Eastern District of New York

Today, following three weeks of trial, a federal jury in Central Islip, New York returned a verdict convicting MS-13 street gang member Adalberto Ariel Guzman, also known as “Gringo,” on federal criminal charges, including murder, conspiracy to commit murder, and firearms offenses, in connection with the execution-style murders of a mother and her two year-old son.  The defendant is facing a sentence of life in prison as a result of his conviction.  Sentencing is scheduled for January 9, 2014, before United States District Judge Joseph F. Bianco. 

The conviction was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office; and Thomas V. Dale, Commissioner of the Nassau County Police Department.

At trial, the government proved that the defendant Adalberto Ariel Guzman carried out the execution-style murders of Vanessa Argueta, a 19 year-old woman, and Diego Torres, her two year-old son, in Central Islip, New York, on February 5, 2010.  The bodies of Argueta and Torres were found in a secluded wooded area in Central Islip.  Argueta had been shot in the head and chest, and Torres had been shot twice in the head.  The evidence introduced at trial established that Guzman fired the fatal shot to Torres’s head, and after committing the murders, he and two of his co-conspirators fled to El Salvador.  Guzman was arrested on May 17, 2010 in Miami, Florida, when he attempted to return to the United States. 

Today’s conviction is the third that the government has obtained in connection with the Argueta and Torres murders.  Heriberto Martinez, also known as “Boxer,” was convicted in March 2013, following a six-week trial, and Rene Mendez Mejia, also known as “Zorro,” pled guilty to the murders in June 2011. 

Guzman’s conviction 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 street gang comprised primarily of immigrants from El Salvador, Honduras and Guatemala.  With numerous branches, or “cliques,” the MS-13 is the largest street gang on Long Island.  Since 2002, more than 200 MS-13 members, including more than two dozen clique leaders, have been convicted on federal felony charges in the Eastern District of New York.  More than 100 of those MS-13 members have been convicted on federal racketeering charges.  Since 2010 alone, this Office has convicted more than 30 members of the MS-13 on charges relating to their participation in one or more murders.  These prosecutions are the product of investigations led by the FBI’s Long Island Gang Task Force, comprising agents and officers of the FBI, Nassau County Police Department, Nassau County Sheriff’s Department, Suffolk County Probation, Suffolk County Sheriff’s Department, Rockville Centre Police Department, and Suffolk County Police Department.

“Guzman and his co-conspirators shot a young mother and her toddler in cold blood.  Her crime in their eyes -- showing “disrespect” to their vicious gang.  Her child’s -- simply being with her when the defendant and his cronies decided that she could no longer live.  Few other acts illustrate so clearly the heartless nature of this criminal enterprise known as MS-13.  Guzman will now be held to account for his allegiance to this band of killers,” stated United States Attorney Lynch.  Ms. Lynch extended her grateful appreciation to each of the law enforcement agencies for their assistance in this case.

The government’s case is being prosecuted by Assistant United States Attorneys John J. Durham and Raymond A. Tierney.

The Defendant:

ADALBERTO ARIEL GUZMAN, also known as “Gringo”
Central Islip, New York
Age: 21

Earlier today, at the federal courthouse in Central Islip, New York, Jay Lockett Sears, a resident of East Moriches, New York, pled guilty before United States District Judge Denis R. Hurley to possessing child pornography.

The guilty plea was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; George Venizelos, Assistant Director-in-Charge of the Federal Bureau of Investigation, New York Field Office; and Edward Webber, Commissioner, Suffolk County Police Department (“SCPD”). 

According to court pleadings, Sears created hundreds of images of child pornography by taking photographs of children in public settings, such as beach club parties and other events, and then placing the heads of the children onto images of adult bodies engaged in sexual activity. Some of the images included pictures of Sears’ face pasted onto the bodies of other males so as to appear as if he were having sexual relations with children.

Sears came to the attention of the SCPD Computer Crimes Squad on January 11, 2013, after hundreds of child pornography images were found in a dumpster outside of the defendant’s East Moriches townhouse apartment building.  The images had been discarded as Sears prepared to move out of his apartment.

“Sears victimized children by using their innocent faces to create child pornography.  He then dragged them further into his aberrant fantasy world by adding his own images to these pictures.  Such exploitation of children is one of our most important law enforcement priorities and will not be tolerated,” stated United States Attorney Lynch.

At sentencing on January 17, 2014, Sears faces up to 10 years in prison.

Parents who believe that their children may have been the victims of persons involved in child pornography should contact the Suffolk County Computer Crimes Squad at (631) 852-6279, or the Federal Bureau of Investigation at (631) 501-8600.

The government’s case is being prosecuted by Assistant United States Attorney Allen Bode.

The Defendant

Name: JAY LOCKETT SEARS
Age: 74

Federal agents have arrested REX MARALIT, a New York City Police Officer assigned to police headquarters in Manhattan, and his brother WILFREDO MARALIT, a Customs and Border Protection Officer assigned to Los Angeles International Airport, pursuant to arrest warrants issued in the Eastern District of New York.  These two men, along with a third brother, ARIEL MARALIT, are charged with conspiring to violate the Arms Export Control Act by exporting high-powered weapons from the United States to the Philippines without a license from the U.S. State Department, and with conspiring to engage in unlicensed firearms dealing.1   REX MARALIT will make his initial appearance at the United States Courthouse, 225 Cadman Plaza East, Brooklyn, New York at 11:00 a.m. in courtroom 2A.  WILFREDO MARALIT will appear at the United States Courthouse, 411 West Fourth Street, Santa Ana, California at 2:00 p.m. in Room 1053, and is expected to be removed to the Eastern District of New York to face the charges.  The government is coordinating with foreign authorities regarding the apprehension of ARIEL MARALIT.

The arrests were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; James T. Hayes, Jr., Special Agent-in-Charge, U.S. Immigration and Customs Enforcement’s (ICE), Homeland Security Investigations (HSI), New York; Craig W. Rupert, Special Agent-in-Charge of the Defense Criminal Investigative Service (DCIS); Joseph Anarumo, Jr., Special Agent-in-Charge, Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), New York Field Division; and Raymond W. Kelly, Commissioner, New York City Police Department (NYPD).

According to the complaint, between January 2009 and March 2013, the defendants engaged in a scheme to smuggle high-powered assault rifles, sniper rifles, pistols and firearm accessories from the United States to the Philippines, where they were sold to overseas customers.  ARIEL MARALIT, who resides in the Philippines, identified customers and sought the assistance of his brothers, both American law enforcement officers, to purchase and ship the weapons for resale overseas.  In response to customer orders from the Philippines, the defendants located weapons advertised on firearms-brokering websites and made arrangements to purchase the guns through dealers in the United States.  They then disassembled the weapons and smuggled them out of the United States in disguised shipments.

According to the complaint, none of the defendants obtained export licenses or federal firearms licenses in connection with the weapons they sold.  Instead, they used their knowledge of firearms and their status as law enforcement officers to engage in an illegal international arms trafficking business.  On several occasions, the defendants used their law enforcement credentials to obtain discounts on weapons from U.S.-based gun dealers.  For example, in an email dated June 21, 2012, REX MARALIT asked a U.S.-based gun dealer whether the dealer had a Special Operations Combat Assault Rifle (“SCAR”) in stock.  Upon learning that the dealer had such a weapon available, REX MARALIT requested that the dealer hold the high-powered assault rifle until the following Monday, adding, “One other question do you give discounts to LEO, I am an active PO with the NYPD, please advise.”  “LEO” is a common abbreviation for “Law Enforcement Officer,” and “PO” refers to “Police Officer.”

The powerful and dangerous firearms that the defendants illegally exported and sold include the Barrett M82A1 .50 caliber semi-automatic rifle, the SCAR, and the FN Herstal 5.7mm semi-automatic pistol.  For example, the Barrett M82A1 .50 caliber semi-automatic rifle is a long-range, weapon capable of penetrating body armor, exterior walls of buildings, and even aircraft.  The Barrett rifle is favored by specialized military forces due to its extraordinary power and range.  The SCAR is a military rifle designed in 2004 at the request of the United States Special Operations Command for a new family of assault rifles to be used by U.S. Special Forces.  The FN Herstal 5.7mm semi-automatic pistol is a high-capacity, battlefield weapon capable of firing a projectile that can penetrate body armor.

The Arms Export Control Act requires exporters of firearms to first obtain the approval of the United States State Department before shipping weapons overseas.  The United States Munitions List requires export licenses for firearms such as the military-style assault rifles, sniper rifles, and semi-automatic handguns allegedly exported by the defendants.  Similarly, dealing in firearms is regulated by the ATF, which requires gun dealers to first obtain a federal firearms license before engaging in such a business.

“As alleged, rather than upholding and enforcing the law as they had sworn to do, these defendants made international gunrunning a family business. The brothers used their knowledge of the law to circumvent it, and sent dangerous weapons overseas without regard for the ultimate destination or targets,” stated U.S. Attorney Lynch.  “Criminal conduct by police officers, federal agents, and their confederates cannot be tolerated and will be met with the full force of the law.”  Ms. Lynch expressed her grateful appreciation to HSI, DCIS, ATF and the NYPD’s Internal Affairs Bureau, which worked closely together to investigate the case, and to the U.S. Attorney’s Office for the Central District of California, and the U.S. Attorney’s Office for the District of New Jersey for their assistance.

“The defendants are alleged to have illegally exported some of the world’s most powerful firearms with complete disregard as to who the end user would be,” said James T. Hayes Jr., Special Agent-in-Charge of HSI New York. “HSI and our law enforcement partners both locally and around the globe are committed to upholding the exportation laws of the United States to ensure that these deadly weapons do not end up in the wrong hands.”

Special Agent-in-Charge Rupert stated, “As alleged, the trafficking in weapons from the U.S. to foreign entities in violation of U.S. law is a wholly unacceptable crime, but when committed by trusted civil servants charged with public safety, the crime is even more deplorable.  DCIS, the law enforcement arm of the Office of the Inspector General, Department of Defense, is dedicated to preventing the exportation of controlled U.S. military technology and to exposing U.S. public servants who violate their oath and the public trust.  The DCIS New York Resident Agency and our partner agencies are commended for their continuing dedication to this pursuit.”

Special Agent-in-Charge Anarumo stated, “The alleged criminal acts carried out by these defendants, including two law enforcement officers, are reprehensible and inexcusable.  We must not allow the public trust and confidence in those sworn to protect and serve our communities to be compromised.  By allegedly misusing their positions as sworn officers of the law in an ill-conceived scheme to illegally acquire and traffic firearms, now, the sad irony is that the laws once enforced by these defendants will be the very same laws used to prosecute them.”

 “The vast majority of police officers do outstanding work to protect New York City and a case like this is disheartening to the entire department,” Commissioner Kelly said. “The experienced personnel assigned to our Internal Affairs Bureau engaged in an in-depth investigation and worked closely with all of the outside agencies involved.”

At sentencing, the defendants face up to 5 years in prison on each charge, forfeiture, and a fine of up to $250,000.

The government’s case is being prosecuted by Assistant United States Attorneys Seth DuCharme and Sam Nitze, with assistance from Trial Attorney David Recker of the Department of Justice Counterespionage Section.

The Defendants:

ARIEL MARALIT
The Philippines
Age: 43

REX G. MARALIT
Lawrenceville, New Jersey
Age: 44

WILFREDO MARALIT
Garden Grove, California
Age: 48

_____________________________

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

Maralit Charging Documents and Exhibits: Maralit.Complaint & Affidavit.pdf
Maralit.Detention letter.pdf
Maralit.Exhibits to Detention Letter.pdf

BROOKLYN, NY – Brooklyn resident Gregory Konoplya, 57, pleaded guilty today in federal court in the Eastern District of New York to conspiracy to pay and receive illegal health care kickback payments, in connection with his role in a $13 million health care fraud scheme.  Konoplya is the fourth defendant to plead guilty in connection with the scheme, which was based at the Cropsey Medical Care PLLC clinic in Bensonhurst, Brooklyn.

Today’s guilty plea was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; Mythili Raman, Acting Assistant Attorney General of the Justice Department’s Criminal Division; George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation (FBI), New York Field Office; and Thomas O’Donnell, Special Agent-in-Charge, U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG).

“Gregory Konoplya tried to take taxpayers for a ride with his fraudulent ambulette service,” stated United States Attorney Lynch.  “He used illegal cash kickbacks to recruit Medicaid beneficiaries to obtain medical services, including rides in his ambulettes, which the beneficiaries did not need.  Konoplya is the latest defendant to be convicted in connection with the government’s ongoing investigation of the Cropsey Medical Care clinic, which submitted more than $13 million in fraudulent claims to Medicare and Medicaid.  We will continue to do our part to root out health care fraud to help protect the integrity of Medicare and Medicaid.”  U.S. Attorney Lynch extended her grateful appreciation the Federal Bureau of Investigation and the Department of Health and Human Services, Office of Inspector General for their work on the investigation. 

Konoplya pleaded guilty before U.S. Magistrate Judge Roanne Mann of the Eastern District of New York.  At sentencing, Konoplya faces a maximum penalty of five years in prison, a fine of over $850,000, restitution of up to $429,000 and forfeiture of up to the same amount, $429,000.      

According to court documents, from 2009 to 2012, Konoplya, working through an ambulette company in Brooklyn, recruited patients to attend a Brooklyn clinic called Cropsey Medical Care PLLC.  An ambulette is a vehicle licensed by New York State’s Medicaid program to transport beneficiaries to and from medical facilities when such transportation is medically necessary.  Konoplya paid employees of Cropsey Medical a per-beneficiary cash kickback so that Cropsey Medical would accept Konoplya’s beneficiaries as patients and Konoplya’s ambulette company could bill Medicaid for the transportation of beneficiaries to and from Cropsey Medical.  Once Konoplya’s beneficiaries were transported to Cropsey Medical, they were paid cash kickbacks to induce them to continue to attend the clinic and receive medically unnecessary physical therapy, diagnostic testing and other services. Such purported medical services were then fraudulently billed by Cropsey Medical to Medicare and Medicaid.

According to court documents, from approximately November 2009 to October 2012, Cropsey Medical submitted more than $13 million in claims to Medicare and Medicaid, seeking reimbursement for a wide variety of fraudulent medical services and procedures, including physician office visits, physical therapy and diagnostic tests.

The case was investigated by the FBI and HHS-OIG, brought as part of the Medicare Fraud Strike Force, and supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of New York.  The case is being prosecuted by Trial Attorney Sarah M. Hall and Assistant U.S. Attorneys Shannon Jones and Ilene Jaroslaw of the Eastern District of New York.

The case was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of New York.  The Medicare Fraud Strike Force operations are part of the Health Care Fraud Prevention & Enforcement Action Team (HEAT), a joint initiative announced in May 2009 between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,500 defendants who have collectively billed the Medicare program for more than $5 billion.  In addition, HHS’s Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, is 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.

In the Spotlight: Loretta Lynch

Nigerian Court Orders Alleged AQAP Operative Extradited To The Us W/I 15 Days To Face Indictment Charging Terrorism Offenses

An indictment was unsealed today in federal court in Brooklyn, New York, charging a Nigerian citizen with providing material support to a designated foreign terrorist organization, al-Qaeda in the Arabian Peninsula (“AQAP”), and using high-powered firearms in furtherance of that crime. The United States is currently seeking the extradition of the defendant, Lawal Olaniyi Babafemi, also known as “Abdullah” and “Ayatollah Mustapha,” from Nigeria.

The charges were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; John Carlin, Acting Assistant Attorney General, National Security Division; and George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office. United States Attorney Lynch acknowledged the continued cooperation and assistance of the government of Nigeria in terrorism matters affecting both nations.

According to court documents, between approximately January 2010 and August 2011, the defendant traveled twice from Nigeria to Yemen to meet and train with leaders of AQAP, the Yemen-based branch of al-Qaeda. Babafemi assisted in AQAP’s English-language media operations, which include the publication of the magazine “Inspire.” At the direction of the now-deceased senior AQAP commander Anwar al-Aulaqi, Babafemi was provided by AQAP leadership with the equivalent of almost $9,000 in cash to recruit other English-speakers from Nigeria to join that group. While in Yemen, Babafemi also received weapons training from AQAP.

On February 21, 2013, a grand jury in the Eastern District of New York returned a sealed indictment charging the defendant with one count of conspiracy to provide material support to AQAP, in violation of Title 18, United States Code, Section 2339B; one count of providing and attempting to provide material support to AQAP, in violation of Title 18, United States Code, Section 2339B; one count of unlawful use of machineguns, in violation of Title 18, United States Code, Section 924(c); and one count of conspiracy to unlawfully use machineguns, in violation of Title 18, United States Code, Section 924(o). At the request of the United States, the Nigerian government thereafter commenced extradition proceedings against the defendant in July 2013.

The charges in the indictment are merely allegations, and the defendant is presumed innocent unless and until proven guilty. The case is assigned to the United States District Judge John Gleeson in the Eastern District of New York.

The government’s case is being prosecuted by Assistant United States Attorneys Zainab Ahmad and Hilary Jager, with assistance from Trial Attorney William M. Narus of the Justice Department’s Counterterrorism Section and Trial Attorney Timothy Hammer of the Justice Department’s Office of International Affairs.

The Defendants

LAWAL OLANIYI BABAFEMI
Age: 33

Earlier today at the federal courthouse in Central Islip, New York, Mohanbhai Ramchandani, of East Elmhurst, New York, pled guilty to violating the United States Treasury Department’s Foreign Bank and Financial Accounts Report law (FBAR) and filing false tax returns to conceal $3.2 million that he earned from his Manhattan-based tailoring business – Mohan’s Custom Tailors. According to court filings and facts presented during the plea proceeding, Ramchandani admitted the illegal activity and cooperated with Internal Revenue Service (IRS) agents after being confronted with the evidence against him.

The guilty plea was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and Toni Weirauch, Special Agent-in-Charge, Internal Revenue Service, Criminal Investigation, New York.

Ramchandani built a successful business that made millions. Rather than live up to his financial responsibilities, he sought to conceal in foreign banks $3.2 million of income clearly earned in the United States. Ramchandani tried to evade not just lawful tax reporting obligations but also the laws that protect our economy,” stated United States Attorney Lynch. “Ramchandani not only grossly underreported his true income, he completely underestimated the tenacity of the IRS to ‘follow the money’.”

IRS Special Agent-in-Charge Weirauch stated, “Offshore tax enforcement is a major priority for the Internal Revenue Service. Individuals who chose to hide income outside of the United States expose themselves to a variety of criminal charges, including criminal tax and FBAR violations, and severe penalties. As we continue to gain access to more and more information about individuals involved in offshore tax evasion, potential violators can expect us to use all of our enforcement tools to stop this abuse.”

The government’s investigation revealed that Ramchandani operated a lucrative custom tailoring business specializing in the manufacturing of suits and shirts. Customers paid for their purchases with cash, checks and credit cards, including American Express. Ramchandani sent checks that American Express issued to him for payment of his customers’ purchases to the Bank of India in Hong Kong where he held an account. He then transferred those proceeds to an account held at the same bank in his son’s name, as well as to other banks in India and Canada. Between 2007 and 2009, Ramchandani hid $3.2 million in the foreign bank accounts and, in violation of FBAR laws, failed to report that he had money in those accounts. Ramchandani also filed tax returns that failed to include the money that he sent overseas. The tax loss to the IRS for 2007, 2008 and 2009 was $736,002.00.

Today’s guilty plea took place before United States District Judge Joseph F. Bianco. When sentenced, Ramchandani faces up to five years in prison, a penalty of $1.6 million for the FBAR violation and restitution to the IRS of $736,002.00 for unpaid taxes.

The government’s case is being prosecuted by Assistant United States Attorney Demetri M. Jones.

The Defendants

MOHANBHAI RAMCHANDANI
Age: 66

Earlier today, in federal court in Brooklyn, New York, Hector Gallardo, a registered representative and a holder of Series 7 and 63 licenses issued by the Financial Industry Regulatory Authority, was sentenced to 60 months in prison in connection with his wire fraud conviction. On December 13, 2012, Gallardo pled guilty to wire fraud for stealing investments induced through false promises of exorbitant monthly investment returns. In addition to the prison term, United States District Judge Sandra L. Townes imposed a term of supervised release of three years and fines and forfeiture awards totaling $876,193.

The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and Philip R. Bartlett, Inspector-in-Charge, United States Postal Inspection Service.

“Hector Gallardo told international investors a tale of safe and lucrative investing through a professional trading corporation. His story was nothing more than a fairy tale, designed to part the investors from their money and to fund his own lavish lifestyle. Ultimately, the truth caught up with Gallardo, and justice has now been served,” stated United States Attorney Lynch. “Protecting investors, foreign and domestic, from fraudulent schemes is a priority of this Office and the Department of Justice. Those who commit these crimes will be aggressively tracked down and prosecuted.”

Between January and October 2007, the defendant, a registered representative employed at the New York office of Orion Trading, LLC, which did business as “Brokerlatino,” solicited investments from two representatives of an investment firm in Bolivia (“the Bolivian investors”) that had collected and bundled funds from at least 350 Bolivian retail investors, each of whom invested sums ranging from approximately $100 to $32,000. Lured by the defendant’s promises of monthly returns between nine and fifteen percent, the Bolivian investors wired approximately $1.15 million to Ventel Enterprises Corporation (“Ventel”), a sham corporation the defendant had falsely described as comprising “professional traders” who bought and sold a wide variety of securities for investors. In the course of the fraud, the defendant returned approximately $250,000 of the Bolivian investors’ investment to fraudulently demonstrate illusory returns on the investment, and to maintain the ruse that the investment was performing well.

