Southern District of New York

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that one-time Long Island businessman MARK HOTTON was sentenced in Manhattan federal court to 34 months in prison for defrauding the producers of the Broadway show “Rebecca – The Musical” (“Rebecca”) through an elaborate scheme involving fictitious overseas “investors,” and for carrying out a separate scheme to defraud a Connecticut-based real estate company through many of the same deceptions employed in the “Rebecca” fraud. HOTTON pled guilty in July 2013 before U.S. District Judge John G. Koeltl, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “Mark Hotton scripted not one, but two intricate and multifaceted schemes to bilk his victims out of hundreds of thousands of dollars. I would especially like to thank the Federal Bureau of Investigation for their work on this complicated fraud case.”

According to the Complaint, the Indictment, and statements made in Manhattan federal court:

HOTTON once worked for a prominent investment bank and financial services firm, and is a former stockbroker with ties to numerous corporate entities. From September 2011 to October 2012, he engaged in two separate schemes involving fictitious individuals and entities he created to defraud his victims – the producers of “Rebecca,” a musical based on the novel by Daphne du Maurier, and a Connecticut-based real estate company.

As of late January 2012, the producers of “Rebecca” (the “Producers”) were trying to raise an additional $4 million in order to mount the musical on Broadway. The budget for Rebecca was between $12 million and $14 million, and in late January 2012, the producers realized they were at least $4 million short of their minimum capitalization goal. To raise additional funds, in February 2012, the Producers’ company entered into an agreement with TM Consulting, Inc., a company HOTTON controlled. Under the agreement, HOTTON undertook to raise money for “Rebecca” in return for a fee of $7,500, plus 8% of any funds raised in excess of $250,000, and tiered percentages of “Rebecca’s net profits.”

Over the course of the next few months, HOTTON led the Producers into believing that he had secured $4.5 million from four overseas investors – “Paul Abrams,” of Hawthorne, East Victoria; “Roger Thomas,” of St. Peter Port, Guernsey; “Julian Spencer,” of Crocker Hill, Chichester, Sussex, and “Walter Timmons,” of London (the “HOTTON Investors”). HOTTON provided the Producers with purported email contact information for these individuals and also furnished the Producers with investment agreements purportedly signed by them. These individuals also purportedly wrote emails to the Producers. For example, in April 2012, “Paul Abrams” wrote one of the Producers an email saying, “Mr. Hotton has spoken so highly about you… I look forward to meeting you and if any further participation in the musical is attainable outside of what I’m doing personally, please let Mr. Hotton know so he can organize it thru my kids Trust.”

Between February and June 2012, the Producers made a number of payments to HOTTON. Not only did they pay the $7,500 fee in February 2012, they also paid HOTTON more than $17,000 between February and June 2012. Furthermore, in April 2012, HOTTON demanded and was paid an “advance” against his 8% commission, claiming that he needed the money to cover the costs of a purported safari he had taken with “Paul Abrams” and Abrams’s eldest son.

In fact, the HOTTON Investors did not even exist. For example, some of the IP addresses used to access the email accounts of the HOTTON Investors trace back to a Manhattan location where HOTTON did business, and the businesses associated with some of the email address for the HOTTON Investors have websites whose domain names were registered to HOTTON and that he apparently created shortly before and during the fraud. HOTTON used the decoy email addresses to fabricate email correspondence between himself and the HOTTON Investors, which he then forwarded to the Producers. In some instances, he used the email addresses to communicate directly with the Producers.

In July 2012, as the Producers pressed for the HOTTON Investors to wire the money they had promised to send by July 31, 2012, HOTTON orchestrated the false illness, hospitalization, and subsequent untimely “death” of one of the main HOTTON Investors, “Paul Abrams.” HOTTON thereupon fabricated correspondence with a man named “Wexler,” who had purportedly been named the executor of the estate of “Paul Abrams.” HOTTON claimed to be meeting with “Wexler” in England in August 2012 in an effort to make sure the contribution to Rebecca was still made. However, travel records indicate that HOTTON had not left the United States since April 2012. Further, the email address used by “Wexler” was associated with a domain that was set up and registered to HOTTON.

As it became increasingly apparent that the commitments of the HOTTON Investors would fall through, HOTTON purported to try to broker a $1.1 million loan for the Producers, even offering up his own real estate and brokerage account as collateral for the loan. But there was no real loan or lender. Rather, HOTTON had simply created a second set of apparently fictional characters and entities to generate payments for himself. Among other things, HOTTON created the domain name of the title company he said could assist the Producers in obtaining the loan; invented the business purportedly making the loan; used decoy emails to fabricate correspondence with individuals who purportedly worked for the lender; and invented a company that would facilitate his hollow offer to put up collateral for the loan. Through this part of the “Rebecca” scheme, HOTTON was able to defraud the Producers into paying in excess of $35,000 to him and companies he controlled, including $10,000 paid to him personally, as half of a fee for helping to broker the loan, and $23,000 paid to a bank account for the “lender” but which was really controlled by HOTTON’s sister and administrative assistant.

The Connecticut Real Estate Fraud

HOTTON employed a similar set of deceptive devices – including some of the same email addresses and fictitious companies used to defraud Rebecca’s Producers – in order to defraud a Connecticut-based real estate company (the “Real Estate Company”) into paying hundreds of thousands of dollars to him and companies he controlled.

Beginning in September 2011, HOTTON agreed to help the president of the Real Estate Company (the “President”) obtain financing for various business ventures. HOTTON promised that a California-based group called “Pacific Ventures” and its affiliate “Mezzanine Capital” would assist in providing a $20 million loan. HOTTON provided as an email address for a contact at “Pacific Ventures” the same email address he told the Producers was used by “Paul Abrams” and which was then purportedly used by “Walter Timmons” as well as the assistants of “Paul Abrams” in the “Rebecca” scheme. Meanwhile, HOTTON provided as an email address for a contact at “Mezzanine Capital” the same email address he told the Producers was used by “Roger Thomas,” one of the HOTTON Investors.

In March 2012, HOTTON told the President that a third company, “CPS Equity,” would be able to process the loan, but required a $200,000 upfront fee, which the President paid. CPS Equity was the company associated with, among other things, the email address used by “Paul Abrams” when communicating with Rebecca’s Producers. Following the initial $200,000 payment, HOTTON further instructed the President to make additional payments in order to secure the loan.

In addition to the prison sentence, HOTTON, 48, of West Islip, New York, was ordered to forfeit $500,000 and to pay restitution of $68,000.

Mr. Bharara praised the outstanding investigative work of the Federal Bureau of Investigation.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Edward B. Diskant and Sarah McCallum are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and Thomas O’Donnell, Special Agent in Charge of the U.S. Department of Health and Human Services, Office of Inspector General (“HHS-OIG”), New York Region, announced today that the United States filed a civil fraud lawsuit in Manhattan federal court against SORKIN’S RX LTD. D/B/A CAREMED PHARMACEUTICAL SERVICES (“CareMed”), a New York-based pharmacy that sells high-cost specialty drugs used to treat conditions that require complex treatment, such as cancer. The United States’ Complaint-in-Intervention alleges that CareMed made false statements to insurance companies to secure prior authorization for the coverage of drugs by, among other things, fabricating Medicare beneficiaries’ medical information and posing as representatives of prescribing physicians’ offices when calling insurers. The Complaint also alleges that CareMed engaged in double-billing by re-stocking unused dosages of Procrit and Rituxan, and then re-selling the drugs and re-billing insurance companies that provide prescription drug coverage to Medicare beneficiaries or Medicaid. In addition, the Complaint alleges that CareMed submitted false claims for payment for automatic refills of Procrit and Rituxan that were not actually received by patients and their doctors. The lawsuit seeks damages and penalties under the False Claims Act.

Simultaneous with the filing of the lawsuit, the United States has settled the claims against CareMed pursuant to a settlement stipulation approved today by U.S. District Judge Denise L. Cote. In the settlement, CareMed admitted that when contacting insurance companies to obtain prior authorization for drug coverage, some representatives of the company had falsely stated that they were calling from the prescribing physicians’ offices and, in some instances, responded to questions seeking the patient’s clinical information based on their understanding of the prior authorization criteria for the particular drug, instead of obtaining the patient’s actual clinical information. CareMed also admitted that it had failed to adequately oversee and train staff responsible for the prior authorization process. Furthermore, CareMed admitted that it had inadequate procedures and auditing processes to ensure that some claims submitted to third-party payors for Rituxan and Procrit were reversed or credited when necessary. CareMed agreed to pay a total of $10 million to resolve the Government’s claims, with $9,534,577 going to the United States and the remaining $465,423 to the State of New York.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, to maximize profits CareMed obtained approvals for the coverage of costly drugs by providing insurers with fake clinical information and posing as physician office staff. CareMed allegedly also re-stocked and re-billed unused medications and stuck the Government – and taxpayers – with the bill for prescription refills that never went to patients or their doctors. By entering into this $10 million settlement, CareMed is being held accountable and paying for its fraud.”

HHS-OIG New York Region Special Agent in Charge Thomas O’Donnell said: “This settlement is another example of the U.S. Department of Health and Human Services, Office of Inspector General’s commitment to holding providers accountable for how they conduct business. HHS-OIG will continue to ensure that the individuals and entities that bill our federal health care programs do so with the utmost integrity.”

As set forth in the complaint filed in Manhattan federal court:

Insurance companies that provide prescription drug coverage to Medicare beneficiaries (“Medicare Part D sponsors”) require health care providers to obtain “prior authorization” for certain drugs, which means that the plan will cover the cost of the drug only if certain criteria are met. The prior authorization process can be time-consuming for physicians and their staff because it may require paperwork and multiple communications with insurance companies. In order to secure business from physicians, CareMed offered to take care of the prior authorization process for them and obtain coverage approvals expeditiously.

CareMed made false statements to Medicare Part D sponsors when seeking prior authorization for drug prescriptions in order to maximize the number of prescriptions it could process and the payments it received each day. Management exerted significant pressure on staff to get prescriptions approved quickly. Because CareMed knew that many insurance companies require the prescribing physician’s office to provide any necessary clinical information directly, staff posed as physician office employees when placing telephone calls to secure prior authorizations. Staff also frequently fabricated the patient’s medical information provided in response to clinical questions posed by insurance companies. They provided insurance companies with false medical information that they knew would meet the prior authorization requirements – which they had learned through online resources, discussions with colleagues, and company training materials – instead of taking the time to obtain the patient’s actual clinical information. For instance, CareMed provided insurance companies with fabricated patient blood test results that staff knew would satisfy the prior authorization requirements for certain drugs.

CareMed took steps to conceal its fraudulent conduct in connection with the prior authorization process. For example, the company installed a caller ID blocking system that prevented its name and location from appearing when outgoing calls were made to insurance companies.

CareMed also engaged in double-billing of Procrit (used to treat anemia caused by chronic kidney disease or chemotherapy) and Rituxan (used to treat non-Hodgkin’s lymphoma). When CareMed learned that a patient had not used medication that was prescribed, it made arrangements to retrieve the medication. CareMed employees sometimes then re-stocked and re-sold the returned medication without reversing the Medicare or Medicaid claim or providing an appropriate credit, and submitted another reimbursement claim for the same medication. As part of its investigation, the Government oversaw an audit that revealed that CareMed received payments from Medicare and Medicaid for amounts of certain dosages of Procrit and Rituxan that far exceeded the amounts the company purchased during the relevant time period.

Furthermore, CareMed sought payment from Medicare Part D sponsors and Medicaid for automatic refills of Procrit and Rituxan that were not actually delivered to and received by patients and their doctors. The pharmacy would generate automatic refills and then submit claims for these refills to Medicare Part D sponsors and Medicaid. However, when patients did not need the refill, CareMed sometimes failed to reverse the previously submitted claim for payment or credit Medicare or Medicaid for amounts already paid. CareMed would then sell the previously billed refill dosage to another customer and seek reimbursement for this sale as well.

In connection with this complaint and settlement, the Government joined a private whistleblower lawsuit that had previously been filed under seal pursuant to the False Claims Act.

Mr. Bharara thanked HHS’s Office of the Inspector General for its investigative efforts and extensive assistance with the case.

The case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorney Jeffrey K. Powell is in charge of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that JOE FERNANDEZ was sentenced today in Manhattan federal court to two consecutive terms of life in prison by U.S District Judge Alvin K. Hellerstein. FERNANDEZ was found guilty on March 7, 2013, following a three-week jury trial, of conspiring to commit a murder-for-hire and using a firearm in furtherance of a crime of violence, with death resulting. FERNANDEZ was convicted for his role in the murders of Arturo Cuellar (“Cuellar”) and Ildefonso Vivero Flores (“Flores”) in the Bronx on February 22, 2000.

Manhattan U.S. Attorney Preet Bharara said: “Joe Fernandez was convicted last year of a ruthless double murder he committed nearly 15 years ago. For $40,000 he ambushed two men and shot them multiple times at close range. Today he learned the price for his wanton disregard for human life. He will spend the rest of his life in prison.”

According to the evidence presented at trial, statements made during other court proceedings including today’s sentencing, and other court documents:

In late 1999 and early 2000, a drug trafficking organization in New York City (the “New York DTO”) was receiving large quantities of cocaine from a Mexican drug trafficking organization (the “Mexican DTO”). In or about February 2000, Cuellar and Flores, two representatives of the Mexican DTO, coordinated the delivery of approximately 274 kilograms of cocaine to the New York DTO. The cocaine was distributed to members of the New York DTO, who sold the drugs on the street, while Cuellar and Flores remained in New York City waiting to receive payment for the drugs.

Instead of paying Cuellar and Flores, however, members of the New York DTO conspired to murder Cuellar and Flores and keep the drug proceeds. On February 21, 2000, members of the New York DTO hired a hitman, co-defendant Patrick Darge (“Darge”), to kill Cuellar and Flores the next day. That same evening, Darge hired FERNANDEZ to serve as his backup during the murders in the event something went wrong. Darge agreed to pay FERNANDEZ $40,000 for this role as a backup during the murders.

On February 22, 2000, Cuellar and Flores were escorted to an apartment building at 3235 Parkside Place in the Bronx, under the ruse that they would be receiving payment for the cocaine at an apartment in that building. Darge and FERNANDEZ, both armed with firearms, were waiting in the lobby of that building for Cuellar and Flores to arrive. Upon Cuellar and Flores’s entrance into the lobby of 3235 Parkside Place, Darge approached Cuellar from behind and fired a gunshot into Cuellar’s skull. Darge’s gun jammed after that shot, at which point FERNANDEZ fired fourteen gunshots, nine of which connected into the bodies of Cuellar and Flores. Cuellar and Flores died as a result of their gunshot wounds.

As negotiated, Darge paid FERNANDEZ $40,000 for his role in the February 22, 2000, murders.

FERNANDEZ, 38, was convicted of one count of participating in a murder-for-hire conspiracy, with death resulting, in violation of Title 18, United States Code, Section 1958, and one count of using a firearm arm in furtherance of a crime of violence, causing death, in violation of Title 18, United States Code, Section 924(j). In addition to the two consecutive prison terms of life, FERNANDEZ was ordered to pay a $200 special assessment fee.

The investigation was conducted by the Drug Enforcement Administration’s New York Drug Enforcement Task Force (the “Task Force”) and the New York City Police Department (“NYPD”). Mr. Bharara thanked the Task Force and the NYPD for their work in the investigation.

The case is being handled by the Office’s Violent and Organized Crimes Unit and Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Todd Blanche, John P. Cronan, and Russell Capone are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that ANTHONIE R. SPARROW was sentenced today in Manhattan federal court to 65 months in prison for his role in perpetrating a $16 million fraudulent investment scheme that victimized hundreds of investors around the world. SPARROW pled guilty in February 2014 to wire fraud and wire fraud conspiracy. U.S. District Judge Robert W. Sweet imposed today’s sentence.

According to the allegations contained in the Indictment and statements made at the plea proceedings:

From 2002 to January 2005, SPARROW and co-defendant Masroor A. Khan (“Khan”) orchestrated and carried out an extensive fraudulent scheme relating to investments in rare, collectible coins. The defendants solicited victims to invest in rare, collectible coins through Lloyd’s & Associates Asset Management Ltd. (“LAM”), a purported collectible coin and precious metal business run by SPARROW. The victims were directed to wire funds – purportedly for investments in rare coins – to LAM bank accounts in New York that SPARROW controlled. Khan and SPARROW told the victims that these funds would be used to purchase coins that would then be held at Pinnacle Depository Service (“Pinnacle”), a purported coin depository and secure storage area, which was also run by SPARROW.

However, rather than purchase coins with the victims’ funds as the defendants had promised, SPARROW simply diverted the vast majority of the money, totaling approximately $16 million, to a bank account in Cyprus controlled by LAM. To prevent the victims from discovering the theft of their investment funds, SPARROW maintained a website where victims were given false information about the value of the coins they supposedly owned. SPARROW deliberately discouraged victims from coming to view their coins in person and, when certain victims insisted on doing so, he staged elaborate ruses to prevent them from seeing more than a few coins.

Beginning in late 2004, victims began to demand the return of their funds. In response, in January 2005, SPARROW closed the New York office of LAM and fled to Spain, from which he was subsequently extradited after being charged in this case.

At today’s proceeding, Judge Sweet also ordered SPARROW to pay $16 million in forfeiture and $16 million in restitution, and a $200 special assessment fee.

Khan remains a fugitive from the charges contained in the Indictment.

Mr. Bharara praised the outstanding investigative work of the FBI. He also thanked the Spanish National Police for their assistance in the arrest and extradition of SPARROW.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Alexander J. Wilson is in charge of the prosecution.

The pending charges against Khan are merely accusations, and he is presumed innocent unless and until proven guilty.

Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal

Bureau of Investigation (“FBI”), announced the filing of an Indictment in Manhattan federal court charging MATTHEW VADO, a Manhattan resident, with production of child pornography, receiving child pornography, and possessing child pornography. VADO, who was previously arrested in June 2014, has been detained since his arrest.

Manhattan U.S. Attorney Preet Bharara said: “This Office has zero tolerance for those who, like Matthew Vado, would allegedly use the internet and mobile apps as a means to target and victimize children.”

FBI Assistant Director-in-Charge George Venizelos said: “Protecting our young people is some of the most important work we do at the FBI. We will continue to police our communities in search of cunning suspects looking to exploit our children.”

According to the Indictment and the June 17, 2014 Complaint filed in Manhattan federal court:

Between June 2013 and June 2014, VADO engaged in multiple chats over the Internet with eight different minor children between the ages of nine and 15. In those chats, VADO induced eight children to send sexually explicit images of themselves to VADO over the internet, and, among other things, sought to persuade one child to engage in a sexual act with a dog. VADO used “Kik Messenger,” a mobile communication application that can be downloaded for use on iPhones and similar mobile devices, to contact at least one child, and also used Kik Messenger to induce and receive sexually explicit images and/or videos of the child and to send pornographic images of himself to the child. VADO employed a username on Kik Messenger that was not his real name.

VADO, 32, is charged with eight counts of production of child pornography, one count of receiving child pornography, and one count of possessing child pornography. Each production of child pornography count carries a mandatory minimum sentence of 15 years in prison and a maximum sentence of 30 years in prison. The receipt of child pornography count carries a mandatory minimum sentence of five years in prison and a maximum sentence of 20 years in prison, and the possession of child pornography count carries a maximum sentence of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

For information about the status of these federal criminal proceedings, victims may call the Victim Witness Coordinator for the United States Attorney’s Office at (866) 874-8900.

Persons with information about children with whom VADO may have had inappropriate sexual contact, or from whom he may have solicited sexually explicit images or videos, are urged to contact the FBI hotline established for this investigation at (212) 384-1600, as well as the Manhattan District Attorney’s Office Sex Crimes Hotline at (212) 335-9373. The Manhattan Child Advocacy Center is available to provide services to children who may be victims of VADO’s conduct, including both inappropriate sexual contact and sexually explicit images. The Manhattan Child Advocacy Center can provide information about obtaining immediate medical treatment, testing for sexually transmitted diseases, and mental health counseling. The Manhattan Child Advocacy Center can be contacted at:

Manhattan Child Advocacy Center

1753 Park Avenue

New York, NY 10035

(646) 695-6100

Mr. Bharara thanked and praised the investigative work of the FBI in this matter, as well as the United States Attorney’s Office for the Southern District of Florida.

This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Max Nicholas is in charge of the prosecution.

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

U.S. v. Matthew Vado Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced today the filing of a five-count Indictment in White Plains federal court charging STEPHEN P. BROWN with sexually exploiting a boy in Sullivan County, New York, in 2012 and with attempted sexual exploitation, attempted enticement, and the distribution and possession of child pornography.

On March 4, 2014, BROWN was arrested in Peekskill, New York, by New York State law enforcement authorities. According to allegations in the federal Complaint, filed on June 16, 2014, BROWN’s arrest in Peekskill followed his on-line communications with an undercover officer posing as an 11-year-old-boy. As alleged in the federal Complaint, BROWN made plans to meet the boy at a hotel in Peekskill to engage in sexual activity and to take sexually explicit photographs. BROWN was arrested when he arrived at the designated location to meet the boy.

The Indictment filed today charges BROWN with attempted sexual exploitation and attempted enticement, as had been charged in the federal Complaint. In addition, the Indictment charges that, in August 2012, BROWN engaged in sexually explicit conduct in Sullivan County with a boy under the age of 11 for the purpose of producing sexually explicit photographs of such activity. Finally, the Indictment filed today charges BROWN with receiving, possessing and distributing child pornography in 2012 through 2014.

The federal charges filed follow state charges against BROWN in Manhattan, Westchester County, Sullivan County and Albany County. BROWN will be arraigned in White Plains Federal Court on Wednesday, October 8.

BROWN, 62, faces upon conviction on the charges of sexual exploitation and attempted sexual exploitation, a minimum sentence of 15 years in prison and a maximum sentence of 30 years in prison on each count. For attempted enticement, he faces a minimum sentence of 10 years in prison and a maximum sentence of life. For receipt and distribution of child pornography, he faces a minimum sentence of 5 years in prison and a maximum sentence of 20 years in prison, and for possession of child pornography, he faces a maximum sentence of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the efforts of the Federal Bureau of Investigation, the New York County District Attorney’s Office, the Sullivan County District Attorney’s Office, the Westchester County District Attorney’s Office, the Albany County District Attorney’s Office, the City of New York Police Department, the New York State Police, and the Rockland County Computer Crimes Task Force in connection with this investigation.

The investigation is ongoing. Any individuals who believe they have information concerning STEPHEN P. BROWN that may be relevant to the investigation should contact the Federal Bureau of Investigation in Goshen, New York, at 1-845-615-1700.

The prosecution is being handled by the Office’s White Plains Division. Assistant United States Attorney Marcia S. Cohen is in charge of the prosecution.

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

U.S. v. Stephen Brown Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced today the filing of a five-count Indictment in White Plains federal court charging STEPHEN P. BROWN with sexually exploiting a boy in Sullivan County, New York, in 2012 and with attempted sexual exploitation, attempted enticement, and the distribution and possession of child pornography.

On March 4, 2014, BROWN was arrested in Peekskill, New York, by New York State law enforcement authorities. According to allegations in the federal Complaint, filed on June 16, 2014, BROWN’s arrest in Peekskill followed his on-line communications with an undercover officer posing as an 11-year-old-boy. As alleged in the federal Complaint, BROWN made plans to meet the boy at a hotel in Peekskill to engage in sexual activity and to take sexually explicit photographs. BROWN was arrested when he arrived at the designated location to meet the boy.

