Southern District of New York

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ERICSON VARGAS CARDONA, a/k/a “Sebas,” was sentenced in Manhattan federal court to 25 years in prison for conspiring to traffic in cocaine and using a semiautomatic assault weapon in furtherance of the cocaine trafficking conspiracy.  In October 2013, VARGAS CARDONA was extradited to the United States from Colombia, where he was arrested pursuant to a provisional arrest warrant that was issued in response to a request by the U.S. Government in connection with this case.  VARGAS CARDONA pled guilty on April 14, 2015, and was sentenced today by Chief U.S. District Judge Loretta A. Preska.

Manhattan U.S. Attorney Preet Bharara said:  “Ericson Vargas Cardona led a criminal enterprise that specialized in cocaine and violence – and lots of both.  Armed with machine guns, explosives, and a grenade launcher, Vargas Cardona distributed his drugs all over the world, including the United States.  Thanks to the incredible dedication of the agents of the Drug Enforcement Administration, Vargas Cardona is no longer a global threat.”

According to the Indictment, documents publicly filed in Colombia in extradition proceedings, publicly filed documents in Manhattan federal court, and statements made at court proceedings in this case, including today’s sentencing:

From 2000 to August 2012, VARGAS CARDONA was a member of La Oficina de Envigado (“La Oficina”), a Colombia-based narcotics trafficking organization that began as a debt-collection agency associated with the United Self-Defenses Forces of Colombia (“AUC”), a right-wing paramilitary organization.  La Oficina collected debts on behalf of narcotics traffickers, invested in narcotics shipments, and eventually began producing cocaine independently.  La Oficina distributed thousands of kilograms of cocaine from Colombia to locations worldwide, including the United States.  In addition, La Oficina engaged in the systematic bribery of Colombian officials.

As a member of La Oficina, VARGAS CARDONA, among other things, worked as a sicario, or assassin, engaged in debt collection activities, and established a cocaine laboratory.  In 2009, VARGAS CARDONA assumed control of La Oficina.  At the time of VARGAS CARDONA’s arrest by Colombian authorities on August 8, 2012, he was found at a property that was used to store an arsenal of weapons and explosives.  Colombian authorities recovered, among other things, 69 bars of C4 explosive, over 190 electrical detonators, more than 2,900 manual detonators, one rocket-propelled grenade launcher, one M-60 machine gun, nine submachine guns, over 50 hand grenades, 28 rifles, nine silencers, and thousands of rounds of ammunition. 

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In addition to his prison term, VARGAS CARDONA, 42, was sentenced to five years of supervised release.

Mr. Bharara praised the outstanding efforts of the New York Field Office of the U.S. Drug Enforcement Administration (“DEA”) and the DEA’s Bogotá, Colombia, Country Office.

The case is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant United States Attorneys Edward Y. Kim and Michael Ferrara are in charge of the prosecution.

            Preet Bharara, the United States Attorney for the Southern District of New York, announced that NOEL CUELLO, the former operator of a tax preparation business with multiple locations in the Bronx, New York, was sentenced today in Manhattan federal court to nine years in prison for leading a large-scale identity theft and tax fraud scheme through which identifying information of minors, including Social Security numbers, was obtained through corrupt payments to a former fraud investigator with the New York City Human Resources Administration.  The identifying information was then used to file thousands of fraudulent tax returns, resulting in millions of dollars in loss to the United States Treasury.  Sentence was imposed by U.S. District Judge Richard J. Sullivan. 

            U.S. Attorney Preet Bharara said: “Noel Cuello ran a criminal tax preparation business, raking in big fees by helping thousands of taxpayers to commit tax fraud.  Using identity information stolen from the City’s Human Resources Administration, Cuello enabled taxpayers to falsely claim dependent children, resulting in millions of dollars in lost tax revenue for the government.”

            According to the Complaint, Indictment, and information presented in connection with sentencings in the case:

            Under federal law, taxpayers may be entitled to claim certain tax credits, including the Earned Income Tax Credit (“EITC”), which is available to qualifying low and moderate income working individuals and families.  If the taxpayer claims the EITC based on having a child, the individual must list the name and Social Security number (“SSN”) of the child on his or her tax return, along with a separate schedule that contains the child’s name, SSN, year of birth, relationship to the taxpayer, and how many months the child lived with the taxpayer during the tax year.

            Between at least approximately 2009 and spring 2014, through a tax preparation business in the Bronx, New York, with multiple locations, conspirators charged individual taxpayers a cash fee in return for which the business would prepare and file tax returns that falsely claimed that the taxpayer had one or more minor dependents, to take fraudulent advantage of the EITC. The business filed thousands of such returns, resulting in refunds totaling millions of dollars.

            The business, which used several names over the years, was principally operated by NOEL CUELLO and his girlfriend, Luz C. Ricardo, with the assistance of his brother, Arismendy Cuello, and Jonathan Orbe, Catherine Ricart, and Joel Vargas, who played various roles, including bringing taxpayers to the business, preparing fraudulent returns, and receiving cash payments from clients.

            To obtain SSNs and other information of minors to be used in the scheme, NOEL CUELLO repeatedly bribed Francisco Abreu, who worked at the time as a fraud investigator with the New York City Human Resources Administration.

            The scheme continued even after law enforcement executed multiple search warrants of the business, with Orbe claiming to have purchased the business from NOEL CUELLO, and Ricart establishing new electronic filer accounts with the Internal Revenue Service, and opening new bank accounts, which were used to continue the scheme.

            In addition to accepting cash in return for assisting other taxpayers to file fraudulent returns, Ricardo, Arismendy Cuello, Orbe, Ricart, and Vargas filed their own fraudulent returns in multiple years, falsely claiming to have one or more minor dependents.

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            In addition to his prison term, NOEL CUELLO, who previously pled guilty to conspiracy to commit wire fraud, was sentenced to three years of supervised release, ordered to forfeit $3.5 million, and ordered to pay $3.5 million in restitution.

            NOEL CUELLO, 32, of the Bronx, New York, was indicted in April 2015, along with Ricardo, 34, Arismendy Cuello, 29, Orbe, 26, Ricart, 38, and Vargas, 29, all also of the Bronx, New York.  All of the defendants subsequently pled guilty and have been sentenced.

            On January 7, 2016, Judge Sullivan sentenced Ricardo, who pled guilty to conspiracy to commit wire fraud and multiple counts of filing a false personal tax return, to 66 months in prison.

            On January 14, 2016, Judge Sullivan sentenced Vargas, who pled guilty to conspiracy to commit wire fraud and multiple counts of filing a false personal tax return, to 24 months in prison.

            On January 22, 2016, Judge Sullivan sentenced Arismendy Cuello, who pled guilty to conspiracy to commit wire fraud and multiple counts of filing a false personal tax return, to 36 months in prison.           

            On January 28, 2016, Judge Sullivan sentenced Orbe, who pled guilty to conspiracy to commit wire fraud and multiple counts of filing a false personal tax return, to 60 months in prison.

            On January 29, 2016, Judge Sullivan sentenced Ricart, who pled guilty to conspiracy to commit wire fraud and multiple counts of filing a false personal tax return, to 36 months in prison.

             Abreu, 44, of the Bronx, New York, who had previously been indicted separately for unrelated robbery and firearm offenses, pled guilty in August 2015 to those unrelated offenses, along with accepting bribes, fraud, and theft counts related to his participation in the scheme.  He is scheduled to be sentenced at a future date by U.S. District Judge Naomi Reice Buchwald.

            Mr. Bharara praised the outstanding work of the Internal Revenue Service-Criminal Investigation.  Mr. Bharara also thanked the New York City Department of Investigation and the Social Security Administration-Office of Inspector General for their assistance in the investigation, which he noted is ongoing.

            The case is being prosecuted by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys Daniel C. Richenthal, Sarah K. Krissoff, and Amanda K. Houle are in charge of the prosecution.

Amsterdam-based VimpelCom Limited, the world’s sixth-largest telecommunications company and an issuer of publicly traded securities in the United States, and its wholly owned Uzbek subsidiary, Unitel LLC, entered into resolutions with the Department of Justice today in which they admitted to a conspiracy to make more than $114 million in bribery payments to a government official in Uzbekistan between 2006 and 2012 to enable them to enter and continue operating in the Uzbek telecommunications market. 

In a related action, the department also filed a civil complaint today seeking the forfeiture of more than $550 million held in Swiss bank accounts, which constitute bribe payments made by VimpelCom and two separate telecommunications companies, or funds involved in the laundering of those payments, to the Uzbek official.  The forfeiture complaint follows an earlier civil complaint filed on June 29, 2015, which seeks forfeiture of more than $300 million in bank and investment accounts held in Belgium, Luxembourg and Ireland that also constitute funds traceable to bribes, or funds involved in the laundering of the bribes, paid by VimpelCom and another telecommunications company to the same Uzbek official.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Preet Bharara of the Southern District of New York, Chief Richard Weber of Internal Revenue Service-Criminal Investigation (IRS-CI) and Special Agent in Charge Clark E. Settles of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI) Washington, D.C., Field Office.

“These cases combine a landmark FCPA resolution for corporate bribery with one of the largest forfeiture actions we have ever brought to recover bribe proceeds from a corrupt government official,” said Assistant Attorney General Caldwell.  “The Criminal Division’s FCPA enforcement program and our Kleptocracy Initiative are two sides of the same anti-corruption coin.  The FCPA resolution in this case is also one of the most significant coordinated international and multi-agency resolutions in the history of the FCPA, and demonstrates our commitment both to pursuing justice and to bringing about corporate reform.”

“Today we mark the resolution of criminal charges and civil proceedings against corrupt corporate entities that made bribery a foundation of their business model,” said U.S. Attorney Bharara.  “As they have admitted in court filings, VimpelCom, the world’s sixth largest telecommunications company, with securities traded in New York, and its subsidiary, Unitel, built their business in Uzbekistan on over $114 million in bribes funneled to a government official.  Those payments, falsely recorded in the company’s books and records, were then laundered through bank accounts and assets around the world, including through accounts in New York.”

“Today’s admission of guilt by VimpelCom and Unitel to paying bribes to government officials is a victory for all who fight corruption at all levels,” said Chief Weber.  “It also demonstrates the skill and tenacity of IRS Criminal Investigation special agents when it comes to delving underneath layers of financial transactions designed to conceal illegal payments for gain.  The global economy demands a level playing field for all.  When certain VimpelCom and Unitel executives chose to use deception in order to continue this scheme and take advantage of insider knowledge, they also chose to become criminals.  IRS-CI pledges to continue our efforts on the international stage to stop corrupt financial schemes such as this one.”

“HSI special agents and our law enforcement partners will continue to investigate financial crimes committed by corrupt foreign officials,” said Special Agent in Charge Settles.  “We will not permit ill-gotten gains to be laundered through U.S. financial markets.”

The Criminal Resolution

In the criminal case, Unitel pleaded guilty and was sentenced to a one-count criminal information filed today in the Southern District of New York and assigned to U.S. District Judge Edgardo Ramos of the Southern District of New York, charging the company with a conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA).

VimpelCom entered into a deferred prosecution agreement in connection with a criminal information charging the company with conspiracy to violate the anti-bribery and books and records provisions of the FCPA, and a separate count of violating the internal controls provisions of the FCPA.  Pursuant to its agreement with the department, VimpelCom agreed to pay a total criminal penalty of $230,326,398.40 to the United States, including $40 million in forfeiture.  VimpelCom also agreed to implement rigorous internal controls, retain a compliance monitor for a term of three years and cooperate fully with the department’s ongoing investigation, including its investigation of individuals.

In related proceedings, VimpelCom settled with the U.S. Securities and Exchange Commission (SEC) and the Public Prosecution Service of the Netherlands (Openbaar Ministrie, or OM).  Under the terms of its resolution with the SEC, VimpelCom agreed to a total of $375 million in disgorgement of profits and prejudgment interest, to be divided between the SEC and OM.  VimpelCom agreed to pay the OM a criminal penalty of $230 million, for a total criminal penalty of $460,326,398.40, and a total resolution amount of more than $835 million.  The department agreed to credit the criminal penalty paid to the OM as part of its agreement with the company.  The SEC agreed to credit the forfeiture paid to the department as part of its agreement with the company.  Thus, the combined total amount of U.S. and Dutch criminal and regulatory penalties paid by VimpelCom will be $795,326,398.40, making it one of the largest global foreign bribery resolutions ever. 

According to the companies’ admissions, VimpelCom and Unitel, through various executives and employees, paid bribes to an Uzbek government official, who was a close relative of a high-ranking government official and had influence over the Uzbek governmental body that regulated the telecom industry.  The companies structured and concealed the bribes through various payments to a shell company that certain VimpelCom and Unitel management knew was beneficially owned by the foreign official.  The bribes were paid on multiple occasions between approximately 2006 and 2012 so that VimpelCom could enter the Uzbek market and Unitel could gain valuable telecom assets and continue operating in Uzbekistan.  VimpelCom and Unitel contemplated additional bribes in 2013, but those bribes were not completed before VimpelCom opened an internal investigation. 

In addition, VimpelCom admitted that it falsified its books and records and attempted to conceal and disguise the bribery scheme by classifying payments as equity transactions, consulting and repudiation agreements and reseller transactions.  VimpelCom also failed to implement and enforce adequate internal accounting controls, which allowed the bribe payments to occur without detection or remediation.  Moreover, when the board of directors sought an FCPA legal opinion assessing corruption risks involved in the transactions, certain VimpelCom management withheld crucial information from outside counsel performing the review that restricted the scope of FCPA opinions, rendering them worthless.  Rather than implement and enforce a strong anti-corruption ethic, certain VimpelCom executives sought ways to give the company plausible deniability of illegality while knowingly proceeding with corrupt business transactions.

A number of significant factors contributed to the department’s criminal resolution with the companies.  Among these, the companies received significant credit for their prompt acknowledgement of wrongdoing after being informed of the department’s investigation, for their willingness to promptly resolve their criminal liability on an expedited basis and for their extensive cooperation with the department’s investigation.  Specifically, the criminal penalty reflects a 45 percent reduction off of the bottom of the U.S. Sentencing Guidelines fine range.  However, the companies did not receive more significant mitigation credit, either in the penalty or the form of resolution, because the companies did not voluntarily self-disclose their misconduct to the department after an internal investigation uncovered wrongdoing. 

The Forfeiture Complaints

The department has also filed two civil complaints seeking a total of $850 million in forfeiture.  A complaint filed today seeks forfeiture of approximately $550 million in proceeds of illegal bribes paid, or property involved in the laundering of those payments, to the Uzbek official by VimpelCom and two other telecommunications companies operating in Uzbekistan.  The $550 million is currently located in Swiss bank accounts.  The department also filed a prior complaint seeking forfeiture of an additional $300 million in proceeds of illegal bribes paid, or property involved in the laundering of those payments, to the same Uzbek official.  The assets sought to be forfeited in that complaint are restrained in Belgium, Luxembourg and Ireland.  In that case, on Jan. 11, 2016, the U.S. District Court for the Southern District of New York entered a partial default judgment against all potential claimants other than the Republic of Uzbekistan. 

As alleged in the complaints and as is part of the criminal resolutions announced today, the telecom companies paid a total of more than $800 million in bribes so that the Uzbek official would assist VimpelCom and other telecommunications companies in obtaining and retaining business in Uzbekistan.  Thereafter, the official’s associates laundered the corruption proceeds through accounts held in Latvia, the United Kingdom, Hong Kong, Ireland, Belgium, Luxembourg and Switzerland.  The illicit funds were transmitted through financial institutions in the United States before they were deposited into accounts in these countries, thereby subjecting them to U.S. jurisdiction.  

The department brought these forfeiture actions under the Kleptocracy Asset Recovery Initiative in the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS), working in partnership with federal law enforcement agencies to forfeit the proceeds of foreign official corruption and, where appropriate, to use those recovered assets to benefit the people harmed by corruption and abuse of office. 

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These cases represent the department’s commitment to both prosecute those who pay bribes and to ensure that the corrupt government officials who receive the bribes cannot use the U.S. financial system to launder their illicit gains.  The IRS-CI and ICE-HSI are investigating the cases, along with the IRS Global Illicit Financial Team in Washington, D.C.  Senior Litigation Counsel Nicola J. Mrazek and Trial Attorney Ephraim Wernick of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Edward Imperatore of the Southern District of New York are prosecuting the criminal case, with substantial assistance from AFMLS.  AFMLS Trial Attorney Marie M. Dalton is prosecuting the forfeiture case with substantial assistance from the Fraud Section. 

Law enforcement colleagues within the OM, the Swedish Prosecution Authority, the Office of the Attorney General in Switzerland and the Corruption Prevention and Combating Bureau in Latvia provided significant cooperation and assistance in this matter.  Law enforcement colleagues in Belgium, France, Ireland, Luxembourg and the United Kingdom have also provided valuable assistance.  The Criminal Division’s Office of International Affairs provided significant assistance in this matter.  The SEC referred the matter to the department and provided extensive cooperation and assistance.

Individuals with information about possible proceeds of foreign corruption located in or laundered through the United States should contact federal law enforcement or send an email to [email protected].  

Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.  

            Preet Bharara, the United States Attorney for the Southern District of New York, Leslie R. Caldwell, the Assistant Attorney General for the Criminal Division of the Department of Justice (“DOJ”), Richard Weber, Chief of the Internal Revenue Service-Criminal Investigation (“IRS-CI”), and Clark E. Settles, Special Agent in Charge of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”) Washington, D.C., Field Office, announced today the filing of criminal charges against VimpelCom Limited (“VimpelCom”), the world’s sixth-largest telecommunications company, with securities publicly traded in New York, and its wholly owned Uzbek subsidiary, Unitel LLC (“Unitel”) for conspiring to violate the Foreign Corrupt Practices Act (“FCPA”) by paying more than $114 million in bribes to a government official in Uzbekistan.  VimpelCom was also charged with violating the FCPA’s internal control provisions. 

            Mr. Bharara also announced that in connection with the filed charges, Unitel pleaded guilty today before United States District Judge Edgardo Ramos, and that SDNY and the DOJ entered into a deferred prosecution agreement (“DPA”) with VimpelCom.  Pursuant to the DPA, VimpelCom admitted to participating in the charged conspiracy.  VimpelCom will pay a total criminal penalty of $230,163,199.20 to the United States, including $40 million in criminal forfeiture.  VimpelCom further agreed to implement rigorous internal controls, retain a compliance monitor for a term of three years, and cooperate fully with the Government.

            In related proceedings, VimpelCom reached a settlement with the U.S. Securities and Exchange Commission (“SEC”) and the Public Prosecution Service of the Netherlands (“PPS”).  Under the terms of its resolution with the SEC, VimpelCom agreed to pay $375 million in disgorgement of profits and prejudgment interest.  VimpelCom agreed to pay the PPS a criminal penalty of $230,163,199.20, yielding a total criminal penalty of $460,326,398.40, and a global resolution amount of more than $835 million.  SDNY and the DOJ agreed under the DPA to credit the criminal penalty paid to PPS, and the SEC separately agreed to credit the forfeiture amount paid to the United States.  Thus, the total of U.S. criminal and regulatory penalties paid by VimpelCom is $795,326,398.40.

            DOJ also filed a civil complaint today seeking forfeiture of $550 million held in Swiss bank accounts which represent proceeds of illegal bribes paid, or property involved in the laundering of those payments, to the Uzbek official by VimpelCom and two other telecommunications companies operating in Uzbekistan.  A previous complaint filed by DOJ seeks $300 million in proceeds of illegal bribes paid, or property involved in the laundering of those payments, by these companies to the same Uzbek official.  In that case, on January 11, 2016, United States District Judge Andrew L. Carter, Jr. entered a partial default judgment against all potential claimants other than the Republic of Uzbekistan.  As alleged in the two complaints, the telecommunications companies paid $850 million in bribes to the Uzbek official to obtain and retain the ability to do business in Uzbekistan.

            Manhattan U.S. Attorney Preet Bharara said: “Today we mark the resolution of criminal charges and civil proceedings against corrupt corporate entities that made bribery a foundation of their business model.  As they have admitted in court filings, VimpelCom, the world’s sixth largest telecommunications company, with securities traded in New York, and its subsidiary, Unitel, built their business in Uzbekistan on over $114 million in bribes funneled to a government official.  Those payments, falsely recorded in the company’s books and records, were then laundered through bank accounts and assets around the world, including through accounts in New York.”

            Assistant Attorney General Leslie R. Caldwell said: “These cases combine a landmark FCPA resolution for corporate bribery with one of the largest forfeiture actions we have ever brought to recover bribe proceeds from a corrupt government official.  The Criminal Division’s FCPA enforcement program and our Kleptocracy Initiative are two sides of the same anti-corruption coin.  The FCPA resolution in this case is also one of the most significant coordinated international and multi-agency resolutions in the history of the FCPA, and demonstrates our commitment both to pursuing justice and to bringing about corporate reform.”

            IRS-CI Chief Richard Weber said: “Today’s admission of guilt by VimpelCom and Unitel to paying bribes to government officials is a victory for all who fight corruption at all levels. It also demonstrates the skill and tenacity of IRS Criminal Investigation special agents when it comes to delving underneath layers of financial transactions designed to conceal illegal payments for gain.  The global economy demands a level playing field for all.  When certain VimpelCom and Unitel executives chose to use deception in order to continue this scheme and take advantage of insider knowledge, they also chose to become criminals. IRS-CI pledges to continue our efforts on the international stage to stop corrupt financial schemes such as this one.”

            HSI Special Agent in Charge Settles said: “HSI special agents and our law enforcement partners will continue to investigate financial crimes committed by corrupt foreign officials. We will not permit ill-gotten gains to be laundered through U.S. financial markets.”                    

            According to the allegations contained in the criminal Informations and civil complaints, which were filed today in Manhattan federal court, the statement of facts set forth in the DPA, and other publicly available information:

            Between approximately 2006 and 2012, VimpelCom and Unitel, through various executives and employees, paid more than $114 million in bribes to illegally obtain telecommunications business in Uzbekistan.  The bribes were paid to an Uzbek government official who was a close relative of a high-ranking government official and who exercised influence over Uzbek telecommunications industry regulators.  VimpelCom and Unitel structured and concealed the bribes through various payments to a shell company that certain VimpelCom and Unitel management knew was beneficially owned by the foreign official.  The bribes were paid on multiple occasions over a period of approximately seven years so that VimpelCom could enter the Uzbek market and Unitel could gain valuable telecom assets and continue operating in Uzbekistan. 

            Under the direction and control of the Uzbek government official, the more than $114 million in bribery proceeds were laundered through accounts held in Latvia, the United Kingdom, Hong Kong, Ireland, Belgium, Luxembourg, and Switzerland.  The illicit funds were transmitted through financial institutions in the Southern District of New York before they were deposited into accounts in those countries.

            As a further part of the scheme, VimpelCom falsified its books and records and attempted to conceal and disguise the bribery scheme by classifying payments as equity transactions, consulting agreements, and so-called repudiation agreements and reseller transactions.  VimpelCom likewise failed to implement and enforce adequate internal accounting controls, which allowed the bribe payments to occur without detection.  Moreover, when the VimpelCom Board of Directors sought FCPA legal opinions assessing corruption risks in the transactions, certain members of VimpelCom management withheld crucial information from outside counsel performing the review, rendering the opinions worthless.

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            Unitel was charged, and pleaded guilty to, one count of conspiring to violate the anti-bribery provisions of the FCPA.  VimpelCom was charged in a two-count Information with conspiracy to violate the anti-bribery and books and records provisions of the FCPA, and with violating the FCPA’s internal controls provisions. 

            Mr. Bharara thanked the Fraud Section of the DOJ’s Criminal Division for their collaboration and praised the efforts of IRS-CI, the IRS Global Illicit Financial Team, and HSI in the investigation.  He also thanked the SEC’s Division of Enforcement for its significant assistance in the investigation.  Mr. Bharara also thanked law enforcement colleagues within the PPS, the Swedish Prosecution Authority, the Office of the Attorney General in Switzerland and the Corruption Prevention and Combating Bureau in Latvia, as well as Belgium, France, Ireland, Luxembourg, Norway and the United Kingdom.  Mr. Bharara also thanked the Department of Justice’s Office of International Affairs for its significant assistance in this matter. 

            The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit and the FCPA Unit of the Fraud Section of DOJ’s Criminal Division.  Assistant United States Attorney Edward A. Imperatore, Senior Litigation Counsel Nicola Mrazek, and Trial Attorney Ephraim Wernick are in charge of the prosecution.  AFMLS Trial Attorney Marie M. Dalton is handling the forfeiture aspects of the case.

            Preet Bharara, the United States Attorney for the Southern District of New York, announced that CHARLES J. MOORE, former Chief Executive Officer of broker-dealer Crucible Capital, Inc. (“Crucible”), was sentenced today to six months in prison for obstructing a regulatory examination conducted by the Securities and Exchange Commission (“SEC”).  The sentence was imposed by U.S. District Judge Colleen McMahon.  MOORE, 63, pled guilty on November 9, 2015, to having caused a Crucible employee to falsify invoices and then provide them to an SEC examination team in response to a document request.  

            According to the agreement pursuant to which MOORE entered his plea of guilty, the underlying criminal Complaint filed August 7, 2014, the Indictment filed on September 30, 2014, and statements made during court proceedings:

            MOORE was at all relevant times the CEO of Crucible, an SEC-registered broker-dealer that maintained no customer securities trading accounts, but held itself out as a “boutique” investment bank helping small businesses to raise capital and financing.  Crucible used its status as an SEC-registered broker-dealer to solicit business.

            MOORE was also at all relevant times the CEO of an affiliated company, Angelic Holdings LLC (“Angelic”), which was not registered with the SEC and which conducted “due diligence” for Crucible-related business.  Crucible and Angelic shared employees and office space.  They also shared expenses, under an agreement that had Crucible paying Angelic a monthly fee and Angelic paying vendors of certain specified services on behalf of both Angelic and Crucible.

            As an SEC-registered broker-dealer that maintained no customer accounts, Crucible was required to maintain net capital of at least $5,000 at all times.  It was also required to file monthly “FOCUS” reports with the SEC reporting its net capital. 

            In the fall of 2013, the SEC opened a regulatory examination of Crucible to explore, among other things, the accuracy of the net capital figures that Crucible had supplied in its FOCUS reports from in or about February 2013 through in or about September 2013.  As part of that examination, the SEC requested all 2013 invoices to Angelic for Crucible-related expenses. 

            MOORE, responding to this request, caused a Crucible employee to create falsified invoices to deliver to the SEC.  Specifically, he directed the employee to take original invoices that had been sent to Crucible personnel, and create versions of those invoices that omitted references to large, unpaid debts appearing on the originals.  MOORE then caused the employee to hand the falsified invoices to the SEC.  The purpose of this obstruction was to hide the true extent of Crucible’s debts from the regulatory examination team, and thus make it appear, falsely, that Crucible’s net capital figures, as reported in its 2013 FOCUS reports, were accurate.

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            Mr. Bharara praised the investigative work of the U.S. Postal Inspection Service and the Federal Bureau of Investigation and thanked the SEC, which filed civil charges in a separate action.

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

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

            Preet Bharara, the United States Attorney for the Southern District of New York, announced today that it has settled a federal civil rights lawsuit against GLENWOOD MANAGEMENT CORPORATION (“GLENWOOD”) and GLENWOOD’S affiliate, LIBERTY STREET REALTY, LLC, by consent decree.  Under the settlement, GLENWOOD agrees to make retrofits at three residential rental complexes in Manhattan – Liberty Plaza, Hawthorne Park, and The Sage – to make them more accessible to individuals with disabilities.  GLENWOOD further agrees to inspect six other residential rental complexes in Manhattan and, where necessary, make retrofits at those buildings as well.  Additionally, GLENWOOD must establish procedures to ensure that its ongoing and future development projects will comply with the accessibility requirements of the federal Fair Housing Act (“FHA”).  Finally, GLENWOOD agrees to provide up to $900,000 to compensate aggrieved persons and pay a civil penalty of $50,000.  The consent decree was approved yesterday by U.S. District Judge J. Paul Oetken.

            Manhattan U.S. Attorney Preet Bharara said: “This is the tenth lawsuit that this Office has brought to ensure that the promise of the Fair Housing Act – that newly built residential buildings are accessible to people with disabilities – is being fulfilled in New York City.  This settlement shows our enforcement efforts have motivated major developers like Glenwood to embrace their obligations under the law by making retrofits in thousands of apartments, compensating aggrieved parties, and establishing procedures to ensure accessibility at ongoing and future development projects.”

            The FHA’s accessible design and construction provisions require new multifamily housing complexes constructed after January 1993 to have basic features accessible to persons with disabilities.  According to the allegations in the Complaint, Liberty Plaza, a 287-unit rental complex located in Manhattan, was designed and constructed with numerous inaccessible features, including excessively high thresholds interfering with accessible routes into and within individual units, insufficient spaces in bathrooms and kitchens for people in wheelchairs, and bathroom configurations preventing installation of grab bars.  These inaccessible conditions at Liberty Plaza were first brought to the attention of the United States by testing performed by the Fair Housing Justice Center. 

            Under the settlement, GLENWOOD agrees to make extensive retrofits at Liberty Plaza and to commit to make retrofits at two other rental complexes that have been inspected, The Hawthorne and The Sage, to make them accessible.  GLENWOOD also agrees to arrange for inspection at its six other rental complexes in Manhattan and, where necessary, to make retrofits at those properties as well.  Together, the nine buildings covered by the consent decree contain more than 2,500 rental apartments.

