Eastern District of New York

Och-Ziff Enters into Three-Year Deferred Prosecution Agreement; Subsidiary Pleads Guilty to Conspiracy to Violate the Foreign Corrupt Practices Act

A New York-based alternative investment and hedge fund manager, Och-Ziff Capital Management Group LLC (Och-Ziff), and its wholly-owned subsidiary, OZ Africa Management GP LLC (OZ Africa), entered into resolutions to resolve criminal charges and agreed to pay a criminal penalty of more than $213 million in connection with a widespread scheme involving the bribery of officials in the Democratic Republic of Congo (DRC) and Libya.     

Principal Deputy Assistant Attorney General David Bitkower 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 Chief Richard Weber of the Internal Revenue Service-Criminal Investigation (IRS-CI) New York Field Office made the announcement. 

“This case marks the first time a hedge fund has been held to account for violating the Foreign Corrupt Practices Act,” said Principal Deputy Assistant Attorney General Bitkower.  “In its pursuit of profits, Och-Ziff and its agents paid millions in bribes to high-level officials across Africa.  By exposing corruption in this industry, the Criminal Division’s Fraud Section continues to root out wrongdoing of all types in the financial sector.”

“Och-Ziff, one of the largest hedge funds, positioned itself to profit from the corruption that is sadly endemic in certain parts of Africa, including in Libya, the Democratic Republic of the Congo, Chad and Niger,” said U.S. Attorney Capers.  “Despite knowing that bribes were being paid to senior government officials, Och-Ziff repeatedly funded corrupt transactions.  One Och-Ziff employee was so bold as to order the removal of language from their African joint venture’s internal audit report that called for an investigation of suspected bribery payments by a business partner.  Today’s corporate resolutions, which include a more than $213 million criminal penalty and an independent compliance monitor, hold Och-Ziff accountable for placing profits above the law and will help ensure that the conduct brought to light here never happens again at this company.”   

“Gaining the upper hand in a business venture by engaging in corrupt practices is bribery in its purest form,” said Assistant Director in Charge Sweeney.  “Doing so with the intention of influencing a foreign official in his or her capacity is nothing short of corruption.  In this scheme, payments of millions of dollars were paid out to senior officials within certain parts of Africa in exchange for access to profitable investment opportunities.  This type of behavior can’t and won’t be tolerated.  I commend the investigators and prosecutors who continue to work together at home and abroad to vigorously enforce the law within the confines of the Foreign Corrupt Practices Act.”

“Today’s plea and deferred prosecution agreement result from the unraveling of complex financial transactions orchestrated by Och-Ziff Capital Management Group LLC and its subsidiary to facilitate illegal payments to foreign government officials,” said Chief Weber.  “IRS-CI will continue to investigate pervasive bribery schemes used by corporations in the pursuit of attractive international investment opportunities.”

Och-Ziff entered into a deferred prosecution agreement in connection with a criminal information charging the company with two counts of conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA), one count of falsifying its books and records and one count of failing to implement adequate internal controls.  Pursuant to its agreement with the department, Och-Ziff agreed to pay a total criminal penalty of $213,055,689.  Och-Ziff also agreed to implement rigorous internal controls, retain a compliance monitor for a term of three years and cooperate fully with the department’s ongoing investigation, including its investigation of individuals.

OZ Africa pleaded guilty to a one-count criminal information filed today and assigned to U.S. District Judge Nicholas G. Garaufis of the Eastern District of New York, charging the company with a conspiracy to violate the anti-bribery provisions of the FCPA.  Sentencing has been scheduled for March 29, 2017.

In related proceedings, the U.S. Securities and Exchange Commission (SEC) filed a cease and desist order against Och-Ziff Capital Management Group LLC and OZ Management LP, whereby Och-Ziff agreed to pay approximately $199 million in disgorgement to the SEC, including prejudgment interest.  Thus, the combined total amount of U.S. criminal and regulatory penalties paid by Och-Ziff is approximately $412 million.

The DRC Bribery Scheme

According to the companies’ admissions, in late 2007, Och-Ziff employees began discussions with a businessman operating in the DRC about entering into a partnership based on special access to lucrative investment opportunities in the DRC involving the country’s diamond and mining sectors.  Och-Ziff employees learned that the businessman gained access to these attractive investment opportunities by making corrupt payments to senior government officials in the DRC, the companies admitted.  According to the plea agreement, between 2008 and 2012, Och-Ziff entered into several DRC-related transactions in conjunction with the businessman, understanding that Och-Ziff’s funds would be used, in part, to pay substantial sums of money to high-ranking DRC officials to secure access to, and preference for, the investment opportunities.  In late 2008, after an Och-Ziff employee was alerted that an audit of the businessman’s records revealed payments to DRC officials, that employee instructed that any references to those payments be removed from a final report of the audit, the companies admitted.  According to the plea agreement, the businessman paid tens of millions of dollars in bribes to DRC officials in exchange for investment opportunities that resulted in more than $90 million in profits for Och-Ziff. 

The Libya Bribery Scheme

Och-Ziff also admitted that, beginning in 2007, it engaged a third-party agent to assist the company in securing an investment from the Libyan Investment Authority (LIA), that country’s sovereign wealth fund, knowing the agent would need to pay bribes to Libyan officials.  The agent was engaged without formal approval or any due diligence, according to court documents.  The company admitted that, beginning in February 2007, the agent worked on behalf of Och-Ziff to obtain an asset placement from the LIA, including setting up a meeting between a senior Och-Ziff employee and the Libyan official empowered to make investment decisions for the LIA.  According to court documents, in late November 2007, Och-Ziff received a $300 million investment from the LIA into the company’s hedge funds.  Och-Ziff admitted that it subsequently entered into an agreement to pay the agent a “finder’s fee” of $3.75 million, knowing that all or a portion of the fees would be paid to Libyan officials in return for their assistance in obtaining the LIA’s investment.  In addition, Och-Ziff admitted that it falsified its books and records and attempted to conceal and disguise the bribes paid through the agent by paying the “finder’s fee” through a sham consulting agreement.

Internal Controls Failures and Falsified Books and Records

Och-Ziff also failed to implement and maintain adequate internal accounting controls, which allowed its employees, agents and business partners to misappropriate assets, the company admitted.  As a result of its failure to conduct due diligence on its partners and the lack of financial controls, Och-Ziff failed to prevent bribe payments from being made in the DRC, Libya, as well as in Chad and Niger, where an Och-Ziff joint venture made mining-related investments, according to admissions in court documents.     

The Corporate Resolutions

The department entered into this resolution in part due to Och-Ziff’s failure to voluntarily self-disclose the companies’ misconduct to the department.  The resolution also reflects the seriousness of the companies’ conduct, including the high value of the bribes paid to foreign officials and the involvement of a high level employee within Och-Ziff.  Notwithstanding, the criminal penalty reflects a 20 percent reduction off the bottom of the U.S. Sentencing Guidelines fine range because of Och-Ziff’s cooperation with the government’s investigation.

*          *          *

In connection with the government’s investigation, Samuel Mebiame, 43, a Gabonese national, was charged on Aug. 16, 2016, with conspiring to bribe foreign government officials to obtain mining rights in Chad, Niger and Guinea.  According to the criminal complaint, Mebiame allegedly worked as a “fixer” for a mining company owned by a joint venture between Och-Ziff and an entity incorporated in Turks and Caicos.  The complaint alleges that Mebiame paid bribes to high-ranking government officials in Niger and Chad to obtain mining rights for the joint venture.  The charges against Mebiame are merely allegations, and he is presumed innocent unless and until proven guilty. 

The FBI’s New York Field Office and IRS-CI’s New York office are investigating the case.  The department appreciates the significant cooperation and assistance provided by the SEC in this matter.  The Swiss Federal Office of Justice, the British Virgin Islands Central Authority, the Maltese judicial authorities and authorities in Jersey and Guernsey also provided assistance.

Assistant Deputy Chief Leo 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’s Business and Securities Fraud Section are prosecuting the case.  The Criminal Division’s Office of International Affairs also provided significant assistance.

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

BROOKLYN, NY – The U.S. Attorney’s Office for the Eastern District of New York and the Criminal Division, Fraud Section are prosecuting a New-York alternative investment and hedge fund manager, Och-Ziff Capital Management Group, LLC (Och-Ziff), which has agreed to pay a $213 million criminal penalty and enter into multiple criminal resolutions with the Department of Justice to resolve charges related to widespread bribery of officials in Libya and the Democratic Republic of Congo.  As part of the resolution, Och-Ziff, the publicly traded parent company, entered into a three-year deferred prosecution agreement (DPA) with the Department of Justice.  An Och-Ziff subsidiary, OZ Africa Management GP, LLC (OZ Africa), pleaded guilty to one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA).  Today’s guilty plea and proceedings in connection with the DPA took place before United States District Judge Nicholas G. Garaufis in the U.S. District Court for the Eastern District of New York.  Sentencing for OZ Africa has been scheduled for March 29, 2017, at 2:00pm.

U.S. Attorney Robert L. Capers of the Eastern District of New York, Principal Deputy Assistant Attorney 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 Richard Weber, Chief, Internal Revenue Service, Criminal Investigation (IRS-CI), made the announcement.

“Och-Ziff, one of the largest hedge funds, positioned itself to profit from the corruption that is sadly endemic in certain parts of Africa, including in Libya, the Democratic Republic of the Congo, Chad, and Niger.  Despite knowing that bribes were being paid to senior government officials, Och-Ziff repeatedly funded corrupt transactions.  One Och-Ziff employee was so bold as to order the removal of language from their African joint venture’s internal audit report that called for an investigation of suspected bribery payments by a business partner.  Today’s corporate resolutions, which include a more than $213 million criminal penalty and an independent compliance monitor, hold Och-Ziff accountable for placing profits above the law and will help ensure that the conduct brought to light here never happens again at this company,” stated United States Attorney Capers.

“This case marks the first time a hedge fund has been held to account for violating the Foreign Corrupt Practices Act,” said Principal Deputy Assistant Attorney General Bitkower.  “In its pursuit of profits, Och-Ziff and its agents paid millions in bribes to high-level officials across Africa.  By exposing corruption in this industry, the Criminal Division’s Fraud Section continues to root out wrongdoing of all types in the financial sector.”

“Gaining the upper hand in a business venture by engaging in corrupt practices is bribery in its purest form,” said FBI Assistant Director in Charge Sweeney.  “Doing so with the intention of influencing a foreign official in his or her capacity is nothing short of corruption.  In this scheme, payments of millions of dollars were paid out to senior officials within certain parts of Africa in exchange for access to profitable investment opportunities.  This type of behavior can’t and won’t be tolerated.  I commend the investigators and prosecutors who continue to work together at home and abroad to vigorously enforce the law within the confines of the Foreign Corrupt Practices Act.”

“Today’s plea and deferred prosecution agreement result from the unraveling of complex financial transactions orchestrated by Och-Ziff Capital Management Group, LLC and its subsidiary to facilitate illegal payments to foreign government officials,” said IRS-CI Chief Weber.  “IRS-CI will continue to investigate pervasive bribery schemes used by corporations in the pursuit of attractive international investment opportunities.”

Under the DPA, Och-Ziff admitted to multiple conspiracy charges in a four-count criminal information, including two counts of conspiracy to violate the anti-bribery provisions of the FCPA, one count of falsifying its books and records and one count of failing to implement adequate internal controls.  Additionally, OZ Africa pleaded guilty to conspiring to bribe senior officials in the Democratic Republic of Congo in connection with obtaining valuable mining concessions.  Collectively, Och-Ziff and OZ Africa agreed to pay a criminal penalty of $213,055,689, and Och-Ziff agreed to retain an independent compliance monitor for a period of three years.

The DRC Bribery Scheme

Between 2005 and 2012, a businessman operating in the DRC with significant interests in the diamond and mining sectors in the DRC paid more than one-hundred million dollars in bribes to DRC officials for special access to attractive investment opportunities.  In late 2007, Och-Ziff employees began discussions to partner with the businessman based upon his special access to these investment opportunities.  Between 2008 and 2011, Och-Ziff entered into several DRC-related transactions with this businessman despite the fact that at least two Och-Ziff employees knew, and a senior Och-Ziff employee believed it was likely, that the businessman gained access to these attractive investment opportunities by making corrupt payments to government officials.  Och-Ziff personnel funded these transactions understanding that Och-Ziff’s funds would be used in part to pay substantial sums of money to high ranking DRC officials to secure access to and preferential treatment for the investment opportunities.  In late 2008, after an Och-Ziff employee was alerted that an audit of the businessman’s records revealed payments for DRC officials, that employee instructed that any references to those payments be removed from a final report of the audit.  The businessman did, in fact, make corrupt payments to and for the benefit of DRC officials to secure the investment opportunities. 

The Libya Bribery Scheme

Separately, but also beginning in 2007, a senior Och-Ziff employee engaged a third-party agent to assist the company in securing an investment from the Libyan sovereign wealth fund, the Libyan Investment Authority (LIA).  At the time of the engagement, the senior Och-Ziff employee knew that the agent would need to make corrupt payments to Libyan officials to secure that investment.  The agent was engaged without formal approval by Och-Ziff and without any due diligence conducted on the agent by Och-Ziff.  From February 2007, the agent worked on behalf of Och-Ziff to obtain an asset placement from the LIA, including setting up a meeting between the senior Och-Ziff employee and the Libyan official who was empowered to make investment decisions for the LIA.  In late November 2007, Och-Ziff received a $300 million investment from the LIA into Och-Ziff hedge funds.  Shortly thereafter, Och-Ziff entered into a consulting agreement to pay a sham “finder’s fee” of $3.75 million, knowing that all or a portion of the fee would be paid to Libyan officials in return for their assistance in obtaining the LIA’s investment.  The agent did in fact make corrupt payments to and for the benefit of Libyan officials to influence the LIA’s investment.

Internal Controls Failures and Falsified Books and Records

Further, Och-Ziff admitted that it knowingly and willfully falsified and caused to be falsified records related to its retention and payment of the agent in Libya.  The falsified records concealed the true purpose of the payments, which purported to be for consulting purposes, but which actually would be used for corrupt payments to Libyan officials in return for their assistance in obtaining the LIA’s investment.  Och-Ziff also failed to implement and maintain an adequate system of internal accounting controls designed to detect and prevent the misappropriation of assets by its employees, agents, and business partners.  As a result, the company failed to prevent bribe payments from being made in the DRC, Libya, as well as in Chad and Niger, where an Och-Ziff joint venture made mining-related investments.  For all the criminal conduct included in these resolutions, Och-Ziff reaped more than $210 million in illegal profits.      

The Corporate Resolutions

The Department entered into this resolution, in part, due to Och-Ziff’s failure to voluntarily self-disclose the offense conduct and the seriousness of the conduct including the high-dollar amount of bribes paid to foreign officials and involvement by a high level employee within Och-Ziff.  Notwithstanding, Och-Ziff received a 20 percent reduction off the bottom of the U.S. Sentencing Guidelines range for its cooperation with the government’s investigation.    Och-Ziff also committed to continue to enhance its compliance program and internal controls, to cooperate with the Department in ongoing investigations, and to retain an independent compliance monitor pursuant to the terms outlined in the DPA. 

*          *          *

In connection with the government’s investigation, Samuel Mebiame, a Gabonese national, was charged on August 16, 2016, by criminal complaint with conspiring to bribe foreign government officials to obtain mining rights in Chad and Niger, as well as Guinea.[1]  According to documents filed in court, Mebiame worked as a “fixer” for a mining company that was owned by a joint venture between Och-Ziff and a Turks & Caicos incorporated entity.  In that capacity, Mebiame paid bribes to high-ranking government officials in Niger and Chad to obtain the mining rights.  During the charged conspiracy, Mebiame repeatedly traveled to the United States to further the scheme, including to meet with coconspirators at the Plaza Hotel in New York and to start companies and open bank accounts through which he could receive international wire transfers from coconspirators. 

*          *          *

In a parallel proceeding announced today, the U.S. Securities and Exchange Commission (SEC) filed a cease and desist order against Och-Ziff Capital Management Group LLC and OZ Management LP, whereby Och-Ziff agreed to pay approximately $199 million in disgorgement to the SEC, including prejudgment interest.  The total amount of the global resolution is thus approximately $412 million.

The FBI’s New York Field Office and IRS-CI’s New York office are investigating the case.  The department appreciates the significant cooperation and assistance provided by the SEC in this matter.  The Swiss Federal Office of Justice, the British Virgin Islands Central Authority, the Maltese judicial authorities and authorities in Jersey and Guernsey also provided assistance.

*          *          *

The case is being prosecuted by Assistant U.S. Attorneys James P. Loonam, Jonathan P. Lax, and David Pitluck of the Business and Securities Fraud Section of the U.S. Attorney’s Office for the Eastern District of New York, and Assistant Deputy Chief Leo Tsao and Trial Attorney James P. McDonald of the Criminal Division’s Fraud Section.  The Criminal Division’s Office of International Affairs provided significant assistance in this matter.

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

Robert L. Capers, United States Attorney for the Eastern District of New York, announced today a settlement with Camp Treetops, a residential summer camp in Lake Placid, New York, under title III of the Americans With Disabilities Act, 42 U.S.C. §§ 12181- 12189 (ADA).  Title III prohibits discrimination against people with disabilities in places of public accommodation, including summer camps.  Individuals with insulin-dependent diabetes fall within the protection of the ADA.

The settlement resolves claims made by Wenda Celidon, a resident of Valley Stream, New York, that Camp Treetops revoked its acceptance of her minor daughter, L.F., into its summer camp program and revoked a scholarship it had granted L.F. because she had insulin-dependent diabetes.  Ms. Celidon alleged that Camp Treetops initially accepted L.F. into the summer program, but one day before she was scheduled to leave for Camp Treetops, the Camp’s director revoked her admission and scholarship due to her insulin-dependent diabetes. 

Under the settlement, Camp Treetops will pay $13,500 to L.F., and adopt a written policy that prohibits discrimination on the basis of disability and creates a process for evaluating requests for reasonable modifications.  The Camp will also train its employees and staff regarding the disability discrimination provisions of federal, state, and local civil rights laws, including title III of the ADA.  

Under the terms of the settlement, Camp Treetops denies violating L.F.’s rights under the ADA.

“Discrimination against individuals, especially children with disabilities, is unacceptable,” stated United States Attorney Capers.  “The ADA requires that such children be given an equal opportunity to attend summer camps, an opportunity that was taken away from the child in this case.” 

The matter was handled by Assistant U.S. Attorney Rukhsanah Singh.

Earlier today in Central Islip, New York, Frederick Ippolito, former Town of Oyster Bay Commissioner of Planning and Development, was sentenced to 27 months’ imprisonment, three years of supervised release, and $548,487.00 in restitution, following his guilty plea on January 26, 2016, to tax evasion.  The sentencing proceeding was held before U.S. District Judge Leonard D. Wexler.

The sentence was announced by Robert L. Capers, United States Attorney for the Eastern District of New York, and Shantelle P. Kitchen, Special Agent-in-Charge, Internal Revenue Service-Criminal Investigation, New York (IRS).

In announcing the sentence, United States Attorney Capers stated, “Today’s sentence reinforces that no one is immune from the laws of the United States.  The defendant’s position as an influential official within a local municipality did not exempt him from paying his fair share of taxes, just like any other citizen.  He has now been held accountable for his actions.”  Mr. Capers extended his grateful appreciation to IRS-Criminal Investigation, the agency responsible for leading the government’s investigation.   

From 2008 to 2013, Ippolito received over $2 million in consulting fees from Carlo Lizza & Sons Paving, Inc., a company located in Old Bethpage, New York, as well as from a principal of that company.  Ippolito evaded taxes on that income by willfully failing to report it on his personal tax returns or the returns of entities he controlled.  Ippolito is the President of CAI Associates, LTD, a consulting and snow removal business, and a former officer of CAI Restaurant, Inc., d/b/a Christiano’s, in Syosset, New York.

From 2009 through January 2016, Ippolito served as the Commissioner of Planning and Development for the Town of Oyster Bay (TOB), a municipality in Nassau County, New York.  The TOB’s Department of Planning and Development was responsible for the enforcement of all codes, rules, and ordinances pertaining to building and zoning, and supervised the issuance of permits for construction within the TOB.  As Commissioner, Ippolito oversaw the TOB Department of Planning and Development’s several divisions, which included, among others, the Building Division, the Code Compliance Bureau, the Division of Administration of Board of Appeals, and the Planning Division.  Ippolito’s resignation as a Commissioner was accepted by the TOB following his guilty plea.

The government’s case is being handled by the Office’s Long Island Criminal Section.  Assistant United States Attorneys Catherine M. Mirabile and Raymond A. Tierney are in charge of the prosecution. 

The Defendant:

FREDERICK IPPOLITO
Age:  77
Syosset, New York

E.D.N.Y. Docket No. 15-CR-129 (LDW)

CENTRAL ISLIP, NY – Earlier today, Eric Aronson, the founder and head of Permapave Industries LLC and Permapave USA Corporation (Permapave), was sentenced to 124 months’ imprisonment to be followed by three years’ supervised release, and ordered to forfeit $26 million in criminal proceeds.  Restitution amount to be determined.  Aronson pleaded guilty to securities fraud on September 12, 2014. 

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 the Federal Bureau of Investigation, New York Field Office, which led the government’s investigation in this case.

Aronson was charged with securities fraud for orchestrating a multi-million dollar Ponzi scheme which, from approximately August 2006 to December 2010, defrauded more than 200 investors out of approximately $26 million.  He and his coconspirators issued promissory notes to investors and promised to use the proceeds to finance shipments of Permapave paving stones from Australia to the United States.  In reality, they operated a Ponzi scheme whereby some investors were paid returns on their investment from the funds Aronson obtained from other defrauded investors.  Aronson converted millions of dollars of investor funds for personal expenditures, including vacations, watches, jewelry, and automobiles.

