Southern District of New York

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ROBERT SMUTEK was sentenced today to eight years in prison for selling 1,4 butanediol, an illegal analogue of the date rape drug gamma hydroxybutyric acid, or GHB.  SMUTEK, a former police officer and resident of Sleepy Hollow, New York, sold 1,4 butanediol in a product called Potion 9 through his Internet website called Online Coral Calcium.  SMUTEK was sentenced yesterday in White Plains federal court by the Honorable Kenneth M. Karas.

U.S. Attorney Preet Bharara stated: “Smutek, a former police officer, was peddling a date rape drug over the Internet from his suburban home.  The sentence imposed on him by the Court properly reflects the callous nature of his years-long drug dealing.”

According to the allegations contained in the Indictment as well as the evidence presented during trial and at sentencing:

SMUTEK sold Potion 9, which was packaged in a one-ounce plastic bottle containing a pink liquid, between 2009 and 2014, advertising it on his website as a “mood enhancer” that supposedly made the user feel euphoric.  According to the label, Potion 9 contained yohimbe, a derivation of a tree root found in South Africa, as well as other natural ingredients.  But according to the evidence at trial, Potion 9 actually contained 1,4 butanediol, an industrial solvent that converted to GHB in the body when ingested.  At sentencing, SMUTEK was held responsible for distributing 200,000 bottles of Potion 9 over five years and ordered to forfeit $1.2 million in proceeds from the scheme.

In addition to his prison term SMUTEK, 53, of Sleepy Hollow, New York, was sentenced to three years of supervised release. 

Mr. Bharara praised the outstanding investigative work of the Rhode Island Task Force of the Office of Criminal Investigations, Food & Drug Administration.  Mr. Bharara also thanked the Internal Revenue Service, Criminal Investigation Division, and the U.S. Postal Inspection Service for their assistance in the investigation.

The prosecution of this case is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Maurene Comey, James McMahon, and Douglas Zolkind are in charge of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, James J. Hunt, Special Agent in Charge of the U.S. Drug Enforcement Administration’s New York Division (“DEA”), James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), and Maria T. Vullo, Superintendent of the New York State Department of Financial Services, announced the arrest of Dr. EMMANUEL LAMBRAKIS, a state licensed doctor who wrote thousands of medically unnecessary prescriptions for oxycodone, totaling nearly 2.4 million pills, over a five-year period.  LAMBRAKIS was arrested yesterday in connection with the charge and is expected to be presented before U.S. Magistrate Judge James L. Cott later today.  

U.S. Attorney Preet Bharara said:  “Although licensed as a doctor, as alleged, Emmanuel Lambrakis was a prolific and dangerous drug dealer.  He allegedly pumped medically unnecessary oxycodone pills into our communities, feeding the addiction of countless people.  This arrest is a critical part of our overall fight against the devastating opioid abuse epidemic.”

Special Agent in Charge James C. Hunt said:  “Drug dealers selling scripts for money give doctors a bad name.  The dismantling of a modern day opium den masquerading as a medical clinic in the heart of Queens shows the result of law enforcement collaboration.  The investigation identified that Emmanuel Lambrakis allegedly diverted oxycodone pills to New York City streets enabling the one thing law enforcement, communities, and health professionals are trying to avoid – opioid addiction and overdose deaths.”     

Superintendent Maria T. Vullo said:  “New York is a safer place because law enforcement authorities worked together to shut down the criminal activities this defendant pursued to enrich himself while endangering the public.  The Department of Financial Services appreciates the opportunity to have worked on this case with the office of U.S. Attorney Bharara and the Drug Enforcement Administration.”

The following allegations are based on the Complaint and other documents filed in Manhattan federal court[1]:

Oxycodone is a highly addictive, narcotic opioid that is used to treat severe and chronic pain conditions.  Oxycodone prescriptions are in high demand and have significant cash value to drug dealers.  In fact, oxycodone tablets can be resold on the street for thousands of dollars.  For example, 30-milligram oxycodone tablets have a current street value of approximately $20 to $30 per tablet in New York City, with street prices even higher in other parts of the country.  A single prescription for 120 30-milligram tablets of oxycodone can net an illicit distributor $2,400 in cash or more.

From at least approximately January 2011 until December 2016, EMMANUEL LAMBRAKIS operated two medical clinics in Queens, New York, where LAMBRAKIS wrote thousands upon thousands of prescriptions for large quantities of oxycodone in exchange for cash payments.  LAMBRAKIS typically charged $150 in cash for “patient visits,” and these visits often involved numerous “patients” being seen by LAMBRAKIS at the same time in the same examination room.  During these “patient visits,” LAMBRAKIS would perform simple, perfunctory body manipulations (such as rotating the patient’s arm or leg) and engage in little or no conversation with the alleged “patient.”  Nonetheless, LAMBRAKIS would then cause the patient to receive a prescription for a large quantity of oxycodone, most often 120 30-milligram tablets or more.

Between January 2011 and the present, LAMBRAKIS wrote approximately 17,000 oxycodone prescriptions at one of his clinics, resulting in the distribution of nearly 2.4 million oxycodone tablets, which have a street value of at least $48 million.  On over 200 occasions, LAMBRAKIS wrote 30 or more prescriptions for 30-milligram oxycodone pills in a single day. As a result of LAMBRAKIS’s actions, it is estimated that LAMBRAKIS collected at least $2.5 million in fees from his “patients.”

*               *               *

LAMBRAKIS, 69, of Manhattan, is charged with one count of conspiring to distribute and possess with intent to distribute oxycodone.  This offense carries a maximum sentence of 20 years in prison.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the outstanding investigative work of the DEA’s Tactical Diversion Squad, which comprises agents and officers from the DEA, the NYPD, the New York State Police, Town of Orangetown Police Department, Rockland County Drug Task Force, Westchester County Police Department, and New York City Department of Investigation.  He also acknowledged the assistance of Health & Human Services, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, New York City Human Resources Administration, and the National Insurance Crime Bureau.

The case is being prosecuted by the Office’s Narcotics Unit.  Assistant U.S. Attorneys Kimberly J. Ravener and Jessica K. Fender are in charge of the prosecution. 

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

Preet Bharara, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (“FBI”), and Christina Scaringi, the Special Agent-in-Charge of the Northeast Region of the U.S. Department of Housing and Urban Development (“HUD”), today announced the unsealing of an Indictment charging five defendants with conspiracy to commit bank fraud, wire fraud, and mail fraud in connection with a debt-elimination scheme to defraud homeowners and banks.

Manhattan U.S. Attorney Preet Bharara stated:  “The defendants allegedly preyed on vulnerable homeowners struggling with their mortgage payments and, with their greed, victimized them further.  When the defendants were done with the victims, after falsely promising to reduce or even eliminate their mortgage debt for fees, these homeowners were left much worse off, in even greater debt.  With the charges today, and thanks to the investigative work of the FBI and HUD, the defendants now face federal fraud charges.”

FBI Assistant Director-in-Charge William F. Sweeney stated:  “As charged, the defendants exploited a program designed to help cost-burdened individuals enjoy the privilege of affordable housing.  Crimes of this nature not only hurt their victims financially, but often force upon them other forms of anguish while harming the financial integrity of the very programs established to help them. We urge everyone to protect themselves against this type of fraud and abuse.  If something doesn’t sound right, trust your instincts and do some checking. If you think you may be or have been a victim of mortgage fraud, we urge you to contact your nearest FBI office.”

HUD-OIG Special Agent-in-Charge Christina Scaringi stated:  “HUD’s reverse mortgage program was created to help our senior citizens find greater financial security through FHA-insured loans.  The defendants’ alleged scheme to unjustly enrich themselves through the victimization of our senior citizens is a shameful act that will not be tolerated by the HUD OIG.  We will continue to aggressively pursue those who would prey on America’s senior citizens and encourage anyone having knowledge of such schemes to contact our HUD hotline.”

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

In at least 2011 and 2012, BRUCE LEWIS, 65, JACQUELINE GRAHAM, 47, and an unindicted co-conspirator were partners in a business that they called the Pillow Foundation or the Terra Foundation (collectively, “Terra”).  Terra held itself out as a business that would investigate and eliminate mortgage debt in exchange for a fee.  Terra solicited clients who were having difficulties making their mortgage payments.

ANTHONY VIGNA, 59, was a lawyer who worked in-house at Terra and provided legal services to it and its clients.  ROCCO CERMELE, 54, was Terra’s director of operations who recruited clients, among other duties.  PAULA GUADAGNO, 58, was a real estate title professional who performed real estate title work for Terra.

LEWIS, GRAHAM, VIGNA, CERMELE, GUADAGNO, and others at Terra told potential clients that Terra could eliminate their mortgage debt in exchange for a fee.  In reality, Terra filed fraudulent discharges of mortgages at local county clerk’s offices in Westchester and Putnam Counties and in Connecticut.  These fraudulent documents made it appear as if Terra’s clients’ mortgages had been discharged, when in fact they had not. 

To profit from their scheme, Terra and the defendants charged monthly fees that they said covered, among other things, audits of the clients’ properties that they often failed to perform.  Terra and the defendants also encouraged their clients to take out second or reverse mortgages on the properties for which Terra had claimed to have discharged the first mortgages.  Once the clients had taken out these second or reverse mortgages, Terra and the defendants retained substantial portions of the proceeds.  Some of these second or reverse mortgages were made under HUD’s Home Equity Conversion Mortgage Program.

In total, Terra and the defendants filed nearly 60 fraudulent discharges in Westchester and Putnam Counties in New York and in Connecticut.  The fraudulent discharges claimed to discharge mortgages with a total loan principal of over $33 million.  In reality, the Terra clients for whom the fraudulent discharges were filed were often left with both a second or reverse mortgage and their original mortgage that had not actually been discharged.

*                      *                     *

VIGNA, CERMELE, and GUADAGNO were taken into federal custody this morning and were presented in White Plains federal court this afternoon before U.S. Magistrate Judge Judith C. McCarthy.  LEWIS and GRAHAM remain at large.                                   

Each defendant is charged with one count of conspiracy to commit wire fraud, bank fraud, and mail fraud, which carries a maximum penalty of 30 years in prison and a $1 million fine.  The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the judge.

Mr. Bharara praised the outstanding investigative work of the FBI and HUD-OIG.  Mr. Bharara also thanked the Westchester and Putnam County District Attorney’s Offices and the Cheshire Police Department in Cheshire, Connecticut, for their ongoing assistance in the case.

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Jennifer Beidel, Michael Maimin, and James McMahon are in charge of the prosecutions.

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that DAVID HOPE, a/k/a “Capo,” pled guilty before U.S. District Judge Sidney H. Stein to his involvement in the sex trafficking of minor girls, possession of child pornography, and possession of a firearm as a convicted felon.

U.S. Attorney Preet Bharara said:  “For years, David Hope manipulated and exploited vulnerable minor girls in the cruelest of ways, selling them for sex for his own profit.  With David Hope’s guilty plea today, we seek to deliver justice to the victims, as well as a measure of real hope.  Protecting girls and young women from sex traffickers like Hope remains a top law enforcement priority for us and the FBI.”

According to the Indictment, Complaint, and other documents filed in the case, as well as statements made during HOPE’s plea proceedings:

Since at least 2013, HOPE directed and conducted a criminal sex trafficking and prostitution enterprise (the “Enterprise”) that recruited and exploited minor girls and young women, and then prostituted them using an online classified ad website for his own profit.  HOPE, who was wheelchair-bound, operated the Enterprise at his apartment in the Bronx, New York (the “Hope Apartment”), Connecticut, and elsewhere.

HOPE recruited minors who looked up to him to participate in the Enterprise and other criminal activity.  HOPE, who was known to carry a firearm, employed myriad tactics – including manipulation, intimidation, coercion, threats, and violence – to recruit and maintain the girls and young women he sold for sex.  At least four minor victims were involved in the Enterprise. 

In or about November 2015, when he was arrested, HOPE also possessed on his cellphone a sexually explicit video of one of the minor girls he trafficked. 

In or about January 2015, HOPE possessed a defaced firearm (the “Firearm”) after he had been previously convicted of a felony crime.  Specifically, on January 16, 2015, when New York City Police Department (“NYPD”) officers were executing a search warrant at the Hope apartment, HOPE instructed a minor female to throw the loaded Firearm out of the rear window of the Hope Apartment.  Before it was thrown out the window, the Firearm was in the bed where Hope was sleeping.

*                *                *

HOPE, 29, of the Bronx, New York, was arrested on November 19, 2015, in the Bronx, New York, and has been in federal custody since.  HOPE pled guilty today to one count of sex trafficking of a minor, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison; one count of conspiracy to commit sex trafficking, which carries a maximum sentence of life in prison; one count of possession of child pornography, which carries a maximum sentence of 10 years in prison; and one count of being a felon in possession of a firearm and ammunition, which carries a maximum sentence of 10 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as the defendant’s sentence will be determined by the judge.  HOPE is scheduled to be sentenced by Judge Stein on March 1st, 2017, at 2:30 p.m.

Mr. Bharara praised the extraordinary investigative work of the FBI.  He thanked the NYPD for its assistance throughout the investigation, and the United States Attorney’s Office for the District of Connecticut and the Connecticut Child Exploitation Task Force for its assistance with investigating HOPE’s operations in Connecticut.  Mr. Bharara also thanked the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”) and the ATF/NYPD Joint Robbery Task Force (SPARTA) for its assistance in the early stages of the investigation.

Any individuals who believe they have information concerning the exploitation of children may contact the Federal Bureau of Investigation at 1-212-384-1000 or https://tips.fbi.gov/.

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Sagar K. Ravi and Christopher J. DiMase are in charge of the prosecution.       

Preet Bharara, the United States Attorney for the Southern District of New York, Kenneth Magidson, the United States Attorney for the Southern District of Texas, Julián Castro, Secretary of the United States Department of Housing and Urban Development (“HUD”), and David A. Montoya, Inspector General of HUD (“HUD-OIG”), announced today that a unanimous jury has found the entities formerly known as ALLIED HOME MORTGAGE CAPITAL CORPORATION (“ALLIED CAPITAL”) and ALLIED HOME MORTGAGE CORPORATION (“ALLIED CORPORATION”) (collectively, “ALLIED”), as well as ALLIED’s president and chief executive officer JIM C. HODGE (“HODGE”), liable for violating the False Claims Act (“FCA”) and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”) in connection with over a decade of fraudulent misconduct related to ALLIED’s participation in the Federal Housing Administration (“FHA”) mortgage insurance program.  The jury awarded the United States a total of $92,982,775 in damages, including $7,370,132 against HODGE.  Pursuant to the FCA, damages in this case are subject to mandatory trebling.  In addition, the FCA provides for a penalty of $5,500 to $11,000 for each violation.  Separately, FIRREA provides for a penalty for each statutory violation.  The Court will determine the amount of the penalties at a later date.  The verdict was returned yesterday following a five-week trial in Houston before United States District Judge George C. Hanks, Jr., of the United States District Court for the Southern District of Texas.  

Manhattan U.S. Attorney Preet Bharara said:  “For years, Jim Hodge and Allied lied to HUD in order to fraudulently reap profits from the FHA mortgage insurance program.  After a month-long public trial where all their misconduct was exposed, a jury has held Mr. Hodge and Allied responsible for their lies and has made them pay for losses the United States suffered on loans that would never have been insured by HUD absent their lies.  This case represents yet another recovery by the United States – this time after a trial – for fraud perpetrated against HUD by participants in the Direct Endorsement Lender program.”

Houston U.S. Attorney Kenneth Magidson said:  “The excellent coordination between personnel from our two U.S. Attorney’s Offices and with HUD investigators has resulted in a tremendous win for the government.  Working together, we ensured a successful outcome following a lengthy trial and investigation against Allied and its CEO.  We will continue to apply our resources whenever and wherever we can to ensure those that perpetuate such egregious fraud against the United States are held accountable for their actions.”

HUD Inspector General David A. Montoya said:  “The heart of our mission is to weed out actors such as these that are intent on defrauding federal housing programs.  This should serve as a notice to all those determined to engage in illegal schemes such as these that they are not beyond the reach of the federal law enforcement community.”

According to the evidence presented at trial:

FHA mortgage insurance makes home ownership possible for millions of American families by protecting lenders against mortgage defaults.  FHA mortgage insurance also makes mortgage loans valuable in the resale market.  To protect the continued availability of FHA mortgage insurance funds, HUD must accurately assess the risk of default on the loans it insures.  To accomplish this task, HUD relies on assurances by lenders that they, and the loans they submit for insurance, comply with program requirements. 

As a HUD-approved loan correspondent, ALLIED CAPITAL originated FHA-insured mortgage loans.  ALLIED CAPITAL was required to seek HUD approval for each branch office from which it originated FHA loans.  Instead of complying with this requirement, however, ALLIED CAPITAL, with HODGE’s knowledge and approval, operated over one hundred “shadow” branch offices that originated FHA loans without HUD authorization.  As part of its scheme to deceive HUD, ALLIED CAPITAL submitted loans originated by those branches to HUD using the ID numbers of approved branches.  ALLIED CAPITAL’s undisclosed shadow branches were not subject to HUD oversight and their default rates were disguised by the default rates of branches whose IDs they were using.  This fraudulent misconduct resulted in $7,370,132 in losses to HUD when certain of those loans defaulted. 

ALLIED CORPORATION, as a participant in HUD’s Direct Endorsement Lender program, underwrote FHA-insured mortgage loans.  For each FHA-insured mortgage loan, ALLIED CORPORATION was required to certify to HUD that the loan was underwritten according to HUD’s guidelines.  Those guidelines ensure that FHA-insured loans are made only to borrowers who can repay them, thereby seeking to avoid losses to HUD’s FHA insurance fund and foreclosures on borrowers’ homes.  ALLIED CORPORATION, however, recklessly underwrote and certified at least 1,192 loans for FHA insurance that were ineligible for insurance under HUD’s guidelines.  This fraudulent misconduct resulted in losses to HUD of $85,612,643 when those loans defaulted.

To compound matters, ALLIED and HODGE operated a dysfunctional quality control program and lied to HUD about it.  HUD requires lenders participating in its programs to timely perform quality control audits of their FHA loans to identify and correct systemic problems, including underwriting problems.  ALLIED, however, employed only a handful of quality control employees to review loans from as many as 600 branch offices.  Many of those employees were unqualified to audit FHA-insured loans.  In addition, HODGE personally directed his employees to falsify quality control reports to give the impression that required reviews had been performed, when in fact they had not.  When HUD auditors later asked for those quality control reports, ALLIED provided the falsified reports.  ALLIED and HODGE also falsely certified to HUD on an annual basis that ALLIED was in compliance with HUD’s quality control requirements.

The United States filed a complaint-in-intervention in this lawsuit in November 2011.  At that time, the action was pending as a qui tam whistleblower lawsuit in the United States District Court for the Southern District of New York.  In September 2012, the action was transferred to the United States District Court for the Southern District of Texas. 

*                *                *

Mr. Bharara and Mr. Magidson thanked HUD’s Office of General Counsel and HUD-OIG for their extraordinary assistance with this case.    

This case is being handled by the Civil Frauds Unit of the United States Attorney’s Office for the Southern District of New York.  Assistant United States Attorneys Jeannette A. Vargas, Joseph N. Cordaro, Jean-David Barnea, Caleb Hayes-Deats, and Stephen Cha-Kim, who were designated as Special Assistant United States Attorneys for the Southern District of Texas for purposes of this matter, are in charge of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States has settled a federal civil rights lawsuit against the CITY OF PORT JERVIS (“PORT JERVIS”) in Orange County, New York.  Under the agreed-upon Consent Decree, PORT JERVIS will repeal a local law enacted in December 2015 that bans places of worship from two of the City’s central business and commercial zoning districts.  The Consent Decree also provides that the lawsuit can be reinstated if Port Jervis fails to amend its zoning laws to comply with federal law prohibiting discrimination and unreasonable impositions on religious freedom by January 23, 2017.  The Consent Decree was entered on November 23, 2016, by U.S. District Judge Kenneth M. Karas.

U.S. Attorney Preet Bharara said: “With this lawsuit and consent decree requiring the City of Port Jervis to repeal or amend a local law that banned places of worship in two of its central business districts, we help to ensure free religious exercise in the city.” 

According to the Complaint, filed in federal court in White Plains on November 21, 2016:

PORT JERVIS violated the Religious Land Use and Institutionalized Persons Act (“RLUIPA”) by passing a local law in December 2015 that banned the use of land for purposes of places of worship in two of Port Jervis’s main commercial and business zones, the Central Business District and the Service Commercial District.  Prior to the passage of the local law, use of land for these purposes was permitted as of right in these districts.  While City officials claimed that the local law was justified by concerns relating to parking, commercial development, and liquor licensing, PORT JERVIS continues to permit nonreligious uses in these areas that will have similar effects.  Accordingly, the Complaint charged that PORT JERVIS treated religious assemblies on unequal terms with comparable nonreligious assemblies or institutions, in violation of RLUIPA.

Moreover, PORT JERVIS substantially burdened the religious exercise of the Goodwill Evangelical Presbyterian Church (the “Church”), which had sought to establish a place of worship in PORT JERVIS’s Central Business District.  After the Church was in contract to purchase property in that district and had received assurances from City officials that it could use the property as a branch of the Church, PORT JERVIS adopted the local law to ban places of worship in the zoning district.  The local law precluded the Church from its intended use of the property for religious exercise and caused the Church to suffer delay and expense in establishing a permanent place of worship in the City.  The Complaint charged that PORT JERVIS substantially burdened the Church’s religious exercise, also in violation of RLUIPA.

Pursuant to the Consent Decree entered on November 23, 2016, PORT JERVIS has until January 23, 2017, to repeal the local law banning places of worship from two of its central zoning districts.  PORT JERVIS also has agreed not to treat religious assemblies or institutions on unequal terms with nonreligious assemblies or institutions, and not to implement any land use regulation in a manner that imposes a substantial burden on the religious exercise of any person, assembly, or institution.  PORT JERVIS has further agreed to comply with certain notice, training, and recordkeeping requirements to ensure that City officials are knowledgeable about and comply with RLUIPA, and to allow the Government to monitor PORT JERVIS’s compliance.

The case is being handled by the Office’s Civil Rights Unit.  Assistant United States Attorney Samuel Dolinger is in charge of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that LILIAN JAKACKI, a/k/a/ “Lilian Wieckowski,” was sentenced today by U.S. District Judge Jed Rakoff to four years in prison for illegally distributing 100,000 tablets of oxycodone, Medicare fraud, and money laundering.  JAKACKI pled guilty on July 28, 2016, before Judge Rakoff.

