Southern District of New York
Press releases recorded for this federal judicial district.
Member of Al Qaeda in the Arabian Peninsula Pleads Guilty in Manhattan Federal Court to Terrorism ChargesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, John P. Carlin, Assistant Attorney General for National Security, 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.
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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.
Three Bronx Men, Including A Corrections Officer, Charged in Manhattan Federal Court with Armored Car Robbery ConspiracyRead the Press Release
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.
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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.
Three Investment Professionals Arrested and Charged in Manhattan Federal Court in Connection with Sophisticated Scheme to Defraud InvestorsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and 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.
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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.
Seven New York National Guard Soldiers Charged in Fraudulent Recruitment Bonus SchemeRead the Press Release
Preet Bharara, United States Attorney for the Southern District of New York, Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and William J. Bratton, Commissioner of the New York City Police Department (“NYPD”), announced today the 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.
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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:
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CELESTE, 29, Bronx, New York, currently a Staff Sergeant in the National Guard
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ARIZAGA, 41, Bronx, New York, currently a Staff Sergeant in the National Guard
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ADAMES, 43, Bronx, New York, currently a Sergeant in the National Guard
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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.
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Former Chief of Mount Pleasant Police Department Sentenced in White Plains Federal Court for Possession of Child PornographyRead the Press Release
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.
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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.
Eight Members and Associates of Violent Mount Vernon Street Gang Known as “Boss Playa Family” or “BPF” Charged in Superseding Indictment with Racketeering OffensesRead the Press Release
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.
Fourteen Plead Guilty in White Plains Federal Court to Participating in Massive Oxycodone and Heroin Conspiracy in and Around Rockland CountyRead the Press Release
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
Twenty Charged in Manhattan Federal Court with Narcotics Conspiracy in the BronxRead the Press Release
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.
Three Individuals Charged in Manhattan Federal Court with Multimillion-Dollar Scheme to Deceive Homeowners into Selling Their HomesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), 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).
* * *
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.
Selim Zherka, Westchester Businessman, Sentenced in White Plains Federal Court to 37 Months for Conspiring to Make False Statements to A Bank and to File Materially False Federal Tax ReturnsRead the Press Release
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.
Manhattan U.S. Attorney Announces Charges Against Bahamas Man for Unlawfully Accessing Celebrities’ Email Accounts to Steal and Sell Upcoming Movie and Television Show Scripts, Personal Identification Information, and Private VideosRead the Press Release
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.
Licensed Firearms Dealer from East Greenbush Sentenced in White Plains Federal Court for Illegally Trafficking Firearms with Obliterated Serial NumbersRead the Press Release
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.
Former Morgan Stanley Financial Adviser Sentenced in Manhattan Federal Court for Illegally Accessing Confidential Client InformationRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that GALEN MARSH was sentenced to three years’ probation and ordered to pay $600,000 in restitution for obtaining confidential client information from his employer, Morgan Stanley, by gaining unauthorized access to certain of Morgan Stanley’s computer systems. MARSH pled guilty on September 21, 2015, to an Information charging him with exceeding his authorized access to Morgan Stanley’s computer systems and was sentenced today by United States District Judge Kevin Thomas Duffy.
According to the Information, other submissions filed in Manhattan federal court, and other statements made in open court:
MARSH was employed in the private wealth management division of Morgan Stanley, initially as a Customer Service Associate (“CSA”) and then as a Financial Advisor (“FA”). In that capacity, MARSH worked as part of a group of CSAs and FAs at Morgan Stanley’s Manhattan office (the “Group”) that provided financial and investment services to particular private wealth management clients. Other similarly structured groups within the private wealth management division provided the same services to Morgan Stanley’s other private wealth management clients (together with the Group’s clients, the “Clients”).
Morgan Stanley maintained certain computer systems to manage confidential account information regarding the Clients. Like other FAs and CSAs, MARSH was authorized to access the Client information maintained in Morgan Stanley’s computer systems only with respect to Clients of his own Group. From June 2011 through December 2014, MARSH used Morgan Stanley’s computer systems to access, without permission or authority, confidential information about certain Clients serviced by FAs and CSAs outside of his Group. In order to obtain this unauthorized access to confidential Client information, MARSH used the identification numbers of other Morgan Stanley branches, groups, and FAs in the computer systems. MARSH conducted a total of approximately 6,000 unauthorized searches in the computer systems, and thereby obtained confidential Client information, including names, addresses, telephone numbers, account numbers, fixed-income investment information, and account values, of approximately 730,000 Client accounts. Over a series of dates from June 2011 through December 2014, MARSH uploaded the confidential Client information from Morgan Stanley to a personal server at his home in New Jersey.
MARSH illegally accessed the Bank’s confidential client information in order to use it for his personal advantage as a private wealth management adviser at the Bank. From October 2013 through December 2014, MARSH was engaged in discussions regarding potential employment with two other financial institutions that are competitors of the Bank.
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As part of the sentence imposed today by Judge Duffy, MARSH, 31, of Hoboken, New Jersey, was ordered to forfeit certain computer hardware that he used in the commission of the offense and to pay restitution to Morgan Stanley in the amount of $600,000.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Christine Magdo is in charge of the prosecution.
Statement of U.S. Attorney Preet Bharara on Letter to New York City Department of Education About Noncompliance with ADARead the Press Release
“This morning, my Office issued a letter to the New York City Department of Education setting forth the findings of our investigation into the physical accessibility of New York City public elementary schools. Our investigation revealed that, 25 years after the passage of the Americans with Disabilities Act, the City is still not fully compliant, and children with disabilities and their families are being denied the right to equal access to a public school education. We have asked the City for a response, including an outline and timeline of corrective actions that will remedy this unacceptable state of affairs.”
Recidivist Securities Fraud Defendant Extradited and Charged in Manhattan Federal Court in Connection with Market Manipulation and Scheme to DefraudRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Philip R. Bartlett, Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced the unsealing of an Indictment against EDWARD DURANTE, a/k/a “Ted Wise,” a/k/a “Efran Eisenberg,” a/k/a “Yulia,” a/k/a “Ed Simmons,” charging him with conspiracy, securities fraud, wire fraud, money laundering, and perjury stemming from a scheme, between 2009 and March 2015, to defraud at least 100 investors of more than $14 million, more than $9 million of which was funneled to DURANTE, his family, or co-conspirators. DURANTE executed the scheme – which centered around a publicly-traded Over-The-Counter company called VGTel, Inc. (“VGTL”) – through false and misleading representations about how private investor monies would be used, making material omissions in connection with the sale of VGTL securities, and through manipulation of the public market in VGTL’s stock. DURANTE, who was previously convicted of similar charges in this District in 2001 and was released from prison in 2009, arrived in the United States yesterday following his extradition from Germany. DURANTE was presented today in federal court in Manhattan before United States Magistrate Judge Henry B. Pitman. The case is assigned to U.S. District Judge Andrew L. Carter, Jr.
In a separate action, the U.S. Securities and Exchange Commission (“SEC”) announced civil charges against DURANTE.
U.S. Attorney Preet Bharara said: “As alleged, Edward Durante no sooner got out of prison from a prior securities fraud conviction than he started another fraud scheme. Picking up where he left off, Durante allegedly lied to investors about how their money would be used, and concealed his manipulation of the market for a publicly traded stock. Edward Durante now stands charged with securities fraud yet again.”
FBI Assistant Director-in-Charge Diego Rodriguez said: “Durante tricked his victims into thinking their money would be invested as promised. Instead, he allegedly used their investments to fund his own lavish lifestyle. Unlike Durante, the FBI and our partners intend to keep the promises we make to those who invest their faith in us. Those who employ schemes to capitalize on the pain and suffering of others will most certainly be brought to justice.”
USPIS Inspector-in-Charge Philip R. Bartlett said: “Through lies and manipulation, Durante and his co-conspirators devised an egregious scheme with the sole purpose of stealing from investors; a classic case of greed overcoming honest business practices. Postal Inspectors remind investors that whenever great returns are offered, an abundance of caution should be exercised to avoid becoming a victim of a scam.”
According to the allegations in the Indictment unsealed today in Manhattan federal court,[1] and statements made in court proceedings:
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 and his co-conspirators fraudulently induced victims to invest in VGTL by, among other things, lying to investors by representing that their investments would be used to fund the operations and growth of VGTL, when in reality their investments were used to personally benefit DURANTE and his co-conspirators. DURANTE also fraudulently induced private investments in VGTL by (a) lying to certain prospective investors about DURANTE’s true identity; (b) failing to disclose to prospective investors that DURANTE had previously been convicted of federal securities fraud violations; and (c) failing to inform certain prospective investors, when they were solicited by brokers to purchase VGTL, that they were purchasing VGTL shares from entities controlled by DURANTE and his associates, rather than from the issuer, and for which entities the brokers were acting as agents. Throughout this time, DURANTE used multiple aliases in connection with his oral and written communications with investors, including “Ted Wise,” “Efran Eisenberg,” and “Yulia.”
In order to fund his illegal scheme, DURANTE used a network of brokers and/or investment advisers (the “brokers”) across the country to recruit investors to buy shares of VGTL, including from California, the Midwest, New York, and Boston. The brokers used different tactics to entice investors. While certain investors knew they were investing in VGTL, the broker typically did not disclose that DURANTE had previously been convicted of securities fraud and other crimes and also misled investors about conflicts of interest and self-dealing that arose when brokers, who were paid by or associated with entities controlled by DURANTE and his associates, solicited investors to purchase VGTL shares without disclosing that the investors were actually purchasing shares directly from these DURANTE-controlled entities. In still other cases, the broker purchased VGTL stock without the permission of the victim investors.
Manipulation of the Market for Shares of VGTL
Aware that increased trading volume in publicly traded VGTL stock would make it more attractive to buyers and investors of private shares of VGTL, DURANTE’s scheme also included an effort to artificially inflate the price of publicly traded VGTL shares in order to create the appearance of greater demand for VGTL shares than actually existed. To pump up VGTL’s stock price, DURANTE caused others to engage in transactions in which accounts under DURANTE’s control bought or sold VGTL stock, while on the same day other accounts under DURANTE’s control took the opposite position. The result of these transactions was that DURANTE and his co-conspirators were effectively taking both sides of a single transaction in VGTL stock in order to artificially inflate the trading volume in VGTL stock as well as its price. In turn, the inflated price fueled DURANTE’s ability to raise private funds for VGTL. In total, Durante pocketed more than $9 million from investor funds, which he caused to be funneled to himself, his family, and his co-conspirators.
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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. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the work of the FBI and the Postal Inspection Service, and thanked the Securities and Exchange Commission for its assistance. He also thanked the United States Marshals Service for their efforts in achieving DURANTE’s extradition. He added that the investigation is continuing.
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 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.
Sullivan County Man Charged in White Plains Federal Court with Distribution of Heroin and Fentanyl Causing the Death of an IndividualRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), James R. Farrell, the Sullivan County District Attorney, and Scott Kinne, the Chief of the Village of Liberty Police Department, announced the filing of a Superseding Indictment charging that TERRENCE JOHNSON, 23, of Sullivan County, distributed heroin and fentanyl, and that the use of the fentanyl caused the overdose death of Malcolm Perry, 35, a resident of Liberty, New York. The Superseding Indictment also charges JOHNSON with multiple additional counts of distributing heroin and fentanyl, conspiring to distribute heroin, and conspiring to distribute crack cocaine. JOHNSON was charged in an initial indictment filed in June 2015, and was previously taken into custody. The Superseding Indictment adds, among other things, the charge against JOHNSON for distributing heroin and fentanyl that resulted in Perry’s death. The case is assigned to U.S. District Judge Cathy Seibel.
U.S. Attorney Bharara stated: “As alleged, Terrence Johnson sold fentanyl-laced heroin in Sullivan County on multiple occasions, including the lethal mixture that killed Malcolm Perry. The heroin epidemic is on the rise and too often having deadly consequences. Thanks to the work of federal, state, and local law enforcement and the Sullivan County DA’s Office, one alleged drug dealer, Terrence Johnson, will be held to account for peddling this poison.”
Sullivan County District Attorney James R. Farrell stated: “I am pleased that our partners in law enforcement on the federal level have used the laws at their disposal to hold accountable a purveyor of dangerous drugs that plague the Sullivan County community. Mr. Perry’s untimely death is one of many losses we, as a community, have suffered as a result of the distribution of heroin and fentanyl by those who seek to profit from others’ addictions. This indictment demonstrates the benefit to Sullivan County that results from combining our resources with those of the federal government, and evaluating laws available on the state and federal levels to determine the best method of prosecution for offenders like this. Without this teamwork, this defendant may not have been charged with acts resulting in Mr. Perry’s death, because of the lack of laws on the state level which contemplate such conduct. I am proud of the partnership between my office, our local law enforcement agencies, federal law enforcement agencies, and the United States Attorney’s Office, and I look forward to our continued collaboration. I applaud Mr. Bharara’s decision to move forward on these charges.”
FBI Assistant Director-in-Charge Rodriguez stated: “Those who engage in the distribution of illegal drugs destroy our communities and ruin lives. In this case, Johnson’s actions were directly responsible for the overdose death of another individual. The FBI and our partners will aggressively pursue any person or organization suspected of bringing these toxic substances to our streets.”
Village of Liberty Police Chief Scott Kinne stated: “I will do everything in my power and use every resource at my disposal to eliminate heroin and fentanyl from the streets of the Village of Liberty, the ongoing cooperation between my department, our local law enforcement partners, federal law enforcement agencies, the Sullivan County District Attorney’s Office and the United States Attorney’s Office should send a clear message to those who continue to threaten the public safety by distributing dangerous drugs: We will stay the course in our endeavor to detect, investigate and apprehend you and bring you to justice.”
According to the allegations in the Superseding Indictment and other information in the public record,[1] on multiple occasions between May 28, 2015, and June 6, 2015, JOHNSON sold heroin mixed with fentanyl in Sullivan County. Fentanyl is a synthetic opioid that is significantly stronger than both ordinary heroin and morphine. One of those sales occurred on or about June 1, 2015. The fentanyl in the drugs sold by Johnson on June 1 caused the death of Malcolm Perry. If convicted of the offense of distributing controlled substances that resulted in death, as charged in Count Four of the Superseding Indictment, JOHNSON faces a mandatory minimum sentence of 20 years in prison, and a maximum sentence of life in prison.
The nine-count Superseding Indictment also charges JOHNSON with multiple counts of distribution and possession with intent to distribute controlled substances, in violation of Title 21, United States Code, Sections 812, 841(a)(1), and 841(b)(1)(C) (Counts One through Three and Counts Five through Seven); conspiring to distribute 100 grams or more of heroin, in violation of Title 21, United States Code, Sections 846 (Count Eight); and conspiring to distribute 280 grams or more of crack cocaine, in violation of Title 21, United States Code, Section 846 (Count Nine).
A chart containing the charges and maximum penalties for each of the counts is set forth below. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
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Mr. Bharara praised the outstanding investigative work of the FBI, the Village of Liberty Police Department, the New York State Police, the Sullivan County Sheriff’s Department, and the Village of Monticello Police Department. Mr. Bharara also thanked the Sullivan County District Attorney’s Office for its assistance in the case.
The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Anden Chow and Michael Gerber are in charge of the prosecution.
The charges contained in the Superseding Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
CHARGE
MAXIMUM PENALTY
Counts One, Two, Three, Five, Six, and Seven
Distribution and Possession with Intent to Distribute controlled substances, in violation of Title 21, United States Code, Sections 812, 841(a)(1), and 841(b)(1)(C)
20 years in prison for each count
Count Four
Distribution of controlled substances resulting in death, in violation of Title 21, United States Code, Sections 812, 841(a)(1), and 841(b)(1)(C)
Life in prison
Mandatory minimum: 20 years in prison
Count Eight
Conspiracy to distribute and possess with intent to distribute 100 grams or more of heroin, in violation of Title 21, United States Code, Section 846
40 years in prison
Mandatory minimum: Five years in prison
[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.
Manhattan U.S. Attorney and FBI Assistant Director Announce Charges Against Leaders of Bronx Heroin Organization in Connection with Overdose Death of Vermont Man and Attempted Murder of Rival Drug TraffickerRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the filing of an indictment charging RAMON CRUZ, a/k/a “Guille,” and FRANCHESCA MORALES, a/k/a “Checa,” with conspiring to distribute heroin from 2010 through 2015, including trafficking heroin from the Bronx to Rutland, Vermont, which caused the death of a Vermont man (the “Victim”). CRUZ, MORALES, and JONATHAN SANTIAGO have also been charged with possessing firearms in connection with their attempt to murder a rival drug dealer. SANTIAGO was also charged with participating in the heroin conspiracy, as was NAJON FLANDERS, a dealer for CRUZ and MORALES.
CRUZ and MORALES were previously arrested on December 2, 2015, on a complaint. They will be arraigned on December 29, 2015, in magistrate’s court. SANTIAGO and FLANDERS are in state custody on unrelated charges and will now be transported to federal custody to face the charges filed today.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Ramon Cruz and Franchesca Morales pumped massive quantities of heroin, not only to the streets of the Bronx, but to rural communities as far north as Rutland, Vermont. The defendants’ alleged heroin dealing led not only to the tragic overdose death of a Vermont man, but also a deadly gun battle with a rival drug dealer. Heroin is on the rise, both in our cities and in rural communities, but so is law enforcement’s effort to combat it. Today’s charges reflect the commitment of my office and our law enforcement partners to pursue and prosecute drug traffickers who are fueling the growing heroin epidemic.”
FBI Special Agent in Charge Diego Rodriguez said: “As alleged, the defendants used their name, ‘Flow Heroin Organization,’ not only in the marketing of their drug bags stamped with the word ‘Flow,’ but also as a business plan by trafficking heroin all the way from the Bronx to Vermont. In their wake they left gun violence to protect their territory and at least one known overdose victim. The FBI will continue to aggressively investigate and work with our law enforcement partners to disrupt and dismantle such violent criminal organizations that threaten the innocent members of our community.”
According to the allegations contained in the Indictment returned today in Manhattan federal court[1]:
Beginning in 2010 and up to December 2015, CRUZ, the leader of the Flow Heroin Organization (“Organization”), received kilogram-quantities of heroin from various suppliers. CRUZ and multiple workers broke down the heroin into smaller quantity “bundles,” containing individual baggies of heroin, which primarily bore the stamp “Flow.” SANTIAGO was, in 2010, a street deputy for CRUZ responsible for heroin sales. After SANTIAGO’s arrest in 2010, MORALES replaced him, although SANTIAGO continued to oversee MORALES from prison. From 2010 through 2015, CRUZ, MORALES, and SANTIAGO relied on street-level dealers, typically members of a gang (“Gang-1”), who sold the heroin to addicts in the Bronx. FLANDERS was one of the street level dealers.
In early 2012, the Organization began distributing Flow heroin in Rutland, Vermont. CRUZ and MORALES used various co-conspirators, including FLANDERS, to transport the heroin to Rutland and recruit street level heroin addicts to sell the heroin for them. On August 28, 2012, one of these co-conspirators provided Flow heroin to a local dealer, who in turn sold some of the Flow heroin to the Victim on the morning of August 29, 2012. The Victim then used the Flow heroin and later died of a heroin overdose. Even after the Victim died, and, indeed, despite knowing that their heroin had caused his death, CRUZ and MORALES continued to traffic large quantities of Flow heroin from the Bronx to Rutland.
The Organization also engaged in acts of violence to protect its territory and its members. In particular, in 2015, members of the Organization made efforts to shoot and kill a rival narcotics dealer (the “Rival”) who is a member of a gang (“Gang-2”) that is a rival to Gang-1. On October 31, 2015, the Rival fired shots at a group of individuals that included MORALES and another member of the Organization. CRUZ and SANTIAGO urged MORALES to kill the rival in retaliation, and CRUZ provided MORALES with a gun for this purpose. On November 1, 2015, MORALES, along with other members of the Organization, including a member of Gang-1 (“Victim-2”), fired shots at the Rival. Weeks later, on November 24, 2015, the Rival shot and killed Victim-2. Subsequent to this homicide, CRUZ and MORALES attempted to locate the Rival, who was in hiding, to murder him. On November 30, 2015, MORALES believed she had located the Rival; she and CRUZ armed themselves, met, and went to kill the Rival, but did not succeed.
CRUZ and MORALES were arrested the next day, December 1, 2015. Law enforcement seized a loaded gun from CRUZ’s apartment and a second loaded gun inside a hidden compartment in MORALES’s car. In connection with the arrest, law enforcement also seized hundreds of grams of heroin, the Flow heroin “stamp,” and tens of thousands of dollars.
CRUZ, 51, of the Bronx, New York, and MORALES, 27, of the Bronx, New York, are each charged with one count of conspiracy to distribute heroin that resulted in a death, which carries a maximum sentence of life in prison, and one count of possession of a firearm that was discharged during a drug trafficking crime, which carries a maximum sentence of life in prison.
SANTIAGO, 28, of the Bronx, New York, is charged with conspiracy to distribute heroin, which carries a maximum sentence of life in prison, and one count of possession of a firearm that was discharged during a drug trafficking crime, which carries a maximum sentence of life in prison.
FLANDERS, 25, of Orange County, New York, is charged with conspiracy to distribute heroin, which carries a maximum sentence of life in prison.
The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentences imposed on the defendants will be determined by the Court.
Mr. Bharara thanked the FBI’s New York Field Division, the New York City Police Department, the New England Division of the Drug Enforcement Administration, the Rutland, Vermont, Police Department, New York State Department of Correctional Services, and the U.S. Attorney’s Office for the District of Vermont for their work on the investigation.
The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Russell Capone, Robert Allen, and Shawn Crowley 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.
Manhattan U.S. Attorney and FBI Assistant Director Announce Arrest of Former Lawyer Stuart Schlesinger for Defrauding Clients of More Than $3 MillionRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced the arrest of STUART SCHLESINGER for defrauding his clients by failing to pay them millions of dollars in personal injury settlements that SCHLESINGER had obtained on their behalf. SCHLESINGER was arrested today by the FBI in Westhampton, New York, and was presented in Manhattan federal court before Chief U.S. Magistrate Judge Frank Maas.
Manhattan U.S. Attorney Preet Bharara stated: “As alleged, Stuart Schlesinger violated the trust of his clients – and the oath he took as an attorney – by lying about the proceeds of his clients’ settlements and keeping the funds for himself. Schlesinger’s alleged actions and greed victimized those already in difficult situations. Thanks to the FBI’s diligent investigation, Schlesinger will now have to answer for his crimes in federal court.”
Assistant Director-in-Charge Diego Rodriguez stated: “As alleged, Schlesinger was supposed to provide legal services for personal injury cases - not take more than $3 million in settlements proceeds to pay his personal expenses. Today’s arrest is a step forward in restoring the public’s trust and a reminder that this type of dishonorable behavior will not go unpunished.”
