Southern District of New York

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 Field Office of the Federal Bureau of Investigation (“FBI”), announced today the filing of a civil forfeiture complaint against the funds in at least 20 bank accounts around the world that are alleged to constitute the proceeds of an elaborate scheme to defraud a United States company (the “Victim Company”).  In particular, the complaint filed today in Manhattan federal court alleges that the perpetrators of this fraud created a fake email address and posed as one of the Victim Company’s legitimate vendors (the “Vendor”) in communications with a professional services company (the “Professional Services Company”) that the Victim Company retained to handle the details and logistics of vendor payments.  Through these fraudulent communications, the perpetrators of the scheme caused the Victim Company to transfer nearly $100 million due to the Vendor to an account at Eurobank Cyprus, Ltd (“Eurobank”) that was actually under their control.  Almost immediately after funds were transferred into this account, the perpetrators of this scheme caused portions of the fraud proceeds to be further dispersed to accounts under their control around the world, including in Latvia, Estonia, Hungary, Lithuania, Slovakia, Estonia, and Hong Kong.

Through the timely actions of officials at Eurobank, and in coordination with U.S. and Cypriot law enforcement authorities, more than $74 million of the stolen funds have already been returned to the Victim Company.  Foreign governments acting at the request of U.S. authorities have restrained 20 accounts worldwide that received portions of the remaining ill-gotten funds, and the funds in those accounts are the subject of the complaint filed today in Manhattan federal court.

Manhattan U.S. Attorney Preet Bharara said: “Criminals can be resourceful and unrelenting in their efforts to scam innocent victims out of money.  Here, the alleged perpetrators – through a fake email address and by impersonating a legitimate vendor – almost got away with $100 million.  Thanks to the timely actions of law enforcement here and abroad, as well as by Eurobank in Cyprus, where the stolen funds were first sent, $74 million has already been returned to the victim company.  With this civil forfeiture action, we seek to return the rest.”

FBI Assistant Director-in-Charge Diego Rodriguez, said: “This modern-day impersonation scheme used a fake email account to scam a business instead of the old way of in-person imitation by the perpetrators.  However, this scam was cut short in the end thanks to modern-day tools used by banks to stop suspicious transactions and cooperation by our foreign partners to restrain the transferred funds.”   

As alleged in the Complaint:

The Victim Company is an American-based corporation doing business worldwide.  Like many corporations, the Victim Company has contractors and vendors who are paid via wire transfer for services provided, including the Vendor, which is based in Asia.  During all times relevant to the Complaint, the Victim Company retained the Professional Services Company to communicate with vendors and handle the details of vendor payments.         

Over the course of several weeks in August and September 2015, the perpetrators of the scheme described in the Complaint managed to impersonate the Vendor by creating a fake email address that resembled email addresses used by actual employees of the Vendor.  Using this fake email address, the perpetrators then communicated with an email account maintained for the purpose of allowing vendors to communicate with the Professional Services Company on behalf of the Victim Company.  Through those email communications, the perpetrators of the scheme convinced the Professional Services Company to change the designated bank account to which the Victim Company would make recurring payments to the Vendor for services rendered.  As a result, payments from the Victim Company meant for the Vendor were transferred to an account under the control of the perpetrators of this scheme (“Subject Account-1”) rather than an account actually affiliated with the Vendor. 

Once this change was put into effect, the Professional Services Company, on behalf of the Victim Company, began directing a series of payments from Victim Company accounts in the United States to Subject Account-1 that were intended for the Vendor.  Specifically, between August 21, 2015, and September 14, 2015, approximately 16 payments intended for the Vendor as payment for services rendered to the Victim Company were wired for deposit into Subject Account-1, totaling approximately $98,879,545.80.  Officials at Eurobank developed concerns regarding these transfers and, as a result, restrained approximately $74 million of the transferred funds before they settled into Subject Account-1.  In coordination with law enforcement authorities, those funds have since been returned to the Victim Company.    

In regard to the approximately $25 million that actually settled into Subject Account-1, the perpetrators of the scheme then laundered portions of those crime proceeds through at least 19 additional accounts, including accounts in Cyprus, Latvia, Hungary, Estonia, Lithuania, Slovakia, and Hong Kong.  Those accounts, along with Subject Account-1, have since been restrained by foreign governments acting at the request of U.S. authorities. 

 

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Mr. Bharara praised the outstanding investigative work of FBI.  He also thanked the

Financial Crimes Enforcement Network (“FinCEN”) of the United States Department of the Treasury, the Law Office of the Republic of Cyprus Unit for Combating Money Laundering, and Eurobank Cyprus Ltd. for all of their assistance in the investigation and the return of funds to the Victim Company.

This investigation is being handled by the Office’s Money Laundering and Asset Forfeiture Unit and Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Edward B. Diskant and Megan L. Gaffney are in charge of the case.

The investigation is ongoing.

Preet Bharara, the United States Attorney for the Southern District of New York, John P. Carlin, Assistant Attorney General for National Security, Angel M. Melendez, Special Agent in Charge of the New York Field Office of the Department of Homeland Security, Homeland Security Investigations (“HSI”), Jonathan Carson, Special Agent in Charge of the U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement, New York Field Office (“DOC”), and Craig Rupert, Special Agent in Charge of the Department of Defense, Defense Criminal Investigative Service, Northeast Field Office (“DCIS”), announced the arrest of FUYI SUN, a/k/a “Frank,” a citizen of the People’s Republic of China (“China”), in connection with a scheme to illegally export to China, without a license, high-grade carbon fiber that is used primarily in aerospace and military applications.

SUN was arrested yesterday after traveling to New York to meet with undercover agents (“UCs”) in an effort to obtain the specialized fiber, which – due to its military and aerospace applications – requires an export license for export to China.

SUN was presented last night in Manhattan federal court before U.S. Magistrate Judge James L. Cott.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Fuyi Sun attempted for years to acquire high-grade carbon fiber for illegal export to China.  Earlier this week, after traveling to New York from China to finalize the deal, Sun allegedly told undercover agents that the carbon fiber he sought was headed for the Chinese military, and then paid tens of thousands of dollars in cash to purchase two cases of it.  And to avoid law enforcement detection, Sun allegedly directed the undercover agents to ship the carbon fiber in unmarked boxes and to falsify the shipping documents regarding the contents of the boxes.”

Assistant Attorney General John P. Carlin said: “Sun allegedly attempted to procure high grade carbon fiber for a source he repeatedly identified as the Chinese military.  The carbon fiber – which has many aerospace and defense applications – is strictly controlled, and Sun expressed a willingness to pay a premium to skirt U.S. export laws.  The National Security Division will continue to work to identify and hold accountable those who seek to violate IEEPA and other laws designed to protect our strategic commodities from those who may wish us harm.”

HSI Special Agent in Charge Angel M. Melendez said: “Keeping items such as this high grade carbon fiber, which can be used for military applications, from falling into the wrong hands possibly endangering national security, is a job HSI takes very seriously. Through this investigation, we have disrupted an alleged attempt to knowingly circumvent export controls and ensured this material will not be used for nefarious purposes.”

DOC Special Agent in Charge Jonathan Carson said: “A top priority of The Office of Export Enforcement is identifying and disrupting the illicit export of items for unauthorized military end-uses and users in China.  Carbon fiber has military, missile and nuclear applications.  In this case, working with our law enforcement partners we thwarted an alleged attempt to illegally export carbon fiber to China.”

DCIS Northeast Field Office Special Agent in Charge Craig Rupert said “The recent arrest ‎reinforces the commitment of the Defense Criminal Investigative Service (DCIS) to halting the spread of Defense technology to restricted nations. The ongoing partnership with other law enforcement agencies is essential to shielding America's investment in defense.”

According to the allegations in the Complaint that was filed yesterday in Manhattan federal court:[1]

Since approximately 2011, SUN has attempted to acquire extremely high-grade carbon fiber, including Toray type M60JB-3000-50B carbon fiber (“M60 Carbon Fiber”).  M60 Carbon Fiber has applications in aerospace technologies, unmanned aerial vehicles (commonly known as “drones”) and other government defense applications.  Accordingly, M60 Carbon Fiber is strictly controlled – including that it requires a license for export to China – for nuclear non-proliferation and anti-terrorism reasons.

In furtherance of his attempts to illegally export M60 Carbon Fiber from the United States to China without a license, SUN contacted what he believed was a distributor of carbon fiber – but which was, in fact, an undercover entity created by HSI and “staffed” by HSI undercover special agents (the “UC Company”).  SUN inquired about purchasing the M60 Carbon Fiber without the required license.  In the course of his years-long communications with the undercover agents and UC Company, SUN repeatedly suggested various security measures that he believed would protect them from “U.S. intelligence.”  Among other such measures, at one point, SUN instructed the undercover agents to use the term “banana” instead of “carbon fiber” in their communications.  Consequently, soon thereafter he inquired about purchasing 450 kilograms of “banana” for more than $62,000.  In order to avoid detection, SUN also suggested removing the identifying barcodes for the M60 Carbon Fiber, prior to transshipment, and further suggested that they identify the M60 Carbon Fiber as “acrylic fiber” in customs documents.

On or about April 11, 2016, SUN traveled from China to New York for the purpose of purchasing M60 Carbon Fiber from the UC Company.  During meetings with the undercover agents, on or about April 11 and 12, 2016, among other things, SUN repeatedly suggested that the Chinese military was the ultimate end-user for the M60 Carbon Fiber he sought to acquire from the UC Company.  SUN claimed to have personally worked in the Chinese missile program.  And SUN asserted that he maintained a close relationship with the Chinese military, had a sophisticated understanding of the Chinese military’s need for carbon fiber, and suggested that he would be supplying the M60 Carbon Fiber to the Chinese military or to institutions closely associated with it. 

On or about April 12, 2016, SUN agreed to purchase two cases of M60 Carbon Fiber from the UC Company.  SUN paid the undercover agents $23,000 in cash for the carbon fiber.  He also paid an additional $2,000 to the undercover agents as compensation for the risk he believed they were taking to illegally export the carbon fiber to China without a license.           

*                *                *

The Complaint charges SUN, age 52, in three counts: Count One charges attempt to violate the International Emergency Economic Powers Act (“IEEPA”); Count Two charges conspiracy to violate IEEPA; and Count Three charges attempt to smuggle goods from the United States.  Counts One and Two each carry a maximum sentence of 20 years in prison.  Count Three carries a maximum sentence of 10 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the extraordinary investigative work of the New York Field Office of HSI, the DOC’s Bureau of Industry and Security’s Office of Export Enforcement, the DCIS New York Office, and the Department of Justice, National Security Division, Counterintelligence and Export Control Section.

This prosecution is being handled by the Office’s Terrorism and International Narcotics and Complex Frauds and Cybercrime Units.  Assistant United States Attorneys Matthew Podolsky, Patrick Egan, Sean Buckley, and Nick Lewin are in charge of the prosecution.  David Recker, Trial Attorney in the National Security Division, Counterintelligence and Export Control Section, is also assisting in the prosecution.

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

 

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

Fuyi Sun, aka Frank, 52, a citizen of the People’s Republic of China, was arrested yesterday in connection with a scheme to illegally export to China, without a license, high-grade carbon fiber that is used primarily in aerospace and military applications.

The arrest was announced by Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Preet Bharara of the Southern District of New York, Special Agent in Charge Angel M. Melendez of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI) New York Field Office, Special Agent in Charge Jonathan Carson of the U.S. Department of Commerce (DOC) Bureau of Industry and Security’s Office of Export Enforcement New York Field Office and Special Agent in Charge Craig Rupert of the Department of Defense’s Defense Criminal Investigative Service (DCIS) Northeast Field Office.

The complaint charges Sun with one count of attempting to violate the International Emergency Economic Powers Act (IEEPA), one count of conspiracy to violate IEEPA and one count of attempting to smuggle goods from the United States.  Sun was arrested yesterday after traveling to the United States to meet with undercover agents (UCs) in an effort to obtain the specialized fiber which, due to its military and aerospace applications, requires an export license for export to China.  Sun was presented last night before U.S. Magistrate Judge James L. Cott of the Southern District of New York.

“Sun allegedly attempted to procure high grade carbon fiber for a source he repeatedly identified as the Chinese military,” said Assistant Attorney General Carlin.  “The carbon fiber – which has many aerospace and defense applications – is strictly controlled, and Sun expressed a willingness to pay a premium to skirt U.S. export laws.  The National Security Division will continue to work to identify and hold accountable those who seek to violate IEEPA and other laws designed to protect our strategic commodities from those who may wish us harm.”

“As alleged, Fuyi Sun attempted for years to acquire high-grade carbon fiber for illegal export to China,” said U.S. Attorney Bharara.  “Earlier this week, after traveling to New York from China to finalize the deal, Sun allegedly told undercover agents that the carbon fiber he sought was headed for the Chinese military, and then paid tens of thousands of dollars in cash to purchase two cases of it.  And to avoid law enforcement detection, Sun allegedly directed the undercover agents to ship the carbon fiber in unmarked boxes and to falsify the shipping documents regarding the contents of the boxes.”

“Keeping items such as this high grade carbon fiber, which can be used for military applications, from falling into the wrong hands possibly endangering national security, is a job HSI takes very seriously,” said Special Agent in Charge Melendez.  “Through this investigation, we have disrupted an alleged attempt to knowingly circumvent export controls and ensured this material will not be used for nefarious purposes.”

“A top priority of the Office of Export Enforcement is identifying and disrupting the illicit export of items for unauthorized military end-uses and users in China,” said Special Agent in Charge Carson.  “Carbon fiber has military, missile and nuclear applications.  In this case, working with our law enforcement partners we thwarted an alleged attempt to illegally export carbon fiber to China.”

“The recent arrest ‎reinforces the commitment of the Defense Criminal Investigative Service (DCIS) to halting the spread of Defense technology to restricted nations,” said Special Agent in Charge Rupert.  “The ongoing partnership with other law enforcement agencies is essential to shielding America's investment in defense.”

According to the allegations in the complaint that was filed yesterday in the Southern District of New York:

Since approximately 2011, Sun has attempted to acquire extremely high-grade carbon fiber, including Toray type M60JB-3000-50B carbon fiber (M60 Carbon Fiber).  M60 Carbon Fiber has applications in aerospace technologies, unmanned aerial vehicles (commonly known as drones) and other government defense applications.  Accordingly, M60 Carbon Fiber is strictly controlled – including that it requires a license for export to China – for nuclear non-proliferation and anti-terrorism reasons.

In furtherance of his attempts to illegally export M60 Carbon Fiber from the United States to China without a license, Sun contacted what he believed was a distributor of carbon fiber, but which was, in fact, an undercover entity created by HSI and staffed by HSI UCs.  Sun inquired about purchasing the M60 Carbon Fiber without the required license.  In the course of his years-long communications with the UCs, Sun repeatedly suggested various security measures that he believed would protect them from U.S. intelligence.  Among other such measures, at one point, Sun instructed the undercover agents to use the term “banana” instead of “carbon fiber” in their communications.  Consequently, soon thereafter he inquired about purchasing 450 kilograms of “banana” for more than $62,000.  In order to avoid detection, Sun also suggested removing the identifying barcodes for the M60 Carbon Fiber prior to transshipment and further suggested that they identify the M60 Carbon Fiber as “acrylic fiber” in customs documents.

During meetings with the UCs, on or about April 11 and 12, 2016, among other things, Sun repeatedly suggested that the Chinese military was the ultimate end-user for the M60 Carbon Fiber he sought to acquire; claimed to have personally worked in the Chinese missile program; and asserted that he maintained a close relationship with the Chinese military, had a sophisticated understanding of the Chinese military’s need for carbon fiber and suggested that he would be supplying the M60 Carbon Fiber to the Chinese military or to institutions closely associated with it. 

On or about April 12, 2016, Sun agreed to purchase two cases of M60 Carbon Fiber from the UCs and paid $23,000 in cash.  He paid an additional $2,000 to the UCs as compensation for the risk he believed they were taking to illegally export the carbon fiber to China without a license.

Attempting to violate IEEPA and conspiracy to violate IEEPA each carry a maximum sentence of 20 years in prison.  Attempting to smuggle goods from the United States carries a maximum sentence of 10 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

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 extraordinary investigative work of the HSI’s New York Field Office, DOC’s Bureau of Industry and Security’s Office of Export Enforcement and DCIS New York Office.

The case is being prosecuted Assistant U.S. Attorneys Matthew Podolsky, Patrick Egan, Sean Buckley and Nick Lewin of the Southern District of New York, with assistance from Trial Attorney David Recker of the National Security Division’s Counterintelligence and Export Control Section.

Sun Complaint

Preet Bharara, United States Attorney for the Southern District of New York, announced today the successful forfeiture of a Tyrannosaurus bataar skull (the “Bataar Skull”) unlawfully taken from the Gobi Desert in Mongolia.  The Bataar Skull, a fossil from the Cretaceous period, which ended approximately 65 million years ago, had been auctioned in Manhattan in 2007 after being unlawfully brought into the United States.  The current owner of the Bataar Skull, having been informed of its origins and the circumstances of its importation into the United States, consented to its forfeiture.  The forfeiture order was signed this morning by the U.S. District Judge J. Paul Oetken.

The Bataar Skull is the latest addition to a lengthy list of looted dinosaur fossils the Office, together with its law enforcement partners at Homeland Security Investigations, has successfully forfeited.  Since 2012, the United States Attorney’s Office for the Southern District of New York has secured the return and repatriation to Mongolia of several dinosaur fossils that include three full Tyrannosaurus bataar skeletons; a full Saurolophus angustirostris skeleton and another partial Saurolophus; six Oviraptor skeletons; four Gallimimus skeletons; a partial Ankylosaurus skeleton; a Protoceratops skeleton; a composite nest containing miscellaneous dinosaur eggs; and numerous small, unidentified prehistoric lizards and turtles.

Manhattan U.S. Attorney Preet Bharara said: “Our Office will continue to work to restore culturally and scientifically important artifacts to their rightful owner.  Together with our law enforcement partners at the Department of Homeland Security, we are proud to repatriate another priceless dinosaur fossil to the Government of Mongolia.”       

According to the civil complaint in this matter and other documents filed in this action:

The Tyrannosaurus bataar is indigenous to, and has only been unearthed in, a specific portion of the Gobi Desert called the Nemegt Basin, in what is now Mongolia.  Mongolian law has long declared dinosaur fossils found within Mongolia to be government property.  Their export from Mongolia without permission of the Government of Mongolia is a violation of Mongolian law.

On or about March 25, 2007, a California-based auction house offered the Bataar skull for sale at auction in Manhattan.  The Bataar Skull had been shipped into the United States in June 2006 with United States Customs documents that described it only as “fossil stone pieces.”  At auction, the Bataar Skull was described as native to the “Eurasian continent.”  The Bataar Skull sold for approximately $230,000 at auction to an anonymous California-based buyer (the “Buyer”).

In 2015, HSI performed a physical examination of the skull and confirmed that it rightfully belongs to the Government of Mongolia and had been illegally imported into the United States.  After being informed of the origins of the Bataar Skull, the Buyer agreed to turn it over to HSI and consented to its forfeiture.

Mr. Bharara praised the investigative work of HSI, and thanked the Government of Mongolia for its assistance. 

The case is being handled by the Office’s Money Laundering and Asset Forfeiture Unit.  Assistant U.S. Attorney Martin S. Bell is in charge of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, and Angel M. Melendez, the Special Agent in Charge of the Department of Homeland Security, Homeland Security Investigations, New York Field Office, announced today that FRED ELM, a/k/a “Frederic Elmaleh,” the founder and manager of Elm Tree Investment Advisors LLC, was arrested this morning in Florida on securities fraud and wire fraud charges stemming from his and Chief Operating Officer AHMAD NAQVI’s scheme to defraud investors in multiple funds created and controlled by ELM and NAQVI.  Among other illicit activity, ELM and NAQVI fraudulently induced more than 50 investors to invest over $17 million based on the false representation that ELM and NAQVI would invest that money, through the funds, in the shares of privately held technology companies, like Twitter, Inc., Alibaba Group Holding Limited, and Uber Technologies, Inc.  ELM was presented this morning in federal court in Fort Lauderdale, Florida, before United States Magistrate Judge Alicia O. Valle.  NAQVI remains at large.

U.S. Attorney Preet Bharara said:  “Fred Elm and Ahmad Naqvi claimed that through their business relationships with elite venture capital firms they could generate profits from well-timed investments in privately-held technology companies.  But as alleged, Elm and Naqvi never returned a penny of profit, spending much of the $17 million of investor money to fund their own high life and pay back other defrauded investors.  As alleged, while promising investors high performing returns, Elm instead took the money and put high-performance sports cars – a Bentley, Maserati and Range Rover – in his own garage. Thanks to the dedicated Homeland Security Investigations agents with the El Dorado Task Force and our partners at the SEC, Elm and Naqvi are now done defrauding investors.”

Special Agent in Charge Angel M. Melendez said:  “These individuals allegedly defrauded investors out of more than $17 million dollars by falsely representing the ability to invest in privately held technology companies, when in reality they used the money to buy homes, luxury cars, and expensive jewelry.  HSI and its El Dorado Task Force partners are committed to fighting financial frauds and to hold accountable the people that commit them.”

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

From at least June 2013 through December 2014, ELM and NAQVI engaged in a scheme to defraud investors in funds that ELM and NAQVI created and controlled at Elm Tree Investment Advisors LLC (“ETIA”), where ELM was the founder and manager, and NAQVI was the chief operating officer.  ELM and NAQVI raised more than $17 million from over 50 investors in four limited partnerships for which ETIA acted as the fund manager:  Elm Tree Investment Fund, LP; Elm Tree Emerging Growth Fund, LP; Elm Tree ‘e’Conomy Fund, LP; and Elm Tree Motion Opportunity, LP (collectively the “Elm Tree Funds”). 

ELM and NAQVI falsely represented that the Elm Tree Funds used investor capital to purchase shares in privately held technology companies before their initial public offerings (“IPOs”).  These companies included Twitter, Inc., Alibaba Group Holding Limited, Uber Technologies, Inc., Square, Inc., Pinterest, Inc., and GoDaddy Group, Inc.  Moreover, ELM and NAQVI falsely represented that they had access to these pre-IPO shares because of their business relationships with leading venture capital firms, such as Kleiner Perkins Caufield & Byers, Benchmark Capital, and Silver Lake Management, L.L.C.  In truth and in fact, ELM and NAQVI did not invest in the pre-IPO shares of these companies and did not have relationships with these venture capital firms.