Today’s sentencing took place before Senior United States District Judge Arthur D. Spatt.

The government’s case is being handled by the Office’s Business and Securities Fraud Section.  Assistant United States Attorney William P. Campos is in charge of the prosecution, with assistance provided by Assistant United States Attorney Brian Morris of the Office’s Civil Division, which is responsible for the forfeiture of assets.

This prosecution was the result of efforts by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. Attorneys’ Offices, and state and local partners, it’s the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations.  Since 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, visit http://www.StopFraud.gov.     

The Defendant:

ERIC ARONSON
Age:  48
Syosset, New York

E.D.N.Y. Docket No. 12 - CR - 245 (ADS)

WASHINGTON – The Justice Department, in coordination with the U.S. Postal Inspection Service (USPIS), the Department of the Treasury’s Office of Foreign Assets Control (OFAC), and other law enforcement partners, today announced wide-ranging enforcement actions – including criminal charges, economic sanctions, seizure of criminal proceeds, and civil injunction lawsuits – along with the execution of search warrants to combat a global network of mass mailing fraud schemes that collectively have defrauded millions of elderly and vulnerable victims across the United States out of hundreds of millions of dollars.  Simultaneously, a consortium of government agencies and non-profit groups led by the Department’s Consumer Protection Branch and Elder Justice Initiative announced a public education campaign to heighten public awareness and educate potential victims and their families about these schemes. 

The actions announced today are part of a broader effort by the Department and its international law enforcement partners to attack fraud schemes targeting older Americans and other vulnerable populations that involve individuals and entities across the globe, including Canada, France, India, the Netherlands, Singapore, Switzerland, Turkey, and the United States. 

“Every year, fraudulent mail fraud schemes target millions of Americans with false promises of wealth and riches, swindling hundreds of thousands of our fellow citizens,” said Attorney General Loretta E.  Lynch.  “Today’s actions send a clear message that the Department of Justice is determined to hold the perpetrators of these harmful schemes accountable.  And they make unmistakably clear that we are committed to protecting our people from exploitation – especially our older citizens, who are so often the focus of shameful ruses.  I want to thank our partners across the federal government for their assistance in bringing these actions, and I pledge the department’s ongoing dedication to ending mail fraud.”

“The defendants targeted the elderly and vulnerable by selling false promises of cash and lavish prizes,” said U.S. Attorney Robert L. Capers for the Eastern District of New York.  “Not surprisingly, the only good fortune befell the defendants.  We will employ every available means, including educating consumers, to protect the public from these schemes.”

“The law enforcement and civil injunction efforts announced today are just a part of our initiative,” said Postal Service’s Chief Postal Inspector Guy Cottrell. “We believe that consumer education is the best defense against these scammers.  We can’t arrest all of these con artists, so preventing the crime is critical.”

The mail schemes involve a complicated web of actors located across the world and each scheme follows a similar pattern.  Fraudulent direct mailers create letters falsely claiming that the recipient has won, or will soon win, cash or valuable prizes, or otherwise will come into good fortune.  In order to collect these benefits, the letters say that the recipients need only send in a small amount of money for a processing fee or taxes.  The letters appear to come from legitimate sources, typically on official-looking letterhead, and – even though they are in reality identical form letters – the letters appear to be personally addressed.  Some solicitations even use fonts that appear to be handwritten.

Today’s actions include both criminal and civil cases against multiple direct mailers who, collectively, are responsible for dozens of schemes involving tens of millions of dollars every year.   In addition, today’s actions also seek to shut down several other actors who work with the mailers to carry out these schemes: an India-based printer that manufactures the solicitations and arranges for bulk shipment to U.S. victims; list brokers who buy, sell, or rent lists of victims from one mailer to another so that once a victim has fallen prey to one scheme, others are able to target this victim; and a Canadian payment processor that, for more than 20 years, has helped dozens of international fraudsters gain access to U.S. banks and take money from victims.

“The Civil Division’s Consumer Protection Branch is working with international and domestic law enforcement through the International Mass-Marketing Fraud Working Group to dismantle these complex frauds through both civil and criminal actions,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.   “And we will continue to work with federal partners and non-governmental organizations to educate the public about this threat to vulnerable consumers.”

Actions against Canadian Payment Processor

The Justice Department, OFAC, and USPIS took simultaneous actions today against PacNet Services Ltd. (PacNet), an international payments processor and money services business based in Vancouver, Canada, along with affiliate companies and their operators.  Today OFAC designated the PacNet Group as a significant transnational criminal organization (TCO) pursuant to Executive Order (E.O.) 13581, “Blocking Property of Transnational Criminal Organizations.”  OFAC is also designating a global network of 12 individuals and 24 entities across 18 countries.  As a result of today’s action, all property and interests in property of the designated persons subject to U.S. jurisdiction are blocked, and U.S. persons are prohibited from engaging in transactions with them.

In addition, USPIS has sought and obtained a seizure warrant in the U.S. District Court for the Eastern District of New York for the funds in a PacNet U.S. bank account that is used to process payments received through fraudulent mailings.  The matter is being investigated by the USPIS team assigned to the Consumer Protection Branch, in conjunction with the USPIS’s Newark Division, Internal Revenue Service-Criminal Investigation’s Newark Field Office, and Homeland Security Investigation’s El Dorado Money Laundering Task Force.  The seizure is being handled by Assistant U.S. Attorney Tanisha Payne of the U.S. Attorney’s Office for the Eastern District of New York and Assistant Director Richard Goldberg of the Civil Division’s Consumer Protection Branch.

According to court filings made public today, PacNet has a 20-year history of engaging in money laundering and mail fraud, by knowingly processing payments on behalf of a wide range of mail fraud schemes that target victims in the United States and throughout the world.  According to these records, in 2016 alone, PacNet has processed payments for the perpetrators of more than 100 different mail fraud campaigns, collectively involving tens of millions of dollars.  In doing so, PacNet provides fraudsters in other countries with unfettered access to U.S. banks.  The records also identify PacNet as the processor for each of the defendants named in the cases announced by the Department today.

“PacNet has knowingly facilitated the fraudulent activities of its customers for many years, and today’s designations are aimed at shielding Americans and the nation’s financial system from the large-scale, illicit money flows that are generated by these scams against vulnerable individuals,” said OFAC Acting Director John E. Smith.  “Treasury will continue to use its authorities to respond to the evolving nature of transnational organized crime.”

Criminal Charges and Civil Injunction Action Filed against Turkish Direct Mailer

In a criminal complaint filed in the U.S. District Court for the Eastern District of New York, the government charged Ercan Barka, 34, a resident of Turkey, with conspiracy to commit mail fraud.  According to the criminal complaint, Barka arranged for fraudulent solicitations to be mass mailed to victims across the United States.  The fraudulent solicitations told recipients that they had won cash awards or lavish prize items and needed to pay a fee to claim their winnings.  Victims allegedly received nothing in return for their fees.  Barka was arrested by U.S. Postal Inspectors at JFK International Airport in New York on Sept. 3, as he was about to board a plane bound for Turkey.

The government also brought a civil injunction action under the Anti-Fraud Injunction Statute against Barka and True Vision LLC, a Delaware-based corporation through which he operates.  The civil complaint seeks to preliminarily and permanently ban Barka from participating in mail fraud schemes.  The complaint alleges that Barka sends millions of fraudulent mailings to potential U.S. victims each year and that, since 2012, U.S. victims have paid more than $29 million to Barka’s mailing campaigns. 

The United States’ civil injunction action is being handled by Assistant U.S. Attorneys Jessica Sklarsky and John Vagelatos of the U.S. Attorney’s Office for the Eastern District of New York, and Trial Attorney Ann F. Entwistle of the Civil Division’s Consumer Protection Branch.

Civil Action under the Anti-Fraud Injunction Statute against Swiss/Singaporean Direct Mailer, Indian Printer, and Connecticut “List Broker”

In a separate civil action, the United States brought suit to shut down entities and individuals, some of whom have engaged in numerous predatory mail fraud schemes for more than a decade, targeting primarily the elderly and vulnerable.  First, the complaint names BDK Mailing GmbH, Mailing Force Pte. Ltd., and Only Three Pte. Ltd. (collectively BDK).  These entities, under common ownership, are based in Switzerland and Singapore.  The complaint also names BDK’s principals, Chantal Seguy, 58, and Marion Elchlepp, 25, both of Paris, and Aurore Jouffroy, of Zurich.  BDK acts as a direct mailer responsible for mailing millions of multi-piece solicitations to potential victims throughout the United States that profess to come from financial entities, scholars, and world-renowned psychics, with contrived names like “Harrison Institute,” “Dr. Grant,” “Finkelstein & Partner,” and “Marie de Fortune,” among others.  The solicitations are written to give the impression that they are personalized and inform recipients that they will receive large sums of money, guaranteed money-making methods, and/or powerful talismans in return for payment of a fee of $50 to $55.  In reality, the complaint alleges, the purported senders and the promised winnings are fictitious.  Although victims send in the requested fees by cash, check, or credit card, they receive nothing in return.  The complaint alleges that tens of thousands of victims send approximately $50 to $60 million annually in response to the defendants’ fraudulent solicitation packets.

In addition, the complaint names Macromark Inc., a Connecticut-based list broker that has marketed BDK’s lead lists to third-party direct mailers, and Mary Ellen Meyer, 45, of Mahopac, New York, a Macromark client service manager.  The complaint alleges that Macromark and Meyer have rented lead lists to BDK and other fraudulent direct mailers who Macromark and Meyer knew would use the lists to personalize and address hundreds of thousands of solicitation packets to potential victims across the United States.  Macromark marketed the lead lists as containing the demographic information of individuals likely to send money in response to the solicitations.  The lists collectively contained approximately 750,000 potential victim names and addresses, according to the complaint. 

Finally, the complaint names Mail Order Solutions India Pvt. Ltd. (MOSI), an India-based printer and distributor, and its principals, Dharti Desai, 49, of New York County and Mumbai, India, and Mehul Desai, also of Mumbai.  As alleged in the complaint, MOSI and its principals have served as one of BDK’s printer/distributors since at least 2005.  MOSI designs, edits, and proofreads BDK’s solicitations, then lettershops them (folds, inserts, and seals the various printed elements of the solicitations into mailing envelopes).  MOSI prepares the letters for entry into the U.S. mail either as air freight to JFK (or another international airport) for delivery to a domestic mailing house, or by shipping the letters to Singapore, Fiji, or Hungary for introduction via the foreign post.  The complaint alleges that since 2013, MOSI has shipped at least 24.5 million solicitation packets to the United States.

The United States’ action is being handled by Assistant U.S. Attorneys Thomas Price and John Vagelatos of the U.S. Attorney’s Office for the Eastern District of New York, and Trial Attorney Gabriel H. Scannapieco of the Civil Division’s Consumer Protection Branch.

Civil Action under the Anti-Fraud Injunction Statute against New York Direct Mailer

In another civil injunction action, the Department seeks to stop a collection of businesses and individuals who have operated a direct mailing scheme based out of Long Island, New York, since at least 2012.  The complaint alleges that DMCS Inc., Direct Marketing Consulting Services Inc., Horizon Marketing Services Inc. (Horizon), Quantum Marketing Inc. (Quantum), and their principals, Sean Novis, 46; Gary Denkberg, 53; and Cathy Johnson, 34, all of Nassau County, New York, committed mail fraud in connection with their scheme.  The complaint alleges that the defendants send fraudulent solicitations styled as notifications that the recipient has won a large cash prize, typically worth more than $1 million.  The complaint alleges that the defendants mail hundreds of thousands of solicitations to potential victims throughout the United States every year and have grossed roughly $30.4 million since 2012.

The United States’ action is being handled by Assistant U.S. Attorneys Sean Greene and John Vagelatos of the U.S. Attorney’s Office for the Eastern District of New York, and Trial Attorney Ann F. Entwistle of the Civil Division’s Consumer Protection Branch.

Consent Decree Entered against Dutch “Caging Service”

Also today, the Department announced that the U.S. District Court for the Eastern District of New York entered a consent decree of permanent injunction against two Dutch caging businesses and their principal, Erik Dekker, 54, of Langbroek, the Netherlands, to prevent them from assisting mass mailing fraud schemes.  The businesses – Kommunikatie Service Buitenland B.V. (KSB) and Trends Service in Kommunikatie B.V. – are known collectively as Trends.  The complaint, which was filed June 1, alleged that Trends and Dekker used P.O. boxes in the Netherlands from which they collected tens of millions of dollars in victim payments for multiple international mail fraud schemes, tracked victims’ information and forwarded proceeds to PacNet for processing.

Also on June 1, Dutch law enforcement agents executed search warrants on the business address used by both companies and on Dekker’s home address.  The Dutch authorities also took control of the Dutch P.O. boxes used by the defendants to receive victim funds.  The coordinated U.S. and Dutch enforcement actions immediately stopped the use of Dutch P.O. boxes to receive payments from fraud victims.  Further investigation revealed that Trends was providing caging services for the Barka and BDK schemes targeted in today’s actions.

Trends and Dekker agreed to settle the litigation and be bound by a consent decree of permanent injunction that prohibits them from performing caging services for prize or psychic mailing campaigns, or any other mailing campaign that misrepresents itself to consumers.  The injunction also allows USPIS to intercept U.S. mail headed to the defendants, and to return that mail – along with any money being sent to the defendants – to U.S. victims.

The United States’ action was handled by Assistant U.S. Attorney John Vagelatos of the U.S. Attorney’s Office for the Eastern District of New York and Trial Attorney Kerala Thie Cowart of the Civil Division’s Consumer Protection Branch.

Criminal Charges against Nevada Mass Mailer

On Sept. 20, pursuant to a 24-count indictment unsealed that day, Glen Burke, 56, of Las Vegas, was arrested on charges related to operating fraudulent schemes including a mass mailing prize campaign that violated a federal court order.  According to the charges, Burke’s business mailed solicitations designed to fool recipients into believing that they had won thousands or millions of dollars.  The solicitations allegedly used fictitious names and in many cases looked like they came from law firms or financial institutions.  The indictment alleges that the solicitations advised consumers to pay a fee – usually $20 to $30 – in order to claim their winnings.  Once consumers paid, however, Burke allegedly failed to send anyone their promised winnings of thousands or millions of dollars.

The indictment also charges Burke and a co-defendant, Michael Rossi, 51, of Las Vegas, with running a fraudulent telemarketing campaign that mirrored the mass mailing campaign.  Rossi was also arrested on Sept. 20.  According to the indictment, telemarketers hired by Burke and Rossi falsely told consumers that they had been selected to receive a valuable prize worth thousands of dollars, and that they would receive the prize if they bought certain products.  Burke and Rossi are charged with conspiracy, mail fraud, and wire fraud in connection with telephone promotions. 

The indictment includes criminal contempt charges against Burke, which stem from a court order entered as part of a Federal Trade Commission (FTC) case brought in 1997, in which the FTC successfully obtained an order that barred Burke from misrepresenting material information to consumers.  Criminal contempt of court has no statutory maximum penalty.

In addition to the contempt charges, Burke and Rossi are each charged with 16 counts of wire fraud, five counts of mail fraud, and one count of conspiracy.  Each of these counts carries a statutory maximum penalty of 20 years in prison.  The indictment also seeks forfeiture of criminal proceeds.

FTC Action against California Mailer, Florida Printer, and Florida List Broker

The FTC filed a case today in U.S. District Court for the Central District of California against Terry Somenzi, 74, of Los Angeles, who did business through a company called International Advisory Services Inc.; David Raff, 54, of Weston, Florida, and his company, Millennium Direct Inc., also doing business as MDI Lists; and Ian Gamberg, 37, also of Weston, doing business through Printmail Corporate Solutions Inc.  As alleged in the FTC’s complaint, since at least 2013, the defendants participated in mailing hundreds of thousands of cash prize notifications from fictitious companies, including Paulson Independent Distributors, International Procurement Center, Keller, Sloan & Associates, and Phelps Ingram Distributors, informing mostly elderly consumers that they won a substantial cash prize of nearly $1 million or more.  The notifications instruct consumers to pay a fee of approximately $25 to collect their prizes, but those who paid received nothing in return.  According to the complaint, Somenzi and Raff, directly and through third-parties, provided the cash prize notifications and mailing lists of consumers’ names and addresses to Gamberg, who then arranged to have the notifications printed and mailed.  Many consumers who paid the fees later received numerous other deceptive personalized cash prize notifications from the defendants and other companies who purchased lists containing the consumers’ personal information.

“In the 21st century, the scam in your mailbox just as likely comes from the other side of the world as from the other side of town,” said Director Jessica Rich of the FTC’s Bureau of Consumer Protection.  “The FTC’s efforts to protect consumers don’t stop at our borders; we work with partners around the world against the perpetrators of mass mailing fraud.  Regardless of where the fraud comes from, we encourage consumers to let us know if they have been scam victims; we share complaint information with our law enforcement partners in the United States and abroad.  Report your complaint at www.ftc.gov, or, for international scams, at the 36-agency joint website www.econsumer.gov.”

Iowa Attorney General Actions against List Broker and Direct Mailers

The Iowa State Attorney General took action today against fraudulent mass mailers and others facilitating their schemes.  It negotiated an Assurance of Voluntary Compliance (AVC) with list broker Macromark to resolve allegations that the company facilitated fraudulent activities on the part of operations that mailed deceptive solicitations relating to sweepstakes and psychics.  The AVC with Macromark requires it to refrain from any further facilitation of such fraudulent activities affecting Iowa residents and to pay $30,000 into a fund that protects elderly Iowans against consumer fraud. 

The Iowa Attorney General also brought an action under the Iowa Consumer Fraud Act seeking an injunction, restitution, and other relief against Waverly Direct Inc., and its owner, Gordon Shearer, a New York-based direct mailer.  Shearer and his company allegedly sent out deceptive mailings from the so-called “Numerological Resource Center.”  These defendants maintain lists of vulnerable people who fell prey to their schemes, according to Iowa’s lawsuit, and market these lists to other mass mailers through a list broker. 

Finally, the Iowa Attorney General brought a lawsuit under the Iowa Consumer Fraud Act against Nicholas Valenti of Nevada.  Valenti has allegedly been involved in marketing the rights to send out deceptive mailings regarding techniques for winning lotteries and other chance-dominated gaming activities. 

* * *

The charges and allegations in the indictments and criminal complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.  The claims made in the civil complaints are allegations only, and there has been no determination of liability. 

Public Education

Reflecting the government’s unified effort to combat elder financial exploitation, the Consumer Protection Branch and Elder Justice Initiative have spearheaded a multi-agency education campaign to inform the public about mass mailing fraud and how it can be avoided.  Agency partners include the USPIS, the FTC, the Consumer Financial Protection Bureau, the Social Security Administration, the Securities and Exchange Commission, the Commodities Futures Trading Commission, and USA.gov.  As described in detail in the fact sheet, each agency is using its means of public outreach to broadcast information about the prevalence of mass mailing fraud.  The outreach includes messages to caregivers – such as friends, relatives, social workers, and others in contact with older individuals – about the need to be vigilant against prize or psychic letters being sent to those under their care. 

In addition, and as described in detail in the fact sheet, the government has also joined forces with non-governmental organizations in the elder justice and consumer protection arena, each of which will contribute to the public education campaign.  These groups include AARP, Consumers Union, Consumer Federation of America, the Elder Justice Coalition, Meals on Wheels Association of America, National Adult Protection Services Association, National Association of Area Agencies on Aging (n4a), National Association of States United for Aging and Disabilities, National Center for Victims of Crime, and National Consumers League.  Using their vast networks and communication tools, these organizations will alert their members and the public to the scourge of mass mailing fraud schemes and offer tips to combat financial exploitation.  Their tools include websites, newsletters, social media channels, training and outreach events, and other means.

U.S. law enforcement’s actions against mass mailing fraud arise out of a larger worldwide effort.  Mass mailing fraud has been identified as a major financial threat by the International Mass-Marketing Fraud Working Group (IMMFWG), a network of civil and criminal law enforcement agencies from Australia, Belgium, Canada, Europol, the Netherlands, Nigeria, Norway, Spain, the United Kingdom, and the United States.  The IMMFWG is co-chaired by the U.S. Department of Justice and FTC, and law enforcement in the United Kingdom.  Recent actions have been taken by law enforcement agencies from several working group countries, including Belgium, Canada, the Netherlands, and the United Kingdom, to disrupt mass mailing fraud schemes and gather evidence for prosecution of criminal participants.  Through these efforts, the working group serves as a model for international cooperation against specific threats that endanger the financial well-being of each country’s residents.

More information on fraud against the elderly is available at https://www.justice.gov/elderjustice/.  For more information about the Consumer Protection Branch and its enforcement efforts, visit its website at http://www.justice.gov/civil/consumer-protection-branch.  

CENTRAL ISLIP, NY – Earlier today, Kevin Barry O’Connell, a Long Island educator and coach, was sentenced at the federal courthouse in Central Islip, New York, to five years in prison following his July 2015 guilty plea to receiving child pornography at his residence in Patchogue, New York.  The sentencing proceeding was held before United States District Judge Leonard D. Wexler.  O’Connell was also sentenced to five years’ supervised release to follow his prison sentence, during which time he must register as a sex offender and he will not be allowed unsupervised contact with minors. 

The sentence was announced by Robert L. Capers, United States Attorney for the Eastern District of New York. 