According to the allegations in the criminal Complaint,[1] SCHLESINGER was a named partner at the law firm of Julien & Schlesinger, P.C., until his disbarment by the New York State Appellate Division, First Judicial Department, on or about September 15, 2015. From at least October 2008 to in or about December 2015, SCHLESINGER executed a scheme to defraud his clients by failing to pay them the proceeds from personal injury settlements that SCHLESINGER had obtained on their behalf. As part of the scheme, SCHLESINGER falsely represented to his clients, by means of telephone calls and e-mail communications, that he had not yet received settlement proceeds and that he was unable to distribute settlement proceeds because of ongoing litigation involving the clients’ cases. In reality, SCHLESINGER deposited settlement proceeds into his law firm’s bank account and then transferred those funds to an operating account to pay the law firm’s expenses and his own personal expenses.
The complaint alleges that SCHLESINGER defrauded at least eight victims of over $3 million in settlement proceeds.
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The Complaint charges SCHLESINGER, 75, of Westhampton, New York, with one count of wire fraud, in violation of Title 18, United States Code, Section 1343, 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.
Mr. Bharara praised the FBI’s outstanding investigative efforts. Mr. Bharara also thanked the Departmental Disciplinary Committee of the New York Appellate Division, First Judicial Department, for its assistance in this investigation.
The case is being prosecuted by the Office’s General Crimes Unit. Assistant U.S. Attorney Matthew Laroche is in charge of the prosecution.
The charge in the Complaint constitutes merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Defendant Sentenced in Manhattan Federal Court to 30 Years in Prison for Shooting at Police Officer and Murdering A 19-Year-Old VictimRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that DARREN MORRIS was sentenced yesterday in Manhattan federal court to 30 years in prison on firearms charges relating to a July 2009 Bronx murder and a November 2009 attempted shooting of a New York City Police Department (“NYPD”) police officer.
Manhattan U.S. Attorney Preet Bharara said: “As part of a Bronx robbery crew, Darren Morris lived a life of violence, including participating in a July 2009 murder and a November 2009 attempted shooting of a police officer. With his conviction and sentence, Morris will no longer pose a threat to the safety of the Bronx community he once terrorized.”
MORRIS was originally charged in September 2011 with robbery and firearms offenses, in connection with his involvement in an attempted home invasion robbery and subsequent police shooting occurring on or about November 2009. During the robbery, MORRIS struck one of the victims in the head with a gun, causing the gun to discharge one round. While fleeing the scene of the robbery, MORRIS also fired several shots at a police officer who pursued him. Two other defendants, Michael Campbell and Alphonso Campbell, were also charged in connection with the attempted robbery.
In January 2013, the United States Attorney’s Office obtained a 24-count Superseding Indictment charging nine defendants, including MORRIS and Michael Campbell, in a wide-ranging robbery conspiracy, and numerous robbery, attempted robbery, carjacking, and firearm charges. As part of that Superseding Indictment, Michael Campbell and Patrick Lewis were charged in the December 26, 2010, murder of victim Patrick Woodburn, 20, of the Bronx, in the area of 3527 Mickle Avenue in the Bronx. The Superseding Indictment alleged that MORRIS, Lewis, Michael Campbell, and other members of their Bronx robbery crew committed a number of armed robberies of drug traffickers and commercial businesses between approximately 2009 and 2012.
Further investigation revealed that MORRIS and Michael Campbell participated in the shooting and murder of victim Jordan Jones, 19, of the Bronx, on or about July 5, 2009, in the area of Monticello Avenue and Nereid Avenue in the Bronx. On March 18, 2014, the United States Attorney’s Office obtained another Superseding Indictment, adding murder charges against MORRIS relating to the killing of Jones.
On February 11, 2014, Michael Campbell pled guilty to participating in the murders of both Woodburn and Jones. On July 1, 2014, the Honorable John F. Keenan sentenced Michael Campbell to 30 years in prison. On February 18, 2014, Lewis pled guilty to participating in the murder of Woodburn, and to his involvement in the charged robbery conspiracy. On September 17, 2014, Judge Keenan sentenced Lewis to 25 years in prison. A number of the other charged members of the robbery crew also pled guilty, and received lengthy sentences (a full table follows).
On September 23, 2014, MORRIS pled guilty to two firearm counts, and admitted during his plea allocution to discharging his firearm during his flight from an attempted home invasion robbery in November 2009, and to shooting and killing Jones in July 2009 in connection with an ongoing dispute with a rival criminal group. On December 16, 2015, Judge Keenan sentenced MORRIS to 30 years in prison in relation to those offenses.
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A chart containing the names, charges of conviction, sentencing dates, and sentences imposed on each defendant is attached.
Mr. Bharara praised the investigative work of the NYPD and the Bureau of Alcohol, Tobacco, Firearms and Explosives.
The case is being prosecuted by the Office’s Violent and Organized Crimes Unit. Assistant United States Attorneys Christopher J. DiMase and Jessica Masella are in charge of the prosecution.
U.S. v. Darren Morris, et al.
DEFENDANT
CHARGES OF CONVICTION
SENTENCE DATE
SENTENCE
DARREN MORRIS
Use of a Firearm In Furtherance of a Crime of Violence (2 counts)
December 16, 2015
30 years
MICHAEL CAMPBELL
Use of a Firearm In Furtherance of a Crime of Violence (2 counts)
July 1, 2014
30 years
PATRICK LEWIS
Use of a Firearm In Furtherance of a Crime of Violence & Robbery Conspiracy
September 17, 2014
25 years
JAMAL FRAZER
Use of a Firearm In Furtherance of a Crime of Violence & Robbery Conspiracy
February 25, 2014
154 months
TYRIEK SKYFIELD
Use of a Firearm In Furtherance of a Crime of Violence
January 30. 2014
10 years
PRINCE WAREHAM
Use of a Firearm In Furtherance of a Crime of Violence
January 30, 2014
7 years
RASHID TURNER
Use of a Firearm In Furtherance of a Crime of Violence
January 31, 2014
7 years
ANTHONY FRANCIS
Robbery
February 24, 2014
6 years
ALPHONSO CAMPBELL
Use of a Firearm In Furtherance of a Crime of Violence
April 3, 2013
5 years
United States Seeks to Forfeit and Return A Tyrannosaurus Bataar Skull Looted from the Gobi Desert in MongoliaRead the Press Release
Preet Bharara, United States Attorney for the Southern District of New York, and 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”), announced today the filing of a civil forfeiture complaint against a Tyrannosaurus bataar skull (the “Bataar Skull”) unlawfully taken from the Gobi Desert in Mongolia. The Bataar skull, a fossil from the Cretaceous period, which ended approximately 65 million years ago, had been auctioned in Manhattan in 2007 after being unlawfully brought into the United States. The current owner of the Bataar Skull, having been informed of its origins and the circumstances of its importation into the United States, has consented to its forfeiture.
The Bataar Skull is the latest addition to a lengthy list of looted dinosaur fossils the United States Attorney’s Office, in conjunction with its law enforcement partners at HSI, has pursued over the past few years. Since 2012, the United States Attorney’s Office for the Southern District of New York has secured through a combination of civil and criminal actions the return and repatriation to Mongolia of several dinosaur fossils that include three full Tyrannosaurus bataar skeletons, a full Saurolophus angustirostris skeleton and another partial Saurolophus, six Oviraptor skeletons, four Gallimimus skeletons, a partial Ankylosaurus skeleton, a Protoceratops skeleton, a composite nest containing miscellaneous dinosaur eggs, and numerous small, unidentified prehistoric lizards and turtles.
Manhattan U.S. Attorney Preet Bharara said: “We are gratified to add the skull of another Tyrannosaurus bataar to the roster of fossils returned to Mongolia. Each of these fossils represents a culturally and scientifically important artifact looted from its rightful owner. Together with our law enforcement partners, we will continue to pursue opportunities to right the wrongs committed when priceless artifacts are stolen.”
Acting Special Agent-in-Charge Glenn Sorge said: “Cultural artifacts such as this Bataar Skull represent a part of Mongolian national cultural heritage. It belongs to the people of Mongolia. These priceless antiquities are not souvenirs to be sold to private collectors or hobbyists. HSI is committed to working closely with our law enforcement partners and the U.S. Attorney's Office to target this illegal activity and return the smuggled items to their countries of origin.”
According to the allegations in the Civil Complaint unsealed today:
The Tyrannosaurus bataar is indigenous to – and has only been unearthed in – a specific portion of the Gobi Desert called the Nemegt Basin, in what is now Mongolia. Mongolian law has long declared dinosaur fossils found within Mongolia to be government property. Their export from Mongolia without permission of the Government of Mongolia is a violation of Mongolian law.
On or about March 25, 2007, a California-based auction house offered the Bataar skull for sale on auction in Manhattan. The Bataar Skull had been shipped into the United States in or around June 2006 with United States Customs documents that described it only as “fossil stone pieces.” At auction, the Bataar Skull was described as native to the “Eurasian continent.” The Bataar Skull sold for approximately $230,000 at auction to an anonymous California-based buyer (the “Buyer”).
In 2015, HSI performed a physical examination of the skull and confirmed that it rightfully belongs to the Government of Mongolia and had been illegally imported into the United States. Upon being informed of the circumstances regarding the Bataar Skull, the Buyer agreed to turn it over to HSI and consented to its forfeiture.
Mr. Bharara praised the investigative work of HSI.
The case is being handled by the Office’s Money Laundering and Asset Forfeiture Unit. Assistant U.S. Attorney Martin S. Bell is in charge of the case.
Two Defendants Sentenced in Manhattan Federal Court to More Than 30 Years in Prison in Connection with 2009 Home Invasion Robbery and MurderRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that ANTOINE BURROUGHS and LEON WHITFIELD were sentenced today in connection with the home invasion robbery and murder of Gerardo Antoniello on September 9, 2009. BURROUGHS and WHITFIELD were each sentenced to nearly 34 years in prison. Both defendants were also required to pay more than half a million dollars in restitution to Antoniello’s mother. Antoniello was killed during the home invasion robbery of his father, Bartolomeo Antoniello, who was targeted for the cash proceeds of the pizza shop he owned in Queens, New York. BURROUGHS and WHITFIELD previously pled guilty before U.S. District Judge Gregory H. Woods, who imposed today’s sentence.
Manhattan United States Attorney Preet Bharara said: “No amount of prison time or restitution will return Gerardo Antoniello to his family. But this significant prison sentence ensures that Antoine Burroughs and Leon Whitfield can’t harm another innocent family.”
In imposing sentence, United States District Judge Woods told the defendants that the crime they committed was “an atrocity” and “an attack on two innocents for the sake of money.”
According to the allegations in the Indictment and statements made at various proceedings in this case, including the guilty pleas:
BURROUGHS and WHITFIELD were hired by Frank LaCorte, an associate of the Gambino Crime Family, to commit a home invasion robbery. On September 9, 2009, BURROUGHS and WHITFIELD attempted to rob Bartolomeo Antoniello at his home in Queens, New York. BURROUGHS and WHITFIELD were targeting the cash proceeds of Antoniello’s pizza shop. Antoniello’s son, Gerardo Antoniello, was home at the time, and attempted to protect his father. BURROUGHS and WHITFIELD brutally beat and pistol whipped the father and son. During the struggle, Gerardo Antoniello was shot in the head and later died of his injuries. He was 29 years old.
Frank LaCorte was convicted in Queens County Court for his role in organizing this and other home invasion robberies and in June 2012 was sentenced to a term of 50 years to life in prison.
Mr. Bharara praised the work of the Federal Bureau of Investigation, the New York City Police Department, the Queens District Attorney’s Office, and the United States Marshals Service.
The case is being handled by the Office’s Violent and Organized Crimes Unit. Assistant U.S. Attorney Rachel Maimin is in charge of the prosecution.
President of Commodities Trading Pool Sentenced in Manhattan Federal Court for Misappropriating Hundreds of Thousands of Dollars of Client FundsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that MICHAEL JAMES SEWARD, president of the now-defunct, unregistered commodities trading pool SK Madison Commodities, LLC (“SK Madison”), was sentenced to 18 months in prison in connection with his misappropriation of approximately $1.3 million of client investor funds. SEWARD pled guilty to a conspiracy to commit securities fraud on August 7, 2015, and was sentenced today by United States District Judge Edgardo Ramos.
SEWARD’s coconspirator, Yan Kaziyev, pled guilty pursuant to a cooperation agreement on June 25, 2014, and awaits sentencing by United States District Judge Paul A. Crotty.
U.S. Attorney Preet Bharara said: “Michael Seward conspired to sweet-talk investors out of their money with promises of double-digit returns from a commodities pool and a purported investment in an Internet company. He lied to investors to lure them in, and then he lied to them to keep them at bay. Now Seward has been sentenced to prison for his deception.”
According to the Indictment and other submissions filed in Manhattan federal court, and other statements made in open court:
From July 2011 through May 2013, SEWARD and Kaziyev, through SK Madison, engaged in a scheme to defraud over 20 individuals by convincing them to invest approximately $1.3 million into the unregistered commodities pool they were operating. To lure investors, SEWARD and Kaziyev made false representations about the success of their pool and, in some cases, about the very nature of the investments they were soliciting.
For example, from around July 2011 to around October 2011, SEWARD and Kaziyev convinced two investors to pay approximately $330,000 to an entity called SK Madison Partners (“SKM Partners”), which these investors understood would be purchasing stock in an Internet social media company. SEWARD, Kaziyev, and another individual took hefty “commissions” for themselves out of the funds and invested the remainder not in any Internet social media company but in the SK Madison commodities trading pool. From there, SEWARD and Kaziyev withdrew yet more of the funds for their own benefit.
To those investors who knew they were investing in SK Madison’s commodities pool, SEWARD and Kaziyev lied about the success the pool had enjoyed. They mailed and emailed false “track record” reports reflecting purported trading profits in most months from August 2011 through dates in 2012 and 2013. These profit figures were fictitious. Even for those months in which the SK Madison pool had turned a profit, the amount of profit bore no relationship to the figure reported in the “track record.” And the “track record” reports reflected trading profits in months in which the pool had in fact suffered significant trading losses. Similarly false profit figures were published to investors through monthly account statements.
In or about the spring and summer of 2013, when confronted by members of the National Futures Association (“NFA”) and the Commodity Futures Trading Commission (“CFTC”) with their large withdrawals from SK Madison’s trading and bank accounts for their own benefit, SEWARD and Kaziyev sought to justify the withdrawals by citing “commissions” of either $55 or $110 per transaction that SK Madison purportedly had charged for operating the commodities pool. In fact, although SK Madison’s prospectus alerted investors that a $55 commission would be levied per completed transaction, the withdrawals that SEWARD and KAZIYEV made and caused to be made from the accounts bore no relationship to the number of trades effectuated in the accounts, and far exceeded what might have been calculated using the $55 commission figure.
* * *
As part of the sentence imposed today by Judge Ramos, SEWARD, 35, of Largo, Florida, was further sentenced to two years of supervised release and was ordered to pay $200,000 in forfeiture and $750,000 in restitution to the victims of the offense.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation and thanked the CFTC, which has filed civil charges in a separate action. Mr. Bharara also thanked the NFA for its assistance in this investigation.
The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit www.StopFraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Sarah Eddy McCallum is in charge of the prosecution.
Manhattan U.S. Attorney Announces $39 Million Civil Fraud Settlement Against Qualitest Pharmaceuticals for Selling Half-Strength Fluoride SupplementsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Scott J. Lampert, Special Agent in Charge of the New York Regional Office for the Office of Inspector General for the Department of Health and Human Services (“HHS-OIG”), and Diego Rodriguez, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Patrick E. McFarland, the Inspector General for the U.S. Office of Personnel Management (“OPM”) announced a $39 million settlement against Vintage Pharmaceuticals, LLC, d/b/a QUALITEST PHARMACEUTICALS; Vintage’S corporate parent Endo Pharmaceuticals, Inc.; and seven of their corporate subsidiaries or affiliates (collectively, “QUALITEST”) in a civil fraud lawsuit. This global settlement resolves federal claims under the False Claims Act, 31 U.S.C. § 3729 et seq., that allege QUALITEST sold chewable fluoride tablets that contained less than half the amount of fluoride ion indicated on the drug label and caused federal healthcare programs to be fraudulently billed for these tablets, and also will resolve numerous state law civil fraud claims.
The Government simultaneously intervened in and settled this lawsuit, which was initially filed by a whistleblower. As alleged in the Government’s intervention papers, QUALITEST violated the False Claims Act by knowingly manufacturing and selling understrength chewable fluoride tablets that were prescribed to children living in communities without fluoridated water supply to prevent tooth decay, and causing Medicaid and the Federal Employees Health Benefits Program to pay millions of dollars for these understrength tablets. Today, U.S. District Judge Denise Cote approved a settlement stipulation to resolve the Government’s claims against QUALITEST. Under that settlement, QUALITEST agrees to pay $22.44 million to the Government to resolve the federal civil fraud claims and make extensive admissions. Further, as part of the global settlement, QUALITEST will pay approximately $16.56 million to the settling states to resolve state law civil fraud claims.
Manhattan U.S. Attorney Preet Bharara said: “The integrity of federal healthcare programs like Medicaid depends on manufacturers telling the truth about their drugs and producing and labelling their drugs accurately. When companies violate that critical obligation, as Qualitest did here by distributing diluted fluoride and then causing health care programs to pay for the full strength tablets, we will pursue them, make them pay damages and admit to their violations.”
HHS-OIG Special Agent in Charge Scott J. Lampert said: “It is shocking that a pharmaceutical company would knowingly distribute diluted fluoride meant to provide preventative dental benefits to children as if it were full strength. We remain committed to investigating companies that put greed over their professional obligations to serve their customers and honestly bill for their products.”
FBI Assistant Director-in-Charge Diego Rodriguez said: “Qualitest knowingly exploited federal healthcare programs and misrepresented the quality of fluoride tablets provided to children in need of these supplements. Today's settlement brings us one step closer to tackling the misuse of public funds.”
OPM Inspector General Patrick E. McFarland said: “Qualitest’s actions are unconscionable and put the health and wellbeing of children at risk. I am proud that we were able to work with our law enforcement partners to hold Qualitest accountable for its offenses. We remain committed to ensuring that the health of Federal employees and their families are protected and that such unscrupulous behavior is caught and punished.”
As part of the settlement, QUALITEST admitted that they manufactured and sold chewable fluoride tablets from 2007 to July 2013 and that they knew federal healthcare programs, including Medicaid, were a significant source of coverage of QUALITEST’s fluoride tablets. QUALITEST also admitted that, since at least 1994, guidelines issued by the American Dental Association and the American Academy of Pediatrics recommended that, to prevent tooth decay, fluoride supplements be prescribed to children living in communities without fluoridated water supply in doses of 1.0 mg, 0.5 mg, or 0.25 mg of fluoride ion per day, depending on a child’s age and the local water fluoridation level. Further, QUALITEST admitted that the drug labeling for their chewable fluoride tablets stated that those tablets contained 1.0 mg, 0.5 mg, and 0.25 mg of fluoride and the drug labeling specifically referenced the guidelines from the American Dental Association and the American Academy of Pediatrics.
However, as QUALITEST’s admissions show, QUALITEST’s manufacturing processes were not designed to produce chewable fluoride tablets that would contain 1.0 mg, 0.5 mg, and 0.25 mg of fluoride ion per tablet. Specifically, as QUALITEST admitted, instead of using the amount of sodium fluoride that would result in the tablets containing the correct amount of fluoride ion, QUALITEST used less than half the appropriate amount of sodium fluoride. As QUALITEST further admitted, this caused children taking the QUALITEST fluoride tablets to receive less than half the amount of fluoride ion recommended by the American Dental Association and American Academy of Pediatrics guidelines.
The allegations of fraud stated in the Complaint were first brought to the attention of the Government by Dr. Stephan Porter, who filed a lawsuit in early 2013 under the qui tam provisions of the False Claims Act. In August 2013, and after the Government began its investigation into the whistleblower’s allegations, QUALITEST stopped making and selling their chewable fluoride tablets. Under the settlement approved earlier today, the Government agreed to pay Dr. Porter approximately $4.71 million pursuant to the False Claims Act’s qui tam provisions.
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The False Claims Act permits the Government to recover up to three times the amount of damages incurred by the United States, in addition to civil penalties ranging from $5,500 to $11,000 per violation. Private parties who have knowledge of fraud committed against the Government may file suit on behalf of the Government and share in any recovery. The United States may then intervene and file its own lawsuit for treble damages and penalties, as it did in this case.
Mr. Bharara praised the extensive investigative work undertaken by HHS-OIG, the FBI, OPM-OIG, and the Food and Drug Administration’s Office of Criminal Investigations, as well as close collaboration by the Medicaid Fraud Control Units for New York and Oregon.
The case is being handled by the Office’s Civil Frauds Unit. Mr. Bharara established the Civil Frauds Unit in March 2010 to bring renewed focus and additional resources to combating healthcare and other types of frauds. Assistant U.S. Attorneys Li Yu and Jean-David Barnea are in charge of the case.
Founder and Portfolio Manager of Canarsie Capital, LLC, Pleads Guilty in Manhattan Federal Court to Securities FraudRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the filing of an Information against OWEN LI, charging him with securities fraud and making a false statement, stemming from LI’s lies to investors and the U.S. Securities and Exchange Commission (“SEC”) regarding the performance of Canarsie Capital, LLC (“Canarsie”) – a hedge fund LI had founded and for which he acted as portfolio manager – which collapsed in January 2015. LI surrendered this morning and pled guilty to the charges before United States Magistrate Judge Frank Maas shortly after the filing of the Information.
In a separate action, the SEC announced civil charges against LI and Canarsie.
U.S. Attorney Preet Bharara said: “As Owen Li has now admitted, he lied to his investors and lied to the SEC. His conduct led to crippling losses for his fund and its investors. Crimes like Owen Li’s taint the entire marketplace and make honest investors wary of investing in securities markets. Thanks to the investigative efforts of the FBI in collaboration with the SEC, Li will be held to account for his deception.”
FBI Assistant Director-in-Charge Diego Rodriguez said: “Owen Li’s multiple unlawful actions as a trader finally caught up with him today as he pleaded guilty to securities fraud and making false statements. The FBI will continue to work with our partners in an effort at ensuring that our financial markets are legal, fair, and equitable.”
According to the two-count Information filed today in Manhattan federal court[1]:
LI founded Canarsie in January 2013 with approximately 10 investors and $16.55 million in assets under management. By the end of 2013, Canarsie had approximately $47.75 million in assets under management, and LI earned over $2.2 million that year. LI raised another $16.8 million in 2014, and at the time of its collapse in January 2015, Canarsie had approximately 41 investors and $56.8 million in assets under management.
According to Canarsie’s offering memorandum (the “Offering Memorandum”), which was provided to investors, Canarsie’s portfolio would be balanced and risk would be managed “through limits on position sizing and market exposure.” Generally no position, whether long or short, would exceed 10% of Canarsie’s assets.
LI Reported Fictitious Trades to His Prime Broker
Canarsie reported Canarsie’s trades daily to its prime broker. At the end of each trading day, the prime broker would match Canarsie’s trade report against trade reports submitted by executing brokers who had filled Canarsie’s orders that day. Mismatches of information concerning trades reported by Canarsie and the executing brokers were considered “trade breaks.”
