Southern District of New York
Press releases recorded for this federal judicial district.
Manhattan U.S. Attorney Files Lawsuit Against Deutsche Bank and Other Entities for Engaging in an Abusive Scheme to Avoid Federal Income TaxesRead the Press Release
Suit Seeks to Recover More than $190 Million in Taxes, Penalties, and Interest
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States has filed a lawsuit against DEUTSCHE BANK, A.G., DB U.S. FINANCIAL MARKETS HOLDING CORP., DEUTSCHE BANK SECURITIES, INC., BMY ACQUISITION CORP., BMY ACQUISITION LLC, BMY STATUTORY TRUST, and FIRST UNION NATIONAL BANK, now known as WELLS FARGO BANK, N.A., as trustee of BMY STATUTORY TRUST, alleging that these parties participated in a series of transactions that amounted to fraudulent conveyances done with the purpose and effect of leaving the United States Treasury with a significant, uncollectable tax bill. The lawsuit seeks to recover those funds, along with appropriate penalties and interest.
Manhattan U.S. Attorney Preet Bharara said: “Through fraudulent conveyances involving shell companies, Deutsche Bank tried to make its potential tax liabilities disappear. This was nothing more than a shell game. This lawsuit seeks to hold Deutsche Bank and the other defendants liable for $190 million in taxes, penalties, and interest owed to the United States taxpayers.”
The following allegations are based on the Complaint filed today in Manhattan Federal court:
Deutsche Bank acquired a corporation in the fall of 1999 that held stock with a very low cost-basis, such that the sale of this stock would trigger more than $100 million in taxable gain as a result of the appreciation in value of the stock. In order to avoid paying taxes on the stock’s built-in gain, Deutsche Bank entered into an arrangement with a firm that created three shell companies: defendants BMY Acquisition Corp. (“BMY Corp.”), BMY Acquisition LLC (“BMY LLC”), and BMY Statutory Trust (“BMY Trust” and, collectively with BMY Corp. and BMY LLC, “BMY”). These shell corporations collectively served as an underfunded special-purpose vehicle with no function other than to be stuck with a tax bill that it could never pay.
To carry out the scheme, the Deutsche Bank and BMY entities executed a series of pre-planned transactions in the spring of 2000. First, a Deutsche Bank entity sold the corporation holding the appreciated stock to BMY for a price that did not represent fair value for it in light of, at a minimum, the tens of millions of dollars of tax liabilities on the built-in gains. BMY paid for the stock using a short-term loan conditioned on the completion of the pre-planned transaction. Immediately after purchasing the stock, BMY sold it to a different Deutsche Bank entity. At the time of this sale, the tax liability on the built-in gains of the stock was triggered on the part of BMY. BMY then paid back its loan and other expenses, leaving it with insufficient funds to pay the tax liability. Meanwhile, Deutsche Bank profited from this transaction by selling the stock with a stepped-up cost basis and without paying the resulting tax liability.
The Internal Revenue Service (“IRS”) has determined that as a result of these transactions the current unpaid federal tax liability, with penalties and interest that resided with the BMY shell company, is greater than $190 million.
The Complaint seeks recovery of the full amount of the unpaid federal tax liability.
The case is being handled by the Tax and Bankruptcy Unit of the Office’s Civil Division. Assistant U.S. Attorneys Robert William Yalen and Ellen London are in charge of the litigation.
U.S.. v. Deutsche Bank (Tax Case) 14 Civ 9669 Complaint
Former Director of Operations for Bernard L. Madoff Investment Securities, Daniel Bonventre, Sentenced in Manhattan Federal Court to 10 Years in Prison for His Role in the Massive FraudRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that DANIEL BONVENTRE, the former Director of Operations for Bernard L. Madoff Investment Securities LLC, was sentenced in Manhattan federal court today to 10 years in prison for his role in Madoff’s multibillion-dollar Ponzi scheme, the largest in history. BONVENTRE was also ordered to forfeit more than $155.5 billion. After a nearly six-month trial before U.S. District Judge Laura Taylor Swain, BONVENTRE was convicted in March 2014 of 22 counts of securities fraud, bank fraud, tax fraud, falsifying the books and records of Madoff Securities, making false filings with the United States Securities and Exchange Commission, and conspiracy.
Manhattan U.S. Attorney Preet Bharara said: “Daniel Bonventre was Bernard Madoff’s Director of Operations, and his partner in crime. For decades, Bonventre used his skills to help hide Madoff’s massive Ponzi scheme, and to funnel stolen customer money out of the fraudulent investment business. Today, Bonventre was sentenced to 10 years in prison and financial penalties that will rob him of his ill-gotten wealth – a punishment that fits Bonventre’s central role in the biggest financial fraud in history.”
According to the allegations in the Superseding Indictment filed in Manhattan federal court, other court documents, and the evidence presented at trial:
BONVENTRE was employed at Bernard L. Madoff Investment Securities (“Madoff Securities”) for 40 years and served as its Director of Operations since approximately 1978. BONVENTRE was responsible for maintaining and supervising the production of the principal internal accounting documents for Madoff Securities, including its general ledger, financial statements, and stock record. BONVENTRE directed that false entries be made in the general ledger that concealed the scope of Madoff Securities’ fraudulent investment advisory operations and understated Madoff Securities’ liabilities by billions of dollars. For example, from 1997 to 2008, more than $750 million of investment advisory investor funds were used to support Madoff Securities’ Market Making and Proprietary Trading operations, but were not accounted for on Madoff Securities’ books and records, including the general ledger, so as to conceal the true source of the funds. Moreover, as BONVENTRE knew, the general ledger did not accurately reflect the assets contained in the bank and brokerage accounts into which investment advisory investor funds were deposited, and likewise did not reflect the liability of Madoff Securities to its investment advisory clients that arose from the custody of investment advisory client funds in those accounts. The assets and associated liabilities of Madoff Securities’ investment advisory operations, which were omitted from the general ledger, ranged from millions to billions of dollars.
As a registered broker-dealer, Madoff Securities was required to file Financial and Operational Combined Uniform Single Reports (“FOCUS Reports”) with the SEC. Those FOCUS Reports require the production of basic information that amounts to a condensed version of a broker-dealer’s general ledger. Because the general ledger was inaccurate, as BONVENTRE well knew, the FOCUS Reports were likewise false because they failed to accurately reflect Madoff Securities’ assets and liabilities. For example, one such report, for the month of April 2006, in the midst of a liquidity crisis in the Ponzi scheme, failed to reflect at least $299 million in Madoff Securities liabilities related to $154 million of an investment advisory client’s bonds and the $145 million that Madoff Securities had borrowed using those bonds as collateral.
During one of those liquidity crises, in late 2005, BONVENTRE used falsified financial statements, false FOCUS Reports, and other fraudulent documents to obtain hundreds of millions of dollars in loans and lines of credit from federally insured financial institutions. Madoff Securities used the proceeds of those fraudulently obtained loans to pay back redemptions to customers of the investment advisory business, thereby prolonging the Ponzi scheme.
Further, 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 which 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, BONVENTRE participated in creating numerous false and fraudulent books and records, including counterfeit Depository Trust Company (“DTC”) reports, which falsely reflected billions of dollars in non-existent securities held on behalf of Madoff Securities clients at the DTC, a third-party clearinghouse.
In addition, between 2004 and 2007, in connection with audits of Bernard L. Madoff’s U.S. Individual Income Tax Returns, Forms 1040, BONVENTRE created false, backdated Madoff Securities records to show the tax auditors. Because Madoff had under-reported his income by tens of millions of dollars each year, BONVENTRE created false documents that appeared consistent with Madoff’s tax returns for the purposes of maintaining the falsity of Madoff’s tax returns and deceiving the auditors.
Likewise, BONVENTRE filed false Income Tax Returns on his own behalf, in which he failed to report cash and other benefits he received from Madoff Securities. Specifically, BONVENTRE was convicted of failing to report millions of dollars in cash and other benefits, including payments on his behalf for his membership in a country club, his son’s private high school tuition, common charges for his Upper East Side cooperative apartment, thousands of dollars in cigars and other luxury items charged to BONVENTRE’s personal credit card, and cash.
In addition to the millions of dollars of off-the-books income that BONVENTRE took from Madoff Securities, he also had his own investment advisory account, through which he received the benefit of more than $1.8 million in at least three fictitious backdated trades that appeared in his account between 2002 and 2006. The trade that appeared in BONVENTRE’s account in 2002 included a purchase that was backdated 12 years, to 1990, and generated fraudulent long-term capital gains of nearly $1 million. The trade that appeared in BONVENTRE’s account in 2006 was entered following his handwritten instructions directing another Madoff Securities employee to generate a fraudulent long-term capital gain of $449,000.
In imposing the 10-year sentence, Judge Swain observed that by “agree[ing] to facilitate the conduct of business ‘Madoff-style,’” BONVENTRE committed “despicable” and “literally, devastatingly serious crimes,” that were “at all times a key to [Madoff’s] success,” and which caused “financial devastation of unprecedented magnitude.” Bonventre was denied bail pending appeal and has been ordered to surrender and begin serving his term on February 19, 2015.
BONVENTRE, 67, was also ordered to forfeit $155.5 billion, including specific bank accounts and real estate, representing property traceable to the massive Ponzi scheme, as well as a related $457 million bank fraud. Judge Swain also imposed a term of two years of supervised release following BONVENTRE’s completion of this sentence.
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.
Manhattan U.S. Attorney and FBI Assistant Director Announce Charges Against Brooklyn Man in Scheme to Defraud Elderly Victims Across the United StatesRead 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 Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of a Complaint charging ALLAH JUSTICE MCQUEEN with conspiracy to commit wire fraud in connection with a scheme that targeted and victimized elderly people across the United States. As alleged, MCQUEEN and his co-conspirators tricked each victim, by phone, into believing that the victim’s grandchild had just been arrested on a narcotics offense and needed thousands of dollars in bail money immediately to avoid prison. The Complaint describes MCQUEEN’s victimization of 17 elderly individuals in New York and across the United States. MCQUEEN was arrested this morning and will be presented later today in federal court in Manhattan.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Allah Justice McQueen showed no justice to his elderly victims. Instead, he exploited the emotions of vulnerable grandparents by convincing them that those they loved were in trouble and needed money. Not only did he allegedly swindle grandparents out of thousands of dollars, he also caused them considerable emotional distress. We are seeing more and more fraud schemes that target vulnerable people, and we urge you to contact our Victim/Witness Unit if you believe you have been affected.”
FBI Assistant Director-in-Charge Venizelos said: “Courtesy and compassion are among the many traits valued by the elderly, making them attractive targets for criminals who seek to capitalize on their trusting nature. McQueen allegedly preyed upon some of society's most vulnerable citizens in a so-called grandparent scam that pinched more than pennies. In this and all cases, justice will certainly come to those who engage in crimes of this nature.”
According to the Complaint unsealed today in Manhattan federal court:
Beginning in approximately 2013, MCQUEEN and his co-conspirators perpetrated a scheme to defraud elderly victims around the United States by tricking them into believing their grandchildren had been imprisoned and needed immediate bail money. In particular, in each case, a member of the conspiracy contacted the victim by phone, purported to be a law enforcement official or attorney, and falsely claimed that the victim’s grandchild had been taken into custody for a narcotics offense and would not be released unless the victim paid thousands of dollars, and in some cases tens of thousands of dollars, in purported bail money. A member of the conspiracy also frequently posed on the call as the victim’s grandchild, typically crying and pleading with the elderly victim to send money to secure the grandchild’s release from jail, and asking the victim not to contact any other family members because the grandchild felt ashamed. In each case, in extreme distress, the victim sent thousands of dollars, at a minimum, as instructed, to certain individuals who, among other things, provided that money to MCQUEEN at his direction. In each case, after paying the “bail” money as directed, the victim directly contacted his or her grandchild and thereupon learned that the grandchild had not, in fact, been arrested, that the grandchild knew nothing about the claims made on the call to the victim, and that the call was fraudulent.
For example, among the 17 examples set forth in the complaint, one 79 year-old victim in New York received a phone call in August 2013 from an individual who identified himself as a police sergeant and claimed that the victim’s grandson had been arrested after drugs were discovered in a car in which the grandson was a passenger. The purported sergeant said the grandson would be released if the victim sent $6,000 in bail money as directed. The victim, who briefly heard, on the phone, an individual who sounded like the victim’s grandson, wired the money as directed. The victim subsequently spoke directly with the victim’s grandson, and learned that he had not been arrested, and knew nothing about the purported sergeant or the basis for his request for bail money. The victim never received any money back from the purported sergeant.
In fact, the victim’s money was wired to particular individuals working with MCQUEEN who collected the wired funds on MCQUEEN’s behalf and provided the money to MCQUEEN. As to a portion of the victim’s money, MCQUEEN appeared personally at a particular location in Brooklyn to arrange for the collection of the proceeds. MCQUEEN subsequently deposited another portion of the money sent by the victim directly into his personal bank account.
MCQUEEN, 33, of Brooklyn, New York, is charged with one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the outstanding investigative work of the FBI.
If you believe you were a victim of this crime, including a victim entitled to restitution, and you wish to provide information to law enforcement and/or receive notice of future developments in the case or additional information, please contact Wendy Olsen-Clancy, the Victim Witness Coordinator at the United States Attorney's Office for the Southern District of New York, at (866) 874-8900, or [email protected]. For additional information, go to: http://www.usdoj.gov/usao/nys/victimwitness.html.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Elisha Kobre 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.
U.S. v. Allah J. McQueen Complaint
Three Bronx Gang Members Convicted in Manhattan Federal Court of Racketeering Charges, Murder, Conspiracy to Murder, Attempted Murder, Narcotics, and Firearms OffensesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that FELIX LOPEZ-CABRERA, 24, CARLOS LOPEZ, 26, and LUIS BELTRAN, 26, were convicted yesterday in Manhattan of various racketeering charges, murder, conspiracy to murder, attempted murder, narcotics conspiracy, and firearms offenses following a twelve-week jury trial before U.S. District Judge Paul A. Engelmayer. The jury convicted LOPEZ-CABRERA, LOPEZ and BELTRAN of charges arising out of their involvement, from 2003 through 2012, in the criminal activities of the Bronx Trinitarios gang (the “BTG”) – a violent street gang that was involved in drug-trafficking and multiple acts of violence, including murder and attempted murder, in New York, New York, the Bronx, New York, and Yonkers, New York.
According to the Superseding Indictment and evidence admitted at trial:
The BTG is a criminal organization that operates primarily in the Bronx, New York. It started in the prison system in the late 1980’s and subsequently spread to the streets. FELIX LOPEZ-CABRERA was a member, and a leader, of the BTG who directed other members to carry out illegal and other activities as part of the racketeering conspiracy. As part of their membership and participation in that enterprise, LOPEZ-CABRERA and CARLOS LOPEZ murdered Raffy Tavares and Irving Cruz, both 19, in the vicinity of 81 East 181st Street, Bronx, New York, on May 23, 2010. LUIS BELTRAN and LOPEZ-CABRERA murdered Raymond Casul, 23, in the vicinity of 271 West Kingsbridge Road, Bronx, New York, on March 31, 2009. LOPEZ-CABRERA was also involved in the September 4, 2009, murder of David Avila-Gomez, 23, in the vicinity of 15 Mount Carmel Place, Yonkers, New York. CARLOS LOPEZ was also involved in the November 20, 2010, murder of Freddy Polanco, 19, in the vicinity of 75 West 190th Street, Bronx, New York. LOPEZ-CABRERA, LOPEZ, and BELTRAN also carried out multiple assaults and attempted murders of individuals believed to be members of rival gangs including the Latin Kings, Dominicans Don’t Play, and the Bloods. LOPEZ-CABRERA and LOPEZ also participated in a more than decade-long conspiracy to distribute kilograms of marijuana and crack cocaine in the Bronx. The evidence at trial also showed that LOPEZ-CABRERA, LOPEZ, BELTRAN, and other members of the BTG possessed, brandished, and discharged a number of firearms in connection with their drug trafficking and racketeering activities with the Trinitarios gang.
FELIX LOPEZ-CABRERA was convicted of one count of racketeering, one count of racketeering conspiracy, two counts of conspiracy to murder in aid of racketeering, four counts of murder in aid of racketeering, two counts of assault and attempted murder in aid of racketeering, one count of conspiracy to distribute or possess with intent to distribute 100 kilograms and more of marijuana, 28 grams and more of crack cocaine, quantities of cocaine and oxycodone, two counts of discharging a firearm in furtherance of a crime of violence or a drug-trafficking crime, and four counts of discharging a firearm in connection with the murders of Raymond Casul, Raffy Taveras, Irving Cruz, and David Avila-Gomez. LOPEZ-CABRERA is scheduled to be sentenced on May 4, 2015, at 9:30 a.m., before Judge Engelmayer.
CARLOS LOPEZ was convicted of one count of racketeering, one count of racketeering conspiracy, two counts of conspiracy to murder in aid of racketeering, three counts of murder in aid of racketeering, one count of assault and attempted murder in aid of racketeering, one count of conspiracy to distribute or possess with intent to distribute 100 kilograms and more of marijuana, 28 grams and more of crack cocaine, quantities of cocaine and oxycodone, two counts of discharging a firearm in furtherance of a crime of violence or a drug-trafficking crime, and three counts of discharging a firearm in connection with the murders of Raffy Taveras, Irving Cruz, and Freddy Polanco. LOPEZ is scheduled to be sentenced on May 5, 2015, at 9:30 a.m., before Judge Engelmayer.
LUIS BELTRAN was convicted of one count of racketeering conspiracy, one count of conspiracy to murder in aid of racketeering, one count of murder in aid of racketeering, and one count of discharging a firearm in connection with the murder of Raymond Casul. BELTRAN is scheduled to be sentenced on May 8, 2015, at 9:30 a.m., before Judge Engelmayer.
The chart below provides the counts of conviction and the penalties for each defendant. The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the judge.
Mr. Bharara praised the investigative work of the New York City Police Department’s Bronx Gang Squad, the Bureau of Alcohol, Tobacco, Firearms and Explosives’ Joint Firearms Task Force, the Drug Enforcement Administration, and Immigration and Customs Enforcement’s Homeland Security Investigations.
This case is being handled by the Office’s Violent and Organized Crimes Unit. Assistant United States Attorneys Jessica Ortiz, Rachel Maimin, and Micah Smith conducted the trial.
Click here to view chart(s)Second Man Arrested and Charged in Manhattan Federal Court for Daytime Armed Robbery of Diamond District StoreRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, James Higgins, Acting Special Agent-in-Charge of the New York Field Division of the Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), and William J. Bratton, Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of a complaint charging LEON FENNER for the armed robbery of a store in the Diamond District of Manhattan on November 11, 2014. FENNER was arrested yesterday in Suitland, Maryland, and presented today in the United States District Court for the District of Maryland before U.S. Magistrate Judge Charles B. Day.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, on November 11th Leon Fenner – armed with a semiautomatic gun – committed a cold and calculated robbery of a jewelry store in the Diamond District during which he brazenly pistol-whipped a bystander. Thanks to the collaboration of law enforcement, Fenner was tracked down and apprehended and will now face justice.”
ATF Acting Special Agent-in-Charge James Higgins said: “The arrest of Mr. Fenner yesterday has even further dismantled the illegal activities of this violent and armed robbery crew. The teamwork and relentless investigative pursuit exhibited by the newly formed ATF-led SPARTA task force coupled with a focused prosecution team is extremely gratifying to be a part of. The unit’s performance in this case should be a stark reminder to the criminal element that law enforcement, especially here in New York City, will not tolerate brazen acts of violence.”
NYPD Commissioner William J. Bratton said: “The New York City Police Department, along with our law enforcement partners, will continue to track down each person responsible for this crime until all parties are in custody and held accountable.”
According to the allegations Complaint unsealed today in Manhattan federal court, it is alleged that:
On November 11, 2014, two men carried out an armed robbery of a jewelry store (the “Store”) on the 8th Floor of a building on 47th Street in the Diamond District of Manhattan. The Store is not open to the public but is a space where clients can view and purchase jewelry. At the time of the robbery, the owner of the store (the “Owner”) and three other individuals were present inside the Store. At approximately 2:20 in the afternoon – in broad daylight as the Veteran’s Day Parade proceeded nearby – LEON FENNER, the defendant, dressed in a suit, carrying a bag, and appearing to be a messenger, came to the door of the store, while a second man (“Perpetrator-2”) served as a lookout in the hallway. After entering, FENNER first said that he was there to serve the Owner of the Store with papers, and took two envelopes out of his bag before placing them on a desk. FENNER then took out a black semiautomatic gun and pointed it at the Owner and the others present and demanded that they give him all the jewelry in the Store. As the robbery was occurring, a relative of the Owner arrived and was let into the Store. FENNER pistol-whipped the Owner’s relative as he entered the Store. The Owner and the others present in the Store emptied more than $600,000 worth of jewelry from a safe and other locations and placed it into FENNER’s bag. FENNER, leaving the envelopes behind in the Store, left the scene with Perpetrator-2.
FENNER was identified based on, among other things, fingerprint analysis of the envelopes left in the Store and surveillance images.
FENNER, 58, of New York, New York, is charged with one count of armed robbery, which carries a maximum sentence of 20 years in prison, and one count of brandishing of a firearm in connection with that robbery, which carries a maximum sentence of life in prison, with a seven-year mandatory minimum sentence. 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.
Rondu Frisby, a/k/a “Reef,” who was one of the individuals present in the Store at the time of the Robbery and a friend of the Owner, was arrested on November 17, 2014, and charged with conspiracy to commit the robbery, and aiding and abetting the brandishing of a firearm in connection with the robbery conspiracy. Frisby allegedly coordinated with FENNER to perpetrate the robbery.
Mr. Bharara praised the investigative work of the NYPD and the Joint Robbery Task Force, consisting of members of the NYPD, ATF, and the United States Marshals Service.
This case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Russell Capone and Gina Castellano are in charge of the prosecution.
The charges contained in the Complaint are merely accusations and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Leon Fenner Complaint & Warrant (14 MAG 2572)
Richard Ammar Chichakli, Co-Conspirator of International Arms Dealer Viktor Bout, Sentenced in Manhattan Federal Court to Five Years in Prison on Money Laundering, Wire Fraud, and Conspiracy ChargesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that RICHARD AMMAR CHICHAKLI, an associate of convicted international arms dealer Viktor Bout, was sentenced today in Manhattan federal court to five years in prison. CHICHAKLI, who was arrested in Australia in January 9, 2013, and then extradited to the United States in May 2013, was convicted on December 13, 2013, following a four-week jury trial, of conspiring with Bout and others to violate the International Emergency Economic Powers Act (“IEEPA”) by attempting to purchase commercial airplanes from American companies in violation of U.S. sanctions. CHICHAKLI was also found guilty of money laundering conspiracy, wire fraud conspiracy, and six separate counts of wire fraud, in connection with the attempted aircraft purchases. U.S. District Judge William H. Pauley III, who presided over the trial, imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara said: “Richard Chichakli conspired to violate international sanctions by attempting to buy commercial aircraft from an American company, even though it was illegal for that company to do business with him. He illegally tried to conceal his own identity and the involvement in the transactions of international arms trafficker Viktor Bout. Now Richard Chichakli will again be engaged in the same enterprise as Viktor Bout: serving time in a federal prison.”
According to evidence at trial and documents previously filed in Manhattan federal court:
CHICHAKLI conspired with Viktor Bout and others to violate IEEPA by engaging in prohibited business transactions with companies based in the United States. The focus of these transactions was the purchase of commercial airplanes for a company that Bout and CHICHAKLI controlled, and the ferrying of those aircraft to Tajikistan. At the time of these unlawful transactions, both CHICHAKLI and Bout had been designated by the U.S. Treasury Department as Specially Designated Nationals (“SDNs”), which meant that individuals and businesses in the United States were prohibited from engaging in financial transactions with them. CHICHAKLI sought to evade these SDN sanctions by, among other things, concealing his identity and his SDN listing, and by concealing Viktor Bout’s involvement in the airplane transactions. In connection with this fraudulent scheme, CHICHAKLI helped to make a series of wire transfer payments, totaling more than $1.7 million from overseas bank accounts into accounts in the United States.
CHICHAKLI was convicted of one count of conspiring to violate IEEPA, one count of money laundering conspiracy, one count of wire fraud conspiracy, and six counts of wire fraud. In addition to a prison term of five years, CHICHAKLI was sentenced to two years of supervised release, was ordered to pay forfeiture in the amount of $1.7 million and was ordered to pay a $900 special assessment fee.
CHICHAKLI’s co-conspirator, Viktor Bout, is currently serving a 25-year prison term as a result of his November 2011 conviction in this District in connection with his conspiring to sell millions of dollars of weapons to a designated foreign terrorist organization.
Mr. Bharara praised the outstanding investigative efforts of the Special Operations Division of the Drug Enforcement Administration (“DEA”), and specially thanked the DEA Canberra Country Office, and the DEA Digital Evidence Laboratory. Mr. Bharara also thanked the Australian Federal Police, the Victoria State Police, and the Australian Attorney General’s Department, as well as the U.S. Department of Justice Office of International Affairs and National Security Division, the United States Department of the Treasury, Office of Foreign Assets Control, and Interpol.
The case is being handled by the Terrorism and International Narcotics Unit. Assistant United States Attorneys Christian R. Everdell, Ian McGinley, and Jenna M. Dabbs are in charge of the prosecution.
Long Island Man Sentenced in Manhattan Federal Court to 10 Years in Prison for Insurance Scam in Which He Caused Dozens of Intentional Car CrashesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that MAXO JEAN was sentenced today to 10 years in prison for perpetrating a multi-year insurance fraud scheme in which JEAN directed co-conspirators to engage in more than 30 car crashes with innocent third parties, and then fraudulently obtained insurance benefits based on unnecessary medical treatments he secured for his co-conspirators following the crashes. A jury convicted JEAN of conspiracy to commit mail, wire, and health care fraud on January 31, 2014, after a one-week trial. JEAN was sentenced today in Manhattan federal court by U.S. Court of Appeals Judge Denny Chin, sitting by designation, who also presided over JEAN’s trial.
Manhattan U.S. Attorney Preet Bharara said: “A car crash is an awful experience. Yet Maxo Jean directed others to cause crashes with innocent drivers, just so that he and his co-conspirators could line their pockets. His scheme quite literally added insult to injury for the innocent drivers and the insurance companies he defrauded.”
