Southern District of New York
Press releases recorded for this federal judicial district.
Former Chief Information Officer of Foundry Networks Sentenced to 78 Months in Prison for Participating in Insider Trading Scheme That Reaped Tens of Millions in Unlawful GainsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that DAVID RILEY, former Chief Information Officer of Foundry Networks, Inc. (“Foundry”), a California-based technology company that was acquired by Brocade Communications, Inc. (“Brocade”), in 2008, was sentenced today to 78 months in prison for his participation in an insider trading scheme that yielded approximately $39 million in ill-gotten gains. The sentence was imposed by U.S. District Judge Valerie E. Caproni. RILEY was convicted following a 13-day trial in September 2014 in which the jury unanimously concluded that RILEY passed inside information about Foundry’s acquisition by Brocade and about Foundry’s earnings for the first quarter of 2008 to Matthew Teeple, a former analyst for San Francisco-based hedge fund Artis Capital Management, L.P. (“Artis”). Teeple pled guilty to related charges in May 2014 and was sentenced principally to 60 months in prison by U.S. District Judge Robert P. Patterson on October 16, 2014.
Manhattan U.S. Attorney Preet Bharara said: “David Riley took advantage of his insider position at Foundry Networks to funnel sensitive nonpublic financial information to Matthew Teeple. This inside information enabled Teeple’s firm to reap nearly $40 million in illegal profits. This conduct has now earned Riley more than six years in federal prison.”
According to the Superseding Indictment filed February 20, 2014, other court documents, and the evidence presented at trial:
As CIO and a Vice President at Foundry, RILEY had access to monthly and quarterly financial reporting, along with other sensitive, nonpublic information (the “Inside Information”) relating to Foundry, well before such information became public. RILEY provided this Inside Information to Teeple – sometimes by telephone and sometimes during meetings the two arranged in the San Jose, California, area. On several occasions, RILEY spoke with Teeple while logged into the database that Foundry used to maintain sensitive financial information. The Inside Information that RILEY passed to Teeple included quarterly financial performance numbers during the first quarter of 2008 and information regarding Brocade’s intended acquisition of Foundry in July 2008.
Teeple passed the Inside Information he got from RILEY on to others, including others at Artis. From the Inside Information Teeple provided about Foundry, Artis ultimately reaped gains of approximately $39 million.
In addition to the prison sentence he received today, RILEY, 48, of San Jose, California, was ordered to pay a fine of $50,000.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation and thanked the Securities and Exchange Commission, which has filed civil charges in a separate action.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Telemachus P. Kasulis and Sarah E. McCallum, and Special Assistant U.S. Attorney Michael P. Holland, are in charge of the prosecution.
Former Chief Information Officer of Foundry Networks Sentenced to 78 Months in Prison for Participating in Insider Trading Scheme That Reaped Tens of Millions in Unlawful GainsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that DAVID RILEY, former Chief Information Officer of Foundry Networks, Inc. (“Foundry”), a California-based technology company that was acquired by Brocade Communications, Inc. (“Brocade”), in 2008, was sentenced today to 78 months in prison for his participation in an insider trading scheme that yielded approximately $39 million in ill-gotten gains. The sentence was imposed by U.S. District Judge Valerie E. Caproni. RILEY was convicted following a 13-day trial in September 2014 in which the jury unanimously concluded that RILEY passed inside information about Foundry’s acquisition by Brocade and about Foundry’s earnings for the first quarter of 2008 to Matthew Teeple, a former analyst for San Francisco-based hedge fund Artis Capital Management, L.P. (“Artis”). Teeple pled guilty to related charges in May 2014 and was sentenced principally to 60 months in prison by U.S. District Judge Robert P. Patterson on October 16, 2014.
Manhattan U.S. Attorney Preet Bharara said: “David Riley took advantage of his insider position at Foundry Networks to funnel sensitive nonpublic financial information to Matthew Teeple. This inside information enabled Teeple’s firm to reap nearly $40 million in illegal profits. This conduct has now earned Riley more than six years in federal prison.”
According to the Superseding Indictment filed February 20, 2014, other court documents, and the evidence presented at trial:
As CIO and a Vice President at Foundry, RILEY had access to monthly and quarterly financial reporting, along with other sensitive, nonpublic information (the “Inside Information”) relating to Foundry, well before such information became public. RILEY provided this Inside Information to Teeple – sometimes by telephone and sometimes during meetings the two arranged in the San Jose, California, area. On several occasions, RILEY spoke with Teeple while logged into the database that Foundry used to maintain sensitive financial information. The Inside Information that RILEY passed to Teeple included quarterly financial performance numbers during the first quarter of 2008 and information regarding Brocade’s intended acquisition of Foundry in July 2008.
Teeple passed the Inside Information he got from RILEY on to others, including others at Artis. From the Inside Information Teeple provided about Foundry, Artis ultimately reaped gains of approximately $39 million.
In addition to the prison sentence he received today, RILEY, 48, of San Jose, California, was ordered to pay a fine of $50,000.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation and thanked the Securities and Exchange Commission, which has filed civil charges in a separate action.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Telemachus P. Kasulis and Sarah E. McCallum, and Special Assistant U.S. Attorney Michael P. Holland, are in charge of the prosecution.
Dutchess County Man Pleads Guilty in White Plains Federal Court to Distributing Heroin and Fentanyl That Caused the Deaths of Three PeopleRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that DENNIS SICA pled guilty today in White Plains federal court to participating in a conspiracy to distribute heroin and fentanyl, the use of which resulted in the deaths of three individuals: Anthony Delello, Laura Brown, and Thomas Miller. SICA was arrested by state authorities on February 2, 2014, and was transferred to federal custody on June 19, 2014. He pled guilty before United States District Judge Cathy Seibel on the day trial was scheduled to begin on the one-count Indictment to which he pled.
U.S. Attorney Preet Bharara stated: “With today’s guilty plea, Dennis Sica formally acknowledged his role in causing the deaths of three young people. The outcome of this prosecution may do little to console the family members who lost their loved ones to the scourge of heroin and Sica’s willingness to exploit their addictions for personal gain. One can hope, however, that the significant penalties Sica faces for his crimes will deter those who peddle deadly drugs and avoid the tragedy that these young victims and their families have suffered.”
According to the allegations contained in the Indictment, the underlying criminal Complaint unsealed on June 19, 2014, and statements made during court proceedings:
From at least late 2013 to February 2014, SICA and others worked together in Dutchess County to sell a particularly potent form of heroin, bags of which were stamped with the brand name “Breaking Bad.” At least some of the heroin distributed by SICA was laced with fentanyl, a synthetic opioid that is significantly stronger than street heroin.
On the night of December 28, 2013, SICA sold “Breaking Bad” heroin to Anthony Delello, a 20-year-old resident of Beekman, New York. Delello snorted some of SICA’s heroin and was found dead by his girlfriend the following day. The Dutchess County Medical Examiner’s report concluded that he died from “acute heroin intoxication.”
Delello’s death did not stop SICA from selling “Breaking Bad” heroin. Four days after Delello was found dead, SICA exchanged a series of text messages with a co-conspirator in which SICA urged the co-conspirator to delete the text message history in the phone they used to sell heroin and, if asked, to deny knowing anything about Delello or the manner of his death.
Slightly more than a month after Delello’s death, two more individuals died after overdosing on “Breaking Bad” heroin. On February 1, 2014, Thomas Miller, 31, was found dead by his mother at his home in Pawling, New York. A hypodermic needle, as well as several glassine bags stamped with the words “Breaking Bad,” were found near his body. Some of the glassine bags were full, others were empty. A chemical analysis of the contents of the full glassine bags showed that they contained a mixture of quinine, fentanyl, and heroin. The medical examiner’s report indicates that Miller died of “acute intoxication by the combined effects of heroin and fentanyl.”
The same day that Miller was found dead, Laura Brown, 35, was found dead of an apparent heroin overdose in New Milford, Connecticut. Brown was found with needles and glassine bags near her body. Several of the glassine bags were stamped with the words “Breaking Bad.” The autopsy performed on Brown’s body showed that she died of “acute heroin and fentanyl intoxication.” According to Brown’s brother, he and Brown together bought “Breaking Bad” heroin from SICA two days before Brown was found dead.
On February 2, 2014, SICA was arrested by state authorities in East Fishkill, New York, after a car in which he was riding was stopped by law enforcement. During a subsequent search of the car, law enforcement officers recovered several glassine bags stamped with a “Breaking Bad” stamp identical to the one that appears on the envelopes recovered from Thomas Miller’s bedroom.
SICA, 37, of Hopewell Junction, New York, pled guilty to one count of conspiracy to distribute heroin and fentanyl resulting in death. The offense carries a mandatory minimum penalty of 20 years in prison, a maximum penalty of life in prison, and a maximum fine of $1 million or twice the gain or loss resulting from the crime. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the outstanding investigative work of the Drug Enforcement Administration’s (“DEA”) Tactical Diversion Squad and the Dutchess County Drug Task Force. The DEA Tactical Diversion Squad is composed of agents and officers of the DEA, the New York City Police Department, the Westchester County Police Department, and the Town of Orangetown Police Department. The Dutchess County Drug Task Force is composed of the City of Poughkeepsie Police Department, the Town of Poughkeepsie Police Department, the East Fishkill Police Department, and the Dutchess County Sheriff’s Office. Mr. Bharara also thanked the New York State Police Forensics Unit, the Dutchess County District Attorney’s Office, the Dutchess County Sheriff’s Office, and the police department for the City of New Milford, Connecticut, for their assistance in the investigation.
The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Scott Hartman and Benjamin Allee are in charge of the prosecution.
Jury Finds Former Manager of Federally Funded Job Placement Centers Liable in Civil Fraud CaseRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that ALEX SAAVEDRA (“SAAVEDRA”), the former director of two Structured Employment Economic Development Corporation (“SEEDCO”) Workforce1 Career Centers, was found liable for violating the False Claims Act (the “FCA”) in connection with a federally funded program to provide assistance to unemployed and underemployed New Yorkers. The jury awarded damages to the United States in the amount of $13,000, which pursuant to the FCA will be trebled to $39,000. In addition, the FCA provides for a civil penalty of $5,500 to $11,000 for each violation. The Court will determine the amount of SAAVEDRA’s civil penalty at a later date. The verdict was returned yesterday following a one-week trial before United States District Judge Alvin K. Hellerstein.
Manhattan U.S. Attorney Preet Bharara said: “Federally funded services such as SEEDCO’s career centers are meant to help people find jobs and achieve the American dream. Unfortunately, SAAVEDRA cared more about reporting big numbers than being honest. This fraudulent conduct resulted in the misappropriation of federal funds, and made it appear that more New Yorkers were getting help than actually were. Prior to the trial, the Government reached settlements with SEEDCO and six of its former managers for the same fraudulent conduct. Now a jury has found the last defendant, the highest ranking Workforce1 Center employee, liable as well. This Office will not hesitate to pursue companies and individuals who fraudulently exploit public funding. This verdict and this case underscore that individuals, as well as entities, responsible for fraud must be held accountable.”
According to the evidence presented at trial:
SEEDCO received federal funding to operate Workforce1 Career Centers (the “WF1 Centers”) in Upper Manhattan and the Bronx. These WF1 Centers provided, among other things, employment training and job placement assistance. In order to receive federal funding for its WF1 Centers, SEEDCO was required to report its job placement performance through a database maintained by the New York City Department of Small Business Services (“SBS”), called WorkSource1. The information was necessary for the calculation of performance-based payments under the federal program.
From 2009 to 2011, SAAVEDRA, as WF1 Center director, caused the entry of false placements into WorkSource1 to make it appear that job candidates had obtained jobs by or with the involvement of SEEDCO when, in fact, they had not. These false placements resulted in performance payments, with federal funds, that SEEDCO had not earned. SAAVEDRA was present at internal all-staff meetings during which this scheme was discussed and, on at least one occasion, instructed a SEEDCO employee to report false placements.
Mr. Bharara thanked the United States Department of Labor, Office of Labor Racketeering and Fraud Investigations, for its assistance in the case. He also thanked the United States Department of Labor Employment and Training Administration, the New York City Department of Investigation, and the New York City Department of Small Business Services.
This case is being handled by the Office’s Civil Frauds Unit. Assistant United States Attorneys Carina H. Schoenberger and Ellen Blain are in charge of the case.
Thomas Hoey, Jr., Sentenced in Manhattan Federal Court to 151 Months in Prison for Large-Scale Drug Distribution and Obstruction of JusticeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and James Hunt, Special Agent in Charge of the New York Division of the Drug Enforcement Administration (“DEA”), announced that THOMAS HOEY, JR., who led a large-scale cocaine distribution conspiracy for over five years, which led to the death of another person, and who engaged in a long-term scheme to obstruct the investigation into his crimes, was sentenced today in Manhattan federal court to 151 months in prison. HOEY was indicted on December 20, 2013, and pled guilty on August 14, 2014, to charges of conspiring to distribute narcotics, conspiring to suborn perjury, and obstruction of justice. U.S. District Judge P. Kevin Castel imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara stated: “Thomas Hoey not only showed complete indifference to the life-threatening situation he himself created by providing cocaine to Kim Calo, he interfered with efforts to get her medical attention. He also waged an ongoing campaign, beginning immediately upon Ms. Calo’s collapse, to destroy evidence, lie to investigators, and obstruct a grand jury investigation by pressuring a witness to perjure herself. The sentence he has received reflects the callousness of his crimes.”
According to the Indictment, statements made during other public proceedings including today’s sentencing, and other court documents:
Between at least 2005 and 2010, HOEY conspired with others to distribute large quantities of cocaine, in social settings, in exchange for various social and sexual favors.
On January 10, 2009, Nicole Zobkiw went to a hotel room at the Kitano Hotel in midtown Manhattan with Kim Calo and HOEY. HOEY provided cocaine to both women and shortly thereafter Ms. Calo collapsed. HOEY then obstructed all efforts by Ms. Zobkiw and the staff of the hotel to get medical assistance for Ms. Calo, who subsequently died of from the combined effects of the cocaine and alcohol she ingested. HOEY also instructed his driver, Alejandro Noriega, to remove the cocaine and all evidence of cocaine use from the hotel room. HOEY then made numerous false statements to the police investigating Ms. Calo’s death about what had occurred in the hotel room that night.
On April 6, 2011, Ms. Zobkiw was subpoenaed before a federal grand jury in the Southern District of New York investigating the circumstances surrounding the death of Kim Calo. Ms. Zobkiw informed the defendant of the grand jury subpoena and asked him to provide her with a lawyer. The lawyer provided to her by HOEY was Barry Balaban. At HOEY’s direction, Balaban instructed and pressured Ms. Zobkiw to lie to the grand jury.
Ms. Zobkiw appeared before the federal grand jury on April 6, 2011, and gave false testimony about numerous matters material to the grand jury’s investigation by, among other things, denying that HOEY had provided Ms. Calo cocaine that night.
One month after lying to the grand jury, Ms. Zobkiw was brought by HOEY, under false pretenses, to an abandoned warehouse in Long Island. Inside the warehouse, Ms. Zobkiw was pressured by others working for HOEY to sign a document that essentially restated her perjurious grand jury testimony. The plan was to send this document to the United States Attorney’s Office for the Southern District of New York in an attempt to prevent criminal charges from being brought against HOEY.
HOEY pled guilty to one count of conspiring to distribute narcotics, one count of conspiring to suborn perjury, and one count of obstruction of justice. In addition to a prison term of 151 months, HOEY was sentenced to three years of supervised release, was ordered to pay a fine of $ $250,000, and was ordered to pay a $300 special assessment fee.
On February 6, 2012, following a jury trial, Ms. Zobkiw was convicted by a jury of two counts of perjury, and one count of obstruction of justice, all related to her false grand jury testimony on April 6, 2011. Ms. Zobkiw passed away before sentencing.
On April 22, 2014, following a guilty plea, Balaban was convicted of one count of conspiring to suborn perjury, and sentenced to 48 months in prison.
On December 18, 2014, following a guilty plea, Noriega was convicted of one count of misprision of a felony, and sentenced to 45 days in prison.
The arrest was the result of a long-term investigation by the DEA’s New York Organized Crime Drug Enforcement Strike Force, which comprises agents and officers of the DEA, the New York City Police Department, Immigration and Customs Enforcement – Homeland Security Investigations (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. Marshal 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.
Mr. Bharara praised the outstanding work of the DEA agents who investigated this case. Mr. Bharara also expressed his gratitude to the New York City Police Department and the New York County District Attorney’s Office for their assistance.
This case is being handled by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Margaret Garnett and Ian McGinley are in charge of the prosecution.
Purported Investment Adviser Pleads Guilty in Manhattan Federal CourtRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that STEVEN WESSEL, a/k/a “Wes Wessels,” pled guilty today in Manhattan federal court to securities fraud, wire fraud, and aggravated identity theft. Specifically, WESSEL admitted engaging in a scheme to defraud two investors and unlawfully using the identity of another person in furtherance of that scheme. WESSEL was arrested June 24, 2014, and pled guilty to a three-count Indictment before U.S. Magistrate Judge Ronald L. Ellis.
Manhattan U.S. Attorney Preet Bharara said: “Steven Wessel sold himself to his clients as a savvy investment adviser. But instead, he gave them nothing but lies and false promises. Wessel developed an elaborate scheme to defraud his investors, which included faking his identity and creating false investment statements. With today’s guilty plea, Wessel’s days of deception are over.”
According to the allegations contained in the Indictment, the underlying criminal Complaint unsealed on June 24, 2014, and statements made during court proceedings:
From June 2013 through April 2014, WESSEL ran a fraudulent investment scheme. WESSEL, who claimed to be the Chairman and Executive Managing Member of Steeplechase USA, LLC (“Steeplechase USA”), located in New York, New York, represented to an investor (“Investor A”) that Steeplechase USA was in the business of trading securities. WESSEL personally solicited $200,000 from Investor A on the understanding that the funds would be solely invested in securities.
Contrary to WESSEL’s promise to invest Investor A’s funds in securities, WESSEL used all of Investor A’s money for his own personal benefit, including for cash withdrawals and personal expenses, including the payment of $25,000 toward a restitution obligation from a prior judgment of conviction. WESSEL did not tell Investor A about this misappropriation. Instead, WESSEL falsely represented to Investor A that his $200,000 investment had gained tens of thousands of dollars and that Steeplechase USA’s portfolio had gained approximately 167 percent in 2013. Furthermore, in connection with this fraudulent scheme, WESSEL sent Investor A multiple emails that purported to come from Steeplechase USA’s accountant (“Accountant 1”). In those emails, WESSEL, pretending to be Accountant 1 without Accountant 1’s knowledge or permission, made multiple false statements concerning Investor A’s investment with Steeplechase USA.
When Investor A requested to withdraw his funds from Steeplechase USA, WESSEL solicited a $550,000 loan from a second investor (“Investor B”). WESSEL falsely represented that he would use Investor B’s money to provide financing for a commercial real estate project. To induce Investor B to lend him money, WESSEL, among other things, created and sent a fabricated email to Investor B. The fabricated email purported to be from a bank and made it appear as if the real estate project was legitimate.
Contrary to WESSEL’s promise to Investor B, WESSEL used all of Investor B’s money for his own benefit, including to pay $251,000 to Investor A – money that, according to WESSEL, represented Investor A’s initial $200,000 investment and $51,000 in fictitious trading profits.
WESSEL, 57, of New York, New York, pled guilty to one count of securities fraud, one count of wire fraud and one count of aggravated identity theft. The securities fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense. The wire fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense. The aggravated identity theft count carries a mandatory sentence of two years in prison, which must be served consecutively to the sentence imposed for the wire fraud count. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.
Mr. Bharara praised the work of the Criminal Investigators of the United States Attorney’s Office, who investigated this case.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 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 the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Damian Williams is in charge of the prosecution. Assistant U.S. Attorney Andrew Adams of the Office’s Money Laundering and Asset Forfeiture Unit is responsible for the forfeiture of assets.
New York City Man Charged in Manhattan Federal Court in Connection with Threats Made to A New York SchoolRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced that DANIEL GRUBER was arrested yesterday on stalking charges related to threats he allegedly made to a New York school and its leadership.
According to the allegations in the Complaint unsealed today in Manhattan federal court:
During March and April 2015, DANIEL GRUBER made a series of harassing internet posts, emails, and telephone calls to various individuals associated with the school. The internet posts were made using different aliases on Google Plus, a social media platform, and became increasingly violent and threatening during the days and weeks before GRUBER’s arrest. In one of these posts, for example, GRUBER, using the alias “Daniel Wintour,” threatened to “burn [the school] to the ground.” In another post, GRUBER, using the same alias, stated that he had prayed and “intend[ed] to destroy the school.” These posts were public.
In addition to threatening the school, GRUBER also threatened multiple individuals affiliated with the school’s leadership. GRUBER told one victim, for example, that he “shoot[s] to kill,” and, on multiple occasions, warned the victim to watch for “the red dot” on his forehead. Other posts referenced and made threats to the victim’s business and family.
GRUBER, 36, was taken into federal custody yesterday in New York, New York. He is charged with one count of stalking. In connection with this charge, GRUBER faces a maximum sentence of five 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.
Mr. Bharara praised the investigative work of the FBI in this matter. He also thanked the New York City Police Department for its assistance with this investigation.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Robert Allen is in charge of the prosecution.
The charges and allegations contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
Former Studio Assistant to Jasper Johns Sentenced in Manhattan Federal Court to 18 Months in Prison for Scheme to Sell Millions of Dollars of Stolen Johns WorksRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that JAMES MEYER, a former assistant to artist Jasper Johns, was sentenced in Manhattan federal court to 18 months in prison for his role the sale of 37 works that MEYER stole from Johns’s studio in Sharon, Connecticut. MEYER pled guilty on August 27, 2014, to one count of interstate transportation of stolen goods. MEYER was sentenced by U.S. District Judge J. Paul Oetken.
Manhattan U.S. Attorney Preet Bharara said: “James Meyer betrayed the trust of his employer, Jasper Johns, by selling, for his own personal gain, works by the artist that were not authorized for sale. Thanks to the hard work of the career prosecutors in my office and the FBI, Meyer’s fraud was uncovered and he will now go to prison for his actions.”
According to the Indictment, plea allocution, statements made at today’s sentencing proceeding, and other documents filed in Manhattan federal court:
MEYER was a studio assistant for Johns for over 25 years, and was responsible for, among other things, maintaining a studio file drawer containing pieces of art that were not yet completed by Johns and not authorized by Johns to be placed in the art market.
During his period of employment for Johns, MEYER removed 83 individual pieces of art from the studio file drawer he was responsible for maintaining, and from elsewhere in Johns’s studio. Between September 2006 and February 2012, MEYER transported more than half of those pieces to an art gallery in Manhattan for the purpose of selling those works without Johns’s knowledge or permission. MEYER represented both to the owner of the gallery (the “Gallery Owner”) and to potential purchasers that these pieces had been given to him as gifts by Johns when, in fact, that was not true.
As part of his scheme, MEYER provided sworn, notarized certifications stating that each piece was an authentic Johns work, that the art had been given to him directly by Johns, that he was the rightful owner of the piece, and that he had the right to sell that particular work. In addition, MEYER conditioned the sale of each of these works on the signed agreement by the purchaser that the art would be kept private for at least eight years, during which time the piece would not be loaned, exhibited, or re-sold.
MEYER also created fictitious inventory numbers for these pieces to give the impression that they were finished works that were authorized by Johns to be sold in the art market. Additionally, to facilitate certain sales, MEYER created fake pages that he inserted into a ledger book of registered pieces of art maintained at Johns’s studio, and which he subsequently photographed, to give additional assurances to prospective buyers about the provenance, or history of ownership, of a particular piece.
During the course of the almost six-year scheme, the Gallery Owner sold 37 works of art on MEYER’s behalf for a total of approximately $10 million, of which approximately $4 million was remitted directly to MEYER.
MEYER, 53, of Salisbury, Connecticut, was also sentenced to two years of supervised release, forfeiture in the amount of $3,992,500, restitution in the amount of $13,455,719, and was ordered to pay a $100 special assessment.
Mr. Bharara praised the outstanding investigative work of the FBI.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Daniel B. Tehrani and Christopher D. Frey are in charge of the prosecution.
CEO Who Oversaw Multimillion-Dollar Corporate Accounting Fraud Pleads Guilty in Manhattan Federal CourtRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that STEVEN KAITZ, the chief executive officer and one of three owners and principals of G3K Displays, Inc., and related entities (“G3K”) – a New Jersey-based company that provided in-store displays for retailers – pled guilty today in Manhattan federal court to an elaborate scheme to defraud G3K’s lenders and customers out of millions of dollars. Among other things, KAITZ admitted that he and others fraudulently inflated G3K’s sales and accounts receivable to secure millions of dollars in loans, and falsely verified to G3K’s lenders and outside auditors false financial information about G3K. KAITZ was charged along with four others in January 2015, and he pled guilty today before United States District Judge Jed S. Rakoff.