The Indictment filed today charges BROWN with attempted sexual exploitation and attempted enticement, as had been charged in the federal Complaint. In addition, the Indictment charges that, in August 2012, BROWN engaged in sexually explicit conduct in Sullivan County with a boy under the age of 11 for the purpose of producing sexually explicit photographs of such activity. Finally, the Indictment filed today charges BROWN with receiving, possessing and distributing child pornography in 2012 through 2014.

The federal charges filed follow state charges against BROWN in Manhattan, Westchester County, Sullivan County and Albany County. BROWN will be arraigned in White Plains Federal Court on Wednesday, October 8.

BROWN, 62, faces upon conviction on the charges of sexual exploitation and attempted sexual exploitation, a minimum sentence of 15 years in prison and a maximum sentence of 30 years in prison on each count. For attempted enticement, he faces a minimum sentence of 10 years in prison and a maximum sentence of life. For receipt and distribution of child pornography, he faces a minimum sentence of 5 years in prison and a maximum sentence of 20 years in prison, and for possession of child pornography, he faces a maximum sentence of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the efforts of the Federal Bureau of Investigation, the New York County District Attorney’s Office, the Sullivan County District Attorney’s Office, the Westchester County District Attorney’s Office, the Albany County District Attorney’s Office, the City of New York Police Department, the New York State Police, and the Rockland County Computer Crimes Task Force in connection with this investigation.

The investigation is ongoing. Any individuals who believe they have information concerning STEPHEN P. BROWN that may be relevant to the investigation should contact the Federal Bureau of Investigation in Goshen, New York, at 1-845-615-1700.

The prosecution is being handled by the Office’s White Plains Division. Assistant United States Attorney Marcia S. Cohen is in charge of the prosecution.

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

U.S. v. Matthew Vado Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that TATYANA GABINSKAYA was found guilty Friday, October 3, 2014, of various health care fraud and mail fraud offenses following a two-week jury trial before the U.S. District Judge J. Paul Oetken. The jury convicted GABINSKAYA of charges arising out of her involvement, from 2007 through February 29, 2012, in the largest single no-fault automobile insurance fraud scheme ever charged.

GABINSKAYA, 60, of Brooklyn, New York, is the 32nd defendant convicted in this case following arrests on February 29, 2012, as part of an indictment (the “Superseding Indictment”) that charged 36 defendants with conspiracy to commit mail fraud and health care fraud and charging some defendants with racketeering and money laundering.

According to the Superseding Indictment and evidence admitted at trial:

Under New York State Law, every vehicle registered in the State is required to have no-fault automobile insurance, which enables the driver and passengers of a registered and insured vehicle to obtain benefits of up to $50,000 per person for injuries sustained in an automobile accident, regardless of fault, (the “No-Fault Law”). The No-Fault Law requires prompt payment for medical treatment, thereby obviating the need for claimants to file personal injury lawsuits in order to be reimbursed. Under the No-Fault Law, patients can assign their right to reimbursement from an insurance company to others, including medical clinics that provide treatment for their injuries. New York State Law also requires that all medical clinics in the State be incorporated, owned, operated, and/or controlled by a licensed medical practitioner in order to be eligible for reimbursement under the No-Fault Law. Insurance companies will not honor claims for medical treatments from a medical clinic that is not actually owned, operated, and controlled by a licensed medical practitioner.

In order to mislead New York authorities and private insurers, the true owners of these medical clinics paid licensed doctors to use their licenses to incorporate the professional corporations, through which the true owners billed private insurers millions of dollars for medical treatments and tests, many of which were not medically necessary. GABINSKAYA was the stated owner of one such clinic that provided MRIs and other radiology tests, although the clinic was, in reality, owned by her co-defendants Mikhail Zemlyansky and Michael Danilovich. In addition, GABINSKAYA was the stated owner of six other medical professional corporations, including five incorporated in the span of approximately one year. When interviewed under oath about her role at the clinic controlled by Zemlyansky and Danilovich, GABINSKAYA repeatedly lied under oath to deceive the insurers and induce them into paying claims that were not eligible for reimbursement.

GABINSKAYA was convicted of one count of conspiracy to commit health care fraud and one substantive count of health care fraud, each of which carries a maximum sentence of 10 years in prison. She was also convicted of one count of conspiracy to commit mail fraud and one substantive count of mail fraud, each of which carries a maximum sentence of 20 years in prison. GABINSKAYA is scheduled to be sentenced on January 28, 2015, at 12:30 p.m., before Judge Oetken. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

A mistrial was declared at the conclusion of GABINSKAYA’s first trial in the fall of 2013 when the jury failed to reach a unanimous verdict as to GABINSKAYA. Two of her co-defendants, Billy Geris and Joseph Vitoulis, were acquitted at trial. With respect to co-defendants Mikhail Zemlyansky and Michael Danilovich, the jury acquitted on some counts and hung on other counts. Zemlyansky and Danilovich are scheduled to be retried in January 2015. Co-defendant Matthew Conroy is scheduled to stand trial beginning December 2, 2014. A trial has not yet been scheduled for co-defendant John Maurello. Thirty-one other defendants, including three other doctors, have pled guilty to, among other things, conspiracy to commit health care fraud. Charges were dismissed against three other defendants, one defendant entered into a deferred prosecution agreement, and one defendant died during the pendency of the case.

U.S. Attorney Bharara thanked the Federal Bureau of Investigation and the New York City Police Department for their continued outstanding work in this investigation. He also thanked the National Insurance Crime Bureau for its assistance.

The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Amanda Kramer, Janis Echenberg, Daniel S. Goldman, Edward Y. Kim, Peter M. Skinner, and Daniel S. Noble are in charge of the prosecution. Assistant U.S. Attorney Carolina Fornos is in charge of the forfeiture aspects of the case.

U.S. v. Mikhail et al. Zemlyansky, Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that former New York State Assemblywoman GABRIELA ROSA was sentenced in Manhattan federal court to a year and a day in prison, after having pled guilty to two federal felony charges arising out of her efforts to obtain United States citizenship through fraud and fraudulently concealing assets and income from a federal bankruptcy court. ROSA was sentenced today before United States District Judge Denise L. Cote. ROSA previously pled guilty pursuant to a plea agreement with the United States Attorney’s Office that required, among other things, that ROSA resign from the Assembly upon entry of her plea.

Manhattan U.S. Attorney Preet Bharara said: “Gabriela Rosa only became eligible to run for the New York State Assembly as a result of a years-long immigration fraud. She also defrauded a federal bankruptcy court and her creditors for her own financial gain. Now yet another state elected official will have to answer for her crimes with time in a federal prison.”

According to the Information, prior court filings, and statements made in Court:

The Marriage and Naturalization Fraud Scheme

The New York State Constitution states that only United States citizens may serve as members of the New York State Legislature. In November 2012, ROSA was elected to the New York State Legislature as an Assemblywoman for Assembly District 72 in Manhattan.

ROSA is a citizen of the Dominican Republic and had no citizenship status in the United States until 2005. In December 2005, ROSA was naturalized as a United States citizen as a result of a scheme to obtain legal residency and ultimately citizenship through a sham marriage. ROSA paid a United States citizen (“Spouse-1”) approximately $8,000 to enter into a sham marriage with her while she maintained a relationship with another individual who had been convicted of federal narcotics trafficking charges, and who later became her husband (“Spouse-2”). In numerous submissions and statements to immigration authorities made under penalty of perjury between 1996 and 2005, ROSA falsely represented to immigration authorities that she had entered into a bona fide marriage with Spouse-1, and that she had never given false or misleading information to a U.S. immigration official while applying for immigration benefits.

The Bankruptcy Fraud Scheme

In September 2009 ROSA filed a voluntary petition for bankruptcy, under Chapter 7 of the United States Bankruptcy Code, in the United States Bankruptcy Court for the Southern District of New York (the “Petition”). Through the Petition, ROSA sought to liquidate over $30,000 in debt that she had accumulated on, among other things, credit card charges and personal loans. In the Petition, which ROSA signed under penalty of perjury, and in subsequent documents submitted in support of the Petition, which were also signed under penalty of perjury, ROSA knowingly and willfully made several false declarations and statements. Among other things, ROSA fraudulently omitted her ownership of a cooperative apartment in Manhattan (the “Apartment”) from the Petition, which required her to list all real or personal property in which she had any ownership interest. ROSA, who worked at the time as a legislative assistant in the New York State Legislature, also failed to list outside income she earned as a political consultant, income earned by Spouse-2 in the Petition and supporting documents, and $25,000 in cash that she had deposited into her bank account months before filing the Petition.

In addition to the prison term of a year and a day, Judge Cote sentenced ROSA to three years’ supervised release, and ordered her to forfeit the proceeds of her bankruptcy fraud and repay creditors whom she defrauded.

Mr. Bharara praised the outstanding investigative work of the Criminal Investigators of the United States Attorney’s Office for the Southern District of New York.

The case is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Howard S. Master and Jason Masimore are in charge of the investigation.

U.S. v. Gabriela Rosa Information

“As the jury unanimously found, David Riley exploited his position and access to information at Foundry Networks, a publicly traded technology company. What Riley forged at Foundry was a pipeline of material, nonpublic information that enabled others to engage in illegal insider trading and reap a windfall of more than 27 million dollars. What Riley got out of the arrangement is a felony conviction and the prospect of losing his liberty. He becomes the 87th defendant convicted of insider trading after trial or by guilty plea in this District in the last five years.”

Preet Bharara, the United States Attorney for the Southern District of New York, announced that DAVID RILEY, former Chief Information Officer of Foundry Networks, Inc. (“Foundry”), a California-based technology company that was acquired by Brocade Communications, Inc. (“Brocade”), in 2008, was found guilty today of crimes related to his participation in an insider trading scheme that yielded over $27 million in ill-gotten gains. Following a 13-day trial conducted before U.S. District Judge Valerie E. Caproni, a jury found that RILEY passed inside information about Foundry’s acquisition by Brocade and about Foundry’s earnings for the first quarter of 2008 to Matthew Teeple, a former analyst for San Francisco-based hedge fund Artis Capital Management, L.P. (“Artis”). Teeple pled guilty to related charges on May 28, 2014.

Manhattan U.S. Attorney Preet Bharara said: “As the jury unanimously found, David Riley exploited his position and access to information at Foundry Networks, a publicly traded technology company. What Riley forged at Foundry was a pipeline of material, nonpublic information that enabled others to engage in illegal insider trading and reap a windfall of more than 27 million dollars. What Riley got out of the arrangement is a felony conviction and the prospect of losing his liberty. He becomes the 87th defendant convicted of insider trading after trial or by guilty plea in this District in the last five years.”

According to the Superseding Indictment filed February 20, 2014, other court documents, and the evidence presented at trial:

As CIO and a Vice President at Foundry, RILEY had access to monthly and quarterly financial reporting, along with other sensitive, nonpublic information (the “Inside Information”) relating to Foundry, well before such information became public. RILEY provided this Inside Information to Teeple – sometimes by telephone and sometimes during meetings the two arranged in the San Jose, California, area. On several occasions, RILEY spoke with Teeple while logged into the database that Foundry used to maintain sensitive financial information. The Inside Information that RILEY passed to Teeple included quarterly financial performance numbers during the first quarter of 2008 and information regarding Brocade’s intended acquisition of Foundry in July 2008.

Teeple passed the Inside Information he got from RILEY on to others, including others at Artis. From the Inside Information Teeple provided about Foundry, Artis ultimately reaped gains of over $27 million in 2008.

RILEY, 48, of San Jose, California, was convicted of one count of conspiracy to commit securities fraud and two counts of securities fraud. The conspiracy count carries a maximum sentence of five years in prison and a fine of the greater of $250,000 or twice the gross gain or loss from the offense. Each of the securities fraud counts carries a maximum sentence of 20 years in prison and a fine of $5 million or twice the gross gain or loss from the offense. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. RILEY is scheduled to be sentenced on February 6, 2015.

The jury was unable to reach a verdict with respect to the remaining count of the Superseding Indictment, which charged RILEY with substantive securities fraud related to passage of inside information concerning negative developments with the Brocade-Foundry deal on October 16, 2008.

Mr. Bharara praised the investigative work of the FBI and thanked the Securities and Exchange Commission, which has filed civil charges in a separate action.

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Telemachus P. Kasulis and Sarah E. McCallum, and Special Assistant U.S. Attorney Michael P. Holland, are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and Edward J. Ryan, the Special Agent in Charge of the United States Social Security Administration, Office of the Inspector General, announced that JAMES CARSON, a former New York City Police Department (“NYPD”) officer, was arrested today for a scheme to fraudulently obtain disability benefits from the Social Security Administration (“SSA”). CARSON allegedly claimed to the SSA that he was unemployed since 1990 and could not work due to disability. However, since at least 2004, at the same time he was collecting disability benefits, he was working full time as the Director of Security for an international watchmaker and luxury watch retailer headquartered in New York, New York (the “Company”). CARSON was arrested earlier this morning at his residence in Yorktown, New York, and will be presented later today in Manhattan federal court before U.S. Magistrate Judge Andrew J. Peck.

Manhattan U.S. Attorney Preet Bharara said: “Not only did James Carson allegedly tell a series of lies to pocket disability benefits to which he was not entitled, but he then took sophisticated steps to conceal his fraudulently obtained income from the Social Security Administration. I would like to thank the Social Security Administration, Office of the Inspector General, for their work in bringing Carson’s alleged scheme to its proper end.”

Special Agent in Charge Edward J. Ryan said: “The investigation outlined in this criminal complaint demonstrates just one of the many actions our office is taking on a daily basis to ensure that the Social Security Disability Insurance Trust Fund is preserved for its intended purpose, providing a safety-net for the truly disabled, not lining the pockets of scammers and thieves. As always, it is particularly troubling when these types of crimes are committed by individuals who were once entrusted with upholding the law, and who are already receiving generous tax-payer financed pensions. Our office greatly appreciates the continued support and the priority given to these cases by the United States Attorney’s Office for the Southern District of New York.”

According to the allegations contained in the Complaint unsealed today:

In approximately 1990, CARSON left his job as a police officer with the NYPD due to a back injury and began receiving Social Security Disability Insurance (“SSD”). This disability benefit is only available to individuals who have a qualifying disability and are unable to work in any profession.

On multiple forms submitted to the SSA, CARSON claimed that he could not work due to a herniated disc and that he had not earned any income since 1990, when he began receiving SSD benefits. For example, in April 2014, CARSON reported to an SSA office for an interview related to his continued receipt of SSD benefits and filled out forms stating, among other things, that he: had not worked since leaving the NYPD in 1990; had “no other income” during that time; and had done “no work at all since my disability began.” CARSON further claimed that his typical day consisted of the following: “[I g]et out of bed. I have breakfast, I walk around backyard [and] deck. Wait for wife to come home from work. I lay down a lot. I rely on my wife to go places – she drives mostly.” In another form also submitted to the SSA that day, CARSON stated that “[m]y wife has to do the driving,” and that he could not drive due to “severe pain [and] weakness.” In response to a question asking about places he goes on a regular basis, CARSON claimed, “I don’t really go anywhere on a regular basis.” When CARSON attended the SSA interview in April 2014, he was limping and walking with a cane, and claimed in written forms that he always uses a cane.

In fact, since at least 2004, CARSON allegedly has been working full time as the Director of Security at the Company – an international watchmaker and luxury watch retailer. CARSON has been observed on multiple occasions driving to and from work, walking up stairs without difficulty, and walking without a cane. Further, EZ Pass records show that CARSON frequently travels back and forth between his residence and his office, typically at around 8:00 a.m. and 5:00 p.m. In 2010, CARSON received the Loss Prevention Case of the Year Award from the National Retail Federation for his role in an investigation into credit card schemes targeting the Company.

In order to prevent the SSA from discovering that he was gainfully employed while claiming to be unemployed due to a disability, CARSON took steps to conceal the income he was receiving from the Company. Rather than get paid directly by the Company, CARSON arranged for his compensation to be paid first to a corporation associated with his relative, and then paid from that corporation to CARSON’s relative as purported wages. Since 2004, CARSON has collected approximately $306,431 in disability benefits.

CARSON, 50, of Yorktown, New York, is charged with one count of theft of government property, which carries a maximum sentence of 10 years in prison, one count of making false statements, which carries a maximum sentence of five years in prison, and one count of failing to report income, which carries a maximum sentence of five years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the outstanding investigative work of the United States Social Security Administration, Office of the Inspector General.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Special Assistant United States Attorney Daniel Tracer is in charge of the prosecution.

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

U.S. v. James Carson Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced that KRISTIN DAVIS, a former candidate for New York City Comptroller, was sentenced today in Manhattan federal court to two years in prison for illegally distributing hundreds of various types of prescription pills. DAVIS, who was arrested in August 2013, and pled guilty in March 2014 to distributing and possessing with intent to distribute controlled substances, was sentenced by U.S. District Judge Edgardo Ramos.

Manhattan U.S. Attorney Preet Bharara said: “The convictions of Kristin Davis and the other defendants in this wide-ranging diversion investigation demonstrate once again this Office’s and our law enforcement partners’ resolve to fight the prescription drug abuse epidemic in every affected corner of New York City and beyond.”

According to the Complaint, Superseding Information, other information in the public record, and Davis’s guilty plea:

On multiple occasions for a period of years through March 2013, DAVIS sold hundreds of prescription pills, containing amphetamine, alprazolam, zolpidem, and carisoprodol, to a person she knew from her own prior purchases and sales to be a drug dealer. Unbeknownst to DAVIS, the person had become a cooperating witness (the “CW”) with the Federal Bureau of Investigation (“FBI”) and was equipped with a recording device. During these sales, DAVIS was recorded saying that the pills she was selling were “Ambien,” “Soma,” and “Xanax.” On a fourth occasion, in April 2013, DAVIS arranged for another individual to sell approximately 180 oxycodone pills to the CW.

There is an illegal market for all of the drugs DAVIS sold and assisted another in selling. Oxycodone is a powerful painkiller with a high potential for addiction and abuse, and it is often used as a substitute for, or adjunct to, other illegal drugs, such as heroin. Amphetamine is a psycho-stimulant, often referred to as “speed,” and it is often used as a substitute for, or adjunct to, other illegal drugs, including methamphetamine and cocaine. Alprazolam is a psychoactive drug often used as a substitute for, or adjunct to, other illegal drugs, such as LSD, heroin or opiates. Zolpidem is a sedative/hypnotic drug often used as a substitute for, or adjunct to, other illegal drugs, including amphetamine, methamphetamine, cocaine, and MDMA (commonly known as ecstasy). Carisoprodol is a skeletal muscle relaxant often used in conjunction with painkillers and so-called “date rape” drugs.

DAVIS was one of several people charged as part of an investigation conducted by the FBI, the United States Department of Health and Human Services, Office of Inspector General (“HHS-OIG”), the New York City Police Department (“NYPD”), and the U.S. Attorney’s Office into the unlawful distribution of prescription drugs containing controlled substances in and around New York City:

• Thomas Rock was arrested on July 10, 2013, for distributing and conspiring to distribute oxycodone and alprazolam. He pled guilty on February 24, 2014, to distributing oxycodone and alprazolam, and was sentenced by U.S. District Judge Paul A. Engelmayer on July 21, 2014, to 15 months in prison.
• Eugene Kurochkin was arrested on July 11, 2013, for distributing oxycodone, alprazolam, amphetamine, and zolpidem. He pled guilty on November 1, 2013, to distributing oxycodone, alprazolam, amphetamine, and zolpidem, and was sentenced by U.S. District Judge Robert W. Sweet on February 10, 2014, to one year in prison.
• Raoul Goldberger and Rebecca Teman were arrested on July 29, 2013, for distributing and conspiring to distribute amphetamine, oxycodone, and vicodin. Goldberger pled guilty on August 21, 2013, to distributing amphetamine and oxycodone, and was sentenced by U.S. District Judge Colleen McMahon on March 12, 2014, to five years in prison. Teman pled guilty on November 12, 2013, to misbranding a prescription drug, and was sentenced by U.S. Magistrate Judge Henry B. Pitman on March 11, 2014, to 18 months’ probation with a special condition of 100 hours of community service.
• Erik Pichardo, who was referred to as “Individual-1” in the Complaint against DAVIS, was arrested in August 2013 for distributing oxycodone. He pled guilty on December 12, 2013, to conspiracy to distribute oxycodone, and is scheduled to be sentenced by Chief U.S. District Judge Loretta A. Preska on October 23, 2014.
• David J. Wright was arrested on October 3, 2013, for distributing oxycodone, amphetamine, and carisoprodol. He pled guilty on July 14, 2014, to distributing oxycodone, amphetamine, and carisoprodol, and is scheduled to be sentenced by Chief U.S. District Judge Loretta A. Preska on November 18, 2014.

In addition to her prison term, DAVIS, 39, of New York City, was sentenced to two years of supervised release. DAVIS was also ordered to pay $1,765 in forfeiture and a $100 special assessment fee.

Mr. Bharara praised the investigative work of the FBI. He also thanked HHS-OIG and the NYPD for their assistance in the investigation.

These cases are being handled by the Office’s Narcotics Unit. Assistant United States Attorneys Daniel C. Richenthal, Kristy J. Greenberg, and Edward A. Imperatore are in charge of the prosecutions.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that CHRISTINA CHAI, the supervising pharmacist at Stanley Pharmacy in Yonkers, New York (“Stanley Pharmacy”), and HI JONG LEE, the owner of Stanley Pharmacy and also a pharmacist, were found guilty Monday in Manhattan federal court of conspiring to unlawfully distribute hundreds of thousands of pills of oxycodone at Stanley Pharmacy. HI JONG LEE was also convicted of conspiring to launder the proceeds of the unlawful oxycodone distribution and structuring cash deposits to avoid the filing of currency transaction reports (“CTRs”). The defendants were convicted on all counts following a two-week trial before U.S. District Judge Paul A. Crotty and a jury. Previously, on August 20, 2014, a third defendant, JI YUN LEE, the store manager at Stanley Pharmacy, pled guilty before Magistrate Judge Gabriel W. Gorenstein for his participation in the oxycodone distribution conspiracy.

Manhattan U.S. Attorney Preet Bharara said: “These three defendants turned their neighborhood pharmacy into an illegal drug spot where thousands of oxycodone pills were sold for cash to drug addicts and other drug dealers. This Office will continue to prosecute those individuals, including licensed pharmacists, who divert prescription medications for profit.”

According to the charging documents in this case and evidence presented at trial:

From in or about 2011 to in or about January 2013, JI YUN LEE, CHRISTINA CHAI and HI JONG LEE, operating out of Stanley Pharmacy, conspired to distribute large quantities of oxycodone to various individuals – including individuals addicted to oxycodone and individuals who intended to resell the drugs – pursuant to prescriptions that the defendants knew to be stolen, tampered with, or otherwise fraudulent, and that were not issued for a legitimate medical purpose. JI YUN LEE, the Stanley Pharmacy store manager, and not a licensed pharmacist, typically met with the oxycodone customers inside Stanley Pharmacy and delivered the filled prescriptions to them. Stanley Pharmacy charged over $1,000, in cash, for 180 30-milligram oxycodone pills, which was well in excess of the average price for a comparable quantity of lawfully prescribed oxycodone pills. CHAI, the only pharmacist on duty from Monday through Friday, filled over 1,000 fraudulent oxycodone prescriptions, including prescriptions that were obviously tampered with or stolen. HI JONG LEE, the owner of Stanley Pharmacy and its lone weekend pharmacist, deposited the majority of the bulk cash proceeds from the unlawful oxycodone distribution.

