Southern District of New York
Press releases recorded for this federal judicial district.
Brooklyn Man Sentenced in Manhattan Federal Court to 15 Years in Prison for Providing Material Support to Al QaedaRead 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 WESAM EL-HANAFI was sentenced today in Manhattan federal court to 15 years in prison for his extensive efforts to support al Qaeda – including financial support and facilitating surveillance of a New York City landmark for an attack – that spanned nearly three years. EL-HANAFI was arrested in the United Arab Emirates in April 2010 and transferred to United States custody. On June 10, 2012, EL-HANAFI pled guilty to one count of providing and attempting to provide material support and resources to al Qaeda, and one count of conspiring to provide material support and resources to al Qaeda, before U.S. District Judge Kimba M. Wood, who also imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara stated: “Wesam El-Hanafi was deeply involved in supporting al Qaeda both financially and by facilitating surveillance of a New York landmark to bring an attack to our homeland in our city. Today’s sentence is a fitting punishment for these crimes and we will continue, with our law enforcement partners, to pursue punishment for those who provide and conspire to provide material support for terrorists.”
According to various public filings and statements made during public proceedings, including today’s sentencing:
From 2007 through late 2009, EL-HANAFI supported al Qaeda in a variety of ways. In 2007, EL-HANAFI and his co-defendant Sabirhan Hasanoff developed contact with individuals whom they understood to be affiliated with al Qaeda. After a period of providing financial support to these individuals, in February 2008, EL-HANAFI traveled to Yemen to meet with two terrorist operatives who EL-HANAFI understood were members of al Qaeda. While in Yemen, EL-HANAFI swore an oath of allegiance, called bayat, to al Qaeda and delivered money and other items, including a laptop computer, to the terrorist operatives. EL-HANAFI also taught the terrorist operatives in Yemen covert Internet communications techniques and supplied them with encryption tools that would facilitate communicating without detection. EL-HANAFI and Hasanoff additionally sent other items, including remote-controlled devices capable of use in an explosives attack, to EL-HANAFI’s terrorist contacts in Yemen.
EL-HANAFI and Hasanoff together funneled approximately $67,000 to terrorist operatives overseas. EL-HANAFI and Hasanoff collected some of this money from a third individual who resided in the United States. During this time, both EL-HANAFI and Hasanoff used aliases to disguise the source of their money when making cash donations to their terrorist contacts.
Moreover, at the direction of his Yemen-based terrorist contacts, EL-HANAFI assigned Hasanoff to perform surveillance of locations in the United States, including the New York Stock Exchange in Manhattan, as potential targets of a terrorist attack by al Qaeda. EL-HANAFI received Hasanoff’s report of his surveillance of the New York Stock Exchange, and sent that report to the terrorist operatives in Yemen.
EL-HANAFI and Hasanoff also undertook efforts to enable their own travel to engage in jihad in Somalia, Afghanistan, and Iraq. Their al Qaeda contacts would not facilitate EL-HANAFI’s and Hasanoff’s travel for jihad, however, because al Qaeda viewed the two men as more valuable for potential attacks on U.S. soil.
In addition to his prison term, EL-HANAFI, 39, a citizen of the United States, who formerly resided in Brooklyn, New York, was sentenced to three years of supervised release. EL-HANAFI was also ordered to pay a $200 special assessment fee and forfeiture in the amount of $70,000.
Hasanoff pled guilty on June 4, 2012, to one count of providing and attempting to provide material support and resources to al Qaeda, and one count of conspiracy to provide material support and resources to al Qaeda. On September 30, 2013, Hasanoff was sentenced to a total term of 18 years in prison, to be followed by a three-year term of supervised release, and was ordered to pay forfeiture in the amount of $70,000.
Mr. Bharara praised the outstanding investigative work of the FBI’s New York-based Joint Terrorism Task Force (“JTTF”) – which principally consists of special agents of the Federal Bureau of Investigation and detectives of the New York City Police Department. Mr. Bharara thanked the Department of Justice’s National Security Division and Office of International Affairs, the Kansas City-based JTTF, and the United States Attorney’s Office for the Western District of Missouri for their extraordinary assistance in this matter.
This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys John P. Cronan, Aimee Hector, Michael Lockard, and Brendan R. McGuire are in charge of the prosecution.
Bitcoin Exchanger Sentenced in Manhattan Federal Court to Four Years in Prison for Selling Nearly $1 Million in Bitcoins for Drug Buys on Silk RoadRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that ROBERT M. FAIELLA, a/k/a “BTCKing,” an underground Bitcoin exchanger, was sentenced today to four years in prison for his role in knowingly transmitting nearly $1 million in Bitcoins intended to facilitate drug trafficking on “Silk Road,” a black-market website designed to enable users to buy and sell illegal drugs anonymously and beyond the reach of law enforcement. FAIELLA pled guilty in September 2014 before U.S. District Judge Jed S. Rakoff, who also imposed today’s sentence.
According to the allegations contained in the Complaint, the Indictment, the Superseding Information, and statements made in other documents filed in Manhattan federal court and related court proceedings:
From about December 2011 to October 2013, FAIELLA ran an underground Bitcoin exchange on the Silk Road website, a website that served as a sprawling and anonymous black market bazaar where illegal drugs of virtually every variety were bought and sold regularly by the site’s users. Operating under the username “BTCKing,” FAIELLA sold Bitcoins – the only form of payment accepted on Silk Road – to users seeking to buy illegal drugs on the site. Upon receiving orders for Bitcoins from Silk Road users, he filled the orders through BitInstant, a company based in New York, New York. BitInstant was designed to enable customers to exchange cash for Bitcoins anonymously, that is, without providing any personal identifying information, and charged a fee for its service. FAIELLA obtained Bitcoins with BitInstant’s assistance, and then sold the Bitcoins to Silk Road users at a markup.
With the knowledge and active assistance of Charles Shrem, the Chief Executive Officer of BitInstant, FAIELLA exchanged nearly $1 million in cash for Bitcoins for the benefit of Silk Road users, so that the users could, in turn, make illegal purchases on Silk Road.
In addition to the prison sentence, FAIELLA, 55, of Fort Myers Beach, Florida, was sentenced to three years of supervised release and was ordered to forfeit $950,000, representing the amount of funds involved in the offense that were intended to promote illegal activity.
FAIELLA’s co-defendant, Shrem, was sentenced to two years in prison by Judge Rakoff on December 19, 2014.
Mr. Bharara praised the outstanding investigative work of the DEA’s New York Organized Crime Drug Enforcement Strike Force, which comprises agents and officers of the U. S. Drug Enforcement Administration, the New York City Police Department, Immigration and Customs Enforcement - Homeland Security Investigations, the New York State Police, the U. S. Internal Revenue Service Criminal Investigation Division, the Federal Bureau of Investigation, the Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S. Secret Service, the U.S. Marshals Service, New York National Guard, Office of Foreign Assets Control, and the New York Department of Taxation and Finance. Mr. Bharara also thanked the FBI’s New York Field Office.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Serrin Turner is in charge of the prosecution, and Assistant United States Attorney Andrew Adams of the Money Laundering and Asset Forfeiture Unit is in charge of the forfeiture aspects of the case.
Manhattan U.S. Attorney Obtains More Than $300,000 in Judgments Against Seven Participants in Scheme to Defraud Federal Government into Paying for Tutoring Services That Were Never ProvidedRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States has obtained civil judgments against seven former employees of The Academic Advantage (“Academic Advantage”) in connection with their role in a scheme whereby Academic Advantage fraudulently obtained federal funds for tutoring services that it never provided. During the relevant period, Academic Advantage participated in a federally funded program pursuant to which it was to provide after-school tutoring to students attending underperforming New York City public schools. The civil judgments are against: (1) JASON ISAACS, an Executive Director of Academic Advantage and the senior-most official overseeing its New York City tutoring program; and (2) six individuals who supervised Academic Advantage’s tutoring program at particular New York City public schools — AYESHA YOUNG, ARLETTE HERNANDEZ, RAYVON JONES, TERESA OSORIO, ALICIA MCKAY, and KRISTIN JOYNER. The judgments against ISAACS, YOUNG, HERNANDEZ, JONES, OSORIO, MCKAY, and JOYNER are for $185,000, $33,308, $27,867, $24,951, $23,616, $20,838, and $20,412, respectively. U.S. District Judge Lewis A. Kaplan endorsed some of the judgments on January 14, 2015, and others on January 12, 2015. The above-referenced judgments are in addition to the more than $2.1 million in settlements and judgments that this Office previously obtained against Academic Advantage and three of its other former employees, Edwin Guzman, Luz Mercedes and Nilsa Dalmasi.
Manhattan U.S. Attorney Preet Bharara said: “With these judgments against seven more former employees of Academic Advantage for their roles in a scheme to fraudulently bill the government for tutoring services that were never provided, we continue our push to clean up corruption in the tutoring of our school kids. Today’s judgments should serve as a reminder that when companies engage in fraud, we will seek to hold those responsible accountable.”
According to the Government’s previously filed pleadings against Academic Advantage and the above-named individuals, as well as other documents filed in Manhattan federal court (including a settlement agreement between the Government and ISAACS):
From 2010 through 2012 (“Covered Period”), the New York City Department of Education (“NYCDOE”) received funds from the federal government to pay for Supplemental Educational Services (“SES”), which included after-school tutoring for students attending underperforming public schools. The NYCDOE entered into contracts with private entities to provide SES tutoring to students in New York City public schools. Students were eligible to receive SES tutoring if they met certain criteria, such as attending a school that had been identified as needing improvement or restructuring for at least two years. Private entities contracted by the NYCDOE to provide SES tutoring were required to have each student who attended a tutoring class sign a daily attendance sheet. A representative from the entity was also required to sign each attendance sheet, certifying that SES tutoring had been provided to all of the students whose signatures appeared on the attendance sheet.
Academic Advantage
During the Covered Period, Academic Advantage contracted with the NYCDOE to provide SES tutoring to students in New York City. Academic Advantage employed individuals whom it referred to as “Site Managers” to supervise its SES program at particular New York City public schools. The Site Managers supervised other employees, known as “Program Aides,” who were also assigned to those schools. Employees with the title “Director” supervised the Site Managers and Program Aides. The Directors reported to an “Executive Director” of Academic Advantage, the highest ranking official overseeing Academic Advantage’s New York City SES program.
During the Covered Period, ISAACS was the Executive Director, YOUNG was a Director, and HERNANDEZ, JONES, OSORIO, MCKAY, and JOYNER were Site Managers.
The Fraudulent Scheme
During the Covered Period, Academic Advantage obtained federal funds by falsely reporting that it had provided SES tutoring to certain students when no SES tutoring had, in fact, been provided to those students. As part of the scheme, Academic Advantage repeatedly submitted to the NYCDOE bills for students who had not actually received any tutoring.
In his settlement agreement with the Government, ISAACS admitted that throughout the Covered Period, Site Managers, Program Aides, and Directors engaged in the following fraudulent conduct in connection with Academic Advantage’s New York City SES program:
- Site Managers routinely forged student signatures on daily student attendance sheets to make it appear that more students had attended Academic Advantage’s SES tutoring classes than had, in fact, attended;
- Site Managers instructed Program Aides to forge student signatures on daily student attendance sheets;
- Program Aides followed the instructions they received from those Site Managers and forged student signatures on daily student attendance sheets;
- Site Managers and Program Aides instructed students to sign daily student attendance sheets for SES tutoring classes that those Site Managers and Program Aides knew the students either had not attended or would not be attending;
- Site Managers routinely signed false certifications on daily student attendance sheets, falsely certifying that after-school tutoring had been provided to all of the students whose purported signatures appeared on the sheets, even though those Site Managers knew that tutoring had not been provided to many of those students; and
- Some Directors knew — and others deliberately ignored or recklessly disregarded — that Site Managers and Program Aides were forging student signatures on daily student attendance sheets or otherwise falsifying student attendance records.
ISAACS further admitted that, during the Covered Period, he had access to information suggesting that Site Managers and/or Program Aides were forging student signatures on daily student attendance sheets and failed to investigate instances of potential forgeries. In addition, ISAACS admitted that Academic Advantage used the above-referenced falsified daily student attendance sheets to prepare invoices that it then submitted in connection with its SES tutoring program. Those invoices ultimately resulted in Academic Advantage being paid federal funds for SES tutoring that it never provided.
In addition to obtaining more than $2.4 million in civil settlements and judgments against Academic Advantage and its former employees, this Office has brought criminal actions against several of those former employees, including Guzman and Mercedes, who have pled guilty to criminal fraud charges.
This is the third coordinated proceeding this Office has pursued against New York City SES providers and their employees for falsifying attendance records and billing for tutoring they did not provide. In 2012 and 2013, this Office filed civil charges against The Princeton Review, Inc. (“Princeton Review”), and civil and criminal charges against several of its former employees. In 2013, this Office filed civil charges against TestQuest, Inc. (“TestQuest”), and civil and criminal charges against several of its former employees. Princeton Review settled the civil charges against it by admitting misconduct and committing to pay the Government up to $10 million. TestQuest settled with the Government for $1.75 million and admissions of wrongdoing. The following former employees of Princeton Review and TestQuest have pled guilty to criminal fraud charges, settled civil fraud charges, or both: Robert Stephen Green, Ana Azocar, Zorayma Azocar, Michael Logan, and Sandra Allen. In addition, Sylvia Brathwaite, a former employee of TestQuest, has had a default judgment entered against her.
Mr. Bharara thanked the U.S. Department of Education Office of the Inspector General for its extraordinary assistance in this case.
The above-referenced civil matters are being handled by the Civil Frauds Unit, and the criminal matters are being handled by the Complex Frauds Unit. Assistant U.S. Attorney Christopher B. Harwood is in charge of the matters.
Manhattan U.S. Attorney Announces Guilty Pleas of Former U.S. Soldier and Former German Soldier for Conspiracy to Murder A Dea Agent and Conspiracy to Import CocaineRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced the guilty pleas of TIMOTHY VAMVAKIAS, a former member of the U.S. Army, and DENNIS GOGEL, a former member of the German armed forces, to charges that include conspiracy to murder an agent of the Drug Enforcement Administration (“DEA”) and conspiracy to import cocaine into the United States. VAMVAKIAS and GOGEL, who were arrested in September 2013 along with co-defendants Joseph Hunter, Slawomir Soborski, and Michael Filter following a long-term DEA undercover investigation, each pled guilty before U.S. District Judge Laura Taylor Swain. VAMVAKIAS pled guilty on Friday, January 9, 2015, and GOGEL pled guilty on Tuesday, January 13, 2015.
Manhattan U.S. Attorney Preet Bharara said: “Timothy Vamvakias and Dennis Gogel have now admitted their roles in a mercenary international narcotics and murder-for-hire conspiracy. These two former members of their countries’ armed forces traded patriotism for profit, plotting to murder a DEA agent and a witness, and facilitating the importation of cocaine, for a promised payoff. Now they face the prospect of lengthy prison terms.”
According to the Indictment filed against VAMVAKIAS, GOGEL, Hunter, Soborski, and Filter, and statements made at the plea proceedings:
All five defendants have previously served in the armed forces of their respective nations. VAMVAKIAS served in the U.S. Army between approximately 1991 and 2004; GOGEL served in the German armed forces between approximately 2006 and 2010; Hunter served in the U.S. Army between approximately 1983 and 2004; Filter served in the German armed forces between approximately 2006 and 2010; and Soborski served in the Polish armed forces between approximately 1998 and 2011. VAMVAKIAS attained the rank of sergeant and served both as infantryman and a military police officer. GOGEL was trained as a sniper. Hunter served as a sniper instructor and a senior drill sergeant, training other soldiers in marksmanship and tactics; and Soborski and Filter were also trained as snipers.
In 2013, VAMVAKIAS and GOGEL were recruited by Hunter to serve as security for a Colombian drug trafficking organization and to perform contract killings. During meetings in Asia, Africa, and the Caribbean, beginning in January 2013 and continuing through late September 2013, Hunter communicated with three confidential sources (the “CSs”) working with the DEA, who purported to be Colombian narcotics traffickers. Hunter agreed to serve as the head of security for the CSs’ purported narcotics trafficking organization, and assembled a “security team” consisting of VAMVAKIAS, GOGEL, Filter, and Soborski. Hunter also told the CSs that he had previously been involved in contract killings – referred to as “bonus jobs” – and that some team members wanted to do as much “bonus work” as possible.
VAMVAKIAS, GOGEL, and their co-defendants thereafter agreed, in meetings and communications with the CSs, to provide security and surveillance services to the narcotics trafficking organization. Furthermore, VAMVAKIS, GOGEL, and Hunter agreed to commit murder-for-hire in Liberia by assassinating both a Special Agent of the DEA and a person who, according to the CSs, was providing information to the DEA about the CSs’ narcotics trafficking organization. In exchange for the murders, VAMVAKIAS and GOGEL were together to be paid approximately $700,000, and Hunter was to receive an additional $100,000 for his leadership role. Communications between these defendants and the CSs occurred by telephone, via email, and in a series of surreptitiously audio-recorded and videotaped meetings over an approximately nine-month period.
In late March 2013, in Thailand, GOGEL and Filter surveilled a vessel on behalf of the CSs’ purported narcotics trafficking organization and reported their activities to Hunter. In April 2013, in Mauritius, at the direction of the CSs, GOGEL, Filter, and Soborski provided security for a meeting at which the participants discussed the distribution of illegal narcotics to the United States. In late June 2013, in the Bahamas, VAMVAKIAS, GOGEL, Filter, and Soborski conducted surveillance of a purported U.S.-registered aircraft at the direction of the third CS (“CS-3”), who posed as a member of the CSs’ narcotics trafficking organization. CS-3 informed the defendants that the aircraft was to be loaded with 300 kilograms of cocaine to be shipped to New York.
With respect to the murder-for-hire scheme, in mid-May 2013, at a meeting with the CSs in Thailand, VAMVAKIAS, GOGEL, Hunter and Soborski were told that a “bonus job” – that is, a contract killing – was in the offing, due to a leak within the CSs’ narcotics trafficking organization. In late May 2013, in email communications, Hunter confirmed that his team would be willing to murder both a U.S. law enforcement agent and a source (purportedly a boat captain) who was providing information to U.S. law enforcement authorities. Hunter confirmed by email that his team would kill both the DEA agent and the informant who was providing information to law enforcement about the CSs’ narcotics trafficking organization. VAMVAKIAS and GOGEL discussed the weapons that could be used and masks to be worn for the murders, and VAMVAKIAS stated that it would be better to “hit the agent first” and then “the snitch.” In early July 2013, Hunter sent via email a list of the items needed for the murders, including “[t]wo Submachine Guns with silencers . . . [t]wo .22 pistols with Silencers.”
In mid-August 2013, at a meeting in Thailand, Hunter told CS-3 that VAMVAKIAS and GOGEL would commit the murders. VAMVAKIS, GOGEL, and Hunter discussed in detail the weapons that would be used and the possibility of entering Liberia without having their passports stamped. They suggested that CS-3 fly them out of the country via private plane following the murders. VAMVAKIAS stated that among other weapons, a sub-machine gun and two .22 caliber pistols would be needed for the murders, and CS-3 agreed to deliver the weapons to Liberia. The next day, at a meeting with GOGEL, CS-3 confirmed that an order for the requested weapons had been made. Later that same day, GOGEL met again with CS-3 and provided CS-3 with two highly sophisticated latex facemasks, which can make the wearer appear to be of another race, for CS-3 to transport to Liberia.
In late September 2013, VAMVAKIAS and GOGEL arrived in Liberia to commit the planned murders-for-hire, where they were arrested. On the same day, Hunter was arrested in Thailand, and Soborski and Filter were arrested in Estonia.
VAMVAKIAS, 43, and GOGEL, 29, each pled guilty to one count of conspiring to import cocaine into the United States, one count of conspiring to murder a federal law enforcement agent and an individual assisting a federal law enforcement agent, one count of conspiring to possess machine guns and silencers during and in furtherance of the murders, and one count of conspiring to distribute cocaine on board an aircraft registered in the United States. As a result of their guilty pleas, VAMVAKIAS and GOGEL each face a mandatory term of 10 years in prison and a maximum possible term of life in prison. VAMVAKIAS is scheduled to be sentenced by Judge Swain on April 30, 2015. GOGEL is scheduled to be sentenced by Judge Swain on May 1, 2015.
The remaining defendants, Hunter, 49, Soborski, 41, and Filter, 30, are charged with conspiracy to import cocaine into the United States. Hunter is also charged with conspiracy to murder a law enforcement agent and a person assisting a law enforcement agent; conspiracy to kill a person to prevent communications to law enforcement agents; and conspiracy to possess a firearm in furtherance of a crime of violence. Each count carries a maximum penalty of life in prison. Trial is scheduled to commence before Judge Swain on March 9, 2015.
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.
The charges against Hunter, Soborski, and Filter are merely accusations and they are presumed innocent unless and until proven guilty.
The guilty pleas were the result of the close cooperative efforts of the United States Attorney’s Office for the Southern District of New York; DEA’s Special Operations Division; DEA’s Bangkok, Ghana, Pretoria, Bucharest, Manila, Nassau and Copenhagen Offices; the Royal Thai Police Narcotics Suppression Bureau and Crime Suppression Division; the Royal Thai Immigration; the Royal Thai Attorney General’s Office; Republic of Liberia’s National Security Agency; the Republic of Liberia’s Attorney General’s Office; the Estonian Police and Border Guard; the Estonian National Criminal Police, Investigative Bureau; the Estonian State Prosecutors Office; the Royal Bahamas Police Force and Drug Enforcement Unit; the Romanian National Police; Interpol; and the U.S. Department of Justice Office of International Affairs.
This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Michael Lockard, Anna Skotko, Aimee Hector, and Emil Bove are in charge of the prosecution.
AJC V. Narendra Modi - Order of DismissalRead the Press Release
AJC v. Modi - Order of Dismissal
Manhattan U.S. Attorney Announces Proposed Settlement Agreement in Landmark Civil RICO ActionRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States Attorney’s Office and the International Brotherhood of Teamsters (the “IBT” or the “Union”) have entered into a settlement agreement (the “proposed agreement”) that, if approved by the Court, would replace the Consent Decree currently governing the Union’s affairs. The Consent Decree has been in place since March 1989, following the Government’s filing of a landmark civil lawsuit under the Racketeer Influenced and Corrupt Organizations (“RICO”) Act designed to rid the Union of the corrupting influence of organized crime and put in place an electoral system that would foster democracy within the Union.
Manhattan U.S. Attorney Preet Bharara said: “The proposed settlement agreement seeks to strike the appropriate balance, recognizing the significant progress that has been made in ridding the International Brotherhood of Teamsters of the influence of organized crime and corruption, while providing an avenue for the Union to demonstrate its ability to preserve these gains through its own independent disciplinary and electoral systems. We recognize that, although substantially diminished, the threat posed to the IBT by organized crime and other corrupting influences persists, and the proposed agreement provides for a continuing monitoring role for the Government. We should also recognize, however, that reaching this juncture is a great tribute to the success of the Consent Decree in forging meaningful and positive change in the IBT.”
Among other features, the Consent Decree permanently enjoined all IBT members, officers, employees, and agents from committing acts of racketeering activity or knowingly associating with various organized crime groups or persons otherwise enjoined from participating in union affairs; provided for “one-member, one-vote” direct elections of IBT International Officers, subject to independent oversight; and established a Court-appointed, three-member Independent Review Board (“IRB”) to investigate and prosecute wrongdoing and oversee the IBT’s implementation of disciplinary or trusteeship charges.
The proposed settlement agreement was submitted today to United States District Chief Judge Loretta A. Preska for her approval. The terms of the proposed agreement seek to ensure that the progress made under the Consent Decree’s disciplinary and electoral reform provisions will be preserved while reducing the Government’s oversight role over time. Among other things, the proposed agreement retains the permanent injunction feature of the Consent Decree, enjoining IBT members, officers, employees and agents from engaging in racketeering or knowingly associating with organized crime groups or persons otherwise banned from Union affairs. With regard to its elections, the Union also has agreed to permanently retain the structural reforms of the Consent Decree, including, without limitation, the one-Teamster, one vote direct elections of IBT International Officers, and to the appointment of an independent election supervisor to oversee those elections. During these elections, the Union will fund the direct mailing of candidate campaign materials to Union members. Further, with regard to the IBT’s disciplinary system, the IRB will be phased out during a five-year transition period, and the Union will establish its own independent disciplinary enforcement mechanism through the appointment of disciplinary officers approved by the Government. Following the transition period, the Government may apply to the Court for further equitable relief upon showing that either the IBT’s electoral or disciplinary systems are functioning ineffectively or that there exists systemic corruption or organized crime influence in the Union. Under the terms of the proposed agreement, the Court retains jurisdiction to ensure that the agreement is enforced.
The proposed agreement has been filed with the Court today as part of the parties’ joint motion requesting that the Court approve the agreement, following a three-week comment period and judicial hearing.
Any written comments that interested persons wish to provide for the Court’s consideration must be received no later than 5:00 p.m. on February 4, 2015. Comments may be sent via email to [email protected], or by first class mail or overnight delivery to:
United States Attorney’s Office, Southern District of New York
AUSA Tara M. La Morte
86 Chambers Street, 3d Floor
New York, New York 10007
A hearing in this matter is scheduled for February 11, 2015, at 11:00 a.m., at 500 Pearl Street, Courtroom 12A, New York, New York 10007.
The proposed settlement agreement and the parties’ joint motion requesting that the Court approve the agreement can be found on the website of the United States Attorney for the Southern District of New York at http://www.justice.gov/usao/nys, and via a link from www.teamster.org.
Assistant United States Attorneys Neil Corwin, Tara M. La Morte, and Jaimie Nawaday are currently in charge of the case.
U.S. v. Teamsters Settlement Agreement
U.S. v. IBT Order regarding comments and hearing
Fifteen Charged in White Plains Federal Court with Narcotics Trafficking in and Around Westchester CountyRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director-In-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and George N. Longworth, the Commissioner of the Westchester County Department of Public Safety, on behalf of the Westchester County Northern Narcotics Initiative, announced the unsealing of an Indictment charging 15 defendants with conspiring to distribute heroin, crack cocaine, and powder cocaine in and around Westchester County from at least in or about January 2014 up to and including in or about January 2015.
