Southern District of New York
Press releases recorded for this federal judicial district.
Manhattan U.S. Attorney Settles Civil Fraud Claims Against Columbia University and Affiliated Public Health Program for Submitting False Claims in Connection with Aids and Hiv Treatment-Related GrantsRead 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 New York Region of the Office of Inspector General (OIG) for the U.S. Department of Health and Human Services (HHS), announced today that the United States filed a civil fraud lawsuit in Manhattan federal court against THE TRUSTEES OF COLUMBIA UNIVERSITY IN THE CITY OF NEW YORK (“Columbia University”), and ICAP (formerly known as INTERNATIONAL CENTER FOR AIDS CARE AND TREATMENT PROGRAMS) (collectively, “Columbia”) for submitting false claims in connection with federal grants that Columbia University obtained to fund ICAP’s AIDS- and HIV-related work. The United States’ Complaint-in-Intervention (the “Complaint”) alleges that Columbia University, as the grant administrator on behalf of ICAP, received millions of dollars in federal grants and, pursuant to the rules applicable to such grants, was required for nearly 200 of ICAP’s employees located in New York City to use a suitable means of verifying that the employees had actually performed the work charged to a particular grant. The Complaint alleges that Columbia was well aware that this was not being done, yet continued wrongly to charge many federal grants for work that was not devoted to the projects they funded. The lawsuit seeks damages and penalties under the False Claims Act.
Simultaneous with the filing of the lawsuit, the United States settled the claims against Columbia pursuant to a settlement stipulation approved today by U.S. District Judge Lorna G. Schofield. In the settlement and as detailed below, Columbia admitted failing to use a suitable means of verifying whether the salary and wage charges that ICAP applied to specific federal grants were based on an employee’s actual effort for that grant. Columbia also admitted that as a result, certain effort reports contained inaccurate information, and for a number of years ICAP mischarged certain federal grants for work that was not allocable to those agreements. Columbia also agreed to pay $9,020,073 to resolve the Government’s claims.
Manhattan U.S. Attorney Preet Bharara said: “Columbia University and ICAP applied to the federal government and received many millions of dollars to fund AIDS and HIV projects around the world. We admire and applaud Columbia’s work in combatting AIDS and HIV. But grantees cannot disregard the terms under which grant money is provided. Grantees are required to use federal money for the purpose for which the grant was given and nothing else. The applicable rules are clear, and they are at the core of ensuring that tax dollars are appropriately spent. Educational institutions, like everyone else, should be held accountable when they fail to follow those rules.”
OIG HHS Special Agent in Charge Thomas O’Donnell said: “Violating rules designed to protect HIV-AIDS grant programs leads to wasteful spending, squandering vital funds that could be used to help end this worldwide epidemic. As HHS is the largest grant-making organization in the Federal government, OIG HHS is committed to protecting these grants and will work tirelessly to ensure all money is used properly.”
As set forth in the Complaint filed in Manhattan federal court:
In 2004, President Bush created the President’s Emergency Plan for AIDS Relief (“PEPFAR program”), a global HIV/AIDS program, targeting billions of dollars in new funding for prevention, treatment, and care services in the most affected countries of the world. That same year, Columbia received $125 million in PEPFAR funding through the Multi-Country Columbia Antiretroviral Program (“MCAP”) grant, and over the years obtained over 75 grants and many millions more from the federal government for HIV- and AIDs-related work performed by ICAP.
These grants are governed by certain rules that require, among other things, that grantees track the work performed by the recipient’s employees and, with limited exceptions, charge grants only for work actually performed as a part of that grant. Columbia claimed to accomplish this by producing effort reports for ICAP’s New York City-based employees purportedly detailing the employees’ distribution of work across federal, state, and private grants, as well as Columbia-sponsored projects. These reports were used to determine how much a given grant was charged for work performed by individual employees.
For nearly 200 individuals, however, these reports were not created or verified by the individuals to whom they applied. Instead, Columbia’s Finance Department provided information for these reports even though the employees of that department had limited or no knowledge of which grants the individuals actually worked on. In addition, the effort reports were certified as correct by the principal investigators on the grants without using suitable means to verify the accuracy of the reports. Instead of taking the appropriate steps to determine whether the reports were accurate, the principal investigators would certify large batches of the reports, without making any inquiry into whether the allocation of work among the grants was accurate. Moreover, ICAP’s management was well aware of the inaccuracies of the effort reporting system.
This resulted in Columbia charging grants for work that was not performed on the project being funded by that grant. For instance, an ICAP Finance Analyst stated that he spent approximately 15-20% of his time on MCAP in fiscal year 2010, but his effort report falsely listed his MCAP effort, and related salary charges, as 85%. Likewise, in fiscal year 2010, an ICAP Subcontracts Manager’s effort report listed her effort as 100% MCAP, but the Subcontracts Manager actually worked on three other grants, in addition to MCAP, that year. The time submitted for many other employees was similarly mischarged.
ICAP also charged federal grants for time spent on activities that are not chargeable to any federal grants, such as competitive grant proposal writing. For example, an ICAP Grants Manager spent a significant amount of her time writing competitive grant proposals, but her effort report showed that all of her time was charged to grants, with as much as 92% of her time charged to MCAP in some years.
Mr. Bharara thanked the Office of Inspector General for HHS for its investigative efforts and extensive assistance with the case.
The case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorney Rebecca C. Martin is in charge of the case.
US ex rel. v. Columbia U. and ICAP complaint-in-intervention
US ex rel. v. Columbia U. and ICAP stipulation and order
Queens Man Sentenced in Manhattan Federal Court to 15 Years in Prison for Conspiracy and Attempting to Provide Material Support to HizballahRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that PATRICK NAYYAR, 50, an Indian citizen who was residing illegally in the United States, was sentenced today in Manhattan federal court to 15 years in prison for crimes related to support he attempted to provide Hizballah, a designated foreign terrorist organization. NAYYAR was convicted in March 2012 after a seven-day jury trial, and he was sentenced today by U.S. District Judge Robert W. Sweet.
According to the Superseding Indictment filed in Manhattan federal court and the evidence presented at trial:
Between July 2009 and September 2009, NAYYAR and his co-conspirator, Conrad Stanisclaus Mulholland, agreed to provide weapons, ammunition, and vehicles to Hizballah, a U.S.-designated foreign terrorist organization based in Lebanon. During a series of meetings with a confidential informant working with the Federal Bureau of Investigation (“FBI”), who represented himself as able to deliver materials to Hizballah, NAYYAR and Mulholland agreed to sell guns, ammunition, vehicles, bulletproof vests, and night-vision goggles to the confidential informant. During these meetings, NAYYAR and Mulholland also provided the confidential informant with a handgun, a box of ammunition, and a pick-up truck, believing that the confidential informant would deliver the items to Hizballah in Lebanon.
NAYYAR’s co-conspirator Mulholland, 47, who is not a citizen of the U.S. and resides abroad, left the U.S. before charges were filed, and remains at large. The charges against Mulholland are pending, and he is presumed innocent unless and until proven guilty.
Mr. Bharara praised the investigative work of the FBI’s New York Joint Terrorism Task Force.
The case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Sean Buckley and Stephen Ritchin are in charge of the prosecution.
Manhattan U.S. Attorney Files Healthcare Fraud Lawsuit Against Computer Sciences Corp. and the City of New York for Orchestrating A Multimillion-Dollar Medicaid Billing Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States has filed a civil healthcare fraud lawsuit in Manhattan federal court against COMPUTER SCIENCES CORP. (“CSC”) and the CITY OF NEW YORK (the “CITY”). The Government’s Complaint seeks treble damages and civil penalties under the False Claims Act against CSC and the CITY for orchestrating billing fraud schemes that used computer programs to automatically alter billing data. Two of the schemes involved CSC and the CITY using computer programs to circumvent the requirement that Medicaid should be billed after private insurance coverage had been exhausted, and a third scheme involved the use of a defaulting program to systematically falsify diagnosis codes submitted to Medicaid. According to the Complaint, these fraud schemes caused the submission of tens of thousands of false claims to Medicaid and allowed the CITY, through CSC, improperly to obtain millions of dollars of Medicaid reimbursements.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, CSC and the City created computer programs that systematically, and fraudulently, altered billing data in order to get paid by Medicaid as quickly as possible and as much as possible. Billing frauds like those alleged undermine the integrity of public healthcare programs like Medicaid. All public healthcare program participants, whether they are healthcare providers, localities like the City, or contractors like CSC, should understand that they must comply with the applicable billing rules.”
The following allegations are based on the Complaint filed today in Manhattan federal court:
In New York State, early intervention program (“EIP”) services are available to children under the age of three who demonstrated developmental delay or have been diagnosed with medical conditions likely to cause delay. For children in New York City receiving EIP services, the CITY was responsible for processing and paying claims submitted by service providers, then seeking coverage from private insurers or Medicaid or billing New York State for its 49% share of the costs not covered by private insurance or Medicaid.
To minimize its share of the costs of the EIP services, the CITY set annual targets for Medicaid payments and made it a priority to obtain Medicaid payments as soon as possible and for as much as possible. The CITY contracted with CSC to process service provider claims and then seek coverage from private insurers, Medicaid, or the State. To ensure that CSC would focus on obtaining Medicaid payments, the CITY offered CSC financial incentives for exceeding certain targets for Medicaid payments and imposed penalties when CSC failed to meet the CITY’s goals for Medicaid payments. To meet those targets, CSC and the CITY implemented billing fraud schemes using computer programs that automatically altered billing data.
Two of these schemes were designed to circumvent Medicaid’s secondary payor requirement, which required the CITY and CSC to exhaust private insurance coverage before billing Medicaid. In the first scheme, rather than obtaining correct private insurance policy IDs for children who had missing or incomplete policy IDs, CSC developed a program to identify missing insurance policy IDs and then applied a default policy number of 999-999-999, which CSC and the CITY knew would result in denials by private insurers. This scheme enabled CSC and the CITY to submit tens of thousands of false claims to Medicaid without exhausting private insurance coverage and to obtain millions of dollars from Medicaid improperly.
In a second scheme, CSC and the CITY used defaulting programs so that they could bypass waiting for private insurance claims to be adjudicated and, instead, submit claims to Medicaid before private insurers had made a determination regarding payment. CSC developed computer programs that identified all private insurance claims that had been pending for a period of time (initially 90 days, and then 120 days) and then submitted those claims to Medicaid by improperly using a code – 0Fill – to indicate that private insurers either did not cover those services or had adjudicated the claims with zero payment. CSC and the CITY did this even where they knew that the lack of adjudication was due to the CITY’s failure to respond to the private insurers’ requests for information from the CITY in connection with adjudicating the claims. This scheme also resulted in the submission of tens of thousands of false claims to Medicaid without exhausting private insurance coverage and allowed the CITY improperly to obtain millions of dollars in Medicaid reimbursement in violation of Medicaid’s secondary payor requirement.
A third scheme was designed to enable CSC and the CITY to evade their responsibility to ensure that EIP service providers supplied accurate and complete diagnosis data, which was required before CSC or the CITY could seek Medicaid coverage on behalf of the providers. Instead of setting up procedures for validating the diagnosis data supplied by service providers, CSC and the CITY developed computer programs to identify diagnosis codes from service providers that they expected Medicaid to reject and then replace those codes with 315.9, a generic diagnosis that CSC and the CITY knew would be accepted by Medicaid. As part of this scheme, CSC and the CITY submitted tens of thousands of claims containing false diagnosis data, including diagnoses that were not accurate, to Medicaid. This enabled the CITY to obtain millions of dollars from Medicaid improperly.
The Complaint seeks treble damages and penalties under the False Claims Act for the millions of dollars in reimbursements that Medicaid paid as a result of the false claims that CSC and the CITY submitted in connection with their billing fraud schemes. In addition, the United States seeks compensatory damages under the common law theories of unjust enrichment and mistake of fact.
Mr. Bharara praised the investigative work of the U.S. Department of Health and Human Services Office of the Inspector General, and thanked it for its ongoing assistance. He also thanked the New York State Medicaid Fraud Control Unit for its active cooperation and assistance in the investigation.
The case is being handled by the Office’s Civil Frauds Unit. Mr. Bharara established the Civil Frauds Unit in March 2010 to bring renewed focus and additional resources to combating healthcare and other types of frauds. Assistant U.S. Attorneys Li Yu and Rebecca C. Martin are in charge of the case.
US v CSC and City of New York Complaint
Manhattan U.S. Attorney and FBI Assistant Director-In-Charge Announce Guilty Plea of Bank Employee to Insider Trading ChargesRead 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 DAVID POST pled guilty today in Manhattan federal court to one count of conspiracy to commit securities fraud and three counts of securities fraud in connection with an insider trading scheme in which POST received material, nonpublic information from a co-conspirator (“CC-1”) who worked for a pharmaceutical company (the “Pharma Company”). POST then made profitable securities trades based on the information provided by CC-1 and reaped over $700,000 in profits. The information concerned potential and actual corporate transactions, including acquisitions. POST pled guilty before U.S. District Judge Alvin K. Hellerstein.
In a separate action, the U.S. Securities and Exchange Commission (“SEC”) announced civil charges against POST.
According to the Information and statements made at today’s plea proceeding in Manhattan federal court:
From at least 2010 through August 2014, POST engaged in an insider trading scheme involving trading around information related to the acquisitions of certain pharmaceutical companies. POST received material, nonpublic information related to potential acquisitions from CC-1, who was a Senior Finance Analyst in the Financial Evaluation and Analysis Group of the Pharma Company. POST and CC-1 communicated with each other via disposable cellphone to disguise their communications. As part of his employment, CC-1 performed work in connection with numerous potential and actual corporate transactions, including acquisitions. CC-1 also had access to a computer directory maintained by the Pharma Company which contained material, nonpublic information related to potential acquisitions by the Pharma Company.
POST on multiple occasions received from CC-1 material, nonpublic information related to future acquisitions by the Pharma Company, including the identities of companies that were in negotiations with the Pharma Company for potential acquisitions (the “Target Companies”). POST then traded in the securities of the Target Companies. The Target Companies were subsequently acquired, in one instance by the Pharma Company, and the prices of the shares of the Target Companies increased after the acquisitions were announced publicly. POST then sold his positions in the shares of the Target Companies, thereby profiting from the movement in stock price. From this illegal trading, POST earned profits in excess of $737,000. POST gave approximately $57,000, in cash, of his illegal proceeds to CC-1, as part of CC-1’s share of the scheme’s profits.
POST, 42, of Livingston, New Jersey, pled guilty to one count of conspiracy to commit securities fraud and three counts of securities fraud. The conspiracy count carries a maximum sentence of five years in prison. The three counts of securities fraud each carry a maximum of 20 years in prison. POST also faces a maximum fine of $5,000,000, or twice the gross gain or loss from the offense on the conspiracy count, and agreed as part of his plea agreement to forfeit the proceeds he obtained as a result of the offenses. 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. POST is scheduled to be sentenced by Judge Hellerstein on February 6, 2015 at 11:00 a.m.
Mr. Bharara praised the investigative work of the FBI. He also thanked the SEC for its assistance.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Jessica Masella and Edward Kim are in charge of the prosecution.
U.S. v. David Post Information
Manhattan U.S. Attorney Files Civil Injunction Lawsuit Against Five Tax Preparers to Prohibit Them from Engaging in Tax Preparation BusinessRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States filed a civil injunction complaint in Manhattan federal court against five individuals, LESTER MORRISON, PAULETTE BULLOCK, GARY HANNA, JOY DAVID, and KEVIN VADEN, who were previously convicted of preparing fraudulent federal tax returns through a tax preparation business, to prohibit them from preparing tax returns for others or engaging in activities that substantially interfere with the administration of federal tax laws.
Manhattan U.S. Attorney Preet Bharara said: “Tax preparers who filed fraudulent returns using the names of deceased children or by concocting phony business losses should not be permitted to continue preparing tax returns for others. This Office is committed to bringing cases like this to protect the integrity of the tax system and the general treasury, which is, after all, the people’s money.”
As set forth in the Complaint:
MORRISON, BULLOCK, HANNA, DAVID, and VADEN all were involved in a tax preparation business with locations in the Bronx and in Englewood, New Jersey. Through that tax preparation business, defendants orchestrated a tax fraud scheme from 2000 to 2008. As part of the scheme, defendants prepared thousands of false and fraudulent tax returns that sought improper deductions through a variety of deceptive means. For example, defendants used the stolen identities of deceased children to claim those children as dependents for the purpose of seeking deductions, claimed phony business losses for non-existent businesses, and falsely claimed education credits.
In 2009 and 2010, all five defendants were indicted based on their participation in this tax fraud scheme. Subsequently, all defendants pled guilty to tax fraud in federal court. HANNA, DAVID, and VADEN have been released from prison, while BULLOCK and MORRISON are scheduled to be released in 2015 and 2016, respectively.
To prevent these defendants from resuming the practice of preparing false and fraudulent tax returns or otherwise interfering with tax collection and administration in the future, the United States seeks a permanent injunction against each defendant to bar him or her from preparing tax returns for others or engaging in any other activity that substantially interferes with the administration of federal tax laws.
The case is being handled by the Office’s Tax and Bankruptcy Unit. Assistant U.S. Attorney Li Yu is in charge of the case.
Manhattan U.S. Attorney and EPA Announce Lawsuit Against Poultry Slaughterhouse for Violations of Federal Clean Water ActRead the Press Release
Defendants Agree to Injunctive Relief and Payment of $330,000 Penalty
Preet Bharara, the United States Attorney for the Southern District of New York, and Judith Enck, Regional Administrator of the U.S. Environmental Protection Agency (“EPA”), announced today that the United States has filed and simultaneously entered into a consent decree settling a civil lawsuit against the KIRYAS JOEL POULTRY PROCESSING PLANT, INC. and KIRYAS JOEL MEAT MARKET CORPORATION (collectively, “Defendants”), for violations of the Clean Water Act (“CWA”) in connection with the operation of a poultry processing plant in Orange County.
U.S. Attorney Preet Bharara stated: “For years, the defendants flouted the law by repeatedly discharging waste from their poultry slaughterhouse into the waters of the United States. Today’s consent decree will ensure that the defendants do not resume these illegal practices in the future and requires them to pay a significant financial penalty for their misconduct. ”
EPA Regional Administrator Judith Enck stated: “From disposing of chicken parts and fats directly into storm drains and sewers, to discharging animal waste into Ramapo River tributaries, this poultry processing plant has a long history of violating the Clean Water Act. This legal agreement and fine will help protect the Ramapo River.”
According to the allegations in the Complaint filed today in White Plains federal court:
At various times between September 2008 and March 2012, the Defendants have spilled and allowed the overflow of untreated wastewater from their poultry processing plant into storm drains and storm sewers that discharge into two tributaries of the Ramapo River, known as Highland Brook and Tributary No. 25, in the Village of Kiryas Joel, in Orange County, New York. Between January 2008 and May 2011, Defendants also failed to obtain a permit for the discharge of stormwater associated with industrial activities, and illegally discharged contaminated stormwater through storm drains. Finally, from January 2008 to April 2011, Defendants discharged substantial volumes of untreated wastewater to the local sewage plant, interfering with that plant’s operations and causing contaminated waste to be discharged into the waters of the United States in violation of the sewage plant’s permit.
In the consent decree filed today, Defendants admit, acknowledge, and accept responsibility for the following:
- At various times between September 2008 and March 2010, and again on March 18, 2012, Defendants took inadequate steps to prevent spills of untreated wastewater from overflowing into storm drains that discharged to waters of the United States.
- From at least 2008 until May 1, 2011, as dischargers of stormwater associated with industrial activity, Defendants failed to apply for an individual permit or to seek coverage under a stormwater general permit, as required by law.
- At various times from at least 2008 until May 1, 2011, Defendants took inadequate steps to prevent stormwater associated with their industrial activities from discharging into storm drains and storm sewers that ultimately discharged into waters of the United States.
- At various times between January 2008 and April 2011, Defendants discharged wastewater containing excess concentrations of pollutants into the sewage plant at levels that caused violations of the plant’s permit.
Pursuant to the consent decree filed today in the United States District Court in White Plains, Defendants will pay a civil penalty of $330,000. To ensure Defendants’ compliance with the CWA, Defendants also agree, among other measures, to conduct ongoing monitoring and recording of pretreatment operations and to submit to EPA an emergency operation plan and a corrective plan of action to prevent CWA violations from reoccurring. Defendants will be subject to substantial additional penalties if they fail to adhere to any of the deadlines in the consent decree and cause further violations of the CWA.
The consent decree will be lodged with the Court for a period of at least 30 days before it is submitted for the Court’s approval, in order to provide public notice and to afford members of the public the opportunity to comment on the consent decree.
This case is being handled by the Office’s Environmental Protection Unit. Assistant United States Attorney Tomoko Onozawa is in charge of the case.
KJP CD - 2014.10.23 CONSENT DECREE (to be filed)
United States v. KJPPP, 14 Civ. 8458 (VB) - ComplaintPrivate Investigator and Former NYPD Officer Arrested in Bribery Scheme to Obtain Reports from Federal Law Enforcement DatabaseRead the Press Release
Preet Bharara, 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 William J. Bratton, the Commissioner of the New York City Police Department (“NYPD”), announced today the arrest of JOSEPH P. DWYER and RONALD G. BUELL on charges that DWYER, a private investigator often retained by Court-appointed attorneys in the Southern District of New York, paid bribes to BUELL, then an NYPD Officer, so that BUELL would access a confidential federal law enforcement database to obtain personal information about potential witnesses in federal criminal cases. DWYER was also charged with mail fraud for improperly billing the Criminal Justice Act fund – which provides public funds for indigent defendants – in connection with the bribery scheme. DWYER and BUELL were arrested this morning, and presented this afternoon in Manhattan federal court before U.S. Magistrate Judge James L. Cott.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, private investigator Joseph Dwyer bribed NYPD officer Ronald Buell for confidential reports from a federal law enforcement database, and, at least in some instances, asked the public to foot the bill. Private investigators assisting criminal defendants can – and should – do many things to serve their clients, but bribing law enforcement officials for confidential data is not one of them. Any private investigator who pays such a bribe, and any law enforcement officer who accepts one, should expect to be prosecuted.”
FBI Assistant Director-in-Charge George Venizelos said: “As alleged, Dwyer and Buell conspired to access a database containing sensitive law enforcement information, abusing their positions of trust for personal gain. In addition to robbing us of taxpayer money, corrupt practices rob us of trust in government, particularly with respect to those who take an oath to enforce and obey the law, not break it. The FBI will continue to investigate those in public positions who engage in corrupt activities.”
Commissioner of the NYPD William Bratton said: “These two individuals are charged with crimes that involved the abuse of their positions for monetary gain. By illegally accessing confidential information, they undermined the integrity of law enforcement operations and data systems. I want to thank our law enforcement partners and the NYPD Internal Affairs Bureau for their commitment in pursuing this case.”
According to the allegations contained in the Complaint unsealed today in Manhattan federal court:
The Federal Bureau of Investigation operates the National Crime Information Center database (“NCIC”), which allows federal, state and local law enforcement the ability to access confidential personal information about individuals in connection with their law enforcement duties. The database is not accessible to the general public, and the disclosure of certain information in the database can jeopardize law enforcement operations and safety.
