Eastern District of New York

The United States Department of Justice today filed a civil complaint in the Eastern District of New York against Barclays Bank PLC and several of its United States affiliates (together, Barclays), alleging that Barclays engaged in a fraudulent scheme to sell residential mortgage-backed securities (RMBS) supported by defective and misrepresented mortgage loans.  As alleged in the complaint, from 2005 to 2007, Barclays personnel repeatedly misrepresented the characteristics of the loans backing securities they sold to investors throughout the world, who incurred billions of dollars in losses as a result of the fraudulent scheme.  The suit also names as defendants two former Barclays executives:  Paul K. Menefee, of Austin, Texas, who served as Barclays’ head banker on its subprime RMBS securitizations, and John T. Carroll, of Port Washington, New York, who served as Barclays’ head trader for subprime loan acquisitions. 

The detailed allegations in the complaint describe Barclays’, Menefee’s, and Carroll’s misconduct in connection with RMBS securitizations Barclays underwrote between 2005 and 2007.  The complaint alleges violations of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), based on mail fraud, wire fraud, bank fraud, and other misconduct.  FIRREA authorizes the Attorney General to seek civil penalties up to the amount of the gain to the violator or the losses suffered by persons other than the violator.

“Financial institutions like Barclays occupy a position of vital public trust,” said Attorney General Loretta E. Lynch.  “Ordinary Americans depend on their assurances of transparency and legitimacy, and entrust these banks with their valuable savings.  As alleged in this complaint, Barclays jeopardized billions of dollars of wealth through practices that were plainly irresponsible and dishonest.   With this filing, we are sending a clear message that the Department of Justice will not tolerate the defrauding of investors and the American people.”

“The widespread fraud that investment banks like Barclays committed in the packaging and sale of residential mortgage-backed securities injured tens of thousands of investors and significantly contributed to the Financial Crisis of 2008,” said Principal Deputy Associate Attorney General Bill Baer.  “Millions of homeowners were left with homes they could not afford, leaving entire neighborhoods devastated.  The government’s complaint alleges that Barclays fraudulently sold investors RMBS full of mortgages it knew were likely to fail, all while telling investors that the mortgages backing the securities were sound.  Today’s complaint makes clear that the Department of Justice will continue to hold financial institutions, and the individuals who work for them, fully accountable for harming investors and the American public.”

“What is now often referred to as the ‘Great Recession’ started with the bursting of the housing bubble, followed by an enormous drop in U.S. home values, hundreds of bank failures, significant turbulence in financial markets, trillions of dollars of losses to investors, and, most devastatingly, a huge wave of home foreclosures,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, the head of the Justice Department’s Civil Division.  “All of these injuries, and more, were caused at least in part by the type of misconduct alleged in this lawsuit.  We will continue holding both banks and their executives responsible for their role in contributing to this unfortunate period in our history.”

“Investors who bought RMBS from Barclays, and who suffered catastrophic losses as a result, included individuals and institutions that form the backbone of our community,” said Robert L. Capers, United States Attorney for the Eastern District of New York.  “Credit unions, pension plans, charitable and religious organizations, university endowments, and financial institutions, among others, including many in this District, invested tens of billions of dollars in securities that Barclays repeatedly assured them were safe investments. Instead of ensuring that their representations to investors were accurate and transparent, so that investors could make properly informed investment decisions, Barclays and its employees repeatedly misled investors and kept to themselves critical information about the loans in the deals.  Time and again, they knowingly chose to put investors at risk of harm in pursuit of additional profits.  Barclays must be held accountable for its rampant fraud in marketing and selling these RMBS, and so must the individuals at the heart of the fraudulent scheme.” 

“As the complaint alleges, Barclays knowingly sold investors RMBS backed by loans it knew were made to borrowers who were not creditworthy and which were supported by house appraisals it knew were inflated,” said Steven Perez, Special Agent in Charge at the Federal Housing Finance Agency Office of the Inspector General (FHFA-OIG).  “The massive losses caused by the fraudulent behavior alleged in the complaint deeply affected not only banks and other financial institutions, including Federal Home Loan Banks, Fannie Mae, and Freddie Mac, but also the American taxpayer.  We will continue to work with our law enforcement partners to hold those who have engaged in misconduct fully accountable for their actions.” 

As alleged in the complaint, from 2005 through 2007, Barclays, through Menefee and Carroll among others, fraudulently sold tens of billions of dollars of RMBS, and repeatedly misled investors about the quality of the mortgages backing those deals.  The alleged scheme involved no fewer than 36 RMBS deals, securitizing over $31 billion worth of subprime and Alt-A mortgage loans.  The complaint alleges that in publicly-filed offering documents and in direct communications with investors and rating agencies, Barclays systematically and intentionally misrepresented key characteristics of the loans it included in these RMBS deals.

The United States alleges that in selling certificates in these deals, Barclays assured investors that it had excluded “unacceptable” loans and that the loans in the deals had been underwritten under loan origination guidelines intended to ensure the borrowers’ ability to pay.  The complaint alleges Barclays represented to investors that property appraisals were reliable and that the properties were worth enough to avoid loss in the event of default.  Barclays told investors that it conducted “robust,” “thorough,” and “comprehensive” due diligence on the loan pools it securitized, and that it did not securitize non-compliant, delinquent, or “scratch and dent” loans.

As alleged in the complaint, these statements were false.  In reality, the complaint alleges, Barclays’ due diligence on these RMBS deals was a sham.  When it did not skip due diligence altogether, Barclays routinely ignored or kept to itself due diligence results that showed the bank that a considerable percentage of the loans in the deals did not conform to the representations it made to investors.  According to the complaint, Barclays sought to maximize the number of loans it securitized, regardless of how poor the quality of the loans.

The United States alleges that Barclays securitized thousands of loans (worth billions of dollars) that its due diligence vendors graded as materially defective, as well as hundreds more that were delinquent or in default at the time of securitization.  Its vendors told it that large percentages of the loans they reviewed violated the lenders’ underwriting guidelines or the relevant law, or involved borrowers who lacked the ability to repay.  Its vendors also told Barclays that the appraised values of significant percentages of the mortgaged properties were overstated and that thousands of those properties were underwater when they were securitized – meaning the properties were worth less than the loans on the properties.  The complaint alleges that Barclays employees, including Menefee and Carroll, ignored or knowingly overrode these findings, waiving thousands of bad loans into the deals.  On a number of occasions, Barclays even recycled into its deals defective loans it had kicked out of previous deals, without conducting any additional due diligence on the loans. 

In general, the borrowers whose loans backed these deals were significantly less creditworthy than Barclays represented, and these loans defaulted at exceptionally high rates early in the life of the deals.  In addition, as alleged in the complaint, mortgaged properties were systematically worth less than what Barclays represented to investors.  The deals were dismal failures, as more than half of the underlying residential mortgages defaulted, resulting in billions of dollars in losses to investors.  Even investors in AAA-rated tranches of these securities, which were rated as safe as investments in U.S. Treasury bonds, suffered or will suffer significant losses.

Menefee and Carroll were central to Barclays’ allegedly fraudulent scheme.  Menefee was the head banker in charge of due diligence and securitization on all of Barclays’ subprime deals, and he decided which loans would be subject to due diligence, as well as which loans would be removed from loan pool purchases.  Carroll was the head trader on all of Barclays’ principal subprime deals, and he determined which subprime loan pools Barclays would bid on, at what price, and on what terms.  As alleged in the complaint, both men made representations about the characteristics of the loans backing the securities that they knew were false when they made them.

In charge of the case for the government are F. Franklin Amanat, Senior Counsel at the United States Attorney’s Office for the Eastern District of New York, along with Katharine E.G. Brooker, Evan P. Lestelle, and Josephine M. Vella, all Assistant United States Attorneys in Brooklyn. 

To report RMBS fraud, go to: http://www.stopfraud.gov/rmbs.html.

BROOKLYN, NY – Earlier today, this Office filed a civil complaint against Barclays Bank plc and several of its United States affiliates (together, Barclays), alleging that Barclays caused billions of dollars of losses to investors by engaging in a fraudulent scheme to sell residential mortgage-backed securities (RMBS) supported by defective and misrepresented mortgage loans.  As alleged in the complaint, from 2005 to 2007, Barclays personnel repeatedly misrepresented the characteristics of the loans backing securities they sold to investors throughout the world, who incurred billions of dollars in losses as a result of the fraudulent scheme.  The suit also names as defendants two former Barclays executives:  Paul K. Menefee, of Austin, Texas, who served as Barclays’ head banker on its subprime RMBS securitizations, and John T. Carroll, of Port Washington, New York, who served as Barclays’ head trader for subprime loan acquisitions.

The filing was announced by Attorney General Loretta E. Lynch, Robert L. Capers, United States Attorney for the Eastern District of New York, Bill Baer, Principal Deputy Associate Attorney General, Benjamin C. Mizer, Principal Deputy Assistant Attorney General for the Department of Justice’s Civil Division, and Steven Perez, Special Agent in Charge at the Federal Housing Finance Agency Office of the Inspector General (FHFA-OIG).

The detailed allegations in the complaint describe Barclays’, Menefee’s, and Carroll’s misconduct in connection with RMBS securitizations Barclays underwrote between 2005 and 2007.  The complaint alleges violations of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), based on mail fraud, wire fraud, bank fraud, and other misconduct.  FIRREA authorizes the Attorney General to seek civil penalties up to the amount of the gain to the violator or the losses suffered by persons other than the violator.

“Financial institutions like Barclays occupy a position of vital public trust,” said Attorney General Lynch.  “Ordinary Americans depend on their assurances of transparency and legitimacy, and entrust these banks with their very livelihood.  As alleged in this complaint, Barclays jeopardized billions of dollars of wealth through practices that were plainly irresponsible and dishonest.   With this filing, we are sending a clear message that the Department of Justice will not tolerate the defrauding of investors and the American people.”

“Investors who bought RMBS from Barclays, and who suffered catastrophic losses as a result, included individuals and institutions that form the backbone of our communities,” said United States Attorney Capers.  “Credit unions, pension plans, charitable and religious organizations, university endowments, and financial institutions, among others, including many in this district, invested tens of billions of dollars in securities that Barclays repeatedly assured them were safe investments.  Instead of ensuring that their representations to investors were accurate and transparent, so that investors could make properly informed investment decisions, Barclays and its employees repeatedly misled investors and kept to themselves critical information about the loans in the deals.  Time and again, they knowingly chose to put investors at risk of harm in pursuit of additional profits.  Barclays must be held accountable for its rampant fraud in marketing and selling these RMBS, and so must the individuals at the heart of the fraudulent scheme.”

“The widespread fraud that investment banks like Barclays committed in the packaging and sale of residential mortgage-backed securities injured tens of thousands of investors and significantly contributed to the Financial Crisis of 2008,” said Principal Deputy Associate Attorney General Baer.  “Millions of homeowners were left with homes they could not afford, leaving entire neighborhoods devastated.  The government’s complaint alleges that Barclays fraudulently sold investors RMBS full of mortgages it knew were likely to fail, all while telling investors that the mortgages backing the securities were sound.  Today’s complaint makes clear that the Department of Justice will continue to hold financial institutions, and the individuals who work for them, fully accountable for harming investors and the American public.”

“What is now often referred to as the ‘Great Recession’ started with the bursting of the housing bubble, followed by an enormous drop in U.S. home values, hundreds of bank failures, significant turbulence in financial markets, trillions of dollars of losses to investors, and, most devastatingly, a huge wave of home foreclosures,” said Principal Deputy Assistant Attorney General Mizer, the head of the Justice Department’s Civil Division.  “All of these injuries, and more, were caused at least in part by the type of misconduct alleged in this lawsuit.  We will continue holding both banks and their executives responsible for their role in contributing to this unfortunate period in our history.”

“As the complaint alleges, Barclays knowingly sold investors RMBS backed by loans it knew were made to borrowers who were not creditworthy and which were supported by house appraisals it knew were inflated,” said Special Agent in Charge Perez of FHFA-OIG.  “The massive losses caused by the fraudulent behavior alleged in the complaint deeply affected not only banks and other financial institutions, including Federal Home Loan Banks, Fannie Mae, and Freddie Mac, but also the American taxpayer.  We will continue to work with our law enforcement partners to hold those who have engaged in misconduct fully accountable for their actions.”

As alleged in the complaint, from 2005 through 2007, Barclays, through Menefee and Carroll among others, fraudulently sold tens of billions of dollars of RMBS, and repeatedly misled investors about the quality of the mortgages backing those deals.  The alleged scheme involved no fewer than 36 RMBS deals, securitizing over $31 billion worth of subprime and Alt-A mortgage loans.  The complaint alleges that in publicly-filed offering documents and in direct communications with investors and rating agencies, Barclays systematically and intentionally misrepresented key characteristics of the loans it included in these RMBS deals.

The United States alleges that in selling certificates in these deals, Barclays assured investors that it had excluded “unacceptable” loans and that the loans in the deals had been underwritten under loan origination guidelines intended to ensure the borrowers’ ability to pay.  The complaint alleges Barclays represented to investors that property appraisals were reliable and that the properties were worth enough to avoid loss in the event of default.  Barclays told investors that it conducted “robust,” “thorough,” and “comprehensive” due diligence on the loan pools it securitized, and that it did not securitize non-compliant, delinquent, or “scratch and dent” loans.

As alleged in the complaint, these statements were false.  In reality, the complaint alleges, Barclays’ due diligence on these RMBS deals was a sham.  When it did not skip due diligence altogether, Barclays routinely ignored or kept to itself due diligence results that showed the bank that a considerable percentage of the loans in the deals did not conform to the representations it made to investors.  According to the complaint, Barclays sought to maximize the number of loans it securitized, regardless of how poor the quality of the loans.

The United States alleges that Barclays securitized thousands of loans (worth billions of dollars) that its due diligence vendors graded as materially defective, as well as hundreds more that were delinquent or in default at the time of securitization.  Its vendors told it that large percentages of the loans they reviewed violated the lenders’ underwriting guidelines or the relevant law, or involved borrowers who lacked the ability to repay.  Its vendors also told Barclays that the appraised values of significant percentages of the mortgaged properties were overstated and that thousands of those properties were underwater when they were securitized – meaning the properties were worth less than the loans on the properties.  The complaint alleges that Barclays employees, including Menefee and Carroll, ignored or knowingly overrode these findings, waiving thousands of bad loans into the deals.  On a number of occasions, Barclays even recycled into its deals defective loans it had kicked out of previous deals, without conducting any additional due diligence on the loans. 

In general, the borrowers whose loans backed these deals were significantly less creditworthy than Barclays represented, and these loans defaulted at exceptionally high rates early in the life of the deals.  In addition, as alleged in the complaint, mortgaged properties were systematically worth less than what Barclays represented to investors.  The deals were dismal failures, as more than half of the underlying residential mortgages defaulted, resulting in billions of dollars in losses to investors.  Even investors in AAA-rated tranches of these securities, which were rated as safe as investments in U.S. Treasury bonds, suffered or will suffer significant losses.

Menefee and Carroll were central to Barclays’ allegedly fraudulent scheme.  Menefee was the head banker in charge of due diligence and securitization on all of Barclays’ subprime deals, and he decided which loans would be subject to due diligence, as well as which loans would be removed from loan pool purchases.  Carroll was the head trader on all of Barclays’ principal subprime deals, and he determined which subprime loan pools Barclays would bid on, at what price, and on what terms.  As alleged in the complaint, both men made representations about the characteristics of the loans backing the securities that they knew were false when they made them.

The government’s case is being handled by this Office’s Civil Division.  Senior Counsel F. Franklin Amanat, and Assistant United States Attorneys Katharine E.G. Brooker, Evan P. Lestelle, and Josephine M. Vella are in charge of the prosecution.  They are assisted by the Fraud Section of the Commercial Litigation Branch of the Justice Department’s Civil Division, as well as attorneys, analysts, and other individuals assigned to the Department of Justice’s RMBS Working Group, which also includes special agents from the FHFA-OIG.  Mr. Capers thanks the FHFA-OIG for its assistance in conducting the investigation in this matter.

The complaint was filed under the auspices of the President’s Financial Fraud Enforcement Task Force, which was created in November 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes.  Since its formation, the Task Force has made great strides in facilitating investigation and prosecution of financial crimes; in enhancing coordination and cooperation among federal, state, and local authorities; in addressing discrimination in the lending and financial markets; and in conducting outreach to the public, to victims, to financial institutions, and to other organizations.    

The RMBS Working Group, part of the Task Force, was established by the Attorney General in late January 2012.  The Working Group has been dedicated to initiating, organizing, and advancing new and existing investigations by federal and state authorities into fraud and abuse in the RMBS market that helped precipitate the 2008 Financial Crisis.  The Working Group has to date recovered tens of billions of dollars in civil penalty settlements and consumer relief from banks and other entities that are alleged to have committed fraud in connection with the issuance of RMBS.  To report RMBS fraud, go to: http://www.stopfraud.gov/rmbs.html.

The Individual Defendants:

PAUL K. MENEFEE
Age:  47
Residence:  Austin, Texas

JOHN T. CARROLL
Age:  49
Residence:  Port Washington, New York

E.D.N.Y. Docket No. 16-CV-7057 (KAM/RLM)

BROOKLYN, N.Y. – Stephen Holsey, a senior consultant to Strategic Development Corporation (SDC), an Oklahoma corporation, was arrested yesterday on charges of wire fraud conspiracy in connection with a more than $1.5 million “advance fee” scheme.  Essentially, Holsey and his co-conspirators offered loans through SDC to developers who were looking to finance large-scale construction projects, in exchange for a ten-percent fee, even though SDC lacked the necessary funds to finance these projects.  Holsey’s initial appearance for removal proceedings to the Eastern District of New York took place yesterday before United States Magistrate Judge Steven P. Shreder at the United States Courthouse, 101 North 5th Street, Muskogee, Oklahoma.

The charges were announced by Robert L. Capers, United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge of the Federal Bureau of Investigation, New York Field Office (FBI).

“As alleged, the defendant and his co-conspirators used lies and deceit to induce unsuspecting real estate developers in need of financing for their projects to pay more than $1.5 million in fees in exchange for loans that conspirators knew they could never finance,” stated United States Attorney Capers.  “We are committed to holding accountable fraudsters who seek to prey on businesses for personal gain.”   Mr. Capers extended his appreciation to the Federal Bureau of Investigation, the agency responsible for leading the government’s investigation.

“In a time when new construction projects meant potential jobs and employment for many, the subjects in this case allegedly dangled that prospect in front of companies so they could finance their lavish lifestyles.  Fraud and theft take on many forms, and the FBI and our partners are focused on finding these crimes wherever scammers try to hide them,” stated FBI Assistant Director-in-Charge Sweeney.

According to the complaint unsealed yesterday, between May 2010 and March 2012, Holsey and his co-conspirators offered loans through SDC to developers to finance large-scale construction projects.  Specifically, Holsey and his co-conspirators told developers that: (i) SDC had funds available to provide financing for the developers’ projects in exchange for a fee, payable in advance, of ten percent of the loan amount; (ii) the ten-percent fee would be placed in an attorney escrow account until the loan closed; and (iii) the ten-percent fee would be refunded if SDC did not fund the project.  Contrary to these representations: (i) SDC did not have the funds necessary to provide financing for the developers’ projects; (ii) the ten-perfect fees were transferred almost immediately, prior to the loan closings, from the attorney escrow account to accounts controlled by Holsey and his co-conspirators; and (iii) despite the lack of funding, the fees were not refunded to the developers and the developers’ associates when SDC did not fund the projects.  In sum, Holsey and his co-conspirators collected approximately $1.5 million in the form of fees and investments from approximately 15 individuals and corporate entities and used those funds to, among other things, pay for personal living expenses and funnel money to other businesses owned or controlled by Holsey and his co-conspirators.

The charges in the complaint are merely allegations, and the defendant is presumed innocent unless and until proven guilty.  If convicted, Holsey faces a maximum sentence of 20 years’ imprisonment.

The government’s case is being prosecuted by the Office’s Business and Securities Fraud Section.  Assistant United States Attorney Tyler Smith is responsible for the prosecution.

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

The Defendant:

STEPHEN HOLSEY
Age:  69
Beggs, Oklahoma

E.D.N.Y. Docket No. 16-M-1113

Earlier today, at the federal courthouse in Brooklyn, New York, Paul Rivera, a leader of a Brownsville-based gang, was sentenced to life in prison, plus a consecutive sentence of 20 years, following his conviction after trial in June 2015 on charges of racketeering, murder, sex trafficking, narcotics trafficking, money laundering, and witness tampering.  These charges arose out of the defendant’s participation in and leadership of a gang known as “Together Forever” or the rap group “TF Mafia” (also referred to as “TF”) that for many years engaged in criminal activity in areas including the Brownsville neighborhood of Brooklyn, New York, an area victimized by a high rate of gang and drug related violent crime.

The sentence was announced by Robert L. Capers, United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).

“With this sentence, I hope that victims of Rivera’s crimes will have some sense of closure,” stated United States Attorney Capers.  “The defendant’s involvement in violent gang activity, including drug trafficking, the prostitution of young women and girls, and a senseless murder, was a scourge on the community.  This case again demonstrates our Office’s unwavering commitment to investigate and prosecute those who perpetrate such crimes.”  Mr. Capers extended his thanks to the Internal Revenue Service – Criminal Investigation, New York City Police Department, the Pennsylvania State Police, the New Jersey State Police, and the United States Attorney’s Office for the Middle District of Pennsylvania, for their assistance in the investigation and prosecution of this case.

FBI Assistant Director-in-Charge Sweeney stated, “The sum of crimes the suspect committed in this investigation are proof of his complete disregard for obeying the laws governing everyone else.  His goal was money and power, and he used intimidation, threats and even murder to assert his dominance over others.  His victims and the communities he operated in can breathe a sigh of relief that he will spend the rest of his life in federal prison.”

As proven at trial, TF has operated in various neighborhoods of Brooklyn well as in other parts of New York and in Pennsylvania since the 1980s.  In connection with his leadership of TF, Rivera killed Robert Barber in the summer of 2011 because he and others in the gang perceived Barber, who was a member of a rival gang, as a threat to TF’s control of narcotics sales in Brownsville.  On the evening of August 22, 2011, Rivera observed Barber walking outside the tattoo shop run by Rivera, which was located at 361 Sutter Avenue in Brownsville.  Rivera took a firearm that had been supplied by another member of TF, stood in the entrance to the tattoo shop, and shot Barber once, killing him.  Rivera later was paid, in the form of money and heroin, for the murder by a fellow TF member.

The jury also found the defendant guilty of interstate prostitution and sex trafficking, including sex trafficking by force, fraud, or coercion, and sex trafficking of one or more minors, which activities were committed as part of TF’s illegal activities.  At trial, two victims testified about their involvement with TF, including one victim who became involved with TF when she was 14 years old, and another who testified that she began working as a prostitute for the defendants when she was 15 years old. 

The counts of conviction also included narcotics trafficking conspiracy, involving cocaine base, heroin, cocaine, and marijuana, and firearms offenses, including use of a firearm to cause the death of Robert Barber, as well as witness tampering and attempted obstruction of justice related to Rivera’s efforts to convince a witness to cease cooperating with the government.

The government’s case is being prosecuted by Assistant United States Attorneys Taryn Merkl, Alixandra Smith, and Michael Robotti.

The Defendants: PAUL RIVERA
Age:  49
Brooklyn, NY

E.D.N.Y. Docket No. 13-149 (KAM)

Robert L. Capers, United States Attorney for the Eastern District of New York, and Judith A. Enck, Regional Administrator, United States Environmental Protection Agency (EPA) Region 2, announced today the filing of a complaint against the State of New York; New York State Office of Parks, Recreation and Historic Preservation (“OPRHP”); and the Palisades Interstate Park Commission (“Commission”).  A Consent Judgment has been lodged to resolve the allegations in the complaint that Defendants failed to close Large Capacity Cesspools located in New York State parks in violation of the Safe Drinking Water Act.    

The complaint alleges that the Defendants violated the Safe Drinking Water Act (“SDWA”) in their continued ownership and operation of 54 Large Capacity Cesspools (“Prohibited LCCs”) at various New York State parks for years beyond the SDWA regulatory deadline by which they were required to close them.  LCCs are cesspools that receive untreated sanitary waste, including human excreta, which have an open bottom or perforated sides, and have the capacity to serve 20 or more persons a day.  Such untreated waste is high in harmful nutrients, such as nitrogen, that can compromise ground and surface water quality.  Nutrient pollution of the ground and surface waters in and surrounding Suffolk County is a longstanding problem that threatens the area’s water quality and ecosystem.  

Congress enacted the SDWA to protect the nation’s drinking water sources, including the regulation of Large Capacity Cesspools to prevent them from contaminating underground sources of drinking water.  Under the SDWA regulations, owners and operators of LCCs were required to close them by April 5, 2005.  The Complaint alleges that Defendants failed to close the Prohibited LCCs by April 5, 2005, and that the Prohibited LCCs, primarily located at Defendants’ comfort stations, continued to operate after April 5, 2005.  The majority of the Prohibited LCCs are located in Defendants’ parks on Long Island. 

Many of our area’s public water systems rely on underground sources of water for their supply. Underground injection wells, including cesspools, pose a risk to the public because they can contaminate underground drinking water sources and the public water systems that use those sources.  Thirty-six of the Prohibited LCCs are above the Nassau/Suffolk County Sole Source Aquifer, which supplies most of the drinking water for the population of Long Island.  Nine of the Prohibited LCCs, which are located in Broome and Orange Counties, are above the Clinton Street-Ballpark and the Ramapo Sole Source Aquifers, which supply most of the drinking water for the populations of the Broome and Orange County areas.  

Under the Consent Judgment, Defendants will close the Prohibited LCCs or convert them to lawful non-LCC uses by July 2019.  The estimated cost of these measures is $8,800,000.  Most of the Long Island Prohibited LCCs will be closed by September 2017 and the remaining Prohibited LCCs on Long Island will be closed by September 2018.  Defendants have already implemented certain measures to achieve compliance with the SDWA, including closing six of the Prohibited LCCs and submitting closure plans for 29 of the remaining Prohibited LCCs.  The Consent Judgment also requires Defendants to pay a $150,000 civil penalty.

In addition, under the terms of the settlement, Defendants will undertake Supplemental Environmental Projects with a total estimated value of $1,020,000 that are intended to reduce the quantity of nutrients harmful to water quality, including nitrogen, from entering the local groundwater at seven of Defendants’ Long Island parks.  At Robert Moses State Park, Sunken Meadow State Park, Wildwood State Park, and Caumsett State Historic Park, Defendants will install urine separation systems that divert the collected urine to a wastewater treatment facility for treatment, rather than discharging it into the ground.  At Connetquot River State Park Preserve and Hallock State Park, Defendants will install nitrogen reducing technology for sanitary waste.  At Captree State Park, Defendants will: (1) install a constructed wetland for sanitary waste treatment to benefit the Main Comfort Station and Restaurant, (2) install green technology site improvements for stormwater treatment, and (3) retrofit the existing stormwater drainage facilities with a bioretention system.

“The United States brought this action to remedy long-standing violations of the Safe Drinking Water Act and to protect New York’s drinking water from harmful nutrient pollution that poses a risk both to public health and the natural environment,” said United States Attorney Capers.  “This office will continue to vigorously enforce violations of the Safe Drinking Water Act to protect the public from contamination of its water supply.”

"Public parks and water pollution don't go together," said EPA Regional Administrator Judith A. Enck. "After years of being out of compliance with federal law, New York State will finally close the numerous cesspools found in state parks, helping protect groundwater from nitrogen and other pollutants."

The action is entitled United States v. State of New York, et al., Civil

Action No. 2:16-CV-6989 (Wexler, J.), (Shields, M.J.). Following a 30-day public comment period and review of any comments received, the United States will determine whether to move the Court to enter the consent judgment.

Assistant United States Attorney Matthew Silverman is in charge of the litigation, with assistance from Lauren Fischer, Assistant Regional Counsel, Water and General Law Branch, EPA Region 2, Nicole Kraft, Section Chief, Water Compliance Branch, EPA Region 2, and Lisa Kim Pelcyger, Environmental Engineer, Water Compliance Branch, EPA Region 2.

Odebrecht S.A. (Odebrecht), a global construction conglomerate based in Brazil, and Braskem S.A. (Braskem), a Brazilian petrochemical company, pleaded guilty today and agreed to pay a combined total penalty of at least $3.5 billion to resolve charges with authorities in the United States, Brazil and Switzerland arising out of their schemes to pay hundreds of millions of dollars in bribes to government officials around the world. 

