Southern District of New York

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that WILLIAM CALI was sentenced in Manhattan federal court in connection with his role in a scheme to exert control over the commercial waste-hauling industry in the greater New York City metropolitan area and in parts of New Jersey. CALI previously pled guilty to one count of participating in a conspiracy to commit extortion. CALI was sentenced today to 18 months in prison by U.S. District Judge P. Kevin Castel.

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

CALI was a participant in a scheme, along with other members and associates of three different Organized Crime Families of La Cosa Nostra (“LCN”) – the Genovese, Gambino, and Luchese Crime Families – to control various waste disposal businesses in the New York City metropolitan area and multiple counties in New Jersey. Members of the scheme engaged in various crimes including extortion, loansharking, mail and wire fraud, and stolen property offenses. CALI, a Genovese Crime Family associate, provided protection and “backing” to a witness cooperating with the Government who operated a waste disposal company in exchange for regular payments made under the threat of harm.

In addition to the prison term, CALI, 61, of Queens, New York, was also sentenced to two years of supervised release, and ordered to pay forfeiture in the amount of $7,900.

CALI was charged as part of a large investigation led by the United States Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation (“FBI”), and the Westchester County Police Department. To date, 32 defendants have been charged with participating in the scheme to exert control over the commercial waste-hauling industry. Twenty-one of these defendants have been convicted for their roles in this scheme.

Mr. Bharara praised the investigative work of the FBI and the Westchester County Police Department.

The prosecution of this case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Brian R. Blais and Patrick Egan are 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.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that CARMINE FRANCO was sentenced yesterday in Manhattan federal court in connection with his role in a scheme to exert control over the commercial waste-hauling industry in the greater New York City metropolitan area and in parts of New Jersey. FRANCO previously pled guilty in November 2013 to participation in a racketeering conspiracy, conspiracy to commit mail and wire fraud, and conspiracy to transport stolen cardboard across state lines. FRANCO was sentenced to one year and one day in prison by U.S. District Judge P. Kevin Castel.

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

FRANCO, who is an associate of the Genovese Crime Family, participated in a criminal enterprise, along with other members and associates of three different Organized Crime Families of La Cosa Nostra (“LCN”) – the Genovese, Gambino, and Luchese Crime Families – to control various waste disposal businesses in the New York City metropolitan area and multiple counties in New Jersey. Members of the enterprise engaged in various crimes in furtherance of the enterprise’s aims, including extortion, loansharking, mail and wire fraud, and stolen property offenses. As part of his guilty plea, FRANCO, who had been barred by the State of New Jersey from participating in the waste hauling industry, acknowledged his membership in the criminal enterprise and his agreement with others to undertake at least two racketeering acts in furtherance of the enterprise. Specifically, FRANCO acknowledged that he committed mail and wire fraud by overbilling customers of a waste transfer station that he controlled in West Nyack, New York. He also acknowledged that he and his associates transported large volumes of stolen cardboard across state lines.

In addition to the prison term, FRANCO, 78, of Ramsey, New Jersey, was also sentenced to two years of supervised release, and ordered to pay a $5,000 fine and restitution in the amount of $5,600, and to forfeit $2.5 million to the United States.

FRANCO was charged as part of a large investigation led by the United States Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation (“FBI”), and the Westchester County Police Department. To date, 32 defendants have been charged with participating in the scheme to exert control over the commercial waste-hauling industry. Twenty-one of these defendants have been convicted for their roles in this scheme.

Mr. Bharara praised the investigative work of the FBI and the Westchester County Police Department.

The prosecution of this case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Brian R. Blais and Patrick Egan are 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.

Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced that RENE CARDONA, a former employee of an afterschool program in the Bronx, was indicted today on two counts of production of child pornography, two counts of receiving and distributing child pornography, and one count of possessing child pornography. CARDONA, who was previously arrested on April 30, 2014, has been detained since his arrest.

Manhattan U.S. Attorney Preet Bharara said: “Crimes involving the alleged exploitation of children are always distressing, but they are especially so where, as here, the defendant was entrusted to work with and mentor children.”

FBI Assistant Director-in-Charge George Venizelos said: “As alleged, during various times between 2011 and 2014, Cardona repeatedly exploited and jeopardized the well-being of innocent children. It is particularly disturbing when a crime like this is committed by an individual like Cardona who is entrusted to care for our children. Cardona’s acts are inexcusable and together with our law enforcement partners, the FBI remains committed to vigorously investigating and bringing to justice those who prey upon and harm our youngest members of society.”

According to the Indictment and the Complaint filed in Manhattan federal court:

In February 2014, CARDONA engaged in multiple chats over the Internet with an eleven-year-old male located in Guam. In those chats, CARDONA, who was aware of the victim’s age, induced the youth to take sexually explicit photographs of himself and to send the photographs to CARDONA. CARDONA also sent sexually explicit photographs of himself to the youth.

CARDONA, 22, faces a mandatory minimum sentence of 15 years in prison and a maximum sentence of 30 years in prison for each count of production of child pornography. For each count of receipt and distribution of child pornography, CARDONA faces a mandatory minimum sentence of five years in prison and a maximum sentence of 20 years in prison, and for the one count of possession of child pornography, he faces a maximum sentence of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

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

CARDONA is believed to have worked at the Betances Summer Camp and Afterschool Programs in the Bronx from 2012 to approximately 2014, and thereafter as a mentor for youths at the Youth Men’s Initiative at Betances Community Center from January to April 2014. CARDONA is also believed to have worked as a volunteer at the Betances Community Center at various times starting in 2011. As alleged in the federal Criminal Complaint, CARDONA admitted to having had inappropriate sexual contact with children, including children he had encountered through these programs.

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

Manhattan Child Advocacy Center

1753 Park Avenue

New York, NY 10035

(646) 695-6100

The investigation and prosecution of CARDONA’s conduct relating to production and distribution of child pornography is being handled by the United States Attorney’s Office for the Southern District of New York. The investigation of CARDONA’s conduct relating to inappropriate sexual contact with youths is being handled by the Manhattan District Attorney’s Office.

Mr. Bharara thanked and praised the investigative work of the FBI and the New York City Police Department in this matter, as well as the Manhattan District Attorney’s Office and the U.S. Attorney’s Office for the Districts of Guam and the Northern Mariana Islands.

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

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

U.S. v. Rene Cardona Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that SAMUEL PIERRE, who was employed by a Member of Congress at the time of his offense, was sentenced yesterday in Manhattan federal court to three months home confinement for accepting an illegal gratuity in return for promising to provide immigration-related assistance that never was provided. PIERRE’s co-defendant, KENOL JANVIER, previously was sentenced to four months home confinement for his role in the offense. PIERRE and JANVIER both were sentenced by U.S. Magistrate Judge Kevin N. Fox.

According to court filings and statements made in court:

From 2007 to July 2009, PIERRE was employed by a Member of Congress as a Brooklyn South Liaison in the Congressman's District Office in Brooklyn, New York. As the Brooklyn South Liaison, PIERRE's job responsibilities included helping the Congressman's constituents with immigration-related issues, by, for example, inquiring about the status of constituents' immigration-related matters pending before the Department of Homeland Security (“DHS”).

In the late spring or early summer of 2008, PIERRE was a guest on a radio show hosted by JANVIER and they discussed, among other things, PIERRE’s job with the Congressman and issues related to the Haitian community, including immigration. During the radio show, listeners were invited to call in with any questions, but rather than help certain listeners who called the show seeking immigration-related advice, JANVIER and/or PIERRE instructed them to call "the office" for free assistance. The “office” phone number, however, was JANVIER’s cellphone number and when listeners called it, JANVIER arranged to meet them in person. JANVIER then met with these individuals and promised that PIERRE and he would be able to assist them with their immigration-related matters in exchange for a set fee. JANVIER took hundreds of dollars from the individuals as a down payment for the promised help with their immigration-related matter.

Thereafter, PIERRE and JANVIER spoke to the individuals on the phone, including using a landline phone at the Congressman’s District Office, regarding the remainder of the fee due, which some of them later paid to JANVIER. In connection with the scheme, PIERRE sent e-mails using his Congressional e-mail account in which he, on behalf of the Congressman’s Office, inquired about the status of these individuals’ immigration-related matters and claimed that the individuals were constituents of the Congressman when, in truth and in fact, they were not. The individuals were unaware that these e-mails had been sent and never received any actual assistance with their immigration-related matters from either PIERRE or JANVIER.

When the individuals who had paid JANVIER to help them tried to contact PIERRE and JANVIER to inquire about the status of their immigration matters, including visiting PIERRE at the Congressman’s Office, PIERRE and JANVIER either did not return the calls or continued to promise to help them but did not. Later, when the individuals demanded the return of their money, PIERRE and JANVIER ignored their requests and never paid them back. In connection with the scheme, PIERRE took money and things of value from JANVIER. In addition, PIERRE took money from JANVIER in connection with JANVIER’s own immigration matter and sent e-mails from his Congressional e-mail account to DHS and wrote a letter from the Congressman’s Office to a federal government immigration office about JANVIER’s immigration application.

In addition to home confinement, Judge Fox sentenced PIERRE, 29, of Brooklyn, New York, to three years of probation and ordered him to pay a $5,000 fine and a $25 special assessment fee. In addition, PIERRE was ordered to pay restitution in the amount of $11,300 joint and several with JANVIER.

JANVIER, 45, of Brooklyn, New York, previously was sentenced on April 24, 2014, by Judge Fox to four months home confinement and three years of probation and was ordered to pay a $25 special assessment fee. In addition, JANVIER was ordered to pay restitution in the amount of $11,300 joint and several with PIERRE.

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

These prosecutions are being handled by the Office’s Public Corruption Unit. Assistant United States Attorney Carrie H. Cohen is in charge of the prosecutions.

U.S. v. Samuel Pierre and Kenol Janvier Complaint
U.S. v. Samuel Pierre Complaint
U.S. v. Kenol Janvier Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, Cheryl Garcia, Acting Special Agent-in-Charge of the New York Office of the U.S. Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud Investigations (“USDOL-OIG”), and Peter M. Rivera, Commissioner of the New York State Department of Labor (“NYDOL”), announced today that MAGDALENA VILLALOBOS pled guilty today in Manhattan federal court to orchestrating a scheme in which she facilitated the filing of fraudulent claims for millions of dollars in unemployment insurance benefits provided by states across the country. VILLALOBOS was charged in October 2013, and pled guilty today before U.S. Magistrate Judge Debra C. Freeman.

Manhattan U.S. Attorney Preet Bharara said: “Magdalena Villalobos facilitated an unemployment benefit scheme that injected fraud into at least 26 states, inflicted millions of dollars in losses, and did a disservice to the qualified claimants across the country who actually needed the funds. I commend and thank our federal and state law enforcement partners for their work on this case.”

USDOL-OIG Acting Special Agent-in-Charge Cheryl Garcia said: “For several years, Villalobos assisted individuals in obtaining unemployment insurance benefits even though they were ineligible because they resided outside the United States. Villalobos’s submission of fraudulent claims siphoned funds intended for those who are qualified and eligible to receive the benefits. This office will continue to work with United States Attorney’s Office and our state partners to investigate fraud against the Department of Labor’s Unemployment Insurance Program.”

New York State Labor Commissioner Peter M. Rivera said: “When individuals defraud the system, they steal from all of us. They steal from law-abiding employers, from workers and their families, and from all of the taxpayers across New York State. I commend our staff members who work hard every day to prevent and detect fraud and catch the criminals who try to get away with it.”

According to the Complaint, the Indictment, and other public documents filed in Manhattan federal court:

From at least July 2006 through her arrest in 2013, VILLALOBOS, a resident of Texas and owner of a purported notary business, accepted payments from fraudulent unemployment benefit claimants in return for placing telephone calls to at least 26 different States in order to certify falsely that those fraudulent claimants were entitled to such benefits. Certain of these claimants would reside outside of the United States while receiving unemployment benefits. Through this scheme, VILLALOBOS made thousands of calls on behalf of fraudulent claimants and inflicted millions of dollars in losses to unemployment benefit funds across the United States.

VILLALOBOS, 59, of San Juan, Texas, pled guilty to one count of conspiracy to steal unemployment insurance benefits. She faces a maximum sentence of five years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the outstanding investigative work of both USDOL-OIG and NYDOL. He also thanked the Federal Bureau of Investigation and the United States Postal Service for their assistance in the Texas investigation. He added that the investigation is continuing.

The prosecution of this case is being overseen by the Office’s General Crimes Unit. Assistant U.S. Attorneys Andrew C. Adams and Rebecca G. Mermelstein are in charge of the prosecution.

U.S. v. Magdalena Villalobos Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ISAIAS FLORES-MENDEZ, 42, of Queens, New York, was sentenced today in Manhattan federal court to life in prison in connection with his leadership of a long-running sex trafficking conspiracy that employed force, fraud, and coercion to sell young women for sex against their wills. FLORES-MENDEZ was also ordered to forfeit approximately $1.7 million, and to pay $84,000 in restitution to a victim of his crime. He was sentenced by U.S. District Judge Katherine B. Forrest.

Manhattan U.S. Attorney Preet Bharara said: “The defendant viciously robbed the victims in this case of their freedom, their dignity, and their fundamental human rights. Although the victims of the defendant’s crimes will never be made whole, his prosecution and today’s sentence hopefully signal to them and everyone else that such atrocities cannot be tolerated in our society and will be prosecuted and punished to the full extent of the law.”

In sentencing FLORES-MENDEZ Judge Forrest said: “On behalf of our system of justice I do want to say to the victims of this crime who are not here because of their undocumented status, because of their fear . . . I do know that no sentence can return to the victims that which has been so brutally taken from them . . . but today is a day that perhaps these victims have been waiting for – a day when our society would understand, and listen to what was happening to them, and see that this defendant, who committed such awful crimes using them, would be brought to justice and is brought to justice. The harm done to those victims is today recognized for what it is in all of its horror. For that which was taken from these women and cannot be returned by any sentence, the defendant is here today to be sentenced and to be brought to justice.”

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

Since at least 1999, when he was first arrested for promoting prostitution, FLORES-MENDEZ has been sexually exploiting vulnerable women for his own financial gain. His predatory crimes have ranged in scope over the years.

He used violence and threats of violence to personally force at least one young woman (“Victim-1”) to engage in prostitution against her will. At the age of 17, Victim-1 was romanced by FLORES-MENDEZ, and lured to the U.S. with the promise of a better life for her and her baby. Once in New York, Victim-1 was made to sleep on a floor with her child, was repeatedly beaten, and was verbally abused on a regular basis by FLORES-MENDEZ, who sexually enslaved Victim-1 and made her work as a prostitute against her will for his own financial gain. When she tried to resist, she was beaten and abused. On one such occasion, FLORES-MENDEZ pushed her and her young child outside on a cold winter night, locked the door, and refused to let her back in. Afraid that her baby would die, Victim-1 succumbed to FLORES-MENDEZ’s demands that she continue to be sold for sex. After she escaped, FLORES-MENDEZ and his brother Bonifacio Flores-Mendez continued to torment her, on one occasion trying to run her over with his car.

FLORES-MENDEZ also used threats of violence to force another woman (“Victim-A”) to help teach Victim-1 how to handle customers, telling Victim-A that he would “break her in half” if she didn’t comply.

In addition to his direct sex trafficking by force, fraud, and coercion, FLORES-MENDEZ also owned and operated a sprawling network of brothels in and around New York City that sexually exploited at least five women per day, each of whom was required to have sex with up to 20 customers per day under abhorrent conditions. Many of the victims of this sex trafficking-prostitution enterprise were forced to engage in prostitution against their wills.

Sixteen defendants in this case, including Bonifacio Flores-Mendez, have pled guilty, and one has entered into a deferred prosecution agreement. All but four defendants have been sentenced. The defendants who have pled to date have agreed to forfeit, in total, more than $1.7 million.

Mr. Bharara praised the outstanding investigative work of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations.

The prosecution of this case is being overseen by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Amanda Kramer and Rebecca Mermelstein are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that MICHAEL LOGAN, a former manager of TestQuest, Inc. (“TestQuest”) — an educational services company that provided tutoring services to students attending underperforming public schools in New York City as part of a federally-funded program — was sentenced today in Manhattan federal court to 24 months in prison for his role in a scheme to defraud the federal government into paying for tutoring services that were never provided. LOGAN pled guilty in June 2013 before U.S. District Judge John F. Keenan, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “With today’s sentence Michael Logan must now pay with his liberty for exploiting a federal program meant to benefit students in need. I would like to thank the U.S. Department of Education’s Office of the Inspector General for their work in helping us to bring this important case.”

According to the Criminal Complaint, Information, and other documents filed in Manhattan federal court, as well as statements made at today’s sentencing and other proceedings:

Each year from 2005 through 2012, the New York City Department of Education (“NYCDOE”) received funds from the federal government to pay for New York City’s Supplemental Educational Services program (“SES”), which included after-school tutoring and other remedial and supplemental academic enrichment services for students attending underperforming public schools. NYCDOE entered into contracts with private entities and organizations to provide SES tutoring to public school students. Students were eligible to receive SES tutoring if they met certain criteria, such as attending a school that had been identified as needing improvement or restructuring for at least two years.

Private entities contracted by NYCDOE to provide SES tutoring were required to have each student who attended a class sign a standard attendance sheet. The tutor was also required to sign the sheet, attesting to the fact that he or she provided SES tutoring to those students whose names appeared on the sheet. Further, as a condition of getting paid for providing tutoring, the private entities were required to certify to NYCDOE that their attendance records were “true and accurate.”

From 2005 through 2012, TestQuest contracted with NYCDOE to provide SES tutoring. It provided individual tutoring to students at their homes and group tutoring at various New York City public schools, including the Monroe Academy of Business and Law/High School of World Cultures (“Monroe”) and the Global Enterprise Academy/Christopher Columbus High School (“Columbus”). TestQuest received tens of millions of dollars in federal funding for tutoring during this time period, including approximately $2.3 million for tutoring purportedly provided at Monroe and Columbus alone.

From 2005 through 2012, LOGAN was responsible for managing TestQuest’s SES tutoring program at Monroe and, later, at Columbus. LOGAN also worked as a long-term substitute teacher and computer technician at Monroe and, at times, coached its baseball team. From 2005 through 2012, LOGAN instructed TestQuest employees to forge student signatures on attendance sheets and to have students sign attendance sheets for tutoring classes they had not attended. On some occasions, he caused TestQuest employees to fraudulently obtain students’ signatures by collecting them from students assembled in the school cafeteria or participating in after-school activities such as baseball or basketball practice. LOGAN told these employees that they would not get paid if they did not collect signatures. One TestQuest employee (who did not actually provide any tutoring services for TestQuest but falsely certified that he had) periodically had conversations with LOGAN during which the employee asked what he was supposed to be doing, and LOGAN replied that the employee should tell anyone who asked that he was teaching English.

Further, when LOGAN learned of the criminal investigation, he coached other participants in the fraud to lie to federal investigators. In one recorded conversation, for example, LOGAN encouraged another TestQuest employee to lie about having taught classes that occurred when LOGAN and the employee were actually coaching after-school sports. As a result of LOGAN’s conduct, TestQuest employees repeatedly submitted bills to NYCDOE for tutoring that never occurred, and for which TestQuest was paid substantial sums of money.