In fact, the defendant did not invest any of the Bolivian investors’ money as promised. At most, he invested approximately $190,000 of their money in stocks and bonds through nominee accounts at three brokerages and lost virtually the entire amount – a fact that he did not disclose to the Bolivian investors. As for the remaining approximately $685,000 of the investment, the defendant stole that money and used it to pay his and his family’s expenses, including airline tickets and multiple trips to Atlantic City. The defendant’s scheme fell apart when the Bolivian investors demanded to see the documentation associated with their purported investments with Ventel. In total, the Bolivian investors’ lost approximately $900,000 of their investments with the defendant and Ventel.

After the defendant’s scheme was brought to the attention of the Securities and Exchange Commission, the defendant fled to Venezuela in September 2009. The defendant later re-entered the United States, where he was tracked by law enforcement to his new home in Long Island City, Queens.

The government’s case is being prosecuted by Assistant United States Attorney James G. McGovern.

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. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants. For more information on the task force, visit http://www.StopFraud.gov.

The Defendants

Name: HECTOR GALLARDO
Age: 40

Winick Boasted About His Fake Passports and Ability to Avoid Arrest

BROOKLYN, NY – On Saturday, August 17, 2013, Thai officials working with Federal Bureau of Investigation (FBI) and U.S. Embassy personnel in Bangkok arrested alleged penny stock fraud kingpin Sandy Winick on a provisional arrest warrant in Bangkok, Thailand, to face extradition proceedings to the Eastern District of New York. Earlier today, Thai officials working with FBI and U.S. Embassy personnel in Bangkok arrested Winick’s alleged penny stock fraud co-defendant Gregory Curry on a provisional arrest warrant in Bangkok, Thailand, and he will also face extradition proceedings to the Eastern District of New York. These arrests mark the latest successful chapter in an effort to address fraud in the over the counter securities markets. Previously, on August 13, 2013, the FBI arrested six men in New York, Arizona, New Jersey, Florida and California -- and the Royal Canadian Mounted Police (RCMP), in coordination with the FBI, arrested a seventh man on a provisional arrest warrant in Ontario, Canada -- for engaging in this same international fraud conspiracy that spanned the globe from North America to Europe and Asia. Each arrest resulted from an indictment charging the nine defendants with 24 counts of securities fraud, wire fraud and false personation of Internal Revenue Service (IRS) employees in connection with the sale of securities and conspiracy. 1

The indictment and arrests were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and George Venizelos, Assistant Director-in-Charge, FBI, New York Field Office.

As set forth in court filings, Sandy Winick masterminded securities fraud and advance fee schemes that victimized investors in approximately 35 nations and generated more than $140 million through various brokerage and bank accounts under their control. Gregory Curry aided Winick in the securities fraud and advance fee schemes. To uncover the international aspects of the scheme and gather evidence, the FBI used wiretaps in the United States and undercover agents in foreign countries.

The indictment and arrests are the result of one of the largest international penny stock investigations ever conducted by the Department of Justice and the FBI and mark the unveiling of a multi-year, ongoing investigation, which included significant assistance from the RCMP, as well as from other U.S. law enforcement agencies and law enforcement authorities in England, as well as assistance from Thailand and China.

Defendant Sandy Winick is charged as the lead defendant in two separate but interrelated schemes. According to the indictment, the defendants first engaged in an international ‘pump and dump’ scheme during which they fraudulently ‘pumped up’ the share price of worthless penny stocks and then ‘dumped’ billions of shares of those stocks by unloading them on unsuspecting victim investors across the globe. Winick boasted about the superiority of the charged scheme compared to another more obvious scam, stating: “That deal is obviously a pump and dump. We know enough to be subtle.” Second, the defendants operated boiler rooms in at least four countries that induced investors in penny stocks, including many of the same victims from the ‘pump and dump’ scheme, to pay advance fees that the defendants promised would enable the victim-investors to sell their penny stocks and recover losses that they incurred. In reality, the defendants simply stole the fees without providing any services, fraudulently extracting millions of additional dollars from their victims. Hundreds of victims live in Brooklyn, Queens and Long Island. As for the group’s recent plans to open a call center in Brooklyn, New York, a co-defendant said, “I tell you what man . . . hitting the Americans would be like taking money from a baby.” Sandy Winick also openly boasted in intercepted phone calls about how he maintained fake passports in assumed names and how regulators and law enforcement officials could never reach him in Thailand.

“As alleged in the indictment, the defendants Sandy Winick and Gregory Curry used our securities markets as a platform from which to run elaborate fraudulent schemes to victimize tens of thousands of unsuspecting investors across the globe. They swindled investors into buying billions of shares of worthless stock, then turned around and used a second scam to pick their pockets yet again. They thought that they could simply run away from their crimes. Today, with the help of our friends in Thai law enforcement, we once again showed that fraudsters cannot hide from the law,” stated United States Attorney Lynch. “I would like to thank our partners at FBI for their hard work on this important investigation.” Ms. Lynch also thanked the Royal Thai Police. Throughout the course of the investigation, significant assistance was also provided by the United States Embassies in Ottawa, Toronto, London, Bangkok and Beijing.

FBI Assistant Director-in-Charge Venizelos stated, “Sandy Winick and Gregory Curry were wanted for their alleged roles in one of the largest international penny stock frauds and advance fee schemes in history. Their arrests are a significant accomplishment for the FBI as we continue our work in this ongoing investigation. We would like to thank our overseas partners, especially the Royal Thai Police, for their ongoing assistance with this matter.”

Winick has been charged with one count of conspiracy to commit securities fraud, two counts of conspiracy to commit wire fraud, 15 counts of wire fraud, four counts of securities fraud and two counts of false personation of an officer of the United States. Curry has been charged with: one count of conspiracy to commit wire fraud, 5 counts of wire fraud and two counts of false personation of an officer of the United States. If convicted, Winick and Curry will face up to 20 years’ imprisonment for each count of conspiracy to commit wire fraud, substantive wire fraud and substantive securities fraud, and up to five years’ imprisonment for conspiracy to commit securities fraud. Winick and Curry face up to three years in prison for each count of false personation of an officer of the United States. In addition, all proceeds of fraudulent schemes are subject to forfeiture. Now that they have been arrested, Winick and Curry will begin extradition proceedings from Thailand to the United States. For the other defendants, the next court date is scheduled for September 5, 2013, at 12:30 p.m., before the Honorable William F. Kuntz II.

The government’s case is being prosecuted by Assistant United States Attorneys Christopher A. Ott, Sylvia Shweder and Melanie Hendry.

This prosecution was the result of efforts by President Barack 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. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants. For more information on the task force, visit http://www.StopFraud.gov.

The Defendants

SANDY WINICK
Citizenship: Canada
Age: 55
Bangbok, Thailand

GREGORY CURRY
Citizenship: Canada
Age: 63
Bangbok, Thailand

_____________________________

1The charges contained in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty..
 

Bostwick Laboratories, Inc. (“Bostwick”) has entered into a civil settlement agreement in which it agreed to pay the United States $503,668.00 to resolve allegations that the company made illegal payments to induce certain physicians to utilize Bostwick’s laboratory testing services – some of which were not medically necessary under the circumstances.

The settlement was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York and Tom O’Donnell, Special Agent-in-Charge of New York’s Office of the Inspector General for the Department of Health and Human Services (HHS).

The government alleges that Bostwick made the illegal payments to physicians to induce them to enroll their patients in a study sponsored by Bostwick called “Determination of the Accuracy of PCA3Plus Urine Assay for the Detection of Prostate Cancer” (the “PCA3Plus Study”). One requirement of the study was that for each patient enrolled, the physicians were obligated to send both the PCA3Plus urine assay for the PCA3Plus Study and prostate biopsy samples – which otherwise could have been sent to any number of laboratories – to Bostwick for analysis. As a result, Bostwick in effect paid those physicians to steer their prostate biopsy analysis business to its laboratories. Bostwick then submitted claims to Medicare and Tricare for reimbursement for both the prostate biopsy test analysis and the PCA3Plus urine assay analysis for each patient enrolled in the PCA3Plus Study, even though the prostate biopsy was the “gold standard” for prostate cancer detection, and the PCA3Plus urine assay was not medically necessary in such situations. In settling this matter, Bostwick is not admitting the government’s allegations.

“Decisions involving medical treatment and testing go to the heart of the doctor patient relationship, and must be based on the needs of each patient and possibility of the advancement of science. They cannot and should not be based on illegal payments from laboratories. Our office is committed to stopping such inducements, and returning patient care to the forefront of the doctors’ decisions,” stated United States Attorney Lynch.

“In order to ensure the best possible treatment for our nation’s Medicare population, it is important that the relationship between labs and physicians be free of any illegal inducements, and we will continue to investigate such allegations,” stated HHS Special Agent-in-Charge O’Donnell.

The investigation that led to the settlement began after Robert Gluck, M.D., an urologist who had been approached by Bostwick regarding participation in the PCA3Plus Study, filed a complaint against the company on behalf of the United States in the Eastern District of New York. Under the federal False Claims Act, a private individual who has uncovered fraud against the federal 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.

The government’s case was handled by Assistant U.S. Attorneys Scott R. Landau and Paul Kaufman.

Earlier today, Nicholas Masi, the final defendant in this case charging 49 members and associates of an international drug trafficking syndicate led by ethnic Albanians located in the United States, Canada, and Europe (the “syndicate”), pled guilty before U.S. District Judge Dora L. Irizarry at the federal courthouse in Brooklyn to drug trafficking charges contained in a superseding indictment returned on July 11, 2011.

The guilty pleas were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; Brian R. Crowell, Special Agent-in-Charge of the Drug Enforcement Administration, New York (DEA); James T. Hayes, Jr., Special Agent-in-Charge, Homeland Security Investigations (HSI), New York, and Toni Weirauch, Special Agent-in-Charge, Internal Revenue Service, Criminal Investigation, New York.

“This family led business was no ‘Mom and Pop’ organization, but a sophisticated ring of international drug dealers and money launderers. They dealt in narcotics by the thousands of pounds and drug proceeds in the multi-millions, and had no qualms about using violence to protect their ill-gotten gains. For more than a decade their web of narcotics trafficking and violence literally spanned the globe. With the assistance of our law enforcement partners across the country, the United States Attorney’s Office for the Eastern District of New York was able to bring this prolific criminal syndicate to justice,” stated United States Attorney Lynch. “We and our partners in law enforcement are committed to investigating and prosecuting international drug traffickers and seizing the proceeds of their crimes. We remain relentless in this pursuit.” Ms. Lynch expressed her grateful appreciation to the DEA Special Operations Division, DEA Newark Division, DEA Denver Division, DEA Miami Division, DEA Albany District Office, DEA Rome Country Office, the HSI attache in Vienna, HSI attache in Toronto, HSI Albany Office, HSI Denver Office, HSI Newark Office, HSI Miami Office, the United States Bureau of Alcohol, Tobacco, Firearms and Explosives, the Monmouth County (New Jersey) Prosecutor’s Office, the Westchester District Attorney’s Office and the New York Attorney General’s Office for their assistance.

DEA Special Agent-in-Charge Crowell stated, “This global organization operated from our street corners to the tops of the supply chain in Canada, Mexico, South America, and Netherlands. We estimate the organization was earning at least $15 million per year trafficking cocaine, marijuana, MDMA, and oxycodone. Our investigative partners at the international, state, local, and federal levels are commended for working tirelessly to shut down this violent syndicate.”

“Today, a violent and ruthless criminal organization that operated an extensive drug supply route in multiple countries has been dismantled,” HSI Special Agent-in-Charge Hayes. “The public expects law enforcement to work together in order to keep our communities free from drugs and the violence that comes with it. These convictions help do just that.”

IRS Special Agent-in-Charge Weirauch stated, “These convictions represent an extraordinary accomplishment in the fight against global drug trafficking. International money laundering remains a high priority for IRS-Criminal Investigation and we are proud to stand with our law enforcement partners as we acknowledge this achievement and look ahead to dismantling other international syndicates.”

The syndicate comprised several inter-related ethnic Albanian family clans (also known as “fis”) with hundreds of associated members, workers, and customers spanning three continents. In operation for more than a decade, the syndicate was responsible for organizing the importation and distribution of tens of thousands of kilograms of hydroponic marijuana from Canada and Mexico, substantial quantities of MDMA from the Netherlands and Canada, hundreds of kilograms of cocaine from Mexico, Colombia, Venezuela, and Peru, and large quantities of diverted prescription pills, such as oxycodone. The drugs were distributed in various locations in the United States, including New York, California, Georgia, Colorado, and Florida, as well as in Canada and Europe.

The four-year investigation revealed that most of the marijuana smuggled from Canada and Mexico was concealed in tractor trailers, typically in hundred pound quantities, with some shipments weighing as much as 1,200 pounds. The marijuana shipments were stored in warehouses and stash locations throughout Brooklyn, Queens, and the Bronx, before distribution. Kilogram quantities of cocaine were obtained from sources in the United States and exported to Albania and other locations in Europe concealed in hidden compartments inside luxury automobiles – ostensibly under the auspices of legitimate car dealerships which were actually controlled by syndicate members. Until the arrests of its members in July 2011, the syndicate was involved in negotiations to obtain hundreds of kilograms of cocaine from sources in South America for transport through the United States to Canada and Europe. The syndicate was also involved in obtaining large shipments of oxycodone, a highly addictive prescription medicine used to treat severe pain, and during the past year distributed thousands of oxycodone pills in New York which had been diverted from pain clinics in Florida.

The government’s investigation further revealed that the syndicate employed the services of a Canadian-based money laundering organization, which was allegedly responsible for laundering more than $15 million of the syndicate’s narcotics proceeds in a single year. Typically, the launderers picked up drug money in New York and transported it to Canadian and Mexican drug suppliers. The syndicate also sent millions of dollars in marijuana sale proceeds to co-conspirators on the West Coast of the United States to purchase cocaine from Mexican drug cartels. The cocaine was then allegedly transported across the border into Canada for distribution, with the proceeds to be used to fund subsequent marijuana purchases.

Several defendants are believed to have committed drug and organized-crime-related violence, including kidnaping and attempted murder. For example, on June 4, 2011, an escalating dispute between syndicate members over the payment of a drug debt led to a shooting outside a Bronx restaurant-bar, and a potential drug-related shooting was narrowly averted in October 2010, when law enforcement agents intercepted a syndicate member with a loaded firearm en route to rob a drug customer who owed him money from a prior drug deal.

During the course of the investigation, federal agents seized more than 1,200 pounds of marijuana, approximately $2 million in suspected drug proceeds, 22 handguns, a military/police-issue assault rifle, and hundreds of rounds of ammunition.

The government’s case is being prosecuted by Assistant United States Attorneys Steven Tiscione, Gina Parlovecchio, Una Dean, and Claire Kedeshian.

The investigation was led by the DEA’s New York Organized Crime Drug Enforcement Strike Force, which is comprised of agents and officers of the U. S. Drug Enforcement Administration, the New York City Police Department, Immigration and Customs Enforcement – Homeland Security Investigations (HSI), the New York State Police, the U. S. Internal Revenue Service Criminal Investigation Division, the Federal Bureau of Investigation, the Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S. Secret Service, and the U.S. Marshal Service.

The Defendants

GJAVIT THAQI
Age: 42

ARIF KURTI
Age: 43

GJEVALIN BERISHA
Age: 33

GJEVALIN BERISHA
Age: 33

KUSHTRIM ABAZAGA
Age: 32

CARLOS ALVAREZ
Age: 30

KUSHTRIM BLAKU
Age: 33

ROBERT BONURA
Age: 34

JOSEPH BUX
Age: 36

ALEJANDRO CALDERIN
Age: 43

JOHN CEKAJ
Age: 43

MARTINO CEKAJ
Age: 35

GIOVANNI DIFUCCIA
Age: 40

ADRIAN DUBIEL
Age: 29

BRIAN DUBLYNN
Age: 36

ARVY EBRAHIME
Age: 31

HECTOR FLORES
Age: 41

ANTHONY GATT
Age: 31

ANGELO GERMANO
Age: 39

JETON GJIDIJA
Age: 35

HAMZA HAMIDEH
Age:

PERRY IEROPOLLI
Age: 31

AL KARAQI
Age: 39

LEE KARAQI
Age: 38

ROBERT KARAQI
Age: 41

HASAN KURTI
Age: 42

IBRAHIM KURTI
Age: 40

BAJRAM LAJQI
Age: 38

SELMAN LAJQI
Age: 41

ALESSANDRO LATINO
Age: 37

LAURETTA LOKAJ
Age: 42

NIKOLA LUKAJ
Age: 41

FRANK MAHONEY
Age: 42

NICHOLAS MASI
Age: 51

DAVID MCLEAN
Age: 47

FATMIR MEHMETI
Age: 35

FAIK MEHMETI
Age: 38

NEFAIL MEHOVIC
Age: 29

VALTER MEMIA
Age: 30

ALBERTO MERCADO
Age: 43

FABIAN MIHAJ
Age: 33

MAGDALENA NIKOLLAJ
Age: 40

MAL REXHA
Age: 51

DARIUS RIVERA
Age: 38

ROBERT RUDAJ
Age: 39

FADIL SALAJ
Age: 53

BRENT SAPERGIA
Age: 50

LANCE SCHONER
Age: 29

LESTER ZABORSKI
Age: 40

AGRON ZENELAJ
Age: 34

Today, at the federal courthouse in Brooklyn, New York, Ming Suan Zhang, a citizen of the People’s Republic of China, pled guilty to violating the International Emergency Economic Powers Act by attempting to export massive quantities of aerospace-grade carbon fiber from the United States to China. According to court filings, Zhang was arrested after trying to acquire a sample of the specialized carbon fiber, a high-tech material used frequently in the military, defense and aerospace industries, which is closely regulated by the United States Department of Commerce to combat nuclear proliferation and terrorism.

The guilty plea was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; James T. Hayes, Jr., Special Agent-in-Charge, U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI), New York; and Sidney Simon, Special Agent-in-Charge, U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement, New York Field Office. The plea took place before United States District Judge Nicholas G. Garaufis.

“Zhang crossed the ocean to obtain massive quantities of restricted American technology for the stated purpose of assisting the Chinese military. He was actively working to circumvent laws that protect our national security by preventing specialized technologies from falling into the wrong hands,” stated U.S. Attorney Lynch. “We will use every tool at our disposal to protect our nation against those who would seek to export valuable defense technology from the United States.” Ms. Lynch expressed her grateful appreciation to the DOC and HSI, which worked closely together to investigate the case and bring the defendant to justice, and noted that the government’s investigation is ongoing.

According to court documents and statements in court today, Zhang came to the attention of federal authorities last year after two Taiwanese accomplices attempted to locate large quantities of the specialized carbon fiber via remote Internet contacts. Zhang told an undercover law enforcement agent that he had an urgent need for the carbon fiber in connection with the scheduled test flight of a Chinese fighter plane. Zhang then arranged a meeting in the United States with an undercover agent to take possession of a carbon fiber sample, which was to be shipped to China and analyzed to verify its authenticity. Zhang was placed under arrest after he arrived for the meeting. The scheme was aimed at obtaining thousands of pounds of the high-grade fiber.

The regulation of carbon fiber falls under the jurisdiction of the Department of Commerce, which reviews and controls the export of certain goods and technology from the United States to foreign countries. In particular, the Commerce Department has placed restrictions on the export of goods and technology that it has determined could make a significant contribution to the military potential or nuclear proliferation of other nations, or that could be detrimental to the foreign policy or national security of the United States.

Carbon fiber composites of the type allegedly pursued by Zhang and his accomplices are ideally suited to applications where strength, stiffness, lower weight, and outstanding fatigue characteristics are critical requirements. These composites also can be used in applications where high temperature, chemical inertness and high damping are important. The two main applications of carbon fiber are in specialized technology, particularly in the fields of aerospace and nuclear engineering, and in general engineering and transportation. In addition, certain carbon fiber-based composites, such as the material sought by the defendant, are used in military aircraft.

At sentencing on November 15, 2013, Zhang faces up to 20 years in prison and a fine of up to $1,000,000.

The government’s case is being prosecuted by Assistant United States Attorneys Seth DuCharme and David Sarratt, with assistance from Trial Attorney David Recker of the Department of Justice Counterespionage Section. Assistance was also provided by Trial Attorney Dan E. Stigall of the Department of Justice Office of International Affairs.

The Defendants

MING SUAN ZHANG
Age: 41

Earlier today, at the federal courthouse in Brooklyn, Joseph Sclafani and Neil Lombardo, members of the Gambino organized crime family of La Cosa Nostra, were sentenced to terms of imprisonment of 180 months and 168 months, respectively, following their April 2013 guilty pleas to conspiracy to distribute cocaine in Brooklyn and Staten Island.  The sentences were imposed by United States District Court Judge John Gleeson, who also ordered that both defendants serve three years of supervised release upon their release from prison, and forfeit $500,000 in narcotics proceeds.

  The sentences were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and Brian R. Crowell, Special Agent-in-Charge of the U.S. Drug Enforcement Administration (DEA).

“Years ago these defendants chose a life of violence and crime, pledging their loyalty to the Gambino crime family.  Today’s case shows them still clinging to that choice, despite previous arrests and incarcerations.  Once out of prison, both men continued their criminal connections and activities, working to bring cocaine across the country into the streets and neighborhoods of Brooklyn and Staten Island,” stated United States Attorney Lynch.  “Today’s sentencings send an important message to both organized crime and drug trafficking enterprises.  Both remain high priorities for the Department and this Office, and we will pursue them with all available resources and law enforcement methods -- particularly in the case of violent recidivists like the defendants in this case.”  Ms. Lynch extended her grateful appreciation to the DEA, the agency responsible for leading the government’s investigation.