Between at least October 2011 through at least in or about November 2013, BUELL, while an active-duty member of the New York City Police Department, accessed the NCIC using a New York state computer system on at least 15 occasions to obtain criminal history information and other personal information related to witnesses and other individuals associated with at least 11 federal criminal prosecutions in the Southern District of New York on which DWYER had been retained as a defense investigator and paid with public funds pursuant to the Criminal Justice Act (“CJA”), Title 18, United States Code, Section 3006A.
During the same time period, BUELL deposited into his personal bank account at least 17 checks issued by DWYER’s private investigations firm, totaling nearly $9,000. In addition, DWYER submitted billing invoices to the CJA administrative office in the Southern District of New York seeking payments and reimbursements for purported investigative work performed to obtain criminal histories of the individuals associated with the federal criminal prosecutions, when, as alleged, DWYER had illegally obtained the criminal history information through bribes paid to BUELL. The United States Treasury Department issued checks on these invoices, which were mailed from a location outside the State of New York to DWYER’s office on Long Island, New York.
DWYER, 46, is charged with one count of participating in a conspiracy to commit bribery and to access a federal database without authorization, one count of bribery, one count of unauthorized database access, and one count of mail fraud. He faces a maximum sentence of 45 years in prison.
BUELL, 48, is charged with one count of participating in a conspiracy to commit bribery and to access a federal database without authorization, one count of bribery, and one count of unauthorized database access. He faces a maximum sentence of 25 years in prison.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Bharara praised the investigative work of the Criminal Investigators at the United States Attorney’s Office, the Federal Bureau of Investigation and the NYPD Internal Affairs Bureau. Mr. Bharara noted that the investigation is ongoing.
The case is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Hadassa Waxman and Brooke E. Cucinella 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.
U.S. v. Dwyer and Buell Complaint
Dutchess County Woman Sentenced in White Plains Federal Court to 51 Months in Prison for Wire Fraud, Filing False Claims, Bank Fraud, and Corruptly Interfering with the IRSRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that MELANIE FERREIRA was sentenced yesterday afternoon in White Plains federal court to 51 months in prison following her conviction for engaging in a series of frauds, which included cheating the Internal Revenue Service (“IRS”) out of nearly half a million dollars, and perpetrating a bank fraud scheme. U.S. District Judge Cathy Seibel, who presided over FERREIRA’s seven-day jury trial in February 2014, imposed the sentence.
U.S. Attorney Preet Bharara said: “Melanie Ferreira thought she could enjoy the fruits of law-abiding taxpayers’ money while evading the tax laws and defrauding the government. Through yesterday’s sentence, she learned how wrong she was.”
According to the Indictment and the evidence presented at trial:
On October 15, 2009, FERREIRA filed a U.S. Individual Income Tax Return, Form 1040, for the year 2008 (“2008 Return”). In her 2008 Return, she falsely reported interest income of $661,600 from three different banks. She then falsely claimed that she had paid taxes in the amount of $661,536 to the IRS for 2008. On that basis, she claimed a refund of $440,924. In reality, in 2008 she actually earned only $17 in interest income. Further, contrary to her claim on her 2008 Return that she had already paid $661,536 in federal taxes, she actually paid only $236.
On October 23, 2009, the IRS wired $440,924 to FERREIRA’s bank account. That same day, FERREIRA wired $44,100 to the individual listed on her tax return as her “tax preparer” and $88,172 to the individual who introduced her to the “tax preparer.”
The following spring, on April 15, 2010, FERREIRA tried to carry out the same type of scheme – requesting a refund of more than $332,033 – when she filed her Form 1040 for the year 2009, but this time, the IRS rejected her refund request. Thereafter, when the IRS notified FERREIRA that she was required to pay back the $440,924 plus interest and penalties, FERREIRA sent the IRS a worthless check for $759,033.05 written on a closed account.
FERREIRA also perpetrated a bank fraud scheme against the Bank of America (“BOA”), the bank that held the mortgage for her house in Dutchess County, New York (“House 1”). In May 2010, she caused a forged cashier’s check for $316,966.05, purporting to be drawn on the Federal Reserve Bank of Cleveland, Ohio (“Check 1”), to be sent to BOA in satisfaction of the mortgage on House 1. Believing that Check 1 was legitimate, BOA filed a satisfaction of mortgage. BOA subsequently determined that Check 1 was fraudulent and filed suit in New York State Supreme Court in order to have the mortgage reinstated. On June 2, 2012, FERREIRA sent a personal check in the amount of $305,000 (“Check 2”) to BOA, purporting, again, to pay off the balance of her mortgage. On the memo line of Check 2, FERREIRA wrote, in red ink, “FOR DISCHARGE OF DEBT EFT ONLY.” Check 2 was written on a bank account that had been closed two years before.
FERREIRA’s schemes – sometimes known as a 1099-OID scheme and an electronic funds transfer or “EFT” scheme – are often used by adherents to the Sovereign Citizens Movement, a group of individuals who, although they reside in the United States, assert the position that they do not have to answer to any government authority, including courts, taxing entities, motor vehicle departments or law enforcement.
In addition to the prison term, Judge Seibel sentenced FERREIRA, 62, of Lagrangeville, New York, to three years of supervised release. FERREIRA was also ordered to make restitution and to forfeit $440,924 that she had wrongfully obtained from the IRS. FERREIRA was ordered to forfeit approximately $96,000 worth of gold Krugerrands and silver coins that she had purchased with the proceeds of her crimes.
In sentencing FERREIRA, Judge Seibel noted that the defendant’s offenses involved “blatant, shameless lies” and that the defendant had “thumbed her nose” at the Government and the Court. The Judge added that FERREIRA showed “no respect for the system” and acted like she was “above the law.”
Mr. Bharara praised the outstanding investigative work of the law enforcement partners involved in the investigation, including the Federal Bureau of Investigation’s Joint Terrorism Task Force and the IRS.
This prosecution is being handled jointly by the Office’s Terrorism and International Narcotics Unit and the White Plains Division. Assistant United States Attorneys Jason P.W. Halperin and Marcia S. Cohen are in charge of the prosecution.
Manhattan U.S. Attorney Announces Charges Against Two Individuals for Participating in Large-Scale Stolen Identity Refund Fraud Tax Scheme Involving in Excess of 40,000 Stolen IdentitiesRead 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 Investigation Division (“IRS-CI”), today announced charges against two individuals for participating in a large-scale tax refund scheme that used tens of thousands of stolen identities to file fraudulent returns to obtain fraudulent tax refund checks. GERARDO ENMANUEL LUNA MARMOLEJOS, a/k/a “Jorge Rodriguez Burgos,” and YOHAURIS RODRIGUEZ HERNANDEZ, a/k/a “Joana Esquilin,” a/k/a “Joana Esquilin Ramirez,” a/k/a “Carla Nunos,” citizens of the Dominican Republic, are charged in a tax fraud scheme involving in excess of 40,000 stolen identities and millions of dollars in fraudulent returns. LUNA MARMOLEJOS and RODRIGUEZ HERNANDEZ were charged in a superseding indictment today and will appear in Manhattan federal court before U.S. District Judge Naomi Reice Buchwald at 3:30 p.m.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Luna Marmolejos and Rodriguez Hernandez conspired to steal tens of thousands of identities in order to file fraudulent tax returns and collect millions of dollars in fraudulent refunds. Tax fraud amounts to theft from the general treasury; and in effect, these defendants allegedly conspired to steal money that belongs to the public. I commend IRS-CI and our other law enforcement partners on this case.”
IRS-CI Acting Special Agent-in-Charge Shantelle P. Kitchen said: “One of the ways the Internal Revenue Service is addressing the identity theft problem is through the vigorous investigation of stolen identity tax refund fraud schemes. These investigations send a clear message about the consequences of filing tax refunds using stolen information, as those involved expose themselves to criminal prosecution and sentences of imprisonment.”
According to the Superseding Indictment filed today in Manhattan federal court:
From at least December 2011 through September 29, 2014, LUNA MARMOLEJOS and RODRIGUEZ HERNANDEZ conspired and engaged in a scheme to steal the names, dates of birth, and Social Security Numbers of individuals, which the defendants then used to file fraudulent income tax returns that claimed tax refunds to which the defendants were not entitled.
LUNA MARMOLEJOS, 23, and RODRIGUEZ HERNANDEZ, 33, both citizens of the Dominican Republic and residing in New Jersey at the time of their arrest, are each charged with one count of conspiracy to steal government funds, which carries a maximum sentence of 5 years in prison, one count of conspiracy to file false claims, which carries a maximum sentence of 10 years in prison, one count of conspiracy to engage in wire fraud, which carries a maximum sentence of 20 years in prison, and one count of aggravated identity theft in connection with the tax fraud scheme, which carries a mandatory sentence of 2 years in prison, to be served consecutively to any other sentence imposed. In addition, LUNA MARMOLEJOS is charged with one count of bail jumping, which carries a maximum sentence of 5 years in prison, to be served consecutively to any other sentence, and one count of visa fraud, which carries a maximum sentence of 10 years in prison. RODRIGUEZ is also charged with one count of visa fraud, which carries a maximum sentence of 10 years in prison, and one count of passport fraud, which carries a maximum sentence of 10 years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the Court.
Mr. Bharara praised the outstanding investigative work of IRS-CI, the United States Postal Inspection Service, Immigration and Customs Enforcement’s Homeland Security Investigations, the United States Marshals Service, and the U.S. Department of State’s Diplomatic Security Service.
This case is being handled by the Office’s General Crimes Unit. Assistant U.S. Attorney Carolina A. Fornos is in charge of the prosecutions.
The charges and allegations contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
U.S. v. Gerardo Enmanuel Luna Marmolejos & Yohauris Rodriguez Hernandez S1 Indictment
Manhattan U.S. Attorney and EPA Announce Settlement of Superfund Claims Against Getty Relating to Newtown Creek Superfund Site in Brooklyn and QueensRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Judith A. Enck, Regional Administrator for the U.S. Environmental Protection Agency (“EPA”), announced today that the United States has entered into a settlement agreement with a bankruptcy trust on behalf of GETTY PETROLEUM MARKETING INC. (“GPMI”) and GETTY TERMINALS CORP. (“GETTY TERMINALS”) (collectively, “GETTY”), which filed for bankruptcy on December 5, 2011. The settlement resolves Getty’s liabilities at Newtown Creek, a Superfund Site in Brooklyn and Queens, New York, and one of the nation’s most polluted waterways. Pursuant to the settlement agreement, which addresses Getty’s liability under the Comprehensive Environmental Response, Compensation and Liability Act (also known as the Superfund law) and the federal Oil Pollution Act, Getty agrees that the United States will receive an allowed $16 million claim in the bankruptcy process.
U.S. Attorney Preet Bharara said: “For more than a century, irresponsible industrial activities turned Newtown Creek into a tributary of toxic waste. Today’s settlement ensures that Getty takes responsibility for its contribution to that sad legacy, and pays a fair share of clean-up costs at the site. This Office is committed to holding those who contaminate our nation’s lands and waterways accountable for their actions, and bankruptcy is not a free pass for polluters.”
EPA Regional Administrator Judith Enck said: “The Superfund program operates on the principle that polluters should pay for the cleanups, rather than passing the costs to taxpayers. Getty’s decades of irresponsibility and indifference to the environment could pose significant environmental risks to Newtown Creek communities and must be addressed. EPA added Newtown Creek to its Superfund National Priorities List of the country’s most hazardous waste sites in September 2010 because its water and sediment contain a range of contaminants including pesticides, heavy metals, polychlorinated biphenyls (PCBs) and volatile organic compounds. EPA is dedicated to cleaning up this area and will hold all responsible parties accountable.”
In its proof of claim, the United States asserted claims against Getty on behalf of the EPA for clean-up costs at the Newtown Creek Superfund Site and on behalf of the U.S. Department of the Interior (“DOI”) and the National Oceanic and Atmospheric Administration (“NOAA”) of the U.S. Department of Commerce for injuries to natural resources at the site. The proof of claim alleged, among other things, that Getty Terminals operated a facility adjacent to Newtown Creek that stored, blended, and distributed gasoline, fuel oil, and gasoline blending additives, and that Getty Terminals utilized underground and aboveground tanks at the facility for the storage of gasoline, diesel, and fuel oil. As alleged in the proof of claim, during the course of operations of the facility, Getty Terminals discharged contaminants from the facility to Newtown Creek, including effluent with lead concentrations and other hazardous substances.
In the settlement agreement filed in bankruptcy court today, the bankruptcy trustee acknowledges Getty’s admission that GPMI was formed to run the marketing and sales business of the former Getty Petroleum Corporation, including the Newtown Creek facility, and that GPMI leased the facility. The bankruptcy trustee also acknowledges Getty’s admission that Getty Terminals operated the facility and exercised actual control or held significant authority to control activities at the facility. Further, the trustee acknowledges in the settlement agreement that Getty has admitted that a spill occurred at the facility in October 2005.
Under the settlement agreement, the United States will receive an allowed general unsecured claim in the amount of $14,844,800 for EPA in settlement of the United States’ claim for the costs of clean-up at the Newtown Creek Superfund Site, and an additional allowed general unsecured claim in the amount of $1,155,200 for claims by DOI and NOAA relating to natural resource damages and costs of assessment at the Newtown Creek Superfund Site. The allowed claims will be paid in an amount to be determined through the bankruptcy process.
The settlement agreement will be lodged with the Bankruptcy Court for a period of at least 30 days before it is submitted for the Court’s approval, to provide public notice and to afford members of the public the opportunity to comment on the consent decree.
Mr. Bharara praised the efforts of EPA, DOI, and NOAA in this case.
This case is being handled by the Office’s Environmental Protection Unit and Tax and Bankruptcy Unit. Assistant United States Attorney Joseph N. Cordaro is in charge of the case.
In Re Getty Notice of Lodging
Haroon Aswat Extradited from the United Kingdom to the Southern District of New York to Face Terrorism ChargesRead 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 William J. Bratton, Commissioner of the New York City Police Department (“NYPD”), announced the extradition of HAROON ASWAT from the United Kingdom to face charges of conspiring to provide and providing material support to al Qaeda and terrorists for attempting to establish a terrorist training camp in the United States.
ASWAT was arrested in Zambia in July 2005, and in August 2005, ASWAT was deported from Zambia to the United Kingdom, where he was arrested pursuant to a provisional warrant that was issued in response to a request by the U.S. Government in connection with this case. On September 4, 2014, the United Kingdom ordered ASWAT extradited to the United States on the charges described below. In coordination with British authorities, ASWAT was extradited from the United Kingdom to the Southern District of New York on October 21, 2014. ASWAT will make his first court appearance later today before U.S. District Judge Katherine B. Forrest.
According to the allegations contained in the Indictment, statements made at related court proceedings, and evidence presented at prior trials:
In late 1999, ASWAT, along with co-defendants Mustafa Kamel Mustafa, a/k/a “Abu Hamza” (“Abu Hamza”), Ouassama Kassir, and Earnest James Ujaama, attempted to create a terrorist training camp in the United States to support al Qaeda, which has been designated by the United States Secretary of State as a foreign terrorist organization. ASWAT conspired with Abu Hamza, Kassir, and Ujaama to establish the terrorist training camp on a rural parcel of property located in Bly, Oregon. The purpose of the Bly, Oregon camp was for Muslims to receive various types of training – including military-style jihad training – in preparation to fight jihad in Afghanistan. As used by the conspirators in this case, the term “jihad” meant defending Islam against purported enemies through violence and armed aggression, including, if necessary, by using murder to expel non-believers from Muslim holy lands.
In a letter faxed from Ujaama, in the United States, to Abu Hamza, in the United Kingdom, the property in Bly was described as a place that “looks just like Afghanistan,” and the letter noted that the men at Bly were “stock-piling weapons and ammunition.” In late 1999, after transmission of the faxed letter, Abu Hamza directed ASWAT and Kassir, both of whom resided in London, England, and attended Abu Hamza’s mosque there, to travel to Oregon to assist in establishing the camp. On November 26, 1999, ASWAT and Kassir arrived in New York, and then traveled to Bly.
ASWAT and Kassir traveled to Bly for the purpose of training men to fight jihad. Kassir told witnesses that he supported Usama Bin Laden and al Qaeda, and that he had previously received jihad training in Pakistan. Kassir also possessed a compact disc that contained instructions on how to make bombs and poisons. After leaving Bly, ASWAT and Kassir traveled to Seattle, Washington, where they resided at a mosque for approximately two months. While in Seattle, Kassir, in ASWAT’s presence, provided men from the mosque with additional terrorist training lessons – including instructions on different types of weapons, how to construct a homemade silencer for a firearm, how to assemble and disassemble an AK-47, and how an AK-47 could be altered to be fully automatic and to launch a grenade. On another occasion, with ASWAT sitting by his side, Kassir announced to the men in Seattle that he had come to the United States for martyrdom and to destroy, and he informed his audience that some of them could die or get hurt.
In September 2002, special agents from the FBI recovered a ledger, among other items, from an al Qaeda safe house in Karachi, Pakistan. The ledger listed a number of individuals associated with al Qaeda, including ASWAT. The al Qaeda safe house was used by Khalid Sheikh Mohammed, al Qaeda’s chief operational planner and the alleged planner of the terrorist attacks of September 11, 2001.
The Indictment charges ASWAT, 40, a British citizen, with four offenses that carry the following maximum penalties:
1) Conspiracy to provide material support to terrorists (18 U.S.C. § 371): Five years
2) Providing material support to terrorists (18 U.S.C. §§ 2339A, 2): 10 years
3) Conspiracy to provide material support to a foreign terrorist organization (al Qaeda) (18 U.S.C. §2339B): 10 years
4) Providing material support to a foreign terrorist organization (al Qaeda) (18 U.S.C. §§ 2339B, 2): 10 years
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.
On May 12, 2009, after a four-week jury trial in the Southern District of New York, Kassir was found guilty of charges relating to his efforts to establish the terrorist training camp in Bly, and his operation of several terrorist websites. On September 15, 2009, U.S. District Judge John F. Keenan sentenced Kassir to life in prison.
On May 19, 2014, after a four-week jury trial in the Southern District of New York, Abu Hamza was found guilty of charges relating to his role in the conspiracy to establish the terrorist training camp in Bly, as well as his role in a hostage-taking in Yemen in 1998 that resulted in four deaths, and his support of violent jihad in Afghanistan in 2000 and 2001. Abu Hamza is scheduled to be sentenced on January 9, 2015, before U.S. District Judge Katherine B. Forrest.
Mr. Bharara praised the outstanding efforts of the FBI’s Manhattan-based Joint Terrorism Task Force, which principally consists of agents and detectives of the FBI and the NYPD, the United States Marshals Service, and the Metropolitan Police Department of London, England. Mr. Bharara also thanked the U.S. Department of Justice’s National Security Division and Office of International Affairs for their ongoing assistance.
This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys John P. Cronan and Ian McGinley are in charge of the prosecution.
The allegations contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
Chinese Gang Leader Sentenced in Manhattan Federal Court to Life in Prison in Connection with Double Murder and Racketeering ConvictionsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that XING LIN, a/k/a “Ding Pa,” the leader of a gang that operated for nearly 15 years in the Chinatown neighborhood of Manhattan as well as in Queens, Atlanta, and Toronto, was sentenced today in Manhattan federal court to life in prison on murder, extortion, and racketeering charges. Following a three-week trial in April 2013, a jury convicted LIN of engaging in racketeering from 1996 through 2009, murdering two individuals in a Queens nightclub in 2004, operating multiple illegal gambling parlors, and extorting bus company owners. LIN was sentenced today by United States District Judge Miriam Goldman Cedarbaum.
Manhattan U.S. Attorney Preet Bharara said: “With today’s sentence, Xing Lin will finally be punished for ordering the murder of two victims, and for his lengthy criminal career of extortion and racketeering. I would like to thank our law enforcement partners at ICE’s Homeland Security Investigations and the New York City Police Department for their hard work on this case.”
According to the Superseding Indictment, other documents filed in Manhattan federal court, and the evidence presented at trial:
From 1996 until December 2009, LIN was a “Dai Lo” – a Chinese term that refers to the boss of a criminal gang. LIN’s gang operated in the Chinatown neighborhood of Manhattan; Flushing, Queens; Atlanta, Georgia; Toronto, Canada; and elsewhere. The members of LIN’s gang were known as followers. LIN and his followers, including co-defendant Hao Chao, a/k/a “Little Beijing,” engaged in a number of criminal ventures, including the operation of high-stakes illegal gambling parlors, the extortion of business owners, and the beating, stabbing, and murder of rivals.
Beginning in 2002, LIN extorted the owners of a bus company that operated buses between Manhattan and Raleigh, North Carolina. In May 2004, Chang Qin Zhou, one of the bus company shareholders, whom LIN was extorting, refused to pay LIN additional money that he had demanded. During the early morning hours of July 30, 2004, Zhou was with a group of men and women in a private room in a karaoke bar located on Kissena Boulevard in Flushing, Queens. LIN and Chou forced their way into the private room, and LIN ordered Chou to “shoot” Zhou. Chou shot Zhou six times, killing him. One of the bullets also struck and killed Mei Ying Li, a waitress who was working at the karaoke bar and who was in the private room at the time of the shooting. A second waitress was shot in the leg and survived.
Following the shooting in the karaoke bar, LIN relocated his criminal gang to Toronto, Canada, where he continued to run gambling parlors and use violence against his rivals.
LIN was arrested in Toronto, Canada, on April 14, 2011. Following extradition, LIN arrived in the United States on August 19, 2011.
In addition to the prison term, LIN, 42, was also ordered to pay a $25,000 fine, and a $400 special assessment fee.
Chou, who was charged in the Superseding Indictment with murder, extortion, and racketeering offenses, is a fugitive. The allegations against Chou are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
Mr. Bharara praised the investigative work of Immigration and Customs Enforcement’s Homeland Security Investigations and the New York City Police Department.
The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Jennifer Burns and Peter Skinner are in charge of the prosecution.
Manhattan U.S. Attorney Announces Narcotics Charges Against New York City Department of Education EmployeeRead 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 James J. Hunt, Acting Special Agent in Charge, Drug Enforcement Administration (“DEA”), New York Division, announced today that YINMI RODRIGUEZ, an employee of the New York City Department of Education, and ROBINSON PAULINO were arrested Wednesday on narcotics conspiracy charges. PAULINO and RODRIGUEZ were presented in Manhattan federal court yesterday afternoon before United States Magistrate Judge Gabriel Gorenstein.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Yinmi Rodriguez and Robinson Paulino worked together to deal cocaine using the United States Postal Service. Based on the charges, each could face at least ten years in prison.”
USPIS Inspector in Charge Philip R. Bartlett said: “U.S. Postal Inspectors will vigorously pursue, arrest and bring to justice anyone who uses the US Mail to facilitate the transport of illegal drugs, ensuring the safety of the mail, our employees and customers.”
DEA Acting Special Agent-in-Charge James J. Hunt said: “The arrests of Paulino and Rodriguez result in a lesson learned for drug traffickers everywhere - law enforcement's combined resources will track you down.”