In addition to the prison term, LOGAN, 50, of the Bronx, New York, was ordered to forfeit $250,000.

The case against LOGAN is part of a broader effort by this Office’s Criminal and Civil Divisions to hold SES providers and their employees accountable for fraudulent conduct. To date, this Office has brought coordinated proceedings against three New York City SES providers and their employees for falsifying attendance records and billing for tutoring they did not provide. In 2012 and 2013, this Office filed civil charges against The Princeton Review, Inc. (“Princeton Review”), and civil and criminal charges against several of its former employees. In 2013, this Office filed civil charges against TestQuest, and civil and criminal charges against several of its former employees, including LOGAN. In 2014, this Office filed civil charges against The Academic Advantage (“Academic Advantage”), and civil and criminal charges against several of its former employees. TestQuest settled the civil charges against it by admitting misconduct and agreeing to pay the Government $1.725 million. Princeton Review and Academic Advantage settled with the Government by admitting misconduct and committing to pay up to $10 million and $2 million, respectively. In addition to LOGAN, the following former employees of TestQuest, Princeton Review and Academic Advantage have pled guilty to criminal fraud charges, settled civil fraud charges, or both: Robert Stephen Green, Ana Azocar, Zorayma Azocar, Sandra Allen, Edwin Guzman and Luz Mercedes.

Mr. Bharara praised the investigative work of the U.S. Department of Education’s Office of Inspector General.

This case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Joseph P. Facciponti and Christopher B. Harwood are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in Charge of the New York Field Office (“FBI”), announced today that JOSEPH DEL VALLE, an owner and partner of various investment companies, including Vanquish Acquisition Partners LLC and PM Capital Management LLC, which were based in Manhattan, New York, surrendered this afternoon on charges of wire fraud and wire fraud conspiracy for operating a fraudulent scheme related to a Florida real estate development project. DEL VALLE is alleged to have obtained approximately $6.4 million from investors for a real estate development project in Miami, Florida. DEL VALLE allegedly took more than $3 million of the investors’ money and used it for other investments and his personal expenses. He will be presented in the United States District Court for the Southern District of New York today.

Manhattan U.S. Attorney Preet Bharara stated: “Joseph Del Valle solicited and obtained over $6 million from people who thought they were investing in a Miami real estate development. But, as alleged, Del Valle misappropriated much of that money, using it for his own purposes, including for hotels, restaurants, and a cruise. There are inherent market risks in most investments, but being swindled is not one that investors should have to bear.”

Assistant Director-in-Charge George Venizelos stated: “This is the same old song. Del Valle promised lucrative real estate investments, but what he delivered was a house of cards. We expect people to make money legitimately, not by stealing from others as alleged in today’s complaint.”

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

Beginning in 2005, JOSEPH DEL VALLE, a co-conspirator (“CC-1”), and an employee of Vanquish Acquisition Partners LLC, began soliciting investors for a real estate development project in the Little Havana neighborhood of Miami (referred to herein as “Project Miami”). Project Miami involved two high-rise buildings in which the bottom floors would house retail shops and the top floors would be residential condominiums. Project Miami was designed to provide affordable housing to middle-income individuals and included an arrangement for financing so that purchasers of the condominiums would receive government-subsidized mortgages. From 2005 through 2007, DEL VALLE, CC-1, and the employee obtained approximately $6.4 million from investors for Project Miami.

Prior to making any investments, investors were told that the investment was solely for Project Miami. Investors were provided with various materials that specified the investments were for Project Miami, and provided that DEL VALLE and his company would only take a five percent management fee. However, almost immediately after investors transferred funds for Project Miami, almost all of which were sent to banks in Manhattan, New York, DEL VALLE and CC-1 transferred amounts far greater than five percent to other bank accounts and began using the funds for other purposes, including investments in a wine magazine and for DEL VALLE’s personal use. For example, in October 2007, DEL VALLE used $30,000 of investor money in Europe for, among other things, hotels, restaurants, a cruise, and cash withdrawals. In total, DEL VALLE and CC-1 used over $3 million for other investments or personal expenses.

When investors became suspicious and requested financial statements for their investments and a return of their money, DEL VALLE represented to investors in phone calls and e-mail communications that the investment funds were secure when, in fact, a large portion of the investors’ money had already been misappropriated and/or diverted to other uses. DEL VALLE also falsely told investors that financial statements were in the process of being prepared and would be mailed to them shortly, but in fact, DEL VALLE and CC-1 had not provided any financial information to the accountant responsible for the preparation of financial statements of the relevant entities.

DEL VALLE, 59, of Aventura, Florida, has been charged with one count of conspiracy to commit wire fraud and one count of wire fraud, each of which carry a maximum potential penalty of 20 years in prison and a 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.

Mr. Bharara praised the work of the FBI.

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 Parvin Moyne is in charge of the prosecution.

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

Del Valle, Joseph Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that DOMINICK PIETRANICO and JOSEPH SARCINELLA were sentenced in Manhattan federal court in connection with their roles in a scheme to exert control over the commercial waste-hauling industry in the greater New York City metropolitan area and in parts of New Jersey. Each defendant previously pled guilty to one count of loansharking in connection with the scheme. PIETRANICO and SARCINELLA were each sentenced today to five months in prison by U.S. District Judge P. Kevin Castel.

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

PIETRANICO and SARCINELLA were participants in a scheme, along with other members and associates of three different Organized Crime Families of La Cosa Nostra (“LCN”) – the Genovese, Gambino, and Luchese Crime Families – to control various waste disposal businesses in the New York City metropolitan area and multiple counties in New Jersey. Members of the scheme engaged in various crimes including extortion, loansharking, mail and wire fraud, and stolen property offenses.

PIETRANICO and SARCINELLA, who are made members of the Genovese Crime Family, provided protection and “backing” to a cooperating Government witness who operated a waste disposal company, and made an extortionate loan at a rate of interest exceeding 100% annually.

In addition to the prison terms, PIETRANICO, 83, of Mahopac, New York, and SARCINELLA, 79, of Scarsdale, New York, were each also sentenced to one year of supervised release. Additionally, PIETRANICO was ordered to forfeit $9,340 and pay a $2,000 fine, and SARCINELLA was ordered to forfeit $10,540 and pay a $5,000 fine.

PIETRANICO and SARCINELLA were charged as part of a large investigation led by the United States Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation (“FBI”), and the Westchester County Police Department. To date, 32 defendants have been charged with participating in the scheme to exert control over the commercial waste-hauling industry. Twenty-one of these defendants have been convicted for their roles in this scheme.

Mr. Bharara praised the investigative work of the FBI and the Westchester County Police Department.

The prosecution of this case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Brian R. Blais and Patrick Egan are 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.

Preet Bharara, the United States Attorney for the Southern District of New York, Robert E. Van Etten, Inspector General of the Port Authority of New York and New Jersey (the “Port Authority”), and Douglas Shoemaker, regional Special Agent-in-Charge of the U.S. Department of Transportation’s (“DOT”) Office of Inspector General, announced today that the United States has filed, and simultaneously settled, a civil fraud lawsuit against a subcontractor, MORETRENCH AMERICAN CORPORATION (“MORETRENCH”), for engaging in fraudulent conduct to exploit regulations designed to increase the role of minority-owned businesses in order to secure a subcontract on the federally-funded World Trade Center Transportation Hub project (the “HUB Project”). Specifically, MORETRENCH caused the prime contractor of the HUB Project to falsely represent to the Port Authority that MORETRENCH paid hundreds of thousands of dollars to a disadvantaged business enterprise (“DBE”) to perform legitimate work on the contract when, in fact, the DBE did not perform any significant work and instead simply received a kickback from MORETRENCH for the fraudulent use of its DBE status. In the settlement, approved in Manhattan federal court yesterday by U.S. District Judge Laura Taylor Swain, MORETRENCH admitted and accepted responsibility for violating the applicable regulations governing the Hub Project and agreed to pay $3 million. MORETRENCH further agreed to pay the Office of Inspector General of the Port Authority $50,000 for its investigative costs.

Manhattan U.S. Attorney Preet Bharara said: “The federal Disadvantaged Business Enterprise regulations and similar Port Authority rules serve the important function of increasing legitimate participation by minority-owned businesses in federally-funded construction projects. With this settlement, Moretrench has publicly admitted to fraudulently violating these rules and will pay a substantial fine as a consequence. I want to thank our partners at the Port Authority Office of Inspector General and the U.S. Department of Transportation’s Office of Inspector General for their work in this important case.”

Port Authority Inspector General Robert E. Van Etten said: “This investigation has shown how individuals in the construction industry have manipulated and circumvented the intent of the Port Authority’s Minority and Women’s Business Enterprise Program for the World Trade Center Transportation Hub project by utilizing firms as fronts to satisfy the Program goals. I would hope that this case serves as an incentive to the industry to adhere to the Program’s intent. I urge those with information of instances of other fraudulent practices to report them to law enforcement. Working with our law enforcement partners we will continue to vigilantly investigate allegations of fraud in the construction industry.”

Douglas Shoemaker, regional Special Agent-in-Charge of DOT’s Office of Inspector General, said: “As evidenced by Moretrench’s agreement to settle this lawsuit, we remain steadfast in our commitment to preventing and detecting fraud related to federally funded transportation programs. Working with our law enforcement and prosecutorial colleagues, we will continue to protect the taxpayers’ investment in our nation’s infrastructure from fraud, waste, abuse and violations of law.”

BACKGROUND ON DBEs

In 1980, the DOT issued regulations in connection with a program to increase the participation of minority and disadvantaged business enterprises in federally-funded public construction contracts. To become certified as a DBE, a company must, among other things, be owned and controlled by socially and economically disadvantaged individuals; be an independent business whose viability does not depend on its relationship with other firms; employ its own work force and own equipment necessary to perform its work; and be able to meet its financial obligations.

General contractors can count funds paid to DBEs toward the attainment of the DBE goals only if the DBEs performed a “commercially useful function.” A DBE subcontractor performs a commercially useful function only when it is responsible for the execution of the work of the contract; actually performs, manages, and supervises the work involved; and furnishes the supervision, labor, and equipment necessary to perform its work.

MORETRENCH’S FRAUD

According to the allegations in the complaint:

As a condition of receiving DOT funding, the Port Authority set Minority Business Enterprise (“MBE”) and Women’s Business Enterprise (“WBE”) goals for the HUB Project. DOT determined that, with respect to the HUB Project, the Port Authority was permitted to follow its own MBE and WBE rules as they were substantially equivalent to the federal DBE regulations. MORETRENCH was hired as a subcontractor on the HUB Project and, as part of its contract, was required to use its best efforts to obtain seventeen percent MBE/WBE participation. MORETRENCH represented that it had hired Environmental Energy Associates, LLC (“EEA”) as a subcontractor to operate the dewatering system for the HUB Project (dewatering is the removal of groundwater). However, EEA operated as a shell company. EEA and MORETRENCH had an arrangement whereby MORETRENCH hired the pump operators, supervised the job site and assembled bi-weekly payrolls. In order to give the appearance that EEA was performing a legitimate role as an MBE, several pump operators, who were already working on the job site as MORETRENCH employees, were switched to EEA’s payroll. EEA’s payroll paperwork was assembled by MORETRENCH employees, but listed EEA as the contractor. EEA received a mark-up on the payroll records as compensation for the use of its MBE status. As part of its requests for payment, MORETRENCH prepared reports to the Port Authority falsely representing that MORETRENCH paid EEA for work performed on the project when in fact MORETRENCH was performing the work itself.

Pursuant to the settlement agreement, MORETRENCH admitted, acknowledged, and accepted responsibility for making and causing false statements to be made in violation of applicable regulations designed to encourage the participation of disadvantaged business enterprises in federally-funded construction projects. MORETRENCH also agreed to pay the United States $3 million.

Mr. Bharara praised the Port Authority Office of Inspector General and the U.S. Department of Transportation’s Office of Inspector General for their invaluable work on this case. He also thanked the Metropolitan Transportation Authority Office of Inspector General and the United States Department of Labor Office of Inspector General for their assistance.

The case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorneys Mara Trager and Ellen London are in charge of the case.

Moretrench Complaint14cv3250
Moretrench endorsed stipulation

Preet Bharara, the United States Attorney for the Southern District of New York, and Bruce Foucart, Special Agent-in-Charge of U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”) Boston Office, announced today that a painting by Serge Poliakoff called “Composition abstraite [Abstract composition]” (the “Poliakoff”) was returned to Brazil at a repatriation ceremony at the United States Attorney’s Office in Manhattan, New York. The painting was smuggled into the United States in violation of U.S. customs law and was forfeited to the United States as a result of civil forfeiture action brought by the United States.

Manhattan U.S. Attorney Preet Bharara stated: “Art and antiquities have special value and meaning that cannot readily be quantified. As a result, they have long been the subject of theft and deception, as well as a means to launder illicit proceeds. Art should serve to inspire the mind and nourish the soul, and not be allowed to become a conduit for crime.”

HSI Special Agent-In-Charge Bruce Foucart stated: “During this seven year investigation, HSI along with our international law enforcement partners have located, detained and seized approximately 1,000 works of art in Switzerland, France, the United Kingdom and the United States, all belonging to Edemar Cid Ferreira. We hope this most recent painting being returned by HSI and the Manhattan U.S. Attorney’s Office to the government of Brazil assists in the recovery of financial losses. HSI remains committed to investigating the illicit importation of cultural property into the United States and the laundering of proceeds derived from illicit activities.”

In a related repatriation ceremony held on September 21, 2010, the U.S. Attorney’s Office for the Southern District of New York returned to Brazil two paintings – “Modern Painting with Yellow Interweave” by Roy Lichtenstein (the “Lichtenstein”) and “Figures dans une structure” by Joaquin Torres-Garcia (the “Torres-Garcia”) – that were smuggled into the United States.

The Poliakoff once belonged to Brazilian banker Edemar Cid Ferreira. Ferreira, the founder and former president of Banco Santos, S.A. (“Banco Santos”), was convicted in Brazil of crimes against the national financial system and money laundering. In December 2006, Ferreira was sentenced in Brazil to 21 years in prison.

As part of the case, a Sao Paulo Court Judge also ordered the search, seizure, and confiscation of assets that Ferreira, his associates, and members of his family had acquired with unlawfully obtained funds from Banco Santos. Those assets included the Poliakoff, the Lichtenstein, the Torres-Garcia, and other artwork valued at $20 million to $30 million. The artwork was kept in several locations, including Ferreira’s home in the Morumbi neighborhood of Sao Paulo, the main offices of Banco Santos, and at a holding facility. When Brazilian authorities searched these locations, they found that several of the most valuable works of art were missing, including the Poliakoff.

The Sao Paulo Court sought INTERPOL’s assistance after searching museums and institutions in Brazil for the missing artwork. In October and November 2007, INTERPOL and the Government of Brazil sought the assistance of the United States to locate and seize the missing works on behalf of the Brazilian government. In response, HSI special agents in New Haven, Connecticut located and seized a painting by Jean-Michel Basquiat called “Hannibal,” and the U.S. Attorney’s Office for the Southern District of New York filed a civil forfeiture Complaint alleging that “Hannibal” had been brought into the United States illegally. Since the filing of the original Complaint in February 2008, the United States seized additional works of art and filed two amended Complaints seeking the forfeiture of four additional artworks listed in the INTERPOL request for assistance.

The Southern District of New York and HSI investigation revealed that the Poliakoff, the Lichtenstein, and the Torres-Garcia were shipped on December 1, 2006, from the Netherlands to a secure storage facility in New York. The invoices, however, failed to comply with U.S. customs laws in a number of respects. For example, the shipping invoices did not identify the names of the paintings or their artists. The invoices also falsely claimed that the combined value of the paintings was $230. In fact, the combined appraisal value of the paintings was recently assessed in excess of $4 million, with the Poliakoff appraised at $500,000.

After the shipment containing the paintings was imported into the United States, the Lichtenstein and the Torres-Garcia were subsequently sold, but the purchasers later voluntarily surrendered the works to HSI. The Poliakoff was shipped to Switzerland, where it was seized by Swiss authorities in July 2008 at the request of the U.S. Attorney’s Office and HSI.

On October 15, 2010, the Poliakoff was forfeited to the United States. “Hannibal,” which was recently valued to be worth about $8 million, and a sculpture known as the “Roman Togatus” have also been forfeited to the United States. An appeal of that decision is pending.

Mr. Bharara praised the investigative work of HSI in helping to locate and seize the painting. He was grateful for the assistance of the Department of Justice’s Office of International Affairs. Mr. Bharara thanked Brazilian authorities for their assistance in the case. He also acknowledged the assistance of the U.S. Department of State and the U.S. Embassy in Brazil for its assistance in the investigation.

The case is being handled by the Money Laundering and Asset Forfeiture Unit of the U.S. Attorney’s Office. Assistant U.S. Attorneys Jason P. Hernandez and Alexander Wilson are in charge of the litigation.

Brazilian Paintings 2nd Amended Complaint

The Swisspartners Group Earned Non-Prosecution Agreement As a Result of its Extraordinary Cooperation and Self-Reporting

James M. Cole, the Deputy Attorney General of the Department of Justice, Preet Bharara, the United States Attorney for the Southern District of New York, Kathryn Keneally, the Assistant Attorney General for the Tax Division of the Department of Justice, and Richard Weber, the Chief of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today that swisspartners Investment Network AG, a Swiss-based asset management firm, and three of its wholly-owned subsidiaries (collectively, the “Swisspartners Group”), entered into a non-prosecution agreement (“NPA”) with the U.S. Attorney’s Office for the Southern District of New York and agreed to pay $4.4 million to the United States. The NPA was entered into based on, among other things, the Swisspartners Group’s remedial measures, voluntary self-reporting, and extraordinary cooperation, including its voluntary production of approximately 110 client files for non-compliant U.S.-taxpayer clients, and provides that the Swisspartners Group will not be criminally prosecuted for assisting U.S. taxpayer-clients in opening and maintaining undeclared foreign bank accounts from in or about 2001 through in or about 2011. The NPA requires the Swisspartners Group to forfeit $3.5 million to the United States, representing certain fees that it earned by assisting its U.S. taxpayer-clients in opening and maintaining these undeclared accounts, and to pay $900,000 in restitution to the IRS, representing the approximate amount of unpaid taxes arising from the tax evasion by the Swisspartners Group’s U.S. taxpayer-clients. The NPA applies only to the four specific entities that are party to it and does not apply to any other subsidiaries of swisspartners Investment Network AG or any individuals.

Deputy Attorney General James Cole said: “The extraordinary cooperation of Swisspartners has enabled us to identify U.S. tax cheats who have hidden behind phony offshore trusts and foundations. In this and other cases around the world we will continue to provide substantial credit for prompt and full cooperation.”

Manhattan U.S. Attorney Preet Bharara said: “This Office will continue to work aggressively to hold accountable not only those U.S. taxpayers who evade their tax obligations by hiding money overseas, but also those abroad who make such tax evasion possible. For its wrongdoing in assisting U.S. taxpayers to open and maintain undeclared accounts overseas, the Swisspartners Group is being made to pay $4.4 million in forfeiture and restitution. Swisspartners avoided criminal charges as a direct result of its decision to self-report its misconduct at a time when it was not even under investigation and its extraordinary cooperation, including its decision to turn over voluntarily the files and identities of U.S. taxpayer clients it helped hide money from the IRS. The case serves as a clear example of the benefits that can be obtained from early and complete cooperation with federal law enforcement.”