Between 2008 and August 2011, Lombardo and Sclafani conspired to distribute multi-kilogram amounts of cocaine in Brooklyn and Staten Island.  Lombardo, who lived in Las Vegas, Nevada, obtained the cocaine from his sources in Mexico and then arranged for it to be transported to Brooklyn.  Once the cocaine was in Brooklyn, Lombardo delivered it to Sclafani, who distributed to cocaine dealers throughout Brooklyn and Staten Island.  According to government filings, in May 2009, Sclafani was stopped in Kansas en route to Las Vegas in possession of more than $100,000 that he intended to use to pay Lombardo for cocaine, and in April 2011, DEA agents at John F. Kennedy International Airport seized $155,000 in cash that Lombardo possessed as he waited to board a flight back to Las Vegas.  In addition, Lombardo and Sclafani were recorded by a cooperating witness explicitly discussing their cocaine business and arranging multi-kilogram transactions.  Lombardo and Sclafani agreed as part of their plea agreements with the government that they were responsible for conspiring to distribute between 15 and 50 kilograms of cocaine.         

Both Lombardo and Sclafani have storied criminal histories. In addition to a prior felony narcotics trafficking conviction, in 1999, Lombardo was convicted of attempted murder in New Jersey State court and witness tampering in the United States District Court for the Southern District of New York after he shot the brother of an individual who he believed was cooperating with law enforcement against him.  He was sentenced to 10 years’ imprisonment.  In addition to felony racketeering and narcotics trafficking convictions, in 1990, Sclafani was convicted of criminal possession of a weapon and harboring the fugitive Gus Farace, who was wanted by authorities for the February 1989 murder of DEA Special Agent Everett Hatcher on Staten Island.  Specifically, in November 1989, in an effort to protect Farace, Sclafani returned fired at assailants who shot at and killed Farace.  Sclafani was sentenced to six years’ imprisonment.      

Both Lombardo and Sclafani are inducted members -- “made men” -- in the Gambino crime family, a sign of their lifelong commitment to organized crime and the crime family’s recognition of their capacity for committing violent and lucrative crimes.

Eight other members of the conspiracy that Lombardo and Sclafani headed up have pled guilty to cocaine conspiracy charges, including Staten Island resident Afrim Kupa and his brother Lulzim Kupa.  On August 9, 2013, Lulzim Kupa, who has prior convictions for narcotics trafficking, racketeering, bank larceny, and bank fraud, was sentenced to 132 months’ imprisonment for his role in the conspiracy.  Afrim Kupa, who also has prior convictions for narcotics trafficking, racketeering, bank larceny and bank fraud, is awaiting sentencing.  

The government’s case is being prosecuted by Assistant United States Attorneys Allon Lifshitz and Robert T. Polemeni. 

The Defendants

JOSEPH SCLAFANI, also known as “Joe Boy”
Age: 47

NEIL LOMBARDO
Age: 57

Earlier today, in Central Islip, New York, the former Chief Executive Officer of a Long Island-based supplier of body armor to the U.S. military and law enforcement agencies was sentenced to 17 years in prison for his leadership role in a $200 million fraud and obstruction of justice case, to be followed by five years of supervised release.  DHB Industries, Inc. founder David H. Brooks, who was convicted in September 2010 on 14 counts of conspiracy, mail and wire fraud, securities fraud, obstruction of justice, and lying to auditors and subsequently pleaded guilty to conspiracy to defraud the IRS and filing false income tax returns, was also ordered to pay a fine of $8.7 million, and to forfeit approximately $65 million in illegally-gained profits to the United States.  The court will determine the amount Brooks must pay in restitution to the victims of his fraud scheme within 90 days.  The sentence was imposed by United States District Judge Joanna Seybert.

The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI); and Richard Weber, Chief, Criminal Investigation, Internal Revenue Service (IRS).

“DHB Industries made body armor that protected the men and women of the U.S. military, who risk their lives to keep us safe.  To David Brooks, it was merely a vehicle for plunder and a means to feed his own greed.  Brooks fancied himself a master of the sport of kings.  In reality, he was a selfish man who looted his company, defrauded his investors, lied to the SEC and the investing public, and sought to profit through insider trading right before the collapse of his house of cards.  And he demonstrated time and time again that he believes he is above the law.  Today, David Brooks learned otherwise,” stated United States Attorney Lynch.   “Thanks to the hard work and dedication of law enforcement, the investing public can rest easier knowing that for the next 17 years, Brooks will not be able to lie, cheat and steal from anyone else.”  Ms. Lynch thanked the FBI and IRS for leading the investigation and the Defense Criminal Investigative Service for its assistance in the case.

FBI Assistant Director-in-Charge Venizelos stated, “David Brooks repeatedly stole from his company, stole from investors, lied to auditors and regulators, and traded on inside information.  He did all this to finance an obscenely lavish lifestyle paid for by his victims. Today’s sentencing is the justice the government has been seeking.”

“Tax fraud was integral to sustaining Brooks’s securities fraud schemes and fueling his lust for money,” stated IRS Chief, Criminal Investigation Weber.  “Brooks falsified his income tax returns in order to prevent law enforcement from discovering that he was looting DHB.  IRS-CI will turn over every stone to find where criminals are hiding and spending their illegal proceeds.  This case should send a message to those who feel that they can commit fraud and evade taxes -- their consuming greed will always leave a money trail.”

During an eight-month trial, the government’s evidence proved that Brooks and others conspired to loot DHB for personal gain.  Brooks concealed his control of a related company in order to funnel more than ten million dollars from DHB to support a thoroughbred horse-racing business.  Brooks also falsely inflated inventory at a DHB subsidiary to artificially boost reported profits, and then lied to auditors in an effort to cover up the schemes.

Although Brooks was initially released on bail conditions requiring that he account for and repatriate all foreign assets, he was re-arrested and bail was revoked in January 2010 after the government discovered that Brooks had concealed millions of dollars in accounts in the tax haven principality of San Marino as well as in London, England.  He has remained in custody ever since.  During his trial, Brooks smuggled prescription pills into the courtroom, created a fake e-mail that his attorney tried to use to cross examine a government witness, and then disobeyed a court order to produce evidence of the email’s authenticity prompting the court to hold him in contempt. 

Unauthorized and Undisclosed Compensation

Brooks stole more than $6 million from DHB’s coffers to finance a horse-racing business that had no relationship to DHB’s business and to finance a lavish lifestyle that included corporate-paid trips to exotic locations, the purchase of a luxury car and an armor-plated vehicle, personal jewelry, plastic surgery for his wife, a burial plot for his mother, a plasma television for his son’s bedroom, country club bills, $40,000 leather bound invitations for his son’s Bar Mitzvah and a $101,000 belt buckle encrusted with diamonds, sapphires and rubies.  To cover up his theft, Brooks created, and directed others to create, fictitious documents and misclassified these personal expenses as business expenses on DHB’s books and records.  In yet another scheme, Brooks scalped tickets to sporting events and concerts that DHB paid for and then kept more than $300,000 that he generated from selling the company’s tickets.

The Related Party Scheme

Brooks also concealed the related party status of Tactical Armor Products (TAP), a company supposedly run independently of DHB by Brooks’ wife, but in fact wholly controlled by Brooks.  Through this scheme, Brooks siphoned more than $10 million out of DHB to pay for obsolete body armor plates sold by TAP.  The profits from these concealed related party transactions were used to pay for more than $16 million in Brooks’s personal horse racing business, jewelry and cash investments.  To conceal the scheme and deceive auditors and investors, Brooks created fraudulent multi-million dollar transactions and doctored internal DHB documents.

The Accounting Frauds

Brooks also engaged in accounting fraud schemes designed to increase the net income and profits that DHB reported in its press releases and filings with the Securities and Exchange Commission (SEC) by falsely inflating the value of DHB’s existing inventory, adding non-existent inventory to the company’s books and records, and fraudulently reclassifying expenses.

Lying to Auditors and Obstruction of Justice

Brooks attempted to cover up several of the schemes by obstructing the SEC’s investigation.  Brooks and others submitted false reports to the SEC during an investigation of DHB’s executive compensation and related party schemes that began in March 2003; Brooks lied to DHB’s independent auditors about the inventory inflation fraud; and when auditors tried to look at the phony inventory, Brooks falsely claimed that it had been destroyed in a hurricane.  Brooks later admitted that the supposed inventory never actually existed.

Insider Trading

In November 2004, several days after DHB filed a financial report with the SEC and sent shareholders a statement containing many of the same misrepresentations and omissions described above, Brooks sold more than $69 million of DHB stock.  In December 2004, he sold an additional $116 million in stock knowing that that DHB’s stock price of $20 per share had been artificially-inflated through his many and varied schemes.  After those insider sales, DHB stock plummeted to pennies per share and the company was de-listed from the American Stock Exchange.

The government’s case was prosecuted by Assistant United States Attorneys Richard  Lunger, Christopher Ott, Christopher Caffarone, James Knapp, Kathleen Nandan, Laura Mantell, Bonni Perlin and Mary Dickman.

This prosecution was the result of efforts by President Barack 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.  Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants.  For more information on the task force, visit http://www.StopFraud.gov.

The Defendant: DAVID H. BROOKS
Age: 58
Old Westbury, New York

Defendants Planned to Open Next Fraudulent Call Center in Brooklyn

BROOKLYN, NY – Earlier today, the Federal Bureau of Investigation (FBI) arrested six men in New York, Arizona, New Jersey, Florida and California for engaging in an international fraud conspiracy that spanned the globe from North America to Europe and Asia.  A seventh defendant was also arrested today on a provisional arrest warrant in Ontario, Canada.  The arrests resulted from an indictment charging nine defendants with 24 counts of securities fraud, wire fraud and false personation of Internal Revenue Service (IRS) employees in connection with the sale of securities and conspiracy.1 As set forth in court filings, the defendants masterminded securities fraud and advance fee schemes that victimized investors in approximately 35 nations and generated more than $140 million through various brokerage and bank accounts under their control.  To uncover the international aspects of the scheme and gather evidence, the FBI used wiretaps in the United States and undercover agents in foreign countries.

The indictment and arrests are the result of one of the largest international penny stock investigations ever conducted by the Department of Justice and the FBI and mark the unveiling of a multi-year, ongoing investigation, which included significant assistance from the Royal Canadian Mounted Police (RCMP), as well as from other U.S. law enforcement agencies and law enforcement authorities in England, as well as assistance from Thailand and China.

The defendants are charged in two separate but interrelated schemes.  According to the indictment, the defendants first engaged in an international ‘pump and dump’ scheme during which they fraudulently ‘pumped up’ the share price of worthless penny stocks and then ‘dumped’ billions of shares of those stocks by unloading them on unsuspecting victim investors across the globe.  Second, the defendants operated boiler rooms in at least four countries that induced investors in penny stocks, including many of the same victims from the ‘pump and dump’ scheme, to pay advance fees that the defendants promised would enable the victim-investors to sell their penny stocks and recover losses that they incurred.  In reality, the defendants simply stole the fees without providing any services, fraudulently extracting millions of additional dollars from their victims.

The charges and arrests were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; George Venizelos, Assistant Director-in-Charge, FBI, New York Field Office; Toni Weirauch, Special Agent-in-Charge, IRS, Criminal Investigation, New York; James C. Spero, Special Agent-in-Charge, Homeland Security Investigations, Department of Homeland Security, Buffalo; and Robert O’Malley, Special Agent-in-Charge, Treasury Inspector General for Tax Administration (TIGTA).

The ‘Pump and Dump’ Scheme

As alleged in the indictment, defendants Sandy Winick, Gary Kershner, Joseph Manfredonia, Cort Poyner, Songkram Roy Shachaisere and William Seals orchestrated one of the largest international penny stock frauds in history.  First, the defendants gained controlling interests of huge quantities of worthless stock in 11 public companies known in the industry as ‘file cabinet businesses’ – thinly traded companies with minimal assets and non-existent business operations, which in many cases were mere shell companies.  They then ‘pumped up’ the share prices of the companies’ stock by engaging in fraudulent and illegal sales campaigns, which included distributing false press releases, announcing non-existent business ventures and fake mergers, posting false information on social media sites and bribing stock promoters and brokers.

These efforts fraudulently inflated share prices so that the pump and dump defendants could trade billions of shares of penny stocks that they owned and controlled at a profit, ultimately generating more than $120 million worth of fraudulent stock sales in accounts under their control.  As a result of the defendants’ efforts, investors in 35 countries were defrauded in connection with their purchase of the companies’ stock.

To avoid detection, the defendants, many of whom operated from outside the United States, were often careful to use “throwaway phones.”  In fact, defendant Poyner was intercepted on a wire communication reminding others in the scheme to use such mobile devices to avoid being caught.  The defendants also knew that they should not draw attention to their illegal trading scheme.  For example, defendant Winick boasted about the superiority of the charged scheme compared to another more obvious scam, stating: “That deal is obviously a pump and dump.  We know enough to be subtle.”

The Advance Fee Scheme

As the indictment alleges, defendants Winick, Gregory Curry, Kolt Curry and Gregory Ellis perpetrated a second scheme in which they fraudulently induced penny stock victims to pay advance fees, on the promise that the victims would then either be able to sell their securities to other waiting investors or join lawsuits to reclaim their losses.  In reality, the advance fees were nothing more than a con, as neither the investors nor the lawsuits existed.   To hoodwink the penny stock owners, the advance fee defendants invented fake trading companies and a fake law firm and then posed as employees of those entities while soliciting advance fees from the penny stock victims. 

To facilitate the scheme, the defendants established boiler rooms or call centers from which members of the conspiracy would solicit advance fees from the unsuspecting penny stock victims.  The call centers were located in various locales around the world, including Canada, Thailand and the United Kingdom.  Recently, the defendants began planning to open a new call center in Brooklyn, New York.  Some of the victims were told that they either needed to pay the advance fee to remove restrictions that were placed upon their penny stock, which prevented the victims from selling their stock in the market, or to join investors in a pending or anticipated lawsuit to recover losses that they incurred while owning the penny stock.  Victims were then told that the advance fees were needed to convert the warrants of their stocks to a saleable security.  In several instances, the advance fee defendants even pretended to be IRS employees collecting a bogus advance tax from victim investors before they could unload their penny stocks.2  The victims were directed to send payment of the advance fees to banks around the world, including bank accounts in New York City.  The fraud proceeds were then transferred through a funds transfer network, located in Getzville, New York, to an account maintained in Beirut, Lebanon.  Ultimately, these defendants generated more than $20 million in fraudulently obtained advance fees.

Defendant Kolt Curry described the Advance Fee Scheme in the following way over an intercepted wire communication: “I would say that 100 percent of these stocks are like uh pink uh… just dumps . . . . so … ya know they’re totally, they’re like, so a lot of these guys are dying . . . . to get rid of this crap. . . . The money is good, it’s easy. It’s easy money. Definitely easy money, and it’s good money.”  In fact, while bragging about his prowess as a fraudster, defendant Kolt Curry further stated, “I had a guy send me a million dollars over one phone call    . . . . He actually sent me almost two million dollars over the period of the hit . . . . I guess in the industry they coin it as a smash and grab.”  As for the group’s recent plans to open a call center in Brooklyn, New York, defendant Kolt Curry said, “I tell you what man . . . hitting the Americans would be like taking money from a baby.”

“As alleged in the indictment, the defendants used our securities markets as a platform from which to run elaborate fraudulent schemes to victimize unsuspecting investors across the globe.  Where others saw citizens of the world, the defendants saw a pool of potential marks.  They cheated, lied and swindled investors into buying billions of shares of worthless stock, then turned around and used a second scam to cheat those investors again.  But today, the defendants were the marks, and it was law enforcement that ran the table,” stated United States Attorney Lynch.  “As this case shows, we are committed to preserving the rule of law and protecting our investors and markets from fraud.  I would like to thank our partners at FBI for their hard work on this important investigation.”  Ms. Lynch also thanked the Royal Canadian Mounted Police, Financial Crime Intelligence Unit in Vancouver and the Integrated Market Enforcement Team in Toronto, the IRS, the Department of Homeland Security, TIGTA and the Serious Organized Crime Agency in the United Kingdom.  Throughout the course of the investigation, significant assistance was also provided by the United States Embassies in Ottawa, Toronto, London, Bangkok and Beijing.  Ms. Lynch also expressed her grateful appreciation to the Securities and Exchange Commission for its cooperation and assistance in the investigation.

FBI Assistant Director-in-Charge Venizelos stated, “As alleged in the indictment, the defendants overstated the value of penny stocks and sold them to unwitting investors worldwide. By tricking victims into paying advance fees with the promise of realizing larger gains or recovering losses, some of the defendants dipped into the pockets of those they had betrayed—not once, but twice. The investing public has the right to trade in an uncorrupted market, and we have a responsibility to uphold the public’s confidence in the integrity of our financial markets. While the charges announced today are significant, they are but one example of what’s left to come as we continue to work with our partners in this ongoing investigation.”

“The criminals behind this scheme were shameless in heartlessly defrauding hundreds of victims out of their savings and retirement accounts for their own enrichment,” said James C. Spero, special agent in charge of Immigration and Customs Enforcement Homeland Security Investigations (HSI) in Buffalo. “HSI is committed to working with our partners at the FBI and the U.S. Attorney’s Office to hold these perpetrators accountable and recover as much money as possible for their victims.”

IRS Special Agent-in-Charge Weirauch stated, “Illegal activity in the investment industry continues to bring financial ruin to unsuspecting American investors.  IRS-Criminal Investigation is proud to be part of the multi-agency team that stopped this international investment scam.  We stand ready to bring our forensic accounting skills to the fight against other investment schemes and white collar crimes.”

“Impersonation of an employee of the Internal Revenue Service is a violation of federal law,” said Robert E. O’Malley, Special Agent in Charge for the TIGTA.  “Taxpayers should exercise extreme caution when contacted by individuals representing themselves as IRS employees, and immediately verify those individuals’ employment by contacting the IRS through their website at www.irs.gov.  If the individuals cannot be verified as IRS employees, they should immediately contact TIGTA.”

The defendants have been charged with: one count of conspiracy to commit securities fraud, two counts of conspiracy to commit wire fraud, 15 counts of wire fraud, four counts of securities fraud and two counts of false personation of an officer of the United States.  If convicted, the defendants will face up to 20 years’ imprisonment for each count of conspiracy to commit wire fraud, substantive wire fraud and substantive securities fraud and up to five years’ imprisonment for conspiracy to commit securities fraud.  The defendants face up to three years in prison for each count of false personation of an officer of the United States.  In addition, all proceeds of fraudulent schemes are subject to forfeiture.  The defendants will be presented for arraignment later today at the United States Courthouses in Brooklyn, New York; Los Angeles, California; Miami, Florida; and Tucson, Arizona.  The defendants in Los Angeles, Miami and Tucson are expected to be removed to Brooklyn.

The government’s case is being prosecuted by Assistant United States Attorneys Christopher A. Ott, Sylvia Shweder and Melanie Hendry.

This prosecution was the result of efforts by President Barack 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.  Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants.  For more information on the task force, visit http://www.StopFraud.gov.

The Defendants

SANDY WINICK
Citizenship: Canada
Age: 55
Bangkok, Thailand

GREGORY CURRY
Citizenship: Canada
Age: 63
Bangkok, Thailand

KOLT CURRY
Citizenship: Canada
Age: 38                      
Ontario, Canada

GREGORY ELLIS
Citizenship: Canada
Age: 46
Ontario, Canada

GARY KERSHNER
Citizenship: United States
Age: 72
Tucson, Arizona

JOSEPH MANFREDONIA
Citizenship: United States
Age: 45
Tom’s River, New Jersey

CORT POYNER
Citizenship: United States
Age: 44
Boca Raton, Florida

SONGKRAM ROY SAHACHAISERE
Citizenship: United States
Age: 43
Huntington Beach, California

WILLIAM SEALS
Citizenship: United States
Age: 51
Fallbrook, California

_____________________________

1The charges contained in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
 

2 The investigation showed that the identities used were fictitious and no IRS employees were involved in the scheme.
 

Following a two-week trial, a federal jury in Brooklyn, New York, today found Edward Byam, Derrick Dunkley, and Akeem Monsalvatge guilty of robbery conspiracy, two counts of robbery, and two counts of using a firearm in connection with those robberies.

The convictions were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York.

The government’s evidence at trial established that the defendants committed two armed robberies of separate Pay-O-Matic check cashing stores in Queens, New York.  In 2010, the three defendants stole over $40,000 from a Pay-O-Matic after one of the defendants gained entry into the secure teller area through the roof.  Wearing hooded sweatshirts and cloth masks over their faces, the defendants held the victim teller at gunpoint, handcuffed him, and beat him with a metal chair before making off with the stolen cash.  In 2012, the defendants robbed yet another Pay-O-Matic check cashing store at gunpoint, this time wearing New York City Police Department jackets, badges, and life-like Hollywood-style special effects masks that concealed their identities and made them appear to be three white men.  During this robbery, the defendants gained entry to the secure teller area by showing one of tellers a picture of her own home to indicate they knew where she lived and then forced the other teller on duty to open the locked doors to the teller area, where the defendants held the tellers at gunpoint and stole over $200,000 from the safe and teller drawers.   

The government’s evidence included the testimony of the victim tellers who were held up at gunpoint during the 2010 and 2012 robberies, a manager at a different check cashing store who, the evidence showed, was a future intended victim of the defendants, as well as the owner of the company that manufactured the life-like special effects masks used by the defendants during the 2012 robbery.  The government’s evidence also included telephone and cell site records placing the defendants at the scene of one of the crimes, DNA evidence, emails, and other documents showing the defendants’ purchases of the disguises used in the 2012 robbery and their purchases of tens of thousands of dollars of luxury items from high-end luxury boutiques.