ELM and NAQVI comingled the approximately $17 million that was invested in the Elm Tree Funds in a single investment account, and then invested only a portion of the money, approximately $7.1 million.  At no point did any of the Elm Tree Funds return a profit.  Instead, for example, between January 2014 and November 2014, the Elm Tree Funds lost approximately $3.9 million in trading.

Moreover, of the investor funds that ELM and NAQVI did not lose in securities trading, ELM routinely converted investor funds to his own use in the form of cash withdrawals and to pay personal expenses, including to purchase a $1.75 million home, high-end furnishings, and other personal items, such as jewelry, daily living expenses, and luxury automobiles, including a Bentley, a Maserati, and a Range Rover.

The conversion of investors’ funds was contrary to the representations that ELM and NAQVI made to investors concerning their and ETIA’s fees.  ELM and NAQVI falsely represented that they and ETIA would take a two percent annual management fee plus 20 percent of any profits that the Elm Tree Funds earned.  In truth and in fact, ELM converted investor money that far exceeded the two percent management fee.  Moreover, because the Elm Tree Funds never returned a profit, ELM, NAQVI, and ETIA were not entitled to a percentage of any profits.

ELM and NAQVI also used approximately $5.2 million of new investor funds to make payments to earlier investors in a Ponzi-like fashion.

To prevent or forestall redemptions, and continue to raise money to fund their scheme, ELM and NAQVI also generated fictitious account statements and also made oral and written misrepresentations that their trading strategies were generating consistently positive returns.

For example, beginning in mid-2013, ELM and NAQVI began to solicit Victim-1 to invest with ETIA in the Elm Tree Funds.  On June 11, 2013, NAQVI sent Victim-1 a series of e-mails regarding the Elm Tree Emerging Growth Fund, in which he falsely represented, among other things, that the fund would invest in pre-IPO Twitter shares, and that ELM, NAQVI, and ETIA had “key contacts” with venture capital firms like Kleiner Perkins Caufield & Byers and Benchmark Capital.  ELM and NAQVI subsequently had in-person meetings and telephone calls with Victim-1 about this investment.  On October 9, 2013, Victim-1 invested approximately $52,500 in the Elm Tree Emerging Growth Fund.  Following Twitter’s IPO on November 6, 2013, Twitter’s stock price rose, and NAQVI subsequently told Victim-1 that ELM, NAQVI, and ETIA had used an options strategy to lock in Victim-1’s profits in Twitter.  Because the fund had not invested in pre-IPO Twitter shares, there were no profits to lock in.  Thereafter, ELM and NAQVI sent fraudulent account statements to Victim-1, including one sent on March 7, 2014.  The statement falsely indicated that Victim-1’s investment in the fund was valued at $274,550 (up from $52,500), and that the Elm Tree Emerging Growth Fund was valued at $68,115,855. 

ELM and NAQVI made similar misrepresentations with respect to Victim-1’s subsequent investments in the Elm Tree ‘e’Conomy Fund and the Elm Tree Motion Opportunity, falsely indicating that those funds invested in Alibaba Group Holding Limited, Uber Technologies, Inc., Square, Inc., Pinterest, Inc., and GoDaddy Group, Inc., and that Victim-1’s investments were growing.  ELM and NAQVI also falsely represented that the value of the Elm Tree ‘e’Conomy Fund as of December 12, 2014, was $125,484,750 and that the value of the Elm Tree Motion Opportunity as of December 18, 2014, was $77,286,220 – falsely claiming that the total value of the Elm Tree Funds was more than $270 million.

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ELM, 46, was arrested this morning at his home in Hollywood, Florida.  NAQVI, 47, remains at large.  ELM and NAQVI are each charged with one count of securities fraud, one count of wire fraud conspiracy, and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison.  Each is also charged with one count of securities fraud conspiracy, which carries a maximum sentence of five years in prison.  The charges carry a maximum fine of $5 million, or twice the gross gain or loss from the offenses.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Bharara praised the work of HSI New York’s El Dorado Task Force, and thanked the U.S. Securities and Exchange Commission for its assistance. 

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

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

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

 

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

Preet Bharara, the United States Attorney for the Southern District of New York, David ‎Schnorbus, Special Agent-in-Charge of the New York Field Office of the United States Department of State, Diplomatic Security Service (“DOS-DSS”); Angel M. Melendez, the Special Agent in Charge of the Department of Homeland Security, Homeland Security Investigations, New York Field Office (“HSI”); Shantelle P. Kitchen, Special Agent in Charge of the Internal Revenue Service-Criminal Investigation (“IRS-CI”); and Philip R. Bartlett, Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS” and together with DSS, HSI, and the IRS, the “Investigating Agencies”), announced charges today against 11 individuals, RYAN JUNGHUN KIM, a/k/a “Ryan Junghun Choi,” a/k/a “Ki Soo Choi,” a/k/a “Lion King,” HOI HAM, SUNG HWAN KIM, a/k/a “Sean Kim,” YOUNG HO JOO, a/k/a “Jay Joo,” MI SOOK KIM, SU YEON YUN, a/k/a “Bebe,”  HYUN JOO LEE, HYUN JOO SHIN, YING AI LI, a/k/a “Sung Soon Kim,” JIN AE JUNG, a/k/a “Jaqueline Kim,” a/k/a “Jackie Kim,” and MOOJA PETERSON, a/k/a “MJ,” for laundering in excess of $1.4 million in illegal proceeds between 2011 and 2016.  These illegal proceeds were generated by at least 10 illegal brothels in and around the New York City metro area that the defendants owned, operated, managed, or advertised. 

HOI HAM, YOUNG HO JOO, SU YEON YUN, HYUN JOO SHIN, YING AI LI, and JIN AE JUNG and were arrested in the New York City metro area today.  SUNG HWAN KIM was arrested in Pennsylvania today.  These defendants will be presented in the Southern District of New York today before United States Magistrate Judge James L. Cott.  RYAN JUNGHUN KIM was arrested in Seoul, South Korea.  MI SOOK KIM, MOOJA PETERSON, and HYUN JOO LEE have not yet been apprehended.

Manhattan U.S. Attorney Preet Bharara said:  “Eleven individuals are charged with laundering more than a million dollars of proceeds from their illegal commercial sex businesses.   I want to thank our federal and local law enforcement partners and recognize the assistance of the Seoul Metropolitan Police Agency.”

Special Agent-in-Charge David ‎Schnorbus said:  “The dismantling of this international conspiracy, stretching from South Korea to the United States, is an important achievement made possible by the coordinated efforts of all agencies supporting this investigation and prosecution. Diplomatic Security’s global presence enables our organization to partner with foreign law enforcement, and the investigative support of the Seoul Metropolitan Police Agency highlights that global reach.”

Special Agent in Charge Angel M. Melendez said:  “Today's arrests and search warrants are the result of the great partnership between HSI and its law enforcement partners to shut down a large international prostitution and money laundering organization operating illegal brothels here in New York.  Sex businesses like these pose a threat to public safety in our communities and must not be tolerated.”

Special Agent in Charge Shantelle P. Kitchen said:  “Money laundering is not just a crime committed by drug dealers.  The kinds of criminal enterprises that launder money to conceal illicit proceeds and to keep their operations going are as diverse as the ways that money can be laundered.  IRS-Criminal Investigation is always ready to bring its financial investigative expertise to money laundering investigations of all kinds.”

Inspector-in-Charge Philip R. Bartlett said: “These individuals operated an illegal prostitution ring, lining their pockets with the profits from the world’s oldest profession.  Today's arrests are yet another example of law enforcements commitment to identify, disrupt and dismantle organized criminal enterprises.”

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

Since 2012, the Investigating Agencies have been investigating a group of brothels (the “Brothels”) operating in and around New York.  Each of the Brothels is independently owned and operated, but the owners of the Brothels work cooperatively through, among other things, the sharing of approved customer lists and information.  Defendants RYAN JUNGHUN KIM, HOI HAM, SUNG HWAN KIM, YOUNG HO JOO, MI SOOK KIM, SU YEON YUN, HYUN JOO LEE, HYUN JOO SHIN, YING AI LI, JIN AE JUNG, and MOOJA PETERSON are individuals who operated the Brothels, including advertisers, website developers, brothel owners, and brothel managers. 

The defendants typically used websites associated with the Brothels to advertise the women prostituted in the Brothels (the “Brothel Websites”).  The Brothel Websites describe, among other things, specific services that the Brothels offer, including a service called the “girlfriend experience.”  In addition to the Brothel Websites, the Brothels used an online aggregator of advertisements to advertise the Brothels (the “Advertising Website”).  The management of online advertising and payment for this advertising was coordinated by the defendants.  The defendants would regularly email among themselves sexually explicit photographs of women prostituted in the Brothels to be used in online advertising, as well as instructions for how certain posts should appear.  They would also exchange emails concerning, among other things, advertising for the Brothels and payment of advertising fees to the Advertising Website. 

To pay for these advertising fees, the defendants would use hundreds of thousands of dollars in illegal proceeds generated by the Brothels’ prostitution business.  These proceeds would be transferred among the defendants through several methods, including cash deliveries, payment of credit card balances, and wire transfers.  An account associated with RYAN JUNGHUN KIM received tens of thousands of dollars from accounts in the names of several of the defendants.  HOI HAM, the defendant, made cash pickups from the Brothels on multiple occasions, and even discussed these pickups in electronic chat messages with RYAN KIM.  Moreover, between December 2012 and May 2014, approximately $326,381 was transferred from a single credit card in HAM’s name to the Advertising Website.  Similarly, between December 2011 and September 2013, approximately $150,000 in cash was deposited into an account in the name of SUNG HWAN KIM and approximately $90,000 during that same period was remitted to the Advertising Website.  Finally, between December 2011 and May 2014, approximately $268,000 was deposited into a bank account maintained in the name of YOUNG HO JOO, the defendant, and another individual.  During this same period, this account remitted approximately $92,311 to the Advertising Website.  To date, the investigation, which is ongoing, has identified more than $1.4 million worth of illegal transactions.         

        *          *          *

Each of the defendants is charged with one count of conspiracy to commit money laundering, which carries of maximum sentence of 20 years in prison; and one count of conspiracy to violate the Travel Act, which carries a maximum sentence of five years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

If you believe you were a victim of this crime, including a victim entitled to restitution, and you wish to provide information to law enforcement and/or receive notice of future developments in the case or additional information, please contact the Victim/Witness Unit at the United States Attorney’s Office for the Southern District of New York, at (866) 874-8900.  For additional information, go to: http://www.usdoj.gov/usao/nys/victimwitness.html

Mr. Bharara praised the outstanding efforts of DSS, HSI, the IRS, USPIS, the New York City Police Department, and the Seoul Metropolitan Police Agency.  He added that the investigation is ongoing.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Sidhardha Kamaraju, Lauren Schorr, and Michael Neff 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.

 

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

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 that JOHN AFRIYIE, a former analyst at a Manhattan-based private investment fund (the “Fund”), was arrested this morning and charged with insider trading.  AFRIYIE made approximately $1.5 million in profits in connection with options trading based on material nonpublic information he misappropriated from the Fund about an impending acquisition of a publicly traded company.  AFRIYIE was presented today in Manhattan federal court before United States Magistrate Judge James L. Cott.            

Manhattan U.S. Attorney Preet Bharara said:  “In February of this year, John Afriyie made a quick $1.5 million profit by trading in options of ADT stock.  His profits were not the result of trading acumen, diligent research, or blind luck, but rather the alleged spoils of criminal insider trading.  Afriyie allegedly traded on material nonpublic information he had obtained about a pending acquisition of ADT that had not yet been made public.  Afriyie’s attempts to keep his alleged criminal insider trading secret by trading in his mother’s name failed, and thanks to the efforts of the FBI and the SEC, he will now answer to federal securities fraud charges.”

FBI Assistant Director-in-Charge Diego Rodriguez said: “Afriyie allegedly disregarded insider trading laws to enrich himself.  The FBI is committed to working with our partners to pursue those who commit these crimes and undermine the public's confidence in the financial markets.”

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

In January 2016, Apollo Investment Management LLC (“Apollo”) contacted the Fund to discuss whether the Fund would provide debt financing for Apollo’s potential acquisition of ADT Corporation (“ADT”) in an all-cash transaction.  The Fund entered into a non-disclosure agreement with Apollo and was granted access to an electronic data room for the ADT transaction.  As an investment analyst at the Fund, AFRIYIE had access to the Fund’s network server, which maintained, among other things, electronic shared directory file folders containing material nonpublic information, including information about Apollo’s acquisition of ADT. 

In violation of the Fund’s policies and in breach of his duties to the Fund and its clients, AFRIYIE accessed material nonpublic information about Apollo’s pending acquisition of ADT in an electronic shared drive folder on the Fund’s network server.  In approximately 28 separate transactions between January 28, 2016, and February 12, 2016, AFRIYIE purchased approximately 2,279 ADT call options for a total of $24,254.02 before the public announcement of that transaction.  AFRIYIE purchased the ADT call options through a brokerage account in the name of AFRIYIE’s mother, which AFRIYIE controlled.  AFRIYIE did not reveal his affiliation with the Fund in the account opening documents for the brokerage account or in his communications with the brokerage firm.  Nor did AFRIYE reveal his trades or the existence of the brokerage account to the Fund. 

The public announcement of Apollo’s acquisition of ADT in February 2016 caused ADT shares to increase in value from $29.20 per share on the day AFRIYIE began purchasing ADT options to $39.64 per share, resulting in a corresponding increase in the value of the call options AFRIYIE had purchased.  As a result of the insider trading alleged in the Complaint, AFRIYIE earned at least $1.53 million in realized and unrealized profits.

*                *                *

AFRIYIE is charged with one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense.  The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

Mr. Bharara praised the investigative work of the FBI and thanked the SEC, which has filed civil charges in a separate action.  He added that the FBI’s investigation is ongoing.

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

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Edward A. Imperatore 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.

 

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

Preet Bharara, the United States Attorney for the Southern District of New York, and David ‎Schnorbus, Special Agent-in-Charge of the New York Field Office of the United States Department of State, Diplomatic Security Service (“DOS-DSS”), announced today that ASHRAF LAKOU pled guilty to bank fraud, credit card fraud, passport fraud, and aggravated identity theft charges in connection with orchestrating a scheme to use stolen victim identification information to make fraudulent credit card purchases and to defraud financial institutions by depositing counterfeit checks into accounts controlled by LAKOU and his co-conspirators.  Through these schemes, LAKOU and his co-conspirators attempted to defraud individuals, businesses and financial institutions out of more than $1.5 million.  LAKOU pled guilty before United States Magistrate Judge James L. Cott.   

According to the criminal Complaint, Indictment, and other documents filed in Manhattan federal court, as well as statements made at related court proceedings:

From September 2013 through July 2015, LAKOU and his co-conspirators engaged in a scheme to defraud businesses and financial institutions by obtaining checks made out to legitimate businesses, opening fraudulent bank accounts in the names of the victim businesses, depositing the checks into the fraudulent accounts, and withdrawing funds from the fraudulent accounts.  LAKOU and his co-conspirators carried out this scheme by, among other means, submitting false documentation in connection with bank account applications and forging the signatures of other actual persons.

From May 2014 through July 2015, LAKOU and his co-conspirators also engaged in a scheme to commit credit card fraud by using stolen credit card information to make fraudulent purchases of jewelry and other merchandise.  LAKOU and his co-conspirators carried out this credit card fraud scheme by, among other means, fraudulently adding their own names as authorized users of preexisting victim credit cards and by submitting fraudulent applications for new credit card accounts in the names of their victims.

       *                *                *

 LAKOU, 27, of Manhattan, pled guilty to one count of conspiracy to commit bank fraud, which carries a maximum sentence of 30 years in prison; one count of conspiracy to commit access device fraud, which carries a maximum sentence of seven-and-a-half years in prison; one count of passport fraud, which carries a maximum sentence of 10 years in prison; and three counts of aggravated identity theft, each of which carries a mandatory sentence of two years in prison.  The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.  As part of his plea, LAKOU agreed to pay $557,894.50 in restitution to victims and to pay $557,894.50 in forfeiture.  Lakou is scheduled to be sentenced at a future date by U.S. District Judge Victor Marrero. 

Zoheb Qamran, 28, of Manhattan, and Jessica Hattar, 26, of Manhattan, have been separately charged in connection with the bank fraud and credit card fraud schemes.  The charges against Qamran and Hattar are merely allegations, and they are presumed innocent unless and until they are proven guilty beyond a reasonable doubt.

Mr. Bharara praised the outstanding efforts of DOS-DDS in the investigation.

The case is being handled by the Office’s Money Laundering and Asset Forfeiture Unit.  Assistant United States Attorney Jonathan Cohen is in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that JOHN CREWS, JR., was sentenced today in White Plains federal court to a prison term of 17 years for his participation in a series of armed robberies in the summer of 2013.  CREWS pled guilty on September 21, 2015, to conspiring to commit armed robberies and brandishing a firearm in the course of those robberies.  CREWS pled guilty before U.S. District Judge Vincent L. Briccetti, who imposed today’s sentence. 

According to the allegations contained in the Indictment, and information adduced during the Court proceedings:

In the summer of 2013, CREWS and others carried out a string of armed robberies in Orange County and Sullivan County.  In a span of approximately six weeks, Crews participated in 10 robberies.  He and others robbed two gas stations, a bar, a bakery, three stores, and a restaurant.  They also carried out two home invasions.  The robberies were in Middletown, Wallkill, and Monticello.  CREWS brandished a gun during each of the robberies.

*                      *                      *

In addition to his prison term, CREWS, 28, of Middletown, New York, was sentenced to three years of supervised release and was ordered to pay restitution in the amount of $5,577 to various establishments that he robbed.    

Mr. Bharara praised the outstanding investigative work of the Bureau of Alcohol, Tobacco, Firearms and Explosives, the New York State Police, the City of Middletown Police Department, the Town of Wallkill Police Department, the Village of Monticello Police Department, the Orange County District Attorney’s Office, and the Sullivan County District Attorney’s Office.

The prosecution is being handled by the Office’s White Plains Division.  Assistant U.S. Attorneys Michael Gerber and Lauren Schorr are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, Julián  Castro, Secretary of the U.S. Department of Housing and Urban Development (“HUD”), Benjamin C. Mizer, Principal Deputy Assistant Attorney General for the Justice Department’s Civil Division, Brian J. Stretch, United States Attorney for the Northern District of California, and David A. Montoya, Inspector General of HUD (“HUD-OIG”), announced today that the United States has settled civil mortgage fraud claims against WELLS FARGO BANK, N.A. (“WELLS FARGO” or the “Bank”), and WELLS FARGO executive KURT LOFRANO (“LOFRANO”), stemming from WELLS FARGO’s participation in the Federal Housing Administration (“FHA”) Direct Endorsement Lender Program.  In the settlement, WELLS FARGO agreed to pay $1.2 billion and admitted, acknowledged, and accepted responsibility for, among other things, certifying to HUD, during the period from May 2001 through December 2008, that certain residential home mortgage loans were eligible for FHA insurance when in fact they were not, resulting in the Government having to pay FHA insurance claims when certain of those loans defaulted.  The agreement resolves the United States’ civil claims in its lawsuit in the Southern District of New York, as well as an investigation conducted by the U.S. Attorney’s Office for the Southern District of New York regarding WELLS FARGO’s FHA origination and underwriting practices subsequent to the claims in its lawsuit, and an investigation conducted by the U.S. Attorney’s Office for the Northern District of California into whether American Mortgage Network, LLC (“AMNET”), a mortgage lender acquired by WELLS FARGO in 2009, falsely certified and submitted ineligible residential mortgage loans for FHA insurance.

The settlement was approved today by U.S. District Judge Jesse M. Furman.

Manhattan U.S. Attorney Preet Bharara said: “Today, Wells Fargo, one of the biggest mortgage lenders in the world, has been held responsible for years of reckless underwriting, while relying on government insurance to deal with the damage.  Wells Fargo has long taken advantage of the FHA mortgage insurance program, designed to help millions of Americans realize the dream of home ownership, to write thousands and thousands of faulty loans.  Driven to maximize profits, Wells Fargo employed shoddy underwriting practices to drive up loan volume, at the expense of loan quality.  Even though Wells Fargo identified through internal quality assurance reviews thousands of problematic loans, the Bank decided not to report them to HUD.  As a result, while Wells Fargo enjoyed huge profits from its FHA loan business, the government was left holding the bag when the bad loans went bust.  With today’s settlement, Wells Fargo has finally resolved the years-long litigation, adding to the list of large financial institutions against which this Office has successfully pursued civil fraud prosecutions.” 

HUD Secretary Julián Castro said: “This Administration remains committed to holding lenders accountable for their lending practices.  The $1.2 billion settlement with Wells Fargo is the largest recovery for loan origination violations in FHA’s history.  Yet, this monetary figure can never truly make up for the countless families that lost homes as a result of poor lending practices.” 

Principal Deputy Assistant Attorney General Benjamin C. Mizer said: “This settlement is another step in the Department of Justice’s continuing efforts to hold accountable FHA approved lenders that unlawfully submitted false claims at the expense of American homeowners and taxpayers.  In addition to today’s resolution with Wells Fargo, the department has pursued similar misconduct by numerous other lenders, returning more than $4 billion to the FHA fund and the Treasury and filing suit where appropriate.  We remain committed to protecting the public fisc from all who seek to abuse it, whether they do business on Wall Street or Main Street.”

Northern District of California U.S. Attorney Brian Stretch said: “Misconduct in the mortgage industry helped lead to a destructive financial crisis that spanned the globe.  American Mortgage Network’s origination of FHA-insured loans that did not comply with Government requirements also caused major losses to the public fisc.  Today’s settlement demonstrates the Department of Justice’s resolve to pursue remedies against those who engaged in this type of misconduct.”                     

HUD Inspector General David A. Montoya said:  “This matter is not just a failure by Wells Fargo to comply with federal requirements in FHA’s Direct Endorsement Lender program – it’s a failure by one of our trusted participants in the FHA program to demonstrate a commitment to integrity and to ordinary Americans who are trying to fulfill their dreams of homeownership.”

