Southern District of New York

Preet Bharara, the United States Attorney for the Southern District of New York, and Shantelle P. Kitchen, the Special Agent-in-Charge of the New York Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced that PATRICK WHITE was sentenced today by the United States District Judge Cathy Seibel to six months in prison on payroll tax fraud charges.

WHITE previously pled guilty to one count of failing to pay payroll taxes accumulated by his commercial construction business.

According to the Information previously filed in White Plains federal court: WHITE operates R & L Construction Inc., a Yonkers based contracting company.  From 2005 through 2011, R&L Construction operated a scheme whereby some employee’s wages were properly reported, while others’ were not.  In so doing, R & L Construction accumulated approximately $3,758,000 in unpaid payroll tax liabilities.

In addition to the prison term, WHITE was sentenced to one year of home confinement, and was ordered to liquidate certain real property to satisfy the $3,758,000 owed to the IRS.

*          *         *

Mr. Bharara praised the outstanding efforts of IRS-CI. He also thanked U.S. Department of Justice’s Tax Division for its significant assistance in the investigation.

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

Preet Bharara, the United States Attorney for the Southern District of New York; William J. Bratton, Commissioner of the New York Police Department (“NYPD”); James J. Hunt, Special Agent in Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”); Glenn Sorge, Acting Special Agent in Charge Homeland Security Investigations (“HSI”) New York; Robert E. Perez, Director of the New York Field Office of Customs and Border Protection (“CBP”); and Joseph Fucito, Sheriff of the City of New York, announced today the unsealing of an Indictment against ten defendants involved in a massive drug distribution ring involving smokable synthetic cannabinoids (“SSC”).  The scheme, which operated in all five boroughs of New York City, allegedly involved the unlawful importation of at least 100 kilograms of illegal synthetic compounds, an amount sufficient to produce approximately 1,300 kilograms of dried SSC product, or approximately 260,000 SSC retail packets.  Coordinated with the unsealing of these criminal charges were searches of five processing facilities and warehouses used to process, store, and distribute SSC, as well as inspections of over 80 stores and bodegas around New York City.

Six of the defendants were arrested last night in connection with today’s charges.  Those defendants will be presented in Manhattan federal court before U.S. Magistrate Judge Sarah Netburn later this afternoon.  MOHAMED ALMATHEEL, HAMID MOSHREF, ABDULLAH DEIBAN, AND FARIS NASSER KASSIM have not yet been arrested.

 Manhattan U.S. Attorney Preet Bharara said:  “Today, we launch an aggressive assault on a public health crisis that is reaching epidemic proportions: the scourge of dangerous new drugs that are killing people and sending thousands upon thousands to emergency rooms in New York City and around the country.  Despite sometimes being called synthetic marijuana, this is not marijuana – it can have unpredictably severe and even lethal effects.  What is more, use of these drugs aggravates all manner of other societal ills: it is entering prisons; preying on the homeless; burdening our hospitals and emergency rooms; fueling addiction; exacerbating mental health problems; and increasing risks to cops who must deal with people high on this poison.  Synthetic cannabinoids are a deadly serious problem that demands an equally serious response.  Today’s collective action is just the start of that response, one that will not end until this poison in a packet no longer endangers our community.”

NYPD Commissioner William Bratton said:  “This is a scourge on our society, affecting the most disadvantaged neighborhoods and our most challenged citizens. It affects teenagers in public housing, homeless in the city shelter system, and it’s quite literally flooding our streets. This is marketed as synthetic marijuana, some call it K2. It is sold by the names of Galaxy, Diamond, Rush, and Matrix. But its real name is poison.”       

DEA Special Agent in Charge James J. Hunt said:  “There is a misconception that synthetic cannabinoids, known on the street as ‘synthetic marijuana,’” ‘K2,’ and ‘spice,’ are safe.  Synthetic cannabinoids are anything but safe.  They are a toxic cocktail of lethal chemicals created in China and then disguised as plant material here in New York City. Today’s arrests represent law enforcement’s efforts to combat this emerging public threat.  By investigating and arresting manufacturers and distributors of ‘spice’ in the city, we have cut off the accessibility for those feeding the beast.”                            

HSI Acting Special Agent in Charge Glenn Sorge said:  “Synthetic marijuana is rapidly becoming a huge problem in our communities.  It is cheap and dangerous, especially for our teens and young adults.  We are working side by side with our law enforcement partners both here and abroad to combat the sale of this hazardous alternative to marijuana.”

CBP Director Robert Perez said:  “Today’s actions are a textbook example of the positive results that come with interagency collaboration among the law enforcement community.  The expertise of our CBP Officers, specifically their targeting and analysis capabilities, resulted in a major investigation involving multiple agencies at all levels of government; the arrest of six individuals, and the takedown of a significant drug trafficking organization.”

Sheriff Joseph Fucito said:  “The Sheriff’s Office stands ready with our partners in law enforcement in addressing the sudden proliferation of synthetic drugs sales in licensed retail locations throughout New York City. Owners and operators of licensed locations have an obligation to keep illegal and highly dangerous substances out of the hands of our children. The Sheriff’s Office is committed to agency partnerships and enforcement strategies that advance this goal.”                  

The following allegations are based on the unsealed Indictment, and other documents filed today in Manhattan federal court[1]:

This scheme involves the unlawful importation, manufacture, and distribution of massive quantities of smokable synthetic cannabinoids (“SSC”), containing controlled substances, throughout the New York City area and elsewhere. ABDULLAH DEIBAN, FARIS NASSER KASSIM, MORAD NASSER KASSIM, a/k/a “BK,” NAGEAB SAEED, WALIDE SAEED, MOHOMED SAEED, HAMID MOSHREF, MOHAMED SALEM, MOHAMED ALMATHEEL, and FIKRI NAGI, the defendants, were members of an international organization that trafficked, manufactured, and distributed SSC (the “Organization”).      

DEIBAN, FARIS NASSER KASSIM, and MORAD NASSER KASSIM arranged the importation of illegal synthetic compounds in powdered form from China to the United States via commercial delivery services.After the chemical compounds arrived in the United States, DEIBAN, FARIS NASSER KASSIM, and MORAD NASSER KASSIM then arranged for them to be retrieved and transported to a processing facility, where they directed other co-conspirators to mix the illegal synthetic compounds with chemical solvents including acetone and/or flavoring additives and to spray the resulting liquid mixture onto tea leaves. DEIBAN, FARIS NASSER KASSIM, and MORAD NASSER KASSIM also organized and supervised the processing facility located on Light Street in the Bronx, New York, where co-conspirators acting under their direction bundled the resulting dried SSC product into retail packets bearing colorful logos and brand names and arranged for the transfer of bulk quantities of the SSC retail packets to warehouses controlled by wholesale distributors.The SSC retail packets were sold under names such as “AK-47,” “Blue Caution,” “Green Giant,” “Geeked Up,” “Psycho,” “Red Eye,” and “Black Extreme,” each containing between approximately three and six grams of product, and sometimes marked “not for human consumption,” or “potpourri.” The illegal SSC retail packets were sold to individual customers for approximately $5 per packet.

NAGEAB SAEED, WALIDE SAEED, and MOHOMED SAEED were among the Organization’s wholesale distributors.NAGEAB SAEED, WALIDE SAEED, and MOHOMED SAEED were responsible for coordinating the distribution of the retail SSC packets to more than 70 retail locations located within the five boroughs of New York City.NAGEAB SAEED, WALIDE SAEED, and MOHOMED SAEED purchased bulk quantities of retail SSC packets from the Organization’s manufacturers, prepared them for delivery, and organized their distribution to retail sellers by directing the Organization’s transporters.

AMID MOSHREF, MOHAMED SALEM, and MOHAMED ALMATHEEL were among the Organization’s transporters.MOSHREF, SALEM, and ALMATHEEL were responsible for moving bulk quantities of SSC retail packets from warehouses controlled by NAGEAB SAEED, WALIDE SAEED, and MOHOMED SAEED to retail sellers throughout New York City.FIKRI NAGI, the defendant, was one of the Organization’s retail sellers.NAGI ordered large quantities of SSC retail packets from NAGEAB SAEED, WALIDE SAEED, and MOHOMED SAEED for resale at retail locations.

Between September 2014 and September 2015, the Organization imported at least 100 kilograms of illegal synthetic compounds, an amount sufficient to produce approximately 1,300 kilograms of dried SSC product, or approximately 260,000 SSC retail packets.

SSC are widely accessible because they are inexpensive and commonly sold at otherwise legitimate retail locations.The colorful logos used on the SSC retail packets and the flavors used, such as lime, strawberry, and blueberry, make SSC attractive to teenagers and young adults. Physical effects of SSC include agitation, rapid heart rate, confusion, dizziness, nausea and vomiting, paranoia, panic attacks, and acute kidney injury.In addition, SSC products have inconsistent potencies, often containing more than one synthetic compound, and are sometimes laced with other toxic chemicals.In a recent two-month period, use of SSC resulted in 2,300 emergency room visits in New York State.Nationally, calls to poison centers in the United States related to synthetic cannabinoid use between January and May 2015 increased 229% over the same period in 2014.

Charts identifying each defendant, the charges, and the maximum penalties are attached to this release.  The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.  The case is assigned to U.S. District Judge Thomas Griesa.

U.S. Attorney Preet Bharara thanked the DEA, the NYPD, HSI, CBP, and the Office of the Sheriff of the City of New York for their work in the year-long investigation, which he noted is ongoing.  The DEA’s New York Organized Crime Drug Enforcement Strike Force also played an important role in today’s enforcement actions.  The Strike Force is comprised of agents and officers of the DEA, NYPD,  HSI, the New York State Police, the U. S. Internal Revenue Service Criminal Investigation Division, the Federal Bureau of Investigation, U.S. Secret Service, the U.S. Marshals Service, New York National Guard, the New York Department of Taxation and Finance, the Rockland County Sheriff’s Office, the Clarkstown Police Department, Port Washington Police Department and New York State Department of Corrections and Community Supervision.      

The case is being prosecuted by the Office’s Narcotics Unit.  Assistant U.S. Attorneys Negar Tekeei, Alexander Rossmiller, Katherine Reilly, and Max Nicholas are in charge of the prosecution.  Assistant U.S. Attorney Niketh Velamoor of the Office’s Money Laundering and Asset Forfeiture Unit is responsible for the forfeiture of assets.

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

U.S. v. Deiban, et al.

COUNT

CHARGE

DEFENDANTS

MAXIMUM PENALTIES

1

Conspiracy to Distribute Narcotics (21 U.S.C. § 846)

ABDULLAH DEIBAN,

FARIS NASSER KASSIM,

MORAD NASSER KASSIM

   a/k/a “BK,”

NAGEAB SAEED,

WALIDE SAEED,

MOHOMED SAEED,

HAMID MOSHREF,

MOHAMED SALEM,

MOHAMED ALMATHEEL, and FIKRI NAGI

20 years in prison

Defendants’ Ages and Residencies

DEFENDANT

RESIDENCE

AGE

1. Murad Nasser Kassim

29

1. Nageab Saeed

26

1. Walide Saeed

30

1. Mohamed Saeed

31

1. Mohamed Abdullah Salem

47

1. Fikri Yahwa Nagi

31

1. Abdullah Deiban

35

1. Faris Nasser Kassim

32

1. Mohamed Almatheel

Unknown

1. Hamid Moshref

Unknown

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that PED ABGHARI, a/k/a “Ted Allen,” and JUSTIN ROMANO pled guilty for their roles in orchestrating a massive mortgage modification scheme that collectively defrauded over 8,000 homeowners out of over $18.5 million.  ABGHARI and ROMANO each pled guilty to wire fraud and conspiracy to commit wire fraud, and ABGHARI also pled guilty to misprision of a felony.  ROMANO pled on September 14, 2015, and ABGHARI pled on September 15, 2015, before U.S. District Judge. John F. Keenan.

Manhattan U.S. Attorney Preet Bharara said: “As they have now admitted, Ped Abghari and Justin Romano took advantage of thousands of homeowners under water with debt and in need of assistance from the Home Affordable Modification Program and similar mortgage modification programs.  Instead of helping to lift desperate homeowners out of debt, Abghari and Romano pushed them deeper in through exorbitant fees for mortgage modification services they never intended to provide.  More than 8,000 homeowners were victimized by the defendants’ greed, but thanks to the extraordinary efforts of the Office of the Special Inspector General for the Troubled Asset Relief Program, those victims now can find some comfort in knowing that those who preyed on their suffering have been forced to admit to their crimes.”

According to the Indictment, and statements made at the plea proceedings:

The Home Affordable Modification Program

As a result of the financial crisis and collapse of the housing bubble in 2008, Congress enacted the Home Affordable Modification Program (“HAMP”), which was to be funded through the Troubled Asset Relief Program (“TARP”).  HAMP permits qualified home owners to obtain mortgage relief.  Specifically, HAMP seeks to prevent foreclosure by modifying troubled loans to achieve monthly payments the homeowner can afford.

Pursuant to HAMP, any homeowner may apply to his or her mortgage provider by completing a short form and submitting it, along with supporting paperwork, to the homeowner’s mortgage provider.  HAMP further sets guidelines for lenders to follow in determining eligibility, such as guidelines based on the homeowner’s income and the principal balance remaining on the mortgage.  Pursuant to HAMP, only a homeowner’s lender may determine the homeowner’s eligibility for a modification and, if appropriate, the modified rate and monthly payment for which the homeowner is eligible.

HAMP applications are readily available online as well as in many local banks.  Submitting an application is, by law, free of charge to the homeowner.  Virtually all mortgage providers are required to participate in the HAMP program and accept HAMP applications.

If a HAMP applicant is approved, he or she receives a reduced monthly mortgage payment set by the lender.  If the HAMP applicant is not eligible for a modification, the application may be rejected.  Common reasons for rejection of a HAMP application include that the homeowner earns too much income to qualify or has not demonstrated sufficient financial hardship or need for a modification.

Mortgage Modification Fraud

PED ABGHARI, a/k/a “Ted Allen,” was a president and owner of an Irvine, California, company that offered purported mortgage modification services (the “Telemarketing Firm”).    JUSTIN ROMANO held himself out as the president of two purported law firms (the “Purported Law Firms”), based in Holbrook, New York, and Sayville, New York, which offered purported mortgage modification services in conjunction with the Telemarketing Firm.

From at least January 2011 through May 2014, through the Telemarketing Firm and the Purported Law Firms, ABGHARI and ROMANO, among others, perpetrated a scheme to defraud homeowners in dire financial straits who were seeking relief through HAMP and other mortgage relief programs.  Through a series of false and fraudulent representations, the defendants duped thousands of homeowners into paying thousands of dollars each in up-front fees in exchange for little or no service from the defendants or their companies.  In total, through their scheme, the defendants obtained over $18.5 million from more than 8,000 victim-homeowners throughout the United States.

Through the Telemarketing Firm, ABGHARI and others purchased thousands of “leads,” consisting of the name, address, and other contact information of homeowners who had fallen behind in making mortgage payments on their homes.  ABGHARI and others then caused the Telemarketing Firm to send, by e-mail, false and fraudulent solicitation letters to the homeowners they identified through the “leads,” misleading these homeowners into believing that their mortgages were already under review and that new, modified rates had already been contemplated and approved by the homeowners’ lenders.

At the direction of ABGHARI and ROMANO, among others, the Telemarketing Firm’s telemarketer and sales people (the “Sales Staff”) called homeowners and/or answered telephone calls from homeowners who received the Telemarketing Firm’s fraudulent solicitations.  During these calls, in an effort to convince the homeowners to pay up-front fees, the defendants, through the Sales Staff, regularly caused various false and fraudulent representations to be made to homeowners, including that (a) the homeowners were retaining a “law firm” and an “attorney” who would complete the HAMP application and negotiate aggressively on the homeowners’ behalf with banks to modify the terms of the homeowners’ mortgages; (b) the defendants would “pre-approve” the homeowners for a guaranteed modification through HAMP; (c) the defendants employed underwriters who would calculate and guarantee the homeowners a new, modified rate and monthly mortgage payment; and (d) the defendants’ mortgage modification services were free, and the up-front fees paid by the homeowners would be paid directly to the homeowners’ lenders.  In truth and in fact, and as ABGHARI and ROMANO well knew, all of these representations were false and fraudulent.

*          *          *

ABGHARI, 38, of Irvine, California, and ROMANO, 41, of Blue Point, New York, each pled guilty to one count of conspiracy to commit wire fraud and one count of wire fraud, each of which carries a maximum sentence of twenty years in prison.  ABGHARI also pled guilty to one count of misprision of a felony, which carries a maximum sentence of three years in prison.  Sentencings for ABGHARI and ROMANO have been set for January 14, 2016.

The 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 judge.

The remaining defendant charged for his role in the scheme, Dionysius Fiumano, a/k/a “D,” is scheduled to begin trial on December 9, 2015, before Judge Keenan.  The charges pending against Fiumano are merely allegations, and he is presumed innocent unless and until proven guilty.

Mr. Bharara praised the investigative work of the Office of the Special Inspector General for the Troubled Asset Relief Program.

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Edward B. Diskant and Joshua A. Naftalis are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, William P. Offord, the Special Agent-in-Charge of the Boston Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), and Diego Rodriguez, Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the arrests of DARCY WEDD and ERDOLO EROMO, the CEO and Senior Vice-President of Business Development, respectively, at a mobile aggregation company based in the United States (the “U.S. Mobile Aggregator”), for their participation in a scheme to charge mobile phone customers millions of dollars in monthly fees for unsolicited, recurring text messages without the customers’ knowledge or consent  – a practice known as “auto-subscribing.”  EROMO was arrested this morning in California, and is expected to be presented today in federal court in Los Angeles before United States Magistrate Judge John E. McDermott.  WEDD was arrested this afternoon in New York, and is expected to be presented today in federal court in New York before United States Magistrate Judge Ronald L. Ellis.  Also named in the Indictment were CHRISTOPHER GOFF, MICHAEL PEARSE, YONGCHAO LIU, a/k/a “Kevin Liu,” and YONG JASON LEE, a/k/a “Jason Lee,” all of whom were previously charged in a criminal complaint for their respective roles in the scheme.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Darcy Wedd, Erdolo Eromo and their co-conspirators engaged in a practice known as ‘auto-subscribing,’ forcing mobile phone users to pay charges for unsolicited and unwanted text messaging services, including horoscopes and celebrity gossip.  Although the text messages were often trivial, what the defendants allegedly did was far from a joking matter.  Their criminal scheme allegedly fleeced hundreds of thousands of everyday customers from around the country out of millions of dollars.”

IRS Special Agent-in-Charge William Offord said: “Criminals rely more and more on technology to facilitate their fraud schemes. Those considering this type of cybercrime should take note: “auto-subscribing” scams could mean “auto-arrest,” conviction and jail time.”

FBI Assistant Director-in-Charge Diego Rodriguez said: “As alleged, the defendants and their co-conspirators profited in the sum of tens of millions of dollars from the scheme to charge mobile phone customers monthly fees for unsolicited text messages.  Consumer fraud like this can have devastating impacts on consumers, businesses and the integrity of the mobile phone industry.”

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

The Auto-Subscription Scheme

From in or about 2011, through in or about 2013, WEDD, EROMO, GOFF, PEARSE, LIU, LEE, and other co-conspirators engaged in a multimillion-dollar scheme to defraud consumers by placing unauthorized charges for premium text messaging services on consumers’ cellular phone bills, without the consumers’ knowledge or consent, through a practice known as “auto-subscribing.”

During the relevant time period, LEE and two other co-conspirators (“CC-1” and “CC-2”) worked for a company that offered premium text messaging services to mobile phone customers (the “Content Provider”).  WEDD, EROMO, GOFF, and another co-conspirator (“CC-3”) worked for the U.S. Mobile Aggregator.  PEARSE and LIU worked for a mobile aggregator based in Australia (the “Australian Mobile Aggregator”).  Mobile aggregators compile, or “aggregate,” charges for premium text messaging services – such as monthly horoscopes, celebrity gossip, and trivia facts – on consumers’ mobile phone bills.

In or about 2010, CC-1 decided to begin auto-subscribing mobile phone users to the Content Provider’s premium text messaging services in order to boost the Content Provider’s sagging revenues.  CC-1 approached PEARSE and LIU and asked them to build a computer program that could spoof the required consumer authorizations for premium text messaging services – i.e., a program that could generate the text message correspondence that one would ordinarily see if a consumer was genuinely signing up to receive the services.  PEARSE and LIU agreed to build the program (the “Auto-Subscription Platform”), which was operational by in or about the middle of 2011.  In or about July 2011, CC-1 approached GOFF, who was the account manager for the Content Provider at the U.S. Mobile Aggregator, in order to obtain a large volume of mobile phone numbers to run through the Auto-Subscription Platform.  GOFF sent CC-1 hundreds of thousands of phone numbers, in exchange for payment, for the purpose of auto-subscribing consumers.

In or about October 2011, CC-1 met with WEDD and told him, in sum and substance, that CC-1 wanted to auto-subscribe consumers through the U.S. Mobile Aggregator’s billing platform and needed additional phone numbers to do so.  WEDD agreed to assist CC-1 in exchange for an up-front payment of approximately $100,000 and a percentage of the auto-subscription proceeds.  WEDD further told CC-1, in sum and substance, that CC-3, who was the Vice President of Compliance and Consumer Protection for the U.S. Mobile Aggregator, would provide phone numbers to CC-1 and that all payments needed to go through CC-3.  WEDD later received his portion of the payments from CC-1 via CC-3.

After CC-1 received phone numbers from WEDD and CC-3, CC-1 passed them on to LEE, the Chief Technology Officer of the Content Provider, who was responsible for verifying that the numbers were still valid and active, and for sorting and filtering the numbers to make it easier to run them through the Auto-Subscription Platform.  After LEE performed these functions, CC-1 sent the numbers to PEARSE and LIU to be run through the Auto-Subscription Platform.

CC-1 also met with EROMO, at the direction of WEDD.  EROMO told CC-1, in sum and substance, that EROMO knew about the plan to auto-subscribe consumers and requested $10,000 in cash to migrate each of CC-1’s premium text messaging services to a different billing platform at the U.S. Mobile Aggregator to facilitate the auto-subscriptions.  EROMO and CC-3 also sold CC-1 and CC-2 so-called “blacklists” or “ninja lists” for approximately $10,000 each.  The blacklists or ninja lists, which were lists of phone numbers that should not be auto-subscribed, included phone numbers belonging to executives at the mobile phone carriers and people at mobile industry compliance groups, who would likely initiate an audit if they noticed that they had been auto-subscribed to a premium text messaging service that they had not authorized.  To pay EROMO for his assistance, CC-1 sent, or caused to be sent, several cash payments to EROMO’s residence through the mail.

The auto-subscription scheme affected hundreds of thousands of consumers and generated tens of millions of dollars in proceeds, which the defendants apportioned among themselves and were used to fund a lavish lifestyle of expensive vacations and gambling.

***

WEDD, EROMO,  GOFF,  PEARSE,  LIU,  and LEE  are each charged with one count of conspiracy to commit wire fraud and mail fraud, and one count of wire fraud, each of which carries a maximum term of 20 years in prison.  WEDD, EROMO, and GOFF are also each charged with one count of conspiracy to commit money laundering, which carries a maximum term of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

GOFF and LEE were arrested on May 27, 2015.  PEARSE and LIU reside in Australia and have not yet been arrested.

Mr. Bharara praised the investigative work of the IRS-CI and the FBI, and expressed his sincere gratitude to the Federal Trade Commission for their support and assistance with the investigation.  He also thanked the U.S. Attorney’s Office for the Central District of California for their help in coordinating the arrests of the defendants.

The prosecution of this case is being overseen by the Office’s Complex Frauds and Cybercrime Unit.Assistant U.S. Attorneys Christian R. Everdell and Sarah E. Paul are in charge of the prosecution.Assistant U.S. Attorney Edward B. Diskant of the Office’s Money Laundering and Asset Forfeiture Unit is in charge of the forfeiture aspects of the case.

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

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

Preet Bharara, the United States Attorney for the Southern District of New York and Robert J. Sica, the Special Agent in Charge of the New York Office of the United States Secret Service (“USSS”), announced today the filing of a criminal complaint against TIMOTHY SEDLAK for attempting to gain unauthorized access to the computer network of a global charitable organization based in New York, New York (the “Organization”).  SEDLAK was arrested in Ocoee, Florida in the evening of September 11, 2015.  He will be presented later today in federal court in Orlando, Florida before United States Magistrate Judge Gregory J. Kelly.   

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

From in or about June 2015, up to and including in or about July 2015, computers associated with two particular internet protocol addresses (the “IP Addresses”) made nearly four hundred thousand attempts to gain unauthorized access to the Organization’s computer network.  As a result, numerous Organization employees experienced difficulty accessing their Organization email accounts, and were disrupted in their ability to conduct regular business functions.  Both of the IP Addresses were subscribed to SEDLAK at SEDLAK’s residence in Florida (the “Sedlak Residence”)

In particular, between June 22, 2015 and July 8, 2015, from one of the IP Addresses, there were approximately 195,000 attempts to log into approximately twenty email accounts of the Organization.  Between July 8, 2015 and July 10, 2015, from the other IP Address, there were an additional approximately 195,000 attempts to log into approximately six email accounts of the Organization.  SEDLAK has never been employed by the Organization, and was not authorized to access any email accounts of the Organization.

On or about September 11, 2015, USSS agents executed a search warrant at the Sedlak Residence, from which they seized, among other things, (i) approximately 30 computers connected to the same internal network, which enabled each computer to communicate with the others (the “Sedlak Computers”); (ii) notes pertaining to the Organization, an executive of the Organization (“Individual-1”) and an individual who has been publicly affiliated with the Organization (“Individual-2”), including e-mail addresses, registrant information for certain website domain names, and certain IP address information associated with the Organization, Individual-1 and/or Individual-2; and (iii) lists of e-mail addresses and e-mail servers, many of which included the word “jihad.”  The Sedlak Computers contained, among other things, a list of certain Organization employees’ email account usernames, and a “brute force” password-cracking tool.  Such a tool is designed to launch a relentless barrage of potential passwords at an email account in an attempt to guess the account’s password.

On or about September 11, 2015, USSS agents interviewed SEDLAK, who claimed to be using the Sedlak Computers to conduct “research” into charitable organizations in the course of his work as a private investigator.  In particular, SEDLAK claimed to be trying to determine if such organizations are unintentionally financing jihadist groups by sending, to charitable organizations in the Middle East, funds which are then seized by jihadist groups.  When asked about notes pertaining to Individual-1 and Individual-2 found at the Sedlak Residence, SEDLAK claimed that he came across such information in his “research” into the financing of jihadist groups.  SEDLAK claimed that he hoped to sell the information he found.

*                *                *

SEDLAK, 42, of Ocoee, Florida, is charged with one count of attempted unauthorized access to a computer, which carries a maximum sentence of five years.  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.

Mr. Bharara praised the outstanding investigative work of the U.S. Secret Service.  Mr. Bharara also noted that the investigation remains ongoing.

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ROBERT LUSTYIK was sentenced today in White Plains federal court by U.S. District Judge Vincent Briccetti to 5 years in prison, to be served consecutively with a ten year federal sentence imposed on him previously in the District of Utah.  LUSTYIK was sentenced for his convictions arising out of a bribery scheme during which he sold confidential law enforcement information in exchange for cash and the promise of additional cash.

U.S. Attorney Preet Bharara said:  “Decades of honest, hard work by thousands of FBI Special Agents dedicated to the pursuit of justice have earned the FBI a well-deserved reputation for public service and integrity.  Robert Lustyik’s criminal conduct, driven by greed and corruption, displayed  a disdain for the integrity for which the FBI stands.  Today, he was held accountable for putting his own greedy self-interest above the interests of the public he served.”    

According to the Complaint, the Indictment, court hearings, and today’s proceedings:

LUSTYIK was a Special Agent with the Federal Bureau of Investigation (“FBI”) who worked on the counterintelligence squad in the White Plains Resident Agency.  Johannes Thaler was LUSTYIK’s friend, and Rizve Ahmed was an acquaintance of Thaler.  From in or about September 2011 through March 2012, LUSTYIK, Thaler, and Ahmed engaged in a bribery scheme.  As part of the scheme, LUSTYIK and Thaler solicited payments of money from Ahmed, in exchange for LUSTYIK’s agreement to provide internal, confidential documents and other confidential information to which LUSTYIK had access by virtue of his position as an FBI Special Agent.  The documents and information pertained to a prominent citizen of Bangladesh (“Individual 1”).  Ahmed perceived himself on the opposite side of a political rivalry with Individual 1.  Ahmed sought, among other things, to obtain information about Individual 1, to locate Individual 1, and to harm Individual 1 and others associated with Individual 1.