Manhattan U.S. Attorney Preet Bharara said: “With today’s guilty plea, Steven Kaitz has taken responsibility for his role in a scheme to inflate his company’s sales and accounts in order to secure over $18.6 million in loans. Not only did Kaitz obtain these funds for his company through lies and misrepresentations, but he also misappropriated some of the money for himself, spending it on luxury items and kickbacks.”
According to the Indictment and statements made during the plea proceeding:
KAITZ, was one of 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.
From approximately 2012 to May 2014, in order to trick various lenders, including Veritas Financial Partners, LLC, and MVC Capital, into lending at least $18.6 million to G3K, KAITZ 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. The defendants also tricked certain of the company’s customers 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, KAITZ was involved in the creation of fake email accounts purporting to belong to fictitious employees of Footlocker and Adidas, G3K’s two largest customers. KAITZ and his co-defendants 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. To keep their scheme afloat, KAITZ and the other owners of G3K also utilized shell companies to engage in “round-trip” transactions to create the false appearance that customers were paying G3K’s phony outstanding receivables.
KAITZ and the other owners of G3K 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 another co-defendant in exchange for her role in the scheme.
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.
KAITZ, 56, of Jersey City, New Jersey, pled guilty to one count of conspiracy to commit bank fraud and wire fraud, which carries a maximum sentence of 30 years in prison. As part of the plea agreement, he agreed to pay restitution in the amount of $18,600,000, and he agreed to forfeit $1,382,427. KAITZ is scheduled to be sentenced by Judge Rakoff on September 8, 2015, at 4:00 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. The charges remain pending against KAITZ’s co-defendants, who are presumed innocent unless and until they are proven guilty.
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. Attorneys Joshua A. Naftalis and Rosemary Nidiry are in charge of the prosecution.
U.S. v. Steven Kaitz, et al. Indictment
Manhattan U.S. Attorney Announces Charges and Arrest in “Pump and Dump” Stock Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Jonathan D. Larsen, the Special Agent-in-Charge of the Newark Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today the arrest of DWAYNE BIGELOW for allegedly participating in a $9 million “pump and dump” stock fraud scheme. Twelve other participants in related pump and dump stock fraud schemes have previously been convicted. As alleged in the Superseding Indictment unsealed yesterday, BIGELOW orchestrated a scheme to manipulate the price of penny stocks through the dissemination of misleading promotional campaigns designed to induce victim investors to purchase penny stocks at artificially inflated prices, thereby allegedly permitting BIGELOW and others to sell the stock they held at a profit. BIGELOW was arrested in Florida yesterday and was presented today in federal court in the Southern District of Florida. BIGELOW will be arraigned at a later date before United States District Judge Paul A. Crotty, to whom the case is assigned.
Manhattan U.S. Attorney Preet Bharara said: “Dwayne Bigelow is alleged to have engaged in a classic pump and dump scheme where the prices of worthless stocks were inflated with the puffery and false representations of paid stock promoters. Bigelow and his co-conspirators allegedly got wealthy, while their victims got fleeced. I want to thank the IRS and the HIDTA Task Force for their work in policing this alleged fraud.”
IRS-CI Special Agent-in-Charge Jonathan D. Larsen said: “Illegal activity involving the investment industry has brought financial ruin to many Americans. As alleged in the indictment, Mr. Bigelow and his co-conspirators manipulated certain penny stocks in a pump and dump scheme that enabled them to earn profits to the tune of over $9 million dollars. IRS-Criminal Investigation is proud to bring our financial investigative skills to team up with our law enforcement partners to investigate and put a stop to this type of illegal activity.”
As alleged in the Superseding Indictment, other documents previously filed in this case, and evidence introduced in court:
DWAYNE BIGELOW and his co-conspirators orchestrated a scheme to defraud investors in multiple companies by helping to take those companies public, hiring individuals to engage in misleading promotion campaigns designed to increase the price and trading volume of the companies’ stocks, and then taking advantage of the “pumped up” price and trading volume by “dumping” their shares into the market.
The scheme worked as follows: BIGELOW and his co-conspirators targeted privately held companies, which were engaged in little to no legitimate business activity, and orchestrated so-called “reverse mergers” between the target companies and shell companies controlled by BIGELOW and others. As a result, BIGELOW and his associates and co-conspirators obtained large quantities of publicly traded shares in the targeted companies, which traded as penny stocks.
BIGELOW then paid other individuals who acted as promoters to carry out misleading promotional campaigns, including by sending e-mails touting the stocks to lists of potential investors using purportedly independent stock analysis email newsletters. These misleading promotional campaigns caused demand for stock in the targeted companies, and the prices of the target companies’ stocks, to rise. BIGELOW and his co-conspirators took advantage of the “pumped-up” stock trading volume and price by “dumping” their shares into the market until the misleading promotional campaign had run out of steam.
The Superseding Indictment alleges three pump and dump securities and wire frauds concerning the stocks of Emerging World Pharma, Inc. (“EWPI”), SMC Entertainment, Inc. (“SMCE”), and Sierra Resources Group, Inc. (“SIRG”). According to the Superseding Indictment, BIGELOW and his co-conspirators made over $9 million from manipulation of these three stocks alone.
BIGELOW, 46, of Jupiter, Florida, is charged in the Superseding Indictment with one count of conspiracy to commit securities fraud and wire fraud (Count One), three counts of securities fraud (Counts Two through Four), and three counts of wire fraud (Counts Five through Seven). The securities and wire fraud charges carry a maximum term of 20 years in prison on each count, and the conspiracy charge carries a maximum term of five years in prison. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
This case originated out of the Government’s long-term investigation into criminal conduct at the Port of New York-New Jersey, which uncovered the charged “pump and dump” stock fraud scheme. Mr. Bharara thanked the Internal Revenue Service-Criminal Investigations’ New Jersey office, as well as the other participants in the High Intensity Drug Trafficking Area (“HIDTA”) Task Force, which includes the New Jersey Offices of the Drug Enforcement Administration and Immigration and Customs Enforcement’s Homeland Security Investigations, for their outstanding work on the investigation. Mr. Bharara also thanked the Securities and Exchange Commission and the Financial Industry Regulatory Authority for their assistance with the investigation.
This case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorneys Howard S. Master, Carrie H. Cohen, and Katherine C. Reilly are in charge of the prosecution.
The charges contained in the Superseding Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Dwayne Bigelow Indictment
Owner of Long Island Produce Distributor Charged in Manhattan Federal Court with Embezzling Money from Company Profit-Sharing PlanRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Jonathan Kay, Phyllis C. Borzi, the Assistant Secretary of Labor for Employee Benefits Security (“DOL”), and Shantelle P. Kitchen, the Special Agent-in-Charge of the New York Office of the Internal Revenue Service’s Criminal Investigation Division (“IRS”), announced today the return of an indictment charging THOMAS HOEY JR. with embezzling assets from his company’s profit-sharing plan. As alleged in the Indictment, HOEY, the owner and president of a Long Island-based produce distributor (the “Company”), and trustee for the Company’s profit-sharing plan (the “Plan”), an employee benefit plan set up for the benefit of the Company’s employees, transferred more than $800,000 from the Plan to the Company’s corporate accounts. HOEY then allegedly unlawfully used the money to cover significant negative balances in the Company’s accounts, to purchase, among other things, hundreds of thousands of dollars of produce for the Company, and for HOEY’s personal expenses. As a result of the defendant’s conduct, he is charged with embezzlement from an employee benefit plan, interstate transportation of stolen money, wire fraud, and money laundering. The defendant, who is in custody following convictions for federal narcotics, perjury, and obstruction charges, was presented and arraigned in Manhattan federal court today before Judge Jesse Furman.
Manhattan U.S. Attorney Preet Bharara said: “Thomas Hoey Jr.’s alleged crime is the nightmare of any employee: the theft of a company-sponsored pension plan. Thanks to the dedicated investigative work of the Department of Labor and the IRS, Hoey will have to answer for his alleged behavior in the court of law.”
DOL Assistant Secretary Phyllis C. Borzi said: “Let this indictment remind fiduciaries that we will not tolerate benefit plan assets being misused to subsidize a lifestyle. They must conduct themselves with undivided loyalty to safeguarding the retirement security of the plan's participants, and we will vigorously pursue all legal remedies when our investigations uncover such betrayals of trust.”
IRS Special Agent-in-Charge Shantelle P. Kitchen said: “This indictment demonstrates the government’s commitment to investigate allegations of impropriety relating to ERISA qualified pension plans. Employees who will one day rely on their account balances expect their plan’s trustee to protect their interests and not exploit their plan for personal use. IRS Criminal Investigation will work with our law enforcement partners on all kinds of corporate fraud allegations, including embezzlement from employee benefit plans.”
According to the allegations contained in the Indictment:
The Plan was set up as an employee pension benefit plan under the Employee Retirement Income Security Act of 1974 (“ERISA”), for the benefit of certain employees of the Company. As an ERISA qualified pension plan, there were strict statutory and regulatory limitations on the use of money contributed to the Plan. In particular, Plan proceeds could only be used to pay for employee disbursement and employee loans, which, in no circumstances, could be greater than $50,000. Moreover, the Company, which was the sponsor for the Plan, was not allowed to receive any money from the Plan.
Between June 2009 and July 2012, however, HOEY transferred almost all of the assets in the Company’s Plan to corporate accounts that he controlled. Specifically, in three transactions on one day in June 2009, the defendant transferred $350,000 from the Plan to the Company’s corporate bank account. In May 2010, the defendant transferred $415,000 from the Plan to the Company’s corporate bank account. Finally, in July 2012, the defendant transferred $73,000 from the Plan to the Company’s corporate bank account. As a result of these withdrawals from the Plan as well as fees on the account, the Plan, which at one point was worth more than $900,000 in employee benefits, was almost entirely depleted.
The Plan money was transferred to corporate accounts to cover significant negative balances as well as for additional corporate expenses and HOEY’s personal expenses. For example, hundreds of thousands of dollars of Plan money was used to pay the Company’s produce suppliers. Plan money was also used to pay for automobile insurance on a policy that covered, among other vehicles, numerous luxury cars that HOEY used for his personal use. During the period of time that HOEY was using Plan money to fund the Company’s corporate accounts, the corporate accounts were also being used to pay for HOEY’s personal expenses, including international travel for HOEY and his family, limousine service, and hotels in Manhattan.
In order to cover up his embezzlement of Plan assets, HOEY caused plan statements to be created that reflected the employees’ full account balances as if no money had been taken out of the Plan. A 2012 account statement for one employee, for example, reflected an individual benefit total of approximately $140,000. At that time, however, the total amount of money left in the Plan was only approximately $15,000.
HOEY, 47, of Garden City, New York, is charged with one count of embezzlement from an employee pension plan, one count of interstate transportation of stolen money, one count of wire fraud, and one count of money laundering. The embezzlement count carries a maximum sentence of five years in prison. The interstate transportation of stolen money and money laundering counts each carry a maximum sentence of 10 years in prison. The wire fraud count carries a maximum sentence of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
HOEY is scheduled to be sentenced by Judge P. Kevin Castel on unrelated charges this Thursday, April 23, 2015, at 2:00 p.m.
Mr. Bharara praised the work of the DOL and the IRS.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Daniel B. Tehrani is in charge of the prosecution.
The allegations contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
Thomas Hoey Indictment - 15 Cr 229 Indictment
Former Mayor of Spring Valley Found Guilty in Federal Court of Bribery, Extortion and Fraud ChargesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that former Spring Valley Mayor NORAMIE JASMIN was found guilty in federal court today of engaging in a bribery scheme in which she negotiated a 50 percent stake for herself in a development company and $5,000 cash in exchange for her use of her office to obtain land and various government approvals to construct a community center in Spring Valley. She was convicted after a one week bench trial before U.S. District Judge Colleen McMahon.
Manhattan U.S. Attorney Preet Bharara said: “This office is committed to ensuring the integrity of New York public officials at all levels and wherever they may be. Today, I announce the conviction of yet another corrupt elected official who failed to live up to her oath of office. Former Spring Valley Mayor Noramie Jasmin used her official position to influence a construction project on a parcel of public land, and she accepted bribes, including a secret fifty percent share of the project, to do so. Like all citizens, the residents of Spring Valley deserved an honest mayor, not one who worked behind closed doors and behind their backs to sell public land and public office for private gain. I want to thank the FBI, the Rockland County District Attorney’s Office, and the Spring Valley Police Department for their outstanding work on this important investigation.”
According to the Complaint and the Indictment filed in federal court and the evidence presented at trial:
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 bribes from an undercover FBI agent (the “UC”) and a cooperating witness working with the Government (the “CW”), on multiple occasions in exchange for official acts. The bribe 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 a 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 voted on the sale. Over the course of two days, JASMIN met the UC and 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 with 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,” precisely what she did in the days preceding that vote.
JASMIN, 51, of Spring Valley, was found guilty of one count of mail fraud and one count of extortion. Each count carries a maximum sentence of 20 years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
JASMIN is scheduled to be sentenced by Judge McMahon on August 7, 2015 at 10 a.m.
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.
Former Investment Adviser at Global Bank Charged in Manhattan Federal Court with Multimillon-Dollar Scheme to Defraud ClientsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that MICHAEL OPPENHEIM was charged with wire, securities, and investment adviser fraud, as well as embezzlement, for allegedly using his position as an investment adviser at a global financial institution based in New York City (the “Bank”) to defraud multiple Bank clients out of approximately $20 million over a four-year period. OPPENHEIM was arrested this morning and will be presented later today in Manhattan federal court before U.S. Magistrate Judge Sarah Netburn.
Manhattan U.S. Attorney Preet Bharara said: “Michael Oppenheim is alleged to have misrepresented to investment advisory clients what he would do with their money. The allegations include that he lied to his clients and misappropriated their money. I want to thank the FBI and the SEC for their continued vigilance in protecting investors and their money.”
FBI Assistant Director-in-Charge Diego Rodriguez said: “Investment advisers are required to act in the best interest of their clients. Oppenheim did just the opposite by allegedly taking advantage of those who trusted him. As alleged, he concealed their money in a game of hide-and-seek and personally benefitted from illegitimately obtained profits. Now that his actions have been exposed, he will be made to face the consequences of the justice system.”
According to the allegations in the Criminal Complaint unsealed today in Manhattan federal court:
From at least March 2011 to March 2015, OPPENHEIM, a former investment adviser at the Bank, a global financial institution based in New York City, abused his relationship of trust with his clients in converting to his own use and benefit at least $20 million belonging to at least seven clients whose investment advisory accounts at the Bank he purported to manage.
In some instances, OPPENHEIM induced clients to consent to the withdrawal of hundreds of thousands, and in some cases millions, of dollars from their accounts at the Bank, based on false and misleading representations that OPPENHEIM would invest their money in low-risk municipal bonds to be held in an account at the Bank. In other instances, OPPENHEIM simply withdrew hundreds of thousands of dollars from clients’ accounts without their knowledge.
OPPENHEIM did not invest these clients’ money in low-risk municipal bonds at the Bank as promised. Instead, after taking a client’s money, OPPENHEIM, without the client’s knowledge, used the client’s money to obtain cashier’s checks purporting to be remitted by the clients. OPPENHEIM then deposited the cashier’s checks in at least three online brokerage accounts OPPENHEIM controlled at financial institutions other than the Bank. OPPENHEIM used clients’ funds for his own personal use, including on-line trading in accounts he controlled, and to pay for personal expenses such as a home loan and bills.
In an effort to cover up his fraudulent scheme, OPPENHEIM provided some clients with fraudulent Bank account statements. The purported Bank account statements reflected bonds held by other clients of the Bank, but OPPENHEIM caused his clients’ names to appear on the statements in order to give the false impression that OPPENHEIM had purchased bonds on behalf of those clients, as he had promised. In a further effort to conceal his fraud, on several occasions, and without his clients’ consent or authority, OPPENHEIM withdrew funds from one client and deposited those funds into the account of another client.
OPPENHEIM continued the fraud until he was terminated by the Bank in March 2015.
OPPENHEIM, 48, of Livingston, New Jersey, is charged with one count of wire fraud, one count of embezzlement, one count of securities fraud, and one count of investment adviser fraud. The embezzlement count carries a maximum of 30 years in prison. The wire fraud and securities fraud counts each carry a maximum sentence of 20 years in prison. The investment adviser fraud count carries a maximum sentence of five years in prison. The charges carry a maximum fine of $5 million, or twice the gross gain or loss from the offense. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
In a separate action, the U.S. Securities and Exchange Commission (“SEC”) announced civil charges against OPPENHEIM.
Mr. Bharara praised the work of the FBI, and thanked the SEC and FINRA for their assistance. He added that the investigation is continuing.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit and the Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Janis Echenberg, Alexander Wilson, and Brooke Cucinella are in charge of the prosecution.
The charges contained in the Complaint are merely accusations and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Michael Oppenheim Complaint
Married Lawyer and Doctor Plead Guilty in Manhattan Federal Court to Obstructing IRS Audit to Hide False Deductions and Expenses Claimed on Tax ReturnsRead the Press Release
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 JEFFREY S. STEIN and MARLA STEIN, who are husband and wife, pled guilty today to 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 also pled guilty to tax evasion charges for the years 2009-2012. JEFFREY S. STEIN, a vascular surgeon, and MARLA STEIN, a New York personal injury lawyer, entered their guilty pleas before U.S. District Judge Denise L. Cote.
Manhattan U.S. Attorney Preet Bharara said: “As they admitted today, Jeffrey Stein and Marla Stein not only cheated the IRS by claiming hundreds of thousands of dollars of false deductions on their tax returns, they doubled down on their fraud by using the identities of others to create false documents in an attempt to snooker the IRS again – this time during an audit. Lawyers, doctors, and indeed all taxpayers have an obligation not only to report their income and expenses truthfully, but also to deal in an honest and forthright manner with the IRS when it conducts an audit. Those who seek to mislead and defraud the IRS do so at their peril.”
IRS Special Agent-in-Charge Shantelle P. Kitchen said: “It is inexcusable when financially successful individuals, with the resources to meet their tax obligations, defraud the tax system. By doing so, they increase the burden on law abiding American taxpayers, effectively forcing them to make up the difference. As we approach the April 15th tax deadline, this investigation serves as a timely warning to those who contemplate filing fraudulent tax returns through falsifying their expenses. It also reinforces the message that falsifying books and records “after the fact,” in preparation for a tax audit, is also a criminal offense and will be dealt with accordingly. IRS-Criminal Investigation remains committed to protecting the American tax system and ensuring that everyone pays their fair share.”
According to the Information filed today in Manhattan federal court:
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 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 was 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 were used were those of the Domestic Employee and a medical professional who had performed services for a member of MARLA STEIN’s 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 members of 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.
JEFFREY S. STEIN, 58, of New York, New York, faces a maximum sentence of eight years in prison, based on the tax evasion and IRS obstruction charges to which he pled guilty. MARLA STEIN, 52, also of Manhattan, faces three years in prison as a result of the IRS obstruction charge to which she pled guilty. Both defendants are scheduled to be sentenced by U.S. District Judge Denise L. Cote on July 28, 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 defendants will be determined by the judge.
Mr. Bharara praised the outstanding efforts of IRS-CI in the investigation.
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.
Manager of Large-Scale Counterfeit Credit Card Scheme Sentenced to 90 Months in PrisonRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that LUIS GUSTAVO TAVAREZ was sentenced to 90 months in prison for his role in a large-scale counterfeit credit card scheme involving credit card numbers stolen from nearly 200 victims and over $600,000 in losses. TAVAREZ pled guilty on August 28, 2014, to conspiracy to commit access device fraud. TAVAREZ was sentenced by U.S. District Judge Richard J. Sullivan.
Manhattan U.S. Attorney Preet Bharara said: “In what is becoming an increasingly common fraud, Tavarez bought stolen credit card information from hackers and used it to fuel his own greed. I would like to thank the United States Secret Service for their investigative work on the case.”
According to the allegations in the Criminal Complaint, Information, plea allocution, and other court documents:
From April 2013 through April 2014, LUIS GUSTAVO TAVAREZ was one of the managers of an extensive counterfeit credit card fraud scheme operating in half a dozen states along the East Coast in 2013 and 2014. As part of the scheme, TAVAREZ purchased stolen credit card information from computer hackers who remotely compromised databases containing credit card numbers, both directly and from “carding” websites where stolen credit card numbers are sold. TAVAREZ then produced counterfeit credit cards that were encoded with the stolen account information. He personally used those counterfeit cards to make unauthorized purchases of store gift cards and retail items, and also provided them to co-conspirators who acted as “shoppers” at his direction. In total, TAVAREZ and his co-conspirators, including Deivi Martinez-Brito, Anthony Reynoso, Plinio Pineda Lopez, Vicente D. Espinal, and Warner Alvarez Almanzar, used counterfeit cards to make hundreds of purchases of store gift cards and merchandise at national retail chains in New York, New Jersey, Pennsylvania, Connecticut, Rhode Island, and Massachusetts. The gift cards and retail items were then sold to others or returned to the stores for cash refunds.
As part of the scheme, TAVAREZ and his co-conspirators obtained stolen account information from almost 200 victims and used that stolen information to make more than $625,000 in unauthorized purchases.
Two days after pleading guilty on August 28, 2014, TAVAREZ fled and became a fugitive from justice. He was apprehended by the United States Marshals Service on September 16, 2014, at a bus station in Indianapolis, Indiana, and returned for sentencing.
TAVAREZ, 34, of Bronx, New York, was also sentenced to three years’ supervised release, restitution and forfeiture judgments in the amount of $627,441.96, and was ordered to pay a $100 special assessment.
Pineda Lopez, 24, of Bronx, New York, pled guilty and was sentenced on January 12, 2015, to six months in prison and six months’ home confinement by U.S. District Judge Alison J. Nathan. Reynoso, 25, of Bronx, New York, pled guilty and was sentenced on January 29, 2015, to six months in prison and six months’ home confinement by U.S. District Judge Richard M. Berman. Martinez-Brito, 25, of New York, New York, pled guilty before U.S. District Judge Gregory H. Woods, and is scheduled for sentencing on June 2, 2015. Alvarez Almanzar, 21, of New York, New York, pled guilty before Judge Richard J. Sullivan and is scheduled for sentencing on April 17, 2015. The prosecution of Espinal, 25, of Bronx, New York, is ongoing.
Mr. Bharara praised the outstanding investigative work of the United States Secret Service. He also thanked the Office of Homeland Security Investigations for their assistance with this case, and the United States Marshals Service for their successful apprehension of TAVAREZ after he fled.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Alexander Wilson is in charge of the prosecution.
The charges contained in the Criminal Complaint and Information are merely accusations and the defendant whose prosecution is ongoing is presumed innocent unless and until proven guilty.
Man Convicted for Bronx Home Invasion Robbery of Quadriplegic and OthersRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Delano A. Reid, Special Agent in Charge of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), and William Bratton, Commissioner of the New York City Police Department (NYPD), announced today that RALPH NOLAN was found guilty of conspiracy to commit robbery, attempted robbery, and brandishing a firearm during and in relation to the attempted robbery following a one-week trial before United States District Judge George B. Daniels. The jury convicted NOLAN Friday, April 10, 2015, for his role in connection with a December 2013 home invasion robbery in the Bronx, New York.
Manhattan U.S. Attorney Preet Bharara stated: “Ralph Nolan terrorized the occupants of a Webster Avenue apartment in the Bronx by tying them up at gunpoint during the commission of a brutal robbery. Now, justice has been served for the victims of this heinous crime.”
ATF Special Agent in Charge Reid stated: “This swift and decisive conviction will definitely resonate with the public in that it clearly shows that the ATF and its law enforcement partners will relentlessly pursue those criminals who prey on the innocent. These depraved acts will not be tolerated. The defendant will now live a large part of his future within a prison cell and be reminded daily of that fact.”
NYPD Commissioner Bratton stated: “I want to thank the NYPD investigators and the prosecutors with the US Attorney's Office, Southern District whose hard work resulted in the conviction of this individual."
According to the allegations in the Indictment against NOLAN and evidence admitted at trial:
On December 16, 2013, NOLAN and two co-conspirators planned and executed an armed home invasion robbery of an apartment in the Bronx, New York, that belonged to a quadriplegic woman. The robbers believed that the apartment contained drugs and drug proceeds. During the course of the robbery, NOLAN, who was armed with a handgun, pistol-whipped one of the apartment occupants and restrained the victims with telephone cords and cable wires before making off with electronics and other items.
NOLAN was convicted of one count of conspiracy to commit robbery and one count of attempted robbery, each carrying a maximum sentence of 20 years in prison. In addition, NOLAN was convicted of one count of brandishing a firearm during and in relation to the attempted robbery, which carries a maximum sentence of life in prison. NOLAN is scheduled to be sentenced August 11, 2015, before Judge Daniels. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
NOLAN, 26, of Gloversville, New York was arrested July 28, 2014. He was remanded pending sentencing.
Mr. Bharara praised the outstanding investigative work of the ATF and NYPD.
The prosecution is being handled by the Office’s Violent and Organized Crime United. Assistant U.S. Attorneys Richard Cooper and Russell Capone represented the government at trial.