During the course of the conspiracy, the defendants distributed over 200,000 oxycodone tablets – over five million milligrams of oxycodone – pursuant to fraudulent prescriptions paid for in cash. In 2012, the quantity of oxycodone purchased by Stanley Pharmacy was more than double the quantity purchased by any other pharmacy in the same zip code.

In total, Stanley Pharmacy brought in over $1.3 million in cash proceeds from the illegal sale of oxycodone. Most of the proceeds were deposited into a bank account controlled by HI JONG LEE. HI JONG LEE, who was responsible for the banking activities of Stanley Pharmacy, regularly deposited the cash proceeds in amounts that, alone or in combination, were just under $10,000, thereby avoiding the required filing of a CTR.

CHRISTINA CHAI, 30, of Edgewater, New Jersey, was convicted of one count of conspiracy to distribute controlled substances. She faces a maximum sentence of 20 years in prison.

HI JONG LEE, 72, of New City, New York, was convicted of one count of conspiracy to distribute controlled substances, one count of conspiracy to commit money laundering, and one count of structuring cash transactions. In connection with the structuring conviction, the jury also found that HI JONG LEE engaged in structuring while violating another law of the United States or as part of a pattern of any illegal activity involving more than $100,000 in a 12-month period. He faces a maximum sentence of 50 years in prison.

JI YUN LEE, 45, of New City, New York, pled guilty to one count of conspiracy to distribute controlled substances. He faces a maximum sentence of 20 years in prison.

The potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. Sentencing dates have not yet been set.

Mr. Bharara praised the work of the DEA’s New York City Tactical Diversion Squad, which comprises members from the DEA, New York City Police Department, Westchester County Department of Public Safety, the New York State Insurance Bureau, the Rockland County Drug Task Force and the Internal Revenue Service. Mr. Bharara also thanked the Westchester County District Attorney’s Office, including members of the New York State Police, the Yonkers Police Department, and District Attorney Investigators, for their work on the investigation.

The case is being handled by the Office’s Narcotics Unit. Assistant U.S. Attorneys Elisha Kobre and Daniel Tehrani are in charge of the prosecution.

U.S. v. Ji Yun Lee et al. Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, today announced the filing of a criminal Complaint charging AARON TUBBS, 43, of Hastings-on-Hudson, Westchester County, New York, formerly a Regional Manager at a General Contractor that performed an approximately $192 million construction project on Bronx-Whitestone Bridge (the “Bridge Project”), with wire fraud in connection with the requirements for participation by minority-owned and women-owned businesses on the Bridge Project. TUBBS surrendered today and was presented on the charge in the Complaint before U.S. Magistrate Judge Paul E. Davison in the federal courthouse in White Plains.

U.S. Attorney Preet Bharara stated: “A major construction project was awarded precisely because it opened opportunities for minority-owned and women-owned businesses. As alleged, these businesses were unlawfully bypassed and deprived of participation. I want to commend our partners: the Offices of Inspector General for the U.S. Department of Transportation, the Port Authority and the Metropolitan Transportation Authority, and the New York State Department of Transportation’s Investigations bureau.”

According to allegations in the Complaint:

The Office of Inspector General of the United States Department of Transportation, together with the Metropolitan Transit Authority (“MTA”) Inspector General, the Port Authority of New York and New Jersey Office of Inspector General, and the New York State Department of Transportation, have conducted an investigation of a company, hereinafter referred to as “MBE-1,” used by general contractors repeatedly on large construction projects in Westchester County, the Bronx, Manhattan, Staten Island, and elsewhere, to obtain credit toward goals required for participation by minority-owned business enterprises and women-owned business enterprises (“MBEs” and “WBEs”) and/or their federal equivalent, disadvantaged business entity (“DBE”) goals. During the investigation, based on numerous interviews and the review of documents, agents learned that MBE-1 was repeatedly used in a scheme, described below, known as “DBE fraud,” “MBE fraud,” and “pass through fraud,” to give the appearance that a minority-owned or woman-owned entity was performing work on a government-funded construction project when in fact other companies, which were not minority-owned or woman-owned, did the work. Among the construction projects in which MBE-1 was used in a fraudulent scheme was the Bronx-Whitestone Bridge Construction Project.

In connection with the investigation, the sole owner and principal of MBE-1 was convicted upon a guilty plea in March 2013, in United States District Court in White Plains, New York, of mail fraud.

The Bronx-Whitestone Bridge

Construction Project

In or about 2008, the MTA initiated a major construction project on the Bronx-Whitestone Bridge (the “Bridge Project”), a suspension bridge over the East River that connects the Bronx and Queens. The project was to replace the Bronx approach and perform repairs to the Queens approach of the Bridge. The MTA estimated that the project would cost approximately $170 million and take approximately four years to complete.

As part of its solicitation for bids on the Bridge Project, the MTA – a “state agency” for purposes of the MBE/WBE Provisions – specified that the Bridge Project was funded by New York State, and therefore that New York State Executive Law Article 15-A governing participation on construction projects by MBEs and WBEs applied. The MTA set an MBE/WBE goal on the Bridge Project of 7% participation by MBEs and 3% by WBEs, for a total of 10%. In connection with setting the MBE/WBE goal, the MTA noted that there were subcontracting opportunities on the Bridge Project, and provided a list of certified MBEs and WBEs with the capability of providing services on the job.

On or about October 23, 2008, a general contractor (“General Contractor-1”) was awarded the contract on the Bridge Project, at a price of approximately $192 million.

In or about 2008 and 2009, AARON TUBBS, the defendant, was a Regional Manager at General Contractor-1. TUBBS participated in, among other things, the award and performance of subcontracts to provide structural steel on the Bridge Project.

In connection with the Bridge Project, General Contractor-1 claimed, in utilization forms and compliance reports, that structural steel would be supplied by a certified MBE, MBE-1, but actually the structural steel was provided by other companies, and MBE-1 was used as a pass-through. In fact, MBE-1 did not meaningfully participate in the Bridge Project, and it received only a small fraction of the state funds that General Contractor-1 represented it had received. The principal of MBE-1 once attempted to enter the Bridge Project job site, and was denied entry.

AARON TUBBS, the defendant, in his capacity as a Regional Manager at General Contractor-1, participated in setting up the fraudulent scheme, creating the pass-through arrangement between General Contractor-1, the MBE, and the actual steel suppliers. For example, according to a representative of a steel supplier (“Supplier 1”), after Supplier 1 agreed to a contract with General Contractor-1, AARON TUBBS, the defendant, informed Supplier 1 that General Contractor-1 would run purchases of structural steel from Supplier 1 through MBE-1 for purposes of meeting minority requirements. Thereafter, in order to purchase the structural steel from steel manufacturers, General Contractor-1 received from Supplier 1 purchase order information, arranged for the information to be placed on letterhead of MBE-1, and arranged for the purchase order to be submitted to the steel manufacturer.

In addition, AARON TUBBS, the defendant, and others at General Contractor-1, sought to employ the same pass-through scheme used on the Bridge Project on another project. The St. George Ferry Terminal construction project was a federally-funded job under the American Recovery and Reinvestment Act of 2009, in Staten Island. The construction project had a goal of nine percent participation by Disadvantaged Business Entities (“DBEs”). General Contractor-1 sought to meet this goal using a DBE as a pass-through. For example, on or about November 9, 2009, General Contractor-1’s field engineer sent an email to another representative of General Contractor-1 stating, in part, “We will be handling rebar at St. George similar to how [General Contractor-1] set up the Whitestone structural steel purchase with [MBE-1]. Aaron Tubbs mentioned that I get in contact with you to describe that process, as we will have our rebar installer, [a purported DBE], manage the material with [another non-DBE company].”

TUBBS is charged with wire fraud, in violation of Title 18, United States Code, Sections 1343 and 2, and faces a maximum of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Bharara praised the investigative work of USDOT’s Office of Inspector General, the Port Authority Office of Inspector General, the Metropolitan Transportation Authority Office of Inspector General, and the New York State Department of Transportation’s Investigations Bureau.

The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorney Benjamin Allee is in charge of the prosecution.

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

TubbsAaron.Complaint

Preet Bharara, United States Attorney for the Southern District of New York, and Mark G. Peters, the Commissioner of the New York City Department of Investigation (“DOI”), announced today the arrest of KISHAWN SCARBORO, an employee of the New York City Housing Authority (“NYCHA”), for theft of government funds. SCARBORO, while employed as a NYCHA Housing Assistant, allegedly embezzled over $90,000 in tenant rent payments owed to NYCHA, and hid her embezzlement by manipulating tenant records in NYCHA’s computer system. SCARBORO voluntarily surrendered to DOI investigators this morning, and was presented this afternoon in Manhattan federal court before United States Magistrate Judge Kevin Nathaniel Fox. She was released on her own recognizance.

According to the allegations in the Complaint unsealed today in Manhattan federal court:

NYCHA is a New York City public entity that provides housing to low and moderate income New York City residents. NYCHA’s operations are funded, in part, by grants from the United States Department of Housing and Urban Development (“HUD”). Each year, HUD provides millions of dollars in grants to NYCHA. In addition to grants from HUD, NYCHA is funded through monthly rental payments made by individuals residing in NYCHA housing. NYCHA maintains a computerized rent collection system which creates an account ledger for each tenant. Each NYCHA housing development is managed by a Housing Manager, who is responsible for reviewing and approving all rent changes and credits. Housing Assistants are NYCHA employees assigned to a particular building or set of tenants for whom they act as the primary point of contact with NYCHA.

From at least June 2010 until September 2013, SCARBORO, using her position as a Housing Assistant at the Jefferson Houses in Harlem, Manhattan, obtained rent checks and money orders from NYCHA tenants and deposited them in her personal bank account by double-endorsing the instruments and/or altering the payee information. Then, using the username and password of her supervisor at the Jefferson Houses, SCARBORO hid her embezzlement by entering false credits and rent adjustments into NYCHA’s computerized rent collection system. SCARBORO deposited approximately $94,884 in checks and money orders into her personal bank account over the course of more than three years.

SCARBORO, 42, of Saylorsburg, Pennsylvania, is charged with one count of theft or bribery concerning programs receiving Federal funds, which carries a maximum sentence of 10 years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Mr. Bharara thanked and praised the DOI for its work in this investigation, which he noted is ongoing.

This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Jessica K. Feinstein is in charge of the prosecution.

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

U.S. v. Kishawn Scarboro Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that MICHAEL A. LUCARELLI, the former Director of Market Intelligence at Lippert/Heilshorn & Associates, Inc. (“LHA”), an investor relations firm, pled guilty today in Manhattan federal court to insider trading. Specifically, LUCARELLI admitted repeatedly using material nonpublic information that he acquired during his employment at LHA to take positions in the stock of LHA clients over the course of the year-long scheme. LUCARELLI was arrested on August 26, 2014, and pled guilty to a one-count Information before U.S. District Judge Jesse M. Furman.

Manhattan U.S. Attorney Preet Bharara said: “Michael Lucarelli, in violation of his company’s policies and his clients’ trust, illegally traded on material nonpublic information for his own financial gain. For using his company’s and clients’ secrets for his own personal gain, he now faces time in federal prison and the forfeiture of over $900,000 that he unlawfully obtained. If you are not deterred by the line of convicted felons who engaged in insider trading over the past several years then you will join the line.”

According to the allegations contained in the Information filed today in Manhattan federal court, the underlying criminal Complaint unsealed on August 26, 2014, the plea agreement, and statements made during court proceedings:

From at least August 2013 through at least August 2014, LUCARELLI engaged in an insider trading scheme to use and trade upon material nonpublic information that he acquired during his employment at LHA, an investor relations firm based in Manhattan. Specifically, LUCARELLI, as an LHA employee, had access to working drafts of press releases prepared by LHA for its clients prior to their issuance to the investing public. Those draft press releases contained material, nonpublic information about business events and announcements relating to LHA’s clients.

In violation of LHA’s policies and in breach of his duties to LHA and its clients, on multiple occasions, LUCARELLI took positions in the stock of LHA clients shortly before the announcement by these companies of material information through press releases prepared by LHA. Shortly after LHA issued the press releases, LUCARELLI sold these securities that he had acquired prior to the issuance, thereby profiting on the movement in the stock price.

LUCARELLI repeatedly traded in LHA client securities despite LHA’s written code of conduct, which strictly prohibited LHA employees from trading in any security issued by an LHA client. LUCARELLI carried out his scheme in at least four different brokerage accounts. When opening new brokerage accounts through which to conduct his illegal trades, LUCARELLI did not reveal his affiliation with LHA. And, on two occasions, LUCARELLI opened new brokerage accounts soon after his ability to trade in other accounts had been suspended by the respective brokerage firms.

On or about July 24, 2014, the Federal Bureau of Investigation (“FBI”) obtained a court-approved search warrant to search LUCARELLI’s office at LHA for evidence of his insider trading activities. During that search, which was conducted without LUCARELLI’s knowledge, the FBI located a locked briefcase that contained a draft press release for LHA client TREX Company (“TREX”). That press release was marked “DRAFT” and contained TREX’s second fiscal quarter 2014 financial results. The following day, after the FBI completed the search, LUCARELLI started purchasing shares of TREX. Between July 25, 2014, and August 1, 2014, LUCARELLI took a net position of 37,400 shares of TREX. Then, on August 4, 2014, shortly before the market opened, TREX issued a press release announcing its second fiscal quarter 2014 financial results. Among other things, TREX announced that sales and earnings before taxes had increased 23 percent and 62 percent, respectively, in comparison with the comparable period in 2013. TREX also issued revenue guidance for the third fiscal quarter of 2014, which was a 27 percent increase over the comparable period in 2013. Within two hours of the announcement, LUCARELLI sold 35,058 of the 37,400 TREX shares he previously purchased. Those sales yielded a profit of almost $90,000.

As a result of the 13 instances of insider trading specifically set forth in the Information, LUCARELLI earned at least $538,215.32 in illicit proceeds. Furthermore, as reflected in the plea agreement, on at least 18 additional occasions, LUCARELLI took positions in LHA client securities on the basis of inside information. In total, these 31 instances yielded LUCARELLI $955,521.62 in profits.

LUCARELLI, 52, of New York, New York, pled guilty to one count of securities fraud. The securities fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense. As part of his guilty plea, LUCARELLI also agreed to forfeit $955,521.62 to the United States. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

Mr. Bharara praised the investigative work of the FBI and thanked the Securities and Exchange Commission, which has filed civil charges in a separate action.

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Brian R. Blais and Damian Williams are in charge of the prosecution. Assistant U.S. Attorney Carolina A. Fornos of the Office’s Money Laundering and Asset Forfeiture Unit is responsible for the forfeiture of assets.

U.S. v. Michael Lucarelli Information

Preet Bharara, the United States Attorney for the Southern District of New York, and Leslie R. Caldwell, Assistant Attorney General for the Justice Department’s Criminal Division, announced that MAXIM CHUKHAREV, formerly an information technology manager for Liberty Reserve, pled guilty today in Manhattan federal court to conspiring to operate an unlicensed money transmitting business. CHUKHAREV helped maintain the technological infrastructure for Liberty Reserve, a company that operated one of the world’s most widely used digital currency services. CHUKHAREV was arrested in San Jose, Costa Rica, in May 2013 and pled guilty today before U.S. District Judge Denise L. Cote.

According to allegations contained in the Indictment filed against Liberty Reserve, CHUKHAREV, and six other individual defendants, and statements made in related court proceedings:

Liberty Reserve was incorporated in Costa Rica in 2006 and billed itself as the Internet’s “largest payment processor and money transfer system.” Liberty Reserve was created, structured and operated to help users conduct illegal transactions anonymously and launder the proceeds of their crimes. It emerged as one of the principal money transfer agents used by cybercriminals around the world to distribute, store, and launder the proceeds of their illegal activity. Liberty Reserve was used extensively for illegal purposes, functioning as the bank of choice for the criminal underworld because it provided an infrastructure that enabled cybercriminals around the world to conduct anonymous and untraceable financial transactions.

Before being shut down by the U.S. government in May 2013, Liberty Reserve had more than one million users worldwide, including more than 200,000 users in the United States, who conducted approximately 55 million transactions through its system totaling more than $6 billion in funds. These funds encompassed suspected proceeds of credit card fraud, identity theft, investment fraud, computer hacking, child pornography, narcotics trafficking, and other crimes.

CHUKHAREV was an associate of Liberty Reserve founder Arthur Budovsky and served as Liberty Reserve’s information technology manager in Costa Rica. In that role, CHUKHAREV was responsible, along with co-defendant Mark Marmilev, formerly Liberty Reserve’s Chief Technology Officer, for maintaining Liberty Reserve’s technological infrastructure.

CHUKHAREV, 28, of San Jose, Costa Rica, pled guilty to one count of conspiring to operate an unlicensed money transmitting business, which carries a maximum sentence of five years in prison. He is scheduled to be sentenced by Judge Cote on January 30, 2015 at 10:00 a.m. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Chukharev is among seven individuals charged in the indictment, which was unsealed on May 28, 2013. Three co-defendants – Vladimir Kats, Azzeddine el Amine, and Mark Marmilev – previously pled guilty and await sentencing. The indictment also charged Liberty Reserve with conspiracy to commit money laundering and operation of an unlicensed money transmitting business, and those charges remain pending.

Mr. Bharara praised the outstanding work of the United States Secret Service, the Internal Revenue Service-Criminal Investigation, and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, which worked together in this case as part of the Global Illicit Financial Team. Mr. Bharara also thanked the United States Secret Service’s New York Electronic Crimes Task Force for its extraordinary assistance with the investigation. Additionally, Mr. Bharara specially thanked all the international law enforcement agencies that assisted in the investigation, in particular, the Judicial Investigation Organization in Costa Rica, the National High Tech Crime Unit in the Netherlands, the Spanish National Police, Financial and Economic Crime Unit, the Cyber Crime Unit at the Swedish National Bureau of Investigation, and the Swiss Federal Prosecutor’s Office.

This case is being prosecuted jointly with the Department of Justice’s Asset Forfeiture and Money Laundering Section (“AFMLS”), which is overseen by Assistant Attorney General Leslie R. Caldwell. Mr. Bharara thanked AFMLS for its partnership and also thanked the Department of Justice’s Office of International Affairs and Computer Crime and Intellectual Property Section for their support.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit and Money Laundering and Asset Forfeiture Unit. Assistant United States Attorneys Serrin Turner, Andrew Goldstein, and Christine Magdo of the Southern District of New York and Trial Attorney Kevin Mosley of AFMLS are in charge of the prosecution, and Assistant United States Attorney Christine Magdo is in charge of the forfeiture aspects of the case.

The charges contained in the Indictment against certain of CHUKHAREV’s co-defendants remain pending and are merely accusations. Those defendants are presumed innocent unless and until proven guilty.

U.S. v, Liberty Reserve, et al. Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that DINESH D’SOUZA was sentenced in Manhattan federal court to five years of probation, with eight months during the first year to be served in a community confinement center, after having pled guilty to violating the federal campaign election law by making illegal contributions to a United States Senate campaign in the names of others. D’SOUZA was sentenced today before U.S. District Judge Richard M. Berman.

Manhattan U.S. Attorney Preet Bharara stated: “Dinesh D’Souza attempted to illegally contribute over $10,000 to a Senate campaign, wilfully undermining the integrity of the campaign finance process. Like many others before him, of all political stripes, he has had to answer for this crime – here with a felony conviction.”

According to the Indictment, prior court filings, and statements made in court:

The Federal Election Campaign Act (the “Election Act”) is designed to limit financial influence in the election of candidates for federal office, including the Office of United States Senator, and provides for the public disclosure of the financing of federal election campaigns. In particular, the Election Act limits the amount and source of money that may be contributed to a federal candidate or that candidate’s authorized campaign committee. The Election Act specifically prohibits any person from making any contribution in the name of another, including reimbursing a third person, before or after that third person’s contribution, as inducement to make that contribution.

In 2012, the Election Act limited campaign contributions to $5,000 from any individual to any one candidate. In March 2012, D’SOUZA contributed $10,000 to the Senate campaign of Wendy Long on behalf of himself and his wife, agreeing in writing to attribute that contribution as $5,000 from his wife and $5,000 from him. In August 2012, D’SOUZA directed other individuals with whom he was associated, namely his assistant and a woman with whom D’SOUZA was romantically involved (the “Straw Donors”), to make contributions to Wendy Long’s campaign for the United States Senate (the “Long Campaign”) on behalf of themselves and their spouses that totaled $20,000 with the promise that he would reimburse them for the contributions. Later that same day or the next day, D’SOUZA, as promised, reimbursed the Straw Donors $10,000 each in cash for the contributions. When confronted by Ms. Long, D’SOUZA initially misled the candidate before admitting what he had done.

During the plea proceeding, D’SOUZA admitted before the Court that he caused two close associates to contribute $10,000 each to the Long Campaign with the understanding that he would reimburse them for their contributions and that he did reimburse them. D’SOUZA also admitted that he knew that what he was doing was wrong and something the law forbids.

In addition to the probationary term with confinement to a community center, Judge Berman sentenced D’SOUZA, 53, of San Diego, California, to a mandatory eight-hour day of community service every week of his five-year term of probation, weekly counseling sessions, and ordered him to pay a $30,000 fine, as well as a $100 special assessment.

Judge Berman previously denied D’SOUZA’s pretrial motion to dismiss the indictment for selective prosecution, ruling that there was “no evidence” to support D’SOUZA’s allegation. In sentencing D’SOUZA, Judge Berman referred to his prior ruling and remarked that “the defendant’s claim of selective prosecution, legally speaking, is ‘all hat, no cattle.’”

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation.

This case is being prosecuted by the Office’s Public Corruption Unit. Assistant United States Attorneys Carrie H. Cohen and Paul M. Krieger are in charge of the prosecution.

Eric Holder, the Attorney General of the United States, Preet Bharara, the United States Attorney for the Southern District of New York, John P. Carlin, the Assistant Attorney General for National Security, George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and William J. Bratton, the Police Commissioner of the City of New York, announced that SULAIMAN ABU GHAYTH, a/k/a “Salman Abu Ghayth,” Usama Bin Laden’s son-in-law and the former spokesman for al Qaeda at the time of the September 11th terrorist attacks, was sentenced today in Manhattan federal court to life in prison by U.S. District Judge Lewis A. Kaplan. ABU GHAYTH, who was arrested overseas on February 28, 2013, and first appeared in this District on March 1, 2013, was found guilty on March 26, 2014, following a three-week jury trial, of conspiring to kill U.S. nationals, conspiring to provide material support to terrorists, and providing material support to terrorists.

Attorney General Eric Holder said: “Justice has been served. This outcome ensures that Sulaiman Abu Ghayth, a senior member of al Qaeda and an associate of Usama bin Laden, will never again set foot outside a prison cell. From beginning to end, this trial, conviction and sentencing have underscored the power of America’s Article III court system to deliver swift and certain justice in cases involving terrorism defendants. We will continue to rely on this robust and proven system to hold accountable anyone who would harm our nation and its people. And we will never waver, and never relent, in our pursuit of violent extremists.”