“Keeping our children safe is a priority for law enforcement and this Office,” stated United States Attorney Capers.  “This crime was particularly egregious in that O’Connell, as an educator, a former high school principal and a coach was entrusted with ensuring the safety and wellbeing of children while he at the same time was victimizing children by receiving images of children being sexually abused.”  Mr. Capers thanked the U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI), for its assistance in the investigation.

According to court filings and facts presented at the guilty plea and sentencing proceedings, O’Connell downloaded video files of the rape and abuse of children as young as eight years’ old which he kept on thumb drives in his Patchogue home.  During a court-ordered search of his residence on October 15, 2012, O’Connell initially lied to HSI agents and denied that he possessed child pornography until agents found three thumb drives in the pocket of a jacket at the house.  O’Connell then admitted that he had hidden the drives in the jacket.

Following his arrest, O’Connell was suspended from his employment as an Assistant Superintendent for Secondary Education in the Roosevelt Union Free School District.  O’Connell had previously served as the Principal of Bellport Senior High School in the South Country Central School District and an Assistant Principal at Walter G. O’Connell Copiague High School.  O’Connell was the Varsity Baseball Coach from 1990 to 2001 at William Floyd High School.

The government’s case is being prosecuted by the Office’s Long Island Criminal Section.  Assistant United States Attorney Allen Bode is in charge of the prosecution.

This prosecution is part of Project Safe Childhood, a nationwide initiative launched in May 2006 by the Department of Justice to combat the growing epidemic of child sexual exploitation and abuse.  Led by United States Attorneys’ Offices, Project Safe Childhood marshals federal, state, and local resources to better locate, apprehend, and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims.  For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov.

The Defendant:

KEVIN BARRY O’CONNELL

Age:  55

Patchogue, New York

E.D.N.Y. Docket No. 12-CR-715 (LDW)

This afternoon, at the federal courthouse in Brooklyn, James C. Brewer, a Revenue Officer of the Internal Revenue Service (IRS) who had been assigned to the Edison, New Jersey, IRS office before his arrest, pled guilty to 12 counts of filing or preparing false tax returns, 12 counts of wire fraud, and one count of mail fraud, all in connection with a multi-year scheme to falsify his tax returns and the tax returns of others and to enrich himself with inflated refunds.  Brewer also pled guilty to committing perjury in United States Tax Court in 2012.  

At sentencing, Brewer faces a maximum term of 20 years’ imprisonment on each wire fraud and mail fraud count, a maximum of three years’ imprisonment on each tax fraud count, and a maximum of five years’ imprisonment on the perjury count.  As part of his plea agreement, Brewer agreed to make restitution to the IRS of over $70,000, plus interest and penalties, and he is subject to fines as well.

The plea was announced by Robert L. Capers, United States Attorney for the Eastern District of New York, Jonathan D. Larsen, Special Agent-in-Charge, Internal Revenue Service-Criminal Investigation (IRS-CI), Newark Field Office, and Rodney A. Davis, Special Agent-in-Charge, Treasury Inspector General for Tax Administration (TIGTA), Washington Field Division.  In announcing the guilty plea, Mr. Capers expressed his grateful appreciation to the United States Attorney’s Office for the District of New Jersey, the United States Attorney’s Office for the District of Nevada, IRS-CI, Las Vegas Field Office, and the Treasury Inspector General for TIGTA, Denver Field Division, for their assistance in this case.

According to court filings and statements made during the guilty plea, as part of a scheme to fraudulently reduce his taxable income and increase his tax refunds, Brewer failed to report any income he received for an unauthorized tax preparation business, underreported the gross receipts earned from an Internet retail business, and claimed false dependents on federal tax returns he prepared and filed on his behalf for three tax years.  Brewer also engaged in a multi-year scheme in which he prepared and filed false tax returns for others.  Brewer listed false dependents and false deductions on these returns, among other materially false information, in order to cause his clients to receive refunds to which they were otherwise not entitled or fraudulently inflate their refunds.  In doing so, Brewer listed the names and social security numbers of various individuals on those tax returns as dependents without those individuals’ authorization.  Brewer also diverted a portion of those clients’ refunds to himself, in some cases without the clients’ authorization or knowledge.  Finally, in an effort to fraudulently obtain for himself a tax credit for first time homebuyers, Brewer lied under oath about his residency when he testified in a matter in the United States Tax Court in New York, New York. 

The guilty plea was entered before the Hon. Pamela K. Chen at the United States District Court for the Eastern District of New York.

The government’s case is being handled by the Office’s Public Integrity Section.  Assistant United States Attorneys Tali Farhadian and Moira Kim Penza are in charge of the prosecution. 

The Defendant:

JAMES C. BREWER
Age:  39
Staten Island, New York

E.D.N.Y. Docket No. 15 CR 209 (PKC)

Earlier today, Andrew Barrett, a New York pharmacist who operated pharmacies in Bronx, Queens, and Rockland counties, was sentenced to 43 months’ imprisonment to be followed by three years of supervised release.  As part of the sentence, he was ordered to forfeit $2.7 million in criminal proceeds, pay $2.7 million in restitution to Medicare and Medicaid, and pay $736,000 in restitution to the Internal Revenue Service. 

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 the agencies that led the government’s investigation: the Federal Bureau of Investigation, New York Field Office; the Department of Health and Human Services, Office of the Inspector General, New York Office (HHS-OIG); and the Internal Revenue Service, Criminal Investigation, New York (IRS-CI).  Mr. Capers also thanked the New York Office of the Medicaid Inspector General (OMIG) for its cooperation and assistance in the case.

On May 25, 2016, Barrett pleaded guilty to committing a health care fraud scheme and filing false tax returns.  From January 2011 to December 2012, he fraudulently billed Medicare and Medicaid approximately $2.7 million for prescription medications that he never dispensed to patients.  Barrett used some of these proceeds to buy pharmaceutical products for his pharmacies. He also falsely claimed over $2 million in personal expenses as business expenses on his tax returns.  Through this scheme, he caused a tax loss of $736,192.80.

The sentencing proceeding was held before United States District Judge Kiyo A. Matsumoto.

 The government’s case is being handled by the Office’s Business and Securities Fraud Section.  Assistant United States Attorneys William P. Campos and Erin E. Argo are in charge of the prosecution, with assistance from Assistant United States Attorney Karin Orenstein of the Office’s Civil Division, which is responsible for the forfeiture of assets. 

The Defendant:

ANDREW BARRETT
Age:  57

E.D.N.Y. Docket No. 15-CR-103

CENTRAL ISLIP, NY – Earlier today, David Bodian, a Long Island attorney, was sentenced at the federal courthouse in Central Islip, New York, to 28 months in prison following his March 2016 guilty plea to wire fraud for stealing more than $1.3 million from a trust fund for which he was the trustee.  The sentencing proceeding was held before United States District Judge Arthur D. Spatt.  As part of the sentence, Bodian was ordered to pay restitution in the amount of $1.3 million to the Lou Bacon Trust. 

The sentence was announced by Robert L. Capers, United States Attorney for the Eastern District of New York, and Philip R. Bartlett, Inspector-in-Charge, United States Postal Inspection Service (USPIS).

According to court filings and facts presented at the guilty plea and sentencing proceedings, in approximately 2000, Bodian was appointed trustee of the Lou Bacon Trust, a trust fund that benefitted a number of individuals and charities.  At the time of his appointment, the trust held over $1 million in total assets.  In approximately 2005, Bodian began looting the fund of its assets to pay for his personal expenses, including a car, high-end audio equipment, home renovations, and international vacations.  From approximately 2005 to 2015, he stole almost the entirety of the trust’s funds, leaving the trust with only $10,000 in cash.  To perpetuate the scheme, Bodian lied to the beneficiaries about the amount of money in the trust bank accounts.  For example, when a beneficiary asked for a copy of a trust bank statement, Bodian borrowed $150,000 from a friend to deposit in the trust’s account to inflate the trust’s assets.  After providing a bank statement to the beneficiary that reflected the $150,000 Bodian had borrowed, he transferred the money back to his friend.

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

This prosecution was the result of efforts by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. Attorneys’ Offices, and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations.  Since 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, visit http://www.StopFraud.gov.

The Defendant:

David Bodian
Age: 59
Dix Hills, New York

E.D.N.Y. Docket No. 16-CR-91 (ADS)

Earlier today, a grand jury in Brooklyn returned a superseding indictment adding charges against Ying Lin, a former station chief for an international air carrier (the Air Carrier), for smuggling, obstruction of justice and wire fraud.  An earlier indictment charged the defendant with structuring financial transactions, which is included in the superseding indictment as well.  The defendant worked as a counter agent for the Air Carrier at John F. Kennedy International Airport and later as station chief for the Air Carrier at Newark Liberty International Airport.  The defendant’s initial appearance on the superseding indictment is scheduled for Tuesday, September 6, 2016, at 12 noon, before Chief United States District Judge Dora L. Irizarry at the United States Courthouse in Brooklyn.

The charges were announced by Robert L. Capers, United States Attorney for the Eastern District of New York, Acting Assistant Director in Charge, George J. Ennis, Jr., Federal Bureau of Investigation, New York Field Office, and Special Agent in Charge, Angel M. Melendez, U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI).

As alleged in the superseding indictment and other court documents filed by the government, the defendant received certain packages from military officers of the People’s Republic of China (PRC) who were stationed at the Permanent Mission of the People’s Republic of China to the United Nations (the PRC Mission) and from other employees of the PRC Consulate in New York.  The defendant then smuggled these packages onto Air Carrier flights departing JFK Airport for the PRC, in violation of applicable Transportation Security Administration (TSA) rules and regulations and Air Carrier policies, which require that checked baggage be accepted only from ticketed passengers.  In return, the defendant received various benefits from PRC employees, including discounted liquor purchased from diplomatic duty-free shops and tax-exempt purchases of electronic devices, as well as free contracting work at her personal residence performed by PRC construction workers.  The defendant continued to engage in smuggling activities after her initial arrest in August 2015.  In addition, the defendant also helped a PRC national that she believed was a target of a federal inquiry escape to the PRC aboard an Air Carrier flight from JFK Airport.

“The defendant repeatedly acted in direct contravention of rules and regulations providing for the safety of flights in the United States in order to reap personal benefits such as free contracting work and tax-free liquor and electronics,” stated United States Attorney Capers.  “The defendant also engaged in obstructive conduct even after she had been arrested in this case.  She will now be held to account.”  Mr. Capers extended his thanks to the TSA for their assistance and support in the investigation.

“The laws and practices in place in this country are meant to protect everyone’s security and safety, and no one is above them.  Ms. Lin abused a position of trust within the system to circumvent those laws for personal gain.  This case should serve as a reminder and warning to anyone trying to bypass our laws.  It is unacceptable and we will hold them accountable,” stated Acting Assistant Director in Charge Ennis.

“Lin allegedly used her position at an international air carrier to smuggle packages onto planes headed to China in return for favors such as discounted liquor and electronics.  These illicit actions created a potential safety issue to the planes and passengers onboard,” said HSI Special Agent in Charge Melendez.  “HSI will remain steadfast in its commitment to ensuring the integrity of our international airports so they are not used for criminal activities.”

The charges in the superseding indictment are merely 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 Attorneys Alexander A. Solomon, Douglas M. Pravda, and Ian C. Richardson are in charge of the prosecution, with assistance provided by the Department’s Counterintelligence and Export Control Section.

The Defendant:

YING LIN
Age: 46
Queens, New York

E.D.N.Y. Docket No. 15-CR-601 (DLI)

Noel Blackman, a medical doctor and the former Health Minister of Guyana, who operated from “pain management” clinics in Elmhurst in Queens County, Franklin Square in Nassau County, and Cypress Hills in Brooklyn, today pleaded guilty to conspiring to illegally distribute oxycodone, a highly addictive prescription pain medication.  The guilty plea was entered before United States District Judge Joanna Seybert at the U.S. Courthouse in Central Islip.  When sentenced, Blackman faces a maximum sentence of 20 years’ imprisonment and a $1 million fine. 

In announcing the guilty plea, United States Attorney Robert L. Capers expressed his grateful appreciation to the U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI) and the United States Department of Justice, Drug Enforcement Administration (DEA), Long Island Tactical Diversion Squad, which led the government’s investigation in this case, and thanked the U.S. Customs & Border Protection (CBP) for its assistance.

“Blackman violated his professional oath to put his patients’ legitimate medical needs first and instead chose to line his pockets with the proceeds from the sale of illegal prescriptions for oxycodone, a highly addictive drug that has been linked to the rise in heroin trafficking and other social ills in our communities,” stated U.S. Attorney Capers. “Together with our law enforcement partners, we will continue to vigorously prosecute illegal prescription drug distribution.”

According to court filings and statements made in court during the guilty plea, between 2015 and February 2016, Blackman wrote prescriptions for more than 365,000 oxycodone pills.  Around midnight on February 7, 2016, HSI agents removed Blackman from a plane at John F. Kennedy International Airport en route to Guyana and arrested him in connection with the conspiracy to illegally distribute oxycodone.  At the time of his arrest, more than $30,000 was found concealed in Blackman’s luggage.  At his guilty plea, Blackman admitted that he wrote oxycodone prescriptions for persons whom he knew had no legitimate medical need for them in exchange for cash.  As part of his guilty plea, Blackman also agreed to forfeit $503,200 attributable to illegal prescription sales.

This case is but one in a series of federal prosecutions by the United States Attorney’s Office as part of the Prescription Drug Initiative.  In January 2012, this Office, in conjunction with the five District Attorneys in the Eastern District of New York, the Nassau and Suffolk County Police Departments, the New York City Police Department, and New York State Police, along with other key federal, state, and local government partners, launched the Initiative to mount a comprehensive response to what the United States Department of Health and Human Services Center for Disease Control and Prevention has called an epidemic increase in the abuse of opioid analgesics.  To date, the Initiative has brought over 160 federal and local criminal prosecutions, including the prosecution of 19 health care professionals, taken civil enforcement actions against a hospital, a pharmacy, and a pharmacy chain, removed prescription authority from numerous rogue doctors, and expanded information-sharing among enforcement agencies to better target and pursue drug traffickers.  The Initiative also is involved in an extensive community outreach program to address the abuse of pharmaceuticals.

The government’s case is being prosecuted by Assistant United States Attorneys Bradley T. King and Madeline O’Connor.

The Defendant:

NOEL BLACKMAN
Age: 68
Valley Stream, New York

E.D.N.Y. Docket No. 16-CR-89 (JS)

BROOKLYN, N.Y. – Jacob Alexander, also known as “Kobi Alexander,” an Israeli national, pleaded guilty today to one count of securities fraud for his role in a stock options backdating scheme involving Comverse Technologies Inc. (Comverse).  Following a bail hearing, the court entered a permanent order of detention. 

Alexander was a founder, former Chief Executive Officer, and member of the Board of Directors of Comverse, which was traded on the NASDAQ stock market.  Comverse was a component stock of the S&P 500 and the NASDAQ 100 at the time of the offense.  Alexander was ordered extradited from Namibia on Monday, August 22, 2016, after having been indicted in the Eastern District of New York more than ten years ago.  Alexander arrived at John F. Kennedy International Airport in Queens, New York, this morning in the custody of special agents of the Federal Bureau of Investigation.  When sentenced, Alexander faces up to 10 years in prison.  Sentencing is set for 12:00PM on December 16, 2016.

The extradition and guilty plea were announced by U.S. Attorney Robert L. Capers of the Eastern District of New York, and Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).

“By fraudulently backdating Comverse stock options, the defendant personally gained millions of dollars in paper profits.  He then compounded his crime by attempting to bribe a witness to make false statements to government investigators.  For more than ten years, law enforcement pursued Kobi Alexander, and now he will be held to account for his role in a securities fraud scheme,” stated United States Attorney Capers.  “The guilty plea announced today demonstrates our steadfast commitment to enforce the law against corporate executives who defraud the investing public.”  

“The wheels of justice turn slowly but they keep moving; this is especially true in the case against Jacob “Kobi” Alexander.  Today, Alexander pled guilty to a charge that was brought forth by the FBI more than 10 years ago for his role in a securities fraud scheme.  Alexander and his coconspirators backdated the issuance of Comverse stock options, awarded them to themselves, and then lied to investors in public filings.  The scheme profited Alexander millions of dollars.  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 Rodriguez.

U.S. Attorney Capers and FBI Assistant Director-in-Charge Rodriguez thanked the Department of Justice’s Office of International Affairs (OIA), the National Police for the Republic of Namibia, Interpol, and FBI Legat Pretoria for their invaluable assistance during the extradition proceedings.  They also thanked the Securities and Exchange Commission (SEC) for their cooperation and assistance in the investigation and prosecution.

According to charging documents, the guilty plea proceeding, and other documents filed by the government in this case, Comverse was a communications software company with offices in Woodbury, New York.  Between 1998 and 2006, the defendant and his coconspirators engaged in a fraudulent backdating scheme using hindsight to select the issuance date of Comverse stock options, which they awarded to themselves and Comverse employees, and then lied about this practice to investors in public filings and elsewhere.  In doing so, the defendant and his coconspirators were able to select issuance dates when Comverse stock was trading lower, thereby awarding themselves and Comverse employees “in-the-money” options without properly accounting for these options in Comverse’s financial disclosures to investors.  By backdating options, the defendant and his coconspirators violated accounting rules and caused Comverse to overstate its profits.  Additionally, the backdated options also violated the terms of Comverse’s stock option plans that were approved by its shareholders.  As the top recipient of stock options in every company-wide grant, the defendant gained millions of dollars in paper profits from the scheme.  Ultimately, the defendant forfeited $60 million, which was applied as restitution to compensate Comverse shareholders. 

When the defendant’s conduct came to light, he attempted to obstruct justice by offering to bribe a witness to make false statements to federal investigators.  Shortly before being charged in connection with his scheme, and after he was aware of the government’s investigation, the defendant moved to Namibia, where he relocated with his family.  The government promptly sought the defendant’s extradition.

Today’s guilty plea took place before United States District Judge Nicholas G. Garaufis.           

*          *          *

The government’s case is being prosecuted by the Office’s Business and Securities Fraud Section.  Assistant United States Attorney James P. Loonam is in charge of the prosecution and led the Office’s efforts to secure Alexander’s extradition from Namibia, with assistance from the Department of Justice’s Office of International Affairs.

*          *          *

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.

The Defendant:

JACOB ALEXANDER, also known as “Kobi Alexander”
Age:  64

E.D.N.Y. Docket No. 06-CR-628 (NGG)

Today, defendant Alvaun Thompson, also known as “Love Pimpin,” was principally sentenced to 30 years’ imprisonment for forcibly sex trafficking minors—including a 13-year-old girl—and producing child pornography.  A federal jury convicted Thompson of all nine counts with which he was charged, following a jury trial in November 2015.

The sentence was announced by Robert L. Capers, United States Attorney for the Eastern District of New York; Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office; and William J. Bratton, Commissioner, New York City Police Department.

The evidence at trial established that from 2013 to 2015, the defendant used physical violence and emotional manipulation to force two minor girls to engage in prostitution.  The defendant’s victims were 13 and 15 years old when he began exploiting them.  The defendant prostituted the minor victims on the streets of Brooklyn and advertised them as prostitutes on the internet, posting explicit photographs.  He impregnated the minor victims and continued to prostitute them while they were pregnant with his children.  The defendant beat the minor victims, and he forced them to get brand-like tattoos of his name.  The defendant personally tattooed the letters “LP”—an abbreviation of his alias “Love Pimpin”—on the face of one of the minor victims.  On at least two occasions, he transported his victims across state lines to engage in prostitution.  In addition to the minor victims, the defendant prostituted other girls and women  and had sexual relationships with them.  He frequently filmed his own sex acts with the prostitutes, and created a pornographic video of himself and one of the minor victims, who was then 15 years old. 

The Hon. I. Leo Glasser conducted an evidentiary hearing on June 29, 2016, to evaluate the defendant’s conduct relevant to sentencing.  At that hearing, the Court made factual findings that the defendant murdered Johnny Moses Robinson—a rival Brooklyn pimp—on September 9, 2013, over a dispute involving one of the defendant’s minor victims.  The government established, by a preponderance of the evidence, that Thompson shot Robinson four times, including once in the face. 

“For years, the defendant preyed on defenseless children by repeatedly subjecting them to acts of physical and psychological abuse and used them to line his pockets by prostituting them on the streets of our city,” stated United States Attorney Capers.  “The sentence announced today reflects the heinous nature of the defendant’s crimes and serves as a warning to others who would seek to exploit the most vulnerable members of our society.”

FBI Assistant Director-in-Charge Rodriguez stated, “It’s hard to comprehend anyone using and abusing children to make money, but this case shows some subjects do it for much more than profit.  This subject took sadistic pleasure in torturing girls who had no ability to defend themselves.  It is unbelievably frustrating to know we open more cases every day, but the FBI and our law enforcement partners know with each arrest we are saving a child from real life monsters.”

“There is no place in our city for sex trafficking, a truly abhorrent crime.  I commend the work of the investigators and prosecutors involved in the case who brought to justice this individual and the deplorable acts he committed on society’s most venerable members, children,” said Police Commissioner Bratton.

The government’s case is being prosecuted by the Office’s Civil Rights Section.  Assistant United States Attorneys Matthew J. Jacobs and Jennifer M. Sasso are in charge of the prosecution.

The Defendant:

Alvaun Thompson
Age:  29

E.D.N.Y. Docket No. 15-CR-80 (ILG)

CENTRAL ISLIP, NY – Earlier today, Daniel Winston LaMarco pleaded guilty to a felony information charging him with wire fraud and commodities fraud causing losses of more than $862,000 to 13 investors.  Today’s plea took place before United States Magistrate Judge Gary R. Brown at the United States Courthouse in Central Islip, New York.  When sentenced, the defendant faces a maximum sentence of 30 years’ imprisonment. 