According to the Second Amended Complaint filed in Manhattan federal court:

WELLS FARGO has been a participant in the Direct Endorsement Lender program, a federal program administered by FHA.As a Direct Endorsement Lender, WELLS FARGO has the authority to originate, underwrite, and certify mortgages for FHA insurance.If a Direct Endorsement Lender approves a mortgage loan for FHA insurance and the loan later defaults, the holder or servicer of the loan may submit an insurance claim to HUD for the outstanding balance of the defaulted loan, along with any associated costs, which HUD must then pay.Under the Direct Endorsement Lender program, neither FHA nor HUD reviews a loan for compliance with FHA requirements before it is endorsed for FHA insurance.Direct Endorsement Lenders are therefore required to follow program rules designed to ensure that they are properly underwriting and certifying mortgages for FHA insurance and maintaining a quality control program that can prevent and correct any deficiencies in their underwriting.The quality control program requirements include conducting a full review of all loans that go 60 days into default within the first six payments, known as “early payment defaults”; taking prompt and adequate corrective action upon discovery of fraud or serious underwriting problems; and disclosing to HUD in writing all loans containing evidence of fraud or other serious underwriting deficiencies.WELLS FARGO failed to comply with these basic requirements.

First, between at least May 2001 and October 2005, WELLS FARGO, the largest HUD-approved residential mortgage lender, engaged in a practice of reckless underwriting of its retail FHA loans, all the while knowing that it would not be responsible when the defective loans went into default.To maximize its loan volume (and profits), WELLS FARGO elected to hire temporary staff to churn out and approve an ever increasing quantity of FHA loans, but neglected to provide this inexperienced staff with proper training.At the same time, WELLS FARGO’s management applied pressure on its underwriters to approve more and more FHA loans.The Bank also imposed short turnaround times for deciding whether to approve the loans, employed lax underwriting standards and controls, and paid bonuses to underwriters and other staff based on the number of loans approved.Predictably, as a result, WELLS FARGO’s loan volume and profits soared, but the quality of its loans declined significantly. Yet, when WELLS FARGO’s senior management was repeatedly advised by its own quality assurance reviews of serious problems with the quality of the retail FHA loans that the Bank was originating, management failed to implement proper and effective corrective measures, leaving HUD to pay hundreds of millions of dollars in claims for defaulted loans.

Second, WELLS FARGO failed to self-report to HUD the bad loans that it was originating, in violation of FHA program reporting requirements.During the period 2002 through 2010, HUD required Direct Endorsement Lenders to perform post-closing reviews of the loans that they originated and to report to HUD in writing loans that contained fraud or other serious deficiencies.This requirement provided HUD with an opportunity to investigate the defective loans and request reimbursement for any claim that HUD had paid or request indemnification for any future claim, as appropriate.During this nine-year period, WELLS FARGO, through its post-closing reviews, internally identified thousands of defective FHA loans that it was required to self-report to HUD, including a substantial number of loans that had gone into “early payment default.”However, instead of reporting these loans to HUD as required, WELLS FARGO engaged in virtually no self-reporting during the four-year period from 2002 through 2005, and only minimal self-reporting after 2005.

In his capacity as Vice President of Credit-Risk – Quality Assurance at WELLS FARGO, LOFRANO executed on WELLS FARGO’s behalf the annual certifications required by HUD for the Bank’s participation in the Direct Endorsement Lender program for certain years.  LOFRANO also organized and participated in the working group responsible for creating and implementing WELLS FARGO’s self-reporting policies and procedures.  In contravention of HUD’s requirements, that group failed to report to HUD loans that WELLS FARGO had internally identified as containing material underwriting findings.  Moreover, LOFRANO received WELLS FARGO quality assurance reports identifying thousands of FHA loans with material findings – very few of which WELLS FARGO reported to HUD.

*          *          *

As part of the settlement, WELLS FARGO has admitted, acknowledged, and accepted responsibility for, among other things, the following conduct:During the period from May 2001 through on or about December 31, 2008, WELLS FARGO submitted to HUD certifications stating that certain residential home mortgage loans were eligible for FHA insurance when in fact they were not, resulting in the Government having to pay FHA insurance claims when certain of those loans defaulted.From May 2001 through January 2003, WELLS FARGO’s quality assurance group conducted monthly internal reviews of random samples of the retail FHA mortgage loans that the Bank had already originated, underwritten, and closed which identified for most of the months that in excess of 25 percent of the loans, and in several consecutive months, more than 40 percent of the loans, had a material finding.For a number of the months during the period from February 2003 through September 2004, the material finding rate was in excess of 20 percent.  A “material” finding was defined by WELLS FARGO generally as a loan file that did not conform to internal parameters and/or specific FHA parameters, contained significant risk factors affecting the underwriting decision, and/or evidenced misrepresentation.

WELLS FARGO also admitted, acknowledged, and accepted responsibility for the following additional conduct:Between 2002 and October 2005, WELLS FARGO made only one self-report to HUD, involving multiple loans.During that same period, the Bank identified through its internal quality assurance reviews approximately 3,000 FHA loans with material findings.Further, during the period between October 2005 and December 2010, WELLS FARGO only self-reported approximately 300 loans to HUD.During that same period, WELLS FARGO’s internal quality assurance reviews identified more than 2,900 additional FHA loans containing material findings.The Government was required to pay FHA insurance claims when certain of these loans that WELLS FARGO identified with material findings defaulted.

LOFRANO admitted, acknowledged, accepted responsibility for, among other things, the following matters in which he participated:From January 1, 2002, until December 31, 2010, he held the position of Vice President of Credit Risk – Quality Assurance at WELLS FARGO; in that capacity, he supervised the Decision Quality Management group; in 2004, he was asked to organize a working sub-group to address reporting to HUD; in or about October 2005, he organized a working group that drafted WELLS FARGO’s new self-reporting policy and procedures; and during the period October 2005 through December 31, 2010, based on application of the Bank’s new self-reporting policy and by committee decision, WELLS FARGO did not report to HUD the majority of the FHA loans that the Bank’s internal quality assurance reviews had identified as having material findings.

*          *          *

Mr. Bharara and Mr. Stretch thanked HUD’s Office of General Counsel, HUD-OIG, and the Commercial Litigation Branch of the U.S. Department of Justice’s Civil Division for their extraordinary assistance with the prosecution and settlement of this case.

This case against WELLS FARGO is the latest in a string of civil fraud lawsuits brought by this Office since May 2011 alleging fraudulent lending practices by residential mortgage lenders.  In addition to WELLS FARGO, this Office has pursued claims against Citi Mortgage (a subsidiary of Citibank), Flagstar Bank, Deutsche Bank (and a number of its subsidiaries), Countrywide, Bank Of America (“BOA”), former BOA executive Rebecca Mairone, Golden First Mortgage Corp. (“Golden First”), former Golden First owner David Movtady, Allied Home Mortgage Corp. (“Allied”), and former Allied executives Jim Hodge and Jeanne Stell.

Assistant U.S. Attorneys Jeffrey S. Oestericher, Christopher B. Harwood, Rebecca S. Tinio, Caleb Hayes-Deats, and Dominika Tarczynska are in charge of the case.

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, Commissioner of the New York City Police Department (“NYPD”), announced today that HAMLET PERALTA, the former owner of a restaurant in Manhattan, was charged in Manhattan federal court with committing wire fraud through a scheme in which he obtained more than $12 million from investors on false pretenses and used that money to repay other investors and for personal expenses.  PERALTA was arrested by FBI agents in Macon, Georgia, yesterday and will be presented before U.S. Magistrate Judge Charles Weigle in Macon this afternoon.

Manhattan U.S. Attorney Preet Bharara said:  “As alleged, Hamlet Peralta solicited investors for his fictitious wholesale liquor business by peddling wholesale lies.  Peralta’s Ponzi scheme allegedly fleeced his victims out of more than $12 million, virtually all of which he spent on himself or to repay other investors.  Thanks to the work of the FBI and NYPD in this investigation, Peralta will not be able to victimize any other investors.”

FBI Assistant Director-in-Charge Diego Rodriquez said:  “Fraud cases remain a priority for the FBI as we continue to identify and investigate those who commit financial crimes against unwitting victims. Peralta, who allegedly engaged in a multimillion-dollar enrichment scheme, will ultimately be brought to justice for his actions.  We are appreciative of the support and cooperation we continue to receive from our law enforcement partners in this and so many cases.”

NYPD Commissioner William J. Bratton said: “As alleged, Hamlet Peralta violated the trust that investors placed in his fictitious wholesale liquor business venture by spending millions of his victim’s investments on clothes, food, and to continue the scheme.  Thanks to the NYPD investigators and our federal law enforcement partners, Peralta will be held accountable for his actions.”

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

From at least in or about July 2013, up to and including at least in or about 2014, PERALTA solicited more than $12 million from various investors by falsely representing that the investors’ money would be used to engage in wholesale liquor distribution for a profit.  PERALTA promised investors high rates of return in the form of regular interest payments on their investments, which he represented were based on the profits to be generated by what he claimed would be his successful wholesale liquor business.

In truth and in fact, however, PERALTA misappropriated the millions of dollars in investments he received, and used those funds to repay other investors or for his own purposes.  Of the more than $12 million provided to him by investors based on the representation that their money would be used to purchase wholesale liquor for resale, PERALTA in fact purchased no more than $700,000 in wholesale liquor.  He used nearly all of the remaining money – more than $11 million – to repay other investors, wire money to himself, take out large cash withdrawals, and pay for personal expenses other than liquor.

As one example, in or about 2013, PERALTA told a prospective investor (“Investor-1”) who was a frequent customer at PERALTA’s restaurant and who had become friendly with PERALTA that he (PERALTA) owned a separate business called West 125th Street Liquors and that he had been approved as an exclusive wine distributor to a major national restaurant supply company (the “Restaurant Supply Company”) that was beginning a wholesale wine business.  PERALTA told the investor that he would receive four percent interest on his investments, based on profits from the wholesale liquor distribution business.  In truth and in fact, however, PERALTA did not own West 125th Street Liquors, and he had not been approved to be a distributor for the Restaurant Supply Company. 

Over the course of the next year, based on PERALTA’s representations, the investor provided PERALTA with more than $3.5 million.  Of that amount, none, or at most only a minimal amount, was spent on wholesale liquor purchases.  Rather, Investor-1’s money was used to pay back other investors; was used to pay for expenses such as restaurant bills and high-end clothing purchases; and was wired to PERALTA’s personal accounts and/or withdrawn in cash.  In or about June 2014, PERALTA provided Investor-1 with a document that purported to be on the letterhead of the Restaurant Supply Company indicating that the Restaurant Supply Company would be electronically transferring PERALTA $1,826,350 within seven days.  In truth and in fact, however, neither PERALTA nor West 125th Street Liquors has ever been a supplier to the Restaurant Supply Company.   

*                *                *

PERALTA, 36, of the Bronx, New York, has been charged with one count of wire fraud, which carries a maximum term of 20 years in prison.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

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

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

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

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

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 Division of the Federal Bureau of Investigation (“FBI”), Eric Johansen, the Chief of the Peekskill Police Department, and George Longworth, Commissioner-Sheriff of the Westchester County Department of Public Safety, today announced the unsealing of two Complaints charging a total of 10 defendants with committing various narcotics offenses in Peekskill, New York.

Manhattan U.S. Attorney Preet Bharara stated: “The complaints charge conspiracies to distribute large quantities of crack cocaine.  With the federal charges brought today we have taken a big step in neutralizing two different drug rings that have been peddling drugs for years in the city of Peekskill.”

FBI Assistant Director-in-Charge Diego Rodriguez stated: “People depend on law enforcement to stem the flow of illegal drugs into their communities and reduce associated crime in the area.  Although today’s actions have halted a conspiracy to distribute highly addictive drugs in the Peekskill area, there are many steps to be taken in ridding society of crimes of this nature.”

Peekskill Police Chief Eric Johansen stated: “The message is clear: deal drugs in Peekskill and we will continue to pursue you with all of our resources.  This community will not tolerate drug dealing and we thank our federal and county partners in law enforcement for supporting our efforts to remove these ten violent, career drug offenders from our streets.”

Westchester County Department of Public Safety Commissioner-Sheriff George Longworth stated: “Sharing resources and conducting joint investigations with federal and local partners remains one of the most effective means we have of combatting the distribution and sale of illegal narcotics in Westchester County. We are grateful for the relationships we have with the U.S. Attorney’s Office, the FBI and the municipal police agencies in our county.”

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

United States v. Eric Bolton, et al., 16 Mag. 2293

In at least 2015 and 2016, ERIC BOLTON, a/k/a “E.B.,” 25, DERRICK FRANKS, a/k/a “Skills,” 47, EDWARD REEVES, 21, WILLIAM BOLTON, 27, FRANKLIN BARBER, a/k/a “Nitty,” 35, and XAVIER DABBS, a/k/a “X,” 26, conspired to sell 28 grams or more of crack cocaine.  Members of the conspiracy distributed crack in and around Peekskill.  Members of the conspiracy also cut up and packaged the crack for resale in a location in Peekskill.

United States v. Kaihiem Taylor, et al., 16 Mag. 2294

In at least 2015 and 2016, KAIHIEM TAYLOR, a/k/a “Killa,” 30, JEROME REED, a/k/a “Popsie,” 27, DESHAWN SMALLS, a/k/a “Scrap,” 24, and NATHANIEL GRAHAM, a/k/a “Happy,” 36, conspired to sell 28 grams or more of crack cocaine.  Members of the conspiracy distributed crack in and around Peekskill.

*                      *                     *

Five defendants were taken into federal custody this morning and were presented in White Plains federal court today before U.S. Magistrate Judge Paul E. Davison.  Two defendants, FRANKLIN BARBER and JEROME REED, remain at large.  An additional three defendants, KAIHIEM TAYLOR, ERIC BOLTON, and NATHANIEL GRAHAM, were already in state custody.                                    

Charts containing the names of the defendants who were charged today, and the charges and maximum penalties they face, are attached.  The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the respective judges.

Mr. Bharara praised the outstanding investigative work of the FBI, the Peekskill Police Department, and the Westchester Department of Public Safety.  Mr. Bharara also thanked the Sullivan County District Attorney’s Office for its ongoing assistance in the case.

These cases are being handled by the Office’s White Plains Division.  Assistant United States Attorney Jennifer Beidel is in charge of the prosecutions.

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

United States v. Eric Bolton, et al., 16 Mag. 2293

CHARGE(S)

DEFENDANT(S)

MAXIMUM PENALTIES

Narcotics conspiracy

(Conspiracy to distribute and possess with intent to distribute 28 grams or more of crack cocaine.)

ERIC BOLTON,

         a/k/a “E.B.,”

DERRICK FRANKS,

         a/k/a “Skills,”

EDWARD REEVES, WILLIAM BOLTON, FRANKLIN BARBER,

         a/k/a “Nitty,” and

XAVIER DABBS,

         a/k/a “X.”

40 years in prison

 

Mandatory minimum: five years in prison

 

United States v. Kaihiem Taylor, et al., 16 Mag. 2294

CHARGE(S)

DEFENDANT(S)

MAXIMUM PENALTIES

Narcotics conspiracy

(Conspiracy to distribute and possess with intent to distribute 28 grams or more of crack cocaine.)

KAIHIEM TAYLOR,

        a/k/a “Killa,”

JEROME REED,

        a/k/a “Popsie,”

DESHAWN SMALLS,

        a/k/a “Scrap,” and

NATHANIEL GRAHAM,

        a/k/a “Happy.”

40 years in prison

 

Mandatory minimum:

five years in prison

 

 

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that JHON JAIRO CRUZ TREJOS, a/k/a “Mellizo,” a citizen of Colombia, was sentenced today to 13 years in prison for conspiring to import cocaine into the United States and a related weapons offense.  CRUZ TREJOS’s conviction on these charges resulted from his efforts to broker weapons deals on behalf of Colombian paramilitary groups, including exchanging cocaine for surface-to-air missiles and machine guns, and attempting to obtain highly enriched uranium to be used in an attack on a United States Embassy.  CRUZ TREJOS pled guilty to cocaine importation and weapons charges in November 2015 before U.S. District Judge Naomi Reice Buchwald, who imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said:  “Jhon Jairo Cruz Trejos conspired to broker multimillion-dollar cocaine deals on behalf of Colombian terrorist organizations.  Cruz Trejos negotiated those deals to fund the purchase of machine guns and surface-to-air missiles, and he tried to obtain uranium for a ‘dirty bomb’ to be used against a U.S. embassy.  For his serious crimes, Cruz Trejos has been sentenced to 13 years in prison.”

According to the allegations contained in the superseding Indictment to which CRUZ TREJOS pled guilty, other documents filed in Manhattan federal court, and statements made during court proceedings:

Beginning in 2010, CRUZ TREJOS and others attempted to broker a weapons deal involving two Colombian paramilitary groups, which are also U.S.-designated foreign terrorist organizations:  the Fuerzas Armadas Revolucionarias de Colombia (“FARC”) and the Ejército de Liberación Nacional (“ELN”).  CRUZ TREJOS expressed interest in purchasing highly enriched uranium, missiles, machine guns, grenades, and explosives on behalf of the FARC and the ELN.  During meetings in February and March 2010, for example, CRUZ TREJOS and another individual explained that the FARC wanted to use uranium to manufacture a “dirty bomb” targeting the United States Embassy in Bogotá, Colombia.  CRUZ TREJOS also stated that FARC personnel planned to use the weapons in attacks on military bases and naval ships in an effort to disrupt drug interdiction efforts by the governments of Colombia and the United States. 

During a recorded meeting in Barbados in December 2010, CRUZ TREJOS and others discussed a multimillion-dollar transaction involving the uranium, as well as 480 missiles, remote-detonated explosives, grenades, and Kalashnikov rifles for use in paramilitary “incursions.”  In late 2011, Franklin Ramos Sanchez, who also was a charged defendant in this case, later told a confidential source (the “CS”), who was acting at the direction of the Federal Bureau of Investigation (“FBI”), that the FARC leadership was evaluating the terms of the deal and considering other options.  In April 2013, Sanchez told the CS that the FARC had postponed its plan to attack the U.S. Embassy in Bogota.

In September 2012, Sanchez escorted the CS to a remote part of Colombia and introduced him to an ELN commander.  The ELN commander expressed interest in exchanging cocaine for weapons, and explained that CRUZ TREJOS would represent him in the transaction going forward.  In April 2013, CRUZ TREJOS discussed transporting cocaine to the United States, with the expectation that the proceeds would be used to pay for the weapons.  Between June 2013 and February 2014, CRUZ TREJOS and Sanchez negotiated terms on a deal that was to involve financing the purchase of at least 60 AK-101 machine guns, 30 Dragunov rifles, 10 PKM machine guns, and several Igla surface-to-air missiles through the importation and distribution of cocaine in the United States.  In furtherance of the deal, on November 22, 2013, CRUZ TREJOS provided 17 kilograms of cocaine and the equivalent of approximately $43,000 to another confidential source acting at the direction of the FBI in Barranquilla, Colombia. 

On February 13, 2014, CRUZ TREJOS and Sanchez were arrested at a mall in Cartagena, Colombia.  In a post-arrest statement, CRUZ TREJOS admitted that he had previously provided cocaine to an associate with the expectation that the proceeds would be used to purchase AK-101s, Dragunovs, and Igla missiles, and that he further planned to sell the weapons to either the FARC or the ELN. 

CRUZ TREJOS and Sanchez were subsequently extradited to the United States.  CRUZ TREJOS arrived in the Southern District of New York on or about April 30, 2015.

*                *                *

On November 5, 2015, CRUZ TREJOS pled guilty to all three Counts of the superseding Indictment: (1) conspiring to import five or more kilograms of cocaine into the United States; (2) distributing five or more kilograms of cocaine, knowing and intending that the narcotics would be imported into the United States; and (3) conspiring to use and carry machine guns during and in furtherance of a drug-trafficking crime.

In addition to his prison term, CRUZ TREJOS, 44, was sentenced to five years of supervised release, and ordered to pay a $300 special assessment.

Mr. Bharara praised the outstanding investigative work of the FBI’s New York Field Office and Weapons of Mass Destruction Directorate.  Mr. Bharara also thanked the U.S. Department of Justice’s Office of International Affairs, and the Colombian National Police.

The prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Emil J. Bove III and Edward Y. Kim are in charge of the prosecution. 

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 Field Office of the Federal Bureau of Investigation (“FBI”), announced that NORMAN D’SOUZA, the former chief financial officer and vice president of finance of a New Jersey-based furniture wholesaler and retailer (“Company-1”) and an Indiana-based furniture manufacturer affiliated with Company-1 (“Company-2”), pled guilty today to participating in a fraudulent scheme to obtain $17 million in loans from a commercial bank based in New York, New York (the “Bank”) and $1 million in municipal loans from Gas City, Indiana (the “City”), by making false statements and providing false and fraudulent documents concerning the Companies’ financial condition.  D’SOUZA pled guilty before U.S. District Judge Ronnie Abrams.  

U.S. Attorney Preet Bharara said: “As he admitted in court today, Norman D’Souza repeatedly misrepresented the financial condition of two companies to deceive a bank and a municipality into lending the companies $18 million dollars, which was never repaid.  Together with our partners at the FBI, we will continue to aggressively pursue accounting frauds like this one, which caused millions of dollars in losses.”

FBI Assistant Director-in-Charge Diego Rodriguez said: “The charges that D'Souza pleaded guilty to are an example of how accounting frauds can lead to large financial losses to banks. Financial fraudsters believe their schemes, whether complex or unsophisticated, will persist undetected. However, when the numbers don't add up, the FBI will unravel the scheme and root out who is responsible.”

According to the allegations contained in the Information to which D’SOUZA pled guilty and statements made during D’SOUZA’s plea proceeding:

From in or about 2011 until in or about September 2014, Company-1, through D’SOUZA and others, fraudulently induced the Bank into lending Company-1 millions of dollars by repeatedly making false and misleading statements about Company-1’s financial condition.  D’SOUZA falsely inflated Company-1’s sales and accounts receivable on “borrowing base certificates” and in financial statements that D’SOUZA provided to the Bank pursuant to loan agreements.  D’SOUZA used those falsely inflated sales and accounts receivable to mislead the Bank about Company-1’s true financial performance, which enabled Company-1 to secure and draw down a $17 million revolving credit facility from the Bank.  Company-1 ultimately defaulted on the loans issued by the Bank in September 2014.  At that time, the outstanding balance of the loans was approximately $16.99 million.