Assistant Attorney General Kathryn Keneally said: “As today’s announcement shows, we receive information about U.S. taxpayers with undisclosed accounts from many sources, some of which are not public. For many accountholders, the time to come forward voluntarily to avoid criminal prosecution has run out.”

IRS-CI Chief Richard Weber said: “I am very pleased that we have successfully concluded negotiations with the Swisspartners Group. In making amends, the Swisspartners Group has turned over 110 account files relating to U.S. taxpayer-clients who maintained undeclared assets overseas. This agreement marks yet another significant step forward in combating offshore tax evasion. Anyone who is hiding money or assets offshore with the intent of committing tax evasion will be found and prosecuted. It's not a matter of ‘if,’ it's a matter of “when.’”

The NPA was entered into between the U.S. Attorney’s Office, on the one hand, and swisspartners Investment Network AG and the following three wholly-owned subsidiaries, on the other: swisspartners Wealth Management AG, a Zurich-based company that establishes and manages entities such as foundations and trusts; swisspartners Insurance Company SPC Ltd., a Cayman Islands-based life insurance carrier that offers life insurance and annuity products; and swisspartners Versicherung AG, a Liechtenstein-based insurance carrier that offers a variety of insurance and annuity products

The NPA recognizes that, beginning in 2008, the Swisspartners Group voluntarily implemented a series of remedial measures to stop assisting U.S. taxpayers in evading federal income taxes. The NPA further recognizes that in 2012, at a time when it was neither a subject nor target of any investigation by the U.S. Department of Justice, the Swisspartners Group self-reported its conduct concerning U.S. taxpayer-clients to the Department of Justice. Additionally, the NPA recognizes the extraordinary cooperation of the Swisspartners Group, including its voluntary production of client files for 110 non-compliant U.S. taxpayers that included the identities of those U.S. taxpayers.

As part of the NPA, the Swisspartners Group admitted various facts concerning its wrongful conduct and the remedial measures that it took to cease that conduct. Specifically, the Swisspartners Group admitted that it knew certain U.S. taxpayers were maintaining undeclared foreign bank accounts with the assistance of the Swisspartners Group in order to evade their U.S. tax obligations, in violation of U.S. law. The Swisspartners Group acknowledged that it helped certain U.S. taxpayer-clients conceal from the IRS their beneficial ownership of undeclared assets maintained in foreign bank accounts by, among other things, creating sham foundations and other sham entities that served as the nominal account holders; placing accounts or insurance policies in the names of non-U.S. nationals; facilitating the transportation of large amounts of cash into the United States on behalf of U.S. taxpayer-clients; and arranging for the bulk deposit of cash at Swiss depository financial institutions on behalf of U.S. taxpayer-clients.

As part of the NPA, the Swisspartners Group has agreed to forfeit $3.5 million to the United States, representing certain fees it obtained in exchange for services that it provided to U.S. taxpayers with undeclared foreign bank accounts from in or about 2001 through in or about 2011. In connection with this forfeiture, the Swisspartners Group has agreed not to contest a civil forfeiture action filed by the United States. That action was filed on May 9, 2014, in the U.S. District Court for the Southern District of New York and assigned to U.S. District Judge Gregory H. Woods.

The U.S. Attorney’s Office entered into the NPA based on factors including:

• the Swisspartners Group’s voluntary implementation of various remedial measures beginning in or about May 2008;
• the Swisspartners Group’s voluntary self-reporting of its criminal conduct at a time when it was neither a subject nor target of any investigation by the U.S. Department of Justice;
• the Swisspartners Group’s voluntary and extraordinary cooperation, including its voluntary production of account files that include the identities of U.S. taxpayer-clients;
• the Swisspartners Group’s willingness to continue to cooperate to the extent permitted by applicable law; and
• the Swisspartners Group’s representation, based on an investigation by outside counsel, the results of which have been shared with the U.S. Attorney’s Office and the Tax Division, that the misconduct under investigation did not, and does not, extend beyond that described in the Statement of Facts.

The NPA requires the Swisspartners Group to continue to cooperate with the United States for at least three years from the date of the agreement. In the event that the Swisspartners Group violates the NPA, the U.S. Attorney’s Office may prosecute the Swisspartners Group.

Mr. Bharara thanked the IRS for its outstanding work in the investigation of this matter and the Tax Division of the Department of Justice for its assistance in the investigation.

This investigation is being overseen by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Jason H. Cowley, Sarah E. Paul, and Jared P. Lenow are in charge of the matter.

U S v $3500000 (Swisspartners Forfeiture Complaint)

Preet Bharara, the United States Attorney for the Southern District of New York, Thomas J. Cannon, the Special Agent-in-Charge of the New York Field Office of the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), and Chief Michael Clancy of the Town of Newburgh Police Department announced the unsealing of an Indictment against three defendants in connection with the December 28, 2013, armed robbery of a store on State Route 32 in the Town of Newburgh, New York.

U.S. Attorney Preet Bharara stated: “These charges are the product of outstanding cooperation among multiple law enforcement agencies. We will continue to work with our law enforcement partners, federal and local, to bring those who participate in violent, criminal conduct to justice.”

Special Agent-in-Charge of the New York Field Office of the ATF Thomas J. Cannon stated: “The defendants have been charged as result of the information-sharing and interagency cooperation that exists between the ATF and the Town of Newburgh Police Department, Ulster County Sherriff’s Office, the Town of New Windsor Police Department, the Town of Plattekill Police Department, and the New York State Police. This investigation should serve as a model to others that when law enforcement effectively collaborates, there is nothing that cannot be achieved.”

Town of Newburgh Chief Michael Clancy stated: “The Town of Newburgh Police Department would like to thank the various law enforcement agencies that assisted in this case including the Town of Plattekill Police Department, the Town of New Windsor Police Department, the Ulster County Sheriff’s Office, and the ATF, and the New York State Police. We would also like to thank U.S. Attorney Preet Bharara and the members of his staff for their efforts in bringing about this Indictment.”

The Indictment charges ANDREW HECHT, 20, MATTHEW MACKSON, 19, and GREGORY SCOTT, 25, with conspiracy to commit robbery, robbery, and the brandishing of a firearm in furtherance of the robbery conspiracy. The charge against each defendant and the corresponding maximum potential penalties are outlined in the chart attached to this press release. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the Court.

The Indictment was unsealed yesterday. One of the defendants was arrested yesterday and one was already in state custody. They were presented in White Plains federal court yesterday before U.S. Magistrate Judge Paul E. Davison, and were ordered detained. One defendant remains at large.

Mr. Bharara praised the outstanding investigative work of the ATF, the Town of Newburgh Police Department, the Town of New Windsor Police Department, the Town of Plattekill Police Department, the Ulster County Sheriff’s Office, and the New York State Police.

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.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that PETER STRAIN, a talent agent for film, television, and Broadway actors, was sentenced today in Manhattan federal court to three years’ probation, six months’ home confinement, and 500 hours of community service for engaging in a scheme to steal over $500,000 of his clients’ money, which he used to purchase, among other things, expensive artwork and luxury personal items. STRAIN pled guilty in March 2014 before U.S. District Judge George B. Daniels, who also imposed today’s sentence.

According to the Superseding Information and other documents filed in Manhattan federal court, and statements made at related court proceedings, including today’s sentencing:

Through his talent agency, Peter Strain & Associates (“PSA”), STRAIN represented television, film, and stage actors. As a talent agent, STRAIN received funds in trust for his clients for their acting work, and was required to remit those funds to his clients, less his commission, which was typically 10%. However, between approximately 2011 and 2013, STRAIN diverted money he received on behalf of three clients, and used it to, among other things, pay for personal luxury retail goods and artwork. In order to conceal his theft and ensure that his clients allowed him to continue receiving money on their behalf, STRAIN repeatedly lied to his clients about why he had failed to timely remit their money.

Between July 2011 and December 2011, STRAIN received more than $1.4 million in an account held in trust for his clients (“the Trust Account”) on behalf of an actor who earned that money for work on a currently broadcast television series (“Client-1”). However, STRAIN failed to remit approximately $500,000 of this money to Client-1, and diverted it for his own personal use. In order to conceal his theft from Client-1, when STRAIN and Client-1 discussed the missing payments by telephone, STRAIN asked Client-1 if he could delay making the payments because, according to STRAIN, he was short on funds as a result of his partners at PSA embezzling money from the firm. STRAIN further claimed that he had recently won a lawsuit against his partners related to the supposed embezzlement, and that he was waiting to receive settlement payments from his partners.

STRAIN’s statements to Client-1 regarding the lawsuit were false. In truth, as STRAIN well knew, STRAIN’s partners had filed a lawsuit accusing STRAIN of embezzling funds from PSA, and STRAIN agreed to settle the lawsuit by paying his partners more than $250,000 for their shares in PSA. Moreover, in order to make a payment required under the settlement, instead of using his own money, STRAIN withdrew $30,000 from the Trust Account.

Ultimately, during 2012, STRAIN repaid Client-1 by stealing money from a different client, Client-2, an actor who has appeared in several television shows, including a currently broadcast television series. STRAIN then lied to Client-2 in order to conceal his theft. Among other things, STRAIN falsely told Client-2 that STRAIN had recently hired a new business management team and that the new team must have misplaced Client-2’s money. In truth and in fact, as STRAIN well knew, STRAIN had used Client-2’s money to repay the money he had stolen from Client-1. STRAIN never fully repaid the money he took from Client-2, and still owes Client-2 in excess of $350,000.

In July 2012, STRAIN failed to timely remit over $200,000 in additional payments to Client-1 for Client-1’s television acting work. In an email to Client-1 asking for additional time to remit the money, STRAIN repeated his false claim that he had “won” the lawsuit with his partners and was waiting for his partners to pay him. STRAIN further falsely claimed that he had Client-1’s money in his possession, but that he was restricted from accessing the money due to court orders. Contrary to his representations to Client-1, STRAIN had not “won” the lawsuit, was not restricted from accessing the funds owed to Client-1, and did not have sufficient funds in the Trust Account to pay Client-1. In fact, in the same month that STRAIN claimed he was unable to access Client-1’s money, STRAIN withdrew more than $80,000 from the Trust Account, leaving the account overdrawn by more than $9,000.

Between November 2012 and February 2013, STRAIN also stole tens of thousands of dollars from another client who has appeared in several television shows, including a currently broadcast television series (“Client-3”). To cover up his theft, STRAIN offered several false excuses to Client-3 for why he had failed to remit Client-3’s money. For example, in November 2012, STRAIN falsely claimed that Client-3’s payments had been lost in the mail. STRAIN also later falsely told Client-3 that the delays in remitting Client-3’s money were caused by a lawsuit, but that a confidentiality clause prevented STRAIN from discussing the details.

STRAIN used the money he stole from his clients to, among other things, pay operating expenses of PSA and to pay for personal luxury retail goods and artwork, some of which he purchased in New York using client money from California bank accounts. Between July 2011 and August 2012, using his clients’ money, STRAIN bought more than $161,000 in jewelry, more than $310,000 in artwork, and more than $57,000 at luxury goods retailers.

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

In addition to probation, STRAIN, 64, of Los Angeles, California, was ordered to forfeit all artwork obtained as part of the fraud, and to pay $384,128.52 in restitution.

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys James Pastore, Jr., and Jason Hernandez are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and Tom O’Donnell, the Special Agent-in-Charge of the New York Field Office of the Inspector General, United States Department of Health and Human Services (“OIG-HHS”), announced the arrest yesterday of KURTISS L. TOMASOVICH for failure to pay child support. TOMASOVICH was arrested and presented in federal court in Ocala, Florida, before U.S. Magistrate Judge Philip R. Lammens.

U.S. Attorney Preet Bharara stated: “As alleged, Kurtiss Tomasovich failed to pay over $100,000 in child support, allegedly choosing to spend his money on his home and businesses, rather than fulfill his court-ordered obligation to pay support for his children. Such alleged conduct represents not only a failure to Tomasovich’s children, but a federal crime. I want to thank the excellent work of our partners at OIG-HHS in this case.”

Special Agent in Charge of the New York Field Office of OIG-HHS Tom O’Donnell stated: "Parents who try to avoid paying child support by moving to another state will instead face justice for their crime. Our investigators work hard to hold deadbeat parents accountable for skipping out on their financial responsibilities to care for their children.”

According to allegations in the Complaint previously filed in White Plains federal court:

Pursuant to a judgment of the New York State Supreme Court, Orange County, beginning in 2008, KURTISS L. TOMASOVICH was obligated to pay a minimum of $3,000 a month in child support with respect to his children, who reside in Tuxedo, New York. From at least in or about February 2008 until at least in or about April 2014, TOMASOVICH, who resides in Florida, failed to pay approximately $158,708 in child support. Notwithstanding TOMASOVICH’s repeated failure to make his child support payments, he has had sufficient assets available to him to pay. For example, TOMASOVICH and his second wife have purchased and developed property in Florida, including constructing a tennis court. In addition, during the relevant time period, TOMASOVICH and his second wife have had access to substantial funds and have owned and operated several businesses in Florida.

TOMASOVICH, 51, of Ocala, Florida, is charged with one count of failing to pay child support, which carries a maximum sentence of two years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the outstanding efforts of OIG-HHS and the Orange County Sheriff’s Department and thanked the Orange County Support Collections Unit for their assistance in the investigation.

This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorney Kathryn Martin is in charge of the prosecution.

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that JASON KONIOR, the founder and manager of a number of related business entities in New York City, collectively referred to as “Absolute,” was sentenced yesterday in Manhattan federal court to 46 months in prison for his participation in a Ponzi scheme. KONIOR previously pled guilty on July 9, 2013, to one count of wire fraud for his role in stealing at least $2.9 million from small hedge fund investors and using the funds to pay off prior investors and to pay himself. He was sentenced yesterday by U.S. District Judge Alvin K. Hellerstein.

According to the Information, statements made during KONIOR’s sentencing proceeding yesterday and his guilty plea on July 9, 2013, and a Complaint previously unsealed in Manhattan federal court:

From late 2011 through May 2012, KONIOR organized and managed a Ponzi scheme in which he misappropriated at least $2.9 million in funds he had solicited from hedge fund investors. He represented to these hedge funds that Absolute would provide additional trading funds of up to nine times the investment they made in Absolute. As part of Absolute’s “first loss” investment program, KONIOR claimed that he would place the combined funds – the investors’ funds and the additional funds to be provided by Absolute – in a brokerage account designated by Absolute. According to KONIOR, the hedge fund investors would then be able to trade securities utilizing that brokerage account. Under the arrangement, the hedge funds would be responsible for trading losses, and they would share any profits with Absolute.

Instead of establishing brokerage accounts for the victim hedge funds, KONIOR misappropriated the funds they provided by paying redemptions to prior investors, making payments to himself, and paying various personal and business expenses. In e-mails, text messages, and telephone conversations, KONIOR pretended that he was establishing brokerage accounts for the three hedge fund investors, when he had already stolen their money. In one case, after he repeatedly failed to set up a brokerage account for one of the hedge funds, the manager of the fund sent him a text message stating, “I want my money back. What did you do to it anyway? Are you going to tell me or do you want the SEC to find out?” KONIOR responded with a text message that said, “[w]e have your funds in our acct. Where else would they be?” At the time he wrote the message, he had already used that hedge fund’s investment to pay off other investors and his own expenses.

In addition to the prison term, Judge Hellerstein sentenced KONIOR, 40, of New York, New York, to three years of supervised release. KONIOR was also ordered to forfeit $2.9 million and to pay a $2.9 million fine.

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

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 John T. Zach and Jason H. Cowley are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, Janet DiFiore, the Westchester County District Attorney, Scott W. Brown, Tarrytown Police Chief on behalf of the Greenburgh Drug and Alcohol Task Force, and George Venizelos, Assistant Director-In-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced the arrest of 11 defendants and the unsealing of an Indictment and a Superseding Indictment charging a conspiracy to distribute kilogram quantities of cocaine in and around the Bronx, across the Hudson Valley, and up to Albany, New York.

U.S. Attorney Preet Bharara stated: “These arrests are the product of the ongoing and unparalleled cooperation between our office and the Westchester District Attorney’s Office, and between federal and local law enforcement authorities. In particular, it is our privilege to work with District Attorney DiFiore and her team to prosecute alleged narcotics traffickers like the defendants. I want to thank our many federal and local law enforcement partners, representing villages, towns, cities and the nation all of whom coalesced to bring this case.”

Westchester District Attorney Janet DiFiore stated: “Law enforcement from all levels, federal, state and local, collaborated in a multi-jurisdictional effort that stretched from New York City to the Capitol District. This coordinated effort resulted in the takedown of a major narcotics trafficking operation in New York State. Our ongoing joint efforts with the United States Attorney’s office and the assistance of U.S. Attorney Preet Bharara in this and other prosecutions is a model of collaborative law enforcement and its results.”

Chief Scott W. Brown of the Tarrytown Police Department, speaking for the Greenburgh Drug and Alcohol Task Force, stated: “We are extremely proud of our officers and grateful for the assistance and cooperation of all agencies involved. The dedication and diligence of these law enforcement professionals will have a significant impact on the flow of illegal drugs in our communities.”

FBI Assistant Director-in-Charge George Venizelos stated: “Today, we were able to disrupt and dismantle yet another drug trafficking organization whose primary goal was to distribute cocaine in the surrounding areas. The arrests and searches were carried out today with our law enforcement partners working side by side to make the streets safer.”

According to allegations in the Indictments unsealed today:

The Indictments charge eleven people, PHILLIP LLENAS, a/k/a “Bemba,” 39, FRANKLIN ABREU, 28, SHERMAN ALSTON, a/k/a “Sherm,” 51, VICTOR ANDRADES, a/k/a “Fat Man,” 38, JAMES FERNANDEZ, a/k/a “Burg,” a/k/a “Burger,” 32, FERNANDO GUERRERO, 31, JOSE PEREYRA, a/k/a “Nano,” 33, MENSUR RADONCIC, a/k/a “Stu,” 31, KEENAN SOTO, a/k/a “Chinito,” 25, and KARL ZARATE, 38, with conspiring to distribute, and possess with intent to distribute, five kilograms or more of cocaine in Westchester County, New York, Orange County, New York, Albany County, New York and the Bronx, New York. The Superseding Indictment charges ANGEL APONTE, a/k/a “A,” 34, with conspiring to distribute, and possess with intent to distribute, five kilogram or more of cocaine. The charge against each defendant and the corresponding maximum potential penalties are outlined in the chart attached to this press release.

All eleven of the defendants charged in the Indictments unsealed today were arrested. Ten of the defendants were presented in White Plains federal court this afternoon before U.S. Magistrate Judge Paul E. Davison. One defendant, ALSTON, is scheduled to be presented at 2:00 p.m. tomorrow before Judge Davison.

Contemporaneous with the arrests, state and federal law enforcement officers executed search warrants at 24 locations and upon 4 vehicles. These searches resulted in the seizure of more than $800,000 cash, more than 5 kilograms of cocaine, approximately 40 pounds of marijuana, eight firearms, several kilo presses and other drug trafficking paraphernalia.