Manhattan U.S. Attorney Preet Bharara said: “Sulaiman Abu Ghayth was the mouthpiece of murder and menace for al Qaeda. Hours after the 9/11 attacks, Abu Ghayth, Usama bin Laden’s propaganda minister, was exhorting others to pledge themselves to al Qaeda in the cause of murdering more Americans. It has been 13 years since that terrible day, but from the day Abu Ghayth was brought to the United States 19 months ago, justice for him has been swift and fair. Today, having been afforded a fair and impartial trial in an American civilian court at which a jury unanimously convicted him of material support to al Qaeda and conspiring to kill Americans, Abu Ghayth has been sentenced to life in prison. No sentence can restore what was taken from the families of al Qaeda’s victims. But today’s sentence ensures that Sulaiman Abu Ghayth will never be free to incite or support mass murder again.”

Assistant Attorney General John Carlin said: “As the face and voice of al Qaeda in the days and weeks after the 9/11 attacks, Abu Ghayth conspired with Usama Bin Laden and others and announced to the world al Qaeda's deadly intentions to continue to attack America. For his role in al Qaeda's plot to kill Americans, Abu Ghayth will now spend the rest of his life in prison. This case highlights our resolve to find and bring to justice – no matter how long it takes – those who plot to attack our citizens and our interests around the world. I want to thank all of the agents, analysts, and prosecutors who are responsible for this result.”

FBI Assistant Director-in-Charge George Venizelos said: “As the spokesman for al Qaeda, Abu Ghayth espoused messages of terror, hate, and fear to motivate others to harm our country, underestimating the resiliency of the United States to stand strong in the face of violence and adversity. Today's sentence is the culmination of years of hard work and cooperative efforts among law enforcement professionals to seek justice for those who lost their lives in the 9/11 attacks. Along with its law enforcement partners, the FBI's Joint Terrorism Task Force will vigorously pursue those who support this radical terrorist agenda.”

NYPD Commissioner William J. Bratton said: “Sulaiman Abu Ghayth was a key spokesman for al Qaeda and had access to the terrorist group's senior leadership as he took to the airwaves and threatened further attacks as our city was recovering from the horror of 9/11. His capture, trial and conviction is a reminder that the NYPD detectives and FBI agents of the Joint Terrorist Task Force will follow leads anywhere in the world to bring terrorists to justice.”

According to the evidence presented at trial, statements made during other public proceedings including today’s sentencing, and other court documents:

Since around 1989, al Qaeda has been an international terrorist organization, dedicated to opposing non-Islamic governments with force and violence. Usama Bin Laden served as the leader, or “emir,” of al Qaeda until his death on or about May 2, 2011. Members of al Qaeda typically have pledged an oath of allegiance, called bayat, to Bin Laden and to al Qaeda.

The core purpose of al Qaeda, as stated by Bin Laden and other leaders, is to support violent attacks against property and nationals, both military and civilian, of the United States and other countries. Between 1989 and 2001, al Qaeda established training camps, guest houses, and business operations in Afghanistan, Pakistan, and other countries for the purpose of training and supporting its agenda of violence and murder. Members and associates of al Qaeda have executed a number of terrorist attacks, all in furtherance of the organization’s stated conspiracy to kill Americans, including the attacks on the United States on September 11, 2001, in New York, Virginia, and Pennsylvania, which killed approximately 2,976 people.

From at least May 2001 up to around 2002, ABU GHAYTH served alongside Bin Laden, appearing with Bin Laden and his then-deputy and now the declared leader of al Qaeda, Ayman al-Zawahiri, speaking on behalf of al Qaeda and in support of Bin Laden’s terrorist objectives, recruiting young men to join al Qaeda and its murderous mission against the United States, and warning that attacks similar to those of September 11, 2001, would continue.

In particular, around May 2001, ABU GHAYTH urged young al Qaeda recruits at a guest house in Kandahar, Afghanistan, to swear bayat to Bin Laden, shortly before these men were brought to an al Qaeda training camp. On the evening of September 11, 2001, immediately after the terrorist attacks on the United States, Bin Laden summoned ABU GHAYTH and asked for his assistance, which ABU GHAYTH agreed to provide. On the morning of September 12, 2001, ABU GHAYTH appeared with Bin Laden, Zawahiri, and another al Qaeda leader, and spoke on behalf of al Qaeda in a speech that would be disseminated around the world, warning the United States and its allies that “[a] great army is gathering against you” and called upon “the nation of Islam” to do battle against “the Jews, the Christians and the Americans.” Also, after the September 11, 2001, terrorist attacks, ABU GHAYTH delivered speeches in which he addressed the then-U.S. Secretary of State and warned that “the storms shall not stop, especially the Airplanes Storm,” and advised Muslims, children, and opponents of the United States “not to board any aircraft and not to live in high rises.” At this time, in Afghanistan, Bin Laden and others within al Qaeda were plotting to detonate shoe bombs aboard flights within or en route to the United States.

ABU GHAYTH continued to speak on behalf of al Qaeda as the terrorist organization’s spokesperson through 2002, repeatedly working to drive more young men to al Qaeda. Also in 2002, ABU GHAYTH arranged to be, and was, successfully smuggled from Afghanistan into Iran, where he was later arrested with other al Qaeda leaders.

ABU GHAYTH, 48, was convicted after trial of one count of conspiring to kill U.S. nationals, in violation of Title 18, United States Code, Section 2332(b); one count of conspiring to provide material support to terrorists, in violation of Title 18, United States Code, Section 2339A; and one count of providing material support to terrorists, in violation of Title 18, United States Code, Section 2339A. In addition to a prison term of life, ABU GHAYTH was ordered to forfeit all foreign and domestic assets derived from, involved in, and used and intended to be used to commit terrorism against the United States, its citizens and residents, and their property, and was ordered to pay a $300 special assessment fee.

ABU GHAYTH’s conviction is the result of the close cooperative efforts of the U.S. Attorney’s Office for the Southern District of New York, the FBI’s Joint Terrorism Task Force – which consists of law enforcement officers of the FBI, NYPD, United States Marshals Service, and other agencies – and the National Security Division of the U.S. Department of Justice. The Justice Department’s Office of International Affairs and the U.S. Department of State also provided assistance.

The prosecution is being handled by Assistant United States Attorneys John P. Cronan, Nicholas J. Lewin, and Michael Ferrara of the Terrorism and International Narcotics Unit of the U.S. Attorney’s Office for the Southern District of New York, with assistance from Trial Attorney Jolie Zimmerman of the National Security Division’s Counterterrorism Section, Tara M. LaMorte of the Civil Division of the U.S. Attorney’s Office for the Southern District of New York, and Diane Gujarati, Deputy Chief of the Criminal Division of the U.S. Attorney’s Office for the Southern District of New York.

Forty-nine days ago, on August 4th, this Office issued a report detailing the appalling treatment of adolescents at Rikers Island. Since then, we have been engaged in making sure that the City and Department of Correction are moving swiftly to implement reforms that are meaningful, effective, and permanent. As the relevant City authorities are well aware, while we are listening to their promises to take various steps, we have an independent responsibility to ensure that the Constitution is respected and upheld everywhere, including on Rikers Island, and part of that duty is to guarantee that needed reforms are lasting, verifiable, and enforceable. Another part of our duty is to make sure that only accurate information is put forward and that competent and attentive leadership is in place at all levels. If, as has been reported, incomplete and inaccurate information has been provided to us, and questionable promotions may have occurred, it does not instill confidence in us that the City will quickly meet its constitutional obligations. We are not, at this early stage, jumping to conclusions about the City’s commitment to change, and our dialogue is ongoing. However, now that the 49-day waiting period has elapsed and all options are available to us, we stand ready to take legal action to compel long-overdue reforms at Rikers, if that becomes necessary to get the job done.

Preet Bharara, the United States Attorney for the Southern District of New York, and Assistant Attorney General for National Security John Carlin announced that ADEL ABDEL BARY, a/k/a “Adel Mohammed Abdul Almagid Abdel Bary,” a/k/a “Abbas,” a/k/a “Abu Dia,” a/k/a “Adel” (“BARY”), pled guilty in Manhattan federal court to international terrorism charges in connection with BARY’s work on behalf of al Qaeda and the Egyptian Islamic Jihad. BARY was extradited to the United States from the United Kingdom on October 6, 2012. BARY pled guilty to a three-count superseding Information charging him with conspiring to kill U.S. nationals, conspiring to make a threat to kill, injure, intimidate, and damage and destroy property by means of an explosive, and making such a threat. Following the defendant’s plea of guilty, Judge Lewis A. Kaplan asked for further information regarding the basis of the plea agreement, which the parties will provide within a week.

Manhattan U.S. Attorney Preet Bharara said: “Adel Abdel Bary filled supporting positions in Egyptian Islamic Jihad and al Qaeda, assisting in fomenting and inciting violence and terrorism, and conspiring to kill innocent people, including American civilians serving their country abroad. Today he has admitted his guilt, and subject to the further information requested by the judge, awaits the sentence to be imposed by an American civilian court.”

According to the Indictment based on which BARY was extradited, the Superseding Information to which he pled, other documents filed in Manhattan federal court, and statements made at today’s guilty plea:

In 1997 and 1998, BARY led the London cell of the Egyptian Islamic Jihad (“EIJ”) organization. EIJ, which was led for years by co-defendant Ayman al Zawahiri, was dedicated to the forceful overthrow of the Egyptian Government and to violent opposition of the United States, in part, for its support of the Government in Egypt. By February 1998, EIJ had effectively merged with al Qaeda and EIJ joined with al Qaeda in targeting American civilians. To that end, in February 1998, indicted co-defendant Usama Bin Laden and Zawahiri endorsed a purported fatwah under the banner of the “International Islamic Front for Jihad on the Jews and Crusaders.” This fatwah stated that Muslims should kill Americans – including civilians – anywhere in the world where they can be found. Then again, on August 4, 1998, EIJ published a statement threatening to retaliate against America for its claimed involvement in the apprehension of EIJ members. A copy of this statement was found in an office used by BARY and his London-based co-conspirators.

While in London, BARY pledged his commitment to pursue the goals of EIJ and to follow the orders of the leadership of the group. Many of the leading members of EIJ became influential members of al Qaeda, including Zawahiri and indicted co-defendant Muhammad Atef, both of whom later sat on the majlis al shura (or consultation council) of al Qaeda. Zawahiri is now the declared leader of al Qaeda.

On August 7, 1998, three days after EIJ published its threat to retaliate against America, al Qaeda operatives bombed the United States Embassies in Nairobi, Kenya, and Dar es Salaam, Tanzania, killing 224 people. BARY transmitted, via international telephone calls to the media, the contents of al Qaeda’s claims of responsibility for the August 7, 1998, bombings. These claims of responsibility included threats of future terrorist attacks by al Qaeda and its allies, and were sent from London, England, to media organizations in France, Qatar, and the United Arab Emirates on August 8, 1998 – the day after the embassy bombings.

In August 1998, both before and after the bombings, BARY additionally arranged for messages to be transmitted from members of the media to his co-conspirators, including Bin Laden and Zawahiri, and conveyed messages from his co-conspirators, including Bin Laden and Zawahiri, to members of the media. BARY also used an office in London, England, which he shared with co-conspirators, to store documents, including the claims of responsibility described above, as well as for other conduct related to the conspiracy to murder U.S. nationals.

In connection with his role in transmitting al Qaeda’s claims of responsibility for the bombings of the U.S. Embassies in Nairobi, Kenya and Dar es Salaam, Tanzania, BARY pled guilty to one count of conspiring to make a threat to kill, injure, intimidate, and damage and destroy property by means of an explosive, in violation of 18 U.S.C. §§ 844(e) and (n), which carries a maximum term of 10 years in prison, and one count of making such a threat, in violation of 18 U.S.C. § 844(e), which carries a maximum term of 10 years in prison. In connection with his role in the conspiracy—led by Bin Laden and Zawahiri—to attack American targets around the world, BARY pled guilty to one count of conspiring to kill U.S. nationals, in violation of 18 U.S.C. §§ 371 and 2332(a)(1), which carries a maximum term of five years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Two co-defendants, Khalid al Fawwaz, a/k/a “Khaled Abdul Rahman Hamad al Fawwaz,” a/k/a “Abu Omar,” a/k/a “Hamad,” and Anas al Liby, a/k/a “Nazih al Raghie,” a/k/a “Anas al Sebai,” are scheduled to commence trial on November 3, 2014, before the Honorable Lewis A. Kaplan. The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

Mr. Bharara praised the outstanding efforts of the Federal Bureau of Investigation, the New York City Police Department, the United States Marshals Service, and the Metropolitan Police Department of London, England (New Scotland Yard). Mr. Bharara also thanked the U.S. Department of Justice’s Office of International Affairs and National Security Division for their ongoing assistance.

This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Sean S. Buckley, Adam Fee, Nicholas J. Lewin, and Stephen J. Ritchin are in charge of the prosecution.

US v. Adel Bary Plea Agreement
U.S. v. Adel Bary Information

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ROBERT KELLY, the Chief Executive Officer of Wwebnet, Inc. (“Wwebnet”), a software development company, was sentenced today in Manhattan federal court to 27 months in prison in connection with his role in an offering fraud scheme. Specifically, KELLY diverted for his own personal use over $2 million in investor proceeds that was intended for the development of a software program capable of transmitting music, videos, and movies over the Internet. He used the money to trade options, to pay his personal income taxes, and for other purposes unrelated to software development or other legitimate business expenses. On March 11, 2014, KELLY pled guilty to securities and wire fraud charges before United States District Judge Paul A. Crotty.

According to the charging documents and related court proceedings:

From 2004 through November 2008, KELLY solicited investors to send money to Wwebnet, Inc., and related companies by misrepresenting that the funds would be used to develop software for transmitting music, videos, and movies over the Internet. Instead of using the millions of dollars in investor proceeds that he obtained for legitimate business purposes, KELLY diverted a substantial portion of the money that he raised for his own financial benefit. For example, KELLY transferred at least $2 million in investor funds into his personal trading account in the Cayman Islands, which he used to make a series of unsuccessful options trades. KELLY also used nearly $100,000 that he received from investors to pay his federal and state personal income taxes. At the same time that he was using investors’ money for his own personal benefit, KELLY falsely told his software development team that he was unable to allocate adequate resources for software development and could do so only when he was able to raise money from investors. As a result, Wwebnet lacked the necessary funds to develop its core product and the company ultimately failed.

In addition to his prison term, KELLY, 57, formerly of New York, New York, and now a resident of Raleigh, North Carolina, was sentenced to three years of supervised release, and was ordered to pay $2,111,600 in forfeiture and $2,111,600 in restitution, as well as a $200 special assessment fee.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation and also thanked the Securities and Exchange Commission for its assistance.

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

The case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Benjamin Naftalis is in charge of the prosecution.

Kelly, Robert Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, Shantelle P. Kitchen, the Acting Internal Revenue Service Special Agent in Charge of the New York Office – Criminal Investigation (“IRS”), George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Christy Romero, the Special Inspector General of the Troubled Asset Relief Program (“SIGTARP”), announced today that Westchester businessman SELIM ZHERKA, 46, of Somers, New York, was indicted by a federal grand jury in White Plains for submitting multiple false loan applications to banks, tax fraud, wire fraud, and witness tampering. ZHERKA was arrested today by agents of the FBI and is expected to be arraigned in federal court in White Plains this afternoon.

U.S. Attorney Bharara stated: “Selim Zherka, while running his various businesses, allegedly engaged in a string of crimes. Zherka, the owner of commercial real estate and other businesses, stands accused of filing multiple false bank loan applications, engaging in tax fraud, and witness tampering. He is also charged with defrauding a businessman of his right to collect a court judgment against Zherka for assault and breach of contract.”

Acting IRS Special Agent in Charge Kitchen stated: “The Internal Revenue Service is committed to ensuring that everyone pays their fair share of taxes. The public should not have to pick up the tab for those who willfully choose to not file correct and accurate returns. IRS-Criminal Investigation investigates individuals who allegedly corruptly violate the tax laws to further their business and personal interests, at the expense of other businesses and individual taxpayers who play by the rules.”

Assistant FBI Director Venizelos stated: “As alleged, Zherka’s entrepreneurship got a little too creative when he began fabricating loan applications, among many other things, and Zherka’s web of deception knew few bounds. Today he finds himself under arrest and on the wrong side of the law.”

Special Inspector General of TARP Christy Romero stated: “Following an extensive criminal investigation by SIGTARP and our law enforcement partners, this morning federal agents apprehended Selim Zherka without incident in Westchester County, New York. Zherka is charged with falsifying information on commercial loan applications submitted to North Fork Bank - later purchased by TARP recipient Capital One - to obtain more than $36.5 million in loans from the bank.”

According to the Indictment, from November 2005 through 2008, ZHERKA obtained a total of over $146 million in loans from three banks – North Fork Bank (now Capital One), Sovereign Bank (now Santander), and Signature Bank – for the purchase and/or refinancing of apartment house complexes in New England, Tennessee, New Jersey, and New York by lying about the purchase prices of the real estate he was acquiring, the amount of the down payments he was making toward the purchases in question, his assets, his income, his tax returns, and the nature and circumstances of a 2000 court judgment against him for assault and breach of contract (which, to date, he has not paid).

Additionally, the Indictment charges ZHERKA with engaging in a decade-long tax fraud scheme. The Indictment alleges that ZHERKA repeatedly submitted fraudulent tax returns to the IRS that overstated depreciation expenses and understated his capital gains on tax returns for the real estate holding companies in which he was a partner and which, in turn, owned the above apartment house complexes, thereby reducing their tax liabilities. The Indictment also charges that ZHERKA obstructed the Internal Revenue Service by, among other means, failing to file personal tax returns for over a decade.

The Indictment also charges that ZHERKA schemed to defraud the judgment creditor in connection with the above-referenced 2000 case of that individual’s right to receive payment of the judgment. ZHERKA had been found liable by a New York State Supreme Court jury in Manhattan for assaulting that individual and for breaching a contract with him.

Finally, the Indictment charges ZHERKA with tampering with witnesses in this investigation.

If convicted on the charges in the Indictment, ZHERKA faces the following maximum penalties: for each of the 11 counts of submitting a false loan application with which he is charged, 30 years in prison and a $1 million fine or twice the gross gain or loss resulting from the crime; for the count of wire fraud and the count of witness tampering, 20 years in prison and a $250,000 fine or twice the gross gain or loss resulting from the crime on each count; for the count of conspiracy to obstruct the IRS and violate tax laws, 5 years in prison and a $250,000 fine or twice the gain or loss resulting from the crime; and for each of the 10 counts of making/subscribing to false returns, the 10 counts of aiding/assisting in the preparation of false tax returns, and the count of attempting to interfere with the administration Internal Revenue laws, 3 years in prison and a $250,000 fine or twice the gross gain or loss resulting from the crime. Additionally, he faces potential criminal forfeitures totaling $146 million, restitution, and the costs of prosecution. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant and any forfeiture would be determined by the Court.

Mr. Bharara praised the work of the IRS, the FBI, and the Special Inspector General for the Troubled Asset Relief Program in this investigation.

This case is being handled out of the White Plains Division. Assistant United States Attorneys Elliott B. Jacobson and Perry A. Carbone are in charge of the prosecution.

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

US v. Zherka memo of law (9-18-14)
Selim Zherka.S2

Preet Bharara, the United States Attorney for the Southern District of New York, Michael McCarthy, the Acting Inspector General for the Export-Import Bank of the United States (“EX-IM”), and Fred Hochberg, the Chairman for EX-IM, announced today that the United States filed a civil fraud lawsuit in Manhattan federal court against HASAN BESNELI, a Turkish business agent, and SABA, INC. (“SABA”), an exporter based in Memphis, for fraudulently obtaining a loan for a construction project in Turkey from Deutsche Bank that was guaranteed by EX-IM. The United States’ complaint alleges that, in applying for the loan and the loan guarantee, BESNELI and SABA misrepresented key aspects of the transaction, including how much of the loan proceeds would be spent on “local costs” in Turkey rather than on U.S.-made goods, and whether the borrower, a Turkish non-profit organization, would furnish a 15% down payment. The lawsuit seeks civil penalties under the Financial Institutions Reform, Recovery, and Enforcement Act (“FIRREA”) and damages and penalties under the False Claims Act.

Simultaneous with the filing of the lawsuit, the United States settled the claims against SABA pursuant to a settlement stipulation approved today by U.S. District Judge John F. Keenan. In the settlement, SABA admitted and accepted responsibility for submitting information to EX-IM in connection with applying for the loan guarantee without verifying the truth or accuracy of such information and for marking up the costs of certain goods – by as much as 300% – for purposes of generating “cash money.” SABA also agreed to pay $3.5 million and to abstain from participating in any EX-IM loan or loan guarantee programs for seven years. The lawsuit is going forward against BESNELI.

Manhattan U.S. Attorney Preet Bharara said: “The Export-Import Bank is charged with promoting export of U.S.-made goods. It is absolutely unacceptable for exporters and business agents to undermine that mission by misrepresenting how proceeds from loans guaranteed by EX-IM will be used.”

EX-IM Acting Inspector General Michael McCarthy said: “This case shows our commitment to vigorously pursue persons and businesses who scheme to defraud the EX-IM Bank. The OIG appreciates the tenacity of the Southern District of New York in this lengthy and complex investigation.”

EX-IM Chairman Fred Hochberg said: “We take very seriously our commitment to taxpayers and our mission to support U.S. jobs. This should serve notice to any outside entity that tries to defraud the Export-Import Bank, we have zero tolerance for waste, fraud and abuse, and we are constantly analyzing transactions for such activity and will work with our Inspector General to take immediate action in response to any evidence of fraud in EX-IM Bank transactions.”

According to the allegations in the complaint filed in Manhattan federal court:

In 2002, BESNELI and SABA began working together to bid on contracts involving export of U.S. goods to be used in construction projects in Turkey. One of those projects involved TC Basbakani Baskanliginda Darussafaka Cemiyeti (“Darussafaka”), a Turkish non-profit organization, which planned to develop a retirement home complex in Urla. To ensure that they would be picked as the exporter for the Urla project, BESNELI and SABA promised Darussafaka that they would obtain an EX-IM-guaranteed loan to finance that project.

BESNELI and SABA made that promise even though they knew that Darussafaka did not plan to comply with EX-IM’s loan guarantee requirements, including a 15% down payment by the borrower, i.e., Darussafaka, and capping “local costs” at 15%. To circumvent those requirements, BESNELI and SABA made misrepresentations to EX-IM and to Deutsche Bank, the lender, regarding how much of the loan funds would be spent on local costs and whether Darussafaka would furnish a down payment. Further, after BESNELI and SABA fraudulently obtained the loan from Deutsche Bank under an EX-IM loan guarantee, they orchestrated a scheme whereby SABA marked up the costs of the U.S.-made goods being exported to Turkey – sometimes by as much as 300% – in order to generate “cash money” that they funneled back to Darussafaka to fund local costs.

Finally, in 2007, Darussafaka defaulted on the loan from Deutsche Bank that was guaranteed by EX-IM. Pursuant to its loan guarantee, EX-IM reimbursed Deutsche Bank and, as a result, was exposed to millions of dollars in potential losses.

The claims against BESNELI were not resolved by the SABA settlement and will go forward. The Government seeks civil penalties against BESNELI for fraudulently obtaining the loan extended by Deutsche Bank, a federally insured financial institution.

Mr. Bharara thanked the EX-IM’s Office of the Inspector General for its investigative efforts and ongoing support and assistance with the case.