Manhattan U.S. Attorney Bharara stated: “Illegal, damaging drugs such as heroin, crack and cocaine continue to be scourges of many communities north of New York City. We and our federal and local law enforcement partners are determined to prevent drug organizations from taking root in our communities, as evidenced by today’s charges and arrests.”
FBI Assistant Director-in-Charge Venizelos stated: “With the scourge of drugs often comes addiction and violence that can cripple a community. We will continue to dismantle the infrastructure for distributing heroin and cocaine, wherever we find it.”
Commissioner Longworth stated: “I am grateful to the FBI and the local chiefs of police who committed resources and personnel to this year-long, multi-agency investigation. I would also like to thank the U.S. Attorney’s Office and the Westchester District Attorney’s Office for partnering with us to combat the scourge of heroin in our communities.”
According to allegations in the Indictment unsealed today in White Plains federal court:
The Indictment charges 15 defendants and contains three counts. Count One charges LAKUAN RHYNE, a/k/a “Rico,” 22, JESSE DABBS, 24, DAIVON PRYOR, 19, JONATHAN THORNTON, a/k/a “Staxx,” 29, JOHNSON VANIYAPURAKAL, 26, and ALLEN WRIGHT, 24, with conspiring to distribute, and possess with intent to distribute, one kilogram or more of heroin in and around Westchester County, in violation of Title 21, United States Code, Sections 846, 841(a)(1), and 841(b)(1)(A).
Count Two charges RHYNE, DABBS, MICHAEL DOUSE, 38, MICHAEL GRAY, 48, ANGELO HARRIS, 34, KEVIN HERBIN, 23, KEVIN MALLORY, 43, ROBERT MILLER, 35, DWAYNE MOUNTAIN, 27, and THORNTON with conspiring to distribute, and possess with intent to distribute, 280 grams or more of crack cocaine in and around Westchester County, in violation of Title 21, United States Code, Sections 846, 841(a)(1), and 841(b)(1)(A).
Count Three charges RHYNE, DABBS, CURTIS DIMMIE, 47, DOUSE, GRAY, MICHAEL HARRINGTON, 34, MALLORY, MILLER, THORNTON, and VANIYAPURAKAL with conspiring to distribute, and possess with intent to distribute, 500 grams or more of cocaine in and around Westchester County, in violation of Title 21, United States Code, Sections 846, 841(a)(1), and 841(b)(1)(B).
The charges against each defendant and the corresponding maximum potential penalties are outlined in the chart attached to this press release.
Twelve of the 15 defendants charged in the Indictment unsealed today were arrested today or had previously been taken into custody. Those defendants were presented in White Plains federal court this afternoon before U.S. Magistrate Judge Judith C. McCarthy. RHYNE was previously taken into custody by Arkansas state authorities, and will be presented in White Plains federal court on a future date.
Mr. Bharara praised the outstanding investigative work of the FBI, the Westchester County Northern Narcotics Initiative, comprised of the Westchester County Department of Public Safety and the police departments of Peekskill, Croton-on-Hudson, Buchanan, Bedford, Yorktown, Mount Kisco, and Ossining, as well as the FBI Violent Crimes Task Force. He also thanked the Westchester County District Attorney’s Office for its participation.
The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys George Turner and Michael Gerber are in charge of the prosecution. Assistant U.S. Attorney Margaret Graham is responsible for the forfeiture aspects of the case.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
Rhyne, Lakuan, et al. Indictment 15 Cr 005
Chief Compliance Officer of WG Trading Company, LP, Sentenced in Manhattan Federal Court for Several Hundred Million-Dollar Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that DEBORAH DUFFY, the former Chief Compliance Officer of WG Trading Company, LP (“WG Trading”), was sentenced in Manhattan federal court to time served in prison for conspiracy, securities fraud, and money laundering. DUFFY maintained the books and records for WG Trading, a fraudulent commodities trading and investment advisory scheme run by principals Stephen Walsh and Paul Greenwood, which raised billions of dollars, misappropriated hundreds of millions of those dollars for their own personal benefit, and then created false promissory notes and account statements to conceal their theft. DUFFY pled guilty on July 21, 2009, and was sentenced on January 8, 2015, by United States District Judge Naomi Reice Buchwald.
Manhattan U.S. Attorney Preet Bharara said: “Deborah Duffy abdicated her oversight responsibility at WG Trading, enabling Walsh and Greenwood to perpetuate their massive investment fraud scheme. But she not only admitted her conduct, she assisted the government’s investigation. Her sentence today reflects both her acknowledgment of her guilt and the value of her cooperation.”
According to the Information, other documents filed in Manhattan federal court, and statements made during court proceedings:
From at least 1996 through February 2009, Walsh and Greenwood solicited $7.6 billion in investor funds on the understanding that they would invest the funds in a program called “equity index arbitrage,” which they represented was a conservative trading strategy that had outperformed the results of the S&P 500 Index for more than ten years. As a result, several institutional investors – including charitable and university foundations, retirement and pension plans, and other institutions – invested billions of dollars. Contrary to their representations to investors, Walsh and Greenwood misappropriated hundreds of millions of dollars in investor funds for their own personal use and to satisfy obligations on investments that were unrelated to the “equity index arbitrage” trading business. Walsh and Greenwood executed promissory notes to, among other things, conceal trading losses and their misappropriation of investor funds. These promissory notes totaled approximately $554 million, and these notes materially misstated the financial condition of WG Trading and misled investors. Walsh and Greenwood also created and caused others to create false account statements that were sent to clients to reflect fictitious returns consistent with the returns that had been promised to those clients.
During this time period, DUFFY was the Chief Compliance Officer of WG Trading. Among other duties, she maintained the books and records of WG Trading, communicated with WG Trading’s regulators and auditors, and prepared and maintained the promissory notes signed by Walsh and Greenwood.
In addition time served, DUFFY, 59, of Mahwah, New Jersey, was sentenced to one year of supervised release and ordered to forfeit $1,272,841. The Court further ordered restitution to be paid by DUFFY in an amount to be determined.
Walsh pled guilty on April 25, 2014, and was sentenced on October 29, 2014, by United States District Judge Miriam Goldman Cedarbaum to 20 years in prison. Greenwood pled guilty on July 28, 2010, and was sentenced on December 3, 2014, by Judge Cedarbaum to 10 years in prison.
Mr. Bharara praised the work of the Federal Bureau of Investigation, and thanked the United States Securities and Exchange Commission, the United States Commodity Futures Trading Commission, and the National Futures Association, for their assistance.
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 Jessica A. Masella is in charge of the prosecution.
Mustafa Kamel Mustafa, A/k/a “Abu Hamza,” Sentenced in Manhattan Federal Court to Life in PrisonRead the Press Release
Charges Based on Participating in a Deadly Hostage-Taking in Yemen, Conspiring to Establish a Terrorism Training Camp in the United States, and Sending One of his Followers to Train and Fight with al Qaeda in Afghanistan
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 MUSTAFA KAMEL MUSTAFA, a/k/a “Abu Hamza,” a/k/a “Abu Hamza al Masri,” (“ABU HAMZA”) was sentenced today in Manhattan federal court to life in prison by U.S. District Judge Katherine B. Forrest, for his participation in a hostage-taking in Yemen in 1998 that resulted in four deaths, a conspiracy to establish a terrorist training camp in Bly, Oregon, and sending a follower to train and fight with al Qaeda in Afghanistan in 2000. ABU HAMZA, who was extradited from the United Kingdom to the Southern District of New York in October 2012, was found guilty on May 19, 2014, following a four-week jury trial, of each of the 11 charges he faced.
Manhattan U.S. Attorney Preet Bharara said: “Abu Hamza’s blood-soaked journey from cleric to convict, from Imam to inmate, is now complete. In May, after a fair and public trial, a jury pronounced Abu Hamza guilty for his leadership and support of, as well as participation in, terrorist activities, ranging from a fatal hostage-taking in Yemen to establishing a terrorist training camp in Oregon to sending a follower to aid Al Qaeda in Afghanistan. After years of fighting extradition, Abu Hamza finally faced justice, as all those who engage in terrorism against innocent civilians must, here in the U.S., and all around the globe, as the terrible events in Paris remind us.”
Assistant Attorney General Carlin said: “Abu Hamza is an unrepentant all-purpose terrorist. With today’s sentence, he is being held accountable for the many ways in which he supported terrorism and other terrorists through much of his life, including his role in a hostage-taking in Yemen, his plot to create a terrorist training camp on U.S. soil, and his facilitation of violent jihad in Afghanistan. This case was charged over ten years ago and was tried after years of extradition proceedings—and is but one example of our resolve to pursue those who threaten the United States and our interests anywhere in the world, no matter how long it takes. I applaud the many prosecutors, agents, and analysts who have devoted years of hard work to the pursuit of justice in this case.”
According to the evidence presented at trial, statements made during other public proceedings including today’s sentencing, and other court documents:
Hostage-Taking in Yemen in December 1998
On December 28, 1998, in Yemen, hostage-takers stormed a caravan of sport utility vehicles carrying 16 tourists, including two United States citizens, and took the tourists hostage by force. Before the hostage-taking, ABU HAMZA issued a public warning to “infidels” not to travel to Yemen. In addition, five days prior to the hostage-taking, ABU HAMZA’s stepson and other associates of ABU HAMZA were arrested in Yemen. During the hostage-taking, the hostages told their victims that they were taken prisoner to free the hostage-takers’ “friends.”
Before the hostage-taking, ABU HAMZA provided the leader of the hostage-takers with a satellite telephone, and subsequently spoke with him on that satellite telephone the night before the hostage-taking and during the hostage-taking. During the call on the day of the hostage-taking, ABU HAMZA agreed to act as an intermediary on behalf of the hostage-takers. ABU HAMZA also provided advice to the leader of the hostage-takers over the telephone.
On December 29, 1998, the Yemeni military launched a rescue operation to free the hostages. The hostage-takers fought the Yemeni military, using the hostages as human shields. During the rescue operation, four of the hostages were killed and several others were wounded.
Subsequently, in a recorded interview with one of the surviving hostages conducted at ABU HAMZA’s mosque, ABU HAMZA said that hostage-taking was “a good thing” under Islam, that people had been warned to stay out of Yemen, that the plan was to hold the tourists captive “until the government let my people go,” and that the hostage-takers “snatched you to exchange you.”
Efforts to Create a Terrorist Training Camp in Bly, Oregon in 1999
In late 1999, ABU HAMZA and several of his followers, including Oussama Abdullah Kassir, Haroon Rashid Aswat, Earnest James Ujaama, and others, attempted to create a terrorist training camp to support al Qaeda on property located in Bly, Oregon. The primary purpose of the Bly, Oregon, camp was to provide various types of terrorist training, including weapons training. In late November 1999, at ABU HAMZA’s direction, Kassir and Aswat traveled from London, England, to Bly to assist in setting up the camp. Kassir brought with him to the camp a manual on the use of sarin nerve gas and letters of appreciation to Usama bin Laden and ABU HAMZA. Aswat subsequently was present at an al Qaeda guest house in Pakistan.
On May 12, 2009, after a four-week jury trial in this District, Kassir was convicted of various criminal offenses, including conspiring to provide material support to terrorists and to al Qaeda, and conspiracy to kill persons overseas, as a result of Kassir’s participation in the efforts to establish the Bly terrorist training camp. On September 15, 2009, United States District Judge John F. Keenan sentenced Kassir to multiple terms of life in prison. The conviction was subsequently affirmed by the Court of Appeals.
Aswat was arrested in Zambia in July 2005 and then deported to England, where he was arrested at the request of the United States, pursuant to a warrant issued in this District. Aswat was extradited to the United States on October 21, 2014. The charges against Aswat are currently pending, and trial is scheduled to commence before Judge Forrest on June 1, 2015.
Facilitating Violent Jihad in Afghanistan in 2000 and 2001
In November 2000, ABU HAMZA requested that Ujaama escort another one of ABU HAMZA’s followers, Feroz Abassi, from London to Ibn Sheikh al-Libi, a commander at a terrorist training camp in Afghanistan. Thereafter, Ujaama and Abassi traveled from London to Pakistan. Ujaama and Abassi then separately entered Afghanistan. ABU HAMZA subsequently conveyed instructions for Abassi to contact Ibn Sheikh al-Libi, who was expecting Abassi. Thereafter, Abassi passed through an al Qaeda safe house in Afghanistan, attended al Qaeda’s al Faruq training camp, and met with senior al Qaeda leaders. In December 2001, United States forces took Abassi into custody in Afghanistan.
In addition, from the spring of 2000 through late 2001, ABU HAMZA provided goods and services to the Taliban by, among other things, directing Ujaama to deliver money to Taliban-controlled parts of Afghanistan.
Ujaama was arrested in 2002 and testified against ABU HAMZA as a cooperating witness for the Government.
ABU HAMZA, 56, a naturalized citizen of the United Kingdom, was convicted after trial of the following 11 offenses:
One - Conspiracy to take hostages (18 U.S.C. § 1203)
Two - Hostage-taking (18 U.S.C. §§ 1203, 2)
Three - Conspiracy to provide material support to terrorists (18 U.S.C. § 371)
Four - Providing material support to terrorists (18 U.S.C. §§ 2339A, 2)
Five - Conspiracy to provide material support to a foreign terrorist organization (al Qaeda) (18 U.S.C. §2339B)
Six - Providing material support to a foreign terrorist organization (al Qaeda) (18 U.S.C. §§ 2339B, 2)
Seven - Conspiracy to provide material support to terrorists (18 U.S.C. § 2339A)
Eight - Providing material support to terrorists (18 U.S.C. §§ 2339A, 2)
Nine - Conspiracy to provide material support to a foreign terrorist organization (al Qaeda) (18 U.S.C. § 2339B)
Ten - Providing material support to a foreign terrorist organization (al Qaeda) (18 U.S.C. §§ 2339B, 2)
Eleven - Conspiracy to provide goods and services to the Taliban (18 U.S.C. § 371)
In addition to the prison term, ABU HAMZA was ordered to pay a $1,100 special assessment fee. In addressing ABU HAMZA’s conduct, Judge Forrest described it as “barbaric, misguided and wrong,” and remarked, “It is important to me that you have not expressed sympathy for the victims of the Yemeni kidnappings.”
Abu Hamza’s conviction is the result of the close cooperative efforts of the U.S. Attorney’s Office for the Southern District of New York, the Justice Department's National Security Division, the Federal Bureau of Investigation, the New York City Police Department, the United States Marshals Service, and New Scotland Yard in the United Kingdom.
The U.S. Department of Justice’s Office of International Affairs contributed extraordinary assistance with the extradition in this case. The U.S. Attorney also thanked the FBI’s Seattle Field Office, the Home Office of the United Kingdom, the United States Department of State, and the United States Department of the Treasury’s Office of Foreign Assets Control for their assistance.
The prosecution is being handled by the Office’s Terrorism and International Narcotics Unit, with assistance from the Counterterrorism Section of the Justice Department's National Security Division. Assistant U.S. Attorneys John P. Cronan, Edward Y. Kim and Ian McGinley are in charge of the prosecution.
Staten Island Physician’s Assistant Pleads Guilty in Manhattan Federal Court to Massive Oxycodone Distribution ConspiracyRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that LEONARD MARCHETTA, a physician’s assistant, pled guilty in Manhattan federal court to conspiring to distribute a massive quantity of oxycodone out of a Staten Island-based medical clinic he oversaw. During a period of approximately three years, in exchange for cash payments, MARCHETTA wrote medically unnecessary prescriptions for more than 125,000 30-milligram oxycodone pills to individuals claiming to be “patients,” and on a number of occasions MARCHETTA issued prescriptions in the names of fictitious individuals or individuals whom he had never seen. MARCHETTA was charged in September 2014, and pled guilty today before U.S. District Judge P. Kevin Castel.
Manhattan U.S. Attorney Preet Bharara said “As Leonard Marchetta oversaw the day-to-day operations of the Staten Island clinic where he worked as a physician’s assistant, he also sat at the center of a scheme to dole out medically unnecessary prescriptions for more than 125,000 oxycodone pills to fake ‘patients.’ His guilty plea today ensures that he will be punished for contributing to the prescription pill abuse epidemic.”
According to the allegations contained in the Indictment and statements made at today’s plea proceeding:
As a physician’s assistant, MARCHETTA, under the supervision of a physician or surgeon, was able to diagnose and treat illnesses and prescribe medications. From at least 2012 until his arrest, MARCHETTA was employed by and oversaw the day-to-day operations of a Staten Island-based medical clinic (the “Clinic”), which advertised itself to the public as a family medical clinic.
During an approximately three-year period, MARCHETTA prescribed oxycodone to “patients” who had no medical need for oxycodone and no legitimate medical record documenting an ailment for which oxycodone would be prescribed. MARCHETTA’s fee for his participation in the scheme was typically approximately $250 in cash for “doctor visits” that usually lasted just a minute or two, involved no actual physical examination, and consistently resulted in the issuance of a prescription for large doses of oxycodone, typically 150 30-milligram tablets. MARCHETTA also received a separate fee of approximately $500 in cash for each medically unnecessary oxycodone prescription he issued. On a number of occasions, MARCHETTA issued prescriptions in the names of fictitious individuals or individuals whom he never saw in exchange for cash. In total, MARCHETTA wrote medically unnecessary prescriptions for more than 125,000 30-milligram oxycodone pills during a period of approximately three years.
As part of the scheme, MARCHETTA’s co-conspirators recruited and paid individuals to pose as “patients” in order to receive medically unnecessary prescriptions from MARCHETTA. On a number of occasions, MARCHETTA wrote a prescription in the name of the “patient” without the “patient” setting foot in the Clinic.
After MARCHETTA issued a medically unnecessary oxycodone prescription in the name of the “patient,” the “patient” was taken or referred to a pharmacy to fill the oxycodone prescription – that is, to obtain the oxycodone tablets – in part for distribution. The patients were paid, typically $150 to $200 in cash, for obtaining and handing over the oxycodone tablets that MARCHETTA had prescribed to them. At times, the “patients,” some of whom were addicted to oxycodone, were paid with oxycodone tablets for their services.
MARCHETTA, 47, of Staten Island, New York, pled guilty to one count of conspiracy to distribute and possess with intent to distribute oxycodone, which carries a maximum sentence of 20 years in prison. He also agreed to forfeit the proceeds that he received from the scheme. MARCHETTA is scheduled to be sentenced by Judge Castel on April 16, 2015, at 11:30 a.m. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of MARCHETTA will be determined by the judge.
Mr. Bharara thanked the United States Department of Health and Human Services, the New York State Department of Financial Services, and the DEA Tactical Diversion Squad New York – comprising agents and officers from the DEA, the New York City Police Department, Town of Orangetown Police Department, and Westchester County Police Department – for their work in the investigation, which he noted is ongoing.
The case is being prosecuted by the Office’s Narcotics Unit. Assistant U.S. Attorney Edward A. Imperatore is in charge of the prosecution.
Seven Defendants Arrested for Multimillion-Dollar Tax Fraud Scheme Involving Purchase of Children’S Identities from Corrupt New York City EmployeeRead the Press Release
Preet Bharara, United States Attorney for the Southern District of New York, Thomas E. Bishop, Acting Special Agent in Charge of the New York Office of the Internal Revenue Service-Criminal Investigation (“IRS-CI”), and Mark Peters, Commissioner of the New York City Department of Investigation (“DOI”), announced today the arrests of NOEL CUELLO, LUZ C. RICARDO, a/k/a “Lucy,” FRANCISCO ABREU, a/k/a “Seyayin,” ARISMENDY CUELLO, a/k/a “Cheito,” JONATHAN ORBE, a/k/a “Jigga,” CATHERINE RICART, a/k/a “Cathy,” and JOEL VARGAS in connection with a large-scale identity theft and tax fraud scheme through which identifying information of minors, including social security numbers, was obtained, including through corrupt payments to ABREU, who worked as a fraud investigator with the New York City Human Resources Administration, and was then used to file thousands of fraudulent tax returns, resulting in millions of dollars in estimated loss to the United States Treasury. The defendants were arrested today and presented in Manhattan federal court before U.S. Magistrate James L. Cott.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, these defendants committed wholesale tax fraud by falsely claiming minor dependents on thousands of tax returns. That they committed this alleged massive fraud with the assistance of a city agency fraud investigator adds an element of galling irony. We are grateful to our partners in this investigation for exposing the scheme and stopping it.”
IRS-CI Acting Special Agent in Charge Thomas E. Bishop said: “IRS-CI remains committed to the fight against stolen identity tax refund fraud. Large stolen identity tax refund fraud schemes require volumes of personal information to succeed and it is unfortunate when people who have access to such information are willing to sell their positions for personal gain. We are appreciative of the opportunity to work with our law enforcement partners in this investigation.”
DOI Commissioner Mark Peters said: “The first obligation of government officials is to protect the private information of the people we serve. Violating this trust is not only illegal, but affects government’s ability to perform its core functions.”
According to the allegations contained in the Complaint unsealed today in Manhattan federal court:
Under federal law, taxpayers may be entitled to claim certain tax credits, including the Earned Income Tax Credit (“EITC”) available to qualifying low and moderate income working individuals and families. If the individual claims the EITC based on having a child, the individual must list the name and social security number (“SSN”) of the child on his or her tax return, along with completing a separate schedule that contains the child’s name, SSN, year of birth, relationship to the taxpayer, and how many months the child lived with the taxpayer during the tax year.
Between at least approximately 2009 and spring 2014, through a tax preparation business in the Bronx, New York, with multiple locations, the defendants, assisted by co-conspirators, charged individual taxpayers a cash fee in return for which the business would prepare and file tax returns that falsely claimed that the taxpayer had one or more minor dependents, to take fraudulent advantage of the EITC. The business filed thousands of such returns, resulting in refunds of millions of dollars.
The business, which went by several names over the years, was principally operated by NOEL CUELLO and RICARDO, with the assistance of ARISMENDY CUELLO, ORBE, RICART, and VARGAS, who played various roles, including bringing taxpayers to the business, preparing fraudulent returns, and receiving cash payments from clients. ABREU, who worked at the time as a fraud investigator with the New York City Human Resources Administration, sold identifying information of minors to be used in the scheme, including names, dates of birth, and SSNs.
The scheme continued even after IRS-CI executed multiple search warrants on the business, with ORBE claiming to have purchased the business from NOEL CUELLO, and ORBE and RICART establishing new electronic filer accounts with the IRS, and opening new bank accounts, which were used to continue the scheme.
In addition to accepting cash in return for assisting other taxpayers to file fraudulent returns, RICARDO, ARISMENDY CUELLO, ORBE, RICART, and VARGAS filed their own fraudulent returns in multiple years, falsely claiming to have one or more minor dependents.
Each of the defendants, NOEL CUELLO, 31, LUZ C. RICARDO, 33, FRANCISCO ABREU, 43, ARISMENDY CUELLO, 28, JONATHAN ORBE, 25, CATHERINE RICART, 36, and JOEL VARGAS, 28, all of the Bronx, New York, is charged with one count of conspiracy to defraud the United States with respect to claims, which carries a maximum term of 10 years; one count of conspiracy to commit wire fraud, which carries a maximum term of 20 years; and one count of aggravated identity theft, which carries a mandatory minimum term of 24 months, to be served consecutively to the sentence imposed for any other count. In addition, RICARDO is charged with two counts of subscribing to a false return; ARISMENDY CUELLO is charged with three counts of subscribing to a false return; ORBE is charged with two counts of subscribing to a false return; RICART is charged with five counts of subscribing to a false return; and VARGAS is charged with two counts of subscribing to false return. Each of the false return counts carries a maximum term of three years. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Bharara praised the outstanding work of IRS-CI and DOI in the investigation. Mr. Bharara also thanked the Social Security Administration-Office of Inspector General for its assistance in the case, which he noted is ongoing.
The case is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Daniel C. Richenthal and Sarah R. Krissoff are in charge of the prosecution.
The charges contained in the Complaint are merely accusations and the defendants are presumed innocent unless and until proven guilty.
USA v. Noel Cuello, et al., Complaint 15 Mag. 41
Bronx Man Sentenced in Manhattan Federal Court to 10 Years in Prison for Sex Trafficking of A MinorRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that ELFEGO BOYD, a/k/a “Kush da Dawn,” 29, of the Bronx, New York, was sentenced today in Manhattan federal court to 10 years in prison in connection with the sex trafficking of a teenage girl (“Minor Victim-1”). BOYD was also ordered to pay $20,000 in restitution to Minor Victim-1. He was sentenced by U.S. District Judge Robert P. Patterson. U.S. Magistrate Judge Michael Dolinger presided over BOYD’s guilty plea on June 25, 2014.
Manhattan U.S. Attorney Preet Bharara said: “Sex trafficking is a heinous crime, but it is particularly reprehensible where perpetrators target vulnerable, minor runaways as Elfego Boyd did in this case. This investigation and prosecution sends the message that individuals who target the vulnerable will themselves become targets for prosecution.”
FBI Assistant Direct-in-Charge George Venizelos said: “Boyd engaged in the act of prostituting a minor, contributing to a rapidly spreading epidemic that projects its poison onto the most vulnerable members of society. January is Human Trafficking Awareness Month, and today’s sentencing should send a message to those with similar intentions of targeting minors: the FBI and our law enforcement partners are committed to investigating allegations of sex trafficking and sending those responsible for such heinous acts to prison.”
According to the Complaint, the Indictment, and other documents filed in Manhattan federal court, and statements made at various proceedings in this case:
In approximately September 2010, Minor Victim-1, who was 15 years old at the time, met BOYD in Times Square, New York after running away from her home in Pennsylvania to New York City. BOYD, who introduced himself as “Kush da Dawn,” asked Minor Victim-1 if she wanted to prostitute for him and she agreed. BOYD then provided food and shelter to Minor Victim-1. While staying with BOYD, Minor Victim-1 also met Norman Darby, BOYD’s co-defendant, who introduced himself as “Black.” Both BOYD and Darby placed advertisements Offering Minor Victim-1 for sex using an online classifieds website. The ads did not receive any responses and Minor Victim-1 left New York City and returned to Pennsylvania a short while later.