According to the Complaint filed yesterday:
From at least February 2014 through October 15, 2014, ROBINSON PAULINO, YINMI RODRIGUEZ and others engaged in a conspiracy to transport multiple kilograms of cocaine from Puerto Rico to the Bronx for distribution in New York City. Packages containing cocaine were sent via the United States Postal Service from Puerto Rico to PAULINO in the Bronx, New York. RODRIGUEZ, an information technology consultant employed by the New York City Department of Education (“DOE”) since 2008, used an IP address (the “DOE IP Address”) associated with a New York City High School to track the shipment of several of these packages. Once PAULINO received delivery of the packages, he brought them to RODRIGUEZ’s apartment in the Bronx.
Between February and September 2014, numerous packages were sent from Puerto Rico to PAULINO or addresses associated with PAULINO in the Bronx. At least three of these packages were intercepted prior to delivery and found to contain in excess of five kilograms of cocaine.
On October 15, 2014, USPIS Postal Inspectors identified a package sent from Puerto Rico and addressed to “Ron Paul,” at an address in the Bronx associated with PAULINO. After a trained narcotics canine reacted to the package in a manner indicating the presence of narcotics, a USPIS Postal Inspector acting in an undercover capacity delivered the package to PAULINO while other law enforcement agents conducted surveillance. As with prior packages, RODRIGUEZ tracked the shipment of this package from Puerto Rico to the Bronx using the DOE IP Address.
After PAULINO accepted delivery of the package, he was observed delivering the package to RODRIGUEZ’s apartment in the Bronx. USPIS Postal Inspectors and DEA agents then conducted a search of RODRIGUEZ’s apartment, pursuant to a court authorized search warrant, recovering, among other things, two kilograms of cocaine from the delivered package and another kilogram of cocaine hidden in the apartment. PAULINO and RODRIGUEZ, who was present in his apartment at the time of the search, were subsequently arrested.
PAULINO, 31, and RODRIGUEZ, 27, both of the Bronx, are each charged with one count of conspiring to distribute narcotics, which carries a maximum term of life in prison and a mandatory minimum of ten years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the investigative work of the Drug Enforcement Administration and United States Postal Inspection Service.
The case is being prosecuted by the Office’s Narcotics Unit. Assistant U.S. Attorneys Joshua A. Naftalis and Andrea M. Griswold 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.
U.S. v. Rodriguez and Paulino Complaint
Co-Conspirators Plead Guilty to Bribery Scheme in White Plains Federal CourtRead the Press Release
Preet Bharara, the U.S. Attorney for the Southern District of New York , Leslie R. Caldwell, the Assistant Attorney General of the Justice Department’s Criminal Division, and Michael E. Horowitz, the Justice Department Inspector General, announced that JOHANNES THALER, and RIZVE AHMED, a/k/a “Caesar,” a native of Bangladesh and co-conspirator of THALER, pled guilty today in White Plains federal court to bribery and conspiracy to commit honest services and wire fraud before U.S. District Judge Vincent L. Briccetti.
According to the Complaint, the Indictment, court hearings, and today’s plea proceeding:
Both THALER and AHMED admitted to participating in a bribery scheme with Robert Lustyik, a former FBI Special Agent in White Plains, whereby Lustyik sold confidential, internal law enforcement information to AHMED in exchange for cash.
Lustyik was an FBI Special Agent who worked on the counterintelligence squad in the White Plains Resident Agency. THALER was Lustyik’s friend, and AHMED was an acquaintance of THALER.
From about September 2011 through March 2012, Lustyik and THALER solicited payments of money from AHMED, in exchange for Lustyik’s agreement to provide internal, confidential documents and other confidential information to which Lustyik had access by virtue of his position as an FBI Special Agent. AHMED was a native of Bangladesh who sought confidential law enforcement information, including a Suspicious Activity Report, pertaining to a prominent Bangladeshi political figure who was affiliated with a political party opposing AHMED’s views (“Individual 1”). AHMED sought, among other things, to obtain information about Individual 1, to locate Individual 1, and to harm Individual 1 and others associated with Individual 1.
As part of the scheme, THALER and AHMED exchanged text messages, including text messages about a “contract” the terms of which would require AHMED to pay a $40,000 “retainer” and $30,000 “monthly” and, in return, Lustyik and THALER would “give [AHMED] everything [they] ha[d] plus set up [Individual 1] and get the inside from the party.”
Lustyik and THALER also exchanged text messages about how to pressure AHMED to pay them additional money in exchange for confidential information. For example, in text messages, Lustyik told THALER, “we need to push [AHMED] for this meeting and get that 40 gs quick . . . . I will talk us into getting the cash . . . . I will work my magic . . . . We r sooooooo close.” THALER responded, “I know. It’s all right there in front of us. Pretty soon we’ll be having lunch in our oceanfront restaurant . . . .”
As another example, in or about late January 2012, Lustyik, upon learning that AHMED was considering using a different source to obtain confidential information about Individual 1, texted THALER, “I want to kill [AHMED] . . . . I hung my ass out the window n we got nothing? . . . . Tell [AHMED], I’ve got [Individual 1’s] number and I’m pissed. . . . I will put a wire on n get [AHMED and his associates] to admit they want [a Bangladeshi political figure] offed n we sell it to Individual 1].” Lustyik further texted THALER, “So bottom line. I need ten gs asap. We gotta squeeze C.”
Lustyik and THALER accepted at least $1,000 from AHMED in exchange for the confidential FBI information, including a Suspicious Activity Report. Lustyik and THALER schemed to obtain additional monthly cash bribes from AHMED, in increments of tens of thousands of dollars, in exchange for additional confidential law enforcement information about Individual 1 and for assistance in having criminal charges against a Bangladeshi political figure dismissed.
THALER, 51, of New Fairfield, Connecticut, pled guilty to one count of bribery and one count of conspiracy to commit honest services and wire fraud. He faces a maximum sentence of 35 years in prison. THALER is scheduled to be sentenced by Judge Briccetti at 11:30 a.m. on January 23, 2015.
AHMED, 35, of Danbury, Connecticut, pled guilty to one count of bribery and one count of conspiracy to commit honest services and wire fraud. He faces a maximum sentence of 35 years in prison. AHMED is scheduled to be sentenced by Judge Briccetti at 2:30 p.m. on January 23, 2015.
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.
Charges against Lustyik, the other defendant who was charged with THALER and AHMED, remain pending. These charges are merely accusations, and the defendant is presumed innocent unless and until proven guilty. Trial is scheduled to begin on November 17, 2014.
This case was investigated by the Department of Justice Office of the Inspector General. The case is being prosecuted by Trial Attorney Emily Rae Woods of the Justice Department’s Public Integrity Section and Assistant U.S. Attorney Benjamin Allee of the White Plains Division of the U.S. Attorney’s Office for the Southern District of New York.
Lustyik Et Al.Indictment
LustyikEtAlComplaint signed (2)
Attorney General Holder Recognizes Department Employees and Others for Their Service at Annual Awards CeremonyRead the Press Release
Attorney General Eric Holder recognized 278 department employees earlier this week, including six from the U.S. Attorney’s Office for the Southern District of New York, for their distinguished public service at the 62nd Annual Attorney General’s Awards Ceremony. Held Wednesday at DAR Constitution Hall, this annual ceremony recognized both department employees and others for their outstanding dedication to carrying out the Department of Justice’s missions.
Attorney General Holder stated: “With this important event, we come together to honor some of our nation’s most distinguished, dedicated, and deserving public servants. The hard work and impressive achievements of these 278 award recipients have inspired their colleagues at every level of the U.S. Department of Justice – including me. Their leadership has been indispensable in defining the past year as one of historic accomplishment in the face of nearly unprecedented challenge.”
Six Assistant U.S. Attorneys from the Office of Manhattan U.S. Attorney Preet Bharara were honored at the ceremony.
Manhattan U.S. Attorney Preet Bharara stated: “I am exceedingly proud of the accomplishments of the prosecutors in the Bernard Madoff investment fraud. Their tireless work uncovering the breadth of the scheme has led to multiple indictments and convictions, ensuring that all who played a role in the largest Ponzi scheme in history are brought to justice. Their ongoing efforts to achieve meaningful compensation for victims show their commitment not just to holding accountable those responsible for the fraud, but to making the victims whole.”
The John Marshall Award for Asset Forfeiture was presented to Assistant U.S. Attorneys Arlo Devlin-Brown, Christopher D. Frey, Randall Wade Jackson, Paul M. Monteleoni, Matthew L. Schwartz, and John T. Zach for the U.S. Attorney’s Office for the Southern District of New York, and Assistant U.S. Attorney Barbara A. Ward of the U.S. Attorney’s Office for the District of New Jersey. This team is responsible for the investigation and prosecution of various cases stemming from the collapse of Bernard L. Madoff Investment Securities, which was revealed in December 2008 to be the largest Ponzi scheme in history. In the five years since Bernard Madoff was arrested for orchestrating his massive Ponzi scheme, the team conducted an international investigation that resulted in the prosecution of more than a dozen individuals; a deferred prosecution agreement with JPMorgan Chase Bank; and the forfeiture and collection of more than $4 billion. The forfeited funds are being distributed through the largest and most ambitious remission project in the department’s history, where it will reach thousands of victims in dozens of countries, and serve as a precedent for future large-scale remission programs. The team’s extraordinary work, including its novel use of forfeiture, has ensured a meaningful measure of recompense to thousands of innocent victims who otherwise would not have recovered anything from the failed investments.
Yonkers Cardiologist Convicted of Fraud SentencedIn White Plains Federal Court to Three Years in PrisonRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that ROHAN WIJETILAKA was sentenced today by U.S. District Judge Vincent L. Briccetti in White Plains federal court to three years in prison for health care fraud. WIJETILAKA, who previously pled guilty in June 2014, was also ordered by Judge Briccetti to pay a total of $2 million in forfeiture and restitution.
U.S. Attorney Preet Bharara stated: "Sworn to use his education and skills to comfort and heal, Wijetilaka instead resorted to fraud on a massive scale, abusing the trust placed in him by his patients and by the community. Our Office commends the investigative efforts in this case of the Drug Enforcement Administration, the Federal Bureau of Investigation, the U.S. Department of Health and Human Services – Office of the Inspector General, the Westchester County Department of Public Safety, and the Yonkers Police Department.”
According to the Indictment to which WIJETILAKA pled guilty, statements made during the plea, and other information presented during the case:
WIJETILAKA, 65, of Manhattan, was a cardiologist licensed to practice medicine in the State of New York. He maintained a cardiology practice in Westchester County, New York (the “Wijetilaka Practice”), which included examination rooms and diagnostic testing facilities. WIJETILAKA obtained payments for diagnostic tests, office visits, and other procedures (collectively, the “Medical Procedures”) from Medicare and numerous private health insurance providers (the “Health Insurance Providers”).
In July 2007, WIJETILAKA received written notice from the New York State Department of Health, State Board for Professional Medical Conduct (the “State Board”), that he was the subject of a State Board investigation. In November 2011, following an initial inquiry, the State Board served WIJETILAKA with formal charges of professional misconduct relating, in part, to alleged fraudulent billing. In June 2012, after multiple hearings, a State Board committee found against WIJETILAKA on 41 specifications of professional misconduct, including fraudulent billing, filing false reports, and failing to maintain adequate medical records.
To receive payments for Medical Procedures from the Health Insurance Providers, WIJETILAKA was required, among other things, to submit, and cause the Wijetilaka Practice to submit, information to the Health Insurance Providers regarding aspects of the Medical Procedures he performed or caused to be performed. For instance, in order to bill Medicare for a particular patient procedure, WIJETILAKA had to submit a form that stated a diagnosis of the patient’s condition and provided a procedure code identifying the service or services rendered. WIJETILAKA also had to certify, in substance, that the services rendered were medically necessary and furnished by the Wijetilaka Practice.
Between 2009 and 2011, WIJETILAKA routinely performed Medical Procedures at the Wijetilaka Practice for which WIJETILAKA and the Wijetilaka Practice submitted claims to Health Insurance Providers. During this period, WIJETILAKA submitted millions of dollars of claims to Medicare alone.
With respect to many of the Medical Procedures he performed or caused to be performed, WIJETILAKA furnished, and caused to be furnished, false information to Health Insurance Providers (the “Fraudulent Claims”) that resulted in the Health Insurance Providers paying the Wijetilaka Practice for procedures that were medically unnecessary and served no meaningful diagnostic purpose. Among other things, WIJETILAKA falsely billed for office visits that did not occur and falsely reported non-existent symptoms to justify costly and unnecessary diagnostic tests.
In order to attract additional patients to the Wijetilaka Practice and maintain existing patients, WIJETILAKA would and did provide Schedule II controlled substances, including oxycodone, to drug-seeking patients, in exchange for those patients undergoing unnecessary diagnostic tests and other Medical Procedures.
In this manner, WIJETILAKA defrauded Health Insurance Providers out of money paid to the Wijetilaka Practice as a result of the Fraudulent Claims.
Despite being on notice that he was under State Board investigation in July 2007, and being formally charged with professional misconduct by the State Board in or about November 2011, for, among other things, fraudulent billing, WIJETILAKA continued his illicit scheme. To conceal his scheme from the State Board, WIJETILAKA generated additional false records to justify tests that he had performed.
Mr. Bharara praised the investigative efforts of the Drug Enforcement Administration, the Federal Bureau of Investigation, the U.S. Department of Health and Human Services – Office of the Inspector General, the Westchester County Department of Public Safety, and the Yonkers Police Department.
The case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Ilan Graff, Andrew Bauer, Kathryn Martin, and Benjamin Allee are in charge of the prosecution.
Foundry Owner Sentenced to 30 Months in Prison for $11 Million Scheme to Sell Fake Sculptures Attributed to Jasper Johns and Other Prominent ArtistsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that BRIAN RAMNARINE was sentenced in Manhattan federal court to 30 months in prison for fraudulently selling and attempting to sell, for more than $11 million, bronze sculptures that he falsely represented to be works of art by prominent artists Jasper Johns, Robert Indiana, and Saint Clair Cemin. RAMNARINE pled guilty in January 2014, on the fifth day of trial, before U.S. District Judge John G. Koeltl, who also imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara said: “Brian Ramnarine’s only art was as a con artist who concocted and carried out not one, but three separate schemes to peddle fake sculptures to unsuspecting buyers for millions of dollars, pretending that they had been made by well-known artists. I would like to thank the Federal Bureau of Investigation, the Police Department of the Port Authority of New York and New Jersey, and the New York State Police for their assistance on this case.”
According to the Indictment, to which RAMNARINE pled guilty, evidence presented at trial, and statements made in Manhattan federal court:
In 1960, Jasper Johns created a painting titled “Flag,” which he gave to fellow artist and friend Robert Rauschenberg. Years later, Johns made a mold (the “Flag Mold”) from that painting in order to make a sculpture. In 1990, Johns provided the Flag Mold to RAMNARINE, who owned a Queens, New York, foundry. Johns instructed RAMNARINE to use the Flag Mold to make a wax cast. RAMNARINE completed the wax cast and gave it to Johns, but never returned to Johns the Flag Mold from which the wax cast was made.
In 2010, RAMNARINE began representing to various members of the art world that he owned a bronze sculpture, titled “Flag,” that was an authorized Jasper Johns work of art created in 1989 (the “Purported 1989 Bronze Sculpture”). In an effort to identify a purchaser for the Purported 1989 Sculpture, he showed it to a representative of an auction house who specialized in the sale of rare art, and to an art dealer. Around the same time, RAMNARINE also attempted to sell the Purported 1989 Bronze Flag directly to an art collector. At RAMNARINE’s direction, several art brokers were in frequent contact with the art collector, and with the art collector’s representative, regarding the possible sale of what was represented to be a genuine and authorized Jasper Johns work of art. Through an art broker to whom RANMARINE had shown the Purported 1989 Bronze Sculpture, RAMNARINE informed the art collector’s representative that he would sell it for approximately $11 million.
After the art collector expressed doubts about the authenticity of the Purported 1989 Bronze Sculpture, RAMNARINE provided false and fraudulent documents and information in an effort to deceive the art collector into believing that the artwork was genuine. For example, RAMNARINE stated that the Purported 1989 Bronze Sculpture was a gift from Johns. To support that assertion, RAMNARINE provided an art broker with a letter dated August 23, 1989, purportedly from Johns, along with other documents that falsely and fraudulently reflected that the Purported 1989 Bronze Sculpture was a genuine Johns work of art, and that it was owned by RAMNARINE.
In truth, the Purported 1989 Bronze Sculpture was a fake. Johns never authorized its production nor did he transfer ownership to RAMNARINE. Instead, against Johns’s earlier instructions and without authorization, RAMNARINE used the original Flag Mold provided by Johns to make the Purported 1989 Bronze Flag, dated it “1989,” and forged Johns’s signature on the back of the sculpture.
RAMNARINE was arrested in November 2012 on charges arising from his attempt to sell the Purported 1989 Bronze sculpture. Shortly after his arrest and while he was on bail, RAMNARINE engaged in two new schemes to defraud an online art gallery located in Queens (the “Gallery”). In particular, RAMNARINE sold to the Gallery two fake sculptures, titled “Two” and “Orb,” that he falsely claimed had been made and authorized by Robert Indiana, and numerous fake sculptures that he falsely claimed had been made and authorized by Saint Clair Cemin. The Gallery paid RAMNARINE tens of thousands of dollars for the phony sculptures.
In addition to the prison sentence, RAMNARINE, 60, of Queens, New York, was sentenced to three years of supervised release, and ordered to forfeit $34,250 and the fake sculptures and to pay $34,250 in restitution to his victims.
Mr. Bharara praised the Federal Bureau of Investigation for its outstanding work in the investigation. He also thanked the Port Authority of New York/New Jersey Police Department and the New York State Police for their assistance.
The case is being handled by the Complex Frauds and Cybercrime Unit of the United States Attorney’s Office. Assistant United States Attorney Daniel B. Tehrani is in charge of the prosecution.
Former Hedge Fund Analyst Sentenced to Five Years in Prison for Participating in Insider Trading SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that MATTHEW TEEPLE, a former analyst for San Francisco-based hedge fund Artis Capital Management, L.P. (“Artis”), was sentenced today to five years in prison for participating in an insider trading scheme that yielded tens of millions of dollars in ill-gotten gains. When he pled guilty in May 2014, TEEPLE admitted that in 2008 he repeatedly gathered and passed to Artis inside information about Foundry Networks, Inc. (“Foundry”), a technology company located in Santa Clara, California, which he had obtained from David Riley, Foundry’s Chief Information Officer at the time. This inside information included the fact – before it became public on July 21, 2008 – that Brocade Communications, Inc. (“Brocade”) was planning to acquire Foundry. On October 2, 2014, following a 13-day jury trial before U.S. District Judge Valerie E. Caproni, Riley was convicted of crimes related to his role in the scheme with which he and TEEPLE were charged together. TEEPLE’s sentence today was imposed by U.S. District Judge Robert P. Patterson, who accepted TEEPLE’s guilty plea in May.
Manhattan U.S. Attorney Preet Bharara said: “Matthew Teeple flagrantly and repeatedly traded on inside information he received from a Foundry Networks, Inc. insider and convicted tipster, David Riley. With today’s sentence, Teeple joins a growing group of professionals who have forfeited their freedom for making a mockery of market rules.”
According to the agreement pursuant to which TEEPLE entered his plea of guilty, other documents filed in Manhattan federal court, and statements made during court proceedings:
From 2005 and continuing through 2008, TEEPLE gathered from Riley sensitive, nonpublic information about Foundry – specifically, its monthly and quarterly sales data and secrets relating to its impending acquisition by Brocade. As CIO and a Vice President at Foundry, Riley had access to Foundry’s sales performance numbers well before they became public and – along with only a handful of other Foundry employees – learned of the Brocade deal before it was announced publicly. TEEPLE gathered these sales- and Brocade-related secrets from Riley over the telephone and in meetings the two held in the San Jose, California, area. On several occasions, TEEPLE spoke with Riley while Riley was logged into the database that Foundry used to maintain sensitive financial information.
TEEPLE passed the inside information he received from Riley on to others, including others at Artis. From the inside information TEEPLE provided about Foundry, Artis ultimately reaped gains and avoided losses of over $36 million.
In addition to the prison sentence he received today, TEEPLE, 43, of San Clemente, California, was sentenced to one year of supervised release. TEEPLE was also ordered to forfeit $553,890.00 in illegal proceeds and to pay a $100,000 fine. Restitution will be determined at a later date.
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 Telemachus P. Kasulis and Sarah E. McCallum, and Special Assistant U.S. Attorney Michael P. Holland, are in charge of the prosecution.
New York Man Pleads Guilty in Manhattan Federal Court to Six Counts of Illegally Possessing FirearmsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that ANTONIO OLMEDA of New York, New York, pled guilty today in Manhattan federal court to all six counts charged in the Indictment against him: three counts of being a convicted felon in possession of various firearms, two counts of possessing unregistered machine guns and one count of possessing an unregistered short-barreled shotgun. OLMEDA was arrested in December 2011 in connection with his alleged attempt to shoot two police officers with the New York City Police Department (“NYPD”). He pled guilty today before U.S. Magistrate Judge Debra Freeman.
Manhattan U.S. Attorney Bharara said: “Antonio Olmeda, a convicted felon, possessed a vast arsenal, including numerous automatic firearms, multiple machine guns and a sawed-off shotgun. The law prohibited Olmeda from having this kind of firepower at his disposal in light of his felony conviction. Our Office and our law enforcement partners remain committed to keeping deadly weapons out of the hands of convicted criminals.”
As alleged in the Indictment, OLMEDA illegally possessed the following firearms:
- Springfield Armory Ultra Compact .45 caliber semi-automatic handgun
- Taurus 85 Ultralite .38 caliber revolver
- Olympic Arms PCR03 .223 caliber fully-automatic rifle
- Smith & Wesson .40 caliber semi-automatic pistol
- Beretta 92SB Compact 9mm Luger semi-automatic pistol
- Cobray Industries M-11 9mm Luger fully-automatic pistol
- Remington model Mohawk 600 .308 caliber rifle
- Roggio Arsenal model RA-15 rifle receiver/frame
- Interarms rifle
- Three Springfield Armory model 1911A1 .45 caliber pistols
- Sig Sauer model SP 2022 9mm caliber pistol
- Taurus model PT140 Millenium .40 caliber pistol
- Smith & Wesson model 4006 .40 caliber pistol
- Star Bonifacio Echeverria model Firestar 9mm caliber pistol
- Charter Arms model Police Undercover .32 caliber revolver
- Walther model PPK/S .380 caliber pistol
- Vulcan Arms model V15 7.62x39mm machine gun
- Norinco AK-type 7.62x39mm machine gun
- Mossberg model 500A 12 gauge shotgun
OLMEDA, 56, from New York City, pled guilty to three counts of being a convicted felon in possession of various firearms, two counts of possessing unregistered machine guns, and one count of possessing an unregistered short-barreled shotgun. Each of these counts carries a maximum sentence of 10 years in prison. OLMEDA is scheduled to be sentenced by U.S. District Judge Richard M. Berman on January 13, 2015. 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.