Brooklyn Man Arrested and Charged in Manhattan Federal Court in Connection with Multimillion-Dollar Fraudulent Investment SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that MARCELLO TREBITSCH was arrested this morning on wire fraud and securities charges stemming from his alleged scheme to defraud multiple investors of approximately $7 million through a fraudulent investment scheme that he allegedly perpetrated for at least five years. Among other false and misleading statements, TREBITSCH allegedly lied to investors by telling them that he would use their money to trade in securities through an investment fund that he controlled, generating double-digit returns with very low risk. Instead, TREBITSCH allegedly invested only a portion of the investors’ money and suffered enormous trading losses, which he failed to disclose to the investors. TREBITSCH allegedly used the remainder of the investors’ money for his own personal benefit and to pay back other investors.
TREBITSCH was presented today before United States Magistrate Judge Debra Freeman.
U.S. Attorney Preet Bharara said: “Investing in securities entails certain risks, but should not include the risk of being defrauded by one’s investment manager. Investment fraud is a high priority for this Office. I want to thank the FBI for working with us to protect investors and their money.”
FBI Assistant Director-in-Charge Diego Rodriguez said: “As alleged, Trebitsch took $7 million in investor money under false pretenses. Allegedly promising double digit returns to investors, Trebitsch suffered losses on what money he did invest. Trebitsch finds himself under arrest on securities and wire fraud charges.”
According to the allegations in the two-count Complaint unsealed today in Manhattan federal court:
From 2009 through December 2014, TREBITSCH engaged in a multimillion-dollar fraudulent investment scheme, during which he solicited money from investors based on materially false and misleading representations. Specifically, TREBITSCH told the investors that he would use their money to purchase large-cap stocks through an investment fund called Allese Capital LLC, which TREBITSCH co-owned with his wife, who was a certified public accountant. TREBITSCH told the investors that he would purchase and sell stocks on a daily basis, with little or no funds invested in the market at the end of each trading day, which would minimize the risk of loss, and result in double-digit annual returns in the range of 14 to 16 percent. In fact, TREBITSCH invested only a portion of the investors’ money, and instead principally used the investors’ money for his own personal benefit, including to repay other investors.
With respect to the portion of investor funds that he did use to purchase securities, TREBITSCH suffered net trading losses, which he did not disclose to the investors. Rather, TREBITSCH sent the investors false and misleading monthly account statements and tax forms, which purported to show positive annual returns in range of 15 to 19 percent on the investors’ investment in Allese.
During the course of the fraudulent scheme, TREBITSCH solicited more than $7 million from multiple investors.
TREBITSCH, 37, of Brooklyn, New York, is charged with one count of wire fraud and one count of securities fraud. The wire fraud count and the securities fraud count each carry a maximum sentence of 20 years in prison; the wire fraud charge carries a maximum fine of $250,000, or twice the gross gain or loss from the offense, and the securities fraud charge carries a maximum fine of $5 million, or twice the gross gain or loss from the offense. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the work of the FBI. He added that the investigation is continuing.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Daniel S. Goldman and Amy Lester are in charge of the prosecution.
The allegations contained in the Complaint are merely accusations, and the defendant is
presumed innocent unless and until proven guilty.
Trebitsch, Marcello Complaint
Middletown Registered Sex Offender Sentenced in White Plains Federal Court to 30 Years in Prison for Sexually Exploiting A Minor via FacebookRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced that DANIEL COONS, 35, a registered sex offender, was sentenced yesterday to 30 years in prison by United States District Judge Cathy Seibel for sexually exploiting a 14-year-old girl via Facebook. COONS coerced the girl into taking sexually explicit photographs of herself and sending them to him online. The sentencing followed COONS’s guilty plea on September 3, 2014.
Manhattan U.S. Attorney Preet Bharara said: “This case underlines the urgent need for law enforcement to continue its efforts to protect children from those who prey on them. As this sentencing demonstrates, we will use every tool available to law enforcement to prosecute and punish those who sexually exploit children.”
FBI Assistant Director-in-Charge Diego Rodriguez said: “Crimes of this nature rob children of their innocence, creating long-lasting negative effects on our nation’s most vulnerable. Our children deserve to live in a society free from the advances of predators. This sentence is a reminder of our commitment to protect their most basic rights.”
According to documents filed in this case and statements made in related court proceedings:
On March 24, 2005, COONS was convicted in Orange County Court of Sexual Abuse in the 1st degree, Engaging in a Course of Sexual Conduct in the 2nd degree, and Sexual Abuse in the 3rd degree. He was sentenced to six months in prison and ten years’ probation. In addition, as a result of that conviction, he was required to register with the New York State Sex Offender Registry.
From at least January 29, 2013, through May 14, 2013, COONS, using the Facebook names “mike.storms.77715,” “nicholas.mathew.7,” and “jacod.davis.9,” communicated with a 14-year-old girl in Kentucky on Facebook and convinced her to take and send sexually explicit photographs. COONS used the different identities to make her believe she was speaking to three different people and tricked her into thinking that her photographs were being shared. COONS threatened the girl that, if she did not send additional sexually explicit photographs, the photos she had already sent would be posted on Facebook.
COONS used an iPhone to access Facebook notwithstanding the fact that the terms of his probation prohibited his use of Facebook. After his arrest, COONS admitted to using multiple Facebook accounts to entice underage girls to send sexually explicit images of themselves to him. COONS said that he used the different Facebook names to convince the girls that they were speaking to more than one male and to convince them that their pictures were being shared with other users. COONS admitted that he engaged in this conduct with at least 10 underage girls. In addition, COONS identified the girl in Kentucky as one of the girls with whom he communicated via Facebook and indicated that he knew the Victim was 14 years old.
Mr. Bharara praised the efforts of the FBI, the Rockland County Computer Crimes Task Force, the Middletown Police Department, the New York State Police, and the Orange County Sheriff’s Department in connection with this investigation.
In sentencing COONS, Judge Seibel underscored the “particularly cruel” nature of the offense and stated that the 30-year sentence was necessary to protect the public from further crimes by the defendant.
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.
Bronx Man Sentenced to 16 Terms of Life in Prison for Armed Robberies of Seven Banks and A Restaurant in Bronx, Westchester, and Putnam CountiesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that KARRIEM BARROW was sentenced today in White Plains federal court to 16 terms of life in prison plus two terms of 20 years in prison in connection with his participation in a series of armed robberies that included seven banks and a restaurant in Bronx, Westchester, and Putnam counties over a two-month period. BARROW was sentenced by U.S. District Judge Kenneth M. Karas, who presided over the nine-day jury trial that resulted in BARROW’S conviction in November 2011.
Manhattan U.S. Attorney Preet Bharara said: “Today’s sentence sends a strong and clear message that our federal and local partners will work together to ensure that those who endanger the lives of our citizens through brazen acts of violence will be met with severe punishment.”
According to the Complaint, Indictment, and evidence presented at trial:
In January 2010, BARROW and his accomplice Carl Farrington robbed the Golden China restaurant located at 881 E. Gun Hill Road in the Bronx, New York, at gunpoint. BARROW and Farrington subsequently participated in a series of armed bank robberies, robbing seven banks (see below).
BARROW was convicted of one count of conspiracy to commit armed robbery, one count of armed robbery, one count of conspiracy to commit armed bank robbery, seven counts of armed bank robbery and eight counts of using, carrying, or possessing a firearm in furtherance of a crime of violence.
Mr. Bharara praised the outstanding investigative work of the Federal Bureau of Investigation, the New York State Police, and the police departments of Westchester County, White Plains, Bronxville, Briarcliff, Greenburgh, and Carmel.
This case is being handled by the Office's White Plains Division. Assistant United States Attorneys Douglas B. Bloom and Parvin Moyne are in charge of the prosecution.
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Three Labor Union Members Plead Guilty in Manhattan Federal Court to Accepting Bribes in Exchange for Labor Union MembershipsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that CHRISTOPHER LUPINO and KELWYN BENJAMIN pled guilty today, and ADAM FORESTA pled guilty on March 31, 2015, each to participating in a conspiracy to commit honest services wire fraud in connection with their accepting bribes in exchange for memberships in Steamfitters Local 638, a New York City labor union. FORESTA, LUPINO, BENJAMIN, and James Sheeran were arrested in November 2014. LUPINO, BENJAMIN, and FORESTA pled guilty today in Manhattan federal court before United States District Judge William H. Pauley III.
Manhattan U.S. Attorney Preet Bharara said: “With their guilty pleas Christopher Lupino, Kelwyn Benjamin, and Adam Foresta have accepted responsibility for their roles in a scheme to swap memberships in Steamfitters Local 638 for cash bribes. We will continue to work with our law enforcement partners at the FBI, the U.S. Department of Labor, and the NYPD to stamp out union fraud wherever we find it.”
According to allegations contained in the Indictment, the underlying criminal Complaint unsealed on November 5, 2014, and statements made during court proceedings:
FORESTA, LUPINO, BENJAMIN, and Sheeran were each members of Steamfitters Local 638, a local division of a labor union that represents workers in the plumbing and pipefitting industries in New York City (the “Union”). Sheeran was an organizer for the Union and worked on membership recruitment. In that capacity, he owed fiduciary duties to Steamfitters Local 638.
In December 2013, an individual who has not been charged (“Applicant-1”) told a cooperating witness (the “CW”) that Applicant-1 had been offered membership in the Union – what is known as a “Union book” – in exchange for a $35,000 bribe. Applicant-1 asked the CW to help him/her pay for the Union book.
Over the next several months, FORESTA, LUPINO, and BENJAMIN each had conversations, which were recorded by the Federal Bureau of Investigation (“FBI”), with the CW about buying Union books for Applicant-1 and another individual who has not been charged (“Applicant-2”). During these calls, the CW was told that each Union book would cost $40,000 – $5,000 for the typical Union application fee and a $35,000 cash bribe.
In October 2014, Applicant-1 met with Sheeran, who coached Applicant-1 to provide answers to questions from Union officials to enable him to secure approval from the interviewing officials, including by misleading the Union officials. Applicant-1 and Applicant-2 met with the Union committee later that month in connection with their applications. After that meeting, LUPINO told the CW that approvals from the Union would come soon.
On November 3, 2014, a few days before Applicant-1 and Applicant-2’s memberships were to be issued, LUPINO and FORESTA arranged for FORESTA to meet with the CW to pick up the bribes for the two Union books. LUPINO told the CW to bring $70,000 in cash and that the other $10,000, which would go to the Union for application fees, should be paid for by check or money order. On November 4, 2014, FORESTA and the CW met in Manhattan. The CW gave FORESTA $35,000 in cash for one Union book – telling FORESTA he/she would pay for the second Union book the next day.
FORESTA, 45, of Staten Island, New York, LUPINO, 51, of New Monmouth, New Jersey, and BENJAMIN, 41, of New York, New York, each pled guilty to one count of conspiring to commit honest services wire fraud, which carries a maximum term 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 defendants will be determined by the judge.
FORESTA, LUPINO, and BEJAMIN are all scheduled to be sentenced on July 31, 2015. Trial against Sheeran is scheduled to begin on September 15, 2015, before Judge Pauley.
Mr. Bharara praised the investigative work of the FBI, the United States Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud Investigations, and the New York City Police Department.
The case is being prosecuted by the Office’s Violent & Organized Crime Unit. Assistant U.S. Attorneys Joshua A. Naftalis and Jordan Estes are in charge of the prosecution.
The allegations contained in the Indictment against Sheeran are merely accusations, and he is presumed innocent unless and until proven guilty.
Manhattan U.S. Attorney’s Office Closes Investigation into the Death of Danroy Henry, Jr.Read the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the evidence does not support pursuing federal criminal charges in connection with the fatal shooting of Danroy Henry, Jr. Mr. Henry, a student at Pace University, was killed during an encounter with police officers from the Pleasantville and Mount Pleasant Police Departments in the early morning of October 17, 2010. Federal prosecutors informed Mr. Henry’s parents of this decision earlier today.
Federal prosecutors thoroughly reviewed the evidence regarding the events that led to and immediately followed Mr. Henry’s shooting, in order to determine whether a prosecutable violation of the federal criminal civil rights laws had occurred. To prove a violation of the federal criminal civil rights statutes, prosecutors must establish, beyond a reasonable doubt, that a law enforcement officer willfully deprived an individual of a constitutional right, meaning that the officer acted with the deliberate and specific intent to do something the law forbids. This is one of the highest standards of intent imposed by law, and is different and higher than the intent standard under the relevant state statutes. Neither accident, mistake, fear, negligence nor bad judgment is sufficient to establish a willful federal criminal civil rights violation.
After conducting an exhaustive examination of all of the evidence, including consultation with experts, career federal prosecutors determined that the evidence does not establish the exacting standard of criminal intent required for a federal criminal civil rights prosecution.
The evidence reveals the following: At approximately 11:30 p.m. on the night of October 16, 2010, Mr. Henry drove himself and several friends to Finnegan’s Grill, located in the Thornwood Shopping Center in Thornwood, New York. Shortly after 1:00 a.m., a fight broke out among several bar patrons. Mr. Henry was not involved in this altercation. As a result of the fight, however, the owner of Finnegan’s Grill closed the establishment for the evening, ejected all of the patrons, and called the police. Police officers from both the Mount Pleasant and Pleasantville Police Departments responded to the scene. Mr. Henry departed the bar, retrieved his car from the parking lot, and pulled into a fire lane in front of Finnegan’s Grill while waiting for several friends. A Mount Pleasant police officer knocked on the window of Mr. Henry’s car, at which point Mr. Henry pulled out of the fire lane. The Mount Pleasant police officer shouted for Mr. Henry to stop. Mr. Henry proceeded to drive on the access road leading from the Thornwood Shopping Center. An officer with the Pleasantville Police Department stepped in front of Mr. Henry’s car. Although there are inconsistencies in the witness accounts regarding the chronology of certain subsequent events, the weight of the evidence indicates that Mr. Henry’s car was braking when it struck the Pleasantville officer, who wound up on the hood of the car, and that the Pleasantville officer then fired through the windshield into the car, wounding one of the passengers and killing Mr. Henry. A toxicology report from the state criminal investigation, which some parties have disputed, indicated that Mr. Henry had a blood alcohol level of .13 at the time of his death.
Several considerations have persuaded federal prosecutors that they cannot prove beyond a reasonable doubt that the Pleasantville police officer intentionally violated the civil rights of Mr. Henry. First, the incident happened within a matter of seconds, without any prior interaction or relationship between the Pleasantville officer and Mr. Henry that could lead a reasonable juror to believe that the officer had a motive to violate Mr. Henry’s civil rights. Second, a reasonable person considering the totality of the evidence would likely conclude that the car driven by Mr. Henry struck the officer and injured him before the officer fired his weapon. This resulted in the officer being positioned hazardously on the hood of a moving vehicle, requiring him to make a split-second decision under conditions of extreme danger, conditions under which the law generally allows latitude to a police officer’s judgment. Third, while portions of isolated testimony from certain of the witnesses at the scene might suggest that the Pleasantville officer acted with bad intent, there is not enough consistent, credible witness testimony to prove beyond a reasonable doubt that the officer acted with the requisite willfulness to deprive Mr. Henry of his constitutional rights. Finally, although racial animus need not be shown to establish a deprivation of rights under color of law, the evidence indicated that because of the darkness, the glare of the headlights and streetlamps, and the condensation on the windows, the Pleasantville officer would in all likelihood not have been able to see who the driver was or the driver’s race.
The Office also examined the evidence regarding the immediate aftermath of the shooting, and the failure of the officers on the scene, which was chaotic, to administer medical care to Mr. Henry as they waited for the EMT crews they had called for to arrive. Here, too, the Office could not conclude that the failure of the officers to provide immediate medical care under the circumstances amounted to a willful federal criminal civil rights violation.
The Office also considered whether there had been a criminal violation of the civil rights of Brandon Cox, who was injured by a bullet as he rode in the passenger side seat in Danroy Henry’s car. This injury arose out of the same exact facts that led to Mr. Henry’s shooting, and for the same reasons, the evidence does not support pursuing federal criminal charges in connection with the injury of Mr. Cox.
This Office analyzed these issues under the standard applicable to criminal cases, which is proof beyond a reasonable doubt. The Office expresses no view regarding any claims made against any party under the standard applicable to civil cases, which is proof by a preponderance of the evidence.
Accordingly, this Office’s investigation into Mr. Henry’s death has been closed.
Mr. Bharara expressed his deep sympathy to the family of Mr. Henry for their tragic loss.
Defendant Found Guilty in Manhattan Federal Court in Connection with 1994 Murder of 16 Year-Old GirlRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Delano A. Reid, Special Agent in Charge of the New York Division of the United States Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), and William J. Bratton, the Police Commissioner of the City of New York (“NYPD”), announced that JOHNNY CEDEÑO was found guilty Monday of conspiracy to commit murder-for-hire, murder-for-hire, and murder in connection with a narcotics conspiracy for his role in the murder of a 16-year-old girl. CEDEÑO was convicted after a six-day jury trial before U.S. District Judge Robert W. Sweet. CEDEÑO is the 20th defendant connected to the “Solid Gold” drug crew to be convicted for acts of violence and/or drug dealing in the Bronx in the 1990’s.
Manhattan U.S. Attorney Preet Bharara said: “Thanks to the efforts of the dedicated agents, detectives, and prosecutors who relentlessly pursued justice in this and related investigations, eight previously unsolved cold-case murders, including the tragic murder of an innocent 16-year-old girl, have now been solved and prosecuted. We hope seeing justice done is some balm to Carmen Diaz’s family, who lost her way too soon.”
ATF Special-Agent-in-Charge Delano A. Reid said: “It's nearly impossible for me to convey how gratified I am to see this long and complicated case come to a close. It was only through the dogged determination and dedication of the assigned investigators and prosecutors that we can now realize the extent of the complexities and obstacles this investigation presented. Cedeno's conviction was a long time coming but the victim's family can finally derive closure from the swift conviction and hopefully can find solace in the fact that once law enforcement has you identified and targeted, your days of freedom are surely numbered.”
NYPD Commissioner William J. Bratton said: “It is our hope that this conviction brings some comfort to the victim’s family who senselessly lost a loved one to gun violence. We thank our federal law enforcement partners who worked tirelessly to see this individual brought to justice”
According to the evidence introduced at trial, other proceedings in this case, and documents previously filed in Manhattan federal court:
JOHNNY CEDEÑO was a drug dealer who sold large quantities of crack cocaine on Bathgate Avenue in the early 90’s. He pled guilty to a firearms charge in the summer of 1994 and, while serving his sentence in connection with that charge, hired members of a drug crew that called itself “Solid Gold” to murder a rival drug dealer from Bathgate Avenue. While attempting to carry out CEDEÑO’s orders, the shooter shot and killed Carmen Diaz, a 16-year-old girl, who was sitting on the front stoop of her apartment building. Carmen Diaz sustained 11 gunshot wounds and died in the hospital three weeks later. The drug rival who was the original target of the shooting sustained injuries but did not die.
In addition to selling enormous quantities of crack cocaine, CEDEÑO and his criminal associates in Solid Gold committed numerous acts of violence, including murder, in the early 1990’s, in the areas of Bathgate Avenue and 178th/179th Streets, and 173rd Street and Boston Road, in the Bronx. Many of those crimes remained unsolved for almost 20 years. After a series of prosecutions in the Southern District of New York, culminating in this trial, 20 members and associates of Solid Gold have now been convicted for their involvement in the organization’s drug dealing activities and a total of eight murders.
JOHNNY CEDEÑO, 58, of the Bronx, faces a mandatory minimum sentence of life in prison. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. Judge Sweet has not yet set a sentencing date.
Mr. Bharara praised the investigative work of the ATF and the NYPD.
This case is being prosecuted by the Office’s Violent Crimes Unit. Assistant United States Attorneys Laurie A. Korenbaum and Brooke E. Cucinella are in charge of the prosecution.
New York Attorney Charged in Multimillion-Dollar Fraud Scheme to Purchase Nationally Circulated MagazineRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Robert J. Sica, the Special Agent-in-Charge of the New York Office of the United States Secret Service, and Diego Rodriguez, Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that HARVEY NEWKIRK, formerly counsel at a law firm in Manhattan, was arrested today for participating in a scheme to fraudulently induce lenders to provide millions of dollars to a company associated with a co-conspirator (“CC-1”) for the attempted purchase of a nationally circulated magazine and related assets (the “Magazine”). NEWKIRK surrendered this morning to the Secret Service, and was presented this afternoon in Manhattan federal court before U.S. Magistrate Judge James L. Cott.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Harvey Newkirk shirked his ethical responsibilities as a lawyer when he participated in a multimillion-dollar fraud scheme, in which deception and misrepresentations were legion, in order to obtain the funds to purchase a national magazine. Fortunately, thanks to our law enforcement partners at the Secret Service and the FBI, Newkirk was apprehended and must now answer for his alleged conduct.”
Secret Service Special Agent-in-Charge Robert Sica said: “The arrest of Harvey Newkirk is another example of the Secret Service's expertise in combating fraud and financial crimes. Our success in this case and other similar investigations is a result of the extraordinary work of our investigators and our close work with our network of law enforcement partners.”
FBI Assistant Director-in-Charge Diego Rodriguez said: “Lying to lenders, creating fictitious documents, and purporting to be someone’s attorney are serious crimes. Newkirk’s alleged elaborate fabrications – in a ridiculous attempt to purchase a nationally circulated magazine – have finally been unveiled.”
According to the allegations contained in the Complaint filed today in Manhattan federal court:
From August 2013 to February 2014, in connection with the potential purchase of the Magazine by a media company (the “Media Company”) associated with CC-1, NEWKIRK and CC-1 made a series of misrepresentations to lenders to induce these lenders to provide millions of dollars in capital to the Media Company for the purchase of the Magazine.
As part of the scheme, in order to mislead lenders into believing that they would receive sufficient collateral for their loans, NEWKIRK falsely promised lenders that assets owned by the father of CC-1 (the “Executive”) would be pledged as security for the loans. NEWKIRK made these promises without the authorization or knowledge of the Executive. In one instance, NEWKIRK and CC-1 provided a lender with account statements that purported to show the Executive’s holdings in the stocks of at least three publicly traded companies. NEWKIRK misled the lender into believing that the Executive’s alleged stock holdings in these companies, as reflected in the account statements, would serve as collateral for the loan. In truth, however, the account statements were fake documents and the Executive was not providing any financial support for the purchase of the Magazine.
Furthermore, after one of the lenders (“Lender-2”) placed approximately $5.5 million in escrow at the Manhattan law firm at which NEWKIRK was then counsel (the “Law Firm”), CC-1 arranged for a fraudulent email to be sent that purported to have been from Lender-2 to NEWKIRK. In response to that fraudulent email, NEWKIRK released approximately $4.9 million of Lender-2’s money from the escrow account to fund the Media Company’s purchase of the Magazine. NEWKIRK also attempted to forward $535,000 of Lender-2’s money to a different potential lender, in order to pay a debt owed to that potential lender. NEWKIRK did so without Lender-2’s knowledge or authorization.
Throughout the course of the scheme, NEWKIRK repeatedly lied to lenders regarding his relationship with the Executive, falsely purporting to be the Executive’s attorney despite having met the Executive on only one prior occasion. In addition, NEWKIRK attempted to hide from the Executive the existence of a lawsuit filed by one lender, in which that lender sought to obtain the Executive’s assets that NEWKIRK had pledged to the lender without the Executive’s knowledge. NEWKIRK also falsely represented to another lender, from whom NEWKIRK and CC-1 were seeking $20,000,000 in financing for the Magazine purchase, that approximately $12,000,000, representing funds provided by, or secured by the personal assets of, the Executive for the Magazine purchase, had been placed in escrow at the Law Firm. In fact, no funds were ever held in escrow at the Law Firm in connection with the Magazine purchase, other than the $5.5 million placed in escrow by Lender-2, and subsequently misappropriated by NEWKIRK.
In March 2015, during a consensual interview with law enforcement, NEWKIRK admitted that the Executive had not been NEWKIRK’s client despite NEWKIRK’s multiple representations to the contrary to various lenders throughout the course of the attempted purchase of the Magazine.
On November 4, 2014, CC-1 pled guilty before the Honorable Jed S. Rakoff to, among other things, charges related to CC-1’s participation in the scheme to defraud lenders for the attempted Magazine purchase.
NEWKIRK, 39, of New Rochelle, New York, is charged with one count of conspiracy to commit wire fraud and one count of wire fraud, each of which carries a maximum term of 20 years in prison. He is also charged with one count of aggravated identity theft, which carries a mandatory minimum and maximum sentence of two years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the investigative work of the United States Secret Service and the FBI.
The prosecution of this case is being overseen by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Andrew C. Adams and Sarah E. Paul are in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Harvey Newkirk Complaint
Swiss Asset Manager Pleads Guilty in Manhattan Federal Court to Conspiring with U.S. Taxpayers to Evade Federal Income Taxes and File False Tax ReturnsRead the Press Release
Preet Bharara, the U.S. Attorney for the Southern District of New York, announced today that PETER AMREIN, a Swiss citizen and former asset manager at a Swiss asset management firm, pleaded guilty to conspiring with U.S. taxpayer-clients and others to help U.S. taxpayers hide millions of dollars in offshore accounts from the Internal Revenue Service (IRS), and to evade U.S. taxes on the income earned in those accounts. AMREIN pleaded guilty before U.S. District Judge Sidney H. Stein.