Separately, in 2012, the City offered loans and other financial incentives to Company-2 in return for Company-2’s agreement to operate a furniture factory in the City and employ local residents.  Among other things, D’SOUZA falsely inflated Company-2’s sales figures in financial statements provided to the City.  The false financial statements misled the City about Company-2’s true financial performance and enabled Company-2 to secure and draw down more than $1 million in loans from the City.  Company-2 ultimately defaulted on the loans issued by the City in September 2014.  At that time, the outstanding balance of the loans was $1 million.

*                *                *

D’SOUZA, 50, of Monmouth Junction, New Jersey, pled guilty to one count of conspiracy to commit bank fraud, which carries a maximum sentence of 30 years in prison, and one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison. D’SOUZA is scheduled to be sentenced on July 22, 2016, before Judge Abrams.

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

Mr. Bharara praised the investigative work of the FBI.

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Edward A. Imperatore is in charge of the prosecution.

16-074            

Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that DAVID W. KENT, the founder of professional networking website Oilpro.com (“Oilpro”), was arrested for charges relating to computer hacking and wire fraud.  The charges stem from KENT’s alleged role in repeatedly hacking into a competitor’s database to steal customer information and attempting to sell Oilpro to the same company whose database KENT had hacked.  KENT was arrested by FBI agents in Spring, Texas, this morning and will be presented before U.S. Magistrate Judge Dena Palermo in Houston this afternoon.

Manhattan U.S. Attorney Preet Bharara said:  “As alleged, David Kent hacked into a competitor’s database and stole information from over 700,000 customer accounts.  Later he allegedly tried to use the proprietary information to defraud that same company. Thanks to the efforts of our law enforcement partners at the FBI, David Kent will now be held to account for his criminal conduct.”           

FBI Assistant Director-in-Charge Diego Rodriquez said:   “In this case, a profitable business was sold for approximately $51 million.  Allegedly, however, instead of relinquishing control of his former company, subject David Kent continued to illegally access data and information from his former business to help benefit a competing business he formed after the sale.  Unauthorized access to a protected computer system is a federal crime.  The FBI will investigate and bring to justice criminal actors who commit computer intrusions, whether the unauthorized access is to a personal computer or a corporate server.”

According to the allegations in the Complaint unsealed today in Manhattan federal

court[1]:

In or about March 2000, KENT founded a website (“Website-1”) that provides, among other things, networking services to professionals working in the oil and gas industry.  Website-1 allows its members to create profiles, which include personal and professional information.  As part of their profiles, members can also upload their resumes.  The profiles are contained in a database maintained by Website-1 (the “Members Database”).  Members are assigned login credentials (i.e. usernames and passwords) when they create their profiles.  Members use these login credentials to access their profiles.

In or around August 2010, KENT sold Website-1 for approximately $51 million to a publicly-traded company headquartered in New York, NY (“Company-1”).  KENT entered into an employment agreement with Company-1 and agreed to continue to serve as the President of Website-1 after the acquisition.  However, KENT left Website-1 in September 2011 and launched Oilpro in October 2013.  Like Website-1, Oilpro provides networking services to professionals working in the oil and gas industry.  Oilpro is headquartered in Houston, Texas.

Between October 2013 and February 2016, KENT conspired to access information belonging to Website-1 without authorization and to defraud Company-1.  KENT accessed the Website-1 Members Database without authorization and stole customer information, including information from over 700,000 customer accounts.  KENT then exploited this information by inviting Website-1’s members to join Oilpro.  Similarly, one of Kent’s employees at Oilpro who previously worked for Website-1 (“CC-1”) accessed information in Website-1’s Google Analytics account without authorization and forwarded the information to KENT.  In the meantime, KENT attempted to defraud Company-1 by misrepresenting during discussions about a potential acquisition of Oilpro by Company-1 that Oilpro had increased its membership through standard marketing methods.           

*                *                *

KENT, 40, of Spring, Texas, has been charged with one count of conspiracy to commit computer hacking and wire fraud, which carries a maximum term of five years in prison, and one count of wire fraud, which carries a maximum term 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.  Mr. Bharara also thanked the Office of International Affairs and the United Kingdom’s National Cyber Crime Unit (NCCU), and noted that the investigation is continuing.  

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Sidhardha Kamaraju and Andrew K. Chan are in charge of the prosecution.

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

 

---

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

Preet Bharara, the United States Attorney for the Southern District of New York, and Shantelle P. Kitchen, Special Agent in Charge of the Internal Revenue Service-Criminal Investigation (“IRS-CI”), announced today the unsealing of a 50-count Indictment of tax preparer SAMUEL GENTLE on charges relating to his false and fraudulent preparation of individual income tax returns for his clients.  According to the Indictment, the loss from GENTLE’s conduct exceeded $630,000.  GENTLE was arraigned today in White Plains federal court before U.S. Magistrate Judge Judith C. McCarthy.  The case is assigned to U.S. District Judge Cathy Seibel.

Manhattan U.S. Attorney Preet Bharara said:  “As alleged, Samuel Gentle abused his position of trust as a tax preparer by systematically assisting taxpayers in filing false and fraudulent returns.  Today’s charges underscore our commitment to pursuing and prosecuting individuals who seek to enable and encourage tax fraud.”

IRS-CI Special Agent in Charge Shantelle P. Kitchen said:  “About 60 percent of American taxpayers use tax professionals to prepare their tax returns.  Fortunately, most tax professionals are reputable and prepare accurate and honest returns for their clients.  IRS Criminal Investigation is responsible for investigating unscrupulous tax return preparers and, working with the United States Attorney’s Office, seeing that they are prosecuted.  I stress the importance of choosing your preparer carefully.  Ask him or her questions about your return and use your common sense in evaluating the answers you receive.”

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

GENTLE operated a tax preparation business called GenGen, Inc., located in Mount Vernon, New York.  From 2009 through 2012, GENTLE’s business prepared and submitted to the IRS, on average, 3,400 tax returns each year.  Some of these tax returns were false and fraudulent in that they contained various inflated deductions for business expenses and gifts to charity. 

As part of the investigation of this matter, an undercover IRS agent posed as a client of GENTLE’s.  During the operation, the agent provided GENTLE with a Form W-2 showing income from wages.  Despite being provided no records to support any other deductions, GENTLE included false and fraudulent deductions for business expenses and gifts to charity on the tax return he prepared for the undercover agent.  GENTLE’s inclusion of these false and fraudulent deductions caused the return to fraudulently claim a refund.

*              *             *

GENTLE, 59, of Mount Vernon, New York, is charged with 50 counts of aiding and assisting the preparation of false and fraudulent U.S. individual income tax returns, each of which carries a maximum sentence of three 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 IRS-Criminal Investigation for their outstanding work in the investigation. 

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

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

 

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that STEPHEN ADAMS, 28, of the Bronx, pled guilty before U.S. Magistrate Judge James C. Francis IV to shooting and killing Bubacarr Camera on June 18, 2015, during an armed robbery of a small business on the Upper West Side of Manhattan, and a June 16, 2015, armed robbery of another small business in Harlem.

U.S. Attorney Preet Bharara stated: “In the course of robbing a small business, Stephen Adams murdered an innocent shopkeeper, Bubacarr Camera, who had recently come to this country to pursue a better life.  I want to thank the ATF, the NYPD, and the U.S. Marshals for their outstanding investigative work on this case.”

According to the allegations in the Indictment to which STEPHEN ADAMS pled guilty and other documents in the public record:         

On June 18, 2015, STEPHEN ADAMS and two other men, Zubearu Bettis and Michael Adams, shot and killed Bubacarr Camera in the course of a robbery of a store located at 906 Amsterdam Avenue on the Upper West Side of Manhattan.

Two days before that murder, on June 16, 2015, Zubearu Bettis and STEPHEN ADAMS robbed another shopkeeper at a store located at 2251 7th Avenue, in Manhattan.  During that robbery, Bettis brandished and discharged a firearm, while ADAMS physically accosted the victim.

*                      *                      *

The charges to which STEPHEN ADAMS pled guilty carry a maximum of life in prison, and a mandatory minimum of 10 years in prison.  The maximum and minimum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

The prosecution is being handled by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Jared Lenow and Max Nicholas are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriquez, Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the arrest of KELVIN ACOSTA on five counts stemming from his sexual exploitation and enticement of minors, his possession and receipt of child pornography, and his extortion of victims for money and child pornography.

Manhattan U.S. Attorney Preet Bharara said:  “Kelvin Acosta is charged with preying on children in the way parents fear most.  He allegedly messaged teenage girls on Facebook, tricked them into providing their email addresses, hacked their email accounts, found sensitive images and videos of them, and then threatened to send these videos and images to their friends and family – unless they created child pornography for him.  Together with our partners at the FBI, we are committed to protecting children from those who seek to entice, exploit, or extort them.”

FBI Assistant Director-in-Charge Diego Rodriquez said:  “As alleged, Kelvin Acosta enticed and extorted minors for compromising photos and video chats. We can’t charge Mr. Acosta for taking advantage of the trust of impressionable young girls, but we can charge him with enticement, extortion and being in possession of child pornography. The FBI will continue to investigate and bring to justice those who exploit our children.”

According to the Complaint[1]:

In 2015, ACOSTA communicated through Facebook and other means with minors in order to induce them to produce and provide child pornography for his benefit.  ACOSTA  manipulated his victims into providing information about their online accounts that enabled him to take over those accounts and extort his victims.

For example, ACOSTA victimized a 13-year-old girl by contacting her over Facebook and telling the victim that he could get her a job at Barnes & Noble if she provided him with her email address and phone number.  ACOSTA then told her that he needed a code that was sent to her phone via text message.  The victim did not know that ACOSTA had accessed her email account and used the “forgot password” function, prompting the email provider to send a text message to the phone number on file to reset the password.  Once ACOSTA received the code from this victim, he told her that he had hacked her account; he said he is a hacker who does this all the time.  He told her that he would send her friends and family the nude photographs in her email account unless she sent him additional child pornography.  Faced with this threat of humiliation, she complied.  ACOSTA directed the victim to video chat him, to undress, and to engage in sexually explicit conduct.  ACOSTA told the victim he was taking pictures of her during this incident.  This victim estimated that she had several video chats with ACOSTA during which she was naked or engaging in sexual acts.

ACOSTA engaged in similar conduct with respect to a second victim, a 17-year-old girl.  After hacking her email account, ACOSTA told this victim that he had two videos of her having sex, and that he was going to send these videos to her family and friends if she did not do what he said.  ACOSTA directed the victim to video chat him and engage in sexually explicit conduct.  In the face of ACOSTA’s threats, the second victim complied with his demands, including that she pay him $600.

*          *          *

ACOSTA, 26, of the Bronx, New York, was arrested on March 29, 2016.  ACOSTA is charged with one count of enticement of a minor to engage in illegal sexual activity, which carries a maximum sentence of life in prison; one count of sexual exploitation of a child, which carries a maximum sentence of 50 years in prison; one count of receipt of child pornography, which carries a maximum sentence of 40 years in prison; one count of possession of child pornography, which carries a maximum sentence of 20 years in prison; and one count of extortion, which carries a maximum sentence of two years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Any individuals who believe they have information concerning KELVIN ACOSTA that may be relevant to the investigation should contact the Federal Bureau of Investigation at 1-212-384-1000 or https://tips.fbi.gov/.

Mr. Bharara praised the outstanding efforts of the FBI and the New York City Police Department in this investigation, and thanked the Brooklyn District Attorney’s Office for its valuable cooperation.  He added that the investigation is continuing.

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

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

 

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that BINDER TAL, BALDEV TAL, a/k/a “David Tal,” a/k/a “Ashok Kumar,” and SHARIFUL MINTU each pled guilty to conspiring to commit bank fraud before U.S. District Court Judge Vincent L. Briccetti. 

Manhattan U.S. Attorney Bharara stated:  “Through various lies about their employment and income, Binder Tal, Baldev Tal, Shariful Mintu and their coconspirators obtained more than $2.5 million in loans and lines of credit.  The banks and credit unions that the defendants defrauded were left holding the bag when the vast majority of these loans defaulted.  Thanks to the outstanding investigative work of the U.S. Postal Inspection Service, IRS Criminal Investigation Division, and New York State Police Auto Crimes Unit, these defendants will now be held accountable for their crime.”

According to the Informations to which the defendants pled guilty and other court documents:

From 2007 to August 2015, BINDER TAL, BALDEV TAL, MINTU, and their co-conspirators fraudulently obtained loans and lines of credit from banks, credit unions, and other lending institutions.  The defendants obtained the loans by providing materially false information to the lenders about the borrowers’ assets, including but not limited to false information about the borrowers’ employment and income.  Through their scheme, the defendants and their co-conspirators fraudulently obtained more than $2.5 million in proceeds in connection with dozens of loan applications and applications for lines of credit.  The vast majority of the loans and lines of credit went into default, and millions of dollars were not repaid.

As part of the scheme to defraud, the defendants used the proceeds to personally enrich themselves and their families.  For example, the fraudulently obtained proceeds from the loans and lines of credit were used toward, among other things, credit card debts for personal expenses of the defendants, business expenses, and debts arising from other fraudulently obtained loans, to conceal the fraudulent nature of these loans.

In addition, the defendants and their co-conspirators also engaged in extensive efforts to perpetuate and conceal the fraudulent scheme.  These efforts included, but were not limited to, multiple members of the conspiracy acting as the borrowers for different loans, falsely claiming that the purpose of the loans was to purchase or finance used luxury automobiles, when in fact many of the automobiles were never purchased or leased by the defendants or their co-conspirators, and the loan proceeds were later distributed to other members of the conspiracy and to entities they controlled.

                                                                *          *         *

BINDER TAL, 34, and, BALDEV TAL, 34, both from Oresfield, Pennsylvania, pled guilty on February 24, 2016, and February 29, 2016, respectively, to one count of conspiring to commit bank fraud.  MINTU, 36, of Montgomery, New York, pled guilty today to the same charge, which carries a maximum sentence of 30 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.

BINDER TAL and BALDEV TAL are scheduled to be sentenced on June 1, 2016.  SHARIFUL is scheduled to be sentenced on July 07, 2016. 

Mr. Bharara praised the outstanding efforts of the United States Postal Inspection Service, the Internal Revenue Service, Criminal Investigation Division, and the New York State Police Auto Crimes Unit.

This case is being handled by the Office’s White Plains Division.  Assistant U.S. Attorneys John P. Collins, Jr. is in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced the arrest and unsealing of a complaint charging ANDREW CASPERSEN, 39, with securities and wire fraud in connection with a scheme to defraud investors of over $95 million.  From at least July 2015 through March 2016, CASPERSEN, a partner in the New York office of a multinational financial services firm involved in private equity and alternative asset advisory work, fraudulently solicited investments in securities by falsely representing that he had authority to conduct deals on behalf of his employer with another private equity fund, and that investors’ funds would be invested in a secured loan to an investment firm, when in fact no such security existed and no such investments were made, and which funds CASPERSEN converted to his own use without the authorization of his investors.  As a result of the scheme, CASPERSEN converted to his own use approximately $24.6 million from a charitable foundation affiliated with a multinational hedge fund based in New York, and $400,000 from an employee of the hedge fund.  Rather than invest his victims’ funds as promised, CASPERSEN used a portion of the $25 million to trade securities in his personal brokerage account, which funds he largely lost as a result of aggressive options trading.  In addition, shortly before his arrest, CASPERSEN fraudulently attempted to solicit an additional $20 million investment from the same charitable foundation and a $50 million investment from another multinational private equity firm headquartered in New York.  CASPERSEN will be presented today before Magistrate Judge James C. Francis.

In a separate action, the SEC filed civil charges against CASPERSEN.  

U.S. Attorney Preet Bharara said: “Andrew Caspersen, a partner at a major financial advisory firm, allegedly scammed his clients into investing tens of millions in sham private equity investments.  To advance his $95 million fraud scheme, Caspersen allegedly put on a shameful charade – creating fake email addresses, setting up misleading domain names, and inventing fictional financiers.  When confronted by a suspicious client who had invested $25 million, Caspersen had no good answers.  He will now have to answer to federal securities and wire fraud charges.”

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

The Scheme to Defraud Firm-3

In October 2015, CASPERSEN sent an email to an individual (“Individual-1”)[2], in which CASPERSEN described “a new investment” that he had structured and in which he claimed he was personally investing.  Individual-1 was employed at a multinational hedge fund headquartered in New York (“Firm-3”), and was responsible for evaluating and recommending investments for a charitable foundation affiliated with the fund (the “Foundation”).  Over the course of additional correspondence in the ensuing days, CASPERSEN offered Individual-1 the opportunity to invest in an $80 million credit facility secured by a private equity portfolio, which CASPERSEN’s employer (“Firm-2”) was purportedly creating to facilitate investments in the private equity secondary market by a firm in New York (“Firm-1”).  On or about November 5, 2015, the Foundation wired $24.6 million of its own money and $400,000 of Individual-1’s money into an account designated by CASPERSEN (“Account-1”) for purposes of investment in the special purpose vehicle CASPERSEN had created in connection with this proposed transaction.  Although CASPERSEN had represented to Individual-1 that CASPERSEN had already raised $30 million for this investment opportunity that he had presented to Individual-1, as of the Foundation’s November 5, 2015, investment, Account-1 had only received a total of $2.51 million in incoming wire transfers since the special purpose vehicle was incorporated.

The next day, November 6, 2015, CASPERSEN wired $17.6 million from Account-1 into CASPERSEN’s own personal brokerage account.  Notwithstanding the representations he had made to Individual-1 about what he would do with the Foundation’s investment, CASPERSEN immediately began using the funds to engage in largely unprofitable securities transactions.  As of December 31, 2015, CASPERSEN’s brokerage account had a net loss of approximately $25 million for the year.  In addition, on November 6, 2015, CASPERSEN wired approximately $8 million from Account-1 to a bank account controlled by Firm-2, for the purpose of covering up an earlier unauthorized wire transfer of the same amount CASPERSEN had diverted for his own use from its intended beneficiary, Firm-2.    

On March 1, 2016, CASPERSEN began soliciting Individual-1 for an additional $20 million investment in the same purported deal.  CASPERSEN falsely claimed that he intended to have his own family make an additional $5 million investment.  When Individual-1 raised questions about the purported signatory for the special purpose vehicle (“Individual-3”), CASPERSEN falsely claimed that Individual-3 worked at Firm-1, even though, in reality, no such person worked at Firm-1.  On March 7, 2016, Individual-1 told CASPERSEN that he wanted to speak directly with Individual-3.  In response, CASPERSEN sent an email to Individual-1, as well as to an email address containing both the name of Individual-3 and the name of Individual-3’s firm (the “Email Address”) to set up a conference call for later that day.  Individual-1 later learned that the domain name for the Email Address had been registered on March 7, just twenty minutes after Individual-1 requested a telephone call with Individual-3, and that the domain name for the Email Address was not the same as the domain name associated with the real Firm-1.  Individual-1 also subsequently learned that a representative of Individual-1’s employer had called Firm-1’s New York office and been told that no one with Individual-3’s name worked at Firm-1.

Later on March 7, 2016, Individual-1 spoke by telephone with a person who identified himself as Individual-3.  Individual-3 claimed to be a vice president in the New York office of Firm-1.  During the call, Individual-1 asked Individual-3 for his telephone number, which Individual-3 refused to provide.  After the call, Individual-1 received an email from the Email Address with a telephone number purporting to belong to Individual-3.  Later that day, Individual-1 called CASPERSEN and confronted him with what he had learned about Individual-3 (i.e., the discrepancy between the newly created domain name for the Email Address, Firm-1’s real domain name, and that no one with Individual-3’s name worked at Firm-1).  CASPERSEN responded that he found the information “strange,” and said he would get to the bottom of it.  CASPERSEN called Individual-1 later and confirmed that the domain name of the Email Address had been recently registered, but stated that Individual-3 was actually a former outside administrator for Firm-1 in Guernsey. 

Individual-1 then told CASPERSEN that the Foundation wanted its $25 million investment back, plus interest.  On March 11, 2016, CASPERSEN told Individual-1 that the Foundation would receive the funds back by the end of the month. 

The Foundation ultimately did not invest an additional $20 million with CASPERSEN, but has not received any of the $25 million principal back.

Firm-1, Firm-2, and a private equity firm referenced by CASPERSEN as part of the scheme (“Firm-4”) have confirmed that they had no knowledge of the special purpose vehicle that CASPERSEN had created as part of the scheme, nor did Firm-1, Firm-2, or Firm-4 authorize CASPERSEN to solicit funds on their behalf. 

The Scheme to Defraud Firm-5

Beginning in October 2015, CASPERSEN began soliciting another multinational private equity firm (“Firm-5”) for an investment in a purported security similar to the one he had offered Individual-1 and the Foundation.  In December 2015, when employees of Firm-5 sought to put their counsel in touch with CASPERSEN’s counsel, CASPERSEN put them off.  On March 8, 2016, CASPERSEN sent a promissory note to Firm-5 employees for $50 million with terms nearly identical to those offered the Foundation in November 2015.  The next day, CASPERSEN emailed Firm-5 employees and represented that his employer, Firm-2, had arranged a loan facility, and had asked him and two others who purportedly worked at Firm-1 (“Individual 6” and “Individual 7”) to be monitors. 

As with the scheme to defraud Individual-1 and the Foundation, Firm-1, Firm-2, and Firm-4 confirmed that they had not authorized CASPERSEN to solicit funds from Firm-5 on their behalf, nor did they agree to participate in an offering of $80 million worth of promissory notes.  Firm-1 also neither employed nor was represented by anyone with the names of Individual-6 or Individual-7.

Firm-5 did not ultimately invest $50 million with CASPERSEN. 

As of March 18, 2016, Account-1 (where the Foundation and Individual-1 had wired their $25 million investment) had a balance of approximately $40,000. 

*                      *                      *

CASPERSEN is charged with one count of securities fraud and one count of wire fraud. Each count carries a maximum term of 20 years in prison.  The maximum fine on these counts is $5 million, or twice the gross gain or loss from the offense.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.           

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

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

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

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

 

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

 

[2] For ease of reference, the defined terms in this press release mirror the defined terms in the Complaint.