OLMEDA is separately charged by the state in Queens County, New York, with two counts of attempted murder in the first degree, two counts of attempted assault on a police officer with a deadly weapon, one count of criminal possession of a weapon in the second degree, and two counts of attempted assault in the first degree, all arising out of his attempt to shoot two NYPD police officers in Queens, New York, on or about December 2, 2011. The state charges are merely accusations, and OLMEDA is presumed innocent of those state charges unless and until proven guilty.
Mr. Bharara praised the outstanding efforts of the Federal Bureau of Investigation’s Manhattan-based Joint Terrorism Task Force, which principally consists of agents and detectives of the FBI and the NYPD; the United States Bureau of Alcohol, Tobacco, Firearms and Explosives; and the United States Marshals Service. Mr. Bharara also thanked the NYPD and the Yonkers Police Department for their ongoing assistance.
The case is being handled jointly by the Office’s Violent and Organized Crime Unit and Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Shane T. Stansbury, Harris M. Fischman, Michael D. Maimin, and John P. Cronan are in charge of the prosecution.
Manhattan U.S. Attorney Announces Guilty Plea of Mayor of Mount Vernon Ernest D. Davis to Failing to File Income Tax ReturnsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that ERNEST D. DAVIS, the mayor of the City of Mount Vernon, pled guilty in White Plains federal court to failing to file corporate and personal income tax returns. DAVIS surrendered today and entered his plea before U.S. Magistrate Judge Paul E. Davison.
According to the Information and today’s plea proceeding:
In 1988, ERNEST D. DAVIS purchased a rental property located at 14-16 Sandford Boulevard East in Mount Vernon, New York. He held the building through a corporation known as 14-16 Sandford East, Inc. DAVIS admitted that he sold the building in 2003 but he failed to file the required federal corporate income tax return with the Internal Revenue Service on which he should have reported the proceeds of the sale. In addition, DAVIS also failed to report the proceeds of the sale of 14-16 Sandford Blvd. on his 2003 U.S. Individual Income Tax Return, Form 1040, which he filed on or about February 1, 2005.
DAVIS also admitted today that he knowingly failed to file a personal federal income tax return for the tax year 2011, when he earned approximately $106,743 in adjusted gross income.
DAVIS, 76, of Mount Vernon, New York, pled guilty to two counts of willfully failing to file federal income tax returns. He faces a maximum sentence of two years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
DAVIS is scheduled to be sentenced by Judge Davison at 11a.m. on January 26, 2015.
Mr. Bharara praised the investigative work of the Internal Revenue Service, the Federal Bureau of Investigation, and the U.S. Department of Housing and Urban Development’s Office of the Inspector General.
The case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Perry A. Carbone, Kathryn Martin and James McMahon are in charge of the prosecution.
U.S. v. Ernest Davis Information
Former Senior Finance Analyst at Pharmaceutical Company Charged in Manhattan Federal Court with Insider TradingRead 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 ZACHARY ZWERKO was arrested on securities fraud charges stemming from his involvement in an insider trading scheme. Specifically, ZWERKO passed material nonpublic information about potential merger and acquisition activity related to certain pharmaceutical companies to a co-conspirator, who then traded on the information, resulting in profits of approximately $722,000. ZWERKO was arrested on Friday, October 10, 2014, in Cambridge, Massachusetts, and is expected to be presented today in Boston federal court before a United States Magistrate Judge.
Manhattan U.S. Attorney Preet Bharara said: “Today we announce charges against yet another individual for alleged insider trading. As alleged, Zachary Zwerko was a spy in the camp of his own company who passed secret merger and acquisition information to his co-conspirator so that lucrative illegal trades could be made. Those with access to inside information who contemplate releasing it for financial profit should understand that this Office and our law enforcement partners will track them down and prosecute them.”
FBI Assistant Director-in-Charge George Venizelos said: “Zwerko is charged, like so many others, with insider trading. This is a crime that undermines the public’s faith in our financial markets and puts companies at risk. The FBI remains committed to curbing corruption to better ensure fairness in the marketplace.”
According to the allegations contained in the Complaint unsealed in Manhattan federal court:
From at least 2012 through the present, ZWERKO was engaged in an insider trading scheme related to the acquisitions of certain pharmaceutical companies. ZWERKO, a Senior Finance Analyst in the Financial Evaluation and Analysis Group of a pharmaceutical company that operates in New Jersey (the “Pharma Company”), performed work in connection with numerous potential and actual corporate transactions, including acquisitions. As a Financial Evaluation and Analysis Group employee, ZWERKO had access to a computer directory maintained by the Pharma Company that contained material, nonpublic information related to the Pharma Company’s potential acquisitions.
On multiple occasions, ZWERKO passed to another person (“CC-1”) material, nonpublic information related to future acquisitions by the Pharma Company, including the identities of companies that were in negotiations with the Pharma Company for potential acquisitions (the “Target Companies”). CC-1 then traded in the securities of the Target Companies. The Target Companies were later acquired, in one instance by the Pharma Company, and the prices of the shares of the Target Companies increased after the acquisitions were announced publicly. CC-1 then sold CC-1’s positions in the shares of the Target Companies, thereby profiting from the movement in stock price. From this illegal trading, CC-1 earned profits of at least approximately $722,000.
ZWERKO, 32, is charged with one count of conspiracy to commit securities fraud, which carries a maximum sentence of five 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.
The U.S. Securities and Exchange Commission (“SEC”) announced civil charges against ZWERKO in a separate action.
Mr. Bharara praised the work of the Federal Bureau of Investigation, and thanked the SEC for its assistance. He added that the investigation is continuing.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Jessica Masella and Edward Kim 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.
New Jersey Man Found Guilty in Manhattan Federal Court of Perpetrating Multimillion-Dollar Investment FraudRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that CHARLES HUGGINS was found guilty in Manhattan federal court of perpetrating a multimillion-dollar investment fraud against dozens of victims across the United States. HUGGINS was convicted following a two-week jury trial before U.S. District Judge Sidney H. Stein.
According to the Complaint and other filings in Manhattan federal court, and the evidence presented at trial:
From 2008 through at least September 2011, HUGGINS and others solicited millions of dollars from various investors through companies known as JYork Industries Inc. (“JYork”) and Urogo Inc. (“Urogo”) with false and misleading representations that he would use the investors’ money exclusively to mine gold and diamonds from Sierra Leone and Liberia. HUGGINS falsely promised investors, among other things, high rates of return on their investments, which he represented were based upon the profits generated by the sale of the gold and diamonds in the United States.
In fact, from 2008 through at least September 2011, HUGGINS and his co-conspirators misappropriated millions of dollars of investors’ funds and used those funds for their own purposes or to repay other investors. Contrary to the representations of HUGGINS and his co-conspirators, the vast majority of the investment funds was used to pay HUGGINS’s personal expenses and for purposes entirely unrelated to what was represented to investors. For example, hundreds of thousands of dollars in investor funds were diverted to Orpheus Inc., a record label owned by HUGGINS, and used to pay, among other expenses, HUGGINS’s $7,200 monthly apartment rent in the Sutton Place section of Manhattan, for upkeep of HUGGINS’s Mercedes Benz, restaurant tabs, clothes from expensive boutiques, and personal credit card bills. HUGGINS personally received hundreds of thousands of dollars in cash and gave tens of thousands of dollars in cash to other members of his family. A portion of the funds was used to make payments to other investors, as in a classic Ponzi scheme.
Dozens of victims across the United States lost their money in the scheme. When certain investors complained that they had not received the investment return that they were promised, HUGGINS gave those investors small repayments from funds invested by others, or claimed that he converted their investment into restricted shares of Oraco Resources, a publicly traded company of which Huggins was a majority shareholder, that were nearly worthless.
HUGGINS, 68, of Edgewater, New Jersey, was convicted of one count of conspiracy to commit wire fraud and one count of wire fraud. Each of those counts carries a maximum potential penalty of 20 years in prison and a fine of the greater of $250,000 or twice the gross gain or loss derived from the offense. 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. HUGGINS is scheduled to be sentenced in January 2015 before Judge Stein.
Mr. Bharara praised the work of the FBI in the investigation of this case. He added that the investigation is continuing.
The case is being handled by the General Crimes Unit of the United States Attorney's Office. Assistant United States Attorneys Edward A. Imperatore and Andrea L. Surratt are in charge of the prosecution.
Founder of Liberty Reserve Arthur Budovsky Extradited from Spain to Face Charges in Manhattan Federal CourtRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Leslie R. Caldwell, Assistant Attorney General for the Justice Department’s Criminal Division, today announced the extradition of ARTHUR BUDOVSKY from Spain to face charges related to his alleged operation of Liberty Reserve, a virtual currency that was used by cybercriminals around the world to launder the proceeds of their illegal activity. BUDOVSKY, 40, a citizen of Costa Rica, was arrested in Spain in May 2013, as a result of an Indictment filed in Manhattan federal court. Following his extradition by Spanish authorities, BUDOVSKY arrived in New York this afternoon. BUDOVSKY will be arraigned before U.S. District Judge Denise L. Cote on October 14, 2014, at 12:45 p.m.
Manhattan U.S. Attorney Preet Bharara stated: “As alleged, Arthur Budovsky founded Liberty Reserve to enable criminals in the United States and around the world to process illegal payments and to launder billions of dollars in crime proceeds anonymously and beyond the reach of U.S. law enforcement. Budovsky allegedly operated Liberty Reserve from Costa Rica and renounced his United States citizenship to evade the authorities. Now, thanks to the cooperative efforts of our law enforcement partners here and in Spain, Arthur Budovsky has been apprehended and will face justice in an American courtroom.”
Assistant Attorney General Leslie R. Caldwell stated: “Arthur Budovsky allegedly built Liberty Reserve overseas to provide the international underworld with a crime-friendly digital currency and elude the scrutiny of American authorities. He even renounced his U.S. citizenship to try to escape facing justice in an American courtroom. With the cooperation of our foreign partners in Spain and elsewhere, this case and extradition are a clear example that money launderers can run, but they cannot hide from the Department of Justice.”
According to allegations contained in the Indictment filed against Liberty Reserve, BUDOVSKY, and six other individual defendants, and statements made in related court proceedings:
Liberty Reserve was born out of BUDOVSKY’s unsuccessful experience running a third-party exchange service, called Gold Age, Inc., for another digital currency, called E-Gold. In or about 2006, BUDOVSKY was convicted in New York State of operating Gold Age, Inc., as an unlicensed money transmitting business. In 2007, the operators of E-Gold were also charged with criminal offenses, including money laundering and operating an unlicensed money transmitting business,, and subsequently ceased doing business. In the wake of his own criminal conviction, BUDOVSKY set about building a digital currency that would succeed in eluding law enforcement where E-Gold had failed, by, among other ways, locating the business outside the United States. Accordingly, BUDOVSKY emigrated to Costa Rica, where he and other defendants began operating Liberty Reserve.
Liberty Reserve billed itself as the Internet’s “largest payment processor and money transfer system.” Liberty Reserve was created, structured, and operated to help users conduct illegal transactions anonymously and launder the proceeds of their crimes. BUDOVSKY devoted himself to building and expanding Liberty Reserve so that the company could profit from attracting more and more criminal customers, all while seeking to evade the scrutiny and reach of U.S. law enforcement authorities. At all relevant times, BUDOVSKY directed and supervised Liberty Reserve’s operations, finances, and corporate strategy.
Liberty Reserve emerged as one of the principal money transfer agents used by cybercriminals around the world to distribute, store, and launder the proceeds of their illegal activity. Liberty Reserve was used extensively for illegal purposes, functioning as the bank of choice for the criminal underworld because it provided an infrastructure that enabled cybercriminals to conduct anonymous and untraceable financial transactions. BUDOVSKY was so committed to evading U.S. law enforcement that he formally renounced his U.S. citizenship in 2011 and became a Costa Rican citizen, telling U.S. immigration authorities that he was concerned that the “software” his “company” was developing “might open him up to liability in the U.S.”
Before being shut down by the U.S. government in May 2013, Liberty Reserve had more than one million users worldwide, including more than 200,000 users in the United States, who conducted approximately 55 million transactions through its system totaling more than $6 billion in funds. These funds encompassed suspected proceeds of credit card fraud, identity theft, investment fraud, computer hacking, narcotics trafficking, and other crimes.
BUDOVSKY is among seven individuals charged in the Indictment, which was unsealed on May 28, 2013. Four co-defendants – Vladimir Kats, Azzeddine el Amine, Mark Marmilev, and Maxim Chukharev – have pled guilty and await sentencing before U.S. District Judge Denise L. Cote. Charges against Liberty Reserve and two individual defendants who have not been apprehended remain pending.
Mr. Bharara praised the outstanding work of the United States Secret Service, the Internal Revenue Service-Criminal Investigation, and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, which worked together in this case as part of the Global Illicit Financial Team. Mr. Bharara also thanked the United States Secret Service’s New York Electronic Crimes Task Force for its extraordinary assistance with the investigation. Additionally, Mr. Bharara specially thanked all the international law enforcement agencies that assisted in the investigation, in particular, Interpol, the Judicial Investigation Organization in Costa Rica, the National High Tech Crime Unit in the Netherlands, the Spanish National Police, Financial and Economic Crime Unit, the Cyber Crime Unit at the Swedish National Bureau of Investigation, and the Swiss Federal Prosecutor’s Office.
This case is being prosecuted jointly with the Department of Justice’s Asset Forfeiture and Money Laundering Section (“AFMLS”), which is overseen by Assistant Attorney General Leslie R. Caldwell. Mr. Bharara thanked AFMLS for its partnership and also thanked the Department of Justice’s Office of International Affairs and Computer Crime and Intellectual Property Section for their support.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit and Money Laundering and Asset Forfeiture Unit. Assistant United States Attorneys Serrin Turner, Andrew Goldstein, and Christine Magdo of the Southern District of New York and Trial Attorney Kevin Mosley of AFMLS are in charge of the prosecution, and Assistant United States Attorney Christine Magdo is in charge of the forfeiture aspects of the case.
The charges contained in the Indictment against BUDOVSKY and certain of BUDOVSKY’s co-defendants remain pending and are merely accusations. Those defendants are presumed innocent unless and until proven guilty.
Former Businessman Sentenced in Manhattan Federal Court to 34 Months in Prison for Fraud in Connection with the Financing of “Rebecca – The Musical”Read the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that one-time Long Island businessman MARK HOTTON was sentenced in Manhattan federal court to 34 months in prison for defrauding the producers of the Broadway show “Rebecca – The Musical” (“Rebecca”) through an elaborate scheme involving fictitious overseas “investors,” and for carrying out a separate scheme to defraud a Connecticut-based real estate company through many of the same deceptions employed in the “Rebecca” fraud. HOTTON pled guilty in July 2013 before U.S. District Judge John G. Koeltl, who also imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara said: “Mark Hotton scripted not one, but two intricate and multifaceted schemes to bilk his victims out of hundreds of thousands of dollars. I would especially like to thank the Federal Bureau of Investigation for their work on this complicated fraud case.”
According to the Complaint, the Indictment, and statements made in Manhattan federal court:
HOTTON once worked for a prominent investment bank and financial services firm, and is a former stockbroker with ties to numerous corporate entities. From September 2011 to October 2012, he engaged in two separate schemes involving fictitious individuals and entities he created to defraud his victims – the producers of “Rebecca,” a musical based on the novel by Daphne du Maurier, and a Connecticut-based real estate company.
As of late January 2012, the producers of “Rebecca” (the “Producers”) were trying to raise an additional $4 million in order to mount the musical on Broadway. The budget for Rebecca was between $12 million and $14 million, and in late January 2012, the producers realized they were at least $4 million short of their minimum capitalization goal. To raise additional funds, in February 2012, the Producers’ company entered into an agreement with TM Consulting, Inc., a company HOTTON controlled. Under the agreement, HOTTON undertook to raise money for “Rebecca” in return for a fee of $7,500, plus 8% of any funds raised in excess of $250,000, and tiered percentages of “Rebecca’s net profits.”
Over the course of the next few months, HOTTON led the Producers into believing that he had secured $4.5 million from four overseas investors – “Paul Abrams,” of Hawthorne, East Victoria; “Roger Thomas,” of St. Peter Port, Guernsey; “Julian Spencer,” of Crocker Hill, Chichester, Sussex, and “Walter Timmons,” of London (the “HOTTON Investors”). HOTTON provided the Producers with purported email contact information for these individuals and also furnished the Producers with investment agreements purportedly signed by them. These individuals also purportedly wrote emails to the Producers. For example, in April 2012, “Paul Abrams” wrote one of the Producers an email saying, “Mr. Hotton has spoken so highly about you… I look forward to meeting you and if any further participation in the musical is attainable outside of what I’m doing personally, please let Mr. Hotton know so he can organize it thru my kids Trust.”
Between February and June 2012, the Producers made a number of payments to HOTTON. Not only did they pay the $7,500 fee in February 2012, they also paid HOTTON more than $17,000 between February and June 2012. Furthermore, in April 2012, HOTTON demanded and was paid an “advance” against his 8% commission, claiming that he needed the money to cover the costs of a purported safari he had taken with “Paul Abrams” and Abrams’s eldest son.
In fact, the HOTTON Investors did not even exist. For example, some of the IP addresses used to access the email accounts of the HOTTON Investors trace back to a Manhattan location where HOTTON did business, and the businesses associated with some of the email address for the HOTTON Investors have websites whose domain names were registered to HOTTON and that he apparently created shortly before and during the fraud. HOTTON used the decoy email addresses to fabricate email correspondence between himself and the HOTTON Investors, which he then forwarded to the Producers. In some instances, he used the email addresses to communicate directly with the Producers.
In July 2012, as the Producers pressed for the HOTTON Investors to wire the money they had promised to send by July 31, 2012, HOTTON orchestrated the false illness, hospitalization, and subsequent untimely “death” of one of the main HOTTON Investors, “Paul Abrams.” HOTTON thereupon fabricated correspondence with a man named “Wexler,” who had purportedly been named the executor of the estate of “Paul Abrams.” HOTTON claimed to be meeting with “Wexler” in England in August 2012 in an effort to make sure the contribution to Rebecca was still made. However, travel records indicate that HOTTON had not left the United States since April 2012. Further, the email address used by “Wexler” was associated with a domain that was set up and registered to HOTTON.
As it became increasingly apparent that the commitments of the HOTTON Investors would fall through, HOTTON purported to try to broker a $1.1 million loan for the Producers, even offering up his own real estate and brokerage account as collateral for the loan. But there was no real loan or lender. Rather, HOTTON had simply created a second set of apparently fictional characters and entities to generate payments for himself. Among other things, HOTTON created the domain name of the title company he said could assist the Producers in obtaining the loan; invented the business purportedly making the loan; used decoy emails to fabricate correspondence with individuals who purportedly worked for the lender; and invented a company that would facilitate his hollow offer to put up collateral for the loan. Through this part of the “Rebecca” scheme, HOTTON was able to defraud the Producers into paying in excess of $35,000 to him and companies he controlled, including $10,000 paid to him personally, as half of a fee for helping to broker the loan, and $23,000 paid to a bank account for the “lender” but which was really controlled by HOTTON’s sister and administrative assistant.
The Connecticut Real Estate Fraud
HOTTON employed a similar set of deceptive devices – including some of the same email addresses and fictitious companies used to defraud Rebecca’s Producers – in order to defraud a Connecticut-based real estate company (the “Real Estate Company”) into paying hundreds of thousands of dollars to him and companies he controlled.
Beginning in September 2011, HOTTON agreed to help the president of the Real Estate Company (the “President”) obtain financing for various business ventures. HOTTON promised that a California-based group called “Pacific Ventures” and its affiliate “Mezzanine Capital” would assist in providing a $20 million loan. HOTTON provided as an email address for a contact at “Pacific Ventures” the same email address he told the Producers was used by “Paul Abrams” and which was then purportedly used by “Walter Timmons” as well as the assistants of “Paul Abrams” in the “Rebecca” scheme. Meanwhile, HOTTON provided as an email address for a contact at “Mezzanine Capital” the same email address he told the Producers was used by “Roger Thomas,” one of the HOTTON Investors.
In March 2012, HOTTON told the President that a third company, “CPS Equity,” would be able to process the loan, but required a $200,000 upfront fee, which the President paid. CPS Equity was the company associated with, among other things, the email address used by “Paul Abrams” when communicating with Rebecca’s Producers. Following the initial $200,000 payment, HOTTON further instructed the President to make additional payments in order to secure the loan.
In addition to the prison sentence, HOTTON, 48, of West Islip, New York, was ordered to forfeit $500,000 and to pay restitution of $68,000.
Mr. Bharara praised the outstanding investigative work of the Federal Bureau of Investigation.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Edward B. Diskant and Sarah McCallum are in charge of the prosecution.
Manhattan U.S. Attorney Settles Civil Fraud Claims Against Caremed Pharmaceutical Services for Engaging in Fraudulent ConductRead 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 (“HHS-OIG”), New York Region, announced today that the United States filed a civil fraud lawsuit in Manhattan federal court against SORKIN’S RX LTD. D/B/A CAREMED PHARMACEUTICAL SERVICES (“CareMed”), a New York-based pharmacy that sells high-cost specialty drugs used to treat conditions that require complex treatment, such as cancer. The United States’ Complaint-in-Intervention alleges that CareMed made false statements to insurance companies to secure prior authorization for the coverage of drugs by, among other things, fabricating Medicare beneficiaries’ medical information and posing as representatives of prescribing physicians’ offices when calling insurers. The Complaint also alleges that CareMed engaged in double-billing by re-stocking unused dosages of Procrit and Rituxan, and then re-selling the drugs and re-billing insurance companies that provide prescription drug coverage to Medicare beneficiaries or Medicaid. In addition, the Complaint alleges that CareMed submitted false claims for payment for automatic refills of Procrit and Rituxan that were not actually received by patients and their doctors. The lawsuit seeks damages and penalties under the False Claims Act.
Simultaneous with the filing of the lawsuit, the United States has settled the claims against CareMed pursuant to a settlement stipulation approved today by U.S. District Judge Denise L. Cote. In the settlement, CareMed admitted that when contacting insurance companies to obtain prior authorization for drug coverage, some representatives of the company had falsely stated that they were calling from the prescribing physicians’ offices and, in some instances, responded to questions seeking the patient’s clinical information based on their understanding of the prior authorization criteria for the particular drug, instead of obtaining the patient’s actual clinical information. CareMed also admitted that it had failed to adequately oversee and train staff responsible for the prior authorization process. Furthermore, CareMed admitted that it had inadequate procedures and auditing processes to ensure that some claims submitted to third-party payors for Rituxan and Procrit were reversed or credited when necessary. CareMed agreed to pay a total of $10 million to resolve the Government’s claims, with $9,534,577 going to the United States and the remaining $465,423 to the State of New York.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, to maximize profits CareMed obtained approvals for the coverage of costly drugs by providing insurers with fake clinical information and posing as physician office staff. CareMed allegedly also re-stocked and re-billed unused medications and stuck the Government – and taxpayers – with the bill for prescription refills that never went to patients or their doctors. By entering into this $10 million settlement, CareMed is being held accountable and paying for its fraud.”