Manhattan U.S. Attorney Preet Bharara said:  “Through her pharmacies in Queens and Brooklyn, Lilian Jakacki dumped 100,000 illegally diverted oxycodone pills into the City’s streets.  Driven by greed, Jakacki abused her pharmacy license, helping to fuel the opioid abuse epidemic that is ravaging too many of our communities.  For her crimes, Jakacki will spend four years in prison and forfeit her ill-gotten gains.”           

According to the allegations in the Indictment and the civil Complaint, and other information in the public record:

Between in or about March 2010 and October 2015, JACKACKI owned and operated two pharmacies in Queens and Brooklyn doing business as “Chopin Chemists.”  During that time period, at these pharmacies, JACKACKI knowingly distributed approximately 100,000 tablets of oxycodone based on fraudulent prescriptions, including prescriptions made out in the names of famous luxury brands, such as Coach and Chanel.  In addition, JACKACKI used the proceeds of that illegal narcotics trade to help finance the purchase of a multimillion-dollar home.  Finally, JACKACKI deliberately overbilled Medicare by more than $500,000, submitting reimbursement claims for medication that she never actually distributed to patients. 

In addition to the prison term, JACKACKI was also directed to forfeit $800,000 and to pay restitution of $520,000.   

Mr. Bharara praised the outstanding investigative work of the DEA’s Tactical Diversion Squad, the U.S. Internal Revenue Service, and the U.S. Department of Health and Human Services.  The DEA’s Tactical Diversion Group includes agents and officers of the DEA, the New York City Police Department, the New York State Police, the Town of Orangetown Police Department, and the Westchester County Police Department.

The prosecution of this case is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Sidhardha Kamaraju, Jordan Estes, and Louis A. Pellegrino are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that REZA OLANGIAN, a dual citizen of the United States and Iran, was found guilty of conspiring and attempting to send surface-to-air missiles (“SAMs”) and military aircraft parts to the Government of Iran.  OLANGIAN was arrested in Estonia on October 10, 2012, pursuant to a U.S. request for his provisional arrest, and he was extradited to the United States on March 26, 2013.  OLANGIAN was convicted after a two-week jury trial before U.S. District Judge Loretta A. Preska.

According to the evidence presented during the trial:

In 2008, OLANGIAN worked with Iranian officials to obtain approximately 375 SAMs for use by the Iranian government.  Ultimately, that missile deal was unsuccessful.

Beginning in early 2012, OLANGIAN worked to negotiate another, separate missile deal, this time with a confidential source (the “CS”), who was working with the Drug Enforcement Administration (“DEA”) and who purported to be a weapons and aircraft broker.  From his base of operations in Tehran, and from approximately May 2012 through October 2012, OLANGIAN arranged for the purchase of “IGLA-S” SAMs and various aircraft components.  During covertly recorded meetings in May 2012, and in subsequent recorded conversations and e-mails with the CS, OLANGIAN described in detail his plans for procuring the SAMs and aircraft parts and then smuggling them over land into Iran, from Afghanistan or from another neighboring country.  OLANGIAN also expressed his interest in purchasing numerous other types of weapons and military parts for the Iranian government, including the so-called “S-300” missile defense system and Russian-made naval vessels.

OLANGIAN’s 2012 negotiations included his participation in a videoconference with the CS, during which OLANGIAN remotely inspected a missile that the CS presented as a sample of the larger quantity of the SAMs that OLANGIAN sought to purchase.  After inspecting the sample missile and inquiring about its specifications, OLANGIAN stated that he would want “at least 200 . . . minimum 200” of such SAMs.  In his communications with the CS, OLANGIAN also indicated that he was arranging for a missile expert to inspect and test the SAMs.

At the same time that he was negotiating with the CS, OLANGIAN was also working with other individuals, both inside and outside Iran, to acquire numerous other items for the Iranian government and Iran-based entities.  For example, OLANGIAN worked with individuals and entities in China, Russia, and Europe to acquire commercial aircraft for use by Iranian airlines.  In one of these commercial aircraft deals, OLANGIAN and his coconspirators planned to purchase aircraft for $80 million and sell them to an Iranian company for $110 million.

During October 2012, OLANGIAN traveled to Estonia in connection with the SAMs deal and in anticipation of later traveling to Russia in connection with one of the aircraft deals.  He was arrested in Estonia, and following his arrest, he was interviewed by U.S. law enforcement agents.  OLANGIAN stated, among other things, that he had been working with Iranian government officials, that the SAMs he had arranged to purchase were being obtained for the Iranian government, and that the aircraft parts he attempted to acquire were to be used in Iranian military aircraft.

OLANGIAN was extradited to the United States on March 26, 2013.

*  *  *

OLANGIAN, 56, was found guilty of all four counts of the Indictment.  Counts One and Two charged him with conspiring to acquire and transfer surface-to-air missile systems and attempting to acquire and transfer surface-to-air missile systems.  Counts Three and Four charged him with conspiring to violate the International Emergency Economic Powers Act (“IEEPA”) and attempting to violate IEEPA. 

OLANGIAN faces a mandatory minimum sentence of 25 years in prison and a maximum sentence of life in prison on each of Counts One and Two, and a maximum sentence of 20 years in prison on each of Counts Three and Four.  The statutory minimum and maximum penalties are prescribed by Congress and are provided here for information purposes only, as any sentencing of the defendant will be determined by the judge.  Sentencing is scheduled for March 13, 2017, at 4:30 p.m., before Judge Preska.

Mr. Bharara praised the outstanding investigative work of the DEA’s Special Operations Division, Bilateral Investigations Unit.  Mr. Bharara also thanked the DEA’s Copenhagen Country Office, as well as the U.S. Department of Justice’s Office of International Affairs and its National Security Division.

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Sean S. Buckley and Shane T. Stansbury are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that DAVID KEITH, a/k/a “David Wright,” a/k/a “David Lee Keith,” a/k/a “David Lee,” a/k/a “Lee David,” pled guilty this afternoon before U.S. District Judge Alison J. Nathan in Manhattan federal court to five counts stemming from his sexual exploitation of minors, related child pornography offenses, and making false statements to a federal agent concerning his abuse of children.

Manhattan U.S. Attorney Preet Bharara said:  “Through lies and trickery, David Keith lured a minor girl into his vehicle and then sexually abused her, videotaping his sick assault and exploitation.  Protecting children from predators like Keith remains a critical priority for law enforcement, and we hope the victims here will take some measure of comfort in knowing that Keith has admitted to and been convicted of his abominable crimes.”   

According to the Indictment, publicly filed documents, and statements made in court:

On at least one occasion in 2013, KEITH produced child pornography during his sexual abuse of a child.  On October 13, 2013, KEITH approached three girls, approximately 12 to 14 years old, on the street, presented himself as part of the entertainment industry, and encouraged the girls to model for him.  KEITH induced one of the girls to enter his vehicle, where he video recorded, among other things, himself engaging in forcible sexual conduct with her.  KEITH threatened the victim not to tell anyone and told her that he had been watching her.

Just one day earlier, on or about October 12, 2013, KEITH, lured a young girl, approximately 8 to 9 years old, into his vehicle where he tricked her into removing some of her clothing and video recorded her exposed genitals. 

In addition, for a period of at least two years, KEITH downloaded and possessed images and videos of child pornography.

During the investigation, KEITH made statements to federal agents, claiming he had an alibi for October 12 and 13.  Those statements were proven false. 

*          *          *

KEITH, 39, of the Bronx, New York, was arrested on November 17, 2015, in the Bronx, New York, and has been in federal custody since.  KEITH pled guilty today to two counts of sexual exploitation of a child, each of which carries a maximum penalty of 50 years in prison, one count of receipt of child pornography, which carries a maximum penalty of 40 years in prison, one count of possession of child pornography, which carries a maximum penalty of 20 years in prison, and one count of making false statements involving sexual abuse of children, which carries a maximum penalty of eight years in prison. 

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

KEITH is scheduled to be sentenced by Judge Nathan on March 10, 2017, at 1:00 p.m.

Mr. Bharara praised the extraordinary efforts of the FBI, and thanked the New York City Police Department Special Victims Unit and the Town of Poughkeepsie Police Department for invaluable assistance in the investigation. 

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Matthew Podolsky and Stephen Ritchin are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, today announced the appointment of Lisa Zornberg as Chief of the Office’s Criminal Division.

Ms. Zornberg returns to the Office from the law firm of Lankler, Siffert & Wohl LLP, where she was a partner representing individuals and entities in white collar criminal, complex civil, and regulatory matters. Ms. Zornberg was previously an Assistant United States Attorney in the Office for 14 years, from 1998 to 2012, serving in both the Civil and Criminal Divisions and rising to supervisory ranks in each division.  From 2011 to 2012, Ms. Zornberg was chief of the Complex Frauds Unit in the Criminal Division, and from 2004 to 2005, she was Deputy Chief of Appeals in the Civil Division. Ms. Zornberg graduated magna cum laude from Harvard College in 1991 and cum laude from Harvard Law School in 1994.  Upon graduation from law school, Ms. Zornberg served as a law clerk to then United States District Judge for the Southern District of New York and now United States Supreme Court Justice Sonia Sotomayor.

In making the appointment, Manhattan U.S Attorney Preet Bharara said: “I am extremely pleased and excited that Lisa Zornberg will be returning to public service as Chief of the Office’s Criminal Division.  Lisa was an outstanding AUSA during her prior tour in the Office and has since become an accomplished criminal defense lawyer.  I am confident that with her intellect, energy and vision, Lisa will be a terrific Criminal Division Chief.  I welcome Lisa’s return, and I thank Joan Loughnane, the Office’s Chief Counsel, who on top of her regular duties has served exceptionally as the Acting Chief of the Criminal Division over the past few weeks.”

Preet Bharara, the United States Attorney for the Southern District of New York, and Carl J. Kotowski, the Special Agent in Charge of the Drug Enforcement Administration’s New Jersey Division, announced today the arrest of ANDREW COOK on a charge of distributing and possessing with intent to distribute methoxetamine hydrochloride (“MXE”), an illegal analogue of the hallucinogenic drug. 

The defendant had an initial appearance in the District of New Hampshire today before Magistrate Judge Andrea K. Johnstone.

U.S. Attorney Preet Bharara said:  “As alleged, Andrew Cook was the sole proprietor of an illegal online distributor of MXE, a dangerous hallucinogenic drug.  Thanks to the work of the DEA, Cook has been arrested and his illegal business taken offline.”

DEA Special Agent in Charge Carl J. Kotowski said:  “Today, the men and women of DEA have arrested a dangerous individual.  Mr. Cook was hiding behind the anonymity of his computer screen.  We will continue to pursue those peddling their drugs whether they are selling them on the street or via the internet.”

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

MXE, a designer drug, is an analogue of a controlled substance and has been “designed” to circumvent drug laws.  MXE belongs to the same class of drugs as ketamine, phenycyclidine (“PCP”), and PCE.  Drugs in this class produce dissociative anesthetic and hallucinogenic effects.        

COOK was the sole owner and operator of an internet business, called Downlow Labs, which shipped various drugs, including MXE, to individuals across the country.  COOK operated a drug manufacturing facility at his home in Long Branch, New Jersey.  A search of COOK’s residence uncovered, among other things, numerous baggies labeled “methoxetamine,” a pill press, masks, beakers, rubber gloves, shipping supplies, invoices, approximately $14,500 in cash, and approximately 395 grams of MXE.

*                      *                      *

COOK, 23, of Long Branch, New Jersey, was charged with one count of distributing and possessing with intent to distribute a controlled substance analogue, 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. 

U.S. Attorney Bharara praised the outstanding investigative work of the DEA New Jersey Tactical Diversion Squad, the New Jersey State Police Hazardous Material Unit, the United States Postal Inspection Service, the Long Branch Police Department, and the Monmouth County Prosecutor’s Office.

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, Angel M. Melendez, the Special Agent-in-Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (“HSI”), and George P. Beach II, the Superintendent of the New York State Police (“NYSP”), announced the arrest of NICHOLAS PAGLIUCA, a teacher at a high school in the town of Mamaroneck, stemming from his possession and receipt of child pornography.  PAGLIUCA was arrested today and will be presented today before United States Magistrate Judge Judith C. McCarthy in White Plains federal court. 

Manhattan U.S. Attorney Preet Bharara said:  “As alleged, Nicholas Pagliuca, a teacher at a local high school, tapped into a website full of illegal child pornography to download images and videos.  Investigation and prosecution of these crimes are critical in protecting our children.”     

HSI Special Agent-in-Charge Angel Melendez said:  “Individuals who take pleasure in downloading videos and photos of young children being sexually exploited need to be brought to justice, especially those whose jobs give them access to children, as in this case.  HSI is putting child predators on notice that we will not stop tracking and arresting these depraved individuals until the threat to children is no more.” 

Superintendent George P. Beach II said:  “Anyone involved in child pornography, promoting the acts of child predators, or who performs predatory acts against children must understand that such crimes will not be tolerated. We will continue to work with our partners to thoroughly investigate and prosecute these illicit activities. Children must be protected, not preyed upon.”

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

In October 2012, an individual who was later identified as PAGLIUCA registered for a 30-day subscription to a website that is a popular means for individuals to trade child pornography images and videos.  PAGLIUCA downloaded hundreds of files containing images and videos of child pornography, many of which depicted prepubescent children engaged in sexual activity with adults or other children.  Using the email address PAGLIUCA used to register with the website, agents with HSI and officers of the NYSP confirmed PAGLIUCA’s identity and his occupation as a teacher at a public high school in Mamaroneck, New York.  PAGLIUCA was arrested at his residence in Somers, New York.

*          *       *     

NICHOLAS PAGLIUCA, 65, of Somers, New York, is charged with one count of possession of child pornography (Count One), which carries a maximum sentence of 20 years in prison, and one count of receipt of child pornography (Count Two), which carries a mandatory minimum sentence of five years in prison and a maximum sentence of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Any individuals who believe they have information concerning NICHOLAS PAGLIUCA that may be relevant to the investigation should contact HSI at through its toll-free hotline at 1-866-DHS-2ICE; TTY for hearing impaired: (802) 872-6196. This hotline is staffed around-the-clock by investigators.

Mr. Bharara praised the efforts of HSI and the New York State Police in this investigation.  He added that the investigation is continuing.

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorney Gillian Grossman is in charge of the prosecution.

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, William F. Sweeney, the Assistant Director-in-charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Robert Mahon, the Acting Chief of the Clarkstown Police Department (“CPD”), announced the arrest of WILLIAM MATEO on charges of bank robbery and a firearms offense.  MATEO was arrested yesterday in Elmsford, New York, and will be presented later today in the Southern District of New York in White Plains before United States Magistrate Judge Judith C. McCarthy.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, William Mateo entered a bank in Central Nyack with a mask and a gun, robbed the bank of over $6,000, and then fired a shot toward one of the bank tellers.  Thanks to the investigative work of the FBI and Clarkstown Police, just three days after the bank robbery, Mateo is under arrest facing federal criminal charges.”

FBI Assistant Director-in-Charge William F. Sweeney said:  “The FBI Westchester County Safe Streets Task Force worked tirelessly to find the suspect accused in this bank robbery because of the threat he posed to the community.  Bank tellers complied and gave him the money he demanded, but before leaving, he fired a round in the direction of the tellers.  His alleged disregard for the harm he could have cause the people and workers show why it was extremely important to find and arrest him.”

CPD Acting Police Chief Captain Robert Mahon said: “I’m so proud of the entire Clarkstown Police Department for bringing this suspect to justice without any injuries to the public or our officers.  Our detectives and the FBI agents assigned to this case worked tirelessly over the past weekend to identify, surveil and apprehend William Mateo for this alleged violent crime.  This arrest exemplifies the highest level of dedication and professionalism shown by both the Clarkstown Police Department and the Federal Bureau of Investigation.”

According to the allegations contained in the Complaint[1] charging MATEO, and other documents in the public record:

On November 18, 2016, MATEO committed a gunpoint robbery of the Key Bank in Central Nyack, New York.  At the time of the robbery, he was wearing a mask and gloves, and carrying a semi-automatic handgun.  After entering the bank, MATEO approached two bank tellers, who handed him cash.  Before exiting, he fired a round in the direction of one of the tellers.  The bullet hit a wooden partition between two tellers, and no one was injured.  MATEO then exited the bank and fled in a car.  MATEO’s vehicle was captured on the bank’s surveillance cameras and observed by a witness.  In a search of MATEO’s residence, law enforcement recovered a mask, a box of gloves matching those worn during the robbery, and a safe containing, among other items, shell casings, live ammunition, and more than $2,000.  After arresting MATEO at a hotel in Elmsford, New York, law enforcement recovered from his hotel room a semi-automatic handgun, a glove, and a firearm magazine.  MATEO subsequently gave a post-arrest statement admitting that he had committed the bank robbery and that he had discharged a firearm during the crime.  In total, MATEO obtained approximately $6,400.

*              *             *

MATEO, 24, of Valley Cottage, New York, is charged with one count of bank robbery, which carries a maximum sentence of 25 years in prison, and one count of use of 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 defendant will be determined by a judge.

Mr. Bharara praised the investigative work of the Clarkstown Police Department and the FBI’s Westchester County Safe Streets Task Force, which is comprised of agents and task force officers from the FBI, the U.S. Probation Office, the Westchester County Police Department, the Westchester County District Attorney’s Office, the New York City Police Department, the City of Yonkers Police Department, the Peekskill Police Department, and the Mount Vernon Police Department. 

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 defendant is presumed innocent unless and until proven guilty.

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that EFRAIN ANTONIO CAMPO FLORES and FRANQUI FRANCISCO FLORES DE FREITAS were found guilty today of conspiring to import cocaine into the United States.  Together with others, CAMPO FLORES and FLORES DE FREITAS agreed to distribute in excess of 800 kilograms of cocaine, knowing and intending that the drugs were destined for the United States.  CAMPO FLORES and FLORES DE FREITAS were convicted after a two-week jury trial before U.S. District Judge Paul A. Crotty.

U.S. Attorney Preet Bharara stated:  “Today, a unanimous jury found Efrain Antonio Campo Flores and Franqui Francisco Flores de Freitas guilty of conspiring to traffic in massive quantities of cocaine.  As the evidence at trial established, the two men thought they would make millions of dollars sending hundreds of kilograms of cocaine to the United States.  What they ended up with is a conviction in an American court and the prospect of years in federal prison.”

According to the evidence presented during the trial:

Beginning no later than August 2015, CAMPO FLORES and FLORES DE FREITAS worked with others in Venezuela and elsewhere in an effort to dispatch large loads of cocaine via aircraft from Simón Bolívar International Airport in Maiquetia, Venezuela.  In early October 2015, an individual who was cooperating with the Drug Enforcement Administration (“DEA”) in Honduras (“CW-1”) reported to the DEA that a Honduran national had introduced CW-1 to two Venezuelans – later identified as CAMPO FLORES and FLORES DE FREITAS – who were interested in sending cocaine-laden aircraft with legitimate-seeming flight plans from Venezuela to Honduras.  On or about October 3, 2015, CW-1 met with CAMPO FLORES, FLORES DE FREITAS, and others in San Pedro Sula, Honduras, to discuss sending hundreds of kilograms of cocaine from Simón Bolívar International Airport to Juan Manuel Gálvez International Airport in Roatan, Honduras.

In late October 2015, two confidential sources working at the direction of the DEA (“CS-1” and “CS-2”) traveled to Caracas, Venezuela, to meet with the defendants.  CS-1 purported to be the Mexican boss of the drug trafficking organization with which CW-1 was affiliated, and CS-2 purported to be an associate of CS-1.  At a meeting in Caracas on or about October 27, 2015, CAMPO FLORES and FLORES DE FREITAS presented CS-1 and CS-2 with a kilogram of cocaine, referring to it as a “little animal,” so that they could test the quality of the drugs.

In early November 2015, FLORES DE FREITAS met in Honduras with individuals acting at the direction of the DEA as well as co-conspirators, including co-defendant Robert de Jesus Soto Garcia, to further discuss the cocaine shipment.   During the recorded meeting, FLORES DE FREITAS and Soto Garcia made precise plans for the drug load, and FLORES DE FREITAS agreed to send the first load of cocaine on November 15, 2015.

On November 10, 2015, CAMPO FLORES and FLORES DE FREITAS flew on a private jet to Haiti intending to pick up an initial multi-million-dollar payment for the cocaine.  Later that day, CAMPO FLORES and FLORES DE FREITAS were arrested by Haitian law enforcement officers, expelled from Haiti, and flown to Westchester County International Airport in White Plains, New York on a DEA jet.

*  *  *

CAMPO FLORES, 30, and FLORES DE FREITAS, 31, were found guilty of conspiracy to (i) import five or more kilograms of cocaine into the United States from a foreign country; and (ii) distribute five or more kilograms of cocaine knowing and intending that it would be imported into the United States, which carries a mandatory minimum sentence of ten years in prison and a maximum penalty of life in prison.  The statutory minimum and maximum penalties are prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Bharara praised the outstanding investigative work of the DEA’s Special Operations Division, Bilateral Investigations Unit, and New York Strike Force.  Mr. Bharara also thanked the DEA’s Port-au-Prince Country Office, U.S. Customs and Border Patrol’s National Targeting Center, DEA’s Airwing, the Government of the Republic of Haiti and the Haitian National Police, and the U.S. Department of Justice’s Office of International Affairs for their assistance.

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

Preet Bharara, the United States Attorney for the Southern District of New York, and William R. Sherman, Special Agent in Charge of the San Diego Division of the U.S. Drug Enforcement Administration (“DEA”), today announced that ROBERTO PONCE-ROCHA was extradited from Colombia where he had been arrested for charges arising out of his leadership role in a drug trafficking conspiracy involving the transportation of large-scale quantities of cocaine, heroin, and methamphetamine into the United States.  As part of the DEA’s investigation of PONCE-ROCHA, which began in or around 2013, law enforcement authorities in the United States and abroad have seized thousands of kilograms of cocaine and other narcotics.  PONCE-ROCHA, a Mexican citizen, arrived in the Southern District of New York yesterday, and was presented today in Manhattan federal court before U.S. Magistrate Judge Gabriel W. Gorenstein. 

Previously, on or about May 24, 2016, two co-conspirators charged in the same Superseding Indictment, Juan Caicedo-Zuniga and Adan Munoz-Cordoba, arrived in the Southern District of New York following their extradition from Panama.  Caicedo-Zuniga and Munoz-Cordoba, who are both Colombian citizens, were arrested on charges arising out of their participation in some of the same narcotics transactions organized and facilitated by PONCE-ROCHA.

Manhattan U.S. Attorney Preet Bharara said:  “As alleged, Roberto Ponce-Rocha was for years a leader of a drug trafficking organization that moved thousands of kilograms of cocaine from Colombia to countries around the world, including to the United States.  Thanks to the tireless efforts of the DEA and its international counterparts, Ponce-Rocha will now face justice in a United States court.” 

