Southern District of New York

Preet Bharara, the United States Attorney for the Southern District of New York, and William J. Bratton, the Commissioner of the New York City Police Department (“NYPD”), announced charges against 19 members of a criminal organization known as the “River Park Towers Young Gunnerz” (“RPT YGz”), which operates out of the River Park Towers housing complex, located on Richman Plaza in the vicinity of Sedgwick Avenue in the Bronx, New York. The RPT YGz members, along with their primary narcotics supplier, are all charged with narcotics trafficking. The gang’s former leader, TYRONE FELDER, is also charged with a firearms offense. These charges follow those announced on August 15 and 16, 2014, against RPT YGz members TYRONE FELDER, JAMAL WALKER, and TOMMY SMALLS, for the carjacking and murder of a livery cab driver in the Bronx.

13 of the defendants, including the three who are currently in federal custody on the murder-related charges, will be presented in Manhattan federal court this afternoon. Two of the defendants are currently in state custody on unrelated state charges and will be presented upon their arrival to the Southern District of New York. Five defendants are still at large.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, the defendants were associated with a violent gang that claimed an entire housing complex as its territory and held residents captive to their drug dealing and violent acts. Thanks to the outstanding work of the NYPD, the residents of River Park Towers are safer today, and these 20 suspected gang members and drug dealers are being brought to justice.”

NYPD Commissioner William J. Bratton said: “These individuals conducted their illegal operation inside of the River Park Towers development, causing alarm to the law abiding residents that live in the area. Thanks to the investigators and prosecutors who built and investigated this case, the message is clear, the NYPD will continue to target gangs who threaten the safety and well-being of all New Yorkers.”

According to the Indictment unsealed today in Manhattan federal court:

From at least 2010 through August 2014, River Park Towers has been plagued by drug dealing and violence, driven in large part by the activities of the RPT YGz. During that time period, the RPT YGz gang has distributed crack cocaine and marijuana, among other drugs, in and around the RPT complex. RPT YGz members have also engaged in robberies and various other acts of violence to protect their territory, assert their identity, and further their illegal activities, including threatening, intimidating and assaulting the security guards who are assigned to protect the River Park Towers complex and who have tried to prevent the RPT YGz members from selling drugs in the area.

TYRONE FELDER was the leader of RPT YGz until his arrest on August 15, 2014. Members of RPT YGz would pay money to FELDER in exchange for permission to sell drugs in and around the River Park Towers complex. FREDERICK ALLEN was recently designated the new leader of the RPT YGz by TYRONE FELDER following FELDER’s arrest.

NICOMEDES FRASQUERI serves as the primary supplier of narcotics for the RPT YGz, operating out of his own apartment within the River Park Towers complex. FRASQUERI has sold quantities of crack cocaine to members of the RPT YGz, among others, for distribution to customers.

TYRONE FELDER, JAMAL WALKER, NICOMEDES FRASQUERI, FREDERICK ALLEN, ANGEL AMERZQUITO, KEVIN ANTHONY, KELVIN DOUGLAS, DERRICK FELDER, ANTHONY GIVENS, KERI GIVENS, BRIAN HALL, ELIJAH HUBBARD, TERRELL JOHNSON, TYRONE MARGWOOD, SHANEQUA MASCALL, LAMONT OBEY, TOMMY SMALLS, GEORGE STONE, JEROME THOMAS, and JOHNA THOMAS are all charged with conspiring to distribute and to possess with intent to distribute crack cocaine and marijuana, a charge that carries a mandatory minimum sentence of 10 years in prison and a maximum penalty of life in prison. In addition, TYRONE FELDER is charged with one count of brandishing a firearm in relation to a narcotics and racketeering conspiracy, which carries a mandatory minimum sentence of seven years in prison, which must run consecutive to any other sentence, and a maximum penalty 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.

A chart containing the names, ages, and residences for the defendants is attached to this release.

The case is assigned to U.S. District Judge Colleen McMahon.

Mr. Bharara praised the outstanding investigative work of the NYPD Bronx Narcotics Division – Major Case Unit. He added that the investigation is continuing.

The Office’s Narcotics Unit is overseeing the case. Assistant U.S. Attorneys Amy Garzon, Andrew DeFilippis, and Patrick Egan 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. Tyrone Felder et al.

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-CI”), announced today that BERNARD KRAMER pled guilty to conspiring to conceal from the IRS over one million dollars he had hidden in Swiss and Israeli bank accounts, and willfully failing to disclose those accounts on his U.S. tax returns. KRAMER, who is cooperating with the Government, entered his guilty plea today before U.S. District Judge Alvin K. Hellerstein.

According to the criminal Information filed today in Manhattan federal court:

Between approximately 1987 and 2010, KRAMER maintained an undeclared bank account at a Swiss private bank headquartered in Zurich, Switzerland (the “Swiss Bank”). With the assistance of others at the Swiss Bank, KRAMER took steps to conceal the existence of, and his interest in, the undeclared account. KRAMER and certain individuals at the Swiss Bank used the coded phrase “Hot Lips” to refer to KRAMER’s undeclared account at the Swiss Bank. Periodically, KRAMER met with a representative of the Swiss Bank (“Swiss Bank Representative-1”) in the United States to discuss KRAMER’s undeclared account at the Swiss Bank and to review statements related to the account. With the assistance of the Swiss Bank, KRAMER repatriated funds to the United States from his undeclared account in a manner designed to ensure that U.S. authorities did not discover the account, including by requesting and receiving checks from the account in amounts just under $10,000 each.

In approximately 2008, it became publicly known that the Swiss bank UBS AG (“UBS”) was being investigated by United States authorities for helping U.S. taxpayers maintain undeclared accounts. Around that time, KRAMER chose to maintain his undeclared account at the Swiss Bank after being assured by Swiss Bank Representative-1 that KRAMER’s undeclared account would remain safe at the Swiss Bank despite the UBS investigation. In approximately March of 2010, however, with the assistance of Swiss Bank Representative-1 and others at the Swiss Bank and an Israeli bank headquartered in Ramat Gan, Israel (the “Israeli Bank”), KRAMER transferred the remaining assets in his undeclared account at the Swiss Bank to a new undeclared account at the Israeli Bank. KRAMER maintained the new undeclared account at the Israeli Bank from 2010 to 2012.

From approximately 1987 through 2012, KRAMER filed false tax returns with the IRS that failed to report his interest in his undeclared accounts at the Swiss Bank and the Israeli Bank, and the income generated in these undeclared accounts, which had a high value of at least $1.1 million.

KRAMER, 83, of Del Ray Beach, Florida, faces a maximum sentence of eight years in prison. As part of his plea, KRAMER has agreed to cooperate with the Government and to pay a civil penalty of $588,042, along with back taxes. He is scheduled to be sentenced by U.S. District Judge Alvin K. Hellerstein on February 6, 2015.

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 efforts of IRS-CI in the investigation, which he noted is ongoing. Mr. Bharara also thanked U.S. Department of Justice’s Tax Division for their assistance in the investigation.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Sarah E. Paul and Jason H. Cowley are in charge of the prosecution.

U.S. v. Bernard Kramer Information

Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), William J. Bratton, the Commissioner of the Police Department for the City of New York (“NYPD”), and Charles Gardner, Commissioner of the Yonkers Police Department (“Yonkers PD”) announced that TAKIEM EWING, a/k/a “Mulla,” TYRONE FELDER, a/k/a “Man Man,” and KAREEM MARTIN, a/k/a “Jamal Walker,” were arrested and charged with carjacking in connection with the August 12, 2014, murder of a livery cab driver in the Bronx, New York. All three men were presented this afternoon in White Plains federal court before United States Magistrate Judge Lisa Margaret Smith and were ordered detained.

U.S. Attorney Preet Bharara stated: “As alleged in the complaint, this was a senseless and heinous murder that took the life of a man who was working as a livery cab driver in the Bronx. The arrests today are a testament to the perseverance and cooperation of the FBI and our local partners, the NYPD and the Yonkers Police Department.”

FBI Assistant Director-in-Charge George Venizelos stated: “As alleged, the defendants were as reckless as they were ruthless, indiscriminately assassinating an innocent livery driver trying to earn a living. This alleged conduct is beyond deplorable. Agents, detectives, and prosecutors worked around-the-clock to make these arrests and to stop this scourge on our community. I commend them for their relentless drive in pursuit of justice.”

NYPD Commissioner William J. Bratton stated: “The victim in this case was a hard-working livery driver who provided an essential service to New Yorkers. His death was senseless and motivated by greed. Thanks to the detectives, agents, and prosecutors pursuing this case, the suspects will now be held accountable for this heinous crime.”

Yonkers PD Commissioner Charles Gardner stated: “This investigation is a prime example of inter-agency cooperation and how it can be used to take violent suspects off of our streets. I would like to thank all the investigators and prosecutors from the FBI, U.S. Attorney’s Office, NYPD and Yonkers PD for their professionalism, which ultimately led to these important arrests.”

According to the Complaint, the FBI, the NYPD, and the Yonkers PD were investigating two commercial robberies, two carjackings, and two murders that took place on August 5, 2014, and August 12, 2014, respectively. The first murder took place in the early morning hours of August 5, 2014, when the body of a livery cab driver (the “Hunter Avenue Homicide Victim”) was found shot in the vicinity of Hunter Avenue in the Bronx, New York.

Later that day, the Yonkers PD received a report that a minimart located on McLean Avenue in Yonkers had been robbed at gunpoint. The robbers took cash, bleach, and a cellular telephone. Video footage from outside the minimart revealed that the robbers arrived in a black sedan the looked like the sedan belonging to the Hunter Avenue Homicide Victim. Also on August 5, 2014, at approximately 5:27 a.m., the Yonkers PD received a report that a Dunkin’ Donuts franchise at Central Park Avenue in Yonkers had been robbed at gunpoint.

According to the Complaint, later on the night of August 5, 2014, the black sedan belonging to the Hunter Avenue Homicide Victim was found abandoned near Exterior Street in the Bronx. The vehicle was doused in bleach. Inside was the cellular telephone that was stolen from the Yonkers minimart.

According to the Complaint, on or about August 12, 2014, at approximately 6:00 a.m., the body of a livery cab driver (the “Bryant Avenue Homicide Victim”) was found shot in the head in the street on Bryant Avenue in the Bronx, New York. He was later pronounced dead.

On or about August 12, 2014, at approximately 8:10 a.m., the livery cab belonging to the Bryant Avenue Homicide Victim (the “Victim’s Cab”) was found abandoned on Underhill Avenue in the Bronx, New York.

According to the Complaint, a ballistics examination has shown that different guns were used to murder the Hunter Avenue Homicide Victim and the Bryant Avenue Homicide Victim. Ballistics evidence shows, however, that both of those guns were used in a single shooting on May 29, 2014, on the corner of Ogden Avenue and West 162nd Street in the Bronx, New York.

According to the Complaint, video footage (“Video-1”) from inside and outside an apartment building on Third Avenue between 167th and 168th Streets in the Bronx, New York (the “Third Avenue Building”), on August 12, 2014, from approximately 5:00 a.m. to 5:01 a.m., shows two men (“Suspect-1” and “Suspect-2”) getting into an elevator on the ninth floor of the Third Avenue Building, taking the elevator downstairs, leaving the building, and turning left onto Third Avenue. Suspect-1 is wearing a dark Adidas sweatshirt and is wearing a knapsack. Suspect-2 is wearing a dark Brooklyn Nets sweatshirt. Additional video footage (“Video-2”) from Third Avenue between 166th and 167th Streets in the Bronx, New York, on August 12, 2014, from approximately 5:34 a.m. to 5:36 a.m., shows four individuals approaching a car from different directions and getting in a car. Two of the individuals are wearing clothing that is consistent with the description of Suspect-1 and Suspect-2.

According to the Complaint, an NYPD detective (“Detective-1”) spoke with a witness (“Witness-1”) who is a livery cab driver who knows the Bryant Avenue Victim. On the morning of August 12, 2014, Witness-1 had been at a mosque on Third Avenue between 166th and 167th Streets (the “Mosque”). At approximately 5:15 a.m., Witness-1 left the Mosque and got into his livery cab. Before Witness-1 left the Mosque, Witness-1 saw the Bryant Avenue Victim at the Mosque. Witness-1 also saw the Victim’s Cab parked on Third Avenue near the Mosque. At approximately 5:20 a.m., an individual wearing a knapsack approached Witness-1’s car and asked for a ride. Witness-1 saw two other individuals nearby, felt uncomfortable, and left.

According to the Complaint, an NYPD detective (“Detective-2”) spoke with a witness (“Witness-2”), who is a livery cab driver who knows the Bryant Avenue Victim. On the morning of August 12, 2014, Witness-2 had been at the Mosque. Sometime after 5:00 a.m., Witness-2 left the Mosque. Before Witness-2 left the Mosque, Witness-2 saw the Bryant Avenue Victim at the Mosque. Witness-2 got into Witness-2’s car, and observed four individuals separated from one another. At approximately 5:25 a.m., one of those individuals asked Witness-2 for a ride, and informed Witness-2 that it was a ride for four people. Witness-2 declined and drove away.

Additional video footage (“Video-3”) from Bryant Avenue in the Bronx, New York, on August 12, 2014, at approximately 6:00 a.m., shows the Victim’s Cab rolling down Bryant Avenue and making contact with at least one parked car. Video-3 shows Suspect-1, Suspect-2, and two other individuals (“Suspect-3” and “Suspect-4”) (collectively, the “Suspects”) running after the Victim’s Cab. They got into the Victim’s Cab, dumped a body onto Bryant Avenue, and drove away in the Victim’s Cab.

Additional video footage (“Video-4”) from the vicinity of Underhill Avenue between Lafayette and Story Avenues, and Bolton Avenue between Lafayette and Story Avenues, in the Bronx, New York, on August 12, 2014, from approximately 6:03 a.m. to 6:05 a.m., shows that the Victim’s Cab pulled up, and the Suspects got out of the Victim’s Cab. The Suspects wiped the outside of the Victim’s Cab, and then ran across a walkway to Bolton Avenue between Lafayette and Story Avenues. They took off their sweatshirts and left their sweatshirts and Suspect-1’s knapsack in a dumpster. The Suspects then walked toward Lafayette Avenue.

Additional video footage (“Video-5”) from Lafayette Avenue in the Bronx, New York, on August 12, 2014, from approximately 6:08 a.m. to 6:09 a.m., shows Suspect-1 and Suspect-3 getting into a car. Suspect-2 and Suspect-4 walked toward Seward Avenue.

According to the Complaint, an NYPD detective (“Detective-3”) spoke with a livery cab driver (“Driver-1”). Driver-1 informed Detective-3, in substance and in part, that at approximately 6:10 a.m. on August 12, 2014, Driver-1 picked up two individuals from the vicinity of the intersection of White Plains Road and Seward Avenue in the Bronx, New York. Driver-1 drove the two individuals in his livery cab (“Cab-1”) to the vicinity of the Third Avenue Building. Driver-1 saw those individuals walking toward the Third Avenue Building.

Additional video footage (“Video-6”) from inside and outside the Third Avenue Building on August 12, 2014, from approximately 6:17 a.m. to 6:21 a.m., shows that Suspect-1 and Suspect-3 got out of a car, entered the Third Avenue Building, and went up in the elevator to the ninth floor. Approximately two minutes later, Suspect-2 and Suspect-4 got out of a car, entered the Third Avenue Building, and went up in the elevator to the ninth floor. Detective-3 has reviewed portions of Video-6. Detective-3 has seen Cab-1. He informed me that, on Video 6, Suspect-2 and Suspect-4 got out of a car that appears to be Cab-1.

The Complaint alleges that a cooperating witness (“CW-1”) was shown portions of Video-1. CW-1 said that Suspect-1 looked like “Mulla,” and identified Suspect-2 as “Kareem.” CW-1 was shown, among other things, portions of Video-6. CW-1 identified Suspect-1 as “Mulla.” CW-1 identified Suspect-2 as “Kareem.” CW-1 identified Suspect-3 as TYRONE FELDER, a/k/a “Man Man,” the defendant. CW-1 previously identified a picture of TAKIEM EWING as “Mulla.” CW-1 previously identified a picture of TYRONE FELDER as “Man Man.” CW-1 previously identified a picture of KAREEM MARTIN as “Kareem.”

The Complaint alleges that an NYPD sergeant (“Sergeant-1”) spoke with an individual in the management office for the Third Avenue Building, and learned that a certain individual (“Person-1”) leases an apartment with Person-1’s daughters on the ninth floor of the Third Avenue Building (the “Apartment”). Also according to the Complaint, the superintendent of the Third Avenue Building identified Suspect-1 as a person who lives in the Apartment with Suspect-1’s mother. Following his arrest in this case, TAKIEM EWING, a/k/a “Mulla,” the defendant, identified Person-1 as his mother.

Mr. Bharara praised the outstanding work of the FBI, the Yonkers Police Department, and the New York City Police Department.

The case is being handled by the Office’s White Plains Division. Assistant United States Attorneys Michael Gerber and Scott Hartman are in charge of the prosecution.

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

TAKIEM EWING, a/k/a “Mulla,” 21, TYRONE FELDER, a/k/a “Man Man,” 25, and KAREEM MARTIN, a/k/a “Jamal Walker” 26, all of the Bronx, are each charged with one count of carjacking with intent to cause death and serious bodily harm in which a death resulted, which carries a maximum sentence of life in prison, or the death penalty. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants would be determined by the judge.

U.S. v. Takiem Ewing, Tyrone Felder, Kareem Martin 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 AZZEDDINE EL AMINE pled guilty today in Manhattan federal court to money laundering and operating an unlicensed money transmitting business for his role in running Liberty Reserve, a company that operated one of the world’s most widely used digital currency services and allegedly laundered more than $6 billion in suspected proceeds of crimes. EL AMINE was arrested in Madrid, Spain, 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, EL AMINE, 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, and 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 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 and laundered more than $6 billion in suspected proceeds of crimes, including credit card fraud, identity theft, investment fraud, computer hacking, child pornography, and narcotics trafficking. EL AMINE served as a principal deputy to Liberty Reserve founder Arthur Budovsky and operated a prominent Liberty Reserve “exchanger” service, from which he shared the profits with Budovsky.

EL AMINE, 47, of San José, Costa Rica, pled guilty to one count of conspiring to commit money laundering, which carries a maximum sentence of 20 years in prison; one count of conspiring to operate an unlicensed money transmitting business, which carries a maximum sentence of five years in prison; and one count of operating an unlicensed money transmitting business, 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.

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 Asset Forfeiture Unit. Assistant United States Attorneys Serrin Turner and Andrew Goldstein 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 EL AMINE’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, announced today that NOVELETTE “PAT” CAMPBELL, a former manager of the federally subsidized Tricham Houses in Manhattan, was sentenced today in Manhattan federal court to one year and one day in prison for accepting bribes in connection with federal program funds. CAMPBELL was convicted in April 2014 of six counts – one count of accepting bribes in connection with federal program funds, one count of conspiracy to accept bribes in connection with federal program funds, and four counts of making false statements to the U.S. Department of Housing and Urban Development (“HUD”). She was convicted after a one-week jury trial before U.S. District Judge George B. Daniels, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “For concocting and carrying out a scheme to trade spots on the waiting list for the Tricham Houses apartments in exchange for bribes of up to $9,000, Novelette ‘Pat’ Campbell has earned herself a spot in the housing of a federal prison. I would like to thank the investigators at the HUD-OIG and ICE-HSI for their hard work on this case.”

According to the Indictment, as well as evidence presented at CAMPBELL’s trial:

From April 2000 through October 2011, CAMPBELL accepted bribes and engaged in a conspiracy to accept bribes from individuals who were not on a waiting list for subsidized housing at the Tricham Houses. Rather than maintain the integrity of the waiting list and process applications on a first-come, first-serve basis as required by HUD, CAMPBELL sold spots on the waiting list for bribes. The people who paid bribes took apartments away from people who were on the waiting list for years. CAMPBELL accepted bribes ranging from $2,000 through $9,000, depending on the size of the apartment.

In addition, CAMPBELL falsified HUD certifications by falsely representing that all administrative procedures had been followed, when they had not, and, on two occasions, forged the signature of a tenant. CAMPBELL also altered original tenant applications for Section 8 housing to falsely add bribe payers as relatives of original applicants.

In addition to her prison term, CAMPBELL, 55, of the Bronx, New York, was sentenced to three years of supervised release, and was ordered to pay $35,500 in forfeiture and a $600 special assessment fee.

Mr. Bharara praised the investigative work of HUD Office of the Inspector General and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations. He noted that the investigation is continuing.

This case is being handled by the Office’s General Crimes Section. Assistant U.S. Attorneys Carolina A. Fornos and Rahul Mukhi are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigaion (“FBI”), and Joseph A. D’Amico, Superintendent of the New York State Police (“NYSP”), announced that ANDREW RENDFLASH, 36, pleaded guilty today to seven bank robberies and a commercial robbery. The robberies occurred in New York, Connecticut, Massachusetts, and Rhode Island between April 2013 and January 2014.

U.S. Attorney Preet Bharara stated: “Andrew Rendflash engaged in a robbery spree, across four states and over many months. Now, thanks to the collaborative efforts of the FBI and our state and local partners, he has pled guilty to his crimes. I want to especially thank the officers of the Ridgefield Police Department for their assistance in the investigation and prosecution of this case.”

FBI Assistant Director-in-Charge George Venizelos stated: “The defendant’s guilty plea is a result of a cooperative investigative effort by federal, state and local authorities. This case should remind other criminals that the FBI and its law enforcement partners will vigorously pursue you and prosecutors will ensure you face justice for your crimes. We will continue to combine the skills of multiple law enforcement agencies to keep our streets safe and hold accountable those who break the law.”

NYSP Superintendent Joseph A. D’Amico stated: "The conclusion of this case is a direct result of the dedication and effort put forth by State Police investigators in Putnam and Westchester counties, and our partner agencies. Once again, good police work put a suspect behind bars whose crimes hurt not only the businesses he targeted, but also innocent customers. I thank our law enforcement partners for their cooperation and hard work during this lengthy investigation that spanned multiple states."

RENDFLASH, who was previously arrested on Connecticut state charges and detained, was arraigned on an eight-count Information on August 11, 2014, before U.S. Magistrate Judge Lisa Margaret Smith, and pleaded guilty to all counts before Judge Smith today. The Information charges RENDFLASH with the robbery of a branch of First Niagara Bank in Ridgefield, Connecticut, on or about January 24, 2014; the robbery of a branch of Citizen’s Bank in Coventry, Rhode Island, on or about December 26, 2013; the robbery of a branch of People’s United Bank in Brewster, New York, on or about December 23, 2013; the robbery of a branch of People’s United Bank in Holyoke, Massachusetts, on or about December 16, 2013; the robbery of a branch of Chase Bank in Somers, New York, on or about November 19, 2013; the robbery of a branch of TD Bank in Waterbury, Connecticut, on or about November 9, 2013; the robbery of a branch of Naugatuck Savings Bank in Southbury, Connecticut, on or about April 3, 2013; and the robbery of a convenience store in Waterbury, Connecticut, on or about November 16, 2013.

The defendant faces a maximum possible sentence of 20 years in prison for each of the eight counts to which he pleaded guilty. The statutory maximum 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. RENDFLASH is scheduled to be sentenced by U.S. District Court Judge Nelson S. Román in White Plains federal court on November 14, 2014, at 10:30 a.m.

Mr. Bharara praised the outstanding investigative work of the FBI; the New York State Police; the Connecticut State Police; the Ridgefield, Connecticut, Police Department; the Waterbury, Connecticut, Police Department; the Holyoke, Massachusetts, Police Department; and the Coventry, Rhode Island, Police Department.

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today the settlement by consent decree of a federal civil rights lawsuit in Manhattan federal court alleging that Tower 31, a residential apartment building at 9 West 31st Street in Manhattan, is inaccessible to persons with disabilities in violation of the Fair Housing Act (“FHA”). In the settlement, developers TOWER 31, LLC and ATLANTIC 31st, LLC, agree to retrofit Tower 31 to remove obstacles to accessibility, allow inspections of a second building to ensure FHA compliance, create a fund to compensate aggrieved people, and pay a civil penalty of $35,000. The consent decree was approved on August 11 by U.S. District Judge Allison J. Nathan. The United States also sued COSTAS KONDYLIS & PARTNERS, LLP and ALAN L. GOLDSTEIN, the architects that designed Tower 31, and that case is still pending.

Manhattan U.S. Attorney Preet Bharara said: “This settlement will not only make Tower 31 a more accessible housing option, but will also ensure that federal standards of accessibility are met in future buildings. We are pleased that Tower 31’s developers promptly recognized the need to provide accessible housing to all New Yorkers. This is the ninth case of this type brought in this district, and our Office will continue to vigorously enforce the laws in place to provide full access consistent with the law for New Yorkers with disabilities to New York City’s rental housing market.”

The United States’ suit alleges that Tower 31 was designed and constructed in violation of the design and construction provisions of the FHA, which requires that new multi-family housing complexes include certain features accessible to persons with disabilities. According to the Complaint, Tower 31, a 283-rental unit building located at 9 West 31st Street in Manhattan, has multiple inaccessible features, including high thresholds interfering with accessible routes, insufficient space within bathrooms and kitchens for people in wheelchairs, a lack of appropriate signage for people with visual impairments, and lobby features that cannot accommodate people using wheelchairs.

Inaccessible features at Tower 31 were first brought to the Government’s attention through testing performed by the Fair Housing Justice Center. The U.S. Attorney’s Office frequently relies on testers to determine whether property owners are engaging in discrimination on the basis of race, disability, or other protected characteristics, and frequently files lawsuits based on the results of such testing.

The claims against ALAN L. GOLDSTEIN and the architectural firm COSTAS KONDYLIS & PARTNERS, LLP were not resolved by the consent decree and will go forward. The Government seeks a court order enjoining the architects and their successors from designing multi-family housing without the accessibility features required by federal law. The Government also seeks, among other relief, damages for persons harmed by the architects’ unlawful practices, and a civil penalty to vindicate the public interest.

Aggrieved individuals may be entitled to monetary compensation from the fund created through today’s settlement. Aggrieved individuals may include those who were:

• Injured by a lack of accessible features at Tower 31;
• Discouraged from living at Tower 31 because of the lack of accessible features;
• Required to pay to have an apartment at Tower 31 made accessible,
• Prevented from having visitors because of a lack of accessible features at Tower 31; or
• Otherwise injured or discriminated against on the basis of disability as a result of the design or construction of Tower 31.