Today’s guilty plea was announced by Robert L. Capers, United States Attorney for the Eastern District of New York.

“LaMarco misled investors regarding his investment performance on a monthly basis for years and encouraged them to invest their money in risky and volatile markets,” stated United States Attorney Capers.  “The message of this prosecution is clear – if you defraud investors for personal gain you will be investigated and prosecuted to the full extent of the law.”  Mr. Capers thanked the criminal investigators in the United States Attorney’s Office for their excellent work on this investigation.

Beginning in or about January 2011, LaMarco began to solicit investors to fund a commodity pool he ran which invested in the Foreign Exchange Market.  LaMarco made false claims regarding his investment performance, and touted the safety of his investment strategy.  Among his victims, LaMarco encouraged two individuals to invest proceeds from a home equity loan with him.  As part of his fraud scheme, LaMarco sent false monthly statements to investors representing that their investments were growing, inducing new investments from the investors, and discouraging them from withdrawing their investments with him.  The monthly statements claimed the investments had more than doubled in value and were worth as much as $1,796,126.22.  In truth, LaMarco had lost almost all of the investors’ money, which totaled more than $862,000, in the Foreign Exchange Market. 

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

This prosecution was the result of efforts by President Obama's Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. Attorneys’ Offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions, and other organizations.  Since 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, visit http://www.StopFraud.gov.

The Defendant:

DANIEL WINSTON LAMARCO
Age:  51
Huntington, New York

E.D.N.Y. Docket No. 16-CR-433 (ADS)

Earlier today, Sandy Winick, a Canadian citizen who was extradited from Thailand, was sentenced at the federal courthouse in Brooklyn, New York, to 78 months in prison following his July 2015 guilty plea to conspiring to commit wire fraud for running an international advance fee scheme.  The sentencing proceeding was held before United States District Judge Eric N. Vitaliano.  As part of the sentence, Winick was ordered to pay   $2,431,038.32 in restitution and $5,000,000 in forfeiture.   

The sentence was announced by Robert L. Capers, United States Attorney for the Eastern District of New York.  Mr. Capers thanked the Federal Bureau of Investigation, New York Field Office (FBI); the Internal Revenue Service, Criminal Investigation, New York (IRS); U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI), Buffalo; Treasury Inspector General for Tax Administration (TIGTA); the Justice Department’s Office of International Affairs (OIA); the Royal Canadian Mounted Police (RCMP); the United Kingdom’s National Crime Agency (NCA); and law enforcement authorities in Thailand and China for their significant cooperation and assistance in this complex global investigation.

According to the indictment and other court filings, between 2008 and 2013, Winick was the leader of two multi-million dollar fraud schemes that used call centers around the world to defraud unsuspecting investors.  In the first scheme, Winick, together with other defendants, was charged with engaging in an international “pump and dump” operation.  Specifically, Winick and his co-defendants secretly controlled and fraudulently inflated the share price of worthless penny stocks through false and misleading press releases and manipulative trading and then sold billions of the fraudulently-inflated shares to investors across the globe.  In the second scheme, Winick, together with other defendants, was charged with operating boiler rooms in four countries to induce investments in penny stocks, including investments by many of the victims in the first scheme, to pay advance fees that the defendants promised would enable them to sell the stocks and recover any losses they incurred.  In reality, Winick and his co-defendants stole more than $5 million from the duped investors and never provided any services.  Winick established and operated boiler rooms or call centers in various locations around the world, including Canada, Thailand, and China, to solicit fees from the victims.  Winick also planned to open a call center in Brooklyn.

*          *          *

The government’s case is being prosecuted by the Office’s Business and Securities Fraud Section.  Assistant United States Attorneys Christopher A. Ott and Sylvia Shweder are in charge of the prosecution, with assistance provided by Assistant United States Attorney Melanie Hendry of the Office’s Civil Division, which is responsible for the forfeiture of assets.

*          *          *

This prosecution was the result of efforts by President Obama’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.  With more than 20 federal agencies, 94 U.S. Attorneys’ Offices, and state and local partners, it’s the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets, and conducting outreach to the public, victims, financial institutions, and other organizations.  Since 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, visit http://www.StopFraud.gov.

The Defendant:

SANDY WINICK
Citizenship: Canada
Age: 58
Ontario, Canada

E.D.N.Y. Docket No. 13-CR-452 (S-2) (ENV)

On Friday, August 12, 2016, at the federal courthouse in Brooklyn, New York, Carmine Avellino, a member of the Lucchese organized crime family of La Cosa Nostra, pleaded guilty to an extortionate collection of credit conspiracy.  The proceeding took place before United States Magistrate Judge Marilyn D. Go.  United States District Judge Ann M. Donnelly accepted the guilty plea earlier today.  Avellino’s co-defendants, Lucchese crime family associates Michael Capra and Daniel Capra pleaded guilty to the extortion conspiracy in July and August of this year.  When sentenced, the defendants each face up to 20 years in prison.     

The guilty pleas were announced by Robert L. Capers, United States Attorney for the Eastern District of New York; Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office; and Timothy D. Sini, Commissioner, Suffolk County Police Department.  Mr. Capers extended his grateful appreciation to the Suffolk County District Attorney’s Office and the City of New York Business Integrity Commission for their assistance with the case.

“Avellino, relying on his reputation as a member of the Lucchese crime family, and Lucchese associates Michael Capra and Daniel Capra, used intimidation and threats of violence to obtain payment from victims on an outstanding debt,” stated United States Attorney Capers.  “These convictions make clear that we hold accountable members of La Cosa Nostra and their associates who use extortion as a tool of their trade.” 

“As this case illustrates, members of La Cosa Nostra are still doing business as usual and continue to threaten victims with violence when a loan is not repaid.  The FBI, working with our law enforcement partners, stand committed to rooting out organized crime enterprises in our communities,” stated FBI Assistant Director-in-Charge Rodriguez. 

“We will not tolerate organized crime operating in our communities.  It has no place in a civilized society.  This case makes clear that law enforcement is committed more than ever to bringing criminals such as Carmine Avellino to justice,” stated Suffolk County Police Commissioner Sini.

According to prior court filings and facts presented during the guilty plea proceedings, between January and July 2010, the defendants conspired and attempted to collect a loan through the use of threats.   Avellino had previously loaned one of the victims $100,000.  After making the majority of the payments on the loan, the victim had difficulty repaying the remainder.  The defendants then used force and coercive means, including threats of physical violence, in an attempt to collect the outstanding loan amount.

The government’s case is being prosecuted by the Office’s Organized Crime and Gangs Section.  Assistant United States Attorneys Maria Cruz Melendez and Nadia Moore are in charge of the prosecution.

The Defendants:

CARMINE AVELLINO
Age: 72
Stony Brook, New York

DANIEL CAPRA
Age: 58
Hauppauge, New York

MICHAEL CAPRA
Age: 52
Smithtown, New York

E.D.N.Y. Docket No. 13-CR-632 (AMD)

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 Genesco Inc. has agreed to clean up contaminated drinking water at the Fulton Avenue Superfund Site (the Site) in the Towns of Hempstead and North Hempstead, New York.  The settlement, which is valued at no less than $5.25 million, requires Genesco to ensure the operation and maintenance of water treatment and indoor air treatment systems at the Site, and to monitor groundwater and indoor air contamination at the Site. Genesco will also reimburse EPA for costs incurred in overseeing the work required by the settlement. 

The settlement, which was entered on August 15, 2016 by the United States District Court for the Eastern District of New York, in an action brought against Genesco pursuant to the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), commonly known as the Superfund statute.  The Superfund law protects human health and the environment while safeguarding taxpayer dollars by holding parties that contributed to contamination responsible for cleaning it up.  Since 1980, EPA’s Superfund program has managed the cleanup of the nation’s high-priority hazardous sites and has responded to environmental emergencies, oil spills, and natural disasters.

The Site in this case includes a 0.8-acre commercial facility at 150 Fulton Avenue in Garden City Park, New York (the Fulton Property), which from approximately 1965 to 1974, contained a fabric-cutting mill that was owned or operated by Genesco.  The mill cut and processed knitted fabrics, which were then dry-cleaned with tetrachloroethylene (commonly known as perc), which was disposed of into the environment during the mill’s operations.   As a result of these past disposal practices, perc contaminated soil, air and groundwater at the Site.  EPA has classified perc as likely to be carcinogenic to humans by all routes of exposure.  Chronic (or long-term) exposure to perc can also cause adverse neurological effects, including impaired cognitive and motor neurobehavioral performance, and may also cause adverse effects in the kidney, liver, immune system, hematologic system, and on development and reproduction.

Groundwater contamination at the site and has impacted two public water supply wells, known as Garden City Water District wells 13 and 14.  Currently, the groundwater entering those wells is treated using an air stripper installed and operated by the Village of Garden City, which forces air through groundwater to remove harmful chemicals, such as perc.  The settlement requires, among other things, that Genesco continue the operation and maintenance of the existing treatment systems for the two wells until remedial goals are met.  The settlement also requires Genesco to monitor contaminant levels in groundwater at the Site, and to pay EPA’s costs of evaluating chemical vapors that may enter buildings near the Fulton Property.   The operation and maintenance of an existing sub-slab ventilation system at the Fulton Property will continue.  EPA will oversee Genesco’s work, which implements the cleanup remedy selected in the agency’s 2015 Record of Decision Amendment for the Fulton Avenue Superfund Site. 

“This settlement reinforces this Office’s firm commitment to eliminating the hazards posed by sites that threaten public health and safety,@ stated United States Attorney Capers. “We will continue to hold accountable those responsible for causing or contributing to hazardous substance sites.”

“Residents of Long Island rely on groundwater as their source of drinking water, so it is critical that groundwater resources be protected from toxic contamination,” said EPA Regional Administrator Enck.  “The EPA will keep working to protect residents of Long Island from the threats of polluted groundwater.”

The settlement was subject to a 30-day public comment period during which no comments were received.

The lead government attorneys for this settlement are Assistant United States Attorney Robert B. Kambic and Assistant Regional Counsel Douglas L. Fischer of EPA.

Defendant:

GENESCO INC.
1415 Murfreesboro Pike, Nashville, Tennessee

E.D.N.Y. Docket No. 09-CV-3917

Earlier today, at the United States District Court in Brooklyn, New York, Nadeem Mehmood Quraishi was sentenced to two years’ imprisonment following his April 21, 2016, conviction following a jury trial for sexual assault aboard an international flight.

The sentence was announced by Robert L. Capers, United States Attorney for the Eastern District of New York, and Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office.

The evidence at trial established that Quraishi sexually assaulted a woman aboard an international flight bound for John F. Kennedy International Airport from Dubai, United Arab Emirates.  He did this after the victim had taken prescription medication and while she slept.  When confronted by flight attendants shortly after the assault, the defendant admitted that he had applied the victim’s lotion to her genital area as she was sleeping. 

“The defendant’s assault of this victim was an outrageous affront to what should have been a safe and peaceful passage on an international flight,” stated United States Attorney Capers.  “To anyone who would commit such a crime be on notice – you will be prosecuted to the full extent of the law.” 

“Being on an airplane for an extended period of time can be stressful because passengers are told they can relax, even while surrounded by complete strangers in a confined space.  The victim in this case was at her most vulnerable being asleep, and Quraishi took full advantage.  It’s unfair to ask passengers to keep their wits about them for more than half a day in the air, which is why we take crimes aboard aircraft so seriously,” stated FBI Assistant Director-in-Charge Rodriguez. 

The sentencing proceeding took place before United States District Judge Carol B. Amon.

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

The Defendant: NADEEM MEHMOOD QURAISHI
Age:  43
Staten Island, New York

E.D.N.Y. Docket No. 16-CR-596 (CBA)

A two-count indictment was unsealed this morning in federal court in Central Islip, New York, charging Tibor Klein, the founder and president of investment advisory firm Klein Financial Services (Klein Financial); and Robert Schulman, a former partner in a Richmond-based global law firm (the law firm), with securities fraud and securities fraud conspiracy.[1]  Schulman tipped Klein about the pending merger between Pfizer, Inc. (Pfizer) and King Pharmaceuticals, Inc. (King) that Schulman had learned through his representation of King, and Klein used that material non-public information to engage in securities transactions ahead of the merger announcement.  Klein will be arraigned later today before United States Magistrate Judge Gary Brown at the U.S. Courthouse, 100 Federal Plaza, Central Islip, New York.  Schulman’s initial appearance for removal proceedings to the Eastern District of New York is scheduled for this afternoon at the Albert V. Bryan U.S. Courthouse, 401 Courthouse Square, Alexandria, Virginia.

The charges were announced by Robert L. Capers, United States Attorney for the Eastern District of New York, and Philip R. Bartlett, Inspector-in-Charge, United States Postal Inspection Service (USPIS).

“As alleged, Robert Schulman and Tibor Klein were licensed professionals who used their positions of trust to fraudulently enrich themselves.  Schulman, an attorney, violated the trust and confidence of his client for personal gain by passing along his client’s sensitive and economically valuable information to Klein, his investment advisor, and Klein exacerbated this crime by using the fraudulently-obtained information to trade in a number of his clients’ accounts,” stated United States Attorney Capers.  “The charges and arrests announced today reflect our steadfast commitment to hold accountable licensed professionals who use their positions to defraud the financial markets.”  Mr. Capers thanked the Securities and Exchange Commission (SEC) for their cooperation and assistance during the investigation.

“These individuals allegedly used proprietary information available solely through their trusted positions for an unfair advantage in the financial market to satisfy their appetite for money.  The arrest of Robert Schulman and Tibor Klein exemplifies the commitment of the United States Postal Inspection Service and its law enforcement partners to maintain a fair trading environment for all investors,” stated Inspector-in-Charge Bartlett.

As detailed in the indictment, in May 2009, Schulman began representing King, a pharmaceutical company then based in Bristol, Tennessee, in a patent litigation in the Western District of Virginia on behalf of the law firm.  Between July 12, 2010 and August 4, 2010, through his representation of King, Schulman learned of a pending merger between King and Pfizer.  On the weekend of August 13, 2010, Klein traveled to Schulman’s residence in McLean, Virginia, to discuss Schulman’s investment portfolio.  During that trip, Schulman revealed to Klein that there was a pending merger between King and Pfizer.  The following Monday, August 16, 2010, Klein began purchasing King stock for himself, Schulman, and other clients of Klein Financial.  Over the next month, Klein purchased more than $585,000 of King stock for himself and his clients. 

In addition, on August 16, 2010, Klein informed a registered broker in Florida that he had obtained inside information regarding the King-Pfizer merger and directed the broker to purchase King stock and call options.[2]  Between August 16, 2010 and August 23, 2010, the registered broker purchased both King stock and call options.  On October 12, 2010, Pfizer’s acquisition of King was publicly announced.  The same day, Klein sold all of the King shares he had acquired and generated a profit of more than $300,000 for himself, Schulman, and Klein Financial clients.  Also, on October 12, 2010, at Klein’s direction, the broker exercised all of the unexpired call options and sold all of the King stock the broker had purchased, generating a profit of more than $100,000, which the broker split with Klein.

*          *          *

If convicted, Klein and Schulman each face a maximum sentence of twenty years’ imprisonment.

The government’s case is being prosecuted by the Office’s Business and Securities Fraud Section.  Assistant United States Attorney David Pitluck 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 www.StopFraud.gov.

The Defendants:

TIBOR KLEIN
Age: 43
Residence: Melville, New York

ROBERT SCHULMAN
Age: 58
Residence: McLean, Virginia

E.D.N.Y. Docket No. 16-CR-442

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

[2] A call option is the right to purchase 100 shares of a stock at a predetermined price before a deadline in exchange for a premium. 

Earlier today, Thomas Torre, the former Chief Financial Officer of Metro Fuel Oil Corp., was sentenced to 20 months’ imprisonment, three years of supervised release, and ordered to forfeit $800,000 in criminal proceeds.  On May 20, 2015, Torre pled guilty to conspiring to commit bank fraud by overstating Metro Fuel’s accounts receivable in order to draw from a revolving line of credit issued by New York Commercial Bank (NYCB).  The fuel company later filed for bankruptcy after fraudulently obtaining over $30 million from NYCB.  The sentencing proceeding was held before United States District Judge Pamela K. Chen. 

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 the Federal Bureau of Investigation, New York Field Office, the agency responsible for leading  the government’s investigation in this case.

For sixty consecutive months, from 2007 to July 2012, Torre submitted false certificates to NYCB that falsely overstated the company’s accounts receivables.  The bank used the information in the certificates to determine the amount Metro Fuel could borrow on its revolving line of credit.  Torre misrepresented the true accounts receivable by deliberately failing to account for the cash payments received from customers and by creating fictitious invoice amounts.  By September 2012, the fuel company could no longer pay its bills and filed a voluntary petition for bankruptcy.  At the time of the bankruptcy, the company owed NYCB more than $30 million. 

The government’s case is being handled by the Office’s Business and Securities Fraud Section.  Assistant United States Attorney William P. Campos is in charge of the prosecution, with assistance provided by Assistant United States Attorney Brian Morris of the Office’s Civil Division, which is 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’s the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations.  Since 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: Thomas Torre
Age:  63
Albertson, New York

E.D.N.Y. Docket No. 14 - CR - 514 (PKC)

A four-count indictment was unsealed today in the United States District Court for the Eastern District of New York charging the defendant John Derounian with mail fraud, wire fraud, and aggravated identity theft in connection with a scheme to defraud the estate of an elderly victim of more than $1.2 million.  The indictment was returned under seal by a federal grand jury sitting in Central Islip, New York, on July 26, 2016. 

The charges were announced by Robert L. Capers, United States Attorney for the Eastern District of New York, and Philip Bartlett, Inspector-in-Charge, United States Postal Inspection Service, New York Division.

“Driven by greed, the defendant allegedly went to great lengths to perpetrate his fraudulent scheme to steal an elderly woman’s entire life-savings.  Such conduct cannot, and will not, be allowed to go unpunished,” stated United States Attorney Capers.  “This Office and the United States Postal Inspection Service are committed to protecting members of our community from fraudsters, especially those who target the elderly.”  Mr. Capers extended his appreciation to Morgan Stanley for its invaluable cooperation during the investigation.    

“To devise a scheme to steal from the deceased is despicably morbid.  Mr. Derounian’s alleged crimes are unconscionable.  Postal Inspectors have no tolerance for anyone who preys on innocent victims, either dead or alive, and will spare no resources to ensure those who commit these crimes are brought to justice,” stated Postal Inspector-in-Charge Bartlett. 

As detailed in the initial complaint, prior court proceedings, and the indictment unsealed today, Derounian is charged for his role in a scheme to steal the entire estate of a woman, who is identified in the indictment as Jane Doe.  On November 12, 2015, Derounian claimed to have found the body of Jane Doe, Derounian’s tenant, at her Sea Cliff home.  Subsequent to Jane Doe’s death, Derounian is alleged to have placed a series of telephone calls and sent emails to Morgan Stanley in an effort to drain Jane Doe’s financial accounts of over $200,000. 

Further, in an effort to perpetuate the fraud, Derounian created a forged will naming himself as the executor and sole beneficiary, aside from a comparatively small charitable donation, of Jane Doe’s estate.  Derounian allegedly then used the authority of the forged will to cremate the body of Jane Doe and sell her real property for over $1 million, which he transferred into bank accounts he controlled.  As a result of the investigation to date, funds totaling over $1.2 million have been seized from Derounian, and the indictment seeks forfeiture of those funds.           

The defendant, who was previously arrested on a complaint and detained, is scheduled to be arraigned this morning before United States District Judge Joan M. Azrack at the federal courthouse in Central Islip. 

The charges in the indictment are merely 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 and Civil Sections.  Assistant United States Attorneys Mark E. Misorek and Robert W. Schumacher are in charge of the prosecution.

The Defendant:

JOHN DEROUNIAN
Age:  51
Sea Cliff, New York

E.D.N.Y. Docket No. 16-412 (JMA)

Earlier today in federal court in Brooklyn, Johnathan Serrano, a member of the United States Army, was sentenced to a 10 month sentence (6 months’ imprisonment and 4 months’ home confinement), ordered to forfeit $10,200 in criminal proceeds to the government, and ordered to pay $67,000 in restitution to the United States Army following his conviction after a guilty plea on April 26, 2016 to one felony count of conspiracy to steal and sell government property, in violation of Title 18, United States Code, Section 371.  Today’s sentencing proceeding was held before Judge I. Leo Glasser.

The conviction stems from Serrano’s leadership in a scheme to steal and sell night-vision devices and components stolen from the United States Army.  Night vision technology allows images to be produced and seen in near-total darkness conditions and is a vital tool for the military.  Night vision devices acquired by the United States military, such as the items stolen and sold by the defendant, contain components made to military specifications and are required by the military to be rendered useless for their intended purpose prior to leaving government control.  The United States military’s policies prohibit the private sale of fully-functional military-issued night vision equipment. 

The defendant is an active-duty member of the United State Army, who was stationed at Fort Bliss base in El Paso Texas and assigned to perform repairs of radio technology.  Between April 2014 and May 2015, Serrano used his access to the repair facilities at the military base to steal numerous components for night vision devices.  To conceal his role in the conspiracy, Serrano had his cousin, co-conspirator Alan Serrano, and another individual, sell the devices over the internet via the eBay website and email communications with prospective buyers.[1]  The investigation revealed that the conspirators sold or attempted to sell over $10,000 worth of night vision equipment, including to a purchaser in Brooklyn, New York.  Additionally, five night vision devices and 50 boxes with serial numbers matching night vision components were recovered from the conspirators’ residences.  In total, Serrano and his co-conspirators stole over $120,000 worth of equipment from the United States Army.