DEA SAC William R. Sherman said:  “The extradition of these alleged international drug traffickers sends a clear message to those who are thinking about endangering the citizens of our country with these potentially deadly drugs: your greed will get you an all expenses paid trip to the United States and a nice long stay in a federal detention facility.” 

According to the allegations contained in the Superseding Indictment as well as statements made in Court:[1]

From at least in or around July 2013 through in or around January 2016, PONCE-ROCHA was a leader in a large-scale international narcotics trafficking conspiracy based in Central and South America that used various methods, including commercial shipments, drivers, and couriers to move narcotics around the world, and to import narcotics into the United States.  PONCE-ROCHA was involved in the transportation of cocaine, heroin, and methamphetamine across the U.S.-Mexico border, as well as the shipment of large-scale quantities of cocaine from Colombia to countries throughout the world, including the United States.  Caicedo-Zuniga and Munoz-Cordoba conspired with PONCE-ROCHA to import narcotics into the United States and other countries.

PONCE-ROCHA was arrested by Colombian authorities on or about March 20, 2016, in Colombia.   

*                *                *

PONCE-ROCHA, 55, is charged in one count of conspiring to distribute at least five kilograms of cocaine, at least one kilogram of heroin, and at least 500 grams of methamphetamine, knowing that such substances would be imported into the United States.  That charge carries a mandatory minimum term of 10 years in prison and a maximum penalty of life in prison.  The statutory minimum and 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.  The case is assigned to U.S. District Judge Jesse M. Furman. 

Mr. Bharara praised the DEA for its work in the investigation.  Mr. Bharara also expressed his appreciation to the DEA Special Operations Division, Homeland Security Investigations San Diego, United States Customs and Border Protection San Diego, the Fontana California Police Department, the Policia Nacional de Panama Unidad de Investigaciones Sensitivas (UEIS), the Colombian National Police Direccion de Investigaciones Criminal e INTERPOL (DIJIN), the Costa Rica Policia Control de Drogas (PCD), the Republica Dominicana Direccion Nacional de Control de Drogas (DNCD), and the Spanish Guardia Civil for their assistance in the investigation.

This case is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys James M. McDonald, Kimberly J. Ravener, and David Zhou are in charge of the prosecution.

The charges contained in the Superseding 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 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.

Preet Bharara, the United States Attorney for the Southern District of New York, James Hunt, the Special Agent in Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), George P. Beach II, the Superintendent of the New York State Police (“NYSP”), George N. Longworth, Commissioner of the Westchester County Police Department, and James P. O’Neill, Commissioner of the New York City Police Department (“NYPD”) announced that FREDERICK WEINTRAUB was sentenced today to 18 months in prison for illegally selling Oxycodone prescriptions for cash.  WEINTRAUB was a podiatrist who wrote and sold multiple prescriptions for Oxycodone, an opiate and controlled substance.  WEINTRUAB pled guilty on August 5, 2016, to one count of distributing an illegal controlled substance.  He was sentenced today in White Plains federal court by U.S. District Court Judge Kenneth M. Karas.

U.S. Attorney Preet Bharara said:  “Illegally diverted prescription opiates feed the vicious cycle of addiction and abuse that is devastating too many of our communities.  As a doctor, Frederick Weintraub was supposed to care for the health of his patients, not help fuel the country’s most acute health crisis.”

Special Agent in Charge James Hunt said:  “A doctor selling prescriptions for cash in a hotel parking lot is a drug dealer perpetuating one of America’s #1 health threats - opioid abuse.   Through invaluable collaboration with members of the TDS and law enforcement partners, this opioid supplier is off the streets and faces 18 months in jail.” 

Superintendent George P. Beach II said:  “Oxycodone is a highly addictive, often abused medication.  By illegally selling prescriptions for these painkillers, Frederick Weintraub put the community he served at risk. I applaud the hard work of the members involved in this investigation. Together we will continue the fight to keep drugs off our streets and to prevent prescription drug abuse.”

Commissioner George N. Longworth said:  “The successful investigation into Frederick Weintraub is just the latest example of the great partnership that exists among federal, state, county, and local law enforcement in our region. The Westchester County Police remains firmly committed to continuing our participation in these joint task forces. They are a critical way to combat the distribution and sale of illegal narcotics in our communities.”

According to the Complaint and Information filed in White Plains federal court, as well as statements made in connection with the plea and sentencing proceedings:

Weintraub was a podiatrist whose medical license was permanently suspended in 2014.  Following this suspension, Weintraub began illegally selling prescriptions for controlled substances in exchange for cash.  Between November 2015 and January 2016, Weintraub sold at least seven prescriptions for Oxycodone, at prices ranging between $500 and $700 per prescription, to an individual who was cooperating with law enforcement.  This individual made recordings of several purchases and provided the prescriptions he purchased to law enforcement.   Each sale took place in Weintraub’s car, which was parked in the lot of a Rockland County hotel, and had no connection to any medical examination.  During these sales, Weintraub negotiated prices and attempted to arrange a long-term relationship with the customer in which Weintraub would provide weekly Oxycodone prescriptions to the customer, who would then fill the prescriptions and resell the pills at a premium.

In addition to his prison term Weintraub, 65, of Upper Saddle River, New Jersey, was sentenced to two years of supervised release. 

Mr. Bharara praised the outstanding investigative work of the DEA’s Tactical Diversion Squad, which comprises agents and officers from the DEA, the NYPD, the New York State Police, Town of Orangetown Police Department, Rockland County Drug Task Force, Westchester County Police Department, and New York City Department of Investigation.  In addition, Mr. Bharara thanked the Northvale Police Department and Town of New Windsor Police Department for their assistance on this investigation..

The prosecution of this case is being handled by the Office’s White Plains Division.  Assistant United States Attorney Maurene Comey is in charge of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that MAURICE SESSUM, the co-owner, chief financial officer, and chief operating officer of a Buffalo, New York-based debt collection company (the “Company”), pled guilty yesterday before Judge Katherine Polk Failla to orchestrating a scheme to coerce thousands of victims across the country, through false threats and representations, into paying a total of more than $31 million to the Company to resolve debts these victims purportedly owed.  In addition, earlier today before Judge Faila, JIMMY STOKES, a Company manager, pled guilty, and TACOBY THOMAS, another Company manager, was sentenced to 70 months in prison for their respective roles in the scheme.  All 14 defendants who were charged for their participation in this fraud have now pled guilty.

U.S. Attorney Preet Bharara said:  “Now that all of the 14 defendants behind the largest debt collection scheme ever prosecuted have admitted their guilt, the process of restitution to the thousands of victims across the country can begin.  Thanks to the dedicated work of our Office’s criminal investigators and the Federal Trade Commission, this so-called ‘business’ is no longer able to victimize consumers.”

According to the allegations contained in the Indictment and statements made during the plea proceedings and THOMAS’s sentencing proceeding:

Between 2010 and February 2015, SESSUM was the co-owner, chief financial officer, and chief operating officer of the Company.  In that capacity, SESSUM, together with his co-defendant and co-owner, Travell Thomas, oversaw four debt collection offices operated by the Company in Buffalo and a team of managers and debt collectors.  As part of the scheme, SESSUM and Travell Thomas falsely inflated the balances of debts owed by consumers in the Company’s debt collection software so that debt collectors could collect more money from the victims than the victims actually owed.   

SESSUM approved debt collection scripts that contained a variety of misrepresentations and instructed his collectors to make those misrepresentations to consumers over the telephone.  The Company’s debt collectors, in turn, attempted to trick and coerce thousands of victims throughout the United States into paying millions of dollars in consumer debts through a variety of false statements and false threats.  Among other things, STOKES misrepresented to victims that he would have a bench warrant issued for their arrest, would contact the “county” to initiate legal proceedings, and was not calling from a collection agency.  Among other things, THOMAS misrepresented to victims that he was a “process server” from “U.S. Couriers” with “legal documents” to serve on victims, that victims had committed “check fraud,” and that THOMAS was calling from an “arbitration firm.”

In total, from about January 2010 through November 2014, the Company collected over $31 million from thousands of victims across the United States.  Of the money that the Company took in from victims, approximately $1.5 million was paid in cash to SESSUM and Travell Thomas, approximately $1.4 million was withdrawn from banks and ATMs, and tens of thousands of dollars were used to pay for SESSUM’s personal expenses.

*                *                *

SESSUM, 40, of Buffalo, New York, and STOKES, 39, of Charlotte, North Carolina, each pled guilty to one count of conspiracy to commit wire fraud and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison and three years of supervised release.  The maximum potential sentences in this case are prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.  SESSUM is scheduled to be sentenced by Judge Failla on March 1, 2017, at 3:00 p.m.   STOKES is scheduled to be sentenced by Judge Failla on May 18, 2017.

In addition to his prison term, THOMAS, 34, of Buffalo, New York, was sentenced to three years of supervised release, and ordered to pay forfeiture in the amount of $896,605.03.

In total, 14 individuals associated with the Company have pled guilty to defrauding consumers as part of this debt collection scheme.  In addition to SESSUM, STOKES, and THOMAS, co-owner and chief executive officer Travell Thomas, former Company mangers Heather Gasta, Mark Lavin, and John Salatino, and debt collectors Jessica Mann, Charles Starks, William Clark, Anthony Caba, Columbus Simmons, Michael Calandra, and Jennifer Sherk, each pled guilty to conspiracy to commit wire fraud.

Starks, Clark, Calandra, and Mann were sentenced by Judge Failla to prison terms of 37 months, 30 months, 15 months, and one year and one day, respectively.  The sentencing of the other defendants who have pled guilty is pending. 

Mr. Bharara praised the efforts of the Office’s Criminal Investigators and he thanked the Federal Trade Commission for its assistance in the case.

The prosecution of this case is being overseen by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Edward A. Imperatore, Jennifer L. Beidel, and Jordan L. Estes are in charge of the prosecution.

There will be a press conference today to announce charges against Gary Tanner, a former executive at Valeant Pharmaceuticals International, Inc., and Andrew Davenport, the former Chief Executive Officer of Philidor Rx Services LLC, for engaging in a multi-million dollar fraud and kickback scheme.   

WHO:             Preet Bharara, United States Attorney for the Southern District of New York

                       William F. Sweeney, Special Agent-in-Charge of the New York Field Office of the Federal Bureau of Investigation

WHAT:           Press Conference

WHEN:           Thursday, November 17, 2016

12:00 p.m.

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

                             1 St. Andrew’s Plaza

                        New York, NY 10007

CONTACT:    James Margolin, Dawn Dearden, Nicholas Biase

(212) 637-2600

NOTE:            Please silence all cell phones, PDAs, and pagers before start of press conference.

Preet Bharara, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the arrests of GARY TANNER, a former executive at Valeant Pharmaceuticals International, Inc. (“Valeant”), and ANDREW DAVENPORT, the former Chief Executive Officer (“CEO”) of Philidor Rx Services LLC (“Philidor”), for engaging in a multimillion-dollar fraud and kickback scheme.  TANNER was arrested in Gilbert, Arizona, and will be presented later today before a Magistrate Judge in Phoenix.  DAVENPORT was arrested this morning in Haverford, Pennsylvania, and will be presented later today before a Magistrate Judge in Philadelphia. 

U.S. Attorney Preet Bharara said:  “Today, we charge corporate fraud at Valeant Pharmaceuticals.  Gary Tanner, a former Valeant executive, and Andrew Davenport, the CEO of Philidor, allegedly concocted a fraudulent scheme to illegally use Philidor as a vehicle for personal profit and self-dealing.  Their alleged kickback scheme illegally converted Valeant shareholder money into their own personal nest eggs.  As alleged, while purporting to be arms-length business counterparts, the two men were, in fact, partners in crime.”

FBI Assistant Director-in-Charge William F. Sweeney said:  “As shareholders, we should be able to put our faith in those responsible for making decisions on behalf of our investments. We should be able to rely on them for placing our best interests above their own. But as evidenced by today’s charges, our right to honest services is sometimes exploited by those who engage in kickback schemes that pose significant risks to investors.”

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

Valeant is a publicly traded pharmaceutical manufacturer headquartered in Canada, with its principal place of business in New Jersey.  Philidor was a specialty mail-order pharmacy that was formed in or about January 2013 with the assistance of Valeant, including the provision of financing, personnel, and supervision.  During the course of Philidor’s existence, at least 90 percent of the drugs dispensed by Philidor were Valeant-branded drugs. 

TANNER was the Valeant executive primarily responsible for the Philidor relationship, as well as Valeant’s alternative fulfillment (“AF”) program more generally.  Valeant’s AF program attempted to cause doctors to prescribe, and patients to purchase, Valeant Pharmaceuticals instead of generic substitutes or alternatives by helping obtain insurance coverage for those drugs or providing other incentives for prescription and purchase of Valeant drugs.  As part of his work at Valeant, TANNER interacted directly with Philidor’s executives, including DAVENPORT, and senior Valeant executives. 

Despite being well compensated by Valeant to represent its interests, TANNER used Valeant human and financial resources to benefit Philidor and its largest owner, DAVENPORT, in a variety of ways, including by arranging for Philidor to receive $2 million in Valeant financing, as well as the support of numerous Valeant staff, including a Valeant-paid sales force that was dedicated to promoting sales through Philidor.  DAVENPORT recognized the importance of TANNER’s support to Philidor’s success, stating in an email to TANNER concerning Philidor: “We both know that this endeavor would face a nearly insurmountable uphill struggle to succeed in the present Valeant environment without your confident support and the efforts of your team.”    

Some of TANNER’s actions benefiting Philidor placed Valeant and its shareholders at risk.  Among other things, TANNER resisted efforts to diversify Valeant’s AF program to include other commercially available alternatives to Philidor, increasing Valeant’s dependence on Philidor and what is known as “payor risk,” i.e., the risk that actions by insurers and other payors concerning Philidor could adversely affect Valeant’s financial performance.  When asked directly by senior Valeant executives whether he had a financial interest in Philidor, TANNER falsely denied having any such interests.

In the fall of 2014, TANNER and DAVENPORT took advantage of Valeant’s dependence on Philidor to help orchestrate Valeant’s agreement to purchase an option to acquire Philidor (the “Option Agreement”) at a cost to Valeant shareholders of almost $300 million, including $100 million in up-front payments, a $33 million time-based milestone payment, and potential future multimillion-dollar sales-based milestone payments. 

Even while TANNER was repeatedly certifying that he was in full compliance with Valeant’s Standards of Business Conduct, which prohibited any conflicts of interest without full disclosure and approval by company management, TANNER and DAVENPORT were making preparations for TANNER to receive multimillion-dollar kickbacks out of the sums paid by Valeant for the Philidor option.  Among other things, TANNER and DAVENPORT set up shell companies and shell company bank accounts to be used to launder and distribute the kickbacks.  While these preparations were underway, TANNER served as an adviser to his employer Valeant in its negotiations with DAVENPORT over the Option Agreement, even while he secretly advised DAVENPORT on his negotiations with Valeant using a secret Philidor email account that TANNER maintained in the name of “Brian Wilson.”

When the Option Agreement was signed in December 2010, Valeant sent $100 million to the bank accounts of the beneficial owners of Philidor, including DAVENPORT; that sum was followed soon thereafter by the $33 million time-based milestone payment.  Over $40 million of those sums were sent to entities that DAVENPORT controlled, including to an entity called “End Game LP.”  DAVENPORT kicked back close to $10 million of that sum to TANNER.  Those sums were laundered through shell company bank accounts, including a company TANNER had created in the name of Befrielse Consolidated, LLC (“Befrielse”).  TANNER used the kickback funds to purchase a new home, to pay for personal expenses, retire debts, and make investments, among other things.  DAVENPORT used his share of the proceeds to purchase tens of millions of dollars in securities and to purchase luxury goods and items, including the installation of a $50,000 custom wine cellar. 

After the Option Agreement was executed, TANNER continued to use his position at Valeant to advance the interests of Philidor and DAVENPORT, including by expanding the number of Valeant products sold through Philidor and resisting Valeant’s efforts to collect cash from Philidor that Valeant was entitled to collect.  In communications concerning the scheme, using TANNER’s secret Brian Wilson email account, DAVENPORT discussed with TANNER how TANNER would secretly continue to promote DAVENPORT’s interests, even while he purported to represent Valeant’s interests as the Valeant executive responsible for Philidor.  Among other things, DAVENPORT stated that he pictured his and TANNER’s “butch and sundance ride into the sunset (or off the cliff as in the flick),” to which TANNER responded, using the secret Brian Wilson account: “[G]ave me a good chuckle when I just saw it. Will have to keep playing the game :).”  

Neither the nature of Valeant’s relationship to Philidor, nor Valeant’s increasing dependence on Philidor to achieve its sales and profitability goals, was disclosed to the public by Valeant until investor websites and news organizations revealed suspect aspects of Philidor’s operations and Valeant’s connection to Philidor in or about October 2015.  Following and in connection with these revelations, several insurers and other payors terminated their contracts with Philidor, resulting in realization of the payor risk that senior executives at Valeant had sought to avoid by diversifying away from Philidor, and Valeant’s stock price declined dramatically.  

*                      *                      *

TANNER, 39, of Gilbert, Arizona, and DAVENPORT, 48, of Haverford, Pennsylvania, are each charged in four counts: one count of conspiracy to commit honest services wire fraud; one count of honest services wire fraud; one count of conspiring to violate the Travel Act; and one count of conspiring to commit money laundering.  Counts One, Two, and Four each carry a maximum sentence of 20 years in prison.  Count Three 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 defendants will be determined by the judge.

Mr. Bharara praised the work of the FBI.  He further thanked the Securities and Exchange Commission for its cooperation and assistance in this investigation.  He added that the FBI’s investigation was ongoing. 

The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations.  Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants.  For more information on the task force, please visit www.StopFraud.gov.       

This case is being handled by the Office’s Securities and Commodities Fraud Task Force and the Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Howard Master, Robert Allen, Richard Cooper, and Ian McGinley are in charge of the prosecution.   

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

[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.

Preet Bharara, the United States Attorney for the Southern District of New York, and Angel M. Melendez, Special Agent in Charge of the New York Field Office of U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), today announced the unsealing of an Indictment and a Complaint, which together charge a total of 10 defendants with conspiring to conceal, harbor, and shield from detection, and move and transport, illegal aliens across the Mexico-United States border and into the New York City area.  Seven defendants were taken into custody today; three defendants remain at large.  The six defendants who were arrested in Texas will be presented and arraigned before United States Magistrate Judges in the Southern and Western Districts of Texas; one of the defendants, CARLOS SANTANA, was arrested in Brooklyn, New York, and will be presented before U.S. Magistrate Judge Gabriel W. Gorenstein later today.  

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

United States v. Maria del Carmen Vasquez et al., 16 Cr. 708

From in or about June 2015 up to and including about October 2016, MARIA DEL CARMEN VASQUEZ, JORGE VASQUEZ-RAMIREZ, JUAN JOSE JIMENEZ BRAVO, MAYTE ZUNIGA BRACHO, ENARDYS FERNANDEZ, CARLOS SANTANA, JORGE GONZALEZ, and ELSA GUADALUPE DURAN conspired to conceal, harbor, and shield from detection, and move and transport, aliens in knowing and reckless disregard of the fact that the aliens had come to, entered, and remained in the United States in violation of law. 

During the course of the conspiracy, the defendants each performed various overt acts in furtherance of the conspiracy, including traveling from Texas through the Southern District of New York to transport aliens and to pick up money, making hotel arrangements for aliens, and renting cars for use in transporting aliens to New York City.  Certain defendants also attempted to transport aliens across the United States-Mexico border and into Texas.

United States v. Luis Batista Casola et al., 16 Mag. 7320

Similarly, in or about July 2016, LUIS BATISTA CASOLA and YOENDRIS BATISTA MATOS conspired to conceal, harbor, and shield from detection, and move and transport, aliens in knowing and reckless disregard of the fact that the aliens had come to, entered, and remained in the United States in violation of law.  During the course of the conspiracy, the defendants accepted money from aliens in exchange for arranging the aliens’ transport from Texas to New York City and other locations in and around the United States.

*                      *                     *

Each defendant in United States v. Vasquez, et al. and United States v. Casola et al. faces a maximum term of 10 years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

A chart containing the names, ages, and residence information of the defendants who were arrested today is attached.

Mr. Bharara praised the outstanding investigative work of HSI, and expressed gratitude for the coordinated efforts of the Homeland Security Investigation Offices in Laredo, McAllen, San Antonio, and Austin, Texas; as well as the HSI Attaché offices in the Dominican Republic and Mexico, Customs and Border Patrol, and the Department of Homeland Security’s Joint Task Force – Investigations.  Mr. Bharara also thanked the U.S. Attorney’s Offices in the Southern and Western Districts of Texas for their assistance and support of the investigation.  Mr. Bharara also expressed appreciation for the assistance provided by the Dominican Republic and Mexico; in particular, he recognized the efforts of the Procuraduría General de la República and the Transnational Criminal Investigative Units of the National Police.

These cases are being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Benet Kearney, Frank Balsamello, and Jessica Fender are in charge of the prosecutions.

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

NAME

AGE

RESIDENCE

MARIA DEL CARMEN VASQUEZ

41

San Antonio, TX

JORGE VASQUEZ-RAMIREZ

39

San Antonio, TX

JUAN JOSE JIMENEZ BRAVO, a/k/a “Juan Carlos”

34

Laredo, TX

MAYTE ZUNIGA BRACHO

36

McAllen, TX

ENARDYS FERNANDEZ

42

Round Rock, TX

CARLOS SANTANA

42

Brooklyn

JORGE GONZALEZ, a/k/a “Jorgito,” a/k/a “Barbie”

46

Laredo, TX

ELSA GUADALUPE DURAN, a/k/a “Elsa Cruz”

48

Laredo, TX

United States v. Luis Batista Casola et al.

NAME

AGE

RESIDENCE

LUIS BATISTA CASOLA, a/k/a “Cuba,”

48

Laredo, TX

YOENDRIS BATISTA MATOS

28

Laredo, TX

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

Preet Bharara, the United States Attorney for the Southern District of New York, and Mary B. McCord, Acting Assistant Attorney General for the National Security Division, announced that AHMAD KHAN RAHIMI, a/k/a “Ahmad Rahami,” was charged today in Manhattan federal court in an eight-count Indictment for offenses related to his alleged execution and attempted execution of bombings in New York City on September 17, 2016.  The case is assigned to U.S. District Judge Richard M. Berman.  Rahimi will be arraigned before Judge Berman tomorrow at 1:00 p.m.

Manhattan U.S. Attorney Preet Bharara said:  “Two months ago, Ahmad Khan Rahimi allegedly planted bombs in the heart of Manhattan and in New Jersey.  The bomb that exploded in Chelsea shattered windows hundreds of yards away and propelled a 100-pound dumpster over 120 feet, injuring over 30 people.  Now indicted by a grand jury, Rahimi will face justice in a federal court for his alleged violent acts of terrorism.”