In March and early April 2014, LI began reporting fictitious “sell” trades to Canarsie’s prime broker at that time (“Prime Broker-1”) as if Canarsie had executed the trades, when, in fact and as LI knew, Canarsie had never actually sold the shares in question. On April 9, 2014, Prime Broker-1 discovered multiple instances from March and early April 2014 in which LI had caused Canarsie to report trades that had not in fact been executed. Specifically, Prime Broker-1 noted that LI had engaged in a pattern of reporting sell trades, particularly in shares of Facebook, Inc. (“Facebook”), to Prime Broker-1, and subsequently canceling the sell trades before the settlement date.
As LI knew, Prime Broker-1 calculated Canarsie’s margin requirement on the basis of trade date, not settlement date. LI’s pattern of booking and cancelling “sell” trades temporarily created the false appearance that the long positions in Facebook and other stocks (and thus the leverage in the account) were diminishing. This allowed Canarsie to (a) avoid a margin call from Prime Broker-1, and (b) avail itself of greater leverage than Prime Broker-1 ordinarily would have extended to Canarsie. Therefore, on April 1, 2014, Canarsie’s account was levered approximately eight times, in that it was employing approximately $377 million of margin with equity of approximately $45 million. In addition, LI had accumulated a position in Facebook that exceeded 10% of Canarsie’s total portfolio, in violation of the risk-management parameters set forth in the Offering Memorandum.
In light of those trade breaks, Prime Broker-1, among other things, forbade Canarsie from using margin and insisted that Canarsie hire a second prime broker, suggesting that eventually the second prime broker would become Canarsie’s sole prime broker in lieu of Prime Broker-1. In a meeting with a prospective second prime broker (“Prime Broker-2”), LI did not inform Prime Broker-2’s representatives that (a) Prime Broker-1 had told Canarsie to find a second prime broker, (b) Prime Broker-1 had withdrawn margin, and (c) if Canarsie established a relationship with Prime Broker-2, Prime Broker-2 would be, in essence, the sole prime broker for Canarsie. In August 2014, Canarsie established a prime brokerage account with Prime Broker-2, and conducted virtually all of its trading through that account from that point on.
LI’s Misstatements to Investors About Canarsie’s Performance
At or around the end of each month, LI and others prepared and sent emails to Canarsie’s investors describing the fund’s performance. Those emails contained an estimated net asset value (“NAV”) and monthly return. Canarsie’s administrator (the “Administrator”) emailed each investor a monthly account statement showing the value of his or her investment and Canarsie’s NAV. On at least two occasions, the estimated NAV supplied by LI and emailed to investors by Canarsie differed materially from the Administrator’s NAV, which appeared in the investors’ monthly statements.
In April 2014, Canarsie suffered approximately $13.6 million in losses and was down approximately 23% from the beginning of the month. However, on or about April 30, 2014, LI falsely told at least one investor that performance was down only nine percent. LI then intentionally delayed approving the correct April NAV, as calculated by the Administrator, because it was significantly worse than the NAV he had reported to investors at the end of April, and lied to investors about the reason for the delayed monthly statement and the reason for the discrepancy.
In December 2014, LI again delayed a monthly statement, this time for November 2014. LI did not approve the preliminary November NAV because it showed losses the fund had incurred toward the end of November and trades that LI had deliberately broken and later canceled or amended. Despite repeated requests from the Administrator, LI delayed approving the November NAV until January 8, 2015, falsely telling the Administrator that he had been in the hospital for a week. LI also falsely told investors who inquired about the November statements that they were late because of staffing changes at the Administrator and the Administrator’s focus on preparing for the annual audit.
On January 9, 2015, LI instructed the Administrator to release the November 2014 statements to investors. LI forwarded the statements to others at Canarsie, informing them that the fund’s November 2014 performance had been worse than the estimate Canarsie had provided to investors. LI falsely told others at Canarsie that the discrepancy was due to a residual amount of money transferred from Canarsie’s account at Prime Broker-1 to the account at Prime Broker-2 on or about November 28, 2014, which was not credited to the account at Prime Broker-2 until December 2014.
LI Misled the SEC Examination Staff
On November 5, 2014, members of the SEC’s Office of Compliance Inspections and Examinations Staff (the “Examination Staff”) conducted a phone interview of LI and others at Canarsie. Among other things, the Examination Staff asked why Canarsie appeared to be moving away from Prime Broker-1 as its prime broker, and conducting virtually all trading activity with Prime Broker-2. LI responded that he had contacts at Prime Broker-2 from his prior employment and certain harder-to-cover stocks were easier to locate through Prime Broker-2 than through Prime Broker-1. LI concealed from the Examination Staff that Prime Broker-1 (a) had withheld margin from Canarsie in or about April and May 2014, and (b) suggested that Canarsie move its prime brokerage relationship elsewhere.
On December 3, 2014, the Examination Staff again interviewed LI, and asked about the Facebook trades cancelled in or about April 2014. LI responded that he had assumed that the brokers executed those orders, and had reported those trades to Prime Broker-1 as executed trades based on that assumption. In fact, LI never placed or transmitted those orders to executing brokers. LI concealed from the Examination Staff that he had fraudulently reported those trades as executions to Prime Broker-2 in an effort to conceal the extent of leverage in the fund and the size of the position in Facebook.
LI Caused Catastrophic Losses in the Fund
In December 2014 and January 2015, LI concealed from investors and others at Canarsie the fact that he was trading the fund in violation of the investment mandates in the Offering Memorandum and that, in doing so, he had placed the fund at excessive risk of catastrophic loss.
The fund’s net account value on or about December 31, 2014, was approximately $59.7 million. Beginning in early January 2015, LI began liquidating the equity long positions in the account – resulting in approximately $18 million in losses – and eliminated all short positions in the fund. At the same time, LI bought short-dated long positions in market index options. The result was an entirely long, unhedged portfolio.
On January 16, 2015, index options prices moved against Canarsie’s positions, resulting in losses of approximately $39 million. At the end of the day on January 16, the account was left with no equity, short, or options positions. As a result of LI’s trading, the fund lost substantially all of its assets between on or about December 31, 2014, and on or about January 16, 2015.
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LI, 29, pled guilty to one count of securities fraud and one count of making a false statement. Count One carries a maximum sentence of 20 years in prison. Count Two carries a maximum sentence of five years in prison. The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the work of the FBI, and thanked the SEC for its assistance.
The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit www.StopFraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Michael Ferrara is in charge of the prosecution.
[1] As the introductory phrase signifies, the entirety of the text of the Information, and the description of the Information set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Brooklyn Man Sentenced in Manhattan Federal Court in Connection with Multimillion-Dollar Ponzi SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that MARCELLO TREBITSCH was sentenced to two years in prison in connection with his operation of a Ponzi scheme that defrauded at least four investors of nearly $6 million over the course of seven years. Among other things, TREBITSCH lied to two of his investors by telling them that he would invest their money through an investment fund that he controlled that would generate double-digit returns with very low risk. To that end, TREBITSCH provided the investors with fake account statements and federal tax forms that reflected significant gains. In reality, TREBITSCH invested only a portion of the investors’ money, suffered enormous trading losses, and used the remainder of the investors’ money for his own personal benefit and to pay back other investors. TREBITSCH pled guilty to a one-count Information charging him with securities fraud on July 13, 2015, and was sentenced today before United States District Judge Vernon S. Broderick.
U.S. Attorney Preet Bharara said: “Marcello Trebitsch purported to be an expert investor, but in reality, he lost much of his victims’ money through poor trading and used the rest for personal gain and to pay old victims with new investors’ money. Trebitsch’s conviction and sentence holds him accountable for his crimes and keeps him from victimizing anyone else.”
According to the Complaint, the Information, other submissions filed in Manhattan federal court, and other statements made in open court:
From 2007 through 2014, TREBITSCH engaged in a multimillion-dollar fraudulent investment scheme, during which he solicited money from investors based on materially false and misleading representations. Specifically, TREBITSCH told the investors that he, through an investment fund that he created called Allese Capital LLC, would (a) create and perfect public shell companies to sell to private companies; (b) execute specific trades at the direction of an investor; and (c) purchase and sell stocks on a daily basis, with little or no money remaining invested in the market at the end of each trading day. In fact, in all cases, TREBITSCH did not invest the money as he said he would, and instead principally used the investors’ money for his own personal benefit, including to repay other investors. With respect to the portion of investor funds that he did use to purchase securities, TREBITSCH suffered net trading losses, which he did not disclose to the investors.
In 2007, TREBITSCH represented to an individual (“Victim-1”) that TREBITSCH would invest Victim-1’s money to perfect shell companies and sell them to private companies for a positive return. TREBITSCH did create and perfect shell companies, but falsely represented to Victim-1 that he sold the shell companies, when, in fact, he had not and instead later used them to create bank accounts through which he wired and concealed proceeds of his scheme.
In 2008, another individual (“Victim-2”) agreed to invest money with TREBITSCH after TREBITSCH promised to simply execute trades as instructed by Victim-2. Instead, TREBITSCH did not invest Victim-2’s money as instructed, and further sent daily account updates by email that were entirely fabricated. After Victim-2 requested a redemption of his investment and purported returns of approximately $3 million, TREBITSCH admitted his fraudulent scheme to Victim-2, informed Victim-2 that TREBITSCH had lost nearly all of the money, and agreed to repay some money to Victim-2 that TREBITSCH obtained from a subsequent investor.
In 2009, TREBITSCH obtained additional investments from another individual (“Victim-3”) by promising to invest in large cap stocks and mitigate risk by selling the entire portfolio at the end of each trading day. Further, TREBITSCH represented that Victim-3 would receive double-digit returns and falsely asserted that a major Wall Street bank had already invested $50 million with TREBITSCH. Rather than invest the money as represented, TREBITSCH used some of Victim-3’s initial investment to repay Victim-2, and further failed to invest the money as promised. Even though TREBITSCH used the money for personal gain, to repay other investors, or lost much of it through poor trading, TREBITSCH sent Victim-3 fake monthly account statements and tax forms, which falsely purported to show double-digit annual returns. Based on these apparent positive returns, Victim-3 invested approximately $6.5 million with TREBITSCH over the course of four years. Of that total investment, TREBITSCH only repaid approximately $2.2 million, some of which was obtained from a subsequent investor.
In 2014, after reviewing Victim-3’s account statements and federal tax forms related to Victim-3’s investment with TREBITSCH, Victim-3’s accountant (“Victim-4”) invested approximately $700,000 with TREBITSCH. None of this money was invested as TREBITSCH promised; rather, it was immediately diverted to Victim-3 to satisfy Victim-3’s redemption request. TREBITSCH never returned any of the $700,000 Victim-4 invested with TREBITSCH.
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As part of the sentence imposed today by Judge Broderick, TREBITSCH, 37, of Brooklyn, New York, was further sentenced to three years of supervised release and was ordered to pay forfeiture and restitution to the victims of the offense in the amount of $5,905,949.
Mr. Bharara praised the work of the Federal Bureau of Investigation.
The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit www.StopFraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Daniel S. Goldman and Amy Lester are in charge of the prosecution.
Staten Island Physician’s Assistant Sentenced in Manhattan Federal Court to 11 Years in Prison for Massive Oxycodone Distribution ConspiracyRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that LEONARD MARCHETTA, a physician’s assistant, was sentenced in Manhattan federal court to 11 years in prison for conspiring to distribute large quantities of oxycodone out of his Staten Island-based medical clinic. MARCHETTA was charged in September 2014 and pled guilty in January 2015 before U.S. District Judge P. Kevin Castel, who also imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara said: “Leonard Marchetta was responsible for the illegal distribution of more than 125,000 medically unnecessary oxycodone pills. With his criminal distribution of highly addictive and dangerous drugs, Marchetta helped fuel the prescription pill epidemic plaguing our community.”
According to the allegations contained in the Indictment and statements made in connection with sentencing:
As a physician’s assistant, MARCHETTA, under the supervision of a physician or surgeon, was able to diagnose and treat illnesses and prescribe medications. From at least 2012 until the time he was arrested, MARCHETTA was employed by and oversaw the day-to-day operations of a Staten Island-based medical clinic (the “Clinic”), which advertised itself to the public as a family medical clinic.
During an approximately three-year period, MARCHETTA prescribed oxycodone to individuals claiming to be “patients,” who had no medical need for oxycodone and no legitimate medical record documenting an ailment for which oxycodone would be prescribed. MARCHETTA’s fee for his participation in the scheme was typically approximately $250 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 150 30-milligram tablets. MARCHETTA also received a separate fee of approximately $500 in cash for each medically unnecessary oxycodone prescription he issued. On a number of occasions, MARCHETTA issued prescriptions in the names of fictitious individuals or individuals whom MARCHETTA never saw in exchange for cash. In total, MARCHETTA wrote medically unnecessary prescriptions for more than 125,000 30-milligram oxycodone pills during a period of approximately three years.
After MARCHETTA issued a medically unnecessary oxycodone prescription in the name of the “patient,” the “patient” was taken or referred to a pharmacy to fill the oxycodone prescription – that is, to obtain the oxycodone tablets – in part for distribution. The patients were paid, typically $150 to $200 in cash, for obtaining and handing over the oxycodone tablets that MARCHETTA had prescribed to them. At times, the “patients,” some of whom were addicted to oxycodone, were paid with oxycodone tablets for their services.
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In addition to his prison term, MARCHETTA, 48, of Staten Island, New York, was sentenced to three years of supervised release, and ordered to pay forfeiture in the amount of $1,870,680. MARCHETTA has been detained since his arrest in September 2014.
Two other defendants, Gregory Zaccagnino and William Tagliaferro, previously pled guilty for their roles in the oxycodone distribution scheme. Zaccagnino was sentenced by Judge Castel to six years in prison. Tagliaferro has yet to be sentenced.
Mr. Bharara thanked the United States Department of Health and Human Services, the New York State Department of Financial Services, and the DEA Tactical Diversion Squad New York (TDS-NY), comprising agents and officers from the DEA, the New York City Police Department, Town of Orangetown Police Department and Westchester County Police Department, for their work in the investigation, which he noted is ongoing.
The case is being prosecuted by the Office’s Narcotics Unit. Assistant U.S. Attorney Edward A. Imperatore is in charge of the prosecution.
Georgia Man Pleads Guilty to Defrauding More Than One Hundred Individuals Through an Online Investment Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that ALEX HAXTON pled guilty today to orchestrating a fraudulent Internet-based investment scheme that victimized more than one hundred individuals. HAXTON pled guilty before U.S. District Judge John G. Koeltl.
According to the allegations contained in the information to which HAXTON pled guilty and statements made during HAXTON’s plea proceeding:
HAXTON was the administrator of a website (the “Website”) that solicited investments on behalf of a company (the “Company”) that HAXTON effectively owned and controlled. As administrator of the Website, HAXTON arranged for representations to be made on the Website advertising its purported investment program. HAXTON also opened and maintained payment processor accounts to receive and disburse funds that individuals provided and expected to be invested in the purported investment program. To incorporate the Company and create the Website, HAXTON used a false Internet protocol address in order to mask his identity because he sought to avoid detection by investors and law enforcement.
Through the Website, HAXTON solicited investments from more than one hundred individuals across the United States and abroad based upon misrepresentations that the investors’ money would be invested in a “High Yield Investment Program,” or “HYIP,” which would invest in shares of start-up companies and generate a guaranteed rate of return of at least 1.8 percent per business day. HAXTON further falsely represented to investors that they could withdraw their invested funds at any time.
In fact, and contrary to the representations that HAXTON made, investors’ funds were not used to invest in start-up companies and generate the “HYIP” investment returns that HAXTON falsely promised. Instead, as HAXTON knew, a portion of the investors’ funds was used to make payments to earlier investors, as in a classic Ponzi scheme. The majority of the investors’ funds were misappropriated by HAXTON to pay for expenses associated with advertising the Website and diverted to HAXTON’s personal bank account for his own personal use.
In 2014, after victim investors began to complain on Internet blogs that they had not received the rates of return from the Website that they had been promised, HAXTON abruptly shut down the Website, a process known in the HYIP industry as “scamming.” When HAXTON shut down the Website, hundreds of investors lost their money, a total of approximately $150,000, which HAXTON kept and spent on himself.
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HAXTON, 27, of Atlanta, Georgia, pled guilty to one count of conspiracy to commit wire fraud and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison. HAXTON is scheduled to be sentenced on April 15, 2016, before Judge Koeltl.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the investigative work of the FBI.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Edward A. Imperatore is in charge of the prosecution.
New York Attorney Found Guilty in Manhattan Federal Court of Fraud in Connection with A Scheme to Purchase Maxim MagazineRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that HARVEY NEWKIRK, formerly counsel at Bryan Cave LLC, the New York law firm, was found guilty today of wire fraud in connection with his participation in a scheme to fraudulently induce lenders to provide tens of millions of dollars toward the purchase of Maxim Magazine and related assets (“Maxim”).
Manhattan U.S. Attorney Preet Bharara said: “As a unanimous jury found, Harvey Newkirk, a lawyer and officer of the court, defrauded lenders out of millions of dollars by lying as part of a scheme to acquire Maxim Magazine. Sworn to practice law ethically, Newkirk instead practiced deceit and dishonesty. For that, the jury has convicted him of a serious federal crime.”
As established by the evidence at trial:
In connection with the potential purchase of Maxim by a company (the “Company”) controlled by Calvin Ramarro Darden (“Darden Junior”), from in or about August 2013 to on or about February 11, 2014, NEWKIRK told a series of lies to lenders to induce the lenders to provide tens of millions of dollars in capital toward the purchase of Maxim. In order to mislead the lenders into believing that they would receive sufficient collateral for their loans, NEWKIRK falsely promised them that Calvin Darden (“Darden Senior”), the former Senior Vice President of U.S. Operations of UPS, and a member of the Board of Directors of Coca-Cola Enterprises, Target Corporation, and Cardinal Health, Inc., would pledge his personal stock holdings in the latter three companies as collateral for the loans. In addition to knowingly making this false promise, NEWKIRK concealed from lenders that, as NEWKIRK knew, the stock owned by Darden Senior was subject to restrictions, and could not be pledged as collateral for any loans. NEWKIRK further falsely promised at least six lenders that each would have a first and sole priority interest in the purported collateral when, as NEWKIRK well knew, only one lender could have any such interest.
NEWKIRK, who represented the Company in the attempted Maxim acquisition in his capacity as an attorney at Bryan Cave, engaged in the fraud in part because NEWKIRK secretly owned part of the Company’s parent company (the “Parent Company”), and would share in any of the Parent Company’s profits resulting from the acquisition. NEWKIRK hid his partial ownership of the Parent Company from Bryan Cave and others. NEWKIRK further lied to Bryan Cave about his relationship with Darden Senior, falsely claiming that Darden Senior had been NEWKIRK’s client for many years when, in truth and in fact, and as NEWKIRK well knew, NEWKIRK had never represented Darden Senior.
In the course of the fraud, NEWKIRK provided lenders with account statements that purported to show Darden Senior’s stock holdings. In truth, however, the account statements were fake documents, and Darden Senior was not providing any financial support for the purchase of Maxim. Also in the course of the fraud, NEWKIRK went to great lengths to hide from Darden Senior, and from Bryan Cave, the existence of a lawsuit filed by one lender in which that lender sought to obtain the collateral of Darden Senior that NEWKIRK had fraudulently pledged to the lender. NEWKIRK deliberately caused a default judgment to be entered against Darden Senior in that lawsuit, knowing that he had concealed the existence of the lawsuit from both Darden Senior and Bryan Cave.
Furthermore, after one of the lenders placed approximately $5.5 million in escrow at Bryan Cave, Darden Junior arranged for a fraudulent email to be sent to NEWKIRK that purported to have been authored by the lender. In response to that fraudulent email, and with knowledge that the email was in fact fraudulent, NEWKIRK released approximately $4.9 million of the lender’s money from the escrow account to fund the purchase of Maxim. Moreover, in an effort to close the deal, NEWKIRK also falsely represented to another individual that approximately $12 million, consisting of funds supposedly provided by, or secured by the personal assets of, Darden Senior, had been placed in escrow at Bryan Cave. In truth and in fact, no funds were ever held in escrow at Bryan Cave in connection with the purchase of Maxim, other than the $5.5 million placed in escrow by the lender described above, which was subsequently misappropriated by NEWKIRK. Lenders lost a total of $8 million in connection with the fraud.
NEWKIRK was found guilty of one count of wire fraud, and found not guilty of one count of conspiracy to commit wire fraud and one count of aggravated identity theft. Sentencing is scheduled for April 14, 2016, before United States District Judge Jed S. Rakoff, who presided over the trial. NEWKIRK faces up to 20 years in prison on the wire fraud charge. The statutory maximum penalty is prescribed by Congress and is provided here for informational purposes only, as any sentencing of NEWKIRK will be determined by the judge.
Mr. Bharara praised the investigative work of the United States Secret Service and the Federal Bureau of Investigation.
The prosecution of this case is being overseen by the Office’s Complex Frauds and Cybercrime Unit.Assistant U.S. Attorneys Andrew C. Adams and Sarah E. Paul are in charge of the prosecution.
Statement of Manhattan U.S. Attorney Preet Bharara on the Convictions of Former New York State Senate Majority Leader Dean Skelos and His Son Adam SkelosRead the Press Release
“The swift convictions of Sheldon Silver and Dean Skelos beg an important question – how many prosecutions will it take before Albany gives the people of New York the honest government they deserve?”
Manhattan U.S. Attorney Announces Conviction of Bank Executive for Attempted Sex Trafficking of A Minor and Possession, Distribution, and Transportation of Child PornographyRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, today announced that CHARLES FAMILETTI, JR., a former Vice-President at HSBC Bank, was convicted Monday evening in Manhattan federal court of attempted sex trafficking of a minor, distribution of child pornography, transportation of child pornography, and possession of child pornography, following a five-day trial before Chief United States District Judge Loretta A. Preska.
U.S. Attorney Preet Bharara said: “In addition to exploiting children through his possession, receipt, and distribution of child pornography, as the jury found, Charles Familetti tried to pay an undercover agent for sex with an 11-year-old child. Thanks to our partners at the FBI, Familetti was arrested before he could personally harm any children. The jury’s verdict should send a message to child predators that their crimes will be investigated and prosecuted to the fullest extent of the law.”