            The settlement also requires GLENWOOD to establish procedures to ensure FHA compliance at its ongoing and future development projects.  These include retaining an FHA compliance consultant to ensure each residential building developed by GLENWOOD will, as constructed, comply with the FHA’s accessibility requirements.  The FHA consultant also will conduct a site visit to identify non-compliant conditions and recommend appropriate solutions prior to the completion of construction.  In addition, GLENWOOD agrees to institute policies and training to ensure that its own employees and agents will comply with the FHA’s accessibility requirements.

            Finally, the settlement requires GLENWOOD to provide up to $900,000 in funds to compensate aggrieved persons.  GLENWOOD also agrees to pay a civil penalty of $50,000. 

            The government’s lawsuit also asserted claims against the architect of Liberty Plaza, STEPHEN B. JACOBS GROUP, PC.  The United States is currently engaged in negotiations with that architect regarding a potential settlement. 

            Aggrieved individuals may be entitled to monetary compensation from the fund created through today’s settlement.  Aggrieved individuals may include those who were:

• Injured by a lack of accessible features at Liberty Plaza or the other properties constructed by GLENWOOD;

• Discouraged from living at Liberty Plaza or the other properties constructed by GLENWOOD because of the lack of accessible features;

• Required to pay to have an apartment at Liberty Plaza or the other properties constructed by GLENWOOD made accessible;

• Prevented from having visitors because of a lack of accessible features at Liberty Plaza or the other properties constructed by GLENWOOD; or

• Otherwise injured or discriminated against on the basis of disability as a result of the design or construction of Liberty Plaza or the other properties constructed by GLENWOOD.

            People who may be entitled to compensation should file a claim by contacting the Civil Rights Complaint Line at (212) 637-0840, using the Civil Rights Complaint Form available on the United States Attorney’s Office’s website http://www.justice.gov/usao/nys/civilrights.html, or by sending a written claim to:

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

                        86 Chambers Street, 3rd Floor

                        New York, New York  10007

                        Attention:  Chief, Civil Rights Unit

            The case is being handled by the Office’s Civil Rights Unit.  Assistant U.S. Attorneys Li Yu, Jessica Jean Hu, and Jacob Lillywhite are in charge of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, and Christina Scaringi, Special Agent in Charge of the Department of Housing and Urban Development - Office of Inspector General (“HUD-OIG”), announced the unsealing of a Complaint against the property manager, CARL IMMICH, for engaging in fraudulent schemes to embezzle funds from Harriet Tubman Terrace Apartments (“Tubman Terrace”), a Section 8 housing complex in Poughkeepsie, New York.  IMMICH was arrested today and presented in White Plains federal court before United States Magistrate Judge Judith C. McCarthy.  As alleged, IMMICH fraudulently obtained hundreds of thousands of dollars belonging to Tubman Terrace. 

U.S. Attorney Preet Bharara said: “As alleged, Carl Immich stole federal taxpayer dollars intended to subsidize housing costs for lower income individuals.  I commend the work of HUD-OIG in safeguarding the people’s money and policing those who seek to pocket it for themselves.”

HUD-OIG Special Agent in Charge Christina Scaringi said: “The arrest and charges today of Carl Immich serve to remind the taxpayer that law enforcement will continue to pursue corruption, in all forms, especially those that impact the integrity of HUD-assisted housing. Mr.  Immich’s charges disclosed today prove our continuing resolve to root out crime in all forms, especially when the funds involved should have been used to help the neediest families.”

According to the allegations in the criminal complaint (the “Complaint”) unsealed today in White Plains federal court[1]:

Tubman Terrace is a large low-income apartment complex in Poughkeepsie, New York.  The rental payments for nearly all of the apartments are subsidized by HUD pursuant to Section 8 of the United States Housing Act of 1937, 42 U.S.C. § 1437f.  From in or about June 2010 through in or about November 2014, HUD provided approximately $150,000 to $160,000 each month to Tubman Terrace. 

Since in or about 2009, Tubman Terrace has been managed by a management company, of which IMMICH is the principal and sole owner.  In that capacity, IMMICH has served as the management agent and property manager of Tubman Terrace since in or about 2009.

From at least in or about December 2010 until at least in or about March 2015, IMMICH fraudulently obtained hundreds of thousands of dollars belonging to Tubman Terrace, which were paid to him or used for personal expenditures.  IMMICH did so through at least three different schemes: (1) he used credit cards intended for Tubman Terrace business expenses for personal expenses, which were then paid through Tubman Terrace’s operating bank account; (2) he obtained check payments from the Tubman Terrace operating bank account to cover other personal expenses; and (3) he obtained payroll checks for himself and his daughter reflecting no work or other entitlement by them to such salary. 

                                                            *          *          *

IMMICH, 53, of Rhinebeck, New York, is charged with one count of embezzling government property, and one count of theft of property from programs receiving government funds, each of which carries a maximum sentence of 10 years in prison.  The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as the judge will determine any sentence imposed on the defendant.        

Mr. Bharara praised the outstanding investigative work of HUD-OIG.            

 The case is being prosecuted by the Office’s White Plains Division.  Assistant U.S. Attorneys Lauren Schorr and Benjamin Allee are in charge of the prosecution. 

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Mark Bialek, Inspector General for the Board of Governors of the Federal Reserve System (“Federal Reserve”), announced today the unsealing of an indictment charging RICHARD MOSELEY, SR. with wire fraud and violating the Racketeer Influenced and Corrupt Organizations Act (“RICO”) and the Truth in Lending Act (“TILA”) for operating a payday lending enterprise that systematically evaded state usury laws in order to charge illegally high interest rates, and for issuing payday loans to consumers who never even sought them.  MOSELEY was arrested this morning and will be presented later today in federal court in Kansas City, Missouri.  The case has been assigned to U.S. District Judge Edgardo Ramos.

Manhattan U.S. Attorney Preet Bharara stated:  “As alleged, Richard Moseley, Sr., extended predatory loans to over six hundred thousand of the most financially vulnerable Americans, charging illegally high interest rates to people struggling just to meet their basic living expenses.  Worse, Moseley allegedly also extended loans to many who never even sought them, withdrawing exorbitant ‘financing fees’ from their bank accounts for loans the borrowers  never asked for or authorized.  For years, Moseley allegedly hid behind sham offshore corporations and operated through the Internet to try to avoid criminal liability.”

FBI Assistant Director-in-Charge Rodriguez stated: “This case is an example of predatory lending at its finest. Claiming more than half a million victims, Moseley, through his enterprise, deceived not only those who unwittingly bought into this sham agreement, but others who never even authorized the origination of the loans they received. Despite their best efforts, innocent people throughout the country were deprived of the opportunity to regain their financial well -being as a result of this conspiracy. Today, we issue a stop payment on Moseley’s fraudulent scheme.”

Federal Reserve Inspector General Bialek stated: “Today’s indictment sends a clear message that those who engage in fraud to obstruct regulators from carrying out their supervisory responsibilities and deceive unsuspecting consumers will be held accountable for their actions.”           

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

Between approximately 2004 and September 2014, MOSELEY owned and operated a group of payday lending businesses (the “Hydra Lenders”) that issued and serviced small, short-term, unsecured loans, known as “payday loans,” through the Internet to customers across the United States.   

For nearly a decade, MOSELEY systematically exploited more than 620,000 financially struggling working people throughout the United States, many of whom were having trouble paying for basic living expenses.  MOSELEY, through the Hydra Lenders, targeted and extended loans to these individuals at illegally high interest rates of more than 700%, using deceptive and misleading communications and contracts and in violation of the usury laws of numerous states that were designed to protect residents from such loan sharking and abusive conduct.  

In furtherance of the scheme, the Hydra Lenders’ loan agreements materially understated the amount the payday loan would cost, the annual percentage rate of the loan, and the total of payments that would be taken from the borrower’s bank account.  The loan agreements suggested, for example, that the borrower would pay $30 in interest for $100 borrowed.  In truth and in fact, however, MOSELEY structured the repayment schedule of the loans such that, on the borrower’s payday, the Hydra Lenders automatically withdrew the entire interest payment due on the loan, but left the principal balance untouched so that, on the borrower’s next payday, the Hydra Lenders could again automatically withdraw an amount equaling the entire interest payment due (and already paid) on the loan.  Under MOSELEY’s control and oversight, the Hydra Lenders proceeded automatically to withdraw such “finance charges” payday after payday, applying none of the money toward repayment of principal.  Indeed, under the terms of the loan agreement, the Hydra Lenders withdrew finance charges from their customers’ accounts unless and until consumers took affirmative action to stop the automatic renewal of the loan. 

Through the Hydra Lenders, MOSELEY also extended numerous payday “loans” to victims across the country who did not even want the loans or authorize the issuance of the loans, but instead had merely submitted their personal and bank account information in order to inquire about the possibility of obtaining a payday loan.  MOSELEY then automatically withdrew the Hydra Lenders’ usurious “financing fees” directly from the financially struggling victims’ bank accounts on a bi-weekly basis.  Although hundreds of victims, over a period of years, lodged complaints that they had never approved or even been aware of the issuance of the loans, the Hydra Lenders, at MOSELEY’s direction, continued to issue loans to consumers without confirming that the consumers in fact wanted the loans that they received or had reviewed and approved the loan terms.    

Throughout their existence, the Hydra Lenders were the subject of complaints from customers across the country, numerous state regulators, and consumer protection groups, about the Hydra Lenders’ deceptive and misleading practices in issuing usurious and fraudulent loans.  Beginning in approximately 2006, in an attempt to avoid civil and criminal liability for his conduct, and to enable the Hydra Lenders to extend usurious loans contrary to state laws, MOSELEY created the sham appearance that the Hydra Lenders were located overseas.  MOSELEY nominally incorporated the Hydra Lenders first in Nevis, and later in New Zealand, and claimed that the Hydra Lenders could not be sued or subject to state enforcement actions because they were beyond the jurisdiction of every state in the United States.  In truth and in fact, the entirety of MOSELEY’s lending business, including all bank accounts from which loans were originated, all communications with consumers, and all employees, were located at MOSELEY’s corporate office in Kansas City, Missouri.  The Hydra Lenders’ purported “offshore” operation consisted of little more than a service that forwarded mail from addresses in Nevis or New Zealand to the Kansas City, Missouri, office. 

In furtherance of the scheme, MOSELEY falsely told his attorneys that the Hydra Lenders maintained physical offices and employees in Nevis and New Zealand and that the decision whether to extend loans to particular consumers was made by employees of the Hydra Lenders in Nevis and New Zealand.  As MOSELEY knew, at no time did the Hydra Lenders have any employees involved in the lending business in Nevis or New Zealand, and at all times the decision whether to underwrite loans was made by employees under MOSELEY’s direction in Kansas City, Missouri.  To defeat state complaints and inquiries, MOSELEY directed his attorneys at an outside law firm to submit correspondence to state Attorneys General which (unbeknownst to MOSELEY’s attorneys) falsely stated that the Hydra Lenders originated loans “exclusively” from their offices overseas and had no physical presence anywhere in the United States.  In reliance on this materially false and misleading correspondence, many state Attorneys General and regulators closed their investigations on the apparent basis that they lacked jurisdiction over the Hydra Lenders and that the Hydra Lenders had no presence or operations in the United States. 

From approximately November 2006 through approximately August 2014, the Hydra Lenders generated approximately $161 million in revenues.  MOSELEY spent millions of dollars he obtained from victims on, among other things, vacation homes in Colorado and Mexico, luxury automobiles, and country club membership dues. 

*                *                *

MOSELEY, 68, of Kansas City, Missouri, is charged with one count of conspiracy to collect unlawful debts in violation of RICO, one count of collecting unlawful debts in violation of RICO, one count of conspiracy to commit wire fraud, and one count of wire fraud, each of which carries a maximum term of 20 years in prison; and one count of violating TILA, which carries a maximum term of one year in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the investigative work of the FBI and the Federal Reserve Office of  the Inspector General.  Mr. Bharara also thanked the Consumer Financial Protection Bureau (the “CFPB”), which referred the case, for its assistance in the investigation.  In a civil enforcement action filed by the CFPB against MOSELEY in the United States District Court for the Western District of Missouri, proceeds that MOSELEY obtained as a result of his fraudulent conduct have been restrained. 

Mr. Bharara noted that the investigation remains ongoing.

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

http://www.usdoj.gov/usao/nys/victimwitness.html

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorney Edward A. Imperatore is in charge of the prosecution.

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, Karl Stiften, Special Agent-in-Charge of the St. Louis Field Office of the Internal Revenue Service (“IRS”), and Diego Rodriguez, Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced the unsealing of a criminal indictment charging SCOTT TUCKER and TIMOTHY MUIR with violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”) and the Truth in Lending Act (“TILA”) for operating a nationwide internet payday lending enterprise that systematically evaded state laws in order to charge illegal interest rates as high as 700% on loans.  Both defendants were arrested in Kansas City, Kansas, earlier today and will be presented in the United States District Court for the District of Kansas.  The case has been assigned to U.S. District Judge Katherine B. Forrest.

Mr. Bharara also announced a non-prosecution agreement (the “Agreement”) with two tribal corporations controlled by the Miami Tribe of Oklahoma, a Native American tribe.  As part of the Agreement, the tribal corporations agree to forfeit $48 million in criminal proceeds from TUCKER’s payday lending enterprise that are currently held in tribal bank accounts.  The Agreement also acknowledges, among other things, that a tribal representative filed false factual declarations in multiple state court actions.  TUCKER and MUIR used these false declarations to defeat numerous state enforcement actions seeking to enjoin the operation of their unlawful business.

Manhattan U.S. Attorney Preet Bharara stated:  “As alleged, Scott Tucker and Timothy Muir targeted and exploited millions of struggling, everyday people by charging illegally high interest rates – as much as 700 percent.  Tucker and Muir allegedly sought to evade liability by claiming that this $2 billion business was actually owned and operated by Native American tribes.  But thanks to the investigative work of the FBI and IRS, this deceptive and predatory scheme to take advantage of the most financially vulnerable in our communities has been exposed for what it is – a criminal scheme.”  

IRS Special Agent-in-Charge Karl Stiften stated:  “These defendants allegedly used deceptive and misleading lending practices to prey on millions of hard working individuals seeking payday loans.  In reality, these loan customers were taken advantage of and charged illegally high interest rates.”

FBI Assistant Director-in-Charge Diego Rodriguez stated:  “As alleged, Tucker and Muir deceptively preyed on more than 4.5 million working people, including those in New York, to enter into payday loans with interest rates ranging from 400 to 700 percent. Not only did their business model violate the Truth-in Lending Act, established to protect consumers from such loans, but they also tried to hide from prosecution by creating a fraudulent association with Native American Tribes to receive sovereign immunity. This scheme, like so many others who swindle innocent victims, only ends with an arrest by the FBI.”

As alleged in the Indictment[1] and described in the Agreement:

From at least 1997 until 2013, TUCKER engaged in the business of making small, short-term, high-interest, unsecured loans, commonly referred to as “payday loans,” through the Internet.  TUCKER’s lending enterprise, which had approximately 600 employees based in Overland Park, Kansas, did business as Ameriloan, f/k/a Cash Advance; One Click Cash, f/k/a Preferred Cash Loans; United Cash Loans; US FastCash; 500 FastCash; Advantage Cash Services; and Star Cash Processing (the “Tucker Payday Lenders”).  TUCKER, working with MUIR, an attorney for TUCKER’s payday lending businesses since 2006, routinely charged interest rates of 400% or 500%, and sometimes higher than 700%, using deceptive and misleading “disclosures” about the true cost of the loans.  These loans were issued to more than 4.5 million working people throughout the United States, including hundreds of thousands of people in New York, many of whom were struggling to pay basic living expenses.  Many of these loans were issued in states, including New York, with laws that expressly forbid lending at the exorbitant interest rates TUCKER charged.

The False Truth-in-Lending Act (“TILA”) Disclosures

TILA is a federal statute intended to ensure that credit terms are disclosed to consumers in a clear and meaningful way, both to protect customers against inaccurate and unfair credit practices, and to enable them to compare credit terms readily and knowledgeably.  Among other things, TILA and its implementing regulations require lenders, including payday lenders like the Tucker Payday Lenders, to accurately, clearly, and conspicuously disclose, before any credit is extended, the finance charge, the annual percentage rate, and the total of payments that reflect the legal obligation between the parties to the loan.

The Tucker Payday Lenders purported to inform prospective borrowers, in clear and simple terms, as required by TILA, of the cost of the loan (the “TILA Box”).  For example, for a loan of $500, the TILA Box provided that the “finance charge – meaning the “dollar amount the credit will cost you” – would be $150, and that the “total of payments” would be $650.  Thus, in substance, the TILA Box stated that a $500 loan to the customer would cost $650 to repay.  While the amounts set forth in the Tucker Payday Lenders’ TILA Box varied according to the terms of particular customers’ loans, they reflected, in substance, that the borrower would pay $30 in interest for every $100 borrowed.

In truth and in fact, through at least 2012, TUCKER and MUIR structured the repayment schedule of the loans such that, on the borrower’s payday, the Tucker Payday Lenders automatically withdrew the entire interest payment due on the loan, but left the principal balance untouched so that, on the borrower’s next payday, the Tucker Payday Lenders could again automatically withdraw an amount equaling the entire interest payment due (and already paid) on the loan.  With TUCKER’s approval, the Tucker Payday Lenders proceeded automatically to withdraw such “finance charges” payday after payday (typically every two weeks), applying none of the money toward repayment of principal, until at least the fifth payday, when they began to withdraw an additional $50 per payday to apply to the principal balance of the loan.  Even then, the Tucker Payday Lenders continued to assess and automatically withdraw the entire interest payment calculated on the remaining principal balance until the entire principal amount was repaid.  Accordingly, as TUCKER and MUIR well knew, the Tucker Payday Lenders’ TILA box materially understated the amount the loan would cost, including the total of payments that would be taken from the borrower’s bank account.  Specifically, for a customer who borrowed $500, contrary to the TILA Box disclosure stating that the finance charge would be $150, for a total payment of $650 by the borrower, in truth and in fact, and as TUCKER and MUIR well knew, the finance charge was $1,425, for a total payment of  $1,925 by the borrower. 

The Sham Tribal Ownership of the Business

In response to complaints that the Tucker Payday Lenders were extending abusive loans in violation of their usury laws, several states filed actions to enjoin the Tucker Payday Lenders from operating in their states.  To thwart these state actions, TUCKER devised a scheme to claim that his lending businesses were protected by sovereign immunity, a legal doctrine that, among other things, generally prevents states from enforcing their laws against Native American tribes.  Beginning in 2003, TUCKER entered into agreements with several Native American tribes (the “Tribes”), including the Miami Tribe of Oklahoma.  The purpose of these agreements was to cause the Tribes to claim they owned and operated parts of TUCKER’s payday lending enterprise, so that when states sought to enforce laws prohibiting TUCKER’s loans, TUCKER’s lending businesses would claim to be protected by sovereign immunity.  In return, the Tribes received payments from TUCKER, typically one percent of the revenues from the portion of TUCKER’s payday lending business that the Tribes purported to own.  

In order to create the illusion that the Tribes owned and controlled TUCKER’s payday lending business, TUCKER and MUIR engaged in a series of deceptions.  Among other things:

• MUIR and other counsel for TUCKER prepared false factual declarations from tribal representatives that were submitted to state courts, falsely claiming, among other things, that tribal corporations substantively owned, controlled, and managed the portions of TUCKER’s business targeted by state enforcement actions.
• TUCKER opened bank accounts to operate and receive the profits of the payday lending enterprise, which were nominally held by tribally owned corporations, but which were, in fact, owned and controlled by TUCKER. TUCKER spent over $100 million from these accounts on lavish personal expenses, including race cars, the expenses of a professional auto racing team, a luxury home in Aspen, Colorado, and jewelry.
• Employees of TUCKER making payday loans over the phone told borrowers that they were operating in Oklahoma and Nebraska, where the Tribes were located, when in fact they were operating at TUCKER’s corporate headquarters in Kansas.These employees were even provided daily weather reports for the Tribes’ reservations, so that the employees could convince customers that the employees actually were calling from those locations (when they were in fact in Kansas).

These deceptions succeeded for a time, and several state courts dismissed enforcement actions against TUCKER’s payday lending businesses based on claims that they were protected by sovereign immunity.  In reality, the Tribes neither owned nor operated any part of TUCKER’s payday lending business.  The Tribes made no payment to TUCKER to acquire the portions of the business they purported to own.  TUCKER continued to operate his lending business from a corporate headquarters in Kansas, and TUCKER continued to reap the profits of the payday lending businesses, which generated over $2 billion in revenue from 2003 to 2012 – in substantial part by charging desperate borrowers high interest rates expressly forbidden by state laws.

*                      *                     *

TUCKER, 53, of Leawood, Kansas, and MUIR, 44, of Overland Park, Kansas, are each charged with conspiring to collect unlawful debts in violation of RICO, which carries a maximum term of 20 years in prison, three counts of violating RICO’s prohibition on collecting unlawful debts, each of which carries a maximum term of 20 years in prison, and five counts of violating the Truth in Lending Act, each of which carries a maximum term of one year in prison.  The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentences the defendants receive will be determined by the Court.  The indictment also seeks to forfeit from TUCKER and MUIR the proceeds and property derived from their alleged crimes, including, among other things, numerous bank accounts, a vacation home in Aspen, Colorado, six Ferrari race cars, four Porsche automobiles, and a Learjet airplane.

Mr. Bharara praised the outstanding investigative work of the IRS and the FBI.  Mr. Bharara also thanked the Criminal Investigators at the United States Attorney’s Office, and the Federal Trade Commission, for their assistance with the case.

Mr. Bharara further noted that the investigation remains ongoing.

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

http://www.usdoj.gov/usao/nys/victimwitness.html.

The prosecution is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Niketh Velamoor and Hagan Scotten are in charge of the prosecution.

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, James J. Hunt, Special Agent in Charge of the U.S. Drug Enforcement Administration New York Division (“DEA”), and Delano A. Reid, Special Agent in Charge of the New York Division of the United States Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), announced today the unsealing of an Indictment in Manhattan federal court charging 17 individuals with narcotics-related offenses.  Fifteen of those charged were arrested this morning in the Southern District of New York and will be presented before United States Magistrate Judge Frank Maas later today.  One defendant was arrested in the District of Maine this morning and will be presented there later today.

According to the allegations in the Indictment:[1]

Between late 2012 and December 2015, MARIO HERRERA, a/k/a “Mo,” JOHN MIRANDA, JOEL CASADO, a/k/a “Cojo,” CESAR DOMINGUEZ, JOEL QUEZADA, a/k/a “J-Buff,” JONATHAN MORALES, a/k/a “Blood,” and OLIVEROS VILLAREAL conspired to distribute and possess with the intent to distribute five kilograms and more of cocaine and a quantity of marijuana.  This charge carries a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison.  The Indictment also charges that between late 2012 and December 2015, HERRERA, MIRANDA, CASADO, DOMINGUEZ,  QUEZADA, THOMAS ABREU, a/k/a “TJ,” JONATHAN GOLDEN, a/k/a “Johnny,” CYNTHIA URRA, DEBRA MONCHE, EZEQUIL NIN, a/k/a “Seki,” ANDREW SEIBERT, a/k/a “Blue,” CARLOS ALVAREZ-GONZALEZ, a/k/a “Pops,” KEITH WOODARDS, ALEXANDER CARNO, and KEVIN SKEETE conspired to distribute and possess with the intent to distribute oxycodone, a Schedule II controlled substance.  This charge carries a maximum sentence of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.

Mr. Bharara praised the outstanding investigative work of the DEA and the ATF.  He also thanked the New York City Police Department, the U.S. Marshals Service, the Putnam County Sheriff’s Department, and the United States Secret Service for their assistance throughout the investigation.

The prosecution is being handled by the Office’s General Crimes Unit.  Assistant U.S. Attorneys Gina Castellano, Jordan Estes, and Jason A. Richman are in charge of the prosecution.

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that JOSEPH DEL VALLE, an owner and partner of various investment companies, pled guilty today in Manhattan federal court to wire fraud and aggravated identity theft charges for operating two fraudulent schemes that resulted in more than $5 million in investor losses.  DEL VALLE pled guilty to a four-count Indictment before United States District Judge Richard M. Berman. 

Manhattan U.S. Attorney Preet Bharara stated: “Joseph Del Valle convinced his clients to invest millions of dollars in his real estate and restaurant projects.  But in reality, his clients were only investing in Del Valle’s personal slush fund that he used to supplement his self-indulgent lifestyle.  Del Valle’s plea today will ensure that he can no longer victimize any other investors.”

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

The Project Miami Scheme

Beginning in 2005, JOSEPH DEL VALLE, a co-conspirator (“CC-1”), and an employee of Vanquish Acquisition Partners LLC began soliciting investors for a real estate development project in the Little Havana neighborhood of Miami (referred to herein as “Project Miami”).  Project Miami involved two high-rise buildings in which the bottom floors would house retail shops and the top floors would be residential condominiums.  Project Miami was designed to provide affordable housing to middle-income individuals and included an arrangement for financing so that purchasers of the condominiums would receive government-subsidized mortgages.  From 2005 through 2007, DEL VALLE, CC-1, and the employee obtained approximately $6.4 million from investors for Project Miami.

Prior to making any investments, investors were told that the investment was solely for Project Miami.  Investors were provided with various materials that specified the investments were for Project Miami, and that DEL VALLE and his company would only take a 5 percent management fee.  However, almost immediately after investors transferred funds for Project Miami, almost all of which were sent to banks in Manhattan, New York, DEL VALLE and CC-1 transferred amounts far greater than 5 percent to other bank accounts and began using the funds for other purposes, including investments in a wine magazine and for DEL VALLE’s personal use.  For example, in October 2007, DEL VALLE used $30,000 of investor money in Europe for, among other things, hotels, restaurants, a cruise, and cash withdrawals.  In total, DEL VALLE and CC-1 used more than $3 million for other investments or personal expenses.

When investors became suspicious and requested financial statements for their investments and a return of their money, DEL VALLE represented to investors in phone calls and e-mail communications that the investment funds were secure when, in fact, a large portion of the investors’ money had already been misappropriated and/or diverted to other uses.  DEL VALLE also falsely told investors that financial statements were in the process of being prepared and would be mailed to them shortly, but in fact, DEL VALLE and CC-1 had not provided any financial information to the accountant responsible for the preparation of financial statements of the relevant entities.    

The Project WT/Bistro, Project Chateau & Project Rioja Scheme

From 2009 through 2014, DEL VALLE conducted a second scheme in which he solicited investors to wire investments to various bank accounts for the purpose of investing in three purported investment projects, Project WT (later named Project Bistro), Project Rioja, and Project Chateau, all of which DEL VALLE controlled.  According to DEL VALLE, Project WT/Bistro was created for the purpose of raising money to expand two restaurants, Project Chateau was created for the purpose of raising money to invest in the high-end segment of the hospitality industry, and Project Rioja was created for the purpose of raising money to invest in the high-end segment of the wine industry.  DEL VALLE raised more than $2 million from investors for these projects.

Among other things, DEL VALLE falsely represented to investors that their money would be used solely to fund the specific projects in which the investors had decided to invest.  However, almost immediately after investors transferred funds to bank accounts controlled by DEL VALLE, DEL VALLE withdrew money from the bank accounts (often through debit card purchases, ATM withdrawals, and wire transfers) and spent approximately all of the funds on restaurants, hotels, clothing, mortgage payments, and payments to DEL VALLE’s family members and his fiancée, among other things.  In addition, to induce investors to invest money in the specific projects, DEL VALLE frequently sent investors multiple fabricated emails that purported to come from well-known chefs and businesspeople.

*                       *                      *

DEL VALLE, 61, of Aventura, Florida, pled guilty to one count of conspiracy to commit wire fraud and two counts of wire fraud, both of which carry a maximum sentence of 20 years in prison; and one count of aggravated identity theft, which carries a mandatory minimum sentence of two years.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.   DEL VALLE will be sentenced May 10, 2016.

Mr. Bharara praised the work of the FBI.

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

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Aimee Hector and Damian Williams are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, Caroline D. Ciraolo, Acting Assistant Attorney General of the Justice Department’s Tax Division, and Richard Weber, Chief, Internal Revenue Service – Criminal Investigation, (“IRS-CI”), announced the filing of criminal charges against Bank Julius Baer & Co., Ltd. (“JULIUS BAER” or the “Company”), a financial institution headquartered in Zurich, Switzerland.   JULIUS BAER is charged with conspiring with many of its U.S. taxpayer-clients and others to help U.S. taxpayers hide billions of dollars in offshore accounts from the United States Internal Revenue Service (the “IRS”) and to evade U.S. taxes on the income earned in those accounts. 

Mr. Bharara also announced a deferred prosecution agreement with JULIUS BAER (the “Agreement”) under which the Company admits that it knowingly assisted many of its U.S. taxpayer-clients in evading their tax obligations under U.S. law.  The admissions are contained in a detailed Statement of Facts attached to the Agreement.  The Agreement requires JULIUS BAER to pay a total of $547 million by no later than February 9, 2016, including through a parallel civil forfeiture action also filed today in the Southern District of New York.              

