Southern District of New York
Press releases recorded for this federal judicial district.
Two Cayman Island Financial Institutions Plead Guilty in Manhattan Federal Court to Conspiring to Hide More Than $130 Million in Cayman Bank AccountsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Stuart Goldberg, Acting Deputy Assistant Attorney General of the Justice Department’s Tax Division, and Richard Weber, Chief, Internal Revenue Service – Criminal Investigation, (“IRS-CI”), announced today the guilty pleas of Cayman National Securities Ltd. (“CNS”) and Cayman National Trust Co. Ltd. (“CNT”), two Cayman Island affiliates of Cayman National Corporation, which provided investment brokerage and trust management services to individuals and entities within and outside the Cayman Islands, including citizens and residents of the United States (“U.S. taxpayers”). CNS and CNT pleaded guilty to a criminal information charging them with conspiring with many of their U.S. taxpayer-clients to hide more than $130 million in offshore accounts from the United States Internal Revenue Service (the “IRS”) and to evade U.S. taxes on the income earned in those accounts. CNS and CNT entered their guilty pleas pursuant to plea agreements requiring the companies to, among other things, produce through the treaty process account files of non-compliant U.S. taxpayers who maintained accounts at CNS and CNT, and pay a total of $6 million in financial penalties. The plea proceeding took place today before the Honorable Thomas P. Griesa, United States District Judge for the Southern District of New York.
Manhattan U.S. Attorney Preet Bharara said: “The guilty pleas of these two Cayman Island companies today represent the first convictions of financial institutions outside Switzerland for conspiring with U.S. taxpayers to evade their lawful and legitimate taxes. The plea agreements require these Cayman entities to provide this Office with the client files, because we are committed to finding and prosecuting not only banks that help U.S. taxpayers evade taxes, but also individual taxpayers who find criminal ways not to pay their fair share. We will follow them no matter how far they go to hide their accounts, whether it is Switzerland, the Cayman Islands, or some other tax haven.”
Acting Deputy Assistant Attorney General Stuart Goldberg said: “Today’s convictions make clear that our focus is not on any one bank, insurance company or asset management firm, or even any one country. The Department and IRS are following the money across the globe –there are no safe havens for US citizens engaged in tax evasion or those actively assisting them.”
IRS Chief Richard Weber said: “The veil of secrecy has been lifted from what was once a common place for criminals to hide their money offshore. The IRS and DOJ work aggressively to require banks to follow the laws and not turn a blind eye to criminal activity. When individuals and entities hide behind shell corporations and numbered bank accounts, they are not only cheating the U.S. government, they are cheating the honest taxpaying citizens who are obeying the law and doing the right thing.”
According to the Information, statements made during the proceedings today, and other documents filed in Manhattan federal court, including the Statement of Facts to the plea agreements:
The Offense Conduct
From at least 2001 through 2011, CNS and CNT, which are both located in Grand Cayman and organized under the laws of the Cayman Islands, assisted certain U.S. taxpayers in evading their U.S. tax obligations to the IRS, and otherwise hiding accounts held at CNS and CNT from the IRS (hereinafter, “undeclared accounts”). CNS and CNT did so by knowingly opening and maintaining undeclared accounts for U.S. taxpayers at CNS and CNT. Specifically, and among other things, in furtherance of a scheme to help U.S. taxpayers hide assets from the IRS and evade taxes:
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CNS and CNT opened, and/or encouraged many U.S. taxpayer-clients to open, accounts held in the name of sham Caymanian companies and trusts (collectively, “structures”), thereby helping U.S. taxpayers conceal their beneficial ownership of the accounts.
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CNS and CNT treated these sham Caymanian structures as the account holders and allowed the U.S. beneficial owners of the accounts to trade in U.S. securities.
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CNS failed to disclose to the IRS the identities of the U.S. beneficial owners who were trading in U.S. securities, in contravention of CNS’s obligations under its Qualified Intermediary Agreement (“QI”) with the IRS.
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After learning about the investigation of Swiss bank UBS AG (“UBS”), in or about 2008, for assisting U.S. taxpayers to evade their U.S. tax obligations, CNS and CNT continued to knowingly maintain undeclared accounts for U.S. taxpayer-clients, and did not begin to engage in any significant remedial efforts with respect to those accounts until 2011 and 2012.
The sham Caymanian structures that CNT set up for U.S. taxpayer-clients included trusts, which were nominally controlled by CNT trust officers, but which in fact were controlled by the U.S. taxpayer-clients; managed companies, for which CNT ostensibly provided direction and management services, but which in truth were shell companies that served only to hold the assets of the U.S. taxpayer-clients; and registered office companies, which were shell companies for which CNT simply supplied a Caymanian mailing address. CNS treated these sham Caymanian structures as the account holders and then permitted the U.S. taxpayer-clients to trade in U.S. securities, without requiring them to submit Form W-9s, which are IRS forms that identify individuals as U.S. taxpayers, as CNS was obligated to do under its QI obligations for accounts held by U.S. persons that held U.S. securities. CNS and CNT agreed to maintain these structures for U.S. taxpayer-clients after many of them expressed concern that their accounts would be detected by the IRS.
In or about April of 2008, it became publicly known that the United States Department of Justice (“DOJ”) was investigating UBS for assisting U.S. taxpayers to evade their U.S. tax obligations. Thereafter, despite the public disclosure of the UBS case, and CNS’s awareness of it, CNS continued to assist U.S. taxpayer-clients in concealing their accounts from the IRS by, among other things, failing to require them to complete Form W-9s. Likewise, up through at least 2010, CNT continued to rely on account opening documentation that, rather than barring the creation of non-tax compliant structures, simply assigned higher “risk” points to such structures. In or about June of 2011, CNT hired a new president, who spearheaded a review of CNT’s files. In the course of that review, not a single file was found to be complete and without tax or other issues. Moreover, with respect to the structures that had U.S. beneficial owners, CNT’s files contained little if any evidence of tax compliance.
At their high-water mark in 2009, CNS and CNT had approximately $137 million in assets under management relating to undeclared accounts held by U.S. taxpayer-clients. From 2001 through 2011, CNS and CNT earned over $3.4 million in gross revenues from the undeclared U.S. taxpayer accounts that they maintained.
CNS and CNT’s Cooperation with the Government Investigation
As part of their plea agreements with the Office of the United States Attorney for the Southern District of New York (the “Office”), CNS and CNT have agreed to cooperate fully with the Office’s investigation of the companies’ criminal conduct. To date, CNS and CNT have already made substantial efforts to cooperate with that investigation, including by: (1) facilitating interviews that the Office conducted of CNS and CNT employees, including top level executives; (2) voluntarily producing documents in response to the Office’s requests; (3) providing, in response to a treaty request, unredacted client files for approximately 20 percent of the U.S. taxpayer-clients who maintained accounts at CNS and CNT; and (4) committing to assist in responding to a treaty request that is expected to result in the production of unredacted client files for approximately 90 to 95 percent of the U.S. taxpayer-clients who maintained accounts at CNS and CNT.
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In connection with their guilty pleas, CNS and CNT have agreed to pay the United States a total of $6 million, which consists of the forfeiture of gross proceeds of their illegal conduct, restitution of the outstanding unpaid taxes from U.S. taxpayers who held undeclared accounts at CNS and CNT, and a fine.
Mr. Bharara praised the outstanding investigative work of IRS-CI, and thanked the Justice Department’s Tax Division for their assistance in the investigation.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Sarah E. Paul and Niketh Velamoor are in charge of the prosecution.
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Senior Auction Official at Beverly Hills Gallery Pleads Guilty in Manhattan Federal Court in Connection with $1 Million Wildlife Smuggling ConspiracyRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, John C. Cruden, the Assistant Attorney General for the Environment and Natural Resources Division of the Department of Justice, and Dan Ashe, the Director of the United States Fish & Wildlife Service (“FWS”) announced today that JOSEPH CHAIT, the senior auction administrator of a gallery and auction house located in Beverly Hills, California (“Auction House-1”), pled guilty to conspiring to smuggle wildlife products made from rhinoceros horn, elephant ivory, and coral with a market value of at least approximately $1 million. CHAIT pled guilty to a two-count Information before U.S. District Judge J. Paul Oetken.
Manhattan U.S. Attorney Preet Bharara stated: “Joseph Chait and his co-conspirators trafficked in wildlife, including rhinoceros horns, worth a market value of at least $1 million, deliberately violating laws put in place to protect endangered species. Critically endangered, rhinoceros have one primary predator, humans. And it is people like Chait who, through their criminal schemes, have fueled the trade of endangered wildlife products. We are grateful for the outstanding work of the Fish and Wildlife Service in this investigation, which is ongoing.”
Assistant Attorney General John C. Cruden stated: “Rhinos and elephants have been on earth for millennia but are now at grave risk due to the illegal wildlife trade. The United States and other destination markets have a special responsibility to help save these beloved creatures from extinction. Those in the auction industry need to be responsible and not turn a blind eye to the fact that trade in protected animal parts is highly regulated. Illegal wildlife trafficking takes many forms and those who deliberately break the rules and engage in smuggling will be prosecuted to the full extent of the law.”
Fish and Wildlife Service Director Dan Ashe stated: “This case demonstrates the insidious nature of wildlife trafficking, showing how these activities permeate our society in many social, economic and cultural areas. One criminal at a time. One guilty plea at a time. Federal prosecutors, our devoted team of law enforcement officers, and their colleagues around the globe are helping reduce trade in illegal wildlife products that is decimating populations of some of our most cherished species.”
According to allegations contained in the Information and statements made in court filings and proceedings:
CHAIT and his co-conspirators engaged in illegal trafficking of wildlife with a market value of at least $1 million. CHAIT personally falsified customs forms by stating that rhinoceros horn and elephant ivory items were made of bone, wood or plastic. For example, during Asia Week in New York City in or about March 2011, CHAIT was approached about the potential sale of a carving of Guanyin, an East Asian spiritual figure made from rhinoceros horn (the “Rhino Carving”). Despite knowing that it was not a genuine antique, CHAIT and his co-conspirators accepted the Rhino Carving for consignment, advertised the sale to foreign clients in China, and put the Rhino Carving on the cover of Auction House-1’s catalogue in connection with an auction of Asian art and antiques. After the Rhino Carving sold at auction for $230,000, CHAIT offered to make a false document for the buyer to help the buyer smuggle the item out of the country. The fake invoice falsely stated that the item cost $108.75 and was made of plastic.
CHAIT also sold rhinoceros ivory carvings to another customer, and provided those carvings to that customer’s courier, even after learning that the customer had been arrested in China for smuggling ivory purchased from CHAIT’s auction house.
In addition to falsifying customs forms by stating that rhinoceros horn and elephant ivory items were made of bone, wood or plastic, CHAIT and his co-conspirators conducted their wildlife smuggling using a variety of methods:
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Wildlife items were shipped to or picked up by third party shippers, who then re-shipped the items out of the country without the required declaration or permits.
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Members of the conspiracy provided packing materials to foreign wildlife buyers to assist them in hand carrying the wildlife out of the country.
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Foreign wildlife buyers were sold protected wildlife items without being assessed a state sales tax if they showed a foreign passport and itinerary for an international flight as proof the item would be leaving the country.
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Protected wildlife was smuggled into the United States without declaration or permits, and then sold at auction by members of the conspiracy.
As a result of a recent Presidential Executive Order, trade in protected wildlife such as rhinoceros horn and elephant ivory has been significantly restricted in the last two years, except for those instances where sellers can prove that the item is a genuine antique that is more than 100 years old.
Rhinoceros are an herbivore species of prehistoric origin and one of the largest remaining mega-fauna on earth. They have no known predators other than humans. All species of rhinoceros are protected under U.S. and international law. Since 1976, trade in rhinoceros horn has been regulated under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (“CITES”), a treaty signed by over 170 countries around the world to protect fish, wildlife, and plants that are or may become imperiled due to the demands of international markets.
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CHAIT, 38, of Beverly Hills, California, faces a maximum of five years in prison for conspiring to smuggle wildlife products, in violation of 18 U.S.C. §§ 371, 554 and 16 U.S.C. §§ 3372(a) and (d) and 3373(d), and a maximum of five years in prison for violating the Lacey Act, 16 U.S.C. §§ 3372(d) and 3373(d)(3)(A)(i). These statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentence imposed on the defendant will be determined by the judge.
CHAIT’s sentencing is scheduled for June 22, 2016, in front of Judge Oetken.
This matter is part of Operation Crash, a continuing investigation by the Department of the Interior’s Fish and Wildlife Service’s Office of Law Enforcement, in coordination with the Department of Justice. A “crash” is the term for a herd of rhinoceros. Operation Crash is an ongoing effort to detect, deter, and prosecute those engaged in the illegal killing of rhinoceros and the unlawful trafficking of rhinoceros horns.
U.S. Attorney Preet Bharara thanked the U.S. Fish and Wildlife Service for its outstanding work in this investigation as well as the U.S. Attorney’s Office for the District of New Jersey for its assistance on this matter. This case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit and the Environmental Crimes Section of the Department of Justice. Assistant United States Attorneys Jennifer Gachiri and Elizabeth Hanft, and Senior Litigation Counsel Richard A. Udell with the Environmental Crimes Section of the Department of Justice are in charge of the prosecution.
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Four Individuals Charged in $7 Million Car Loan Scheme Involving Dealerships Throughout the New York City AreaRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of a complaint charging JULIO ALVAREZ, CHRISTOPHER CAMPOS, MARCO BLASIO, and GEURIS RAMOS with bank and wire fraud charges for perpetrating a scheme to fraudulently obtain millions of dollars in car loans. The defendants used at least 20 straw buyers to obtain more than 200 new automobiles based on false representations that, among other things, the straw buyers would use the cars for their personal use when, in fact, the defendants obtained the vehicles in order to lease them to livery cab drivers. ALVAREZ, CAMPOS, BLASIO, and RAMOS were arrested this morning and will be presented later today before Magistrate Judge Kevin Nathaniel Fox.
Manhattan U.S. Attorney Preet Bharara stated: “As alleged, the defendants carried out a scheme to obtain millions of dollars in loans under false pretenses at the expense of financial institutions who were deceived into funding the purchase of more than 200 new vehicles. Thanks to the efforts of our partners at the FBI, these defendants will now be held to account for their criminal misconduct.”
FBI Assistant Director-in-Charge Diego Rodriguez stated: “The charges announced today describe a scheme in which the defendants allegedly benefitted from fraudulently obtained car loans. The funding was used by the defendants and their co-conspirators to finance the purchase of more than 200 new automobiles. The cost of these loans, which ultimately went into default, will eventually be transferred to ordinary citizens seeking financial assistance. We take these crimes very seriously as we continue to seek out those who exploit the lending industry.”
According to the allegations contained in the Complaint[1] unsealed today in Manhattan federal court:
Between approximately October 2012 and September 2013, ALVAREZ, CAMPOS – who was a practicing attorney, BLASIO, and RAMOS orchestrated a scheme to fraudulently obtain new automobiles that ALVAREZ, CAMPOS, and RAMOS, among others, intended to lease to livery cab drivers. In order to secure financing in connection with the purchase of these new cars without having to pay the higher interest rates typically charged for commercial vehicles or borrow the cost of the vehicles based on their own ability to pay, ALVAREZ and CAMPOS enlisted and aided individuals with good credit histories (“straw buyers”) to submit fraudulent car loan applications to numerous lenders. In order to obtain the new vehicles, the defendants sent straw buyers, including RAMOS, to several car dealerships located throughout the New York City area, where dealership employees, including BLASIO, helped straw buyers submit fraudulent loan applications.
The auto loan applications submitted by the straw buyers falsely represented that the vehicles would be used for the buyers’ personal use, rather than as part of the defendants’ leasing business. In addition, in many cases, the car loan applications misrepresented personal information about the straw buyers, including their incomes and assets. ALVAREZ, CAMPOS, BLASIO, and RAMOS also caused financing applications to be sent to multiple financial institutions at the same time so that the lenders would not know that the straw buyers were incurring obligations to other lenders in connection with the purchase of multiple new automobiles.
In total, the scheme carried out by ALVAREZ, CAMPOS, BLASIO, and RAMOS, among others, involved at least approximately 20 straw purchasers, the purchase of more than approximately 200 new vehicles, and more than $7,000,000 in fraudulently obtained loans from a variety of financial institutions. Most of the loans ultimately went into default.
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ALVAREZ, 47, of Fort Lee, New Jersey, CAMPOS, 39, of Fort Lee, New Jersey, BLASIO, 52, of Commack, New York, and RAMOS, 38, of Bronx, New York, are each charged with one count of conspiracy to commit bank and wire fraud, which carries a maximum sentence of 30 years in prison, one count of bank fraud, which carries a maximum sentence of 30 years in prison, and one count of wire fraud, 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 investigative work of the FBI, and noted that the investigation remains ongoing.
If you believe you were a victim of this crime, including a victim entitled to restitution, and you wish to provide information to law enforcement and/or receive notice of future developments in the case or additional information, please contact the Victim/Witness Unit at the United States Attorney’s Office for the Southern District of New York, at (866) 874-8900. For additional information, go to:
http://www.usdoj.gov/usao/nys/victimwitness.html
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Niketh Velamoor and Sidhardha Kamaraju are in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
U.S. Attorney’s Office Closes Investigation into the Death of Ramarley GrahamRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that there is insufficient evidence to pursue federal criminal charges in connection with the fatal shooting of Ramarley Graham. Mr. Graham was killed during an encounter with police officers from the New York City Police Department (“NYPD”) on February 2, 2012. Mr. Graham was 18 years old at the time. The U.S. Attorney met today with Mr. Graham’s family and their representatives to inform them of this decision.
After conducting a thorough and independent investigation, the U.S. Attorney’s Office has determined that there is insufficient evidence to meet the high burden of proof required for a federal criminal civil rights prosecution. To prove a violation of the federal criminal civil rights statute, prosecutors must establish, beyond a reasonable doubt, that a law enforcement officer willfully deprived an individual of a constitutional right, meaning that the officer acted with the deliberate and specific intent to do something the law forbids. This is the highest standard of intent imposed by law, and is different from and higher than the intent standard under the relevant state statutes. Neither accident, mistake, fear, negligence nor bad judgment is sufficient to establish a federal criminal civil rights violation.
The evidence from the investigation reveals the following: At approximately 2:00 p.m. on February 2, 2012, two members of a team of NYPD police officers from the Street Narcotics Enforcement Unit (“SNEU”) began conducting surveillance of a bodega on White Plains Road in the Wakefield section of the Bronx. At approximately 2:45 p.m., the NYPD officers observed Ramarley Graham and two other individuals open the door to that bodega, walk in, and then immediately walk out. Video evidence from a nearby business shows Mr. Graham adjusting the front of his pants as he walked northbound on White Plains Road near the bodega. The two police officers conducting surveillance informed investigators that, after observing these actions, they transmitted over the police radio a description of Mr. Graham and his companions to the other members of the SNEU team, and further informed the SNEU team that Mr. Graham possibly had a firearm. The police officers then followed Mr. Graham and his companions as they continued walking north on White Plains Road, and then turned east on East 229th Street. One of the NYPD officers conducting surveillance reported that, when Mr. Graham reached with his hands to pull at his belt, the officer observed the slide of a firearm tucked into the waistband of Mr. Graham’s pants. According to the officers, his partner then transmitted over a non-recorded police channel that Mr. Graham had a firearm. Upon hearing this transmission, the other members of the SNEU team, including NYPD Officer Richard Haste (who had not previously observed Mr. Graham and had not had any prior direct interaction with him), moved to intercept Mr. Graham as he walked eastbound on East 229th Street.
Video evidence shows that Mr. Graham walked to 749 East 229th Street, which officers later learned to be Graham’s residence. As Mr. Graham opened the front door, an unmarked police vehicle quickly pulled up and stopped near the front of the house. As Officer Haste and another officer exited the vehicle, Mr. Graham looked in the direction of the officers and then quickly stepped inside the house and closed the front door. Approximately five seconds later, Officer Haste ran up to the front door and found it locked. He then unsuccessfully attempted to kick the door open. Video evidence shows that Officer Haste proceeded to the back of the house in an attempt to gain entry and entered the house through the back. Another officer followed him inside a few seconds later. Video evidence shows that Officer Haste then opened the front door of the building from the inside of the house and let in two additional officers. Officer Haste and another officer then climbed the stairs up to the second floor apartment.
Inside that apartment were Mr. Graham, Mr. Graham’s grandmother, and Mr. Graham’s six-year-old brother. One of the NYPD officers kicked open the door to Mr. Graham’s apartment. The door to the apartment opened onto a hallway, leading to a living room at the end of the hallway. The evidence establishes that Officer Haste advanced into the hallway of the apartment with his firearm drawn, where he encountered Mr. Graham. According to Officer Haste, he gave commands to Mr. Graham to the effect of, “Police, show me your hands.” Mr. Graham instead moved into an adjacent bathroom. Officer Haste then advanced down the hallway to the doorway of the bathroom.
At this critical moment in time, no other witness present in the apartment, including Mr. Graham’s grandmother, had a view of Mr. Graham. According to Officer Haste, when he looked in the bathroom, he saw Mr. Graham facing him, with his hand in his waistband. Also according to Officer Haste, Mr. Graham then made a motion as if he were pulling something out of his pants. Officer Haste stated that he believed that Mr. Graham was reaching for the weapon that had been described in the earlier radio transmission, and that he fired one round from his weapon in response to a perceived deadly threat. The bullet struck Mr. Graham, causing his death. No gun was found at the scene. A bag of marijuana was found in the toilet bowl next to where Mr. Graham was standing.
In the context of this case, to establish a violation of federal law, the Department of Justice would have to establish beyond a reasonable doubt that, at the time of the shooting, Officer Haste lacked probable cause to believe that Mr. Graham posed a significant threat of death or serious physical injury to the officer or to others, and that he willfully deprived Mr. Graham of his right to be free from excessive force. The weight of the evidence indicates that, at the time the shooting took place, Officer Haste believed Mr. Graham to be in possession of a firearm that was tucked into the waistband of his pants, for which Officer Haste believed Mr. Graham was reaching. Although Officer Haste ultimately was proven to be mistaken in his belief, the determination as to the willfulness of his actions must be assessed in light of his knowledge at the time of the shooting.
The investigation revealed no evidence to refute Officer Haste’s claim that he shot Mr. Graham in response to his mistaken belief that Mr. Graham was reaching for a gun. The evidence that, before Officer Haste began to chase Mr. Graham, other officers reported over the police radio that Mr. Graham had a gun is unrefuted. There are no witness accounts or physical evidence that materially contradict Officer Haste’s statement that Mr. Graham appeared to be pulling something from his waistband at the time of the shooting. Nor is there any video of the shooting itself. Accordingly, the Department of Justice could not conclude or prove beyond a reasonable doubt that there was a federal criminal civil rights violation.
This Office analyzed these issues under the standard applicable to criminal cases, which is proof beyond a reasonable doubt. The Office expresses no view regarding any claims made against any party under the standard applicable to civil cases, which is proof by a preponderance of the evidence.
Accordingly, this Office’s investigation into Mr. Graham’s death has been closed.
Mr. Bharara expressed his deep sympathy to the family of Mr. Graham for their tragic loss.
New York Man Sentenced to 16 Years in Prison for Attempting to Acquire RicinRead the Press Release
Cheng Le, 22, of Manhattan, New York, was sentenced today to 16 years in prison for attempting to acquire ricin, postal fraud and identity theft in relation to a terrorism offense. Le was convicted on Aug. 27, 2015, following a four-day jury trial before U.S. District Judge Alison J. Nathan of the Southern District of New York, who imposed today’s sentence. Le’s trial conviction marked the first time in the Southern District of New York a defendant had been convicted at trial of attempting to possess a biological toxin for use as a weapon or of aggravated identity theft during and in relation to a terrorism offense.
The announcement was made by Assistant Attorney General for National Security John P. Carlin and U.S. Attorney Preet Bharara of the Southern District of New York.
“Cheng Le attempted to acquire ricin for use as a lethal weapon, and used a stolen identity to do so,” said Assistant Attorney General Carlin. “Le sought a ‘risk-free’ way to murder an individual, but thanks to the efforts of law enforcement, his lethal plans were thwarted and the deadly toxin was kept out of his hands.”
“Through the Dark Web, Cheng Le attempted to acquire a lethal toxin,” said U.S. Attorney Bharara. “In Le’s own words, established at trial, he was looking for ‘simple and easy death pills’ and ways to commit ‘100% risk-free’ murder. Thanks to the FBI, the NYPD and the Postal Inspection Service, Le’s deadly plot was thwarted and he has been incapacitated by a lengthy term in federal prison.”
According to the allegations contained in documents previously filed in federal court and the evidence presented at trial:
Ricin is a highly potent and fatal toxin with no known antidote. The dark web is a colloquial name for a number of extensive, sophisticated and widely used online criminal marketplaces, which allow participants to buy and sell illegal items, including ricin.
In early December 2014, Le contacted a FBI online covert employee (OCE) on a particular dark web marketplace using an encrypted messaging service. The OCE had taken over the dark web identity from another individual who had a reputation for selling lethal poisons. After making contact with the OCE, Le inquired, “this might sound blunt but do you sell ricin?”
Following that initial contact, Le exchanged a series of messages with the OCE concerning his efforts to purchase ricin. During these messages, Le confirmed his understanding of the lethal nature of ricin, revealed his intent to resell the ricin to at least one secondary buyer, proposed that the OCE conceal the ricin in a single pill in an otherwise ordinary bottle of pills and indicated a desire to obtain more ricin in the future. Le’s messages to the OCE included the following:
• “If [the ricin’s] good quality, I’ve already had buyers lining up.”
• “Does ricin have antidote? Last I check there isn’t one, isn’t it?”
• “Injection can be difficult to pull off. Ricin doesn’t work immediately. You wouldn’t expect the target to not fight back after being jabbed.”
• “The client would like to know . . . if it is wise to use ricin on someone who is hospitalized. . . . Injection will leave needle holes on the body which could be found in regular forensic examination. But hospitalized people already have needles in them so it wouldn’t be suspicious. Thing is, would ricin make the death look like someone succumbed to the injuries after an accident and didn’t make it through? In that case then, a little anethestical [sic] gas in the target’s car, get him drowsy when driving, get into an accident, and then kill him in the hospital bed.”
• “I probably told you this before, about mixing one and only one toxic pill into a bottle of normal pills. They all look identical. And as the target takes the medicine every day, sooner or later he’d ingest that poisonous pill and die. Even if there is a murder investigation, they won’t find any more toxin. 100% Risk Free.”
• “If you can make them into simple and easy death pills, they’d become bestsellers.”
• “I’ll be trying out new methods in the future. After all, it is death itself we’re selling here, and the more risk-free, the more efficient we can make it, the better.”
• “Also, besides that one bottle of pills with one poisonous pill in there, can you send some extra loose powder/liquid ricin? I’d like to test something.”
Moreover, during these exchanges, Le revealed to the OCE that he had a specific victim in mind: “someone middle-aged. Weight around 200 lbs.”
On Dec. 18, 2014, Le directed the OCE to send a quantity of ricin addressed to the name of an individual whose stolen identity Le had assumed at a particular postal box in Manhattan. On Dec. 22, 2014, the FBI prepared a mock shipment of ricin that was consistent with Le’s request to the OCE. The sham shipment included a fake ricin tablet concealed in a pill bottle, and a quantity of loose fake ricin powder. The next day, the sham shipment was delivered to the postal box. Le, wearing latex gloves, retrieved the sham shipment, opened it and took the contents to his apartment.
When FBI agents entered Le’s apartment to arrest him and search the apartment pursuant to a search warrant, they saw the pill bottle open in his apartment. The agents also recovered from Le’s apartment an envelope containing castor seeds from which Ricin can be produced. The agents further observed that Le’s computer was open to the online account that he had used to communicate with the OCE and to Le’s personal email account.
Le was arrested in New York on Dec. 23, 2014, and was later convicted at trial of one count of attempting to possess a biological toxin for use as a weapon, one count of using a fictitious name in furtherance of unlawful business involving the mail and one count of aggravated identity theft during and in relation to a terrorism offense. In addition to the prison term, Le was sentenced to five years of supervised release.
Assistant Attorney General Carlin joined U.S. Attorney Bharara in praising the outstanding investigative efforts of the FBI’s New York Joint Terrorism Task Force and the U.S. Postal Inspection Service.
This prosecution is being handled by Assistant U.S. Attorneys Ilan Graff and Andrew D. Beaty of the Southern District of New York and Trial Attorney Joseph Kaster of the National Security Division’s Counterterrorism Section.