In the spring of 2011, Minor Victim-1 traveled from Pennsylvania to New York City where she again encountered BOYD and stayed at his apartment in the Bronx, New York. BOYD told Minor Victim-1 that he loved her and that they were boyfriend-girlfriend. BOYD then posted online advertisements offering Minor Victim-1 for sex in exchange for money. At BOYD’s direction, Minor Victim-1 had sex in exchange for money with multiple men who responded to those ads, after which BOYD took all the money.
Later, BOYD took Minor Victim-1 to a house in Long Island where she stayed along with BOYD, Darby and others, for several months. During that period, Darby and Minor Victim-1 posted advertisements offering Minor Victim-1 for sex online in exchange for money. At BOYD and Darby’s direction, Minor Victim-1 had sex in exchange for money with several men who responded to those ads at hotels (where she was driven by BOYD and Darby).
Eventually, BOYD returned to New York City with Minor Victim-1. At BOYD’s direction, Minor Victim-1 continued to have sex in exchange for money with multiple men who responded to online advertisements, after which BOYD took all the money.
Minor Victim-1, who turned sixteen years old during the several-month period she was being offered for sex by BOYD and Darby, told BOYD her age.
In November 2011, after getting into an argument with BOYD, Minor Victim-1 ran away.
In his plea allocution, BOYD acknowledged that he knew Minor Victim-1 was underage at the time he offered her for commercial sex in exchange for money.
In addition to the prison term and restitution, BOYD was sentenced to five years of supervised release.
BOYD’s co-defendant, Norman Darby, pled guilty to conspiracy to engage in sex trafficking and is scheduled to be sentenced later this month before Judge Patterson.
Mr. Bharara praised the outstanding investigative work of the Federal Bureau of Investigation and the New York City Police Department in investigating this case.
The prosecution of this case is being overseen by the Office’s General Crimes Unit. Assistant United States Attorneys Andrea Griswold and Gina Castellano are in charge of the prosecution.
U.S. v. Elfego Boyd Indictment
Buffalo Man Sentenced on Drug ChargesRead the Press Release
CONTACT: Barbara Burns
PHONE: (716) 843-5817
FAX: (716) 551-3051
BUFFALO, N.Y. -- U.S. Attorney William J. Hochul, Jr. announced today that Anthony Drayton, Jr., 38, of Buffalo, NY, who was convicted of possession with intent to distribute and distribution of crack cocaine, was sentenced to 108 months in prison by Chief U.S. District Judge William M. Skretny.Assistant U.S. Thomas S. Duszkiewicz, who handled the case, stated that between December 2010 and June 21, 2011, the defendant traveled from buffalo to Olean, NY to sell quantities of crack cocaine. On June 9 and June 21, 2011, Drayton sold crack cocaine to undercover police officers.
The sentencing is the culmination of an investigation by the Drug Enforcement Administration, under the direction of Special Agent in Charge James J. Hunt, New York Field Division, the Southern Tier Regional Drug Task Force, and the New York State Police, under the direction of Major Michael Cerretto.
Printing Company Owner Pleads Guilty in Manhattan Federal Court to Kickback SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that ROBERT T. MADISON pled guilty today for his participation in a scheme to pay kickbacks to two executives of a pharmaceutical marketing company in exchange for printing contracts. MADISON pled guilty before U.S. District Judge Paul A. Engelmayer.
Manhattan U.S. Attorney Preet Bharara said: “Rather than building a true business relationship, Robert Madison built one based on bribery –with everything from private jet travel to cash to payments at a “Gentlemen’s Club” – and deceit by directing the payments to third parties and controlled companies. Because of this, he will now pay over $1.4 million in restitution.”
According to the Indictment previously filed in Manhattan federal court, statements made during MADISON’s guilty plea, and other Court filings:
MADISON was the owner and operator of Creative Press, a printing and direct mail marketing company located in Phoenix, Arizona. MADISON’s company provided printing and direct mailing services to a New Jersey-based pharmaceutical marketing agency (the “Marketing Agency”). MADISON also owned and operated a company called East Coast Vending. From February 2007 through January 2009, ROBERT MADISON engaged in a scheme to commit honest services fraud by paying undisclosed kickbacks to, or for the benefit of, two executives at the Marketing Agency – Michael J. Mitrow and Matthew J. Mitrow – in order to continue the business relationship between the Marketing Agency and MADISON’s company.
MADISON took various steps to conceal from the Marketing Agency the kickback payments, including by causing certain payments to be made through East Coast Vending rather than Creative Press; causing payments to be made to third parties on behalf of Michael Mitrow and Matthew Mitrow rather than directly to them; and routing kickback payments through companies controlled by one of the executives and others.
Among the kickbacks that MADISON paid to or for the benefit of Michael Mitrow and Matthew Mitrow were the following: (i) over $700,000 in private jet travel by the Mitrows and their friends and relatives; (ii) approximately $426,000 to a company owned by one of the executives; (iii) approximately $39,000 in home renovations; (iv) a $19,000 payment to a New York City “Gentlemen’s Club;” and (v) approximately $30,000 in credit card debts.
MADISON, 43, of Henderson, Nevada, pled guilty to one count of conspiracy to commit honest services mail and wire fraud, and faces a maximum sentence of 20 years in prison. As part of his plea agreement with the Government, MADISON agreed to pay restitution of $1.416 million.
Michael Mitrow, 46, of Whitehouse Station, New Jersey, is charged with two counts of conspiracy to commit wire fraud, which each carry a maximum sentence of 20 years in prison, three counts of wire fraud, which each carry a maximum sentence of 20 years in prison, one count of tax evasion, which carries a maximum sentence of five years in prison, and one count of obstructing and impeding the IRS, which carries a maximum sentence of three years in prison.
Matthew Mitrow, 40, of Westfield, New Jersey, is charged with one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
The charges against Michael Mitrow and Matthew Mitrow are merely accusations, and they are presumed innocent unless and until proven guilty.
Mount Vernon Man Charged in White Plains Federal Court with Threatening to Shoot Police OfficersRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the arrest of JEREMY MOTT on charges of threatening to shoot members of the Police Department of the City of Mount Vernon, New York. The Complaint alleges that MOTT posted messages on Internet social media sites in which he threatened to shoot Mount Vernon police officers and included a digital image depicting the shooting of a police officer.
MOTT was taken into federal custody today. He was presented in White Plains federal court before U.S. Magistrate Judge Lisa Margaret Smith and was released on bond.
U.S. Attorney Preet Bharara stated: “We will not tolerate threats of violence against police officers. Period. Here, as alleged, social media were used for the threat. Law enforcement should not have to wait to see whether a threat will be acted on, so now the defendant will have to answer for his threatening intentions, as charged.”
FBI Assistant Director-in-Charge George Venizelos stated: “As we seen all too often, social media is used as a platform for posting threats against members of the law enforcement community. As alleged, Mott made significant online threats in which he threatened to shoot Mount Vernon police officers. Those who threaten the lives of law enforcement officers through interstate communications will be fully investigated by the FBI and our partners.”
According to allegations in the Complaint unsealed today in White Plains federal court:
MOTT posted messages on Facebook and Instagram, both of which included digital images of an individual discharging a firearm into a police vehicle through the driver’s side window. The Facebook message included the threat, “I SWEAR IF COPS IN MOUNT VERNON THINK THEY CAN FOLLOW THE MADNESS THIS IS HOW THEY GOING TO END UP.” The Instagram message included the threat, “THEY BETTER KEEP THAT CRAZY SHYT AWAY FROM MOUNT VERNON CAUSE ME & MY [N****S] NOT PLAYING NO GAMES WITH THEM PPL ! !”
MOTT, 24, of Mount Vernon, New York, is charged with one count of making interstate threats, which upon conviction carries 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 a judge.
Mr. Bharara praised the outstanding investigative work of the FBI’s Westchester Violent Crimes Task Force, which comprises agents and detectives of the FBI, Homeland Security Investigations, the City of Yonkers Police Department, the Westchester County Department of Public Safety, and the Westchester County District Attorney’s Office. He also thanked the Police Department of the City of Mount Vernon. He added that the investigation is continuing.
The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorney Douglas Zolkind is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
Mott.complaint.signed
Manhattan U.S. Attorney and FBI Assistant Director Announce Arrests of Five Defendants in Multimillion-Dollar Corporate Accounting FraudRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the arrests of STEVEN KAITZ, LATCHMEE MAHATO, a/k/a “Robbie,” JONATHAN WHEELER, and ZACHARY KAITZ, former executives and employees of a New Jersey-based company that provided in-store displays for retailers (the “Company”), and KATHLEEN SMITH, a former employee of a New York-based sports apparel and footwear retailer that was a major customer of the Company (“Customer-1”), in connection with an elaborate scheme to defraud the Company’s lenders and customers out of millions of dollars. Among other things, the defendants fraudulently inflated the Company’s sales and accounts receivables to secure millions of dollars in loans, and falsely verified to the Company’s lenders and outside auditors false financial information about the Company. The defendants were arrested this morning and are expected to be presented later today in Manhattan federal court before United States Magistrate Judge James L. Cott. The defendants will be arraigned tomorrow at 4:00 p.m. before United States District Judge Jed S. Rakoff.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, the defendants went to elaborate lengths to falsify company accounting data to defraud lenders and customers. To bolster the falsehoods, the defendants allegedly created fake email accounts for fictitious employees of the defrauded customers. Now they will be made to answer for the charged collusion and self-dealing that supplanted honest business practices.”
FBI Assistant Director-in-Charge George Venizelos said: “As alleged, the defendants concocted a scheme to make millions of dollars and concealed their misdeeds by lying to customers and lenders. Their dishonesty resulted in unjust enrichment at the expense of unsuspecting customers, burdening lenders with bad loans and weakening our financial markets. Those who engage in this type of financial fraud will be identified and held accountable.”
According to the allegations contained in the Indictment unsealed today in Manhattan federal court:
STEVEN KAITZ, WHEELER, and MAHATO (the “Management Defendants”) were the three owners and principals of the Company, and ZACHARY KAITZ served as the Company’s Vice President of Creative Services. SMITH worked for Customer-1 – one of the Company’s two largest customers – and was the director of a business unit that handled visual displays for Customer-1. From approximately 2012 to May 2014, in order to trick various lenders into lending millions of dollars to the Company, the defendants engaged in a scheme to falsely inflate the Company’s revenue and accounts receivables, and as part of the scheme, made and caused to be made materially false and misleading statements about the Company’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 the Company’s customers. The defendants also tricked certain of the Company’s customers, including Customer-1, into paying falsely inflated invoices from the Company. For her role in the scheme, SMITH received substantial kickbacks from the Management Defendants that included cash payments, personal family vacations, and home renovations.
The defendants took elaborate steps to keep the scheme afloat and prevent the Company’s lenders and outside auditors from discovering the fraud. For example, STEVEN KAITZ, WHEELER, and MAHATO created fake email accounts purporting to belong to fictitious employees of Customer-1 and “Customer-2” (a multinational designer and manufacturer of athletic footwear, clothing, and accessories, with U.S. headquarters in Portland, Oregon). To do so, the defendants used domain names that were very similar to the actual domain names used by Customer-1 and Customer-2. These defendants operated the fake email accounts themselves, pretending to be employees of Customer-1 and Customer-2, and then used those fake email accounts to “verify” false information about the Company’s financial condition, including its sales and accounts receivables, to the Company’s lenders and outside auditors. Further, at the Management Defendants’ direction, and in exchange for kickbacks, SMITH also falsely “verified” to the Company’s lenders certain financial information concerning the Company, including the amounts of money that Customer-1 supposedly owed the Company, even though SMITH knew those amounts were false. SMITH also caused Customer-1 to pay invoices from the Company that she knew were falsely inflated.
As another example of the steps taken to keep their scheme afloat, STEVEN KAITZ, WHEELER, and MAHATO utilized shell companies to engage in “round-trip” transactions to create the false appearance that customers were paying the Company’s phony outstanding receivables. ZACHARY KAITZ, who was skilled in graphic design, helped carry out the fraud by creating fraudulent documentation, such as fake invoices, purchase orders, and bills of lading, to support the false representations to the lenders about the Company’s business.
STEVEN KAITZ, WHEELER, and MAHATO misappropriated approximately $2.8 million of the loan proceeds for their own personal use, to pay for homes and luxury cars, private school tuition, and personal credit card bills, as well as kickbacks to SMITH.
As of May 2014, when the Company’s lenders terminated their lending relationships with the Company after discovering the fraud, the Company had approximately $18.6 million in loans outstanding.
STEVEN KAITZ and ZACHARY KAITZ are also charged in a separate mortgage fraud scheme based on their creation of fake documents that STEVEN KAITZ used to secure a mortgage for a vacation home in Martha’s Vineyard, Massachusetts.
STEVEN KAITZ, 56, of Jersey City, New Jersey, is charged with one count of conspiracy to commit bank fraud and wire fraud, and two counts of bank fraud, each of which carries a maximum sentence of 30 years in prison; and one count of conspiracy to commit honest services wire fraud, one count of wire fraud, and one count of conspiracy to commit money laundering, each of which carries a maximum sentence of 20 years.
LATCHMEE MAHATO, a/k/a “Robbie, 49, of Jamaica, Queens, is charged with one count of conspiracy to commit bank fraud and wire fraud, and one count of bank fraud, each of which carries a maximum term of 30 years; and one count of conspiracy to commit honest services wire fraud, one count of wire fraud, and one count of conspiracy to commit money laundering, each of which carries a maximum sentence of 20 years.
JONATHAN WHEELER, 46, of Southport, Connecticut, is charged with one count of conspiracy to commit bank fraud and wire fraud, and one count of bank fraud, each of which carries a maximum term of 30 years; and one count of conspiracy to commit honest services wire fraud, one count of wire fraud, and one count of conspiracy to commit money laundering, each of which carries a maximum sentence of 20 years.
KATHLEEN SMITH, 49, of South Plainfield, New Jersey, is charged with one count of conspiracy to commit bank fraud and wire fraud, and one count of bank fraud, each of which carries a maximum term of 30 years; and one count of conspiracy to commit honest services wire fraud and one count of wire fraud, each of which carries a maximum sentence of 20 years.
ZACHARY KAITZ, 31, of Brooklyn, New York, is charged with one count of conspiracy to commit bank fraud and wire fraud, and two counts of bank fraud, each of which carries a maximum sentence of 30 years; and one count of wire fraud, which carries a maximum sentence of 20 years.
Mr. Bharara praised the outstanding investigative work of the FBI.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Joshua A. Naftalis and Rosemary Nidiry are in charge of the prosecution.
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.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
U.S. v. Steven Kaitz, et al. Indictment
Manhattan U.S. Attorney Settles Civil Mortgage Fraud Lawsuit Against Golden First Mortgage Corp. and Its Owner, David MovtadyRead the Press Release
Defendants Admit to and Accept Responsibility for Submitting False Loan Certifications to HUD-FHA
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States has settled a civil mortgage fraud lawsuit against GOLDEN FIRST MORTGAGE CORP. (“GOLDEN FIRST”), and its owner, operator and President, DAVID MOVTADY (“MOVTADY”). The Government’s complaint, filed in April 2013, and amended in August 2013 (the “Amended Complaint”), sought damages and civil penalties under the False Claims Act for years of misconduct in connection with GOLDEN FIRST’s participation in the Federal Housing Administration’s (“FHA’s”) Direct Endorsement Lender Program. In the settlement approved today in Manhattan federal court by U.S. District Judge Jesse Furman, MOVTADY and GOLDEN FIRST admitted, acknowledged, and accepted responsibility for conduct alleged in the Amended Complaint, specifically that they failed to maintain a compliant quality control program and therefore did not conform to all U.S. Department of Housing and Urban Development (“HUD”) and FHA regulations applicable to the Direct Endorsement Lender Program. This conduct was contrary to the representations in GOLDEN FIRST’S annual certification, including the annual certification signed by MOVTADY on September 15, 2008. The defendants also agreed to a $36 million judgment against GOLDEN FIRST and a $300,000 payment from MOVTADY. Finally, the settlement permanently bars MOVTADY from conducting any business with the federal government.
Manhattan U.S. Attorney Preet Bharara said: “This settlement holds Golden First and its owner, David Movtady, accountable for lying to the Government about compliance with HUD requirements and approving bad loans. This type of conduct costs the United States millions of dollars when the loans inevitably default, and this Office is committed to snuffing it out.”
According to the allegations contained in the Complaint, the Amended Complaint, and other public court filings:
GOLDEN FIRST was a participant in the Direct Endorsement Lender program – a federal program administered by FHA – from 1989 until 2010. MOVTADY was the owner, president and operator of GOLDEN FIRST from 1979 until 2010. As a Direct Endorsement Lender, GOLDEN FIRST had the authority to originate, underwrite, and certify mortgages for FHA insurance. If a Direct Endorsement Lender approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to HUD for the costs associated with the defaulted loan, which HUD must then pay. Under the Direct Endorsement Lender program, HUD relies on lenders to properly review, underwrite, and certify loans before they are endorsed for FHA insurance. Direct Endorsement Lenders are therefore required to follow HUD’s program rules, including certifying mortgages and maintaining a quality control program that can prevent and correct any deficiencies in their underwriting. The quality control program requirements include maintaining a program independent of the lender’s business units; disclosing to HUD, within 60 days of initial discovery, all loans containing evidence of fraud or other serious underwriting problems; and conducting a full review of all loans that go into default within the first six payments (“early payment defaults”). GOLDEN FIRST and MOVTADY failed to comply with all three of these basic requirements. Notwithstanding these failures, MOVTADY fraudulently certified that GOLDEN FIRST “conforms to all HUD-FHA regulations necessary to maintain its HUD-FHA approval.”
GOLDEN FIRST and MOVTADY also engaged in a regular practice of originating and underwriting FHA loans that GOLDEN FIRST and MOVTADY knew should have never been approved. Nonetheless, GOLDEN FIRST certified that more than a thousand FHA loans met HUD’s requirements and therefore were eligible for FHA insurance.
Pursuant to the settlement, the United States will obtain a $36 million judgment against GOLDEN FIRST and recover $300,000 from MOVTADY, individually, within six months of the settlement. MOVTADY will also be permanently barred from conducting any business with the federal government. As part of the settlement, the defendants admitted, acknowledged, and accepted responsibility for the following misconduct:
- GOLDEN FIRST failed to conform fully to HUD-FHA rules requiring Direct Endorsement Lenders to maintain a compliant quality control program;
- Contrary to representations in GOLDEN FIRST’S annual certifications, including an annual certification signed by MOVTADY on September 15, 2008, GOLDEN FIRST did not conform to all applicable HUD-FHA regulations;
- GOLDEN FIRST endorsed certain loans for FHA mortgage insurance that did not meet all underwriting requirements contained in HUD’s handbooks and mortgagee letters, and therefore were not eligible for FHA mortgage insurance under the DEL program; and
- GOLDEN FIRST submitted to HUD-FHA certifications stating that certain loans were eligible for FHA mortgage insurance when in fact they were not; FHA insured certain loans endorsed by GOLDEN FIRST that were not eligible for FHA mortgage insurance; and HUD consequently incurred losses when some of those loans defaulted.
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.
Mr. Bharara thanked HUD’s Office of the Inspector General for its assistance in this case.
This case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorneys Lara K. Eshkenazi and Lawrence H. Fogelman are in charge of the case.
Robert Lustyik, Former FBI Special Agent, Pleads Guilty to Bribery Scheme in White Plains Federal CourtRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Leslie R. Caldwell, the Assistant Attorney General of the Justice Department’s Criminal Division, and Michael E. Horowitz, the Justice Department Inspector General, announced that ROBERT LUSTYIK, a former Special Agent with the Federal Bureau of Investigation (“FBI”), pleaded guilty today in White Plains federal court to all counts with which he is charged, including bribery, conspiracy to commit fraud, and theft of government property. LUSTYIK pleaded guilty before United States District Judge Vincent L. Briccetti,.
U.S. Attorney Preet Bharara said: “Robert Lustyik today admitted to conducting a bribery scheme in which, for his own personal gain, he secretly sold information and documents to which he had access as an FBI agent. Lustyik betrayed our system of justice: he breached not only the law, but also his sworn oath, and the great trust and confidence placed in him by citizens and colleagues. For his criminal conduct he now faces, as he must, serious, commensurate penalties.”
Assistant Attorney General Leslie R. Caldwell said: “Robert Lustyik discarded the FBI’s principles of ‘fidelity, bravery, and integrity,’ and sold his badge to the highest bidder. Greed has no place in public service or law enforcement. The Department of Justice will root out corruption wherever it takes hold, and hold accountable those who abuse the public’s trust for personal gain.”
Inspector General Michael E. Horowitz said: “The Department of Justice Office of the Inspector General is committed to working with our law enforcement partners to identify, investigate, and bring to justice all DOJ employees who engage misconduct.”
According to the Complaint, the Indictment, court hearings, and today’s plea proceeding:
LUSTYIK was an FBI Special Agent who worked on the counterintelligence squad in the White Plains Resident Agency. LUSTYIK’s co-defendant, Johannes Thaler, was LUSTYIK’s friend, and LUSTYIK’s other co-defendant, Rizve Ahmed, was an acquaintance of Thaler. From in or about September 2011 through March 2012, LUSTYIK, Thaler, and Ahmed engaged in a bribery scheme. As part of the scheme, LUSTYIK and Thaler solicited payments of money from Ahmed, in exchange for LUSTYIK’s agreement to provide internal, confidential documents and other confidential information to which LUSTYIK had access by virtue of his position as an FBI Special Agent. The documents and information pertained to a prominent citizen of Bangladesh (“Individual 1”). Ahmed perceived himself to be on the opposite side of a political rivalry with Individual 1. Ahmed sought, among other things, to obtain information about Individual 1, to locate Individual 1, and to harm Individual 1 and others associated with Individual 1.
As part of the scheme, LUSTYIK and Thaler exchanged text messages, including messages about how to pressure Ahmed to pay them additional money in exchange for confidential information. For example, in text messages, LUSTYIK told Thaler, “we need to push [Ahmed] for this meeting and get that 40 gs quick . . . . I will talk us into getting the cash . . . . I will work my magic . . . . We r sooooooo close.” Thaler responded, “I know. It’s all right there in front of us. Pretty soon we’ll be having lunch in our oceanfront restaurant . . . .”
As another example, in or about late January 2012, LUSTYIK, upon learning that Ahmed was considering using a different source to obtain confidential information about Individual 1, texted Thaler, “I want to kill C . . . . I hung my ass out the window n we got nothing? . . . . Tell [Ahmed], I’ve got [Individual 1’s] number and I’m pissed. . . . I will put a wire on n get [Ahmed and his associates] to admit they want [a Bangladeshi political figure] offed n we sell it to Individual 1].” LUSTYIK further texted THALER, “So bottom line. I need ten gs asap. We gotta squeeze C.”
LUSTYIK, 52, of Westchester County, pleaded guilty to all five counts in the Indictment in which he is charged. LUSTYIK pleaded guilty to (1) conspiracy to engage in a bribery scheme; (2) soliciting bribes by a public official; (3) conspiracy to defraud the citizens of the United States and the FBI; (4) theft of government property; and (5) unauthorized disclosure of a Suspicious Activity Report. He faces a maximum sentence of 55 years in prison. LUSTYIK is scheduled to be sentenced by Judge Briccetti on April 30, 2015, at 9:30 a.m.
Thaler and Ahmed previously pleaded guilty to bribery and conspiracy to commit fraud before Judge Briccetti. Thaler, 51, of New Fairfield, Connecticut, faces a maximum sentence of 35 years in prison. He is scheduled to be sentenced by Judge Briccetti on January 23, 2015, at 11:30 a.m. Ahmed, 35, of Danbury, Connecticut, faces a maximum sentence of 35 years in prison. He is scheduled to be sentenced by Judge Briccetti on January 23, 2015, at 2:30 p.m. 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 efforts of the Department of Justice Office of the Inspector General, which conducted the investigation in this case, and the Financial Crimes Enforcement Network for the U.S. Department of Treasury.
The prosecution is being handled by the Office’s White Plains Division and by the Public Integrity Section of the U.S. Department of Justice. Assistant United States Attorney Benjamin Allee and Trial Attorney Emily Rae Woods are in charge of the prosecution.
Lustyik Et Al.Indictment
Kentucky Businessman Pleads Guilty in Manhattan Federal Court to $53 Million Tax Scheme and Massive Fraud That Involved the Bribery of Bank OfficialsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and David A. Hubbert, Deputy Assistant Attorney General for the Tax Division of the Department of Justice, announced that WILBUR ANTHONY HUFF, a Kentucky businessman, pled guilty today in Manhattan federal court to various tax crimes that caused more than $50 million in losses to the Internal Revenue Service (“IRS”), and a massive fraud that involved the bribery of bank officials, the fraudulent purchase of an insurance company, and the defrauding of insurance regulators. HUFF pled guilty this afternoon before U.S. District Judge Naomi Reice Buchwald.
Manhattan U.S. Attorney Preet Bharara said: “Today’s guilty plea ensures that Wilbur Huff will be punished for perpetuating a vortex of fraud – complete with bribery, tax crimes that caused $53 million in losses to the IRS, the fraudulent purchase of a company, and the defrauding of insurance regulators. Those who might be tempted to follow in Huff’s criminal footsteps should understand that this Office and our law enforcement partners will aggressively pursue and root out fraud wherever we find it.”
According to the information, plea agreement, and statements made during court proceedings:
HUFF was a businessman who controlled numerous entities located throughout the United States (“HUFF-Controlled Entities”). HUFF controlled the companies and their finances, using them to orchestrate a $53 million fraud on the IRS as well as other illegal schemes. However, rather than exercise control of these companies openly, HUFF concealed his control by installing other individuals to oversee the companies’ day-to-day functions and to serve as the companies’ titular owners, directors, or officers. HUFF also maintained a corrupt relationship with Park Avenue Bank and its executives, Charles J. Antonucci, Sr., the President and Chief Executive Officer, and Matthew L. Morris, the Senior Vice President.