Acting Assistant Attorney General Mary B. McCord said:  “Ahmad Khan Rahimi has been indicted in New York and separately charged in New Jersey for allegedly planting and detonating bombs that resulted in numerous injuries.  It was through world class investigative work that the defendant was identified and arrested before he could do any more harm.  Pursuing those who seek to conduct attacks on our homeland will always remain the highest priority of the National Security Division.”

As alleged in the criminal Complaint that was filed on September 20, 2016, and the Indictment that was filed today[1]:

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 – consisting of a high explosive main charge – detonated, causing injuries to over 30 people and multiple millions of dollars of 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 in a dumpster.  The explosion propelled the more than 100-pound dumpster 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 located by law enforcement.  The 27th Street Bomb, which failed to detonate, 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 also was planted by RAHIMI, 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 on account of other law enforcement activity. 

On September 18, 2016, at approximately 8:40 p.m., 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 attempt 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 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, and Nidal Hasan, who shot and killed 13 people in Foot Hood, Texas.

*                *                *

RAHIMI, 28, of Elizabeth, New Jersey, is charged in the Indictment with one count of using a weapon of mass destruction, in violation of 18 U.S.C. § 2332a, which carries a maximum sentence of life in prison; one count of attempting to use a weapon of mass destruction, in violation of 18 U.S.C. § 2332a, which carries a maximum sentence of life in prison; one count of bombing a place of public use, in violation of 18 U.S.C. § 2332f, which carries a maximum sentence of life in prison; one count of destroying property by means of fire or explosive, in violation of 18 U.S.C. § 844(i), which carries a maximum sentence of 20 years in prison; one count of attempting to destroy property by means of fire or explosive, in violation of 18 U.S.C. § 844(i), which carries a maximum sentence of 20 years in prison; one count of interstate transportation and receipt of explosives, in violation of 18 U.S.C. § 844(d), 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, in violation of 18 U.S.C. § 924(c), each of which count carries a mandatory minimum consecutive sentence of 30 years in prison and, if convicted of both counts, a mandatory sentence of life in prison.

The statutory maximum 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 pending charges 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. Bharara praised the outstanding efforts of the Federal Bureau of Investigation’s New York Joint Terrorism Task Force, which principally consists of special agents from the Federal Bureau of Investigation and detectives from the New York City Police Department.  Mr. Bharara 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 Nicholas J. Lewin, 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.

The charges contained in the Complaint and 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 Complaint and the Indictment, and the description of the Complaint and Indictment set forth herein, constitute only allegations and every fact described should be treated as an allegation.

Preet Bharara, the United States Attorney for the Southern District of New York, and Vanita Gupta, the Principal Deputy Assistant Attorney General for Civil Rights for the Department of Justice, announced today that the United States has entered into an agreement with THE CITY OF YONKERS (the “City”) and THE CITY OF YONKERS POLICE DEPARTMENT (“YPD”), which is the product of the United States’ comprehensive investigation of YPD police practices and furthers the parties’ commitment to constitutional policing.   

U.S. Attorney Preet Bharara said: “This agreement ensures that the Yonkers Police Department polices in a way that keeps its citizens safe, while protecting their constitutional rights.  The measures put in place with this agreement, including clear and reasonable use-of-force policies and guidance on how to properly evaluate and respond to use-of-force incidents, will make Yonkers safer for citizens and police alike.  We thank the Yonkers Police Department and the City of Yonkers for cooperating with our investigation, and for joining our effort to ensure that the Yonkers Police Department protects its citizens not only from physical harm, but also from violations of their constitutional rights.”

Head of the Civil Rights Division Vanita Gupta said: “This agreement will ensure that the Yonkers Police Department continues to advance constitutional, effective and community-oriented policing.  Through clear policy guidance, data analysis and accountability systems, we believe these reforms will make the entire community safer and strengthen public trust in the police.”

The agreement is the result of the United States’ comprehensive investigation of YPD police practices that began in August 2007 under the Violent Crime Control and Law Enforcement Act of 1994, and the Omnibus Crime Control and Safe Streets Act of 1968.  In June 2009, the United States sent the City a technical assistance letter that identified necessary reforms to YPD practices and policies in the areas of use of force, citizen complaints, investigations, supervisory oversight, and training.  After receiving the United States’ technical assistance letter, the City and YPD made substantial changes to its policies and procedures.  The agreement implements and further improves those policies and procedures and addresses the United States’ remaining concerns.  Under the agreement, the YPD will, among other things:

• Maintain and implement clear use-of-force policies that require officers to use only that force which is reasonable in light of the resistance encountered and to de-escalate force immediately as resistance decreases, and provide that the use of unreasonable force may subject officers to discipline, possible criminal prosecution, and/or civil liability.

• Thoroughly and timely evaluate, document, and review use-of-force incidents, arrests, and citizen complaints of officer misconduct.

• Maintain and implement clear policies on investigatory stops and detentions, which permit investigatory stops and detentions only where the officer has the reasonable suspicion, under the totality of the circumstances, that criminal activity or a violation of law has been or is about to be committed.

• Develop a system to collect data on all investigatory stops and searches, except stops purely for traffic enforcement, whether or not they result in an arrest or issuance of a citation.  The system shall require recording of, among other things, the officer’s name and badge number; the subject’s apparent race, ethnicity, gender and age; and the reason for the stop, including a description of the facts creating reasonable suspicion.

• Permit onlookers or bystanders to witness, observe, record, and/or comment on officer conduct, including stops, detentions, searches, arrests, or uses of force, with some limitations.

• Continue to develop and implement a computerized risk management system to identify and respond to potentially problematic incidents, officers, units, training, and tactics. 

• Continue to maintain and build community relationships and engage constructively with the community to ensure collaborative problem-solving efforts and to increase community confidence in the Department, including by developing a survey to measure officer outreach to a cross-section of community members in each precinct, with an emphasis on community partnerships and problem-solving strategies that build mutual respect and trusting relationships with community stakeholders. 

• Ensure that officers and supervisors receive appropriate levels of training in constitutional policing.

The agreement also provides that consultants retained by the United States will conduct compliance reviews to ensure that YPD has implemented the measures required by the agreement, and issue public reports of those compliance reviews. 

This case is being handled by Assistant United States Attorney Tomoko Onozawa of the Office’s Civil Rights Unit and the Special Litigation Section of the Civil Rights Division of the Department of Justice. 

The Justice Department announced today that it has reached an agreement with the city of Yonkers, New York, and the Yonkers Police Department (YPD) to resolve the department’s investigation of YPD and ensure constitutional policing.

The agreement is the result of the department’s investigation of YPD under the Violent Crime Control and Law Enforcement Act of 1994 and the Omnibus Crime Control and Safe Streets Act of 1968.  In June 2009, the United States sent the city a technical assistance letter that identified necessary reforms to YPD practices and policies in the areas of use of force, civilian complaints, investigations, supervisory oversight and training.  After receiving the department’s technical assistance letter, the city and YPD made substantial changes to its policies and procedures.  This agreement implements and further improves those policies and procedures and addresses the department’s remaining concerns. 

“This agreement will ensure that the Yonkers Police Department continues to advance constitutional, effective and community-oriented policing,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division.  “Through clear policy guidance, data analysis and accountability systems, we believe these reforms will make the entire community safer and strengthen public trust in the police.”

“This agreement ensures that the Yonkers Police Department polices in a way that keeps its citizens safe, while protecting their constitutional rights,” said U.S. Attorney Preet Bharara of the Southern District of New York.  “The measures put in place with this agreement, including clear and reasonable use-of-force policies and guidance on how to properly evaluate and respond to use-of-force incidents, will make Yonkers safer for citizens and police alike.  We thank the Yonkers Police Department and the city of Yonkers for cooperating with our investigation, and for joining our effort to ensure that the Yonkers Police Department protects its citizens not only from physical harm, but also from violations of their constitutional rights.”

The agreement is carefully tailored to address the department’s remaining concerns while also taking into account and seeking to build upon the positive reforms YPD has already made following the department’s investigation.  Under the agreement, the YPD will, among other things:

• maintain and implement clear policies to avoid using excessive and unreasonable force and timely document and review uses of force;
• maintain and implement clear and appropriate policies on investigatory stops and detentions, as well as searches and arrests;
• develop a system to collect data on all investigatory stops and searches, except stops purely for traffic enforcement, whether or not they result in an arrest or issuance of a citation;
• permit onlookers or bystanders to witness, observe, record and/or comment on officer conduct, including stops, detentions, searches, arrests or uses of force, consistent with applicable law and best practices;
• ensure the transparency and accessibility of the misconduct complaint process and investigate all misconduct complaints fully and fairly;
• continue to develop and implement a computerized risk management system to identify and respond to potentially problematic incidents, officers, units, training and tactics;  
• continue to maintain and build community relationships and engage constructively with the community to ensure collaborative problem-solving efforts and to increase community confidence in the department;
• develop a survey to measure officer outreach to a cross-section of community members in each precinct, with an emphasis on community partnerships and problem-solving strategies that build mutual respect and trusting relationships with community stakeholders; and
• ensure that officers and supervisors receive appropriate levels of training in constitutional policing.

The agreement also provides that consultants retained by the department will conduct compliance reviews to ensure that YPD has implemented the measures required by the agreement and issue public reports of those compliance reviews.

This case is being handled by the Civil Rights Division’s Special Litigation Section and the U.S. Attorney’s Office of the Southern District of New York.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that SCOTT A. BEATTY pled guilty in Manhattan federal court today to commodities fraud in connection with his scheme to defraud at least 49 investors of more than $825,000 through a scheme in which BEATTY solicited investments for off-exchange foreign currency contracts known as “forex.”  BEATTY was arrested on April 21, 2016, and pled guilty today before United States Magistrate Judge Sarah Netburn. 

U.S. Attorney Preet Bharara said:  “Scott Beatty admitted today that he purposely cheated dozens of investors out of hundreds of thousands of dollars.  He lied about his abilities to generate returns on foreign exchange investments, and then used investors’ money to pay his own bills and to pay back other investors.”

According to the Complaint, the Information, and other statements made in open court:

From January 2011 through June 2014, BEATTY, through his investment companies Peak Capital Management Group, Inc., and Peak Capital Group, Inc., engaged in a fraudulent scheme to obtain investments from individual investors purportedly for the purpose of trading in forex.  In connection with the scheme, BEATTY made a series of false and misleading representations to investors, on a website he created and maintained (the “Website”) and through email, including: (a) that BEATTY was using investors’ funds to conduct forex trading when, in fact, BEATTY used just $125,000 of the $825,00 in investor funds for trading; (b); that BEATTY’s forex trading was generating consistently positive annualized returns as high as 43.9 percent when, in fact, his limited trading was consistently unsuccessful; and (c) that BEATTY had created individual accounts for each investor, in which BEATTY purported to execute forex trading when, in fact, BEATTY failed to create such individualized accounts.  In addition to false and misleading representations made on the Website and over email, BEATTY generated wholly fictitious account statements that he provided to his clients through a client portal on the Website.

As a result of these misrepresentations, BEATTY obtained more than $825,000 in investments from more than 49 investors, the majority of whom were Japanese citizens who were not authorized to trade leveraged, margined, or financed forex in individually managed accounts under the Commodity Exchange Act.  Of the money he did not lose in commodities trading, BEATTY routinely converted investor funds to his own use in the form of cash withdrawals and debit card purchases, including at least $517,000 for, among other things, BEATTY’s personal expenses such as restaurant bills and retail purchases.  In addition, to hide his trading losses and continue to fund his personal lifestyle, BEATTY used new investor funds to pay back other investors in a Ponzi-like fashion.  In total, BEATTY distributed approximately $184,000 back to investors. 

*                      *                      *

BEATTY, 41, of Roy, Utah, pled guilty to one count of commodities fraud, which carries a maximum sentence of 10 years in prison and a maximum fine of $1 million, or twice the gross gain or loss from the offense.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  The defendant will be sentenced at a future date by United States District Judge Paul G. Gardephe.

Mr. Bharara praised the work of the Federal Bureau of Investigation and thanked the U.S. Commodity Futures Trading Commission for their assistance with the investigation.  

The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations.  Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants.  For more information on the task force, please visit www.StopFraud.gov.       

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

“Ahmad Khan Rahami, the alleged Chelsea bomber, was brought today to Manhattan to face terrorism charges.  Allegedly driven by a commitment to violent jihad, Rahami planted bombs in the heart of Manhattan and in New Jersey.  One of the bombs exploded on a Saturday evening in Chelsea, injuring over 30 people and shattering windows hundreds of yards away.  For his alleged acts of terror, Rahami will now face justice in a federal courthouse just blocks south of where he allegedly planted his bombs.  Rahami will be presented on his federal terrorism charges today in the Southern District of New York before United States Magistrate Judge Sarah Netburn.”

Preet Bharara, the United States Attorney for the Southern District of New York, announced that pharmacist KIAN GOHARI was convicted yesterday of narcotics and healthcare fraud charges for his role in a conspiracy to distribute medically unnecessary oxycodone pills and fraudulently bill Medicaid for those oxycodone pills.  The jury convicted GOHARI following an eight-day trial before U.S. District Judge Jed S. Rakoff.

Manhattan U.S. Attorney Preet Bharara said: “A unanimous jury found that Kian Gohari had turned his Brooklyn pharmacy into an illegal oxycodone distribution mill, unlawfully diverting tens of thousands of oxycodone pills for resale.  This Office and our law enforcement partners are committed to stemming the illegal flow of oxycodone, a primary driver of opiate abuse in our country.”

According to court papers and evidence admitted at trial:

From 2012 to 2015, KIAN GOHARI, who owned Ekwunife Pharmacy in Brooklyn, New York, distributed over 25,000 medically unnecessary oxycodone pills and fraudulently billed the majority of those pills to Medicaid.  GOHARI had an agreement with a co-conspirator, whereby GOHARI would distribute the oxycodone pills only if the co-conspirator brought GOHARI prescriptions for high-end medications – many of which were also medically unnecessary – such as HIV medications, psychiatric medications, and expensive pain gels.  GOHARI then billed Medicaid for those prescriptions for hundreds of thousands of dollars.  The co-conspirator subsequently sold the oxycodone pills in Brooklyn and Manhattan.

For these activities, GOHARI was convicted of one count of conspiracy to distribute narcotics and one count of conspiracy to commit healthcare fraud.  GOHARI faces a maximum sentence of 30 years in prison.  GOHARI is scheduled to be sentenced on March 9, 2016, before Judge Rakoff.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. 

U.S. Attorney Bharara praised the outstanding investigative work of the Federal Bureau of Investigation’s New York Health Care Fraud Task Force, which includes investigators from the FBI, the NYPD, and other federal, state, and local law enforcement agencies.

The case is being prosecuted by the Office’s Narcotics Unit.  Assistant U.S. Attorneys Jordan Estes, Jason A. Richman, and Edward Diskant are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that JOHN TODD WILLIAMS, a/k/a “JT,” a/k/a “Joe Steele,” was sentenced today to five years in prison for perpetrating a multi-year debt collection fraud scheme that defrauded more than 6,000 victims around the country out of millions of dollars.  WILLIAMS owned and operated a debt collection company based in Norcross, Georgia, called WILLIAMS, SCOTT & ASSOCIATES, a/k/a “WSA,” a/k/a “Warrant Services Association,” (“WSA”).  WILLIAMS and his co-conspirators, whom he employed as debt collectors at WSA, tricked and coerced victims into making payments to WSA by making false threats and telling a host of lies.  These threats included falsely claiming that warrants had been issued for the victims’ arrest or that criminal charges were pending against them.  A jury convicted WILLIAMS of conspiracy to commit wire fraud on July 12, 2016, after a five-day trial.  WILLIAMS was sentenced today in Manhattan federal court by the Honorable Richard J. Sullivan, who also presided over WILLIAMS’s trial.

Manhattan U.S. Attorney Preet Bharara said:  “As the jury found in convicting him, John Todd Williams was the ring-leader of a ruthless and predatory fraudulent debt collection operation that victimized thousands of people across the nation.  His criminal network of collectors used lies and threats, including false claims of being law enforcement who would arrest them, to get vulnerable victims to pay up.  For his callous crime, Williams himself now has been sentenced to prison.”

According to the evidence presented at trial:

Between approximately 2009 and May 2014, employees working for WSA, led by WILLIAMS, routinely attempted to trick and coerce thousands of victims throughout the United States into paying millions of dollars in consumer debts through a variety of false statements and false threats.  Employees of WSA typically used aliases, sometimes referring to themselves as “Detective” or “Investigator,” falsely advised consumers they had committed purported crimes such as “check fraud” or “depository check fraud,” and told consumers that if they failed to make immediate payments to WSA to resolve the matters, warrants would be issued for their arrest.  WSA employees also falsely claimed that WSA had contracts with, or was otherwise affiliated with, certain federal or local law enforcement agencies, including the Department of Justice and the Federal Bureau of Investigation.

Among other false statements, WSA employees also claimed that WSA was a law firm or otherwise worked with lawyers, and that they would have the victims’ driver’s licenses suspended if those victims did not make payment to WSA.  To falsely create an appearance of legitimacy, and further trick their victims into making payments, WSA employees routinely used legal terminology to invent legitimate-sounding, but completely bogus, explanations for the supposed imminent arrest of the victims, including for example, that the “statute of limitations” on the victims’ “civil legal rights” had expired and therefore the matter was now a criminal matter that could be resolved only by voluntary payment to WSA, or arrest.  WILLIAMS and WSA employees also attempted to collect debts from victims who had already paid off their loans.  When victims told WSA employees that they had already paid their debts, they were told, at WILLIAMS’s instruction, that “you can’t pay a debt with a debt instrument,” i.e., a credit card.

*                *                *

In addition to the prison term, Judge Sullivan ordered WILLIAMS, 50, of Norcross, Georgia, to pay over $3.9 million in restitution to his victims.           

Mr. Bharara praised the outstanding investigative work of the FBI.  He also thanked the Consumer Financial Protection Bureau (“CFPB”) for referring this case to this Office, and the Federal Trade Commission (“FTC”) for its assistance in this investigation.  Mr. Bharara also acknowledged with appreciation the extraordinary partnership between this Office and both the FTC and CFPB in the Office’s ongoing effort to combat consumer fraud.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

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

If you wish to report a crime by another debt collector, you may contact the FTC at 1-877-FTC-HELP.  For guidance on coping with debt, and information about dealing with debt collection companies in particular, consider the following link to publications issued by the Federal Trade Commission:

http://www.consumer.ftc.gov/articles/0149-debt-collection

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Sarah E. Paul and Benet J. Kearney represented the Government at trial and at sentencing.

Preet Bharara, the United States Attorney for the Southern District of New York, 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 HABIBOLLAH ZAREI, a/k/a “Adasi Habik,” a/k/a “Emre Polatkan,” BORA DENIZ, NESTEREN ZAREI DENIZ, and ABDULLAH EVREN ERDEM with using the U.S. financial system to conduct hundreds of millions of dollars’ worth of transactions on behalf of the Government of Iran and other Iranian entities, which were barred by United States sanctions; laundering funds in connection with those illegal transactions; and defrauding several financial institutions by concealing the true nature of these transactions.  The four defendants are alleged to have orchestrated fraudulent transactions that were intended to hide the fact that the transactions were for the benefit of Iranian entities and to have laundered funds in connection with that illegal activity.  The case is assigned to United States District Judge Crotty.

All four defendants currently remain at large.

Manhattan U.S. Attorney Preet Bharara stated:  “As alleged, these defendants conspired and schemed to hide millions of dollars’ of financial transactions specifically to evade U.S. sanctions laws.  These alleged transactions were criminal violations of long-standing economic sanctions against the government of Iran, and warrant strong legal action.  This Office and its law enforcement partners are committed to policing sanctions laws designed to protect the security of the United States.”

Assistant Director-in-Charge William F. Sweeney Jr. stated: “The United States has stringent laws against dealings with Iran because of the threat posed to our national security.  The subjects named in this case allegedly concealed how they were aiding entities in Iran, and knowingly evaded sanctions.  Our job in the FBI is to make sure entities with ties to the Iranian government can’t use our banking and businesses communities to unwittingly harm our country by hiding their origin and intent.”

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

Beginning in 1979, the President has repeatedly found that the situation in Iran constitutes an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States and declared a national emergency to deal with the threat.  Pursuant to these Presidential declarations, the United States has instituted a host of economic sanctions against Iran and Iranian entities pursuant to the International Emergency Economic Powers Act (the “IEEPA”).  This sanctions regime prohibits, among other things, financial transactions involving the United States or United States persons that were intended for the Government or Iran or Iranian entities. 

Between at 2014 and 2016, HABIBOLLAH ZAREI, BORA DENIZ, NESTEREN ZAREI DENIZ, and ERDEM conspired to conduct international financial transactions on behalf of and for the benefit of Iranian businesses.  As part of the scheme, the defendants caused U.S. banks to conduct at least $100,000,000 in international financial transfers in furtherance of Iranian steel and copper transactions.  Specifically, the defendants facilitated the export of thousands of tons of copper and steel from Iran, routing the financial transactions linked to these exports through U.S. financial institutions.  Using shell companies, the defendants concealed from the U.S. banks, however, the fact that these transactions were related to metal exports from Iran.   

*                *                *

HABIBOLLAH ZAREI, 67, is a resident of Turkey and dual citizen of Turkey and Iran.  BORA DENIZ, 44, is a resident and citizen of Turkey.  NESTEREN ZAREI DENIZ, 39, is HABIBOLLAH ZAREI’s daughter and BORA DENIZ’s wife, and is a resident of Turkey and dual citizen of Turkey and Iran.  ERDEM, 32, is HABIBOLLAH ZAREI’s son-in-law and a resident and citizen of Turkey.  Each defendant is charged with conspiracy to defraud the United States, which carries a maximum sentence of five years in prison; conspiracy to violate the IEEPA, which carries a maximum sentence of 20 years in prison; conspiracy to commit bank fraud, which carries a maximum sentence of 30 years in prison; and conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the outstanding investigative work of the FBI and its New York Field Office, Counterintelligence Division, and the Department of Justice, National Security Division, Counterintelligence and Export Control Section.

The prosecution of this case is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant United States Attorneys Michael D. Lockard and Sidhardha Kamaraju are in charge of the prosecution, with assistance from Elizabeth Cannon of the Counterintelligence and Export Control Section.  Assistant United States Attorney Jaimie Nawaday is principally responsible for the forfeiture aspects of the case.

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that ALEX LICHTENSTEIN, a/k/a “Shaya,” pled guilty to bribery and offering a bribe in connection with his efforts to pay bribes to obtain gun licenses through the New York City Police Department’s (“NYPD”) License Division.  LICHTENSTEIN pled guilty before United States District Judge Sidney H. Stein today. 