As part of the scheme, LUSTYIK and Thaler exchanged text messages, including messages about how to pressure Ahmed to pay them additional money in exchange for confidential information.  For example, in text messages, LUSTYIK told Thaler, “we need to push [Ahmed] for this meeting and get that 40 gs quick . . . . I will talk us into getting the cash . . . . I will work my magic . . . . We r sooooooo close.”  Thaler responded, “I know.  It’s all right there in front of us.  Pretty soon we’ll be having lunch in our oceanfront restaurant . . . .”

For another example, in or about late January 2012, LUSTYIK, upon learning that Ahmed was considering using a different source to obtain confidential information about Individual 1, texted Thaler, “I want to kill C . . . . I hung my ass out the window n we got nothing? . . . . Tell [Ahmed], I’ve got [Individual 1’s] number and I’m pissed. . . . I will put a wire on n get [Ahmed and his associates] to admit they want [a Bangladeshi political figure] offed n we sell it to Individual 1].”  LUSTYIK further texted Thaler, “So bottom line.  I need ten gs asap.  We gotta squeeze C.”

*                *                *

LUSTYIK, 53, of Westchester County, pled guilty on December 23, 2014, to all five counts in the Indictment in which he is charged.  LUSTYIK pled guilty to (1) conspiracy to engage in a bribery scheme; (2) soliciting bribes by a public official; (3) conspiracy to defraud the citizens of the United States and the FBI; (4) theft of government property; and (5) unauthorized disclosure of a Suspicious Activity Report.  In addition to his prison term, LUSTYIK is also sentenced to two years supervised release.

Thaler, 51, of New Fairfield, Connecticut, and Ahmed, 35, of Danbury, Connecticut, were each sentenced for bribery and conspiracy to commit fraud, to which each previously pled guilty.  Thaler was sentenced by Judge Briccetti to 30 months in prison, and Ahmed to 42 months in prison.

Mr. Bharara praised the efforts of the Department of Justice Office of the Inspector General, which conducted the investigation in this case.

The prosecution is being handled by the Office’s White Plains Division and by the Public Integrity Section of the U.S. Department of Justice.  Assistant United States Attorney Benjamin Allee and Trial Attorney Emily Rae Woods are in charge of the prosecution. 

Preet Bharara, the United States Attorney for the Southern District of New York, and Scott Lampert, Special Agent in Charge of the U.S. Department of Health and Human Services, Office of Inspector General’s (“HHS-OIG”) New York Region, announced that a transition plan for NARCO FREEDOM, INC. (“NARCO FREEDOM”), a provider of outpatient chemical dependency clinics and short-term housing in residences known as “three-quarter houses,” has been approved in Manhattan Federal Court.  In April 2015, NARCO FREEDOM was enjoined from engaging in a fraudulent kickback scheme and a temporary receiver was appointed to take over NARCO FREEDOM’s operations.  On September 11, 2015, the Court approved the receiver’s plan to transition the substance abuse clinics and the housing operated by NARCO FREEDOM to other healthcare providers.  This transition prevents the imminent disruption of clinical services and housing for NARCO FREEDOM residents.  U.S. District Judge John G. Koeltl entered the order last Friday.

Manhattan U.S. Attorney Preet Bharara said:  “As the Complaint in this case alleged, Narco Freedom defrauded the government and profited from the exploitation of people most in need of their help.  Enjoining Narco Freedom from continuing to engage in the kickback scheme and transitioning its clinics and houses to other providers will provide this vulnerable population with the continuity of care and housing they sorely need.”

HHS-OIG Special Agent in Charge Scott Lampert said: “The conduct displayed by Narco Freedom is a clear example of the damage personal greed does to our nation’s healthcare system.  The transition approved by the Court puts an end to Narco Freedom’s illegal practices and allows important substance abuse treatment to continue to be provided without interruption.  HHS-OIG recognizes the importance of such treatment, and will continue to ensure that those who provide those services do so in an honest fashion that complies with the law.”

As set forth in the complaint filed on October 28, 2014, in Manhattan federal court:

Since in or about 2006, NARCO FREEDOM was engaged in a scheme to induce individuals who qualified for Medicaid and lacked stable housing to enroll in and attend NARCO FREEDOM’s outpatient clinics in exchange for short-term housing in residences known as “three-quarter houses,” which NARCO FREEDOM referred to as “Freedom Houses.”  NARCO FREEDOM allowed individuals without housing, many of whom had been released on parole, to reside in the Freedom Houses for approximately six to nine months, but required all Freedom House residents to enroll in and attend its outpatient clinics, and evicted residents who did not comply.  NARCO FREEDOM operated the Freedom Houses specifically in order to drive business to its outpatient clinics, and forced residents of its Freedom Houses who were already enrolled in other outpatient programs to transfer to NARCO FREEDOM’s outpatient programs, in violation of the Patients’ Rights provision of the New York State Code.

On October 29, 2014, U.S. District Judge Koeltl granted the Government’s motion for a restraining order which enjoined NARCO FREEDOM from evicting the residents of its Freedom Houses for refusing to engage in the kickback scheme.  On April 2, 2015, Judge Koeltl granted the Government’s motion for a preliminary injunction, concluding that NARCO FREEDOM provided numeration to Medicaid recipients in the form of below-market housing.  Judge Koeltl found that by “[p]roviding below-market housing to Medicaid recipients increases costs to the Medicaid program through over-and inappropriate utilization.  For those who need housing, the prospect of nearly free housing creates a strong incentive to overuse Narco Freedom’s drug treatment programs.”  On April 3, 2015, the Court granted the Government request for an appointment of a temporary receiver to take over and manage the operations of NARCO FREEDOM.  On July 28, 2015, New York State Office of Alcohol and Substance Abuse Services issued temporary emergency operating certificates for certain of the three-quarter houses, which were now being operated by the temporary receiver, certifying them as chemical dependence supportive living services.

Friday, Judge Koeltl granted the temporary receiver’s application to transition NARCO FREEDOM’s substance abuse clinics and houses to two other providers who will ensure the continuity of operations, subject to the Court’s order.  Specifically the Court ordered Narco Freedom to transition all of its clinics and houses to two different providers, Samaritan Village and Acacia Network, effective on September 22, 2015.  Both organizations currently provide housing and substance abuse services in New York City.

*          *          *

Mr. Bharara thanked the Office of the Inspector General at HHS-OIG for its investigative efforts and support and assistance with the case, as well as the New York State Office of Alcohol and Substance Abuse Services and the New York City Human Resources Administration for their assistance and cooperation.

The case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorneys Kirti Vaidya Reddy and Cristine Irvin Phillips are in charge of the case.

            Preet Bharara, the United States Attorney for the Southern District of New York, announced that SAMUEL L. WHITESIDE pled guilty on September 10, 2015, in Manhattan federal court to traveling interstate to commit murder to further his prostitution business, and to persuading, inducing, enticing, and coercing women to travel interstate to engage in prostitution.  He pled guilty before U.S. District Judge Paul A. Crotty.

            Manhattan U.S. Attorney Preet Bharara said: “Samuel Whiteside has now admitted that he traveled from Boston to New York to murder a rival with whom he had a dispute over his prostitution business.  Violence that is so often associated with the prostitution business led to a murder here.  Thanks to the work of the FBI and the New York City Police Department, the murderer here has been brought to justice.”

            According to the Superseding Indictment, other documents filed in Manhattan federal court, and statements made at various proceedings in this case, including yesterday’s guilty plea:

            In the early morning hours of June 5, 2012, WHITESIDE murdered Anthony Martino (the “Victim”) by stabbing him to death in a motel room at the Metro Motel, in the Bronx, New York.  WHITESIDE attacked Martino because of a dispute between Whiteside and Martino relating to their respective prostitution businesses.

              Specifically, WHITESIDE and the Victim had a dispute about a woman who had worked for WHITESIDE as a prostitute.  WHITESIDE believed that the Victim owed WHITESIDE money related to that woman, who had been traded and sold between WHITESIDE and the Victim.  In the weeks leading up to Martino’s murder, WHITESIDE searched for Martino in order to confront him about the money he believed Martino owed to him for that prostitute.

            On the evening of June 4, 2012, and continuing through the early morning hours of June 5, 2012, WHITESIDE was in telephone contact with Martino and learned that Martino was at the Metro Motel.  During the course of that night, WHITESIDE traveled from New England to the Metro Motel.  When he arrived, WHITESIDE forced his way into Martino’s room and attacked and stabbed the Victim with a knife three times, which resulted in the Victim’s death.

            In addition, between at least January 2012 and February 2013, WHITESIDE operated a prostitution business in which he marketed the sexual services of women to male customers in exchange for money.  WHITESIDE took the women to various locations in Massachusetts, Rhode Island, New York, New Jersey, North Carolina, and Illinois to engage in prostitution.

*                *                *

            WHITESIDE, 31, of Dorchester, Massachusetts, faces a maximum of life in prison and eight years of supervised release.  The statutory maximum 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.  WHITESIDE is scheduled to be sentenced by Judge Crotty on December 8, 2015.

            Mr. Bharara praised the investigative work of the Federal Bureau of Investigation and New York City Police Department.

            The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Kan M. Nawaday and Kristy J. Greenberg are in charge of the prosecution.

UPDATE

The charges against the defendant in this case, Benjamin Wey, were dismissed on August 8, 2017. Click the link below for further detail.

Charges Also Unsealed Against a Geneva-Based Banker, Who Remains at Large

            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 unsealing of an Indictment against BENJAMIN WEY and his Geneva-based banker, SEREF DOGAN ERBEK, charging them with conspiracy, securities fraud, wire fraud, and other charges stemming from WEY’s scheme to obtain and conceal his beneficial ownership interest in publicly trading companies through so-called “reverse merger” transactions between Chinese companies and U.S. shell companies, and then to reap tens of millions of dollars of illegal profit by manipulating the companies’ stock prices.  WEY was arrested this morning at his home in Manhattan and is expected to be presented today in federal court in Manhattan before United States Magistrate Judge Frank Maas.  ERBEK remains at large.

            In a separate action, the U.S. Securities and Exchange Commission (“SEC”) announced civil charges against WEY and ERBEK, among others.

           U.S. Attorney Preet Bharara said:  “Ben Wey fashioned himself a master of industry, but as alleged, he was merely a master of manipulation.  The indictment charges that Wey used reverse merger transactions between Chinese companies and U.S. shell companies to illegally conceal his ownership interest and then, with the help of his alleged co-conspirator, manipulated the market so that he could sell his interest at artificially inflated prices.  As alleged, in making tens of millions in illicit profit, Wey refused to let the securities laws or the rules of a fair marketplace get in the way of his dishonest scheme.”

           FBI Assistant Director-in-Charge Diego Rodriguez said:  “The illegal manipulation of stock prices causes significant losses for innocent investors and creates sizeable profits for fraudsters. Wey and Erbek allegedly falsified the true sales volume, demand, and price of stocks in the over-the-counter marketplace through a series of reverse merger transactions involving shell companies. They are believed to have profited in the tens of millions, while victim shareholders were left holding the bill. The FBI and our partners will continue to investigate and prosecute those who cheat the system in this way.”

            According to the eight-count Indictment unsealed today in Manhattan federal court[1]:

            Among other fraudulent and illicit conduct, WEY engineered reverse mergers between Chinese operating companies and publicly traded U.S. shell companies designed to give WEY significant undisclosed ownership in the resulting publicly trading entities, in violation of U.S. securities laws.  Specifically, WEY caused entities controlled by a sibling and other nominees to obtain large portions of the shares of certain U.S. shell companies trading over the counter.  WEY then identified various Chinese operating companies that wanted to raise capital in the U.S. markets.  WEY, through his company, New York Global Group (“NYGG”), facilitated the Chinese companies’ reverse mergers with the U.S. shell companies in which WEY, through his nominees, secretly held significant ownership interest.  Not only did WEY defraud the investing public by failing to disclose, as required under the securities laws, his beneficial ownership of more than five percent of the stock of the new companies, but he then manipulated the market price and demand for the shares in these companies, resulting in tens of millions of dollars of undisclosed and illicit profit.

Reverse Merger Scheme That Illegally Hid Ownership Interest

            WEY caused certain entities (the “Nominee Entities”) that were owned or otherwise associated with a sibling of WEY’s (“Wey’s Sibling”), certain other members of WEY’s extended family, and employees of an NYGG entity located in Beijing, China, NYGG-Asia (collectively, the “Nominee Owners” and, together with the Nominee Entities, the “Nominees”), to obtain a substantial portion of the shares of certain U.S. shell companies (the “Shell Companies”) that were trading on the National Association of Securities Dealers’ Over-the-Counter Bulletin Board, a regulated quotation service that displays real-time quotes, last-sale prices, and volume information for certain over-the-counter securities.

            Although records associated with the Nominee Entities, all of which were incorporated offshore, identify certain of the Nominee Owners as the sole shareholders, directors, and/or signatories of the Nominee Entities, in fact, and unbeknownst to the investing public, WEY actually controlled the Nominee Entities.  In executing the scheme to defraud, WEY routinely directed ERBEK, who knew of WEY’s control over the Nominees and knew of the securities laws’ requirements for disclosing beneficial ownership interest of over five percent, to conduct stock trading for accounts held in the names of the Nominees.

            In addition, WEY, through NYGG-Asia, identified various Chinese operating companies (the “Operating Companies”) that wanted to raise capital in the U.S. markets, and offered NYGG’s services in facilitating reverse merger transactions for the purpose of gaining access to those capital markets.  WEY intentionally caused the Operating Companies to merge with the particular Shell Companies in which WEY, through the Nominees, held significant, illegally undisclosed ownership stakes.  The companies that resulted from these reverse merger transactions were SmartHeat, Inc.; Deer Consumer Products, Inc.; and CleanTech Innovations, Inc. (the “Issuers”).

            As a further part of the conspiracy and scheme to defraud, WEY caused the Nominees to continue to retain undisclosed control of more than five percent of the shares of each of the Issuers – shares originally of the Shell Companies that, by virtue of the reverse merger transactions, became shares of the Issuers.  Although WEY was required by federal securities laws to report his beneficial ownership in the Issuers, he deliberately did not.  In fact, to further obscure from the investing public the extent to which he owned and exercised control over Issuers’ stock, and with ERBEK’s knowledge and assistance, WEY purposefully caused the Nominees’ holdings to be structured in such a way as to ensure that no single one of the Nominees held a greater than five percent beneficial ownership interest in any of the Issuers.

Manipulation of the Market for Shares of the Reverse Merger Companies

             At the time that the Issuers emerged from reverse merger transactions, their common stock traded only in over-the-counter markets and in low volumes.  The Issuers’ stock could not be sold in significant quantities in the open market until a liquid market developed and the shares traded on an exchange.  To create liquidity so that WEY could profit from his scheme, WEY caused the Issuers’ management to apply for listings on the Nasdaq, which would increase market interest and liquidity in the Issuers’ securities.  To satisfy Nasdaq’s requirement that an issuer have at least 300 “round-lot” shareholders – defined as shareholders owning at least 100 shares of common stock each – WEY deceptively caused shares of some of the Issuers to be transferred from certain of the Nominees to dozens of WEY’s friends, employees, and business associates, among others, as gifts or unsolicited bonuses in increments of 100 or more, thereby artificially inflating the number of shareholders in each of the Issuers.

            Both before and after an Issuer became listed on Nasdaq, WEY and ERBEK caused the share price of its stock to be manipulated in various ways.  For example, on multiple occasions, WEY caused two retail brokers located in Manhattan to solicit their customers to buy shares of common stock of the Issuers while those brokers simultaneously actively discouraged the sale of these stocks by their customers, so as to artificially maintain the stock price of each Issuer.  Similarly, WEY explicitly instructed ERBEK to maintain the share prices of at least two Issuers’ stock held in certain of the Nominees’ accounts.  For example, on or about February 7, 2011, WEY sent an email to ERBEK stating, “Cleantech just traded at $4.50 per share.  Please make sure the trader buys the stock at $5 per share, stay at $5 per share bid price, not less.  Please make sure this happens right away.”  ERBEK agreed to do so, but cautioned WEY, “Obviously, we need to be careful to give such orders/make such comments.  I may explain it over the phone; please call me if you have time.”  WEY also orchestrated match trades in the securities of the Issuers, for the purpose of manipulating the prices of those stocks.

            At the same time that WEY and ERBEK were causing the share prices of the Issuers’ stock to be manipulated, WEY caused shares held in the name of Wey’s Sibling and other Nominees at brokerage accounts in the United States and overseas to be sold, thereby generating millions of dollars in proceeds at artificially inflated prices.  WEY caused those proceeds to be transferred from accounts in the United States to accounts overseas, only to then send millions of dollars back to the United States for his own benefit.  For example, more than $20 million in cash was transferred from a Hong Kong account in the name of Wey’s Sibling to bank accounts in the United States that WEY and/or WEY’s wife controlled.

*                      *                      *

            WEY, 43, is charged with one count of conspiracy to commit securities fraud and wire fraud; two counts of securities fraud; one count of wire fraud; two counts of failure to disclose ownership in excess of five percent; and two counts of money laundering.  Count One carries a maximum sentence of five years in prison.  Counts Two and Four through Eight each carry a maximum sentence of 20 years in prison.  Count Three carries a maximum sentence of 25 years in prison.  The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.  ERBEK, 53, is charged with one count of conspiracy to commit securities fraud and wire fraud, which carries a maximum sentence of five years in prison; two counts of securities fraud, one of which carries a maximum sentence of 20 years in prison, the other of which carries a sentence of 25 years in prison; and one count of wire fraud, which carries a maximum sentence of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

            Mr. Bharara praised the work of the Federal Bureau of Investigation, and thanked the SEC for its assistance.  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’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations.  Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants.  For more information on the task force, please visit www.StopFraud.gov.

            This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Sarah Eddy McCallum, Andrew C. Adams, and Michael Ferrara are in charge of the prosecution.  

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

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

            Preet Bharara, the United States Attorney for the Southern District of New York, Glenn Sorge, Acting Special Agent-in-Charge of the New York Field Office of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), James J. Hunt, 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”), today announced the unsealing of two Indictments charging a total of 17 members and associates of two Bronx-based street gangs, the Taylor Avenue Crew and the Leland Avenue Crew, with various racketeering and narcotics offenses, including two murders of rival gang members.

            Twelve of the seventeen defendants, JAMES CAPERS, TOMMY BROWN, JESSE IRVIN, EDWIN MOYE, UNIQUE CHRISTOPHER, DANTE RODGERS, IRVIN ORTIZ, ELIJAH DAVILA, RICARDO GARCIA, PABLO CHEVERE, GLADYS MORALES, KENNETH MERCADO, and ANDREA BELL, were taken into federal custody yesterday or this morning and will be presented before Chief United States Magistrate Judge Frank Maas later today.  Four of the defendants, MARQUISE ROCHESTER, CHRISTIAN McKNIGHT, SAMUEL SERRANO, and MESSIAH PERRY, are currently incarcerated in state custody on other charges, and will be presented at a later date.  The case of United States v. Irvin Ortiz, et al, 15 Cr. 608 (KPF) has been assigned to U.S. District Judge Katherine Polk Failla.  The case of United States v. James Capers, et al., 15 Cr. 607 (WHP) has been assigned to U.S. District Judge William H. Pauley, III.          

            Manhattan U.S. Attorney Preet Bharara said: “Members of the Taylor Avenue and Leland Avenue Crews allegedly wreaked havoc on the community through the sale of crack cocaine and a wave of violence on the streets of the Bronx.  On two occasions, that violence allegedly ended in the murders of rival gang members.”

            HSI Acting Special Agent-in-Charge Glenn Sorge said: “Today’s arrests deal a serious blow to two gangs that allegedly used the streets of New York City to sell drugs and commit acts of violence including murder.  HSI will continue to work with our law enforcement partners to rid the streets of these dangerous criminal organizations that instill fear in our communities.”

            DEA Special Agent in Charge James J. Hunt said: “Drug trafficking inevitably leads to further crime and violence, as depicted in the alleged charges against the members of the Leland Avenue and Taylor Avenue Crews.  Through a common goal, law enforcement pooled resources to investigate and arrest those who converted their Avenues into their own private battlefields.”                                       

            Police Commissioner William J. Bratton said: “These indictments and arrests are the result of the collaborative power of law enforcement to address narcotics sales and street level shootings, crimes which are often committed by just a few individuals but affect a great many more.  I would like to thank the NYPD investigators and our federal law enforcement partners who worked tirelessly to protect this Bronx community and bring justice to those responsible for this scourge of drugs, death and violence.”

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

United States v. Irvin Ortiz, et al., 15 Cr. 608 (KPF)

            The Taylor Avenue Crew was a criminal enterprise that operated principally in and around the Bronx, New York, from at least 2012 up to and including 2015.  One of the Taylor Avenue Crew’s principal objectives was to sell cocaine base, commonly known as “crack cocaine,” primarily in and around Taylor Avenue in the Bronx.  The Taylor Avenue Crew controlled crack cocaine sales within this area by prohibiting and preventing non-members, outsiders, and rival narcotics dealers from distributing crack cocaine in the area controlled by the enterprise.

            Members and associates of the Taylor Avenue Crew engaged in acts of violence against the Leland Avenue Crew, a rival gang that sold crack cocaine primarily in and around Leland Avenue, which runs parallel to Taylor Avenue and is located two blocks east.  These acts of violence included assaults, attempted murder, and murder, and were committed to protect the Taylor Avenue Crew’s drug territory, to retaliate against members of rival gangs who had encroached on the territory controlled by the Taylor Avenue Crew, and to otherwise promote the standing and reputation of the Taylor Avenue Crew amongst rival gangs.

            The violence perpetrated by the Taylor Avenue Crew turned deadly in March 2015.  On or about March 3, 2015, ELIJAH DAVILA and Allen McQueen, a now deceased member of the Taylor Avenue Crew,    murdered Pablo Beard, a member of the Leland Avenue Crew, by shooting Beard in the vicinity of 1512 Leland Avenue in the Bronx.  As alleged in the Ortiz Indictment, DAVILA committed this murder to maintain and increase his position in the Taylor Avenue Crew.

            Count One of the Ortiz Indictment charges IRVIN ORTIZ, RICARDO GARCIA, ELIJAH DAVILA, SAMUEL SERRANO, MESSIAH PERRY, PABLO CHEVERE, GLADYS MORALES, and KENNETH MERCADO with participating in a racketeering conspiracy.  Count Seven of the Ortiz Indictment charges ORTIZ, GARCIA, DAVILA, SERRANO, PERRY, MORALES, and MERCADO, with a firearms offense in connection with that conspiracy.

            Counts Two, Three, Six, and Eight charge DAVILA with conspiracy to commit murder in aid of racketeering activity, murder in aid of racketeering activity, murder in connection with a drug crime, and a related firearms offense in connection with the March 2015 murder of Pablo Beard.

            Count Four of the Ortiz Indictment charges MERCADO with assault and attempted murder in aid of racketeering activity in connection with the August 2015 shooting of members of the Leland Avenue Crew.

            Count Five of the Ortiz Indictment charges ORTIZ, GARCIA, DAVILA, SERRANO, PERRY, CHEVERE, MORALES, MERCADO, and ANDREA BELL with participating in a narcotics conspiracy, in connection with their distribution of crack cocaine in and around Taylor Avenue.

United States v. James Capers, et al., 15 Cr. 607 (WHP)

            The Leland Avenue Crew was a criminal enterprise that operated principally in and around the Bronx, New York, from at least 2012 up to and including 2015.  One of the principal objectives of the Leland Avenue Crew was to sell crack cocaine, primarily in and around Leland Avenue in the Bronx.  Members and associates of the Leland Avenue Crew engaged in acts of violence against the Taylor Avenue Crew.  These acts of violence included assaults, attempted murder, and murder intended either to protect the Leland Avenue Crew’s drug territory, retaliate against members of rival gangs who had encroached on the territory controlled by the Leland Avenue Crew, or to otherwise promote the standing and reputation of the Leland Avenue Crew among rival gangs.

            The violence perpetrated by the Leland Avenue Crew also turned deadly in July 2015.  On or about July 7, 2015, JAMES CAPERS   murdered Allen McQueen, a member of the Taylor Avenue Crew, by shooting McQueen in the vicinity of 1531 Taylor Avenue in the Bronx.  As alleged in the Capers Indictment, CAPERS committed this murder to maintain and increase his position in the Leland Avenue Crew.

            Count One of the Capers Indictment charges CAPERS, TOMMY BROWN, JESSE IRVIN, MARQUISE ROCHESTER, EDWIN MOYE, CHRISTIAN MCKNIGHT, UNIQUE CHRISTOPHER, and DANTE RODGERS with participating in a racketeering conspiracy.  Count Six of the Capers Indictment charges CAPERS, IRVIN, ROCHESTER, MOYE, and MCKNIGHT with a firearms offense in connection with that conspiracy.

            Counts Two, Four, and Five charge CAPERS with murder in aid of racketeering activity, murder in connection with a drug crime, and a related firearms offense, in connection with the July 2015 murder of Allen McQueen.

             Count Three charges CAPERS, BROWN, IRVIN, ROCHESTER, MOYE, MCKNIGHT, CHRISTOPHER, and RODGERS with participating in a narcotics conspiracy, in connection with their distribution of crack cocaine in and around Leland Avenue.

*                      *                     *

            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 HSI, the DEA, and the NYPD.  He also thanked the Bronx County District Attorney’s Office for its 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 Jessica Lonergan, Scott Hartman, and Jason Swergold 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.                                                            

United States v. Irvin Ortiz, et al., 15 Cr. 608 (KPF)

COUNT

CHARGE

DEFENDANTS

MAX. PENALTIES

1

Racketeering conspiracy

18 U.S.C. § 1962(d)

IRVIN ORTIZ

RICARDO GARCIA

ELIJAH DAVILA

SAMUEL SERRANO

MESSIAH PERRY

PABLO CHEVERE

GLADYS MORALES

KENNETH MERCADO

20 years in prison

2

Conspiracy to commit murder in aid of racketeering activity

18 U.S.C. § 1959(a)(5)

ELIJAH DAVILA

10 years in prison

3

Murder in aid of racketeering activity

18 U.S.C. § 1959(a)(1)

ELIJAH DAVILA

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)

KENNETH MERCADO

20 years in prison

5

Narcotics conspiracy

21 U.S.C. § 846

IRVIN ORTIZ

RICARDO GARCIA

ELIJAH DAVILA

SAMUEL SERRANO

MESSIAH PERRY

PABLO CHEVERE

GLADYS MORALES

KENNETH MERCADO

ANDREA BELL

Life in prison

Mandatory minimum of 10 years in prison

6

Murder in connection with a drug crime

21 U.S.C. § 848(e)(1)(A)

ELIJAH DAVILA

Death penalty, or life in prison

Mandatory minimum of 20 years in prison

7

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)

IRVIN ORTIZ

RICARDO GARCIA

ELIJAH DAVILA

SAMUEL SERRANO

MESSIAH PERRY

GLADYS MORALES

KENNETH MERCADO

Life in prison

Mandatory minimum of 10 years in prison

8

Murder through use of a firearm

18 U.S.C. § 9249(j)

ELIJAH DAVILA

Death penalty, or mandatory minimum of life in prison

DEFENDANT

AGE

RESIDENCE

IRVIN ORTIZ

a/k/a “Goonie”

27

Bronx, NY

RICARDO GARCIA

a/k/a “Bucky”

24

Bronx, NY

ELIJAH DAVILA

a/k/a “Montana”

23

Bronx, NY

SAMUEL SERRANO

a/k/a “Smaxx”

22

Bronx, NY

MESSIAH PERRY

a/k/a “Showtime”

22

Bronx, NY

PABLO CHEVERE

a/k/a “Splash”

32

Bronx, NY

GLADYS MORALES

a/k/a “La Bruja”

34

Bronx, NY

KENNETH MERCADO

a/k/a “Fly,” a/k/a “Twin”

25

Bronx, NY

ANDREA BELL

a/k/a “Andrea Martin,” a/k/a “Drea”

41

Bronx, NY

United States v. James Capers, et al., 15 Cr. 607 (WHP)

COUNT

CHARGE

DEFENDANTS

MAX. PENALTIES

1

Racketeering conspiracy

18 U.S.C. § 1962(d)

JAMES CAPERS

TOMMY BROWN

JESSE IRVIN

MARQUISE ROCHESTER

EDWIN MOYE

CHRISTIAN MCKNIGHT

UNIQUE CHRISTOPHER

DANTE RODGERS

20 years in prison

2

Murder in aid of racketeering activity

18 U.S.C. § 1959(a)(1)

JAMES CAPERS

Death penalty, or life in prison

3

Narcotics conspiracy

21 U.S.C. § 846

JAMES CAPERS

TOMMY BROWN

JESSE IRVIN

MARQUISE ROCHESTER

EDWIN MOYE

CHRISTIAN MCKNIGHT

UNIQUE CHRISTOPHER

DANTE RODGERS

Life in prison

Mandatory minimum of 10 years in prison

4

Murder in connection with a drug crime

21 U.S.C. § 848(e)(1)(A)

JAMES CAPERS

Death penalty, or life in prison

Mandatory minimum of 20 years in prison

5

Murder through use of a firearm

18 U.S.C. § 924(j)

JAMES CAPERS

Death penalty, or mandatory minimum of 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)

JAMES CAPERS

JESSE IRVIN

MARQUISE ROCHESTER

EDWIN MOYE

CHRISTIAN MCKNIGHT

Life in prison

Mandatory minimum of 10 years in prison

DEFENDANT

AGE

RESIDENCE

JAMES CAPERS,

a/k/a “Mitch,”

22

Bronx, NY

TOMMY BROWN

a/k/a “Bizzy”

20

Bronx, NY

JESSE IRVIN

a/k/a “Spookz”

24

Bronx, NY

MARQUISE ROCHESTER,

a/k/a “Mook,” a/k/a “Millz”

23

Bronx, NY

EDWIN MOYE,

a/k/a “Eazy”

24

Bronx, NY

CHRISTIAN MCKNIGHT,

a/k/a “Spice”

22

Bronx, NY

UNIQUE CHRISTOPHER,

a/k/a “Bills”

19

Bronx, NY

DANTE RODGERS

21

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.