The criminal charge is contained in an Information (the “Information”) alleging one count of conspiracy to (1) defraud the IRS, (2) to file false federal income tax returns and (3) to evade federal income taxes.  If JULIUS BAER abides by all of the terms of the Agreement, the Government will defer prosecution on the Information for three years and then seek to dismiss the charges.

In addition, two Julius Baer client advisers, DANIELA CASADEI and FABIO FRAZZETTO, pled guilty in Manhattan federal court today.  CASADEI and FRAZZETTO were originally charged in 2011 and remained at large until February 2, 2016, when they each made initial appearances before the Honorable Gabriel W. Gorenstein, United States Magistrate Judge for the Southern District of New York. 

CASADEI and FRAZZETTO each pled guilty to an Information (collectively, with the JULIUS BAER Information, the “Informations”) before U.S. District Judge Laura Taylor Swain charging them with conspiring with U.S. taxpayer-clients and others to help U.S. taxpayers hide their assets in offshore accounts and to evade U.S. taxes on the income earned in those accounts. 

Manhattan U.S. Attorney Preet Bharara said:  “Bank Julius Baer not only turned a blind eye to tax avoiders, but actually conspired with them to break the law.  Together with our partners at the IRS, we will continue to prosecute financial institutions and individuals who facilitate tax evasion.”

Acting Assistant Attorney General Caroline D. Ciraolo said:  “Today’s resolution with Bank Julius Baer and the guilty pleas entered by two bank employees reflect the department’s continued commitment to hold accountable those financial institutions who conspired with U.S. taxpayers to conceal assets abroad and evade U.S. tax obligations, as well as those individuals responsible for such crimes.  The deferred prosecution agreement filed today makes it clear that there is a heavy price to pay for this conduct, and that there is a significant benefit in fully cooperating with the department.”

IRS Chief Richard Weber said:  “In taking responsibility for their actions, Bank Julius Baer has agreed to cooperate and pay a substantial penalty for their role in circumventing offshore disclosure laws.  The agreement – as well as the guilty pleas of client advisors Daniela Casadei and Fabio Frazzetto – sends a strong message to the international banking community as well as U.S. taxpayers who think they can outsmart the system by hiding their money in these international banks.  The consequences of not reporting your foreign accounts and paying the taxes you owe will be significant for those who do not heed the warnings that agreements like this yield.”

According to the Informations, statements made during the proceedings today, and other documents filed in Manhattan federal court, including the Statement of Facts to the Agreement:

The Offense Conduct

From at least the 1990s through 2009, JULIUS BAER helped many of its U.S. taxpayer-clients evade their U.S. tax obligations, file false federal tax returns with the IRS, and otherwise hide accounts held at JULIUS BAER from the IRS (hereinafter, “undeclared accounts”).  JULIUS BAER did so by opening and maintaining undeclared accounts for U.S. taxpayers and by allowing third-party asset managers to open undeclared accounts for U.S. taxpayers at JULIUS BAER.  CASADEI and FRAZZETTO, bankers who worked as client advisers at JULIUS BAER, directly assisted various U.S. taxpayer-clients in maintaining undeclared accounts at JULIUS BAER in order to evade their obligations under United States law.  At various times, CASADEI, FRAZZETTO, and others advised those U.S. taxpayer-clients that their accounts at JULIUS BAER would not be disclosed to the IRS because JULIUS BAER had a long tradition of bank secrecy and no longer had offices in the U.S., making JULIUS BAER less vulnerable to pressure from U.S. law enforcement authorities than other Swiss banks with a presence in the U.S.    

In furtherance of the scheme to help U.S. taxpayers hide assets from the IRS and evade taxes, JULIUS BAER undertook, among other actions, the following:

• Entering into “code word agreements” with U.S. taxpayer-clients under which JULIUS BAER agreed not to identify the U.S. taxpayers by name within the bank or on bank documents, but rather to identify the U.S. taxpayers by code name or number, in order to reduce the risk that U.S. tax authorities would learn the identities of the U.S. taxpayers.
• Opening and maintaining accounts for many U.S. taxpayer-clients held in the name of non-U.S. corporations, foundations, trusts, or other legal entities (collectively, “structures”) or non-U.S. relatives, thereby helping such U.S. taxpayers conceal their beneficial ownership of the accounts.

JULIUS BAER was aware that many U.S. taxpayer-clients were maintaining undeclared accounts at JULIUS BAER in order to evade their U.S. tax obligations, in violation of U.S. law.  In internal JULIUS BAER correspondence, undeclared accounts held by U.S. taxpayers were at times referred to as “black money,” “non W-9,” “tax neutral,” “unofficial,” or “sensitive” accounts. 

JULIUS BAER also advised its bankers to take certain steps to avoid scrutiny from U.S. authorities when travelling to the U.S., as well as steps to avoid U.S. law enforcement identifying JULIUS BAER clients.  In a memo entitled “U.S. Clients Do’s & Don’ts,” circulated internally in 2006, a JULIUS BAER employee provided client advisers with advice regarding travel to the U.S., including:

• “At Immigration . . . When asked by Officer what will you do while in the USA, say Business and of course some leisure, trying to take some time to enjoy your beautiful country. Proud government employees usually love this type of statement.One can throw in skydiving or another fun sport/activity.This tends to shift the questioning away from the business purpose to the ‘fun time’ part of the trip (carrying a tennis racket also puts the emphasis on “fun and games,” and not on business).”
• "In regard to communicating while in the U.S.:“Only use mobile phone[s] registered in and operating from Switzerland.Avoid phone calls from hotel to clients.It is recommended to purchase a telephone calling card from the post office, grocery stores, or electronic shops.This allows you to use practically any phone with no specific link left behind.The best is to pay for the calling card in cash.For ex: a 400 minutes local calling card costs less than $50, but the rates can vary.Most cards can also be used to call anywhere abroad.”

At its high-water mark in 2007, JULIUS BAER had approximately $4.7 billion in assets under management relating to approximately 2,589 undeclared accounts held by U.S. taxpayer-clients.  From 2001 through 2011, JULIUS BAER earned approximately $87 million in profit on approximately $219 million gross revenues from its undeclared U.S. taxpayer accounts, including accounts held through structures. 

Julius Baer’s Blocked Effort to Self-Report, Acceptance of Responsibility, and

Cooperation in the Government Investigation

Notwithstanding its lucrative criminal conduct, by at least 2008, JULIUS BAER began to implement institutional policy changes to cease providing assistance to U.S. taxpayers in violating their U.S. legal obligations.  For example, by November 2008, the Company began an “exit” plan for U.S. client accounts that lacked evidence of U.S. tax compliance.  In that same month, JULIUS BAER imposed a prohibition on opening accounts for any U.S. clients without an IRS Form W-9.

Additionally, in November 2009, before JULIUS BAER became aware of any U.S. investigation into its conduct, JULIUS BAER decided proactively to approach U.S. law enforcement authorities regarding its conduct relating to U.S. taxpayers.  Prior to self-reporting to the United States Department of Justice, JULIUS BAER notified its regulator in Switzerland of its intention to contact U.S. law enforcement authorities.  This Swiss regulator requested that JULIUS BAER not contact U.S. authorities in order not to prejudice the Swiss government in any bilateral negotiations with the U.S. on tax-related matters.  Accordingly, JULIUS BAER did not, at that time, self-report to U.S. law enforcement authorities.

After ultimately engaging with U.S. authorities, JULIUS BAER has taken exemplary actions to demonstrate acceptance and acknowledgement of responsibility for its conduct.  JULIUS BAER conducted a swift and robust internal investigation, and furnished the U.S. Government with a continuous flow of unvarnished facts gathered during the course of that internal investigation.  As part of its cooperation, JULIUS BAER also, among other things, (1) successfully advocated in favor of a decision provided by the Swiss Federal Council in April 2012 to allow banks under investigation by the United States Department of Justice to legally produce employee and third-party information to the Department, and subsequently produced such information immediately upon issuance of that decision; and (2) encouraged certain employees, including FRAZZETTO and CASADEI, to accept responsibility for their participation in the conduct at issue and cooperate with the ongoing investigation.     

*                *                *

CASADEI, 52, a Swiss citizen, and FRAZZETTO, 42, an Italian and Swiss citizen, each pled guilty to one count of conspiracy to defraud the IRS, to evade federal income taxes, and to file false federal income tax returns.  CASADEI and FRAZZETTO each face a maximum sentence of five years in prison.  The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentences imposed on the defendants will be determined by the judge. 

CASADEI and FRAZZETTO are each scheduled to be sentenced before Judge Swain on August 12, 2016.

Mr. Bharara praised the outstanding investigative work of IRS-CI, and thanked the Justice Department’s Tax Division for their significant assistance in the investigation.  Mr. Bharara also thanked the Department of Homeland Security for their assistance with the case.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Jason H. Cowley and Sarah E. Paul are in charge of the prosecution. 

Scheme Victimized More Than 1,000 Individuals Throughout the United States

Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division and U.S. Attorney Preet Bharara of the Southern District of New York, announced that Kenneth Levin, the owner of a company that purported to sell lucrative vending machine “business opportunities,” and his son and manager at the company, Taylor Levin, were found guilty yesterday for their participation in a nearly $11 million scheme that victimized at least 1,300 consumers across the country.  Kenneth Levin and Taylor Levin were convicted after a three-week jury trial before the Honorable Katherine B. Forrest.  The defendants were arrested in March 2015 along with five other co-conspirators who have all pleaded guilty.

“Kenneth and Taylor Levin preyed upon the entrepreneurial resolve of thousands of victims across the country, deceiving them with promises of business assistance and giant windfalls, when instead they were duping the victims out of over $10 million,” said Manhattan U.S. Attorney Bharara.  “This three-week trial and the unanimous verdict made clear that the business opportunities Kenneth and Taylor Levin were actually selling their victims was for themselves alone.  I want to thank the U.S. Postal Inspection Service and the Consumer Protection Branch of the Justice Department for their assistance in this prosecution.”

“The defendants convicted in this case twisted the American entrepreneurial spirit to their advantage, luring consumers with the prospect of starting their own business and being their own boss,” said Principal Deputy Assistant Attorney General Mizer, head of the Justice Department’s Civil Division. “Justice Department prosecutors will continue to team together and work with law enforcement to ensure that the crime of business opportunity fraud, in all of its forms, is stopped and perpetrators are prosecuted.”

As established by the evidence at trial:

From January 2005 to December 2011, Kenneth Levin and Taylor Levin and their co-conspirators perpetrated a scheme to defraud consumers by making material misrepresentations in an effort to induce those consumers to invest thousands of dollars in purported vending machine “business opportunities.”  Through a company located in Manhattan, New York (Company-1) and its successor companies (together, the Business Opportunity Companies), the defendants and other employees falsely promised customers that if they purchased packages of five or 10 vending machines, the customers would be provided access to established, high-profit locations for the machines and would be connected with experienced “locators,” who would facilitate placing the vending machines in those pre-determined locations.

The defendants and other employees further falsely promised to provide training and ongoing customer assistance on how to operate a successful vending machine business and misled customers about the features of the vending machines – including purposefully concealing the fact that the machines were manually operated and accepted only exact change, rather than automatic machines that accept bills and provide change.  Despite the defendants’ claims, there were no pre-determined locations available, locators were inexperienced and ill-equipped to find profitable locations for the vending machines and the Business Opportunity Companies delivered little or no follow-up service or assistance to their customers.

The defendants also misled prospective customers about the profits customers could earn from the machines.  Prospective customers were assured that they would earn significant profits from the vending machines in a relatively short period of time.  Customers were also misled into believing that certain employees of the Business Opportunity Companies personally owned vending machines that were profitable.  The defendants and their co-conspirators made these assertions knowing that there were scores of dissatisfied customers who, rather than making any profit, had lost their entire investment.  Through their scheme, the Business Opportunity Companies obtained nearly $11 million from more than 1,300 customers throughout the United States.

The Business Opportunity Companies also encouraged prospective customers to contact the locators to verify that the purported locations were available.  The locators were directed to echo the false statements made to customers and affirm that high-traffic and therefore profitable, locations had already been found and were waiting in the prospective customers’ respective geographic areas.  In reality, the locators who worked with the Business Opportunity Companies did not have high-traffic locations or routes waiting in the prospective customer’s area.  The locators had no special skills, tools, or expertise in finding locations and generally placed consumers’ machines wherever they could, often in businesses that had not consented to housing the machines or that soon demanded that the machines be removed.  The vending machines generated little money and customers lost nearly all, if not all, of their investments.  

Kenneth Levin, the founder and President of the Business Opportunity Companies, operated and controlled the Business Opportunity Companies’ day-to-day operations.  To acquire customers, the Business Opportunity Companies placed advertisements in newspapers throughout the country, claiming that the Business Opportunity Companies had high-profit locations available for the placement of vending machines.  Prospective customers responding to the advertisements were sent misleading promotional materials and also spoke by telephone with representatives of the Business Opportunity Companies, including Kenneth Levin’s son, Taylor Levin.  Both defendants made various misrepresentations as described above to induce customers to buy the vending machine “business opportunity.”  The defendants further concealed from prospective customers the fact that the Business Opportunity Companies received numerous complaints from customers about the lack of profitability of the vending machine “business opportunities” they were selling and the locators’ complete failure to place the vending machines in profitable locations.  In an effort to conceal customer complaints from prospective customers, the Business Opportunity Companies changed their name regularly, both to avoid association with previous complaints, and to evade a federal law requiring them to provide prospective customers with a list of recent customers. 

*              *             *

Kenneth Levin, 69, and Taylor Levin, 34, both of Manhattan, were found guilty of all three counts in the Indictment:  one count of conspiracy to commit mail fraud and wire fraud and one count each of mail fraud and wire fraud.  Each count carries a maximum sentence of 20 years in prison.  Kenneth Levin’s sentencing is scheduled for April 1, 2016, and Taylor Levin’s sentencing is scheduled for April 15, 2016, both before Judge Forrest.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of Kenneth Levin and Taylor Levin will be determined by a Judge.

The five other individuals arrested along with Kenneth Levin and Taylor Levin on March 5, 2015, pleaded guilty for their respective roles in this scheme.  

Sears Hobbs pleaded guilty on Jan. 4, 2016, and is scheduled to be sentenced on March 11, 2016.

James Conley pleaded guilty on Oct. 22, 2015, and is scheduled to be sentenced on Feb. 11, 2016.

Marcel Harris pleaded guilty on Oct. 26, 2015, and is scheduled to be sentenced on Feb. 26, 2016.

Stephen Friedman pleaded guilty on Oct. 27, 2015, and is scheduled to be sentenced on Feb. 26, 2016.

Jonathan Campbell pleaded guilty on Sept. 17, 2015, and is scheduled to be sentenced on Feb. 12, 2016.

U.S. Attorney Bharara praised the United States Postal Inspection Service for their outstanding work in the investigation.  U.S. Attorney Bharara also thanked the Consumer Protection Branch of the Justice Department’s Civil Division for its valuable contributions to this case.

This matter is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Janis Echenberg and Jennifer Beidel are in charge of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, and Benjamin C. Mizer, the Principal Deputy Assistant Attorney General of the Justice Department’s Civil Division, announced that KENNETH LEVIN, the owner of a company that purported to sell lucrative vending machine “business opportunities,” and his son and manager at the company, TAYLOR LEVIN, were found guilty yesterday for their participation in a nearly $11 million scheme that victimized at least 1,300 consumers across the country.  KENNETH LEVIN and TAYLOR LEVIN were convicted after a three-week jury trial before the Honorable Katherine B. Forrest.  The defendants were arrested in March 2015 along with five other co-conspirators who have all pled guilty.

Manhattan U.S. Attorney Preet Bharara said:  “Kenneth and Taylor Levin preyed upon the entrepreneurial resolve of thousands of victims across the country, deceiving them with promises of business assistance and giant windfalls, when instead they were duping the victims out of over ten million dollars.  This three-week trial and the unanimous verdict made clear that the business opportunities Kenneth and Taylor Levin were selling to their victims were actually for themselves alone.  I want to thank the U.S. Postal Inspection Service and the Consumer Protection Branch of the Justice Department for their assistance in this prosecution.”

Principal Deputy Assistant Attorney General Benjamin C. Mizer said:  “The defendants convicted in this case twisted the American entrepreneurial spirit to their advantage, luring consumers with the prospect of starting their own business and being their own boss.   Justice Department prosecutors will continue to team together and work with law enforcement to ensure that the crime of business opportunity fraud, in all of its forms, is stopped and perpetrators are prosecuted.”

As established by the evidence at trial:

From January 2005 to December 2011, KENNETH LEVIN and TAYLOR LEVIN and their co-conspirators perpetrated a scheme to defraud consumers by making material misrepresentations in an effort to induce those consumers to invest thousands of dollars in purported vending machine “business opportunities.”  Through a company located in Manhattan, New York (“Company-1”), and its successor companies (together, the “Business Opportunity Companies”), the defendants and other employees falsely promised customers that if they purchased packages of five or 10 vending machines, the customers would be provided access to established, high-profit locations for the machines, and would be connected with experienced “locators,” who would facilitate placing the vending machines in those pre-determined locations.  The defendants and other employees further falsely promised to provide training and ongoing customer assistance on how to operate a successful vending machine business, and misled customers about the features of the vending machines – including purposefully concealing the fact that the machines were manually operated and accepted only exact change, rather than automatic machines that accept bills and provide change.  Despite the defendants’ claims, there were no pre-determined locations available, locators were inexperienced and ill-equipped to find profitable locations for the vending machines, and the Business Opportunity Companies delivered little or no follow-up service or assistance to their customers.

The defendants also misled prospective customers about the profits customers could earn from the machines.  Prospective customers were assured that they would earn significant profits from the vending machines in a relatively short period of time.  Customers were also misled into believing that certain employees of the Business Opportunity Companies personally owned vending machines that were profitable.  The defendants and their co-conspirators made these assertions knowing that there were scores of dissatisfied customers who, rather than making any profit, had lost their entire investment.  Through their scheme, the Business Opportunity Companies obtained nearly $11 million from more than 1,300 customers throughout the United States.       

The Business Opportunity Companies also encouraged prospective customers to contact the locators to verify that the purported locations were available.  The locators were directed to echo the false statements made to customers and affirm that high-traffic, and therefore profitable, locations had already been found and were waiting in the prospective customers’ respective geographic areas.  In reality, the locators who worked with the Business Opportunity Companies did not have high-traffic locations or routes waiting in the prospective customers’ areas.  The locators had no special skills, tools, or expertise in finding locations and generally placed consumers’ machines wherever they could, often in businesses that had not consented to housing the machines or that soon demanded that the machines be removed.  The vending machines generated little money and customers lost nearly all, if not all, of their investments.  

KENNETH LEVIN, the founder and President of the Business Opportunity Companies, operated and controlled the Business Opportunity Companies’ day-to-day operations.  To acquire customers, the Business Opportunity Companies placed advertisements in newspapers throughout the country, claiming that the Business Opportunity Companies had high-profit locations available for the placement of vending machines.  Prospective customers responding to the advertisements were sent misleading promotional materials and also spoke by telephone with representatives of the Business Opportunity Companies, including KENNETH LEVIN’s son, TAYLOR LEVIN.  Both defendants made various misrepresentations as described above to induce customers to buy the vending machine “business opportunity.”  The defendants further concealed from prospective customers the fact that the Business Opportunity Companies received numerous complaints from customers about the lack of profitability of the vending machine “business opportunities” they were selling and the locators’ complete failure to place the vending machines in profitable locations.  In an effort to conceal customer complaints from prospective customers, the Business Opportunity Companies changed their names regularly, both to avoid association with previous complaints, and to evade a federal law requiring them to provide prospective customers with a list of recent customers. 

*              *             *

KENNETH LEVIN, 69, and TAYLOR LEVIN, 34, both of Manhattan, New York, were found guilty of all three counts in the Indictment:  one count of conspiracy to commit mail fraud and wire fraud, and one count each of mail fraud and wire fraud.  Each count carries a maximum sentence of 20 years in prison.  KENNETH LEVIN’s sentencing is scheduled for April 1, 2016, and TAYLOR LEVIN’s sentencing is scheduled for April 15, 2016, both before Judge Forrest.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of KENNETH LEVIN and TAYLOR LEVIN will be determined by the court.

The five other individuals arrested along KENNETH LEVIN and TAYLOR LEVIN on March 5, 2015, have pled guilty before Judge Forrest for their respective roles in this scheme.  

Sears Hobbs pled guilty on January 4, 2016, and is scheduled to be sentenced on March 11, 2016.

James Conley pled guilty on October 22, 2015, and is scheduled to be sentenced on February 11, 2016.

Marcel Harris pled guilty on October 26, 2015, and is scheduled to be sentenced on February 26, 2016.

Stephen Friedman pled guilty on October 27, 2015, and is scheduled to be sentenced on February 26, 2016.

Jonathan Campbell pled guilty on September 17, 2015, and is scheduled to be sentenced on February 12, 2016.

Mr. Bharara praised the United States Postal Inspection Service (“USPIS”) for their outstanding work in the investigation.  Mr. Bharara also thanked the Consumer Protection Branch of the Justice Department’s Civil Division for its valuable contributions to this case.

This matter is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Janis Echenberg and Jennifer Beidel are in charge of the case.    

Preet Bharara, United States Attorney for the Southern District of New York, and Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the arrest of ERIC IAN HORNAK SPOUTZ, a/k/a “Robert Chad Smith,” a/k/a “John Goodman,” a/k/a “James Sinclair,” on charges of wire fraud in connection with the sale of dozens of forged artworks by renowned American artists, such as Willem De Kooning, Franz Kline, and Joan Mitchell. SPOUTZ was arrested in Los Angeles today and will be presented before U.S. Magistrate Judge Gail Standish of the Central District of California this afternoon. 

Manhattan U.S. Attorney Preet Bharara said:  “As alleged, Eric Spoutz used false and fictitious provenance to peddle his forged artwork to unsuspecting buyers, claiming they were masterpieces from Willem De Kooning, Franz Kline and Joan Mitchell.  Our Office has a long history of investigating – and prosecuting – those who try to contaminate the art world with fraudulent artwork.  Thanks to the outstanding investigative work by the FBI, Spoutz’s alleged forgery mill is no longer in business.”

FBI Assistant Director-in-Charge Diego Rodriguez said: “As alleged, Eric Spoutz created an entire world of fiction to make a profit—from the fraudulent paintings he was selling, to the phony letters and receipts for provenance. The only real thing in this situation seems to be the financial losses the victims have incurred for purchasing what they thought were true works of art, whether for investment purposes or personal enjoyment.”

According to the allegations contained in the Complaint[1] and other documents in the public record, and statements made in court:

Between 2010 and March 2015, SPOUTZ repeatedly sold works of art he falsely claimed were by well-known artists, using forged documents to convince buyers of the authenticity of those works.  During the course of the scheme, SPOUTZ sold dozens of fraudulent works of art – which he attributed to, among others, Willem De Kooning, Franz Kline, and Joan Mitchell – through various channels, including auction houses and on EBay.

SPOUTZ was publicly accused of selling forged works of art as early as 2005, after which he began selling them under various aliases, particularly “Robert Chad Smith” and “John Goodman.”  To deceive his victims into believing the works of art were authentic, SPOUTZ created and provided forged receipts, bills of sale, and letters from deceased attorneys and other individuals.  These documents falsely indicated that SPOUTZ, in the guise of one of his false identities, had inherited or purchased dozens of works by these artists. 

Despite his efforts to create false histories for the artwork, investigators identified multiple inconsistencies and errors in SPOUTZ’s forged provenance documents.  Many of the purported transactions took place before SPOUTZ was born, and the forged letters included non-existent addresses both for the purported sender and various parties referenced as sources of the artworks.  SPOUTZ also consistently used a single distinctive typesetting when forging documents purportedly authored by entirely different art galleries in different decades regarding unrelated transactions.  In one instance, investigators located the original letter used by SPOUTZ as a model for one of his forgeries in a collection at a private university, which holds a collection of letters from the individual whose identity SPOUTZ used to create a false story of inheritance.

*                *                *

SPOUTZ, 32, of Mount Clemens, Michigan, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Unknown victims may have purchased artwork from SPOUTZ unwittingly under provenance documents using historical names such as “Betty Parsons Gallery,” “Larry Larkin,” “Henry Hecht,” and “Julius or Jay Wolf.”  If you believe you are a victim and purchased a fraudulent painting, please call the New York Art Crime Team at 212-384-1000, attention Special Agent Chris McKeogh or Special Agent Meridith Savona.

The case is being prosecuted by the Office’s Money Laundering and Asset Forfeiture Unit.  Assistant United States Attorney Andrew C. Adams is in charge of the prosecution.

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

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

            Preet Bharara, the United States Attorney for the Southern District of New York, James Hunt, the Special Agent in Charge of the New York Division of the Drug Enforcement Administration (“DEA”), William J. Bratton, the Police Commissioner of the City of New York (“NYPD”), and Joseph D’Amico, Superintendent of the New York State Police (“NYSP”), announced that JOSE LUIS GRACESQUI was found guilty Tuesday of conspiracy to commit murder-for-hire, murder-for-hire, and murder in connection with a narcotics conspiracy for his role in the murder of a 28-year old Manhattan man in 1999.  GRACESQUI was convicted after a three-week jury trial before U.S. District Judge P. Kevin Castel. 

            Manhattan U.S. Attorney Preet Bharara said: “Thanks to the efforts of the dedicated agents, detectives, and prosecutors who relentlessly pursued justice, this cold-case murder of an innocent 28-year old man has now been solved and prosecuted.  We hope seeing justice done brings some measure of peace to Richard Diaz’s family.” 

            DEA Special-Agent-in-Charge James Hunt said: “This conviction exemplifies the significant role violence plays in the infrastructure of drug trafficking. I commend the New York Drug Enforcement Task Force and the U.S. Attorney's Office Southern District of New York for their diligent work throughout this three week jury trial.”

            NYPD Commissioner William J. Bratton said: “It is our hope that this conviction brings some level of comfort to the victim’s family. I commend the efforts of the NYPD investigators and our law enforcement partners who worked to bring this individual to justice.”

            According to the evidence introduced at trial, other proceedings in this case, and documents previously filed in Manhattan federal court:

            JOSE LUIS GRACESQUI, a/k/a “Luis Perez,” a/k/a “Ramon Ortiz,” a/k/a “Onel Colon,” a/k/a “Muffler,” was a member of a crew who committed violent robberies, kidnappings, and beatings of drug dealers.  In the summer of 1999, GRACESQUI was hired by a major drug dealer in upper Manhattan to kill one of the drug dealer’s customers (“Intended Victim-1”) after Intended Victim-1 and a number of his associates stole heroin from the drug dealer.

            On the night of July 19, 1999, GRACESQUI and a member of his crew saw Intended Victim-1 in a car with another person and began following Intended Victim-1 through Manhattan.  When the car with Intended Vicitm-1 stopped at a red light, GRACESQUI got out of the car in which he had been, approached the car with Intended Victim-1, and began shooting.  The shots hit both Intended Victim-1 and the driver of the car, Richard Diaz.  Richard Diaz was able to drive a short distance to the Henry Hudson Parkway, until Diaz lost consciousness and died.  Intended Victim-1 sustained injuries but did not die.  

*               *               *

            JOSE LUIS GRACESQUI, 45, of Queens, faces a mandatory minimum sentence of life in prison.  The potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  Sentencing is scheduled for June 10, 2016, before Judge Castel. 

            Mr. Bharara praised the investigative work of the DEA New York Drug Enforcement Task Force, which comprises agents and officers of the DEA, NYPD, and the New York State Police.

            This case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Laurie A. Korenbaum, Brendan F. Quigley, and Rebekah Donaleski are in charge of the prosecution.

            Preet Bharara, the United States Attorney for the Southern District of New York, and Mark G. Peters, Commissioner of the New York City Department of Investigation (“DOI”), announced today the filing of criminal charges against KWAME INSAIDOO, the executive director of United Block Association (“UBA”), a non-profit organization, along with his wife ROXANNA PEARSON, a/k/a “Roxanna Insaidoo,” with fraud and embezzlement charges involving UBA’s contracts to operate senior centers for New York City and the misappropriation of over $953,875.  INSAIDOO and PEARSON were arrested this morning in Bay Shore, New York, and are scheduled to appear before U.S. Magistrate Judge Gabriel Gorenstein in Manhattan federal court later today. 

            U.S. Attorney Preet Bharara said:  “As alleged, an executive director of a non-profit organization, with the assistance of his wife, abused his position of trust as a provider of public services to enrich himself and his family.  Kwame Insaidoo and Roxanna Pearson allegedly diverted close to a million dollars in public funds designed to assist our city’s elderly and spent it on themselves.  I thank our partners in this investigation for their work in rooting out public corruption.”

            Commissioner Mark G. Peters said: “The defendants stole food from the mouths of New York's seniors, diverting almost a million dollars from programs designed to provide meals and services to the elderly, according to the criminal complaint. Our investigation revealed systemic vulnerabilities in the Department for the Aging's practices that we are now working with the agency to correct so that City services get to New Yorkers in need – not to crooks who prey on them. I thank the U.S. Attorney for his continued partnership in these investigations.”  According to the allegations contained in the Complaint[1] unsealed today in Manhattan federal court and publicly available documents:

            UBA is a non-profit organization headquartered in New York, New York, that was controlled by INSAIDOO.  UBA has agreements with New York City’s Department for the Aging (“DFTA”) to operate and provide healthy meals and programming for four senior centers in Upper Manhattan.  UBA had been awarded contracts with New York City to operate each of these senior centers.  These contracts are partly federally funded.  Since in or about July 2008, DFTA had paid UBA more than $11,682,213 for purported services performed under those agreements.