Deputy Assistant Attorney General Sung-Hee Suh of the Justice Department’s Criminal Division, U.S. Attorney Robert L. Capers of the Eastern District of New York, Assistant Director Stephen Richardson of the FBI’s Criminal Investigative Division and Assistant Director in Charge William F. Sweeney of the FBI’s New York Field Office made the announcement.

“Odebrecht and Braskem used a hidden but fully functioning Odebrecht business unit—a ‘Department of Bribery,’ so to speak—that systematically paid hundreds of millions of dollars to corrupt government officials in countries on three continents,” said Deputy Assistant Attorney General Suh.  “Such brazen wrongdoing calls for a strong response from law enforcement, and through a strong effort with our colleagues in Brazil and Switzerland, we have seen just that.  I hope that today’s action will serve as a model for future efforts.”

“These resolutions are the result of an extraordinary multinational effort to identify, investigate and prosecute a highly complex and long-lasting corruption scheme that resulted in the payment by the defendant companies of close to a billion dollars in bribes to officials at all levels of government in many countries,” said U.S. Attorney Capers.  “In an attempt to conceal their crimes, the defendants used the global financial system – including the banking system in the United States – to disguise the source and disbursement of the bribe payments by passing funds through a series of shell companies.  The message sent by this prosecution is that the United States, working with its law enforcement partners abroad, will not hesitate to hold responsible those corporations and individuals who seek to enrich themselves through the corruption of the legitimate functions of government, no matter how sophisticated the scheme.”

“This case illustrates the importance of our partnerships and the dedicated personnel who work to bring to justice those who are motivated by greed and act in their own best interest,” said Assistant Director Richardson.  “The FBI will not stand by idly while corrupt individuals threaten a fair and competitive economic system or fuel criminal enterprises.  Our commitment to work alongside our foreign partners to root out corruption across the globe is unwavering and we thank our Brazilian and Swiss partners for their tireless work in this effort.”

“No matter what the reason, when foreign officials receive bribes, they threaten our national security and the international free market system in which we trade,” said Assistant Director in Charge Sweeney.  “Just because they’re out of our sight, doesn’t mean they’re beyond our reach.  The FBI will use all available resources to put an end to this type of corrupt behavior.”

Odebrecht pleaded guilty to a one-count criminal information filed today by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office in the U.S. District Court for the Eastern District of New York, charging the company with conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA).  Odebrecht agreed that the appropriate criminal fine is $4.5 billion, subject to further analysis of the company’s ability to pay the total global penalties.  In related proceedings, Odebrecht also settled with the Ministerio Publico Federal in Brazil and the Office of the Attorney General in Switzerland. 

Under the plea agreement, the United States will credit the amount that Odebrecht pays to Brazil and Switzerland over the full term of their respective agreements, with the United States and Switzerland receiving 10 percent each of the principal of the total criminal fine and Brazil receiving the remaining 80 percent.  The fine is subject to an inability to pay analysis to be completed by the Department of Justice and Brazilian authorities on or before March 31, 2017, because Odebrecht has represented it is only able to pay approximately $2.6 billion over the course of the respective agreements.  Sentencing has been scheduled for April 17, 2017. 

Braskem, whose American Depositary Receipts (ADRs) are publicly traded on the New York Stock Exchange, separately pleaded guilty to a one-count criminal information filed in the Eastern District of New York charging it with conspiracy to violate the anti-bribery provisions of the FCPA.  Braskem agreed to pay a total criminal penalty of $632 million.  Sentencing has not yet been scheduled.  In related proceedings, Braskem also settled with the U.S. Securities and Exchange Commission (SEC), the Ministerio Publico Federal in Brazil and the Office of the Attorney General in Switzerland.  Under the terms of its resolution with the SEC, Braskem agreed to a total of $325 million in disgorgement of profits.  Braskem agreed to pay Brazilian authorities 70 percent of the total criminal penalty and agreed to pay the Swiss authorities 15 percent.  The department has agreed to credit the criminal penalties paid to Brazilian and Swiss authorities as part of its agreement with the company.  The United States will receive $94.8 million, an amount equal to 15 percent of the total criminal fines paid by Braskem. 

Under their respective plea agreements, Odebrecht and Braskem are required to continue their cooperation with law enforcement, including in connection with the investigations and prosecutions of individuals responsible for the criminal conduct.  Odebrecht and Braskem also agreed to adopt enhanced compliance procedures and to retain independent compliance monitors for three years.  The cases are assigned to U.S. District Judge Raymond J. Dearie of the Eastern District of New York.

The combined total amount of United States, Brazilian and Swiss criminal and regulatory penalties paid by Braskem will be approximately $957 million.  The combined total amount of penalties imposed against Odebrecht will be at least $2.6 billion and up to $4.5 billion.  With a combined total of at least $3.5 billion, today’s resolutions with Odebrecht and Braskem are the largest-ever global foreign bribery resolution.     

The Bribery Schemes

According to its admissions, Odebrecht engaged in a massive and unparalleled bribery and bid-rigging scheme for more than a decade, beginning as early as 2001.  During that time, Odebrecht paid approximately $788 million in bribes to government officials, their representatives and political parties in a number of countries in order to win business in those countries.  The criminal conduct was directed by the highest levels of the company, with the bribes paid through a complex network of shell companies, off-book transactions and off-shore bank accounts. 

As part of the scheme, Odebrecht and its co-conspirators created and funded an elaborate, secret financial structure within the company that operated to account for and disburse bribe payments to foreign government officials and political parties.  By 2006, the development and operation of this secret financial structure had evolved such that Odebrecht established the “Division of Structured Operations,” which effectively functioned as a stand-alone bribe department within Odebrecht and its related entities.  Until approximately 2009, the head of the Division of Structured Operations reported to the highest levels within Odebrecht, including to obtain authorization to approve bribe payments.  After 2009, this responsibility was delegated to certain company business leaders in Brazil and the other jurisdictions.  To conceal its activities, the Division of Structured Operations utilized an entirely separate and off-book communications system, which allowed members of the Division of Structured Operations to communicate with one another and with outside financial operators and other co-conspirators about the bribes via secure emails and instant messages, using codenames and passwords. 

The Division of Structured Operations managed the “shadow” budget for the Odebrecht bribery operation via a separate computer system that was used to request and process bribe payments as well as to generate and populate spreadsheets that tracked and internally accounted for the shadow budget.  These funds for the company’s sophisticated bribery operation were generated by the Odebrecht Finance Department through a variety of methods, as well as by certain Odebrecht subsidiaries, including Braskem.  The funds were then funneled by the Division of Structured Operations to a series of off-shore entities that were not included on Odebrecht’s balance sheet as related entities.  The Division of Structured Operations then directed the disbursement of the funds from the off-shore entities to the bribe recipient, through the use of wire transfers through one or more of the off-shore entities, as well as through cash payments both inside and outside Brazil, which were sometimes delivered using packages or suitcases left at predetermined locations. 

Odebrecht, its employees and agents took a number of steps while in the United States to further the scheme.  For instance, in 2014 and 2015, while located in Miami, two Odebrecht employees engaged in conduct related to certain projects in furtherance of the scheme, including meetings with other co-conspirators to plan actions to be taken in connection with the Division of Structured Operations, the movement of criminal proceeds and other criminal conduct.  In addition, some of the off-shore entities used by the Division of Structured Operations to hold and disburse unrecorded funds were established, owned and/or operated by individuals located in the United States.  In all, this conduct resulted in corrupt payments and/or profits totaling approximately $3.336 billion.

Braskem also admitted to engaging in a wide-ranging bribery scheme and acknowledged the pervasiveness of its conduct.  Between 2006 and 2014, Braskem paid approximately $250 million into Odebrecht’s secret, off-book bribe payment system.  Using the Odebrecht system, Braskem authorized the payment of bribes to politicians and political parties in Brazil, as well as to an official at Petróleo Brasileiro S.A. – Petrobras (Petrobras), the state-controlled oil company of Brazil.  In exchange, Braskem received various benefits, including: preferential rates from Petrobras for the purchase of raw materials used by the company; contracts with Petrobras; and favorable legislation and government programs that reduced the company’s tax liabilities in Brazil.  This conduct resulted in corrupt payments and/or profits totaling approximately $465 million.

The Corporate Resolutions

The department reached these resolutions with Odebrecht and Braskem based on a number of factors, including: the failure to voluntarily disclose the conduct that triggered the investigation; the nature and seriousness of the offense, which spanned many years, involved the highest levels of the companies, occurred in multiple countries and involved sophisticated schemes to bribe high-level government officials; the lack of an effective compliance and ethics program at the time of the conduct; and credit for each company’s respective cooperation.  The companies also engaged in remedial measures, including terminating and disciplining individuals who participated in the misconduct, adopting heightened controls and anti-corruption compliance protocols and significantly increasing the resources devoted to compliance.

The criminal penalty for Odebrecht reflects a 25 percent reduction off the bottom of the U.S. Sentencing Guidelines fine range because of Odebrecht’s full cooperation with the government’s investigation, while the criminal penalty for Braskem reflects a 15 percent reduction off the bottom of the U.S. Sentencing Guidelines as a result of its partial cooperation.

Odebrecht has represented its ability to pay a maximum of $2.6 billion of the total fine amount.  The department and Brazilian authorities are engaged in further analysis regarding the company’s claimed inability to pay, which will be completed on or before March 31, 2017.

*          *          *

The FBI’s New York Field Office is investigating the case.  Chief Dan Kahn and Trial Attorneys Christopher Cestaro, Sarah Edwards, David Fuhr, Kevin R. Gingras, Lorinda Laryea and David Last of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Julia Nestor and Alixandra Smith of the Eastern District of New York are prosecuting the case. 

The Criminal Division’s Office of International Affairs also provided substantial assistance.  The SEC and the Ministerio Publico Federal in Brazil the Departamento de Polícia Federal and the Office of the Attorney General in Switzerland provided significant cooperation.

The Criminal Division’s Fraud Section is responsible for investigating and prosecuting all FCPA matters.  Additional information about the Justice Department’s Fraud Section FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.

BROOKLYN, N.Y. – Odebrecht S.A. (Odebrecht), a global construction conglomerate based in Brazil, and Braskem S.A. (Braskem), a Brazilian petrochemical company, pleaded guilty today and agreed to pay a combined total penalty of at least $3.5 billion to resolve charges with authorities in the United States, Brazil and Switzerland arising out of their schemes to pay hundreds of millions of dollars in bribes to government officials around the world.

U.S. Attorney Robert L. Capers of the Eastern District of New York, Deputy Assistant Attorney General Sung-Hee Suh of the Justice Department’s Criminal Division, Assistant Director Stephen Richardson of the FBI’s Criminal Investigative Division and Assistant Director in Charge William F. Sweeney of the FBI’s New York Field Office made the announcement.

"These resolutions are the result of an extraordinary multinational effort to identify, investigate and prosecute a highly complex and long-lasting corruption scheme that resulted in the payment by the defendant companies of close to a billion dollars in bribes to officials at all levels of government in many countries," said U.S. Attorney Capers. "In an attempt to conceal their crimes, the defendants used the global financial system – including the banking system in the United States – to disguise the source and disbursement of the bribe payments by passing funds through a series of shell companies. The message sent by this prosecution is that the United States, working with its law enforcement partners abroad, will not hesitate to hold responsible those corporations and individuals who seek to enrich themselves through the corruption of the legitimate functions of government, no matter how sophisticated the scheme."

"Odebrecht and Braskem used a hidden but fully functioning Odebrecht business unit—a ‘Department of Bribery,’ so to speak—that systematically paid hundreds of millions of dollars to corrupt government officials in countries on three continents," said Deputy Assistant Attorney General Suh. "Such brazen wrongdoing calls for a strong response from law enforcement, and through a strong effort with our colleagues in Brazil and Switzerland, we have seen just that. I hope that today’s action will serve as a model for future efforts."

"This case illustrates the importance of our partnerships and the dedicated personnel who work to bring to justice those who are motivated by greed and act in their own best interest," said FBI Assistant Director Richardson. "The FBI will not stand by idly while corrupt individuals threaten a fair and competitive economic system or fuel criminal enterprises. Our commitment to work alongside our foreign partners to root out corruption across the globe is unwavering and we thank our Brazilian and Swiss partners for their tireless work in this effort."

"No matter what the reason, when foreign officials receive bribes, they threaten our national security and the international free market system in which we trade," said FBI Assistant Director in Charge Sweeney. "Just because they’re out of our sight, doesn’t mean they’re beyond our reach. The FBI will use all available resources to put an end to this type of corrupt behavior."

Odebrecht pleaded guilty to a one-count criminal information filed today by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office in the U.S. District Court for the Eastern District of New York, charging the company with conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA). Odebrecht agreed that the appropriate criminal fine is $4.5 billion, subject to further analysis of the company’s ability to pay the total global penalties. In related proceedings, Odebrecht also settled with the Ministerio Publico Federal in Brazil and the Office of the Attorney General in Switzerland.

Under the plea agreement, the United States will credit the amount that Odebrecht pays to Brazil and Switzerland over the full term of their respective agreements, with the United States and Switzerland receiving 10 percent each of the principal of the total criminal fine and Brazil receiving the remaining 80 percent. The fine is subject to an inability to pay analysis to be completed by the Department of Justice and Brazilian authorities on or before March 31, 2017, because Odebrecht has represented it is only able to pay approximately $2.6 billion over the course of the respective agreements. Sentencing has been scheduled for April 17, 2017.

Braskem, whose American Depositary Receipts (ADRs) are publicly traded on the New York Stock Exchange, separately pleaded guilty to a one-count criminal information filed in the Eastern District of New York charging it with conspiracy to violate the anti-bribery provisions of the FCPA. Braskem agreed to pay a total criminal penalty of $632 million. Sentencing has been scheduled for January 2017. In related proceedings, Braskem also settled with the U.S. Securities and Exchange Commission (SEC), the Ministerio Publico Federal in Brazil and the Office of the Attorney General in Switzerland. Under the terms of its resolution with the SEC, Braskem agreed to a total of $325 million in disgorgement of profits. Braskem agreed to pay Brazilian authorities 70 percent of the total criminal penalty and agreed to pay the Swiss authorities 15 percent. The department has agreed to credit the criminal penalties paid to Brazilian and Swiss authorities as part of its agreement with the company. The United States will receive $94.8 million, an amount equal to 15 percent of the total criminal fines paid by Braskem.

Under their respective plea agreements, Odebrecht and Braskem are required to continue their cooperation with law enforcement, including in connection with the investigations and prosecutions of individuals responsible for the criminal conduct. Odebrecht and Braskem also agreed to adopt enhanced compliance procedures and to retain independent compliance monitors for three years. The cases are assigned to U.S. District Judge Raymond J. Dearie of the Eastern District of New York.

The combined total amount of United States, Brazilian and Swiss criminal and regulatory penalties paid by Braskem will be approximately $957 million. The combined total amount of penalties imposed against Odebrecht will be at least $2.6 billion and up to $4.5 billion. With a combined total of at least $3.5 billion, today’s resolutions with Odebrecht and Braskem are the largest-ever global foreign bribery resolution.

The Bribery Schemes

According to its admissions, Odebrecht engaged in a massive and unparalleled bribery and bid-rigging scheme for more than a decade, beginning as early as 2001. During that time, Odebrecht paid approximately $788 million in bribes to government officials, their representatives and political parties in a number of countries in order to win business in those countries. The criminal conduct was directed by the highest levels of the company, with the bribes paid through a complex network of shell companies, off-book transactions and off-shore bank accounts.

As part of the scheme, Odebrecht and its co-conspirators created and funded an elaborate, secret financial structure within the company that operated to account for and disburse bribe payments to foreign government officials and political parties. By 2006, the development and operation of this secret financial structure had evolved such that Odebrecht established the "Division of Structured Operations," which effectively functioned as a stand-alone bribe department within Odebrecht and its related entities. Until approximately 2009, the head of the Division of Structured Operations reported to the highest levels within Odebrecht, including to obtain authorization to approve bribe payments. After 2009, this responsibility was delegated to certain company business leaders in Brazil and the other jurisdictions. To conceal its activities, the Division of Structured Operations utilized an entirely separate and off-book communications system, which allowed members of the Division of Structured Operations to communicate with one another and with outside financial operators and other co-conspirators about the bribes via secure emails and instant messages, using codenames and passwords.

The Division of Structured Operations managed the "shadow" budget for the Odebrecht bribery operation via a separate computer system that was used to request and process bribe payments as well as to generate and populate spreadsheets that tracked and internally accounted for the shadow budget. These funds for the company’s sophisticated bribery operation were generated by the Odebrecht Finance Department through a variety of methods, as well as by certain Odebrecht subsidiaries, including Braskem. The funds were then funneled by the Division of Structured Operations to a series of off-shore entities that were not included on Odebrecht’s balance sheet as related entities. The Division of Structured Operations then directed the disbursement of the funds from the off-shore entities to the bribe recipient, through the use of wire transfers through one or more of the off-shore entities, as well as through cash payments both inside and outside Brazil, which were sometimes delivered using packages or suitcases left at predetermined locations.

Odebrecht, its employees and agents took a number of steps while in the United States to further the scheme. For instance, in 2014 and 2015, while located in Miami, two Odebrecht employees engaged in conduct related to certain projects in furtherance of the scheme, including meetings with other co-conspirators to plan actions to be taken in connection with the Division of Structured Operations, the movement of criminal proceeds and other criminal conduct. In addition, some of the off-shore entities used by the Division of Structured Operations to hold and disburse unrecorded funds were established, owned and/or operated by individuals located in the United States. In all, this conduct resulted in corrupt payments and/or profits totaling approximately $3.336 billion.

Braskem also admitted to engaging in a wide-ranging bribery scheme and acknowledged the pervasiveness of its conduct. Between 2006 and 2014, Braskem paid approximately $250 million into Odebrecht’s secret, off-book bribe payment system. Using the Odebrecht system, Braskem authorized the payment of bribes to politicians and political parties in Brazil, as well as to an official at Petróleo Brasileiro S.A. – Petrobras (Petrobras), the state-controlled oil company of Brazil. In exchange, Braskem received various benefits, including: preferential rates from Petrobras for the purchase of raw materials used by the company; contracts with Petrobras; and favorable legislation and government programs that reduced the company’s tax liabilities in Brazil. This conduct resulted in corrupt payments and/or profits totaling approximately $465 million.

The Corporate Resolutions

The department reached these resolutions with Odebrecht and Braskem based on a number of factors, including: the failure to voluntarily disclose the conduct that triggered the investigation; the nature and seriousness of the offense, which spanned many years, involved the highest levels of the companies, occurred in multiple countries and involved sophisticated schemes to bribe high-level government officials; the lack of an effective compliance and ethics program at the time of the conduct; and credit for each company’s respective cooperation. The companies also engaged in remedial measures, including terminating and disciplining individuals who participated in the misconduct, adopting heightened controls and anti-corruption compliance protocols and significantly increasing the resources devoted to compliance.

The criminal penalty for Odebrecht reflects a 25 percent reduction off the bottom of the U.S. Sentencing Guidelines fine range because of Odebrecht’s full cooperation with the government’s investigation, while the criminal penalty for Braskem reflects a 15 percent reduction off the bottom of the U.S. Sentencing Guidelines as a result of its partial cooperation.

Odebrecht has represented its ability to pay a maximum of $2.6 billion of the total fine amount. The department and Brazilian authorities are engaged in further analysis regarding the company’s claimed inability to pay, which will be completed on or before March 31, 2017.

* * *

The case is being prosecuted by Assistant U.S. Attorneys Alixandra Smith and Julia Nestor of the Business and Securities Fraud Section of the U.S. Attorney’s Office for the Eastern District of New York, and FCPA Chief Dan Kahn and Trial Attorneys Christopher Cestaro, Sarah Edwards, David Fuhr, Kevin R. Gingras, Lorinda Laryea and David Last of the Criminal Division’s Fraud Section. The FBI’s International Corruption squad in New York investigated this case.

The Criminal Division’s Office of International Affairs also provided substantial assistance. The SEC and the Ministerio Publico Federal in Brazil the Departamento de Polícia Federal and the Office of the Attorney General in Switzerland provided significant cooperation.

Today, at the federal courthouse in Central Islip, New York, Khalif House pleaded guilty to an indictment charging him with conspiracy to commit armed robberies in connection with 40 knife-point robberies that he and his co-conspirators committed between February 9, 2015 and June 7, 2016.  The announcement of the guilty plea was made by Robert L. Capers, United States Attorney for the Eastern District of New York.

As part of the plea, House admitted his role in each of the robberies which occurred in Nassau, Queens and Suffolk Counties, including at Carvel, Dunkin Donuts, Subway and 7-Eleven stores (a complete list of the robberies that House allocuted to is attached hereto as Exhibit 1).  On almost every occasion, House robbed stores wearing mismatched gloves, with his face covered, while brandishing a knife.  During one of the robberies, House chased down a fleeing employee, dragging her back into the premises to prevent her escape.  On another occasion, in order to avoid apprehension, House cut an employee, who attempted to disarm him during a robbery.  House was ultimately apprehended in Floral Park, on June 8, 2016, following the attempted robbery of a Dollar Tree store located in Queens.  When the Floral Park Police located House, he was hiding in a stranger’s van, and in possession of, among other things, mismatched gloves.

House’s arrest and conviction were the result of a joint investigation conducted by the Federal Bureau of Investigation’s Long Island Gang Task Force, the Nassau County Police Department, the New York City Police Department, and the Suffolk County Police Department.  Additionally, a number of other law enforcement agencies assisted the investigation, including the Floral Park Police Department.

“The defendant engaged in a widespread and dangerous pattern of knife-point commercial robberies, which terrorized the communities and jeopardized the safety of the employees of more than three-dozen local businesses.  As a result of the diligent work and collaboration of federal and local law enforcement authorities, the defendant will now be held accountable for his actions,” stated United States Attorney Capers.  Mr. Capers extended his grateful appreciation to all of the participating law enforcement agencies for their invaluable assistance in this case.

House pleaded guilty before United States District Judge Joan M. Azrack.  When sentenced, House will face a maximum of 20 years in federal prison. 

The government’s case is being handled by the Office’s Long Island Criminal Section.  Assistant United States Attorney Mark Misorek is in charge of the prosecution.

The Defendant:

Name: KHALIF HOUSE
Age: 24
Residence: Hempstead, New York

E.D.N.Y. Docket No. 16-CR-370 (JMA)

BROOKLYN, N.Y. – John Desantis, a New York resident, and Dwayne Malloy, a New Jersey resident, the former owner and president, respectively, of Premier Links, Inc. (Premier Links), a Staten Island-based company, were arrested today on charges of securities fraud and wire fraud.  From approximately 2005 to 2012, Desantis and Malloy operated Premier Links as an unregistered broker-dealer, and through it stole more than $9 million from more than 300 investors in approximately 40 states.[1]  The defendants are scheduled to be arraigned before United States Magistrate Judge Lois Bloom, at the United States Courthouse, 225 Cadman Plaza East, Brooklyn, New York.

The charges were announced by Robert L. Capers, United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge of the Federal Bureau of Investigation, New York Field Office (FBI).

“As alleged, the defendants preyed on unsuspecting investors and stole their money after conning the investors into buying shares of worthless companies.  Now, their day of reckoning has arrived,” stated United States Attorney Capers.  “Today’s arrests demonstrate this Office’s continuing commitment to protecting the investing public from those who seek to swindle investors for personal gain.”   Mr. Capers extended his appreciation to the Federal Bureau of Investigation, the agency responsible for leading the government’s investigation, and thanked the U.S. Securities and Exchange Commission (SEC) for its assistance and cooperation during the investigation.

“As alleged, John Desantis and Dwayne Malloy operated an unregistered broker-dealer operation that preyed on innocent investors who were targeted in a boiler-room style investment scheme to invest in securities and promised big returns.  Instead, Desantis and Mallory used the investors’ money for their own pocketbook to the tune of $9.3 million.  Ensuring that all investors have factual information and our markets are fair is exactly why the FBI continues to investigate and bring those to justice who perpetrate securities fraud schemes,” stated FBI Assistant Director-in-Charge Sweeney.

According to the superseding indictment unsealed this morning and other documents filed publicly in the case, Premier Links operated from a Staten Island office and purported to sell stock to investors.  However, the defendants and others at Premier Links were never registered as broker-dealers with the SEC.  Instead, Premier Links operated as a “boiler room,” using “cold callers” and other means to entice victims into investing their money in securities with promises of outsized returns.  The defendants located their victims by using a printed list, which one of the defendants referred to as “the suckers list.”  Once the victims wired or mailed money to Premier Links, the defendants and other co-conspirators typically stole the funds for their personal use.  Bank records show that the defendants converted the investors’ money into cash through over 900 ATM and teller withdrawals.  They also wrote checks to themselves and made personal purchases.  To date, investigators have identified at least $9.3 million in investor losses from the scheme.

The criminal case has been assigned to United States District Judge Eric N. Vitaliano.  If convicted, each defendant faces up to 20 years’ imprisonment, as well as a fine equal to double the investors’ losses, and mandatory restitution to the victims.

The government’s case is being prosecuted by the Office’s Business and Securities Fraud Section.  Assistant United States Attorneys Jack Dennehy and Alexander Mindlin are responsible for the prosecution.

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

The Defendants:

JOHN DESANTIS
Age: 40
Staten Island, New York

DWAYNE MALLOY
Age: 41
Hazlet, New Jersey

E.D.N.Y. Docket No. 15 CR 135 (S-1) (ENV)

---

[1] The charges announced today are allegations, and the defendants are presumed innocent unless and until proven guilty.

BROOKLYN, N.Y. – An eight-count indictment was unsealed this morning in federal court in Brooklyn, New York, charging seven defendants, all of whom are or were formerly affiliated with Platinum Partners L.P. (Platinum), a purportedly $1.7 billion hedge fund based in New York, New York.  The indicted individuals are: Mark Nordlicht, the founder and Chief Investment Officer of Platinum; David Levy, the co-Chief Investment Officer of Platinum; Uri Landesman, the former Managing Partner and President of Platinum; Joseph SanFilippo, the Chief Financial Officer of Platinum’s signature hedge fund; Joseph Mann, a member of Platinum’s Investor Relations and Finance Departments; Daniel Small, a former Managing Director and co-Portfolio Manager of Platinum; and Jeffrey Shulse, the former Chief Executive Officer and Chief Financial Officer of Black Elk Energy Offshore Operations, LLC (Black Elk).[1]  

Nordlicht, Levy, Landesman, SanFilippo and Mann are charged with securities fraud, investment adviser fraud, securities fraud conspiracy, investment adviser fraud conspiracy and wire fraud conspiracy for defrauding investors through, among other things, the overvaluation of their largest assets, the concealment of severe cash flow problems at Platinum’s signature fund, and the preferential payment of redemptions.  Nordlicht, Levy, Small and Shulse are charged with securities fraud, securities fraud conspiracy and wire fraud conspiracy for defrauding Black Elk’s independent bondholders through a fraudulent offering document and diverting more than $95 million in proceeds to Platinum by falsely representing in the offering document that Platinum controlled approximately $18 million of the bonds when, in fact, Platinum controlled more than $98 million of the bonds.

Nordlicht, Levy, Landesman, SanFilippo, Mann, Small and Shulse will be arraigned later today before United States Magistrate Judge Lois Bloom at the United States Courthouse, 225 Cadman Plaza East, Brooklyn, New York.  Shulse’s initial appearance for removal proceedings to the Eastern District of New York is scheduled for this afternoon at the United States Courthouse, 515 Rusk Avenue, Houston, Texas.

The charges were announced by Robert L. Capers, United States Attorney for the Eastern District of New York; William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI); and Philip Bartlett, Inspector-in-Charge, United States Postal Inspection Service, New York Division (USPIS).

“As alleged, Nordlicht and his cohorts engaged in one of the largest and most brazen investment frauds perpetrated on the investing public, earning Platinum more than $100 million in fees during the charged conspiracy.  Platinum Partners purported to be a standard bearer in the hedge fund industry, reporting annual average returns of more than 17 percent since inception in 2003.  In reality, their returns were the result of the overvaluation of their largest assets, which eventually led to Nordlicht and his co-conspirators operating Platinum like a Ponzi scheme, where they used loans and new investor funds to pay off existing investors,” stated United States Attorney Capers.  “The charges and arrests announced today reflect our steadfast commitment to holding accountable hedge funds on Wall Street who rip off investors for personal gain.”  Mr. Capers thanked the Securities and Exchange Commission, New York Regional Office (SEC) for their significant cooperation and assistance during the investigation.

“This case shows how several members of this firm allegedly manipulated and lied to investors about the health of the investments they were making, and then plotted ways to cover up their actions.  The FBI and our law enforcement partners do all we can to stop these schemes and to keep fraudsters from stealing from investors, but we can’t do it alone.  We need people to call us when they see things that don’t add up, or don’t make sense,” stated FBI Assistant Director-in-Charge Sweeney.