Manhattan U.S. Attorney Preet Bharara said:  “As he admitted today, Alex Lichtenstein acted as a corrupt gun ‘expediter,’ bribing police officers to obtain gun licenses, offering thousands of dollars per license.  In a recorded conversation, Lichtenstein bragged of using his NYPD connections to obtain 150 gun licenses.  This type of corruption not only undermines public confidence in law enforcement, but it undermines public safety.  And it cannot be tolerated.  I thank the FBI and the NYPD for their dedication and commitment to this case and this important investigation.”           

According to the Complaint and Indictment filed in Manhattan federal court and statements made during the plea proceeding:

LICHTENSTEIN is a member of the Borough Park Shomrim, a volunteer, ostensibly unarmed, Orthodox Jewish patrol society whose mission includes combating criminal activity and locating missing people.  LICHTENSTEIN ran a business charging clients thousands of dollars to expedite their gun license applications.  LICHTENSTEIN charged his clients as much as $18,000 per gun license.

In April 2016, LICHTENSTEIN approached an officer for the NYPD and offered the officer cash bribes in order for the officer to help LICHTENSTEIN obtain gun licenses for LICHTENSTEIN’s customers from the NYPD’s License Division.  The License Division is responsible for reviewing, investigating, and approving or disapproving all applications for gun licenses in New York City.  The License Division receives approximately 5,000 applications for gun licenses per year.  LICHTENSTEIN told the officer that he charged customers thousands of dollars to help obtain License Division approval for their gun license applications, and that he was able to get the licenses approved using his own connections in the License Division, although those connections had recently cut him out. 

The officer did not agree to assist LICHTENSTEIN, and reported the encounter to the NYPD Internal Affairs Bureau (“IAB”).  Working with the Federal Bureau of Investigation (“FBI”) and IAB, the officer set up and recorded a meeting with LICHTENSTEIN, at which LICHTENSTEIN offered the officer $6,000 per license application that the officer could help get through the License Division.  In that recorded meeting, LICHTENSTEIN told the officer that he had obtained gun licenses for approximately 150 individuals in the past, and that his customers needed his services because the License Division would otherwise reject applications “for the biggest stupidity,” such as a history of moving violations.  LICHTENSTEIN boasted that he was able to use his connections in the License Division to “expedite” the application process, i.e., to forego the full investigation typically conducted before the NYPD License Division approves or disapproves an application.  The officer asked LICHTENSTEIN if his previous connections in the License Division were making money, to which LICHTENSTEIN responded, “now they cut down, now nobody’s making money.”

In fact, LICHTENSTEIN had substantial connections to a sergeant in the License Division, David Villanueva, who had worked at the License Division for more than a decade.  A Commanding Officer at the NYPD with whom Villanueva was friendly introduced LICHTENSTEIN to the License Division and Villanueva in or about 2013.  From that introduction through early 2016, LICHTENSTEIN spent significant time at the License Division with Villanueva, often on a near daily basis.  From at least 2012 through 2016, LICHTENSTEIN gave Villanueva cash bribes and other benefits to pay for Villanueva’s work in expediting and approving gun license applications for LICHTENSTEIN’s clients.  Richard Ochetal, a police officer who worked under Villanueva, did first-level review of many of these applications and was instructed to approve them.  Ochetal was compensated in the form of some of the cash that LICHTENSTEIN gave to Villanueva.  Villanueva[1] is currently charged in a case pending before Judge Stein, and Ochetal pled guilty to accepting bribes in exchange for the approval of gun license applications, and is cooperating with the Government in the investigation.

In reviewing and approving applications for LICHTENSTEIN’s clients, Villanueva and Ochetal omitted some of the required checks, such as criminal history checks, and in other instances ran checks only after they approved licenses.  They also approved applications despite red flags that, had they not been bribed, may have led those applications to be rejected.  For example, they approved applications of individuals with prior arrests and previous allegations of domestic violence.  In addition, Villanueva and Ochetal approved applications for licenses to carry firearms, which require certain business-related justifications, in scenarios were there was no real business justification for the request.  A review of the applications of LICHTENSTEIN’s clients reveals that Villanueva and Ochetal were able to secure licenses for those clients often within weeks, whereas the process normally takes months to, in some instances, over a year.  Villanueva and Ochetal did this for LICHTENSTEIN’s clients because of the cash payments coming from LICHTENSTEIN, as well as other benefits, such as limousine rides, bottles of liquor, and a wine tour.

*                *                *

LICHTENSTEIN, 44, who now resides in Pomona, New York, has pled guilty to one count of bribery, which carries a maximum term of 10 years in prison, and one count of offering a bribe, which carries a maximum term of 10 years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the investigative work of the FBI and the NYPD Internal Affairs Bureau, and noted that the investigation is continuing.  

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

[1] Villanueva was charged in an indictment unsealed on June 20, 2016, with one count of bribery, which carries a maximum term of 10 years in prison, and one count of conspiracy to commit bribery, which carries a maximum term of five years in prison.  The charges against Villanueva are merely accusations, and he is presumed innocent unless and until proven guilty.

Preet Bharara, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Anthony J. Orlando, the Acting Special-Agent-in-Charge of the Los Angeles Office of the Internal Revenue Service, Criminal Investigations (“IRS-CI”), announced today that DAVID BERGSTEIN, a film producer and entrepreneur, and KEITH WELLNER, the former General Counsel, Chief Operating Officer, and Chief Compliance Officer of Weston Capital Asset Management (“Weston”), a registered investment adviser, were arrested this morning and charged with defrauding investors of more than $26 million.  BERGSTEIN was arrested in Hidden Hills, California, and will be presented later today before a Magistrate Judge in Los Angeles.  WELLNER was arrested this morning in Manhattan, and will be presented later today before United States Magistrate Judge Sarah Netburn in Manhattan federal court.  The case is assigned to U.S. District Judge P. Kevin Castel.

Manhattan U.S. Attorney Preet Bharara said:  “As alleged, David Bergstein and Keith Wellner defrauded investors out of more than $26 million.  They allegedly withheld material information, transferred funds without disclosing conflicts of interest, and misappropriated funds for their own use.  For their web of alleged deception and self-dealing, Bergstein and Wellner now face federal criminal charges.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “Bergstein and Wellner allegedly tricked their victims into thinking their money would be invested responsibly, but they essentially used these investments to fund their own lifestyle to the tune of several million dollars. People have the right to trade in an uncorrupted market, and today’s charges are proof of the FBI’s continued determination to root out those who unlawfully interfere with this process.”           

IRS-CI Acting Special Agent in Charge Anthony J. Orlando said:  “Many investors feel comfortable entrusting their hard-earned dollars with well-known movie financiers and attorneys, but this case brings to light that investors need to perform their due diligence before turning over their money to others.  IRS Criminal investigation is proud to work with our federal law enforcement partners in identifying and investigating those who seek to dupe investors with false promises.”

According to the Indictment unsealed in Manhattan federal court,[1] from 2011 through 2012, the defendants engaged in a scheme to defraud by (i) concealing material information from Weston investors about financial transactions involving their money; (ii) transferring funds from one pool of Weston’s investors to make payments to, provide a security interest for, or otherwise benefit, another pool of Weston’s investors, without the required disclosures to investors concerning conflicts of interest; and (iii) misappropriating a portion of funds transferred from investor accounts for their own and others’ benefit.  BERGSTEIN and WELLNER orchestrated this scheme in part through two transactions involving Weston investors’ assets: first, a loan from a Weston fund called the Partners 2 (or “P2”) Fund, and, second, a swap agreement with a Weston fund called the Wimbledon TT Portfolio (the “TT Portfolio”). 

            The Partners 2 Loan Scheme

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

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

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

            The TT Portfolio Swap Agreement Scheme

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

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

In addition to diverting TT Portfolio money for unauthorized and improper investments, WELLNER and other Weston officers improperly paid themselves with TT Portfolio investor money, which was not disclosed to investors.  As a further part of the scheme, moreover, BERGSTEIN made false representations about Swartz IP’s assets and ability to meet redemption requests and secretly diverted TT Portfolio investor proceeds to pay BERGSTEIN’s personal expenses, among other things.

BERGSTEIN and WELLNER also gave a false and misleading investor presentation, made false investment disclosures, and distributed a fake loan note concealing the origin of the P2 Loan in order to attempt to conceal their criminal conduct.

*                *                *

BERGSTEIN, 54, of Hidden Hills, California, and WELLNER, 49, of Manhattan, are charged with the offenses set forth in the chart attached to this release.  The statutory maximum sentences are prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendants would be determined by the judge.

Mr. Bharara praised the investigative work of the FBI, IRS-CI, and the Office’s Criminal Investigators.  He also thanked the Securities and Exchange Commission, which has filed civil charges against BERGSTEIN in a separate action. 

The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations.  Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants.  For more information on the task force, please visit www.StopFraud.gov.                

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Edward A. Imperatore and Robert W. Allen are in charge of the prosecution.

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

COUNT

CHARGE

DEFENDANTS

MAXIMUM PENALTIES

1

Conspiracy to Commit Investment Adviser Fraud and Securities Fraud (18 U.S.C. § 371)

DAVID BERGSTEIN

KEITH WELLNER

Five years in prison and a $250,000 fine or twice the gross gain or loss from the offense

2

Investment Adviser Fraud (15 U.S.C. §§ 80b-6 & 80b-17; 18 U.S.C. § 2)

DAVID BERGSTEIN

KEITH WELLNER

Five years in prison and a fine of $10,000

3

Investment Adviser Fraud (15 U.S.C. §§ 80b-6 & 80b-17; 18 U.S.C. § 2)

DAVID BERGSTEIN

KEITH WELLNER

Five years in prison and a fine of $10,000

4

Securities Fraud (15 U.S.C. §§ 78j(b) & 78ff; 17 C.F.R. § 240.10b-5; 18 U.S.C. § 2)

DAVID BERGSTEIN

KEITH WELLNER

20 years in prison and a $5,000,000 fine or twice the gross gain or loss from the offense

5

Securities Fraud (15 U.S.C. §§ 78j(b) & 78ff; 17 C.F.R. § 240.10b-5; 18 U.S.C. § 2)

DAVID BERGSTEIN

KEITH WELLNER

20 years in prison and a $5,000,000 fine or twice the gross gain or loss from the offense

6

Wire Fraud (18 U.S.C.      §§ 1343 and 2)

DAVID BERGSTEIN

KEITH WELLNER
 

20 years in prison and a $250,000 fine or twice the gross gain or loss from the offense

7

Conspiracy to Commit Wire Fraud (18 U.S.C. § 1349)

DAVID BERGSTEIN

20 years in prison and a $250,000 fine or twice the gross gain or loss from the offense

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that JAQUAN MCINTOSH, a/k/a “BJ,” pled guilty today to participating in a racketeering conspiracy in connection with his membership in the “2Fly YGz” (“2Fly”), a violent street gang that operated in and around the Eastchester Gardens public housing development (“ECG”) in the Bronx.  As part of his guilty plea, MCINTOSH admitted to his participation in the murder of Donville Simpson on or about October 5, 2013 – Simpson’s 17th birthday – at ECG.  MCINTOSH faces a maximum term of life in prison, and will be sentenced next year by United States District Judge Lewis A. Kaplan. 

U.S. Attorney Preet Bharara said:  “In today’s plea, Jaquan McIntosh admitted to killing a 17-year-old boy as part of his membership in 2Fly, a violent street gang, that has been terrorizing the Eastchester Gardens public housing development in the Bronx.  Gang violence continues to threaten the safety and security of too many New Yorkers, particularly those in public housing.  Thanks to the work of the NYPD, HSI, DEA and ATF, one more source of gang violence in the Bronx has been brought to justice.”

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

MCINTOSH was a member of 2Fly, a subset of the “Young Gunnaz,” or “YG” street gang, which operates throughout New York City.  2Fly is based in the Bronx, within and around 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.

As part of his involvement in 2Fly, MCINTOSH shot and killed Donville Simpson at ECG on or about October 5, 2013 – Simpson’s 17th birthday – during a shootout with a rival street gang.

MCINTOSH 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, 57 members and associates of 2Fly were charged in the Indictment with racketeering conspiracy, narcotics conspiracy, narcotics distribution, and firearms charges.  To date, 19 of these defendants have pled guilty.

*                      *                     *

Mr. Bharara praised the outstanding work of the NYPD’s Bronx Homicide Task Force, the NYPD’s 49th Precinct Detective Squad, the Bronx Gang Squad, HSI, DEA, and ATF.  

He also thanked the Bronx County District Attorney’s Office for their support in this case.

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 Johnson-Skinner are in charge of the prosecution. 

REZA ZARRAB was arrested on March 19, 2016, and is scheduled to begin trial on January 23, 2017, before Judge Berman.  MOHAMMAD ZARRAB, JAMSHIDY, and NAJAFZADEH remain at large.

According to the allegations contained in the superseding indictment[1] filed today in Manhattan federal court:

Beginning in or about 1979, the president has repeatedly found that the situation in Iran constitutes an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States and declared a national emergency to deal with the threat.  Pursuant to these presidential declarations, the United States has instituted a host of economic sanctions against Iran and Iranian entities pursuant to the International Emergency Economic Powers Act (the “IEEPA”).  This sanctions regime prohibits, among other things, financial transactions involving the United States or United States persons that were intended for the Government or Iran or Iranian entities. 

Between at least in or about 2010 and in or about 2015, REZA ZARRAB, MOHAMMAD ZARRAB, JAMSHIDY, and NAJAFZADEH conspired to conduct international financial transactions on behalf of and for the benefit of, among others, Iranian business, the Iranian government, and entities owned or controlled by the Iranian government.  Among the beneficiaries of the defendants’ scheme were:

• Mahan Air, an Iranian airline designated by the United States Department of the Treasury, Office of Foreign Assets Control (“OFAC”), as a Specially Designated National (“SDN”) pursuant to Executive Order 13224 for providing financial, material, and technological support to the Islamic Revolutionary Guard Corps-Qods Force (“IRGC-QF”), and providing transportation services to Hizballah, a Lebanon-based designated Foreign Terrorist Organization, including by transporting personnel, weapons and goods on behalf of Hizballah and omitting from Mahan Air cargo manifests secret weapons shipments bound for Hizballah;
• Bank Mellat, an Iranian government-owned bank designated as a SDN under the Iranian Transactions and Sanctions Regulations, the Iranian Financial Sanctions Regulations, and the Weapons of Mass Destruction Proliferators Sanctions Regulations; Mellat Exchange, an Iranian money services business owned and controlled by Bank Mellat;
• the National Iranian Oil Company (“NIOC”), identified by OFAC as an agent or affiliate of Iran’s Islamic Revolutionary Guard Corp; the Naftiran Intertrade Company Ltd., Naftiran Intertrade Company Sarl, and Hong Kong Intertrade Company, companies located in the United Kingdom, Switzerland, and Hong Kong that were acting on behalf of NIOC; and
• the MAPNA Group, an Iranian construction and power plant company. 

REZA ZARRAB, MOHAMMAD ZARRAB, JAMSHIDY, NAJAFZADEH, and their co-conspirators used an international network of companies located in Iran, Turkey, the United Arab Emirates (“UAE”), and elsewhere to conceal from U.S. banks, OFAC, and others that the transactions were on behalf of and for the benefit of Iranian entities.  This network of companies includes Royal Holding A.S., a holding company in Turkey; Durak Doviz Exchange, a money services business in Turkey; Flash Doviz Exchange, a money services business in Turkey; Al Nafees Exchange, a money services business in the UAE; Royal Emerald Investments, a company located in the UAE; Asi Kiymetli Madenler Turizm Otom, a company located in Turkey; ECB Kuyumculuk Ic Vedis Sanayi Ticaret Limited Sirketi, a company located in Turkey; Gunes General Trading LLC, a company located in the UAE; Hanedan General Trading LLC, a company in the UAE, and others.  As a result of this scheme, the co-conspirators induced U.S. banks unknowingly to process international financial transactions in violation of the IEEPA.

Mahan Air provided transportation, funds transfers, and personnel travel services to the IRGC-QF, including by, among other things, providing travel services to IRGC-QF personnel flown to and from Iran and Syria for military training, aiding the covert travel of suspected IRGC-QF officers into and out of Iraq by bypassing normal security procedures, and facilitating IRGC-QF arms shipments.  In addition, Mahan Air also provided services for Hizballah, transporting personnel, weapons, and goods on behalf of Hizballah.  MOHAMMAD ZARRAB and his co-conspirators facilitated financial transactions through U.S. banking institutions that concealed that the transactions were for the benefit of Mahan Air.  MOHAMMAD ZARRAB and his co-conspirators used their network of corporate entities in Turkey and UAE to conceal that Mahan Air was the true beneficiary of these transactions.

*                *                *

REZA ZARRAB, 33, is a resident of Turkey and dual citizen of Turkey and Iran.  MOHAMMAD ZARRAB, 38, is REZA ZARRAB’s brother, and is a resident of Turkey and dual citizen of Turkey and Iran.  JAMSHIDY, 29, is a resident of Turkey and dual citizen of Turkey and Iran.  NAJAFZADEH, 65, is a resident of Iran and the UAE and a citizen of Iran.  Each defendant is charged with conspiracies to defraud the United States, to violate the IEEPA, to commit bank fraud, and to commit money laundering.  The conspiracy to defraud the United States count carries a maximum term of five years in prison.  The conspiracy to violate the IEEPA and money laundering conspiracy counts each carry a maximum term of 20 years in prison.  The bank fraud conspiracy count carries a maximum term of 30 years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the outstanding investigative work of the FBI and its New York Field Office, Counterintelligence Division, and the Department of Justice, National Security Division, Counterintelligence and Export Control Section.

The prosecution of this case is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant United States Attorneys Michael D. Lockard, Sidhardha Kamaraju, and David Denton, and Special Assistant United States Attorney Dean Sovolos, are in charge of the prosecution, with assistance from Trial Attorney Elizabeth Cannon of the Counterintelligence and Export Control Section.  Assistant United States Attorney Jaimie Nawaday is principally responsible for the forfeiture aspects of the case.

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 herein, constitute only allegations, and every fact described should be treated as an allegation.  This press release focuses on the allegations set forth in the superseding indictment that are new and were not previously alleged in prior indictments in this case.

PREET BHARARA, the United States Attorney for the Southern District of New York, and ROBERT L. CAPERS, the United States Attorney for the Eastern District of New York, announced today that special telephone numbers have been set up to receive complaints of possible violations of federal election laws relating to the upcoming general elections in New York City and other counties in their districts. 

The United States Attorneys said that their Offices will be available to receive complaints at the following numbers on Tuesday, November 8, 2016:

(646) 369-4739                       (Manhattan, Bronx, Dutchess, Orange, Putnam, Rockland, Sullivan and Westchester counties)    

(718) 254-6323                       (Brooklyn, Queens, Staten Island, Nassau and Suffolk counties)

In addition, complaints of possible violations of federal election laws may be made directly to the Federal Bureau of Investigation at (212) 384-1000.

The Department of Justice has an important role in deterring election fraud and discrimination at the polls, and combating these violations whenever and wherever they occur.  The Department’s long-standing Election Day Program furthers these goals, and also seeks to ensure public confidence in the integrity of the election process by providing local points of contact within the Department for the public to report possible election fraud and voting rights violations while the polls are open on Election Day.

Federal law protects against such crimes as intimidating or bribing voters, buying and selling votes, impersonating voters, altering vote tallies, stuffing ballot boxes, and marking ballots for voters against their wishes or without their input.  It also contains special protections for the rights of voters and provides that they can vote free from acts that intimidate or harass them.  For example, actions of persons designed to interrupt or intimidate voters at polling places by questioning or challenging them, or by photographing or videotaping them, under the pretext that these are actions to uncover illegal voting, may violate federal voting rights law.  Further, federal law protects the right of voters to mark their own ballot or to be assisted by a person of their choice.

The United States Attorneys also noted that the following additional telephone numbers are available on election day for citizens to call for routine inquiries, such as where to vote or how late the polls are open, or to register complaints that may concern violations of New York State election laws:

IN NEW YORK CITY

City Board of Elections

Main Office                           (866) 868-3692

TTY #: 212-487-5496

Bronx                                      (718) 299-9017

Brooklyn                                 (718) 797-8800

Manhattan                               (212) 886-2100

Queens                                    (718) 730-6730

Staten Island                           (718) 876-0079

IN COUNTIES OUTSIDE NEW YORK CITY

County Boards of Elections

Dutchess                                 (845) 486-2473

Nassau                                     (516) 571- 8683

Orange                                    (845) 360-6500

Putnam                                    (845) 808-1300

Rockland                                 (845) 638-5172

Suffolk                                    (631) 852-4500

Sullivan                                   (845) 807-0400

Westchester                             (914) 995-5700

Assistant United States Attorney DAVID J. KENNEDY is responsible for overseeing the handling of complaints of voting rights abuses and election fraud for the Southern District of New York.

Assistant United States Attorney CATHERINE MIRABILE is responsible for overseeing the handling of complaints of voting rights abuses and election fraud for the Eastern District of New York.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that ANDREW CASPERSEN was sentenced in Manhattan federal court to four years in prison for defrauding investors of over $38 million and misappropriating over $8 million from his former employer.  CASPERSEN pled guilty on July 6, 2016, to one count of securities fraud and one count of wire fraud before U.S. District Judge Jed S. Rakoff, who also imposed today’s sentence. 

Manhattan U.S. Attorney Preet Bharara stated:  “Using his Wall Street pedigree, Andrew Caspersen deceived and defrauded investors – including his own family and friends and a charity – out of tens of millions of dollars.  Caspersen duped his unwitting victims through an elaborate scheme involving made-up private equity ventures, fake mail addresses, and fictional financiers.  Caspersen has admitted to his crimes and has now been sentenced to time in federal prison.”

According the Information and other filings in Manhattan federal court, and statements made in today’s proceedings:

The Scheme to Defraud Investors

Beginning in November 2014 and continuing until his arrest in March 2016, CASPERSEN engaged in a Ponzi-like scheme to defraud investors, including close friends, family members, and college classmates, by falsely claiming that their funds would be used to make secured loans to private equity firms and would thereby earn an annual rate of return of 15 to 20 percent.  In total, CASPERSEN attempted to defraud more than a dozen investors of nearly $150 million.  As a result of the false and fraudulent representations made by CASPERSEN, investors wired a total of approximately $38.5 million to shell company bank accounts controlled by CASPERSEN.  Among those defrauded was a charitable organization, which made a $25 million purported investment with CASPERSEN, and which CASPERSEN solicited for an additional $20 million shortly before his arrest.  CASPERSEN never used investor funds to make the secured loans that had been promised.  Instead, CASPESEN used investor funds for purposes that investors had not authorized, including to make securities trades in his own brokerage account and to make periodic interest payments to earlier investors.  CASPERSEN went to great lengths to execute and conceal his criminal conduct: he fabricated promissory notes and other legal documents, set up fake entities with names resembling those of real private equity funds, opened bank accounts in the names of those shell companies, registered a domain name and email address purportedly associated with a legitimate private equity firm, and used the identities of two individuals without their authorization.