People who may be entitled to compensation should file a claim by contacting the Civil Rights Complaint Line at (212) 637-0840, using the Civil Rights Complaint Form available on the United States Attorney’s Office’s website http://www.justice.gov/usao/nys/civilrights.html, or sending a written claim to:

U.S. Attorney’s Office, Southern District of New York

86 Chambers Street, 3rd Floor

New York, New York 10007

Attention: Chief, Civil Rights Unit

The case is being handled by the Office’s Civil Rights Unit. Assistant U.S. Attorneys Carina H. Schoenberger, Emily E. Daughtry, Li Yu, and Jessica Jean Hu are in charge of the case.

Tower 31 LLC Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced that JAY SEITZ, a psychologist licensed to practice in the State of New York, was sentenced today in Manhattan federal court in connection with his participation in a multi-year, no-fault automobile insurance fraud scheme. SEITZ was sentenced to two years in prison by U.S. District Judge Sidney H. Stein. SEITZ was convicted in March following a six-day jury trial of one count of conspiracy to commit mail fraud and health care fraud, one count of mail fraud, and one count of health care fraud.

Manhattan U.S. Attorney Preet Bharara said: “Jay Seitz violated the ethical code he swore to uphold and committed fraud in pursuit of personal profit. With the sentence meted out today, his unscrupulous practices and flagrant violation of the law have now been justly punished.”

According to the Indictment filed in Manhattan federal court, other court documents, evidence introduced during trial and statements made at other court proceedings:

Between 2006 and 2008, SEITZ purported to provide psychological services to patients at medical clinics located in the Bronx and Brooklyn, New York. SEITZ signed treatment notes that described the diagnoses he purportedly made and the services he purportedly provided to patients treated at these clinics. These treatment notes, which often did not accurately reflect the psychological symptoms suffered by patients or the treatment they were provided, were used to generate claims that were submitted to no-fault insurance companies for reimbursement. These claims reflected that the psychological services for which reimbursement was sought were provided by SEITZ. In fact, SEITZ did not diagnose or treat any patients on whose behalf claims were submitted to no-fault insurance providers. Although the patients at the clinics with which SEITZ was associated sometimes received psychological screening and treatment, this treatment was provided by individuals who were not licensed psychologists or licensed social workers. In addition, the treatment duration and number of treatment sessions reflected on the claims forms often exceeded the actual duration of services provided or the number of sessions at which treatment was actually provided. No-fault insurance providers reimbursed over $3 million of claims submitted on behalf of two professional corporations associated with SEITZ, for patients purportedly, but not actually, treated by SEITZ.

In addition to the prison term, SEITZ, 62, of New York, New York, was sentenced to one year of supervised release. SEITZ was also ordered to pay restitution in the amount of $2,703,137.89 and forfeit $584,089.92 in assets.

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

The case is being handled by the Office=s Violent and Organized Crime Unit. Assistant U.S. Attorneys Brian Blais and Kristy Greenberg are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, Cheryl Garcia, Special Agent-in-Charge of the United States Department of Labor, Office of Inspector General (“DOL-OIG”) and James T. Hayes, Jr., the Special Agent in Charge of the New York Field Office of U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI); announced today federal charges against RICHARD KASSEL, an immigration lawyer, and three others, in a scheme to obtain immigration visas by submitting fraudulent diplomas and transcripts representing that aliens had earned advanced degrees that they did not obtain from schools they did not attend.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, the defendants, including attorney Richard Kassel, cheated the system by engaging in a scheme to forge fraudulent diplomas and transcripts in order to obtain employment-based visas intended for professionals who had legitimately earned advanced degrees. Work visas must be earned not churned out if the system is to be valid and secure.”

As alleged in an indictment (the “Indictment”) unsealed today in Manhattan federal court, KASSEL created a scheme to obtain employment-based visas for immigration clients in exchange for a fee by pretending that these individuals possessed advanced degrees that they never earned. To perpetrate the scheme, KASSEL and ROSANNA ALMONTE, an assistant working for KASSEL, prepared and submitted fraudulent visa applications supported by fictitious diplomas and fake transcripts. JANA HALODA and VACLAV HALODA, both originally clients of KASSEL, facilitated the fraud by creating the fraudulent diplomas and supporting documents on a home computer and printer. More than a hundred fraudulent visa applications supported by these forged documents were submitted between 2008 and the present.

KASSEL (50), ALMONTE (26), JANA HALODA (32), and VACLAV HALODA (37) are all charged with conspiracy to commit immigration fraud and five substantive counts of visa fraud. If convicted, each defendant faces a maximum of five years of imprisonment on the conspiracy charge and ten years imprisonment on each of the five counts of immigration fraud. The defendants also face a maximum fine of $250,000 or twice the gross gain or loss from the offense for each count. 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 agents with the U.S. Immigration and Customs Enforcement’s Department of Homeland Security Investigations and the United States Department of Labor’s Office of the Inspector General. He added that the investigation is ongoing.

The Office’s General Crimes Unit is overseeing the case. Assistant United States Attorney Andrea M. Griswold 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. Richard Kassel Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that attorney ALBERT BALDEO, a former Queens District Leader, was found guilty today in federal court of tampering with witnesses during the investigation of his alleged campaign fraud by the Federal Bureau of Investigation (“FBI”). BALDEO was convicted of seven counts of obstruction of justice in Manhattan federal court after a two-week trial before U.S. District Judge Paul A. Crotty.

U.S. Attorney Bharara stated: “The fact that Albert Baldeo lost his election does not excuse his corrupt conduct. With today’s verdict of guilty, an impartial federal jury has found that Baldeo lied and instructed others to lie to law enforcement agents investigating the source of his campaign contributions, and threatened and intimidated others in order to conceal the truth. These practices have no place in our politics or our justice system, and there should be no doubt that this Office will prosecute such conduct while it continues to vigorously investigate and prosecute political corruption in New York City and New York State.”

According to the Complaint, Indictment, and Superseding Indictment and evidence presented at trial:

In the fall of 2010, BALDEO, then a Queens District Leader of a political party and attorney, participated in a scheme to defraud New York City that involved the funneling of multiple illegal campaign contributions to his ultimately unsuccessful campaign for City Council. On various occasions, BALDEO, and in at least one instance one of BALDEO’s employees, provided money orders or cash to individuals to contribute to the campaign in their own names, even though BALDEO supplied the funds and these individuals did not contribute any of their own money or reimburse him for these donations.

As part of this scheme, BALDEO gave each such donor, commonly referred to as a “straw donor,” a campaign contribution card in which he or she wrote his or her name, address, employment information, and the amount of money purportedly donated to the BALDEO campaign. BALDEO instructed the straw donors to sign the contribution cards falsely affirming that the contribution was being made from their personal funds and was not being reimbursed in any manner. The New York City Campaign Finance Board (“CFB”) relied upon the information contained in these fraudulent contribution forms, among other things, in order to determine whether to release public matching campaign funds to BALDEO’s 2010 campaign. Moreover, as part of this scheme, BALDEO instructed several of these straw donors to sign affidavits, at least one of which was actually provided to the CFB, that also falsely asserted that these straw donors’ contributions were made using their own funds.

After learning of the FBI’s investigation of this matter, BALDEO obstructed the investigation by repeatedly instructing certain straw donors to provide false information to, or not cooperate with, the FBI agents who were investigating contributions to his campaign.

Moreover, in response to BALDEO learning that one straw donor was going to refuse to lie as instructed by BALDEO: (1) a threatening letter was faxed from BALDEO’s office to the office of this straw donor’s attorney; (2) a co-conspirator of BALDEO’s not charged in this matter made false allegations to the New York City Administration for Children’s Services that this straw donor was abusing his grandchild; and (3) BALDEO and the same co-conspirator made at least one complaint each to the New York City Department of Buildings about properties owned by this straw donor or his wife.

BALDEO, 54, of Richmond Hill, New York, was convicted of one count of conspiracy to obstruct justice, and six counts of obstruction of justice, each relating to a separate instance of witness tampering. Each count carries a maximum sentence of 20 years in prison. BALDEO was acquitted of three fraud-related counts relating to approximately $15,000 in claims for city matching funds from the CFB which were never awarded. 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. BALDEO is scheduled to be sentenced by Judge Crotty on December 16, 2014, at 11:00 a.m.

United States Attorney Bharara praised the investigative work of the FBI and expressed his appreciation for the assistance of the New York State Board of Elections, the New York City Campaign Finance Board, the New York City Administration for Children’s Services, and the New York City Department of Buildings in the investigation and prosecution of this matter.

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

Preet Bharara, the United States Attorney for the Southern District of New York, and Richard J. Condon, Special Commissioner of Investigation for the New York City School District (“SCI”), today announced federal charges against DERVAL LAZZARI, a/k/a “Eduardo,” for allegedly engaging in a scheme that used two companies he and others owned and controlled (the “Acme Companies”) to defraud the New York City Department of Education (the “DOE”) by submitting over $1 million of fraudulent invoices for supposed repair work. LAZZARI, a native of Argentina, was arrested at JFK Airport Thursday morning by criminal investigators from the United States Attorney’s Office after arriving on a flight from Argentina. He was presented in Manhattan federal court before U.S. Magistrate Judge Sarah Netburn Thursday afternoon.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Derval Lazzari cheated the New York City Department of Education and the children it educates by submitting fraudulent invoices for repairs to New York City schools. Particularly now, as New York City expands pre-kindergarten education, those individuals tempted to take for themselves funds intended for children should know that they will be caught and prosecuted.”

SCI Special Commissioner Richard J. Condon said: “The arrest of Lazzari by the Southern District investigators is a significant step towards the recovery of stolen educational funds.”

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

The Acme Companies were contracted by the DOE to repair and service kitchen equipment and electrical outlets at New York City Schools between 2006 and 2013. During this time, LAZZARI and others engaged in a scheme to systematically bill the DOE for: (a) vastly more expensive replacement parts than were actually installed; (b) parts that were never used; and (c) services that were either unnecessary and/or never performed. For example, LAZZARI caused the Acme Companies to repeatedly bill the DOE $572 for a circuit breaker estimated to cost $18. The Acme Companies also billed the DOE at least 8,000 times for expensive “leak tests” for refrigerators that were never performed.

LAZZARI, 54, of Queens, New York, is charged with wire fraud and conspiracy to commit wire fraud. If convicted, he faces a maximum of 20 years in prison on each count. LAZZARI also faces a maximum fine of $250,000 or twice the gross gain or loss from the offense. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the investigative work of the Special Commissioner of Investigation for New York City’s Department of Education. Mr. Bharara also thanked the Criminal Investigators with the United States Attorney’s Office, as well as Customs and Border Protection for their assistance in tracking and apprehending LAZZARI.

The Office’s Public Corruption Unit is overseeing the case. Assistant United States Attorneys Martin S. Bell and Andrea M. Griswold are 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. Derval Lazzari Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, Philip R. Bartlett, Inspector in Charge of the United States Postal Inspection Service (“USPIS”), and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced that CHARLES J. MOORE was arrested this morning and charged with obstructing a regulatory examination and making false statements and false filings. As alleged, MOORE repeatedly caused the broker-dealer firm Crucible Capital Group, Inc. (“Crucible”), which he controlled, to report its net capital above the threshold mandated by Securities and Exchange Commission (“SEC”) regulations, when, in fact, the firm had a net capital deficiency. MOORE is also alleged to have supported these false filings by directing a Crucible employee to falsify invoices received from vendors by removing references to past-due balances, and deliver the falsified invoices to SEC employees conducting a regulatory examination of Crucible. MOORE was arrested this morning at Crucible’s offices at 27 Whitehall Street in Manhattan, and will be presented before U.S. Magistrate Judge Sarah Netburn this afternoon.

Manhattan U.S. Attorney Preet Bharara said: “The SEC is entitled to the truth when it examines the books and records of institutions as it seeks to protect investors and our markets. Broker-dealers, from large institutions to boutique firms, have a duty to make accurate financial reports. As the charges set forth, Charles Moore attempted to blow smoke in the eyes of the SEC, which was also an attempt to deceive his clients, and such charges come with appropriately hefty maximum sentences.”

USPIS Inspector in Charge Philip R. Bartlett said: “The idea that Mr. Moore allegedly concocted a scheme to provide false documentation to a government agency and believe it would go unnoticed is a crime of great arrogance. Postal Inspectors along with their law enforcement partners have no tolerance for anyone who breaks the law.”

FBI Assistant Director-in-Charge George Venizelos said: “As alleged, Moore deliberately tried to hide debts on required SEC reports for almost eight months and then when the SEC was looking into it, he further tried to hide his lies and actions by directing employees to create falsified invoices and use personal email accounts to cover his trail. Lies and cover-ups are not an acceptable way for a chief executive officer to act. The FBI will continue to investigate this type of illegal conduct and prosecute those who violate our laws.”

According to the Complaint unsealed today:

MOORE was at all relevant times the Chief Executive Officer of Crucible, an SEC-registered broker-dealer that maintained no customer securities trading accounts, but held itself out as a “boutique” investment bank helping small businesses to raise capital and financing. Crucible used its status as an SEC-registered broker-dealer to solicit business.

MOORE was also at all relevant times the CEO of an affiliated company, Angelic Holdings LLC (“Angelic”), which was not registered with the SEC and conducted “due diligence” for Crucible-related business. Crucible and Angelic shared employees and office space. They also shared expenses, under an agreement that had Crucible paying Angelic a monthly fee and Angelic paying vendors of certain specified services on behalf of both Angelic and Crucible.

As an SEC-registered broker-dealer that maintained no customer accounts, Crucible was required to maintain net capital of at least $5,000 at all times. It was also required to file monthly “FOCUS” reports with the SEC reporting its net capital. Finally, Crucible was required to preserve and archive its business-related emails for review by the SEC upon request.

From in or about February 2013 through in or about September 2013, MOORE caused Crucible to file false FOCUS reports that failed to account for certain large debts. These debts, although nominally owed by Angelic, were required by SEC regulation and guidance to have been incorporated into Crucible’s net capital computation. Had they been so incorporated, Crucible would have been required to report a net capital deficiency throughout much of 2013.

In the fall of 2013, the SEC opened a regulatory examination of Crucible to explore, among other things, the accuracy of Crucible’s net capital reporting. As part of that examination, the SEC requested all 2013 invoices to Angelic for Crucible-related expenses.

MOORE, responding to this request, caused a Crucible employee to create falsified invoices to deliver to the SEC. Specifically, he directed the employee to take original invoices that had been sent to Crucible personnel, and create versions of those invoices that omitted references to large, unpaid debts appearing on the originals. MOORE then caused the employee to hand the falsified invoices to the SEC.

Finally, throughout 2013, MOORE tried to hide the truth about Crucible’s net capital and its outstanding debts by directing – in flagrant breach of regulatory requirements and his own firm’s compliance policy – that all correspondence with professionals involved in Crucible’s and Angelic’s finances take place not over Crucible’s business email accounts but instead over MOORE’s own and his employees’ personal email accounts. Many of the original invoices that MOORE directed his employee to falsify before furnishing to the SEC in the fall of 2013 had, at MOORE’s instruction, been sent by the vendor to a Gmail account belonging to a Crucible employee.

MOORE, 62, is charged with obstructing a regulatory examination, making false statements, and falsifying and failing to keep required books and records of a broker-dealer. The obstruction and falsifying records counts each carry a maximum sentence of 20 years in prison. The false statement charge carries a maximum sentence of five years in prison.

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

This case 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 Sarah E. McCallum and Andrew B. Bauer are in charge of the prosecution.

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

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

U.S. v. Charles Moore Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced that prominent wine dealer RUDY KURNIAWAN was sentenced today to 10 years in prison for carrying out an elaborate scheme in which he manufactured and sold counterfeit bottles of purportedly rare and expensive wine for millions of dollars, and for fraudulently obtaining a $3 million loan from a financing company. KURNIAWAN was found guilty in December 2013 following a one-week jury trial before U.S. District Judge Richard Berman, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “Rudy Kurniawan planned and executed an intricate counterfeit wine scheme, mixing cheaper, more common wines, bottling the mixture into old bottles with fake labels, and then fraudulently selling those bottles for millions of dollars. Now, Kurniawan will trade his life of luxury for time behind bars.”

According to the evidence presented at trial, documents filed in Manhattan federal court, and statements made at today’s sentencing proceeding:

The Counterfeit Wine Scheme

KURNIAWAN had been a collector of fine and rare wines, and rose to become one of the most prominent and prolific dealers in the United States of purportedly rare and expensive wine. From 2004 through 2012, he engaged in a systematic scheme to defraud wine collectors and others by selling and attempting to sell numerous counterfeit bottles of purportedly rare and expensive wine. KURNIAWAN manufactured counterfeit bottles of rare and vintage wine at his home in Arcadia, California, operating what was, in effect, a counterfeit wine laboratory.

KURNIAWAN mixed and blended lower-priced wines so that they would mimic the taste and character of rare and far more expensive wines. He then poured his creations into empty bottles of rare and expensive wines that he obtained from various sources and created a finished product by sealing the bottles with corks and outfitting the bottles with counterfeit wine labels he created. KURNIAWAN then sold and attempted to sell these counterfeit bottles of wine at auctions and in direct sales to wealthy wine collectors. KURNIAWAN earned millions of dollars through the sale of these counterfeit bottles of wine.

The Scheme to Defraud a Lender

KURNIAWAN also devised and carried out a scheme to fraudulently obtain a $3 million loan from a financing company located in New York City that specialized in extending loans that are secured by valuable collectibles, such as art and wine. KURNIAWAN obtained the loan by providing false information to, and concealing material information from, the financing company, including falsely omitting approximately $7.4 million in outstanding loans, falsely representing his annual expenses, and falsely representing that he was a permanent resident of the United States when he had no legal immigration status in the United States and had, in fact, been ordered by an immigration court to leave the country years earlier.

In addition to the prison sentence, KURNIAWAN, 37, of Arcadia, California, was ordered to forfeit $20 million and to pay restitution to his victims of $28,405,502.5.

Mr. Bharara praised the outstanding work of the FBI’s Art Crime Team and its New York and Los Angeles field offices.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Stanley J. Okula, Jr. is in charge of the prosecution. Assistant U.S. Attorney Andrew Adams is handling the forfeiture aspects of the prosecution.

U.S. v. Rudy Kurniawan indictment

Preet Bharara, the United States Attorney for the Southern District of New York, and Christy Romero, Special Inspector General of the Troubled Asset Relief Program (“SIGTARP”), announced today the unsealing of charges against PED ABGHARI, a/k/a “Ted Allen,” DIONYSIUS FIUMANO, a/k/a “D,” and JUSTIN ROMANO for engaging in a mortgage modification scheme that defrauded over 8,000 homeowners in all 50 states out of over $18.5 million, in what is believed to be the largest mortgage modification scheme ever charged. Each defendant is charged with wire fraud and conspiracy to commit wire fraud. ABGHARI and FIUMANO were arrested this morning in Irvine, California, and are expected to be presented later today in federal court in Los Angeles before United States Magistrate Judge Paul L. Abrams. ROMANO was arrested this morning in Blue Point, New York and is expected to be presented later today in Manhattan federal court before United States Magistrate Judge Sarah Netburn.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, these defendants preyed on thousands of homeowners struggling to make their mortgage payments and meet their financial obligations. This Office has zero tolerance for those who target and exploit financially vulnerable people, and we will continue to work to hold these and like-minded defendants accountable.”

The Special Inspector General for TARP, Christy Romero, said “Earlier today, SIGTARP special agents arrested Abghari, Fiumano, and Romano after our investigation with the U.S. Attorney's Office uncovered an alleged massive, nationwide mortgage modification fraud scheme that purportedly targeted homeowners behind on their mortgage payments who simply wanted help from TARP's housing program, HAMP. The defendants are alleged to have stolen more than $18.5 million from more than 8,000 struggling homeowners by making empty promises that the homeowners would be preapproved for lower mortgage payments through HAMP. This was all a purported ruse used to trick vulnerable homeowners into paying the defendants thousands of dollars in up-front fees for which zero meaningful work was ever actually done. SIGTARP has aggressively pursued these allegations, working closely with Preet Bharara's office, to protect homeowners in New York and across our nation from becoming victims of this crime and to bring perpetrators to justice.”

According to the allegations contained in the Indictment:

The Home Affordable Modification Program

As a result of the financial crisis and collapse of the housing bubble in 2008, Congress enacted the Home Affordable Modification Program (“HAMP”), which was to be funded through the Troubled Asset Relief Program (“TARP”). HAMP permits qualified homeowners to obtain mortgage relief. Specifically, HAMP seeks to prevent foreclosure by modifying troubled loans to achieve monthly payments the homeowner can afford.

Pursuant to HAMP, any homeowner may apply to his or her mortgage provider by completing a short form and submitting it, along with supporting paperwork, to the homeowner’s mortgage provider. HAMP further sets guidelines for lenders to follow in determining eligibility, such as guidelines based on the homeowner’s income and the principal balance remaining on the mortgage. Pursuant to HAMP, only a homeowner’s lender may determine the homeowner’s eligibility for a modification and, if appropriate, the modified rate and monthly payment for which the homeowner is eligible.

HAMP applications are readily available online as well as in many local banks. Submitting an application is, by law, free of charge to the homeowner. Virtually all mortgage providers are required to participate in the HAMP program and accept HAMP applications.

The Defendants’ Mortgage Modification Scheme

PED ABGHARI was a co-president and owner of an Irvine, California company that offered purported mortgage modification services (the “Telemarketing Firm”). DIONYSIUS FIUMANO was a senior manager of the Telemarketing Firm, and was directly responsible for training and overseeing the Firm’s telemarketers and salespeople (the “Sales Staff”). JUSTIN ROMANO held himself out as the president of two purported law firms (the “Purported Law Firms”), based in in Holbrook, New York, and Sayville, New York, respectively, which offered purported mortgage modification services in conjunction with the Telemarketing Firm.

From at least January 2011 through May 2014, through the Telemarketing Firm and the Purported Law Firms, ABGHARI, FIUMANO, and ROMANO perpetrated a scheme to defraud homeowners in dire financial straits who were seeking relief through HAMP and other mortgage relief programs. Through a series of false and fraudulent representations, the defendants duped thousands of homeowners into paying thousands of dollars each in up-front fees in exchange for little or no service from the defendants or their companies. In total, through their scheme, the defendants obtained over $18.5 million from more than 8,000 victim-homeowners throughout the United States.

As alleged, to perpetrate the scheme, through the Telemarketing Firm, ABGHARI and FIUMANO purchased thousands of “leads,” consisting of the name, address, and other contact information of homeowners who had fallen behind in making mortgage payments on their home. Thereafter, ABGHARI and FIUMANO caused the Telemarketing Firm to send, by e-mail, false and fraudulent solicitation letters to the homeowners they identified through the “leads,” misleading these homeowners into believing that their mortgages were already under review for a HAMP modification and that new, modified rates had already been contemplated and approved by the homeowners’ lenders.

At the direction of ABGHARI, FIUMANO, and ROMANO, the Sales Staff called homeowners and/or answered telephone calls from homeowners who received the Telemarketing Firm’s fraudulent solicitations. During these calls, in an effort to convince the homeowners to pay up-front fees, the defendants, through the Sales Staff, regularly caused various false and fraudulent representations to be made to homeowners, including that (a) the homeowners were retaining a “law firm” and an “attorney” who would complete the HAMP application and negotiate aggressively on the homeowners’ behalf with banks to modify the terms of the homeowners’ mortgages; (b) the defendants would “pre-approve” the homeowners for a guaranteed modification through HAMP; (c) the defendants employed underwriters who would calculate and guarantee the homeowners a new, modified rate and monthly mortgage payment; and (d) the defendants’ mortgage modification services were free, and the up-front fees paid by the homeowners would be paid directly to the homeowners’ lenders.

In truth and in fact, and as ABGHARI, FIUMANO, and ROMANO well knew, all of these representations were false and fraudulent. As the defendants knew, neither they nor any of their employees could pre-approve the homeowners or guarantee any of the homeowners a mortgage modification or new monthly payment. Furthermore, not only were the defendants’ “services” not free, the defendants kept all of the fees paid by the homeowners, and paid none of it to the homeowners’ lenders. In addition, as the defendants knew, neither the Telemarketing Firm nor the Purported Law Firms provided the homeowners with an attorney or any sort of legal assistance, and they frequently did little more than complete the Government-sponsored HAMP application which, as noted above, the homeowners could have obtained and completed on their own, free of charge. In some cases, as the volume of homeowners paying thousands of dollars to “retain” the defendants’ services swelled, the defendants and their employees did nothing at all in exchange for the money they received from homeowners.

As customer complaints about the Telemarketing Firm and Purported Law Firms mounted, ABGHARI, FIUMANO, and ROMANO sought to cover up their fraudulent scheme by changing the names of the Telemarketing Firm and Purported Law Firms. For example, as ABGHARI emailed employees of one of the Purported Law Firms, “[t]he main reason we’re being slammed . . . is because we waited too long to change names. I normally change names every 9 months to keep things cool and have all agencies off our backs. Within the next month or so you’ll see a major slow down on complaints because we no longer do business under [the name of the Purported Law Firm] or [the name of the Telemarketing Firm].”

ABGHARI, 37, of Irvine, California, FIUMANO, 43, of Irvine, California, and ROMANO, 40, of Blue Point, New York are each charged with one count of conspiring to commit wire fraud, and one count of wire fraud, each of which carries a maximum term of 20 years in prison.

Mr. Bharara praised the investigative work of the Office of the Special Inspector General for the Troubled Asset Relief Program.

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Edward B. Diskant and Joshua A. Naftalis are in charge of the prosecution.

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

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

U.S. v. Ped Abghari et al. Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that MARVIN JEMAL, the former Chief Executive Officer of a Manhattan-based company that designed, imported and distributed luggage, business bags, backpacks, and accessories (the “Company”), pled guilty today in connection with a scheme to fraudulently obtain millions of dollars in loans from a bank by making false statements and submitting false and phony documents to the bank. JEMAL pled guilty before U.S. District Judge Valerie E. Caproni.

Manhattan U.S. Attorney Preet Bharara said: “Marvin Jemal orchestrated a scheme to line his own pockets by duping a bank into lending his luggage company more than $6 million based on lies and phony documents, and then diverting the money for his own personal uses, including the purchase of homes and luxury cars. Now Jemal stands convicted of a felony and awaits sentencing.”