The sentence was announced by Robert L. Capers, United States Attorney for the Eastern District of New York; Craig Rupert, Special Agent-in-Charge, Department of Defense, Defense Criminal Investigative Services (DCIS), New York; Angel M. Melendez, Special Agent-in-Charge, Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI), New York; and Diego G. Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation (FBI), New York Field Office.

The government’s case is being prosecuted by Assistant United States Attorney Craig R. Heeren.

The Defendants:

JOHNATHAN SERRANO
El Paso, Texas
Age: 31

ALAN SERRANO
El Paso, Texas
Age: 25

[1] On March 4, 2016, Alan Serrano pled guilty to unlawful sale of government property.  His sentencing is scheduled for tomorrow before Judge Glasser.

Robert L. Capers, United States Attorney for the Eastern District of New York joined Queens District Attorney Richard A. Brown and Queens Borough President Melinda Katz at the first-ever Hate Crimes Forum yesterday in Queens Borough Hall, where law enforcement and community leaders and advocates discussed in depth what constitutes a hate crime and how these crimes are investigated and prosecuted.

“My office shares the commitment of the District Attorneys, law enforcement agencies and advocacy groups within the Eastern District of New York to making the district a safer place for everyone, by conducting outreach to prevent hate crimes and assisting our state partners or bringing federal prosecutions as appropriate,” stated U.S. Attorney Capers.  “Crimes motivated by bias - whether against a race, gender, religious affiliation, sexual orientation or otherwise - will be addressed head on, with the goal of justice for all.  We cannot reach our full potential and promise as a country until every person can live free from discrimination, harassment and violence.”

District Attorney Brown said, “In 1987, my office was the first District Attorney’s Office in New York City to establish a unit specifically focused on the prosecution of individuals who victimize others based on their own prejudices. Hate crimes – whether motivated by sexual orientation, gender, religious or ethnic bias – will never be tolerated in Queens County.”
 
Queens Borough President Katz said, “Yesterday’s Hate Crimes Forum helped reconvene a broad spectrum of community leaders, advocates and stakeholders to review the laws and procedures related to how hate crimes are investigated and prosecuted. Hate crimes are taken very seriously in the Borough of Queens, and combating it requires the collaboration of various entities. Thank you to District Attorney Brown, the NYPD and U.S. Attorney Robert Capers for working with my office to host this important forum.”

Assistant Commissioner for the Law Enforcement Bureau at the New York City Commission on Human Rights Sapna V. Raj said, “Everyone in New York City deserves to be treated with dignity and respect. The Commission enforces one of the strongest City anti-discrimination laws in the nation and strives to educate every New Yorker about protections under the law. Yesterday’s forum provided a great opportunity for advocates and community members to learn about the City’s many resources and services available to victims of discrimination.”

More than 50 different community groups and organizations attended the Hate Crimes Forum, which included formal presentations from the invited speakers and a question and answer segment to zero in on community concerns.

Featured Speakers Included:

 ▸ Robert L. Capers, the U.S. Attorney for the Eastern District of New York
 ▸ Deputy Inspector Mark Magrone, the commanding officer of the New York City Police Department’s Hate Crimes Task Force
 ▸ Queens Assistant District and Section Chief Attorney Michael E. Brovner, of District Attorney Brown’s Gang Violence and Hate Crimes Bureau
 ▸ Assistant Commissioner Sapna V. Raj, of New York City’s Commission on Human Rights
 ▸ Lead Advisor Rama Issa, Community Relations Bureau, of the New York City Commission on Human Rights
 
The goal of the forum was to reach out to the vibrant Queens community of organizations and community groups in order to provide information about the law enforcement response to hate crimes. The turnout reflected a vast diversity of ethnic, racial, religious, sexual orientation and geographical interest, to name a few. In turn, it also provided an opportunity for law enforcement representatives to hear about the community concerns in regards to this topic, as well as some others.

In addition to the featured speakers, there were several pieces of hate crime prevention artwork displayed at the venue. The thought-provoking images were created for an annual art contest and exhibition established by the Organization of Chinese Americans-New York Chapter. The competition was designed to engage young people and to encourage them to speak out against hate crimes through creative expression.

The conference was organized by Assistant District Attorney Mariela Palomino Herring, Bureau Chief of District Attorney Brown’s Gang Violence and Hate Crimes Bureau, under the supervision of Executive Assistant District Attorney Jesse Sligh, Special Prosecutions Division, and in collaboration with Susie Tanenbaum, Director of Immigrant and Intercultural Affairs, Queens Borough President’s Office.

Earlier today, an indictment was unsealed charging Gonzalo Erick Aguilar Vargas, also known as “Erick Aguilar” and “Erick Vargas,” Hillary Calle, Kiancin Lee, also known as “Mala,” Monica Vargas, and Ricky Vargas with conspiring to traffic heroin, conspiring to kidnap, kidnapping, and possessing and brandishing firearms in relation to the charged heroin trafficking and kidnapping crimes.  The defendants are scheduled to be arraigned this afternoon before United States Magistrate Judge Steven M. Gold at the federal courthouse in Brooklyn, New York. 

The charges and arrests were announced by Robert L. Capers, United States Attorney for the Eastern District of New York; Angel M. Melendez, Special Agent-in-Charge, New York, U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI); James J. Hunt, Special Agent-in-Charge, Drug Enforcement Administration (DEA), New York Division; and William J. Bratton, Commissioner, New York City Police Department (NYPD).

As alleged in the indictment, on February 6, 2015, a member of the defendants’ drug trafficking crew was arrested while picking up a parcel containing heroin sent from Ecuador through John F. Kennedy International Airport into Queens, New York.  The crew member was released from law enforcement custody later that day.  The following day, the defendants kidnapped the crew member and his female companion in Manhattan so that their leader, Gonzalo Erick Aguilar Vargas, could confront him regarding the lost parcel of heroin.  Hillary Calle, Monica Vargas, and Ricky Vargas drove the two victims to New Jersey and then returned with them through Manhattan to Queens, where they waited for other crew members to arrive.  Kiancin Lee and another crew member subsequently arrived and ordered the kidnapped crew member into a vehicle.  When he refused, Ricky Vargas, Kiancin Lee, and the other crew member viciously assaulted him using firearms.  The victim crew member ultimately escaped and his female companion was later released. 

“As detailed in the indictment, the defendants were members of a drug trafficking organization that imported heroin from Ecuador through John F. Kennedy Airport and distributed it throughout the New York City area,” stated United States Attorney Capers.  “The defendants allegedly kidnapped and viciously assaulted a member of their crew after he was arrested in another case in order to enforce their control over the crew’s activities.  As this prosecution demonstrates, we are committed to working closely with our local partners, including city, state, and federal law enforcement, to rid our communities of the ravages of drug trafficking and its related violence.”  Mr. Capers extended his grateful appreciation to the Office of Queens County District Attorney Richard A. Brown for its assistance with this investigation and prosecution, as well as the New York Field Office of United States Customs and Border Protection.

“Drugs and guns are a deadly combination and every seizure makes our community safer.  These arrests and indictments demonstrate our relentless pursuit to remove drug traffickers from our streets,” said HSI New York Special Agent-in-Charge Melendez.  “The safety of our communities is one of HSI’s top priorities.  HSI and our state, federal, and local law enforcement partners pool information and resources to target drug smuggling and related criminal elements.”

“Underscoring the brutality linked with drug trafficking, the Vargas organization’s alleged crimes are a reminder of the dark side of drug trafficking-firearms offenses, kidnappings, and assaults.  By working with our federal, state, and local law enforcement partners, five alleged members of a violent heroin trafficking organization were investigated, indicted, and arrested,” said DEA New York Special Agent-in-Charge Hunt.

“This investigation is the latest example of the multi-agency collaboration needed to combat crime from Ecuador to the tarmac at John F. Kennedy airport.  That collaboration that resulted in today’s arrest for alleged kidnapping and firearms offenses was all to further an illicit and violent drug business,” said New York City Police Commissioner Bratton.  “I commend the work of the investigators and prosecutors involved in making this case.”

The charges contained in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.  If convicted of all counts, defendants Gonzalo Erick Aguilar Vargas, Kiancin Lee, and Ricky Vargas face a mandatory minimum of 17 years’ imprisonment and a maximum of life imprisonment.  The defendants Hillary Calle and Monica Vargas face a mandatory minimum of 10 years’ imprisonment and a maximum of life imprisonment.   

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

The Defendants:

GONZALO ERICK AGUILAR VARGAS, also known as “Erick Aguilar” and “Erick Vargas”
Age: 23

HILLARY CALLE    
Age: 23

KIANCIN LEE, also known as “Mala”
Age: 23

MONICA VARGAS
Age: 44

RICKY VARGAS
Age: 24

E.D.N.Y. Docket No. 16-CR-406

Earlier today, defendants Milton Contreras and Jose Osmin Rubio pled guilty to the murder of a 19-year-old victim on Long Island.  The guilty pleas were entered before United States Magistrate Judge Ramon E. Reyes, Jr., at the federal courthouse in Brooklyn, New York.  In the past month, two additional defendants pled guilty and admitted their participation in the murder – defendant Byron Lopez pled guilty before United States District Court Judge Margo Brodie on July 5, 2016, and defendant Oscar Welman Espinoza-Merino pled guilty before Judge Reyes on July 28, 2016.  When sentenced, the defendants face up to life imprisonment, as well as restitution and a fine.

The guilty pleas were announced by Robert L. Capers, United States Attorney for the Eastern District of New York, Angel M. Melendez, Special Agent-in-Charge, New York, U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations, (HSI); Delano A. Reid, Special Agent-in-Charge, Bureau of Alcohol, Tobacco, Firearms and Explosives, New York Field Division (ATF); and William J. Bratton, Commissioner, New York City Police Department.

In announcing thee guilty pleas, U.S. Attorney Capers expressed his grateful appreciation to the Suffolk County Police Department for its assistance with the investigation.

As detailed in the superseding indictment, the four defendants are members of the Jamaica, Queens and/or Brentwood, Long Island chapters of the violent street gang La Mara Salvatrucha, also known as “MS-13.”  On February 25, 2014, Lopez, Espinoza-Merino, Contreras and Rubio directed the victim, fellow gang member Sidney Valverde, to travel to Long Island under the false pretense that they needed him to assist in gang business there.  In fact, the co-conspirators planned to kill Valverde because they believed that he was providing information about the gang’s activities to law enforcement.  After Valverde arrived in Long Island, the co-conspirators shot him in the back of the head and left his body on Miller Place Beach in Suffolk County where it was discovered by a beachcomber approximately two weeks later.

This case is the latest 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 international 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.  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 in the Eastern District of New York, and has convicted dozens of MS-13 leaders and members in connection with those murders. 

The government’s case is being handled by the Office’s Organized Crime and Gangs Section.  Assistant United States Attorney Alixandra Smith is in charge of the prosecution.

The Defendants:

BYRON LOPEZ
Age:  25
Queens, New York

OSCAR WELMAN ESPINOZA-MERINO (“Speedy” and “Petey”)
Age:  23
Brentwood, New York

MILTON CONTRERAS (“Diabolico”)
Age:  20
Brentwood, New York

JOSE OSMIN RUBIO (“Slow”)
Age:  25
Brentwood, New York

E.D.N.Y. Docket No. 14-463 (MKB) (RER)

Earlier today, Salvador Jimenez Uribe, also known as “Salvador Uribe Jimenez,” pleaded guilty before United States District Judge Raymond J. Dearie in the federal courthouse in Brooklyn, New York, to a four-count superseding indictment for his involvement in an international cocaine importation conspiracy and international narcotics importation, distribution, and money laundering conspiracies.  When sentenced, Jimenez faces up to life in prison.

The guilty plea was announced by Robert L. Capers, United States Attorney for the Eastern District of New York, and James J. Hunt, Special Agent-in-Charge, Drug Enforcement Administration (DEA), New York Division.  The investigation was led by the DEA New York Organized Crime Drug Enforcement Strike Force.

According to court filings and facts presented during the plea proceeding, between approximately July 1, 2007 and February 26, 2008, Jimenez and his co-conspirators imported hundreds of kilograms of cocaine, as well as more than five kilograms of heroin, and more than a thousand kilograms of marijuana, from Mexico into the United States and distributed those narcotics in the New York area, including in the Eastern District of New York.  Jimenez, a Mexican citizen, also worked with others during that time period to transport millions of dollars of proceeds from the sale of those narcotics back to Mexico, in a way that concealed the true source of the proceeds and avoided financial transaction reporting requirements.  Between Approximately May 1, 2012 and March 15, 2015, Jimenez again conspired with others to import more than five kilograms of cocaine.

The government’s case is being handled by the Office’s International Narcotics and Money Laundering Section.  Assistant United States Attorneys Hiral D. Mehta and Craig R. Heeren are in charge of the prosecution.

The Defendant:

SALVADOR JIMENEZ URIBE        
Age: 50
Residence: Guadalajara, Mexico

EDNY Docket No. 12-CR-603 (RJD)

Earlier today, a complaint was unsealed charging Hani Kabbara, a Canadian citizen, with conspiracy to commit access device fraud.  According to the complaint, the defendant was the mastermind of a sophisticated scheme that used overseas call centers to conduct telephone extortion scams to extract from victims financial products called MoneyPaks.  These Moneypaks were then sold in online criminal forums or converted to cash by Kabbara  using fraudulently-obtained prepaid debit cards.  The defendant is scheduled to appear this afternoon before United States Magistrate Judge Steve M. Gold at the U.S. Courthouse in the Brooklyn New York.

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

As alleged in the complaint, the defendant obtained hundreds of thousands of dollars in MoneyPaks from victims of his extortion schemes he ran from his overseas call centers.  He demanded payment from his victims in the form of MoneyPaks, which are vouchers that can be loaded with funds and used to fund prepaid debit cards.  The defendant sold the MoneyPaks in online criminal forums or, with his co-conspirators, transferred the funds onto prepaid debit cards, which themselves were obtained using stolen personally identifiable information.  The defendant and his co-conspirators, who communicated with each other anonymously in cyberspace through dark web forums and encrypted chat applications, then used a crew of workers in and around the New York metropolitan area to withdraw funds from the debit cards, consolidate the cash, and send it back to the defendant in Canada.

The defendant was arrested in New York City on August 1, 2016.

“Cybercriminals terrorize innocent, often elderly, victims through the use of telephone extortion schemes and believe they can operate with impunity behind encrypted chats and online monikers,” stated United States Attorney Capers.  “Today’s arrest sends the message that we are watching, we will find you, and we will bring you to justice.”

“As alleged, Kabbara was a mastermind of schemes.  First, he used a call center to extort victims for hundreds of thousands of dollars using Moneypaks.  Then he and his co-conspirators moved those funds to pre-paid debt cards, which were obtained using stolen personal information.  The FBI is committed to investigating those who commit cybercrime and bringing them to justice, no matter where in the world they may reside,” stated FBI Assistant Director in Charge Rodriguez.

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 handled by the Office’s National Security & Cybercrime Section.  Assistant United States Attorney Una A. Dean is in charge of the prosecution.

The Defendant:

HANI KABBARA
Age: 31
Nationality:  Canadian

E.D.N.Y. Docket No. 16-M-691

Earlier today, Leonid Momotok, of Suwanee, Georgia, pleaded guilty to conspiracy to commit wire fraud for his role in an international scheme to hack into three business newswires and steal yet-to-be published press releases containing non-public financial information that was then used to make trades that generated approximately $30 million in illegal profits.  The guilty plea was entered before United States Magistrate Judge Ramon E. Reyes, Jr. at the federal courthouse in Brooklyn, New York.  When sentenced, Momotok 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 Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office.

“Using non-public press releases stolen by overseas hackers, Momotok and his group of traders engaged in a brazen scheme that was unprecedented in its scope, impact and sophistication,” stated United States Attorney Capers.  “Today’s guilty plea demonstrates our steadfast commitment and preparedness to combating the ever-evolving threat of cybercrime and to protecting the integrity of our financial markets.”  Mr. Capers thanked the Securities and Exchange Commission (SEC) and the Department of Justice’s Office of International Affairs (OIA) for their cooperation and assistance in the investigation.

“In one of the most sophisticated insider trading cases we’ve seen to-date, Momotok and other traders used information to trade on from not yet released press releases obtained by hackers from newswire services.  The scheme profited the traders approximately $30 million in ill-gotten profits.  Today’s guilty plea should send a message to others who seek to cheat the system for a lucrative payday- these schemes only end with prison time and forfeiture of those profits,” stated Assistant Director-in-Charge Rodriguez.

According to court filings and facts presented at the plea hearing, between February 2010 and August 2015, computer hackers based in Ukraine gained unauthorized access into the computer networks of Marketwired L.P., PR Newswire Association LLC (PRN), and Business Wire (collectively, the “Newswire Companies”).  The hackers used a series of sophisticated cyber-attacks to gain access to the Newswire Companies’ computer networks.  Once in the computer networks, the hackers stole press releases about upcoming announcements by public companies concerning earnings, gross margins, revenues, and other confidential and material financial information.  At one point, one of the hackers sent an online chat message in Russian to another individual stating, “I’m hacking prnewswire.com.”  In another online chat, the hackers stated that they had compromised the log-in credentials of 15 Business Wire employees. 

To capitalize on this stolen information, the hackers shared the stolen press releases with Momotok and other traders through overseas servers.  In a series of emails, the hackers provided the traders with credentials and instructions on how to access and use the overseas servers.  To assist the hackers steal the most valuable information, the traders created “shopping lists” or “wish lists” for the hackers listing desired upcoming press releases from Marketwired and PRN for publicly traded companies.  Once Momotok and the other traders received the stolen press releases, they used that information to execute trades ahead of the issuance of the press release.  In order to execute trades before the press releases were made public, Momotok and the other traders sometimes had to execute trades in extremely short windows of time.  Frequently, all of this illegal trading activity occurred on the same day.  Momotok and the other traders traded on stolen press releases containing material nonpublic information about publicly traded companies that included, among hundreds of others: Align Technology Inc.; Caterpillar Inc.; Hewlett Packard; Home Depot; Panera Bread Co.; and Verisign Inc. 

Momotok and his co-conspirators’ gained more than $30 million from their illegal trades.  In exchange for providing Momotok and the other traders with the stolen press releases, the hackers received a percentage of the illegal proceeds, which were transferred to them through foreign shell companies.

*          *          *

The government’s case is being prosecuted by the Office’s Business and Securities Fraud and National Security and Cybercrime Sections.  Assistant United States Attorneys Christopher A. Ott, Christopher L. Nasson and Richard M. Tucker are in charge of the prosecution, with assistance provided by Assistant United States Attorneys Brian D. Morris and Tanisha Payne of the Office’s Civil Division, which is 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 ww.StopFraud.gov.

The Defendant:

LEONID MOMOTOK
Age:  48
Residence: Suwanee, Georgia

E.D.N.Y. Docket No. 15-CR-381 (RJD)

An indictment was unsealed today in United States District Court for the Eastern District of New York charging Nestor Luis Reverol Torres, the former General Director of Venezuela’s La Oficina Nacional Antidrogas (ONA) and former commander of Venezuela’s National Guard, and Edylberto Jose Molina Molina, the former Sub-Director of ONA and currently Venezuela’s military attaché to Germany, with participating in an international cocaine distribution conspiracy.[1]  The indictment was returned under seal by a federal grand jury in Brooklyn, New York, on January 21, 2015, and relates to Reverol’s and Molina’s alleged activities from January 2008 to December 2010, when they served as the top officials for ONA, Venezuela’s government agency charged with combating narcotics trafficking.

The indictment was 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), New York Division; and Angel Melendez, Special Agent-in-Charge, U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI), New York.

According to court documents, from January 2008 to December 2010, in their then official capacities at ONA, Reverol and Molina received payments from drug traffickers in exchange for assisting the drug traffickers in distributing cocaine for ultimate importation into the United States.  For example, in exchange for such payments they alerted the traffickers to future drug raids or the locations where law enforcement officers in Venezuela were conducting counter-narcotics activities to allow drug traffickers to change the location where they stored drugs or alter drug transportation routes.  They also took steps to stop or hinder ongoing narcotics investigations to allow cocaine-laden vehicles to leave Venezuela and arranged for the release of individuals arrested for narcotics violations and the release of narcotics and narcotics-related currency that had been seized by law enforcement.  Reverol and Molina also prevented the arrest or deportation of individuals targeted by foreign countries, such as the United States, for prosecution on drug-related charges.

The indictment is the second indictment unsealed in the Eastern District of New York against alleged corrupt high-level officials in Venezuela who allegedly assisted narcotics traffickers in importing cocaine into the United States.  On March 20, 2013, a third superseding indictment was unsealed charging Vassyly Kotosky Villaroel Ramirez, also known as “Mauro” and “Angel,” a captain in the Venezuelan Guardia Nacional, and Rafael Antonio Villasana Fernandez, an officer in the Venezuelan Guardia Nacional, with participating in an international cocaine distribution conspiracy between January 1, 2004 and December 1, 2009.  According to court documents, Kotosky and Villasana allegedly used official government vehicles to transport more than seven metric tons of cocaine from the Colombian border to various airports and seaports in Venezuela for ultimate importation into the United States.