            In connection with the investigation, DOI auditors discovered, among other things, numerous transfers involving a UBA bank account that had never been disclosed to the City and was involved in transfers of substantial funds that were embezzled by INSAIDOO and PEARSON, including through a shell corporation they had set up.  INSAIDOO never disclosed this UBA account, or several other UBA bank accounts, to DFTA in violation of the contract requirements as well as requirements mandated by the City.  DOI’s auditors also found evidence of various financial irregularities that potentially had an effect on UBA’s ability to provide services under the City’s contracts.                                               

            UBA over-reported and over-billed the City for its supposed purchases of food supplies at the same time INSAIDOO was embezzling funds from UBA.  At times, UBA appears to have over-reported total expenses of its four senior centers by more than 500%.

            INSAIDOO abused his authority as UBA’s Executive Director and, with the assistance of his wife, PEARSON, caused the misappropriation of over $953,875 to himself, PEARSON, and others.  INSAIDOO and PEARSON used these funds to pay for personal expenses, including the mortgage for their Long Island residence, as well as its utilities, the purchase of a late-model luxury sedan, and clothes, insurance, and loan payments, among other things. 

            PEARSON was purportedly a consultant to UBA until 2012 when she was terminated because her relationship with UBA was in violation of the City’s and DFTA’s anti-nepotism polices.  However, INSAIDOO continued to authorize compensation to PEARSON even after UBA terminated her.

            INSAIDOO, 59, and PEARSON, 62, both of Bay Shore, Long Island, are each charged with conspiracy to commit wire fraud, wire fraud, embezzlement from a federally funded program, and money laundering, each of which carries a maximum penalty of 20 years in prison.  Each is also charged with conspiracy to embezzle from a federally funded program, which carries a maximum penalty of five years in prison.

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

            U.S. Attorney Bharara praised the work of DOI and the Criminal Investigators of the United States Attorney’s Office for the Southern District of New York. 

            The case is being prosecuted by the Office’s General Crimes Unit.  Assistant U.S. Attorney Eli J. Mark is in charge of the prosecution.

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

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

Preet Bharara, United States Attorney for the Southern District of New York, Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and William J. Bratton, Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of an Indictment in Manhattan federal court charging GJETO PRELAJ, a/k/a “Bibi,” ERBI KAU, a/k/a “Mafia,” BLEDAR BATSKA, a/k/a “Alex,” NIKOLIN DEDUSHI, a/k/a “Niko,” ENIS MUSTAFA, and MEHMET BOGIC, a/k/a “Bogi,” with access device fraud and aggravated identity theft for their alleged roles in schemes to steal customer bank account information and to use counterfeit/stolen debit and credit cards in New York and Nevada.  PRELAJ, KAU, BATSKA, DEDUSHI, and VICTOR TOMESCU were also charged with possessing, using, and trafficking devices that used “skimming” technology to secretly record the debit card and personal identification numbers of customers who used automated teller machines (“ATMs”).  Such devices can be employed to steal hundreds of card numbers of ATM users, which can be encoded on new counterfeit cards and used to make thousands of dollars of fraudulent charges or withdrawals. 

All the defendants were arrested and taken into custody earlier this morning.  The case has been assigned to U.S. District Judge Richard J. Sullivan.  PRELAJ, KAU, BATSKA, MUSTAFA, TOMESCU, and BOGIC was presented before Judge Sullivan in Manhattan federal court this afternoon.  DEDUSHI, who was arrested in Las Vegas, Nevada, was presented in the U.S. District Court for the District of Nevada in Las Vegas.            

Manhattan U.S. Attorney Preet Bharara said:  “Today, we arrested seven defendants who allegedly stole debit and credit card numbers using sophisticated skimming devices installed on ATMs, and then used that information to defraud victims out of thousands of dollars.  I want to thank the FBI, NYPD, as well as the Joint Organized Crime Task Force and FBI-NYPD Financial Cyber Crimes Taskforce, for their excellent work in this investigation.”          

FBI Assistant Director-in-Charge Diego Rodriguez said:  “As alleged today, the defendants participated in a plot to steal proprietary financial information from their victims. Criminals who turn a quick profit in these types of schemes exploit and manipulate the very technology we depend on to streamline the banking process.  Furthermore, this system of new-age thievery has the ability to cause considerable losses to banks and their clientele.  The FBI is serious about protecting banks and bank customers from the nefarious actions of cyber criminals and transnational organized crime groups who are known to engage in this type of activity. We urge the public to visit our website at www.fbi.gov for tips on how to avoid being victimized by skimming.”

Police Commissioner William J. Bratton said:  “Identity theft is a crime that often has an ongoing impact on unwitting victims who are left to piece their financial lives back together.  As alleged, the individuals named in this indictment engaged in a type of criminal activity that affects not only their direct victims, but financial systems as well, through the use of skimming device technology and the counterfeiting of credit cards. I commend the well-coordinated work of the investigators assigned to this case and our many law enforcement partners in dismantling this operation.”

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

From January 2015 through December 2015, PRELAJ, KAU, BATSKA, DEDUSHI, and MUSTAFA conspired to, among other things, place skimming devices on ATMs in Las Vegas, which can be used to surreptitiously record the numbers of cards that are used in the ATM by reading the information contained on the cards’ magnetic strips.  For example, on September 2, 2015, KAU removed a skimming device that was installed on an ATM in a gas station in Las Vegas.  On the morning of September 12, 2015, BATSKA installed at least one skimming device on ATMs in the business center of a hotel in Las Vegas, which was later removed by KAU on the evening of the same day.

The conspiracy also involved producing and trafficking in counterfeit debit cards created with information stolen by skimming devices, and using those cards to withdraw money fraudulently from victims’ bank accounts.  For example, on August 18, 2015, PRELAJ and KAU used counterfeit debit cards at an ATM in Manhattan.  Also, on September 10, 2015, MUSTAFA used at least one counterfeit debit card to withdraw almost $1,000 in cash fraudulently from an ATM at a gas station in Las Vegas.  In addition, on October 24, 2015, DEDUSHI mailed a magnetic card reader and writer from Las Vegas to PRELAJ in the Bronx, New York to be used to produce counterfeit cards.  

In January 2015, PRELAJ and KAU sold a skimming device in Queens, New York, in exchange for $6,000 in a transaction that was brokered by TOMESCU.  Furthermore, from November 2015 through December 2015, PRELAJ and BATSKA fraudulently obtained thousands of dollars of merchandise at department stores in Manhattan by using at least one credit card that had been stolen from a victim by BOGIC.

Finally, PRELAJ, KAU, BATSKA, DEDUSHI, MUSTAFA, and BOGIC were charged with aggravated identity theft for transferring, possessing, and using other persons’ debit and credit card numbers and associated personal identification numbers in connection with the felony crimes described above.

*                *                *

Attached are charts containing the charges against the defendants and the maximum penalties they face, as well as the defendants’ ages and residences.  The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the Court.

Mr. Bharara praised the outstanding investigative work of the Joint Organized Crime Task Force and FBI-NYPD Financial Cyber Crimes Task Force.  He also thanked the FBI’s Las Vegas Field Office, the Las Vegas Metropolitan Police Department, the United States Postal Inspection Service, and U.S. Customs and Border Protection for their assistance throughout the investigation.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Robert Allen and Sagar K. Ravi are in charge of the prosecution.

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

###

United States v. Gjeto Prelaj, et al.

COUNT

CHARGE

DEFENDANTS

MAXIMUM PENALTIES

1

Conspiracy to Commit Access Device Fraud

(18 U.S.C. § 1029(b)(2))

GJETO PRELAJ, a/k/a “Bibi”

ERBI KAU, a/k/a “Mafia”

BLEDAR BATSKA, a/k/a “Alex”

NIKOLIN DEDUSHI, a/k/a “Niko”

ENIS MUSTAFA

Seven-and-a-half years in prison

2

Access Device Fraud —

Producing, Using, and Trafficking in Counterfeit Access Devices

(18 U.S.C. §§ 1029(a)(1) and 2)

GJETO PRELAJ, a/k/a “Bibi”

ERBI KAU, a/k/a “Mafia”

BLEDAR BATSKA, a/k/a “Alex”

NIKOLIN DEDUSHI, a/k/a “Niko”

ENIS MUSTAFA

10 years in prison

3

Access Device Fraud —

Fifteen and More Counterfeit and Unauthorized Access Devices

(18 U.S.C. §§ 1029(a)(3) and 2)

GJETO PRELAJ, a/k/a “Bibi”

ERBI KAU, a/k/a “Mafia”

BLEDAR BATSKA, a/k/a “Alex”

NIKOLIN DEDUSHI, a/k/a “Niko”

10 years in prison

4

Access Device Fraud —

Device-Making Equipment

(18 U.S.C. §§ 1029(a)(4) and 2)

GJETO PRELAJ, a/k/a “Bibi”

ERBI KAU, a/k/a “Mafia”

VICTOR TOMESCU

15 years in prison

5

Access Device Fraud —

Device-Making Equipment

(18 U.S.C. §§ 1029(a)(4) and 2)

GJETO PRELAJ, a/k/a “Bibi”

ERBI KAU, a/k/a “Mafia”

BLEDAR BATSKA, a/k/a “Alex”

NIKOLIN DEDUSHI, a/k/a “Niko”

15 years in prison

6

Access Device Fraud — Access Devices Issued to Another Person

(18 U.S.C. §§ 1029(a)(5) and 2)

GJETO PRELAJ, a/k/a “Bibi”

BLEDAR BATSKA, a/k/a “Alex”

MEHMET BOGIC, a/k/a “Bogi”

15 years in prison

7

Aggravated Identity Theft           (18 U.S.C. §§ 1028A(a)(1) & (b), and 2)

GJETO PRELAJ, a/k/a “Bibi”

ERBI KAU, a/k/a “Mafia”

BLEDAR BATSKA, a/k/a “Alex”

NIKOLIN DEDUSHI, a/k/a “Niko”

ENIS MUSTAFA

MEHMET BOGIC, a/k/a/ “Bogi”

Mandatory minimum: two years in prison, consecutive to any other sentence

DEFENDANT

RESIDENCE

AGE

GJETO PRELAJ, a/k/a “Bibi”

Bronx, New York

39

ERBI KAU, a/k/a “Mafia”

Queens, New York

27

BLEDAR BATSKA, a/k/a “Alex”

Queens, New York

39

NIKOLIN DEDUSHI, a/k/a “Niko”

Las Vegas, Nevada

45

ENIS MUSTAFA

Queens, New York

30

VICTOR TOMESCU

Queens, New York

62

MEHMET BOGIC, a/k/a/ “Bogi”

Bronx, New York

52

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

The founder of Liberty Reserve, a virtual currency once used by cybercriminals around the world to launder the proceeds of their illegal activity, pleaded guilty today to running a massive money laundering enterprise, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Preet Bharara of the Southern District of New York.

Arthur Budovsky, 42, pleaded guilty to one count of conspiring to commit money laundering before U.S. District Judge Denise L. Cote of the Southern District of New York.  He is scheduled to be sentenced on May 6, 2016.

“After a prior conviction for operating an unlicensed money transmitting business, Budovsky developed Liberty Reserve, which quickly became a premier service used by criminals around the world to launder their criminal proceeds,” said Assistant Attorney General Caldwell.  “As a result of this global investigation, however, Budovsky was returned to the United States to face justice once again.”

“Arthur Budovsky founded and operated Liberty Reserve, an underworld cyber-banking system that laundered hundreds of millions of dollars in illicit proceeds for criminals around the world,” said U.S. Attorney Bharara.  “The only liberty that Budovsky and Liberty Reserve promoted was the freedom to commit and profit from crime.  Thanks to this truly global investigation that included cooperation from 17 countries, Liberty Reserve has been shut down, and its founder Arthur Budovsky stands convicted in an American court of law, facing the loss of his own liberty.”

According to the indictment filed against Liberty Reserve, Budovsky and six co-defendants and Budovsky’s admissions at today’s hearing: 

Budovsky specifically designed Liberty Reserve, which billed itself as the Internet’s “largest payment processor and money transfer system,” to help users conduct anonymous and untraceable illegal transactions and launder the proceeds of their crimes.  From its inception in or about 2006, Budovsky directed and supervised Liberty Reserve’s operations, finances and business strategy.  To grow the business and evade the scrutiny and reach of U.S. law enforcement, Budovsky emigrated to Costa Rica, where he and other defendants began operating Liberty Reserve, and in 2011, Budovsky renounced his U.S. citizenship and became a Costa Rican citizen.  Budovsky told U.S. immigration authorities that his company was developing a software that “might open him up to liability in the U.S.”   

Liberty Reserve became one of the principal money-transmitting services used by cybercriminals around the world to amass, distribute, store and launder the proceeds of their illegal activity, including proceeds of investment fraud, credit card fraud, identity theft and computer hacking.  Before the U.S. government shut down Liberty Reserve in May 2013, it had more than 5 million user accounts worldwide, including more than 600,000 accounts associated with users in the United States, and had processed millions of transactions.  Budovsky admitted in his plea agreement to laundering more than $250 million in criminal proceeds.

*                      *                      *           

Four co-defendants, Vladimir Kats, Azzeddine El Amine, Mark Marmilev and Maxim Chukharev, have already pleaded guilty.  Marmilev and Chukharev were sentenced to five years and three years in prison, respectively.  Kats and El Amine await sentencing before Judge Cote.  Charges remain pending against Liberty Reserve and two individual defendants who are fugitives.

The U.S. Secret Service, the Internal Revenue Service-Criminal Investigation and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations worked together in this case as part of the Global Illicit Financial Team.  The U.S. Secret Service’s New York Electronic Crimes Task Force assisted with the investigation.  The Judicial Investigation Organization in Costa Rica, Interpol, the National High Tech Crime Unit in the Netherlands, the Spanish National Police, Financial and Economic Crime Unit, the Cyber Crime Unit at the Swedish National Bureau of Investigation and the Swiss Federal Prosecutor’s Office also provided assistance. 

Trial Attorney Kevin Mosley of the Criminal Division’s Asset Forfeiture and Money Laundering Section and Assistant U.S. Attorneys Serrin Turner, Christine Magdo, Christian Everdell and Andrew Goldstein of the Southern District of New York are prosecuting the case.  The Criminal Division’s Office of International Affairs and Computer Crime and Intellectual Property Section provided substantial assistance.

            Preet Bharara, the United States Attorney for the Southern District of New York, and Leslie R. Caldwell, Assistant Attorney General for the Justice Department’s Criminal Division, announced today that ARTHUR BUDOVSKY pled guilty to running a massive money laundering enterprise in connection with his operation of Liberty Reserve, a virtual currency once used by cybercriminals around the world to launder the proceeds of their illegal activity.  BUDOVSKY pled guilty to one count of conspiring to commit money laundering before U.S. District Judge Denise L. Cote. 

            Manhattan U.S. Attorney Preet Bharara stated: “Arthur Budovsky founded and operated Liberty Reserve, an underworld cyber-banking system that laundered hundreds of millions of dollars in illicit proceeds for criminals around the world.  The only liberty that Budovsky and Liberty Reserve promoted was the freedom to commit and profit from crime.  Thanks to this truly global investigation that included cooperation from 17 countries, Liberty Reserve has been shut down, and its founder Arthur Budovsky stands convicted in an American court of law, facing the loss of his own liberty.”

            Assistant Attorney General Leslie R. Caldwell stated: “After a prior conviction for operating an unlicensed money transmitting business, Budovsky developed Liberty Reserve, which quickly became a premier service used by criminals around the world to launder their criminal proceeds.  As a result of this global investigation, however, Budovsky was returned to the United States to face justice once again.”

            According to allegations contained in the Indictment filed against Liberty Reserve, BUDOVSKY, and six other individual defendants, and statements made in related court filings and proceedings: 

            Liberty Reserve billed itself as the Internet’s “largest payment processor and money transfer system.”  At all relevant times, BUDOVSKY directed and supervised Liberty Reserve’s operations, finances, and business strategy.  Liberty Reserve was specifically designed by Budovsky to help users conduct illegal transactions anonymously and launder the proceeds of their crimes.  BUDOVSKY devoted himself to building and expanding Liberty Reserve so that the company could profit from attracting criminal customers, all while seeking to evade the scrutiny and reach of U.S. law enforcement authorities.  

            Liberty Reserve was born out of BUDOVSKY’s unsuccessful experience running a third-party exchange service, called GoldAge, Inc., for another digital currency, called E-Gold.  In or about 2006, BUDOVSKY was convicted in New York State of operating GoldAge as an unlicensed money transmitting business.  In 2007, the operators of E-Gold were also charged with criminal offenses, including money laundering and operating an unlicensed money transmitting business, and subsequently ceased doing business.  In the wake of his own criminal conviction, BUDOVSKY set about building a digital currency that would succeed in eluding law enforcement where E-Gold had failed, by, among other things, locating the business outside the United States.  Accordingly, BUDOVSKY emigrated to Costa Rica, where he and other defendants began operating Liberty Reserve.  BUDOVSKY was so committed to evading U.S. law enforcement that he formally renounced his U.S. citizenship in 2011 and became a Costa Rican citizen, telling U.S. immigration authorities that he was concerned that the “software” his “company” was developing “might open him up to liability in the U.S.”

            Liberty Reserve subsequently emerged as one of the principal money transmitting services used by cybercriminals around the world to amass, distribute, store, and launder the proceeds of their illegal activity.  Liberty Reserve functioned as a financial hub for the online underworld, favored for the ease with which it enabled cybercriminals to conduct anonymous and untraceable financial transactions.  Before being shut down by the U.S. government in May 2013, Liberty Reserve had more than five million user accounts worldwide, including more than 600,000 accounts associated with users in the United States, and processed tens of millions of transactions through its system.  These funds encompassed proceeds of investment fraud, credit card fraud, identity theft, and computer hacking, among other crimes.  As part of his plea agreement, BUDOVSKY admitted to laundering more than $250 million in criminal proceeds through his operation of Liberty Reserve.

                                                            *                      *                      *

            BUDOVSKY, 42, faces a maximum sentence of 20 years in prison for conspiring to commit money laundering.  This statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentence imposed on the defendant will be determined by the judge. 

            BUDOVSKY’s sentencing is scheduled for May 6, 2016.

            Four co-defendants – Vladimir Kats, Azzeddine El Amine, Mark Marmilev, and Maxim Chukharev – have already pled guilty.  Marmilev and Chukharev have both been sentenced, to five and three years in prison, respectively.  Kats and el Amine await sentencing before U.S. District Judge Denise L. Cote.  Charges against Liberty Reserve and two individual defendants who have not been apprehended remain pending.

            Mr. Bharara praised the outstanding work of the United States Secret Service, the Internal Revenue Service-Criminal Investigation, and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, which worked together in this case as part of the Global Illicit Financial Team.  Mr. Bharara also thanked the United States Secret Service’s New York Electronic Crimes Task Force for its extraordinary assistance with the investigation.  Additionally, Mr. Bharara specially thanked all the international law enforcement agencies that assisted in the investigation, in particular, the Judicial Investigation Organization in Costa Rica, Interpol, the National High Tech Crime Unit in the Netherlands, the Spanish National Police, Financial and Economic Crime Unit, the Cyber Crime Unit at the Swedish National Bureau of Investigation, and the Swiss Federal Prosecutor’s Office. 

            This case is being prosecuted jointly with the Department of Justice’s Asset Forfeiture and Money Laundering Section (“AFMLS”), which is overseen by Assistant Attorney General Leslie R. Caldwell.  Mr. Bharara thanked AFMLS for its partnership and also thanked the Department of Justice’s Office of International Affairs and Computer Crime and Intellectual Property Section for their support.

            The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit and Money Laundering and Asset Forfeiture Unit.  Assistant United States Attorneys Serrin Turner, Christine Magdo, Christian Everdell, and Andrew Goldstein of the Southern District of New York and Trial Attorney Kevin Mosley of AFMLS are in charge of the prosecution.

            The charges contained in the Indictment against the remaining defendants remain pending and are merely accusations.  Those defendants are presumed innocent unless and until proven guilty.

            Preet Bharara, the United States Attorney for the Southern District of New York, announced that MIKHAIL ZEMLYANSKY was sentenced today to 15 years in prison in connection with his operation, from 2007 through 2012, of a sprawling racketeering conspiracy that engaged in the largest single no fault automobile insurance fraud scheme ever charged, two investment fraud schemes that resulted in losses to nearly 300 victims of approximately $17 million, multiple complex money laundering operations, and illegal gambling.  Zemlyansky was convicted on March 19, 2015, following a four-week jury trial, of racketeering conspiracy, securities fraud, wire fraud, and mail fraud.  He was sentenced today by the United States District Judge J. Paul Oetken, who presided over the trial.

            U.S. Attorney Preet Bharara said:  “Driven by an insatiable greed, Mikhail Zemlyansky operated a sophisticated criminal enterprise that, during a five-year span, preyed on hundreds of innocent victims, reaping tens of millions of dollars in illicit proceeds.  Zemlyansky’s criminal schemes were wide-ranging, from insurance and securities fraud to illegal gambling.  Thanks to the tireless work of the prosecutors and our partners at the FBI and NYPD, justice has now been served for Zemlyansky.”   

            According to the Superseding Indictment, evidence admitted at trial, court filings, and statements made in open court:

            From at least 2007 through 2012, ZEMLYANSKY was a leader, along with co-defendant Michael Danilovich, of a criminal enterprise engaged in a pattern of racketeering that included a massive scheme to defraud automobile insurance companies under New York’s no fault insurance law, multiple securities fraud schemes, money laundering, and the operation of illegal gambling businesses (the “Zemlyansky/Danilovich Organization”).

            As part of the enterprise, ZEMLYANSKY was convicted for operating two investment fraud schemes that swindled nearly 300 innocent victims out of approximately $17 million.  Both schemes – Lyons Ward & Associates and the Rockford Group – purported to be settlement claims funding companies that invested in lawsuits in return for a portion of future settlements.  As part of these schemes, ZEMLYANSKY, Danilovich, and their co-conspirators created bogus documents and account statements used by cold-callers working in boiler rooms to solicit victims through lies.  In reality, there was no investment fund at all; instead, ZEMLYANSKY and his co-conspirators simply stole the money invested by victims and laundered the proceeds by wiring them overseas to shell companies in Eastern Europe, which were then converted into cash in the United States. 

            In addition to the investment fraud schemes, ZEMLYANSKY and his co-conspirators perpetrated a sophisticated scheme to steal hundreds of millions of dollars from automobile insurance companies.  Under New York State law, every vehicle registered in the State is required to have no fault automobile insurance, which enables the driver and passengers of a registered and insured vehicle to obtain benefits of up to $50,000 per person for injuries sustained in an automobile accident, regardless of fault (the “No Fault Law”).  The No Fault Law requires prompt payment for medical treatment, thereby obviating the need for claimants to file personal injury lawsuits in order to be reimbursed.  New York State Law also requires that all medical clinics in the State be incorporated, owned, operated, and controlled by a licensed medical practitioner in order to be eligible for reimbursement under the No Fault Law.  Insurance companies will not honor claims for medical treatments from a medical clinic that is not actually owned, operated, and controlled by a licensed medical professional.  

            From at least 2007 through 2012, the Zemlyansky/Danilovich Organization defrauded automobile insurance companies of hundreds of millions of dollars by, among other things, creating and operating medical clinics that provided unnecessary or excessive medical treatments in order to take advantage of the No Fault Law.  The Organization fraudulently owned and controlled more than a dozen medical professional corporations (“PCs”) – including no fault clinics, MRI offices, and acupuncture and chiropractic PCs – by recruiting and paying licensed medical professionals to use their licenses to incorporate the PCs.  ZEMLYANSKY and his co-conspirators paid kickbacks of thousands of dollars to runners to recruit patients to receive the same battery of tests and treatments, and received kickbacks from other co-conspirators for referring patients for additional unnecessary treatments.  All told, the Organization billed insurance companies for hundreds of millions of dollars in fraudulent medical treatments.  ZEMLYANSKY and his co-conspirators laundered the proceeds of the fraud through check cashing entities and shell companies, and used the money to pay for luxury cars, watches, and vacations. 

            Finally, the Zemlyansky/Danilovich Organization operated high-stakes illegal poker games in Brooklyn and New York City that netted profits of tens of thousands of dollars per game. 

*          *          *

            As part of the sentence imposed today by Judge Oetken, ZEMLYANSKY, 39, of Hewlett, New York, was further sentenced to three years of supervised release and was ordered to pay a fine of $50,000 and forfeiture and restitution to the victims of his crimes in the amount of $29,575,846.30.

            At ZEMLYANSKY’s first trial in the fall of 2013, a mistrial was declared on Count One – which charged ZEMLYANSKY with a different racketeering conspiracy – after the jury failed to reach a unanimous verdict.  At that trial, ZEMLYANSKY was acquitted of eight counts of charges related to the no fault insurance fraud scheme and money laundering. 

            On November 5, 2015, co-defendant Michael Danilovich was convicted following a five-week trial before United States District Judge Deborah A. Batts of 16 counts of racketeering conspiracy, securities fraud, health care fraud, mail fraud, wire fraud, and money laundering charges related to the crimes committed by the Zemlyansky/Danilovich Organization.  Danilovich is scheduled to be sentenced by Judge Batts on March 8, 2016.   

            U.S. Attorney Preet Bharara thanked the Federal Bureau of Investigation and the New York City Police Department for their continued outstanding work in this investigation.  Mr. Bharara also thanked the National Insurance Crime Bureau, the investigative units of the insurance companies, the Manhattan District Attorney’s Office, and the Alabama Securities Commission for their valuable assistance with the investigation.           

            The case is being prosecuted by the Office’s Violent & Organized Crime Unit.  Assistant U.S. Attorneys Daniel S. Goldman, Daniel S. Noble, and Joshua A. Naftalis are in charge of the prosecution. 

            Preet Bharara, the United States Attorney for the Southern District of New York, announced that SURESH HIRANANDANEY, LALIT CHABRIA, and ANITA CHABRIA, who were senior executives of privately owned for-profit schools, were sentenced yesterday in Manhattan federal court for their roles in a student financial aid fraud scheme in which they defrauded the United States Department of Education (“Education Department”) of $1,000,000 in education grant funds, and in a student visa fraud scheme that generated $7,440,000 in illegal revenues.

            United States District Judge J. Paul Oetken sentenced HIRANANDANEY to one year and one day in prison, LALIT CHABRIA to one year and one day in prison, and ANITA CHABRIA to six months of home confinement.  Judge Oetken also ordered these three former executives to forfeit $7,440,000 for the student visa fraud and to pay $1,000,000 in restitution for the student financial aid fraud.  These former executives were arrested in May 2014, along with co-defendants Samir Hiranandaney and Seema Shah, following a long-term investigation by the United States Immigration and Customs Enforcement’s Homeland Security Investigations (“ICE-HSI”), the United States Department of State’s Diplomatic Security Service (“DOS-DSS”), and the United States Department of Education’s Office of the Inspector General (“ED-OIG”).  

            Manhattan U.S. Attorney Bharara stated:  “Suresh Hiranandaney, Lalit Chabria, and Anita Chabria exploited our nation’s financial aid and foreign student visa programs, engaging in a long-running fraud scheme that generated millions of dollars.  The defendants greedily took advantage of programs meant to help people get a higher education, and in the process, committed federal crimes.”

            According to the Complaint and Indictment, sentencing submissions and other publicly filed court documents, and statements made at public court proceedings in this case, including yesterday’s sentencings:

            HIRANANDANEY, LALIT CHABRIA, and ANITA CHABRIA were associated with the Micropower Career Institute (“MCI”), a for-profit school with five campuses in New York and New Jersey, or the Institute for Health Education (“IHE”), a for-profit school located in New Jersey, both of which offered vocational, language, and other classes to, among others, domestic students whose tuition was partially covered by Department of Education Department financial aid, and foreign students who were allowed to stay in this country on student visas requiring that they pursue full courses of study at bona fide educational institutions.  Hiranandaney was MCI’s president; his brother-in-law, LALIT CHABRIA, was MCI’s chief executive officer and IHE’s president; and ANITA CHABRIA, the sister of HIRANANDANEY and wife of LALIT CHABRIA, was MCI’s vice president and the director of MCI’s Mineola Campus in Mineola, New York. 

            HIRANANDANEY, LALIT CHABRIA, and ANITA CHABRIA defrauded the Education Department of $1,000,000 of educational grant money – funds that the Education Department had paid to MCI for the purpose of covering tuition for domestic students to attend classes at MCI.  As part of this fraud, they falsified and manipulated documents to hide MCI’s failure to timely return financial aid money received by MCI for domestic students who had dropped out of MCI.