Tax Crimes
From 2008 to 2010, HUFF controlled O2HR, a professional employer organization (“PEO”) located in Tampa, Florida. Like other PEOs, O2HR was paid to manage the payroll, tax, and workers’ compensation insurance obligations of its client companies. However, instead of paying $53 million in taxes that O2HR’s clients owed the IRS, and instead of paying $5 million to Providence Property and Casualty Insurance Company (“Providence P&C”) – an Oklahoma-based insurance company – for workers’ compensation coverage expenses for O2HR clients, HUFF stole the money that his client companies had paid O2HR for those purposes. Among other things, HUFF diverted millions of dollars from O2HR to fund his investments in unrelated business ventures, and to pay his family members’ personal expenses. The expenses included mortgages on HUFF’s homes, rent payments for his children’s apartments, staff and equipment for HUFF’s farm, designer clothing, jewelry, and luxury cars.
Conspiracy to Commit Bank Bribery, Defraud Bank Regulators, and Fraudulently Purchase an Oklahoma Insurance Company
From 2007 up to and including 2010, HUFF engaged in a massive multi-faceted conspiracy, in which he schemed to (i) bribe executives of Park Avenue Bank, (ii) defraud bank regulators and the board and shareholders of a publicly-traded company and (iii) fraudulently purchase an Oklahoma insurance company. As described in more detail below, HUFF paid bribes totaling hundreds of thousands of dollars in cash and other items to Morris and Antonucci, in exchange for their favorable treatment at Park Avenue Bank.
As part of the corrupt relationship between HUFF and the bank executives, HUFF, Morris, Antonucci, and others conspired to defraud various entities and regulators during the relevant time period. Specifically, Huff conspired with Morris and Antonucci to falsely bolster Park Avenue Bank’s capital, by orchestrating a series of fraudulent transactions to make it appear that Park Avenue Bank had received an outside infusion of $6.5 million, and engaged in a series of further fraudulent actions to conceal from bank regulators the true source of the funds.
HUFF further conspired with Morris, Antonucci, and others to defraud Oklahoma insurance regulators and others by making material misrepresentations and omissions regarding the source of $37.5 million used to purchase Providence Property and Casualty Insurance Company, an Oklahoma insurance company that provided workers’ compensation insurance for O2HR’s clients, and to whom O2HR owed a significant debt.
Bribery of Park Avenue Bank Executives
From 2007 to 2009, HUFF paid Morris and Antonucci at least $400,000 in exchange for which they: (1) provided HUFF with fraudulent letters of credit obligating Park Avenue Bank to pay an investor in one of HUFF’s businesses $1.75 million if HUFF failed to pay the investor back himself; (2) allowed the HUFF-Controlled Entities to accrue $9 million in overdrafts; (3) facilitated intra-bank transfers in furtherance of HUFF’s frauds; and (4) fraudulently caused Park Avenue Bank to issue at least $4.5 million in loans to the HUFF-Controlled Entities.
Fraud on Bank Regulators and a Publicly-Traded Company
From 2008 to 2009, HUFF, Morris, and Antonucci engaged in a scheme to prevent Park Avenue Bank from being designated as “undercapitalized” by regulators – a designation that would prohibit the Bank from engaging in certain types of banking transactions, and that would subject the Bank to a range of potential enforcement actions by regulators. Specifically, they engaged in a series of deceptive, “round-trip” financial transactions to make it appear that Antonucci had infused the Bank with $6.5 million in new capital when, in actuality, the $6.5 million was part of the Bank’s pre-existing capital. HUFF, Morris, and Antonucci funneled the $6.5 million from the Bank through accounts controlled by HUFF to Antonucci. This was done to make it appear as though Antonucci was helping to stabilize the Bank’s capitalization problem, so the Bank could continue engaging in certain banking transactions that it would otherwise have been prohibited from doing, and to put the Bank in a better posture to receive $11 million from the Troubled Asset Relief Program. To conceal their unlawful financial maneuvering, HUFF created, or directed the creation of, documents falsely suggesting that Antonucci had earned the $6.5 million through a bogus transaction involving another company Antonucci owned. HUFF, Morris, and Antonucci further concealed their scheme by stealing $2.3 million from General Employment Enterprises, Inc., a publicly-traded temporary staffing company, in order to pay Park Avenue Bank back for monies used in connection with the $6.5 million transaction.
Fraud on Insurance Regulators and the Investment Firm
From July 2008 to November 2009, HUFF, Morris, Antonucci, and Allen Reichman, an executive at an investment bank and financial services company headquartered in New York, New York (the “Investment Firm”), conspired to (i) defraud Oklahoma insurance regulators into allowing Antonucci to purchase the assets of Providence P&C – the Oklahoma insurance company that was owed $5 million by O2HR and (ii) defraud the Investment firm into providing a $30 million loan to finance the purchase. Specifically, HUFF and Antonucci devised a scheme in which Antonucci would purchase Providence P&C’s assets by obtaining a $30 million loan from the “Investment Firm,” which used Providence P&C’s own assets as collateral for the loan. However, because Oklahoma insurance regulators had to approve any sale of Providence P&C, and because Oklahoma law forbade the use of Providence P&C’s assets as collateral for such a loan, HUFF, Morris, Antonucci, and Reichman made, and conspired to make, a number of material misstatements and material omissions to the Investment Firm and Oklahoma insurance regulators concerning the true nature of the financing for Antonucci’s purchase of Providence P&C. Among other things, Reichman directed Antonucci to sign a letter that provided false information regarding the collateral that would be used for the loan, and HUFF, Morris, and Antonucci conspired to falsely represent to Oklahoma insurance regulators that Park Avenue Bank – not the Investment Firm – was funding the purchase of Providence P&C.
After deceiving Oklahoma regulators into approving the sale of Providence P&C, HUFF took $4 million dollars of the company’s assets, which he used to continue the scheme to defraud O2HR’s clients. Ultimately, in November 2009, the insurance company became insolvent and was placed in receivership after HUFF, Morris, and Antonucci had pilfered its remaining assets.
HUFF, 53, of Caneyville and Louisville, Kentucky, pleaded guilty to one count of corruptly endeavoring to obstruct and impede the due administration of the internal revenue laws, which carries a maximum penalty of three years in prison, one count of aiding and assisting with the preparation and presentation of false and fraudulent tax returns, which carries a maximum penalty of three years in prison, one count of failing and causing the failure to pay taxes to the IRS, which carries a maximum penalty of one year in prison, and one count of conspiracy to (a) commit bank bribery, (b) commit fraud on bank regulators and the board and shareholders of a publicly-traded company, and (c) fraudulently purchase an Oklahoma insurance company, which carries a maximum penalty of five years in prison. He is scheduled to be sentenced by Judge Buchwald on April 8, 2015, at 2:30 p.m. 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. As part of his plea, Huff also agreed to forfeit $10.8 million to the United States and to provide restitution in the following amounts to victims of his crimes: $70,100,000 to the Receiver for Park Avenue Property and Casualty Insurance Company; $4,857,266.62 to the Federal Deposit Insurance Corporation (“FDIC”); $597,420.29 to Valley National Bank (the successor of Park Avenue Bank); and $53,094,219 to the Internal Revenue Service.
Charles Antonucci, who was charged separately by complaint on March 15, 2010, pleaded guilty to his role in the crimes described above on October 8, 2010. Matthew L. Morris and Allen Reichman were charged by Indictment with HUFF on October 1, 2012. Morris pleaded guilty in connection with the case on October 17, 2014.
Reichman is currently scheduled to go to trial before Judge Buchwald beginning on March 2, 2015. The charges against Reichman are allegations and he is presumed innocent unless and until proven guilty beyond a reasonable doubt.
Mr. Bharara praised the investigative work of the Special Inspector General for the Troubled Asset Relief Program, the Federal Bureau of Investigation, the IRS, the New York State Department of Financial Services, Immigration and Customs Enforcement’s Homeland Security Investigations, and the Office of Inspector General of the FDIC. Mr. Bharara also thanked the Department of Justice’s Tax Division and the United States Attorney’s Office for the Southern District of Florida for their assistance.
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.
The case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Janis Echenberg and Daniel Tehrani and Special Assistant U.S. Attorney Tino Lisella are in charge of the criminal case.
Owner of NYC Maintenance and Construction Company Sentenced in Manhattan Federal Court for Failing to Pay Payroll TaxesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Larry Wszalek, Acting Deputy Assistant Attorney General for the Tax Division of the Department of Justice, announced today that THOMAS NASTASI III, was sentenced to 12 months in prison for failing to pay to the Internal Revenue Service (“IRS”) more than $1.7 million in payroll taxes of his companies, Nastasi Maintenance LLC and Nastasi Maintenance & Construction, LLC. NASTASI pled guilty in August 2013 before U.S. District Judge Paul G. Gardephe, who also imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara said: “The crime for which Thomas Nastasi has been sentenced was not a complex scheme. His companies worked on luxury buildings in New York. Rather than remit payroll taxes he owed, Nastasi spent the money buying luxury items for himself. Now, he not only has to pay the taxes he owed, he has to pay for his crime with a prison term as well.”
According to the Indictment and other documents filed in Manhattan federal court, as well as statements made during court proceedings:
From 2001 through 2011, NASTASI owned and operated several Manhattan construction and maintenance companies, including Nastasi Maintenance & Construction, which performs contracting work on such buildings as Rockefeller Center and the Chrysler Building. As the President of the companies, NASTASI was responsible for withholding payroll taxes from his employees and paying those taxes over to the IRS. Those taxes included the employees’ income taxes, Social Security, and Medicare taxes. NASTASI accumulated over $1.7 million in payroll taxes that were owed but never paid to the IRS. Those taxes also included the employer’s portion of Social Security and Medicare taxes for his employees.
Instead of paying the companies’ payroll taxes to the IRS, NASTASI used company funds to pay hundreds of thousands of dollars in personal expenses, including $67,000 in cigar purchases, a house in Mt. Kisco, and expenses related to his boat. NASTASI also made false statements to the IRS in the course of its attempts to obtain delinquent tax returns and collect the corporate and personal taxes owed by NASTASI and his companies.
In addition to his prison sentence, NASTASI, 48, of Mt. Kisco, New York, was sentenced to three years of supervised release, ordered to pay a fine of $60,000, and was also ordered to pay restitution to the IRS of $1,593,414 to be paid within 90 days.
Mr. Bharara thanked the IRS Criminal Investigation Division for its outstanding investigative work in this case.
Department of Justice Tax Division Senior Litigation Counsel Nanette L. Davis is in charge of the prosecution.
Manhattan U.S. Attorney Files and Settles Civil Fraud Lawsuit Against Subcontractor Rmd Holdings, Ltd., for Violating the Disadvantaged Business Enterprise RegulationsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Douglas Shoemaker, the Regional Special Agent-in-Charge for the United States Department of Transportation Office of Inspector General (“USDOT-OIG”), and Michael Nestor, the Inspector General for The Port Authority of New York & New Jersey (“Port Authority”), announced today that the United States has filed, and simultaneously settled, a civil fraud lawsuit against a subcontractor, RMD HOLDINGS, LTD., D/B/A NATIONWIDE CONSTRUCTION (“RMD”), for engaging in fraudulent conduct designed to take advantage of the Disadvantaged Business Enterprise Program in order to secure a subcontract on a federally funded project. Specifically, RMD caused the prime contractor on a project for the design and construction of the LaGuardia Central Terminal building (the “LaGuardia Project”) to falsely represent to the Port Authority of New York and New Jersey (“PANYNJ”) that RMD paid approximately one million dollars to a disadvantaged business enterprise (“DBE”) to perform legitimate work on the contract when, in fact, the DBE did not perform a commercially useful function, but rather received a “commission” from RMD for the fraudulent use of its DBE status. In the settlement, approved yesterday in Manhattan federal court by U.S. District Judge Vernon S. Broderick, RMD admitted and accepted responsibility for violating the DBE regulations governing the LaGuardia Project and agreed to pay $416,000. This is part of a global settlement between RMD and the United States for fraudulent conduct on the part of RMD with regard to DBEs, pursuant to which RMD will pay $1,750,000.
Manhattan U.S. Attorney Preet Bharara said: “The Disadvantaged Business Enterprise program exists to help qualified minority-owned and women-owned businesses succeed. That aim was subverted here. The regulations governing the program must be followed by all contractors working on federally funded contracts – not just prime contractors. Today’s settlement will help ensure that subcontractors as well as prime contractors comply with this important law.”
USDOT-OIG Special Agent-in-Charge Douglas Shoemaker stated: “As evidenced by this settlement agreement, we remain steadfast in our commitment to maintaining the integrity of the U.S. Department of Transportation’s Disadvantaged Business Enterprise program. Working with the Secretary of Transportation and other DOT leaders, and our law enforcement and prosecutorial colleagues, we will continue to protect the taxpayers’ investment in our nation’s infrastructure from fraud, waste, abuse and violations of law.”
Port Authority Inspector General Michael Nestor stated: “This investigation has shown how individuals in the construction industry have manipulated and circumvented the intent of the DBE Program on a Port Authority project by utilizing a firm as a pass-through to satisfy the Program goals. I would hope that this case serves as an incentive to the industry to adhere to the Program’s intent. I urge those with information of instances of other fraudulent practices to report them to law enforcement. Working with our law enforcement partners we will continue to vigilantly investigate allegations of fraud in the construction industry.”
BACKGROUND ON DBEs
In 1980, the USDOT issued regulations in connection with the DBE program, a program to increase the participation of business enterprises owned by socially and economically disadvantaged individuals in federally funded public construction contracts. To become certified as a DBE, a company must:
- be owned and controlled by socially and economically disadvantaged individuals;
- be an independent business whose viability does not depend on its relationship with other firms;
- employ its own work force and own the equipment necessary to perform its work; and
- be able to meet its financial obligations.
Recipients of USDOT construction grants, such as the Port Authority of New York and New Jersey (“PANYNJ”), are required to establish a DBE program that establishes goals for the percentage of a project’s work that should be awarded to DBEs (“DBE goals”). General contractors on construction projects must make good faith efforts to meet the relevant DBE goals. As a condition of receiving USDOT funding for the LaGuardia Project, the PANYNJ established DBE goals for the project and required the general contractor to either meet or make good faith efforts to meet the DBE goal.
General contractors can count funds paid to DBEs toward the attainment of the DBE goals only if the DBEs performed a “commercially useful function.” A DBE subcontractor performs a commercially useful function only when it actually performs, manages, and supervises the work involved. A DBE does not perform a “commercially useful function” if “its role is limited to that of an extra participant in a transaction, contract, or project through which funds are passed in order to obtain the appearance of DBE participation.”
RMD’S FRAUD
According to the allegations in the complaint:
USDOT set the DBE participation goal for the LaGuardia Project at 17% of the project’s cost (or approximately $1.8 million). An intermediary contractor was hired by the prime contractor on the LaGuardia Project to install the bollard structural steel, and this intermediary contractor hired RMD as a subcontractor. The contract between the intermediary and RMD required RMD to provide materials provided by a DBE or woman-owned business, and RMD represented to the intermediary contractor that it would use the DBE MS Construction Co. (“MS”) to supply approximately $1.1 million in bollard structural steel. RMD provided the intermediary contractor with invoices and other documentation purportedly from MS so that the intermediary contractor could claim credit toward its DBE contract requirements. The payments to MS were incorporated into a report signed by the president of the intermediary contractor and submitted to the prime contractor to show that the intermediary contractor was meeting its DBE goals as required by the contract with the prime contractor. In reality, RMD knew that MS was not actually supplying the steel, which instead was supplied by several third-party suppliers, none of which was a DBE. RMD paid MS a percentage of the amount paid to the actual steel suppliers for the sole purpose of fraudulently using MS’s DBE status to earn DBE credit for the prime contractor.
Pursuant to the settlement agreement, RMD admitted, acknowledged, and accepted responsibility for the fact that one of its employees caused false certifications to be submitted to USDOT representing that a DBE performed certain work on, and received certain payments in connection with, the LaGuardia Project, when in fact the DBE never performed any work and merely received a commission from RMD for the fraudulent use of its DBE status. RMD also agreed to pay the United States $416,000 in damages.
Mr. Bharara commended the USDOT Office of Inspector General and the Port Authority Office of Inspector General for their invaluable work on this case. Mr. Bharara also expressed his thanks to the U.S. Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud Investigations, New York Region, for its assistance in the case.
The case is being handled by the Office’s Civil Frauds Unit.
Assistant U.S. Attorneys Mara Trager and Ellen London are in charge of the case.
RMD complaint
RMD executed stipulationManhattan U.S. Attorney Announces Charges Against Manager of Commodities Pool for Defrauding Investors of More Than $5 MillionRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Philip R. Bartlett, the Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced today the unsealing of an indictment in Manhattan federal court against WHILEON CHAY for his alleged management of several fraudulent commodities pools, generally operating under the name “4X Solutions” or a variation thereof. Beginning in or about 2007, CHAY solicited more than $5 million from investors in commodities pools that purported to engage principally in foreign exchange (“forex”) trading, promising approximate annual returns of 24% and claiming that “[t]here is no risk in this activity.” In fact, however, CHAY lost more than $2 million in forex and other commodities trading, and misappropriated a significant portion of the remaining investor funds for his personal use, including to pay for luxury cars and for his deceased wife to be cryogenically frozen. CHAY fled the United States during the course of the investigation. The case has been assigned to United States District Judge Kimba M. Wood.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Whileon Chay deceived investors about the commodities pools he managed, claiming to be a successful trader when he in fact was losing millions and misappropriating investors’ money for his own use. Although he has fled the country, these charges against him will persist and so will our efforts to bring him back to face them.”
USPIS Inspector-in-Charge Bartlett said: “Over the past five years Postal Inspectors have investigated hundreds of investment fraud schemes. In each case there are misrepresentations made to investors and the misuse of funds entrusted to the companies. As alleged here, Mr. Chay betrayed the trust of his clients when he misappropriated their investments to fund his lavish lifestyle.”
According to the allegations in the Indictment unsealed yesterday in Manhattan federal court and other court documents:
In approximately 2007, CHAY began operating the first of several unregistered commodities pools operating under the name “4X Solutions,” collectively referred to in the Indictment as the “4X Entities,” and began to solicit investors. CHAY represented to investors, orally and through written materials, that he had “been successfully trading the 4x for 15 years. During this period [CHAY’s] clients have never experienced a month that did not make money.” CHAY also caused monthly account statements to be sent to investors, which represented that the 4X Entities were producing steady returns. By 2011, the 4X Entities purported to have more than $16.5 million in assets under management.
In fact, CHAY did not invest the money as promised, and to the extent that he did invest it at all, he lost it. Between 2007 and 2011, CHAY lost approximately $2.3 million in forex and other commodities and securities trading, even as he continued to represent to investors and potential investors that the 4X Entities were profitable and that “[w]e have never had a loosing [sic] month.” Materials distributed to investors also claimed that “[t]here is no risk in this activity.” CHAY perpetuated the fraud by disseminating fraudulent account statements that represented that investors were receiving consistent positive returns, and by using new investors’ funds to pay purported returns to existing investors. He also misappropriated a significant portion of the funds invested in the 4X Entities for his personal use, including to pay his personal expenses and to maintain a lavish lifestyle, which he flaunted to potential investors. For example, CHAY drove a different luxury car virtually every time he met with one particular investor. CHAY also misappropriated investor funds for other purposes, including more than $150,000 to pay for his deceased wife to be cryogenically frozen.
In October 2011, during the course of the investigation, CHAY departed from New York to Lima, Peru, and has not returned to the United States.
CHAY, 38, formerly of New York, New York, is charged in the Indictment with commodities fraud (Count One), wire fraud (Count Two), and mail fraud (Count Three). The mail and wire fraud charge each carries a maximum term of 20 years in prison, and the commodities fraud charge carries a maximum term of 10 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.
Separately, the United States Commodities Futures Trading Commission (“CFTC”) has sued CHAY and 4X Solutions, Inc., in an action filed in United States District Court for the Southern District of New York. CHAY has not appeared in that case, and the Clerk of Court has issued a certificate of default against CHAY.
Mr. Bharara praised the investigative work of the USPIS. He also thanked the CFTC for its assistance.
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. Attorneys Matthew L. Schwartz and Katherine Reilly are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
Chay, Whileon Indictment
Former Consultant to New York Democratic Senate Campaign Committee Sentenced in White Plains Federal Court to Three Years in Prison for Tax and Fraud ConvictionsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that MELVIN LOWE, a former consultant to the New York State Democratic Senate Campaign Committee ("DSCC"), was sentenced today to 36 months in prison for conspiring with New York State Senator John Sampson to defraud the DSCC of $100,000, and for personal income tax offenses. LOWE was convicted by a jury in September 2014. United States District Judge Vincent L. Briccetti imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara said: “Melvin Lowe’s corrupt actions were another example of a political figure in New York State putting his own personal greed ahead of the public’s trust. I hope that today’s sentence will send yet another powerful signal to any public official who questions the resolve of this office to root out public corruption.”
According to the Complaint, the Indictment filed in federal court and the evidence presented at trial:
LOWE was retained as a consultant by the DSCC after New York State Senator John Sampson was appointed as the Senate's Democratic Conference Leader following the June 2009 "coup" that temporarily shifted the balance of power in the New York Senate from the Democrats to the Republicans. In early June 2010, Sampson asked LOWE to arrange for a covert payment of $20,000 to Michael Nieves, a Queens-based political operative who had previously worked for former New York State Senator Hiram Monserrate and who had helped engineer the resolution of the Senate coup that had brought Sampson to power. LOWE then arranged for a New Jersey-based political consultant to submit a false invoice to the DSCC for $100,000 in printing services. Sampson approved payment of the invoice and the DSCC sent $100,000 to the New Jersey-based consultant. LOWE instructed the consultant to send $20,000 of the proceeds to Nieves, $75,000 of the proceeds to LOWE's consulting company, and to keep $5,000 for himself. The jury heard evidence that LOWE and Senator Sampson had a close relationship of trust that included LOWE giving Sampson an envelope of cash.
LOWE received more than $2.1 million in consulting income from 2007 to 2012. He reported less than $25,000 in income in each of his federal income tax returns for 2007 through 2009, which he did not file until late 2010. LOWE never filed tax returns for 2010 through 2012. He never made any payments toward his taxes for the years 2000 through 2012.
LOWE also caused a bank to make a false statement to his mortgage lender regarding the balance in his checking account. When the mortgage lender sent LOWE’s bank a Verification of Deposit form to verify LOWE's claim that he had $65,000 in his checking account, LOWE caused the assistant manager to claim that LOWE's account had a balance of more than $80,000. At that time, the balance in LOWE's checking account was $2,156.
In addition to the prison sentence, LOWE, 53, of Manhattan, was sentenced to three years’ supervised release.
Mr. Bharara praised the outstanding investigative work of the Internal Revenue Service - Criminal Investigation and the investigators from the U.S. Attorney's Office for the Southern District of New York.
This case is being handled by the Office’s White Plains Division. Assistant United States Attorneys Perry A. Carbone and James McMahon are in charge of the prosecution.
Former Ceo of Bitcoin Exchange Company Sentenced in Manhattan Federal Court to Two Years in Prison for Helping to Sell Nearly $1 Million in Bitcoins for Drug Buys on Silk RoadRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that CHARLIE SHREM, the former Chief Executive Officer and Compliance Officer of BitInstant, a Bitcoin exchange company, and the former Vice Chairman of the Bitcoin Foundation, was sentenced today to two years in prison for his role in knowingly transmitting nearly $1 million in Bitcoins intended to facilitate drug trafficking on “Silk Road,” a black-market website designed to enable users to buy and sell illegal drugs anonymously and beyond the reach of law enforcement. SHREM pled guilty in September 2014 before U.S. District Judge Jed S. Rakoff, who also imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara said: “Charlie Shrem knowingly facilitated the purchase and use of Bitcoins by others to buy illegal drugs on the Silk Road site. He willfully abdicated his duties as compliance officer of BitInstant, putting illegal profit ahead of legal and ethical responsibility. Now Shrem has been made to answer for his crimes.”
According to the allegations contained in the Complaint, the Indictment, the Superseding Information, and statements made in other documents filed in Manhattan federal court and related court proceedings:
From about December 2011 to October 2013, SHREM’s co-defendant, Robert M. Faiella, ran an underground Bitcoin exchange on the Silk Road website, a website that served as a sprawling and anonymous black market bazaar where illegal drugs of virtually every variety were bought and sold regularly by the site’s users. Operating under the username “BTCKing,” Faiella sold Bitcoins – the only form of payment accepted on Silk Road – to users seeking to buy illegal drugs on the site. Upon receiving orders for Bitcoins from Silk Road users, he filled the orders through BitInstant, a company based in New York, New York. BitInstant was designed to enable customers to exchange cash for Bitcoins anonymously, that is, without providing any personal identifying information, and charged a fee for its service. Faiella obtained Bitcoins with BitInstant’s assistance, and then sold the Bitcoins to Silk Road users at a markup.
SHREM was the Chief Executive Officer of BitInstant, and from about August 2011 until about July 2013, when BitInstant ceased operating, he was also its Compliance Officer, in charge of ensuring BitInstant’s compliance with federal and other anti-money laundering (“AML”) laws. SHREM was also the Vice Chairman of the Bitcoin Foundation, a foundation dedicated to promoting the Bitcoin virtual currency system.
SHREM, who allegedly bought drugs on Silk Road himself, was fully aware that Silk Road was a drug-trafficking website, and through his communications with Faiella, SHREM also knew that Faiella was operating a Bitcoin exchange service for Silk Road users. Nevertheless, SHREM knowingly facilitated Faiella’s business with BitInstant in order to maintain Faiella’s business as a lucrative source of revenue. SHREM knowingly allowed Faiella to use BitInstant’s services to buy Bitcoins for his Silk Road customers; personally processed Faiella’s orders; gave Faiella discounts on his high-volume transactions; failed to file a single suspicious activity report with the United States Treasury Department about Faiella’s illicit activity, as he was otherwise required to do in his role as BitInstant’s Compliance Officer; and deliberately helped Faiella circumvent BitInstant’s AML restrictions, even though it was SHREM’s job to enforce them and even though BitInstant had registered with the Treasury Department as a money services business.