As established by the evidence at trial:
FAMILETTI was arrested in July 2013 following a Federal Bureau of Investigation (“FBI”) sting operation in which he agreed to pay an undercover FBI agent $500 in order to have sexual relations with an 11-year old boy. During that operation, an FBI agent also downloaded several files containing child pornography from FAMILETTI via a publicly available peer-to-peer file sharing network. On July 15, 2013, FAMILETTI met with the undercover agent to confirm the agreement and make the final arrangements to obtain the supposed 11-year old boy. FAMILETTI then took the agent to an ATM, withdrew the money to cover the full $500 fee for the boy, and gave the agent $100 as a down payment. After the meeting, FAMILETTI returned to his apartment in midtown Manhattan to await the boy’s arrival. At the agreed-upon time for the boy to arrive, the FBI instead executed a search warrant at FAMILETTI’s apartment. While executing the search warrant, the FBI located an SD card containing over 2,000 image files and over 500 video files of child pornography hidden inside a loaf of bread in FAMILETTI’s refrigerator. It was further established at trial that FAMILETTI carried the SD card with him when he traveled.
FAMILETTI, 48, of San Francisco, California, is set to be sentenced on March 15, 2016, before Judge Preska. FAMILETTI faces a mandatory minimum sentence of 15 years in prison and a maximum sentence of life in prison on the attempted sex trafficking of a minor charge. FAMILETTI faces a mandatory minimum term of five years in prison and a maximum sentence of 20 years in prison on each of the distribution and transportation of child pornography charges. FAMILETTI faces a maximum sentence of 20 years in prison on the possession of child pornography charge.
The statutory maximum and minimum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the Judge.
Mr. Bharara praised the outstanding efforts of the FBI.
The prosecution is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Patrick Egan, Jessica Fender, and Sarah Krissoff are in charge of the prosecution.
The FBI encourages the public to report suspected child predators and any suspicious activity through their switchboard at (212) 384 -1000. It is staffed around the clock by investigators. Suspected child sexual exploitation or missing children may 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.
Former Employee of Global Financial Services Company Charged with Unauthorized Access of Supervisor’s Email Account on Approximately 100 OccasionsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of a complaint charging KRISTOPHER ROCCHIO with computer fraud, stemming from his repeated unauthorized access of his former supervisor’s email account from at least August 2013 through in or about February 2015. ROCCHIO was arrested this morning, and will be presented in Manhattan federal court before Magistrate Judge Ronald L. Ellis later today.
According to the allegations contained in the criminal complaint[1] unsealed today in Manhattan federal court:
From February 2008 through March 2012, ROCCHIO was employed by a global fixed-income financial services company with an office in New York, New York (the “Company”). While employed by the Company, ROCCHIO had a direct supervisor (the “Supervisor”). During ROCCHIO’s employment, the Supervisor never gave ROCCHIO permission to read the Supervisor’s email account at the Company (the “Supervisor’s Email”), and never knowingly gave ROCCHIO the password to the Supervisor’s Email.
In March of 2012, ROCCHIO left the Company. On or about February 25, 2015, the Supervisor received an email bounce back message to the Supervisor’s Email. The message indicated that an email sent from the Supervisor’s Email could not be delivered (the “Failed Email”). The Supervisor had not personally attempted to send the Failed Email. The Supervisor then checked the sent mail folder of the Supervisor’s Email and noticed two emails in the folder that the Supervisor had not personally sent. One email was the Failed Email. The other email (the “February 25 Email”) was sent to another email address (the “Email Account”). The content of both the Failed Email and the February 25 Email was the same, and included a password-protected attachment that detailed, among other things, the compensation and performance evaluations for numerous employees at the Company. Later that same day, the Supervisor checked the sent mail folder of the Supervisor’s Email again, but both the Failed Email and the February 25 Email had been deleted by someone other than the Supervisor.
FBI agents reviewed records from the Email Account and learned that the subscriber for the Email Account is ROCCHIO. The Email Account contains the February 25 Email. The Email Account also contains an earlier email from the Supervisor’s Email sent on or about December 21, 2013 (the “December 21 Email”). The December 21 Email has an attachment, which is a PowerPoint presentation that contained internal metrics of the Company. Also on or about December 21, 2013, the Email Account forwarded the December 21 Email to an email account associated with ROCCHIO (“Email Account-2”) at another financial services company in New York, New York (“Company-2”). Email Account-2 then forwarded the December 21 Email to another employee at Company-2. Company-2 employed ROCCHIO from May 2013 through July 2015.
Records of remote access to the Supervisor’s Email reveal a number of IP addresses used to access the Supervisor’s Email. Three of the IP addresses – which collectively accessed the Supervisor’s Email at least 79 times – were assigned to ROCCHIO. One of the IP addresses – which accessed the Supervisor’s Email at least 15 times – was assigned to Company-2. One of the IP addresses that accessed the Supervisor’s Email was assigned to a hotel in Chicago, Illinois, where ROCCHIO was staying at the time of the access into the Supervisor’s Email.
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ROCCHIO, 38, of Staten Island, New York, is charged with two counts of computer fraud, in violation of Title 18, United States Code, Section 1030. Each count carries a maximum penalty of five years in prison. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentence imposed on the defendant will be determined by the Court.
Mr. Bharara praised the outstanding efforts of the FBI and its New York Cyber Division.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Megan Gaffney is in charge of the prosecution.
The charges contained in the Complaint are merely accusations and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the descriptions of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
48 Members and Associates of 2 Rival Bronx Street Gangs Charged in Federal Court with Racketeering Offenses, Including 3 Murders, Narcotics Trafficking, and Firearms OffensesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Delano A. Reid, the Special Agent in Charge of the New York Division of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”), James J. Hunt, the Special Agent in Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), and William J. Bratton, the Commissioner of the New York City Police Department (“NYPD”), announced the unsealing today of two Indictments charging a total of 48 members and associates of two Bronx-based street gangs, the Young Gunnaz (“YGz”) and 18 Park, with various racketeering, narcotics, and firearms offenses, including three gang-related murders, and five gang-related attempted murders.
The YGz Indictment charges 22 members and associates of the YGz gang in the case of United States v. Ramel Matthews et al., which has been assigned to U.S. District Judge Valerie E. Caproni. The 18 Park Indictment charges 26 members and associates of the 18 Park gang in the case of United States v. Jonathan Rodriguez et al., which has been assigned to U.S. District Judge Paul A. Engelmayer. Of the 48 defendants charged in both the YGz and 18 Park Indictments, 40 are currently in custody, including 23 defendants who were arrested earlier today as part of a coordinated takedown by ATF, DEA, and NYPD. Most of these defendants will be presented today before United States Magistrate Judge Ronald L. Ellis.
Manhattan U.S. Attorney Preet Bharara said: “Today’s charges incapacitate four dozen alleged gang members who have wreaked havoc on Bronx streets for years. As alleged, these defendants are members of gangs that have engaged in all manner of mayhem – three murders, five attempted murders, racketeering, drug dealing, and gun charges. Thanks to the brave men and women of the ATF, DEA, and NYPD, these alleged criminals must now face justice in federal court.”
ATF Special Agent in Charge Delano A. Reid said: "Today, the ATF along with the NYPD, DEA and HSI, successfully launched a large-scale arrest operation on two, Bronx based, violent street gangs who conducted their illegal narcotics and firearm trafficking operation in and around the Patterson Housing projects for several years. As alleged, the 18th Park and YGz gangs routinely conducted their street level narcotics trafficking of crack cocaine, heroin, and marijuana and in the course of these activities, committed various acts of violence, to include approximately 30 non-fatal shootings, three homicides, assaults and stabbings. With nearly three dozen arrested thus far, I am confident that our efforts today will clearly illustrate that this type of gang activity will not be tolerated and there will be consequences for those who choose to illegally deal in firearms and commit acts of violence. I am hopeful that the residents of this area will wake up to a safer environment no longer plagued by the scourge of senseless gang violence.”
DEA Special Agent in Charge James J. Hunt said: “Drug gangs plague our neighborhoods with gun violence. The bottom line is, when there are gangs competing to sell poison for profit, gunfire, murder and violent crimes are inevitable consequences. I commend law enforcement’s brave efforts to rid the unacceptable risks of violence to our neighborhoods by making these arrests today.”
Commissioner William J. Bratton said: “As alleged, the numerous acts of violence perpetrated by these street gangs demonstrate an egregious and sustained disregard for the law and the safety of our community. This investigation conducted by NYPD detectives and our federal and state partners is to be commended. While the unfortunate correlation between narcotics trafficking and violence is well known, so is our commitment to stop these acts.”
As alleged in the Indictments unsealed today in Manhattan federal court and in other court papers[1]:
United States v. Ramel Matthews, et al.
The YGz was a criminal enterprise that operated mainly in and around several housing developments in the Bronx, New York, from 2005 through December 2015. Members and associates of the YGz enriched themselves by committing robberies and selling drugs, such as crack cocaine, heroin, and marijuana, and engaged in acts of violence, including murder and attempted murder of rival gang members, rival drug traffickers, and innocent bystanders.
For example, on June 27, 2009, YGz members RAMEL MATTHEWS, ANTHONY SCOTT, and HASWANI TYSON attempted to commit a gunpoint robbery near the Mott Haven Houses in the Bronx, and in the course of this attempted robbery, SCOTT shot and killed Darrel Ledgister, who was 21 years old.
More recently, on April 16, 2012, a large group of YGz members, including WENDELL BELLE and WILLIAM BRACEY, stomped to death Moises Lora a/k/a “Noah,” a 16-year-old associate of a rival gang, in a courtyard in the Melrose Houses in the Bronx.
Count One of the YGz Indictment charges RAMEL MATTHEWS, WENDELL BELLE, WILLIAM BRACEY, ANTHONY SCOTT, HASWANI TYSON, RASHAAD CONYERS, PAUL GILBERT, KAREEM LANIER, TERRANCE WILLIAMS, JASON MOYE, MICHAEL BROWN, BRIANT LAMONT MAYNOR, ANDY SEDA, DAVOUN MATTHEWS, JOSEPH ANDERSON, DAVAUGHN BROOKS, JOHN HUGHES, JOSEPH JEFFRIES, DONOVAN REYNOLDS, KYLE HINES, CHANEL LEON, and CHRISTOPHER MORALES with participating in a racketeering conspiracy for criminal involvement in the YGz gang. Count Nine of the YGz Indictment charges 16 of those 22 defendants (namely, RAMEL MATTHEWS, BELLE, BRACEY, SCOTT, CONYERS, GILBERT, LANIER, WILLIAMS, MOYE, BROWN, MAYNOR, SEDA, DAVOUN MATTHEWS, HUGHES, JEFFRIES, REYNOLDS, and MORALES) with a related firearms offense.
Counts Two and Eight of the YGz Indictment charge RAMEL MATTHEWS, ANTHONY SCOTT, and HASWANI TYSON with the murder of Darrel Ledgister in aid of racketeering, and a related firearms offense.
Count Three of the YGz Indictment charges WENDELL BELLE and WILLIAM BRACEY with the murder of Moises Lora in aid of racketeering.
Count Four of the YGz Indictment charges WENDELL BELLE with aiding and abetting an assault with a deadly weapon and attempted murder in connection with a November 2013 shooting aimed at killing rival gang members near Courtlandt Avenue in the Bronx, resulting in a bystander being shot and wounded.
Count Five of the YGz Indictment charges PAUL GILBERT with assault with a deadly weapon and attempted murder in connection with a June 2014 shooting by the Mott Haven Houses in the Bronx aimed at killing an associate of a rival gang in the Bronx, resulting in an individual being shot and wounded.
Count Six of the YGz Indictment charges RASHAAD CONYERS with assault with a deadly weapon and attempted murder in connection with a May 2015 shooting near the Patterson Houses in the Bronx aimed at killing rival gang members in the Bronx.
Count Seven of the YGz Indictment charges RAMEL MATTHEWS, TERRANCE WILLIAMS, MICHAEL BROWN, ANDY SEDA, DAVOUN MATTHEWS, DAVAUGHN BROOKS, JOHN HUGHES, JOSEPH JEFFRIES, KYLE HINES, CHANEL LEON, and CHRISTOPHER MORALES with participating in a conspiracy to distribute crack cocaine, heroin, and marijuana.
United States v. Jonathan Rodriguez, et al.
18 Park was a criminal enterprise that operated mainly in and around the Patterson Houses and Mott Haven Houses in the Bronx, New York, from 2006 through December 2015. Members and associates of 18 Park enriched themselves by selling drugs, such as crack cocaine, heroin, and marijuana, and committed acts of violence, including murder and attempted murder of rival gang members, rival drug traffickers, and innocent bystanders.
For example, on May 29, 2011, 18 Park member KEITH RUIZ and others, murdered Johnny Moore, a 16-year-old associate of a rival gang, in the Patterson Houses in the Bronx.
Count One of the 18 Park Indictment charges JONATHAN RODRIGUEZ, MARQUIS WRIGHT, WALI BURGOS, JASON BENJAMIN, JORDAN RIVERA, WILLIAM AMARAZIN, RAHEEM AMARAZIN, TJON MACOLL, COREY HEYWARD, JONATHAN HARRIS, WILLIAM KNOX, COREY COOKS, DAQUAN McBETH, JAHNOMI BENJAMIN, KEITH RUIZ, RYAN VALENTIN, MIGUEL ROMERO, KAYE ROSADO, ANDREW ECHEVARRIA, NAQUAN SIMMONS, DIQUINN LACEND, WILFREDO RIVERA, KENNETH JENKINS, VINCENT FIELDER, MIA DENTICO, and PAMELA BROWN with participating in a racketeering conspiracy for criminal involvement in the 18 Park gang. Count Six of the 18 Park Indictment also charges 20 of those 26 defendants (RODRIGUEZ, WRIGHT, BURGOS, JASON BENJAMIN, RIVERA, WILLIAM AMARAZIN, RAHEEM AMARAZIN, MACOLL, HEYWARD, HARRIS, KNOX, COOKS, McBETH, JAHNOMI BENJAMIN, VALENTIN, ROMERO, ECHEVARRIA, SIMMONS, LACEND, and DENTICO) with a related firearms offense.
Count Two of the 18 Park Indictment charges KEITH RUIZ with aiding and abetting the murder of Johnny Moore in aid of racketeering.
Count Three of the 18 Park Indictment charges WALI BURGOS, JORDAN RIVERA, and COREY COOKS with assault with a dangerous weapon and attempted murder in connection with an October 2014 shooting in the Patterson Houses aimed at killing a rival gang member.
Count Four of the 18 Park Indictment charges WILLIAM AMARAZIN and TJON MACOLL with assault with a dangerous weapon and attempted murder in connection with a December 2011 shooting aimed at killing an associate of a rival gang.
Count Five of the 18 Park Indictment charges MARQUIS WRIGHT, WALI BURGOS, JASON BENJAMIN, JORDAN RIVERA, WILLIAM AMARAZIN, RAHEEM AMARAZIN, TJON MACOLL, COREY HEYWARD, JONATHAN HARRIS, WILLIAM KNOX, DAQUAN McBETH, JAHNOMI BENJAMIN, MIQUEL ROMERO, KAYE ROSADO, ANDREW ECHEVARRIA, NAQUAN SIMMONS, DIQUINN LACEND, KENNETH JENKINS, VINCENT FIELDER, MIA DENTICO and PAMELA BROWN with conspiring to distribute crack cocaine, heroin, and marijuana.
* * *
Charts containing the names, ages, residences, charges, and maximum penalties for the defendants are set forth below. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Bharara praised the outstanding investigative work of ATF, the DEA, and the NYPD. He also thanked the United States Attorney’s Office for the Northern District of New York and Bronx County District Attorney’s Office for their participation and support in this ongoing investigation.
This case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Samson Enzer, James McDonald, and Dina McLeod are in charge of the prosecution.
The charges contained in the Indictments are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
###
15-316
United States v. Ramel Matthews et al.
COUNT
CHARGE
DEFENDANTS
MAX. PENALTIES
1
Racketeering conspiracy
18 U.S.C. § 1962(d)
RAMEL MATTHEWS WENDELL BELLE
WILLIAM BRACEY
ANTHONY SCOTT
HASWANI TYSON
RASHAAD CONYERS
PAUL GILBERT
KAREEM LANIER
TERRANCE WILLIAMS
JASON MOYE
MICHAEL BROWN
BRIANT LAMONT MAYNOR
ANDY SEDA
DAVOUN MATTHEWS
JOSEPH ANDERSON
DAVAUGHN BROOKS JOHN HUGHES
JOSEPH JEFFRIES DONOVAN REYNOLDS
KYLE HINES
CHANEL LEON CHRISTOPHER MORALES
Life in prison
2
Murder in aid of racketeering activity
18 U.S.C. § 1959(a)(1)
RAMEL MATTHEWS
ANTHONY SCOTT
HASWANI TYSON
Death penalty, or life in prison
3
Murder in aid of racketeering activity
18 U.S.C. § 1959(a)(1)
WENDELL BELLE
WILLIAM BRACEY
Death penalty, or life in prison
4
Assault and attempted murder in aid of racketeering activity
18 U.S.C. §§ 1959(a)(3) and 1959 (a)(5)
WENDELL BELLE
20 years in prison
5
Assault and attempted murder in aid of racketeering activity
18 U.S.C. §§ 1959(a)(3) and 1959 (a)(5)
PAUL GILBERT
20 years in prison
6
Assault and attempted murder in aid of racketeering activity
18 U.S.C. §§ 1959(a)(3) and 1959 (a)(5)
RASHAAD CONYERS
20 years in prison
7
Narcotics conspiracy
21 U.S.C. § 846
RAMEL MATTHEWS
TERRANCE WILLIAMS, MICHAEL BROWN
ANDY SEDA
DAVOUN MATTHEWS, DAVAUGHN BROOKS, JOHN HUGHES
JOSEPH JEFFRIES
KYLE HINES
CHANEL LEON CHRISTOPHER MORALES
Life in prison
8
Murder through use of a firearm
18 U.S.C. § 924(j)
RAMEL MATTHEWS
ANTHONY SCOTT
HASWANI TYSON
Death penalty, or life in prison
9
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
924(c)(1)(A)(iii)
RAMEL MATTHEWS
WENDELL BELLE
WILLIAM BRACEY
ANTHONY SCOTT
RASHAAD CONYERS, PAUL GILBERT
KAREEM LANIER
TERRANCE WILLIAMS, JASON MOYE
MICHAEL BROWN
BRIANT LAMONT MAYNOR
ANDY SEDA
DAVOUN MATTHEWS,
JOHN HUGHES
JOSEPH JEFFRIES
DONOVAN REYNOLDS, CHRISTOPHER MORALES
Life in prison
DEFENDANT
AGE
RESIDENCE
RAMEL MATTHEWS,
a/k/a “Rah”
26
Bronx, NY
WENDELL BELLE,
a/k/a “Delly Dell”
23
Bronx, NY
WILLIAM BRACEY,
a/k/a “Rel”
21
Bronx, NY
ANTHONY SCOTT,
a/k/a “Tyson”
22
Bronx, NY
HASWANI TYSON,
a/k/a “Swani”
23
Bronx, NY
RASHAAD CONYERS,
a/k/a “Houle”
25
Bronx, NY
PAUL GILBERT,
a/k/a “Too Fly Tay”
a/k/a “Don Tay”
25
Bronx, NY
KAREEM LANIER,
a/k/a “Black”
24
Bronx, NY
TERRANCE WILLIAMS,
a/k/a “TA”
23
Bronx, NY
JASON MOYE,
a/k/a “Tall Jay”
27
Bronx, NY
MICHAEL BROWN,
a/k/a “Mighty”
27
Bronx, NY
BRIANT LAMONT MAYNOR,
a/k/a “Binky”
27
Bronx, NY
ANDY SEDA,
a/k/a “Ant White”
23
Bronx, NY
DAVOUN MATTHEWS,
a/k/a “Juice”
24
Bronx, NY
JOSEPH ANDERSON,
a/k/a “Jojo”
26
Bronx, NY
DAVAUGHN BROOKS,
a/k/a “Day Day”
a/k/a “Dolla”
23
Bronx, NY
JOHN HUGHES,
a/k/a “Pino”
22
Bronx, NY
JOSEPH JEFFRIES,
a/k/a “Joey”
20
Bronx, NY
DONOVAN REYNOLDS,
a/k/a “Donnie G”
22
Bronx, NY
KYLE HINES
22
Bronx, NY
CHANEL LEON,
a/k/a “Black Gums”
23
Bronx, NY
CHRISTOPHER MORALES,
a/k/a “Yayo”
26
Bronx, NY
United States v. Jonathan Rodriguez, et al.