“The indictment announced today reflects our ongoing efforts to combat one of the most insidious and dangerous aspects of the international drug trade – the ability of drug cartels to infiltrate and corrupt the highest echelons of government and law enforcement,” said U.S. Attorney Capers.  “Nothing can be more damaging to law enforcement’s efforts to stop the flow of illegal drugs than when corrupt public officials violate the public’s trust by actively assisting drug traffickers in their deadly criminal activities.”  Mr. Capers extended his grateful appreciation to the DEA’s New York Drug Enforcement Task Force[2] and the Department of Homeland Security, Homeland Security Investigations (HSI) New York El Dorado Task Force,[3] the agencies responsible for leading the investigation, and to the invaluable assistance provided by the DEA Bogota Country Office, the DEA Miami Field Office, and the U.S. Attorney’s Office for the Southern District of Florida.

DEA Special Agent-in-Charge Hunt stated, “As alleged, Nestor Luis Reverol Torres and Edylberto Jose Molina Molina used their positions of power to enable drug trafficking organizations, all the while hindering law enforcement’s efforts to thwart them.  Simply put, the indictments send a message that here is no difference between a drug trafficker and a drug trafficker who leads anti-narcotics trafficking efforts.  Drug law enforcement working in the U.S. and overseas will continue to stop those at every level and every profession who supply or abet the distribution of poison to American doorsteps.”  

“Today’s indictment emphasizes that no one is above the law.  These former government officials allegedly used their positions of trust to feed their greed, and along the way betrayed their oath of service by warning drug traffickers of sensitive law enforcement operations,” said Special Agent-in-Charge Melendez of HSI New York.  “We will continue to work tirelessly with our federal and international law enforcement partners to expose criminals who attempt to cross our borders with illicit drugs.”

The government’s case is being prosecuted by the Office’s International Narcotics and Money Laundering Section.  Assistant United States Attorneys Gina M. Parlovecchio and Hiral Mehta are in charge of the prosecution.

The Defendants:

NESTOR LUIS REVEROL TORRES
Age:  51
Venezuela

EDYLBERTO JOSE MOLINA MOLINA
 Age:  53
Venezuela

E.D.N.Y. Docket No. 15-CR-020

[1] The charge in the indictment is merely an allegation, and the defendants are presumed innocent unless and until proven guilty.

[2] The New York Drug Enforcement Task Force comprises agents and officers from the Drug Enforcement Administration, New York City Police Department, and the New York State Police.

[3] HSI New York Office’s El Dorado Task Force comprises over 240 members from more than 29 law enforcement agencies in New York and New Jersey – including special agents, state and local police investigators, intelligence analysts, and federal prosecutors – with the assistance of the task force’s High Intensity Financial Crimes Area (HIFCA)/Intelligence Unit.

A New York surgeon who practiced at hospitals in Brooklyn and Long Island, New York, was convicted last night for submitting millions of dollars in false and fraudulent claims to Medicare.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Robert L. Capers of the Eastern District of New York, Assistant Director in Charge Diego G. Rodriguez of the FBI’s New York Division and Special Agent in Charge Scott Lampert of the U.S. Department of Health and Human Services-Office of Inspector General (HHS-OIG) New York Regional Office made the announcement.

Syed Imran Ahmed, 51, of Long Island, New York, was convicted of one count of health care fraud, three counts of making false statements related to health care matters and two counts of money laundering.

According to evidence presented at trial, Ahmed submitted millions of dollars in false claims to the Medicare program for incision-and-drainage and wound debridement surgeries that he did not perform.  Trial evidence showed that many of the claims also falsely stated that the surgeries were performed in an operating room, even though Ahmed never performed the surgeries.  The evidence introduced at trial showed Ahmed submitted over $25 million in false claims to the Medicare program for surgeries he never performed and he received over $3 million from Medicare as payment for the false claims.     

The FBI and HHS-OIG investigated the case, which was brought as part of the Medicare Fraud Strike Force under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office of the Eastern District of New York.  Fraud Section Trial Attorneys Turner Buford and Debra Jaroslawicz and Senior Litigation Counsel Patricia Notopoulos of the Eastern District of New York are prosecuting the case. 

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged nearly 2,900 defendants who have collectively billed the Medicare program for more than $10 billion.  In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to www.stopmedicarefraud.gov.  

BROOKLYN, NY – Late yesterday, a New York surgeon who practiced at hospitals in Brooklyn and Long Island was convicted for submitting millions of dollars in false and fraudulent claims to Medicare after a three-week jury trial.

The conviction was announced by Robert L. Capers, United States Attorney for the Eastern District of New York; Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Assistant Director in Charge Diego G. Rodriguez of the FBI’s New York Division and Special Agent in Charge Scott Lampert of the U.S. Department of Health and Human Services - Office of Inspector General (“HHS-OIG”), New York Regional Office, made the announcement.

Syed Imran Ahmed, 51, of Long Island, was convicted after trial of one count of health care fraud, three counts of making false statements related to Medicare claims and two counts of money laundering.

According to evidence presented at trial, Dr. Ahmed, a surgeon, submitted millions of dollars in false claims to the Medicare program for incision-and-drainage and wound debridement surgeries that he did not perform.  Many of the claims also falsely stated that the surgeries were performed in an operating room, even though Dr. Ahmed never performed the surgeries in an operating room or anywhere else.  The evidence introduced at trial showed Dr. Ahmed submitted over $25 million in false claims to the Medicare program for surgeries he never performed.  Dr. Ahmed received over $3 million from Medicare as payment for the false claims.     

The FBI and HHS-OIG investigated the case, which was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office of the Eastern District of New York.  Fraud Section Trial Attorneys Turner Buford and Debra Jaroslawicz and Senior Litigation Counsel Patricia Notopoulos of the U.S. Attorney’s Office of the Eastern District of New York are prosecuting the case. 

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged nearly 2,900 defendants who have collectively billed the Medicare program for more than $10 billion.  In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to www.stopmedicarefraud.gov.  

Earlier today in federal court in Brooklyn, Brayan Jiménez, the president of the Guatemalan soccer federation (FENAFUTG) from 2009 to 2015, pleaded guilty to racketeering conspiracy and wire fraud conspiracy in connection with his receipt of bribes in exchange for the awarding of contracts for the media and marketing rights to FIFA World Cup qualifier matches, and for authorizing certain “friendly” matches played by the Guatemalan national soccer team.  Jimenez also agreed to forfeit $350,000.  At sentencing, Jiménez faces a maximum sentence of 20 years for each count.  Today’s plea proceeding took place before United States Magistrate Judge Robert M. Levy.

The guilty plea was announced by Robert L. Capers, United States Attorney for the Eastern District of New York; Diego G. Rodriguez, 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, Jiménez negotiated and accepted bribes totaling hundreds of thousands of dollars in exchange for his agreement to exercise his influence as the president of FENAFUTG to award contracts to Media World, a Florida sports marketing company, for the media and marketing rights to the Guatemalan national soccer team’s home World Cup qualifier matches for the 2018 and 2022 editions of the World Cup.  Over a period of years, Media World transmitted these bribes from its U.S. bank accounts to the defendant and a co-conspirator, often using intermediaries in the United States and Guatemala.

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:

BRAYAN JIMÉNEZ
Age:  62
Nationality:  Guatemala

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

Earlier today in Central Islip, New York, Gregory Sclafani, an automobile transportation broker, was sentenced to 30 months’ imprisonment to be followed by three years of supervised release based on his March 31, 2016, guilty plea to mail fraud.  The defendant was also ordered to pay his victims restitution.  In 2011, the defendant was permanently enjoined from providing automobile transportation services in New York following a civil lawsuit filed by the New York State Attorney General’s Office in 2009. 

The sentence was announced by Robert L. Capers, United States Attorney for the Eastern District of New York. 

In announcing the sentence today, U.S. Attorney Capers stated, “The defendant’s scheme to victimize unsuspecting customers was particularly brazen in that it was executed while the defendant was permanently enjoined from engaging in the transportation brokerage business.  He has now been held to account.”  Mr. Capers extended his grateful appreciation to the United States Postal Inspection Service; United States Department of Transportation, Office of Inspector General; New York State Police; and the New York State Attorney General’s Office for their assistance in the case.

From 2007 until his arrest in 2014, the defendant made fraudulent representations to induce customers to use him as a broker for the long-distance hauling of their vehicles and then failed to deliver the services as contracted.  When aggrieved customers complained, the defendant ignored the complaints and retained the customers’ money.  Additionally, once in possession of the customers’ bank account information that had been provided for the services, the defendant made repeated unauthorized withdrawals from their bank accounts.  In an effort to conceal the ongoing fraud and to thwart the defrauded customers’ attempts to obtain refunds, the defendant frequently changed the names of the brokerage companies he controlled and used aliases when speaking to the aggrieved customers.

The scheme victimized at least 100 individuals.

The sentencing proceeding was held before United States District Judge Denis R. Hurley.  

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

The Defendant:

GREGORy SCLAFANI
Age:  64
Southampton, New York

E.D.N.Y. Docket No. 14-CR-639 (DRH)

This afternoon, Naquan Reyes was sentenced to life imprisonment by United States District Judge Sandra L. Townes at the federal courthouse in Brooklyn, based on his conviction for murdering Nicole Thompson.  Judge Townes also imposed a forfeiture judgment in the amount of $184,000.  According to court filings, and as admitted by Reyes during his guilty plea, Reyes paid another individual to murder Ms. Thompson to prevent her from cooperating with law enforcement and undermining a lucrative and long-standing scheme to defraud banks in the New York area. 

The plea was announced by Robert L. Capers, United States Attorney for the Eastern District of New York; Diego G. Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI); and David E. Beach, Special Agent-in-Charge, United States Secret Service, New York Field Office. 

As alleged in the government’s sentencing memorandum, between 2008 and his arrest in 2014, Reyes perpetrated a scheme to defraud various banks of more than $800,000.  As part of the scheme, Reyes secured employment at more than half a dozen banks and, relying in part on knowledge he acquired from his employment, Reyes created counterfeit checks and recruited others to deposit those checks into their and others’ bank accounts.  Reyes and his coconspirators then attempted to withdraw the funds from the bank accounts before the banks learned the checks were counterfeit.  Among those he recruited to make the deposits was Nicole Thompson.  On July 16, 2010, Thompson was arrested by the New York City Police Department in connection with her role in the scheme, and she immediately decided to cooperate with law enforcement.  When Reyes learned of Thompson’s plans to cooperate, and thereby jeopardize his ongoing fraud scheme, Reyes paid another individual to murder her and then traveled from New York to Maryland to personally dispose of her body.  On July 24, 2010, Thompson’s body, duct taped and wrapped in garbage bags, was found in a dumpster in Landover, Maryland.  Thompson was 24 years old at the time of her murder.  Reyes later brazenly commented that he would “do it again if [his] life was on the line.  It was either me or her.”  After his arrest, rather than accept full responsibility for his crimes, Reyes tried to persuade an ex-girlfriend to lie to law enforcement in an apparent attempt to receive credit for purported cooperation.

Mr. Capers expressed his grateful appreciation to the Prince George’s County, Maryland Police Department, New York City Police Department, and Bronx County District Attorney’s Office for their significant cooperation and assistance in the investigation.

The government’s case is being prosecuted by Assistant United States Attorneys Elizabeth Kramer, Elizabeth Geddes, Samuel Nitze and Karin Orenstein.

The Defendant:

NAQUAN REYES
Age:  31
Brooklyn, NY

E.D.N.Y. Docket No. 14-CR-0227

A seventeen-count indictment was fully unsealed yesterday in the United States District Court for the Eastern District of New York charging Marquez Bridges, Micah Isaiah Desuze, Dominique Chanel Fairnot, Jeremy Sanchez, Ashanti Sease-Matthews, and Omar Jermaine Walker with conspiracy to deal in firearms and making false statements to acquire firearms.  Jeremy Sanchez, who was the most recent defendant arrested in this case, is scheduled to be arraigned before the Honorable Magistrate Judge Robert Levy at 2:00 p.m. this afternoon.  The next status conference in the case is scheduled for August 4, 2016 before the Honorable Allyne R. Ross. 

The charges and arrests were announced by Robert L. Capers, United States Attorney for the Eastern District of New York; Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI); and William J. Bratton, Commissioner, New York City Police Department (NYPD).

“We stand committed to stemming the flow of illegal firearms into our communities,” stated United States Attorney Capers.  “All too often, firearms brought into New York illegally end up in the hands of criminals and result in acts of violence.”  Mr. Capers extended his grateful appreciation to the United States Air Force Office of Special Investigations.

“Illegal guns most often end up in the hands of criminals who usually don't abide by the laws designed to protect society.  A disturbing facet of this case is that several of the subjects were former members of the military, trusted to defend our nation, and make it safer.  These weapons have made our communities more dangerous,” stated FBI Assistant Director-in-Charge Rodriguez. 

“This department has no tolerance for those who traffic illegal guns into our city,” said New York Police Commissioner Bratton.  “I commend the work of the detectives and agents whose work resulted in these arrests.”

As set forth in the indictment and other documents filed by the government, between October 2015 and April 2016 the defendants purchased more than 70 firearms from stores and gun shows in Georgia.  The firearms were transported to the metropolitan New York City area, where they were sold in illegal transactions on the street.  The defendants, who acted as straw purchasers, made false statements to obtain the firearms.  In particular, the defendants lied on ATF Form 4473, a form gun purchasers are required to complete to verify, among other things, that they are not purchasing firearms on behalf of others.  Three of the defendants, Desuze, Sease-Matthews, and Walker, are former members of the United States military.

The charges in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.  If convicted, the defendants face a maximum prison term of ten years.

The government’s case is being prosecuted by the Office’s Organized Crime & Gangs Section.  Assistant United States Attorneys Margaret E. Gandy and Rena Paul are in charge of the prosecution. 

The Defendants:

MARQUEZ BRIDGES
Age:  26
Atlanta, Georgia

MICAH ISAIAH DESUZE
Age:  24
Atlanta, Georgia

DOMINIQUE CHANEL FAIRNOT
Age:  26
Atlanta, Georgia

JEREMY SANCHEZ
Age:  26
Atlanta, Georgia

ASHANTI SEASE-MATTHEWS
Age:  23
Atlanta, Georgia

OMAR JERMAINE WALKER
Age:  26
Savannah, Georgia

E.D.N.Y. Docket No. 16-CR-326

Earlier today, Naveed Khan, 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 plea was entered before United States Magistrate Judge Ramon E. Reyes, Jr. at the federal courthouse in Brooklyn, New York.  When sentenced, Khan 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 Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office.

According to court filings and facts presented at the plea hearing, 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 fraudulent scheme caused a loss of approximately $131 million to the investing public.

Between October 2014 and April 2015, a ForceField executive paid kickbacks to Khan in exchange for purchasing ForceField stock in his clients’ brokerage accounts.  Khan and ForceField did not disclose to Khan’s clients the kickbacks Khan was receiving for purchasing ForceField stock.  Khan 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 Christopher L. Nasson and Mark E. Bini 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:

NAVEED KHAN
Age:  33
Residence: Staten Island, New York

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

United States Attorney Robert L. Capers and Scott J. Lampert, Special Agent-in-Charge, Health and Human Services, Office of Inspector General (HHS-OIG), New York Region, today announced that the United States has entered into a civil settlement agreement with Deremedx Dermatology, P.C. d/b/a Dermatique and Dr. Barry A. Solomon to resolve a case brought under the federal False Claims Act.  Solomon is the owner of, and sole practitioner at, Dermatique.  The agreement resolves an investigation involving allegations that, in contravention of Medicare and Medicaid regulations, Solomon engaged in a host of fraudulent billing practices and submitted false claims to government healthcare programs.

Under the terms of the civil settlement agreement, Solomon and Dermatique will pay a total of $302,227.11.  Solomon will also enter into an Integrity Agreement to provide compliance oversight for the next three years.  The civil settlement agreement was approved by United States District Court Judge Leonard D. Wexler.

The government’s investigation revealed that between approximately June 2009 through at least 2014, Solomon repeatedly billed for services performed as if he were supervising the procedures even though he was not in the office during the procedures and was, at least in some cases, out of the country.  Solomon also billed for so-called “impossible days,” in which he submitted claims for more hours than he could have possibly worked.  In one of those instances, Solomon billed Medicare for more than 26 hours in one calendar day.  Finally, the investigation revealed that Solomon occasionally double billed Medicare for certain examinations and procedures.

The investigation commenced with the filing of a qui tam complaint by Relator Diane Vitale.  Under the federal False Claims Act statute, a private individual who has uncovered fraud against the government may file a suit in federal court on behalf of the United States.  If the United States is successful in resolving those claims, the individual who filed the complaint may receive a share of the recovery.

“Health care providers who engage in fraudulent billing practices, including billing for services and procedures they did not perform, jeopardize critical government healthcare programs.  The message today is clear – if you engage in such conduct you will be held to account,” stated U.S. Attorney Capers.

“Solomon’s fraudulent billing practices compromised the integrity of taxpayer-funded health programs, and won’t be tolerated” said Lampert, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services.  “HHS-OIG is committed to holding healthcare providers accountable for the services they provide to our most vulnerable citizens.”

The United States’ case was handled by Assistant U.S. Attorney Kenneth M. Abell. 

The Defendant:

BARRY A. SOLOMON
Age: 59
Residence:  Long Beach, New York

Earlier today, at the United States District Court in Central Islip, New York, the Hon. Joseph F. Bianco sentenced Nikitas Margiellos, a former leader of a Long Island burglary crew, to 10 years’ imprisonment, three years supervised release and ordered to pay $1,700,000 million in restitution following his August 19, 2014, plea of guilty to interstate transportation of stolen property. 

The sentence was announced by Robert L. Capers, United States Attorney for the Eastern District of New York; Madeline Singas, Nassau County District Attorney; Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office; Thomas C. Krumpter, Acting Commissioner, Nassau County Police Department; Shantelle P. Kitchen, Special Agent-in-Charge, Internal Revenue Service-Criminal Investigation, New York; and William J. Bratton, Commissioner, New York City Police Department.

In announcing the imposition of sentence, U.S. Attorney Capers extended his grateful appreciation to each of the participating agencies and offices.

Between 2009 and 2012, Margiellos was one of the leaders of a burglary crew that committed approximately 37 commercial burglaries and eight residential burglaries in Nassau and Suffolk Counties stealing approximately $8,000,000 in cash and property.  Margiellos participated in every one of the 45 burglaries.  The crew used traditional burglary tools, such as blow torches, crowbars, wire cutters, and sledge hammers, as well as more modern technology, including cell phone jammers and police scanners, to commit the burglaries.  They also often conducted surveillance of their victims to determine when the homes and businesses would be unoccupied.  On at least one occasion, crew members installed a tracking device on a victim’s car to assist in this endeavor. 

On January 21, 2016, Judge Bianco sentenced co-defendant Rafael Astacio, who was a NYPD Detective at the time he committed the burglaries, to a term of imprisonment of 72 months following his plea of guilty.  On January 19, 2016 and April 21, 2016, following their pleas of guilty, co-defendants Leonard Repka and Victor Arias were sentenced to terms of imprisonment of 24 months and 54 months, respectively.  Three additional co-defendants are awaiting sentencing.

The government’s case is being prosecuted by the Office’s Long Island Criminal Office.  Assistant United States Attorney Christopher C. Caffarone and Special Assistant United States Attorney Rick Whelan are in charge of the prosecution.

The Defendant:

NIKITAS MARGIELLOS
Age: 43
West Babylon, New York

E.D.N.Y. Docket No. 13-CR-640 (JFB)

Defendant Sold High-Quality Counterfeit U.S. Currency to Undercover Secret Service Agent Posing as Member of New York-Based Criminal Enterprise

On July 22, Louay Ibrahim Hussein had his initial appearance at the federal courthouse in Brooklyn, New York, before U.S. Magistrate Judge Lois Bloom.  Hussein is charged in connection with his leadership role in a wide-ranging scheme to distribute large quantities of high-grade counterfeit U.S. currency believed to be produced with support from sponsors in Lebanon and Iran for sale and use in markets across the globe, including in the United States and Europe.  Hussein, a Lebanese national, was arrested in Kuala Lumpur, Malaysia, in 2014, and arrived in the United States on Thursday, July 21, following extradition proceedings.  Earlier today, Hussein was ordered detained by U.S. Magistrate Judge Robert M. Levy until he can satisfy the terms and conditions of a proposed substantial bond package.

The charges were announced by U.S. Attorney Robert L. Capers for the Eastern District of New York, Special Agent in Charge David E. Beach for the U.S. Secret Service’s New York Field Office and Assistant Director in Charge Diego G. Rodriguez for the Federal Bureau of Investigation’s New York Field Office (FBI).

As alleged in the complaint and related filings, the charges against the defendant arose from a long-term undercover investigation in which the defendant and his co-conspirators sold hundreds of thousands of dollars in counterfeit currency to an agent with the U.S. Secret Service who was posing as a member of a New York-based criminal enterprise.  Over the course of several months in 2012, the defendant, through intermediaries located overseas, sold the agent nearly $150,000 in high-quality counterfeit $100 bills and nearly $150,000 in counterfeit Euro notes.  In October 2013, the defendant attempted to make another sale to the agent in Cyprus of approximately $300,000 in counterfeit currency, again through intermediaries.  In June 2014, the defendant and co-defendant Nazer Al-Shekh Mosa aka Mohammed Hasan Haidar, a Syrian national, sold the undercover agent approximately $170,000 in counterfeit currency in Kuala Lumpur, Malaysia.  Hussein and Mosa were arrested in August 2014 in Malaysia, pursuant to provisional arrest requests from the United States, during an attempt to sell additional counterfeit currency to the undercover agent.  Mosa waived extradition last year, pleaded guilty to conspiracy to distribute counterfeit currency on April 20, and is awaiting sentence.  A U.S. - based co-conspirator, Mouafak Al Sabsabi, also was arrested in August 2014.  Al Sabsabi pled guilty to conspiracy to distribute counterfeit currency and was sentenced principally to time served and a three year term of supervised release on May 31.   