Mr. Bharara praised the outstanding investigative work of the FBI, the Greenburgh Drug and Alcohol Task Force, comprised of the police departments of the Town of Greenburgh, and the Villages of Ardsley, Dobbs Ferry, Elmsford, Hastings, Irvington, North Castle, Sleepy Hollow, and Tarrytown, the Westchester District Attorney’s Office, the New York State Police, the Yonkers Police Department, the U.S. Department of Homeland Security, the U.S. Drug Enforcement Administration, and the New York City Police Department.

The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Michael Gerber and Scott Hartman are in charge of the prosecution. Assistant U.S. Attorney Paul Monteleoni is responsible for the forfeiture aspects of the case.

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

United States v. Aponte, S1 14 Cr. 268
United States v. Llenas, et al., 14 Cr. 268
Takedown Chart

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ILLYA TRINCHER was sentenced today in Manhattan federal court to six months in prison followed by six months’ home confinement in connection with his leadership role in the operation of a high-stakes illegal sports gambling business. TRINCHER was also ordered to forfeit approximately $6.4 million. He was sentenced by U.S. District Judge Jesse M. Furman.

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

TRINCHER and defendant Hillel Nahmad, a/k/a “Helly,” operated and led a nationwide illegal gambling business in New York City and Los Angeles that catered primarily to multi-millionaire and billionaire clients. As part of this business, the organization ran a high-stakes, illegal sportsbook that utilized several online gambling websites operating illegally in the United States. The organization booked bets that were often in the hundreds of thousands of dollars, and at times a million dollars, on a single sporting event. The organization also made millions of dollars of sports bets each year.

Twenty-nine defendants in this case have pled guilty, and two have entered into deferred prosecution agreements. The defendants who have pled to date have agreed to forfeit, in total, more than $69,000,000. The following defendants have pled guilty, and have been or await sentencing:

• Bryan Zuriff pled guilty to gambling charges on July 26, 2013, and was sentenced on November 25, 2013.
• William Barbalat pled guilty to gambling charges on August 14, 2013, and was sentenced on December 16, 2013.
• Kirill Rapoport pled guilty to gambling charges on August 16, 2013, and was sentenced on December 19, 2014.
• Edwin Ting and Justin Smith pled guilty to gambling charges on September 4, 2013, and were sentenced on January 21, 2014, and January 6, 2014, respectively.
• Dmitry Druzhinsky and David Aaron pled guilty to gambling charges on October 4, 2013, and were sentenced on April 18, 2014, and February 14, 2014, respectively.
• Alexander Zaverukha pled guilty to gambling charges on October 10, 2013, and was scheduled on May 1, 2014.
• Nicholas Hirsch pled guilty to conspiring to commit wire fraud on October 16, 2013, and was sentenced on February 25, 2014.
• Anatoly Shteyngrob pled guilty to conspiring to commit money laundering on October 17, 2013, and is scheduled to be sentenced on June 10, 2014.
• Yugeshwar Rajkumar pled guilty to gambling charges on October 18, 2013, and was sentenced on March 25, 2014.
• Stan Greenberg pled guilty to conspiring to commit racketeering on October 22, 2013, and was sentenced on May 2, 2014.
• Arthur Azen pled guilty to conspiring to commit money laundering and conspiring to collect extensions of credit by extortionate means on November 5, 2013, and was sentenced on April 9, 2014.
• Hillel Nahmad pled guilty to gambling charges on November 12, 2013, and was sentenced on April 30, 2014.
• Vadim Trincher pled guilty to conspiring to commit racketeering on November 14, 2013, and was sentenced on April 30, 2014.
• Eugene Trincher pled guilty to gambling charges on November 14, 2013, and is scheduled to be sentenced on June 9, 2014.
• Anatoly Golubchik pled guilty to conspiring to commit racketeering on November 15, 2013, and was sentenced on April 29, 2014.
• Illya Trincher pled guilty to gambling charges on November 15, 2013, and was sentenced on May 8, 2014.
• Ronald Uy pled guilty to structuring financial transactions on November 25, 2013, and was sentenced on March 27, 2014.
• Moshe Oratz pled guilty to gambling charges on December 3, 2013, and was sentenced on April 9, 2014.
• Michael Sall pled guilty to interstate travel in aid of an unlawful activity (illegal gambling), and Jonathan Hirsch pled guilty to gambling charges on December 4, 2013. Sall was sentenced on April 18, 2014, and Hirsch is scheduled to be sentenced on May 9, 2014.
• Noah Siegel pled guilty to gambling charges on December 5, 2013, and was sentenced on April 10, 2014.
• Molly Bloom pled guilty to gambling charges on December 12, 2013, and was be sentenced on May 2, 2014.
• Alexander Katchaloff pled guilty to gambling charges on January 16, 2014, and is scheduled to be sentenced on May 20, 2014.
• Donald McCalmont, John Jarekci, a/k/a “John Hanson,” and Abraham Mosseri pled guilty to making a fraudulent tax statement, to failing to file a tax return, and to causing a financial institution to participate in a lottery related matter, respectively, on January 24, 2014. McCalmont was sentenced on May 7, 2014, and Jarekci and Mosseri are scheduled to be sentenced on May 28, 2014, and May 21, 2014, respectively.
• William Edler and Peter Feldman entered into deferred prosecution agreements on April 11, 2014.
• Illya Rozenfeld pled guilty to interstate travel in aid of an unlawful activity (illegal gambling) on May 6, 2014, and is scheduled to be sentenced on August 14, 2014.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation, the New York City Police Department, and the Internal Revenue Service.

The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Harris M. Fischman, Joshua A. Naftalis, Peter J. Skinner, and Kristy J. Greenberg of the Violent and Organized Crime Unit are in charge of the prosecution. Assistant U.S. Attorney Alexander Wilson of the Office’s Money Laundering and Asset Forfeiture Unit is responsible for the forfeiture aspects of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, and James T. Hayes, Jr., Special Agent-in-Charge of U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations in New York (“HSI”), announced that RICHARD DINIZO, 59, entered a guilty plea today to a six-count Information that was filed on May 5. The Information to which DINIZO pled guilty charges that DINIZO engaged in sexually explicit conduct with seven different minors, all under the age of 11 at the time of the sexual abuse, and videoed the sexual abuse, and that DINIZO transported the videos he made of the minors engaging in sexual activity to recipients outside of New York.

On April 25, 2013, the Government unsealed a six-count Indictment charging DINIZO with engaging in sexual activity with five minors and videoing it and transporting the sexually explicit videos to recipients outside of New York. The six-count Information filed May 5 supersedes that Indictment and adds additional victims of DINIZO’s crimes.

U.S. Attorney Preet Bharara stated: “For the children preyed upon by Richard Dinizo, the encounter was a nightmare. This serial pedophile not only recorded his deviant criminal acts but shared those videos with others. This prosecution incapacitates and holds to account a dangerous man who threatened the well-being of children in our community.”

Special Agent in Charge James T. Hayes, Jr. stated: “Today’s guilty plea will ensure that one of the most heartless and depraved child predator this office has ever encountered can never again victimize another child. I am grateful for the tireless, diligent effort of the HSI Special Agents, Westchester and Putnam police officers and deputies, the New York State Police, and local and Federal prosecutors who investigated and prosecuted these crimes."

According to the Information filed on May 5, 2014, and court proceedings:

From 2007 through 2010, DINIZO engaged in sexually explicit conduct with seven different minors, all under the age of 11 and videoed that conduct. DINIZO’s homemade videos included multiple videos in which DINIZO appears on camera with a blindfolded victim and engages in trickery in order to manipulate the victim into engaging in sexual activity.

After editing the videos (and removing, among other things, images of himself and the voices that appear on the unedited videos), DINIZO transported his homemade sexually explicit videos to recipients outside of New York. In 2010 and 2011, the National Center for Missing and Exploited Children (“NCMEC”) received DINIZO’s homemade videos among other videos recovered by law enforcement in investigations throughout the country and internationally. Until DINIZO’s arrest in this case and the instant investigation, NCMEC had not been able to identify the child victims or the place of their abuse.

DINIZO is scheduled to be sentenced by U.S. District Judge Vincent L. Briccetti on September 12, 2014, and faces a minimum sentence of 15 years in prison and a maximum sentence 170 years (30 years on each of Counts One through Five and 20 years on Count Six). 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.

On February 18, 2014, DINIZO was convicted in Westchester County Court of Predatory Sexual Assault against a Child Less Than 13 Years Old and sentenced to a term of imprisonment of 25 years to life.

Mr. Bharara praised the efforts of ICE HSI, the Westchester County District Attorney’s Office, the Putnam County District Attorney’s Office, Putnam County Sherriff’s Office, the New York State Police, and the National Center for Missing and Exploited Children in connection with this investigation.

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

DINIZO supersedinginformation FINAL

Preet Bharara, the United States Attorney for the Southern District of New York, and James T. Hayes, Jr., the Special Agent-in-Charge of the New York Office of U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), announced today the return of the Duryodhana, a 10th Century sandstone sculpture, to the Kingdom of Cambodia. The return of the Duryodhana follows the settlement of a civil forfeiture action filed by the U.S. Attorney’s Office for the Southern District of New York, which alleged that the Duryodhana was stolen from the Prasat Chen temple at Koh Ker in 1972 by an organized looting network, and ultimately imported into the United States and offered for sale by Sotheby’s Inc. (“Sotheby’s”). The settlement of the civil forfeiture action, which was approved by United States District Judge George B. Daniels on December 16, 2013, required Sotheby’s and the customer selling the Duryodhana, Decia Ruspoli de Poggia Suasa (“Ruspoli”), to return the sculpture to the Kingdom of Cambodia.

Manhattan U.S. Attorney Preet Bharara said: “A priceless piece of Cambodia’s cultural history was stolen over 40 years ago. Once stolen, the Duryodhana should not have been for sale at any price. By bringing legal action to cause the return of the Duryodhana to the Kingdom of Cambodia, we have reaffirmed our commitment to ensuring that Manhattan does not become a Mecca for stolen art and antiquities. Everyone who sells, collects, or curates art should support doing what is right when it comes to repatriating priceless stolen artifacts. We are proud to have played a role in removing the Duryodhana from the stream of commerce, and pleased to commemorate its imminent return to its homeland.”

HSI Special Agent-in-Charge James T. Hayes, Jr., said: “HSI is proud to partner with the Southern District of New York to return this statue to the people of Cambodia after a more than 40-year absence. HSI is committed to continuing to be the dominant force in preserving and maintaining the integrity of cultural symbols throughout the world.”

According to an Amended Complaint filed in Manhattan federal court in April 2013, and other documents filed in the case:

From 928 to 944 A.D., Koh Ker was the capital of the ancient Khmer empire in Cambodia. The Khmer regime under Jayavarman IV constructed a vast complex of sacred monuments at Koh Ker, including the Prasat Chen temple and its statuary. These monuments have never been transferred to any private owner, and remain the property of the Cambodian state.

During the civil conflicts of the 1960s and 1970s, statues and other artifacts were stolen from Koh Ker and entered the international art market through an organized looting network. In the case of monumental statues like the Duryodhana, the heads would sometimes be forcibly detached from the torsos and transported first, with the torsos following later, due to the physical challenges of transporting the large torsos on dirt roads. The statues would then be transported to the Cambodia-Thailand border, and transferred to Thai brokers, who would in turn transport them to dealers of Khmer artifacts in Thailand, particularly Bangkok. These dealers would sell the artifacts to local or international customers, who would either retain the pieces or sell them on the international art market.

The Duryodhana, along with a companion statue, the Bhima, was stolen from Prasat Chen in 1972 via this looting network. The heads of the statues were removed and transported first, followed by the torsos, and ultimately delivered to a Thai dealer based in Bangkok. The Duryodhana and the Bhima were then obtained by a well-known collector of Khmer antiquities (Athe Collector@). The Duryodhana was sold to a Belgian businessman in 1975 and was ultimately transferred to his widow, Ruspoli.

In 2010, Ruspoli consigned the Duryodhana to Sotheby’s. Sotheby’s imported it into the United States and offered it for sale in 2011.

Mr. Bharara thanked HSI for its outstanding work on this investigation, which he noted is ongoing, and praised its ongoing efforts to find and repatriate stolen and looted cultural property. Mr. Bharara also thanked the United Nations Educational, Scientific, and Cultural Organization and L’Ecole Francaise d’Extreme-Orient for their assistance.

This matter is being handled by the Office’s Money Laundering and Asset Forfeiture Unit. Assistant U. S. Attorneys Sharon Cohen Levin, Alexander J. Wilson, Sarah E. Paul, and Christine I. Magdo are in charge of the case.

Duryodhana - Cambodian Scupture - Amended Complaint
Duryodhana - Cambodian Sculpture - Settlement Stipulation and Order

Preet Bharara, the United States Attorney for the Southern District of New York, Rafael A. Medina, the Special Agent-in-Charge of United States Postal Service, Office of Inspector General (“USPS-OIG”), and Cheryl Garcia, Acting Special Agent-in-Charge of the United States Department of Labor, Office of Inspector General (“DOL-OIG”), Office of Labor Racketeering and Fraud Investigations, today announced charges against 11 defendants for defrauding the Department of Labor’s federal workers’ compensation benefits program by claiming to be injured or disabled so that they could claim benefits to which they were not entitled. In addition, certain of the defendants failed to report income that they earned from other businesses they were running while allegedly too disabled to return to their federal employment. The 11 defendants include 10 United States Postal Service employees and one employee of the U.S. Navy, all but one of whom were arrested and presented today in Manhattan federal court before Magistrate Judge James C. Francis IV. One defendant was arrested on April 17, 2014, as part of the same operation.

Manhattan U.S. Attorney Preet Bharara said: “A federal employee is entitled to workers’ compensation benefits if he is in fact disabled by a workplace injury. As alleged, these defendants all showed remarkable strength and vigor for people claiming to have sustained debilitating injuries. They also showed a lack of integrity in exploiting a program meant to provide assistance to the truly disabled, not a source of easy money for the unscrupulous.”

Rafael A. Medina, Special Agent-in-Charge of the USPS-OIG, said: “Today’s arrests should send a clear message to every Postal Service employee that workers’ compensation fraud is a federal crime that carries serious consequences and will not be tolerated. The USPS-OIG, along with our law enforcement partners, will continue to aggressively investigate those who engage in fraudulent activities intended to defraud federal benefit programs and the Postal Service.”

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

The Regulatory Scheme

Postal Service and other federal employees are covered by the Federal Employees’ Compensation Act (“FECA”), which provides tax-free benefits to civilian federal employees who sustain injuries or an occupational disease as a result of their employment. Postal employees can receive up to 75 percent of the gross salary to which the employee is entitled if the employee has at least one dependent. The Postal Service is the largest participant in FECA, paying more than $1 billion in benefits and $60 million in administrative fees annually.

Pursuant to the DOL’s Office of Workers’ Compensation Programs (“OWCP”) guidelines, a claimant must prove that he or she is injured by submitting a claim, including medical documentation and other evidence, which attests to the severity of the claimant’s injury or disability. The employee’s claim and supporting medical evidence is evaluated by the OWCP to determine the claimant’s medical impairment and the effect of the impairment on the claimant’s ability to work on a sustained basis. Once approved, in order to receive FECA benefits on an ongoing basis, the claimant is required to update the OWCP periodically on, among other things, the status of his or her physical condition. In addition, the claimant is required to certify periodically whether he or she has had any other sources of income within the past 15 months. Claimants are advised that fraudulent concealment of income or other information which would have an effect on benefits may result in criminal prosecution.

The Defendants

The 11 defendants charged as part of this operation are JUANITA TOLBERT, SAMUEL MUNOZ, SHONTA HOLMES, ALICE BACA, FAITH PINKNEY, ANGEL CORUJO, PEDRO NUNEZ, RONALD WERNER, LASHONNE TUGGLES, CHARLES WALWYN and JEANNIE WIGFALL. The defendants defrauded the DOL’s OWCP in a variety of ways. For example:

SHONTA HOLMES, who had been employed by the Postal Service since 1989, submitted a federal workers’ compensation claim indicating that she sustained an occupational injury, Carpal Tunnel Syndrome, on or about April 17, 2002. Since May 2004, HOLMES has drawn federal benefits and has not reported to work. In January 2012, HOLMES was examined by a doctor to evaluate her capacity to work. The doctor’s report stated that HOLMES could not resume any type of work and that HOLMES was unable to handle even “10 pounds of weight up to one-third at a time even in a sedentary position.” In July 2012, another doctor submitted a report which concluded that HOLMES was “permanently and totally disabled.” In September 2013, HOLMES stated that her condition limits many of her daily activities including bathing, bike riding, doing her hair, driving, laundry, going to the store, and sexual activities. HOLMES indicated that she considered herself “totally disabled” and “unable to perform any assignment for the Postal Service.” Nevertheless, in the course of the investigation from October 2011 through September 2013, HOLMES has been observed in and around public places, such as stores and gyms, engaged in strenuous physical activity. For example, HOLMES has been observed in a gym using dumbbell free weights, each weighing approximately 10 to 20 pounds, and performing repetitive strengthening exercises such as bicep curls and chest presses; using a “Smith Machine,” which is a free standing piece of equipment used in weight training, to perform shoulder press exercises with the machine loaded with approximately 50 to 100 pounds of weights; participating in an “Ultimate Abs” class, which involved the use of weight training exercises with a barbell; exercising on a treadmill and a Stairmaster; and working out with a personal trainer, including punching a punching bag while wearing boxing gloves. In addition, HOLMES has been observed driving, shopping, and running errands. As of May 3, 2014, HOLMES has received FECA compensation totaling approximately $426,114.35.

ANGEL CORUJO, who had been employed by the Postal Service since 1987, submitted a federal workers’ compensation claim indicating he sustained a back injury on or about July 15, 2003. Since he began to draw federal benefits in or about August 2003, CORUJO has not reported for work. In October 2013, CORUJO certified that he had not worked for any employer during the past 15 months. In January 2014, CORUJO submitted a report by a doctor in which CORUJO reported pain as a “7/10 severity all the time” and represented that he used a motorized wheelchair while at home and a cane for ambulatory assistance in the community. Nevertheless, in the course of the investigation, CORUJO was observed in 2013 hanging holiday decorations at his home, including balancing on a stepstool; pushing a loaded shopping cart at a home improvement store without the aid of a wheelchair or cane; and, in 2014, using a snow blower to clear his driveway of snow. In addition, the investigation uncovered that CORUJO was employed periodically in 2013 and 2014 by another employer other than the Postal Service, something he did not report as required. As of April 5, 2014, CORUJO has received FECA compensation totaling $402,651.

RONALD JAMES WERNER, who had been employed as a civilian firefighter by the U.S. Navy prior to September 2005, submitted a federal workers’ compensation claim indicating he sustained a knee injury in September 2005. Since at least April 2008, WERNER has drawn federal benefits and has not reported for work. In January 2013, WERNER certified that he had not worked for any employer during the past 15 months and that he had not earned any income from other employment in that time period. In January 2012, WERNER submitted a report by a doctor which stated that he could not perform his usual job or another type of work even with restrictions. In May 2013, WERNER submitted a report by another doctor which stated that WERNER was “permanently unable to work” due to a “[t]otal knee replacement” and that he would be unable to, among other activities, sit, walk, stand, reach, twist, bend or operate a motor vehicle to work. Nevertheless, in the course of the investigation in 2013, WERNER was observed in the vicinity of a truck bearing the logo “Werner’s Home Improvements” at various worksites where residential construction was taking place; entering and shopping in various home improvement stores, including purchasing 2x4s and other construction supplies; loading and unloading building construction materials into and out of a pickup truck; and arriving at a recycling center and unloading various appliances from his vehicle. WERNER’s credit card records reflect over $180,000 in purchases from a home improvement store from 2010 to 2013. In addition, an employee of a home improvement store where WERNER shopped praised WERNER to law enforcement agents who asked for a recommendation for a contractor, saying that WERNER was highly recommended and had been known at the store for years. Between April 2008 and March 2014, WERNER has received FECA compensation totaling $340,812.