New York Man Sentenced in Manhattan Federal Court to 16 Years in Prison for Attempting to Acquire Deadly Toxin, RicinRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and John P. Carlin, Assistant Attorney General for National Security, announced that CHENG LE was sentenced today to 16 years in prison for attempting to acquire ricin, postal fraud, and identity theft in relation to a terrorism offense. LE was convicted on August 27, 2015, following a four-day jury trial before U.S. District Judge Alison J. Nathan, who imposed today’s sentence. LE’s conviction marked the first time in the District that a defendant had been convicted at trial of attempting to possess a biological toxin for use as a weapon or of aggravated identity theft during and in relation to a terrorism offense.
Manhattan U.S. Attorney Preet Bharara said: “Through the Dark Web, Cheng Le attempted to acquire a lethal toxin. In Le’s own words, established at trial, he was looking for ‘simple and easy death pills’ and ways to commit ‘100% risk-free’ murder. Thanks to the FBI, the NYPD, and the Postal Inspection Service, Le’s deadly plot was thwarted and he has been incapacitated by a lengthy term in federal prison.”
Assistant Attorney General John P. Carlin said: “Cheng Le attempted to acquire ricin for use as a lethal weapon, and used a stolen identity to do so. Le sought a ‘risk-free’ way to murder an individual, but thanks to the efforts of law enforcement, his lethal plans were thwarted and the deadly toxin was kept out of his hands.”
According to the allegations contained in documents previously filed in federal court and the evidence presented at trial:
Ricin is a highly potent and fatal toxin with no known antidote. The “Dark Web” is a colloquial name for a number of extensive, sophisticated, and widely used online criminal marketplaces, which allow participants to buy and sell illegal items, including ricin.In early December 2014, LE contacted a Federal Bureau of Investigation (“FBI”) online covert employee (the “OCE”) on a particular Dark Web marketplace using an encrypted messaging service. The OCE had taken over the Dark Web identity from another individual who had a reputation for selling lethal poisons. After making contact with the OCE, LE inquired, “this might sound blunt but do you sell ricin?”
Following that initial contact, LE exchanged a series of messages with the OCE concerning his efforts to purchase ricin. During these messages, LE confirmed his understanding of the lethal nature of ricin, revealed his intent to resell the ricin to at least one secondary buyer, proposed that the OCE conceal the ricin in a single pill in an otherwise ordinary bottle of pills, and indicated a desire to obtain more ricin in the future. LE’s messages to the OCE included the following:
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“If [the ricin’s] good quality, I’ve already had buyers lining up.”
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“Does ricin have antidote? Last I check there isn’t one, isn’t it?”
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“Injection can be difficult to pull off. Ricin doesn’t work immediately. You wouldn’t expect the target to not fight back after being jabbed.”
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“The client would like to know . . . if it is wise to use ricin on someone who is hospitalized. . . . Injection will leave needle holes on the body which could be found in regular forensic examination. But hospitalized people already have needles in them so it wouldn’t be suspicious. Thing is, would ricin make the death look like someone succumbed to the injuries after an accident and didn’t make it through? In that case then, a little anethestical [sic] gas in the target’s car, get him drowsy when driving, get into an accident, and then kill him in the hospital bed.”
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“I probably told you this before, about mixing one and only one toxic pill into a bottle of normal pills. They all look identical. And as the target takes the medicine every day, sooner or later he’d ingest that poisonous pill and die. Even if there is a murder investigation, they won’t find any more toxin. 100% Risk Free.”
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“If you can make them into simple and easy death pills, they’d become bestsellers.”
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“I’ll be trying out new methods in the future. After all, it is death itself we’re selling here, and the more risk-free, the more efficient we can make it, the better.”
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“Also, besides that one bottle of pills with one poisonous pill in there, can you send some extra loose powder/liquid ricin? I’d like to test something.”
Moreover, during these exchanges, LE further revealed to the OCE that he had a specific victim in mind: “someone middle-aged. Weight around 200 lbs.”
On December 18, 2014, LE directed the OCE to send a quantity of ricin addressed to the name of an individual whose stolen identity LE had assumed at a particular postal box in Manhattan (the “Postal Box”). On December 22, 2014, the FBI prepared a mock shipment of ricin (the “Sham Shipment”) that was consistent with LE’s request to the OCE. The Sham Shipment included a fake “ricin” tablet concealed in a pill bottle (the “Pill Bottle”), and a quantity of loose fake “ricin” powder. The next day, the Sham Shipment was delivered to the Postal Box. LE, wearing latex gloves, retrieved the Sham Shipment, opened it, and took the contents to his apartment.
When FBI agents entered LE’s apartment to arrest LE and to search the apartment, pursuant to a search warrant, they saw the Pill Bottle open in his apartment. The agents also recovered from LE’s apartment an envelope containing castor seeds, from which ricin can be produced. The agents further observed that LE’s computer was open to the online account that he had used to communicate with the OCE and to LE’s personal email account.
LE was arrested in New York, New York, on December 23, 2014.
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LE, 22, of Manhattan, New York, was convicted after trial of one count of attempting to possess a biological toxin for use as a weapon, one count of using a fictitious name in furtherance of unlawful business involving the mail, and one count of aggravated identity theft during and in relation to a terrorism offense. In addition to the prison term, LE was sentenced to five years of supervised release.
In pronouncing today’s sentence, Judge Nathan described LE’s conduct as “a horrible, serious, and quite terrifying offense.”
Mr. Bharara praised the outstanding investigative efforts of the FBI’s New York Joint Terrorism Task Force – which principally consists of agents from the FBI and detectives from the New York City Police Department – and the United States Postal Inspection Service. He also thanked the National Security Division of the U.S. Department of Justice for its assistance.
This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Ilan Graff and Andrew D. Beaty are in charge of the prosecution.
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Former Investment Adviser at Global Bank Sentenced in Manhattan Federal Court to 5 Years in Prison for $20 Millon Scheme to Defraud ClientsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that MICHAEL OPPENHEIM was sentenced today to five years in prison and over $20 million in forfeiture for using his position as an investment adviser at JP Morgan Chase & Co. (“JPMC”) to defraud multiple JPMC clients out of millions of dollars over the course of seven years. Among other false and misleading statements, OPPENHEIM lied to his clients by claiming to have invested their money in low-risk municipal bonds and sending them doctored account statements purportedly reflecting those investments and profits earned. In reality, OPPENHEIM used the clients’ money for his own personal benefit and, in certain circumstances, to pay back other clients. OPPENHEIM pled guilty in November 2015 before United States District Judge Analisa Torres, who imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara said: “Michael Oppenheim’s clients placed not just their money but their trust in their financial adviser, only to have Oppenheim use their investments as his cash cow – to the tune of more than $20 million. Thanks to the FBI’s investigation, Oppenheim’s business of siphoning his clients’ money is over.”
According to the Complaint, the Information, and other statements made in open court:
From at least March 2008 to March 2015, OPPENHEIM, a former investment adviser at JPMC, a global financial institution based in New York City, violated the trust of his clients by converting to his own use and benefit at least $20 million belonging to at least eight clients whose investment advisory accounts at JPMC he purported to manage. OPPENHEIM did not invest these clients’ money in low-risk municipal bonds at JPMC as promised. Instead, after taking a client’s money, OPPENHEIM, without the client’s knowledge, used the client’s money to obtain cashiers’ checks purporting to be remitted by the clients. OPPENHEIM then deposited the cashiers’ checks in at least three online brokerage accounts OPPENHEIM controlled at financial institutions other than JPMC. OPPENHEIM used clients’ funds for his own personal use, including on-line trading in accounts he controlled, and to pay for personal expenses such as gambling and trading debts, a home loan, and credit card bills, including for luxury clothing and travel.
In an effort to cover up his fraudulent scheme, OPPENHEIM provided some clients with fraudulent bank account statements. The purported bank account statements reflected bonds held by other clients of JPMC, but OPPENHEIM caused his clients’ names to appear on the statements in order to give the false impression that OPPENHEIM had purchased bonds on behalf of those clients, as he had promised. In a further effort to conceal his fraud, on several occasions, and without his clients’ consent or authority, OPPENHEIM withdrew funds from one client and deposited those funds into the account of another client.
OPPENHEIM continued the fraud until he was terminated by JPMC in March 2015.
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In addition to the prison sentence, OPPENHEIM, 49, of Livingston, New Jersey, was sentenced to three years of supervised release, and ordered to forfeit $20,185,225 to the United States. In connection with his plea agreement, OPPENHEIM also agreed to pay restitution of more than $27 million to the victims of his crime. A final restitution order will be submitted to the court by June 6, 2016.
The U.S. Securities and Exchange Commission (“SEC”) has pending civil charges against OPPENHEIM in a separate action.
Mr. Bharara praised the work of the FBI, and thanked the SEC and FINRA for their 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 Complex Frauds and Cybercrime Unit and the Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Janis Echenberg and Brooke Cucinella are in charge of the prosecution.
Manhattan U.S. Attorney Announces Bribery Charges Against Chairman of New Jersey-Based Federal Credit UnionRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and David E. Beach, Special Agent-in-Charge of the New York Field Office of the United States Secret Service, announced today the unsealing of a superseding indictment charging TREVON GROSS with accepting over $150,000 in bribes as the Chairman of the Board of a federal credit union that served primarily low-income local residents in New Jersey.GROSS was bribed by the operators of Coin.mx, an unlawful Bitcoin exchange operated by co-defendant Anthony Murgio.GROSS surrendered to the FBI earlier today and is expected to be presented this afternoon in Manhattan federal court.
According to the allegations contained in the superseding indictment unsealed today and the criminal complaints previously filed in this case[1]:
The Unlawful Bitcoin Exchange
Anthony Murgio, GROSS’s co-defendant, knowingly operated Coin.mx, an unlawful internet-based Bitcoin exchange, in violation of federal anti-money laundering laws and regulations, including those requiring money services businesses like Coin.mx to meet registration and reporting requirements set forth by the United States Treasury Department. Murgio and his co-conspirators engaged in substantial efforts to evade detection of their unlawful Bitcoin exchange scheme by operating through a phony front company called “Collectables Club,” and by maintaining a corresponding phony “Collectables Club” website. In doing so, they sought to deceive the major financial institutions through which they operated into believing their unlawful Bitcoin exchange business was simply a members-only association of individuals who discussed, bought, and sold collectable items, such as stamps and sports memorabilia.
In addition to lying to financial institutions, Murgio and his co-conspirators deceived U.S. banks and credit card issuers into authorizing credit and debit card payment and ACH (Automated Clearing House) transactions to purchase Bitcoins through Coin.mx. In particular, Murgio and his co-conspirators deliberately misidentified and miscoded customers’ credit and debit card transactions, in violation of bank and credit card company rules and regulations, and limited the dollar amount of individual transactions engaged in by their customers, in order to deceive banks into allowing the transactions to be completed, and avoid arousing suspicion from the banks. Murgio and his co-conspirators also knowingly instructed their Coin.mx customers to lie to banks about the Bitcoin exchange transactions the customers were executing through Coin.mx, and to state falsely that they were for the exchange of collectables items, and not for Bitcoins.
GROSS Secretly Sells Control of the Federal Credit Union to Murgio
In approximately 2014, in an effort to evade potential scrutiny from financial institutions and others about the nature of Coin.mx, Murgio, Yuri Lebedev, and their co-conspirators acquired control of HOPE FCU, a federal credit union in New Jersey with primarily low-income members. GROSS, who was the Chairman of the Board of HOPE FCU, allowed Murgio, Lebedev, and their co-conspirators to take control of HOPE FCU and assisted their efforts in exchange for bribes, which GROSS directed Murgio to pay to bank accounts under GROSS’s control. In total, at GROSS’s direction, Murgio and his co-conspirators paid over $150,000 to accounts under GROSS’s control. GROSS, in turn, spent proceeds from the bribes on personal expenses, including payments on his personal credit cards. With GROSS’s assistance, Murgio installed his co-conspirators, including Lebedev, on HOPE FCU’s Board of Directors and transferred Coin.mx’s banking operations to HOPE FCU.
Murgio, Lebedev, and their co-conspirators operated HOPE FCU as a captive bank for their unlawful Bitcoin exchange until at least early 2015.At that time, after discovering that substantial payment processing activity was being conducted through HOPE FCU, the National Credit Union Administration (“NCUA”) forced HOPE FCU to cease engaging in such activity, and Murgio thereafter found new, overseas payment processing channels for his unlawful business. In October 2015, in connection with the charged conduct, the NCUA placed HOPE FCU into conservatorship, and thereafter liquidated it.
* * *
GROSS, 46, of Jackson, New Jersey, is charged with one count of corruptly accepting payments as an officer of a financial institution, which carries a maximum sentence of 30 years in prison.
Murgio and Lebedev were arrested on July 21, 2015, and are each charged with one count of conspiracy to corruptly make payments to an officer of a financial institution, which carries a maximum sentence of five years in prison. Murgio is also charged with corruptly making payments to an officer of a financial institution, which carries a maximum sentence of 30 years in prison. In addition, Murgio is charged with one count of conspiracy to operate an unlicensed money transmitting business and one count of operating an unlicensed money transmitting business, each of which carries a maximum sentence of five years in prison; 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 one count of money laundering, which carries a maximum sentence of 20 years in prison.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Trial is presently scheduled in this case for October 31, 2016, before the Honorable Alison J. Nathan.
Mr. Bharara praised the investigative work of the FBI and the Secret Service.He also thanked the National Credit Union Administration for their assistance with the investigation.
The prosecution of this case is being overseen by the Office’s Complex Frauds and Cybercrime Unit.Assistant U.S. Attorneys Eun Young Choi and Daniel S. 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 superseding indictment and the complaints, and the description of the indictment and complaints set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Brooklyn Man Sentenced in Manhattan Federal Court in Connection with Advance Fee SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that OCTAVIO LOMBARDO, a/k/a “Otto Lombardo,” was sentenced today in Manhattan federal court to two years in prison for wire fraud stemming from his scheme to defraud small business owners of more than $1 million through an advance fee scheme. LOMBARDO lied to small business owners by claiming to have the ability and expertise to structure investment loans for their businesses through LOMBARDO’s exclusive relationships with small community banks across the United States, when in fact he did not have the ability to obtain such financing. In connection with the scheme, LOMBARDO induced over 30 business owners to pay an upfront fee that was purportedly to pay for expenses incurred during the due diligence process prior to the loan’s closing. Instead, LOMBARDO used the vast majority of the money he received from the business owners – over $1 million in total – on his own personal expenses, including rental payments, club dues, food, and other personal items. LOMBARDO pled guilty on September 21, 2015, before United States District Judge Jesse M. Furman, who also imposed today’s sentence.
U.S. Attorney Preet Bharara said: “Octavio Lombardo lied to dozens of small business owners who looked to him for help in obtaining financing. Lombardo purported to have expertise and relationships with community banks that would facilitate investment loans at favorable terms. But in fact, he had no such expertise or relationships, just the gumption to steal his clients’ money. Today he has been held to account for his crime.”
According to the Complaint, the Indictment, and other statements made in open court:
From at least in or about 2007 through in or about 2013, LOMBARDO engaged in a fraudulent scheme to mislead small business owners into paying an upfront due diligence fee, typically in the amount of $25,000, in connection with loans that LOMBARDO promised to obtain for the small business owners. During this period, LOMBARDO held himself out to the business owners as having the ability and expertise to structure investment loans for their businesses through LOMBARDO’s purported exclusive relationships with small community banks across the United States. In truth and in fact, LOMBARDO had no ability to provide such financing, and none of the businesses at issue received a loan through LOMBARDO during this period of time.
In connection with the scheme, LOMBARDO made a series of false and misleading misrepresentations to the business owners, including: (i) that LOMBARDO could obtain interest-only loans in amounts ranging from $1 million to $75 million by consolidating the lending power of several small community banks into a trust, which he would manage through his holding company, Lombardo & Company; (ii) that, in order to structure the loan appropriately, LOMBARDO needed to conduct due diligence of the businesses, including by obtaining corporate and financial documentation, and by conducting site visits; (iii) that LOMBARDO required a non-refundable upfront payment – generally in the amount of $25,000 – to cover the expenses incurred during the due diligence process, including legal and other professional fees, taxes, appraisals, and the like; and (iv) that this fee would be incorporated into the final loan agreement, so that the business owners would ultimately “get back” the upfront payment once the financing was in place.
As a result of these misrepresentations, LOMBARDO obtained over $1 million in so-called due diligence payments from more than three dozen business owners. LOMBARDO spent the vast majority of the due diligence payments on his own personal expenses, including, among other things, rental payments, club dues, food, and other personal items. For example, LOMBARDO spent more than $300,000 on rental payments for his residence in Brooklyn, more than $100,000 on membership dues for a private gun club located in Manhattan, and more than $50,000 on restaurants and purchases of wine and liquor.
Once he received the due diligence payments, LOMBARDO made a variety of excuses to the business owners – including, among others, that he was having health problems and had been hospitalized, that he was traveling, and that he had a new grandchild – in order to explain the delay in closing the loans.
Ultimately, LOMBARDO did not provide any of the loans to the business owners as promised.
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In addition to his prison sentence, LOMBARDO, 68, of Brooklyn, New York, was sentenced to three years of supervised release. The Court further ordered LOMBARDO to pay $1,038,500 in restitution.
Mr. Bharara praised the work of the Federal Bureau of 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. Attorneys Amy Lester and Damian Williams are in charge of the prosecution.
Pharmacist and Four Other Individuals Charged in Manhattan Federal Court in Oxycodone Distribution SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and William J. Bratton, the Police Commissioner of the City of New York (“NYPD”), announced charges today against five individuals for their participation in an oxycodone distribution ring. The alleged conspiracy involved the distribution of oxycodone from a pharmacy in Brooklyn to individuals in the New York metropolitan area. Four of those charged were arrested this morning and presented today in the Southern District of New York, before United States Magistrate Judge Debra Freeman.
Manhattan U.S. Attorney Preet Bharara said: “Recent reports suggest a connection between opioid abuse and declining life expectancy. Yet allegedly these defendants schemed to illegally obtain and resell thousands of oxycodone pills. I want to thank our partners at the FBI and NYPD for their work to fight this public health emergency.”
FBI Assistant Director-in-Charge Diego Rodriguez said: “Opioid and prescription drug abuse is sweeping the country. By allegedly engaging in a conspiracy to distribute oxycodone within our community, the defendants engaged in behavior that ultimately contributes to this epidemic – one that has a lasting impact on all segments of society. Today's arrests are not only a victory for the FBI and our partners, but for everyone who confronts the tragic outcomes of opioid addiction and abuse.”
NYPD Commissioner William J. Bratton said: “Oxycodone and other prescription pain killers have the potential to become highly addictive. And they are a driving force behind a rise in fatal overdoses and a spike in heroin addiction that are impacting parts of our City. I commend the work of the US Attorney, the FBI and the NYPD in bringing charges against these five defendants who, as alleged, willfully conspired to peddle these potentially dangerous pills to those likely snared in the downward spiral of addiction.”
According to the allegations in the criminal Complaint[1] unsealed today:
GILBERTO CABRERA, ROBERT HESPETH, KIAN GOHARI, a/k/a “Danny,” SHERI BOWEN, and CALVIN BARRETT, JR., were all members of a drug trafficking organization that, among other things: (i) arranged for individuals to visit doctors’ offices and receive prescriptions for oxycodone that they did not intend to use; (ii) filled those prescriptions at Ekwunife Pharmacy, d/b/a “Afam Pharmacy Associates,” in Brooklyn, New York (the “Pharmacy”); and (iii) distributed those oxycodone pills to purchasers in the New York metropolitan area.
CABRERA, HESPETH, GOHARI, and BOWEN were arrested this morning; BARRETT remains at large.
The conspiracy was led by CABRERA and HESPETH, neither of whom was a medical professional. CABRERA and HESPETH recruited co-conspirators – like BOWEN – willing to obtain prescriptions of oxycodone they did not intend to use. CABRERA and BOWEN then arranged for the co-conspirators to visit doctors’ offices in Brooklyn, New York. Certain doctors tried to monitor patients’ use of oxycodone to insure that they were actually using the pills prescribed to them. Frequently, before co-conspirators visited those doctors, CABRERA or HESPETH provided urine that would test positive for oxycodone, so that the doctor would believe that the co-conspirator was, in fact, taking the oxycodone, rather than selling or distributing it.
After a co-conspirator received the oxycodone prescription, CABRERA arranged for the prescription to be sent to the Pharmacy to be filled, or he took the prescription to the Pharmacy himself. CABRERA gave the prescriptions to a particular pharmacist – GOHARI – who filled the prescriptions for CABRERA. After receiving the oxycodone pills, CABRERA distributed the pills to individuals in the New York metropolitan area. For example, CALVIN BARRETT, JR., frequently purchased distribution-level quantities of oxycodone from CABRERA.
GILBERTO CABRERA, ROBERT HESPETH, KIAN GOHARI, a/k/a “Danny,” SHERI BOWEN, and CALVIN BARRETT, JR., are charged in Count One of the Complaint with conspiring to distribute and possess with the intent to distribute oxycodone, a schedule II controlled substance. The charges in Count One carry a maximum penalty of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.
Mr. Bharara praised the outstanding investigative work of the FBI’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.
This prosecution is being handled by the Office’s Narcotics Unit. Assistant U.S. Attorneys Megan Gaffney and Jordan Estes are in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.
United States Seeks to Forfeit and Return A Roman Statue Stolen from the Villa Torlonia in 1983Read the Press Release
Preet Bharara, United States Attorney for the Southern District of New York, and Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the filing of a civil forfeiture complaint against a Roman marble peplophoros statue (the “Torlonia Peplophoros”) stolen from the Villa Torlonia in Rome in 1983. The Torlonia Peplophoros had been sold in Manhattan in 2001 after being unlawfully brought into the United States in the late 1990s. The current owner of the Torlonia Peplophoros, having discovered that it was stolen, voluntarily turned it over the United States.
Manhattan U.S. Attorney Preet Bharara said: “The Torlonia Peplophoros was stolen in a brazen theft more than 30 years ago, and we are proud to have recovered it so it can finally be returned to its rightful owners. We will continue to work with our law enforcement partners to recover and return stolen treasures no matter how long they have been missing.”
FBI Assistant Director-in-Charge Diego Rodriguez said: “Stolen artwork and culture items belong with their rightful owners no matter how much time has passed since the theft. The FBI is pleased to help with the return of the Torlonia Peplophoros to its rightful home in the Villa Torlonia museum in Rome.”
According to the allegations in the Civil Complaint unsealed today:
In 1797, Giovanni Torlonia, a famous Vatican banker in Rome, purchased what is now called the Villa Torlonia (the “Villa”) after inheriting the title of Marchese. The Torlonia family owned the Villa until 1977, though it was used by Benito Mussolini as his personal residence from 1925 to 1943, and then occupied by the Allied High Command from 1944 to 1947. After 1947, the Villa was abandoned and deteriorated until the Municipality of Rome purchased it from the Torlonia family in 1977.
Since 1978, the Villa has been opened to the public and restored by the Municipality of Rome. It contained various works of art and other significant cultural property, including the Torlonia Peplophoros, a statue depicting a woman wearing a body-length garment, known as a peplos (or peplum), that was common in ancient Greece.
During the night of November 11, 1983, and the following morning, an unknown number of thieves stole 15 statues and other items from the Villa. The Torlonia Peplophoros was among the stolen statues.
In the late 1990s, the Torlonia Peplophoros was imported into the United States by the owner of a New York City art gallery (the “Gallery”). In 2001, the Gallery sold the Torlonia Peplophoros to an individual residing in New York City (the “Buyer”) for approximately $75,000.
The Buyer became aware that the Torlonia Peplophoros was stolen when the Buyer attempted to offer it for sale through a New York City auction house, and voluntarily turned it over to the FBI in late 2015.
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Mr. Bharara thanked the FBI’s Art Crime Team for its outstanding work on this matter.
The case is being handled by the Office’s Money Laundering and Asset Forfeiture Unit. Assistant U.S. Attorney Alexander Wilson is in charge of the case.
Two Men Sentenced in White Plains Federal Court in Connection with Sullivan County ArsonRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that NICHOLAS MOTTA and DOMINIC MOTTA were sentenced today in White Plains federal court to prison terms of 15 months, and 12 months and one day, respectively, for their roles in a scheme to obtain insurance proceeds by committing arson. NICHOLAS MOTTA and DOMINIC MOTTA pled guilty on November 6, 2015, to attempted mail fraud in connection with the arson and insurance fraud scheme. The third defendant in the case, Anthony Perso, pled guilty to attempted mail fraud on October 23, 2015. All three defendants pled guilty before the U.S. District Judge Nelson S. Román, who imposed today’s sentences.
According to the allegations contained in the indictment and information adduced during the Court proceedings:
In the early morning hours of February 10, 2010, during a blizzard, a shuttered bar in Swan Lake, New York, formerly known as Kilcoin’s, was set ablaze and destroyed. Perso was among the individuals who set the fire. NICHOLAS and DOMINIC MOTTA owned the bar, and arranged the arson by having others, including Perso, travel to Sullivan County to set the bar afire, in order to make a claim to recover proceeds from the insurance company. In pursuing the insurance claim, DOMINIC MOTTA deceived the insurance company about the fire in order to attempt to obtain more than $100,000 in insurance proceeds. The insurance company, however, detected the arson, and ultimately denied DOMINIC MOTTA’s claim when MOTTA repeatedly failed to respond to requests by the insurance company that he answer questions about the fire under oath.
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In addition to their prison terms, DOMINIC MOTTA, 59, and NICHOLAS MOTTA, 43, both of Islandia, New York, were each sentenced to one year of supervised release and ordered to pay a $100 special assessment. NICHOLAS MOTTA was ordered to pay a fine of $7,500 and DOMINIC MOTTA was ordered to pay a fine of $5,000.
Anthony Perso, 32, of Medford, New York, is scheduled to be sentenced by Judge Román on March 11, 2106, at 10:30 a.m.
Mr. Bharara praised the outstanding investigative work of the Federal Bureau of Investigation, the Suffolk County District Attorney’s Office, the Suffolk County Police Department, and the Sullivan County Sheriff’s Office.
The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Benjamin Allee and George Turner are in charge of the prosecution.
Leader of A Colombian Drug Trafficking Organization Sentenced to 25 Years in PrisonRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that ERICSON VARGAS CARDONA, a/k/a “Sebas,” was sentenced in Manhattan federal court to 25 years in prison for conspiring to traffic in cocaine and using a semiautomatic assault weapon in furtherance of the cocaine trafficking conspiracy. In October 2013, VARGAS CARDONA was extradited to the United States from Colombia, where he was arrested pursuant to a provisional arrest warrant that was issued in response to a request by the U.S. Government in connection with this case. VARGAS CARDONA pled guilty on April 14, 2015, and was sentenced today by Chief U.S. District Judge Loretta A. Preska.
Manhattan U.S. Attorney Preet Bharara said: “Ericson Vargas Cardona led a criminal enterprise that specialized in cocaine and violence – and lots of both. Armed with machine guns, explosives, and a grenade launcher, Vargas Cardona distributed his drugs all over the world, including the United States. Thanks to the incredible dedication of the agents of the Drug Enforcement Administration, Vargas Cardona is no longer a global threat.”
According to the Indictment, documents publicly filed in Colombia in extradition proceedings, publicly filed documents in Manhattan federal court, and statements made at court proceedings in this case, including today’s sentencing:
From 2000 to August 2012, VARGAS CARDONA was a member of La Oficina de Envigado (“La Oficina”), a Colombia-based narcotics trafficking organization that began as a debt-collection agency associated with the United Self-Defenses Forces of Colombia (“AUC”), a right-wing paramilitary organization. La Oficina collected debts on behalf of narcotics traffickers, invested in narcotics shipments, and eventually began producing cocaine independently. La Oficina distributed thousands of kilograms of cocaine from Colombia to locations worldwide, including the United States. In addition, La Oficina engaged in the systematic bribery of Colombian officials.
As a member of La Oficina, VARGAS CARDONA, among other things, worked as a sicario, or assassin, engaged in debt collection activities, and established a cocaine laboratory. In 2009, VARGAS CARDONA assumed control of La Oficina. At the time of VARGAS CARDONA’s arrest by Colombian authorities on August 8, 2012, he was found at a property that was used to store an arsenal of weapons and explosives. Colombian authorities recovered, among other things, 69 bars of C4 explosive, over 190 electrical detonators, more than 2,900 manual detonators, one rocket-propelled grenade launcher, one M-60 machine gun, nine submachine guns, over 50 hand grenades, 28 rifles, nine silencers, and thousands of rounds of ammunition.
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In addition to his prison term, VARGAS CARDONA, 42, was sentenced to five years of supervised release.
Mr. Bharara praised the outstanding efforts of the New York Field Office of the U.S. Drug Enforcement Administration (“DEA”) and the DEA’s Bogotá, Colombia, Country Office.
The case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Edward Y. Kim and Michael Ferrara are in charge of the prosecution.