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

From 2007 through October 2009, MARVIN JEMAL and Mark Bernstein, the former CEO and CFO, respectively, of the Company, engaged in a scheme to fraudulently induce a commercial bank based in New York (the “Bank”) to lend millions of dollars to the Company. Among other things, JEMAL and Bernstein knowingly made false representations to the Bank, concealed material facts from the Bank, and submitted false and fraudulent documents to the Bank, including fabricated invoices and shipping documents. In total, the Company obtained approximately $6.9 million in loans from the Bank and defaulted on approximately $6 million of those loans. Although the loans were purportedly for the benefit of the Company’s business, JEMAL diverted approximately $3.5 million of the loan proceeds to personal bank accounts and used the money to pay for various personal expenses, including mortgage payments on properties he owned, credit card bills, and payments on his Porsche.

The Factoring Agreement

The Company obtained the loans from the Bank as part of a secured credit facility, pursuant to a factoring agreement between the Company and the Bank. Under the terms of the factoring agreement, the Company would assign and sell the Company’s interest in its accounts receivable to the Bank and, in exchange, the Company could borrow from the Bank up to 85% of the value of those receivables. In addition, the Company could borrow up to 50% of the value of its inventory. In order to draw down on its secured credit facility, however, the Company was required to provide the Bank with, among other things, an accurate listing of all accounts receivable, as well as supporting documentation, including copies of (i) relevant underlying invoices and (ii) shipping documents or other proof of delivery.

The Scheme to Fraudulently Obtain Loans

To fraudulently obtain loans from the Bank under the factoring agreement, JEMAL and Bernstein made false statements and submitted false and fraudulent documents to the Bank, including the following:

• JEMAL and Bernstein sent duplicate and/or fabricated invoices to the Bank that purported to reflect the sale of certain products by the Company and, thus, an outstanding receivable for the Company. In truth, however, the sales reflected on those invoices were false, as those sales either had never occurred or had already been invoiced separately.
• JEMAL and Bernstein provided fraudulent shipping documents to the Bank to substantiate the purported sales of products by reflecting that those products had been shipped to customers. In truth, however, those shipping documents were false and fraudulent, as the products had not, in fact, been shipped to the customers as reflected in the shipping documents.
• JEMAL and Bernstein concealed material facts from the Bank, including credits that the Company had provided to certain of its customers (which thereby reduced the total accounts receivable associated with those customers) and instances in which the Company had directly collected and deposited payments from its customers on the same invoices the Company assigned to the Bank.
• JEMAL and Bernstein provided inaccurate monthly inventory spreadsheets to the Bank which overstated the Company’s existing inventory.

Further, in order to conceal the scheme, JEMAL made various oral misrepresentations to certain representatives of the Bank when those representatives confronted him about irregularities and other issues that the Bank had discovered with respect to the Company’s assignment of its accounts receivable.

JEMAL, 60, of Brooklyn, New York, pled guilty to one count of bank fraud, which carries a maximum sentence of 30 years in prison. Sentencing is scheduled for November 5, 2014, before Judge Caproni.

Bernstein, 64, of Belle Harbor, New York, pled guilty in October 2013 before U.S. District Judge Robert P. Patterson to one count of conspiracy to commit bank fraud, one count of bank fraud, and one count of making a false statement to influence bank action, each of which carries a maximum sentence of 30 years in prison. He also pled guilty to one count of wire fraud and one count of money laundering, each of which carries a maximum sentence of 20 years in prison. He is scheduled to be sentenced on November 13, 2014.

The maximum potential sentence in this case is prescribed by Congress and is 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 FBI.

The case is being prosecuted 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. Marvin Jamal Plea Agreement

Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), James J. Hunt, the Acting Special Agent in Charge of the New York Field Division of the Drug Enforcement Agency, 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”), Thomas Zugibe, the District Attorney of Rockland County, Joseph A. D'Amico, Superintendent of the New York State Police, and William J. Bratton, the Commissioner of the Police Department for the City of New York (“NYPD”) announced today the unsealing of an Indictment charging DANIEL PAGANO, an alleged Captain of the Genovese Organized Crime Family of La Cosa Nostra (the “Genovese Crime Family”), and MICHAEL PALAZZOLO, an associate of the Genovese Crime Family, with participating in a racketeering conspiracy by, among other crimes, committing extortion and loan sharking and operating an illegal gambling business. PAGANO was taken into custody today, and PALAZZOLO surrendered today. Both defendants were presented and arraigned in Manhattan federal court this afternoon before United States Magistrate Judge Sarah Netburn. U.S. District Judge Ronnie Abrams has been assigned to the case.

Manhattan U.S. Attorney Preet Bharara said: “Just as they have for decades, members of La Cosa Nostra – as alleged in this Indictment – continue to use muscle and intimidation to threaten and extort New Yorkers. Today’s arrests of a Captain and associate of the Genovese Crime Family should serve as a reminder to all members and associates of La Cosa Nostra that you do not operate with impunity. You may bully your way into financial gain but ultimately you will pay the price. I would like to thank all of our law enforcement partners who worked so hard on this case and in particular Rockland County District Attorney Thomas Zugibe, without whose support today’s arrests would not have been possible.”

FBI Assistant Director-in-Charge George Venizelos said: “Today’s arrests mark 22 total arrests in this mob scheme. The charges, which we’ve seen time and time again, include racketeering, extortion, loan sharking, and operating illegal gambling businesses. The FBI will continue to work with our local, state, and federal partners to root out any and all organized crime activity—wherever we may find it.”

DEA Acting Special Agent in Charge James J. Hunt said: “Today’s collaborative law enforcement effort by DEA, U.S. Attorney Office, Southern District of New York, FBI, ICE HIS, Rockland County District Attorney Office, New York State Police, NYPD Police and our other state and local counterparts is a testament to the fact that we will use all resources at our disposal to target any and all organized crime groups.”

ICE HSI Special Agent-in-Charge James T. Hayes said: “The arrests today illustrate the Department of Homeland Security's clear commitment to identify and fully prosecute organized crime networks operating in our cities. HSI will continue to work jointly with our law enforcement partners to dismantle these organizations from the top down.”

Rockland County District Attorney Thomas Zugibe said: "While this case was initiated in Rockland County though our Regional Investigative Resource Center, Organized Crime Unit it quickly became apparent that the activity of these individuals impacted the metropolitan area. This is another example of how inter agency cooperation is instrumental to success and an analysis of the facts made it clear that these charges are best suited for Federal prosecution. With the arrests of Mr. Pagano and Mr. Palazzolo, both long time county residents with a long, documented history of organized criminal activity, law enforcement has dealt a significant blow to the Genovese Crime Family."

New York State Police Superintendent Joseph A. D'Amico said: "The hard work in this long term investigation has paid off with the indictments of Daniel Pagano and Michael Palazzolo. With Pagano, a known street boss, and his associate Palazzolo behind bars, this organization has suffered a huge blow to their operation. The indictments announced today and our partnerships should send a message to others involved in these types of crimes, this illegal activity and threats to others will not be tolerated by law enforcement. We thank our partners in this investigation, and look forward to continuing the fight against organized crime with them."

NYPD Police Commissioner William J. Bratton said: “Organized crime has no place in our communities. Thanks to the collaborative efforts of the investigators and prosecutors involved in this case, this illegal enterprise has been shut down and these criminals will be brought to justice.”

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

The Genovese Crime Family is part of a nationwide criminal organization known by various names, including the “Mafia” and “La Cosa Nostra” (“LCN”), which operates through entities known as “Families.” The Genovese Crime Family operates through groups of individuals known as “crews” and “regimes,” most of which are based in New York City. Each “crew” has as its leader a person known as a “Caporegime,” “Capo,” “Captain,” or “Skipper,” who is responsible for supervising the criminal activities of his crew and providing “Soldiers” and associates with support and protection. In return, the Capo typically receives a share of the illegal earnings of each of his crew’s Soldiers and associates, which was sometimes referred to as Atribute.@ DANIEL PAGANO is a Caporegime or Captain in the Genovese Crime Family.

Each crew consists of “made” members, sometimes known as “Soldiers,” “wiseguys,” “friends of ours,” and “good fellows.” Soldiers are aided in their criminal endeavors by other trusted individuals, known as “associates,” who sometimes are referred to as “connected” or identified as “with” a Soldier or other member of the Family. Associates participate in the various activities of the crew and its members. In order for an associate to become a made member of the Family, the associate must first be of Italian descent and typically needed to demonstrate the ability to generate income for the Family and/or the willingness to commit acts of violence. MICHAEL PALAZZOLO is an associate of the Genovese Crime Family.

From in or about 2009 through in or about February 2012, PAGANO and PALAZZOLO, along with other members and associates of the Genovese Crime Family, committed a wide array of crimes including extortion, loan sharking, and operating an illegal gambling business. In or about 2012, PALAZZOLO and other co-conspirators, not named as defendants in the Indictment, used threats of force to attempt to collect payment from an individual who they believed robbed one of those co-conspirators of marijuana.

PAGANO, 61, of Rockland County, is charged with participating in a racketeering conspiracy. The charge carries a maximum term of 20 years in prison.

PALAZZOLO 49, of Rockland County, is charged with one count of participating in a racketeering conspiracy and one count of participating in an extortion conspiracy. These charges carry a maximum term of imprisonment of 40 years in prison.

Mr. Bharara thanked the FBI, the Rockland County District Attorney’s Office, the DEA, the U.S. Immigration and Customs Enforcement’s Department of Homeland Security Investigations, the New York City Police Department, and the New York State Police.

This investigation was a result of the Department of Justice's Organized Crime and Drug Enforcement Task Force Program, and it combined the resources and expertise of its member federal agencies in cooperation with local law enforcement. The investigation was conducted by a joint task force of the NYPD and the FBI.

The prosecution is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Jennifer Burns, Rahul Mukhi, Daniel Goldman, and Emil Bove are in charge of the prosecution.

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

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

U.S. v. Daniel Pagano & Michael Palazzolo Indictment

Eric Holder, the United States Attorney General, and Preet Bharara, the United States Attorney for the Southern District of New York, announced today the completion of a multi-year civil investigation pursuant to the Civil Rights of Institutionalized Persons Act (“CRIPA”) into the conditions of confinement of adolescent male inmates on Rikers Island. The investigation, which focused on use of force by staff, inmate-on-inmate violence, and use of punitive segregation during the period 2011-2013, concluded that there is a pattern and practice of conduct at Rikers Island that violates the rights of adolescents protected by the Eighth Amendment and the Due Process Clause of the Fourteenth Amendment of the United States Constitution. The investigation found that adolescent inmates are not adequately protected from physical harm due to the rampant use of unnecessary and excessive force by New York City Department of Correction (“DOC”) staff and violence inflicted by other inmates. In addition, the investigation found that DOC relies too heavily on punitive segregation as a disciplinary measure, placing adolescent inmates in what amounts to solitary confinement at an alarming rate and for excessive periods of time. Many of the adolescent inmates are particularly vulnerable because they suffer from mental illness.

Attorney General Eric Holder said: “The extremely high rates of violence and excessive use of solitary confinement for adolescent males uncovered by this investigation are inappropriate and unacceptable. The Department of Justice is dedicated to ensuring the effectiveness, safety and integrity of our criminal justice systems. Going forward, we will work with the City of New York to make good on our commitment to reform practices that are unfair and unjust, and to ensure that - in all circumstances, and particularly when it comes to our young people - incarceration is used to deter, punish, and ultimately rehabilitate, not merely to warehouse and forget.”

Manhattan U.S. Attorney Preet Bharara said: “As our investigation has shown, for adolescents, Rikers Island is a broken institution. It is a place where brute force is the first impulse rather than the last resort; where verbal insults are repaid with physical injuries; where beatings are routine while accountability is rare; and where a culture of violence endures even while a code of silence prevails. The adolescents in Rikers are walled off from the public, but they are not walled off from the Constitution. Indeed most of these young men are pre-trial detainees who are innocent until proven guilty, but whether they are pre-trial or convicted, they are entitled to be detained safely and in accordance with their Constitutional rights – not consigned to a corrections crucible that seems more inspired by Lord of the Flies than any legitimate philosophy of humane detention. These young men, automatically charged as adults despite their age under New York law, may be on an island and out of sight, but they can no longer remain out of mind. Attention must be paid immediately to their rights, their safety and their mental well-being, and in the wake of this report we will make sure that happens one way or another.”

In its report to the City of New York, made public today, the U.S. Attorney’s Office notes that “a deep-seated culture of violence is pervasive throughout the adolescent facilities at Rikers, and DOC staff routinely utilize force not as a last resort, but instead as a means to control the adolescent population and punish disorderly or disrespectful behavior.”

The following statistics are illustrative:

• In FY 2012, there were 517 reported staff use of force incidents in an average daily adolescent population of 791 in the Robert N. Davoren Center and Eric M. Taylor Center, the two facilities that house the most adolescents. These incidents resulted in 1,059 injuries.
• In FY 2013, there were 565 reported staff use of force incidents in an average daily population at these same two facilities of 682, resulting in 1,057 injuries.
• In FY 2013, there were 845 reported inmate-on-inmate fights involving adolescents in the RNDC and EMTC. This marked an increase from the 795 reported fights in FY 2012.
• During the period April 2012 through April 2013, adolescents sustained a total of 754 visible injuries, according to DOHMH data.
• Adolescents in RNDC and EMTC sustained a total of 96 suspected fractures from September 2011 through August 2012, according to DOHMH data.
• In FY 2013, adolescents were taken to get emergency medical services 459 times.
• In FY 2013, there were 1,118 emergency alarms in the RNDC and EMTC adolescent housing areas, or on average more than three alarms each day.

The report makes the following specific factual determinations:

• Force is used against adolescents at an alarming rate and violent inmate-on-inmate fights and assaults are commonplace, resulting in a striking number of serious injuries, including broken bones and lacerations requiring stitches;
• Correction officers resort to “headshots,” meaning blows to an inmate’s head or facial area, too frequently;
• Force is used as punishment or retribution;
• Force is used in response to inmates’ verbal altercations with officers;
• Use of force by specialized response teams within the jails is particularly brutal;
• Correction officers attempt to justify use of force by yelling “stop resisting” even when the adolescent has been completely subdued or was never resisting in the first place; and
• Use of force is particularly common in areas without video surveillance cameras.

The report further identifies the following systemic deficiencies that are largely responsible for the excessive and unnecessary use of force by DOC staff. Many of these systemic deficiencies also lead to the high levels of inmate-on-inmate violence. These deficiencies include:

• Inadequate reporting by staff of the use of force, including false reporting;
• Inadequate investigations into the use of force;
• Inadequate staff discipline for inappropriate use of force;
• An inadequate classification system for adolescent inmates;
• An inadequate inmate grievance system;
• Inadequate supervision of inmates by staff;
• Inadequate training both on use of force and on managing adolescents; and
• General failures by management to adequately address the extraordinarily high levels of violence perpetrated against and among the adolescent population.

Finally, DOC’s use of prolonged punitive segregation for adolescent inmates is excessive and inappropriate. Adolescent inmates, many of whom have mental illnesses, are routinely placed in what amounts to solitary confinement for weeks and sometimes months at a time. On any given day in 2013, 15-25% of the adolescent population were in punitive segregation, often for infractions involving non-violent conduct. According to census data for December 16, 2013, well over half the adolescents in punitive segregation on that day were serving sentences for rule infractions of 60 days or more.

The report also sets forth the following 10 categories of remedial measures necessary to address the Constitutional violations identified:

1. House adolescent inmates separately in a DOC jail not physically located on Rikers Island;

2. Increase the number of cameras in adolescent areas;

3. Revise use of force policy to clarify prohibited conduct;

4. Ensure that staff submit complete, accurate, and prompt use of force reports, and institute a zero-tolerance policy for failing to report;

5. Ensure that use of force incidents are investigated thoroughly and promptly, and hold staff accountable for biased or incomplete reports and investigations;

6. Ensure that inmates are adequately supervised, intervene to de-escalate fights, and transfer vulnerable or otherwise at risk inmates to alternative housing units;

7. Improve officer training programs on use of force, conflict resolution, reporting use of force, and handling of the adolescent population;

8. Ensure that staff are held accountable and disciplined for the use of excessive and unnecessary force;

9. Develop alternative disciplinary strategies that do not involve lengthy isolation, and prohibit the placement of adolescents with mental health disorders in solitary confinement;

10. Develop and implement a strategic plan to create an institutional culture that does not tolerate violence and holds staff accountable for excessive or unnecessary use of force.

This Office looks forward to engaging in discussions with the City to make system-wide changes that will safeguard the Constitutional rights of adolescents, and prevent them from continuing to suffer unnecessary harm while in City custody.

Mr. Bharara thanked the Board of Correction for the assistance it provided in connection with the Office’s investigation.

This case is being handled by the Office’s Civil Rights Unit. Assistant U.S. Attorneys Emily E. Daughtry and Jeffrey K. Powell are in charge of the case.

SDNY Rikers Report

Preet Bharara, the United States Attorney for the Southern District of New York announced that FRANK PERKINS HIXON, JR., a former Senior Managing Director of Evercore Group, LLC, a subsidiary of Evercore Partners Inc. (“Evercore”), was sentenced today to 30 months’ imprisonment for insider trading and false statement offenses. In April 2014, HIXON pled guilty before U.S. District Judge Ronnie Abrams to using inside information to trade and cause others to trade in the securities of Evercore, Westway Group Inc. (“Westway”), and Titanium Metals Corporation (“Titanium”), and to making false statements to FBI agents during the course of the investigation into his insider trading. Judge Abrams also imposed today’s sentence.

According to the Information and other documents filed in Manhattan federal court, as well as statements made during court proceedings:

Between April 2010 and January 2014, HIXON was a Senior Managing Director with the Mining and Metals Group of Evercore. HIXON used material non-public information that he acquired as part of his employment with Evercore to trade and cause trades in brokerage accounts belonging to the mother of his young child (“Individual A”), who lived in Austin, Texas, and to HIXON’s father (“Individual B”), who lived in Johns Creek, Georgia.

HIXON’s Insider Trading

In 2011, HIXON led an Evercore team in advising Westway about a non-public offer from another company (“Company A”) to purchase some of its business components and, more generally, in connection with potential transactions concerning Westway’s other business components. Company A’s offer was made in early September 2011, and a Special Committee was formed around that time to consider the offer and other strategic alternatives. Those developments were not announced publicly until December 15, 2011. Meanwhile, between October 21 and December 15, 2011, HIXON purchased, and caused to be purchased, 229,000 shares of Westway for Individual A’s brokerage account by logging into Individual A’s account from various locations, including Evercore’s Manhattan office. As the negotiations for the contemplated Westway transactions became protracted, HIXON sold and caused to be sold about 140,000 of the Westway shares that had accumulated in Individual A’s account, for a profit of approximately $260,000. Later, in 2012, HIXON made additional purchases of Westway shares for Individual A’s account, in advance of a tender offer for Westway’s outstanding equity securities that was announced on December 20, 2012. Profits reaped from sales of those shares amounted to approximately $104,000.

In October 2012, HIXON was invited, along with other Evercore personnel, to meet with a Special Committee of Titanium’s board of directors to discuss a potential engagement in connection with an unspecified $3 billion transaction. At the October 23, 2012, pitch meeting, which HIXON attended by teleconference from London, England, HIXON and the rest of the Evercore team learned that the transaction being considered was an acquisition of Titanium by Precision Castparts Corp. (“PCP”), a manufacturer of complex metal components and products. HIXON also learned the approximate offer price, and that the transaction was likely to close before year’s end.

Within approximately one hour of the meeting with the Special Committee, HIXON began buying 20,000 Titanium shares for Individual A’s account from a mobile device he was using in London, England. Eight days later, after HIXON had returned from England, 20,000 more shares of Titanium were purchased for Individual A’s account, mostly through logins from Evercore’s Manhattan office. That same day, HIXON caused Individual B to buy 15,000 shares of Titanium. After market close on November 9, 2012, Titanium announced PCP’s tender offer for its shares. The next trading day, November 12, 2012, all 40,000 of Individual A’s shares of Titanium were sold for a profit of approximately $180,000. Later that month, Individual B’s Titanium shares were sold for a profit of approximately $70,000.

On January 14, 2013, HIXON attended an Evercore partnership meeting at which he learned that Evercore would be announcing record financial results for the fourth quarter of 2012. During the two days preceding the bank’s January 30, 2013, announcement, HIXON, logging into Individual A’s account from Evercore’s Manhattan offices and from his home in Manhattan, bought 27,000 shares of Evercore for the account. At the same time, HIXON caused Individual B to purchase 10,000 shares of Evercore for Individual B’s account. After Evercore’s earnings release, Individual A and Individual B sold all of their Evercore shares, and reaped a combined profit of approximately $96,000.

Lies to Evercore and the FBI

In February 2013, Evercore asked HIXON to respond to a request from the Financial Industry Regulatory Authority (“FINRA”) and to identify any known names from a list of people and entities that had traded in Titanium stock prior to PCP’s tender offer. Although Individual A and B were both on the FINRA list, HIXON responded by email: “No known relationships.”

When, following further inquiry from FINRA, Evercore confronted HIXON about his failure to identify Individual A—who, as noted above, is the mother of his young child—HIXON claimed not to know Individual A by her legal name, which was what appeared on the FINRA list, and to know her only by a different name that she uses. Documents produced by Evercore, including text messages and emails between HIXON and Individual A, make clear that HIXON had, in fact, long been aware of Individual A’s legal name. And bank records show that he wrote numerous large checks to Individual A, in her legal name, from 2009 to 2010.

Confronted by Evercore with his failure to identify his own father’s name on the FINRA list for Titanium, Hixon asserted that the associated location given for Individual B on the FINRA list, Duluth, Georgia, was inaccurate because Individual B lived in Johns Creek, Georgia. Johns Creek shares a zip code with portions of Duluth, and was only incorporated as its own city many years after Individual B had begun living there. The city listed on the brokerage account statements for Individual B’s account was Duluth, not Johns Creek.

Following Evercore’s inquiries into his conduct, HIXON agreed to swear out a declaration memorializing certain statements he had made upon having been confronted with matters related to Titanium. Among the statements to which Hixon swore was this one: “I did not share any information about Titanium Metals Corporation (‘TIMET’) with anyone outside of Evercore, and was fully aware of my obligations to keep any information I learned about any transaction involving TIMET confidential . . . .”

After swearing out this statement, HIXON called Individual B to alert him to expect an inquiry from an Evercore representative about his Titanium trades. HIXON explained to Individual B that he had provided “privileged information” to Individual B about Titanium, but that he had denied as much in a signed statement to Evercore. HIXON then coached Individual B to lie to Evercore by saying, among other things, that Individual B had researched Titanium and bought the stock on his own. Individual B followed HIXON’s instructions and lied to Evercore’s representative.

On January 27, 2014, FBI agents interviewed Individual A at her home in Austin. She told them, in sum and substance, that her own trading in Titanium and in Westway had been prompted by research she had done, rather than by HIXON. She further claimed that HIXON had never had access to, or traded in, her brokerage account.

On January 28, 2014, HIXON met with two FBI agents and told them, among other things, that he did not have access to and had never traded in Individual A’s brokerage account. HIXON also claimed that he never recommended particular stocks to either Individual A or Individual B, because he did not want to be held responsible for the performance of the stocks he might pick. Regarding Titanium, HIXON said he had been “shocked” by the news that it would be acquired by PCP, and had been surprised at the purchase price.

In addition to the prison sentence, HIXON, 55, of New York, New York, was fined $100,000 and ordered to forfeit $710,000 and to pay $1,204,777.80 in restitution to Evercore. HIXON was also sentenced to three years supervised release.

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. Mr. Bharara also thanked Evercore for its cooperation in this matter.

This case 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. Attorney Sarah E. McCallum is in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York announced that JAMES MONAHAN, the owner of a real estate investment company called Panam Management Group, Inc., was sentenced to 58 months in prison. MONAHAN previously pled guilty on May 29, 2013, to one count each of wire fraud, mail fraud and conspiracy to commit wire and mail fraud for operating a fraudulent real estate scheme. In connection with the scheme, MONAHAN obtained approximately $4.7 million from investors for a real estate development project he claimed to be constructing in the Dominican Republic and then misappropriated those funds. The real estate project was never developed and investors lost all of their money. He was sentenced today by U.S. District Judge John G. Koeltl.

According to the Indictment, statements made during MONAHAN’s guilty plea proceeding, and a Complaint previously unsealed in Manhattan federal court:

Beginning in early 2008, MONAHAN, a former sergeant in the New York City Police Department (“NYPD”), negotiated with another real estate investment company to solicit investors for a project he claimed to be constructing in the Dominican Republic. During the negotiations, MONAHAN repeatedly touted his prior service with the NYPD as proof of his trustworthiness and as a reason to invest in the project.

In connection with the project, MONAHAN and a co-conspirator, EDWARD ADAMS, who was a New York based attorney, executed agreements that required investor funds to be deposited into escrow accounts that were to be managed by ADAMS. The agreements required that the majority of the funds be deposited in an account to which the defendants would not have access. From October 2008 through February 2009, approximately $4.7 million in investor funds was deposited into the escrow accounts. Shortly after the deposits were made, the funds were improperly withdrawn from the account by ADAMS without disclosure to investors.

In an effort to hide the fact that the funds had been removed from the escrow account, in May 2009, MONAHAN mailed a forged letter on the stationary of a major bank to investors claiming that their money was safely deposited with that bank. In fact, by June 2009, all of the investor funds had been taken from the escrow accounts. At that point, almost no work had been performed on the purported project in the Dominican Republic and no money was returned to investors.

In addition to the prison term, Judge Koeltl sentenced MONAHAN, 44, of New York, New York, to 3 years of supervised release. MONAHAN was also ordered to forfeit $4.7 million.

Mr. Bharara praised the work of the Federal Bureau of Investigation and the Securities and Exchange Commission.

This case 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. Attorney John T. Zach is in charge of the prosecution.

U.S. v. James Monahan Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that SALMAAN SIDDIQUI, a former Vice President in the Investment Banking Division of Credit Suisse Group (“Credit Suisse”), was sentenced yesterday to time served in connection with a scheme to hide more than $100 million in losses in a mortgage-backed securities trading book at Credit Suisse. On February 1, 2012, SIDDIQUI pled guilty, pursuant to a cooperation agreement, to the offense of conspiracy to falsify the books and records of the bank. The bonds at issue were composed of subprime residential mortgage-backed securities (“RMBS”) and commercial mortgage-backed securities (“CMBS”). Once discovered, the manipulation of these bond prices contributed to Credit Suisse taking a $2.65 billion write-down of its 2007 year-end financial result. Siddiqui was sentenced by U.S. District Judge Paul A. Crotty.