“These Platinum Partners employees devised a scheme to lure investors to funds they managed knowing the funds were insolvent and would not return the high yields they claimed. Postal Inspectors will never tolerate unfairness in the market and will vigorously pursue and bring to justice anyone who breaks the law, ensuring there is an honest and secure trading environment for investors,” stated USPIS Inspector-in-Charge Bartlett.

*          *          *

As detailed in the indictment, between 2011 and 2016, Nordlicht and Levy, together with their co-conspirators, orchestrated two separate schemes: (i) a scheme to defraud investors and prospective investors in funds managed by Platinum; and (ii) a scheme to defraud third-party holders of Black Elk’s bonds.

The Fraudulent Investment Scheme

Platinum was a hedge fund founded in 2003 and based in New York, New York.  Since September 2011, Platinum was registered with the SEC as an investment adviser.  Platinum managed several hedge funds, but the vast majority of its assets were invested through Platinum Partners Value Arbitrage Fund, L.P. (PPVA) and Platinum Partners Credit Opportunities Master Fund, L.P. (PPCO).  Platinum charged its investors a two percent management fee and a 20 percent incentive or performance fees.  In March 2016, Platinum reported to regulators, including the SEC, that it had $1.7 billion in assets under management (AUM), including approximately $1.1 billion in gross asset value in PPVA and more than $590 million in PPCO. 

Between November 2012 and December 2016, Nordlicht, Levy, Landesman, SanFilippo and Mann, together with others, participated in a scheme to defraud investors and prospective investors in Platinum through lies and omissions relating to, among other things: (i) the performance of some of PPVA’s highly illiquid and privately-held assets; (ii) PPVA’s accessibility to cash or assets that could easily be converted into cash; (iii) the purpose of loans raised through investors and the use of those loan proceeds; and (iv) PPVA’s preferential redemption, or investor payment, process.  Specifically, Platinum fraudulently overvalued some of PPVA’s highly illiquid and privately-held assets in order to, among other things, boost performance numbers, attract new investors, retain existing investors and extract high management and incentive fees.  From 2012 through 2016, Platinum extracted more than $100 million in fees based, in large part, on their overvalued assets.  Platinum’s overvaluation of some of their assets precipitated a severe cash crunch, which Platinum initially attempted to mitigate through high-interest loans between its various hedge funds and related entities.  When the inter-fund loans proved insufficient to resolve PPVA’s cash crunch, Platinum began selectively paying some investors ahead of others, contrary to the terms of its governing documents.

As early as 2012, Nordlicht and his co-conspirators knew that PPVA was in trouble, but concealed that reality from investors and prospective investors.  For example, on November 6, 2012, upon learning that PPVA’s investors had sought $27 million in redemptions, Nordlicht exchanged emails with Landesman that stated, in part: “If we don’t exceed [the $27 million in redemptions] in [subscriptions] . . . we are probably going to have to put black elk in side pocket . . . It’s just very daunting.  It seems like we make some progress and then [redemptions] are relentless almost.  It’s tough to get ahead in [subscriptions] if u have to replace 150-200 a year.” 

By 2014, the defendants were relying almost exclusively on new investments and inter-fund loans to pay redemptions to PPVA’s investors.  For example, on April 29, 2014, when faced with requests from investors who had not yet received their redemptions, Nordlicht sent an email to SanFilippo that stated, in part: “Start paying down [redemptions] as [you] can.  Between [a new investor] and [a one-off loan] (additional 10 million), [should] have decent short term infusion.  Hopefully some [M]ay 1 [new investments] show up as well.  Have a few more outflows to discuss but this is obviously the priority.”  Nordlicht and his co-defendants concealed PPVA’s cash crunch and selective redemption payments from investors.  For example, in an investor call on January 14, 2015, Nordlicht stated, in part: “If we look historically, we’ve been very very fortunate . . . we’re running about a billion four between all our different entities . . . I think we’ve returned about double that in cash to investors, so that is really an indication of . . . being very very liquid and nimble . . . in terms of 2015 for PPVA, we are targeting much higher returns than normal.”

Nordlicht’s and Landesman’s knowledge of Platinum’s dire situation was perhaps best illustrated by an email exchange on December 13, 2015.  When Nordlicht forwarded an email to Landesman where he had informed a co-conspirator that his wife was convincing him to get on a flight to Israel if he was unable to get a loan from his partners to save the fund, Landesman responded: “You should get on the flight if there is no bridge [loan], probably even if there is . . . We need to go through the mehalech of how we are going to share this with clients and employees, going to be very rough, big shame . . . it was nice seeing you, hopefully the girls will reacclimate [sic] quickly.”  Notwithstanding the above email exchange, on February 7, 2016, Landesman sent an email to an investor that stated, in part: “Fund is sound, I believe, new structure ideal.  Mark [Nordlicht] is really energized.  Hope to be beyond liquidity concerns forever by end of May, we welcome your further investment.”

PPVA was heavily invested in oil and gas companies that performed significantly below expectations and the valuations that Platinum attributed to them.  These valuations were further undermined by the plummeting price of oil, which dropped from approximately $105 per barrel in December 2013, to approximately $60 per barrel in December 2014, to approximately $36 per barrel in December 2015.

Despite the severe problems that PPVA was facing beginning in at least 2012, Platinum reported that PPVA’s AUM increased from approximately $727 million at the end of 2012, to approximately $757 million at the end of 2013, to approximately $770 million at the end of 2014, to approximately $910 million at the end of 2015.  Platinum collected two percent management fees off these amounts and 20 percent incentive fees off the profits.

The Fraudulent Black Elk Bond Scheme

From approximately November 2011 to December 2016, Nordlicht, Levy, Small and Shulse, together with their co-conspirators, orchestrated a fraudulent scheme to defraud third-party holders of Black Elk’s publicly-traded bonds (the bondholders) by diverting the proceeds from the sale of the vast majority of Black Elk’s most lucrative assets to Platinum even though the bondholders had priority over Platinum’s equity interests.  As early as November 2011, Nordlicht, Levy and Small were plotting to deceive the bondholders.  For example, when Nordlicht learned about the relevant covenants associated with the bonds, he sent an email to Levy, Small and another that stated: “Seem like there are bond[s] to be had out there and an additional 60 million is 24 down . . . We [would] have to figure it out . . . I’m sure we can get them in friendly hands if the covenants are going to be an obstacle.”

By late 2013, faced with the fact that Black Elk was effectively insolvent but knowing that Black Elk still possessed certain valuable assets, the defendants pursued opportunities to sell Black Elk’s assets while simultaneously pursuing a fraudulent strategy to divert the proceeds from any such asset sale to the preferred equity stockholders, which were controlled by Platinum, instead of the bondholders.  To execute this scheme, in early 2014, the defendants caused Platinum to purchase Black Elk bonds on the open market to gain control of a majority of the $150 million of outstanding bonds.  Platinum purchased and then transferred the bonds through a number of related entities in an effort to conceal Platinum’s ownership and control of the bonds. 

By approximately April 2014, Platinum owned and controlled approximately $98 million of the $150 million of outstanding bonds.  Between March 2014 and April 2014, Platinum and its related parties also purchased the vast majority of the outstanding preferred equity that was owned by third parties to obtain nearly 100 percent ownership of the preferred equity.  By approximately May 2014, when alternative approaches failed, the defendants, together with others, determined that the only path to getting the preferred equity paid ahead of the bondholders was through a cash tender offer and consent solicitation process.  On July 2, 2014, Small forwarded an email from a Platinum trader to Nordlicht and Levy that set forth the following summary of the $98,631,000 of the bonds controlled by Platinum: (i) PPCO: $32,917,000; (ii) PPVA: $18,321,000; (iii) PPLO: $17,046,000; (iv) BAM [a related entity]: $13,360,000; and (v) BBIL [a related entity]: $16,987,000.  Nevertheless, in response to a query from an attorney, on July 9, 2014, Small sent an email that stated, in part: “$18,321,000 bonds are controlled by PPVA and should be disclosed and excluded from the calculation.  I believe this implies that $65,840,000 are required to obtain a majority consent.” 

On July 16, 2014, Black Elk announced that it had commenced a public offer for the bonds (the Consent Solicitation).  The Consent Solicitation and accompanying press release provided, among other things, that: (i) Black Elk had commenced a cash tender offer to purchase the outstanding bonds at par value; (ii) Black Elk was soliciting bondholders’ consents to modify certain of the restrictive covenants governing the bonds; (iii) the bondholders that tendered their bonds would be considered to have validly delivered their consent to the proposed amendments; (iv) the bondholders could also consent to the proposed amendments without tendering their bonds; (v) the Consent Solicitation was being made in connection with the sale of assets and the net proceeds of the sale would be used by Black Elk to purchase the tendered bonds; and (vi) the offer would expire at 5:00 p.m. New York time on August 13, 2014. 

Notably, the Consent Solicitation prohibited “any person directly or indirectly controlling or controlled by or under direct or indirect common control with [Black Elk]” from voting in the Consent Solicitation process.  Thus, the approximately $98 million of bonds controlled by Platinum should have been excluded from the voting process.  Nonetheless, the defendants caused Black Elk to disclose in the Consent Solicitation that: “[PPVA] and its affiliates, which own approximately 85% of our outstanding voting membership interests, own[ed] approximately $18,321,000 principal amount of the outstanding Notes.  Otherwise, neither we, nor any person directly or indirectly controlled by or under direct or indirect common control with us, nor, to our knowledge, any person directly or indirectly controlling us, held any Notes.”

The defendants then caused Platinum’s related parties to consent to the proposed amendments but not tender their bonds.  As of the offer’s expiration on August 13, 2014, bondholders that held $11,333,000 of the BE Bonds validly had tendered and were paid.  To the surprise of the remaining bondholders, who were unaware of Platinum’s control of $98,631,000 or approximately 65 percent of the BE Bonds, the trustee revealed that the holders of $110,565,000 or approximately 73.71 percent of the bonds had validly consented to the Consent Solicitation, thereby allowing the preferred equity to get paid from the proceeds of Black Elk’s sale of assets.

On or about August 11, 2015, Black Elk’s creditors filed a petition to place the company into an involuntary Chapter 7 bankruptcy, which was converted on or about September 1, 2015 to a voluntary Chapter 11 bankruptcy.  As of December 2016, a number of bondholders who did not tender their BE Bonds have yet to receive the principal amount of their holdings.

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The criminal case has been assigned to Chief Judge Dora L. Irizarry of the United States District Court.  If convicted, each of the defendants faces a maximum sentence of 20 years’ imprisonment.

The government’s case is being prosecuted by the Office’s Business and Securities Fraud Section.  Assistant United States Attorneys Winston Paes, Alicyn Cooley, Lauren Elbert and Sarah Evans are in charge of the prosecution, with assistance provided by Assistant United States Attorney Brian Morris of the Office’s Civil Division.

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

The Defendants:

MARK NORDLICHT
Age: 48
Residence: New Rochelle, New York

DAVID LEVY
Age: 31
Residence: New York, New York

URI LANDESMAN
Age: 55
Residence: New Rochelle, New York

JOSEPH SANFILIPPO
Age: 38
Residence: Freehold, New Jersey

JOSEPH MANN
Age: 24
Residence: Brooklyn, New York

DANIEL SMALL
Age: 47
Residence: New York, New York

JEFFREY SHULSE
Age: 44
Residence: Houston, Texas

E.D.N.Y. Docket No. 16-CR-640 (DLI)

 

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[1] The charges announced today are allegations, and the defendants are presumed innocent unless and until proven guilty.

Earlier today at the federal courthouse in Central Islip, New York, Malik Yousaf was sentenced to 48 months in prison following his September 22, 2014, guilty plea to committing wire fraud and concealing and harboring illegal aliens employed at 7-Eleven, Inc. (7-Eleven) franchise stores located throughout Long Island and Virginia. 

The sentence was announced by Robert L. Capers, United States Attorney for the Eastern District of New York.  Mr. Capers expressed his grateful appreciation to Immigration and Customs Enforcement, Homeland Security Investigations, New York Field Office (HSI); New York State Police; Suffolk County Police; United States Department of Labor; and the New York Office of Inspector General for the Social Security Administration.  

According to court filings and facts presented in court, the defendant acted as the chief manager of five 7-Eleven franchise stores during the course of the conspiracy, hired dozens of illegal aliens, equipped them with more than 20 identities stolen from United States citizens, housed them at residences his coconspirators owned, and stole substantial portions of his workers’ wages.  During the scheme, the defendant generated over $182 million in proceeds from the 7-Eleven franchise stores. 

In addition to the sentence of imprisonment, the court entered an order forfeiting the defendant’s rights to eight 7-Eleven stores in New York and ten 7-Eleven stores in Virginia, as well as a Long Island residence worth over $150,000.  The court also ordered the defendant to pay $2.5 million in restitution for the back wages that he stole from his workers. 

The government’s case is being prosecuted by the Office’s Business and Securities Fraud Section.  Assistant United States Attorneys Matthew Amatruda is in charge of the prosecution.  Assistant United States Attorneys Brian Morris and Elliot M. Schachner of the Office’s Civil Division are responsible for the forfeiture of assets.

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

For questions or concerns about immigrant workers and job seekers, contact the New York State Department of Labor Division Policies and Affairs (DIPA) at its toll-free worker hotline (1-877-466-9757).

E.D.N.Y. Docket No. 14-CR-351(SJF)

The Defendant:

MALIK YOUSAF
Age: 55
South Setauket, New York

Earlier today, the U.S. Attorney’s Office for the Eastern District of New York filed a criminal information in Brooklyn federal court charging Torneos y Competencias S.A. (Torneos), a South American sports marketing company, with wire fraud conspiracy in connection with the company’s long-running participation in a scheme to corrupt international soccer.  Torneos entered into a deferred prosecution agreement with the government in which the company admitted to its role in the 15-year scheme, including its role in paying tens of millions of dollars in bribes and kickbacks to a high-ranking FIFA official to secure his support for, among other things, the acquisition of rights to broadcast the 2018, 2022, 2026, and 2030 editions of the FIFA World Cup.  As part of the deferred prosecution agreement, Torneos agreed to over $112.8 million in forfeiture and criminal penalties, and further agreed to implement enhanced internal controls and a rigorous corporate compliance program and to cooperate fully with the government’s ongoing investigation.

The charge and resolution were announced by Robert L. Capers, U.S. Attorney for the Eastern District of New York; William F. Sweeney, Jr., Assistant Director-in-Charge, FBI, New York Field Office; and Richard Weber, Chief, Internal Revenue Service (IRS) Criminal Investigation.

“Today’s announcement marks another important step in our continuing effort to root out corruption in international soccer and sends a clear message that corporate entities that rely on the U.S. financial system to enrich themselves through bribery will be held to account,” stated U.S. Attorney Capers.  “Today, Torneos is being held to account for its conduct, but under new management it is also being given a chance to change the way the business of soccer is done in the future.  This corporate resolution reflects the seriousness and sustained nature of Torneos’s criminal conduct as well as the prompt and decisive actions the company undertook to cooperate after the charges in this investigation were first unsealed last year.  We are following the evidence where it leads and will continue to bring the individuals and entities who have corrupted soccer to justice.”  Mr. Capers extended his thanks to the agents, analysts, and other investigative personnel with the FBI New York Eurasian Joint Organized Crime Squad and the IRS Criminal Investigation Los Angeles Field Office, as well as their colleagues abroad, for their continuing commitment and dedication over the course of this multi-year investigation.

“The only people who should be scoring in a soccer match are the players on the field, not the myriad of companies behind the scenes who see the game as an easy payday.  As alleged in this case, we won’t allow businesses to use our financial systems for corrupt practices, and we will continue our search for those entities who are still doing so,” said FBI Assistant Director-in-Charge Sweeney.

“As today’s agreement reflects, Torneos y Competencias undermined the process of fair and open competition when they engaged in corrupt schemes to pay bribes in order to secure lucrative contracts,” said IRS Criminal Investigation Chief Weber.  “The IRS is committed to aggressively investigating corporations that use a complex web of offshore entities and foreign and domestic bank accounts to enrich themselves through bribery.”

The Criminal Scheme

According to court documents, Torneos engaged in a 15-year scheme to corrupt international soccer through the payment of bribes and kickbacks to high-ranking officials of FIFA, the organization responsible for the regulation and promotion of soccer worldwide, as well as leading officials of the continental confederations and other soccer governing bodies that operate under the FIFA umbrella.  Torneos conspired with others to systematically pay and agree to pay tens of millions of dollars in bribes and kickbacks to high-ranking officials of FIFA, two of FIFA’s confederations, CONCACAF and CONMEBOL, and several national member associations, including the Argentine national soccer federation (AFA), to obtain lucrative media and marketing rights to international soccer tournaments and matches.  In addition to multiple editions of the FIFA World Cup, these tournaments and matches included the CONMEBOL Copa Libertadores, the CONMEBOL Copa América, the jointly organized CONMEBOL/CONCACAF Copa América Centenario, and international friendly matches played by the Argentinian national soccer team.

Torneos and its co-conspirators employed a variety of means to prevent the detection of their illegal activities and to conceal the location and ownership of proceeds of those activities, including the use of sham contracts and invoices, reliance on corrupt intermediaries and bankers, the creation and use of shell companies, and the use of cash.  Torneos and its co-conspirators also relied on the integrity of the U.S. financial system and its banking institutions and wire facilities to facilitate their scheme, and on the growing U.S. market for soccer to generate profits from the scheme.

The following are three examples of the conduct encompassed in the wire fraud conspiracy charged in the information filed today and to which Torneos has admitted as part of its agreement with the government:

FIFA World Cup

Over the course of several years starting in approximately 2010, Torneos, at times with the assistance of an affiliate of a major broadcasting company headquartered in Latin America and one of its high-level executives, paid millions of dollars in bribes and kickbacks to a high-ranking and influential FIFA official in connection with the Latin American broadcasting company affiliate’s acquisition of rights to broadcast the 2018, 2022, 2026, and 2030 editions of the World Cup, and the subsequent purchase and exploitation by Torneos’s subsidiary TyC International B.V. (TyC International) of the rights to broadcast those editions of the World Cup to audiences in Argentina, Uruguay, and Paraguay.  Among other things, the FIFA official – who was also a high-ranking official of CONMEBOL and AFA – used his enormous influence within the global governing body, in exchange for bribes, to push FIFA to sell lucrative rights to broadcast the 2026 and 2030 editions of the World Cup to the Latin American broadcasting company affiliate earlier than anticipated and long before the selection of host countries for those editions of the tournament.

CONMEBOL Copa Libertadores

Over the course of 15 years, Torneos executives and their co-conspirators systematically paid millions of dollars in annual bribe and kickback payments to high-ranking officials of CONMEBOL and its member associations in exchange for their support of Torneos affiliate T&T Sports Marketing Ltd. (T&T) as the holder of the broadcasting rights to the Copa Libertadores, South America’s premier club team tournament.  T&T was owned by Torneos and, at various times and in part, by affiliates of a major broadcasting company headquartered in the United States.  At times, Torneos paid the bribes and kickbacks with the agreement and support of the U.S. broadcasting company affiliates and their representatives, including three high-ranking executives.  Torneos employed a variety of means to facilitate and disguise the annual bribe and kickback payments, including the use of intermediaries, shell companies created off the official books of Torneos, currency dealers, and cash. 

CONMEBOL Copa América and CONMEBOL/CONCACAF Copa América Centenario

In 2013, Torneos and its co-conspirators formed a new company, Datisa S.A. (Datisa), which included as its three shareholders Torneos’s subsidiary Productora de Eventos S.A.; the Traffic Group, a multinational sports marketing conglomerate headquartered in Brazil; and another sports marketing company headquartered in Argentina.  Datisa thereafter paid and agreed to pay tens of millions of dollars in bribe and kickback payments to high-ranking officials of CONMEBOL, CONMEBOL’s member associations, and the president of CONCACAF in connection with the companies’ acquisition of the media and marketing rights to the 2015, 2019, and 2023 editions of the Copa América and to the 2016 Copa América Centenario, a centennial edition of the tournament played earlier this year in stadiums across the United States.  According to court documents, at least 17 soccer officials are implicated in this scheme alone.

Deferred Prosecution Agreement

Pursuant to the deferred prosecution agreement filed today, Torneos has waived federal indictment, agreed to the filing of the criminal information, and accepted responsibility for its criminal conduct and that of its senior executives and other employees.  In addition, Torneos has agreed to forfeiture of $89,062,616, which represents profits it made from corrupt contracts, and to pay a criminal penalty of $23,760,000 to the government over the term of the agreement.[1]  In consideration of Torneos’s remedial actions to date – which has included the termination of its entire senior management team and the hiring of a new General Manager, Chief Financial Officer, Legal Director and Chief Compliance Officer, and Compliance Manager – and its commitment to, among other things: (a) accept and acknowledge responsibility for its conduct; (b) continue its cooperation; (c) agree to forfeiture and make the payment of a financial penalty; and (d) implement enhanced internal controls and a rigorous corporate compliance program that includes policies and procedures designed to detect and deter violations of all applicable federal, state, and foreign anti-corruption laws, the government agreed to defer the prosecution for a period of 48 months and to obtain an exclusion of time under the Speedy Trial Act to allow Torneos to demonstrate good conduct and compliance with the terms of this agreement.  The Honorable Pamela K. Chen approved the exclusion of time at a proceeding held in Brooklyn federal court earlier today.  If Torneos complies with its obligations under the agreement, the government will move to dismiss the charge filed today after the conclusion of the 48-month period.  If Torneos violates the agreement, it is subject to full criminal prosecution.

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The charge and resolution announced today are part of an investigation into corruption in international soccer being led by the U.S. Attorney’s Office of the Eastern District of New York, the FBI’s New York Field Office, and the IRS-CI Los Angeles Field Office.  The prosecutors in Brooklyn are receiving considerable assistance from attorneys in various parts of the Justice Department’s Criminal Division in Washington, D.C., including the Office of International Affairs, the Organized Crime and Gang Section, the Asset Forfeiture and Money Laundering Section, and the Fraud Section, as well as from INTERPOL Washington.  Assistant United States Attorneys Evan M. Norris, Samuel P. Nitze, Brian D. Morris, M. Kristin Mace, and Tanya Hajjar are in charge of today’s prosecution.

The government’s investigation is ongoing.

The Defendant:

TORNEOS Y COMPETENCIAS S.A.
Buenos Aires, Argentina

E.D.N.Y. Docket No.: 16 CR 634 (PKC)

 

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[1] As set forth in the agreement, all money forfeited by Torneos will be held in reserve to ensure its availability to satisfy any order of restitution entered at sentencing in United States v. Jeffrey Webb et al., 15 CR 252 (PKC), and related cases, for the benefit of any individuals or entities that qualify as victims under federal law.

Defendant Bribed High-Ranking Government Officials in Multiple African Countries to Obtain Uranium Concessions and Other Mining Rights for Himself and Others

The son of a former Prime Minister of Gabon pleaded guilty earlier today in federal court to conspiring to make corrupt payments to government officials in Africa in violation of the Foreign Corrupt Practices Act (FCPA). 

Deputy Assistant Attorney General Sung-Hee Suh of the Justice Department’s Criminal Division, U.S. Attorney Robert L. Capers of the Eastern District of New York, Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office and Acting Special Agent in Charge Ronald L. Whitsett of the Internal Revenue Service-Criminal Investigation (IRS-CI), New York made the announcement. 

Samuel Mebiame, 43, a Gabonese national, worked as a consultant to a mining company that was owned by a joint venture between Och-Ziff Capital Management Group LLC (Och-Ziff), a New York-based hedge fund management company, and an entity incorporated in Turks and Caicos.  According to court documents, between at least 2007 and 2012, Mebiame worked as a “fixer” for the joint venture and conspired with others to pay bribes to high-level government officials in Chad and Niger in order to obtain business opportunities and mining rights for the joint venture in both of those countries.  In addition, Mebiame paid bribes to high-level government officials in Guinea as an agent of the Turks and Caicos entity to obtain business opportunities and mining rights in that country.

In addition, according to court documents, the bribes paid by Mebiame to the high-ranking government officials were often masked through additional intermediaries or lawyers.  In Niger, Mebiame paid more than $3 million in bribes to a high-ranking government official both directly and through intermediary agents, who were selected by the government official.  Mebiame also made payments for luxury cars for that foreign official.  In return, Mebiame obtained licenses for uranium concessions for the joint venture from the government of Niger.  Similarly, in Chad, Mebiame bribed a high-ranking government official with cash payments and luxury foreign travel for the official and the official’s wife.  In return, Mebiame obtained uranium concessions for the joint venture, including an asset which had been stripped from a French-owned company by the Chadian government at Mebiame’s urging.  In Guinea, during a time when the conspirators were seeking to establish a state-owned mining company there, Mebiame made corrupt payments to gain special access to senior Guinean government officials.  Mebiame provided the officials with cash and other benefits, including an S-Class Mercedes Benz vehicle and the use of private planes, in exchange for special access and confidential information. 

On Sept. 29, 2016, in connection with the government’s investigation, Och-Ziff was charged pursuant to a criminal information with violations of the FCPA’s anti-bribery, books and records, and accounting controls violations for conduct in Libya and the Democratic Republic of Congo, and conduct in Chad and Niger connected to Mebiame’s conduct.  Och-Ziff entered into a deferred prosecution agreement in connection with those charges.  An Och-Ziff subsidiary company, OZ Africa Management GP LLC (OZ Africa), pleaded guilty to a one-count criminal information related to large-scale bribe payments in the Democratic Republic of Congo.  OZ Africa is scheduled to be sentenced on March 29, 2017.  

The FBI’s New York Field Office and IRS-CI New York are investigating the case.  Assistant Chief Leo R. Tsao and Trial Attorney James P. McDonald of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys James P. Loonam, Jonathan P. Lax and David Pitluck of the Eastern District of New York are prosecuting the case.  The Criminal Division’s Office of International Affairs provided significant assistance in this matter.  The U.S. Securities and Exchange Commission’s Boston Regional Office provided significant cooperation.

The Criminal Division’s Fraud Section is responsible for investigating and prosecuting all FCPA matters.  Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.

Mebiame Samuel Information

Mebiame Samuel Plea Agreement

Samuel Mebiame, a Gabonese national and the son of a former Prime Minister of Gabon, pleaded guilty earlier today in Brooklyn federal court, to conspiring to make corrupt payments to government officials in Africa, in violation of the Foreign Corrupt Practices Act (FCPA).  Mebiame worked as a consultant to a joint venture between Och-Ziff Capital Management Group LLC, a New York-based hedge fund management company, and a Turks and Caicos incorporated entity.  Mebiame paid bribes to high level government officials in Chad, Niger, and Guinea to obtain opportunities in the mining sectors in each of those countries.  He faces up to five years’ imprisonment at the time of his sentencing.

The guilty plea was announced by U.S. Attorney Robert L. Capers of the Eastern District of New York; Principal Deputy Assistant Attorney General David Bitkower of the Justice Department’s Criminal Division; William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI); and Ronald L. Whitsett, Acting Special Agent-in-Charge, Internal Revenue Service, Criminal Investigation (IRS-CI), New York.

According to court filings and facts presented during the plea proceeding, Mebiame worked as a “fixer” for the joint venture and conspired with others to pay bribes to foreign government officials to obtain rights to mineral concessions from government officials on behalf of the joint venture.  Mebiame’s corrupt payments, made between at least 2007 and 2012, were directed to high-ranking government officials and were often masked through additional intermediaries or lawyers.  In Niger, Mebiame paid more than $3 million in bribes to a high-ranking government official both directly and through the use of intermediary agents, who were selected by the government official.  In addition, Mebiame made payments for luxury cars for the foreign official.  In return, Mebiame obtained licenses for uranium concessions from the government of Niger for the joint venture.  Similarly, in Chad, Mebiame paid cash bribes to a high-ranking government official and paid for luxury foreign travel for the official and the official’s wife.  In return, Mebiame obtained uranium concessions for the joint venture, including an asset which had been stripped from a French-owned company by the Chadian government at Mebiame’s urging.  In addition, during the conspirators’ efforts to establish a state-owned mining company in Guinea, Mebiame gained special access to government officials and confidential information by making corrupt payments and providing other benefits to senior government officials in Guinea, including an S-class Mercedes Benz sedan, the use of private planes, and cash.  During the conspiracy, Mebiame repeatedly traveled to the United States, received payments to U.S. bank accounts, and sent e-mail communications from the United States to further the scheme.  The communications included an e-mail between the conspirators which discussed a “bet” about what conduct would be sufficient to violate the FCPA.