Working together, SHREM and Faiella exchanged nearly $1 million in cash for Bitcoins for the benefit of Silk Road users, so that the users could, in turn, make illegal purchases on Silk Road.
In imposing the sentence, Judge Rakoff remarked: "There's no question that Mr. Shrem, over a period of many months, was knowingly, willfully, and to some extent excitedly, even passionately involved in activity that he knew was a serious violation of the law and that was promoting the evil business of trafficking in drugs."
In addition to the prison sentence, SHREM, 24, of New York, New York, was sentenced to three years of supervised release and was ordered to forfeit $950,000, representing the amount of funds involved in the offense that were intended to promote illegal activity.
Mr. Bharara praised the outstanding investigative work of the DEA’s New York Organized Crime Drug Enforcement Strike Force, which is comprised of agents and officers of the U. S. Drug Enforcement Administration, the New York City Police Department, Immigration and Customs Enforcement - Homeland Security Investigations, the New York State Police, the U. S. Internal Revenue Service Criminal Investigation Division, the Federal Bureau of Investigation, the Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S. Secret Service, the U.S. Marshal Service, New York National Guard, Office of Foreign Assets Control and the New York Department of Taxation and Finance. Mr. Bharara also thanked the FBI’s New York Field Office.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Serrin Turner is in charge of the prosecution, and Assistant United States Attorney Andrew Adams of the Money Laundering and Asset Forfeiture Unit is in charge of the forfeiture aspects of the case.
SHREM’s co-defendant, Faiella, pled guilty in September 2014, along with SHREM, and is scheduled to be sentenced before Judge Rakoff on January 20, 2015.
Court Authorizes IRS to Issue Summonses for Records Relating to U.S. Taxpayers Who Used Services of Sovereign Management & Legal, Ltd., to Conceal Offshore Accounts, Assets, or EntitiesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, David Hubbert, the Deputy Assistant Attorney General for Civil Trial Matters in the Department of Justice’s Tax Division, John Koskinen, the Commissioner of the Internal Revenue Service (“IRS”), and Anthony D. Williams, the Special Agent in Charge of the Drug Enforcement Administration’s Los Angeles Field Division (“DEA”), announced that U.S. District Judge Vernon S. Broderick signed an order yesterday in Manhattan federal court authorizing the IRS to issue summonses requiring Federal Express Corporation a/k/a FedEx Express (“FedEx Express”); FedEx Ground Package System, Inc., a/k/a FedEx Ground (“FedEx Ground”); DHL Express (“DHL”); United Parcel Service, Inc. (“UPS”); Western Union Financial Services, Inc. (“Western Union”); the Federal Reserve Bank of New York (the “FRBNY”); Clearing House Payments Company LLC (“Clearing House”); and HSBC Bank USA, National Association (“HSBC USA”), to produce information about U.S. taxpayers who may be evading or have evaded federal taxes by using the services of SOVEREIGN MANAGEMENT & LEGAL, LTD. (“Sovereign”), to establish, maintain, or conceal foreign accounts, assets, and entities.
In this action, the Court granted the IRS permission to serve what are known as “John Doe” summonses on FedEx Express, FedEx Ground, DHL, UPS, Western Union, the FRBNY, Clearing House, and HSBC USA. The IRS uses John Doe summonses to obtain information about possible tax fraud by individuals whose identities are unknown. The John Doe summonses direct these eight entities to produce records that will assist the IRS in identifying U.S. taxpayers who, from the years 2005 through 2013, used Sovereign’s services to establish, maintain, operate, or control any foreign financial account or other assets; any foreign corporation, company, trust, foundation or other legal entity; or any foreign or domestic financial account in the name of such foreign entity.
Manhattan U.S. Attorney Preet Bharara said: “This action demonstrates our Office’s commitment to pursuing tax evaders who use offshore service providers to avoid their U.S. tax obligations. By issuing these John Doe summonses, we continue our joint efforts with the IRS to identify and hold accountable those who conceal their foreign assets in order to dodge their legal responsibility to pay taxes.”
Deputy Assistant Attorney General David Hubbert said: “This summons action is but the latest step in the Department of Justice’s efforts to identify and hold fully accountable U.S. taxpayers who have sidestepped their tax obligations by hiding money overseas. The world is getting smaller for tax cheats, and we will work with our partners at the IRS to vigorously enforce the nation’s tax laws against those who seek to avoid paying their fair share.”
IRS Commissioner John Koskinen said: “The IRS remains committed to continuing our priority efforts to stop offshore tax evasion wherever it is found. We have made tremendous progress in this area, working cooperatively with other agencies. The John Doe summons remains an important tool in our efforts to find international tax evaders and those who help them.”
DEA Special Agent in Charge Anthony D. Williams said: “The DEA has a longstanding commitment to sharing information with our federal, state, and local partners. Issuance of these summonses exemplifies how outstanding investigative results can be derived from a culture of interagency cooperation.”
According to the allegations set forth in the documents filed in support of the petition, and other information in the public record:
Sovereign is a multi-jurisdictional offshore services provider that offers clients, among other things, the formation and administration of anonymous corporations and foundations in Panama as well as offshore entities. Related services provided by Sovereign include the maintenance and operation of offshore structures, mail forwarding, the availability of virtual offices, re-invoicing, and the provision of professional managers who appoint themselves directors of the client’s entity while the client maintains ultimate control over the assets.
As a result of a DEA investigation of online narcotics trafficking known as OPERATION ADAM BOMB, the IRS learned that Sovereign was involved in assisting U.S. clients with tax evasion. During the IRS’s investigation of Sovereign’s conduct, one taxpayer, making a voluntary disclosure of tax non-compliance to avoid prosecution, reported that Sovereign helped the taxpayer form an anonymous corporation in Panama that the taxpayer used to control assets without appearing to own them.
The IRS investigation also determined that Sovereign uses Federal Express, UPS, and DHL to correspond with U.S. clients, and Western Union to transmit funds to and from clients in the U.S. In addition, the IRS learned that the wire services operated by the FRBNY and Clearing House, and the U.S. correspondent bank accounts that HSBC USA holds for Sovereign’s banks in Panama and Hong Kong, are likely to have records of financial transactions between Sovereign and its clients in the U.S. By obtaining information from these entities through John Doe summonses, the IRS expects to be able to identify Sovereign’s U.S. clients who may be avoiding or evading taxes.
Federal law requires U.S. taxpayers to pay taxes on all income earned worldwide. U.S. taxpayers must also report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year. Willful failure to report a foreign account can result in a fine of up to 50 percent of the amount in the account at the time of the violation.
This case is being handled by the Office’s Tax and Bankruptcy Unit. Assistant United States Attorney Joseph N. Cordaro is in charge of the case.
Sovereign Management John Doe Summonses Order
Pennsylvania Man Charged in White Plains Federal Court with Retaliating Against A Witness and StalkingRead the Press Release
Preet Bharara, United States Attorney for the Southern District of New York, and Philip R. Bartlett, the Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced today the arrest of KRIS SERGENTAKIS for retaliating against a witness and stalking. The Complaint alleges that SERGENTAKIS has engaged in a scheme to retaliate against, stalk, and harass an individual (“Victim-1”) who previously provided law enforcement with information relating to SERGENTAKIS’s commission of federal offenses, for which SERGENTAKIS was previously convicted and served a federal prison sentence. SERGENTAKIS was arrested this morning in Pennsylvania and is expected to be presented today in federal court in Allentown, Pennsylvania, before a United States Magistrate Judge.
Manhattan U.S. Attorney Bharara said: “As alleged, after Kris Sergentakis was reported for engaging in kickbacks, convicted, and sentenced to a prison term, he began a campaign of retaliation and stalking in an effort to destroy the life of the former colleague who exposed his criminal conduct. There will be zero tolerance from this Office and our law enforcement partners for witness intimidation and harassment. The criminal justice system relies on witnesses, and they should not suffer for being good citizens who come forward to ensure justice is done.”
USPIS Inspector-in-Charge Bartlett said: “Sergentakis viciously and knowingly attempted to destroy his victim’s reputation and livelihood through letters, emails, and the internet. Law enforcement has a responsibility to protect witnesses against intimidation and will bring to justice anyone who engages in these types of slanderous attacks.”
According to the Complaint unsealed today in White Plains federal court:
SERGENTAKIS was formerly employed in the graphics department of The Leukemia and Lymphoma Society (“LLS”), a charitable non-profit organization that funds cancer research and is headquartered in White Plains. In 2006, SERGENTAKIS pled guilty in Manhattan federal court to commercial bribery and mail fraud charges arising out of his participation in a kickback scheme in which he allocated certain of LLS’s printing contracts to certain vendors in return for payments from the vendors. During the course of that investigation and prosecution, Victim-1, who was LLS’s Chief Financial Officer at the time and subsequently became its Chief Executive Officer, provided information to law enforcement relating to SERGENTAKIS’s conduct at LLS and his violations of federal law.
From at least 2007 to the present, SERGENTAKIS has harassed and threatened Victim-1 through letters, emails, and the Internet. SERGENTAKIS began by sending multiple letters to Victim-1 and other current and former employees at LLS. For example, in 2007, SERGENTAKIS sent a letter to Victim-1 stating, in part, that “[e]very person on the planet will know that you are a dangerous child molester,” and “I’ll be everywhere you are warning people.” SERGENTAKIS’s letter to Victim-1 further stated that “when I am released I will be outside where you live, work, eat, whatever;” “I will never give up;” and “[a]s long as I live this will never end.” The letter concluded with: “This hasn’t even started yet.”
In 2010, shortly after being released from prison, SERGENTAKIS created a website (the “Website”) containing harassing and threatening content regarding Victim-1. On at least two occasions, Internet service providers stopped hosting the Website because of its content, but SERGENTAKIS responded by relaunching the Website with a different service provider. Between 2010 and the present, the Website’s content included, among many other things, the following:
- An image of a guillotine with the title “THE CURE FOR PEDOPHILLIA”[sic] and, immediately below the image, the statement: “We all have a responsibility to keep children safe from pedophiles like [Victim-1] . . . .”
- “[Victim-1] also enjoys beating helpless animals, he had a dalmation [sic] which would have accidents in the house so [Victim-1] would beat the dog to a pulp the same way he abuses cancer patients by denying them the monies the public wants them to have.”
- Photographs of Victim-1 and members of Victim-1’s family that had been posted on the Facebook accounts of certain of Victim-1’s family members.
- The statement that a poster regarding Victim-1 would be produced and that “Manhattan and [the town where Victim-1 lived] would be wallpapered with a 100,000 posters.”
SERGENTAKIS also created a Facebook account on which he posted harassing and threatening content regarding Victim-1. For example, in September 2014, the Facebook account showed a photograph of Victim-1 with the word “CRIMINAL” imposed in all capital letters across the bottom and, in August 2014, SERGENTAKIS posted a comment on the account stating: “I am thinking of running a promotion. What do you prefer a coffee mug or t shirt?” Above this comment was a photograph of a coffee mug bearing the web address of the Website, an image of Victim-1 behind prison bars, and the words “[Victim-1] CEO LLS.” In addition, SERGENTAKIS posted links to and advertisements for the Website on various other websites, including search engine websites, social media websites, news websites, and blogs.
SERGENTAKIS also used email to conduct his campaign of retaliation and harassment. For example, in August 2010, SERGENTAKIS sent an email to the then-principal of the high school where Victim-1’s children were enrolled as students, providing a link to the Website and stating: “this is something u need to know about.” SERGENTAKIS sent numerous emails to the media promoting the Website and making false allegations about Victim-1. For example, in September 2010, SERGENTAKIS sent an email to a TV station in Missouri stating, in part: “the head of a major nonprofit was arrested for child molestation and case fixing see [Website-1].” As another example, in September 2013, SERGENTAKIS sent an email to ABC News with the subject line “please review [Website-1]” and stating: “The CEO is a pedophile and millions of dollars are missing.” SERGENTAKIS further sent multiple emails to donors of LLS promoting the Website, disseminating such allegations about Victim-1, and encouraging the donors to stop supporting LLS.
SERGENTAKIS, 54, of Bangor, Pennsylvania, is charged with one count of retaliating against a witness or informant, which carries a maximum sentence of 10 years in prison, and one count of stalking, which carries a maximum sentence of five years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.
Mr. Bharara thanked and praised the USPIS for its outstanding work in this investigation.
This case is being handled by the Office’s White Plains Division. Assistant United States Attorney George D. Turner is in charge of the prosecution.
The charges contained in the Complaint are merely accusations and the defendant is presumed innocent unless and until proven guilty.
Nunez V. City of New York, Et Al. - U.S. Motion to Intervene DocumentsRead the Press Release
Nunez v. City of NY US Complaint in Intervention Exhibit A
Nunez v. City of NY, et al US Motion to Intervene Memo of Law
Nunez v. City of NY, et al US Motion to Intervene Notice of Motion
Nunez v. City of New York, et al US Complaint-In-InterventionManhattan U.S. Attorney Sues Thomas E. Haider, Former Chief Compliance Officer of Moneygram International, Inc., for Violating the Bank Secrecy ActRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Jennifer Shasky Calvery, the Director of the Financial Crimes Enforcement Network (“FinCEN”), announced today that the United States has filed a civil enforcement action against THOMAS E. HAIDER (“HAIDER”), the former Chief Compliance Officer of MoneyGram International, Inc. (“MoneyGram”), for violating the Bank Secrecy Act (“BSA”). At all times relevant to the Complaint, MoneyGram operated a money transfer service that enabled customers to transfer money from one MoneyGram location to another. The Complaint alleges that, notwithstanding his obligations as MoneyGram’s Chief Compliance Officer, HAIDER violated the BSA by failing to ensure that MoneyGram: (1) implemented and maintained an effective anti-money laundering (“AML”) program; and (2) filed timely suspicious activity reports with law enforcement when it knew, suspected, or had reason to suspect that third parties were using its money transfer service to facilitate criminal activity. The Complaint further alleges that, as a result of HAIDER’s conduct, the perpetrators of fraudulent telemarketing and other schemes were able to use MoneyGram’s money transfer system to engage in criminal activity and defraud MoneyGram customers out of substantial amounts of money.
Prior to the filing of the Complaint, FinCEN – which is responsible for enforcing compliance with the BSA – assessed a $1 million penalty against HAIDER for his above-referenced conduct. The Complaint seeks both to collect that assessed penalty and to enjoin Haider from participating, directly or indirectly, in the conduct of the affairs of any “financial institution” (as that term is used in the BSA) that is located in the United States or conducts business within the United States, for a term of years sufficient to prevent future harm to the public.
Manhattan U.S. Attorney Preet Bharara said: “Compliance officers perform an essential function in our society, serving as the first line of defense in the fight against fraud and money laundering. Unfortunately, as the Complaint alleges, Mr. Haider violated his obligations as MoneyGram’s Chief Compliance Officer. By allegedly failing to take the actions clearly required of him under the law, he allowed criminals to use MoneyGram to defraud innocent consumers and then launder the proceeds of their fraudulent schemes. As this case demonstrates, we are committed to working with FinCEN to enforce the requirements of the Bank Secrecy Act and hold individuals such as Mr. Haider accountable.”
FinCEN Director Jennifer Shasky Calvery said: “In my job, I’ve met hundreds of compliance officers and I know them to be some of the most dedicated and trustworthy professionals in the financial industry. FinCEN and our law enforcement partners greatly depend on their judgment and their diligence in our common fight against money laundering, fraud, and terrorist finance. Mr. Haider’s failures are an affront to his peers and to his profession. With his willful violations, he created an environment where fraud and money laundering thrived and dirty money rampaged through the very system he was charged with protecting. His inaction led to personal savings lost and dreams ruined for thousands of victims.”
As alleged in the Complaint, filed today in Manhattan Federal Court:
Since at least 2003, MoneyGram has operated a money transfer service that enables its customers to transfer money to and from various locations in the United States and abroad through its global network of agents and outlets. MoneyGram outlets are independently owned entities that MoneyGram has authorized to transfer money through its money transfer system. Typically, MoneyGram outlets are businesses (such as convenience stores and internet cafes) that offer money transfers through MoneyGram, but primarily provide other types of goods and services. MoneyGram agents are the individuals or entities that own and/or operate MoneyGram outlets.
As a money transmitter, MoneyGram is subject to, and must comply with, various requirements set forth in the BSA and its implementing regulations. As relevant here – and at all times relevant to the Complaint – MoneyGram was required to implement and maintain an effective AML program. MoneyGram was also required to file with FinCEN suspicious activity reports (“SARs”) identifying financial transactions that: (1) were sent by or through MoneyGram; (2) involved (individually or in the aggregate) funds of at least $2,000; and (3) MoneyGram knew, suspected, or had reason to suspect involved, among other things, the use of MoneyGram’s money transfer system to facilitate criminal activity. Such SARs were required to be filed within 30 days of MoneyGram detecting facts that may have constituted a basis for filing the SARs.
From at least 2003 through on or about May 23, 2008, HAIDER was MoneyGram’s Chief Compliance Officer. As such, HAIDER was responsible for ensuring that MoneyGram implemented and maintained an effective AML program and complied with its SAR-filing obligations.
Notwithstanding HAIDER’s obligations as MoneyGram’s Chief Compliance Officer, at all times relevant to the Complaint, HAIDER failed to ensure that MoneyGram (1) implemented and maintained an effective AML program and (2) fulfilled its obligation to file timely SARs. HAIDER’s failures included the following:
- Failure to Implement a Discipline Policy. HAIDER failed to ensure that MoneyGram implemented a policy for disciplining agents and outlets that MoneyGram personnel knew or suspected were involved in fraud and/or money laundering.
- Failure to Terminate Known High-Risk Agents/Outlets. HAIDER failed to ensure that MoneyGram terminated agents and outlets that MoneyGram personnel understood were involved in fraud and/or money laundering, including outlets that HAIDER himself was on notice posed an unreasonable risk of fraud and/or money laundering. For example, with respect to one such outlet: in 2004, HAIDER learned that the Toronto Police Department regarded the outlet as “dirty”; in 2005, 2006 and 2007, MoneyGram’s Fraud Department – which HAIDER supervised – identified the outlet as one of MoneyGram’s leading fraud outlets; in 2007, MoneyGram’s Fraud Department proposed to HAIDER (and others) that the outlet be terminated, and provided compelling evidence that the outlet was complicit in fraudulent schemes; and by the time Haider left MoneyGram in 2008, MoneyGram had received hundreds of reports from its customers linking the outlet to fraudulent activity.
- Failure to File Timely SARs. HAIDER failed to ensure that MoneyGram fulfilled its obligation to file timely SARs, including because: (1) HAIDER maintained MoneyGram’s AML program so that the individuals responsible for filing SARs were not provided with information possessed by MoneyGram’s Fraud Department that should have resulted in the filing of SARs on specific agents or outlets; and (2) HAIDER failed to provide adequate direction to MoneyGram staff regarding when to file SARs relating to fraud.
- Failure to Conduct Effective Audits of Agents/Outlets. HAIDER failed to ensure that MoneyGram conducted effective audits of agents and outlets, including outlets that MoneyGram personnel knew or suspected were involved in fraud and/or money laundering.
- Failure to Conduct Adequate Due Diligence on Agents/Outlets. HAIDER failed to ensure that MoneyGram conducted adequate due diligence on prospective agents, or existing agents seeking to open additional outlets, which resulted in, among other things, MoneyGram (1) granting outlets to agents who had previously been terminated by other money transmission companies and (2) granting additional outlets to agents who MoneyGram personnel knew or suspected were involved in fraud and/or money laundering.
As a result of HAIDER’s above-described AML failures, agents and outlets that MoneyGram personnel knew or suspected were involved in fraud and/or money laundering were allowed to continue to use MoneyGram’s money transfer system to facilitate their fraudulent schemes. The above-referenced failures continued throughout HAIDER’s employment at MoneyGram, and resulted in MoneyGram’s customers suffering substantial losses, as many were duped into using MoneyGram’s money transfer system to send significant sums of money to the perpetrators of fraudulent schemes.
Mr. Bharara thanked FinCEN for its extraordinary assistance in bringing this case, and its ongoing partnership with this Office in identifying and investigating potential BSA violations.
Mr. Bharara also thanked the Asset Forfeiture and Money Laundering Section of the U.S. Department of Justice, the United States Attorney’s Office for the Middle District of Pennsylvania, and the United States Postal Inspection Service for their assistance in connection with this case.
The case is being handled by Assistant U.S. Attorney Christopher B. Harwood from the Office’s Civil Frauds Unit.
U.S. v. Thomas Haider Complaint
Man Sentenced in White Plains Federal Court to 15 Months in Prison for Reckless Assault of Baby on Grounds of West PointRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that STEWART DANIEL HARBIN, 30, was sentenced yesterday to 15 months in prison by United States District Judge Cathy Seibel for his 2012 reckless assault of a baby while on the grounds of West Point Military Academy (“West Point”). The sentencing followed HARBIN’S guilty plea on March 13, 2014.
According to documents filed in this case and statements made in related court proceedings:
On October 17, 2012, at approximately 10:40 p.m., emergency personnel at West Point responded to a 911 call from the defendant’s home, a residence located within West Point. The emergency personnel transported the defendant’s 10-week-old infant child (the “Baby”) from the residence to Keller Army Community Hospital (“KACH”), West Point’s hospital. After examination at KACH, the Baby, at approximately 1:30 a.m. on October 18, 2013, was transported, via ambulance, to Westchester County Medical Center (AWCMC@). There, medical personnel determined that the Baby had rib fractures and an intracranial hemorrhage. Tests, including radiological studies, revealed rib fractures in at least two stages of healing. There were eight sub-acute (healing) fractures and one acute (new) rib fracture. The healing fractures were determined to be between 10 days and six weeks old, and were determined to have occurred on multiple occasions as determined by the different stages of healing. In addition, the tests performed on the Baby revealed evidence of a prior intracranial injury.
On March 13, 2014, Harbin pleaded guilty to recklessly assaulting the Baby. During the plea proceeding, the defendant stated that, “on or about October 17, 2012, in the County of Orange, New York, on the land belonging to West Point Military Academy, I, Stewart Harbin, caused serious physical injury to the brain of my son [name omitted], who was less than five years of age, specifically, approximately ten weeks old, by slamming or throwing the child so as to impact the child’s head on a hard surface or object.” HARBIN said, “Specifically, I put [the Baby] down hard onto a hard infant seat that had no give. We used this hard infant seat to secure him on the couch and within his crib and later in which I put [the Baby] down hard, causing his head to impact the hard surface of the infant seat, causing the brain to bleed.” At the plea proceeding, the Government underscored its view that, although HARBIN had admitted that he was the actor who acted upon the Baby and caused the injuries, the Government did not accept the notion that the brain injuries were sustained by putting the Baby down hard onto an infant seat. Judge Seibel inquired of Harbin: “When you say you put the infant down hard on the hard infant seat, do you mean that you slammed the child down or threw the child down?” Harbin stated, “Yes, ma’am.”
In sentencing HARBIN to 15 months’ imprisonment, Judge Seibel described the offense conduct as “horrifying.” Judge Seibel granted the defendant’s request to enter a residential treatment program for service-related Post Traumatic Stress Disorder before he begins serving his sentence. Judge Seibel ordered HARBIN to surrender to the Bureau of Prisons in six months. The Court also imposed a term of supervised release of three years.
Mr. Bharara praised the efforts of the FBI, the West Point Military Police, and the Westchester District Attorney’s Office in connection with this investigation.
The case is being handled by the White Plains Division. Assistant United States Attorney Marcia S. Cohen is in charge of the prosecution.
Department of Justice Takes Legal Action to Address Pattern and Practice of Excessive Force and Violence at Rikers Island Jails That Violates the Constitutional Rights of Young Male InmatesRead the Press Release
Eric Holder, the Attorney General of the United States, Preet Bharara, the United States Attorney for the Southern District of New York, and Vanita Gupta, the Acting Assistant Attorney General for Civil Rights for the Department of Justice, announced today that the United States has taken legal action to ensure that critically important reforms are put in place to address conduct at Rikers Island that has violated the constitutional rights of New York City’s youngest inmates, who are between the ages of 16 and 18 (“Young Inmates”). Specifically, the Department of Justice has filed a motion seeking the Court’s permission to join and become a plaintiff in a pending class action lawsuit against New York City, Nunez v. City of New York (the “Nunez Action”), which alleges that the Department of Correction (“DOC”) has engaged in a pattern and practice of using unnecessary and excessive force against inmates. The Department has taken this legal step as part of its ongoing effort to ensure that DOC implements all needed institutional reforms promptly, and that these reforms are lasting, verifiable, and enforceable through the judicial process.
Attorney General Eric Holder said: “With this filing, the Department of Justice is taking an important step to ensure the safety and constitutional rights of young people incarcerated at Rikers Island. We’ve seen alarming evidence of unnecessary and excessive use of force against juveniles, as well as a systemic failure to protect them from violence and deeply troubling -- and potentially scarring -- use of solitary confinement. This action allows the Justice Department to seek necessary reforms to remedy these unlawful conditions, to ensure fair treatment, and to provide all incarcerated young people with the protections, and opportunities to build better futures, that they deserve.”
Manhattan U.S. Attorney Preet Bharara said: “Sometimes it’s the case that bureaucracy can get in the way of reform-minded thinking and comprehensive cultural change. We hope that won’t be the case here. We welcome the aspirations articulated by Commissioner Ponte but we hope those aspirations will find concrete expression in the form of permanent, enforceable, and verifiable terms in a court-approved settlement agreement. The devil, as they say, is in the details and we have come to the conclusion that joining the pending case as a formal party is the best and most efficient way to get those details done. That is why we are now taking the steps necessary to carry out our responsibility under the law. Given the longstanding sad state of affairs at Rikers Island, our impatience is more than understandable. As I’ve said before, one way or another, we will get enduring and enforceable reform at Rikers Island.”