According to the Information to which Siddiqui pled guilty, and statements made during court proceedings:

SIDDIQUI was employed at Credit Suisse as a Vice President in the bank’s New York office. He reported to David Higgs, a Managing Director, who in turn reported to Kareem Serageldin, the Global Head of the Structured Credit Group in the Securities Department of Credit Suisse’s Investment Banking Division. The Structured Credit Group held and traded ABS (“Asset Backed Security”) cash bonds, which included RMBS and CMBS. SIDDIQUI was a trader and had, on occasion, responsibility for marking the securities in a trading book known as “ABN1.” The ABN1 book was composed primarily of several thousand individual long and short subprime-related positions, and also included other securities. The long positions consisted of, among other things, various types of cash securities, including AAA-rated and non-AAA-rated cash bonds. Until March 2008, ABN1 had a net asset value of approximately $5.35 billion, approximately $3.71 billion of which consisted of ABS cash bonds, including RMBS and CMBS positions.

Pricing of Mortgage-Backed Securities

Credit Suisse traders were required at all relevant times to price securities they held at their fair value, that is, on a “mark-to-market” basis, which was determined by reference to either the current market price of the asset or liability, or the current price for a similar asset or liability. In the absence of a liquid market, Credit Suisse traders were required to look to other indicia in order to determine the fair value of the assets on their books. During this time, the ABX Index served as a benchmark for certain securities backed by home loans. It was widely understood within Credit Suisse that traders were to consult the corresponding ABX indices when pricing RMBS bonds and related products.

The Bond Pricing Scheme

The deterioration throughout 2007 of the real estate market in the United States, including the subprime housing market, led to significant reductions in valuations of mortgage-backed securities. As mortgage delinquencies increased across the country, the value of the securities backed by these mortgages decreased and the market for them became increasingly illiquid.

By late November 2007, SIDDIQUI and his co-conspirators were aware that the market for mortgage-backed securities had declined enormously. On November 28, 2007, Serageldin told SIDDIQUI, Higgs, and another co-conspirator that “the housing market [was] going down the tubes” and that they had to “find a way to sell these bonds,” i.e., the mortgage-backed bonds in ABN1. As they recognized, “[t]hose bonds are going to start trading worse than the [ABX] Index.” SIDDIQUI and his co-conspirators did not sell the bonds because the market prices for the bonds were substantially below the inflated value at which they marked the bonds.

From August 2007 through February 2008, SIDDIQUI and his co-conspirators artificially increased the price of bonds in order to create the false appearance of profitability in the ABN1 trading book. Specifically, Serageldin directed Higgs on numerous occasions to reach specific Profit & Loss (“P&L”) targets on a daily and month-end basis. Higgs, in turn, instructed SIDDIQUI and another co-conspirator to mark the books so as to achieve the particular P&L targets specified by Serageldin, rather than to reflect the fair value of the bonds.

Credit Suisse’s ABN1 Trading Book Was Falsely Inflated as a Result of the Scheme

As a result of the scheme, there was a growing disparity between the values ascribed to the marks in the ABN1 book and the available external benchmarks, such as the ABX Index. From August 2007 through the end of that year, as ABX Index prices fell, bond prices in ABN1 that were supposed to reflect the ABX Index remained effectively stable, thereby giving the false impression to Credit Suisse senior management that the ABN1 book was profitable. On one occasion in January 2008, Serageldin expressed concern to Higgs that the overpriced bonds were at risk of being discovered: “We should mark these down because someone is going to spot this,” he said.

The February 2008 Mark-Down

On March 20, 2008, Credit Suisse issued a press release which announced completion of its internal review and stated that the fair value reduction, or write-down, of the ABS positions – which included but was not limited to the ABNl book – was approximately $2.65 billion. Approximately $540 million of this write-down was attributable to the ABN1 trading book and included ABS cash bonds for the fourth quarter 2007 that SIDDIQUI and his co-conspirators manipulated and inflated in connection with his scheme.

Judge Crotty also ordered SIDDIQUI to pay forfeiture in the amount of $150,000, and a $100 special assessment.

Mr. Bharara praised the work of the Federal Bureau of Investigation and thanked the Securities and Exchange Commission for its assistance in the investigation of this case.

Yesterday’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 United States Attorney Eugene Ingoglia is in charge of the prosecution.

U.S. v. Salmaan Siddiqui Information

Preet Bharara, the United States Attorney for the Southern District of New York, Michael Nestor, Acting Inspector General of the Port Authority of New York and New Jersey (the “Port Authority”), Shantelle P. Kitchen, the Acting Special Agent-in-Charge of the New York Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), Douglas Shoemaker, Regional Special Agent-in-Charge of the U.S. Department of Transportation’s Office of the Inspector General (“DOT-OIG”), and Cheryl Garcia, the Special Agent-in-Charge for the New York Regional Office of the U.S. Department of Labor’s Office of the Inspector General (“DOL-OIG”), Office of Labor Racketeering and Fraud Investigations announced that LARRY DAVIS, President and Chief Executive Officer of DCM Erectors, Inc. (“DCM”) was charged today with engaging in a fraudulent scheme to violate the Port Authority’s Minority and Women-Owned Business Enterprise Program (“M/WBE Program”), which is designed to increase the role of minority and women-owned businesses working on its projects. In addition, the principals of the MBE and WBE previously pled guilty before U.S. District Judge Robert P. Patterson for their roles in the fraudulent scheme and agreed to forfeit their crime proceeds. DAVIS surrendered today to a Complaint and was presented this afternoon in Manhattan federal court before U.S. Magistrate Judge Freeman.

Manhattan U.S. Attorney Preet Bharara said: “Larry Davis and his company had the special privilege of working on the World Trade Center Project, which is not only a major project, but is also one that holds a special place in New Yorkers’ hearts. Davis gained contracts for his company worth almost $1 billion for construction work at the World Trade Center. These contracts came with the responsibility to increase the role of minority and women-owned businesses in the project, which are important to both the community and the economy. Instead, as alleged in the Complaint, Davis committed fraud by claiming that work was going to minority and women-owned businesses when it was not. Davis allegedly tried to cheat the system and deserving businesses out of work.”

Port Authority Acting Inspector General Michael Nestor said: “The Port Authority made a commitment to prevent fraud from occurring in the rebuilding of the WTC site and implemented a robust Fraud Prevention Program, including the use of integrity monitors. Unfortunately, the defendant, despite holding nearly $1 Billion in WTC contracts, seized upon the opportunity to engage in fraudulent activity undermining the role of minority and women-owned businesses at the WTC site. His activity was detected by the Inspector General’s integrity monitor on the 1 WTC project, and then working with the US Attorney’s Office and our law enforcement partners, was thoroughly investigated making today’s announcement possible. I want to thank the Port Authority’s World Trade Center Construction Department for their assistance. The Port Authority OIG will continue to work diligently to prevent and detect fraud at the WTC site and on other Port Authority projects.”

IRS-CI Acting Special Agent-in-Charge Shantelle P. Kitchen said: “This investigation uncovered schemes that, for years, exploited a program designed to encourage minority and women-owned business to participate in Port Authority projects. IRS-Criminal Investigation is committed to using its financial investigative expertise to unravel complex frauds. We are proud to be part of the collective law enforcement effort on this investigation; it demonstrates the government’s resolve to protect public funds and its commitment to ensure the public’s trust.”

DOT-OIG Regional Special Agent-in-Charge Douglas Shoemaker said: “Fraud harms the integrity of Port Authority’s M/WBE program and hurts law-abiding, small business contractors trying to compete on a level playing field. Working with our Federal, State, and local law enforcement and prosecutorial partners, we will continue our vigorous efforts to pursue those who violate the law, and expose and shut down fraud schemes that illegally take advantage of minority and women-owned business enterprises.”

According to the Complaint, Informations, other documents filed in the case, and statements made today in Manhattan federal court:

DCM specializes in steel erection for large construction projects. Since at least March 1999, DAVIS has owned DCM and served as its President and Chief Executive Officer. In 2007, DCM was awarded an approximately $256 million trade contract for work to be performed on One World Trade Center and in 2009, DCM was awarded an approximately $330 million trade contract for work to be performed on the World Trade Center Port Authority Trans-Hudson (PATH) Transportation Hub (collectively, the “World Trade Center Project”).

The work to be performed by DCM for the World Trade Center Project included, but was not limited to, drafting and engineering, surveying, structural steel supply and erection, and supply and installation of metal decking. As a result of change orders and changes in the scope of work, among other things, DCM’s contracts for the World Trade Center Project increased during the course of the Project to almost $1 billion.

The Port Authority’s M/WBE Program is designed to ensure that M/WBEs receive work on its projects and applies to the World Trade Center Project. Pursuant to the M/WBE Program, all contractors, including trade contractors such as DCM, are obligated to make good faith efforts to enter into subcontracts with M/WBEs, the total value of which must equal at least 17 percent of the overall contract amount (12 percent for MBEs and five percent for WBEs).

In order to satisfy the M/WBE Program, DAVIS engaged in a fraudulent scheme in which he caused DCM to claim that certain work was performed by a minority-owned business, Solera/DCM Joint Venture LLC (ASolera/DCM@), and a woman-owned business, GLS Enterprises, Inc. (“GLS”), when, in truth and in fact, DCM itself performed such work or arranged for such work to be performed by other non-M/WBE subcontractors and GLS was not an independent WBE.

Solera/DCM is a joint venture between DCM and a minority owned business, Solera Construction, Inc. (“Solera”), which is owned by JOHNNY GARCIA (“GARCIA”), a qualified minority business owner who previously pled guilty for his role in the fraudulent scheme. Solera/DCM is owned 60 percent by Solera and 40 percent by DCM. DCM and DAVIS established Solera/DCM as a joint venture majority owned by Solera with the express purpose of using it to satisfy MBE requirements on public construction projects.

From 2009 through in or about August 2012, DAVIS caused DCM to misrepresent to the Port Authority that Solera/DCM performed certain work on the World Trade Center Project when, in truth and in fact, the work, including metal decking and steel procurement, was performed by a non-minority contractor or by DCM itself, respectively. To facilitate the fraud, DAVIS directed Solera/DCM to place laborers who worked for a non-minority contractor performing metal decking on Solera/DCM’s payroll and then invoice DCM for such laborers= time and also created certain invoices and directed GARCIA to sign them to make it appear as if Solera/DCM procured steel, when, in truth and in fact, DCM did so. DCM claimed MBE credit for work purportedly performed by Solera/DCM on the World Trade Center Project in the total amount of approximately $70 million. As part of the fraudulent scheme, DCM paid GARCIA a total of at least $2 million ($150,000 in annual salary and additional monthly payments).

The owner of GLS is GALE D’ALOIA (“D’ALOIA”), who served as GLS’s Chairwoman and Chief Executive Officer and previously pled guilty for her role in the fraudulent scheme. Even though GLS was nominally independent from DCM and DAVIS, GLS=s only client and source of revenue was DCM (and its affiliates) and D’ALOIA performed the same payroll management duties under the name GLS that she previously had performed in her role as an employee of DCM. D’ALOIA also reported to DAVIS whose approval was required for any major expenditures and which were paid for by DCM. Accordingly, under the WBE program, GLS was not a bona fide independent business because its viability depends on its relationship with another firm or firms, namely DCM.

From 2009 through in or about September 2012, DAVIS caused DCM to fraudulently claim WBE credit for GLS’s payroll management work and also misrepresented to the Port Authority that GLS performed surveying work on the World Trade Center Project when, in truth and in fact, the surveying work was performed by DCM itself. To facilitate the fraud, DAVIS directed GLS to place unionized surveyors who had been on DCM=s payroll on its payroll and then to certify such payroll and invoiced DCM for the workers even though DCM continued to actually supervise them. As compensation for engaging in the fraudulent scheme, DAVIS paid GLS 10 percent of each week’s total payroll for the surveyors, which totaled approximately $575,000.

DAVIS, 63, of Mississauga, Ontario, Canada, is charged in two counts with wire fraud and a conspiracy to commit wire fraud. He faces a maximum sentencing on each charge of 20 years in prison, three years of supervised release, and a $100 special assessment.

GARCIA, 48, of Ossining, New York, is charged in two counts with wire fraud and a conspiracy to commit wire fraud. He faces a maximum sentence on each charge of 20 years in prison, three years of supervised release, and a $100 special assessment. As part of GARCIA’s plea agreement, he has agreed to forfeit $669,000. A sentencing hearing date for GARCIA has not yet been scheduled.

D’ALOIA, 66, of Charleston, South Carolina, is charged in two counts with wire fraud and a conspiracy to commit wire fraud. She faces a maximum sentence on each charge of 20 years in prison, three years of supervised release, and a $100 special assessment. As part of D’ALOIA’s plea agreement, she has agreed to forfeit $575,000. A sentencing hearing date for D’ALOIA has not yet been scheduled.

The charges contained in the Complaint are merely accusations and the defendant is presumed innocent unless and until proven guilty. 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 Port Authority’s Office of Inspector General, IRS-CI, DOT-OIG, and DOL-OIG.

This case is being prosecuted by the Office’s Public Corruption Unit. Assistant United States Attorney Carrie H. Cohen is in charge of the prosecutions.

U.S. v. Larry Davis Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced that MICHAEL BINDAY, the president and owner of a Scarsdale-based insurance agency, JAMES KEVIN KERGIL, an insurance agent based in Peekskill, New York, and MARK RESNICK, an insurance agent based in Orlando, Florida, were sentenced today to prison terms of 12 years, nine years, and six years, respectively, for their involvement in a massive scheme to defraud life insurance companies in connection with the issuance of stranger-originated life insurance (“STOLI”) policies. BINDAY, KERGIL, and RESNICK were found guilty of mail fraud, wire fraud, and conspiracy to commit mail and wire fraud in October 2013, following a 12-day jury trial before U.S. District Judge Colleen McMahon, who also imposed today’s sentences. KERGIL and RESNICK were also found guilty of conspiring to obstruct justice.

Manhattan U.S. Attorney Preet Bharara said: “For several years, the defendants carried out an elaborate scheme to deceive life insurance providers and trick them into issuing policies for unintended beneficiaries. Based on the defendants’ web of lies, the insurance companies were misled to believe they were issuing policies for wealthy senior citizens when in reality, those seniors were straw applicants who had no ability to pay the premiums and had been recruited by the defendants who were seeking big commissions for themselves. The defendants now will have to forfeit the proceeds of their scheme and, more importantly, their liberty.”

According to the evidence at trial, documents filed in Manhattan federal court, and statements made at today’s sentencing and other court proceedings:

BINDAY ran a business in Scarsdale, New York called R. Binday Plans and Concepts, Ltd. (“R. Binday”). R. Binday purported to be a general agency that secured high face-value life insurance policies for wealthy “clients.” In truth, from 2006 through early 2009, BINDAY and his company were engaged almost exclusively in procuring STOLI policies – policies on the lives of seniors for the benefit of investors who were strangers to them – by means of false and fraudulent applications.

The various life insurance companies on whose behalf R. Binday claimed to act as agent (the “Insurers”) expressly prohibited their agents from soliciting and submitting STOLI business. In pricing and underwriting universal life insurance, the Insurers relied on the basic premise that the people applying for the policies – rather than professional investors – were the ones seeking and planning to pay for these high-face-value policies. These assumptions permitted the Insurers to offer lower prices than they could have without the assumptions. Accordingly, the Insurers asked questions on their universal life applications specifically designed to identify STOLI policies and to prevent such policies from being issued. The Insurers also required their agents to certify that all information in the life insurance applications – including the answers to these questions and the applicants’ financial information – was accurate.

BINDAY, with the help of R. Binday office workers and independent insurance agents, including KERGIL and RESNICK, prepared and submitted applications for life insurance that were riddled with lies to conceal from the Insurers that the applications were for STOLI policies and to trick the Insurers into issuing those policies. The insurance applications were designed to falsely make it appear to the Insurers that the senior citizens purportedly applying for life insurance were wealthy individuals who wanted insurance for their “estate planning” needs. In fact, unbeknownst to the Insurers, most of the seniors could not possibly afford these policies, and the financial information included in the applications was completely fabricated. In reality, the seniors were people of modest means who had been recruited by the defendants to serve as straw insureds so that investors could insure the seniors’ lives, pay the premiums until death, and then reap what BINDAY and his associates had projected would be massive profits – at the expense of the Insurers. Yet BINDAY, KERGIL, RESNICK, and others certified to the Insurers, over and over, that these were not applications for STOLI policies, and that the information on the applications was accurate to the best of their knowledge.

In addition to preparing and submitting blatantly false insurance applications, BINDAY, KERGIL, and RESNICK supported their fraud with bogus back-up documentation and supposedly “independent” verification papers, all predicated on false financial figures and other lies. And once a policy had been issued based on these falsehoods, the defendants arranged elaborate bank transactions to create the false impression that the seniors – rather than investors – were the ones paying the premiums on the policies. The defendants also instructed insureds to refuse to speak to Insurer representatives and, if conversation could not be avoided, to lie.

For every stealth STOLI policy issued, the Insurers paid out a substantial commission, usually in the six figures. The defendants split these commissions with the investors on whose behalf they were secretly operating, generally pocketing about half for themselves. Collectively, the defendants made millions in commissions over just a few years from their fraudulent STOLI applications.

To cover up and perpetuate their fraud, the defendants lied to governmental authorities and conspired to destroy evidence. First, in 2009, during sworn testimony before the New York State Insurance Department, BINDAY falsely claimed he was not involved in procuring STOLI policies and that he would never submit a life insurance application knowing it to be for a STOLI policy. Later, in 2010, after FBI agents approached RESNICK with questions about stealth STOLI policies he had submitted, all three defendants and another insurance agent conspired to destroy documents and electronic records related to their fraud.

In addition to their prison sentences, BINDAY, 50, of New York, New York, KERGIL, 59, of Peekskill, New York, and RESNICK, 58, of Orlando, Florida, were ordered to pay $39,308,305.63 in restitution, an amount for which they are jointly and severally liable. Additionally, BINDAY was ordered to forfeit $13,522,424.64; KERGIL was ordered to forfeit $15,623,737.64; and RESNICK was ordered to forfeit $14,315.868. Portions of the forfeiture judgments carry joint and several liability.

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 Sarah E. McCallum and Eun Young Choi are in charge of the prosecution. Assistant U.S. Attorney Paul Monteleoni is handling the forfeiture aspects of the prosecution.

“Today, Judge Rakoff imposed stiff penalties in a case brought by this Office to punish and deter the fraudulent and reckless lending activities of a financial institution leading up to the financial crisis in 2008.

On October 23, 2013, after a four-week trial, a jury sent a loud and clear message to Wall Street that this kind of conduct will not be tolerated, finding that Countrywide and its former executive, Rebecca Mairone, committed mail and wire fraud by selling thousands of toxic mortgages to Fannie Mae and Freddie Mac with lies that they were quality investments.

Today that message was reinforced through the imposition of tough civil penalties against Countrywide, Bank of America, which purchased Countrywide in 2008, and Mairone. Judge Rakoff ordered Countrywide and Bank of America to pay $1,267,491,770, based on the amount that Countrywide falsely induced the victims, Fannie Mae and Freddie Mac, to pay for fraudulently misrepresented loans and ordered Mairone to pay a civil penalty to the Government of $1,000,000. In determining the penalty amounts, the Court highlighted the egregious nature of the fraud, stating that ‘[the bank’s] HSSL [loan] process . . .was from start to finish the vehicle for a brazen fraud by the defendants, driven by a hunger for profits and oblivious to the harms thereby visited, not just on the immediate victims but also on the financial system as a whole.’

Throughout a year-long litigation and month-long trial, Bank of America claimed that the Government had no case. After the jury said otherwise, Bank of America claimed that it should pay no penalty at all, arguing that the victims were not harmed and that the bank did not profit from this massive fraud. Judge Rakoff’s opinion squarely and emphatically rejects the bank’s claims which, besides ignoring the victims’ out-of-pocket losses, also ignored that the fraudulent conduct required penalties to be paid for punitive and deterrence purposes as well.

This is the first case in which a bank or any of its executives has been found liable under FIRREA for mortgage fraud leading up to the financial crisis, and now it is the first case in which civil penalties have been imposed upon a bank or any of its executives following such a finding. The jury verdict and subsequent imposition of penalties make clear that mortgage fraud cannot be viewed as simply another cost of doing business in the financial world. This Office will continue to investigate and vigorously prosecute mortgage fraud in all of its forms using all of the civil and criminal tools at its disposal.”

U.S. v. Countrywide, et al. (Bank of America) Opinion and Order

Preet Bharara, the United States Attorney for the Southern District of New York, and James J. Hunt, Acting Special Agent in Charge, Drug Enforcement Administration (“DEA”), New York Division, announced today that PATRICK MORGAN was arrested this morning in Buffalo, NY on narcotics distribution and narcotics conspiracy charges. MORGAN is expected to be presented later today in the Western District of New York before United States Magistrate Judge Hugh B. Scott.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Patrick Morgan sold drugs that, far from enabling a good time, resulted in tragedy with the death of Jeffrey Russ. It bears repeating that every time people use drugs like “Molly” they are rolling the dice with their own lives, which is a foolish and senseless wager.”

DEA Acting Special Agent-in-Charge James J. Hunt said: “Synthetic drugs such as ‘Molly’ are extremely dangerous and have grown increasingly more popular at events such as music festivals. Those who ingest it, even if for the very first time, are putting themselves at risk because they have no idea what they are putting into their bodies. DEA and our law enforcement partners will continue to investigate any and all drug trafficking organizations that place lives at risk by selling these dangerous substances.”

The following allegations are based on the Complaint unsealed in Manhattan federal court:

In early August 2013, PATRICK MORGAN sold pills commonly called “Molly,” which contained 4-methylenedioxymethaphetamine (MDMA) and 3,4-methylenedioxymethcathinone (methylone), to three individuals (the “Three Individuals”), including Jeffrey Russ, for their use at an electronic music concert in Buffalo, New York.

In mid-August 2013, the Three Individuals pooled their money in order to buy additional Molly pills from MORGAN. The Three Individuals intended to consume and distribute these Molly pills at the Electric Zoo music festival. Electric Zoo was a three-day, outdoor electronic music festival on Randall’s Island, New York, scheduled to be held from August 30, 2013 through September 1, 2013. Attendance at Electric Zoo was estimated to be over 130,000 people.

In mid-August 2013, MORGAN sold one of the Three Individuals approximately 80 Molly pills that MORGAN was told the Three Individuals intended to consume and distribute at Electric Zoo.

On August 30, 2013, the Three Individuals, including Jeffrey Russ, attended Electric Zoo and consumed some of the Molly pills that were purchased from MORGAN. Toward the end of the concert on August 30, 2013, Russ collapsed and had a seizure. Russ was treated by emergency medical technicians on Randall’s Island and ultimately taken to Harlem Hospital. When Russ arrived at Harlem Hospital, he was unresponsive. On August 31, 2013, at approximately 3:21 a.m., Russ died at Harlem Hospital from acute intoxication by the combined effect of MDMA and methylone with hyperthermia.

MORGAN, 23, of Buffalo, New York, is charged with one count of conspiring to distribute narcotics, and one count of distributing narcotics, each of which carries a maximum term of 20 years in prison.

Mr. Bharara praised the investigative work of the Drug Enforcement Administration.

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

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

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

U.S. v. Patrick Morgan Complaint

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”), yesterday announced the unsealing of commodities fraud, securities fraud, wire fraud, and conspiracy charges against MICHAEL JAMES SEWARD, president of the now-defunct, unregistered commodities trading pool SK Madison Commodities, LLC (“SK Madison”). As alleged, SEWARD and his former business partner, YAN KAZIYEV, a/k/a “Ian Kaziyev,” convinced investors to part with approximately $1.3 million under false pretenses, and then pocketed approximately $700,000 of those funds for themselves. SEWARD is currently detained in Pinellas County, Florida on unrelated state felony charges.

Also unsealed yesterday were identical charges against KAZIYEV, as well as KAZIYEV’s June 25, 2014 guilty plea, pursuant to a cooperation agreement, to all counts, before the Honorable Paul A. Crotty.

Manhattan U.S. Attorney Preet Bharara said: “Yan Kaziyev and, as alleged, Michael Seward fraudulently convinced investors to put their money into an unregistered commodities trading pool, and then used that money for their personal gain. This case shows that investors should be aware of the potential for fraud in commodities trading pools, as they should be in any other securities investment.”

Assistant Director in Charge George Venizelos said: “Like we’ve seen time and time again, the defendants cooked up a scheme to defraud unwitting investors. Under the guise of a profitable commodity trading pool and an investment in a social media company, the defendants failed to do anything except steal from those who trusted them. Today the game is up. The defendants find themselves on the wrong side of the law and charged in Manhattan Federal Court.”

According to the allegations in the Indictment against SEWARD and the Information against KAZIYEV unsealed today:

From July 2011 through May 2013, SEWARD and KAZIYEV, through SK Madison, engaged in a scheme to defraud over 20 individuals by convincing them to invest approximately $1.3 million into the unregistered commodities pool they were operating. To lure investors, SEWARD and KAZIYEV made false representations about the success of their pool and, in some cases, about the very nature of the investments they were soliciting.

For example, from around July 2011 to around October 2011, SEWARD and KAZIYEV convinced two investors to pay approximately $330,000 to an entity called SK Madison Partners (“SKM Partners”), which these investors understood would be purchasing stock in an Internet social media company. SEWARD, KAZIYEV, and another individual took hefty “commissions” for themselves out of the funds and invested the remainder not in any Internet social media company but in the SK Madison commodities trading pool. From there, SEWARD and KAZIYEV withdrew yet more of funds for their own benefit.

To those investors who knew they were investing in SK Madison’s commodities pool, SEWARD and KAZIYEV lied about the success the pool had enjoyed. They mailed and emailed false “track record” reports reflecting purported trading profits in most months from August 2011 through dates in 2012 and 2013. These profit figures were fictitious, even for those months in which the SK Madison pool had turned a profit, the amount of profit bore no relationship to the figure reported in the “track record.” And the “track record” reports reflected trading profits in months in which the pool had in fact suffered significant trading losses. Similarly false profit figures were published to investors through monthly account statements.