The Scheme to Divert Funds from the Park Hill Group

From January 2013 through March 2016, CASPERSEN was employed in the secondary advisory group at Park Hill Group.  In July 2015, CASPERSEN opened a bank account under the name “PHG Operating LLC,” which was controlled by CASPERSEN for his own benefit and was unknown to Park Hill Group (the “Fake PHG Account”).  In the fall of 2015, CASPERSEN directed clients of Park Hill Group to wire a total of approximately $8.9 million, representing payment for legitimate work that Park Hill Group had done, to the Fake PHG Account.  CASPERSEN then transferred those funds to his brokerage account, in order to execute trades in securities for his own benefit.  CASPERSEN later repaid Park Hill Group using the proceeds of his securities fraud scheme.

*              *              *

In addition to his prison term, CASPERSEN, 40, of Manhattan, was sentenced to three years of supervised release.  Judge Rakoff will order restitution at a later date.

Mr. Bharara praised the work of the Office’s criminal investigators, and thanked the Securities and Exchange Commission for its assistance. 

The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations.  Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants.  For more information on the task force, please visit www.StopFraud.gov.

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

Preet Bharara, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the arrest of JONATHAN POWELL for obtaining unauthorized access to email accounts maintained by a New York City area university, using his work computer, and causing over $5,000 of loss in the process.  POWELL went on to compromise social media and other online accounts linked to the university email accounts, and mined those linked accounts for the users’ login credentials and other private and confidential information.  POWELL also attempted to access email accounts at more than 75 other universities around the country.  At the time of the alleged offense, POWELL was employed by a private business at its branch office located in Phoenix, Arizona.  POWELL was arrested this morning, and is expected to be arraigned in federal court in Phoenix later today before a U.S. Magistrate Judge.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Jonathan Powell targeted dozens of universities around the country, successfully hacking into student email accounts hosted on at least two universities’ servers and accessing the social media, email, and other online accounts of many of those students.  Powell allegedly stole students’ personal information and searched their photos for potentially embarrassing content.  This case should serve as a wakeup call for universities and educational institutions around the country.  There is no greater threat to our security and personal privacy than the cyber threat, and hackers must be identified, stopped, and punished.”

FBI Assistant Director William F. Sweeney Jr. said: “Sitting at a computer more than 2,000 miles away, Jonathan Powell allegedly attempted unauthorized access to more than 2,000 university email accounts.  Powell used password reset tools to basically pick the lock of thousands of personal spaces and look around at what was stored there.  Cybercrime victims can be large companies or individual users who have their network or accounts accessed illegally, even if there is no theft.  The FBI takes seriously any allegations of intrusions, and we will continue to hold accountable those who pose a threat in cyberspace.”

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

From at least in or about October 2015 up to and including at least in or about September 2016, POWELL obtained unauthorized access to email accounts hosted by at least two United States-based educational institutions, including one which has its primary campus in New York, New York (“University-1”).  POWELL obtained unauthorized access to these accounts by accessing password reset utilities maintained by the email servers at the victim institutions, which are designed to allow authorized users to reset forgotten passwords to accounts.  POWELL utilized the password reset utilities to change the email account passwords of students and others affiliated with those educational institutions.  Once POWELL gained access to the compromised email accounts (the “Compromised Accounts”), he obtained unauthorized access to other password-protected email, social media, and online accounts to which the Compromised Accounts were registered, including, but not limited to, Apple iCloud, Facebook, Google, LinkedIn, and Yahoo! accounts.  Specifically, using the Compromised Accounts, POWELL requested password resets for linked accounts hosted by those websites (the “Linked Accounts”), resulting in password reset emails being sent to the Compromised Accounts, which allowed POWELL to change the passwords for the Linked Accounts.  POWELL then logged into the Linked Accounts and searched within the Linked Accounts, gaining access to private and confidential content stored in the Linked Accounts.  In one instance, POWELL searched a University-1 student’s linked Gmail account for digital photographs, and for the terms “password,” “naked,” “cum” and “horny.”

An analysis of University-1 password reset utility logs and other data revealed that POWELL accessed the University-1 password reset utility approximately 18,640 different times between approximately October 2015 and September 2016.  During that timeframe, POWELL attempted approximately 18,600 password changes in connection with approximately 2,054 unique University-1 email accounts, and succeeded in making 1,378 password changes in connection with approximately 1,035 unique University-1 email accounts.  (The number of successful password changes is greater than the number of compromised University-1 email accounts because certain University-1 email accounts were compromised more than once.)

In or about September 2016, POWELL repeatedly accessed the password reset utility of a second university located in Pennsylvania (“University-2”), in a similar fashion to University‑1.  During that timeframe, POWELL attempted to change the email passwords for approximately 220 University-2 email accounts, and successfully changed the email passwords for approximately 15 University-2 email accounts.  Following the unauthorized access of those University-2 email accounts, a number of Facebook accounts linked to the compromised University-2 email accounts were also compromised.

The FBI obtained and analyzed the device (the “Device”) assigned to POWELL at his place of employment in Phoenix, Arizona (the “Company”), which POWELL utilized in the above-described scheme.  The FBI also obtained from the Company a network backup of certain files on the Device, created on or about September 30, 2016 (the “Device Backup”), which the FBI also analyzed.  The Device and Device Backup contain, among other things, a number of documents listing University-1 email account usernames and passwords.  Certain documents found on the Device also contain credentials – i.e., usernames and passwords – for logging into various internet service provider (“ISP”) accounts appearing to belong to the same University‑1 email account users.

A review of the Device’s web browser history, covering the period from July 5, 2016, to October 3, 2016, revealed that POWELL accessed student directories and login portals associated with more than 75 other colleges and universities (the “Other Universities”) across the United States.  An analysis of the Device Backup demonstrated that the Device Backup contains several documents with filenames that refer to certain of the Other Universities.  Those documents contain what appear to be login credentials for a variety of password-protected accounts linked to email accounts at certain of the Other Universities.

*              *             *

POWELL, 29, of Phoenix, Arizona, is charged with one count of fraud in connection with computers, which carries a maximum sentence of five years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the investigative work of the FBI.

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Christopher J. DiMase and Timothy Howard are in charge of the prosecution.

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, Shantelle P. Kitchen, the Special Agent in Charge of the New York Field Office of the Internal Revenue Service - Criminal Investigation (“IRS-CI”), William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (“FBI”), Thomas P. DiNapoli, New York State Comptroller, and George Beach, Superintendent, New York State Police, announced that ALBERT MELIN, the former treasurer of the Patterson Fire Department in Patterson, New York (“PFD”), pled guilty today to wire fraud and false subscription to tax returns before Magistrate Judge Judith C. McCarthy in connection with his embezzlement of more than $1.1 million from the PFD.

Manhattan U.S. Attorney Preet Bharara said:  “As he admitted today, Albert Melin betrayed the trust placed in him by the Patterson Fire Department, embezzling over a million dollars of fire department funds.  Melin took money that was supposed to be used for fighting fires and other department needs, and instead used it to keep his own private businesses afloat and pay his personal bills.  Thanks to our law enforcement partners at IRS-CI, FBI, the State Comptroller’s Office and the State Police, Melin’s betrayal was uncovered and his million-dollar embezzlement scheme put to an end.”

Special Agent in Charge Shantelle P. Kitchen said:  “The public expects that individuals who hold positions of fiscal responsibility in publicly funded organizations will be held accountable when they take what they are supposed to protect.  Melin took advantage of his position as treasurer of the Patterson Fire Department, committing tax fraud in conjunction with his embezzlement.  While the people of Patterson were impacted by the theft of resources from their fire department, perhaps they will find some consolation in that his scheme was uncovered, investigated, and prosecuted.”

Assistant-Director-in-Charge William F. Sweeney said:  “Melin’s scheme, and other related frauds, have a devastating impact on public entities directly and the citizens they serve indirectly. The FBI is committed to working with our law enforcement partners to ensure this type of behavior ceases to exist.”

Comptroller Thomas P. DiNapoli said:  “Former treasurer Albert Melin was so brash that he wrote $1.1 million in fire department checks to his chiropractic and another business to support his opulent lifestyle.  Luckily, our $5.7 million investigation of nearby Mahopac Fire Department prompted the Patterson fire commissioners to examine their books and expose these thefts. I thank U.S. Attorney for the Southern District Preet Bharara, the New York State Police, the Internal Revenue Service and the Federal Bureau of Investigation for their diligent work on this case.”

State Police Superintendent George Beach said:  “This arrest should serve as a reminder that those who choose to abuse their position will be held accountable for their actions.  This former treasurer took money from the fire department where he was a trusted leader, then used it for personal gain.   I want to thank our partners for working to put this defendant behind bars, making sure he will no longer be able to take advantage of those who put their trust in him.”

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

MELIN was first elected treasurer of the PFD in 2013.  From December 2013 to October 2015, MELIN embezzled PFD funds under his control by writing checks to the two businesses he owned, 211 Medical, P.C. (“211 Medical”) and N.A.S. Management Co., Inc. (“N.A.S.”).  MELIN then deposited the checks to bank accounts held by 211 Medical or N.A.S.  MELIN also charged expenses of 211 Medical and N.A.S. to the PFD’s debit card.

MELIN embezzled more than $1.1 million by writing more than 130 fraudulent checks.  He used the money to support 211 Medical and N.A.S., to make payments on his home mortgage loan, and to pay personal expenses, including the costs of family vacations.  MELIN failed to report this income on his personal tax return for 2014 and falsely reported some of the embezzled funds as revenue on the corporate tax return for 211 Medical in an effort to disguise its source.

MELIN, 46, of Patterson, New York, pled guilty to one count of wire fraud, which carries a maximum sentence of 20 years in prison, and one count of subscribing to false tax returns, which carries a maximum sentence of three years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentence will be determined by the court.

In pleading guilty, MELIN agreed to forfeit to the United States a sum of money no less than $1,151,000.

MELIN is scheduled to be sentenced by U.S. District Court Judge Nelson S. Roman on February 3, 2017. 

Mr. Bharara praised the outstanding investigative work of the IRS, the FBI, the New York State Comptroller, and the New York State Police.  He thanked the Putnam County District Attorney’s Office for its assistance in the investigation.

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorney James McMahon is in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that TRAVELL THOMAS, the owner, chief executive officer (“CEO”), and president of a Buffalo, New York-based debt collection company (the “Company”), pled guilty today before Judge Katherine Polk Failla to orchestrating a scheme to coerce thousands of victims across the country, through false threats and representations, into paying a total of more than $31 million to the Company to resolve debts these victims purportedly owed.  To date, 11 individuals associated with the Company have pled guilty to participating in the scheme. 

U.S. Attorney Preet Bharara said: “As he admitted today, Travell Thomas ran a massive, fraudulent debt collection scheme through which he and his cohorts stole over $31 million from his vulnerable victims.  Thomas instructed his debt collectors to threaten, intimidate, and lie to their victims by overstating their debts and making false claims about what would happen to if they didn’t pay up.  Today’s plea is the eleventh in this landmark consumer fraud case that victimized thousands of people across the country.”

According to the allegations contained in the Indictment to which THOMAS pled guilty and statements made during his plea proceeding and other court proceedings: 

Between 2010 and February 2015, THOMAS was the co-owner, CEO, and president of the Company.  In that capacity, Thomas oversaw four debt collection offices operated by the Company in Buffalo and a team of managers and debt collectors.  As part of the scheme, THOMAS falsely inflated the balances of debts owed by consumers in the Company’s debt collection software so that THOMAS’s debt collectors could collect more money from the victims than the victims actually owed, a practice known within the Company as “juicing” balances.  THOMAS also placed purported debts with more than one of his offices so that multiple collectors from within the Company could solicit and coerce a particular victim to repay a debt more than once. 

As owner and president of the Company, THOMAS drafted, approved, and disseminated collection scripts that contained a variety of misrepresentations and instructed his collectors to make those misrepresentations to consumers over the telephone.  At THOMAS’s direction and under his supervision, the Company’s debt collectors, using a variety of aliases, attempted to trick and coerce thousands of victims throughout the United States into paying millions of dollars in consumer debts through a variety of false statements and false threats, including that: (1) the Company was affiliated with local government and law enforcement agencies, including the “county” and the district attorney’s office; (2) the consumers had committed criminal acts, such as “wire fraud” or “check fraud,” and if they did not pay the debt immediately, warrants or other process would be issued, at which point they would be arrested or hauled into court; (3) the victims would have their driver’s licenses suspended if they did not pay their debts immediately; (4) the Company was a law firm or mediation firm and that the Company’s employees were working with lawyers, a law firm, mediators, or arbitrators; and (5) a civil lawsuit would be filed, or was pending, against the victims for failing to pay their debts. 

In total, from about January 2010 through November 2014, the Company collected over $31 million from thousands of victims across the United States.  Of the money that the Company took in from victims, approximately $1.5 million was paid in cash to THOMAS and his co-owner and co-defendant, Maurice Sessum, approximately $1.4 million was cashed from banks and ATMs, and tens of thousands of dollars were used to pay for THOMAS’s gambling expenses, tickets for professional sports games, THOMAS’s wedding reception, and jewelry, among other expenses.

*                *                *

THOMAS, 38, of Orchard Park, New York, pled guilty to one count of conspiracy to commit wire fraud and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison and three years of supervised release.  The maximum potential sentence in this case is prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

THOMAS is scheduled to be sentenced by Judge Failla on February 10, 2017.  

In total, 11 individuals associated with the Company have pled guilty to defrauding consumers as part of this debt collection scheme.  In addition to THOMAS’s guilty plea, former Company mangers Tacoby Thomas, Heather Gasta, Mark Lavin, and John Salatino, and debt collectors Jessica Mann, Charles Starks, William Clark, Columbus Simmons, Michael Calandra, and Jennifer Sherk, each pled guilty to conspiracy to commit wire fraud and wire fraud for their roles in the scheme.  The other defendants who have not pled guilty are presumed innocent unless and until proven guilty.   

Starks, Clark, Calandra, and Mann were sentenced by Judge Failla to prison terms of 37 months, 30 months, 15 months, and one year and one day, respectively.  The sentencing of the other defendants who have pled guilty is pending. 

Mr. Bharara praised the efforts of the Office’s Criminal Investigators.  He also thanked the Federal Trade Commission, which referred the case to the Office.

The prosecution of this case is being overseen by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Edward A. Imperatore, Jennifer L. Beidel, and Jordan L. Estes are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and Caroline D. Ciraolo, the Principal Deputy Assistant Attorney General for the Tax Division of the Department of Justice, announced that WILLIAM DOONAN, an attorney who operated a tax preparation business in the Bronx, New York, pled guilty today in Manhattan federal court to charges related to his participation in filing fraudulent tax returns, falsely claiming more than $6 million in deductions.  DOONAN pled guilty today before U.S. Magistrate Judge Andrew J. Peck. 

Manhattan U.S. Attorney Preet Bharara said:  “William Doonan used his law degree and tax preparation business to fleece the IRS out of millions of dollars in fraudulent tax deductions.  As he admitted today, Doonan claimed numerous false deductions for thousands of clients, defrauding the IRS and unlawfully depriving the public of tax revenue.”

Principal Deputy Assistant Attorney General Caroline D. Ciraolo said:  “William Doonan used his law practice to prepare thousands of false tax returns each year with phony deductions, costing the U.S. treasury more than $1.5 million.  His conviction sends a clear message – we will fully prosecute crooked tax preparers – whether they be lawyers and tax professionals or temporary storefront operators.”

According to the allegations contained in the Information filed in Manhattan federal court and statements made during the plea proceeding:

Since at least 2009, DOONAN has been in the business of preparing federal tax returns for clients in exchange for fees.  DOONAN, a New York licensed attorney since 1982, carried out his tax preparation business in the Bronx using the firm name “William Doonan, Esq.”  DOONAN prepared and filed more than 3,000 federal tax returns with the Internal Revenue Service (“IRS”) each year and regularly prepared and filed client returns that were false and fraudulent.  For example, on some of his clients’ returns, DOONAN added false medical and dental expenses, state and local taxes, home mortgage interest, gifts to charity, job expenses, and certain miscellaneous deductions.  DOONAN also attached Schedules C to his clients’ returns that reported “consulting” businesses that the relevant clients did not own, operate, or materially participate in, and business losses that the relevant clients did not incur.  Between tax years 2009 through tax year 2012, DOONAN included in excess of $6 million in these fabricated and inflated items on his clients’ federal tax returns.

*                *                *

DOONAN, 69, of the Bronx, New York, pled guilty to one count of aiding and assisting in the preparation of a false tax return, and one count of obstructing and impeding the due administration of internal revenue laws.  Each charge carries a maximum sentence of three years in prison.  As part of his plea, DOONAN agreed that he caused a tax loss of between $1.5 and $3.5 million, and has agreed to pay $65,820 in restitution to the IRS. 

DOONAN is scheduled to be sentenced by U.S. District Judge Vernon S. Broderick on February 10, 2017, 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. Bharara and Ms. Ciraolo praised the outstanding efforts of the IRS-CI in the investigation.     This case is being prosecuted by the U.S. Attorney’s Office’s Complex Frauds and Cybercrime Unit.  Special Assistant United States Attorney Jorge Almonte (of the Tax Division) is in charge of the prosecution.

Attorney General Loretta E. Lynch, Preet Bharara, the United States Attorney for the Southern District of New York, Sarah R. Saldaña, Director of U.S. Immigration and Customs Enforcement (“ICE”), Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division, and Angel M. Melendez, Special Agent in Charge of the New York Field Office of ICE’s Homeland Security Investigations (“HSI”), announced the unsealing of a 21-count superseding indictment (the “Indictment”) in the U.S. District Court for the Southern District of New York charging seven defendants with sex trafficking offenses.  The Indictment, which was returned under seal on September 15, 2016, alleges that the defendants are members of an international sex trafficking organization that exploited and trafficked adult and minor women in Mexico and in the United States from at least 2000 to 2016.  Members of the defendants’ sex trafficking organization, which operated largely as a family business, used false promises, physical and sexual violence, and threats to force and coerce adult and minor women to work in prostitution for the organization’s profit in both Mexico and the United States. 

Six of the defendants charged were taken into custody on October 26 and 27, 2016.  As part of a coordinated bilateral law enforcement action, two defendants, RAUL ROMERO-GRANADOS, a/k/a “Chicarcas,” a/k/a “El Negro,” and ISAAC LOMELI-RIVERA, a/k/a “Giro,” were arrested in the United States, and four defendants, EFRAIN GRANADOS-CORONA, a/k/a “Chavito,” a/k/a “Cepillo,” ALAN ROMERO-GRANADOS, a/k/a “El Flaco,” PEDRO ROJAS-ROMERO, and EMILIO ROJAS-ROMERO, were arrested in Mexico.  The defendants arrested in Mexico were taken into custody by Mexican authorities pursuant to Provisional Arrest Warrants submitted by the United States in August 2016.  The defendants arrested in the United States were presented on October 27, 2016, in Manhattan federal court before United States Magistrate Judge Kevin Nathaniel Fox.  One defendant, JUAN ROMERO-GRANADOS, a/k/a “Chegoya,” a/k/a “El Guero,” remains a fugitive.  The case has been assigned to United States District Judge Andrew L. Carter, Jr.  

Attorney General Loretta E. Lynch said:  “Human trafficking is a corrosive and degrading practice that goes against both the rule of law and the most basic standards of human dignity.  This Indictment is yet another sign of the Justice Department’s steadfast determination to hold traffickers accountable for their heinous crimes, and of our unshakeable commitment to helping survivors reclaim their futures and restart their lives.  I want to commend our partners in Mexican law enforcement for their commitment to combating human trafficking.  We thank them for their cooperation in this important action, and for their ongoing collaboration in our shared efforts to end human trafficking in our nations.”

U.S. Attorney Preet Bharara said:  “The Indictment outlines alleged conduct of these defendants that is brutal and predatory.  The defendants allegedly raped, beat, tortured, and enslaved their victims, often minors who were coercively separated from their families.  The combined efforts of American and Mexican law enforcement that made these charges possible reflect our joint commitment to protect victims of these most predatory crimes that treat human beings as chattel.”

ICE Director Sarah R. Saldaña said:  “The sexual exploitation of human beings is one of the vilest crimes committed against humanity.  This operation reflects our commitment to bring to justice traffickers who have no regard for human life.  Each arrest is a testament to the outstanding bilateral relationship between Mexico and the United States.  We are sending a clear message to human traffickers that law enforcement agencies on both sides of the border have them in their sights.”

Principal Deputy Assistant Attorney General Vanita Gupta said:  “Through vigorous enforcement efforts and collaborative international partnerships, the Justice Department works tirelessly to bring traffickers to justice and protect victims held in modern-day slavery.  Human traffickers degrade the humanity of the vulnerable victims they target.  I commend our Mexican counterparts for their dedication to fighting the heinous crime of human trafficking and their critical assistance in this case.”

HSI Special Agent in Charge Angel M. Melendez said:  “Human trafficking is nothing less than a modern form of slavery and no one should be forced to live in a world of fear and involuntary servitude. HSI will remain steadfast in its commitment to working with its law enforcement partners to dismantle the international criminal organizations involved in human trafficking.”

As alleged in the Indictment unsealed on October 27, 2016, in Manhattan federal court:[1] 

EFRAIN GRANADOS-CORONA, a/k/a “Chavito,” a/k/a “Cepillo,” RAUL ROMERO-GRANADOS, a/k/a “Chicarcas,” a/k/a “El Negro,” ISAAC LOMELI-RIVERA, a/k/a “Giro,” JUAN ROMERO-GRANADOS, a/k/a “Chegoya,” a/k/a “El Guero,” ALAN ROMERO-GRANADOS, a/k/a “El Flaco,” PEDRO ROJAS-ROMERO, and EMILIO ROJAS-ROMERO, the defendants, are members of an international sex trafficking organization (the “STO”).  Many of the members of the STO are related by blood, marriage and community.  For example:  EFRAIN GRANADOS-CORONA is the uncle of RAUL ROMERO-GRANADOS, ISAAC LOMELI-RIVERA (through LOMELI-RIVERA’s relationship with EFRAIN GRANADOS-CORONA’s niece), JUAN ROMERO-GRANADOS, and ALAN ROMERO-GRANADOS; PEDRO ROJAS-ROMERO and EMILIO ROJAS-ROMERO are brothers; JUAN ROMERO-GRANADOS and ALAN ROMERO-GRANADOS are also brothers; and ISAAC LOMELI-RIVERA is RAUL ROMERO-GRANADOS’s brother-in-law.