“Those who would use violence and intimidation to make a quick buck should take this as a lesson: whatever tricks and deception they employ, they will be found and they will be prosecuted to the fullest extent of the law,” stated United States Attorney Lynch.  Ms. Lynch expressed her grateful appreciation to the New York City Police Department’s Police Impersonation Unit and the New York Field Office of the Bureau of Alcohol, Tobacco, Firearms and Explosives, the agencies responsible for leading the government’s investigation.  Ms. Lynch also thanked the United States Marshals Service for their crucial assistance in apprehending these violent criminals.

When sentenced by United States District Judge Raymond J. Dearie, the defendants face a mandatory term of imprisonment between 32 years and life.

The government’s case is being prosecuted by Assistant United States Attorneys Maria Cruz Melendez, Una A. Dean, Tiana A. Demas, and Tyler J. Smith.

The Defendants

EDWARD BYAM, Age: 25

DERRICK DUNKLEY, Age: 25

AKEEM MONSALVATGE, Age: 38

Following a four-day trial, a federal jury in Brooklyn yesterday returned a verdict convicting David Ojo of conspiracy to commit wire fraud and identification document fraud.  The defendant was a member of an international organized crime conspiracy, operating in Romania, Bulgaria, and the United States, that defrauded victims of tens of thousands of dollars through an Internet scam. 

The conviction was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation (FBI), New York Field Office.

Trial testimony showed that the defendant and his co-conspirators advertised used cars for sale on websites like Craigslist and eBay.  Some buyers who responded to the advertisements were told variations of a story that the seller of the car had been called to active duty in Afghanistan and needed to sell his car quickly.  The victims were promised that their purchases would be handled by an eBay or Google Checkout agent, who would hold their payments in escrow until they had received the car.  Once the victims agreed to buy the cars and wired payments through Western Union, they never received any cars or heard from the purported sellers again.

The defendant worked with individuals in Romania and the United States to make and use false Pennsylvania and Delaware driver’s licenses, which they used to claim the money that the victims had wired through Western Union.  The defendant was personally responsible for making or directing more than 30 separate money pick-ups in which victims were defrauded out of more than $80,000.

“Ojo and his cohorts sought to hide in cyberspace as they concocted a scheme that crossed the ocean and invoked patriotic themes to fleece hard working Americans.  Their scheme was a new low for used car dealers, but no match for law enforcement.  This conviction shows that we are committed to rooting out Internet scams that prey on those that purchase goods online,” stated United States Attorney Lynch. 

When sentenced by the Honorable Allyne R. Ross, the defendant faces a maximum penalty of 20 years’ imprisonment.

The government’s case is being prosecuted by Assistant United States Attorneys Douglas M. Pravda and Margaret E. Gandy.

The Defendant

DAVID OJO
Age: 32

BROOKLYN, NY – Earlier today, Quazi Mohammad Rezwanul Ahsan Nafis, who attempted to detonate a 1,000-pound bomb at the New York Federal Reserve Bank on Liberty Street in lower Manhattan’s financial district in October 2012, was sentenced to 30 years in prison by Chief Judge Carol B. Amon of United States District Court in Brooklyn, New York.           

The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; John Carlin, Acting Assistant Attorney General for National Security; George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation (FBI), New York Field Office; and Raymond W. Kelly, Commissioner, New York City Police Department (NYPD).

“Nafis came to the United States radicalized and bent on fighting jihad here in our homeland.  He sought to commit mass murder in downtown Manhattan in the name of al-Qaeda.  The prospect of widespread death and destruction could not dissuade him from his deadly plan.  Nafis’s goals of martyrdom and carnage were thwarted by the vigilance of law enforcement.  He will now spend the next 30 years where his own actions have landed him, in a federal prison cell,” stated United States Attorney Lynch.  “I would like to thank our partners at the FBI, NYPD, Immigration and Customs Enforcement/Homeland Security Investigations, the United States Secret Service, the other agencies who participate in the JTTF, and the Department of Justice’s National Security Division, for their hard work on this important investigation.  I would also like to thank the security teams at the New York Federal Reserve Bank and the New York Stock Exchange for their assistance.”

“With the sentence handed down today, Rezwanul Nafis is being held accountable for his attempt to carry out a terrorist attack on U.S. soil.  I applaud the many agents, analysts, and prosecutors who ensured that his deadly plans never came to fruition and who are responsible for today’s successful outcome,” said Acting Assistant Attorney General for National Security Carlin.

As set forth in the indictment and other case filings, defendant Nafis, a 22-year-old Bangladeshi national, traveled to the United States in January 2012 intending to fight violent jihad.  Nafis possessed operable bomb-making instructions and attempted to recruit multiple individuals to form a terrorist cell inside the United States.  Nafis also actively sought out al-Qaeda contacts within the United States to assist him in carrying out an attack.  Unbeknownst to Nafis, one of the individuals he attempted to recruit into his jihadist cell was actually a source for the FBI.  During the subsequent investigation, FBI agents, NYPD detectives and other law enforcement agents working with the FBI’s New York Joint Terrorism Task Force were able to closely monitor Nafis as he attempted to implement his plan.

Nafis proposed several targets for his attack, including a high-ranking United States official and the New York Stock Exchange.  Ultimately, Nafis decided to conduct a bombing operation against the New York Federal Reserve Bank.  In a statement claiming responsibility for the terrorist bombing of the Federal Reserve Bank on behalf of al-Qaeda, Nafis wrote that he wanted to “destroy America” and that he believed the most efficient way to accomplish this goal was to target America’s economy.  In this statement, Nafis also included quotations from “our beloved Sheikh Osama bin Laden” to justify the fact that Nafis expected that the attack would involve the killing of women and children.           

During the investigation, Nafis came into contact with an FBI undercover agent who posed as an al-Qaeda facilitator.  At Nafis’s request, the undercover agent supplied Nafis with 20 50-pound bags of purported explosives.  Nafis then stored the material and assembled the explosive device for his attack.  Nafis purchased components for the bomb’s detonator and conducted surveillance for his attack on multiple occasions in New York City’s financial district.  Throughout his interactions with the undercover agent, which were captured on recordings, Nafis repeatedly asserted that the plan was his own and the reason he had come to the United States was to commit an attack.

On October 17, 2012, the day of the planned attack, Nafis met the undercover agent and traveled in a van to a warehouse located in the Eastern District of New York.  While en route, Nafis explained to the undercover agent that he had a “Plan B” that involved conducting a suicide bombing operation in the event that the attack was about to be thwarted by the police.  Upon arriving at the warehouse, Nafis assembled what he believed to be an operational 1,000-pound bomb inside the van.  Nafis and the undercover agent then drove to the New York Federal Reserve Bank.  During this drive, Nafis armed the purported bomb by assembling the detonator and attaching it to the explosives.  Nafis and the undercover agent parked the van next to the New York Federal Reserve Bank, exited the van, and walked to a nearby hotel.  There, Nafis recorded a video statement which he intended to release to the public in connection with the attack.  During this video statement, Nafis stated: “We will not stop until we attain victory or martyrdom.”  Nafis then repeatedly, but unsuccessfully, attempted to detonate the bomb, which had been assembled using inert explosives provided by the undercover agent.  JTTF agents arrested Nafis immediately after he attempted to detonate the bomb.

On February 7, 2013, in federal court in Brooklyn, New York, Nafis pled guilty to attempting to use a weapon of mass destruction.  During the guilty plea proceeding, Nafis admitted under oath that he had attempted to bomb the Federal Reserve Bank in Manhattan, that he had used a cellular phone as the detonator for the explosion, and that he had selected the Federal Reserve Bank as the target for his attack.

The government’s case is being prosecuted by Assistant U.S. Attorneys James P. Loonam and Richard M. Tucker, with assistance from Trial Attorney Bridget Behling of the Justice Department’s Counterterrorism Section.

The Defendant:

QUAZI MOHAMMAD REZWANUL AHSAN NAFIS
Age: 22
Jamaica, New York

Earlier today, at the federal courthouse in Brooklyn, New York, Martin Weisberg, a former corporate partner in the New York office of the international law firm Baker & McKenzie LLP, was sentenced to 24 months’ imprisonment on his conviction for money laundering and for his conviction on conspiracy to commit securities fraud, to run concurrently.  As a further part of his sentence, Weisberg was ordered to pay $297,500 in restitution, $250,000 in forfeiture, and a $200 special assessment, and is to serve three years of supervised release following the completion of his prison term.  Weisberg must surrender to the Bureau of Prisons by November 6, 2013.

The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office.   The sentence was imposed by United States District Judge Nicholas G. Garaufis.

“A license to practice law is not a license to violate it.  As a noted attorney, Weisberg held a position of trust and had the respect of his peers.  Instead of using his talents to provide wise counsel, he lied to and stole from his own clients, lied to the Securities and Exchange Commission, and betrayed the investing public.  Weisberg’s unbridled greed has led him from the halls of an international law firm to a federal prison cell,” stated United States Attorney Lynch.  Ms. Lynch expressed her grateful appreciation to the Federal Bureau of Investigation, the agency that led the government’s investigation, and thanked the Securities and Exchange Commission for its assistance.

The securities fraud conspiracy conviction resulted from Weisberg’s involvement with a scheme in which he received kickback payments from co-conspirators in connection with the issuance of publicly-traded securities by two of Weisberg’s former corporate clients.  The money laundering conviction resulted from Weisberg’s theft of money from an escrow account established on behalf of one of his clients for which Weisberg served as escrow agent.  The convictions relate to separate criminal acts committed by Weisberg and were charged in two separate indictments.  Weisberg entered a guilty plea to both charges on May 21, 2013, on the morning that jury selection for his first trial was scheduled to begin.

In connection with the securities fraud conspiracy conviction, Weisberg engaged in a $55 million fraud scheme in which he agreed to conceal co-conspirators’ ownership and control of securities issued through a series of offerings by two public companies, Xybernaut Corporation and Ramp Corporation.  During the course of the conspiracy, Weisberg acted as outside counsel to Xybernaut and Ramp, and was a member of Xybernaut’s Board of Directors.  In return for his participation, the co-conspirators made kickback payments to Weisberg and others.  The co-conspirators’ ownership and control over the Xybernaut and Ramp securities and the kickback payments were never disclosed in Ramp’s or Xybernaut’s corporate filings with the U.S. Securities and Exchange Commission.

In connection with the money laundering conviction, Weisberg was engaged by a corporate client to establish a $30 million escrow account.  He advised the client that the account could not earn interest for the client’s benefit.  In fact, Weisberg caused the $30 million to be placed into an interest-bearing account.  During a 14-month period, the account earned approximately $1.6 million in interest, and Weisberg caused approximately $1.3 million to be wired out of the account to pay for his personal and business expenses without the client’s knowledge.  Weisberg concealed the fraud by falsely convincing his client that the bank did not send monthly account statements; Weisberg instead sent the client letters on law firm letterhead stating false account balances.

The government’s case is being prosecuted by Assistant United States Attorneys Ilene Jaroslaw and John Nowak.

This prosecution was the result of efforts by President Barack 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.  Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants.  For more information on the task force, visit http://www.StopFraud.gov.

The Defendant:

MARTIN WEISBERG
Residence:  Waccabuc, NY
Age:  62

A 24-count indictment was unsealed this morning in federal court in Central Islip, New York, charging Brian R. Callahan, an investment fund manager, and Adam J. Manson, a real estate developer, with conspiracy to commit securities and wire fraud for their roles in operating a $96 million Ponzi scheme.  Both defendants are in custody and will be arraigned this afternoon before United States Magistrate Judge A. Kathleen Tomlinson at the United States Courthouse in Central Islip.  In addition, the government seized over $1 million of alleged criminal proceeds and moved to forfeit the defendants’ interest in the Panoramic View Resort & Residences in Montauk, New York (the “Panoramic View”). 

The charges were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI); and Toni Weirauch, Special Agent-in-Charge, United States Internal Revenue Service, Criminal Investigation, New York (IRS).

According to the indictment and other court filings, between December 2006 and February 2012, Callahan raised more than $118 million from at least 40 investors in connection with four different investment funds that he managed.  He had assured those investors that their money would be invested in mutual funds, hedge funds and other securities.  Instead of investing the money as he promised, Callahan misappropriated approximately $96 million and began to operate the investment funds as a large-scale Ponzi scheme.  Among other things, Callahan diverted millions of dollars towards the Panoramic View, an unprofitable 117-unit beachfront resort and residence development in Montauk, New York, that he owned with his brother-in-law and co-defendant, Adam Manson.  He also commingled the money from the various investment funds and used it to pay tens of millions of dollars in partial redemptions to his victim investors to keep the Ponzi scheme afloat, and to purchase luxury items such as expensive cars and homes in Old Westbury and Westhampton, New York.  To avoid detection and continue the scheme, Callahan sent fake account statements to investors that falsely showed that their funds were invested and performing well, and he repeatedly lied to his investors about both the nature and status of their investments.

“As alleged, the defendants used one of Long Island’s landmarks, the Panoramic View Resort, to perpetrate a wide-ranging fraud,” stated United States Attorney Lynch.  “Callahan gave his word that he would invest his clients’ funds safely and responsibly in established vehicles.  Instead, he simply stole the funds to prop up his partner’s failing investment.  To conceal their status as business failures, the defendants employed all the tricks in the typical con man’s bag.  They created fake documents, stole a person’s identity and engaged in forgery.  The defendants allegedly lied to the lender, they lied to the auditor, and Callahan repeatedly lied to his investors.  The lies stop now.  Today’s arrests demonstrate the Office’s commitment to aggressively prosecute those individuals who commit financial crimes.”  Ms. Lynch expressed her grateful appreciation to the Securities and Exchange Commission and the British Virgin Islands Financial Investigation Agency for their cooperation and assistance in the investigation.

FBI Assistant Director-in-Charge Venizelos stated, “Allegedly, Mr. Callahan and Mr. Manson violated the trust of their clients, stealing victims’ hard earned money to perpetuate their fraud.  Instead of investing the funds as promised, Mr. Callahan used the deposits to perpetuate the scheme, all while buying luxury cars and an estate in Westhampton.  Mr. Callahan was so indiscriminant, he even stole from a Long Island Fire Department.  Today, the game is up. The FBI will continue working to protect investors and stop alleged fraudsters.

IRS Special Agent-in-Charge Weirauch stated,  “The architects of Ponzi-type schemes often employ a variety of sophisticated measures to keep them operating without detection.  However, the cooperation between IRS-Criminal Investigation, the U.S. Attorney’s Office, and the FBI should give the investing public confidence that such schemes will ultimately be uncovered and thoroughly investigated, and that the scammers will be prosecuted.”   

In one instance, Callahan allegedly solicited a $600,000 investment from a Long Island-based fire department by promising to invest the fire department’s money in mutual funds and other securities.  Instead of investing the money, Callahan fraudulently diverted the fire department’s funds to the Panoramic View, and sent bogus account statements to the fire department that falsely showed that the funds had been invested in mutual funds.  Callahan also convinced a Maryland resident to invest approximately $11 million after promising to invest those funds in low-risk securities.  Callahan used the investor’s money to make redemption payments to other investors whom he had previously defrauded and to keep the Ponzi scheme afloat.

According to the indictment, Manson managed the Panoramic View property and poured the money that Callahan had diverted from the investors into Manson’s struggling real estate project at the Panoramic View.  To help Callahan carry out his investment scheme, Manson lied to the independent auditor of Callahan’s investment funds and, together with Callahan, provided fake documents, including bogus promissory notes and doctored balance sheets, to the independent auditor.  Manson’s and Callahan’s fraudulent actions concealed the misuse of the investors’ funds and caused the auditor to overstate the value and profits of Callahan’s investment funds to the victim investors.  As a result of Manson and Callahan’s fraudulent actions, investors were lulled into believing that the funds were performing, and they continued to “invest” their money with Callahan.

As alleged in the indictment, Manson also defrauded a New York-based lending institution that had loaned more than $45 million to Manson in connection with his real estate development project at the Panoramic View.  While attempting to extend these loans past their maturity date, Manson misled the lender about the money that the Panoramic View had received from Callahan’s funds, and falsely told the lender that the funds were from his father.  Manson engaged in this fraudulent conduct in an effort to conceal the fact that he was simultaneously telling the independent auditor of the Callahan funds that there were no other creditors or debt associated with the Panoramic View. 

The charges contained in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.  If convicted, the defendants each face a maximum sentence of twenty years’ imprisonment on each of the securities fraud, wire fraud and conspiracy to commit wire fraud counts, five years’ imprisonment on the conspiracy to commit securities fraud count, and Callahan faces two years’ imprisonment for each of the aggravated identity theft counts.  Additionally, if convicted, Callahan and Manson may be fined up to $5,000,000 for each of the securities fraud counts, $250,000 for each of the wire fraud, conspiracy to commit wire fraud and conspiracy to commit securities fraud counts, and Callahan may be fined up to $250,000 for each of the aggravated identity theft counts.  In addition to seizing over $1 million in alleged criminal proceeds, the government is also seeking to forfeit all Panoramic View cooperative units held by Callahan and Manson, together with Callahan’s residence in Old Westbury, New York, and Manson’s beachfront condominium in Westhampton, New York.

The government’s case is being prosecuted by Assistant United States Attorneys David C. Woll, Jr., Christopher C. Caffarone, Brian D. Morris, and Karin Orenstein. 

This prosecution was the result of efforts by President Barack 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.  Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants.  For more information on the task force, visit http://www.StopFraud.gov.

The Defendants:

BRIAN R. CALLAHAN
Age: 43
Old Westbury, New York

ADAM J. MANSON
Age: 41
Old Westbury, New York

BROOKLYN, N.Y.-- U.S. Attorney William J. Hochul, Jr. announced today that Dejvid Mirkovic, 38, of Lake Worth, Florida, was sentenced by U.S. District Judge John Keenan to 24 years in prison for conspiring to murder the U.S. District Judge (the “federal judge”) who presided over the boiler room fraud conviction of Mirkovic’s coconspirator, a close business associate. Mirkovic and his coconspirator agreed to pay $40,000 to an undercover police officer, who they thought was a hit-man, to kill the federal judge as well as the Assistant U.S. Attorney (the “federal prosecutor”) who successfully handled the coconspirator’s fraud prosecution. Mirkovic paid the undercover officer $22,000 in cash as a down payment for the murders of the federal judge and the federal prosecutor.

In addition to the term of imprisonment, Judge Keenan sentenced Mirkovic to five years of supervised release and the forfeiture of over $200,000, a car and four firearms.

According to case filings and statements at Mirkovic’s guilty plea proceeding, law enforcement authorities learned of the plot in August 2012, when a confidential informant reported that Mirkovic’s coconspirator stated he wanted to torture and kill the federal judge and the federal prosecutor and asked the informant for assistance in arranging for a hit-man to carry out the murders. During the subsequent investigation, two undercover law enforcement officers, posing as hit-men, met with Mirkovic and the coconspirator numerous times at locations on Long Island, including at the Nassau County Correctional Center (“NCCC”), where the coconspirator was being held. At one of the first meetings, the coconspirator offered to pay one of the undercover officers $3,000 to assault an individual with whom the coconspirator had a financial dispute. Mirkovic then met with one of the undercover officers and paid him $1,500 as a down payment for the assault. After one of the undercover officers showed proof of the purported assault of John Doe – in fact, a staged photograph and an identification card for John Doe – Mirkovic paid the undercover officer the $1,500 balance.

Later that same day, Mirkovic again met with the undercover officer, relayed the coconspirator’s instructions to murder the federal judge and federal prosecutor, and offered $40,000 for commission of the two murders. Mirkovic also gave the undercover officer a $12,000 down payment and paid an additional $10,000 the following week. Mirkovic promised payment of the final $18,000 upon confirmation of the murders. At the time of Mirkovic’s arrest at his home in Lake Worth, Florida, law enforcement officers recovered $18,000 in cash and a loaded 9mm semi-automatic handgun.

In pleading guilty on March 13, 2013, Mirkovic admitted under oath that he agreed to kill the federal judge in retaliation for the performance of the judge’s duties. Mirkovic further admitted under oath that he traveled to the Eastern District of New York in the fall of 2012 and made a down payment for the murder.

The sentence was the latest development in an investigation handled by Special Agents of the Federal Bureau of Investigation, New York Office, under the direction of Assistant Director-in-Charge George Venizelos. The government’s case is being prosecuted by Assistant United States Attorneys Marshall L. Miller, Una A. Dean, and Brian Morris of the Eastern District of New York, under the supervision of U.S. Attorney William J. Hochul of the Western District of New York.

Earlier today, in federal court in Brooklyn, Russell Argila, a former shop steward for Local 1 New York of the International Union of Bricklayers and Allied Craftworkers, pleaded guilty to a criminal information charging him with accepting illegal bribe payments in his capacity as a union official.  As alleged in court documents, Argila accepted $7,800 in cash bribes from an employer of the bricklayers whose interests Argila represented as a shop steward for the union.  Argila was arrested on April 24, 2013.

On July 26 and July 30, 2013, also in federal court in Brooklyn, Muzaffar I. Nadeem, Zainul Syed, Afzaal Chaudry, and Irfan Muzaffar, each of Brooklyn, were arraigned on a separate but related indictment charging them with various offenses involving a scheme to defraud the New York City School Construction Authority (the SCA) by falsely certifying that workers employed on SCA projects were receiving the prevailing wage, as required by law and contract.  These defendants were arrested on February 21, 2013.1

The plea and indictment were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; Eric T. Schneiderman, New York State Attorney General; Rose Gill Hearn, Commissioner, New York City Department of Investigation; and Toni Weirauch, Special Agent-in-Charge, Internal Revenue Service, Criminal Investigation (IRS), New York.