Ten of the defendants were taken into custody this morning and are expected to be presented in Manhattan federal court later this afternoon. ANGEL CORUJO was arrested on April 17, 2014, as part of the same operation. All 11 defendants are charged with theft of government funds, which carries a maximum sentence of 10 years in prison, and federal workers’ compensation benefits fraud, which carries a maximum sentence of five years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the Court.

Attached is a chart reflecting the age and place of residence for each of the charged defendants.

Manhattan U.S. Attorney Bharara praised the USPS-OIG, the DOL-OIG’s Office of Labor Racketeering and Fraud Investigations, the Social Security Administration – Office of Inspector General, and the Naval Criminal Investigative Service for their outstanding work in the investigation, which he noted is ongoing.

The Office’s General Crimes Unit is handling the case. Assistant U.S. Attorneys Richard Cooper, Andrew DeFilippis, Patrick Egan, Samson Enzer, Margaret Graham, Andrea Griswold, Jared Lenow, and Special Assistant U.S. Attorney Daniel Tracer are in charge of the prosecution.

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

Click here to view chart(s)

Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that ALEX V. EKDESHMAN, 41, of Holmdel, New Jersey, was arrested this morning on commodities fraud, wire fraud, and mail fraud charges. EKDESHMAN is expected to be presented today in Manhattan federal court before United States Magistrate Judge Michael H. Dolinger.

U.S. Attorney Preet Bharara said: “As alleged, Alex Ekdeshman took over a million dollars from more than a hundred investors under false pretenses, using money meant for foreign exchange transactions for other purposes, including to buy personal items and pay family members. When an investment manager lies about what he’s doing with your money, that is not just dishonest, it is a federal crime.”

Assistant Director in Charge George Venizelos said: "While risk is inherent in the investment world, that risk should not include reliance on a greedy investment professional who takes his client's money through misrepresentations, putting his own financial interests above those he promised to serve. As alleged, Ekdeshman broke the law when he traded on his client's trust and lied to investors for personal gain. The FBI is committed to protecting innocent investors and maintaining the integrity of the American financial markets."

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

From at least in or about May 2011 through May 2013, EKDESHMAN ran a fraudulent commodities trading scheme. EKDESHMAN, who was chief executive officer of Paramount Management, LLC (“Paramount Management”), located in New York, New York, represented to investors that Paramount Management was in the business of investing in foreign exchange currency transactions, or “forex.” Through various employees of Paramount Management, EKDESHMAN solicited investor funds on the understanding that the funds would be solely invested in forex. As a result of these solicitations, EKDESHMAN and his employees collected at least $1.58 million from approximately 115 investors.

Contrary to EKDESHMAN’s promise to invest the investors’ funds in forex, EKDESHMAN misappropriated the large majority of investor funds. More than $1 million in investor funds were never traded in forex. Instead, EKDESHMAN used those funds to make payments to himself and his family members, to buy personal items, to pay for business expenses related to Paramount Management, and to pay employees of Paramount Management.

EKDESHMAN is charged with one count of commodities fraud, one count of wire fraud, and one count of mail fraud. The commodities fraud count carries a maximum sentence of 10 years in prison and a maximum fine of $1 million, or twice the gross gain or loss from the offense. The wire and mail fraud counts each carry a maximum sentence of 20 years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

Mr. Bharara praised the work of the Federal Bureau of Investigation, and thanked the United States Commodity Futures Trading Commission for its assistance. He added that the investigation is continuing.

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

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

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

presumed innocent unless and until proven guilty.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ANATOLY GOLUBCHIK and was sentenced yesterday in Manhattan federal court to five years in prison and VADIM TRINCHER was also sentenced today to five years in prison for participating in a racketeering conspiracy in connection with their roles as members of a Russian-American organized crime enterprise. GOLUBCHIK and TRINCHER were also each ordered to forfeit more than $20 million in cash, investments, and real property. They were charged in April 2013 along with 32 other alleged members and associates of two Russian-American organized crime enterprises in an indictment that included racketeering, money laundering, extortion, and various gambling offenses. GOLUBCHIK and TRINCHER were sentenced by U.S. District Judge Jesse M. Furman.

Manhattan U.S. Attorney Preet Bharara said: “The sentences meted out to Anatoly Golubchik and Vadim Trincher are just and appropriate penalties for the roles the defendants played in this far-reaching, Russian-American organized crime ring. I’d like to thank the Federal Bureau of Investigation, the New York City Police Department, and the Internal Revenue Service for their tireless efforts in working to ensure that the members of this underground enterprise were held to account for their crimes.”

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

The Taiwanchik-Trincher Organization (the “Organization”) was a criminal enterprise with strong ties to Russia and Ukraine. The enterprise operated a high-stakes, illegal sports gambling business out of New York City that catered primarily to Russian oligarchs living in Ukraine and Russia. GOLUBCHIK and TRINCHER were U.S.-based participants in the enterprise. GOLUBCHIK and TRINCHER booked sports bets that reached into the millions of dollars and laundered the proceeds of the Organization’s international sportsbook. Between 2006 and April 2012, the enterprise laundered approximately $100 million in proceeds from their gambling operation in Russia and Ukraine through shell companies and bank accounts in Cyprus; and of this $100 million, approximately $50 million was subsequently sent from Cyprus into the United States. Once the money had been transferred to the United States, it was either laundered through additional shell companies or invested in legitimate investments, such as hedge funds and real estate.

The Taiwanchik-Trincher Organization operated under the protection of Alimzhan Tokhtakhounov, who is known as a “Vor,” a term translated as “Thief-in-Law,” that refers to a member of a select group of high-level criminals from the former Soviet Union. Tokhtakhounov used his status as a Vor to resolve disputes with clients of the high-stakes illegal gambling operation with implicit and sometimes explicit threats of violence and economic harm. Between December 2011 and February 2013, Tokhtakhounov was paid at least approximately $12 million for his services by the Taiwanchik-Trincher Organization. Tokhtakhounov is also under indictment in the Southern District of New York for his alleged involvement in bribing officials at the 2002 Winter Olympics held in Salt Lake City, Utah. Tokhtakhounov is a fugitive and is still being sought.

Twenty-eight defendants in this case have pled guilty, and two have entered into deferred prosecution agreements. The defendants who have pled to date have agreed to forfeit, in total, more than $68 million. The following defendants have pled guilty, and have been sentenced or await sentencing:

• Bryan Zuriff pled guilty to gambling charges on July 26, 2013, and was sentenced on November 25, 2013.
• William Barbalat pled guilty to gambling charges on August 14, 2013, and was sentenced on December 16, 2013.
• Kirill Rapoport pled guilty to gambling charges on August 16, 2013, and was sentenced on December 19, 2014.
• Edwin Ting and Justin Smith pled guilty to gambling charges on September 4, 2013, and were sentenced on January 21, 2014, and January 6, 2014, respectively.
• Dmitry Druzhinsky and David Aaron pled guilty to gambling charges on October 4, 2013, and were sentenced on April 18, 2014, and February 14, 2014, respectively.
• Alexander Zaverukha pled guilty to gambling charges on October 10, 2013, and is scheduled to be sentenced on May 1, 2014.
• Nicholas Hirsch pled guilty to conspiring to commit wire fraud on October 16, 2013, and was sentenced on February 25, 2014.
• Anatoly Shteyngrob pled guilty to conspiring to commit money laundering on October 17, 2013, and is scheduled to be sentenced on June 10, 2014.
• Yugeshwar Rajkumar pled guilty to gambling charges on October 18, 2013, and was sentenced on March 25, 2014.
• Stan Greenberg pled guilty to conspiring to commit racketeering on October 22, 2013, and is scheduled to be sentenced on May 2, 2014.
• Arthur Azen pled guilty to conspiring to commit money laundering and conspiring to collect extensions of credit by extortionate means on November 5, 2013, and was sentenced on April 9, 2014.
• Hillel Nahmad pled guilty to gambling charges on November 12, 2013, and was sentenced on April 30, 2014.
• Vadim Trincher pled guilty to conspiring to commit racketeering on November 14, 2013, and was sentenced on April 30, 2014.
• Eugene Trincher pled guilty to gambling charges on November 14, 2013, and is scheduled to be sentenced on June 9, 2014.
• Anatoly Golubchik pled guilty to conspiring to commit racketeering on November 15, 2013, and was sentenced on April 29, 2014.
• Illya Trincher pled guilty to gambling charges on November 15, 2013, and is scheduled to be sentenced on May 8, 2014.
• Ronald Uy pled guilty to structuring financial transactions on November 25, 2013, and was sentenced on March 27, 2014.
• Moshe Oratz pled guilty to gambling charges on December 3, 2013, and was sentenced on April 9, 2014.
• Michael Sall pled guilty to interstate travel in aid of an unlawful activity (illegal gambling) and Jonathan Hirsch pled guilty to gambling charges on December 4, 2013. Sall was sentenced on April 18, 2014, and Hirsch is scheduled to be sentenced on May 9, 2014.
• Noah Siegel pled guilty to gambling charges on December 5, 2013, and was sentenced on April 10, 2014.
• Molly Bloom pled guilty to gambling charges on December 12, 2013, and is scheduled to be sentenced on May 2, 2014.
• Alexander Katchaloff pled guilty to gambling charges on January 16, 2014, and is scheduled to be sentenced on May 20, 2014.
• Donald McCalmont, John Jarekci, a/k/a “John Hanson,” and Abraham Mosseri pled guilty to making a fraudulent tax statement, to failing to file a tax return, and causing a financial institution to participate in a lottery related matter, respectively, on January 24, 2014, and are scheduled to be sentenced on May 29, 2014, May 28, 2014, and May 21, 2014, respectively.
• William Edler and Peter Feldman entered into deferred prosecution agreements on April 11, 2014.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation, the New York City Police Department, and the Internal Revenue Service.

The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Harris M. Fischman, Joshua A. Naftalis, Peter J. Skinner, and Kristy J. Greenberg of the Violent and Organized Crime Unit are in charge of the prosecution. Assistant U.S. Attorney Alexander Wilson of the Office’s Money Laundering and Asset Forfeiture Unit is responsible for the forfeiture aspects of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that HILLEL NAHMAD, a/k/a “Helly,” was sentenced today in Manhattan federal court to one year and one day in connection with his leadership role in the operation of a high-stakes illegal sports gambling business. NAHMAD was also ordered to forfeit $6,427,000 and all his right, title, and interest in the painting Carnaval à Nice, 1937 by Raoul Dufy to the United States. He was sentenced by U.S. District Judge Jesse M. Furman.

Manhattan U.S. Attorney Preet Bharara said: “For art gallery owner Helly Nahmad, running a multimillion-dollar illegal sports gambling business came with a steep price, forfeiture of over $6 million and time behind bars – a punishment he likely never pictured.”

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

NAHMAD operates the Helly Nahmad Gallery out of the Carlyle Hotel in New York, New York. NAHMAD and defendant Illya Trincher operated and led a nationwide illegal gambling business in New York City and Los Angeles that catered primarily to multi-millionaire and billionaire clients. As part of this business, the organization ran a high-stakes, illegal sportsbook that utilized several online gambling websites operating illegally in the United States. The organization booked bets that were often in the hundreds of thousands of dollars, and at times a million dollars, on a single sporting event. The organization also made millions of dollars of sports bets each year. NAHMAD was the primary source of financing for the illegal gambling business, and he was entitled to a substantial share of its profits.

Twenty-eight defendants in this case have pled guilty, and two have entered into deferred prosecution agreements. The defendants who have pled to date have agreed to forfeit, in total, more than $68 million. The following defendants have pled guilty, and have been sentenced or await sentencing:

• Bryan Zuriff pled guilty to gambling charges on July 26, 2013, and was sentenced on November 25, 2013.
• William Barbalat pled guilty to gambling charges on August 14, 2013, and was sentenced on December 16, 2013.
• Kirill Rapoport pled guilty to gambling charges on August 16, 2013, and was sentenced on December 19, 2014.
• Edwin Ting and Justin Smith pled guilty to gambling charges on September 4, 2013, and were sentenced on January 21, 2014, and January 6, 2014, respectively.
• Dmitry Druzhinsky and David Aaron pled guilty to gambling charges on October 4, 2013, and were sentenced on April 18, 2014, and February 14, 2014, respectively.
• Alexander Zaverukha pled guilty to gambling charges on October 10, 2013, and is scheduled to be sentenced on May 1, 2014.
• Nicholas Hirsch pled guilty to conspiring to commit wire fraud on October 16, 2013, and was sentenced on February 25, 2014.
• Anatoly Shteyngrob pled guilty to conspiring to commit money laundering on October 17, 2013, and is scheduled to be sentenced on June 10, 2014.
• Yugeshwar Rajkumar pled guilty to gambling charges on October 18, 2013, and was sentenced on March 25, 2014.
• Stan Greenberg pled guilty to conspiring to commit racketeering on October 22, 2013, and is scheduled to be sentenced on May 2, 2014.
• Arthur Azen pled guilty to conspiring to commit money laundering and conspiring to collect extensions of credit by extortionate means on November 5, 2013, and was sentenced on April 9, 2014.
• Hillel Nahmad pled guilty to gambling charges on November 12, 2013, and was sentenced on April 30, 2014.
• Vadim Trincher pled guilty to conspiring to commit racketeering on November 14, 2013, and was sentenced on April 30, 2014.
• Eugene Trincher pled guilty to gambling charges on November 14, 2013, and is scheduled to be sentenced on June 9, 2014.
• Anatoly Golubchik pled guilty to conspiring to commit racketeering on November 15, 2013, and was sentenced on April 29, 2014.
• Illya Trincher pled guilty to gambling charges on November 15, 2013, and is scheduled to be sentenced on May 8, 2014.
• Ronald Uy pled guilty to structuring financial transactions on November 25, 2013, and was sentenced on March 27, 2014.
• Moshe Oratz pled guilty to gambling charges on December 3, 2013, and was sentenced on April 9, 2014.
• Michael Sall pled guilty to interstate travel in aid of an unlawful activity (illegal gambling) and Jonathan Hirsch pled guilty to gambling charges on December 4, 2013. Sall was sentenced on April 18, 2014, and Hirsch is scheduled to be sentenced on May 9, 2014.
• Noah Siegel pled guilty to gambling charges on December 5, 2013, and was sentenced on April 10, 2014.
• Molly Bloom pled guilty to gambling charges on December 12, 2013, and is scheduled to be sentenced on May 2, 2014.
• Alexander Katchaloff pled guilty to gambling charges on January 16, 2014, and is scheduled to be sentenced on May 20, 2014.
• Donald McCalmont, John Jarekci, a/k/a “John Hanson,” and Abraham Mosseri pled guilty to making a fraudulent tax statement, failing to file a tax return, and causing a financial institution to participate in a lottery related matter, respectively, on January 24, 2014, and are scheduled to be sentenced on May 29, 2014, May 28, 2014, and May 21, 2014, respectively.
• William Edler and Peter Feldman entered into deferred prosecution agreements on April 11, 2014.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation, the New York City Police Department, and the Internal Revenue Service.

The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Harris M. Fischman, Joshua A. Naftalis, Peter J. Skinner, and Kristy J. Greenberg of the Violent and Organized Crime Unit are in charge of the prosecution. Assistant U.S. Attorney Alexander Wilson of the Office’s Money Laundering and Asset Forfeiture Unit is responsible for the forfeiture aspects of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that TCHAMY YALA and PAPIS DJEME, citizens of Guinea Bissau, pled guilty yesterday and today, respectively, in Manhattan federal court to narcotics importation conspiracy charges. YALA and DJEME were arrested on April 2, 2013, by the Drug Enforcement Administration’s (DEA) Special Operations Division, Bilateral Investigative Unit Narco-Terrorism Group and the DEA Foreign-deployed Advisory Support Team (FAST) off the coast of West Africa while on board a vessel under DEA control in international waters. They were transferred thereafter to the custody of the United States. YALA and DJEME pled guilty before U.S. District Judge Richard M. Berman.

Manhattan U.S. Attorney Preet Bharara said: “International drug traffickers pose a serious threat to the United States and its citizens. As this case makes clear, we are committed to halting the flood of narcotics from overseas into our nation, and to working with all of our law enforcement partners, both here and abroad, in bringing the exporters of this poison to justice.”

According to the Indictment previously unsealed in this case:

Beginning in the summer of 2012, YALA, DJEME, and a co-defendant engaged in a series of recorded meetings in Guinea-Bissau with confidential sources (the “CSs”) working with the DEA who purported to be representatives and/or associates of South American-based narcotics traffickers.

In an early meeting in which the defendants discussed the shipment of ton-quantities of cocaine from South America to Guinea Bissau by sea, a co-conspirator noted that the Guinea Bissau government was weak in light of the recent coup d’etat and that it was therefore a good time for the proposed cocaine transaction. In further meetings, YALA and DJEME agreed to assist the CSs by receiving a two-ton load of cocaine that would be transported to Guinea-Bissau by boat and stored in Guinea Bissau for distribution to Europe and the United States. For example, on November 17, 2012, YALA, DJEME and a co-conspirator met with two of the CSs in Guinea Bissau and discussed importing 1,000 kilograms of cocaine into the United States. Also during the meeting, a co-conspirator offered to utilize a company that he owned to facilitate the shipment of cocaine out of Guinea Bissau. YALA and a co-defendant agreed to receive a fee of $1,000,000 per 1,000 kilograms of cocaine received in Guinea Bissau.

YALA, 42, and DJEME, 30, each pled guilty to one count of conspiring to distribute cocaine, knowing and intending that the cocaine would be imported into the United States. Each defendant faces a maximum sentence of life in prison. YALA is scheduled to be sentenced by Judge Berman on September 4, 2014. DJEME is scheduled to be sentenced by Judge Berman on September 23, 2014. 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 charges against YALA and DJEME were the result of the extraordinary investigative efforts of DEA’s Special Operations Division. Mr. Bharara also praised the seamless, coordinated work of FAST, the DEA Lisbon Country Office, and the DEA Bogota Country Office, as well as the U.S. Department of Justice Office of International Affairs, and the U.S. State Department.

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

U.S. v. Jose Americo Bubo Na Tchuto et al. Indictment

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 Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today the arrest of SHLOIME TORIM on various fraud charges. TORIM was arrested today, and was presented this afternoon in White Plains federal court before U.S. Magistrate Judge Lisa Margaret Smith, who ordered him jailed pending the satisfaction of bail conditions.

U.S. Attorney Preet Bharara said: “As alleged, Shloime Torim evaded his responsibilities as a taxpayer to the IRS and ultimately to the American people. He will now face his responsibilities as a criminal defendant.”