Acting Assistant Attorney General Vanita Gupta said: “Today we are taking legal action to ensure that critically important reforms are put in place to address the culture of violence and overuse of punitive segregation at Rikers Island that has violated the constitutional rights of New York City’s youngest inmates. We stand ready to work with the City to remedy these deeply disturbing conditions for the safety of confined youth, remedies that will ultimately also promote public safety and the safety of correctional officers.”
On August 4, 2014, the Department issued a report that concluded that “a deep-seated culture of violence is pervasive throughout the adolescent facilities at Rikers, and DOC staff routinely use force not as a last resort, but instead as a means to control the adolescent population and punish disorderly or disrespectful behavior.” The report urged the City to adopt and implement over 70 specific remedial measures. Although DOC’s new leadership has taken some positive steps in response to the report with respect to the 16- and 17-year-old population, including reducing the inmate-to-staff ratio, developing new programming, and moving toward eliminating the use of punitive segregation, much more needs to be done.
The Department’s proposed 36-page Complaint-in-Intervention (“Complaint”), filed today along with a motion to intervene in the Nunez Action, alleges that the City has engaged in a pattern and practice of violating the constitutional rights of Young Inmates, and that the City’s deliberate indifference to these constitutional rights has caused these inmates serious physical, psychological, and emotional harm. Like the August 4, 2014, report, the Complaint focuses on use of force by staff, inmate-on-inmate violence, and the use of punitive segregation.
Specifically, the Complaint alleges:
- Staff use force against Young Inmates with alarming frequency. In Fiscal Year 2014, there were 553 reported staff use of force incidents involving Young Inmates at the Robert D. Davoren Center (“RNDC”) and the Eric M. Taylor Center (“EMTC”), the two facilities that housed most Young Inmates. These incidents resulted in 1,088 injuries.
- Inmate-on-inmate fights and assaults are pervasive in large part because inmates are inadequately supervised by inexperienced and poorly trained officers. In Fiscal Year 2014, there were 657 reported inmate-on-inmate fights involving Young Inmates at RNDC and EMTC.
- Staff use of force and inmate-on-inmate fights and assaults have resulted in an alarming number of serious injuries to Young Inmates, including broken jaws, broken orbital bones, broken noses, long bone fractures, and lacerations requiring stitches.
- Staff frequently punch, strike, or kick Young Inmates in the head or facial area.
- Force is used as a means to punish Young Inmates, and staff unnecessarily continue to use force against inmates who already have been restrained.
- Force is used in response to inmate verbal taunts and insults.
- Specialized response teams, including probe and cell extraction teams, use excessive force.
- Staff regularly tell inmates to “stop resisting,” even though the inmate has been completely subdued, to justify the use of force.
- Use of excessive force is common in areas outside video surveillance coverage. DOC recently transferred many 18-year-old inmates to housing units that have no video surveillance at all.
The Complaint further alleges that, notwithstanding a long and troubled history of pervasive use of force against inmates at Rikers, the City has for years failed to address systemic deficiencies, including:
- Failure to ensure that use of force is accurately reported, and allowing a powerful code of silence to persist.
- Failure to conduct thorough and comprehensive investigations into use of force incidents.
- Failure to appropriately discipline staff for using excessive and unnecessary force.
- Failure to ensure that inmates are adequately supervised.
- Failure to implement an adequate age-appropriate classification system.
- Failure to provide staff with effective training on the proper use of force and how to appropriately manage youth.
In addition, the Complaint asserts that the City has engaged in a pattern and practice of placing Young Inmates in punitive segregation at an alarming rate and for excessive periods of time.
Since issuing its report in August, the U.S. Attorney’s Office has had several meetings with the City’s Law Department regarding the U.S. Attorney’s Office’s proposed remedial measures. Some of these discussions have included attorneys representing the Nunez plaintiffs, who have been engaging in settlement discussions with the City for several months. However, thus far, although there has been some constructive dialogue, the City has been unwilling to commit to an enforceable agreement including the type of reforms and oversight that are necessary to fully address the long-standing problems at Rikers and safeguard the constitutional rights of inmates.
Mr. Bharara thanked the Board of Correction for its continuing assistance in connection with this matter.
This case is being handled by the Office’s Civil Rights Unit. Assistant U.S. Attorneys Jeffrey K. Powell and Emily E. Daughtry are in charge of the case.
Nunez v. City of NY, et al. U.S. Motion to Intervene Notice of Motion
Nunez v. City of NY, et al. US Motion to Intervene Memorandum of Law
Nunez v. City of NY, et al. US Complaint-In-Intervention
Nunez v. City of NY, et al. U.S. Complaint-in-Intervention Exhibit AU.S. Broker-Dealer CEO and Managing Director Plead Guilty in Manhattan Federal Court to Massive International Bribery SchemeRead 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 the guilty pleas of BENITO CHINEA and JOSEPH DEMENESES , the former Chief Executive Officer and former Managing Director, respectively, of a United States broker-dealer (the “Broker-Dealer”), on felony charges arising from a conspiracy 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 pled guilty today in Manhattan federal court before United States District Judge Denise L. Cote.
Manhattan U.S. Attorney Preet Bharara stated: “In exchange for overseas trading business for their brokerage firm, Benito Chinea and Joseph Demeneses arranged millions of dollars in bribe payments to an officer at a state-run economic development bank of Venezuela. With their guilty pleas today, they are the latest defendants to answer for their roles in this massive international bribery conspiracy.”
Assistant Attorney General Leslie R. Caldwell said: “Benito Chinea and Joseph DeMeneses are the fifth and sixth defendants to plead guilty in connection with this far-reaching bribery scheme, which ranged from Wall Street to the streets of Caracas. The guilty pleas and the forfeiture of assets once again demonstrate that the Department is committed to holding corporate executives who engage in foreign bribery individually accountable and to deny them the proceeds of their corruption.”
According to the allegations in the Indictment 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, 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 a BANDES official 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 late 2008 through 2012, CHINEA and DEMENESES, together with three Miami-based Broker-Dealer employees, Ernesto Lujan, Tomas Alberto Clarke Bethancourt, and Jose Alejandro Hurtado, 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 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 commissions from trades with BANDES.
In order to conceal their conduct, CHINEA, DEMENESES and their co-conspirators routed the payments to Gonzalez, frequently in six-figure amounts, through third-parties posing as “foreign finders” and into offshore bank accounts. In several instances, CHINEA personally signed checks worth millions of dollars that were made payable to one of these purported “foreign finders” and later deposited in a Swiss bank account.
As further alleged in court documents, as a result of the bribery scheme, BANDES quickly became the Broker-Dealer’s most profitable customer. As the relationship continued, however, Gonzalez became increasingly unhappy about the untimeliness of the payments due her from the Broker-Dealer, and she threatened to suspend BANDES’s business. In response, DEMENESES and Clarke agreed to pay Gonzalez approximately $1.5 million from their personal funds. CHINEA and DEMENESES agreed to use Broker-Dealer funds to reimburse DEMENESES and Clarke for these bribe payments. To conceal their true nature, CHINEA and DEMENESES agreed to hide these reimbursements in the Broker-Dealer’s books as sham loans from the Broker-Dealer to corporate entities associated with DeMeneses and Clarke.
CHINEA, 48, of Manalapan, New Jersey, and DEMENESES, 46, of Fairfield, Connecticut, each pled guilty to one count of conspiracy to violate the Foreign Corrupt Practices Act and to violate the Travel Act. Each defendant faces 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 would be determined by the judge. CHINEA and DEMENESES have also agreed to pay $3,636,432 and $2,670,612 in forfeiture, respectively, which amounts represent their earnings from the bribery scheme.
Each defendant also faces pending civil charges filed by the U.S. Securities and Exchange Commission.
Gonzalez, Clarke, Hurtado, and Lujan have also pled guilty in connection with the scheme.
Mr. Bharara praised Department of Justice’s Criminal Division and the Federal Bureau of Investigation for their work in the investigation. He also thanked the U.S. Securities & 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’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 United States Attorneys Harry A. Chernoff and Jason H. Cowley, and Fraud Section Senior Deputy Chief James Koukios are in charge of the prosecution. Assistant United States Attorney Carolina Fornos is responsible for the forfeiture aspects of the case.
Additional information about the Justice Department’s FCPA enforcement efforts can be
found at www.justice.gov/criminal/fraud/fcpa.
Statement of Manhattan U.S. Attorney Preet Bharara on Conviction of Rikers Island Correction Officer Terrence PendergrassRead the Press Release
“Our efforts to reform Rikers Island continue. Following last week’s conviction of correction officer Austin Romain for taking bribes and smuggling drugs into Rikers Island, today a jury convicted former Rikers Island captain Terrence Pendergrass of a federal civil rights crime. The jury unanimously found that Pendergrass violated Jason Echevarria’s constitutional rights by deliberately ignoring his pleas for help and depriving him of urgent medical care, leaving Echevarria to die alone in his cell. Echevarria should not have died, and the convictions of individual wrongdoers at Rikers Island – as well as the systemic, institution-wide reforms we are pursuing – should help prevent tragedies like Echevarria’s death from occurring again.”
Rikers Island Correction Officer Found Guilty in Manhattan Federal Court of Deliberately Ignoring Urgent Medical Needs of Inmate Who DiedRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that TERRENCE PENDERGRASS, a correction officer and former captain, was found guilty today in federal court of deliberately ignoring the urgent medical needs of a Rikers Island inmate who had ingested a corrosive disinfectant and later died, in violation of the inmate’s rights under the United States Constitution.
U.S. Attorney Bharara stated: “Our efforts to reform Rikers Island continue. Following last week’s conviction of correction officer Austin Romain for taking bribes and smuggling drugs into Rikers Island, today a jury convicted former Rikers Island captain Terrence Pendergrass of a federal civil rights crime. The jury unanimously found that Pendergrass violated Jason Echevarria’s constitutional rights by deliberately ignoring his pleas for help and depriving him of urgent medical care, leaving Echevarria to die alone in his cell. Echevarria should not have died, and the convictions of individual wrongdoers at Rikers Island – as well as the systemic, institution-wide reforms we are pursuing – should help prevent tragedies like Echevarria’s death from occurring again.”
According to the Complaint, Indictment, and evidence presented at trial:
Rikers Island is a jail complex, located in the Bronx, New York, maintained by the New York City Department of Correction. At the time of his death, Jason Echevarria was an inmate incarcerated on Rikers Island in the Mental Health Assessment Unit for Infracted Inmates (known as “MHAUII”), a unit housing inmates who had committed infractions while incarcerated and who were identified as needing mental health treatment.
On the afternoon of August 18, 2012, Echevarria swallowed a powerful disinfectant/detergent combination in powder form, commonly referred to as a “soap ball,” used to clean and disinfect cells. Echevarria had been given the soap ball by a new correction officer for the purpose of cleaning Echevarria’s cell following a sewage backup. The soap ball contained, among other things, ammonium chloride, a corrosive chemical that is life threatening if ingested.
After Echevarria swallowed the soap ball, he began banging on his cell door and asking for help. Echevarria also told a correction officer that he had swallowed a soap ball and needed help. That correction officer in turn informed PENDERGRASS, the captain on duty at that time. As the captain on duty, PENDERGRASS was responsible for arranging for medical treatment for the inmates in his unit. Rather than arrange for that care, however, PENDERGRASS responded that the correction officer should only call on PENDERGRASS if he needed help with the extraction of an inmate from a cell or if there was a dead body. A short time later, the same correction officer told PENDERGRASS that he saw vomit in Echevarria’s cell, and PENDERGRASS responded that Echevarria should be told to “hold it.” Soon after, another correction officer told PENDERGRASS that Echevarria had swallowed a soap ball and that a pharmacy technician had told that officer that Echevarria needed a doctor. Despite what he had been told, and despite going to Echevarria’s cell himself after Echevarria had vomited, PENDERGRASS did not call for medical help. He also ordered an officer who was trying to call for help to hang up the phone.
PENDERGRASS, 50, of Howard Beach, New York, was convicted of one count of deprivation of rights under color of law. He faces a maximum sentence of 10 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. Sentencing has been scheduled for April 17, 2015, at 4:00 p.m., before U.S. District Judge Ronnie Abrams.
United States Attorney Bharara praised the work of the Federal Bureau of Investigation, and expressed his appreciation for the assistance of the New York City Department of Correction, Investigation Division, the Bronx County District Attorney’s Office, and the New York City Department of Investigation in the investigation of this matter.
This case is being prosecuted jointly by the Office’s Civil Rights Unit and Public Corruption Unit. Assistant U.S. Attorneys Lara K. Eshkenazi and Daniel C. Richenthal are in charge of the prosecution.
U.S. v. Terrence Pendergrass Indictment
Manhattan U.S. Attorney Announces Arrests of International Arms Traffickers for Conspiracy to Kill Americans and Related Terrorism ChargesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Michele Leonhart, Administrator of the United States Drug Enforcement Administration (“DEA”), announced today the arrests of CRISTIAN VINTILA (“VINTILA”), MASSIMO ROMAGNOLI (“ROMAGNOLI”), and VIRGIL FLAVIU GEORGESCU (“GEORGESCU”), international arms traffickers charged with conspiring to sell large quantities of military-grade weaponry to the Fuerzas Armadas Revolucionarias de Colombia (the “FARC”) – a designated foreign terrorist organization – to be used to kill Americans in Colombia. VINTILA and GEORGESCU were arrested in Podgorica, Montenegro, by Montenegrin authorities Monday as they prepared to finalize the transaction. ROMAGNOLI was arrested in Montenegro yesterday by Montenegrin authorities.
U.S. Attorney Preet Bharara said: “As alleged, Vintila, Romagnoli, and Georgescu attempted to sell military-grade weapons, from pistols to rocket launchers, to people they believed were associated with a terrorist group. Now they will no longer be able to participate in this illicit trade.”
DEA Administrator Michele Leonhart said: “Ruthless global weapons traffickers pose a direct threat to the safety and stability of the United States and to the rule of law. DEA's strong international partnerships have once again made the difference in disrupting a conspiracy that could have put innocent American lives in grave danger. Nothing is more important than the overall safety and security of our citizens. Thankfully, these alleged conspirators are out of business and will hopefully soon face U.S. justice.”
According to the Indictment unsealed yesterday in Manhattan federal court:
Since May 2014, VINTILA has been a Romania-based weapons trafficker, ROMAGNOLI has been a Europe-based weapons trafficker, who is able to procure fraudulent end-user certificates (“EUCs”) for military-grade weaponry, and GEORGESCU has been a Romania-based weapons broker. Between May and October 2014, VINTILA, ROMAGNOLI, and GEORGESCU conspired to sell an arsenal of weapons, including machine guns and anti-aircraft cannons, with the understanding that the weapons would go to the FARC to be used by the FARC against the United States. During a series of recorded telephone calls and in-person meetings, VINTILA, ROMAGNOLI, and GEORGESCU agreed to sell the weapons to three confidential sources working with the DEA (“CSs”), who represented that they were acquiring these weapons for the FARC. VINTILA, ROMAGNOLI, and GEORGESCU agreed to provide these weapons to the CSs with the specific understanding that the weapons would be used to kill Americans and, in particular, to shoot down American helicopters and airplanes. ROMAGNOLI further agreed to provide fraudulent EUCs, in order to make the illegal sale of weapons look legitimate.
During their consensually recorded meetings, VINTILA and ROMAGNOLI provided the CSs with catalogues of military-grade weapons they were prepared to provide the FARC. VINTILA gave the CSs a catalogue of weapons that included pistols, machine guns, and other high-powered weaponry, and ROMAGNOLI showed the CSs a catalogue that included automatic weapons and shoulder-fired rocket launchers. ROMAGNOLI additionally showed one of the CSs a sample fraudulent EUC. VINTILA, ROMAGNOLI, and GEORGESCU also discussed the logistics of receiving payment for the weapons from the CSs and delivering the weapons to the FARC.
The Indictment charges VINTILA, 44, ROMAGNOLI, 43, and GEORGESCU, 42, with two separate terrorism offenses:
Count One charges all three defendants with conspiracy to kill United States officers or employees, in violation of Title 18, United States Code, Sections 1114 and 1117. If convicted of Count One, each defendant faces a maximum sentence of life in prison. Count Two charges all three defendants with conspiracy to provide material support or resources to a designated foreign terrorist organization, in violation of Title 18, United States Code, Section 2339B. If convicted of Count Two, each defendant faces a maximum sentence of 15 years in prison. The statutory maximum sentences 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 efforts of the DEA’s Special Operations Division, the DEA’s Bucharest Country Office, the DEA’s Rome Country Office, the Montenegrin National Police, and the Romanian Authorities. The arrests are also the result of the close cooperative efforts of the U.S. Attorney’s Office for the Southern District of New York, the National Security Division of the U.S. Department of Justice, and the Justice Department’s Office of International Affairs.
The case is being prosecuted by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Andrea Lee Surratt and Ilan Graff are in charge of the prosecution.
The allegations contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
Vintila et al. Indictment
Avon Subsidiary Pleads Guilty in Manhattan Federal Court to Conspiring to Violate the Foreign Corrupt Practices ActRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Leslie R. Caldwell, the Assistant Attorney General for the Criminal Division of the Department of Justice (“DOJ”), and Andrew G. McCabe, Assistant Director-in-Charge of the Washington Field Office of the Federal Bureau of Investigation (“FBI”), announced today the guilty plea of Avon Products (China) Co. Ltd. (“Avon China”), a wholly owned subsidiary of the New York-based cosmetics company, Avon Products, Inc. (“Avon”), to a criminal Information charging Avon China with conspiring to violate the accounting provisions of the Foreign Corrupt Practices Act (“FCPA”) by concealing and disguising gifts, cash, non-business meals, travel, and entertainment it gave to Chinese government officials in order to obtain and retain certain business benefits for Avon China. In addition, the U.S. Attorney’s Office and DOJ entered into a deferred prosecution agreement (“DPA”) with Avon, relating to Avon’s role in the conspiracy and its failure to implement internal controls. Pursuant to the DPA with Avon, a criminal Information has been filed charging Avon with conspiring to violate the books and records provisions of the FCPA and with violating the internal controls provisions of the FCPA. In a proceeding today before United States District Judge George B. Daniels, the criminal Informations were filed against Avon and Avon China, and Avon China entered its guilty plea and was sentenced.
In total, Avon and Avon China have agreed to pay $67,648,000 in criminal penalties. Avon has also agreed to implement rigorous internal controls, cooperate fully with the Government, and retain a compliance monitor for at least 18 months.
In a related matter, Avon reached a settlement with the U.S. Securities and Exchange Commission (“SEC”) and will pay an additional $67,365,013 in disgorgement and prejudgment interest, bringing the total amount of U.S. criminal and regulatory penalties paid by Avon and Avon China to $135,013,013.
Manhattan U.S. Attorney Preet Bharara said: “For years in China it was ‘Avon calling,’ as Avon bestowed millions of dollars in gifts and other things on Chinese government officials in return for business benefits. Avon China was in the door-to-door influence-peddling business, and for years its corporate parent, rather than putting an end to the practice, conspired to cover it up. Avon has now agreed to adopt rigorous internal controls and to the appointment of a monitor to ensure that reforms are instituted and maintained.”
Assistant Attorney General Leslie R. Caldwell said: “Companies that cook their books to hide improper payments will face criminal penalties, as Avon China’s guilty plea demonstrates. Public companies that discover bribes paid to foreign officials, fail to stop them, and cover them up do so at their own peril.”
FBI Assistant Director-In-Charge Andrew G. McCabe said: “When corporations knowingly engage in bribery in order to obtain and retain contracts, it disrupts the level playing field to which all businesses are entitled. Companies who attempt to advance their businesses through foreign bribery should be on notice. The FBI, with our law enforcement partners, is continuing to push this unacceptable practice out of the business playbook by investigating companies that ignore the law.”
According to the allegations contained in the criminal Informations, which were filed today in Manhattan federal court, and other publicly available information:
From at least 2004 through late 2008, Avon and Avon China conspired to falsify Avon’s books and records by falsely and misleadingly describing the nature and purpose of certain Avon China transactions in order to disguise things of value that Avon China executives and employees gave to government officials in China. Specifically, Avon China disguised over $8 million in gifts, cash, non-business travel, meals, and entertainment it gave to Chinese government officials in order to obtain and retain business benefits for Avon China. Avon China attempted to disguise the payments and benefits through various means, including by falsely or misleadingly describing the nature or purpose of, or participants associated with, such expenses, and falsely recording payments to a third-party consultant as payments for legitimate services.
Moreover, in late 2005, Avon learned that Avon China was routinely providing things of value to Chinese government officials and failing to properly document them. Instead of ensuring the practice was halted, disciplining the culpable individuals, and implementing appropriate controls to address this problem, Avon and Avon China took steps to conceal the conduct, despite knowing that Avon’s books and records would continue to be inaccurate if steps were not taken to correct the conduct. Avon China thus continued operating in the same improper manner, until late 2008.
Avon has since cooperated with the Government, including by conducting an extensive internal investigation, voluntarily making U.S. and foreign employees available for interviews, and collecting, analyzing, translating, and organizing voluminous evidence. Avon has also undertaken extensive anti-corruption remedial efforts, including taking appropriate disciplinary action against culpable employees, and continuing to enhance Avon’s internal accounting, reporting, and compliance functions.
Mr. Bharara praised the outstanding efforts of the FBI in the investigation. He also thanked the SEC’s Division of Enforcement for its significant assistance in the investigation.
The case is being handled by the Complex Frauds and Cybercrime Unit and the Fraud Section of the DOJ’s Criminal Division. Assistant U.S. Attorney Sarah E. Paul, and Senior Trial Attorney Laura Perkins of the Criminal Division’s Fraud Section, are in charge of the prosecution.
Avon Products Information
Avon China Information
Avon DPA
Avon China Plea Agreement
Two Members of Bronx Drug Trafficking Crew Convicted in Manhattan Federal Court for Murders, Drug Trafficking, Firearms Offenses, and Other CrimesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that ARMANI CUMMINGS, a/k/a “A1,” and JOSE MUNOZ, a/k/a “Rico,” were found guilty on December 12 of murder, drug trafficking, firearms offenses, and other crimes. The jury convicted CUMMINGS and MUNOZ on all 14 counts in the indictment following a four-week trial before U.S. District Judge Victor Marrero.
Manhattan U.S. Attorney Preet Bharara said: “Armani Cummings and Jose Munoz were members of a violent drug trafficking crew who themselves used violence in the extreme. As a unanimous jury found, they murdered three men who were rivals, for control of territory. Thanks to the FBI and the NYPD, Cummings and Munoz will likely never return to any section of the Bronx.”
According to court papers and the evidence admitted at trial:
ARMANI CUMMINGS, 23, and JOSE MUNOZ, 26, were members of a crack cocaine distribution organization operating in the Allerton Avenue section of the Bronx, New York, between 2006 and 2012, responsible for the distribution of crack cocaine. CUMMINGS and MUNOZ carried, possessed, and brandished firearms during the period of the charged narcotics conspiracy in order to protect their narcotics and narcotics proceeds, and to ensure that rival drug dealers did not encroach on their territory.
In or about mid-2009, a dispute over narcotics territory in the Allerton area erupted between a drug crew lead by CUMMINGS, and another drug crew. On January 14, 2010, as a result of this drug dispute, CUMMINGS shot and killed 18-year-old Laquan Jones, a/k/a “Bills.” On June 9, 2010, CUMMINGS, along with a criminal associate, shot and killed 45-year old Carl Copeland, a/k/a “Giovanni.” Jones and Copeland were both members of a rival drug crew, and had taken steps to keep CUMMINGS and CUMMINGS’s associates from selling crack in certain locations in the Allerton area.
MUNOZ, a/k/a “Rico,” who had been selling crack in the Allerton area in 2008, was released from jail in or about 2010, and returned to the Allerton area. MUNOZ joined CUMMINGS’s drug crew, and used violence and threats of violence to ensure that drug dealers from outside of Allerton did not sell crack in the area. In that regard, MUNOZ attacked a number of rival drug dealers in 2010, stole their crack, and warned them not to return. On December 31, 2011, while at a New Year’s Eve party, MUNOZ saw one of his drug rivals, Shameek Young, a/k/a “Boom.” Munoz then fired into a crowd of people, and hit Young in the back four times, killing him.
For their roles in the Allerton Avenue crack cocaine distribution conspiracy, CUMMINGS and MUNOZ were convicted of one count of conspiring to distribute 280 or more grams of crack; and with carrying and possessing guns in connection with, and in furtherance of, the narcotics conspiracy. CUMMINGS was also convicted, in six additional counts, with the narcotics-related murder of Laquan Jones, and of the murder of Carl Copeland. MUNOZ was convicted, on three counts, of the narcotics-related murder of Shameek Young. MUNOZ was also convicted of two counts of robbery, and one count of possessing and brandishing a firearm during, and in relation to, the robbery. CUMMINGS and MUNOZ will be sentenced by Judge Marrero on April 10, 2015. Both face mandatory life sentences.
U.S. Attorney Bharara praised the Federal Bureau of Investigation and the New York City Police Department 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 Hadassa Waxman and Michael Gerber are in charge of the prosecution.
Four Employees of Bernard L. Madoff’s Fraudulent Investment Advisory Business Sentenced in Manhattan Federal Court for Their Roles in the Massive FraudRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that ANNETTE BONGIORNO, the manager of the fraudulent investment advisory business at Bernard L. Madoff Investment Securities LLC, JOANN CRUPI, a/k/a “Jodi,” who managed hundreds of millions of dollars in fictitious investments, and JEROME O’HARA and GEORGE PEREZ, who worked as computer programmers designing and maintaining the proprietary software that enabled the fraud, were sentenced in Manhattan federal court. BONGIORNO was sentenced last Tuesday to six years in prison, and ordered to forfeit more than $155 billion. O’HARA, who was sentenced last Tuesday, and PEREZ, who was sentenced on Wednesday, were each sentenced to two-and-a-half years in prison, and ordered to forfeit more than $19 billion. CRUPI, who was sentenced today, was sentenced to six years in prison, and ordered to forfeit more than $33 billion. After a nearly six-month trial before U.S. District Judge Laura Taylor Swain, BONGIORNO, CRUPI, O’HARA, and PEREZ were convicted in March 2014 of, respectively, ten, thirteen, eight, and eight counts of securities fraud, falsifying the books and records of Madoff Securities, and conspiracy; BONGIORNO and CRUPI were also convicted of tax fraud, and CRUPI was convicted of bank fraud.