“Instead of fighting for the workers he promised to represent, Argila traded their right to earn a legal and a living wage for cash to line his own pockets.  As alleged in the related indictment, those defendants cheated workers out of the wages they had earned by the sweat of their brows and laundered the proceeds of this conspiracy to hide their actions and fund an amusement park overseas.  There was no holiday for the workers involved, only exploitation,” stated United States Attorney Lynch.  “This Office and our law enforcement partners will continue to prosecute fraud and corruption throughout the construction industry.”  Ms. Lynch expressed her thanks to the U.S. Department of Labor, Office of Inspector General, the New York City School Construction Authority, Office of Inspector General, the New York City Police Department, and the New York County District Attorney’s Office for their assistance in the investigation.

As charged in the indictment, Nadeem operated a construction company, SM&B Construction Co., Inc. (SM&B) in Brooklyn, which has been awarded over $72 million in contracts by the SCA since 1997 and has received over $37 million in fraud-induced payments from the SCA since 2008.  Chaudry and Syed worked as a foreman and office manager, respectively, at SM&B.  Muzaffar is Nadeem’s son.  Both New York State Labor Law and its contracts with the SCA required SM&B to pay workers on SCA-funded projects a prevailing wage rate, which was set by the New York City Comptroller.  In fact, SM&B paid cash to workers on its projects, including bricklayers and laborers, at rates far below the prevailing wage.  As alleged in the indictment, Nadeem, Chaudry, and Syed falsely certified to the SCA that the workers had been paid the prevailing wage, thus committing mail fraud, wire fraud, and conspiracy to commit those crimes.

As further alleged in the indictment, Nadeem laundered over $6 million in proceeds of the charged fraud scheme by funneling it through shell companies.  After running these proceeds through the shell companies, Nadeem sent more than $3.3 million from the shell companies to Pakistan, to invest in an amusement park and resort complex called “Waysgoose Park.”

To conceal the charged fraud scheme from law enforcement, and to obtain cash to pay the illegally low wages to workers, Nadeem, Syed, and Muzaffar allegedly engaged in illegal structuring, specifically, cashing multiple checks, each for less than $10,000, on a single day, for a total amount of more than $10,000, and thereby avoiding the required filing of Currency Transaction Reports (CTRs).  As charged in the indictment, since January 2008, more than $3.6 million in structured checks were written on SM&B’s account.  Nadeem and Syed also allegedly arranged for the payment of $30,000 in cash bribes to an undercover SCA Inspector, and allegedly paid $7,800 in cash bribes to a union official.

Argila faces a maximum sentence of five years.  If convicted, the indicted defendants each face a maximum sentence of 20 years for the mail fraud, wire fraud, money laundering, and related conspiracy charges, a maximum sentence of 10 years for bribing an undercover SCA inspector and engaging in transactions over $10,000 involving the proceeds of their crime, and a maximum sentence five years for bribing a union official, structuring financial transactions, and other conspiracy charges.

The government’s case is being prosecuted by Assistant United States Attorneys Paul Tuchmann, Lan Nguyen, and Claire Kedeshian.

The Defendants:

MUZAFFAR NADEEM
Age: 57
Residence: Brooklyn, NY

AFZAAL CHAUDRY
Age: 46
Residence: Brooklyn, NY

ZAINUL SYED
Age: 39
Residence: Brooklyn, NY

IRFAN MUZAFFAR
Age: 29
Residence: Brooklyn, NY

RUSSELL ARGILA
Age: 40
Mahopac, NY

_____________________________

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

Earlier today, at the federal courthouse in Central Islip, New York, Mark Hotton, a former Long Island stockbroker, pled guilty to conspiring to launder the illicit proceeds of almost two decades of fraud before United States District Judge Joanna Seybert.  When sentenced, Hotton faces up to 20 years in prison, forfeiture of $1.8 million and restitution of up to $5.75 million to the victims of his frauds.

According to court filings and facts presented at the plea proceeding, between January 1995 and October 2012, Hotton used funds he obtained from a series of securities fraud schemes, mail fraud schemes and other crimes to promote his continuing illegal conduct.  Throughout the conspiracy, Hotton also laundered proceeds of his frauds to pay employees cash wages, thereby avoiding federal withholding taxes intended for Social Security, Medicare and Medicaid.  The defendant also laundered funds to avoid required payments to union pension and benefit funds.

The guilty plea was announced by Loretta E. Lynch, the United States Attorney for the Eastern District of New York; Toni Weirauch, Special Agent-in-Charge, New York Field Office of the Internal Revenue Service, Criminal Investigation; and Deputy Inspector General, Daniel R. Petrole of the U.S. Department of Labor, Office of the Inspector General, Office of Labor Racketeering and Fraud Investigations.

                   “Mark Hotton was a stockbroker who earned a substantial income, but that wasn’t enough for him.  For almost two decades, he was the star of his own drama, cheating investors, partners, and his own employees to prop up the fairy tale of his success.  Today the curtain has finally fallen on the tale of fraud and deception staged by this defendant, and he stands revealed as the fraud and con man that he is.  He will now be held to account for his actions,” stated United States Attorney Lynch.  Ms. Lynch expressed her grateful appreciation to the IRS-CI and the DOL-OIG for their investigation and participation in this case.

Hotton was arrested by federal agents on Monday, October 15, 2012, on these offenses, as well as additional fraudulent conduct in the Southern District of New York arising from the financing of the proposed Broadway play “Rebecca.”  Hotton pleaded guilty to charges, arising from that conduct, yesterday in United States District Court in Manhattan. 

                  The government’s case is being prosecuted by Assistant U.S. Attorneys Burton T. Ryan, Jr. and Melanie Hendry.

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.  Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants.  For more information on the task force, visit http://www.StopFraud.gov.

The Defendant

MARK  C.  HOTTON
Age: 47
Residence: West Islip, New York

BROOKLYN, NY – Earlier today, Yuri Khandrius, 50, of Brooklyn, New York, was sentenced to eight years in prison for his role in a $77 million Medicare fraud scheme. In addition to the prison term, U.S. District Judge Nina Gershon of the Eastern District of New York sentenced Khandrius to three years of supervised release with a concurrent exclusion from Medicare, Medicaid and all Federal health programs, ordered him to forfeit $446,655 and ordered him to pay restitution in the amount of $10,000,000.  Khandrius’s surrender date is September 16, 2013.

The sentence was announced by U.S. Attorney for the Eastern District of New York Loretta E. Lynch; Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI); and Special Agent-in-Charge Thomas O’Donnell of the HHS Office of Inspector General (HHS-OIG).

Khandrius pleaded guilty on December 3, 2012 to one count of conspiracy to commit health care fraud, one count of health care fraud and one count of conspiracy to pay kickbacks. Including Khandrius, 13 individuals were convicted in this case, either through guilty plea or trial conviction.

According to court documents, from 2005 to 2010, Khandrius was an employee of a clinic in Brooklyn that operated under three corporate names: Bay Medical Care PC, SVS Wellcare Medical PLLC and SZS Medical Care PLLC (Bay Medical clinic).  According to court documents, the owners, operators and employees of the Bay Medical clinic paid cash kickbacks to Medicare beneficiaries and used the beneficiaries’ names to bill Medicare for more than $77 million in services that were medically unnecessary or never provided.  The defendants billed Medicare for a wide variety of fraudulent medical services and procedures, including physician office visits, physical therapy and diagnostic tests.

According to trial testimony, Khandrius, who holds no medical licenses or certifications, impersonated his co-defendant Dr. Gustave Drivas at the clinic.  Dr. Drivas was the Bay Medical clinic’s “no-show” doctor.  Khandrius admitted at his change of plea hearing that he signed prescriptions and medical charts in Drivas’s name, and performed medical tests and procedures on patients although he was not licensed to do so.  Khandrius’s impersonation of Dr. Drivas assisted the conspirators in disguising the use of Drivas’s Medicare billing number to bill more than $20 million in claims for services that were not rendered or medically unnecessary.  (Drivas was convicted of health care fraud conspiracy and health care fraud by a jury after a seven-week trial.)  According to trial testimony, Khandrius also directed a phony allergy testing fraud at the Bay Medical clinic that involved giving patients bottles of tap water instead of allergy medications, wrote prescriptions for co-workers and at least one minor child using Dr. Drivas’s prescription pad and in response to a written audit from Medicare, falsely filled out medical charts in an attempt to back up the billing and deceive Medicare.

The government’s investigation included the use of a court-ordered audio/video recording device hidden in a room at the clinic, in which the conspirators paid cash kickbacks to corrupt Medicare beneficiaries. The conspirators were recorded paying approximately $500,000 in cash kickbacks during a period of approximately six weeks from April to June 2010. This room was marked “PRIVATE” and featured a Soviet-era poster of a woman with a finger to her lips and the words “Don’t Gossip” in Russian. The purpose of the kickbacks was to induce the beneficiaries to receive unnecessary medical services or to stay silent when services not provided to the patients were billed to Medicare.

This case is being prosecuted by Trial Attorney Sarah M. Hall of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Shannon Jones of the Eastern District of New York. The case was investigated by the FBI and HHS.

The case was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of New York. The Medicare Fraud Strike Force operations are part of the Health Care Fraud Prevention & Enforcement Action Team (HEAT), a joint initiative announced in May 2009 between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,500 defendants who have collectively billed the Medicare program for more than $5 billion. In addition, HHS’s Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, is 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, at the federal courthouse in Brooklyn, Hector Aleman Lemos, the former leader of the Flushing, Queens, chapter of the violent international gang La Mara Salvatrucha, also known as “MS-13,” was sentenced to 30 years in prison following his March 7, 2013, guilty plea to racketeering and murder conspiracy.  The sentence was imposed by United States District Judge Nicholas G. Garaufis, who also imposed a term of supervised release of 3 years.  As a consequence of his conviction, Lemos, a citizen of El Salvador, is also subject to potential deportation at the conclusion of the prison term.

The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; James T. Hayes, Jr., Special Agent-in-Charge, U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI), New York Field Office; Raymond W. Kelly, Commissioner, New York City Police Department, and Charles Gardner, Commissioner, City of Yonkers Police Department.

“As a member and leader of MS-13, Lemos spread death and destruction throughout his community.  No one in his orbit was safe from the violence that accompanied him, including an innocent bystander who paid with his life for nothing more than being in the wrong place at the wrong time, and a 13-year-old boy who thankfully survived his encounter with Lemos.  Today, Lemos received the significant jail term called for by his actions, which will bring justice to the gang’s victims and their families,” said United States Attorney Lynch.  “Today’s sentence represents a clear warning to the gang that we will continue to vigorously prosecute its members and work to dismantle its operations in this District.”  Ms. Lynch extended her grateful appreciation to U.S. Immigration and Customs Enforcement, Homeland Security Investigations, the New York City Police Department, and the City of Yonkers Police Department.

Lemos, known in the gang as “Diablito,” was the leader of the Flushing chapter of the gang, which committed a series of violent crimes, including murder, murder conspiracy and attempted murder, in Flushing, Queens and elsewhere.  Among other crimes, Lemos was charged with shooting a 25-year-old man named John Halley in Yonkers, New York, who he believed, incorrectly, was a member of a rival gang.  In pleading guilty, Lemos admitted that he was a member of MS-13 and that he had participated in the murder of Halley, as well as in the shooting of a 13-year-old boy in Flushing.  

Since 2002, more than 200 MS-13 members, including more than two dozen clique leaders, have been convicted on federal felony charges in the Eastern District of New York.  More than 100 of those MS-13 members have been convicted on federal racketeering charges.  MS-13 is a violent, transnational gang, based in El Salvador, which has engaged in narcotics trafficking, robbery, extortion, murder and other crimes in cities throughout the United States and Central America.  The gang has had a strong presence in immigrant communities in Queens and Long Island.

The government’s case is being prosecuted by Assistant United States Attorneys Gina M. Parlovecchio and Darren A. LaVerne.

The Defendant

HECTOR ALEMAN LEMOS, also known as “Diablito”
Age: 32

Leonid Zalkind, 36, of Philadelphia, Pennsylvania, pleaded guilty today to one count of conspiracy to commit money laundering before U.S. District Judge Nina Gershon of the Eastern District of New York.  At sentencing, scheduled for December 2, 2013, Zalkind faces a maximum penalty of 20 years in prison and a $500,000 fine. 

The guilty plea was announced by U.S. Attorney for the Eastern District of New York Loretta E. Lynch; Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI); and Special Agent-in-Charge Thomas O’Donnell of the HHS Office of Inspector General (HHS-OIG).

According to court documents, from 2010 to 2012, Zalkind operated numerous shell companies and bank accounts through which he laundered the proceeds of health care fraud from the Brooklyn clinic Cropsey Medical Care PLLC (“Cropsey Medical”).  Zalkind conspired with others to accept checks from Cropsey Medical, which were made payable to various shell companies Zalkind controlled.  These checks did not represent payment for any legitimate service at or for Cropsey Medical, but rather were written to launder Cropsey Medical’s fraudulently obtained health care proceeds.  Zalkind admitted at the plea proceeding that he deposited such checks into bank accounts he controlled, intending these transactions to hide and disguise the fact that these funds were proceeds of a crime.  He admitted that he knew these funds were proceeds of illegal activity.

The proceeds of checks Zalkind negotiated and cashed were given to the owners and operators of Cropsey Medical, at which point they were used to pay illegal cash kickbacks to Cropsey Medical’s purported patients.  According to court documents, from approximately November 2009 to October 2012, Cropsey Medical submitted more than $13 million in claims to Medicare and Medicaid, seeking reimbursement for a wide variety of fraudulent medical services and procedures, including physician office visits, physical therapy and diagnostic tests.

Eight individuals, including a doctor, owners/operators and employees of Cropsey Medical clinics, along with other individuals who paid and received kickbacks to induce the transportation and referral of patients to the clinic, as well as individuals who laundered funds for Cropsey Medical, await trial before Judge Nina Gershon.  Trial has not yet been scheduled.

The government’s case is being prosecuted by Trial Attorney Sarah M. Hall and Assistant U.S. Attorneys Shannon Jones and Ilene Jaroslaw of the Eastern District of New York.  The case was investigated by the FBI and HHS.

The case was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of New York.  The Medicare Fraud Strike Force operations are part of the Health Care Fraud Prevention & Enforcement Action Team (HEAT), a joint initiative announced in May 2009 between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,500 defendants who have collectively billed the Medicare program for more than $5 billion.  In addition, HHS’s Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, is 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.

Following a five-week sentencing proceeding, a federal jury in Brooklyn today returned a verdict imposing the death penalty on Ronell Wilson for the murders of two New York City Police Department Detectives, Rodney J. Andrews and James Nemorin.

The verdict was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, Joseph Anarumo, Jr., Special Agent-in-Charge of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) in New York, Raymond W. Kelly, Commissioner, New York City Police Department (NYPD), and Richmond County District Attorney Daniel M. Donovan, Jr.

In March of 2003, the NYPD Firearms Investigation Unit began an investigation of the Stapleton Crew (the “Crew”), a violent criminal enterprise whose members terrorized the borough of Staten Island for several years.  On March 3, 2003, Detective Nemorin, posing as an international gun trafficker, purchased a firearm from a member of the Crew.  Several days later, on March 10, 2003, Detective Nemorin and Detective Andrews, who also was working in an undercover capacity, arranged to purchase another gun from members of the Crew.  On this occasion, however, members of the Stapleton Crew, including Wilson, decided to rob the officers rather than sell them another gun.  In furtherance of this plan, Wilson and an associate met with the undercover officers in the vicinity of the Stapleton Houses in Staten Island.  Wilson instructed the officers to drive him to a second location in Staten Island, where he received a .44 caliber revolver from other Crew associates.  Later, Wilson, who had detected that the undercover detectives were police officers, used that revolver to murder both detectives, execution-style, and steal their car.  When Wilson was apprehended by local police several days later, lyrics to a rap song boasting about the murders were found in his pocket. 

In 2006, a federal jury found Wilson guilty of committing numerous crimes in connection with the Crew, including the murders of Detectives Nemorin and Andrews, and imposed the death penalty.  In 2011, the United States Court of Appeals for the Second Circuit affirmed Wilson’s conviction, but vacated the death sentence and remanded the case for re-sentencing.  As a result of today’s verdict, Wilson will receive the death penalty.

“Ten years ago, on a deserted Staten Island Street, Ronell Wilson ruthlessly executed Detectives Andrews and Nemorin, two husbands, two fathers, two heroes.  Their deaths were a tragedy, not just for their families, but for all of New York City.  Today, a jury of his peers looked at Ronell Wilson, everything he did and all that he is, and rendered justice.  We hope that the verdict brings some measure of closure to the victims’ families, the men and women of the New York City Police Department, and to the communities Detectives Nemorin and Andrews served so well,” stated United States Attorney Lynch.  Ms. Lynch extended her grateful appreciation to the ATF, the NYPD and Richmond County District Attorney’s Office for their assistance in this case.

The government’s case was prosecuted by Assistant United States Attorneys James G. McGovern and Celia Cohen. 

The Defendant

RONELL WILSON
Age: 31

Earlier today, a 28-count federal indictment was unsealed in federal court in Brooklyn charging Jeffrey Shalhoub with operating a Ponzi scheme to defraud investors in his unregistered commodities trading pool.1   The indictment alleges that Shalhoub solicited his alleged victims to invest money in his company, The 9 Group, Ltd., which purportedly pooled investor money and used the money to trade in the commodities futures markets.  Shalhoub told his investors that they would receive returns of up to 10% of their principal investment every week through his investments in commodities futures.  The indictment charges that after he solicited approximately $300,000 of investor money, Shalhoub lost a substantial sum of this money through his trading activities, and misappropriated much of the remaining funds by keeping the money for himself.  The defendant allegedly concealed the theft and losses by sending his investors fraudulent account statements which falsely showed that his investors’ accounts were earning a rate of return of up to 5.2% each week.  The indictment further alleges that because of his trading losses and theft of investor funds, Shalhoub could not pay his existing investors their expected investment returns and, therefore, had to use new investor money to pay purported earnings to the existing investors. 

Shalhoub was arrested earlier today.  He will be arraigned in United States District Court for the Eastern District of New York before United States Magistrate Judge Robert M. Levy.  The case has been assigned to United States District Judge Sterling Johnson, Jr.

The charges were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and Philip R. Bartlett, Inspector-in-Charge, United States Postal Inspection Service.

“As alleged in the indictment, Shalhoub employed fraud and deceit to take advantage of victims who sought to invest in America’s markets.  His promises of high returns were all a criminal mirage, propped up by account statements that were no more than fairy tales,” stated United States Attorney Lynch.  “Today’s arrest demonstrates the Department of Justice’s continuing commitment to investigate and prosecute those who commit financial crimes, particularly those who haven’t gotten the message that we will not tolerate Ponzi schemes.”  Ms. Lynch thanked the United States Postal Inspection Service for its work on the investigation and also acknowledged the Commodities Futures Trading Commission for its assistance.

The government’s case is being prosecuted by Assistant United States Attorneys Tyler Smith, David C. Woll, Jr., and Brendan G. King.

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.  Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants.  For more information on the task force, visit http://www.StopFraud.gov.

The Defendant

JEFFREY SHALHOUB
Age: 38
Residence: Staten Island, NY

_____________________________

1The charges contained in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
 

WASHINGTON. – The Justice Department’s Civil Rights Division and the U.S. Attorney’s Office for the Eastern District of New York announced today that they, along with plaintiff adult home residents, entered into a comprehensive settlement agreement with the state of New York under the Americans with Disabilities Act (ADA).  The settlement agreement will provide relief to thousands of people with mental illness unnecessarily segregated in 23 adult homes in New York City.  Adult homes are institutional, segregated settings that house large numbers of people with mental illness. 

Under the settlement agreement, New York will offer supported housing to people with mental illness currently residing in adult homes.  Supported housing is apartments scattered throughout  the community for which the state provides rental assistance and housing-related support services.  Supported housing residents have access to community-based services and supports that promote their inclusion, independence, and full participation in community life.  The settlement agreement has been filed with the U.S. District Court for the Eastern District of New York for the court’s approval. 

The Supreme Court made clear in its landmark decision Olmstead v. L.C, that people with disabilities have a civil right under the ADA to receive services in the most integrated setting appropriate to their needs.  The state worked cooperatively with the department and private plaintiffs to negotiate a settlement that resolves the allegations that the New York mental health service system violates the ADA by relying on large, institutional adult homes instead of supported housing units that are scattered throughout the community.  A state is responsible for segregation when it designs and implements a system that unnecessarily relies on institutional facilities, regardless of whether they are privately owned and operated.

“Today’s settlement agreement reaffirms the right of people with disabilities to live independently and participate in all aspects of community life,” said Eve L. Hill, Deputy Assistant Attorney General for the Civil Rights Division.  “This agreement creates opportunities for thousands of New Yorkers with mental illness to participate fully in community life, enriching local communities and ending the stigmatization of institutional life.  Governor Andrew Cuomo played a crucial role in making this agreement a reality, and I commend his leadership.”

Over the next five years, New York will provide scattered-site supported housing to at least 2,000, and potentially more than 4,000, adult home residents.  New York has also committed to providing people moving to supported housing with the community-based services and supports that will allow them to thrive in the community.  The agreement also will ensure that adult home residents have the information they need to make an informed choice about where to live.  If they choose to move to supported housing, they will participate in a person-centered, transition planning process.  An independent reviewer with extensive experience in mental health systems will monitor the state’s compliance with the agreement.