Preet Bharara, the United States Attorney for the Southern District of New York,   announced today that STEVEN KAITZ, LATCHMEE MAHATO, a/k/a “Robbie,” and JONATHAN WHEELER, the three owners and principals of Projuban, LLC, d/b/a G3K Displays, Inc., and related entities (“G3K”) – a New Jersey-based company that provided in-store displays for retailers – and ZACHARY KAITZ, an executive at G3K, were sentenced in Manhattan federal court for their roles in an elaborate scheme to defraud G3K’s lenders and customers out of millions of dollars.  U.S. District Judge Jed S. Rakoff sentenced STEVEN KAITZ yesterday to 40 months in prison.  Today, Judge Rakoff sentenced MAHATO to 24 months in prison; WHEELER to 21 months in prison; and ZACHARY KAITZ to four months in prison.  STEVEN KAITZ, MAHATO, WHEELER, and ZACHARY KAITZ, and Kathleen Smith, the fifth defendant charged in this case, each pled guilty earlier this year before Judge Rakoff.

Manhattan U.S. Attorney Preet Bharara said:  “This case highlights the lengths people will go to steal money and cover their tracks.  These defendants covered much of the fraud playbook, from creating phony purchase orders and invoices to using fake email customer accounts to inflate company revenues, and then used the ill-gotten gains to pay for homes, luxury cars, and private school tuition.”

According to the Indictment and statements made during the proceedings in this case:

STEVEN KAITZ, LATCHMEE MAHATO, and JONATHAN WHEELER were the three owners and principals of G3K, a company that manufactured and designed displays for retailers around the world, including major retailers of sports apparel and footwear.  ZACHARY KAITZ served as G3K’s vice president of creative services. 

From 2012 to May 2014, in order to trick various lenders, including Veritas Financial Partners, LLC, and MVC Capital, Inc., into lending at least $18.6 million to G3K, STEVEN KAITZ, MAHATO, WHEELER, and others engaged in a scheme to falsely inflate G3K’s revenue and accounts receivable, and as part of the scheme, made and caused to be made materially false and misleading statements about G3K’s financial condition.  To create the false impression of sales, the defendants created phony documents, including fake and falsely inflated purchase orders purporting to reflect sales to G3K’s customers.  STEVEN KAITZ, MAHATO, WHEELER, and Kathleen Smith also tricked certain of the company’s customers, including Foot Locker, Inc., Smith’s employer, into paying falsely inflated invoices from G3K.

The defendants took elaborate steps to keep the scheme afloat and prevent G3K’s lenders and outside auditors from discovering the fraud.  For example, STEVEN KAITZ, MAHATO, and WHEELER were involved in the creation of fake email accounts purporting to belong to fictitious employees of Foot Locker and Adidas, G3K’s two largest customers.  STEVEN KAITZ, MAHATO, and WHEELER operated these fake email accounts themselves, pretending to be employees of those customers, and then used those fake email accounts to “verify” false information about G3K’s financial condition, including its sales and accounts receivable, to G3K’s lenders and outside auditors.  STEVEN KAITZ, MAHATO, and WHEELER also utilized shell companies to engage in “round-trip” transactions to create the false appearance that customers were paying G3K’s phony outstanding receivables, thereby allowing G3K to continue to borrow from its lenders.  ZACHARY KAITZ, who was skilled in graphic design, helped carry out the fraud by creating fraudulent documentation, such as fake invoices, purchase orders, and bills of lading, to support the false representations to the lenders about G3K’s business.

STEVEN KAITZ, MAHATO, and WHEELER further misappropriated approximately $2.8 million of the loan proceeds for their own personal use, to pay for homes and luxury cars, private school tuition, and personal credit card bills, as well as kickbacks to Smith.

As of May 2014, when G3K’s lenders terminated their lending relationships with the company after discovering the fraud, G3K had approximately $18.6 million in loans outstanding.

*                      *                      *

In addition to their prison terms, STEVEN KAITZ, 56, of Jersey City, New Jersey, was ordered to forfeit $1,382,427 and pay $18,687,518 in restitution; LATCHMEE MAHATO, a/k/a “Robbie,” 50, of Jamaica, Queens, was ordered to forfeit $2,215,417 and pay $18,687,518 in restitution; JONATHAN WHEELER, 46, of Southport, Connecticut, was ordered to forfeit $957,435 and pay $18,687,518 in restitution; and ZACHARY KAITZ, 32, of Brooklyn, New York, was ordered to forfeit $100,000 and pay $18,687,518 in restitution.

Kathleen Smith, 50, of South Plainfield, New Jersey, is scheduled to be sentenced before Judge Rakoff on October 16, 2015.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation.

The case is being prosecuted by the Office’s Complex Frauds & Cybercrime Unit.  Assistant U.S. Attorney Joshua A. Naftalis is in charge of the prosecution.  Assistant U.S. Attorney Edward B. Diskant of the Money Laundering & Asset Forfeiture Unit is responsible for the forfeiture aspects of the prosecution.

            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 today the arrests of KALEIL ISAZA TUZMAN and ROBIN SMYTH.  TUZMAN, the former chairman of the board of directors and chief executive officer of the technology start-up company KIT digital, was arrested yesterday in Colombia on market manipulation and accounting fraud charges.  TUZMAN is being held in Colombia pending extradition proceedings.  SMYTH, the former chief financial officer (“CFO”) of KIT digital, a publicly traded company that was based in New York, New York, and Prague, Czech Republic, was arrested today in Australia on accounting fraud charges.  SMYTH is being held in Australia pending extradition proceedings.

            Manhattan U.S. Attorney Preet Bharara said: “As alleged, Kaleil Isaza Tuzman and Robin Smyth engaged in an elaborate conspiracy to mislead investors and regulators about the financial health of the publicly traded company they oversaw.  I want to thank the FBI and the Postal Inspection Service for helping to bring these two alleged fraudsters to justice.”

            FBI Assistant Director Diego Rodriguez said: “As alleged, Tuzman and Smyth conspired to personally profit through market manipulation and accounting fraud in the tens of millions of dollars.  Despite being as far away as Australia and Colombia, we seek to bring them to justice in the United States to face their accusers and alleged victims.  The FBI will continue to work with U.S. Postal Inspection Service and our other partners in an effort at ensuring that our financial markets are legal, fair, and equitable.”       

            USPIS Inspector-in-Charge Philip R. Bartlett said: “These individuals took extraordinary steps to conceal their deceit from auditors and clients, creating instability in investor portfolios.  Their actions highlight their arrogance and disregard for rules and regulations.”

            According to the Indictment unsealed in Manhattan federal court[1], TUZMAN and SMYTH engaged in the following fraudulent schemes during their tenures as KIT digital’s Chairman and CEO, and CFO, respectively:

The Market Manipulation Scheme

            Between in or about December 2008 and in or about September 2011, TUZMAN and a co-conspirator (“CC-1”), who operated a hedge fund (the “Hedge Fund”), engaged in a scheme to artificially inflate the share price and trading volume of KIT digital’s shares.Specifically, at various times when KIT digital’s shares traded on the OTC Bulletin Board and later on the NASDAQ, TUZMAN directed a scheme in which KIT digital shares were purchased and sold through the Hedge Fund, at times for the purpose of manipulating the stock price and at times for the purpose of creating the illusion of greater volume in the trading of KIT digital shares.TUZMAN personally invested his own money into the Hedge Fund and also arranged for KIT digital to invest money in the Hedge Fund, thereby using the Hedge Fund as a vehicle by which KIT digital, at TUZMAN’s direction, invested in itself without disclosing that fact, or the fact of the manipulation, to the investing public.

            Specifically, CC-1, with TUZMAN’s knowledge and approval, frequently engaged in match trading in which CC-1 caused an account under CC-1’s control to buy or sell KIT digital stock, and on the same day caused an account under CC-1’s control to take the opposite position.TUZMAN also directed CC-1 to make timely purchases of KIT digital stock in an effort to manipulate the price of KIT digital shares at certain critical moments, including, for instance, when KIT digital was seeking to raise additional capital and in the weeks before KIT digital’s stock began trading on the NASDAQ.At times, CC-1 was responsible for nearly all of the day’s trading activity in KIT digital stock.

            Between 2009 and 2010, TUZMAN caused KIT digital to invest approximately $1,150,000 in company cash in the Hedge Fund but failed to disclose to KIT digital shareholders that these investments with the Hedge Fund were not part of an arms-length relationship.Instead, TUZMAN portrayed these investments as efforts to safely invest assets of KIT digital. In reality, TUZMAN caused KIT digital to make these investments in order to help fund CC-1’s purchases of KIT digital shares, as part of the effort to manipulate the market described above.And, on one occasion, TUZMAN caused KIT digital to invest $250,000 in the Hedge Fund so that CC-1 could reimburse TUZMAN for a prior, personal investment that TUZMAN made with the Hedge Fund, thereby using KIT digital as his personal bank.

The Accounting Fraud Scheme

            From at least in or about 2010 through in or about 2012, TUZMAN and SMYTH, with others, engaged in an illegal scheme to deceive KIT digital shareholders, members of the investing public, KIT digital’s independent auditors, and others concerning KIT digital’s true operating performance and financial results.

            TUZMAN, working with others, including SMYTH, devised and executed a scheme to inflate KIT digital’s revenue falsely.This scheme involved two principal methods: (a) the improper recognition of revenue from so-called “perpetual license” contracts for KIT digital software (contracts that gave the purchasing customer the right to use the licensed software indefinitely), and (b) the execution of fraudulent “round-trip” transactions which had the effect of using KIT digital’s own cash, rather than payments received from customers, to pay off bills, known as accounts receivable, that were due and owed to KIT digital from those customers, rather than disclose to KIT digital’s auditors and the investing public the fact that the bills were uncollectible.       

            With regard to the first method, TUZMAN and SMYTH knew that KIT digital had sold perpetual licenses for software that, at the time of sale, was not complete and required substantial future development.But instead of booking revenue ratably as KIT digital reached interim development milestones or recognizing revenue in full once software development was complete, TUZMAN and SMYTH caused KIT digital to recognize the entirety of the revenue from certain contracts at the time of sale despite the fact that KIT digital had not delivered a product to KIT digital’s customers.This premature revenue recognition violated relevant software accounting principles and was contrary to KIT digital’s statements to the investing public and its independent auditors, among others.Because of TUZMAN’s and SMYTH’s actions, KIT digital recognized approximately $6,000,000 in revenue that should not have been in its quarterly and annual reports submitted to the SEC, thus misleading the investing public and others about KIT digital’s true financial health.

            With regard to the second method, TUZMAN and SMYTH, on at least one occasion, caused KIT digital to use company money, ostensibly escrowed in connection with a KIT digital corporate acquisition, to pay off suspicious or uncollectible receivables by year-end.Specifically, TUZMAN and SMYTH caused KIT digital to add an artificial $7,850,000 “restructuring fee” to the purchase price of a company that KIT digital sought to acquire.  Once the purchase price was raised, TUZMAN and SMYTH established an escrow account that was funded with $7,850,000 in KIT digital cash which purported to represent the so-called restructuring fee.  The use of the escrowed KIT digital money was governed by a “side letter” between KIT digital and the acquired company that SMYTH created but both defendants intentionally hid from KIT digital’s auditors and the investing public.  The side letter dictated that escrowed funds could be used only to cover the costs KIT digital expected to incur from integrating the acquired company into KIT digital.  However, TUZMAN and SMYTH used the escrowed money in a round-trip transaction that resulted in KIT digital using its own cash to pay down approximately $4,400,000 in suspicious or uncollectable accounts receivables.  TUZMAN’s and SMYTH’s actions caused KIT digital’s 2011 annual financial report to overstate the company’s assets by $7,850,000 and to understate the company’s pre-tax, year-end losses by approximately $4,400,000.

            TUZMAN, 43, is charged in eight counts.For the market manipulation scheme, TUZMAN is charged with one count of conspiracy to commit securities fraud, one count of securities fraud, one count of conspiracy to commit wire fraud, and one count of wire fraud.For the accounting fraud scheme, TUZMAN is charged with one count of conspiracy to commit securities fraud, make false statements in annual and quarterly SEC reports, and make false statements to auditors, one count of securities fraud, and two counts of making false statements in annual and quarterly SEC reports.

            SMYTH, 61, is charged with one count of conspiracy to commit securities fraud, make false statements in annual and quarterly SEC reports, and make false statements to auditors, one count of securities fraud, and three counts of making false statements in annual and quarterly SEC reports.

            The securities fraud and wire fraud counts each carry a maximum sentence of 20 years in prison and a maximum fine of $5,000,000, or twice the gross gain or loss from the offense.Each of the counts for conspiracy to commit securities fraud, make false statements in annual and quarterly SEC reports, and make false statements to auditors carries a maximum sentence of five years in prison.  Each count for making false statements in annual and quarterly SEC reports 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 sentencings of the defendants would be determined by the judge.

            Mr. Bharara praised the work of the Federal Bureau of Investigation and the United States Postal Inspection Service.He also thanked the SEC – which filed charges against TUZMAN and SMYTH today in a parallel civil case – for its assistance.He also thanked the Colombian government for its help in apprehending TUZMAN and thanked the Australian government for its assistance in apprehending SMYTH.  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’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations.Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants.For more information on the task force, please visit www.StopFraud.gov.         

            This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Edward Y. Kim, Sarah E. McCallum, and Damian Williams are in charge of the prosecution.

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, and Mark Hamlet, the Special Agent in Charge of the Special Operations Division of the United States Drug Enforcement Administration (“DEA”), announced today the extradition of  PIRZADA KHAWAJA ABDUL HAMEED CHISHTI, a/k/a “Abdul Hameed Chishti Pirzada Khawaja,” a/k/a “Benny,” and PIRZADA KHAWAJA ABDUL WAHAB CHISHTI, a/k/a “Abdul Wahab Chishti Pirzada Khawaja,” a/k/a “Angel.”  Both are citizens of Pakistan residing in Spain and are charged with conspiring to commit narco-terrorism, to provide material support to a foreign terrorist organization, to import heroin into the United States, and to unlawfully sell missile launching systems.  HAMEED CHISHTI and WAHAB CHISHTI were arrested, along with co-defendants Sohail Kaskar and Ali Danish, in Spain on June 17, 2014, at the request of the United States.  HAMEED CHISHTI and WAHAB CHISHTI arrived in the Southern District of New York today, and will be presented before United States Magistrate Judge Gabriel W. Gorenstein.  The case is assigned to United States District Judge J. Paul Oetken.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Hameed Chishti and Wahab Chishti had no qualms selling multi-kilogram quantities of U.S.-bound heroin to individuals they believed to be members of a terrorist organization, the FARC.  According to the complaint and indictment, they also planned to arm these purported terrorists with military-grade weapons, believing they would be used to protect the FARC’s drug-trafficking enterprise.  Thanks to the dedicated work of the DEA, this entire conspiracy was foiled and these defendants will face justice on American soil.”

DEA Special Agent in Charge Mark Hamlet said: “Hameed and Wahab Chishti illustrate once again that drug trafficking and terror conspiracies often intersect, support, and facilitate each other’s dangerous and potential deadly plots.  DEA and our global partners often uncover criminal activities where drug trafficking networks and terror organizations are one and the same.  DEA will continue to work to strengthen our national security and rule of law by attacking these deadly transnational criminal groups who deal in weapons, drugs, and other crimes with the ultimate goal of bringing them to justice here in the United States.”

According to the allegations contained in the Indictment and the underlying Complaint unsealed in Manhattan federal court[1]:

From 2013 through the date of their arrests, HAMEED CHISHTI and WAHAB CHISHTI, and their co-defendants, Kaskar and Danish, participated in a conspiracy to import heroin into the United States, to distribute heroin that would be imported into the United States, and to support the Fuerzas Armadas Revolucionarias de Colombia (“FARC”), or the Revolutionary Armed Forces of Colombia.  During meetings at locations in Spain and elsewhere, the defendants agreed to sell multi-kilogram quantities of heroin to individuals they believed to be representatives of the FARC.  In fact, the purported FARC representatives were confidential sources working with the DEA.  The defendants believed that the purported FARC representatives planned to transport the heroin to the United States.  In April 2014, HAMEED CHISHTI and WAHAB CHISHTI arranged for the delivery of a one-kilogram sample of heroin to the purported FARC representatives in the Netherlands, for transport on to the United States.

During the course of the narcotics negotiations, the purported FARC representatives indicated that the FARC was interested in buying “Iglas” – the name of Russian-made surface-to-air missiles – to protect its drug-trafficking business in Colombia.  From April 2014 through June 2014, HAMEED CHISHTI, WAHAB CHISHTI, and their co-conspirators participated in discussions where they agreed to sell several missiles to the purported FARC representatives for the purpose of protecting and furthering the FARC’s efforts to manufacture and distribute cocaine for importation, ultimately, into the United States.  In April 2014, Danish told the purported FARC representatives that three to five missiles could be delivered directly to wherever they were needed, and that a larger quantity of missiles could be delivered to the FARC in Colombia by diverting the missiles from a “legitimate” order.  In May 2014, HAMEED CHISHTI forwarded Danish’s bank account information to one of the purported FARC representatives to facilitate payment for the surface-to-air missiles.

*              *             *

The indictment charges HAMEED CHISHTI, 47, and WAHAB CHISHTI, 49, with conspiring to commit narco-terrorism, to provide material support to a foreign terrorist organization, to import heroin into the United States, and to unlawfully sell missile launching systems.  The United States is seeking extradition of the remaining defendants in the indictment, Kaskar and Danish, from Spain.

If convicted, each defendant faces a maximum sentence of life in prison and a mandatory minimum term of 25 years in prison.The maximum and mandatory minimum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentences will be determined by the judge.

Mr. Bharara praised the outstanding efforts of the Special Operations Division of the DEA. Mr. Bharara also thanked the DEA’s New York Field Division and the New York Organized Crime Drug Enforcement Strike Force; the U.S. Customs and Border Patrol, National Targeting Center; the DEA’s Madrid Country Office, the Hague Country Office, the Bogota Country Office, and the Port of Spain Country Office; the Government of the Kingdom of Spain and the Guardia Civil, Central Operations Unit; the Government of the Kingdom of the Netherlands and the National Police of the Netherlands; the Government of the Republic of Colombia and the Colombian National Police; and the U.S. Department of Justice’s Office of International Affairs and National Security Division.

This case is being handled by the Office’s Terrorism and International Narcotics Unit.Assistant United States Attorneys Michael D. Lockard, Adam Fee, and Emil J. Bove III are in charge of the prosecution.

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

            Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced that HASSAN KHAN, a Long Island resident, was arrested today and charged in a criminal complaint with five counts stemming from his sexual exploitation and enticement of a minor and his receipt of child pornography.  KHAN was presented today in Manhattan federal court before U.S. Magistrate Judge Gabriel W. Gorenstein.         

            U.S. Attorney Preet Bharara said: “As alleged, Hassan Khan sexually exploited an innocent child, beginning the grooming process when she was just 11 years old.  This Office is dedicated to ensuring that those who sexually abuse children are held to account.  I want to thank the FBI for their remarkable work in this case.”

            Assistant Director-in-Charge Diego Rodriguez said:  “Khan was arrested today for allegedly targeting, grooming, and exploiting a minor for several years. He carried out this illicit behavior by enticing her online and engaging in sexually explicit conduct with her, both in the United States and abroad. As this terrifying ordeal comes to an end, the nightmare continues for the victim and her family. Innocence, once stolen, is not easily restored. The FBI, with assistance from our local and international partners, will continue to pursue sexual predators, remove them from their hideaway, and deliver them into the arms of the law.”

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

            In or about 2007, KHAN initiated online conversations with a then-11-year-old girl (the "Victim.").  Between 2007 and 2013, KHAN, who was aware of the Victim's age, coerced and enticed the Victim to engage in illegal sexual activity.  The Complaint further alleges that KHAN engaged in a sexual act with the Victim, and coerced and enticed the Victim to engage in sexually explicit conduct for the purpose of producing a visual depiction of such conduct.

*          *          *

            KHAN, 28, was arrested today in Manhattan, New York.  The Complaint charges KHAN in five counts.  Counts One and Two charge KHAN with coercing and enticing a minor to engage in illegal sexual activity.  Count Three charges KHAN with sexual exploitation of a child.  Count Four charges KHAN with sexual exploitation of a child outside of the United States.  Count Five charges KHAN with receipt of child pornography.  Counts One and Two carry a mandatory minimum sentence of 10 years in prison and a maximum penalty of life in prison.  Counts Three and Four carry a mandatory minimum sentence of 15 years in prison and a maximum sentence of 30 years in prison.  Count Five carries a mandatory minimum sentence of five years in prison and a maximum sentence of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

            Mr. Bharara praised the efforts of the FBI in this investigation.  He added that the investigation is continuing. Any individuals who believe they have information concerning HASSAN KHAN that may be relevant to the investigation should contact the Federal Bureau of Investigation at 1-212-384-1000.

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

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

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

Preet Bharara, United States Attorney for the Southern District of New York, announced today that LENA LASHER, a licensed pharmacist, was sentenced in Manhattan federal court today to three years in prison for misbranding and fraud offenses arising from an Internet pharmacy scheme.  LASHER was convicted on May 15, 2015, after a two-week trial before U.S. District Judge Naomi Reice Buchwald.

Manhattan U.S. Attorney Preet Bharara said: “Lena Lasher abused her position as a licensed pharmacist by dispensing prescription drugs to customers without valid prescriptions and customers who had never consulted with a physician. Prescription drugs, especially the pain medications that Lasher dispensed, can be addictive and dangerous, and this Office is committed to prosecuting those who illegally dispense prescription drugs.”

According to the Indictment, and Superseding Indictment, public filings, and evidence presented at trial:

From 2008 through late November 2012, LASHER, along with others, engaged in a scheme to dispense prescription drugs, including addictive pain medications, to customers who ordered them online, without meeting or consulting with a physician.  Over the course of the scheme, LASHER, a licensed pharmacist who was the Pharmacist-In-Charge at Hellertown Pharmacy in Hellertown, Pennsylvania, and who supervised a second pharmacy, Palmer Pharmacy & Much More in Easton, Pennsylvania, dispensed and caused others to dispense hundreds of thousands of pain pills without valid prescriptions.

LASHER also directed employees at the two pharmacies she supervised to ship pills in vials with false or misleading labels.  At LASHER’s direction, instructions on the labels for how often a customer should take certain drugs were often altered, and the descriptions on the labels regarding the quantity of pills in the pill vial were often inaccurate.  She also directed employees to take pills that had been returned by customers or delivery services, remove the labels, and then to re-dispense the pills to other customers with new labels, without informing those new customers that they were receiving pills that had previously been dispensed to others.  LASHER also instructed her employees to store pills without required information, such as a lot number or expiration date.

As part of her effort to conceal the nature of the Internet pharmacy business at both pharmacies, LASHER made false representations to multiple state boards of pharmacy and to an investigator with the Commonwealth of Pennsylvania.  LASHER also instructed her employees to use code when talking about the Internet pharmacy scheme, telling them to refer to prescription drugs dispensed pursuant to prescriptions obtained over the Internet as “nursing home meds” and not to use the word “Internet” in describing the pharmacies’ business.

LASHER, 47, of High Bridge, New Jersey, was convicted after trial of one count of conspiracy to introduce misbranding prescription drugs into interstate commerce and to misbrand prescription drugs while held for sale, with intent to defraud or mislead; one count of introducing misbranding prescription drugs into interstate commerce, with intent to defraud or mislead; one count of conspiracy to commit mail fraud and wire fraud; one count of mail fraud; and one count of wire fraud.  In addition to the prison term, LASHER was also sentenced to two years supervised release, and was ordered to pay $2.5 million in forfeiture.

United States Attorney Bharara praised the work of the Drug Enforcement Administration, the Food and Drug Administration, Office of Criminal Investigations, and the United States Postal Inspection Service, and expressed his appreciation for the assistance of the Commonwealth of Pennsylvania, Department of State, and the New Jersey Department of Law & Public Safety, Division of Law, Professional Boards Prosecution Section.

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

            Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (“FBI”), and Daniel McMahon, the Chief of the Yorktown Police Department, today announced the unsealing of a Complaint charging four defendants with participating in a scheme to steal, transport, and sell  a shipment of approximately 1,200 computers, valued at over $1 million, that were bound for two public high schools in New Jersey.  All four defendants were arrested this morning and will be presented in White Plains federal court today before U.S. Magistrate Judge Lisa Margaret Smith.          

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

            On or about January 15, 2014, ANTON SALJANIN, a driver for a shipping company, drove a truck from Yorktown Heights, New York, to a technology company located in Massachusetts to pick up a shipment of approximately 1,200 Apple MacBook Air computers.  ANTON SALJANIN brought his brother, GJON SALJANIN, with him.  The computers were being shipped to two public high schools located in New Jersey, and were valued at over $1 million.

            The next morning, ANTON SALJANIN reported to the Yorktown Police Department that the truck had been stolen from a parking lot located in Yorktown Heights.  Later that day, ANTON SALJANIN reported to Yorktown Police that he had been driving around looking for the truck when he happened to spot it from the highway in a parking lot in Danbury, Connecticut.  The truck would not have been visible in the Danbury parking lot to a driver passing by on the highway.  Furthermore, historical cell site data for ANTON SALJANIN’s cellphone contradicts his claims about the route he took to look for the truck.

            Yorktown Police detectives examined the truck and found that a window had been broken.  The detectives found broken glass on the scene in the Danbury parking lot but found no broken glass on the scene in the Yorktown Heights parking lot, suggesting that the window had been broken at the Danbury parking lot rather than at the Yorktown Heights parking lot.

            During interviews with the Yorktown Police, ANTON SALJANIN and GJON SALJANIN claimed that on the night of January 15, 2014, they drove directly from a convenience store outside of Yorktown Heights to the Yorktown Heights parking lot.  Security camera footage from various locations in Yorktown Heights shows that a truck matching the description of the truck driven by the SALJANIN brothers departed from their claimed route, and instead traveled in the direction of the residence of UJKA VULAJ, a long-time friend of ANTON SALJANIN.  The video surveillance footage also shows that the duration of the detour corresponds to the approximate length of time it would have taken to drive to VULAJ’s residence, unload the computers from the truck, and return to the route to the Yorktown Heights parking lot.