Previously, on September 29, 2016, in connection with the government’s broader investigation, Och-Ziff was charged pursuant to a criminal information with violations of the FCPA’s anti-bribery, books and records, and accounting controls violations for conduct in Libya and the Democratic Republic of Congo, and conduct in Chad and Niger connected to Mebiame.  Och-Ziff entered into a deferred prosecution agreement in connection with those charges.  An Och-Ziff subsidiary company, OZ Africa Management GP, LLC, pleaded guilty to a one-count criminal information related to large-scale bribe payments in the Democratic Republic of Congo.  Sentencing of OZ Africa Management GP, LLC has been scheduled for March 29, 2017.   

The government’s case is being prosecuted by the U.S. Attorney’s Office Business and Securities Fraud Section, and the Foreign Corrupt Practices Act Unit of the Department of Justice, Fraud Section.  Assistant United States Attorneys James P. Loonam, Jonathan P. Lax, and David Pitluck, Assistant Chief Leo R. Tsao and Trial Attorney James P. McDonald are in charge of the prosecution.

*          *          *

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

Earlier today in federal court in Brooklyn, Julio Rocha pleaded guilty to racketeering conspiracy and wire fraud conspiracy in connection with his receipt of bribes in exchange for his awarding contracts for the media and marketing rights to FIFA World Cup qualifier matches.  Rocha, the president of the Nicaraguan soccer federation (FENIFUT) from 1998 to 2012, was the FIFA development officer for Central America and the Spanish-speaking Caribbean at the time of his arrest in Zurich, Switzerland on May 27, 2015.  As part of his plea, Rocha also agreed to forfeit over $292,000.  At sentencing, Rocha faces a maximum sentence of 20 years for each count.  Today’s plea proceeding took place before United States District Judge Pamela K. Chen.

The guilty plea was announced by Robert L. Capers, United States Attorney for the Eastern District of New York; William F. Sweeney, Jr., Assistant Director in Charge, FBI, New York Field Office; and Acting Special Agent in Charge Anthony J. Orlando, IRS Criminal Investigation, Los Angeles Field Office.

According to court filings and facts presented during the plea proceeding, Rocha negotiated and accepted bribes totaling over $150,000 in exchange for exercising his influence as the president of FENIFUT to award a Florida sports marketing company named Traffic Sports USA, Inc. (Traffic) a contract for the media and marketing rights to the Nicaraguan national soccer team’s home World Cup qualifier matches for multiple editions of the World Cup, including the 2014 and 2018 editions.  These bribes were transmitted from U.S. bank accounts, often through intermediaries, to accounts Rocha controlled.  After he stepped down as president of FENIFUT and was employed by FIFA as a development officer, Rocha attempted to facilitate Traffic’s negotiations with a high-ranking FENIFUT official for the rights to Nicaragua’s World Cup qualifier matches for the 2022 edition of the World Cup in an effort to receive for himself a portion of any bribe money paid for those rights.

In addition, Rocha used his position as FENIFUT president to further enrich himself through other schemes, including one in which he took kickbacks from a Miami company that he had contracted with on behalf of FENIFUT for the purpose of obtaining assistance in securing corporate sponsorships for the federation.

The guilty plea announced today is part of an investigation into corruption in international soccer being led by the U.S. Attorney’s Office for the Eastern District of New York, the FBI New York Field Office, and the IRS-CI Los Angeles Field Office.  The prosecutors in Brooklyn are receiving considerable assistance from attorneys in various parts of the Justice Department’s Criminal Division in Washington, D.C., including the Office of International Affairs, the Organized Crime and Gang Section, the Asset Forfeiture and Money Laundering Section, and the Fraud Section, as well as from INTERPOL Washington. 

Assistant U.S. Attorneys Evan M. Norris, Paul Tuchmann, Keith D. Edelman, and Brian D. Morris of the Eastern District of New York are in charge of today’s prosecution.

The government’s investigation is ongoing.

The Defendant:

JULIO ROCHA
Age:  66
Nationality:  Nicaragua

E.D.N.Y. Docket No. 15 CR 252 (S-1)

Defendant Zachary Sizemore, an active-duty service member of the United States Air Force, made his initial appearance this morning before United States Magistrate Judge Marilyn Go at the U.S. Courthouse in Brooklyn, New York, on charges of theft and sale without authority of night-vision devices and components stolen from the Air Force.  He was released on a $50,000 bond.

On November 29, 2016, the defendant was arrested on the Wright-Patterson Air Force Base in Dayton, Ohio, where he is stationed.  He appeared that afternoon before United States Chief Magistrate Judge Sharon L. Ovington at the U.S. Courthouse in Dayton, Ohio, and was ordered to appear at the federal courthouse in Brooklyn this morning.

The charges were announced by Robert L. Capers, United States Attorney for the Eastern District of New York, Craig Rupert, Special Agent-in-Charge for the Department of Defense, Defense Criminal Investigative Service (DCIS) and Angel M. Melendez, Special Agent-in-Charge for the U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI), New York.  

“Our military’s night vision technology is among the most advanced in the world.  As alleged, the defendant made stolen, military-issued, night vision devices available on the internet to anyone with the means to purchase them.  Such technology gives our soldiers a critical advantage on the battlefield.   Stealing that technology and selling it to the highest bidder puts our soldiers at risk.  We will continue to use all of the law enforcement tools at our disposal to help protect our soldiers abroad,” stated United States Attorney Capers.  Mr. Capers expressed his grateful appreciation to the U.S. Attorney’s Office for the Southern District of Ohio, the Air Force Office of Special Investigations, and Customs and Border Protection for their assistance.

DCIS Special Agent-in-Charge Rupert stated, “Continued cooperation with our military and federal law enforcement partners guarantees success in pursuing those who threaten the security of our American warfighters, their families, and our facilities, not to mention the investment of the American taxpayer in state-of-the-art technology for personal gain.  This complaint highlights a continuing threat that DCIS will not be deterred in pursuing.”

“As an active duty member of the United States Air Force, Sizemore allegedly broke the sacred military oath of protecting this nation when he stole and sold high-tech military technology on the internet,” stated Special Agent-in-Charge Melendez of HSI New York.  “This night vision equipment is highly advanced, giving our military a much deserved edge on today’s battlefield.  HSI is committed to making sure this technology does not fall into the wrong hands.”

Night vision devices acquired by the United States military, such as the items allegedly stolen and sold by the defendant, contain components made to military specifications.  They are required by the military to be rendered useless for their intended purpose prior to leaving government control.  United States military policies prohibit the private sale of fully functional military-issued night vision equipment.

According to the complaint, between July 2013 and November 2016, Sizemore sold or attempted to sell at least three night vision devices that were stolen from the United States military, including an AN/PVS-7D night vision goggle and two mini-thermal monoculars.  In addition, he created online postings for, and sold or attempted to sell, approximately 45 items described as night vision equipment or thermal equipment.  Of those postings, Sizemore sold at least 38 such items for approximately $50,000.

The charges in the complaint are merely allegations, and the defendant is presumed innocent unless and until proven guilty.  If convicted, the defendant faces up to 10 years in prison, forfeiture, and a fine of up to $250,000.

The government’s case is being prosecuted by Assistant United States Attorney Nomi D. Berenson.

The Defendant:

ZACHARY SIZEMORE
Dayton, Ohio
Age:  24

E.D.N.Y. Docket No. 16-M-1051

Earlier today, an indictment was unsealed in the United States District Court for the Eastern District of New York, charging seven defendants for their involvement in narcotics trafficking and an attempted Hobbs Act robbery in the Queensbridge Houses located in Long Island City, NY.  Three additional defendants involved in narcotics trafficking in the Queensbridge Houses were indicted by the Queens County District Attorney’s Office and charged with felonies for selling cocaine.  Six of the defendants are under arrest.

The federal defendants’ initial appearances and arraignments are scheduled this afternoon before United States Magistrate Judge Marilyn D. Go at the federal courthouse in Brooklyn, New York.  The two state defendants’ initial appearances and arraignments are also scheduled for this afternoon in Queens County Supreme Court.

The charges were announced by Robert L. Capers, United States Attorney for the Eastern District of New York; Richard A. Brown, District Attorney for Queens County; James J. Hunt, Special Agent-in-Charge, Drug Enforcement Administration (DEA); and James P. O’Neil, Commissioner, New York City Police Department (NYPD).  The arrests follow a long-term investigation by the DEA and NYPD into the narcotics and related violence that has plagued the Queensbridge Houses for the last decade. 

As alleged in the indictment and other court documents filed by the government, all but one of the seven federal defendants were members of a narcotics conspiracy that trafficked in a significant amount of crack cocaine in and around the Queensbridge Houses, the largest public housing development in the United States.  Court-authorized wiretaps of telephones used by two of the defendants disclosed that during just a nine-month period, the defendants’ drug trafficking operation was responsible for the distribution of more than 280 grams of crack cocaine.  In addition, three of the defendants – Edward Carrillo, Johnnie Monroe, and a co-conspirator – trafficked more than 400 grams of fentanyl as well as quantities of oxycodone.  The distribution of the fentanyl pills by the defendants resulted in the death of a young mother in West Virginia.  The three federal defendants continued to traffic in the deadly pills even after having learned about the woman’s death, and one of the defendants went so far as to proclaim that the deadly pills would “feed up the projects.” 

Defendants Carrillo, Monroe, and a co-conspirator also are charged with an attempted armed robbery of an individual they believed to be traveling from West Virginia to New York carrying more than $100,000 in drug proceeds.  When the defendants tried to commit the robbery, the putative drug trafficker never showed up but, as one of the defendants put it, if he had appeared they “would have taken him down” with their “biscuits” – a term the defendants used to refer to firearms.      

“Today’s arrests are the latest example of the success that can be achieved through federal, state, and local law enforcement cooperation to combat violence and narcotics trafficking in our communities.  The defendants wantonly distributed large quantities of addictive narcotics into our communities, some of which proved deadly.  Even the death of a young mother did not stop their drug trafficking – but these arrests will.”  Mr. Capers thanked the Queens County District Attorney’s Office for its participation and assistance in the investigation.

Queens County District Attorney Brown stated, “This investigation is just the latest result of a coordinated law enforcement and prosecutorial anti-drug initiative that began soon after I took office more than twenty-five years ago.  Since that time, we have targeted hundreds of drug dealers operating in and around public housing developments throughout Queens and have put a significant dent in the drug trafficking which has long troubled the residents of these developments.  It is imperative that we stop those who flood our streets and lure our children into lives of crime.”

DEA Special Agent-in-Charge Hunt stated, “As evident in this investigation, local drug crews are just as much a public health threat than overseas drug cartels.  As alleged, not only was this violent drug crew selling crack cocaine, oxycodone, and fentanyl from their front doors, but sending fatal doses to areas in West Virginia for resale.  Fentanyl abuse is death, and these defendants capitalized on their products’ potency fueling more addiction and death in their own community.” 

“This case is a classic example of teamwork among local, state, and federal partners in dealing with criminal activity that knows no geographical boundaries,” said Police Commissioner O'Neill.  “Illegal drugs often go hand-in-hand with violence and death.  By dealing with these issues through a well-coordinated approach, indictments like these can be successfully obtained.”

The charges announced today are allegations, and the defendants are presumed innocent unless and until proven guilty.  If convicted, the federal defendants face maximum sentences of life and defendants Carrillo, Monroe, and a co-conspirator face a minimum sentence of 20 years’ imprisonment for distributing fentanyl that resulted in death.  If convicted, the state defendants face up to nine years in prison. 

The government’s case is being prosecuted by the Office’s Organized Crime and Gangs Section.  Assistant United States Attorneys Andrey Spektor and Lindsay K. Gerdes are in charge of the prosecution.  The state charges are being prosecuted by Assistant District Attorney Emily F. Collins, of the Queens District Attorney’s Gang Violence and Hate Crimes Bureau. 

The Defendants:

Prosecuted by the United States Attorney’s Office:

TERRELL CARMICHAEL, also known as “Rell”
Age: 31
Long Island City, New York

EDWARD CARRILLO, also known as “Super Ed”
Age: 43
New York, New York

JOHNNIE MONROE, also known as “Nut”
Age: 46
Brooklyn, New York

MICHAEL YOUNG, also known as “Littles”
Age: 32
Long Island City, New York

Prosecuted by the Queens County District Attorney’s Office:

MOHAMED SALEH, also known as “Arab”
Age: 30
Long Island City, New York

SHAMAR STALLWORTH, also known as “Black”
Age: 31
Long Island City, New York

E.D.N.Y. Docket No.  16-CR-617 (BMC)                   

 

BROOKLYN, NY – Earlier today, Howard Leventhal, the President, Chief Executive Officer and Chief Technology Officer of mHealth Technologies Corp., formerly named Neovision USA, Inc. (Neovision), was sentenced by United States District Judge Brian M. Cogan to 60 months’ imprisonment.  In December 2013, Leventhal had pleaded guilty to wire fraud and aggravated identity theft for defrauding and attempting to defraud a number of individuals and entities of millions of dollars by falsely claiming that Neovision had a lucrative contract with Canada’s Department of Health (Health Canada) and for stealing the identity of Glenda Yeates, Health Canada’s former Deputy Minister of Health.  As part of the sentence, Leventhal was also sentenced to 3 years’ supervised release and ordered to pay $1,350,819.78 in forfeiture and restitution.

The sentence was announced by Robert L. Capers, United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).

“Leventhal used his considerable imagination, non-existent technology, and stolen identities to deceive a number of entities and individuals.  Fortunately for investors, his alternate reality, propped up by fabricated bank documents, unraveled and collapsed when he attempted to defraud an undercover FBI agent.  Today’s sentence sends a strong message to those who use lies and deceit to defraud investors that they will be held accountable for their crimes,” stated United States Attorney Capers.  Mr. Capers expressed his appreciation to the FBI for their hard work and dedication over the course of this investigation and prosecution and thanked the Royal Canadian Mounted Police (RCMP) and Health Canada for their significant cooperation and assistance in the investigation.

“Stranger than fiction truly applies in this case with the subject using a popular sci-fi movie as the inspiration to scam millions of dollars from people.  He also forged the signature of the Canadian deputy health minister, which not many people would question as legitimate.  The FBI and our law enforcement partners do all we can every day to stop these fraudsters, but we can’t do it alone.  This investigation serves as a warning to anyone thinking about investing any of their money, do the research and if everything doesn’t add up, we need them to call us,” stated FBI Assistant Director-in-Charge Sweeney.

According to court filings and facts presented at the sentencing hearings, Leventhal told potential investors that Neovision had written agreements with Health Canada, whereby Neovision would provide Health Canada with “Heltheo’s McCoy Home Health Tablet,” a device ostensibly named after the fictional Dr. Leonard McCoy of TV’s Star Trek series.[1]  The written agreement provided by Leventhal to potential investors was purportedly signed by Glenda Yeates, Canada’s former Deputy Health Minister, on behalf of the government of Canada.  For example, in May 2012, Leventhal used this agreement and entered into a factoring agreement with Paragon Financial Group, Inc. (Paragon”, a Florida company, whereby Paragon advanced Neovision $800,000 in exchange for Paragon’s right to collect a larger sum of money purportedly owed to Neovision by Health Canada.  Leventhal also used the purported agreement with Health Canada to solicit more than $26 million from other potential investors, including an undercover law enforcement agent posing as a high net worth individual. 

Contrary to Leventhal’s representations, (1) there was no agreement between Health Canada and Neovision, (2) Health Canada did not owe Neovision any money, and (3) Deputy Health Minister Glenda Yeates’ signature on the agreement was a forgery.  To conceal his scheme, Leventhal assumed the identities of Health Canada representatives, including that of former Deputy Health Minister Glenda Yeates.  Further, Leventhal created and used domain names, telephone numbers, and email addresses that closely resembled those actually used by Health Canada.  For example, Leventhal created and used healthcanada.com.co and hc-sg-gc.ca in place of Health Canada’s true domain name hc-sc.gc.ca.

*          *          *

The government’s case is being prosecuted by the Office’s Business and Securities Fraud Section.  Assistant United States Attorney Winston M. Paes is in charge of the prosecution.

*          *          *

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

The Defendant:

HOWARD LEVENTHAL
Age: 60
Grayslake, Illinois

E.D.N.Y. Docket No. 13-CR-695 (BMC)

 

---

[1]  Leventhal claimed that Heltheo’s McCoy Home Health Tablet can instantaneously and effectively deliver detailed patient data to physicians and other licensed medical care providers.

A criminal complaint was unsealed today in federal court in the Eastern District of New York charging Mohamed Rafik Naji, 37, of Brooklyn, New York, with attempting to provide material support to the Islamic State of Iraq and the Levant (ISIL), a designated foreign terrorist organization.  Naji was arrested earlier today at his home in Brooklyn, New York, and his initial appearance is scheduled for this afternoon before U.S. Magistrate Judge Robert M. Levy at the U.S. Courthouse at 225 Cadman Plaza East, Brooklyn, New York.

The charges were announced by Acting Assistant Attorney General for National Security Mary B. McCord, U.S. Attorney Robert L. Capers of the Eastern District of New York, Assistant Director in Charge William F. Sweeney of the FBI’s New York Field Office and Commissioner James P. O’Neill of the New York City Police Department.

“As alleged, the defendant attempted to join ISIL and support its terrorist objectives,” stated U.S. Attorney Capers. “We will continue to identify and prosecute individuals like Naji who seek to provide support to foreign terrorist organizations that endanger our citizens and partners around the world.” Mr. Capers extended his grateful appreciation to the FBI’s Joint Terrorism Task Force, which comprises a number of federal, state, and local agencies from the region. 

“As we alleged in our complaint today, Naji has shown continued support to ISIL, beginning in 2014 with social media posts and ultimately traveling to Yemen in March 2015 where he claimed his allegiance to ISIL stating, ‘I belong to Islamic state only.’ He continued to express support for ISIL and violent jihad upon his return in the U.S. months later. Terrorism threats, like Naji, are only mitigated through the joint efforts of law enforcement to protect our communities,” said Assistant Director in Charge Sweeney.

“As alleged, the defendant expressed a devotion to join ISIL through both conversation and social media, traveling to Yemen in an effort to join their ranks,” said Police Commissioner O’Neill. “Detectives and agents on the Joint Terrorism Task Force uncovered the alleged terrorist objectives of the defendant. I want to commend their work in continually protecting New York City, and our nation, from those who seek to harm us.”

As set forth in court documents, Naji is a 37-year-old legal permanent resident of the U.S. Beginning in December 2014, through social media posts, Naji expressed his support of ISIL by, among other posts, sharing a video of an ISIL leader advocating violence against civilian targets.

According to the complaint, in March 2015, Naji traveled from New York to Yemen in an effort to join ISIL’s ranks. While in Yemen, Naji persistently tried to travel to areas controlled by ISIL. In emails to an associate in the U.S., Naji explained that he was on his fifth try to reach ISIL-controlled territory. He also sent his associate media files with sounds of gunfire and claimed to have been almost killed by the “army.” Following these email exchanges, Naji instructed his associate to “erase all ur messages,” “even from your trash.”

While in Yemen, Naji engaged in online conversations with a confidential source. During those conversations, Naji instructed the confidential source that in order to join “dawlat islam,” (ISIL), he should travel to Hadramout, an area in southern Yemen. In one of the online conversations with the confidential source, Naji proclaimed his allegiance to ISIL stating, “I belong to Islamic state only,” according to the complaint.

Naji returned to the U.S. in September 2015. Since his return, he has continued to express his support for ISIL and violent jihad. Following the deadly attack in Nice, France in July 2016, Naji expressed support for a similar attack in Time Square.

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

The government’s case is being prosecuted by Assistant U.S. Attorneys Melody Wells and Ian Richardson of the National Security & Cybercrime Section of the U.S Attorney’s Office, with assistance from Trial Attorney Brian Morgan of the National Security Division’s Counterterrorism Section.

Ahmad Sheikhzadeh, 60, a U.S. citizen and resident of New York City, New York, pleaded guilty to filing a false income tax return that substantially understated the amount of cash salary the defendant received from Iran’s Permanent Mission to the United Nations (IMUN) and conspiring to facilitate the transfer of funds to Iran without the required license from the Treasury Department in violation of the International Emergency Economic Powers Act (IEEPA). 

The announcement was made by Acting Assistant Attorney General for National Security Mary B. McCord, U.S. Attorney Robert L. Capers for the Eastern District of New York, Assistant Director in Charge William F. Sweeney, Jr. for the FBI’s New York Field Office and Special Agent in Charge Shantelle Kitchen for the IRS Criminal Investigation Division in New York. The plea proceeding took place before U.S. District Judge Pamela K. Chen in federal court in Brooklyn.

According to court filings and facts presented during the plea proceeding, beginning in January 2008, Sheikhzadeh was employed as a consultant to the IMUN and received a regular salary, in cash, approximately once per month, through an intermediary who was an official at the IMUN. Sheikhzadeh was not a declared IMUN official. From 2008 through 2012, Sheikhzadeh filed personal income tax returns that substantially understated the amount of income he received from his work for the IMUN. In addition, distinct from his work for the IMUN, Sheikhzadeh provided money remitting (“hawala”) services to co-conspirators in the U.S. to facilitate investments in Iran and to direct disbursements from Iranian bank accounts. Sheikhzadeh engaged in these money transfers without a license from the Treasury Department’s Office of Foreign Assets Control in violation of IEEPA.

Sheikhzadeh will be sentenced on March 30, 2017. When sentenced, the defendant faces up to 23 years in prison. The defendant has agreed to pay over $147,000 in restitution and forfeiture. The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes, as the sentencing of the defendant will be determined by the court based on the advisory Sentencing Guidelines and other statutory factors.

This case is being prosecuted by Assistant U.S. Attorneys Tali Farhadian and Peter Baldwin from the Office’s Public Integrity and National Security and Cybercrime Sections, and Brian Morris from the Asset Forfeiture Section.  Assistance was also provided by Trial Attorney David Recker of the National Security Division’s Counterintelligence and Export Control Section.

BROOKLYN, NY –  Earlier today in federal court in Brooklyn, Ahmad Sheikhzadeh, a United States citizen and resident of New York City, pled guilty to filing a false income tax return that substantially understated the amount of cash salary he received from Iran’s Permanent Mission to the United Nations (IMUN) and conspiring to facilitate the transfer of funds to Iran without the required license from the Treasury Department in violation of the International Emergency Economic Powers Act (IEEPA).  Today’s plea proceeding took place before United States District Judge Pamela K. Chen.

The guilty plea was announced by Robert L. Capers, United States Attorney for the Eastern District of New York, Acting Assistant Attorney General for National Security Mary B. McCord, William F. Sweeney, Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (FBI), and Shantelle Kitchen, Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service-Criminal Investigation (IRS-CI).

According to court filings and facts presented during the plea proceeding, beginning in January 2008, Sheikhzadeh was employed as a consultant to the IMUN and received a regular salary, in cash, approximately once per month through an intermediary who was an official at the IMUN.  Sheikhzadeh was not a declared IMUN official.  From 2008 through 2012, Sheikhzadeh filed personal income tax returns that substantially understated the amount of income he received from his work for the IMUN.  In addition, distinct from his work for the IMUN, Sheikhzadeh provided money remitting (“hawala”) services to co-conspirators in the United States to facilitate investments in Iran and to direct disbursements from Iranian bank accounts.  Sheikhzadeh engaged in these money transfers without a license from the Treasury Department’s Office of Foreign Assets Control (OFAC) in violation of IEEPA.

When sentenced, Sheikhzadeh faces up to 23 years in prison.  He has agreed to pay over $147,000 in restitution and forfeiture.

The government’s case is being prosecuted by Assistant United States Attorneys Tali Farhadian and Peter Baldwin from the Office’s Public Integrity and National Security and Cybercrime Sections, and Brian Morris from the Asset Forfeiture Section.  Assistance was also provided by Trial Attorney David Recker of the Justice Department’s Counterintelligence and Export Control Section.  

The Defendant:

AHMAD SHEIKHZADEH
Age: 60
New York, New York

E.D.N.Y. Docket No.  15-182 (PKC)

A criminal complaint was unsealed today in federal court in the Eastern District of New York charging Mohamed Rafik Naji with attempting to provide material support to the Islamic State of Iraq and the Levant (ISIL), a foreign terrorist organization.  Naji was arrested earlier today at his home in Brooklyn, New York, and his initial appearance is scheduled for this afternoon before U.S. Magistrate Judge Robert M. Levy at the U.S. Courthouse, 225 Cadman Plaza East, Brooklyn, New York.

The charges were announced by U.S. Attorney Robert L. Capers of the Eastern District of New York, Acting Assistant Attorney General for National Security Mary B. McCord, Assistant Director in Charge William F. Sweeney of the New York Field Office of the Federal Bureau of Investigation (FBI), and James P. O’Neill, Commissioner, New York City Police Department (NYPD).

As set forth in court documents, Naji is a 37-year-old legal permanent resident of the United States.  Beginning in December 2014, through social media posts, Naji expressed his support of ISIL by, among other posts, sharing a video of an ISIL leader advocating violence against civilian targets.  According to the complaint, in March 2015, Naji travelled from New York to Yemen in an effort to join ISIL’s ranks.  While in Yemen, Naji persistently tried to travel to areas controlled by ISIL.  In emails to an associate in the United States, Naji explained that he was on his fifth try to reach ISIL controlled territory.  He also sent his associate media files with sounds of gunfire and claimed to have been almost killed by the “army.” Following these email exchanges, Naji instructed his associate to “erase all ur messages,” “even from your trash.” 

While in Yemen, Naji engaged in online conversations with a confidential source.  During those conversations, Naji instructed the confidential source that in order to join “dawlat islam” he should travel to Hadramout, an area in southern Yemen.  In one of the online conversations with the confidential source Naji proclaimed his allegiance to ISIL stating, “I belong to Islamic state only,” according to the complaint. 

Naji returned to the United States in September 2015.  Since his return, he has continued to express his support for ISIL and violent jihad.  Following the deadly attack in Nice, France in July 2016, Naji expressed support for a similar attack in Times Square.

“As alleged, the defendant was persistent in his efforts to join ISIL and support its terrorist objectives,” stated U.S. Attorney Capers.  “We will continue to identify and prosecute individuals like Naji who seek to empower our nation’s enemies and endanger our citizens and partners around the world.”  Mr. Capers extended his grateful appreciation to the FBI’s Joint Terrorism Task Force, which comprises a number of federal, state and local agencies from the region. 

“As we alleged in our complaint today, Naji has shown continued support to ISIL, beginning in 2014 with social media posts and ultimately traveling to Yemen in March 2015 where he claimed his allegiance to ISIL stating, ‘I belong to Islamic state only.’  He continued to express support for ISIL and violent jihad upon his return in the US months later.  Terrorism threats, like Naji, are only mitigated through the joint efforts of law enforcement to protect our communities,” said FBI Assistant Director in Charge Sweeney.

“As alleged, the defendant expressed a devotion to join ISIL through both conversation and social media, traveling to Yemen in an effort to join their ranks,” said Police Commissioner O’Neill.  “Detectives and agents on the Joint Terrorism Task Force uncovered the alleged terrorist objectives of the defendant.  I want to commend their work in continually protecting New York City, and our nation, from those who seek to harm us.”

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

The government’s case is being prosecuted by Assistant U.S. Attorneys Melody Wells and Ian Richardson of the National Security & Cybercrime Section of the U.S Attorney’s Office, with assistance from Brian Morgan of the National Security Division’s Counterterrorism Section.

The Defendant:

MOHAMED RAFIK NAJI
Age: 37
Brooklyn, New York

E.D.N.Y. Docket No.  16-M-1049

JPMorgan Securities (Asia Pacific) Limited (JPMorgan APAC), a Hong Kong-based subsidiary of multinational bank JPMorgan Chase & Co. (JPMC), agreed to pay a $72 million penalty for its role in a scheme to corruptly gain advantages in winning banking deals by awarding prestigious jobs to relatives and friends of Chinese government officials.

Assistant Attorney General Leslie R. Caldwell of the Criminal Division, U.S. Attorney Robert L. Capers of the Eastern District of New York and Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office made the announcement. 

“The so-called Sons and Daughters Program was nothing more than bribery by another name,” said Assistant Attorney General Caldwell.  “Awarding prestigious employment opportunities to unqualified individuals in order to influence government officials is corruption, plain and simple.  This case demonstrates the Criminal Division’s commitment to uncovering corruption no matter the form of the scheme.”

“U.S. businesses cannot lawfully seek to gain a business advantage by corruptly influencing foreign government officials,” said U.S. Attorney Capers.  “The common refrain that this is simply how business is done overseas is no defense.  In this case, JPMorgan employees designed a program to hire otherwise unqualified candidates for prestigious investment banking jobs solely because these candidates were referred to the bank by officials in positions to award business to the bank.  In certain instances, referred candidates were hired with the understanding that the hiring was linked to the award of specific business.  This is no longer business as usual; it is corruption.”