Acting Special Agent-in-Charge Shantelle P. Kitchen stated: "In order to maintain the public's confidence in the tax system, it is important that the government thoroughly investigates and prosecutes those who willfully obstruct and impede the administration of the tax laws. IRS Criminal Investigation is committed to ensuring that everyone pays their fair share and our investigators are skilled in unraveling the complicated schemes that criminals use to conceal income."

According to the Indictment previously filed in White Plains federal court:

SHLOIME TORIM resided in Orange County, New York, and engaged in a variety of income-producing businesses, including car leasing, rentals and real estate. When conducting business, TORIM used multiple identities. At times he used his actual name, “Shloime Torim,” and the social security number assigned to him, and other times he used different social security numbers associated with his aliases, such as “Shloime Goldstein,” or “Max Gold.” TORIM controlled over 100 corporations and other business entities (the “Torim Entities”). Most of the Torim Entities were shell companies and served no purpose other than to conceal TORIM’s income.

From at least 2002 through April 2014, TORIM engaged in a course of conduct calculated to impede and impair the due administration of the Internal Revenue laws by obstructing the IRS in assessing and collecting United States income taxes. TORIM impeded the IRS by using shell companies and corresponding bank accounts to conceal his income, using family members as nominees to disguise his interests in various business accounts, commingling funds among nominee and business accounts, using multiple identities and social security numbers that he obtained under the names “Shloime Torim,” “Shloime Goldstein,” and “Max Gold,” and failing to file individual corporate income tax returns.

TORIM, 76, of Monroe, New York, is charged with one count of endeavoring to obstruct and impede the due administration of the Internal Revenue laws, which carries a maximum sentence of three years in prison, five counts of failing to file United States Individual Income tax returns for the tax years 2007 through 2011, each of which carries a maximum sentence of one year in prison, and two counts of making a false statement to a bank for the purpose of obtaining a loan, which carries a maximum sentence of 30 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the outstanding efforts of IRS-CI and United States Department of State Diplomatic Security Service. He also thanked the U.S. Department of Justice’s Tax Division for its significant assistance in the investigation

This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorney John P. Collins, Jr. is in charge of the prosecution.

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that CARLOS URENA and LIMET VASQUEZ were both found guilty after trial of racketeering, racketeering conspiracy, and a drug conspiracy involving marijuana, crack cocaine, powder cocaine, and oxycodone. As part of the racketeering conviction, the jury found, among other things, that URENA and VASQUEZ participated in a conspiracy to murder Ka’Shawn Phillips in Yonkers, New York, in 2005, and in a separate attempted murder in Manhattan, New York, in 2005. URENA was also convicted of murder in aid of racketeering and the use of a firearm in connection with the murder in aid of racketeering, both in connection with the murder of Ka’Shawn Phillips. URENA and VASQUEZ were convicted following a seven-week jury trial presided over by U.S. District Judge Paul A. Engelmayer.

Manhattan U.S. Attorney Preet Bharara said: “The defendants, Carlos Urena and Limet Vasquez, now stand convicted after trial for perpetuating the crusade of crime for the Bronx Trinitarios Gang, including conspiring to murder a sixteen year-old rival gang member. The Bronx streets are safer because of the jury’s verdict and the continued efforts of our law enforcement partners – the NYPD, ATF, and the DEA – who help us in building these cases.”

According to the evidence introduced at trial, other proceedings in this case, and documents previously filed in Manhattan federal court:

URENA and VASQUEZ were members of the Bronx Trinitarios Gang (“BTG”), a criminal organization that operated primarily in the Bronx, New York. The BTG started in the prison system in the late 1980s and subsequently spread to the streets. URENA, VASQUEZ, and others carried out illegal activities as part of a racketeering conspiracy, and to accomplish BTG’s goals of enhancing its power, protecting its turf from rival gangs including the Dominicans Don’t Play, the Bloods, the Crips, the Latin Kings, and other gangs, and enriching its members. Those activities included murder, attempted murders, conspiracies to commit murders, robbery, and narcotics trafficking.

On September 2, 2005, URENA and VASQUEZ participated in an attempted murder of a rival gang member in the Fort Washington area of Manhattan. The next evening, on September 3, 2005, URENA and VASQUEZ participated in a conspiracy to murder a 16-year-old named Ka’Shawn Phillips, who they had been told was a member of a rival gang. On that evening, a group of Trinitarios attacked Phillips on Saratoga Avenue in Yonkers, stabbing and shooting him to death. URENA was one of the men who shot and killed Phillips. In addition, as part of their membership in the BTG, URENA and VASQUEZ also participated in other acts of violence and a narcotics conspiracy involving marijuana, crack cocaine, powder cocaine, and oxycodone.

URENA faces a mandatory minimum sentence of life in prison. VASQUEZ faces a maximum sentence of life in prison, with a mandatory minimum sentence of five years in prison. A sentencing date has not yet been scheduled. 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.

Mr. Bharara praised the investigative work of the New York City Police Department’s Bronx Gang Squad, the Bureau of Alcohol, Tobacco, Firearms and Explosives’ Joint Firearms Task Force, and the Drug Enforcement Administration.

This case is being prosecuted by the Office’s Violent and Organized Crimes Unit. Assistant United States Attorneys Ryan P. Poscablo, Timothy D. Sini, and Micah W. J. Smith conducted the trial.

U.S. v. Leonides Sierra et al S5 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, John P. Carlin, Assistant Attorney General for National Security, and George C. Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that LI FANGWEI, who is more commonly known by his alias “Karl Lee,” is charged with violating the International Emergency Economic Powers Act (“IEEPA”) by using United States-based financial institutions to engage in millions of dollars of U.S. dollar transactions in violation of economic sanctions that prohibited such financial transactions. In addition, LI FANGWEI is also charged with conspiring to commit wire fraud and bank fraud, a money laundering conspiracy, two separate violations of IEEPA, and two separate substantive counts of wire fraud, in connection with such illicit transactions. LI FANGWEI, a national of the People’s Republic of China, is a fugitive.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Li Fangwei has used subterfuge and deceit to continue to evade U.S. sanctions that had been imposed because of his illicit trade in prohibited materials with Iran. Previously having been exposed as a violator of those sanctions, Li spun a web of front companies to carry out prohibited transactions essentially in disguise. He now stands charged with serious crimes, and millions of his dollars have been seized. It is the hope of this Office not only that Li’s banned commerce cease once and for all, but that he be apprehended and brought before the bar of American justice.”

Assistant Attorney General for National Security John P. Carlin said: “These charges are an important part of the all tools approach our government is taking against Li Fangwei to shut down and deny him the profit from his proliferation activities. This case is an outstanding example of multiple agencies working together to focus various enforcement efforts on the significant threat to our national security posed by such proliferation networks.”

FBI Assistant Director in Charge George C. Venizelos said: “Whether motivated by greed or otherwise, Li Fangwei allegedly ignored sanctions imposed by the United States Government and hid behind front companies he developed to engage in a series of illegal transactions, including attempts to acquire ‘dual use’ items on behalf of Iran-based entities. IEEPA makes it a crime to willfully violate U.S. sanctions on designated countries such as Iran. Individuals and companies who evade U.S. sanctions and misuse our banking system to further their illegal activity not only undermine the integrity of our financial markets but also threaten U.S. National Security interests. The FBI is committed to ensuring that strategically important goods and technology, particularly those that could be used in the production or delivery of weapons of mass destruction, do not end up in the wrong hands.”

According to the Superseding Indictment previously filed in Manhattan federal court and other court documents:

LI FANGWEI controls a large network of industrial companies based in eastern China, one of which is LIMMT Economic and Trade Company, Ltd. (“LIMMT”). Over the years, LI FANGWEI’s companies have done millions of dollars of business with Iran. This business has included selling to Iranian entities various metallurgical goods and related components that are banned for transfer to Iran by, among others, the United Nations, because the items are controlled by the Nuclear Supplier’s Group (a multinational group that maintains “control lists,” which identify nuclear-related dual-use equipment, material, and technology). LI FANGWEI has been, among other things, a long-time supplier to Iran’s Defense Industries Organization and Iran’s Aerospace Industries Organization. In addition, LI FANGWEI has been a principal contributor to Iran’s ballistic missile program through China-based entities that have been sanctioned by the United States.

In light of his supply of restricted items to Iran, the United States has imposed targeted sanctions on both LI FANGWEI and LIMMT. Specifically, the United States Department of the Treasury’s Office of Foreign Asset Controls (“OFAC”) publicly added LIMMT (in 2006) and LI FANGWEI (in 2009) to its List of Specially Designated Nationals and Blocked Persons (the “SDN List”). By virtue of their inclusion on the SDN List, LI FANGWEI and LIMMT were effectively precluded from conducting any business within the United States without first obtaining a license or authorization from OFAC. Neither LI FANGWEI nor LIMMT has sought such a license or authorization.

The above-referenced restrictions have forced LI FANGWEI to operate much of his business covertly. In response to United States sanctions, LI FANGWEI has built an outsized network of China-based front companies – to conceal his continuing participation, and LIMMT’s continuing participation, in sanctioned activities. The front companies are listed in Exhibit A to the Superseding Indictment. As shown in Exhibit A, many of those front companies have used the same address as LIMMT, or a close variant thereof.

During the period from 2006 through the present, LI FANGWEI has used front companies to engage in more than 165 separate U.S. dollar transactions, with a total value in excess of approximately $8.5 million. Included in those illicit transactions have been transactions involving sales to U.S. companies, sales of merchandise by LI FANGWEI to Iran-based companies utilizing the U.S. financial system, as well as attempts to acquire on behalf of Iran-based entities so-called “dual use” items from the United States, China, and other countries that could be used in the production of weapons of mass destruction and/or devices used to deliver weapons of mass destruction.

The U.S. Attorney’s Office and the FBI announced the seizure of over $6,895,000 in funds attributable to the LI FANGWEI front companies, and the filing of a civil complaint seeking the forfeiture of those funds to the United States. The seized funds are substitutes for money held by LI FANGWEI’s front companies at banks in China, and were seized from accounts at U.S. banks held in the name of foreign banks used by these front companies to conduct U.S. currency transactions (the “correspondent accounts”). The funds were seized pursuant to seizure warrants issued on December 18, 2013, and April 25, 2014. The $6,895,000 represents funds used by the LI FANGWEI front companies to engage in transactions that violate the U.S. sanctions laws and thus are subject to forfeiture. There are no allegations of wrongdoing by the U.S. or foreign banks that maintain these accounts. Because the funds used in those transactions are held in banks overseas, the United States is unable to seize the funds directly. However, pursuant to U.S. law, the United States can seize funds located in a bank’s correspondent accounts in the United States if there is probable cause to believe that funds subject to forfeiture are on deposit with that bank overseas. Based on this provision and others, the seizure warrants were executed. These funds were transferred to a seized asset account maintained by the United States Marshals Service pending resolution of the forfeiture action.

Based on information developed in the course of the FBI’s investigation into LI FANGWEI that forms the basis of the Superseding Indictment, OFAC today is adding eight additional front companies used by LI FANGWEI to its List of Specially Designated Nationals and Blocked Persons.

Finally, the United States Department of Commerce announced today the addition of nine China-based suppliers of LI FANGWEI to its Entity List.

The Superseding Indictment charges LI FANGWEI with seven separate offenses:

• Count One: Conspiracy to violate the International Emergency Economic Powers Act;
• Counts Two and Three: Substantive violations of the International Emergency Economic Powers Act;
• Count Four: Money laundering conspiracy;
• Count Five: Conspiracy to commit wire fraud and bank fraud; and
• Counts Six and Seven: Wire fraud.

If convicted, LI FANGWEI faces a maximum sentence of 20 years in prison on each of Counts One through Four and Counts Six and Seven, and 30 years in prison on Count Five. 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.

The U.S. Department of State’s Transnational Organized Crime Rewards Program is offering a reward of up to $5 million for information leading to the arrest and/or conviction of LI FANGWEI.

Mr. Bharara praised the outstanding investigative efforts of the FBI and thanked the New York County District Attorney’s Office, which had charged LI FANGWEI and LIMMT in April 2009 for their use of front companies to commit books and records violations and to evade U.S. sanctions. Evidence developed by the New York County District Attorney’s Office greatly assisted the FBI's investigation of LI FANGWEI's more recent criminal conduct.

In addition, Mr. Bharara thanked the U.S. Department of Justice’s National Security Division Counterespionage Section, the U.S. Department of State, the U.S. Department of Treasury, and the U.S. Department of Commerce for their assistance in this matter.

The case is being handled by the Terrorism and International Narcotics Unit. Assistant United States Attorney Sean S. Buckley is in charge of the prosecution. Assistant United States Attorneys Micah W. J. Smith and Paul M. Monteleoni are in charge of the forfeiture aspects of the case.

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

U.S. v. Li Fangwei in Rem Complaint and S1 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the leaders of the fraud, kickback, and money laundering scheme targeting the City of New York’s (the “City’s”) CityTime information technology project, were sentenced today in Manhattan federal court and ordered to forfeit millions of dollars in cash and property. MARK MAZER, who managed the CityTime project for the City and who was convicted of defrauding the City, receiving kickbacks while managing the project for the City, and laundering the proceeds of his crimes, was sentenced to 20 years in prison. GERARD DENAULT, who managed the project on behalf of the prime contractor on the project, Science Applications International Corporation (“SAIC”), and who was convicted of defrauding the City, defrauding SAIC of its right to DENAULT’s honest services, and laundering the proceeds of his crimes, was sentenced to 20 years in prison. DIMITRY ARONSHTEIN, who managed a subcontractor on the project and who was convicted of paying kickbacks to MAZER and working with MAZER to launder crime proceeds, was sentenced to 20 years in prison. MAZER, DENAULT, and ARONSHTEIN were sentenced today by U.S. District Judge George B. Daniels, who also presided over the defendants’ six-week jury trial in the fall of 2013. Judge Daniels also ordered that the defendants forfeit over $40 million in cash and property tied to their crimes.

Manhattan U.S. Attorney Preet Bharara said: “Today’s sentences punctuate an epic scheme by Mark Mazer, Gerard Denault, Dimitry Aronshtein, and others to steal millions of dollars through kickbacks and fraud from the City of New York, and then squirrel away the proceeds. These defendants are being justly punished – through lengthy sentences and forfeiture of over $40 million in cash and property – for orchestrating one of the largest and most brazen frauds ever committed against the City. This Office’s CityTime prosecutions have held accountable culpable individuals, as well as SAIC, the contractor at the center of the scheme, and through penalties and restitution of over $550 million, has made the City economically whole.”

According to the evidence introduced at trial, public filings, and statements made in court:

The CityTime project was a City initiative to modernize its timekeeping and payroll systems across City agencies. In 2000, SAIC became the lead contractor on CityTime, which at the time had a contract value of approximately $73 million. In 2003, SAIC appointed DENAULT as Program Manager on CityTime. DENAULT later became a Vice President of SAIC and head of SAIC’s New York office. SAIC, at the behest of DENAULT, hired Technodyne LLC (“Technodyne”) as a “single source” subcontractor to provide staffing services on the CityTime project, and repeatedly renewed Technodyne’s “single source” arrangement on the project.

Technodyne’s principals, Reddy Allen and Padma Allen, agreed to pay kickbacks to DENAULT and others in connection with the CityTime project, in exchange for obtaining what ultimately became over $325 million in work on CityTime as an SAIC subcontractor. In 2004, MAZER began managing the CityTime project for the City. Soon thereafter, he arranged with DENAULT for a company controlled by ARONSHTEIN, who is MAZER’s uncle, to become a subcontractor to Technodyne. MAZER used his power on the project to steer over $65 million in business to ARONSHTEIN’s company, and another $23 million in business to a company controlled by Victor Natanzon. In exchange for the business, ARONSHTEIN and Natanzon paid MAZER over $30 million in kickbacks, representing 80% of their net profits on the project. DENAULT received a $5 kickback from Reddy Allen and Padma Allen for every hour Technodyne billed to the City for labor. He also received an additional $2 per hour billed by ARONSHTEIN and Natanzon, resulting in total kickbacks to DENAULT of over $9 million.

Further, in order to maximize the amount of kickbacks they received, DENAULT and MAZER worked together to defraud the City into overpaying for the CityTime project by, among other things, inflating the rates charged for CityTime labor sourced through Technodyne, and overstaffing the project. MAZER also submitted fraudulent timesheets for consultants who had been fired or were on vacation. In part as a result of the fraud and kickback schemes, the costs of the CityTime project ballooned to over $620 million by the time the defendants were arrested in December 2010.

MAZER, DENAULT, and ARONSHTEIN also devised and carried out elaborate schemes to launder the proceeds of their crimes. DENAULT arranged for the kickbacks to be laundered through companies controlled by Padma Allen’s mother in India before being deposited into a shell entity account in the United States that he controlled. MAZER devised a scheme whereby ARONSHTEIN and Natanzon would launder money through shell company bank accounts controlled by Larisa Medzon, Anna Makovetskaya, and Svetlana Mazer. ARONSHTEIN also laundered millions of dollars through wire transfers to shell entity bank accounts located abroad and through other entities that he himself controlled.

In addition to the prison terms, MAZER, 50, of Manhasset, New York, ARONSHTEIN, 53, of Oceanside, New York, and DENAULT, 52, of Danbury, Connecticut, were each sentenced to three years of supervised release. The defendants were also ordered to forfeit $40 million.

These sentences follow a number of earlier developments in the case, including the guilty pleas of co-defendants Medzon, Makovetskaya, Svetlana Mazer, Carl Bell, and Natanzon; SAIC’s entry into a deferred prosecution agreement (“DPA”) in which it agreed to forfeit over $500 million to the United States; forfeiture of over $10 million in cash and property belonging to fugitive defendants Reddy Allen and Padma Allen; and payment of record restitution to the City of over $466 million, which, along with cancellation of $40 million in debt owed to SAIC, brings the total amount recovered for the City’s taxpayers as a result of the investigation and prosecution to over $500 million. The charges contained in the Indictment against Reddy and Padma Allen are merely accusations and they are presumed innocent unless and until proven guilty.

The sentencings of Medzon, Makovetskaya, and Svetlana Mazer are scheduled to take place before Judge Daniels on June 24, 2014 at 10:00 a.m. The sentencings of Natanzon and Bell have not yet been scheduled.

Mr. Bharara thanked and praised the New York City Department of Investigation (“DOI”) for its outstanding work on the case.

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that STEPHEN WALSH, an investment manager and principal of WG Trading Company, LP (“WG Trading Company”) and WG Trading Investors, pled guilty today in Manhattan federal court to securities fraud. WALSH and his partner Paul Greenwood ran a fraudulent commodities trading and investment advisory scheme that raised billions of dollars, misappropriated hundreds of millions of those dollars for their own personal benefit, and then created false promissory notes and account statements to conceal their theft. WALSH was originally charged in February 2009, and he pled guilty today before United States Magistrate Judge Kevin Nathaniel Fox.

Manhattan U.S. Attorney Preet Bharara said: “Stephen Walsh and his partner Paul Greenwood ran an investment operation that was a veritable money-making machine – for them. Their purported investing strategy wasn’t nearly as effective as their fraudulent sales pitch to investors. Walsh personally pocketed tens of millions in stolen investor dollars. He will soon surrender his money and himself to answer for this fraud.”