            From in or about January 2014 through at least in or about April 2014, VULAJ and a co-worker, CARLOS CACERES, sold at least dozens of Apple MacBook Air computers.  They sold the computers, which had a retail value of approximately $1,000, for far below the market price.  VULAJ and CACERES charged $500 to $800 in cash for each computer, and handed over each computer in plain brown cardboard packaging.

            Count One of the Complaint charges all four defendants, ANTON SALJANIN, a/k/a “Tony,” GJON SALJANIN, UJKA VULAJ, a/k/a “Tito,” and CARLOS CACERES, with conspiring to commit theft from an interstate shipment, interstate transportation of stolen property, and receipt, possession, and sale of stolen property.  Count Two of the Complaint charges ANTON SALJANIN, GJON SALJANIN, and VULAJ with stealing property with a value of at least $1,000 from an interstate shipment, and aiding and abetting such theft.  Count Three of the Complaint charges ANTON SALJANIN, GJON SALJANIN, and VULAJ with transporting in interstate commerce stolen property with a value of at least $5,000, and aiding and abetting such transport.  Count Four of the Complaint charges VULAJ and CACERES with receiving, possessing, and selling stolen property with a value of at least $5,000, and aiding and abetting such receipt, possession, and sale.

            Charts containing the charges against the defendants and the maximum penalties they face, as well as the defendants’ ages and residences, are attached.  The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the judge.

            Mr. Bharara praised the outstanding investigative work of the FBI, the Yorktown Police Department, the Westchester County Police Department, and the New York City Police Department.  Mr. Bharara also thanked the Bronx County District Attorney’s Office for its ongoing assistance in the case.

            This case is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Won Shin, Benjamin Allee, and Scott Hartman are in charge of the prosecutions.

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

COUNT

CHARGE

DEFENDANTS

MAXIMUM PENALTIES

1

Conspiracy

18 U.S.C. § 371

ANTON SALJANIN,    a/k/a “Tony,”
GJON SALJANIN, UJKA VULAJ,    a/k/a “Tito,” and
CARLOS CACERES

Five years in prison

2

Theft from an interstate shipment

18 U.S.C. § 659

ANTON SALJANIN,    a/k/a “Tony,”
GJON SALJANIN, and
UJKA VULAJ,    a/k/a “Tito”

10 years in prison

3

Interstate transportation of stolen property

18 U.S.C. § 2314

ANTON SALJANIN,    a/k/a “Tony,”
GJON SALJANIN, and
UJKA VULAJ,    a/k/a “Tito”

10 years in prison

4

Receipt, possession, and sale of stolen property

18 U.S.C. § 2315

UJKA VULAJ,    a/k/a “Tito,” and
CARLOS CACERES

10 years in prison

DEFENDANT

AGE

RESIDENCE

ANTON SALJANIN,    a/k/a “Tony”

43

Yorktown Heights, NY

GJON SALJANIN

40

Yorktown Heights, NY

UJKA VULAJ,    a/k/a “Tito”

54

Yorktown Heights, NY

CARLOS CACERES

37

Bronx, NY

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

“My Office has been in communication with the office of Dutchess County District Attorney William Grady, and we will be coordinating and working with his office to investigate the April 21, 2015 death of Samuel Harrell, an inmate at Fishkill Correctional Facility.” 

Preet Bharara, the United States Attorney for the Southern District of New York, announced that Westchester businessman SELIM ZHERKA pled guilty today to conspiring 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.  As part of his plea agreement, ZHERKA agreed to forfeit $5.23 million.  ZHERKA entered his guilty plea before U.S. District Judge Cathy Seibel.

U.S. Attorney Preet Bharara said: “With his guilty plea, Selim Zherka now has admitted to what we have been alleging all along, that he waged a years-long campaign of lies to a bank and the IRS to obtain millions of dollars in loans and fraudulently reduce his tax liabilities.  In addition to admitting his guilt, Zherka has agreed to forfeit over $5 million in ill-gotten gains.  I want to thank the FBI, IRS, and the TARP Special Inspector General for the excellent work in this investigation and prosecution.”

According to the Superseding Information filed today in White Plains federal court 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 and/or refinancing 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 payment he was making toward the purchase in question.

Additionally, the Superseding Information to which ZHERKA pled guilty charges him with engaging in a five-year-long tax fraud scheme.  The Information alleges that 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 and which, in turn, owned apartment house complexes, 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 today, and are awaiting sentencing.

SELIM ZHERKA, 47, of Somers, New York, faces a maximum sentence of five years in prison, based on the conspiracy charge to which he pled guilty.  ZHERKA is scheduled to be sentenced by U.S. District Judge Cathy Seibel on December 22, 2015, at 10:00 a.m.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

*          *         *

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

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 prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that CHENG LE was found guilty of attempting to acquire ricin to use as a weapon, postal fraud, and identity theft.  LE was convicted after a four-day jury trial before United States District Judge Alison J. Nathan.

U.S. Attorney Bharara said:  “As a unanimous jury has found, Cheng Le attempted to acquire ricin, a potentially lethal toxin, through the Dark Web so that it could be used to kill without a trace.  As Le himself put it, he was looking for ‘simple and easy death pills’ and ways to commit ‘100% risk-free’ murder.  Thanks to the FBI, the NYPD, and the Postal Inspection Service, he was thwarted in his poisonous plot.”

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

Ricin is a highly potent and fatal toxin with no known antidote.  The “Dark Web” is a colloquial name for a number of extensive, sophisticated, and widely used online criminal marketplaces, which allow participants to buy and sell illegal items, including ricin.

In early December 2014, LE contacted an FBI online covert employee (the “OCE”) on a particular Dark Web marketplace using an encrypted messaging service.  The OCE had taken over the Dark Web identity from another individual who had a reputation for selling lethal poisons.  After making contact with the OCE, LE inquired, “this might sound blunt but do you sell ricin?”

Following that initial contact, LE exchanged a series of messages with the OCE concerning his efforts to purchase ricin.  During these messages, LE confirmed his understanding of the lethal nature of ricin, revealed his intent to resell the ricin to at least one secondary buyer, proposed that the OCE conceal the ricin in a single pill in an otherwise ordinary bottle of pills, and indicated a desire to obtain more ricin in the future.  LE’s messages to the OCE included the following:

• “If [the ricin’s] good quality, I’ve already had buyers lining up.”

• “Does ricin have antidote? Last I check there isn’t one, isn’t it?”

• “Injection can be difficult to pull off. Ricin doesn’t work immediately. You wouldn’t expect the target to not fight back after being jabbed.”

• “The client would like to know . . . if it is wise to use ricin on someone who is hospitalized. . . .  Injection will leave needle holes on the body which could be found in regular forensic examination. But hospitalized people already have needles in them so it wouldn’t be suspicious. Thing is, would ricin make the death look like someone succumbed to the injuries after an accident and didn’t make it through? In that case then, a little anethestical gas in the target’s car, get him drowsy when driving, get into an accident, and then kill him in the hospital bed.”

• “I probably told you this before, about mixing one and only one toxic pill into a bottle of normal pills. They all look identical. And as the target takes the medicine every day, sooner or later he’d ingest that poisonous pill and die. Even if there is a murder investigation, they won’t find any more toxin. 100% Risk Free.”

• “If you can make them into simple and easy death pills, they’d become bestsellers.”

• “I’ll be trying out new methods in the future. After all, it is death itself we’re selling here, and the more risk-free, the more efficient we can make it, the better.”

• “Also, besides that one bottle of pills with one poisonous pill in there, can you send some extra loose powder/liquid ricin? I’d like to test something.”

Moreover, during these exchanges, LE further revealed to the OCE that he had a specific victim in mind: “someone middle-aged.  Weight around 200 lbs.”

On December 18, 2014, LE directed the OCE to send a quantity of ricin in the name of an individual whose stolen identity LE had assumed, and to a particular postal box in Manhattan (the “Postal Box”).  On December 22, 2014, the FBI prepared a mock shipment of ricin (the “Sham Shipment”) that was consistent with LE’s request to the OCE.  The Sham Shipment included both a fake “ricin” tablet concealed in a pill bottle (the “Pill Bottle”), and a quantity of loose fake “ricin” powder.   The next day, the Sham Shipment was delivered to the Postal Box.  LE, wearing latex gloves, retrieved the Sham Shipment, opened it, and took the contents to his apartment.

When FBI agents entered LE’s apartment to arrest LE and to search the apartment, pursuant to a search warrant, they saw the Pill Bottle open in his apartment.  The agents additionally recovered from LE’s apartment an envelope containing castor seeds, which is the substance from which ricin is derived.  The agents further observed that LE’s computer – which was protected with encryption software – was open to the online account that he had used to communicate with the OCE and to LE’s personal email account.

*                      *                      *

LE, 22, of New York, New York was convicted of one count of attempting to possess a biological toxin for use as a weapon, in violation of Title 18, United States Code, Section 175(a), which carries a maximum sentence of life in prison; one count of using a fictitious name in furtherance of unlawful business involving the mail, in violation of Title 18, United States, Section 1342, which carries a maximum sentence of five years in prison; and one count of aggravated identity theft during and in relation to a terrorism offense, in violation of Title 18, United States Code, Section 1028A(a)(2), which carries an additional mandatory minimum sentence of five years in prison.  This prosecution marked the first convictions after trial in this District for violations of Sections 175(a) and 1028A(a)(2).

The mandatory minimum and maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.  Sentencing has not yet been scheduled.

Mr. Bharara praised the outstanding investigative efforts of the FBI’s New York Joint Terrorism Task Force – which principally consists of agents from the FBI and detectives from the New York City Police Department – and the United States Postal Inspection Service.  He also thanked the National Security Division of the U.S. Department of Justice for its assistance.

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today the guilty plea of SCOTT STAMMERS, a citizen of the United Kingdom, to conspiring to import 100 kilograms of North Korean-produced methamphetamine into the United States.  STAMMERS was arrested in September 2013, along with co-defendants Philip Shackels, Ye Tiong Tan Lim, Kelly Allan Reyes Peralta, and Adrian Valkovic, following a long-term investigation by the Drug Enforcement Administration (“DEA”).  STAMMERS pled guilty before Magistrate Judge James L. Cott.

Manhattan U.S. Attorney Preet Bharara said:  “Scott Stammers conspired to import into the United States 100 kilograms of dangerously pure North Korean methamphetamine.  Thanks to the work of the DEA and the cooperation of law enforcement partners around the world, including in Thailand, Liberia and Romania, Stammers’s scheme ended, not with the North Korean methamphetamine flooding American streets as he had intended, but rather with a guilty plea in a Manhattan federal court.”

According to the allegations contained in the Indictment, the plea agreement for STAMMERS, and statements made in court proceedings:

In 2012, Tan Lim and Peralta, members of a criminal organization operating in Hong Kong and the Philippines, sold more than 30 kilograms of methamphetamine that had been produced in North Korea.  STAMMERS and Shackels were responsible for storing the methamphetamine after it had been sold by Tan Lim and Peralta.  This North Korean methamphetamine was later seized by law enforcement agents in Thailand and in the Philippines and tested at more than 99% pure.

In 2013, Tan Lim and Peralta again agreed to provide North Korean methamphetamine, this time agreeing to supply 100 kilograms of the methamphetamine to confidential sources working at the direction of the DEA (the “CSes”) for importation to the United States.  As Tan Lim explained, his criminal organization was the only one currently able to obtain methamphetamine from North Korea:  “Because before, there were eight [other criminal organizations].  But now only us, we have the NK [i.e., North Korea] product. . . . [I]t’s only us who can get from NK.”  Tan Lim further explained that, because of recent international tensions, the North Korean government had destroyed some methamphetamine labs, leaving behind only the labs of Tan Lim’s organization:  “And all the, the NK government already burned all the labs.  Only our labs are not closed. . . . To show Americans that they [the North Korean government] are not selling it any more, they burned it.  Then they transfer to another base.”  In anticipation of these geo-political complications, Tan Lim noted that his organization had stockpiled one ton of North Korean methamphetamine in the Philippines for storage.

As a prelude to the 100-kilogram methamphetamine deal, Tan Lim and Peralta arranged to have a sample of the drug delivered to Shackels, who sent that sample (along with a second sample from another supplier) to an address from which the methamphetamine samples would be sent to the United States.  These two methamphetamine samples tested at more than 98% and 96% pure.

Tan Lim and Peralta agreed to deliver the 100 kilograms of North Korean methamphetamine in Thailand, from where they understood it would be shipped to the United States by boat.  In preparation, Tan Lim and Peralta arranged for a “dry run,” sending a shipping container of tea leaves from the Philippines to Thailand in order to test delivery channels that would later be used for the shipment of methamphetamine.

STAMMERS, Valkovic, and Shackels agreed to provide security, transportation, and storage for the 100 kilograms of methamphetamine once it arrived in Thailand.  Valkovic, the Sergeant-at-Arms of the Outlaw Motorcycle Club (“OMC”) in Thailand, was to be the “ground commander,” and would supervise an armed crew of OMC members that would provide security for the methamphetamine.  STAMMERS and Shackels were to arrange for the 100 kilograms to be taken to a warehouse, counted, re-packaged, and delivered to a marina in Thailand, to be transferred to a boat that would deliver the methamphetamine to the United States.

In September 2013, Tan Lim and Peralta traveled to Thailand in order to receive payment for the 100 kilogram methamphetamine deal.  STAMMERS, Tan Lim, Peralta, Valkovic, and Shackels were arrested by Thai law enforcement on September 25, 2013.

*                *                *

As a result of his guilty plea, STAMMERS, 46, faces a maximum possible term of life in prison and a mandatory term of 10 years in prison.  The minimum and maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentence will be determined by the judge.  A sentencing date for STAMMERS has not been scheduled.

Valkovic pled guilty on August 5, 2015, before Judge Carter to conspiring to import 100 kilograms of methamphetamine into the United States.  Peralta pled guilty on August 18, 2015, and Tan Lim pled guilty on August 19, 2015, to the same charge before U.S. Magistrate Judge Debra Freeman.

The remaining defendant, Shackels, 32, is charged with conspiracy to import methamphetamine into the United States.  His trial is scheduled to commence before Judge Carter on September 21, 2015.

The guilty plea was the result of the close cooperative efforts of the United States Attorney’s Office for the Southern District of New York; DEA’s Special Operations Division, Bilateral Investigations Unit; and DEA’s Bangkok, Manila, Ghana, Pretoria, Bucharest, Nassau, and Copenhagen Country Offices.  Mr. Bharara also thanked the Thai Police Narcotics Suppression Bureau and Crime Suppression Division; the Royal Thai Immigration; the Royal Thai Attorney General’s Office; the Republic of Liberia’s National Security Agency; the Republic of Liberia’s Attorney General’s Office; the Romanian National Police; Interpol; and the U.S. Department of Justice Office of International Affairs for their support and assistance.

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant United States Attorneys Anna Skotko, Michael D. Lockard, and Emil Bove are in charge of the prosecution.

The allegations against Shackels in the Indictment are merely accusations and that defendant is presumed innocent unless and until proven guilty.

Preet Bharara, the United States Attorney for the Southern District of New York, John P. Carlin, Assistant Attorney General for National Security, Diego Rodriguez, 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 Police Department for the City of New York (“NYPD”), announced that AHMED MOHAMMED EL GAMMAL, a/k/a “Jammie Gammal,” was indicted today for providing, and conspiring to provide, material support to the Islamic State of Iraq and the Levant (“ISIL”), a designated foreign terrorist organization, as well as for aiding and abetting the receipt of military-type training from ISIL and conspiring to receive such training.  EL GAMMAL was arrested on Monday in Avondale, Arizona, and presented in federal court in the District of Arizona, pursuant to a criminal complaint that was unsealed yesterday in Manhattan federal court.  The case is assigned to Judge Edgardo Ramos of United States District Court for the Southern District of New York.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Ahmed Mohammed el Gammal actively touted online his support for ISIL and its terrorist ways, ultimately meeting and assisting a New York college student to travel to Syria to obtain military training from ISIL.  Individuals like Gammal who allegedly serve as facilitators for ISIL fuel the hatred and radicalization that keep terrorist organizations like ISIL alive.”

Assistant Attorney General John P. Carlin said: “Ahmed Mohammed El Gammal is charged with conspiring to provide and providing material support to ISIL.  The National Security Division’s highest priority is counterterrorism, and we will continue to pursue justice against those who seek to provide material support to designated foreign terrorist organizations.”

FBI Assistant Director in Charge Diego Rodriguez said: “As alleged, Gammal helped a college student in New York receive terrorist training in Syria through a contact in Turkey, in order to support ISIL.  These relationships were allegedly made and solidified through the internet while Gammal was in Arizona.  This is another example of how social media is utilized for nefarious and criminal purposes around the world.  The identification of the conspiracy, and arrest today, demonstrate how federal and local law enforcement continue to work together to mitigate such threats globally and protect the United States.”

NYPD Commissioner William Bratton said: “This investigation demonstrates how easily people can support a terrorist organization without ever meeting, from the anonymity of their own computer and hidden behind obscure social media accounts and the veil of the internet. I commend the detectives and agents on the Manhattan based Joint Terrorism Task Force and the prosecutors of the U.S. Attorney’s Office for the Southern District for their unwavering commitment to keeping our city safe.”

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

In August 2014, a 24-year-old New York City resident (“CC-1”) who was growing increasingly radicalized learned via social media that EL GAMMAL had posted social media comments supportive of ISIL.  Minutes later, CC-1 contacted EL GAMMAL.  Over the next several months, CC-1 and EL GAMMAL continued corresponding over the Internet, although CC-1 deleted many of these exchanges.

In the midst of these communications, in October 2014, EL GAMMAL traveled to Manhattan, where CC-1 was enrolled in college, and contacted and met with CC-1.  While in New York City, EL GAMMAL also contacted another co-conspirator (“CC-2”), who lived in Turkey, about CC-1’s plans to travel to the Middle East.  EL GAMMAL later provided CC-1 with social media contact information for CC-2.  Thereafter, EL GAMMAL and CC-2 had multiple social media exchanges about CC-1 traveling to the Middle East.  In addition, CC-1 began communicating with CC-2, introducing himself as a friend of “Gammal’s.”

In late January 2015, CC-1 abruptly left New York City for Istanbul, Turkey.  After CC-1 arrived in Turkey, EL GAMMAL continued to communicate with him over the Internet, providing advice on traveling toward Syria and on meeting with CC-2.  After CC-1 arrived in Syria, he received military-type training from ISIL between early February and at least early May 2015.

On May 7, 2015, CC-1 reported to EL GAMMAL that “everything [was] going according to plan.”

*                      *                      *

EL GAMMAL, 42, of Avondale, Arizona, is charged with one count of providing material support to a designated foreign terrorist organization and one count of conspiring to provide material support to a designated foreign terrorist organization, each of which carries a maximum sentence of 20 years in prison; one count of receiving military-type training from a designated foreign terrorist organization, which carries a mandatory sentence of 10 years in prison; and one count of conspiring to receive military-type training from a designated foreign terrorist organization, which carries a maximum sentence of five years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Mr. Bharara praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force – which principally consists of agents from the FBI and detectives from the NYPD.  Mr. Bharara also thanked the Counterterrorism Section of the Department of Justice’s National Security Division, the U.S. Attorney’s Office for the District of Arizona, and the Phoenix Field Office of the FBI for their assistance.

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Brendan F. Quigley, Negar Tekeei, and Andrea L. Surratt are in charge of the prosecution, with assistance from Trial Attorney Ranganath Manthripragada of the National Security Division’s Counterterrorism Section.

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

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

Ahmed Mohammed El Gammal, aka Jammie Gammal, 42, of Avondale, Arizona, was indicted today for providing and conspiring to provide material support to the Islamic State of Iraq and the Levant (ISIL), a designated foreign terrorist organization, as well as for aiding and abetting the receipt of military-type training from ISIL and conspiring to receive such training. 

Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Preet Bharara of the Southern District of New York, Assistant Director in Charge Diego G. Rodriguez of the FBI’s New York Field Office and Commissioner William J. Bratton of the New York City Police Department (NYPD) made the announcement. 

“Ahmed Mohammed El Gammal is charged with conspiring to provide and providing material support to ISIL,” said Assistant Attorney General Carlin.  “The National Security Division’s highest priority is counterterrorism, and we will continue to pursue justice against those who seek to provide material support to designated foreign terrorist organizations.”

“As alleged, Ahmed Mohammed el Gammal actively touted online his support for ISIL and its terrorist ways, ultimately meeting and assisting a New York college student to travel to Syria to obtain military training from ISIL,” said U.S. Attorney Bharara.  “Individuals like Gammal who allegedly serve as facilitators for ISIL fuel the hatred and radicalization that keep terrorist organizations like ISIL alive.”

“As alleged, Gammal helped a college student in New York receive terrorist training in Syria through a contact in Turkey, in order to support ISIL,” said Assistant Director in Charge Rodriguez.  “These relationships were allegedly made and solidified through the internet while Gammal was in Arizona.  This is another example of how social media is utilized for nefarious and criminal purposes around the world.  The identification of the conspiracy, and arrest today, demonstrate how federal and local law enforcement continue to work together to mitigate such threats globally and protect the United States.”

“This investigation demonstrates how easily people can support a terrorist organization without ever meeting, from the anonymity of their own computer and hidden behind obscure social media accounts and the veil of the internet,” said Commissioner Bratton.  “I commend the detectives and agents on the Manhattan based Joint Terrorism Task Force and the prosecutors of the U.S. Attorney’s Office for the Southern District for their unwavering commitment to keeping our city safe.”

As alleged in the indictment returned today and the complaint unsealed yesterday in the Southern District of New York:

In August 2014, a 24-year-old New York City resident (CC-1) learned via social media that El Gammal had posted social media comments that supported ISIL.  Minutes later, CC-1 contacted El Gammal.  Over the next several months, CC-1 and El Gammal continued corresponding over the Internet, although CC-1 deleted many of these exchanges.

In the midst of these communications, in October 2014, El Gammal traveled to Manhattan, New York, where CC-1 was enrolled in college, and contacted and met with CC-1.  While in New York City, El Gammal also contacted another co-conspirator (CC-2), who lived in Turkey, about CC-1’s plans to travel to the Middle East.  El Gammal later provided CC-1 with social media contact information for CC-2.  Thereafter, El Gammal and CC-2 had multiple social media exchanges about CC-1 traveling to the Middle East.  In addition, CC-1 began communicating with CC-2, introducing himself as a friend of “Gammal’s.”

In late January 2015, CC-1 abruptly left New York City for Istanbul.  After CC-1 arrived in Turkey, El Gammal continued to communicate with him over the Internet, providing advice on traveling toward Syria and on meeting with CC-2.  After CC-1 arrived in Syria, he received military-type training from ISIL between early February and at least early May 2015.

On May 7, 2015, CC-1 reported to El Gammal that “everything [was] going according to plan.” 

*                      *                      *

El Gammal is charged with one count of providing material support to a designated foreign terrorist organization and one count of conspiring to provide material support to a designated foreign terrorist organization, each of which carries a maximum sentence of 20 years in prison; one count of receiving military-type training from a designated foreign terrorist organization, which carries a mandatory sentence of 10 years in prison; and one count of conspiring to receive military-type training from a designated foreign terrorist organization, which carries a maximum sentence of five years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as the defendant’s sentence, if any, will be determined by a judge.

El Gammal was arrested on Aug. 24, 2015, in Avondale, and presented in federal court in the District of Arizona, pursuant to a criminal complaint.  The case is assigned to U.S. District Judge Edgardo Ramos of the Southern District of New York.

Assistant Attorney General Carlin joins U.S Attorney Bharara in praising the outstanding investigative efforts of the FBI’s New York Joint Terrorism Task Force.  The FBI’s Phoenix Field Office also provided valuable assistance.

The case is being prosecuted by Assistant U.S. Attorneys Brendan F. Quigley, Negar Tekeei and Andrea L. Surratt of the Southern District of New York, with assistance from Trial Attorney Ranganath Manthripragada of the National Security Division’s Counterterrorism Section.  The U.S. Attorney’s Office of the District of Arizona also provided significant assistance.

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

El Gammal Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, Janet DiFiore, the District Attorney for Westchester County, 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 an Indictment charging seven 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.

Two of the defendants charged in the Indictment were arrested today.  ANTOINE LITTLE was arrested in Bedford, Texas, and will be presented today in federal court in Fort Worth, Texas.  GORHAM VALENTINE was arrested today in Norwalk, Connecticut and will be presented this afternoon along with RAMSEUR in White Plains federal court before U.S. Magistrate Judge Lisa Margaret Smith.  Four of the seven defendants charged in the Indictment unsealed today, JAMEL UPSON, TYRONE McCALLUM, PORTLAND RAMSEUR, and JASON WHITE, were previously in state custody.

U.S. Attorney Preet Bharara said:  “Members of the BPF gang allegedly unleashed a terrifying wave of violence on the streets of Mount Vernon.  Over the course of several years, BPF gunfire erupted in and around the gang’s territory with shocking and tragic frequency.  On two of those occasions, the defendant Jamel Upson, one of BPF’s leaders, allegedly shot and killed members of a rival gang.  The charges brought today serve as a reminder that we and our law enforcement partners are determined to combat the scourge of gang and drug violence in Mount Vernon.”

Westchester County District Attorney Janet DiFiore stated:  “The allegations in this indictment describe the frightening and brazen hold these defendants had on neighborhoods in and around the City of Mount Vernon. Over the past several years we have worked tirelessly to pursue members and associates of this gang and now as a result of the collaborative efforts of federal, state and local law authorities these defendants will be held accountable for the crimes they now stand accused of. Our priority is and will continue to be enhancing the safety and quality of life for all of the hard working residents of the City of Mount Vernon.”

FBI Assistant Director-in-Charge Diego Rodriguez stated:  “As alleged, the Mount Vernon-based street gang ‘Boss Playa Family’ used violence and an array of criminal activities to enhance the gang’s power and protect its territory. It’s gang related activity like this that infects our communities with an illness that kills our neighborhoods’ safety and growth. However, there is an antidote to this that is made of law enforcement working at both the federal and local level to get gangs like this off the street.”

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

The BPF street gang was a criminal enterprise that operated principally in and around the City of Mount Vernon, New York, from at least in or about 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 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 Indictment, UPSON committed these murders in order to maintain and increase his position in the BPF gang.

*                      *                      *

Counts One and Two of the Indictment charge all seven defendants, JAMEL UPSON, SHAWN EVANS, 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 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 Indictment charges UPSON, 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 sentencing 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 Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

15-221
 

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

COUNT

CHARGE

DEFENDANTS

MAX. PENALTIES

1

Racketeering conspiracy

18 U.S.C. § 1962(d)

JAMEL UPSON

SHAWN EVANS

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

SHAWN EVANS

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

PORTLAND RAMSEUR

JASON WHITE

20 years in prison

Defendant

Age

Residence

JAMEL UPSON

31

Mount Vernon, NY

SHAWN EVANS

27

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

Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, 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 today that ROBERT A. OLINS was arrested this morning on conspiracy, obstruction, and bank fraud charges stemming from his scheme to hide assets from a receiver (the “Receiver”) appointed by U.S. District Judge Denise L. Cote of the United States District Court for the Southern District of New York to oversee the liquidation of OLINS’s art and antiques collection (the “Art and Antiques Collection”) to satisfy a $3.3 million disgorgement judgment entered in connection with an enforcement proceeding by the Securities and Exchange Commission (“SEC”).

Among other misrepresentations, OLINS caused the Receiver to make false statements to the Court concerning the value of the items in the Art and Antiques Collection in order to induce the Receiver and the Court to approve sales of certain items without knowledge that OLINS had secretly sold or planned to resell the items at higher prices, with OLINS illicitly pocketing the difference instead of paying the SEC.

OLINS is expected to be presented today in federal court in Manhattan before United States Magistrate Judge James L. Cott.

U.S. Attorney Preet Bharara said:  “As alleged, Robert Olins carried out a brazen shell game to deceive and hide assets from two federal courts, a court-appointed receiver, and the SEC.  Olins allegedly lied repeatedly, grossly understating what he received from the sale of valuable art and antiquities so that he could pocket money that should have gone to satisfy a court judgment.”