According to the Indictment and the evidence presented at JEAN’s trial and other court proceedings:
From 2006 through 2011, JEAN engaged in a scheme to cause more than 30 intentional car crashes in order to fraudulently obtain insurance benefits. JEAN orchestrated the scheme by finding cars, recruiting crews of drivers and passengers, and then sending the crews out to hit cars driven by innocent victims. JEAN paid the drivers and passengers he recruited, and directed them to crash into cars driven by innocent people so that the supposed “accidents” would appear to be real accidents. Following the crashes, JEAN took his co-conspirators to corrupt medical clinics and directed them to submit to unnecessary treatment, including unnecessary surgeries, for their non-existent injuries, so that the treatments could be billed to car insurance companies. JEAN encouraged his co-conspirators to submit to treatments that he thought were likely to result in the largest payments from insurance companies, such as unnecessary back and shoulder surgeries. JEAN and his co-conspirators then filed fraudulent no-fault insurance claims and insurance claims that fraudulently alleged pain and suffering. The fraudulent insurance claims filed by JEAN and his co-conspirators totaled over $1.5 million, of which they succeeded in collecting nearly $600,000 in payments from ten different insurance companies. JEAN further profited from the scheme by collecting more than $150,000 in insurance company payouts and in kickbacks from the corrupt medical clinics.
In addition to the prison term, Judge Chin ordered JEAN, 52, of Long Island, New York, to forfeit $ 586,831.74 and to pay restitution to his victims.
Mr. Bharara praised the outstanding investigative work of the FBI, and thanked the National Insurance Crime Bureau for its assistance in the case.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Sarah E. Paul and Alexander J. Wilson are in charge of the prosecution.
Brooklyn Man Arrested and Charged in Manhattan Federal Court in Connection with Advance Fee 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 OCTAVIO LOMBARDO, a/k/a “Otto Lombardo,” was arrested this morning on wire fraud charges stemming from his advance fee scheme, which allegedly defrauded small business owners of more than $1 million.
Among other false and misleading statements, LOMBARDO allegedly lied to small business owners by claiming to have the ability and expertise to structure investment loans for their businesses through LOMBARDO’s exclusive relationships with small community banks across the United States, when in fact he did not have the ability to obtain such financing. In connection with the scheme, LOMBARDO induced over 30 business owners to pay an upfront fee that was purportedly to pay for expenses incurred during the due diligence process prior to the loan’s closing. Instead, LOMBARDO used the vast majority of the money he received from the business owners – over $1 million in total – on his own personal expenses, including rental payments, club dues, food and other personal items.
LOMBARDO is expected to be presented today in federal court in Manhattan before Chief United States Magistrate Judge Frank Maas.
U.S. Attorney Preet Bharara said: “As alleged, Mr. Lombardo repeatedly lied to dozens of small business owners and used an illegal scheme to defraud them of their hard-earned money. He proceeded to use this corruptly obtained money, amounting to over $1 million, on his own living expenses and leisure activities. I want to thank our partners at the FBI for their hard work in investigating this case and in continuing to expose unlawful schemes such as this one.”
FBI Assistant Director-in-Charge George Venizelos said: “As alleged, Lombardo stole from dozens of small business owners, looking to make significant investments with their new equity. His scheme not only defrauded the owners, but took capital away from new investments and critical employee hires.”
According to the Complaint unsealed today in Manhattan federal court:
From at least 2007 through 2013, LOMBARDO engaged in a fraudulent scheme to mislead small business owners into paying an upfront due diligence fee, typically in the amount of $25,000, in connection with loans that LOMBARDO promised to obtain for the small business owners. During this period, LOMBARDO held himself out to the business owners as having the ability and expertise to structure investment loans for their businesses through LOMBARDO’s purported exclusive relationships with small community banks across the United States. In fact, LOMBARDO had no ability to provide such financing, and none of the businesses at issue received a loan through LOMBARDO during this period.
In connection with the scheme, LOMBARDO made a series of false and misleading misrepresentations to the business owners, including: (i) that LOMBARDO could obtain interest-only loans in amounts ranging from $1 million to $75 million by consolidating the lending power of several small community banks into a trust, which he would manage through his holding company, Lombardo & Company; (ii) that, in order to structure the loan appropriately, LOMBARDO needed to conduct due diligence of the businesses, which included obtaining corporate and financial documentation and conducting site visits; (iii) that LOMBARDO required a non-refundable upfront payment – generally in the amount of $25,000 – to cover the expenses incurred during the due diligence process, including legal and other professional fees, taxes, appraisals and the like; and (iv) that this fee would be incorporated into the final loan agreement, so that the business owners would ultimately “get back” the upfront payment once the financing was in place.
As a result of these misrepresentations, LOMBARDO obtained over $1 million in so-called due diligence payments from more than three dozen business owners. LOMBARDO spent the vast majority of the due diligence payments on his own personal expenses, including, among other things, rental payments, club dues, food and other personal items. For example, LOMBARDO spent more than $300,000 on rental payments for his residence in Brooklyn, more than $100,000 on membership dues for a private gun club located in Manhattan and more than $50,000 on restaurants and purchases of wine and liquor.
Once he received the due diligence payments, LOMBARDO made a variety of excuses to the business owners – including, among others, that he was having health problems and had been hospitalized, that he was traveling and/or that he had a new grandchild – in order to explain the delay in closing the loan.
Ultimately, LOMBARDO did not provide any of the loans to the business owners as promised.
LOMBARDO, 67, was arrested this morning at his residence in Brooklyn, New York. He is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the work of the Federal Bureau of Investigation. 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. Attorneys Amy Lester and Damian Williams are in charge of the prosecution.
The allegations contained in the Complaint are merely accusations, and the defendant is
presumed innocent unless and until proven guilty.
U.S. v. Octavio Lombardo Complaint
Ten Defendants Charged in $70 Million Scheme to Defraud Medicaid and Medicare Through Medical Clinics in Brooklyn and QueensRead 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”), William J. Bratton, Commissioner of the New York City Police Department (“NYPD), and Thomas O’Donnell, the Special Agent-in-Charge of the New York Office of the Department of Health and Human Services, announced today the unsealing of an indictment charging ten defendants with operating a massive health care fraud scheme through three medical clinics in Brooklyn and Queens through which the defendants submitted over $70 million in fraudulent claims to Medicaid and Medicare. As alleged in the Indictment, VICTOR LIPKIN, VADIM ZUBKOV, EDUARD ZAVALUNOV, NIKOLOZ CHOCHIEV, ANATOLIY FATAKHOV, MARIANA SWAFFAR, JACQUELINE PINEZ, JONATHAN OLIVER, JASON BRISSETT, and GILBERT TROTMAN recruited financially disadvantaged and homeless people insured by Medicare and/or Medicaid (the “Phony Patients”) to undergo unnecessary medical tests, typically performed by unlicensed personnel, at the clinics in exchange for cash, and then billed the insurers for administering those unnecessary tests. In total, the defendants are alleged to have submitted over $70 million in fraudulent claims to Medicaid and Medicare, for which they fraudulently received over $25 million in insurance payments. Each of the defendants was arrested this morning. All of the defendants other than TROTMAN are expected to be arraigned in Manhattan federal court later today before a U.S. Magistrate Judge. TROTMAN was arrested in the Atlanta, Georgia, area and will be presented there later today.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, these defendants corrupted financially strapped people and fleeced Medicare and Medicare to the tune of tens of millions of dollars. To fuel their greedy scheme, the defendants allegedly had phony patients submit to medically unnecessary treatments, paying these ‘patients’ a fraction of what they themselves reaped from the fraudulent billings. The scheme enriched the defendants and burdened Medicare and Medicaid, but the scheme has been exposed and ended.”
FBI Assistant Director-in-Charge Venizelos said: “As alleged, the defendants engaged in a systematic scheme to defraud government programs designed to assist deserving patients. Adding insult to injury, the defendants preyed upon vulnerable members of our community, exploiting the less fortunate in furtherance of their criminal activity. Health care fraud wastes tax dollars, increases costs for the public and destroys the integrity of our health care system. The FBI, along with our federal, state, and local law enforcement partners, is committed to investigating this type of fraud and holding accountable those who take advantage of our government health care programs.”
NYPD Commissioner William J. Bratton said: “Healthcare fraud places a burden on taxpayers and on a healthcare system that millions of people rely on for medical care. Thanks to the collaborative efforts of our investigators, along with our federal partners, this criminal network was dismantled and its members will be held accountable for their actions.”
HHS Special Agent-in-Charge O’Donnell said: “Kickbacks and medically unnecessary services have no place in the Medicare and Medicaid systems. These programs are intended for the elderly and the most vulnerable segments of our society. The Office of Investigations will continue to vigorously pursue those that defraud these programs for their personal gain.”
According to the allegations contained in the Indictment unsealed today in Manhattan federal court:
The Heath Care Fraud Scheme
Beginning in or about 2005, LIPKIN and ZUBKOV recruited and paid a particular licensed physician (the “Doctor”) to act as the nominal owner and/or physician under whose name three purported medical clinics would bill Medicare, Medicaid, and private insurance providers (the “Insurance Providers”) for unnecessary services and tests – including sleep tests and stress tests – performed at the clinics. The clinics were located on Avenue V in Brooklyn, New York, and on Hillside Avenue and Elmhurst Avenue, respectively, in Queens, New York. LIPKIN and ZUBKOV were, in fact, the beneficial owners of the clinics, but they concealed their ownership through the Doctor’s nominal affiliation with the clinics, and by laundering the proceeds of the clinics’ operation through shell companies that they owned and controlled. LIPKIN, ZUBKOV, and ZAVALUNOV operated and controlled the clinics, and ran the clinics’ day-to-day operations, despite the fact that they were not licensed physicians, as required by New York law.
At the direction of LIPKIN, ZUBKOV, and ZAVALUNOV, other members of the scheme, including OLIVER, BRISSETT and TROUTMAN (the “Runners”), and CHOCHIEV, recruited financially disadvantaged individuals with Medicaid and/or Medicare insurance to act as Phony Patients and undergo unnecessary medical tests at the clinics in exchange for cash payments. The Runners often recruited such individuals from soup kitchens and local welfare offices, and coached them on what to say on various medical forms in order to make it falsely appear that the medical tests to which the defendants intended to subject them were medically necessary. In furtherance of the scheme, CHOCHIEV also made threats of physical violence to individuals who CHOCHIEV believed owed money to the scheme members.
Also in furtherance of the scheme, before the medically unnecessary tests were performed on the Phony Patients, SWAFFAR and PINEZ obtained the Phony Patients’ Medicaid and/or Medicare insurance information, and then contacted the Insurance Providers to confirm that the Insurance Providers would reimburse for the tests. SWAFFAR and PINEZ engaged in such conduct knowing that the Phony Patients were being recruited and paid by the Runners to undergo the tests. Once they determined that a particular Phony Patient’s insurance would pay out claims made by the clinic for the planned medical tests, SWAFFAR and PINEZ notified the Runners that the individuals were eligible and could be brought to the clinic to undergo such tests.
After the Phony Patients had been recruited, confirmed to be Medicare and/or Medicaid eligible, and transported to one of the clinics by the Runners or CHOCHIEV, in many instances, certain individuals who were not physicians administered a host of unnecessary medical tests to them. In particular, for example, FATAKHOV administered unnecessary medical tests, including stress tests, to the Phony Patients of the Elmhurst Avenue Clinic. FATAKHOV administered these tests outside the presence and supervision of the Doctor or other licensed physician, knowing that the presence or supervision of a licensed physician was required. After the unnecessary medical tests were administered, the Phony Patients were paid cash kickbacks. The defendants, through the clinics, then submitted fraudulent claims to Medicaid and Medicare seeking reimbursement for the unnecessary medical tests. In total, in the course of the scheme, the defendants fraudulently billed over $70 million to Medicaid and Medicare, for which they received over $25 million in reimbursements.
All ten defendants are charged with conspiring to commit mail fraud, wire fraud, and health care fraud. LIPKIN, ZUBKOV, and ZAVALUNOV are also charged with conspiring to launder the proceeds of the fraud. A table listing the charges against each defendant and the potential penalties for each count is attached. The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the judge.
Mr. Bharara praised the outstanding investigative work of the FBI’s New York Health Care Fraud Task Force, the NYPD, and HHS. Mr. Bharara also thanked the New York City Human Resources Administration, the New York State Office of Medicaid Inspector General, and the New York State Attorney General Medicaid Fraud Control Unit for their assistance in the investigation.
The FBI’s New York Health Care Fraud Task Force was formed in 2007 in an effort to combat health care fraud in the greater New York City area. The task force comprises agents, officers, and investigators of the FBI, NYPD, New York State Insurance Fraud Bureau, U.S. Department of Labor, U.S. Office of Personnel Management Inspector General, U.S. Food and Drug Administration, NYS Attorney General’s Office, NYS-Office of Medicaid Inspector General, NYC Health and Hospitals Inspector General, New York City Human Resources Administration, and National Insurance Crime Bureau.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Timothy Howard and Daniel Tehrani are in charge of the prosecution. Assistant United States Attorney Carolina Fornos is in charge of the forfeiture aspects of the case.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
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Lipkin, Victor, et al. Indictment (14 Cr 773)
Investment Managers 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 STEPHEN WALSH and PAUL GREENWOOD, investment managers and principals of WG Trading Company, LP, and WG Trading Investors, were sentenced in Manhattan federal court in connection with a fraudulent commodities trading and investment advisory scheme. WALSH was sentenced to 20 years in prison, and GREENWOOD was sentenced to 10 years in prison. WALSH and GREENWOOD ran a fraudulent commodities trading and investment advisory scheme that 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. WALSH pled guilty on April 25, 2014, and was sentenced on October 29, 2014, by United States District Judge Miriam Goldman Cedarbaum. GREENWOOD pled guilty pursuant to a cooperation agreement on July 28, 2010, and was sentenced today by Judge Cedarbaum.
Manhattan U.S. Attorney Preet Bharara said: “Stephen Walsh and Paul Greenwood ran an investment operation that purported to follow a conservative strategy but was in fact mostly fictional. They stole hundreds of millions of dollars of investors’ funds – much of it from sophisticated institutional investors – and lied to conceal their theft. Now they are answering for their massive fraud, and they will have to forfeit their ill-gotten gains and their freedom”
According to the Indictment, 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 10 years. As a result, several institutional investors – including charitable and university foundations, retirement and pension plans, and other institutions – invested billions of dollars. Investors either became limited partners in WG Trading Company or received promissory notes issued by WG Trading Investors that WALSH and GREENWOOD represented would pay interest at a rate equal to the investment returns earned by a limited partner of WG Trading Company.
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 in favor of WG Trading Investors to, among other things, conceal trading losses and their misappropriation of investor funds. These promissory notes materially misstated the financial condition of WG Trading Company 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.
In addition to the prison sentence, WALSH, 69, of Sands Point, New York, was sentenced to three years of supervised release, and ordered to forfeit $50,743,779; and GREENWOOD, 67, of Southern Pines, North Carolina, was sentenced to three years of supervised release, and ordered to forfeit $83.5 million. The Court further ordered restitution to be paid by both WALSH and GREENWOOD in an amount to be determined.
On July 21, 2009, Deborah Duffy, the former Chief Compliance Office of WG Trading Company, pled guilty to conspiracy, securities fraud, and money laundering for her role in the fraud scheme. Duffy’s sentencing is set for January 8, 2015.
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’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 Jessica A. Masella and Benjamin Naftalis are in charge of the prosecution.
Long Island Man Sentenced in Manhattan Federal Court to Five Years in Prison for Multimillion-Dollar Investment Fraud 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 that NIZAR OTHMAN, the former principal of a Manhattan-based financial firm, NAOK Financial, Inc. (“NAOK”), was sentenced today to five years in prison for a fraudulent investment scheme in which OTHMAN lied to victims and tricked them into paying him over $2 million for purported investments with supposed guaranteed rates of return. In reality, OTHMAN did not invest the funds as promised, and instead, used the funds largely for his own benefit. OTHMAN pled guilty in September 2014 before U.S. District Judge Lorna G. Schofield, who also imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara said: “Nizar Othman was a fraudster who through his investment firm swindled numerous individuals out of millions of dollars. He preyed on people’s life savings and took the benefits of a widowed spouse while he exploited personal relationships for personal gain. We hope today’s sentence gives some measure of comfort to the victims.”
Assistant Director in Charge George Venizelos said: “This was another phony investment scheme, pitched to some of the most vulnerable people in our society. Today, Othman rightfully finds himself facing a stiff sentence for his investor shakedown.”
According to the Indictment, other documents filed in Manhattan federal court, and statements made at court proceedings:
From 2008 through March 2013, OTHMAN owned and operated NAOK, a now-defunct financial consulting and investment firm with an office in Manhattan. In connection with his operation of NAOK, OTHMAN engaged in a fraudulent scheme whereby he tricked multiple victims into investing millions of dollars with his company. For example, in April 2011, OTHMAN convinced Victim-1to invest $1.2 million with NOAK, using the proceeds of her recently-deceased husband’s life insurance and pension benefits. OTHMAN falsely told Victim-1 that he would invest the money in real estate ventures and promised to triple her investment in three years. OTHMAN even showed Victim-1 photographs of properties that he claimed he was investing in. Instead of investing the $1.2 million in real estate, however, OTHMAN used Victim-1’s money to pay for NAOK’s operating expenses, to repay other individuals who had invested with NAOK, and to pay for OTHMAN’s personal expenses, including dining, clothing, and travel expenses. Victim-1 lost her entire $1.2 million investment.
In addition to Victim-1, OTHMAN defrauded at least five other victims by fraudulently inducing them to invest hundreds of thousands of dollars with NAOK. In each instance, OTHMAN exploited personal relationships with the victims to gain their trust, and then betrayed that trust by lying about how the victims’ money would be invested and the rates of return that the victims would receive. For example, in March 2011, OTHMAN induced Victim-2, a retired barber, to invest his life savings of $480,000 with NAOK. OTHMAN falsely claimed that Victim-2’s money would be invested with a hedge fund broker with whom OTHMAN claimed to have a business relationship. OTHMAN visited Victim-2 at his house multiple times, invited Victim-2 to NAOK’s office in Manhattan, and guaranteed Victim-2 that he would receive at least a 10 percent return on his investment in three years. OTHMAN further promised to pay the guaranteed 10 percent return himself if the investment failed. As with Victim-1’s investment, instead of investing Victim-2’s money as promised, OTHMAN used the money for his own personal benefit. Victim-2 lost his entire $480,000 investment.
Further, in order to conceal and perpetuate the scheme, OTHMAN made various misrepresentations to the victims regarding the performance of their investments. For example, in October 2012, when Victim-1 inquired about the status of her $1.2 million real estate investment, OTHMAN told her that it was presently valued at $1.35 million. In truth and in fact, and as OTHMAN was well aware, OTHMAN never invested Victim-1’s $1.2 million in any real estate ventures. Similarly, in the first year following Victim-2’s $480,000 investment, OTHMAN falsely represented that the investment had earned a 13 percent return; in the second year, OTHMAN falsely reported a 14 percent return.
In total, the defendant’s fraudulent investment scheme resulted in losses to victims of approximately $2,138,000.
In addition to the prison sentence, OTHMAN, 31, of Albertson, New York, was sentenced to three years of supervised release. OTHMAN was also ordered to pay $2,138,000 million in restitution to his victims, and to forfeit $2,138,000 in criminal proceeds.
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 Serrin Turner, Daniel Noble, and Alexander Wilson are in charge of the prosecution.
Florida Man Pleads Guilty in Manhattan Federal Court to Defrauding Investors in Multiple Securities Fraud SchemesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that STEVEN STALTARE pled guilty today to defrauding investors in connection with two fraudulent investment schemes. STALTARE’s first scheme involved defrauding investors in connection with the transfer of stock in Dematco, Inc. (“Dematco”). STALTARE’s second scheme involved defrauding investors in connection with soliciting investment in various stocks, including Dematco, Preventia, Inc. (“Preventia”), First Choice Healthcare Solutions, Inc. (“First Choice”), and Savtira Corporation (“Savtira”). STALTARE admitted misleading investors in connection with both schemes by making numerous false statements and misrepresentations and by misappropriating investment funds for his own personal use. STALTARE was arrested on August 8, 2013, and pled guilty today to a four-count Indictment before U.S. District Judge George B. Daniels.
STALTARE was previously convicted of securities fraud in United States v. Herbert Cannon et al., 04 Cr. 842 (GBD), in the Southern District of New York. STALTARE was sentenced to 32 months in prison by Judge Daniels in connection with his prior conviction.
Manhattan U.S. Attorney Preet Bharara stated: “Steven Staltare purported to offer investment opportunities, but was instead engaged in a shell game where he failed to pay for securities he purchased from one victim and offered them as collateral for a loan he secured from another victim whom he never repaid. He also took hundreds of thousands of dollars from other investors and never invested it as promised, instead using the money for himself. Now, having admitted his crimes, he stands to pay for them with his liberty.”
According to the allegations contained in the Indictment, the underlying criminal Complaint unsealed on August 7, 2013, and statements made during court proceedings:
First, from at least 2011 through 2012, STALTARE defrauded two investors (“Victim-1” and “Victim-2,” respectively) in connection with the transfer of shares of Dematco stock. In late 2011, STALTARE approached Victim-1 and asked Victim-1 to transfer hundreds of thousands of shares of Dematco stock that Victim-1 owned to a “partner” of STALTARE in exchange for $70,000 in cash. Victim-1 agreed to turn over his shares in Dematco in exchange for $70,000. At approximately the same time, STALTARE and another individual (“Partner-1”) approached Victim-2 and asked Victim-2 to loan them approximately $150,000 so that STALTARE could purchase shares of Dematco stock. STALTARE and Partner-1 promised Victim-2 that he would be paid $200,000 in three weeks and that Victim-2 would receive approximately 1/3 of the profits from the eventual sale of Dematco stock. Victim-2 was also promised that he would receive Dematco stock certificates as collateral for this loan. Based upon these representations, Victim-2 agreed to make this $150,000 loan to STALTARE and Partner-1. After Victim-2 made this loan, STALTARE provided Victim-2 with stock certificates that had been provided to STALTARE by Victim-1. Ultimately, STALTARE did not provide Victim-1 with the $70,000 that he had promised to pay in exchange for Victim-1’s shares of Dematco, nor did STALTARE provide Victim-2 with any repayment for the $150,000 loan or any profits from any sale of Dematco stock. In reality, STALTARE transferred Victim-1’s shares in Dematco to Victim-2 without compensating Victim-1, and misappropriated the funds provided by Victim-2 for STALTARE’s own personal benefit.
Second, from at least 2012 through 2013, STALTARE defrauded two other investors (“Victim-3” and “Victim-4,” respectively) by misappropriating funds intended for investment in the stock of various companies. STALTARE agreed to invest approximately $25,000 for Victim-3 in Preventia stock, promising significant investment returns. STALTARE also agreed to invest approximately $357,000 for Victim-4 in various securities, including stock in Dematco, Preventia, First Choice, and Savtira, again promising significant investment returns. However, once Victim-3 and Victim-4 provided STALTARE with the funds to invest in these stocks, rather than investing these funds in stocks on behalf of Victim-3 and Victim-4 as promised, STALTARE misappropriated these funds for his own personal benefit.
In the course of effectuating these fraudulent schemes, STALTARE defrauded victims in excess of $600,000 from 2011 through 2013.
STALTARE, 49, of Tampa, Florida, pled guilty to two counts of securities fraud and two counts of wire fraud. Each of the securities fraud and wire fraud charges carries a maximum term of 20 years in prison. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge. STALTARE is scheduled to be sentenced on March 12, 2015, at 10:00 a.m. by Judge Daniels.
Mr. Bharara praised the investigative work of the USPIS.
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 Brian Blais is in charge of the prosecution.
Former Branch Manager of Bank Pleads Guilty in Manhattan Federal Court to Cashing over $400,000 in Fraudulently Obtained Tax Refund ChecksRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Shantelle P. Kitchen, Acting Special Agent in Charge of the New York Office of the Internal Revenue Service, Criminal Investigation Division (“IRS-CID”), and James T. Hayes, Jr., the Special Agent in Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), announced that EDWIN MEJIA pled guilty today to participating in a scheme to cash more than $400,000 in fraudulently obtained federal tax refund checks issued in other people’s names. MEJIA was arrested in March 2014 and pled guilty today before U.S. District Judge Paul A. Engelmayer.
According to the allegations in the Complaint and Information filed in Manhattan federal court, and statements made during today’s plea proceeding:
Until approximately March 2014, MEJIA worked at branches of a bank (“Bank-1”) in Yonkers and Manhattan. MEJIA initially was a banker and later became the branch manager of multiple branches of Bank-1. From approximately 2010 through 2013, MEJIA participated in a scheme to fraudulently obtain and cash tax refund checks issued by the United States Treasury. The fraudulent refund checks were generated by the filing of false and fraudulent tax returns in the names of other people (the “purported filers”), and the checks were made payable to the purported filers. As part of this scheme, MEJIA helped facilitate the cashing of the fraudulent refund checks.
In particular, MEJIA obtained personal identification information for the purported filers, including their Social Security numbers and dates of birth. MEJIA then cashed the fraudulent checks himself or by paying a co-conspirator to do so. When cashing a fraudulent check himself, MEJIA presented the refund check, along with the corresponding Social Security number and date of birth of the purported filer, to a complicit bank employee. Other times, MEJIA paid a co-conspirator to open bank accounts in the names of the purported filers and cash the checks. As part of the scheme, MEJIA cashed, or caused others to cash, more than $400,000 in fraudulent Treasury checks.
* * *
MEJIA, 31, of Yonkers, New York, pled guilty to one count of theft of public funds, which carries a maximum sentence of 10 years in prison, and one count of aggravated identity theft, which carries a mandatory consecutive sentence of two years in prison. The statutory minimum and maximum sentences are prescribed by Congress and are provided here for informational purposes, as any sentencing of the defendant will be determined by the judge. As part of his plea, MEJIA also agreed to pay $442,642.58 in forfeiture. He is scheduled to be sentenced by Judge Engelmayer on March 12, 2015, at 2:15 p.m.
Mr. Bharara praised the outstanding efforts of IRS-CID and HSI in the investigation.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Jonathan Cohen is in charge of the prosecution.
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Edwin Mejia Information
Former Branch Manager of Bank Pleads Guilty in Manhattan Federal Court to Cashing over $400,000 in Fraudulently Obtained Tax Refund ChecksRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Shantelle P. Kitchen, Acting Special Agent in Charge of the New York Office of the Internal Revenue Service, Criminal Investigation Division (“IRS-CID”), and James T. Hayes, Jr., the Special Agent in Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), announced that EDWIN MEJIA pled guilty today to participating in a scheme to cash more than $400,000 in fraudulently obtained federal tax refund checks issued in other people’s names. MEJIA was arrested in March 2014 and pled guilty today before U.S. District Judge Paul A. Engelmayer.