Manhattan U.S. Attorney Preet Bharara said: “Earlier this year, a jury unanimously found Annette Bongiorno, Joann Crupi, Jerome O’Hara, and George Perez guilty of every crime with which they were charged as a result of their willful participation in Bernard Madoff’s historic Ponzi scheme. As the Court acknowledged today and last week, each of them knowingly agreed to defraud thousands of victims, leading to billions of dollars in losses and unspeakable hardship. Although the sentences imposed by the Court cannot adequately compensate their many, many victims, time in prison for Bongiorno, Crupi, O’Hara, and Perez is a measure of justice.”
According to the allegations in the Superseding Indictment filed in Manhattan federal court, other court documents, and the evidence presented at trial:
BONGIORNO, an employee in the investment advisory business for 40 years, managed hundreds of investment advisory accounts purportedly having a cumulative balance of approximately $8.5 billion as of November 30, 2008. BONGIORNO also supervised employees who worked for the investment advisory business, and was for many years the head of the fraudulent investment business.
CRUPI, an employee in the investment advisory business for 25 years, managed several Madoff Securities investment advisory accounts purportedly having a cumulative balance of approximately $900 million as of November 30, 2008. CRUPI also, like BONGIORNO before her, tracked the daily activity of the bank account into which billions of dollars of investment advisory client money was deposited, and from which investment advisory client redemptions were paid.
During the course of managing investment advisory accounts, BONGIORNO and CRUPI “executed” trades in the investment advisory clients’ accounts only on paper, based on historically reported prices of securities that they researched in the Wall Street Journal and Bloomberg. Those trades achieved annual rates of return that had been pre-determined by Madoff. BONGIORNO and CRUPI also backdated the purchase dates of purported trades so that they could control the amount of gains reflected in the investment advisory accounts. For example, on at least one occasion, BONGIORNO back-dated a trade by more than twelve years in the account of her co-defendant, Daniel Bonventre (who was sentenced last Monday to 10 years in prison). On another occasion, in the fall of 2008, BONGIORNO back-dated sales of Lehman Brothers shares in her own investment advisory account, after Lehman Brothers had in reality filed for bankruptcy. Similarly, CRUPI caused backdated, losing trades to be placed in her own investment account for tax purposes.
Further, BONGIORNO processed exceptional gains in certain investment advisory accounts that purportedly occurred months before the investment advisory accounts had been established. BONGIORNO also asked certain investment advisory clients to return previously issued Madoff Securities account statements so that she could alter them, and often include additional backdated trades.
CRUPI handled the receipt of funds sent to Madoff Securities by its clients for investment; transferred clients’ funds between and among various Madoff Securities bank accounts; handled client requests for redemptions sent to Madoff Securities by clients; monitored, on a daily basis, funds transferred into and out of the Madoff Securities bank account that was principally used to perpetrate the fraud; and prepared and assisted in the preparation of fabricated documents designed to deceive regulators and outside auditors. Further, CRUPI provided banks with false information in connection with mortgage loans for other Madoff Securities employees.
BONGIORNO and CRUPI also filed false Income Tax Returns on their own behalf, in which they failed to report income that they received from Madoff Securities. Specifically, BONGIORNO was convicted for failing to report thousands of dollars in cash that she withdrew from two “Bernard L. Madoff Special” accounts over a period of many years. Similarly, CRUPI was convicted for failing to report thousands of dollars in personal expenditures on a corporate credit card, including for food, wine, personal travel, and home improvement projects.
O’HARA and PEREZ were employed as computer programmers at Madoff Securities beginning in 1990 and 1991, respectively. They were responsible for developing and maintaining computer programs that supported the operation of the Madoff Securities investment advisory business. For example, O’HARA and PEREZ created special programs that, among other things: created books and records for a small subset of Madoff Securities investment advisory clients to help hide the scope and nature of the investment advisory business; changed the names of account holders to help explain why the SEC would not find investment advisory client securities at the Depository Trust Company (“DTC”); altered details about the number of shares, execution times, and transaction numbers for trades reported on Madoff Securities trade blotters, by employing algorithms that produced false and random results; created false and fraudulent order entry and execution reports that included fictitious times at which orders for equities transactions purportedly were placed; generated fraudulent commission reports; and created fraudulent investment advisory client account statements in a format different from those sent to clients.
Between 2004 and 2008, Madoff Securities was subject to at least five reviews by the United States Securities and Exchange Commission (“SEC”) and a European accounting firm that was conducting a review of Madoff Securities’ operations on behalf of investment advisory clients. As part of a concerted effort overseen by Madoff to deceive both the SEC and the European accounting firm, CRUPI, O’HARA, and PEREZ participated in creating numerous false and fraudulent books and records. O’HARA and PEREZ knew that the special programs they developed contained fraudulent information and that they were used in connection with the SEC and European accounting firm reviews. Similarly, O’HARA created false books and records – including by inserting fictitious securities positions – for the Madoff Securities market making and proprietary trading businesses, in order to deceive auditors from the Internal Revenue Service and New York State taxing authorities.
In imposing the sentences, Judge Swain observed that BONGIORNO’s “work was integral to the success of the unspeakable fraud perpetrated by Bernard Madoff,” and thereby “destroyed or at least chipped away at the foundation of innocent investors’ dreams.” Similarly, Judge Swain noted that O’HARA and PEREZ’s “work kept in place the essential backbone of the infrastructure through which the [] fraud was perpetrated,” and that through their conduct, “so many innocent lives were irreversibly upended.” Judge Swain observed that CRUPI was “the reassuring voice of Madoff Securities to at least one victim” (who had written a letter to the Court) and that she caused “staggering and continuing harm.”
In addition to the six-year prison term, BONGIORNO, 66, was also ordered to forfeit more than $155 billion, including specific bank accounts and real estate, representing property traceable to the massive Ponzi scheme. Judge Swain also imposed a term of two years of supervised release following BONGIORNO’s completion of this sentence. O’HARA, 51, and PEREZ, 48, were each ordered to forfeit more than $19 billion, and each was sentenced to three years of supervised release following the completion of his sentence. In addition to her prison sentence, CRUPI, 53, was ordered to forfeit $33.9 billion, and to serve four years of supervised release.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation. He also thanked the U.S. Securities and Exchange Commission, the Internal Revenue Service, and the U.S. Department of Labor for their assistance.
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.
Assistant United States Attorneys Matthew L. Schwartz, John T. Zach, and Randall W. Jackson are in charge of the prosecution. Assistant United States Attorneys Matthew L. Schwartz and Paul M. Monteleoni are in charge of the forfeiture aspects of the case.
Former Fed-Ex Driver Convicted in Manhattan Federal Court of Using Truck to Assist Two Separate Drug Rings, and of Witness Tampering and ExtortionRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that EDGAR ENCARNACION, a/k/a “Edgar Encarnacion-Lafontaine,” a/k/a “Tapon,” 47, was convicted on December 11 in Manhattan federal court of conspiring to distribute marijuana, conspiring to distribute cocaine, conspiring to commit extortion, extortion, and conspiring to commit witness tampering. As a result of his conviction, ENCARNACION faces a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison.
Manhattan U.S. Attorney Preet Bharara said: “A jury convicted Edgar Encarnacion of conspiring with a massive marijuana trafficking ring, and using his FedEx truck to transport large amounts of cocaine from California to the New York City area. While he was on pretrial release for the marijuana charges, Encarnacion threatened family members of another FedEx driver. Witness tampering and extortion will not be tolerated, and the jury has properly held Encarnacion accountable for his crimes.”
ENCARNACION’s charges initially arose out of a multi-year investigation titled “Operation Green Venom,” a coordinated multi-agency investigation that was led by Homeland Security Investigations, Immigration and Customs Enforcement (“ICE HSI”), and first announced in October 2010. More than 60 defendants have been convicted in United States v. Manuel Geovanny Rodriguez-Perez, et al., 10 Cr. 905 (LTS), and related cases. Those defendants include former Rock-a-fella music founder Kareem Burke, a/k/a “Biggs,” who received a sentence of five years in prison, High Times Magazine editor Matthew Woodstock Stang, a/k/a “Magazine Guy,” and Oscar Rodriguez, the cousin of the organization’s leader, who was convicted of racketeering and marijuana related charges and sentenced to 20 years in prison earlier this year.
According to the complaints, Indictments, and the evidence at trial, in 2010, EDGAR ENCARNACION agreed to use his FedEx truck to smuggle marijuana for Manuel Geovanny Rodriguez-Perez, a/k/a “Manuel Rodriguez,” a/k/a “Shorty,” the leader of a Washington Heights-based marijuana trafficking organization. During that same period, ENCARNACION was working with a separate cocaine-trafficking organization. ENCARNACION smuggled up to multi-kilogram quantities of cocaine in the sleeper area of his truck as he drove cross-country from California to Woodbridge, New Jersey. In December 2010, a man who was assigned to drive with ENCARNACION (the “Co-Driver”) stole $30,000 of several hundred thousand dollars of drug money that ENCARNACION had agreed to transport for the cocaine organization. About a week later, ENCARNACION was arrested in connection with the marijuana-trafficking investigation, Operation Green Venom. ENCARNACION was released on bail on those charges.
In early 2012, ENCARNACION began a campaign intended to force the Co-Driver to return the drug money he had stolen. ENCARNACION employed Facebook accounts set up in women’s names – including the name of one of the Co-Driver’s family members – to reach out to the Co-Driver’s in-laws. In these messages, ENCARNACION warned that the cocaine trafficking organization was “equipped with dangerous people who will do anything for money,” and threatened that the Co-Driver’s family in the Dominican Republic was “the most vulnerable, but nobody will be spared.” ENCARNACION posted photographs of the Co-Driver and his family members, including his three young daughters, on one of the Facebook accounts. In addition to using these Facebook accounts to threaten the Co-Driver’s family members, ENCARNACION used them to send disparaging messages about his ex-wife to her current in-laws.
During the same period in which he was making the Facebook threats, ENCARNACION also caused a telephone call to be made to one of the Co-Driver’s relatives in the Dominican Republic, during which she was warned that if the Co-Driver did not return the money, “blood was going to be spilled.” When these efforts did not cause the Co-Driver to return the money, ENCARNACION then went to the Co-Driver’s mother’s house, and demanded that she tell her son to call him about the money. During this visit, ENCARNACION also showed her a photograph of her son and grand-daughters. A week later, ENCARNACION left a threatening letter in front of the Co-Driver’s mother’s door, which reported that there would be violent retaliation if the Co-Driver did not return the money and warned, “Avoid the ‘law,’ otherwise the family in the [Dominican Republic] will not be saved.”
The Co-Driver’s family used an Internet search to discover that ENCARNACION was on pretrial release in connection with Operation Green Venom, and contacted federal authorities. The Co-Driver then agreed to assist the investigation by recording telephone conversations with ENCARNACION and his associate, co-defendant Juan Peralta, a/k/a “Johnny Jay,” who pled guilty to threats-related charges. After approximately six additional weeks of investigation – during which the threats continued through Superstorm Sandy – ENCARNACION was arrested at his residence on new charges, and remanded.
ENCARNACION, 47, was convicted of one count of cocaine conspiracy, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison; one count of marijuana conspiracy, which carries a mandatory minimum sentence of five years in prison and a maximum sentence of 40 years in prison; one count of conspiracy to commit extortion, which carries a maximum sentence of five years in prison; one count of extortion, which carries a maximum sentence of 20 years in prison; and one count of witness tampering, which carries a maximum sentence of 20 years in prison. Because the defendant was on pretrial release for all but one of the counts, he faces a potential additional penalty of 40 years – 10 years for each count. The maximum potential sentences in this case are prescribed by Congress and are provided for informational purposes only, as any sentencing of the defendant will be determined by the Court.
Mr. Bharara praised the outstanding investigative work of ICE HSI.
The prosecution of the cases arising from “Operation Green Venom” is being overseen by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Amie N. Ely and Emil Bove conducted the trial.
Czar Entertainment Founder James Rosemond Convicted in Manhattan Federal Court for Ordering the Murder of 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 found guilty on December 11 of murder-for-hire, conspiracy to murder-for-hire, and firearms offenses for ordering the murder of Lowell Fletcher. The jury convicted ROSEMOND on all counts in the controlling indictment following a two-week re-trial before U.S. District Judge Colleen McMahon.
According to court papers and the evidence admitted at trial:
JAMES ROSEMOND was the founder 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 by promising the men at least $30,000 in payment for killing Fletcher. ROSEMOND had developed criminal relationships with these men through his involvement in the cocaine trade. 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.
At the conclusion of ROSEMOND’s first trial earlier in 2014, a mistrial was declared because the jury was not able to reach a unanimous verdict on the counts against ROSEMOND and a co-defendant relating to the Fletcher murder. ROSEMOND’s co-defendant in that trial, Rodney Johnson, was convicted of narcotics and firearms counts, and is scheduled to be sentenced in January 2015 before Judge McMahon. ROSEMOND was retried on the murder-for-hire, conspiracy to murder-for-hire, and firearms offenses, resulting in yesterday’s conviction on all the counts against ROSEMOND arising from the Fletcher murder.
For his role in ordering, planning, and paying for the murder of Lowell Fletcher, ROSEMOND was convicted of one count of substantive murder-for-hire, one count of conspiracy to murder-for-hire, and two firearms counts. ROSEMOND faces a mandatory minimum sentence of life in prison. ROSEMOND is scheduled to be sentenced in March 2015 before Judge McMahon.
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. The trial was conducted by Assistant U.S. Attorneys Samson Enzer and Ryan P. Poscablo.
Statement of Manhattan U.S. Attorney Preet Bharara on Conviction of Rikers Island Correction Officer Austin RomainRead the Press Release
"Our efforts to root out bad conduct at Rikers Island, by individuals and by the institution as a whole, continue. Today, we took another step in the right direction with the conviction of correction officer Austin Romain for taking bribes and conspiring to smuggle drugs into Rikers Island. Holding corrupt officers like Romain accountable for their misconduct is just part of the solution; it is not a substitute for the sweeping, institutional reforms necessary at Rikers Island. We will continue to press forward on both fronts – holding individual bad actors accountable and demanding meaningful, institutional reforms."
Former Correction Officer Convicted in Manhattan Federal Court of Bribery and Narcotics Offenses in Connection with Rikers Island Inmate Contraband Distribution RingRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today the conviction of AUSTIN ROMAIN, a New York City Correction Officer, in connection with his receipt of thousands of dollars in cash bribes to smuggle marijuana and other contraband into Rikers Island for inmates. Following a four-day trial before the Honorable Robert W. Sweet, United States District Judge, the jury convicted ROMAIN of bribery and narcotics offenses.
Last month, former Correction Officer Khalif Phillips, who conspired with some of the same individuals as ROMAIN, was sentenced by the Honorable Richard J. Sullivan, United States District Judge, to 36 months in prison after his conviction for narcotics-related offenses.
Manhattan U.S. Attorney Preet Bharara said: “Our efforts to root out bad conduct at Rikers Island, by individuals and by the institution as a whole, continue. Today, we took another step in the right direction with the conviction of correction officer Austin Romain for taking bribes and conspiring to smuggle drugs into Rikers Island. Holding corrupt officers like Romain accountable for their misconduct is just part of the solution; it is not a substitute for the sweeping, institutional reforms necessary at Rikers Island. We will continue to press forward on both fronts – holding individual bad actors accountable and demanding meaningful, institutional reforms.”
As alleged in the Superseding Indictment against ROMAIN and established by the evidence admitted at trial:
ROMAIN became a Correction Officer in 2007. He was assigned to the George R. Vierno Center (GRVC) and later the Otis Bantum Correctional Center (OBCC) at Rikers Island. On multiple occasions in 2012 and 2013, ROMAIN smuggled marijuana, tobacco, and other contraband into the GRVC and provided it to inmates housed in that facility, who in turn sold it to other inmates. ROMAIN coordinated with the girlfriends of his inmate co-conspirators, who met with him to supply him with marijuana and to pay him for his smuggling activities. ROMAIN accepted thousands of dollars in bribes for the packages that he smuggled in to the GRVC and OBCC.
ROMAIN, 32, of Brooklyn, New York, was convicted on one count of honest services fraud, one count of bribery, and one count of conspiring to distribute marijuana. Romain was acquitted on one count that alleged he had distributed marijuana on a particular date. The marijuana conspiracy count carries a maximum term of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense. The bribery conviction carries a maximum term of 10 years in prison. The honest services fraud conviction carries a maximum sentence of 20 years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the outstanding investigative work of the New York City Department of Investigation and the DEA’s New York Drug Enforcement Task Force, which comprises members of the DEA, the New York City Police Department, and the New York State Police.
The prosecution is being handled by the Office’s Public Corruption Unit. Assistant United States Attorneys Russell Capone and Martin S. Bell are in charge of the prosecution.
Former Corporate Lawyer Arrested and Charged in Manhattan Federal Court in Connection with Multimillion-Dollar Ponzi SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that CHARLES A. BENNETT was arrested this morning on securities and wire fraud charges stemming from his scheme to defraud over 30 investors of more than $5 million through a Ponzi scheme that he perpetrated for more than five years. Among other false and misleading statements, BENNETT lied to investors by claiming to have exclusive access to a highly successful privately held investment fund in which he would purportedly invest the investors’ money. BENNETT solicited millions of dollars from over 30 investors, including his close friends and family members, but never actually invested any of the money in the investment fund or any other investment vehicle. Instead, BENNETT used the investors’ money for his own personal benefit and to pay back other investors.
BENNETT is expected to be presented today before United States Magistrate Judge Kevin Nathaniel Fox.
U.S. Attorney Preet Bharara said: “As alleged, Charles Bennett built a Ponzi scheme with money from friends and family, among others. The scheme, in which he allegedly told lie upon lie, lasted over five years and defrauded investors of over $5 million.”
FBI Assistant Director-in-Charge George Venizelos said: “All attorneys take an oath to deal honestly and promote their client’s best interests. As alleged, Bennett appeared to his clients to be a reputable attorney whom they could trust to invest their hard-earned money. Instead, he breached his oath and leveraged relationships he had with clients, some of whom he identified as close friends and family members, for personal financial gain. The FBI will continue to work with its law enforcement and private sector partners to investigate those whose greed-based schemes rob individuals of their hard-earned money.”
In a separate action, the U.S. Securities and Exchange Commission (“SEC”) announced civil charges against BENNETT.
According to the two-count Complaint unsealed today in Manhattan federal court:
From 2008 through November 2014, BENNETT, a former corporate lawyer at a law firm based in New York City, was engaged in a multimillion-dollar Ponzi scheme, during which he solicited money from investors based on materially false and misleading representations. Specifically, BENNETT told the investors that he himself had invested money in a highly successful privately held investment fund, and that, should they choose to invest, the investors’ money would be held in BENNETT’s account. BENNETT communicated by email and telephone with many of the investors in order to tell them about the purported status of their investments, including their purported returns. BENNETT also led most of the investors to believe that they were the only individuals to whom he had extended the offer to invest with him.
BENNETT created false and misleading paperwork in furtherance of the scheme, including “promissory notes” that he provided to the investors as a record of the amounts of money they had given to BENNETT to invest. BENNETT also provided certain investors with account statements that purported to show the amount that BENNETT (and the investors, through BENNETT) had invested. In fact, BENNETT never invested any of the investors’ money in the investment fund or in any other investment vehicle, but instead spent the money on his own personal expenses and to repay other investors.
During the course of the fraudulent scheme, BENNETT solicited more than $5 million from more than 30 investors.
BENNETT, 56, of Manhattan, is charged with one count of wire fraud and one count of securities fraud. The securities fraud count and the wire fraud count each carry a maximum sentence of 20 years in prison; and 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.
Mr. Bharara praised the work of the Federal Bureau of Investigation, and thanked the SEC for its assistance. He added that the investigation is continuing.
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 Amy Lester is in charge of the prosecution.
The allegations contained in the Complaint are merely accusations, and the defendant is
presumed innocent unless and until proven guilty.
Charles Bennett Complaint
Chief Technology Officer of Liberty Reserve Sentenced in Manhattan Federal Court to Five Years in PrisonRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Leslie R. Caldwell, Assistant Attorney General for the Justice Department’s Criminal Division, announced that MARK MARMILEV was sentenced today to five years in prison for conspiring to operate an unlicensed money transmitting business that he knew involved the transmission of funds derived from criminal activity. MARMILEV was principally responsible for designing and maintaining the technological infrastructure for Liberty Reserve, a company that operated one of the world’s most widely used digital currency services. MARMILEV pled guilty in September 2014 before U.S. District Judge Denise L. Cote, who also imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara said: “Mark Marmilev spent years designing and maintaining the technological architecture that allowed Liberty Reserve to operate a global payment processor and money transfer system that catered to criminals. Now, he will pay for that crime with five years in federal prison. ”
Assistant Attorney General Leslie R. Caldwell said: “Marmilev used his tech savvy to create a virtual currency business that was used extensively by criminals throughout the world. He and Liberty Reserve’s founders boasted they were outside the reach of U.S. law enforcement, and he couldn’t have been more wrong. His prison sentence shows that those who hide their illegal activities from the scrutiny of the Justice Department will be caught and will go to prison.”
According to allegations contained in the Indictment filed against Liberty Reserve, MARMILEV, and six other individual defendants, and statements made in other documents filed in Manhattan federal court and related court proceedings:
Liberty Reserve was incorporated in Costa Rica in 2006 and billed itself as the Internet’s “largest payment processor and money transfer system.” Liberty Reserve was created, structured, and operated to help users conduct illegal transactions anonymously and launder the proceeds of their crimes. It emerged as one of the principal money transfer agents used by cybercriminals around the world to distribute, store, and launder the proceeds of their illegal activity. Liberty Reserve was used extensively for illegal purposes, functioning as the bank of choice for the criminal underworld because it provided an infrastructure that enabled cybercriminals around the world to conduct anonymous and untraceable financial transactions.
Before being shut down by the U.S. government in May 2013, Liberty Reserve had more than five million user accounts worldwide, including more than 600,000 accounts associated with users in the United States, and processed tens of millions of transactions through its system, totaling more than $16 billion in funds. These funds encompassed suspected proceeds of credit card fraud, identity theft, investment fraud, computer hacking, child pornography, narcotics trafficking, and other crimes.
MARMILEV was a longtime associate of Liberty Reserve founder Arthur Budovsky and served as Liberty Reserve’s chief technology officer. In that role, MARMILEV was principally responsible for designing and maintaining Liberty Reserve’s technological infrastructure. MARMILEV worked for Liberty Reserve for years despite knowing that the business was used extensively to process criminal transactions. MARMILEV even promoted Liberty Reserve to criminals on Internet discussion forums, where, using aliases, he touted Liberty Reserve’s lack of anti-money laundering policies and its tolerance for, as he put it, “shady businesses.”
In addition to the prison sentence, MARMILEV, 35, of Brooklyn, New York, was sentenced to three years of supervised release and a $250,000 fine. In conjunction with the sentencing, a civil forfeiture complaint was filed today seeking the forfeiture of Gourmet Boutique, a retail grocery business located in Brooklyn, New York, and the forfeiture of MARMILEV’s interest in Grimaldi’s, a pizzeria located in the Coney Island area of Brooklyn, New York; according to the complaint, MARMILEV purchased these business interests using more than $1.6 million in Liberty Reserve proceeds.
Mr. Bharara praised the outstanding work of the United States Secret Service, the Internal Revenue Service-Criminal Investigation, and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, which worked together in this case as part of the Global Illicit Financial Team. Mr. Bharara also thanked the United States Secret Service’s New York Electronic Crimes Task Force for their extraordinary assistance with the investigation. Additionally, Mr. Bharara specially thanked all the international law enforcement agencies that assisted in the investigation, in particular, the Judicial Investigation Organization in Costa Rica, the National High Tech Crime Unit in the Netherlands, the Spanish National Police, Financial and Economic Crime Unit, the Cyber Crime Unit at the Swedish National Bureau of Investigation, and the Swiss Federal Prosecutor’s Office.
This case is being prosecuted jointly with the Department of Justice’s Asset Forfeiture and Money Laundering Section (“AFMLS”), which is overseen by Assistant Attorney General Leslie R. Caldwell. Mr. Bharara thanked AFMLS for its partnership and also thanked the Department of Justice’s Office of International Affairs and Computer Crime and Intellectual Property Section for their support.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit and Money Laundering and Asset Forfeiture Unit. Assistant United States Attorneys Serrin Turner, Andrew Goldstein, and Christine Magdo of the Southern District of New York and Trial Attorney Kevin Mosley of AFMLS are in charge of the prosecution, and Assistant United States Attorney Christine Magdo is in charge of the forfeiture aspects of the case.
The charges contained in the Indictment against certain of MARMILEV’s co-defendants remain pending and are merely accusations. Those defendants are presumed innocent unless and until proven guilty.
Supplier of “Molly” That Resulted in A Death at Electric Zoo Concert Pleads Guilty in Manhattan Federal Court to Narcotics Conspiracy ChargeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that PATRICK MORGAN pled guilty today to conspiring to distribute narcotics. MORGAN, who was arrested in July 2014, pled guilty before United States District Judge Edgardo Ramos.
Manhattan U.S. Attorney Preet Bharara said: “With today’s guilty plea, Patrick Morgan now stands convicted of conspiring to distribute the drug Molly, which led to the tragic death of Jeffery Russ. This Office remains committed to aggressively pursuing and prosecuting those who peddle this extremely dangerous drug.”
According to the Indictment, the underlying criminal Complaint, and statements made during court proceedings:
In early August 2013, PATRICK MORGAN sold pills commonly called “Molly,” which contained 3,4-methylenedioxymethamphetamine (“MDMA” or “ecstasy”) and 3,4-methylenedioxy-N-methylcathinone (“methylone”), to three individuals (the “Three Individuals”), including Jeffrey Russ, for their use at an electronic dance music concert in Buffalo, New York.