COUNT
CHARGE
DEFENDANTS
MAX. PENALTIES
1
Racketeering conspiracy
18 U.S.C. § 1962(d)
JONATHAN RODRIGUEZ
MARQUIS WRIGHT
WALI BURGOS
JASON BENJAMIN
JORDAN RIVERA
WILLIAM AMARIZAN
RAHEEM AMARIZAN
TJON MACOLL
COREY HEYWARD
JONATHAN HARRIS
WILLIAM KNOX
COREY COOKS
DAQUAN McBETH
JAHNOMI BENJAMIN
KEITH RUIZ
RYAN VALENTIN
MIGUEL ROMERO
KAYE ROSADO
ANDREW ECHEVARRIA
NAQUANN SIMMONS
DIQUINN LACEND
WILFREDO RIVERA KENNETH JENKINS
VINCENT FIELDER
MIA DENTICO
PAMELA BROWN
Life in prison
2
Murder in aid of racketeering activity
18 U.S.C. § 1959(a)(1)
KEITH RUIZ
Death penalty, or life in prison
3
Assault and attempted murder in aid of racketeering activity
18 U.S.C. §§ 1959(a)(3) and 1959 (a)(5)
WALI BURGOS
JORDAN RIVERA
COREY COOKS
20 years in prison
4
Assault and attempted murder in aid of racketeering activity
18 U.S.C. §§ 1959(a)(3) and 1959 (a)(5)
WILLIAM AMARIZAN
TJON MACOLL
20 years in prison
5
Narcotics conspiracy
21 U.S.C. § 846
MARQUIS WRIGHT
JASON BENJAMIN
JORDAN RIVERA
WILLIAM AMARIZAN
RAHEEM AMARIZAN
TJON MACOLL
COREY HEYWARD
JONATHAN HARRIS
WILLIAM KNOX
DAQUAN McBETH
KAYE ROSADO
ANDREW ECHEVARRIA
NAQUANN SIMMONS
DIQUINN LACEND
WILFREDO RIVERA KENNETH JENKINS
VINCENT FIELDER
MIA DENTICO
PAMELA BROWN
Life in prison
6
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
924(c)(1)(A)(iii)
JONATHAN RODRIGUEZ, MARQUIS WRIGHT WALI BURGOS
JASON BENJAMIN JORDAN RIVERA
WILLIAM AMARIZAN RAHEEM AMARIZAN TJON MACOLL
COREY HEYWARD
JONATHAN HARRIS WILLIAM KNOX
COREY COOKS
DAQUAN McBETH
JAHNOMI BENJAMIN
RYAN VALENTIN
MIGUEL ROMERO
KAYE ROSADO
ANDREW ECHEVARRIA
NAQUANN SIMMONS
DIQUINN LACEND
WILFREDO RIVERA
KENNETH JENKINS VINCENT FIELDER
MIA DENTICO
Life in prison
DEFENDANT
AGE
RESIDENCE
JONATHAN RODRIGUEZ,
a/k/a “Bebo”
27
Bronx, NY
MARQUIS WRIGHT,
a/k/a “Mark”
28
Bronx, NY
WALI BURGOS,
a/k/a “Guy Fisher”
21
Bronx, NY
JASON BENJAMIN,
a/k/a “JC”
25
Bronx, NY
JORDAN RIVERA
20
Bronx, NY
WILLIAM AMARIZAN,
a/k/a “Will Dollars” a/k/a “Will Dollars,”
a/k/a “Spanish Will”
24
Bronx, NY
RAHEEM AMARIZAN,
a/k/a “Rah Rah”
22
Bronx, NY
TJON MACOLL,
a/k/a “TJ”
24
Bronx, NY
COREY HEYWARD
29
Bronx, NY
JONATHAN HARRIS,
a/k/a “Eggy”
20
Bronx, NY
WILLIAM KNOX,
a/k/a “Mills Gunna”
23
Bronx, NY
COREY COOKS
20
Bronx, NY
DAQUAN McBETH,
a/k/a “Day Day”
25
Bronx, NY
JAHNOMI BENJAMIN,
a/k/a “Jamroc”
23
Bronx, NY
KEITH RUIZ,
a/k/a “Keefy”
23
Bronx, NY
RYAN VALENTIN
20
Bronx, NY
MIGUEL ROMERO,
a/k/a “Mikey”
22
Bronx, NY
KAYE ROSADO,
a/k/a “Trippa”
30
Bronx, NY
ANDREW ECHEVARRIA,
a/k/a “Drew”
26
Bronx, NY
NAQUANN SIMMONS,
a/k/a “Young Money”
23
Bronx, NY
DIQUINN LACEND,
a/k/a “Naughty”
21
Bronx, NY
WILFREDO RIVERA,
a/k/a “Cito”
19
Bronx, NY
KENNETH JENKINS,
28
Bronx, NY
VINCENT FIELDER,
a/k/a “DJ”
29
Bronx, NY
MIA DENTICO
48
Bronx, NY
PAMELA BROWN
28
Bronx, NY
[1] As the introductory phrase signifies, the entirety of the text of the Indictments, and the description of the Indictments set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Owner of Utah-Based Pharmaceutical Wholesale Distributor Charged in Hundred-Million-Dollar Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and William J. Bratton, the Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of an indictment charging RANDY CROWELL, a/k/a “Roger,” with fraudulently distributing, through his Utah-based wholesale distribution company, more than $100 million worth of prescription drugs obtained through a nationwide black market – drugs that were then dispensed by pharmacies to unsuspecting customers. This scheme was not only profitable for CROWELL, but also dangerous to the thousands of patients who ultimately took these black market medications not knowing that they had been previously prescribed to others and then resold and trafficked, often in unsafe conditions. CROWELL was arrested at his home in Henderson, Nevada, and will be presented before U.S. Magistrate Judge Cam Ferenbach this afternoon in the U.S. District Court for the District of Nevada. The case has been assigned to Judge Edgardo Ramos in U.S. District Court for the Southern District of New York.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Randy Crowell perverted the system designed to ensure patients receive safe and effective medication, making millions in the process. Crowell’s alleged crime victimized not only benefit programs like Medicaid, but also countless everyday people suffering from illnesses who had no idea their medicine had been diverted from the legitimate stream of commerce and could be dangerous to consume.”
FBI Assistant Director-in-Charge Diego Rodriguez said: “The crime alleged today details an insatiable desire to generate revenue at the expense of those in need of true medical care. Targeting the most vulnerable sources of supply, namely Medicaid patients and others with subsidized benefits, scheme participants encouraged sick people with serious illnesses to forego medical treatment in exchange for profit. This put others at risk of unknowingly purchasing mishandled medication. While many social benefit programs are subject to fraud, estimates of fraudulent billings to public health care programs are in the tens of billions. It’s essential that all levels of law enforcement work together as closely as possible in an effort to eradicate drug distribution on the black market and combat fraud to taxpayer-funded programs.”
Police Commissioner William J. Bratton said: “This investigation demonstrates the relentless efforts of the Healthcare Fraud Task Force to bring to justice those who would profit from the distribution of illegal medications. I commend the efforts of the investigators involved in this case whose work resulted in this arrest.”
According to the allegations contained in the indictment[1] unsealed today in Manhattan federal court:
From early 2010 until at least July 2012, CROWELL, who was the owner and operator of a licensed wholesale distributor of prescription medications based in St. George, Utah (“Wholesaler-1”), participated in a sophisticated scheme to defraud health insurance companies and Government programs such as Medicaid out of hundreds of millions of dollars by trafficking prescriptions through a nationwide black market. CROWELL, through Wholesaler-1, purchased, for more than $100 million, prescription medications from this black market at a fraction of the legitimate prices for these drugs, before selling the same as new, legitimate bottles of medication to pharmacies all over the country.
To maximize their profits, CROWELL and his co-conspirators focused on some of the most expensive medications on the market, including those used to treat HIV/AIDS. The scheme was not only profitable but potentially dangerous to the tens of thousands of patients ultimately receiving and taking these prescription drugs. As detailed below, many of the bottles purchased through the underground market and then distributed as safe, legitimate medications by CROWELL and Wholesaler-1 had in fact been previously dispensed to others, including individuals based in the Southern District of New York. To conceal the fact that they had been previously dispensed, the bottles were typically “cleaned” with hazardous chemicals such as lighter fluid before being transported and stored in conditions that were frequently unsanitary and insufficient to ensure the safety and efficacy of the medication.
In total, between 2010 and July 2012, CROWELL and Wholesaler-1 paid more than $100 million to buy medications from illegitimate sources of supply, with CROWELL personally earning, during that time period, nearly $16 million from his operation of Wholesaler-1.
THE SCHEME TO DEFRAUD
The fraudulent scheme charged in the Indictment operated by distorting the legitimate flow of medications from manufacturer to pharmacy. Rather than purchasing medications from manufacturers or legitimate authorized distributors at full price, scheme participants, including CROWELL, created and exploited an underground market for these same prescription drugs. Scheme participants targeted the cheapest possible source of supply for these drugs – Medicaid patients and other individuals who received these prescription drugs on a monthly basis for little or no cost, and who were then willing to sell their medicines rather than taking them as prescribed (the “Insurance Beneficiaries”).
Insurance Beneficiaries had prescriptions filled for medications each month at pharmacies across the country, including in Manhattan and the Bronx, and then sold their medications to low-level participants (“Collectors”) in the scheme who worked on street corners and bodegas and would pay cash – typically as little as $40 or $50 per bottle. Every major health care benefit program, including Medicaid, expressly prohibits a beneficiary from seeking care under such circumstances, and health care benefit programs would not have paid for the medications issued by pharmacies to the Insurance Beneficiaries had these health care benefit programs known that the Insurance Beneficiaries were selling their drugs to others, rather than taking them as prescribed.
Because the ultimate goal of the scheme was to resell these medications as new at full price, Collectors and other scheme participants used lighter fluid and other potentially hazardous chemicals to remove the patient labels affixed when the bottles were initially dispensed to the Insurance Beneficiaries. This process, referred to as “cleaning” the bottles, was dangerous, as these hazardous chemicals could infiltrate the bottles rendering the medication unfit for human consumption.
Collectors then sold these second-hand drugs to higher-level scheme participants (“Aggregators”) who bought dozens, and sometimes hundreds, of bottles at a time from multiple collectors before selling them to higher-level scheme participants with direct access to legitimate distribution channels, including corrupt wholesale companies like Wholesaler-1. The corrupt wholesale companies, including Wholesaler-1, then resold the bottles as new to pharmacies, including potentially the very same pharmacies that initially dispensed these medications, at full price. In so doing, and as described below, CROWELL and other corrupt wholesale companies intentionally misrepresented where these medications were coming from and, in particular, concealed the fact that these prescription drugs had been obtained from an illegal and illegitimate black market.
CROWELL AND WHOLESALER-1
Central to the scheme’s success was the participation of corrupt, licensed wholesale distributors willing to buy the “second hand” medications at a fraction of their legitimate price and then resell them as new to pharmacies that would in turn dispense these medications to unsuspecting patients. CROWELL and Wholesaler-1 were among the largest of these corrupt wholesalers.
Between 2010, when Wholesaler-1 was created by CROWELL, and July 2012, Wholesaler-1 had no legitimate sources of supply. Instead, CROWELL caused Wholesaler-1 to purchase exclusively from illegitimate sources – including the so-called “Aggregators” – who sold to CROWELL at substantially reduced rates, sometimes as much as 50 percent less than the price of acquiring these medications from legitimate sources. Consistent with their illegitimate origins, inbound shipments of prescription drugs frequently arrived at Wholesaler-1 improperly packaged in unsealed, unsecure cardboard boxes. On some occasions, bottles of medication arrived at Wholesaler-1 with the initial patient labels still affixed to them. On other occasions, bottles arrived having already been opened, or containing what appeared to be the wrong medication. At the direction of CROWELL, employees of Wholesaler-1 then inventoried these bottles, attempted to remove any bottles that still had patient labels affixed to them or were otherwise visibly used or damaged, and then arranged for the medications to be shipped out to Wholesaler-1’s customers – i.e., pharmacies all over the country, including pharmacies in Manhattan and the Bronx.
To effectuate the scheme – and, in particular, to convince pharmacies to buy these medications, and health care benefit programs to pay for them, CROWELL and others made false and fraudulent representations about the origins of these medications. Specifically, CROWELL and others acting at his direction created false and fraudulent documents known as “pedigrees” for these medications, which purported to document the legitimate movement of these medications bought and sold by Wholesaler-1 from a manufacturer to the pharmacy. In truth, and as CROWELL well knew, none of the medications purchased or distributed by Wholesaler-1 had come from legitimate sources of supply, and the pedigrees created by Wholesaler-1 and signed by CROWELL were intentionally fabricated so that the medications could be sold, as new, to pharmacies and so that health care benefit programs would be duped into paying for these illegitimate second-hand drugs.
In order to evade detection, CROWELL took additional steps to conceal the unlawful nature of his activities, including using the name “Roger,” frequently changing or “dropping” the phones he used to communicate with co-conspirators, and paying co-conspirators through front or “sham” companies.
* * *
CROWELL is charged with one count of conspiracy to commit health care fraud, which carries a maximum sentence of 10 years in prison, one count of conspiracy to commit mail and wire fraud, which carries a maximum sentence of 20 years in prison, one count of conspiracy to violate the Food, Drug and Cosmetics Act, which carries a maximum sentence of five years in prison, and one count of conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the investigative work of the New York FBI’s Health Care Fraud Task Force, which comprises agents, officers and investigators from the FBI, the NYPD, the New York State Insurance Fraud Bureau, U.S. Department of Labor, U.S. Office of Personnel Management's Inspector General, U.S. Food and Drug Administration, U.S. Health and Human Services Office of Inspector General, New York State Office of Medicaid Inspector General, New York Health and Hospitals Corporation Inspector General, and the National Insurance Crime Bureau.
The prosecution of this case is being overseen by the Office’s Money Laundering and Asset Forfeiture Unit.Assistant U.S. Attorneys Edward B. Diskant and Matthew Podolsky 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 forth herein constitute only allegations, and every fact described should be treated as an allegation.
Manhattan U.S. Attorney and FBI Assistant Director-In-Charge Announce Arrest of Individual for Theft of Valuable Source Code from Former EmployerRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced the arrest of XU JIAQIANG for theft of a trade secret, in connection with XU’s theft of proprietary source code from XU’s former employer. XU was arrested yesterday by the FBI in White Plains and was presented today in White Plains federal court before U.S. Magistrate Judge Judith C. McCarthy.
U.S. Attorney Preet Bharara stated: “As alleged, Xu Jiaqiang cheated his former employer through a scheme to steal valuable proprietary source code and sell it to other companies. Theft of trade secrets of the type alleged against Xu drains the lifeblood of innovation and competition, and is rightly a serious federal crime. I would like to thank the FBI for its determined efforts in this investigation, and the U.S. Department of Justice’s National Security Division for its assistance and support.”
Assistant Director-in-Charge Diego Rodriguez stated: “Proprietary software is proprietary for a reason – a company invests in its development, safeguards it and it generates revenue. It is not for employees to take the information they’ve been entrusted with and profit themselves. As alleged, Xu attempted to sell his former employer’s proprietary software code to others. The FBI is committed to enforcing laws that protect U.S. companies from trade secret thefts.”
According to the allegations contained in the criminal Complaint[1]:
From November 2010 to May 2014, XU worked as a developer for a particular U.S. company (the “Victim Company”). As a developer, XU enjoyed access to certain proprietary software (the “Proprietary Software”), as well as that software’s underlying source code (the “Proprietary Source Code”). The Proprietary Software is a clustered file system developed and marketed by the Victim Company in the United States and other countries. A clustered file system facilitates faster computer performance by coordinating work among multiple servers. The Victim Company takes significant precautions to protect the Proprietary Source Code as a trade secret. Among other things, the Proprietary Source Code is stored behind a company firewall and can only be accessed by a small subset of the Victim Company’s employees. Before receiving Proprietary Source Code access, Victim Company employees must first request and receive approval from a particular Victim Company official. Victim Company employees must also agree in writing at both the outset and the conclusion of their employment that they will maintain the confidentiality of any proprietary information. The Victim Company takes these and other precautions in part because the Proprietary Software and the Proprietary Source Code are economically valuable, which value depends in part on the Proprietary Source Code’s secrecy.
In May 2014, XU voluntarily resigned from the Victim Company. XU subsequently communicated with one undercover law enforcement officer (“UC-1”), who posed as a financial investor aiming to start a large-data storage technology company, and another undercover law enforcement officer (“UC-2”), who posed as a project manager, working for UC-1. In these communications, XU discussed his past experience with the Victim Company and indicated that he had experience with the Proprietary Software and the Proprietary Source Code. On March 6, 2015, XU sent UC-1 and UC-2 a code, which XU stated was a sample of XU’s prior work with the Victim Company. A Victim Company employee (“Employee-1”) later confirmed that the code sent by XU included proprietary Victim Company material that related to the Proprietary Source Code.
XU subsequently informed UC-2 that XU was willing to consider providing UC-2’s company with the Proprietary Source Code as a platform for UC-2’s company to facilitate the development of UC-2’s company’s own data storage system. XU informed UC-2 that if UC-2 set up several computers as a small network, then XU would remotely install the Proprietary Software so that UC-1 and UC-2 could test it and confirm its functionality.
In or around early August 2015, the FBI arranged for a computer network to be set up, consistent with XU’s specifications. Files were then remotely uploaded to the FBI-arranged computer network (the “Xu Upload”). Thereafter, on or about August 26, 2015, XU and UC-2 confirmed that UC-2 had received the Xu Upload. In September 2015, the FBI made the Xu Upload available to a Victim Company employee who has expertise regarding the Proprietary Software and the Proprietary Source Code (“Employee-2”). Based on Employee-2’s analysis of technical features of the Xu Upload, it appeared to Employee-2 that the Xu Upload contained a functioning copy of the Proprietary Software. It further appeared to Employee-2 that the Xu Upload had been built by someone with access to the Proprietary Source Code who was not working within the Victim Company or otherwise at the Victim Company’s direction.
On December 7, 2015, XU met with UC-2 at a hotel in White Plains, New York (the “Hotel”). XU stated, in sum and substance, that XU had used the Proprietary Source Code to make software to sell to customers, that XU knew the Proprietary Source Code to be the product of decades of work on the part of the Victim Company, and that XU had used the Proprietary Source Code to build a copy of the Proprietary Software, which XU had uploaded and installed on the UC Network (i.e., the Xu Upload). XU also indicated that XU knew the copy of the Proprietary Software that XU had installed on the UC Network contained information identifying the Proprietary Software as the Victim Company’s property, which could reveal the fact that the Proprietary Software had been built with the Proprietary Source Code without the Victim Company’s authorization. XU told UC-2 that XU could take steps to prevent detection of the Proprietary Software’s origins – i.e., that it had been built with stolen Proprietary Source Code – including writing computer scripts that would modify the Proprietary Source Code to conceal its origins.
Later on December 7, 2015, XU met with UC-1 and UC-2 at the Hotel. During that meeting, XU showed UC-2 a copy of what XU represented to be the Proprietary Source Code on XU’s laptop. XU noted to UC-2 a portion of the code that indicated it originated with the Victim Company as well as the date on which it had been copyrighted. XU also stated that XU had previously modified the Proprietary Source Code’s command interface to conceal the fact that the Proprietary Source Code originated with the Victim Company and identified multiple specific customers to whom XU had previously provided the Proprietary Software using XU’s stolen copy of the Proprietary Source Code.
* * *
The Complaint charges XU, 29, with one count of theft of a trade secret, in violation of Title 18, United States Code, Section 1832, which carries a maximum sentence of ten 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.
Mr. Bharara praised the FBI’s outstanding investigative efforts. XU’s arrest is the result of the close cooperative efforts of the U.S. Attorney’s Office for the Southern District of New York and the National Security Division of the U.S. Department of Justice.
The case is being prosecuted by the Office’s Terrorism and International Narcotics Unit and its White Plains Division. Assistant U.S. Attorneys Benjamin Allee and Ilan Graff and Trial Attorney David Aaron of the National Security Division’s Counterintelligence and Export Control Section are involved in the prosecution.
The charge in the Complaint constitutes merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Leader of “Trinitarios” Gang Sentenced in Manhattan Federal Court to 10 Years in PrisonRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that ANDY SOSA – the former leader of the “Trinitarios,” a violent street and prison gang composed primarily of individuals of Dominican descent – was sentenced in Manhattan federal court to 10 years in prison for his participation in a massive conspiracy to distribute narcotics and use and possess firearms. SOSA previously pled guilty before U.S. Magistrate Judge James L. Cott and was sentenced today by U.S. District Judge Shira A. Scheindlin.
Manhattan U.S. Attorney Preet Bharara said: “Andy Sosa is responsible for funneling massive quantities of heroin, marijuana, prescription drugs and cocaine onto the streets of the Bronx, using violence to intimidate anyone who stood in his way. Thanks to the concerted, combined, and coordinated efforts of federal and local law enforcement, Sosa’s brutal reign has ended.”
According to the indictment, and other documents filed in the case, as well as statements made during the sentencing proceedings:
From approximately 2009 until his arrest in July 2014, SOSA was immersed in activity with the Trinitarios street gang, which has terrorized certain neighborhoods of the Bronx. He led the “Greenbridge” chapter of the Trinitarios, which controlled the drug markets in the area of Kingsbridge Road and Webb Avenue. Undeterred by the arrests of his fellow Trinitarios in a 2011 sweep, SOSA filled the void, and continued to sell drugs – cocaine, marijuana, pills and what amounted to kilogram quantities of heroin over the years – in that area of the Bronx. Because of SOSA’s leadership rank in the gang, other Trinitario members and associates sold drugs in that area only with his permission or at his direction. SOSA’s drug distribution network also extended beyond the Bronx; the investigation revealed that he gave hundreds of grams of heroin to others to sell for him in Connecticut.
SOSA also kept firearms at his apartment in the Bronx, for use by Trinitarios to protect their drug distribution territory and themselves from rival gang members, or for use in retaliation against other neighborhood gangs. Indeed, SOSA was shot by members of a rival gang, known as “Dominicans Don’t Play” (or “DDP”). He carried a 9mm firearm for protection, and his apartment was used to store guns (including, at various times, a .45 caliber handgun, a .38 caliber handgun, a .357 magnum, and a 9mm) and to stash drugs for gang members. SOSA ran Trinitario meetings at his apartment on a number of occasions.
Mr. Bharara praised the work of the New York City Police Department (“NYPD”), the Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), the Drug Enforcement Administration (“DEA”), and the Department of Homeland Security (“HSI”).
The case is being handled by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Justina Geraci, Rebecca Mermelstein, and Rachel Maimin are in charge of the prosecution.
Manhattan U.S. Attorney Announces Arrest and Unsealing of Charges Against Senior Adviser to the Operator of the “Silk Road” WebsiteRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), James M. Gibbons, Acting Special Agent-in-Charge of Homeland Security Investigations Chicago (“HSI”), James J. Hunt, Special Agent in Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), and Shantelle P. Kitchen, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today the unsealing of a complaint charging ROGER THOMAS CLARK, a senior adviser to Ross Ulbricht, a/k/a “Dread Pirate Roberts,” a/k/a “DPR,” the owner and operator of the “Silk Road” website, an online illicit black market that operated from January 2011 until October 2, 2013. CLARK is alleged to have been a close confidante of Ulbricht’s who advised him on all aspects of Silk Road’s operations and helped him grow the site into an extensive criminal enterprise. CLARK was arrested in Thailand on December 3, 2015, and is pending extradition to the United States.
Manhattan U.S. Attorney Preet Bharara said: “Silk Road was a secret online marketplace for illegal drugs, hacking services, and a whole host of other criminal activity. Like a consigliere, Roger Thomas Clark allegedly served as a trusted confidante to Silk Road founder and operator Ross Ulbricht, advising him on all aspects of this illegal business, including how to maximize profits and use threats of violence to thwart law enforcement. Thanks to the investigative work of our fellow law enforcement agencies and our international partners, Clark is in custody and awaits American justice.”
FBI Assistant Director Diego Rodriguez said: “The arrest of Roger Thomas Clark shows again that conducting criminal activities on the Dark Web does not keep a criminal out of law enforcement’s reach. As alleged, Clark was paid at least hundreds of thousands of dollars to act as a counselor to Ross Ulbricht’s black-market bazaar, Silk Road. Clark may have thought residing in Thailand would keep him out of reach of U.S authorities, but our international partnerships have proven him wrong. We thank our law enforcement partners who have worked with the FBI on this case.”
HSI Chicago Acting Special Agent-in-Charge James M. Gibbons said: “Roger Clark, a high-ranking Silk Road operator, served as Ross Ulbricht’s closest adviser and confidante as together they facilitated an anonymous global black market for all things illegal. As this arrest proves, the ‘long arm of the law’ has a great reach – even in cyberspace. Our HSI special agents continue to work closely with our federal and international law enforcement partners around the world to patrol the darknet and protect public safety.”
DEA Special Agent in Charge James J. Hunt said: “Anonymity is what Roger Thomas Clark believed he attained posing as ‘Variety Jones’ while allegedly committing crimes; but handcuffed and pending extradition is not anonymity. I command and thank law enforcement's tenacious investigative skills and coordination throughout this investigation.”
IRS-CI Special Agent in Charge Shantelle P. Kitchen said: “Although the conviction of Ross Ulbricht effectively brought an end to the operation of the Silk Road site, this complaint represents another step in bringing full closure to the investigation of this criminal enterprise. IRS Criminal Investigation remains committed to bringing our expertise in conducting complex financial investigations to the investigation of narcotics organizations of all types, including those operating in the anonymity of cyberspace.”