In or about the spring and summer of 2013, when confronted by members of the National Futures Association (“NFA”) and the Commodity Futures Trading Commission (“CFTC”) with their large withdrawals from SK Madison’s trading and bank accounts for their own benefit, SEWARD and KAZIYEV sought to justify the withdrawals by citing “commissions” of either $55 or $110 per transaction that SK Madison purportedly had charged for operating the commodities pool. In fact, although SK Madison’s prospectus alerted investors that a $55 commission would be levied per completed transaction, the withdrawals that SEWARD and KAZIYEV made and caused to be made from the accounts bore no relationship to the number of trades effectuated in the accounts, and far exceeded what might have been calculated using the $55 commission figure.

SEWARD, 35, of Largo, Florida, and KAZIYEV, 36, of Queens, New York, are both charged with commodities fraud, securities fraud, wire fraud, and conspiracy to commit commodities, securities, and wire 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. The securities fraud charge carries a maximum sentence of 20 years in prison and a fine of the greater of $5 million or twice the gross gain or loss from the offense. The commodities fraud charge carries a maximum sentence of 10 years in prison and a fine of the greater of the costs of the prosecution plus $1 million or twice the gross gain or loss from the offense. The wire fraud charge carries a maximum sentence of 20 years in prison and a fine of the greater of $250,000 or twice the gross gain or loss from the offense.

Mr. Bharara praised the investigative work of the FBI and thanked the CFTC, which has filed civil charges in a separate action. Mr. Bharara also thanked the NFA for its assistance in this investigation.

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. Attorney Sarah E. McCallum is in charge of the prosecution.

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.

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

CFTC v. SK Madison Yan Kaziyev Information
CFTC v. SK Madison Michael Seward Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that RAFAEL CEPEDA, a man originally from the Dominican Republic, was sentenced yesterday in White Plains federal court to 42 months in prison for making false claims of United States citizenship, failing to register as a sex offender, and aggravated identity theft. CEPEDA was also ordered to be removed from the United States. CEPEDA pled guilty on March 18, 2014. He was sentenced by U.S. District Judge Cathy Seibel.

According to documents filed in this case and statements made in court:

For over 20 years, CEPEDA lived under an illegally assumed identity as a person who was a U.S citizen, when in fact CEPEDA was never a U.S. citizen. CEPEDA even served multiple prison sentences under the assumed identity. Among CEPEDA’s past crimes was a 2008 conviction in New York for Attempted Course of Sexual Conduct Against a Child, for which he was sentenced to two-to-four years in prison. As a result of this conviction, CEPEDA was required to register as a sex offender for life. Nevertheless, in 2013, CEPEDA moved from the State of New York to Hartford, Connecticut, and failed to register as a sex offender in Connecticut.

Also, in 2010, CEPEDA applied for a U.S. passport using the assumed identity of a true U.S. citizen, as well as a birth certificate and New York State ID card.

In addition to the prison term, CEPEDA, 52, of Hartford, Connecticut, was also sentenced to five years of supervised release, and was ordered to be removed from the United States upon completion of his sentence.

Mr. Bharara praised the investigative work of the U.S. Immigration and Customs Enforcement’s (“ICE”) Enforcement and Removal Operations (“ERO”), the U.S. Department of State, Bureau of Diplomatic Security, and the U.S. Marshals Service.

The case is being handled by the Office’s White Plains Unit. Assistant United States Attorney Daniel P. Filor is in charge of the prosecution.

“With today’s verdict of guilty reached by an impartial and independent jury, the clean-up of corruption in New York continues in courtrooms. As the jury unanimously found, Daniel Halloran played a key role in two distinct political corruption schemes: first, for $20,000, Halloran was willing and able to serve as a go-between to deliver bribes to political party officials, and second he also took nearly $25,000 in cash and illegal campaign contributions to steer $80,000 in City Council money to other bribe payers. Dan Halloran was the lone defendant in the trial that just ended in his conviction, but he is unfortunately not alone in a crowded field of New York officials who are willing to sell out their offices for self-enrichment. This Office will continue the vigorous prosecution of political corruption to secure for the people of New York – regardless of party affiliation – what they deserve: the honest labors of their elected representatives. And we will continue to partner with the FBI, whose outstanding investigative work in this case was instrumental to achieving a just result.”

Preet Bharara, the United States Attorney for the Southern District of New York, announced that former New York City Council Member DANIEL HALLORAN was found guilty in federal court of arranging the bribery of New York City Republican leaders to allow New York State Senator Malcolm Smith, a Democrat, to run as a Republican candidate for New York City Mayor in 2013. In addition, HALLORAN was found guilty of accepting a $15,000 cash bribe in exchange for designating up to $80,000 in New York City funds to a non-profit entity that would allow the money to be embezzled through a no-show job. HALLORAN was convicted in White Plains federal court after a two-month jury trial before U.S. District Judge Kenneth M. Karas.

U.S. Attorney Preet Bharara stated: “With today’s verdict of guilty reached by an impartial and independent jury, the clean-up of corruption in New York continues in courtrooms. As the jury unanimously found, Daniel Halloran played a key role in two distinct political corruption schemes: first, for $20,000, Halloran was willing and able to serve as a go-between to deliver bribes to political party officials, and second he also took nearly $25,000 in cash and illegal campaign contributions to steer $80,000 in City Council money to other bribe payers. Dan Halloran was the lone defendant in the trial that just ended in his conviction, but he is unfortunately not alone in a crowded field of New York officials who are willing to sell out their offices for self-enrichment. This Office will continue the vigorous prosecution of political corruption to secure for the people of New York – regardless of party affiliation – what they deserve: the honest labors of their elected representatives. And we will continue to partner with the FBI, whose outstanding investigative work in this case was instrumental to achieving a just result.”

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

HALLORAN was elected to the New York City Council in 2009, representing a district in Queens, New York. While a member of the city council, HALLORAN participated in two overlapping criminal schemes that involved the payment of bribes to obtain official action. First, HALLORAN arranged for $110,000 in cash bribes to be paid to leaders of the Republican Party so that they would allow Smith to run for mayor on the Republican Party’s ballot line. Second, HALLORAN accepted an up-front kickback of $15,000 for designating up to $80,000 of New York City Council discretionary funding to a company he believed was controlled by those who paid him the bribes.

The Bribery of Republican Party Leaders

From in or about November 2012 until his arrest in April 2013, HALLORAN agreed with Smith, an undercover FBI agent posing as a wealthy real estate developer (the “UC”), and a cooperating witness (“CW”) to bribe New York City Republican Party leaders in exchange for their authorization of Smith to appear as a Republican candidate for New York City Mayor in 2013, even though Smith is a registered Democrat.

In furtherance of the scheme, HALLORAN arranged for the UC and the CW to meet Vincent Tabone, the Vice Chairman of the Queens County Republican Party, Joseph Savino, the Chairman of the Bronx County Republican Party, and other party leaders so they could be paid bribes in exchange for supporting Smith’s bid to compete for the Republican nomination. HALLORAN also negotiated the size of bribes that the party leaders required in order to authorize Smith to run on the Republican ballot line. During a meeting with the UC, Tabone accepted a $25,000 cash bribe and agreed to accept another $25,000 after his committee authorized Smith to compete in the Republican primary. Savino similarly accepted a $15,000 cash bribe and agreed to accept another $15,000 after he voted to authorize Smith to compete for the Republican ballot line. In return for his efforts, HALLORAN accepted $15,500 as a down payment on a “broker’s” fee of at least $75,000 and expected to be appointed First Deputy Mayor if Smith was elected mayor.

Bribery for City Council Discretionary Funding

From in or about August 2012 until his arrest in April 2013, HALLORAN accepted a bribe of $15,000 cash from the UC and the CW in exchange for agreeing to steer up to $80,000 in New York City Council discretionary funding to a consulting company he believed was controlled by the UC and the CW (the “Company”). In furtherance of this scheme, HALLORAN wrote two letters on New York City Council letterhead about this funding, one to civic organizations and the other to the Company. Despite suggesting in these letters that work would be done by the Company to support the allotment of taxpayer money, HALLORAN agreed with the UC and the CW that the Company would provide no services.

HALLORAN, 42, of Queens, New York, was found guilty of one count of conspiracy, which carries a maximum sentence of 5 years in prison; two counts of wire fraud, each of which carries a maximum sentence of 20 years in prison; and two counts of Travel Act bribery, each of which carries a maximum sentence of 5 years in prison. Each of the counts of conviction also carries a maximum fine of $250,000, or twice the gross gain or loss from the offense. 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.

HALLORAN is scheduled to be sentenced by Judge Karas on December 12, 2014, at 2:00 p.m.

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

This case is being handled by the Office’s White Plains Division and Public Corruption Unit. Assistant United States Attorneys Douglas B. Bloom and Justin Anderson are in charge of the prosecution.

Redacted Indictment (Halloran)

Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, Assistant Director-In-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), Chief Ramon Bethencourt of the City of Middletown Police Department, announced the arrest of seven defendants and the unsealing of a Superseding Indictment charging a conspiracy to distribute over a kilogram of heroin in and around Orange County, New York. Fourteen defendants were previously charged in the case in November 2013. Three of the new defendants are also charged with possessing firearms in furtherance of the heroin distribution conspiracy.

U.S. Attorney Preet Bharara stated: “These defendants stand accused of spreading heroin across Orange County, with their destructive drugs backed by dangerous weapons. Now they will have to answer those charges, thanks to the cooperative efforts of the FBI and our local partners.”

FBI Assistant Director-in-Charge George Venizelos stated: “Today, we announce the arrest of seven individuals who sought to traffic heroin in the Orange County area with the aid of firearms. The FBI remains committed to working with our law enforcement partners to investigate those who introduce drugs and other dangers into our neighborhoods.”

New York State Police Superintendent Joseph A. D'Amico stated: "The new defendants being charged today were part of a heroin distribution network operating on the streets of Middletown. The New York State Police are committed to identifying and removing these dangerous drug dealers from our community. We will continue to work closely with our law enforcement partners, to make sure our neighborhoods are safe and the individuals who choose to engage in this type of illegal activity are held accountable."

The Superseding Indictment charges eight new defendants, DESIO ALLEN, a/k/a “T.O.,” 24, JUSTICE BEARD, 25, EBAN CARRION, a/k/a “Five,” 23, BARRY COOPER, a/k/a “B-Nyse,” 21, TAUREAN LIGHTFOOT, a/k/a “T-Streets,” 20, RICHARD LOCKETT, a/k/a “Wall Street,” 27, CLIFFORD SHAMSUNDAR, a/k/a “Face,” 22, and RASHID WESTON, a/k/a “Gutta,” 26, with conspiring to distribute, and possess with intent to distribute, over a kilogram of heroin. The Superseding Indictment also charges ALLEN, COOPER, and WESTON with possessing firearms in furtherance of the conspiracy. MIGUEL MARGOLLA, 30, and CARLOS MARTINEZ, a/k/a “B-Way,” 24, who were previously charged in the case, are also named in the Superseding Indictment. MARGOLLA is charged with participating in the heroin distribution conspiracy. MARTINEZ is charged with participating in the heroin distribution conspiracy and possessing firearms in furtherance of the conspiracy.

The charge against each defendant and the corresponding maximum potential penalties are outlined in the chart attached to this press release.

Seven of the new defendants charged in the Superseding Indictment were arrested today or had previously been taken into custody. They were presented in White Plains federal court before U.S. Magistrate Judge Judith C. McCarthy and were detained. One defendant, EBAN CARRION, remains at large as a fugitive.

Mr. Bharara praised the outstanding investigative work of the FBI, the City of Middletown Police Department, the New York State Police, the Orange County Sherriff’s Department, the U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), the U.S. Marshals Service, the Town of Wallkill Police Department, and the Town of Ramapo Police Department.

The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorney Michael Gerber 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.

Orange County Heroin.Indictment_Redacted
Chart Orange Heroin

Preet Bharara, the United States Attorney for the Southern District of New York, Sam Hirsch, the Acting Assistant Attorney General for the Environment and Natural Resources Division of the Department of Justice, and Dan Ashe, Director of the U.S. Fish and Wildlife Service (“USFWS”), announced that XIAO JU GUAN, a/k/a “Tony Guan,” a Canadian antiques dealer, was indicted by a federal grand jury in Manhattan today for conspiring to violate the Lacey Act and smuggle wildlife, including rhinoceros horn, elephant ivory and coral, and was also charged with committing substantive Lacey Act and smuggling crimes.

Manhattan U.S. Attorney Preet Bharara said: “There is an ever-expanding black market for objects made from endangered species that fuels the devastating and senseless slaughter of noble animals. The charges levied today are designed to deal a heavy blow to those that are deliberately profiting from the trade in rare and endangered species.”

Assistant Attorney General Sam Hirsch said: “Illegal wildlife trafficking is a multi-billion dollar business that must be stopped. The Justice Department is working vigorously to uphold the laws designed to protect rhinos and elephants and other threatened species from extinction and is working alongside our international partners to bring black-market wildlife traders to justice. We are also very grateful here for the assistance from Canadian authorities.”

USFWS Director Dan Ashe said: “As this case illustrates, the United States plays a key role in the illegal wildlife trade – often as the source of, or transit country for, poached and smuggled wildlife products headed elsewhere in the world. This makes coordination vital with our international partners as we work together to halt the slaughter of rhinos, elephants and many other imperiled species. We have a long history of collaboration with Environment Canada on wildlife trafficking and other issues, and we appreciate the invaluable assistance they’ve provided in this case.”

According to the Indictment and other documents filed in Manhattan federal court, as well as statements made at the time of GUAN’s arrest:

Rhinoceros are a rare herbivore species of prehistoric origin and one of the largest remaining mega-fauna on earth. All species of rhinoceros and elephant are protected under U.S. and international law. Trade in rhinoceros horn, elephant ivory and many species of coral is regulated under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), a treaty signed by over 170 countries around the world to protect fish, wildlife and plants that are or may become imperiled due to the demands of international markets. An animal species listed as protected within CITES cannot be exported from the United States without prior notification to, and approval from, USFWS, including in the form of an export permit. In addition to the CITES treaty requirements, the Lacey Act makes it unlawful for a person to knowingly make a false record, account and identification for wildlife including objects made from and containing rhinoceros horn, elephant ivory and coral.

GUAN was the president and owner of an antiques business in British Columbia, Canada. With his co-conspirators, GUAN smuggled rhinoceros horns and sculptures made from elephant ivory and coral, with a market value in excess of $500,000, from various U.S. auction houses to Canada, in a deliberate effort to evade U.S. laws requiring them to obtain certain declarations and permits in order to lawfully export these rare wildlife items. To smuggle the items across the border, GUAN and his co-conspirators shipped the items to an address close to the Canadian border and then drove the items across the border, or else shipped packages containing the wildlife items directly to Canada with false paperwork, and without the required declarations or permits.

Among other unlawful transactions, on March 29, 2014, GUAN traveled from Vancouver to New York in an attempt to purchase two endangered black rhinoceros horns from undercover USFWS agents posing as wildlife traffickers. After purchasing the horns at a storage facility in the Bronx, GUAN asked the undercover agents to drive him and an accomplice, who was acting as his interpreter, to a nearby express mail store where GUAN mailed the horns to an address in Point Roberts, Washington, less than a mile from the Canadian border and 17 miles from GUAN’s antiques business. In completing the shipping labels, GUAN claimed that the box of black rhino horns contained “handicrafts” worth just $200, even though GUAN had just paid $45,000 to the undercover agents for them. Furthermore, in doing so, GUAN indicated that he would arrange to have the rhinoceros horns driven across the border, and that he had done so many times before.

At the time of GUAN’s arrest, wildlife enforcement officers with Environment Canada executed a search warrant at GUAN’s antique business in Canada.

This case is the part of “Operation Crash,” a U.S. Fish & Wildlife and Justice Department crackdown on illegal trafficking in rhinoceros horns. Operation Crash is a continuing investigation by the Department of the Interior’s Fish and Wildlife Service, in coordination with the Department of Justice. A “crash” is the term for a herd of rhinoceros. Operation Crash is an ongoing effort to detect, deter and prosecute those engaged in the illegal killing of rhinoceros and the unlawful trafficking of rhinoceros horns.

GUAN, 39, faces up to five years in prison for the conspiracy and wildlife charges and up to ten years in prison for the crime of smuggling. He could be fined up to $250,000 per count or up to twice the gross gain from the criminal conduct. 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 efforts of USFWS in the investigation, which he noted is ongoing. He also thanked Environment Canada’s Wildlife Enforcement Directorate and Justice Canada for their assistance with this case.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Janis M. Echenberg and Senior Counsel Richard A. Udell of the Justice Department’s Environmental Crimes Section 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.

U.S. v. Xiao Ju Guan Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that JAMES TAGLIAFERRI, formerly the president of TAG Virgin Islands (“TAG”), was found guilty yesterday in Manhattan federal court of investment adviser fraud, securities fraud, multiple counts of wire fraud, and multiple counts of violating the Travel Act, in connection with his multi-faceted fraudulent scheme. TAGLIAFERRI, through TAG, an SEC-registered investment adviser: (a) accepted undisclosed compensation in exchange for causing his clients to invest in certain securities, (b) used client funds for illegitimate purposes, including re-paying other clients, and (c) caused fictitious securities instruments to be placed in client accounts. In total, TAGLIAFERRI’s scheme caused clients to lose at least $50 million. TAGLIAFERRI was convicted after a four-and-a-half week trial presided over by U.S. District Judge Ronnie Abrams.

Manhattan U.S. Attorney Preet Bharara said: “James Tagliaferri not only shirked his duty to act in his clients’ best interests, as investment advisers are obligated to do, he orchestrated a scheme to defraud them – taking millions of dollars in undisclosed compensation in exchange for placing their money in certain investments. With yesterday’s guilty verdict, Tagliaferri will now be punished for his actions.”

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

In 2007, TAGLIAFERRI opened TAG in the U.S. Virgin Islands and began offering investment advisory services to clients through that company. Previously, TAGLIAFERRI had offered such services through another company, Taurus Advisory Group, which was based in Connecticut.

Beginning in 2007, TAGLIAFERRI executed a multi-faceted scheme to defraud TAG clients. First, TAGLIAFERRI began taking undisclosed fees in exchange for placing client funds in certain companies. He received at least $1.6 million in undisclosed fees in exchange for causing clients to invest in the securities of a horse-racing company located in Garden City, New York (“Company 1”). TAGLIAFERRI placed at least $40 million of client funds in investments relating to Company 1. He also received at least approximately $1.75 million in undisclosed compensation in exchange for placing client funds in several companies affiliated with an associate of his (“Associate 1”). Ultimately, TAGLIAFERRI placed at least $80 million in client funds in investments relating to these companies.

TAGLIAFERRI often used his clients’ money to finance these undisclosed payments to TAG. He did this by transferring client funds from custodial accounts to a trust account maintained by an attorney. He then diverted a portion of those funds – the undisclosed fee – from the trust account to a TAG account in the Virgin Islands that he controlled. By routing fees to TAG through this trust account and other third-party accounts, TAGLIAFERRI was able to receive these fees with no record of such fees appearing on the monthly statements that custodial financial institutions sent to TAG clients.

Second, TAGLIAFERRI used client funds for improper purposes, including making payments to other clients who were demanding their money, and to make payments on behalf of companies he was affiliated with, including Company 1. He orchestrated a complex series of transactions between and among TAG client accounts to access funds for these purposes. For example, when an immediate need for funds arose, he caused clients to purchase shares of a publicly-traded company affiliated with Associate 1 from a client account affiliated with Associate 1 that TAGLIAGERRI controlled. Once those sales took place and TAG client funds were transferred to that account, he used those funds for his own purposes, including for payments to other clients demanding their money.

Third, TAGLIAFERRI caused fictitious securities – which he identified as “sub-notes” – to be placed in client accounts. These sub-notes purportedly obligated a company located in Pennsylvania (the “Pennsylvania Company”) to make payments to TAG clients based upon supposed promissory note agreements between the Pennsylvania Company and TAG. In reality, and as TAGLIAFERRI well knew, the Pennsylvania Company never executed any agreement that obligated it to make payments to TAG or TAG clients.

TAGLIAFERRI, 75, of St. Thomas, U.S. Virgin Islands, was convicted of one count of investment adviser fraud and six counts of violating the Travel Act, which each carry a maximum sentence of five years in prison. He was also convicted of one count of securities fraud and four counts of wire fraud, which each carry a maximum sentence of 20 years in prison. The jury was unable to reach a verdict regarding one wire fraud count and one Travel Act count, and a mistrial was declared as to those two counts. TAGLIAFERRI is scheduled to be sentenced by Judge Abrams on November 7, 2014. 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 U.S. Postal Inspection Service and the Criminal Investigators of the United States Attorney’s Office. He also thanked the United States Securities and Exchange Commission and the U.S. Attorney’s Office for the Eastern District of North Carolina for their assistance in this matter.

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 Jason H. Cowley and Parvin D. Moyne, and Special Assistant United States Attorney Saima S. Ahmed of the United States Securities and Exchange Commission are in charge of the prosecution.

Tagliaferri, James Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that LEONIDES SIERRA, a/k/a “Junito” – the former national leader of the “Trinitarios,” a violent street and prison gang comprising primarily individuals of Dominican descent – was sentenced yesterday in Manhattan federal court to 19 years in prison for his role as the leader of a massive, multi-year racketeering conspiracy. Sierra is currently serving 221/2 years to life in prison in New York State as a result of his 1989 conviction of intentional murder. Sierra’s federal sentence will run consecutively to the New York State term of imprisonment.

Manhattan U.S. Attorney Preet Bharara said: “When Sierra created the Trinitarios Gang on Rikers Island in 1992, a dangerous and bloodthirsty organization was born, responsible for overwhelming violence both on the streets of New York and other cities, and inside the prison system. With Sierra’s conviction, the Trinitarios Gang lost its founder and leader. Sierra’s conviction and sentence are capstones to this Office’s five-year effort to dismantle the Trinitarios. The sentence imposed ensures that Sierra will not see the light of day for many years to come. It should also serve to remind members and leaders of other violent gangs that we will continue to work to bring them to justice.”

In imposing sentence, United States District Judge Paul A. Engelmayer told the defendant: “Instead of putting up a stop sign, you gave the Trinitarios a green light to commit violence by your actions. Your actions sent the message to these gang members that retribution, violence, and hits are OK.” Judge Engelmayer told Sierra that he had “no right to decide who lived or who died,” and that his actions were “wrong, destructive to society, and to the Dominican community.”

According to the Indictment, and other documents filed in the case, as well as statements made during the sentencing proceedings:

SIERRA, with two others, created the Trinitarios Gang on Rikers Island in 1992, in order to protect prison inmates of Dominican descent from other competing violent gang members. The Trinitarios quickly morphed into a violent organization both in the prison system and on the streets, as its members began to be released from prison and continued their membership. SIERRA managed and led the Trinitarios while he was an inmate at various New York State prisons, including, at the time of his arrest in this case, Attica Correctional Facility. SIERRA ordered numerous acts of violence (referred to as “green lights” in the gang’s parlance) against other inmates in the New York State prison system, and, in connection with his guilty plea in this case, also admitted that in 2011, he conspired to murder another member of the Trinitarios Gang who was at liberty in the community. Sierra targeted this victim because the victim refused to acknowledge Sierra as the gang’s Supreme Leader. Sierra and his co-conspirators were arrested in this case before their plan could come to fruition.

In his capacity as the gang’s leader, Sierra also ordered the establishment of a Central Committee, which was responsible for conveying Sierra’s orders and messages to the gang’s top leadership on the street, among other things. During the time Sierra served as the gang’s national leader, Trinitarios members operating in the Bronx and Manhattan were responsible for numerous homicides and non-fatal shootings, targeting both other members of the Trinitarios and members of rival gangs. Specifically, this Office has charged members and associates of the Bronx Trinitarios Gang with committing nine homicides between 2005 and 2010, and members and associates of the Manhattan Trinitarios Gang with committing one homicide in 2006.

Since 2009, as part of “Operation Patria” and “Operation Green Haze,” this Office has charged at least 147 members and associates of the Trinitarios Gang.

Mr. Bharara praised the work of the New York City Police Department, the Bureau of Alcohol, Tobacco, Firearms, and Explosives, the Drug Enforcement Administration, and the New York State Department of Corrections and Community Services.

The case is being handled by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Nola B. Heller, Micah W.J. Smith, Jessica Ortiz, Sarah Krissoff, Timothy D. Sini, Ryan Poscablo, and Rachel Maimin are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today the filing and settlement of a lawsuit against NEW ROCHELLE SCHOOL DISTRICT (the “District”) for violating Title II of the Americans with Disabilities Act of 1990 (the “ADA”) by failing to evacuate two students with disabilities from the New Rochelle High School during an actual evacuation, as well as drills. The settlement, in the form of a consent decree, was approved yesterday by U.S. District Judge Cathy Seibel.

Manhattan U.S. Attorney Preet Bharara said: “We think of schools as safe havens for all students, and students with disabilities are no exception. The ADA requires that students with disabilities be given the opportunity to participate meaningfully in all programs put in place by their schools – a requirement that applies with particular force to an emergency preparedness program. There is never an excuse for jeopardizing the safety of any child.”

According to the Complaint and Consent Decree filed in Manhattan federal court, the District failed to provide two students with disabilities with “meaningful access” to the school’s emergency preparedness programs when it failed to evacuate them on January 31, 2013, during a school-wide evacuation, after the fire alarm was triggered as a result of a smoke condition in the electrical room of the New Rochelle High School. In addition, the investigation revealed that the District had failed to maintain evacuation plans for students with disabilities and failed to permit them to participate fully in evacuation drills. Title II of the ADA prohibits a public entity from, among other things, excluding individuals with disabilities from, or denying them the benefits of, its services, programs, or activities. To comply with Title II, a public entity must ensure that individuals with disabilities are afforded “meaningful access” to such services, benefits, and activities, including emergency preparedness programs.

In the Consent Decree, NEW ROCHELLE SCHOOL DISTRICT expressly acknowledges “that it failed to evacuate J.F. and A.B. from the New Rochelle High School (‘NRHS’) with the rest of the student body during an evacuation that occurred on January 31, 2013; the District also acknowledges that prior to January 31, 2013, it failed to ensure that J.F. and A.B. were evacuated from NRHS during some evacuation drills conducted for the NRHS student body.”

Under the Consent Decree, the District has agreed to ensure that students with disabilities are able to participate meaningfully in evacuations – whether actual evacuations or drills. The Consent Decree further requires the District to provide ADA training to all District employees, including school administration, aides, security personnel, and teachers who have students with disabilities in their classrooms. In addition, the District must obtain technical assistance from an expert approved by the United States for the purpose of creating and implementing written evacuation plans for students with disabilities. Finally, the District has agreed that upon the request of any student with a disability, it will make reasonable modifications to its policies, practices, and procedures concerning the placement of the student in particular classrooms.