            Similarly, HIRANANDANEY, LALIT CHABRIA, and ANITA CHABRIA made $7,440,000 in illicit profits by defrauding immigration authorities.  In this scheme, they concealed that MCI and IHE were collecting millions of dollars in tuition revenues from foreign students who were not attending courses as required to stay in the United States on student visas. HIRANANDANEY, LALIT CHABRIA, ANITA CHABRIA, and others fraudulently portrayed MCI and IHE to immigration authorities as legitimate institutes of higher learning where foreign students carried full course loads.  In reality, the majority of foreign students at MCI and IHE did not attend the required number of classes.  HIRANANDANEY, LALIT CHABRIA, and ANITA CHABRIA failed to report this to immigration authorities, as required, while MCI and IHE continued to collect millions of dollars in tuition from foreign students with delinquent attendance.  When a campus of MCI came under regulatory scrutiny, HIRANANDANEY, LALIT CHABRIA, ANITA CHABRIA, and others transferred foreign students with delinquent attendance to affiliated schools (such as another MCI campus or IHE) that were not under scrutiny.

*            *           *

            In addition to their prison and home confinement sentences, HIRANANDANEY, 61, of Dix Hills, New York, and LALIT CHABRIA, 54, and ANITA CHABRIA, 50, both of Old Bethpage, New York, were ordered to forfeit $7,440,000 to the United States Government from the proceeds of their student visa fraud, and pay $1,000,000 in restitution to United States Department of Education for losses from their student financial aid fraud. 

            The remaining defendants, Samir Hiranandaney and Seema Shah, are scheduled to be sentenced later this year before Judge Oetken.   

            Manhattan U.S. Attorney Bharara praised ICE-HSI, DOS-DSS, and ED-OIG for their work in the investigation of this case. 

            This case is being prosecuted by the Office’s General Crimes Unit.  Assistant U.S. Attorneys Samson Enzer and Margaret Graham are in charge of the prosecution.  Assistant U.S. Attorney Andrew Adams is in charge of the forfeiture aspects of the case.

            Preet Bharara, the United States Attorney for the Southern District of New York, Michael Greco, the Southern District of New York United States Marshal (“USMS”), and William Bratton, the Police Commissioner of the City of New York (“NYPD”), announced the arrest of ONEIL SCOTT on charges of robbery conspiracy, attempted robbery, kidnapping conspiracy, kidnapping resulting in death, and firearms offenses.  At the time he was charged, SCOTT was serving a federal sentence on a robbery conviction arising from his participation in a Bronx armed robbery in approximately September 2010.  Two other defendants, ALVIN HENRY and CHAI GREEN, were arrested on Tuesday, January 19, 2016, in connection with the same charges, contained in an Indictment unsealed the same day.  All three defendants have been remanded and remain in custody.

            Manhattan U.S. Attorney Preet Bharara said: “As alleged, these three defendants, for no reason other than greed, carried out a scheme to kidnap and rob a suspected narcotics trafficker, ultimately taking his life. Those who use violence to terrorize our communities will be prosecuted to the fullest extent of the law.”

            U.S. Marshal Michael Greco said: “Oneil Scott is a dangerous individual who was involved in a myriad of criminal activity. The diligent and joint efforts by the U.S. Attorney’s Office, the New York Police Department and the Marshals Service in getting him back to New York in order to face these additional charges makes our streets safer and is another win for the justice system.

            NYPD Commissioner William Bratton said: “As alleged, these individuals participated in a kidnapping so violent that it resulted in death of their intended target. Adding insult to injury, the victim was set on fire, and his body abandoned in the back seat of a vehicle in a Bronx alleyway.  I commend the work of the NYPD detectives, prosecutors and U.S. Marshals for their work and cooperation in this long-term investigation that resulted in theses arrests and indictments for this heinous crime.”

            According to the allegations contained in the Indictment[1] and other documents in the public record, and statements made in court:

            In 2014, SCOTT, HENRY, GREEN, and others committed multiple armed robberies of suspected narcotics traffickers.  During one of these attempted armed robberies, they violently assaulted and ultimately killed their intended target.  Just after midnight on the morning of March 11, 2014, SCOTT, HENRY, GREEN, and others apprehended the victim, Wayne Thomas, then 22 years old, of the Bronx, as the victim was parking his car in front of his residence.  The defendants suspected that the victim was a drug trafficker who might be in possession of narcotics and/or narcotics proceeds.  During the kidnapping, which was caught on surveillance video, several individuals violently grabbed the victim, pistol-whipped him, forced him into another car, and drove off with him.  During both the kidnapping and the defendants’ subsequent attempts to obtain information about the whereabouts of drugs and drug money, the victim was seriously assaulted.

            At approximately 5:30 a.m. on March 11, 2014, members of the New York City Police Department and the New York City Fire Department responded to 911 calls reporting a burning vehicle in an alleyway in the Bronx.  Upon arriving at the scene, they observed a car still on fire.  The Fire Department extinguished the fire, and officials then became aware that the victim’s body was in the back seat of the car.  The Office of the Chief Medical Examiner of New York City subsequently performed an autopsy on the victim, and concluded that the cause of death was not fire-related injuries, but rather blunt force trauma, indicating that the victim had died before being placed in the rear of the vehicle.

            ALVIN HENRY’s true name was unknown until his arrest by law enforcement officials on January 19, 2016 in connection with the instant charges.

*              *             *

            SCOTT, 33, of the Bronx, HENRY, 27, of the Bronx, and GREEN, 36, of the Bronx are each charged with one count of robbery conspiracy, which carries a maximum sentence of 20 years in prison; one count of attempted robbery, which carries a maximum sentence of 20 years in prison; one count of kidnapping conspiracy, which carries a maximum sentence of life in prison; one count of kidnapping resulting in death, which carries a maximum sentence of death; and one count of use of a firearm, which carries a maximum sentence of life in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by a judge

            Mr. Bharara praised the investigative work of the USMS and the NYPD.

            The case is being prosecuted by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Christopher J. DiMase and Margaret Graham are in charge of the prosecution.

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ANTHONY GRECCO, a New Jersey resident, was found guilty today of robbing and murdering Ryan Ennis, a resident of Ossining, New York, and of conspiring to distribute marijuana and heroin.  Following a nine-day trial before the Honorable Kenneth M. Karas, a jury found that GRECCO traveled on August 26, 2014 from New Jersey to Ossining, where he robbed and murdered Ennis in furtherance of GRECCO’s narcotics trafficking activities.

U.S. Attorney Preet Bharara stated:  “Anthony Grecco took a human life, violently murdering Ryan Ennis, for a few thousand dollars.  Today, a unanimous jury reached a swift verdict, holding Grecco accountable for his callous crime.  I want to thank our local and federal law enforcement partners for making this conviction possible.”

As established by the evidence at trial: 

GRECCO was a marijuana dealer based in New Jersey.  As of the spring of 2014, one of his customers was Ryan Ennis, 25, who had been purchasing marijuana from GRECCO and reselling it in the area around Ossining, New York.  By late summer 2014, GRECCO’s marijuana supply had dried up and he became desperate for cash. 

GRECCO set up a meeting with Ennis on the pretense that he would be bringing more marijuana for Ennis.  In fact, GRECCO intended to rob Ennis, and kill him if necessary, in order to get money.  He wanted that money not only because he was strapped for cash, but because he intended to invest in the heroin business of another drug dealer in New Jersey.  In preparation for the meeting with Ennis, GRECCO obtained a knife and stuffed a backpack full of linens so that Ennis would not realize that GRECCO had arrived without any marijuana.

On August 26, 2014, GRECCO drove with two accomplices from New Jersey to an apartment complex in Ossining, where Ennis was waiting alone in his father’s apartment.  After arriving in Ossining, while the other two individuals waited outside, GRECCO went into the apartment and robbed Ennis.  In the course of the robbery, GRECCO stabbed Ennis repeatedly and slashed his throat, killing him.  GRECCO took $8,900 – the cash that Ennis had prepared for the marijuana deal – as well as a cellphone and a hat, from Ennis.  After the murder, GRECCO returned to New Jersey, where he showered and threw away the blood-stained clothes that he had been wearing in an attempt to cover his tracks. 

*                      *                     *

GRECCO was found guilty on all five counts in the Indictment, namely, (1) conspiracy to commit Hobbs Act robbery; (2) Hobbs Act robbery; (3) conspiracy to distribute marijuana; (4) conspiracy to distribute heroin; and (5) Travel Act murder.  Sentencing is scheduled for May 25, 2016.  GRECCO faces a maximum sentence of life in prison.  The statutory maximum penalty is prescribed by Congress and is provided here for informational purposes only, as any sentencing of GRECCO will be determined by the judge.

U.S. Attorney Bharara praised the outstanding investigative work of the Village of Ossining Police Department and the FBI’s Westchester County Violent Crimes Task Force, which is comprised of investigators from the FBI, the Westchester County Police Department, the Westchester County District Attorney’s Office, the City of Peekskill Police Department, the New York City Police Department, and the City of Yonkers Police Department.

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

            Preet Bharara, the United States Attorney for the Southern District of New York, and Scott J. Lampert, Special Agent in Charge of the U.S. Department of Health and Human Services, Office of Inspector General’s New York Region (“HHS-OIG”), announced today that the United States has settled civil fraud claims under the False Claims Act against CenterLight Healthcare, Inc., and CenterLight Health System, Inc. (collectively, “CenterLight”), for the enrollment of ineligible members in the CenterLight Healthcare managed long-term care plan (“CenterLight MLTCP”).  CenterLight improperly billed the Medicaid program for 1,241 members who attended or were referred by social adult day care centers (“SADCCs”) and whose needs did not meet the criteria of the managed care plan.  The settlement resolves claims that CenterLight engaged in improper marketing practices to enroll members through SADCCs and induced such members to use SADCCs as the members’ primary source of personal care services.  CenterLight continued to seek and obtain monthly capitation payments for members well after the New York State Department of Health issued guidance in early 2013 explicitly stating that an individual’s attendance at SADCCs does not satisfy the MLTCP eligibility standard.

            Under the terms of the settlement approved yesterday by United States District Judge Lewis A. Kaplan, CenterLight must pay a total of $46,751,086.74 to the Medicaid Program, $18,700,434.70 of which will go to the United States.  In addition, CenterLight is required to:

• Comply with all contractual and regulatory requirements governing the enrollment, assessment, re-assessment, and dis-enrollment of CenterLight MLTCP members.

• Credential only SADCCs that are properly certified and capable of providing community-based personal care services consistent with regulatory requirements.

• Monitor SADCCs in its provider network to ensure that they furnish the community-based personal care services called for under CenterLight MLTCP member care plans and operate in compliance with applicable regulations.

• Prohibit marketing practices that are directed at enrolling CenterLight MLTCP members through SADCCs.

            Manhattan U.S. Attorney Preet Bharara said:  “CenterLight Healthcare improperly received millions of Medicaid dollars by enrolling ineligible members into its managed care plan.  With this settlement, CenterLight now has admitted to its conduct and will pay over $46 million.  We are committed to holding health care providers accountable if they wrongfully seek and receive federal funds, and we thank HHS’s Office of the Inspector General and the New York State Attorney General’s Office for their assistance.”   

            HHS-OIG Special Agent in Charge Scott J. Lampert said:  “CenterLight’s conduct compromised the integrity of the Medicaid program by enrolling beneficiaries in a plan for which they were not eligible.  HHS-OIG is committed to holding providers accountable for their practices, and the manner in which care is provided.”                       

            Pursuant to the Medicaid managed long-term care program, health care providers, such as CenterLight, are responsible for arranging and managing long-term health care services offered to Medicaid beneficiaries.  In exchange, providers receive a monthly capitation payment of approximately $3,800 for each beneficiary enrolled in the health care plan.  MLTCPs offer a variety of services, including assistance with activities of daily living, care management services, skilled nursing services, physical therapy, occupational therapy, speech therapy, nursing home care, and preventive services.  In order to qualify for enrollment in an MLTCP, Medicaid beneficiaries need to, among other things, be eligible for a nursing home level of care and require at least 120 days of community-based long-term care, which includes a wide range of health care services such as personal care services.  CenterLight contracted with SADCCs to provide care, including personal care services, to CenterLight MLTCP members. 

            In the settlement agreement, CenterLight admits that 1,241 CenterLight MLTC members who had been referred by SADCCs or had used SADCC services were not eligible to be members of the managed care plan.  Many of these ineligible members were not eligible at the time of their initial enrollment, while others were ineligible to remain in the managed care plan at the time of their re-assessment but were not dis-enrolled in a timely manner.  Although the SADCCs were supposed to be providing care to CenterLight members, CenterLight admits that various SADCCs in its provider network did not provide services that qualified as personal care services under the terms of its Medicaid contract or were not legally permitted to provide such services. 

*                *                *

            Mr. Bharara thanked HHS’s Office of the Inspector General for its assistance with the case.  Mr. Bharara also thanked the Medicaid Fraud Control Unit of the New York State Attorney General’s Office for its investigative efforts and assistance.

            The case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorney Jeffrey K. Powell is in charge of the case.

Preet Bharara, United States Attorney for the Southern District of New York, Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Thomas P. DiNapoli, New York State Comptroller, announced the indictment of MICHAEL J. VATTER, the Chief of the Newburgh Fire Department, charging him with fraudulently obtaining approximately $95,000 in pension benefits by failing to report his return to work in the public sector to the New York State and Local Police and Fire Retirement System.  Under New York State law, a public sector retiree who is receiving a pension and who returns to public service cannot receive both pension payments and a public sector paycheck.  The law permits public sector retirees to earn up to $30,000 per year from public sector employment before their pension benefits are cut off for that year.

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

VATTER served in the Newburgh Fire Department in various capacities from 1980 until his retirement in May 2000.  Following his retirement, VATTER attended law school and practiced law.  In November 2009, the Indictment charges, VATTER returned to the Newburgh Fire Department as its Chief.  The Indictment further alleges that VATTER failed to report his return to the public sector despite knowing he had a duty under state law to do so.  As a result of this conduct, VATTER obtained $95,106 in pension benefits from the New York State and Local Police and Fire Retirement System source to which he was not entitled. 

VATTER, 57, of Walkill, New York, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison.

Mr. Bharara praised the investigative work of the FBI, the Office of the New York State Comptroller, the Orange County District Attorney's Office, and the Orange County Sheriff's Office.  

This prosecution is being handled by the Office's White Plains Division.  Assistant U.S. Attorney James McMahon is in charge of the prosecution.

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

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

            Preet Bharara, the United States Attorney for the Southern District of New York, announced today that KAREN ALAMEDDINE, a/k/a “Karen Dean,” the former controller of a New York-based non-profit organization whose core mission is to cure genetic illnesses by supporting biomedical research (the “Non-Profit”), was sentenced in Manhattan federal court to four years in prison for embezzling more than $2 million from the Non-Profit, and to tax evasion for deliberately failing to report to the Internal Revenue Service (“IRS”) as income the money she embezzled.  ALAMEDDINE was sentenced today by United States District Judge Gregory H. Woods.

            Manhattan U.S. Attorney Preet Bharara said: “Karen Alameddine’s brazen theft of over $2 million was not just a breach of her duties of loyalty and honesty to her employer, it was a federal crime that diverted much-needed funds from biomedical research that could help to cure genetic illnesses.  Thanks to the work of the IRS and the Postal Inspection Service, Alameddine will now pay the price for her faithless conduct.”           

            According to the Complaint, the Indictment, guilty plea, and proceedings in Manhattan federal court:

            From approximately late 2008 through early 2014, while working as the controller for the Non-Profit, ALAMEDDINE diverted over $2 million of the Non-Profit’s funds to her own bank accounts and for her own personal use.  ALAMEDDINE executed the scheme principally by disguising QuickBooks entries to make transfers to her personal bank account appear as if they were transfers made to pay grant recipients of the Non-Profit.  ALAMEDDINE further sought to disguise the fraud by inventing a fictitious accounting firm named “Davis & Greene,” purportedly based in Washington, D.C., which was, according to ALAMEDDINE, retained to prepare certain tax returns for the Non-Profit for the 2012 and 2013 tax years. 

            After ALAMEDDINE fraudulently transferred the funds from an account belonging to the Non-Profit to a personal bank account, she further transferred the funds to other accounts she controlled, and thereafter used those funds for various personal expenses, including to pay personal bills.  Among the personal items ALAMEDDINE paid for with the embezzled money were utility bills, car payments, jewelry, the purchase of a recreational vehicle, her personal mortgages, and leisure travel.  In addition to the fraudulent diversions, ALAMEDDINE carried out her embezzlement scheme by secretly procuring a credit card in the Non-Profit’s name and using it to pay for personal expenses; by submitting fraudulent requests for reimbursement for expenses she falsely claimed to have incurred; and by making illicit transfers from the Non-Profit’s bank account purportedly to pay for expenses related to hiring of temporary help to assist with certain accounting and payroll functions but which, in truth, were never actually incurred.  

            In addition, for each of the calendar years 2009 through 2013, ALAMEDDINE filed tax returns with the IRS in which she deliberately omitted reporting the income she received from the fraud.  Those deliberate omissions resulted in ALAMEDDINE’s evasion of a total of over $640,000 in income tax for the years 2009 through 2013. 

*                *                *

            ALAMEDDINE, 58, of Perris, California, who has been in custody since her arrest in November 2014, pled guilty to one count of wire fraud and one count of tax evasion.  In addition to her prison term, ALAMEDDINE was ordered to pay $2,674,983 in restitution, including $1,934,000 to the Non-Profit and $640,000 to the IRS.  ALAMEDDINE was also ordered to forfeit $1,828,000 in proceeds she obtained from the embezzlement offense.

            Mr. Bharara praised the outstanding investigative work of the IRS and the U.S. Postal Inspection Service. 

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

            Preet Bharara, the United States Attorney for the Southern District of New York, announced today that MICHAEL BARNETT, a real estate developer, pled guilty to conspiring to defraud lenders and make false statements to the U.S. Department of Housing and Urban Development (“HUD”) in connection with his development of Vineyard Commons, a luxury residential complex in Ulster County, New York.

            Manhattan U.S. Attorney Preet Bharara said:  “Michael Barnett admitted today to engaging in a fraudulent scheme to defraud both his construction lender and HUD in order to receive hundreds of thousands of dollars in kickbacks.  Thanks to the investigative efforts of the HUD Inspector General’s Office, Barnett will now be made to pay for his criminal conduct.”

            According to BARNETT’s admissions in court during his plea allocution and the allegations made in the Superseding Indictment:

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

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

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

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

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

            BARNETT faces up to five years in prison, a fine of up to $250,000 or twice the gross loss or gain from the offense, an order of $1,334,620 in restitution, and an order to forfeit $200,000.

            Mr. Bharara thanked the Department of Housing and Urban Development, Office of the Inspector General, for its outstanding work on the investigation.

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that STEVEN WESSEL, a/k/a “Wes Wessels,” was sentenced today in Manhattan federal court to 55 months in prison for securities fraud, wire fraud, and aggravated identity theft.  WESSEL engaged in a scheme to defraud two investors and unlawfully use the identity of another person in furtherance of that scheme to defraud.  WESSEL pled guilty on April 23, 2015, and was sentenced today by Chief United States District Judge Loretta A. Preska.

Manhattan U.S. Attorney Preet Bharara said:  “Steven Wessel lied to investors who trusted him with their money, spending almost all of it to pay for his own personal expenditures.”

According to the allegations contained in the Superseding Indictment, the underlying criminal Complaint unsealed on June 24, 2014, and statements made during court proceedings:

From at least June 2013 through April 2014, WESSEL ran a fraudulent investment scheme.  WESSEL, who claimed to be the Chairman and Executive Managing Member of Steeplechase USA, LLC (“Steeplechase USA”), located in New York, New York, represented to an investor (“Investor A”) that Steeplechase USA was in the business of trading securities.  WESSEL personally solicited $200,000 from Investor A on the understanding that the funds would be solely invested in securities. 

Contrary to WESSEL’s promise to invest Investor A’s funds in securities, WESSEL used substantially all of Investor A’s money for his own personal benefit, including for cash withdrawals and personal expenses, such as the payment of $25,000 toward a restitution obligation from a prior judgment of conviction.  WESSEL did not tell Investor A about this misappropriation.  Instead, WESSEL falsely represented to Investor A that his $200,000 investment had gained tens of thousands of dollars and that Steeplechase USA’s portfolio had gained approximately 167% in 2013.  Furthermore, in connection with this fraudulent scheme, WESSEL sent Investor A multiple emails that purported to come from Steeplechase USA’s accountant (“Accountant 1”).  In those emails, WESSEL, pretending to be Accountant 1 without Accountant 1’s knowledge or permission, made multiple false statements concerning Investor A’s investment with Steeplechase USA.  

When Investor A requested to withdraw his funds from Steeplechase USA, WESSEL solicited a $550,000 loan from a second investor (“Investor B”).  WESSEL falsely represented that he would use Investor B’s money to provide financing for a commercial real estate project.  To induce Investor B to lend him money, WESSEL, among other things, created and sent a fabricated email to Investor B.  The fabricated email purported to be from a bank and made it appear as if the real estate project were legitimate. 

Contrary to WESSEL’s promise to Investor B, WESSEL used substantially all of Investor B’s money for his own benefit, including to pay $251,000 to Investor A – money that, according to WESSEL, represented Investor A’s initial $200,000 investment and $51,000 in trading profits.  

*                      *                      *

In addition to the prison sentence, WESSEL, 58, of New York, New York, was sentenced to three years of supervised release.  The Court further ordered WESSEL to pay $499,000 in restitution.  

Mr. Bharara praised the work of the Criminal Investigators of the United States Attorney’s Office, who investigated this case.

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

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

            Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and William J. Bratton, Commissioner of the New York City Police Department (“NYPD”), announced that BORIS KOTLYARSKY and BORIS NAYFELD were taken into custody yesterday for seeking payment from a victim who they claimed NAYFELD had been hired to murder.  KOTLYARSKY and NAYFELD were presented this afternoon in Manhattan federal court before U.S. Magistrate Judge James C. Francis IV.  

            Manhattan U.S. Attorney Preet Bharara said: “As alleged, Boris Kotlyarsky and Boris Nayfeld conspired to extort $125,000 from a victim, claiming that Nayfeld had been hired to murder the victim.  Thanks to the FBI and the NYPD, the victim is unharmed and the defendants are under arrest.”

            FBI Assistant Director-in-Charge Diego Rodriguez said: “This is yet another example of the cooperation by the FBI and NYPD through the Eurasian Organized Crime Task Force. We remain committed to keeping dangerous felons off our streets so the people of our communities can live in peace.”

            NYPD Commissioner William J. Bratton said: “As alleged, this thuggish story seems like a yarn made only in Hollywood.  But today, in New York, these two defendants find themselves charged in brazen extortion plot.”

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

            BORIS KOTLYARSKY informed the Victim that a Russian businessman (the “Businessman”) had approached BORIS NAYFELD with a contract to kill the Victim in exchange for a $100,000 payment.  KOTLYARKSKY offered to broker a meeting between the Victim and NAYFELD. The Victim understood KOTLYARSKY to be offering the Victim an opportunity to intercede with NAYFELD before NAYFELD killed the Victim.

            KOTLYARSKY then arranged a series of meetings between the Victim and BORIS NAYFELD.  During these meetings, NAYFELD told the Victim, among other things, that the Businessman had transferred $50,000 to NAYFELD as partial payment on a contract for the Victim’s murder, and that it was good that KOTLYARSKY had intervened on the Victim’s behalf.  NAYFELD told the Victim to pay him $125,000.  Shortly after the Victim delivered NAYFELD a first payment by check, law enforcement agents arrested NAYFELD and, shortly thereafter, KOTLYARSKY.

*          *          *                       

            Mr. Bharara praised the outstanding work of the FBI and the NYPD for their investigative efforts and ongoing support and assistance with the case.

            The prosecution of this case is being overseen by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorney Andrew M. Thomas is in charge of the case.

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, Glenn Sorge, Acting Special Agent-in-Charge of the New York Office of U.S. Immigration and Customs Enforcement’s (“ICE”), Homeland Security Investigations (“HSI”), and Timothy Houghton, Acting District Director of the New York District of U.S. Citizenship and Immigration Services (“USCIS”), announced today the arrest of GNOLEBA SERI for immigration fraud and aggravated identity theft.  SERI was arrested today by HSI in Brooklyn, New York, and was presented this afternoon before the Honorable James C. Francis IV. 

U.S. Attorney Preet Bharara stated:  “Gnoleba Seri allegedly used his legal knowledge to circumvent the law and forge documents that are critical to obtaining an immigrant visa.  The strength of the United States’ immigration system rests on the integrity of its process, and this office and our law enforcement partners will hold accountable those who undermine that process.”

Acting Special-Agent-in-Charge Glenn Sorge stated: “Gnoleba Seri allegedly abused the special trust bestowed upon him as an immigration attorney to commit fraud and identity theft.  When individuals falsify immigration documents, the system is severely undermined and the security of our nation is put at risk.  HSI is committed to working with its law enforcement partners to ensure fraudsters are identified and brought to justice.”

Acting District Director Timothy Houghton stated: “We are proud to stand by our partners today to send a message that U.S. immigration fraud will not be tolerated.  We are committed to ensuring the integrity of our nation's immigration system.”

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

Between October 2012 and April 2015, GNOLEBA SERI, a licensed immigration attorney working in New York, New York, and Brooklyn, New York, engaged in a scheme to use personal information contained in legitimate immigration documents for fraudulent purposes.  In his role as an immigration attorney, SERI submitted falsified and forged I-864 Forms (affidavits of support for those seeking immigrant visas) in support of his clients’ applications for immigration visas and for legal permanent resident status.  Specifically, SERI received legitimate I-864 Forms, tax information, pay stubs, and W-2 forms from individuals sponsoring his clients, and then fraudulently submitted these documents in applications for other clients.  That is, SERI submitted I-846 Forms that listed individuals as financial sponsors who had never met the people they were purportedly agreeing to sponsor.  Those I-846 Forms included the sponsors’ real names, identifying information, and financial information, as well as forged signatures.  These fraudulent and forged I-864 Forms all listed SERI as the preparer, and many of them were notarized by him.

*                *                *

SERI, 49, of Brooklyn, New York, is charged with one count of visa fraud, which carries a maximum sentence of 10 years in prison; one count of aggravated identity theft, which carries a mandatory consecutive minimum sentence of two years in prison; and one count of mail fraud, which carries a maximum sentence of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Mr. Bharara praised the outstanding investigative efforts of law enforcement personnel at HSI and USCIS. 

The case is being prosecuted by the Office’s General Crimes Unit.  Assistant U.S. Attorney Andrew D. Beaty is in charge of the prosecution.

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that HAROLD JAMES PICKERSTEIN, 69, of Fairfield, Connecticut, waived his right to indictment and pled guilty today before U.S. District Judge Victor A. Bolden in federal court in Bridgeport, Connecticut, to one count of mail fraud related to his theft of more than $600,000 from a client’s investment account.

According to court documents and statements made in court, PICKERSTEIN, an attorney, represented an individual (“Victim 1”) and served as the trustee for an investment account (the “Trust Account”) held for the benefit of Victim 1.  Between approximately August 2011 and October 2013, PICKERSTEIN withdrew $613,216.20 from the Trust Account without authorization from Victim 1 and used the funds to pay for personal expenses, including payments to state and federal tax authorities to satisfy his tax liabilities.

In November 2013, PICKERSTEIN was to disburse all remaining funds in the Trust Account to Victim 1.  After Victim 1 questioned PICKERSTEIN as to why the disbursed funds were less than Victim 1 expected, PICKERSTEIN sent a letter to Victim 1 in which he falsely represented that a portion of the Trust Account’s funds had been deducted to pay legal bills.

PICKERSTEIN faces a maximum term of 20 years in prison, a maximum fine of approximately $1.2 million, and $633,410.04 in restitution.

PICKERSTEIN resigned from the Connecticut bar in December 2014.

This matter has been investigated by Federal Bureau of Investigation and is being prosecuted by Assistant U.S. Attorney William J. Nardini.

The U.S. Attorney for the Southern District of New York has been overseeing the case because of the recusal of the U.S. Attorney’s Office for the District of Connecticut.

Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and William J. Bratton, Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of charges against RUBEN PIZZARO for a November 24, 2015, murder in the Bronx and a December 31, 2015, non-fatal shooting in Manhattan during a carjacking.      

PIZZARO, a gang member, is charged with shooting and killing David Rivera, a rival gang member, on the morning of November 24, 2015.  Weeks later, while law enforcement actively sought to arrest him, PIZZARO is charged with shooting another man on the morning of New Years’ Eve.  PIZZARO has been charged in two separate criminal complaints for the murder of RIVERA and the non-fatal New Years’ Eve shooting.

PIZZARO was presented today before the Honorable James C. Francis IV.

Manhattan U.S. Attorney Preet Bharara said: “The senseless, deadly violence Ruben Pizzaro allegedly committed on the streets of the Bronx is exactly why this office has pledged to help reduce gun violence in the City.  By prosecuting gun cases together with our partners at the FBI and NYPD, we will dismantle violent neighborhood gangs and make New York safer for everyone.”   

FBI Assistant Director in Charge Diego Rodriguez said: “As alleged, Pizzaro showed no dignity towards human life with his actions of killing a rival gang member and his involvement in a non-fatal shooting.  The FBI will continue to work with our partners to disrupt and dismantle such violent gang activity, and bring those involved to justice.”

Police Commissioner William J. Bratton said:  “The safe apprehension of this individual removes a violent criminal and repeat offender from the streets of our City, as alleged. I want to thank the members of the NYPD and our partners in law enforcement in the offices of the United States Attorney for the Southern District of New York and the New York Field Office of the Federal Bureau of Investigation, for their work on this case.”