Leader of Multimillion-Dollar Tax Fraud Scheme Involving the Use of Children’s Identities Sentenced to Nine Years in PrisonRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that NOEL CUELLO, the former operator of a tax preparation business with multiple locations in the Bronx, New York, was sentenced today in Manhattan federal court to nine years in prison for leading a large-scale identity theft and tax fraud scheme through which identifying information of minors, including Social Security numbers, was obtained through corrupt payments to a former fraud investigator with the New York City Human Resources Administration. The identifying information was then used to file thousands of fraudulent tax returns, resulting in millions of dollars in loss to the United States Treasury. Sentence was imposed by U.S. District Judge Richard J. Sullivan.
U.S. Attorney Preet Bharara said: “Noel Cuello ran a criminal tax preparation business, raking in big fees by helping thousands of taxpayers to commit tax fraud. Using identity information stolen from the City’s Human Resources Administration, Cuello enabled taxpayers to falsely claim dependent children, resulting in millions of dollars in lost tax revenue for the government.”
According to the Complaint, Indictment, and information presented in connection with sentencings in the case:
Under federal law, taxpayers may be entitled to claim certain tax credits, including the Earned Income Tax Credit (“EITC”), which is available to qualifying low and moderate income working individuals and families. If the taxpayer claims the EITC based on having a child, the individual must list the name and Social Security number (“SSN”) of the child on his or her tax return, along with a separate schedule that contains the child’s name, SSN, year of birth, relationship to the taxpayer, and how many months the child lived with the taxpayer during the tax year.
Between at least approximately 2009 and spring 2014, through a tax preparation business in the Bronx, New York, with multiple locations, conspirators charged individual taxpayers a cash fee in return for which the business would prepare and file tax returns that falsely claimed that the taxpayer had one or more minor dependents, to take fraudulent advantage of the EITC. The business filed thousands of such returns, resulting in refunds totaling millions of dollars.
The business, which used several names over the years, was principally operated by NOEL CUELLO and his girlfriend, Luz C. Ricardo, with the assistance of his brother, Arismendy Cuello, and Jonathan Orbe, Catherine Ricart, and Joel Vargas, who played various roles, including bringing taxpayers to the business, preparing fraudulent returns, and receiving cash payments from clients.
To obtain SSNs and other information of minors to be used in the scheme, NOEL CUELLO repeatedly bribed Francisco Abreu, who worked at the time as a fraud investigator with the New York City Human Resources Administration.
The scheme continued even after law enforcement executed multiple search warrants of the business, with Orbe claiming to have purchased the business from NOEL CUELLO, and Ricart establishing new electronic filer accounts with the Internal Revenue Service, and opening new bank accounts, which were used to continue the scheme.
In addition to accepting cash in return for assisting other taxpayers to file fraudulent returns, Ricardo, Arismendy Cuello, Orbe, Ricart, and Vargas filed their own fraudulent returns in multiple years, falsely claiming to have one or more minor dependents.
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In addition to his prison term, NOEL CUELLO, who previously pled guilty to conspiracy to commit wire fraud, was sentenced to three years of supervised release, ordered to forfeit $3.5 million, and ordered to pay $3.5 million in restitution.
NOEL CUELLO, 32, of the Bronx, New York, was indicted in April 2015, along with Ricardo, 34, Arismendy Cuello, 29, Orbe, 26, Ricart, 38, and Vargas, 29, all also of the Bronx, New York. All of the defendants subsequently pled guilty and have been sentenced.
On January 7, 2016, Judge Sullivan sentenced Ricardo, who pled guilty to conspiracy to commit wire fraud and multiple counts of filing a false personal tax return, to 66 months in prison.
On January 14, 2016, Judge Sullivan sentenced Vargas, who pled guilty to conspiracy to commit wire fraud and multiple counts of filing a false personal tax return, to 24 months in prison.
On January 22, 2016, Judge Sullivan sentenced Arismendy Cuello, who pled guilty to conspiracy to commit wire fraud and multiple counts of filing a false personal tax return, to 36 months in prison.
On January 28, 2016, Judge Sullivan sentenced Orbe, who pled guilty to conspiracy to commit wire fraud and multiple counts of filing a false personal tax return, to 60 months in prison.
On January 29, 2016, Judge Sullivan sentenced Ricart, who pled guilty to conspiracy to commit wire fraud and multiple counts of filing a false personal tax return, to 36 months in prison.
Abreu, 44, of the Bronx, New York, who had previously been indicted separately for unrelated robbery and firearm offenses, pled guilty in August 2015 to those unrelated offenses, along with accepting bribes, fraud, and theft counts related to his participation in the scheme. He is scheduled to be sentenced at a future date by U.S. District Judge Naomi Reice Buchwald.
Mr. Bharara praised the outstanding work of the Internal Revenue Service-Criminal Investigation. Mr. Bharara also thanked the New York City Department of Investigation and the Social Security Administration-Office of Inspector General for their assistance in the investigation, which he noted is ongoing.
The case is being prosecuted by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Daniel C. Richenthal, Sarah K. Krissoff, and Amanda K. Houle are in charge of the prosecution.
VimpelCom Limited and Unitel LLC Enter into Global Foreign Bribery Resolution of More Than $795 Million; United States Seeks $850 Million Forfeiture in Corrupt Proceeds of Bribery SchemeRead the Press Release
Amsterdam-based VimpelCom Limited, the world’s sixth-largest telecommunications company and an issuer of publicly traded securities in the United States, and its wholly owned Uzbek subsidiary, Unitel LLC, entered into resolutions with the Department of Justice today in which they admitted to a conspiracy to make more than $114 million in bribery payments to a government official in Uzbekistan between 2006 and 2012 to enable them to enter and continue operating in the Uzbek telecommunications market.
In a related action, the department also filed a civil complaint today seeking the forfeiture of more than $550 million held in Swiss bank accounts, which constitute bribe payments made by VimpelCom and two separate telecommunications companies, or funds involved in the laundering of those payments, to the Uzbek official. The forfeiture complaint follows an earlier civil complaint filed on June 29, 2015, which seeks forfeiture of more than $300 million in bank and investment accounts held in Belgium, Luxembourg and Ireland that also constitute funds traceable to bribes, or funds involved in the laundering of the bribes, paid by VimpelCom and another telecommunications company to the same Uzbek official.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Preet Bharara of the Southern District of New York, Chief Richard Weber of Internal Revenue Service-Criminal Investigation (IRS-CI) and Special Agent in Charge Clark E. Settles of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI) Washington, D.C., Field Office.
“These cases combine a landmark FCPA resolution for corporate bribery with one of the largest forfeiture actions we have ever brought to recover bribe proceeds from a corrupt government official,” said Assistant Attorney General Caldwell. “The Criminal Division’s FCPA enforcement program and our Kleptocracy Initiative are two sides of the same anti-corruption coin. The FCPA resolution in this case is also one of the most significant coordinated international and multi-agency resolutions in the history of the FCPA, and demonstrates our commitment both to pursuing justice and to bringing about corporate reform.”
“Today we mark the resolution of criminal charges and civil proceedings against corrupt corporate entities that made bribery a foundation of their business model,” said U.S. Attorney Bharara. “As they have admitted in court filings, VimpelCom, the world’s sixth largest telecommunications company, with securities traded in New York, and its subsidiary, Unitel, built their business in Uzbekistan on over $114 million in bribes funneled to a government official. Those payments, falsely recorded in the company’s books and records, were then laundered through bank accounts and assets around the world, including through accounts in New York.”
“Today’s admission of guilt by VimpelCom and Unitel to paying bribes to government officials is a victory for all who fight corruption at all levels,” said Chief Weber. “It also demonstrates the skill and tenacity of IRS Criminal Investigation special agents when it comes to delving underneath layers of financial transactions designed to conceal illegal payments for gain. The global economy demands a level playing field for all. When certain VimpelCom and Unitel executives chose to use deception in order to continue this scheme and take advantage of insider knowledge, they also chose to become criminals. IRS-CI pledges to continue our efforts on the international stage to stop corrupt financial schemes such as this one.”
“HSI special agents and our law enforcement partners will continue to investigate financial crimes committed by corrupt foreign officials,” said Special Agent in Charge Settles. “We will not permit ill-gotten gains to be laundered through U.S. financial markets.”
The Criminal Resolution
In the criminal case, Unitel pleaded guilty and was sentenced to a one-count criminal information filed today in the Southern District of New York and assigned to U.S. District Judge Edgardo Ramos of the Southern District of New York, charging the company with a conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA).
VimpelCom entered into a deferred prosecution agreement in connection with a criminal information charging the company with conspiracy to violate the anti-bribery and books and records provisions of the FCPA, and a separate count of violating the internal controls provisions of the FCPA. Pursuant to its agreement with the department, VimpelCom agreed to pay a total criminal penalty of $230,326,398.40 to the United States, including $40 million in forfeiture. VimpelCom also agreed to implement rigorous internal controls, retain a compliance monitor for a term of three years and cooperate fully with the department’s ongoing investigation, including its investigation of individuals.
In related proceedings, VimpelCom settled with the U.S. Securities and Exchange Commission (SEC) and the Public Prosecution Service of the Netherlands (Openbaar Ministrie, or OM). Under the terms of its resolution with the SEC, VimpelCom agreed to a total of $375 million in disgorgement of profits and prejudgment interest, to be divided between the SEC and OM. VimpelCom agreed to pay the OM a criminal penalty of $230 million, for a total criminal penalty of $460,326,398.40, and a total resolution amount of more than $835 million. The department agreed to credit the criminal penalty paid to the OM as part of its agreement with the company. The SEC agreed to credit the forfeiture paid to the department as part of its agreement with the company. Thus, the combined total amount of U.S. and Dutch criminal and regulatory penalties paid by VimpelCom will be $795,326,398.40, making it one of the largest global foreign bribery resolutions ever.
According to the companies’ admissions, VimpelCom and Unitel, through various executives and employees, paid bribes to an Uzbek government official, who was a close relative of a high-ranking government official and had influence over the Uzbek governmental body that regulated the telecom industry. The companies structured and concealed the bribes through various payments to a shell company that certain VimpelCom and Unitel management knew was beneficially owned by the foreign official. The bribes were paid on multiple occasions between approximately 2006 and 2012 so that VimpelCom could enter the Uzbek market and Unitel could gain valuable telecom assets and continue operating in Uzbekistan. VimpelCom and Unitel contemplated additional bribes in 2013, but those bribes were not completed before VimpelCom opened an internal investigation.
In addition, VimpelCom admitted that it falsified its books and records and attempted to conceal and disguise the bribery scheme by classifying payments as equity transactions, consulting and repudiation agreements and reseller transactions. VimpelCom also failed to implement and enforce adequate internal accounting controls, which allowed the bribe payments to occur without detection or remediation. Moreover, when the board of directors sought an FCPA legal opinion assessing corruption risks involved in the transactions, certain VimpelCom management withheld crucial information from outside counsel performing the review that restricted the scope of FCPA opinions, rendering them worthless. Rather than implement and enforce a strong anti-corruption ethic, certain VimpelCom executives sought ways to give the company plausible deniability of illegality while knowingly proceeding with corrupt business transactions.
A number of significant factors contributed to the department’s criminal resolution with the companies. Among these, the companies received significant credit for their prompt acknowledgement of wrongdoing after being informed of the department’s investigation, for their willingness to promptly resolve their criminal liability on an expedited basis and for their extensive cooperation with the department’s investigation. Specifically, the criminal penalty reflects a 45 percent reduction off of the bottom of the U.S. Sentencing Guidelines fine range. However, the companies did not receive more significant mitigation credit, either in the penalty or the form of resolution, because the companies did not voluntarily self-disclose their misconduct to the department after an internal investigation uncovered wrongdoing.
The Forfeiture Complaints
The department has also filed two civil complaints seeking a total of $850 million in forfeiture. A complaint filed today seeks forfeiture of approximately $550 million in proceeds of illegal bribes paid, or property involved in the laundering of those payments, to the Uzbek official by VimpelCom and two other telecommunications companies operating in Uzbekistan. The $550 million is currently located in Swiss bank accounts. The department also filed a prior complaint seeking forfeiture of an additional $300 million in proceeds of illegal bribes paid, or property involved in the laundering of those payments, to the same Uzbek official. The assets sought to be forfeited in that complaint are restrained in Belgium, Luxembourg and Ireland. In that case, on Jan. 11, 2016, the U.S. District Court for the Southern District of New York entered a partial default judgment against all potential claimants other than the Republic of Uzbekistan.
As alleged in the complaints and as is part of the criminal resolutions announced today, the telecom companies paid a total of more than $800 million in bribes so that the Uzbek official would assist VimpelCom and other telecommunications companies in obtaining and retaining business in Uzbekistan. Thereafter, the official’s associates laundered the corruption proceeds through accounts held in Latvia, the United Kingdom, Hong Kong, Ireland, Belgium, Luxembourg and Switzerland. The illicit funds were transmitted through financial institutions in the United States before they were deposited into accounts in these countries, thereby subjecting them to U.S. jurisdiction.
The department brought these forfeiture actions under the Kleptocracy Asset Recovery Initiative in the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS), working in partnership with federal law enforcement agencies to forfeit the proceeds of foreign official corruption and, where appropriate, to use those recovered assets to benefit the people harmed by corruption and abuse of office.
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These cases represent the department’s commitment to both prosecute those who pay bribes and to ensure that the corrupt government officials who receive the bribes cannot use the U.S. financial system to launder their illicit gains. The IRS-CI and ICE-HSI are investigating the cases, along with the IRS Global Illicit Financial Team in Washington, D.C. Senior Litigation Counsel Nicola J. Mrazek and Trial Attorney Ephraim Wernick of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Edward Imperatore of the Southern District of New York are prosecuting the criminal case, with substantial assistance from AFMLS. AFMLS Trial Attorney Marie M. Dalton is prosecuting the forfeiture case with substantial assistance from the Fraud Section.
Law enforcement colleagues within the OM, the Swedish Prosecution Authority, the Office of the Attorney General in Switzerland and the Corruption Prevention and Combating Bureau in Latvia provided significant cooperation and assistance in this matter. Law enforcement colleagues in Belgium, France, Ireland, Luxembourg and the United Kingdom have also provided valuable assistance. The Criminal Division’s Office of International Affairs provided significant assistance in this matter. The SEC referred the matter to the department and provided extensive cooperation and assistance.
Individuals with information about possible proceeds of foreign corruption located in or laundered through the United States should contact federal law enforcement or send an email to [email protected].
Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.
Global Telecommunications Company and Its Subsidiary Charged in Massive Bribery Scheme Involving Uzbek Official; Company to Pay $795 Million in PenaltiesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Leslie R. Caldwell, the Assistant Attorney General for the Criminal Division of the Department of Justice (“DOJ”), Richard Weber, Chief of the Internal Revenue Service-Criminal Investigation (“IRS-CI”), and Clark E. Settles, Special Agent in Charge of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”) Washington, D.C., Field Office, announced today the filing of criminal charges against VimpelCom Limited (“VimpelCom”), the world’s sixth-largest telecommunications company, with securities publicly traded in New York, and its wholly owned Uzbek subsidiary, Unitel LLC (“Unitel”) for conspiring to violate the Foreign Corrupt Practices Act (“FCPA”) by paying more than $114 million in bribes to a government official in Uzbekistan. VimpelCom was also charged with violating the FCPA’s internal control provisions.
Mr. Bharara also announced that in connection with the filed charges, Unitel pleaded guilty today before United States District Judge Edgardo Ramos, and that SDNY and the DOJ entered into a deferred prosecution agreement (“DPA”) with VimpelCom. Pursuant to the DPA, VimpelCom admitted to participating in the charged conspiracy. VimpelCom will pay a total criminal penalty of $230,163,199.20 to the United States, including $40 million in criminal forfeiture. VimpelCom further agreed to implement rigorous internal controls, retain a compliance monitor for a term of three years, and cooperate fully with the Government.
In related proceedings, VimpelCom reached a settlement with the U.S. Securities and Exchange Commission (“SEC”) and the Public Prosecution Service of the Netherlands (“PPS”). Under the terms of its resolution with the SEC, VimpelCom agreed to pay $375 million in disgorgement of profits and prejudgment interest. VimpelCom agreed to pay the PPS a criminal penalty of $230,163,199.20, yielding a total criminal penalty of $460,326,398.40, and a global resolution amount of more than $835 million. SDNY and the DOJ agreed under the DPA to credit the criminal penalty paid to PPS, and the SEC separately agreed to credit the forfeiture amount paid to the United States. Thus, the total of U.S. criminal and regulatory penalties paid by VimpelCom is $795,326,398.40.
DOJ also filed a civil complaint today seeking forfeiture of $550 million held in Swiss bank accounts which represent proceeds of illegal bribes paid, or property involved in the laundering of those payments, to the Uzbek official by VimpelCom and two other telecommunications companies operating in Uzbekistan. A previous complaint filed by DOJ seeks $300 million in proceeds of illegal bribes paid, or property involved in the laundering of those payments, by these companies to the same Uzbek official. In that case, on January 11, 2016, United States District Judge Andrew L. Carter, Jr. entered a partial default judgment against all potential claimants other than the Republic of Uzbekistan. As alleged in the two complaints, the telecommunications companies paid $850 million in bribes to the Uzbek official to obtain and retain the ability to do business in Uzbekistan.
Manhattan U.S. Attorney Preet Bharara said: “Today we mark the resolution of criminal charges and civil proceedings against corrupt corporate entities that made bribery a foundation of their business model. As they have admitted in court filings, VimpelCom, the world’s sixth largest telecommunications company, with securities traded in New York, and its subsidiary, Unitel, built their business in Uzbekistan on over $114 million in bribes funneled to a government official. Those payments, falsely recorded in the company’s books and records, were then laundered through bank accounts and assets around the world, including through accounts in New York.”
Assistant Attorney General Leslie R. Caldwell said: “These cases combine a landmark FCPA resolution for corporate bribery with one of the largest forfeiture actions we have ever brought to recover bribe proceeds from a corrupt government official. The Criminal Division’s FCPA enforcement program and our Kleptocracy Initiative are two sides of the same anti-corruption coin. The FCPA resolution in this case is also one of the most significant coordinated international and multi-agency resolutions in the history of the FCPA, and demonstrates our commitment both to pursuing justice and to bringing about corporate reform.”
IRS-CI Chief Richard Weber said: “Today’s admission of guilt by VimpelCom and Unitel to paying bribes to government officials is a victory for all who fight corruption at all levels. It also demonstrates the skill and tenacity of IRS Criminal Investigation special agents when it comes to delving underneath layers of financial transactions designed to conceal illegal payments for gain. The global economy demands a level playing field for all. When certain VimpelCom and Unitel executives chose to use deception in order to continue this scheme and take advantage of insider knowledge, they also chose to become criminals. IRS-CI pledges to continue our efforts on the international stage to stop corrupt financial schemes such as this one.”
HSI Special Agent in Charge Settles said: “HSI special agents and our law enforcement partners will continue to investigate financial crimes committed by corrupt foreign officials. We will not permit ill-gotten gains to be laundered through U.S. financial markets.”
According to the allegations contained in the criminal Informations and civil complaints, which were filed today in Manhattan federal court, the statement of facts set forth in the DPA, and other publicly available information:
Between approximately 2006 and 2012, VimpelCom and Unitel, through various executives and employees, paid more than $114 million in bribes to illegally obtain telecommunications business in Uzbekistan. The bribes were paid to an Uzbek government official who was a close relative of a high-ranking government official and who exercised influence over Uzbek telecommunications industry regulators. VimpelCom and Unitel structured and concealed the bribes through various payments to a shell company that certain VimpelCom and Unitel management knew was beneficially owned by the foreign official. The bribes were paid on multiple occasions over a period of approximately seven years so that VimpelCom could enter the Uzbek market and Unitel could gain valuable telecom assets and continue operating in Uzbekistan.
Under the direction and control of the Uzbek government official, the more than $114 million in bribery proceeds were laundered through accounts held in Latvia, the United Kingdom, Hong Kong, Ireland, Belgium, Luxembourg, and Switzerland. The illicit funds were transmitted through financial institutions in the Southern District of New York before they were deposited into accounts in those countries.
As a further part of the scheme, VimpelCom falsified its books and records and attempted to conceal and disguise the bribery scheme by classifying payments as equity transactions, consulting agreements, and so-called repudiation agreements and reseller transactions. VimpelCom likewise failed to implement and enforce adequate internal accounting controls, which allowed the bribe payments to occur without detection. Moreover, when the VimpelCom Board of Directors sought FCPA legal opinions assessing corruption risks in the transactions, certain members of VimpelCom management withheld crucial information from outside counsel performing the review, rendering the opinions worthless.
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Unitel was charged, and pleaded guilty to, one count of conspiring to violate the anti-bribery provisions of the FCPA. VimpelCom was charged in a two-count Information with conspiracy to violate the anti-bribery and books and records provisions of the FCPA, and with violating the FCPA’s internal controls provisions.
Mr. Bharara thanked the Fraud Section of the DOJ’s Criminal Division for their collaboration and praised the efforts of IRS-CI, the IRS Global Illicit Financial Team, and HSI in the investigation. He also thanked the SEC’s Division of Enforcement for its significant assistance in the investigation. Mr. Bharara also thanked law enforcement colleagues within the PPS, the Swedish Prosecution Authority, the Office of the Attorney General in Switzerland and the Corruption Prevention and Combating Bureau in Latvia, as well as Belgium, France, Ireland, Luxembourg, Norway and the United Kingdom. Mr. Bharara also thanked the Department of Justice’s Office of International Affairs for its significant assistance in this matter.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit and the FCPA Unit of the Fraud Section of DOJ’s Criminal Division. Assistant United States Attorney Edward A. Imperatore, Senior Litigation Counsel Nicola Mrazek, and Trial Attorney Ephraim Wernick are in charge of the prosecution. AFMLS Trial Attorney Marie M. Dalton is handling the forfeiture aspects of the case.
CEO of Broker-Dealer Sentenced in Manhattan Federal Court for Obstructing Regulatory Examination by Producing False Invoices to SEC Exam TeamRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that CHARLES J. MOORE, former Chief Executive Officer of broker-dealer Crucible Capital, Inc. (“Crucible”), was sentenced today to six months in prison for obstructing a regulatory examination conducted by the Securities and Exchange Commission (“SEC”). The sentence was imposed by U.S. District Judge Colleen McMahon. MOORE, 63, pled guilty on November 9, 2015, to having caused a Crucible employee to falsify invoices and then provide them to an SEC examination team in response to a document request.
According to the agreement pursuant to which MOORE entered his plea of guilty, the underlying criminal Complaint filed August 7, 2014, the Indictment filed on September 30, 2014, and statements made during court proceedings:
MOORE was at all relevant times the CEO of Crucible, an SEC-registered broker-dealer that maintained no customer securities trading accounts, but held itself out as a “boutique” investment bank helping small businesses to raise capital and financing. Crucible used its status as an SEC-registered broker-dealer to solicit business.
MOORE was also at all relevant times the CEO of an affiliated company, Angelic Holdings LLC (“Angelic”), which was not registered with the SEC and which conducted “due diligence” for Crucible-related business. Crucible and Angelic shared employees and office space. They also shared expenses, under an agreement that had Crucible paying Angelic a monthly fee and Angelic paying vendors of certain specified services on behalf of both Angelic and Crucible.
As an SEC-registered broker-dealer that maintained no customer accounts, Crucible was required to maintain net capital of at least $5,000 at all times. It was also required to file monthly “FOCUS” reports with the SEC reporting its net capital.
In the fall of 2013, the SEC opened a regulatory examination of Crucible to explore, among other things, the accuracy of the net capital figures that Crucible had supplied in its FOCUS reports from in or about February 2013 through in or about September 2013. As part of that examination, the SEC requested all 2013 invoices to Angelic for Crucible-related expenses.
MOORE, responding to this request, caused a Crucible employee to create falsified invoices to deliver to the SEC. Specifically, he directed the employee to take original invoices that had been sent to Crucible personnel, and create versions of those invoices that omitted references to large, unpaid debts appearing on the originals. MOORE then caused the employee to hand the falsified invoices to the SEC. The purpose of this obstruction was to hide the true extent of Crucible’s debts from the regulatory examination team, and thus make it appear, falsely, that Crucible’s net capital figures, as reported in its 2013 FOCUS reports, were accurate.
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Mr. Bharara praised the investigative work of the U.S. Postal Inspection Service and the Federal Bureau of Investigation and thanked the SEC, which filed civil charges 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. Attorney Sarah Eddy McCallum is in charge of the prosecution.
Manhattan U.S. Attorney Files Civil Rights Suit and Enters Settlement with Developer to Enhance Accessibility at More Than 2,500 Rental ApartmentsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that it has settled a federal civil rights lawsuit against GLENWOOD MANAGEMENT CORPORATION (“GLENWOOD”) and GLENWOOD’S affiliate, LIBERTY STREET REALTY, LLC, by consent decree. Under the settlement, GLENWOOD agrees to make retrofits at three residential rental complexes in Manhattan – Liberty Plaza, Hawthorne Park, and The Sage – to make them more accessible to individuals with disabilities. GLENWOOD further agrees to inspect six other residential rental complexes in Manhattan and, where necessary, make retrofits at those buildings as well. Additionally, GLENWOOD must establish procedures to ensure that its ongoing and future development projects will comply with the accessibility requirements of the federal Fair Housing Act (“FHA”). Finally, GLENWOOD agrees to provide up to $900,000 to compensate aggrieved persons and pay a civil penalty of $50,000. The consent decree was approved yesterday by U.S. District Judge J. Paul Oetken.
Manhattan U.S. Attorney Preet Bharara said: “This is the tenth lawsuit that this Office has brought to ensure that the promise of the Fair Housing Act – that newly built residential buildings are accessible to people with disabilities – is being fulfilled in New York City. This settlement shows our enforcement efforts have motivated major developers like Glenwood to embrace their obligations under the law by making retrofits in thousands of apartments, compensating aggrieved parties, and establishing procedures to ensure accessibility at ongoing and future development projects.”
The FHA’s accessible design and construction provisions require new multifamily housing complexes constructed after January 1993 to have basic features accessible to persons with disabilities. According to the allegations in the Complaint, Liberty Plaza, a 287-unit rental complex located in Manhattan, was designed and constructed with numerous inaccessible features, including excessively high thresholds interfering with accessible routes into and within individual units, insufficient spaces in bathrooms and kitchens for people in wheelchairs, and bathroom configurations preventing installation of grab bars. These inaccessible conditions at Liberty Plaza were first brought to the attention of the United States by testing performed by the Fair Housing Justice Center.
Under the settlement, GLENWOOD agrees to make extensive retrofits at Liberty Plaza and to commit to make retrofits at two other rental complexes that have been inspected, The Hawthorne and The Sage, to make them accessible. GLENWOOD also agrees to arrange for inspection at its six other rental complexes in Manhattan and, where necessary, to make retrofits at those properties as well. Together, the nine buildings covered by the consent decree contain more than 2,500 rental apartments.
The settlement also requires GLENWOOD to establish procedures to ensure FHA compliance at its ongoing and future development projects. These include retaining an FHA compliance consultant to ensure each residential building developed by GLENWOOD will, as constructed, comply with the FHA’s accessibility requirements. The FHA consultant also will conduct a site visit to identify non-compliant conditions and recommend appropriate solutions prior to the completion of construction. In addition, GLENWOOD agrees to institute policies and training to ensure that its own employees and agents will comply with the FHA’s accessibility requirements.
Finally, the settlement requires GLENWOOD to provide up to $900,000 in funds to compensate aggrieved persons. GLENWOOD also agrees to pay a civil penalty of $50,000.
The government’s lawsuit also asserted claims against the architect of Liberty Plaza, STEPHEN B. JACOBS GROUP, PC. The United States is currently engaged in negotiations with that architect regarding a potential settlement.
Aggrieved individuals may be entitled to monetary compensation from the fund created through today’s settlement. Aggrieved individuals may include those who were:
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Injured by a lack of accessible features at Liberty Plaza or the other properties constructed by GLENWOOD;
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Discouraged from living at Liberty Plaza or the other properties constructed by GLENWOOD because of the lack of accessible features;
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Required to pay to have an apartment at Liberty Plaza or the other properties constructed by GLENWOOD made accessible;
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Prevented from having visitors because of a lack of accessible features at Liberty Plaza or the other properties constructed by GLENWOOD; or
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Otherwise injured or discriminated against on the basis of disability as a result of the design or construction of Liberty Plaza or the other properties constructed by GLENWOOD.