“Creating a barter system in which jobs are awarded to applicants in exchange for lucrative business deals is a corrupt scheme in and of itself,” said Assistant Director in Charge Sweeney.  “But when foreign officials are among those involved in the bribe, the international free market system and our national security are among the major threats we face.  Those engaging in these illegal acts abroad may think they're out of sight and out of mind, but they're wrong.  The FBI has recently established three dedicated international corruption squads to combat this type of quid pro quo, and we'll use all resources at our disposal to uncover and put an end to these crimes.”

According to JPMorgan APAC’s admissions, beginning in 2006, senior Hong Kong-based investment bankers set up and used a “client referral program,” also referred to as the “Sons and Daughters Program,” to hire candidates referred by clients and government officials.  The Sons and Daughters Program was used as a means to influence those same officials to award investment deals to JPMorgan APAC.  By late 2009, JPMorgan APAC executives and senior bankers revamped the client referral program to improve its efficacy by prioritizing those hires linked to upcoming client transactions.  In order to be hired, a referred candidate had to have a “directly attributable linkage to business opportunity.” 

According to admissions made in connection with the resolution, these quid pro quo arrangements were discussed internally among JPMorgan APAC bankers.  For example, in late 2009, a Chinese government official communicated to a senior JPMorgan APAC banker that hiring a referred candidate would significantly influence the role JPMorgan APAC would receive in an upcoming initial public offering (IPO) for a Chinese state-owned company.  The banker communicated this message to several senior colleagues, who then spent several months trying to place the referred candidate in an investment banking position in New York.  Despite learning from personnel in New York that this referred candidate was not qualified for an investment banking position, senior JPMorgan APAC bankers created a new position for the candidate in New York, and JPMorgan APAC thereafter obtained a leading role in the IPO.  Further, JPMorgan APAC employees misused compliance questionnaires to justify and paper over corrupt business arrangements.  Employees also used a template with pre-filled answers, including that there was “no expected benefit” from the hire, and compliance personnel drafted and modified questionnaires that failed to state the true purpose of the hire.

JPMorgan APAC further admitted that candidates hired during the scheme were typically given the same titles and paid the same amount as entry-level investment bankers, despite the fact that many of these hires performed ancillary work such as proofreading and provided little real value to any deliverable product. 

The corrupt scheme netted JPMorgan APAC at least $35 million in profits from business mandates with Chinese state-owned companies. 

JPMorgan APAC entered into a non-prosecution agreement and agreed to pay a criminal penalty of $72 million to resolve the matter.  As part of the agreement, JPMorgan APAC has agreed to continue to cooperate with the department in any ongoing investigations and prosecutions relating to the conduct, including of individuals, to enhance its compliance program, and to report to the department on the implementation of its enhanced compliance program.

The department reached this resolution based on a number of factors, including that JPMorgan APAC did not voluntarily and timely disclose the conduct at issue.  However, JPMorgan APAC did receive full credit for its and JPMC’s cooperation with the criminal investigation, including conducting a thorough internal investigation, making foreign-based employees available for interviews in the United States and producing documents to the government from foreign countries in ways that did not implicate foreign data privacy laws.  JPMorgan APAC also took significant employment action against six employees who participated in the misconduct resulting in their departure from the bank, and it disciplined an additional 23 employees who, although not involved in the misconduct, failed to effectively detect the misconduct or supervise those engaged in it.  JPMorgan APAC imposed more than $18.3 million in financial sanctions on former or current employees in connection with the remediation efforts.  Based on these actions and other considerations, the company received a non-prosecution agreement and an aggregate discount of 25 percent off of the bottom of the U.S. Sentencing Guidelines fine range. 

In related proceedings, the U.S. Securities and Exchange Commission (SEC) filed a cease and desist order against JPMC, whereby JPMC agreed to pay $130.5 million in disgorgement to the SEC, including prejudgment interest.  The Federal Reserve System’s Board of Governors also issued a consent cease-and-desist order and assessed a $61.9 million civil penalty. Thus, the combined U.S. criminal and regulatory penalties paid by JPMC and its Hong Kong subsidiary are approximately $264.4 million. 

The FBI’s New York Field Office investigated the case.  The department appreciates the significant cooperation and assistance provided by the SEC and the Federal Reserve Bank of New York in this matter.  Assistant Deputy Chief Leo Tsao and Trial Attorneys James P. McDonald and Derek J. Ettinger of the Criminal Division’s Fraud Section and Assistant U.S. Attorney James P. Loonam of the Eastern District of New York’s Business and Securities Fraud Section prosecuted the case. 

The Criminal Division’s Fraud Section is responsible for investigating and prosecuting all FCPA matters.  Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.

BROOKLYN, N.Y. – JPMorgan Securities (Asia Pacific) Limited (JPMorgan APAC), a Hong-Kong based subsidiary of multinational bank JPMorgan Chase & Co. (JPMC), agreed to pay a $72 million penalty for its role in a scheme to corruptly gain advantages in winning banking deals by awarding prestigious jobs to relatives and friends of Chinese government officials.

United States Attorney Robert L. Capers of the Eastern District of New York, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, and Assistant Director in Charge William F. Sweeney, Jr. of the FBI’s New York Field Office made the announcement. 

“U.S. businesses cannot lawfully seek to gain a business advantage by corruptly influencing foreign government officials.  The common refrain that this is simply how business is done overseas is no defense,” said United States Attorney Capers.  “In this case, JPMorgan employees designed a program to hire otherwise unqualified candidates for prestigious investment banking jobs solely because these candidates were referred to the bank by officials in positions to award business to the bank.  In certain instances, referred candidates were hired with the understanding that the hiring was linked to the award of specific business.  This is no longer business as usual; it is corruption.”     

“The so-called Sons and Daughters Program was nothing more than bribery by another name,” said Assistant Attorney General Caldwell.  “Awarding prestigious employment opportunities to unqualified individuals in order to influence government officials is corruption, plain and simple.  This case demonstrates the Criminal Division’s commitment to uncovering corruption no matter the form of the scheme.”

“Creating a barter system in which jobs are awarded to applicants in exchange for lucrative business deals is a corrupt scheme in and of itself,” said Assistant Director in Charge Sweeney.  “But when foreign officials are among those involved in the bribe, the international free market system and our national security are among the major threats we face.  Those engaging in these illegal acts abroad may think they’re out of sight and out of mind, but they’re wrong.  The FBI has recently established three dedicated international corruption squads to combat this type of quid pro quo, and we’ll use all resources at our disposal to uncover and put an end to these crimes.”

According to JPMorgan APAC’s admissions, beginning in 2006, senior Hong Kong-based investment bankers set up and used a “client referral program,” also referred to as the “Sons and Daughters Program,” to hire candidates referred by clients and government officials.  The Sons and Daughters Program was used as a means to influence those same officials to award investment deals to JPMorgan APAC.  By late 2009, JPMorgan APAC executives and senior bankers revamped the client referral program to improve its efficacy by prioritizing those hires linked to upcoming client transactions.  In order to be hired, a referred candidate had to have a “directly attributable linkage to business opportunity.” 

According to admissions made in connection with the resolution, these quid pro quo arrangements were discussed internally among JPMorgan APAC bankers.  For example, in late 2009, a Chinese government official communicated to a senior JPMorgan APAC banker that hiring a referred candidate would significantly influence the role JPMorgan APAC would receive in an upcoming initial public offering (IPO) for a Chinese state-owned company.  The banker communicated this message to several senior colleagues, who then spent several months trying to place the referred candidate in an investment banking position in New York.  Despite learning from personnel in New York that this referred candidate was not qualified for an investment banking position, senior JPMorgan APAC bankers created a new position for the candidate in New York, and JPMorgan APAC thereafter obtained a leading role in the IPO.  Further, JPMorgan APAC employees misused compliance questionnaires to justify and paper over corrupt business arrangements.  Employees also used a template with pre-filled answers, including that there was “no expected benefit” from the hire, and compliance personnel drafted and modified questionnaires that failed to state the true purpose of the hire.

JPMorgan APAC further admitted that candidates hired during the scheme were typically given the same titles and paid the same amount as entry-level investment bankers, despite the fact that many of these hires performed ancillary work such as proofreading and provided little real value to any deliverable product. 

The corrupt scheme netted JPMorgan APAC at least $35 million in profits from business mandates with Chinese state-owned companies. 

JPMorgan APAC entered into a non-prosecution agreement and agreed to pay a criminal penalty of $72,000,000 to resolve the matter.  As part of the agreement, JPMorgan APAC has agreed to continue to cooperate with the department in any ongoing investigations and prosecutions relating to the conduct, including of individuals, to enhance its compliance program, and to report to the department on the implementation of its enhanced compliance program.

The department reached this resolution based on a number of factors, including that JPMorgan APAC did not voluntarily and timely disclose the conduct at issue.  However, JPMorgan APAC did receive full credit for its and JPMC’s cooperation with the criminal investigation, including conducting a thorough internal investigation, making foreign-based employees available for interviews in the United States and producing documents to the government from foreign countries in ways that did not implicate foreign data privacy laws. 

JPMorgan APAC also took significant employment action against six employees who participated in the misconduct resulting in their departure from the bank, and it disciplined an additional 23 employees who, although not involved in the misconduct, failed to effectively detect the misconduct or supervise those engaged in it.  JPMorgan APAC imposed more than $18.3 million in financial sanctions on former or current employees in connection with the remediation efforts.  Based on these actions and other considerations, the company received a non-prosecution agreement and an aggregate discount of 25 percent off of the bottom of the U.S. Sentencing Guidelines fine range. 

In related proceedings, the U.S. Securities and Exchange Commission (SEC) filed a cease and desist order against JPMC, whereby JPMC agreed to pay $130.5 million in disgorgement to the SEC, including prejudgment interest.  The Federal Reserve System’s Board of Governors also issued a consent-cease-and-desist order and assessed a $61.9 million civil penalty.  Thus, the combined U.S. criminal and regulatory penalties paid by JPMC and its Hong-Kong subsidiary are approximately $264.4 million. 

*          *          *

The case is being prosecuted by Assistant U.S. Attorney James P. Loonam of the Eastern District of New York’s Business and Securities Fraud Section and Assistant Deputy Chief Leo Tsao and Trial Attorneys James P. McDonald and Derek J. Ettinger of the Criminal Division’s Fraud Section.  The FBI’s New York Field Office investigated the case. 

Earlier today, at the federal courthouse in Central Islip, New York, Zwanger-Pesiri Inc., a Long Island radiology company, pleaded guilty to two counts of health care fraud for illegally performing and billing for procedures that had not been ordered by treating physicians.  After accepting the guilty plea, United States District Court Judge Joanna Seybert approved a settlement with the United States and the State of New York in which Zwanger-Pesiri agreed to forfeit $2.4 million in the criminal case and pay $8,153,727 million to resolve civil liability arising from its fraudulent practices.

The announcement was made by Robert L. Capers, U.S. Attorney for the Eastern District of New York, Scott J. Lampert, Special Agent in Charge, U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG), William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office, and Eric Schneiderman, New York State Attorney General. 

As part of the plea agreement and criminal settlement, Zwanger-Pesiri pled guilty to a criminal information charging the company with illegally engaging in schemes to fraudulently obtain reimbursements from Medicare and Medicaid by “bundling” the tests it performed, such that when a patient’s treating physician ordered one test to be performed, Zwanger-Pesiri would automatically perform a related but unordered test.  For example, between July 2009 and February 2014, when patients were referred to Zwanger-Pesiri for either a dual energy X-ray absorptiometry (DXA) bone scan or a vertebral fracture assessment (LVA), Zwanger-Pesiri would perform both tests.  Similarly, between January 2008 and February 2014, when female patients were referred to Zwanger-Pesiri for either a pelvic or transvaginal ultrasound, Zwanger-Pesiri would perform both tests.

As part of the civil settlement with the United States and State of New York, Zwanger Pesiri agreed to pay $6,921,490.80 to the United States and $1,232,236.20 to New York State to resolve allegations set forth in a qui tam complaint filed by Donna Geraci and Linda Gibb.  Under federal and state False Claims Act statutes, a private individual who has uncovered fraud against the government may file a suit in federal court on behalf of the United States and the State of New York.  If the United States and the State are successful in resolving those claims, the individual who filed the complaint may receive a share of the recovery.  In addition to resolving civil liability arising from the conduct described in the criminal information, the civil settlement resolves allegations that Zwanger-Pesiri fraudulently billed Medicare and Medicaid programs for procedures performed or supervised by physicians who were not properly credentialed with Medicare and Medicaid programs, or which were performed at an unauthorized practice location. 

Finally, as part of the global settlement, Zwanger-Pesiri agreed to enter into a Corporate Integrity Agreement with HHS-OIG that will govern its future conduct and ensure careful oversight of its billing practices.

“Zwanger-Pesiri illegally pursued corporate profits at the expense of federal and state health care providers and taxpayers.  Today’s guilty plea and approximate $10.5 million global settlement demonstrates our vigilance in bringing to justice those who put profits first and health care second,” said United States Attorney Capers.  Mr. Capers expressed his appreciation to HHS-OIG, the FBI, and the State of New York Attorney General’s Office.

“Zwanger-Pesiri, like all health care providers, must be held to a high standard of ethical behavior,” said Special Agent in Charge Lambert of the U.S. Department of Health and Human Services, Office of Inspector General’s New York Region.  “Corporate greed must never be a part of medical decision making.  HHS-OIG and our law enforcement partners are committed to protecting patient care, and the federally funded health care programs intended for the nation’s most vulnerable citizens.”

“This case reminds us of a growing epidemic that exploits private and public insurers and the people they insure. Health care fraud is often mistaken for a victimless crime, but it victimizes insurers directly and the insured and others indirectly. Those who employ these schemes will most certainly be brought to justice,” said FBI Assistant Director-in-Charge Sweeney.     

“These defendants knowingly overbilled Medicaid by millions, draining the program of important resources meant to help some of our most vulnerable individuals,” said Attorney General Schneiderman.  “I thank our partners in law enforcement for helping us protect New York taxpayer dollars against fraud and waste. We will continue to vigilantly guard the integrity of Medicaid, and will punish those who steal from our state.”

The federal criminal case was prosecuted by Assistant United States Attorney Lara Treinis Gatz, and its civil claims were litigated by Assistant United States Attorney Robert W. Schumacher.  The State of New York’s civil claims were litigated by Carolyn T. Ellis, Chief, Civil Enforcement Division, Medicaid Fraud Control Unit, Office of the Attorney General.

Earlier today, at the federal courthouse in Central Islip, New York, Arnolvin Umanzor Velasquez, a member of the Brentwood Locos Salvatruchas (BLS) clique of La Mara Salvatrucha, also known as the MS-13, a transnational criminal organization, was sentenced to 40 years in prison in connection with his involvement in the December 18, 2011, execution-style murders of two brothers, Ricardo and Enston Ceron.  After committing the murders, in order to avoid apprehension, Velasquez, who is an El Salvador citizen, fled to his home country before returning to the United States and relocating to Georgia.  On May 19, 2015, Velasquez was located and arrested in Flowery Branch, Georgia, by a Federal Bureau of Investigation (FBI) SWAT team and transferred to the Eastern District of New York in custody.  Thereafter, on March 11, 2016, Velasquez pled guilty to the Ceron brothers’ murders.

The sentence was announced by Robert L. Capers, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, FBI, New York Field Office, and Timothy Sini, Commissioner, Suffolk County Police Department.

“The MS-13 is a scourge on too many communities on Long Island, across the United States, and around the world.  The senseless acts of violence committed by its members cannot and will not be tolerated and will be met with resolute and unwavering enforcement by this Office and the members of the FBI’s Long Island Gang Task Force,” stated United States Attorney Capers.  “Today’s sentence should serve a reminder to MS-13 members: If you engage in violence in this district, you will be prosecuted to the fullest extent of the law and justly punished.”

“This case illustrates how MS-13 maintains an ironfisted control over their turf, no life is protected, not even their own members.  Their goal is to create chaos wherever they plant their flag.  Our Long Island Safe Streets Task Force is working day and night, hand in hand with our partners, to get these gang members out of our communities,” stated FBI Assistant Director-in-Charge Sweeney.

“The Suffolk County Police Department is fully committed to decimating the MS-13 in the Brentwood area.  We will continue our multi-pronged strategy which entails collecting intelligence and creating strategic subject lists of known gang members, intense street enforcement targeted at those individuals, and collaboration with our federal law enforcement partners, including the FBI and the United States Attorney's Office, to strategically prosecute gang members under the federal RICO statute,” stated Commissioner Sini.  “This sentencing is yet another step in the right direction, but we will not stop until the job is done.”  

As set forth in prior court filings, a detention letter, and the government’s sentencing memorandum, the BLS clique killed Enston Ceron because he was not attending meetings or “putting in work” for the MS-13, and the clique members were concerned that he might cooperate with law enforcement authorities if he were arrested.  The BLS clique also murdered his brother, Ricardo Ceron, who belonged to the Western clique of the MS-13, because they were concerned he would retaliate if he learned that the BLS killed his brother.  On December 18, 2011, Velasquez and Sergio Cerna, who had agreed to carry out the murders and were armed with .22 caliber and 9mm semi-automatic handguns, asked Enston and Ricardo Ceron for a ride home from a party.  When the car stopped in the vicinity of Lincoln Avenue and Stockton Streets in Brentwood, Velasquez and Cerna executed the Ceron brothers, shooting them in the head and torso at close range.  Velasquez and Cerna exited the car and when another vehicle approached the murder scene and stopped to try to help, Cerna fired multiple shots at the Good Samaritan, striking him once in the chest.  Miraculously, the Good Samaritan survived the shooting.

Today’s sentence is the latest event in a series of federal prosecutions by the United States Attorney’s Office for the Eastern District of New York targeting members of the MS-13, a violent, transnational criminal organization.  The MS-13’s leadership is based in El Salvador and Honduras, but the gang has thousands of members across the United States, comprised primarily of immigrants from Central America.  With numerous branches, or cliques, the MS-13 is the largest and most violent street gang on Long Island.  Since 2003, hundreds of MS-13 members, including dozens of clique leaders, have been convicted on federal felony charges in this district.  A majority of those MS-13 members have been convicted on federal racketeering charges for participating in murders, attempted murders, and assaults.  Since 2010 alone, this Office has obtained indictments charging MS-13 members with carrying out more than 30 murders, and has convicted dozens of MS-13 leaders and members in connection with those murders.  These prosecutions are the product of investigations led by the FBI’s Long Island Gang Task Force, comprising agents and officers of the FBI, Nassau County Police Department, Nassau County Sheriff’s Department, Suffolk County Probation, Suffolk County Sheriff’s Office, and Suffolk County Police Department.

The government’s case is being prosecuted by the Office’s Long Island Criminal Section.  Assistant United States Attorneys John J. Durham, Raymond A. Tierney, and Paul G. Scotti are in charge of the prosecution.

The Defendant:

ARNOLVIN UMANZOR VELASQUEZ (“Momia” and “Lito”)
Age: 23
Brentwood, New York and Flowery Branch, Georgia

E.D.N.Y. Docket No. 15-CR-087 (S-2)(JFB)

Earlier this morning in federal court in Brooklyn, Rafael Esquivel, the former president of the Venezuelan soccer federation, pleaded guilty to racketeering conspiracy, three counts of wire fraud conspiracy, and three counts of money laundering conspiracy in connection with his participation in multiple bribery schemes related to the awarding of contracts for the media and marketing rights to international soccer tournaments.   Esquivel, the president of the Venezuelan soccer federation from 1988 to 2015, was also a vice president of CONMEBOL, the South American soccer confederation, at the time of his arrest on May 27, 2015.  As part of his plea, Esquivel also agreed to forfeit over $16 million.  At sentencing, Esquivel faces a maximum sentence of 20 years for each count.  Today’s plea proceeding took place before United States District Judge Pamela K. Chen.

The guilty plea was announced by Robert L. Capers, United States Attorney for the Eastern District of New York; William F. Sweeney, Jr., Assistant Director in Charge, FBI, New York Field Office; and Acting Special Agent in Charge Anthony J. Orlando, IRS Criminal Investigation, Los Angeles Field Office.

According to court filings and facts presented during the plea proceeding, Esquivel was involved in multiple criminal schemes involving the payment of and agreement to pay millions of dollars in bribes from sports marketing companies in connection with, among other things, the sale of media and marketing rights to soccer tournaments.  These tournaments included the Copa Libertadores, South America’s premier club team tournament, and the Copa América, which features the men’s national teams of CONMEBOL’s 10 member associations as well as two national teams invited to participate from outside the CONMEBOL region.  As part of his involvement in the criminal schemes, Esquivel used his influence as a soccer official to obtain millions of dollars in bribe payments from co-conspirators who sent the payments from overseas banks accounts into accounts Esquivel controlled at banks in the United States.

The guilty plea announced today is part of an investigation into corruption in international soccer being led by the U.S. Attorney’s Office for the Eastern District of New York, the FBI New York Field Office, and the IRS-CI Los Angeles Field Office.  The prosecutors in Brooklyn are receiving considerable assistance from attorneys in various parts of the Justice Department’s Criminal Division in Washington, D.C., including the Office of International Affairs, the Organized Crime and Gang Section, the Asset Forfeiture and Money Laundering Section, and the Fraud Section, as well as from INTERPOL Washington.

Assistant U.S. Attorneys Evan M. Norris, Samuel P. Nitze, M. Kristin Mace, Tanya Hajjar, and Brian D. Morris of the Eastern District of New York are in charge of today’s prosecution.

The government’s investigation is ongoing.

The Defendant:

RAFAEL ESQUIVEL
Age:  70
Nationality:  Venezuela

E.D.N.Y. Docket No. 15 CR 252 (S-1)

A four-count superseding indictment was unsealed today in the United States District Court for the Eastern District of New York charging Cornell Bozier with one count of conspiracy to commit honest services wire fraud and three substantive counts of federal program bribery.  From April 2011 to April 2013, Bozier served as the Chairman of the Board of Commissioners (the Board) at the Village of Hempstead Housing Authority (the VHHA).  The defendant was arrested this morning and is scheduled to be arraigned this afternoon before United States District Judge Joan M. Azrack at the federal courthouse in Central Islip, New York. 

The charges were announced by Robert L. Capers, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation (FBI), New York Field Office, and Christina Scaringi, Special Agent-in- Charge, Department of Housing and Urban Development, Office of the Inspector General (HUD-OIG), Northeast Region.

“The corruption and betrayal of the public trust detailed in the indictment was compounded by the fact that the defendant allegedly orchestrated this scheme to line his pockets with money stolen from a federal program that provides low-income families with safe and affordable housing,” stated United States Attorney Capers.  “This Office and our law enforcement partners are steadfast in our resolve to uncover public corruption at every level of government and prosecute those responsible.”  Mr. Capers expressed his grateful appreciation to the FBI and HUD-OIG, the agencies responsible for leading the investigation.

“Bozier created a conduit for illegal activity, one that permeated the layers of oversight put in place to protect the public from the corruption in which he’s alleged to have been engaged.  Misuse of public funds in furtherance of one’s own objectives is stealing, no matter how you cut it.  We won’t let this type of corruption undermine the safety and security of our communities, or erase the expectation of trust the public deserves to have in those who govern these decisions,” stated FBI Assistant Director-in-Charge Sweeney.  

“Bid-rigging schemes such as those outlined in this indictment not only deprive businesses of fair competition, they damage the integrity of HUD programs established to help those in need.  The charges today prove that the end result of such corruption will be both costly and extremely unpleasant to the offending party,” stated Scaringi, Special Agent-in-Charge, HUD OIG, Northeast Region. 

The VHHA is responsible for providing and maintaining safe and affordable housing for low income individuals living in the Village of Hempstead.  According to the VHHA’s procurement policy, when large and costly construction projects are required at one of the various properties maintained by the VHHA, a public request for bids from independent and private contractors must be published to ensure that the Board awards the contract to the most qualified lowest bidder. 

Instead, as alleged in the superseding indictment, Bozier used his position as the Board Chair of the VHHA Board to recruit and direct co-conspirators to submit fraudulently inflated construction bids for repair projects on VHHA properties, bypass the required procurement process, and ensure that the construction contracts were awarded to companies owned or controlled by co-conspirators.  Bozier directed the hiring of additional co-conspirators for positions within the VHHA to help facilitate the Board’s acceptance of fraudulent bids and exerted improper influence and pressure on those Board members to vote in favor of the grossly inflated bids submitted by Bozier’s co-conspirators.  In exchange for these official actions, Bozier solicited and accepted numerous kickbacks during the course of the conspiracy totaling approximately $100,000.  

In one case detailed in the superseding indictment, Bozier secured the awarding of a contract to replace the roof at a building operated by the VHHA for a construction company controlled by a co-conspirator.  Pursuant to the fraudulent bid, the VHHA paid approximately $250,000 for the project that a co-conspirator paid a sub-contractor $23,000 to complete.  More than $200,000 in proceeds from the fraudulently inflated contract were distributed between Bozier and several co-conspirators. 

To date, the investigation has identified more than $500,000 that was allegedly stolen from the VHHA as a result of the charged conspiracy. 

The five co-conspirators charged in the underlying indictment have previously pleaded guilty and are awaiting sentence.

If convicted, Bozier faces a term of imprisonment of up to 20 years for the conspiracy to commit honest services fraud charge and up to 10 years for each of the federal program bribery charges.  The charges in the superseding indictment are allegations, and the defendant is presumed innocent unless and until proven guilty.

The government’s case is being handled by the Office’s Long Island Criminal Section.  Assistant United States Attorney Paul G. Scotti is in charge of the prosecution.

The Defendant:

CORNELL BOZIER
Age:  56
North Baldwin, NY

E.D.N.Y. Docket No. 15-CR-303 (S-1) (JMA)

Earlier today, an indictment was unsealed in the United States District Court for the Eastern District of New York charging nine defendants with crimes including racketeering, extortion, loansharking, illegal gambling, and drug trafficking.  Eight of the defendants are under arrest, and one remains at large.

The defendants’ initial appearances and arraignments are scheduled this afternoon before United States Magistrate Judge Steven L. Tiscione at the federal courthouse in Brooklyn, New York.

The charges were announced by Robert L. Capers, United States Attorney for the Eastern District of New York; James J. Hunt, Special Agent-in-Charge, Drug Enforcement Administration (DEA); James P. O’Neil, Commissioner, New York City Police Department (NYPD); Angel M. Melendez, Special Agent-in-Charge, Immigration and Customs Enforcement, Homeland Security Investigations (HSI); George Beach, Superintendent, New York State Police (NYSP); and Shantelle P. Kitchen, Special Agent-in-Charge, Criminal Investigation Division, Internal Revenue Service (IRS).  The arrests resulted from a long-term investigation by the DEA’s New York Organized Crime Drug Enforcement Strike Force.[1]   

As alleged in the indictment and other court documents filed by the government, the defendants were members of an Eastern European organized crime syndicate that operated extensively in the Brighton Beach and Coney Island neighborhoods of Brooklyn as well as overseas.  Syndicate members in Brooklyn reported directly to members of organized crime — known as “thieves in law” or “Thieves”— based in various former states of the Soviet Union.  The Thieves would, in turn, help the defendants extort money from individuals living abroad and authorize the use of physical force by the defendants in the United States.    

All but two of the defendants are naturalized U.S. citizens who immigrated to the United States from Eastern European countries.  Librado Rivera is a U.S. citizen by birth, and Aleksey Tsvetkov is a Ukrainian citizen. The defendants presently reside in New York City, predominantly in Coney Island and Brighton Beach.

Since as early as March 2016, the defendants allegedly generated profits through their criminal acts.  To collect outstanding debts, worth in the aggregate millions of dollars, they regularly used threats of violence.  The syndicate’s reach was international and included extorting payments in the United States and threatening victims and their family members living abroad.  For example, wiretap recordings reveal that the defendants tracked down the father of an extortion victim in Russia in order to determine where his son was living.  After locating the victim — whom defendants claimed owed syndicate members nearly $200,000 — defendant Gershman announced, the “Thieves have found him . . . in Israel,” and “they were at [his] place today.”  Another extortion victim who struggled to repay his debt was ominously reminded that, “the person who is going to work with you [to repay the debt] … is a boxer with cauliflower ears.”  The interest rate being charged this particular victim was 100% per year.

The government’s investigation revealed that the syndicate members ran high-stakes illegal poker games in various locations in Brooklyn, where a single game could involve wagers totaling as much as $150,000.

Another of the syndicate’s profitable schemes was the trafficking of a substantial quantity of marijuana, at least 100 kilograms as charged in the indictment.