U.S. Attorney Preet Bharara said: “Peter Amrein’s guilty plea today is another example of individuals being held culpable, in addition to institutions, for their criminal violations of U.S. tax laws. Regardless of the elaborate scheme you might employ, we will use all of our investigative powers to ensure that all citizens pay their fair share, and that those who assist them in evading our laws are also held responsible.”
According to the allegations in the Superseding Information and the prior Indictment, as well as statements made during the plea proceeding and other documents filed in Manhattan federal court:
AMREIN worked as a client advisor at a Swiss bank (Swiss Bank No. 3) and, later, as an asset manager at a Swiss asset management firm (the Swiss Asset Management Firm). In those roles, between 1998 and 2012, AMREIN helped U.S. taxpayers evade taxes and hide millions of dollars in undeclared accounts at various Swiss banks, including Wegelin & Co., which was charged and pleaded guilty in the Southern District of New York for its conduct in conspiring with U.S. taxpayers to evade taxes. AMREIN, among other things, worked with an attorney based in Zurich, Switzerland, to establish sham foundations, which were organized under the laws of non-U.S. countries such as Liechtenstein, so that the undeclared assets of certain of AMREIN’s U.S. taxpayer-clients could be maintained in the names of these foreign foundations rather than in the clients’ own names. AMREIN did so in order to help his clients conceal their ownership of these undeclared accounts from the IRS.
In 2008, it became publicly known that UBS AG (UBS) was being investigated by United States law enforcement for helping U.S. taxpayers maintain undeclared accounts in Switzerland. Because of the investigation of UBS, one of the Swiss banks where AMREIN had opened undeclared accounts for U.S. taxpayers (Swiss Bank No. 4) informed AMREIN that it was going to close these undeclared accounts. In order to assist his clients in continuing to maintain undeclared accounts, AMREIN searched for other banks in Switzerland that, despite the public investigation of UBS, were still willing to open undeclared accounts for U.S. taxpayers. AMREIN found such a bank (Swiss Bank No. 1). Thereafter, AMREIN opened undeclared accounts for U.S. taxpayer-clients at Swiss Bank No. 1 in the name of sham foundations, and transferred the clients’ undeclared assets from Swiss Bank No. 4 to these accounts at Swiss Bank No. 1.
For some of these clients, AMREIN, with the assistance of others, helped send funds back to the United States and to other foreign jurisdictions in ways that were designed to ensure that U.S. authorities would not discover the existence of the clients’ undeclared accounts. For instance, AMREIN instructed a client advisor at Swiss Bank No. 1 (the Swiss Bank No. 1 Client Advisor) to empty one of the accounts by sending checks in amounts smaller than $9,900 to the beneficial owner of the account, i.e., the U.S. taxpayer. On another occasion, AMREIN instructed the Swiss Bank No. 1 Client Advisor to transfer the balance of one of the accounts, which was then valued at more than $2.4 million, to another account controlled by the U.S. taxpayer in Belize City, Belize. Moreover, as late as 2011, AMREIN continued to look for other Swiss banks that were still willing to open undeclared accounts for U.S. taxpayers. For example, in June 2011, AMREIN met with a client advisor at a Swiss bank (Swiss Bank No. 2), to discuss opening undeclared accounts for U.S. taxpayer-clients at Swiss Bank No. 2.
Mr. Bharara praised the outstanding investigative work of the IRS-Criminal Investigations. He also thanked the Department of Justice’s Tax Division for their significant assistance in the investigation.
AMREIN, 53, a Swiss citizen, pleaded guilty pursuant to a plea agreement to one count of conspiracy to defraud the IRS, to evade federal income taxes, and to file false federal income tax returns. AMREIN faces a maximum sentence of five years in prison. The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. AMREIN is scheduled to be sentenced before Judge Stein on July 1, 2015.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Sarah E. Paul, Jason H. Cowley, and Daniel B. Tehrani are in charge of the prosecution.
Manhattan U.S. Attorney Announces Indictment of Former President of Law Enforcement Labor Union for Defrauding Union of FundsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Andriana Vamvakas, the New York District Director of the U.S. Department of Labor's Office of Labor Management Standards ("DOL-OLMS"), announced the indictment of former union president JOHN EARVIN for engaging in a fraudulent scheme to embezzle funds from the United Federation of Law Enforcement Officers (“UFLEO” or the “Union”). The UFLEO represents Special Inspectors employed by the Metropolitan Transportation Authority of New York (“MTA”). EARVIN was arrested today and will be arraigned later today in Manhattan federal court before Judge Gabriel W. Gorenstein. The case has been assigned to Judge Paul A. Engelmayer.
According to the allegations in the Indictment filed in Manhattan federal court yesterday:
From February 2007 through April 2010, EARVIN was the Union’s president, supervising the affairs of the Union and managing the Union’s finances, including through sole control of the Union’s bank account (the “Account”). Through his presidency, EARVIN allegedly perpetrated a scheme to defraud the Union by diverting Union dues payments deposited into the Account for his own benefit, principally by making hundreds of ATM withdrawals at off-track betting facilities and other locations and making personal use of the funds. In furtherance of the scheme, and to prevent its discovery, EARVIN, as alleged, repeatedly lied to Union members about the Account by, for example, claiming that he could not provide an accounting of funds to Union members because an independent auditor was reviewing the Union’s finances. As a result of the scheme, EARVIN is accused of defrauding the Union and its members of approximately $48,012.
EARVIN, 67, of New Rochelle, New York is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison. The Indictment also seeks forfeiture of crime proceeds. The statutory maximum penalty is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
U.S. Attorney Preet Bharara thanked the DOL-OLMS for its work in the investigation.
The case is being prosecuted by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Carrie H. Cohen and Jennifer Gachiri are in charge of the prosecution.
The charge contained in the Indictment is merely an accusation and the defendant is presumed innocent unless and until proven guilty.
U.S. v. John Earvin Indictment
Manhattan U.S. Attorney and FBI Assistant Director Announce Charges Against Founder of Non-Profit Organization for Defrauding Parents of Abducted ChildrenRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), today announced charges against PETER SENESE, the Founding Director of the I CARE Foundation (“I CARE”), which advertises itself as a “self-funded non-profit organization dedicated to preventing child abduction and trafficking.” Since at least 2013, SENESE allegedly defrauded parents whose children were victims of international abduction by falsely representing that he, working with the worldwide resources of I CARE, could rescue their children and return to them to the United States in exchange for money for his purported rescue operation expenses. SENESE was arrested this morning in Brooklyn, New York, and will be presented later today before U.S. Magistrate Judge Gabriel W. Gorenstein.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Peter Senese fed a pack of lies to desperate parents by telling them, among other things, that he and his company could, for a price, locate and recover their internationally kidnapped children. In fact, he could do no such thing, but that didn’t stop him from allegedly repeatedly reaching out to the parents for more money to fund his non-existent rescue mission. This type of alleged fraud that preys on the especially vulnerable and desperate is a top priority for us, and we will work to ensure those who commit these outrageous crimes are held to strict account.”
FBI Assistant Director Diego Rodriguez said: “As alleged, Senese’s supposed self-funded corporation to prevent child abduction and trafficking turned out to be nothing more than a ruse. He allegedly preyed on the anguish of suffering families, left them open to be victimized a second time, and accepted their payments to fund his personal venture without ever having access to the worldwide resources of which he spoke. Fortunately, his journey ends today. The FBI and our law enforcement partners often work hand in hand on cases involving the mysterious disappearance of a child, and we will continue to protect the welfare of those faced with this terrible tragedy. ”
According to the allegations in the Complaint filed today in Manhattan federal court:
Through his websites (www.stopchildabduction.org and www.petersenese.com) and elsewhere, SENESE promotes I CARE as “a self-funded not-for-profit 501-C-3[sic] corporation” that “does not accept outside financial contributions and has reunited numerous internationally kidnapped children while preventing an exponentially larger number of children from abduction.” SENESE also represents that I CARE includes “some of the leading figures in the world dedicated to protecting children from abduction and trafficking” and that “there have been many, many children of international parental child abduction who have been reunited and returned home due directly to the great efforts, financial, legal, and investigative resources” of I CARE.
Between at least November 2013 and February 2015, SENESE specifically represented to victims that he could recover their children from other countries by working with a team of former members of the U.S. Army component Delta Force (“Delta Force”), of which SENESE claimed to have also been a member. SENESE repeatedly represented to one victim (“V-1”) that he could recover V-1’s child (“Child-1”) from India in a matter of weeks, but that he needed a few thousand dollars from V-1 to cover his operational expenses. In the months that followed, SENESE repeatedly represented that he was very close to recovering Child-1, appeared on a local radio program with V-1, and sent numerous text messages and emails stating, in part, that he was either in India or an unspecified “remote location” and that Child-1 would be returned to the United States in a matter of hours or days. During the same period, SENESE repeatedly asked for additional funds, typically ranging from $3,000 to $5,000 per month to cover his operational expenses.
In fact, SENESE has not traveled outside of the country for years. While SENESE represented that he was in foreign locations, he was actually in Miami, Florida; New York, New York; or Los Angeles, California. SENESE also has never had any affiliation with the United States military, and the children SENESE promised to recover have not been recovered.
SENESE, 49, of Brooklyn, New York, is charged with one count of wire fraud, which carries a maximum sentence of 30 years in prison. The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the outstanding work of the FBI for its investigative efforts and ongoing support and assistance with the case.
The prosecution is being handled by the Office’s General Crimes Unit. Assistant U.S. Attorney Jaimie L. Nawaday is in charge of the case.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Peter Senese Complaint
Haroon Aswat, Abu Hamza Co-Conspirator, Pleads Guilty to Terrorism Charges in Manhattan Federal CourtRead the Press Release
Preet Bharara, United States Attorney for the Southern District of New York, and Assistant Attorney General for National Security John P. Carlin announced that HAROON ASWAT pled guilty today in Manhattan federal court to terrorism charges related to ASWAT’s efforts to establish a terrorist training camp in the United States. ASWAT was arrested in Zambia in July 2005. In August 2005, ASWAT was deported from Zambia to the United Kingdom, where he was arrested pursuant to a provisional arrest warrant that was issued in response to a request by the U.S. Government in connection with this case. ASWAT was extradited to the United States from the United Kingdom on October 21, 2014. ASWAT pled guilty today to one count of conspiring to provide material support to al Qaeda, and one count of providing material support to al Qaeda.
Manhattan U.S. Attorney Preet Bharara said: “Haroon Aswat fought his extradition to the United States for almost 10 years. He then pled guilty to material support charges within just six months of arriving here, showing again our legal system’s capacity for swift justice. For providing support to al Qaeda, Aswat now comes face-to-face with justice and faces up to 20 years in prison, and after the completion of his term he will be deported.”
Assistant Attorney General for National Security John P. Carlin said: “With this guilty plea, Haroon Aswat is being held accountable for his provision of material support to al Qaeda and his role in a plot to establish a terrorist training camp on American soil. Aswat was arrested almost 10 years ago, and his guilty plea is a testament to our determination to bring to justice all those who wish to harm the United States, whether at home or abroad, no matter how long it takes. I would like to extend my gratitude to all of the many agents, analysts and prosecutors whose dedication and persistence made possible the guilty plea in this case.”
According to the allegations contained in the Indictment, statements made at related court proceedings including today’s guilty plea, and evidence presented at prior trials:
In late 1999, ASWAT, along with co-defendants Mustafa Kamel Mustafa, a/k/a “Abu Hamza” (“Abu Hamza”), Ouassama Kassir, and Earnest James Ujaama, attempted to create a terrorist training camp in the United States to support al Qaeda, which has been designated by the United States Secretary of State as a foreign terrorist organization. ASWAT conspired with Abu Hamza, Kassir, and Ujaama to establish the terrorist training camp on a rural parcel of property located in Bly, Oregon. The purpose of the Bly, Oregon camp was for Muslims to receive various types of training – including military-style jihad training – in preparation to fight jihad in Afghanistan. As used by the conspirators in this case, the term “jihad” meant defending Islam against purported enemies through violence and armed aggression, including, if necessary, by using murder to rid Muslim holy lands of non-believers in Islam.
In a letter faxed from Ujaama, in the United States, to Abu Hamza, in the United Kingdom, the property in Bly was described as a place that “looks just like Afghanistan,” and the letter noted that the men at Bly were “stock-piling weapons and ammunition.” In late 1999, after transmission of the faxed letter, Abu Hamza directed ASWAT and Kassir, both of whom resided in London, England, and attended Abu Hamza’s mosque there, to travel to Oregon to assist in establishing the camp. On November 26, 1999, ASWAT and Kassir arrived in New York, and then traveled to Bly.
ASWAT and Kassir traveled to Bly for the purpose of training men to fight jihad. Kassir told witnesses that he supported Usama Bin Laden and al Qaeda, and that he had previously received jihad training in Pakistan. Kassir also possessed a compact disc that contained instructions on how to make bombs and poisons. After leaving Bly, ASWAT and Kassir traveled to Seattle, Washington, where they resided at a mosque for approximately two months. While in Seattle, Kassir, in ASWAT’s presence, provided men from the mosque with additional terrorist training lessons – including instructions on different types of weapons, how to construct a homemade silencer for a firearm, how to assemble and disassemble an AK-47, and how an AK-47 could be altered to be fully automatic and to launch a grenade. On another occasion, with ASWAT sitting by his side, Kassir announced to the men in Seattle that he had come to the United States for martyrdom and to destroy, and he informed his audience that some of them could die or get hurt.
A ledger recovered in September 2002 from an al Qaeda safe house in Karachi, Pakistan, listed a number of individuals associated with al Qaeda, including ASWAT. The al Qaeda safe house was used by Khalid Sheikh Mohammed, al Qaeda’s chief operational planner and the alleged planner of the terrorist attacks of September 11, 2001.
ASWAT pled guilty to one count of conspiracy to provide material support to a foreign terrorist organization (al Qaeda), and one count of providing material support to a foreign terrorist organization (al Qaeda), each of which carries a maximum term of 10 years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Abu Hamza and Kassir were previously convicted for their roles in attempting to establish a terrorist training camp in the United States. On May 12, 2009, after a four-week jury trial in the Southern District of New York, Kassir was found guilty of charges relating to his efforts to establish the terrorist training camp in Bly, and his operation of several terrorist websites. On September 15, 2009, U.S. District Judge John F. Keenan sentenced Kassir to life in prison.
On May 19, 2014, after a four-week jury trial in the Southern District of New York, Abu Hamza was found guilty of charges relating to his role in the conspiracy to establish the terrorist training camp in Bly, as well as his role in a hostage-taking in Yemen in 1998 that resulted in four deaths, and his support of violent jihad in Afghanistan in 2000 and 2001. On January 9, 2015, U.S. District Judge Katherine B. Forrest sentenced Abu Hamza to life in prison.
Mr. Bharara praised the outstanding efforts of the Federal Bureau of Investigation’s Manhattan-based Joint Terrorism Task Force – which principally consists of agents of the FBI and detectives of the New York City Police Department, and includes officers of numerous federal, state, and local law enforcement agencies – the United States Marshals Service, and the Metropolitan Police Department of London, England. Mr. Bharara also thanked the U.S. Department of Justice’s National Security Division and Office of International Affairs for their ongoing assistance.
This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys John Cronan, Ian McGinley, and Shane Stansbury are in charge of the prosecution.
Manhattan U.S. Attorney Announces Conviction of Colombian Narcotics Trafficker for Conspiracy to Engage in Narco-Terrorism and Other Terrorism and Narcotics ChargesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced the conviction yesterday of RAFAEL ANTONIO GARAVITO-GARCIA for conspiracy to engage in narco-terrorism, and other terrorism and narcotics charges. Following an eight-day trial before U.S. District Judge Jed S. Rakoff, the jury found GARAVITO-GARCIA guilty of all four counts with which he was charged: conspiracy to engage in narco-terrorism (Count One), conspiracy to distribute five kilograms or more of cocaine, knowing or intending that the cocaine would be imported into the United States (Count Two), conspiracy to provide material support and resources to the Fuerzas Armadas Revolucionarios de Colombia (the “FARC”) (Count Three), and conspiracy to acquire and transfer anti-aircraft missiles (Count Four). GARAVITO-GARCIA was arrested in Colombia on April 5, 2013, following a long-term investigation conducted by the Drug Enforcement Administration’s (“DEA”) Special Operations Division, and arrived in the Southern District of New York on July 22, 2014. The guilty verdict marks the first time in the District a defendant has been convicted at trial of conspiracy to engage in narco-terrorism, although in prior cases there have been pleas of guilty to the narco-terrorism conspiracy charge.
Manhattan U.S. Attorney Preet Bharara said: “As a unanimous jury has found, Rafael Antonio Garavito-Garcia was at the heart of a conspiracy to import cocaine into the U.S. and arm a terrorist organization with sophisticated weaponry that would be used against U.S. forces in Colombia. Thanks to the outstanding work of the DEA, another dangerous international criminal no longer poses a threat. He now awaits sentencing on these serious crimes.”
According to court documents and the evidence presented at trial:
Beginning in the summer of 2012, GARAVITO-GARCIA communicated with confidential sources (the “CSs”) working with the DEA who purported to be representatives and/or associates of the FARC. The communications occurred by telephone, over e-mail, and in a series of audio-recorded and videotaped meetings. Following initial recorded meetings in Brazil, GARAVITO-GARCIA accompanied the CSs to Guinea Bissau, where he introduced them to two local men, whom he indicated were his associates in that country. GARAVITO-GARCIA later introduced the CSs to a Colombian man, whom GARAVITO-GARCIA identified as his drug trafficking partner.
During meetings in Guinea-Bissau beginning in June 2012, and continuing through November 2012, GARAVITO-GARCIA agreed to receive and store multi-ton shipments of FARC-owned cocaine in Guinea-Bissau. He agreed, in particular, to receive the cocaine in Guinea-Bissau and to store the cocaine there pending the eventual shipment of some of the cocaine to the United States, where it would be sold for the financial benefit of the FARC. GARAVITO-GARCIA also agreed to sell some of the cocaine himself, and to provide the FARC with some of the proceeds of his drug sales. Also during those meetings, GARAVITO-GARCIA and his associates agreed to help arrange to purchase weapons for the FARC, including surface-to-air missiles, by importing them into Guinea-Bissau for the nominal use of the Guinea-Bissau military.
For example, on June 30, 2012, during a recorded meeting in Guinea Bissau with the CSs, GARAVITO-GARCIA and his Guinea Bissau-based associates agreed to assist in the distribution of FARC cocaine by facilitating the shipment of cocaine to Guinea Bissau inside loads of military uniforms. They also agreed to establish a front company in Guinea Bissau to facilitate the export of cocaine from Guinea Bissau to the United States. On July 2, 2012, GARAVITO-GARCIA introduced the CSs to General Antonio Indjai, who was then head of the Guinea-Bissau Armed Forces, and helped win Indjai’s support for the drug and weapons deal. During another recorded meeting in Guinea Bissau the following day, GARAVITO-GARCIA met with the CSs and a Guinea Bissau military representative and discussed the benefits of using Guinea Bissau as a transshipment point for cocaine obtained in South America and destined for the United States. GARAVITO-GARCIA also discussed with the others the process for offloading the cocaine once it arrived in Guinea Bissau, and the nature of the weapons to be supplied to the FARC to combat American forces assisting the Colombian authorities, including surface-to-air missiles and AK-47 assault rifles.
Thereafter, on August 31, 2012, during a recorded meeting in Bogota, Colombia, GARAVITO-GARCIA and his Colombian partner agreed to facilitate the receipt of approximately 4,000 kilograms of cocaine from the FARC in Guinea Bissau, with the understanding that approximately 500 kilograms of that cocaine would later be sent to customers in the United States and Canada. During a recorded meeting in Guinea Bissau on November 13, 2012, GARAVITO-GARCIA explained to a Guinea Bissau military official that the FARC needed anti-aircraft missiles to be used against United States helicopters operating in Colombia. The military official then advised one of the CSs that the weapons transaction could be executed once the FARC brought money to Guinea Bissau.
GARAVITO-GARCIA was arrested in Bogota, Colombia, on April 5, 2013.
GARAVITO-GARCIA, 70, of Bogota, Colombia, was convicted of one count of conspiracy to commit narco-terrorism, which carries a mandatory minimum sentence of 20 years, and a maximum sentence of life in prison. In addition, GARAVITO-GARCIA was convicted of one count of conspiracy to import cocaine into the United States, which carries a mandatory minimum sentence of 10 years, and a maximum sentence of life in prison; one count of conspiracy to provide material support to a designated foreign terrorist organization, namely, the FARC, which carries a maximum sentence of 15 years in prison; and one count of conspiracy to acquire and transfer anti-aircraft missiles, which carries a mandatory minimum sentence of 25 years in prison, and a maximum sentence of life in prison. The mandatory minimum and maximum potential sentences are prescribed by Congress and are provided here for informational purposes, as any sentencing of the defendant will be determined by the judge.
Sentencing before Judge Rakoff is scheduled for July 20, 2015, at 4:00 p.m.
In April 2013, an indictment was unsealed charging General Antonio Indjai with conspiracy to commit narco-terrorism, conspiracy to import cocaine into the United States, conspiracy to provide material support to the FARC, and conspiracy to acquire and transfer anti-aircraft missiles. Indjai is currently a charged defendant located outside the arrest jurisdiction of the United States.
The conviction 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’s Bilateral Investigation Unit and FAST, the DEA Lisbon Country Office, the DEA Bogota Country Office, the U.S. Department of Justice’s Office of International Affairs and its National Security Division, and the U.S. State Department.
This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Aimee Hector, Shane Stansbury, and Ilan Graff are in charge of the prosecution.
CEO and Managing Director of U.S. Broker-Dealer Each Sentenced to Four Years in Prison for Scheme to Bribe A Venezuelan Foreign OfficialRead the Press Release
PREET BHARARA, the United States Attorney for the Southern District of New York, and LESLIE R. CALDWELL, the Assistant Attorney General for the Criminal Division of the United States Department of Justice, announced that BENITO CHINEA and JOSEPH DEMENESES , the former Chief Executive Officer and former Managing Director, respectively, of a United States broker-dealer (the “Broker-Dealer”), were each sentenced to four years in prison today for carrying out a scheme to pay bribes to Maria De Los Angeles Gonzalez De Hernandez (“Gonzalez”), who was a senior official in Venezuela’s state economic development bank, Banco de Desarrollo Económico y Social de Venezuela (“BANDES”). CHINEA and DEMENESES, working with others, arranged the bribe payments to Gonzalez in exchange for her directing BANDES’s financial trading business to the Broker-Dealer. CHINEA and DEMENESES each had previously pled guilty to conspiring to violate the Foreign Corrupt Practices Act and the Travel Act. They were sentenced today by U.S. District Judge Denise Cote.
Previously, on May 3, 2013, Gonzalez, along with two employees of the Broker-Dealer, Tomas Alberto Clarke Bethancourt (“Clarke”) and Jose Alejandro Hurtado (“Hurtado”) were arrested on charges relating to this bribery scheme. On June 12, 2013, a managing director of the Broker-Dealer, Ernesto Lujan (“Lujan”), was arrested on related charges as well. Each of these four defendants has since entered guilty pleas.
Manhattan U.S. Attorney Preet Bharara said: “Benito Chinea and Joseph DeMeneses paid bribes to an officer of a state-run development bank in exchange for lucrative business she steered to their firm. Chinea and DeMeneses profited for a time from the corrupt arrangement, but that profit has turned into prison and now they must forfeit their millions of dollars in ill-gotten gains as well as their liberty.”
Assistant Attorney General Leslie R. Caldwell said: “These Wall Street executives orchestrated a massive bribery scheme with a corrupt official in Venezuela to illegally secure tens of millions of dollars in business for their firm. The convictions and prison sentences of the CEO and Managing Director of a sophisticated Wall Street broker-dealer demonstrate that the Department of Justice will hold individuals accountable for violations of the FCPA and will pursue executives no matter where they are on the corporate ladder.”
According to the allegations in the Indictment, the defendants’ pleas, and other documents previously filed in Manhattan federal court:
Background on the Broker-Dealer and BANDES
At all times relevant to the charges, CHINEA was the chief executive officer and DEMENESES was a managing director in the Broker Dealer, which was headquartered in New York, with offices in Miami, Florida. In 2008, the Broker-Dealer established a group called the Global Markets Group, which included DEMENESES, Lujan, and Clarke, and which offered fixed income trading services to institutional clients. One of the Broker-Dealer’s clients was BANDES, which operated under the direction of the Venezuelan Ministry of Finance. The Venezuelan government had a majority ownership interest in BANDES and provided it with substantial funding. Gonzalez was an official at BANDES and oversaw the development bank’s overseas trading activity. At her direction, BANDES conducted substantial trading through the Broker-Dealer. Most of the trades executed by the Broker-Dealer on behalf of BANDES involved fixed income investments for which the Broker-Dealer charged BANDES a mark-up on purchases and a mark-down on sales.