Because of this agreement, people like Ilona Spiegel, one of the named plaintiffs, will get the opportunity to live independently and “become emancipated” after 15 years in an adult home.  Spiegel lived independently in her own apartment until she received psychiatric treatment in a hospital in 1998.  When she left the hospital, her only discharge option was to move into an adult home.  In the adult home, Spiegel shares a small room with a roommate, has scheduled mealtimes and no opportunity to cook for herself, has little privacy as staff have entered her room without permission and finds living in the adult home extremely isolating.  Spiegel has said that she cannot wait to live in her own apartment again and have autonomy over her life, including doing her own cooking, cleaning and shopping, have personal privacy in her home, and be free from intrusion into her personal belongings.

Loretta E. Lynch, U.S. Attorney for the Eastern District of New York stated: “With this agreement, thousands of New Yorkers will be able to leave the shadow of institutional living and instead live in and contribute to their communities.  Because of this cooperative effort, their lives will be immeasurably better and our communities all the richer for their presence.”

The individual plaintiff adult home residents, on behalf of themselves and a class of adult home residents with mental illness, are represented by Paul, Weiss, Rifkind, Wharton & Garrison, LLP; Disability Advocates Inc.; Bazelon Center for Mental Health Law; New York Lawyers for the Public Interest; MFY Legal Services Inc.; and Urban Justice Center.

The Civil Rights Division enforces the ADA, which authorizes the attorney general to investigate whether a state is serving individuals with disabilities in the most integrated settings appropriate to their needs. Visit www.justice.gov/crt to learn more about the Olmstead decision, the ADA, and other laws enforced by the Justice Department’s Civil Rights Division.

This agreement is due to the efforts of the following Civil Rights Division and U.S. Attorney’s Office staff: Alison Barkoff, Special Counsel for Olmstead Enforcement; Rebecca B. Bond, Chief of the Disability Rights Section; Sheila Foran, Special Legal Counsel; Amanda Maisels and Nicholas Lee, Trial Attorneys; Lance Simon, Contractor; and Michael J. Goldberger, Chief of Civil Rights in the Civil Division of the U.S. Attorney’s Office for the Eastern District of New York.

Earlier today, at the federal courthouse in Central Islip, New York, Louis Abate, the former Fiscal Director for the Nassau County Office of Housing and Community Development, previously convicted of stealing over $120,000 in federal housing benefits intended for low-income Long Islanders in need of housing financial assistance, was sentenced to eighteen months in prison by United States District Judge Sandra J. Feuerstein.  Judge Feuerstein also imposed restitution of $122,250. 

The sentenced was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and Cary Rubenstein, Special Agent-in-Charge, U.S. Department of Housing and Urban Development, Office of Inspector General.

“The defendant had the trust of his colleagues and the County and was charged with providing much needed housing for low income families.  Instead, he abused that trust to enrich himself and cooked the books to hide his deception,” stated United States Attorney Lynch.  “This sentence should deter likeminded public officials from abusing their authority by embezzling money entrusted in their care.”  Ms. Lynch extended her grateful appreciation to the Department of Housing and Urban Development, Office of Inspector General, for its assistance.    

Qualifying low income families are eligible to receive Section 8 Program rent subsidies under a federal program funded by the United States Department of Housing and Urban Development (HUD).  The Nassau County Office of Housing and Community Development (NCOHCD) is the administrative entity responsible for implementing and monitoring the programs and grants funded by HUD in Nassau County, including Section 8 grants.  Once a Section 8 applicant is accepted for assistance, NCOHCD, using Section 8 HUD funds, provides rent assistance through payments that are made directly to the recipient’s landlord.  The Fiscal Director of NCOHCD is appointed by the Nassau County Executive.  

Between May 2009 and August 2011, the defendant stole more than $120,000 in federal rental subsidies from a Section 8 program that he oversaw, which serviced individuals residing in Island Park, New York.  In order to accomplish the theft, the defendant created a fictitious landlord with no associated tenant, and for more than two years diverted the Section 8 benefits for this supposed landlord to a bank account he personally controlled.  Abate was successful in concealing his fraud from the NCOHCD by systematically altering various accounting records to remove any reference to the diverted funds.  During this period, Abate illegally paid himself approximately $5,000 per month – more than three times the monthly amount of federal Section 8 subsidies received by any single participating landlord in the Island Park area during that time.

The government’s case is being prosecuted by Assistant United States Attorney Lara Treinis Gatz.

The Defendant

Name: LOUIS ABATE
Age: 49
Residence: North Massapequa, New York

Earlier today, in federal court in Brooklyn, New York, Joseph Debose, a resident of North Carolina and a former United States Marine and Staff Sergeant in a U.S. Special Forces National Guard Unit, was sentenced to 24 months’ imprisonment for violating the Arms Export Control Act.  Debose provided multiple shipments of firearms to co-conspirators who then secreted the weapons in packages and transported them to shipping companies to be sent to customers in China.  The weapons included dozens of semi-automatic handguns, rifles and shotguns.

The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York;  John Carlin, Assistant Attorney General, U.S. Department of Justice; James T. Hayes, Jr., Special Agent-in-Charge, U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI), New York; Joseph Anarumo, Jr., Special Agent-in-Charge, Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), New York Field Division; Toni Weirauch, Special Agent-in-Charge, Internal Revenue Service (IRS), New York Field Office; and Sidney Simon, Special Agent-in-Charge, Department of Commerce (DOC), Office of Export Enforcement, New York Field Office.

“Through his service in the U.S. Marine Corps and National Guard, the defendant swore an oath to this country and its people, and was decorated.  He then traded the honor which won him medals for the easy money of illegal arms sales,” stated U.S. Attorney Lynch.  “We take very seriously our responsibility to stem the flow of illegal weapons through New York and ensure our national security.  This case demonstrates the tremendous effectiveness and determination of the multiple federal law enforcement agencies tasked with taking on this global challenge.”  Ms. Lynch expressed her grateful appreciation to the federal agencies that worked closely together to investigate the case.

The sentence was imposed by United States District Judge Eric N. Vitaliano.  In addition to the 24 months in prison, Judge Vitaliano imposed a term of three years of supervised release.  To date, four individuals have been convicted of weapons trafficking and export offenses in connection with this case. 

Authorities initially learned of the arms smuggling scheme in August 2011 after counter-smuggling officers in China seized a package containing firearms with defaced serial numbers, which had been shipped from Queens, New York.  Upon learning of the seizure of the weapons, U.S. law enforcement officials traveled to China to examine the evidence.  The types of weapons seized by the Chinese authorities have been included by the President of the United States on the United States Munitions List, and may not be exported without a license from the U.S. State Department.  Using forensic techniques, agents determined that one of the weapons seized in China had originally been purchased in North Carolina.  Agents then traced that gun, and others, to Debose.  Agents also learned that Debose had filed a false police report, in which he claimed the weapons had been stolen from his garage.  Agents arrested Debose in a sting operation when he arrived at a meeting location with a truckload of guns for the next shipment.  At the time of his arrest, Debose was a staff sergeant assigned to a Special Forces National Guard unit based in West Virginia. 

The government’s case was prosecuted by Assistant United States Attorney Seth DuCharme, with assistance from Trial Attorney David Recker of the Department of Justice Counterespionage Section.  Assistance also was provided by the U.S. Attorneys’ Offices in the Northern District of West Virginia and the Eastern District of North Carolina.

The Defendant

JOSEPH DEBOSE
Age: 30

Earlier today, at the federal courthouse in Brooklyn, New York, Ronald Atkinson was sentenced to a term of imprisonment of 151 months for his violent assault on a correctional counselor while incarcerated at the Metropolitan Detention Center in Brooklyn, New York. The sentence will run consecutively to the 86 months’ incarceration remaining on Atkinson’s 2010 sentence for bank robbery. The sentence was imposed by United States District Judge Edward R. Korman, who also imposed a term of supervised release of three years.

The sentence was announced by Loretta E. Lynch, United States Attorney for the
Eastern District of New York; and George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation (FBI), New York Field Office.

“When held to account for his criminal activity that spanned the country, the defendant sought to continue his crime spree within the walls of the correctional institution, with his unprovoked and vicious assault on a federal employee. Today, Atkinson received the significant prison sentence called for by his actions,” stated United States Attorney Lynch. “Today’s sentence represents a clear warning to all federal prison inmates that assaults on Bureau of Prisons’ staff will be met with the full force of the law.”

Atkinson was arrested by the FBI on June 17, 2009, on charges that he committed four bank robberies in Manhattan and two in Las Vegas, Nevada. He was ordered detained and incarcerated at the Metropolitan Detention Center pending trial. On June 29, 2009, Atkinson committed a brutal and utterly unprovoked assault on a correctional counselor, punching him in the head multiple times until Atkinson was restrained. As a result of the assault, the correctional counselor suffered serious injuries, including a broken nose, broken bones under his right eye, broken bones in his right eye socket, a gash in his right cheek that required several stitches to close, two black eyes, a split lip, and two slipped discs in his neck, which continue to cause pain and numbness in the counselor’s arm and hand. The counselor also now suffers from migraines, vertigo, and post-traumatic stress disorder, none of which he suffered from prior to the assault.

As a result of all of these injuries, the counselor, an 18-year veteran of the Bureau of Prisons who had also worked at the Metropolitan Correctional Center in Manhattan and the Federal Detention Center in Miami, Florida, was forced to take a medical retirement from his job with the Bureau of Prisons.

Ms. Lynch thanked the Federal Bureau of Investigation and the Federal Bureau of Prisons for their assistance in this case.

The government’s case was prosecuted by Assistant United States Attorney Douglas M. Pravda.

The Defendant:

Name: RONALD ATKINSON
Age: 40

Earlier today, Sergio Benitez, a developer of affordable housing projects in Brooklyn for the New York City Department of Housing Preservation and Development (HPD), was sentenced to a term of imprisonment of 22 months followed by three years of supervised release, including a three-year ban from applying for any other city or governmental housing contracts, based on his conviction for wire fraud conspiracy.  He was also ordered to pay $228,200 in restitution to the City of New York and fined $10,000.  Benitez previously paid an additional $228,200 in forfeiture to the government.  The sentencing proceeding was held before United States District Judge Nina Gershon at the U.S. Courthouse in Brooklyn, New York. 

The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI); Daniel R. Petrole, Deputy Inspector General, United States Department of Labor (DOL) Office of Inspector General; and Rose Gill Hearn, Commissioner, New York City Department of Investigation (DOI). 

Benitez was arrested on October 6, 2011, as part of a seven-defendant case involving corruption at HPD and ultimately pleaded guilty to wire fraud conspiracy.  According to the government’s filings and other public records, Benitez was a major real estate developer of affordable housing projects sponsored by HPD.  Benitez defrauded HPD by demanding kickbacks from a construction contractor in return for hiring him as the general contractor on the Cooper Decatur Cluster affordable housing development in Brooklyn.  From 2006 until Benitez’s arrest, the contractor paid two percent of the funds he received from HPD to Benitez, for a total of $228,200 in kickbacks.  In order to cover the cost of these kickbacks, the contractor inflated his invoices to HPD by a similar amount.  To disguise the kickbacks, Benitez issued sham invoices to the contractor from one of Benitez’s several companies, All Boro Painting & Repairs, Inc.  In the meantime, Benitez was featured as a model real estate developer in the New Housing Marketplace Plan issued by HPD in early 2011, where he was quoted as saying, “I’m originally from Brooklyn, and I see my work as a way of giving back.”

“Sergio Benitez claimed that he was ‘giving back’ to Brooklyn, but in reality, all he gave the people of the City of New York was a hefty bill for his own corruption.  In taking hundreds of thousands of dollars in kickbacks, Benitez stole from the very community he had pledged to serve, by diverting funds meant for affordable housing construction into his own pockets,” stated United States Attorney Lynch.  “Today’s sentence shows that even the most influential real estate developers will be brought to justice if they steal public funds for corrupt personal gain.”

FBI Assistant Director-in-Charge Venizelos stated, “While Sergio Benitez publicly touted his community-minded commitment to Brooklyn, he was privately taking kickbacks whose cost was passed on to the city. Actions speak louder than words, and his actions were self-serving and deceitful.”

DOI Commissioner Gill Hearn stated, “This developer hurt low-income New Yorkers, fleeced the taxpayers, and is going to prison for milking the City’s affordable housing program for kickbacks.  His undoing in this joint investigation should warn off anyone tempted to tack the cost of corruption onto the City’s bill.”

United States Attorney Lynch thanked the Internal Revenue Service, Criminal Investigation, New York; the United States Department of Housing and Urban Development; and the New York City Police Department for their cooperation in this case.

To date nine defendants, including HPD’s former Assistant Commissioner, two other supervisory officials at HPD, and six real estate developers and general contractors have pleaded guilty to charges including racketeering conspiracy, bribery and wire fraud conspiracy in connection with the government’s ongoing investigation of widespread corruption of the affordable housing industry.  Benitez is the third defendant to have been sentenced.   

The government’s case is being prosecuted by Assistant United States Attorneys Cristina M. Posa, Anthony Capozzolo and Claire Kedeshian.

The Defendant

SERGIO BENITEZ
Colts Neck, New Jersey
Age: 53

Walgreen Co. (Walgreens), the nation’s largest drug store chain, agreed to pay $80 million in civil penalties for violations of the Controlled Substances Act resolving administrative actions by the Drug Enforcement Administration (DEA), and Department of Justice civil investigations in the Eastern District of New York, the Southern District of Florida, the District of Colorado and the Eastern District of Michigan, as well as civil investigations by DEA nationwide.  Walgreens also agreed to surrender the authority of six of its pharmacies and one of its distribution centers to distribute or dispense certain controlled substances for a period of two years. Walgreens further agreed to create a Department of Pharmaceutical Integrity to ensure compliance with regulations and to prevent the diversion of controlled substances. The details of the nationwide resolution, announced by the Southern District of Florida U.S. Attorney’s Office on June 11, 2013, can be found at http://www.justice.gov/usao/fls/PressReleases/130611-01.html.

Details surrounding the Eastern District of New York’s investigation of Walgreens were made public earlier today with the guilty plea of nurse practitioner Eva MacDowall.  MacDowall, who was prosecuted by the Suffolk County District Attorney’s Office, pled guilty in Suffolk County Court to one charge of criminal possession of a forged instrument in the second degree in connection with her writing a bogus prescription for oxycodone that she filled at a Walgreens pharmacy in Selden, New York, on June 8, 2012.  The investigation and prosecution of MacDowall revealed that Walgreens repeatedly violated the Controlled Substances Act by filling numerous prescriptions that Walgreens employees knew, or should have known, were not issued for a legitimate medical purpose.  Over a two year period from July 2010 until July 2012, MacDowall filled 94 different, illegitimate prescriptions -- primarily for two highly addictive painkillers, oxycodone and hydrocodone -- at a Walgreens pharmacy in Selden and two Walgreens pharmacies in Medford.

“The abuse of oxycodone, hydrocodone and other painkillers has become an epidemic, as overdose deaths from prescription painkillers is now more common than overdose deaths from heroin and cocaine combined,” said United States Attorney Loretta E. Lynch.  “Nationwide, Walgreens repeatedly failed to live up to its obligation to safeguard highly addictive prescription drugs.  Here on Long Island, these three stores allowed themselves to become a haven for prescription drug abusers, turning a blind eye as McDowall repeatedly filled one forged prescription after another.  In so doing, Walgreen’s contributed to the epidemic increase in the abuse of prescription drugs that we are seeing in Long Island, and around the country.”

Suffolk County New York District Attorney Thomas J. Spota stated, “We are pleased that Suffolk County’s prosecution of this defendant aided in the exposure of improper practices at Walgreens and the successful civil action by the United States Attorneys’ Offices that ultimately forced the retailer to comply with the law and pay 80 million dollars in fines.”                                 

Brian R. Crowell, Special Agent-in-Charge, Drug Enforcement Administration, New York Filed Office, stated, “This is the trend of a local investigation merging with a nationwide federal investigation focused on the diversion of pain medication and its harmful effects to citizens across our country.  Beginning in 2010, the Suffolk County Police Department began investigating a nurse practitioner forging prescriptions for inexplicably large amounts of oxycodone and hydrocodone filled at two Walgreens Pharmacies in Long Island, New York.  Subsequently, a Federal Task Force pooled their resources which led to the national civil investigation into Walgreens CSA violations.  The primary threat to the New York City region is opiate abuse, ranging from diverted pain medication to heroin.  Opiate abuse has spread like cancer leaving disaster and death in its wake; there was a 6% increase of people seeking treatment for heroin addiction last year, and of all prescription drug deaths, 74% are accidental deaths.  Today’s announcement demonstrates law enforcement’s collaboration at its best to combat the deadly effects of opiate abuse and identify those who threaten public health and safety and violate the law at every step in the drug supply chain.”

In January 2012, the United States Attorney’s Office for the Eastern District of New York and the Drug Enforcement Administration, in conjunction with the five district attorneys in this jurisdiction, 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 Prescription Drug Initiative to mount a comprehensive response to what the U.S. Department of Health and Human Services’ Centers for Disease Control and Prevention has called an epidemic increase in the abuse of so-called opioid analgesics.  To date, the Prescription Drug Initiative has brought over 120 federal and local criminal prosecutions, taken civil enforcement action against a pharmacy, 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.

Assistant United States Attorney Elliot M. Schachner led the civil investigation of Walgreens in the Eastern District of New York.  Suffolk County Assistant District Attorney Tanya Rickoff was responsible for the criminal prosecution of Eva MacDowall.

Earlier today, at the federal courthouse in Central Islip, New York, Frank Lobacz, a Bayshore, New York, doctor convicted of health care fraud, tax evasion, and the looting of an employee pension fund, was sentenced to 65 months in prison by United States District Judge Dennis R. Hurley.  Judge Hurley also imposed fines, restitution, and penalties on Lobacz of over $3.5 million.

The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York and Toni Weirauch, Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”).

On November 13, 2010, after a month-long trial, a jury convicted Lobacz on all six counts of an indictment charging health care fraud, the filing of false pension fund reports with the U.S. Department of Labor, and tax evasion during the years 2001 to 2003.  In addition to his prison sentence, the district court today ordered Lobacz to pay $727,480.63 in restitution to two private insurance plans, as well as $2,886,454.60 in federal income tax.

Lobacz was a licensed New York Doctor of Osteopathic Medicine, or D.O., who maintained offices in Nassau and Suffolk counties.  In the 1970’s, he created a retirement pension plan for himself and his staff, and named himself as the plan administrator in filings with the United States Department of Labor.  As the administrator, Lobacz was responsible for filing annual reports on the financial health of the plan and was required to notify the IRS if he or any one else borrowed or withdrew money from the plan.

At trial, witnesses testified that in addition to running his medical practice, Lobacz engaged in highly complex and risky stock options trading.  Between 2000 and 2002,  he transferred over $3.5 million in money and stocks to and from the pension plan and his personal brokerage account to pay for personal expenses, including vacation home improvements, artwork, credit card debt, a home equity loan, and college tuition for a daughter.  The defendant never reported this misuse of employee pension funds, and between 2000 and 2003, he failed to report over $1 million in options trading income to the IRS.

Evidence at trial also showed that starting in 2005, to compensate for trading losses, the defendant filed some 1,500 false insurance claims for medical services and procedures purportedly rendered to a retired couple, who were close friends of the defendant, as well as to Lobacz’s younger children, his wife, and himself.  The couple testified at trial that although they received routine acupuncture treatments from the defendant, which would not have been covered under their insurance plans, the bulk of the bills submitted in their names were for services that they either did not receive, or for visits on dates when the couple was traveling outside of New York State.  Other fraudulent bills claimed that the defendant, his wife, and two children received near daily treatments normally provided to those suffering severe respiratory conditions, among other ailments.  However, public school records, as well as patient files from Lobacz’s offices, showed that no such treatments or visits actually occurred.  In all, the defendant billed $727,480.62 in false health care claims to GHI and United Healthcare Insurance Company of New York.

Following imposition of the sentence, United States Attorney Lynch stated, “The defendant Lobacz had a medical practice and investment portfolio which generated significant income, but that was not enough for him.  Abandoning his fiduciary obligations to his staff, he looted their pension plan to cover his own personal expenses.  Continuing his pattern of using other people, the defendant used friends’ and family members’ personal information to defraud private insurance companies.  Further, Lobacz also failed to pay taxes on very substantial income.  He will now be held to account for these crimes.”

Ms. Lynch expressed her grateful appreciation to the IRS for its investigation and participation in this case.

The government’s case is being prosecuted by Assistant United States Attorney Michael P. Canty and James M. Miskiewicz.

The Defendant:

FRANK LOBACZ
Age: 68

New Arrest: DEA agents executed a search warrant this morning in Huntington Station, Long Island. Adrian Bonilla, 34, of Huntington Station was placed under arrest. The search yielded 11 kilos of cocaine and $3 million in USC.

BROOKLYN, NY – Earlier today, Anatoly Kraiter, 35, of Brooklyn, New York, was sentenced today to 37 months in prison for his role as a money launderer for a $77 million Medicare fraud scheme.  In addition to the prison term, U.S. District Judge Nina Gershon of the Eastern District of New York sentenced Kraiter to three years of supervised release and ordered him to forfeit $100,000.  Kraiter’s surrender date is September 16, 2013. 

The sentence was announced by U.S. Attorney for the Eastern District of New York Loretta E. Lynch; Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI); and Special Agent-in-Charge Thomas O’Donnell of the HHS Office of Inspector General (HHS-OIG).