Assistant U.S. Attorney Rebecca C. Martin is in charge of the case.

U.S. v. City School District of New Rochelle Civil Complaint
U.S. v. City School District of New Rochelle Consent Decree

Preet Bharara, the United States Attorney for the Southern District of New York, Leslie R. Caldwell, the Assistant Attorney General for the U.S. Department of Justice’s Criminal Division, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that FREDERIC CILINS, a French citizen, was sentenced today to 24 months in prison for obstructing a federal criminal investigation of alleged bribes paid to secure valuable mining rights in the Republic of Guinea. CILINS pled guilty to one count of obstructing a criminal investigation in March 2014 before U.S. District Judge William H. Pauley, III, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “Frederic Cilins went to great lengths to thwart a Manhattan federal grand jury’s investigation into an alleged bribery scheme in the Republic of Guinea. In an effort to prevent the federal authorities from learning the truth, Cilins paid a witness for her silence and to destroy key documents. Today, Cilins learned that no one can manipulate justice.”

Assistant Attorney General Leslie R. Caldwell said: “Cilins offered to bribe a witness in an FCPA investigation to stop the witness from talking to the FBI. Today’s sentence holds Cilins accountable for his effort to undermine the integrity of our justice system, and sends a message that those who interfere with federal investigations will be prosecuted and sent to prison.”

FBI Assistant Director-in-Charge George Venizelos: “Cilins obstructed the efforts of the FBI during the course of this investigation. His guilty plea and sentence demonstrate our shared commitment with the U.S. Attorney’s Office to hold accountable those who seek to interfere with the administration of justice. This case should be a reminder to all those who try to circumvent the efforts of a law enforcement investigation: the original crime and the cover-up both lend themselves to prosecution.”

According to the superseding information and other documents filed in Manhattan federal court, as well as statements made at today’s sentencing proceeding and at CILINS’s guilty plea:

CILINS endeavored to obstruct an investigation being conducted by a federal grand jury sitting in the Southern District of New York into potential violations of the Foreign Corrupt Practices Act (“FCPA”) and money laundering. The investigation related to allegations that a mining company with which CILINS was affiliated paid bribes to officials of a former governmental regime of the Republic of Guinea to win valuable mining concessions in the Simandou region of Guinea. During monitored and recorded phone calls and face-to-face meetings, CILINS agreed to pay substantial sums of money to induce a witness to, among other things, destroy and turn over to CILINS for destruction documents related to the bribery allegations. CILINS did so knowing that those documents were being sought by the FBI and were to be produced before a federal grand jury. He also sought to induce the witness to sign an affidavit containing false statements regarding matters under investigation by the grand jury, and tried to get the witness to leave the United States to avoid being questioned by the FBI about these allegations.

In addition to the prison sentence, CILINS, 51, a resident of France, was ordered to pay a fine of $75,000 and to forfeit $20,000.

Mr. Bharara praised the outstanding efforts of FBI in the investigation, which he noted is ongoing. He also thanked the Justice Department’s Office of International Affairs and Office of Enforcement Operations for their assistance in the investigation.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Elisha J. Kobre and Trial Attorney Tarek Helou of the Fraud Section of the Criminal Division are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States filed a civil injunction complaint in Manhattan federal court alleging that MEDWAY CONSTRUCTION INC. (“MEDWAY”), a construction sub-contracting company, has for years failed to comply with its tax obligations and has interfered with the enforcement of the internal revenue laws.

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

MEDWAY has, since at least 2003, engaged in a pattern and practice of ignoring its federal tax obligations to the detriment of the U.S. Treasury. In particular, MEDWAY has incurred more than $1 million in unpaid federal tax liabilities, and has accumulated these liabilities on an ongoing basis since 2003. If left unaddressed, MEDWAY will continue its years-long pattern of failing to pay its taxes. The Complaint seeks to bar MEDWAY from failing to pay future tax liabilities on a timely basis, require it to comply with the internal revenue laws, and become current with all outstanding tax liabilities.

Simultaneously with the filing of the Complaint, the United States filed an Order to Show Cause seeking to temporarily enjoin MEDWAY from continuing to violate or interfere with the enforcement of the internal revenue laws.

Mr. Bharara thanked the Internal Revenue Service for its assistance in the case.

The case is being handled by the Office’s Tax and Bankruptcy Unit. Assistant U.S. Attorney James Nicholas Boeving is in charge of the case.

U.S. v. Medway Construction, Inc. complaint

Preet Bharara, the United States Attorney for the Southern District of New York, William J. Bratton, the Commissioner of the Police Department for the City of New York (“NYPD”), James J. Hunt, the Acting Special Agent-in-Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), Thomas Cannon, the Special Agent-in-Charge of the New York Field Division of the U.S. Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”), 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 charges today against 27 individuals who sold narcotics and used guns in the Fordham and Kingsbridge areas of the Bronx, 20 of whom were members and associates of the Trinitarios street gang (the “Trinitarios” or the “Gang”).

Manhattan U.S. Attorney Preet Bharara said: “As alleged, for approximately five years, members and associates of the Trinitarios maintained a vise-like grip on narcotics trafficking in the Fordham and Kingsbridge areas of the Bronx, and controlled their territory through violence. Gangs like the Trinitarios are a cancer on New York’s neighborhoods – both in the physical harm they inflict and the atmosphere of despair they create. Today’s arrests again demonstrate this Office’s commitment to eradicating the scourge of gangs throughout the Southern District of New York and to giving back to residents the peaceful enjoyment of their communities.”

NYPD Police Commissioner William J. Bratton said, “Gangs and illegal drug trafficking compromise the quality of life in our communities. Thanks to the collaborative efforts of the investigators and prosecutors involved in this case, their operation has been shut down and they will be brought to justice.”

DEA Acting Special Agent-in-Charge James J. Hunt said: “Residents of Fordham and Kingsbridge areas of the Bronx were unwilling victims of gun violence and intimidation imposed by the Trinitarios gang’s drug operations. This operation is the epitome of law enforcement collaboration between the US Attorney’s Office Southern District of New York, New York City’s Finest, local and federal law enforcement to combat gang violence and reclaim these neighborhoods from drug trafficking.”

ATF Special Agent-in-Charge Thomas Cannon said: “The arrests today mark the latest collaborative efforts of law enforcement against the scourge of gang violence, in particular the alleged criminal activities of members and associates of the Trinitarios. This investigation, which spans many years and has resulted in the arrests of over 100 gang members, continues to uncover the wanton violence and extensive narcotics trafficking this criminal organization and its associates committed with impunity on the streets of New York. The ATF is grateful to our law enforcement partners at the DEA, HSI, the NYPD and the U.S. Attorney’s Office for their investigative focus and dedication throughout. Today, New York City residents can rest knowing that members of the Trinitarios responsible for victimizing the citizens of New York City and beyond have been brought to justice.”

ICE HSI New York Special Agent-in-Charge James T. Hayes, Jr. said: “Today’s arrest disrupt the illegal drug trafficking and violence of TREY 18, a particularly dangerous contingent of the Trinitarios criminal street gang. HSI is committed to working collaboratively across all levels of law enforcement to combat the violence and chaos caused by transnational criminal organizations such as the Trinitarios."

Two Indictments (“Indictment One” and “Indictment Two”) and a Complaint were unsealed today in Manhattan federal court.

According to Indictment One, from approximately 2009 to the present, the Trinitarios operated in the Fordham and Kingsbridge neighborhoods of the Bronx, among other locations. The Trinitarios operating in these neighhorhoods during this time period were members of two related “sets,” or factions of the Gang, called the “18 Treys” and “Greenbridge.” Members of the 18 Treys and Greenbridge sets, and their associates, committed acts of violence, such as shootings, against rival gangs – such as the “Eden Boys” gang – in order to protect their drug-trafficking operation, and to protect fellow members and associates of the Trinitarios. Members and associates of the 18 Treys and Greenbridge sets controlled drug trafficking in the Fordham and Kingsbridge neighborhoods of the Bronx. ANDY SOSA, a/k/a “Sosa Gucci Prada,” and NELSON VERAS, a/k/a “Monkey,” a/k/a “Monkey White,” were leaders of the Trinitarios in these neighborhoods. MICKEY VALDEZ, a/k/a “Mikey,” was one of the shooters on behalf of the Gang, enforcing the Gang’s control over these neighborhoods, as well as the Gang’s drug trafficking, through violence.

ANDY SOSA, a/k/a “Sosa Gucci Prada,” MICKEY VALDEZ, a/k/a “Mikey,” NELSON VERAS, a/k/a “Monkey,” a/k/a “Monkey White,” OSCAR ALMANZAR, a/k/a “Heavy,” JIMMY KELLY, AKBAR HUSSAIN, a/k/a “AK,” DARWIN AYALA, a/k/a “Fatulo,” JOSHUEL RODRIGUEZ, a/k/a “Alpa,” MIGUEL CARELA, a/k/a “Bone,” a/k/a “Bonet,” JUSTIN RAMIREZ, a/k/a “E.T.,” JAMES PAULINO, LUCAS CHAJECKI, a/k/a “Luc,” OMAURIS CABRERA, a/k/a “Oh Boy,” EDWIN MERCEDES, a/k/a “Mela,” a/k/a “Melasas,” CHRISTOPHER PEREZ, a/k/a “Flaco,” ARGENIS RODRIGUEZ, ISMEAL VASQUEZ, a/k/a “Ish,” MICHAEL ALVARADO, a/k/a “Dirt,” JORGE ARTILES, and ARGENIS HENRIQUEZ, a/k/a “Shysty,” are charged in Indictment One with conspiring to sell cocaine, heroin, crack, marijuana, oxycodone, and suboxone. SOSA, VERAS, RODRIGUEZ, CARELA, and RAMIREZ are also charged with carrying, brandishing, and discharging a firearm, and aiding and abetting the same, in connection with the charged narcotics conspiracy.

In Indictment Two, FRANCIS SANTOS, a/k/a “Lucky,” MANUEL SANTOS, and RALPHAEL GERMAN, a/k/a “Capo,” are charged with selling cocaine and marijuana in the vicinity of Andrews Avenue in the Bronx.

In the Complaint, SAGE PEREZ, a/k/a “Mango,” DANIEL BERROA, a/k/a “Bucks,” YAMIL LUNA, a/k/a “Still,” and JULIAN REYNOSO, a/k/a “Juju,” are charged with selling marijuana in the vicinity of West Kingsbridge Road in the Bronx.

During the arrests, agents and officers seized, among other evidence, prescription pills, heroin, and narcotics packaging paraphernalia. To date, in this case, agents and officers have seized, among other evidence, numerous firearms with ammunition, two machetes, multiple knives, and quantities of marijuana, cocaine, heroin, and ecstasy.

In a coordinated strike, 19 defendants were arrested in New York late last night and early this morning. They will be presented later this afternoon in Manhattan federal court. OMAURIS CABRERA is already in federal custody on a separate narcotics charge, and remains in custody. FRANCIS SANTOS, OSCAR ALMAZAR, EDWIN MERCEDES, and ARGENIS HENRIQUEZ are already in custody on state charges. As of the time of this press release, the following defendants are still being sought: Nelson Veras, Michael Alvarado, Jorge Artilles, Justin Ramirez, Argenis Rodriguez, Lucas Chajecki, and Manuel Santos. A chart identifying each defendant, the charges, and the maximum penalties is attached to this release. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

The indicted cases are assigned to U.S. District Judges Shira A. Scheindlin and Victor Marrero.

Today’s charges stem from a long-term investigation, “Operation Patria,” conducted by federal and local law enforcement officers working with the U.S. Attorney’s Office for the Southern District of New York. The charges unsealed today come approximately two years after the filing of the initial indictment in this case, which charged 50 members and associates of the Trinitiarios Gang with racketeering, narcotics, and firearms offenses, and approximately one year after the superseding indictment, which charged 26 additional defendants with nine murders. A total of 104 defendants have been charged in this case between the original indictment and the charges unsealed today. Aside from those defendants charged today for the first time in this case, all but 18 of those defendants have already been convicted at trial or by guilty plea.

In addition, in 2009 and 2010, this Office charged a combined 43 members and associates of the Manhattan faction of the Trinitarios Gang with racketeering, murder in aid of racketeering, conspiracy to commit murder in aid of racketeering, assault and attempted murder in aid of racketeering, narcotics conspiracy, and firearms offenses. All of those individuals have pleaded guilty to charges associated with that case, including the May 2012 guilty pleas of Jonathan Feliz, who was alleged to have been the leader of the Manhattan faction of the Trinitarios Gang, to a mandatory minimum term of 30 years in prison for racketeering offenses committed in connection with his leadership of the Gang, and Louinsky Minier, also one of the Gang’s leaders, to charges related to the November 23, 2006, murder of Roy Abreu, which occurred on 162nd Street and Broadway in Manhattan.

Since 2009, this Office has charged at least a combined 147 members and associates of the Trinitarios Gang, including Leonides Sierra, a/k/a “Junito,” the Gang’s national leader, who pled guilty.

Mr. Bharara praised the outstanding investigative work of the DEA, the NYPD, the ATF, and HSI/ICE. He added that the investigation is continuing.

The Office's Violent and Organized Crime Unit is overseeing the case. Assistant U.S. Attorneys Rachel Maimin and Justina Geraci are in charge of the prosecution.

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

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U.S. v. Daniel Berroa et al Complaint
U.S. v. Francis Santos et al. Indictment
U.S. v. Andy Sosa et al. Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Charles Gardner, the Commissioner of the Yonkers Police Department, announced today the unsealing of charges against DA’QUAN JOHNSON, a/k/a “Bloody,” a/k/a “Buddha,” JAMES JOHNSON, a/k/a “Jimmy,” and KENNETH MOORE, a/k/a “Doogie” for a fatal shooting related to gang rivalry in Yonkers.

U.S. Attorney Preet Bharara stated: “Once again we charge another senseless killing of a bystander by rival street gangs and drug dealers underscoring the continuing need to dismantle these violent groups, who not only threaten each other but everyone around them. We and our law enforcement partners remain dedicated to this goal.”

FBI Assistant Director-in-Charge George Venizelos stated: “Members and associates of street gangs viciously defend their respective territories, at times aligning themselves with each other to engage in acts of violence against anyone who dares to encroach on the area they control. In this case, murder served as the final result in the constant violence between two gangs. Eradicating gangs and stamping out the violence they bring to our neighborhoods remain top priorities for the FBI. The people of our communities deserve the right to live in a society that is free from violence. One in which walking to the corner store or sending children to school doesn’t trigger the fear of violence lurking around every bend.”

Yonkers Police Commissioner Charles Gardner stated: “The arrest of these violent individuals will make the streets of Yonkers a safer place. While working with our federal and local law enforcement partners we continue to make progress in aggressively pursuing and removing violent gang members from our community. Gang members operating in Yonkers should be warned that they may be the target of other ongoing investigations and they will ultimately be held accountable for their actions. I would like to specifically thank the US Attorney’s office for the Southern District of NY and the FBI Violent Crimes Task Force for their tenacious efforts in this investigation.”

According to the allegations in the Indictment unsealed today in White Plains federal court and other documents in the public record:

DA’QUAN JOHNSON, JAMES JOHNSON, and MOORE are members and affiliates of the “Grimy Motherfuckers,” or “GMF,” a local, street-level gang operating in and around the Schlobohm Housing Project in Yonkers, New York. At its inception, GMF was aligned with the Strip Boyz, a different street gang that was likewise based in the Schlobohm Housing Project in Yonkers and was made up of members one generation older than most GMF members. GMF and the Strip Boyz controlled crack cocaine and marijuana sales in and around the Schlobohm Housing Project and were allied in disputes with rival gang members, including members of the Cliff Street Gangsters and the Elm Street Wolves, two gangs from the east side of Nepperhan Avenue in Yonkers.

In late June and early July 2012, federal authorities arrested 20 members of the Strip Boyz on charges of narcotics distribution and/or firearm offenses in a case captioned United States v. Mark David, S1 12 Cr. 214 (ER) (S.D.N.Y.). All 20 defendants have pled guilty in satisfaction of the charges.

The federal arrests of the Strip Boyz left GMF the dominant gang in the area around the Schlobohm Housing Project, and GMF members have continued to engage in acts of violence and intimidation to preserve the dominance of the Schlobohm Housing Project and the surrounding areas that they previously shared with the Strip Boyz. Above all, GMF members are aligned in their ongoing disputes with rival gangs in southwest Yonkers, among them a gang based in the vicinity of Highland Avenue known as “Highland.”

The dispute between GMF and Highland resulted in members of those gangs committing numerous acts of violence against one another. With regard to the conduct that underlies the Indictment, on December 27, 2013, a shooting occurred in the vicinity of Palisade Avenue and Elm Street in Yonkers, which is territory controlled by GMF. After the shooting occurred, members of GMF received information that the individuals responsible for it were members of Highland. In retaliation for the shooting, the same night, DA’QUAN JOHNSON and KENNETH MOORE, along with other GMF members, traveled to territory controlled by Highland with the intent of retaliating. A GMF member then shot into a crowd that had congregated for a candlelight vigil at the intersection of Highland Avenue and Jackson Street. One of the bullets hit Tyrone Arthur in the chest, killing him. After the murder, JAMES JOHNSON took custody of the murder weapon and hid it from law enforcement.

DA’QUAN JOHNSON, 23, of Yonkers, and MOORE, 24, of Mount Vernon, New York are charged with conspiracy to commit murder in aid of racketeering, in violation of Title 18, United States Code, Section 1959(a)(5); murder in aid of racketeering, in violation of Title 18, United States Code, Sections 1959(a)(1) and 2; and possessing a firearm in furtherance of a crime of violence resulting in death, in violation of Title 18, United States Code, Section 924(j). JAMES JOHNSON, 22, of Yonkers, is charged with being an accessory after the fact to the murder, in violation of Title 18, United States Code, Section 3.

DA’QUON JOHNSON and JAMES JOHNSON were arrested this morning in Yonkers. They were presented before United States Magistrate Judge Judith C. McCarthy. KENNETH MOORE arrested in Georgia and presented in Atlanta federal court.

Mr. Bharara praised the outstanding investigative work of the FBI’s Westchester Violent Crimes Task Force, which is comprised of agents and detectives of the FBI, Homeland Security Investigations, the City of Yonkers Police Department, the Westchester County Police, the Westchester County District Attorney’s Office. He also thanked the Westchester County District Attorney’s Office and the Atlanta Field Office of the FBI. He added that the investigation is continuing.

The prosecution is being handled by the Office’s White Plains Division and Violent Crimes Unit. Assistant U.S. Attorney Scott Hartman 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.

United States v. Da’Quan Johnson et al., 14 Cr. 476

COUNT CHARGE DEFENDANTS MAXIMUM PENALTIES

1 Conspiracy to murder in aid of racketeering

DA’QUAN JOHNSON, a/k/a “Bloody,” a/k/a “Buddha,” and KENNETH MOORE, a/k/a “Doogie”

10 years in prison

2 Murder in aid of racketeering

DA’QUAN JOHNSON, a/k/a “Bloody,” a/k/a “Buddha,” and KENNETH MOORE, a/k/a “Doogie”

Mandatory life in prison or the death penalty

3 Carrying and using a firearm during and in relation to, and possessing a firearm in furtherance of, a crime of violence, resulting in the death of another

DA’QUAN JOHNSON, a/k/a “Bloody,” a/k/a “Buddha,” and KENNETH MOORE, a/k/a “Doogie” Life in prison or the death penalty

Mandatory minimum 10 years in prison consecutive to any other sentence

4 Accessory after the fact to murder

JAMES JOHNSON, a/k/a “Jimmy”

15 years in prison

The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Johnson et al - Indictment_Redacted

Preet Bharara, the United States Attorney for the Southern District of New York, announced that AVI AYACHE and YARON BAR, two leaders of an Israeli lottery fraud ring, were sentenced today by Chief United States District Judge Loretta A. Preska to 13 years and 12 years in prison, respectively, on mail and wire fraud charges. All 12 members of the ring who were charged in this case have pleaded guilty. With this sentence, nine of the twelve defendants have been sentenced. Before today’s sentencing, the sentences have ranged from 40 to 144 months in prison. Three remaining sentencings are scheduled for July and August, 2014.

Manhattan U.S. Attorney Preet Bharara said: “Avi Ayache and Yaron Bar were leaders of a predatory group that targeted elderly people in the U.S., conning them into believing they were lottery winners. Preying on their victims’ dreams of financial comfort, Ayache and Bar bilked them out of substantial portions of their life savings. Now Ayache and Bar will spend a substantial portion of their lives in prison.”

According to the Indictment, other documents filed in Manhattan federal court, and statements made at various proceedings in this case:

From approximately 2005 through 2009, the defendants participated in a phony “lottery prize” scheme that targeted victims, mostly elderly, in the United States. The defendants identified victims, or “leads,” by purchasing from list brokers the names and contact information of U.S. residents who subscribed to sweepstakes lotteries. Then, operating out of telemarketing boiler rooms run by “Managers,” “Qualifiers” called the victims and, using a script, falsely told the victims they had won a substantial cash prize, and asked them about their assets. If the victim had sufficient assets, the victim was transferred to a “Shooter,” who purported to be an attorney in the U.S., and who told the victims that to obtain the prize, they had to pay several thousands of dollars in fees and taxes. Victims who complied were typically contacted again by Shooters and induced to send additional funds, amounting to tens and sometimes hundreds of thousands of dollars. In reality, there was no lottery prize and the victims were ultimately bilked out of an estimated total of more than $8 million.

The defendants operated multiple boiler rooms that used the names of various sham law firms purportedly located in New York, including law firms named “Abrahams Kline,” “Bernstein Schwartz,” “Steiner, Van Allen, and Colt,” “Bloomberg and Associates,” and “Meyer Stevens.” The defendants further used various aliases and call forwarding telephone numbers to mask the fact that the defendants were located in Israel. The defendants also possessed bank accounts in Israel, Cyprus, and Uganda, to which illegal proceeds were wired. In furtherance of the fraudulent scheme, the defendants even sent shipments of flowers and gift baskets to various victims in the United States in order to “congratulate” them on their purported lottery winnings.

In addition to the prison terms, Judge Preska also ordered AYACHE and BAR to forfeit $8.2 million and pay restitution of $8.2 million.

Eleven of the twelve defendants were arrested in Israel in July 2009. All 11 were extradited to the United States. A twelfth defendant, Matthew Getto, was arrested in July 2009 at Newark International Airport as he attempted to board a flight for Israel.

The earlier sentencings of the members of the lottery fraud scheme included the following:

• On June 5, 2012, Avi Perov was sentenced by the Honorable Barbara S. Jones to 51 months in prison on wire fraud charges;
• On August 4, 2011, Yulia Rayz was sentenced by the Honorable Barbara S. Jones to 40 months in prison on wire fraud charges;
• On December 15, 2011, Naor Green was sentenced by the Honorable Barbara S. Jones to 40 months in prison on wire fraud charges;
• On June 7, 2012, Ian Kaye was sentenced by the Honorable Barbara S. Jones to 51 months in prison on wire fraud charges;
• On April 18, 2013, Limor Cohen was sentenced by the Honorable Loretta A. Preska to 97 months in prison on wire fraud charges;
• On December 12, 2013, Matthew Getto was sentenced by the Honorable Harold Baer to 144 months in prison on wire fraud charges.

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

The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorney Peter M. Skinner is in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and James T. Hayes, Jr., Special Agent-in-Charge of the New York Office of U.S. Immigration

and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), announced today the return to the Mongolian government of the fossilized remains of over 18 dinosaur skeletons, including two Tyrannosaurus bataar skeletons that were unlawfully taken from Mongolia. The Office already returned one Tyrannosaurus bataar, fully prepared for display, to Mongolia in a ceremony held in May 2013.

The repatriation represents the culmination of a two-year effort to return numerous dinosaur fossils that were unlawfully taken from Mongolia, some of which were illegally smuggled into the United States using false customs importation documents, and some of which were voluntarily forfeited to the United States for return to Mongolia despite never having been brought into the country. That two-year effort included two successful civil forfeiture law suits, a successful criminal investigation and prosecution, and separate civil actions undertaken to secure the transfer of the groups of fossils.

The Mongolian dinosaur fossils being returned today include:

• Two additional Tyrannosaurus bataar skeletons;
• A skeleton of a Saurolophus angustirostris, a duckbilled, plant-eating dinosaur, and a partial skeleton of an additional Saurolophus;
• Two freestanding Oviraptors, dinosaurs known (perhaps apocryphally) for eating the eggs of other dinosaurs;
• A rock matrix containing at least four Oviraptors;
• A rock slab containing two Gallimimus skeletons, which were large, ostrich-like dinosaurs;
• Two additional Gallimimus skeletons;
• The partial skeleton of an Ankylosaurus, a dinosaur known for having a heavily armored body and a bony club-like tail;
• The skeleton of a Protoceratops, a dinosaur about the size of a large dog with a distinctive neck frill;
• One restored composite “egg nest” display piece made of composite dinosaur egg fossils;
• Several small, unidentified prehistoric lizards and turtles; and
• Numerous partial skeletons.

Manhattan U.S. Attorney Preet Bharara said: "Today, we return a veritable nest of dinosaurs that includes two additional Tyrannosaurus bataar skeletons, along with numerous other examples of fossils of dinosaurs native to the Gobi Desert. This is a historic event for the U.S. Attorney’s Office, in addition to being a pre-historic event, and we are proud to participate in the return of these dinosaur skeletons to their rightful home.”

HSI Special Agent-in-Charge James T. Hayes, Jr., said: “The fossils returned today do not belong in the hands of any private collection or one owner. They belong to the people of Mongolia where they will be displayed in their national museum alongside the Bataar ICE repatriated last year. HSI will not allow the illicit greed of some to trump the cultural history of an entire nation.”

According to the Criminal Complaint and Information, related Civil Complaints and related filings, and statements made in Court:

Civil and Criminal Actions

In March 2012, the Government initiated a civil forfeiture action in order to recover a nearly complete Tyrannosaurus bataar skeleton (the “First Bataar”), which was sold at auction for over $1 million. Tyrannosaurus bataar was a carnivorous dinosaur that lived during the late Cretaceous period, approximately 70 million years ago. The Tyrannosaurus bataar, which has only been found in what is now Mongolia, was first discovered in 1946 during a joint Soviet-Mongolian expedition to the Gobi Desert in the Mongolian Ömnögovi Province. Mongolian law enacted in 1924 declares dinosaur fossils to be the property of the Government of Mongolia, and criminalizes their export from the country.