FBI Assistant Director-in-Charge Diego Rodriguez said:  “Olins had a $3 million judgment due from previous securities violations, but instead of paying it back, he sought to conspire and hide assets to profit himself. This case should be a warning to others who seek to enrich themselves rather than pay judgments. This type of scheming only ends in handcuffs.”

USPIS Inspector-in-Charge Philip R. Bartlett said: “Similar to Mr. Olins’s innovative ways to enrich himself, the Postal Inspectors will also be innovative, as well as tireless, to investigate individuals who create fraudulent schemes to enrich themselves.”

According to the allegations contained in the Complaint and in court documents previously filed in federal court:[1]

On or about December 20, 2007, the SEC filed a civil complaint against OLINS in the United States District Court for the Northern District of California (the “California Court”) alleging that OLINS had violated provisions of the federal securities laws.  See SEC v. Olins, 07 Civ. 6423 (MMC).  On or about February 25, 2011, the California Court entered a $3,373,225 disgorgement judgment against OLINS (the “Disgorgement Judgment”).  On or about July 27, 2011, the SEC filed an action in the United States District Court for the Southern District of New York (the “New York Court”), registering the Disgorgement Judgment and asking that a receiver be appointed to liquidate certain assets belonging to OLINS, including the Art and Antiques Collection.  See SEC v. Olins et al., 11 Misc. 261 (DLC).  On or about May 11, 2012, the New York Court issued an order appointing American Bank and Trust Company as the Receiver.  The order prohibited OLINS, as well as any person or entity with “possession, custody or control” of any item from the Art and Antiques Collection, from engaging in any form of side deal, self-help, set-off, or transaction not approved by the Court.

OLINS devised a scheme, in coordination with an executive (“CC-1”) of an arts and antiques dealer based in London and New York (the “Antiques Dealer”), to hide assets from the Receiver and the Courts and personally enrich himself.  Based on material misrepresentations by OLINS and CC-1, the Receiver and the New York Court approved sales of certain items in the Art and Antiques Collection without the knowledge that OLINS and CC-1 had secretly sold or planned to resell the items at higher prices, with OLINS illicitly pocketing the difference.

Specifically, OLINS illicitly profited from the improper liquidation of at least two pieces from the Arts and Antiques Collection:

The Antique Vases

On or about April 3, 2012, the Antiques Dealer recorded the sale of a Louis XV Porcelain Garniture of Three Vases (the “Vases”) to a client for approximately $1.2 million.  At the time of the sale, the Vases were part of the Art and Antiques Collection and not owned by the Antiques Dealer.  On or about April 10, 2012, the Antiques Dealer received payment of approximately $1.2 million, a fact which was relayed via email to CC-1.

On or about June 14, 2012, the Receiver filed an application requesting approval to sell the Vases to the Antiques Dealer for $540,000.  The application was supported by a declaration of a vice president at the Receiver (“Individual-1”), based on information he received from CC-1 that the Antiques Dealer was negotiating the sale of the Vases to a client for approximately $600,000.  Based on this information, the New York Court approved the sale of the Vases from the Receiver to the Antiques Dealer for $540,000.

In truth, and as OLINS and CC-1 well knew, in or about April 2012, the Antiques Dealer had already pre-sold the Vases to another client for approximately $1.2 million and received payment for that sale.  OLINS personally received at least $460,000 in cash and credit from the sale of the Vases.

At no time did OLINS disclose his receipt of the proceeds from the Vases to the SEC, the Receiver, the New York Court, or the California Court, nor did he provide those proceeds to the SEC or the Receiver.

The Dragon Candelabra

In November and December 2012, Individual-1 communicated with OLINS and CC-1 concerning the sale of a pair of Louis XV Gilt Bronze Dragon Candelabra (the “Dragon Candelabra”), an item from the Art and Antiques Collection.

In or about November 2013, Individual-1 agreed to sell the Dragon Candelabra to an individual not named herein (“Individual-2”) for $235,000.  At the time he approved the sale, Individual-1 understood that Individual-2 intended to place the Dragon Candelabra on consignment with the Antiques Dealer in an effort to find a buyer who would pay in excess of $235,000.

On or about November 19, 2013, after taking possession of the Dragon Candelabra from Individual-2, the Antiques Dealer recorded a sale of the Dragon Candelabra to a client not named herein for approximately $1.2 million.  Individual-2 was subsequently credited at least $653,000 for the sale of the Dragon Candelabra.

Notwithstanding the representation by OLINS to Individual-1 that OLINS would not receive any proceeds from the sale of the Dragon Candelabra, OLINS in fact received at least $197,000 from the sale of the Dragon Candelabra.

At no time did OLINS disclose his receipt of the proceeds from the Dragon Candelabra to the SEC, the Receiver, the New York Court, or the California Court, nor did he provide those proceeds to the SEC or the Receiver.

The 2014 Contempt Proceeding

On September 29, 2014, the California Court issued an order to show cause why OLINS should not be held in contempt for failure to pay the Disgorgement Judgment.  In response, OLINS filed a declaration with the California Court in which he made the following statements, among others:

     a.  “There has been no effort on my part to secret assets or ignore the Disgorgement Judgment.”

     b.  “I have spent untold hours trying to find buyers for pieces of the [Arts and Antiques] Collection so that [the Receiver] will be paid in full and the SEC will get monies from the proceeds as well.”

     c.  “I continue[] to work cooperatively with the Receiver/Bank in assisting in the sales of the Receivership assets.  I have been doing everything I can to repay my debt to [the Receiver] and the SEC’s penalty Judgment and Disgorgement Order.”

     d.  OLINS also made the following representations about his income for the 2012 and 2013 calendar years:

          i.  Apart from $114,281 in consulting fees, OLINS said he “received no other . . . income for 2012.”

          ii.  Apart from $57,882.06 in consulting fees, OLINS said he “received no other . . . income for 2013.”

In truth, OLINS had earned a total of at least $657,000 in 2012 and 2013: (a) in 2012, OLINS received at least $460,000 in proceeds from the sale of the Vases; and (b) in 2013, OLINS received at least $197,000 in proceeds from the sale of the Dragon Candelabra.

*                      *                      *

OLINS, 58, was arrested this morning in West Hartford, Connecticut.  He is charged with one count of conspiracy to obstruct justice, one count of obstruction of justice, one count of conspiracy to commit bank fraud and one count of bank fraud.

The conspiracy to obstruct justice count carries a maximum of five years in prison; the obstruction charge carries a maximum of 10 years in prison; each of the conspiracy to commit bank fraud and bank fraud charges carries a maximum of 30 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the work of the Federal Bureau of Investigation and the United States Postal Inspection Service, and thanked the SEC for its assistance.  He added that the investigation is continuing.

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

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that OSCAR HUACHILLO, the former owner and operator of multiple HIV/AIDS clinics in New York City, was sentenced today in Manhattan federal court to 87 months in prison for orchestrating a scheme to defraud Medicare out of more than $31 million; he was also sentenced to 60 months in prison, to be served concurrently, for evading more than $3.4 million in federal income taxes by falsely underreporting his income.  As part of the scheme, HUACHILLO submitted bills to Medicare for expensive treatments that were administered at highly diluted doses or never administered at all, and were often unnecessary.  HUACHILLO previously pled guilty to conspiring to commit health care fraud and committing tax evasion before U.S. District Judge Katherine Polk Failla, who imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “Oscar Huachillo defrauded Medicare out of tens of millions of dollars and evaded millions of dollars in taxes on his illegal windfall.  His schemes put patients at risk, undermined and exploited the Medicare program, and cheated honest taxpayers.”      

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

HUACHILLO set up and operated multiple health care clinics in New York City that purported to provide injection and infusion treatments to Medicare-eligible HIV/AIDS patients, but that were, in reality, health care fraud mills (the “Clinics”) that routinely billed Medicare for medications that were never provided or were provided at highly diluted doses, and that were often unnecessary because the person being “treated” did not medically need the treatments.

HUACHILLO and his co-conspirators executed the fraudulent scheme by recruiting HIV/AIDS patients who were eligible for Medicare to come to the Clinics multiple times per week, for multiple months, to undergo expensive “treatments” that were often unnecessary.  The purported treatments included drugs costing hundreds of dollars each to administer and typically reserved for cancer and anemia patients.  HUACHILLO and his co-conspirators paid the patients cash kickbacks of up to $300 per week in exchange for coming to the Clinics and agreeing to undergo the treatments.  Patients were also offered approximately $50 for each additional patient they referred to the Clinics.  HUACHILLO and his co-conspirators then used these patients’ status as Medicare beneficiaries to submit claims to Medicare for reimbursement for the treatments purportedly administered to the patients, often receiving tens of thousands of dollars in reimbursements per patient.  As a result of the scheme, from 2009 through 2013, HUACHILLO and his co-conspirators defrauded the Medicare system out of at least $31 million.

In addition, HUACHILLO willfully evaded over $3.4 million in taxes owed to the IRS during the tax years 2009 through 2011 by falsely underreporting his taxable income, including income he had obtained through fraudulent Medicare claims.

In pronouncing the sentence, Judge Failla said, “[I]n the cases I’ve had as a judge, this is the worst fraud I’ve had.  $31 million in losses; that’s terrible.” She also said, “The conduct is simply reprehensible.”

*                *                *

In addition to the term of prison, HUACHILLO, 55, of Manhattan, was sentenced to three years of supervised release and was ordered to pay $3,454,244.16 in restitution and $31,177,987.84 in forfeiture, including forfeiture of approximately $14 million of assets that were seized at or around the time of HUACHILLO’s arrest in August 2013.

George Juvier, 58, of Manhattan, has been charged separately in connection with the Medicare fraud scheme.  In January 2015, Juvier pled guilty to engaging in a health care fraud conspiracy before U.S. Magistrate Judge Frank Maas.  Juvier is scheduled to be sentenced at 11:00 a.m. on October 8, 2015, by U.S. District Judge Kimba M. Wood.

Mr. Bharara praised the outstanding efforts of the Department of Health and Human Services-Office of the Inspector General, IRS-Criminal Investigation Division, and the Federal Bureau of Investigation in the investigation.  Mr. Bharara also thanked the U.S. Department of Justice’s Tax Division for their assistance in the investigation.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorney Jonathan Cohen is in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that CHARLES ANTONUCCI, SR., the former president and chief executive officer of The Park Avenue Bank, was sentenced today to 30 months in prison for his involvement in a massive fraud involving self-dealing, bank bribery, embezzlement of bank funds, attempting to fraudulently obtain more than $11 million worth of taxpayer rescue funds from the Troubled Asset Relief Program (“TARP”), and participating in a $37.5 million fraud scheme that left an Oklahoma insurance company in receivership.  ANTONUCCI pled guilty pursuant to a cooperation agreement with the government in October 2010 before U.S. District Judge Naomi Reice Buchwald, who imposed today’s sentence.  Yesterday, Judge Buchwald sentenced Matthew L. Morris, a former senior vice president of the Bank, who also pled guilty pursuant to a cooperation agreement, to one year and one day in prison.

ANTONUCCI was the first defendant convicted of fraud of TARP funds, a program whose purpose was to provide funds to viable financial institutions to stabilize and strengthen the nation’s financial system, and to enable those financial institutions to increase the flow of financing to U.S. businesses and consumers.

According to the Information, Complaint, sentencing submissions, and statements made during court proceedings:

Background

The Park Avenue Bank (the “Bank”) was a federally insured and state-chartered bank that was headquartered on Park Avenue, New York, New York.  The Bank’s clients consisted primarily of small businesses, for which the Bank made loans, extended lines of credit, and maintained depository accounts.  As of the end of 2009, the Bank had approximately $500 million on deposit, and over $520 million in assets.  ANTONUCCI served as president and chief executive officer (“CEO”) of the Bank from June 2004 to October 2009, and also served on its Board of Directors.  During this period, and as part of the fraudulent schemes for which he was convicted and sentenced, ANTONUCCI maintained a corrupt relationship with Wilber Anthony Huff, a Kentucky-based businessman, and Morris, the senior vice president of the Bank.

The Schemes

From 2006 through 2010, ANTONUCCI, Morris, and Huff engaged in a massive multifaceted conspiracy, in which they schemed to (i) receive and pay bank bribes, (ii) engage in self-dealing; (iii) defraud bank regulators and the board and shareholders of a publicly traded company, and (iv) fraudulently purchase an Oklahoma insurance company.

Bank Bribery

From 2007 to 2009, Huff paid ANTONUCCI and Morris at least $400,000 in exchange for which they: (i) provided Huff with fraudulent letters of credit obligating the Bank to pay an investor in one of Huff’s businesses $1.75 million if Huff failed to pay the investor back himself; (ii) allowed certain of Huff’s beneficially owned businesses to accrue $9 million in overdrafts; (iii) facilitated intra bank transfers in furtherance of certain of Huff’s other frauds; and (iv) fraudulently caused the Bank to issue at least $4.5 million in loans to Huff’s beneficially owned businesses.

In particular, ANTONUCCI and Morris accepted bribes from Huff, including but not limited to hundreds of thousands of dollars of cash bribes, free use of Huff’s airplane, and free use of another customer’s luxury automobile.  On more than 10 occasions in 2008 and 2009, ANTONUCCI used a private plane owned by Huff to fly to, among other places, Florida, Panama, Arizona (so that ANTONUCCI could attend the Super Bowl), and Augusta, Georgia (so that ANTONUCCI could attend the Masters Golf Tournament).

Self-Dealing

ANTONUCCI also engaged in a pattern of self-dealing in connection with his position as President and CEO of the Bank.  For example, ANTONUCCI, among other things, approved a $400,000 loan through the Bank to an entity he controlled called Easy Wealth, through which ANTONUCCI obtained tens of thousands of dollars in proceeds. ANTONUCCI also had the Bank pay rent to him for one or more properties that ANTONUCCI owned and which the Bank did not use, including a property in Fishkill, New York, and directed Bank employees to perform substantial work on non-Bank matters in which he had personal financial interests.

Fraud on Bank Regulators and a Publicly Traded Company

From 2008 to 2009, ANTONUCCI, Morris, and Huff engaged in a scheme to prevent the Bank from being designated as “undercapitalized” by regulators – a designation that would prohibit the Bank from engaging in certain types of banking transactions, and that would subject the Bank to a range of potential enforcement actions by regulators.  Specifically, they engaged in a series of deceptive, “round-trip” financial transactions to make it appear that ANTONUCCI had infused the Bank with $6.5 million in new capital when, in actuality, the $6.5 million was part of the Bank’s pre-existing capital.  ANTONUCCI, Morris, and Huff funneled the $6.5 million from the Bank through accounts controlled by Huff to ANTONUCCI.  This was done to make it appear as though ANTONUCCI was helping to stabilize the Bank’s capitalization problem, so the Bank could continue engaging in certain banking transactions that it would otherwise have been prohibited from doing, and to put the Bank in a better posture to receive $11 million from the TARP.  To conceal their unlawful financial maneuvering, Huff created, or directed the creation of, documents falsely suggesting that ANTONUCCI had earned the $6.5 million through a transaction involving another company ANTONUCCI owned.  When the Bank’s regulators began investigating the source of the purported $6.5 million capital infusion, ANTONUCCI lied to them about the true nature of the transaction.  ANTONUCCI, Morris, and Huff further concealed their scheme by stealing $2.3 million from General Employment Enterprises, Inc. (“GEE”), a publicly traded temporary staffing company, in order to pay the Bank back for monies used in connection with the $6.5 million transaction.  In order to conceal this transaction, ANTONUCCI caused a counterfeit certificate of deposit (“CD”) to be created by the Bank, making it appear that GEE’s $2.3 million had been invested in a CD at the Bank.

Fraud on Insurance Regulators and the Investment Firm

From July 2008 to November 2009, ANTONUCCI, Morris, Huff, and Allen Reichman, an employee at an investment bank and financial services company headquartered in New York, New York (the “Investment Firm”), conspired to (i) defraud Oklahoma insurance regulators into allowing ANTONUCCI to purchase the assets of Providence P&C (the Oklahoma insurance company), and (ii) defraud the Investment Firm into providing a $30 million loan to finance the purchase.  Specifically, ANTONUCCI and Huff devised a scheme in which ANTONUCCI would purchase Providence P&C’s assets by obtaining a $30 million loan from the Investment Firm, which used Providence P&C’s own assets as collateral for the loan.  However, because Oklahoma insurance regulators had to approve any sale of Providence P&C, and because Oklahoma law forbade the use of Providence P&C’s assets as collateral for such a loan, ANTONUCCI, Morris, Huff, and Reichman made, and conspired to make, a number of material misstatements and material omissions to the Investment Firm and Oklahoma insurance regulators concerning the true nature of the financing for ANTONUCCI’s purchase of Providence P&C.  Among other things, Reichman directed ANTONUCCI to sign a letter that provided false information regarding the collateral that would be used for the loan, and ANTONUCCI, Morris, and Huff conspired to falsely represent to Oklahoma insurance regulators that the Bank – not the Investment Firm – was funding the purchase of Providence P&C.

After deceiving Oklahoma regulators into approving the sale of Providence P&C, Huff took $4 million of the company’s assets.  Ultimately, in November 2009, the insurance company became insolvent and was placed in receivership after ANTONUCCI, Morris, and Huff had pilfered its remaining assets.

*                *                *

In addition to the prison sentence, ANTONUCCI, 64, of Woodside, New York, was also ordered to forfeit $11.2 million to the United States and to provide more than $54 million in restitution to victims of his crimes, including, among others, the Federal Deposit Insurance Corporation (“FDIC”).

Huff, who pled guilty to his role in the above-described offense and other interrelated frauds in December 2014, was sentenced by Judge Buchwald on June 4, 2015, to 12 years in prison.  Reichman, who pled guilty to his role in the Providence P&C scheme in February 2015, was sentenced by Judge Buchwald on July 15, 2015, to 21 months in prison.

Mr. Bharara praised the investigative work of the Special Inspector General for the Troubled Asset Relief Program, the Federal Bureau of Investigation, the IRS, the New York State Department of Financial Services, Immigration and Customs Enforcement’s Homeland Security Investigations, and the Office of Inspector General of the FDIC.  Mr. Bharara also thanked the Department of Justice’s Tax Division and the United States Attorney’s Office for the Southern District of Florida for their assistance.

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

The case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Janis Echenberg and Daniel Tehrani are in charge of the criminal case.       

            Preet Bharara, the United States Attorney for the Southern District of New York, announced today that RENE CARDONA, a former employee of an afterschool program in the Bronx, was sentenced to 17½ years in prison for producing, receiving, distributing, and possessing child pornography.  On April 9, 2015, CARDONA was found guilty by U.S. District Judge Ronnie Abrams following a bench trial.  CARDONA, who was arrested on April 30, 2014, has been detained since his arrest.

            Manhattan U.S. Attorney Preet Bharara said:  “Rene Cardona sexually exploited and victimized young children, including children he was supposed to care for at an afterschool program.  He preyed on the most innocent and vulnerable in our community.”

            According to the Complaint and other documents filed in this case, and statements made in related court proceedings:

            On or about March 13, 2014, the Guam Police Department received information that an 11-year-old boy (“Victim-1”), while residing in Guam, produced child pornography for an adult male in New York, New York, later identified as CARDONA.  Victim-1 met CARDONA over the social media site Instagram in or about February 2014.  FBI agents in Guam subsequently obtained a search warrant directed to Instagram, which revealed that, in or about February 2014, CARDONA and Victim-1 traded photographs, with CARDONA repeatedly asking Victim-1 to provide sexually explicit photographs of himself.  Victim-1 eventually provided CARDONA with five sexually explicit photographs of himself engaged in the lascivious exhibition of his genitals.

            After identifying CARDONA’s residence, and learning that CARDONA had been employed in an afterschool program located in the Bronx, New York, law enforcement agents obtained a search warrant for CARDONA’s residence.  During the execution of the search warrant, CARDONA admitted to law enforcement agents that he had engaged in the chats with Victim-1 described above.  CARDONA further admitted, among other things, that: (1) CARDONA had had sexual contact with a 14-year-old boy (“Victim-2”); (2) CARDONA took three to four sexually explicit photographs of Victim-2; and (3) CARDONA had had inappropriate sexual contact with children, including children he had encountered through an afterschool program.  CARDONA’s Instagram account further reflects that in or about February 2014, CARDONA provided an image of Victim-2 engaged in sexually explicit conduct to another individual over the Internet.

            During the course of the search of CARDONA’s residence, law enforcement agents identified a laptop computer and an iPhone, which were each later confirmed to belong to CARDONA.  Forensic analysis revealed that the laptop and iPhone contained hundreds of images and videos that depicted actual minors engaged in sexually explicit conduct.  Some of the files contained on the laptop and iPhone depicted pre-pubescent minors engaged in sexually explicit conduct.

*                *                *

            For the offenses with which he was convicted, CARDONA faced a statutory mandatory minimum of 15 years in prison.  In addition to his term of imprisonment, CARDONA, 23, was also sentenced to 10 years of supervised release.          

            CARDONA worked at the Betances summer camp and afterschool programs in the Bronx from 2012 to approximately 2014 and thereafter as a mentor for youths at the Youth Men’s Initiative at Betances Community Center from January to April 2014.  Cardona also worked as a volunteer at the Betances Community Center at various times starting in 2011.   The investigation of CARDONA’s conduct relating to inappropriate sexual contact with youths in violation of state law is being handled by the Manhattan District Attorney’s Office.          

            Mr. Bharara thanked and praised the investigative work of the Federal Bureau of Investigation and the New York City Police Department in this matter, as well as the Manhattan District Attorney’s Office and the U.S. Attorney’s Office for the Districts of Guam and the Northern Mariana Islands.

            This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Gina Castellano and Andrew DeFilippis are in charge of the prosecution.

            Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and William J. Bratton, the Commissioner of the Police Department for the City of New York (“NYPD”), announced that JASON PAUL SMITH was arrested today in Lubbock, Texas, for communicating a hoax threat to bomb the Statue of Liberty that precipitated the evacuation of more than 3,200 people from Liberty Island in New York Harbor.  SMITH is expected to be presented later today in federal court in the Northern District of Texas.

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

            On April 24, 2015, SMITH initiated a call to the emergency 911 system (the “911 Call”) from his iPad using a service that assists hearing-impaired individuals with making and receiving telephone calls (the “Service”).  In the 911 Call, SMITH identified himself as “Abdul Yasin,” described himself as an “ISI terrorist,” and threatened that “we” are preparing to “blow up” the Statue of Liberty. 

            Law enforcement officers responded to the threat that SMITH conveyed in the 911 Call, and conducted a sweep of the areas in and around the Statue of Liberty and Liberty Island with the aid of canine units trained to detect explosives.  Canine units alerted to the area of the visitor lockers at the base of the Statue of Liberty, prompting law enforcement officers and emergency responders to evacuate the more than 3,200 people who were on Liberty Island at the time.  Subsequently, the threat conveyed by SMITH was determined to be unfounded.

            The iPad registered in SMITH’s name has used the Service to make other 911 calls, including at least two calls in May 2015 from a user who identified himself as “Isis allah Bomb maker” and who threatened to attack Times Square and kill police officers at the Brooklyn Bridge.

*                      *                      *

            SMITH, 42, of Harts, West Virginia, is charged with one count of conveying false and misleading information and hoaxes, which carries a maximum sentence of five years in prison.  The maximum penalty is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.         

            Mr. Bharara praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force – which principally consists of agents from the FBI and detectives from the NYPD.  Mr. Bharara also thanked the United States Park Police for its assistance.

            The prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorney David Zhou 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 text of the Complaint and the description of the Complaint herein constitute only allegations, and every fact described should be treated as an allegation.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today the guilty pleas of YE TIONG TAN LIM, a citizen of Taiwan, ALLAN KELLY REYES PERALTA, a citizen of the Philippines, and ADRIAN VALKOVIC, a citizen of the Czech Republic, to conspiring to import 100 kilograms of North Korean-produced methamphetamine into the United States.  TAN LIM, PERALTA, and VALKOVIC were arrested in September 2013, along with co-defendants Scott Stammers and Philip Shackels, following a long-term investigation by the Drug Enforcement Administration (“DEA”).  VALKOVIC pled guilty on August 5, 2015, before U.S. District Judge Andrew L. Carter.  PERALTA pled guilty on August 18, 2015, and TAN LIM pled guilty August 19, 2015, both before U.S. Magistrate Judge Debra Freeman.

Manhattan U.S. Attorney Preet Bharara said:  “Ye Tiong Tan Lim, Kelly Reyes Peralta, and Adrian Valkovic’s conspiracy reads much like the script of an action movie - outlaw biker gangs providing protection and logistics for a U.S.-bound load of North Korean methamphetamine.  But the plan was all too real, and the target for the drugs they planned to import were the streets of the United States.  Thanks to the expert work of the DEA and prosecutors in my office, the conspiracy was thwarted and the drug traffickers’ mission made impossible.”

According to the allegations contained in the Indictment, the plea agreements for TAN LIM, PERALTA, and VALKOVIC, and statements made in court proceedings:

In 2012, TAN LIM and PERALTA, members of a criminal organization operating in Hong Kong and the Philippines, sold more than 30 kilograms of methamphetamine that had been produced in North Korea.  Stammers and Shackels were responsible for storing the methamphetamine after it had been sold by TAN LIM and PERALTA.  This North Korean methamphetamine was later seized by law enforcement agents in Thailand and in the Philippines and tested at more than 99% pure.

In 2013, TAN LIM and PERALTA again agreed to provide North Korean methamphetamine, this time agreeing to supply 100 kilograms of the methamphetamine to confidential sources working at the direction of the DEA (the “CSes”) for importation to the United States.  As TAN LIM explained, his criminal organization was the only one currently able to obtain methamphetamine from North Korea:  “Because before, there were eight [other criminal organizations].  But now only us, we have the NK [i.e., North Korea] product. . . . [I]t’s only us who can get from NK.”  TAN LIM further explained that, because of recent international tensions, the North Korean government had destroyed some methamphetamine labs, leaving behind only the labs of TAN LIM’s organization:  “And all the, the NK government already burned all the labs.  Only our labs are not closed. . . . To show Americans that they [the North Korean government] are not selling it any more, they burned it.  Then they transfer to another base.”  In anticipation of these geo-political complications, TAN LIM noted that his organization had stockpiled one ton of North Korean methamphetamine in the Philippines for storage.

As a prelude to the 100-kilogram methamphetamine deal, TAN LIM and PERALTA arranged to have a sample of the drug delivered to Shackels, who sent that sample (along with a second sample from another supplier) to an address from which the methamphetamine samples would be sent to the United States.  These two methamphetamine samples tested at more than 98% and 96% pure.

TAN LIM and PERALTA agreed to deliver the 100 kilograms of North Korean methamphetamine in Thailand, from where they understood it would be shipped to the United States by boat.  In preparation, TAN LIM and PERALTA arranged for a “dry run,” sending a shipping container of tea leaves from the Philippines to Thailand in order to test delivery channels that would later be used for the shipment of methamphetamine.

VALKOVIC, Stammers, and Shackels agreed to provide security, transportation, and storage for the 100 kilograms of methamphetamine once it arrived in Thailand.  VALKOVIC, the Sergeant-at-Arms of the Outlaw Motorcycle Club (“OMC”) in Thailand, was to be the “ground commander,” and would supervise an armed crew of OMC members that would provide security for the methamphetamine.  Stammers and Shackels were to arrange for the 100 kilograms to be taken to a warehouse, counted, re-packaged, and delivered to a marina in Thailand, to be transferred to a boat that would deliver the methamphetamine to the United States.

In September 2013, TAN LIM and PERALTA traveled to Thailand in order to receive payment for the 100 kilogram methamphetamine deal.  TAN LIM, PERALTA, VALKOVIC, Stammers, and Shackels were arrested by Thai law enforcement on September 25, 2013.

*          *          *

As a result of their guilty pleas, TAN LIM, 55, PERALTA, 43, and VALKOVIC, 45, each face a maximum possible term of life in prison and a mandatory term of 10 years in prison.  The minimum and maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of these defendants will be determined by the judge.  VALKOVIC is scheduled to be sentenced by Judge Carter on November 6, 2015.  Sentencing dates have not yet been scheduled for TAN LIM and PERALTA.