According to the allegations in the Complaint and Information filed in Manhattan federal court, and statements made during today’s plea proceeding:
Until approximately March 2014, MEJIA worked at branches of a bank (“Bank-1”) in Yonkers and Manhattan. MEJIA initially was a banker and later became the branch manager of multiple branches of Bank-1. From approximately 2010 through 2013, MEJIA participated in a scheme to fraudulently obtain and cash tax refund checks issued by the United States Treasury. The fraudulent refund checks were generated by the filing of false and fraudulent tax returns in the names of other people (the “purported filers”), and the checks were made payable to the purported filers. As part of this scheme, MEJIA helped facilitate the cashing of the fraudulent refund checks.
In particular, MEJIA obtained personal identification information for the purported filers, including their Social Security numbers and dates of birth. MEJIA then cashed the fraudulent checks himself or by paying a co-conspirator to do so. When cashing a fraudulent check himself, MEJIA presented the refund check, along with the corresponding Social Security number and date of birth of the purported filer, to a complicit bank employee. Other times, MEJIA paid a co-conspirator to open bank accounts in the names of the purported filers and cash the checks. As part of the scheme, MEJIA cashed, or caused others to cash, more than $400,000 in fraudulent Treasury checks.
MEJIA, 31, of Yonkers, New York, pled guilty to one count of theft of public funds, which carries a maximum sentence of 10 years in prison, and one count of aggravated identity theft, which carries a mandatory consecutive sentence of two years in prison. The statutory minimum and maximum sentences are prescribed by Congress and are provided here for informational purposes, as any sentencing of the defendant will be determined by the judge. As part of his plea, MEJIA also agreed to pay $442,642.58 in forfeiture. He is scheduled to be sentenced by Judge Engelmayer on March 12, 2015, at 2:15 p.m.
Mr. Bharara praised the outstanding efforts of IRS-CID and HSI in the investigation.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Jonathan Cohen is in charge of the prosecution.
East Hampton Man Pleads Guilty in Manhattan Federal Court to Fraudulent Sales of Purported Jackson Pollock and Willem De Kooning ArtworksRead 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 Office of the Federal Bureau of Investigation (“FBI”), announced today that JOHN RE, 54, of East Hampton, New York, pled guilty to one count of wire fraud in connection with his nine-year scheme to defraud art collectors who sought to acquire works by famous American artists such as Jackson Pollock and Willem De Kooning, which resulted in approximately $2.5 million in losses to victims. RE pled guilty today before U.S. District Judge P. Kevin Castel.
According to the allegations set forth in the Criminal Complaint, other documents filed in the case, and statements made at related court proceedings:
From at least March 2005 through January 2014, RE invented a false provenance, the history demonstrating an artwork’s authenticity, for dozens of paintings, sketches, and pastels that he sold to art collectors in order to extract thousands of dollars from his victims for every piece that RE sold. RE persisted in selling these artworks despite his knowledge that their provenance was falsified and despite repeated instances of de-authentication by respected appraisers and experts in the field of forensic analysis. In at least one instance, when confronted by a victim, RE resorted to threats of violence, claiming that his victim should be wary of RE’s purported connections to organized crime.
In his plea agreement, RE expressly acknowledged that he has never discovered or sold any work of art found in a home that formerly belonged to a purported acquaintance of Jackson Pollock and Willem De Kooning, as RE had falsely represented to collectors, and RE further acknowledged that he knowingly and fraudulently fabricated such a provenance for every work of art to which he previously attributed such a provenance.
RE, 54, of East Hampton, New York, pled guilty to one count of wire fraud, which carries a maximum sentence of twenty years in prison. The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes, as any sentencing of the defendant will be determined by the judge. RE also agreed to forfeit $2,500,000, representing the proceeds of RE’s sales of fraudulent artworks. In connection with today’s plea, Judge Castel issued a post-indictment restraining order that effectively restricts RE’s ability to sell a submarine – the “U.S.S. Deep Quest” – pending the satisfaction of RE’s forfeiture debt. RE purchased the submarine in Texas using proceeds he obtained from the fraudulent sale of a purported Jackson Pollock painting in the course of the scheme. RE is scheduled to be sentenced by Judge Castel on April 10, 2015.
Mr. Bharara praised the outstanding efforts of the FBI, the Suffolk County District Attorney’s Office, and the Suffolk County Police Department in the investigation. Mr. Bharara also thanked the Village of East Hampton Police Department for their assistance with this case.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Andrew C. Adams is in charge of the prosecution.
Ninth Defendant in Massive International Credit Card Fraud Conspiracy Pleads Guilty in Manhattan Federal CourtRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Robert J. Sica, the Special Agent-in-Charge of the New York Office of the United States Secret Service, announced today that ALI REZA KANUGA pled guilty yesterday in Manhattan federal court to conspiracy to commit access device fraud and aggravated identity theft. KANUGA is the ninth defendant to plead guilty as part of an international investigation into a massive credit card fraud ring, which was responsible for stealing the personal financial information of hundreds of thousands of consumers, and using it to steal tens of millions of dollars worldwide. KANUGA, who was extradited from the United Kingdom in February 2012, pled guilty yesterday before U.S. Magistrate Judge Michael H. Dolinger.
Manhattan U.S. Attorney Preet Bharara said: “Ali Reza Kanuga and his co-conspirators stole sensitive bank account information around the globe, travelling from one country to the next to victimize consumers and financial institutions alike. Because of the wide-ranging investigation conducted by this Office and the U.S. Secret Service, together with our international partners, this global criminal organization has been dismantled, and its leaders are either behind bars or are fugitives from justice.”
Chart of Defendants
Secret Service Special Agent-in-Charge Robert J. Sica said: “The arrest of Ali Reza Kanuga is yet another example of how the Secret Service continues to successfully combat data theft and financial crimes. The Secret Service utilized state-of-the-art investigative techniques to dismantle this criminal network. Our success in this case and other similar investigations is a result of the extraordinary work of our cyber investigators and our close work with our extensive network of law enforcement partners.”
According to the allegations contained in the Indictment filed on November 15, 2012, and other court documents:
From at least 2007 until at least the summer of 2011, the Khan Family Organization was an international criminal organization principally in the business of stealing credit card, bank account, and related financial information from consumers at retail establishments; using the stolen account information to extract cash from automated teller machines (“ATMs”) using counterfeit ATM cards; and laundering the proceeds of the scheme back to its organizers. The Khan Family Organization (or the “Organization”) – which has at various times been based out of the United Kingdom, the United Arab Emirates, and the Netherlands – developed an especially sophisticated method of fraudulently obtaining customer account data from retail locations. At the time of the arrest of its leader, Irfan Khan, a/k/a “Superman,” in or about March 2010, the Organization was one of the largest, if not the single largest, credit card skimming syndicates throughout the world. As described below, members and associates of the Organization were dispatched throughout the United Kingdom, mainland Europe, and elsewhere to install credit card reader devices that had been customized to steal users’ account information, through the addition of particularly advanced “skimmers.”
The Organization’s leadership then dispatched members and associates throughout the world – including to New York City, the United Kingdom, mainland Europe, Southeast Asia, the Middle East, Africa, the Caribbean, South America, Australia, and elsewhere – to create counterfeit ATM cards using the stolen account information and fraudulently to withdraw cash from victims’ accounts. Members and associates of the Organization then laundered the proceeds of the fraud back to its leadership through various means, including by physically carrying cash internationally; through structured Western Union or similar transactions; and through the informal system of banking known as hawala or its functional equivalent.
Using extraordinarily sophisticated technology, the Organization began to mass produce its skimmers for installation into bank-card readers (also known as PIN Entry Devices, or “PEDs”) in retail locations throughout Europe. The Organization operated on a massive scale:
● In 2008, a member of the Organization’s leadership contacted various electronics and software purveyors in Britain to source component parts to manufacture the Organization’s skimmers, ordering, for example, 900 modems and 1,300 circuit boards.
● Between April 2008 and March 2009, a secure FTP site used by the Organization to receive text messages containing stolen accounts and PINs received approximately 350,000 transfers of data, representing approximately the number of accounts compromised by the Organization over that period.
● In early 2009, a pair of police seizures from the Organization’s premises in London resulted in the seizure of almost a thousand PEDs in various stages of alteration.
● In early 2010, two co-conspirators were arrested in the Netherlands carrying a memory device that contained, among other things, approximately 186,000 unique stolen bank account numbers and their associated PINS.
● In April 2011, three co-conspirators were arrested in the Netherlands carrying a laptop computer that contained, among other things, approximately 15,000 unique stolen bank account numbers and their associated PINS.
KANUGA was responsible for leading a group of conspirators – including co-defendants Ujval Jethwa and Michaela Jo Berney – in installing the Organization’s custom-made PEDs in at least 15 retail locations in the Netherlands. In March 2010, data stolen from the Dutch skimmers was disseminated to members and associates of the Organization throughout the world, who used it to create counterfeit ATM cards, which they then used at local banks and other ATM locations. For instance, Jethwa, co-defendant Asif Khan, and another co-conspirator travelled from the United Kingdom to New York City. On just two days, March 6-7, 2010, Jethwa and other co-conspirators, including Timothy Guvercin, engaged in at least 1,110 transactions at approximately 95 locations in Manhattan, resulting in the theft of approximately $260,000 in cash. During the same two days, different co-conspirators were using the same stolen data in at least 18 other countries. Asif Khan then assisted with laundering those fraud proceeds back to the Organization’s leadership in Europe and the Middle East through the use of hawala bankers.
At around the same time, Irfan Khan and another co-conspirator, Zeshan Mian, were arrested in Amsterdam, the Netherlands, and were charged with possession of stolen bank data. They had, among other things, a memory card containing approximately 186,000 unique stolen bank card numbers and their associated PINS, along with an illustrated, step-by-step manual to creating the Organization’s skimming device, which Irfan Khan and Mian had created.
While in prison, Irfan Khan continued to run the Organization. For example, in April 2011, co-defendants Mohammed Shabaz Khawar, Abdul Qayam Durrani, Fassel Azim, and David Ashley Smith travelled to the Netherlands from the United Kingdom to install additional PEDs at retail outlets in and around Rotterdam. Khawar, Durrani, and Smith were arrested by Dutch authorities, in possession of a laptop computer that contained financial information about more than 15,000 back accounts, as well as skimmers built to the Organization’s specifications. The group also possessed a “top up” card to add credit to an illicit pre-paid cellphone that Irfan Khan was using in his Dutch prison to direct the Organization.
KANUGA, 32, of London, England, pled guilty to one count of conspiracy to commit access device fraud and one count of aggravated identity theft. The conspiracy count carries a maximum sentence of seven and a half years in prison, a maximum fine of $250,000, or twice the gross gain or loss from the offense, and forfeiture of the proceeds of the offense. The aggravated identity theft count carries a mandatory two-year sentence, which must run consecutively to any other sentence imposed. The statutory minimum and 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. A chart reflecting the status of the other charged defendants is attached. KANUGA is scheduled to be sentenced in February 2015.
Mr. Bharara praised the investigative work of the United States Secret Service. He also thanked the Politie Amsterdam Amstelland, the Arrondissementsparket Amsterdam, the Metropolitan Police Service, the City of London Police, and the Dedicated Cheque and Plastic Crime Unit for their help in the investigation.
This case is being handled by the Office’s General Crimes Unit. Assistant U.S. Attorneys Matthew L. Schwartz and Negar Tekeei are in charge of the prosecution.
Canadian Antiques Dealer Pleads Guilty in Manhattan Federal Court for Wildlife SmugglingRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Sam Hirsch, the Acting Assistant Attorney General for the Environment and Natural Resources Division of the Department of Justice, announced that XIAO JU GUAN, a/k/a “Tony Guan,” a Canadian antiques dealer, pled guilty today in Manhattan federal court to attempting to smuggle rhinoceros horns from New York to Canada. GUAN was arrested in March 2014 as part of “Operation Crash,” a nationwide crackdown in the illegal trafficking in rhinoceros horns, for his role in smuggling and attempting to smuggle rhinoceros horns as well as items carved from elephant ivory and coral, from auction houses throughout the United States to Canada. He pled guilty today before U.S. District Judge Laura Taylor Swain.
Manhattan U.S. Attorney Preet Bharara said: “Because all species of rhinos are endangered, and elephant populations are either vulnerable or endangered, the trade in rhinoceros horns and elephant ivory is stringently limited. The survival of these magnificent animals depends in large part on enforcement of laws and international treaties governing such trade. Tony Guan’s admitted conduct increased the existential threat to these creatures, and now he awaits the penalty for that conduct.”
Acting Assistant Attorney General Sam Hirsch said: “The United States will aggressively prosecute anyone who illegally traffics in endangered wildlife species, in whatever form. Rhinos and elephants are not antiques, as the president of an antique company engaged in international trade should know. These are iconic animals of pre-historic origin, fighting for their very survival as a species. The illegal trade in rhino horn and elephant ivory and the escalation of black-market prices are directly related to horrific poaching on living animals. Guan has admitted to smuggling rhino horn and elephant ivory across international borders. The United States is grateful for the Canadian authorities’ coordination and assistance in bringing this wildlife trafficker to justice.”
According to the information, plea agreement, and statements made during court proceedings:
GUAN, the president and owner of an antiques business in Richmond, British Columbia, was arrested on March 29, 2014, after flying from Vancouver to New York and purchasing two endangered black rhinoceros horns from undercover special agents with the U.S. Fish and Wildlife Service at a storage facility in the Bronx. After purchasing the horns, GUAN had the undercover agents drive him and a female accomplice acting as his interpreter to a nearby express mail store where he mailed the horns to an address in Point Roberts, Washington, less than a mile from the Canadian border and 17 miles from his business. GUAN falsely labeled the box of black rhino horns as containing “handicrafts.” GUAN indicated that he had people who could drive the horns across the border and that he had done so many times before.
As part of his plea, GUAN admitted that he, and others acting at his direction, smuggled more than $400,000 of rhino horns and sculptures made from elephant ivory and coral from various U.S. auction houses to Canada by the same method, or by having packages mailed directly to Canada with false paperwork and without the required declaration or permits.
GUAN, 39, of Richmond, British Columbia, Canada, pled guilty to one count of attempted smuggling, which carries a maximum penalty of ten years in prison. He is scheduled to be sentenced by Judge Swain on March 13, 2015, at 3:30 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, GUAN agreed to forfeit items recovered from a search of his antiques business in Canada, and also agreed that he will not participate in any further trade, purchase, or sale of wildlife in the United States.
Rhinoceros are an herbivore species of prehistoric origin and one of the largest remaining mega-fauna on earth. They have no known predators other than humans. All species of rhinoceros are protected under U.S. and international law. Since 1976, trade in rhinoceros horn has been regulated under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), a treaty signed by over 170 countries around the world to protect fish, wildlife, and plants that are or may become imperiled due to the demands of international markets.
Operation Crash is a continuing investigation by the Department of the Interior’s Fish and Wildlife Service, in coordination with the Department of Justice. A “crash” is the term for a herd of rhinoceros. Operation Crash is an ongoing effort to detect, deter, and prosecute those engaged in the illegal killing of rhinoceros and the unlawful trafficking of rhinoceros horns.
Mr. Bharara commended the U.S. Fish and Wildlife Service for its outstanding work in this investigation. He also thanked the Department of Justice’s Environment and Natural Resources Division, and Canada’s Wildlife Enforcement Directorate.
The case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Janis M. Echenberg and Senior Litigation Counsel Richard A. Udell with the Environmental Crimes Section of the Department of Justice are in charge of the prosecution.
California Man Pleads Guilty in Manhattan Federal Court to Selling “Blackshades” Malware That Enabled Users Around the World to Secretly and Remotely Control Victims’ ComputersRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that BRENDAN JOHNSTON, an administrator of Blackshades who helped market and sell malicious software, or malware, including the Blackshades’ Remote Access Tool (“RAT”), pled guilty today in Manhattan federal court to conspiracy to commit computer hacking. As an administrator, JOHNSTON marketed and sold the RAT and other malware, and provided technical assistance to Blackshades’ customers. He pled guilty today before U.S. District Judge Jesse M. Furman.
Manhattan U.S. Attorney Preet Bharara said: “Today Brendan Johnston, who helped market and sell the Blackshades RAT, became the latest individual to plead guilty to computer hacking offenses in connection with this case. This Office will continue to work with our law enforcement partners at the Federal Bureau of Investigation to find and prosecute those who create, market, and employ malicious software.”
According to the allegations in documents filed in Manhattan federal court, and statements made at today’s plea and other court proceedings:
Beginning in at least 2010, an organization known as “Blackshades” sold and distributed malware to thousands of cybercriminals throughout the world. Blackshades’ flagship product was the RAT – a sophisticated piece of malware that enabled cybercriminals secretly and remotely to gain control over a victim’s computer. After installing the RAT on a victim’s computer, a user of the RAT had free rein to, among other things, access and view documents, photographs, and other files on the victim’s computer, record all of the keystrokes entered on the victim’s keyboard, steal the passwords to the victim’s online accounts, and even activate the victim’s web camera to spy on the victim – all of which could be done without the victim’s knowledge.
The RAT was purchased by at least several thousand users in more than 100 countries and used to infect more than half a million computers worldwide. Blackshades generated sales of more than $350,000 between September 2010 and April 2014.
JOHNSTON personally used Blackshades malware and was also a paid employee of the Blackshades organization who, among other things, marketed and sold the RAT, and provided technical assistance to users of the RAT to assist them in infecting and remotely controlling victims’ computers with the RAT. In certain online postings, JOHNSTON described himself as an “authorized seller” and “admin,” or administrator, of Blackshades.
JOHNSTON, 24, of Thousand Oaks, California, pled guilty today before U.S. District Judge Jesse M. Furman to conspiracy to commit computer hacking, which carries a maximum sentence of 10 years in prison. He is scheduled to be sentenced by Judge Furman on May 27, 2015, at 3:30 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.
Alex Yücel, the alleged owner of Blackshades and co-creator of the RAT, was arrested in Moldova in November 2013 and extradited to the United States in May 2014. His case is pending before United States District Judge Kevin P. Castel. The charges against Yücel are merely accusations and he is presumed innocent unless and until proven guilty.
Michael Hogue, the co-creator of the RAT, pled guilty before Judge Castel in January 2013 and is awaiting sentencing.
Kyle Fedorek, a customer of Blackshades who purchased the RAT and used it to steal financial and other account information from more than 400 victims, pled guilty on August 19, 2014, before U.S. Magistrate Judge Gabriel W. Gorenstein and is scheduled to be sentenced by U.S. District Judge Vernon S. Broderick on January 30, 2015, at 2:30 p.m.
Marlen Rappa, a customer of Blackshades who purchased the RAT and used it to infect victims’ computers, spy on those victims using their web cameras, and steal personal files from their computers, pled guilty on October 31, 2014, before U.S. District Judge Valerie E. Caproni. He is scheduled to be sentenced by Judge Caproni on January 29, 2015, at 2:00 p.m.
Mr. Bharara praised the outstanding investigative work of the Federal Bureau of Investigation.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Sarah Lai and Daniel Noble are in charge of the prosecution.
Manhattan U.S. Attorney Announces Extradition of Former Member of German Armed Services Charged with Narcotics ConspiraciesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Thomas M. Harrigan, the Deputy Administrator of the United States Drug Enforcement Administration (“DEA”), today announced that MICHAEL FILTER was extradited from Estonia where he had been arrested for conspiracy to import cocaine into the United States and conspiracy to distribute cocaine on board an aircraft. FILTER, a German citizen, arrived in the Southern District of New York yesterday, and made his first appearance in Manhattan federal court today. FILTER’s co-defendants, Joseph Manuel Hunter, Timothy Vamvakias, and Dennis Gogel were previously arrested in Thailand (Hunter) and Liberia (Vamvakias and Gogel) and brought to the United States in September 2013. Co-defendant Slawomir Soborski was previously arrested in Estonia in September 2013 and was extradited to the United States in April 2014.
Manhattan U.S. Attorney Preet Bharara said: “Now that he has arrived in the Southern District, Michael Filter can begin to answer for his role as an alleged member of a would-be ‘security team’ to international narcotics traffickers. This Office remains committed to pursuing and prosecuting those who would help perpetuate the flow of illegal drugs into our country.”
DEA Deputy Administrator Thomas M. Harrigan said: “Michael Filter, who allegedly facilitated global drug trafficking and violence with associates such as Joseph Hunter, will now face justice in the United States. A former member of the German armed forces, Filter was a key player in a worldwide criminal enterprise that included associates charged in an elaborate murder-for-hire scheme.”
According to the allegations contained in the Superseding Indictment:
All five defendants have previously served in the armed forces of their respective nations. FILTER and Gogel served in the German armed forces until 2009 and 2010, respectively; Soborski served in the Polish armed forces until 2011; and Hunter and Vamvakias served in the U.S. Army until 2004. FILTER, Gogel, and Soborski were trained as snipers; Hunter served as a sniper instructor and a senior drill sergeant, training other soldiers in marksmanship and tactics; and Vamvakias attained the rank of sergeant and served both as infantryman and a military police officer.
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 FILTER, Vamvakias, Gogel, and Soborski.
Hunter and his co-defendants, including FILTER, thereafter agreed, in meetings and communications with the CSs, to provide security and surveillance services to the narcotics trafficking organization. Hunter and his four co-defendants provided a variety of services to the CSs’ purported narcotics organization. In late March 2013, in Thailand, at Hunter’s direction, FILTER, Soborski, and Gogel surveilled a vessel on behalf of the CSs’ purported narcotics trafficking organization. In April 2013, in Mauritius, at the direction of the CSs, FILTER, Soborski, and Gogel provided security for a meeting at which the participants discussed the distribution of illegal narcotics to the United States, and in late June 2013, in the Bahamas, FILTER, Soborski, Vamvakias, and Gogel conducted surveillance of a purported U.S.-registered aircraft at the direction of one of the CSs. That CS informed the defendants that the aircraft was to be loaded with 300 kilograms of cocaine to be shipped to New York.
In late September 2013, FILTER was arrested in Estonia, with Soborski, in coordination with Estonian authorities, and remained in the custody of Estonian authorities until his extradition today to the United States.
FILTER, Hunter, Vamvakias, Gogel, and Soborski have each been charged with conspiracy to import cocaine into the United States (Count One) and FILTER, Vamvakias, Gogel, and Soborski are also charged with conspiracy to distribute cocaine on board an aircraft (Count Five).
Hunter, Vamvakias, and Gogel are also charged with conspiracy to murder a law enforcement agent and a person assisting a law enforcement agent (Count Two); conspiracy to kill a person to prevent communications to law enforcement agents (Count Three); and conspiracy to possess a firearm in furtherance of a crime of violence (Count Four). These additional charges against Hunter, Vamvakias, and Gogel relate to their alleged participation in a murder-for-hire plot proposed by the CSs targeting a Special Agent of the DEA and a person who those defendants believed was providing information to the DEA about the CSs’ narcotics trafficking. FILTER is not charged with participating in the murder-for-hire plot.
Each count carries a maximum penalty of life in prison. The maximum potential 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. The case is assigned to U.S. District Judge Laura Taylor Swain. Trial has been set for March 9, 2015.
The charges, arrests, and transfers of the defendants 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; 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’s Office of International Affairs.
This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Michael Lockard, Aimee Hector, Anna Skotko, and Emil Bove 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.
Manhattan and Brooklyn U.S. Attorneys Announce Guilty Plea in Manhattan Federal Court of Colombian Narcotics Kingpin to Massive Cocaine ConspiracyRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York (“SDNY”), and Loretta E. Lynch, the United States Attorney for the Eastern District of New York (“EDNY”), announced that DANIEL BARRERA BARRERA, also known as “Loco Barrera,” a citizen of Colombia, pled guilty today in the Southern District of New York before U.S. Magistrate Judge Ronald L. Ellis to conspiring to distribute and manufacture cocaine knowing that it would be imported into the United States. For decades, BARRERA manufactured hundreds of tons of cocaine annually in Colombia and trafficked it to various parts of the world, including the U.S., and laundered tens of millions of dollars in proceeds from that narcotics trafficking activity. BARRERA was previously extradited from Colombia to the United States on July 9, 2013.
In March 2010, the U.S. Department of the Treasury’s Office of Foreign Assets Control designated BARRERA as a “Special Designated Narcotics Trafficker,” pursuant to the Foreign Narcotics Kingpin Designation Act. BARRERA was arrested in Venezuela on September 18, 2012. Thereafter, he was sent to Colombia, from where the U.S. sought and obtained BARRERA’s extradition. The extradition and guilty plea of BARRERA is the result of an ongoing Organized Crime Drug Enforcement Task Forces (“OCDETF”) investigation led by the Drug Enforcement Administration (“DEA”) and Homeland Security Investigations (“HSI”). The principal mission of the OCDETF program is to identify, disrupt, and dismantle the most serious drug trafficking, weapons trafficking, and money laundering organizations, and those primarily responsible for the nation’s illegal drug supply.
U.S. Attorney Preet Bharara said: “Daniel Barrera Barrera operated at the interface of two Colombian terrorist organizations that were sworn enemies of each other but each of which benefitted from Barrera’s patronage. As he has now admitted in our courthouse, Barrera bought cocaine paste from the FARC and, under the protection of the AUC, turned it into hundreds of tons of hugely profitable product annually, some of which he knew was intended for distribution in the U.S. A drug kingpin who enriched two terrorist organizations and himself by producing and peddling poison now stands to lose his wealth, his empire, and his liberty.”
U.S. Attorney Loretta E. Lynch said: “Daniel ‘Loco’ Barrera Barrera’s reign as one of the world’s most prolific narcotics traffickers has come to an end. Barrera’s illegal empire, funded by millions of dollars of illicit proceeds and backed by some of the most lethal drug cartels and terrorist groups in the world, wreaked havoc in Colombia and around the world for decades. The amount of destruction Barrera wrought upon the world, all in pursuit of staggering profits, is truly incalculable. This plea demonstrates our government’s commitment to bringing all narcotics traffickers to justice, no matter how rich, powerful, ruthless and violent they may be.”