Between at least in or about 2000 and the present, members of the STO (the “Traffickers”) have used false romantic promises, physical and sexual violence, threats of the same, lies, and coercion to force and coerce adult and minor women (the “Victims”) to work in prostitution in both Mexico and the United States.

In most cases, a Trafficker entices a Victim – frequently a minor – in Mexico.  The Trafficker then uses multiple means to isolate the Victim from her family.  In some cases, the Trafficker uses romantic promises to induce the Victim to leave her family and live with him.  In other cases, the Trafficker rapes the Victim, making it difficult for her to return to her family due to the associated stigma of the rape.  Once a Victim is separated from her family, the Trafficker frequently monitors her communications, keeps her locked in an apartment, leaves her without food, and engages in physical or sexual violence against the Victim.  Traffickers often tell Victims that the Traffickers owe a significant debt and that the Victim must work in prostitution to assist in repaying the debt.  Traffickers typically begin forcing the Victims to work in prostitution in Mexico, frequently in a neighborhood of Mexico City known as “La Merced.”   Victims are often required to see at least 20 to 40 customers per day.  Traffickers monitor the number of clients a Victim sees by surveilling the Victim, communicating with brothel workers, and by counting the number of condoms provided to a Victim.  Traffickers typically require the Victims to turn over all of the prostitution proceeds to the Traffickers. 

After a Victim has worked in prostitution in Mexico for some time, Traffickers typically arrange for the Victim to be smuggled into the United States.  Members of the STO assist one another in making smuggling arrangements.  In many cases, multiple Traffickers and multiple Victims are smuggled into the United States together.  In other cases, one Trafficker may remain in Mexico while arranging for a Victim to be smuggled together with another Trafficker and other Victims.

Once in the United States, the members of the STO generally maintain their Victims at one of several shared apartments in New York City.  Victims living in the same apartment are frequently forbidden to communicate with one another.  Once in the United States, Traffickers continue to use physical and sexual violence, threats of the same, lies, and coercion to force the Victims to work in prostitution. 

In most cases, the Trafficker or another member of the STO provides a Victim with contact information with which to find work.  The Victims typically work weeklong shifts either in a brothel, or in a “delivery service.”  In a delivery service, the Victim is delivered to a customer’s home by a “driver.”  These brothels and delivery services are located both within New York, and in surrounding states, including, but not limited to Connecticut, Maryland, Virginia, New Jersey, and Delaware.

Generally, each customer pays $30-35 for 15 minutes of sex.  Of that, half of the money typically goes to the driver (in the case of a delivery service) or to the brothel.  The other $15 goes to the Victim, who is then typically forced to give all of the proceeds to the Trafficker.  When a Trafficker is unavailable, a Victim may also give the proceeds to another member of the STO.

The Traffickers then frequently send, or have their Victims send, some of the prostitution proceeds to Traffickers’ family members and associates in Mexico by wire transfer.  Such transfers provide financial assistance to the Traffickers’ families and provide financial support to the Traffickers themselves if they return to Mexico. 

*                      *                     *                      

Since 2009, the Department of Justice and ICE’s Homeland Security Investigations (HSI) have collaborated with Mexican law enforcement counterparts in a Bilateral Human Trafficking Enforcement Initiative aimed at strengthening high-impact prosecutions under both U.S. and Mexican law.  The initiative is aimed at dismantling human trafficking networks operating across the United States-Mexico border, bringing human traffickers to justice, reuniting victims with their children, and restoring the rights and dignity of human trafficking victims held under the trafficking networks’ control.  These efforts have resulted in successful prosecutions in both Mexico and the United States, including U.S. federal prosecutions of over 50 defendants in multiple cases in New York, Georgia, Florida, and Texas since 2009, and numerous Mexican federal and state prosecutions of associated sex traffickers.  In announcing the unsealed charges, Attorney General Lynch commended U.S. and Mexican law enforcement partners for their shared and continued commitment to coordinated bilateral anti-trafficking efforts.

Attorney General Lynch and U.S. Attorney Bharara praised the outstanding investigative work of HSI, the work of the Mexican government and Mexican law enforcement in executing the arrests and preparing for the extradition of the defendants to the United States, and the assistance provided by the New York City Police Department, the State Department, the Civil Rights Division’s Human Trafficking Prosecution Unit, and the Criminal Division’s Office of International Affairs.  The Justice Department also acknowledged the non-governmental victim service providers and advocates for their dedicated efforts to restore and improve the lives of survivors of trafficking and their families in connection with this case and others.

*                      *                     *

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

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

The prosecution is being handled by the Violent and Organized Crime Unit of the U.S. Attorney’s Office for the Southern District of New York.  Assistant U.S. Attorneys Kristy J. Greenberg, Jane Kim, and Rebecca G. Mermelstein are in charge of the prosecution.

United States v. Efrain Granados-Corona, a/k/a “Chavito,” a/k/a “Cepillo,” et al.,

S3 16 Cr. 324 (ALC)

COUNT

CHARGE

DEFENDANT(S)

MAXIMUM PENALTIES

1

Conspiracy to Commit Sex Trafficking

18 U.S.C. § 1594

EFRAIN GRANADOS-CORONA,

   a/k/a “Chavito,”

   a/k/a “Cepillo,”

RAUL ROMERO-GRANADOS,

   a/k/a “Chicarcas,”

   a/k/a “El Negro,”

ISAAC LOMELI-RIVERA,

   a/k/a “Giro,” 

JUAN ROMERO-GRANADOS,

   a/k/a “Chegoya,”

   a/k/a “El Guero,” ALAN ROMERO-GRANADOS,

   a/k/a “El Flaco,”

PEDRO ROJAS-ROMERO, EMILIO ROJAS-ROMERO

Life Imprisonment

2

Sex Trafficking of a Minor by Force, Fraud, or Coercion

18 U.S.C. §§ 1591(a), (b)(1), (b)(2), and 2 

RAUL ROMERO-GRANADOS,

   a/k/a “Chicarcas,”

   a/k/a “El Negro”

Life Imprisonment

3

Sex Trafficking of a Minor by Force, Fraud, or Coercion

18 U.S.C. §§ 1591(a), (b)(1), (b)(2), and 2 

EFRAIN GRANADOS-CORONA, a/k/a “Chavito,”

a/k/a “Cepillo,”,

Life Imprisonment

4

Sex Trafficking of a Minor by Force, Fraud, or Coercion

18 U.S.C. §§ 1591(a), (b)(1), (b)(2), and 2 

EFRAIN GRANADOS-CORONA,

   a/k/a “Chavito,”

   a/k/a “Cepillo,”

RAUL ROMERO-GRANADOS,

   a/k/a “Chicarcas,”

   a/k/a “El Negro”

Life Imprisonment

5

Sex Trafficking by Force, Fraud, and Coercion

18 U.S.C. §§ 1591(a), (b)(1), and 2 

EFRAIN GRANADOS-CORONA,

   a/k/a “Chavito,”

   a/k/a “Cepillo,”

RAUL ROMERO-GRANADOS,

   a/k/a “Chicarcas,”

   a/k/a “El Negro,”

PEDRO ROJAS-ROMERO

Life Imprisonment

6

Sex Trafficking by Force, Fraud, and Coercion

18 U.S.C. §§ 1591(a), (b)(1), and 2 

ISAAC LOMELI-RIVERA,

   a/k/a “Giro”

Life Imprisonment

7

Sex Trafficking by Force, Fraud, and Coercion

18 U.S.C. §§ 1591(a), (b)(1), and 2 

ISAAC LOMELI-RIVERA,

   a/k/a “Giro”

Life Imprisonment

8

Sex Trafficking by Force, Fraud, and Coercion

18 U.S.C. §§ 1591(a), (b)(1), and 2 

JUAN ROMERO-GRANADOS,

   a/k/a “Chegoya,”

   a/k/a “El Guero”

Life Imprisonment

9

Sex Trafficking by Force, Fraud, and Coercion

18 U.S.C. §§ 1591(a), (b)(1), and 2 

ALAN ROMERO-GRANADOS,

   a/k/a “El Flaco”

Life Imprisonment

10

Sex Trafficking by Force, Fraud, and Coercion

18 U.S.C. §§ 1591(a), (b)(1), and 2 

EMILIO ROJAS-ROMERO

Life Imprisonment

11

Sex Trafficking by Force, Fraud, and Coercion

18 U.S.C. §§ 1591(a), (b)(1), and 2 

PEDRO ROJAS-ROMERO,

EMILIO ROJAS-ROMERO

Life Imprisonment

12

Transportation of a Minor for Purposes of Prostitution

18 U.S.C. §§ 2423(a) and 2 

EFRAIN GRANADOS-CORONA,

   a/k/a “Chavito,”

   a/k/a “Cepillo”

Life Imprisonment

13

Transportation of a Minor for Purposes of Prostitution

18 U.S.C. §§ 2423(a) and 2 

RAUL ROMERO-GRANADOS,

   a/k/a “Chicarcas,”

   a/k/a “El Negro”

Life Imprisonment

14

Transportation of a Minor for Purposes of Prostitution

18 U.S.C. §§ 2423(a) and 2 

RAUL ROMERO-GRANADOS,

   a/k/a “Chicarcas,”

   a/k/a “El Negro”

Life Imprisonment

15

Transportation for Purposes of Prostitution

18 U.S.C. §§ 2421 and 2

EFRAIN GRANADOS-CORONA,

   a/k/a “Chavito,”

   a/k/a “Cepillo”

Ten years’ imprisonment

16

Transportation for Purposes of Prostitution

18 U.S.C. §§ 2421 and 2

ISAAC LOMELI-RIVERA,

   a/k/a “Giro”

Ten years’ imprisonment

17

Transportation for Purposes of Prostitution

18 U.S.C. §§ 2421 and 2

ISAAC LOMELI-RIVERA,

   a/k/a “Giro”

Ten years’ imprisonment

18

Transportation for Purposes of Prostitution

18 U.S.C. §§ 2421 and 2

JUAN ROMERO-GRANADOS,

   a/k/a “Chegoya,”

   a/k/a “El Guero”

Ten years’ imprisonment

19

Transportation for Purposes of Prostitution

18 U.S.C. §§ 2421 and 2

ALAN ROMERO-GRANADOS,

   a/k/a “El Flaco”

Ten years’ imprisonment

20

Transportation for Purposes of Prostitution

18 U.S.C. §§ 2421 and 2

PEDRO ROJAS-ROMERO

Ten years’ imprisonment

21

Transportation for Purposes of Prostitution

18 U.S.C. §§ 2421 and 2

EMILIO ROJAS-ROMERO

Ten years’ imprisonment

DEFENDANT

AGE

RESIDENCE

EFRAIN GRANADOS-CORONA,

     a/k/a “Chavito,”

     a/k/a “Cepillo”

41

Mexico

RAUL ROMERO-GRANADOS,

     a/k/a “Chicarcas,”

     a/k/a “El Negro”

32

New York, United States

ISAAC LOMELI-RIVERA,

     a/k/a “Giro”

34

New York, United States

JUAN ROMERO-GRANADOS,

     a/k/a “Chegoya,”

     a/k/a “El Guero”

30

Mexico

ALAN ROMERO-GRANADOS,

     a/k/a “El Flaco”

24

Mexico

PEDRO ROJAS-ROMERO

37

Mexico

EMILIO ROJAS-ROMERO

34

Mexico

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that TERRENCE JOHNSON, 23, of Sullivan County, was sentenced today by U.S. District Judge Cathy Seibel to 262 months in prison for distributing heroin and fentanyl; distributing cocaine; selling heroin, fentanyl, and cocaine within 1,000 feet of elementary schools; conspiring to distribute at least 100 grams of heroin, conspiring to distribute at least 280 grams of crack cocaine, and for distributing a mixture of heroin and fentanyl that resulted in the overdose death of Malcolm Perry, 35, a resident of Liberty, New York.  JOHNSON pled guilty on June 3, 2016, before U.S. Magistrate Judge Paul E. Davison.

U.S. Attorney Bharara stated: “Even after learning that his fentanyl-laced heroin had sent customers to the emergency room, Terrence Johnson continued to sell his poisonous blend, ultimately causing the tragic death of Malcolm Perry.  For his callous crime, Johnson has received an appropriately severe sentence.  Drug dealers who peddle deadly poison across our District should understand, if they sell opioids that kill, serious consequences await them.”

According to the allegations in the Indictment and other information in the public record:

Between May 28, 2015, and June 6, 2015, JOHNSON was selling a mixture of heroin and fentanyl in Sullivan County.  Fentanyl is a synthetic opioid that is significantly stronger than both ordinary heroin and morphine. During that period, several customers who purchased that mixture from JOHNSON overdosed and required emergency medical attention.  On or about June 1, 2015, Malcolm Perry overdosed and died of acute fentanyl intoxication as a result of using the mixture sold by JOHNSON.  Even after learning that Perry had died, JOHNSON continued to sell the mixture.

Between 2012 and 2013, JOHNSON also conspired to distribute over 280 grams of crack cocaine in Sullivan County.

*                *                *

In addition to the term of imprisonment, JOHNSON was also sentenced to 6 years of supervised release and ordered to pay a $1,000 special assessment.

Mr. Bharara praised the outstanding investigative work of the Federal Bureau of Investigation, the Village of Liberty Police Department, the New York State Police, the Sullivan County Sheriff’s Department, and the Village of Monticello Police Department.  Mr. Bharara also thanked the Sullivan County District Attorney’s Office for its assistance in the case.

The prosecution is being handled by the Office’s White Plains Division.  Assistant U.S. Attorneys Anden Chow, Michael Gerber, and George Turner are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), James J. Hunt, Special Agent in Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Division of the Federal Bureau of Investigation (“FBI”), announced that New York City Police Officer MERLIN ALSTON, 33, was convicted today of narcotics and firearms charges for his role in a long-running conspiracy to distribute large amounts of cocaine and molly in the Bronx.  The jury convicted ALSTON on both counts in the controlling indictment following a two-week trial before U.S. District Judge Colleen McMahon.   

U.S. Attorney Preet Bharara stated:  “Rather than use his police badge and gun to serve and protect the citizens of New York City, Merlin Alston instead chose to protect and serve major Bronx drug dealers.  Today’s unanimous jury verdict demonstrates that no one is above the law.”

DEA Special Agent in Charge James J. Hunt said:  “Merlin Alston’s crimes were an about-face to law enforcement.  As members of the New York Drug Enforcement Task Force worked to rid our communities of drugs, he was pushing drugs into them.  I applaud our law enforcement partners and the U.S. Attorney’s Office Southern District of New York for their efforts in this investigation.” 

According to court papers and evidence admitted at trial:

From 2010 to 2014, MERLIN ALSTON, who at the time was an active NYPD police officer, conspired with others to distribute large quantities of narcotics.  ALSTON personally delivered approximately 40 kilograms of cocaine during that time.  In addition, ALSTON provided armed security to a cocaine trafficker, using a shotgun and his NYPD service weapon to do so.  ALSTON also provided confidential information about law enforcement operations, including arrests and surveillance, to several Bronx drug dealers.

For these activities, ALSTON was convicted of one count of conspiracy to distribute narcotics and one count of possession of firearms in furtherance of the narcotics conspiracy.  ALSTON faces a mandatory minimum of 15 years in prison and a maximum sentence of life in prison.  ALSTON is scheduled to be sentenced on February 2, 2017, before Chief Judge McMahon.  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. 

U.S. Attorney Bharara thanked the Office of the Special Narcotics Prosecutor for the City of New York for its invaluable assistance, and praised the DEA, the FBI, and the NYPD for their outstanding work in this investigation.  The DEA New York Drug Enforcement Task Force comprises agents and officers of the DEA, the NYPD, and the New York State Police. 

The case is being prosecuted by the Office’s Narcotics Unit.  Assistant U.S. Attorneys Jared Lenow and Thomas McKay are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York,  William J. Cotter, Special Agent-in-Charge of the San Antonio Field Office of the Internal Revenue Service, Criminal Investigations (“IRS-CI”), and Terence S. Opiola, Special Agent in Charge of the Newark Field Office of the Department of Homeland Security, Homeland Security Investigations (“HSI”), announced today a complaint charging CARLOS DJEMAL, ISIDORO HAIAT, BRAULIO LOPEZ, MAX FRAENKEL, DANIEL BLITZER, and ROBERT MORENO with international money laundering and wire fraud as well as conspiracies to commit these same offenses.  DJEMAL was arrested in Chicago, Illinois; MORENO was arrested in Dallas, Texas; FRAENKEL was arrested in Austin, Texas.  BLITZER will be presented this afternoon in Manhattan federal court before U.S. Magistrate Judge Andrew J. Peck.  HAIAT and LOPEZ have not been apprehended.

Manhattan U.S. Attorney Preet Bharara said:  “As alleged, Carlos Djemal, Isidoro Haiat, and their co-defendants used the U.S. banking system to commit an international fraud scheme that deprived the Mexican government of substantial tax revenue and involved the laundering of over $100 million.  Thanks to the outstanding investigative work of HSI and the IRS, these alleged criminals will now face charges in an American court.” 

IRS-CI Special Agent-in-Charge William J. Cotter said:  “This investigation took law enforcement above and beyond its traditional role in financial crimes.  In effect, it put us squarely in the middle of the high-tech world of banking and the sophisticated electronic movement of money.  This investigation serves to remind us that there is no such thing as free money and there are no awards or incentives for creativity when it comes to crime.”           

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

Beginning in or about June 2011 through in or about at least May 2016, CARLOS DJEMAL, ISIDORO HAIAT, BRAULIO LOPEZ, MAX FRAENKEL, DANIEL BLITZER, and ROBERT MORENO were engaged in a scheme to defraud the Mexican government of tax revenue relating to Mexico’s value added tax (“VAT”) and then launder the proceeds of the scheme throughout the United States and Mexico.  The Mexican government imposes VAT on goods sold from one Mexican company to another; however, when certain goods (such as cellular phones) are exported from Mexico, the previously-paid VAT is refunded to the exporter.  DJEMAL, HAIAT, LOPEZ, MORENO, FRAENKEL, and BLITZER created and controlled dozens of companies (the “Front Companies”) purportedly doing business as importers and exporters of cellular phones in order to fraudulently obtain VAT refunds from the Mexican government. 

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

Once the phones were shipped to the United States, they were transferred to one or more Front Companies in the United States created by LOPEZ, MORENO, FRAENKEL, or BLITZER, and then shipped back to a different Front Company in Mexico.  Through this process, the phones were shipped repeatedly in a circular fashion between Front Companies controlled by the defendants and their co-conspirators in Mexico and the United States, enabling DJEMAL and HAIAT, to obtain multiple fraudulent VAT refunds for the same phones. 

In order to create the appearance of legitimate cell phone sales, each transfer of phones was generally accompanied by a transfer of funds to and from accounts held in the name of the relevant Front Companies and owned and controlled by the defendants or their co-conspirators.  As part of the scheme, each defendant or co-conspirator who controlled a Front Company receiving funds as part of the scheme retained approximately 1% for his participation in the scheme.

Between approximately June 2011 to approximately May 2016, DJEMAL, HAIAT, LOPEZ, MORENO, FRAENKEL, and BLITZER moved more than $100 million dollars through dozens of accounts maintained by Front Companies in this fashion, including through accounts maintained at a financial institution in the Southern District of New York.

*                *                *                       

Mr. Bharara praised the outstanding work of HSI and IRS-CI for their investigative efforts and ongoing support and assistance with the case.  Mr. Bharara also thanked the Government of Mexico, and in particular the Secretaría de Hacienda y Crédito Público, for their assistance and collaboration in this investigation.

The prosecution of this case is being overseen by the Office’s Money Laundering and Asset Forfeiture Unit.  Assistant U.S. Attorney Jaimie L. Nawaday is in charge of the case.

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that CARLTON P. CABOT, the former owner and chief executive officer of Cabot Investment Properties LLC (“CIP”), was sentenced today in Manhattan federal court to 10 years in prison for defrauding hundreds of elderly investors in numerous CIP-sponsored real estate investments.  As part of the fraud, CABOT and his co-defendant misappropriated approximately $17 million of investor funds to pay for personal and business expenses, and concealed the fraud from the investors with manipulated financial statements.  CABOT pled guilty to one count of securities fraud on May 31, 2016, before U.S. District Judge Jesse M. Furman who imposed today’s sentence.

U.S. Attorney Preet Bharara said:  “Carlton Cabot took $17 million from vulnerable investors and spent it lavishly on himself, and then lied to cover it up.  The victims, many of whom were in their 70s and 80s, were simply looking for a steady income stream to sustain them in their retirement.  Now, instead of economic safety and security, they are faced with financial ruin.  Cabot has rightfully been held to account for his selfish and criminal acts.”

According to the allegations contained in the criminal complaint against CABOT, the indictment to which CABOT pled guilty and Cabot’s admissions during his plea allocution, and the statements made by the victims of CABOT’s fraud:

From 2003 through 2012, CIP – which was controlled by CABOT – sponsored and oversaw approximately 18 so-called tenants-in-common (“TIC”) securities offerings to investors located all over the United States (collectively, the “TIC Investments” and the “TIC Investors”). A TIC investment is a real estate investment in which investors collectively own a piece of commercial real estate and are entitled to receive a portion of the rental income from the property.

From 2008 through 2012, CABOT engaged in a scheme to defraud the TIC Investors by misappropriating funds belonging to the TIC Investments and concealing his misappropriations by knowingly providing false and misleading financial reports and other information to the TIC Investors.

According to the representations in the offering prospectuses for the TIC Investments, CIP was allowed to collect only “excess” rental income from the TIC Investments – i.e., any additional money left over after the TIC Investments had paid the operating expenses for the properties and the disbursements due to the TIC Investors.  Despite these representations, CABOT repeatedly transferred money out of bank accounts belonging to the TIC Investments and into CIP bank accounts that he controlled (the “CIP Operating Accounts”) before these funds could be used to pay for operating expenses and disbursements to the TIC Investors.   

CABOT then used these funds to pay for unauthorized purposes without the knowledge or authorization of the TIC Investors, including: (1) to cover the operating expenses and investor distributions of other TIC Investments that had no available funds; (2) to pay for millions of dollars of personal expenses, including expensive cars, rental apartments, and private school tuition; and (3) to pay for CIP business expenses, including an approximately $1,125,651 civil settlement to certain TIC Investors who had sued CABOT and others.

To conceal the misappropriation of TIC Investment funds from the TIC Investors, CABOT and his co-defendant, Timothy J. Kroll, CIP’s chief operating officer, provided false and misleading financial reports to the TIC Investors that intentionally hid the fact that CIP owed large sums of money to the TIC Investments. 