People who may be entitled to compensation should file a claim by contacting the Civil Rights Complaint Line at (212) 637-0840, using the Civil Rights Complaint Form available on the United States Attorney’s Office’s website http://www.justice.gov/usao/nys/civilrights.html, or by sending a written claim to:
U.S. Attorney’s Office, Southern District of New York
86 Chambers Street, 3rd Floor
New York, New York 10007
Attention: Chief, Civil Rights Unit
The case is being handled by the Office’s Civil Rights Unit. Assistant U.S. Attorneys Li Yu, Jessica Jean Hu, and Jacob Lillywhite are in charge of the case.
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Property Manager at Section 8 Apartment Complex Arrested for Embezzling Government FundsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Christina Scaringi, Special Agent in Charge of the Department of Housing and Urban Development - Office of Inspector General (“HUD-OIG”), announced the unsealing of a Complaint against the property manager, CARL IMMICH, for engaging in fraudulent schemes to embezzle funds from Harriet Tubman Terrace Apartments (“Tubman Terrace”), a Section 8 housing complex in Poughkeepsie, New York. IMMICH was arrested today and presented in White Plains federal court before United States Magistrate Judge Judith C. McCarthy. As alleged, IMMICH fraudulently obtained hundreds of thousands of dollars belonging to Tubman Terrace.
U.S. Attorney Preet Bharara said: “As alleged, Carl Immich stole federal taxpayer dollars intended to subsidize housing costs for lower income individuals. I commend the work of HUD-OIG in safeguarding the people’s money and policing those who seek to pocket it for themselves.”
HUD-OIG Special Agent in Charge Christina Scaringi said: “The arrest and charges today of Carl Immich serve to remind the taxpayer that law enforcement will continue to pursue corruption, in all forms, especially those that impact the integrity of HUD-assisted housing. Mr. Immich’s charges disclosed today prove our continuing resolve to root out crime in all forms, especially when the funds involved should have been used to help the neediest families.”
According to the allegations in the criminal complaint (the “Complaint”) unsealed today in White Plains federal court[1]:
Tubman Terrace is a large low-income apartment complex in Poughkeepsie, New York. The rental payments for nearly all of the apartments are subsidized by HUD pursuant to Section 8 of the United States Housing Act of 1937, 42 U.S.C. § 1437f. From in or about June 2010 through in or about November 2014, HUD provided approximately $150,000 to $160,000 each month to Tubman Terrace.
Since in or about 2009, Tubman Terrace has been managed by a management company, of which IMMICH is the principal and sole owner. In that capacity, IMMICH has served as the management agent and property manager of Tubman Terrace since in or about 2009.
From at least in or about December 2010 until at least in or about March 2015, IMMICH fraudulently obtained hundreds of thousands of dollars belonging to Tubman Terrace, which were paid to him or used for personal expenditures. IMMICH did so through at least three different schemes: (1) he used credit cards intended for Tubman Terrace business expenses for personal expenses, which were then paid through Tubman Terrace’s operating bank account; (2) he obtained check payments from the Tubman Terrace operating bank account to cover other personal expenses; and (3) he obtained payroll checks for himself and his daughter reflecting no work or other entitlement by them to such salary.
* * *
IMMICH, 53, of Rhinebeck, New York, is charged with one count of embezzling government property, and one count of theft of property from programs receiving government funds, each of which carries a maximum sentence of 10 years in prison. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as the judge will determine any sentence imposed on the defendant.
Mr. Bharara praised the outstanding investigative work of HUD-OIG.
The case is being prosecuted by the Office’s White Plains Division. Assistant U.S. Attorneys Lauren Schorr and Benjamin Allee are in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.
Manhattan U.S. Attorney Announces Criminal Charges Against Owner of $161 Million Fraudulent Internet Payday Lending EnterpriseRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Mark Bialek, Inspector General for the Board of Governors of the Federal Reserve System (“Federal Reserve”), announced today the unsealing of an indictment charging RICHARD MOSELEY, SR. with wire fraud and violating the Racketeer Influenced and Corrupt Organizations Act (“RICO”) and the Truth in Lending Act (“TILA”) for operating a payday lending enterprise that systematically evaded state usury laws in order to charge illegally high interest rates, and for issuing payday loans to consumers who never even sought them. MOSELEY was arrested this morning and will be presented later today in federal court in Kansas City, Missouri. The case has been assigned to U.S. District Judge Edgardo Ramos.
Manhattan U.S. Attorney Preet Bharara stated: “As alleged, Richard Moseley, Sr., extended predatory loans to over six hundred thousand of the most financially vulnerable Americans, charging illegally high interest rates to people struggling just to meet their basic living expenses. Worse, Moseley allegedly also extended loans to many who never even sought them, withdrawing exorbitant ‘financing fees’ from their bank accounts for loans the borrowers never asked for or authorized. For years, Moseley allegedly hid behind sham offshore corporations and operated through the Internet to try to avoid criminal liability.”
FBI Assistant Director-in-Charge Rodriguez stated: “This case is an example of predatory lending at its finest. Claiming more than half a million victims, Moseley, through his enterprise, deceived not only those who unwittingly bought into this sham agreement, but others who never even authorized the origination of the loans they received. Despite their best efforts, innocent people throughout the country were deprived of the opportunity to regain their financial well -being as a result of this conspiracy. Today, we issue a stop payment on Moseley’s fraudulent scheme.”
Federal Reserve Inspector General Bialek stated: “Today’s indictment sends a clear message that those who engage in fraud to obstruct regulators from carrying out their supervisory responsibilities and deceive unsuspecting consumers will be held accountable for their actions.”
According to the allegations contained in the Indictment[1] unsealed today in Manhattan federal court:
Between approximately 2004 and September 2014, MOSELEY owned and operated a group of payday lending businesses (the “Hydra Lenders”) that issued and serviced small, short-term, unsecured loans, known as “payday loans,” through the Internet to customers across the United States.
For nearly a decade, MOSELEY systematically exploited more than 620,000 financially struggling working people throughout the United States, many of whom were having trouble paying for basic living expenses. MOSELEY, through the Hydra Lenders, targeted and extended loans to these individuals at illegally high interest rates of more than 700%, using deceptive and misleading communications and contracts and in violation of the usury laws of numerous states that were designed to protect residents from such loan sharking and abusive conduct.
In furtherance of the scheme, the Hydra Lenders’ loan agreements materially understated the amount the payday loan would cost, the annual percentage rate of the loan, and the total of payments that would be taken from the borrower’s bank account. The loan agreements suggested, for example, that the borrower would pay $30 in interest for $100 borrowed. In truth and in fact, however, MOSELEY structured the repayment schedule of the loans such that, on the borrower’s payday, the Hydra Lenders automatically withdrew the entire interest payment due on the loan, but left the principal balance untouched so that, on the borrower’s next payday, the Hydra Lenders could again automatically withdraw an amount equaling the entire interest payment due (and already paid) on the loan. Under MOSELEY’s control and oversight, the Hydra Lenders proceeded automatically to withdraw such “finance charges” payday after payday, applying none of the money toward repayment of principal. Indeed, under the terms of the loan agreement, the Hydra Lenders withdrew finance charges from their customers’ accounts unless and until consumers took affirmative action to stop the automatic renewal of the loan.
Through the Hydra Lenders, MOSELEY also extended numerous payday “loans” to victims across the country who did not even want the loans or authorize the issuance of the loans, but instead had merely submitted their personal and bank account information in order to inquire about the possibility of obtaining a payday loan. MOSELEY then automatically withdrew the Hydra Lenders’ usurious “financing fees” directly from the financially struggling victims’ bank accounts on a bi-weekly basis. Although hundreds of victims, over a period of years, lodged complaints that they had never approved or even been aware of the issuance of the loans, the Hydra Lenders, at MOSELEY’s direction, continued to issue loans to consumers without confirming that the consumers in fact wanted the loans that they received or had reviewed and approved the loan terms.
Throughout their existence, the Hydra Lenders were the subject of complaints from customers across the country, numerous state regulators, and consumer protection groups, about the Hydra Lenders’ deceptive and misleading practices in issuing usurious and fraudulent loans. Beginning in approximately 2006, in an attempt to avoid civil and criminal liability for his conduct, and to enable the Hydra Lenders to extend usurious loans contrary to state laws, MOSELEY created the sham appearance that the Hydra Lenders were located overseas. MOSELEY nominally incorporated the Hydra Lenders first in Nevis, and later in New Zealand, and claimed that the Hydra Lenders could not be sued or subject to state enforcement actions because they were beyond the jurisdiction of every state in the United States. In truth and in fact, the entirety of MOSELEY’s lending business, including all bank accounts from which loans were originated, all communications with consumers, and all employees, were located at MOSELEY’s corporate office in Kansas City, Missouri. The Hydra Lenders’ purported “offshore” operation consisted of little more than a service that forwarded mail from addresses in Nevis or New Zealand to the Kansas City, Missouri, office.
In furtherance of the scheme, MOSELEY falsely told his attorneys that the Hydra Lenders maintained physical offices and employees in Nevis and New Zealand and that the decision whether to extend loans to particular consumers was made by employees of the Hydra Lenders in Nevis and New Zealand. As MOSELEY knew, at no time did the Hydra Lenders have any employees involved in the lending business in Nevis or New Zealand, and at all times the decision whether to underwrite loans was made by employees under MOSELEY’s direction in Kansas City, Missouri. To defeat state complaints and inquiries, MOSELEY directed his attorneys at an outside law firm to submit correspondence to state Attorneys General which (unbeknownst to MOSELEY’s attorneys) falsely stated that the Hydra Lenders originated loans “exclusively” from their offices overseas and had no physical presence anywhere in the United States. In reliance on this materially false and misleading correspondence, many state Attorneys General and regulators closed their investigations on the apparent basis that they lacked jurisdiction over the Hydra Lenders and that the Hydra Lenders had no presence or operations in the United States.
From approximately November 2006 through approximately August 2014, the Hydra Lenders generated approximately $161 million in revenues. MOSELEY spent millions of dollars he obtained from victims on, among other things, vacation homes in Colorado and Mexico, luxury automobiles, and country club membership dues.
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MOSELEY, 68, of Kansas City, Missouri, is charged with one count of conspiracy to collect unlawful debts in violation of RICO, one count of collecting unlawful debts in violation of RICO, one count of conspiracy to commit wire fraud, and one count of wire fraud, each of which carries a maximum term of 20 years in prison; and one count of violating TILA, which carries a maximum term of one year in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the investigative work of the FBI and the Federal Reserve Office of the Inspector General. Mr. Bharara also thanked the Consumer Financial Protection Bureau (the “CFPB”), which referred the case, for its assistance in the investigation. In a civil enforcement action filed by the CFPB against MOSELEY in the United States District Court for the Western District of Missouri, proceeds that MOSELEY obtained as a result of his fraudulent conduct have been restrained.
Mr. Bharara noted that the investigation remains ongoing.
If you believe you were a victim of this crime, including a victim entitled to restitution, and you wish to provide information to law enforcement and/or receive notice of future developments in the case or additional information, please contact the Victim/Witness Unit at the United States Attorney’s Office for the Southern District of New York, at (866) 874-8900. For additional information, go to:
http://www.usdoj.gov/usao/nys/victimwitness.html
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Edward A. Imperatore is in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment, and the description of the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Manhattan U.S. Attorney Announces Charges Against Owner of, and Attorney for, $2 Billion Unlawful Internet Payday Lending EnterpriseRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Karl Stiften, Special Agent-in-Charge of the St. Louis Field Office of the Internal Revenue Service (“IRS”), and Diego Rodriguez, Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced the unsealing of a criminal indictment charging SCOTT TUCKER and TIMOTHY MUIR with violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”) and the Truth in Lending Act (“TILA”) for operating a nationwide internet payday lending enterprise that systematically evaded state laws in order to charge illegal interest rates as high as 700% on loans. Both defendants were arrested in Kansas City, Kansas, earlier today and will be presented in the United States District Court for the District of Kansas. The case has been assigned to U.S. District Judge Katherine B. Forrest.
Mr. Bharara also announced a non-prosecution agreement (the “Agreement”) with two tribal corporations controlled by the Miami Tribe of Oklahoma, a Native American tribe. As part of the Agreement, the tribal corporations agree to forfeit $48 million in criminal proceeds from TUCKER’s payday lending enterprise that are currently held in tribal bank accounts. The Agreement also acknowledges, among other things, that a tribal representative filed false factual declarations in multiple state court actions. TUCKER and MUIR used these false declarations to defeat numerous state enforcement actions seeking to enjoin the operation of their unlawful business.
Manhattan U.S. Attorney Preet Bharara stated: “As alleged, Scott Tucker and Timothy Muir targeted and exploited millions of struggling, everyday people by charging illegally high interest rates – as much as 700 percent. Tucker and Muir allegedly sought to evade liability by claiming that this $2 billion business was actually owned and operated by Native American tribes. But thanks to the investigative work of the FBI and IRS, this deceptive and predatory scheme to take advantage of the most financially vulnerable in our communities has been exposed for what it is – a criminal scheme.”
IRS Special Agent-in-Charge Karl Stiften stated: “These defendants allegedly used deceptive and misleading lending practices to prey on millions of hard working individuals seeking payday loans. In reality, these loan customers were taken advantage of and charged illegally high interest rates.”
FBI Assistant Director-in-Charge Diego Rodriguez stated: “As alleged, Tucker and Muir deceptively preyed on more than 4.5 million working people, including those in New York, to enter into payday loans with interest rates ranging from 400 to 700 percent. Not only did their business model violate the Truth-in Lending Act, established to protect consumers from such loans, but they also tried to hide from prosecution by creating a fraudulent association with Native American Tribes to receive sovereign immunity. This scheme, like so many others who swindle innocent victims, only ends with an arrest by the FBI.”
As alleged in the Indictment[1] and described in the Agreement:
From at least 1997 until 2013, TUCKER engaged in the business of making small, short-term, high-interest, unsecured loans, commonly referred to as “payday loans,” through the Internet. TUCKER’s lending enterprise, which had approximately 600 employees based in Overland Park, Kansas, did business as Ameriloan, f/k/a Cash Advance; One Click Cash, f/k/a Preferred Cash Loans; United Cash Loans; US FastCash; 500 FastCash; Advantage Cash Services; and Star Cash Processing (the “Tucker Payday Lenders”). TUCKER, working with MUIR, an attorney for TUCKER’s payday lending businesses since 2006, routinely charged interest rates of 400% or 500%, and sometimes higher than 700%, using deceptive and misleading “disclosures” about the true cost of the loans. These loans were issued to more than 4.5 million working people throughout the United States, including hundreds of thousands of people in New York, many of whom were struggling to pay basic living expenses. Many of these loans were issued in states, including New York, with laws that expressly forbid lending at the exorbitant interest rates TUCKER charged.
The False Truth-in-Lending Act (“TILA”) Disclosures
TILA is a federal statute intended to ensure that credit terms are disclosed to consumers in a clear and meaningful way, both to protect customers against inaccurate and unfair credit practices, and to enable them to compare credit terms readily and knowledgeably. Among other things, TILA and its implementing regulations require lenders, including payday lenders like the Tucker Payday Lenders, to accurately, clearly, and conspicuously disclose, before any credit is extended, the finance charge, the annual percentage rate, and the total of payments that reflect the legal obligation between the parties to the loan.
The Tucker Payday Lenders purported to inform prospective borrowers, in clear and simple terms, as required by TILA, of the cost of the loan (the “TILA Box”). For example, for a loan of $500, the TILA Box provided that the “finance charge – meaning the “dollar amount the credit will cost you” – would be $150, and that the “total of payments” would be $650. Thus, in substance, the TILA Box stated that a $500 loan to the customer would cost $650 to repay. While the amounts set forth in the Tucker Payday Lenders’ TILA Box varied according to the terms of particular customers’ loans, they reflected, in substance, that the borrower would pay $30 in interest for every $100 borrowed.
In truth and in fact, through at least 2012, TUCKER and MUIR structured the repayment schedule of the loans such that, on the borrower’s payday, the Tucker Payday Lenders automatically withdrew the entire interest payment due on the loan, but left the principal balance untouched so that, on the borrower’s next payday, the Tucker Payday Lenders could again automatically withdraw an amount equaling the entire interest payment due (and already paid) on the loan. With TUCKER’s approval, the Tucker Payday Lenders proceeded automatically to withdraw such “finance charges” payday after payday (typically every two weeks), applying none of the money toward repayment of principal, until at least the fifth payday, when they began to withdraw an additional $50 per payday to apply to the principal balance of the loan. Even then, the Tucker Payday Lenders continued to assess and automatically withdraw the entire interest payment calculated on the remaining principal balance until the entire principal amount was repaid. Accordingly, as TUCKER and MUIR well knew, the Tucker Payday Lenders’ TILA box materially understated the amount the loan would cost, including the total of payments that would be taken from the borrower’s bank account. Specifically, for a customer who borrowed $500, contrary to the TILA Box disclosure stating that the finance charge would be $150, for a total payment of $650 by the borrower, in truth and in fact, and as TUCKER and MUIR well knew, the finance charge was $1,425, for a total payment of $1,925 by the borrower.
The Sham Tribal Ownership of the Business
In response to complaints that the Tucker Payday Lenders were extending abusive loans in violation of their usury laws, several states filed actions to enjoin the Tucker Payday Lenders from operating in their states. To thwart these state actions, TUCKER devised a scheme to claim that his lending businesses were protected by sovereign immunity, a legal doctrine that, among other things, generally prevents states from enforcing their laws against Native American tribes. Beginning in 2003, TUCKER entered into agreements with several Native American tribes (the “Tribes”), including the Miami Tribe of Oklahoma. The purpose of these agreements was to cause the Tribes to claim they owned and operated parts of TUCKER’s payday lending enterprise, so that when states sought to enforce laws prohibiting TUCKER’s loans, TUCKER’s lending businesses would claim to be protected by sovereign immunity. In return, the Tribes received payments from TUCKER, typically one percent of the revenues from the portion of TUCKER’s payday lending business that the Tribes purported to own.
In order to create the illusion that the Tribes owned and controlled TUCKER’s payday lending business, TUCKER and MUIR engaged in a series of deceptions. Among other things:
- MUIR and other counsel for TUCKER prepared false factual declarations from tribal representatives that were submitted to state courts, falsely claiming, among other things, that tribal corporations substantively owned, controlled, and managed the portions of TUCKER’s business targeted by state enforcement actions.
- TUCKER opened bank accounts to operate and receive the profits of the payday lending enterprise, which were nominally held by tribally owned corporations, but which were, in fact, owned and controlled by TUCKER. TUCKER spent over $100 million from these accounts on lavish personal expenses, including race cars, the expenses of a professional auto racing team, a luxury home in Aspen, Colorado, and jewelry.
- Employees of TUCKER making payday loans over the phone told borrowers that they were operating in Oklahoma and Nebraska, where the Tribes were located, when in fact they were operating at TUCKER’s corporate headquarters in Kansas.These employees were even provided daily weather reports for the Tribes’ reservations, so that the employees could convince customers that the employees actually were calling from those locations (when they were in fact in Kansas).
These deceptions succeeded for a time, and several state courts dismissed enforcement actions against TUCKER’s payday lending businesses based on claims that they were protected by sovereign immunity. In reality, the Tribes neither owned nor operated any part of TUCKER’s payday lending business. The Tribes made no payment to TUCKER to acquire the portions of the business they purported to own. TUCKER continued to operate his lending business from a corporate headquarters in Kansas, and TUCKER continued to reap the profits of the payday lending businesses, which generated over $2 billion in revenue from 2003 to 2012 – in substantial part by charging desperate borrowers high interest rates expressly forbidden by state laws.
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TUCKER, 53, of Leawood, Kansas, and MUIR, 44, of Overland Park, Kansas, are each charged with conspiring to collect unlawful debts in violation of RICO, which carries a maximum term of 20 years in prison, three counts of violating RICO’s prohibition on collecting unlawful debts, each of which carries a maximum term of 20 years in prison, and five counts of violating the Truth in Lending Act, each of which carries a maximum term of one year in prison. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentences the defendants receive will be determined by the Court. The indictment also seeks to forfeit from TUCKER and MUIR the proceeds and property derived from their alleged crimes, including, among other things, numerous bank accounts, a vacation home in Aspen, Colorado, six Ferrari race cars, four Porsche automobiles, and a Learjet airplane.
Mr. Bharara praised the outstanding investigative work of the IRS and the FBI. Mr. Bharara also thanked the Criminal Investigators at the United States Attorney’s Office, and the Federal Trade Commission, for their assistance with the case.
Mr. Bharara further noted that the investigation remains ongoing.
If you believe you were a victim of this crime, including a victim entitled to restitution, and you wish to provide information to law enforcement and/or receive notice of future developments in the case or additional information, please contact the Victim/Witness Unit at the United States Attorney’s Office for the Southern District of New York, at (866) 874-8900. For additional information, go to:
http://www.usdoj.gov/usao/nys/victimwitness.html.
The prosecution is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Niketh Velamoor and Hagan Scotten 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.
Seventeen Charged in Manhattan Federal Court with Narcotics-Related Offenses, Including the Distribution of Cocaine, Marijuana, and OxycodoneRead the Press Release
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 New York Division (“DEA”), and Delano A. Reid, Special Agent in Charge of the New York Division of the United States Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), announced today the unsealing of an Indictment in Manhattan federal court charging 17 individuals with narcotics-related offenses. Fifteen of those charged were arrested this morning in the Southern District of New York and will be presented before United States Magistrate Judge Frank Maas later today. One defendant was arrested in the District of Maine this morning and will be presented there later today.
According to the allegations in the Indictment:[1]
Between late 2012 and December 2015, MARIO HERRERA, a/k/a “Mo,” JOHN MIRANDA, JOEL CASADO, a/k/a “Cojo,” CESAR DOMINGUEZ, JOEL QUEZADA, a/k/a “J-Buff,” JONATHAN MORALES, a/k/a “Blood,” and OLIVEROS VILLAREAL conspired to distribute and possess with the intent to distribute five kilograms and more of cocaine and a quantity of marijuana. This charge carries a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison. The Indictment also charges that between late 2012 and December 2015, HERRERA, MIRANDA, CASADO, DOMINGUEZ, QUEZADA, THOMAS ABREU, a/k/a “TJ,” JONATHAN GOLDEN, a/k/a “Johnny,” CYNTHIA URRA, DEBRA MONCHE, EZEQUIL NIN, a/k/a “Seki,” ANDREW SEIBERT, a/k/a “Blue,” CARLOS ALVAREZ-GONZALEZ, a/k/a “Pops,” KEITH WOODARDS, ALEXANDER CARNO, and KEVIN SKEETE conspired to distribute and possess with the intent to distribute oxycodone, a Schedule II controlled substance. This charge 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 a judge.
Mr. Bharara praised the outstanding investigative work of the DEA and the ATF. He also thanked the New York City Police Department, the U.S. Marshals Service, the Putnam County Sheriff’s Department, and the United States Secret Service for their assistance throughout the investigation.
The prosecution is being handled by the Office’s General Crimes Unit. Assistant U.S. Attorneys Gina Castellano, Jordan Estes, and Jason A. Richman are in charge of the prosecution.
The charges contained in the Indictment are merely accusations and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth below constitute only allegations, and every fact described should be treated as an allegation.
Florida Man Pleads Guilty in Manhattan Federal Court in Connection with Two Multimillion-Dollar Fraud SchemesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that JOSEPH DEL VALLE, an owner and partner of various investment companies, pled guilty today in Manhattan federal court to wire fraud and aggravated identity theft charges for operating two fraudulent schemes that resulted in more than $5 million in investor losses. DEL VALLE pled guilty to a four-count Indictment before United States District Judge Richard M. Berman.
Manhattan U.S. Attorney Preet Bharara stated: “Joseph Del Valle convinced his clients to invest millions of dollars in his real estate and restaurant projects. But in reality, his clients were only investing in Del Valle’s personal slush fund that he used to supplement his self-indulgent lifestyle. Del Valle’s plea today will ensure that he can no longer victimize any other investors.”
According to the Indictment, and other statements made in open court:
The Project Miami Scheme
Beginning in 2005, JOSEPH DEL VALLE, a co-conspirator (“CC-1”), and an employee of Vanquish Acquisition Partners LLC began soliciting investors for a real estate development project in the Little Havana neighborhood of Miami (referred to herein as “Project Miami”). Project Miami involved two high-rise buildings in which the bottom floors would house retail shops and the top floors would be residential condominiums. Project Miami was designed to provide affordable housing to middle-income individuals and included an arrangement for financing so that purchasers of the condominiums would receive government-subsidized mortgages. From 2005 through 2007, DEL VALLE, CC-1, and the employee obtained approximately $6.4 million from investors for Project Miami.
Prior to making any investments, investors were told that the investment was solely for Project Miami. Investors were provided with various materials that specified the investments were for Project Miami, and that DEL VALLE and his company would only take a 5 percent management fee. However, almost immediately after investors transferred funds for Project Miami, almost all of which were sent to banks in Manhattan, New York, DEL VALLE and CC-1 transferred amounts far greater than 5 percent to other bank accounts and began using the funds for other purposes, including investments in a wine magazine and for DEL VALLE’s personal use. For example, in October 2007, DEL VALLE used $30,000 of investor money in Europe for, among other things, hotels, restaurants, a cruise, and cash withdrawals. In total, DEL VALLE and CC-1 used more than $3 million for other investments or personal expenses.
When investors became suspicious and requested financial statements for their investments and a return of their money, DEL VALLE represented to investors in phone calls and e-mail communications that the investment funds were secure when, in fact, a large portion of the investors’ money had already been misappropriated and/or diverted to other uses. DEL VALLE also falsely told investors that financial statements were in the process of being prepared and would be mailed to them shortly, but in fact, DEL VALLE and CC-1 had not provided any financial information to the accountant responsible for the preparation of financial statements of the relevant entities.
The Project WT/Bistro, Project Chateau & Project Rioja Scheme
From 2009 through 2014, DEL VALLE conducted a second scheme in which he solicited investors to wire investments to various bank accounts for the purpose of investing in three purported investment projects, Project WT (later named Project Bistro), Project Rioja, and Project Chateau, all of which DEL VALLE controlled. According to DEL VALLE, Project WT/Bistro was created for the purpose of raising money to expand two restaurants, Project Chateau was created for the purpose of raising money to invest in the high-end segment of the hospitality industry, and Project Rioja was created for the purpose of raising money to invest in the high-end segment of the wine industry. DEL VALLE raised more than $2 million from investors for these projects.
Among other things, DEL VALLE falsely represented to investors that their money would be used solely to fund the specific projects in which the investors had decided to invest. However, almost immediately after investors transferred funds to bank accounts controlled by DEL VALLE, DEL VALLE withdrew money from the bank accounts (often through debit card purchases, ATM withdrawals, and wire transfers) and spent approximately all of the funds on restaurants, hotels, clothing, mortgage payments, and payments to DEL VALLE’s family members and his fiancée, among other things. In addition, to induce investors to invest money in the specific projects, DEL VALLE frequently sent investors multiple fabricated emails that purported to come from well-known chefs and businesspeople.
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DEL VALLE, 61, of Aventura, Florida, pled guilty to one count of conspiracy to commit wire fraud and two counts of wire fraud, both of which carry a maximum sentence of 20 years in prison; and one count of aggravated identity theft, which carries a mandatory minimum sentence of two years. 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. DEL VALLE will be sentenced May 10, 2016.
Mr. Bharara praised the work of the FBI.
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’s 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 Aimee Hector and Damian Williams are in charge of the prosecution.
Manhattan U.S. Attorney Announces Criminal Charges Against Bank Julius Baer of Switzerland with Deferred Prosecution Agreement Requiring Payment of $547 Million, as Well as Guilty Pleas of Two Julius Baer BankersRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Caroline D. Ciraolo, Acting Assistant Attorney General of the Justice Department’s Tax Division, and Richard Weber, Chief, Internal Revenue Service – Criminal Investigation, (“IRS-CI”), announced the filing of criminal charges against Bank Julius Baer & Co., Ltd. (“JULIUS BAER” or the “Company”), a financial institution headquartered in Zurich, Switzerland. JULIUS BAER is charged with conspiring with many of its U.S. taxpayer-clients and others to help U.S. taxpayers hide billions of dollars in offshore accounts from the United States Internal Revenue Service (the “IRS”) and to evade U.S. taxes on the income earned in those accounts.
Mr. Bharara also announced a deferred prosecution agreement with JULIUS BAER (the “Agreement”) under which the Company admits that it knowingly assisted many of its U.S. taxpayer-clients in evading their tax obligations under U.S. law. The admissions are contained in a detailed Statement of Facts attached to the Agreement. The Agreement requires JULIUS BAER to pay a total of $547 million by no later than February 9, 2016, including through a parallel civil forfeiture action also filed today in the Southern District of New York.
The criminal charge is contained in an Information (the “Information”) alleging one count of conspiracy to (1) defraud the IRS, (2) to file false federal income tax returns and (3) to evade federal income taxes. If JULIUS BAER abides by all of the terms of the Agreement, the Government will defer prosecution on the Information for three years and then seek to dismiss the charges.