The Bribery Scheme
From at least late 2008 through at least 2012, CHINEA and DEMENESES, along with Lujan, Clarke, Hurtado, and Gonzalez, participated in a bribery scheme in which Gonzalez directed trading business she controlled at BANDES to the Broker-Dealer, and in return, agents and employees of the Broker-Dealer, including CHINEA and DEMENESES, split the revenue the Broker-Dealer generated from this trading business with Gonzalez. During this time period, the Broker-Dealer generated over $60 million in mark-ups and mark-downs from trades with BANDES. Agents and employees of the Broker-Dealer, including CHINEA, DEMENESES, Lujan, Clarke, and Hurtado, devised a split with Gonzalez of the commissions paid by BANDES to the Broker-Dealer.
To further conceal the scheme, the kickbacks to Gonzalez were often paid using intermediary corporations and offshore accounts that she held in Switzerland, among other places. For example, DEMENESES, Lujan, and Clarke used an account in Switzerland to transfer at least $1.5 million to an account Gonzalez controlled in Switzerland. In addition to Gonzalez receiving the bribe payments, other participants in the scheme, including CHINEA and DEMENESES, also received millions in proceeds generated from the scheme.
In addition to the prison terms, Judge Cote sentenced CHINEA, 48, who resides in Manalapan, New Jersey, and DEMENESES, 45, who resides in Fairfield, Connecticut, to three years of supervised release each. CHINEA was ordered to forfeit $3,636,432 and DEMENESES was ordered to forfeit $2,670,612. Each defendant was also ordered to pay a $40,000 fine and a $100 special assessment fee.
Mr. Bharara praised DOJ’s Criminal Division and the Federal Bureau of Investigation for their work in the investigation. He also thanked the Securities and Exchange Commission for its assistance in this case.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorneys Harry A. Chernoff and Jason H. Cowley, and Fraud Section Deputy Chief James Koukios and Trial Attorney Kevin Gingras, are in charge of the prosecution.
Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.
Pharmacist Sentenced in Manhattan Federal Court to 36 Months in Prison for Multimillion-Dollar Medicare/Medicaid Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that PURNA CHANDRA ARAMALLA was sentenced today to 36 months in prison, and ordered to pay over $7 million in restitution, for conducting a scheme to defraud Medicaid, Medicare, and the New York State-funded AIDS Drug Assistance Program (“ADAP”) through the purchase and sale of illegally diverted prescription drugs, including HIV medication. ARAMALLA was also sentenced for tax evasion. He was sentenced by U.S. District Judge Paul A. Crotty.
Manhattan U.S. Attorney Preet Bharara said: “Purna Aramalla’s prescription drug diversion scheme defrauded millions of dollars from programs established to provide health care assistance for the elderly and indigent. The scheme also jeopardized the health of anyone induced to sell his or her prescription or medication, and anyone who unwittingly purchased repackaged drugs.”
ARAMALLA, a pharmacist, owned and operated A Fair Deal Pharmacy Inc. in Queens, New York, and Quality Drug Inc. in the Bronx, New York. Using these pharmacies, ARAMALLA carried out a multimillion-dollar scheme to defraud the New York State Medicaid, Medicare, and ADAP programs through the sale of diverted prescription drugs, that is, drugs not obtained from legitimate sources.
As part of the scheme, ARAMALLA purchased prescription drugs, including high-cost medications used to treat HIV, that were obtained from patients who sold the drugs rather than use them to treat their illnesses. ARAMALLA then repackaged and resold those prescription drugs to his customers, as if they were new drugs obtained from legitimate sources. ARAMALLA requested and received reimbursement from Medicaid, Medicare, and ADAP in connection with these sales, even though these programs would not have been willing to reimburse the cost of second-hand drugs. In addition, in some cases, these programs had already paid for the prescription drugs when they were initially dispensed. In order to make the diverted drugs appear to be new drugs from legitimate sources, ARAMALLA and his co-conspirators used lighter fluid and other means to dissolve the adhesive on the patient labels on prescription bottles so that they could be removed and replaced with new labels.
ARAMALLA also sought and obtained reimbursement for prescription drugs that were never actually dispensed to patients. Instead, customers with prescriptions for drugs essentially “sold” their prescriptions to ARAMALLA, agreeing not to take delivery of the drugs in exchange for a share of the reimbursed proceeds.
From January 2010 to September 2013, ARAMALLA’s pharmacies received more than $10 million in reimbursements from Medicaid, Medicare, and ADAP that cannot be accounted for by ARAMALLA’s purchases from legitimate wholesalers.
In addition to his prison term, ARAMALLA, 67, of Port Washington, New York, was ordered to forfeit $7,503,605, pay restitution to his victims in the same amount, file amended tax returns for the years 2010 through 2012, and pay back taxes and applicable penalties.
Mr. Bharara praised the outstanding investigative work of the New York FBI Health Care Fraud Task Force and the Internal Revenue Service. He also thanked the U.S. Department of Health and Human Services, Office of Inspector General, the New York State Office of Medicaid Inspector General, and the New York City Human Resources Administration.
The New York FBI Health Care Fraud Task Force was formed in 2007 in an effort to combat health care fraud in the greater New York City area. The task force comprises agents, officers, and investigators from the Federal Bureau of Investigation, the New York City Police Department, the New York State Insurance Fraud Bureau, U.S. Department of Labor, U.S. Office of Personnel Management Inspector General, U.S. Food and Drug Administration, New York State Attorney General's Office, New York State Office of Medicaid Inspector General, New York State Health and Hospitals Inspector General, and the National Insurance Crime Bureau.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Niketh Velamoor and Andrew Adams are in charge of the prosecution.
Major Drug Trafficker Sentenced in Manhattan Federal Court to Life Plus 30 Years in Prison for Two Murder-For-Hire Conspiracies, Attempted Murder, and Narcotics and Firearms OffensesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that ROGER KEY, a/k/a “Luchie,” a violent and large-scale drug trafficker who operated in Manhattan and the Bronx, New York, was sentenced today in Manhattan federal court to life plus 30 years in prison in connection with his role in carrying out two murder-for-hire conspiracies – resulting in the murder of one victim and the near-fatal shooting of an innocent bystander – attempted murder, and narcotics and firearms offenses. KEY was convicted in April 2014 following a three-week jury trial before U.S. District Judge Sidney H. Stein, who also imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara said: “With today’s sentence, Roger Key has been punished with life in prison for his lethal laundry list of murder, gun, and drug-related offenses, and the Southern District of New York is safer as a result. I would like to thank our federal and local law enforcement partners for helping us to develop and bring this case.”
According to court documents, the evidence presented at trial, and today’s proceedings:
From 2009 through September 2012, KEY supplied powder cocaine and crack cocaine to various drug organizations operating in Manhattan and the Bronx. KEY also used, carried, and possessed firearms during the narcotics conspiracy.
In September 2010, KEY hired a co-conspirator to murder Terry Harrison. Harrison was shot and killed on September 10, 2010, at 681 Courtlandt Avenue in the Bronx. Harrison was the leader of a rival drug-trafficking crew with whom KEY and his co-conspirators were engaged in a violent conflict over drug-trafficking territory in the Bronx.
From October 2011 through December 2011, KEY hired a co-conspirator to kill Matthew Allen, and aided and abetted the attempted murder-for-hire of Matthew Allen on November 16, 2011, which resulted in the non-fatal shooting of another victim, at 302 Brooklyn Avenue, Brooklyn, New York.
In addition to the prison term, KEY, 38, of the Bronx, New York, was sentenced to 10 years of supervised release.
At trial, KEY was convicted of narcotics conspiracy, conspiracy to commit the murder-for-hire of Matthew Allen, the attempted murder-for-hire of Matthew Allen, conspiracy to commit the murder-for-hire of Terry Harrison, and firearms possession and use in connection with both the narcotics conspiracy and the Matthew Allen murder plot. KEY was acquitted at trial of the murder-for-hire of Terry Harrison, murder in connection with a drug crime, and a firearms possession charge in connection with that murder.
KEY is the last of 18 defendants originally charged in this case to be convicted and sentenced in proceedings before Judge Stein. He is also the last of a total of four individuals who have been convicted and sentenced for offenses relating to the conspiracy to commit the murder-for-hire and the attempted murder-for-hire of Matthew Allen.
Mr. Bharara praised the outstanding work of the Federal Bureau of the Investigation, the Westchester County Violent Crimes Task Force, and the New York City Police Department, including the 40th Precinct Detective Squad and the Manhattan North Narcotics Major Case Unit, who conducted the investigation of the case. Mr. Bharara also thanked the New York County District Attorney’s Office, who provided critical assistance in the investigation and prosecution of the case.
This case is being overseen by the Office’s Violent & Organized Crime Unit. Assistant United States Attorneys Abigail S. Kurland and Adam Fee are in charge of the prosecution.
Connecticut Man Pleads Guilty in White Plains Federal Court to Nearly $ 1 Million Fraud Against More Than 30 Businesses in Eight StatesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that SHANE FUSCO pled guilty today to bank fraud charges.
FUSCO is charged with one count of conspiracy to commit bank fraud and one count of bank fraud.
Manhattan U.S. Attorney Bharara stated: “Shane Fusco brazenly defrauded dozens of small businesses up and down the Eastern seaboard of hundreds of thousands of dollars in goods using fraudulent bank checks and fraudulent personal checks. In the end, Fusco will face justice for trying to steal close to a million dollars in goods.”
FBI Assistant Director Diego Rodriguez stated: “Fusco conned more than two dozen businesses out of nearly $1 million in a scheme that served to further enrich his lifestyle. Stealing money from victims in this way not only compromises the livelihood of business owners, but could also lead to long-term financial consequences for the victim companies. As evidenced by today’s plea, the time has come for Fusco to pay the price for his crimes.”
According to the Information 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 businesses 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.
FUSCO faces a maximum sentence of 30 years in prison on each count in the Information. He is scheduled to be sentenced on July 8, 2015. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes, any sentencing of the defendant will be determined by the judge.
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. Attorney John P. Collins, Jr., is in charge of the prosecution.
Seventeen Charged in White Plains Federal Court with Massive Oxycodone and Heroin Conspiracies in and Around Rockland CountyRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Thomas Zugibe, Rockland County District Attorney, James Hunt, Special Agent in Charge of the New York Division of the Drug Enforcement Administration (“DEA”), and Ed Day, Rockland County Executive, announced the unsealing of an Indictment charging 17 defendants with conspiring to distribute oxycodone and heroin in and around Rockland County.
Twelve of the seventeen defendants charged in the Indictment unsealed today were arrested today or had previously been taken into custody. Those defendants are expected to be presented in White Plains federal court today before Magistrate Judge Judith C. McCarthy. In a related prosecution, New York State has charged an additional 12 defendants.
U.S. Attorney Bharara stated: “What we have more and more in this country is poison by prescription. The abuse of prescription painkillers, and oxycodone in particular, has become a crisis of epidemic proportions. Today we announce the unsealing of charges against members of a massive drug trafficking organization who sought to capitalize on this increasingly deadly epidemic. The federal Indictment names 17 defendants, and the Rockland County DA is bringing a related prosecution against 12 additional defendants. We will not permit prescription painkillers and other illegal drugs to decimate our community, our state, or our nation. This has to stop, and we will do everything we can to stop it.”
District Attorney Zugibe stated: “Dealers in this operation are alleged to have sunk to a new low, selling prescription drugs and heroin at popular locations where parents drop off their kids to see a movie, attend a birthday party or spend time ice skating with friends. With today’s federal indictment, we take a giant step to ensure a feeling of safety and security in our community – making certain that Rockland County continues to be a great place to live and work. Our success in this ongoing investigation is the direct result of the exceptional cooperation with U.S. Attorney Preet Bharara, the DEA and state and local law enforcement agencies. My office is dedicated to continuing to work with our partners to target, investigate and bring to justice those who prey on our community.”
DEA SAC Hunt stated: “Throughout the nation, opioid overdose and abuse statistics have become reality in our local towns, suburban communities and inner city. Diverted prescription pain medication and heroin drug crews are public health enemy #1. Today’s arrests of Victor Esteban and his alleged drug crew demonstrate law enforcement’s commitment to arresting those responsible for arming addicts with their drug of choice and protecting residents from the possibility of being another statistic.”
County Executive Day said: “We are losing an average of two local residents each month to the scourge of heroin and prescription drugs. It’s happening to wealthy families and to poor families. It doesn’t know any boundaries. This operation demonstrates how police and prosecutors continue to work together to dig in at the local level and hammer away at the drug markets plaguing our neighborhoods. I want to commend District Attorney Zugibe and U.S. Attorney Bharara for leading a dedicated team in the support of making Rockland County a safer community.”
According to the allegations in the Indictment and other documents in the public record:
The defendants were part of a sophisticated drug trafficking organization (the “Organization”) that operated in the area of Rockland County, New York. The Organization, led by defendant VICTOR ESTEBAN, distributed massive quantities of oxycodone and heroin, often in highly public locations, including at the Palisades Center Mall in West Nyack, New York.
Since 2014, members and associates of the Organization have conspired to distribute more than 50,000 oxycodone tablets, with a value in excess of $1 million, in and around Rockland County. The defendants obtained the oxycodone through deceptive means, including the use of forged and fraudulent prescriptions. For example, defendant JUSHAWN STEVENS used his home computer to fill out official blank New York State prescriptions with fraudulent information about purported patients and prescribing doctors. Law enforcement officers also identified a defendant posing as a doctor on the phone when a pharmacy called to inquire about an oxycodone prescription. After generating fraudulent prescriptions, the defendants employed lower-level members of the Organization, known as “runners,” to go to pharmacies across New York State to fill the fraudulent prescriptions.
The principal supplier of heroin to the Organization was JUAN AGRAMONTE, who was based in the Bronx. ESTEBAN pooled money with other defendants to purchase significant quantities of heroin from AGRAMONTE, which they then distributed in locations around Rockland County.
The defendants distributed oxycodone and heroin in a multitude of public places. They sold these illicit drugs in the parking lots of the Palisades Center Mall in West Nyack, New York, at the Mt. Ivy Trailer Park in Pomona, New York, and in various motels around Rockland County, where they would rent rooms to meet with customers.
Certain defendants also celebrated their oxycodone and heroin trafficking activity on social media sites like Twitter and Instagram. Some of the defendants referred to themselves as the “TMC” crew, meaning “Too Much Cash.” For example, on one occasion, a defendant posted a message on Twitter saying, “Shout out my TMC bros we taking over the streets.” On another occasion, a defendant posted a message on Twitter saying, “I make money without a 9-5 gimmie some feens a trap fone and I’ll be fine . . . ,” meaning that he did not need a legitimate job, but rather only some drug addicts and a “trap phone” with which to arrange drug deals. This defendant also posted a message saying, “The feds just wanna see me in jail.”
The Indictment charges 17 defendants and contains two counts. 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 Drug Enforcement Administration’s Tactical Diversion Squad (Group TDS-NY), which comprises agents and officers from the DEA, the New York City Police Department, Town of Orangetown Police Department and the Westchester County Police Department. He also thanked the Rockland County District Attorney’s Office for its participation, and the Internal Revenue Service for its assistance.
The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys George Turner and Douglas Zolkind are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
US v. Esteban et al Indictment
Leader of Contraband Cigarettes Trafficking Conspiracy Sentenced in Manhattan Federal Court to 78 Months in PrisonRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that MOHAMMED ALAZZAM was sentenced today in Manhattan federal court to 78 months in prison, and to restitution in the amount of $36,195,000. ALAZZAM was sentenced for organizing and leading a conspiracy to distribute untaxed cigarettes in and around New York City and Westchester County, and bail jumping. The sentence was imposed by the Honorable Loretta A. Preska, United States District Judge.
U.S. Attorney Preet Bharara said: “For years, Mohammed Alazzam ran an underground black market for untaxed cigarettes, costing more than $36 million in tax revenue and netting millions of dollars for himself. His conduct deprived New York’s system for taxing cigarettes – which is designed to protect public health and save lives – of millions of dollars. Today’s sentence requires Alazzam to pay for his greed by forfeiting money and his liberty.”
According to the Indictment, court hearings, and today’s proceedings:
From late 2008 through May 2011, when ALAZZAM and his co-conspirators were arrested in this case, a criminal organization led by ALAZZAM and Yacoub Kanan (the “Alazzam Organization”) ran a black market for untaxed, contraband cigarettes in the New York metropolitan area. The Alazzam Organization obtained its supply of contraband cigarettes from, among other places, the Poospatuck Reservation, in Suffolk County, New York, in quantities ranging from 300 cartons to more than 1,000 cartons at a time, for which no New York State or city taxes were paid. Once obtained, the supply of contraband cigarettes was routinely stored by the Alazzam Organization in private storage facilities, including in Yonkers, New York, and Mt. Vernon, New York. The contraband cigarettes were thereafter distributed from the storage facilities to others by way of the backs of pick-up trucks and other vehicles that traveled to and from the facilities regularly.
ALAZZAM was the leader of the organization. He organized the criminal conspiracy by, among other things, arranging for a regular supply of contraband cigarettes, paying for the supply in amounts of more than $100,000 on a sometimes weekly basis, arranging for and renting storage locations to store the cigarettes, recruiting and instructing members of the conspiracy to transport and sell the contraband cigarettes, and, when those members were arrested, bailing them out and arranging for their representation by counsel.
The Alazzam Organization was responsible for distributing approximately 100 cases of contraband cigarettes per week during the conspiracy, from December 2008 until the arrest of Alazzam and his co-conspirators in May 2011. This resulted in a total estimated tax loss of $36,195,000. The estimated wholesale value of the contraband cigarettes is $26,250,000, and the retail value is far greater. During the conspiracy, ALAZZAM bragged that his personal net profit from the criminal organization was in excess of a million dollars annually.
On May 13, 2011, ALAZZAM and ten co-conspirators were indicted for conspiracy to traffic untaxed cigarettes. While charges in this case were pending and less than two months before the scheduled trial, ALAZZAM, who had been released on conditions of bail, fled to Jordan. He thereby failed to appear for pre-trial conferences and the scheduled trial, which appearances were required as a condition of his release. On September 13, 2013, ALAZZAM voluntarily returned to the U.S. and surrendered to law enforcement officers. ALAZZAM pled guilty in April 2014.
ALAZZAM is the eighth defendant and member of the conspiracy to be sentenced in the case. Yacoub Kanan remains at large, while the other two defendants pled guilty and await sentencing.
In addition to the prison time and restitution, ALAZZAM, 49, of Westchester County, was ordered to forfeit $2,500,000.
Mr. Bharara praised the efforts of the Bureau of Alcohol, Tobacco, Firearms, and Explosives for their investigation in this case.
The prosecution is being handled by the Office’s White Plains Division. Assistant United States Attorneys Benjamin Allee and Rachel Maimin are in charge of the prosecution.
Leader of Contraband Cigarettes Trafficking Conspiracy Sentenced in Manhattan Federal Court to 78 Months in PrisonRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that MOHAMMED ALAZZAM was sentenced today in Manhattan federal court to 78 months in prison, and to restitution in the amount of $36,195,000. ALAZZAM was sentenced for organizing and leading a conspiracy to distribute untaxed cigarettes in and around New York City and Westchester County, and bail jumping. The sentence was imposed by the Honorable Loretta A. Preska, United States District Judge.
U.S. Attorney Preet Bharara said: “For years, Mohammed Alazzam ran an underground black market for untaxed cigarettes, costing more than $36 million in tax revenue and netting millions of dollars for himself. His conduct deprived New York’s system for taxing cigarettes – which is designed to protect public health and save lives – of millions of dollars. Today’s sentence requires Alazzam to pay for his greed by forfeiting money and his liberty.”
According to the Indictment, court hearings, and today’s proceedings:
From late 2008 through May 2011, when ALAZZAM and his co-conspirators were arrested in this case, a criminal organization led by ALAZZAM and Yacoub Kanan (the “Alazzam Organization”) ran a black market for untaxed, contraband cigarettes in the New York metropolitan area. The Alazzam Organization obtained its supply of contraband cigarettes from, among other places, the Poospatuck Reservation, in Suffolk County, New York, in quantities ranging from 300 cartons to more than 1,000 cartons at a time, for which no New York State or city taxes were paid. Once obtained, the supply of contraband cigarettes was routinely stored by the Alazzam Organization in private storage facilities, including in Yonkers, New York, and Mt. Vernon, New York. The contraband cigarettes were thereafter distributed from the storage facilities to others by way of the backs of pick-up trucks and other vehicles that traveled to and from the facilities regularly.
ALAZZAM was the leader of the organization. He organized the criminal conspiracy by, among other things, arranging for a regular supply of contraband cigarettes, paying for the supply in amounts of more than $100,000 on a sometimes weekly basis, arranging for and renting storage locations to store the cigarettes, recruiting and instructing members of the conspiracy to transport and sell the contraband cigarettes, and, when those members were arrested, bailing them out and arranging for their representation by counsel.
The Alazzam Organization was responsible for distributing approximately 100 cases of contraband cigarettes per week during the conspiracy, from December 2008 until the arrest of Alazzam and his co-conspirators in May 2011. This resulted in a total estimated tax loss of $36,195,000. The estimated wholesale value of the contraband cigarettes is $26,250,000, and the retail value is far greater. During the conspiracy, ALAZZAM bragged that his personal net profit from the criminal organization was in excess of a million dollars annually.
On May 13, 2011, ALAZZAM and ten co-conspirators were indicted for conspiracy to traffic untaxed cigarettes. While charges in this case were pending and less than two months before the scheduled trial, ALAZZAM, who had been released on conditions of bail, fled to Jordan. He thereby failed to appear for pre-trial conferences and the scheduled trial, which appearances were required as a condition of his release. On September 13, 2013, ALAZZAM voluntarily returned to the U.S. and surrendered to law enforcement officers. ALAZZAM pled guilty in April 2014.
ALAZZAM is the eighth defendant and member of the conspiracy to be sentenced in the case. Yacoub Kanan remains at large, while the other two defendants pled guilty and await sentencing.
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In addition to the prison time and restitution, ALAZZAM, 49, of Westchester County, was ordered to forfeit $2,500,000.
Mr. Bharara praised the efforts of the Bureau of Alcohol, Tobacco, Firearms, and Explosives for their investigation in this case.
The prosecution is being handled by the Office’s White Plains Division. Assistant United States Attorneys Benjamin Allee and Rachel Maimin are in charge of the prosecution.
15-078
Canadian Antiques Dealer Sentenced in Manhattan Federal Court to 30 Months in Prison for Smuggling Rhinoceros Horns, Elephant Ivory, and CoralRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, John C. Cruden, the Assistant Attorney General for the Environment and Natural Resources Division of the Department of Justice, and Dan Ashe, the U.S. Fish and Wildlife Director, announced that XIAO JU GUAN, a/k/a “Tony Guan,” 39, of Richmond, British Columbia, was sentenced today in Manhattan federal court to 30 months in prison for smuggling rhinoceros horns, elephant ivory, and coral from the United States to Canada. In addition to the prison term, Judge Swain ordered Guan to forfeit wildlife items found during a search of his Canadian antiques business.
Manhattan U.S. Attorney Preet Bharara said: “Trafficking in rhinoceros horns and elephant ivory poses a literally existential threat to these endangered or vulnerable species, who die a cruel, pointless death due to greed. These living creatures are not among us as a source of wanton plunder. Without strict enforcement of international agreements and U.S. laws, these extraordinary animals may disappear from the face of the earth. Tony Guan has learned the price of putting profit over the prolonged existence of rhinos and elephants.”
Assistant Attorney General John C. Cruden said: “Wildlife smuggling is a transnational crime that knows no borders and requires an international response. Cooperation between the United States and Canadian law enforcement was crucial to cracking this case. The United States greatly appreciates the assistance of Environment Canada in bringing Guan to justice. International law enforcement collaboration is essential if we are to prevent elephant and rhino species from being extinguished in our own lifetime.”
U.S. Fish and Wildlife Director Dan Ashe said: “The illegal trade in rhinoceros horn is the number one threat to many populations of African rhinos, and is driving the species towards extinction. The wholesale slaughter of these magnificent animals in the wild is taking place so a few callous individuals can line their own pockets. But global law enforcement cooperation through avenues such as the Fish and Wildlife Service’s Operation Crash is bringing people like Guan to justice, and we thank our Canadian and other international partners for the critical role they play in cases such as this. Together we will end the scourge of rhino horn and other wildlife trafficking.”
“The successful outcome of this investigation, and the ongoing success of Operation Crash, is another example of the strong collaboration that exists between Environment Canada’s Enforcement Branch, the U.S. Fish and Wildlife Service, and our partners in conservation enforcement agencies across Canada and the United States,” said Gord Owen, Chief Enforcement Officer, Environment Canada.