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

From at least 1996 through February 2009, WALSH and Greenwood solicited $7.6 billion in investor funds on the understanding that they would invest the funds in a program called “equity index arbitrage,” which they represented was a conservative trading strategy that had outperformed the results of the S&P 500 Index for more than 10 years. As a result, several institutional investors – including charitable and university foundations, and retirement and pension plans – invested billions of dollars. Investors either became limited partners in WG Trading Company or received promissory notes issued by WG Trading Investors that WALSH and Greenwood represented would pay interest at a rate equal to the investment returns earned by a limited partner of WG Trading Company.

Contrary to their representations to investors, WALSH and Greenwood misappropriated hundreds of millions of dollars in investor funds for their own personal use, and to satisfy obligations on investments that were unrelated to the “equity index arbitrage” trading business. Among other things, WALSH used the funds to finance his lifestyle, to make payments to his ex-wife totaling millions of dollars pursuant to their divorce settlement, and to finance business ventures of his children.

WALSH and Greenwood executed promissory notes in favor of WG Trading Investors, partly to conceal trading losses and their misappropriation of investor funds. These promissory notes totaled approximately $554 million, of which approximately $261 million were payable by WALSH to WG Trading Investors. These notes materially misstated the financial condition of WG Trading Company and misled investors. WALSH and Greenwood also created and caused others to create false account statements that were sent to clients to reflect fictitious returns consistent with the returns that had been promised to those clients.

WALSH, 69, of Sands Point, New York, pled guilty to Count Two of the Indictment, which charges him with securities fraud. This charge carries a maximum penalty of 20 years in prison. Pursuant to a plea agreement, WALSH agreed to entry of a forfeiture order in the amount of $50,743,779, which represents the amount of funds that WALSH misappropriated and by which he personally profited from the fraud. 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.

On July 21, 2009, Deborah Duffy, the former Chief Compliance Office of WG Trading Company, pled guilty to conspiracy, securities fraud, and money laundering for her role in the fraud scheme. On July 28, 2010, Greenwood, a managing general partner of WG Trading Company, pled guilty to conspiracy, securities fraud, commodities fraud, wire fraud, and money laundering for his role in the fraud scheme. Sentencing dates for Duffy and Greenwood have not yet been set.

Mr. Bharara praised the work of the Federal Bureau of Investigation, and thanked the United States Securities and Exchange Commission, the United States Commodity Futures Trading Commission, and the National Futures Association, for their assistance.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys John J. O’Donnell, Jessica A. Masella, and Benjamin A. Naftalis are in charge of the prosecution.

U.S. v. Stephen Walsh & Paul Greenwood Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that MAHAMADOU DAFFE, a tax preparer in Queens, New York, was sentenced today in Manhattan federal court to 102 months in prison for his participation in a conspiracy to steal government funds, theft of government funds, conspiracy to file false claims, wire fraud, and aggravated identity theft in connection with the preparation and filing of nearly 1,000 false income tax returns submitted online using stolen identities. DAFFE was also sentenced today in connection with his participation in a conspiracy to steal government funds, theft of government funds, and conspiracy to file false claims in connection with his use of stolen children’s identities to claim false dependents on his clients’ income tax returns. DAFFE was found guilty in January 2014 after a one-week trial before U.S. District Judge Naomi Reice Buchwald.

Manhattan U.S. Attorney Preet Bharara stated: “Tax preparer Mahamadou Daffe orchestrated schemes to file false returns on behalf of his clients and used stolen identities to deceive the IRS, all for his own unjust enrichment. His unscrupulous practices and flagrant violation of the law have now been justly punished.”

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

From 2008 through January 2013, DAFFE engaged in two separate schemes to defraud the Internal Revenue Service (“IRS”). DAFFE filed false tax returns for his tax preparation clients, in which he caused those clients to claim as dependents children who were in fact total strangers to them, and whose identities DAFFE stole. In exchange, DAFFE collected $1,000 per return.

In another scheme, during the same time frame, DAFFE used stolen identities to file hundreds of false tax returns, supported by bogus Forms W-2, through an online tax preparation service intended for use by individual taxpayers. He then funneled the resulting refunds into numerous bank accounts he controlled—accounts in his own name, the names of co-conspirators, and the names of aliases DAFFE and his co-conspirators used. DAFFE’s crimes resulted in a loss to the IRS of more than $1.5 million, during which he attempted to steal more than $4.5 million from the Government.

In addition to the prison term DAFFE, 31, of Queens, New York, was also sentenced to three years of supervised release.

Mr. Bharara praised the investigative work of the Internal Revenue Service, Criminal Investigation, and thanked the IRS for its assistance.

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that YONG WANG was sentenced today in Manhattan federal court to 210 months in prison for advertising in connection with the sexual exploitation of children through 18 Chinese-language child pornography websites he owned and operated. WANG pled guilty in May 2013 and was sentenced today by U.S. District Judge Paul G. Gardephe.

Manhattan U.S. Attorney Preet Bharara said: “With today’s sentence, Yong Wang will be punished – with a loss of his liberty – for earning a living at the expense of innocent children by operating a vast network of illicit child pornography websites from the comfort of his home. Those who conduct businesses that capitalize on the sexual exploitation of children should understand that this Office and its law enforcement partners have no tolerance for such operations and are actively working to shut them down.”

According to documents filed in Manhattan federal court and statements made in related court proceedings:

WANG maintained 18 Chinese-language websites out of his apartment in Flushing, New York. Members of the websites could access numerous links to an extensive child pornography collection that included images and videos of children exposing their genitals, engaging in sexually explicit conduct with adults, and in sadistic and/or masochistic depictions. To access the websites, individuals had to purchase a “VIP membership” or accumulate a certain number of points. WANG charged customers $25 for a quarterly membership and $100 for a lifetime membership. Undercover FBI agents registered for a VIP membership with WANG and gained access to one of the websites entitled - in Chinese - “Empire of the Young and Innocent Fragrances.” On the website, users were directed to different forums with links that were titled with descriptive names, such as “Young Young Empire,” “Young Girl Beauty Photos Military Region,” “Young Boy Movie Zone,” and “Exclusive Quality Young Girl Photos Set.” WANG made in excess of $700,000 in connection with his operation of these websites.

In addition to the prison term, WANG, 28, a citizen of China who resided in Flushing, New York, was ordered to pay $750,000 in forfeiture, representing the proceeds he obtained from operating the child pornography websites, and a $250,000 fine.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation. He also thanked the Chinese Ministry of Public Security for their cooperation and assistance.

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

Preet Bharara, 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 Mark G. Peters, the Commissioner of the New York City Department of Investigation (“DOI”), announced today the arrest of AKIM MURRAY, an employee of the Medicaid Reimbursement Unit of the New York City Human Resources Administration (“HRA”), for Medicaid fraud. The Complaint alleges that MURRAY, an HRA Eligibility Specialist whose job involved issuing reimbursements for Medicaid-eligible expenses, manipulated the system in order to have hundreds of thousands of dollars’ worth of checks issued to his friends and criminal associates, who in turn gave him a substantial cut of the proceeds. MURRAY was taken into custody this morning, and is expected to be presented this afternoon in Manhattan federal court before Chief U.S. Magistrate Judge Kevin Nathaniel Fox.

Manhattan U.S. Attorney Bharara said: “Akim Murray was supposed to make sure that Medicaid benefits went to people eligible for the program. Instead, as alleged, Murray abused his position as a New York City employee and diverted hundreds of thousands of dollars earmarked for people in need to line his own pockets and those of his friends. Such abuses cannot and will not be tolerated by this Office and our law enforcement partners.”

FBI Assistant Director-in-Charge Venizelos said: “As alleged in the complaint, Murray used his position as an HRA Eligibility Specialist to profit off of a system designed to help those in financial distress obtain medical assistance. Health care fraud increases costs for everyone, wastes tax dollars, and destroys the integrity of our health care system. The FBI, along with our federal, state and local law enforcement partners, is committed to investigating this type of fraud and hold accountable those who take advantage of our government health care programs.”

DOI Commissioner Peters said: “This public servant used Medicaid benefits as a treasure trove to enrich himself and his cohorts, creating an intricate criminal network of kickbacks, according to the charges. This investigation shows that gaming the system to siphon public funds away from eligible individuals will only lead to arrest.”

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

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

From at least July 2009 until September 2010, MURRAY, an HRA Eligibility Specialist, exploited loopholes in HRA’s computer systems to both recommend and then separately approve the issuance of Medicaid reimbursement checks without meaningful oversight. MURRAY used the personal identifying information of his co-conspirators to create and unilaterally approve requests for reimbursement checks in their names. When the checks were sent to his friends and other associates, MURRAY demanded that they cash the checks and give him between 50-70% of the proceeds. MURRAY approved hundreds of thousands of dollars in Medicaid reimbursement requests without proper oversight.

MURRAY, 52, of New York, New York, is charged with one count of conspiracy to commit mail fraud and health care fraud, one count of mail fraud, and one count of health care fraud, which carry maximum sentences of 20 years, 20 years, and 10 years in prison, respectively. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

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

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

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

U.S. v. Akim Murray Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and William J. Bratton, the Police Commissioner of the City of New York (“NYPD”), announced the unsealing of a seven-count Superseding Indictment yesterday charging eight members of a robbery crew operating across New York, New Jersey, Virginia, and Connecticut with robbery conspiracy and robberies of high-end jewelry and watch stores using violence, including firearms, and resulting in the theft of more than one million dollars in watches and other goods.

The Superseding Indictment charges SEAN ROBINSON, 42, ALLEN WILLIAMS, 35, ROBERTO GRANT, 33, TERRELL RATLIFF, 22, TYRONE DEHOYOS, 35, RALIK HANSEN, 28, RONALD MCINTYRE, 36 and KENDAL THOMPSON, 30, with robbery conspiracy, substantive robbery, and firearms offenses. Five of the defendants – WILLIAMS, GRANT, RATLIFF, DEHOYOS, and THOMPSON – were previously arrested and detained pending trial. Yesterday, ROBINSON was arrested in Brooklyn, New York, and McINTYRE was transferred into federal custody, and both were arraigned before Judge Robert P. Patterson and detained pending trial. HANSEN remains wanted by the FBI and is considered to be armed and dangerous.

According to the allegations contained in the Superseding Indictment, other court documents previously filed in federal court, and statements made in Court yesterday:

Between approximately July 1, 2013, and January 30, 2014, a highly organized crew engaged in a series of violent robberies of high-end jewelry and watch stores located in four states, smashed display cases with hammers, while customers and employees were in the stores, and stole more than one million dollars in luxury watches. The crew used violence as necessary to carry out the scheme. For example, during one robbery in September 2013 in Brooklyn, New York, two of the robbers displayed handguns, and a store owner was shot when he attempted to prevent members of the crew from fleeing with their stolen watches. In another robbery in August 2013 in Richmond, Virginia, the robbers used a handheld stun gun to subdue a female store employee before fleeing with more than a $100,000 in watches.

Among the stores robbed by the crew are: Cartier in Manhattan, New York; the Borgata Hotel and Casino in Atlantic City, New Jersey; Schwarzschild’s Jewelers in Richmond, Virginia; Martin Jewelers in Cranford, New Jersey; Henry Reid and Sons Jewelers in New Canaan, Connecticut, and Litan Jewelers in Brooklyn, New York.

Mr. Bharara praised the investigative work of the FBI and the NYPD. He also thanked the police departments of Cranford, New Jersey; Atlantic City, New Jersey; Richmond, Virginia; and New Canaan, Connecticut, and the Manhattan and Brooklyn District Attorneys’ Offices, and the Union County, New Jersey, Prosecutor’s Office, for their assistance in the investigation, which he noted is ongoing.

The case is being prosecuted by the Office’s General Crimes Unit. Assistant United States Attorneys Andrea Griswold and Richard Cooper are in charge of the prosecution.

The charges contained in the Superseding Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty. The maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.

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U.S. v. Allen Williams et al. S3 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that JOSEPH L. JUNKOVIC, a contractor who administered cancer screening services for low-income New Yorkers, pled guilty today to defrauding the New York State Department of Health (“NYSDOH”). JUNKOVIC pled guilty before U.S. District Judge Katherine B. Forrest.

Manhattan U.S. Attorney Preet Bharara said: “Joseph Junkovic used his contract position with the New York State Department of Health to enrich himself and cheat the public out of hundreds of thousands of dollars intended for low-income New Yorkers in need of potentially lifesaving services. With today’s guilty plea, Junkovic will be made to pay for short-term financial gain by a likely term in federal prison.”

According to the allegations made in previously filed Court papers and statements made at today’s plea proceeding:

From April 2008 through September 2011, JUNKOVIC used a not-for-profit corporation that he controlled, Cancer Service Network, Inc. (“CSN”), to obtain more than 18 separate contracts with NYSDOH to provide cancer screening services for indigent New Yorkers. CSN, however, was merely a pass-through organization run out of JUNKOVIC’s home in the Bronx, and JUNKOVIC directed the monies CSN received from NYSDOH to administer the cancer screening programs to his personal consulting company, JLJ Consulting Group, Ltd. (“JLJ”). In billing NYSDOH for his services, JUNKOVIC submitted separate invoices for each contract listing the total number of hours he claimed to have worked each month. When added together, JUNKOVIC frequently billed NYSDOH for well more than 600 hours per month – more than 140 hours per week (20 hours a day, including Saturdays and Sundays) – for his purported services, even while he was frequently on vacation or spending thousands of dollars at various casinos.

For some months, JUNKOVIC claimed he had worked so many hours on multiple contracts simultaneously that he billed a total of more than 24 hours a day for his services. On other occasions, he claimed he worked hundreds of hours while he was overseas. For example, for the month of August 2010, CSN billed NYSDOH for more than 590 hours of JUNKOVIC’s time, even though travel and bank records show that JUNKOVIC traveled to Vienna, Austria, on August 6, 2010 and did not return until August 30, 2010.

As part of his plea agreement, JUNKOVIC admitted to causing more than $360,000 in losses to NYSDOH.

JUNKOVIC, 49, of the Bronx, New York, pled guilty to one count of making false statements in connection with a health care program and faces a maximum sentence of five years in prison. As part of the plea agreement, JUNKOVIC has agreed to forfeit $360,556, and to pay restitution to the State of New York an amount up to $360,556. JUNKOVIC is scheduled to be sentenced by Judge Forrest on July 30, 2014, at 1:00 p.m. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the investigative work of the Office of the New York State Comptroller.

This case is being prosecuted by the Office’s Public Corruption Unit. Assistant United States Attorney Andrew D. Goldstein is in charge of the prosecution.

U.S. v. Nick A. Jodha Information

Preet Bharara, the United States Attorney for the Southern District of New York, and James J. Hunt, the Acting Special Agent-in-Charge of the New York Field Division of the U.S. Drug Enforcement Administration (“DEA”), announced that CRAIG OLEKSOWICZ was sentenced today by U.S. District Judge Edgardo Ramos in Manhattan federal court to 120 months’ imprisonment. OLEKSOWICZ’s criminal conduct, for which he was sentenced, included illegally distributing oxymorphone, a Schedule II controlled substance, the use of which caused the July 2011 and October 2011 deaths of another individual, two young men in Pearl River, New York.

U.S. Attorney Bharara stated: “The illegal distribution of highly-addictive and dangerous prescription pills is the fastest-growing drug problem in the country. Painkillers that Craig Oleksowicz illegally dealt led to the overdose death of two young men. Today’s sentence of ten years in prison for Oleksowicz’s crimes shows how seriously this Office takes this public health epidemic.”

According to the Information, to which OLEKSOWICZ pled guilty, statements made during the plea and sentencing proceedings or associated court filings:

OLEKSOWICZ, 38, of Pearl River, New York, used worker’s compensation benefits to pay for prescriptions of oxymorphone, codeine, methadone, and other medications. Between at least February 2011 and October 2011, OLEKSOWICZ and others regularly distributed OLEKSOWICZ’s prescription oxymorphone pills for profit. Oyxmorphone is a powerful painkiller with a high potential for addiction and abuse, and its improper use may lead to fatality. Indeed, in July 2011 and in October 2011, the use of oxymorphone pills supplied by OLEKSOWICZ caused the overdose death of two young men, aged 20 and 21, respectively, both residents of Pearl River. In the months following those deaths, OLEKSOWICZ continued his illegal distribution of pills, selling codeine, methadone, and Valium pills for profit on at least four separate occasions in February 2012.

Mr. Bharara praised the investigative efforts of the DEA, the Westchester County Department of Public Safety, the Rockland County Drug Task Force, and the Orangetown Police Department.

The case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Christopher J. DiMase and Abigail Kurland are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director-in-Charge of the New York Office 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-CI”), announced today the unsealing of a twelve-count Indictment charging JOSE CARLOS BERGANTINOS DIAZ, JESUS ANGEL BERGANTINOS DIAZ, and PEI SHEN QIAN with orchestrating a $33 million scheme to create and sell paintings that they pretended were painted by world-famous artists but were, in fact, created by QIAN. The Indictment further charges JOSE CARLOS BERGANTINOS DIAZ and JESUS ANGEL BERGANTINOS DIAZ with laundering the proceeds of the fraud, and charges JOSE CARLOS BERGANTINOS DIAZ with hiding international bank accounts and millions of dollars in illicit income from the IRS. QIAN is also charged with lying to FBI agents investigating the scheme. JESUS ANGEL BERGANTINOS DIAZ and JOSE CARLOS BERGANTINOS DIAZ were arrested on April 14, 2014, and April 18, 2014, respectively, in Spain, and QIAN is believed to be located in China. The case has been assigned to U.S. District Court Judge Sidney H. Stein.

Manhattan U.S. Attorney Preet Bharara said: “Today’s charges paint a picture of perpetual lies and greed. As alleged, the defendants tricked victims into paying more than $33 million for worthless paintings which they fabricated in the names of world-famous artists. The Bergantinos Diaz brothers then laundered and hid their illegal proceeds overseas. With today’s Indictment, the defendants must now answer for their alleged roles as modern masters of forgery and deceit.”

FBI Assistant Director-in-Charge Venizelos said: “As alleged, a meeting on a New York street corner would lead to a worldwide art fraud scheme that netted the defendants more than $33 million over two decades. The charges announced today show the many facets the conspirators went through to peddle fraudulent creations as famous artwork to be sold for a large profit. These charges also show the FBI’s commitment to investigate and bring to justice those who use fraud as a means to make money.”

IRS Special Agent-in-Charge Shantelle Kitchen said: “This indictment represents a significant accomplishment in the unravelling of a major international art fraud conspiracy with underlying complex financial criminal activity. The Internal Revenue Service has made international tax administration a top priority and this investigation illustrates the government's resolve in uncovering, investigating and prosecuting tax evasion and money laundering schemes with international implications. Furthermore, it reminds the public that the proceeds from illegal sales, in this case, the sale of counterfeit paintings, can be taxable.”