According to the allegations contained in the criminal complaint[1] unsealed today in Manhattan federal court, and evidence submitted at trial and in court filings during the prosecution of Ross Ulbricht:
Ulbricht created Silk Road in approximately January 2011, and owned and operated the underground website until it was shut down by law enforcement authorities in October 2013. During that time, Silk Road emerged as the most sophisticated and extensive criminal marketplace on the Internet, serving as a sprawling black-market bazaar where unlawful goods and services, including illegal drugs of virtually all kinds, were bought and sold regularly by the site’s users. While in operation, Silk Road was used by thousands of drug dealers and other unlawful vendors to distribute hundreds of kilograms of illegal drugs and other unlawful goods and services to well over a hundred thousand buyers, and to launder hundreds of millions of dollars deriving from these unlawful transactions.
Silk Road enabled its users to buy and sell drugs and other illegal goods and services anonymously and outside the reach of law enforcement. Silk Road was operated on what is known as “The Onion Router” or “Tor” network, a special network of computers on the Internet, distributed around the world, designed to conceal the true IP addresses of the computers on the network and thereby the identities of the networks’ users. Silk Road also included a Bitcoin-based payment system that served to facilitate the illegal commerce conducted on the site, including by concealing the identities and locations of the users transmitting and receiving funds through the site.
CLARK, who went by the online nicknames “Variety Jones,” “VJ,” “Cimon,” and “Plural of Mongoose,” was described by Ulbricht as a trusted “mentor,” who regularly advised him on the management of the Silk Road enterprise. Among other things, CLARK counseled Ulbricht on the improvement and expansion of Silk Road’s technical infrastructure, including helping Ulbricht hire and manage a computer programmer to assist with these projects. CLARK also helped Ulbricht develop and enforce the rules governing how Silk Road vendors and users could do business on the site, which were designed to maximize the commissions that Ulbricht received from Silk Road sales. CLARK further advised Ulbricht on how to conceal his involvement in, and hide his profits from, the operation of Silk Road, including helping Ulbricht devise cover stories to tell others and make plans to obtain foreign citizenship and offshore bank accounts. Finally, CLARK also advised Ulbricht on tactics to thwart efforts by law enforcement to investigate Silk Road. In that vein, CLARK repeatedly advocated the use of intimidation and violence to keep members of the Silk Road support staff from cooperating with law enforcement. In one such conversation, in which CLARK and Ulbricht discussed “track[ing] down” a certain Silk Road employee to ensure that he had not gone “[o]ff the rails,” CLARK commented, “[D]ude, we’re criminal drug dealers – what line shouldn’t we cross?”
CLARK was paid at least hundreds of thousands of dollars for his assistance in operating Silk Road.
* * *
CLARK, 54, a citizen of Canada, is charged with one count of narcotics conspiracy, which carries a maximum sentence of life in prison and a mandatory minimum sentence of 10 years, and one count of money laundering conspiracy, which carries a maximum sentence of 20 years in prison. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentence imposed on the defendant will be determined by the Court.
Mr. Bharara praised the outstanding joint efforts of the FBI and its New York Special Operations and Cyber Division, HSI Chicago-O’Hare, the DEA’s New York Field Division, and IRS-CI’s New York Field Office. Mr. Bharara also thanked the HSI Attache Bangkok, Thailand, for its assistance and support. Mr. Bharara also thanked the Royal Thai Police and the U.S. Department of Justice’s Office of International Affairs for their support and assistance.
This case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Timothy Howard and Richard Cooper are in charge of the prosecution.
The charges contained in the Complaint are merely accusations and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the complaint, and the description of the complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Three Charged in Manhattan Federal Court with December 2014 Fatal Shooting in Manhattan and Eleven Charged with Firearms and Drug Charges from Drug Trade Between New York and VermontRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Delano A. Reid, Special Agent in Charge of the New York Field Division of the Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), and William J. Bratton, the Commissioner of the New York City Police Department (“NYPD”), announced charges against three individuals for the December 28, 2014, murder of Rashaun Nicholson, which occurred in Lower Manhattan. Specifically, CORY HARRIS, a/k/a “Hop,” a/k/a “P,” FRANK JENKINS, a/k/a “Frizz” and RAHEEM MALDONADO, were charged with participating in a conspiracy to commit murder for hire; murder for hire; and murder in connection with a narcotics trafficking conspiracy. In addition, HARRIS, JENKINS, and MALDONADO, along with eight others, were charged with participating in a conspiracy to transport large quantities of crack cocaine and heroin from locations in New York City, to Bennington, Vermont, for resale in Bennington. Eight of the defendants, including HARRIS, JENKINS and MALDONADO, were also charged with possessing and using firearms in connection with the narcotics trafficking offense. All 11 defendants were previously taken into custody on charges contained in a previous indictment. The 11 defendants charged in the Superseding Indictment will be arraigned in Manhattan federal court today at 4:30 p.m.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, these defendants not only fueled drug addiction and violence in Manhattan and the Bronx, but spread it to small towns and communities outside of New York, like Bennington, Vermont. The defendants did everything in their power, including allegedly using deadly violence, to protect their interests. Thanks to the dedicated investigators of the ATF and the NYPD, these alleged criminals are now off the street.”
ATF Special Agent in Charge Delano A. Reid said: “As has been evidenced in this case, an investigation – when conducted in a thorough and logical manner – can take a considerable amount of time and effort before all of its layers are ultimately revealed. The exhaustive pursuit for the truth by the investigators and prosecutors involved has uncovered yet another alleged crime perpetrated by Harris et al. I hope that this serves as a clear illustration to the criminal element that law enforcement will enthusiastically pursue all leads until all illegal activities are uncovered and all those responsible be deprived of their freedom.”
Police Commissioner William J. Bratton said: “The litany of charges alleged against these individuals demonstrates an ongoing and flagrant disregard for the law. I commend the NYPD investigators and our federal partners for disrupting this violent criminal operation; one that potentially extended well beyond New York and would have put countless innocent people in harm’s way.”
As alleged in the Superseding Indictment and in other documents previously filed in Manhattan federal court[1]:
On December 28, 2014, in connection with a narcotics trafficking offense, FRANK JENKINS, in exchange for a payment from CORY HARRIS and RAHEEM MALDONADO, shot and killed Rashaun Nicholson in the vicinity of 78 Catherine Street, New York, New York.
In addition, from at least in or about 2014, up to and including in or about 2015, CORY HARRIS, 31, DANIEL HERRING, 25, FRANK JENKINS, JR., 21, JARON LANGHORNE, 20, MITCHELL MALDONADO, 24, RAHEEM MALDONADO, 23, UNIQUE NEWELL, 22, ADAM PHILLIPS, 32, KRYSTAL PINSONNEAULT, 32, MIGUEL ROBLES, 31, and LUIS ZABALA, 31, conspired to sell controlled substances, including crack cocaine and heroin, in Vermont and elsewhere. Specifically, the Indictment charges (1) HARRIS, HERRING, JENKINS, LANGHORNE, MITCHELL MALDONADO, RAHEEM MALDONADO, NEWELL, and ZABALA with conspiring to distribute at least 280 grams of crack cocaine, and at least 100 grams of heroin; (2) MIGUEL ROBLES with conspiring to distribute at least 100 grams of heroin; (3) PHILLIPS with conspiring to distribute at least 280 grams of crack cocaine; and (4) PINSONNELAULT with conspiring to distribute mixtures and substances containing crack cocaine and heroin. HARRIS, HERRING, JENKINS, LANGHORNE, MITCHELL MALDONADO, RAHEEM MALDONADO, NEWELL, and ZABALA are charged with using and possessing firearms between 2014 and 2015, in furtherance of the narcotics trafficking conspiracy. HARRIS is also charged with using firearms in April 2012 in furtherance of a separate marijuana trafficking conspiracy.
During the time period charged in the Indictment, members of the conspiracy obtained crack and heroin from locations in New York City, including Manhattan and the Bronx, and then transported the crack and heroin to Vermont, for distribution in and around Bennington, Vermont. The members of the conspiracy sold crack and heroin from private apartments and certain motels in the Bennington area. Many of the members of the conspiracy used firearms in connection with their narcotics trafficking.
Members of the conspiracy also provided heroin, crack, and other controlled substances to certain women in and around Bennington, who were addicted, or became addicted, to those controlled substances. These women assisted members of the conspiracy with the transportation, storage, and distribution of crack and heroin in exchange for additional controlled substances, or in exchange for cash that the women used, in part, to purchase additional controlled substances.
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Apart from PINSONNEAULT, all of the defendants face mandatory minimum prison terms ranging from five years to 35 years, and maximum prison terms ranging from 40 years to life. PINSONNEAULT faces a maximum term of 20 years in prison.
The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentences imposed on the defendants will be determined by the Court.
A chart containing the names of the defendants, and the charges and maximum penalties they face, is attached.
Mr. Bharara praised the outstanding investigative work of the Bureau of Alcohol, Tobacco, Firearms and Explosives, the New York City Police Department, the United States Marshals, the Vermont State Police, and the Bennington Police Department. Mr. Bharara also thanked the United States Attorney’s Office for District of Vermont for assisting his Office at all stages of the investigation.
The prosecution is being handled by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Michael Gerber and Hadassa Waxman 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
Conspiracy to distribute and possess with intent to distribute 280 grams and more of crack cocaine, and 100 grams and more of heroin.
CORY HARRIS, DANIEL HERRING, FRANK JENKINS JR., JARON LANGHORNE, MITCHELL MADONADO, RAHEEM MALDONADO, UNIQUE NEWELL, and LUIS ZABALA
Life in prison
Mandatory minimum: 10 years in prison
Conspiracy to distribute and possess with intent to distribute 100 grams and more of heroin
MIGUEL ROBLES.
Life in prison
Mandatory minimum: 5 years in prison
Conspiracy to distribute and possess with intent to distribute 280 grams and more of crack cocaine
ADAM PHILLIPS
Life in prison
Mandatory minimum: 10 years in prison
Conspiracy to distribute and possess with intent to distribute crack cocaine and heroin
KRYSTAL PINSONNEAULT
20 years in prison
Possession of a firearm in furtherance of a narcotics trafficking offense
CORY HARRIS (2 counts), DANIEL HERRING, FRANK JENKINS JR., JARON LANGHORNE, MITCHELL MADONADO, RAHEEM MALDONADO, UNIQUE NEWELL, and LUIS ZABALA
Life in prison
Mandatory minimum: 5 years in prison, to be imposed consecutively to any other sentence
Conspiracy to commit murder for hire, and murder for hire
CORY HARRIS, FRANK JENKINS, and RAHEEM MALDONADO
Mandatory life in prison
Discharging a firearm in furtherance of a narcotics trafficking offense resulting in death
CORY HARRIS, FRANK JENKINS, and RAHEEM MALDONADO
Life in prison
Mandatory 25 years in prison
Murder in furtherance of a narcotics trafficking offense
CORY HARRIS, FRANK JENKINS, and RAHEEM MALDONADO
Life in prison
[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.
Current and Former New York City Human Resources Administration Employees Each Charged with Corruption OffensesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Mark G. Peters, Commissioner of the New York City Department of Investigation (“DOI”), Catherine Leahy Scott, Acting Inspector General of the New York State Office of Welfare Inspector General (“State IG”), and Diego Rodriguez, Assistant Director-In-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the filing of criminal charges against CHERISSE WATSON-JACKSON, a/k/a “Reesie,” a current New York City Human Resources Administration (“HRA”) supervisor, along with eleven others, with corruption offenses involving the theft of approximately $1.5 million from two public assistance programs. U.S. Attorney Bharara and Commissioner Peters simultaneously announced separate charges against PETRONILA PERALTA, a/k/a “Petra,” a former HRA employee, in a separate scheme involving the theft of approximately $600,000 more in public funds.
WATSON-JACKSON and PERALTA were arrested this morning in Queens, New York, and the Bronx, New York, respectively, and are scheduled to appear before U.S. Magistrate Judge Sarah Netburn in Manhattan federal court later today. GERARD STOKES, VERNECKA PETERSEN-FOWLER, KEVIN WILLIAMS, BEVERLY LORD, JARON ANNUNZIATA, and BEVERLY FRANKLIN were also arrested this morning, and are scheduled to appear before U.S. Magistrate Judge Sarah Netburn in Manhattan federal court later today. DERRICK WILLIAMS, a/k/a “Blood,” is in state custody on an unrelated charge, and is expected to appear in Manhattan federal court later this week. ISAAC ALLEN is in custody in Vermont on an unrelated charge, and is expected to appear in Manhattan federal court at a later date. COREY BROCK, a/k/a “Cee,” MAURICE CROMWELL, a/k/a “Reece,” and YESENIA DEPENA remain at large.
U.S. Attorney Preet Bharara said: “As alleged, one current and one former HRA employee abused their positions of trust as administrators of public funds to enrich themselves. Cherisse Watson-Jackson and Petronila Peralta allegedly diverted more than $2 million in public funds designed to assist the most needy in our community for their own personal use. I thank our partners in this investigation for their work in rooting out public corruption.”
Commissioner Mark G. Peters said: “During a season when we are reminded about hunger’s prevalence, these defendants are charged with shamelessly stealing the funds that assist in feeding that basic need. Vulnerabilities like those exposed in these arrests and in DOI’s Report breed corruption and must be dealt with swiftly to prevent further fraud of this magnitude from occurring. I thank our law enforcement partners and HRA for their partnership on these important cases.”
New York State Inspector General Catherine Leahy Scott said: “Cherisse Watson-Jackson was entrusted to provide government assistance to New York’s neediest families but instead abused that trust and her authority, steering $1.5 million in public funds to herself and her accomplices. Today’s arrests should send a clear message that my law enforcement partners and I will not tolerate the use of public office and public resources for criminal activity. We will investigate and bring to justice those who corrupt the system, and will continue to work together to find solutions to curtail systemic theft and abuse of public funds.”
FBI Assistant Director-In-Charge Diego Rodriguez said: “Watson-Jackson and Peralta are accused of abusing their positions to commit fraud through theft from a program designed to support the most in need. They not only allegedly took from the needy, but they conspired to defraud the tax-payers. Their actions jeopardized the foundation of the programs set up to help the community. This fraudulent scheme not only profited Watson-Jackson and Peralta, but it also lined the pockets of their co-conspirators. The FBI continues to work alongside our partners in the New York City Department of Investigation and New York State Office of Welfare Inspector General to ensure confidence in the government and its programs.”
According to the allegations contained in the Complaints[1] unsealed today in Manhattan federal court and publicly-available documents:
HRA is an agency of the City of New York responsible for administering various public assistance programs. Among other things, HRA provides temporary help to individuals and families with social service and economic needs to assist them in reaching self-sufficiency. Its services include, among other things, administering the federally-funded Supplemental Nutrition Assistance Program (“SNAP”) (more commonly known as “food stamps”), the federally-funded Temporary Aid to Needy Families Program (“TANF”), and providing rental assistance to low-income families and individuals.
The Watson-Jackson Scheme
Since 1993, WATSON-JACKSON has worked at HRA, most recently as a supervisor in a job center in Queens, New York. In that capacity, she supervised a group of other supervisors who in turn were responsible for teams of employees who review and determine eligibility for public assistance clients. Since at least early 2012, and continuing until at least December 2013, WATSON-JACKSON abused her position by engaging in a scheme to defraud two of the public assistance programs that she was charged to help administer. The first of the two schemes involved WATSON-JACKSON fraudulently loading electronic benefit transfer (“EBT”) cards with funds from SNAP, which funds were then spent by co-conspirators throughout the New York City area, including by ALLEN, DERRICK WILLIAMS, BROCK, STOKES, and ANNUNZIATA. The second scheme involved WATSON-JACKSON fraudulently causing rental assistance checks to be mailed to co-conspirators who posed as “landlords” of low-income tenants. Co-conspirators, including CROMWELL, KEVIN WILLIAMS, ANNUNZIATA, FRANKLIN, and PETERSON cashed and/or assisted others to cash the fraudulently-obtained checks, including with the assistance of DEPENA, a teller at a check-cashing business who knowingly cashed more than 200 fraudulent checks in different names. The two schemes led by WATSON-JACKSON resulted in the loss of more than approximately $1.5 million in public funds.
The Peralta Scheme
Between 2005 and August 2014, PERALTA worked at HRA, most recently as a Job Opportunity Specialist in a different job center in Queens, New York. In that capacity, PERALTA was supposed to provide economic support and employment-related services to persons in need. Starting by approximately 2009, PERALTA abused her position by fraudulently issuing more than approximately 800 supplemental issuances to individuals who were not entitled to such payments. A “supplemental issuance” is a supplemental transmission of funds to a public assistance beneficiary who did not receive the amount of funds he or she was due previously. Between approximately 2009 and May 2011, PERALTA repeatedly issued such funds not to individuals who were entitled to them, but to co-conspirators, and took steps to seek to conceal her conduct, including by using the computer system log-in information of a former employee of HRA, rather than her own. The scheme led by PERALTA resulted in the loss of more than approximately $600,000 in public funds.
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WATSON-JACKSON, 44, of Queens, New York; CROMWELL, 39, of Staten Island, New York; ALLEN, 39, of Brooklyn, New York, DERRICK WILLIAMS, 34, of Queens, New York; BROCK, 35, of Queens, New York; STOKES, 32, of Queens, New York; PETERSEN-FOWLER, 44, of Brooklyn, New York; KEVIN WILLIAMS, 27, of Queens, New York; DEPENA, 24, of Brooklyn, New York; LORD, 53, of Queens, New York; ANNUNZIATA, 35, of Brooklyn, New York; and FRANKLIN, 37, of Queens, New York, are each charged in a complaint with conspiracy to commit mail and wire fraud, which carries a maximum penalty of 20 years in prison. WATSON-JACKSON, CROMWELL, DERRICK WILLIAMS, BROCK, STOKES, KEVIN WILLIAMS, and DEPENA are also each charged with aggravated identity theft, which carries a mandatory penalty of two years in prison, to be served consecutively to any penalty imposed for the mail and wire fraud conspiracy.
PERALTA, 51, of Bronx, New York, is charged in a separate complaint with conspiracy to commit wire fraud, which carries a maximum penalty of 20 years in prison, and aggravated identity theft, which carries mandatory penalty of two years in prison, to be served consecutively to any penalty imposed for the wire fraud conspiracy.
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, the State IG, and the FBI, and noted that both investigations are ongoing.
These cases are being prosecuted by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Daniel C. Richenthal, Andrew D. Beaty, and Shawn G. Crowley are in charge of the prosecutions.
The charges contained in the Complaints are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[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.
Statement of Manhattan U.S. Attorney Preet Bharara on the Conviction of Former New York Assembly Speaker Sheldon SilverRead the Press Release
“Today, Sheldon Silver got justice, and at long last, so did the people of New York.”
Former Mount Vernon Commissioner and Her Associate Found Guilty in White Plains Federal Court on Fraud ChargesRead the Press Release
Preet Bharara, United States Attorney for the Southern District of New York, announced that Constance Post, former Commissioner of the Mount Vernon Department of Planning and Community Development as well as Executive Director of the Mount Vernon Urban Renewal Agency (“MVURA”), and Wayne Charles were found guilty today in White Plains federal court on charges stemming from their diversion of more than $1.2 million in federal funds from the U.S. Department of Housing and Urban Development (“HUD”) that were administered by the MVURA.
U.S. Attorney Preet Bharara said: “As the jury unanimously found, Constance Post abused her position of public trust to conspire with Wayne Charles to enrich themselves. Their corruption victimized the citizens of Mount Vernon, HUD, and U.S. taxpayers. Now, the defendants await sentencing for their crimes.”
As established by the evidence at trial:
Post and Charles, who had a romantic relationship, arranged to steer a computer services contract to a company secretly owned by Charles. Using the name of a defunct computer services company that a friend had operated, Charles concealed from the City of Mount Vernon that he had no computer expertise, no employees, and no ability to perform under the contract. Post hired and directed people to work for Charles’s company, which enriched Charles, between 1998 and 2002, but ultimately cost the City and HUD more than twice what it would have paid if the employees had worked directly for the City. Post also disregarded the monetary restrictions placed upon her by the MVURA board that approved the computer services contract, and she steered hundreds of thousands of dollars to Charles beyond her authorization.
Separately, in connection with a $500,000 loan of HUD funds awarded by the MVURA Board to renovate property in Mt. Vernon, Charles, with the approval of Post, falsely stated that he had not used any other names, and falsely certified that he had no other business with the City of Mount Vernon and the MVURA. In fact, Charles used several false names with the approval and assistance of Post in order to conceal his involvement with the computer services contract. Then, after renovations were complete on the property in 2003, another lender, in accordance with the terms of the MVURA=s loan, repaid $250,000 of the loan, leaving an unpaid balance of $250,000. Post took steps to conceal the existence of the loan and the fact that Charles still owed the MVURA the $250,000, ensuring that Charles was not required to repay the loan to Mount Vernon. In 2005, when federal investigators were examining the MVURA=s financial records, Post retroactively recorded the unpaid balance of the Charles loan on the books of the MVURA. Shortly thereafter, Charles made a few payments on the loan, which otherwise remains unpaid.
The evidence also established that, during the course of their scheme, Charles paid Post $30,000.
Post and Charles were each convicted of one count of conspiracy to commit mail fraud and one count of mail fraud. Charles was also previously convicted at an earlier trial of making false statements to federal agents who interviewed him in 2006 about the subject matter of this case.
Sentencing is scheduled for March 1, 2016, before United States District Judge Kenneth M. Karas. Post and Charles each face up to 20 years in prison on the conspiracy charge and up to 20 years in prison on the mail fraud charge of the Indictment. Charles also faces up to five years in prison on the false statement charge. The statutory maximum penalties 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 joint efforts of the United States Department of Housing and Urban Development - Inspector General and the Federal Bureau of Investigation.
The prosecution is being handled by the Office's White Plains Division. Assistant U.S. Attorneys Andrew Dember and Daniel Filor are in charge of the prosecution.
Bronx Man Indicted for Sexual Exploitation, Enticement, and Child Pornography CrimesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriquez, Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the indictment of DAVID KEITH, a/k/a “David Wright,” a/k/a “David Lee Keith,” for four counts stemming from his sexual exploitation and enticement of minors and his receipt of child pornography.
Manhattan U.S. Attorney Preet Bharara said: “David Keith is charged with preying on some of the most vulnerable members of our community in the way parents fear most. He allegedly approached young girls under the guise of working in modeling, and then coerced and tricked the victims into engaging in sexually explicit conduct with him, capturing it on video. Together with our partners at the FBI, we are committed to protecting children from those who seek to sexually exploit them.”
FBI Assistant Director-in-Charge Diego Rodriquez said: “As alleged, David Keith targeted young girls as they walked in public. He preyed on their vulnerabilities, giving them praise and attention. With twisted tongue, he allegedly told them he could make them models, tricking them into sexually explicit conduct with him, captured on video. He then allegedly threatened them if they revealed the truth. The FBI continues to work on this, and other similar cases, to stop predatory activity that steals the innocence of childhood and threatens our community.”