The case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorneys Cristine Irvin Phillips, Li Yu, and Ellen M. London are in charge of the case. This case was investigated by the EX-IM OIG in Washington, D.C.

U.S. v. Besneli and SABA Stip of Settlement
U.S. v. Besneli and SABA Civil Complaint

Dmitry Braverman Charged with at Least Eight Different Trades Based on Nonpublic Information About Mergers and Acquisitions Activity of the Law Firm’s Clients

Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that DMITRY BRAVERMAN was arrested this morning on securities fraud charges stemming from his involvement in an insider trading scheme. Specifically, BRAVERMAN traded on material nonpublic information about potential merger and acquisition activity of at least eight clients of his employer – a national, full-service law firm – resulting in profits of approximately $300,000. BRAVERMAN is expected to be presented today in San Francisco federal court before a United States Magistrate Judge.

U.S. Attorney Preet Bharara said: “As alleged, Dmitry Braverman, undeterred by the many felony convictions of others for insider trading, abused his access to nonpublic information about mergers and acquisitions for personal gain. Braverman’s charged actions are yet another example of brazen disregard for laws that are intended to keep the playing field level.”

FBI Assistant Director-in-Charge George Venizelos said: “Our message of deterrence has apparently still not been heard. Braverman used his computer prowess to snoop on deals and get inside information. He then made numerous trades with his illegal edge. Braverman finds himself under arrest and faces stiff jail time for his alleged crimes.”

In a separate action, the U.S. Securities and Exchange Commission (“SEC”) announced civil charges against BRAVERMAN.

According to the one-count Complaint unsealed today in Manhattan federal court:

From at least in or about September 2010 through December 2013, BRAVERMAN was engaged in an insider trading scheme. BRAVERMAN, who is a senior systems engineer at a full-service law firm (the “Law Firm”), was primarily responsible for maintaining and designing software in connection with the Law Firm’s finance function and had access to financial and billing databases. BRAVERMAN’s level of computer and database systems access of the Law Firm gave him access to information about, among other things, the Law Firm’s clients in potential merger and acquisition activity, as well information about the identities of the other parties to the potential deal.

Between about 2010 and 2011, BRAVERMAN engaged in at least four trades that were based on inside information, and tipped another person (“Individual-1”), who engaged in two of the same trades. In April 2011, however, BRAVERMAN and Individual-1 abruptly closed out the last of these trades on the same day that another employee of the Law Firm was arrested on separate insider trading charges. In November 2012, BRAVERMAN opened a new brokerage account and (again) began trading on the basis of inside information he obtained from the Law Firm. Specifically, between November 2012 and the present, BRAVERMAN engaged in at least four additional trades based on inside information. In total, BRAVERMAN made more than approximately $300,000 in profits from the trades between 2010 and the present.

BRAVERMAN, 41, was arrested this morning at his home in San Mateo, California. He is charged with one count of securities fraud. The securities fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the work of the Federal Bureau of Investigation, and thanked the SEC for its assistance. He added that the investigation is continuing.

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Matthew L. Schwartz and Benjamin Naftalis are in charge of the prosecution.

The allegations contained in the Complaint are merely accusations, and the defendant is

presumed innocent unless and until proven guilty.

U.S. v. Dmitry Braverman Complaint
Dmitry Braverman transactions chart

Preet Bharara, the United States Attorney for the Southern District of New York, announced that RICHARD MELTZ, the former Chief of Police, United States Department of Veterans Affairs, at the Bedford Veterans Affairs Medical Center, was sentenced today in Manhattan federal court to ten years for conspiring to kidnap, rape, and murder the wife of a man he had met over the Internet, and a female Federal Bureau of Investigation agent working in an undercover capacity. MELTZ pled guilty before U.S. District Judge Paul G. Gardephe, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “Today’s sentence ensures that Richard Meltz will pay with his liberty for his role in a macabre conspiracy to kidnap, brutalize, and kill two victims that, fortunately, did not come to full fruition.”

According to the Information to which MELTZ pled guilty, statements made during the plea proceeding, and other court documents:

Between the spring of 2011 and January 2013, MELTZ, Robert Christopher Asch and Michael Van Hise engaged in a series of electronic email and instant message communications during which they discussed and planned the kidnapping, torture, and murder of Van Hise’s wife and other members of Van Hise’s family. Van Hise sent to MELTZ and Asch photographs of these family members, and the approximate location of their residence. MELTZ engaged in detailed discussions about kidnapping and brutalizing the proposed victims, and ultimately agreed with Van Hise and Asch to kidnap, rape, and kill Van Hise’s wife. The co-conspirators ceased active planning of the kidnapping when the FBI arrested New York City Police Officer Gilberto Valle for a related kidnapping conspiracy, and began investigating Van Hise.

In addition, beginning in approximately January 2013, MELTZ, Asch, and an FBI agent working in an undercover capacity (“UC-1”) began discussions about kidnapping a woman, who unbeknownst to MELTZ and his co-conspirators, was also an FBI agent working in an undercover capacity. MELTZ participated in multiple conversations with both UC-1 and Asch about the conspiracy’s objective to kidnap and commit acts of violence against the intended victim and other women. MELTZ advised Asch to obtain a stun gun to subdue the intended target, and based on MELTZ’s direction, Asch purchased a high-voltage Taser gun at a gun show in Pennsylvania, which they intended to use in the commission of the kidnapping offense.

In addition to his prison term, MELTZ, 66, of Linden, New Jersey, was sentenced to three years of supervised release, and was ordered to pay a $200 special assessment fee.

Van Hise and Asch were both convicted following a two-week jury trial. Both men await sentencing.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation. He also thanked the Department of Veterans Affairs and the New Jersey State Police for their assistance in the investigation.

The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Brooke E. Cucinella and Hadassa Waxman are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that NICK A. JODHA, a/k/a “Nick Persaud,” the owner of a contracting business that provided heating, ventilation, and air conditioning (“HVAC”) services throughout the New York City metropolitan area, was sentenced in Manhattan federal court to one year and one day in prison for his role in a tax evasion scheme. JODHA pled guilty in April 2014 before U.S. District Court Judge Richard J. Sullivan, who also imposed today’s sentence.

According to the criminal Information against JODHA and statements made at the plea proceeding:

JODHA operated and was a 50% owner of United HVAC Services, Inc. (“United HVAC”), an HVAC contracting firm based in South Ozone Park, New York, with operations throughout New York City. From 2007 through 2010, JODHA cashed more than $2.3 million in checks made payable to United HVAC at a check cashing service in Manhattan, rather than depositing the business checks into the business’s corporate bank account. JODHA used the proceeds from the cashed checks for business and personal purposes.

During the same period, in order to prepare both personal and corporate income tax returns, JODHA provided his accountant with the statements from the business bank account of United HVAC. However, JODHA failed to inform his accountant of the checks he cashed at the check cashing service, which were not reflected in the statements of United HVAC’s business bank account. Moreover, JODHA failed to advise his accountant that he used a portion of the cashed checks for business and personal expenses.

JODHA admitted to filing false S-Corporation income tax returns on behalf United HVAC for the tax years 2007 through 2010, which omitted any business activity and flow-through income concerning the cashed business checks, and to filing false individual income tax returns for the tax years 2007 through 2010, which understated his true taxable income and the taxes due on that income. JODHA’s conduct caused a tax loss to the Government of approximately $214,529.

In addition to the prison term, JODHA, 43, of South Ozone Park, New York, and Kissimmee, Florida, was sentenced to two years of supervised release. JODHA was also ordered to pay $214,529 in restitution to the IRS and a $100 special assessment fee.

Mr. Bharara praised the efforts of IRS-CI in the investigation. He also thanked the U.S. Department of Justice’s Tax Division for their significant assistance in the investigation.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Special Assistant U.S. Attorney Jorge Almonte of the Department of Justice’s Tax Division is in charge of the prosecution.

PREET BHARARA, the United States Attorney for the Southern District of New York, announced that the Department of Justice held its 30th annual Executive Office for United States

Attorneys (EOUSA) Director’s Awards Ceremony yesterday, during which 243 award recipients from 44 districts were recognized for their dedication to carrying out the mission of the Department of Justice. Among the award recipients were Arlo Devlin-Brown, Antonia M. Apps, John T. Zach, Sharon Cohen Levin, Christine Magdo, Micah Smith, Daniel Filor, Ellen London, and Carina H. Schoenberger from the U.S. Attorney’s Office for the Southern District

of New York. Attorney General Eric Holder and Executive Office for U.S. Attorneys (EOUSA) Director Monty Wilkinson presided at yesterday’s ceremony in the Great Hall at the Robert F. Kennedy Department of Justice Building in Washington, D.C.

In his prepared remarks to awardees, Attorney General Holder said, “Locally, nationally, and internationally, you represent the very best that this Department has to offer. Your work embodies our ongoing commitment – not merely to win cases, but to do justice; to protect our fellow citizens from crime, violence, and terrorism; to empower the most vulnerable among us; and to uphold the rule of law.”

EOUSA Director Monty Wilkinson echoed those sentiments, saying to the recipients, “You have persevered, and remained focused and motivated – achieving remarkable results in work that makes a difference in the lives of citizens across our great country. The vast scope of your collective accomplishments is nothing short of exceptional.”

Manhattan U.S. Attorney Preet Bharara said: "This year’s Director’s Award winners exemplify the extraordinary intellect, determination, and dedication that are the hallmarks of this Office. I congratulate them for this well-deserved recognition. Their commitment to justice serves the interests of the citizens of New York and the entire country.”

Arlo Devlin-Brown, Antonia M. Apps, John T. Zach, Sharon Cohen Levin, Christine Magdo, and Micah Smith, working with Federal Bureau of Investigation Special Agents Matthew Callahan, B.J. Kang, James Hinkle, Matt Thoresen, Ronan Byrne, and David Makol, were recognized for Superior Performance by a Litigative Team for their successful investigation and prosecution of the entities managing the hedge fund SAC Capital, in an insider trading scheme that was on a scale without known precedent in the hedge fund industry. The criminal charges against SAC Capital, and a related civil money laundering and forfeiture action, were based on insider trading committed by numerous SAC Capital employees (eight of whom have been individually prosecuted) that was, as charged, “made possible by institutional practices that encouraged the widespread solicitation and use of insider information.” The SAC entity defendants pleaded guilty to all charges pursuant to a plea agreement, requiring the SAC Capital hedge fund to cease operating as investment advisers and to pay a historic financial penalty of $1.8 billion, the largest ever imposed in an insider trading prosecution.

Daniel Filor, Ellen London, and Carina H. Schoenberger were recognized for Superior Performance as an Assistant United States Attorney - Civil for their work in representing the United States in the In re Ambac bankruptcy proceeding, which culminated in a substantial recovery for the government. The United States had challenged Ambac's accounting for its credit default swap losses during the financial crisis, which allowed Ambac to obtain a $700 million tax refund from the Internal Revenue Service. AUSAs Filor, London, and Schoenberger led efforts to recover $101.9 million in cash and secured a $1 billion reduction of Ambac's net operating losses.

EOUSA provides oversight, general executive assistance, and direction to the 94 United States Attorneys’ offices around the country. For more information on EOUSA and its mission, visit http://www.justice.gov/usao.

Preet Bharara, United States Attorney for the Southern District of New York, announced today that AKIM MURRAY, an employee of the Medicaid Reimbursement Unit of the New York City Human Resources Administration (“HRA”), pled guilty before U.S. District Judge Richard M. Berman to a Medicaid fraud scheme in which MURRAY, whose job involved issuing reimbursements for Medicaid-eligible expenses, manipulated the system in order to have over one million dollars’ worth of checks issued to his friends and criminal associates. Those co-conspirators, in turn, gave MURRAY a substantial cut of the proceeds.

Manhattan U.S. Attorney Bharara said: “For over a year, Akim Murray used his job within New York City government to essentially embezzle funds intended to benefit low-income people entitled to reimbursements for certain of their health care payments. He stole from a program for people in need and gave the money to his friends and himself. Today, what Murray has earned is a felony conviction and the prospect of serious prison time."

According to the allegations in the Information, a previously filed Complaint, other documents filed in Manhattan federal court, and statements made at today’s guilty plea:

Medicaid is a federally funded program designed to provide low-income families with affordable health care. The HRA oversees the program and processes applications from New York City residents. Under Medicaid, individuals who successfully apply for Medicaid coverage can be reimbursed for eligible expenses submitted in the approximate three-month period prior to the application (“Pre-Enrollment Services”). In order to be reimbursed for Pre-Enrollment Services, the successful Medicaid applicant requesting reimbursement must provide proof that he or she made eligible health care payments out of pocket before applying for Medicaid. City employees known as Eligibility Specialists, working for HRA’s Medicaid Reimbursement Unit, receive and process requests for reimbursement using a computer system, and make recommendations for HRA supervisors as to whether a request should be approved.

From at least July 2009 until September 2010, MURRAY, an HRA Eligibility Specialist, exploited loopholes in HRA’s systems to both recommend and then separately approve the issuance of Medicaid reimbursement checks without meaningful oversight. MURRAY used the personal identifying information of his co-conspirators to create and unilaterally approve requests for reimbursement checks in their names. When the checks were sent to his friends and other associates, MURRAY demanded that they cash the checks and give him a substantial portion of the proceeds, often between 50 and 70 percent. MURRAY approved over $1.3 million in illicit Medicaid reimbursement requests during the course of the fraud.

MURRAY, 52, of New York, New York, pled guilty to one count of conspiracy to commit health care fraud, which carries a maximum sentence of 10 years. Sentencing is scheduled for December 17, 2014, before Judge Berman.

The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the investigative work of the FBI’s Health Care Fraud Task Force and the DOI for their assistance in this investigation, which he noted remains ongoing. The New York FBI Health Care Fraud Task Force was formed in 2007 in an effort to combat health care fraud in the greater New York City area. The task force comprises agents, officers, and investigators from the FBI, NYPD, the New York State Insurance Fraud Bureau, U.S. Department of Labor, U.S. Office of Personnel Management Inspector General, U.S. Food and Drug Administration, New York State Attorney General’s Office, New York State Office of Medicaid Inspector General, New York State Health and Hospitals Inspector General, and the National Insurance Crime Bureau.

This case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorney Martin S. Bell is in charge of the prosecution.

U.S. v. Akim Murray Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, and Leslie R. Caldwell, Assistant Attorney General for the Justice Department’s Criminal Division, announced that MARK MARMILEV, the former chief technology officer of Liberty Reserve, pled guilty today in Manhattan federal court to conspiring to operate an unlicensed money transmitting business that he knew involved the transmission of funds derived from criminal activity. MARMILEV was principally responsible for designing and maintaining the technological infrastructure for Liberty Reserve, a company that operated one of the world’s most widely used digital currency services. MARMILEV was arrested in Brooklyn, New York, in May 2013 and pled guilty today before U.S. District Judge Denise L. Cote.

Manhattan U.S. Attorney Preet Bharara said: “As the chief technology officer of Liberty Reserve, Mark Marmilev was responsible for the infrastructure of a global payment processor and money transfer system that catered largely to criminals. With his guilty plea today, we are one step closer to holding to account everyone integrally involved in this sprawling Internet enterprise that served as a central financial institution for cyber criminals and illegal transactions of numerous kinds.”

Assistant Attorney General Leslie R. Caldwell said: “Marmilev designed and maintained a massive criminal infrastructure in cyberspace for one of the world’s most widely used digital currency systems, which laundered billions in criminal proceeds. This is the third conviction in the largest international money laundering case ever brought by the department, and we will continue to ensure that virtual currencies are not misused to enable criminals to hide from the U.S. justice system.”

According to allegations contained in the Indictment filed against Liberty Reserve, MARMILEV, and six other individual defendants, and statements made in related court proceedings:

Liberty Reserve was incorporated in Costa Rica in 2006 and billed itself as the Internet’s “largest payment processor and money transfer system.” Liberty Reserve was created, structured and operated to help users conduct illegal transactions anonymously and launder the proceeds of their crimes. It emerged as one of the principal money transfer agents used by cybercriminals around the world to distribute, store, and launder the proceeds of their illegal activity. Liberty Reserve was used extensively for illegal purposes, functioning as the bank of choice for the criminal underworld because it provided an infrastructure that enabled cybercriminals around the world to conduct anonymous and untraceable financial transactions.

Before being shut down by the U.S. government in May 2013, Liberty Reserve had more than one million users worldwide, including more than 200,000 users in the United States, who conducted approximately 55 million transactions through its system totaling more than $6 billion in funds. These funds encompassed suspected proceeds of credit card fraud, identity theft, investment fraud, computer hacking, child pornography, narcotics trafficking, and other crimes.

MARMILEV was an associate of Liberty Reserve founder Arthur Budovsky and served as Liberty Reserve’s chief technology officer. In that role, MARMILEV was principally responsible for designing and maintaining Liberty Reserve’s technological infrastructure.

MARMILEV, 35, of Brooklyn, New York, pled guilty to one count of conspiring to operate an unlicensed money transmitting business that failed to comply with federal registration requirements and that MARMILEV knew involved the transmission of funds derived from criminal activity, which carries a maximum sentence of five years in prison. A sentencing date has not yet been scheduled. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Marmilev and Budovsky were among seven individuals charged in the indictment, which was unsealed on May 28, 2013, and two co-defendants – Vladimir Kats and Azzeddine el Amine – previously pleaded guilty and await sentencing. The indictment also charged Liberty Reserve with conspiracy to commit money laundering and operation of an unlicensed money transmitting business, and the charges remain pending.

Mr. Bharara praised the outstanding work of the United States Secret Service, the Internal Revenue Service-Criminal Investigation, and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, which worked together in this case as part of the Global Illicit Financial Team. Mr. Bharara also thanked the United States Secret Service’s New York Electronic Crimes Task Force for their extraordinary assistance with the investigation. Additionally, Mr. Bharara specially thanked all the international law enforcement agencies that assisted in the investigation, in particular, the Judicial Investigation Organization in Costa Rica, the National High Tech Crime Unit in the Netherlands, the Spanish National Police, Financial and Economic Crime Unit, the Cyber Crime Unit at the Swedish National Bureau of Investigation, and the Swiss Federal Prosecutor’s Office.

This case is being prosecuted jointly with the Department of Justice’s Asset Forfeiture and Money Laundering Section (“AFMLS”), which is overseen by Assistant Attorney General Leslie R. Caldwell. Mr. Bharara thanked AFMLS for its partnership and also thanked the Department of Justice’s Office of International Affairs and Computer Crime and Intellectual Property Section for their support.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit and Money Laundering and Asset Forfeiture Unit. Assistant United States Attorneys Serrin Turner, Andrew Goldstein, and Christine Magdo of the Southern District of New York and Trial Attorney Kevin Mosley of AFMLS are in charge of the prosecution, and Assistant United States Attorney Christine Magdo is in charge of the forfeiture aspects of the case.

The charges contained in the Indictment against certain of MARMILEV’s co-defendants remain pending and are merely accusations. Those defendants are presumed innocent unless and until proven guilty.

Preet Bharara, the United States Attorney for the Southern District of New York, and Shantelle P. Kitchen, the Acting Special Agent in Charge of the New York Office of the Internal Revenue Service – Criminal Investigation (“IRS”), announced that a former consultant to the New York State Democratic Senate Campaign Committee ("DSCC"), MELVIN LOWE, was found guilty today in White Plains federal court of conspiring with New York State Senator John Sampson to defraud the DSCC of $100,000. Lowe was also found guilty of one count of wire fraud arising out of his scheme to defraud the DSCC; three counts of subscribing to false tax returns; three counts of failing to file tax returns; and one count of causing a bank employee to make a false report of a federally insured bank. LOWE was found guilty after a one-week trial before U.S. District Judge Vincent L. Briccetti.

Manhattan U.S. Attorney Preet Bharara stated: "This conviction is another step in restoring the public's trust in New York State politics. As the jury found, Lowe participated in a series of backroom deals in which the bridge of corruption extended between the world of elected officials and their complicit consultants. Consultants, like elected officials, need to be held accountable in order to clean up our political system."

IRS-Criminal Investigation Acting Special Agent in Charge Shantelle P. Kitchen stated: “The public expects that politicians and those who work in the public arena be held to the same standards as they are, especially when it comes to matters of basic citizenship, like paying taxes, and applying for loans. This jury has held Mr. Lowe accountable to these standards.”

According to the Complaint and the Indictment filed in federal court and the evidence presented at trial:

LOWE was retained as a consultant by the DSCC after New York State Senator John Sampson was appointed as the Senate's Democratic Conference Leader following the June 2009 "coup" that temporarily shifted the balance of power in the New York Senate from the Democrats to the Republicans. In early June 2010, Sampson asked LOWE to arrange for a covert payment of $20,000 to Michael Nieves, a Queens-based political operative who had previously worked for former New York State Senator Hiram Monserrate and who had helped engineer the resolution of the Senate coup that had brought Sampson to power. LOWE then arranged for a New Jersey-based political consultant to submit a false invoice to the DSCC for $100,000 in printing services. Sampson approved payment of the invoice and the DSCC sent $100,000 to the New Jersey-based consultant. LOWE instructed the consultant to send $20,000 of the proceeds to Nieves, $75,000 of the proceeds to LOWE's consulting company and to keep $5,000 for himself. The jury heard evidence that LOWE and Senator Sampson had a close relationship of trust that included LOWE giving Sampson an envelope of cash.

LOWE received more than $2.1 million in consulting income from 2007 to 2012. He reported less than $25,000 in income in each of his returns for 2007 through 2009, which he did not file until late 2010. LOWE never filed returns for 2010 through 2012. He never made any payments toward his taxes for the years 2000 through 2012.

LOWE also caused an assistant manager of his bank to make a false statement to his mortgage lender regarding the balance in his checking account. When the mortgage lender sent his bank a Verification of Deposit form to verify LOWE's claim that he had $65,000 in his checking account, LOWE caused the assistant manager to claim that LOWE'S account had a balance of more than $80,000. At that time, the balance in LOWE'S checking account was $2,156.

LOWE, 53, of Manhattan, was found guilty of one count of conspiracy, which carries a maximum sentence of 20 years in prison; one counts of wire fraud, which carries a maximum sentence of 20 years in prison; three counts of subscribing to false tax returns, each of which carries a maximum sentence of 3 years in prison; three counts of failing to file tax returns, each of which carries a maximum sentence of 1 year in prison; and one count of causing a bank employee to make a false statement in a report and statement of a federally insured bank, which carries a maximum sentence of 30 years in prison. The conspiracy, wire fraud and tax charges each carry a maximum fine of $250,000, while the false statement charge carries a maximum fine of $1 million. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the Court.

Mr. Bharara praised the outstanding investigative work of the Internal Revenue Service - Criminal Investigation and the investigators from the U.S. Attorney's Office for the Southern District of New York.

This case is being handled by the Office’s White Plains Division. Assistant United States Attorneys Perry A. Carbone and James McMahon are in charge of the prosecution.

Lowe, Melvin Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, James J. Hunt, the Acting Special Agent-in-Charge of the New York Field Division of the U.S. Drug Enforcement Administration (DEA), and William J. Bratton, the Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of an Indictment

charging JORDAN HART, a former player for a minor league hockey team (“Team-1”), and OSCAR JOHNSON, a physician’s assistant who formerly provided medical services to Team-1, with various offenses principally relating to the distribution of oxycodone. As alleged, JOHNSON wrote medically unnecessary Percocet prescriptions for HART on a monthly basis from June 2009 through July 2011, despite never once conducting any treatment or diagnosis of HART for any injuries or illnesses over that time period. From at least December 2010 through April 2011, HART sold at least some of the oxycodone he obtained from JOHNSON’s prescriptions to Derek Boogaard, who was a professional hockey player for an NHL team in New York, New York (“Team-2”), and who suffered from an addiction to prescription painkillers and Ambien. On May 13, 2011, two weeks after last purchasing oxycodone from HART in New York, Boogaard died of an overdose of oxycodone and alcohol in Minneapolis, Minnesota.