According to the allegations contained in two complaints filed against PIZZARO:

Pizzaro is a member of a Bronx component of a national gang, and sells narcotics in the vicinity of 180th Street and Arthur Avenue in the Bronx, New York, blocks from where members of a rival gang sell narcotics on behalf of two Bronx-based traffickers.  On both October 31 and November 1, 2015, PIZZARO, members of the rival gang, including David Rivera, and one of the traffickers exchanged gunfire.  Pizzaro also shot a different member of the rival gang in the hand on November 2, 2015.

Three weeks later, on November 24, 2015, in broad daylight at 9:15 in the morning, PIZZARO shot and killed Rivera in the vicinity of 175th Street and Crotona Avenue.  PIZZARO remained a fugitive until yesterday.  In the interim, he was involved in another serious act of violence on New Year’s Eve.  That day PIZZARO committed a carjacking, forcing the Carjacking Victim at gunpoint to drive him to the vicinity of Ellwood Street and 196th Street in New York, New York.  Once there, PIZZARO approached another individual (the “Shooting Victim”) on the street, shot the Shooting Victim in the shoulder, and stole two bags that the Shooting Victim was carrying.  A fingerprint from PIZZARO was recovered on the van that had been reported carjacked.

PIZZARO, 23, of the Bronx, New York, is charged with one count of possession of a firearm which causes the death of another individual, which carries a maximum sentence of death, and one count of possession of a firearm in furtherance of a carjacking, which carries a sentence of life in prison.

Mr. Bharara thanked the FBI, the NYPD, and the United States Marshal’s Service for their work on the investigation.

The case is being prosecuted by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Shawn Crowley, Russell Capone, and Robert Allen are in charge of the prosecution. 

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

Preet Bharara, the United States Attorney for the Southern District of New York, John P. Carlin, Assistant Attorney General for National Security, Diego Rodriguez, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and William J. Bratton, the Commissioner of the New York City Police Department (“NYPD”), announced today the indictment of MAALIK ALIM JONES based upon his alleged support of al Shabaab, a designated Foreign Terrorist Organization based in Somalia that is allied with al Qaeda.  JONES, a United States citizen, was presented before Chief U.S. Magistrate Judge Frank Maas on December 19, 2015, pursuant to a Criminal Complaint. The case is assigned to U.S. District Judge Paul G. Gardephe.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Maalik Alim Jones traveled to Somalia, received military training from al Shabaab, and took up arms as a terrorist fighter with an organization that has declared the United States a target.  Now, as ever, we are determined to protect the people of this country from the murderous designs of terrorist organizations.  Having allegedly sworn allegiance to al Shabaab, a terrorist organization bent on destroying America, Maalik Jones will now face American justice in a Manhattan federal court.”

Assistant Attorney General John P. Carlin said: “Maalik Alim Jones was charged with providing material support to al Shabaab and receiving training from the terrorist organization.  The National Security Division’s highest priority is counterterrorism and we will continue to hold accountable those who seek to provide material support to terrorists.”

FBI Assistant Director-in-Charge Diego Rodriguez said: “This case highlights the international nature of terrorism and the criminal actions taken in pursuit of attacks against others.  As alleged herein, Maalik Alim Jones, from Maryland, joined a terrorist organization in Somalia, traveled from New York to Kenya, through Morocco and the UAE, where he was trained to kill and destroy communities. Recently he was caught trying to get to Yemen.  We applaud the thorough investigation by the agents and task force officers on FBI’s JTTF, who were able to identify his activities, stop his plans, and bring him here to face the U.S. justice system.”

Commissioner William J. Bratton said:  “As alleged, Jones traveled to Somalia to fight on behalf of al Shabaab, learning to fire an AK-47 and rocket propelled grenade. He then used this training to attack the Kenyan government, fighting on behalf of this terrorist organization. The work by detectives and agents of the New York Joint Terrorism Task Force should be commended, and the prosecutors of the Southern District of New York whose efforts led to this indictment.”

According to the allegations in the Indictment, and the Complaint[1] that was unsealed in Manhattan federal court:

In February 2008, the U.S. Department of State designated al Shabaab as a Foreign Terrorist Organization.  Al Shabaab has used violent means to, among other things, destabilize the government of Somalia, quell the Somali population, and force the withdrawal of foreign troops in Somalia.  A former leader of al Shabaab, whose exhortations were echoed by the leadership of al Qaeda, called for foreign fighters to join al Shabaab in a “holy war” in Somalia.  As a result of al Shabaab’s recruitment efforts, men from other countries – including the U.S. – have traveled to Somalia to engage in violent jihad.  Since al Shabaab’s designation as a Foreign Terrorist Organization in February 2008, it has made several public statements demonstrating its intent to harm U.S. interests.  In February 2012, the then-Emir of al Shabaab swore allegiance to Ayman al-Zawahiri, the Emir of al Qaeda, stating that al Shabaab “will hereby merge into al Qa’ida.”

Al Shabaab also maintains a specialized fighting force, known as Jaysh Ayman, that is responsible for carrying out commando-style attacks and cross-border raids in which fighters, among other things, travel across the land border between Somalia and Kenya to target individuals and carry out attacks against civilian and military targets in Kenya.

In or about July 2011, JONES traveled via commercial aircraft from New York to Kenya, with stopovers in Morocco and the United Arab Emirates.  After arriving in Kenya, JONES traveled by land from Kenya to Somalia, where he trained, worked, and fought with al Shabaab in Somalia.  Among other things, JONES received military training at an al Shabaab training camp, where he learned to operate an AK-47 assault rifle and rocket-propelled grenades.  JONES also became a member of al Shabaab’s Jaysh Ayman, and participated in combat against soldiers of the Kenyan government on behalf of al Shabaab. 

JONES has appeared with other al Shabaab fighters in at least two videos that were recovered from an al Shabaab fighter.  In one of the videos, JONES possessed a firearm, and is seen with several al Shabaab fighters who participated in a June 14, 2015, attack on a Kenyan Defense Force base in Lamu County, Kenya, during which two Kenyan soldiers were killed.

*                *                *

JONES, 31, of Maryland, is charged with five counts: (1) conspiracy to provide material support to al Shabaab; (2) providing, and attempting to provide, material support to al Shabaab; (3) conspiracy to receive military-type training from al Shabaab; (4) receipt of military-type training from al Shabaab; and (5) possessing, carrying, and using firearms during and in relation to a crime of violence.  If convicted, JONES faces a maximum sentence of life in prison on the charges.  In addition, Count Five carries a mandatory minimum sentence of 30 years in prison.  The minimum and maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the Court.

Mr. Bharara praised the investigative work of the FBI’s New York Joint Terrorism Task Force – which principally consists of agents from the FBI and detectives from the New York City Police Department.  He also expressed gratitude to the U.S. Department of Justice’s National Security Division and Office of International Affairs, and the U.S. Department of State, for their assistance. 

This case is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant United States Attorneys Sean S. Buckley and Andrew J. DeFilippis, and National Security Division Trial Attorney Josh Parecki, are in charge of the prosecution.

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

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

Maalik Alim Jones, 31, of Maryland, was indicted based on his alleged support of al Shabaab, a designated foreign terrorist organization based in Somalia that is allied with al Qaeda.  Jones, a U.S. citizen, was presented before Chief U.S. Magistrate Judge Frank Maas of the Southern District of New York on Dec. 19, 2015, pursuant to a criminal complaint. 

The charges were announced today by Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Preet Bharara of the Southern District of New York, Assistant Director in Charge Diego Rodriguez of the FBI’s New York Field Office and Commissioner William J. Bratton of the New York City Police Department.

“Maalik Alim Jones was charged with providing material support to al Shabaab and receiving training from the terrorist organization,” said Assistant Attorney General Carlin.  “The National Security Division’s highest priority is counterterrorism and we will continue to hold accountable those who seek to provide material support to terrorists.”

“As alleged, Maalik Alim Jones traveled to Somalia, received military training from al Shabaab, and took up arms as a terrorist fighter with an organization that has declared the United States a target,” said U.S. Attorney Bharara.  “Now, as ever, we are determined to protect the people of this country from the murderous designs of terrorist organizations.  Having allegedly sworn allegiance to al Shabaab, a terrorist organization bent on destroying America, Maalik Jones will now face American justice in a Manhattan federal court.”

“This case highlights the international nature of terrorism and the criminal actions taken in pursuit of attacks against others,” said Assistant Director in Charge Rodriguez.  “As alleged herein, Maalik Alim Jones, from Maryland, joined a terrorist organization in Somalia, traveled from New York to Kenya, through Morocco and the UAE, where he was trained to kill and destroy communities.  Recently he was caught trying to get to Yemen.  We applaud the thorough investigation by the agents and task force officers on FBI’s JTTF, who were able to identify his activities, stop his plans, and bring him here to face the U.S. justice system.”

“As alleged, Jones traveled to Somalia to fight on behalf of al Shabaab, learning to fire an AK-47 and rocket propelled grenade,” said Commissioner Bratton.  “He then used this training to attack the Kenyan government, fighting on behalf of this terrorist organization.  The work by detectives and agents of the New York Joint Terrorism Task Force should be commended, and the prosecutors of the Southern District of New York whose efforts led to this indictment.”

According to the allegations in the indictment and the complaint, which was unsealed today:

In or about July 2011, Jones traveled via commercial aircraft from New York to Kenya, with stopovers in Morocco and the United Arab Emirates.  After arriving in Kenya, Jones traveled by land from Kenya to Somalia where he trained, worked and fought with al Shabaab in Somalia.  Among other things, Jones received military training at an al Shabaab training camp, where he learned to operate an AK-47 assault rifle and rocket-propelled grenades.  Jones also became a member of al Shabaab’s specialized fighting force, Jaysh Ayman, and participated in combat against soldiers of the Kenyan government on behalf of al Shabaab. 

Jones has appeared with other al Shabaab fighters in at least two videos that were recovered from an al Shabaab fighter.  In one of the videos, Jones possessed a firearm, and is seen with several al Shabaab fighters who, on June 14, 2015, participated in an attack on a Kenyan Defense Force base in Lamu County, Kenya, during which two Kenyan soldiers were killed.

Jones is charged with conspiracy to provide material support to al Shabaab; providing, and attempting to provide, material support to al Shabaab; conspiracy to receive military-type training from al Shabaab; receipt of military-type training from al Shabaab; and possessing, carrying and using firearms during and in relation to a crime of violence.  If convicted, Jones faces a maximum sentence of life imprisonment on the charges.  In addition, the firearms offense carries a mandatory minimum sentence of 30 years’ imprisonment.  The minimum and maximum potential sentences are prescribed by Congress and are provided here for information purposes only, as any sentencing of the defendant would be determined by the court.

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

Assistant Attorney General Carlin joined U.S. Attorney Bharara in praising the investigative work of the FBI’s New York Joint Terrorism Task Force.  The Justice Department’s Office of International Affairs also provided significant assistance. 

This case is being prosecuted by Assistant U.S. Attorneys Sean S. Buckley and Andrew J. DeFilippis of the Southern District of New York and Trial Attorney Josh Parecki of the National Security Division’s Counterterrorism Section. 

Maalik Jones Indictment

Maalik Jones Complaint

“After a thorough investigation of interference with the operation of the Moreland Commission and its premature closing, this Office has concluded that, absent any additional proof that may develop, there is insufficient evidence to prove a federal crime.  We continue to have active investigations related to substantive inquiries that were being conducted by the Moreland Commission at the time of its closure.”

Preet Bharara, the United States Attorney for the Southern District of New York, announced the conviction of KEVIN LOWE, the owner of “Astramed,” a purported medical clinic with multiple locations in the Bronx, New York, and from which more than five million tablets of the prescription painkiller oxycodone were unlawfully distributed over a three-year period.  On May 4, 2015, LOWE was convicted of a conspiracy to distribute narcotics following a two-week jury trial presided over by U.S. District Judge Lorna G. Schofield.  Today, Judge Schofield sentenced LOWE to a term of 144 months in prison.

Manhattan U.S. Attorney Preet Bharara said: “Kevin Lowe and his co-defendants used a network of bad doctors and street-level dealers to flood the streets of New York City with millions of highly addictive, potent opioids, all under the guise of a legitimate medical clinic.  Instead of medical care, Lowe and others illegally dispensed opioids, enabling a vicious cycle of addiction that affects too many in our communities.  Thanks to the Drug Enforcement Administration and the New York City Police Department, this so-called ‘clinic’ is out of business and those responsible are been held accountable.”

According to the allegations contained in the Indictment and the evidence presented by the government during LOWE’s trial:

From approximately January 2011 until February 2014, a drug distribution ring operated out of “Astramed,” a purported medical clinic with multiple locations in the Bronx that LOWE owned and operated.  At these clinics, doctors working under LOWE’s direction wrote tens of thousands of medically unnecessary prescriptions for oxycodone, a highly addictive, prescription opioid used to treat severe and chronic pain conditions.  Oxycodone prescriptions, once written, have enormous cash value to street-level drug dealers, who can fill prescriptions at most pharmacies and resell the resulting pills at vastly inflated rates.  Indeed, a single prescription for 180 30-milligram oxycodone pills has an average resale value in New York City of more than $6,000, and far more in nearby states.        

LOWE capitalized on the black market for oxycodone by employing board-certified, state-licensed doctors who were willing to write medically unnecessary prescriptions for large quantities of oxycodone in return for cash.  LOWE’s clinics, which accepted no insurance from patients seeking oxycodone prescriptions, typically charged $300 in cash for “doctor visits” that usually lasted just a minute or two, involved no actual physical examination, and consistently resulted in the issuance of a prescription for large doses of oxycodone, typically 180 30-milligram tablets, or a daily dosage of six 30-milligram tablets. 

LOWE’s clinics bore little resemblance to a standard medical office.  For example, on a daily basis, crowds of up to 100 people gathered outside the Astramed office on Southern Boulevard (the “Clinic”) clamoring to see one of the doctors at the clinic in order to obtain a prescription for oxycodone.  Virtually none of these individuals had any medical need for oxycodone, or any legitimate medical record documenting an ailment for which oxycodone would be prescribed.  Instead, most of these individuals were members of “crews” – that is, they were recruited and paid by high-level drug traffickers, oxycodone distributors (the “Crew Chiefs”), to pose as “patients” in order to receive medically unnecessary prescriptions from the doctors.  The Crew Chiefs then arranged for, and oversaw the filling of, the resulting prescription at various pharmacies and took possession of the oxycodone pills to be resold on the street.  Crew Chiefs also paid the Clinic’s employees hundreds of dollars in cash at a time to get their Crew Members into the Clinic to see one of the doctors. 

In total, between approximately January 2011 and February 2014, Astramed doctors issued 34,925 medically unnecessary prescriptions for oxycodone, comprising nearly 5.5 million oxycodone tablets with a street value of more than $165 million.  LOWE alone collected more than $7 million in cash for these sham “doctor visits” during this time period. 

*                                  *                                  *

On May 4, 2015, after a two-week jury trial, LOWE, 55, of Melville, New York, was convicted of one count of conspiracy to distribute and possess with intent to distribute oxycodone, which carries a maximum sentence of 20 years in prison.  In addition to the prison sentence, LOWE was ordered to forfeit $2,338,661.   LOWE has previously forfeited $455,351 in proceeds earned from his unlawful operation of the Astramed clinics and seized at the time of his arrest.

Twenty-three additional participants in the drug distribution ring – including doctors, clinic employees, and drug traffickers who oversaw crews of “patients” whom they sent into the clinics in order to obtain medically unnecessary prescriptions – have previously been sentenced by Judge Schofield pursuant to guilty pleas and are included in the chart below.  Two defendants have pled guilty but have not yet been sentenced, and one defendant entered into a deferred prosecution agreement. 

Mr. Bharara thanked the Drug Enforcement Administration and the New York City Police Department for their work on the investigation. Mr. Bharara also thanked the Town of Orangetown Police Department, the Westchester County Police Department, the United States Department of Health and Human Services, the New York State Health Department’s Bureau of Narcotic Enforcement, the Office of the Medicaid Inspector General, New York City's Human Resources Administration, the New York State Attorney General’s Office Medicaid Fraud Control Unit, the Internal Revenue Service-Criminal Investigation, and the El Dorado Task Force for their assistance.

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

DEFENDANT

CHARGE

SENTENCE

Robert Terdiman

Pled guilty to conspiring to distribute oxycodone on March 20, 2015

Sentenced October 20, 2015, to time served, followed by one year of supervised release.  As part of his plea, DR. TERDIMAN also forfeited $355,086

David Moody

Pled guilty to conspiring to distribute oxycodone on July 15, 2014

Sentenced November 14, 2014, to 90 months in prison, followed by three years of supervised release

Rashawn Whidbee

Pled guilty to conspiring to distribute oxycodone on July 29, 2014

Sentenced December 1, 2014, to 18 months in prison, followed by three years of supervised release

Robert Williams

Pled guilty to conspiring to distribute oxycodone on July 11, 2014

Sentenced October 14, 2014, to 48 months in prison, followed by three years of supervised release

Donald Carr

Pled guilty to conspiring to distribute oxycodone on July 14, 2014

Sentenced November 21, 2014, to 132 months in prison, followed by three years of supervised release

George Barrow

Pled guilty to conspiring to distribute oxycodone on July 29, 2014

Sentenced February 24, 2015, to 102 months in prison, followed by three years of supervised release

Bradley Mitchell

Pled guilty to conspiring to distribute oxycodone on August 3, 2014

Sentenced March 4, 2015, to 132 months in prison , followed by three years of supervised release

Elijah Pinckney

Pled guilty to conspiring to distribute oxycodone on September 29, 2014

Sentenced January 6, 2015, to 46 months in prison, followed by three years of supervised release

Evelyn White

Pled guilty to conspiring to distribute oxycodone on February 24, 2015

Sentenced August 10, 2015, to 12 months in prison, followed by three years of supervised release

Cedric White

Pled guilty to conspiring to distribute oxycodone on February 13, 2015

Sentenced August 3, 2015, to 24 months in prison, followed by three years of supervised release

Sheila Carter

Pled guilty to conspiring to distribute oxycodone on March 3, 2015

Sentenced July 27, 2015, to 40 months in prison, followed by three years of supervised release

Jonathan Huertas

Pled guilty to conspiring to distribute oxycodone on March 16, 2015

Sentenced August 27, 2015, to 32 months in prison, followed by three years of supervised release

OLGA MENDOZA DELAROSA

Pled guilty to conspiring to distribute oxycodone on September 12, 2014

Sentenced on February 18, 2015, to 30 months in prison, followed by three years of supervised release

BRYAN RIVERA

Pled guilty to conspiring to distribute oxycodone on March 2, 2015

Sentenced on June 4, 2015, to 12 months and a day in prison, followed by three years of supervised release

SAMANTHA LIVINGSTON

Pled guilty to conspiring to distribute oxycodone on April 2, 2015

Sentenced on December 1, 2015 to three years of probation

BRIDGET HIGGINS

Completed the term of a deferred prosecution agreement on November 13, 2015.

DAVID STEWART

Pled guilty to conspiring to distribute oxycodone on December 17, 2014

Sentenced on June 10, 2015, to four months in prison, followed by three years of supervised release

VOKART ALSAIDI

Pled guilty to conspiring to distribute oxycodone on December 17, 2014

Sentenced on April 24, 2015, to 60 months in prison, followed by three years of supervised release

KENRICK CHANDLER

Pled guilty to conspiring to distribute oxycodone on October 9, 2014

Sentenced on May 11, 2015 to 130 months in prison, followed by three years of supervised release

DARRYL BRATHWAITE

Pled guilty to conspiring to distribute oxycodone on September 9, 2014

Sentenced on December 11, 2014 to 52 months in prison, followed by three years of supervised release

THEODORE ROOSEVELT JOHNSON

Pled guilty to conspiring to distribute oxycodone on July 8, 2014

Sentenced on January 30, 2015, to 34 months in prison, followed by three years of supervised release

WALEED ALSAIDI

Pled guilty to conspiring to distribute oxycodone on February 4, 2015

Sentenced on July 8, 2015, to 30 months in prison, followed by 3 years of supervised release

RONALD CARR

Pled guilty to conspiring to distribute oxycodone on August 4, 2014

Sentenced on November 18, 2014 to 34 months in prison, followed by three years of supervised release

Minh Quang Pham, aka Amin, 33, pleaded guilty today in the Southern District of New York to terrorism charges based on Pham’s efforts in support of al Qaeda in the Arabian Peninsula (AQAP), a designated foreign terrorist organization.  Pham was arrested in the United Kingdom on June 29, 2012, and was extradited to the United States on Feb. 26, 2015.  Pham pleaded guilty to one count of providing material support to AQAP, one count of conspiring to receive military training from AQAP and one count of possessing and using a machine gun in furtherance of crimes of violence.

The plea was announced by Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Preet Bharara of the Southern District of New York and Assistant Director in Charge Paul M. Abbate of the FBI’s Washington Field Office.

“Minh Quang Pham provided material support to al Qaeda in the Arabian Peninsula and received explosives training from Anwar Aulaqi while in Yemen.  With his guilty plea, he will be held accountable for his terrorist activities,” said Assistant Attorney General Carlin.  “Counterterrorism is the National Security Division’s highest priority, and we will continue to bring justice to those who seek to aid designated foreign terrorist organizations in their efforts to wage violent attacks against the United States and our allies.”

“As he has now admitted in an American court of law, Minh Quang Pham swore a terrorist’s oath to wage jihad for AQAP,” said U.S. Attorney Bharara.  “Pham traveled to Yemen to receive terrorist training, including instructions in bomb-making by the now-deceased senior AQAP leader Anwar Aulaqi.  Vowing to wage violent jihad and brandishing a Kalashnikov rifle, Pham provided material support to the highest levels of AQAP.  Now, all that awaits him is sentencing for his admitted acts of terrorism.”

“Defendant Minh Quang Pham sought and received military-style training from an al Qaeda affiliate with the intent to martyr himself and inflict harm on behalf of the group,” said Assistant Director in Charge Abbate.  “He also attempted to inspire others toward violence through the preparation and dissemination of terrorist propaganda.  This case and the subsequent extradition of Pham underscores the unwavering resolve of the FBI and our international law enforcement partners to relentlessly pursue and capture dangerous terrorists anywhere in the world and bring them to face justice in the United States.”

According to the indictment, extradition materials and court filings, and statements made at related court proceedings, including today’s guilty plea:

In December 2010, after informing others that he planned to travel to Ireland, Pham traveled from London, where he resided, to Yemen, the principal base of operations for AQAP.  Pham traveled to Yemen in order to join AQAP, to wage jihad on behalf of AQAP and to martyr himself for AQAP’s cause.  After arriving in Yemen, he swore an oath of loyalty to AQAP in the presence of an AQAP commander.

While in Yemen in 2010 and 2011, Pham provided assistance to and received training from Anwar Aulaqi, a U.S.-born senior leader of AQAP.  Aulaqi personally taught Pham how to create a lethal explosive device using household chemicals and directed Pham to detonate such an explosive device at the arrivals area of London’s Heathrow International Airport following Pham’s return to the United Kingdom in 2011.

During his time in Yemen, Pham also assisted with the preparation and dissemination of AQAP’s propaganda magazine, Inspire.  Pham worked directly with a now-deceased U.S. citizen who was a prominent member of AQAP and responsible for editing and publishing Inspire.  In addition, AQAP trained Pham in the use of a Kalashnikov assault rifle and provided him such a rifle, which he used in furtherance of his activities on behalf of AQAP in Yemen. 

On July 27, 2011, Pham returned to the United Kingdom.  Upon his arrival at London’s Heathrow International Airport, U.K. authorities detained Pham, searched him and recovered various materials from him, including various electronic media that contained computer files forensically identical to those possessed by a cooperating witness who had previously reported sharing electronic documents with Pham while they were in Yemen with AQAP.  In addition, Pham was found to be in possession of a live round of .762 caliber armor-piercing ammunition, which is consistent with ammunition that is used in a Kalashnikov assault rifle.

Pham was arrested in the United Kingdom on June 29, 2012, pursuant to a provisional arrest warrant obtained by the U.S. Attorney’s Office of the Southern District of New York, which then requested his extradition.  Pham then challenged his extradition to the United States.  On Feb. 3, 2015, a court in the United Kingdom denied Pham’s challenge and ordered him extradited to the United States.  Pham arrived in the Southern District of New York on Feb. 26, 2015.

Pham faces a mandatory minimum sentence of 30 years in prison and a maximum sentence of life in prison.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only as the final sentence will be determined by the judge.  Pham is scheduled to be sentenced on April 14, 2016. 

Assistant Attorney General Carlin joined U.S. Attorney Bharara in praising the extraordinary investigative work of the FBI’s Washington Field Office.  They also expressed their gratitude to the New York Joint Terrorism Task Force for the critical role it played in the investigation and prosecution.  Assistant Attorney General Carlin and U.S. Attorney Bharara also thanked the Department of Justice’s Office of International Affairs for their significant assistance, as well as the Metropolitan Police Service and the Crown Prosecution Service for their cooperation in the investigation, prosecution and extradition.

This case is being prosecuted by Assistant U.S. Attorneys Anna M. Skotko, Sean S. Buckley, Shane T. Stansbury and Ian McGinley of the Southern District of New York and Trial Attorneys Kelly Harris and Rebecca Magnone of the National Security Division’s Counterterrorism Section.

Pham Plea Agreement

            Preet Bharara, the United States Attorney for the Southern District of New York, John P. Carlin, Assistant Attorney General for National Security, and Paul M. Abbate, the Assistant Director-in-Charge of the Washington, D.C., Office of the Federal Bureau of Investigation (“FBI”), announced today that MINH QUANG PHAM, a/k/a “Amin,” pled guilty in Manhattan federal court to terrorism charges based upon PHAM’s efforts in support of al Qaeda in the Arabian Peninsula (“AQAP”), a designated foreign terrorist organization.  PHAM was arrested in the United Kingdom on June 29, 2012, and was extradited to the United States on February 26, 2015.  PHAM pled guilty today to one count of providing material support to AQAP, one count of conspiring to receive military training from AQAP, and one count of possessing and using a machine gun in furtherance of crimes of violence.

            Manhattan U.S. Attorney Preet Bharara said: “As he has now admitted in an American court of law, Minh Quang Pham swore a terrorist’s oath to wage jihad for AQAP.  Pham traveled to Yemen to receive terrorist training, including instructions in bomb-making by the now-deceased senior AQAP leader Anwar Aulaqi.  Vowing to wage violent jihad and brandishing a Kalashnikov rifle, Pham provided material support to the highest levels of AQAP.  Now, all that awaits him is sentencing for his admitted acts of terrorism.”

            Assistant Attorney General John P. Carlin said: “Minh Quang Pham provided material support to al Qaeda in the Arabian Peninsula and received explosives training from Anwar Aulaqi while in Yemen.  With his guilty plea, he will be held accountable for his terrorist activities.  Counterterrorism is the National Security Division’s highest priority, and we will continue to bring justice to those who seek to aid designated foreign terrorist organizations in their efforts to wage violent attacks against the United States and our allies.”

            FBI Assistant Director Paul M. Abbate said: “Defendant Minh Quang Pham sought and received military-style training from an al Qaeda affiliate with the intent to martyr himself and inflict harm on behalf of the group.  He also attempted to inspire others toward violence through the preparation and dissemination of terrorist propaganda.  This case and the subsequent extradition of Pham underscores the unwavering resolve of the FBI and our international law enforcement partners to relentlessly pursue and capture dangerous terrorists anywhere in the world and bring them to face justice in the United States.”

            According to the Indictment, extradition materials and court filings, and statements made at related court proceedings, including today’s guilty plea:

            AQAP was designated by the United States Department of State as a foreign terrorist organization in January 2010.  AQAP’s leadership has publicly claimed responsibility for plots to murder U.S. nationals and commit terrorist attacks against U.S. interests, including the 2009 Christmas Day bomb plot, in which an AQAP operative attempted to detonate an explosive device on a civilian airplane traveling to Detroit, Michigan.  Only months later, AQAP attempted to detonate explosive devices within the holds of commercial airliners traveling to the United States.

            In December 2010, after informing others that he planned to travel to Ireland, PHAM traveled from London, where he resided, to Yemen, the principal base of operations for AQAP.   PHAM traveled to Yemen in order to join AQAP, to wage jihad on behalf of AQAP, and to martyr himself for AQAP’s cause.  After arriving in Yemen, he swore an oath of loyalty to AQAP in the presence of an AQAP commander.

            While in Yemen in 2010 and 2011, PHAM provided assistance to and received training from Anwar Aulaqi, a U.S.-born senior leader of AQAP.  Prior to Aulaqi’s death in September 2011, Aulaqi called on his followers to conduct attacks against American interests abroad, including by killing American civilians.  Aulaqi personally taught PHAM how to create a lethal explosive device using household chemicals, and directed PHAM to detonate such an explosive device at the arrivals area of London’s Heathrow International Airport following PHAM’s return to the United Kingdom in 2011.

            During his time in Yemen, PHAM also assisted with the preparation of, and dissemination of, AQAP’s propaganda magazine, Inspire.  To that end, PHAM worked directly with a now-deceased U.S. citizen who was a prominent member of AQAP and responsible for editing and publishing Inspire.  In addition, Pham received training from AQAP in the use of a Kalashnikov assault rifle, and was provided with a Kalashnikov assault rifle by the organization, which he carried with him in furtherance of his activities on behalf of AQAP in Yemen.            