Kraiter pleaded guilty on July 24, 2012 to one count of conspiracy to commit money laundering.  Including Kraiter, 13 individuals were convicted in this case, either through guilty plea or trial conviction. 

According to court documents, from 2008 to 2010, Kraiter opened and operated numerous shell companies and bank accounts through which he laundered the proceeds of health care fraud from Brooklyn clinic SZS Medical Care PLLC (“SZS Medical”).  The owners and operators of SZS Medical, along with closely related medical clinics Bay Medical Care PC and SVS Wellcare Medical PLLC (collectively, “the Bay Medical clinics”) committed a $77 million Medicare fraud from 2005 to 2010.  According to court documents, the Bay Medical clinics submitted more than $77 million in claims to Medicare, seeking reimbursement for a wide variety of fraudulent medical services and procedures, including physician office visits, physical therapy and diagnostic tests.

The government’s investigation included the use of a court-ordered audio/video recording device hidden in a room at the clinic, in which the conspirators paid cash kickbacks to corrupt Medicare beneficiaries. The conspirators were recorded paying approximately $500,000 in cash kickbacks during a period of approximately six weeks from April to June 2010. This room was marked “PRIVATE” and featured a Soviet-era poster of a woman with a finger to her lips and the words “Don’t Gossip” in Russian. The purpose of the kickbacks was to induce the beneficiaries to receive unnecessary medical services or to stay silent when services not provided to the patients were billed to Medicare.

To generate the large amounts of cash needed to pay the patients, the conspirators used a network of external money launderers, including Kraiter.  According to court documents, Kraiter conspired with others to accept checks from the Bay Medical clinics, which were made payable to various shell companies Kraiter and his co-conspirators controlled. These checks did not represent payment for any legitimate service, but rather were written to launder the Bay Medical clinics’ fraudulently obtained health care proceeds. Kraiter admitted at his change of plea hearing that he deposited such checks into bank accounts he controlled, intending these transactions to hide and disguise the fact that these funds were proceeds of a crime.  He admitted that he knew these funds were proceeds of health care fraud.

According to court documents, Kraiter and his co-conspirators negotiated and cashed these checks and provided the cash back to the owners and operators of the Bay Medical clinics. Such cash was then diverted to the personal use of the owners and operators of the Bay Medical clinics, and used to pay illegal cash kickbacks to the Bay Medical clinics’ purported patients.

This case is being prosecuted by Trial Attorney Sarah M. Hall of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Shannon Jones and William Campos of the Eastern District of New York.  The case was investigated by the FBI and HHS.

The case was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of New York. The Medicare Fraud Strike Force operations are part of the Health Care Fraud Prevention & Enforcement Action Team (HEAT), a joint initiative announced in May 2009 between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,500 defendants who have collectively billed the Medicare program for more than $5 billion.  In addition, HHS’s Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, is 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.

William J. Conway, a Baldwin, New York physician, pled guilty today in United States District Court for the Eastern District of New York to conspiring to illegally distribute the highly addictive painkiller oxycodone to patients, who the defendant knew were addicts and without performing any meaningful medical examination. When sentenced, Conway faces up to 20 years in prison, a $1 million fine and loss of his license to practice medicine.

The guilty plea was announced by Loretta E. Lynch, the United States Attorney for the Eastern District of New York, Brian R. Crowell, Special Agent-in-Charge of the U.S. Drug Enforcement Administration (DEA), New York Division, and Thomas V. Dale, Commissioner, Nassau County Police Department. The plea was entered before the Honorable Leonard D. Wexler at the United States Courthouse in Central Islip, New York.

Conway was arrested on June 6, 2012 as part of the Eastern District of New York’s Prescription Drug Initiative, led by the United States Attorney’s Office and the DEA, working with the Nassau County Police Department, the New York State Police and numerous other local, state and federal law enforcement agencies. He has been held in custody since the arrest.

According to court filings and records of the New York State Bureau of Narcotics Enforcement, between January 2009 and November 2011, Conway issued 5,554 oxycodone prescriptions – for a total of 782,032 pills – to numerous individuals. During the execution of a federal search warrant at his offices on March 1, 2012, Conway surrendered his DEA registration authorizing him to prescribe controlled substances. Despite that surrender, Conway continued to engage in the conspiracy to illegally distribute oxycodone after that date.

On April 23, 2011, Giovanni Manzella, a 34 year-old man from Long Beach, New York, died of an overdose of oxycodone less than 48 hours after Conway provided him with two prescriptions totaling 450 pills. On October 27, 2011, 29 year-old Christopher Basmas of Hicksville, New York was pronounced dead of an overdose, also within two days after receiving a prescription from Conway for 180 pills of oxycodone. Patient files seized by the DEA revealed that neither man received meaningful medical examinations from Conway. The files for these and other patients typically consisted of little more than notations of a patient’s height, weight and blood pressure. After Basmas’ death, Conway attempted to alter patient files to cover his tracks, but still continued to issue prescriptions – in some instances, in the names of individuals he had never treated, or even met.

In September 2012, Conway’s office assistant, Robert Hachemeister, was charged with conspiring with Conway to illegally distribute oxycodone, and with distributing oxycodone to Conway’s patients. Hachemeister, who had worked as an office assistant for Conway since approximately 1995, distributed thousands of oxycodone pills using prescription pads that were pre-signed by Conway between 2011 and 2012. On January 9, 2013, Hachemeister pled guilty to conspiring to illegally distribute oxycodone and is currently awaiting sentencing.

“Instead of providing needed medical services to his community, Dr. Conway directly contributed to the tragedy of prescription drug abuse that has swept across our district and our nation. On Conway’s watch, oxycodone pills might as well have been mints in a candy jar. Even the death of his patients only led him to try to conceal his actions, rather than truly care for his patients. Today’s conviction should serve as a warning to those who would violate their oath as medical professionals to do no harm: if you illegally distribute prescription drugs, you will be held accountable,” stated United States Attorney Lynch. “I want to thank our partners at the DEA, Nassau County Police and the New York State Police for their effective work in investigating this case.”

DEA Special Agent-in-Charge Crowell stated, “One of DEA’s top priorities is to stop overdoses and deaths by fully identifying and prosecuting those responsible for putting diverted drugs in the hands of those abusing opiates. Dr. Conway has been tied to local overdoses that bring home the enormity of the country’s prescription pill epidemic. One out of every ten high school seniors has abused oxycodone or hydrocodone for recreational use. Investigating rogue doctors and increasing the awareness of the dangers associated with Rx abuse are two significant steps our law enforcement team takes to curtail this problem and to protect our communities.”

The Prescription Drug Initiative is a joint effort led by the United States Attorney’s Office for the Eastern District of New York, the DEA and the five District Attorneys in Kings, Nassau, Queens, Richmond and Suffolk Counties, working in conjunction with the New York City Police Department and the Nassau and Suffolk County Police Departments, as well as the Department of Health and Human Services, the Internal Revenue Service, New York/New Jersey HIDTA, the New York State Department of Health and the New York State Medicaid Inspector General. The Prescription Drug Initiative is a broad and comprehensive approach to the epidemic of prescription drug trafficking and abuse, involving not only criminal investigation and prosecution at the federal, state and local level, but also the targeted use of civil law enforcement, regulatory action and community outreach. The Initiative has expanded information-sharing among federal and state enforcement agencies to better identify and target suspected traffickers, and ensure greater use of criminal, civil, forfeiture, injunctive and other tools.

The government’s case is being prosecuted by Assistant United States Attorneys Sean C. Flynn and Michael P. Canty.

The Defendant

Name: WILLIAM J. CONWAY
Age: 70

BROOKLYN, NY - Michael J. Scaglione, Esq., 41, an attorney in Coral Gables, Florida, was arrested this morning on charges that he laundered over $750,000, which he believed were proceeds from a penny stock fraud scheme. The money was, in fact, provided to Scaglione by an undercover law enforcement agent who posed as a criminal stock promoter as part of a sting operation. Scaglione, who is a partner at Scaglione Law Firm, P.A., in Coral Gables, Florida, was arrested after he took possession of an additional $500,000 in cash that he agreed to launder.

The charges were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; George Venizelos, Assistant Director in Charge, Federal Bureau of Investigation, New York Field Office (FBI); and Toni Weirauch, Special Agent in Charge, United States Internal Revenue Service, Criminal Investigation, New York (IRS).

According to the complaint unsealed this morning in the Eastern District of New York, Scaglione exploited his position as an attorney to launder money through an escrow account for an undercover law enforcement agent (“undercover agent”) who posed as a corrupt stock promoter. In his dealings with Scaglione, the undercover agent represented himself to be a middleman working with corrupt stock brokers who artificially inflated prices for worthless stock in exchange for high commissions. Scaglione agreed to launder what he believed were proceeds of this stock fraud through his attorney escrow account in order to hide that money from the United States Securities and Exchange Commission and the IRS. Scaglione then funneled over $750,000, including $88,000 in cash given to him in a Federal Express box in the lobby of a Miami Beach hotel, through the escrow account into the undercover agent’s bank account in Long Island, New York. Scaglione carefully structured the movement of these funds to avoid triggering financial reporting requirements. In exchange, Scaglione collected over $25,000 in fees. In recorded conversations, Scaglione assured the undercover agent that their conversations were “completely privileged” and that his money was “safe” with Scaglione. When the undercover agent explained to Scaglione that he did not “want to go to jail,” Scaglione stated to the undercover agent that the escrow account was “tight as can be.” Directly prior to his arrest this morning, at a hotel in Miami Beach, Florida, Scaglione accepted an additional $500,000 in cash from the undercover agent, which Scaglione believed to be proceeds from the penny stock fraud.

“As alleged in the complaint, Scaglione hid behind his license to practice law as he threw himself into the purported scheme to launder money. In so doing he crossed the line from attorney to defendant,” stated United States Attorney Lynch. “I would like to thank our partners at the FBI and the IRS for their swift action and effective work on this important investigation.”

FBI Assistant Director in Charge Venizelos stated, “As alleged, the defendant breached the code of ethics for his profession and flagrantly broke the law, in laundering what he believed to be the proceeds of criminal activity. Contrary to the counsel he gave, the attorney-client privilege is not a veil of secrecy to hide criminal conduct.”

IRS Special Agent in Charge Weirauch stated, “Criminal attempts to conceal reportable financial transactions from government agencies, including the Internal Revenue Service and the Securities and Exchange Commission, may appear to be victimless crimes to some. However, they erode our nation’s financial systems and ultimately harm the American public. In particular, the laundering of proceeds from illegitimate activities that are nevertheless taxable threatens our voluntary tax compliance system; failure to investigate and prosecute these types of crimes would erode public confidence.”

The defendant is scheduled to appear tomorrow before United States Magistrate Judge Alicia M. Otazo-Reyes at the United States Courthouse in Miami, Florida, for removal proceedings to the Eastern District of New York.

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

The government’s case is being prosecuted by Assistant United States Attorney Jacquelyn M. Kasulis..

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency task force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets and recover proceeds for victims of financial crimes.

The Defendant

Name: MICHAEL J. SCAGLIONE
Age: 41
Miami Springs, Florida

Preet Bharara, Loretta E. Lynch, and Wifredo A. Ferrer – the United States Attorneys for the Southern District of New York (“SDNY”), Eastern District of New York (“EDNY”), and Southern District of Florida (“SDFL”), respectively – Michele M. Leonhart, the Administrator of the U.S. Drug Enforcement Administration (“DEA”), James Dinkins, the Executive Assistant Director of the U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), and Raymond W. Kelly, the Police Commissioner of the City of New York (“NYPD”), announced today the extradition of DANIEL BARRERA BARRERA, also known as “Loco,” a citizen of Colombia, to the U.S. on charges that for decades he manufactured hundreds of tons of cocaine annually in Colombia and trafficked it to various parts of the world, including the U.S., and laundered tens of millions of dollars in proceeds from that narcotics trafficking activity. BARRERA arrived in the Southern District of New York this afternoon. He will be presented and arraigned in the Southern District of New York before U.S. District Judge Alvin K. Hellerstein on July 10, 2013, at 11:00 a.m., and in the Eastern District of New York before U.S. District Judge I. Leo Glasser on July 11, 2013, at 3:30 p.m. Following his prosecution in New York, BARRERA will be presented and arraigned in the Southern District of Florida.

In March 2010, the U.S. Department of the Treasury’s Office of Foreign Assets Control designated BARRERA as a “Special Designated Narcotics Trafficker,” pursuant to the Foreign Narcotics Kingpin Designation Act. BARRERA was arrested in Venezuela on September 18, 2012. Thereafter, he was sent to Colombia, from where the U.S. sought BARRERA’s extradition. The extradition of BARRERA is the result of an ongoing Organized Crime Drug Enforcement Task Forces (OCDETF) investigation led by DEA and HSI. The principal mission of the OCDETF program is to identify, disrupt and dismantle the most serious drug trafficking, weapons trafficking and money laundering organizations, and those primarily responsible for the nation’s illegal drug supply.

U.S. Attorney Preet Bharara said: “For more than a decade, as alleged, Daniel Barrera Barrera has operated at the center of a truly evil web spun between his narcotics trafficking organization and two violent and sworn enemy terrorist organizations – the AUC and the FARC. By purchasing raw cocaine paste from the FARC, which he processed in laboratories in areas controlled by the AUC, to whom he paid fees, Barrera’s behemoth cocaine organization reached an annual production rate of upwards of 400 tons, enriching itself and the two terrorist organizations it paid off, as the indictment describes. This was truly cocaine with blood in its background. With his arrival in the U.S., Barrera must now answer for his alleged crimes, and we will continue to work with our law enforcement partners, both here and abroad, to prosecute him and other alleged titans of the transnational drug trade.”

U.S. Attorney Loretta E. Lynch said: “As alleged in the three indictments on which he was extradited, Daniel “Loco” Barrera Barrera was the kingpin of a stunningly prolific Colombian drug cartel, which flooded the globe with its deadly product. Barrera also allegedly wrought destruction closer to home, working with not one but two terrorist organizations responsible for decades of death and destruction in Colombia, all to ensure his deadly business ran smoothly. His extradition to the United States marks the fall of the last don of an organization marked by its worldwide reach, ruthless criminality, and staggering profits. This investigation exemplifies the global cooperation necessary to combat international drug traffickers and our commitment to dismantle these criminal organizations from the highest levels down.”

U.S. Attorney Wifredo A. Ferrer said: “Daniel “Loco” Barrera Barrera’s arrest and extradition is the direct result of strong international cooperation with Colombian authorities. It also reflects the hard work and perseverance of our law enforcement partners – both at home and abroad – whose dedicated efforts led to the capture of one of the world’s most notorious drug traffickers. While Barrera evaded capture for several years, the time has finally come for him to answer for his crimes and face justice. As this case confirms, the United States will never tire in its pursuit of those who profit from the illegal drug trade.”

DEA Administrator Michele M. Leonhart said: “Daniel Barrera allegedly worked with both the FARC and AUC terrorist organizations in operating his drug trafficking syndicate, becoming one of the most prolific drug traffickers of the past twenty years. Charged with manufacturing upwards of 400 tons of cocaine a year, Barrera’s alleged impact on the global trade of cocaine was immense – but so was DEA’s response. Thanks to the cooperative efforts of our Colombian and U.S. law enforcement counterparts, Barrera’s criminal career is over as he now faces charges that may bring him a life behind bars.”

ICE HSI Executive Assistant Director James Dinkins said: “Mr. Barrera and his co-conspirators stand accused of running one of the largest cocaine trafficking operations in history. His extradition to the United States represents a major victory for the rule of law. While Mr. Barrera may have thought he was safe hiding and conducting his illicit activities in South American countries, an international team of law enforcement agencies worked tirelessly and cooperatively towards bringing him to justice.”

NYPD Commissioner Raymond W. Kelly said: “If any one case epitomizes the nexus between terrorism and drug trafficking and the destructive impact on Colombian society, this is it; not to mention the crime and suffering cocaine addiction has fueled on the demand-side of the equation in the streets of New York. Barrera’s extradition is a milestone, and we’re indebted to the detectives, agents, and prosecutors who’ve made it possible.”

As alleged in the Superseding Indictment filed in the Southern District of New York (S1 07 Cr. 862 (AKH)), the Superseding Indictment filed in the Eastern District of New York (S2 10 Cr. 288 (ILG)), the Superseding Indictment filed in the Southern District of Florida (S1 10 Cr. 20587 (DLG)), other documents filed in these cases, and information in the public record:

Since 1998, BARRERA has run a cocaine manufacturing and trafficking syndicate which each month processed approximately 30,000 kilograms of raw cocaine base into about the same amount of cocaine powder – in total, up to approximately 400 tons of cocaine annually.

BARRERA purchased the raw cocaine base or paste from the designated terrorist group Fuerzas Armadas Revolucionarias de Colombia (Revolutionary Armed Forces of Colombia, or the “FARC”), which has been the world’s largest supplier of cocaine and which has engaged in bombings, massacres, kidnappings, and other acts of violence within Colombia.

BARRERA converted the raw cocaine into powder at laboratories he owned and operated in an area of Colombia controlled by the since demobilized terrorist group, Autodefensas Unidas de Colombia (the “AUC”). For years, the AUC’s main political objective was to defeat the FARC in armed conflict, and it financed its terrorist activities through the proceeds of cocaine trafficking in AUC-controlled regions of Colombia.

Although BARRERA purchased raw materials for cocaine production from the FARC, he was able to maintain his network of cocaine-processing laboratories in AUC-controlled territory, in part by paying monthly “taxes” to the AUC. The fees BARRERA paid to the AUC also allowed him to safely move the processed cocaine through and out of Colombia, into locations on four continents – including into the U.S.

BARRERA reaped tens of millions of dollars of profits from cocaine trafficking, which he laundered through illicit means.

The FARC and the AUC are both designated by the U.S. Department of State as Foreign Terrorist Organizations.

BARRERA, 44, is charged in the Southern District of New York with one count of conspiring to distribute and manufacture cocaine knowing it would be unlawfully imported into the U.S. On that count, BARRERA faces a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison.

BARRERA is charged in the Eastern District of New York with one count of conspiracy to launder money. On that count, BARRERA faces a maximum sentence of 20 years in prison.

BARRERA is charged in the Southern District of Florida with one count of conspiring to import cocaine into the U.S. and one count of conspiring to manufacture and distribute cocaine knowing that it would be unlawfully imported into the U.S. On those counts, BARRERA faces a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison.

Mr. Bharara, Ms. Lynch, and Mr. Ferrer praised the outstanding work of the OCDETF, working in cooperation with HSI New York’s El Dorado Task Force, the DEA’s Bogota Country Office, the DEA’s Caracas Country Office, the DEA’s Miami Field Division, the DEA’s New York Drug Enforcement Task Force – which is comprised of agents and officers of the DEA, the New York City Police Department, and the New York State Police – as well as HSI Bogota. Mr. Bharara, Ms. Lynch, and Mr. Ferrer also thanked the Colombian National Police, the U.S. Marshals Service, and the U.S. Department of Justice’s Office of International Affairs for their ongoing assistance.

The Southern District of New York case is being handled by that office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Jenna Dabbs, Benjamin Naftalis, and Andrea Surratt are in charge of the prosecution. The Eastern District of New York case is being handled by that office’s International Narcotics Strike Force. Assistant United States Attorneys Justin Lerer, Soumya Dayananda, and Amir Toossi are in charge of the prosecution. The Southern District of Florida case is being handled by that office’s Narcotics Unit. Assistant United States Attorney Adam Fels is in charge of the prosecution.

The charges and allegations contained in the Indictments are merely accusations and the defendant is presumed innocent unless and until proven guilty.

Court approves “without hesitation” HSBC DPA that imposes a record corporate forfeiture of $1.256 billion, independent monitor and important remedial measures.

Earlier today, defendant Suresh Sriskandarajah pleaded guilty in federal court in Brooklyn, New York, to conspiring to provide material support to a foreign terrorist organization, the Liberation Tigers of Tamil Eelam (“LTTE”), also known as the Tamil Tigers, in connection with his attempt to procure sophisticated military technology, including submarine and warship design software and night vision equipment, for the LTTE. Sriskandarajah faces a maximum term of 15 years’ imprisonment.  Six of Sriskandarajah’s co-defendants were previously convicted of terrorism-related offenses in connection with their support for the LTTE.

Sriskandarajah’s guilty plea was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office; Aaron T. Ford, Special Agent-in-Charge, Federal Bureau of Investigation, Newark Field Office, and Raymond W. Kelly, Commissioner of the New York City Police Department.  The guilty plea was accepted by United States District Judge Raymond J. Dearie.

As detailed in court filings, between September 2004 and April 2006, Sriskandarajah and several co-conspirators assisted a principal LTTE procurement officer in researching and acquiring aviation equipment, submarine and warship design software, night vision equipment and communications technology.  Sriskandarajah used students as couriers to smuggle prohibited items into territory in Sri Lanka that was controlled by the LTTE at that time.  Additionally, Sriskandarajah helped the LTTE launder its proceeds in the United States and elsewhere. Following his indictment in the Eastern District of New York, Sriskandarajah, who is a Canadian citizen, was extradited to the United States from Canada, arriving in 2012.