HART and JOHNSON were arrested this morning. HART will be presented in Manhattan federal court before U.S. Magistrate Judge Michael H. Dolinger later this afternoon. JOHNSON will be presented in federal court in Salt Lake City, Utah, later this afternoon. The case has been assigned to U.S. District Judge Naomi Reice Buchwald.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, for more than two years, Oscar Johnson casually provided Percocet prescriptions to a former minor league hockey player without once treating or examining that player during that period. The minor league player, Jordan Hart, then filled those prescriptions and sold the corresponding drugs to Derek Boogaard, an NHL player, feeding Boogaard’s growing, debilitating addiction. Ultimately, that addiction, fueled at least in part by the drugs that Johnson illegally prescribed, and Hart peddled for cash, culminated in Boogaard’s tragic overdose death. We have seen far too many tragedies from prescription drug overdoses. This Office will continue to warn people of the dangers of prescription drug abuse and investigate and prosecute those who illegally deal in pain medications wherever we find them. And finally, the sports world is not exempt from federal narcotics law and should not expect to be.”

DEA Acting Special Agent in Charge James J. Hunt said: “Like a sad story of lost potential, Derek Boogaard fell victim to prescription drug addiction ending in the most tragic consequence – a fatal overdose. His death in Minneapolis led law enforcement on a trail to Long Island and Utah that identified two people who allegedly supplied him diverted oxycodone, Jordan Hart and Oscar Johnson. Let this be another warning to the athletes across America about the fatal dangers of prescription drug abuse and a warning to those who distribute diverted prescription medication throughout our communities – law enforcement will track you down.” Acting SAC Hunt would like to extend his condolences to the Boogaard family for their loss.

NYPD Commissioner William J. Bratton said: “The NYPD will continue to work with our law enforcement partners to stop the illegal drug trade in any form of distribution. Thanks to the investigators and prosecutors involved in this case, this illegal supply of prescription narcotics was shut down before it could destroy another life.”

According to the allegations contained in the Indictment unsealed today in Manhattan federal court:

Oxycodone is a prescription narcotic-strength opioid used to treat severe and chronic pain conditions. Oxycodone is typically dispensed in five to 30 milligram tablets to patients suffering from conditions such as post-operative pain, severe back and orthopedic injuries, as well as pain associated with certain forms of cancer treatments and terminal illnesses. Oxycodone is a highly addictive opioid which, along with other controlled substance prescription medications, is abused by almost seven million Americans, resulting in more deaths from prescription drug overdoses than auto accidents. Because of its extremely addictive properties, oxycodone is heavily regulated, and should be prescribed with care. Indeed, the standard of care for properly prescribing oxycodone and other opioids requires monthly to quarterly in-person evaluation of a patient, including a full discussion of the degree of pain relief the patient is obtaining, the degree of improvement from the medication, an assessment of side effects, scrutiny for aberrant behavior, physical examination, compliance monitoring, and the development and implementation of a treatment plan utilizing all possible alternatives.

JOHNSON was a physician’s assistant for a medical services group in Utah (the “Medical Group”) that provided contract medical services to Team-1, which played in the East Coast Hockey League (“ECHL”). JOHNSON worked for the Medical Group between 2007 and July 2011, and was the primary medical liaison to Team-1 during that time. As a physician’s assistant, JOHNSON, under the supervision of a physician or surgeon, was able to diagnose and treat illnesses, and prescribe medications including oxycodone.

HART played for Team-1 during the 2007-2008 and 2008-2009 ECHL seasons. During those two seasons, JOHNSON did not regularly prescribe oxycodone for HART. Indeed, JOHNSON wrote HART a total of four prescriptions for medications containing oxycodone during HART’s entire tenure with Team-1. However, after the 2008-2009 ECHL season ended in April 2009, and after HART had stopped playing for Team-1 and retired from the ECHL, JOHNSON began a practice of writing oxycodone prescriptions for HART approximately every month. The prescriptions began in June 2009 and continued until July 2011 – the last month JOHNSON worked for the Medical Group. In total, between June 2009 and July 2011 JOHNSON wrote HART 26 prescriptions for Percocet, which contains oxycodone, for a total of 2,920 pills.

JOHNSON did not conduct any in-person treatment or examination of HART prior to writing any of the 26 prescriptions issued between June 2009 and July 2011. Instead, JOHNSON simply signed the prescriptions and provided them to a medical assistant to mail to HART in New York, where all 26 of the prescriptions were filled. When questioned, JOHNSON told the medical assistant that HART had shoulder pain and was looking for a doctor in New York. JOHNSON continued to write prescriptions for HART without any treatment or examination for 26 months.

HART, in turn, began selling the Percocet he obtained from prescriptions written by JOHNSON beginning in at least December 2010. HART sold some or all of the painkillers to Derek Boogaard, a professional hockey player for Team-2, an NHL team in New York, New York. Boogaard, who had previously played for a professional hockey team in Minneapolis, Minnesota, had a documented history of addiction to prescription painkillers and Ambien. In December 2010, Boogaard suffered a severe concussion after an on-ice fight during a game, and never played again. Boogaard subsequently suffered severe migraines and began spending most of his time in his New York apartment with the lights off, abusing oxycodone and Ambien. At least some of the oxycodone was purchased from HART, to whom Boogaard had been introduced by a teammate. Boogaard regularly traveled to Huntington, New York, where HART lived, to purchase the pills.

In April 2011, Boogaard was sent to a rehabilitation facility in California to deal with his addiction to painkillers. Boogaard was given permission to leave the facility in late April 2011 to travel to New York and then Minneapolis. When Boogaard arrived in New York on April 29, 2011, he met with HART and wrote HART a $4,000 check to buy prescription drugs. Boogaard then traveled to Minneapolis and met his brother. While unpacking his belongings from the trip to New York, Boogaard provided a bag of prescription drugs to his brother for safekeeping, before ultimately returning to the rehabilitation facility in California.

On May 12, 2011, during another reprieve from the rehabilitation facility, Boogaard consumed one of the painkillers he had brought from New York to Minneapolis two weeks earlier. After a late night of drinking with friends at bars in downtown Minneapolis, Boogaard went to sleep during the early morning hours of May 13, 2011. He was found dead later that day. Boogaard’s cause of death was determined to be a mixed oxycodone and alcohol toxicity.

HART, 31, of Huntington, New York, is charged with one count of conspiracy to distribute and possess with intent to distribute oxycodone, which carries a maximum sentence of 20 years in prison. JOHNSON, 59, of Salt Lake City, Utah, is charged with 26 counts of distributing and possessing with intent to distribute oxycodone, each of which carries a maximum sentence of 20 years in prison, and one count of making a false statement, which carries a maximum sentence of five years in prison. The maximum statutory sentences are prescribed by Congress and are provided here for informational purposes, as any sentencing of the defendants would be determined by the judge.

Mr. Bharara thanked the DEA Tactical Diversion Squad New York (TDS-NY) comprising agents and officers from the DEA, the New York City Police Department, the Town of Orangetown Police Department, and the Westchester County Police Department, as well as the Drug Enforcement Administration Field Offices in Minneapolis, Minnesota, and Salt Lake City, Utah, and the Minneapolis Police Department for their work in the investigation, which he noted is ongoing.

The case is being prosecuted by the Office’s Narcotics Unit. Assistant U.S. Attorneys Russell Capone and Jessica Lonergan are in charge of the prosecution.

The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

U.S. v. Jordan Hart and Oscar Johnson Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that MATHEW MARTOMA, a former portfolio manager of CR Intrinsic Investors, LLC, a division of SAC Capital, was sentenced today in Manhattan federal court to nine years in prison based on his participation in the most lucrative insider trading scheme ever charged, involving approximately $275 million in illegal profits and avoided losses. Martoma was convicted of one count of conspiracy to commit securities fraud and two counts of securities fraud after a four-week jury trial presided over by U.S. District Judge Paul G. Gardephe in January and February of this year.

Manhattan U.S. Attorney Preet Bharara said: “SAC Capital portfolio manager Mathew Martoma received a bonus of more than $9 million for the $275 million he made for his hedge fund through the most profitable insider trading scheme ever charged. Today, Martoma was sentenced to nine years in prison, and financial penalties that strip him of the ill-gotten millions in proceeds of his crime. Today’s sentence of a lengthy prison term is well-suited to the audacity of the illegal trading in this case. The long and short of Mathew Martoma’s trading is that he traded his liberty, his name and his time with his family for what in the end is nothing.”

According to the allegations in the Superseding Indictment filed in Manhattan federal court, other court documents, and the evidence presented at trial:

During the period of the insider trading scheme, MARTOMA was an SAC Capital portfolio manager responsible for investment decisions in public companies in the health care sector, including pharmaceutical companies Elan and Wyeth, that were involved in the development of experimental drugs to combat Alzheimer’s Disease. At the time, scientists and investors alike were awaiting the results of a clinical trial being conducted by Elan and Wyeth of a drug called bapineuzumab, which offered a novel but untested approach to the treatment of Alzheimer’s Disease (the “Drug Trial”).

In order to obtain material non-public information (the “Inside Information”) about the Drug Trial, MARTOMA, shortly after starting his employment at SAC Capital in the summer of 2006, began using expert networking firms to try to speak to doctors involved in the Drug Trial who had access to confidential information. Through these efforts, MARTOMA arranged dozens of paid consultations with one of the Drug Trial’s principal investigators, Dr. Joel Ross, and the chairman of the Drug Trial’s Safety Monitoring Committee (“SMC”), Dr. Sidney Gilman. Through an exploitation of MARTOMA’s personal and financial relationships with these doctors, MARTOMA was able to obtain Inside Information about the Drug Trial.

The information that MARTOMA initially received from Dr. Ross included anecdotal reports concerning patients under the care of Dr. Ross. The Inside Information MARTOMA initially received from Dr. Gilman included generally positive safety data about which Dr. Gilman was aware through his chairmanship of the SMC. In fact, Martoma arranged a paid consultation shortly after each and every SMC meeting in part to ensure that he would be among the first to learn if any substantial safety issues were emerging from the Drug Trial that could lead to the cancellation of the Drug Trial and decreases in the price of Elan and Wyeth stock. Based in part on the positive safety information, MARTOMA purchased and held shares of Elan and Wyeth, and further recommended that the owner of the Hedge Fund (the “SAC Capital Owner”) purchase and hold Elan and Wyeth securities, which the SAC Capital Owner did. By the spring of 2008, SAC Capital held approximately $700 million worth of Elan and Wyeth equity securities.

Elan and Wyeth planned to release the full results of the Drug Trial to the investing public at the International Conference on Alzheimer’s Disease (the “ICAD Presentation”) on July 29, 2008. Dr. Gilman was selected to present the results on behalf of both drug companies and was “unblinded” to the full safety and efficacy results of the drug trial on July 15, 2008. Until that time, Dr. Gilman had only been privy to the safety results of the Drug Trial. On July 17, 2008, Dr. Gilman received a draft PowerPoint presentation that had been created for the ICAD meeting and that was marked “Confidential, Do Not Distribute.” The draft PowerPoint presentation showed that the Drug Trial results were negative, particularly in comparison with market expectations.

Later on July 17, 2008, MARTOMA called Dr. Gilman from his home and spoke to Dr. Gilman in detail about the negative news in the draft PowerPoint presentation during a phone call that lasted one hour and forty-five minutes. Then, on Saturday, July 19, 2008, MARTOMA flew roundtrip from New York City to Detroit, Michigan, to meet Dr. Gilman in his University of Michigan office and review the negative news in the draft PowerPoint presentation further.

The next day, Sunday, July 20, 2008, MARTOMA sent the SAC Capital Owner an email in which he wrote that “…It’s important [that we speak,]” which they did, for approximately 20 minutes. The SAC Capital Owner then directed SAC Capital to sell Elan and Wyeth securities prior to the ICAD Presentation. Over the next seven days, SAC Capital liquidated its entire equity position in Elan and almost all of its equity position in Wyeth – a total of 17.7 million shares worth approximately $700 million. SAC Capital also shorted Elan and Wyeth by approximately 7.75 million shares. This trading represented over 20% of the reported U.S. trading volume in Elan and 11% of the volume in Wyeth.

MARTOMA also received information about the ICAD presentation from Dr. Joel Ross. In particular, on the evening of July 28, 2008, after Dr. Ross had been unblinded to the Drug Trial results at a dinner for Principal Investigators, Dr. Ross met with MARTOMA in a hotel lobby to discuss the negative results. To the surprise of Dr. Ross, MARTOMA already seemed to know of the Drug Trial results.

The day after the ICAD presentation, Elan stock closed approximately 42% lower and Wyeth shares fell approximately 11%.

Through this trading activity SAC Capital earned profits and avoided losses of approximately $275 million.

In imposing the nine-year prison sentence, Judge Gardephe described Martoma’s conduct as “deeply corrosive to our financial markets,” generating cynicism among investors.

MARTOMA, 40, was also ordered to forfeit to the United States $9.3 million, representing the bonus he earned through the insider trading, as well as his interests in his Florida home and several bank accounts. Judge Gardephe also imposed a term of three years of supervised release following Martoma’s completion of this sentence.

Mr. Bharara praised the efforts of the FBI and also thanked the SEC for its assistance in the investigation. He added that the investigation is continuing.

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Arlo Devlin-Brown and Eugene Ingoglia are in charge of the prosecution. Assistant U.S. Attorney Christine I. Magdo of the Office’s Money Laundering and Asset Forfeiture Unit is in charge of the forfeiture aspects of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the repatriation of nine stolen 18th century paintings to the Republic of Peru.

Miguel Cabrera was an 18th century Mexican painter. He is considered one of the most important painters of his time in New Spain, an area that included present-day Mexico and Central America. Cabrera painted for the Archbishop and for the Jesuit order, and therefore many of Cabrera’s works were religious in nature. Of the nine paintings that are being returned to Peru, “Resurrection of Lazarus” is perhaps the most recognized and the finest example of Cabrera’s talent.

Manhattan U.S. Attorney Preet Bharara said: “We are pleased to return these nine Miguel Cabrera paintings. They are part of Peru’s cultural heritage, but they were stolen from a church in Lima six years ago and smuggled out of Peru to be trafficked on the international art market. Our Office is committed to ensuring that stolen artwork, especially when it is an important part of a nation’s cultural heritage, does not find a safe haven for resale in the Southern District of New York or elsewhere in the U.S.”

FBI Assistant Director George Venizelos said: “The theft of priceless artifacts deprives people of their religious and cultural heritage and corrupts the legitimate markets for works of art. The FBI will continue to commit investigative resources and work with law enforcement agencies around the world to recover these works of art and bring to justice criminals who steal these precious pieces. We are pleased to be able to return these paintings to the government of Peru.”

In 2008, nine paintings by Miguel Cabrera were reported as having been stolen from a church in Lima, Peru. Eight of the paintings were consigned to Jackson’s International Auctioneers & Appraisers in Cedar Falls, Iowa, which brought the paintings to the attention of law enforcement, assisted in identifying them as the stolen paintings, and turned them over to the FBI.

The FBI conducted an investigation and confirmed that the eight paintings were among those that had been stolen from the church in Lima. The art dealer who had consigned the paintings to the auction house was told that the paintings were stolen, and he has signed a stipulation relinquishing any right, title and interest in the paintings so they may rightfully be returned to Peru. That stipulation was approved yesterday by U.S. District Judge Denise Cote.

The ninth missing painting by Miguel Cabrera, “Resurrection of Lazarus,” was discovered to be at an auction house in New York City. The FBI took possession of the painting in early 2014, after determining it was the stolen painting. The person who had consigned that painting to the auction house was notified that the painting had been stolen from Peru, and he also agreed to relinquish any right, title and interest in the painting so it may be repatriated to Peru. The stipulation signed by the consignor of “Resurrection of Lazarus” was also approved yesterday by Judge Cote.

Mr. Bharara praised the investigative work of the FBI and thanked the Peruvian Embassy and the Peruvian Consulate in New York for their assistance in coordinating the repatriation of the paintings.

Ambassador Harold Forsyth of the Republic of Peru said: “The close cooperation between Peru, the U.S. Attorney’s Office and the FBI continues to produce concrete results. These pieces belong to the cultural heritage of Peru and their recovery shows that our two countries continue in fighting together against this evil form of international crime, because it steals our identity and denies the world the opportunity to appreciate the beauty of our history.”

The case is being handled by the Office’s Money Laundering and Asset Forfeiture Unit. Sharon Cohen Levin, Chief of the Money Laundering and Asset Forfeiture Unit, and Assistant U.S. Attorney Christine I. Magdo are in charge of the matter.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that CHEON PARK was sentenced in Manhattan federal court to 24 months in prison and over $2 million in forfeiture and restitution for defrauding the New York State Education Department (“NYSED”) and the New York City Department of Education (“NYCDOE”) out of millions of dollars in connection with special education services and preschool programs provided to New York City children by a company that PARK owned and operated. PARK pled guilty in March 2014 to one count of mail fraud before U.S. District Judge J. Paul Oetken, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “Cheon Park lined his pockets with millions of dollars meant to provide important services for special-needs children. Today, he was made to pay for his crimes through federal prison time and restitution in the millions of dollars. We will continue to do everything in our power to pursue and prosecute those who defraud the government, particularly those who shamelessly siphon scarce public money away from some of the city’s most vital programs.”

According to the Information, an earlier Criminal Complaint, and statements made at court proceedings:

Between 2005 and 2012, PARK deliberately inflated the amount of compensation Bilingual SEIT, a company PARK owned and operated, paid certain of its employees and contractors. He also misrepresented the type of work performed by certain employees on annual certified consolidated fiscal reports (“CFRs”) and financial statements submitted to NYSED and NYCDOE.

PARK owned and operated Bilingual SEIT from at least 2005 to 2012. During that time, Bilingual SEIT had a contract with the NYCDOE to provide publicly funded special education services and preschool programs to New York City schoolchildren aged three to five with physical, emotional, and/or developmental disabilities. Specifically, Bilingual SEIT received funding to provide: (1) special education itinerant teacher, commonly referred to as SEIT, services; (2) special education classes in a center-based setting for preschool students with special needs; (3) individual evaluations for preschool students with disabilities; and (4) physical, occupational, and/or speech therapy for preschool students who qualified for such services. As of September 2012, Bilingual SEIT operated out of five locations in Manhattan, Queens, and Brooklyn.

During the seven-year period that Bilingual SEIT was under contract with the NYCDOE, it claimed reimbursement for and received approximately $94.5 million in federal, New York State, and New York City funds to provide the services described above. In order to receive such money, PARK was required to file a CFR on behalf of Bilingual SEIT supported by audited financial statements with the NYSED. The CFR and audited financial statements represented the costs that Bilingual SEIT had incurred the previous year and the justification for those costs, and included compensation Bilingual SEIT purported to pay its employees and contractors. Each year, PARK signed the certification pages for the CFRs filed with the NYSED, which relied on the CFR and audited financial statements in determining the amount of public funds to pay Bilingual SEIT per student for the services Bilingual SEIT provided to New York City preschool students.

Beginning in approximately June 2011, the New York State Comptroller’s office (the “Comptroller”) conducted an audit of Bilingual SEIT to determine whether the costs reported by Bilingual SEIT on the CFRs for the years July 2007 through 2009 were properly calculated, justified, and allowable under guidance issued by the NYSED. In July 2012, the Comptroller issued a report that concluded that nearly $1.5 million of the costs that PARK certified for the two-year audit period should have been disallowed, including money paid to 26 employees whose time and attendance could not be substantiated. As a result of the Comptroller’s report, the NYCDOE cancelled Bilingual SEIT’s classes and declined to renew its contract with Bilingual SEIT.

In fact, PARK engaged in several schemes designed to inflate the costs Bilingual SEIT represented it incurred, resulting in more public money for Bilingual SEIT, much of which, as set forth below, was kicked back to PARK. PARK fraudulently received funds from New York State and New York City to pay multiple individuals who performed little or no work for Bilingual SEIT. At PARK’s request and direction, these individuals then kicked back as much as 50% of the salary they fraudulently received from Bilingual SEIT to PARK. PARK also fraudulently received funds from New York State and New York City to deliberately overpay other individuals who worked for Bilingual SEIT. At PARK’s request and direction, these individuals also kicked back a portion of the overpayment to PARK on a regular basis.

Further, in addition to receiving kickbacks, PARK used Bilingual SEIT funds for his personal benefit in other ways. PARK arranged for Bilingual SEIT to pay his ex-wife and ex-sister-in-law for work they did not perform, and also arranged for Bilingual SEIT to pay for tutoring for PARK’s children and for a Bilingual SEIT employee to clean PARK’s home twice a week.

In addition to his prison term, PARK, 46, of Manhasset, New York, was ordered to forfeit $1,924,318, representing the proceeds of the crime, as well as pay restitution in the amount of $2,151,318. Last week, PARK paid to the United States Marshals Service the entirety of the forfeiture amount. PARK was also sentenced to pay a $100 special assessment.

Mr. Bharara praised the investigative work of the Office of the State Comptroller, the Special Commissioner of Investigation for New York City’s Department of Education, and the Office of Inspector General for the United States Department of Education. He also thanked the Queens County District Attorney’s Office for its assistance.

This case is being prosecuted by the Office’s Public Corruption Unit. Assistant United States Attorneys Paul Krieger and Martin Bell are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ROBERT M. FAIELLA, a/k/a “BTCKing,” an underground Bitcoin exchanger, and CHARLIE SHREM, formerly the Chief Executive Officer and Compliance Officer of a Bitcoin exchange company, both pled guilty today before U.S. District Judge Jed S. Rakoff to operating an unlicensed money transmitting business, through which they knowingly transmitted money intended to facilitate criminal activity – specifically, drug trafficking on “Silk Road,” a black-market website designed to enable its users to buy and sell illegal drugs anonymously and beyond the reach of law enforcement.

Manhattan U.S. Attorney Preet Bharara said: “Robert Faiella and Charlie Shrem opted to travel down a crooked path – running an illegal money transmitting business that catered to criminals bent on trafficking narcotics on the dark web drug site, Silk Road. The approximately $1 million in Bitcoins Faiella and Shrem sold to these outlaws cost them a lot more than they bargained for and bought them today’s convictions.”

According to the Complaint, the Indictment, the Superseding Information unsealed today against SHREM, and statements made in related court proceedings:

From about December 2011 to October 2013, FAIELLA ran an underground Bitcoin exchange on the Silk Road website, a website that served as a sprawling and anonymous black market bazaar where illegal drugs of virtually every variety were bought and sold regularly by the site’s users. Operating under the username “BTCKing,” FAIELLA sold Bitcoins – the only form of payment accepted on Silk Road – to users seeking to buy illegal drugs on the site. FAIELLA never registered his business as a money transmitting business with the U.S. Treasury Department, as required under federal regulations, even though he knew that he was required to do so.