            On July 27, 2011, PHAM returned to the United Kingdom from Yemen.  Upon his arrival at London’s Heathrow International Airport, United Kingdom authorities detained PHAM, searched him, and recovered various materials from him.  For example, PHAM was found in possession of various electronic media that contained computer files forensically identical to those possessed by a cooperating witness who had previously reported sharing electronic documents with PHAM while they were in Yemen with AQAP.  In addition, upon his arrival in the United Kingdom from Yemen, PHAM was found to be in possession of a live round of .762 caliber armor-piercing ammunition, which is consistent with ammunition that is used in a Kalashnikov assault rifle.

            PHAM was arrested in the United Kingdom on June 29, 2012, pursuant to a provisional arrest warrant obtained by the United States Attorney’s Office for the Southern District of New York, which then requested his extradition.  PHAM then challenged his extradition to the United States.  On February 3, 2015, a court in the United Kingdom denied PHAM’s challenge, and ordered him extradited to the United States.  PHAM arrived in the Southern District of New York on February 26, 2015.

*                *                *

            PHAM, 33, pled guilty to one count of providing and attempting to provide material support and resources to AQAP; one count of  conspiring to receive military-type training from, and on behalf of, AQAP; and one count of knowingly carrying and using a firearm (machine gun) in furtherance of crimes of violence.  PHAM faces a mandatory minimum sentence of 30 years in prison and a maximum sentence of life in prison.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  PHAM is scheduled to be sentenced on April 14, 2016.   

            Mr. Bharara praised the extraordinary investigative work of the Washington, D.C., Field Office of the FBI.  He also expressed his gratitude to the New York Joint Terrorism Task Force – which principally consists of agents from the FBI and detectives from the New York City Police Department – for the critical role it played in the investigation and prosecution.  In addition, Mr. Bharara thanked the Department of Justice’s National Security Division and Office of International Affairs.  Lastly, Mr. Bharara also thanked the British authorities, including the Metropolitan Police Service/SO15 Counter Terrorism Command at New Scotland Yard and the Crown Prosecution Service, for their cooperation in the investigation, prosecution, and extradition.

            This case is being handled by the Terrorism and International Narcotics Unit of the U.S. Attorney’s Office for the Southern District of New York.  Assistant U.S. Attorneys Anna M. Skotko, Sean S. Buckley, Shane T. Stansbury, and Ian McGinley are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriquez, 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 that MICHAEL SANTIAGO, a corrections officer at Downstate Correctional Facility in Fishkill, New York, KENNETH SMITH, and BRUCE COLLAZO, a/k/a “Tonz,” were arrested this morning for participating in a conspiracy to rob a series of armored cars in the Bronx, New York.  SANTIAGO, SMITH, and COLLAZO were presented today in Manhattan federal court before United States Magistrate Judge Andrew J. Peck.

Manhattan U.S. Attorney Preet Bharara said:  “Michael Santiago, a corrections officer entrusted with the safekeeping of the community, Kenneth Smith, and Bruce Collazo are charged with conspiring to conduct a series of brazen daytime armed robberies, provoking gun violence on busy streets, and putting lives at risk.  Together with our partners at the FBI and the NYPD, we are committed to keeping our neighborhoods safe by taking violent criminals off the streets.”   

FBI Assistant Director-in-Charge Diego Rodriquez said:  “As alleged, over several months, the defendants conspired to brazenly hold up armored car operators at gunpoint for cash.  This vicious activity put everyday citizens in the forefront of violence, and the FBI-NYPD Violent Crimes Task Force stands with our law enforcement partners to investigate and bring all those involved to justice.”

NYPD Commissioner William J. Bratton said:  “This is the type of collaboration we rely on to keep our city safe. This operation, taken down earlier this morning in raids across the Bronx, is the most significant case since the re-formation of the oldest task force in law enforcement history. Together, NYPD detectives and FBI agents arrested these defendants who, among other things, engaged in a massive midday shoot-out on a busy Bronx street, as alleged. Tonight, our city – because of the hard work of agents, detectives, and prosecutors – is a little bit safer.”

According to the Complaint[1]:

Between August and December 2015, SANTIAGO, SMITH, and COLLAZO, along with other members of the robbery crew who remain at large, participated in gunpoint robberies of armored car operators.  Specifically, on August 24, 2015, December 4, 2015, and December 15, 2015, members of the crew robbed armored car operators of thousands of dollars in cash at gunpoint.  During the December 15, 2015, robbery, a member of the crew exchanged gunfire with the operator of the armored vehicle before escaping on foot.

*                *                *

SANTIAGO, 29, SMITH, 34, and COLLAZO, 20, all of the Bronx, New York, are each charged with one count of conspiracy to commit Hobbs Act robbery, which carries a maximum sentence of 20 years in prison; and one count of using or carrying firearms during and in relation to, or possessing firearms in furtherance of, a crime of violence, which firearms were discharged, which carries a maximum sentence of life in prison, and a mandatory consecutive minimum sentence of 10 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Bharara praised the efforts of the FBI, the NYPD, the New York State Department of Corrections and Community Supervision, and the Office of Special Investigation in this investigation.  He added that the investigation is continuing.

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

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

[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint 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 Office of the Federal Bureau of Investigation (“FBI”), and Philip R. Bartlett, Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced the arrests of CHRISTOPHER CERVINO, a/k/a “Smitty,” LARRY WERBEL, and SHEIK F. KHAN, a/k/a “Abida Khan,” for their involvement in a scheme, between 2009 and March 2015, to defraud at least 100 investors of more than $15 million.  CERVINO, WERBEL and KHAN, along with EDWARD DURANTE, a/k/a “Ted Wise,” a/k/a “Efran Eisenberg,” a/k/a “Yulia Svitchkara,” a/k/a “Anthony Walsh,” a/k/a “Ed Simmons,” who arrived by extradition from Germany on December 18, 2015, were charged in a Superseding Indictment unsealed today with various crimes related to a fraudulent scheme principally involving  a publicly traded company called VGTel, Inc. (“VGTL”), which was secretly controlled by DURANTE.  DURANTE, who was previously convicted in December 2001 of securities fraud, wire fraud, and money laundering in this District and barred by the U.S. Securities and Exchange Commission (“SEC”) from any association with the sale of securities, in concert with CERVINO, WERBEL, and KHAN, executed the scheme through false and misleading representations about how private investor monies would be used, as well as omissions in connection with the sale of VGTL securities, and through the manipulation of the public market in VGTL’s stock. 

In addition, Mr. Bharara announced the unsealing of guilty pleas earlier this week by WALTER REISSMAN and KENNETH WISE, who admitted to their own involvement in the fraudulent scheme.  REISSMAN pled guilty to conspiracy, securities fraud, wire fraud, and making false statements to law enforcement officials.  WISE pled guilty to conspiracy, securities fraud, wire fraud, and money laundering.  REISSMAN and WISE are cooperating with the Government in this investigation.    

CERVINO, who is charged with conspiracy, securities fraud, wire fraud, and perjury, was arrested this morning in Franklin Lakes, New Jersey, and was presented this afternoon in federal court in Manhattan before United States Magistrate Judge Andrew J. Peck.  WERBEL, who is charged with conspiracy, securities fraud, wire fraud, investment adviser fraud, and making false statements, was arrested this morning in Solon, Ohio, and was presented today in federal court in the Northern District of Ohio.  KHAN, who is charged with conspiracy, securities fraud, wire fraud, and investment adviser fraud, was arrested last night in Las Vegas, Nevada, and will be presented later today in federal court in the District of Nevada.  The case is before United States District Judge Andrew L. Carter, Jr.  

In a separate action, the SEC filed civil charges against CERVINO, WERBEL, KHAN, REISSMAN, and WISE.  The SEC previously charged DURANTE on December 18, 2015. 

U.S. Attorney Preet Bharara said: “No sooner had Edward Durante gotten out of jail for securities fraud than he allegedly headed up another criminal scheme.  As alleged, Durante and his network of scammers spun a web of lies, inducing victims into investing in phony private placement opportunities, manipulating the price and trading volume of a publicly traded stock, and conspiring to defraud more than one hundred investors out of over $15 million.”

FBI Assistant Director Diego Rodriguez said: “Over six years, Cervino, Werbel, and Khan allegedly conspired with recidivist securities fraud defendant Edward Durante to defraud more than 100 investors out of millions in a scheme of misleading representations and stock manipulation. The FBI is committed to investigating and bringing to justice those who prey upon trusting individuals for their own personal gain.”

USPIS Inspector-in-Charge Philip R. Bartlett said: “These individuals took advantage of their manipulation of the market to con investors into purchasing stock at inflated prices.  Postal Inspectors remind investors to thoroughly review all investment opportunities, especially whenever great returns are offered, to avoid becoming a victim of a scam.”  

According to the allegations in the Superseding Indictment unsealed today in Manhattan federal court,[1] and statements made in court proceedings:

From in or about 2009 up through and including in or about March 2015, DURANTE, CERVINO, WERBEL, KHAN, REISSMAN, and WISE (the “Defendants”) perpetrated a multi-pronged scheme to defraud more than 100 investors of at least $15 million by soliciting funds in public and private shares of various securities, including VGTL, through false and misleading representations and omissions and by failing to invest investors’ funds as promised.  The Defendants further manipulated the public Over-The-Counter market of VGTL stock by controlling a majority of the public shares, inducing investors to buy stock based on false representations and omissions, and engaging in trades in which the Defendants controlled both the accounts that purchased the stock and the accounts that sold the stock in order to artificially inflate the stock price and trading volume.  Moreover, DURANTE, with the knowledge of WERBEL, REISSMAN and WISE, among others, used numerous aliases in order to conceal his true identity and regulatory bar from investors, compliance personnel, regulators and law enforcement.  Of the approximately $15 million invested in the fraudulent scheme, more than $9 million was funneled to the Defendants and other co-conspirators.

2001 Securities Fraud Conviction

In December 2001, DURANTE was convicted in federal court of conspiracy to commit securities fraud, wire fraud, and money laundering, as well as making false statements in connection with a market manipulation scheme in which the defendant also used the alias “Ed Simmons.”  The defendant was sentenced to 121 months in prison and was released in or about 2009, the year he began the current scheme.  In connection with that scheme, DURANTE was ordered by a United States District Court to pay disgorgement and prejudgment interest totaling over $39 million.  DURANTE was also barred from certain activities in connection with the securities industry, including the sale of securities. 

Private Placement Securities Fraud Involving VGTL

Among other fraudulent and illicit conduct, between 2009 and in or about March 2015, DURANTE, CERVINO, WERBEL, KHAN, REISSMAN, and WISE and others fraudulently induced victims to invest in private shares of VGTL by, among other things, concealing from investors that DURANTE controlled the entities selling the shares; that DURANTE was prohibited from any association with the sale of securities; and that DURANTE was previously convicted of crimes related to a similar scheme to defraud.  Furthermore, some of the Defendants lied to investors by (a) representing that their investments would be used to fund the operations and growth of VGTL in connection with potential reverse mergers, when in reality no reverse merger was ever consummated and the investments were instead used primarily to personally benefit the Defendants; and (b) representing that the investors would receive an eight-percent dividend on their investments until their private shares could be sold at a promised premium on the public market, when, in reality, no interest payments were ever provided to the investors and many investors never received VGTL stock certificates or were not permitted to sell the stock.    

In order to fund his illegal scheme, DURANTE used a network of brokers, including WERBEL and KHAN, investment advisers in Cleveland, Ohio, and Los Angeles, California, respectively, to induce investors to buy shares of VGTL.  Although WERBEL knew DURANTE’s true identity and that he had been previously convicted of securities fraud, WERBEL did not disclose this information to any of his clients he solicited to invest in VGTL.  Moreover, DURANTE provided WERBEL with kickbacks of as much as 20 percent of monies invested by his clients, which WERBEL did not disclose to his clients.  WERBEL also failed to disclose to his clients that the investors were purchasing shares of VGTL from entities controlled by DURANTE, not from the issuer itself.  Similarly, KHAN also received kickbacks in return for inducing her clients to invest in private shares of VGTL, which she did not disclose to her clients.  KHAN also did not disclose to her investors that their private shares of VGTL were purchased from DURANTE-controlled entities.  In total, WERBEL received more than $300,000 and KHAN received more than $100,000 in undisclosed kickbacks from DURANTE for inducing clients to invest in private shares of VGTL. 

Manipulation of the Market for Shares of VGTL

The Defendants further engaged in a scheme to control and manipulate the public stock of VGTL in order to artificially inflate the stock price and trading volume so as to profit from their own sales of VGTL stock and to further induce investments in private shares of VGTL.  To that end, through entities he controlled, DURANTE held a majority of the publicly-traded stock of VGTL.  DURANTE recruited CERVINO, a broker, to open brokerage accounts associated with DURANTE-controlled entities and investors who were clients of WERBEL’s and KHAN’s, many of whom did not know they had accounts with CERVINO.  WERBEL and KHAN, along with DURANTE, induced their clients to purchase VGTL stock through CERVINO – sometimes without the clients’ knowledge or permission – while DURANTE and CERVINO ensured that many of these purchases were matched with sales of VGTL stock by DURANTE-controlled accounts.  The result of these transactions was that the Defendants were effectively taking both sides of a single transaction in VGTL stock in order to artificially control VGTL’s stock price.  The Defendants’ efforts to artificially inflate the market for VGTL increased the stock price from approximately $.25 per share in April 2012 to as much as $1.90, and dramatically inflated the trading volume, which increased the Defendants’ abilities to raise private investments in VGTL.  To compensate CERVINO for his efforts to control and manipulate the market in VGTL, DURANTE made at least two cash payments to CERVINO totaling $35,000.  Moreover, DURANTE personally siphoned more than $4 million in profits, which he concealed through the use of wire transfers among multiple accounts in the names of other individuals, including WISE.

*                      *                      *

DURANTE, 63, is charged with one count of conspiracy to commit securities fraud, one count of securities fraud, one count of conspiracy to commit wire fraud, one count of wire fraud, one count of conspiracy to commit money laundering, one count of money laundering and one count of perjury.  Counts One and Seven each carry a maximum sentence of five years in prison.  Counts Two through Six each carry a maximum sentence of 20 years in prison.  The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.

CERVINO, 43, is charged with one count of conspiracy to commit securities fraud, one count of securities fraud, one count of conspiracy to commit wire fraud, one count of wire fraud, and one count of perjury.  Counts One and Five each carry a maximum sentence of five years in prison.  Counts Two through Four each carry a maximum sentence of 20 years in prison.  The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.

WERBEL, 67, is charged with one count of conspiracy to commit securities fraud, one count of securities fraud, one count of conspiracy to commit wire fraud, one count of wire fraud, one count of investment adviser fraud, and one count of making false statements to federal officers.  Counts One and Six each carry a maximum sentence of five years in prison.  Counts Two through Five each carry a maximum sentence of 20 years in prison.  The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.

KHAN, 52, is charged with one count of conspiracy to commit securities fraud, one count of securities fraud, one count of conspiracy to commit wire fraud, one count of wire fraud, and one count of investment adviser fraud.  Count One carries a maximum sentence of five years in prison.  Counts Two through Five each carry a maximum sentence of 20 years in prison.  The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.

On January 4, 2016, WISE, 75, pled guilty before Judge Peck to one count of conspiracy to commit securities fraud, one count of securities fraud, one count of conspiracy to commit wire fraud, one count of wire fraud, one count of conspiracy to commit money laundering, and one count of money laundering.  Count One carries a maximum sentence of five years in prison.  Counts Two through Six each carry a maximum sentence of 20 years in prison.  The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.

On January 5, 2016, REISSMAN, 58, pled guilty before Judge Carter to one count of conspiracy to commit securities fraud, one count of securities fraud, one count of conspiracy to commit wire fraud, one count of wire fraud, and one count of making false statements to federal officers.  Counts One and Five each carry a maximum sentence of five years in prison.  Counts Two through Four each carry a maximum sentence of 20 years in prison.  The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.

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

Mr. Bharara praised the work of the FBI and the Postal Inspection Service, 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. Attorneys Edward Y. Kim, Daniel S. Goldman, and Andrea M. Griswold are in charge of the prosecution.  

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

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

Preet Bharara, United States Attorney for the Southern District of New York, Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and William J. Bratton, Commissioner of the New York City Police Department (“NYPD”), announced today the arrest of EVETTE MERCED, DARRYL HARRISON, SIUL CELESTE, JEANETTE ARIZAGA, YESENIA ADAMES, RENETTA EDWARDS, and JEFFERSON SIMBANAMUZO, all current members of the New York Army National Guard, in connection with a scheme to obtain fraudulent recruiting bonuses.  Defendant YESENIA ADAMES was arrested today and will be presented in the Eastern District of Virginia.  The remaining defendants were arrested today and will be presented in Manhattan federal court before Magistrate Judge Andrew J. Peck. 

Manhattan U.S. Attorney Preet Bharara said: “Those who join the National Guard nobly serve their fellow citizens.  But as alleged, these defendants used their positions in the National Guard to steal.  I would like to thank our partners at the FBI, Army CID, and NYPD for their work in uncovering this fraud.”

FBI Assistant Director-in-Charge Diego Rodriguez said:  “Those charged today, in one form or another, took advantage of an Army National Guard incentive program established to encourage soldiers to recruit civilians into the service.  While some of the defendants blatantly lied about signing up new recruits, others, already serving as recruiters, we're altogether ineligible for payment by the program.  This scheme resulted in hundreds of thousands of dollars in losses to the government.  While the majority of our respected military personnel remain committed to serving and protecting our great country, this select few served only to protect their own interests.  As we are reminded today, there will be no reward for this type of behavior.”

Police Commissioner William J. Bratton said:  “The NYPD has no tolerance for any member of the service who violates the law. We will hold them fully responsible for their actions.”

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

In September 2005, the Army National Guard established a recruiting bonus program, referred to as the Guard Recruiting Assistance Program (“G-RAP”), and administered by a private company, Document and Packaging Broker, Inc. (“Docupak”).  The G-RAP was designed to offer referral bonus payments to Army National Guard soldiers who were not otherwise involved in Army National Guard recruitment efforts for civilians whom the soldiers successfully convinced to serve in the Army National Guard.  A participating soldier, also known as a Recruiting Assistant (“RA”), could receive up to $2,000 in bonus payments for referring another individual to join.  To participate in the program, soldiers were required to establish an online account in their name to record their referral and recruitment efforts.  The RA would input the personal identifying information of each recruit into the account.  Based on certain milestones achieved by the referred soldier, a participating soldier could then receive payment through direct deposit into the participating soldier’s designated bank account.  Soldiers who were themselves serving as paid recruiters for the Army National Guard as part of the National Guard’s standard recruitment program were not eligible to participate in the G-RAP or to receive a referral bonus payment, as the G-RAP was intended to be a supplement to the National Guard’s standard recruiting program.   

Beginning in 2007, MERCED and HARRISON, who then served as full-time salaried recruiters for the Army National Guard, abused their positions as officers by providing the personal identifying information of potential soldiers to CELESTE, ARIZAGA, ADAMES, and EDWARDS, in exchange for thousands of dollars in kickbacks.  CELESTE, ARIZAGA, ADAMES, and EDWARDS then used their respective online RA accounts to falsely claim that they were responsible for referring those soldiers to the New York Army National Guard.  After making those false claims, CELESTE, ARIZAGA, ADAMES, and EDWARDS received referral bonus payments totaling over $62,000 from the G-RAP and kicked back a significant portion of those payments to MERCED and HARRISON. 

In a similar but separate scheme, SIMBANAMUZO, a current NYPD police officer, used his online RA account to falsely claim that he was responsible for referring soldiers to the New York Army National Guard whose information he had obtained from various paid recruiters.

*              *             *  

MERCED, 45, of East Stroudsburg, Pennsylvania, currently a Staff Sergeant in the National Guard, is charged with one count of conspiracy to commit bribery, one count of solicitation and receipt of bribes, and one count of theft of government funds, which carry maximum sentences of five years, 10 years, and 10 years in prison, respectively.  MERCED is also charged with one count of aggravated identity theft which carries a mandatory sentence of two years in prison. 

HARRISON, 51, of East Stroudsburg, Pennsylvania, currently a Sergeant First Class in the National Guard, is charged with one count of conspiracy to commit bribery, one count of solicitation and receipt of bribes, and one count of theft of government funds, which carry maximum sentences of five years, 10 years, and 10 years in prison, respectively.  HARRISON is also charged with one count of aggravated identity theft which carries a mandatory sentence of two years in prison. 

The following defendants were each charged with one count of conspiracy to commit bribery, which carries a maximum sentence of five years in prison, and one count of theft of government funds, which carries a maximum sentence of 10 years in prison:

• CELESTE, 29, Bronx, New York, currently a Staff Sergeant in the National Guard

• ARIZAGA, 41, Bronx, New York, currently a Staff Sergeant in the National Guard

• ADAMES, 43, Bronx, New York, currently a Sergeant in the National Guard

• EDWARDS, 40, Brooklyn, New York, currently a Sergeant in the National Guard

SIMBANAMUZO, 41, of the Bronx, New York, currently a NYPD police officer and a Sergeant in the National Guard, is charged with one count of theft of government funds, which carries a maximum sentence of 10 years in prison.

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

Mr. Bharara praised the investigative work of the FBI, the Army CID, and the NYPD.

This case is being handled by the Office’s Public Corruption Unit.  Assistant United States Attorney Robert L. Boone is in charge of the prosecution.

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

16-004

1 As the introductory phrase signifies, the entirety of the text of the Complaints and the description 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 BRIAN FANELLI, the former Chief of the Mount Pleasant, New York, Police Department, was sentenced to 18 months in prison for possession of child pornography.  Fanelli pled guilty in July 2015 to one count of possession of child pornography before United States District Judge Kenneth M. Karas, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara stated:  “Brian Fanelli, a former police chief who swore to protect and serve, instead helped fuel a market that victimizes and exploits some of the most vulnerable in our community.  As today’s sentencing demonstrates, we will be vigilant in investigating and prosecuting those who sexually exploit children.”

According to materials submitted in connection with today’s sentencing:

From at least as early as October 2013, through January 2014, FANELLI used a Peer-to-Peer File Sharing Program (“P2P Network”) to download more than 120 files containing images and videos believed to be child pornography, many of which contained depictions of graphic sexual abuse of young, pre-pubescent victims.  During the course of FANELLI’s criminal conduct, in addition to serving as police chief, FANELLI taught classes to children about sexual abuse awareness.  Certain of the files downloaded by FANELLI were made available to other P2P Network users through FANELLI’s computer’s shared folder on the P2P Network program.  On three occasions, agents with the Department of Homeland Security, Homeland Security Investigations (“HSI”), acting in an undercover capacity, used the P2P Network to download from FANELLI’s computer files containing images and videos believed to contain child pornography. 

*                      *                      *

In addition to a prison term, Judge Karas sentenced FANELLI, 56, of Mahopac, New York, to five years of supervised release.  He was ordered to forfeit his computer and hard drives, which were used to commit the offense, to the United States, and to pay a $100 special assessment fee.

Mr. Bharara praised the outstanding investigative work of the Department of Homeland Security.

HSI encourages the public to report suspected child predators and any suspicious activity through its toll-free hotline at 1-866-DHS-2ICE.  Investigators staff this hotline around the clock. Suspected child sexual exploitation or missing children may also be reported to the National Center for Missing and Exploited Children, an Operation Predator partner, at 1-800-843-5678 or http://www.cybertipline.com.

The prosecution is being overseen by the Office’s White Plains Division and the Public Corruption Unit.  Assistant United States Attorneys Anden F. Chow and Andrew D. Goldstein are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, Janet DiFiore, Westchester County District Attorney, and Diego Rodriguez, Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of a Superseding Indictment charging eight members and associates of a Mount Vernon-based street gang, “Boss Playa Family” or “BPF,” with participation in a racketeering conspiracy and firearms offenses, and charging certain of those BPF members and associates with murder in aid of racketeering and narcotics conspiracy.

Six of the eight defendants were charged in the original Indictment, filed in August 2015, and have previously been taken into custody.  Today’s Superseding Indictment charges two additional BPF affiliates, SAMUEL CARLOS and ANTHONY JONES.  Both CARLOS and JONES were arrested today in Mount Vernon, New York, and will be presented this afternoon in White Plains federal court before U.S. Magistrate Judge Judith C. McCarthy.

U.S. Attorney Preet Bharara said:  “As alleged, members and associates of the BPF street gang wreaked havoc in and around Mount Vernon, engaging in shootings, attempted shootings, larcenies, and narcotics trafficking.  A scourge on Mount Vernon, the BPF gang allegedly unleashed a wave of violence in the city’s streets.  The indictment unsealed today brings charges against two more associates of the BPF gang, and serves as a reminder that the perpetrators of gang violence in Mount Vernon will not escape the reach of law enforcement.  I want to praise and thank the FBI, Westchester County District Attorney’s Office and Mount Vernon Police Department for their outstanding work in this investigation.”

Westchester County District Attorney Janet DiFiore stated:  “As evidenced by these most recent indictments, our priority has been and will continue to be enhancing the safety, security and quality of life for all of the hard working residents of the City of Mount Vernon.  We have worked continuously over the past several years to pursue members and associates of this gang and now as a result of the collaborative efforts of federal, state and local law enforcement authorities these defendants are being held accountable for the years of criminal activity they now stand accused of.”

FBI Assistant Director-in-Charge Diego Rodriguez stated:  “As noted in the superseding indictment, although it may take time, the facts will come out.  Persons, such as Carlos and Jones, who have allegedly engaged in a racketeering conspiracy and firearms offenses, will have to answer for their crimes.  I would like to recognize the FBI special agents and task force officers who tirelessly work to ensure those who threaten the peace and safety of our communities are held accountable for their actions.”

According to the allegations in the Superseding Indictment[1] and other documents in the public record:

The BPF street gang was a criminal enterprise that operated principally in and around the City of Mount Vernon, New York, from at least 2007 up to and including 2014.  BPF members and associates sought to enhance the gang’s power, protect and expand its territory, and enrich its members through a wide array of criminal activities, including murder, attempted murder, larceny, arson, and the distribution of cocaine and marijuana.  BPF members and associates expressly acknowledged and celebrated their gang affiliation through various means, including by wearing clothing emblazoned with “Boss Playa Family” and “BPF,” and by creating and posting on the Internet rap videos that promoted BPF. 

One of BPF’s principal objectives was to maintain and exercise control over its territory, the area of Seventh Avenue and Sandford Boulevard in Mount Vernon.  To that end, BPF sought to assert its dominance over rival gangs, particularly the “Goonies,” a gang based in a neighboring area of Mount Vernon.  During the time period relevant to the Superseding Indictment, BPF members and associates were responsible for numerous acts of violence targeting members of the rival Goonies gang, including multiple murders and many other shootings.  In furtherance of such violence, firearms were maintained in stash locations by certain BPF members and associates for shared use by other members and associates of the gang when guns were needed to strike or retaliate against the Goonies.

The violence perpetrated by BPF turned deadly on two occasions in 2008.  On or about August 13, 2008, JAMEL UPSON, one of BPF’s lead enforcers or “shooters,” aided and abetted by others known and unknown, murdered Shomari Knox, a member of the Goonies, by shooting Knox in the area of Ninth Avenue and Third Street in Mount Vernon.  Several months later, on or about December 14, 2008, UPSON, again aided and abetted by others known and unknown, murdered another member of the Goonies, Cory Cabiness, by shooting him in the vicinity of the Ebony Gardens apartment complex in Mount Vernon.  As alleged in the Superseding Indictment, UPSON committed these murders in order to maintain and increase his position in the BPF gang.

*                      *                      *

Counts One and Two of the Superseding Indictment charge all eight defendants, JAMEL UPSON, SAMUEL CARLOS, ANTHONY JONES, ANTOINE LITTLE, TYRONE McCALLUM, PORTLAND RAMSEUR, GORHAM VALENTINE, and JASON WHITE, with a BPF racketeering conspiracy and firearms offenses in connection with that conspiracy.  As alleged, various combinations of those defendants committed, among other acts of racketeering, at least eight shootings in furtherance of the BPF conspiracy.  Counts Three and Four of the Superseding Indictment charge UPSON with murder in aid of racketeering activity and a related firearms offense in connection with the August 2008 murder of Shomari Knox, and Counts Five and Six charge UPSON with murder in aid of racketeering activity and a related firearms offense in connection with the December 2008 murder of Cory Cabiness.  Finally, Count Seven of the Superseding Indictment charges UPSON, CARLOS, RAMSEUR, and WHITE with conspiring to distribute cocaine and marijuana in and around BPF territory.  

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

Mr. Bharara praised the outstanding investigative work of the FBI and the Mount Vernon Police Department.  He also thanked the Westchester County District Attorney’s Office for its participation and support in this ongoing investigation.    

The prosecution is being handled by the Office’s White Plains Division.  Assistant U.S. Attorneys George Turner and Daniel Filor are in charge of the prosecution.