By the end of 2012, when CIP ceased its day-to-day operations, CIP and its principals, CABOT and Kroll, owed approximately $17 million to the TIC Investments, which has never been repaid.

*                *                *

In addition to his prison sentence, CABOT, 54, of Stamford, Connecticut, was sentenced to three years of supervised release and ordered to pay $17 million in restitution and forfeiture. 

On October 7, 2015, Kroll pled guilty before Judge Furman for his role in the scheme.

Mr. Bharara praised the outstanding efforts of the U.S. Postal Inspection Service and Internal Revenue Service’s Criminal Investigation Division.  He also thanked the Office of the Secretary, William F. Galvin, Massachusetts Securities Division, for its assistance with the investigation of this case.

The prosecution of this case is being overseen by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Christian R. Everdell and Edward A. Imperatore are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that CLYDEDORO GRAHAM was sentenced in White Plains federal court to 270 months in prison for kidnapping a 19-year-old victim (the “Victim”), conspiring to engage in sex trafficking of the Victim, and attempting to engage in sex trafficking of the Victim.  CLYDEDORO GRAHAM was convicted in November 2015 after a seven-day jury trial before United States District Judge Nelson S. Román, who imposed today’s sentence.

U.S. Attorney Preet Bharara stated:  “Clydedoro Graham orchestrated a horrifying plot to lure a 19-year-old woman to his apartment, hold her against her will, and coerce her—through repeated sexual assault and other physical and psychological pressure—to work as a prostitute for him.  A unanimous jury convicted him of kidnapping and sex trafficking, and today, the Court imposed a significant sentence that reflects the viciousness of the defendant’s crimes.”

According to the allegations in the Complaint and Superseding Indictment filed in federal court, and the evidence presented at trial:

On the evening of June 16, 2014, CLYDEDORO GRAHAM was at his apartment in Yonkers, New York, (the “Apartment”) with his girlfriend and accomplice, Alisa Papp.  His cousin, Kevin Graham, and his friend, Hector Garcia, were also present.  As Papp, Kevin Graham, and Garcia knew, CLYDEDORO GRAHAM was a “pimp.”  That night, the four co-conspirators agreed to lure a prostitute to the Apartment for the purpose of forcing her to work for them.

CLYDEDORO GRAHAM was the leader of this scheme.  Using his cellphone, he went to Backpage.com, a website where prostitutes post advertisements.  He trolled through the advertisements searching for a target, and eventually decided on the Victim.  Kevin Graham called the Victim and led her to believe, falsely, that he wanted to hire her for a prostitution “date.”

When the Victim arrived, the co-conspirators were lying in wait.  Papp served as the lookout, making sure the Victim did not arrive with anyone else.  Kevin Graham met her outside and led her into the Apartment, while CLYDEDORO GRAHAM and Garcia hid inside.  Once inside the Apartment – and at the direction of CLYDEDORO GRAHAM – the co-conspirators took away the Victim’s purse and phone, removed the battery from her phone, and told her that she was there to work as a prostitute for them.  The Victim asked repeatedly to leave, but CLYDEDORO GRAHAM and his accomplices refused.

The co-conspirators told the Victim that she had no choice but to have sex with each of the men.  She refused and asked again to go home.  CLYDEDORO GRAHAM said she could give it up or they would “take it.”  CLYDEDORO GRAHAM, Kevin Graham, and Hector Garcia took turns having sex with the Victim, against her will.

Later that night, Kevin Graham and Garcia left the Apartment.  For the next two days and two nights, CLYDEDORO GRAHAM and Papp held the Victim captive in the Apartment.  Among other coercive measures, CLYDEDORO GRAHAM removed the doorknob from the interior side of the Apartment’s front door to prevent the Victim from escaping.  He then made plans to bring the Victim out onto the streets of Yonkers to prostitute her for his own benefit.

CLYDEDORO GRAHAM’s scheme unraveled on June 18, 2014, when two Yonkers police officers arrived at the Apartment after receiving a tip from individuals who had been searching for the Victim.  The officers demanded to speak with the Victim, immediately determined that she was being held against her will, and brought her to safety.

*                      *                      *

In addition to the prison sentence, CLYDEDORO GRAHAM, 28, of Yonkers, New York, was sentenced to three years of supervised release.

Mr. Bharara praised the outstanding investigative work of the FBI’s Westchester Violent Crimes Task Force, which comprises agents and detectives of the FBI, United States Probation, the City of Yonkers Police Department, the City of Peekskill Police Department, the New York City Police Department, the Westchester County Police, and the Westchester County District Attorney’s Office.

The prosecution is being handled by the Office’s White Plains Division.  Assistant U.S. Attorneys Douglas Zolkind and Kathryn Martin are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, Angel M. Melendez, Special Agent in Charge of New York, U.S. Immigration and Customs Enforcement (“ICE”) Homeland Security Investigations (“HSI”), Robert E. Perez, Director, Field Operations New York, U.S. Customs and Border Protection (“CBP”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced charges today against two individuals for conspiring to traffic in counterfeit goods.  DAYE DONG and HONGYU CHEN are charged with importing counterfeit goods from China into the United States with the intent to distribute and sell the counterfeit products to retailers in New York City and elsewhere.  The defendants were arrested today and will be presented before U.S. Magistrate Judge Kevin Nathaniel Fox later this afternoon.

Manhattan U.S. Attorney Preet Bharara said:  “These defendants allegedly sold counterfeit goods, fueling consumers’ desire for low prices on high end products.  But the cheap prices come at a high price for legitimate businesses.  Protection of intellectual property remains an important priority for my office and for our partners at CBP, ICE, and the NYPD.”  

HSI Special Agent in Charge Angel M. Melendez said:  “People wrongly assume intellectual property theft is a victimless crime.  The reality is, individuals like those charged today are allegedly robbing from law abiding merchants and from the legitimate companies that manufacture these items.  Brand-name knockoffs are not a harmless way to beat the system.”

CBP Director Robert E. Perez said:  “U. S. Customs and Border Protection is proud of the expertise we provide in support of investigations that result in the takedown of criminal enterprises.  It is through interagency partnerships and collaborative efforts, like the one leading to today's arrests, that law enforcement successfully combats today's criminal organizations.”

NYPD Commissioner James P. O’Neill said:  “This sale of conterfeit merchandise is a scheme that is old as crime itself.  Today’s arrests led by Homeland Security and Immigration and Customs Enforcement ensures consumers have confidence in the products they purchase.”

According to the allegations in the Complaint[1]:

From March 2012 to October 2016, DONG and CHEN, who are married, imported counterfeit luxury and designer brand goods into the United States from China.  DONG and CHEN stored the imported counterfeit goods in two warehouses with the intent to transfer the goods to retailers in New York City, including a Manhattan retail store operated by CHEN, and elsewhere.  On October 27, 2016, federal and New York City law enforcement officers conducted a search of DONG and CHEN’s residence, warehouses, and retail store, and found more than 30,000 pieces of counterfeit goods, including handbags and wallets, for various luxury and designer brands. 

DONG, 49, and CHEN, 48, of Bayside, New York, are both charged with one count of conspiring to traffic in counterfeit goods, and one count of trafficking in counterfeit goods.  Each count carries a maximum sentence of 20 years in prison. 

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

Mr. Bharara praised the outstanding investigative work of the U.S. Department of Homeland Security, Homeland Security Investigations.  He also thanked the New York Police Department for its assistance.

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

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, and Mark Hamlet, Special Agent in Charge of the Special Operations Division of the United States Drug Enforcement Administration (“DEA”), announced today the extradition of MEMET GEZER, a/k/a “Muhammad Altrky,” a/k/a “Wissam Abdel Rahman Younes,” a/k/a “Mohamed Subhe Al Gazar” (“GEZER”) and SABER KARIMCH, a/k/a “Abu Farouk” (“KARIMCH”), international arms traffickers charged with conspiring to sell large quantities of military-grade weaponry to individuals GEZER and KARIMCH believed were representatives of a Mexican drug trafficking organization (the “DTO”).  GEZER and KARIMCH, were arrested by Montenegrin authorities on April 14, 2016, extradited from Montenegro today, and will be arraigned in front of United States Magistrate Judge Kevin Nathaniel Fox later today.  The case is assigned to Chief United States District Judge Colleen McMahon.

U.S. Attorney Preet Bharara stated:  “Highlighting the global nature and impact of the drug trade, two men from the Middle East working with what they believed to be members of a Mexican drug trafficking organization, allegedly agreed to provide military-grade weapons, including machine guns and rocket-propelled grenades, to help protect cocaine shipments headed for the United States.  Thanks to the DEA’s relentless efforts, these alleged international arms traffickers are now on American soil facing criminal charges.”

Special Agent in Charge Mark Hamlet stated:  “This global conspiracy uncovered by DEA and its partners further highlights the dangerous and potentially deadly connection between arms dealers and drug trafficking networks worldwide.  DEA’s vast global presence allows us to pursue some of the world’s most dangerous criminals so they may face justice for their crimes in the United States.”

According to the Indictment and Complaints[1], which were unsealed in October 2016:

Between September 2015 and March 2016, GEZER and KARIMCH participated in a series of in-person meetings and telephone calls with individuals whom GEZER and KARIMCH understood to be representatives of a Mexican drug trafficking organization (the “DTO”).  However, those individuals were, in fact, two DEA confidential sources (the “CSes”).  During those meetings and telephone calls, which were recorded, GEZER and KARIMCH agreed to supply the DTO with high-powered weapons, including machine guns, grenades, and rocket-propelled grenades (“RPGs”), with the express understanding that those weapons would be used to protect large cocaine shipments as they traveled from and through Mexico for distribution in the United States. 

In early 2016, one of the CSes met with GEZER in a foreign country.  GEZER escorted the CS to a gated compound and showed the CS bulk quantities of weapons, including RPGs, grenades, sniper rifles, and machine guns.  In February 2016, GEZER sent the CS videos of some of the weapons that GEZER had shown the CS in the gated compound to confirm that GEZER was ready to proceed with the weapons deal. 

GEZER additionally offered to sell the CSes large sums of United States currency for a fraction of the currency’s face value, with the understanding that the money would help the CSes launder drug money for the DTO.  In early February 2016, GEZER showed one of the CSes what appeared to be approximately $2 million in U.S. currency, which GEZER indicated was a small fraction of what GEZER could make available to the CSes.

* * *

GEZER, 49, a citizen of Turkey, and KARIMCH, 50, a citizen of Syria, are each charged with one count of conspiracy to import cocaine into the United States, which carries a maximum sentence of life in prison and a mandatory sentence of 10 years in prison; two counts of attempting to import cocaine into the United States, each carrying a maximum sentence of life in prison and a mandatory sentence of 10 years in prison; and one count of conspiracy to aid and abet the possession of firearms in furtherance of drug trafficking offenses, which carries a maximum sentence of 20 years in prison.  In addition, GEZER is charged with conspiracy to launder money, which carries a maximum sentence of 20 years in prison. 

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

Mr. Bharara praised the outstanding investigative efforts of the DEA’s Special Operations Division, the DEA’s Rome Country Office, and the Montenegrin National Police.  The defendants’ arrests and subsequent extradition are also the result of the close cooperative efforts of the U.S. Attorney’s Office for the Southern District of New York and the Justice Department’s Office of International Affairs.

The case is being prosecuted by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Andrea Surratt and Ilan Graff are in charge of the prosecution.

The allegations contained in the Complaints and 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 Complaints and Indictment, and the description of the Complaints and Indictment set forth herein constitute only allegations, and every fact described should be treated as an allegation. 

Preet Bharara, the United States Attorney for the Southern District of New York announced that BORIS KOTLYARSKY pled guilty to extortion conspiracy and extortion in connection with a scheme to extract payment from a person who believed that he was the subject of a murder-for-hire plot.  KOTLYARSKY pled guilty this morning in Manhattan federal court before U.S. Magistrate Judge Kevin Nathaniel Fox. 

Manhattan U.S. Attorney Preet Bharara said:  “As Boris Kotlyarsky has admitted, he took cruel advantage of a desperate situation, giving a victim the extortionate choice between paying off his hitman or death.  Kotlyarsky’s manipulation did not result in a payoff, but instead a criminal conviction.”

According to the allegations in the charging documents, including the Complaint and Indictment, and statements made in court proceedings:

In October 2015, KOTLYARSKY’s associate (“CC-1”), who has extensive connections to Russian organized crime, told KOTLYARSKY that a Russian businessman (the “Businessman”) had approached CC-1 with a contract to kill the Businessman’s son-in-law (the “Victim”) in exchange for payment.  

CC-1 did not know the identity of the Victim.  KOTLYARSKY, however, informed CC-1 of the identity of the Victim, told CC-1 that the Victim was wealthy, and offered to broker a meeting between the Victim and CC-1 so that the Victim could negotiate a payment to CC-1 to avoid harm.

Between October 2015 through January 14, 2016, KOTLYARSKY repeatedly contacted the Victim and emphasized CC-1’s reputation for violence and connections with organized crime.  In January 2016, KOTLYARSKY arranged a series of meetings between the Victim and CC-1.  During these meetings, CC-1 told the Victim, among other things, that it was fortunate that KOTLYARSKY had contacted CC-1, and that the Victim owed $125,000 to CC-1, with $50,000 due by January 15, 2016.

During a meeting on January 14, 2016, arranged by KOTLYARSKY, the Victim gave CC-1 a check for $50,000.  Shortly after the meeting KOTLYARSKY and CC-1 were arrested.

*          *          *

KOTLYARSKY, 68, pled guilty to one count of conspiracy to commit Hobbs Act extortion, which carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense; and to one count of Hobbs Act extortion, which carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.

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

Mr. Bharara praised the outstanding work of the FBI, U.S. Customs and Border Protection, and the NYPD 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. Attorney Andrew Thomas is in charge of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that MICHAEL BARNETT, a real estate developer, was sentenced today by U.S. District Judge Kenneth M. Karas to 37 months in prison for conspiring to defraud lenders and make false statements to the U.S. Department of Housing and Urban Development (“HUD”) in connection with his development of Vineyard Commons, a luxury residential complex in Ulster County, New York.  BARNETT pled guilty on January 19, 2016, before U.S. Magistrate Judge Paul E. Davison.

Manhattan U.S. Attorney Preet Bharara said:  “Michael Barnett abused his position as the developer of Vineyard Commons to enrich himself and defraud HUD and his construction lender.  Today he has been sentenced to federal prison for his crimes.”

According to the Superseding Indictment to which BARNETT pled guilty and his admissions in court during his plea allocution:

BARNETT, who was the developer of Vineyard Commons, sought kickbacks and investments from subcontractors and vendors on the project and made false statements to the project’s lender so that he could draw down on the project’s line of credit.  BARNETT arranged with his co-defendants, Robert Lees and Kevin DiCello, executives of a vendor that provided rough carpentry and lumber supplies on the project (the “Lumber Company”), to have the Lumber Company pay Barnett a kickback in exchange for BARNETT’s award to the Lumber Company of the Vineyard Commons contract, as well as future business on other developments BARNETT was planning.  To raise funds for the kickback, BARNETT, Lees, and DiCello agreed that the Lumber Company would inflate its bid for labor and materials by approximately $865,000.

BARNETT, Lees, and DiCello intended that the kickback would be funded unwittingly by the construction lender, and ultimately by HUD through its guaranty of the construction loan, through the submission of false and inflated requests to draw down the construction loan.

In January 2010, the Lumber Company made a partial kickback payment of $200,000 to BARNETT, and Lees and DiCello disguised the transaction on the Lumber Company’s books by making it appear to be a customer rebate payable to a company controlled by BARNETT that was not involved in the development of Vineyard Commons.  BARNETT then used the $200,000 as a partial payment of an obligation he had to the general contractor on Vineyard Commons.

BARNETT also solicited subcontractors and vendors on the Vineyard Commons project, including the Lumber Company, to provide labor and materials to build a pool house at his home.  Some of these subcontractors and vendors, including the Lumber Company, agreed to do so.

Finally, BARNETT submitted false invoices to the construction lender in order to enrich himself fraudulently by drawing down the loan.

In addition to the prison sentence, BARNETT, 47, of Marlboro, New York, was sentenced to three years of supervised release.  Judge Karas also ordered BARNETT to forfeit $200,000 in ill-gotten gains and any interest in certain specified real property, and to pay $1,334,620 in restitution.

*                *                *

BARNETT’s co-defendants have been convicted and are awaiting sentence.  Lees was convicted by a jury on May 20, 2016, of conspiracy, mail fraud, money laundering, and making false statements in a loan application, and is scheduled to be sentenced by Judge Karas on December 15, 2016.  DiCello pled guilty on April 20, 2016, to conspiracy, mail fraud, money laundering, and making false statements in a loan application, and is scheduled to be sentenced by Judge Karas on January 19, 2017.

Mr. Bharara praised the outstanding efforts of HUD-Office of Inspector General.

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Michael D. Maimin, James McMahon, and Won S. Shin are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and Shantelle P. Kitchen, Special Agent In Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced that HAROLD LEVINE, a Manhattan tax attorney, and RONALD KATZ, a Florida certified public account, were charged today in Manhattan federal court in an eight-count Indictment with engaging in a multi-year tax evasion scheme involving the diversion of millions of dollars of fees from a Manhattan law firm and the failure to report that fee income to the Internal Revenue Service.   

Mr. Bharara said:  “As tax professionals and partners at professional firms, both Harold Levine and Ronald Katz knew better.  But as alleged, they engaged in a multi-year scheme to divert and evade taxes on millions of dollars of fee income.”

IRS-CI Special Agent in Charge Shantelle P. Kitchen said:  “Tax and accounting professionals who conceal their incomes, evade income taxes, and otherwise obstruct the Internal Revenue Service simply have no excuse for violating the very laws their professions are centered on.  IRS-Criminal Investigation works hard to ensure that everyone pays their fair sure and we take particular interest in allegations involving professionals who should simply know better.” 

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

HAROLD LEVINE, a tax attorney and former head of the tax department at a major Manhattan Law Firm (the “Law Firm”), schemed with RONALD KATZ, a certified public accountant, to divert from the Law Firm over $3 million in fee income from tax shelter and related transactions that LEVINE worked on while serving as a partner of the New York Law Firm.  In addition, LEVINE failed to report that fee income to the IRS on his personal tax returns during the period 2005-2011.  For his involvement in this scheme, KATZ received and failed to report to the IRS over $1.2 million in fee income.     

As part of the fee diversion scheme, for example, LEVINE caused tax shelter fees paid by a Law Firm client to be routed to a partnership entity he co-owned with KATZ and thereafter used those fees – totaling approximately $500,000 – to be used to purchase a home in Levittown, New York.  LEVINE caused the home to be purchased as a residence for a Law Firm employee (the “Law Firm Employee”) with whom he carried on 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 to claim false deductions as a rental property.

In or about 2013, LEVINE was questioned by IRS agents concerning his involvement in certain tax shelter transactions and the fees received for those transactions.  During that questioning, LEVINE falsely represented 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 represent falsely to the IRS that she had paid $1,000 per month in rent to LEVINE.

*                *                *

LEVINE, 58, of New York, New York, and KATZ, 59, of Boca Raton, Florida, are scheduled to be arraigned in magistrate’s court on Monday, October 31.  The case was assigned to United States District Judge Jed S. Rakoff, and a conference was set before Judge Rakoff for Tuesday, November 1, 2016, at 11:00 a.m.

LEVINE, who was charged with one count each of obstructing the IRS, conspiracy, tax evasion, and wire fraud, and two counts of making false statements, faces the following penalties, if convicted:

Statutes Violated

Number

of Counts

Description

Maximum Sentence

26 U.S.C. ' 7212(a)

1

Corruptly endeavoring to obstruct and impede the due administration of the Internal Revenue Laws

Three years in prison

26 U.S.C. ' 7201

1

Tax Evasion

Five years in prison

18 U.S.C. ' 1343

1

Wire Fraud

20 years in prison

18 U.S.C. ' 371

1

Conspiracy

Five years in prison

18 U.S.C. ' 1001

2

False Statements

Five years in prison

KATZ is charged with one count each of obstructing the IRS (maximum penalty three years in prison) and conspiracy (five years in prison), and two counts of tax evasion (five years).

The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the Court.

Mr. Bharara praised the outstanding investigative work of the IRS. 

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Special Assistant United States Attorneys Stanley J. Okula and Assistant United States Attorney Daniel Noble are in charge of the prosecution.

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that SAMUEL GENTLE, a tax preparer and the owner of tax preparation businesses named GenGen, Inc., and GenGen Financial, Inc., in Mount Vernon, New York, was sentenced today in White Plains federal court to 51 months in prison for obstructing the IRS and preparing false and fraudulent individual income tax returns for his clients.  GENTLE was found guilty in July 2016 after a one-week trial before U.S. District Judge Cathy Seibel.

Manhattan U.S. Attorney Preet Bharara said:  “As established at trial, Samuel Gentle abused his position as a tax preparer to file false tax returns on behalf of his clients, himself, and his businesses.  His fraud resulted in over half a million dollars in losses to the IRS, and now a sentence of 51 months in prison for Gentle.”

As established by the evidence at trial:

From 2010 through 2014, GENTLE operated a large and thriving tax preparation business that prepared and submitted to the IRS, on average, 3,200 tax returns each year.  These tax returns contained a pattern of false and fraudulently inflated deductions for business expenses and gifts to charity.  Numerous clients of GENTLE testified that they had not provided GENTLE with any information that he could have used to support the false or inflated deductions.

As part of the investigation of this matter, an undercover IRS agent posed as GENTLE’S client.  During the operation, the agent provided GENTLE with no records that he could have used to support any deductions.  But, consistent with his pattern, GENTLE included false and fraudulent deductions for business expenses and gifts to charity on the tax return he prepared for the undercover agent. 

GENTLE also failed to report on his own personal and business tax returns nearly half of the $1 million in receipts that he received for his tax preparation services from 2010 through 2014.  He spread the receipts across eight bank accounts at five banks, and he failed to issue required IRS forms to himself or his employees, further concealing from the IRS the amount of receipts he and his business had received.

As confirmed by IRS audits as well as the evidence at trial, GENTLE’s crimes resulted in a loss to the IRS of more than $550,000.

In addition to the prison term, GENTLE, 59, of Mount Vernon, New York, was sentenced to one year of supervised release and ordered to pay a $125,000 fine and to pay the IRS over $295,000 in back taxes.

Mr. Bharara praised the investigative work of the Internal Revenue Service, Criminal Investigation, and thanked the IRS for its assistance. 

This matter is being handled by the Office’s White Plains Division.  Assistant U.S. Attorneys Jennifer Beidel, Margery Feinzig, and James McMahon are in charge of the case.