Upon receiving orders for Bitcoins from Silk Road users, FAIELLA filled the orders through a company based in New York, New York (the “Company”). The Company enabled customers to exchange cash for Bitcoins anonymously, that is, without providing any personal identifying information, and it charged a fee for its service. FAIELLA obtained Bitcoins with the Company’s assistance, and then sold the Bitcoins to Silk Road users at a markup.

SHREM was the Chief Executive Officer of the Company, and from about August 2011 until about July 2013, when the Company ceased operating, he was also its Compliance Officer, in charge of ensuring the Company’s compliance with federal anti-money laundering (“AML”) laws. SHREM was also the Vice Chairman of a foundation dedicated to promoting the Bitcoin virtual currency system.

SHREM was fully aware that Silk Road was a drug-trafficking website, and through his communications with FAIELLA, SHREM also knew that FAIELLA was operating a Bitcoin exchange service for Silk Road users. Nevertheless, SHREM knowingly facilitated FAIELLA’s business with the Company in order to maintain FAIELLA’s business as a lucrative source of revenue. SHREM knowingly allowed FAIELLA to use the Company’s services to buy Bitcoins for his Silk Road customers; personally processed FAIELLA’s orders; and gave FAIELLA discounts on his high-volume transactions. Even though it was SHREM’s job to enforce the Company’s AML restrictions and even though the Company had registered with the Treasury Department as a money services business, SHREM failed to file a single suspicious activity report with the U.S. Treasury Department about FAIELLA’s illicit activity, as he was required to do in his role as the Company’s Compliance Officer, and deliberately helped FAIELLA circumvent the Company’s AML restrictions.

Working together, SHREM and FAIELLA exchanged nearly $1 million in cash for Bitcoins for the benefit of Silk Road users, so that the users could, in turn, make illegal purchases on Silk Road.

In late 2012, when the Company stopped accepting cash payments, FAIELLA ceased doing business with the Company and temporarily shut down his illegal Bitcoin exchange service on Silk Road. FAIELLA resumed operating on Silk Road in April 2013 without the Company’s assistance, and continued to exchange tens of thousands of dollars a week in Bitcoins until the Silk Road website was shut down by law enforcement in October 2013.

FAIELLA, 54, of Cape Coral, Florida, pled guilty to one count of operating an unlicensed money transmitting business through which he knowingly transmitted funds intended to be used to promote or support unlawful activity, which carries a maximum sentence of five years in prison. SHREM, 24, of New York, New York, pled guilty to aiding and abetting FAIELLA in the operation of his unlicensed money transmitting business, which also carries a maximum sentence of five years in prison. FAIELLA and SHREM will be sentenced by Judge Rakoff on January 20, 2015, at 4:00 p.m. and 4:30 p.m., respectively. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Bharara praised the outstanding investigative work of the DEA’s New York Organized Crime Drug Enforcement Strike Force, which comprises agents and officers of the U.S. Drug Enforcement Administration, the New York City Police Department, Immigration and Customs Enforcement - Homeland Security Investigations, 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, the U.S. Marshal Service, New York National Guard, Office of Foreign Assets Control and the New York Department of Taxation and Finance. Mr. Bharara also thanked the FBI’s New York Field Office.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Serrin Turner is in charge of the prosecution, and Assistant United States Attorney Andrew Adams of the Money Laundering and Asset Forfeiture Unit is in charge of the forfeiture aspects of the case.

U.S. v. Charlie Shrem S1 Information
U.S. v. Robert Faiella and Charlie Shrem Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, Philip R. Bartlett, the Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), Jeffrey G. Hughes, Special Agent-in-Charge, Northeast Field Office, of the Department of Veterans Affairs, Office of Inspector General (“VA-OIG”), and Albert Aviles, Chief of the Department of Veterans Affairs Police Detachment in Bronx, New York, announced that ROBERT TUCKER, of Bronx, New York, and ERIK CASIANO, of West Orange, New Jersey, were arrested yesterday for allegedly engaging in a conspiracy to distribute more than five kilograms of cocaine. The defendants will be presented in Manhattan federal court this afternoon before U.S. Magistrate Judge Ronald L. Ellis.

U.S. Attorney Preet Bharara said: “As alleged, the defendants used the cover of a facility dedicated to caring for our nation’s heroes to further a scheme to distribute large amounts of cocaine. I would like to thank the United States Postal Inspection Service, the Department of Veterans Affairs, Office of Inspector General, and the Department of Veterans Affairs Police for their outstanding work on this case.”

USPIS Inspector-in-Charge Philip R. Bartlett said: “These employees allegedly took advantage of the trust placed in them by their employer and the US Government. Criminals involved in drug trafficking should take note, U.S. Postal Inspectors will vigorously pursue, arrest and bring to justice anyone who uses the US Mail to facilitate the transport of illegal drugs, firearms or drug proceeds.”

VA-OIG Special Agent-in-Charge Jeffrey G. Hughes said: “The arrest of two VA Medical Center employees comes as a result of an outstanding collaborative effort of all the federal agencies involved. The Department of Veterans Affairs, Office of Inspector General is committed to uncovering illegal activities at VA facilities and assisting in the prosecution of those who place their own interest ahead of the safety of both veterans receiving treatment and dedicated VA employees.”

VA Police Chief Albert Aviles said: “Drug abuse is a national epidemic and communities everywhere must be vigilant to suspicious activities. Thanks to vigilance and good police work, we can report today that these drugs are off the street and that the alleged perpetrators of this activity are under arrest. We are grateful to the Postal Inspection Service and our own VA Police staff, for their diligence and professionalism. We are grateful to our community law enforcement partners, for their significant involvement in this investigation. This was truly a team effort and a strong 'win' for law enforcement. Through this effort we can continue to assure a safe environment of care for all of our Veterans.”

According to the Complaint filed today in Manhattan federal court:

Since at least November 2013, the defendants used the United States Postal Service and the mailroom at the Veterans Affairs Medical Center in the Bronx, New York (the “Medical Center”), to receive and distribute narcotics, including cocaine. TUCKER has been employed by the Medical Center since 1997, and has served as the Supervisor of the Logistics Warehouse and Mail Center since 2012. CASIANO has been employed by the Medical Center since 2012 as a pipefitter in the Plumbing Department.

In December 2013, Postal Inspectors in San Juan, Puerto Rico, seized a suspicious package that was addressed to the Medical Center, to the attention of “Warehouse,” and discovered approximately two kilograms of cocaine inside the package.

On four separate occasions in July and August 2014, TUCKER was observed by undercover law enforcement personnel retrieving packages similar in size and weight to the aforementioned package from the Medical Center mailroom. The packages had been sent from San Juan, Puerto Rico, to the Medical Center, to the attention of “Logistic[s] Warehouse.” On each occasion, TUCKER brought the package to his office, and CASIANO subsequently went into TUCKER’s office and retrieved the package’s contents before carrying them out of the Medical Center building. Two of the four packages handled by CASIANO and TUCKER were examined by drug-sniffing dogs prior to delivery and tested positive for the presence of narcotics.

On September 2, 2014, TUCKER was observed on video surveillance retrieving another similarly addressed package from the Medical Center mailroom. TUCKER then brought the package to his office and met in the office with CASIANO, who provided $500 in cash to TUCKER. Thereafter, CASIANO brought the package to his car. As CASIANO attempted to drive out of the Medical Center facility, he was arrested by Postal Inspectors, VA-OIG agents, and DEA agents who seized one kilogram of cocaine from the car.

TUCKER, 64, and CASIANO, 29, are each charged with one count of conspiracy to distribute and possess with intent to distribute a controlled substance, in violation of 21 U.S.C. § 846. They each face a mandatory minimum of 10 years in prison and a maximum of life in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Bharara praised the investigative work of the USPIS, the Department of Veterans Affairs OIG, the Veterans Affairs Police, the DEA New York Organized Crime Drug Enforcement Task Force, and the Port Authority of New York and New Jersey Police, and thanked the Veterans Affairs Medical Center for its assistance. The DEA’s New York Organized Crime Drug Enforcement Strike Force comprises agents and officers of the U. S. Drug Enforcement Administration, the New York City Police Department, Immigration and Customs Enforcement’s Homeland Security Investigations, 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, the U.S. Marshals Service, New York National Guard, Office of Foreign Assets Control, and the New York Department of Taxation and Finance.

This case is being prosecuted by the Office’s Narcotics Unit. Assistant United States Attorney Andrew DeFilippis is in charge of the prosecution.

The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

U.S. v. Robert Tucker & Erik Casiano Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, James J. Hunt, the Acting Special Agent-in-Charge of the New York Field Division of the U.S. Drug Enforcement Administration (“DEA”), Thomas O’Donnell, the Special Agent-in-Charge of the New York Field Office of the United States Department of Health and Human Services Office of the Inspector General (“HHS-OIG”), and William J. Bratton, the Commissioner of the New York City Policy Department (“NYPD”), announced today the unsealing of an Indictment in Manhattan federal court charging LEONARD MARCHETTA, a physician’s assistant, WILLIAM TAGLIAFERRO, and GREGORY ZACCAGNINO with federal drug offenses in connection with an oxycodone distribution ring they operated out of a Staten Island-based medical clinic run by MARCHETTA. As alleged, MARCHETTA wrote medically unnecessary prescriptions for large quantities of oxycodone in exchange for cash and on a number of occasions, MARCHETTA issued prescriptions in the names of fictitious individuals or individuals whom MARCHETTA had never seen. TAGLIAFERRO and ZACCAGNINO recruited and paid individuals to pose as “patients” in order to obtain medically unnecessary prescriptions of oxycodone from MARCHETTA, according to the Indictment. The prescriptions were then allegedly filled at pharmacies, and TAGLIAFERRO and ZACCAGNINO collected the resulting pills, in part for distribution, as charged in the Indictment.

MARCHETTA, TAGLIAFERRO, and ZACCAGNINO were arrested this morning and will be presented in Manhattan federal court before U.S. Magistrate Judge Ronald L. Ellis later this afternoon. The case has been assigned to U.S. District Judge P. Kevin Castel.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Leonard Marchetta exploited his position as a physician’s assistant by doling out thousands of unnecessary prescriptions for oxycodone pills to phony patients, recruited by his co-defendants. Thanks to our law enforcement partners, Marchetta and his team were caught and they will now face justice for their alleged crimes, which come amidst an epidemic of prescription pill abuse now plaguing our area.”

DEA Acting Special Agent-in-Charge James J. Hunt said: “These three arrests are a stepping stone to removing one of the contributing factors of the opiate problem in Staten Island and throughout the United States – those who abuse our health care system and illegally prescribe pain medication which ultimately is sold throughout our streets. Identifying and arresting those who divert prescription medication, community outreach and treatment combined are the ultimate weapons to fight opiate abuse.”

HHS-OIG Special Agent-in-Charge Thomas O’Donnell said: “Today’s arrests reaffirm our commitment to working with our law enforcement partners to protect federally-funded health care programs as well as patients who rely on those programs from the dangers of America's prescription drug fraud epidemic.”

NYPD Commission William J. Bratton said: “These individuals allegedly operated an illegal pill mill, profiting with a drug that is responsible for numerous overdose deaths and tragedies. But thanks to the investigators and prosecutors involved in this case, this criminal enterprise has been dismantled and the persons responsible for the operation can no longer endanger lives by contributing to the supply of illegal narcotics in our communities.”

According to the allegations contained in the Indictment unsealed today in Manhattan federal court:

Oxycodone is a highly addictive, prescription narcotic-strength opioid used to treat severe and chronic pain conditions. Almost seven million Americans abuse controlled-substance prescription medications, including opioid painkillers, resulting in more deaths from prescription drug overdoses than auto accidents. Oxycodone prescriptions have enormous cash value to street level drug dealers, who can fill the prescriptions at most pharmacies and resell the resulting pills at vastly inflated rates. Indeed, a single prescription for 180 30-milligram oxycodone pills can net the distributor as much as $7,200 in cash.

As a physician’s assistant, MARCHETTA, under the supervision of a physician or surgeon, is able to diagnose and treat illnesses and prescribe medications. At all relevant times, MARCHETTA has been employed by and overseen the day-to-day operations of a Staten Island- based medical clinic (the “Clinic”), which advertises itself to the public as a family medical clinic.

MARCHETTA prescribed oxycodone to “patients” who had no medical need for oxycodone and no legitimate medical record documenting an ailment for which oxycodone would be prescribed. MARCHETTA’s fee for his participation in the scheme was typically approximately $250 in cash for “doctor visits” that usually lasted just a minute or two, involved no actual physical examination, and consistently resulted in the issuance of a prescription for large doses of oxycodone, typically 150 30-milligram tablets. MARCHETTA also received a separate fee of approximately $500 in cash for each medically unnecessary oxycodone prescription he issued. On a number of occasions, MARCHETTA issued prescriptions in the names of fictitious individuals or individuals whom MARCHETTA never saw in exchange for cash.

TAGLIAFERRO and ZACCAGNINO recruited and paid individuals to pose as “patients” in order to receive medically unnecessary prescriptions from MARCHETTA. TAGLIAFERRO and ZACCAGNINO made appointments directly with the Clinic for the “patients” they sent to see MARCHETTA. On a number of occasions, TAGLIAFERRO and ZACCAGNINO obtained prescriptions issued by MARCHETTA in the name of the “patient” without the “patient” setting foot in the Clinic.

After MARCHETTA issued a medically unnecessary oxycodone prescription in the name of the “patient,” TAGLIAFERRO or ZACCAGNINO then took or referred the “patient” to a pharmacy to fill the oxycodone prescription – that is, to obtain the oxycodone tablets – of which TAGLIAFERRO or ZACCAGNINO took possession, in part for distribution. TAGLIAFERRO and ZACCAGNINO paid the “patients,” typically $150 to $200 in cash, for obtaining and handing over the oxycodone tablets that had been prescribed to them by MARCHETTA. At times, ZACCAGNINO paid the “patients,” some of whom were addicted to oxycodone, with oxycodone tablets for their services.

At TAGLIAFERRO’s direction, certain “patients” of MARCHETTA billed Medicaid or private health insurance carriers for filling the medically unnecessary oxycodone prescriptions that MARCHETTA issued.

MARCHETTA, 47, TAGLIAFERRO, 41, and ZACCAGNINO, 49, all of Staten Island, New York, are each charged with one count of conspiracy to distribute and possess with intent to distribute oxycodone, which carries a maximum sentence of 20 years in prison. TAGLIAFERRO is also charged with conspiracy to commit health care fraud, which carries a maximum sentence of 20 years in prison. The maximum statutory sentences are prescribed by Congress and are provided here for informational purposes, as any sentencing of the defendants would be determined by the judge.

Mr. Bharara thanked the United States Department of Health and Human Services, the New York State Department of Financial Services, and the DEA Tactical Diversion Squad New York (TDS-NY) comprising agents and officers from the DEA, the New York City Police Department, Town of Orangetown Police Department and Westchester County Police Department for their work in the investigation, which he noted is ongoing.

The case is being prosecuted by the Office’s Narcotics Unit. Assistant U.S. Attorney Edward A. Imperatore is in charge of the prosecution.

The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

U.S. v. Leonard Marchetta, et al. Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that PAPIS DJEME, a citizen of Guinea Bissau, was sentenced today in Manhattan federal court to 78 months in prison for participating in a conspiracy to import narcotics into the United States. DJEME was arrested on April 2, 2013, by the Drug Enforcement Administration’s (“DEA”) Special Operations Division, Bilateral Investigative Unit Narco-Terrorism Group, and the DEA’s Foreign-deployed Advisory Support Team (“FAST”) off the coast of West Africa while onboard a vessel under DEA control in international waters. On April 29, 2014, DJEME pled guilty before U.S. District Judge Richard M. Berman, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “From start to finish, this case has shown that US law enforcement will bring to justice traffickers who bring illegal drugs into this country, even when their criminal acts span four continents. Djeme and his codefendants conspired to transport drugs between South America and West Africa and sell them in Europe and the US. Now he faces 78 months in federal prison here.”

According to the Indictment, other documents filed in Manhattan federal court, and statements made at DJEME’s guilty plea and today’s sentencing:

Beginning in the summer of 2012, DJEME and his co-defendants, former Guinea Bissau Naval Admiral Jose Americo Bubo Natchuto and Tchamy Yala, engaged in a series of recorded meetings in Guinea Bissau with confidential sources (the “CSs”) working with the DEA who purported to be representatives and/or associates of South American-based narcotics traffickers.

In an early meeting in which Natchuto and Yala discussed the shipment of ton-quantities of cocaine from South America to Guinea Bissau by sea, Natchuto noted that the Guinea Bissau government was weak in light of the recent coup d’état and that it was therefore an ideal time for the proposed cocaine transaction. At an October 2012 meeting, DJEME advocated using “go-fast” boats to transport the cocaine into Guinea Bissau, because such boats could more easily navigate the waters of Guinea Bissau, and provided a photograph of the type of “go-fast” boat that could be used to transport the cocaine, as well as information for the purchase of such boats.

In further meetings, DJEME, Natchuto, and Yala agreed to assist the CSs by receiving a two-ton load of cocaine that would be transported to Guinea Bissau by boat and stored in Guinea Bissau for distribution to Europe and the United States. For example, on November 17, 2012, DJEME and his co-defendants met with two of the CSs in Guinea Bissau and discussed importing 1,000 kilograms of cocaine into the United States. Also during the meeting, Natchuto offered to utilize a company that he owned to facilitate the shipment of cocaine out of Guinea Bissau. DJEME agreed to provide the two CSs with business documents for Natchuto’s company, and additionally confirmed that he and Yala would handle the security of the drugs in Guinea Bissau, with only DJEME, Natchuto, and Yala knowing the precise location of the drugs.

At a meeting the following day at which DJEME was present, Natchuto confirmed that he would charge a fee of $1,000,000 per 1,000 kilograms of cocaine received in Guinea Bissau. DJEME provided the confidential source who was posing as the cocaine supplier with a Skype account and two email addresses. The CSs later received emails from the accounts provided by DJEME, including a December 2012 email with longitude and latitude coordinates for where the boat transporting the cocaine from South America could meet the “go fast” boat off the west coast of Africa, so the cocaine could then be brought to Guinea Bissau on the “go fast” boat.

In addition to his prison term, DJEME, 31, was sentenced to three years of supervised release and was ordered to pay a $100 special assessment.

On April 28, 2014, DJEME’s co-defendant, Tchamy Yala, pled guilty to participating in a conspiracy to import narcotics into the United States. Yala’s sentencing is scheduled to take place before Judge Berman on November 17, 2014, at 11:00 a.m.

Mr. Bharara praised the outstanding efforts of the Special Operations Division of the DEA. Mr. Bharara also thanked DEA’s FAST, Lisbon Country Office, and Bogota Country Office, as well as the U.S. Department of Justice’s Office of International Affairs and the U.S. Department of State.

This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorney Aimee Hector is in charge of the prosecution.

U.S. v. Papis Djeme S1 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that IOANNIS VIGLAKIS, a/k/a “Pablo,” was sentenced today in Manhattan federal court to 120 months for attempting to provide material support to the Fuerzas Armadas Revolucionarias de Colombia (“FARC”), a Colombian terrorist organization. VIGLAKIS, who was arrested in Panama City, Panama, in August 2012 and subsequently turned over to the custody of the United States, pled guilty on December 10, 2013, to attempting to provide material support to the FARC, which has been designated a foreign terrorist organization by the U.S. Secretary of State. VIGLAKIS pled guilty before U.S. District Judge Katherine B. Forrest, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “Ioannis Viglakis attempted to sell military-grade weapons to the FARC, a terrorist organization, which has used such weapons to shoot down American aircraft in Colombia. For attempting to provide material support to a terrorist organization in this way, Viglakis has been sentenced to 120 months in prison.”

According to the Indictment, other public filings in this case, and statements made at VIGLAKIS’s guilty plea and at today’s sentencing:

Beginning in November 2011, VIGLAKIS had a series of meetings with a DEA confidential source (the “CS”) who represented himself as an associate of the FARC. During those meetings, which took place in Europe and Central America, the CS informed VIGLAKIS that he was seeking weapons for use by the FARC to attack American forces in Colombia. VIGLAKIS offered to provide the FARC with functional, bona fide, military-grade weapons – including assault rifles, rocket-propelled grenade (“RPG”) launchers and surface-to-air missiles – in exchange for cocaine and cash. During the meetings, VIGLAKIS and the CS discussed the FARC’s use of these weapons to fight the Colombian and American governments, including by shooting down American aircraft in Colombia.

Over the following months, VIGLAKIS indicated that he would provide the CS with several RPG launchers as a sample. On July 18, 2012, VIGLAKIS successfully arranged for the delivery of six live RPGs and three working RPG launchers in Europe, which were received by a DEA undercover agent.

Then, in August 2012, during meetings in Panama, VIGLAKIS gave the CS approximately 8,500 euros as a partial payment to the FARC to transport a multi-kilogram shipment of cocaine to Spain on his behalf, and further offered to provide the CS with approximately 200 hand grenades in exchange for additional kilograms of cocaine.

In addition to his prison term, VIGLAKIS, 54, a citizen of Greece, was to pay a $100 special assessment fee.

Mr. Bharara praised the outstanding work of the Special Operations Division of the DEA, as well as the DEA’s Panama Country Office, Madrid Country Office, and Copenhagen Country Office. Mr. Bharara also thanked the U.S. Department of Justice’s Office of International Affairs and National Security Division, the U.S. Department of State, and the Government of the Republic of Panama.

This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Christian R. Everdell, Aimee Hector, and Michael Lockard are in charge of the prosecution.

U.S. v. Ioannis Viglakis S1 Superseding Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that DINO BOUTERSE, who is the son of the President of Suriname and reportedly served previously as the head of Suriname’s Counter-Terrorism Unit, pled guilty today in Manhattan federal court in connection with his attempt to provide material support and resources to Hezbollah, a designated terrorist organization, along with narcotics trafficking and firearms offenses. BOUTERSE, who was arrested in Panama on August 29, 2013, and arrived in the United States on August 30, 2013, pled guilty before U.S. District Judge Shira A. Scheindlin.

Manhattan U.S. Attorney Preet Bharara said: “Today, a supporter of terrorism, who was in a position of national power in Suriname and presented himself as an opponent of terrorism, has pled guilty. In addition to conspiring to import cocaine into the United States, Dino Bouterse has acknowledged that he attempted to provide material support to Hezbollah. Now he faces, at a minimum, 15 years in prison.”

According to the Indictment, other documents filed in Manhattan federal court, and statements made at today’s guilty plea:

In 2013, BOUTERSE used his position to assist individuals he believed were members of Hezbollah who intended to conduct terrorist attacks against American interests. In exchange for a multimillion-dollar pay-off, BOUTERSE agreed to allow large numbers of purported Hezbollah operatives to use Suriname as a permanent base for, among other things, attacks on American targets. In furtherance of his efforts to assist Hezbollah, BOUTERSE supplied a false Surinamese passport to a purported Hezbollah operative, who in actuality was an undercover law enforcement officer, for the purpose of clandestine travel, including travel to the United States, began determining which heavy weapons he could provide to Hezbollah, and indicated how Hezbollah operatives, supplied with a Surinamese cover story, could enter the United States.

In June 2013, BOUTERSE and his co-defendant, Edmund Quincy Muntslag, met in Suriname with DEA confidential sources (the “CSs”), in a local government office, to discuss importing cocaine into the United States using commercial airline flights. During the meeting, BOUTERSE showed the CSs a rocket launcher and a kilogram of cocaine.