Despite the fact that many of the defendants do not have legitimate employment, the government’s investigation revealed thousands of dollars flowing into their bank accounts, and the defendants were observed driving high-end luxury automobiles.

In addition to court authorized wiretaps, the government’s investigation included surveillance, confidential sources, and the controlled purchase of narcotics.   

“The United States remains the land of opportunity,” stated United States Attorney Capers.  “But that does not include an opportunity for international organized criminal groups to profit by victimizing individuals residing here or abroad.  In keeping with my Office’s long-standing practice, we will aggressively investigate such organizations, whether they are domestic or, as in this case, have tentacles reaching to Eastern European Thieves, and we will ensure that their activities are detected and stopped at the earliest possible juncture.”

DEA Special Agent-in-Charge Hunt stated, “This drug investigation’s path uncovered an alleged Russian organized crime syndicate operating in Brighton Beach and Coney Island, NY.  As history often repeats itself, racketeering, loansharking, extortion, and illegal gambling are just some of crimes the defendants are charged with committing here in Brooklyn, similar to crimes committed by the Thieves in Law in the former Soviet states.  Today’s arrests exemplify the effectiveness of the DEA’s Strike Force which comprises federal, state, and local law enforcement from 15 agencies.” 

“The NYPD worked diligently with its law enforcement partners to take down this alleged criminal enterprise, whose Brooklyn operation had significant ties overseas,” said Police Commissioner James P. O'Neill. “These defendants operated with impunity, threatening loansharking victims with physical violence, trafficking large quantities of narcotics and hosting high stakes poker games.  I want to commend the investigators working this case for their dedication in taking down these persistent criminals.”

“The alleged members of this criminal organization operate out of Brighton Beach and Coney Island, among other neighborhoods right here in New York,” said Melendez, Special Agent-in-Charge of HSI, New York.  “HSI will stay committed to these joint enforcement efforts to ensure that these criminal groups do not continue to abuse our communities with their drug trafficking, loansharking or illegal gambling.”

NYSP Superintendent Beach II stated “We simply will not tolerate this type of criminal activity in New York State.  I want to thank our federal and local partners for their hard work and collaboration on this case, which has resulted in nine dangerous criminals being taken off our streets.”

IRS Criminal Investigation Special Agent-in-Charge Kitchen stated, “IRS Criminal Investigation is a dedicated partner on DEA’s New York Organized Crime Drug Enforcement Strike Force and as such, remains fully committed to its mission.  This investigation provides another example of how agencies with different investigative missions can pool their respective skills toward reaching a common objective.  Today, as a result of the Strike Force partnership, an ongoing criminal enterprise has been derailed.”

The charges contained in the indictments are allegations, and the defendants are presumed innocent unless and until proven guilty.  If convicted of all counts, defendants Leonid Gershman, Vyacheslav Malkeyev, and Librado Rivera face mandatory minimum sentences of five years and maximum sentences of 40 years, while defendants Aleksey Tsvetkov, Renat Yusufov, Igor Krugly, and Isok Aronov face maximum sentences of 20 years.

The government’s case is being prosecuted by the Office’s Organized Crime and Gangs Section.  Assistant United States Attorneys Matthew J. Jacobs and Andrey Spektor are in charge of the prosecution.

The Defendants:

LEOIND GERSHMAN, also known as “Lenny,” “Lenny G.,” “Lyonchik” and “Lyonya”
Age: 33

ALEKSEY TSVETKOV, also known as “Pelmin,” “Lesha” and “Lyosha”
Age: 38

RENAT YUSUFOV, also known as “Ronnie” and “Ronik”
Age: 38

IGOR KRUGLY
Age: 37

VYACHESLAV MALKEYEV, also known as “Steve Bart”
Age: 32

ISOK ARONOV
Age: 32

YUSIF PARDILOV, also known as “Yosik”
Age: 52

LIBRADO RIVERA, also known as “Macho” and “Max”
Age: 36

E.D.N.Y. Docket No. 16-CR-553 (BMC)                  

 

---

[1]  The Strike Force comprises agents and officers of the DEA, the NYPD, Immigration and Customs Enforcement, HSI, the NYSP, the IRS Criminal Investigation Division, the Federal Bureau of Investigation, the U.S. Secret Service, the U.S. Marshal Service, the New York National Guard, the New York Department of Taxation and Finance, the Clarkstown Police Department, the Port Washington Police Department, and New York State Department of Corrections and Community Supervision.  The Strike Force is partially funded by the New York/New Jersey High Intensity Drug Trafficking Area, which is a federally funded crime fighting initiative.

A one-count indictment was unsealed today in United States District Court for the Eastern District of New York charging Massimo Dabusco, also known as “Max,” and Vito Menadi with conspiracy to commit extortion.  The indictment was returned under seal by a federal grand jury sitting in Brooklyn on November 1, 2016, and relates to Dabusco’s alleged activities as an Inspector with the New York City Department of Buildings (DOB) and his silent partnership with Menadi in A&G Contracting Group Corp. (A&G), a demolition and excavation company.  Dabusco resigned from his job as a DOB Inspector in August 2015.

The charges were announced by Robert L. Capers, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and Mark G. Peters, Commissioner New York City Department of Investigation.

The indictment alleges that Dabusco served as a silent partner to Menadi in A&G in violation of the New York City law.  Further, Dabusco used his official position to influence property owners and contractors, over whom Dabusco had regulatory authority, to hire A&G and Menadi to perform excavation and demolition jobs.  As part of his efforts to secure business for A&G, Dabusco illegally warned contractors about impending DOB inspections.  In exchange for his conduct, Dabusco received a share of A&G’s profits.   

Additionally, Dabusco allegedly abused his position as a DOB Inspector by threatening punitive action against contractors and property owners in an effort to benefit Menadi and A&G.  For instance, Dabusco threatened to use his authority as a DOB Inspector to shut down all of a contractor’s existing jobs if the contractor did not pay outstanding fines owed by Menadi and A&G.

“New York City’s Building Inspectors are entrusted with a vitally important public safety mission.  Today’s indictment makes clear that public officials who place personal gain above this public trust and those who assist those officials in such corrupt practices, will be aggressively prosecuted.  Maintaining safe buildings and safeguarding the health and wellbeing of New Yorkers demands no less,” stated United States Attorney.

“Public officials, whether elected, appointed, or employed, have a duty to maintain honest and faithful public service.  Using your position to influence the decisions of others, and receiving something of value in return, is a direct violation of the law.  As alleged, Dabusco may have tried to build up his business by engaging in corrupt activity, but now he’ll have to answer for his actions,” stated FBI Assistant Director-in-Charge Sweeney.     

DOI Commissioner Peters said, “Once again, DOI, along with its law enforcement partners, has found a City building inspector corruptly abusing his power and authority, conspiring with his co-defendant to shakedown property owners by threatening them with DOB violations, and pressuring them to steer business to a preferred contracting company, according to the charges.  This investigation demonstrates the importance of coordination between the United States Attorney’s Office for the Eastern District of New York and the Federal Bureau of Investigation and the need for DOI to continue its enforcement efforts in the building and construction industry.”  

The defendants are scheduled to be arraigned this afternoon before United States Magistrate Judge Steven L. Tiscione at the federal courthouse in Brooklyn.  The charges in the indictment are allegations, and the defendants are presumed innocent unless and until proven guilty.

The government’s case is being prosecuted by Assistant United States Attorney Martin Coffey.

The Defendants:

MASSIMO DABUSCO
Age:  54
Yorktown Heights, New York

Vito Menadi
 Age:  43
 Brooklyn, New York,

E.D.N.Y. Docket No.16 Cr 0559(ILG)

Earlier today, Brooklyn drug trafficker Shaun Taylor, also known as “S-Dot,” was sentenced to ten life terms plus 50 years in prison.  Following a three-week jury trial, Taylor was convicted on September 8, 2014, of all charges including murder for hire, drug-related murder, narcotics trafficking conspiracy, and firearms offenses.  The charges arose from the defendant’s participation in a decade-long narcotics trafficking operation in the Bushwick neighborhood of Brooklyn, which was responsible for distributing kilogram quantities of heroin, cocaine, and crack cocaine in Brooklyn, Queens, and Long Island.  Taylor ordered two murders during the conspiracy, one of which resulted in the death of an unintended victim, whom Taylor’s hitman shot in a case of mistaken identity.

The sentence was announced by Robert L. Capers, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office, and James P. O’Neill, Commissioner, New York City Police Department. 

The evidence at trial established that Taylor frequently recruited young men to settle scores on his behalf.  When another drug dealer stole the cellular telephone Taylor used to conduct his narcotics business, he recruited Timothy Pinkney to murder him.  On April 29, 2005, Taylor offered Pinkney $1,500 to carry out the hit, drove Pinkney to the scene, and mistakenly directed him to shoot Terrance Barnett, who was standing in front of a school in Bushwick.  Barnett just happened to be visiting Brooklyn for the weekend and had no prior relationship with Taylor or Pinkney.  Pinkney shot Barnett in the head and torso at close range, killing him.  Pinkney subsequently pled guilty to his role in the murder and is currently serving a 23-year prison sentence.

Two years later, Taylor and a co-conspirator stole approximately five kilograms of cocaine that was shipped to Joseph Vargas.  Fearing Vargas might retaliate, Taylor hired two young men to kill him.  On June 20, 2007, Taylor drove with the men to point out Vargas, who was at a car wash on DeKalb Avenue in Bushwick.  Taylor provided the murder weapon and left the scene.  One of the men entered the carwash and shot Vargas and his brother.  Vargas’s brother survived, but Vargas was killed.

“The defendant was responsible for two murders – one, another drug dealer, the other, an innocent bystander who tragically was in the wrong place at the wrong time – once again demonstrating the inextricable link between drug trafficking and wanton violence.  Taylor will now spend the rest of his life behind bars for his depraved acts,” stated United States Attorney Capers. Mr. Capers extended his grateful appreciation to the Federal Bureau of Investigation and the New York City Police Department for their outstanding work in this case.

“Shaun Taylor has shown a disregard for human life by paying others to do his dirty work for him, all so he could maintain total control over his drug trade in Brooklyn.  In his desire to seek revenge, an innocent man Terrance Barnett died for no reason.  The FBI and our law enforcement partners will continue to work every day to stop the corrosive effects the drug trade has on our communities,” stated FBI Assistant Director-in-Charge Sweeney.

The sentence was imposed by Chief United States District Judge Dora L. Irizarry.

The government’s case is being handled by Assistant United States Attorneys Matthew Amatruda, David Pitluck, and Tali Farhadian.

The Defendant:

SHAUN TAYLOR
Age: 32
Brooklyn, NY

E.D.N.Y. Docket No. 10-CR-268

BROOKLYN, NY – Earlier today, Gerald Cocuzzo, a resident of Boca Raton, Florida and a broker registered with the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority, Inc. (FINRA), pleaded guilty to securities fraud in connection with the fraudulent market manipulation of ForceField Energy Inc. (ForceField), a publicly-traded company listed on the NASDAQ under the ticker symbol “FNRG.”  The guilty plea was entered before United States Magistrate Judge Ramon E. Reyes, Jr. at the federal courthouse in Brooklyn, New York.  When sentenced, Cocuzzo faces up to 20 years in prison, as well as restitution, criminal forfeiture, and a fine.

The guilty plea was announced by Robert L. Capers, United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).

According to court filings and facts presented at the plea hearings, between January 2009 and April 2015, the defendant, together with others, engaged in a scheme to defraud investors in ForceField, a purported worldwide distributor and provider of LED lighting products and solutions, by artificially controlling the price and volume of traded shares of ForceField through, among other means: (1) using nominees to purchase and sell ForceField stock without disclosing this information to investors and potential investors; (2) orchestrating the trading of ForceField stock to create the appearance of genuine trading volume and interest in the stock; and (3) concealing payments to stock promoters and broker dealers who promoted and sold ForceField stock to investors and potential investors while claiming to be independent of the company.  The defendants’ fraudulent scheme caused a loss of approximately $131 million to the investing public.             

Between January 2015 and April 2015, a ForceField executive paid commission payments, or kickbacks, to Cocuzzo in exchange for his purchase of ForceField stock in his clients’ brokerage accounts.  Cocuzzo did not disclose to his clients the kickbacks he was receiving for purchasing ForceField stock.  Cocuzzo and his co-conspirators took pains to conceal their participation in the fraudulent scheme by using prepaid, disposable cellular telephones and encrypted, content-expiring messaging applications to communicate with each other, and by paying kickbacks in cash.

The government’s case is being prosecuted by the Office’s Business and Securities Fraud Section.  Assistant United States Attorneys Mark E. Bini and Lauren H. Elbert are in charge of the prosecution.

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

The Defendant:

GERALD COCUZZO
Age:  38
Residence: Delray Beach, Florida

E.D.N.Y. Docket No. 16-CR-234 (BMC)

Friday afternoon, Maliek Ramsey, also known as “Squinge,” and Rodney Muschette, also known as “Stitch,” were convicted of the 2008 retaliation murder of a federal informant.  Ramsey and Muschette are members of the Eight Trey Crips, a set of the Crips street gang operating in and around Brooklyn, New York, and elsewhere.  When sentenced, they will face mandatory life imprisonment.  

The convictions were announced by Robert L. Capers, United States Attorney for the Eastern District of New York; William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI); James O’Neill, Commissioner, New York City Police Department (NYPD); and George N. Turner, Chief of Police, Atlanta Police Department (APD). 

“The defendants’ actions tore at the fabric of our criminal justice system, a system that relies upon members of the community to notify law enforcement about criminal activity,” stated U.S. Attorney Capers.  “Without the cooperation of all segments of the community – including victims, eyewitnesses, and cooperating witnesses – our system cannot work.”  Mr. Capers extended his grateful appreciation to the FBI Charlotte, NC, Field Office, the FBI Raleigh, NC, Resident Agency, the FBI Atlanta, GA, Field Office and the United States Attorney’s Office for the Eastern District of North Carolina for their assistance. 

“We depend on eyewitnesses for the information that isn’t revealed from forensic evidence, and many times those eyewitnesses are known to the subjects in a case.  The FBI and our law enforcement partners will pursue anyone who threatens witnesses with violence because they were willing to come forward,” stated FBI Assistant Director-in-Charge Sweeney.

“In partnership with the U.S. Attorney’s Office, the Atlanta Police Department has removed another dangerous and violent criminal from Atlanta streets,” said Atlanta Police Chief Turner.”  Muschette and Ramsey mercilessly took the life of Mr. Nashwad Johnson and those actions will not go unpunished.  The Atlanta Police Department is committed to cracking down on criminal activity and individuals that threaten the safety and quality of life for Atlanta residents and visitors.”

On December 30, 2008, the leader of the Eight Trey Crips was sentenced in Brooklyn federal court to 110 months’ imprisonment based on his conviction for possessing a firearm as a felon in connection with a June 2005 shooting in Brooklyn, New York.  Fellow gang member Nashwad Johnson, also known as “Nash,” had witnessed that shooting.  At the leader’s sentencing proceeding, he stated his belief that Johnson was a federal informant, and he later made sure that the message was communicated to other gang members.  The leader’s sister told him that everyone in the gang was “all messed up” about the news, and, in particular, she told him that defendant Ramsey – who was in England at that time – was crying and thought it was his fault.  The afternoon of New Year’s Eve, Muschette and Ramsey spoke for 20 minutes to iron out their murder plan, and Ramsey ordered Muschette to shoot Johnson. 

At or around the time of that sentencing, Muschette and other members of the gang traveled with Johnson from Raleigh, North Carolina, to Atlanta, Georgia.  Shortly before midnight on New Year’s Eve in 2008 – one day after the leader was sentenced – Muschette and others carried out their plan to kill Johnson because they believed that he had provided information to federal law enforcement about their gang. Muschette and his coconspirators drove Johnson to a wooded area off an Atlanta highway.  There, Muschette shot Johnson eleven times, including five shots in Johnson’s back, ending his life.

The government’s case is being prosecuted by the Office’s Organized Crime and Gangs Section.  Assistant United States Attorneys Elizabeth A. Geddes and Patrick T. Hein are in charge of the prosecution.

The Defendants:

MALIEK RAMSEY, also known as “Squinge”
Age: 36

RODNEY MUSCHETTE, also known as “Stitch”
Age: 35

E.D.N.Y. Docket No.  15-CR-525 (ERK)

ROBERT L. CAPERS and PREET BHARARA, the United States Attorneys for the Eastern and Southern Districts of New York, respectively, announced today that special telephone numbers have been set up to receive complaints of possible violations of federal election laws relating to the upcoming primary elections in New York City and other counties in their districts. 

The United States Attorneys said that their Offices will be available to receive complaints at the following numbers on Tuesday, November 8, 2016:

(718) 254-6323                       (Brooklyn, Queens, Staten Island, Nassau and Suffolk counties)

(646) 369-4739                       (Manhattan, Bronx, Dutchess, Orange, Putnam, Rockland, Sullivan

                                                    and Westchester counties)

In addition, complaints of possible violations of federal election laws may be made directly to the Federal Bureau of Investigation (FBI) at (212) 384-1000.

The Department of Justice has an important role in deterring election fraud and discrimination at the polls, and combating these violations whenever and wherever they occur.  The Department’s long-standing Election Day Program furthers these goals, and also seeks to ensure public confidence in the integrity of the election process by providing local points of contact within the Department for the public to report possible election fraud and voting rights violations while the polls are open on Election Day.

Federal law protects against such crimes as intimidating or bribing voters, buying and selling votes, impersonating voters, altering vote tallies, stuffing ballot boxes, and marking ballots for voters against their wishes or without their input.  It also contains special protections for the rights of voters and provides that they can vote free from acts that intimidate or harass them.  For example, actions of persons designed to interrupt or intimidate voters at polling places by questioning or challenging them, or by photographing or videotaping them, under the pretext that these are actions to uncover illegal voting, may violate federal voting rights law.  Further, federal law protects the right of voters to mark their own ballot or to be assisted by a person of their choice.

The United States Attorneys also noted that the following additional telephone numbers are available on election day for citizens to call for routine inquiries, such as where to vote or how late the polls are open, or to register complaints that may concern violations of New York State election laws:

IN NEW YORK CITY

City Board of Elections

Main Office                           (866) 868-3692

      TTY #: 212-487-5496

Bronx                                     (718) 299-9017

Brooklyn                                (718) 797-8800

Manhattan                             (212) 886-2100

Queens                                   (718) 730-6730

Staten Island                         (718) 876-0079

 

IN COUNTIES OUTSIDE NEW YORK CITY

County Boards of Elections

Dutchess                                 (845) 486-2473

Nassau                                    (516) 571- 8683

Orange                                    (845) 360-6500

Putnam                                    (845) 808-1300

Rockland                                 (845) 638-5172

Suffolk                                    (631) 852-4500

Sullivan                                   (845) 807-0400

Westchester                            (914) 995-5700

 

Assistant United States Attorney CATHERINE MIRABILE is responsible for overseeing the handling of complaints of voting rights abuses and election fraud for the Eastern District of New York.

Assistant United States Attorney DAVID J. KENNEDY is responsible for overseeing the handling of complaints of voting rights abuses and election fraud for the Southern District of New York.

Earlier today, Jared Mitchell, an investor relations professional, and Maroof Miyana, a registered broker, pleaded guilty to securities fraud in connection with the fraudulent market manipulation of ForceField Energy Inc. (ForceField), a publicly-traded company listed on the NASDAQ under the ticker symbol “FNRG.”  The guilty pleas were each entered before United States Magistrate Judge Ramon E. Reyes, Jr. at the federal courthouse in Brooklyn, New York.  When sentenced, Mitchell and Miyana each face up to 20 years in prison, as well as restitution, criminal forfeiture, and a fine.

The guilty pleas were announced by Robert L. Capers, United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).

According to court filings and facts presented at the plea hearings, between January 2009 and April 2015, the defendants, together with others, engaged in a scheme to defraud investors in ForceField, a purported worldwide distributor and provider of LED lighting products and solutions, by artificially controlling the price and volume of traded shares of ForceField through, among other means:  (1) using nominees to purchase and sell ForceField stock without disclosing this information to investors and potential investors; (2) orchestrating the trading of ForceField stock to create the appearance of genuine trading volume and interest in the stock; and (3) concealing payments to stock promoters and broker dealers who promoted and sold ForceField stock to investors and potential investors while claiming to be independent of the company.  The defendants’ fraudulent scheme caused a loss of approximately $131 million to the investing public.   

Between October 2014 and April 2015, a ForceField executive paid commission payments, or kickbacks, to Mitchell in exchange for the registered broker defendants’ purchasing ForceField stock in their clients’ brokerage accounts; Mitchell would distribute a portion of the kickbacks to the registered brokers, including Miyana, and keep a portion of the kickback for himself.  The registered broker defendants did not disclose to their clients the kickbacks they were receiving for purchasing ForceField stock.  Mitchell, Miyana, and their co-conspirators took pains to conceal their participation in the fraudulent scheme by using prepaid, disposable cellular telephones and encrypted, content-expiring messaging applications to communicate with each other, and by paying kickbacks in cash.

The government’s case is being prosecuted by the Office’s Business and Securities Fraud Section.  Assistant United States Attorneys Mark E. Bini and Lauren H. Elbert are in charge of the prosecution.

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

The Defendants:

JARED MITCHELL
Age:  34
Residence: New York, New York

MAROOF MIYANA
Age:  36
Residence: Boca Raton, Florida

E.D.N.Y. Docket No. 16-CR-234 (BMC)

Earlier today, at the federal courthouse in Central Islip, New York, James Burke, the former Chief of Department for the Suffolk County Police Department (SCPD), was sentenced to 46 months in prison and three years of supervised release by United States District Judge Leonard D. Wexler.  Previously, on February 26, 2016, Burke pleaded guilty to a civil rights violation and conspiracy to obstruct justice. 

The civil rights violation related to Burke’s assault of a Smithtown man who had been arrested for breaking into Burke’s SCPD-issued vehicle and stealing his property on December 14, 2012.  Following that assault, over almost three years, Burke and other Suffolk County law enforcement authorities took actions to obstruct the federal civil rights investigation into the assault.  Burke was arrested and arraigned on December 9, 2015, and he has been in federal custody since that date.  

The sentence was announced by Robert L. Capers, United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).

“During his tenure as the highest ranking uniformed officer in the Suffolk County Police Department, James Burke considered himself untouchable.  He abused his authority by brazenly assaulting a handcuffed prisoner, he pressured subordinates to lie to cover up his criminal acts, and he attempted to thwart the civil rights investigation into his conduct,” stated United States Attorney Capers.  “With today’s sentence, Burke learned that no one is above the law and that the consequences for such egregious behavior are severe.”

FBI Assistant Director-in-Charge Sweeney stated, “Burke’s abuse of power and efforts to obstruct justice not only threatened to undermine the integrity of a federal investigation, but also the reputation of all the Suffolk County police officers who value the laws they are sworn to uphold.  As evidenced by today’s sentence, Burke, and others, are reminded that this type of behavior won’t go unpunished.”

On December 14, 2012, New York State Probation Department and SCPD officers arrested probationer Christopher Loeb at his mother’s home in Smithtown, New York, for a variety of probation violations.  During the arrest and search of the Loeb residence, officers discovered a cache of merchandise stolen from over a dozen vehicles, including an SCPD-issued SUV operated by Burke.  Among the items taken from Burke’s SUV were his gun belt, several magazines of ammunition, a box of cigars, a humidor, and a canvas bag that contained toiletries, clothing, and other items.

Burke was permitted to enter the Loeb residence and retrieve the canvas bag and several other articles, even as the search was underway.  He then drove to the SCPD’s Fourth Precinct in Smithtown where detectives had begun interrogating Loeb.  Burke entered the interrogation room where Loeb was handcuffed and chained to an eyebolt fastened to the floor.  Burke then punched and kicked Loeb in the head and body.

Subsequently, Burke and others pressured the detectives who witnessed the assault to conceal the event.  Those efforts continued even after the FBI and the U.S. Attorney’s Office opened an investigation of the assault in 2013.  In one instance, Burke summoned detectives under his command to SCPD headquarters in Yaphank, New York, to persuade the detectives to agree to a false version of events that would conceal the assault.  In October 2013, one of those detectives testified falsely under oath in a state pretrial hearing in the Loeb prosecution, denying that Loeb had been assaulted.  

The government’s case is being prosecuted by the Office’s Long Island Criminal Section.  Assistant United States Attorneys Lara Treinis Gatz and John J. Durham are in charge of the prosecution, assisted by EDNY Investigator William Hessle.

The Defendant:

JAMES BURKE
Age:  52
Smithtown, New York

E.D.N.Y. Docket No. 15-CR-627 (LDW)

Marc Broidy, the founder, Principal, and Chief Executive Officer of Broidy Wealth Advisors, LLC, was arrested earlier today on charges of securities fraud.  Broidy allegedly schemed to defraud his clients by withdrawing over $640,000 in excess management fees and then misappropriating more than $865,000 worth of stock held in trusts, over which he was trustee, to conceal his fraudulent overbilling scheme.  The defendant’s initial appearance is scheduled for this afternoon before United States Magistrate Judge Frederick F. Mumm at the United States Courthouse, 312 North Spring Street, Los Angeles, California.  The government will seek his removal to the Eastern District of New York.

The charges and arrest were announced by Robert L. Capers, United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).

“As alleged in the criminal complaint, through a web of lies and fabricated documents, Marc Broidy deceived his clients and betrayed their trust by using their investment accounts as his personal slush fund.  When one client unearthed his fraudulent scheme, Broidy simply stole from another client in an effort to cover up his theft.  However, his days of ‘robbing Peter to pay Paul’ have now come to an end,” stated United States Attorney Capers.  Mr. Capers thanked the U.S. Securities and Exchange Commission, New York Regional Office (SEC), for their invaluable cooperation and assistance during the investigation.

“As alleged, Broidy overbilled clients while underreporting the management fees he deducted for his services. Despite being caught red-handed, he cashed out on stock held in trust accounts he was appointed to oversee, all in an effort to defray personal expenses. Financial crimes have the potential to turn lives upside down and inside out. Victims of these types of crimes deserve to see justice served. We would like to thank our colleagues from the FBI's Los Angeles Field Office for their assistance with this investigation,” stated FBI Assistant Director-in-Charge Sweeney.

According to the complaint unsealed this morning, from approximately November 2010 to July 2016, Broidy had discretionary authority to buy and sell securities in brokerage accounts he set up for his clients and was permitted to deduct management fees from those accounts as compensation.  For three of his clients, instead of deducting the amounts he was permitted to bill, Broidy took more than $640,000 in excess fees.  To hide his theft, Broidy falsified many of those clients’ Internal Revenue Service Form 1099s so that the forms reflected far less in management fees than Broidy actually took. 

One client discovered the theft and forced Broidy to repay the stolen fees in a settlement.  To pay the settlement and other personal expenses, such as credit card bills and house and car payments, Broidy sold more than $865,000 worth of stock held in trust accounts that another client had established for his children, and for which he had appointed Broidy trustee.

The charges in the complaint are allegations, and the defendant is presumed innocent unless and until proven guilty.  If convicted, Broidy faces a maximum sentence of 20 years in prison.

*          *          *

The government’s case is being handled by the Office’s Business and Securities Fraud Section.  Assistant United States Attorney Matthew Amatruda is in charge of the prosecution.

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

The Defendant:

MARC BROIDY
Age:  43
Los Angeles, California

Yesterday, a complaint was unsealed charging Dwayne C. Hans, a United States citizen, with wire fraud, computer fraud, and money laundering.  According to the complaint, between April 2016 and July 2016, the defendant masterminded a series of frauds against a U.S. financial institution in which he masqueraded as an authorized representative of that institution.  Using that ruse, he transferred funds from the financial institution’s corporate bank accounts for his own use.  The defendant also accessed a website run by the U.S. General Services Administration without authorization and then redirected money intended for the financial institution to his own bank account. 

The defendant’s initial appearance was held yesterday before United States District Judge Thomas O. Rice at the U.S. Courthouse in Spokane, Washington.  The court scheduled a detention hearing for Monday, October 31, to determine whether the defendant will be held in custody pending his removal to the Eastern District of New York for further proceedings.

The charges were announced by Robert L. Capers, United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director in Charge, Federal Bureau of Investigation, New York Field Office (FBI).

As alleged in the complaint, the defendant stole $134,000 from the financial institution and attempted to steal approximately $1.5 million more.  Posing as someone authorized to conduct financial transactions for the financial institution, the defendant misappropriated money from corporate bank accounts to buy shares of stock in publicly traded companies, invest in a real estate property in Brooklyn, New York, and benefit his family members.  He also conducted an unauthorized intrusion into the website SAM.gov, which stores information about companies that provide services to the federal government.  During this unauthorized website intrusion, the defendant changed information in entries pertaining to the financial institution, including by replacing the bank account information for the financial institution with the defendant’s personal bank account information.  As a result, the Pension Benefit Guarantee Corporation sent more than $1.5 million to the defendant instead of the financial institution.  These fraudulent wire transfers were reversed once they were detected.