Preet Bharara, the United States Attorney for the Southern District of New York, and Shantelle P. Kitchen, Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigations Division (“IRS-CI”), announced today that NISAR SAHI was sentenced today by United States District Judge Denise L. Cote to 37 months in prison for stealing government funds.  

Manhattan U.S. Attorney Preet Bharara said:  “For four years, Nisar Sahi stole hundreds of thousands of dollars in tax refunds that rightfully belonged to honest, hardworking American taxpayers.  Now, thanks to the excellent investigation by the IRS, Sahi will face time in federal prison for stealing from the U.S. government.”

IRS-CI Special Agent in Charge Shantelle P. Kitchen said:  “IRS-Criminal Investigation is committed to the investigation of fraudulent tax refund schemes.  The investigation and prosecution of Nisar Sahi is just another example of the government’s diligence and persistence in identifying individuals who use other people’s personal information to file fraudulent tax returns for their own financial benefit and bringing them to justice.”

According to the Information to which SAHI pled guilty, and other court documents filed in this case:

From 2011 to 2015, SAHI devised and executed a scheme to obtain false and fraudulent tax returns totaling $803,995 from the IRS.  SAHI carried out this scheme by preparing and submitting to the IRS federal income tax returns — using the names and social security numbers of others — and directing that the refunds be sent to bank accounts and addresses that he controlled. 

In addition to the prison sentence, SAHI, 50, of Pakistan, was ordered to forfeit $319,712 in ill-gotten gains, and to pay restitution to the IRS in the same amount. 

Mr. Bharara praised the outstanding investigative work of IRS-CI.  Mr. Bharara also thanked the U.S. Department of Justice’s Tax Division for its assistance.

The case is being prosecuted by the Office’s General Crimes Unit.  Assistant United States Attorney Rebekah Donaleski is in charge of the prosecution.

Loretta E. Lynch, the Attorney General of the United States, Preet Bharara, the United States Attorney for the Southern District of New York, James B. Comey, Director of the Federal Bureau of Investigation (“FBI”), and John P. Carlin, Assistant Attorney General for National Security, announced today the unsealing of an indictment charging seven Iranians – AHMAD FATHI; HAMID FIROOZI; AMIN SHOKOHI; SADEGH AHMADZADEGAN, a/k/a Nitr0jen26; OMID GHAFFARINIA, a/k/a PLuS; SINA KEISSAR; and NADER SAEDI, a/k/a Turk Server – who were employed by two Iran-based computer companies,  ITSecTeam (“ITSEC”) and Mersad Company (“MERSAD”), which were sponsored by Iran’s Islamic Revolutionary Guard Corps – for conducting a coordinated campaign of distributed denial of service (“DDoS”) attacks against 46 major companies, primarily in the U.S. financial sector, from late 2011 through mid-2013.  These attacks, which occurred on more than 176 days, disabled victim bank websites, prevented customers from accessing their accounts online, and collectively cost the banks tens of millions of dollars in remediation costs as they worked to neutralize and mitigate the attacks on their servers.  In addition, FIROOZI is also charged with obtaining unauthorized access into the Supervisory Control and Data Acquisition (“SCADA”) systems of the Bowman Dam, located in Rye, New York, in August and September of 2013.

Attorney General Loretta E. Lynch said:  “In unsealing this indictment, the Department of Justice is sending a powerful message: that we will not allow any individual, group, or nation to sabotage American financial institutions or undermine the integrity of fair competition in the operation of the free market.  Through the work of our National Security Division, the FBI, and U.S. Attorney’s Offices around the country, we will continue to pursue national security cyber threats through the use of all available tools, including public criminal charges.  And as today’s unsealing makes clear, individuals who engage in computer hacking will be exposed for their criminal conduct and sought for apprehension and prosecution in an American court of law.”

Manhattan U.S. Attorney Preet Bharara said: “The charges announced today respond directly to a cyber-assault on New York, its institutions, and its infrastructure.  The alleged onslaught of cyber-attacks on 46 of our largest financial institutions, many headquartered in New York City, resulted in hundreds of thousands of customers being unable to access their accounts and tens of millions of dollars being spent by the companies trying to stay online through these attacks.  The infiltration of the Bowman Avenue dam represents a frightening new frontier in cybercrime.  These were no ordinary crimes, but calculated attacks by groups with ties to Iran’s Islamic Revolutionary Guard and designed specifically to harm America and its people.  We now live in a world where devastating attacks on our financial system, our infrastructure, and our way of life can be launched from anywhere in the world, with a click of a mouse.  Confronting these types of cyber-attacks cannot be the job of just law enforcement.  The charges announced today should serve as a wake-up call for everyone responsible for securing our financial markets and for guarding our infrastructure.  Our future security depends on heeding this call.” 

FBI Director James B. Comey said: “The FBI will find those behind cyber intrusions and hold them accountable — wherever they are, and whoever they are.  By calling out the individuals and nations who use cyber-attacks to threaten American enterprise, as we have done in this indictment, we will change behavior.”

Assistant Attorney General John P. Carlin said:  “Like past nation state-sponsored hackers, these defendants and their backers believed that they could attack our critical infrastructure without consequence, from behind a veil of cyber anonymity.  This indictment once again shows there is no such veil – we can and will expose malicious cyber hackers engaging in unlawful acts that threaten our public safety and national security.”

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

DDoS Attacks

The DDoS attacks against the U.S. financial sector began in approximately December 2011, and occurred sporadically until September 2012, at which point they escalated in frequency to a near-weekly basis, occurring between Tuesdays and Thursdays during normal business hours in the United States through in or about May 2013.  On certain days during the campaign, victim computer servers were hit with as many as 140 Gigabits of data per second, and hundreds of thousands of customers were cut off from online access to their bank accounts.

For the purpose of carrying out the attacks, the defendants built botnets that consisted of thousands of compromised computer systems that had been infected with the defendants’ malware, and were subject to their remote command and control.  The defendants and their co-conspirators ordered their botnets to direct significant amounts of malicious traffic at computer servers used to operate the websites for victim corporations, which overwhelmed victim servers and prevented customers from accessing the websites or their accounts online during the period of the attacks.  Although the DDoS campaign damaged and disrupted the businesses of the financial sector victims and interfered with their customers’ ability to do online banking during the course of the attacks, the attacks did not affect or result in the theft of customer account data.

FATHI, FIROOZI, and SHOKOHI were responsible for ITSEC’s portion of the DDoS attack campaign against the U.S. financial sector.  FATHI was the leader of ITSEC and was responsible for supervising and coordinating ITSEC’s portion of the DDoS campaign, as well as managing computer intrusion and cyberattack projects being conducted for the government of Iran.  FIROOZI procured and managed computer servers that were used to coordinate and direct DDoS attacks for ITSEC.  SHOKOHI is a computer hacker who helped build ITSEC’s botnet and created malware used to direct the botnet to engage in DDoS attacks.  During the time that he worked in support of the DDoS campaign, SHOKOKI received credit for his computer intrusion work from the Iranian government towards his completion of his mandatory military service requirement in Iran.

AHMADZADEGAN, GHAFFARINIA, KEISSAR, and SAEDI were responsible for MERSAD’s portion of the DDoS attack campaign against the U.S. financial sector. AHMADZADEGAN was a co-founder of MERSAD and was responsible for managing the MERSAD botnet.  He was also a member of Iranian hacking groups Sun Army and the Ashiyane Digital Security Team (“ADST”), and claimed responsibility for hacking servers belonging to the National Aeronautics and Space Administration (“NASA”) in February 2012.  AHMADZADEGAN has also provided training to Iranian intelligence personnel.  GHAFFARINIA was the other co-founder of MERSAD and created malicious computer code used to build MERSAD’s botnet for the DDoS campaign.  GHAFFARINIA was also a member of Sun Army and ADST, and has also claimed responsibility for hacking NASA servers in February 2012, as well as thousands of other servers in the United States, the United Kingdom, and Israel.  KEISSAR procured computer servers used to access, manipulate, and test MERSAD’s botnet.  SAEDI wrote computer scripts used to locate vulnerable servers to build MERSAD’s botnet.  SAEDI was also a former Sun Army computer hacker who expressly touted himself as an expert in DDoS attacks.

Bowman Dam Intrusion

Between August 28, 2013, and September 18, 2013, FIROOZI repeatedly obtained unauthorized access to the SCADA systems of the Bowman Dam, in Rye, New York, which allowed him to repeatedly obtain information regarding the status and operation of the dam, including information about the water levels and temperature, and the status of the sluice gate, which is responsible for controlling water levels and flow rates.  Although that access would normally have permitted FIROOZI to remotely operate and manipulate the Bowman Dam’s sluice gate, unbeknownst to FIROOZI, the sluice gate had been manually disconnected for maintenance at the time his intrusion.

*                *                *

FATHI, 37; FIROOZI, 34; SHOKOHI, 25; AHMADZADEGAN, 23; GHAFFARINIA, 25; KEISSAR, 25; and SAEDI, 26, all citizens and residents of Iran, are each charged with one count of conspiracy to commit and aid and abet computer hacking, which carries a maximum sentence of 10 years in prison.  FIROOZI is also charged with an additional count of obtaining and aiding and abetting unauthorized access to a protected computer, which carries a maximum sentence of five years in prison.

Mr. Bharara praised the outstanding investigative work of the FBI and the multiple FBI Field Offices that participated in the investigation, which included agents from the Chicago, Cincinnati, New York, Newark, Phoenix, and San Francisco FBI Field Offices.  Mr. Bharara also thanked the Department of Homeland Security for its work to remediate the intrusion at the Bowman Dam.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorney Timothy T. Howard is in charge of the prosecution, with assistance provided by Deputy Chief Sean M. Newell of the National Security Division’s Counterintelligence and Export Control Section.

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

 

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that STEPHEN P. BROWN was sentenced to 292 months in prison and supervised release for life for attempting to entice a minor to engage in sexual activity.  United States District Judge Nelson S. Román imposed the sentence.           

U.S. Attorney Preet Bharara stated:  “Over the course of three decades, Stephen Brown sexually abused four boys.  His predatory activity ended when he used email and text messages in an attempt to lure an individual he believed was his most recent 11-year-old victim.  That child victim he thought he was going to meet and have sex with, was in fact an undercover officer.  This case underlines the urgent and serious need for law enforcement to continue its efforts to protect vulnerable children from those who seek to prey on them.”

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

Between January 14, 2014 and March 4, 2014, BROWN, engaged in sexually explicit online communications with a New York State Police Investigator who was acting in an undercover capacity and posing as an 11-year old boy.  During these communications, BROWN discussed various sexual acts he wished to perform on the boy, requested that the boy provide BROWN with sexually explicit photographs of himself, and made a plan to meet the boy in a Westchester County, New York, hotel for the purpose of engaging in sexual activity. 

On March 4, 2014, BROWN was arrested in Westchester when he arrived at the designated meeting place to meet the boy. After his arrest, BROWN admitted, among other things, that he had exchanged emails and instant messages with a boy and discussed meeting the boy to engage in sexual acts.  BROWN admitted that he asked the boy for sexually explicit photos and that he wanted such photos.  He stated that he brought his camera to the hotel because he intended to take sexually explicit photos of the boy. 

After his arrest, a search of BROWN’s home revealed BROWN’s possession of thousands of images and videos of child pornography.  Further, the investigation of BROWN revealed that, over the last 30 years, BROWN sexually abused four boys.

BROWN, 64, of Manhattan, New York, was also ordered to pay a $50,000 fine.

Mr. Bharara praised the efforts of the Federal Bureau of Investigation, the New York County District Attorney’s Office, the Sullivan County District Attorney’s Office, the Westchester County District Attorney’s Office, the Albany County District Attorney’s Office, the City of New York Police Department, the New York State Police, and the Rockland County Computer Crimes Task Force in connection with this investigation.

The prosecution is being handled by the Office’s White Plains Division.  Assistant United States Attorney Marcia S. Cohen is in charge of the prosecution.  

Preet Bharara, the United States Attorney for the Southern District of New York, announced that EDMUND QUINCY MUNTSLAG, a citizen of Suriname, was found guilty yesterday in Manhattan federal court of conspiring to import cocaine into the United States.  The four-day jury trial was held before U.S. District Judge Shira A. Scheindlin.

Manhattan U.S. Attorney Preet Bharara said:  “As a unanimous jury found, Edmund Muntslag conspired to create a drug route for hundreds of kilograms of cocaine from his home country of Suriname to the streets of New York City.  Thanks to the outstanding work of the Drug Enforcement Administration, Muntslag and his co-defendant, Dino Bouterse, will no longer be plotting to smuggle cocaine into the United States, but rather answering for their crimes in a federal prison.”

According to the allegations contained in the Indictment, other documents publicly filed in Manhattan federal court, and the evidence introduced at trial:

In 2013, MUNSTLAG, along with co-defendant Dino Bouterse, the son of the President of Suriname who declared himself the head of that country’s Counterterrorism Unit, conspired to sell hundreds of kilograms of cocaine to a purported Mexican cartel for importation to the U.S. In furtherance of this conspiracy, Bouterse supplied to individuals that he and MUNTSLAG believed to be representatives of the cartel, but who in fact were confidential sources working at the direction and under the supervision of the Drug Enforcement Administration (“DEA”), with genuine Surinamese passports bearing false identification information.  

Approximately three weeks later, MUNTSLAG received $60,000 in cash as a payment to allow a 10-kilogram “test load” of cocaine to pass through the airport in Paramaribo, Suriname, where it was to be loaded onto a commercial airline flight concealed inside luggage.  Thereafter, MUNTSLAG worked with corrupt airport employees in Suriname to send the 10-kilogram test load to Port-of-Spain, Trinidad and Tobago, from where MUNTSLAG and Bouterse believed it would be further transported and sold by the purported cartel in New York, New York. MUNTSLAG and Bouterse expected to receive proceeds from the sale of the cocaine in New York, and also expected to send additional, 100-kilogram cocaine shipments to the purported cartel using a similar method upon the successful completion of the test load. 

The cocaine was seized by Trinidadian law enforcement officers, in coordination with agents of the DEA, in Port-of-Spain on July 27, 2013.  MUNTSLAG was arrested in Port-of-Spain on August 29, 2013, and Bouterse was arrested in Panama City, Panama, on August 29, 2013.

*                *                *

MUNTSLAG, 32, of Suriname, was convicted of conspiring to import five kilograms or more of cocaine into the United States, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison. The minimum and maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  MUNTSLAG is scheduled to be sentenced on June 28, 2016, at 4:30 p.m. 

On August 29, 2014, Bouterse, 43, also of Suriname, pled guilty to attempting to provide material support to Hezbollah, a Foreign Terrorist Organization; using and carrying a firearm or during and in relation to a drug-trafficking crime; and conspiring to import five kilograms or more of cocaine into the United States.  On March 10, 2015, Bouterse was sentenced principally to a term of 195 months in prison.

Mr. Bharara praised the outstanding efforts of the Special Operations Division of the DEA.  Mr. Bharara also thanked the DEA’s Miami Field Division, Panama City Country Office, Port-of-Spain Country Office, and Bogota Country Office; the Government of Trinidad and Tobago; and the U.S. Department of Justice’s Office of International Affairs.

This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Michael D. Lockard and Andrew DeFilippis are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that MARC WIESELTHIER, a certified public accountant and former partner at a New York accounting firm (the “Firm”), was sentenced today to 27 months in prison for participating in a scheme to obtain millions of dollars in loans by making false statements and providing false and fraudulent documents to two commercial banks based in New York (the “Banks”) concerning the financial condition of a Florida-based cosmetics company (the “Company”) that was a client of WIESELTHIER.  WIESELTHIER pled guilty on November 18, 2015, before U.S. Magistrate Judge Debra Freeman.  Today’s sentence was imposed by U.S. District Judge Lewis A. Kaplan.

Manhattan U.S. Attorney Preet Bharara said: “Outside auditors are responsible for ensuring their clients’ financial statements are accurate. Marc Wieselthier, a partner at a New York accounting firm, admitted to falsely certifying a company’s financial statements, knowing that it would deceive two New York banks into making multimillion-dollar loans.”

According to the allegations contained in the information to which WIESELTHIER pled guilty, other documents filed in Manhattan federal court, and statements made in court proceedings:

WIESELTHIER was a licensed certified public accountant at the Firm.  From 2009 through at least November 2015, WIESELTHIER was a partner at the Firm.  The Company and its chief executive officer (“CEO”) were clients of WIESELTHIER, who performed, among other things, year-end audits of financial statements for the Company.

From 2007 through 2014, the Company, through its officers and WIESLTHIER, fraudulently induced the Banks into lending the Company millions of dollars by repeatedly making, and causing to be made, materially false and misleading statements about the Company’s financial condition.  Specifically, the Company falsely inflated its sales and accounts receivable on “borrowing base certificates” and in financial statements audited by WIESELTHIER, which were provided to the Banks pursuant to loan agreements between the Banks and the Company.  The Company used those falsely inflated sales and accounts receivable to mislead the Banks about the Company’s true financial performance in order to secure and draw down millions of dollars in revolving loans from the Banks that the Company would not otherwise have been entitled to receive.

As part of the scheme, on an annual basis, WIESELTHIER knowingly issued unqualified audit reports known as “clean opinions” falsely certifying that the Company’s financial statements fairly, and in all material respects, reflected the true financial condition of the Company and were in conformity with generally accepted accounting principles (“GAAP”).  In truth and in fact, at the time that WIESELTHIER issued those “clean opinions,” WIESELTHIER knew that the Company’s financial statements overstated the Company’s accounts receivable and understood that the Banks would rely upon those false financial statements in loaning money to the Company.  WIESELTHIER hid his accounting work for the Company from his own partners and associates at the Firm in an apparent effort to conceal the fraud. 

In March 2014, the Company defaulted on the loans at issue.  At that time, the Company’s outstanding balance on the loans was more than $4.8 million.

*                *                *

In addition to his prison term, WIESELTHIER, 57, of Plainview, New York, was sentenced to three years of supervised release, and ordered to pay forfeiture of $166,000 and restitution of $4,888,460.35.

Three other defendants in this matter, Thomas Thompson, the sales manager of the Company, Jay Sosonko, the CFO of the Company, and Emanuel Cohen, the CEO of the Company, previously pled guilty for their roles in the fraudulent scheme, and are scheduled to be sentenced on March 24, 2016, April 14, 2016, and June 1, 2016, respectively.

Mr. Bharara praised the investigative work of the FBI.

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorney Edward A. Imperatore is in charge of the prosecution.

Preet Bharara, United States Attorney for the Southern District of New York, announced today that HECTOR SANTILLAN, a/k/a “Bane,” a/k/a “Bene,” a/k/a “Liro,” was sentenced in Manhattan federal court to 151 months in prison for conspiring to distribute cocaine, heroin, and oxycodone pills, and possessing with intent to distribute cocaine.  He was convicted in November 2015 following a five-day jury trial before U.S. District Judge Robert W. Sweet.  SANTILLAN was sentenced today before Judge Sweet.

U.S. Attorney Bharara stated: “Hector Santillan was convicted by a jury of serious drug trafficking crimes.  Heroin and prescription pill abuse is ravaging our neighborhoods, and those like Santillan who peddle these drugs are fueling this national epidemic.”

According to the evidence presented at trial and documents filed in the case:           

From in or about the summer of 2012, up to and including February 12, 2013, SANTILLAN sold cocaine, heroin, and oxycodone pills as a member of a drug trafficking organization spanning the east coast of the United States.  On February 12, 2013, SANTILLAN and a co-conspirator travelled from Massachusetts to the Washington Heights neighborhood of Manhattan, where SANTILLAN purchased four kilograms of cocaine.  As they turned around to return to Massachusetts, their car was pulled over by a Westchester County Police officer for a traffic violation.  A search of the car later revealed the cocaine in a compartment hidden under the seat on which SANTILLAN was sitting.  The evidence at trial also showed that SANTILLAN owned an assault rifle, and in concert with other co-conspirators, SANTILLAN used his assault rifle to make a credible threat to use violence against an individual he believed was planning to rob the organization of drugs and drug proceeds.

SANTILLAN, 38, of Methuen, Massachusetts, was sentenced to 151 months in prison, to be followed by four years of supervised release, and a $200 special assessment.

United States Attorney Bharara praised the investigative work of the Drug Enforcement Administration and the Westchester County Department of Public Safety. 

The case is being handled by the Office’s Narcotics Unit.  Assistant U.S. Attorneys Kristy J. Greenberg and Noah D. Solowiejczyk are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ADONY NINA, the leader of a drug trafficking organization (the “Organization”) that operated in the Bronx, was sentenced yesterday to life in prison for running the Organization and murdering Aisha Morales in June 2011.  NINA was convicted after an October 2013 trial of one count of conspiring to distribute heroin and crack cocaine and one count of discharging a firearm in relation to a narcotics conspiracy.  NINA was further convicted after a May 2015 trial of one count of intentionally causing the killing of Aisha Morales while engaged in a narcotics conspiracy and one count of aiding and abetting the use of a firearm that caused the death of Aisha Morales.  Both trials were before United States District Judge Richard J. Sullivan, who imposed yesterday’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “Adony Nina was twice convicted by juries in this District of crimes of violence connected to his crack and heroin trafficking empire.  Nina’s reign of violence included the murder of 21-year-old Aisha Morales that he, as the head of his drug trafficking organization, had ordered.  For his crimes that terrorized his Bronx neighborhood, Adony Nina has been sentenced to spend the rest of his life in federal prison.”

NINA was initially arrested in April 2012 pursuant to a Complaint charging him with possession of ammunition as a felon.  In December 2012, NINA was additionally charged with narcotics trafficking and firearms charges in a Superseding Indictment filed in December 2012.  NINA and his co-defendant Candido Antomattei, another high-ranking member of the Organization, were convicted of narcotics trafficking and firearms charges following a trial in October 2013.  In April 2014, NINA was charged with the murder of Aisha Morales in a Superseding Indictment, and was convicted of participating in the Aisha Morales murder after a trial in May 2015.  Cathy Morales, who along with NINA participated in the murder of Aisha Morales (no relation), pled guilty in February 2015 to one count of intentionally killing an individual while engaged in a narcotics conspiracy.  Cathy Morales was sentenced to 45 years in prison in October 2015 for her role in the murder of Aisha Morales.  Thirteen other members of the Organization have pled guilty to various federal narcotics and firearms charges.