Calling it "a very serious offense," Judge Swain said that Guan "helped to feed a hot market for these goods" and further stated that the defendant's conduct "feeds demand for the slaughter of rare and already endangered species."
According to the Indictment, other documents filed in Manhattan federal court, and statements made at various proceedings in this case, including today’s sentencing:
GUAN was arrested in March 2014 as part of “Operation Crash,” a nationwide crackdown on the illegal trafficking in rhinoceros horns, for GUAN’s role in smuggling and attempting to smuggle rhinoceros horns, as well as items carved from elephant ivory and coral, from auction houses throughout the United States to Canada.
GUAN, the president and owner of Bao Antiques in Richmond, British Columbia, was arrested after flying from Vancouver to New York and purchasing two endangered black rhinoceros horns from undercover special agents with the U.S. Fish and Wildlife Service at a storage facility in the Bronx. After purchasing the horns, GUAN had the undercover agents drive him and a female accomplice acting as his interpreter to a nearby express mail store where he mailed the horns to an address in Point Roberts, Washington, less than a mile from the Canadian border and 17 miles from his business. GUAN falsely labeled the box of black rhinoceros horns as containing “handicrafts.” GUAN indicated that he had people who could drive the horns across the border and that he had done so many times before.
At the same time GUAN was arrested in the United States, Canadian authorities executed a search warrant at his antique business in Richmond, B.C. Canadian law enforcement officers seized various wildlife objects from the business, nine of which have been positively identified as wildlife objects purchased in the U.S. via a Manhattan-based internet auction business. These items, made from elephant ivory and coral, were smuggled out of the U.S. and into Canada without the required declaration or permits under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (“CITES”). Some were shipped directly to Canada and others were sent, at GUAN’s direction, to addresses near the U.S./Canadian border in Point Roberts, Washington. GUAN also recruited college-age family members and acquaintances to assist him with smuggling the wildlife items. Photos of some of the smuggled wildlife artifacts are enclosed. In addition, during the search of GUAN’s business, Canadian law enforcement also discovered illegal narcotics, including approximately 50,000 ecstasy pills.
The rhinoceros is an herbivore species of prehistoric origin and one of the largest remaining mega-fauna on earth. They have no known predators other than humans. All species of rhinoceros are protected under U.S. and international law. Since 1976, trade in rhinoceros horn has been regulated under CITES, a treaty signed by over 170 countries around the world to protect fish, wildlife, and plants that are or may become imperiled due to the demands of international markets. Rhinoceros are also protected under the U.S. Endangered Species Act which further regulates trade and transport.
Operation Crash is a continuing investigation by the Department of the Interior’s Fish and Wildlife Service, in coordination with the Department of Justice. A “crash” is the term for a herd of rhinoceros. Operation Crash is an ongoing effort to detect, deter, and prosecute those engaged in the illegal killing of rhinoceros and the unlawful trafficking of rhinoceros horns.
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Mr. Bharara commended the U.S. Fish and Wildlife Service for its outstanding work in this investigation. He also thanked the Department of Justice’s Environment and Natural Resources Division, and Canada’s Wildlife Enforcement Directorate.
The case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Janis M. Echenberg and Senior Litigation Counsel Richard A. Udell with the Environmental Crimes Section of the Department of Justice are in charge of the prosecution.
15-079
Canadian Antiques Dealer Sentenced in Manhattan Federal Court to 30 Months in Prison for Smuggling Rhinoceros Horns, Elephant Ivory, and CoralRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, John C. Cruden, the Assistant Attorney General for the Environment and Natural Resources Division of the Department of Justice, and Dan Ashe, the U.S. Fish and Wildlife Director, announced that XIAO JU GUAN, a/k/a “Tony Guan,” 39, of Richmond, British Columbia, was sentenced today in Manhattan federal court to 30 months in prison for smuggling rhinoceros horns, elephant ivory, and coral from the United States to Canada. In addition to the prison term, Judge Swain ordered Guan to forfeit wildlife items found during a search of his Canadian antiques business.
Manhattan U.S. Attorney Preet Bharara said: “Trafficking in rhinoceros horns and elephant ivory poses a literally existential threat to these endangered or vulnerable species, who die a cruel, pointless death due to greed. These living creatures are not among us as a source of wanton plunder. Without strict enforcement of international agreements and U.S. laws, these extraordinary animals may disappear from the face of the earth. Tony Guan has learned the price of putting profit over the prolonged existence of rhinos and elephants.”
Assistant Attorney General John C. Cruden said: “Wildlife smuggling is a transnational crime that knows no borders and requires an international response. Cooperation between the United States and Canadian law enforcement was crucial to cracking this case. The United States greatly appreciates the assistance of Environment Canada in bringing Guan to justice. International law enforcement collaboration is essential if we are to prevent elephant and rhino species from being extinguished in our own lifetime.”
U.S. Fish and Wildlife Director Dan Ashe said: “The illegal trade in rhinoceros horn is the number one threat to many populations of African rhinos, and is driving the species towards extinction. The wholesale slaughter of these magnificent animals in the wild is taking place so a few callous individuals can line their own pockets. But global law enforcement cooperation through avenues such as the Fish and Wildlife Service’s Operation Crash is bringing people like Guan to justice, and we thank our Canadian and other international partners for the critical role they play in cases such as this. Together we will end the scourge of rhino horn and other wildlife trafficking.”
“The successful outcome of this investigation, and the ongoing success of Operation Crash, is another example of the strong collaboration that exists between Environment Canada’s Enforcement Branch, the U.S. Fish and Wildlife Service, and our partners in conservation enforcement agencies across Canada and the United States,” said Gord Owen, Chief Enforcement Officer, Environment Canada.
Calling it "a very serious offense," Judge Swain said that Guan "helped to feed a hot market for these goods" and further stated that the defendant's conduct "feeds demand for the slaughter of rare and already endangered species."
According to the Indictment, other documents filed in Manhattan federal court, and statements made at various proceedings in this case, including today’s sentencing:
GUAN was arrested in March 2014 as part of “Operation Crash,” a nationwide crackdown on the illegal trafficking in rhinoceros horns, for GUAN’s role in smuggling and attempting to smuggle rhinoceros horns, as well as items carved from elephant ivory and coral, from auction houses throughout the United States to Canada.
GUAN, the president and owner of Bao Antiques in Richmond, British Columbia, was arrested after flying from Vancouver to New York and purchasing two endangered black rhinoceros horns from undercover special agents with the U.S. Fish and Wildlife Service at a storage facility in the Bronx. After purchasing the horns, GUAN had the undercover agents drive him and a female accomplice acting as his interpreter to a nearby express mail store where he mailed the horns to an address in Point Roberts, Washington, less than a mile from the Canadian border and 17 miles from his business. GUAN falsely labeled the box of black rhinoceros horns as containing “handicrafts.” GUAN indicated that he had people who could drive the horns across the border and that he had done so many times before.
At the same time GUAN was arrested in the United States, Canadian authorities executed a search warrant at his antique business in Richmond, B.C. Canadian law enforcement officers seized various wildlife objects from the business, nine of which have been positively identified as wildlife objects purchased in the U.S. via a Manhattan-based internet auction business. These items, made from elephant ivory and coral, were smuggled out of the U.S. and into Canada without the required declaration or permits under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (“CITES”). Some were shipped directly to Canada and others were sent, at GUAN’s direction, to addresses near the U.S./Canadian border in Point Roberts, Washington. GUAN also recruited college-age family members and acquaintances to assist him with smuggling the wildlife items. Photos of some of the smuggled wildlife artifacts are enclosed. In addition, during the search of GUAN’s business, Canadian law enforcement also discovered illegal narcotics, including approximately 50,000 ecstasy pills.
The rhinoceros is an herbivore species of prehistoric origin and one of the largest remaining mega-fauna on earth. They have no known predators other than humans. All species of rhinoceros are protected under U.S. and international law. Since 1976, trade in rhinoceros horn has been regulated under CITES, a treaty signed by over 170 countries around the world to protect fish, wildlife, and plants that are or may become imperiled due to the demands of international markets. Rhinoceros are also protected under the U.S. Endangered Species Act which further regulates trade and transport.
Operation Crash is a continuing investigation by the Department of the Interior’s Fish and Wildlife Service, in coordination with the Department of Justice. A “crash” is the term for a herd of rhinoceros. Operation Crash is an ongoing effort to detect, deter, and prosecute those engaged in the illegal killing of rhinoceros and the unlawful trafficking of rhinoceros horns.
Mr. Bharara commended the U.S. Fish and Wildlife Service for its outstanding work in this investigation. He also thanked the Department of Justice’s Environment and Natural Resources Division, and Canada’s Wildlife Enforcement Directorate.
The case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Janis M. Echenberg and Senior Litigation Counsel Richard A. Udell with the Environmental Crimes Section of the Department of Justice are in charge of the prosecution.
Former Hip-Hop Manager James Rosemond Sentenced in Manhattan Federal Court to Life Plus Twenty Years in Prison for Ordering the Murder of Rap Group Associate Lowell FletcherRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that JAMES ROSEMOND, a/k/a “Jimmy the Henchman,” was sentenced today in Manhattan federal court to life plus twenty years in prison for offenses arising from his role in ordering a crew of men to murder Lowell Fletcher, an associate of the rap group known as “G-Unit,” in retaliation for an assault on Rosemond’s son by Fletcher and other G-Unit associates. ROSEMOND was found guilty of all the counts against him in the indictment, which charged him with committing murder-for-hire, conspiracy to commit murder-for-hire, and two firearms offenses, following a jury trial in December 2014 before United States District Judge Colleen McMahon.
U.S. Attorney Preet Bharara said: “James Rosemond had Lowell Fletcher murdered, and after the deed, Rosemond bragged to a criminal associate that he would never be caught for the murder because Fletcher was merely a ‘gangbanger’ who died in the Bronx. This prosecution has proven Rosemond wrong. The sentence imposed on Rosemond today demonstrates that murdering anyone, anywhere in the Southern District of New York, will not be tolerated.”
According to court papers, including the Government’s sentencing memorandum, and the evidence admitted at trial:
JAMES ROSEMOND was the head of Czar Entertainment, a rap music management company, and also the head of a large-scale cocaine trafficking organization. In 2007, members and associates of a rival rap group known as “G-Unit” – including Marvin Bernard, a/k/a “Tony Yayo,” and his associate Lowell Fletcher, a/k/a “Lodi Mac” – assaulted ROSEMOND’s son. ROSEMOND’s son was not seriously injured in the assault, and Fletcher ended up serving prison time for his involvement in the assault. Nevertheless, ROSEMOND recruited a crew of men to murder Fletcher upon his release from prison – men with whom ROSEMOND had developed criminal relationships through his involvement in the cocaine trade – by promising at least $30,000 in payment for killing Fletcher. At ROSEMOND’s direction, members of the murder crew selected a dark and quiet location for the murder in the vicinity of Mount Eden and Jerome Avenues in the Bronx, and lured Fletcher to that spot. When Fletcher arrived there in the evening on September 27, 2009, a member of the murder crew stepped out of the shadows and fired five bullets into Fletcher’s back using a .22 caliber handgun with a silencer. Fletcher died later that night. On October 2, 2009, ROSEMOND had a trusted employee of his cocaine organization provide a kilogram of cocaine – worth about $30,000 in street value – as payment for the murder.
In imposing today’s sentence, Judge McMahon said that Rosemond’s criminal conduct was “heinous,” “vile,” and “disgusting.”
U.S. Attorney Bharara thanked and praised the U.S. Drug Enforcement Administration, the New York City Police Department, the U.S. Department of Homeland Security, and the U.S. Marshals Service for their outstanding work in this investigation.
The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Laurie Korenbaum, Nola Heller, Samson Enzer, and Thomas McKay are in charge of the prosecution.
Two Individuals Plead Guilty in Manhattan Federal Court in Connection with 2009 Home Invasion Robbery and MurderRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that ANTOINE BURROUGHS and LEON WHITFIELD pled guilty to robbery charges in connection with the home invasion robbery and murder of Gerardo Antoniello on September 9, 2009. Antoniello was killed during the home invasion robbery of his father, Bartolomeo Antoniello, who was targeted for the cash proceeds of the pizza shop he owned in Queens, New York. BURROUGHS and WHITFIELD pled guilty today before United States District Judge Gregory B. Woods.
U.S. Attorney Preet Bharara said: “At the direction of an associate of the Gambino Crime Family, Antoine Burroughs and Leon Whitfield targeted and attempted to rob a Queens pizza shop owner in his home, and then brutally murdered his son as he tried to protect his father. With today’s pleas, the perpetrators of this crime will be held accountable.”
According to the allegations in the Indictment and statements made at various proceedings in this case, including the guilty pleas:
BURROUGHS and WHITFIELD were hired by Frank LaCorte, an associate of the Gambino Crime Family, to commit a home invasion robbery. On September 9, 2009, BURROUGHS and WHITFIELD attempted to rob Bartolomeo Antoniello at his home in Queens, New York. BURROUGHS and WHITFIELD were targeting the cash proceeds of Antoniello’s pizza shop. Antoniello’s son, Gerardo Antoniello, was home at the time, and attempted to protect his father. BURROUGHS and WHITFIELD brutally beat and pistol-whipped the father and son, and the father was seriously injured. During the struggle, Gerardo Antoniello was shot in the head and died later of his injuries. He was 29 years old.
As a result of these criminal activities, the two men have pled guilty as follows:
BURROUGHS pled guilty to one count of robbery conspiracy, which carries a maximum sentence of 20 years in prison, and one count of attempted robbery, which carries a maximum sentence of 20 years in prison. As a part of his plea, BURROUGHS admitted to shooting and killing Antoniello during the robbery.
WHITFIELD pled guilty to one count of robbery conspiracy, which carries a maximum sentence of 20 years in prison, and one count of attempted robbery, which carries a maximum sentence of 20 years in prison. As a part of his plea, WHITFIELD admitted that he carried a fake gun during the robbery and that BURROUGHS shot and killed Antoniello during the struggle.
The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the Judge.
Both defendants are scheduled to be sentenced by Judge Woods on July 29, 2015.
Frank LaCorte was convicted in Queens County Court for his role in organizing this and numerous other home invasion robberies and in June 2012 was sentenced to a term of 50 years to life in prison.
Mr. Bharara praised the work of the Federal Bureau of Investigation, the New York City Police Department, the Queens District Attorney’s Office, and the United States Marshals Service.
The case is being handled by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorney Rachel Maimin is in charge of the prosecution.
Manhattan U.S. Attorney Announces Conviction of Mikhail Zemlyansky on Racketeering, Securities Fraud, Mail Fraud, and Wire Fraud ChargesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that MIKHAIL ZEMLYANSKY was found guilty yesterday on racketeering conspiracy, securities fraud, mail fraud, and wire fraud charges following a four-week jury trial before United States District Judge J. Paul Oetken. The jury convicted ZEMLYANSKY of racketeering stemming from the largest single no-fault automobile insurance fraud scheme ever charged, and his two investment fraud schemes, Lyons Ward & Associates and the Rockford Group.
U.S. Attorney Preet Bharara said: “Mikhail Zemlyansky now stands convicted of spearheading three fraud schemes: one in which the defendant and his co-conspirators billed insurance companies for over $100 million in fraudulent medical treatments, and two that swindled investors out of over $18 million. Worse yet, Zemlyansky laundered the fruits of his crimes through check-cashing entities and shell companies, and invested his criminal proceeds on luxury items. Today’s verdict ensures that he will be punished for the vortex of fraud he orchestrated.”
According to the allegations in the Superseding Indictment and evidence admitted at trial:
From 2007 through 2012, ZEMLYANSKY was a leader of an enterprise engaged in a pattern of racketeering that included a massive scheme to defraud automobile insurance companies under New York’s no-fault insurance law, multiple securities fraud schemes, money laundering, and the operation of illegal gambling businesses.
Under New York State Law, every vehicle registered in the State is required to have no-fault automobile insurance, which enables the driver and passengers of a registered and insured vehicle to obtain benefits of up to $50,000 per person for injuries sustained in an automobile accident, regardless of fault (the “No-Fault Law”). The No-Fault Law requires prompt payment for medical treatment, thereby obviating the need for claimants to file personal injury lawsuits in order to be reimbursed. Under the No-Fault Law, patients can assign their right to reimbursement from an insurance company to others, including medical clinics that provide treatment for their injuries. New York State law also requires that all medical clinics in the state be incorporated, owned, operated, and/or controlled by a licensed medical practitioner in order to be eligible for reimbursement under the No-Fault Law. Insurance companies will not honor claims for medical treatments from a medical clinic that is not actually owned, operated, and controlled by a licensed medical professional.
From 2007 through 2012, ZEMLYANSKY’S organization defrauded automobile insurance companies of more than $100 million by, among other things, creating and operating medical clinics that provided unnecessary and excessive medical treatments in order to take advantage of the No-Fault Law. In addition, ZEMLYANSKY’S organization fraudulently owned and controlled more than a dozen medical professional corporations (“PCs”) – including no-fault clinics, MRI offices, and acupuncture and chiropractic PCs – by paying licensed medical professionals to use their licenses to incorporate the professional corporations. ZEMLYANSKY and his co-conspirators paid kickbacks of thousands of dollars to runners to recruit patients to receive the same battery of tests and treatments, and received kickbacks from other co-conspirators for referring patients for additional unnecessary treatments. All told, ZEMLYANSKY’S organization billed insurance companies for more than $100 million in fraudulent medical treatments. Furthermore, ZEMLYANSKY and his co-conspirators further laundered the proceeds of the fraud through check-cashing entities and shell companies, and used the money to pay for luxury cars, watches and vacations.
In addition to the no-fault insurance fraud, ZEMLYANSKY was convicted for operating two investment fraud schemes that swindled innocent victims out of nearly $18 million. Both fraudulent entities – Lyons Ward & Associates and the Rockford Group – purported to be settlement claims funding companies that invested in lawsuits in return for a portion of future settlements. As part of these schemes, ZEMLYANSKY and his co-conspirators created bogus documents and account statements used by cold-callers working in boiler rooms to solicit victims through false representations. In reality, there was no investment fund at all; instead, ZEMLYANSKY and his co-conspirators simply stole the money invested by victims and laundered the proceeds by wiring them overseas to shell companies in Eastern Europe, which were then turned into cash in the United States.
Finally, ZEMLYANSKY’S organization operated high-stakes illegal poker games in Mill Basin, Brooklyn, that netted profits of tens of thousands of dollars per game.
ZEMLYANSKY was convicted of one count of conspiracy to commit racketeering, which carries a maximum sentence of 20 years in prison. In addition, ZEMLYANSKY was convicted of one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years; mail fraud and wire fraud, which carries a maximum sentence of 20 years; as well as substantive counts of securities fraud, mail fraud and wire fraud, each carrying a maximum of 20 years. ZEMLYANSKY is scheduled to be sentenced on July 15, 2015, at 3:00 p.m., before Judge Oetken. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
ZEMLYANSKY, 37, of Hewlett, New York, was initially arrested on February 29, 2012, and is the 34th defendant convicted in this case. ZEMLYANSKY was remanded pending sentencing following his conviction.
At ZEMLYANSKY’S first trial in the fall of 2013, a mistrial was declared on Count One – which also charged ZEMLYANSKY with racketeering conspiracy – after the jury failed to reach a unanimous verdict. At that trial, ZEMLYANSKY was acquitted of eight counts of charges related to the no-fault insurance fraud scheme and money laundering.
U.S. Attorney Preet Bharara thanked the Federal Bureau of Investigation and the New York City Police Department for their continued outstanding work in this investigation. Mr. Bharara also thanked the National Insurance Crime Bureau, the investigative units of the insurance companies, the Manhattan District Attorney’s Office, and the Alabama Securities Commission for their valuable assistance with the investigation.
The case is being prosecuted by the Office’s Violent & Organized Crime Unit. Assistant U.S. Attorneys Daniel S. Goldman, Daniel S. Noble, and Joshua A. Naftalis are in charge of the prosecution. Assistant U.S. Attorney Carolina Fornos of the Office’s Money Laundering & Asset Forfeiture Unit is responsible for the forfeiture aspects of the case.
Manhattan U.S. Attorney and New York State Attorney General Announce $714 Million Proposed Settlement with the Bank of New York Mellon over Fraudulent Foreign Exchange Trading PracticesRead the Press Release
Bank Agrees to Terminate Employment Relationship with Responsible Executives
Preet Bharara, the United States Attorney for the Southern District of New York, Eric T. Schneiderman, the Attorney General for the State of New York, Thomas E. Perez, the U.S. Secretary of Labor (“DOL”), and Andrew J. Ceresney, Director of the Division of Enforcement for the Securities and Exchange Commission (“SEC”), announced today proposed settlements of civil lawsuits against and investigations of THE BANK OF NEW YORK MELLON (“BNYM” or the “Bank”) alleging that BNYM engaged in fraud and other misconduct when providing foreign exchange (“FX”) services to its customers. Specifically, BNYM agreed to pay a total of $714 million to settle lawsuits brought by the United States and New York State, private class action lawsuits brought by BNYM customers, and investigations by the SEC and DOL, all of which concern BNYM’s misconduct in connection with its standing instruction (“SI”) FX product. As part of the proposed settlement with the United States and the settlement with New York State, BNYM admits to and accepts responsibility for conduct alleged in the civil fraud lawsuits, including that contrary to representations to clients that it provided “best rates” and “best execution,” the Bank actually gave clients the worst reported interbank rates of the trading day. BNYM must terminate its employment relationship with certain executives with responsibilities related to the SI product, including DAVID NICHOLS (“NICHOLS”), who is a defendant in the United States’ lawsuit, and must reform its practices further to improve and increase the information provided to customers. NICHOLS also admits and accepts responsibility for conduct alleged in the United States’ complaint. The proposed settlement of the United States’ civil fraud lawsuit and proposed settlements of the customer class action lawsuits are subject to court approval. The United States submitted its proposed settlement to United States District Judge Lewis A. Kaplan today for review and approval.
Manhattan U.S. Attorney Preet Bharara said: “The Bank of New York Mellon’s custody clients, many of whom are public pension funds and non-profit organizations, trusted the Bank to be honest about the financial services it was providing and to deal with them fairly. BNYM and its executives, motivated by outsized profits and bonuses, breached this trust and repeatedly misled clients to believe that the pricing they were getting on foreign exchange was far better than it actually was. The Bank, after three years of litigation, has finally admitted what was always clear from the evidence – contrary to its various representations, including a claim of ‘best rates,’ the bank in fact gave clients prices at or near the worst interbank rates reported during the trading day. The bank repeatedly deceived its customers and is paying a heavy penalty for it. We will not hesitate to pursue and punish financial institutions and their executives who exploit their customer base to improve their bottom lines.”
Attorney General Schneiderman said: “Investors count on financial institutions to tell them the truth about how their investments are being managed. The Bank of New York Mellon misled customers and traded at their expense. Today’s settlement shows that institutions and individuals responsible for defrauding investors will be held accountable and will face serious consequences for their wrongdoing. This excellent outcome also shows what can be achieved when law enforcement agencies collaborate on an important matter such as this one.”
U.S. Secretary of Labor Thomas E. Perez said: “This case is a reminder that financial institutions charged with safeguarding retirement plan assets sometimes put the institution’s interests ahead of those of the investors they represent. Today’s settlement offers more proof that when they do so, we at the department along with our colleagues at federal and state agencies will hold them accountable.”
SEC Division of Enforcement Director Andrew J. Ceresney said: “BNYM misled registered investment company clients regarding its pricing of their foreign currency transactions. The bank said that it priced transactions according to ‘best execution standards’ and at market rates at the times of the trades, but in fact priced these transactions near the end of the day at or near the worst rates reported during the entire trading day.”
On October 4, 2011, the United States and New York State each filed civil fraud lawsuits against BNYM, one of the world’s largest custody banks, alleging that BNYM engaged in a scheme to defraud custodial clients who used BNYM’s FX services since at least 2001. The United States amended its complaint in 2012 to add as a defendant NICHOLS, a Managing Director at BNYM who had responsibilities with respect to BNYM’s representations to clients about the SI product.
The United States’ lawsuit was brought under the Financial Institutional Reform, Recovery and Enforcement Act of 1989 ("FIRREA”), which authorizes the United States to recover civil penalties for frauds involving or affecting financial institutions. This Office has pioneered the use of FIRREA to civilly prosecute financial institutions and their executives for engaging in fraud. Judge Kaplan issued a landmark decision in April 2013 endorsing the Government’s use of FIRREA in this case to pursue a financial institution for engaging in fraudulent conduct affecting its own federally insured deposits by putting them at risk. Two other Southern District of New York judges have followed Judge Kaplan’s decision in other financial fraud cases brought by this Office.
New York State’s lawsuit was brought pursuant to the Martin Act, which permits the State to seek damages and other relief for fraud.
As outlined in the lawsuits, BNYM offers FX services to its custodial clients, for whom it holds domestic and international financial assets, including currency. In particular, BNYM offers the SI product, pursuant to which BNYM automatically provides currency exchange on an as-needed basis when, for example, the client buys or sells foreign assets.