HHS-OIG New York Region Special Agent in Charge Thomas O’Donnell said: “This settlement is another example of the U.S. Department of Health and Human Services, Office of Inspector General’s commitment to holding providers accountable for how they conduct business. HHS-OIG will continue to ensure that the individuals and entities that bill our federal health care programs do so with the utmost integrity.”
As set forth in the complaint filed in Manhattan federal court:
Insurance companies that provide prescription drug coverage to Medicare beneficiaries (“Medicare Part D sponsors”) require health care providers to obtain “prior authorization” for certain drugs, which means that the plan will cover the cost of the drug only if certain criteria are met. The prior authorization process can be time-consuming for physicians and their staff because it may require paperwork and multiple communications with insurance companies. In order to secure business from physicians, CareMed offered to take care of the prior authorization process for them and obtain coverage approvals expeditiously.
CareMed made false statements to Medicare Part D sponsors when seeking prior authorization for drug prescriptions in order to maximize the number of prescriptions it could process and the payments it received each day. Management exerted significant pressure on staff to get prescriptions approved quickly. Because CareMed knew that many insurance companies require the prescribing physician’s office to provide any necessary clinical information directly, staff posed as physician office employees when placing telephone calls to secure prior authorizations. Staff also frequently fabricated the patient’s medical information provided in response to clinical questions posed by insurance companies. They provided insurance companies with false medical information that they knew would meet the prior authorization requirements – which they had learned through online resources, discussions with colleagues, and company training materials – instead of taking the time to obtain the patient’s actual clinical information. For instance, CareMed provided insurance companies with fabricated patient blood test results that staff knew would satisfy the prior authorization requirements for certain drugs.
CareMed took steps to conceal its fraudulent conduct in connection with the prior authorization process. For example, the company installed a caller ID blocking system that prevented its name and location from appearing when outgoing calls were made to insurance companies.
CareMed also engaged in double-billing of Procrit (used to treat anemia caused by chronic kidney disease or chemotherapy) and Rituxan (used to treat non-Hodgkin’s lymphoma). When CareMed learned that a patient had not used medication that was prescribed, it made arrangements to retrieve the medication. CareMed employees sometimes then re-stocked and re-sold the returned medication without reversing the Medicare or Medicaid claim or providing an appropriate credit, and submitted another reimbursement claim for the same medication. As part of its investigation, the Government oversaw an audit that revealed that CareMed received payments from Medicare and Medicaid for amounts of certain dosages of Procrit and Rituxan that far exceeded the amounts the company purchased during the relevant time period.
Furthermore, CareMed sought payment from Medicare Part D sponsors and Medicaid for automatic refills of Procrit and Rituxan that were not actually delivered to and received by patients and their doctors. The pharmacy would generate automatic refills and then submit claims for these refills to Medicare Part D sponsors and Medicaid. However, when patients did not need the refill, CareMed sometimes failed to reverse the previously submitted claim for payment or credit Medicare or Medicaid for amounts already paid. CareMed would then sell the previously billed refill dosage to another customer and seek reimbursement for this sale as well.
In connection with this complaint and settlement, the Government joined a private whistleblower lawsuit that had previously been filed under seal pursuant to the False Claims Act.
Mr. Bharara thanked HHS’s Office of the Inspector General for its investigative efforts and extensive assistance with the case.
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.
Man Sentenced in Manhattan Federal Court to Two Consecutive Life Terms for February 2000 Double Murder in the BronxRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that JOE FERNANDEZ was sentenced today in Manhattan federal court to two consecutive terms of life in prison by U.S District Judge Alvin K. Hellerstein. FERNANDEZ was found guilty on March 7, 2013, following a three-week jury trial, of conspiring to commit a murder-for-hire and using a firearm in furtherance of a crime of violence, with death resulting. FERNANDEZ was convicted for his role in the murders of Arturo Cuellar (“Cuellar”) and Ildefonso Vivero Flores (“Flores”) in the Bronx on February 22, 2000.
Manhattan U.S. Attorney Preet Bharara said: “Joe Fernandez was convicted last year of a ruthless double murder he committed nearly 15 years ago. For $40,000 he ambushed two men and shot them multiple times at close range. Today he learned the price for his wanton disregard for human life. He will spend the rest of his life in prison.”
According to the evidence presented at trial, statements made during other court proceedings including today’s sentencing, and other court documents:
In late 1999 and early 2000, a drug trafficking organization in New York City (the “New York DTO”) was receiving large quantities of cocaine from a Mexican drug trafficking organization (the “Mexican DTO”). In or about February 2000, Cuellar and Flores, two representatives of the Mexican DTO, coordinated the delivery of approximately 274 kilograms of cocaine to the New York DTO. The cocaine was distributed to members of the New York DTO, who sold the drugs on the street, while Cuellar and Flores remained in New York City waiting to receive payment for the drugs.
Instead of paying Cuellar and Flores, however, members of the New York DTO conspired to murder Cuellar and Flores and keep the drug proceeds. On February 21, 2000, members of the New York DTO hired a hitman, co-defendant Patrick Darge (“Darge”), to kill Cuellar and Flores the next day. That same evening, Darge hired FERNANDEZ to serve as his backup during the murders in the event something went wrong. Darge agreed to pay FERNANDEZ $40,000 for this role as a backup during the murders.
On February 22, 2000, Cuellar and Flores were escorted to an apartment building at 3235 Parkside Place in the Bronx, under the ruse that they would be receiving payment for the cocaine at an apartment in that building. Darge and FERNANDEZ, both armed with firearms, were waiting in the lobby of that building for Cuellar and Flores to arrive. Upon Cuellar and Flores’s entrance into the lobby of 3235 Parkside Place, Darge approached Cuellar from behind and fired a gunshot into Cuellar’s skull. Darge’s gun jammed after that shot, at which point FERNANDEZ fired fourteen gunshots, nine of which connected into the bodies of Cuellar and Flores. Cuellar and Flores died as a result of their gunshot wounds.
As negotiated, Darge paid FERNANDEZ $40,000 for his role in the February 22, 2000, murders.
FERNANDEZ, 38, was convicted of one count of participating in a murder-for-hire conspiracy, with death resulting, in violation of Title 18, United States Code, Section 1958, and one count of using a firearm arm in furtherance of a crime of violence, causing death, in violation of Title 18, United States Code, Section 924(j). In addition to the two consecutive prison terms of life, FERNANDEZ was ordered to pay a $200 special assessment fee.
The investigation was conducted by the Drug Enforcement Administration’s New York Drug Enforcement Task Force (the “Task Force”) and the New York City Police Department (“NYPD”). Mr. Bharara thanked the Task Force and the NYPD for their work in the investigation.
The case is being handled by the Office’s Violent and Organized Crimes Unit and Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Todd Blanche, John P. Cronan, and Russell Capone are in charge of the prosecution.
Resident of Spain Sentenced in Manhattan Federal Court to 65 Months in Prison for His Role in $16 Million Investment Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that ANTHONIE R. SPARROW was sentenced today in Manhattan federal court to 65 months in prison for his role in perpetrating a $16 million fraudulent investment scheme that victimized hundreds of investors around the world. SPARROW pled guilty in February 2014 to wire fraud and wire fraud conspiracy. U.S. District Judge Robert W. Sweet imposed today’s sentence.
According to the allegations contained in the Indictment and statements made at the plea proceedings:
From 2002 to January 2005, SPARROW and co-defendant Masroor A. Khan (“Khan”) orchestrated and carried out an extensive fraudulent scheme relating to investments in rare, collectible coins. The defendants solicited victims to invest in rare, collectible coins through Lloyd’s & Associates Asset Management Ltd. (“LAM”), a purported collectible coin and precious metal business run by SPARROW. The victims were directed to wire funds – purportedly for investments in rare coins – to LAM bank accounts in New York that SPARROW controlled. Khan and SPARROW told the victims that these funds would be used to purchase coins that would then be held at Pinnacle Depository Service (“Pinnacle”), a purported coin depository and secure storage area, which was also run by SPARROW.
However, rather than purchase coins with the victims’ funds as the defendants had promised, SPARROW simply diverted the vast majority of the money, totaling approximately $16 million, to a bank account in Cyprus controlled by LAM. To prevent the victims from discovering the theft of their investment funds, SPARROW maintained a website where victims were given false information about the value of the coins they supposedly owned. SPARROW deliberately discouraged victims from coming to view their coins in person and, when certain victims insisted on doing so, he staged elaborate ruses to prevent them from seeing more than a few coins.
Beginning in late 2004, victims began to demand the return of their funds. In response, in January 2005, SPARROW closed the New York office of LAM and fled to Spain, from which he was subsequently extradited after being charged in this case.
At today’s proceeding, Judge Sweet also ordered SPARROW to pay $16 million in forfeiture and $16 million in restitution, and a $200 special assessment fee.
Khan remains a fugitive from the charges contained in the Indictment.
Mr. Bharara praised the outstanding investigative work of the FBI. He also thanked the Spanish National Police for their assistance in the arrest and extradition of SPARROW.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Alexander J. Wilson is in charge of the prosecution.
The pending charges against Khan are merely accusations, and he is presumed innocent unless and until proven guilty.
Manhattan Man Indicted in Manhattan Federal Court for Producing, Receiving, and Possessing Child PornographyRead 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 the filing of an Indictment in Manhattan federal court charging MATTHEW VADO, a Manhattan resident, with production of child pornography, receiving child pornography, and possessing child pornography. VADO, who was previously arrested in June 2014, has been detained since his arrest.
Manhattan U.S. Attorney Preet Bharara said: “This Office has zero tolerance for those who, like Matthew Vado, would allegedly use the internet and mobile apps as a means to target and victimize children.”
FBI Assistant Director-in-Charge George Venizelos said: “Protecting our young people is some of the most important work we do at the FBI. We will continue to police our communities in search of cunning suspects looking to exploit our children.”
According to the Indictment and the June 17, 2014 Complaint filed in Manhattan federal court:
Between June 2013 and June 2014, VADO engaged in multiple chats over the Internet with eight different minor children between the ages of nine and 15. In those chats, VADO induced eight children to send sexually explicit images of themselves to VADO over the internet, and, among other things, sought to persuade one child to engage in a sexual act with a dog. VADO used “Kik Messenger,” a mobile communication application that can be downloaded for use on iPhones and similar mobile devices, to contact at least one child, and also used Kik Messenger to induce and receive sexually explicit images and/or videos of the child and to send pornographic images of himself to the child. VADO employed a username on Kik Messenger that was not his real name.
VADO, 32, is charged with eight counts of production of child pornography, one count of receiving child pornography, and one count of possessing child pornography. Each production of child pornography count carries a mandatory minimum sentence of 15 years in prison and a maximum sentence of 30 years in prison. The receipt of child pornography count carries a mandatory minimum sentence of five years in prison and a maximum sentence of 20 years in prison, and the possession of child pornography count carries a maximum sentence of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
For information about the status of these federal criminal proceedings, victims may call the Victim Witness Coordinator for the United States Attorney’s Office at (866) 874-8900.
Persons with information about children with whom VADO may have had inappropriate sexual contact, or from whom he may have solicited sexually explicit images or videos, are urged to contact the FBI hotline established for this investigation at (212) 384-1600, as well as the Manhattan District Attorney’s Office Sex Crimes Hotline at (212) 335-9373. The Manhattan Child Advocacy Center is available to provide services to children who may be victims of VADO’s conduct, including both inappropriate sexual contact and sexually explicit images. The Manhattan Child Advocacy Center can provide information about obtaining immediate medical treatment, testing for sexually transmitted diseases, and mental health counseling. The Manhattan Child Advocacy Center can be contacted at:
Manhattan Child Advocacy Center
1753 Park Avenue
New York, NY 10035
(646) 695-6100
Mr. Bharara thanked and praised the investigative work of the FBI in this matter, as well as the United States Attorney’s Office for the Southern District of Florida.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Max Nicholas is in charge of the prosecution.
The charges and allegations contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Matthew Vado Indictment
Manhattan Man Charged in White Plains Federal Court with Sexually Exploiting Boy in Sullivan County and Sexual Exploitation, Enticement, and Child Pornography CrimesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today the filing of a five-count Indictment in White Plains federal court charging STEPHEN P. BROWN with sexually exploiting a boy in Sullivan County, New York, in 2012 and with attempted sexual exploitation, attempted enticement, and the distribution and possession of child pornography.
On March 4, 2014, BROWN was arrested in Peekskill, New York, by New York State law enforcement authorities. According to allegations in the federal Complaint, filed on June 16, 2014, BROWN’s arrest in Peekskill followed his on-line communications with an undercover officer posing as an 11-year-old-boy. As alleged in the federal Complaint, BROWN made plans to meet the boy at a hotel in Peekskill to engage in sexual activity and to take sexually explicit photographs. BROWN was arrested when he arrived at the designated location to meet the boy.
The Indictment filed today charges BROWN with attempted sexual exploitation and attempted enticement, as had been charged in the federal Complaint. In addition, the Indictment charges that, in August 2012, BROWN engaged in sexually explicit conduct in Sullivan County with a boy under the age of 11 for the purpose of producing sexually explicit photographs of such activity. Finally, the Indictment filed today charges BROWN with receiving, possessing and distributing child pornography in 2012 through 2014.
The federal charges filed follow state charges against BROWN in Manhattan, Westchester County, Sullivan County and Albany County. BROWN will be arraigned in White Plains Federal Court on Wednesday, October 8.
BROWN, 62, faces upon conviction on the charges of sexual exploitation and attempted sexual exploitation, a minimum sentence of 15 years in prison and a maximum sentence of 30 years in prison on each count. For attempted enticement, he faces a minimum sentence of 10 years in prison and a maximum sentence of life. For receipt and distribution of child pornography, he faces a minimum sentence of 5 years in prison and a maximum sentence of 20 years in prison, and for possession of child pornography, he faces a maximum sentence of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the efforts of the Federal Bureau of Investigation, the New York County District Attorney’s Office, the Sullivan County District Attorney’s Office, the Westchester County District Attorney’s Office, the Albany County District Attorney’s Office, the City of New York Police Department, the New York State Police, and the Rockland County Computer Crimes Task Force in connection with this investigation.
The investigation is ongoing. Any individuals who believe they have information concerning STEPHEN P. BROWN that may be relevant to the investigation should contact the Federal Bureau of Investigation in Goshen, New York, at 1-845-615-1700.
The prosecution is being handled by the Office’s White Plains Division. Assistant United States Attorney Marcia S. Cohen is in charge of the prosecution.
The charges and allegations contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Stephen Brown Indictment
Manhattan Man Charged in White Plains Federal Court with Sexually Exploiting Boy in Sullivan County and Sexual Exploitation, Enticement, and Child Pornography CrimesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today the filing of a five-count Indictment in White Plains federal court charging STEPHEN P. BROWN with sexually exploiting a boy in Sullivan County, New York, in 2012 and with attempted sexual exploitation, attempted enticement, and the distribution and possession of child pornography.
On March 4, 2014, BROWN was arrested in Peekskill, New York, by New York State law enforcement authorities. According to allegations in the federal Complaint, filed on June 16, 2014, BROWN’s arrest in Peekskill followed his on-line communications with an undercover officer posing as an 11-year-old-boy. As alleged in the federal Complaint, BROWN made plans to meet the boy at a hotel in Peekskill to engage in sexual activity and to take sexually explicit photographs. BROWN was arrested when he arrived at the designated location to meet the boy.
The Indictment filed today charges BROWN with attempted sexual exploitation and attempted enticement, as had been charged in the federal Complaint. In addition, the Indictment charges that, in August 2012, BROWN engaged in sexually explicit conduct in Sullivan County with a boy under the age of 11 for the purpose of producing sexually explicit photographs of such activity. Finally, the Indictment filed today charges BROWN with receiving, possessing and distributing child pornography in 2012 through 2014.
The federal charges filed follow state charges against BROWN in Manhattan, Westchester County, Sullivan County and Albany County. BROWN will be arraigned in White Plains Federal Court on Wednesday, October 8.
BROWN, 62, faces upon conviction on the charges of sexual exploitation and attempted sexual exploitation, a minimum sentence of 15 years in prison and a maximum sentence of 30 years in prison on each count. For attempted enticement, he faces a minimum sentence of 10 years in prison and a maximum sentence of life. For receipt and distribution of child pornography, he faces a minimum sentence of 5 years in prison and a maximum sentence of 20 years in prison, and for possession of child pornography, he faces a maximum sentence of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the efforts of the Federal Bureau of Investigation, the New York County District Attorney’s Office, the Sullivan County District Attorney’s Office, the Westchester County District Attorney’s Office, the Albany County District Attorney’s Office, the City of New York Police Department, the New York State Police, and the Rockland County Computer Crimes Task Force in connection with this investigation.
The investigation is ongoing. Any individuals who believe they have information concerning STEPHEN P. BROWN that may be relevant to the investigation should contact the Federal Bureau of Investigation in Goshen, New York, at 1-845-615-1700.
The prosecution is being handled by the Office’s White Plains Division. Assistant United States Attorney Marcia S. Cohen is in charge of the prosecution.
The charges and allegations contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Matthew Vado Indictment
Brooklyn Doctor Found Guilty in Manhattan Federal Court in Connection with Massive No-Fault Insurance Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that TATYANA GABINSKAYA was found guilty Friday, October 3, 2014, of various health care fraud and mail fraud offenses following a two-week jury trial before the U.S. District Judge J. Paul Oetken. The jury convicted GABINSKAYA of charges arising out of her involvement, from 2007 through February 29, 2012, in the largest single no-fault automobile insurance fraud scheme ever charged.
GABINSKAYA, 60, of Brooklyn, New York, is the 32nd defendant convicted in this case following arrests on February 29, 2012, as part of an indictment (the “Superseding Indictment”) that charged 36 defendants with conspiracy to commit mail fraud and health care fraud and charging some defendants with racketeering and money laundering.
According to the Superseding Indictment and evidence admitted at trial:
Under New York State Law, every vehicle registered in the State is required to have no-fault automobile insurance, which enables the driver and passengers of a registered and insured vehicle to obtain benefits of up to $50,000 per person for injuries sustained in an automobile accident, regardless of fault, (the “No-Fault Law”). The No-Fault Law requires prompt payment for medical treatment, thereby obviating the need for claimants to file personal injury lawsuits in order to be reimbursed. Under the No-Fault Law, patients can assign their right to reimbursement from an insurance company to others, including medical clinics that provide treatment for their injuries. New York State Law also requires that all medical clinics in the State be incorporated, owned, operated, and/or controlled by a licensed medical practitioner in order to be eligible for reimbursement under the No-Fault Law. Insurance companies will not honor claims for medical treatments from a medical clinic that is not actually owned, operated, and controlled by a licensed medical practitioner.
In order to mislead New York authorities and private insurers, the true owners of these medical clinics paid licensed doctors to use their licenses to incorporate the professional corporations, through which the true owners billed private insurers millions of dollars for medical treatments and tests, many of which were not medically necessary. GABINSKAYA was the stated owner of one such clinic that provided MRIs and other radiology tests, although the clinic was, in reality, owned by her co-defendants Mikhail Zemlyansky and Michael Danilovich. In addition, GABINSKAYA was the stated owner of six other medical professional corporations, including five incorporated in the span of approximately one year. When interviewed under oath about her role at the clinic controlled by Zemlyansky and Danilovich, GABINSKAYA repeatedly lied under oath to deceive the insurers and induce them into paying claims that were not eligible for reimbursement.
GABINSKAYA was convicted of one count of conspiracy to commit health care fraud and one substantive count of health care fraud, each of which carries a maximum sentence of 10 years in prison. She was also convicted of one count of conspiracy to commit mail fraud and one substantive count of mail fraud, each of which carries a maximum sentence of 20 years in prison. GABINSKAYA is scheduled to be sentenced on January 28, 2015, at 12:30 p.m., before Judge Oetken. 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.
A mistrial was declared at the conclusion of GABINSKAYA’s first trial in the fall of 2013 when the jury failed to reach a unanimous verdict as to GABINSKAYA. Two of her co-defendants, Billy Geris and Joseph Vitoulis, were acquitted at trial. With respect to co-defendants Mikhail Zemlyansky and Michael Danilovich, the jury acquitted on some counts and hung on other counts. Zemlyansky and Danilovich are scheduled to be retried in January 2015. Co-defendant Matthew Conroy is scheduled to stand trial beginning December 2, 2014. A trial has not yet been scheduled for co-defendant John Maurello. Thirty-one other defendants, including three other doctors, have pled guilty to, among other things, conspiracy to commit health care fraud. Charges were dismissed against three other defendants, one defendant entered into a deferred prosecution agreement, and one defendant died during the pendency of the case.
U.S. Attorney Bharara thanked the Federal Bureau of Investigation and the New York City Police Department for their continued outstanding work in this investigation. He also thanked the National Insurance Crime Bureau for its assistance.
The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Amanda Kramer, Janis Echenberg, Daniel S. Goldman, Edward Y. Kim, Peter M. Skinner, and Daniel S. Noble are in charge of the prosecution. Assistant U.S. Attorney Carolina Fornos is in charge of the forfeiture aspects of the case.
U.S. v. Mikhail et al. Zemlyansky, Indictment
Former New York State Assemblywoman Sentenced in Manhattan Federal Court for Citizenship and Bankruptcy Fraud SchemesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that former New York State Assemblywoman GABRIELA ROSA was sentenced in Manhattan federal court to a year and a day in prison, after having pled guilty to two federal felony charges arising out of her efforts to obtain United States citizenship through fraud and fraudulently concealing assets and income from a federal bankruptcy court. ROSA was sentenced today before United States District Judge Denise L. Cote. ROSA previously pled guilty pursuant to a plea agreement with the United States Attorney’s Office that required, among other things, that ROSA resign from the Assembly upon entry of her plea.
Manhattan U.S. Attorney Preet Bharara said: “Gabriela Rosa only became eligible to run for the New York State Assembly as a result of a years-long immigration fraud. She also defrauded a federal bankruptcy court and her creditors for her own financial gain. Now yet another state elected official will have to answer for her crimes with time in a federal prison.”
According to the Information, prior court filings, and statements made in Court:
The Marriage and Naturalization Fraud Scheme
The New York State Constitution states that only United States citizens may serve as members of the New York State Legislature. In November 2012, ROSA was elected to the New York State Legislature as an Assemblywoman for Assembly District 72 in Manhattan.
ROSA is a citizen of the Dominican Republic and had no citizenship status in the United States until 2005. In December 2005, ROSA was naturalized as a United States citizen as a result of a scheme to obtain legal residency and ultimately citizenship through a sham marriage. ROSA paid a United States citizen (“Spouse-1”) approximately $8,000 to enter into a sham marriage with her while she maintained a relationship with another individual who had been convicted of federal narcotics trafficking charges, and who later became her husband (“Spouse-2”). In numerous submissions and statements to immigration authorities made under penalty of perjury between 1996 and 2005, ROSA falsely represented to immigration authorities that she had entered into a bona fide marriage with Spouse-1, and that she had never given false or misleading information to a U.S. immigration official while applying for immigration benefits.