In addition, two Julius Baer client advisers, DANIELA CASADEI and FABIO FRAZZETTO, pled guilty in Manhattan federal court today. CASADEI and FRAZZETTO were originally charged in 2011 and remained at large until February 2, 2016, when they each made initial appearances before the Honorable Gabriel W. Gorenstein, United States Magistrate Judge for the Southern District of New York.
CASADEI and FRAZZETTO each pled guilty to an Information (collectively, with the JULIUS BAER Information, the “Informations”) before U.S. District Judge Laura Taylor Swain charging them with conspiring with U.S. taxpayer-clients and others to help U.S. taxpayers hide their assets in offshore accounts and to evade U.S. taxes on the income earned in those accounts.
Manhattan U.S. Attorney Preet Bharara said: “Bank Julius Baer not only turned a blind eye to tax avoiders, but actually conspired with them to break the law. Together with our partners at the IRS, we will continue to prosecute financial institutions and individuals who facilitate tax evasion.”
Acting Assistant Attorney General Caroline D. Ciraolo said: “Today’s resolution with Bank Julius Baer and the guilty pleas entered by two bank employees reflect the department’s continued commitment to hold accountable those financial institutions who conspired with U.S. taxpayers to conceal assets abroad and evade U.S. tax obligations, as well as those individuals responsible for such crimes. The deferred prosecution agreement filed today makes it clear that there is a heavy price to pay for this conduct, and that there is a significant benefit in fully cooperating with the department.”
IRS Chief Richard Weber said: “In taking responsibility for their actions, Bank Julius Baer has agreed to cooperate and pay a substantial penalty for their role in circumventing offshore disclosure laws. The agreement – as well as the guilty pleas of client advisors Daniela Casadei and Fabio Frazzetto – sends a strong message to the international banking community as well as U.S. taxpayers who think they can outsmart the system by hiding their money in these international banks. The consequences of not reporting your foreign accounts and paying the taxes you owe will be significant for those who do not heed the warnings that agreements like this yield.”
According to the Informations, statements made during the proceedings today, and other documents filed in Manhattan federal court, including the Statement of Facts to the Agreement:
The Offense Conduct
From at least the 1990s through 2009, JULIUS BAER helped many of its U.S. taxpayer-clients evade their U.S. tax obligations, file false federal tax returns with the IRS, and otherwise hide accounts held at JULIUS BAER from the IRS (hereinafter, “undeclared accounts”). JULIUS BAER did so by opening and maintaining undeclared accounts for U.S. taxpayers and by allowing third-party asset managers to open undeclared accounts for U.S. taxpayers at JULIUS BAER. CASADEI and FRAZZETTO, bankers who worked as client advisers at JULIUS BAER, directly assisted various U.S. taxpayer-clients in maintaining undeclared accounts at JULIUS BAER in order to evade their obligations under United States law. At various times, CASADEI, FRAZZETTO, and others advised those U.S. taxpayer-clients that their accounts at JULIUS BAER would not be disclosed to the IRS because JULIUS BAER had a long tradition of bank secrecy and no longer had offices in the U.S., making JULIUS BAER less vulnerable to pressure from U.S. law enforcement authorities than other Swiss banks with a presence in the U.S.
In furtherance of the scheme to help U.S. taxpayers hide assets from the IRS and evade taxes, JULIUS BAER undertook, among other actions, the following:
- Entering into “code word agreements” with U.S. taxpayer-clients under which JULIUS BAER agreed not to identify the U.S. taxpayers by name within the bank or on bank documents, but rather to identify the U.S. taxpayers by code name or number, in order to reduce the risk that U.S. tax authorities would learn the identities of the U.S. taxpayers.
- Opening and maintaining accounts for many U.S. taxpayer-clients held in the name of non-U.S. corporations, foundations, trusts, or other legal entities (collectively, “structures”) or non-U.S. relatives, thereby helping such U.S. taxpayers conceal their beneficial ownership of the accounts.
JULIUS BAER was aware that many U.S. taxpayer-clients were maintaining undeclared accounts at JULIUS BAER in order to evade their U.S. tax obligations, in violation of U.S. law. In internal JULIUS BAER correspondence, undeclared accounts held by U.S. taxpayers were at times referred to as “black money,” “non W-9,” “tax neutral,” “unofficial,” or “sensitive” accounts.
JULIUS BAER also advised its bankers to take certain steps to avoid scrutiny from U.S. authorities when travelling to the U.S., as well as steps to avoid U.S. law enforcement identifying JULIUS BAER clients. In a memo entitled “U.S. Clients Do’s & Don’ts,” circulated internally in 2006, a JULIUS BAER employee provided client advisers with advice regarding travel to the U.S., including:
- “At Immigration . . . When asked by Officer what will you do while in the USA, say Business and of course some leisure, trying to take some time to enjoy your beautiful country. Proud government employees usually love this type of statement.One can throw in skydiving or another fun sport/activity.This tends to shift the questioning away from the business purpose to the ‘fun time’ part of the trip (carrying a tennis racket also puts the emphasis on “fun and games,” and not on business).”
- "In regard to communicating while in the U.S.:“Only use mobile phone[s] registered in and operating from Switzerland.Avoid phone calls from hotel to clients.It is recommended to purchase a telephone calling card from the post office, grocery stores, or electronic shops.This allows you to use practically any phone with no specific link left behind.The best is to pay for the calling card in cash.For ex: a 400 minutes local calling card costs less than $50, but the rates can vary.Most cards can also be used to call anywhere abroad.”
At its high-water mark in 2007, JULIUS BAER had approximately $4.7 billion in assets under management relating to approximately 2,589 undeclared accounts held by U.S. taxpayer-clients. From 2001 through 2011, JULIUS BAER earned approximately $87 million in profit on approximately $219 million gross revenues from its undeclared U.S. taxpayer accounts, including accounts held through structures.
Julius Baer’s Blocked Effort to Self-Report, Acceptance of Responsibility, and
Cooperation in the Government Investigation
Notwithstanding its lucrative criminal conduct, by at least 2008, JULIUS BAER began to implement institutional policy changes to cease providing assistance to U.S. taxpayers in violating their U.S. legal obligations. For example, by November 2008, the Company began an “exit” plan for U.S. client accounts that lacked evidence of U.S. tax compliance. In that same month, JULIUS BAER imposed a prohibition on opening accounts for any U.S. clients without an IRS Form W-9.
Additionally, in November 2009, before JULIUS BAER became aware of any U.S. investigation into its conduct, JULIUS BAER decided proactively to approach U.S. law enforcement authorities regarding its conduct relating to U.S. taxpayers. Prior to self-reporting to the United States Department of Justice, JULIUS BAER notified its regulator in Switzerland of its intention to contact U.S. law enforcement authorities. This Swiss regulator requested that JULIUS BAER not contact U.S. authorities in order not to prejudice the Swiss government in any bilateral negotiations with the U.S. on tax-related matters. Accordingly, JULIUS BAER did not, at that time, self-report to U.S. law enforcement authorities.
After ultimately engaging with U.S. authorities, JULIUS BAER has taken exemplary actions to demonstrate acceptance and acknowledgement of responsibility for its conduct. JULIUS BAER conducted a swift and robust internal investigation, and furnished the U.S. Government with a continuous flow of unvarnished facts gathered during the course of that internal investigation. As part of its cooperation, JULIUS BAER also, among other things, (1) successfully advocated in favor of a decision provided by the Swiss Federal Council in April 2012 to allow banks under investigation by the United States Department of Justice to legally produce employee and third-party information to the Department, and subsequently produced such information immediately upon issuance of that decision; and (2) encouraged certain employees, including FRAZZETTO and CASADEI, to accept responsibility for their participation in the conduct at issue and cooperate with the ongoing investigation.
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CASADEI, 52, a Swiss citizen, and FRAZZETTO, 42, an Italian and Swiss citizen, each pled guilty to one count of conspiracy to defraud the IRS, to evade federal income taxes, and to file false federal income tax returns. CASADEI and FRAZZETTO each face a maximum sentence of five years in prison. The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentences imposed on the defendants will be determined by the judge.
CASADEI and FRAZZETTO are each scheduled to be sentenced before Judge Swain on August 12, 2016.
Mr. Bharara praised the outstanding investigative work of IRS-CI, and thanked the Justice Department’s Tax Division for their significant assistance in the investigation. Mr. Bharara also thanked the Department of Homeland Security for their assistance with the case.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Jason H. Cowley and Sarah E. Paul are in charge of the prosecution.
Father and Son Found Guilty in Manhattan Federal Court in Connection with Multimillion-Dollar Vending Machine “Business Opportunity” SchemeRead the Press Release
Scheme Victimized More Than 1,000 Individuals Throughout the United States
Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division and U.S. Attorney Preet Bharara of the Southern District of New York, announced that Kenneth Levin, the owner of a company that purported to sell lucrative vending machine “business opportunities,” and his son and manager at the company, Taylor Levin, were found guilty yesterday for their participation in a nearly $11 million scheme that victimized at least 1,300 consumers across the country. Kenneth Levin and Taylor Levin were convicted after a three-week jury trial before the Honorable Katherine B. Forrest. The defendants were arrested in March 2015 along with five other co-conspirators who have all pleaded guilty.
“Kenneth and Taylor Levin preyed upon the entrepreneurial resolve of thousands of victims across the country, deceiving them with promises of business assistance and giant windfalls, when instead they were duping the victims out of over $10 million,” said Manhattan U.S. Attorney Bharara. “This three-week trial and the unanimous verdict made clear that the business opportunities Kenneth and Taylor Levin were actually selling their victims was for themselves alone. I want to thank the U.S. Postal Inspection Service and the Consumer Protection Branch of the Justice Department for their assistance in this prosecution.”
“The defendants convicted in this case twisted the American entrepreneurial spirit to their advantage, luring consumers with the prospect of starting their own business and being their own boss,” said Principal Deputy Assistant Attorney General Mizer, head of the Justice Department’s Civil Division. “Justice Department prosecutors will continue to team together and work with law enforcement to ensure that the crime of business opportunity fraud, in all of its forms, is stopped and perpetrators are prosecuted.”
As established by the evidence at trial:
From January 2005 to December 2011, Kenneth Levin and Taylor Levin and their co-conspirators perpetrated a scheme to defraud consumers by making material misrepresentations in an effort to induce those consumers to invest thousands of dollars in purported vending machine “business opportunities.” Through a company located in Manhattan, New York (Company-1) and its successor companies (together, the Business Opportunity Companies), the defendants and other employees falsely promised customers that if they purchased packages of five or 10 vending machines, the customers would be provided access to established, high-profit locations for the machines and would be connected with experienced “locators,” who would facilitate placing the vending machines in those pre-determined locations.
The defendants and other employees further falsely promised to provide training and ongoing customer assistance on how to operate a successful vending machine business and misled customers about the features of the vending machines – including purposefully concealing the fact that the machines were manually operated and accepted only exact change, rather than automatic machines that accept bills and provide change. Despite the defendants’ claims, there were no pre-determined locations available, locators were inexperienced and ill-equipped to find profitable locations for the vending machines and the Business Opportunity Companies delivered little or no follow-up service or assistance to their customers.
The defendants also misled prospective customers about the profits customers could earn from the machines. Prospective customers were assured that they would earn significant profits from the vending machines in a relatively short period of time. Customers were also misled into believing that certain employees of the Business Opportunity Companies personally owned vending machines that were profitable. The defendants and their co-conspirators made these assertions knowing that there were scores of dissatisfied customers who, rather than making any profit, had lost their entire investment. Through their scheme, the Business Opportunity Companies obtained nearly $11 million from more than 1,300 customers throughout the United States.
The Business Opportunity Companies also encouraged prospective customers to contact the locators to verify that the purported locations were available. The locators were directed to echo the false statements made to customers and affirm that high-traffic and therefore profitable, locations had already been found and were waiting in the prospective customers’ respective geographic areas. In reality, the locators who worked with the Business Opportunity Companies did not have high-traffic locations or routes waiting in the prospective customer’s area. The locators had no special skills, tools, or expertise in finding locations and generally placed consumers’ machines wherever they could, often in businesses that had not consented to housing the machines or that soon demanded that the machines be removed. The vending machines generated little money and customers lost nearly all, if not all, of their investments.
Kenneth Levin, the founder and President of the Business Opportunity Companies, operated and controlled the Business Opportunity Companies’ day-to-day operations. To acquire customers, the Business Opportunity Companies placed advertisements in newspapers throughout the country, claiming that the Business Opportunity Companies had high-profit locations available for the placement of vending machines. Prospective customers responding to the advertisements were sent misleading promotional materials and also spoke by telephone with representatives of the Business Opportunity Companies, including Kenneth Levin’s son, Taylor Levin. Both defendants made various misrepresentations as described above to induce customers to buy the vending machine “business opportunity.” The defendants further concealed from prospective customers the fact that the Business Opportunity Companies received numerous complaints from customers about the lack of profitability of the vending machine “business opportunities” they were selling and the locators’ complete failure to place the vending machines in profitable locations. In an effort to conceal customer complaints from prospective customers, the Business Opportunity Companies changed their name regularly, both to avoid association with previous complaints, and to evade a federal law requiring them to provide prospective customers with a list of recent customers.
* * *
Kenneth Levin, 69, and Taylor Levin, 34, both of Manhattan, were found guilty of all three counts in the Indictment: one count of conspiracy to commit mail fraud and wire fraud and one count each of mail fraud and wire fraud. Each count carries a maximum sentence of 20 years in prison. Kenneth Levin’s sentencing is scheduled for April 1, 2016, and Taylor Levin’s sentencing is scheduled for April 15, 2016, both before Judge Forrest. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of Kenneth Levin and Taylor Levin will be determined by a Judge.
The five other individuals arrested along with Kenneth Levin and Taylor Levin on March 5, 2015, pleaded guilty for their respective roles in this scheme.
Sears Hobbs pleaded guilty on Jan. 4, 2016, and is scheduled to be sentenced on March 11, 2016.
James Conley pleaded guilty on Oct. 22, 2015, and is scheduled to be sentenced on Feb. 11, 2016.
Marcel Harris pleaded guilty on Oct. 26, 2015, and is scheduled to be sentenced on Feb. 26, 2016.
Stephen Friedman pleaded guilty on Oct. 27, 2015, and is scheduled to be sentenced on Feb. 26, 2016.
Jonathan Campbell pleaded guilty on Sept. 17, 2015, and is scheduled to be sentenced on Feb. 12, 2016.
U.S. Attorney Bharara praised the United States Postal Inspection Service for their outstanding work in the investigation. U.S. Attorney Bharara also thanked the Consumer Protection Branch of the Justice Department’s Civil Division for its valuable contributions to this case.
This matter is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Janis Echenberg and Jennifer Beidel are in charge of the case.
Father and Son Found Guilty in Manhattan Federal Court in Connection with Multimillion-Dollar Vending Machine “Business Opportunity” SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Benjamin C. Mizer, the Principal Deputy Assistant Attorney General of the Justice Department’s Civil Division, announced that KENNETH LEVIN, the owner of a company that purported to sell lucrative vending machine “business opportunities,” and his son and manager at the company, TAYLOR LEVIN, were found guilty yesterday for their participation in a nearly $11 million scheme that victimized at least 1,300 consumers across the country. KENNETH LEVIN and TAYLOR LEVIN were convicted after a three-week jury trial before the Honorable Katherine B. Forrest. The defendants were arrested in March 2015 along with five other co-conspirators who have all pled guilty.
Manhattan U.S. Attorney Preet Bharara said: “Kenneth and Taylor Levin preyed upon the entrepreneurial resolve of thousands of victims across the country, deceiving them with promises of business assistance and giant windfalls, when instead they were duping the victims out of over ten million dollars. This three-week trial and the unanimous verdict made clear that the business opportunities Kenneth and Taylor Levin were selling to their victims were actually for themselves alone. I want to thank the U.S. Postal Inspection Service and the Consumer Protection Branch of the Justice Department for their assistance in this prosecution.”
Principal Deputy Assistant Attorney General Benjamin C. Mizer said: “The defendants convicted in this case twisted the American entrepreneurial spirit to their advantage, luring consumers with the prospect of starting their own business and being their own boss. Justice Department prosecutors will continue to team together and work with law enforcement to ensure that the crime of business opportunity fraud, in all of its forms, is stopped and perpetrators are prosecuted.”
As established by the evidence at trial:
From January 2005 to December 2011, KENNETH LEVIN and TAYLOR LEVIN and their co-conspirators perpetrated a scheme to defraud consumers by making material misrepresentations in an effort to induce those consumers to invest thousands of dollars in purported vending machine “business opportunities.” Through a company located in Manhattan, New York (“Company-1”), and its successor companies (together, the “Business Opportunity Companies”), the defendants and other employees falsely promised customers that if they purchased packages of five or 10 vending machines, the customers would be provided access to established, high-profit locations for the machines, and would be connected with experienced “locators,” who would facilitate placing the vending machines in those pre-determined locations. The defendants and other employees further falsely promised to provide training and ongoing customer assistance on how to operate a successful vending machine business, and misled customers about the features of the vending machines – including purposefully concealing the fact that the machines were manually operated and accepted only exact change, rather than automatic machines that accept bills and provide change. Despite the defendants’ claims, there were no pre-determined locations available, locators were inexperienced and ill-equipped to find profitable locations for the vending machines, and the Business Opportunity Companies delivered little or no follow-up service or assistance to their customers.
The defendants also misled prospective customers about the profits customers could earn from the machines. Prospective customers were assured that they would earn significant profits from the vending machines in a relatively short period of time. Customers were also misled into believing that certain employees of the Business Opportunity Companies personally owned vending machines that were profitable. The defendants and their co-conspirators made these assertions knowing that there were scores of dissatisfied customers who, rather than making any profit, had lost their entire investment. Through their scheme, the Business Opportunity Companies obtained nearly $11 million from more than 1,300 customers throughout the United States.
The Business Opportunity Companies also encouraged prospective customers to contact the locators to verify that the purported locations were available. The locators were directed to echo the false statements made to customers and affirm that high-traffic, and therefore profitable, locations had already been found and were waiting in the prospective customers’ respective geographic areas. In reality, the locators who worked with the Business Opportunity Companies did not have high-traffic locations or routes waiting in the prospective customers’ areas. The locators had no special skills, tools, or expertise in finding locations and generally placed consumers’ machines wherever they could, often in businesses that had not consented to housing the machines or that soon demanded that the machines be removed. The vending machines generated little money and customers lost nearly all, if not all, of their investments.
KENNETH LEVIN, the founder and President of the Business Opportunity Companies, operated and controlled the Business Opportunity Companies’ day-to-day operations. To acquire customers, the Business Opportunity Companies placed advertisements in newspapers throughout the country, claiming that the Business Opportunity Companies had high-profit locations available for the placement of vending machines. Prospective customers responding to the advertisements were sent misleading promotional materials and also spoke by telephone with representatives of the Business Opportunity Companies, including KENNETH LEVIN’s son, TAYLOR LEVIN. Both defendants made various misrepresentations as described above to induce customers to buy the vending machine “business opportunity.” The defendants further concealed from prospective customers the fact that the Business Opportunity Companies received numerous complaints from customers about the lack of profitability of the vending machine “business opportunities” they were selling and the locators’ complete failure to place the vending machines in profitable locations. In an effort to conceal customer complaints from prospective customers, the Business Opportunity Companies changed their names regularly, both to avoid association with previous complaints, and to evade a federal law requiring them to provide prospective customers with a list of recent customers.
* * *
KENNETH LEVIN, 69, and TAYLOR LEVIN, 34, both of Manhattan, New York, were found guilty of all three counts in the Indictment: one count of conspiracy to commit mail fraud and wire fraud, and one count each of mail fraud and wire fraud. Each count carries a maximum sentence of 20 years in prison. KENNETH LEVIN’s sentencing is scheduled for April 1, 2016, and TAYLOR LEVIN’s sentencing is scheduled for April 15, 2016, both before Judge Forrest. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of KENNETH LEVIN and TAYLOR LEVIN will be determined by the court.
The five other individuals arrested along KENNETH LEVIN and TAYLOR LEVIN on March 5, 2015, have pled guilty before Judge Forrest for their respective roles in this scheme.
Sears Hobbs pled guilty on January 4, 2016, and is scheduled to be sentenced on March 11, 2016.
James Conley pled guilty on October 22, 2015, and is scheduled to be sentenced on February 11, 2016.
Marcel Harris pled guilty on October 26, 2015, and is scheduled to be sentenced on February 26, 2016.
Stephen Friedman pled guilty on October 27, 2015, and is scheduled to be sentenced on February 26, 2016.
Jonathan Campbell pled guilty on September 17, 2015, and is scheduled to be sentenced on February 12, 2016.
Mr. Bharara praised the United States Postal Inspection Service (“USPIS”) for their outstanding work in the investigation. Mr. Bharara also thanked the Consumer Protection Branch of the Justice Department’s Civil Division for its valuable contributions to this case.
This matter is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Janis Echenberg and Jennifer Beidel are in charge of the case.
Michigan Art Dealer Arrested and Charged with Fraud for Selling Dozens of Forged Artworks over Five YearsRead the Press Release
Preet Bharara, United States Attorney for the Southern District of New York, and Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the arrest of ERIC IAN HORNAK SPOUTZ, a/k/a “Robert Chad Smith,” a/k/a “John Goodman,” a/k/a “James Sinclair,” on charges of wire fraud in connection with the sale of dozens of forged artworks by renowned American artists, such as Willem De Kooning, Franz Kline, and Joan Mitchell. SPOUTZ was arrested in Los Angeles today and will be presented before U.S. Magistrate Judge Gail Standish of the Central District of California this afternoon.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Eric Spoutz used false and fictitious provenance to peddle his forged artwork to unsuspecting buyers, claiming they were masterpieces from Willem De Kooning, Franz Kline and Joan Mitchell. Our Office has a long history of investigating – and prosecuting – those who try to contaminate the art world with fraudulent artwork. Thanks to the outstanding investigative work by the FBI, Spoutz’s alleged forgery mill is no longer in business.”
FBI Assistant Director-in-Charge Diego Rodriguez said: “As alleged, Eric Spoutz created an entire world of fiction to make a profit—from the fraudulent paintings he was selling, to the phony letters and receipts for provenance. The only real thing in this situation seems to be the financial losses the victims have incurred for purchasing what they thought were true works of art, whether for investment purposes or personal enjoyment.”
According to the allegations contained in the Complaint[1] and other documents in the public record, and statements made in court:
Between 2010 and March 2015, SPOUTZ repeatedly sold works of art he falsely claimed were by well-known artists, using forged documents to convince buyers of the authenticity of those works. During the course of the scheme, SPOUTZ sold dozens of fraudulent works of art – which he attributed to, among others, Willem De Kooning, Franz Kline, and Joan Mitchell – through various channels, including auction houses and on EBay.
SPOUTZ was publicly accused of selling forged works of art as early as 2005, after which he began selling them under various aliases, particularly “Robert Chad Smith” and “John Goodman.” To deceive his victims into believing the works of art were authentic, SPOUTZ created and provided forged receipts, bills of sale, and letters from deceased attorneys and other individuals. These documents falsely indicated that SPOUTZ, in the guise of one of his false identities, had inherited or purchased dozens of works by these artists.
Despite his efforts to create false histories for the artwork, investigators identified multiple inconsistencies and errors in SPOUTZ’s forged provenance documents. Many of the purported transactions took place before SPOUTZ was born, and the forged letters included non-existent addresses both for the purported sender and various parties referenced as sources of the artworks. SPOUTZ also consistently used a single distinctive typesetting when forging documents purportedly authored by entirely different art galleries in different decades regarding unrelated transactions. In one instance, investigators located the original letter used by SPOUTZ as a model for one of his forgeries in a collection at a private university, which holds a collection of letters from the individual whose identity SPOUTZ used to create a false story of inheritance.
* * *
SPOUTZ, 32, of Mount Clemens, Michigan, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.
Unknown victims may have purchased artwork from SPOUTZ unwittingly under provenance documents using historical names such as “Betty Parsons Gallery,” “Larry Larkin,” “Henry Hecht,” and “Julius or Jay Wolf.” If you believe you are a victim and purchased a fraudulent painting, please call the New York Art Crime Team at 212-384-1000, attention Special Agent Chris McKeogh or Special Agent Meridith Savona.
The case is being prosecuted by the Office’s Money Laundering and Asset Forfeiture Unit. Assistant United States Attorney Andrew C. Adams 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 set forth below constitute only allegations, and every fact described should be treated as an allegation.
Manhattan U.S. Attorney Announces Conviction of Jose Luis Gracesqui on Murder-For-Hire ChargesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, James Hunt, the Special Agent in Charge of the New York Division of the Drug Enforcement Administration (“DEA”), William J. Bratton, the Police Commissioner of the City of New York (“NYPD”), and Joseph D’Amico, Superintendent of the New York State Police (“NYSP”), announced that JOSE LUIS GRACESQUI was found guilty Tuesday of conspiracy to commit murder-for-hire, murder-for-hire, and murder in connection with a narcotics conspiracy for his role in the murder of a 28-year old Manhattan man in 1999. GRACESQUI was convicted after a three-week jury trial before U.S. District Judge P. Kevin Castel.
Manhattan U.S. Attorney Preet Bharara said: “Thanks to the efforts of the dedicated agents, detectives, and prosecutors who relentlessly pursued justice, this cold-case murder of an innocent 28-year old man has now been solved and prosecuted. We hope seeing justice done brings some measure of peace to Richard Diaz’s family.”
DEA Special-Agent-in-Charge James Hunt said: “This conviction exemplifies the significant role violence plays in the infrastructure of drug trafficking. I commend the New York Drug Enforcement Task Force and the U.S. Attorney's Office Southern District of New York for their diligent work throughout this three week jury trial.”
NYPD Commissioner William J. Bratton said: “It is our hope that this conviction brings some level of comfort to the victim’s family. I commend the efforts of the NYPD investigators and our law enforcement partners who worked to bring this individual to justice.”
According to the evidence introduced at trial, other proceedings in this case, and documents previously filed in Manhattan federal court:
JOSE LUIS GRACESQUI, a/k/a “Luis Perez,” a/k/a “Ramon Ortiz,” a/k/a “Onel Colon,” a/k/a “Muffler,” was a member of a crew who committed violent robberies, kidnappings, and beatings of drug dealers. In the summer of 1999, GRACESQUI was hired by a major drug dealer in upper Manhattan to kill one of the drug dealer’s customers (“Intended Victim-1”) after Intended Victim-1 and a number of his associates stole heroin from the drug dealer.
On the night of July 19, 1999, GRACESQUI and a member of his crew saw Intended Victim-1 in a car with another person and began following Intended Victim-1 through Manhattan. When the car with Intended Vicitm-1 stopped at a red light, GRACESQUI got out of the car in which he had been, approached the car with Intended Victim-1, and began shooting. The shots hit both Intended Victim-1 and the driver of the car, Richard Diaz. Richard Diaz was able to drive a short distance to the Henry Hudson Parkway, until Diaz lost consciousness and died. Intended Victim-1 sustained injuries but did not die.
* * *
JOSE LUIS GRACESQUI, 45, of Queens, faces a mandatory minimum sentence of life in prison. The 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. Sentencing is scheduled for June 10, 2016, before Judge Castel.
Mr. Bharara praised the investigative work of the DEA New York Drug Enforcement Task Force, which comprises agents and officers of the DEA, NYPD, and the New York State Police.
This case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Laurie A. Korenbaum, Brendan F. Quigley, and Rebekah Donaleski are in charge of the prosecution.
Executive Director of New York City Non-Profit Organization and His Wife Each Charged with Corruption OffensesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Mark G. Peters, Commissioner of the New York City Department of Investigation (“DOI”), announced today the filing of criminal charges against KWAME INSAIDOO, the executive director of United Block Association (“UBA”), a non-profit organization, along with his wife ROXANNA PEARSON, a/k/a “Roxanna Insaidoo,” with fraud and embezzlement charges involving UBA’s contracts to operate senior centers for New York City and the misappropriation of over $953,875. INSAIDOO and PEARSON were arrested this morning in Bay Shore, New York, and are scheduled to appear before U.S. Magistrate Judge Gabriel Gorenstein in Manhattan federal court later today.
U.S. Attorney Preet Bharara said: “As alleged, an executive director of a non-profit organization, with the assistance of his wife, abused his position of trust as a provider of public services to enrich himself and his family. Kwame Insaidoo and Roxanna Pearson allegedly diverted close to a million dollars in public funds designed to assist our city’s elderly and spent it on themselves. I thank our partners in this investigation for their work in rooting out public corruption.”