The complaints allege that BNYM provided its clients with very limited information about how it determined what currency exchange rates or prices would be used for standing instruction FX, and that what little information BNYM did provide to clients about pricing was false, incomplete, and/or misleading. For example, the complaints allege that BNYM’s FX executives, including NICHOLS, misled clients by representing that the product offered “best execution,” which is commonly understood to mean that the client receives the best available market price at the time that the currency trade is executed. As explained in the complaints, instead of providing clients with the most favorable prices available at the time the trades were executed, BNYM actually gave its SI clients the worst prices -- ones at the outer margins of the interbank daily range. According to the complaints, BNYM generated enormous profits based on the difference or “spread” between the actual interbank rate at the time of execution and the less favorable rates it gave to SI clients.
In January 2012, the United States entered into a partial settlement with BNYM resolving the Government’s injunctive claims and requiring the Bank to reform its business practices. In particular, BNYM was required, among other things, to disclose how SI transactions were priced, to make certain pricing data available to custodial clients, and to stop describing the SI product as “free” or claiming that it offered “best execution.”
Pursuant to the proposed settlements and other agreements, BNYM will pay a total of $714 million, of which $335 million will collectively be paid to the United States and New York State. Pursuant to the proposed settlement with the United States, BNYM will pay a civil penalty of $167.5 million. BNYM will similarly pay $167.5 million to the State of New York, nearly all of which will be directed to a fund that will compensate BNYM’s customers who were victims of BNYM’s misconduct. Two New York State agencies – the New York State Deferred Compensation Plan and the State University of New York (“SUNY”) – were among the victims and will be compensated for their losses.
BNYM will also pay $335 million to resolve private class action lawsuits filed by the Bank's customers.
To resolve DOL’s claims under the Employee Retirement Income Security Act (“ERISA”), BNYM will pay $14 million to the Bank’s ERISA plan customers (in addition to approximately $70 million that will be distributed to ERISA plan customers through the other settlements).
The SEC’s Division of Enforcement has reached a preliminary agreement with BNYM to recommend to the Commission a settlement of the SEC’s investigation concerning BNYM’s SI product. The settlement will include an administrative order finding that, in violation of Sections 31(a) and 34(b) of the Investment Company Act, BNYM prepared and provided its registered investment company clients with trade confirmations and monthly transaction reports that were misleading in light of the representations made because they did not specify the time the standing instruction transactions were executed or provide information about how specific rates were assigned. The proposed settlement is subject to finalization, review and approval by the Commission. Under the terms of the proposed settlement, BNYM will pay $30 million to the SEC.
In connection with the proposed settlements of the United States’ lawsuit and the settlement of New York State’s lawsuit, BNYM admits, acknowledges, and accepts responsibility for committing conduct alleged in the federal and state complaints, including the following:
How BNYM Priced Standing Instruction Foreign Exchange Transactions
1) If the client was purchasing foreign currency, the client received a price at or close to the highest reported interbank rate for that day or session (at or near the least favorable interbank price for the client reported during the trading day or session), and if the client was selling foreign currency, the client received a price at or close to the lowest reported interbank rate of the day or session (also at or near the least favorable interbank price for the client reported during the trading day or session).
2) Because SI clients received pricing at or near the high end of the reported interbank range for their currency purchases and at or near the low end of the reported interbank range for their sales, the Bank was generally buying low from, and selling high to, its own clients. The Bank recorded the difference or “spread” between the rates it gave clients and the interbank market price at the time the SI transactions were priced as “sales margin.”
BNYM’s Representations to Its Clients
1) The Bank made numerous representations to existing and potential clients concerning the SI product, including:
(i) The service provided “benefits” to its clients, including “FX execution according to best execution standards.”
(ii) The Bank “ensures best execution on foreign exchange transactions through the following mechanisms: As a major market participant, the Bank is actively engaged in making markets and taking position in numerous currencies so that we can provide the best rates for our clients.”
(iii) “Understanding the fiduciary role of the fund manager, it is our goal to provide best execution for all foreign exchange executed in support of our clients’ transactions.”
(iv) “We price foreign exchange at levels generally reflecting the interbank market at the time the trade is executed by the foreign exchange desk.”
(v) The Bank’s “primary focus is on securing the best possible rates for our clients rather than on trading for the bank’s own account.”
BNYM Did Not Provide Its SI Clients with the Best Price
1) Contrary to the representations set forth above, including that BNYM offered “best rates,” the Bank gave SI clients prices that were at or near the worst interbank rates reported during the trading day or session.
2) The Bank generally did not disclose its SI FX pricing methodology discussed above to its custodial clients or their investment managers.
3) The Bank was aware that many clients did not fully understand the Bank’s pricing methodology for SI transactions.
4) The Bank was aware that many market participants equated “best execution” with best price, or considered best price to be one of the most important factors in determining best execution.
As part of the proposed settlement with the United States, NICHOLS also admits, acknowledges and accepts responsibility for conduct alleged in the United States’ complaint, including the following:
1) From 2002 through 2011, NICHOLS was a Managing Director at the Bank who, among other duties, participated in the drafting and dissemination of the Bank’s description of “best execution” and the SI product. The description was disseminated to certain existing and prospective custody clients through responses to requests for proposals (“RFP”) and in other communications, and included the following statements:
(i) “Understanding the fiduciary role of the fund manager, it is our goal to provide best execution for all foreign exchange executed in support of our clients’ transactions.”
(ii) “Since The Bank of New York Mellon is one of the largest global custodians, our clients gain the ongoing benefit of aggregation of transactions across our broad customer base; accordingly, we price foreign exchange at levels generally reflecting the interbank market at the time the trade is executed by the foreign exchange desk.”
(iii) “Best execution encompasses a variety of services designed to maximize the proceeds of each trade, while containing inherent risks and the total cost of processing.”
2) NICHOLS had oversight of the Global Markets website and approved the content, which included the following statement: the Bank’s SI clients “benefit from . . . FX execution according to best execution standards.”
3) NICHOLS understood how the Bank priced SI transactions and also knew:
(i) The Bank generally did not disclose its SI FX pricing methodology discussed above to its custodial clients or their investment managers.
(ii) Many clients did not fully understand the Bank’s pricing methodology for SI transactions.
(iii) Many market participants equated “best execution” with best price, or considered best price to be one of the most important factors in determining best execution.
As part of the proposed U.S. and State settlement, BNYM must terminate its employment relationship with executives involved in the conduct alleged in the lawsuit, including NICHOLS. BNYM must also make further reforms to its business practices by providing clients additional pricing information about new standing instruction services BNYM currently offers to clients.
Mr. Bharara thanked the New York Attorney General's Office as well as counsel for the private litigants with whom this Office cooperated to litigate the multiple FX cases against the Bank and bring them to a successful conclusion.
The United States' FIRREA lawsuit arose in part from a whistleblower who filed a declaration pursuant to FIRREA.
The United States’ case has been handled by the Office's Civil Frauds Unit. Mr. Bharara established the Civil Frauds Unit in March 2010 to bring renewed focus and additional resources to combating financial fraud.
Assistant U.S. Attorneys Pierre G. Armand, Lawrence H. Fogelman, Jeffrey K. Powell, and Arastu Chaudhury are in charge of the case.
U.S. v. Bank of New York Mellon et al. Stipulation & Settlement
Manhattan U.S. Attorney Announces Charges Against Bronx Man for Aiming A Laser Beam at AircraftRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), William J. Bratton, Commissioner of the New York City Police Department (“NYPD”), and Michael A. Fedorko, Superintendent of Police and Director of Public Safety for the Port Authority of New York and New Jersey (“PAPD”), announced that ELEHECER BALAGUER was arrested today for aiming the beam of a laser pointer at aircraft in the vicinity of LaGuardia Airport. BALAGUER surrendered to the FBI this morning, and appeared before U.S. Magistrate Judge Debra C. Freeman in Manhattan federal court earlier today.
U.S. Attorney Preet Bharara said: “As charged, Elehecer Balaguer’s actions were simple but potentially disastrous: pointing a powerful laser at airplanes carrying hundreds of people and then at a police helicopter. In fact these actions had dire consequences that could have been worse yet, including impairing and damaging the vision of pilots with the possibility of creating real danger to the aircraft. I commend the NYPD Aviation Unit pilots who, at great risk to themselves, located the source of these incidents.”
FBI Assistant Director-in-Charge Diego Rodriguez said: “The behavior displayed by Mr. Balaguer was more than careless. Pointing a laser at an aircraft during its operation creates a dangerous situation for pilots, passengers, and innocent bystanders on the ground. The FBI will vigorously pursue these criminal acts. For the safety of all who fly, we remind the public to alert law enforcement of any known incidents of laser strikes.”
Police Commissioner William J. Bratton said: “Pointing a laser pointer at the operator of an aircraft is an irresponsible act that poses a real and immediate danger. It is important that the public understands that the intentional misuse of this device has the potential to create a devastating outcome and is against the law.”
According to the Complaint filed in Manhattan federal court today:
On March 9, 2015, three pilots of commercial airplanes arriving at or departing from LaGuardia Airport in Queens were stuck in the eyes with a bright green beam, causing the pilots to lose focus temporarily and, in two instances, briefly blinding the pilots. In response, an Air Traffic Controller at LaGuardia Airport temporarily changed the runway directions used for all airplanes arriving at and departing from LaGuardia Airport that evening, so that airplanes would avoid the laser beam.
Each of the pilots who was struck with the green beam noticed that the beam appeared to originate from the Bronx, New York. Later in the evening on March 9, 2015, officers from the NYPD Aviation Unit responded to the pilots’ complaints by flying in a helicopter (the “NYPD Helicopter”) in the vicinity of the location where the airplanes had been struck with a beam. While the NYPD Helicopter was in that area, a green beam was directed into the cockpit of the NYPD Helicopter, causing both of the pilots also to lose sight temporarily. The pilots on board the NYPD Helicopter observed that the laser beam appeared to originate from a particular second floor apartment of a building in the Bronx (the “Apartment”).
NYPD officers responded to the Apartment later in the night of March 9, 2015. BALAGUER and others were present in the Apartment. The officers recovered a laser pointer (the “Laser Pointer”) from the top of a refrigerator near the window from where the green beam that struck the NYPD Helicopter appeared to have originated. Written on the Laser Pointer is the warning: “DANGER – LASER RADIATION – AVOID DIRECT EYE EXPOSURE.” When questioned the night of March 9, 2015, BALAGUER admitted that he owned the Laser Pointer, but denied knowing who pointed the Laser Pointer at passing airplanes.
On March 13, 2015, BALAGUER admitted to law enforcement that he shined the beam of the Laser Pointer at an airplane on March 9, 2015. BALAGUER further admitted to lying to law enforcement when he was interviewed by NYPD officers on March 9, 2015.
BALAGUER, 54, is charged with one count of aiming a laser pointer at an aircraft, which carries a maximum penalty of five years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.
U.S. Attorney Bharara praised the investigative work of the New York FBI’s Joint Terrorism Task Force – which principally consists of agents from the FBI and detectives from the NYPD, and comprises investigators from numerous federal, state, and local law enforcement agencies. Mr. Bharara also thanked the NYPD’s Aviation Unit and the Port Authority of New York and New Jersey.
This case is being handled by the Terrorism and International Narcotics Unit of the U.S. Attorney’s Office for the Southern District of New York. Assistant U.S. Attorney Ian McGinley is in charge of the prosecution.
The charge in the Complaint is merely an accusation, and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Elehecer Balaguer Complaint
Former Investment Manager Employee Pleads Guilty in Manhattan Federal Court to Obstruction of Justice and Perjury ChargesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that STEVEN HART pled guilty today to obstruction of justice and perjury 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, who was employed at an investment management firm headquartered in Englewood Cliffs, New Jersey (the “Investment Firm”), lied in sworn testimony to the SEC that he had obtained consent from the president of the Investment Firm (the “Investment Firm President”) to conduct match trades between a fund managed by the Investment Firm and a fund controlled and owned in part by HART. Moreover, when representatives of the SEC called the Investment Firm in an attempt to speak with the Investment Firm President, HART, on three occasions, answered the phone and pretended to be either the Investment Firm President or another employee. HART entered his guilty plea today before the Honorable Katherine P. Failla.
Manhattan U.S. Attorney Preet Bharara said: “Steven Hart went to great lengths to try to derail and avoid an investigation into his trading conduct. But, as his plea today shows, no one is above the law, including the law that governs investigations, and obvious attempts to change the course of a legal investigation will not be tolerated.”
According to the Information filed in Manhattan federal court and statements made during today’s proceeding:
HART worked at the Investment Firm, which managed several funds. HART, who reported directly to 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, New York. Through Octagon, HART invested his own money and the money of several of his associates.
In or about 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 nonpublic information (“MNPI”) relating to confidentially marketed securities offerings – information that HART had obtained while being solicited to invest in these 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, 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 multiple occasions, HART impersonated other employees of the Investment Firm during telephone conversations with the SEC. Specifically, on December 8, 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 another employee of the Investment Firm. The SEC attorney asked HART, who was pretending to be another employee, to ask the Investment Firm President to return the call, which HART failed to do. The following day, the same SEC attorney again called the Investment Firm to speak with the firm’s President. HART again received the phone call and, on this occasion, pretended to be the Investment Firm President. During that call, HART, pretending to be 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 dispose of restricted shares of stock.
Finally, on December 11, 2009, the same SEC attorney, along with a second SEC attorney, called the Investment Firm to speak with the firm’s President. HART again received the phone call and again 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.
HART, 42, of New York, New York, faces a maximum sentence of ten years in prison. He is scheduled to be sentenced by Judge Failla on July 2, 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.
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.
Australian Man Pleads Guilty in Manhattan Federal Court to Helping Run the “Silk Road” WebsiteRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that PETER PHILLIP NASH, a/k/a “Samesamebutdifferent,” a/k/a “Batman73,” a/k/a “Symmetry,” a/k/a “Anonymousasshit,” pled guilty today to narcotics trafficking and money laundering charges in connection with his role in operating “Silk Road,” a hidden website designed to enable its users to buy and sell illegal drugs and other unlawful goods and services anonymously and beyond the reach of law enforcement. U.S. District Judge Thomas P. Griesa presided over the plea proceedings.
According to the allegations in the Indictment, and statements made at today’s plea and other court proceedings:
From January 2011, up to and including October 2, 2013, the “Silk Road” website hosted a sprawling black-market bazaar on the Internet, where illegal drugs and other illicit goods and services were regularly bought and sold by the site’s users. During its more than two-and-a-half years in operation, Silk Road was used by several thousand drug dealers and other unlawful vendors to distribute hundreds of kilograms of illegal drugs and other illicit goods and services to well over a hundred thousand buyers, and to launder hundreds of millions of dollars deriving from these unlawful transactions.
The owner and operator of Silk Road, Ross William Ulbricht, a/k/a “Dread Pirate Roberts,” a/k/a “DPR,” a/k/a “Silk Road,” ran the website with the assistance of a small support staff, including both site administrators and forum moderators. The site administrators were responsible for, among other things, monitoring user activity on Silk Road for problems, responding to customer service inquiries, and resolving disputes between buyers and vendors. The forum moderators were responsible for, among other things, monitoring user activity on discussion forums associated with the site, providing guidance to forum users concerning how to conduct business on Silk Road, and reporting any significant problems discussed on the forums to the site administrators and to Ulbricht. Ulbricht paid the site administrators and forum moderators salaries ranging from approximately $50,000 to approximately $75,000 per year for their services.
From January 2013, up to and including October 2, 2013, NASH worked as the primary moderator on the Silk Road discussion forums. NASH was arrested in December 2013 along with co-defendants Andrew Michael Jones, a/k/a “Inigo,” and Gary Davis, a/k/a “Libertas,” who worked as site administrators on Silk Road. NASH, Jones, and Davis were each paid salaries by Ulbricht for their roles on Silk Road’s customer support staff.
NASH, 41, of Brisbane, Australia, pled guilty to one count of narcotics conspiracy, which carries a maximum sentence of life in prison, and one count of money laundering conspiracy, which carries a maximum sentence of 20 years in prison. The maximum sentences are prescribed by Congress and are provided for informational purposes only, as the sentence will be determined by the judge. NASH is scheduled to be sentenced on May 26, 2015.
Ulbricht was convicted following trial on February 4, 2015, on charges relating to narcotics trafficking, computer hacking, trafficking in fraudulent identification documents, and money laundering. He is scheduled to be sentenced on May 15, 2015, before U.S. District Judge Katherine B. Forrest.
Jones pled guilty on October 2, 2014, before U.S. District Judge Thomas P. Griesa. He is currently scheduled to be sentenced on October 1, 2015.
Davis is currently pending extradition in Ireland.
Mr. Bharara praised the outstanding investigative work of the Federal Bureau of Investigation and its New York Special Operations and Cyber Division, as well as the outstanding investigative work of the Drug Enforcement Administration’s (“DEA”) New York Organized Crime Drug Enforcement Strike Force, which comprises agents and officers of the DEA, the Internal Revenue Service, the New York City Police Department, U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), the New York State Police, the Bureau of Alcohol, Tobacco, Firearms and Explosives, the U.S. Secret Service, the U.S. Marshals Service, Office of Foreign Assets Control, and New York Department of Taxation. Mr. Bharara also thanked the ICE-HSI Chicago-O’Hare office for its assistance and support, as well as the Department of Justice’s Computer Crime and Intellectual Property Section. Additionally, Mr. Bharara praised the foreign law enforcement partners whose contributions to the success of the investigation and prosecution have been invaluable, namely, the Australian Federal Police, the Irish Republic’s Computer Crime Investigation Unit of the An Garda Siochana, the Reykjavik Metropolitan Police of the Republic of Iceland, and the French Republic’s Central Office for the Fight Against Crime Linked to Information Technology and Communication.
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 Attorneys Serrin Turner and Tim Howard are in charge of the prosecution.
The charges contained in the Indictment remain pending and are merely accusations against Davis, who is presumed innocent unless and until proven guilty.
Manhattan U.S. Attorney and FBI Assistant Director-In-Charge Announce Filing of Criminal Charges Against, and Deferred Prosecution Agreement with, Commerzbank AG New York Branch in Connection with Olympus Corporation’s Billion Dollar Accounting FraudRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today two major actions filed in federal court in the District of Columbia and Manhattan against COMMERZBANK AG (“COMMERZ”), and COMMERZBANK AG NEW YORK BRANCH (“COMMERZ NEW YORK”).
First, a criminal Information was filed today in federal court in the District of Columbia charging COMMERZ NEW YORK with felony violations of the Bank Secrecy Act, in connection with COMMERZ’s and COMMERZ NEW YORK’s relationship with the Olympus Corporation (“Olympus”) and COMMERZ NEW YORK’s failure to, among other things, maintain an effective anti-money laundering program, detect reportable transactions under U.S. law and prevent them from being processed by COMMERZ NEW YORK. The criminal BSA charges are contained in a four-count felony Information (the “Information”) which also charges COMMERZ with conspiring to violate the International Emergency Economic Powers Act (“IEEPA”) based on COMMERZ’s role in processing, from 2001 through at least 2008, $263 million of transactions that were prohibited under U.S. law. The case is assigned to United States District Judge Beryl Howell.
Second, the United States has entered into an agreement (the “Agreement”) with COMMERZ and COMMERZ NEW YORK (collectively, the “Company”) under which the Company agrees to accept responsibility for its conduct by stipulating to the accuracy of an extensive Statement of Facts; to pay a $300 million forfeiture amount to the victims of the Olympus fraud; to refrain from future criminal conduct and cooperate fully with the Government; and to continue reforms of its Bank Secrecy Act (“BSA”)/Anti-Money Laundering (“AML”) compliance program. Assuming the Company’s continued compliance with the Agreement, the Government has agreed to defer prosecution on the Information for a period of three years, after which time the Government will seek to dismiss the charges. The $300 million forfeiture amount to the victims of the Olympus fraud will be paid through a parallel civil forfeiture complaint filed in Manhattan federal court.
COMMERZ and COMMERZ NEW YORK will pay a total of $1.45 billion in penalties to resolve the Olympus-related AML charges, IEEPA violations, and payments to regulators.
Manhattan U.S. Attorney Preet Bharara said: “Today, Commerz New York stands charged with Bank Secrecy Act criminal offenses for its acute, institutional anti-money laundering deficiencies that made it a conduit for over a billion dollars of the Olympus fraud. These criminal charges follow a multi-year investigation and a guilty plea by a former Commerzbank Singapore employee who helped set up the structure that allowed for the Olympus fraud. Institutions, not just individuals, have an obligation to follow the law, and anti-money laundering laws in particular are critical for financial institutions to follow. With today’s resolution, the bank, as part of a deferred prosecution agreement, has accepted responsibility in a detailed statement of facts, agreed to continue reforming its anti-money laundering practices, and will pay $300 million that will go to victims of the Olympus fraud.”
FBI Assistant Director-in-Charge Diego Rodriguez said: “Today we announce more charges against yet another bank. Commerz New York violated the Bank Secrecy Act designed to prevent the movement of money, often with nefarious intent. Commerzbank enabled Olympus to evade detection for years. And worse yet, failed to create a process to prevent this criminal behavior. Management at banks and financial institutions should heed this warming: This behavior will be investigated, vigorously.”
According to the allegations in the criminal Information and other documents filed today in the United States District Court for the District of Columbia, and felony plea documents related to an Olympus executive filed previously in the District Court for the Southern District of New York:
Since 2008, and continuing until at least 2013, COMMERZ NEW YORK violated the BSA and its implementing regulations. Specifically, COMMERZ NEW YORK failed to maintain adequate policies, procedures, and practices to ensure its compliance with United States law, including its obligation to detect and report suspicious activity. As a result of the wilful failure of COMMERZ NEW YORK to comply with United States law, a multibillion-dollar securities fraud was operated through COMMERZ and COMMERZ NEW YORK.
Olympus was a Japan-based manufacturer of medical devices and cameras. Its common stock is listed on the Tokyo Stock Exchange, and its American Depository Receipts trade in the United States. From at least the late 1990s through 2011, Olympus perpetrated a massive accounting fraud designed to conceal from its auditors and investors hundreds of millions of dollars in losses. In September 2012, Olympus and three of its senior executives pled guilty in Japan to inflating the company’s net worth by approximately $1.7 billion.
Olympus used COMMERZ and COMMERZ NEW YORK to perpetrate its fraud. COMMERZ, through its branch and affiliates in Singapore, both loaned money to off-balance-sheet entities created by or for Olympus to perpetrate its fraud, and transacted more than $1.6 billion through COMMERZ NEW YORK in furtherance of the fraud.
The Suspicions at COMMERZ
COMMERZ and COMMERZ NEW YORK were used in furtherance of the Olympus fraud during two different time periods. From approximately 1999 through 2000, Olympus perpetrated its fraud primarily through COMMERZ and its Singapore branch and affiliates. Among other things, Olympus used special purpose vehicles to facilitate the fraud, some of which were created by COMMERZ – including several executives based in Singapore – at Olympus’s direction, using funding from COMMERZ. One of those Singapore-based executives, Chan Ming Fon, was involved in creating the Olympus structure in 1999 while at Commerzbank (Southeast Asia) Ltd., and later managed an Olympus-related entity in 2005-2010 on behalf of which he submitted false confirmations to Olympus’s auditors. In September 2013, Chan pled guilty in Manhattan federal court to conspiracy to commit wire fraud.
From 1999 through 2000, Olympus executives asked COMMERZ executives to provide certain false documents to Olympus’s auditors, which would have failed to disclose that certain Olympus assets were pledged as collateral for loans from a COMMERZ affiliate. COMMERZ obtained a legal opinion, which, in the words of one COMMERZ executive written to an Olympus executive, “ma[de] clear that our bank could be subject to both civil and criminal penalties if we are seen to be assisting or facilitating you in the non-disclosure.” Although COMMERZ ultimately declined to provide the false documents, its executives suggested a variety of ways Olympus could nonetheless fail to disclose the pledge.
In 2000, Olympus took its business away from COMMERZ and transferred it to another bank. In 2005, however, Olympus – and its fraud – returned to COMMERZ. From that point until at least 2010, COMMERZ executives expressed strong suspicions about the Olympus transactions and structure. One senior executive worried that Olympus would have to “write off [the] full amount” of the relevant transactions, and wondered about the effects on COMMERZ if “any negative news is splash[ed] on the front page.” A senior legal and compliance officer responsible for COMMERZ’s Singapore branch and affiliates wrote at the time that he was “concerned” about fraud, asset stripping, market manipulation, and tax offenses, and that “[i]f the [Olympus] structure and transactions can not [be] explained we must file Suspicious Transaction report as a matter of law and [COMMERZ] policy.”
The New York Wires
In March 2010, two wire transfers in the amount of approximately $455 million and $67 million, respectively, related to the Olympus scheme were processed by COMMERZ NEW YORK through the correspondent account for the Singapore branch of COMMERZ. Those wires caused COMMERZ NEW YORK’s automated AML monitoring software to “alert.”