The Bankruptcy Fraud Scheme
In September 2009 ROSA filed a voluntary petition for bankruptcy, under Chapter 7 of the United States Bankruptcy Code, in the United States Bankruptcy Court for the Southern District of New York (the “Petition”). Through the Petition, ROSA sought to liquidate over $30,000 in debt that she had accumulated on, among other things, credit card charges and personal loans. In the Petition, which ROSA signed under penalty of perjury, and in subsequent documents submitted in support of the Petition, which were also signed under penalty of perjury, ROSA knowingly and willfully made several false declarations and statements. Among other things, ROSA fraudulently omitted her ownership of a cooperative apartment in Manhattan (the “Apartment”) from the Petition, which required her to list all real or personal property in which she had any ownership interest. ROSA, who worked at the time as a legislative assistant in the New York State Legislature, also failed to list outside income she earned as a political consultant, income earned by Spouse-2 in the Petition and supporting documents, and $25,000 in cash that she had deposited into her bank account months before filing the Petition.
In addition to the prison term of a year and a day, Judge Cote sentenced ROSA to three years’ supervised release, and ordered her to forfeit the proceeds of her bankruptcy fraud and repay creditors whom she defrauded.
Mr. Bharara praised the outstanding investigative work of the Criminal Investigators of the United States Attorney’s Office for the Southern District of New York.
The case is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Howard S. Master and Jason Masimore are in charge of the investigation.
U.S. v. Gabriela Rosa Information
Statement of Manhattan U.S. Attorney Preet Bharara on Conviction of David RileyRead the Press Release
“As the jury unanimously found, David Riley exploited his position and access to information at Foundry Networks, a publicly traded technology company. What Riley forged at Foundry was a pipeline of material, nonpublic information that enabled others to engage in illegal insider trading and reap a windfall of more than 27 million dollars. What Riley got out of the arrangement is a felony conviction and the prospect of losing his liberty. He becomes the 87th defendant convicted of insider trading after trial or by guilty plea in this District in the last five years.”
Former Chief Information Officer of Foundry Networks Found Guilty in Manhattan Federal Court of Participating in Insider Trading Scheme That Reaped over Tens of Millions in Unlawful GainsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that DAVID RILEY, former Chief Information Officer of Foundry Networks, Inc. (“Foundry”), a California-based technology company that was acquired by Brocade Communications, Inc. (“Brocade”), in 2008, was found guilty today of crimes related to his participation in an insider trading scheme that yielded over $27 million in ill-gotten gains. Following a 13-day trial conducted before U.S. District Judge Valerie E. Caproni, a jury found that RILEY passed inside information about Foundry’s acquisition by Brocade and about Foundry’s earnings for the first quarter of 2008 to Matthew Teeple, a former analyst for San Francisco-based hedge fund Artis Capital Management, L.P. (“Artis”). Teeple pled guilty to related charges on May 28, 2014.
Manhattan U.S. Attorney Preet Bharara said: “As the jury unanimously found, David Riley exploited his position and access to information at Foundry Networks, a publicly traded technology company. What Riley forged at Foundry was a pipeline of material, nonpublic information that enabled others to engage in illegal insider trading and reap a windfall of more than 27 million dollars. What Riley got out of the arrangement is a felony conviction and the prospect of losing his liberty. He becomes the 87th defendant convicted of insider trading after trial or by guilty plea in this District in the last five years.”
According to the Superseding Indictment filed February 20, 2014, other court documents, and the evidence presented at trial:
As CIO and a Vice President at Foundry, RILEY had access to monthly and quarterly financial reporting, along with other sensitive, nonpublic information (the “Inside Information”) relating to Foundry, well before such information became public. RILEY provided this Inside Information to Teeple – sometimes by telephone and sometimes during meetings the two arranged in the San Jose, California, area. On several occasions, RILEY spoke with Teeple while logged into the database that Foundry used to maintain sensitive financial information. The Inside Information that RILEY passed to Teeple included quarterly financial performance numbers during the first quarter of 2008 and information regarding Brocade’s intended acquisition of Foundry in July 2008.
Teeple passed the Inside Information he got from RILEY on to others, including others at Artis. From the Inside Information Teeple provided about Foundry, Artis ultimately reaped gains of over $27 million in 2008.
RILEY, 48, of San Jose, California, was convicted of one count of conspiracy to commit securities fraud and two counts of securities fraud. The conspiracy count carries a maximum sentence of five years in prison and a fine of the greater of $250,000 or twice the gross gain or loss from the offense. Each of the securities fraud counts carries a maximum sentence of 20 years in prison and a fine of $5 million or twice the gross gain or loss from the offense. 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. RILEY is scheduled to be sentenced on February 6, 2015.
The jury was unable to reach a verdict with respect to the remaining count of the Superseding Indictment, which charged RILEY with substantive securities fraud related to passage of inside information concerning negative developments with the Brocade-Foundry deal on October 16, 2008.
Mr. Bharara praised the investigative work of the FBI 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 Telemachus P. Kasulis and Sarah E. McCallum, and Special Assistant U.S. Attorney Michael P. Holland, are in charge of the prosecution.
Manhattan U.S. Attorney Announces Arrest of Former NYPD Officer for Fraudulently Obtaining Disability BenefitsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Edward J. Ryan, the Special Agent in Charge of the United States Social Security Administration, Office of the Inspector General, announced that JAMES CARSON, a former New York City Police Department (“NYPD”) officer, was arrested today for a scheme to fraudulently obtain disability benefits from the Social Security Administration (“SSA”). CARSON allegedly claimed to the SSA that he was unemployed since 1990 and could not work due to disability. However, since at least 2004, at the same time he was collecting disability benefits, he was working full time as the Director of Security for an international watchmaker and luxury watch retailer headquartered in New York, New York (the “Company”). CARSON was arrested earlier this morning at his residence in Yorktown, New York, and will be presented later today in Manhattan federal court before U.S. Magistrate Judge Andrew J. Peck.
Manhattan U.S. Attorney Preet Bharara said: “Not only did James Carson allegedly tell a series of lies to pocket disability benefits to which he was not entitled, but he then took sophisticated steps to conceal his fraudulently obtained income from the Social Security Administration. I would like to thank the Social Security Administration, Office of the Inspector General, for their work in bringing Carson’s alleged scheme to its proper end.”
Special Agent in Charge Edward J. Ryan said: “The investigation outlined in this criminal complaint demonstrates just one of the many actions our office is taking on a daily basis to ensure that the Social Security Disability Insurance Trust Fund is preserved for its intended purpose, providing a safety-net for the truly disabled, not lining the pockets of scammers and thieves. As always, it is particularly troubling when these types of crimes are committed by individuals who were once entrusted with upholding the law, and who are already receiving generous tax-payer financed pensions. Our office greatly appreciates the continued support and the priority given to these cases by the United States Attorney’s Office for the Southern District of New York.”
According to the allegations contained in the Complaint unsealed today:
In approximately 1990, CARSON left his job as a police officer with the NYPD due to a back injury and began receiving Social Security Disability Insurance (“SSD”). This disability benefit is only available to individuals who have a qualifying disability and are unable to work in any profession.
On multiple forms submitted to the SSA, CARSON claimed that he could not work due to a herniated disc and that he had not earned any income since 1990, when he began receiving SSD benefits. For example, in April 2014, CARSON reported to an SSA office for an interview related to his continued receipt of SSD benefits and filled out forms stating, among other things, that he: had not worked since leaving the NYPD in 1990; had “no other income” during that time; and had done “no work at all since my disability began.” CARSON further claimed that his typical day consisted of the following: “[I g]et out of bed. I have breakfast, I walk around backyard [and] deck. Wait for wife to come home from work. I lay down a lot. I rely on my wife to go places – she drives mostly.” In another form also submitted to the SSA that day, CARSON stated that “[m]y wife has to do the driving,” and that he could not drive due to “severe pain [and] weakness.” In response to a question asking about places he goes on a regular basis, CARSON claimed, “I don’t really go anywhere on a regular basis.” When CARSON attended the SSA interview in April 2014, he was limping and walking with a cane, and claimed in written forms that he always uses a cane.
In fact, since at least 2004, CARSON allegedly has been working full time as the Director of Security at the Company – an international watchmaker and luxury watch retailer. CARSON has been observed on multiple occasions driving to and from work, walking up stairs without difficulty, and walking without a cane. Further, EZ Pass records show that CARSON frequently travels back and forth between his residence and his office, typically at around 8:00 a.m. and 5:00 p.m. In 2010, CARSON received the Loss Prevention Case of the Year Award from the National Retail Federation for his role in an investigation into credit card schemes targeting the Company.
In order to prevent the SSA from discovering that he was gainfully employed while claiming to be unemployed due to a disability, CARSON took steps to conceal the income he was receiving from the Company. Rather than get paid directly by the Company, CARSON arranged for his compensation to be paid first to a corporation associated with his relative, and then paid from that corporation to CARSON’s relative as purported wages. Since 2004, CARSON has collected approximately $306,431 in disability benefits.
CARSON, 50, of Yorktown, New York, is charged with one count of theft of government property, which carries a maximum sentence of 10 years in prison, one count of making false statements, which carries a maximum sentence of five years in prison, and one count of failing to report income, 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 investigative work of the United States Social Security Administration, Office of the Inspector General.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Special Assistant United States Attorney Daniel Tracer is in charge of the prosecution.
The charges contained in the Complaint are merely accusations. The defendant is presumed innocent unless and until proven guilty.
U.S. v. James Carson Complaint
Former New York City Comptroller Candidate Sentenced in Manhattan Federal Court to Two Years in Prison for Illegally Distributing Prescription PillsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that KRISTIN DAVIS, a former candidate for New York City Comptroller, was sentenced today in Manhattan federal court to two years in prison for illegally distributing hundreds of various types of prescription pills. DAVIS, who was arrested in August 2013, and pled guilty in March 2014 to distributing and possessing with intent to distribute controlled substances, was sentenced by U.S. District Judge Edgardo Ramos.
Manhattan U.S. Attorney Preet Bharara said: “The convictions of Kristin Davis and the other defendants in this wide-ranging diversion investigation demonstrate once again this Office’s and our law enforcement partners’ resolve to fight the prescription drug abuse epidemic in every affected corner of New York City and beyond.”
According to the Complaint, Superseding Information, other information in the public record, and Davis’s guilty plea:
On multiple occasions for a period of years through March 2013, DAVIS sold hundreds of prescription pills, containing amphetamine, alprazolam, zolpidem, and carisoprodol, to a person she knew from her own prior purchases and sales to be a drug dealer. Unbeknownst to DAVIS, the person had become a cooperating witness (the “CW”) with the Federal Bureau of Investigation (“FBI”) and was equipped with a recording device. During these sales, DAVIS was recorded saying that the pills she was selling were “Ambien,” “Soma,” and “Xanax.” On a fourth occasion, in April 2013, DAVIS arranged for another individual to sell approximately 180 oxycodone pills to the CW.
There is an illegal market for all of the drugs DAVIS sold and assisted another in selling. Oxycodone is a powerful painkiller with a high potential for addiction and abuse, and it is often used as a substitute for, or adjunct to, other illegal drugs, such as heroin. Amphetamine is a psycho-stimulant, often referred to as “speed,” and it is often used as a substitute for, or adjunct to, other illegal drugs, including methamphetamine and cocaine. Alprazolam is a psychoactive drug often used as a substitute for, or adjunct to, other illegal drugs, such as LSD, heroin or opiates. Zolpidem is a sedative/hypnotic drug often used as a substitute for, or adjunct to, other illegal drugs, including amphetamine, methamphetamine, cocaine, and MDMA (commonly known as ecstasy). Carisoprodol is a skeletal muscle relaxant often used in conjunction with painkillers and so-called “date rape” drugs.
DAVIS was one of several people charged as part of an investigation conducted by the FBI, the United States Department of Health and Human Services, Office of Inspector General (“HHS-OIG”), the New York City Police Department (“NYPD”), and the U.S. Attorney’s Office into the unlawful distribution of prescription drugs containing controlled substances in and around New York City:
- Thomas Rock was arrested on July 10, 2013, for distributing and conspiring to distribute oxycodone and alprazolam. He pled guilty on February 24, 2014, to distributing oxycodone and alprazolam, and was sentenced by U.S. District Judge Paul A. Engelmayer on July 21, 2014, to 15 months in prison.
- Eugene Kurochkin was arrested on July 11, 2013, for distributing oxycodone, alprazolam, amphetamine, and zolpidem. He pled guilty on November 1, 2013, to distributing oxycodone, alprazolam, amphetamine, and zolpidem, and was sentenced by U.S. District Judge Robert W. Sweet on February 10, 2014, to one year in prison.
- Raoul Goldberger and Rebecca Teman were arrested on July 29, 2013, for distributing and conspiring to distribute amphetamine, oxycodone, and vicodin. Goldberger pled guilty on August 21, 2013, to distributing amphetamine and oxycodone, and was sentenced by U.S. District Judge Colleen McMahon on March 12, 2014, to five years in prison. Teman pled guilty on November 12, 2013, to misbranding a prescription drug, and was sentenced by U.S. Magistrate Judge Henry B. Pitman on March 11, 2014, to 18 months’ probation with a special condition of 100 hours of community service.
- Erik Pichardo, who was referred to as “Individual-1” in the Complaint against DAVIS, was arrested in August 2013 for distributing oxycodone. He pled guilty on December 12, 2013, to conspiracy to distribute oxycodone, and is scheduled to be sentenced by Chief U.S. District Judge Loretta A. Preska on October 23, 2014.
- David J. Wright was arrested on October 3, 2013, for distributing oxycodone, amphetamine, and carisoprodol. He pled guilty on July 14, 2014, to distributing oxycodone, amphetamine, and carisoprodol, and is scheduled to be sentenced by Chief U.S. District Judge Loretta A. Preska on November 18, 2014.
In addition to her prison term, DAVIS, 39, of New York City, was sentenced to two years of supervised release. DAVIS was also ordered to pay $1,765 in forfeiture and a $100 special assessment fee.
Mr. Bharara praised the investigative work of the FBI. He also thanked HHS-OIG and the NYPD for their assistance in the investigation.
These cases are being handled by the Office’s Narcotics Unit. Assistant United States Attorneys Daniel C. Richenthal, Kristy J. Greenberg, and Edward A. Imperatore are in charge of the prosecutions.
Defendants Convicted in Manhattan Federal Court for Illegal Distribution of Oxycodone from Pharmacy in YonkersRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that CHRISTINA CHAI, the supervising pharmacist at Stanley Pharmacy in Yonkers, New York (“Stanley Pharmacy”), and HI JONG LEE, the owner of Stanley Pharmacy and also a pharmacist, were found guilty Monday in Manhattan federal court of conspiring to unlawfully distribute hundreds of thousands of pills of oxycodone at Stanley Pharmacy. HI JONG LEE was also convicted of conspiring to launder the proceeds of the unlawful oxycodone distribution and structuring cash deposits to avoid the filing of currency transaction reports (“CTRs”). The defendants were convicted on all counts following a two-week trial before U.S. District Judge Paul A. Crotty and a jury. Previously, on August 20, 2014, a third defendant, JI YUN LEE, the store manager at Stanley Pharmacy, pled guilty before Magistrate Judge Gabriel W. Gorenstein for his participation in the oxycodone distribution conspiracy.
Manhattan U.S. Attorney Preet Bharara said: “These three defendants turned their neighborhood pharmacy into an illegal drug spot where thousands of oxycodone pills were sold for cash to drug addicts and other drug dealers. This Office will continue to prosecute those individuals, including licensed pharmacists, who divert prescription medications for profit.”
According to the charging documents in this case and evidence presented at trial:
From in or about 2011 to in or about January 2013, JI YUN LEE, CHRISTINA CHAI and HI JONG LEE, operating out of Stanley Pharmacy, conspired to distribute large quantities of oxycodone to various individuals – including individuals addicted to oxycodone and individuals who intended to resell the drugs – pursuant to prescriptions that the defendants knew to be stolen, tampered with, or otherwise fraudulent, and that were not issued for a legitimate medical purpose. JI YUN LEE, the Stanley Pharmacy store manager, and not a licensed pharmacist, typically met with the oxycodone customers inside Stanley Pharmacy and delivered the filled prescriptions to them. Stanley Pharmacy charged over $1,000, in cash, for 180 30-milligram oxycodone pills, which was well in excess of the average price for a comparable quantity of lawfully prescribed oxycodone pills. CHAI, the only pharmacist on duty from Monday through Friday, filled over 1,000 fraudulent oxycodone prescriptions, including prescriptions that were obviously tampered with or stolen. HI JONG LEE, the owner of Stanley Pharmacy and its lone weekend pharmacist, deposited the majority of the bulk cash proceeds from the unlawful oxycodone distribution.
During the course of the conspiracy, the defendants distributed over 200,000 oxycodone tablets – over five million milligrams of oxycodone – pursuant to fraudulent prescriptions paid for in cash. In 2012, the quantity of oxycodone purchased by Stanley Pharmacy was more than double the quantity purchased by any other pharmacy in the same zip code.
In total, Stanley Pharmacy brought in over $1.3 million in cash proceeds from the illegal sale of oxycodone. Most of the proceeds were deposited into a bank account controlled by HI JONG LEE. HI JONG LEE, who was responsible for the banking activities of Stanley Pharmacy, regularly deposited the cash proceeds in amounts that, alone or in combination, were just under $10,000, thereby avoiding the required filing of a CTR.
CHRISTINA CHAI, 30, of Edgewater, New Jersey, was convicted of one count of conspiracy to distribute controlled substances. She faces a maximum sentence of 20 years in prison.
HI JONG LEE, 72, of New City, New York, was convicted of one count of conspiracy to distribute controlled substances, one count of conspiracy to commit money laundering, and one count of structuring cash transactions. In connection with the structuring conviction, the jury also found that HI JONG LEE engaged in structuring while violating another law of the United States or as part of a pattern of any illegal activity involving more than $100,000 in a 12-month period. He faces a maximum sentence of 50 years in prison.
JI YUN LEE, 45, of New City, New York, pled guilty to one count of conspiracy to distribute controlled substances. He faces a maximum sentence of 20 years in prison.
The 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. Sentencing dates have not yet been set.
Mr. Bharara praised the work of the DEA’s New York City Tactical Diversion Squad, which comprises members from the DEA, New York City Police Department, Westchester County Department of Public Safety, the New York State Insurance Bureau, the Rockland County Drug Task Force and the Internal Revenue Service. Mr. Bharara also thanked the Westchester County District Attorney’s Office, including members of the New York State Police, the Yonkers Police Department, and District Attorney Investigators, for their work on the investigation.
The case is being handled by the Office’s Narcotics Unit. Assistant U.S. Attorneys Elisha Kobre and Daniel Tehrani are in charge of the prosecution.
U.S. v. Ji Yun Lee et al. Indictment
Former Manager of Bronx-Whitestone Bridge Construction Project Charged in White Plains Federal Court with FraudRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, today announced the filing of a criminal Complaint charging AARON TUBBS, 43, of Hastings-on-Hudson, Westchester County, New York, formerly a Regional Manager at a General Contractor that performed an approximately $192 million construction project on Bronx-Whitestone Bridge (the “Bridge Project”), with wire fraud in connection with the requirements for participation by minority-owned and women-owned businesses on the Bridge Project. TUBBS surrendered today and was presented on the charge in the Complaint before U.S. Magistrate Judge Paul E. Davison in the federal courthouse in White Plains.
U.S. Attorney Preet Bharara stated: “A major construction project was awarded precisely because it opened opportunities for minority-owned and women-owned businesses. As alleged, these businesses were unlawfully bypassed and deprived of participation. I want to commend our partners: the Offices of Inspector General for the U.S. Department of Transportation, the Port Authority and the Metropolitan Transportation Authority, and the New York State Department of Transportation’s Investigations bureau.”
According to allegations in the Complaint:
The Office of Inspector General of the United States Department of Transportation, together with the Metropolitan Transit Authority (“MTA”) Inspector General, the Port Authority of New York and New Jersey Office of Inspector General, and the New York State Department of Transportation, have conducted an investigation of a company, hereinafter referred to as “MBE-1,” used by general contractors repeatedly on large construction projects in Westchester County, the Bronx, Manhattan, Staten Island, and elsewhere, to obtain credit toward goals required for participation by minority-owned business enterprises and women-owned business enterprises (“MBEs” and “WBEs”) and/or their federal equivalent, disadvantaged business entity (“DBE”) goals. During the investigation, based on numerous interviews and the review of documents, agents learned that MBE-1 was repeatedly used in a scheme, described below, known as “DBE fraud,” “MBE fraud,” and “pass through fraud,” to give the appearance that a minority-owned or woman-owned entity was performing work on a government-funded construction project when in fact other companies, which were not minority-owned or woman-owned, did the work. Among the construction projects in which MBE-1 was used in a fraudulent scheme was the Bronx-Whitestone Bridge Construction Project.
In connection with the investigation, the sole owner and principal of MBE-1 was convicted upon a guilty plea in March 2013, in United States District Court in White Plains, New York, of mail fraud.
The Bronx-Whitestone Bridge
Construction Project
In or about 2008, the MTA initiated a major construction project on the Bronx-Whitestone Bridge (the “Bridge Project”), a suspension bridge over the East River that connects the Bronx and Queens. The project was to replace the Bronx approach and perform repairs to the Queens approach of the Bridge. The MTA estimated that the project would cost approximately $170 million and take approximately four years to complete.
As part of its solicitation for bids on the Bridge Project, the MTA – a “state agency” for purposes of the MBE/WBE Provisions – specified that the Bridge Project was funded by New York State, and therefore that New York State Executive Law Article 15-A governing participation on construction projects by MBEs and WBEs applied. The MTA set an MBE/WBE goal on the Bridge Project of 7% participation by MBEs and 3% by WBEs, for a total of 10%. In connection with setting the MBE/WBE goal, the MTA noted that there were subcontracting opportunities on the Bridge Project, and provided a list of certified MBEs and WBEs with the capability of providing services on the job.
On or about October 23, 2008, a general contractor (“General Contractor-1”) was awarded the contract on the Bridge Project, at a price of approximately $192 million.
In or about 2008 and 2009, AARON TUBBS, the defendant, was a Regional Manager at General Contractor-1. TUBBS participated in, among other things, the award and performance of subcontracts to provide structural steel on the Bridge Project.
In connection with the Bridge Project, General Contractor-1 claimed, in utilization forms and compliance reports, that structural steel would be supplied by a certified MBE, MBE-1, but actually the structural steel was provided by other companies, and MBE-1 was used as a pass-through. In fact, MBE-1 did not meaningfully participate in the Bridge Project, and it received only a small fraction of the state funds that General Contractor-1 represented it had received. The principal of MBE-1 once attempted to enter the Bridge Project job site, and was denied entry.