The investigation has revealed that Hussein and his co-defendants are members of a multinational criminal network engaged in the production and distribution of counterfeit U.S. currency.  In conversations with the undercover agent and others, Hussein claimed to have access to as much as $800 million in high-quality counterfeit U.S. currency for sale to clients based in Iran and elsewhere, and offered to procure weapons, narcotics and counterfeit currency and to have them shipped through U.S. ports.

“The reliability of U.S. currency is a pillar of the global financial system.  As alleged, counterfeiters such as the defendant and his co-conspirators exploited that reliability and threatened the stability it provides, all to serve their own greed,” said U.S. Attorney Capers.  “This investigation sends the message around the world that counterfeiters, wherever located, can and will be brought to justice.” 

U.S. Attorney Capers extended his grateful appreciation to the New York Field Offices of the U.S. Secret Service and the FBI, to the Justice Department’s Office of International Affairs and to the Royal Malaysian Police and Attorney General’s Chambers for their assistance in the investigation and in effecting the defendant’s extradition.

“This investigation highlights the immeasurable effectiveness of law enforcement partnerships in combatting fraud,” said Secret Service Special Agent in Charge Beach.  “We will continue to work closely with our domestic and international partners to defeat criminal enterprises and protect the Nation’s financial infrastructure.” 

“We are pleased that Louay Ibrahim Hussein was extradited and will now face the U.S. justice system for his role in a charged international counterfeit currency ring,” said Assistant Director in Charge Rodriguez.  “As uncovered in a multi-year investigation with the U.S. Secret Service, we allege Hussein and his co-conspirators sold more than a half a million dollars of counterfeit U.S. currency with the help of sponsors in Lebanon and Iran.  Additionally, Hussein claimed to have access to millions more. Counterfeit currency doesn’t just devalue authentic currency, it weakens markets and global economies.”

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 handled by the Office’s National Security & Cybercrime Section.  Assistant U.S. Attorneys Samuel P. Nitze and J. Matthew Haggans are in charge of the prosecution.

On July 22, 2016, Louay Ibrahim Hussein had his initial appearance at the federal courthouse in Brooklyn, New York, before U.S. Magistrate Judge Lois Bloom.  Hussein is charged in connection with his leadership role in a wide-ranging scheme to distribute large quantities of high-grade counterfeit U.S. currency believed to be produced with support from sponsors in Lebanon and Iran for sale and use in markets across the globe, including in the United States and Europe.  Hussein, a Lebanese national, was arrested in Kuala Lumpur, Malaysia, in 2014, and arrived in the United States on Thursday, July 21, following extradition proceedings.  Earlier today, Hussein was ordered detained by U.S. Magistrate Judge Robert M. Levy until he can satisfy the terms and conditions of a proposed substantial bond package.

The charges were announced by Robert L. Capers, United States Attorney for the Eastern District of New York, David E. Beach, Special Agent in Charge, United States Secret Service, New York Field Office, and Diego G. Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).

As alleged in the complaint and related filings, the charges against the defendant arose from a long-term undercover investigation in which the defendant and his co-conspirators sold hundreds of thousands of dollars in counterfeit currency to an agent with the United States Secret Service who was posing as a member of a New York-based criminal enterprise.  Over the course of several months in 2012, the defendant, through intermediaries located overseas, sold the agent nearly $150,000 in high-quality counterfeit $100 bills and nearly $150,000 in counterfeit Euro notes.  In October 2013, the defendant attempted to make another sale to the agent in Cyprus of approximately $300,000 in counterfeit currency, again through intermediaries.  In June 2014, the defendant and co-defendant Nazer Al-Shekh Mosa, also known as Mohammed Hasan Haidar, a Syrian national, sold the undercover agent approximately $170,000 in counterfeit currency in Kuala Lumpur, Malaysia.  Hussein and Mosa were arrested in August 2014 in Malaysia, pursuant to provisional arrest requests from the United States, during an attempt to sell additional counterfeit currency to the undercover agent.  Mosa waived extradition last year, pled guilty to conspiracy to distribute counterfeit currency on April 20, 2016, and is awaiting sentence.  A U.S. - based co-conspirator, Mouafak Al Sabsabi, also was arrested in August 2014.  Al Sabsabi pled guilty to conspiracy to distribute counterfeit currency and was sentenced principally to time served and a three year term of supervised release on May 31, 2016.   

The investigation has revealed that Hussein and his co-defendants are members of a multinational criminal network engaged in the production and distribution of counterfeit U.S. currency.  In conversations with the undercover agent and others, Hussein claimed to have access to as much as $800 million in high-quality counterfeit U.S. currency for sale to clients based in Iran and elsewhere, and offered to procure weapons, narcotics, and counterfeit currency and to have them shipped through U.S. ports.

“The reliability of U.S. currency is a pillar of the global financial system.  As alleged, counterfeiters such as the defendant and his co-conspirators exploited that reliability and threatened the stability it provides, all to serve their own greed,” stated United States Attorney Capers.  “This investigation sends the message around the world that counterfeiters, wherever located, can and will be brought to justice.”  Mr. Capers extended his grateful appreciation to the New York Field Offices of the United States Secret Service and Federal Bureau of Investigation, to the Justice Department’s Office of International Affairs, and to the Royal Malaysian Police and Attorney General’s Chambers for their assistance in the investigation and in effecting the defendant’s extradition.

“This investigation highlights the immeasurable effectiveness of law enforcement partnerships in combatting fraud,” said Secret Service Special Agent in Charge Beach.  “We will continue to work closely with our domestic and international partners to defeat criminal enterprises and protect the Nation’s financial infrastructure.” 

“We are pleased that Louay Ibrahim Hussein was extradited and will now face the U.S. justice system for his role in a charged international counterfeit currency ring.  As uncovered in a multi-year investigation with the U.S. Secret Service, we allege Hussein and his co-conspirators sold more than a half a million dollars of counterfeit U.S. currency with the help of sponsors in Lebanon and Iran.  Additionally, Hussein claimed to have access to millions more. Counterfeit currency doesn’t just devalue authentic currency, it weakens markets and global economies,” stated Assistant Director-in-Charge Rodriguez of the FBI.

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 handled by the Office’s National Security & Cybercrime Section.  Assistant United States Attorneys Samuel P. Nitze and J. Matthew Haggans are in charge of the prosecution.

The Defendants:

LOUAY IBRAHIM HUSSEIN
Age: 42
Lebanon

NAZER AL SHEKH MOSA, a/k/a  MohammEd HASAN HAIDAR
Age: 29
Damascus, Syria

MOUAFAK ALSABSABI, also known as “Abu Masen,”
Age: 68
Garden City, New York

E.D.N.Y. Docket No. 14-M-732
E.D.N.Y. Docket No. 16-CR-117 (Defendant HAIDAR)
E.D.N.Y. Docket No. 14-CR-583 (Defendant ALSABSABI)

A 23-count indictment was unsealed today in United States District Court for the Eastern District of New York charging defendants Edwin Amaya-Sanchez, also known as “Strong, “William Castellanos, also known as “Dizzy” and “Satanico,” Jhonny Contreras, also known as “Reaper” and “Conejo,” and Reynaldo Lopez-Alvarado, also known as “Mente,” all of whom are all members of La Mara Salvatrucha, also known as the MS-13 (MS-13), with four murders, including the May 26 and 28, 2013 murders of Derrick Mayes and Keenan Russell, the July 14, 2014 murder of Jose Lainez-Murcia, the June 30, 2015 murder of Jonathan Cardona-Hernandez, and an April 9, 2013 attempted murder, as well as related firearms, accessory after the fact, obstruction of justice, and arson offenses.

The charges were announced by Robert L. Capers, United States Attorney for the Eastern District of New York, Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and Timothy D. Sini, Commissioner, Suffolk County Police Department (SCPD).

“The senseless and depraved violence reflected in the devastating loss of life allegedly at the hands of these defendants and their fellow gang members is a trademark of the MS-13.  Whether it is random violence exemplified by the murders of Derrick Mayes and Keenan Russell, or the targeted executions of Jose Lainez-Murcia and Jonathan Cardona-Hernandez, the MS-13’s thirst for murder and mayhem is a threat to our communities who are affected by their brutal acts of violence,” stated United States Attorney Capers.  “This Office and our law enforcement partners will continue our steadfast resolve to dismantle the MS-13 and keep our communities safe from gang violence.”  Mr. Capers expressed his grateful appreciation to all the members of the FBI’s Long Island Gang Task Force.

“The history of MS-13 illustrates in vivid detail the gang simply has no regard for human life.  As detailed in this case, these men allegedly killed random people they did not know, and actively targeted others.  The FBI’s Long Island Gang Task Force works aggressively each day to track down anyone associated with the gang in the hope that we will stop their next random killing,” stated Assistant Director-in-Charge Rodriguez. 

“This prosecution is an enormous victory for Suffolk County residents, and we thank the United States Attorney's Office and the FBI for their continued partnership.  With this case, we continue to send the clear message to gang members in Suffolk County that the Suffolk County Police Department, along with our law enforcement partners, will bring you to justice for your heinous and depraved crimes.  This is just the beginning of results that our renewed partnership with our federal law enforcement partners will reap for Suffolk County residents,” stated Commissioner Sini. 

As detailed in the indictment and the government’s detention letter filed earlier today, Contreras is charged with the murders of Mayes and Russell, who were both killed in Central Islip over Memorial Day weekend in 2013.  On May 26, 2013, Contreras and another MS-13 member armed themselves with a .25 caliber handgun and 20-gauge shotgun and drove around Central Islip in a stolen minivan looking for rival gang members to kill.  While on Wilson Boulevard, Contreras and his co-conspirator observed Mayes, an African-American man, whom they did not know, but assumed to be a member of the Bloods street gang because he was wearing an article of red clothing.  The MS-13 members approached Mayes, shot him multiple times, and killed him.  On May 27-28, 2013, Contreras and several other MS-13 members, who were armed with the same .25 caliber handgun and 20-gauge shotgun, as well as a 9mm handgun, again drove around Central Islip in the stolen minivan and other vehicles, looking for rival gang members to kill, and observed several African-Americans, including Russell, outside a house party on Acorn Street.  The MS-13 members approached Russell, who they again did not know, but assumed to be a member of the Bloods, opened fire with the weapons, and killed him.  When the MS-13 members fled the scene in the minivan, they ran out of gas and called Lopez-Alvarado, who helped them get gas and hide the firearms.  Later, the MS-13 members learned that the minivan had been linked to the murders and they agreed to destroy it.  Contreras, Lopez-Alvarado and another MS-13 member wiped the minivan down to remove any fingerprints, drove it to a wooded area in Ronkonkoma, doused it with gas, and set it on fire.  Shortly after participating in the Mayes and Russell murders, Contreras, who had been an MS-13 associate, was inducted as a member of the MS-13.

Amaya-Sanchez is indicted in connection with the July 14, 2014 murder of Lainez-Murcia, who was shot and killed while sitting in a car outside of his home on Twin Lawns Avenue in Brentwood.  Amaya-Sanchez orchestrated the murder because he believed that Lainez-Murcia was an assassin who had killed MS-13 members in El Salvador.  Amaya-Sanchez, who worked with Lainez-Murcia and knew where he lived, drove other MS-13 members, who were armed with two 9mm handguns, to Lainez-Murcia’s house and dropped them off.  When Lainez-Murcia left the house and got into his car, the other MS-13 members approached and fired multiple times, killing Lainez-Murcia.  The other MS-13 members ran down the block where Amaya-Sanchez picked them up and drove them away.

Further, the indictment charges Castellanos in connection with the June 30, 2015, murder of 16 year-old Cardona-Hernandez, whom the MS-13 members believed was associated with a rival gang.  On the night of the murder, Castellanos and other MS-13 members drove Cardona-Hernandez to Nicoll Avenue in Central Islip, where they shot and killed him using two 9mm handguns.

Finally, Lopez-Alvarado is charged with an April 9, 2013 attempted murder of a man on Benton Place in Bay Shore.  Lopez-Alvarado, who was a new member of the MS-13, and another MS-13 member went out looking to kill a rival gang member in order for Lopez-Alvarado to gain full status in the gang.  When they observed a group of men who they assumed were members of the Bloods, Lopez-Alvarado and his co-conspirator retrieved the same .25 caliber handgun and 20-gauge shotgun used in the Mayes and Russell murders, drove back to Benton Place, approached the group of men and opened fire.  One man was struck and was subsequently transported to a local hospital, where he was treated and survived the shooting.

This is the latest indictment 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 international 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 the Eastern District of New York.  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 in the Eastern District of New York, 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, SCPD, Nassau County Police Department, Nassau County Sheriff’s Department, Suffolk County Probation, Suffolk County Sheriff’s Department, and Rockville Centre Police Department.

The defendants are scheduled to be arraigned this afternoon before United States District Judge Joseph F. Bianco at the federal courthouse in Central Islip.  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 handled by the Office’s Long Island Criminal Section.  Assistant United States Attorneys John J. Durham, Paul G. Scotti, and Raymond A. Tierney are in charge of the prosecution.

The Defendants:

Edwin Amaya-Sanchez (“Strong”)
Age:  29
Brentwood, New York

William Castellanos (“Dizzy” and “Satanico”)
Age:  19
Central Islip, New York

Jhonny Contreras (“Reaper”)
Age:  22
Brentwood, New York

Reynaldo Lopez-Alvarado (“Mente”)
Age:  24
Brentwood, New York

E.D.N.Y. Docket No. 16-403 (JMA/JFB)

This afternoon, following a two week trial, a federal jury in Brooklyn, New York, returned a guilty verdict against Gregorio and Angelo Gigliotti for their operation of a transnational cocaine trafficking operation that stretched from Italy, to Queens and to Costa Rica.  Gregorio Gigliotti was also convicted of possessing a stash of firearms in connection with the operation.  When sentenced by United States District Judge Raymond J. Dearie, the defendants face a maximum sentence of life imprisonment.  Gregorio Gigliotti faces a mandatory minimum sentence of 15 years in prison, and Angelo Gigliotti faces a mandatory minimum sentence of 20 years in prison.     

The verdict was announced by Robert L. Capers, United States Attorney for the Eastern District of New York; Angel M. Melendez, Special Agent-in-Charge, U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI), New York; and Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office.

“This case serves as a powerful example of the impact of international cooperation in combatting criminal organizations whose activities transcend national borders,” stated United States Attorney Capers.  Mr. Capers thanked our law enforcement partners in Italy, including the Prosecutor of the Republic of Reggio Calabria; the Italian National Police (INP), and in particular, the Squadra Mobile of Reggio Calabria and the Servizio Centrale Operativo; the Direzione Centrale per i Servizi Antidroga; and the Direzione Nazionale Antimafia, as well as our law enforcement partners in Costa Rica, including the Organismo de Investigacion Judicial.  Mr. Capers also expressed his gratitude to the U.S. Department of Justice Attaché and the Offices of the HSI and FBI Legal Attaché at the U.S. Embassy in Rome, as well as the FBI Legal Attaché at the U.S. Embassy in Panama City, who coordinated extensive evidence-sharing and coordinated operations.  Mr. Capers also thanked the New York City Police Department and the Drug Enforcement Administration for their assistance in this matter.

“This family run business served more than just pizza to its customers, using store fronts like a pizzeria to import large amounts of cocaine,” said HSI New York Special Agent-in-Charge Melendez.  “Like father like son, both of these defendants will likely be spending the next several years in jail.” 

“This case has sentiments of the famous Pizza Connection case- an organized crime family running a narcotics trafficking ring fronted from a family restaurant in New York.  Today’s guilty verdict matches the past.  We are pleased to say that another organized crime enterprise’s attempt at evading law enforcement has been disrupted.  We thank our law enforcement partners here, in Italy and Costa Rica for their continued cooperation,” stated FBI Assistant Director-in-Charge Rodriguez.           

Evidence presented at trial  - including court-authorized wiretaps and physical surveillance - revealed that Gregorio Gigliotti, together with his wife, owned and operated several businesses in New York City that were used to facilitate their narcotics-trafficking operation, including Cucino Amodo Mio, an Italian restaurant and pizzeria in Corona, Queens, and Fresh Farm Produce Export Corp., an import company.  Their son, Angelo Gigliotti, played the role of Gregorio’s trusted assistant, including handling the drug trafficking operation when Gregorio was out of the country.  In October 2014, law enforcement intercepted a shipment of cassava (a starchy root also referred to as yucca) that was shipped to the United States from Costa Rica and bound for Fresh Farm Produce Export Corp. in New York.  The shipment was found to contain approximately 40 kilograms of cocaine secreted inside cardboard boxes of cassava.  Earlier, Gigliotti’s wife traveled to Costa Rica with more than $360,000 in cash that she delivered to the sources of supply.  In September 2014, Franco Fazio, a relative and Italian national, traveled from Italy to New York and then to Costa Rica to deliver another $170,000 in cash to the sources of supply. 

In December 2014, law enforcement intercepted a second shipment of cassava bound for Fresh Farm Produce Export Corp. in New York that had also been shipped from Costa Rica and seized approximately 15 kilograms of cocaine secreted within the cardboard boxes of the produce.  Prior to the arrival of this shipment of cocaine, Fazio had made two additional trips to Costa Rica to meet with the sources of supply.

The Gigliotti defendants were arrested on March 11, 2015, in New York.  That same day, law enforcement searched Cucino Amodo Mio as well as Gregorio and his wife’s residence.  In the restaurant they seized one 12 gauge shotgun, one loaded .357 magnum Trooper revolver, one loaded .22 caliber Colt pistol, one.38 caliber Charter Arms revolver, one 9 mm Keltec pistol, one .762 Czech pistol, one .38 caliber Derringer that had a defaced serial number, ammunition magazines, loose ammunition, two handgun holsters, brass knuckles, more than $100,000 in cash, and a drug ledger detailing the disbursement of money made on the sale of narcotics.  In the Gigliotti residence, agents recovered a loaded handgun and more than $18,000 in cash.

The charges in the indictment against co-defendants Eleonora Gigliotti and Franco Fazio remain pending.  These charges are merely allegations, and these defendants are presumed innocent unless and until proven guilty. 

The government’s case is being prosecuted by the Office’s Organized Crime and Gangs Section.  Assistant United States Attorneys Margaret E. Gandy and Keith D. Edelman are in charge of the prosecution.

The Defendants:

GREGORIO GIGLIOTTI
Age:  60
Queens, New York

ANGELO GIGLIOTTI
Age:  36
Queens, New York

E.D.N.Y. Docket No. 15-CR-204 (S-2) (RJD)

Anthony Christian was sentenced today to life in prison by United States District Judge Eric N. Vitaliano at the federal courthouse in Brooklyn.  Christian was convicted at trial in October 2014 on charges of racketeering – including the murder of Jerome Estella and three murder conspiracies as racketeering acts – as well as firearms possession and multiple counts based on his trafficking in crack cocaine.  The defendant faced a mandatory life sentence for his role in the Estella murder.  The charges arose out of the defendant’s long-time dominance of a drug crew that operated in the Park Hill housing complex in the Clifton neighborhood of Staten Island.

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

As proven at trial, Anthony Christian, also known as “Nitty,” and his brother Harvey Christian led a violent narcotics distribution ring in Park Hill from 1991 to 2011.  In the mid-1990s, the Christian brothers and their associates sought to take control of more drug territory within Park Hill.  To achieve this, they engaged in massive gun battles for months.  During one of the battles, in May 1995, law enforcement recovered 77 shell casings inside a residential building, outside on the street, and on the roof.  In 1999, Anthony Christian ordered another member of the enterprise to murder a rival drug dealer named Corey Brooker.  In the course of looking for Brooker, the enterprise member had a dispute with Brooker’s associate, Jerome Estella.  Anthony Christian then authorized the other enterprise member to murder Estella, and provided him with the 9 millimeter handgun he used to carry out the murder.

In the year before the Christian brothers’ arrests in 2011, multiple search warrants and arrests related to members of the organization and their associates were executed in and around Park Hill and elsewhere in New York.  These searches and arrests resulted in the seizure of firearms and ammunition, including a Mac-11 pistol, as well as large quantities of crack and powder cocaine.  During a search of the Christian brothers’ apartment in the Park Hill housing complex in February 2010, the New York City Police Department (NYPD) recovered multiple bullet-proof vests, crack-cocaine, and marijuana.

Harvey Christian, who was also convicted of all counts at trial in October 2014, faces a mandatory minimum 40-year prison term and is awaiting sentencing.

Mr. Capers extended his grateful appreciation to the FBI, the NYPD, and the Richmond County District Attorney’s Office.

The government’s case is being prosecuted by Assistant United States Attorneys Allon Lifshitz, Richard M. Tucker, and Kevin Trowel.

The Defendant:

ANTHONY CHRISTIAN
Age:  43
Staten Island, New York

E.D.N.Y. Docket No. 11-CR-425

Earlier today, Nestor Marcelino Delacruz Santana (Delacruz) was arraigned on an indictment before United States District Judge Nicholas G. Garaufis in Brooklyn federal court.  Delacruz is charged with the 2003 firearm-related homicide of Francisco De Orbe. 

The charges were announced by Robert L. Capers, United States Attorney for the Eastern District of New York, and James J. Hunt, Special Agent-in-Charge, Drug Enforcement Administration (DEA), New York Division.  The investigation was led by the DEA’s New York Drug Enforcement Task Force comprising agents and officers from the DEA, New York City Police Department, and the New York State Police.