At the time, COMMERZ NEW YORK had conducted no due diligence on the Singapore branch and affiliates of COMMERZ, consistent with COMMERZ’s policy of not conducting due diligence on its own branches. In response to the alerts, however, COMMERZ NEW YORK sent a request for information to COMMERZ in Frankfurt and COMMERZ’s Singapore branch, inquiring about the transactions. The Singapore branch responded in a brief e-mail, dated April 20, 2010, referring to the Olympus-related entities involved in the wires:
GPA Investments Ltd. ist [sic] a Caymen [sic] Islands SPV, Creative Dragons SPC-Sub Fund E is a CITS administered fund both of which are part of an SPC structure to manage securities investments for an FATF country based MNC.
According to the Relationship Manager the payment reflects the proceeds from such securities investments to be reinvested.
COMMERZ’s Singapore branch did not relay any of the concerns about the Olympus-sponsored structures and transactions.
Based on its response, COMMERZ NEW YORK closed the alert without taking any further action other than to note that in March 2010 alone, GPA Investments had been involved in six transactions through COMMERZ NEW YORK totalling more than $522 million. In fact, between 1999 and 2010, a total of more than $1.6 billion in furtherance of the Olympus fraud was cleared through COMMERZ NEW YORK. COMMERZ NEW YORK failed to file a SAR in the United States concerning Olympus or any of the Olympus-related entities until November 2013 – more than two years after the Olympus accounting fraud was revealed.
COMMERZ NEW YORK’s Compliance Deficiencies
COMMERZ NEW YORK had the same designated BSA Officer continuously from approximately 2003 until early 2014. Over those years, she raised concerns about AML compliance, both to her superiors at COMMERZ NEW YORK, and with COMMERZ Frankfurt.
Under the BSA, a financial institution is required to detect and report suspicious activity. This is accomplished, in part, through conducting due diligence, and enhanced due diligence where appropriate, of the correspondent relationship – which COMMERZ NEW YORK failed to do – and by sending requests for further information to the correspondent bank when potentially suspicious transactions are detected. COMMERZ NEW YORK frequently had difficulties getting responses to requests for information generated in connection with automated transaction monitoring “alerts.” Because requests for information went unanswered for as long as eight months without SARs being filed, alerts were often closed without any response to the pending request. As a result of these deficiencies, COMMERZ NEW YORK cleared numerous AML “alerts” based on its own perfunctory internet searches and searches of public source databases but without ever receiving responses to its requests for information.
On June 24, 2010, a COMMERZ NEW YORK-based compliance officer who had primary responsibility for automated transaction monitoring wrote in an e mail to the BSA Officer and the Head of Compliance in New York (who had previously served as the Head of Compliance in Asia) that “we currently have 90 alerts a day,” with “808 alerts outstanding,” which “could lead to a possible back log.” He continued, “I also wanted to make you aware that we have currently over 130 Frankfurt RFIs [i.e., requests for information] outstanding,” noting “a decrease in response to the RFIs” from Frankfurt. The following day, the Head of Compliance in New York forwarded the e mail to COMMERZ’s Global Head of Compliance, adding that “things are not getting better with regards to th[ose] findings. (see below). I will forward you the DRAFT memo on potential revision of staffing needs.” Although the Global Head of Compliance thereafter instituted new procedures designed to increase the speed of responses to RFIs from New York, problems persisted with the timely flow of information from business units outside the U.S. to compliance officers in New York.
COMMERZ and COMMERZ NEW YORK also failed to conduct adequate due diligence or to obtain “know your customer” information with respect to correspondent bank accounts for COMMERZ’s own foreign branches and affiliates. These systemic deficiencies reflected a failure to maintain adequate policies, procedures, and controls to ensure compliance with the BSA and regulations prescribed thereunder and to guard against money laundering.
IEEPA Violations
According to admissions contained in the deferred prosecution agreement, from 2002 to 2008, COMMERZ knowingly and willfully moved $263 million through the U.S. financial system on behalf of Iranian and Sudanese entities subject to U.S. economic sanctions. COMMERZ engaged in this criminal conduct using numerous schemes designed to conceal the true nature of the illicit transactions from U.S. regulators.
For example, in the deferred prosecution agreement, COMMERZ acknowledged that it used non-transparent payment messages, known as cover payments, to conceal the involvement of sanctioned entities, and also removed information identifying sanctioned entities from payment messages, in transactions processed through COMMERZ NEW YORK and other financial institutions in the United States. Specifically, in 2003, COMMERZ designated a group of employees in the Frankfurt back office to review and amend Iranian payments so that the payments would not be stopped by U.S. sanctions filters. In doing so, COMMERZ ensured that Iranian payment messages did not mention the Iranian entity, as transactions may have otherwise been stopped pursuant to the U.S. sanctions.
COMMERZ admitted that it hid these practices from COMMERZ NEW YORK. For example, in 2003, when two state-owned Iranian banks wanted to begin routing their U.S. dollar clearing business through COMMERZ, a COMMERZ back office employee emailed other COMMERZ employees directing: “If for whatever reason CB New York inquires why our turnover has increase[d] so dramatically, under no circumstances may anyone mention that there is a connection to the clearing of Iranian banks!!!!!!!!!!!!!.”
COMMERZ admitted that this conduct continued even though its senior management was warned that the bank’s practices for Iranian clients “raised concerns.” For example, in October 2003, the head of COMMERZ’s internal audit division stated in an email to a member of COMMERZ’s senior management that Iranian bank names in payment messages going to the United States were being “neutralized” and warned: “it raises concerns if we consciously reference the suppression of the ordering party in our work procedures in order to avoid difficulties in the processing of payments with the U.S.A.”
In another scheme designed to avoid U.S. sanctions, COMMERZ admitted that, in 2004, it agreed with an Iranian bank client that, rather than sending direct wire payments to the United States, the Iranian bank would pay U.S. beneficiaries with COMMERZ-issued checks listing only the Iranian bank’s account number and address in London with no mention of the Iranian bank’s name.
Additionally, COMMERZ admitted that in 2005, it created a “safe payment solution” for an Iranian shipping company client, which allowed the client to conduct transactions using the U.S. financial system. The safe payment solution involved routing payments through special purpose entities controlled by the Iranian company, which were incorporated outside of Iran and bore no obvious connection to the Iranian client. COMMERZ and its client switched use of such special purpose entities when COMMERZ NEW YORK’s sanctions compliance filters were updated to detect the use of a particular special purpose entity. COMMERZ continued to process payments on behalf the Iranian client even after the client had been designated by OFAC as an entity subject to U.S. sanctions for its involvement in weapons of mass destruction proliferation.
In addition, COMMERZ admitted that, from 2002 to 2007, it provided Sudanese sanctioned entities with access to the U.S. financial system by engaging in similar schemes to remove reference to Sudanese companies from the transaction records.
The Deferred Prosecution Agreement
As a result of the foregoing conduct, this Office has entered into a Deferred Prosecution Agreement with the Company which has been submitted today to Judge Howel1. Pursuant to the Agreement, the Company has agreed to the following terms and conditions. First, the Company has agreed to waive indictment and to the filing of the Information, charging the Company with violations of the Bank Secrecy Act. Count Two of the Information charges that the Company failed to maintain an effective anti-money laundering program, from in 2008 through in or about 2013, as required under the BSA. Count Three of the Information alleges that the Company violated the BSA by failing to file Suspicious Activity Reports with respect to correspondent banking transactions. Count Four of the Information charges that the Company failed to obtain adequate due diligence on foreign institutions owned by or affiliated with the Company, information that if collected and maintained would have reasonably allowed for the detection and reporting of instances of money laundering and other suspicious activity.
Second, pursuant to the Agreement, the Company agrees to acknowledge responsibility for its conduct by, among other things, stipulating to the accuracy of a detailed Statement of Facts.
Third, the Company agrees to a $300 million non-tax deductible payment, in the form of a civil forfeiture, which the Government intends to distribute to the victims of the Olympus fraud, consistent with the applicable Department of Justice regulations, through the ongoing remission process. To effectuate that forfeiture, the Office has today filed a parallel civil forfeiture complaint in the Southern District of New York, which has been assigned to United States District Judge Paul Gardephe.
Fourth, the Company agrees to various cooperation obligations, including (1) an obligation to report any criminal conduct by any employee acting within the scope of his employment at the Company; (2) reporting to the Offices any BSA-related investigation or proceeding in which the Company is involved; and (3) committing no subsequent federal crimes.
Fifth, the Company agrees to continue reforming its Bank Secrecy Act/Anti-Money Laundering compliance programs and procedures, as required under the prior formal enforcement actions taken by the Federal Reserve and the additional actions taken concurrently by the Federal Reserve and the New York State Department of Financial Services (“DFS”), and to provide quarterly reports and other information to this Office about its progress.
In consideration of these obligations, the Government has agreed to defer prosecution on the Information for a period of three years, after which time – assuming that the Company does not violate the Agreement – the Government will seek to dismiss the charges.
In separate actions, the Federal Reserve Board and DFS announced that they had also reached agreements with COMMERZ and COMMERZ NEW YORK with respect to its BSA crimes.
Mr. Bharara praised the work of the FBI. He also thanked the Federal Reserve Board, the Internal Revenue Service, Criminal Investigation, and DFS.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Bonnie Jonas is in charge of the prosecution.
US v. $300000000 15 Civ. 1825 (SDNY Civil Forfeiture Complaint)
U.S. v. Commerzbank AG, et al Information
Captain of Genovese Crime Family Pleads Guilty in Manhattan Federal Court to RacketeeringRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today the guilty plea of DANIEL PAGANO, a Captain of the Genovese Organized Crime Family of La Cosa Nostra (the “Genovese Crime Family”). PAGANO pled guilty before U.S. District Judge Ronnie Abrams to participating in a racketeering conspiracy. As part of his plea, PAGANO admitted to being a leader of the criminal enterprise. PAGANO is scheduled to be sentenced by Judge Abrams on July 10, 2015.
Manhattan U.S. Attorney Preet Bharara said: “Danny Pagano, a capo in the Genovese Crime family, has now admitted to being a leader in a racketeering conspiracy that spanned nearly five years. Today’s plea demonstrates that La Cosa Nostra is not a thing of the past or a relic of movie myth. Our efforts with our law enforcement partners are aimed at making it so.”
According to the Indictment, the plea agreement, and statements made during the plea proceeding:
The Genovese Crime Family is part of a nationwide criminal organization known by various names, including the “Mafia” and “La Cosa Nostra” (“LCN”), which operates through entities known as “Families.” The Genovese Crime Family operates through groups of individuals known as “crews” and “regimes,” most of which are based in New York City. Each “crew” has as its leader a person known as a “Caporegime,” “Capo,” “Captain,” or “Skipper,” who is responsible for supervising the criminal activities of his crew and providing “Soldiers” and associates with support and protection. In return, the Capo typically receives a share of the illegal earnings of each of his crew’s Soldiers and associates, which is sometimes referred to as Atribute.@ DANIEL PAGANO is a Caporegime or Captain in the Genovese Crime Family.
Each crew consists of “made” members, sometimes known as “Soldiers,” “wiseguys,” “friends of ours,” and “good fellows.” Soldiers are aided in their criminal endeavors by other trusted individuals, known as “associates,” who sometimes are referred to as “connected” or identified as “with” a Soldier or other member of the Family. Associates participate in the various activities of the crew and its members. In order for an associate to become a made member of the Family, the associate must first be of Italian descent and typically needed to demonstrate the ability to generate income for the Family and/or the willingness to commit acts of violence.
From 2009 through August 2014, PAGANO, along with other members and associates of the Genovese Crime Family, committed a wide array of crimes including operating an illegal gambling business. PAGANO, a Captain, exercised a leadership role within the Family by, among other things, settling disputes between and among associates of the Family.
PAGANO, 61, of Rockland County, 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.
Mr. Bharara thanked the Federal Bureau of Investigation (“FBI”), the Rockland County District Attorney’s Office, the Drug Enforcement Administration, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, the New York City Police Department (“NYPD”), and the New York State Police.
This investigation was a result of the Department of Justice's Organized Crime and Drug Enforcement Task Force Program, and it combined the resources and expertise of its member federal agencies in cooperation with local law enforcement. The investigation was conducted by the FBI-NYPD Joint Organized Crime Task Force.
The prosecution is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Jennifer Burns, Abigail Kurland, and Rahul Mukhi are in charge of the prosecution.
Leader of Multimillion-Dollar Bank Fraud Scheme Sentenced in Manhattan Federal Court to 88 Months in PrisonRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, today announced that MAHABUBUZ ZAMAN was sentenced today to 88 months in prison for his participation in an elaborate bank fraud scheme that yielded more than two million dollars in ill-gotten gains. ZAMAN had been found guilty on November 12, 2014, by a Manhattan jury of conspiracy to commit bank fraud, conspiracy to commit identification document fraud, and use of a false passport, after a two-week jury trial. ZAMAN was sentenced today by U.S. District Judge Alison J. Nathan, who also presided over the jury trial.
Manhattan U.S. Attorney Preet Bharara said: “Mahabubuz Zaman may have enjoyed the riches of this multimillion-dollar bank fraud scheme for years. But now, thanks to the hard work of Immigration and Customs Enforcement’s Homeland Security Investigations, and prosecutors, Zaman will be spending the next seven years in federal prison.”
According to the Superseding Indictment, other court documents, and the evidence introduced at trial:
From approximately 2008 through November 2012, ZAMAN and his co-conspirators allegedly engaged in a bank fraud scheme in which they created hundreds of counterfeit checks, deposited those counterfeit checks into bank accounts they had opened in the names of sham companies in order to fraudulently inflate the balances in those accounts, and then withdrew funds from those bank accounts before the financial institutions were able to determine the fraudulent nature of the checks. In addition to the check fraud, the defendant and his partners-in-crime also obtained fraudulent mortgages and ran up credit card debt using false identities. The scheme victimized approximately 15 different banks, resulting in more than two million dollars in losses to the banks.
As part of the scheme, the conspirators incorporated sham companies and then opened bank accounts in the names of those sham companies. The individuals opening the accounts (the “accountholders”) often used false identities, including names and social security numbers, and presented false identification documents, including false Bangladeshi passports and forged United States visas. The accountholders were generally instructed to make small legitimate deposits at first so that the banks would make funds immediately available upon future fraudulent deposits.
ZAMAN and his co-conspirators obtained copies of legitimate checks and then used the payor account information that appeared on those checks to create counterfeit checks made payable to the sham companies they had incorporated as part of the scheme. The accountholders deposited the counterfeit checks into the sham company bank accounts at various banks. The accountholders often made deposits at numerous branches of the same bank on the same day. These deposits often were made on a Thursday or Friday so that the defendant and his co-conspirators could withdraw the illegal proceeds over the weekend when the banks were closed and were less likely to determine that the checks were counterfeit.
Once the defendant and his co-conspirators confirmed that funds from the counterfeit checks were available for withdrawal, the accountholders were directed to withdraw the funds from the counterfeit checks, typically over the weekend. The defendant and his co-conspirators often withdrew the funds from global cash access machines at casinos in Atlantic City, New Jersey, which did not have daily withdrawal limits. The accountholders often used false identification documents, including false Bangladeshi passports and fake United States visas, when making the withdrawals.
ZAMAN was one of the leaders of the scheme who recruited accountholders and directed both accountholders and higher-ranking members of the crew in the scheme’s operations, fronting the money for the scheme’s expenses and collecting a large share of its profits. In addition, ZAMAN was primarily responsible for the crew’s fraudulent mortgage operations.
In addition to the prison term, Judge Nathan sentenced ZAMAN to three years of supervised release, and ordered him to pay restitution and forfeiture in the amount of $2,638,700, and a $300 special assessment.
Manhattan U.S. Attorney Bharara praised the investigative work of the New York Field Office of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations. He also thanked United States Citizenship and Immigration Services, the Queens County District Attorney’s office, the New Jersey State Police, the New York City Police Department, the New York State Police, and the United States Secret Service for their assistance in the matter.
The prosecution of this case is being handled by the Office’s Complex Frauds Unit. Assistant United States Attorneys Lisa Korologos and Alexander Wilson are in charge of the prosecution.
Former South American Counter-Terrorism Official Sentenced in Manhattan Federal Court to More Than 16 Years in Prison for Attempting to Support HezbollahRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and John P. Carlin, Assistant Attorney General for National Security, announced that DINO BOUTERSE, a citizen of Suriname who assisted in the formation of that country’s Counter-Terrorism Unit, was sentenced today in Manhattan federal court to 195 months in prison for attempting to provide material support and resources to Hezbollah, a designated terrorist organization, along with narcotics trafficking and firearms offenses. BOUTERSE, who was arrested in Panama on August 29, 2013, and arrived in the United States on August 30, 2013, pled guilty before U.S. District Judge Shira A. Scheindlin, who also imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara said: “Dino Bouterse was supposed to oppose terrorism. Instead, Bouterse betrayed his official position and tried to support and aid Hezbollah, including his agreement to assist Hezbollah in acquiring weapons, and conspiring to import cocaine to the U.S. Today he has been sentenced to a lengthy prison term for those odious crimes.”
According to the Indictment, other documents filed in Manhattan federal court, and statements made at today’s sentencing:
In 2013, BOUTERSE used his position within the government of Suriname to assist individuals he believed were members of Hezbollah, who informed BOUTERSE that they intended to conduct terrorist attacks against American interests. In exchange for a multimillion-dollar payment, BOUTERSE agreed to allow large numbers of purported Hezbollah operatives to use Suriname as a permanent base for, among other things, attacks on American targets. In furtherance of his efforts to assist Hezbollah, BOUTERSE (i) supplied a false Surinamese passport to a purported Hezbollah operative for the purpose of clandestine travel, including travel to the United States; (ii) discussed heavy weapons that he could provide to Hezbollah; and (iii) instructed the purported Hezbollah members about how Hezbollah operatives, supplied with a Surinamese cover story, could enter the United States.
In June 2013, BOUTERSE and a co-defendant, Edmund Quincy Muntslag, met in BOUTERSE’s office in Suriname with confidential sources (the “CSs”) working with the Drug Enforcement Administration (“DEA”) to discuss importing cocaine into the United States using commercial airline flights. During the meeting, BOUTERSE showed the CSs a rocket launcher and a kilogram of cocaine.
Approximately one month later, BOUTERSE and Muntslag worked to provide transportation and security for cocaine being sent through Suriname to the United States. As a test run, BOUTERSE and Muntslag sent 10 kilograms of cocaine on a commercial flight departing from Suriname. BOUTERSE personally verified the arrangements for the 10-kilogram cocaine shipment in a text message. The cocaine was intercepted by law enforcement officials after it departed Suriname.
In July 2013, BOUTERSE met with one of the CSs to discuss opening Suriname to the CSs’ purported Hezbollah associates.
Later that month, BOUTERSE met in Europe with one of the CSs and with 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 to act, in part, as a personal armed force. BOUTERSE confirmed his understanding that the purported Hezbollah operatives would operate in South America against American targets, and he agreed to supply Surinamese passports to the operatives – and to assist with their applications for visas to travel from South America into the United States. In addition, in response to a request for surface-to-air missiles and rocket-propelled grenades, BOUTERSE stated that he would need “two months” and that he would provide a list of what he could supply. Finally, at the July 2013 meeting in Europe, BOUTERSE agreed to create a false Surinamese passport for one of the purported Hezbollah operatives, so that BOUTERSE and the Hezbollah operative could travel to Suriname to inspect the facilities that BOUTERSE had agreed to prepare for the Hezbollah contingent.
At a subsequent meeting in August 2013, BOUTERSE delivered a Surinamese passport with false identifying information to a purported Hezbollah operative. As had been discussed at the July 2013 meeting in Europe, the purported Hezbollah operative was to use the fraudulent passport to travel to Suriname. BOUTERSE indicated that everything was ready in Suriname for the arrival of the purported Hezbollah members, and that some “toys” – a code-word for weapons – would be available for inspection.
Following this meeting, BOUTERSE was arrested by Panamanian law enforcement and transferred to the custody of the DEA.
On August 29, 2014, BOUTERSE pled guilty to (i) attempting to provide material support to Hezbollah, a Foreign Terrorist Organization; (ii) conspiring to import five kilograms or more of cocaine into the United States; and (iii) using and carrying, or aiding and abetting the use and carrying of, a firearm or during and in relation to a drug-trafficking crime. In addition to his prison term, BOUTERSE, 42, a citizen of Suriname, was ordered to pay a $300 special assessment fee.
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; 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 Michael D. Lockard, Adam Fee, Michael Ferrara, and Edward Y. Kim are in charge of the prosecution.
New York City Public School Teacher Charged with Producing, Receiving, and Possessing Child PornographyRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced that JON CRUZ, a teacher and debate coach at the Bronx High School for Science, was arrested today on charges relating to producing, receiving, and possessing child pornography.
U.S. Attorney Preet Bharara said: “Whenever child pornography charges are brought, it is among the most difficult and disturbing situations law enforcement must face, particularly as it relates to the victims. What makes this case even more disturbing than the charges themselves is, as alleged, Jon Cruz was involved in child pornography while he was working with children every day through his job as a teacher and debate coach. Now the justice process must take over.”
FBI Assistant Director in Charge Diego Rodriguez said: “It takes a special depravity to produce child pornography. This type of insidious behavior must stop. And others who think they can hide in the Deep Web—or are beyond the reach of law enforcement—should think again. Our youth deserve our unwavering commitment to their security, particularly from a coach and teacher at their school.”
According to the Complaint unsealed today in Manhattan federal court:
From July 2014 through December 2014, JON CRUZ engaged in multiple chats over a mobile communication application with minor victims from different states. In those chats, CRUZ, who was aware of the ages of the victims, offered to pay the victims to take nude photographs of themselves and send the photographs to CRUZ. In at least one case, CRUZ paid a fifteen-year-old male over $500 to take sexually explicit photographs of himself and to send the photographs to CRUZ.
CRUZ, 32, was arrested this morning in New York, NY. He is charged with one count of production of child pornography, one count of receiving child pornography, and one count of possessing child pornography. For production of child pornography, CRUZ faces a mandatory minimum sentence of 15 years in prison and a maximum sentence of 30 years in prison. For his receipt of child pornography, he faces a mandatory minimum sentence of 5 years in prison and a maximum sentence of 20 years in prison. For his possession of child pornography, he faces 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.
CRUZ is a teacher at the Bronx High School for Science, where he has been employed since 2006. CRUZ is also the head coach of the Bronx Science Speech and Debate Team. Persons with information about children with whom CRUZ may have had inappropriate sexual contact, or from whom he may have solicited sexually explicit images or videos, are urged to contact the FBI hotline established for this investigation at (212) 384-2166 or [email protected].
Mr. Bharara praised the investigative work of the New York and New Mexico offices of the FBI in this matter. He also thanked the New York State Police and the Bernalillo, New Mexico County Sheriff’s Office for their assistance with this investigation.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Shawn Crowley is in charge of the prosecution.
The charges and allegations contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
US v. Jon Cruz Complaint
New York City Private Investigator Pleads Guilty in Manhattan Federal Court to Hacking into E-Mail AccountsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that ERIC SALDARRIAGA, a licensed private investigator in New York City, pled guilty to a criminal Information charging him with conspiracy to commit computer hacking. SALDARRIAGA pled guilty before U.S. District Judge Richard J. Sullivan.
Manhattan U.S. Attorney Preet Bharara said: “Eric Saldarriaga crossed the line as a private investigator by hiring hackers to unlawfully and secretly access over 60 email accounts, including accounts belonging to people he was investigating. With today’s plea, Mr. Saldarriaga will face the repercussions of his illegal actions.”
FBI Assistant Director Diego Rodriguez said: “Eric Saldarriaga didn't honorably serve his clients when he abused his powers to the detriment of his victims. Unlawfully accessing personal information is no minor crime. As today’s guilty plea suggests, those who exploit their authority in this way will be made to answer for their actions.”
According to the allegations contained in the Information and statements made in court:
The defendant, a licensed private investigator, owned a company that provided private investigation services to members of the public for a fee. Beginning in 2009, SALDARRIAGA, through services advertised on the internet (the “Hacking Services”), hired individuals to hack into the e-mail accounts of numerous victims. SALDARRIAGA used the Hacking Services to access, unlawfully and secretly, the e-mail accounts of individuals he investigated on behalf of his clients, as well as individuals in whom SALDARRIAGA was interested for personal reasons.
SALDARRIAGA paid the Hacking Services to provide him with login credentials, including usernames and passwords, for victims’ e-mail accounts. SALDARRIAGA then unlawfully accessed and reviewed victims’ e-mail communications. In total, SALDARRIAGA hired Hacking Services to hack into, and provide unauthorized access to, at least 60 different e-mail accounts.
SALDARRIAGA, 41, of Queens, New York, pled guilty to one count of conspiracy to commit computer hacking, which carries a maximum sentence of five years in prison. SALDARRIAGA is scheduled to be sentenced by Judge Sullivan on June 26, 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 praised the FBI for their outstanding work in the investigation.
This matter is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Daniel Noble is in charge of the case.
U.S. v. Eric Saldarriaga Information