Commissioner Mark G. Peters said: “The defendants stole food from the mouths of New York's seniors, diverting almost a million dollars from programs designed to provide meals and services to the elderly, according to the criminal complaint. Our investigation revealed systemic vulnerabilities in the Department for the Aging's practices that we are now working with the agency to correct so that City services get to New Yorkers in need – not to crooks who prey on them. I thank the U.S. Attorney for his continued partnership in these investigations.” According to the allegations contained in the Complaint[1] unsealed today in Manhattan federal court and publicly available documents:
UBA is a non-profit organization headquartered in New York, New York, that was controlled by INSAIDOO. UBA has agreements with New York City’s Department for the Aging (“DFTA”) to operate and provide healthy meals and programming for four senior centers in Upper Manhattan. UBA had been awarded contracts with New York City to operate each of these senior centers. These contracts are partly federally funded. Since in or about July 2008, DFTA had paid UBA more than $11,682,213 for purported services performed under those agreements.
In connection with the investigation, DOI auditors discovered, among other things, numerous transfers involving a UBA bank account that had never been disclosed to the City and was involved in transfers of substantial funds that were embezzled by INSAIDOO and PEARSON, including through a shell corporation they had set up. INSAIDOO never disclosed this UBA account, or several other UBA bank accounts, to DFTA in violation of the contract requirements as well as requirements mandated by the City. DOI’s auditors also found evidence of various financial irregularities that potentially had an effect on UBA’s ability to provide services under the City’s contracts.
UBA over-reported and over-billed the City for its supposed purchases of food supplies at the same time INSAIDOO was embezzling funds from UBA. At times, UBA appears to have over-reported total expenses of its four senior centers by more than 500%.
INSAIDOO abused his authority as UBA’s Executive Director and, with the assistance of his wife, PEARSON, caused the misappropriation of over $953,875 to himself, PEARSON, and others. INSAIDOO and PEARSON used these funds to pay for personal expenses, including the mortgage for their Long Island residence, as well as its utilities, the purchase of a late-model luxury sedan, and clothes, insurance, and loan payments, among other things.
PEARSON was purportedly a consultant to UBA until 2012 when she was terminated because her relationship with UBA was in violation of the City’s and DFTA’s anti-nepotism polices. However, INSAIDOO continued to authorize compensation to PEARSON even after UBA terminated her.
INSAIDOO, 59, and PEARSON, 62, both of Bay Shore, Long Island, are each charged with conspiracy to commit wire fraud, wire fraud, embezzlement from a federally funded program, and money laundering, each of which carries a maximum penalty of 20 years in prison. Each is also charged with conspiracy to embezzle from a federally funded program, which carries a maximum penalty of five years in prison.
The maximum potential sentences in these cases are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.
U.S. Attorney Bharara praised the work of DOI and the Criminal Investigators of the United States Attorney’s Office for the Southern District of New York.
The case is being prosecuted by the Office’s General Crimes Unit. Assistant U.S. Attorney Eli J. Mark 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 below constitute only allegations, and every fact described should be treated as an allegation.
Seven Charged in Manhattan Federal Court with Crimes Related to ATM Skimming and Counterfeit and Stolen Credit CardsRead the Press Release
Preet Bharara, United States Attorney for the Southern District of New York, Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and William J. Bratton, Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of an Indictment in Manhattan federal court charging GJETO PRELAJ, a/k/a “Bibi,” ERBI KAU, a/k/a “Mafia,” BLEDAR BATSKA, a/k/a “Alex,” NIKOLIN DEDUSHI, a/k/a “Niko,” ENIS MUSTAFA, and MEHMET BOGIC, a/k/a “Bogi,” with access device fraud and aggravated identity theft for their alleged roles in schemes to steal customer bank account information and to use counterfeit/stolen debit and credit cards in New York and Nevada. PRELAJ, KAU, BATSKA, DEDUSHI, and VICTOR TOMESCU were also charged with possessing, using, and trafficking devices that used “skimming” technology to secretly record the debit card and personal identification numbers of customers who used automated teller machines (“ATMs”). Such devices can be employed to steal hundreds of card numbers of ATM users, which can be encoded on new counterfeit cards and used to make thousands of dollars of fraudulent charges or withdrawals.
All the defendants were arrested and taken into custody earlier this morning. The case has been assigned to U.S. District Judge Richard J. Sullivan. PRELAJ, KAU, BATSKA, MUSTAFA, TOMESCU, and BOGIC was presented before Judge Sullivan in Manhattan federal court this afternoon. DEDUSHI, who was arrested in Las Vegas, Nevada, was presented in the U.S. District Court for the District of Nevada in Las Vegas.
Manhattan U.S. Attorney Preet Bharara said: “Today, we arrested seven defendants who allegedly stole debit and credit card numbers using sophisticated skimming devices installed on ATMs, and then used that information to defraud victims out of thousands of dollars. I want to thank the FBI, NYPD, as well as the Joint Organized Crime Task Force and FBI-NYPD Financial Cyber Crimes Taskforce, for their excellent work in this investigation.”
FBI Assistant Director-in-Charge Diego Rodriguez said: “As alleged today, the defendants participated in a plot to steal proprietary financial information from their victims. Criminals who turn a quick profit in these types of schemes exploit and manipulate the very technology we depend on to streamline the banking process. Furthermore, this system of new-age thievery has the ability to cause considerable losses to banks and their clientele. The FBI is serious about protecting banks and bank customers from the nefarious actions of cyber criminals and transnational organized crime groups who are known to engage in this type of activity. We urge the public to visit our website at www.fbi.gov for tips on how to avoid being victimized by skimming.”
Police Commissioner William J. Bratton said: “Identity theft is a crime that often has an ongoing impact on unwitting victims who are left to piece their financial lives back together. As alleged, the individuals named in this indictment engaged in a type of criminal activity that affects not only their direct victims, but financial systems as well, through the use of skimming device technology and the counterfeiting of credit cards. I commend the well-coordinated work of the investigators assigned to this case and our many law enforcement partners in dismantling this operation.”
According to the allegations in the Indictment[1] unsealed today in Manhattan federal court:
From January 2015 through December 2015, PRELAJ, KAU, BATSKA, DEDUSHI, and MUSTAFA conspired to, among other things, place skimming devices on ATMs in Las Vegas, which can be used to surreptitiously record the numbers of cards that are used in the ATM by reading the information contained on the cards’ magnetic strips. For example, on September 2, 2015, KAU removed a skimming device that was installed on an ATM in a gas station in Las Vegas. On the morning of September 12, 2015, BATSKA installed at least one skimming device on ATMs in the business center of a hotel in Las Vegas, which was later removed by KAU on the evening of the same day.
The conspiracy also involved producing and trafficking in counterfeit debit cards created with information stolen by skimming devices, and using those cards to withdraw money fraudulently from victims’ bank accounts. For example, on August 18, 2015, PRELAJ and KAU used counterfeit debit cards at an ATM in Manhattan. Also, on September 10, 2015, MUSTAFA used at least one counterfeit debit card to withdraw almost $1,000 in cash fraudulently from an ATM at a gas station in Las Vegas. In addition, on October 24, 2015, DEDUSHI mailed a magnetic card reader and writer from Las Vegas to PRELAJ in the Bronx, New York to be used to produce counterfeit cards.
In January 2015, PRELAJ and KAU sold a skimming device in Queens, New York, in exchange for $6,000 in a transaction that was brokered by TOMESCU. Furthermore, from November 2015 through December 2015, PRELAJ and BATSKA fraudulently obtained thousands of dollars of merchandise at department stores in Manhattan by using at least one credit card that had been stolen from a victim by BOGIC.
Finally, PRELAJ, KAU, BATSKA, DEDUSHI, MUSTAFA, and BOGIC were charged with aggravated identity theft for transferring, possessing, and using other persons’ debit and credit card numbers and associated personal identification numbers in connection with the felony crimes described above.
* * *
Attached are charts containing the charges against the defendants and the maximum penalties they face, as well as the defendants’ ages and residences. The statutory maximum sentences 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 Joint Organized Crime Task Force and FBI-NYPD Financial Cyber Crimes Task Force. He also thanked the FBI’s Las Vegas Field Office, the Las Vegas Metropolitan Police Department, the United States Postal Inspection Service, and U.S. Customs and Border Protection for their assistance throughout the investigation.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Robert Allen and Sagar K. Ravi are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty
###
United States v. Gjeto Prelaj, et al.
COUNT
CHARGE
DEFENDANTS
MAXIMUM PENALTIES
1
Conspiracy to Commit Access Device Fraud
(18 U.S.C. § 1029(b)(2))
GJETO PRELAJ, a/k/a “Bibi”
ERBI KAU, a/k/a “Mafia”
BLEDAR BATSKA, a/k/a “Alex”
NIKOLIN DEDUSHI, a/k/a “Niko”
ENIS MUSTAFA
Seven-and-a-half years in prison
2
Access Device Fraud —
Producing, Using, and Trafficking in Counterfeit Access Devices
(18 U.S.C. §§ 1029(a)(1) and 2)
GJETO PRELAJ, a/k/a “Bibi”
ERBI KAU, a/k/a “Mafia”
BLEDAR BATSKA, a/k/a “Alex”
NIKOLIN DEDUSHI, a/k/a “Niko”
ENIS MUSTAFA
10 years in prison
3
Access Device Fraud —
Fifteen and More Counterfeit and Unauthorized Access Devices
(18 U.S.C. §§ 1029(a)(3) and 2)
GJETO PRELAJ, a/k/a “Bibi”
ERBI KAU, a/k/a “Mafia”
BLEDAR BATSKA, a/k/a “Alex”
NIKOLIN DEDUSHI, a/k/a “Niko”
10 years in prison
4
Access Device Fraud —
Device-Making Equipment
(18 U.S.C. §§ 1029(a)(4) and 2)
GJETO PRELAJ, a/k/a “Bibi”
ERBI KAU, a/k/a “Mafia”
VICTOR TOMESCU
15 years in prison
5
Access Device Fraud —
Device-Making Equipment
(18 U.S.C. §§ 1029(a)(4) and 2)
GJETO PRELAJ, a/k/a “Bibi”
ERBI KAU, a/k/a “Mafia”
BLEDAR BATSKA, a/k/a “Alex”
NIKOLIN DEDUSHI, a/k/a “Niko”
15 years in prison
6
Access Device Fraud — Access Devices Issued to Another Person
(18 U.S.C. §§ 1029(a)(5) and 2)
GJETO PRELAJ, a/k/a “Bibi”
BLEDAR BATSKA, a/k/a “Alex”
MEHMET BOGIC, a/k/a “Bogi”
15 years in prison
7
Aggravated Identity Theft (18 U.S.C. §§ 1028A(a)(1) & (b), and 2)
GJETO PRELAJ, a/k/a “Bibi”
ERBI KAU, a/k/a “Mafia”
BLEDAR BATSKA, a/k/a “Alex”
NIKOLIN DEDUSHI, a/k/a “Niko”
ENIS MUSTAFA
MEHMET BOGIC, a/k/a/ “Bogi”
Mandatory minimum: two years in prison, consecutive to any other sentence
DEFENDANT
RESIDENCE
AGE
GJETO PRELAJ, a/k/a “Bibi”
Bronx, New York
39
ERBI KAU, a/k/a “Mafia”
Queens, New York
27
BLEDAR BATSKA, a/k/a “Alex”
Queens, New York
39
NIKOLIN DEDUSHI, a/k/a “Niko”
Las Vegas, Nevada
45
ENIS MUSTAFA
Queens, New York
30
VICTOR TOMESCU
Queens, New York
62
MEHMET BOGIC, a/k/a/ “Bogi”
Bronx, New York
52
[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.
Founder of Liberty Reserve Pleads Guilty to Laundering More Than $250 Million through His Digital Currency BusinessRead the Press Release
The founder of Liberty Reserve, a virtual currency once used by cybercriminals around the world to launder the proceeds of their illegal activity, pleaded guilty today to running a massive money laundering enterprise, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Preet Bharara of the Southern District of New York.
Arthur Budovsky, 42, pleaded guilty to one count of conspiring to commit money laundering before U.S. District Judge Denise L. Cote of the Southern District of New York. He is scheduled to be sentenced on May 6, 2016.
“After a prior conviction for operating an unlicensed money transmitting business, Budovsky developed Liberty Reserve, which quickly became a premier service used by criminals around the world to launder their criminal proceeds,” said Assistant Attorney General Caldwell. “As a result of this global investigation, however, Budovsky was returned to the United States to face justice once again.”
“Arthur Budovsky founded and operated Liberty Reserve, an underworld cyber-banking system that laundered hundreds of millions of dollars in illicit proceeds for criminals around the world,” said U.S. Attorney Bharara. “The only liberty that Budovsky and Liberty Reserve promoted was the freedom to commit and profit from crime. Thanks to this truly global investigation that included cooperation from 17 countries, Liberty Reserve has been shut down, and its founder Arthur Budovsky stands convicted in an American court of law, facing the loss of his own liberty.”
According to the indictment filed against Liberty Reserve, Budovsky and six co-defendants and Budovsky’s admissions at today’s hearing:
Budovsky specifically designed Liberty Reserve, which billed itself as the Internet’s “largest payment processor and money transfer system,” to help users conduct anonymous and untraceable illegal transactions and launder the proceeds of their crimes. From its inception in or about 2006, Budovsky directed and supervised Liberty Reserve’s operations, finances and business strategy. To grow the business and evade the scrutiny and reach of U.S. law enforcement, Budovsky emigrated to Costa Rica, where he and other defendants began operating Liberty Reserve, and in 2011, Budovsky renounced his U.S. citizenship and became a Costa Rican citizen. Budovsky told U.S. immigration authorities that his company was developing a software that “might open him up to liability in the U.S.”
Liberty Reserve became one of the principal money-transmitting services used by cybercriminals around the world to amass, distribute, store and launder the proceeds of their illegal activity, including proceeds of investment fraud, credit card fraud, identity theft and computer hacking. Before the U.S. government shut down Liberty Reserve in May 2013, it had more than 5 million user accounts worldwide, including more than 600,000 accounts associated with users in the United States, and had processed millions of transactions. Budovsky admitted in his plea agreement to laundering more than $250 million in criminal proceeds.
* * *
Four co-defendants, Vladimir Kats, Azzeddine El Amine, Mark Marmilev and Maxim Chukharev, have already pleaded guilty. Marmilev and Chukharev were sentenced to five years and three years in prison, respectively. Kats and El Amine await sentencing before Judge Cote. Charges remain pending against Liberty Reserve and two individual defendants who are fugitives.
The U.S. Secret Service, the Internal Revenue Service-Criminal Investigation and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations worked together in this case as part of the Global Illicit Financial Team. The U.S. Secret Service’s New York Electronic Crimes Task Force assisted with the investigation. The Judicial Investigation Organization in Costa Rica, Interpol, the National High Tech Crime Unit in the Netherlands, the Spanish National Police, Financial and Economic Crime Unit, the Cyber Crime Unit at the Swedish National Bureau of Investigation and the Swiss Federal Prosecutor’s Office also provided assistance.
Trial Attorney Kevin Mosley of the Criminal Division’s Asset Forfeiture and Money Laundering Section and Assistant U.S. Attorneys Serrin Turner, Christine Magdo, Christian Everdell and Andrew Goldstein of the Southern District of New York are prosecuting the case. The Criminal Division’s Office of International Affairs and Computer Crime and Intellectual Property Section provided substantial assistance.
Founder of Liberty Reserve Arthur Budovsky Pleads Guilty in Manhattan Federal Court to Laundering Hundreds of Millions of Dollars Through His Global Digital Currency BusinessRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Leslie R. Caldwell, Assistant Attorney General for the Justice Department’s Criminal Division, announced today that ARTHUR BUDOVSKY pled guilty to running a massive money laundering enterprise in connection with his operation of Liberty Reserve, a virtual currency once used by cybercriminals around the world to launder the proceeds of their illegal activity. BUDOVSKY pled guilty to one count of conspiring to commit money laundering before U.S. District Judge Denise L. Cote.
Manhattan U.S. Attorney Preet Bharara stated: “Arthur Budovsky founded and operated Liberty Reserve, an underworld cyber-banking system that laundered hundreds of millions of dollars in illicit proceeds for criminals around the world. The only liberty that Budovsky and Liberty Reserve promoted was the freedom to commit and profit from crime. Thanks to this truly global investigation that included cooperation from 17 countries, Liberty Reserve has been shut down, and its founder Arthur Budovsky stands convicted in an American court of law, facing the loss of his own liberty.”
Assistant Attorney General Leslie R. Caldwell stated: “After a prior conviction for operating an unlicensed money transmitting business, Budovsky developed Liberty Reserve, which quickly became a premier service used by criminals around the world to launder their criminal proceeds. As a result of this global investigation, however, Budovsky was returned to the United States to face justice once again.”
According to allegations contained in the Indictment filed against Liberty Reserve, BUDOVSKY, and six other individual defendants, and statements made in related court filings and proceedings:
Liberty Reserve billed itself as the Internet’s “largest payment processor and money transfer system.” At all relevant times, BUDOVSKY directed and supervised Liberty Reserve’s operations, finances, and business strategy. Liberty Reserve was specifically designed by Budovsky to help users conduct illegal transactions anonymously and launder the proceeds of their crimes. BUDOVSKY devoted himself to building and expanding Liberty Reserve so that the company could profit from attracting criminal customers, all while seeking to evade the scrutiny and reach of U.S. law enforcement authorities.
Liberty Reserve was born out of BUDOVSKY’s unsuccessful experience running a third-party exchange service, called GoldAge, Inc., for another digital currency, called E-Gold. In or about 2006, BUDOVSKY was convicted in New York State of operating GoldAge as an unlicensed money transmitting business. In 2007, the operators of E-Gold were also charged with criminal offenses, including money laundering and operating an unlicensed money transmitting business, and subsequently ceased doing business. In the wake of his own criminal conviction, BUDOVSKY set about building a digital currency that would succeed in eluding law enforcement where E-Gold had failed, by, among other things, locating the business outside the United States. Accordingly, BUDOVSKY emigrated to Costa Rica, where he and other defendants began operating Liberty Reserve. BUDOVSKY was so committed to evading U.S. law enforcement that he formally renounced his U.S. citizenship in 2011 and became a Costa Rican citizen, telling U.S. immigration authorities that he was concerned that the “software” his “company” was developing “might open him up to liability in the U.S.”
Liberty Reserve subsequently emerged as one of the principal money transmitting services used by cybercriminals around the world to amass, distribute, store, and launder the proceeds of their illegal activity. Liberty Reserve functioned as a financial hub for the online underworld, favored for the ease with which it enabled cybercriminals to conduct anonymous and untraceable financial transactions. Before being shut down by the U.S. government in May 2013, Liberty Reserve had more than five million user accounts worldwide, including more than 600,000 accounts associated with users in the United States, and processed tens of millions of transactions through its system. These funds encompassed proceeds of investment fraud, credit card fraud, identity theft, and computer hacking, among other crimes. As part of his plea agreement, BUDOVSKY admitted to laundering more than $250 million in criminal proceeds through his operation of Liberty Reserve.
* * *
BUDOVSKY, 42, faces a maximum sentence of 20 years in prison for conspiring to commit money laundering. This statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentence imposed on the defendant will be determined by the judge.
BUDOVSKY’s sentencing is scheduled for May 6, 2016.
Four co-defendants – Vladimir Kats, Azzeddine El Amine, Mark Marmilev, and Maxim Chukharev – have already pled guilty. Marmilev and Chukharev have both been sentenced, to five and three years in prison, respectively. Kats and el Amine await sentencing before U.S. District Judge Denise L. Cote. Charges against Liberty Reserve and two individual defendants who have not been apprehended remain pending.
Mr. Bharara praised the outstanding work of the United States Secret Service, the Internal Revenue Service-Criminal Investigation, and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, which worked together in this case as part of the Global Illicit Financial Team. Mr. Bharara also thanked the United States Secret Service’s New York Electronic Crimes Task Force for its extraordinary assistance with the investigation. Additionally, Mr. Bharara specially thanked all the international law enforcement agencies that assisted in the investigation, in particular, the Judicial Investigation Organization in Costa Rica, Interpol, the National High Tech Crime Unit in the Netherlands, the Spanish National Police, Financial and Economic Crime Unit, the Cyber Crime Unit at the Swedish National Bureau of Investigation, and the Swiss Federal Prosecutor’s Office.
This case is being prosecuted jointly with the Department of Justice’s Asset Forfeiture and Money Laundering Section (“AFMLS”), which is overseen by Assistant Attorney General Leslie R. Caldwell. Mr. Bharara thanked AFMLS for its partnership and also thanked the Department of Justice’s Office of International Affairs and Computer Crime and Intellectual Property Section for their support.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit and Money Laundering and Asset Forfeiture Unit. Assistant United States Attorneys Serrin Turner, Christine Magdo, Christian Everdell, and Andrew Goldstein of the Southern District of New York and Trial Attorney Kevin Mosley of AFMLS are in charge of the prosecution.
The charges contained in the Indictment against the remaining defendants remain pending and are merely accusations. Those defendants are presumed innocent unless and until proven guilty.
Mikhail Zemlyansky Sentenced to 15 Years for Racketeering, Securities Fraud, Mail Fraud, Wire Fraud, and Money LaunderingRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that MIKHAIL ZEMLYANSKY was sentenced today to 15 years in prison in connection with his operation, from 2007 through 2012, of a sprawling racketeering conspiracy that engaged in the largest single no fault automobile insurance fraud scheme ever charged, two investment fraud schemes that resulted in losses to nearly 300 victims of approximately $17 million, multiple complex money laundering operations, and illegal gambling. Zemlyansky was convicted on March 19, 2015, following a four-week jury trial, of racketeering conspiracy, securities fraud, wire fraud, and mail fraud. He was sentenced today by the United States District Judge J. Paul Oetken, who presided over the trial.
U.S. Attorney Preet Bharara said: “Driven by an insatiable greed, Mikhail Zemlyansky operated a sophisticated criminal enterprise that, during a five-year span, preyed on hundreds of innocent victims, reaping tens of millions of dollars in illicit proceeds. Zemlyansky’s criminal schemes were wide-ranging, from insurance and securities fraud to illegal gambling. Thanks to the tireless work of the prosecutors and our partners at the FBI and NYPD, justice has now been served for Zemlyansky.”
According to the Superseding Indictment, evidence admitted at trial, court filings, and statements made in open court:
From at least 2007 through 2012, ZEMLYANSKY was a leader, along with co-defendant Michael Danilovich, of a criminal enterprise engaged in a pattern of racketeering that included a massive scheme to defraud automobile insurance companies under New York’s no fault insurance law, multiple securities fraud schemes, money laundering, and the operation of illegal gambling businesses (the “Zemlyansky/Danilovich Organization”).
As part of the enterprise, ZEMLYANSKY was convicted for operating two investment fraud schemes that swindled nearly 300 innocent victims out of approximately $17 million. Both schemes – Lyons Ward & Associates and the Rockford Group – purported to be settlement claims funding companies that invested in lawsuits in return for a portion of future settlements. As part of these schemes, ZEMLYANSKY, Danilovich, and their co-conspirators created bogus documents and account statements used by cold-callers working in boiler rooms to solicit victims through lies. In reality, there was no investment fund at all; instead, ZEMLYANSKY and his co-conspirators simply stole the money invested by victims and laundered the proceeds by wiring them overseas to shell companies in Eastern Europe, which were then converted into cash in the United States.
In addition to the investment fraud schemes, ZEMLYANSKY and his co-conspirators perpetrated a sophisticated scheme to steal hundreds of millions of dollars from automobile insurance companies. Under New York State law, every vehicle registered in the State is required to have no fault automobile insurance, which enables the driver and passengers of a registered and insured vehicle to obtain benefits of up to $50,000 per person for injuries sustained in an automobile accident, regardless of fault (the “No Fault Law”). The No Fault Law requires prompt payment for medical treatment, thereby obviating the need for claimants to file personal injury lawsuits in order to be reimbursed. New York State Law also requires that all medical clinics in the State be incorporated, owned, operated, and controlled by a licensed medical practitioner in order to be eligible for reimbursement under the No Fault Law. Insurance companies will not honor claims for medical treatments from a medical clinic that is not actually owned, operated, and controlled by a licensed medical professional.
From at least 2007 through 2012, the Zemlyansky/Danilovich Organization defrauded automobile insurance companies of hundreds of millions of dollars by, among other things, creating and operating medical clinics that provided unnecessary or excessive medical treatments in order to take advantage of the No Fault Law. The Organization fraudulently owned and controlled more than a dozen medical professional corporations (“PCs”) – including no fault clinics, MRI offices, and acupuncture and chiropractic PCs – by recruiting and paying licensed medical professionals to use their licenses to incorporate the PCs. ZEMLYANSKY and his co-conspirators paid kickbacks of thousands of dollars to runners to recruit patients to receive the same battery of tests and treatments, and received kickbacks from other co-conspirators for referring patients for additional unnecessary treatments. All told, the Organization billed insurance companies for hundreds of millions of dollars in fraudulent medical treatments. ZEMLYANSKY and his co-conspirators laundered the proceeds of the fraud through check cashing entities and shell companies, and used the money to pay for luxury cars, watches, and vacations.
Finally, the Zemlyansky/Danilovich Organization operated high-stakes illegal poker games in Brooklyn and New York City that netted profits of tens of thousands of dollars per game.
* * *
As part of the sentence imposed today by Judge Oetken, ZEMLYANSKY, 39, of Hewlett, New York, was further sentenced to three years of supervised release and was ordered to pay a fine of $50,000 and forfeiture and restitution to the victims of his crimes in the amount of $29,575,846.30.
At ZEMLYANSKY’s first trial in the fall of 2013, a mistrial was declared on Count One – which charged ZEMLYANSKY with a different racketeering conspiracy – after the jury failed to reach a unanimous verdict. At that trial, ZEMLYANSKY was acquitted of eight counts of charges related to the no fault insurance fraud scheme and money laundering.
On November 5, 2015, co-defendant Michael Danilovich was convicted following a five-week trial before United States District Judge Deborah A. Batts of 16 counts of racketeering conspiracy, securities fraud, health care fraud, mail fraud, wire fraud, and money laundering charges related to the crimes committed by the Zemlyansky/Danilovich Organization. Danilovich is scheduled to be sentenced by Judge Batts on March 8, 2016.
U.S. Attorney Preet Bharara thanked the Federal Bureau of Investigation and the New York City Police Department for their continued outstanding work in this investigation. Mr. Bharara also thanked the National Insurance Crime Bureau, the investigative units of the insurance companies, the Manhattan District Attorney’s Office, and the Alabama Securities Commission for their valuable assistance with the investigation.
The case is being prosecuted by the Office’s Violent & Organized Crime Unit. Assistant U.S. Attorneys Daniel S. Goldman, Daniel S. Noble, and Joshua A. Naftalis are in charge of the prosecution.
Three Senior Executives Sentenced in Manhattan Federal Court for Their Roles in Student Visa and Financial Aid Frauds at For-Profit SchoolsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that SURESH HIRANANDANEY, LALIT CHABRIA, and ANITA CHABRIA, who were senior executives of privately owned for-profit schools, were sentenced yesterday in Manhattan federal court for their roles in a student financial aid fraud scheme in which they defrauded the United States Department of Education (“Education Department”) of $1,000,000 in education grant funds, and in a student visa fraud scheme that generated $7,440,000 in illegal revenues.
United States District Judge J. Paul Oetken sentenced HIRANANDANEY to one year and one day in prison, LALIT CHABRIA to one year and one day in prison, and ANITA CHABRIA to six months of home confinement. Judge Oetken also ordered these three former executives to forfeit $7,440,000 for the student visa fraud and to pay $1,000,000 in restitution for the student financial aid fraud. These former executives were arrested in May 2014, along with co-defendants Samir Hiranandaney and Seema Shah, following a long-term investigation by the United States Immigration and Customs Enforcement’s Homeland Security Investigations (“ICE-HSI”), the United States Department of State’s Diplomatic Security Service (“DOS-DSS”), and the United States Department of Education’s Office of the Inspector General (“ED-OIG”).
Manhattan U.S. Attorney Bharara stated: “Suresh Hiranandaney, Lalit Chabria, and Anita Chabria exploited our nation’s financial aid and foreign student visa programs, engaging in a long-running fraud scheme that generated millions of dollars. The defendants greedily took advantage of programs meant to help people get a higher education, and in the process, committed federal crimes.”
According to the Complaint and Indictment, sentencing submissions and other publicly filed court documents, and statements made at public court proceedings in this case, including yesterday’s sentencings:
HIRANANDANEY, LALIT CHABRIA, and ANITA CHABRIA were associated with the Micropower Career Institute (“MCI”), a for-profit school with five campuses in New York and New Jersey, or the Institute for Health Education (“IHE”), a for-profit school located in New Jersey, both of which offered vocational, language, and other classes to, among others, domestic students whose tuition was partially covered by Department of Education Department financial aid, and foreign students who were allowed to stay in this country on student visas requiring that they pursue full courses of study at bona fide educational institutions. Hiranandaney was MCI’s president; his brother-in-law, LALIT CHABRIA, was MCI’s chief executive officer and IHE’s president; and ANITA CHABRIA, the sister of HIRANANDANEY and wife of LALIT CHABRIA, was MCI’s vice president and the director of MCI’s Mineola Campus in Mineola, New York.