The First Bataar had been taken from Mongolia and sent to Great Britain without permission from the Mongolian government. It was then imported into the United States from Great Britain in a fashion contrary to federal law, using customs importation documents that contained numerous false statements.

By 2012, Texas-based Heritage Auctions, Inc., offered the First Bataar at an auction conducted in New York City. Prior to the sale, the Government of Mongolia sought, and was granted, a Temporary Restraining Order prohibiting the auctioning, sale, release, or transfer of the Tyrannosaurus Bataar Skeleton by a Texas State District Judge. Notwithstanding the state court order, Heritage Auctions completed the auction and the Tyrannosaurus Bataar Skeleton sold for over $1 million. However, the sale was contingent upon the outcome of any court proceedings instituted on behalf of the Mongolian Government.

On May 22, 2012, the President of Mongolia, Tsakhia Elbegdorj, sent a letter to the United States Attorney’s Office for the Southern District of New York formally requesting the Office’s “assistance in preserving Mongolia’s cultural heritage in this rare national treasure by . . . seeking forfeiture of . . . the Tyrannosaurus bataar skeleton.”

On June 5, 2012, at the request of the President of Mongolia, several paleontologists specializing in Tyrannosaurus bataars examined the First Bataar and concluded that it is in fact a Tyrannosaurus bataar skeleton that was unearthed from the western Gobi Desert in Mongolia between 1995 and 2005. Shortly thereafter, on June 18, 2012, the United States Attorney’s Office filed a civil action seeking the forfeiture of the Bataar skeleton and the District Court issued a warrant authorizing ICE’s Homeland Security Investigations (HSI) to seize the Bataar skeleton.

On September 24, 2012, the United States Attorney’s Office filed an amended civil forfeiture Complaint which included the original paleontological reports as well as additional reports from those same paleontologists and other paleontologists. The additional reports definitively stated that given the particularized coloring of the bones of the First Bataar skeleton, the First Bataar skeleton undoubtedly came from Mongolia’s Gobi Desert.

On October 17, 2012, Eric Prokopi, a self-described “commercial paleontologist” who had imported the First Bataar, was arrested on one count of conspiracy to smuggle illegal goods, possess stolen property, and make false statements, one count of smuggling goods into the United States, and one count of interstate sale and receipt of stolen goods. Prokopi owned and ran a business out of his Florida home in which he bought and sold whole and partial fossilized dinosaur skeletons. The charges stemmed from Prokopi’s illegal importation of the Bataar and other dinosaur fossils into the United States, including the remains of a small, flying dinosaur from what is now China that had previously been administratively forfeited.

Not long after his arrest, on December 27, 2012, Prokopi pled guilty to engaging in a scheme to illegally import the fossilized remains of numerous dinosaurs that had been taken out of their native countries illegally and smuggled into the United States. As part of his plea agreement, Prokopi consented to the forfeiture of the First Bataar. Prokopi also agreed to forfeit other Mongolian dinosaur fossils that the investigation had uncovered, including a second nearly complete Tyrannosaurus bataar skeleton (the “Second Bataar”), a Saurolophus Angustirostris skeleton (the “Saurolophus,” a duckbilled dinosaur that lived during the Cretaceous period), and an Oviraptor skeleton, all of which had been in his possession but have since been recovered by the U.S. Attorney’s Office. He further agreed to forfeit his interest in a third Tyrannosaurus bataar skeleton (the “Third Bataar”), which was located in Great Britain.

On February 2, 2013, the Government filed a second civil action against several of the dinosaur fossils that had been in Prokopi’s possession. These included the Saurolophus, possession of which had been transferred to a California auction house, and a matrix containing at least five Oviraptor skeletons (the “Raptor Matrix”), which the California auction house had, at one point, put up for sale.

Recovery and Repatriation of Dinosaur Skeletons

On May 6, 2013, and May 9, 2013, the civil actions concluded when U.S. District Judge P. Kevin Castel signed judgments forfeiting the First Bataar, the Second Bataar, the Saurolophus, two Raptors, and the Raptor Matrix for the purpose of their return to the Government of Mongolia. The California auction house agreed to assist in facilitating the return of the Saurolophus and the Raptor Matrix to Mongolia, consenting to the forfeiture of both items and agreeing to furnish the United States Attorney’s Office with a metal stand used to display the Saurolophus.

Separately, on May 1, 2013, U.S. District Judge Harold Baer signed a stipulation arranging for the return of, among other fossils, the Third Bataar; a rock slab containing two Gallimimus skeletons (the “Gallimimus slab”), two additional Gallimimus skeletons, an Ankylosaurus skeleton and Ankylosaurus skull, a Protoceratops skeleton, and one restored composite egg nest display piece made of composite dinosaur egg fossils (together, the “Moore dinosaurs”) provided to the United States Attorney’s Office by Christopher Moore, a British citizen and onetime business partner of Eric Prokopi. During the U.S. Attorney’s Office’s investigation, Moore informed the Government of his possession of the Moore dinosaurs. Upon being advised that the Moore dinosaurs had been stolen from Mongolia, Moore agreed to send them to the United States Attorney’s Office for their return to Mongolia.

On July 3, 2014, Prokopi was sentenced to a term of three months in prison by U.S. District Judge Alvin K. Hellerstein.

The First Bataar was formally returned to the Government of Mongolia in a Repatriation Ceremony held in New York on May 6, 2013. The remaining dinosaur fossils will be returned to the Government of Mongolia today.

Mr. Bharara praised the investigative work of HSI. Mr. Bharara also thanked Mongolian authorities for their assistance in the case.

The forfeiture actions were handled by the Money Laundering and Asset Forfeiture Unit of the U.S. Attorney's Office. Assistant U.S. Attorneys Sharon Cohen Levin and Martin S. Bell were in charge of the litigation. The criminal case was handled by the Complex Frauds Unit. Martin S. Bell was in charge of the prosecution.

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 BNP Paribas S.A. (BNPP), a global financial institution headquartered in Paris, pled guilty today before U.S. District Judge Lorna G. Schofield to a one-count Information charging the bank with conspiring to violate the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA), for its role in processing billions of dollars of U.S. dollar transactions through the U.S. financial system on behalf of Sudanese, Iranian, and Cuban entities subject to U.S. economic sanctions from 2004 through 2012.

At today’s proceeding, Judge Schofield accepted the plea agreement that had been entered into by the Government and BNPP on June 30, 2014, under which BNPP agreed to forfeit a total of $8.8336 billion, pay a criminal fine of $140 million, cooperate with U.S. authorities, and be subject to a five-year term of probation, during which BNPP must enhance its compliance policies and procedures in accordance with settlement agreements BNPP has entered into with its principal U.S. regulators, the Board of Governors of the Federal Reserve System, and the New York State Department of Financial Services. Judge Schofield set a sentencing date of October 3, 2014, at 2:00 p.m.

In accepting the bank’s guilty plea, Judge Schofield said: “The defendant’s actions not only flouted U.S. foreign policy, but also provided support to governments that threaten both our regional and national security. And in the case of Sudan, a government that has committed flagrant human rights abuses and has known links to terrorism. I find that the severity of the defendant’s conduct more than warrants the criminal charge to which it has pleaded. . . . The forfeiture amount will surely have a deterrent effect on others that may be tempted to engage in similar conduct, all of whom should be aware that no financial institution is immune from the rule of law.”

According to the plea agreement, statements made during today’s plea proceeding, and the Statement of Facts containing further admissions by BNPP, BNPP knowingly and willfully moved more than $8.8 billion through the U.S. financial system on behalf of entities subject to U.S. embargo from 2004 through 2012, including more than $4.3 billion in transactions involving entities that were specifically designated by the U.S. Government as being cut off from the U.S. financial system.

BNPP admitted that the majority of illegal payments were made on behalf of sanctioned entities in Sudan, which was subject to U.S. embargo based on the Sudanese government’s role in facilitating terrorism and committing human rights abuses. BNPP processed approximately $6.4 billion through the United States on behalf of Sudanese sanctioned entities from July 2006 through June 2007, including approximately $4 billion on behalf of a financial institution owned by the government of Sudan, even as internal emails showed BNPP employees expressing concern about the bank’s assistance to the Sudanese government in light of its role in supporting international terrorism and committing human rights abuses during the same time period. Indeed, in March 2007, a senior compliance officer at BNPP wrote to other high-level BNPP compliance and legal employees reminding them that certain Sudanese banks with which BNPP dealt “play a pivotal part in the support of the Sudanese government which . . . has hosted Osama Bin Laden and refuses the United Nations intervention in Darfur.”

One way in which BNPP processed illegal transactions on behalf of Sudanese sanctioned entities was through a sophisticated system of “satellite banks” set up to disguise both BNPP’s and the sanctioned entities’ roles in the payments to and from financial institutions in the United States. As early as August 2005, a senior compliance officer at BNPP warned several legal, business, and compliance personnel at BNPP’s subsidiary in Geneva that the satellite bank system was being used to evade U.S. sanctions: “As I understand it, we have a number of Arab Banks (nine identified) on our books that only carry out clearing transactions for Sudanese banks in dollars. . . . This practice effectively means that we are circumventing the US embargo on transactions in USD by Sudan.”

Similarly, BNPP admitted that it provided Cuban sanctioned entities with access to the U.S. financial system by hiding the Cuban sanctioned entities’ involvement in payment messages. From October 2004 through early 2010, BNPP knowingly and willfully processed approximately $1.747 billion on behalf of Cuban sanctioned entities. In the statement of facts, BNPP admitted that it continued to do U.S. dollar business with Cuba long after it was clear that such business was illegal in order to preserve BNPP’s business relationships with Cuban entities. BNPP further admitted that its conduct with regard to the Cuban embargo was both “cavalier” and “criminal,” as evidenced by the bank’s 2006 decision, after certain Cuban payments were blocked when they reached the United States, to strip the wire messages for those payments of references to Cuban entities and resubmit them as a lump sum in order to conceal from U.S. regulators the bank’s longstanding, and illicit, Cuban business.

BNPP also admitted to engaging in more than $650 million of transactions involving entities tied to Iran, and this conduct continued into 2012 – nearly two years after the bank had commenced an internal investigation into its sanctions compliance and had pledged to cooperate with the Government. The illicit Iranian transactions were done on behalf of BNPP clients, including a petroleum company based in Dubai that was effectively a front for an Iranian petroleum company and an Iranian oil company.

This case is being prosecuted by the Money Laundering and Asset Forfeiture Unit of the U.S. Attorney’s Office for the Southern District of New York, and the Money Laundering and Bank Integrity Unit of the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS). Assistant United States Attorneys Andrew D. Goldstein, Martin S. Bell, Micah W.J. Smith, and Christine I. Magdo of the Southern District of New York, and Trial Attorneys Craig Timm and Jennifer E. Ambuehl of AFMLS, are in charge of the prosecution.

This case was investigated by the Internal Revenue Service-Criminal Investigation’s Washington Field Division and the Federal Bureau of Investigation’s New York Field Office. The New York County District Attorney’s Office also conducted its own investigation alongside the Department of Justice on this investigation. The Department of Justice expressed its gratitude to the Board of Governors of the Federal Reserve, the Federal Reserve Bank of New York, the New York State Department of Financial Services, and the Treasury Department’s Office of Foreign Assets Control for their assistance with this matter.

“While we are disappointed with the verdict on the sole count that the jury was permitted to consider, we respect the jury trial system whatever the outcome, and we thank the jury for their service. This Office maintains its faith in the criminal justice system, a system that has resulted in the convictions by trial or guilty plea of 85 other defendants on insider trading charges. We will continue to seek justice in the investigation and prosecution of those who violate the securities laws of the United States.”

Preet Bharara, the United States Attorney for the Southern District of New York, and Michele M. Leonhart, Administrator of the U.S. Drug Enforcement Administration (“DEA”), announced terrorism, narcotics, and weapons charges against FLORINDO ELEUTERIO FLORES-HALA, a/k/a “Comrade Artemio,” VICTOR QUISPE-PALOMINO, a/k/a “Comrade José,” and JORGE QUISPE-PALOMINO, a/k/a “Raul.” As set forth in the Indictment, FLORES-HALA, VICTOR QUISPE-PALOMINO, and JORGE QUISPE-PALOMINO are leaders of the Peruvian-based terrorist organization Sendero Luminoso, or “Shining Path,” which has engaged in cocaine-trafficking and terrorist acts against Peruvian civilians and military, including bombings and massacres, since approximately 1980. FLORES-HALA is in the custody of Peruvian law enforcement. VICTOR QUISPE-PALOMINO and JORGE QUISPE-PALOMINO remain at large. The three are accused of facilitating international narcotics trafficking in order to provide support for the terrorist organization. The case has been assigned to United States District Judge Richard J. Sullivan.

U.S. Attorney Preet Bharara stated: “As alleged, these defendants are leaders of a murderous paramilitary organization, and they themselves ordered ambushes that killed nearly two dozen Peruvian soldiers and police officers. The product of the Peruvian cocaine trade they plied and protected sometimes ends up for sale in the United States. Such a path is anything but shining; it is the path to prison.”

DEA Administrator Michele M. Leonhart stated: “For decades, the Shining Path has fueled terror, addiction and instability across the globe using the proceeds of their drug trafficking. This investigation and our ongoing global efforts reflect DEA’s unwavering commitment to protecting our citizens from these violent and brutal narco-terror organizations. The DEA, along with our outstanding Peruvian law enforcement counterparts, will continue to attack this terrorist organization until they are completely dismantled.”

According to the Indictment:

For more than 30 years, the Shining Path has been an international terrorist group ostensibly committed to Maoist ideals and dedicated to the violent overthrow of the democratically elected Government of Peru. Initially founded and conceived as a political movement and an outgrowth of the Peruvian Communist Party, the Shining Path became a terrorist army engaged in bombings, massacres, and other acts of violence within Peru. The Shining Path has been designated by the United States Secretary of State as a foreign terrorist organization since the designation was first established in U.S. law in October 1997, and has remained on the list of designees ever since.

The Shining Path is styled as a military organization whose armed combatants in recent years have been concentrated in two geographically distinct factions in South Central Peru: the Upper Huallaga Valley (the “UHV”) and the territory bounded by the Apurimac and Ene River Valleys (the “VRAE”). The UHV and VRAE factions have in the recent past been led, respectively, by FLORES-HALA and VICTOR QUISPE-PALOMINO. Within each of the UHV and VRAE factions, the Shining Path’s members are divided into armed columns. JORGE QUISPE-PALOMINO has served as a column leader in the VRAE faction of the Shining Path.

The Shining Path funds its terrorist activities, at least in part, with proceeds from the cocaine trade. For approximately the past decade, the Shining Path has sought to control all aspects of the cocaine trade in the UHV and the VRAE, which contain some of the world’s most fertile coca leaf producing areas. In addition to cultivating and processing its own cocaine for sale, the Shining Path levies a system of taxes called “cupos” on the cultivation, processing, and transit of cocaine in and through the UHV and the VRAE. The Shining Path also provides transport and armed security to drug trafficking organizations moving large loads of cocaine through and out of the VRAE and the UHV. FLORES-HALA, VICTOR QUISPE-PALOMINO, and JORGE QUISPE-PALOMINO knew and understood that at least some of the cocaine the Shining Path grew, taxed, and transported was destined eventually to be sold in the United States.

For at least the past 10 years, the Shining Path has directed violent acts against Peruvian National Police (“PNP”) and Peruvian Army installations and personnel, and has conducted numerous violent attacks on counter-narcotics patrols, killing scores of soldiers and policemen. These acts of violence were intended to protect the Shining Path’s financial interests in the cocaine trade, to serve as reprisal for law enforcement efforts to eradicate illegal cocaine trafficking, and to arm itself by forcefully taking weapons from dead and wounded targets of its violent ambushes.

In Count One of the Indictment, FLORES-HALA, 52, VICTOR QUISPE-PALOMINO, 54, and JORGE QUISPE-PALOMINO, 56, all Peruvian citizens, are charged with conspiring to provide material support to a foreign terrorist organization, specifically, the Shining Path.

In Count Two, FLORES-HALA, VICTOR QUISPE-PALOMINO, and JORGE QUISPE-PALOMINO are charged with conspiring to distribute cocaine with the intent to support terrorist activity.

In Count Three, FLORES-HALA is charged with aiding and abetting the discharge of firearms during and in relation to the terrorism offense charged in Count One. Specifically, Count Three charges that, on December 22, 2005, in Aucayacu, Peru, FLORES-HALA directed Shining Path members to fire automatic weapons at a passing PNP convoy, resulting in the killing of eight PNP officers.

In Count Four, VICTOR QUISPE-PALOMINO, and JORGE QUISPE-PALOMINO are charged with aiding and abetting the discharge of firearms during and in relation to the terrorism offense charged in Count One. Specifically, Count Four charges that, on April 9, 2009, in Ayacucho, Peru, VICTOR QUISPE-PALOMINO and JORGE QUISPE-PALOMINO ordered and planned an ambush in which a group of Shining Path members, armed with assault rifles, detonated a series of mines on a road where a Peruvian Army patrol was passing, and followed with gunfire, killing 15 soldiers, wounding more than a dozen, and seizing 13 assault rifles.

Count One carries a maximum term of life in prison and a maximum fine of $250,000. Count Two carries a maximum term of life in prison, a mandatory minimum term of 20 years in prison, and a maximum fine of $250,000. Counts Three and Four each carry a maximum term of life in prison, a mandatory minimum term of 10 years in prison, and a maximum fine of $250,000. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants would be determined by the Judge.

These historic charges are the result of the close cooperative efforts of the United States Attorney’s Office for the Southern District of New York and the DEA, including the DEA’s Lima Country Office and Special Operations Division. The United States Government also worked closely with Peruvian Government authorities – the Peruvian National Police, the combined Peruvian armed forces and the Peruvian National Prosecutors Office; this Indictment would not have been possible without their ongoing cooperation and assistance. Mr. Bharara also thanked the U.S. Department of Justice’s Office of International Affairs and National Security Division, the United States Department of State, and the United States Department of Defense for their ongoing assistance.

This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorney Michael Ferrara is in charge of the prosecution.

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

U.S. v. Flores-Hala et al., Shining Path Indictment

Preet Bharara, United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director-in-Charge of the New York Office and Andrew W. Vale the Special Agent in Charge of the Albany Division of the Federal Bureau of Investigation ("FBI"), and Shantelle P. Kitchen, the Acting Special Agent in Charge of the New York Field Office of the Internal Revenue Service - Criminal Investigation ("IRS"), announced today that a grand jury sitting in White Plains has returned an Indictment charging New York State Senator THOMAS W. LIBOUS with making false statements to the FBI in connection with a federal grand jury investigation about payments he allegedly caused an Albany lobbying firm to funnel to his son, Matthew Libous. Matthew Libous, an attorney, was also separately charged with tax crimes, including his failure to identify the source of payments he received from the lobbying firm.

Manhattan U.S. Attorney Preet Bharara stated: "As alleged, Thomas Libous took advantage of his position as Senator and Chairman of the Transportation Committee by corruptly causing lobbyists, who wanted Libous's influence to benefit their clients, to funnel money through a law firm to his son where Libous has gotten his son a position. He then tried to cover up his corrupt conduct by lying to FBI Agents about his knowledge of his son's arrangement with the firm, as the Indictment describes. Public servants should serve the public first, not themselves and their families. This Office will continue to pursue elected officials who attempt to take corrupt advantage of their positions."

Assistant FBI Director George Venizelos stated: “As alleged, rather than serve the public he took an oath to serve, Senator Libous used his political position to garner favorable treatment for himself and his son. Lying to FBI Agents is a serious offense and his alleged criminal conduct is an injustice to the community he represents. The investigation and indictment of Senator Libous demonstrates the FBI’s ongoing commitment to weed out public corruption at all levels of government and bring to justice those who betray the public’s trust.”

Acting Special Agent in Charge of IRS – Criminal investigation Shantelle P. Kitchen stated: “IRS-Criminal Investigation will thoroughly investigate those who wilfully violate the income tax laws and obstruct tax administration and we will work with the Department of Justice to see that they are prosecuted. While prosecuting violators is essential to making the tax system work, such prosecutions also reassure the confidence of honest taxpayers in the tax system. We are committed to ensuring that everyone pays their fair share.”

According to the allegations in the Indictment:

A federal grand jury in White Plains was investigating allegations that THOMAS LIBOUS had obtained a job for a family member at a Westchester law firm (“the Law Firm”) in exchange for a promise to refer business to the firm and had arranged for an Albany lobbying firm that regularly lobbied him to secretly pay the law firm $50,000 per year to defray the cost of Libous’s son’s salary and lease of a Range Rover. The lobbying firm specialized in transportation issues and THOMAS LIBOUS served as the Chairman of the Senate's Transportation Committee at the time. The Indictment further alleges that THOMAS LIBOUS told a partner of the Law Firm that the firm would have to "build a new wing" to accommodate the business he would refer to it if it hired his son.

Special Agents of the FBI interviewed THOMAS LIBOUS on June 24, 2010, as part of the grand jury's investigation. According to the Indictment, THOMAS LIBOUS made the following false statements to the agents during the interview:

a. he could not recall how his son began to work at the Law Firm;

b. no deals were made to get his son the job at the Law Firm;

c. he was not aware that the lobbying firm had paid any part of his son's salary at the Law Firm;

d. he never promised to refer work to the Law Firm;

e. he was not involved in his son's decision to work at the Law Firm;

f. he had no business or personal relationship with the Law Firm; and

g. he did not know of any relationship between the lobbying firm and the Law Firm.

THOMAS LIBOUS, 61, of Binghamton, New York, faces a maximum sentence of 5 years' imprisonment. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes, as any sentencing of the defendant will be determined by the judge.

Also announced today is the return of a second Indictment, returned by a grand jury sitting in White Plains, charging MATTHEW LIBOUS with obstructing the IRS in its administration of the tax laws and subscribing to false tax returns.

According to the allegations in the Indictment:

MATTHEW LIBOUS, 32, was employed at a Westchester law firm in early 2006. At the same time, MATTHEW LIBOUS received legal fees directly from clients for whom he provided legal services without the law firm's knowledge. After the law firm terminated MATTHEW LIBOUS' employment, MATTHEW LIBOUS continued to receive legal fees from clients which he failed to report on his federal income tax return. The Indictment alleges that MATTHEW LIBOUS failed to accurately identify the source of payments he received from an Albany lobbying firm that were funneled to him through the Westchester law firm. The Indictment also alleges that MATTHEW LIBOUS failed to report a total of $57,580 in legal fees and other income on his 2006, 2007 and 2008 tax returns.

In 2008, MATTHEW LIBOUS became an owner of Wireless Construction Solutions, LLC ("WCS"), a Westchester-based company that installed and serviced cellular telephone towers. The Indictment alleges that from 2008 through 2011, MATTHEW LIBOUS caused WCS to pay personal expenses on his behalf, including expenses for multiple casino trips, vacations, iTune purchases, a gym membership, an internet dating subscription, spa treatments, visits to tanning salons, clothing, food and student loan payments. According to the Indictment, MATTHEW LIBOUS caused WCS to pay $244,218 in personal expenses from 2008 through 2011. The Indictment alleges that MATTHEW LIBOUS failed to report any of this income on his tax return.

The Indictment charges MATTHEW LIBOUS with one count of obstructing the administration of the tax laws, which carries a maximum sentence of three years' imprisonment, and five counts of subscribing to false tax returns, each of which carries a maximum sentence of three years' imprisonment. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the investigative work of the FBI and the IRS.

These prosecutions are being handled by the Office's White Plains Division. Assistant U.S. Attorneys Perry A. Carbone and James McMahon are in charge of the prosecutions.

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

Libous Thomas.Indictment
Libous Matthew.Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, and Michael P. Stephens, Acting Inspector General for the Federal Housing Finance Agency Office of Inspector General (“FHFA-OIG”), announced today that the United States has settled civil fraud claims under the False Claims Act against HSBC BANK USA, N.A., HSBC FINANCE CORPORATION, HSBC MORTGAGE CORPORATION (USA), and HSBC MORTGAGE SERVICES, INC. (collectively, “HSBC”), related to HSBC’s failure to oversee the reasonableness of foreclosure-related charges HSBC submitted to HUD’s Federal Housing Administration (“FHA”) and the Federal National Mortgage Association (“Fannie Mae”) for reimbursement, contrary to program requirements and HSBC’s certifications that it had done so.

In the settlement, approved for release yesterday in Manhattan federal court by U.S. District Judge Thomas P. Griesa, HSBC accepted responsibility for failing to create or maintain systems to review fees and charges submitted by outside counsel and other third-party providers to HSBC during 2009 and 2010, fees and charges which HSBC then submitted to FHA and Fannie Mae for reimbursement without the requisite oversight and review. HSBC agreed to pay the Government $10 million to resolve its liability to the United States for this conduct.

Manhattan U.S. Attorney Preet Bharara said: “HSBC failed to live up to its legal obligation to monitor and review fees and expenses it was submitting to FHA and Fannie Mae for reimbursement, and in the process, cost the public millions of dollars. With today’s settlement, HSBC publicly admits to its failures and agrees to pay the Government $10 million. Civil actions like these serve as an important tool that our Office can and will continue to use in holding financial institutions responsible for misconduct.”

FHFA-OIG Acting Inspector General Michael P. Stephens: “HSBC had a responsibility, as a servicer, to have controls in place which ensured the fees and charges submitted to Fannie Mae were appropriate and reasonable. Their lack of controls showed gross neglect and an abject failure to serve their customers, FHA and Fannie Mae, and therefore the taxpayers. We are proud to have worked with our partners on this case.”

According to the settlement filed in Manhattan federal court:

As a residential mortgage loan servicer, HSBC performs or oversees the performance of certain administrative activities in connection with residential mortgage loans, such as collecting mortgage payments and pursuing foreclosure when borrowers become delinquent. In pursuing foreclosure on behalf of HSBC, outside counsel and other third-party providers of foreclosure-related services, such as title companies and process servers, incur fees and expenses. HSBC has routinely submitted reimbursement requests to FHA and Fannie Mae for these foreclosure-related fees and expenses.

Pursuant to the National Housing Act, FHA offers mortgage insurance programs whereby it insures lenders against losses on mortgage loans, including expenses related to mortgage servicing, and specifically, expenses incurred in foreclosure proceedings. HSBC has been an approved servicer of FHA-insured loans for many years. In order to obtain and maintain FHA approval to service FHA-insured loans, HSBC was required to submit and did submit annual certifications stating that it adhered to all FHA handbooks, regulations and policies. One such handbook requires servicers to create and maintain a quality control program that reviews all aspects of servicing operations, including foreclosure fees and charges.