AARON TUBBS, the defendant, in his capacity as a Regional Manager at General Contractor-1, participated in setting up the fraudulent scheme, creating the pass-through arrangement between General Contractor-1, the MBE, and the actual steel suppliers. For example, according to a representative of a steel supplier (“Supplier 1”), after Supplier 1 agreed to a contract with General Contractor-1, AARON TUBBS, the defendant, informed Supplier 1 that General Contractor-1 would run purchases of structural steel from Supplier 1 through MBE-1 for purposes of meeting minority requirements. Thereafter, in order to purchase the structural steel from steel manufacturers, General Contractor-1 received from Supplier 1 purchase order information, arranged for the information to be placed on letterhead of MBE-1, and arranged for the purchase order to be submitted to the steel manufacturer.
In addition, AARON TUBBS, the defendant, and others at General Contractor-1, sought to employ the same pass-through scheme used on the Bridge Project on another project. The St. George Ferry Terminal construction project was a federally-funded job under the American Recovery and Reinvestment Act of 2009, in Staten Island. The construction project had a goal of nine percent participation by Disadvantaged Business Entities (“DBEs”). General Contractor-1 sought to meet this goal using a DBE as a pass-through. For example, on or about November 9, 2009, General Contractor-1’s field engineer sent an email to another representative of General Contractor-1 stating, in part, “We will be handling rebar at St. George similar to how [General Contractor-1] set up the Whitestone structural steel purchase with [MBE-1]. Aaron Tubbs mentioned that I get in contact with you to describe that process, as we will have our rebar installer, [a purported DBE], manage the material with [another non-DBE company].”
TUBBS is charged with wire fraud, in violation of Title 18, United States Code, Sections 1343 and 2, and faces a maximum of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Bharara praised the investigative work of USDOT’s Office of Inspector General, the Port Authority Office of Inspector General, the Metropolitan Transportation Authority Office of Inspector General, and the New York State Department of Transportation’s Investigations Bureau.
The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorney Benjamin Allee 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.
TubbsAaron.Complaint
New York City Housing Authority Employee Charged in Manhattan Federal Court with Embezzling Tenants’ Rent PaymentsRead the Press Release
Preet Bharara, United States Attorney for the Southern District of New York, and Mark G. Peters, the Commissioner of the New York City Department of Investigation (“DOI”), announced today the arrest of KISHAWN SCARBORO, an employee of the New York City Housing Authority (“NYCHA”), for theft of government funds. SCARBORO, while employed as a NYCHA Housing Assistant, allegedly embezzled over $90,000 in tenant rent payments owed to NYCHA, and hid her embezzlement by manipulating tenant records in NYCHA’s computer system. SCARBORO voluntarily surrendered to DOI investigators this morning, and was presented this afternoon in Manhattan federal court before United States Magistrate Judge Kevin Nathaniel Fox. She was released on her own recognizance.
According to the allegations in the Complaint unsealed today in Manhattan federal court:
NYCHA is a New York City public entity that provides housing to low and moderate income New York City residents. NYCHA’s operations are funded, in part, by grants from the United States Department of Housing and Urban Development (“HUD”). Each year, HUD provides millions of dollars in grants to NYCHA. In addition to grants from HUD, NYCHA is funded through monthly rental payments made by individuals residing in NYCHA housing. NYCHA maintains a computerized rent collection system which creates an account ledger for each tenant. Each NYCHA housing development is managed by a Housing Manager, who is responsible for reviewing and approving all rent changes and credits. Housing Assistants are NYCHA employees assigned to a particular building or set of tenants for whom they act as the primary point of contact with NYCHA.
From at least June 2010 until September 2013, SCARBORO, using her position as a Housing Assistant at the Jefferson Houses in Harlem, Manhattan, obtained rent checks and money orders from NYCHA tenants and deposited them in her personal bank account by double-endorsing the instruments and/or altering the payee information. Then, using the username and password of her supervisor at the Jefferson Houses, SCARBORO hid her embezzlement by entering false credits and rent adjustments into NYCHA’s computerized rent collection system. SCARBORO deposited approximately $94,884 in checks and money orders into her personal bank account over the course of more than three years.
SCARBORO, 42, of Saylorsburg, Pennsylvania, is charged with one count of theft or bribery concerning programs receiving Federal funds, 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.
Mr. Bharara thanked and praised the DOI for its work in this investigation, which he noted is ongoing.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Jessica K. Feinstein 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. Kishawn Scarboro Complaint
Former Director of Market Intelligence at Investor Relations 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 MICHAEL A. LUCARELLI, the former Director of Market Intelligence at Lippert/Heilshorn & Associates, Inc. (“LHA”), an investor relations firm, pled guilty today in Manhattan federal court to insider trading. Specifically, LUCARELLI admitted repeatedly using material nonpublic information that he acquired during his employment at LHA to take positions in the stock of LHA clients over the course of the year-long scheme. LUCARELLI was arrested on August 26, 2014, and pled guilty to a one-count Information before U.S. District Judge Jesse M. Furman.
Manhattan U.S. Attorney Preet Bharara said: “Michael Lucarelli, in violation of his company’s policies and his clients’ trust, illegally traded on material nonpublic information for his own financial gain. For using his company’s and clients’ secrets for his own personal gain, he now faces time in federal prison and the forfeiture of over $900,000 that he unlawfully obtained. If you are not deterred by the line of convicted felons who engaged in insider trading over the past several years then you will join the line.”
According to the allegations contained in the Information filed today in Manhattan federal court, the underlying criminal Complaint unsealed on August 26, 2014, the plea agreement, and statements made during court proceedings:
From at least August 2013 through at least August 2014, LUCARELLI engaged in an insider trading scheme to use and trade upon material nonpublic information that he acquired during his employment at LHA, an investor relations firm based in Manhattan. Specifically, LUCARELLI, as an LHA employee, had access to working drafts of press releases prepared by LHA for its clients prior to their issuance to the investing public. Those draft press releases contained material, nonpublic information about business events and announcements relating to LHA’s clients.
In violation of LHA’s policies and in breach of his duties to LHA and its clients, on multiple occasions, LUCARELLI took positions in the stock of LHA clients shortly before the announcement by these companies of material information through press releases prepared by LHA. Shortly after LHA issued the press releases, LUCARELLI sold these securities that he had acquired prior to the issuance, thereby profiting on the movement in the stock price.
LUCARELLI repeatedly traded in LHA client securities despite LHA’s written code of conduct, which strictly prohibited LHA employees from trading in any security issued by an LHA client. LUCARELLI carried out his scheme in at least four different brokerage accounts. When opening new brokerage accounts through which to conduct his illegal trades, LUCARELLI did not reveal his affiliation with LHA. And, on two occasions, LUCARELLI opened new brokerage accounts soon after his ability to trade in other accounts had been suspended by the respective brokerage firms.
On or about July 24, 2014, the Federal Bureau of Investigation (“FBI”) obtained a court-approved search warrant to search LUCARELLI’s office at LHA for evidence of his insider trading activities. During that search, which was conducted without LUCARELLI’s knowledge, the FBI located a locked briefcase that contained a draft press release for LHA client TREX Company (“TREX”). That press release was marked “DRAFT” and contained TREX’s second fiscal quarter 2014 financial results. The following day, after the FBI completed the search, LUCARELLI started purchasing shares of TREX. Between July 25, 2014, and August 1, 2014, LUCARELLI took a net position of 37,400 shares of TREX. Then, on August 4, 2014, shortly before the market opened, TREX issued a press release announcing its second fiscal quarter 2014 financial results. Among other things, TREX announced that sales and earnings before taxes had increased 23 percent and 62 percent, respectively, in comparison with the comparable period in 2013. TREX also issued revenue guidance for the third fiscal quarter of 2014, which was a 27 percent increase over the comparable period in 2013. Within two hours of the announcement, LUCARELLI sold 35,058 of the 37,400 TREX shares he previously purchased. Those sales yielded a profit of almost $90,000.
As a result of the 13 instances of insider trading specifically set forth in the Information, LUCARELLI earned at least $538,215.32 in illicit proceeds. Furthermore, as reflected in the plea agreement, on at least 18 additional occasions, LUCARELLI took positions in LHA client securities on the basis of inside information. In total, these 31 instances yielded LUCARELLI $955,521.62 in profits.
LUCARELLI, 52, of New York, New York, pled guilty to one count of securities 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. As part of his guilty plea, LUCARELLI also agreed to forfeit $955,521.62 to the United States. 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 FBI 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 Brian R. Blais and Damian Williams are in charge of the prosecution. Assistant U.S. Attorney Carolina A. Fornos of the Office’s Money Laundering and Asset Forfeiture Unit is responsible for the forfeiture of assets.
U.S. v. Michael Lucarelli Information
Liberty Reserve Information Technology Manager Pleads Guilty in Manhattan Federal CourtRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Leslie R. Caldwell, Assistant Attorney General for the Justice Department’s Criminal Division, announced that MAXIM CHUKHAREV, formerly an information technology manager for Liberty Reserve, pled guilty today in Manhattan federal court to conspiring to operate an unlicensed money transmitting business. CHUKHAREV helped maintain the technological infrastructure for Liberty Reserve, a company that operated one of the world’s most widely used digital currency services. CHUKHAREV was arrested in San Jose, Costa Rica, in May 2013 and pled guilty today before U.S. District Judge Denise L. Cote.
According to allegations contained in the Indictment filed against Liberty Reserve, CHUKHAREV, and six other individual defendants, and statements made in related court proceedings:
Liberty Reserve was incorporated in Costa Rica in 2006 and billed itself as the Internet’s “largest payment processor and money transfer system.” Liberty Reserve was created, structured and operated to help users conduct illegal transactions anonymously and launder the proceeds of their crimes. It emerged as one of the principal money transfer agents used by cybercriminals around the world to distribute, store, and launder the proceeds of their illegal activity. Liberty Reserve was used extensively for illegal purposes, functioning as the bank of choice for the criminal underworld because it provided an infrastructure that enabled cybercriminals around the world to conduct anonymous and untraceable financial transactions.
Before being shut down by the U.S. government in May 2013, Liberty Reserve had more than one million users worldwide, including more than 200,000 users in the United States, who conducted approximately 55 million transactions through its system totaling more than $6 billion in funds. These funds encompassed suspected proceeds of credit card fraud, identity theft, investment fraud, computer hacking, child pornography, narcotics trafficking, and other crimes.
CHUKHAREV was an associate of Liberty Reserve founder Arthur Budovsky and served as Liberty Reserve’s information technology manager in Costa Rica. In that role, CHUKHAREV was responsible, along with co-defendant Mark Marmilev, formerly Liberty Reserve’s Chief Technology Officer, for maintaining Liberty Reserve’s technological infrastructure.
CHUKHAREV, 28, of San Jose, Costa Rica, pled guilty to one count of conspiring to operate an unlicensed money transmitting business, which carries a maximum sentence of five years in prison. He is scheduled to be sentenced by Judge Cote on January 30, 2015 at 10:00 a.m. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Chukharev is among seven individuals charged in the indictment, which was unsealed on May 28, 2013. Three co-defendants – Vladimir Kats, Azzeddine el Amine, and Mark Marmilev – previously pled guilty and await sentencing. The indictment also charged Liberty Reserve with conspiracy to commit money laundering and operation of an unlicensed money transmitting business, and those charges remain pending.
Mr. Bharara praised the outstanding work of the United States Secret Service, the Internal Revenue Service-Criminal Investigation, and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, which worked together in this case as part of the Global Illicit Financial Team. Mr. Bharara also thanked the United States Secret Service’s New York Electronic Crimes Task Force for its extraordinary assistance with the investigation. Additionally, Mr. Bharara specially thanked all the international law enforcement agencies that assisted in the investigation, in particular, the Judicial Investigation Organization in Costa Rica, the National High Tech Crime Unit in the Netherlands, the Spanish National Police, Financial and Economic Crime Unit, the Cyber Crime Unit at the Swedish National Bureau of Investigation, and the Swiss Federal Prosecutor’s Office.
This case is being prosecuted jointly with the Department of Justice’s Asset Forfeiture and Money Laundering Section (“AFMLS”), which is overseen by Assistant Attorney General Leslie R. Caldwell. Mr. Bharara thanked AFMLS for its partnership and also thanked the Department of Justice’s Office of International Affairs and Computer Crime and Intellectual Property Section for their support.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit and Money Laundering and Asset Forfeiture Unit. Assistant United States Attorneys Serrin Turner, Andrew Goldstein, and Christine Magdo of the Southern District of New York and Trial Attorney Kevin Mosley of AFMLS are in charge of the prosecution, and Assistant United States Attorney Christine Magdo is in charge of the forfeiture aspects of the case.
The charges contained in the Indictment against certain of CHUKHAREV’s co-defendants remain pending and are merely accusations. Those defendants are presumed innocent unless and until proven guilty.
U.S. v, Liberty Reserve, et al. Indictment
Dinesh D’Souza Sentenced in Manhattan Federal Court to Five Years of Probation for Campaign Finance FraudRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that DINESH D’SOUZA was sentenced in Manhattan federal court to five years of probation, with eight months during the first year to be served in a community confinement center, after having pled guilty to violating the federal campaign election law by making illegal contributions to a United States Senate campaign in the names of others. D’SOUZA was sentenced today before U.S. District Judge Richard M. Berman.
Manhattan U.S. Attorney Preet Bharara stated: “Dinesh D’Souza attempted to illegally contribute over $10,000 to a Senate campaign, wilfully undermining the integrity of the campaign finance process. Like many others before him, of all political stripes, he has had to answer for this crime – here with a felony conviction.”
According to the Indictment, prior court filings, and statements made in court:
The Federal Election Campaign Act (the “Election Act”) is designed to limit financial influence in the election of candidates for federal office, including the Office of United States Senator, and provides for the public disclosure of the financing of federal election campaigns. In particular, the Election Act limits the amount and source of money that may be contributed to a federal candidate or that candidate’s authorized campaign committee. The Election Act specifically prohibits any person from making any contribution in the name of another, including reimbursing a third person, before or after that third person’s contribution, as inducement to make that contribution.
In 2012, the Election Act limited campaign contributions to $5,000 from any individual to any one candidate. In March 2012, D’SOUZA contributed $10,000 to the Senate campaign of Wendy Long on behalf of himself and his wife, agreeing in writing to attribute that contribution as $5,000 from his wife and $5,000 from him. In August 2012, D’SOUZA directed other individuals with whom he was associated, namely his assistant and a woman with whom D’SOUZA was romantically involved (the “Straw Donors”), to make contributions to Wendy Long’s campaign for the United States Senate (the “Long Campaign”) on behalf of themselves and their spouses that totaled $20,000 with the promise that he would reimburse them for the contributions. Later that same day or the next day, D’SOUZA, as promised, reimbursed the Straw Donors $10,000 each in cash for the contributions. When confronted by Ms. Long, D’SOUZA initially misled the candidate before admitting what he had done.
During the plea proceeding, D’SOUZA admitted before the Court that he caused two close associates to contribute $10,000 each to the Long Campaign with the understanding that he would reimburse them for their contributions and that he did reimburse them. D’SOUZA also admitted that he knew that what he was doing was wrong and something the law forbids.
In addition to the probationary term with confinement to a community center, Judge Berman sentenced D’SOUZA, 53, of San Diego, California, to a mandatory eight-hour day of community service every week of his five-year term of probation, weekly counseling sessions, and ordered him to pay a $30,000 fine, as well as a $100 special assessment.
Judge Berman previously denied D’SOUZA’s pretrial motion to dismiss the indictment for selective prosecution, ruling that there was “no evidence” to support D’SOUZA’s allegation. In sentencing D’SOUZA, Judge Berman referred to his prior ruling and remarked that “the defendant’s claim of selective prosecution, legally speaking, is ‘all hat, no cattle.’”
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation.
This case is being prosecuted by the Office’s Public Corruption Unit. Assistant United States Attorneys Carrie H. Cohen and Paul M. Krieger are in charge of the prosecution.
Al Qaeda Spokesman Sulaiman Abu Ghayth Sentenced in Manhattan Federal Court to Life in Prison for Conspiring to Kill Americans, Providing Material Support to TerroristsRead the Press Release
Eric Holder, the Attorney General of the United States, Preet Bharara, the United States Attorney for the Southern District of New York, John P. Carlin, the Assistant Attorney General for National Security, George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and William J. Bratton, the Police Commissioner of the City of New York, announced that SULAIMAN ABU GHAYTH, a/k/a “Salman Abu Ghayth,” Usama Bin Laden’s son-in-law and the former spokesman for al Qaeda at the time of the September 11th terrorist attacks, was sentenced today in Manhattan federal court to life in prison by U.S. District Judge Lewis A. Kaplan. ABU GHAYTH, who was arrested overseas on February 28, 2013, and first appeared in this District on March 1, 2013, was found guilty on March 26, 2014, following a three-week jury trial, of conspiring to kill U.S. nationals, conspiring to provide material support to terrorists, and providing material support to terrorists.
Attorney General Eric Holder said: “Justice has been served. This outcome ensures that Sulaiman Abu Ghayth, a senior member of al Qaeda and an associate of Usama bin Laden, will never again set foot outside a prison cell. From beginning to end, this trial, conviction and sentencing have underscored the power of America’s Article III court system to deliver swift and certain justice in cases involving terrorism defendants. We will continue to rely on this robust and proven system to hold accountable anyone who would harm our nation and its people. And we will never waver, and never relent, in our pursuit of violent extremists.”
Manhattan U.S. Attorney Preet Bharara said: “Sulaiman Abu Ghayth was the mouthpiece of murder and menace for al Qaeda. Hours after the 9/11 attacks, Abu Ghayth, Usama bin Laden’s propaganda minister, was exhorting others to pledge themselves to al Qaeda in the cause of murdering more Americans. It has been 13 years since that terrible day, but from the day Abu Ghayth was brought to the United States 19 months ago, justice for him has been swift and fair. Today, having been afforded a fair and impartial trial in an American civilian court at which a jury unanimously convicted him of material support to al Qaeda and conspiring to kill Americans, Abu Ghayth has been sentenced to life in prison. No sentence can restore what was taken from the families of al Qaeda’s victims. But today’s sentence ensures that Sulaiman Abu Ghayth will never be free to incite or support mass murder again.”
Assistant Attorney General John Carlin said: “As the face and voice of al Qaeda in the days and weeks after the 9/11 attacks, Abu Ghayth conspired with Usama Bin Laden and others and announced to the world al Qaeda's deadly intentions to continue to attack America. For his role in al Qaeda's plot to kill Americans, Abu Ghayth will now spend the rest of his life in prison. This case highlights our resolve to find and bring to justice – no matter how long it takes – those who plot to attack our citizens and our interests around the world. I want to thank all of the agents, analysts, and prosecutors who are responsible for this result.”
FBI Assistant Director-in-Charge George Venizelos said: “As the spokesman for al Qaeda, Abu Ghayth espoused messages of terror, hate, and fear to motivate others to harm our country, underestimating the resiliency of the United States to stand strong in the face of violence and adversity. Today's sentence is the culmination of years of hard work and cooperative efforts among law enforcement professionals to seek justice for those who lost their lives in the 9/11 attacks. Along with its law enforcement partners, the FBI's Joint Terrorism Task Force will vigorously pursue those who support this radical terrorist agenda.”
NYPD Commissioner William J. Bratton said: “Sulaiman Abu Ghayth was a key spokesman for al Qaeda and had access to the terrorist group's senior leadership as he took to the airwaves and threatened further attacks as our city was recovering from the horror of 9/11. His capture, trial and conviction is a reminder that the NYPD detectives and FBI agents of the Joint Terrorist Task Force will follow leads anywhere in the world to bring terrorists to justice.”
According to the evidence presented at trial, statements made during other public proceedings including today’s sentencing, and other court documents:
Since around 1989, al Qaeda has been an international terrorist organization, dedicated to opposing non-Islamic governments with force and violence. Usama Bin Laden served as the leader, or “emir,” of al Qaeda until his death on or about May 2, 2011. Members of al Qaeda typically have pledged an oath of allegiance, called bayat, to Bin Laden and to al Qaeda.
The core purpose of al Qaeda, as stated by Bin Laden and other leaders, is to support violent attacks against property and nationals, both military and civilian, of the United States and other countries. Between 1989 and 2001, al Qaeda established training camps, guest houses, and business operations in Afghanistan, Pakistan, and other countries for the purpose of training and supporting its agenda of violence and murder. Members and associates of al Qaeda have executed a number of terrorist attacks, all in furtherance of the organization’s stated conspiracy to kill Americans, including the attacks on the United States on September 11, 2001, in New York, Virginia, and Pennsylvania, which killed approximately 2,976 people.
From at least May 2001 up to around 2002, ABU GHAYTH served alongside Bin Laden, appearing with Bin Laden and his then-deputy and now the declared leader of al Qaeda, Ayman al-Zawahiri, speaking on behalf of al Qaeda and in support of Bin Laden’s terrorist objectives, recruiting young men to join al Qaeda and its murderous mission against the United States, and warning that attacks similar to those of September 11, 2001, would continue.
In particular, around May 2001, ABU GHAYTH urged young al Qaeda recruits at a guest house in Kandahar, Afghanistan, to swear bayat to Bin Laden, shortly before these men were brought to an al Qaeda training camp. On the evening of September 11, 2001, immediately after the terrorist attacks on the United States, Bin Laden summoned ABU GHAYTH and asked for his assistance, which ABU GHAYTH agreed to provide. On the morning of September 12, 2001, ABU GHAYTH appeared with Bin Laden, Zawahiri, and another al Qaeda leader, and spoke on behalf of al Qaeda in a speech that would be disseminated around the world, warning the United States and its allies that “[a] great army is gathering against you” and called upon “the nation of Islam” to do battle against “the Jews, the Christians and the Americans.” Also, after the September 11, 2001, terrorist attacks, ABU GHAYTH delivered speeches in which he addressed the then-U.S. Secretary of State and warned that “the storms shall not stop, especially the Airplanes Storm,” and advised Muslims, children, and opponents of the United States “not to board any aircraft and not to live in high rises.” At this time, in Afghanistan, Bin Laden and others within al Qaeda were plotting to detonate shoe bombs aboard flights within or en route to the United States.
ABU GHAYTH continued to speak on behalf of al Qaeda as the terrorist organization’s spokesperson through 2002, repeatedly working to drive more young men to al Qaeda. Also in 2002, ABU GHAYTH arranged to be, and was, successfully smuggled from Afghanistan into Iran, where he was later arrested with other al Qaeda leaders.
ABU GHAYTH, 48, was convicted after trial of one count of conspiring to kill U.S. nationals, in violation of Title 18, United States Code, Section 2332(b); one count of conspiring to provide material support to terrorists, in violation of Title 18, United States Code, Section 2339A; and one count of providing material support to terrorists, in violation of Title 18, United States Code, Section 2339A. In addition to a prison term of life, ABU GHAYTH was ordered to forfeit all foreign and domestic assets derived from, involved in, and used and intended to be used to commit terrorism against the United States, its citizens and residents, and their property, and was ordered to pay a $300 special assessment fee.
ABU GHAYTH’s conviction is the result of the close cooperative efforts of the U.S. Attorney’s Office for the Southern District of New York, the FBI’s Joint Terrorism Task Force – which consists of law enforcement officers of the FBI, NYPD, United States Marshals Service, and other agencies – and the National Security Division of the U.S. Department of Justice. The Justice Department’s Office of International Affairs and the U.S. Department of State also provided assistance.