According to the publicly filed documents, evidence presented at the trials in this case, and statements made in court throughout the pendency of the case:

From 2008 through 2013, the Organization’s members sold crack cocaine and heroin, among other drugs, primarily in the vicinity of Longwood Avenue, and Beck, Kelly, and Simpson Streets in the Bronx.  NINA was the leader of the organization, supplying his workers with crack cocaine and heroin.  NINA also supplied his workers with firearms, and relied on the regular use of violence and threats of harm against his workers, customers, and rival drug dealers, all in an effort to control the Organization and maintain control over what he considered to be its territory.

During and in relation to NINA’s administration of the Organization, NINA provided a gun to his worker Cathy Morales and directed her to shoot at a group of women that included the victim, Aisha Morales.  Cathy Morales carried out NINA’s instructions and fatally shot Aisha Morales, who was 21 years old at the time of her death, in the head.  The shooting took place in the vicinity of 1018 East 163rd Street, in broad daylight.  Prior to the murder, NINA, Cathy Morales, and other members of the Organization threatened rival drug dealers who were selling drugs in the Organization’s territory.  The murder was the culmination of the dispute with the rival drug dealers.  Aisha Morales was not involved in the drug-dealing activities that led to the dispute.      

*               *                 *

In addition to the prison term, NINA, 38, of the Bronx, New York, was ordered to pay restitution.

Mr. Bharara praised the outstanding investigative work of the Bureau of Alcohol, Tobacco, Firearms and Explosives and the New York City Police Department.

The prosecution is being handled by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Christopher DiMase, Rebecca Mermelstein, Margaret Graham, Daniel Noble, and Sarah Krissoff are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and Christina Scaringi, the Special Agent in Charge of the U.S. Department of Housing and Urban Development, Office of Inspector General (“HUD OIG”), announced today that ANTHONY BOVE, the former Commissioner of the Board of Water Supply of the City of Mount Vernon (the “Water Department”), pled guilty to soliciting a $10,000 bribe from an employee of the Water Department, and with lying to federal law enforcement officers when BOVE was interviewed during the investigation.  BOVE pled guilty to the Information today in White Plains federal court before U.S. District Judge Vincent L. Briccetti. 

U.S. Attorney Bharara stated:  “The people of Mount Vernon deserved better than Anthony Bove, who used his public position to solicit a bribe from his own employee.  As the Commissioner of the Board of Water Supply, Bove was entrusted with the responsibility of ensuring that the people of Mount Vernon had a safe and clean water supply, not to find ways to line his own pockets through bribes.  I want to thank the HUD OIG and the investigators and prosecutors in my office for making this important case.”

Special Agent in Charge Scaringi stated:  “In the last number of years, we have seen an unfortunate increase in the failure of our public officials to exercise integrity in connection with their official positions, thus further eroding the public’s trust in them.  Anthony Bove’s guilty plea today is proof of our continuing resolve to ferret out official misconduct and corruption.  The HUD OIG thanks the U.S. Attorney’s Office for their continuing partnership in helping to detect and prosecute corrupt conduct.”

According to the allegations in the Information and other documents in the public record:

ANTHONY BOVE was the Commissioner of the Water Department of the City of Mount Vernon (the “City”).  The City annually receives in excess of $10,000 in federal funds from the United States government.  The City’s Water Department is responsible for serving City residents by, among other things, monitoring and treating the City’s water supply, repairing water main leaks, and reading water meters and generating water bills.  In accordance with the City Charter, the Commissioner of the Water Department is appointed by the City’s Mayor, serves at the Mayor’s pleasure, and reports directly to the Mayor as the head of one of the City’s departments.

In the spring of 2015, while serving as the Water Commissioner, BOVE solicited a $10,000 bribe from a Water Department employee (“the Employee”) in exchange for approving the Employee’s promotion within the Water Department.  The Employee, who was serving in a provisional capacity as the bookkeeper of the Water Department, had passed a civil service bookkeeping examination in order to become eligible for a permanent bookkeeping position at the Water Department.  After receiving the test results, the Employee completed the necessary form to apply for the permanent bookkeeping position, and submitted it to BOVE for his approval and signature, which was required for the promotion to occur.

BOVE did not approve the application; instead, on April 14, 2015, BOVE told the Employee to meet him at Memorial Field in Mount Vernon.  At Memorial Field, BOVE conveyed to the Employee that he would not approve the Employee’s promotion unless he gave BOVE $10,000, and that he could give BOVE half ($5,000) up front and pay the balance later.  BOVE said that he would accept the remaining payments on installment:  “So give me like, fucking like 20 dollars every fucking paycheck or whatever, you know.”

Following the April 14 meeting, BOVE called the Employee on multiple occasions to ask whether and when the Employee would pay him.  The Employee did not make any payments to BOVE and his application form seeking the permanent bookkeeping position remained unapproved. 

On December 7, 2015, a Special Agent from HUD OIG and a Criminal Investigator from the U.S. Attorney’s Office for the Southern District of New York interviewed BOVE in connection with a federal investigation into whether BOVE had attempted to extort the Employee.  During the interview, BOVE lied to the investigating agents, stating, in sum and substance, that he had never asked for money to approve a job promotion for anyone in his department.

*                      *                      *

BOVE, 48, of North Salem, New York, pled guilty to one count of bribery concerning programs receiving federal funds, which carries a maximum sentence of 10 years in prison, and one count of making a false statement to federal law enforcement officers, which carries a maximum sentence of five years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

BOVE is scheduled to be sentenced on June 29, 2016.

Mr. Bharara praised HUD OIG and the Criminal Investigators of the U.S. Attorney’s Office for their outstanding work during this investigation.    

The prosecution is being handled by the Office’s White Plains Division.  Assistant U.S. Attorney George Turner is in charge of the prosecution.

Charges Unsealed against Three Defendants Who Allegedly Engaged in Hundreds of Millions of Dollars of Transactions on Behalf of the Government of Iran and Iranian Entities as Part of a Scheme to Evade U.S. Sanctions

An indictment was unsealed in the Southern District of New York against Reza Zarrab, aka Riza Sarraf, 33, a resident of Turkey and dual citizen of Turkey and Iran; Camelia Jamshidy, aka Kamelia Jamshidy, 29, a citizen of Iran; and Hossein Najafzadeh, 65, a citizen of Iran, for engaging in hundreds of millions of dollars-worth of transactions on behalf of the government of Iran and other Iranian entities, which were barred by U.S. sanctions, laundering the proceeds of those illegal transactions and defrauding several financial institutions by concealing the true nature of these transactions. 

Zarrab was arrested on March 19, 2016, and was presented in federal court in Miami earlier today.  Jamshidy and Najafzadeh remain at large.  The case is assigned to U.S. District Judge Richard M. Berman of the Southern District of New York.

The indictment 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 Diego Rodriguez of the FBI’s New York Field Office.

“According to charges in the indictment, Zarrab, Jamshidy and Najafzadeh circumvented U.S. sanctions by conducting millions of dollars-worth of transactions on behalf of the Iranian government and Iranian businesses,” said Assistant Attorney General Carlin.  “These alleged violations, as well as the subsequent efforts taken to cover up these illicit actions, undermined U.S. laws designed to protect national security interests.  The National Security Division will continue to vigorously pursue and bring to justice those who seek to violate U.S. sanctions.”

“As alleged, these defendants conspired for years to violate and evade United States sanctions against Iran and Iranian entities,” said U.S. Attorney Bharara.  “By allegedly laundering money through institutions around the world, Reza Zarrab, Camelia Jamshidy, and Hossein Najafzadeh undermined the U.S. sanctions regime imposed against Iran, and committed federal crimes.”

“For almost five years, from 2010 to 2015, the defendants allegedly conspired to thwart U.S. and international economic sanctions against Iran by concealing financial transactions that were on behalf of Iranian entities,” said Assistant Director in Charge Rodriguez.  “The charges announced today should send a message to those who try to hide who are their true business partners.  We appreciate the assistance of the FBI’s Miami Office with this case.”

According to the allegations contained in the indictment:

Beginning in 1979, the U.S. President found that the situation in Iran constituted an unusual and extraordinary threat to the national security, foreign policy and economy of the United States and declared a national emergency to deal with the threat.  Consistent with that designation, the United States has instituted a host of economic sanctions against Iran and Iranian entities pursuant to the International Emergency Economic Powers Act (IEEPA).  This sanctions regime prohibits, among other things, financial transactions involving the United States or United States persons that are intended for the government or Iran, or specified Iranian-related entities.

Between 2010 and 2015, Zarrab, Jamshidy and Najafzadeh conspired to conduct international financial transactions on behalf of and for the benefit of, among others, Iranian businesses, the Iranian government and entities owned or controlled by the Iranian government.  Among the beneficiaries of these scheme were Bank Mellat, an Iranian government-owned bank designated, during the time of the charged offenses, by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) as a Specially Designated National (SDN) under the Iranian Transactions and Sanctions Regulations, the Iranian Financial Sanctions Regulations and the Weapons of Mass Destruction Proliferators Sanctions Regulations; Mellat Exchange, an Iranian money services business owned and controlled by Bank Mellat; the National Iranian Oil Company (NIOC), identified during the time of the charged offenses by OFAC as an agent or affiliate of Iran’s Islamic Revolutionary Guard Corp (IRGC); the Naftiran Intertrade Company Ltd. (NICO), Naftiran Intertrade Company Sarl (NICO Sarl) and Hong Kong Intertrade Company (KHICO), companies located in the United Kingdom, Switzerland and Hong Kong, respectively, that were acting on behalf of NIOC; and the MAPNA Group, an Iranian construction and power plant company.  Bank Mellat, NIOC, NICO Sarl, NICO and HKICO are no longer designated as SDNs and NIOC is no longer identified as an agent or affiliate of the IRGC, though these entities remain “blocked parties,” with whom U.S. persons continue to be prohibited generally from engaging in unlicensed transactions or dealings.

The scheme was part of an intentional effort to assist the government of Iran in evading the effects of United States and international economic sanctions.  For example, on or about Dec. 3, 2011, Zarrab and Najafzadeh received a draft letter in Farsi prepared for Zarrab’s signature and addressed to the general manager of the Central Bank of Iran.  The letter stated, in part, that “[t]he role of the Supreme Leader and the esteemed officials and employees of Markazi Bank [the Central Bank of Iran] play against the sanctions, wisely neutralizes the sanctions and even turns them into opportunities by using specialized methods.”  The letter goes on to state, in part, “[i]t is not secret that the trend is moving towards intensifying and increasing the sanctions, and since the wise leader of the Islamic Revolution of Iran has announced this to be the year of the Economic Jihad, the Zarrab family, which has had a half a century of experience in foreign exchange, . . . considers it to be our national and moral duty to declare our willingness to participate in any kind of cooperation in order to implement monetary and foreign exchange anti-sanction policies . . . .”

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

Each defendant is charged with conspiracies to defraud the United States, to violate the IEEPA, to commit bank fraud and to commit money laundering.  The conspiracy to defraud the United States charge carries a maximum sentence of five years in prison.  The conspiracy to violate the IEEPA and money laundering conspiracy counts each carry a maximum of 20 years in prison.  The bank fraud conspiracy charge carries a maximum sentence of 30 years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

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

Assistant Attorney General Carlin joined U.S. Attorney Bharara in praising the outstanding investigative work of the FBI New York Field Office’s Counterintelligence Division.

The case is being prosecuted by Assistant U.S. Attorneys Michael Lockard, Emil Bove and Sidhardha Kamaraju of the Southern District of New York, with assistance from Trial Attorney Mariclaire Rourke of the National Security Division’s Counterintelligence and Export Control Section.  Assistant U.S. Attorney Jaimie Nawaday of the Southern District of New York is principally responsible for the forfeiture aspects of the case. 

Zarrab et al Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, John P. Carlin, Assistant Attorney General for National Security, 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 an indictment against three individuals in connection with engaging in hundreds of millions of dollars’ worth of transactions on behalf of the Government of Iran and other Iranian entities, which were barred by United States sanctions, laundering the proceeds of those illegal transactions, and defrauding several financial institutions by concealing the true nature of these transactions.  REZA ZARRAB, a/k/a “Riza Sarraf,” CAMELIA JAMSHIDY, a/k/a “Kamelia Jamshidy,” and HOSSEIN NAJAFZADEH are charged with orchestrating fraudulent transactions that were intended to hide the fact that the transactions were for the benefit of the Government of Iran or other sanctioned Iranian entities and to launder the proceeds of that illegal activity.  The case is assigned to United States District Judge Richard M. Berman.

ZARRAB was arrested on March 19, 2016, and was presented in federal court in Miami, Florida, today.  JAMSHIDY and NAJAFZADEH remain at large.

Manhattan U.S. Attorney Preet Bharara stated:  “As alleged, these defendants conspired for years to violate and evade United States sanctions against Iran and Iranian entities.  By allegedly laundering money through institutions around the world, Reza Zarrab, Camelia Jamshidy, and Hossein Najafzadeh undermined the U.S. sanctions regime imposed against Iran, and committed federal crimes.”

Assistant Attorney General John P. Carlin stated:  “According to charges in the indictment, Zarrab, Jamshidy and Najafzadeh circumvented U.S. sanctions by conducting millions of dollars-worth of transactions on behalf of the Iranian government and Iranian businesses.  These alleged violations, as well as the subsequent efforts taken to cover up these illicit actions, undermined U.S. laws designed to protect national security interests.  The National Security Division will continue to vigorously pursue and bring to justice those who seek to violate U.S. sanctions.”

FBI Assistant Director-in-Charge Diego Rodriguez stated:  “For almost five years, from 2010 to 2015, the defendants allegedly conspired to thwart U.S. and international economic sanctions against Iran by concealing financial transactions that were on behalf of Iranian entities. The charges announced today should send a message to those who try to hide who are their true business partners. We appreciate the assistance of the FBI’s Miami Office with this case.”

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

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

Between at least in or about 2010 and in or about 2015, ZARRAB, JAMSHIDY, and NAJAFZADEH conspired to conduct international financial transactions on behalf of and for the benefit of, among others, Iranian business, the Iranian government, and entities owned or controlled by the Iranian government.  Among the beneficiaries of these scheme were Bank Mellat, an Iranian government-owned bank designated, during the time of the charged offenses, by the United States Department of the Treasury, Office of Foreign Assets Control (“OFAC”), as a Specially Designated National (“SDN”) under the Iranian Transactions and Sanctions Regulations, the Iranian Financial Sanctions Regulations, and the Weapons of Mass Destruction Proliferators Sanctions Regulations; Mellat Exchange, an Iranian money services business owned and controlled by Bank Mellat; the National Iranian Oil Company (“NIOC”), identified during the time of the charged offenses by OFAC as an agent or affiliate of Iran’s Islamic Revolutionary Guard Corp (“IRGC”); the Naftiran Intertrade Company Ltd. (“NICO”), Naftiran Intertrade Company Sarl (“NICO Sarl”), and Hong Kong Intertrade Company (HKICO), companies located in the United Kingdom, Switzerland, and Hong Kong that were acting on behalf of NIOC; and the MAPNA Group, an Iranian construction and power plant company.  Bank Mellat, NIOC, NICO Sarl, NICO, and HKICO are no longer designated as SDNs and NIOC is no longer identified as an agent or affiliate of the IRGC, though these entities remain “blocked parties,” with whom U.S. persons continue to be prohibited generally from engaging in unlicensed transactions or dealings.

The scheme was part of an intentional effort to assist the Government of Iran in evading the effects of United States and international economic sanctions.  For example, on or about December 3, 2011, ZARRAB and NAJAFZADEH received a draft letter in Farsi prepared for ZARRAB’s signature and addressed to the General Manager of the Central Bank of Iran.  The letter stated, in part, that “[t]he role of the Supreme Leader and the esteemed officials and employees of Markazi Bank [the Central Bank of Iran] play against the sanctions, wisely neutralizes the sanctions and even turns them into opportunities by using specialized methods.”  The letter goes on to state, in part, “[i]t is not secret that the trend is moving towards intensifying and increasing the sanctions, and since the wise leader of the Islamic Revolution of Iran has announced this to be the year of the Economic Jihad, the Zarrab family, which has had a half a century of experience in foreign exchange, . . . considers it to be our national and moral duty to declare our willingness to participate in any kind of cooperation in order to implement monetary and foreign exchange anti-sanction policies . . . .”

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

*                *                *

ZARRAB, 33, is a resident of Turkey is an Iranian-Turkish citizen.  JAMSHIDY, 29, is a citizen of Iran.  NAJAFZADEH, 65, is a citizen of Iran.  Each defendant is charged with conspiracy to defraud the United States, which carries a maximum sentence of five years in prison; conspiracy to violate the IEEPA, which carries a maximum sentence of 20 years in prison; conspiracy to commit bank fraud, which carries a maximum sentence of 30 years in prison; and conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

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

The prosecution of this case is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant United States Attorneys Michael Lockard, Emil Bove, and Sidhardha Kamaraju are in charge of the prosecution.  Assistant United States Attorney Jaimie Nawaday is principally responsible for the forfeiture aspects of the case.

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

 

---

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today the conviction after trial of THOMAS HOEY, JR. for embezzling nearly all of the assets of his company’s profit sharing plan and defrauding the plan participants.  HOEY, the owner and president of a Long Island based produce distributor (the “Company”), and trustee for the Company’s profit sharing plan (the “Plan”), an employee benefit plan set up for the benefit of the Company’s employees, transferred over $750,000 from the Plan to the Company’s corporate accounts.  HOEY then unlawfully used the money to cover significant negative balances in the Company’s accounts, to purchase, among other things, hundreds of thousands of dollars of produce for the Company, and for hundreds of thousands of dollars of HOEY’s personal expenses.  HOEY was convicted after a four-day jury trial before Judge Paul A. Engelmayer.

U.S. Attorney Preet Bharara said:  “Thomas Hoey Jr. made real what is the nightmare of any hardworking employee: the theft of a company-sponsored pension plan.  As the jury found in convicting him today, Hoey stole virtually all of his employees’ retirement plan money, and spent it himself on international travel, limousine service, and luxury Manhattan hotels.  Thanks to the efforts of our law enforcement partners at the Department of Labor and Internal Revenue Service, Hoey will now receive just punishment for his crimes.”   

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

The Plan was set up as an employee pension benefit plan under the Employee Retirement Income Security Act of 1974 (“ERISA”), for the benefit of certain employees of the Company.  As an ERISA qualified pension plan, there were strict statutory and regulatory limitations on the use of money contributed to the Plan.  In particular, Plan proceeds could only be used to pay for employee disbursement and employee loans, which, in no circumstances, could be greater than $50,000.  Moreover, the Company, which was the sponsor for the loan, was not allowed to receive any money from the Plan. 

Between June 2009 and July 2012, however, the defendant transferred almost all of the assets in the Company’s Plan to corporate accounts that HOEY controlled.  Specifically, in three transactions on one day in June 2009, the defendant transferred $350,000 from the Plan to the Company’s corporate bank account.  In May 2010, the defendant transferred $415,000 from the Plan to the Company’s corporate bank account.  And finally, in July 2012, the defendant transferred $73,000 from the Plan to the Company’s corporate bank account.  As a result of these withdrawals from the Plan as well as fees on the account, the Plan, which at one point was worth over $900,000 in employee benefits, was almost entirely depleted. 

The Plan money was transferred to corporate accounts to cover significant negative balances as well as for additional corporate expenses and HOEY’s personal expenses.  For example, hundreds of thousands of dollars of Plan money was used to pay invoices from the Company’s produce suppliers.  Plan money was also used to pay for automobile insurance on a policy that covered, among other vehicles, numerous luxury cars that HOEY used for his personal use.  During the period of time that HOEY was using Plan money to fund the Company’s corporate accounts, the corporate accounts were also being used to pay for HOEY’s personal expenses, including international travel for HOEY and his family, limousine service, and hotels in Manhattan.

In order to cover up HOEY’s embezzlement of Plan assets, HOEY caused plan statements to be created that reflected the employees’ full account balances as if no money had been taken out of the Plan.  A 2012 account statement for one employee, for example, reflected an individual benefit total of approximately $140,000.  At that time, however, the total amount of money left in the Plan was only approximately $15,000.

*                      *                      *

HOEY, 48, of Garden City, New York, was convicted of one count of embezzlement from an employee pension plan, which carries a maximum sentence of five years in prison; one count of interstate transportation of stolen money, which carries a maximum sentence of 10 years in prison; one count of wire fraud, which carries a maximum sentence of 20 years in prison; and one count of money laundering, which carries a maximum sentence of 10 years in prison.  HOEY will be sentenced on July 19, 2016, at 10:00 a.m. before Judge Paul A. Engelmayer.

Mr. Bharara praised the work of the DOL and IRS.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Kristy J. Greenberg and Daniel B. Tehrani are in charge of the prosecution.  

Preet Bharara, the United States Attorney for the Southern District of New York announced that WILLIAM J. WELLS pled guilty in Manhattan federal court today to an Indictment charging him with securities fraud and wire fraud in connection with his scheme to defraud more than 30 investors of more than $1.5 million through a fraud scheme over the course of more than six years.  WELLS was arrested on October 1, 2015, and pled guilty today before United States Magistrate Judge Henry B. Pitman.

U.S. Attorney Preet Bharara said:  “As he admitted today in court, William Wells engaged in a fraudulent scheme where he lured investors through lies about his trading performance and spent their money lavishly on himself.  Instead of operating a legitimate investment firm – as he said he would to his investors – Wells focused on covering up his consistent trading losses and his personal spending of investor money, going so far as to create entirely fake account statements to reassure his clients.  Thanks to the outstanding work of the FBI, Wells has now been forced out of the fraud-scheme business.”

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

From September 2009 through his arrest, WELLS, through his investment firm Promitor Capital LLC (“Promitor Capital”), engaged in a scheme to obtain investments by falsely representing that he had achieved consistently positive returns in the U.S. equity markets, including through the successful use of options to hedge risk.  In truth, WELLS’ trading was remarkably unsuccessful.  Between 2009 and the time of his arrest, WELLS realized trading losses every year and, in total, trading losses in excess of $500,000.  In fact, as of September 2015, Promitor Capital had less than $1,000 under management. 