As alleged in the Superseding Indictment filed in the Southern District of New York (S1 07 Cr. 862 (AKH)), the Superseding Indictment filed in the Eastern District of New York (S2 10 Cr. 288 (ILG)), statements made at today’s guilty plea and other court proceedings, and other information in the public record:
From 1998 until 2010, BARRERA ran a cocaine manufacturing and trafficking syndicate out of Colombia. BARRERA purchased the raw cocaine base or paste from the designated terrorist group Fuerzas Armadas Revolucionarias de Colombia (Revolutionary Armed Forces of Colombia, or the “FARC”). The FARC, which has been and is dedicated to the violent overthrow of the democratically elected Government of Colombia, has been the world’s largest supplier of cocaine and has engaged in bombings, massacres, kidnappings, and other acts of violence within Colombia.
After purchasing the raw cocaine base from the FARC, BARRERA converted the raw cocaine into powder at laboratories he owned and operated in an area of Colombia controlled by the since demobilized terrorist group, Autodefensas Unidas de Colombia (the “AUC”). For years, the AUC’s main political objective was to defeat the FARC in armed conflict, and it financed its terrorist activities through the proceeds of cocaine trafficking in AUC-controlled regions of Colombia. At the time of BARRERA’s criminal conduct, the FARC and the AUC were both designated by the U.S. Department of State as Foreign Terrorist Organizations.
After processing the cocaine powder in his laboratories, BARRERA arranged for the shipment and transportation of the cocaine powder to locations on four continents, including the United States. Although BARRERA purchased raw materials for cocaine production from the FARC, he was able to maintain his network of cocaine-processing laboratories in AUC-controlled territory, in part by paying monthly “taxes” to the AUC. The fees BARRERA paid to the AUC also allowed him to safely move the processed cocaine through and out of Colombia.
Each month, BARRERA processed approximately 30,000 kilograms of raw cocaine base into about the same amount of cocaine powder, resulting in approximately 400 tons of cocaine annually. In total, BARRERA reaped tens of millions of dollars of profits from cocaine trafficking, which he laundered through illicit means.
Earlier today, BARRERA, 47, pled guilty in the Southern District of New York to one count of conspiring to distribute and manufacture cocaine knowing it would be unlawfully imported into the U.S. On that count, BARRERA faces a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison. BARRERA is scheduled to be sentenced by U.S. District Judge Alvin K. Hellerstein on February 27, 2015.
On October 9, 2014, BARRERA pleaded guilty in the Eastern District of New York to one count of conspiring to launder money. On that count, BARRERA faces a maximum sentence of 20 years in prison. BARRERA is scheduled to be sentenced by U.S. District Judge I. Leo Glasser on January 22, 2015.
BARRERA is also charged in the Southern District of Florida with one count of conspiring to import cocaine into the U.S. and one count of conspiring to manufacture and distribute cocaine knowing that it would be unlawfully imported into the U.S. On those counts, BARRERA faces a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison. Following his prosecutions in the Southern and Eastern Districts of New York, BARRERA will be presented and arraigned in the Southern District of Florida. The charge and allegations contained in the Southern District of Florida Indictment are merely accusations and the defendant is presumed innocent of that charge unless and until proven guilty.
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 and Ms. Lynch praised the outstanding work of the OCDETF, working in cooperation with HSI New York’s El Dorado Task Force, the DEA’s Bogota Country Office, the DEA’s Caracas Country Office, the DEA’s Miami Field Division, the DEA’s New York Drug Enforcement Task Force – which comprises agents and officers of the DEA, the New York City Police Department, and the New York State Police – as well as HSI Bogota. Mr. Bharara and Ms. Lynch also thanked the Colombian National Police, the U.S. Marshals Service, and the U.S. Department of Justice’s Office of International Affairs for their ongoing assistance.
The Southern District of New York case is being handled by that office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Jenna Dabbs, Benjamin Naftalis, and Andrea Surratt are in charge of the prosecution. The Eastern District of New York case is being handled by that office’s International Narcotics and Money Laundering Section. Assistant United States Attorneys Justin Lerer, Soumya Dayananda, and Amir Toossi are in charge of the prosecution.
Owner of Debt Relief Company Sentenced in Manhattan Federal Court to 108 Months in Prison for Multimillion-Dollar Scheme That Victimized over 1,200 Financially Struggling PeopleRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that MICHAEL LEVITIS, the owner of MISSION SETTLEMENT AGENCY (“MISSION”), was sentenced in Manhattan federal court to 108 months in prison in connection with a multimillion-dollar scheme that victimized more than 1,200 financially struggling people across the country. MISSION was also sentenced today, and ordered to pay a fine of $4,393,044. LEVITIS and MISSION pled guilty on April 8, 2014, before U.S. District Judge Paul G. Gardephe, who also imposed today’s sentences.
Manhattan U.S. Attorney Preet Bharara said: “Michael Levitis preyed upon people across the country who, like so many Americans, were struggling to pay off their debts after the financial downturn. Through Mission Settlement Agency, Levitis lied about quick, guaranteed cures to their serious financial problems in order to trick them out of money they could not afford to lose. Worse, he created, for many people, a nightmare of spiraling debt and plummeting credit scores that plagues them to this day. With his sentence today, he has been held responsible and punished for his crimes. As we demonstrated just yesterday through our announcement of another consumer debt-related case, this Office is committed to working with our law enforcement partners to pursue and prosecute those who seek to profit by exploiting financially struggling and vulnerable people. I would like to thank the U.S. Postal Inspection Service for their work on this case, and the Consumer Financial Protection Bureau for bringing this matter to our attention.”
According to the allegations contained in the Indictment and Superseding Information, other documents filed in Manhattan federal court, and statements made in court proceedings:
Beginning in 2009, MISSION offered “debt settlement” services to financially disadvantaged people who were struggling or unable to pay their credit card debts. Like other purported debt settlement providers, MISSION held itself out as a company that could successfully negotiate to lower the overall debt its customers owed to credit card companies and banks. MISSION solicited prospective customers through telemarketing and mail solicitations. Thereafter, MISSION’s sales representatives typically spoke to the prospective customers on the phone, describing MISSION’s work and its supposed ability to renegotiate debt.
LEVITIS was MISSION’s beneficial owner, and was responsible for managing MISSION’s day-to-day operations, its finances, its hiring and termination of employees, and its advertising and solicitation of customers.
From 2009 through May 2013, at LEVITIS’s direction, he and his co-conspirators Denis Kurlyand, Boris Shulman, Manuel Cruz, Felix Lemberskiy, and Zakhir Shirinov systematically exploited and defrauded over 1,200 customers across the country, who were financially disadvantaged people struggling to pay their credit card debts. They tricked people into paying MISSION for purported debt settlement services by lying to prospective customers about MISSION’s ability to help settle their debts, the fees that MISSION charged, and MISSION’s purported affiliation with the federal government. Among other things, the defendants: (1) lied about and/or concealed MISSION’s fees, falsely assuring customers that MISSION would charge a mere $49 per month when, in truth, MISSION took thousands of dollars in fees from funds that its customers believed would be used to pay creditors, (2) deceived customers by fraudulently and falsely promising that MISSION could slash their debts – typically, by 45% -- when, in fact, for the majority of its customers, MISSION did little or no work and failed to achieve any reduction in debt, and (3) sent prospective customers solicitation letters that falsely suggested that the agency was acting on behalf of or in connection with a federal governmental program, which letters included an image of the Great Seal of the United States and indicated that they were coming from the “Reduction Plan Administrator” of the purported “Office of Disbursement.” As a result of the defendants’ scheme, in addition to losing money, most of MISSION’s customers failed to achieve the reduction in debt that the defendants had promised them, and some of them suffered further declines in their credit ratings, were sued by their creditors, and/or fell into bankruptcy.
MISSION received over $6.6 million in fees during the course of the scheme. For more than 1,200 of its customers, MISSION took fees totaling nearly $2.2 million but never paid a penny to the customers’ creditors. LEVITIS used the money that MISSION took from its customers to pay for, among other things, the operating expenses of Rasputin, a restaurant/nightclub he controlled, lease payments for two different luxury Mercedes cars, credit card bills for his mother, and expenses for parties and other events featured in a reality television show in which he starred during the course of the scheme.
In addition to his prison term, LEVITIS, 38, of Brooklyn, New York, was sentenced to three years of supervised release, and ordered to pay forfeiture and restitution of $2,196,522 and a fine of $15,000.
In sentencing LEVITIS, Judge Gardephe said, “There is something special and extraordinary about the crimes here: the fact that they were directed at desperate people, hundreds of desperate people drowning in debt, trying to find a way out of their problems. […] The determination to extract from these people their last few dollars makes this crime extraordinary.”
LEVITIS and MISSION previously entered into a stipulation of settlement of the civil forfeiture action filed by the United States Attorney’s Office for the Southern District of New York entitled United States v. All Right, Title, and Interest in Rasputin Restaurant, 13 Civ. 3069 (GHW). As part of that stipulation of settlement, LEVITIS and MISSION consented to the entry of a permanent injunction barring them from providing, directly or indirectly, any debt relief or mortgage relief services in the future.
Five other defendants, Denis Kurlyand, Boris Shulman, Felix Lemberskiy, Zakhir Shirinov, and Manuel Cruz, previously pled guilty for their roles in the fraudulent scheme, and await sentencing.
Mr. Bharara praised the investigative work of the United State Postal Inspection Service. He also thanked the Consumer Financial Protection Bureau for referring this case to this Office and for their assistance in this matter. Mr. Bharara also thanked the New York City Department of Consumer Affairs for their assistance in the case.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Nicole W. Friedlander and Edward A. Imperatore are in charge of the prosecution. Assistant United States Attorney Carolina A. Fornos of the Office’s Asset Forfeiture Unit is responsible for the forfeiture aspects of the case.
Manhattan U.S. Attorney Announces Charges Against Kentucky Resident for Maintaining Secret Swiss Bank AccountsRead the Press Release
U.S. Attorney Preet Bharara for the Southern District of New York and Acting Special Agent in Charge Shantelle P. Kitchen of the Internal Revenue Service-Criminal Investigation (IRS-CI) New York Field Office announced today the unsealing of an indictment against Peter Canale, a U.S. citizen and resident of Kentucky, for conspiring to defraud the IRS and evade taxes by establishing and maintaining secret, undeclared bank accounts in Switzerland. Canale was arrested this morning at his residence in Jamestown, Kentucky, and is expected to be presented later today in the U.S. District Court for the Eastern District of Kentucky. Canale is scheduled to be arraigned before U.S District Judge Katherine B. Forrest in Manhattan federal court on Dec. 3, 2014, at 3:00 p.m.
According to the allegations in the indictment unsealed today in Manhattan federal court:
Canale conspired with others – including Michael Canale, his brother, Beda Singenberger, a Swiss citizen who ran a financial advisory firm, and Hans Thomann, a Swiss citizen who served as a client adviser at UBS and certain Swiss asset management firms – to establish and maintain undeclared bank accounts in Switzerland and to hide those accounts from the IRS. Canale used a sham entity to conceal from the IRS his ownership of the undeclared accounts and deliberately failed to report the accounts and the income generated in the accounts to the IRS.
In approximately 2000, a relative of Canale’s who held an undeclared bank account in Switzerland died and left a substantial portion of the assets in the undeclared account to Canale and Michael Canale. Canale and his brother met with Thomann and Singenberger and determined they would continue to maintain the assets in the undeclared account for the benefit of Canale and his brother.
Thereafter, in approximately 2005, Canale, with Singenberger’s assistance, opened an undeclared account at the Swiss bank Wegelin. The account was opened in the name of a sham foundation formed under the laws of Lichtenstein to conceal Canale’s ownership. As of Dec. 31, 2009, the account held assets valued at approximately $789,000.
For each of the calendar years from 2007 through 2010, Canale willfully failed to report on his tax returns his interest in the undeclared accounts and the income generated in those accounts. For each of these years, Canale also failed to file a Report of Foreign Bank and Financial Accounts (FBAR) with the IRS, as the law required him to do.
Canale, 61, is charged with one count of conspiracy to defraud the United States, evade taxes, and file a false and fraudulent income tax return, which carries a statutory maximum sentence of five years in prison. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
U.S. Attorney Bharara praised the outstanding investigative work of IRS-CI and also thanked the U.S. Department of Justice’s Tax Division for their assistance.
The case is being prosecuted by the U.S. Attorney’s Office for the Southern District of New York’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Jason Cowley and Sarah Paul and Special Assistant U.S. Attorney Jorge Almonte of the Tax Division 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.
Manhattan U.S. Attorney Announces Charges Against Kentucky Resident for Maintaining Secret Swiss Bank AccountsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Shantelle P. Kitchen, the Acting Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigations Division (“IRS-CI”), announced today the unsealing of an Indictment against PETER CANALE, a U.S. Citizen and resident of Kentucky, for conspiring to defraud the IRS and evade taxes by establishing and maintaining secret, undeclared bank accounts in Switzerland. CANALE was arrested this morning at his residence in Jamestown, Kentucky, and is expected to be presented later today in the United States District Court for the Eastern District of Kentucky. CANALE is scheduled to be arraigned before U.S District Judge Katherine B. Forrest in Manhattan federal court on December 3, 2014, at 3:00 p.m.
According to the allegations in the Indictment unsealed today in Manhattan federal court:
CANALE conspired with others – including his brother Michael Canale, Beda Singenberger, a Swiss citizen who ran a financial advisory firm, and Hans Thomann, a Swiss citizen who served as a client adviser at UBS and certain Swiss asset management firms – to establish and maintain undeclared bank accounts in Switzerland, and to hide those accounts from the IRS. CANALE used a sham entity to conceal from the IRS his ownership of the undeclared accounts, and deliberately failed to report the accounts and the income generated in the accounts to the IRS.
In approximately 2000, a relative of CANALE’s who held an undeclared bank account in Switzerland died and left a substantial portion of the assets in the undeclared account to CANALE and Michael Canale. CANALE and his brother met with Thomann and Singenberger and determined they would continue to maintain the assets in the undeclared account for the benefit of CANALE and his brother.
Thereafter, in approximately 2005, CANALE, with Singenberger’s assistance, opened an undeclared account at the Swiss bank Wegelin. The account was opened in the name of a sham foundation formed under the laws of Lichtenstein to conceal CANALE’s ownership. As of December 31, 2009, the account held assets valued at approximately $789,000.
For each of the calendar years from 2007 through 2010, CANALE willfully failed to report on his tax returns his interest in the undeclared accounts and the income generated in those accounts. For each of these years, CANALE also failed to file with the IRS a Report of Foreign Bank and Financial Accounts, or FBAR, as the law required him to do.
CANALE, 61, of Jamestown, Kentucky, is charged with one count of conspiracy to defraud the United States, evade taxes, and file a false and fraudulent income tax return, which carries a maximum sentence of five years in prison. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the outstanding investigative work of IRS-CI. Mr. Bharara also thanked the U.S. Department of Justice’s Tax Division for their assistance.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Jason Cowley and Sarah Paul and Special Assistant United States Attorney Jorge Almonte of the DOJ’s Tax Division 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.
US v Peter Canale Indictment
Manhattan U.S. Attorney Announces Charges Against Inside Man Arrested in Connection with Daytime Armed Robbery of Diamond District StoreRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, James Higgins, Acting Special Agent in Charge of the New York Field Division of the Bureau of Alcohol, Tobacco, Firearms and Explosives, and William J. Bratton, Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of a complaint charging RONDU FRISBY, a/k/a “Reef,” for his role in an armed robbery of a store in the Diamond District of Manhattan on November 11, 2014. FRISBY was arrested yesterday and was presented today in Manhattan federal court before the Honorable Ronald L. Ellis and detained on consent.
Manhattan U.S. Attorney Preet Bharara said: “Thanks to the dogged detective work of the NYPD and the ATF, and the determined efforts of career prosecutors in my Office's Violent and Organized Crime Unit, one of the people allegedly responsible for a brazen armed robbery is in custody. As alleged, the defendant and his accomplices used deceit to gain entry to a Diamond District jewelry store in broad daylight last week, but once inside, the tactics turned violent. With the arrest of Rondu Frisby we are closer to apprehending the other two men willing to use a pistol for profit.”
ATF Acting Special Agent in Charge James Higgins said: “I am extremely gratified that the investigators involved have swiftly apprehended and arrested at least one of the perpetrators in this investigation. This arrest stems from the investigative efforts of the newly formed ATF/NYPD robbery task force. Yesterday's arrest demonstrates the effectiveness of combining federal and local law enforcement resources and expertise in targeting violent offenders.”
Police Commissioner William J. Bratton said: “Through coordinated efforts with our law enforcement partners, Rondu Frisby’s role was quickly uncovered, and he was tracked down and charged. We will continue to pursue the remaining fugitives until they too are brought to justice.”
According to the Complaint unsealed today in Manhattan federal court, it is alleged that:
On November 11, 2014, two men carried out an armed commercial robbery of a jewelry store (the “Store”) on the 8th Floor of a building on 47th Street in the Diamond District of Manhattan. The Store is not open to the public but is a space where clients can view and purchase jewelry. RONDU FRISBY, the defendant, is a friend of the owner of the store (the “Owner”). FRISBY arrived at the Store moments before the robbery after having told the Owner that he was going to come by to help a friend pick out jewelry for the friend’s girlfriend. Just after FRISBY arrived, at approximately 2:20 in the afternoon – in broad daylight as the Veteran’s Day Parade proceeded nearby – one man (“Perpetrator-1”), dressed in a suit, carrying a bag, and appearing to be a messenger, came to the door of the store, while a second man (“Perpetrator-2”) served as a lookout in the hallway. FRISBY let Perpetrator-1 into the Store. After entering, Perpetrator-1 first said that he was there to serve the Owner of the Store with papers, and took two envelopes out of his bag before placing them on a desk. Perpetrator-1 then took out a black semiautomatic gun and pointed it at the Owner, FRISBY, and two others present and demanded that they give him all the jewelry in the Store. FRISBY and the others emptied more than $600,000 worth of jewelry from a safe and other locations and placed it into Perpetrator-1’s bag, before he and Perpetrator-2 left the scene. FRISBY, among others, was interviewed after the robbery and provided an account of what happened but did not state that he knew Perpetrator-1 or Perpetrator-2.
Perpetrator-1 was identified based on fingerprint analysis of the envelopes left in the store, and a cellphone number for Perpetrator-1 was then obtained. Cellphone analysis shows 25 phone communications between FRISBY and Perpetrator-1 on the day of the robbery, both before and after the robbery but not during it. In addition, surveillance footage from 47th Street just before the robbery shows FRISBY walking toward the Store, with Perpetrator-1 20 feet behind him, and Perpetrator-2 30 feet behind FRISBY. In particular, at 2:14 p.m., both FRISBY and Perpetrator-1 can be seen talking on their phones. Cellphone records show a call between FRISBY and Perpetrator-1 at that time.
A search of FRISBY’s apartment pursuant to a search warrant uncovered in excess of $100,000 in cash.
FRISBY, 37 of New York, New York, is charged with one count of conspiracy to commit robbery, which carries a maximum sentence of 20 years in prison, and one count of aiding and abetting the brandishing of a firearm in connection with the robbery conspiracy, which carries a maximum sentence of life in prison, with a seven-year mandatory minimum sentence. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.
Mr. Bharara praised the investigative work of the NYPD and the Joint Robbery Task Force, consisting of members of the NYPD, ATF, and the United States Marshals Service.
This case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorney Russell Capone 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.
US v. Rondu Frisby Complaint
Manhattan U.S. Attorney and FBI Assistant Director Announce Charges and Arrests in Multimillion-Dollar Debt Collection Scam That Targeted More Than 6,000 Victims in All 50 StatesRead 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 Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of a complaint charging WILLIAMS, SCOTT & ASSOCIATES (“WSA”), a debt collection company based in Norcross, Georgia, its owner JOHN TODD WILLIAMS, and six of its employees – BENITA CANNEDY, RUDY JAMES, ARTHUR COOK, CHRISTOPHER LENYSZYN, CLARK SMITH, and TITUS MCDOWELL – with conspiracy to commit wire fraud in connection with a nationwide debt collection scheme that targeted more than 6,000 victims throughout the United States. As alleged, the defendants contacted consumers whose debt WSA had purchased, and tried to trick and coerce them into making payments to WSA by making false threats and telling a host of lies. Among those lies were that WSA was part of a federal task force and that warrants would be issued for the consumers’ arrests if they failed to make immediate payment to WSA. In total, WSA obtained more than $4.1 million from its victims. Each of the individual defendants was arrested this morning in Georgia and will be presented later today in federal court in Atlanta.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, the defendants –third-party debt collectors acting under the guise of government authority– illegally and repeatedly threatened arrest, prosecution, and prison for countless Americans. Now, after years of threatening false arrest, these defendants are the ones who now find themselves in handcuffs, facing the loss of their own liberty. We are far from finished looking at the seedy side of debt collection. It affects too many people.”
FBI Assistant Director-in-Charge Venizelos said: “As alleged, this was nothing but a scam of total fabrication in order to coerce thousands into paying debts. This scheme took advantage of our poorest and most vulnerable citizens from all fifty states, including right here in New York City. The defendants were nothing more than bullies with bogus badges.”
According to the allegations contained in the Complaint unsealed today in Manhattan federal court:
Between approximately 2009 and May 2014, employees working for WSA routinely attempted to trick and coerce thousands of victims throughout the United States into paying millions of dollars in consumer debts through a variety of false statements and false threats. Employees of WSA typically used aliases, sometimes referring to themselves as “Detective” or “Investigator,” falsely advised consumers they had committed purported crimes such as “check fraud” or “depository check fraud,” and told consumers that if they failed to make an immediate payment to WSA to resolve the matter, a warrant would be issued for their arrest. WSA employees also falsely claimed that WSA had contracts with, or was otherwise affiliated with, certain federal or local law enforcement agencies, including the Department of Justice and the United States Marshals Service, as well as non-existent government agencies such as the “Federal Government Task Force” and the “DOJ Task Force.” To further create the appearance that it was affiliated with the federal government, WSA at times sent victims correspondence containing the seal of the United States Department of State and the following language: “Warrant Services Association, A Division of the Federal Government Task Force.”
When victims expressed doubt or sought more information, WSA employees intensified the pressure and created a heightened sense of urgency by imposing false deadlines. In one case, for example, a WSA employee told a victim he/she had 15 minutes to decide whether to make payment to WSA, and that if the victim elected not to, an arrest warrant would be issued for the victim’s spouse. In another instance, a defendant told a victim who advised that she was eight-months pregnant that she had two hours to pay WSA, or else the case would be forwarded to Los Angeles County and a warrant would be issued for her arrest.
Among other false statements, WSA employees claimed that WSA was a law firm, and that they would have the victims’ driver’s licenses suspended if those victims did not make payment to WSA. To falsely create an appearance of legitimacy, and further trick their victims into making payments, WSA employees routinely used legal terminology to invent legitimate-sounding, but completely bogus, explanations for the supposed imminent arrest of the victims, including for example, that the “statute of limitations” on the victims’ “civil legal rights” had expired and therefore the matter was now a criminal matter that could be resolved only by voluntary payment to WSA, or arrest. To frighten their victims, WSA employees warned that the arrest could take place at any time and any place, including at their homes and places of work.
In total, from approximately 2009 through approximately April 2014, WSA obtained more than $4.1 million dollars from over 6,000 victims in all 50 states.
After the FBI conducted a search of WSA’s office in Norcross, Georgia in May 2014, WILLIAMS shut down WSA and opened a new debt collection business. Based on victim complaints, employees of that debt collection business have been making the same threats and false statements to victims.
Scripts Recovered From the WSA Office
When FBI agents searched the WSA Office in May 2014, they recovered, among other things, scripts for calls with victims that contained numerous misrepresentations, including false threats of criminal charges and arrests, and false associations with the government. For example, the scripts included the following language:
“Who are we? We are a government task force set up to investigate and collect info on individuals involved in Depository Account Fraud and theft by deception.”
“This is investigator _____ I calling [sic] in reference to a complaint that has been filed through the national check fraud center were [sic] that stated that they have sent correspondents [sic] to ________ as well _______ and you have not responsed [sic] which has made your statue [sic] of limitations for your civil legal rights exhaust. That means that you are being pursued for one count of theft by deception and can be forwarded over to the local county for proceedings to start.”
“This message is for _______. My name is _______ from the investigation services of WSA. Currently there is a criminal complaint pending against you for theft of services. We are going ahead with legal proceedings today therefore we do need to speak with you immediately. Contact our office as soon as possible at [a particular telephone number] Ext ____. Thank you. Failure to respond will lead to criminal charges persude [sic] against you being forwarded over to your county.”
Recorded Calls Between The Defendants and Their Victims
During the search of WSA’s office, FBI agents also recovered computers containing recordings of thousands of calls between WSA employees and victims. Those recorded calls included the following:
- A call in which CANNEDY identified herself as “Chief Investigator Sharon Wright” and stated that she was investigating a criminal complaint against the victim for a payday loan the victim had taken out. When the victim told CANNEDY she was not currently working, CANNEDY responded that she had no choice but to forward the case to Los Angeles County and that Los Angeles County would issue a warrant for her arrest for “depository check fraud” and “theft by deception.” When the victim asked for customer service, CANNEDY responded: “Customer service? Ma’am you’re on the way to jail.” Later, the victim asked to see information to ensure that everything was legitimate, and CANNEDY responded, “Don’t take care of it, and you’ll see just how legit it is.” The victim said that she wanted to take care of the debt, was eight months pregnant, and did not want to go to jail. CANNEDY then responded, “I’m not going to go back and forth. I wouldn’t care if you were nine months pregnant. I have a job to do here.” CANNEDY told the victim she had two hours to pay WSA, and after that, the case would be forwarded to Los Angeles County for the issuance of an arrest warrant.
- A call in which JAMES told a victim he had an outstanding “restitution” of over $2,000, and when the victim said he had already paid it with a credit card, JAMES claimed the victim still had to pay WSA because “when you file for an ADR, you can’t use a debt instrument to pay a debt.” The victim said he did not have enough money to pay immediately and asked for documentation of the debt since he believed he had paid it already. JAMES told the victim that sending documentation would not stop the warrant from being processed. JAMES said that once he hung up the phone, he would put the case into “refusal status” and that the victim should have his attorney contact the office to set up an arraignment.
- A call in which COOK told a victim that her husband was being pursued for a “theft by receiving” charge to be forwarded to the local county and processed for a warrant. COOK advised that if her husband was “detained by county sheriffs, he would have to sit in reformatory” until he was tried.
- A call in which LENYSZYN told a victim that he was an investigator for “WSA” and was investigating “theft of services.” LENYSZYN explained that “what we do is we issue warrants and we do the suspension of driver’s license over here.” When the victim asked whether a warrant would be issued if he could only pay half the money, LENYSZYN said it could be a suspension of the victim’s driver’s license or a warrant and that “you don’t want any surprises either at the house or work, especially when it comes to that, your business your family and all that.