As detailed in the indictment and other court filings by the government, Delacruz was an associate of a violent New York-based robbery crew that operated in Philadelphia and elsewhere.  The crew targeted drug dealers who had access to large sums of narcotics and drug proceeds.  Crew members would kidnap their intended victims and torture them until they disclosed the location of their drugs and cash, which the crew then stole. 

On or about May 9, 2003, in Frankford, Pennsylvania, a suburb of Philadelphia, Delacruz and other crew members kidnapped and tortured De Orbe until he revealed the location of his drugs and cash.  The crew then stole several thousand dollars in cash and more than a kilogram of cocaine from De Orbe.

Having predetermined that De Orbe would be killed after he was robbed, at Delacruz’s direction one of his co-conspirators injected De Orbe with an overdose of heroin.  When that failed to kill De Orbe, he was shot in the neck, and his body was discarded.   

“As charged in the indictment, Delacruz was a member of a vicious robbery crew that hunted down and murdered its victims for drugs and money,” stated United States Attorney Capers.  “Law enforcement pursued him for nearly a decade, demonstrating our commitment to ridding the streets of our communities from the scourge of drug trafficking and its related violence.”

DEA Special Agent-in-Charge Hunt stated, “A little more than a kilogram of cocaine and thousands of dollars was the price Delacruz put on his victim’s head.  This historical investigation brought a brutal killer to justice after 13 years on the lam.  I commend the men and women of the New York Drug Enforcement Task Force for their dutiful commitment to this investigation.”

“The NYPD will continue to investigate and arrest those who carry out this type of brazen violence that threatens the public safety,” said NYPD Police Commissioner Bratton.  “With the hard work of the U.S. Attorney’s Office for the Eastern District of New York and the Drug Enforcement Task Force, we will continue to root out organized drug trafficking and the inevitable violence that follows.”

NYSP Superintendent Beach stated, “The work of the New York Drug Enforcement Task Force and our partners has resulted in a dangerous man being taken off the streets.  This man and his associates are a prime example of the dangerous crimes that are associated with drug trafficking.  State Police and our partners will continue to work together to rid our communities of these dangerous substances, and the violence that comes with them.”

The charges in the indictment are merely allegations, and Delacruz is presumed innocent unless and until proven guilty.  If convicted, he faces a maximum penalty of life imprisonment, or possibly the death penalty.

The government’s case is being handled by the Office’s International Narcotics and Money Laundering Section.  Assistant United States Attorneys Julia Nestor and Craig R. Heeren are in charge of the prosecution.

The Defendant:

NESTOR MARCELINO DELACRUZ SANTANA  
Philadelphia, Pennsylvania
Age: 44

EDNY Docket No. 16-CR-337

Alexander Fishenko, a dual citizen of the United States and Russia, was sentenced today to 10 years in prison and ordered to forfeit more than $500,000 in criminal proceeds following his guilty plea on Sept. 9, 2015 to a 19-count indictment.  Fishenko pleaded guilty to acting as an agent of the Russian government within the United States without prior notification to the Attorney General, conspiring to export and illegally exporting controlled microelectronics to Russia, conspiring to launder money and obstruction of justice. 

The sentence was announced by Assistant Attorney General for National Security John P. Carlin and U.S. Attorney Robert L. Capers of the Eastern District of New York.

Fishenko, 10 other individuals and two corporations – ARC Electronics Inc. (ARC) and Apex System LLC (Apex) – were indicted in October 2012.  Five defendants previously pleaded guilty, three individuals were convicted in October 2015 after trial and three individuals remain at large.  ARC is now defunct and Apex, a Russian-based procurement firm, failed to appear in court.   

“Alexander Fishenko illegally shipped millions of dollars of high-technology products to Russian military affiliated actors in clear violation of United States law,” said Assistant Attorney General Carlin.  “Export laws exist as an important part of our national security framework and protecting national assets from ending up in the hands of our potential adversaries is one of our highest priorities.”   

“U.S. export laws exist to check the proliferation overseas of dangerous military technologies but Fishenko, while working illegally as an agent of the Russian government, flouted these laws in order to line his pockets,” stated U.S. Attorney Capers.  “Today’s sentence sends a powerful message of deterrence to others, who like Fishenko and his co-conspirators, would be willing to sacrifice the national security of the United States for their personal financial gain.” 

In 1998, Fishenko founded ARC and also served as an executive of Apex.  Between approximately October 2008 and October 2012, Fishenko led a conspiracy to obtain advanced, technologically cutting-edge microelectronics from manufacturers and suppliers located within the United States and to export those high-tech goods to in Russia while evading the government licensing system set up to control such exports.  These commodities have applications and are frequently used in a wide range of military systems, including radar and surveillance systems, missile guidance systems and detonation triggers.  Russia does not domestically produce many of these sophisticated goods.  Between 2002 and 2012, ARC shipped approximately $50 million worth of microelectronics and other technologies to Russia.  ARC’s largest clients – including Apex subsidiaries – were certified suppliers of military equipment for the Russian Ministry of Defense. 

To induce manufacturers and suppliers to sell these high-tech goods to ARC and to evade applicable export controls, Fishenko and his co-conspirators provided false end-user information in connection with the purchase of the goods, concealed the fact that they were exporters and falsely classified the exported goods on export records submitted to the Department of Commerce. 

Ultimate recipients of ARC’s products included a research unit for the Russian FSB internal security agency, a Russian entity that builds air and missile defense systems and another that produces electronic warfare systems for the Russian Ministry of Defense.

Today’s sentencing took place before Senior U.S. District Judge Sterling Johnson Jr. of the Eastern District of New York.

Assistant Attorney General Carlin joined U.S. Attorney Capers in extending his grateful appreciation to the FBI’s Houston Field Office and the Department of Commerce for their leading roles in the investigation.

The government’s case is being handled by the U.S. Attorney’s Office’s National Security & Cybercrime Section.  The case is being prosecuted by Assistant U.S. Attorneys Richard M. Tucker and Una A. Dean of the Eastern District of New York and Trial Attorney David Recker of the National Security Division’s Counterintelligence and Export Control Section.  Assistant U.S. Attorney Claire Kedeshian of the Eastern District of New York is handling the forfeiture aspects of the case.

Earlier today, Alexander Fishenko, a dual citizen of the United States and Russia, was sentenced to 120 months’ imprisonment and ordered to forfeit more than $500,000 in criminal proceeds following his guilty plea on September 9, 2015 to a nineteen-count indictment.  Fishenko was charged with acting as an agent of the Russian government within the United States without prior notification to the Attorney General, conspiring to export, and illegally exporting, controlled microelectronics to Russia, conspiring to launder money, and obstruction of justice. 

Fishenko, ten other individuals, and two corporations – ARC Electronics, Inc. (ARC) and Apex System, L.L.C. (Apex) – were indicted in October 2012.  Five individual defendants previously pleaded guilty, three individuals were convicted in October 2015 after trial, and three remain at large.  ARC is now defunct, and Apex, a Russian-based procurement firm, failed to appear in court. 

The sentence was announced by Robert L. Capers, United States Attorney for the Eastern District of New York, and John P. Carlin, Assistant Attorney General for National Security.

“U.S. export laws exist to check the proliferation overseas of dangerous military technologies, but Fishenko, while working illegally as an agent of the Russian government, flouted these laws in order to line his pockets,” stated United States Attorney Capers.  “Today’s sentence sends a powerful message of deterrence to others, who like Fishenko and his co-conspirators, would be willing to sacrifice the national security of the United States for their personal financial gain.”  Mr. Capers extended his grateful appreciation to the Federal Bureau of Investigation, Houston Field Office and the Department of Commerce for their leading roles in the investigation.

“Alexander Fishenko illegally shipped millions of dollars of high-technology products to Russian military affiliated actors in clear violation of United States law,” said Assistant Attorney General Carlin.  “Export laws exist as an important part of our national security framework and protecting national assets from ending up in the hands of our potential adversaries is one of our highest priorities.”   

In 1998, Fishenko founded ARC, and he also served as an executive of Apex.   Between approximately October 2008 and October 2012, Fishenko led the conspiracy to obtain advanced, technologically cutting-edge microelectronics from manufacturers and suppliers located within the United States and to export those high-tech goods to in Russia, while evading the government licensing system set up to control such exports.  These commodities have applications and are frequently used in a wide range of military systems, including radar and surveillance systems, missile guidance systems, and detonation triggers.  Russia does not produce many of these sophisticated goods domestically.  Between 2002 and 2012, ARC shipped approximately $50,000,000 worth of microelectronics and other technologies to Russia.  ARC’s largest clients – including Apex subsidiaries – were certified suppliers of military equipment for the Russian Ministry of Defense. 

To induce manufacturers and suppliers to sell these high-tech goods to ARC, and to evade applicable export controls, Fishenko and his co-conspirators provided false end user information in connection with the purchase of the goods, concealed the fact that they were exporters, and falsely classified the goods they exported on export records submitted to the Department of Commerce. 

Ultimate recipients of ARC’s products included a research unit for the Russian FSB internal security agency, a Russian entity that builds air and missile defense systems and another that produces electronic warfare systems for the Russian Ministry of Defense.

Today’s sentencing took place before United States District Senior Judge Sterling Johnson, Jr.

The government’s case is being handled by the Office’s National Security & Cybercrime Section.  Assistant United States Attorneys Richard M. Tucker and Una A. Dean, as well as Trial Attorney David Recker from the Department of Justice’s Counterintelligence and Export Control Section, are in charge of the prosecution.  Assistant United States Attorney Claire Kedeshian is handling the forfeiture aspects of the case.

The Defendant:

ALEXANDER FISHENKO
Age:  50
Houston, Texas                                       

E.D.N.Y. Docket No. 12 CR 626 (SJ)

Charges Also Unsealed Against Former Head of Foreign Exchange Cash-Trading Desk for Europe, Middle East and Africa

The head of global foreign exchange cash trading at HSBC Bank plc, a subsidiary of HSBC Holdings plc (collectively HSBC), and HSBC’s former head of foreign exchange cash trading for Europe, the Middle East and Africa were charged with conspiring to defraud a client of HSBC through a scheme commonly referred to as “front running.” 

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Robert L. Capers of the Eastern District of New York, Acting Inspector General Frederick W. Gibson of the Federal Deposit Insurance Corporation (FDIC) and Assistant Director in Charge Paul M. Abbate of the FBI’s Washington Field Office made the announcement.          

Mark Johnson, 50, a U.K. citizen and U.K. and U.S. resident, and Stuart Scott, 43, a U.K. citizen and resident, were charged by complaint with conspiracy to commit wire fraud.  Johnson was arrested last night at JFK International Airport in Queens, New York, and will be arraigned later today before U.S. Magistrate Judge Lois Bloom of the Eastern District of New York.

“The defendants allegedly betrayed their client’s confidence, and corruptly manipulated the foreign exchange market to benefit themselves and their bank,” said Assistant Attorney General Caldwell.  “This case demonstrates the Criminal Division’s commitment to hold corporate executives, including at the world’s largest and most sophisticated institutions, responsible for their crimes.”

“As alleged, the defendants placed personal and company profits ahead of their duties of trust and confidentiality owed to their client, and in doing so, defrauded their client of millions of dollars,” said U.S. Attorney Capers.  “When questioned by their client about the higher price paid for their significant transaction, the defendants wove a web of lies designed to conceal the truth and divert attention away from their fraudulent trades.  The charges and arrest announced today reflect our steadfast commitment to hold accountable corporate executives and licensed professionals who use their positions to fraudulently enrich themselves.”

“The Federal Deposit Insurance Corporation Office of Inspector General is pleased to join the Department of Justice and our law enforcement colleagues in announcing this arrest,” said Acting Inspector General Gibson.  “Our collective efforts help ensure public confidence in the financial markets.  It is critically important to hold individuals accountable for their actions, particularly those who abuse their positions of public trust.  We will continue to pursue justice for those involved as this case moves forward.

“These individuals are accused of defrauding clients by misusing confidential information to manipulate currency prices for the benefit of the bank and themselves,” said Assistant Director in Charge Abbate.  “The FBI will continue to work aggressively with our partners to prevent, investigate and prosecute criminal fraud in the financial markets.”

According to the complaint, in November and December 2011, Johnson and Scott misused information provided to them by a client that hired HSBC to execute a foreign exchange transaction related to a planned sale of one of the client’s foreign subsidiaries.  HSBC was selected to execute the foreign exchange transaction – which was going to require converting approximately $3.5 billion in sales proceeds into British Pound Sterling – in October 2011.  HSBC’s agreement with the client required the bank to keep the details of the client’s planned transaction confidential.  Instead, Johnson and Scott allegedly misused confidential information they received about the client’s transaction.  On multiple occasions, Johnson and Scott allegedly purchased Pound Sterling for HSBC’s “proprietary” accounts, which they held until the client’s planned transaction was executed.  The complaint alleges that, as part of the scheme, both Johnson and Scott made misrepresentations to the client about the planned foreign exchange transaction that concealed the self-serving nature of their actions.  Specifically, the complaint alleges that Johnson and Scott caused the $3.5 billion foreign exchange transaction to be executed in a manner that was designed to spike the price of the Pound Sterling, to the benefit of HSBC and at the expense of their client.  In total, HSBC allegedly generated profits of roughly $8 million from its execution of the FX Transaction for the Victim Company, including profits generated from the front running conduct by Johnson, Scott, and other traders whom they directed.

The investigation is being conducted by the FDIC’s Office of Inspector General and the FBI’s Washington Field Office.  Trial Attorney Melissa Aoyagi and Senior Litigation Counsel Carol Sipperly of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Jacquelyn Kasulis of the Eastern District of New York’s Business and Securities Fraud Section are prosecuting the case.

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

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. 

BROOKLYN, N.Y. – The head of global foreign exchange cash trading at HSBC Bank plc, a subsidiary of HSBC Holdings plc (collectively HSBC), and HSBC’s former head of foreign exchange cash trading for Europe, the Middle East and Africa, were charged with conspiring to defraud a client of HSBC through a scheme commonly referred to as “front running.”

U.S. Attorney Robert L. Capers of the Eastern District of New York, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Acting Inspector General Frederick W. Gibson of the Federal Deposit Insurance Corporation (FDIC), and Assistant Director in Charge Paul M. Abbate of the FBI’s Washington Field Office, made the announcement.

Mark Johnson, 50, a U.K. citizen and U.K. and U.S. resident, and Stuart Scott, 43, a U.K. citizen and resident, were charged by complaint with conspiracy to commit wire fraud.  Johnson was arrested last night at JFK International Airport in Queens, New York, and will be arraigned later today before U.S. Magistrate Judge Lois Bloom of the Eastern District of New York.

“As alleged, the defendants placed personal and company profits ahead of their duties of trust and confidentiality owed to their client, and in doing so, defrauded their client of millions of dollars,” stated United States Attorney Capers.  “When questioned by their client about the higher price paid for their significant transaction, the defendants wove a web of lies designed to conceal the truth and divert attention away from their fraudulent trades.  The charges and arrest announced today reflect our steadfast commitment to hold accountable corporate executives and licensed professionals who use their positions to fraudulently enrich themselves.”

“The defendants allegedly betrayed their client’s confidence, and corruptly manipulated the foreign exchange market to benefit themselves and their bank,” said Assistant Attorney General Caldwell.  “This case demonstrates the Criminal Division’s commitment to hold corporate executives, including at the world’s largest and most sophisticated institutions, responsible for their crimes.”

“The Federal Deposit Insurance Corporation Office of Inspector General is pleased to join the Department of Justice and our law enforcement colleagues in announcing this arrest,” said FDIC Acting Inspector General Gibson. “Our collective efforts help ensure public confidence in the financial markets.  It is critically important to hold individuals accountable for their actions, particularly those who abuse their positions of public trust.  We will continue to pursue justice for those involved as this case moves forward.”

“These individuals are accused of defrauding clients by misusing confidential information to manipulate currency prices for the benefit of the bank and themselves,” said Assistant Director in Charge Abbate.  “The FBI will continue to work aggressively with our partners to prevent, investigate and prosecute criminal fraud in the financial markets.”

According to the complaint, in November and December 2011, Johnson and Scott misused information provided to them by a client that hired HSBC to execute a foreign exchange transaction related to a planned sale of one of the client’s foreign subsidiaries.  HSBC was selected to execute the foreign exchange transaction – which was going to require converting approximately $3.5 billion in sales proceeds into British Pound Sterling – in October 2011.  HSBC’s agreement with the client required the bank to keep the details of the client’s planned transaction confidential.  Instead, Johnson and Scott allegedly misused confidential information they received about the client’s transaction.  On multiple occasions, Johnson and Scott allegedly purchased Pound Sterling for HSBC’s “proprietary” accounts, which they held until the client’s planned transaction was executed.  The complaint alleges that, as part of the scheme, both Johnson and Scott made misrepresentations to the client about the planned foreign exchange transaction that concealed the self-serving nature of their actions.  Specifically, the complaint alleges that Johnson and Scott caused the $3.5 billion foreign exchange transaction to be executed in a manner that was designed to spike the price of the Pound Sterling, to the benefit of HSBC and at the expense of their client.  In total, HSBC allegedly generated profits of roughly $8,000,000 from its execution of the FX Transaction for the Victim Company, including profits generated from the front running conduct by Johnson, Scott, and other traders whom they directed. 

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The investigation is being conducted by the FDIC’s Office of Inspector General and the FBI’s Washington Field Office.  Trial Attorney Melissa Aoyagi and Senior Litigation Counsel Carol Sipperly of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Jacquelyn Kasulis of the Eastern District of New York’s Business and Securities Fraud Section are prosecuting the case.

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

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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.

On Friday, July 15, 2016, a federal grand jury in Brooklyn returned a seven-count indictment charging Wafa Abboud, the former executive director of a charity that provides services to individuals with developmental disabilities, and Marcelle P. Bailey and Rami Misbah Taha, with embezzling and laundering hundreds of thousands of dollars from that charity for Abboud’s  personal use.  The defendants were also charged with bank fraud in connection with Abboud’s purchase of her residence in Merrick, New York.                    

The charges were announced by Robert L. Capers, United States Attorney for the Eastern District of New York; Eric Schneiderman, New York State Attorney General; and Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office.

As is alleged in the federal indictment, between January 2011 and her termination in May 2016, Abboud served as the Executive Director of Human First, Inc. (Human First), a not-for-profit social services provider based in Nassau County, New York, that provided services to children and young adults with autism and other development disabilities throughout the metropolitan New York City area.

The government’s investigation revealed that, during the relevant period, Abboud directed Human First to pay approximately $900,000 in purported consulting fees to a company controlled by her co-defendant, Bailey.  Abboud, in turn, used hundreds of thousands of dollars of these funds to pay her personal expenses, including more than $114,000 in personal credit card debt, which included charges for cosmetic surgery, family vacations, jewelry, meals, and spa treatments.  She also used the funds to pay property taxes on her Merrick residence and to make large international wire transfers.

In December 2014, Abboud purchased the Merrick residence for $1.3 million, making a down payment of $340,000.  In the months prior to that purchase, she authorized hundreds of thousands of dollars in payments from Human First to companies controlled by her co-defendant Taha, payments that were purportedly for renovation work being performed on Human First owned properties.  Instead, those funds were re-routed to Abboud and used to fund the down payment on her residence.  Similarly, between April and December 2015, Abboud directed Human First to pay more than $400,000 to Taha-controlled entities, the vast majority of which were then transferred to a construction company as a payment for renovations on Abboud’s residence. 

Abboud, Bailey, and Taha are also charged with conspiracy to commit bank fraud in connection with false statements they made to secure the $1 million mortgage on Abboud’s residence.

United States Attorney Capers stated, “Embezzlement of public funds meant to aid individuals with developmental disabilities impacts some of the most vulnerable members of our community.  With this indictment, we serve notice that those who engage in such crimes will be vigorously investigated and held to account.”   Mr. Capers extended his grateful appreciation to the New York State Office of the Inspector General for its assistance.

“The crimes alleged by state and federal prosecutors are troubling, particularly because they involve funds intended to benefit the developmentally disabled community,” said Attorney General Schneiderman.  “When individuals embezzle funds intended for a charitable purpose it undermines the mission of the charity and harms all donors and honest non-profit organizations.”

“As alleged, Wafa Abboud embezzled and laundered hundreds of thousands of dollars from a charity she was entrusted to run over a time period of five years.  Abboud used co-conspirators to help her steal funds that were intended to help children with disabilities; instead the funds were used to finance a lavish lifestyle.  Corruption is corruption wherever it exists.  The FBI is committed to investigating and rooting it out, whether it happens in a public office or a nonprofit organization,” stated FBI Assistant Director-in-Charge Rodriguez.

The charges announced today are merely allegations, and the defendants are presumed innocent unless and until proven guilty.  If convicted of the embezzlement charges, the defendants face a maximum sentence of 10 years’ imprisonment.  If convicted of conspiracy to embezzle public funds, the defendants face a maximum sentence of five years’ imprisonment.  If convicted of bank fraud or conspiracy to commit bank fraud, the defendants face a maximum sentence of 30 years.  If convicted of conducting an unlawful monetary transaction over $10,000, the defendants Abboud and Taha face a maximum sentence of 10 years.

The government’s case is being prosecuted by the Office’s Public Integrity Section.  Assistant United States Attorneys Robert Polemeni and Nathan Reilly, along with Special Assistant United States Attorney John Chiara (Special Counsel, Office of the New York State Attorney General) are in charge of the prosecution.

The Defendants:

WAFA ABBOUD
Age: 48
Merrick, New York

MARCELLE P. BAILEY
Age: 49
Floral Park, New York

RAMI MISBAH TAHA
Age: 39
Bronx, New York

E.D.N.Y. Docket No. 16-CR-396