In connection with the scheme, WELLS made a series of false and misleading representations to investors, including: (a) that WELLS’ trading was generating consistently positive returns when, in fact, his trading was consistently unsuccessful; (b) that investors were invested in certain stocks at certain times when, in fact, none of the accounts held by Promitor or WELLS held those stocks; and (c) that WELLS had created so-called sub-accounts for clients, for which WELLS purported to execute individualized trading strategies, when, in fact, no such sub-accounts were ever funded.  In addition to false and misleading representations made orally and in writing, WELLS also generated wholly fictitious account statements that he provided to his clients. 

As a result of these misrepresentations, WELLS obtained more than $1.5 million in investments from more than 30 investors, many of whom were friends, colleagues, or family members. WELLS routinely converted investor funds he did not lose trading to his own use in the form of cash withdrawals and to pay personal expenses, including more than $500,000 for, among other things, credit card bills, payments for WELLS’ automobile, and for private school tuition.  In addition, to hide his trading losses and to continue to fund his personal lifestyle, WELLS used new investor funds to pay back other investors in a Ponzi-like fashion.  In total, WELLS distributed less than approximately $500,000 back to investors. 

*                      *                      *

WELLS, 42, formerly of Manhattan and New Jersey, now living in Valley Cottage, New York, pled guilty to one count of securities fraud and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  The defendant will be sentenced at a future date by United States District Judge Kimba M. Wood.

Mr. Bharara praised the work of the Federal Bureau of Investigation and thanked the Securities and Exchange Commission for their assistance with the investigation.  

The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it’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. Attorney Andrea M. Griswold is in charge of the prosecution.  

Preet Bharara, the United States Attorney for the Southern District of New York, and Angel M. Melendez, Special Agent-in-Charge of the New York Office of U.S. Immigration and Customs Enforcement’s (“ICE”), Homeland Security Investigations (“HSI”), announced that MATTHEW GOLDFARB was sentenced in White Plains federal court today to 12 years in prison for distribution of child pornography.  GOLDFARB pled guilty to one count of distributing child pornography in June 2015 before United States District Judge Cathy Seibel, who imposed today’s sentence.

U.S. Attorney Bharara stated:  “By distributing child pornography, Matthew Goldfarb further victimized the children depicted in those horrifying images and videos, and helped sustain and perpetuate the market for such vile materials.  Today’s sentence serves as a reminder that law enforcement will do all we can to protect children from predators who make and distribute child pornography.”

Special Agent-in-Charge Melendez stated:  “Today's sentencing removes a dangerous and disturbed sexual predator like Mr. Goldfarb from our community, making it safer for all those that live in it, especially our children.  We are committed to protecting the most vulnerable in our society through outreach efforts to educate our communities as well as enforcement.”

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

Between July and November 2014, GOLDFARB distributed child pornography over the Internet through the use of peer-to-peer file-sharing software.  A forensic examination of GOLDFARB’s laptop computer, which was seized by HSI agents during the execution of a search warrant at GOLDFARB’s residence, revealed 455 images and 748 videos containing child pornography.  The images and videos included depictions of adults performing sex acts with prepubescent children, and many of the videos were over an hour in length.  On June 24, 2015, GOLDFARB pled guilty to distribution of child pornography before Judge Seibel, and was released on home detention prior to sentencing.  

In August 2015, while on release, GOLDFARB resumed trading child pornography over the Internet.  GOLDFARB posted the following statement on the photo-sharing website iMGSRC.RU:  “Trade young boys and girls. Send to receive. No empty emails.”  GOLDFARB created a new Gmail account, and used it to trade child pornography with other individuals.  GOLDFARB used a Kindle tablet, which he hid between the box springs in his bed, to access the Internet and trade child pornography.  In one email exchange with another individual interested in trading child pornography, GOLDFARB wrote, “I got arrested for porn so I am not supposed to use the internet.  I use a tablet bc I can hide it.”

On October 30, 2015, HSI agents executed a second search warrant at GOLDFARB’s residence, and also executed a search warrant on his newly created Gmail account.  They discovered that GOLDFARB’s Gmail account contained an additional 540 images and 102 videos containing child pornography that GOLDFARB had sent and/or received between August and October 2015.  That same day, GOLDFARB was arrested and ordered detained until sentencing.     

GOLDFARB’s emails also revealed that, in addition to trading child pornography, GOLDFARB had engaged in a series of exchanges in which he discussed ideas for kidnapping young boys and raping them.  In one email, GOLDFARB wrote:  “[Y]ou can’t get one near houses during the day. Find a path that has trees on both sides and you are good.  If you find someone walking alone at night tackle him, knock him out, tie up hands, throw into car drive away.”  GOLDFARB also expressed his intention to use his time in prison to come up with ideas for committing such crimes against children, writing that, “It’s going to give me ideas on how to lock my boy up anyways.”

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In addition to the prison sentence, GOLDFARB, 24, of Wappingers Falls, New York, was sentenced to lifetime supervision after his release.  GOLDFARB was also ordered to pay a total of $24,000 in restitution to victims of his crime.

Mr. Bharara praised the outstanding efforts of HSI.    

The prosecution is being handled by the Office’s White Plains Division.  Assistant U.S. Attorney George Turner is in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York announced today the conviction of MOSHE MIRILASVHILI, a board-certified, state-licensed doctor, for conspiracy to distribute oxycodone.  During the period of the charged conspiracy, MIRILASHVILI wrote more than 13,000 medically unnecessary prescriptions for oxycodone, typically in return for cash payments.  MIRILASHVILI was convicted after a three-week jury trial before Judge Colleen McMahon.

Manhattan U.S. Attorney Preet Bharara said:  “In just a matter of two years, Dr. Moshe Mirilashvili flooded the streets of New York City with more than a million pills of highly addictive oxycodone, a drug involved in the overdose deaths of thousands of Americans each year.  As the jury unanimously found today, Dr. Mirilashvili, blinded by greed, cast away his Hippocratic Oath and instead aligned himself with street-level drug dealers.  Thanks to the collaborative efforts of the federal and local law enforcement partners, Dr. Mirilashvili is no longer in the business of fueling for profit the opioid addiction that plagues too many people in our communities.”

The following is based on the Indictment as well as evidence presented during trial:

Oxycodone is a highly addictive, prescription-strength narcotic used to treat severe and chronic pain conditions.  Every year more than 13 million Americans abuse oxycodone, with the misuse of prescriptions painkillers such as oxycodone, leading to as many as 500,000 annual emergency room visits.  Oxycodone prescriptions have enormous cash value to street level drug dealers, who can fill the prescriptions at most pharmacies and resell the pills at vastly inflated rates.  Indeed, a single prescription for 90 30-milligram oxycodone pills has an average resale value in New York City of $2,700 or more.

From October 2012 until December 2014, MIRILASHVILI, a board-certified, state-licensed doctor, wrote thousands of medically unnecessary prescriptions for large quantities of oxycodone in exchange for cash payments.  MIRILASHVILI did so out of a sham medical office located on West 162nd Street in Manhattan where MIRILASHVILI typically charged $200 in cash for “patient visits” that typically involved little, if any, actual examination and almost always resulted in the issuance of a prescription for a large quantity of oxycodone, typically 90 30-milligram tablets.

Virtually none of these “patients” had any medical need for oxycodone, nor any legitimate medical records 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 drug traffickers (the “Crew Chiefs”), to pose as “patients” in order to receive medically unnecessary prescriptions.  The Crew Chiefs then obtained these prescriptions and arranged for them to be filled at various pharmacies so that the oxycodone pills thereby obtained could be resold on the streets of New York.  

As established at trial, MIRILASHVILI worked directly with some of these Crew Chiefs who paid MIRILASHVILI’s cash fees in return for the oxycodone prescriptions MIRILASHVILI guaranteed for their “patients.”  As part of the scheme, MIRILASHVILI frequently accepted and even created fraudulent and fake documents – such as MRI and urinalysis reports – ostensibly documenting the medical need for the oxycodone prescriptions MIRILASHVILI was writing.  For example, among documents recovered from MIRILASHVILI’s home at the time of his arrest, were lab reports in which the name of the “patient” had been cut and pasted onto the document, as well as similar reports in which the name of the patient or other relevant information had been whited out.  More than $1.75 million in cash earned from writing these medically unnecessary prescriptions was also recovered from the defendant’s home at the time of his arrest.

In total, between October 2012 and December 2014, MIRILASHVILI wrote more than 13,000 medically unnecessary prescriptions for oxycodone, comprising nearly 1.2 million oxycodone tablets with a street value of $36,000,000 or more.  MIRILISHIVILI collected more than $2.4 million in fees for “doctor visits” during this time period.  

Ten other participants in the conspiracy – including the drug traffickers who oversaw crews of “patients” sent into the clinics to obtain medically unnecessary oxycodone prescriptions and clinic staff, who profited by selling access to MIRILASHVILI and the fraudulent prescriptions he wrote – have previously pled guilty.

     *          *          *

MIRILASHVILI, 67, of Great Neck, New York, was convicted of one count of conspiracy to distribute oxycodone, which carries a maximum sentence of 20 years in prison, and two counts of unlawful distribution of oxycodone, which carries a maximum sentence of 20 years in prison each.  MIRILASHVILI will be sentenced July 20, 2016, at 2 p.m. before the Judge Colleen McMahon.

U.S. Attorney Preet Bharara thanked the Drug Enforcement Administration, the New York Police Department, the Westchester County Police Department, the Town of Orangetown Police Department, and the New York State Department of Finance for their work in the two-year investigation, which he noted is ongoing.        

The case is being prosecuted by the Office’s Narcotics Unit.  Assistant U.S. Attorneys Edward B. Diskant and Brooke E. Cucinella are in charge of the prosecution. 

Evgeny Buryakov, aka Zhenya, 41, pleaded guilty today to conspiring to act in the United States as an agent of the Russian Federation without providing prior notice to the Attorney General.

The guilty plea was announced by Assistant Attorney General for National Security John P. Carlin and U.S. Attorney Preet Bharara of the Southern District of New York. 

“Evgeny Buryakov pleaded guilty to covertly working as a Russian agent in the United States without notifying the Attorney General,” said Assistant Attorney General Carlin.  “Foreign nations who attempt to illegally gather economic and other intelligence information through espionage pose a direct threat to U.S. national security.  The National Security Division will continue to work with our law enforcement partners to identify and hold accountable those who illegally operate as covert agents within the United States.”

“An unregistered intelligence agent, under cover of being a legitimate banker, gathers intelligence on the streets of New York City, trading coded messages with Russian spies who send the clandestinely collected information back to Moscow,” said U.S. Attorney Bharara.  “This sounds like a plotline for a Cold War-era movie, but in reality, Evgeny Buryakov pled guilty today to a federal crime for his role in just such a scheme.  More than two decades after the end of the Cold War, Russian spies still seek to operate in our midst under the cover of secrecy.  But in New York, thanks to the work of the FBI and the prosecutors in my office, attempts to conduct unlawful espionage will not be overlooked.  They will be investigated and prosecuted.”

According to indictment, other court filings and statements made during court proceedings:

Beginning in at least 2012, Buryakov worked in the United States as an agent of Russia’s foreign intelligence agency, known as the SVR.  Buryakov operated under non-official cover, meaning he entered and remained in the United States as a private citizen, posing as an employee in the New York office of a Russian bank, Vnesheconombank (VEB).  SVR agents operating under such non-official cover (NOCs) are typically subject to less scrutiny by the host government and, in many cases, are never identified as intelligence agents by the host government.  As a result, an NOC is an extremely valuable intelligence asset for the SVR.

Federal law prohibits individuals from acting as agents of foreign governments within the United States without prior notification to the Attorney General.  Department of Justice records indicate that Buryakov never notified the Attorney General that he was, in fact, an agent of the Russia Federation.

Buryakov worked in New York with at least two other SVR agents, Igor Sporyshev and Victor Podobnyy.  From on or about Nov. 22, 2010, to on or about Nov. 21, 2014, Sporyshev officially served as a trade representative of the Russian Federation in New York.  From on or about Dec. 13, 2012, to on or about Sept. 12, 2013, Podobnyy officially served as an attaché to the Permanent Mission of the Russian Federation to the United Nations.  The investigation, however, showed that Sporyshev and Podobnyy also worked as officers of the SVR.  Sporyshev and Podobnyy were charged along with Buryakov in January 2015, however, Sporyshev and Podobnyy no longer lived in the United States at that time and were not arrested.

The directives from the SVR to Buryakov, Sporyshev and Podobnyy, as well as to other covert SVR agents acting within the United States, included requests to gather intelligence on, among other subjects, potential U.S. sanctions against Russian banks and the United States’ efforts to develop alternative energy resources. 

During the course of their work as covert SVR agents in the United States, Buryakov, Sporyshev and Podobnyy regularly met and communicated using clandestine methods and coded messages in order to exchange intelligence-related information while shielding their associations with one another as SVR agents.  Sporyshev was responsible for relaying intelligence assignments from the SVR to Buryakov.

On or about March 28, 2014, Sporyshev was recorded telling Buryakov that he needed help researching the “effects of economic sanctions on our country,” among other things.  A few days later, on April 2, 2014, Sporyshev called Buryakov and stated, in an intercepted conversation, that he had not seen Buryakov in a while, and asked to meet Buryakov outside VEB’s office in New York in 20 minutes.  A court-authorized search of Buryakov’s computer at VEB revealed that, at around the time of this telephone call, Buryakov conducted the following internet searches: “sanctions Russia consiquences” [sic] and “sanctions Russia impact.”

Two days later, on April 4, 2014, Buryakov called Sporyshev and in an intercepted conversation, stated that he “wrote you an order list,” and suggested that they meet.  Approximately 20 minutes later, Sporyshev met Buryakov in the driveway of Buryakov’s home.  Their encounter, which was captured by a video surveillance camera located near Buryakov’s residence, lasted approximately two minutes.  On the video footage, the defendants appeared to exchange a small object.

In the summer of 2014, Buryakov met multiple times with a confidential source working for the FBI and an FBI undercover employee, both of whom purported to be working on a casino development project in Russia.  During these meetings, Buryakov accepted documents that were purportedly obtained from a U.S. government agency and which supposedly contained information potentially useful to Russia, including information about U.S. sanctions against Russia.

Buryakov will be sentenced on May 25, 2016, where he faces a statutory maximum sentence of five years in prison.

Assistant Attorney General Carlin joined U.S. Attorney Bharara in praising the investigative work of the FBI’s Counterintelligence Division.

The prosecution is being handled by Assistant U.S. Attorneys Emil J. Bove III, Brendan F. Quigley and Stephen J. Ritchin of the Southern District of New York, with assistance provided by Senior Trial Attorney Heather Schmidt of the National Security Division’s Counterintelligence and Export Control Section.  

Buryakov Plea Agreement

Preet Bharara, the United States Attorney for the Southern District of New York, announced that MATTHEW VADO was sentenced in Manhattan federal court on Wednesday, March 9, to 30 years in prison for production, receipt, and possession of child pornography.  VADO pled guilty to eight counts of producing child pornography, one count of receiving child pornography, and one count of possessing child pornography on October 15, 2015, before United States District Judge Paul A. Engelmayer, who imposed VADO’s sentence.

According to the Complaint, the Indictment, and other statements made in open court, between June 2013 and June 2014, VADO engaged in chats over the Internet with multiple minor children between the ages of 9 and 15.  In those chats, VADO induced eight children to send sexually explicit images of themselves to VADO over the internet, and among other things, sought to persuade one child to engage in a sexual act with a dog.  VADO used “Kik Messenger,” a mobile communication application, to contact at least one child, and also used the application to induce the production of, and to receive, sexually explicit images and videos of the child as well as to send pornographic images of himself to the child.  VADO employed a username on Kik Messenger that was not his real name.

VADO, 33, of Manhattan, was sentenced to 30 years in prison and supervised release for life.

Mr. Bharara praised the outstanding efforts of the Federal Bureau of Investigation.

The FBI encourages the public to report suspected child predators and any related suspicious activity by calling them at (212) 384 -1000.  Suspected child sexual exploitation or missing children may be reported to the National Center for Missing and Exploited Children at 1-800-843-5678 or www.cybertipline.com.

The prosecution is being handled by the Office’s General Crimes Unit.  Assistant United States Attorney Max Nicholas is in charge of the prosecution.

            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 EVGENY BURYAKOV, a/k/a “Zhenya,” pled guilty today to conspiring to act in the United States as an agent of the Russian Federation, without providing prior notice to the Attorney General.

            U.S. Attorney Preet Bharara said:  “An unregistered intelligence agent, under cover of being a legitimate banker, gathers intelligence on the streets of New York City, trading coded messages with Russian spies who send the clandestinely collected information back to Moscow.  This sounds like a plotline for a Cold War-era movie, but in reality, Evgeny Buryakov pled guilty today to a federal crime for his role in just such a scheme.  More than two decades after the end of the Cold War, Russian spies still seek to operate in our midst under the cover of secrecy.  But in New York, thanks to the work of the FBI and the prosecutors in my office, attempts to conduct unlawful espionage will not be overlooked.  They will be investigated and prosecuted.”

            Assistant Attorney General John P. Carlin said: “Evgeny Buryakov pleaded guilty to covertly working as a Russian agent in the United States without notifying the Attorney General.  Foreign nations who attempt to illegally gather economic and other intelligence information through espionage pose a direct threat to U.S. national security.  The National Security Division will continue to work with our law enforcement partners to identify and hold accountable those who illegally operate as covert agents within the United States.”           

            According to the Complaint, the Indictment, other court filings, and statements made during court proceedings:

            Beginning in 2012, bURYAKOV worked in the United States as an agent of Russia’s foreign intelligence agency, known as the “SVR.”  BURYAKOV operated under “non-official cover,” meaning he entered and remained in the United States as a private citizen, posing as an employee in the Manhattan office of a Russian bank, Vnesheconombank, also known as “VEB.”  SVR agents operating under such non-official cover – sometimes referred to as “NOCs” – typically are subject to less scrutiny by the host government, and, in many cases, are never identified as intelligence agents by the host government.  As a result, a NOC is an extremely valuable intelligence asset for the SVR.

            Federal law prohibits individuals from acting as agents of foreign governments within the United States without prior notification to the United States Attorney General.  Department of Justice records indicate that BURYAKOV never notified the United States Attorney General that he was, in fact, an agent of the Russian Federation.

            BURYAKOV worked in New York with at least two other SVR agents, Igor Sporyshev and Victor Podobnyy.  From November 22, 2010, to November 21, 2014, Sporyshev officially served as a trade representative of the Russian Federation in New York.  From December 13, 2012, to September 12, 2013, Podobnyy officially served as an attaché to the Permanent Mission of the Russian Federation to the United Nations.  The investigation, however, showed that Sporyshev and Podobnyy also worked as officers of the SVR.  For their roles in the charged conspiracy, Sporyshev and Podobnyy were charged along with BURYAKOV in January 2015.  However, Sporyshev and Podbonyy no longer lived in the United States and thus were not arrested.

BURYAKOV’s Co-Conspirators Are Recorded Inside the SVR’s New York “Residentura”

            During the course of the investigation, the FBI recorded Sporyshev and Podobnyy speaking inside the SVR’s offices in New York, known as the “Residentura.” 

            The FBI obtained the recordings after Sporyshev attempted to recruit an FBI undercover employee (“UCE-1”), who was posing as an analyst from a New York-based energy company.  In response to requests from Sporyshev, UCE-1 provided Sporyshev with binders containing purported industry analysis written by UCE-1 and supporting documentation relating to UCE-1’s reports, as well as covertly placed recording devices.  Sporyshev then took the binders to, among other places, the Residentura.

            During subsequent recorded conversations, Sporyshev and Podobnyy discussed, among other things, Sporyshev’s SVR employment contract and his official cover position, their work as SVR officers, and the FBI’s July 2010 arrests of 10 SVR agents in the United States, known as the “Illegals.”

            Sporyshev and Podobnyy also discussed BURYAKOV’s prior service with the SVR in South Africa.  BURYAKOV worked in South Africa between approximately 2004 and 2009, officially as a representative of VEB.  During a conversation about Sporyshev’s cover position in New York, Podobnyy related that, when BURYAKOV was working in South Africa, he had dinner with an SVR official and BURYAKOV’s supervisor at VEB and that, during the dinner, the SVR official told the VEB official that BURYAKOV was an “employee of the Service,” i.e., the SVR.           

            Further, Sporyshev and Podobnyy were recorded discussing, among other things, their (i) attempting to recruit New York City residents as intelligence sources for Russia; (ii) tasking BURYAKOV to gather intelligence; and (iii) transmitting intelligence reports prepared by BURYAKOV back to SVR headquarters in Moscow. 

            The directives from the SVR to BURYAKOV, Sporyshev, and Podobnyy, as well as to other covert SVR agents acting within the United States, included requests to gather intelligence on, among other subjects, potential United States sanctions against Russian banks and the United States’ efforts to develop alternative energy resources. 

BURYAKOV’s Intelligence Taskings

            Sporyshev was responsible for relaying intelligence assignments from the SVR to BURYAKOV.

BURYAKOV Drafts a Proposal for the SVR’s “Active Measures Directorate”

            In May 2013, Sporyshev and Podbonyy were recorded discussing a proposal that BURYAKOV had drafted about a planned deal in which Bombardier Aircraft Company (“Bombadier”) in Canada would manufacture certain airplanes in Russia.  Sporyshev noted that Canadian “unions were resisting” and that BURYAKOV’s “proposal [was] for MS” – the SVR’s Active Measures Directorate – to “pressur[e] the unions and secur[e] from the company a solution that is beneficial to us.”  Other evidence developed during the investigation showed that, around the time of this conversation, BURYAKOV had conducted Internet searches relating to Bombardier and labor unions and, earlier, had obtained news articles regarding the planned deal and also attended a conference in Canada that Bombardier personnel also attended. 

BURYAKOV Assists Sporyshev in Attempting to Obtain Sensitive Information About the New York Stock Exchange

            Also, on May 21, 2013, Sporyshev called BURYAKOV, greeted him, and then described a tasking from “top sources” relating to three questions that ITAR-TASS, a Russian news agency, could put to the New York Stock Exchange.  Sporyshev called the defendant back approximately 20 minutes later.  During the call, BURYAKOV proposed questions regarding (i) exchange traded funds (ETFs), including the “mechanisms of their use to destabilize the market;” (ii) “curbing of trading robot activities;” and (iii) “technical parameters” and “other regulations directly related to the exchange.”  On July 8, 2013, a purported “bureau chief” for ITAR-TASS sent an email to an employee of the New York Stock Exchange that parroted the questions that BURYAKOV proposed to Sporyshev.  