WILLIAMS, 48, of Norcross, Georgia, CANNEDY, 36, of Duluth, Georgia, JAMES, 32, of Lithonia, Georgia, COOK, 31, of Duluth, Georgia, LENYSZYN, 46, of Acworth, Georgia, SMITH, 39, of Norcross, Georgia, and MCDOWELL, 38, of Avondale Estates, Georgia, are each charged with one count of conspiracy to commit wire fraud, which 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 defendants will be determined by the judge.
Mr. Bharara praised the outstanding investigative work of the FBI. He also thanked the Consumer Financial Protection Bureau (“CFPB”) for referring this case to this Office, and the Federal Trade Commission (“FTC”) for its assistance in this investigation. The FTC separately filed earlier this year a complaint against WSA and WILLIAMS. Mr. Bharara also acknowledged with appreciation the extraordinary partnership between this Office and both the FTC and CFPB in the Office’s ongoing effort to combat consumer fraud.
If you believe you were a victim of this crime, including a victim entitled to restitution, and you wish to provide information to law enforcement and/or receive notice of future developments in the case or additional information, please contact the Victim/Witness Unit at the United States Attorney’s Office for the Southern District of New York, at (866) 874-8900. For additional information, go to:
http://www.usdoj.gov/usao/nys/victimwitness.html.
If you wish to report a crime by another debt collector, you may contact the FTC at 1-877-FTC-HELP. For guidance on coping with debt, and information about dealing with debt collection companies in particular, consider the following link to publications issued by the Federal Trade Commission:
http://www.consumer.ftc.gov/articles/0149-debt-collection.
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 Daniel Tehrani and Jennifer Gachiri are in charge of the prosecution, and Assistant United States Attorney Jonathan Cohen is in charge of the forfeiture aspects of the case.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
U.S. v. WSA, et al Complaint
Former Stock Broker Pleads Guilty in Manhattan Federal Court to Insider Trading ChargesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that DARYL PAYTON, a former stock broker at a securities trading firm (“Securities Trading Firm-1”), pled guilty today in Manhattan federal court to charges arising from his involvement in an insider trading scheme. The alleged scheme involved the misappropriation of material, non-public information (“Inside Information”) concerning IBM’s acquisition of a software company, SPSS, Inc., in 2009. PAYTON was charged in June 2012, and pled guilty today before U.S. District Judge Andrew L. Carter, Jr.
Manhattan U.S. Attorney Preet Bharara said: “With his guilty plea today, Daryl Payton must answer for his role in a scheme to acquire inside information about a corporate acquisition, and profit illegally from it to the tune of a quarter of a million dollars.”
According to the Indictment to which PAYTON pled guilty, statements made during the plea proceeding, and other court documents:
The Inside Information concerning IBM’s acquisition of SPSS originated from a corporate lawyer who was part of the legal team that represented IBM in the transaction (“Attorney-1”) in 2009. On or about May 31, 2009, Attorney-1 shared Inside Information concerning the transaction, including the names of the parties and the fact that IBM was going to acquire SPSS for a significant premium over its market price, with his close friend, Trent Martin, a former research analyst at an international financial services firm. The information was shared in confidence and, based on their longstanding history of sharing confidences, Attorney-1 expected that Martin would not share the information or use it to trade.
However, in June and July 2009, Martin bought SPSS common stock and call option contracts based on the Inside Information he was given by Attorney-1 and, in turn, shared the tip with his roommate, Thomas Conradt, who worked as a stock broker at Securities Trading Firm-1. In July 2009, Conradt bought SPSS common stock and tipped PAYTON, his co-worker at Securities Trading Firm-1 who also bought SPSS call options, as well as other co-workers at the firm. When IBM announced its acquisition of SPSS on July 28, 2009, the share price of SPSS common stock rose by 41% in one day. Thereafter, PAYTON sold his SPSS positions, yielding total profits of at least $250,000.
PAYTON, 38, pled guilty to one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison and a fine of $250,000, or twice the gross gain or loss from the offense. He is scheduled to be sentenced by Judge Carter on March 5, 2015, at 2:00 p.m. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation. He also thanked the U.S. Securities and Exchange Commission.
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 Jessica Masella, Andrew Bauer, and Damian Williams are in charge of the prosecution.
U.S. v. Benjamin Durant and Daryl Payton S3 Indictment
Former Controller of Non-Profit Organization That Funds Medical Research Charged in Manhattan Federal Court with Embezzling over $1.8 Million and Evading TaxesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Philip R. Bartlett, Inspector in Charge, United States Postal Inspection Service (“USPIS”), and Shantelle P. Kitchen, Acting Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigations Division (“IRS-CI”), announced today the arrest of KAREN ALAMEDDINE, a/k/a “Karen Dean,” the former controller of a New York-based non-profit organization whose core mission is to cure genetic illnesses by supporting biomedical research (the “Non-Profit”), for allegedly embezzling more than $1.8 million from the Non-Profit. ALAMEDDINE also was charged with tax evasion for deliberately failing to report to the IRS as income the money she embezzled from the Non-Profit. ALAMEDDINE was arrested yesterday in Boston, Massachusetts, and was presented today before United States Magistrate Judge Judith Gail Dein in Boston federal court.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Karen Alameddine not only embezzled almost $2 million and evaded taxes, she did so by ripping off the non-profit organization she worked for – an organization dedicated to finding cures for serious diseases – and she did so when she was supposed to be responsible for its finances. I would like to thank our partners on this investigation, USPIS and IRS-CI, for their work.”
USPIS Inspector in Charge Philip R. Bartlett said: “While Ms. Alameddine allegedly went to great lengths to hide her theft from her employer and those hoping to find the cure for serious illnesses, she could not hide from the watchful eye of law enforcement who put an end to her illegal activities.”
IRS Acting Special Agent in Charge Shantelle P. Kitchen said: “It is clear how embezzlement can hurt a business’s owners or stockholders, but stealing from a non-profit organization deprives those who will benefit from the organization’s mission. As a financial investigative agency, IRS-CI is dedicated to working with federal prosecutors and our partner federal law enforcement agencies, like the U.S. Postal Inspection Service, to investigate those who take advantage of their positions for personal criminal gain, at the expense of others.”
According to the Complaint unsealed in Manhattan federal court:
From approximately late 2008 through early 2014, while working as the controller for the Non-Profit, ALAMEDDINE diverted over $1.8 million of the Non-Profit’s funds to her own bank accounts and for her own personal use. ALAMEDDINE executed the scheme principally by disguising QuickBooks entries to make transfers to her personal bank account appear as if they were transfers made to pay grant recipients of the Non-Profit. ALAMEDDINE further sought to disguise the fraud by inventing a fictitious accounting firm named “Davis & Greene,” purportedly based in Washington, D.C., which was, according to ALAMEDDINE, retained to prepare certain tax returns for the Non-Profit for the 2012 and 2013 tax years.
After ALAMEDDINE fraudulently transferred the funds from an account belonging to the Non-Profit to a personal bank account, she further transferred the funds to other accounts she controlled, and thereafter used those funds for various personal expenses, including to pay personal bills. Among the personal bills ALAMEDDINE paid with the fraudulently diverted funds were utility bills, car payments, and personal mortgages.
In addition, for each of the calendar years 2009 through 2013, ALAMEDDINE filed tax returns with the IRS in which she deliberately omitted the reporting of the income she received from the fraud. Those deliberate omissions resulted in ALAMEDDINE’s evasion of substantial amounts of income for each of the years between 2009 and 2013.
ALAMEDDINE, 57, of Perris, CA, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison, and five counts of tax evasion, each of which carries a maximum sentence of 5 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 IRS and the USPIS.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Stanley J. Okula is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
United States Announces Court Approval of Historic $5.15 Billion Environmental and Tort Settlement with Anadarko Petroleum Corp.Read the Press Release
Additional Payments for Individual Tort Victims
Largest Litigation Recovery for the Clean-Up of Environmental Contamination in Government’s History
Preet Bharara, the United States Attorney for the Southern District of New York, Sam Hirsch, Acting Assistant Attorney General for the Justice Department’s Environment and Natural Resources Division (“ENRD”), and Cynthia Giles, Assistant Administrator of the U.S. Environmental Protection Agency, announced today that the United States District Court in Manhattan has approved the historic settlement of fraudulent conveyance claims brought by the United States and co-plaintiff Anadarko Litigation Trust (the “Trust”) against the Kerr-McGee Corporation and certain of its affiliates, including Andarko Petroleum Corporation, in the bankruptcy of Tronox Inc. and its subsidiaries (“Tronox”). Pursuant to the settlement agreement, the defendants must pay $5.15 billion, of which approximately $4.4 billion will be paid to fund environmental clean-up and for environmental claims, plus interest from April 3, 2014. This settlement will result in the largest payment for the clean-up of environmental contamination ever obtained in a lawsuit brought by the Department of Justice.
Manhattan U.S. Attorney Preet Bharara said: “Corporations may not pursue profit at the expense of public health. They may not hide from their responsibilities through corporate shell-games. And they may not rely on bankruptcy to push the cost of their misconduct onto the American taxpayer. This settlement will require the defendants to pay billions to make up for a legacy of environmental contamination and ruination left across the nation. ”
Acting Assistant Attorney General Sam Hirsch said: “The court’s approval of this settlement marks a significant victory for environmental justice by holding Kerr-McGee fully accountable for its attempts to defraud American taxpayers and escape a toxic legacy. Thanks to this settlement, billions of dollars will be made available to clean up contaminated sites across the United States.”
EPA Assistant Administrator Cynthia Giles said: “At EPA, we stand by the principle that if you make a mess, you clean it up. This decision means that soon more than $4 billion will be put to work in American communities, cleaning up water supplies and removing dangerous contamination.”
Settlement Approval
On April 3, 2014, the United States announced this settlement, which was then subject to a period of public comment and judicial approval. After receiving and considering comments from the public, the United States sought approval of the settlement agreement. On May 30, 2014, the United States Bankruptcy Court issued a decision recommending that the District Court approve the settlement. Now, the District Court has followed the Bankruptcy Court’s recommendation and approved the agreement.
In her decision, United States District Judge Katherine B. Forrest recognized that this case arises from a “series of transactions [by the Kerr-McGee Corporation] that resulted in the spin-off of Tronox, which Kerr-McGee left saddled with the massive environmental and tort liabilities it had accumulated over the course of decades of operating in the chemical, mining, and oil and gas industries, but without sufficient assets with which to address these liabilities.” For this reason, as the District Court explained, both the United States and the Tronox estate (now represented by the Trust) brought fraudulent conveyance claims against the defendants, which the settlement resolves.
In approving the settlement, the District Court concluded:
- “The settlement is historic” and provides the “largest [clean-up] recovery in American history.”
- “The Settlement Agreement promotes federal environmental law’s objectives of ‘encourag[ing] prompt and effective responses to hazardous waste releases,’ ‘impos[ing] liability on responsible parties,’ and ‘reduc[ing] the inefficient expenditure of public funds on lengthy litigation.’”
- The settlement is a “fair and reasonable” consent decree resolving the Government’s claims against the defendants.
The District Court issued its opinion on Monday, November 10, 2014.
The District Court’s approval is subject to appeal. If no timely appeal (or other further review specified in the settlement agreement) is filed, the settlement will go into effect. Two days later, the defendants’ payment will be due.
Mr. Bharara again thanked the many federal, state, and tribal officials who worked tirelessly on this matter, as well as the Trust, its trustee, and its counsel, for their critical work on this case.
This case was handled by the Environmental Protection Unit and the Tax and Bankruptcy Unit of SDNY’s Civil Division. Assistant U.S. Attorney Robert William Yalen is in charge of the case, which he handled along with Assistant U.S. Attorney Joseph Pantoja and Alan S. Tenenbaum, Katherine Kane, Frederick S. Phillips, Marcello Mollo, and Erica Pencak of ENRD.
Tronox Approval
Ringleader in Multimillion-Dollar Bank Fraud Scheme Found Guilty in Manhattan Federal CourtRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that MAHABUBUZ ZAMAN, a/k/a “Mahabub Zaman,” a/k/a “Faisal Ahmed,” was found guilty yesterday of participating in an elaborate bank fraud scheme which yielded millions of dollars in ill-gotten gains. Following a two-week trial before U.S. District Judge Alison J. Nathan, the jury found ZAMAN, one of the leaders of the scheme, guilty of conspiracy to commit bank fraud, conspiracy to commit identification document fraud, and use of a false passport. As part of the scheme, ZAMAN and his co-conspirators used fake companies, phony identification documents and hundreds of counterfeit checks to withdraw millions of dollars in stolen funds from more than a dozen banks.
Manhattan U.S. Attorney Preet Bharara said: “With the jury’s swift verdict, a 16th defendant, Mahabubuz Zaman, now stands convicted for his role in this multimillion-dollar bank fraud scheme. And we’re all the more close to bringing this case to a just and fitting conclusion, where each and every perpetrator of this fraud is made to answer for his or her crimes.”
According to the Superseding Indictment filed October 7, 2014, other court documents, and the evidence presented at trial:
From approximately 2008 through November 2012, ZAMAN and his co-conspirators engaged in a bank fraud scheme in which they created hundreds of counterfeit checks, deposited those counterfeit checks into bank accounts they had opened in the names of sham companies in order to fraudulently inflate the balances in those accounts, and then withdrew funds from those bank accounts before the financial institutions were able to determine the fraudulent nature of the checks. In addition to the check fraud, the defendant and his co-conspirators also obtained fraudulent mortgages and ran up credit card debt using false identities. The scheme victimized approximately 15 different banks, resulting in millions of dollars in losses to the banks.
As part of the scheme, the conspirators incorporated sham companies and then opened bank accounts in the names of those sham companies. The individuals opening the accounts (the “accountholders”) often used false identities, including names and social security numbers, and presented false identification documents, including false Bangladeshi passports and forged United States visas. The accountholders were generally instructed to make small legitimate deposits at first, so that the banks would make funds immediately available upon future fraudulent deposits.
The defendant and his co-conspirators obtained copies of legitimate checks and then used the payor account information that appeared on those checks to create counterfeit checks made payable to the sham companies they had incorporated as part of the scheme. The accountholders deposited the counterfeit checks into the sham company bank accounts at various banks. The accountholders often made deposits at numerous branches of the same bank on the same day. These deposits often were made on a Thursday or Friday so that the defendant and his co-conspirators could withdraw the illegal proceeds over the weekend when the banks were closed and were less likely to determine that the checks were counterfeit.
Once the defendant and his co-conspirators confirmed that funds from the counterfeit checks were available for withdrawal, the accountholders were directed to withdraw the funds from the counterfeit checks, typically over the weekend. The defendant and his co-conspirators often withdrew the funds from global cash access machines at casinos in Atlantic City, New Jersey, which did not have daily withdrawal limits. The accountholders often used false identification documents, including false Bangladeshi passports and fake United States visas, when making the withdrawals.
ZAMAN was one of the leaders of the scheme. Among other things, he recruited accountholders, directed both accountholders and higher-ranking members of the crew in the scheme’s operations, and collected a large share of the illicit profits. In addition, ZAMAN was primarily responsible for the crew’s fraudulent mortgage operations.
ZAMAN, 42, of Queens, New York, faces a maximum sentence of 30 years in prison for conspiring to commit bank fraud, 15 years in prison for conspiring to commit identification document fraud, and 10 years in prison for using a false passport. 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. ZAMAN is scheduled to be sentenced by Judge Nathan on February 27, 2015.
In addition to the verdict yesterday, 15 of ZAMAN’s co-conspirators have previously pled guilty in connection with the bank fraud and fraudulent identity document conspiracy. A chart listing the date of conviction and charges of conviction for each of the 16 convicted defendants is attached. Four charged co-conspirators – Hamid Khan, Akther Rahman, Abdur Razzak, and Khairul Islam – are still at large.
U.S. Attorney Bharara praised the investigative work of ICE HSI. He also thanked United States Citizenship and Immigration Services, Queens County District Attorney’s office, the New Jersey State Police, the New York City Police Department, the New York State Police, the United States Secret Service, and the New York City Taxi and Limousine Commission for their assistance in the matter.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Lisa Korologos and Alexander Wilson are in charge of the prosecution.
Click here to view chart(s)
U.S. v. Mahabubuz Zaman S4 Indictment
Lawyer Sentenced in Manhattan Federal Court to Five Years in Prison in Connection with Leadership of Asylum Fraud RingRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that FENG LING LIU, a/k/a Karen, the attorney and owner of law firms in the Chinatown neighborhood of Manhattan, was sentenced in Manhattan federal court to five years in prison for her leadership of an immigration fraud conspiracy. Following a four-week trial in March and April 2014, a jury convicted LIU of participating in a conspiracy to commit immigration fraud between approximately 2007 and approximately 2012. LIU was sentenced yesterday by United States District Judge Ronnie Abrams.
Manhattan U.S. Attorney Preet Bharara said: “I would like to thank our law enforcement partners at the Federal Bureau of Investigation and U.S. Citizenship and Immigration Services for their hard work on this case.”
According to the Indictment filed in Manhattan federal court, public court filings, and the evidence admitted at trial:
LIU, a lawyer, operated two law firms – the Law Offices of Feng Ling Liu and Moslemi and Associates, Inc. – both of which assisted aliens from China in obtaining asylum status through fraud. LIU and her employees profited by creating and submitting asylum applications containing false stories of persecution purportedly suffered by alien applicants. LIU and her employees coached applicants to lie to immigration authorities and assisted applicants in obtaining and/or creating false documentation to support the fraudulent claims. In total, the two law firms filed thousands of fraudulent applications and earned tens of millions of dollars from their fraud.
In addition to the prison term, LIU, 48, of New York, New York, was ordered to pay a $12,500 fine and a $100 special assessment fee, and to forfeit $7,245,000.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation, and thanked the New York Asylum Office of the Department of Homeland Security, U.S. Citizenship and Immigration Services.
The case is being handled by the Office’s Organized Crime Unit. Assistant U.S. Attorneys Rebecca Mermelstein, Patrick Egan, and Robert Boone are in charge of the prosecution. Assistant U.S. Attorney Andrew Adams is in charge of the forfeiture.
Indictment in U.S. V. Irving Rubin, Et Al.Read the Press Release
U.S. v. Irving Rubin, et al. Indictment
Fourteen Defendants Charged in White Plains Federal Court with Massive Mortgage Fraud ConspiracyRead 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”), and Carl E. DuBois, the Sheriff of Orange County, today announced the unsealing of an Indictment (the “Indictment”) charging 15 defendants, including 14 defendants with conspiracy to commit bank fraud and wire fraud in connection with mortgages and other loans secured by properties in Brooklyn, Manhattan and Monroe in Orange County, New York. The defendants include several related members of a family, the Rubins, as well as a real estate attorney and a real estate appraiser. The Indictment sets forth a total of 21 counts charging various defendants with additional crimes, including making false statements to lenders, aggravated identity theft, and theft of public money. Thirteen of the defendants were arrested today in a coordinated takedown. They will be arraigned on the charges in the Indictment before United States Magistrate Judge Paul E. Davison in the White Plains federal courthouse.
U.S. Attorney Preet Bharara stated: “The charges unsealed today describe a sweeping and cynical fraud. As alleged, the scheme carried out by the Rubins and others ripped off banks, welfare programs, and taxpayers. It ranged from 2004 to 2014, from Brooklyn to Harlem to Orange County, and the individuals involved alternately played the parts of prince or pauper, depending on which scam was being perpetrated. Now their alleged double dealing will be stopped, and they will have to submit to the truth-seeking process of the criminal justice system.”
FBI Assistant Director George Venizelos stated: “In a clear case of double dipping, the defendants convinced lenders of their affluence while allegedly accepting aid from government programs established for the benefit of those less fortunate, profiting from the proceeds of millions of dollars in fraudulently obtained loans and significantly defrauding the government of public money. May today’s charges remind those who poke holes in the government safety net and exploit gaps in the mortgage and banking sectors that they will face the error of their ways.”
Orange County Sheriff Carl E. DuBois stated: “We would like to thank United States Attorney Preet Bharara and his staff for their efforts and assistance, and I would also like to thank the personnel from all of the agencies involved for a commitment to this long and complicated investigation. It is important to note that this case originated from the Orange County Sheriff’s Office. Upon investigating what is usually a routine case, our investigator showed due diligence in her follow up, and with the latitude and encouragement by my office to investigate further using FBI resources, the result was a lengthy and comprehensive multi-jurisdictional, multi-million dollar mortgage fraud investigation.”
According to allegations made in the Indictment:
IRVING RUBIN, the defendant, was a purported real estate developer. IRVING RUBIN’s son, YEHUDA RUBIN, the defendant, was a purported mortgage broker and real estate developer. IRVING RUBIN, as well as his brothers ABRAHAM RUBIN, JACOB RUBIN, and SAMUEL RUBIN, the defendants; his sons YEHUDA RUBIN and JOEL RUBIN, the defendants; his wife, DESIREE RUBIN, the defendant; and his relatives-in-law JOEL KOPPEL, BENZION KRAUS, RIFKA RUBIN, RACHEL RUBIN, and RIVKY RUBIN, the defendants, claimed to own properties in Brooklyn, New York, as well as in Manhattan and Orange County, New York. MARTIN KOFMAN, the defendant, was a real estate lawyer licensed to practice in New York. PINCHUS GLAUBER, the defendant, was a real estate appraiser licensed in New York.
From at least in or about 2004 through in or about 2014, IRVING RUBIN, a/k/a “Joseph Rubin,” YEHUDA RUBIN, a/k/a “Yidel Rubin,” PINCHUS GLAUBER, MARTIN KOFMAN, JOEL KOPPEL, a/k/a “Yoel Koppel,” a/k/a “Joel Kopple,” BENZION KRAUS, a/k/a “Benzion Krauz,” a/k/a “Benzion Krause,” ABRAHAM RUBIN, DESIREE RUBIN, a/k/a “Henchy Rubin,” JACOB RUBIN, a/k/a “Yaakov Rubin,” JOEL RUBIN, a/k/a “Yoel Rubin,” RACHEL RUBIN, a/k/a “Ruchy Rubin,” RIFKA RUBIN, a/k/a “Sura Rubin,” RIVKY RUBIN, a/k/a “Rivka Rubin,” and SAMUEL RUBIN, a/k/a “Shaye Rubin,” the defendants, and others known and unknown (hereinafter, the “Rubin Organization”), fraudulently obtained mortgage loans and other loans from banks and other lending institutions (the “lenders”). The defendants obtained the loans by providing materially false information to the lenders about the borrowers’ assets and liabilities, including but not limited to false information about the borrower’s employment, income, bank accounts, and primary residence. Through their scheme, the defendants fraudulently obtained more than $20 million in loan proceeds in connection with more than twenty fraudulent loans. The majority of the loans went into default, and the majority of the loan proceeds were not repaid.
As part of the scheme to defraud, the defendants used the fraudulent loan proceeds to personally enrich themselves and their families. Fraudulently obtained loan proceeds were used toward, among other things, (i) credit card debts for personal expenses of defendants, (ii) personal home mortgage payments of defendants, (iii) other real estate development projects including projects from which the defendants and others earned rental income, and (iv) debts arising from other fraudulently obtained loans, to conceal the fraudulent nature of these loans.
As part of the scheme to defraud, the defendants and others known and unknown also engaged in extensive efforts to perpetuate and conceal the fraudulent scheme. These efforts included, but were not limited to:
- Numerous members of the conspiracy acting as the borrowers for different loans, falsely claiming that the purpose of the loans was to purchase or refinance their primary residence, when, in fact the property was not their primary residence, and the loan proceeds were later distributed to other members of the conspiracy and to entities they controlled.
- The common claim by multiple co-conspirators acting as borrowers of sole ownership or control of assets or bank accounts, to give the false appearance of creditworthiness, when in fact the assets and/or bank accounts were non-existent or were owned and controlled by other members of the conspiracy, and the borrower either had joint or no ownership of them.
- Sham transfers of ownership of properties from one member of the conspiracy to another, or to other trusted individuals, thereby confounding attempts by lenders to recover on defaulted loans and facilitating further fraudulent borrowing against the properties.
- Following default on a fraudulently obtained loan, coordinated efforts to deceive the lender into granting a satisfaction of the debt at a significant loss, such as by proposing short sales of properties that, unbeknownst to the lender, were not arm’s-length transactions.
In furtherance of the scheme to defraud, members of the conspiracy participated in fraudulently obtaining loans in several ways, including but not limited to the following:
- YEHUDA RUBIN, the defendant, was an organizer of the fraudulent scheme. YEHUDA RUBIN personally participated in at least ten of the particular fraudulent loans, in various roles, including as borrower, borrower’s power of attorney, mortgage broker, distributor of fraudulent loan proceeds, and arranger of short sales.
- IRVING RUBIN, DESIREE RUBIN, ABRAHAM RUBIN, JACOB RUBIN, SAMUEL RUBIN, JOEL RUBIN, RIVKY RUBIN, RACHEL RUBIN, JOEL KOPPEL, RIFKA RUBIN, and BENZION KRAUSE, the defendants, were borrowers who fraudulently obtained loans from banks and other lenders. Working in concert with co-conspirators, they obtained loans upon false representations and pretenses. IRVING RUBIN, ABRAHAM RUBIN, JACOB RUBIN, SAMUEL RUBIN, and JOEL RUBIN, among others, also participated in the scheme by, among other things, (i) obtaining ownership of properties, (ii) assisting other borrowers in making false representations, (iii) receiving fraudulent loan proceeds, (iv) obtaining and distributing rental income on the properties, and (v) assisting in efforts to prevent or dissuade a lender from collecting on a defaulted loan.
- MARTIN KOFMAN, the defendant, acted as real estate attorney on numerous transactions associated with the fraudulent loans, including closings. KOFMAN, through his law firm’s trust account, distributed fraudulent loan proceeds between and among members of the conspiracy. KOFMAN also provided false information to lenders, including “show checks,” to deceive a bank into believing that the borrower had made a down payment toward the purchase of a property, when in fact the borrower made no such payment and the checks were ultimately deposited back into the law firm’s trust account.
- PINCHUS GLAUBER, the defendant, completed multiple appraisals of properties in connection with particular fraudulent loans. GLAUBER included false information in the appraisals, including about the detail with which he had inspected the properties he appraised. The estimated value of certain properties appraised by GLAUBER was false and inflated.