The remaining defendants, Stammers, 46, and Shackels, 32, are charged with conspiracy to import methamphetamine into the United States.  Trial is scheduled to commence before Judge Carter on September 21, 2015.

The guilty pleas were the result of the close cooperative efforts of the United States Attorney’s Office for the Southern District of New York; DEA’s Special Operations Division, Bilateral Investigations Unit; and DEA’s Bangkok, Manila, Ghana, Pretoria, Bucharest, Nassau, and Copenhagen Country Offices.  Mr. Bharara also thanked the Thai Police Narcotics Suppression Bureau and Crime Suppression Division; the Royal Thai Immigration; the Royal Thai Attorney General’s Office; the Republic of Liberia’s National Security Agency; the Republic of Liberia’s Attorney General’s Office; the Romanian National Police; Interpol; and the U.S. Department of Justice Office of International Affairs for their support and assistance.

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant United States Attorneys Anna Skotko, Michael D. Lockard, and Emil Bove are in charge of the prosecution.

The charges against Stammers and Shackels are merely accusations and these defendants are presumed innocent unless and until proven guilty.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that JOHNNY MORGAN was sentenced today in Manhattan federal court to seven years in prison for illegally possessing a firearm after previously having been convicted of a felony.  In November 2014, MORGAN was convicted after a jury trial.  MORGAN was sentenced by United States District Judge Gregory H. Woods.

Manhattan U.S. Attorney Preet Bharara said: “Federal gun laws – including one that prohibits a convicted felon from possessing a firearm or ammunition – play a critical role in reducing gun violence in our communities.  Following more than 40 convictions for crimes ranging from drugs to assault, Johnny Morgan not only possessed a gun, but shot it four times near a nightclub in the Bronx.  For committing that federal crime, Morgan will now spend seven years in prison.  I want thank the New York City Police Department for their excellent work in this and countless other gun cases our office brings with them. ”

According to the allegations contained in court documents previously filed in federal court, and statements made in Court during the trial and sentencing proceedings of MORGAN:

On or about February 20, 2012, MORGAN was asked to leave a nightclub (the “Club”) in the Bronx, New York, by the Club’s security staff.  MORGAN left the Club, but returned several minutes later.  Once inside, after being confronted by the Club’s staff and owner, MORGAN pulled out a .40 caliber, semi-automatic Glock pistol (the “Firearm”), and pointed it at the Club’s owner.  Although MORGAN was ultimately persuaded to leave the Club without harming anyone, once outside, he walked a short distance away, and then fired four gunshots into the air.

New York City Police Department officers, responding to a 911 call, began to canvas the area.  Officers ultimately found MORGAN walking alone, down a street several blocks away from the Club.  MORGAN was arrested and the Firearm was recovered.  Subsequent DNA testing by the New York City Office of Chief Medical Examiner (“OCME”) revealed that a profile of DNA found on the Firearm was consistent with MORGAN’s DNA.

MORGAN was taken into custody in February 2012.  Before trial, MORGAN challenged the admissibility of OCME’s DNA testing, which was ultimately found to be sufficiently reliable to be admitted at trial.  In November 2014, a jury trial was held before Judge Woods.  The jury returned a guilty verdict on November 14, 2014.

Prior to his conviction on this charge, MORGAN had previously been convicted of 40 crimes, including a federal conviction in the Southern District of New York for marijuana distribution and state assault charges.    

*                *                *

In imposing today’s sentence, Judge Woods noted that in light of MORGAN’s extensive criminal history, he posed a significant risk of recidivism and had not been sufficiently deterred by his prior terms of imprisonment.

Mr. Bharara praised the investigative work of the New York City Police Department.  He also thanked OCME for its efforts.

The case is being prosecuted by the Office’s General Crimes Unit.  Assistant United States Attorneys Sidhardha Kamaraju and Robert Allen are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ROBERT STEWART, the father of former investment bank managing director Sean Stewart, pled guilty today to participating in a conspiracy to trade on inside information about several mergers and acquisitions announced between 2011 and 2014.  ROBERT STEWART was arrested on May 14, 2015, and Sean Stewart surrendered to federal authorities that same day.  Charges against Sean Stewart remain pending before U.S. District Judge Laura Taylor Swain.  A third member of the charged conspiracy, cooperating witness Richard Cunniffe, pled guilty before Judge Swain on May 12, 2015, and awaits sentencing.   ROBERT STEWART is scheduled to be sentenced by Judge Swain on November 12.

Manhattan U.S. Attorney Preet Bharara said:  “Instead of teaching his son lessons of right and wrong, Robert Stewart worked with him to break the law by trading on nonpublic information and sharing in the benefits with him.  Robert Stewart’s criminal actions – to which he has pled guilty today – perpetuate the unfortunate perception that the markets are rigged in favor of those with connections.”

According to the agreement pursuant to which ROBERT STEWART entered his plea of guilty today, the underlying criminal Complaint filed May 13, 2015, the Superseding Indictment filed July 15, 2015, and statements made during court proceedings:

In early 2011, Sean Stewart, who at the time held the position of Vice President in the Healthcare Investment Banking Group of a global bank headquartered in Manhattan (“Investment Bank A”), began tipping his father, ROBERT STEWART, with nonpublic information about upcoming mergers and acquisitions.  The first of these deals involved the acquisition of Kendle International Inc. (“Kendle”) by INC Research, LLC, which was announced publicly on May 4, 2011.  Sean Stewart worked on the deal, representing Kendle.  ROBERT STEWART made about $7,900 in profits on purchases of Kendle stock executed in February and March of 2011.  When questioned by the Securities and Exchange Commission about his Kendle trades in May 2013, ROBERT STEWART reported that he used the proceeds of those trades to pay expenses related to Sean Stewart’s June 2011 wedding.   

The second deal about which Sean Stewart tipped ROBERT STEWART was the acquisition of Kinetic Concepts Inc. (“KCI”) by Apax Partners, announced on July 13, 2011.  Although ROBERT STEWART purchased some stock in KCI based on Sean Stewart’s tip, he sold that stock before the acquisition was announced, around the same time that Sean Stewart learned the Financial Industry Regulatory Authority was conducting an inquiry into ROBERT STEWART’s Kendle trading.

Also around this time, in the spring of 2011, ROBERT STEWART expressed a concern to co-conspirator and cooperating witness Richard Cunniffe that ROBERT STEWART was “too close to the source” to be trading in KCI stock in his own account, and asked Cunniffe to make purchases of KCI call options for ROBERT STEWART in Cunniffe’s brokerage account.  Cunniffe agreed to do so, and also mirrored for his own benefit the KCI trades that ROBERT STEWART was directing.

When the KCI/Apax Partners deal was announced, ROBERT STEWART and Cunniffe reaped profits totaling approximately $107,790.  At around this time, ROBERT STEWART told Cunniffe that the source of the KCI tip and the earlier Kendle tip had been ROBERT’s son.  Later, around the spring of 2012, ROBERT STEWART clarified for Cunniffe that the son in question was Sean Stewart, who worked on the “sell side” on Wall Street.

In October 2011, Sean Stewart left Investment Bank A.  A few months later, he joined an investment banking advisory firm headquartered in Manhattan (“Investment Bank B”) as a Managing Director.

During Sean Stewart’s tenure with Investment Bank B, based on tips concerning nonpublic acquisition-related information supplied by Sean Stewart, ROBERT STEWART had Cunniffe conduct options trading in advance of the public announcements of three more deals: (1) the acquisition of Gen-Probe Inc. by Hologic Inc., announced on April 30, 2012; (2) the acquisition, by tender offer, of Lincare Holdings Inc. (“Lincare”) by Linde AG, announced on July 1, 2012; and (3) the acquisition of CareFusion Corp. (“CareFusion”) by Becton, Dickinson & Co. (“Becton”), announced on October 5, 2014.  Investment Bank B represented Hologic Inc. in connection with its acquisition of Gen-Probe Inc.; Linde AG in connection with its acquisition of Lincare; and CareFusion in connection with its acquisition by Becton.  The profits that ROBERT STEWART and Cunniffe reaped from illegal insider trading in advance of the announcements of these three deals totaled approximately $1.1 million.  In the midst of the scheme, in December 2012, ROBERT STEWART transferred at least $15,000 to Sean Stewart.

To try to avoid detection for their crimes, ROBERT STEWART and Cunniffe refrained from speaking explicitly about their trading over the phone or e-mail, sometimes using “golf”-related code.  For example, shortly after the announcement of Lincare’s proposed acquisition by Linde AG, a German company, ROBERT STEWART wrote to Cunniffe that he had seen a news story about the “high cost of golf reservations since a foreign company purchased all-even more expensive than imagined.”  Other steps ROBERT STEWART and Cunniffe took to avoid detection included trying to discuss their trading at face-to-face meetings and adopting a profit-splitting mechanism that had Cunniffe paying ROBERT STEWART his portion of the illegal proceeds in small increments, over time, typically in cash.  

In March and April of 2015, Cunniffe recorded meetings he had with ROBERT STEWART.  During one such meeting, ROBERT STEWART accepted a payment of $2,500 cash from Cunniffe, which was the balance of the proceeds owed to ROBERT STEWART for profitable trading executed in Cunniffe’s account in advance of the CareFusion acquisition announcement.  Also during this meeting, ROBERT STEWART admitted that Sean Stewart once chastised him for failing to make use of a tip, saying, “I can’t believe I handed you this on a silver platter and you didn’t invest in it.”      

*                      *                      *

ROBERT STEWART, 60, of North Merrick, New York, pled guilty to Count One of a nine-count Superseding Indictment.  Count One charges a conspiracy to commit insider trading and carries a maximum term of five years in prison.  As part of his guilty plea, ROBERT STEWART agreed to forfeit $150,000.  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 investigative work of the FBI and also thanked the Securities and Exchange Commission, which has filed civil charges in a separate action.

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

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Sarah E. McCallum and Brooke E. Cucinella are in charge of the prosecution.  

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that SHANE FUSCO was sentenced today by United States District Judge Cathy Seibel to 100 months in prison on bank fraud charges.

FUSCO previously plead guilty to one count of conspiracy to commit bank fraud and one count of bank fraud.

Manhattan U.S. Attorney Preet Bharara said:  “In scheme to steal upwards of a million dollars, Shane Fusco brazenly defrauded dozens of small businesses up and down the Eastern seaboard by using fraudulent bank and personal checks.  We thank the FBI, the Secret Service, the Orange County Sherriff’s Office, the Connecticut State Police and our colleagues at the U.S. Attorney’s Office in Connecticut for the work in this case.”

According to the Information previously filed in White Plains federal court and public information:  For almost two years, FUSCO fraudulently created bank and personal checks in a scheme to obtain vehicle parts and jewelry, among other items, from 34 business and one individual.  FUSCO was eventually caught using a fake check in an attempt to buy tires while driving a stolen truck that was hitched to a stolen trailer.

*          *         *

Mr. Bharara praised the outstanding efforts of the United States Attorney’s Office for the District of Connecticut, the FBI, the United States Secret Service Connecticut Financial Crimes Task Force, the Orange County Sherriff’s Office and the Connecticut State Police.

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that SEAN ROBINSON was sentenced today in Manhattan federal court to 20 years in prison for leading a robbery crew that committed violent daytime robberies of jewelry and watch stores in 2013 and 2014.  Since February 2014, ROBINSON and ten other defendants have been charged for their respective roles in this robbery conspiracy.  In May 2014, ROBINSON pled guilty to participating in the robbery conspiracy.  ROBINSON was sentenced by United States District Judge Loretta A. Preska.

Manhattan U.S. Attorney Preet Bharara said: “Sean Robinson led a violent robbery crew that terrorized employees and customers at high-end jewelry and watch stores up and down the Northeastern seaboard, from Manhattan, Brooklyn, and Connecticut to New Jersey and Virginia.  Robinson’s crime spree included a gunpoint robbery in broad daylight of a Brooklyn jewelry store where the robbers shot the store owner.”

According to the allegations contained in court documents previously filed in federal court, and statements made in court during the pleas and sentencing proceedings of ROBINSON and other members of the conspiracy:

Between approximately July 1, 2013, and January 30, 2014, a highly organized crew engaged in a series of violent robberies of high-end jewelry and watch stores located in four states.  During those robberies, crew members smashed display cases with hammers while customers and employees were in the stores and stole more than a million dollars in luxury watches.

The crew at times used violence to carry out the scheme.  For example, during the September 23, 2013, armed daytime robbery of a jewelry store in Brooklyn, New York, in which two of the robbers displayed handguns, one of the robbers shot the store owner when he attempted to prevent members of the crew from fleeing with stolen jewelry.  ROBINSON, the leader of the crew, planned the September 23, 2013, robbery, as well as a series of other robberies committed by this crew.

Among the stores robbed by the crew are: Cartier, Travers Jewelers, and Golden Nugget Jewelry, all in Manhattan, the Borgata Hotel and Casino in Atlantic City, New Jersey, Schwarzschild’s Jewelers in Richmond, Virginia, Martin Jewelers in Cranford, New Jersey, Henry Reid and Sons Jewelers in New Canaan, Connecticut, and Litan Jewelers in Brooklyn, New York.

*                *                *

In imposing today’s sentence, Judge Preska noted that ROBINSON “planned and organized all of these robberies,” which were “very serious offenses with serious consequences to victims [and] bystanders.”  Judge Preska also said that ROBINSON’s “involvement reflects a total disregard for the law.”

Eleven defendants have been charged in this investigation.  Two members of this conspiracy were previously sentenced.  On March 18, 2015, Judge Preska sentenced Allen Williams to 108 months in prison.  On October 23, 2014, United States District Judge Robert P. Patterson sentenced Terrell Ratliff to 33 months in prison.  Two members of the conspiracy, Jamal Dehoyos and Courtney Hardin, are currently fugitives.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation’s Interstate Robbery Apprehension Team and the New York City Police Department.  He also thanked the police departments of Cranford, New Jersey, Atlantic City, New Jersey Richmond, Virginia, and New Canaan, Connecticut, and the Manhattan and Brooklyn District Attorneys’ Offices, and the Union County, New Jersey, Prosecutor’s Office, for their assistance in the investigation, which he noted is ongoing.

The case is being prosecuted by the Office’s General Crimes Unit.  Assistant United States Attorneys Andrea M. Griswold and Richard Cooper are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and Mark Hamlet, the Special Agent in Charge of the Special Operations Division of the United States Drug Enforcement Administration (“DEA”), today announced the extradition of EDMUND QUINCY MUNTSLAG, a citizen of Suriname, who is charged with conspiring to import cocaine into the United States.  MUNTSLAG’s co-defendant, Dino Bouterse, a citizen of Suriname who held himself out as Commander of that country’s Counter-Terrorism Unit, previously pled guilty in Manhattan federal court to participating in the cocaine importation conspiracy as well as to attempting to provide material support and resources to Hezbollah, a designated terrorist organization, and a firearms offense.  MUNTSLAG was arrested in Trinidad & Tobago on August 29, 2013, at the request of the United States.  He arrived in the Southern District of New York last night, and was presented today before Magistrate Judge Andrew J. Peck.  The case is assigned to United States District Judge Shira A. Scheindlin.

Manhattan U.S. Attorney Preet Bharara said: “Now that Edmund Quincy Muntslag has arrived in the Southern District of New York, he can be held accountable for his alleged role in conspiring to import massive quantities of cocaine from Suriname to the United States.  Today’s extradition is the result of the continued collaboration between our office, the DEA and our international law enforcement partners.”

DEA Special Operations Division Special Agent in Charge Mark Hamlet said: “Critical to strengthening our national security are efforts such as DEA‘s successful pursuit of global criminals like Edmund Muntslag and dangerous facilitators of terror such as Dino Bouterse.  The frightening connection between drug trafficking and terror across the world is clearly illustrated in this successful case.  This could not have been done without our strong foreign partnerships, and DEA is extremely pleased that Muntslag has been extradited to face justice in a U.S. court.”

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

 In June 2013, MUNTSLAG and Bouterse met in Suriname with confidential sources working with the DEA (the “CSes”), in a local government office.  During the meeting, Bouterse showed the CSes a rocket launcher and a kilogram of cocaine.  According to MUNTSLAG, the cocaine had been treated to evade detection by drug-sniffing dogs.

Approximately one month later, MUNTSLAG and Bouterse worked together to provide transportation and security for cocaine being sent through Suriname to the United States.  As a test run, MUNTSLAG and Bouterse sent ten kilograms of cocaine on a commercial flight departing from Suriname.  MUNTSLAG personally oversaw the arrangements for the 10-kilogram cocaine shipment, and confirmed its departure from Suriname via text message.  The cocaine was intercepted by law enforcement officials after it departed Suriname.

In July 2013, Bouterse met in Suriname with one of the CSes to discuss opening Suriname to the CSes’ purported Hezbollah associates.  Later that month, Bouterse met in Greece with the same CS and two other men who purported to be associated with Hezbollah.  During this meeting, Bouterse discussed initially hosting 30 to 60 Hezbollah members in Suriname for training and operations.  He also indicated that he wanted a Hezbollah cell in Suriname, in part, to act as a kind of personal armed force.  Immediately after the conclusion of the meeting in Europe, Bouterse sent MUNTSLAG a text message stating “we hit the jackpot.”

At a subsequent meeting in August 2013 in Panama, Bouterse delivered a Surinamese passport with false identifying information to one of the CSes.  As had been discussed at the July 2013 meeting in Greece, one of the purported Hezbollah operatives was to use the fraudulent passport to travel to Suriname.  At the August 2013 meeting, Bouterse indicated that everything was ready in Suriname for the arrival of the purported Hezbollah members, and that some “toys,” or weapons, would be available for inspection.  Bouterse also discussed receiving $2 million in cash in exchange for giving the purported Hezbollah operatives arms and access to Suriname, and asked the CSes to have the cash delivered to MUNTSLAG in Trinidad & Tobago.  At that time, MUNTSLAG was waiting in Trinidad & Tobago to receive the cash, which he planned to transport back to Suriname to deliver to Bouterse.  Shortly after the August 2013 meeting, MUNTSLAG was arrested in Trinidad & Tobago.

*              *             *

The Indictment charges MUNTSLAG with conspiring to import cocaine into the United States and to distribute cocaine, knowing and intending that it would be imported to the United States.

If convicted, MUNTSLAG faces a maximum sentence of life in prison and a mandatory minimum term of 10 years in prison.The maximum and mandatory minimum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentence will be determined by the judge.

On August 29, 2014, Bouterse pleaded guilty to the narcotics importation conspiracy with which MUNTSLAG is charged as well as attempting to provide material support to Hezbollah, a Foreign Terrorist Organization; and using and carrying, or aiding and abetting the use and carrying of, a firearm, during and in relation to a drug-trafficking crime.On March 10, 2015, Judge Scheindlin sentenced Bouterse to 195 months’ imprisonment on all counts.

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

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

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that NORAMIE JASMIN, the former mayor of Spring Valley in Rockland County, was sentenced today in federal court in White Plains to four years in prison for fraud and extortion, charges that stemmed from her misuse of her position as mayor in an effort to enrich herself.  JASMIN negotiated a 50% stake in a development company and $5,000 cash for herself in exchange for her use of her office to obtain land and various government approvals to construct a community center in Spring Valley.  JASMIN was convicted in April after a one-week bench trial before U.S. District Judge Colleen McMahon, who imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “By abusing her position as mayor for her own personal gain, Noramie Jasmin betrayed the trust the people of Spring Valley put in her.  As the conviction and prison sentence today make clear, we do not accept public corruption in New York as the status quo.  I would like to thank our partners at the FBI, the Rockland County District Attorney’s Office, and the Spring Valley Police Department for their excellent work in this important case.”

According to the evidence presented at trial, the Indictment, and the Complaint:

NORAMIE JASMIN was sworn in as Mayor of the Village of Spring Valley, New York in December 2009.  From September 2011 through April 2013, JASMIN accepted cash and other benefits from an undercover FBI agent (the “UC”) and a witness cooperating with the Government (the “CW”) on multiple occasions in exchange for official acts.  The scheme centered on the development of a community center in the Village of Spring Valley whose construction costs were expected to be at least $12 million.  In exchange for her vote in favor of the sale of land owned by Spring Valley to a company she believed was controlled by the UC, JASMIN demanded a secret ownership stake in the company.  JASMIN also asked for an advance on her profits from the scheme and accepted a $5,000 cash payment from the CW.  In support of the scheme, JASMIN directed the UC to find people to pose as bidders for the project so that the transaction would appear legitimate to the other members of the Spring Valley Board of Trustees who were to, and did, vote on the sale.  Over the course of two days, JASMIN met the UC, together with two other undercover FBI agents posing as straw bidders (the “Straw Bidders”), in hotel rooms and instructed the Straw Bidders on how to make a presentation before the Spring Valley Board of Trustees such that the Straw Bidders would lose their purported bids on the land sale.  JASMIN then presided over the presentations made by the company in which she had a secret financial stake and the fake presentations that she had helped prepare.  The following day, JASMIN presided over a Village Board of Trustees meeting, during which she asked the Board for permission to negotiate the sale of Village land to the UC’s company and then voted a “strong yes” to grant herself that permission.  When questioned as to why the Board needed to vote to grant her that permission, JASMIN remarked that she “cannot sit behind closed doors with a developer to negotiate on behalf of the Board.” The evidence showed that that was precisely what she did; she sat behind closed doors and negotiated a financial stake for herself in the days preceding the vote.

*                      *                      *

 In addition to her prison sentence, JASMIN, 51, of Spring Valley, New York, was sentenced to three years of supervised release and ordered to pay $15,000 in restitution of her salary and to forfeit $5,000.  JASMIN was ordered to surrender to the Bureau of Prisons on November 2.

Mr. Bharara praised the outstanding investigative work of the Federal Bureau of Investigation, the Rockland County District Attorney’s Office, and Chief Paul Modica and the Spring Valley Police Department.

This case is being handled by the Office’s White Plains Division and Public Corruption Unit.  Assistant United States Attorneys Douglas B. Bloom and Jessica K. Feinstein are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that STEVEN HART was sentenced yesterday to four months in prison in Manhattan federal court for obstruction of justice and perjury charges relating to an investigation that the U.S. Securities and Exchange Commission (the “SEC”) had conducted into potential violations of the federal securities laws.  Hart previously pled guilty on March 13, 2015 to a two-count criminal information.  He was sentenced by U.S. District Judge Katherine Polk Failla.

Manhattan U.S. Attorney Preet Bharara said:  “Steven Hart obstructed an SEC investigation into securities fraud by giving false testimony under oath and even going so far as to impersonate his boss when the SEC called with questions.  Prosecutors and regulators cannot do their jobs properly if people deliberately obstruct their investigations, as Hart did here.”

According to the Information filed in Manhattan federal court, other court documents, and statements made in court:

HART, who was employed at an investment management firm headquartered in Englewood Cliffs, New Jersey (the “Investment Firm”), and reported directly to the president of the Investment Firm (the “Investment Firm President”), served as a portfolio manager at the firm and, in that capacity, exercised trading authority over the brokerage accounts for one of the funds managed by the Investment Firm (the “Fund”).  At the same time, HART also controlled and directed Octagon Capital Partners, LP (“Octagon”), a private investment fund with its principal place of business in New York, NY.  Through Octagon, HART invested his own money and the money of several of his associates.

In 2009, the SEC was investigating HART’s trading activities at the Investment Firm (the “SEC Investigation”).  First, the SEC was investigating whether HART, in his capacity as a portfolio manager at the Investment Firm, had conducted improper “match trades” or “cross trades” between his personal fund, Octagon, and the Fund.  The SEC was also investigating whether HART had traded in securities based on material non-public information (“MNPI”) relating to confidentially-marketed securities offerings – information that HART had obtained while being solicited to invest in those offerings.

As part of this investigation, SEC officials, among other things, issued a subpoena to the Investment Firm, care of the Investment Firm President, seeking the production of several different categories of documents.  HART received the subpoena at the Investment Firm before it was seen by any other employee and produced documents to the SEC in New York without (1) informing anyone else at the Investment Firm about the subpoena, or (2) informing the SEC that it was HART alone who responded to the subpoena.

Moreover, in the course of providing sworn testimony to the SEC, HART made several materially false statements.  He falsely testified that the Investment Firm President had agreed that HART should conduct match trades involving the Fund as part of an investment strategy for the Fund.  HART also falsely testified that he and the Investment Firm President had discussed the SEC Investigation, and that the Investment Firm President was aware that HART had been subpoenaed to testify before the SEC.    

On two occasions, HART impersonated the Investment Firm President during telephone conversations with the SEC.  Specifically, on December 9, 2009, an SEC attorney called the Investment Firm to speak with the firm’s President about the SEC Investigation.  HART received the phone call and pretended to be the Investment Firm President.  During that call, HART, speaking as the Investment Firm President, falsely stated that:  (1) the Investment Firm President was aware that HART had engaged in improper trading activity, but nevertheless wanted HART to remain an employee of the Investment Firm; and (2) the Investment Firm President was aware of, and had approved, HART’s match trading activity as a means for the Fund to dispense of restricted shares of stock.

On December 11, 2009, the same SEC attorney, along with a second SEC attorney, called the Investment Firm again to speak with the firm’s President.  HART again received the phone call and pretended to be the Investment Firm President.  During that call, HART, speaking as the Investment Firm President, falsely stated to the SEC attorneys that:  (1) HART’s match trading activity was an intentional strategy of the Investment Firm to take a loss on the trading in exchange for the ability to sell otherwise restricted shares of stock; (2) HART was still a valued employee of the Investment Firm who had earned the Investment Firm far more than whatever amount HART had gained through match trading; and (3) HART had fully disclosed to the Investment Firm President that HART had traded based on MNPI and that this was a one-time mistake that would not happen again.  Each of these statements was false.     

*                      *                      *

In addition to the prison term, Judge Failla sentenced Hart, 42, who currently resides in Manhattan, New York, to two years’ supervised release.

Mr. Bharara thanked the U.S. Securities and Exchange Commission for its assistance in the investigation. 

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that RANA KHANDAKAR, and USAWAN SAELIM were sentenced today to 56 and 36 months in prison, respectively, for engaging in a massive internet credit card fraud and identity theft scheme.  KHANDAKAR and SAELIM were convicted in July 2014 following a three-week jury trial before U.S. District Judge John G. Koeltl, who imposed their sentences.

Manhattan U.S. Attorney Preet Bharara said: “Khandakar and Saelim used the internet to engage in a smorgasbord of frauds, ranging from the unauthorized sale of EZPass tags to Medicaid fraud.  For their years of cyber scamming, the defendants now face years in federal prison.”

According to the Superseding Indictment, evidence admitted at trial, and submissions made in connection with sentencing:

From 2008 through 2012, KHANDAKAR and SAELIM engaged in a large-scale and sophisticated cyber fraud involving millions of dollars in completed and attempted fraudulent charges on hundreds of stolen credit cards and debit cards.  The defendants’ fraud consisted principally of two types of schemes from which they netted over $1 million worth of goods, services, and cash.  In one type of scheme, the defendants used stolen credit and debit card numbers to buy goods, such as EZ Pass tags, baby care items, gift cards, movie tickets and computers, and then resold those items online.  The second scheme involved the use of stolen identities to set up merchant processing accounts, which were then used to incur charges on stolen credit cards for the benefit of the defendants.  In addition, KHANDAKAR and SAELIM used stolen personal identifying information of their victims to establish fake businesses, open bank accounts, acquire and manufacture credit and debit cards, and create counterfeit checks, among other things.

One way in which the defendants obtained the personal identifying information of their victims was by posting fake job listings online, in which they required applicants to submit their Social Security number and other personal identifying information.  The defendants also used stolen credit and debit account information to obtain goods and services for their personal use, such as food delivery, pet insurance, entertainment, and cash.   Throughout the course of their fraud scheme, while amassing hundreds of thousands of dollars in ill-gotten gains, the defendants were also defrauding the Medicaid program, by collecting thousands of dollars in health insurance benefits intended for low-income individuals to which they were not entitled.