The defendant was arrested in Richland, Washington, on October 26, 2016, pursuant to a criminal complaint issued in the Eastern District of New York.

“Cybercriminals scour the internet for information they can use to steal with impunity,” stated United States Attorney Capers.  “They threaten to undermine our confidence in the internet and in the cyber world, on which we rely each and every day.  The arrest announced today sends all would be cyber criminals a message – we will find you, and we will bring you to justice.”

“Criminals who exploit the internet to commit crimes think they can hide behind the virtual veil of a computer screen.  But just as today’s charges remind us that everyone is at risk of becoming a victim of cybercrime, so too should the public be reminded that the FBI will continue to be a major force in confronting those who think they can evade the law,” stated FBI Assistant Director in Charge Sweeney.

The charges in the complaint are allegations, and the defendant is presumed innocent unless and until proven guilty.

The government’s case is being handled by the Office’s National Security & Cybercrime Section.  Assistant United States Attorney David K. Kessler is in charge of the prosecution.

The Defendant:

DWAYNE C. HANS
Age: 27

E.D.N.Y. Docket No. 16-MJ-951

Earlier today, A&L Cesspool Service Corporation (A&L Cesspool), a Queens-based cesspool services company, pled guilty at the federal courthouse in Brooklyn, New York, to violating the Clean Water Act by dumping waste removed from blocked sewer lines into manholes that flowed directly into the Gowanus Canal, among other locations in New York City.  The guilty plea was taken by U.S. District Judge I. Leo Glasser, who immediately following the plea sentenced the company to two years’ probation and criminal financial penalties totaling $900,000, pursuant to a plea agreement entered by the company and the government.

The guilty plea and sentence were announced by Robert L. Capers, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and Vernesa Jones-Allen, Special Agent-in-Charge, U.S. Environmental Protection Agency, Criminal Investigations Division, New York (EPA). 

According to court filings and facts presented during the plea proceeding, A&L Cesspool is one of the largest cesspool service providers in New York City.  Among other services, A&L Cesspool clears blocked sewer lines by pumping and removing waste.  A&L Cesspool held a permit issued by the New York City Department of Environmental Protection that allowed it to dispose of liquid waste removed from sewer lines at designated wastewater treatment facilities.  Rather than following the rules set forth in the permit, however, employees of A&L Cesspool repeatedly dumped liquid waste at other locations, including into various manholes at John F. Kennedy International Airport, Fort Wadsworth on Staten Island, a New York City Housing Authority housing development in Brooklyn, and into the Gowanus Canal.

Under the Clean Water Act, it is a crime for anyone to knowingly dump pollutants into a waterway of the United States without a permit or in violation of a permit.  As part of the plea resolution, A&L Cesspool pleaded guilty to a criminal information charging the company with one count of conspiracy to violate the Clean Water Act, one count of unlawfully discharging pollutants into a waterway of the United States, namely, the Gowanus Canal, without a permit, and four counts of illegally dumping pumped sewer waste in violation of its permit. 

The financial penalties imposed by the court include a $375,000 fine, $350,000 in criminal forfeiture, and a $175,000 community service payment to the National Fish and Wildlife Foundation to be used toward projects in or directly benefiting the Gowanus area of Brooklyn. 

“Today’s felony guilty plea and sentence demonstrate that polluters face serious consequences for violating the Clean Water Act,” stated United States Attorney Capers.  “The Department of Justice is committed to prosecuting businesses who ignore their obligation to keep our waterways clean.”

“Environmental laws, such as those violated by A&L Cesspool, are put in place to protect us from grossly negligent practices that threaten the cleanliness of our communities and put the public’s health at risk.  Circumventing procedures to properly dispose of pollutants is a serious crime, and those who engage in this type of activity won’t get away with it,” said FBI Assistant Director-in-Charge Sweeney. 

“Waste that is disposed of illegally jeopardizes the health and safety of the entire community, so it’s imperative that septic haulers adhere to the appropriate waste disposal regulations and laws,” said Special Agent-in-Charge Jones-Allen of EPA’s criminal enforcement program in New York.  “EPA and its law enforcement partners will continue to pursue those who undermine our efforts to protect public health, and those who ignore the law must be held to account.”

The government’s case is being prosecuted by the Office’s Public Integrity Section.  Assistant United States Attorneys Lan Nguyen and Lauren Howard Elbert are in charge of the prosecution, with assistance from Assistant U.S. Attorney Brian Morris of the Office’s Civil Division, which is responsible for the forfeiture of assets.

The Defendant Company

A&L Cesspool Service Corporation
Queens, New York

E.D.N.Y. Docket No. 16-CR-524 (ILG)

Earlier today Gerald Surya, M.D., pleaded guilty to falsely certifying physical examinations for commercial drivers.  Specifically, Dr. Surya certified that he had examined applicants for commercial driver’s licenses (CDLs) and found them physically fit to drive heavy commercial vehicles when in fact he had not performed those examinations.  When sentenced, Surya faces up to 15 years in prison.

The guilty plea was announced by Robert L. Capers, United States Attorney for the Eastern District of New York, and Douglas Shoemaker, Regional Special Agent-in-Charge, United States Department of Transportation-Office of Inspector General (USDOT-OIG).

As set forth in court filings and facts presented at the guilty plea proceeding, drivers of certain commercial vehicles, such as school buses and heavy transportation trucks, must possess a CDL issued by the New York State Department of Motor Vehicles (DMV) pursuant to regulations set forth by the United States Department of Transportation (USDOT).  Before obtaining a CDL, all applicants must pass written and road tests related to safely driving such large vehicles.  In addition, the applicants must be examined and certified fit to drive those vehicles by a physician or other qualified medical personnel authorized by the USDOT to conduct such examinations.  Upon receipt of the certification, the applicant must file a copy with the DMV.  Further, on a monthly basis, USDOT-certified medical examiners are required to electronically transmit to USDOT copies of certifications they have executed for CDL applicants.

Dr. Surya was authorized to conduct USDOT mandated medical examinations and certifications for CDL applicants and purportedly performed such examinations at his office located at John F. Kennedy International Airport in Queens, New York.  In fact, the applicants were not examined by Dr. Surya, but instead by other office staff members who had little or no medical training and were not authorized to conduct the mandated medical examinations.

Today’s guilty plea took place before United States District Judge LeShann DeArcy Hall.

The government’s case is being prosecuted by the Office’s Public Integrity Section.  Assistant United States Attorney Michael H. Warren is in charge of the prosecution.           

The Defendant:

GERALD SURYA
Age: 47
Residence: New Hyde Park, New York

E.D.N.Y. Docket No. 16-CR-194 (LDH) 

A 13-count indictment was unsealed this morning in federal court in Central Islip charging Edward Mangano and John Venditto with conspiracy to commit federal program bribery and honest services fraud, as well as the related substantive counts, and charging Mangano with extortion.  The indictment also charges Edward Mangano, Linda Mangano, and Venditto with obstructing justice, and Linda Mangano and Venditto with making false statements.  Since January 2010, Edward Mangano has served as the Nassau County Executive.  Since January 1998, Venditto has served as the Town of Oyster Bay (the TOB or Town) Supervisor. 

The defendants were arrested this morning and will be arraigned today before the Hon. Sandra J. Feuerstein, United States District Judge, at the United States Courthouse, 100 Federal Plaza, Central Islip, New York.  Earlier today, federal agents also executed two search and seizure warrants at the Manganos’ residence in Bethpage, New York, and at the County Executive’s Office in Mineola, New York. 

The charges were announced by Robert L. Capers, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and Shantelle P. Kitchen, Special Agent-in-Charge, Internal Revenue Service-Criminal Investigation, New York Field Office (IRS-CI).

“Yet again, we announce a breach of trust by two of our public officials.  In 2010, Nassau County voters granted Edward Mangano the opportunity to serve by electing him their highest ranking official in the County.  Similarly, in 1998, Town of Oyster Bay voters granted John Venditto the honor of electing him their chief elected official.  Yet, as alleged in the indictment, both of these men undermined the very system of laws they promised to uphold by furthering their personal interests rather than the best interests of their constituents.  Sadly, Mangano also enlisted the assistance of his wife in an attempt to shield his wrongdoing from public scrutiny,” stated United States Attorney Capers.  “However, no one is above the law, and the defendants will now be held to account for their actions.”  Mr. Capers extended his grateful appreciation to the FBI, IRS-CI, the agencies responsible for leading the government’s investigation, and thanked the Securities and Exchange Commission and the Nassau County District Attorney’s Office for their valuable assistance.

“As detailed in the indictment, Edward Mangano and John Venditto abused their positions as the highest ranking elected officials in Nassau County and the Town of Oyster Bay, respectively – at least, until today.  Those involved in this scheme allegedly lied about their conduct to investigators, fanning the flames of a fire that became too large to contain.  Public corruption wastes countless tax dollars every year, threatens the credibility of governmental institutions, and opens the door for further criminal activity,” stated FBI Assistant Director-in-Charge Sweeney.

 “The public expects its elected officials to serve them honestly and honorably,” stated IRS-CI Special Agent-in-Charge Kitchen.  “When public officials abuse the power they have been entrusted for their own personal benefit, they violate the public trust and betray their constituents.  As a law enforcement agency, IRS Criminal Investigation takes allegations of public corruption very seriously, and we are always ready to contribute to an investigation when the allegation has a financial component.” 

I.          Background

As alleged in the indictment and other court filings, between January 2010 and February 2015, Nassau County Executive Edward Mangano, TOB Supervisor John Venditto, and others, engaged in a scheme to receive bribes and kickbacks from a businessman and restaurateur, identified in the indictment as Co-Conspirator #1, in exchange for performing official actions to benefit Co-Conspirator #1 in connection with that individual’s businesses in Nassau County and the TOB.  The official actions included: (a) the TOB’s guarantee of certain loans that Co-Conspirator #1 received from a bank and lender in connection with Co-Conspirator #1’s status as a TOB concessionaire (the “TOB Loan Scheme”); and (b) Nassau County’s award of certain contracts to Co-Conspirator #1’s businesses (the “Nassau County Contracts Scheme”).  In connection with these schemes, Mangano and Venditto are each charged with conspiring to commit federal program bribery and honest services wire fraud and related substantive counts, and Mangano is charged with extortion under color of official right.

II.        The TOB Loan Scheme

The indictment charges that Co-Conspirator #1 paid bribes and kickbacks to Edward Mangano and John Venditto in exchange for, among other things, the officials’ assistance in obtaining the Town’s guarantee of four loans totaling approximately $20 million that two of Co-Conspirator #1’s businesses received from a bank (identified in the indictment as the Bank) and from a private corporate financing company (identified in the indictment as the Lender).  As detailed in the government’s bail letter filed today, the first loan, which closed on June 9, 2010, was a $1,500,000 line of credit from the Bank.  The second loan, which closed on May 25, 2011, was a $3,400,000 loan from the Bank.  The third loan, which closed on November 18, 2011, was a $7,843,138 loan from the Lender.  The fourth loan, which closed on June 22, 2012, was a $12,273,748 loan from the Lender.  In late 2012 and 2013, Co-Conspirator #1 sought an additional loan of approximately $12 million from the Lender in connection with improvements to be made to Co-Conspirator #1’s facilities at two Town beaches – this loan was not ultimately extended.

Edward Mangano and John Venditto used their official positions to influence and reach a particular outcome, i.e., the Town’s guarantee of the loans for Co-Conspirator #1.  As a result of the guarantees, were Co-Conspirator #1’s entities to default on the loans, the Town would be responsible for repaying the Bank and/or the Lender the entire amount of the loans.  In or about November 2015, Co-Conspirator #1 defaulted on the repayment of the two loans with the Lender and the loans’ holder, which had previously been assigned the loans from the Lender, demanding that the TOB remit payment on the outstanding money due under the loan documents.

III.       The Nassau County Contracts Scheme

As set forth in the indictment, beginning in approximately late 2011 through December 2012, Co-Conspirator #1, through certain business entities, was awarded lucrative contracts by Nassau County, including certain contracts worth hundreds of thousands of dollars to provide food services to Nassau County agencies.  Specifically, as detailed in the government’s bail letter, Nassau County awarded two contracts to business entities of Co-Conspirator #1:  a 2012 Nassau County contract to supply bread and rolls to the Nassau County Correctional Center (the Bread and Rolls Contract), and November/December 2012 daily purchase orders with the Nassau County Office of Emergency Management (OEM) to supply emergency food services to OEM following Hurricane Sandy (the OEM Emergency Food Services Contract).  The Bread and Rolls contract was valued at approximately $200,000 and the OEM Emergency Food Services Contract was valued at approximately $237,000.  Edward Mangano used his official position to effectuate a specific outcome, i.e., the award of these contracts to Co-Conspirator #1.

IV.       The Receipt of Bribes and Kickbacks

As set forth in the indictment and, in greater detail, in the government’s bail letter, Co-Conspirator #1 provided Linda Mangano with a “no-show” job for approximately three and one-half years, from April 2010 to August 2014, at a restaurant owned and operated by Co-Conspirator #1, identified in the indictment as Restaurant #2.  The payments from Co-Conspirator #1 to Linda Mangano in connection with her “no-show” job totaled over $450,000.  In addition, Co-Conspirator #1 paid for various hotel and travel expenses for the Mangano family, including vacations to Niagara Falls in 2010, Marco Island Florida in December 2011, St. Thomas in July 2012, Turks and Caicos in July 2013, and Amelia Island, Florida in July 2014, as well as an ergonomic office chair in January 2010 ($3,371.90), massage chair from Brookstone in September 2012 ($3,623.73), a Panerai Luminor watch in November 2012 ($7,304), and hardwood flooring and its installation in the Manganos’ bedroom in January 2013 ($3,701.81).   Co-Conspirator #1 also provided free meals to Edward Mangano and his family and associates.

From July 2011 to December 2013, Co-Conspirator #1 additionally provided Venditto and his family members and associates with free limousine service.   Co-Conspirator #1 also allowed Venditto to hold fundraisers at Co-Conspirator #1’s restaurants at a discounted rate and permitted Venditto to use a conference room in the basement of one of Co-Conspirator #1’s restaurants.

V.        The Obstruction of Justice

The indictment further alleges that Edward Mangano, Linda Mangano, and Venditto engaged in obstruction of justice in connection with their attempts to cover-up their wrongdoing, and Linda Mangano and Venditto are also charged with making false statements to federal law enforcement authorities. 

As alleged in the indictment, between January 2015 and the present, the Manganos engaged in a conspiracy intended to obstruct a grand jury investigation.  Specifically, they repeatedly met with Co-Conspirator #1, and fabricated stories in an attempt to explain Linda Mangano’s employment by Co-Conspirator #1 and Co-Conspirator #1’s payments of gifts and vacation expenses to the Mangano family.

On January 13, 2015, FBI agents interviewed Linda Mangano at her residence.  On May 20 and 24, 2015, prosecutors and FBI and IRS agents interviewed her at the U.S. Attorney’s Office in Central Islip.  On all three occasions, Linda Mangano was advised that lying to federal officials was a federal crime.  Nevertheless, on each occasion, when asked about her employment by Co-Conspirator #1, Linda Mangano fabricated examples of work she allegedly did for Co-Conspirator #1. 

On October 23, 2016 and December 18, 2015, prosecutors and FBI and IRS agents interviewed Venditto at the U.S. Attorney’s Office in Central Islip.  At the beginning of each interview, Venditto was advised that lying to federal officials constituted a federal crime.  During the December 18, 2015 interview, Venditto stated that he had not received anything of value, including the payment for limousine services, from Co-Conspirator #1.  Records from the limousine company, bank records for Co-Conspirator #1, and interviews with numerous witnesses, establish that Co-Conspirator #1 paid for the limousine service.

If convicted, Edward Mangano and John Venditto each face a term of imprisonment of up to 20 years for each honest services wire fraud charge, the conspiracy to commit honest services wire fraud charge, up to 10 years for the federal program bribery charge, up to five years for the conspiracy to commit federal program bribery.  Edward Mangano faces a term of up to 20 years for the extortion charge.  Edward Mangano, Linda Mangano, and John Venditto each face a term of imprisonment of up to 20 years for each obstruction of justice charge, and up to five years for each false statement charge.  The charges in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.

The government’s case is being prosecuted by the Office’s Long Island Criminal Section.  Assistant United States Attorneys Catherine M. Mirabile, Raymond A. Tierney, and Lara Treinis Gatz are in charge of the prosecution.  Assistant United States Attorney Madeline O’Connor of the Office’s Civil Division is responsible for the forfeiture of assets.

The Defendants:

EDWARD MANGANO
Age:  54
Bethpage, NY

LINDA MANGANO
Age:  54
Bethpage, NY

JOHN VENDITTO
Age:  67
North Massapequa, NY

E.D.N.Y. Docket No. 16-CR-540 (SJF)

Earlier today in federal court in Brooklyn, Aaron Davidson pleaded guilty to racketeering conspiracy and wire fraud conspiracy in connection with his involvement in schemes involving the payment of bribes to a high-ranking soccer official in exchange for media and marketing rights to international soccer tournaments and matches.  Davidson agreed to and paid these bribes on behalf of Traffic Sports USA, Inc. (Traffic USA), the Miami sports marketing company for which he served as president at the time of his arrest on May 27, 2015.  As part of his plea, Davidson also agreed to forfeit $507,906.84.  At sentencing, Davidson faces a maximum sentence of 20 years for each count.  Today’s plea proceeding took place before United States District Judge Pamela K. Chen.

The guilty plea was announced by Robert L. Capers, United States Attorney for the Eastern District of New York; William F. Sweeney, Jr., Assistant Director in Charge, FBI, New York Field Office; and Acting Special Agent in Charge Anthony J. Orlando, IRS Criminal Investigation, Los Angeles Field Office.

According to court filings and facts presented during the plea proceeding, Davidson, a U.S. citizen, joined Traffic USA in 2003, initially working in sales and ultimately rising to the position of president of the company.  During his time at Traffic USA, Davidson was involved in multiple criminal schemes including, among others, schemes involving the agreement to pay and payment of bribes to a high-ranking official of FIFA, CONCACAF, the Caribbean Football Union, and one of FIFA’s national member associations in order to obtain lucrative media and marketing rights to international soccer tournaments and matches for Traffic USA and its business partners.  Those tournaments and matches included FIFA World Cup qualifiers, the CONCACAF Gold Cup, the CONCACAF Champions League, and the Copa América Centenario, a tournament jointly organized by CONCACAF and CONMEBOL, the South American soccer confederation.  In total, Davidson negotiated and agreed to bribe payments totaling more than $14 million.

The guilty plea announced today is part of an investigation into corruption in international soccer being led by the U.S. Attorney’s Office for the Eastern District of New York, the FBI New York Field Office, and the IRS-CI Los Angeles Field Office.  The prosecutors in Brooklyn are receiving considerable assistance from attorneys in various parts of the Justice Department’s Criminal Division in Washington, D.C., including the Office of International Affairs, the Organized Crime and Gang Section, the Asset Forfeiture and Money Laundering Section, and the Fraud Section, as well as from INTERPOL Washington. 

Assistant U.S. Attorneys Evan M. Norris, Amanda Hector, Paul Tuchmann, Nadia Shihata, Keith D. Edelman, and Brian D. Morris of the Eastern District of New York are in charge of today’s prosecution.

The government’s investigation is ongoing.

The Defendant:

AARON DAVIDSON
Age:  45
Nationality:  United States

E.D.N.Y. Docket No. 15 CR 252 (S-1)

Earlier today, a four-count indictment was unsealed in United States District Court for the Eastern District of New York charging Nicholas Washington, also known as “Nicholas Hayes” and “Face,” with the 2005 murder of Steven Negron and the 2006 murder of Andrell Napper.  The indictment was returned under seal by a federal grand jury sitting in Brooklyn on May 7, 2014.

The charges were announced by Robert L. Capers, United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).

As detailed in the indictment and a detention memorandum filed by the government, Washington was a leader of the “G’z Up” gang, which operated in and around the Marcy Houses public housing development in the Bedford-Stuyvesant neighborhood of Brooklyn.  G’z Up members and associates earned money by trafficking in crack-cocaine and firearms in Brooklyn, upstate New York and Pennsylvania, and committed acts of violence to protect their enterprise.

In 2005, Washington allegedly planned the murder of a rival drug supplier and directed two G’z Up members to carry out the crime.  Those G’z Up members shot at the rival gang member but instead struck and killed Negron, who was standing nearby. 

In 2006, Washington allegedly planned a second murder.  The intended victim was a rival gang member who Washington believed was responsible for the murder of Washington’s brother.  Washington and other members and associates of G’z Up located the target, and two of Washington’s associates opened fire.  Napper, who was not the intended target, was instead struck and killed.

Two days after Washington was indicted he learned of the federal charges, evaded arrest, and was a fugitive for more than two years.  On May 21, 2016, New York City Police Officers arrested him in connection with a non-fatal shooting that occurred in Brooklyn on May 9, 2014.  Washington is currently charged in New York Supreme Court, Kings County, with attempted murder and other crimes based on that shooting.  On October 19, 2016, Washington was taken into federal custody.

“Nicholas Washington’s days as a fugitive are over.  He will now face charges for the two murders he ordered that tragically resulted in the deaths of two bystanders,” stated United States Attorney Capers.  “The message here is clear – we will be dogged in our pursuit of violent gang members who commit senseless and cowardly acts of violence and will not let the passage of time deter us from bringing them to justice.”

FBI Assistant Director-in-Charge Sweeney stated, “When gang members start pulling the trigger on their weapons, they’re not worried about the collateral damage they inflict.  In this case, two innocent people were murdered for just simply being in the wrong place at the wrong time.  The suspect here thought he was smarter than law enforcement by evading arrest, but his continued alleged criminal behavior landed him in custody where he will face justice.” 

The defendant is scheduled to be arraigned this afternoon before United States Magistrate Judge Robert M. Levy at the federal courthouse in Brooklyn.  The charges announced today are merely allegations, and the defendant is presumed innocent unless and until proven guilty.

The government’s case is being prosecuted by Assistant United States Attorneys Allon Lifshitz and Melody Wells. 

The Defendant:

Nicholas Washington
Age:  32
Brooklyn, New York

E.D.N.Y. Docket No. 14-CR-266 (ILG)

The Justice Department filed a statement of interest today arguing that the Fair Housing Act (FHA) requires that landlords who consider criminal records in evaluating prospective tenants do not use overly broad generalizations that disproportionately disqualify people based on a legally protected characteristic, such as race or national origin.

The statement of interest was filed in the U.S. District Court for the Eastern District of New York in Fortune Society Inc. v. Sandcastle Towers Housing Development Fund Corp. et al.  The case was brought by an organization that helps formerly incarcerated individuals find housing challenging the practices of an affordable rental apartment complex with 917 units in Far Rockaway, Queens.

In the statement of interest, the department aims to assist the court in evaluating whether a housing provider’s policy that considers criminal records in an application process produces unlawful discriminatory effects in violation of the FHA.  Although the FHA does not forbid housing providers from considering applicants’ criminal records, the department states in its filing that “categorical prohibitions that do not consider when the conviction occurred, what the underlying conduct entailed, or what the convicted person has done since then run a substantial risk of having a disparate impact based on race or national origin.”

The brief explains that when a housing provider has a criminal record check policy with a disparate impact, the housing provider must “prove with evidence – and not just by invoking generalized concerns about safety – that the ban is necessary.”  Even then, the policy will still violate the FHA if there is a less discriminatory alternative.

“This filing demonstrates the Justice Department’s steadfast commitment to removing discriminatory barriers that prevent formerly incarcerated individuals from restarting their lives,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division.  “Women and men who served their time and paid their debt to society need a place to live, yet unlawful housing policies can too often prevent successful reentry to their communities.  While not all criminal records policies adopted by landlords violate the Fair Housing Act, we will take action when they do."

“Landlords' categorical refusals to rent to individuals who have served their debts to society can illegally discriminate against those individuals based on their race or national origin,” said U.S. Attorney Robert L. Capers of the Eastern District of New York.  “This office will continue to work to fight such discrimination.”

In this case, the plaintiff argues that the Sandcastle complex had a policy of refusing to rent to individuals with prior convictions for felonies or misdemeanors other than traffic offenses.  The plaintiff argues that this policy has an unjustified disparate impact against prospective African-American and Hispanic tenants, in violation of the FHA.  In the statement of interest, the department does not take a position on the factual accuracy of the plaintiff’s arguments, but instead addresses the appropriate legal framework for analyzing its claim.  The legal framework set forth in the filing is consistent with the guidance released by the U.S. Department of Housing and Urban Development in April 2016 concerning how the FHA applies to the use of criminal records by providers or operators of housing and real-estate related transactions.

Fortune Society Inc. v. Sandcastle Towers Housing Development Fund Corp. et al. was filed in the Eastern District of New York in 2014.  After the completion of pre-trial discovery, both parties have asked the court to enter judgment in their favor before trial.  Those requests, filed in September 2016, are now pending with the court.

Sandcastle SOI

Projects Included the Empire State Building, Brooklyn Navy Yard, Bronx Terminal Market, Federal Reserve Bank of New York, and New York University

Earlier today, the U.S. Attorney’s Office for the Eastern District of New York (the Office) filed fraud charges in Brooklyn federal court against Plaza Construction LLC, successor to Plaza Construction Corp. (Plaza Construction), one of the largest construction firms in New York City.  Plaza Construction is charged with mail and wire fraud conspiracy for improperly billing its clients more than $2.2 million over a thirteen-year period for hours not worked and for inserting a hidden surcharge into its bills for the purpose of obtaining payments to offset administrative costs.  As a result, Plaza Construction has entered into a deferred prosecution agreement with the Office in which it admitted to fraudulently overbilling clients and agreed to pay more than $9 million in restitution to victims, and forfeiture and penalties to the federal government.  The company has additionally instituted far-reaching corporate reforms designed to eliminate future problems and enforce best industry practices. 

Today’s deferred prosecution agreement marks the fourth resolution by the Office aimed at rooting out fraud in the construction industry.  In April 2012, Lend Lease (US) Construction LMB Inc. (formerly Bovis Lend Lease LMB Inc.) was charged with defrauding its clients, entered into a deferred prosecution agreement, and paid $56 million in restitution and penalties for engaging in a ten-year overbilling scheme.  In May 2015, Hunter Roberts Construction Group, LLC entered into a non-prosecution agreement and agreed to pay more than $7 million in restitution and penalties for engaging in an eight-year fraudulent overbilling scheme.  In December 2015, Tishman Construction Corporation was charged with defrauding its clients, entered into a deferred prosecution agreement, and paid more than $20 million in restitution and penalties for engaging in a ten-year overbilling scheme. 

The charges and disposition were announced by Robert L. Capers, United States Attorney for the Eastern District of New York; Michael Nestor, Inspector General, Port Authority of New York and New Jersey (PANYNJ); William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI); Carol Fortine Ochoa, Inspector General, General Services Administration (GSA), Office of Inspector General; Scott S. Dahl, Inspector General, U.S. Department of Labor (DOL), Office of Inspector General; and Mark G. Peters, Commissioner, New York City Department of Investigation (DOI).

“For more than a decade, Plaza Construction overbilled its clients by charging them for unworked time and by fraudulently inserting a hidden surcharge to help offset its administrative costs.  By doing so, the company defrauded its clients and abused the trust placed in it to provide construction services at some of New York’s most storied sites.  Today’s criminal charges and resolution, the fourth resolution in this area, demonstrate our steadfast efforts in combating and eliminating fraud in New York City’s construction industry,” stated U.S. Attorney Capers.  Mr. Capers thanked the investigative agencies for their outstanding commitment and dedication over the course of this multi-year industry investigation.

“Plaza’s conduct that perpetuated an industry-wide fraud for more than a decade has come to an end.  Government contracting agencies, and private clients alike, deserve to be billed strictly for what they bargained for, not duped into overpaying for gratuitous or phantom services.  Responsible for overseeing one of the largest government contracting agencies in the region, the Port Authority Office of Inspector General will continue to uproot fraud and corruption within the area’s construction industry,” stated PANYNJ Inspector General Nestor.  Mr. Nestor thanked his law enforcement partners for their dedication and professionalism in investigating these practices.

“Fraudulent business practices put consumers, employees, and other industry competitors at a significant disadvantage.  Trust, once broken, is difficult to restore.  Companies, no matter how large or small, are reminded to exercise due diligence in alerting authorities about crimes of this nature.  We, along with our partners, take crimes of fraud seriously, and we will continue to seek justice to the full extent of the law,” stated FBI Assistant Director-in-Charge Sweeney.