At the same time that the defendants were representing to banks that they had substantial income and assets, they were also representing to state and local agencies that they had little or no income and assets and were entitled to receive various forms of public assistance, including Medicaid, Food Stamps, and Home Energy Assistance Program (“HEAP”) benefits. For example:
- YEHUDA RUBIN and RACHEL RUBIN, the defendants, received Medicaid and Food Stamps at various times during the conspiracy. To receive benefits, they claimed, among other things, that their only income was $180 per month, and later $360 bi-weekly, from RACHEL RUBIN’s employment. To receive loans totaling more than $1 million, on the other hand, YEHUDA RUBIN claimed that he was employed, earning more than $17,000 per month in employment and rental income, and RACHEL RUBIN claimed that she was employed, earning $14,000 per month.
- JOEL RUBIN and RIVKY RUBIN, the defendants, received Medicaid and Food Stamps at various times during the conspiracy. To receive benefits, they claimed, among other things, that they were homeless, and later that their only income was $130 per week and $180 per week. To receive loans totaling more than $1 million, on the other hand, they claimed that RIVKY RUBIN was employed and had an income of $12,000 per month.
- SAMUEL RUBIN, the defendant, received Medicaid and Food Stamps at various times during the conspiracy. To receive benefits, SAMUEL RUBIN claimed, among other things, an income of $200 per week and $0 in financial resources. To receive loans in excess of $7 million, however, SAMUEL RUBIN claimed an income of more than $350,000 per year and a net worth of more than $10 million.
- IRVING RUBIN and DESIREE RUBIN, the defendants, received Medicaid at various times during the conspiracy. To receive benefits, IRVING RUBIN and DESIREE RUBIN claimed, among other things, that their only income was $1,200 per week, from IRVING RUBIN’s employment at Tristate Management. To receive a loan in excess of $500,000, on the other hand, IRVING RUBIN and DESIREE RUBIN claimed, among other things, that DESIREE RUBIN was employed at Tristate Management with a monthly income of $16,000.
In addition, seven are charged with theft of public money, in violation of Title 18, United States Code, Section 641. In particular, the defendants are charged with obtaining Medicaid and/or Food Stamps by submitting false information in the applications for such benefits.
The defendants and the counts with which they are charged in the Indictment are set forth in the attached list.
Mr. Bharara praised the investigative work of the FBI and the Orange County Sheriff’s Office.
The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Benjamin Allee, Kathryn Martin, and Michael Maimin 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.
U.S. v. Irving Rubin, et al. Indictment
U.S. v. Rubin, et al. Ages & Residences Chart
Former Swiss Banker Charged in Manhattan Federal Court for Conspiring with U.S. Taxpayers to Hide Hundreds of Millions of Dollars in Swiss Bank AccountsRead the Press Release
U.S. Attorney Preet Bharara for the Southern District of New York and Acting Special Agent in Charge Shantelle P. Kitchen of the New York Field Office of the Internal Revenue Service- Criminal Investigation (IRS-CI) announced today the indictment of Martin Dunki, a former client advisor and Senior Vice President at a Swiss bank headquartered in Zurich, Switzerland (Swiss Bank No. 1), for conspiring with U.S. taxpayer-clients and others to hide hundreds of millions of dollars in offshore accounts from the IRS, and to evade U.S. taxes on the income earned in those accounts.
“As alleged, Martin Dunki went to great lengths to help his U.S. taxpayer clients secret away millions of dollars in Swiss bank accounts,” said U.S. Attorney Bharara. “With today’s Indictment, Dunki joins the ranks of many other individuals this Office has charged in connection with hiding money in offshore bank accounts from the Internal Revenue Service.”
“The vigorous pursuit of unreported income in hidden offshore accounts is a top priority for the Internal Revenue Service,” said Acting IRS-CI Special Agent in Charge Shantelle P. Kitchen. “As part of our strategy, we will continue to identify and investigate banking and finance professionals who advise U.S. clients about ways to conceal their assets from the U.S. Government.”
According to the allegations contained in the indictment, which was unsealed today in Manhattan federal court, and other publicly available information:
Between 1995 and 2012, Dunki helped U.S. taxpayers evade taxes and hide hundreds of millions of dollars in undeclared accounts at Swiss Bank No. 1. Dunki provided this advice and assistance to U.S. taxpayers in his capacity as a client advisor at Swiss Bank No. 1, where he was employed until early 2012.
One of Dunki’s co-conspirators was Edgar Paltzer, an attorney based in Zurich, Switzerland, who previously pleaded guilty in the Southern District of New York for his role in assisting U.S. taxpayers and others to evade taxes. In 1999, Dunki, Paltzer and an attorney from Santa Barbara, California (Attorney 1), began working together in the management of undeclared accounts at Swiss Bank No. 1 for a number of U.S. taxpayers (collectively, the Dunki/Attorney 1 Clients). The undeclared assets of the Dunki/Attorney 1 Clients were maintained in accounts held in the names of sham foreign foundations, rather than in the names of the clients individually, to help the clients conceal their ownership of these undeclared accounts from the IRS. Initially, the sham foundations that held the accounts were organized under the laws of Liechtenstein. In December 2008, however, Liechtenstein and the United States signed a Tax Information Exchange Treaty (TIEA), under which Liechtenstein agreed to provide the United States with access to certain bank and other information needed to enforce U.S. tax laws. As a result of the TIEA between Liechtenstein and the United States, and to prevent disclosure to the IRS of the undeclared accounts maintained by the Dunki/Attorney 1 Clients, Dunki and others transferred the undeclared assets of the Dunki/Attorney 1 Clients to new accounts at Swiss Bank No. 1, held by new sham foundations organized under the laws of Panama. Moreover, beginning in August 2009, in response to the investigation of another Swiss bank, UBS AG, for helping U.S. taxpayers maintain undeclared accounts in Switzerland, Dunki and others helped to further conceal the undeclared accounts of the Dunki/Attorney 1 Clients by using assets in those accounts to purchase gold and other precious metals. The gold and precious metals, which amounted to tens of millions of dollars, were then transferred to escrow accounts opened at Swiss Bank No. 1 and hidden, along with substantial sums of cash, in a vault in Switzerland for the benefit of the Dunki/Attorney 1 Clients.
In addition to opening, maintaining, and managing undeclared accounts at Swiss Bank No. 1 for the Dunki/Attorney 1 Clients, Dunki opened, maintained and managed undeclared accounts at Swiss Bank No. 1 for other U.S. taxpayers. For instance, between 2000 and 2012, Dunki helped one U.S. taxpayer hide nearly $300 million in assets at Swiss Bank No. 1, in undeclared accounts held in the names of sham Liberian corporations. Further, between 1995 and 2008, Dunki helped another U.S. taxpayer maintain approximately $70 million in an undeclared account at Swiss Bank No. 1. When Dunki met with this taxpayer in the United States, the account statements that Dunki brought with him were deliberately cut off at the top, to omit the account number and the name of Swiss Bank No. 1, because – as Dunki himself acknowledged to the taxpayer – Dunki had to be careful not to leave a trace when going through U.S. customs.
Dunki also helped U.S. taxpayers bring funds back to the United States in ways designed to ensure that U.S. authorities would not discover the existence of the taxpayers’ undeclared accounts at Swiss Bank No. 1. For example, on at least one occasion, Dunki met a U.S. taxpayer in the United States and provided the taxpayer with an envelope containing approximately $10,000 in cash, which represented a cash withdrawal from the taxpayer’s undeclared account at Swiss Bank No. 1. On other occasions, Dunki helped send money from a U.S. taxpayer’s undeclared account at Swiss Bank No. 1 to another account in Geneva, Switzerland, and, from there, to a diamond dealer in Manhattan. Once the money was received by the diamond dealer, the U.S. taxpayer would pick it up and give the diamond dealer a fraction of the money as a commission.
Dunki, 66, a Swiss citizen, resides in Switzerland and has not been arrested. Dunki is charged with one count of conspiracy to defraud the IRS, which carries a maximum sentence of five 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.
U.S. Attorney Bharara praised the outstanding efforts of IRS-CI in the investigation, which he noted is ongoing. He also thanked the Justice Department’s Tax Division for their significant assistance in the investigation.
This case is being handled by the U.S. Attorney’s Office for the Southern District of New York Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Sarah E. Paul and Jason H. Cowley are in charge of the prosecution.
The charge and allegations contained in the indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
Former Swiss Banker Charged in Manhattan Federal Court for Conspiring with U.S. Taxpayers to Hide Hundreds of Millions of Dollars in Swiss Bank AccountsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Shantelle P. Kitchen, Acting Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today the indictment of MARTIN DUNKI, a former client advisor and Senior Vice President at a Swiss bank headquartered in Zurich, Switzerland (“Swiss Bank No. 1”), for conspiring with U.S. taxpayer-clients and others to hide hundreds of millions of dollars in offshore accounts from the IRS, and to evade U.S. taxes on the income earned in those accounts.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Martin Dunki went to great lengths to help his U.S. taxpayer clients secret away millions of dollars in Swiss bank accounts. With today’s Indictment, Dunki joins the ranks of many other individuals this Office has charged in connection with hiding money in offshore bank accounts from the Internal Revenue Service.”
Acting IRS-CI Special Agent in Charge Shantelle P. Kitchen said: “The vigorous pursuit of unreported income in hidden offshore accounts is a top priority for the Internal Revenue Service. As part of our strategy, we will continue to identify and investigate banking and finance professionals who advise U.S. clients about ways to conceal their assets from the U.S. Government.”
According to the allegations contained in the Indictment, which was unsealed today in Manhattan federal court, and other publicly available information:
Between 1995 and 2012, DUNKI helped U.S. taxpayers evade taxes and hide hundreds of millions of dollars in undeclared accounts at Swiss Bank No. 1. DUNKI provided this advice and assistance to U.S. taxpayers in his capacity as a client advisor at Swiss Bank No. 1, where DUNKI was employed until early 2012.
One of DUNKI’s co-conspirators was Edgar Paltzer, an attorney based in Zurich, Switzerland, who previously pled guilty in the Southern District of New York for his role in assisting U.S. taxpayers and others to evade taxes. In 1999, DUNKI, Paltzer, and an attorney from Santa Barbara, California (“Attorney 1”) began working together in the management of undeclared accounts at Swiss Bank No. 1 for a number of U.S. taxpayers (collectively, the “Dunki/Attorney 1 Clients”). The undeclared assets of the Dunki/Attorney 1 Clients were maintained in accounts held in the names of sham foreign foundations, rather than in the names of the clients individually, to help the clients conceal their ownership of these undeclared accounts from the IRS. Initially, the sham foundations that held the accounts were organized under the laws of Liechtenstein. In December 2008, however, Liechtenstein and the United States signed a Tax Information Exchange Treaty (“TIEA”), under which Liechtenstein agreed to provide the United States with access to certain bank and other information needed to enforce U.S. tax laws. As a result of the TIEA between Liechtenstein and the United States, and to prevent disclosure to the IRS of the undeclared accounts maintained by the Dunki/Attorney 1 Clients, DUNKI and others transferred the undeclared assets of the Dunki/Attorney 1 Clients to new accounts at Swiss Bank No. 1, held by new sham foundations organized under the laws of Panama. Moreover, beginning in August 2009, in response to the investigation of another Swiss bank, UBS AG (“UBS”), for helping U.S. taxpayers maintain undeclared accounts in Switzerland, DUNKI and others helped to further conceal the undeclared accounts of the Dunki/Attorney 1 Clients by using assets in those accounts to purchase gold and other precious metals. The gold and precious metals, which amounted to tens of millions of dollars, were then transferred to escrow accounts opened at Swiss Bank No. 1 and hidden, along with substantial sums of cash, in a vault in Switzerland for the benefit of the Dunki/Attorney 1 Clients.
In addition to opening, maintaining, and managing undeclared accounts at Swiss Bank No. 1 for the Dunki/Attorney 1 Clients, DUNKI opened, maintained, and managed undeclared accounts at Swiss Bank No. 1 for other U.S. taxpayers. For instance, between 2000 and 2012, DUNKI helped one U.S. taxpayer hide nearly $300 million in assets at Swiss Bank No. 1, in undeclared accounts held in the names of sham Liberian corporations. Further, between 1995 and 2008, DUNKI helped another U.S. taxpayer maintain approximately $70 million in an undeclared account at Swiss Bank No. 1. When DUNKI met with this taxpayer in the United States, the account statements that DUNKI brought with him were deliberately cut off at the top, to omit the account number and the name of Swiss Bank No. 1, because – as DUNKI himself acknowledged to the taxpayer – DUNKI had to be careful not to leave a trace when going through U.S. customs.
DUNKI also helped U.S. taxpayers bring funds back to the United States in ways designed to ensure that U.S. authorities would not discover the existence of the taxpayers’ undeclared accounts at Swiss Bank No. 1. For example, on at least one occasion, DUNKI met a U.S. taxpayer in the United States and provided the taxpayer with an envelope containing approximately $10,000 in cash, which represented a cash withdrawal from the taxpayer’s undeclared account at Swiss Bank No. 1. On other occasions, DUNKI helped send money from a U.S. taxpayer’s undeclared account at Swiss Bank No. 1 to another account in Geneva, Switzerland and, from there, to a diamond dealer in Manhattan. Once the money was received by the diamond dealer, the U.S. taxpayer would pick it up and give the diamond dealer a fraction of the money as a commission.
DUNKI, 66, a Swiss citizen, resides in Switzerland and has not been arrested. DUNKI is charged with one count of conspiracy to defraud the IRS, which carries a maximum sentence of five 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 efforts of IRS-CI in the investigation, which he noted is ongoing. He also thanked DOJ’s Tax Division for their significant assistance in the investigation.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Sarah E. Paul and Jason H. Cowley are in charge of the prosecution.
The charge and allegations contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
Former Senior Systems Engineer at National Law Firm Pleads Guilty in Manhattan Federal Court to Insider TradingRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that DMITRY BRAVERMAN, a former Senior Systems Engineer at a prominent national law firm, pled guilty today in Manhattan federal court to insider trading. Specifically, BRAVERMAN admitted repeatedly using material nonpublic information concerning planned merger and acquisition activity of at least eight clients of the law firm to acquire stock and options, resulting in profits of more than $300,000. BRAVERMAN, who was arrested in September 2014, pled guilty to a one-count Information before U.S. District Judge Paul A. Engelmayer.
Manhattan U.S. Attorney Preet Bharara said: “Dmitry Braverman abused the trust not only of his employer, a major law firm, but also of the numerous companies that relied upon the law firm to handle sensitive matters. Today’s conviction is yet another in a long line.”
According to the allegations contained in the Information filed today in Manhattan federal court, the underlying criminal Complaint, and statements made during court proceedings:
From at least September 2010 through December 2013, BRAVERMAN was engaged in an insider trading scheme. BRAVERMAN, who was a senior systems engineer at a national, full-service law firm, was primarily responsible for maintaining and designing software in connection with the law firm’s finance function, and had access to financial and billing databases. BRAVERMAN consequently had computer and database systems access to confidential information about, among other things, the law firm’s clients in potential merger and acquisition activity, as well as information about the identities of the other parties to the potential deal.
Between about 2010 and 2011, BRAVERMAN engaged in at least four trades that were based on inside information concerning potential mergers and acquisition activity of clients of the law firm. In April 2011, however, BRAVERMAN closed out the last of these trades on the same day that another employee of the law firm, Matthew Kluger, was arrested on separate insider trading charges. In November 2012, BRAVERMAN opened a new brokerage account in the name of a relative living in Russia, and again began trading on the basis of inside information he obtained from the law firm. Specifically, between November 2012 and December 2013, BRAVERMAN engaged in at least four additional trades based on inside information. In total, BRAVERMAN made more than approximately $300,000 in profits from the trades.
BRAVERMAN, 41, of San Mateo, California, pled guilty to one count of securities fraud, without the benefit of a plea agreement. The securities fraud count carries a maximum sentence of 20 years in prison, a maximum fine of $5 million, or twice the gross gain or loss from the offense, and forfeiture of the proceeds of the offense. BRAVERMAN is scheduled to be sentenced by U.S. District Judge Paul A. Engelmayer on March 6, 2015. 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.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation and thanked the Securities and Exchange Commission, which has filed civil charges in a separate action.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’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 Benjamin Naftalis are in charge of the prosecution.
Dozens of Online “Dark Markets” Seized Pursuant to Forfeiture Complaint Filed in Manhattan Federal Court in Conjunction with the Arrest of the Operator of Silk Road 2.0Read the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Leslie R. Caldwell, Assistant Attorney General of the Justice Department’s Criminal Division, George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Peter Edge, Executive Associate Director of Homeland Security Investigations (“HSI”), announced today the seizure of the Silk Road 2.0 website as well as dozens of additional “dark market” websites offering a range of illegal goods and services for sale on the “Tor” network, a special network of computers on the Internet designed to conceal the true IP addresses of the computers on the network. The website addresses and computer servers hosting these websites were seized yesterday as part of a coordinated international law enforcement action involving the U.S. Attorney’s Office for the Southern District of New York, the Department of Justice’s Computer Crime and Intellectual Property Section, and the law enforcement agencies of approximately 16 foreign nations working under the umbrella of Europol’s European Cybercrime Centre (EC3) and Eurojust. This action follows the arrest announced Thursday of BLAKE BENTHALL, a/k/a “Defcon,” for his alleged role in operating the Silk Road 2.0 website. It constitutes the largest law enforcement action to date against criminal websites operating on the “Tor” network.
Manhattan U.S. Attorney Preet Bharara said: “As illegal activity online becomes more prevalent, criminals can no longer expect that they can hide in the shadows of the ‘dark web.’ We shut down the original Silk Road website and now we have shut down its replacement, as well as multiple other ‘dark market’ sites allegedly offering all manner of illicit goods and services, from firearms to computer hacking. In coordination with domestic and international law enforcement agencies, we will continue to seize websites that promote illegal and harmful activities, and prosecute those who create and operate them.”
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division said: “It is a plain fact that criminals use advanced technology to commit their crimes and conceal evidence – and they hide behind international borders so they can stymie law enforcement. But the global law enforcement community has innovated and collaborated to disrupt these ‘dark market’ websites, no matter how sophisticated or far-flung they have become.”
FBI Assistant Director-in-Charge George Venizelos said: “In today’s world we do everything online, from banking to grocery shopping. In much the same way, criminals have taken their illicit business to the ‘Tor’ network. However, websites that offer everything from drugs to illegal services on these black-market sites are not out of reach of law enforcement, as today’s announcement shows. We will continue to work with law enforcement at home and abroad to investigate, disrupt, and dismantle illicit networks that pose a threat in cyberspace.”
HSI Executive Associate Director Peter Edge said: “Underground websites such as Silk Road and Silk Road 2 are like the Wild West of the Internet, where criminals can anonymously buy and sell all things illegal. We will continue to use all of our resources and work closely with our U.S. and international law enforcement partners to shut down these hidden black market sites, and hold criminals accountable who use anonymous Internet software to peddle their illegal activities.”
According to the forfeiture complaint and other public documents:
The sites targeted in the seizure operation include the Silk Road 2.0 website and dozens of other “dark market” websites operating on what is known as “The Onion Router” or “Tor” network, a part of the Internet designed to make it practically impossible to physically locate the computers hosting or accessing websites on the network (the “Dark Market Sites”). These sites were all operating online criminal marketplaces, openly advertising on their home pages and offering to sell a variety of illicit goods and services to customers in the United States and elsewhere. The advertised goods and services included, among other things: illegal narcotics; firearms; stolen credit card data and personal identification information; counterfeit currency; fake passports and other identification documents; and computer-hacking tools and services.
The Dark Market Sites were designed to facilitate the illicit commerce hosted on the sites by providing anonymity to their users, in at least two ways. First, the Dark Market Sites were only accessible to users of the Tor anonymizing network. Second, the Dark Market Sites accepted payments for their illicit goods and services in “Bitcoin” or similar electronic currency designed to be as anonymous as cash.
The operation against the Dark Market Sites involved the seizure of over 400 Tor website addresses – known as “.onion” addresses – as well as the servers hosting them. Examples of some of the sites seized in the operation include:
- “Pandora” (pandora3uym4z42b.onion), “Blue Sky” (blueskyplzv4fsti.onion), “Hydra” (hydrampvvnunildl.onion), and “Cloud Nine” (xvqrvtnn4pbcnxwt.onion), all of which were dark markets similar to Silk Road 2.0, offering an extensive range of illegal goods and services for sale, including drugs, stolen credit card data, counterfeit currency, and fake identity documents.
- “Executive Outcomes” (http://iczyaan7hzkyjown.onion), which specialized in firearms trafficking, with offerings including assault rifles, automatic weapons, and sound suppressors. The site stated that it used “secure drop ship locations” throughout the world so that “anonymity [was] ensured” throughout the shipping process, and that all serial numbers from the weapons it sold were “remove[d] . . . and refill[ed] with metal.”
- “Fake Real Plastic” (http://igvmwp3544wpnd6u.onion), which offered to sell counterfeit credit cards, encoded with “stolen credit card data” and “printed to look just like real VISA and Mastercards.” The cards were “[g]uaranteed to have at least $2500 left on [the] credit card limit” and could be embossed with “any name you want on the card.”
- “Fake ID” (http://23swqgocas65z7xz.onion), which offered fake passports from a number of countries, advertised as “high quality” and having “all security features” of genuine documents.
- “Fast Cash!” (http://5oulvdsnka55buw6.onion) and “Super Notes Counter” (http://67yjqewxrd2ewbtp.onion), which offered to sell counterfeit Euros and U.S. dollars in exchange for Bitcoin.
Mr. Bharara praised the outstanding joint efforts of the FBI and its New York Special Operations and Cyber Branch and HSI and its Cyber Crimes Center and Chicago-O’Hare Field Office. He also thanked the Drug Enforcement Administration’s New York Organized Crime Drug Enforcement Strike Force, which comprises agents and officers of the DEA, the Internal Revenue Service, the New York City Police Department, HSI, the New York State Police, the Bureau of Alcohol, Tobacco, Firearms and Explosives, the U.S. Secret Service, the U.S. Marshals Service, Office of Foreign Assets Control, and New York Department of Taxation. Mr. Bharara also thanked the Department of Justice’s Computer Crime and Intellectual Property Section for its partnership in the operation, the Office of International Affairs, and the law enforcement authorities of Bulgaria, the Czech Republic, Finland, France, Germany, Hungary, Ireland, Latvia, Lithuania, Luxembourg, the Netherlands, Romania, Spain, Sweden, Switzerland, and the United Kingdom, whose actions have been coordinated through Eurojust and Europol’s EC3. Mr. Bharara also noted that the investigation remains ongoing.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit and Money Laundering and Asset Forfeiture Unit. Assistant United States Attorneys Serrin Turner, Timothy Howard, and Daniel Noble are in charge of the prosecution. Assistant United States Attorney Margaret Graham is in charge of the forfeiture aspect of the case.
TweetOperator of “Silk Road 2.0” Website Charged in Manhattan Federal CourtRead 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 Peter Edge, Executive Associate Director of Homeland Security Investigations (“HSI”), announced today the arrest of BLAKE BENTHALL, a/k/a “Defcon,” in connection with his operation and ownership of the Silk Road 2.0 website, a hidden website designed to enable its users to buy and sell illegal drugs and other unlawful goods and services anonymously and beyond the reach of law enforcement. BENTHALL was arrested yesterday in San Francisco, California. He will be presented later today in federal court in San Francisco before Magistrate Judge Jaqueline Scott Corley.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Blake Benthall attempted to resurrect Silk Road, a secret website that law enforcement seized last year, by running Silk Road 2.0, a nearly identical criminal enterprise. Let’s be clear – this Silk Road, in whatever form, is the road to prison. Those looking to follow in the footsteps of alleged cybercriminals should understand that we will return as many times as necessary to shut down noxious online criminal bazaars. We don’t get tired.”
FBI Assistant Director-in-Charge George Venizelos said: “It’s been more than a year since the FBI made an arrest of the administrator of the black-market bazaar, Silk Road, and here we stand again, announcing the arrest of the creator and operator of Silk Road 2.0. Following a very close business model to the first, as alleged, Blake Benthall ran a website on the Tor network facilitating supposedly anonymous deals of drugs and illegal services generating millions of dollars in monthly sales. Benthall should have known that those who hide behind the keyboard will ultimately be found. The FBI worked with law enforcement partners here and abroad on this case and will continue to investigate and bring to prosecution those who seek to run similar black markets online.”
HSI Executive Associate Director Peter Edge said: “Blake Benthall’s arrest ends his status as the alleged administrator of a website that allows illicit black-market activities to evolve and expand, and provides a safe haven for illegal vices. HSI will continue to work in partnership with its federal and international law enforcement partners around the world to hold criminals who use anonymous internet software for illegal activities who seek to hide behind the anonymity of the Internet to carry out illegal activities accountable for their actions.”
According to the Complaint unsealed today in Manhattan federal court:
Since about December 2013, BENTHALL, a/k/a “Defcon,” has secretly owned and operated an underground website known as “Silk Road 2.0” – one of the most extensive, sophisticated, and widely used criminal marketplaces on the Internet today. The website has operated on the “Tor” network, a special network of computers on the Internet, distributed around the world, designed to conceal the true IP addresses of the computers on the network and thereby the identities of the network’s users. Since its launch in November 2013, Silk Road 2.0 has been used by thousands of drug dealers and other unlawful vendors to distribute hundreds of kilograms of illegal drugs and other illicit goods and services to buyers throughout the world, as well as to launder millions of dollars generated by these unlawful transactions. As of September 2014, Silk Road 2.0 was generating sales of at least approximately $8 million per month and had approximately 150,000 active users.
Silk Road 2.0 was created in the wake of the Government’s October 2013 seizure of the website known as “Silk Road” and the arrest of its alleged owner and operator, Ross William Ulbricht, a/k/a “Dread Pirate Roberts.” The original Silk Road website had been designed to enable people anywhere in the world to buy and sell illegal drugs and other illegal goods and services anonymously and beyond the reach of law enforcement. Before its seizure in October 2013, Silk Road was used extensively to facilitate such transactions.
In November 2013, approximately five weeks after the Government shut down Silk Road and arrested Ulbricht, Silk Road 2.0 was launched. Designed to fill the void left by the Government’s seizure of Silk Road, Silk Road 2.0 was virtually identical to the original Silk Road website in the way it appeared and functioned. In particular, like its predecessor, Silk Road 2.0 operated exclusively on the “Tor” network and required all transactions to be paid for in Bitcoins in order to preserve its users’ anonymity and evade detection by law enforcement. Likewise, the offerings on Silk Road 2.0 consisted overwhelmingly of illegal drugs, which were openly advertised as such on the site. As of October 17, 2014, Silk Road 2.0 had over 13,000 listings for controlled substances, including, among others, 1,783 listings for “Psychedelics,” 1,697 listings for “Ecstasy,” 1,707 listings for “Cannabis,” and 379 listings for “Opioids.” Besides illegal narcotics, other illicit goods and services were openly advertised for sale on Silk Road 2.0 as well, including fraudulent identification documents and computer-hacking tools and services.