BURYAKOV Assists Sporyshev in Analyzing the Effect of Sanctions

            Another example of an intelligence tasking occurred in late March 2014.  Specifically, on March 28, 2014, Sporyshev was recorded telling BURYAKOV that Sporyshev needed help researching the “effects of economic sanctions on our country,” among other things.  A few days later, on April 2, 2014, Sporyshev called BURYAKOV and stated, in an intercepted conversation, that he had not seen BURYAKOV in a while, and asked to meet BURYAKOV outside VEB’s office in Manhattan in 20 minutes.  A court-authorized search of BURYAKOV’s computer at VEB revealed that, at around the time of this telephone call, BURYAKOV conducted the following internet searches: “sanctions Russia consiquences” [sic] and “sanctions Russia impact.”

            Two days later, on April 4, 2014, BURYAKOV called Sporyshev and, in an intercepted conversation, stated that he (BURYAKOV) “wrote you an order list,” and suggested that they meet.  Approximately 20 minutes later, Sporyshev met BURYAKOV in the driveway of BURYAKOV’s home.  Their encounter, which was captured by a video surveillance camera located near BURYAKOV’s residence, lasted approximately two minutes.  On the video footage, the defendants appeared to exchange a small object.

Clandestine Meetings and Communications

            During the course of their work as covert SVR agents in the United States, BURYAKOV, Sporyshev, and Podobnyy regularly met and communicated using clandestine methods and coded messages, in order to exchange intelligence-related information while shielding their associations with one another as SVR agents.  These efforts were designed, among other things, to preserve their respective covers as an employee of VEB (BURYAKOV), a trade representative of the Russian Federation in New York (Sporyshev), and an attaché to the Permanent Mission of the Russian Federation to the United Nations (Podobnyy).

            During the investigation, the FBI intercepted numerous calls between BURYAKOV and Sporyshev in which one of the men told the other that he needed to meet for some purpose, such as to transfer an item (such as a “ticket,” “book,” or “list,”) or for a purported social purpose.  In fact, BURYAKOV and Sporyshev used this coded language to signal that they needed to exchange intelligence information.

            FBI surveillance revealed that, at some of these meetings between BURYAKOV and Sporyshev, they exchanged documents or other small items.  Notably, despite discussing on approximately a dozen occasions the need to meet to transfer “tickets,” BURYAKOV and Sporyshev were – other than one occasion where they discussed going to a movie – never observed attending, or discussing in any detail, events that would typically require tickets, such as a sporting event or concert.

BURYAKOV’s Receipt of Purported Official United States Government Documents

            In the summer of 2014, BURYAKOV met multiple times with a confidential source working for the FBI (“CS-1”) and an FBI undercover employee (“UCE-2”).  Both CS-1 and UCE-2 purported to be working on a casino development project in Russia.

            During a conversation recorded on July 22, 2014, Sporyshev warned BURYAKOV that meeting with UCE-2 might be a “trap” but authorized BURYAKOV to go ahead so he could make a better assessment.

            During the course of the subsequent meetings, and consistent with his interests as a Russian intelligence agent, BURYAKOV demonstrated his strong desire to obtain information about subjects far outside the scope of his work as a bank employee.  During these meetings, BURYAKOV also accepted documents that were purportedly obtained from a U.S. government agency and which purportedly contained information potentially useful to Russia, including information about United States sanctions against Russia.

*                *                *

            BURYAKOV, 41, pled guilty to one count of conspiring to act in the United States as an agent of the Russian Federation without providing notice to the Attorney General, which carries a maximum sentence of five years.  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.

            BURYAKOV will be sentenced on May 25, 2016, at 11:00 a.m.

            U.S. Attorney Bharara praised the investigative work of the FBI’s Counterintelligence Division.                       

            The prosecution is being handled by Assistant U.S. Attorneys Emil J. Bove III, Brendan F. Quigley, and Stephen J. Ritchin of the Terrorism and International Narcotics Unit of the U.S. Attorney’s Office for the Southern District of New York, with assistance provided by Senior Trial Attorney Heather Schmidt of the National Security Division’s Counterintelligence and Export Control Section. 

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 Field Office of the Federal Bureau of Investigation (“FBI”), announced the arrest and unsealing of an eight-count indictment charging NEDKO NEDEV, 38, a citizen of Bulgaria and the United States, with various crimes related to market manipulation, insider trading, and aggravated identity theft for devising and carrying out a series of schemes (1) to manipulate the public market for two securities – Rocky Mountain Chocolate Factory, Inc. (“Rocky Mountain”), and Avon Products, Inc. (“Avon”) – through sham tender offers filed publicly with the Securities and Exchange Commission (the “SEC”), and (2) to trade on material, nonpublic information about an impending tender offer by Bulgarian company Euroins Insurance Group AD (“Euroins”) for U.S.-based insurer Tower Group International Ltd. (“Tower Group”), which NEDEV knew about because of his role advising the proposed acquirer.  The sham offer for Avon, a company with more than 400 million shares outstanding, caused a 400-percent increase over the average per-day trading volume, resulting in a manipulation of the market by hundreds of millions of dollars, and caused the New York Stock Exchange (“NYSE”) to halt trading three times in Avon shares in the half-hour period following the sham offer.  NEDEV was arrested in Bulgaria and his extradition to the U.S. will be sought.  The case has been assigned to Judge Kimba M. Wood.

In a separate action, the SEC previously filed civil charges against NEDEV for market manipulation in June 2015.

U.S. Attorney Preet Bharara said: “As alleged, Nedko Nedev engaged in elaborate schemes to manipulate the market in various publicly traded securities.  His alleged lies caused massive swings in share prices and trading volume, including a sham tender offer that required the New York Stock Exchange to halt trading in Avon shares.  Nedev’s alleged securities fraud schemes also involved purchasing shares of a U.S. insurance company he knew, through inside information, to be the acquisition target of a European company he was advising.  If you manipulate the U.S. securities markets with disinformation and deception, whether from New York or from Bulgaria, as Nedev is alleged to have done, you will be held to account.”

FBI Assistant Director-in-Charge Diego Rodriguez said:  “As alleged, Nedko Nedev created and carried out a market manipulation scheme not once but twice to profit himself.  Today, he faces charges for those schemes as well as identity theft and insider trading. The FBI will continue to work with our partners in an effort at ensuring that our financial markets are legal, fair, and equitable.”

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

From at least in or about January 2012 through at least in or about December 2012, NEDEV devised and carried out a scheme to manipulate the public market for Rocky Mountain stock, enrich himself, and mitigate trading losses.  In furtherance of the scheme, NEDEV artificially inflated the share price and trading volume of Rocky Mountain through a sham tender offer he caused to be filed on December 18, 2012, on EDGAR, the Electronic Data Gathering, Analysis and Retrieval System, which is the means by which companies and others file public documents with the SEC (the “Rocky Mountain Offer”). 

Three years later, from at least in or about April 2015 through at least in or about May 2015, NEDEV devised and carried out a similar scheme to manipulate the public market for Avon stock, enrich himself, and mitigate trading losses.  In furtherance of the scheme, NEDEV inflated the share price and trading volume of Avon stock through a sham tender offer he caused to be filed on EDGAR (the “Avon Offer”).  In making the Avon Offer, NEDEV used nearly identical means and methods to those used in the Rocky Mountain Offer filed on EDGAR in 2012.  Unlike the Rocky Mountain Offer, however, the Avon Offer was filed early in the trading day, causing a significant impact on Avon’s trading volume and share price and permitting NEDEV to sell a portion of his Avon holdings for a profit.

In between the Rocky Mountain Offer and the Avon Offer, from in or about October 2013 through at least in or about May 2014, NEDEV carried out a scheme to enrich himself by trading on material, nonpublic information concerning an offer by Euroins to acquire Tower Group, which NEDEV obtained from the Chairman of Euroins’ parent company, Eurohold (the “Eurohold Chairman”) and which he understood was nonpublic at the time, and which he was duty-bound not to misappropriate for his own personal benefit.  In May 2014, after Euroins publicly offered to acquire Tower Group, NEDEV sold a portion of his shares of Tower Group for a profit.

Nedev’s Brokerage Accounts

Between in or about June 2008 and in or about at least June 2015, NEDEV traded equities, options, and Contracts for Difference of publicly traded companies through U.S.-based online broker-dealers at which NEDEV maintained certain accounts, including: (a) Strategic Wealth Investments Inc. (the “Strategic Wealth Account”); (b) SWIP Capital Partners, Inc. (the “SWIP Account”); (c) Strategic Capital Partners Muster Limited (the “Strategic Capital Account”); and (d) Strategic Capital Partners Muster Limited CFD Account (the “Strategic Capital CFD Account,” collectively with the Strategic Capital Account, the “Strategic Capital Accounts”).

The Rocky Mountain Market Manipulation

From at least in or about December 2008, NEDEV caused the Strategic Accounts to hold shares of Rocky Mountain stock.  When NEDEV opened the Strategic Capital Account in July 2012, Rocky Mountain was the first stock purchased.  As of August 2012, the Strategic Accounts held shares of Rocky Mountain valued at more than $1.1 million.  After reaching a peak share price of almost $14.00 per share in August 2012, Rocky Mountain’s share price began to decline steadily.  By November 2012, the price had dropped to approximately $10.36 per share.  By that time, NEDEV’s Rocky Mountain holdings in the Strategic Accounts had accumulated a total of approximately $250,000 in unrealized losses as well as approximately $278,000 in realized losses.

To effectuate the scheme to manipulate the market in Rocky Mountain, NEDEV created a fictitious entity to make a sham tender offer for Rocky Mountain.  Previously, on or about January 28, 2012, NEDEV had registered the email account [email protected] (the “Bali Email Account”) at a U.S.-based email provider (the “Provider”).  Between January 2012 and May 2015, NEDEV used the Bali Email Account to send and receive emails in the name of “Peter Bali,” a name he used in the course of the scheme, as well as other names.  On or about November 21, 2012, NEDEV caused Rocky Mountain to receive a voicemail from an individual who purported to be named “Peter Bali.”  The voicemail indicated that Bali had mailed a tender offer to purchase Rocky Mountain on behalf of a company purportedly called “PST Capital Group” (“PST”).  One week later, on or about November 28, 2012, NEDEV caused Rocky Mountain to receive a letter of intent from PST (the “PST Letter of Intent”), which identified Bali as the “Chairman” of PST and indicated that PST was based in London, England.  The PST Letter of Intent offered, among other things, to purchase all outstanding shares of Rocky Mountain at a price of $13.50 per share.  On or about December 6, 2012, NEDEV caused Rocky Mountain to receive another voicemail from the individual purporting to be Bali asking if Rocky Mountain had received the PST Letter of Intent.  In truth and in fact, PST did not exist, as it had been invented for the purpose of effecting the market manipulation scheme. 

Approximately two weeks later, on or about December 13, 2012, NEDEV caused a Form ID (the “PST Form ID”) to be filed with the SEC from Bulgaria.  The PST Form ID, which requested that PST be allowed to file documents on EDGAR, indicated that PST was based in London, England, and contained a notary stamp purporting to be associated with a particular California-based registered notary (the “PST Notary”).  In truth and in fact, the stamp was forged, as the PST Notary neither notarized the PST Form ID, nor authorized anyone to use the PST Notary’s name or notary credentials to do so, as NEDEV well knew. 

To further effectuate the market manipulation scheme, NEDEV caused the Rocky Mountain Offer to be filed on EDGAR on or about December 18, 2012, after the close of the trading day.  As with the PST Form ID, the Rocky Mountain Offer was filed from Bulgaria.  As with the PST Letter of Intent, the Rocky Mountain Offer was made in the name of PST, listed Bali as PST’s Chairman, and proposed to acquire all of Rocky Mountain’s stock at $13.50 per share, which represented an approximately 27 percent premium above the stock’s closing price as of December 18, 2012.  The Rocky Mountain Offer also contained certain specific language regarding certain terms of the Rocky Mountain Offer.

Rocky Mountain’s share price was approximately $10.60 when the market closed at 4:00 p.m. on December 18, 2012.  As intended by NEDEV, Rocky Mountain’s share price began to increase following the release of the Rocky Mountain Offer. 

Before the markets opened on December 19, 2012, Rocky Mountain issued a press release publicly filed on EDGAR as a Form 8-K (the “Rocky Mountain Press Release”) indicating that the Rocky Mountain Offer appeared to be fake.  Rocky Mountain’s share price opened at approximately $11.00 per share.  Although the Rocky Mountain Press Release diminished the impact of the Rocky Mountain Offer, inasmuch as the release was issued before the trading day began, the stock price nonetheless rose approximately 4.6 percent during market hours on December 19, 2012, to a high of $11.09 per share, and the trading volume increased approximately 1,775 percent on that day. 

NEDEV did not cause any shares of Rocky Mountain to be sold from the Strategic Accounts on December 19, 2012.

The Avon Market Manipulation

From at least in or about February 2012, the Strategic Accounts held Avon stock and Avon derivatives, specifically options and CFDs.  As of April 2015, NEDEV caused the Strategic Accounts to hold positions in Avon valued at more than $225,000.  After reaching a share price of $15.28 per share in April 2014, Avon’s share price began to decline steadily.  By April 2015, the share price had dropped to $8.17 per share.  By that time, NEDEV had suffered a total of approximately $46,000 in unrealized losses on his Avon holdings.

To effectuate the scheme to manipulate the market in Avon, NEDEV created a fictitious entity to make a sham tender offer for Avon.  Thus, on or about April 16, 2015, NEDEV caused the email account [email protected] (the “PTG Email Account”) to be registered with the Provider.  The PTG Email Account was registered in the name “Steve Kohe.” 

Five days later, on April 21, 2015, NEDEV caused a Form ID (the “PTG Form ID”) to be filed with the SEC requesting access to file documents on EDGAR on behalf of the purported entity PTG Capital Partners Ltd. (“PTG”).  The PTG Form ID provided the PTG Email Account and listed “Steve Kohe,” a name NEDEV used to execute the scheme, as PTG’s Chief Compliance Officer.  In truth and in fact, PTG did not exist, as it had been invented by NEDEV for the purpose of effecting his market manipulation scheme.  Like the PST Form ID, the PTG Form ID indicated that PTG operated in London, England.  Also like the PST Form ID, the PTG Form ID contained a notary stamp purporting to be associated with another California-based registered notary (the “PTG Notary”).  In truth and in fact, the PTG Notary neither notarized the PTG Form ID, nor authorized anyone to use the PTG Notary’s name or notary credentials to do so, as NEDEV well knew. 

To further effectuate the market manipulation scheme, NEDEV caused the Avon Offer to be filed on EDGAR on May 14, 2015, at approximately 11:34 a.m., in the first half of the trading day.  The Avon Offer proposed to acquire all of Avon’s stock at $18.75 per share, which represented an approximately 181 percent premium above the stock’s closing price on May 13, 2015.  As with the Rocky Mountain Offer, the Avon Offer was filed from Bulgaria.  In addition, the Avon Offer contained nearly identical language as was contained in the Rocky Mountain Offer. 

The Avon Offer significantly affected the share price and trading volume of Avon, a company with more than 400 million publicly trading shares.  Approximately half an hour after the Avon Offer was publicly filed at 11:34 a.m., Bloomberg released an article (the “Bloomberg Article”) indicating that Avon had stated the Avon Offer was fake.  During the approximate half hour after the public release of the Avon Offer but before the Bloomberg Article, the share price of Avon increased to a high of $8.00 per share from a low of $6.60 per share, the effect of which was to manipulate the market by hundreds of millions of dollars.  The total trading volume during just this approximate half-hour period was more than 17 million shares, more than the average per-day trading volume for the three-month period before the Avon Offer.  In total, the trading volume on the day of the Avon Offer was more than 69 million shares, an increase of more than 400 percent over the average per-day trading volume for the three-month period before the Avon Offer.  As a result of this significant increase in the volume of trading, the NYSE halted trading three times in Avon shares in the half-hour period following the Avon Offer. 

Approximately 25 minutes after the Avon Offer was filed on EDGAR, NEDEV sold a portion of his Avon holdings at the artificially inflated price.  Through these sales, NEDEV earned profits in the Strategic Capital Accounts.  The Avon Offer also caused the value of his unsold Avon positions to increase significantly during the time period of the manipulation.

Despite the release of the Bloomberg Article reporting that the Avon Offer was a sham, the unusually high trading volume continued as the market adjusted to the news, including as certain individuals who purchased shares at an artificial price as a result of the Avon Offer sought to unwind those positions.

The Insider Trading Scheme

In or about October 2013, through a pre-existing relationship with the Eurohold Chairman, NEDEV learned that Euroins was interested in acquiring a U.S.-based insurance company and that Tower Group was one of the target companies under consideration.  NEDEV encouraged the Eurohold Chairman to make an offer for Tower Group and offered to act as an external consultant to help bring the deal to fruition.  NEDEV and the Eurohold Chairman agreed that NEDEV would act as an external consultant and that NEDEV would be compensated if a deal were consummated. 

In or about October 2013, possessing the Inside Information that Euroins was considering a business combination with Tower Group, NEDEV began purchasing Tower Group stock in the Strategic Accounts. 

On or about January 6, 2014, Tower Group announced that it had entered into a merger agreement in which Tower Group was to be acquired by another insurer, ACP Re, for $3.00 per share. Because NEDEV believed the price of Tower Group stock would increase if a competing offer by Euroins were made at a higher price, he took steps to prevent the merger with ACP Re from being consummated so that an offer from Euroins would be viable.  To further effectuate his insider trading scheme, NEDEV participated in numerous emails and phone calls to encourage Euroins to continue to pursue an offer for Tower Group, notwithstanding Tower Group’s announcement of a different deal.

Between January and May 2014, NEDEV continued to accumulate Tower Group stock in the Strategic Accounts.  By May 13, 2014, the Strategic Accounts held more than 385,000 shares of Tower Group stock valued at approximately $863,000, which represented the second largest position by value in the Strategic Accounts.  At that time, the Tower Group position also represented an unrealized loss of approximately $258,000, as the share price of Tower Group had declined from a high of approximately $2.98 per share on January 6, 2014, to a low of $1.67 per share on May 7, 2014.

Between May 8, 2014, and May 13, 2014, NEDEV took specific steps to encourage Euroins to make a tender offer for Tower Group, despite NEDEV’s knowledge, which he acquired during the scheme, that Euroins’s proposed offer lacked certain detail considered essential in such a transaction, such as information about how Euroins would finance any offer for Tower Group stock.  On or about May 13, 2014, at the direction of NEDEV, Euroins sent a letter of intent (the “Euroins Letter of Intent”) to Tower Group offering to acquire all of Tower Group’s outstanding stock for $3.75 per share (the “Tower Group Offer”).  The Tower Group Offer represented a premium of approximately 67 percent over the then-current Tower Group share price and a premium of $.75 per share over the pending ACP Re offer. 

At approximately 12:26 p.m. on May 13, 2014, Euroins issued a press release (the “Euroins Press Release”) through a U.S.-based newswire service stating that Euroins had submitted an acquisition offer to Tower Group.  The language contained in the Euroins Press Release was nearly identical to the language contained in the December 2012 Rocky Mountain Offer, which would later be included in the Avon Offer.

Almost immediately after the Euroins Press Release was issued at approximately 12:26 p.m. on May 13, 2014, Tower Group’s share price increased to $2.91 per share.  At approximately 12:50 p.m., NEDEV received email confirmation that the Euroins Press Release had been released and immediately began selling shares of Tower Group held in the Strategic Accounts.  In total, on or about May 13, 2014, NEDEV caused the Strategic Accounts to sell approximately 90,000 shares of Tower Group for a gain of approximately $26,100.  When Euroins received questions from investors on the day the Euroins Press Release was released, the questions were routed to NEDEV via email.  NEDEV did not advise the Eurohold Chairman or anyone at Euroins that he sold Tower Group stock after the Tower Offer was made.

Two days later, on or about May 15, 2014, Tower Group issued a press release acknowledging receipt of the Euroins Letter of Intent but announcing that Tower Group’s Board of Directors had unanimously determined that Euroins’s proposal “[did] not constitute and could not reasonably be expected to lead to a superior proposal” to the contemplated merger with the other insurer.

Finally, in or about June 2015, following media reports that the SEC and the FBI were investigating NEDEV in connection with the Rocky Mountain, Avon, and Tower Group Offers, the Eurohold Chairman met with NEDEV in Sofia, Bulgaria.  During their meeting, the Eurohold Chairman confronted NEDEV about his stock holdings in Tower Group at the time NEDEV was advising on a potential acquisition of Tower Group by Euroins.  NEDEV acknowledged that he had owned Tower Group stock at the time of the Tower Group Offer and apologized.  

*                      *                      *

NEDEV, 38, is charged in eight counts.  In connection with the Rocky Mountain market manipulation scheme, NEDEV is charged with one count of securities fraud (Count One), one count of wire fraud (Count Two), and one count of aggravated identity theft (Count Three).  In connection with the Avon market manipulation scheme, NEDEV is also charged with one count of securities fraud (Count Four), one count of wire fraud (Count Five), and one count of aggravated identity theft (Count Six).  In connection with the Tower Group insider trading scheme, NEDEV is charged with one count of fraud in connection with a tender offer (Count Seven) and one count of securities fraud (Count Eight).  Counts One, Two, Four, Five, Seven, and Eight each carry a maximum sentence of 20 years in prison.  Counts Three and Six, the aggravated identity theft charges, carry a mandatory sentence of two years each, that must be imposed in addition to the sentence imposed on other counts.  The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.

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

Mr. Bharara praised the work of the FBI, and thanked the SEC Division of Enforcement and Office of Inspector General for their assistance.  Mr. Bharara also thanked the Office of International Affairs and Bulgarian law enforcement for their assistance in the arrest and apprehension of NEDEV.

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

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

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

 

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

 

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

• 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.

• 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.

• 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.

• 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.

*                *                *

            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. 

            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:

• 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.

• Members of the conspiracy provided packing materials to foreign wildlife buyers to assist them in hand carrying the wildlife out of the country.

• 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.

• 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.

*                      *                      *

            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.

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.

*                *                *

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.

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.                             

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.

            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:

• “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 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. 

*          *          *

            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.

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.

*                      *                      *

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.

            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.

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            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.

 

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[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.

 

            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.   

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.                       

 

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

 

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.

            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.