HIRANANDANEY, LALIT CHABRIA, and ANITA CHABRIA defrauded the Education Department of $1,000,000 of educational grant money – funds that the Education Department had paid to MCI for the purpose of covering tuition for domestic students to attend classes at MCI. As part of this fraud, they falsified and manipulated documents to hide MCI’s failure to timely return financial aid money received by MCI for domestic students who had dropped out of MCI.
Similarly, HIRANANDANEY, LALIT CHABRIA, and ANITA CHABRIA made $7,440,000 in illicit profits by defrauding immigration authorities. In this scheme, they concealed that MCI and IHE were collecting millions of dollars in tuition revenues from foreign students who were not attending courses as required to stay in the United States on student visas. HIRANANDANEY, LALIT CHABRIA, ANITA CHABRIA, and others fraudulently portrayed MCI and IHE to immigration authorities as legitimate institutes of higher learning where foreign students carried full course loads. In reality, the majority of foreign students at MCI and IHE did not attend the required number of classes. HIRANANDANEY, LALIT CHABRIA, and ANITA CHABRIA failed to report this to immigration authorities, as required, while MCI and IHE continued to collect millions of dollars in tuition from foreign students with delinquent attendance. When a campus of MCI came under regulatory scrutiny, HIRANANDANEY, LALIT CHABRIA, ANITA CHABRIA, and others transferred foreign students with delinquent attendance to affiliated schools (such as another MCI campus or IHE) that were not under scrutiny.
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In addition to their prison and home confinement sentences, HIRANANDANEY, 61, of Dix Hills, New York, and LALIT CHABRIA, 54, and ANITA CHABRIA, 50, both of Old Bethpage, New York, were ordered to forfeit $7,440,000 to the United States Government from the proceeds of their student visa fraud, and pay $1,000,000 in restitution to United States Department of Education for losses from their student financial aid fraud.
The remaining defendants, Samir Hiranandaney and Seema Shah, are scheduled to be sentenced later this year before Judge Oetken.
Manhattan U.S. Attorney Bharara praised ICE-HSI, DOS-DSS, and ED-OIG for their work in the investigation of this case.
This case is being prosecuted by the Office’s General Crimes Unit. Assistant U.S. Attorneys Samson Enzer and Margaret Graham are in charge of the prosecution. Assistant U.S. Attorney Andrew Adams is in charge of the forfeiture aspects of the case.
Oneil Scott Arrested and Charged in Manhattan Federal Court with Violent Attempted Robbery and Kidnapping of Bronx Man Resulting in His DeathRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Michael Greco, the Southern District of New York United States Marshal (“USMS”), and William Bratton, the Police Commissioner of the City of New York (“NYPD”), announced the arrest of ONEIL SCOTT on charges of robbery conspiracy, attempted robbery, kidnapping conspiracy, kidnapping resulting in death, and firearms offenses. At the time he was charged, SCOTT was serving a federal sentence on a robbery conviction arising from his participation in a Bronx armed robbery in approximately September 2010. Two other defendants, ALVIN HENRY and CHAI GREEN, were arrested on Tuesday, January 19, 2016, in connection with the same charges, contained in an Indictment unsealed the same day. All three defendants have been remanded and remain in custody.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, these three defendants, for no reason other than greed, carried out a scheme to kidnap and rob a suspected narcotics trafficker, ultimately taking his life. Those who use violence to terrorize our communities will be prosecuted to the fullest extent of the law.”
U.S. Marshal Michael Greco said: “Oneil Scott is a dangerous individual who was involved in a myriad of criminal activity. The diligent and joint efforts by the U.S. Attorney’s Office, the New York Police Department and the Marshals Service in getting him back to New York in order to face these additional charges makes our streets safer and is another win for the justice system.
NYPD Commissioner William Bratton said: “As alleged, these individuals participated in a kidnapping so violent that it resulted in death of their intended target. Adding insult to injury, the victim was set on fire, and his body abandoned in the back seat of a vehicle in a Bronx alleyway. I commend the work of the NYPD detectives, prosecutors and U.S. Marshals for their work and cooperation in this long-term investigation that resulted in theses arrests and indictments for this heinous crime.”
According to the allegations contained in the Indictment[1] and other documents in the public record, and statements made in court:
In 2014, SCOTT, HENRY, GREEN, and others committed multiple armed robberies of suspected narcotics traffickers. During one of these attempted armed robberies, they violently assaulted and ultimately killed their intended target. Just after midnight on the morning of March 11, 2014, SCOTT, HENRY, GREEN, and others apprehended the victim, Wayne Thomas, then 22 years old, of the Bronx, as the victim was parking his car in front of his residence. The defendants suspected that the victim was a drug trafficker who might be in possession of narcotics and/or narcotics proceeds. During the kidnapping, which was caught on surveillance video, several individuals violently grabbed the victim, pistol-whipped him, forced him into another car, and drove off with him. During both the kidnapping and the defendants’ subsequent attempts to obtain information about the whereabouts of drugs and drug money, the victim was seriously assaulted.
At approximately 5:30 a.m. on March 11, 2014, members of the New York City Police Department and the New York City Fire Department responded to 911 calls reporting a burning vehicle in an alleyway in the Bronx. Upon arriving at the scene, they observed a car still on fire. The Fire Department extinguished the fire, and officials then became aware that the victim’s body was in the back seat of the car. The Office of the Chief Medical Examiner of New York City subsequently performed an autopsy on the victim, and concluded that the cause of death was not fire-related injuries, but rather blunt force trauma, indicating that the victim had died before being placed in the rear of the vehicle.
ALVIN HENRY’s true name was unknown until his arrest by law enforcement officials on January 19, 2016 in connection with the instant charges.
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SCOTT, 33, of the Bronx, HENRY, 27, of the Bronx, and GREEN, 36, of the Bronx are each charged with one count of robbery conspiracy, which carries a maximum sentence of 20 years in prison; one count of attempted robbery, which carries a maximum sentence of 20 years in prison; one count of kidnapping conspiracy, which carries a maximum sentence of life in prison; one count of kidnapping resulting in death, which carries a maximum sentence of death; and one count of use of a firearm, 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 sentencings of the defendants will be determined by a judge
Mr. Bharara praised the investigative work of the USMS and the NYPD.
The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Christopher J. DiMase and Margaret Graham are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth below constitute only allegations, and every fact described should be treated as an allegation.
New Jersey Man Found Guilty of Robbing and Murdering Ossining ResidentRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that ANTHONY GRECCO, a New Jersey resident, was found guilty today of robbing and murdering Ryan Ennis, a resident of Ossining, New York, and of conspiring to distribute marijuana and heroin. Following a nine-day trial before the Honorable Kenneth M. Karas, a jury found that GRECCO traveled on August 26, 2014 from New Jersey to Ossining, where he robbed and murdered Ennis in furtherance of GRECCO’s narcotics trafficking activities.
U.S. Attorney Preet Bharara stated: “Anthony Grecco took a human life, violently murdering Ryan Ennis, for a few thousand dollars. Today, a unanimous jury reached a swift verdict, holding Grecco accountable for his callous crime. I want to thank our local and federal law enforcement partners for making this conviction possible.”
As established by the evidence at trial:
GRECCO was a marijuana dealer based in New Jersey. As of the spring of 2014, one of his customers was Ryan Ennis, 25, who had been purchasing marijuana from GRECCO and reselling it in the area around Ossining, New York. By late summer 2014, GRECCO’s marijuana supply had dried up and he became desperate for cash.
GRECCO set up a meeting with Ennis on the pretense that he would be bringing more marijuana for Ennis. In fact, GRECCO intended to rob Ennis, and kill him if necessary, in order to get money. He wanted that money not only because he was strapped for cash, but because he intended to invest in the heroin business of another drug dealer in New Jersey. In preparation for the meeting with Ennis, GRECCO obtained a knife and stuffed a backpack full of linens so that Ennis would not realize that GRECCO had arrived without any marijuana.
On August 26, 2014, GRECCO drove with two accomplices from New Jersey to an apartment complex in Ossining, where Ennis was waiting alone in his father’s apartment. After arriving in Ossining, while the other two individuals waited outside, GRECCO went into the apartment and robbed Ennis. In the course of the robbery, GRECCO stabbed Ennis repeatedly and slashed his throat, killing him. GRECCO took $8,900 – the cash that Ennis had prepared for the marijuana deal – as well as a cellphone and a hat, from Ennis. After the murder, GRECCO returned to New Jersey, where he showered and threw away the blood-stained clothes that he had been wearing in an attempt to cover his tracks.
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GRECCO was found guilty on all five counts in the Indictment, namely, (1) conspiracy to commit Hobbs Act robbery; (2) Hobbs Act robbery; (3) conspiracy to distribute marijuana; (4) conspiracy to distribute heroin; and (5) Travel Act murder. Sentencing is scheduled for May 25, 2016. GRECCO faces a maximum sentence of life in prison. The statutory maximum penalty is prescribed by Congress and is provided here for informational purposes only, as any sentencing of GRECCO will be determined by the judge.
U.S. Attorney Bharara praised the outstanding investigative work of the Village of Ossining Police Department and the FBI’s Westchester County Violent Crimes Task Force, which is comprised of investigators from the FBI, the Westchester County Police Department, the Westchester County District Attorney’s Office, the City of Peekskill Police Department, the New York City Police Department, and the City of Yonkers Police Department.
The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Michael Gerber, Scott Hartman, and George Turner are in charge of the prosecution.
Manhattan U.S. Attorney Announces $46.7 Million Settlement of Civil Fraud Claims Against Centerlight Healthcare for Enrollment of Ineligible Individuals in Medicaid Managed Long-Term Care PlanRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Scott J. Lampert, Special Agent in Charge of the U.S. Department of Health and Human Services, Office of Inspector General’s New York Region (“HHS-OIG”), announced today that the United States has settled civil fraud claims under the False Claims Act against CenterLight Healthcare, Inc., and CenterLight Health System, Inc. (collectively, “CenterLight”), for the enrollment of ineligible members in the CenterLight Healthcare managed long-term care plan (“CenterLight MLTCP”). CenterLight improperly billed the Medicaid program for 1,241 members who attended or were referred by social adult day care centers (“SADCCs”) and whose needs did not meet the criteria of the managed care plan. The settlement resolves claims that CenterLight engaged in improper marketing practices to enroll members through SADCCs and induced such members to use SADCCs as the members’ primary source of personal care services. CenterLight continued to seek and obtain monthly capitation payments for members well after the New York State Department of Health issued guidance in early 2013 explicitly stating that an individual’s attendance at SADCCs does not satisfy the MLTCP eligibility standard.
Under the terms of the settlement approved yesterday by United States District Judge Lewis A. Kaplan, CenterLight must pay a total of $46,751,086.74 to the Medicaid Program, $18,700,434.70 of which will go to the United States. In addition, CenterLight is required to:
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Comply with all contractual and regulatory requirements governing the enrollment, assessment, re-assessment, and dis-enrollment of CenterLight MLTCP members.
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Credential only SADCCs that are properly certified and capable of providing community-based personal care services consistent with regulatory requirements.
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Monitor SADCCs in its provider network to ensure that they furnish the community-based personal care services called for under CenterLight MLTCP member care plans and operate in compliance with applicable regulations.
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Prohibit marketing practices that are directed at enrolling CenterLight MLTCP members through SADCCs.
Manhattan U.S. Attorney Preet Bharara said: “CenterLight Healthcare improperly received millions of Medicaid dollars by enrolling ineligible members into its managed care plan. With this settlement, CenterLight now has admitted to its conduct and will pay over $46 million. We are committed to holding health care providers accountable if they wrongfully seek and receive federal funds, and we thank HHS’s Office of the Inspector General and the New York State Attorney General’s Office for their assistance.”
HHS-OIG Special Agent in Charge Scott J. Lampert said: “CenterLight’s conduct compromised the integrity of the Medicaid program by enrolling beneficiaries in a plan for which they were not eligible. HHS-OIG is committed to holding providers accountable for their practices, and the manner in which care is provided.”
Pursuant to the Medicaid managed long-term care program, health care providers, such as CenterLight, are responsible for arranging and managing long-term health care services offered to Medicaid beneficiaries. In exchange, providers receive a monthly capitation payment of approximately $3,800 for each beneficiary enrolled in the health care plan. MLTCPs offer a variety of services, including assistance with activities of daily living, care management services, skilled nursing services, physical therapy, occupational therapy, speech therapy, nursing home care, and preventive services. In order to qualify for enrollment in an MLTCP, Medicaid beneficiaries need to, among other things, be eligible for a nursing home level of care and require at least 120 days of community-based long-term care, which includes a wide range of health care services such as personal care services. CenterLight contracted with SADCCs to provide care, including personal care services, to CenterLight MLTCP members.
In the settlement agreement, CenterLight admits that 1,241 CenterLight MLTC members who had been referred by SADCCs or had used SADCC services were not eligible to be members of the managed care plan. Many of these ineligible members were not eligible at the time of their initial enrollment, while others were ineligible to remain in the managed care plan at the time of their re-assessment but were not dis-enrolled in a timely manner. Although the SADCCs were supposed to be providing care to CenterLight members, CenterLight admits that various SADCCs in its provider network did not provide services that qualified as personal care services under the terms of its Medicaid contract or were not legally permitted to provide such services.
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Mr. Bharara thanked HHS’s Office of the Inspector General for its assistance with the case. Mr. Bharara also thanked the Medicaid Fraud Control Unit of the New York State Attorney General’s Office for its investigative efforts and assistance.
The case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorney Jeffrey K. Powell is in charge of the case.
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Newburgh Fire Chief Charged in White Plains Federal Court with Fraudulently Obtaining Retirement BenefitsRead the Press Release
Preet Bharara, United States Attorney for the Southern District of New York, Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Thomas P. DiNapoli, New York State Comptroller, announced the indictment of MICHAEL J. VATTER, the Chief of the Newburgh Fire Department, charging him with fraudulently obtaining approximately $95,000 in pension benefits by failing to report his return to work in the public sector to the New York State and Local Police and Fire Retirement System. Under New York State law, a public sector retiree who is receiving a pension and who returns to public service cannot receive both pension payments and a public sector paycheck. The law permits public sector retirees to earn up to $30,000 per year from public sector employment before their pension benefits are cut off for that year.
According to the allegations contained in the Indictment[1] unsealed today in White Plains federal court:
VATTER served in the Newburgh Fire Department in various capacities from 1980 until his retirement in May 2000. Following his retirement, VATTER attended law school and practiced law. In November 2009, the Indictment charges, VATTER returned to the Newburgh Fire Department as its Chief. The Indictment further alleges that VATTER failed to report his return to the public sector despite knowing he had a duty under state law to do so. As a result of this conduct, VATTER obtained $95,106 in pension benefits from the New York State and Local Police and Fire Retirement System source to which he was not entitled.
VATTER, 57, of Walkill, New York, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison.
Mr. Bharara praised the investigative work of the FBI, the Office of the New York State Comptroller, the Orange County District Attorney's Office, and the Orange County Sheriff's Office.
This prosecution is being handled by the Office's White Plains Division. Assistant U.S. Attorney James McMahon is in charge of the prosecution.
The charge contained in the Indictment is merely an accusation, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment forth herein constitute only allegations, and every fact described should be treated as an allegation.
Former Controller of Non-Profit Organization That Funds Medical Research Sentenced in Manhattan Federal Court to Four Years in Prison for Embezzling over $2 Million and Tax EvasionRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that KAREN ALAMEDDINE, a/k/a “Karen Dean,” the former controller of a New York-based non-profit organization whose core mission is to cure genetic illnesses by supporting biomedical research (the “Non-Profit”), was sentenced in Manhattan federal court to four years in prison for embezzling more than $2 million from the Non-Profit, and to tax evasion for deliberately failing to report to the Internal Revenue Service (“IRS”) as income the money she embezzled. ALAMEDDINE was sentenced today by United States District Judge Gregory H. Woods.
Manhattan U.S. Attorney Preet Bharara said: “Karen Alameddine’s brazen theft of over $2 million was not just a breach of her duties of loyalty and honesty to her employer, it was a federal crime that diverted much-needed funds from biomedical research that could help to cure genetic illnesses. Thanks to the work of the IRS and the Postal Inspection Service, Alameddine will now pay the price for her faithless conduct.”
According to the Complaint, the Indictment, guilty plea, and proceedings in Manhattan federal court:
From approximately late 2008 through early 2014, while working as the controller for the Non-Profit, ALAMEDDINE diverted over $2 million of the Non-Profit’s funds to her own bank accounts and for her own personal use. ALAMEDDINE executed the scheme principally by disguising QuickBooks entries to make transfers to her personal bank account appear as if they were transfers made to pay grant recipients of the Non-Profit. ALAMEDDINE further sought to disguise the fraud by inventing a fictitious accounting firm named “Davis & Greene,” purportedly based in Washington, D.C., which was, according to ALAMEDDINE, retained to prepare certain tax returns for the Non-Profit for the 2012 and 2013 tax years.
After ALAMEDDINE fraudulently transferred the funds from an account belonging to the Non-Profit to a personal bank account, she further transferred the funds to other accounts she controlled, and thereafter used those funds for various personal expenses, including to pay personal bills. Among the personal items ALAMEDDINE paid for with the embezzled money were utility bills, car payments, jewelry, the purchase of a recreational vehicle, her personal mortgages, and leisure travel. In addition to the fraudulent diversions, ALAMEDDINE carried out her embezzlement scheme by secretly procuring a credit card in the Non-Profit’s name and using it to pay for personal expenses; by submitting fraudulent requests for reimbursement for expenses she falsely claimed to have incurred; and by making illicit transfers from the Non-Profit’s bank account purportedly to pay for expenses related to hiring of temporary help to assist with certain accounting and payroll functions but which, in truth, were never actually incurred.
In addition, for each of the calendar years 2009 through 2013, ALAMEDDINE filed tax returns with the IRS in which she deliberately omitted reporting the income she received from the fraud. Those deliberate omissions resulted in ALAMEDDINE’s evasion of a total of over $640,000 in income tax for the years 2009 through 2013.
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ALAMEDDINE, 58, of Perris, California, who has been in custody since her arrest in November 2014, pled guilty to one count of wire fraud and one count of tax evasion. In addition to her prison term, ALAMEDDINE was ordered to pay $2,674,983 in restitution, including $1,934,000 to the Non-Profit and $640,000 to the IRS. ALAMEDDINE was also ordered to forfeit $1,828,000 in proceeds she obtained from the embezzlement offense.
Mr. Bharara praised the outstanding investigative work of the IRS and the U.S. Postal Inspection Service.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Stanley J. Okula is in charge of the prosecution.
Ulster County Real Estate Developer Pleads Guilty to Conspiring to Receive A Kickback and to Defraud Construction LenderRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that MICHAEL BARNETT, a real estate developer, pled guilty to 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.
Manhattan U.S. Attorney Preet Bharara said: “Michael Barnett admitted today to engaging in a fraudulent scheme to defraud both his construction lender and HUD in order to receive hundreds of thousands of dollars in kickbacks. Thanks to the investigative efforts of the HUD Inspector General’s Office, Barnett will now be made to pay for his criminal conduct.”
According to BARNETT’s admissions in court during his plea allocution and the allegations made in the Superseding Indictment:
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 two executives of a vendor who 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 and the two Lumber Company executives agreed that the Lumber Company would inflate its bid for labor and materials by approximately $865,000.
BARNETT and the Lumber Company executives 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 the Lumber Company executives 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.
BARNETT faces up to five years in prison, a fine of up to $250,000 or twice the gross loss or gain from the offense, an order of $1,334,620 in restitution, and an order to forfeit $200,000.
Mr. Bharara thanked the Department of Housing and Urban Development, Office of the Inspector General, for its outstanding work on the investigation.
This case is being handled by the Office’s White Plains Division. Assistant United States Attorneys Michael Maimin and James McMahon are in charge of the prosecution.
Investment Adviser Sentenced in Manhattan Federal CourtRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that STEVEN WESSEL, a/k/a “Wes Wessels,” was sentenced today in Manhattan federal court to 55 months in prison for securities fraud, wire fraud, and aggravated identity theft. WESSEL engaged in a scheme to defraud two investors and unlawfully use the identity of another person in furtherance of that scheme to defraud. WESSEL pled guilty on April 23, 2015, and was sentenced today by Chief United States District Judge Loretta A. Preska.
Manhattan U.S. Attorney Preet Bharara said: “Steven Wessel lied to investors who trusted him with their money, spending almost all of it to pay for his own personal expenditures.”
According to the allegations contained in the Superseding Indictment, the underlying criminal Complaint unsealed on June 24, 2014, and statements made during court proceedings:
From at least June 2013 through April 2014, WESSEL ran a fraudulent investment scheme. WESSEL, who claimed to be the Chairman and Executive Managing Member of Steeplechase USA, LLC (“Steeplechase USA”), located in New York, New York, represented to an investor (“Investor A”) that Steeplechase USA was in the business of trading securities. WESSEL personally solicited $200,000 from Investor A on the understanding that the funds would be solely invested in securities.
Contrary to WESSEL’s promise to invest Investor A’s funds in securities, WESSEL used substantially all of Investor A’s money for his own personal benefit, including for cash withdrawals and personal expenses, such as the payment of $25,000 toward a restitution obligation from a prior judgment of conviction. WESSEL did not tell Investor A about this misappropriation. Instead, WESSEL falsely represented to Investor A that his $200,000 investment had gained tens of thousands of dollars and that Steeplechase USA’s portfolio had gained approximately 167% in 2013. Furthermore, in connection with this fraudulent scheme, WESSEL sent Investor A multiple emails that purported to come from Steeplechase USA’s accountant (“Accountant 1”). In those emails, WESSEL, pretending to be Accountant 1 without Accountant 1’s knowledge or permission, made multiple false statements concerning Investor A’s investment with Steeplechase USA.
When Investor A requested to withdraw his funds from Steeplechase USA, WESSEL solicited a $550,000 loan from a second investor (“Investor B”). WESSEL falsely represented that he would use Investor B’s money to provide financing for a commercial real estate project. To induce Investor B to lend him money, WESSEL, among other things, created and sent a fabricated email to Investor B. The fabricated email purported to be from a bank and made it appear as if the real estate project were legitimate.
Contrary to WESSEL’s promise to Investor B, WESSEL used substantially all of Investor B’s money for his own benefit, including to pay $251,000 to Investor A – money that, according to WESSEL, represented Investor A’s initial $200,000 investment and $51,000 in trading profits.
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In addition to the prison sentence, WESSEL, 58, of New York, New York, was sentenced to three years of supervised release. The Court further ordered WESSEL to pay $499,000 in restitution.
Mr. Bharara praised the work of the Criminal Investigators of the United States Attorney’s Office, who investigated this case.
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 Damian Williams is in charge of the prosecution.
Two Individuals Charged in Manhattan Federal Court with Extortion PlotRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and William J. Bratton, Commissioner of the New York City Police Department (“NYPD”), announced that BORIS KOTLYARSKY and BORIS NAYFELD were taken into custody yesterday for seeking payment from a victim who they claimed NAYFELD had been hired to murder. KOTLYARSKY and NAYFELD were presented this afternoon in Manhattan federal court before U.S. Magistrate Judge James C. Francis IV.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Boris Kotlyarsky and Boris Nayfeld conspired to extort $125,000 from a victim, claiming that Nayfeld had been hired to murder the victim. Thanks to the FBI and the NYPD, the victim is unharmed and the defendants are under arrest.”
FBI Assistant Director-in-Charge Diego Rodriguez said: “This is yet another example of the cooperation by the FBI and NYPD through the Eurasian Organized Crime Task Force. We remain committed to keeping dangerous felons off our streets so the people of our communities can live in peace.”
NYPD Commissioner William J. Bratton said: “As alleged, this thuggish story seems like a yarn made only in Hollywood. But today, in New York, these two defendants find themselves charged in brazen extortion plot.”
According to the allegations in the Complaint[1] filed today in Manhattan federal court:
BORIS KOTLYARSKY informed the Victim that a Russian businessman (the “Businessman”) had approached BORIS NAYFELD with a contract to kill the Victim in exchange for a $100,000 payment. KOTLYARKSKY offered to broker a meeting between the Victim and NAYFELD. The Victim understood KOTLYARSKY to be offering the Victim an opportunity to intercede with NAYFELD before NAYFELD killed the Victim.
KOTLYARSKY then arranged a series of meetings between the Victim and BORIS NAYFELD. During these meetings, NAYFELD told the Victim, among other things, that the Businessman had transferred $50,000 to NAYFELD as partial payment on a contract for the Victim’s murder, and that it was good that KOTLYARSKY had intervened on the Victim’s behalf. NAYFELD told the Victim to pay him $125,000. Shortly after the Victim delivered NAYFELD a first payment by check, law enforcement agents arrested NAYFELD and, shortly thereafter, KOTLYARSKY.
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Mr. Bharara praised the outstanding work of the FBI 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 M. Thomas 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 below constitute only allegations, and every fact described should be treated as an allegation.
Manhattan U.S. Attorney Announces Arrest of New York Immigration Attorney for Immigration Fraud and Aggravated Identity TheftRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Glenn Sorge, Acting Special Agent-in-Charge of the New York Office of U.S. Immigration and Customs Enforcement’s (“ICE”), Homeland Security Investigations (“HSI”), and Timothy Houghton, Acting District Director of the New York District of U.S. Citizenship and Immigration Services (“USCIS”), announced today the arrest of GNOLEBA SERI for immigration fraud and aggravated identity theft. SERI was arrested today by HSI in Brooklyn, New York, and was presented this afternoon before the Honorable James C. Francis IV.
U.S. Attorney Preet Bharara stated: “Gnoleba Seri allegedly used his legal knowledge to circumvent the law and forge documents that are critical to obtaining an immigrant visa. The strength of the United States’ immigration system rests on the integrity of its process, and this office and our law enforcement partners will hold accountable those who undermine that process.”
Acting Special-Agent-in-Charge Glenn Sorge stated: “Gnoleba Seri allegedly abused the special trust bestowed upon him as an immigration attorney to commit fraud and identity theft. When individuals falsify immigration documents, the system is severely undermined and the security of our nation is put at risk. HSI is committed to working with its law enforcement partners to ensure fraudsters are identified and brought to justice.”
Acting District Director Timothy Houghton stated: “We are proud to stand by our partners today to send a message that U.S. immigration fraud will not be tolerated. We are committed to ensuring the integrity of our nation's immigration system.”
According to the Complaint[1] unsealed today in Manhattan federal court:
Between October 2012 and April 2015, GNOLEBA SERI, a licensed immigration attorney working in New York, New York, and Brooklyn, New York, engaged in a scheme to use personal information contained in legitimate immigration documents for fraudulent purposes. In his role as an immigration attorney, SERI submitted falsified and forged I-864 Forms (affidavits of support for those seeking immigrant visas) in support of his clients’ applications for immigration visas and for legal permanent resident status. Specifically, SERI received legitimate I-864 Forms, tax information, pay stubs, and W-2 forms from individuals sponsoring his clients, and then fraudulently submitted these documents in applications for other clients. That is, SERI submitted I-846 Forms that listed individuals as financial sponsors who had never met the people they were purportedly agreeing to sponsor. Those I-846 Forms included the sponsors’ real names, identifying information, and financial information, as well as forged signatures. These fraudulent and forged I-864 Forms all listed SERI as the preparer, and many of them were notarized by him.
* * *
SERI, 49, of Brooklyn, New York, is charged with one count of visa fraud, which carries a maximum sentence of 10 years in prison; one count of aggravated identity theft, which carries a mandatory consecutive minimum sentence of two years in prison; and one count of mail fraud, which carries a maximum sentence of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.
Mr. Bharara praised the outstanding investigative efforts of law enforcement personnel at HSI and USCIS.
The case is being prosecuted by the Office’s General Crimes Unit. Assistant U.S. Attorney Andrew D. Beaty is in charge of the prosecution.
The allegations contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint forth herein constitute only allegations, and every fact described should be treated as an allegation.
Connecticut Attorney Admits Stealing More Than $600k from Client’s Trust AccountRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that HAROLD JAMES PICKERSTEIN, 69, of Fairfield, Connecticut, waived his right to indictment and pled guilty today before U.S. District Judge Victor A. Bolden in federal court in Bridgeport, Connecticut, to one count of mail fraud related to his theft of more than $600,000 from a client’s investment account.