When Silk Road 2.0 was launched, it was controlled for a short time by a co-conspirator using the same online moniker as that allegedly used by Ross Ulbricht in operating the original Silk Road website – “Dread Pirate Roberts.” In late December 2013, however, BENTHALL, using the moniker “Defcon,” took over administration of the site and has owned and operated it continuously since that time. In that role, BENTHALL has controlled and overseen all aspects of Silk Road 2.0, including, among other things: the computer infrastructure and programming code underlying the website; the terms of service and commission rates imposed on vendors and customers of the website; the small staff of online administrators and forum moderators who have assisted with the day-to-day operation of the website; and the massive profits generated from the operation of the illegal business.
During the Government’s investigation, which was conducted jointly by the FBI and HSI, an HSI agent acting in an undercover capacity (the “HSI-UC”) successfully infiltrated the support staff involved in the administration of the Silk Road 2.0 website, and was given access to private, restricted areas of the site reserved for BENTHALL and his administrative staff. By doing so, the HSI-UC was able to interact directly with BENTHALL throughout his operation of the website.
BENTHALL, 26, of San Francisco, California, is charged with one count of conspiring to commit narcotics trafficking, which carries a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison; one count of conspiring to commit computer hacking, which carries a maximum sentence of five years in prison; one count of conspiring to traffic in fraudulent identification documents, which carries a maximum sentence of 15 years in prison; and one count of money laundering conspiracy, which 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 joint efforts of the FBI and its New York Cyber Branch and HSI and its Cyber Crimes Center and Chicago-O’Hare Field Office. He also thanked the Drug Enforcement Administration’s New York Organized Crime Drug Enforcement Strike Force, which comprises agents and officers of the DEA, the Internal Revenue Service, the New York City Police Department, HSI, the New York State Police, the Bureau of Alcohol, Tobacco, Firearms and Explosives, the U.S. Secret Service, the U.S. Marshals Service, Office of Foreign Assets Control, and New York Department of Taxation. Mr. Bharara also thanked the Department of Justice’s Computer Crime and Intellectual Property Section for its assistance and support, the Department of Justice’s Criminal Division Office of International Affairs, and the law enforcement authorities of France, Germany, Lithuania, the Netherlands, and the United Kingdom. Mr. Bharara also noted that the investigation remains ongoing.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit and Money Laundering and Asset Forfeiture Unit. Assistant United States Attorneys Serrin Turner, Timothy Howard, and Daniel Noble are in charge of the prosecution. Assistant United States Attorney Margaret Graham is in charge of the forfeiture aspect of the case.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Blake Benthall Complaint
Manhattan U.S. Attorney Settles Civil Fraud Claims Against Visiting Nurse Service for Obtaining Millions in Medicaid Payments by Enrolling Ineligible Individuals in Its Managed Long-Term Care Plans and for Providing Substandard Services at Social AdultRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Thomas O'Donnell, Special Agent in Charge of the U.S. Department of Health and Human Services, Office of Inspector General’s (“HHS-OIG”) New York Region, announced today that the United States has settled civil fraud claims under the False Claims Act against VISITING NURSE SERVICE OF NEW YORK, VNS CHOICE, and VNS CHOICE COMMUNITY CARE (collectively, “VNS”) related to the enrollment of ineligible members in the VNS Choice managed long-term care plan (“Choice MLTCP”). VNS improperly billed the Medicaid program for 1,740 members whose needs did not qualify for the managed care plan. These members were improperly referred by social adult day care centers (“SADCCs”), or received services primarily from SADCCs, many of which provided substandard and minimal care.
Under the terms of the settlement approved today by United States District Judge Ronnie Abrams, VNS must pay a total of $34,994,428 to the Medicaid Program, $13,997,771 of which will go to the United States. In addition, VNS is required to:
- Credential only SADCCs that are properly certified and capable of providing community-based personal care services consistent with regulatory requirements
- Ensure that SADCCs provide the community-based personal care services called for under Choice MLTCP member care plans
- Monitor SADCCs in its provider network to ensure compliance with applicable regulations
- Prohibit marketing practices specifically directed at enrolling Choice MLTCP members through SADCCs
Manhattan U.S. Attorney Preet Bharara said: “VNS collected millions of dollars in Medicaid payments by enrolling ineligible persons into its managed care plan who clearly did not meet the criteria for long-term care. The company developed a network of social adult day care centers that were ill-equipped to provide the required level of care and instead served merely as a conduit to induce Medicaid beneficiaries to enroll.”
HHS-OIG Special Agent in Charge Thomas O'Donnell said: “VNS’s conduct compromised the integrity of the Medicaid program. HHS-OIG is committed to holding providers accountable for the quality of care they deliver and the manner in which that care is provided.”
Pursuant to the Medicaid managed long-term care program, health care providers, such as VNS, are responsible for arranging and managing long-term health care services offered to Medicaid beneficiaries. In exchange, providers receive a monthly capitation payment of approximately $3800 for each beneficiary enrolled in the health care plan. In order to qualify for enrollment in the Choice MLTCP, Medicaid beneficiaries need to be eligible for a nursing home level of care and require at least 120 days of community-based long-term care, which includes a wide range of health care services such as personal care services. VNS contracted with SADCCs to provide care, including personal care services, to Choice MLTCP members.
In the settlement agreement, VNS admits that 1,740 Choice MLTC members who had been referred by SADCCs or used SADCC services were not eligible to be members of the plan. These members were eventually unenrolled, beginning in August 2013. Although the SADCCs were supposed to be providing care to VNS Choice members, VNS admits that, during 2012 and 2013, various SADCCs in its provider network did not provide services that qualified as personal care services under the terms of its Medicaid contract. The settlement also resolves claims that VNS Choice improperly received referrals from SADCCs and induced members to use SADCCs as the members’ primary source of personal care services.
In April 2013, New York State had suspended enrollment in the Choice MLTCP based on concerns regarding the relationship between VNS and SADCCs. This suspension remained in effect until the Government reached an agreement in principle to resolve its investigation.
Mr. Bharara thanked the Medicaid Fraud Control Unit of the New York State Attorney General’s Office for its investigative efforts and extensive work on the case. Mr. Bharara also thanked HHS’s Office of the Inspector General for its assistance.
The case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorney Jeffrey K. Powell is in charge of the case.
Visiting Nurse Service Settlement
Manhattan U.S. Attorney and FBI Assistant Director Announce Securities and Wire Fraud Charges Against Texas Man for Running Bitcoin 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 TRENDON SHAVERS, a/k/a “pirateat40,” was arrested this morning on securities fraud and wire fraud charges stemming from his involvement in a Bitcoin-related Ponzi scheme. SHAVERS was the founder and operator of Bitcoin Savings and Trust (“BCS&T”), which offered and sold Bitcoin-based investments through the Internet. In total, SHAVERS raised at least 764,000 Bitcoin in BCS&T investments, which amounted to more than $4.5 million based on the average price of Bitcoin during the period of the scheme. SHAVERS is expected to be presented today in the Eastern District of Texas, Sherman Division, before a United States Magistrate Judge.
Bitcoin are a decentralized form of electronic currency, existing entirely on the Internet and not in any physical form. The currency is not issued by any government, bank, or company, but rather is generated and controlled automatically through computer software operating on a “peer-to-peer” network. Bitcoin transactions are processed collectively by the software-enabled computers composing the network.
U.S. Attorney Preet Bharara said: “As alleged, Trendon Shavers managed to combine financial and cyber fraud into a Bitcoin Ponzi scheme that offered absurdly high interest payments, and ultimately cheated his investors out of their Bitcoin investments. This case, the first of its kind, should serve as a warning to those looking to make a quick buck with unsecured currency.”
FBI Assistant Director-in-Charge George Venizelos said: “Shavers used a new currency, but the same old reprehensible tricks. He claimed to offer a Bitcoin market-arbitrage strategy. In reality, it was nothing more than an insidious scheme motivated by greed. Today, Shavers’ jig is up. He finds himself under arrest and charged in Manhattan federal court.”
According to the two-count Complaint unsealed today in Manhattan federal court:
From at least September 2011 up through and including September 2012, SHAVERS operated a Ponzi scheme. Specifically, SHAVERS solicited investments in BCS&T on the “Bitcoin Forum” – a public, Internet-based forum where, among other things, Bitcoin investment opportunities were posted. SHAVERS’s offer to investors was straightforward: investors who lent Bitcoin to BCS&T would be paid up to seven percent interest weekly – an annualized interest rate of 3,641% per year – and investors could withdraw their investments in BCS&T at any time. SHAVERS claimed that the Bitcoin invested by BCS&T investors would be used to support a Bitcoin market-arbitrage strategy, which included (i) lending Bitcoin to others for a fixed period of time; (ii) trading Bitcoin via online exchanges; and (iii) selling Bitcoin locally via private, off-markets transactions – i.e., “over-the-counter transactions.” SHAVERS also personally guaranteed to cover any losses in the event of a market change. In truth, SHAVERS largely failed to execute the claimed market arbitrage strategy, failed to honor all of his investors’ redemption requests as well as his personal guarantee, and failed to deliver the agreed upon rates of interest.
In the end, BCS&T was a Ponzi scheme in which SHAVERS used Bitcoin from new investors to make purported interest payments to existing investors and to cover investors’ requests to withdraw Bitcoin from existing BCS&T accounts. In addition, SHAVERS diverted investors’ Bitcoin for day trading in his own account on a Bitcoin currency exchange, and exchanged investors’ Bitcoin for U.S. dollars to pay certain of his personal expenses. At the peak of the scheme, SHAVERS raised, and had in his possession, about seven percent of all the Bitcoin that were then in public circulation. In the end, at least 48 of approximately 100 investors lost all or part of their investment in BCS&T.
SHAVERS, 32, was arrested this morning at his home in McKinney, Texas. He is charged with one count of securities fraud and one count of wire fraud. The securities fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense. The wire fraud count carries a maximum sentence of 20 years in prison and maximum fine of $250,000, or twice the gross gain or loss from the offense. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
On September 18, 2014, in a separate civil action brought by the Securities and Exchange Commission (“SEC”), the United States District Court for the Eastern District of Texas entered final judgment against both SHAVERS and BCS&T, and ordered SHAVERS to pay more than $40 million in disgorgement and prejudgment interest, and a civil penalty of $150,000 related to BCS&T.
Mr. Bharara praised the work of the FBI, and thanked the SEC for its invaluable assistance. He added that the investigation is continuing.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Benjamin Naftalis, Daniel S. Goldman, and Michael Ferrara are in charge of the prosecution.
The allegations contained in the Complaint are merely accusations, and the defendant is
presumed innocent unless and until proven guilty.
The United States Attorney’s Office for the Southern District of New York is committed to protecting the rights of crime victims. If you are a victim of an offense being prosecuted by our Office, our Victim/Witness Unit can make sure that you are notified of important stages of the case to help you exercise your rights. In addition, our Victim/Witness Unit can help refer you to agencies that provide other services to witnesses, such as compensation and counseling. For information or assistance with referrals, please contact:
Wendy Olsen Clancy
Victim/Witness Coordinator
United States Attorney's Office
One St. Andrew’s Plaza
New York, New York 10007
(866) 874-8900
U.S. v. Trendon Shavers Complaint
Gang Member and Robber Sentenced in Manhattan Federal Court to 25 Years on Racketeering, Robbery, Narcotics, and Firearms ChargesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that RUDY MENDOZA, 29, was sentenced today in Manhattan federal court to 25 years in prison for racketeering conspiracy, narcotics conspiracy, robbery conspiracy, and firearms charges. MENDOZA was convicted after a nine-day trial in November 2013. The Honorable Colleen McMahon imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara said: “Within months of being released from state prison, Rudy Mendoza rejoined the Los Vagos street gang and attempted to participate in an armed robbery. Multi-agency cooperation and coordination, including the effective use of an ATF undercover agent, ensured that a violent criminal was prevented from causing harm and has been held accountable for the full scope of his crimes.”
In September 2011, a few months after being released from state prison in March 2011, MENDOZA and five other members of a Bronx-based robbery crew were arrested as part of an undercover investigation by the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”) in connection with a plan to conduct an armed robbery of cocaine dealers. MENDOZA and three of his co-conspirators who were arrested on their way to the planned robbery each possessed a loaded handgun.
At the time of MENDOZA’s arrest in the robbery case, he had already been identified in a separate investigation by the Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”) as a member of the Los Vagos street gang, a criminal organization comprising Mexican and Mexican-American members based primarily in East Harlem. Wiretapped telephone calls in the HSI case revealed that the handgun the ATF seized from MENDOZA belonged to the Los Vagos gang.
In November 2011, MENDOZA and 11 other members and associates of the Los Vagos gang were charged with racketeering conspiracy, murder conspiracy, firearms, and narcotics offenses.
The evidence at trial revealed MENDOZA’s active participation in the robbery crew, and the inner workings of the Los Vagos gang. Shortly before he expected to commit the robbery, MENDOZA assured the ATF undercover agent that he was prepared to violently assault the drug dealers his crew planned to rob. Former Los Vagos gang members testified about MENDOZA’s role in the gang, which included supplying cocaine for the leader of the gang to resell. The former gang members also described the full scope of the Los Vagos gang’s criminal activities, including acts of violence such as beatings, stabbings, and shootings, to protect their members from rival gangs, including the Latin Kings, and to dissuade rival gangs from encroaching on their territory. The gang also extorted or robbed individuals who lived or worked in their territory, and collected dues from members in order to buy firearms and to assist gang members who had been incarcerated or who wished to return to the United States from Mexico illegally.
With MENDOZA’s conviction at trial, all six charged members of the robbery crew and all twelve charged members and associates of the Los Vagos gang have been convicted.
Mr. Bharara praised the outstanding investigative work of the ATF, HSI, and the New York City Police Department. He also thanked the New York County District Attorney’s Office for their assistance.
The prosecution of the cases is being overseen by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Amie N. Ely and Amy Lester are in charge of the prosecution.
Former CEO of Luggage Manufacturer Sentenced in Manhattan Federal Court to Three Years in Prison for Multimillion-Dollar Bank Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that MARVIN JEMAL, the former Chief Executive Officer of a Manhattan-based company that designed, imported and distributed luggage, business bags, backpacks, and accessories (the “Company”), was sentenced today to three years in prison for orchestrating and carrying out a scheme to fraudulently obtain millions of dollars in loans from a commercial bank. To secure the loans, JEMAL and others made false statements and submitted false and phony documents to the bank. JEMAL pled guilty in August 2014 before U.S. District Judge Valerie E. Caproni, who imposed today’s sentence.
According to the Indictment, other documents filed in Manhattan federal court, and statements made at court proceedings:
From 2007 through October 2009, MARVIN JEMAL and Mark Bernstein, the former CEO and CFO, respectively, of the Company, engaged in a scheme to fraudulently induce a commercial bank based in New York (the “Bank”) to lend millions of dollars to the Company. Among other things, JEMAL and Bernstein knowingly made false representations to the Bank, concealed material facts from the Bank, and submitted false and fraudulent documents to the Bank, including fabricated invoices and shipping documents. In total, the Company obtained approximately $6.9 million in loans from the Bank and defaulted on over $6 million of those loans. Nearly $2.0 million in loans were obtained through the submission of fraudulent information. Moreover, although the loans were purportedly for the benefit of the Company’s business, JEMAL diverted approximately $1.9 million of the loan proceeds to personal bank accounts and used the money to pay for various personal expenses, including mortgage payments on properties he owned, credit card bills, and payments on his Porsche.
The Factoring Agreement
The Company obtained the loans from the Bank as part of a secured credit facility, pursuant to a factoring agreement between the Company and the Bank. Under the terms of the factoring agreement, the Company would assign and sell the Company’s interest in its accounts receivable to the Bank and, in exchange, the Company could borrow from the Bank up to 85% of the value of those receivables. In addition, the Company could borrow up to 50% of the value of its inventory. In order to draw down on its secured credit facility, however, the Company was required to provide the Bank with, among other things, an accurate listing of all accounts receivable, as well as supporting documentation, including copies of (i) relevant underlying invoices and (ii) shipping documents or other proof of delivery.
The Scheme to Obtain Loans Fraudulently
To obtain loans from the Bank fraudulently under the factoring agreement, JEMAL and Bernstein made false statements and submitted false and fraudulent documents to the Bank, including the following:
- JEMAL and Bernstein sent duplicate and/or fabricated invoices to the Bank that purported to reflect the sale of certain products by the Company and, thus, an outstanding receivable for the Company. In truth, however, the sales reflected on those invoices were false, as those sales either had never occurred or had already been invoiced separately.
- JEMAL and Bernstein provided fraudulent shipping documents to the Bank to substantiate the purported sales of products by reflecting that those products had been shipped to customers. In truth, however, those shipping documents were false and fraudulent, as the products had not, in fact, been shipped to the customers as reflected in the shipping documents.
- JEMAL and Bernstein concealed material facts from the Bank, including credits that the Company had provided to certain of its customers (which thereby reduced the total accounts receivable associated with those customers) and instances in which the Company had directly collected and deposited payments from its customers on the same invoices the Company assigned to the Bank.
- JEMAL and Bernstein provided inaccurate monthly inventory spreadsheets to the Bank which overstated the Company’s existing inventory.
Further, in order to conceal the scheme, JEMAL made various oral misrepresentations to certain representatives of the Bank when those representatives confronted him about irregularities and other issues that the Bank had discovered with respect to the Company’s assignment of its accounts receivable.
In addition to the prison sentence, JEMAL, 61, of Brooklyn, New York, was ordered to pay $2,729,422.71 in restitution to the Bank and to forfeit $2,729,422.71 in criminal proceeds.
Bernstein, 64, of Belle Harbor, New York, pled guilty in October 2013 before U.S. District Judge Robert P. Patterson for his role in the scheme and is scheduled to be sentenced on January 15, 2015.
Mr. Bharara praised the outstanding investigative work of the Federal Bureau of Investigation.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Daniel S. Noble is in charge of the prosecution.
United States Attorneys Offices AvailableTo Receive Election ComplaintsRead the Press Release
Preet Bharara and Loretta Lynch, the United States Attorneys for the Southern and Eastern Districts of New York, respectively, announced today that special telephone numbers have been set up to receive complaints of possible violations of federal election laws relating to the upcoming general elections in New York City and other counties in their districts.
The United States Attorneys said that their Offices will be available to receive complaints at the following numbers on Tuesday, November 4, 2014:
(212) 637-0840 (for Manhattan, Bronx, and Dutchess, Orange, Putnam, Rockland, Sullivan and Westchester counties) and
(718) 254-7000 (for Brooklyn, Queens, Staten Island, and Nassau and Suffolk counties)
In addition, complaints of possible violations of federal election laws may be made directly to the Federal Bureau of Investigation at (212) 384-1000.
A spokesperson for the United States Attorneys said that the enforcement of federal laws protecting the rights of all eligible persons to vote for the candidates of their choice is a high priority of the Department of Justice.
It is unlawful under federal law to deny or abridge anyone's right to vote because of race, color or national origin. Federal laws also require local election authorities to make voting accessible to disabled and elderly voters. Voters who require assistance because of blindness, disability or inability to read and write have the right to receive such assistance from a person of their own choosing. In counties with substantial numbers of non-English speaking voters, federal laws prohibit the denial or abridgement of a voter’s ability to participate in the election process in certain languages other than English (i.e., Spanish, Chinese, Korean).
In addition, certain activities designed to subvert the integrity of the election process are federal crimes. It is a federal crime, for example, to deprive citizens of their right to fair elections or to conspire to do so. Specific election laws also make it a crime to bribe or intimidate voters, to cause ballots to be cast fraudulently in the names of individuals who did not vote (“ballot stuffing”), to vote more than once, or to alter or falsely report the vote count. It can also be a federal offense to challenge qualified voters without cause and in bad faith, or to harass persons seeking to vote for the purpose of discouraging their vote.
The spokesperson said that the ability of federal law enforcement authorities to detect and eliminate improper restrictions on voting rights and to prosecute election fraud depends to a large extent on the watchfulness and cooperation of the voters. It is therefore imperative that those who have been asked to participate in illegal election practices, who have been the subject of such practices, who have observed such practices, or who have information bearing on such practices, make that information known promptly to the FBI or the United States Attorneys Offices at the telephone numbers listed above.
The United States Attorneys also noted that the following additional telephone numbers are available on Election Day for citizens to call for routine inquiries, such as where to vote or how late the polls are open, or to register complaints that may concern violations of New York State election laws:
IN NEW YORK CITY
City Board of Elections
Main Office (212) 487-5300
(212) 868-3692
Bronx (718) 299-9017
Brooklyn (718) 797-8800
Manhattan (212) 886-2100
Queens (718) 730-6730
Staten Island (718) 876-0079
IN COUNTIES OUTSIDE NEW YORK CITY
County Boards of Elections
Dutchess (845) 486-2473
Nassau (516) 571-2411
Orange (845) 291-2444
Putnam (845) 808-1300
Rockland (845) 638-5172
Suffolk (631) 852-4500
Sullivan (845) 794-3000
Westchester (914) 995-5700
Assistant United States Attorney DAVID J. KENNEDY is responsible for overseeing the handling of complaints of voting rights abuses and election fraud for the Southern District of New York.
Assistant United States Attorney MARISA SEIFAN is responsible for overseeing the handling of complaints of voting rights abuses and election fraud for the Eastern District of New York.
New York-Based Marijuana Trafficker Sentenced in Manhattan Federal Court to 20 Years in Prison on Racketeering and Narcotics Conspiracy ChargesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that OSCAR RODRIGUEZ, a/k/a “Chan,” 37, was sentenced today in Manhattan federal court on racketeering conspiracy and marijuana trafficking charges. OSCAR RODRIGUEZ was convicted after a trial in April 2014. The Honorable Donald E. Walter, visiting judge from the Western District of Louisiana, imposed a sentence of 20 years in prison.
Manhattan U.S. Attorney Preet Bharara said: “Oscar Rodriguez has now been sentenced for crimes he committed as a key member of a murderous narcotics-trafficking gang. The neighborhoods in Washington Heights that Rodriguez and his gang terrorized for over a decade are safer as a result of his arrest, conviction, and sentencing, as well as the conviction of over 50 other Rodriguez Enterprise members and associates in related cases brought by our Office. I commend the outstanding work of federal and local law enforcement in making this community safer.”
RODRIGUEZ’s charges arose out of a multi-year investigation titled “Operation Green Venom,” a coordinated multi-agency investigation that was led by ICE HSI and first announced in October 2010. With his conviction, a total of more than 50 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,” and High Times Magazine editor Matthew Woodstock Stang, a/k/a “Magazine Guy.”
According to the Indictment and the evidence at trial, OSCAR RODRIGUEZ was a member of the “Rodriguez Enterprise,” a massive racketeering organization whose members sold large quantities of marijuana, engaged in murders and other violent acts, transported and laundered millions of dollars, obstructed justice and committed perjury, and engaged in firearms offenses. The Rodriguez Enterprise was led by Manuel Geovanny Rodriguez-Perez, OSCAR RODRIGUEZ’s cousin. OSCAR RODRIGUEZ’s role in the organization included trafficking truckloads of marijuana, managing a lucrative block in Washington Heights, Manhattan, perpetrating violent assaults – including the 2005 near-fatal assault of a young man who sold marijuana for him – and participating in a plot to locate and move the body of another young man who had been strangled to death and buried in a park in the Bronx years earlier. The assault victim and the murder victim both were targeted for violent retaliation for stealing marijuana from the Rodriguez Enterprise. In 2005, OSCAR RODRIGUEZ also threatened the family of the employee he assaulted, in a successful effort to cause the employee to stop cooperating with state authorities. OSCAR RODRIGUEZ participated in these acts on behalf of the Rodriguez Enterprise from at least 1998 through his arrest on October 14, 2010.
In addition to the prison term, Judge Walter also sentenced RODRIGUEZ to five years of supervised release.
Mr. Bharara praised the outstanding investigative work of Immigration and Customs Enforcement’s Homeland Security Investigations and the New York City Police Department. He also thanked the U.S. Drug Enforcement Administration; the U.S. Marshals Service; the Bergen County, New Jersey, Prosecutor’s Office; the Englewood, New Jersey, Police Department; the U.S. Department of Housing and Urban Development; the City of New York Department of Investigation; and the New York County District Attorney’s Office for their assistance.
The prosecution of the cases arising from “Operation Green Venom” is being overseen by the Office’s Violent and Organized Crimes Unit. Assistant U.S. Attorneys Amie N. Ely and Andrew C. Adams are in charge of the prosecution. Assistant U.S. Attorney Adams is also responsible for forfeiture proceedings in connection with this case.
Software Company CEO and Former Adjunct Columbia Business School Professor Arrested and Charged in Manhattan Federal Court in Connection with Multimillion-Dollar Fraud 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 GREGORY RORKE was arrested this morning on securities and wire fraud charges stemming from his alleged scheme to defraud investors in his company, Navagate, Inc. (“Navagate”), of approximately $3 million dollars. RORKE was presented today in Manhattan federal court before United States Magistrate Judge Gabriel W. Gorenstein.
U.S. Attorney Preet Bharara said: “As alleged, Gregory Rorke grossly misrepresented his character and financial stability to investors, whom he then defrauded of millions of dollars. I want to thank the Federal Bureau of Investigation and the Securities and Exchange Commission for their tireless work on this case.”
FBI Assistant Director-in-Charge George Venizelos said: “As alleged, Rorke bilked clients out of approximately $3 million based on lies and false representations of his and Navagate’s financial worth. The arrest of Rorke should serve as a reminder that lying to investors comes at a cost. The FBI will continue to aggressively pursue those who engage in securities fraud in an effort to prevent future victimization of unsuspecting investors and to protect the integrity of the financial market.”
According to the two-count Complaint unsealed today in Manhattan federal court:
From at least December 2009 through the present, RORKE engaged in a fraudulent scheme to mislead investors into making investments in a convertible debt offering (the “Navagate Offering”) in his company, Navagate. RORKE, a former adjunct professor at Columbia Business School, was the co-founder, chief executive, and principal owner of Navagate. RORKE solicited investments and was involved in the daily management and operation of Navagate.