The Fraudulent Purchase and Re-Sale of EZ Pass Tags and other Items

KHANDAKAR and SAELIM used at least 50 stolen American Express credit cards to purchase EZ Pass tags and credits.  They then resold the tags and credits through two websites they founded – www.drezpass.com and www.ezpasstag.com.  Neither of these websites was an authorized EZ Pass retailer.  The defendants also purchased baby care items using stolen credit card information and re-sold those items on another website they founded – www.udiapers.com. In addition, the defendants purchased tens of thousands of dollars of gift cards, computers, and movie tickets, and resold those items on websites such as eBay and Craigslist.  Because they had obtained the merchandise for free using stolen credit cards, their profit margin in reselling the merchandise was 100% of the sale price. 

The Fraudulent Merchant Accounts

In order to process credit and debit card transactions, a business must establish an account with a credit and debit card processor, known as a “merchant account.”  Each merchant account is linked to a bank account associated with the business.

As part of their scheme, KHANDAKAR and SAELIM established fraudulent online merchant accounts linked to phony businesses, such as “Tips,” “La Pala Pa,” and “Cafe 007,” which they used to process bogus credit and debit card charges.  The defendant used stolen personal identifying information to set up the merchant accounts, and then made unauthorized charges to those merchant accounts using stolen credit and debit card numbers.

Through these fraudulent merchant accounts, KHANDAKAR and SAELIM attempted to make millions of dollars’ worth of charges on at least 385 stolen American Express credit card accounts, and on more than 1,000 credit or debit card accounts at Citibank, JP Morgan Chase, Bank of America, and Discover, among others.  In some cases, the same credit cards that incurred charges in connection with the fraudulent EZ Pass purchases were also charged in connection with the fraudulent merchant accounts.

KHANDAKAR and SAELIM were convicted of one count of conspiracy to commit mail and bank fraud; one count of access device fraud; one count of aggravated identity theft; and one count of theft from the government.  In addition, Khandakar was convicted of one count of mail fraud and SAELIM was convicted of one count of bank fraud.

*          *          *

In addition to their prison sentences, KHANDAKAR and SAELIM were sentenced to three years of supervised release, and were each ordered to pay $263,000 in restitution and $950,000 in forfeiture.

Mr. Bharara praised the work of the Secret Service, the MTA-OIG, the Port Authority OIG, and U.S. Department Health and Human Services OIG.   He also thanked the New York State Police, the New York State Department of Vehicles Field Investigative Unit, and the Social Security Administration for their assistance in the investigation.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Christine I. Magdo is in charge of the prosecution.

Stradivarius Violin, Constructed in 1734, was Missing for 35 Years Before Its Recovery by the FBI

U.S. Attorney Preet Bharara of the Southern District of New York, and Assistant Director in Charge Diego Rodriguez of the FBI’s New York Field, announced today the return of a 1734 Stradivarius violin to the heirs of deceased violinist Roman Totenberg today at a ceremony at the U.S. Attorney’s Office in the Southern District of New York.  The violin was stolen from Totenberg in 1980.  It was recently recovered by the FBI following a tip to a New York City Police Department (NYPD) detective’s source about the stolen violin.  The detective exercised due diligence and conducted an initial assessment before passing the case along to the FBI’s Art Crime Team.

“Today, we return to its rightful owners the centuries-old Ames Stradivarius, stolen 35 years ago from renowned violinist Roman Totenberg,” said U.S. Attorney Bharara.  “This is a remarkable story of a quick-witted violin appraiser who recognized the long-lost Ames Stradivarius and immediately called law enforcement.  Thanks to the violin appraiser’s good citizenship and law enforcement’s prompt response, today we celebrate the Totenberg family’s reunion with a priceless family heirloom, thought for decades to have been lost forever – a joyful ending to an amazing story.”

“Today’s ceremony is just one example of our commitment to restore significant arts and antiquities to their rightful owners,” said Assistant Director in Charge Diego Rodriguez.  “We will continue to provide investigative support to address these criminal matters.  Many thanks to our partners at the U.S. Attorney’s Office for the Southern District of New York and the New York City Police Department for their continued partnership in this and so many investigations.  I’d like to remind the public that two antique bows were stolen along with the Ames Stradivarius.  We ask anyone with information to please contact the FBI’s Art Crime Team in New York at (212) 384-2100 as we work to return this stolen property to the Totenberg family.”

According to court filings and other publically available information:

The violin, known as the Ames Stradivarius after violinist George Ames, the owner of the violin in the late 19th Century, was made in 1734 by Antonio Stradivari, a luthier based in Cremona, Italy.  Between 1666 and 1737, Stradivari created over 1,000 instruments, including approximately 400 violins that are known to exist today.  Stradivari’s violins are widely considered to be of the highest quality of craftsmanship.

In 1980, the Ames Stradivarius was owned by Totenberg, a Polish-born violinist who immigrated to the United States in 1938.  Totenberg enjoyed a long and distinguished career as a performer and a teacher.  He was chair of the strings department at Boston University from 1961 to 1978; the director of the Longy School of Music in Cambridge, Massachusetts, from 1978 to 1985; an instructor at various conservatories across the country; and co-chairman of the Boston University strings department for a second time beginning in 1994.  Totenberg passed away in 2012.

In May 1980, following a concert at the Longy School, the Ames Stradivarius was stolen, along with two antique bows also belonging to Totenberg. 

On June 26, 2015, after having been missing for over 35 years, the Ames Stradivarius surfaced at a hotel in Manhattan, where it was being presented for appraisal by an individual who had received the violin from a former spouse.  After being contacted by the appraiser, the FBI approached the individual, who voluntarily relinquished the Ames Stradivarius to a special agent assigned to the FBI’s Art Crime Team.  After contacting the heirs of Roman Totenberg, the U.S. Attorney’s Office of the Southern District of New York and the FBI have arranged for the return of the Ames Stradivarius to the Totenberg family.

The return today to Totenberg’s three daughters is being made pursuant to stipulated agreements that have been entered between the relevant parties and also so ordered by the Honorable Lorna G. Schofield, U.S. District Court Judge of the Southern District of New York.  

U.S. Attorney Bharara thanked the FBI and the NYPD for their outstanding work on this matter.

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

Stradivarius Stipulation (US-Totenberg)

Stradivarius Stipulation (US-Tran)

Ames Stradivarius - Photos

Preet Bharara, the United States Attorney for the Southern District of New York, and Brian M. Hickey, the Special Agent-in-Charge of the U.S. Department of Education Office of Inspector General’s Northeastern Regional Office (“ED-OIG”), announced charges today against three individuals for their participation in a scheme to fraudulently lower the student loan default rate of the for-profit school in whose Loan Management Department they were employed during the scheme.  Defendants DIANNA SALAZAR, ALEKSANDRA CHOLEWICKA, and SHAYNA POLITE are charged with conspiracy to commit federal student financial aid fraud and make false statements, attempted federal student financial aid fraud, making false statements, and wire fraud.  All of the defendants surrendered to law enforcement today and were presented before U.S. Magistrate Judge Andrew J. Peck in Manhattan federal court this afternoon.

Manhattan U.S. Attorney Preet Bharara said:  “Student financial aid fraud depletes federal funds meant to fuel the dreams of an affordable higher education for countless Americans.  The defendants charged today are alleged to have lied to lower their for-profit school’s student loan default rate in order to receive more such financial aid.”

ED-OIG Special Agent-in-Charge Brian Hickey said:  “Federal student aid exists so that individuals can make their dream of a higher education a reality, it’s not a slush fund for unscrupulous school officials. As the law enforcement arm of the U.S. Department of Education, we are committed to fighting student aid fraud and ensuring that those who steal student aid or game the system for their own selfish purposes are stopped and held accountable for their criminal actions.”

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

Each of the defendants was associated with a for-profit educational institution (the “For-Profit School”) that was located in New York, New York during the scheme and specializes in preparing students for employment in a technical career after graduation.  DIANNA SALAZAR was the manager of the School’s Loan Management Department.  ALEKSANDRA CHOLEWICKA and SHAYNA POLITE worked as loan advisors in the Loan Management Department.   

The named defendants are charged with preparing and submitting fraudulent applications for deferment or forbearance of student loans administered by the United States Department of Education (“ED”) in order to fraudulently lower the student loan default rate of the For-Profit School so that it would continue to be eligible to receive federal student aid.

The ED administers and provides loans to eligible students and families to help cover the cost of higher education through Title IV Federal Student Assistance Programs authorized by the Higher Education Act of 1965, as amended.  If a school’s student loan default rate, which is a measurement of the percentage of students who entered repayment on their loans and defaulted within a specific period, is 30 percent or higher in three consecutive years, the school loses its eligibility to receive certain federal student aid for its students.  A student that has entered repayment on his or her loan and has been granted a deferment or forbearance is relieved of making loan payments for a specified time period and is not considered in default.

The defendants submitted fraudulent deferment and forbearance applications to the ED and other loan holders in two ways.  First, the defendants manually altered dates on previously submitted deferment and forbearance applications using liquid paper and resubmitted the applications in order to extend the deferment or forbearance period.  Second, the defendants copied authentic student signatures from old deferment and forbearance documents and manually cut and pasted those signatures on new deferment and forbearance applications that were submitted with current dates.  By falsifying dates and forging student signatures, the defendants misrepresented to the ED and other loan holders that the For-Profit School’s students were eligible for a deferment or forbearance and that the student had certified that the information provided in the forms was true and correct.

*                      *                      *

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.

Mr. Bharara praised the investigative work of ED-OIG.

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

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

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

            Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, Assistant Director-in-Charge New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the return of a 1734 Stradivarius violin to the heirs of deceased violinist Roman Totenberg today at a ceremony at the United States Attorney’s Office in Manhattan.  The violin was stolen from Mr. Totenberg in 1980.  It was recently recovered by the FBI, following a tip to a New York City Police Department (“NYPD”) detective’s source about the stolen violin.  The detective exercised due diligence and conducted an initial assessment before passing the case along to the FBI’s Art Crime Team.

            Manhattan U.S. Attorney Preet Bharara said: “Today, we return to its rightful owners the centuries-old Ames Stradivarius, stolen thirty five years ago from renowned violinist Roman Totenberg.  This is a remarkable story of a quick-witted violin appraiser who recognized the long-lost Ames Stradivarius and immediately called law enforcement.  Thanks to the violin appraiser’s good citizenship and law enforcement’s prompt response, today we celebrate the Totenberg family’s reunion with a priceless family heirloom, thought for decades to have been lost forever – a joyful ending to an amazing story.”

            Assistant Director-in-Charge Diego Rodriguez said: “Today’s ceremony is just one example of our commitment to restore significant arts and antiquities to their rightful owners. We will continue to provide investigative support to address these criminal matters.  Many thanks to our partners at the U.S. Attorney’s Office for the Southern District of New York and the New York City Police Department for their continued partnership in this and so many investigations.  I’d like to remind the public that two antique bows were stolen along with the Ames Stradivarius. We ask anyone with information to please contact the FBI’s Art Crime Team in New York at (212) 384-2100 as we work to return this stolen property to the Totenberg family.”

            According to court filings and other publically available information:

            The violin, known as the “Ames” Stradivarius after violinist George Ames, the owner of the violin in the late 19th Century, was made in 1734 by Antonio Stradivari, a luthier based in Cremona, Italy.  Between 1666 and 1737, Stradivari created over 1,000 instruments, including approximately 400 violins that are known to exist today.  Stradivari’s violins are widely considered to be of the highest quality of craftsmanship.

            In 1980, the Ames Stradivarius was owned by Roman Totenberg, a Polish-born violinist who immigrated to the United States in 1938.  Totenberg enjoyed a long and distinguished career as a performer and a teacher.  He was chair of the strings department at Boston University from 1961 to 1978; the director of the Longy School of Music in Cambridge, Massachusetts, from 1978 to 1985; an instructor at various conservatories across the country; and co-chairman of the Boston University strings department for a second time beginning in 1994.  Mr. Totenberg passed away in 2012.

            In May 1980, following a concert at the Longy School, the Ames Stradivarius was stolen, along with two antique bows also belonging to Totenberg.

            On June 26, 2015, after having been missing for over 35 years, the Ames Stradivarius surfaced at a hotel in Manhattan, where it was being presented for appraisal by an individual who had received the violin from a former spouse.  After being contacted by the appraiser, the FBI approached the individual, who voluntarily relinquished the Ames Stradivarius to a special agent assigned to the FBI’s Art Crime Team.  After contacting the heirs of Roman Totenberg, the U.S. Attorney’s Office and the FBI have arranged for the return of the Ames Stradivarius to the Totenberg family.

            The return today to Mr. Totenberg’s three daughters is being made pursuant to stipulated agreements that have been entered between the relevant parties and also so ordered by the Honorable Lorna G. Schofield, United States District Court Judge for the Southern District of New York. 

            Mr. Bharara thanked the FBI and the NYPD for their outstanding work on this matter.

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that PETER CANALE, a United States Citizen and resident of Jamestown, Kentucky, pled guilty today to willfully failing to file Reports of Foreign Bank and Financial Accounts (“FBARs”) with the Internal Revenue Service (“IRS”) regarding secret bank accounts that he maintained and controlled in Switzerland.  CANALE maintained his undeclared accounts at multiple different Swiss banks for approximately ten years, from 2000 through 2010.  During that time, CANALE’s undeclared assets reached a high value of over $780,000.  CANALE entered his guilty plea before U.S. District Judge Katherine B. Forrest.

According to the superseding Information filed in Manhattan federal court, other court documents, and statements made in connection with CANALE’s guilty plea:

Beginning in the early 1990s, a relative of CANALE (the “Relative”) maintained an undeclared offshore bank account at a predecessor firm of the Swiss bank UBS AG.  Upon the Relative’s death in July 2000, CANALE met in Manhattan with two Swiss bankers, Hans Thomann and Beda Singenberger, and discussed the continued maintenance of the assets that CANALE and his brother, Michael Canale, had inherited from the Relative.  They agreed that Thomann, working with Singenberger, would continue to maintain the assets in an undeclared bank account in Switzerland for the benefit of CANALE and Michael Canale.  Later, in July 2005, with the assistance of Singenberger, CANALE opened an undeclared account at Wegelin & Co. (“Wegelin”), a Swiss private bank.  CANALE’s undeclared account at Wegelin was opened in the name of a sham foundation organized under the laws of Liechtenstein, called the Janara Foundation.  CANALE, however, remained the beneficial owner of the assets in the Janara Foundation account.  As of December 31, 2009, the Janara Foundation account at Wegelin held assets valued at approximately $788,920.

In May 2010, Singenberger, acting under the authority given to him by CANALE, opened an undeclared bank account in the name of the Janara Foundation at another Swiss private bank (“Swiss Bank A”), and transferred the assets from the Janara Foundation account at Wegelin to the Janara Foundation account at Swiss Bank A.  As of October 31, 2010, the Janara Foundation bank account at Swiss Bank A, of which CANALE was the beneficial owner, held assets valued at approximately $718,143.

As charged in the superseding Information, for each of the calendar years from 2007 through 2010, CANALE was required, but failed, to file FBARs with the IRS disclosing his signatory or other authority over the Janara Foundation accounts held at Wegelin and Swiss Bank A, which had an aggregate value of more than $10,000 during each of these years.  For each of the calendar years from 2007 through 2010, CANALE also filed false Forms 1040 with the IRS, in which he failed to report as income the dividends, interest, and other income received by him from the Janara Foundation accounts at Wegelin and Swiss Bank A.

*                *                *

            CANALE, 62, faces a maximum sentence of five years in prison.  As part of his plea, CANALE has agreed to pay a civil penalty of $394,460, file amended tax returns, and pay back taxes of $106,820.  He is scheduled to be sentenced by Judge Forrest on December 3, 2015 at 1:00 p.m.  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.

            Mr. Bharara praised the outstanding efforts of the IRS-CI in the investigation.  Mr. Bharara also thanked the U.S. Department of Justice’s Tax Division for their assistance in the investigation.

            This case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Special Assistant United States Attorney Jorge Almonte (of the Tax Division) and Assistant United States Attorney Sarah E. Paul are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that IRWIN LIPKIN, the former Controller at Bernard L. Madoff Investment Securities LLC (“BLMIS”), was sentenced today to six months in prison for fraud and other offenses set forth in a two-count Superseding Information to which LIPKIN pled guilty.  Specifically, LIPKIN pled guilty in November 2012 to one count of conspiracy to commit securities fraud, to falsify records, to make false filings with the Securities and Exchange Commission (“SEC”), and to falsify statements in relation to documents required by the Employee Retirement Income Security Act (“ERISA”), and to one substantive count of falsifying statements in relation to documents required by ERISA.  The overt acts in the conspiracy included, among other things, falsifying financial information BLMIS filed with the SEC, causing fake trades to be created in investment accounts LIPKIN and his family members maintained at BLMIS, and arranging to keep himself and his wife on the BLMIS payroll after his retirement in 1998 – even though neither was working for the firm – so they could collect benefits to which they were not entitled.  LIPKIN was sentenced in Manhattan federal court by U.S. District Judge Laura Taylor Swain.

Manhattan U.S. Attorney Preet Bharara said: “Bernard Madoff did not commit his massive fraud alone.  Irwin Lipkin, hired in the 1960s as BLMIS’s third employee, right after Madoff and Madoff’s wife, was among Madoff’s most loyal accomplices.  Year after year, Lipkin helped keep Madoff’s house of cards from collapsing, falsifying the very financial records that Lipkin, as the Controller, was supposed to monitor.  In exchange, Lipkin reaped the rewards of fake trades and no-show jobs for himself and his family.  Lipkin’s sentencing – the last among the 15 defendants convicted for their participation in Madoff’s fraud – marks the close of another chapter in this tragic tale of unchecked greed.”

According to the Superseding Information to which LIPKIN pled guilty and other court filings:

LIPKIN was employed by BLMIS from 1964 through 1998, and was the first person who was not a family member to be hired by Bernard L. Madoff.  In his role as Controller, LIPKIN participated in maintaining the firm’s financial books and records since at least the mid-1970s.  At the direction of Bernard L. Madoff, LIPKIN, along with Daniel Bonventre, Enrica Cotellessa-Pitz, and others, made false and misleading entries concerning BLMIS’s profit and loss numbers (“P&L”) in the General Ledger and Stock Record, and in supporting books and records. 

As an SEC-registered broker-dealer, BLMIS was required to file Financial and Operational Combined Uniform Single (“FOCUS”) Reports on a monthly, quarterly, and annual basis, as well as annual financial statements concerning BLMIS’s assets, liabilities, revenues, and expenses.  The information contained in the FOCUS Reports and the annual financial statements was derived principally from information recorded in the BLMIS General Ledger and the Stock Record.  Because those numbers were false and misleading, the corresponding numbers contained in the FOCUS Reports and annual financial statements were false and misleading as well.  The annual financial statements provided to various BLMIS Investment Advisory customers also failed to accurately reflect the P&L of BLMIS.  “These filings,” LIPKIN admitted when pleading guilty in November 2012, “helped Mr. Madoff run the Ponzi scheme that harmed thousands of people.”

When LIPKIN retired from BLMIS in 1998, he taught his successor as Controller how to manipulate the revenues at BLMIS in order to reach a particular P&L result, thereby allowing the fraud at BLMIS to continue.

In addition, since at least 1975, LIPKIN and his wife maintained their own personal Investment Advisory accounts at BLMIS.  On multiple occasions, LIPKIN asked Annette Bongiorno, a BLMIS employee who worked in the Investment Advisory business, to execute fake, back-dated trades in both his account and the accounts of his family members.  In an effort to reduce his capital gains income, LIPKIN also asked Bongiorno either to cancel the sales of shares in his account well after those sales had purportedly occurred, or to document nonexistent purchases of shares near the monthly high price, and nonexistent sales near the monthly low price, weeks later.  No such trades actually occurred.

 LIPKIN also arranged “no-show” jobs at BLMIS for both himself and his wife.   As a result, they received income from salaries, health care insurance, 401(k) plans, and other benefits to which they were not entitled.

*               *                 *

In addition to the prison term, Judge Swain sentenced LIPKIN, 77, of Paramus, New Jersey, to three years’ supervised release, including eighteen months of home confinement.  LIPKIN was also ordered to forfeit $170 billion dollars and various pieces of property, including a house in Florida, stocks from brokerage and retirement accounts, and artwork.  This amount represents all of the investor funds paid into BLMIS from the mid-1970s – when LIPKIN became involved with the conspiracy – through December 2008.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation.  He also thanked the U.S. Securities and Exchange Commission and the U.S. Department of Labor for their assistance on this case.

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

The case is being handled by the Office's Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Christopher Frey, Andrea Griswold, and David Abramowicz are in charge of the prosecution.  Assistant U.S. Attorneys Jonathan Cohen, Paul Monteleoni, and Niketh Velamoor are responsible for the forfeiture aspects of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, Philip R. Bartlett, Inspector-in-Charge of the New York Office of the United States Postal Inspection Service (“USPIS”), and Thomas E. Bishop, Acting Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service’s Criminal Investigation Division (“IRS-CI”) announced the arrests today of BINDER TAL, BALDEV TAL, and SHARIFUL MINTU on bank fraud and money laundering charges.  BALDEV TAL was arrested this morning in Orefield, Pennsylvania and appeared in Philadelphia federal court this afternoon.  MINTU was arrested this morning in Orange County, New York, and appeared in White Plains federal court this morning, before U.S. Magistrate Judge Paul E. Davison.  BINDER TAL remains at large.  Each defendant is charged with one count of conspiring to commit bank fraud and one count of conspiring to commit money laundering.

Manhattan U.S. Attorney Bharara said: “For years, banks, credit unions, and small businesses have lost millions of dollars because of the fraud allegedly perpetrated by the defendants in this case.  I would like to thank our partner agencies for their assistance on this case.”

Inspector in Charge Philip R. Bartlett said: “Through disguise and deceit, these defendants created an elaborate scheme to defraud financial institutions. The use of the U.S. Mail to facilitate any fraud scheme will never be tolerated by members of America's oldest law enforcement agency"

 Acting Special Agent-in-Charge Thomas E. Bishop said: “IRS-CI is always ready to work with our law enforcement partners in the investigation of money laundering schemes and the financial crimes with which they are related.  It is important to remember that money laundering is not a victimless crime.  While the victims of bank fraud are usually identifiable individuals or institutions, the damage money laundering inflicts on our nation’s economic strength ultimately harms every American taxpayer.”

According to the allegations in the Complaint unsealed this morning in White Plains federal court[1]:

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

As part of their fraud scheme, the defendants used the proceeds to personally enrich themselves and their families.  They used their proceeds for, among other things, (i) credit card debts for personal expenses; (ii) debts arising from business expenses; and (iii) debts arising from other fraudulently obtained loans, to conceal the fraudulent nature of these loans.

In addition, the defendants and their co-conspirators also engaged in extensive efforts to perpetuate and conceal the fraudulent scheme.  These efforts included members of the conspiracy acting as the borrowers for different loans, falsely claiming that the purpose of the loans was to purchase or finance used luxury automobiles.  In fact, many of the automobiles were never purchased or leased by the defendants or their co-conspirators, and the loan proceeds were later distributed to other members of the conspiracy and to entities they controlled.

                                                                *          *         *

BINDER TAL, BALDEV TAL, and MINTU each face a maximum sentence of 30 years in prison on the charge of conspiring to commit bank fraud and a maximum sentence of 20 years in prison on the charge of conspiring to commit money laundering.  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 efforts of the United States Postal Inspection Service, the Internal Revenue Service, Criminal Investigation Division, and the New York State Police Special Investigations Unit.

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

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), Adrian H. Anderson, the Dutchess County Sheriff, and Ronald J. Knapp,  the Chief of Police of City of Poughkeepsie Police Department, today announced the unsealing of an Indictment and two Complaints charging 10 defendants with committing heroin trafficking and firearms offenses in and around Dutchess County, New York.  Eight defendants were taken into federal custody today and were presented in White Plains federal court this afternoon before U.S. Magistrate Judge Paul E. Davison.  Two defendants were previously taken into federal custody on a Complaint filed on May 14, 2015. 

U.S. Attorney Preet Bharara said: “Heroin is a growing problem in New York, making an unfortunate comeback in cities and rural communities alike.  Heroin and prescription pill overdoses keep going up, killing more and more people every day.  With heroin trafficking and firearms charges like those brought today against ten defendants selling drugs in Dutchess County, we aim to confront this epidemic.  We thank the FBI, the Dutchess County Sherriff’s Office and the Poughkeepsie Police Department for their extraordinary efforts on this case.”

Assistant Director-in-Charge Diego Rodriguez said:  “Today, we announce the charges against ten individuals who allegedly sought to sell heroin in the City of Poughkeepsie with the aid of firearms. The charges demonstrate the FBI’s continued effort to work closely with our law enforcement partners in eliminating the terror these groups inflict on our communities. Dismantling violent gangs remains a priority for the FBI.”

Sheriff Adrian H. Anderson said: “Today the Dutchess County Sheriff’s Office partnered with Federal and local law enforcement agencies to assist in the arrests of numerous people who have allegedly been dealing heroin and other dangerous drugs throughout Dutchess County and surrounding areas. All of these law enforcement agencies are dedicated to working together to rid our streets of dangerous drugs, and I would like to take this opportunity to thank the U.S. Attorney’s Office, the FBI, and the City of Poughkeepsie Police for their outstanding work in helping to make this investigation such an enormous success. Those who deal in heroin and other dangerous drugs are not going to be allowed to poison our community, and this investigation is the latest example of how Federal and local law enforcement agencies working together can make a huge difference and go a long way towards making our streets and residents safer.”

Chief of Police Ronald J. Knap said: “These arrests culminate a joint investigation into regional narcotics trafficking, specifically heroin.  The City of Poughkeepsie was one of the communities that these suspects lived and operated in. We thank the U.S. Attorney’s Office for their work and pending prosecution of this case.  We also thank the FBI and Dutchess County Sheriff for their participation in this successful investigation. The City of Poughkeepsie has suffered more than its share of heroin deaths.  Arresting and prosecuting those who deal in these dangerous drugs on the Federal level is an important strategy as the effort cannot be deal with solely as a local problem.”

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

From December 2013 through June 2015, MONDU ALLAH, CARITA BENNERMAN, CLIFTON CATTS, EUGENE LAMONT GRAVES, LARRY GRAVES, MAURICE HOLLIS, JULIENNE KOLOZY, and SAMUEL TURNER conspired to sell more than one kilogram of heroin.  During the course of the conspiracy, law enforcement officers observed certain defendants participating in the sale of heroin to confidential informants working with law enforcement and to an undercover law enforcement officer.  Law enforcement officers, using a court-authorized wiretap, also intercepted numerous communications in which certain of the defendants discussed heroin trafficking and arranged heroin transactions.  On May 13, 2015, ALLAH and HOLLIS also carried, and aided and abetted the carrying of, a firearm in furtherance of the narcotics conspiracy charged in the Indictment.

In addition the Indictment, two Complaints were also unsealed today.  As alleged in those Complaints:

From December 2013 through January 2014, ROBERT NOVICK conspired to sell heroin, and sold 3, 4 methylenedioxymethamphetamine, commonly referred to as “MDMA,” in Poughkeepsie.  On May 9, 2015, VARICK GOSS conspired to sell heroin and crack cocaine in Poughkeepsie.

*              *             *

ALLAH and HOLLIS, two of the defendants charged in the Indictment, both face a mandatory term of 10 years in prison on Count One and a mandatory term of 5 years in prison on Count Two, consecutive to any sentence on Count One.  Each faces a maximum term of life in prison on both counts.  The other six defendants charged in the Indictment each face a mandatory term of 10 years in prison on Count One, and a maximum term of life.  Each defendant charged in the Complaints faces a maximum term of 20 years in prison.  The statutory minimum and maximum sentences are prescribed by Congress and are provided here for information purposes only, as any sentencing of the defendants would be determined by the respective judges.

Mr. Bharara praised the outstanding investigative work of the FBI Hudson Valley Safe Streets Task Force, the Dutchess County Sheriff’s Office, the City of Poughkeepsie Police Department, and other local law enforcement partners.

These cases are being handled by the Office’s White Plains Division.  Assistant U.S. Attorneys Lauren Schorr and Douglas Zolkind are in charge of the prosecutions.