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

United States v. Jamel Upson, et al., S2 15 Cr. 570

COUNT

CHARGE

DEFENDANTS

MAX. PENALTIES

1

Racketeering conspiracy

18 U.S.C. § 1962(d)

JAMEL UPSON

SAMUEL CARLOS

ANTHONY JONES

ANTOINE LITTLE

TYRONE McCALLUM

PORTLAND RAMSEUR

GORHAM VALENTINE

JASON WHITE

UPSON: Life in prison

Other Defendants: 20 years in prison

2

Using or carrying a firearm during and in relation to, or possessing a firearm in furtherance of, a crime of violence or drug trafficking crime

18 U.S.C. § 924(c)

JAMEL UPSON

SAMUEL CARLOS

ANTHONY JONES

ANTOINE LITTLE

TYRONE McCALLUM

PORTLAND RAMSEUR

GORHAM VALENTINE

JASON WHITE

Life in prison

Mandatory minimum of 10 years in prison

3

Murder in aid of racketeering activity

18 U.S.C. § 1959(a)(1)

JAMEL UPSON

Death penalty, or mandatory life in prison

4

Murder through use of a firearm

18 U.S.C. §§ 924(j), 924(c)(1)(A)(iii), 924(c)(1)(C)(i)

JAMEL UPSON

Death penalty, or life in prison

Mandatory minimum of 25 years in prison

5

Murder in aid of racketeering activity

18 U.S.C. § 1959(a)(1)

JAMEL UPSON

Death penalty, or mandatory life in prison

6

Murder through use of a firearm

18 U.S.C. §§ 924(j), 924(c)(1)(A)(iii), 924(c)(1)(C)(i)

JAMEL UPSON

Death penalty, or life in prison

Mandatory minimum of 25 years in prison

7

Narcotics conspiracy

21 U.S.C. §§ 846, 841(b)(1)(C), 841(b)(1)(D)

JAMEL UPSON

SAMUEL CARLOS

PORTLAND RAMSEUR

JASON WHITE

20 years in prison

Defendant

Age

Residence

JAMEL UPSON

31

Mount Vernon, NY

SAMUEL CARLOS

27

Mount Vernon, NY

ANTHONY JONES

26

Mount Vernon, NY

ANTOINE LITTLE

32

Bedford, TX

TYRONE McCALLUM

28

Mount Vernon, NY

PORTLAND RAMSEUR

30

Mount Vernon, NY

GORHAM VALENTINE

30

Mount Vernon, NY

JASON WHITE

32

Mount Vernon, NY

[1] As the introductory phrase signifies, the entirety of the text of the Superseding Indictment and the description of the Superseding Indictment 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, Thomas Zugibe, Rockland County District Attorney, James Hunt, Special Agent in Charge of the New York Division of the U.S. Drug Enforcement Administration (“DEA”), and Ed Day, Rockland County Executive, announced that 14 defendants pled guilty today to conspiring to distribute oxycodone and heroin in and around Rockland County.

On March 25, 2015, an indictment was unsealed charging 17 defendants with conspiring to distribute oxycodone and heroin.  The case was assigned to District Judge Kenneth M. Karas.  Today, 14 of the defendants pled guilty before Magistrate Judge Judith C. McCarthy.  The prosecution against the remaining defendants is ongoing.

U.S. Attorney Bharara stated: “The abuse of prescription painkillers and heroin continues to plague too many of our communities.  As they have now admitted through their guilty pleas, these defendants capitalized on this deadly epidemic, working together to distribute massive quantities of oxycodone in Rockland County.  Several also trafficked in large quantities of heroin.  Prescription pill and heroin abuse is on the rise, but so are law enforcement efforts to stem it.  Thanks to the outstanding work of the DEA and our local law enforcement partners, this operation that helped to fuel Rockland County’s heroin and prescription pill problem has been dismantled.”

District Attorney Zugibe stated: “This was a large and ongoing drug dealing conspiracy which did great harm to many people, including dozens of Rockland County residents.  This case and its 14 guilty pleas are prime examples of how cooperation among federal and local law enforcement can lead to the dismantling of a significant drug trafficking organization that pushed poison into our neighborhoods.”

DEA SAC Hunt stated: “In 2014, there were 47,055 drug overdose deaths; 28,647 deaths, or 61%, involved opioids.  The abuse of diverted pain medication and heroin are destroying lives and enabling drug traffickers to make a toxic profit off addiction.  Last March, law enforcement combined resources to identify and arrest 14 of Rockland’s most treacherous opioid drug traffickers, resulting in today’s 14 guilty pleas.”  

County Executive Day said: “These criminals trafficked over 50,000 oxycodone pills and significant amounts of heroin, and in the process destroyed countless lives.  The nationwide prescription drug and heroin epidemic is fueled by organizations just like this one. The success of this probe is attributed to the ongoing partnership between Rockland County, the U.S. Attorney's Office and our federal, state, and local law enforcement partners.”

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

The defendants were part of a sophisticated drug trafficking organization (the “Organization”) that operated in the area of Rockland County, New York.  The Organization, led by defendant VICTOR ESTEBAN, distributed massive quantities of oxycodone and heroin, often in highly public locations, including at the Palisades Center Mall in West Nyack, New York.

Since 2014, members and associates of the Organization have conspired to distribute more than 50,000 oxycodone tablets, with a value in excess of $1 million, in and around Rockland County.  The defendants obtained the oxycodone through deceptive means, including the use of forged and fraudulent prescriptions.  The defendants also employed lower-level members of the Organization, known as “runners,” to go to pharmacies across New York State to fill the fraudulent prescriptions.

The principal supplier of heroin to the Organization was JUAN AGRAMONTE, who was based in the Bronx.  ESTEBAN pooled money with other defendants to purchase significant quantities of heroin from AGRAMONTE, which they then distributed in locations around Rockland County.

The defendants distributed oxycodone and heroin in a multitude of public places.  They sold these illicit drugs in the parking lots of the Palisades Center Mall in West Nyack, New York, at the Mt. Ivy Trailer Park in Pomona, New York, and in various motels around Rockland County, where they would rent rooms to meet with customers.

Certain defendants also celebrated their oxycodone and heroin trafficking activity on social media sites like Twitter and Instagram. Some of the defendants referred to themselves as the “TMC” crew, meaning “Too Much Cash.”  For example, on one occasion, a defendant posted a message on Twitter saying, “Shout out my TMC bros we taking over the streets.”  On another occasion, a defendant posted a message on Twitter saying, “I make money without a 9-5 gimmie some feens a trap fone and I’ll be fine . . . ,” meaning that he did not need a legitimate job, but rather only some drug addicts and a “trap phone” with which to arrange drug deals.  This defendant also posted a message saying, “The feds just wanna see me in jail.” 

*              *             *

Defendants VICTOR ESTEBAN, ANDREW FLORES, CHRISTIAN MINAYA, EDWIN CEBALLOS, JIMMY RODRIGUEZ, and ELOM KALEDZI pled guilty to conspiring to distribute oxycodone and heroin.  Defendants MIGUEL CABRERA, ROMELLO DELOATCH, ROLANDO GARCIA, WESLEY JACKSON, BRANDON MORILLO, RAMON MORILLO, and BRANDON THOMAS pled guilty to conspiring to distribute oxycodone.  Defendant JUAN AGRAMONTE pled guilty to conspiring to distribute heroin.

The charges to which the defendants pled guilty, and the maximum penalties they face, are set forth in a chart below.  Also set forth below is a chart with the defendants’ names, ages, and residences.  The defendants will be sentenced before Judge Karas in May 2016.

Mr. Bharara praised the outstanding investigative work of the Drug Enforcement Administration’s Tactical Diversion Squad (Group TDS-NY), which comprises agents and officers from the DEA, the New York State Police, the New York City Police Department, Town of Orangetown Police Department, and the Westchester County Police Department.  He also thanked the Rockland County District Attorney’s Office for its participation, and the Internal Revenue Service for its assistance.

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

CHARGE

DEFENDANTS

MAXIMUM PENALTIES

Count One

Narcotics conspiracy – Oxycodone

(Conspiracy to distribute and possess with intent to distribute oxycodone, in violation of 21 U.S.C. §§ 846, 841(a)(1) & 841(b)(1)(C))

VICTOR ESTEBAN

MIGUEL CABRERA

EDWIN CEBALLOS

ROMELLO DELOATCH

ANDREW FLORES

ROLANDO GARCIA

WESLEY JACKSON

ELOM KALEDZI

CHRISTIAN MINAYA

BRANDON MORILLO

RAMON MORILLO

JIMMY RODRIGUEZ

BRANDON THOMAS

20 years in prison

Count Two

Narcotics conspiracy – Heroin (100g or more)

(Conspiracy to distribute and possess with intent to distribute 100 grams or more of heroin, in violation of 21 U.S.C. §§ 846, 841(a)(1) & 841(b)(1)(B))

VICTOR ESTEBAN

JUAN AGRAMONTE

40 years in prison

Mandatory minimum: 5 years in prison

Narcotics conspiracy – Heroin

(Conspiracy to distribute and possess with intent to distribute heroin, in violation of 21 U.S.C. §§ 846, 841(a)(1) & 841(b)(1)(C))

EDWIN CEBALLOS

ANDREW FLORES

ELOM KALEDZI

CHRISTIAN MINAYA

JIMMY RODRIGUEZ

20 years in prison

DEFENDANT

AGE

RESIDENCE

VICTOR ESTEBAN

27

Bronx, NY; Pomona, NY; Middletown, NY

JUAN AGRAMONTE

50

Bronx, NY

MIGUEL CABRERA

26

Haverstraw, NY

EDWIN CEBALLOS

27

New York, NY

ROMELLO DELOATCH

21

Spring Valley, NY

ANDREW FLORES

27

New City, NY

ROLANDO GARCIA

21

Garnerville, NY

WESLEY JACKSON

28

Newburgh, NY

ELOM KALEDZI

32

New City, NY

CHRISTIAN MINAYA

21

Garnerville, NY

BRANDON MORILLO

22

New York, NY

RAMON MORILLO

30

New York, NY

JIMMY RODRIGUEZ

23

Spring Valley, NY

BRANDON THOMAS

21

Pomona, NY

            Preet Bharara, the United States Attorney for the Southern District of New York, William J. Bratton, Commissioner of the of the New York City Police Department (“NYPD”), and Glenn Sorge, Acting Special Agent in Charge of the United States Department of Homeland Security, Homeland Security Investigations (“HSI”), and the United States Marshals Service today announced further arrests in a federal indictment charging 20 defendants with allegedly participating in a conspiracy to distribute crack cocaine in the Bronx, New York, and charging six of those defendants with carrying guns as part of the conspiracy.  Nineteen defendants are now in federal custody – five after having initially fled apprehension.  One defendant remains at large.  The case is assigned to U.S. District Judge Richard M. Berman.

            U.S. Attorney Preet Bharara stated:  “Until these arrests, the flood of poisonous drugs that allegedly accompanied this conspiracy were a plague on the neighborhood these defendants dominated through intimidation and threats of violence.  We thank the New York City Police Department and the Department of Homeland Security for their extraordinary efforts on this case, and the U.S. Marshals Service for their vital assistance in apprehending those fugitives who tried to escape justice.”  

             Commissioner William J. Bratton said:  “The resolve of the NYPD and its law enforcement partners to stamp out illegal narcotic sales and its accompanying violence remains unfettered.  I commend the work of the investigators and prosecutors involved in this case, whose dedication to protecting the residents of New York has resulted in these pivotal arrests.”

            Acting Special Agent in Charge Glenn Sorge said:  “The individuals arrested today wreaked havoc on the neighborhoods of the Bronx by selling crack cocaine to anyone who had the money, including young children.  This operation embodies HSI’s commitment to partner with our federal and state authorities to rid our communities of these dangerous criminal organizations and the violence that comes with them.”  

            Michael Greco, the United States Marshal for the Southern District of New York stated:  “The U.S. Marshals success in this operation was a direct result of interagency collaboration and tireless follow up with previous investigative efforts by HSI and NYPD. The swift apprehension of these dangerous fugitives is proof of the effectiveness and efficiency derived from federal and local law enforcement agencies working together.”            

            As alleged in the Indictment, United States v. Rayshawn Barnes, a/k/a “Twerk,” et al., S1 15 Cr. 288 (RMB)[1]:

            Since at least 2013, the defendants conspired to distribute massive amounts of crack cocaine, as well as other drugs, in an area of the Bronx centered on Barnes Avenue and East 213th Street.  The defendants often sold to children as young as middle school age, and controlled the area by the threat of violence.  Many carried guns to make that threat real. 

            The NYPD and HSI used the full spectrum of law enforcement techniques to investigate this criminal conspiracy.  Through covert surveillance, dozens of undercover purchases of narcotics, and court-authorized wiretaps of the conspirators’ phones, among other methods, law enforcement agents learned the structure and membership of the conspiracy, and amassed evidence of its crimes.    

*                      *                     *

            The defendants in United States v. Barnes, et al. face maximum terms of life in prison and mandatory minimum terms of at least 10 years in prison. The  defendants charged with both narcotics conspiracy and gun possession face a mandatory minimum term of at least 15 years in prison. 

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

            A chart containing the names of the defendants who were arrested, and the charges and maximum penalties they face, is attached.

            Mr. Bharara praised the outstanding investigative work of the New York City Police Department’s Organized Crime Control Bureau Bronx Narcotics Major Case Unit, 47th Precinct Narcotics Module, 47th Precinct Detective Squad, and All Source Intelligence Collaboration Unit, the United States Department of Homeland Security, Homeland Security Investigations, the United States Marshals for the Southern District of New York and the New York/New Jersey Regional Fugitive Task Force.

            The prosecution is being handled by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Rachel Maimin, Micah Smith, Robert Allen, and Hagan Scotten are in charge of the prosecution.

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

CHARGE(S)

DEFENDANTS

MAXIMUM PENALTIES

Narcotics conspiracy

(Conspiracy to distribute and possess with intent to distribute 280 grams or more of crack cocaine.)

RAYSHAWN BARNES, a/k/a “Twerk,” ALEXANDER FINLEY, a/k/a “A,” a/k/a “Abe,” EMMANUEL MCKENZIE, a/k/a “Bliz,” a/k/a “Bills,” a/k/a “Manny Fresh,” TRAVIS HENRY, a/k/a “Barker,” a/k/a “Migo,” EVERAL MCLAGGON, a/k/a “Doghouse,” a/k/a “Max,” ARSENIO MILLER, a/k/a “Mayno,” JERMAINE MITCHELL, a/k/a “Jerry,” OMAR SHARPE, a/k/a “Dummy,” a/k/a “Dumbshit,” KEMANI CAMPBELL, a/k/a “Bibby,” a/k/a “Juice,” ALEX CHRISTIE, a/k/a “Denimz,” a/k/a “A1,” SEAN JOHNSON, a/k/a “Dutty,” PETER BLAIR, a/k/a “Twin,” a/k/a “Drilla,” ENIKO WILSON, a/k/a “Bigz,” a/k/a “Akeem,” SHAWN WILLIAMS, a/k/a “Fry Eye,” a/k/a “Flyers,” ODAINE JOHNSON, a/k/a “Flocka,” VANDERMME MCDONALD, a/k/a “Van Dam,” a/k/a “Tommy Lee,” FABIAN WILLIAMS, JAVARRE BROWN, a/k/a “Choppy,” and JAMAR DAVIDSON, a/k/a “Smoove.”

Life in prison

Mandatory minimum: 10 years in prison

Possession of a firearm during and in relation to a drug-trafficking crime

RAYSHAWN BARNES, a/k/a “Twerk,” OMAR SHARPE, a/k/a “Dummy,” a/k/a “Dumbshit,” JERMAINE MITCHELL, a/k/a “Jerry,” KEMANI CAMPBELL, a/k/a “Bibby,” a/k/a “Juice,” ALEX CHRISTIE, a/k/a “Denimz,” a/k/a “A1,” and PETER BLAIR, a/k/a “Twin,” a/k/a “Drilla,”

Life in prison

Mandatory minimum: five years in prison, consecutive to any other sentence

[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,  Diego Rodriguez, Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), Christy Goldsmith Romero, Special Inspector General for the Troubled Asset Relief Program (“SIGTARP”), and Shirin Emami, Acting Superintendent of Financial Services for the New York State Department of Financial Services (“DFS”), announced that SAMANTHA BOUBERT, CHRISTINE MAHARAJ, and OWEN REID were taken into custody this week for participating in a scheme to fraudulently induce distressed homeowners to sell their homes to a company associated with the defendants.  BOUBERT was presented this afternoon in Manhattan federal court before U.S. Magistrate Judge Henry Pitman.  MAHARAJ and REID were presented yesterday afternoon in Manhattan federal court, also before U.S. Magistrate Judge Henry Pitman.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, these defendants preyed upon distressed homeowners and, through lies and front companies, tricked people into giving up their homes.  The damage allegedly caused by these defendants went far beyond financial harm; as charged, their schemes often resulted in victims being evicted from their homes.”

FBI Assistant Director Diego Rodriguez said: “All too often, desperate homeowners fall prey to elaborate homeowner relief schemes. As alleged, the defendants knowingly exploited the vulnerabilities of their victims, making it their goal to capitalize on the misfortune of others. This behavior caused serious damage to a number of struggling families who were forced out of their homes. The FBI continues to support partnerships within the mortgage industry and law enforcement as we work together to combat this serious crime.”

SIGTARP Inspector General Christy Goldsmith Romero said:  “As part of TARP, the government implemented the Making Home Affordable (MHA) program which contains many free mortgage assistance programs for distressed homeowners.  For homeowners seeking mortgage modifications, the Home Affordable Modification Program (HAMP) is available and, like the other government programs, it is free to apply.  Homeowners need to avoid anyone asking to take the title to their home, or selling their home as part of a loan modification or assistance program.” 

DFS Acting Superintendent of Financial Services Shirin Emami said: “As alleged in these charges, these arrests shut down an elaborate scheme that preyed on innocent people seeking to save their homes from foreclosure. Victimizing financially distressed homeowners is a despicable crime and the Department of Financial Services will continue to aggressively investigate cases such as this. We thank the U.S. Attorney's office for their cooperation and diligent work pursuing this matter.”

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

From January 2013 through May 2015, SAMANTHA BOUBERT, CHRISTINE MAHARAJ, OWEN REID, and others, (collectively, the “Hillside Fraud Team”) targeted distressed homeowners in the New York City area, including the Bronx, Brooklyn, and Queens.  The Hillside Fraud Team, which primarily operated from a Hillside Avenue address, tricked and coerced homeowners into selling or deeding their properties to a Hillside business they controlled.

The Hillside Fraud Team sent mailings to the owners of distressed properties on the letterhead of the Homeowners Assistance Services of New York (“HASNY”), inviting the homeowners to seek assistance from HASNY to avoid foreclosure and save their homes.  The Hillside Fraud Team also hired telemarketers to contact homeowners and to invite them to meet with HASNY representatives to learn more about avoiding foreclosure.

REID and others trained and directed the telemarketers to appeal to the emotions of the owners of distressed properties.  They developed a script for telemarketers to use in their calls, which included, in substance, a statement that a short sale would be a means for homeowners to lower their monthly payments and still remain in their homes.

Many of the homeowners who sought assistance from HASNY met with a member of the Hillside Fraud team, who typically advised the homeowner that HASNY could assist him or her with a loan modification.  In other cases, homeowners were advised that a loan modification could not be completed, but a particular type of short sale could be arranged in which the homeowner would sell the property to a third party, Launch Development, and then a relative of the homeowner could repurchase the property from Launch Development within 90 days.  Homeowners typically were told they could remain in their homes throughout the entire process.  REID and MAHARAJ both participated in these meetings.

 After an initial meeting with homeowners, a closing typically was scheduled during which the homeowner would meet with another co-conspirator who was described as the homeowner’s attorney for the transaction.  The homeowners, who had been led to believe that they were about to receive a loan modification or would be able to transfer their property to a trusted relative, were encouraged to sign documents, which in some cases were blank.  Unbeknownst to the homeowners, by signing some of those documents, they were agreeing to sell their homes to a Hillside Business – often Launch Development – and would be forced to vacate their homes soon thereafter.

As part of the fraud, the Hillside Fraud Team often used Uniform Commercial Code liens to coerce victims into participating in these deals.  BOUBERT filed liens on homeowner properties, even when those homeowners owed no debt to a Hillside Business.

After purchasing a property from a homeowner, members of the Hillside Fraud Team typically appeared at the homeowner’s residence and demanded that the homeowner vacate the premises, or commenced eviction proceedings against the homeowner, or both.           

The Hillside Fraud Team generated millions of dollars as a result of their fraudulent scheme.

BOUBERT, MAHARAJ, and REID are each charged with one count of conspiracy to commit wire fraud and bank fraud, which carries a maximum term 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 sentencings of the defendants will be determined by the judge.

Amir Meiri, Mario Alvarenga, and Rajesh Maddiwar have previously been charged in connection with the Hillside Fraud, in the case United States v. Alvarenga, et al., 15 Cr. 627 (ER).

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Mr. Bharara praised the outstanding work of the FBI, SIGTARP, and the New York State Department of Financial Services for their investigative efforts and ongoing support and assistance with the case.

The prosecution of this case is being overseen by the Office’s General Crimes Unit.  Assistant U.S. Attorneys Jaimie L. Nawaday and Andrew M. Thomas are in charge of the case.

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that Westchester businessman SELIM ZHERKA was sentenced today to 37 months in prison on charges that he conspired to make false statements to a bank in order to receive millions of dollars in loans and to file materially false tax returns with the IRS.  ZHERKA pled guilty to the conspiracy on August 27, 2015, before U.S. District Judge Cathy Seibel, who imposed today’s sentence.  In addition to the prison sentence, ZHERKA was ordered to forfeit $5.23 million in ill-gotten gains and to pay a $1.5 million fine.                                                                                                                                                    

U.S. Attorney Preet Bharara said: “Selim Zherka waged a years-long campaign of lies to banks and the IRS to obtain millions of dollars in loans and fraudulently reduce his tax liabilities.  Now he faces prison and the forfeiture of over $5 million.  I want to thank the IRS, the FBI, and the TARP Special Inspector General for their excellent work on this case.”

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

From December 2005 through the present, ZHERKA conspired with others to obtain $63.5 million in loans from Sovereign Bank (now Santander) for the purchase of apartment house complexes in Tennessee by lying about the purchase price of the real estate he was acquiring and the amount of the down payments he was making toward the purchases in question.  In addition, ZHERKA repeatedly submitted fraudulent tax returns to the IRS that overstated depreciation expenses and understated his capital gains for the real estate holding companies in which he was a partner, thereby reducing their tax liabilities.     

Four other individuals have previously pled guilty in White Plains federal court to conspiring with ZHERKA to commit offenses related to the conduct to which ZHERKA pled guilty, and are awaiting sentencing.

In addition to the prison sentence and forfeiture, ZHERKA was ordered to make restitution as follows: $878,871 (plus interest and civil fraud penalties thereon) in federal taxes; $179,634 (plus interest and civil fraud penalties thereon) in New York State Taxes; $207,508 in Connecticut taxes; and $10,373 (plus interest and civil fraud penalties thereon) in Massachusetts taxes; and to pay a fine of $1.5 million.  

SELIM ZHERKA, 48, of Somers, New York, has been detained at the Metropolitan Correctional Center in lower Manhattan since his arrest on August 27, 2014.

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Mr. Bharara praised the outstanding efforts of the IRS, the FBI, the Special Inspector General for the Troubled Asset Relief Program, and the Department of Justice’s Tax Division for their significant assistance in this investigation and prosecution.

This case is being handled out of the White Plains Division.  Assistant United States Attorneys Elliott B. Jacobson and Perry A. Carbone and Special Assistant United States Attorney Andrew J. Kameros are in charge of the case.

            Preet Bharara, the United States Attorney for the Southern District of New York, and Glenn Sorge, acting Special Agent in Charge of U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (“HSI”) New York, announced today the filing of a criminal complaint against ALONZO KNOWLES in connection with KNOWLES’s scheme to sell stolen scripts of upcoming movies and television shows, and the personal identification information and private, sexually explicit videos of celebrities and other professionals in the entertainment, professional sports, and media industries (the “Victims”), all of which KNOWLES obtained by gaining unlawful access to the Victims’ personal e-mail accounts.  KNOWLES was arrested in New York, New York, on December 21, 2015, and charged with one count of criminal copyright infringement and one count of identity theft.  He will be presented later today in Manhattan federal court in the before United States Magistrate Judge Henry B. Pitman.      

            Manhattan U.S. Attorney Preet Bharara stated:  “This case has all of the elements of  the kind of blockbuster script the defendant, Alonzo Knowles, is alleged to have stolen: hacks into celebrities’ private emails, identity theft, and attempts to sell victims’ information to the highest bidder.  Unfortunately, these circumstances are all too real.  I want to thank HSI for their quick work to stop Knowles’s alleged intrusions and his efforts to profit from the information he stole.”  

            Acting Special Agent in Charge Glenn Sorge stated:  “This arrest brings down an alleged email hacking scheme that targeted many individuals including some in the entertainment industry.  As cyber-crime becomes more pervasive, this operation embodies HSIs commitment to target those who use the cyber world for illegal financial gain.”

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

            In early December 2015, representatives of an American premium cable and satellite television network (“TV Network-1”) were informed by the executive producer (the “Executive Producer”) of a popular drama television series airing on TV Network-1 (“TV Series-1”) that an individual may have obtained unauthorized access to scripts of the upcoming season of TV Series-1.  In particular, a popular radio host (“Witness-1”) had contacted the Executive Producer because Witness-1 had received an unsolicited offer, by email, from an individual who offered to sell Witness-1 scripts of upcoming episodes of TV Series-1.  That individual was later identified as KNOWLES.  Thereafter, at the direction of law enforcement, Witness-1 introduced KNOWLES to an undercover law enforcement agent (the “UC”) who expressed interest in purchasing the scripts.

            In videoconference calls in December 2015, KNOWLES claimed to the UC that he had “exclusive content” that was “really profitable” and worth “hundreds of thousands of dollars.”  KNOWLES stated that he obtained the material directly from the Victims without their knowledge, and claimed to be able to acquire additional material from other celebrities and entertainment, sports, and media industry professionals.  KNOWLES showed the UC a list of the e-mail addresses and phone numbers of at least 130 such individuals that he had in his possession. 

            KNOWLES also offered to sell the UC sexually explicit images and videos that KNOWLES had stolen from the personal e-mail accounts of such individuals, certain of whom KNOWLES specifically identified to the UC.  As an example, KNOWLES provided the UC with images and a video clip that he had stolen from the personal email account of another radio host (“Victim-5”) that had been sent to Victim-5 by another individual.  In addition, after the UC inquired whether KNOWLES could obtain the personal identification information of celebrities, KNOWLES provided the UC with a copy of the passport, Social Security Number, and other personal identification information of a particular film actor.  In addition, KNOWLES offered to sell the UC “a very popular A list celebrity ssn along with 30 unreleased tracks towards their upcoming album.”

            On December 21, 2015, during a meeting with the UC in New York, New York, KNOWLES claimed to use two different methods to gain unlawful access to Victims’ email accounts.  One method, according to KNOWLES, involved sending a “virus” to the Victim’s computer which enabled KNOWLES to access it.  The other method involved KNOWLES emailing a false notification to the Victim stating that the Victim’s email account had been hacked, and asking for the Victim’s passcodes.  Either way, once KNOWLES had successfully accessed the Victim’s e-mail account, KNOWLES, unbeknownst to the Victim, changed the settings in the Victim’s e-mail account in order to maintain ongoing access to it. 

            During the December 21, 2015, meeting, KNOWLES attempted to sell to the UC, in exchange for $80,000, approximately 15 movie and television scripts that he had unlawfully obtained from the Victims, and KNOWLES also provided the UC with the Social Security Numbers of three professional athletes and a movie actress, whereupon KNOWLES was arrested.

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            KNOWLES, 23, of Freeport, Bahamas, is charged with one count of felony criminal copyright infringement, which carries a maximum sentence of five years in prison, and one count of identity theft, which carries a maximum sentence of five years.  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 outstanding investigative work of the HSI.  Mr. Bharara also noted that the investigation remains ongoing.

            The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorney Kristy J. Greenberg is in charge of the prosecution.

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that JONATHAN CUNEY, of East Greenbush, New York, was sentenced today in White Plains federal court to 37 months in prison for transporting and selling firearms with obliterated serial numbers while he was a licensed firearms dealer.  CUNEY pled guilty on June 1, 2015.  He was sentenced today by U.S. District Judge Vincent L. Briccetti.

U.S. Attorney Preet Bharara said:  “Regulations governing firearms dealers and the sale of firearms are critically important to public safety.  Jonathan Cuney flouted these regulations and intentionally introduced nearly two dozen untraceable firearms into the streets.  Fortunately, Cuney was caught and convicted before more illegal guns could endanger our neighborhoods.”

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

CUNEY was a Federal Firearms License holder, which allowed him to manufacture, import, and sell firearms.  However, on multiple occasions between April 2013 and July 2014, CUNEY personally obliterated the serial numbers from firearms, and sold 22 of those firearms, including to an undercover Special Agent with the Bureau of Alcohol, Tobacco, Firearms and Explosives. 

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In addition to the prison term, CUNEY, 32, of East Greenbush, New York, was also sentenced to two years of supervised release.

Mr. Bharara praised the investigative work of the Bureau of Alcohol, Tobacco, Firearms and Explosives, and thanked the Town of New Windsor Police Department for its assistance.

The case is being handled by the Office’s White Plains Unit.  Assistant United States Attorney Daniel P. Filor is in charge of the prosecution.