The prosecution is being handled by Assistant United States Attorneys John P. Cronan, Nicholas J. Lewin, and Michael Ferrara of the Terrorism and International Narcotics Unit of the U.S. Attorney’s Office for the Southern District of New York, with assistance from Trial Attorney Jolie Zimmerman of the National Security Division’s Counterterrorism Section, Tara M. LaMorte of the Civil Division of the U.S. Attorney’s Office for the Southern District of New York, and Diane Gujarati, Deputy Chief of the Criminal Division of the U.S. Attorney’s Office for the Southern District of New York.
Statement of Manhattan U.S. Attorney Preet Bharara on Status of Rikers Island InvestigationRead the Press Release
Forty-nine days ago, on August 4th, this Office issued a report detailing the appalling treatment of adolescents at Rikers Island. Since then, we have been engaged in making sure that the City and Department of Correction are moving swiftly to implement reforms that are meaningful, effective, and permanent. As the relevant City authorities are well aware, while we are listening to their promises to take various steps, we have an independent responsibility to ensure that the Constitution is respected and upheld everywhere, including on Rikers Island, and part of that duty is to guarantee that needed reforms are lasting, verifiable, and enforceable. Another part of our duty is to make sure that only accurate information is put forward and that competent and attentive leadership is in place at all levels. If, as has been reported, incomplete and inaccurate information has been provided to us, and questionable promotions may have occurred, it does not instill confidence in us that the City will quickly meet its constitutional obligations. We are not, at this early stage, jumping to conclusions about the City’s commitment to change, and our dialogue is ongoing. However, now that the 49-day waiting period has elapsed and all options are available to us, we stand ready to take legal action to compel long-overdue reforms at Rikers, if that becomes necessary to get the job done.
International Terrorism Defendant Pleads Guilty in Manhattan Federal CourtRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Assistant Attorney General for National Security John Carlin announced that ADEL ABDEL BARY, a/k/a “Adel Mohammed Abdul Almagid Abdel Bary,” a/k/a “Abbas,” a/k/a “Abu Dia,” a/k/a “Adel” (“BARY”), pled guilty in Manhattan federal court to international terrorism charges in connection with BARY’s work on behalf of al Qaeda and the Egyptian Islamic Jihad. BARY was extradited to the United States from the United Kingdom on October 6, 2012. BARY pled guilty to a three-count superseding Information charging him with conspiring to kill U.S. nationals, conspiring to make a threat to kill, injure, intimidate, and damage and destroy property by means of an explosive, and making such a threat. Following the defendant’s plea of guilty, Judge Lewis A. Kaplan asked for further information regarding the basis of the plea agreement, which the parties will provide within a week.
Manhattan U.S. Attorney Preet Bharara said: “Adel Abdel Bary filled supporting positions in Egyptian Islamic Jihad and al Qaeda, assisting in fomenting and inciting violence and terrorism, and conspiring to kill innocent people, including American civilians serving their country abroad. Today he has admitted his guilt, and subject to the further information requested by the judge, awaits the sentence to be imposed by an American civilian court.”
According to the Indictment based on which BARY was extradited, the Superseding Information to which he pled, other documents filed in Manhattan federal court, and statements made at today’s guilty plea:
In 1997 and 1998, BARY led the London cell of the Egyptian Islamic Jihad (“EIJ”) organization. EIJ, which was led for years by co-defendant Ayman al Zawahiri, was dedicated to the forceful overthrow of the Egyptian Government and to violent opposition of the United States, in part, for its support of the Government in Egypt. By February 1998, EIJ had effectively merged with al Qaeda and EIJ joined with al Qaeda in targeting American civilians. To that end, in February 1998, indicted co-defendant Usama Bin Laden and Zawahiri endorsed a purported fatwah under the banner of the “International Islamic Front for Jihad on the Jews and Crusaders.” This fatwah stated that Muslims should kill Americans – including civilians – anywhere in the world where they can be found. Then again, on August 4, 1998, EIJ published a statement threatening to retaliate against America for its claimed involvement in the apprehension of EIJ members. A copy of this statement was found in an office used by BARY and his London-based co-conspirators.
While in London, BARY pledged his commitment to pursue the goals of EIJ and to follow the orders of the leadership of the group. Many of the leading members of EIJ became influential members of al Qaeda, including Zawahiri and indicted co-defendant Muhammad Atef, both of whom later sat on the majlis al shura (or consultation council) of al Qaeda. Zawahiri is now the declared leader of al Qaeda.
On August 7, 1998, three days after EIJ published its threat to retaliate against America, al Qaeda operatives bombed the United States Embassies in Nairobi, Kenya, and Dar es Salaam, Tanzania, killing 224 people. BARY transmitted, via international telephone calls to the media, the contents of al Qaeda’s claims of responsibility for the August 7, 1998, bombings. These claims of responsibility included threats of future terrorist attacks by al Qaeda and its allies, and were sent from London, England, to media organizations in France, Qatar, and the United Arab Emirates on August 8, 1998 – the day after the embassy bombings.
In August 1998, both before and after the bombings, BARY additionally arranged for messages to be transmitted from members of the media to his co-conspirators, including Bin Laden and Zawahiri, and conveyed messages from his co-conspirators, including Bin Laden and Zawahiri, to members of the media. BARY also used an office in London, England, which he shared with co-conspirators, to store documents, including the claims of responsibility described above, as well as for other conduct related to the conspiracy to murder U.S. nationals.
In connection with his role in transmitting al Qaeda’s claims of responsibility for the bombings of the U.S. Embassies in Nairobi, Kenya and Dar es Salaam, Tanzania, BARY pled guilty to one count of conspiring to make a threat to kill, injure, intimidate, and damage and destroy property by means of an explosive, in violation of 18 U.S.C. §§ 844(e) and (n), which carries a maximum term of 10 years in prison, and one count of making such a threat, in violation of 18 U.S.C. § 844(e), which carries a maximum term of 10 years in prison. In connection with his role in the conspiracy—led by Bin Laden and Zawahiri—to attack American targets around the world, BARY pled guilty to one count of conspiring to kill U.S. nationals, in violation of 18 U.S.C. §§ 371 and 2332(a)(1), which carries a maximum term 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.
Two co-defendants, Khalid al Fawwaz, a/k/a “Khaled Abdul Rahman Hamad al Fawwaz,” a/k/a “Abu Omar,” a/k/a “Hamad,” and Anas al Liby, a/k/a “Nazih al Raghie,” a/k/a “Anas al Sebai,” are scheduled to commence trial on November 3, 2014, before the Honorable Lewis A. Kaplan. The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
Mr. Bharara praised the outstanding efforts of the Federal Bureau of Investigation, the New York City Police Department, the United States Marshals Service, and the Metropolitan Police Department of London, England (New Scotland Yard). Mr. Bharara also thanked the U.S. Department of Justice’s Office of International Affairs and National Security Division for their ongoing assistance.
This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Sean S. Buckley, Adam Fee, Nicholas J. Lewin, and Stephen J. Ritchin are in charge of the prosecution.
US v. Adel Bary Plea Agreement
U.S. v. Adel Bary InformationSoftware Company Ceo Sentenced in Manhattan Federal Court to 27 Months in Prison for His Role in $2 Million Securities Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that ROBERT KELLY, the Chief Executive Officer of Wwebnet, Inc. (“Wwebnet”), a software development company, was sentenced today in Manhattan federal court to 27 months in prison in connection with his role in an offering fraud scheme. Specifically, KELLY diverted for his own personal use over $2 million in investor proceeds that was intended for the development of a software program capable of transmitting music, videos, and movies over the Internet. He used the money to trade options, to pay his personal income taxes, and for other purposes unrelated to software development or other legitimate business expenses. On March 11, 2014, KELLY pled guilty to securities and wire fraud charges before United States District Judge Paul A. Crotty.
According to the charging documents and related court proceedings:
From 2004 through November 2008, KELLY solicited investors to send money to Wwebnet, Inc., and related companies by misrepresenting that the funds would be used to develop software for transmitting music, videos, and movies over the Internet. Instead of using the millions of dollars in investor proceeds that he obtained for legitimate business purposes, KELLY diverted a substantial portion of the money that he raised for his own financial benefit. For example, KELLY transferred at least $2 million in investor funds into his personal trading account in the Cayman Islands, which he used to make a series of unsuccessful options trades. KELLY also used nearly $100,000 that he received from investors to pay his federal and state personal income taxes. At the same time that he was using investors’ money for his own personal benefit, KELLY falsely told his software development team that he was unable to allocate adequate resources for software development and could do so only when he was able to raise money from investors. As a result, Wwebnet lacked the necessary funds to develop its core product and the company ultimately failed.
In addition to his prison term, KELLY, 57, formerly of New York, New York, and now a resident of Raleigh, North Carolina, was sentenced to three years of supervised release, and was ordered to pay $2,111,600 in forfeiture and $2,111,600 in restitution, as well as a $200 special assessment fee.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation and also thanked the Securities and Exchange Commission for its assistance.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
The case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Benjamin Naftalis is in charge of the prosecution.
Kelly, Robert Indictment
Selim Zherka, Westchester Businessman, Indicted by White Plains Federal Grand Jury for Submitting False Loan Applications, Tax Fraud, Wire Fraud, and Witness TamperingRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Shantelle P. Kitchen, the Acting Internal Revenue Service Special Agent in Charge of the New York Office – Criminal Investigation (“IRS”), George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Christy Romero, the Special Inspector General of the Troubled Asset Relief Program (“SIGTARP”), announced today that Westchester businessman SELIM ZHERKA, 46, of Somers, New York, was indicted by a federal grand jury in White Plains for submitting multiple false loan applications to banks, tax fraud, wire fraud, and witness tampering. ZHERKA was arrested today by agents of the FBI and is expected to be arraigned in federal court in White Plains this afternoon.
U.S. Attorney Bharara stated: “Selim Zherka, while running his various businesses, allegedly engaged in a string of crimes. Zherka, the owner of commercial real estate and other businesses, stands accused of filing multiple false bank loan applications, engaging in tax fraud, and witness tampering. He is also charged with defrauding a businessman of his right to collect a court judgment against Zherka for assault and breach of contract.”
Acting IRS Special Agent in Charge Kitchen stated: “The Internal Revenue Service is committed to ensuring that everyone pays their fair share of taxes. The public should not have to pick up the tab for those who willfully choose to not file correct and accurate returns. IRS-Criminal Investigation investigates individuals who allegedly corruptly violate the tax laws to further their business and personal interests, at the expense of other businesses and individual taxpayers who play by the rules.”
Assistant FBI Director Venizelos stated: “As alleged, Zherka’s entrepreneurship got a little too creative when he began fabricating loan applications, among many other things, and Zherka’s web of deception knew few bounds. Today he finds himself under arrest and on the wrong side of the law.”
Special Inspector General of TARP Christy Romero stated: “Following an extensive criminal investigation by SIGTARP and our law enforcement partners, this morning federal agents apprehended Selim Zherka without incident in Westchester County, New York. Zherka is charged with falsifying information on commercial loan applications submitted to North Fork Bank - later purchased by TARP recipient Capital One - to obtain more than $36.5 million in loans from the bank.”
According to the Indictment, from November 2005 through 2008, ZHERKA obtained a total of over $146 million in loans from three banks – North Fork Bank (now Capital One), Sovereign Bank (now Santander), and Signature Bank – for the purchase and/or refinancing of apartment house complexes in New England, Tennessee, New Jersey, and New York by lying about the purchase prices of the real estate he was acquiring, the amount of the down payments he was making toward the purchases in question, his assets, his income, his tax returns, and the nature and circumstances of a 2000 court judgment against him for assault and breach of contract (which, to date, he has not paid).
Additionally, the Indictment charges ZHERKA with engaging in a decade-long tax fraud scheme. The Indictment alleges that ZHERKA repeatedly submitted fraudulent tax returns to the IRS that overstated depreciation expenses and understated his capital gains on tax returns for the real estate holding companies in which he was a partner and which, in turn, owned the above apartment house complexes, thereby reducing their tax liabilities. The Indictment also charges that ZHERKA obstructed the Internal Revenue Service by, among other means, failing to file personal tax returns for over a decade.
The Indictment also charges that ZHERKA schemed to defraud the judgment creditor in connection with the above-referenced 2000 case of that individual’s right to receive payment of the judgment. ZHERKA had been found liable by a New York State Supreme Court jury in Manhattan for assaulting that individual and for breaching a contract with him.
Finally, the Indictment charges ZHERKA with tampering with witnesses in this investigation.
If convicted on the charges in the Indictment, ZHERKA faces the following maximum penalties: for each of the 11 counts of submitting a false loan application with which he is charged, 30 years in prison and a $1 million fine or twice the gross gain or loss resulting from the crime; for the count of wire fraud and the count of witness tampering, 20 years in prison and a $250,000 fine or twice the gross gain or loss resulting from the crime on each count; for the count of conspiracy to obstruct the IRS and violate tax laws, 5 years in prison and a $250,000 fine or twice the gain or loss resulting from the crime; and for each of the 10 counts of making/subscribing to false returns, the 10 counts of aiding/assisting in the preparation of false tax returns, and the count of attempting to interfere with the administration Internal Revenue laws, 3 years in prison and a $250,000 fine or twice the gross gain or loss resulting from the crime. Additionally, he faces potential criminal forfeitures totaling $146 million, restitution, and the costs of prosecution. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant and any forfeiture would be determined by the Court.
Mr. Bharara praised the work of the IRS, the FBI, and the Special Inspector General for the Troubled Asset Relief Program in this investigation.
This case is being handled out of the White Plains Division. Assistant United States Attorneys Elliott B. Jacobson and Perry A. Carbone 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. Zherka memo of law (9-18-14)
Selim Zherka.S2Manhattan U.S. Attorney Settles Civil Fraud Claims Against Exporter for Fraudulently Obtaining A Loan Guaranteed by the Export-Import BankRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Michael McCarthy, the Acting Inspector General for the Export-Import Bank of the United States (“EX-IM”), and Fred Hochberg, the Chairman for EX-IM, announced today that the United States filed a civil fraud lawsuit in Manhattan federal court against HASAN BESNELI, a Turkish business agent, and SABA, INC. (“SABA”), an exporter based in Memphis, for fraudulently obtaining a loan for a construction project in Turkey from Deutsche Bank that was guaranteed by EX-IM. The United States’ complaint alleges that, in applying for the loan and the loan guarantee, BESNELI and SABA misrepresented key aspects of the transaction, including how much of the loan proceeds would be spent on “local costs” in Turkey rather than on U.S.-made goods, and whether the borrower, a Turkish non-profit organization, would furnish a 15% down payment. The lawsuit seeks civil penalties under the Financial Institutions Reform, Recovery, and Enforcement Act (“FIRREA”) and damages and penalties under the False Claims Act.
Simultaneous with the filing of the lawsuit, the United States settled the claims against SABA pursuant to a settlement stipulation approved today by U.S. District Judge John F. Keenan. In the settlement, SABA admitted and accepted responsibility for submitting information to EX-IM in connection with applying for the loan guarantee without verifying the truth or accuracy of such information and for marking up the costs of certain goods – by as much as 300% – for purposes of generating “cash money.” SABA also agreed to pay $3.5 million and to abstain from participating in any EX-IM loan or loan guarantee programs for seven years. The lawsuit is going forward against BESNELI.
Manhattan U.S. Attorney Preet Bharara said: “The Export-Import Bank is charged with promoting export of U.S.-made goods. It is absolutely unacceptable for exporters and business agents to undermine that mission by misrepresenting how proceeds from loans guaranteed by EX-IM will be used.”
EX-IM Acting Inspector General Michael McCarthy said: “This case shows our commitment to vigorously pursue persons and businesses who scheme to defraud the EX-IM Bank. The OIG appreciates the tenacity of the Southern District of New York in this lengthy and complex investigation.”
EX-IM Chairman Fred Hochberg said: “We take very seriously our commitment to taxpayers and our mission to support U.S. jobs. This should serve notice to any outside entity that tries to defraud the Export-Import Bank, we have zero tolerance for waste, fraud and abuse, and we are constantly analyzing transactions for such activity and will work with our Inspector General to take immediate action in response to any evidence of fraud in EX-IM Bank transactions.”
According to the allegations in the complaint filed in Manhattan federal court:
In 2002, BESNELI and SABA began working together to bid on contracts involving export of U.S. goods to be used in construction projects in Turkey. One of those projects involved TC Basbakani Baskanliginda Darussafaka Cemiyeti (“Darussafaka”), a Turkish non-profit organization, which planned to develop a retirement home complex in Urla. To ensure that they would be picked as the exporter for the Urla project, BESNELI and SABA promised Darussafaka that they would obtain an EX-IM-guaranteed loan to finance that project.
BESNELI and SABA made that promise even though they knew that Darussafaka did not plan to comply with EX-IM’s loan guarantee requirements, including a 15% down payment by the borrower, i.e., Darussafaka, and capping “local costs” at 15%. To circumvent those requirements, BESNELI and SABA made misrepresentations to EX-IM and to Deutsche Bank, the lender, regarding how much of the loan funds would be spent on local costs and whether Darussafaka would furnish a down payment. Further, after BESNELI and SABA fraudulently obtained the loan from Deutsche Bank under an EX-IM loan guarantee, they orchestrated a scheme whereby SABA marked up the costs of the U.S.-made goods being exported to Turkey – sometimes by as much as 300% – in order to generate “cash money” that they funneled back to Darussafaka to fund local costs.
Finally, in 2007, Darussafaka defaulted on the loan from Deutsche Bank that was guaranteed by EX-IM. Pursuant to its loan guarantee, EX-IM reimbursed Deutsche Bank and, as a result, was exposed to millions of dollars in potential losses.
The claims against BESNELI were not resolved by the SABA settlement and will go forward. The Government seeks civil penalties against BESNELI for fraudulently obtaining the loan extended by Deutsche Bank, a federally insured financial institution.
Mr. Bharara thanked the EX-IM’s Office of the Inspector General 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 Cristine Irvin Phillips, Li Yu, and Ellen M. London are in charge of the case. This case was investigated by the EX-IM OIG in Washington, D.C.
U.S. v. Besneli and SABA Stip of Settlement
U.S. v. Besneli and SABA Civil ComplaintSenior Information Systems Engineer at National Law Firm Charged in Manhattan Federal Court with Insider TradingRead the Press Release
Dmitry Braverman Charged with at Least Eight Different Trades Based on Nonpublic Information About Mergers and Acquisitions Activity of the Law Firm’s Clients
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 DMITRY BRAVERMAN was arrested this morning on securities fraud charges stemming from his involvement in an insider trading scheme. Specifically, BRAVERMAN traded on material nonpublic information about potential merger and acquisition activity of at least eight clients of his employer – a national, full-service law firm – resulting in profits of approximately $300,000. BRAVERMAN is expected to be presented today in San Francisco federal court before a United States Magistrate Judge.
U.S. Attorney Preet Bharara said: “As alleged, Dmitry Braverman, undeterred by the many felony convictions of others for insider trading, abused his access to nonpublic information about mergers and acquisitions for personal gain. Braverman’s charged actions are yet another example of brazen disregard for laws that are intended to keep the playing field level.”
FBI Assistant Director-in-Charge George Venizelos said: “Our message of deterrence has apparently still not been heard. Braverman used his computer prowess to snoop on deals and get inside information. He then made numerous trades with his illegal edge. Braverman finds himself under arrest and faces stiff jail time for his alleged crimes.”
In a separate action, the U.S. Securities and Exchange Commission (“SEC”) announced civil charges against BRAVERMAN.
According to the one-count Complaint unsealed today in Manhattan federal court:
From at least in or about September 2010 through December 2013, BRAVERMAN was engaged in an insider trading scheme. BRAVERMAN, who is a senior systems engineer at a full-service law firm (the “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’s level of computer and database systems access of the Law Firm gave him access to information about, among other things, the Law Firm’s clients in potential merger and acquisition activity, as well 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, and tipped another person (“Individual-1”), who engaged in two of the same trades. In April 2011, however, BRAVERMAN and Individual-1 abruptly closed out the last of these trades on the same day that another employee of the Law Firm was arrested on separate insider trading charges. In November 2012, BRAVERMAN opened a new brokerage account and (again) began trading on the basis of inside information he obtained from the Law Firm. Specifically, between November 2012 and the present, 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 between 2010 and the present.
BRAVERMAN, 41, was arrested this morning at his home in San Mateo, California. He is charged with one count of securities 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 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, 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 Matthew L. Schwartz and Benjamin Naftalis 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. Dmitry Braverman Complaint
Dmitry Braverman transactions chartDefendant Who Conspired to Kidnap, Rape, and Murder Women Sentenced in Manhattan Federal Court to Ten Years in PrisonRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that RICHARD MELTZ, the former Chief of Police, United States Department of Veterans Affairs, at the Bedford Veterans Affairs Medical Center, was sentenced today in Manhattan federal court to ten years for conspiring to kidnap, rape, and murder the wife of a man he had met over the Internet, and a female Federal Bureau of Investigation agent working in an undercover capacity. MELTZ pled guilty before U.S. District Judge Paul G. Gardephe, who also imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara said: “Today’s sentence ensures that Richard Meltz will pay with his liberty for his role in a macabre conspiracy to kidnap, brutalize, and kill two victims that, fortunately, did not come to full fruition.”
According to the Information to which MELTZ pled guilty, statements made during the plea proceeding, and other court documents:
Between the spring of 2011 and January 2013, MELTZ, Robert Christopher Asch and Michael Van Hise engaged in a series of electronic email and instant message communications during which they discussed and planned the kidnapping, torture, and murder of Van Hise’s wife and other members of Van Hise’s family. Van Hise sent to MELTZ and Asch photographs of these family members, and the approximate location of their residence. MELTZ engaged in detailed discussions about kidnapping and brutalizing the proposed victims, and ultimately agreed with Van Hise and Asch to kidnap, rape, and kill Van Hise’s wife. The co-conspirators ceased active planning of the kidnapping when the FBI arrested New York City Police Officer Gilberto Valle for a related kidnapping conspiracy, and began investigating Van Hise.
In addition, beginning in approximately January 2013, MELTZ, Asch, and an FBI agent working in an undercover capacity (“UC-1”) began discussions about kidnapping a woman, who unbeknownst to MELTZ and his co-conspirators, was also an FBI agent working in an undercover capacity. MELTZ participated in multiple conversations with both UC-1 and Asch about the conspiracy’s objective to kidnap and commit acts of violence against the intended victim and other women. MELTZ advised Asch to obtain a stun gun to subdue the intended target, and based on MELTZ’s direction, Asch purchased a high-voltage Taser gun at a gun show in Pennsylvania, which they intended to use in the commission of the kidnapping offense.
In addition to his prison term, MELTZ, 66, of Linden, New Jersey, was sentenced to three years of supervised release, and was ordered to pay a $200 special assessment fee.
Van Hise and Asch were both convicted following a two-week jury trial. Both men await sentencing.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation. He also thanked the Department of Veterans Affairs and the New Jersey State Police for their assistance in the investigation.
The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Brooke E. Cucinella and Hadassa Waxman are in charge of the prosecution.