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

15-202                                                  

CHARGE

DEFENDANTS

MAXIMUM PENALTIES

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)(A))

MONDU ALLAH,

a/k/a “Mindu Allah,”

a/k/a “Duberry,”

a/k/a “Du,”

CARITA BENNERMAN,

CLIFTON CATTS,

EUGENE LAMONT GRAVES,

LARRY GRAVES,

a/k/a “Knowledge,”

MAURICE HOLLIS,

a/k/a “Mo,”

JULIENNE KOLOZY, and

SAMUEL TURNER

Life in prison

Mandatory minimum: 10 years in prison

Use of a firearm in furtherance of a drug trafficking crime

(in violation of 18 U.S.C. § 924(c))

MONDU ALLAH,

a/k/a “Mindu Allah,”

a/k/a “Duberry,”

a/k/a “Du,” and

MAURICE HOLLIS,

a/k/a “Mo”

Life in prison

Mandatory minimum: 5 years in prison, to be imposed consecutively to any other sentence

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))

ROBERT NOVICK

20 years in prison

Distribution and possession with intent to distribute 3, 4 methylenedioxymethamphetamine

(in violation of 21 U.S.C. §§ 841(a)(1) & 841(b)(1)(C))

ROBERT NOVICK

20 years in prison

Narcotics conspiracy – Heroin and crack cocaine

(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))

VARICK GOSS

20 years in prison

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that SAMUEL TERWILLIGER was sentenced to 12 years in prison for his attempted enticement of a minor to engage in sexual activity.  TERWILLIGER pled guilty on October 22, 2014 before U.S. District Court Judge Vincent Briccetti, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “Samuel Terwilliger has now been sentenced for his predatory crime, attempting to entice a minor to engage in sexual activity.  This case – and others like it that we prosecute – underlines the need for law enforcement to be vigilant in its protection of children from those who prey on them.  I want to thank the FBI, the Rockland County Computer Crimes Task Force, the Child Protective Services of Sullivan County, and the Sullivan County Sheriff’s Department for their work in this investigation and prosecution. ”

According to the Complaint and other documents filed in this case, and statements made in related court proceedings:

In August 2013, an individual (the “Reporter”) advised the Federal Bureau of Investigation (“FBI”) that the Reporter, posing as a 14-year-old girl, had engaged in online communications with a person using the screen name “tas_128.”  During those communications, “tas_128” indicated that “tas_128” wanted to engage in sexual activities with the Reporter.  The FBI instructed the Reporter to advise “tas_128” that the Reporter had a young friend who would be interested in communicating with “tas_128” and provided the Reporter with an email address to provide to “tas_128” for an undercover FBI agent (“UC”).

Between August 16, 2013 and September 26, 2013, the UC and “Tas_128,” later identified as SAMUEL TERWILLIGER, engaged in a series of emails and text communications.  Among other things, TERWILLIGER told the UC that he was 24 years old and the UC told TERWILLIGER that she was a 13-year-old girl.  During these communications, TERWILLIGER acknowledged his understanding that the UC was a minor, solicited graphic sexual images of the minor from the UC, and described in detail a variety of sexual acts he wanted to engage in with the 13-year-old.  TERWILLIGER repeatedly requested that the minor join him in a “three-way relationship” with his girlfriend and told the girl that he wanted to impregnate her.  TERWILLIGER told the UC, “We have been trying to find a woman for a year now that would join our relationship.”

On April 10, 2014, the FBI executed a search warrant at the defendant’s residence.  On that date, the defendant admitted that he had engaged in sexually-explicit conversations with a girl whom he believed to be approximately 13 years old.  He also admitted that, at the time he was communicating with her, he planned to bring her to stay with him and his girlfriend because he wanted to have sex with her and impregnate her.  In addition, the defendant admitted that, in October 2013, he had engaged in sexual intercourse with a 15-year-old girl while his girlfriend watched.

*                *                  *

TERWILLIGER, 26, of Calicoon, NY, was also sentenced to 5 years’ supervised release to follow the imprisonment.

Mr. Bharara praised the efforts of the FBI, the Rockland County Computer Crimes Task Force, Child Protective Services of Sullivan County, and the Sullivan County Sheriff’s Department in connection with this case.

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that HENRY JAMES was sentenced today in Manhattan federal court to 205 months in prison for leading a robbery crew that committed over two dozen armed robberies in the Bronx and Brooklyn in 2013.  Since September 2013, JAMES and ten other defendants have been charged for their respective roles in this armed robbery conspiracy.  In October 2014, JAMES pled guilty to participating in the robbery conspiracy and a firearms offense.  JAMES was sentenced by United States District Judge Sidney H. Stein.

In November 2014, co-defendants Markquez McFadden and Qushawn Woods were convicted after a two-week jury trial before Judge Stein.  McFadden and Woods were each found guilty of participating in the robbery conspiracy, and McFadden was also found guilty of a firearms offense.  On July 9, 2015, Judge Stein sentenced Woods to 46 months in prison.  On July 15, 2015 Judge Stein sentenced McFadden to 120 months in prison.

The eight other defendants in this case – Jerome Ortiz, Edward Matthews, Kelvin Green, Tyrell Jones, Untra Jones, Cesar Thomas, Dennis Buie, Sr., and Dennis Buie, Jr. – pled guilty to various offenses, including participating in the robbery conspiracy and/or firearms offenses.

Manhattan U.S. Attorney Preet Bharara said: “Henry James, a convicted murderer, led a violent and ruthless armed robbery crew that terrorized hard working employees at various stores in the Bronx and Brooklyn.  For his crime spree of over two dozen armed robberies, James has now been convicted and sentenced.”

            According to the allegations contained in the Indictments, evidence presented at trial, and other court documents previously filed in Manhattan federal court:

Between July and October 2013, the eleven-member crew that JAMES led and organized committed more than two dozen armed robberies in the Bronx and Brooklyn.  The robberies followed a simple but violent pattern.  Multiple robbers entered a store during business hours while customers and employees were inside and demanded money, cellphones, and other items at gunpoint.  During these robberies, one robber entered the store first, drew his gun, approached the clerk, and announced a robbery.  The other robber or robbers then walked in, often closed the door behind them, and then put a mask over (or pulled a hood onto) their faces.  The robbers would demand access to the “drop box” or “lock box” where they believed cash was held.  Afterward, the robbers left the store and drove away in a vehicle that was parked around the corner from the store.  In certain robberies, store employees were pistol whipped.

JAMES previously served a more than a 20-year sentence for a 1986 second degree murder in which a victim was killed during the course of a robbery.  Less than one year after he was released from prison, JAMES began recruiting members to commit these armed robberies.

*                *                *

            All eleven defendants have either pled guilty or been convicted after trial.  In addition to JAMES, Woods, and McFadden, the following defendants have been sentenced by Judge Stein:

• On July 31, 2014 Jerome Ortiz was sentenced to 120 months in prison.
• On October 28, 2014, Edward Matthews was sentenced to 132 months in prison.
• On December 17, 2014, Untra Jones was sentenced to 90 months in prison.
• On February 23, 2015, Dennis Buie, Sr. was sentenced to 27 months in prison.

Cesar Thomas, Dennis Buie, Jr., Kelvin Green, and Tyrell Jones have yet to be sentenced.

            Mr. Bharara praised the investigative work of the New York City Police Department, especially detectives from the Bronx Robbery Squad and Joint Robbery Task Force.  Mr. Bharara also thanked the United States Marshals Service Fugitive Task Force for their outstanding assistance in the pursuit and arrest of JAMES.

The case is being prosecuted by the Office’s Violent & Organized Crime Unit.  Assistant United States Attorneys Andrew Bauer, Andrea M. Griswold, and Joshua A. Naftalis are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that JEFFREY S. STEIN and MARLA STEIN, who are husband and wife, were sentenced today to 18 months and 12 months and one day in prison, respectively, for obstructing the IRS by, among other things, providing to an IRS auditor phony documents designed to support false deductions both claimed on their joint tax returns for the years 2009-2012.  JEFFREY S. STEIN, a vascular surgeon, and MARLA STEIN, a New York personal injury lawyer, were both sentenced by U.S. District Judge Denise L. Cote.

Manhattan U.S. Attorney Preet Bharara said: “Taxpayers have an obligation not only to file truthful and accurate tax returns, but also to deal with the IRS honestly during audits.  Jeffrey and Marla Stein failed to do so, and as a result, both have been sentenced today to jail terms.”

According to the Information and other documents filed in Manhattan federal court, as well as the transcript of today’s sentencing proceedings:

JEFFREY S. STEIN was a vascular surgeon who, between 2009 and 2012, conducted business principally through his own Manhattan and Long Island-based medical practice, “Jeffrey Stein, M.D.”  Between 2008 and 2011, JEFFREY S. STEIN was also affiliated with and earned income from certain medical groups, including one based in Brooklyn that had contracts with the United States Department of Veterans Affairs (“V.A.”).

MARLA STEIN was an attorney who, between 2009 and 2012, performed legal services largely as an independent contractor to certain Manhattan-based personal injury law firms.

Both JEFFREY S. STEIN and MARLA STEIN reported the profits from their medical and law practices, respectively, on separate Schedules C (Profit or Loss From Business) attached to the joint U.S. Individual Income Tax Returns, Forms 1040, that they filed for the tax years 2009-2012.

Filing of False Tax Returns

In connection with the preparation of their Forms 1040 for the tax years 2009-2012, JEFFREY S. STEIN and MARLA STEIN provided false and fictitious information to their accountant in order to fraudulently reduce the amount of taxes they would have to pay to the IRS.  In particular, JEFFREY S. STEIN provided the accountant with (a) wholly fictitious Schedule C expenses purportedly incurred by his medical practice, such as contract labor expenses and transcription services that were, in truth and fact, never incurred or paid; and (b) falsely inflated Schedule C expenses purportedly incurred by his medical practice, including travel and auto expenses, deductible meals and entertainment, and the amounts of wages paid to employees of his medical practice.  In addition, MARLA STEIN provided this accountant with (a) wholly fictitious Schedule C contract labor and advertising expenses purportedly incurred by her law practice but which were, in truth and fact, never incurred or paid; and (b) falsely inflated Schedule C expenses purportedly incurred by her law practice, including those for office supplies and deductible meals and expenses.

In addition to the foregoing, for the tax years 2007-2013, JEFFREY S. STEIN and MARLA STEIN failed to inform their accountant that they employed and paid approximately $15,000 annually in cash wages to a household employee (“the Domestic Employee”) who performed certain cleaning and childcare services in their Upper East Side home.

As a result of the falsely inflated and wholly fictitious information provided by JEFFREY S. STEIN and MARLA STEIN to their accountant in connection with the preparation of their Forms 1040 for the 2009-2012 tax years, the accountant prepared tax returns for JEFFREY S. STEIN and MARLA STEIN that falsely and fraudulently understated their business income and, consequently, the amount of taxes due and owing to the IRS.  In addition, as a result of the failure of JEFFREY S. STEIN and MARLA STEIN to inform their accountant of the cash wages paid to their Domestic Employee for the 2007-2013 tax years, JEFFREY S. STEIN and MARLA STEIN failed to pay to the IRS various employment taxes due and owing to the IRS, and also aided the Domestic Employee in avoiding detection by the IRS of the employee’s failure to report her cash wages to the IRS for the tax years 2007-2013.

Obstruction of the IRS Audit

In February 2013, the IRS notified JEFFREY S. STEIN and MARLA STEIN, the defendants, that their tax returns for the 2010 and 2011 tax years had been selected for audit, specifically with respect to their respective Schedule C expenses.  In response to requests by the IRS auditor for documents supporting their claimed deductions and expenses, JEFFREY S. STEIN and MARLA STEIN created and provided to their accountant – whom they retained to represent them during the audit – various fabricated and fictitious documents and information as part of a corrupt effort to convince the IRS auditor that the expenses claimed on their respective Schedules C were legitimate.

Among the fabricated and fictitious documents created by JEFFREY S. STEIN and MARLA STEIN and provided to their accountant, in order to pass on to the IRS auditor, were the following:

(a) Using the names of four disabled military veterans (including two former patients) whose identities and other personal information JEFFREY S. STEIN obtained as a result of his work for the V.A., JEFFREY S. STEIN created bogus invoices in the names of those veterans (“the Bogus Invoices”).  The Bogus Invoices falsely recited that the individuals whose names were contained on the invoices had performed during 2010 and 2011, and been paid by JEFFREY S. STEIN for, various medical services rendered to JEFFREY S. STEIN’s medical practice, such as “ultrasound technologist” and “vascular technologist” services.  In truth and fact, none of the individuals whose names were placed on the Bogus Invoices provided any of the services recited in the fabricated invoices, which totaled $126,525.  One of the veterans whose name and social security number were placed on a Bogus Invoice by JEFFREY S. STEIN was not even alive in 2011 – a year for which JEFFREY S. STEIN created a Bogus Invoice for that individual.

(b) JEFFREY S. STEIN created invoices purportedly sent to STEIN’s medical practice in 2010 and 2011 by a Long Island hospital (“the Hospital”) reflecting payments sought by the Hospital for “surgical physician assistant cost sharing,” which invoices JEFFREY S. STEIN claimed were paid by his medical practice.  In truth and fact, the services reflected in the Hospital invoices were never provided to JEFFREY S. STEIN and never paid by his medical practice as expenses.

(c) JEFFREY S. STEIN created invoices purportedly sent to STEIN’s medical practice in 2010 and 2011 by a company that provided transcription services.  In truth and fact, the transcription company identified by JEFFREY S. STEIN never provided any transcription services to JEFFREY S. STEIN’s medical practice.

(d) MARLA STEIN created certain documentation indicating that two individuals, whose names and purported tax identification numbers were included thereon, had provided certain services to MARLA STEIN’s law practice and had been paid fee income by MARLA STEIN as a result.  In truth and fact, neither of those individuals had provided services to MARLA STEIN’s law practice.  Instead, the individuals whose identities and social security numbers were used were those of the Domestic Employee and a medical professional who had performed services for a member of MARLA STEIN’s immediate family.

(e) Using genuine invoices previously provided to MARLA STEIN by photographers and a videographer who had performed services in connection with religious celebrations for MARLA STEIN’s family, MARLA STEIN used the names of the photographers and videographer but fraudulently altered the real invoices to make them appear as if the services reflected in the invoices had been provided to MARLA STEIN’s law practice, as part of her work on personal injury cases.

*                *                *                                          

In addition to prison terms, JEFFREY S. STEIN, 58, of New York, New York, and MARLA STEIN, 52, also of Manhattan, were also ordered to pay restitution to the IRS in the aggregate amount of $344,989.

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

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorney Stanley J. Okula, Jr. is in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and William J. Bratton, the Commissioner of the New York City Police Department (“NYPD”), announced the unsealing today of an Indictment charging 20 defendants with participating in a conspiracy to distribute large quantities of heroin and crack cocaine in the vicinity of Hoe Avenue and Aldus Street in the Bronx.  Six of the 20 defendants were also charged with possessing firearms in furtherance of the narcotics trafficking conspiracy.  Several of the defendants charged in the Indictment were involved in a recent shooting in which a member of the conspiracy used a handgun to fire shots at two individuals – who luckily were not struck by the gunfire – in front of an apartment building on Aldus Street.  Fifteen of the defendants named in the Indictment are in federal custody and are expected to be arraigned in Manhattan federal court before U.S. Magistrate Judge Henry Pitman.  Fourteen of those defendants were taken into federal custody today, and one was already in federal custody on a separate criminal case pending in Manhattan federal court.

 Manhattan U.S. Attorney Preet Bharara said: “As alleged, the twenty defendants charged today were part of a dangerous drug trafficking crew that terrorized a Bronx neighborhood by peddling heroin and crack cocaine in apartment buildings with families and children, just a block from a public school.  As the indictment alleges, this crew protected its turf with guns, not afraid to shoot at people in front of a Bronx apartment building, as one of the defendants is alleged to have done in May.  Thanks to the outstanding work of the FBI and the NYPD, the residents of that Bronx neighborhood are safer today.”

FBI Assistant Director-in-Charge Diego Rodriguez said: “The FBI remains committed to protecting our community by targeting and removing violent drug distributors and their guns from our neighborhoods.  As alleged herein, the defendants committed their illegal acts near a school and surrounded by families.  With no regard for innocent lives, they brazenly carried and fired their weapons on crowded New York City streets.  We thank the New York City Police Department and the United States Attorney's Office for sharing our commitment through solid partnerships and strong joint investigations.”

NYPD Commissioner Bratton said: “There is no place in our communities for narcotics trafficking and the violence associated with this criminal enterprise.  I would like to commend the NYPD investigators, the agents of the FBI, and the prosecutors of the U.S. Attorney’s Office whose work in this investigation brought these individuals to justice.”

As alleged in the Indictment and other court documents unsealed today in Manhattan federal court***:

From May 2014 through July 2015, the twenty defendants named in the Indictment – specifically, RAFAEL OJEDA, 51, CALVIN OJEDA, 24, JONATHAN OJEDA, 22, SERVANDO JOSE GOMEZ, 41, HECTOR TIRADO, 22, TRAVIS PROFIT, 28, ANGEL SEPULVEDA, 35, EDUARDO VAZQUEZ, 23, JASON PEREZ, 24, TREVIS BOWENS, 25, JHOVY DIONIZIO, 27, CHRISTIAN DUMES, 33, CHRISTIAN RAMOS, 26, PAQUITO RODRIGUEZ, 56, GISETTE RIVERA, 56, SAMUEL PALMER, 20, JOSE COLON, 48, ANTOINE HENDERSON, 28, ADRIEL PONCE, 25, and CHRISTOPHER RICHARDSON, 22 – participated in a conspiracy to sell controlled substances, including heroin and crack cocaine, in the vicinity of Hoe Avenue in the Bronx.  Specifically, the Indictment charges these twenty defendants with conspiring to distribute and possess with intent to distribute at least one kilogram of mixtures and substances containing a detectable amount of heroin and an unspecified quantity of mixtures and substances containing cocaine base in a form commonly known as “crack.”  Six of the twenty defendants – namely, CALVIN OJEDA, JONATHAN OJEDA, GOMEZ, PROFIT, VAZQUEZ and PEREZ – are also charged with possessing firearms in furtherance of the narcotics trafficking conspiracy.

During the time period charged in the Indictment, members of the conspiracy sold large quantities of heroin and crack in the vicinity of Hoe Avenue in the Bronx, about one city block from a public school.  Members of the conspiracy sold heroin and crack from stairwells and other common areas in apartment buildings where families with children reside, and in private apartments that have been converted into drug stash houses in such buildings, among other locations.  Multiple members of the conspiracy used firearms in connection with their narcotics trafficking.  On or about May 29, 2015, several of the defendants charged in the Indictment were involved in a shooting in which one of the defendants used a handgun to fire shots at two people in front of an apartment building on Aldus Street.

*          *          *

Of the twenty defendants named in the Indictment, the fourteen defendants charged only with participating in the narcotics trafficking conspiracy face mandatory minimum prison terms of 10 years and maximum prison terms of life.  The remaining six defendants, who are charged both with participating in the narcotics trafficking conspiracy and also with possession of firearms in furtherance of that conspiracy, face mandatory minimum prison terms of fifteen years and maximum prison terms of life.  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 praised the outstanding investigative work of the FBI and NYPD.

The prosecution is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Samson Enzer and Jared Lenow 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.

###

15 Cr. 487 (GBD).

CHARGE(S)

DEFENDANTS

MAXIMUM PENALTIES

Conspiracy to distribute and possess with intent to distribute one kilogram and more of heroin, and an unspecified quantity of crack cocaine

All twenty of the defendants named in the Indictment:

RAFAEL OJEDA

CALVIN OJEDA

JONATHAN OJEDA

SERVANDO JOSE GOMEZ

HECTOR TIRADO

TRAVIS PROFIT

ANGEL SEPULVEDA

EDUARDO VAZQUEZ

JASON PEREZ

TREVIS BOWENS

JHOVY DIONIZIO

CHRISTIAN DUMES

CHRISTIAN RAMOS

PAQUITO RODRIGUEZ

GISETTE RIVERA

SAMUEL PALMER

JOSE COLON

ANTOINE HENDERSON

ADRIEL PONCE

CHRISTOPHER RICHARDSON

Life in prison

Mandatory minimum: 10 years in prison

Possession of firearms in furtherance of the above-referenced narcotics conspiracy

Six of the twenty defendants named in the Indictment:

CALVIN OJEDA

JONATHAN OJEDA

SERVANDO JOSE GOMEZ

TRAVIS PROFIT

EDUARDO VAZQUEZ

JASON PEREZ

Life in prison

Mandatory minimum: 5 years in prison, to be imposed consecutively to any other sentence

***As the introductory phrase signifies, the text of the Indictment and other court papers referenced herein, and the description of those materials set forth herein, constitute only allegations, and every fact described should be treated as an allegation.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that RYAN TOMAZIN, the founder and managing partner of R2 Capital Group LLC (“R2 Capital”), pled guilty in Manhattan federal court to a two-count Indictment charging him with defrauding investors and misappropriating investment funds.  TOMAZIN and other principals at R2 Capital caused over $850,000 of investors’ funds to be withdrawn from bank accounts associated with the commodity pool and directed to bank accounts held in their own names or that of their respective holding companies.  TOMAZIN was arrested on December 11, 2014 and pled guilty today before United States District Judge Paul A. Crotty.

Manhattan U.S. Attorney Preet Bharara said:  “As Ryan Tomazin acknowledged today by pleading guilty to securities and commodities fraud, he lied to investors and used his company to line his own pockets with investors’ money.”

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

In late 2009, R2 Capital created a commodity pool, R2 Capital Partners I L.P. (the “Commercial Pool”) and began to solicit investors, eventually raising approximately $2.2 million.  In early 2010, TOMAZIN solicited a potential investor in the Commercial Pool (“Investment Fund-1”) and provided Investment Fund-1 with documentation that stated, among other things, that R2 Capital would receive a management fee limited to 50% of the profits earned by the Commercial Pool.  Investment Fund-1 invested over $1 million in the Commercial Pool.  From June 2010 up to and including July 2011, the Commercial Pool experienced significant net losses.  In July 2011, all trading activity in the Commercial Pool ceased.  By August 2011, there was less than $5,000 remaining in bank accounts associated with the Commercial Pool.  Nonetheless, between August 2011 and March 2013, TOMAZIN caused false “Trading Statements” to be sent to Investment Fund-1 reflecting false purported monthly trading profits and inaccurate trade balances.  Furthermore, contrary to prior representations that R2 Capital’s management fee would be limited to 50% of profits earned, TOMAZIN and other principals at R2 Capital caused approximately $850,000 to be withdrawn from bank accounts associated with the Commercial Pool for their own personal benefit.

*                *                *

TOMAZIN, 35, of Stamford, Connecticut, pled guilty to one count of securities fraud and one count of commodities fraud.  The securities fraud charge carries a maximum term of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense.  The commodities fraud charge carries a maximum term of 10 years in prison and a maximum fine of $1 million, or twice the gross gain or loss from the offense.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  As part of the plea agreement, TOMAZIN agreed to pay forfeiture and restitution to the victims of the offense in the amount of $288,000.  TOMAZIN is scheduled to be sentenced by Judge Crotty on December 3, 2015.

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.

Mr. Bharara thanked U.S. Commodity Futures Trading Commission for their assistance with the investigation.

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

Preet Bharara, the United States Attorney for the Southern District of New York,   announced that JONATHAN LYONS, a former sales representative at a company purporting to provide mortgage modification services, pled guilty yesterday in Manhattan federal court for his role in a multimillion-dollar scheme that victimized more than 500 financially struggling homeowners across the country.  LYONS, who was arrested in October 2013, pled guilty before U.S. District Judge George B. Daniels.

Manhattan U.S. Attorney Preet Bharara said:  “Through his plea, Jonathan Lyons acknowledged his role in a multimillion dollar scheme that targeted and victimized hundreds of desperate, financially vulnerable homeowners weighed down by debt.  We thank our partners, including the Special Inspector General for the Troubled Asset Relief Program, the Federal Bureau of Investigation, and the New York State Office of the Attorney General for their role in bringing Lyons to justice.”

According to the allegations contained in the Indictment and related Informations, the plea agreements, and statements made in court proceedings:

From approximately January 2009 to June 2011, LYONS and his co-conspirators perpetrated a scheme to defraud homeowners who were in danger of losing their homes because they could not afford to pay their residential mortgages.  Through a company located in Long Island, New York (“Company-1”), and its successor companies (the “Mortgage Modification Companies”), LYONS, his co-conspirators, and other employees falsely promised to help financially struggling residential mortgage holders refinance their mortgages for lower interest rates and monthly payments.  Despite the defendants’ claims, however, the Mortgage Modification Companies delivered little or no service to their customers, diverting most, if not all, of the customers’ payments to the Mortgage Modification Companies’ owners and employees rather than using those funds to assist customers in procuring mortgage modifications.  Through their scheme, the Mortgage Modification Companies obtained at least $2.3 million from more than 500 homeowners throughout the United States.

The Mortgage Modification Companies charged customers thousands of dollars in up-front fees—in violation of New York State law—and made fraudulent claims about the companies’ services, including that the Mortgage Modification Companies guaranteed that they would either: (i) secure a mortgage modification that would result in a significant reduction in the customer’s interest rate and/or monthly payments; or (ii) provide the customer’s money back.  Through the Mortgage Modification Companies, the defendants and other employees also falsely claimed to be affiliated with the federal government’s Home Affordable Modification Program (“HAMP”), a federally-funded mortgage assistance program that is part of the Troubled Asset Relief Program and is available to homeowners free of charge.

The Mortgage Modification Companies targeted homeowners who had fallen behind, or were in danger of falling behind, in making mortgage payments on their homes.  LYONS and two other company sales representatives, AREN GOLDFADEN and DARRELL KEYS, spoke to hundreds of struggling homeowners on behalf of the Mortgage Modification Companies, repeatedly making materially false or misleading representations to convince these prospective clients to pay upfront fees to the companies.  The false or misleading representations included that the Mortgage Modification Companies were associated with HAMP; that a mortgage modification was guaranteed and would take only approximately thirty to sixty days; and that the Mortgage Modification Companies would issue a full refund of the upfront fee to any client whose mortgage was not successfully modified in the stated time period.  ANTHONY BLACKWELL, who held himself out as an attorney for the Mortgage Modification Companies, despite not having a valid law license for most of the relevant period, and ANGEL GONZALEZ, a sales manager who was involved in training sales representatives, instructed the companies’ sales representatives on how to lie to customers and routinely refused to provide refunds to customers despite the fact that those customers did not obtain mortgage modifications as promised.

BLACKWELL and GONZALEZ also personally met with and spoke directly to customers and told similar lies.  They sought to cover up their fraudulent scheme by, among other things, directing sales representatives to assuage customers by falsely claiming that work was being done on the customer’s behalf and that the company just needed more time to obtain a mortgage modification, when, in fact, little or no work was being done to provide a mortgage modification to the customers.

*              *             *

LYONS, 53, of Rockville Center, New York, pled guilty to one count of conspiracy to commit wire fraud, and faces 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 the judge.  LYONS is scheduled to be sentenced on by Judge Daniels on January 7, 2016.

BLACKWELL, GOLDFADEN, GONZALEZ, and KEYS also each pled guilty to one count of conspiracy to commit wire fraud.  BLACKWELL, 49, of Manhattan, New York, pled guilty before Judge Daniels on July 8, 2015, and is scheduled to be sentenced on November 5, 2015.  GOLDFADEN, 38, of East Rockaway, pled guilty before Judge Daniels on June 1, 2015, and is scheduled to be sentenced on October 15, 2015.  GONZALEZ, 33, of Rosedale, New York, pled guilty before Judge Daniels on March 5, 2015.  KEYS, 52, of Uniondale, New York, pled guilty before U.S. District Judge Robert W. Sweet on September 19, 2013.

In addition, a founder and co-owner of Company-1, SCOTT SCHREIBER, 32, of Brooklyn, New York, pled guilty for his role in the offense to one count of conspiracy to commit wire fraud and one count of wire fraud, before the late U.S. District Judge Robert P. Patterson on October 16, 2013.  SCHREIBER’s case is now before U.S. District Judge Loretta A. Preska.  Sentencing dates have not yet been set for GONZALEZ, KEYS or SCHREIBER.

            Mr. Bharara praised the Special Inspector General for the Troubled Asset Relief Program and the Federal Bureau of Investigation for their outstanding work in the investigation.  Mr. Bharara also thanked the New York State Office of the Attorney General 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’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 matter is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Janis Echenberg and Daniel Tehrani are in charge of the case.