RORKE solicited investor contributions to the Navagate Offering based on materially false and fraudulent misrepresentations. In particular, RORKE signed and provided to investors a personal guarantee supported by a financial statement. The financial statement falsely indicated that Rorke personally had at least $12 million in assets, including more than $1 million in cash, more than $5 million in “readily marketable securities” and a home worth more than $1 million. In truth, and as RORKE well knew, the majority of the pledged assets did not belong to RORKE.
In addition, in order to obtain access to funds invested by Navagate investors and maintained in an escrow account, RORKE signed a notarized affidavit indicating that he had paid monies owed to the Internal Revenue Service in satisfaction of Navagate’s tax liabilities. In truth, the tax liabilities had not been paid, remained outstanding, and were actually increasing.
Further, on November 28, 2012, after receiving multiple complaints from Navagate investors demanding repayment and/or threatening to sue RORKE, RORKE forwarded an email purporting to be from a representative of Hong Kong Shanghai Bank Corporation (“HSBC”), which falsely stated that HSBC had just signed a multimillion-dollar contract with Navagate when, in truth and in fact, the email appears to have been a complete fabrication.
As a result of his fraudulent scheme, RORKE raised approximately $3 million in investor money from more than 30 investors.
RORKE, 60, was arrested this morning at his residence in Bronxville, New York. He is charged with one count of wire fraud and one count of securities fraud, each of which carries a maximum sentence of 20 years in prison. The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense. The maximum potential 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.
In a separate action, the U.S. Securities and Exchange Commission (“SEC”) announced civil charges against RORKE and Navagate.
Mr. Bharara praised the work of the FBI, 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. Attorneys Andrea M. Griswold and Eugene Ingoglia are in charge of the prosecution.
The allegations contained in the Complaint are merely accusations, and the defendant is
presumed innocent unless and until proven guilty.
U.S. v. Gregory Rorke Complaint
Defendant Charged in Massive Internet Fraud Scheme That Infected Millions of Computers Worldwide Extradited from Estonia to the Southern District of New YorkRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today the extradition of VLADIMIR TSASTSIN from Estonia to face charges of computer intrusion, wire fraud, and money laundering, among other offenses. The charges relate to the alleged operation of a massive and sophisticated Internet fraud scheme that infected with malware more than four million computers located in over 100 countries. The malware secretly altered the settings on infected computers, enabling TSASTSIN and the six other charged defendants –Timur Gerassimenko, Dmitri Jegorov, Valeri Aleksejev, Konstantin Poltev, Andrey Taame, and Anton Ivanov – to digitally hijack Internet searches and re-route computers to certain websites and advertisements. TSASTSIN, an Estonian citizen, was arrested in Estonia on November 8, 2011, when the Indictment against him was unsealed. He arrived in the Southern District of New York yesterday, and was presented today before U.S. Magistrate Judge Gabriel W. Gorenstein.
Manhattan U.S. Attorney Preet Bharara said: “Now that Vladimir Tsastsin has been delivered to the Southern District of New York, he can answer for his alleged role in a scheme in which he and others manipulated Internet advertising techniques and reaped at least $14 million in ill-gotten gains in the process.”
The following allegations are based on the Indictment and other court documents previously filed in Manhattan federal court:
From 2007 until October 2011, TSASTSIN, Gerassimenko, Jegorov, Aleksejev, Poltev, Taame, and Ivanov controlled and operated various companies that masqueraded as legitimate publisher networks (the “Publisher Networks”) in the Internet advertising industry. The Publisher Networks entered into agreements with ad brokers under which they were paid based on the number of times that Internet users clicked on the links for certain websites or advertisements, or based on the number of times that certain advertisements were displayed on certain websites. Thus, the more traffic that went to the advertisers’ websites and display ads, the more money the defendants earned under their agreements with the ad brokers. The defendants fraudulently increased the traffic to the websites and advertisements that would earn them money and made it appear to advertisers that the Internet traffic came from legitimate clicks and ad displays on the defendants’ Publisher Networks when, in actuality, it had not.
To carry out the scheme, the defendants and their co-conspirators used what are known as “rogue” Domain Name System (“DNS”) servers, and malware (“the Malware”) that was designed to alter the DNS server settings on infected computers. Victims’ computers became infected with the Malware when they visited certain websites or downloaded certain software to view videos online. The Malware altered the DNS server settings on victims’ computers to route the infected computers to rogue DNS servers controlled and operated by the defendants and their co-conspirators. The re-routing took two forms that are described in detail below: “click hijacking” and “advertising replacement fraud.” The Malware also prevented the infected computers from receiving anti-virus software updates or operating system updates that otherwise might have detected the Malware and stopped it. In addition, the infected computers were also left vulnerable to infections by other viruses.
When the user of an infected computer clicked on a search result link displayed through a search engine query, the Malware caused the computer to be re-routed to a different website. Instead of being brought to the website to which the user asked to go, the user was brought to a website designated by the defendants. Each “click” triggered payment to the defendants under their advertising agreements. This click hijacking occurred for clicks on unpaid links that appeared in response to a user’s query as well as clicks on “sponsored” links or advertisements that appeared in response to a user’s query – often at the top of, or to the right of, the search results – thus causing the search engines to lose money. For example, when the user of an infected computer clicked on the domain name link for the official website of Apple-iTunes, the user was instead taken to a website for a business unaffiliated with Apple Inc. that purported to sell Apple software.
Advertising Replacement Fraud
Using the DNS Changer Malware and rogue DNS servers, the defendants also replaced legitimate advertisements on websites with substituted advertisements that triggered payments to the defendants. For example, when the user of an infected computer visited the home page of the Wall Street Journal, a featured advertisement for the American Express “Plum Card” had been fraudulently replaced with an ad for “Fashion Girl LA.”
The defendants earned millions of dollars under their advertising agreements, not by legitimately displaying advertisements through their Publisher Networks, but rather by using the Malware to fraudulently drive Internet traffic to the websites and ads that would earn them more money. As a result, the defendants and their co-conspirators earned at least $14 million in ill-gotten gains through click hijacking and advertisement replacement fraud. The defendants laundered the proceeds of the scheme through numerous companies including, among others, Rove Digital, an Estonian corporation, and others listed in the Indictment.
TSASTSIN, 34, of Estonia, is charged with one count of wire fraud conspiracy, which carries a maximum sentence of 30 years in prison; one count of wire fraud, which carries a maximum sentence of 30 years in prison; one count of computer intrusion conspiracy, which carries a maximum sentence of 10 years in prison; one count of computer intrusion furthering fraud, which carries a maximum sentence of five years in prison; one count of computer intrusion by transmitting information, which carries a maximum sentence of 10 years in prison; one count of money laundering, which carries a maximum sentence of 30 years in prison; and 21 counts of engaging in monetary transactions of value over $10,000 involving fraud proceeds, each of which carries 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 a judge.
Estonian nationals Gerassimenko, Jegorov, Aleksejev, Poltev, and Ivanov were also arrested in November 2011, and were all previously extradited to the United States. The last defendant, Taame, who is a Russian national, remains at large. Aleksejev pleaded guilty to conspiracy to commit unauthorized computer intrusion and computer intrusion on February 1, 2013, and was sentenced to 48 months in prison. Ivanov pleaded guilty to all charges on February 21, 2013, and was sentenced to time served.
The case against TSASTSIN and the remaining co-defendants is pending before U.S. District Judge Lewis A. Kaplan. The next conference is scheduled for November 5, 2014 at 2:30 p.m.
Mr. Bharara praised the outstanding investigative work of the Federal Bureau of Investigation, National Aeronautics and Space Administration-Office of the Inspector General, and the Estonian National Police and Border Guard Board. He also thanked the Office of International Affairs in the U.S. Department of Justice’s Criminal Division for its assistance with the extradition.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Sarah Lai and Alexander Wilson are in charge of the prosecution.
The charges and allegations contained in the Indictment against TSASTSIN and the remaining defendants are merely accusations, and they are presumed innocent unless and until proven guilty.
New Jersey Man Sentenced to Three Months in Prison in Manhattan Federal Court for Hiding over $1 Million in Secret Swiss Bank AccountRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that VIKTOR KORDASH was sentenced today to three months in prison for willfully failing to file Reports of Foreign Bank and Financial Accounts (“FBARs”) with the IRS regarding a secret Swiss bank account that he maintained and controlled at Wegelin & Co. (“Wegelin”), a Swiss bank formerly headquartered in St. Gallen, Switzerland, which separately pled guilty in January 2013 to assisting U.S. taxpayers in maintaining undeclared accounts. During the time that KORDASH maintained his undeclared account at Wegelin, KORDASH received tens of thousands of dollars in cash distributions from his undeclared account. KORDASH pled guilty in May 2014 before U.S. District Judge Ronnie Abrams, who also imposed today’s sentence.
According to the Information filed in Manhattan federal court, other court documents, and statements made in connection with KORDASH’s guilty plea and sentencing:
In the early 1980s, KORDASH opened an account at Wegelin. At that time, KORDASH was living in Russia and was a Russian citizen. In 1984, however, KORDASH emigrated to the United States, and in 1986, KORDASH applied for and was granted citizenship in the United States. After immigrating to the United States, and after becoming a United States citizen, KORDASH continued to maintain his account at Wegelin, and failed to declare it to the IRS, up until approximately November 2010. KORDASH used the undeclared account as an operating and investment account for his antique reproductions business, which he operated out of New York, New York.
During the time period that KORDASH maintained his undeclared account at Wegelin, capital gains and losses were generated in the account from KORDASH’s investments in foreign securities. Between 2007 and 2010, the high value of KORDASH’s undeclared account was over $1.5 million. Further, between at least April 2008 and June 2010, KORDASH received a series of cash distributions from the undeclared account from Wegelin’s correspondent account in Stamford, Connecticut, which totaled over $168,000. In November 2010, KORDASH closed the undeclared account and transferred the balance to his wife. The balance of the undeclared account at the time of its closure and transfer was nearly $1 million.
For each of the calendar years from at least 1986 through 2010, Kordash failed to file an FBAR with the IRS, as he was required to do, disclosing his signatory or other authority over his undeclared account at Wegelin. He was required to identify the financial institution with which his account was held, the type of account, the account number, and the maximum value of the account during the calendar year for which the FBAR was being filed. He willfully failed to do so.
In addition to the sentence of three months in prison, KORDASH, 64, of Cliffside Park, New Jersey, was also sentenced to three years’ supervised release, and ordered to pay back taxes of over $268,000 and a civil penalty of over $750,000.
Mr. Bharara praised the outstanding efforts of IRS-CI in the investigation. Mr. Bharara also thanked U.S. Department of Justice’s Tax Division for their assistance in the investigation.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Sarah E. Paul and Jason H. Cowley are in charge of the prosecution.
Eight Charged in White Plains Federal CourtWith Heroin Trafficking in MiddletownRead 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 Office of the Federal Bureau of Investigation (“FBI”), Ramon Bethencourt, the Chief of the City of Middletown Police Department, and Joseph A. D’Amico, the Superintendent of the New York State Police, announced the arrest of eight defendants and the unsealing of an Indictment charging a conspiracy to distribute over a kilogram of heroin in and around Middletown, New York.
U.S. Attorney Preet Bharara stated: “To those heroin traffickers in Middletown who still have not gotten the message, let me be clear: Together with our federal and local partners, we will not rest until heroin is off our streets, and until those who supply this destructive drug are brought to justice.”
FBI Assistant Director-in-Charge George Venizelos stated: “Today, we announce the arrest of eight individuals who sought to traffic heroin in the Middleton area. The FBI remains committed to working with our law enforcement partners to investigate those who introduce drugs and other dangers into our neighborhoods.”
NY State Police Superintendent Joseph A. D’Amico stated: “These arrests and the seriousness of the charges these traffickers face show the commitment our law enforcement partners have in keeping dangerous drugs off our streets. Today, eight defendants are behind bars and the heroin they intended to distribute will never reach the Middletown community."
The Indictment charges eight defendants, FREDDIE SERRANO, a/k/a “Jose,” 53, GISELLE SANTANA,33, JOHN BAKER, a/k/a “Johnny Joint,” 38, DEBRA JEAN BLISS, 61, ANTONIO DIAZ-PEREZ, a/k/a “TONE,” 39, JOSEPH FREEHILL, 36, FRANCISCO RODRIGUEZ, a/k/a “Tito,” 58, and ANGEL SOSTRE-SOSTRE, a/k/a “Nito,” 47, with conspiring to distribute, and possess with intent to distribute, over a kilogram of heroin.
The charge against each defendant and the corresponding maximum potential penalties are outlined in the chart attached to this press release. The maximum potential sentences are prescribed by Congress and are provided for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Seven of the defendants charged in the Indictment were arrested today. Five were presented in White Plains federal court this afternoon before U.S. Magistrate Judge Judith C. McCarthy; two are scheduled to be presented tomorrow, and the eighth is currently in the Orange County Jail on unrelated charges.
Mr. Bharara praised the outstanding investigative work of the FBI, the City of Middletown Police Department, the New York State Police, the Orange County Sherriff’s Department, the Town of Wallkill Police Department, the Orange County District Attorney and the Sullivan County District Attorney.
The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Michael Gerber and Jessica K. Feinstein are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
CHARGE(S) DEFENDANTS MAXIMUM PENALTIES
Narcotics conspiracy
(Conspiracy to distribute and possess with intent to distribute 1 kilogram or more of heroin.) FREDDIE SERRANO,
a/k/a “Jose,”
Life in prison
GISELLE SANTANA,
JOHN BAKER,
a/k/a “Johnny Joint,”
DEBRA JEAN BLISS,
ANTONIO DIAZ-PEREZ,
a/k/a “TONE,”
JOSEPH FREEHILL,
FRANCISCO RODRIGUEZ,
a/k/a “Tito,” and
ANGEL SOSTRE-SOSTRE,
a/k/a “Nito.”
Mandatory minimum: 10 years in prison
Yonkers Man Arrested for Lying to Federal Authorities About Fake Threat Against the PresidentRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced criminal charges today against JUAN MEDINA. MEDINA faces federal charges for lying to the United States Secret Service about his responsibility for making a fake emergency call about a plot to assassinate the President of the United States. MEDINA was arrested this morning at his home in Yonkers, and was presented this afternoon in White Plains federal court before United States Magistrate Judge Judith C. McCarthy, who released him on a $25,000 personal recognizance bond secured by two co-signers.
According to a Complaint filed today in White Plains federal court:
On or about August 29, 2014, when the President of the United States was visiting Westchester County, 911 emergency operators received a phone call reporting that a former roommate of the caller (“the suspect”) was traveling to New York with AR-14 and AK-47 firearms to kill the President. The caller, who identified himself only as “Hassan,” gave law enforcement the suspect’s address in New Haven, Connecticut, and a description of the roommate’s vehicle.
Following the 911 call, dozens of federal, state, and local law enforcement were dispatched in New York and Connecticut in an attempt to locate the roommate and his vehicle. Secret Service agents arrived at the suspect’s New Haven residence and interviewed his neighbors. Based on the results of their investigation, agents guided their interagency search teams to a few neighboring towns. Hours later, officers from the Hamden Police Department identified the suspect’s vehicle in a parking lot. Secret Service agents then located and interviewed the suspect at a nearby residence. Searches of the suspect’s vehicle and the residence revealed no evidence supporting the allegations in the 911 call. The suspect, who was surprised that the Secret Service was looking for him, cooperated with law enforcement and told agents that he believed an individual named “Juan,” who was a friend of his girlfriend, was responsible for the 911 call.
On or about September 1, 2014, Secret Service agents traveled to the home of the suspect’s girlfriend in Yonkers, New York. JUAN MEDINA, the defendant, answered the door. After being informed by the Secret Service agents that they were federal agents, MEDINA acknowledged that he disliked the suspect but, in response to questioning by the Secret Service about the 911 call, MEDINA denied having made the call.
On or about September 3, 2014, JUAN MEDINA voluntarily agreed to be interviewed by the Secret Service and Yonkers police. During the interview, MEDINA again denied making the 911 call about the plot to kill the President, and he denied knowing who made the call. MEDINA provided a written statement summarizing his denial.
At the request of the Secret Service, MEDINA agreed to be interviewed again. During this interview, MEDINA admitted that he was the one who made the 911 call. MEDINA told the Secret Service that he had made the call using a pre-paid “burner” cellphone, which he later sold on the street. MEDINA said he made the call because he did not approve of the relationship between his former roommate (the suspect) and the girlfriend, and he wanted to get his former roommate in trouble.
MEDINA, 30, a resident of Yonkers, New York, is charged with one count of making false statements to federal authorities, which carries a maximum sentence of 5 years’ imprisonment. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.
Mr. Bharara praised the investigative efforts of the United States Secret Service and their law enforcement partners, specifically the New York State Police, the Yonkers Police Department, the Connecticut State Police, the Hamden Police Department, the New Haven Police Department, the Fairfield Police Department, the East Haven Police Department, the Westchester County Department of Public Safety, and the FBI’s Joint Terrorism Task Forces in White Plains, New York and New Haven, Connecticut.
The charges contained in the federal Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
The case is being handled by the Office’s White Plains Division. Assistant U.S. Attorney Jessica K. Feinstein is in charge of the prosecution
Medina Complaint
Two New Jersey Residents Charged with Fatal Robbery of Ossining ManRead 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 Field Office of the Federal Bureau of Investigation (“FBI”), and Joseph Burton, Jr., the Chief of Police of the Village of Ossining Police Department, announced the filing of a federal criminal Complaint charging ANTHONY GRECCO, 33, of Manville, New Jersey, and ANDREA BEATTY, 27, of New Brunswick, New Jersey, in connection with the fatal robbery of Ryan Ennis of Ossining, New York. BEATTY was arrested this morning and is expected to be presented later today in White Plains federal court before United States Magistrate Judge Judith C. McCarthy. GRECCO is currently detained at the Somerset County Jail in Somerville, New Jersey. It is expected that he will be presented in White Plains federal court later this week.
U.S. Attorney Preet Bharara stated: “As alleged in the Complaint, the defendants carried out a violent robbery that resulted in a brutal death. Thanks to the dogged investigative work of the FBI and the extraordinary dedication of our local partners, the defendants will have to answers for their crimes. I particularly want to thank District Attorney Janet DiFiore and her team at the Westchester County District Attorney’s Office for their assistance with this investigation.”
Assistant Director in Charge George Venizelos stated: “This murder was as violent as it was gruesome and is the most recent example of the violence drugs can cause. The impressive cooperation between the Ossining Police Department, Westchester District Attorney and federal law enforcement made today’s arrest a reality.”
Chief Joseph Burton, Jr. of the Village of Ossining Police Department stated: Chief Joseph Burton, Jr. of the Village of Ossining Police Department stated: “I would like to thank all of the agencies that helped us continue our investigation across state lines, especially the Westchester County District Attorney’s Office, the Westchester County Police Forensic Investigation Unit, the United States Attorney’s Office, the Federal Bureau of Investigation and all of our counterparts in New Jersey. I am especially proud of Detective Lieutenant William Sullivan for his leadership and the members of the Ossining Police Department Detective Division for their dedication and perseverance. Their determination and tenacious approach were critical in apprehending these suspects. This was a total team effort involving 10 law enforcement agencies from New York and New Jersey, all working together as a team, which resulted in the timely arrest of these two defendants. Hopefully this will give some closure to the victim’s family.”
According to allegations in the Complaint:
On August 27, 2014, shortly after 9:00 p.m., Ryan Ennis was found dead in an apartment in Ossining, New York. An autopsy was performed, and Ennis’s death was ruled a homicide. There was a large wound to the left side of Ennis’s neck, a large wound to the back of Ennis’s head, and additional wounds on his abdomen and upper left arm. The medical examiner determined that Ennis had been killed between 18 and 36 hours earlier.
The account history for Ennis’s cellphone shows that on August 26, 2014, between the hours of 9:37 a.m. and 7:28 p.m., there were 35 text messages between Ennis’s cellphone and a cellphone identified as belonging to GRECCO. The text messages discuss a drug transaction between Ennis and GRECCO scheduled to take place after 4:00 p.m. on August 26.
After the 7:28 p.m. message between Ennis and GRECCO on August 26, no other text messages were received by, or transmitted from Ennis’s cellphone. There was an incoming call to Ennis’s cellphone at 7:36 p.m. from GRECCO’s phone. Cellphone data shows that at the time of the 7:36 p.m. call, GRECCO’s phone was located in the vicinity of Croton Avenue, at the intersection of Routes 9 and 133, approximately half a mile from the apartment where Ennis was found dead.
On September 23, 2014, law enforcement officers interviewed GRECCO in Manville, New Jersey. During the interview, GRECCO admitted that in August he traveled to New York with another person for the purposes of robbing Ennis, to whom GRECCO had sold marijuana in the past, and that the robbery had not gone according to plan.
On October 22, 2014, law enforcement officers interviewed BEATTY in Ossining, New York. BEATTY admitted that in August 2014, she went to New York with GRECCO and another man for the purpose of committing a robbery. BEATTY knew before she made the trip that GRECCO intended to rob a man who owed him money in connection with drugs. BEATTY described the apartment complex where she drove GRECCO to commit the robbery and led officers to the apartment where Ennis was found dead.
BEATTY recalled that when GRECCO came back to her car after going into the apartment building to commit the robbery, he appeared flustered and said that the robbery had not proceeded according to plan. GRECCO also said, in effect, that “it” had been easier than he thought it would have been.
After they left the apartment complex, BEATTY drove GRECCO to a rooming house in New Jersey. Inside of the rooming house, GRECCO handed BEATTY a stack of money. She later counted it and found that it totaled $8900. GRECCO used the rooming house bathroom to shower. When he came out of the bathroom, he was carrying a garbage bag with clothing in it. GRECCO asked BEATTY if she knew where he could dispose of the clothing.
The Complaint charges GRECCO and BEATTY each with one count of Hobbs Act Robbery and one count of conspiracy to commit Hobbs Act Robbery, in violation of Title 18, United States Code, Section 1951. If convicted of the two offenses charged in the Complaint, GRECCO and BEATTY each face a combined maximum prison term of 40 years. The maximum potential sentences are prescribed by Congress and are provided 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 Ossining Police Department and the FBI’s Westchester County Violent Crimes Task Force, which is comprised of investigators from the FBI, the Westchester County Department of Public Safety, the Westchester County District Attorney’s Office, and the City of Yonkers Police Department. Mr. Bharara also thanked the following agencies for their assistance with the investigation: the FBI’s Newark Division; the Manville, New Jersey Police Department; the New Brunswick, New Jersey Police Department; the Middlesex County Prosecutor’s Office; and the Somerset County Prosecutor’s Office.
The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Michael Gerber and Scott Hartman 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.
Grecco et al.Complaint
Grecco et al.Complaint
Manhattan U.S. Attorney Obtains Temporary Restraining Order Against Outpatient Chemical Dependency Clinics Engaged in A Fraudulent Kickback SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Thomas O'Donnell, Special Agent in Charge of the U.S. Department of Health and Human Services, Office of Inspector General’s (“HHS-OIG”) New York Region, announced today that the United States has obtained a temporary restraining order (“TRO”) in Manhattan federal court against NARCO FREEDOM, INC. (“NARCO FREEDOM”), a provider of health care services including outpatient chemical dependency clinics. The TRO addresses an ongoing fraudulent kickback scheme whereby NARCO FREEDOM offers Medicaid recipients short-term housing in residences known as “three-quarter houses” or “Freedom Houses,” conditioned upon those residents attending NARCO FREEDOM’s outpatient clinics, thereby generating tens of millions of dollars in Medicaid funds for NARCO FREEDOM. The TRO enjoins NARCO FREEDOM from evicting the residents of its Freedom Houses for refusing to engage in the kickback scheme. U.S. District Judge John G. Koeltl entered the TRO today.
Manhattan U.S. Attorney Preet Bharara said: “Through its alleged scheme, Narco Freedom has both defrauded the government and profited from the exploitation of vulnerable individuals specifically when they are most in need of help. There is now a temporary restraining order in place that protects these vulnerable individuals, and this Office looks forward to obtaining further relief to remedy the alleged fraud that Narco Freedom has perpetrated.”
HHS-OIG Special Agent in Charge Thomas O'Donnell said: “The conduct displayed by Narco Freedom is another example of the damage personal greed does to our nation’s healthcare system. HHS-OIG recognizes the importance of substance abuse treatment, and will continue to ensure that those who provide those services do so in an honest fashion that complies with the law.”
As set forth in the complaint filed on October 28, 2014, in Manhattan federal court:
Since in or about 2006, NARCO FREEDOM has been engaged in a scheme to induce individuals who qualify for Medicaid, and who lack stable housing, to enroll in and attend NARCO FREEDOM’s outpatient clinics in exchange for short-term housing in residences known as “three-quarter houses,” which NARCO FREEDOM refers to as “Freedom Houses.” NARCO FREEDOM allows individuals without housing, many of whom have been recently released on parole, to reside in the Freedom Houses for approximately six to nine months, but requires all Freedom House residents to enroll in and attend its outpatient clinics, and evicts residents who do not comply. NARCO FREEDOM operates the Freedom Houses specifically in order to drive business to its outpatient clinics, and forces residents of its Freedom Houses who are already enrolled in other outpatient programs to transfer to NARCO FREEDOM’s outpatient programs, in violation of the Patients’ Rights provision of the New York State Code.
The complaint alleges that residents of the Freedom Houses are forced to sign paperwork purporting to relinquish any housing rights as well as privacy rights under the Health Care Portability and Accountability Act and other federal statutes. Staff at the Freedom Houses then monitor the residents’ attendance at outpatient programs and evict residents who do not attend all outpatient services as directed. NARCO FREEDOM obtains substantial financial gain from these outpatient services, which are funded almost entirely through Medicaid. NARCO FREEDOM also requires the Freedom House residents to direct their monthly shelter allowance provided by the New York City Human Resources Administration to NARCO FREEDOM. The Freedom Houses are the subject of numerous building code violations and resident complaints, including lack of basic sanitation and failure to curb drug use in the residences. The scheme exploits vulnerable individuals who are forced to comply with NARCO FREEDOM’s rules because they lack stable housing options.
According to the complaint, NARCO FREEDOM has subjected HHS to tens of millions of dollars in losses in Medicaid funds paid as a result of its fraudulent kickback scheme.
Mr. Bharara thanked the Office of the Inspector General at HHS-OIG for its investigative efforts and ongoing support and assistance with the case.
The case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorneys Kirti Vaidya Reddy and Cristine Irvin Phillips are in charge of the case.
US v. Narco Freedom Complaint_14-CV-8593
US v. Narco Freedom TRO