“Plaza Construction used deceitful practices to bilk the American taxpayers.  The GSA OIG is committed to working with our law enforcement partners to hold accountable contractors who defraud the United States,” said GSA Inspector General Ochoa.

“Plaza Construction defrauded their clients by charging them for work that was not performed and by charging them prohibited fees.  Today’s resolution holds Plaza accountable for their actions and deters those who would contemplate similar misconduct in the future.  We will continue to work with our law enforcement partners to vigorously pursue fraud in the construction industry that has a negative impact on the American workforce,” stated DOL Inspector General Dahl.

DOI Commissioner Peters said, “These fraudulent overbilling schemes involved some of the highest profile construction projects in New York City, driving up costs, exploiting overtime, and siphoning millions of dollars in unearned, ill-gotten gains.  DOI will continue to work with its law enforcement partners to expose and stop this type of corruption, and ensure construction sites and companies are following the rules and operating lawfully.”

The Overbilling Scheme

As alleged in the felony information, Plaza Construction engaged in a fraudulent overbilling scheme that impacted a number of its projects for at least a thirteen-year period.  These projects included the Brooklyn Navy Yard, Bronx Terminal Market, Federal Reserve Bank of New York, New York University, and Empire State Building. 

Plaza Construction’s role on construction projects was typically that of a construction manager, which often required it to supply workers from certain trade unions and to supervise the work done by subcontractors or trade contractors.  From at least 1999 through approximately February 2012, Plaza Construction submitted bills to clients, including government contracting and funding agencies, that contained numerous false statements and material misrepresentations and omissions.  From August 2004 through February 2012, Plaza Construction systemically inserted a hidden surcharge in its bills to clients that was specifically prohibited and secretly generated additional revenue to offset certain administrative costs. 

Additionally, from at least 1999 until 2009, Plaza Construction also billed its clients for hours not worked by labor foremen from Local 79 Mason Tenders’ District Council of Greater New York and carried out this fraudulent overbilling by: (a) allowing labor foremen to be absent from work for major holidays and certain vacation days; (b) providing between five and seven hours of guaranteed overtime per day, whether worked or not, for a particular senior labor foreman; and (c) adding one to two hours of unworked or unnecessary “guaranteed” overtime per day to the time sheets for certain labor foremen.  In furtherance of this overbilling scheme, Plaza Construction completed and submitted time sheets to its clients as though the labor foremen had actually worked.

The Deferred Prosecution Agreement

Pursuant to the deferred prosecution agreement filed today, Plaza Construction accepted responsibility for its fraudulent billing practices and agreed to offer restitution to its clients in the amount of $2,226,270.19 and pay a penalty of $5,619,269.92 and forfeit $1,350,317.43 to the government over a two-year period.  In consideration of Plaza Construction’s remedial actions to date and its commitment to, among other actions: (a) accept and acknowledge responsibility for its conduct; (b) continue its cooperation; (c) make restitution available to victims; and (d) make the payment of forfeiture and a financial penalty to the government; the government agreed to defer the prosecution for a period of 24 months and to obtain an exclusion of time to allow Plaza Construction to demonstrate good conduct and compliance with the terms of this agreement.[1]  Plaza Construction’s remedial measures include the creation of the positions of General Counsel, Associate General Counsel and Compliance Director at the company; establishing a Compliance Committee; instituting annual training for all officers and non-union employees regarding its Code of Business Ethics; establishing an ethics hotline for employees to report ethics violations or concerns; and the revision of time sheet recording and client billing policies. 

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The government’s case is being handled by the Office’s Business and Securities Fraud Section.  Assistant United States Attorneys Whitman Knapp and Jonathan P. Lax are in charge of the prosecution, with assistance from Assistant United States Attorney Brian Morris of the Office’s Civil Division, which is responsible for the forfeiture of assets.

The Defendant:

PLAZA CONSTRUCTION LLC
New York, New York

EDNY Docket No.: 16-CR-532 (NGG)

 

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[1]  The request for the exclusion of time is pending before the Court.

Earlier today in federal court in Brooklyn, Eduardo Li pleaded guilty to racketeering conspiracy, wire fraud, and wire fraud conspiracy in connection with his receipt of bribes in exchange for his awarding contracts for the media and marketing rights to FIFA World Cup qualifier matches and his authorization of international friendly matches played by the Costa Rican national soccer team, among other conduct.  Li, the president of the Costa Rican soccer federation (FEDEDUT) from 2007 to 2015, was a member-elect of the FIFA executive committee at the time of his arrest in Zurich on May 27, 2015 and a member of the CONCACAF executive committee from 2013 to 2015.  As part of his plea, Li agreed to forfeit $668,000.  At sentencing, Li faces a maximum sentence of 20 years for each count.  Today’s plea proceeding took place before United States District Judge Pamela K. Chen.

The guilty plea was announced by Robert L. Capers, United States Attorney for the Eastern District of New York; William F. Sweeney, Jr., Assistant Director in Charge, FBI, New York Field Office; and Acting Special Agent in Charge Anthony J. Orlando, IRS Criminal Investigation, Los Angeles Field Office.

According to court filings and facts presented during the plea proceeding, Li negotiated and accepted bribes totaling hundreds of thousands of dollars in exchange for exercising his influence as the president of FEDEFUT to award a Florida sports marketing company a contract for the media and marketing rights to the Costa Rican national soccer team’s home World Cup qualifier matches for the 2022 edition of the World Cup.  These bribes were transmitted from U.S. bank accounts to Li using intermediaries in the United States and Costa Rica.  Li also accepted tens of thousands of dollars in bribes, which were also transmitted from bank accounts in the United States, in exchange for exercising his influence as president of FEDEFUT to authorize friendly matches played by the Costa Rican national soccer team. 

In addition, Li agreed to accept a $500,000 bribe from intermediaries in Panama in exchange for exercising his influence as president of FEDEFUT to award an American company the contract to serve as the uniform sponsor for the Costa Rican national soccer team.  The intermediaries told Li not to tell anyone at the uniform sponsor about the bribe.  Li received approximately $230,000 of the bribe money from the intermediaries in cash United States currency in 2014 and 2015 but was arrested before he could receive the balance.

Finally, Li embezzled for his own use over $90,000 of funds that FIFA sent to FEDEFUT to support the 2014 Under 17 FIFA Women’s World Cup soccer tournament, which was held in Costa Rica.  Li diverted these funds through a scheme involving bogus invoices.

The guilty plea announced today is part of an investigation into corruption in international soccer being led by the U.S. Attorney’s Office for the Eastern District of New York, the FBI New York Field Office, and the IRS-CI Los Angeles Field Office.  The prosecutors in Brooklyn are receiving considerable assistance from attorneys in various parts of the Justice Department’s Criminal Division in Washington, D.C., including the Office of International Affairs, the Organized Crime and Gang Section, the Asset Forfeiture and Money Laundering Section, and the Fraud Section, as well as from INTERPOL Washington. 

Assistant U.S. Attorneys Evan M. Norris, Amanda Hector, Paul Tuchmann, Nadia Shihata, Keith D. Edelman, and Brian D. Morris of the Eastern District of New York are in charge of today’s prosecution.

The government’s investigation is ongoing.

The Defendant:

EDUARDO LI
Age:  57
Nationality:  Costa Rica

E.D.N.Y. Docket No. 15 CR 252 (S-1)

Earlier today, Alexey Barysheff of Brooklyn, New York, a naturalized citizen of the United States, was arrested on federal charges of illegally exporting controlled technology from the United States to end-users in Russia.  Simultaneously, two Russian nationals, Dmitrii Aleksandrovich Karpenko and Alexey Krutilin, were arrested in Denver, Colorado, on charges of conspiring with Barysheff and others in the scheme.[1]  Federal agents also executed search warrants at two Brooklyn locations that were allegedly used as front companies in Barysheff’s illegal scheme. 

Barysheff is scheduled to make his initial appearance today at 2:00 p.m. at the United States Courthouse, 225 Cadman Plaza East, Brooklyn, New York, before Chief United States Magistrate Judge Roanne L. Mann.  Karpenko and Krutilin are scheduled to make their initial appearances today at the United States Courthouse in Denver, Colorado, where the government will seek their removal in custody to the Eastern District of New York.

The arrests and charges were announced by U.S. Attorney Robert L. Capers of the Eastern District of New York; Assistant Attorney General for National Security John P. Carlin; Special Agent in Charge Angel M. Melendez, U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI) for New York; FBI Assistant Director in Charge William F. Sweeney, Jr., New York Field Office; Special Agent in Charge Jonathan Carson, U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement, New York Field Office; and Craig Rupert, Special Agent in Charge of the Department of Defense, Defense Criminal Investigative Service, North East Field Office.

The complaints allege that Barysheff, Karpenko, Krutilin, and others were involved in a conspiracy to obtain technologically cutting-edge microelectronics from manufacturers and suppliers located within the United States and to export those high-tech products to Russia, while evading the government licensing system set up to control such exports.  The Department of Commerce, pursuant to authority granted by the President of the United States, has placed restrictions on the export and re-export of items that it has determined could make a significant contribution to the military potential and weapons proliferation of other nations and that could be detrimental to the foreign policy and national security of the United States.  The microelectronics shipped to Russia included, among other products, digital-to-analog converters and integrated circuits, which are frequently used in a wide range of military systems, including radar and surveillance systems, missile guidance systems, and satellites.  These electronic devices required a license from the Department of Commerce to be exported to Russia and have been restricted for anti-terrorism and national security reasons. 

As further detailed in the complaints, in 2015 Barysheff registered the Brooklyn, New York-based companies BKLN Spectra, Inc. (Spectra) and UIP Techno Corp. (UIP Techno).  Since that time, the defendants, and others have used those entities as U.S.-based front companies to purchase, attempt to purchase, and illegally export controlled technology.  To induce U.S.-based manufacturers and suppliers to sell them high-tech, export-controlled microelectronics and to evade applicable controls, the defendants and their co-conspirators purported to be employees and representatives of Spectra and UIP Techno and provided false end-user information in connection with the purchase of the items, concealed the fact that they were exporters, and falsely classified the goods they exported on records submitted to the Department of Commerce.  To conceal the true destination of the controlled microelectronics from the U.S. suppliers, the defendants and their co-conspirators shipped the items first to Finland and subsequently to Russia.      

“U.S. export laws exist to prevent potentially dangerous technology from falling into the wrong hands,” said U.S. Attorney Capers.  “Those who seek to evade the scrutiny of U.S. regulatory and law enforcement agencies by operating in the shadows present a danger to our national security and our allies abroad.  We will continue to use all of our available national security options to hold such individuals and corporations accountable.”

“According to the complaints, Barysheff, Karpenko, and Krutilin conspired among themselves and with others to send sensitive U.S. technology surreptitiously to Russia in violation of U.S. export law,” said Assistant Attorney General Carlin.  “These laws are in place to protect the national security, and we will spare no effort in pursuing and holding accountable those who seek to harm the national security by illegally procuring strategic commodities for foreign entities.”

“Had law enforcement not interceded, the alleged perpetrators would have exported materials that are known to be used in a wide range of military devices,” said Melendez, Special Agent in Charge for HSI New York.  “HSI will continue to partner with other law enforcement agencies while focusing its efforts on national security and stopping the illegal flow of sensitive technology.”

“Export controls were established to prevent certain individuals, organizations, or nations from obtaining protected technology and information.  When the laws are evaded, we become vulnerable to the many threats posed by our adversaries.  The FBI will continue to protect our national security assets as we work with our partners to prevent the exportation of restricted materials,” said Sweeney, FBI Assistant Director in Charge, New York Field Office.

“Today’s arrest is a collaborative effort among law enforcement agencies.  I commend our colleagues for their efforts,” said Special Agent in Charge Carson, U.S. Department of Commerce Bureau of Industry and Security, Office of Export Enforcement, New York Field Office. “The Office of Export Enforcement will continue to use our unique authorities as the regulator and enforcer of our nation's export control laws to keep the most dangerous goods out of the most dangerous hands.”

“The attempted theft of restricted U.S. technology by foreign actors severely threatens the United States’ defensive posture,” said Special Agent in Charge Craig Rupert, DCIS Northeast Field Office.  “DCIS will continue to pursue these investigations with our Federal partners to shield America's investment in national defense.”

If convicted of the charges, the defendants face up to 25 years in prison and a $1 million fine.

The case is being handled by the Office’s National Security and Cybercrime Section.  Assistant U.S. Attorneys Craig R. Heeren and Peter W. Baldwin are in charge of the prosecution, with assistance from Trial Attorney Matthew Walczewski of the National Security Division’s Counterintelligence and Export Control Section.

The Defendants:

ALEXEY BARYSHEFF
Age: 36
Brooklyn, New York

DMITRII ALEKSANDROVICH KARPENKO
Age: 33
Russia

ALEXEY KRUTILIN
Age: 27
Russia

E.D.N.Y. Docket Nos. 16-893-M, 16-894-M

 

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[1]  The charges contained in the complaints naming Barysheff, Karpenko, and Krutilin are allegations, and the defendants are presumed innocent unless and until proven guilty.

Robert L. Capers, United States Attorney for the Eastern District of New York, and Judith A. Enck, Regional Administrator, United States Environmental Protection Agency (EPA) Region 2, today announced that the United States has entered into a settlement with Rachelann Yetim and five corporate entities through which she owned or operated three gas stations on Long Island that contain underground storage tanks (USTs).  These USTs typically hold large quantities of gasoline and can cause significant environmental damage if allowed to leak.  The settlement requires defendants to maintain strict compliance with regulations pertaining to the operation of USTs at those stations, submit reports to EPA demonstrating such compliance, and pay a civil penalty, which was calculated based on defendants’ financial condition.  The settlement also provides for a series of penalties – including escalating monetary fines – if defendants engage in additional violations of the Resource Conservation and Recovery Act (RCRA).  Earlier today, the Consent Judgment memorializing the settlement was approved by United States District Judge Joseph F. Bianco.

In 2014, the United States filed a federal civil environmental complaint against Ms. Yetim, her father Nedjet Yetim, and 15 related corporate entities for widespread violations of the federal leak prevention requirements for USTs at four gas stations on Long Island.  As alleged in the complaint, defendants had, among other RCRA violations, failed to:  monitor for leaks, provide for adequate protection against corrosion and overflows, adequately secure tanks when facilities were temporarily closed, maintain records of release detection monitoring, and provide necessary information to EPA about the tank systems.  As additionally alleged in the complaint, the Yetims have been the principals of several corporate entities and have personally managed, directed, or conducted matters related to pollution and environmental compliance at the facilities.  The corporate defendants, all of which are directly related to the individual defendants or were tenants at the relevant facilities, owned and/or operated the gas stations during the periods of the violations alleged in the complaint.

The evidence of public record with the New York State Department of Conservation demonstrates that there were releases from the tanks at all four facilities, each of which is located above a federally-designated Sole Source Aquifer.  As set forth in the complaint, among other criteria, a Sole Source Aquifer is an aquifer that supplies 50% of the drinking water consumed within the Sole Source Aquifer’s boundaries.  The Sole Source Aquifer designation is a tool to protect drinking water supplies in areas with few or no alternative sources to the groundwater resources, and where, if contamination occurred, using an alternative source would be extremely expensive.  Nevertheless, defendants repeatedly failed to comply with numerous federal leak prevention requirements under RCRA.

Since the filing of the federal complaint, one of the gas stations has been permanently closed.  Rachelann Yetim sought to bring the remaining three stations into compliance and cooperated with the EPA to effectuate necessary measures, which included several significant upgrades to the facilities and providing necessary information to EPA.  The consent judgment with Rachelann Yetim and the five corporate entities through which she has owned and/or operated the USTs is the culmination of those efforts.  Defendant Nedjet Yetim has not settled with the government and is the subject of a pending motion for summary judgment filed by the United States.

“The Consent Judgment entered by the Court is the product of a longstanding effort by the EPA and by this Office to ensure that the residents of Long Island would not be harmed by defendants’ disregard of their obligations under federal law to safeguard the public from gasoline and waste oil leaks at their underground storage tanks,” stated United States Attorney Capers.  “We are committed to vigorous enforcement of the laws protecting the environment from hazardous wastes.”

“These defendants showed a disregard for underground storage tank regulations that are designed to protect against petroleum leaks,” said EPA’s Regional Administrator Enck.  “Under this agreement, the residents of Long Island will be better protected from the threat of petroleum contamination to groundwater.  Groundwater is the major source of drinking water for millions of residents of Long Island.  It is imperative that petroleum storage tanks fully comply with all environmental regulations to ensure that drinking water is not polluted and people’s health is protected.”

The government’s case is being prosecuted by Assistant United States Attorney Kenneth M. Abell.  EPA is represented by Assistant Regional Counsel Karen Taylor.

Settling Defendants:

RACHELANN YETIM
Age: 30
Residence: Floral Park, NY

Fast Gasoline, Inc.
Black Realty, Inc.
TAG Gasoline, Inc.
NGRV Realty Co., Inc.
Venus Bukey Realty, Inc.

Other Defendants:

NEDJET YETIM
Age: 52
Residence: Patchogue, NY

Hempstead Gasoline Station, Inc.
Elmont Gasoline Corp.
102 Elmont Realty Corp.
Target Petroleum, Inc.
Liberty Petroleum, Inc., (d/b/a as Liberty Petroleum – RGV Petroleum, Inc.)
ASLI & Gizem Realty Corp.
S&B Petroleum, Inc.
Gizem Realty Corp.
PDE Island Park, Inc.
T-Maxx @ Petro Gas, Inc

Gas Stations:

653 Hempstead Turnpike, Elmont NY
725 Wyandanch Avenue North Babylon, NY
4305 Austin Boulevard, Island Park, NY
1278 Hempstead Turnpike Elmont, NY (closed)

CG Technology, LP, formerly doing business as Cantor Gaming (CG Technology and Cantor Gaming),[1] one of the largest race and sports book operators in the United States, has entered into a non-prosecution agreement and agreed to pay $16.5 million in penalties and forfeiture to the federal government to resolve a criminal investigation into the company’s past involvement in illegal gambling and money laundering schemes.  In addition, pursuant to the agreement, CG Technology will provide continuing cooperation and has undertaken far-reaching reforms to its business and compliance operations.  Michael Colbert, a former senior executive officer at Cantor Gaming, who was the Director of Risk Management, previously pleaded guilty in the United States District Court for the Eastern District of New York to conspiring to participate in an illegal gambling business.  Colbert faces up to five years’ imprisonment for his involvement in criminal activity at Cantor Gaming.

The resolution was announced by Robert L. Capers, United States Attorney for the Eastern District of New York; Daniel G. Bogden, United States Attorney for the District of Nevada; Philip Bartlett, Inspector in Charge, United States Postal Inspection Service, New York Division (USPIS); Richard Weber, Chief, Internal Revenue Service, Criminal Investigation (IRS-CI); and James P. O’Neill, Commissioner, New York City Police Department (NYPD).

“Cantor Gaming quickly grew into one of the largest race and sports book operators in the United States.  Unacceptably, this growth came at the expense of compliance with the law, and as a result Cantor Gaming became a place where at least two large-scale illegal bookmakers could launder their ill-gotten proceeds.  The Cantor Gaming senior officer who oversaw the illegal conduct has pleaded guilty for his involvement in this criminal activity.  The non-prosecution agreement recognizes Cantor Gaming’s decision to accept full responsibility, provide complete cooperation, and take remedial measures to enforce best industry practices going forward,” stated U.S. Attorney Capers.  Mr. Capers thanked the investigative agencies for their outstanding commitment and dedication over the course of this investigation.  Mr. Capers also thanked the District Attorney’s Office for Queens County, the Financial Crimes Enforcement Network of the Department of the Treasury, and the Nevada Gaming Control Board, Enforcement Division for their assistance with the investigation. 

“CG Technology’s admissions that it violated federal laws by accepting messenger betting, out-of-state betting, and processing large amounts of monies which were the proceeds of illegal activities, are significant victories for the government,” said U.S. Attorney Bogden. 

“CG Technology, formerly Cantor Gaming, ran its enterprise with total disregard for government regulations and the penalties associated with breaking the law.  As Postal Inspectors and their law enforcement partners continue to prove, greed and eagerness to ‘game’ the system will never be tolerated, and those who choose to ignore the law will be brought to justice,” said USPIS Inspector Bartlett.  

“Cantor Gaming bet on never getting caught but this wager didn’t pay off,” said Chief Weber, IRS Criminal Investigation.  “Financial transactions always leave a money trail and IRS-CI Special Agents relentlessly follow that trail.  This large scale illegal bookmaking investigation uncovered the kind of widespread corruption that is too often associated with criminal enterprises.  Working with our law enforcement partners, we will continue to pursue these types of investigations to keep the books clean for consumers and corporations who are following the law.”

“Illegal sports betting is a multi-million-dollar business often involving other illicit activity.  There is good reason why this activity needs to be regulated and operated according to the law and industry standards.  The ‎illegal conduct forming the basis for this investigation was clearly motivated by greed and deliberate disregard for the rules of the gaming industry.  This settlement should serve as a message to those who try to beat the system,” stated NYPD Commissioner O’Neill.

Pursuant to the non-prosecution agreement signed today, Cantor Gaming, which is now known as CG Technology, acknowledged and accepted responsibility for aiding and abetting the operation of an illegal gambling business and money laundering from approximately 2009 through 2013.  Cantor Gaming, an affiliate of the financial services company Cantor Fitzgerald, LP, operates race and sports books in the following eight casinos all located in Las Vegas, Nevada: the Venetian, the Palazzo, the M Resort Spa Casino, the Hard Rock Hotel and Casino, the Tropicana, the Cosmopolitan, the Palms Casino Resort, and the Silverton Casino Hotel.

Cantor Gaming’s strategy to grow its business required it to attract and retain bettors who frequently placed large wagers on sporting contests.  To do so, Cantor Gaming offered higher betting limits than other sports books and gave the important bettors preferential treatment, including direct access to Michael Colbert, whose job was to set the lines and odds for the betting contests.  Important bettors interacted with Colbert and his staff rather than the “front of the house” staff that was under the supervision of Cantor Gaming’s chief operating officer, which normally handled interactions with bettors.  To accommodate some of the important bettors, Colbert and his staff facilitated violations of state and federal laws, including: (a) knowingly accepting and facilitating “messenger betting”[2] in its sports books on repeated occasions; (b) knowingly accepting and facilitating out-of-state betting activity through wire communications; and (c) processing large cash deposits and withdrawals and third-party wire transfers, knowing that the property involved represented the proceeds of some form of illegal activity.  As set forth in the Statement Facts, which is attached to the non-prosecution agreement, two of these important high volume bettors ran illegal bookmaking operations and were able to launder their illegal proceeds through Cantor Gaming wagering accounts.

On or about August 21, 2013, Michael Colbert pleaded guilty in the Eastern District of New York to conspiracy to conduct an illegal gambling business, in violation of Title 18, United States Code, Section 371, and faces a term of imprisonment of up to five years when sentenced. 

In light of CG Technology’s complete acceptance of responsibility for the full breadth of its unlawful conduct, cooperation, and far-reaching remedial measures, the government has agreed not to prosecute CG Technology for its criminal conduct, provided that CG Technology complies for two years with all the terms of the agreement executed today. 

The government’s case is being handled by the Office’s Business and Securities Fraud Section.  Assistant United States Attorneys James P. Loonam and Matthew Amatruda are in charge of the case, with assistance from Assistant United States Attorney Brian Morris of the Office’s Civil Division, which is responsible for the forfeiture of assets, as well as Assistant United States Attorney Nicholas Dickinson of the District of Nevada.   

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

 

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[1] Cantor Gaming changed its name to CG Technology, LP in January 2014.  The conduct which was the subject of the criminal investigation occurred while the company was doing business as Cantor Gaming.

[2] The practice of having an agent or “runner” place a bet on behalf of a third-party in exchange for compensation is known as “messenger betting.”  It is illegal for a licensed sports book in Nevada to knowingly accept wagers from compensated agents.

Robert L. Capers, United States Attorney for the Eastern District of New York, and Judith A. Enck, Regional Administrator, United States Environmental Protection Agency (EPA) Region 2, announced today the filing of a complaint against The New York Racing Association, Inc. (NYRA) as well as the lodging of a consent decree to resolve the allegations in the complaint. 

The complaint alleges that NYRA, which operates the Aqueduct Racetrack where horse racing, training, and boarding of horses occur, and where up to 450 horses are housed on site during the horse racing season, violated the Clean Water Act as a result of discharging polluted wastewater, containing animal wash water and detergent, and feed waste, from Aqueduct Racetrack into New York City’s and New York State’s storm sewer systems.  In 2013 and 2014 alone, NYRA generated and discharged an estimated 1.26 million gallons per year of polluted wastewater to storm sewer systems.  The discharges from Aqueduct ultimately flowed to the Hawtree and Bergen Basins, tributaries located within the eastern portion of Jamaica Bay, a navigable water of the United States.  Eastern Jamaica Bay and associated tributaries are currently designated by the New York State Department of Environmental Conservation as impaired due to ammonia, nitrogen, oil/grease, and pathogens.

Under the consent decree, NYRA will implement measures to eliminate discharges to the storm sewers and ensure that all polluted wastewater from Aqueduct Racetrack flows to sanitary sewers.  The settlement includes interim and long term measures, including (1) designation of an employee who is responsible for ensuring that there are no discharges of polluted wastewaters into storm drains; (2) implementation of procedures applicable to employees to ensure that no polluted wastewater discharges occur; (3) installation and operation of a telemetry monitoring system in the manholes that will alert employees of any dry weather flows in the storm sewers; and (4) weekly inspections. The settlement also requires NYRA to implement horse washing procedures and to implement a public website that makes inspection results and information about NYRA’s compliance available to the public.  The Consent Decree also requires NYRA to pay $150,000 as a civil penalty.

In addition, the Consent Decree requires NYRA to implement a Supplemental Environmental Project to reduce storm water runoff impacts.  NYRA will plant 62 trees at the nearby NYRA Belmont Racetrack which will (1) capture storm water enabling some of it to evaporate back to the atmosphere rather than reach the ground; (2) mitigate the effect of heavy storm events (i.e., large amounts of runoff) by intercepting and slowing the rate at which storm water reaches the ground; (3) break up the soil to allow the soil to become more permeable and able to absorb greater amounts of storm water; and (4) abate soil erosion. The trees will also provide wildlife habitat and reduce urban “heat island” effects.

Aqueduct Racetrack is a concentrated animal feeding operation (CAFO).  EPA defines a CAFO as a facility where animals are kept and raised in confined situations for a total of 45 days or more in any 12-month period and feed is brought to the animals rather than the animals grazing or otherwise feeding in pastures, fields, or on range land.  CAFOs generate significant volumes of animal waste which, if improperly managed, can result in environmental and human health risks such as water quality impairment, fish kills, algal blooms, contamination of drinking water sources, and transmission of disease-causing bacteria and parasites associated with food and waterborne diseases.  This action was brought as part of EPA’s National Enforcement Initiative that uses innovative monitoring and targeting techniques to identify areas where CAFOs impair our nation’s natural resources or adversely impact communities, and to promote technologies to address excess nutrients and reduce animal waste pollution.

“The United States brought this action to ensure that the polluted wastewater discharges that flow from Aqueduct Racetrack and through storm sewers to Jamaica Bay are eliminated.   Jamaica Bay is an important habitat for fish, wildlife, migratory birds, and plants.  This office will continue to vigorously enforce violations of the Clean Water Act to reduce pollution to this and other waters of the United States,” said United States Attorney Capers.

“Over a million gallons of polluted wastewater has been released every year from the Aqueduct Racetrack into Jamaica Bay, including animal wash water and detergent, and feed waste,” said EPA Regional Administrator Enck.  “It is imperative that the New York Racing Association comply with the federal Clean Water Act.”

The action is entitled United States v. The New York Racing Association, Inc., Civil Action No. 1:16-CV-05442-LDH-CLP, (DeArcy Hall, J.), (Pollak, M.J.).  Following a 30-day comment period and review of any comments received, the United States will determine whether to move to enter the consent decree. 

Assistant United States Attorney Deborah B. Zwany is in charge of the litigation, with assistance from Phyllis Kaplan Feinmark, Chief, Water and General Law Branch, EPA Region 2, Kimberly McEathron, Physical Scientist, Water Compliance Branch, EPA Region 2, Kathryn J. Greenwald, Environmental Protection Specialist, EPA Office of Enforcement and Compliance Assurance, and Kristin Buterbaugh, Attorney-Adviser, EPA Office of Enforcement and Compliance Assurance.