According to the Indictment[1]:
On October 13, 2013, KEITH, who lives in the vicinity of the University Heights, Morris Heights, Mount Hope, and Mount Eden neighborhoods in the Bronx, New York, approached three girls, approximately 12 to 14 years old, on the street, presented himself as part of the modeling industry, and encouraged the girls to model for him. KEITH induced one of the girls to enter his vehicle, a gray Yukon Denali, where he video recorded, among other things, himself engaging in forcible sexual conduct with her. KEITH threatened the victim not to tell anyone and told her that he had been watching her.
On or about October 12, 2013, KEITH, also in his gray Yukon Denali, video recorded the exposed genitals of a second victim, approximately 8 to 9 years of age.
In addition, KEITH’s computer contained images and videos of child pornography downloaded from the Internet.
KEITH is scheduled to be arraigned before Judge Alison J. Nathan, on December 4, 2015, at 2:00 p.m.
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KEITH, 38, of the Bronx, New York, was arrested on November 17, 2015, in the Bronx, New York, and has been in Federal custody since. KEITH is charged with two counts of sexual exploitation of a child, each of which carries a maximum sentence of 50 years in prison; one count of receipt of child pornography, which carries a maximum sentence of 40 years in prison; and one count of possession of child pornography, 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 the judge.
Any individuals who believe they have information concerning DAVID KEITH that may be relevant to the investigation should contact the Federal Bureau of Investigation at 1-212-384-1000 or https://tips.fbi.gov/.
Mr. Bharara praised the efforts of the FBI 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 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 forth herein constitute only allegations, and every fact described should be treated as an allegation.
Manhattan U.S. Attorney Files and Simultaneously Settles False Claims Act Lawsuit Against Defense Contractor and Its President for Multi-Year Fraud Involving Sale of Defective Weapons Sights to U.S. Military and Other AgenciesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Craig Rupert, the Northeast Field Office Special Agent of the Department of Defense-Office of Inspector General (“DoD-OIG”), Andrew Traver, the Director of the Naval Criminal Investigative Service (“NCIS”), and Frank Robey, the Major Procurement Fraud Unit Director of the U.S. Army Criminal Investigation Command (“CID”), announced today that the United States filed and simultaneously settled a civil fraud lawsuit under the False Claims Act and common law against L-3 COMMUNICATIONS EOTECH, INC. (“EOTECH”); its parent company, L-3 COMMUNICATIONS CORPORATION (“L-3”); and EOTECH’s president PAUL MANGANO (“MANGANO”) (collectively, “Defendants”). As alleged in the complaint, for years, EOTECH sold defective holographic weapon sights to the U.S. Department of Defense (“DOD”), the U.S. Department of Homeland Security (“DHS”), and the Federal Bureau of Investigation (“FBI”). These sights were designed to allow users to quickly acquire and hit targets, and to return fire in a range of extreme environmental conditions. Defendants knew that the sights failed to perform as represented in cold temperatures and humid environments, but delayed disclosure of these defects for years. In connection with the settlement, approved today by United States District Judge Richard Sullivan EOTECH and L-3 have agreed to pay the United States $25,600,000, and all three defendants have made admissions of conduct alleged in the complaint.
Manhattan U.S. Attorney Preet Bharara said: “The defendants, L-3, EOTech, and EOTech’s senior executive Paul Mangano, engaged in fraudulent double dealing by selling defective products to the men and women who risk their lives to protect our country. With their own sights focused exclusively on corporate profits, the defendants let our soldiers fight with defective sights on their weapons. We will continue to pursue and hold accountable corporations and their executives who put profits over honesty and fair dealing, particularly when it comes to dealings that affect our service men and women.”
DoD-OIG Northeast Field Office Special Agent in Charge Craig Rupert said: “This settlement illustrates the seriousness of the harm to the Defense Department and other federal agencies from defective products. The safety of our warfighters and law enforcement who depend on these products is paramount in the fight against terror and crime. DCIS remains vigilant for and vigorously pursues all similar complaints in our effort to shield America's investment in our national defense.”
NCIS Director Andrew Traver said: “American service members not only deserve the highest quality equipment, American taxpayers deserve the highest integrity suppliers, who do not take millions of dollars and squander public trust. Holographic Weapons Sights are used in combat; a sight that 'almost works' is not acceptable. It is gratifying that NCIS could be part of the joint investigation to hold EOTECH accountable.”
U.S. Army CID Major Procurement Fraud Unit Director Frank Robey said: “We are pleased with today's settlement; however, there is no monetary substitute great enough for the safety and required tactical advantage that the young men and women serving in our armed forces in harm's way deserve. It is imperative that when someone contracts with the U.S. Army, they provide only their very best with no exceptions.”
According to the complaint filed in Manhattan federal court:
EOTECH has earned tens of millions of dollars through its sales of sights to DOD, DHS, and the FBI. In 2004, and again in 2010, EOTECH contracted with DOD to supply holographic weapon sights for use in close quarter urban combat as well as longer range target acquisition. EOTECH represented to DOD that its sights could operate in temperatures ranging from -40 degrees to 140 degrees Fahrenheit, as well as in humid and other extreme environmental conditions. Those representations were important because EOTECH’s combat optical sights were used by operators in Iraq and Afghanistan, as well as by special operations forces around the world.
By early 2006, Defendants knew that their sights failed to perform as represented. At hot and cold temperatures, the sights experienced a condition known as “thermal drift,” meaning that the sight’s point of aim differed from its point of impact. EOTECH’s own internal tests showed that some models experienced drift of 6 to 12 minutes of angle (“MOA”), i.e., 6 to 12 inches per 100 yards. Even though EOTECH’s contracts with DOD required disclosure of any information concerning the reliability of the sights, EOTECH did not disclose this defect to DOD until 2015, after the FBI discovered the problem and presented its findings to EOTECH.
In 2007, Defendants became aware of a separate performance failure in cold temperature, known internally as “cold weather distortion.” At around 32 degrees Fahrenheit, the sight’s aiming dot became distorted, affecting accuracy by 12 MOA, increasing to 20 MOA at 5 degrees Fahrenheit. Defendants did not disclose this defect from DOD for more than a year, until EOTECH had a fix in place. EOTECH then presented the fix as an upgrade to a product that conformed to specifications, and did not disclose that the entire stock of sights that DOD had purchased since 2004 was defective.
By 2008, Defendants also knew that EOTECH’s sights failed in humid environments, a defect known internally as “moisture incursion.” Although EOTECH represented that the sights passed humidity and other testing, Defendants knew that the seals leaked, allowing moisture to enter the sight, resulting in dimming of the circle and aiming dot necessary for acquiring a target. Over the next several years, EOTECH’s internal tests repeatedly confirmed these leaks. Nevertheless, EOTECH did not notify DOD of the problem until 2013, when it once again presented a fix as an upgrade to a product that conformed to specifications.
MANGANO, as president of EOTECH, was ultimately responsible for disclosing quality issues to customers. MANGANO was apprised of each of the defects with the sights and yet did not recommend disclosing any of the defects until he believed either a fix was in place or that DOD would find out about the defect from another source.
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As part of today’s settlement, EOTECH and L-3 admitted that EOTECH knew that its holographic weapon sights experienced thermal drift, cold weather distortion, and moisture incursion. EOTECH and L-3 also admitted that despite EOTECH’s representations to DOD that the sights performed in hot, cold, and humid conditions, and despite EOTECH’s contractual obligation to disclose to DOD any performance-related data affecting the reliability of the sights, EOTECH continued to sell the sights to the Government for more than one year without disclosing cold weather distortion, and for several years without disclosing thermal drift or moisture incursion. MANGANO, who has been the president of EOTECH since 2006, admitted that he knew that the sights experienced cold weather distortion and moisture incursion, but EOTECH continued to sell the sights to the Government for over one year (in the case of cold weather distortion) or several years (in the case of moisture incursion) without a disclosure.
Mr. Bharara praised the DOD’s Defense Criminal Investigative Service, Naval Criminal Investigative Service, and Army Criminal Investigation Command; DHS Homeland Security Investigations; and the FBI for their investigative efforts and ongoing support and assistance with the case.
The case is being handled by the Office’s Civil Frauds Unit. Assistant United States Attorneys Jaimie L. Nawaday and Joseph N. Cordaro are in charge of the case.
Manhattan U.S. Attorney Announces Charges Against Wholesale Distributor of Spice and FlakkaRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Carl J. Kotowski, Special Agent in Charge of the Drug Enforcement Administration’s New Jersey Division (“DEA”), announced today that RICHARD GALIMI, 46, was arrested yesterday and charged in a criminal complaint for his role in distributing bulk quantities of synthetic cannabinoids, commonly known as “Spice,” and synthetic cathinones containing Alpha-PVP, commonly known as “Flakka.” GALIMI arranged for the importation of synthetic controlled substances from China, arranged for them to be processed and packaged, and was responsible for the distribution of packets of Spice for individual use. A search of a Brooklyn warehouse maintained by GALIMI resulted in the seizure of approximately 2,000 packets of pre-packaged Flakka and approximately 2,000 grams of pre-packaged Spice, as well as approximately 25 grams of bulk synthetic chemicals and 200 pounds of leafy substances that are used to manufacture Spice.
GALIMI was arrested in Brooklyn and will be presented in Manhattan federal court today.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Richard Galimi was responsible for the distribution of potentially lethal synthetic cannabinoids and cathinones. Peddlers of these dangerous drugs – marketed as Spice and Flakka – target young people who are lured by the packaging and pricing. But the product is always unsafe and it can be deadly.”
According to the Complaint[1] and publicly available documents:
Beginning in at least 2011, GALIMI made unsolicited phone calls to the owners of smoke shops in order to sell a powerful chemical Spice with the brand name “Hydro” to the smoke shop owners, which was then sold to retail customers. Beginning in early 2015, GALIMI met with individuals cooperating with the DEA (the “CSs”) and began providing Spice and Flakka to the CSs. During the course of the investigation, the DEA purchased approximately $6,500 worth of Spice and Flakka from GALIMI.
In order to manufacture the Spice, GALIMI arranged for leaves in bulk quantities to be brought to a warehouse in Brooklyn. In the warehouse, GALIMI employed at least five individuals who were responsible for packaging the Spice in retail packages. GALIMI also manufactured a synthetic cannabinoid that he marketed as being three times stronger than typical Spice.
In addition, GALIMI used brokers to import capsules of Flakka and packaging materials from China to New York via Hong Kong, using various forms of international mail services. GALIMI was involved in importing approximately 3,000 capsules of Flakka to the United States on a regular basis.
Spice is the street name applied to a synthetic cannabinoid. Spice is popular among teenagers and young adults, and is widely accessible because it is inexpensive and commonly sold at otherwise legitimate retail locations. The colorful logos used on the Spice retail packets and the flavors used, such as lime, strawberry, and blueberry, make Spice attractive to teenagers and young adults. The physical effects of Spice can include agitation, rapid heart rate, confusion, dizziness, nausea and vomiting, paranoia, panic attacks, and acute kidney injury.
Flakka is the street name applied to a synthetic cathinone that is a derivative of the synthetic drug commonly known as “bath salts.” Flakka is intended to mimic the effects of an amphetamine. Flakka can come in a rocky crystalline form and often comes in capsules. Flakka typically contains Alpha-PVP, which is a Schedule I controlled substance. Flakka is frequently sold to consumers in small packets that have colorful logos. A tenth-gram quantity, or one standard dose, of Flakka typically sells for as little as $3.00. The physical effects of Flakka can include aggression, paranoia, and hallucinations.
After the United States Attorney’s Office for the Southern District of New York charged 10 defendants involved in a Spice drug distribution ring in September 2015, Spice-related emergency room visits in New York City for the month of October 2015 were down 36 percent compared to their peak in July 2015, according to the New York City Department of Health and Mental Hygiene.
GALIMI is charged with one count of conspiracy to distribute and possess with intent to distribute a controlled substance, which carries a maximum potential sentence of 20 years in prison. The statutory maximum penalty is prescribed by Congress and is provided her for informational purposes only, as any sentencing of the defendant would be determined by the judge.
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U.S. Attorney Preet Bharara praised the outstanding work of the DEA’s New Jersey Division.
The case is being prosecuted by the Office’s Narcotics Unit. Assistant U.S. Attorney Noah Solowiejczyk is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.
Manhattan U.S. Attorney Announces Agreement with Westchester County Jail to Establish Corrective Measures and Appoint an Independent MonitorRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced an agreement with Westchester County that resolves the United States’ long-running investigation into Westchester County Jail (the “Jail”) under the Civil Rights of Institutionalized Persons Act (“CRIPA”). This agreement, approved today by the Westchester County Board of Acquisition and Contract, implements a resolution of the Government’s findings regarding the Jail’s use of force against inmates, its use of isolation as a method of discipline for minors incarcerated at the jail, and its provision of inadequate medical and mental health care to inmates. The agreement requires the appointment of an independent monitor to ensure that the Jail complies with the agreement. The agreement will last for three years, or until the time that the Jail has achieved substantial compliance with its terms.
The Jail, located in Valhalla, New York, houses pretrial detainees and sentenced inmates. The Jail also houses minors awaiting transfer to a juvenile detention facility and minors adjudicated as adults.
Manhattan U.S. Attorney Preet Bharara said: “As I have emphasized many times before, within the walls of a correctional facility does not mean outside the protection of the Constitution. Jails have a constitutional obligation to take reasonable steps to protect the safety of inmates and to provide humane conditions of confinement. This agreement, and the commitment on the part of the County to comply with its terms, are important steps toward ensuring that inmates at Westchester County Jail are treated in a manner consistent with the Constitution.”
The agreement between the United States and the Jail resolves a long-running investigation into the Jail. In 2009, the United States issued a letter setting forth the Government’s findings regarding constitutional violations at the Jail. Key findings included that the Jail had failed to adequately protect inmates from physical harm caused by inappropriate and excessive force used by staff and failed to provide adequate medical and mental health care, particularly with respect to minors housed in isolation in the punitive segregation unit of the Jail, all resulting in unconstitutional living conditions.
Since the Government issued its findings letter and during the ongoing investigation, the Jail has made progress in addressing various problematic conditions and has now agreed to implement all the corrective measures set forth in the parties’ agreement to ensure the Jail’s compliance with constitutional requirements.
With respect to minors, the agreement requires that the Jail cease its practice of placing minors under 18 years old in isolation or punitive segregation, and that it develop systems to address disciplinary issues in a manner that is consistent with minors’ needs and that does not deprive them of access to certain programs and services. The agreement also requires the development and implementation of alternative approaches to discipline for 18-year-old inmates. The Jail has agreed to measures designed to ensure that its use of force is not excessive and is consistent with the law, and has agreed to implement appropriate policies and practices concerning review of all uses of force, training of staff, and supervision of inmates. The agreement also puts in place requirements concerning the provision of medical and mental health care for both minors and adults.
Finally, the agreement mandates the appointment of an independent monitor to assist the County in achieving compliance with the provisions of the agreement, to make reports concerning the status and progress of compliance, and to provide the County with technical assistance to comply with the provisions of the agreement. The United States and the monitor will have full access to the Jail and its records, staff, and inmates for the life of the agreement. The agreement will terminate in three years if the United States agrees that the County is in substantial compliance with all provisions and has maintained substantial compliance with all provisions for 24 months.
The case is being handled by the Office’s Civil Rights Unit. Assistant U.S. Attorneys Rebecca C. Martin and Tara M. La Morte are in charge of the case.
Former New York State Senator Thomas W. Libous Sentenced in White Plains Federal Court for Making False Statements to the FBIRead the Press Release
Preet Bharara, United States Attorney for the Southern District of New York, announced today that New York State Senator THOMAS W. LIBOUS was sentenced to six months of house arrest for making false statements to the Federal Bureau of Investigation (“FBI”). LIBOUS was convicted on July 22, 2015, following a seven-day trial in White Plains federal court before the Hon. Vincent L. Briccetti, United States District Judge, who also imposed today’s sentence.
The evidence at trial proved that a federal grand jury in White Plains was investigating allegations that THOMAS LIBOUS had obtained a job for a his son Matthew Libous at a Westchester law firm (“the Law Firm”) in exchange for a promise to refer business to the firm, and had arranged for an Albany lobbying firm that regularly lobbied him to secretly pay the law firm $50,000 per year to defray the cost of Matthew Libous's salary and lease of a Range Rover. The lobbying firm specialized in transportation issues and THOMAS LIBOUS served as the Chairman of the Senate's Transportation Committee at the time. The evidence also showed that THOMAS LIBOUS told a partner of the Law Firm that the firm would have to “build a new wing” to accommodate the business he would refer to it if it hired the member of his family.
Special Agents of the FBI interviewed THOMAS LIBOUS on June 24, 2010, as part of the grand jury's investigation. The evidence at trial showed THOMAS LIBOUS made the following false statements to the agents during the interview:
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he could not recall how Matthew Libous began to work at the Law Firm;
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no deals were made to get Matthew Libous the job at the Law Firm;
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he was not aware that the lobbying firm had paid any part of Matthew Libous's salary at the Law Firm;
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he never promised to refer work to the Law Firm;
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he was not involved in Matthew Libous's decision to work at the Law Firm;
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he had no business or personal relationship with the Law Firm; and
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he did know of any relationship between the lobbying firm and the Law Firm.
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In imposing sentence, Judge Briccetti said LIBOUS’s conduct in lying to the FBI was “disgraceful” and took note of LIBOUS’s “total lack of remorse.” He called the monthly payments totaling $50,000 from the lobbying firm to the Law Firm the “elephant in the room” that LIBOUS had not explained. Judge Briccetti said that ordinarily he would have imposed a sentence of six months in prison but he declined to send LIBOUS to prison given his terminal medical condition.
In addition to the sentence of home confinement, LIBOUS, 62, of Binghamton, New York, was also sentenced to two years of supervised release and ordered to pay a fine of $50,000.
Mr. Bharara praised the investigative work of the FBI.
The prosecution is being handled by the Office's White Plains Division. Assistant U.S. Attorneys Benjamin R. Allee and James McMahon are in charge of the prosecution.
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Manhattan U.S. Attorney Announces Conviction of Jamal Smalls for Murder, Narcotics Trafficking, and Firearms ChargesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that JAMAL SMALLS, a/k/a “Poo Black,” a/k/a “Machiavelli,” a/k/a “Mack,” was found guilty today of the July 26, 2012, drug-related murder of Doneil White; leading a narcotics trafficking conspiracy that distributed powder cocaine, crack cocaine, and heroin in 2012 and 2013; and using and discharging firearms in connection with that narcotics conspiracy, following a two-week jury trial before United States District Judge Naomi Reice Buchwald.
U.S. Attorney Preet Bharara said: “Jamal Smalls led a violent drug trafficking crew and, as the jury found, was responsible for murder as well as other mayhem and drug peddling. Thanks to the FBI and the NYPD, this threat to public safety is off the streets and awaiting sentencing for his crimes.”
According to the Superseding Indictment, evidence admitted at trial, and statements made at court proceedings and in court filings:
JAMAL SMALLS, a/k/a “Poo Black,” a/k/a “Machiavelli,” a/k/a “Mack,” was a high-ranking member of the Bloods. In 2012 and 2013, SMALLS ran a drug trafficking crew that operated in and around the John Adams Houses in the Bronx, New York. SMALLS and his crew sold large quantities of powder cocaine, crack cocaine, and heroin in and around the housing project, as well as in North Carolina, South Carolina, and Virginia.
In 2000, SMALLS was convicted for first degree manslaughter in New York State. Throughout SMALLS’s term of incarceration, he received narcotics from his brother and persons working on behalf of the crew to distribute within the state prison system. In April 2012, SMALLS was released from New York State prison. After his release, SMALLS began to lead the crew with his brother, participating in large-quantity narcotics transactions in the Bronx and out-of-state.
SMALLS was also involved in repeated violence committed in connection with the crew’s drug trafficking. On July 18, 2012, SMALLS tried to shoot Doneil White, a rival drug dealer, but missed; SMALLS, however, hit a bystander in the back outside of the Johns Adams Houses. A week later, on July 25, 2012, SMALLS again shot at Doneil White in the John Adams Houses, but missed. Early the next morning, on July 26, 2012, SMALLS paid a member of his crew $10,000 to shoot Doneil White in a stairwell at the John Adams Houses. White died a few days later as result of his severe injuries.
Following his arrest in August 2012, and while in pre-trial detention, SMALLS continued to lead the narcotics conspiracy, by, among other things, giving directives to members of the crew through telephone calls and in-person visits.
* * *
SMALLS, 39, of the Bronx, New York, was convicted of (a) conspiracy to distribute and possess with the intent to distribute 280 grams and more of crack cocaine, one kilogram and more of heroin, and five kilograms and more of cocaine; (b) using, carrying, possessing, and discharging firearms in connection with that narcotics conspiracy; and (c) the drug-related murder of Doneil White. In total, SMALLS faces a maximum sentence of life in prison and a mandatory minimum sentence of 45 years in prison. SMALLS is scheduled to be sentenced on March 10, 2016, at 2:30 p.m., before Judge Buchwald. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
U.S. Attorney 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 Bronx District Attorney’s Office for their valuable assistance with the investigation.
The case is being prosecuted by the Office’s Violent & Organized Crime Unit. Assistant U.S. Attorneys Kan M. Nawaday, Joshua A. Naftalis, and Drew Johnson-Skinner are in charge of the prosecution.
Manhattan U.S. Attorney Announces $370 Million Civil Fraud Settlement Against Novartis Pharmaceuticals for Kickback Scheme Involving High-Priced Prescription Drugs, Along with $20 Million Forfeiture of Proceeds from the SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), Gregory E. Demske, Chief Counsel to the Inspector General of the U.S. Department of Health and Human Services (“HHS-OIG”), and Scott J. Lampert, Special Agent in Charge of HHS-OIG’s New York Regional Office, announced a $390 million settlement against NOVARTIS Pharmaceuticals Corp. (“NOVARTIS”) in a civil fraud lawsuit based on claims that NOVARTIS gave kickbacks to specialty pharmacies in return for recommending two of its drugs, Exjade and Myfortic. The settlement resolves claims under the federal False Claims Act, 31 U.S.C. § 3729 et seq., and numerous state false claims act claims. The settlement also provides for resolution of claims against NOVARTIS under the federal civil forfeiture statute, 18 U.S.C. § 981 et seq. This is the third settlement in this lawsuit – in January 2014 and April 2015, two specialty pharmacies, Bioscrip, Inc. (“Bioscrip”) and Accredo Health Group (“Accredo”), agreed to pay a total of $75 million to resolve federal and state claims against them based on the same allegations. Together with today’s settlement, the federal and state governments will recover $465 million in total based on the kickback allegations in this lawsuit.