According to court documents and statements made in court, PICKERSTEIN, an attorney, represented an individual (“Victim 1”) and served as the trustee for an investment account (the “Trust Account”) held for the benefit of Victim 1. Between approximately August 2011 and October 2013, PICKERSTEIN withdrew $613,216.20 from the Trust Account without authorization from Victim 1 and used the funds to pay for personal expenses, including payments to state and federal tax authorities to satisfy his tax liabilities.
In November 2013, PICKERSTEIN was to disburse all remaining funds in the Trust Account to Victim 1. After Victim 1 questioned PICKERSTEIN as to why the disbursed funds were less than Victim 1 expected, PICKERSTEIN sent a letter to Victim 1 in which he falsely represented that a portion of the Trust Account’s funds had been deducted to pay legal bills.
PICKERSTEIN faces a maximum term of 20 years in prison, a maximum fine of approximately $1.2 million, and $633,410.04 in restitution.
PICKERSTEIN resigned from the Connecticut bar in December 2014.
This matter has been investigated by Federal Bureau of Investigation and is being prosecuted by Assistant U.S. Attorney William J. Nardini.
The U.S. Attorney for the Southern District of New York has been overseeing the case because of the recusal of the U.S. Attorney’s Office for the District of Connecticut.
Fugitive Arrested for November 24, 2015, Murder of Bronx Man and New Year’s Eve Shooting in Connection with CarjackingRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and William J. Bratton, Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of charges against RUBEN PIZZARO for a November 24, 2015, murder in the Bronx and a December 31, 2015, non-fatal shooting in Manhattan during a carjacking.
PIZZARO, a gang member, is charged with shooting and killing David Rivera, a rival gang member, on the morning of November 24, 2015. Weeks later, while law enforcement actively sought to arrest him, PIZZARO is charged with shooting another man on the morning of New Years’ Eve. PIZZARO has been charged in two separate criminal complaints for the murder of RIVERA and the non-fatal New Years’ Eve shooting.
PIZZARO was presented today before the Honorable James C. Francis IV.
Manhattan U.S. Attorney Preet Bharara said: “The senseless, deadly violence Ruben Pizzaro allegedly committed on the streets of the Bronx is exactly why this office has pledged to help reduce gun violence in the City. By prosecuting gun cases together with our partners at the FBI and NYPD, we will dismantle violent neighborhood gangs and make New York safer for everyone.”
FBI Assistant Director in Charge Diego Rodriguez said: “As alleged, Pizzaro showed no dignity towards human life with his actions of killing a rival gang member and his involvement in a non-fatal shooting. The FBI will continue to work with our partners to disrupt and dismantle such violent gang activity, and bring those involved to justice.”
Police Commissioner William J. Bratton said: “The safe apprehension of this individual removes a violent criminal and repeat offender from the streets of our City, as alleged. I want to thank the members of the NYPD and our partners in law enforcement in the offices of the United States Attorney for the Southern District of New York and the New York Field Office of the Federal Bureau of Investigation, for their work on this case.”
According to the allegations contained in two complaints filed against PIZZARO:
Pizzaro is a member of a Bronx component of a national gang, and sells narcotics in the vicinity of 180th Street and Arthur Avenue in the Bronx, New York, blocks from where members of a rival gang sell narcotics on behalf of two Bronx-based traffickers. On both October 31 and November 1, 2015, PIZZARO, members of the rival gang, including David Rivera, and one of the traffickers exchanged gunfire. Pizzaro also shot a different member of the rival gang in the hand on November 2, 2015.
Three weeks later, on November 24, 2015, in broad daylight at 9:15 in the morning, PIZZARO shot and killed Rivera in the vicinity of 175th Street and Crotona Avenue. PIZZARO remained a fugitive until yesterday. In the interim, he was involved in another serious act of violence on New Year’s Eve. That day PIZZARO committed a carjacking, forcing the Carjacking Victim at gunpoint to drive him to the vicinity of Ellwood Street and 196th Street in New York, New York. Once there, PIZZARO approached another individual (the “Shooting Victim”) on the street, shot the Shooting Victim in the shoulder, and stole two bags that the Shooting Victim was carrying. A fingerprint from PIZZARO was recovered on the van that had been reported carjacked.
PIZZARO, 23, of the Bronx, New York, is charged with one count of possession of a firearm which causes the death of another individual, which carries a maximum sentence of death, and one count of possession of a firearm in furtherance of a carjacking, which carries a sentence of life in prison.
Mr. Bharara thanked the FBI, the NYPD, and the United States Marshal’s Service for their work on the investigation.
The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Shawn Crowley, Russell Capone, and Robert Allen are in charge of the prosecution.
The charges contained in the complaints are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
United States Citizen Indicted for Supporting and Receiving Military Training from Al ShabaabRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, John P. Carlin, Assistant Attorney General for National Security, Diego Rodriguez, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and William J. Bratton, the Commissioner of the New York City Police Department (“NYPD”), announced today the indictment of MAALIK ALIM JONES based upon his alleged support of al Shabaab, a designated Foreign Terrorist Organization based in Somalia that is allied with al Qaeda. JONES, a United States citizen, was presented before Chief U.S. Magistrate Judge Frank Maas on December 19, 2015, pursuant to a Criminal Complaint. The case is assigned to U.S. District Judge Paul G. Gardephe.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Maalik Alim Jones traveled to Somalia, received military training from al Shabaab, and took up arms as a terrorist fighter with an organization that has declared the United States a target. Now, as ever, we are determined to protect the people of this country from the murderous designs of terrorist organizations. Having allegedly sworn allegiance to al Shabaab, a terrorist organization bent on destroying America, Maalik Jones will now face American justice in a Manhattan federal court.”
Assistant Attorney General John P. Carlin said: “Maalik Alim Jones was charged with providing material support to al Shabaab and receiving training from the terrorist organization. The National Security Division’s highest priority is counterterrorism and we will continue to hold accountable those who seek to provide material support to terrorists.”
FBI Assistant Director-in-Charge Diego Rodriguez said: “This case highlights the international nature of terrorism and the criminal actions taken in pursuit of attacks against others. As alleged herein, Maalik Alim Jones, from Maryland, joined a terrorist organization in Somalia, traveled from New York to Kenya, through Morocco and the UAE, where he was trained to kill and destroy communities. Recently he was caught trying to get to Yemen. We applaud the thorough investigation by the agents and task force officers on FBI’s JTTF, who were able to identify his activities, stop his plans, and bring him here to face the U.S. justice system.”
Commissioner William J. Bratton said: “As alleged, Jones traveled to Somalia to fight on behalf of al Shabaab, learning to fire an AK-47 and rocket propelled grenade. He then used this training to attack the Kenyan government, fighting on behalf of this terrorist organization. The work by detectives and agents of the New York Joint Terrorism Task Force should be commended, and the prosecutors of the Southern District of New York whose efforts led to this indictment.”
According to the allegations in the Indictment, and the Complaint[1] that was unsealed in Manhattan federal court:
In February 2008, the U.S. Department of State designated al Shabaab as a Foreign Terrorist Organization. Al Shabaab has used violent means to, among other things, destabilize the government of Somalia, quell the Somali population, and force the withdrawal of foreign troops in Somalia. A former leader of al Shabaab, whose exhortations were echoed by the leadership of al Qaeda, called for foreign fighters to join al Shabaab in a “holy war” in Somalia. As a result of al Shabaab’s recruitment efforts, men from other countries – including the U.S. – have traveled to Somalia to engage in violent jihad. Since al Shabaab’s designation as a Foreign Terrorist Organization in February 2008, it has made several public statements demonstrating its intent to harm U.S. interests. In February 2012, the then-Emir of al Shabaab swore allegiance to Ayman al-Zawahiri, the Emir of al Qaeda, stating that al Shabaab “will hereby merge into al Qa’ida.”
Al Shabaab also maintains a specialized fighting force, known as Jaysh Ayman, that is responsible for carrying out commando-style attacks and cross-border raids in which fighters, among other things, travel across the land border between Somalia and Kenya to target individuals and carry out attacks against civilian and military targets in Kenya.
In or about July 2011, JONES traveled via commercial aircraft from New York to Kenya, with stopovers in Morocco and the United Arab Emirates. After arriving in Kenya, JONES traveled by land from Kenya to Somalia, where he trained, worked, and fought with al Shabaab in Somalia. Among other things, JONES received military training at an al Shabaab training camp, where he learned to operate an AK-47 assault rifle and rocket-propelled grenades. JONES also became a member of al Shabaab’s Jaysh Ayman, and participated in combat against soldiers of the Kenyan government on behalf of al Shabaab.
JONES has appeared with other al Shabaab fighters in at least two videos that were recovered from an al Shabaab fighter. In one of the videos, JONES possessed a firearm, and is seen with several al Shabaab fighters who participated in a June 14, 2015, attack on a Kenyan Defense Force base in Lamu County, Kenya, during which two Kenyan soldiers were killed.
* * *
JONES, 31, of Maryland, is charged with five counts: (1) conspiracy to provide material support to al Shabaab; (2) providing, and attempting to provide, material support to al Shabaab; (3) conspiracy to receive military-type training from al Shabaab; (4) receipt of military-type training from al Shabaab; and (5) possessing, carrying, and using firearms during and in relation to a crime of violence. If convicted, JONES faces a maximum sentence of life in prison on the charges. In addition, Count Five carries a mandatory minimum sentence of 30 years in prison. The minimum and maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the Court.
Mr. Bharara praised the investigative work of the FBI’s New York Joint Terrorism Task Force – which principally consists of agents from the FBI and detectives from the New York City Police Department. He also expressed gratitude to the U.S. Department of Justice’s National Security Division and Office of International Affairs, and the U.S. Department of State, for their assistance.
This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Sean S. Buckley and Andrew J. DeFilippis, and National Security Division Trial Attorney Josh Parecki, are in charge of the prosecution.
The charges contained in the Indictment and Complaint are merely accusations and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the texts of the Indictment and the Complaint and the description of the Indictment and Complaint set forth below constitute only allegations, and every fact described should be treated as an allegation.
U.S. Citizen Indicted for Supporting and Receiving Military Training from Al ShabaabRead the Press Release
Maalik Alim Jones, 31, of Maryland, was indicted based on his alleged support of al Shabaab, a designated foreign terrorist organization based in Somalia that is allied with al Qaeda. Jones, a U.S. citizen, was presented before Chief U.S. Magistrate Judge Frank Maas of the Southern District of New York on Dec. 19, 2015, pursuant to a criminal complaint.
The charges were announced today by Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Preet Bharara of the Southern District of New York, Assistant Director in Charge Diego Rodriguez of the FBI’s New York Field Office and Commissioner William J. Bratton of the New York City Police Department.
“Maalik Alim Jones was charged with providing material support to al Shabaab and receiving training from the terrorist organization,” said Assistant Attorney General Carlin. “The National Security Division’s highest priority is counterterrorism and we will continue to hold accountable those who seek to provide material support to terrorists.”
“As alleged, Maalik Alim Jones traveled to Somalia, received military training from al Shabaab, and took up arms as a terrorist fighter with an organization that has declared the United States a target,” said U.S. Attorney Bharara. “Now, as ever, we are determined to protect the people of this country from the murderous designs of terrorist organizations. Having allegedly sworn allegiance to al Shabaab, a terrorist organization bent on destroying America, Maalik Jones will now face American justice in a Manhattan federal court.”
“This case highlights the international nature of terrorism and the criminal actions taken in pursuit of attacks against others,” said Assistant Director in Charge Rodriguez. “As alleged herein, Maalik Alim Jones, from Maryland, joined a terrorist organization in Somalia, traveled from New York to Kenya, through Morocco and the UAE, where he was trained to kill and destroy communities. Recently he was caught trying to get to Yemen. We applaud the thorough investigation by the agents and task force officers on FBI’s JTTF, who were able to identify his activities, stop his plans, and bring him here to face the U.S. justice system.”
“As alleged, Jones traveled to Somalia to fight on behalf of al Shabaab, learning to fire an AK-47 and rocket propelled grenade,” said Commissioner Bratton. “He then used this training to attack the Kenyan government, fighting on behalf of this terrorist organization. The work by detectives and agents of the New York Joint Terrorism Task Force should be commended, and the prosecutors of the Southern District of New York whose efforts led to this indictment.”
According to the allegations in the indictment and the complaint, which was unsealed today:
In or about July 2011, Jones traveled via commercial aircraft from New York to Kenya, with stopovers in Morocco and the United Arab Emirates. After arriving in Kenya, Jones traveled by land from Kenya to Somalia where he trained, worked and fought with al Shabaab in Somalia. Among other things, Jones received military training at an al Shabaab training camp, where he learned to operate an AK-47 assault rifle and rocket-propelled grenades. Jones also became a member of al Shabaab’s specialized fighting force, Jaysh Ayman, and participated in combat against soldiers of the Kenyan government on behalf of al Shabaab.
Jones has appeared with other al Shabaab fighters in at least two videos that were recovered from an al Shabaab fighter. In one of the videos, Jones possessed a firearm, and is seen with several al Shabaab fighters who, on June 14, 2015, participated in an attack on a Kenyan Defense Force base in Lamu County, Kenya, during which two Kenyan soldiers were killed.
Jones is charged with conspiracy to provide material support to al Shabaab; providing, and attempting to provide, material support to al Shabaab; conspiracy to receive military-type training from al Shabaab; receipt of military-type training from al Shabaab; and possessing, carrying and using firearms during and in relation to a crime of violence. If convicted, Jones faces a maximum sentence of life imprisonment on the charges. In addition, the firearms offense carries a mandatory minimum sentence of 30 years’ imprisonment. The minimum and maximum potential sentences are prescribed by Congress and are provided here for information purposes only, as any sentencing of the defendant would be determined by the court.
The charges contained in the complaint are merely accusations and the defendant is presumed innocent unless and until proven guilty.
Assistant Attorney General Carlin joined U.S. Attorney Bharara in praising the investigative work of the FBI’s New York Joint Terrorism Task Force. The Justice Department’s Office of International Affairs also provided significant assistance.
This case is being prosecuted by Assistant U.S. Attorneys Sean S. Buckley and Andrew J. DeFilippis of the Southern District of New York and Trial Attorney Josh Parecki of the National Security Division’s Counterterrorism Section.
Maalik Jones Indictment
Maalik Jones Complaint
Statement of U.S. Attorney Preet Bharara Relating to Moreland Commission InvestigationRead the Press Release
“After a thorough investigation of interference with the operation of the Moreland Commission and its premature closing, this Office has concluded that, absent any additional proof that may develop, there is insufficient evidence to prove a federal crime. We continue to have active investigations related to substantive inquiries that were being conducted by the Moreland Commission at the time of its closure.”
Doctor and Owner of Bronx Clinics Involved in Illegal Distribution of More Than Five Million Oxycodone Pills Is Sentenced to 12 Years in PrisonRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced the conviction of KEVIN LOWE, the owner of “Astramed,” a purported medical clinic with multiple locations in the Bronx, New York, and from which more than five million tablets of the prescription painkiller oxycodone were unlawfully distributed over a three-year period. On May 4, 2015, LOWE was convicted of a conspiracy to distribute narcotics following a two-week jury trial presided over by U.S. District Judge Lorna G. Schofield. Today, Judge Schofield sentenced LOWE to a term of 144 months in prison.
Manhattan U.S. Attorney Preet Bharara said: “Kevin Lowe and his co-defendants used a network of bad doctors and street-level dealers to flood the streets of New York City with millions of highly addictive, potent opioids, all under the guise of a legitimate medical clinic. Instead of medical care, Lowe and others illegally dispensed opioids, enabling a vicious cycle of addiction that affects too many in our communities. Thanks to the Drug Enforcement Administration and the New York City Police Department, this so-called ‘clinic’ is out of business and those responsible are been held accountable.”
According to the allegations contained in the Indictment and the evidence presented by the government during LOWE’s trial:
From approximately January 2011 until February 2014, a drug distribution ring operated out of “Astramed,” a purported medical clinic with multiple locations in the Bronx that LOWE owned and operated. At these clinics, doctors working under LOWE’s direction wrote tens of thousands of medically unnecessary prescriptions for oxycodone, a highly addictive, prescription opioid used to treat severe and chronic pain conditions. Oxycodone prescriptions, once written, have enormous cash value to street-level drug dealers, who can fill prescriptions at most pharmacies and resell the resulting pills at vastly inflated rates. Indeed, a single prescription for 180 30-milligram oxycodone pills has an average resale value in New York City of more than $6,000, and far more in nearby states.
LOWE capitalized on the black market for oxycodone by employing board-certified, state-licensed doctors who were willing to write medically unnecessary prescriptions for large quantities of oxycodone in return for cash. LOWE’s clinics, which accepted no insurance from patients seeking oxycodone prescriptions, typically charged $300 in cash for “doctor visits” that usually lasted just a minute or two, involved no actual physical examination, and consistently resulted in the issuance of a prescription for large doses of oxycodone, typically 180 30-milligram tablets, or a daily dosage of six 30-milligram tablets.
LOWE’s clinics bore little resemblance to a standard medical office. For example, on a daily basis, crowds of up to 100 people gathered outside the Astramed office on Southern Boulevard (the “Clinic”) clamoring to see one of the doctors at the clinic in order to obtain a prescription for oxycodone. Virtually none of these individuals had any medical need for oxycodone, or any legitimate medical record documenting an ailment for which oxycodone would be prescribed. Instead, most of these individuals were members of “crews” – that is, they were recruited and paid by high-level drug traffickers, oxycodone distributors (the “Crew Chiefs”), to pose as “patients” in order to receive medically unnecessary prescriptions from the doctors. The Crew Chiefs then arranged for, and oversaw the filling of, the resulting prescription at various pharmacies and took possession of the oxycodone pills to be resold on the street. Crew Chiefs also paid the Clinic’s employees hundreds of dollars in cash at a time to get their Crew Members into the Clinic to see one of the doctors.
In total, between approximately January 2011 and February 2014, Astramed doctors issued 34,925 medically unnecessary prescriptions for oxycodone, comprising nearly 5.5 million oxycodone tablets with a street value of more than $165 million. LOWE alone collected more than $7 million in cash for these sham “doctor visits” during this time period.
* * *
On May 4, 2015, after a two-week jury trial, LOWE, 55, of Melville, New York, was convicted of one count of conspiracy to distribute and possess with intent to distribute oxycodone, which carries a maximum sentence of 20 years in prison. In addition to the prison sentence, LOWE was ordered to forfeit $2,338,661. LOWE has previously forfeited $455,351 in proceeds earned from his unlawful operation of the Astramed clinics and seized at the time of his arrest.
Twenty-three additional participants in the drug distribution ring – including doctors, clinic employees, and drug traffickers who oversaw crews of “patients” whom they sent into the clinics in order to obtain medically unnecessary prescriptions – have previously been sentenced by Judge Schofield pursuant to guilty pleas and are included in the chart below. Two defendants have pled guilty but have not yet been sentenced, and one defendant entered into a deferred prosecution agreement.
Mr. Bharara thanked the Drug Enforcement Administration and the New York City Police Department for their work on the investigation. Mr. Bharara also thanked the Town of Orangetown Police Department, the Westchester County Police Department, the United States Department of Health and Human Services, the New York State Health Department’s Bureau of Narcotic Enforcement, the Office of the Medicaid Inspector General, New York City's Human Resources Administration, the New York State Attorney General’s Office Medicaid Fraud Control Unit, the Internal Revenue Service-Criminal Investigation, and the El Dorado Task Force for their assistance.
The case is being prosecuted by the Office’s Narcotics Unit. Assistant U.S. Attorneys Edward B. Diskant and Tatiana R. Martins are in charge of the prosecution.
DEFENDANT
CHARGE
SENTENCE
Robert Terdiman
Pled guilty to conspiring to distribute oxycodone on March 20, 2015
Sentenced October 20, 2015, to time served, followed by one year of supervised release. As part of his plea, DR. TERDIMAN also forfeited $355,086
David Moody
Pled guilty to conspiring to distribute oxycodone on July 15, 2014
Sentenced November 14, 2014, to 90 months in prison, followed by three years of supervised release
Rashawn Whidbee
Pled guilty to conspiring to distribute oxycodone on July 29, 2014
Sentenced December 1, 2014, to 18 months in prison, followed by three years of supervised release
Robert Williams
Pled guilty to conspiring to distribute oxycodone on July 11, 2014
Sentenced October 14, 2014, to 48 months in prison, followed by three years of supervised release
Donald Carr
Pled guilty to conspiring to distribute oxycodone on July 14, 2014
Sentenced November 21, 2014, to 132 months in prison, followed by three years of supervised release
George Barrow
Pled guilty to conspiring to distribute oxycodone on July 29, 2014
Sentenced February 24, 2015, to 102 months in prison, followed by three years of supervised release
Bradley Mitchell
Pled guilty to conspiring to distribute oxycodone on August 3, 2014
Sentenced March 4, 2015, to 132 months in prison , followed by three years of supervised release
Elijah Pinckney
Pled guilty to conspiring to distribute oxycodone on September 29, 2014
Sentenced January 6, 2015, to 46 months in prison, followed by three years of supervised release
Evelyn White
Pled guilty to conspiring to distribute oxycodone on February 24, 2015
Sentenced August 10, 2015, to 12 months in prison, followed by three years of supervised release
Cedric White
Pled guilty to conspiring to distribute oxycodone on February 13, 2015
Sentenced August 3, 2015, to 24 months in prison, followed by three years of supervised release
Sheila Carter
Pled guilty to conspiring to distribute oxycodone on March 3, 2015
Sentenced July 27, 2015, to 40 months in prison, followed by three years of supervised release
Jonathan Huertas
Pled guilty to conspiring to distribute oxycodone on March 16, 2015
Sentenced August 27, 2015, to 32 months in prison, followed by three years of supervised release
OLGA MENDOZA DELAROSA
Pled guilty to conspiring to distribute oxycodone on September 12, 2014
Sentenced on February 18, 2015, to 30 months in prison, followed by three years of supervised release
BRYAN RIVERA
Pled guilty to conspiring to distribute oxycodone on March 2, 2015
Sentenced on June 4, 2015, to 12 months and a day in prison, followed by three years of supervised release
SAMANTHA LIVINGSTON
Pled guilty to conspiring to distribute oxycodone on April 2, 2015
Sentenced on December 1, 2015 to three years of probation
BRIDGET HIGGINS
Completed the term of a deferred prosecution agreement on November 13, 2015.
DAVID STEWART
Pled guilty to conspiring to distribute oxycodone on December 17, 2014
Sentenced on June 10, 2015, to four months in prison, followed by three years of supervised release
VOKART ALSAIDI
Pled guilty to conspiring to distribute oxycodone on December 17, 2014
Sentenced on April 24, 2015, to 60 months in prison, followed by three years of supervised release
KENRICK CHANDLER
Pled guilty to conspiring to distribute oxycodone on October 9, 2014
Sentenced on May 11, 2015 to 130 months in prison, followed by three years of supervised release
DARRYL BRATHWAITE
Pled guilty to conspiring to distribute oxycodone on September 9, 2014
Sentenced on December 11, 2014 to 52 months in prison, followed by three years of supervised release
THEODORE ROOSEVELT JOHNSON
Pled guilty to conspiring to distribute oxycodone on July 8, 2014
Sentenced on January 30, 2015, to 34 months in prison, followed by three years of supervised release
WALEED ALSAIDI
Pled guilty to conspiring to distribute oxycodone on February 4, 2015
Sentenced on July 8, 2015, to 30 months in prison, followed by 3 years of supervised release
RONALD CARR
Pled guilty to conspiring to distribute oxycodone on August 4, 2014
Sentenced on November 18, 2014 to 34 months in prison, followed by three years of supervised release
Member of Al Qaeda in the Arabian Peninsula Pleads Guilty to Terrorism ChargesRead the Press Release
Minh Quang Pham, aka Amin, 33, pleaded guilty today in the Southern District of New York to terrorism charges based on Pham’s efforts in support of al Qaeda in the Arabian Peninsula (AQAP), a designated foreign terrorist organization. Pham was arrested in the United Kingdom on June 29, 2012, and was extradited to the United States on Feb. 26, 2015. Pham pleaded guilty to one count of providing material support to AQAP, one count of conspiring to receive military training from AQAP and one count of possessing and using a machine gun in furtherance of crimes of violence.
The plea was announced by Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Preet Bharara of the Southern District of New York and Assistant Director in Charge Paul M. Abbate of the FBI’s Washington Field Office.
“Minh Quang Pham provided material support to al Qaeda in the Arabian Peninsula and received explosives training from Anwar Aulaqi while in Yemen. With his guilty plea, he will be held accountable for his terrorist activities,” said Assistant Attorney General Carlin. “Counterterrorism is the National Security Division’s highest priority, and we will continue to bring justice to those who seek to aid designated foreign terrorist organizations in their efforts to wage violent attacks against the United States and our allies.”
“As he has now admitted in an American court of law, Minh Quang Pham swore a terrorist’s oath to wage jihad for AQAP,” said U.S. Attorney Bharara. “Pham traveled to Yemen to receive terrorist training, including instructions in bomb-making by the now-deceased senior AQAP leader Anwar Aulaqi. Vowing to wage violent jihad and brandishing a Kalashnikov rifle, Pham provided material support to the highest levels of AQAP. Now, all that awaits him is sentencing for his admitted acts of terrorism.”
“Defendant Minh Quang Pham sought and received military-style training from an al Qaeda affiliate with the intent to martyr himself and inflict harm on behalf of the group,” said Assistant Director in Charge Abbate. “He also attempted to inspire others toward violence through the preparation and dissemination of terrorist propaganda. This case and the subsequent extradition of Pham underscores the unwavering resolve of the FBI and our international law enforcement partners to relentlessly pursue and capture dangerous terrorists anywhere in the world and bring them to face justice in the United States.”
According to the indictment, extradition materials and court filings, and statements made at related court proceedings, including today’s guilty plea:
In December 2010, after informing others that he planned to travel to Ireland, Pham traveled from London, where he resided, to Yemen, the principal base of operations for AQAP. Pham traveled to Yemen in order to join AQAP, to wage jihad on behalf of AQAP and to martyr himself for AQAP’s cause. After arriving in Yemen, he swore an oath of loyalty to AQAP in the presence of an AQAP commander.
While in Yemen in 2010 and 2011, Pham provided assistance to and received training from Anwar Aulaqi, a U.S.-born senior leader of AQAP. Aulaqi personally taught Pham how to create a lethal explosive device using household chemicals and directed Pham to detonate such an explosive device at the arrivals area of London’s Heathrow International Airport following Pham’s return to the United Kingdom in 2011.
During his time in Yemen, Pham also assisted with the preparation and dissemination of AQAP’s propaganda magazine, Inspire. Pham worked directly with a now-deceased U.S. citizen who was a prominent member of AQAP and responsible for editing and publishing Inspire. In addition, AQAP trained Pham in the use of a Kalashnikov assault rifle and provided him such a rifle, which he used in furtherance of his activities on behalf of AQAP in Yemen.
On July 27, 2011, Pham returned to the United Kingdom. Upon his arrival at London’s Heathrow International Airport, U.K. authorities detained Pham, searched him and recovered various materials from him, including various electronic media that contained computer files forensically identical to those possessed by a cooperating witness who had previously reported sharing electronic documents with Pham while they were in Yemen with AQAP. In addition, Pham was found to be in possession of a live round of .762 caliber armor-piercing ammunition, which is consistent with ammunition that is used in a Kalashnikov assault rifle.
Pham was arrested in the United Kingdom on June 29, 2012, pursuant to a provisional arrest warrant obtained by the U.S. Attorney’s Office of the Southern District of New York, which then requested his extradition. Pham then challenged his extradition to the United States. On Feb. 3, 2015, a court in the United Kingdom denied Pham’s challenge and ordered him extradited to the United States. Pham arrived in the Southern District of New York on Feb. 26, 2015.
Pham faces a mandatory minimum sentence of 30 years in prison and a maximum sentence of life in prison. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only as the final sentence will be determined by the judge. Pham is scheduled to be sentenced on April 14, 2016.
Assistant Attorney General Carlin joined U.S. Attorney Bharara in praising the extraordinary investigative work of the FBI’s Washington Field Office. They also expressed their gratitude to the New York Joint Terrorism Task Force for the critical role it played in the investigation and prosecution. Assistant Attorney General Carlin and U.S. Attorney Bharara also thanked the Department of Justice’s Office of International Affairs for their significant assistance, as well as the Metropolitan Police Service and the Crown Prosecution Service for their cooperation in the investigation, prosecution and extradition.
This case is being prosecuted by Assistant U.S. Attorneys Anna M. Skotko, Sean S. Buckley, Shane T. Stansbury and Ian McGinley of the Southern District of New York and Trial Attorneys Kelly Harris and Rebecca Magnone of the National Security Division’s Counterterrorism Section.
Pham Plea Agreement