The LTTE was founded in 1976 and uses illegal methods to raise money, acquire weapons and technology, and publicize its cause of establishing an independent Tamil state in northern Sri Lanka.  The LTTE began its armed conflict against the Sri Lankan government in
1983, and utilizes a guerrilla strategy that often includes acts of terrorism.  At its height, the LTTE controlled most of the northern and eastern coastal areas of Sri Lanka.  Over the past 19 years, the LTTE has conducted approximately 200 suicide bombings, resulting in the deaths of hundreds of victims, and carried out numerous political assassinations, including the May 1991 assassination of former Indian Prime Minister Rajiv Gandhi, the 1993 assassination of the President of Sri Lanka, Ranasinghe Premadasa, the July 1999 assassination of Neelan Thiruchelvam, a member of the Sri Lankan parliament, the June 2000 assassination of C.V. Goonaratne, the Sri Lankan Industry Minister, the August 2006 assassination of the Sri Lankan government’s peace secretariat, Ketheshwaran Loganathan, the January 2008 assassination of Sri Lankan Minister for Nation Building, D.M. Dassanayake, and the April 2008 assassination of Sri Lankan Highways Minister, Jeyaraj Fernandopulle.  In May 2009, the LTTE’s forces in Sri Lanka were defeated by the Sri Lankan government.

In 1997, the LTTE was designated by the U.S. State Department as a Foreign Terrorist Organization, and the LTTE therefore may not legally raise money or procure equipment or materials in the United States.

“The defendant helped the LTTE, an organization that pioneered terrorist tactics and has killed numerous civilians in brutal terrorist attacks, obtain sophisticated military technology and equipment,” stated United States Attorney Lynch.  “Claiming to fight for freedom, the LTTE instead created a climate of fear and bloodshed, systematically assassinating those who stood in the way of their terrorist goals.  We will continue to locate and prosecute those who fund and support terrorist organizations, wherever they reside.”  Ms. Lynch extended her grateful appreciation to the New York and Newark Field Offices of the FBI, and the New York City Police Department.

The government’s case is being prosecuted by Assistant U.S. Attorney Alexander Solomon.

The Defendant

Name: SURESH SRISKANDARAJAH
Age: 32

Earlier today, Edmund Ansbro, a registered sex offender, was sentenced to a term of imprisonment of 264 months and lifetime supervised release following his conviction for transporting child pornography in interstate commerce.  The proceeding was held before Senior United States District Judge Denis R. Hurley at the United States Courthouse in Central Islip, New York.

The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation (FBI), New York Field Office, and Edward Webber, Commissioner of the Suffolk County Police Department (SCPD).

Ansbro was arrested in Brooklyn on June 10, 2010, as a result of an undercover investigation by a detective with the SCPD Computer Crimes Unit and a special agent with the FBI Sexual Exploitation of Children Unit.  According to a complaint filed in federal court, Ansbro admitted at the time of his arrest that he had been trading child pornography for the past six years and had collected approximately 250 gigabytes of child pornography.

New York State records show that Ansbro was convicted on April 4, 2000, in Kings County Supreme Court, of two counts of Sexual Abuse in the First Degree: Sexual Conduct with an Individual Less Than 11 Years Old.  Ansbro was sentenced to six months jail and five years’ probation.  Following the conviction, Ansbro was required to register as a sex offender with New York State authorities.

“This sentence stands as a strong warning to prior sex offenders that we will prosecute them to the fullest extent of the law,” stated United States Attorney Lynch.  “We will not accept the continuing victimization of our children.”  Ms. Lynch expressed her grateful appreciation to the Federal Bureau of Investigation and Suffolk County Police Department for their assistance in this case.

The government’s case was prosecuted by Assistant United States Attorney Allen Bode.

The Defendant

EDMUND ANSBRO
Brooklyn, New York
Age: 43

Earlier today, United States District Judge Joseph F. Bianco sentenced Jose Gustavo Orellana-Torres, also known as “Diablito,” the former leader of the Coronados clique of La Mara Salvatrucha, also known as the MS-13 street gang, to 365 months’ imprisonment following his September 25, 2012 guilty plea to racketeering, including predicate acts relating to the May 26, 2009 murder of Dexter Acheampong in Central Islip, New York, and the July 5, 2009 attempted murder of a suspected rival gang member in Roosevelt, New York. 

The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office, and Thomas V. Dale, Commissioner of the Nassau County Police Department.

According to his plea allocution and documents previously filed in the case, on May 26, 2009, Orellana-Torres attended a Coronados clique meeting in Brentwood, New York, and the MS-13 members agreed to “put in work” for the gang by killing rival gang members.  Orellana-Torres and several other MS-13 members drove around Brentwood and Central Islip looking for rival gang members, and Orellana-Torres was armed with a .38 caliber revolver.  While in the vicinity of East Maple Street in Central Islip, the MS-13 members observed Dexter Acheampong, whom they did not know, but believed, based on the color of his skin and the neighborhood he was walking in, to be a member of the Bloods street gang.  In fact, Mr. Acheampong did not belong to any street gang.  Orellana-Torres stepped out of the car and fired four shots at Mr. Acheampong with the .38 caliber revolver, striking the victim twice in the back as he tried to escape.  Mr. Acheampong was found dead in the driveway of a home on East Maple Street the next morning.

Just over a month later, on July 4-5, 2009, Orellana-Torres attended another MS-13 meeting, this time in Roosevelt, New York.  The MS-13 members again discussed killing rival gang members.  Orellana-Torres, who possessed the same .38 caliber revolver that night, and other MS-13 members drove around Roosevelt, New York, looking for rival gang members.  The MS-13 members observed a man, whose identity is known to the government but is not being disclosed in order to protect his safety, whom they believed to be a rival gang member.  One of the other MS-13 members fired several shots at the man, striking him once in the hand.

“The MS-13 street gang has become infamous for its senseless and depraved acts of violence, but even for the MS-13, these vicious crimes demonstrated exceptional depravity.  Orellana-Torres and his co-conspirators targeted Dexter Acheampong and another young man, whom they did not even know, because they believed them to be rival gang members,” stated United States Attorney Lynch.  “This sentence should make clear that gang members will pay a heavy price for such cold, calculated acts of violence.”

FBI Assistant Director-in-Charge Venizelos stated, “We cannot overstate our commitment to investigating MS-13 and other gangs on Long Island.  As the case of Orellana-Torres shows, MS-13 is not about ethnic pride, it is a violent, murderous horde.  It is hard to imagine a more wanton disregard for human life than shooting a person in the back because the color of his skin makes you think a may be a rival gang member.”

Orellana-Torres’s conviction is the latest in a series of federal prosecutions by this Office targeting New York members of the MS-13, a violent international street gang comprised primarily of immigrants from El Salvador, Honduras and Guatemala.  With numerous branches, or “cliques,” the MS-13 is the largest street gang on Long Island.  Since 2002, more than 200 MS-13 members, including more than two dozen clique leaders, have been convicted on federal felony charges in the Eastern District of New York.  More than 100 of those MS-13 members have been convicted on federal racketeering charges.  Since 2010 alone, this Office has convicted more than 30 members of the MS-13 on charges relating to their participation in one or more murders.  These prosecutions are the product of investigations led by the FBI’s Long Island Gang Task Force, comprising agents and officers of the FBI, Nassau County Police Department, Nassau County Sheriff’s Department, Suffolk County Probation, Suffolk County Sheriff’s Department and the Rockville Centre Police Department.

The government’s case was prosecuted by Assistant United States Attorneys John J. Durham, Raymond A. Tierney and Carrie N. Capwell.

The Defendant

JOSE GUSTAVO ORELLANA-TORRES (“Diablito”)
Age: 28

Earlier today, Gershon Barkany pleaded guilty at the federal courthouse in Central Islip, New York, to wire fraud.  The proceeding took place before United States Magistrate Judge Arlene R. Lindsay.  When sentenced, Barkany faces up to 20 years in prison.  As part of his plea agreement with the government, Barkany agreed to a $62 million money judgment payable to the United States.

The guilty plea was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office. 

According to court filings and facts presented during the plea proceeding, between December 2009 and March 2013, Barkany induced seven investors to give him approximately $62 million by promising to use their money in “risk-free” deals to purchase, and then immediately re-sell at a profit, commercial real estate properties located in New York City and New Jersey.  However, no such deals existed and the investors lost their entire investments. 

In one instance, Barkany approached an investor he knew from the community and who placed his trust in the defendant.  Barkany preyed on that trust to convince the investor to invest $46.5 million that was supposed to be used as a down payment to purchase an office building in Manhattan, a hotel in Atlantic City and properties in the Bronx and Queens.  Barkany explained that he would find a buyer for those properties who would pay a higher price before the actual closing, resulting in a profit for Barkany and the investor.  Barkany assured the investor that the real estate deals were risk free because if Barkany was unable to find a buyer before the closing, the owner of the properties would refund their monies.  In fact, those real estate deals did not exist and the investment was not refunded.

On March 28, 2013, FBI special agents arrested Barkany.  Shortly thereafter, two additional victims contacted the FBI and advised that they too had been defrauded by Barkany.  As he had done with the other victims, Barkany induced those investors to give him approximately $7.5 million by promising to use their money in a “risk-free” deal to purchase, and then immediately re-sell at a profit, an office building located on 53rd Street in Manhattan.  That deal also did not exist.  In furtherance of that scheme, Barkany created fictitious documents, including a purchase agreement purportedly signed by the seller of the office building and an escrow agreement allegedly signed by a third-party escrow agent.  Neither the seller of the property nor the third-party escrow agent signed or entered into those agreements.  Barkany created those documents to deceive the victims.

As part of his Ponzi scheme, Barkany diverted some of the funds he received to pay investors whom he had defrauded earlier.  The defendant also lost some of the funds in gambling and otherwise used the money for his own benefit.

“The defendant bilked investors out of funds that he led them to believe were to be invested in safe real estate deals.  Instead, he was paying investors to keep his Ponzi scheme afloat and to gamble,” stated United States Attorney Lynch.  “Barkany rolled the dice that his brazen greed and dishonesty would go unnoticed. That gamble did not pay off.  Today’s conviction sends a clear message that this office is committed to vigorously investigating and prosecuting individuals who are responsible for committing financial crimes.”

FBI Assistant Director-in-Charge Venizelos stated, “Barkany has admitted to a multimillion-dollar real estate swindle where he convinced wealthy investors they were buying no-risk properties.  Unbeknownst to his victims, what they were really buying were not brick-and-mortar buildings, but the smoke-and-mirror fantasy of Barkany’s fraudulent sales pitch.”

The government’s case is being prosecuted by Assistant United States Attorneys Christopher Caffarone and Diane Beckmann.

The Defendant

GERSHON BARKANY
Age: 29
Residence: Woodmere, NY

New Arrest: British citizen Christopher Gardner, residing in Farmingdale, LI, arrested by FBI agents and charged in the attached complaint for hacking former employer Dan’s Papers web files, and disabling company’s website. Defendant Faces up to 10 years in Prison.

A complaint and information were unsealed in federal court yesterday afternoon charging Justin Kaliebe, an American citizen and resident of Babylon and Bay Shore, New York, with attempting to travel to Yemen in order to join the foreign terrorist organization, al-Qaeda in the Arabian Peninsula (“AQAP”), also known as Ansar al-Sharia (“AAS”).  On February 8, 2013, Kaliebe pled guilty before United States Magistrate Judge A. Kathleen Tomlinson to both counts of the information, charging him with attempting to provide material support to terrorists, in violation of 18 U.S.C. § 2339A(a), and attempting to provide material support to a designated foreign terrorist organization, AQAP/AAS, in violation of 18 U.S.C. § 2339B(a)(1).  Thereafter, on March 5, 2013, United States District Judge Arthur D. Spatt reviewed and accepted Kaliebe’s guilty plea.  A status conference is scheduled for June 26, 2013 at 3:00 p.m. at the United States Courthouse in Central Islip, New York, when Judge Spatt is expected to set a sentencing date.  Kaliebe faces a maximum sentence of 30 years in prison when he is sentenced by Judge Spatt.

The charges were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation (FBI), New York Field Office; and Raymond W. Kelly, Commissioner, New York City Police Department (NYPD).

According to the court filings, Kaliebe attempted to travel from the United States to Yemen for the purpose of joining AQAP/AAS and waging violent “jihad.”  During numerous meetings and recorded conversations and email correspondence with undercover law enforcement officers, Kaliebe explained that he had been searching for an opportunity to travel abroad and fight jihad for two years – long before Kaliebe first approached the undercover officers about his plans to join a terrorist group.  Kaliebe repeatedly expressed his desire to travel to Yemen in order to join AQAP/AAS and to help carry out its violent extremist agenda.  Kaliebe also demonstrated extensive knowledge of terrorist organizations, including AQAP/AAS and al-Qaeda, and current and former leaders of those terrorist organizations.  For example, Kaliebe referenced, and at times quoted, Anwar al-Awlaki, a member and leader of AQAP, as well as Omar Abdel Rahman (the “Blind Sheik”), Ayman al-Zawahiri (the current leader of al-Qaeda), and Usama Bin Laden.  Further, Kaliebe demonstrated detailed knowledge of various terrorist attacks that were carried out by AQAP/AAS in Yemen, as well as other attacks carried out by al-Qaeda around the world. 

According to the court filings, during a recorded conversation that took place on June 4, 2012, Kaliebe observed that “the crime that they would charge people like us with” was conspiracy “to kill, maim and kidnap in foreign countries,” a reference to a federal criminal statute that has previously been used to charge other individuals who departed or attempted to depart the United States in order to fight jihad abroad.  Later during that same conversation, Kaliebe stated that, once he arrived in Yemen, he expected to fight the “Yemeni army” and “those who are fighting against the Sharia of Allah . . . whether it’s the U.S. drones or the, their puppets, in the Yemeni army . . .  or, who knows, if American agents or whatever, U.S. Special Forces . . . who they got over there.”  When asked if he was afraid to die, Kaliebe responded “I wanna . . . .  It’s what anyone would want, any believer would want.”  During another recorded conversation, which took place on July 9, 2012, Kaliebe stated that he had been inspired by several sheiks, including “Sheik Usama,” “who showed how he could bring an entire nation to its knees.” 

According to the court filings, beginning in approximately July 2012, Kaliebe saved money to finance his travel to Yemen, which he then used to apply for and purchase a United States passport, and to purchase an airline ticket to Oman, from where he intended to travel by land to Yemen.  During a recorded meeting on July 30, 2012, Kaliebe stated explicitly that he was saving money “as a means to go to Yemen to fight jihad.” 

On December 26, 2012, Kaliebe sent an email in which he swore his loyalty to the leaders of AQAP and al-Qaeda, respectively, writing, “I pledge my loyalty, allegiance and fidelity to the Mujahedeen of Al-Qaa'idah in the Arabian Peninsula and its leaders, Shaykh Abu Baseer Nasir Al-Wuhayshi and Shaykh Ayman Al-Zawahiri, hafidhahum Allah!  May Allah accept this from me and may he allow me to fight in his cause til the day that I leave this dunya.”

According to court filings, on January 18, 2013 Kaliebe reaffirmed his commitment to jihad, telling an NYPD Intelligence Division undercover officer, in a recorded conversation, that he understood “there’s a way out, but for me, the only way out is [martyrdom].”  Additionally, Kaliebe paid homage to several terrorist leaders, telling the undercover law enforcement officer that:

[My] standard is Abu Dujana.  [M]y standard is Abu Mus’ab Al-Zarqawi.  My standard is Sheik Anwar Al-Awlaki and Sheik Usama, both who bore witness to the truth for their blood.

Finally, Kaliebe stated, “Oh Allah, please allow me, please allow me and my brother [ ] to fight jihad in your cause oh Allah.  Oh Allah, please give us one of the two victories, victory on the ground or victory through [martyrdom.]”

On January 21, 2013, Kaliebe’s efforts culminated in an attempt to board a flight to Muscat, Oman at John F. Kennedy Airport in Queens, New York.  He was arrested at the airport by members of the FBI’s Joint Terrorism Task Force and the NYPD Intelligence Division.  Thereafter, on February 8, 2013, Kaliebe waived indictment and pled guilty to attempting to provide material support to AQAP/AAS and attempting to provide material support to terrorists.

The government’s investigation is on-going.

“Kaliebe attempted to turn his back on his country and align with radical terrorists.  His goal was to travel overseas to wage violent jihad against Yemeni and U.S. forces opposed to al-Qaeda.  Firmly committed to this plan, he found both inspiration and guidance in the online teachings of al-Qaeda leaders, including Usama Bin Laden.  While the Internet has made worlds of knowledge available to all, unfortunately it is also used as a platform for al-Qaeda and other terrorist groups to spread their poisonous propaganda.  Terrorists continue to exploit this free and open medium to persuade United States citizens and others to carry out attacks, both here and abroad.  We must and will use every tool to identify and disrupt potential attackers before they strike,” stated United States Attorney Lynch.  United States Attorney Lynch thanked the Port Authority of New York and New Jersey Police for their assistance in this investigation.

FBI Assistant Director-in-Charge Venizelos stated, “Kaliebe was equipped to travel overseas and fight jihad abroad.  He set the wheels in motion – convinced of his well-thought-out plan – but  didn’t get very far.  The FBI, along with our law enforcement partners, will seek out those who pledge allegiance to terrorists and terrorist organizations throughout the world, and we will continue to work together to disrupt their evil plans.”

NYPD Commissioner Kelly stated, “The  NYPD is concerned about the continuing interest of some young Americans in violent jihad and their identification with terrorist organizations like AQAP.  That is why the NYPD Intelligence Division continues to track individuals allegedly evincing support for terrorism, and, that is why we worked in close cooperation with the JTTF to apprehend this suspect.”

The government’s case is being prosecuted by Assistant United States Attorney John J. Durham, Seth D. DuCharme, and Sean C. Flynn, with assistance provided by Trial Attorney Kelli Andrews of the Counterterrorism Section of the Department of Justice.

The Defendant

JUSTIN KALIEBE
Age: 18

Earlier today, at the federal courthouse in Brooklyn, New York, the Honorable Sandra L. Townes, United States District Judge, sentenced Derome Gray to 241 months in prison for the armed robbery of a post office in Queens, New York, and for shooting at the Deputy U.S. Marshals who ultimately tracked him down and apprehended him.

The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; Charles G. Dunne, United States Marshal for the Eastern District of New York; Philip R. Bartlett, Postal Inspector-in-Charge, United States Postal Inspection Service; and Joseph Anarumo, Jr., Special Agent-in-Charge, Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), New York Field Division.

Early in the morning of June 8, 2007, the defendant and others subdued three Postal Service employees at gunpoint, stole cash from the victims and from several lock boxes, herded the employees into a vault, and fled.  An investigation by United States Postal Inspectors quickly identified the robbers, including Gray.  The other individuals involved in the robbery were apprehended shortly after the robbery and were convicted of their crimes.  Gray, however, fled New York and became a fugitive, hiding in Virginia before returning to New York.  For four years, Postal Inspectors and the United States Marshals Service hunted Gray before finally locating him at a residence in Queens, New York, where he had sought safe harbor and support from an associate. 

On October 3, 2011, U.S. Marshals and other members of the Regional Fugitive Task Force entered the home to arrest Gray.  Gray responded by firing two rounds in the Marshals’ direction, which fortunately were deflected.  The Marshals immediately apprehended Gray and an associate without firing a shot.  Several firearms, including a cache of semiautomatic handguns and rifles, were seized from the home.  Special Agents of the ATF responded to the scene and led the investigation into the events arising from Gray’s arrest.  

“With a pistol in his hand, the defendant brazenly invaded a United States Post Office and put the lives of three postal workers in jeopardy.  Then, for more than four years, he led investigators on a manhunt up and down the Eastern seaboard.  Finally, when confronted by the U.S. Marshals, the defendant tried to shoot his way out, again putting the lives of our public servants at risk.  He has now been held to account for his crimes,” stated United State Attorney Lynch.  Ms. Lynch expressed her grateful appreciation to the U.S. Marshals, Postal Inspectors and ATF agents for their outstanding work.

The government’s case was prosecuted by Assistant United States Attorneys Seth DuCharme and Justin Lerer.

The Defendant

DEROME GRAY
Alias: “Rome”
Age: 42

Earlier today, Theodore Sweeten, the president of Symtech International, Inc. (“Symtech”), pleaded guilty to a charge of wire fraud before United States District Judge Nicholas G. Garaufis at the federal courthouse in Brooklyn, New York. When sentenced, Sweeten faces a maximum sentence of twenty years’ imprisonment.

The guilty plea was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office.

Sweeten, who claimed he developed and patented the “Clean Air Valve,” among other environmental products, admitted at his guilty plea that he defrauded an investor of $5 million by lying to him about his expertise in their joint venture agreement. The indictment charged Sweeten, and two others, with inducing the victim to make the investment in order to “lease” a credit line of $100 million, which in turn would enable him to generate millions of dollars in profit through special investment programs.1 In furtherance of that scheme, the indictment alleges that the defendants falsely represented that the victim’s funds would be held in an attorney escrow account pending confirmation of the posting of $100 million in the leased-funds account. In fact, they simply distributed the victim’s $5 million among themselves and falsely represented that a $100 million account had been created at HSBC by sending the victim fabricated bank documents on HSBC letterhead.

“Theodore Sweeten defrauded an investor of his hard-earned savings through fanciful tales about his investment and environmental expertise, but the only expertise Sweeten truly had was being a con man,” stated United States Attorney Lynch. “This Office, together with our law enforcement colleagues, will vigorously pursue those who prey on unsuspecting investors.” Ms. Lynch expressed her appreciation to the Federal Bureau of Investigation, the agency responsible for leading the government’s investigation.

The government’s case is being prosecuted by Assistant United States Attorneys Winston M. Paes and Marcia M. Henry.

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

The Defendant: THEODORE SWEETEN
Age: 60
Residence: Ashland, Oregon

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1 The charges against the co-defendants are merely allegations, and they are presumed innocent unless and until proven guilty.