HSBC has also been an approved servicer of loans held by Fannie Mae. Fannie Mae is a government sponsored enterprise that purchases mortgage loans as part of its mission to promote liquidity in the housing market. Fannie Mae has been under the conservatorship of the Federal Housing Finance Agency since September 2008. As part of its obligations as a loan servicer for Fannie Mae, HSBC was required to create and implement audit and control systems to ensure compliance with Fannie Mae’s requirements. Specifically, as a servicer of Fannie Mae loans, HSBC was required to ensure that all costs submitted to Fannie Mae for reimbursement were reasonable, customary and necessary.

As set forth in the settlement, during certain years, contrary to program requirements and HSBC’s certifications, HSBC failed to implement and maintain the requisite quality controls, failed to oversee the foreclosure-related charges it submitted to FHA and Fannie Mae for reimbursement, and caused millions of dollars in losses to FHA and Fannie Mae as a result.

Specifically, as part of the settlement, HSBC admitted, acknowledged, and accepted responsibility for the following conduct:

• Notwithstanding HUD requirements and HSBC’s annual certifications to FHA, prior to 2011, HSBC failed to create or maintain an adequate FHA quality control program to review the fees and charges submitted by outside counsel and other third-party providers to HSBC, which HSBC then submitted to FHA for reimbursement.
• Because, prior to 2011, HSBC lacked an adequate quality control program to oversee the fees and charges charged by outside counsel and other third party providers handling foreclosure-related services for FHA-insured mortgages, it failed to sufficiently oversee these fees and charges, despite certifying to FHA that it had done so.
• Between May 1, 2009, and December 31, 2010, HSBC failed to create or maintain Fannie Mae audit and control systems sufficient to ensure that the fees and expenses submitted by outside counsel and other third-party providers to HSBC, which HSBC then submitted to Fannie Mae for reimbursement, were reasonable, customary, or necessary.
• Because, between May 1, 2009, and December 31, 2010, it lacked sufficient audit and control systems to oversee the fees and expenses charged by outside counsel and other third party providers handling foreclosure-related services for HSBC as to Fannie Mae mortgages, HSBC failed to sufficiently oversee these fees and expenses, despite being required by Fannie Mae to do so.

In the settlement agreement, HSBC also agreed to comply with all rules applicable to servicers of mortgage loans insured by FHA and to servicers of loans held or securitized by Fannie Mae and the Federal National Mortgage Corporation (“Freddie Mac”). This includes compliance with all rules, requirements, or guidelines regarding implementation and maintenance of quality control programs, oversight of outside counsel and other third-party vendors, and submissions of fees and expenses for reimbursement by FHA, Fannie Mae, and/or Freddie Mac.

In connection with this settlement, the Government joined a private whistleblower lawsuit that had previously been filed under seal pursuant to the False Claims Act. The whistleblower suit remains under seal as the Government continues its investigation.

Mr. Bharara thanked the FHFA-OIG and the U.S. Department of Housing and Urban Development for their support and assistance with the case.

The case is being handled by the Office’s Civil Frauds Unit. Assistant United States Attorneys Cristine Irvin Phillips and Andrew E. Krause are in charge of the case.

Libous Thomas.Indictment
Libous Matthew.Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, 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”),

Shantelle Kitchen, the Acting Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation Division (“IRS-CID”), and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that OSCAR HUACHILLO, the former operator of multiple HIV/AIDS clinics in New York City, pled guilty to orchestrating a scheme to defraud Medicare out of more than $31 million by billing Medicare for expensive treatments that were administered at a highly diluted dose or never administered at all, and were often medically unnecessary. HUACHILLO also pled guilty to evading more than $3.4 million in federal income taxes by falsely underreporting his income. HUACHILLO pled guilty before U.S. District Judge Katherine Polk Failla.

Manhattan U.S. Attorney Preet Bharara said: “Oscar Huachillo has admitted guilt in defrauding Medicare out of tens of millions of dollars, and then literally compounding the felony by evading millions of dollars in taxes on the illegal windfall. In the process, his schemes put patients at risk, financially burdened the Medicare program, and cheated honest taxpayers. Now he awaits sentencing for his crimes.”

HHS-OIG Special Agent-in-Charge Thomas O’Donnell said: “Mr. Huachillo engaged in an elaborate scheme that resulted in poor patient care and millions defrauded from Federal health care programs. We will not tolerate such greed-fueled fraud, which undermines our health care system and the vulnerable individuals it serves.”

IRS-CI Acting Special Agent-in-Charge Shantelle P. Kitchen said: “IRS Criminal Investigation is pleased to work with our law enforcement partners in the fight against healthcare fraud, ready to follow stolen proceeds back to the orchestrators of schemes. It is clear how Medicare fraud, in particular, takes resources away from citizens with legitimate financial needs. However, money obtained through illegal sources, such as healthcare fraud, forms the backbone of the untaxed, underground economy. Such crimes pose threats to the nation’s tax system and the public’s confidence in it.”

FBI Assistant Director-in-Charge George Venizelos said: “Huachillo treated our American health care system as a vehicle to fuel his greed and line his own pockets when he organized a Medicare fraud of more than $31 million. The FBI, in conjunction with our law enforcement partners, will continue to investigate and bring to justice criminals who bilk the system and defraud the American taxpayer.”

According to the criminal complaint, superseding information, and other documents filed in Manhattan federal court, as well as statements made at related court proceedings:

HUACHILLO set up and operated multiple health care clinics in New York City that purported to provide injection and infusion treatments to Medicare-eligible HIV/AIDS patients, but that were, in reality, health care fraud mills (the “Clinics”) that routinely billed Medicare for medications that were never provided or were provided at highly diluted doses and that were often unnecessary because the person being “treated” did not medically need the treatments.

HUACHILLO and his co-conspirators executed the fraudulent scheme by recruiting HIV/AIDS patients who were eligible for Medicare to come to the Clinics multiple times per week, for multiple months, to undergo expensive “treatments” that were often unnecessary. The purported treatments included drugs costing hundreds of dollars each to administer and typically reserved for cancer and anemia patients. HUACHILLO and his co-conspirators paid the patients cash kickbacks of up to $300 per week in exchange for coming to the Clinics and agreeing to undergo the treatments. Patients were also offered approximately $50 for each additional patient they referred to the Clinics. HUACHILLO and his co-conspirators then used these patients’ status as Medicare beneficiaries to submit claims to Medicare for reimbursement for the treatments purportedly administered to the patients, often receiving tens of thousands of dollars in reimbursements per patient. However, in truth, the treatments typically were provided in highly diluted doses or not provided at all, and were often medically unnecessary. As a result of the scheme, from 2009 through 2013, HUACHILLO and his co-conspirators defrauded the Medicare system out of at least $31 million.

In addition, HUACHILLO willfully evaded over $3.4 million in taxes owed to the IRS during the tax years 2009 through 2011 by falsely underreporting his taxable income, including income he had obtained through fraudulent Medicare claims.

HUACHILLO, 54, of Manhattan, pled guilty to one count of conspiracy to commit health care fraud, which carries a maximum sentence of 10 years in prison, and one count of tax evasion, which carries a maximum sentence of five years in prison. 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. As part of his plea, HUACHILLO agreed to forfeit more than $31 million in proceeds of his crime, including over $14 million of assets that were seized at or around the time he was arrested, and to pay back taxes of more than $3.4 million. HUACHILLO is scheduled to be sentenced by Judge Failla on October 15, 2014, at 3:00 p.m.

George Juvier, 56, of Manhattan, has been charged separately in connection with the Medicare fraud scheme. The charges against Juvier are merely allegations, and he is presumed innocent unless and until he is proven guilty beyond a reasonable doubt.

Mr. Bharara praised the outstanding efforts of HHS-OIG, IRS-CID, and the FBI in the investigation, which he noted is ongoing. Mr. Bharara also thanked the U.S. Department of Justice’s Tax Division for their assistance in the investigation.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Jonathan Cohen is in charge of the prosecution. Assistant United States Attorney Micah Smith of the Office’s Money Laundering and Asset Forfeiture Unit is responsible for the forfeiture aspects of the case.

US v. Oscar Huachillo and George Juvier Complaint
US v. Oscar Huachillo S1 Information (Signed)

BNP Paribas Information
BNP Paribas Statement of Facts
BNP Paribas Notice of Intent
BNP Paribas Plea Agreement
BNP Paribas Consent Preliminary Order of Forfeiture

"BNPP banked on never being held to account for its criminal support of countries and entities engaged in acts of terrorism and other atrocities. But that is exactly what we do today. BNPP, the world's fourth largest bank, has agreed to plead guilty and pay penalties of almost $9 billion for performing the hat trick of sanctions violations, unlawfully opening the doors of the U.S. financial markets to three sanctioned countries, Sudan, Iran, and Cuba. For years, BNPP provided access to billions of dollars to these sanctioned countries, as well as to individuals and groups specifically identified and designated by the U.S. government as being subject to sanctions. The bank did so deliberately and secretly, in ways designed to evade detection by the U.S. authorities. For its years-long and wide-ranging criminal conduct, BNPP will soon plead guilty in a federal courthouse in Manhattan."

Preet Bharara, the United States Attorney for the Southern District of New York, announced that MARK GOLDBERG, a Bronx-based tax preparer, was sentenced today in Manhattan federal court to 57 months in prison for his participation in a scheme to file fraudulent tax returns on behalf of thousands of clients, falsely claiming more than $7 million in bogus deductions, including false school tuition credits and expenses. GOLDBERG pled guilty in August 2013 before Chief U.S. District Judge Loretta A. Preska, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “Mark Goldberg prepared thousands of fraudulent tax returns that resulted in over $2.5 million in fraudulent refunds for his clients. Now he has to surrender the ill-gotten gains and his liberty.”

According to the Indictment, statements made during court proceedings, and other documents filed in Manhattan federal court:

GOLDBERG ran a tax preparation and multi-service business named E&M Multi-Services, Inc. (“E&M”) out of a storefront building in the Bronx. Through that business, he prepared, and oversaw the preparation of, thousands of federal and New York State tax returns that claimed false deductions, expenses, and credits, including tuition credits and expenses, unreimbursed employee business expenses, medical and dental expenses, charitable gifts, and earned income tax credits. Between 2005 and 2012, GOLDBERG caused the preparation and filing of tax returns for his clients that included over $7 million of fabricated and fraudulently-inflated deductions, resulting in over $2.5 million in refunds being paid to his clients to which they were not lawfully entitled. GOLDBERG also failed to report any of the income derived from his tax preparation activities, and further submitted fraudulent personal returns claiming bogus refunds and tax credits.

In addition to the prison term, Chief Judge Preska ordered GOLDBERG, 40, of the Bronx, to pay restitution in the amount of $2,597,419 to the United States and the State of New York for the losses caused as a result of his scheme, and to forfeit $500,000 in fees generated by GOLDBERG as part of his tax fraud scheme. Chief Judge Preska also sentenced GOLDBERG to three years of supervised release, and ordered him to pay a special assessment of $300.

Mr. Bharara praised the investigative efforts of the Internal Revenue Service-Criminal Investigation and the New York State Department of Taxation and Finance. Mr. Bharara also thanked the U.S. Department of Justice’s Tax Division and the Bronx District Attorney’s Office for their assistance.

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Stanley J. Okula, Jr., and Paul Monteleoni, and Special Assistant United States Attorney Jorge Almonte of the Tax Division are in charge of the prosecution.

BNP Paribas Will Pay Total Financial Penalties In Excess Of $8.9 Billion

Attorney General Eric H. Holder, Deputy Attorney General James M. Cole, Criminal Division Assistant Attorney General Leslie Caldwell, United States Attorney for the Southern District of New York Preet Bharara, Internal Revenue Service Criminal Investigation Chief Richard Weber, Federal Bureau of Investigation Director James B. Comey, and District Attorney Cyrus R. Vance Jr. of New York County announced that BNP Paribas S.A. (BNPP), a global financial institution headquartered in Paris, has agreed to plead guilty to conspiring to violate the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA) by processing billions of dollars of U.S. dollar transactions through the U.S. financial system on behalf of Sudanese, Iranian, and Cuban entities subject to U.S. economic sanctions. The agreement by the French bank to plead guilty is the first time a financial institution has agreed to plead guilty based on large-scale, systematic violations of U.S. economic sanctions.

Attorney General Holder said: “BNP Paribas went to elaborate lengths to conceal prohibited transactions, cover its tracks, and deceive U.S. authorities. These actions represent a serious breach of U.S. law. Sanctions are a key tool in protecting U.S. national security interests, but they only work if they are strictly enforced. If sanctions are to have teeth, violations must be punished. Banks thinking about conducting business in violation of U.S. sanctions should think twice because the Justice Department will not look the other way.”

Deputy Attorney General Cole said: “BNP ignored US sanctions laws and concealed its tracks. And when contacted by law enforcement it chose not to fully cooperate. This failure to cooperate had a real effect -- it significantly impacted the government’s ability to bring charges against responsible individuals, sanctioned entities and satellite banks. This failure together with BNP’s prolonged misconduct mandated the criminal plea and the nearly $9 billion penalty that we are announcing today.”

Assistant Attorney General Caldwell said: “By providing dollar clearing services to individuals and entities associated with Sudan, Iran, and Cuba – in clear violation of U.S. law – BNPP helped them gain illegal access to the U.S. financial system. In doing so, BNPP deliberately disregarded U.S. law of which it was well aware, and placed its financial network at the services of rogue nations, all to improve its bottom line. Remarkably, BNPP continued to engage in this criminal conduct even after being told by its own lawyers that what it was doing was illegal.”

U.S. Attorney Preet Bharara said: "BNPP banked on never being held to account for its criminal support of countries and entities engaged in acts of terrorism and other atrocities. But that is exactly what we do today. BNPP, the world's fourth largest bank, has agreed to plead guilty and pay penalties of almost $9 billion for performing the hat trick of sanctions violations, unlawfully opening the doors of the U.S. financial markets to three sanctioned countries, Sudan, Iran, and Cuba. For years, BNPP provided access to billions of dollars to these sanctioned countries, as well as to individuals and groups specifically identified and designated by the U.S. government as being subject to sanctions. The bank did so deliberately and secretly, in ways designed to evade detection by the U.S. authorities. For its years-long and wide-ranging criminal conduct, BNPP will soon plead guilty in a federal courthouse in Manhattan."

According to documents released publicly today, over the course of eight years, BNPP knowingly and willfully moved more than $8.8 billion through the U.S. financial system on behalf of sanctioned entities, including more than $4.3 billion in transactions involving entities that were specifically designated by the U.S. Government as being cut off from the U.S. financial system. BNPP engaged in this criminal conduct through various sophisticated schemes designed to conceal from U.S. regulators the true nature of the illicit transactions. BNPP routed illegal payments through third party financial institutions to conceal not only the involvement of the sanctioned entities but also BNPP’s role in facilitating the transactions. BNPP instructed other financial institutions not to mention the names of sanctioned entities in payments sent through the United States and removed references to sanctioned entities from payment messages to enable the funds to pass through the U.S. financial system undetected.

FBI Director James Comey said: “The significant financial penalties imposed on BNP Paribas sends a powerful deterrent message to any company that places its profits ahead of its adherence to the law. We will continue to work closely with our federal and state partners to ensure compliance with U.S. banking laws to promote integrity across financial institutions and to safeguard our national security.”

IRS-CI Chief Weber said: “Today’s outcome is a testament to U.S. efforts to stem the exploitation of the American financial system and ensure that if you chose to do business in our country you must abide by our laws. BNP Paribas will forfeit the historic figure of almost $8.9 Billion representing the proceeds of criminal activity. BNPP had many opportunities to take corrective action and abide by the law, and yet, despite warnings from American regulators and other banks, consciously chose to ignore those warnings and commit literally thousands of flagrant violations. IRS-CI, and our domestic and international law enforcement partners, will continue to pursue these cases and follow the money trail – wherever it may lead.”

District Attorney Vance said: “The most important values in the international community – respect for human rights, peaceful coexistence, and a world free of terror – significantly depend upon the effectiveness of international sanctions. Today’s guilty plea marks the seventh major case involving sanctions violations by a large international bank that my Office has pursued and resolved since 2009. These cases are critically important for international public safety and the security of our banking system, which is put at risk when it is used to further criminal activity. The seven investigations have revealed a series of widespread schemes to falsify the business records of financial institutions in Manhattan and have resulted in the forfeiture of approximately $12 billion in total. But, more importantly, they have resulted in a fundamental change in the way all banks conduct their business, have heightened vigilance worldwide with respect to dealing with sanctioned entities, and have increased the integrity of our Manhattan-based financial institutions.”

BNPP will waive indictment and be charged in a one-count felony criminal information, filed in federal court in the Southern District of New York, charging BNPP with knowingly and willfully conspiring to commit violations of IEEPA and TWEA, from 2004 through 2012. BNPP has agreed to plead guilty to the information, has entered into a written plea agreement, and has accepted responsibility for its criminal conduct. BNPP is scheduled to formally enter its guilty plea before United States District Judge Lorna Schofield on July 9, 2014 at 4:30 p.m.

The plea agreement, subject to approval by the court, provides that BNPP will pay total financial penalties of $8.9736 billion, including forfeiture of $8.8336 billion and a fine of $140 million.

In addition to the joint forfeiture judgment, the New York County District Attorney’s Office is also announcing today that BNPP has pleaded guilty in New York State Supreme Court to falsifying business records and conspiring to falsify business records. In addition, the Board of Governors of the Federal Reserve System is announcing that BNPP has agreed to a cease and desist order, to take certain remedial steps to ensure its compliance with U.S. law in its ongoing operations, and to pay a civil monetary penalty of $508 million. The New York State Department of Financial Services (DFS) is announcing BNPP has agreed to, among other things, terminate or separate from the bank 13 employees, including the Group Chief Operating Officer and other senior executives; suspend U.S. dollar clearing operations through its New York Branch and other affiliates for one year for business lines on which the misconduct centered; extend for two years the term of a monitorship put in place in 2013, and pay a monetary penalty to DFS of $2.2434 billion. In satisfying its criminal forfeiture penalty, BNPP will receive credit for payments it is making in connection with its resolution of these related state and regulatory matters. The Treasury Department’s Office of Foreign Assets Control has also levied a fine of $963 million, which will be satisfied by payments made to the Department of Justice.

According to documents released publicly today, including a detailed statement of facts admitted to by BNPP, BNPP has acknowledged that, from at least 2004 through 2012, it knowingly and willfully moved over $8.8 billion through the U.S. financial system on behalf of Sudanese, Iranian and Cuban sanctioned entities, in violation of U.S. economic sanctions.

The majority of illegal payments were made on behalf of sanctioned entities in Sudan, which was subject to U.S. embargo based on the Sudanese government’s role in facilitating terrorism and committing human rights abuses. BNPP processed approximately $6.4 billion through the United States on behalf of Sudanese sanctioned entities from July 2006 through June 2007, including approximately $4 billion on behalf of a financial institution owned by the government of Sudan, even as internal emails showed BNPP employees expressing concern about the bank’s assisting the Sudanese government in light of its role in supporting international terrorism and committing human rights abuses during the same time period. Indeed, in March 2007, a senior compliance officer at BNPP wrote to other high-level BNPP compliance and legal employees reminding them that certain Sudanese banks with which BNPP dealt “play a pivotal part in the support of the Sudanese government which . . . has hosted Osama Bin Laden and refuses the United Nations intervention in Darfur.”

One way in which BNPP processed illegal transactions on behalf of Sudanese sanctioned entities was through a sophisticated system of “satellite banks” set up to disguise both BNPP’s and the sanctioned entities’ roles in the payments to and from financial institutions in the United States. As early as August 2005, a senior compliance officer at BNPP warned several legal, business and compliance personnel at BNPP’s subsidiary in Geneva that the satellite bank system was being used to evade U.S. sanctions: “As I understand it, we have a number of Arab Banks (nine identified) on our books that only carry out clearing transactions for Sudanese banks in dollars. . . . This practice effectively means that we are circumventing the US embargo on transactions in USD by Sudan.”

Similarly, BNPP provided Cuban sanctioned entities with access to the U.S. financial system by hiding the Cuban sanctioned entities’ involvement in payment messages. From October 2004 through early 2010, BNPP knowingly and willfully processed approximately $1.747 billion on behalf of Cuban sanctioned entities. In the statement of facts, BNPP admitted that it continued to do U.S. dollar business with Cuba long after it was clear that such business was illegal in order to preserve BNPP’s business relationships with Cuban entities. BNPP further admitted that its conduct with regard to the Cuban embargo was both “cavalier” and “criminal,” as evidenced by the bank’s 2006 decision, after certain Cuban payments were blocked when they reached the United States, to strip the wire messages for those payments of references to Cuban entities and resubmit them as a lump sum in order to conceal from U.S. regulators the bank’s longstanding, and illicit, Cuban business.

Further according to court documents, BNPP engaged in more than $650 million of transactions involving entities tied to Iran, and this conduct continued into 2012 – nearly two years after the bank had commenced an internal investigation into its sanctions compliance and had pledged to cooperate with the Government. The illicit Iranian transactions were done on behalf of BNPP clients, including a petroleum company based in Dubai that was effectively a front for an Iranian petroleum company, and an Iranian oil company.

This case was investigated by the IRS-Criminal Investigation’s Washington Field Division and the FBI’s New York Field Office. This case is being prosecuted by the Money Laundering and Bank Integrity Unit of the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS), and the Money Laundering and Asset Forfeiture Unit of the U.S. Attorney’s Office for the Southern District of New York. Trial Attorneys Craig Timm and Jennifer E. Ambuehl of AFMLS and Assistant United States Attorneys Andrew D. Goldstein, Martin S. Bell, Christine I. Magdo, and Micah W.J. Smith of the Southern District of New York are in charge of the prosecution.

The New York County District Attorney’s Office also conducted its own investigation alongside with the Department of Justice on this investigation. The Department of Justice expressed its gratitude to the Board of Governors of the Federal Reserve, the Federal Reserve Bank of New York, the New York State Department of Financial Services and the Treasury Department’s Office of Foreign Assets Control for their assistance with this matter.

BNP Paribas Information
BNP Paribas Statement of Facts
BNP Paribas Notice of Intent
BNP Paribas Plea Agreement
BNP Paribas Consent Preliminary Order of Forfeiture

Preet Bharara, the United States Attorney for the Southern District of New York, and Thomas P. DiNapoli, the New York State Comptroller, today announced the filing and unsealing of a civil fraud lawsuit against CONTINUUM HEALTH PARTNERS, INC. (“CONTINUUM”), BETH ISRAEL MEDICAL CENTER d/b/a MOUNT SINAI BETH ISRAEL (“BETH ISRAEL”), and ST. LUKE’S-ROOSEVELT HOSPITAL CENTER d/b/a MOUNT SINAI ST. LUKE’S and MOUNT SINAI ROOSEVELT (“SLR”) for the hospitals’ fraudulent delay in fully repaying nearly $1 million in Medicaid overpayments for almost two years after it had discovered the overpayments. Federal law requires that when a recipient of Government funds discovers it has been overpaid, it must repay the Government within 60 days, but the hospitals in this case did not complete their repayments for nearly two years, and then only after repeated Government inquiries.

Manhattan U.S. Attorney Preet Bharara said: “The law requires hospitals that receive federal funds to which they are not entitled to promptly return them. They cannot just keep the money – after learning that they should not have received it – in the hopes that the government will not figure it out. To do so is fraud. I want to thank the office of New York State Comptroller Thomas DiNapoli, a frequent partner in these types of cases, for their excellent work in this investigation.”

New York State Comptroller Thomas P. DiNapoli said: “New York State’s Medicaid program costs taxpayers more than $50 billion annually. Fraud in the Medicaid program affects all New Yorkers and will not be tolerated. Audits and investigations by my office have found billions of those dollars lost to waste, fraud and abuse. We will continue to work with federal and state law enforcement to combat Medicaid fraud statewide. I thank U.S. Attorney Preet Bharara for his efforts to prosecute this case, which stemmed from the work of my office, and bring unscrupulous providers to justice.”

According to the allegations in the Government’s Complaint filed in Manhattan federal court:

CONTINUUM submitted hundreds of improper claims to Medicaid in 2009 and 2010 on behalf of BETH ISRAEL and SLR, totaling nearly $1 million, due to a software problem. These claims arose from care provided to patients enrolled in a Medicaid Managed Care Organization (the “MCO”), which contracted with healthcare providers. Under the applicable Medicaid regulations, these providers were entitled to receive as payment for care rendered to the enrolled patients only the amount paid by the MCO and were not entitled to obtain additional payments. A computer glitch caused the MCO erroneously to indicate to its contracted providers, including BETH ISRAEL and SLR, that they should seek additional reimbursement from Medicaid for the healthcare services they provided to the enrollees. CONTINUUM, on behalf of BETH ISRAEL and SLR, thus submitted the improper claims to Medicaid, and received payment for most of them.

Despite becoming aware of the software issue in late 2010 and, further, being provided in early February 2011 with a spreadsheet by a CONTINUUM employee who had identified virtually all of the claims affected by the issue, CONTINUUM and the hospitals failed to take appropriate steps to timely repay the claims. Instead, their repayments occurred only as the Office of the New York State Comptroller brought groups of potentially affected claims to CONTINUUM’s attention, over the course of more than a year. CONTINUUM and the hospitals repaid the remaining approximately 300 affected claims only after this Office issued a Civil Investigative Demand to CONTINUUM in June 2012, and the repayments were completed only in early 2013.

The Complaint in this case was filed under the False Claims Act, which punishes violators who submit false claims to the Government or knowingly attempt to avoid an obligation to repay federal funds. The allegations of fraud stated in the Complaint were first brought to the attention of the Government by a whistleblower, who filed a lawsuit under the qui tam provisions of the False Claims Act. Those provisions allow private parties who have knowledge of fraud committed against the Government to file suit on behalf of the Government and share in any recovery. The United States may then intervene and file a complaint, as it did here.

Mr. Bharara praised the investigative work of the Office of the State Comptroller. He also thanked the U.S. Department of Health and Human Services, Office of Inspector General, for its assistance in this case.

The case is being handled by the Office’s Civil Frauds Unit. Civil Frauds Unit Co-Chief Rebecca C. Martin and Assistant U.S. Attorney Jean-David Barnea are in charge of this matter.

U.S. v. Continuum HealthPartners, Inc., et al. Complaint-In-Intervention