Approximately one month later, BOUTERSE and Muntslag worked to provide transportation and security for cocaine being sent through Suriname to the United States. As a test run, BOUTERSE and Muntslag sent 10 kilograms of cocaine on a commercial flight departing from Suriname. BOUTERSE personally verified the arrangements for the 10-kilogram cocaine shipment in a text message. The cocaine was intercepted by law enforcement officials after it departed Suriname.

In July 2013, BOUTERSE met with one of the CSs to discuss opening Suriname to the CSs’ purported Hezbollah associates.

Later that month, BOUTERSE met in Europe with one of the CSs and with two other men who purported to be associated with Hezbollah. During this meeting, BOUTERSE discussed initially hosting 30 to 60 Hezbollah members in Suriname for training and operations. He also indicated that he wanted a Hezbollah cell in Suriname, in part, to act as a personal armed force. BOUTERSE confirmed his understanding that the purported Hezbollah operatives would operate in South America against American targets, and he agreed to supply Surinamese passports to the operatives—and to assist with their applications for visas to travel from South America into the United States. In addition, in response to a request for surface-to-air missiles and rocket-propelled grenades, BOUTERSE stated that he would need “two months” and that he would provide a list of what he could supply. Finally, at the July 2013 meeting in Europe, BOUTERSE agreed to create a false Surinamese passport for one of the purported Hezbollah operatives, so that BOUTERSE and the Hezbollah operative could travel to Suriname to inspect the facilities that BOUTERSE had agreed to prepare for the Hezbollah contingent.

At a subsequent meeting in August 2013, BOUTERSE delivered a Surinamese passport with false identifying information to a purported Hezbollah operative. As had been discussed at the July 2013 meeting in Europe, the purported Hezbollah operative was to use the fraudulent passport to travel to Suriname. BOUTERSE indicated that everything was ready in Suriname for the arrival of the purported Hezbollah members, and that some “toys,” or weapons, would be available for inspection.

Muntslag was arrested on August 29, 2013, in Trinidad and Tobago, and is pending extradition to the United States to face a narcotics importation charge in the Indictment.

BOUTERSE, 41, pled guilty to one count of attempting to provide material support to Hezbollah, a designated foreign terrorist organization, one count of conspiring to import cocaine into the United States, and one count of carrying a firearm in connection with the conspiracy to import cocaine. Those charges carry a maximum term in prison of life, and a mandatory minimum term in prison of 15 years.

The charge against the remaining defendant, Edmund Quincy Muntslag, is merely an allegation, and he is presumed innocent unless and until proven guilty.

Mr. Bharara praised the outstanding efforts of the Special Operations Division of the Drug Enforcement Administration (“DEA”). Mr. Bharara also thanked the DEA’s Miami Field Division, Panama City Country Office, Port-of-Spain Country Office, and Bogota Country Office; the Government of the Republic of Panama; and the U.S. Department of Justice’s Office of International Affairs and its National Security Division.

This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Michael D. Lockard, Adam Fee, Michael Ferrara, and Edward Y. Kim are in charge of the prosecution.

U.S. v. Dino Bouterse S2 Indictment

Filing Seeks Order Forfeiting Pension Contributions Made by Former New York State Assemblyman Eric Stevenson, Convicted of Corruption Offenses

Preet Bharara, the United States Attorney for the Southern District of New York, announced today the agreement of MIGUEL MARTINEZ, a former New York City Council member convicted of corruption offenses, to forfeit pension benefits to satisfy the forfeiture order against him, and the filing of an application for an order forfeiting pension contributions made by ERIC STEVENSON, a former New York State assemblyman convicted of corruption offenses.

Manhattan U.S. Attorney Preet Bharara said: “Today’s actions represent a substantial step towards preventing corrupt elected officials from benefiting from pensions paid for by the people they betrayed in office. As I announced last year, this Office is committed to using every available legal means to prevent taxpayers’ money from being used to pay for the comfortable retirement of officials who betray those taxpayers while in office.”

As alleged in the applications seeking forfeiture, the agreement to forfeit MARTINEZ’s pension benefits, and other court documents:

Former New York City Council member MIGUEL MARTINEZ was convicted of corruption offenses on July 16, 2009. On December 15, 2009, MARTINEZ was sentenced to five years in prison and ordered to forfeit $106,000. MARTINEZ is currently a vested member of the New York City Employee Retirement System and will be eligible to receive benefits when he reaches the age of 57. On December 17, 2013, the Office filed an application for an order forfeiting MARTINEZ’s right to pension benefits until his forfeiture judgment is fully paid. In an agreement submitted to Judge Paul A. Crotty today, MARTINEZ agreed to forfeit his right to pension benefits until his forfeiture judgment is fully paid. In satisfying this forfeiture judgment, MARTINEZ will receive credit for payments he makes towards restitution. This agreement is subject to approval by the Court.

Former New York State Assemblyman ERIC STEVENSON was convicted of corruption offenses in January 2014 after a six-day trial. On May 21, 2014, STEVENSON was sentenced and ordered to forfeit $22,000. This forfeiture judgment remains unpaid. STEVENSON is not a vested member in the New York State & Local Employee Retirement System but is entitled to a refund of the contributions he made into the system. Today, the Office filed an application to Chief Judge Loretta A. Preska seeking to forfeit these pension contributions.

Additionally, on December 17, 2013, the Office sought the forfeiture of pension benefits by Larry Seabrook, a former New York City Council member who was convicted of corruption offenses, and filed discovery requests seeking to locate benefits paid to convicted former New York City Council member Hiram Monserrate and convicted former Yonkers City Council member Sandy Annabi to satisfy the outstanding forfeiture judgments against them. These matters remain pending.

The prosecutions of these officials were handled by the Office’s Public Corruption Unit and its White Plains Division. The forfeiture of the defendants’ pensions is being handled by the Office’s Money Laundering and Asset Forfeiture Unit. Assistant United States Attorney Paul Monteleoni is in charge of the forfeitures.

U.S. v. Miguel Martinez - Govt's Letter to Judge Crotty, Forfeiture Stipulation
U.S. v. Eric Stevenson - Govt's Motion for Forfeiture of Substitute Assets

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that LUIS GUSTAVO TAVAREZ pled guilty in Manhattan federal court to managing a large-scale counterfeit credit card scheme involving nearly 200 stolen credit card numbers and over $600,000 dollars in losses to victims. TAVAREZ was charged in May 2014, and pled guilty today before U.S. District Judge Richard J. Sullivan.

Manhattan U.S. Attorney Preet Bharara said: “Luis Tavarez bought stolen credit card information from cybercriminals, and spent the next year lining his pockets with other people’s money. Today’s guilty plea ensures that he will spend time paying for that decision.”

According to the allegations in the Criminal Complaint and Information, and statements made at related court proceedings:

From April 2013 through April 2014, TAVAREZ and his co-conspirators obtained stolen credit card information from computer hackers and “carding” websites, which are Internet-based forums in which users sell and exchange stolen credit card numbers. TAVAREZ encoded that stolen account information onto counterfeit credit cards, which he and a team of accomplices used to make hundreds of unauthorized purchases of store gift cards and merchandise at national retail chains in New York, New Jersey, Pennsylvania, Connecticut, Rhode Island, and Massachusetts. The gift cards and retail items were then sold to others or returned to the stores for a cash refund.

As part of the scheme, the defendants and their co-conspirators obtained stolen account information for almost 200 credit card accounts and used that stolen information to make more than $600,000 in unauthorized purchases.

TAVAREZ, 34, of Bronx, New York, pled guilty to one count of conspiracy to commit access device fraud, which carries a maximum sentence of seven and a half years in prison. The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes, as the sentencing of the defendant will be determined by the judge.

TAVAREZ is scheduled to be sentenced on December 17, 2014 before Judge Sullivan.

Four other defendants were charged alongside TAVAREZ in connection with the scheme. Two of the defendants, Anthony Reynoso and Plinio Pineda Lopez, previously pled guilty to participating in the fraud. The charges against the remaining defendants, Vicente D. Espinal and Warner Alvarez Almanzar, are merely allegations, and they are presumed innocent unless and until proven guilty.

Mr. Bharara praised the outstanding investigative work of the U.S. Secret Service. He also thanked Immigration and Customs Enforcement’s Homeland Security Investigations for their assistance with this case.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Alexander Wilson is in charge of the prosecution.

U.S. v. Luis Tavarez Information

Preet Bharara, the United States Attorney for the Southern District of New York, and James T. Hayes, Jr., the Special Agent-in-Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), announced today the filing in Manhattan federal court of a civil forfeiture action targeting seven properties alleged purchased in Dutchess County, New York, by Greek national NIKOLAOS PANAGIOTOPOULOS using the proceeds of a long-running human smuggling operation.

Manhattan U.S. Attorney Preet Bharara said: “With today’s civil complaint seeking forfeiture of seven Dutchess County properties allegedly purchased with the proceeds of a sprawling, lengthy human smuggling operation, we continue our work to take the profit out of crime whenever it touches the Southern District of New York. I would like to thank ICE HSI for helping our office to carry out that objective on this case.”

ICE HSI Special-Agent-in-Charge James T. Hayes, Jr., said: “These seizures are an important step in our efforts to dismantle the alleged worldwide human smuggling operation run by Panagiotopoulos. Criminal organizations should be on notice that the United States will not allow proceeds of criminal activity from anywhere in the world to be laundered in our country. HSI New York partners with HSI Attaché offices in Athens and around the world to work closely with U.S. Attorney’s offices to strip criminal organizations of their illicitly obtained assets.”

According to the allegations contained in the Complaint filed today in Manhattan federal court:

Since 2013, ICE HSI, in coordination with Greek law enforcement authorities, investigated the human smuggling and visa fraud activities of Greek national NIKOLAOS PANAGIOTOPOULOS. PANAGIOTOPOULOS is believed to have participated in human smuggling, passport fraud, and visa fraud since at least 2003. As part of this scheme, PANAGIOTOPOULOS facilitated the smuggling of foreign nationals, principally Albanian citizens, into the United States, Australia, the United Kingdom, and Canada, in exchange for payments of thousands of dollars per smuggled person. He received payment for his illegal services principally in cash or money orders that he would then launder through bank accounts in the United States and, ultimately through the purchase of real estate, including real estate in Dutchess County, New York.

PANAGIOTOPOULOS has recently been arrested and charged by Greek authorities with crimes relating to false applications for passports, and is currently awaiting trial in Athens.

The Complaint includes claims for the forfeiture of seven properties located in the Town of Wappinger, New York, each of which is alleged to have been purchased with PANAGIOTOPOULOS’s fraud proceeds. The Complaint further seeks civil money laundering penalties in the amount of at least $373,297.93.

Mr. Bharara thanked ICE HSI for their work on the investigation.

This civil forfeiture and money laundering case is being overseen by the Office’s Money Laundering and Asset Forfeiture Unit. Assistant U.S. Attorney Andrew C. Adams is in charge of the suit.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that JAMES MEYER, a former assistant to artist Jasper Johns, pled guilty in Manhattan federal court in connection with his sale of 22 works that he stole from Johns’ studio in Sharon, Connecticut. MEYER pled guilty today before U.S. District Judge J. Paul Oetken.

Manhattan U.S. Attorney Preet Bharara said: “James Meyer made millions by stealing and selling the valuable artworks that he was entrusted with maintaining. With his guilty plea today, Meyer will now have to pay for that decision.”

According to the Indictment, other documents filed in Manhattan federal court, and statements made at today’s guilty plea:

MEYER was a studio assistant for Johns for over 25 years, and was responsible for, among other things, maintaining a studio file drawer containing pieces of art that were not yet completed by Johns and not authorized by Johns to be placed in the art market.

Between September 2006 and February 2012, MEYER removed 22 individual pieces of art from the studio file drawer he was responsible for maintaining, and from elsewhere in Johns’ studio, and transported those pieces from the studio in Sharon to an art gallery located in Manhattan for the purpose of selling those works without Johns’ knowledge or permission. MEYER represented both to the owner of the gallery (the “Gallery Owner”) and to potential purchasers that these pieces had been given to him as gifts by Johns when, in fact, that was not true.

As part of his scheme, MEYER provided sworn, notarized certifications both to the Gallery Owner and to buyers stating that each piece was an authentic Johns work, that the art had been given to him directly by Johns, that he was the rightful owner of the piece, and that he had the right to sell that particular work. In addition, MEYER conditioned the sale of each of these works on the signed agreement by the purchaser that the art would be kept private for at least eight years, during which time the piece would not be loaned, exhibited, or re-sold.

MEYER also created fictitious inventory numbers for these pieces to give the impression that they were finished works that were authorized by Johns to be sold in the art market. Additionally, to facilitate certain sales MEYER created fake pages that he thereafter inserted into a ledger book of registered pieces of art maintained at Johns’ studio, and which he subsequently photographed, to give additional assurances to prospective buyers about the provenance, or history of ownership, of a particular piece.

During the course of the almost six-year scheme, the Gallery Owner sold 22 works of art on MEYER’s behalf for a total of approximately $6.5 million, of which $3.99 million was remitted directly to MEYER.

MEYER, 52, of Salisbury, Connecticut, pled guilty to one count of interstate transportation of stolen property, which carries a maximum sentence of 10 years in prison. Sentencing is scheduled for December 10, 2014, before Judge Oetken.

The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the outstanding investigative work of the FBI.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Christopher D. Frey is in charge of the prosecution.

U.S. v. James Meyer Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today that MICHAEL A. LUCARELLI, the Director of Market Intelligence at Lippert/Heilshorn & Associates, Inc. (“LHA”), an investor relations firm, was arrested this morning on 13 counts of insider trading. LUCARELLI is expected to be presented today in Manhattan federal court before United States Magistrate Judge James L. Cott.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, and despite the well-known parade of convicted insider trading perpetrators over the past several years, Michael Lucarelli was not deterred and violated both his company’s policies and his responsibility to its clients by trading on material nonpublic information for his personal financial gain. For the over $500,000 he earned from his illicit trades he is charged with 13 counts of securities fraud.”

FBI Assistant Director-in-Charge George Venizelos said: “Instead of doing his job, Lucarelli spent his days setting up brokerage accounts to make illegal trades using inside information from unwitting clients. He violated the responsibility he had to both company and clients. He also broke the law and today finds himself under arrest and charged in a thirteen count complaint.”

According to the Complaint unsealed in Manhattan federal court:

From at least August 2013 through at least August 2014, LUCARELLI engaged in an insider trading scheme to use and trade upon material non-public information that he acquired during his employment at LHA, an investor relations firm based in Manhattan. Specifically, LUCARELLI, as an LHA employee, had access to working drafts of press releases prepared by LHA for its clients prior to their issuance to the investing public. Those draft press releases contained material, non-public information about business events and announcements relating to LHA’s clients.

In violation of LHA’s policies and in breach of his duties to LHA and its clients, on multiple occasions, LUCARELLI took positions in the stock of LHA clients shortly before the announcement by these companies of material information through press releases prepared by LHA. Shortly following the issuance of the press releases drafted by LHA, LUCARELLI exited the positions in these securities that he had acquired prior to the issuance, thereby profiting on the movement in the stock price.

LUCARELLI repeatedly traded in LHA client securities despite LHA’s written code of conduct, which strictly prohibited LHA employees from trading in any security issued by an LHA client. LUCARELLI carried out his scheme in at least four different brokerage accounts. When opening new brokerage accounts through which to conduct his illegal trades, LUCARELLI did not reveal his affiliation with LHA. And, on two occasions, LUCARELLI opened new brokerage accounts soon after his ability to trade in other accounts had been suspended by the respective brokerage firms.

On or about July 24, 2014, the FBI obtained a search warrant to search LUCARELLI’s office at LHA for evidence of his insider trading activities. During that search, which was conducted without LUCARELLI’s knowledge, the FBI located a locked briefcase which, when opened, contained a draft press release for LHA client, TREX Company (“TREX”). That press release was marked “DRAFT” and contained TREX’s second fiscal quarter 2014 financial results. The following day, after the FBI completed the search, LUCARELLI started purchasing shares of TREX. Between July 25, 2014 and August 1, 2014, LUCARELLI took a net position of 37,400 shares of TREX. Then, on August 4, 2014, shortly before the market opened, TREX issued a press release announcing its second fiscal quarter 2014 financial results. Among other things, TREX announced that sales and earnings before taxes had increased 23 percent and 62 percent, respectively, in comparison with the comparable period in 2013. TREX also issued revenue guidance for the third fiscal quarter of 2014, which was a 27 percent increase over the comparable period in 2013. Within two hours of the announcement, LUCARELLI sold 35,058 of the 37,400 TREX shares he previously purchased. Those sales yielded a profit of almost $90,000.

As a result of the 13 instances of insider trading alleged in the Complaint, LUCARELLI earned at least $538,215.32 in illicit proceeds. Furthermore, the FBI has discovered numerous additional trades that LUCARELLI conducted in LHA client securities and that exhibit a similar pattern of fraud. The FBI’s investigation is ongoing.

LUCARELLI is charged with 13 counts of securities fraud. The securities fraud counts each carry a maximum sentence of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

Mr. Bharara praised the investigative work of the FBI and thanked the SEC, which has filed civil charges in a separate action.

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Brian Blais and Damian Williams are in charge of the prosecution. Assistant U.S. Attorney Carolina Fornos of the Office’s Money Laundering and Asset Forfeiture Unit is responsible for the forfeiture of assets.

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

U.S. v. Michael Lucarelli Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced that RAYMOND CHRISTIAN, GLENN THOMAS, and TYRELL WHITAKER were found guilty last Friday in Manhattan federal court of the December 15, 2010, murder of Jeffrey Henry. Jeffrey Henry was killed when the defendants attempted an armed robbery of individuals selling crack cocaine from an apartment located at 54 Chambers Street, Newburgh, New York. CHRISTIAN, THOMAS, and WHITAKER were convicted after a three-week jury trial before U.S. District Judge Edgardo Ramos.

Manhattan U.S. Attorney Preet Bharara stated: “This case is the embodiment of how drug trafficking begets violence, and why we and our law enforcement partners are determined to stop both. In the mayhem of a shootout that came out of the deadly mix of drugs, guns and men bent on robbery, the defendants committed a cold-blooded murder for drugs and cash. Now they will pay the price for their crime.”

According to the Indictment filed in federal court and the evidence presented at trial:

On December 15, 2010, CHRISTIAN, WHITAKER, and THOMAS, along with at least five other individuals, participated in the gunpoint robbery of a house at 54 Chambers Street in Newburgh, New York. The house was well-known throughout Newburgh for its prolific crack cocaine trafficking. During the robbery, CHRISTIAN lost his firearm to one of the victims, which resulted in a shoot-out between robbers and victims. As the robbers attempted to flee the house, they encountered Jeffrey Henry, who had just arrived. Henry attempted to pull the door shut, to lock the robbers in the house, while calling 911. The robbers, including WHITAKER and THOMAS, were ultimately able to pry the door open and, through the opening, shoot Henry. Henry was shot twice, and died shortly thereafter.

All three of the defendants, CHRISTIAN, 21, THOMAS, 25, and WHITAKER, 20, are from Newburgh, New York. They were each found guilty of one count of robbery, one count of use of a firearm during the robbery, and one count of murder through the use of a firearm during the robbery. In addition, CHRISTIAN and THOMAS were also found guilty of one count of conspiracy to commit robbery. CHRISTIAN and THOMAS were found not guilty of one count of conspiring to distribute narcotics. The defendants each face a maximum sentence of life in prison, and a mandatory minimum sentence of 10 years of in prison. The potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the outstanding investigative work of the Federal Bureau of Investigation, the New York State Police, the Newburgh Police Department, the Orange County District Attorney’s Office, and the Orange County Sheriff’s Office.

The case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Andrew Bauer and Kan M. Nawaday are in charge of the prosecution.

U.S. v. Raymond Christian, et al. Indictment

Preet Bharara, United States Attorney for the Southern District of New York, announced today that JOHN L. MONTANEZ, a police officer with the New York City Police Department (“NYPD”), pleaded guilty in Manhattan federal court to credit card fraud and identity theft offenses. MONTANEZ, who was arrested late May 2014, entered his plea today before U.S. District Judge Katherine Polk Failla.

Manhattan U.S. Attorney Preet Bharara said: “John Montanez summed it up well when he told a cooperating witness ‘I am not the cop you think I am.’ In fact, he’s a criminal who dishonored himself, the NYPD and the public he serves, and by doing so, made every other honest police officer’s job that much harder. I want to thank the Bronx District Attorney’s Office, the Federal Bureau of Investigation, and the NYPD Internal Affairs Bureau for working with my office to investigate, and snuff out, this conduct.”

According to the Complaint, Information, and today’s plea proceeding:

In 2011, an individual, who subsequently agreed to cooperate with law enforcement, and who is referred to in the case as the “CW,” informed MONTANEZ that the CW had a suspended and/or revoked driver’s license. In response, MONTANEZ offered to provide the CW with the name and driver’s license number of a real person – so that if the CW were stopped by law enforcement, the CW could pretend to be someone else – in return for items that the CW would purchase for MONTANEZ with fraudulently obtained or stolen credit cards. After that, in return for the CW purchasing merchandise for MONTANEZ, and providing to MONTANEZ credit card/debit card numbers that MONTANEZ understood were stolen or fraudulently obtained, MONTANEZ provided to the CW multiple names, dates of birth, and driver’s license identification numbers of other people. One such person, referred to in the Complaint as “Victim-1,” was a fellow police officer with the NYPD, serving in the same precinct as MONTANEZ.

The CW was arrested in June 2013 and later began recording meetings with MONTANEZ in connection with the CW’s cooperation with law enforcement. During these meetings, MONTANEZ offered to provide additional identities to the CW in return for merchandise purchased with credit/debit cards that MONTANEZ believed the CW had stolen or fraudulently obtained. In one recorded meeting, MONTANEZ observed to the CW: “I am not the cop you think I am. I am a piece of s***.”

MONTANEZ, 28, of the Bronx, New York, pleaded guilty to one count of access device fraud and one count of aggravated identity theft. He faces a maximum sentence of 17 years in prison, with a mandatory minimum term of two years. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

MONTANEZ is scheduled to be sentenced by Judge Failla on January 14, 2015.

Mr. Bharara thanked the Bronx County District Attorney’s Office, who worked with the CW to develop evidence implicating MONTANEZ and assisted in the prosecution. Mr. Bharara also praised the investigative work of the Federal Bureau of Investigation and the NYPD Internal Affairs Bureau.

The case is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorney Daniel C. Richenthal is in charge of the prosecution.

U.S. John Montanez Information

“Last fall, this Office began an independent review of the evidence regarding the death of Ramarley Graham after the local authorities completed their investigation and ultimately were not able to bring any charges arising out of the shooting. Today we received a letter from the mother of Ramarley Graham and other materials, which we are reviewing. This Office is acutely aware of how painful it is to lose a child in an encounter with law enforcement under any circumstances. In addition to reviewing evidence obtained from local authorities, this Office has been conducting its own independent investigation of this tragic incident. There are many reasons that a federal civil rights investigation should be conducted confidentially, including grand jury secrecy rules, as well as prudential and other reasons, including fairness to all the parties involved. Above all, a proper investigation must be thorough, fair and independent so that in the end justice is done, and we are absolutely committed to that. Finally, it should be understood that this Office has repeatedly been in communication with the attorneys for the mother of Mr. Graham and we will continue to do so,” said James Margolin, a spokesman for the U.S. Attorney's Office for the Southern District of New York.