In mid-August 2013, the Three Individuals pooled their money in order to buy additional Molly pills from MORGAN. The Three Individuals intended to consume and distribute these Molly pills at the Electric Zoo music festival. Electric Zoo was a three-day, outdoor electronic dance music festival on Randall’s Island, New York, scheduled to be held from August 30, 2013, through September 1, 2013. Attendance at Electric Zoo was estimated to be over 130,000 people.
In mid-August 2013, MORGAN sold one of the Three Individuals approximately 80 Molly pills that MORGAN understood the Three Individuals intended to consume and distribute at Electric Zoo.
On August 30, 2013, the Three Individuals, including Jeffrey Russ, attended Electric Zoo and consumed some of the Molly pills that were purchased from MORGAN. Toward the end of the concert on August 30, 2013, Russ collapsed and had a seizure. Russ was treated by emergency medical technicians on Randall’s Island and ultimately taken to Harlem Hospital. When Russ arrived at Harlem Hospital, he was unresponsive. On August 31, 2013, at approximately 3:21 a.m., Russ died at Harlem Hospital from acute intoxication by the combined effect of MDMA and methylone with hyperthermia.
MORGAN, 24, of Buffalo, New York, pled guilty to conspiring to distribute narcotics, 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 defendant will be determined by the judge. MORGAN is scheduled to be sentenced on March 13, 2015, at 10:30 a.m., by Judge Ramos.
Mr. Bharara praised the investigative work of the Drug Enforcement Administration.
The case is being prosecuted by the Office’s Narcotics Unit. Assistant U.S. Attorney Joshua A. Naftalis is in charge of the prosecution.
Manhattan U.S. Attorney Announces Charges Against Doctor and 10 Other Individuals Involved in Illegal Distribution of More Than One Million Oxycodone PillsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, James J. Hunt, Special Agent-in-Charge of the U.S. Drug Enforcement Administration’s New York Division (“DEA”), and William J. Bratton, the Police Commissioner of the New York City Police Department (“NYPD”), today announced the unsealing of an Indictment against 11 participants in a massive illegal drug distribution ring involving the prescription painkiller oxycodone. As detailed further below, the distribution ring operated out of purported medical clinics in Manhattan and the Bronx, including the office of MOSHE MIRILISHVILI, a Board certified, state licensed doctor, who alone wrote more than 13,000 medically unnecessary prescriptions for oxycodone in a two-year period, resulting in the unlawful distribution of nearly 1.2 million oxycodone tablets. The scheme also involved drug traffickers who oversaw crews of “patients” sent into the clinics to obtain medically unnecessary oxycodone prescriptions so that the pills could be obtained and resold, and clinic staff who profited by selling access to MIRILISHVILI and the fraudulent prescriptions he wrote.
Nine of the 11 defendants were arrested this morning in connection with the charges unsealed today and are expected to be presented before U.S. Magistrate Judge Kevin N. Fox later this afternoon. Defendants Ganeene Goode and Kevin Frye remain at large.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Moshe Mirilishvili violated the oath of his profession and flouted the law to write more than 13,000 medically unnecessary prescriptions for oxycodone. He and his co-defendants, motivated by greed, allegedly conspired to enrich themselves by flooding the illicit market for this highly addictive and dangerous drug.”
DEA Special Agent-in-Charge James C. Hunt said: “As alleged, these defendants are drug dealers playing doctor. They use nicknames, roles and an organizational hierarchy that mimics street drug trafficking crews. Instead of providing legitimate medical examinations or treatment, Dr. Mirilishvili and his office staff allegedly took payments from drug chiefs, drug crews and ‘patients’ in exchange for oxycodone prescriptions used to fuel the spread of opioid abuse throughout New York City.”
NYPD Commissioner William J. Bratton said: “Dr. Mirilishvili not only made millions in illegal profits, he contributed to the growing addiction of oxycodone. Today’s arrests will help prevent more illegally prescribed prescription pain killers from reaching our streets and will hopefully improve quality of life for the residents who live on the same blocks as these pseudo medical facilities. I want to thank the investigators, agents and prosecutors involved in bringing this drug distribution network to justice.”
The following allegations are based on the Indictment unsealed today in Manhattan federal court:
Oxycodone is a highly addictive, prescription-strength narcotic used to treat severe and chronic pain conditions. Every year more than 13 million Americans abuse oxycodone, with the misuse of prescription painkillers such as oxycodone leading to as many as 500,000 annual emergency room visits. Oxycodone prescriptions have enormous cash value to street level drug dealers, who can fill the prescriptions at most pharmacies and resell the resulting pills at vastly inflated rates. Indeed, a single prescription for 90 30-milligram oxycodone pills has an average resale value in New York City of $2,700 or more.
From approximately January 2012 until December 2014, the drug distribution ring operated at various purported medical clinics in Manhattan and the Bronx, including the office of the defendant MOSHE MIRILISHVILI (the “Clinic”), where MIRILISHIVILI, a Board certified, state licensed doctor, wrote thousands of medically unnecessary prescriptions for large quantities of oxycodone in exchange for cash payments. MIRILISHVILI typically charged $200 in cash for “patient visits” that typically involved little, if any, actual examination and almost always resulted in the issuance of a prescription for a large quantity of oxycodone, typically 90 30-milligram tablets.
Virtually none of these “patients” had any medical need for oxycodone, nor any legitimate medical records documenting an ailment for which oxycodone would be prescribed. Instead, most of these individuals were members of “crews” – that is, they were recruited and paid by drug traffickers (the “Crew Chiefs”), to pose as “patients” in order to receive medically unnecessary prescriptions. The Crew Chiefs then obtained these prescriptions and arranged for them to be filled at various pharmacies so that the oxycodone pills thereby obtained could be resold on the streets of New York.
Various Clinic employees participated in and profited from the scheme, charging Crew Chiefs cash fees for scheduling “patient visits” necessary to obtain these oxycodone prescriptions (the “Office Staff”). The Office Staff also profited by creating fake documents such as MRI reports purporting to reflect injuries or urinalysis reports ostensibly documenting that the patient was taking rather than selling the oxycodone, all of which MIRILISHVILI would frequently request in an effort to avoid the attention of law enforcement.
In total, between October 2012 and December 2014, MIRILISHVILI wrote more than 13,000 medically unnecessary prescriptions for oxycodone, comprising nearly 1.2 million oxycodone tablets with a street value of $36,000,000 or more. MIRILISHIVILI collected more than $2.6 million in fees for “doctor visits” during this time period.
To maximize their profits, many of the Crew Chiefs involved in this scheme also sent their “patients” to see other doctors operating out of similar fraudulent medical clinics, including a clinic on Southern Boulevard in the Bronx, New York, and a clinic in Upper Manhattan. Between January 2012 and the present, doctors at these clinics wrote more than 35,000 oxycodone prescriptions, virtually none of them medically necessary, resulting in the unlawful distribution of millions of oxycodone tablets.
All of the defendants are charged with one count of conspiracy to distribute and possess with intent to distribute oxycodone. This offense carries a maximum sentence of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
A chart containing each defendant’s age and residence information is attached. The case is assigned to U.S. District Judge Colleen McMahon.
U.S. Attorney Bharara praised the investigative efforts of the Drug Enforcement Administration’s Tactical Diversion Squad (Group TDS-NY), which led this two-year investigation, and thanked the New York State Department of Financial Services and the Hackensack, New Jersey, Police Department for their assistance in the investigation. DEA’s Group TDS-NY consists of agents and officers from the U.S. Drug Enforcement Administration, the New York City Police Department, the Town of Orangetown Police Department, and the Westchester County Police Department. Mr. Bharara also noted that the investigation is ongoing.
The case is being prosecuted by the Office’s Narcotics Unit. Assistant U.S. Attorneys Edward B. Diskant and Brooke E. Cucinella are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
Click here to view chart(s)
Mirilishvili, Moshe et al. Indictment
Connecticut Man Charged in Manhattan Federal Court with Misappropriation of over $1 Million from Investors in Commodity PoolRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), today announced the arrest of RYAN TOMAZIN, a founder and managing partner of R2 Capital Group LLC (“R2 Capital”), in connection with the unsealing of a two-count Indictment charging TOMAZIN with defrauding investors and misappropriating investment funds. Beginning in late 2009, TOMAZIN solicited over one million dollars from investors for investment in a commodity pool. From late 2009 through December 2014, TOMAZIN defrauded investors by disseminating, or causing others to disseminate, documents containing false representations regarding how assets in the commodity pool would be managed, and by falsely informing investors that their investments were increasing in value when, in fact, their investments had declined in value precipitously. As a further part of the scheme, TOMAZIN and other principals at R2 Capital caused over $850,000 of investors’ funds to be withdrawn from bank accounts associated with the commodity pool, and directed to bank accounts held in TOMAZIN’s and other principals’ own names or those of their respective holding companies for no legitimate purpose.
TOMAZIN was arrested by the FBI this morning at his residence in Connecticut, and will be presented in federal court in the Southern District of New York this afternoon.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Ryan Tomazin misled investors about the commodity pool he ran, and then misappropriated their money. With today’s arrest, he will now be brought to justice for this fraud.”
FBI Assistant Director-in-Charge George Venizelos said: “Once again we see greed and unethical behavior by those we trust with our investments. As alleged in the indictment, Mr. TOMAZIN defrauded investors, misappropriated their investment funds for his own personal benefit and then made false representations to cover his unethical scheme. Today’s arrest is another example of our continued commitment to work with our partners to expose and prosecute such criminal activity.”
According to the allegations in the Indictment unsealed today in Manhattan federal court:
R2 Capital began operations as an investment firm in 2008. In late 2009, R2 Capital created a commodity pool, R2 Capital Partners I L.P. (the “Commercial Pool”) and began to solicit investors, eventually raising approximately $2.2 million. In early 2010, R2 Capital engaged in trading on behalf of the Commercial Pool, but experienced significant losses and ceased all trading activity in or about July 2011. By August 2011, there was less than $5,000 remaining in bank accounts associated with the Commercial Pool.
In early 2010, TOMAZIN solicited a potential investor in the Commercial Pool (“Investment Fund-1”) and provided Investment Fund-1 with documentation that stated, among other things, that R2 Capital would receive a management fee limited to 50% of the profits earned by the Commercial Pool. Investment Fund-1 invested over $1 million in the Commercial Pool. From June 2010 to July 2011, the Commercial Pool experienced significant net losses. In July 2011, all trading activity in the Commercial Pool ceased. Nonetheless, between August 2011 and March 2013, TOMAZIN caused false “Trading Statements” to be sent to Investment Fund-1 reflecting false purported monthly trading profits and inaccurate trade balances. Furthermore, contrary to prior representations that R2 Capital’s management fee would be limited to 50% of profits earned, TOMAZIN and other principals at R2 Capital caused approximately $850,000 to be withdrawn from bank accounts associated with the Commercial Pool for their own personal benefit.
TOMAZIN, 39, of Stamford, Connecticut, is charged in the Indictment with securities fraud (Count One) and commodities fraud (Count Two). The securities fraud charge carries a maximum term of 20 years in prison and the commodities fraud charge carries a maximum term of 10 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.
In a separate action, the United States Commodities Futures Trading Commission (“CFTC”) previously sued TOMAZIN, two others, and R2 Capital, in an action filed in United States District Court for the District of Colorado.
Mr. Bharara praised the investigative work of the FBI. He also thanked the CFTC for its assistance.
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. Attorneys Harry Chernoff and Aimee Hector are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
Ryan Tomazin Indictment
Thirteen Members and Associates of Violent Yonkers Street Gang Charged in White Plains Federal Court with Racketeering, Violent Crimes, Narcotics Conspiracy, and Firearms OffensesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Charles Gardner, the Commissioner of the Yonkers Police Department, announced today the unsealing of a Superseding Indictment charging 13 members and associates of a Yonkers-based street gang, the “Grimy Motherfuckers” (“GMF”), with racketeering, violent crimes, narcotics conspiracy, and firearms offenses. The original Indictment, filed in July 2014, alleged that GMF operated as a Racketeer Influenced and Corrupt Organization (RICO) and charged three GMF affiliates with offenses related to the murder of Tyrone Arthur on December 27, 2013. Today’s Superseding Indictment charges 10 additional GMF members and associates (as well as the three defendants previously charged) with a variety of crimes, including charges related to the March 27, 2010, maiming of a rival gang member.
Eleven of the 13 defendants charged in the Superseding Indictment unsealed today were arrested today or have previously been taken into custody. The defendants arrested today were presented in White Plains federal court this afternoon. The case is assigned to U.S. District Judge Cathy Seibel.
U.S. Attorney Preet Bharara stated: “As alleged, this Yonkers-based gang plagued the community of the Schlobohm Housing Projects with drug dealing and lethal violence. With today’s Indictment and arrests, we are another step closer to making the streets and citizens in this neighborhood safer.”
FBI Assistant Director-in-Charge George Venizelos stated: “As alleged, this investigation targeted violent individuals who used murder, threats and intimidation to further their criminal agenda. The charges demonstrate our continued effort to work closely with our law enforcement partners to strike at gang-related criminal enterprises and to eliminate the terror these groups inflict on our communities. Dismantling violent gangs remains a priority for the FBI.”
Yonkers Police Commissioner Charles Gardner stated: “Once again we have worked with our federal partners the FBI and the US Attorney’s Office for the Southern District of NY to target violent gang members who choose to do business here in Yonkers. These particular suspects failed to recognize our determination in ridding our community of violence. They will now be held accountable for their actions and I would like to thank all of the investigators who were involved in this morning’s arrests.”
According to the allegations in the Superseding Indictment and other documents in the public record:
From at least 2008 through 2014, the GMF has been a criminal enterprise operating in and around the Schlobohm Housing Projects in Yonkers, New York. At its inception, GMF was aligned with the Strip Boyz, a different street gang that was likewise based in the Schlobohm Housing Project in Yonkers and was made up of members one generation older than most GMF members. GMF and the Strip Boyz controlled crack cocaine and marijuana sales in and around the Schlobohm Housing Project and were allied in disputes with rival gang members, including members of the Cliff Street Gangsters and the Elm Street Wolves, two gangs from the east side of Nepperhan Avenue in Yonkers. In late June and early July 2012, law enforcement authorities arrested 20 members of the Strip Boyz on charges of narcotics distribution and/or firearm offenses in a federal case captioned United States v. Mark David, S1 12 Cr. 214 (ER). All 20 defendants have pled guilty in connection with those charges.
The 2012 arrests of the Strip Boyz left GMF the dominant gang in the area around the Schlobohm Housing Project, and GMF members have continued to engage in acts of violence and intimidation to preserve their dominance of the Schlobohm Housing Project and the surrounding areas that they previously shared with the Strip Boyz. In order to protect their territory and enhance the reputation of the gang, GMF members have committed numerous acts of violence, including murder, attempted murders, stabbings, and assaults.
The 10-count Superseding Indictment, United States v. Da’Quan Johnson, et al., charges DA’QUAN JOHNSON, JAMES JOHNSON, KENNETH MOORE, JAMEKE BROWN, DAQUAN COUCH, DARIN FIELDS, ANTHONY FORD, FLOYD GILHAM, CHRISTOPHER GREBINGER, RONNIE KING, GERALD MARTIN, JAMES MCCALLUM, and WILBUR RANDOLPH with conspiring to violate the RICO statute and with using, carrying, possessing, and discharging firearms during and in relation to their participation in the conspiracy. As in the initial Indictment, DA’QUAN JOHNSON and MOORE are also charged with racketeering murder, conspiracy to commit the same, and a firearms offense in connection with the December 27, 2013, shooting death of Tyrone Arthur. JAMES JOHNSON is charged with serving as an accessory after the fact to the December 27, 2013, murder and with attempted murder, maiming, and a firearms offense in connection with the March 27, 2010, shooting of a rival gang member that left the victim paralyzed. Defendants DA’QUAN JOHNSON, JAMES JOHNSON, BROWN, COUCH, GILHAM, KING, MCCALLUM, and RANDOLPH are also charged with conspiring to distribute marijuana.
Charts containing the names, ages, residences, charges, and maximum penalties for the defendants are set forth below. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Bharara praised the outstanding investigative work of the FBI’s Westchester Violent Crimes Task Force, which comprises agents and detectives of the FBI, Homeland Security Investigations, the City of Yonkers Police Department, the Westchester County Police, and the Westchester County District Attorney’s Office. He also thanked the Westchester County District Attorney’s Office. He added that the investigation is continuing.
The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Scott Hartman and Douglas Zolkind are in charge of the prosecution.
The charges contained in the Superseding Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
U.S. v. Da'quan Johnson S1 Indictment
United States v. Da'Quan Johnson Chart
Statement of Manhattan U.S. Attorney Preet Bharara on the U.S. Court of Appeals Second Circuit Decision in U.S. V. Todd Newman and Anthony ChiassonRead the Press Release
“Today’s decision by the Court of Appeals interprets the securities laws in a way that will limit the ability to prosecute people who trade on leaked inside information. The decision affects only a subset of our recent cases, and in those cases – as in all our criminal cases – we investigated and prosecuted misconduct based on our good faith assessment and understanding of the facts and the law that existed at the time. We are still assessing the Court’s decision, which appears in our view to narrow what has constituted illegal insider trading, and are considering our options for further appellate review.”
Civil Rights Settlement in Manhattan Federal Court Requires Major Real Estate Developer to Make New and Recent Rental Complexes Accessible to All New YorkersRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today the settlement of a federal civil rights lawsuit with the RELATED COMPANIES (“RELATED”) by consent decree. Under the settlement, RELATED agrees to establish procedures that will ensure that its ongoing and future development projects, such as the residential complexes at the Hudson Yards development on Manhattan’s West Side, will comply with the accessibility requirements of the federal Fair Housing Act (“FHA”). RELATED also agrees to make retrofits at four residential rental complexes in Manhattan – One Carnegie Hill, Tribeca Green, 500 West 30th Street, and 529 West 29th Street – to make them more accessible to individuals with disabilities. Additionally, RELATED agrees to inspect its twelve other residential rental complexes in Manhattan and, where necessary, make retrofits at those buildings as well. Finally, RELATED agrees to provide up to $1.9 million to compensate aggrieved persons and pay a civil penalty of $100,000. The consent decree was approved today by U.S. District Judge Shira A. Scheindlin.
Manhattan U.S. Attorney Preet Bharara said: “For over two decades, the Fair Housing Act has required newly built residential rental buildings to be accessible to people with disabilities. Yet developers in New York City have too often disregarded that requirement. It is encouraging that a major developer like Related has embraced its obligations under the law by agreeing to establish a process for ensuring accessibility at its ongoing and future development projects and to make retrofits in thousands of apartments. We hope this settlement will serve as a positive example for the developer community. But any developer that continues to ignore its obligation to comply with the law must understand that my Office is prepared to use all legal tools available to enforce the Fair Housing Act and ensure that New Yorkers with disabilities have full access to rental apartments in New York City.”
The FHA’s accessible design and construction provisions require new multi-family housing complexes constructed after January 1993 to have basic features accessible to persons with disabilities. In March 2014, the United States filed this lawsuit against RELATED and two architectural firms, alleging that a number of past and ongoing rental projects designed and constructed by RELATED and the architects, including One Carnegie Hill and Tribeca Green, do not comply with the FHA’s accessibility requirements.
Under the settlement, RELATED agrees that, for every multi-family housing project it constructs in the next four years, it will retain an FHA compliance consultant to ensure that the building, as constructed, will comply with the FHA’s accessibility requirements. For example, the FHA consultant will advise RELATED on the selection of fixtures and appliances and whether deviating from the architects’ drawings will affect accessibility. The FHA consultant also will conduct a site visit to identify non-compliant conditions and recommend appropriate solutions prior to the completion of construction. In addition, RELATED agrees to institute policies and training to ensure that its own employees and agents will comply with the FHA’s accessibility requirements.
Further, the settlement also requires RELATED to make extensive retrofits at two rental complexes, One Carnegie Hill and Tribeca Green, and to commit to additional retrofits at two other rental complexes that have been inspected, 500 West 30th Street, and 529 West 29th Street, in order to make them accessible. RELATED also agrees to arrange for inspection at its 12 other rental complexes in Manhattan and, where necessary, to make retrofits at those properties as well. Together, the 16 buildings covered by the consent decree contain more than 4,500 rental apartments.
Finally, the settlement requires RELATED to provide up to $1.9 million in funds to compensate aggrieved persons. RELATED also agrees to pay a civil penalty of $100,000.
The government’s lawsuit also asserted claims against the architects of One Carnegie Hill and Tribeca Green, ISMAIL LEYVA ARECHITECTS and ROBERT M. STERN ARCHITECTS. The United States is engaged in active negotiations with those architects regarding a potential settlement.
This settlement resolves claims against the developers in this eighth FHA lawsuit brought by the United States in Manhattan federal court to rectify inaccessible conditions at residential apartment buildings. The United States has settled claims against developers in the seven prior cases through consent decrees. A ninth lawsuit involving inaccessible design and construction of residential apartment buildings, against the Durst Organization, is still pending.
Aggrieved individuals may be entitled to monetary compensation from the fund created through today’s settlement. Aggrieved individuals may include those who were:
- Injured by a lack of accessible features at One Carnegie Hill, Tribeca Green, or the other properties constructed by RELATED;
- Discouraged from living at One Carnegie Hill, Tribeca Green, or the other properties constructed by RELATED because of the lack of accessible features;
- Required to pay to have an apartment at One Carnegie Hill, Tribeca Green, or the other properties constructed by RELATED made accessible,
- Prevented from having visitors because of a lack of accessible features at One Carnegie Hill, Tribeca Green, or the other properties constructed by RELATED; or
- Otherwise injured or discriminated against on the basis of disability as a result of the design or construction of One Carnegie Hill, Tribeca Green, or the other properties constructed by RELATED.
People who may be entitled to compensation should file a claim by contacting the Civil Rights Complaint Line at (212) 637-0840, using the Civil Rights Complaint Form available on the United States Attorney’s Office’s website http://www.justice.gov/usao/nys/civilrights.html, or sending a written claim to:
U.S. Attorney’s Office, Southern District of New York
86 Chambers Street, 3rd Floor
New York, New York 10007
Attention: Chief, Civil Rights Unit
The case is being handled by the Office’s Civil Rights Unit. Assistant U.S. Attorneys Li Yu, Emily E. Daughtry, Carina H. Schoenberger, and Jessica J. Hu are in charge of the case.
Related Companies Consent Decree
Member of Guinea Bissau-Based International Narcotics Trafficking Conspiracy Sentenced in Manhattan Federal Court to Five Years in PrisonRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that TCHAMY YALA, a citizen of Guinea Bissau, was sentenced today in Manhattan federal court to five years in prison for participating in a conspiracy to import narcotics into the United States. YALA was arrested on April 2, 2013, by the Drug Enforcement Administration’s (“DEA”) Special Operations Division, Bilateral Investigative Unit Narco-Terrorism Group, and the DEA’s Foreign-deployed Advisory Support Team (“FAST”) off the coast of West Africa while onboard a vessel under DEA control in international waters. On April 28, 2014, YALA pled guilty before U.S. District Judge Richard M. Berman.
Manhattan U.S. Attorney Preet Bharara stated: “With his sentence today, Yala is being held responsible for his integral role in an international scheme to traffic narcotics into the United States. I would like to thank the Drug Enforcement Administration for their outstanding work on this case.”
According to the Indictment, other documents filed in Manhattan federal court, and statements made at YALA’s guilty plea and today’s sentencing:
Beginning in the summer of 2012, YALA and his co-defendants, former Guinea Bissau Naval Admiral Jose Americo Bubo Natchuto and Papis Djeme, engaged in a series of recorded meetings in Guinea Bissau with confidential sources (the “CSs”) working with the DEA, who purported to be representatives and associates of South American-based narcotics traffickers.
In an early meeting in which Nachuto and YALA discussed the shipment of ton-quantities of cocaine from South America to Guinea Bissau by sea, Nachuto noted that the Guinea Bissau government was weak in light of the recent coup d’etat, and that it was therefore an ideal time for the proposed cocaine transaction. YALA indicated that the boat carrying the cocaine would unload at a secure location in Guinea Bissau that could not be detected. At an October 2012 meeting at which YALA was present, Djeme advocated using “go-fast” boats to transport the cocaine into Guinea Bissau, because such boats could more easily navigate the waters of Guinea Bissau, and provided a photograph of the type of “go-fast” boat that could be used to transport the cocaine as well as information for the purchase of such boats.
In further meetings, YALA, Nachuto, and Djeme agreed to assist the CSs by receiving a two-ton load of cocaine that would be transported to Guinea Bissau by boat and stored in Guinea Bissau for distribution to Europe and the United States. In one November 2012 meeting, YALA and his co-defendants met with two of the CSs in Guinea Bissau and discussed importing large quantities of cocaine into the United States. During that meeting, Nachuto offered to utilize a company that he owned to facilitate the shipment of cocaine out of Guinea Bissau. Natchuto indicated that YALA and Djeme would be responsible for handling the security of the drugs while they remained in Guinea Bissau, with only Djeme, Nachuto, and YALA knowing the precise location of the drugs.
At a meeting the following day at which YALA was present, Nachuto confirmed that he would charge a fee of $1,000,000 per 1,000 kilograms of cocaine received in Guinea Bissau. In February 2013, YALA escorted one of the CSs to a location in Guinea Bissau where the narcotics were to be stored and hidden. The following month, YALA purchased two cisterns, which were intended to be filled with the narcotics and buried underground for safe-keeping, as well as additional equipment for the storage of the narcotics.
In addition to his prison term, YALA, 42, was sentenced to three years of supervised release and was ordered to pay a $100 special assessment.
On April 29, 2014, YALA’s co-defendant, Papis Djeme, pled guilty to participating in a conspiracy to import narcotics into the United States. On September 3, 2014, Djeme was sentenced by Judge Berman to 78 months in prison.
Mr. Bharara praised the outstanding efforts of the Special Operations Division of the DEA. Mr. Bharara also thanked DEA’s FAST, Lisbon Country Office, and Bogota Country Office, as well as the U.S. Department of Justice’s Office of International Affairs.
This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorney Aimee Hector is in charge of the prosecution.