In April 2013, the Government first intervened as to NOVARTIS in this lawsuit, which was initially filed by a whistleblower, and asserted that NOVARTIS violated the False Claims Act and the Anti-Kickback Statute, 42 U.S.C. § 1370a-7b, by giving kickbacks to specialty pharmacies in return for recommending Exjade, an iron chelation drug, and Myfortic, an anti-rejection drug for kidney transplant recipients. With respect to Exjade, the Government alleged that NOVARTIS gave kickbacks in the form of patient referrals and rebates to Bioscrip and Accredo to induce those pharmacies to recommend Exjade refills. More specifically, the Government alleged that, to increase Exjade sales, Novartis incentivized and pressured the pharmacies to emphasize Exjade’s benefits to patients while understating the drug’s serious, potentially life-threatening, side effects. With respect to Myfortic, the Government alleged that NOVARTIS gave rebate contracts to specialty pharmacies to induce the pharmacies to recommend to doctors that they switch patients to Myfortic from competitor drugs.
Today, U.S. District Judge Colleen McMahon approved a settlement to resolve the Government’s claims against NOVARTIS. Under that settlement, NOVARTIS agrees to (i) pay $370,000,000 to resolve the federal and state false claims act claims, (ii) forfeit $20 million as proceeds from the scheme under the federal civil forfeiture statute, (iii) make extensive admissions concerning its relationship with specialty pharmacies, and (iv) amend its corporate integrity agreement with HHS-OIG to subject NOVARTIS’s specialty pharmacy relationships to independent review and extend the term of that agreement by five years. Of the $370 million, $286,870,245.98 will be paid to the Government, and $83,129,754.02 will be paid to settling states.
Manhattan U.S. Attorney Preet Bharara said: “This is the third substantial settlement in connection with Novartis’s scheme to use kickbacks to co-opt healthcare providers’ independence. The Anti-Kickback Statute was enacted to ensure that the medical treatment and advice patients receive, and federal programs pay for, are free from the taint of corporate kickbacks. But that was not the case with Novartis here. Novartis gave kickbacks to influence specialty pharmacies to provide patients one-sided advice about Exjade, without disclosing the drug’s serious side effects, and to recommend switching patients who were using other drugs to Myfortic. Novartis turned pharmacies that should have been disinterested healthcare providers into a biased salesforce for the drug-maker. Drug-makers and their relationships with healthcare providers – whether they are doctors, pharmacists, or nurses – must comply with the Anti-Kickback Statute. If they don’t, we will bring all appropriate law enforcement tools to bear to ensure that they do.”
FBI Assistant Director-in-Charge Diego Rodriguez said: “In the course of our investigation with the Health and Human Services Office of Inspector General, Novartis was found to be giving incentives to pharmacies to push certain drugs to patients. Today’s settlement with Novartis should serve as a warning to companies who choose to operate their businesses with kickbacks rather than honesty – those companies will pay more in the long run. Doctors should be advising patients based on medical facts, not pharmacies based on dollar signs. The FBI is committed to working with our federal partners to protect our citizens from fraud and ensure everyone receives the quality medical care they need.”
HHS-OIG Chief Counsel Gregory E. Demske said: “Reliable information is essential for patients taking drugs on a long-term basis, and money should not distort the advice that patients receive about drugs with serious side effects. OIG will continue to investigate kickback arrangements between pharmaceutical manufacturers and specialty pharmacies.”
HHS-OIG Special Agent in Charge Scott J. Lampert said: “Novartis’s kickbacks and other aggressive sales tactics, as alleged in this case, threatened the impartiality of medical decision-making and the financial integrity of Medicare and Medicaid. Our agency will continue to investigate companies who step over the line to maximize their market share at the expense of federal health care programs.”
As the Government contended, evidence uncovered in the lawsuit shows that Exjade patient referrals were very valuable for pharmacies and that when it launched Exjade in 2005, NOVARTIS created a “closed distribution network” involving just three specialty pharmacies, BioScrip, Accredo, and US Bioservices. This gave NOVARTIS control over how many Exjade patients would be assigned to the pharmacies.
The Government also contended that evidence shows, starting in early 2007, NOVARTIS saw Exjade sales were far below internal targets because of low refill rates due, in significant part, to side effects that were more frequent and more severe than initially expected. To increase Exjade refills and hit its sales targets, NOVARTIS leveraged its control over patient referrals to pressure BioScrip, Accredo, and US Bioservices to hire or assign nurses to call Exjade patients and, under the guise of education or clinical counseling, encourage patients to order more refills.
More specifically, as the Government contended, NOVARTIS knew that, when the pharmacies called patients, they emphasized the benefits of taking Exjade – for example, by telling patients that not taking Exjade would cause damage to their organs or lead to infertility – while understating the serious, potentially life-threatening risks of taking Exjade – for example, by not mentioning potential side effects like kidney and liver failure. Indeed, NOVARTIS encouraged the pharmacies to promote Exjade refills in these ways even though FDA had characterized claims about Exjade preventing organ damage as “unsubstantiated.”
In addition, the Government contended that, to incentivize the pharmacies to intensify their efforts to promote Exjade refills, NOVARTIS devised a scheme under which it allocated more patient referrals and gave higher rebates to pharmacies that obtained higher refill rates. Indeed, NOVARTIS went forward with this scheme – which operated from 2008 to 2012 – even though it knew that the scheme presented risks of violating the Anti-Kickback Statute.
Finally, with regard to Myfortic, the Government contended evidence shows that NOVARTIS offered lucrative rebate offers to five specialty pharmacies in return for the pharmacies’ promise to recommend to doctors that they switch patients to Myfortic from competitor drugs. For example, in July 2011, NOVARTIS offered rebates to a specialty pharmacy in Mississippi once the pharmacy owner agreed to “create a letter to” doctors “with a recommendation of moving [ ] patients to Myfortic.”
As part of the settlement, NOVARTIS made extensive factual admissions about its relationships and interactions with specialty pharmacies in connection with distribution of Exjade and Myfortic and accepted responsibility for those admissions (those admissions, which are part of the settlement stipulation approved by the Court, are attached as an addendum).
* * *
The allegations of fraud stated in the Complaint were first brought to the attention of federal law enforcement by David Kester, the whistle-blower who filed a lawsuit under the False Claims Act. The False Claims Act permits the Government to recover up to three times the amount of damages incurred by the United States, plus civil penalties ranging from $5,500 to $11,000 per violation. Private parties who have knowledge of fraud committed against the Government may file suit on behalf of the Government and share in any recovery. The United States may then intervene and file its own lawsuit for treble damages and penalties, as it did in this case.
Mr. Bharara praised the investigative work of the FBI, HHS-OIG, and the Medicaid Fraud Control Units for New York, Washington, California, and Ohio. He also thanked the Commercial Litigation Branch of the U.S. Department of Justice’s Civil Division in Washington, D.C., including Laurie Oberembt, and the Office of Counsel to the Inspector General of HHS, including Mary Riordan and Geeta Kaveti, for their critical assistance in this case.
The case is being handled by the Office’s Civil Frauds Unit. Mr. Bharara established the Civil Frauds Unit in March 2010 to bring renewed focus and additional resources to combating healthcare and other types of frauds. Assistant U.S. Attorneys Li Yu, Rebecca C. Martin, David J. Kennedy, Jeffrey K. Powell, and Peter Aronoff are in charge of the case, and Assistant U.S. Attorney Alexander J. Wilson of the Money Laundering and Asset Forfeiture Unit is responsible for the forfeiture aspects of the case.
Two Men Charged in Manhattan Federal Court with Sex Trafficking of Minors and Related CrimesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that DAVID HOPE, a/k/a “Capo,” was arrested for his alleged role as the leader of a sex trafficking and prostitution enterprise, which exploited vulnerable minor girls and young women. HOPE and KEMAR WILLIAMS were charged in a criminal Complaint with conspiracy to commit sex trafficking and sex trafficking of minors. HOPE was also charged with the use of interstate facilities and interstate travel to promote a prostitution enterprise, and with possession of a firearm and ammunition by a previously convicted felon. HOPE was presented before U.S. Magistrate Judge Debra Freeman in Manhattan federal court this afternoon. WILLIAMS remains at large.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, David Hope and Kemar Williams recruited vulnerable minor girls and adult women and then sold them for sex in order to profit from their exploitation. Hope is also alleged to have possessed a firearm and to have used guns, threats, and violence to carry out his illegal operations. The arrest of Hope today should make clear that the trafficking of girls and young women will be prosecuted to the fullest extent possible.”
FBI Assistant Director-in-Charge Diego Rodriguez said: “As alleged, the defendants used violence and fear to prey upon girls and recruit them into a world of exploitation and brutality. Operating out of his Bronx apartment, Hope acted as the leader, with Williams facilitating the prostitution enterprise. The FBI will continue to investigate and bring to justice those who sexually exploit our children.”
According to the allegations in the Complaint unsealed today in Manhattan federal
court[1]:
Since at least 2013, HOPE directed and conducted a criminal sex trafficking and prostitution enterprise (the “Enterprise”) that recruited and exploited minor girls and young women, and then prostituted them using an online classifieds website for his own profit. HOPE, who is wheelchair-bound, operated the Enterprise at his apartment in the Bronx, New York (the “Hope Apartment”), and elsewhere. WILLIAMS participated and engaged in the Enterprise and facilitated the prostitution of minor girls.
Sex trafficking and prostitution enterprises often recruit vulnerable minor victims who lack education, a stable home, family support, and who have suffered past physical and emotional trauma, and exploit those victims’ need for shelter, stability, and affection for their own financial gain. Sex traffickers also prey on young adult women with the same vulnerabilities. Once these sex traffickers have recruited victims, they advertise them on websites dedicated to “escort” services and on classifieds websites. To evade detection by law enforcement, advertisements are posted in the adult entertainment section of the website and purport to offer individuals as mere escorts, but the advertisements signal that they are, in fact, offering individuals for sale for commercial sex acts.
HOPE recruited minors who looked up to him to participate in the Enterprise and other criminal activity, including robberies. HOPE, who was known to carry a firearm, employed myriad tactics – including manipulation, intimidation, coercion, threats, and violence – to recruit and maintain the girls and young women he sold for sex. For example, on at least two occasions, HOPE physically beat one of the adult women he prostituted using his upper body, and on at least one occasion, threatened that victim with a firearm.
At least three minor victims and at least three adults were prostituted by HOPE in the Hope Apartment.
HOPE regularly used the classifieds website Backpage.com (“Backpage”) to advertise young women and girls for commercial sex. HOPE drafted advertisements, chose the sexually provocative photos used in the advertisements, and posted the advertisements using his personal email address and smartphone. When a potential customer responded to an advertisement for commercial sex, HOPE instructed Adult Victim-1 to answer telephone calls or text messages from the customer, ask whether the customers “were affiliated with law enforcement,” and provide the rates that HOPE set for commercial sex. Such rates were based on the length of time that a customer would engage in commercial sex and the number of women or girls involved. For example, on at least two occasions, HOPE offered a “two-girl special” involving minor girls.
When a customer arrived at the Hope Apartment, the customer was escorted by Adult Victim-1 to a room that was enclosed by a curtain and which contained condoms and alcohol and had music playing. Adult Victim-1 then discussed with the customer the length and type of commercial sex acts requested. In the event that such room of the Hope Apartment was occupied by a customer and another customer had arrived at the Hope Apartment, another room in the Hope Apartment was set aside as a waiting area with chairs and some alcohol.
The customer was always required to pay the woman or girl who was prostituted by HOPE in advance of any sexual contact, and all money received from customers was given to HOPE. Adult Victim-1 earned thousands of dollars for HOPE by being prostituted. For example, Adult Victim-1 earned $6,000 over a four-day period for commercial sex, which she gave to HOPE. The amount of money that Minor Victim-1 and Minor Victim-3 received from HOPE for being prostituted was at HOPE’s discretion.
HOPE typically was present in the Hope Apartment while women and girls were being prostituted. HOPE was known to carry a firearm on his person and sometimes slept on top of firearms in the Hope Apartment.
In October 2015, a law enforcement officer (the “UC”) conducted an undercover operation and responded to an advertisement that was posted in the New Haven, Connecticut, section of Backpage and that appeared to be offering minor females for commercial sex as part of a “two girl special” (the “CT Backpage Ad”). The advertisement contained several photos of a female who appeared to be less than 18 years old in sexually provocative poses and had the following heading: “2 freaks❤ . . . Freaky and ready for it.” The UC texted the callback number listed in the advertisement, which instructed the UC to go to a specific room at a motel in Milford, Connecticut (the “Motel”). When the UC approached the door to the room, it was opened by Minor Victim-2, who was prostituted by Hope earlier in 2015. The UC also encountered Minor Victim-1, who was prostituted by HOPE since at least 2013, in the room.
According to records from the Motel, WILLIAMS paid for the Motel room in cash on several days, including on October 26, 2015, the day that the UC encountered Minor Victim-1 and Minor Victim-2. Surveillance video from the Motel also shows WILLIAMS paying a Motel clerk and speaking with HOPE at the Motel. Between August 1, 2015, and November 18, 2015, email addresses believed to have been used by HOPE posted the CT Backpage Ad as well as more than 60 advertisements for commercial sex on Backpage.
HOPE was also charged with possession of a firearm and ammunition by a previously convicted felon. On January 16, 2015, when New York City Police Department (“NYPD”) officers were conducting a search warrant at the Hope apartment, HOPE instructed Minor Female-1 to throw a loaded firearm out of the rear window of the HOPE Apartment. Before it was thrown out of the window, the firearm was in the bed where HOPE was sleeping.
* * *
Attached are charts containing the charges against the defendants and the maximum penalties they face, as well as the defendants’ ages and residences. 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.
Any individuals who believe they have information concerning DAVID HOPE, a/k/a “Capo,” or KEMAR WILLIAMS that may be relevant to the investigation should contact the Federal Bureau of Investigation at (212) 384-1000 or https://tips.fbi.gov/.
Mr. Bharara praised the outstanding investigative work of the FBI. He thanked the NYPD for its assistance throughout the investigation, and the United States Attorney’s Office for the District of Connecticut, the Connecticut Child Exploitation Task Force, and the Milford, Connecticut, Police Department for their assistance with investigating the defendants’ operations in Connecticut. Mr. Bharara also thanked the United States Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”) and the ATF/NYPD Joint Robbery Task Force (SPARTA) for its assistance in the early stages of the investigation, and noted that the investigation is continuing.
This case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Christopher J. DiMase and Sagar K. Ravi 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.
United States v. David Hope, et al.
COUNT
CHARGE
DEFENDANTS
MAXIMUM PENALTIES[2]
1
Sex Trafficking Conspiracy
(18 U.S.C. § 1591(c))
DAVID HOPE a/k/a “Capo”
KEMAR WILLIAMS
Life
2
Sex Trafficking of Minor Victim-1
(18 U.S.C. § 1591(a) and (b)(2))
DAVID HOPE a/k/a “Capo”
KEMAR WILLIAMS
Life
3
Sex Trafficking of Minor Victim-2
(18 U.S.C. § 1591(a) and (b)(2))
DAVID HOPE a/k/a “Capo”
KEMAR WILLIAMS
Life
4
Use of Interstate Commerce to Promote a Prostitution Enterprise
(18 U.S.C. § 1952(a)(3))
DAVID HOPE a/k/a “Capo”
20 years in prison
5
Felon in Possession
(18 U.S.C. § 922(g))
DAVID HOPE a/k/a “Capo”
10 years in prison
DEFENDANT
RESIDENCE
AGE
DAVID HOPE a/k/a “Capo”
Bronx, New York
28
KEMAR WILLIAMS
Brooklyn, New York
29
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.
[2] 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.
Partner at New York Accounting Firm Pleads Guilty in Manhattan Federal Court to Multimillion-Dollar Accounting Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that MARC WIESELTHIER, a certified public accountant and partner at a New York accounting firm (the “Firm”), pled guilty today to participating in a scheme to obtain millions of dollars in loans by making false statements and providing false and fraudulent documents to two commercial banks based in New York (the “Banks”) concerning the financial condition of a Florida-based cosmetics company (the “Company”) that was a client of WIESELTHIER. WIESELTHIER pled guilty before United States Magistrate Judge Debra Freeman.
Manhattan U.S. Attorney Preet Bharara said: “Marc Wieselthier has admitted to lying about the financial condition of a company to induce banks to lend the company millions of dollars. Relying on false information, the banks made loans that ended up defaulting with nearly $5 million still owed. Wieselthier now joins his co-conspirators in awaiting sentencing for his crime.”
FBI Assistant Director in Charge Diego Rodriguez said: “Wieselthier, with the knowledge of his co-conspirators, convinced lenders of his client’s affluence in an effort to mask the true nature of the company’s financial situation. In the end, the banks incurred a significant financial loss as a result of this type of fraud. Today’s plea serves as a reminder that engaging in illegal activity of this sort poses a significant risk to one’s personal freedom.”
According to the allegations contained in the information to which WIESELTHIER pled guilty and statements made during WIESELTHIER’s plea proceeding:
WIESELTHIER was a licensed certified public accountant at the Firm. Since 2009, WIESELTHIER has been a partner at the Firm. The Company and its chief executive officer (“CEO”) were clients of WIESELTHIER, who performed, among other things, year-end audits of financial statements for the Company.
From 2007 through 2014, the Company, through its officers, fraudulently induced the Banks into lending the Company millions of dollars by repeatedly making, and causing to be made, materially false and misleading statements about the Company’s financial condition. Specifically, the Company falsely inflated its sales and accounts receivable on “borrowing base certificates” and in financial statements audited by WIESELTHIER, which were provided to the Banks pursuant to loan agreements between the Banks and the Company. The Company used those falsely inflated sales and accounts receivable to mislead the Banks about the Company’s true financial performance so that the Company could secure and draw down millions of dollars in revolving loans from the Banks that the Company would not otherwise have been entitled to receive.
As a part of the scheme, on an annual basis, WIESELTHIER knowingly issued unqualified audit reports known as “clean opinions” falsely certifying that the Company’s financial statements fairly, and in all material respects, reflected the true financial condition of the Company and were in conformity with generally accepted accounting principles (“GAAP”). In truth and in fact, at the time that WIESELTHIER issued those “clean opinions,” WIESELTHIER knew that the Company’s financial statements falsely overstated the Company’s accounts receivable and understood that the Banks would rely upon those false financial statements in loaning money to the Company. WIESELTHIER hid his accounting work for the Company from his own partners and associates in an apparent effort to conceal the fraud.
In March 2014, the Company defaulted on the loans at issue. At that time, the Company’s outstanding balance on the loans was more than $4.8 million.
* * *
WIESELTHIER, 57, of Plainview, New York, pled guilty to one count of conspiracy to commit bank fraud, which carries a maximum sentence of 30 years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
WIESELTHIER is scheduled to be sentenced on March 23, 2016, at 2:30 p.m., before U.S. District Judge Lewis A. Kaplan.
Emanuel Cohen, 71, of Boca Raton, Florida, the former CEO of the Company, and Thomas Thompson, 42, of Coral Springs, Florida, the former sales manager of the Company, previously pled guilty for their roles in the scheme. Cohen and Thompson are scheduled to be sentenced by Judge Kaplan on March 2, 2016 and February 17, 2016, respectively.
Mr. Bharara praised the outstanding investigative work of the FBI.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Edward A. Imperatore is in charge of the prosecution.
Civil Rights Settlement Requires Major Real Estate Developer to Make Rental Complexes Accessible to All New YorkersRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States has reached a settlement that resolves a federal civil rights lawsuit against THE DURST ORGANIZATION, INC. (“DURST”), a major real estate developer based in New York City, and DURST’s affiliates and subsidiaries. The lawsuit alleges that DURST engaged in a pattern and practice of developing rental apartment buildings that are inaccessible to persons with disabilities. Under the settlement, DURST agrees to establish procedures to ensure that its ongoing and future development projects, such as the 2,400-unit Halletts Point development in Queens and the 709-unit VIA 57 West development in Manhattan, will comply with the accessibility requirements of the federal Fair Housing Act (“FHA”). DURST also agrees to make two apartment buildings in Manhattan containing more than 1,000 units – The Helena and The Epic – more accessible to individuals with disabilities. Finally, DURST agrees to provide up to $515,000 to compensate aggrieved persons and pay a civil penalty of $55,000. The settlement was reached after the court denied DURST’s motion to dismiss the government’s lawsuit and was approved yesterday by U.S. District Judge Ronnie Abrams.
Manhattan U.S. Attorney Preet Bharara said: “This is the ninth in a series of lawsuits that this office has brought against real estate developers and architects who fail to design and construct new apartment buildings accessible to people with disabilities. When the government filed this lawsuit, Durst claimed that it should not be held responsible for inaccessible conditions at The Helena and other rental buildings – despite the fact that Durst’s own website trumpets its role in developing those buildings. It was only after the Court rejected Durst’s argument that Durst finally accepted its obligations under the law. Today’s settlement with Durst makes clear that real estate developers cannot hide behind opaque corporate structures to evade their obligation to comply with the Fair Housing Act or avoid liability for violating that Act.”
The FHA’s accessible design and construction provisions require new multi-family housing complexes constructed after January 1993 to have basic features accessible to persons with disabilities. In April 2014, the United States filed this lawsuit against DURST and an architectural firm, alleging that past and ongoing rental projects designed and constructed by DURST and the architect, including The Helena, did not comply with the FHA’s accessibility requirements. Inaccessible features at The Helena were first brought to the attention of the United States by testing performed by the Fair Housing Justice Center.
In September 2014, DURST moved to dismiss the government’s complaint on the grounds that DURST itself could not be held liable under the Fair Housing Act because it was not involved with developing any of the rental buildings at issue. The government opposed that motion, noting that DURST’s public statements on its own website described its executives’ direct involvement with the design and construction of buildings like The Helena. On January 9, 2015, the court denied DURST’s motion to dismiss. Shortly thereafter, DURST pursued settlement discussions with the government.
Under the settlement, DURST agrees that, for every multi-family housing project it constructs in the next three years, it will retain an FHA compliance consultant to ensure that the building, as constructed, will comply with the FHA’s accessibility requirements. For example, the FHA consultant will advise DURST on the selection of fixtures and appliances and whether deviating from the architects’ drawings will affect accessibility. 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, DURST agrees to institute policies and training to ensure that its own employees and agents will comply with the FHA’s accessibility requirements.
Further, the settlement also requires DURST to make extensive retrofits at The Helena, and to commit to additional retrofits at The Epic once that building has been inspected, to make these buildings accessible.
Finally, the settlement requires DURST to provide up to $515,000 in funds to compensate aggrieved persons. DURST also agrees to pay a civil penalty of $55,000.
The government’s lawsuit also asserted claims against the architect of The Helena, FXFOWLE ARCHITECTS, P.C. Those claims remain pending while FXFOWLE pursues settlement negotiations with the government.
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 The Helena, The Epic, or the other properties constructed by DURST;
-
Discouraged from living at The Helena, The Epic, or the other properties constructed by DURST because of the lack of accessible features;
-
Required to pay to have an apartment at The Helena, The Epic, or the other properties constructed by DURST made accessible,
-
Prevented from having visitors because of a lack of accessible features at The Helena, The Epic, or the other properties constructed by DURST; or
-
Otherwise injured or discriminated against on the basis of disability as a result of the design or construction of The Helena, The Epic, or the other properties constructed by Durst.
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 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.
-