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

From the early 1990’s through at least June 2009, JOSE CARLOS BERGANTINOS DIAZ, JESUS ANGEL BERGANTINOS DIAZ, PEI SHEN QIAN, and Glafira Rosales engaged in a scheme to create and sell paintings that they pretended were painted by world-famous abstract expressionist artists, including Mark Rothko, Jackson Pollock, Willem de Kooning, Richard Diebenkorn, Robert Motherwell, Barnett Newman, Sam Francis, and Franz Kline, among others (the “Fake Works”). By knowingly and falsely claiming that the Fake Works were painted by these famous artists, JOSE CARLOS BERGANTINOS DIAZ, JESUS ANGEL BERGANTINOS DIAZ, QIAN, and Rosales were able to trick purchasers into paying tens of millions of dollars in total for many of the Fake Works which, as the defendants and Rosales well knew, were essentially worthless. In fact, the Fake Works were created by QIAN, with guidance from Rosales and the other defendants.

JOSE CARLOS BERGANTINOS DIAZ first met QIAN on a street corner in Manhattan, where QIAN was selling paintings. Thereafter, QIAN created the Fake Works at the request of, and in exchange for payments from, JOSE CARLOS BERGANTINOS DIAZ, JESUS ANGEL BERGANTINOS DIAZ, and Rosales.

JOSE CARLOS BERGANTINOS DIAZ purchased canvases of old paintings at flea markets, and stained newer canvases with tea bags, which he gave to QIAN to create the Fake Works, and thereby create the false appearance that the Fake Works had been created decades earlier. In addition, JOSE CARLOS BERGANTINOS DIAZ, JESUS ANGEL BERGANTINOS DIAZ, and Rosales created false provenances (i.e., historical ownership records) for particular Fake Works in order to dupe purchasers into believing that those Fake Works were painted by particular famous artists, instead of by QIAN. All told, the defendants earned more than $33 million from the scheme to create and sell the Fake Works.

Further, to conceal the illegal nature and origin of the proceeds from the scheme, JOSE CARLOS BERGANTINOS DIAZ, JESUS ANGEL BERGANTINOS DIAZ, and Rosales laundered the fraud proceeds by transferring them through foreign and domestic bank accounts that they controlled. JOSE CARLOS BERGANTINOS DIAZ also hid over $7 million of his illicit income from the IRS and knowingly failed to report the existence of his foreign bank accounts, as required by law.

Finally, during an interview with FBI agents investigating the scheme, QIAN falsely claimed, among other things, that he did not recognize Rosales’s name, that QIAN was unfamiliar with the names of certain artists (including artists whose names QIAN had repeatedly signed on paintings he created in order to trick purchasers into believing those artists had created the paintings), and that QIAN had never attempted to create paintings mimicking the style of certain abstract expressionist artists.

JOSE CARLOS BERGANTINOS DIAZ, 58, of Sands Point, New York, is charged with one count of conspiracy to commit wire fraud, one count of wire fraud, one count of conspiracy to commit money laundering, and one count of money laundering, each of which carries a maximum sentence of 20 years in prison. He is also charged with one count of conspiracy to defraud the IRS, which carries a maximum sentence of five years in prison, three counts of filing false tax returns, each of which carries a maximum sentence of three years in prison, and four counts of willful failure to file a Report of Foreign Bank and Financial Accounts, each of which carries a maximum sentence of five years in prison.

JESUS ANGEL BERGANTINOS DIAZ, 65, of Lugo, Spain, is charged with one count of conspiracy to commit wire fraud, one count of wire fraud, one count of conspiracy to commit money laundering, and one count of money laundering.

PEI SHEN QIAN, 75, of Queens, New York, is charged with one count of conspiracy to commit wire fraud and one count of wire fraud. He is also charged with one count of making false statements to agents of the FBI, which carries a maximum of five years in prison.

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

Rosales was previously charged in Indictment 13 Cr. 518. On September 16, 2013, Rosales pled guilty to all nine counts of the Indictment. Rosales awaits sentencing before the U.S. District Judge Katherine P. Failla.

Mr. Bharara praised the outstanding efforts of the FBI and IRS-CI in the investigation, which he noted is ongoing.

This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Jason P. Hernandez and Stanley J. Okula, Jr., are in charge of the prosecution.

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

U.S. v. Bergantinos Diaz, et al. Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that OSCAR RODRIGUEZ, 36, was convicted yesterday in Manhattan federal court of racketeering conspiracy and marijuana trafficking charges. As a result of his conviction, RODRIGUEZ faces a mandatory minimum sentence of twenty years in prison and a maximum sentence of life in prison.

Manhattan U.S. Attorney Preet Bharara said: “A jury has convicted Oscar Rodriguez of the crimes he committed as a key member of a murderous, narcotics-trafficking organization. The neighborhoods in Washington Heights that Rodriguez and his organization terrorized for over a decade are safer as a result of his conviction, and the conviction of over 50 other Rodriguez Enterprise members and associates in related cases brought by our Office. These prosecutions exemplify the positive difference that federal and local law enforcement, working together, can make in the everyday lives of the citizens in our communities.”

RODRIGUEZ’s charges arose out of a multi-year investigation titled “Operation Green Venom,” a coordinated multi-agency investigation that was led by ICE HSI and first announced in October 2010. With his conviction, a total of more than 50 defendants have been convicted in United States v. Manuel Geovanny Rodriguez-Perez, et al., 10 Cr. 905 (LTS), and related cases. Those defendants include former Rock-a-fella music founder Kareem Burke, a/k/a “Biggs,” who received a sentence of five years in prison, and High Times Magazine editor Matthew Woodstock Stang, a/k/a “Magazine Guy.”

According to the Indictment and the evidence at trial, OSCAR RODRIGUEZ was a member of the “Rodriguez Enterprise,” a massive racketeering organization whose members sold large quantities of marijuana, engaged in murders and other violent acts, transported and laundered millions of dollars, obstructed justice and committed perjury, and engaged in firearms offenses. The leader of the Rodriguez Enterprise was Manuel Geovanny Rodriguez-Perez, OSCR RODRIGUEZ’s cousin. OSCAR RODRIGUEZ worked closely with Rodriguez-Perez for over a decade, trafficking truckloads of marijuana, managing a lucrative block in Washington Heights, Manhattan, perpetrating violent assaults – including the near-fatal assault of his own employee – and participating in a plot to uncover and remove the body of another employee murdered by members of the Rodriguez Enterprise. OSCAR RODRIGUEZ participated in these acts on behalf of the Rodriguez Enterprise from at least 1996 through his arrest on October 14, 2010.

RODRIGUEZ, 36, was convicted of one count of narcotics conspiracy, which carries a mandatory minimum sentence of 20 years in prison and a maximum sentence of life in prison, and one count of racketeering conspiracy, which carries a maximum sentence of life in prison. The maximum potential sentences in this case are prescribed by Congress and are provided for informational purposes only, as any sentencing of the defendant will be determined by the Court.

Mr. Bharara praised the outstanding investigative work of ICE HSI and the NYPD. He also thanked the U.S. Drug Enforcement Administration; the U.S. Marshals Service; the Bergen County, New Jersey, Prosecutor’s Office; the Englewood, New Jersey, Police Department; the U.S. Department of Housing and Urban Development; the City of New York Department of Investigation; and the New York County District Attorney’s Office for their assistance. Mr. Bharara added that the investigation is continuing.

The prosecution of the cases arising from “Operation Green Venom” is being overseen by the Office’s Violent Crimes Unit. Assistant U.S. Attorneys Amie N. Ely and Andrew C. Adams are in charge of the prosecution. Assistant U.S. Attorney Adams is also responsible for forfeiture proceedings in connection with this case.

U.S. v. Oscar Rodriguez Indictment

Preet Bharara, United States Attorney for the Southern District of New York, announced today that the United States entered into a settlement agreement with the holders of terrorism-related judgments against the Government of Iran (the “Judgment Creditors”) concerning properties (the “Defendant Properties”) found to have been forfeited by the entities that served as fronts for the Government of Iran, in violation of federal law. The Defendant Properties include a 36-story office building located at 650 Fifth Avenue (the “Building”), several other properties in California, Virginia, Texas, Maryland, and Queens, New York, and the contents of several bank accounts formerly in the name of entities that served as fronts for the Government of Iran. Under the settlement, which was approved by U.S. District Judge Katherine B. Forrest today, the real estate Defendant Properties will be sold by the United States Marshals Service, with the net sale proceeds, along with the contents of the bank accounts, distributed to the signatory Judgment Creditors according to an agreed-upon distribution. Of the 20 judgment creditors who were parties to the litigation, this settlement resolves the case as to all but one of them. The settling Judgment Creditors include the families and estates of victims of the 1983 terrorist bombings of U.S. Marine Barracks in Beirut, the 1996 terrorist bombing of the Khobar Towers in Saudi Arabia, and terrorist attacks in Israel and elsewhere.

This settlement follows Judge Forrest’s September 11, 2013, order, in which she found that the Building is forfeitable to the United States, and Judge Forrest’s order of March 28, 2014, in which she found that the remaining Defendant Properties are forfeitable to the United States and that the Judgment Creditors should also prevail in their claims against the entities that served as fronts for Iran.

Manhattan U.S. Attorney Bharara said: “From the very beginning of this case, this Office sought to dismantle Iran’s slice of Manhattan – an office tower on Fifth Avenue – both to end Iran's illegal sanctions-violation and money-laundering schemes and to provide a means of compensating victims of Iranian-sponsored terrorism. With this settlement, we have taken an important step toward completing what will be the largest ever terrorism-related forfeiture and providing a substantial recovery for victims of terrorism.”

According to the settlement papers, the amended civil forfeiture Complaint, and the opinions issued by Judge Forrest in this case:

 

The Alavi Foundation has been providing numerous services to the Iranian Government, including managing the Building for the Iranian Government, running a charitable organization for the Iranian Government, and transferring funds from 650 Fifth Avenue Company to Bank Melli Iran (“Bank Melli”), a bank wholly owned and controlled by the Government of Iran. Likewise, Assa Corporation and Assa Company Limited (“Assa Co. Ltd.”) have been providing numerous services to Bank Melli in contravention of the International Emergency Economic Powers Act (“IEEPA”) and the Iranian Transactions Regulations, including transferring rental income generated from 650 Fifth Avenue Company to Bank Melli, following Bank Melli’s instructions with regard to Assa Corporation’s affairs, reporting back to Bank Melli on Assa Corporation’s financial situation and business dealings, and managing the affairs of Assa Corporation for the benefit of Bank Melli.

The Building was constructed in the 1970s by the Pahlavi Foundation, a non-profit organization operated by the Shah of Iran to pursue Iran’s charitable interests in the United States, and was financed by a substantial loan from Bank Melli.

After the 1979 Iranian revolution, the Islamic Republic of Iran established the Bonyad Mostazafan, also known as the Bonyad Mostazafan va Janbazan (“Bonyad Mostazafan”), to centralize, take possession of, and manage property expropriated by the revolutionary government. The Bonyad Mostazafan is controlled by the Government of Iran, and reports directly to the Ayatollah. The Bonyad Mostazafan sought to take control of the Shah’s property, including the assets of the Pahlavi Foundation. Between approximately October 1978 and approximately October 1979, all five previous directors of the Pahlavi Foundation resigned, and four new directors took their places. On February 25, 1980, an amended Certificate of Incorporation for the Pahlavi Foundation was filed renaming the Foundation “The Mostazafan Foundation of New York.” The Mostazafan Foundation of New York later renamed itself the Alavi Foundation.

The Government of Iran’s Involvement in the Management of the Building

In 1989, the Alavi Foundation and Bank Melli formed a partnership, 650 Fifth Avenue Company, in order to avoid paying federal taxes on rental income from the Building. Bank Melli’s ownership interest in 650 Fifth Avenue Company, however, was disguised through the creation of two shell companies. The Alavi Foundation transferred 35 percent of 650 Fifth Avenue Company to Assa Corporation, an entity wholly owned by Assa Co. Ltd. Assa Co. Ltd. is a Jersey, Channel Islands, United Kingdom, entity owned by Iranian citizens who represent the interests of Bank Melli. In conjunction with the transfer of the 35 percent interest in 650 Fifth Avenue Company to Assa Corp., Bank Melli cancelled its loan on the Building. Today, the Alavi Foundation owns 60 percent of 650 Fifth Avenue Company, and Bank Melli owns 40 percent of 650 Fifth Avenue Company, through Assa Corp. and Assa Co. Ltd.

The decision to convert Bank Melli’s mortgage on the Building into a partnership interest in 650 Fifth Avenue Company was discussed and approved by high-level Iranian Government officials. Among others, the head of the Bonyad Mostazafan (also the Deputy Prime Minister of Iran), the Office of the Prime Minister of Iran, the director of the Central Bank of Iran, and the general director of Bank Melli, as well as other Bonyad Mostazafan and Bank Melli officials, discussed and approved the partnership between the Alavi Foundation and Bank Melli. After the Alavi Foundation and Assa Corporation entered into the 650 Fifth Avenue Company partnership agreement, a Bonyad Mostazafan official forwarded the agreement to a Bank Melli official, noting that “the partnership is based on prior agreements between the Ministry of Finance, Bank Melli, and the Bonyad Mostazafan, with the only change being the building will be valued at two million dollars less than as previously agreed . . . .”

The Iranian Government’s control of the Alavi Foundation has continued. In 1989, Kamal Kharrazi was named as the new Iranian Ambassador to the United Nations. As a result of tension between the new Ambassador and the Alavi Foundation president, the Ambassador eventually demanded the president’s resignation. In July 1991, the president resigned his position, and he was replaced that August by an individual who served as president until the summer of 2007. In 1992, the Alavi Foundation’s new president met in New York and in Tehran with Bank Melli officials concerning $1.7 million in real estate taxes owed by 650 Fifth Avenue Company and $2.2 million in unpaid distributions owed by the partnership to Assa Corp. The Tehran meeting was attended by a Bank Melli board member, the head of Bank Melli’s Overseas Network Supervisory Department, the head of Bank Melli’s New York branch, and the head of Bank Melli’s Foreign Affairs. The head of the board of directors and managing director of Bank Melli forwarded the minutes of the Tehran meeting to the head of the Bonyad Mostazafan along with a cover letter stating that “it is hoped that your firm instructions and the extra attention of the brothers from that esteemed Foundation, who are responsible for the Alavi Foundation of New York, will resolve the partnership’s mutual problems quickly. . . .”

Iranian Ambassadors to the U.N. continued to direct the affairs of the Alavi Foundation and to attend meetings of the Alavi Foundation board. In the late 1990s, two Bank Melli employees sought Ambassador Kharrazi’s permission for Assa Corp. to sell its interest in 650 Fifth Avenue Company. The Ambassador informed Bank Melli that the Building would be sold when the real estate market improved. Ambassador Seyed Mohammad Hadi Nejad Hosseinian, Kharrazi’s successor, originated the Alavi Foundation’s project funding formula. In 2004, Hosseinian’s successor told the Alavi Foundation to settle a lawsuit with a company controlled by a former Alavi Foundation president for $4 million.

In October 2007, Alavi Foundation board members met with the Ambassador and another former Iranian Government official to address issues relating to the Building’s management and Alavi’s charitable services. At that meeting, the Ambassador stated that it was necessary to increase the Building’s profit, that the Ambassador was worried about Assa Corporation’s 40 percent share, that the Foundation should only allocate to Shiites, and that the Ambassador would determine the composition of the board. The Ambassador ordered a study about the possibility of increasing the Foundation’s revenue and profit, stating that a business plan and comparative analysis had to be done. The Ambassador instructed: “I have to definitely see the proposed allocations before a final decision is reached. I have to be kept informed and I have to be able to state my opinion in order for you to make a decision.” The Ambassador told the board members that “[i]f there is an issue that needs to be conveyed to Tehran, let me know, I will convey it.”

The Forfeiture Complaints, the Summary Judgment Decisions, and the Settlement

On December 17, 2008, this Office filed a civil Complaint seeking forfeiture of the 40 percent interest held by Assa Corporation in 650 Fifth Avenue Company. In an Amended Complaint filed in 2009, the United States sought to forfeit all right, title, and interest in 650 Fifth Avenue Company, including the Alavi Foundation’s 60 percent interest in the company. The United States also sought to forfeit the contents of bank accounts held by 650 Fifth Avenue Company, the Alavi Foundation, and Assa Corporation, as well as other real properties owned by the Alavi Foundation in Virginia, California, Maryland, Texas, and Queens. The Judgment Creditors filed claims against the Defendant Properties pursuant to the Terrorism Risk Reinsurance Act (“TRIA”), under which they asserted valid terrorism-related judgments against the Government of Iran.

On September 11, 2013, days before the commencement of what would have been the largest forfeiture trial in history, Judge Forrest granted summary judgment in favor of the United States’ claims for forfeiture of the Building as the result of violations of the Iranian Transactions Regulations promulgated under the IEEPA, and the federal money laundering statutes. The Court found that the Alavi Foundation and Assa Corp. committed the IEEPA violations and money laundering offenses. Subsequently, on March 28, 2014, the Court granted summary judgment in favor of the United States’ claims for forfeiture of the remaining Defendant Properties, and in favor of the Judgment Creditors’ claims under TRIA. As part of this decision, Judge Forrest ruled that the Alavi Foundation and Assa Corporation effectively “are” Iran for purposes of the Foreign Sovereign Immunities Act and TRIA, and thus subject to the jurisdiction of the court. The combined effect of these decisions was to ensure that the Building would no longer be in the control of the Alavi Foundation and Assa Corporation.

Under the terms of the settlement entered today, the Building and other forfeited assets will be sold by the United States Marshals Service. The Government will recover its litigation expenses and any sales costs from the sales proceeds, and the remaining net proceeds of the sales will be distributed to the Judgment Creditors that are party to the settlement according to an agreed-upon distribution. The full amount of the claim made by the lone judgment creditor that filed a claim but did not join the settlement will be retained by the settling Judgment Creditors pending the resolution of the non-settling creditor’s claims.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation, the Internal Revenue Service, Criminal Investigation Division, the Joint Terrorism Task Force, and the Police Department of the City of New York. He also thanked the Counterterrorism Section of the Department of Justice National Security Division, the Office of Foreign Assets Control and the Manhattan District Attorney’s Office for their initiation and assistance in this case.

Assistant United States Attorneys Sharon Cohen Levin, Michael D. Lockard, Martin S. Bell, and Carolina A. Fornos are in charge of the civil forfeiture action.

In re 650 Fifth Avenue and Related Properties (Alavi-Assa) Settlement Stipulation
In re 650 Fifth Avenue and Related Properties (Alavi - Assa) Stipulation Exhibits

Preet Bharara, the United States Attorney for the Southern District of New York, and Michele M. Leonhart, the Administrator of the United States Drug Enforcement Administration (“DEA”), today announced that SLAWOMIR SOBORSKI was extradited from Estonia where he had been arrested for conspiracy to import cocaine into the United States and conspiracy to distribute cocaine on board an aircraft. SOBORSKI, a Polish citizen, will make his first appearance today in Manhattan federal court before U.S. Magistrate Judge Henry B. Pitman. SOBORSKI’s co-defendants, Joseph Manuel Hunter, Timothy Vamvakias, and Dennis Gogel, were previously arrested in Thailand (Hunter) and Liberia (Vamvakias and Gogel) and brought to the United States in September 2013. Co-defendant Michael Filter was previously arrested in Estonia in September 2013 and is pending extradition to the United States.

Manhattan U.S. Attorney Preet Bharara said: “With the arrival of Slawomir Soborski in the United States, one more of the alleged international band of narcotics traffickers and mercenary hitmen, allegedly eager and prepared to kill for cash, will be forced to face these bone-chilling charges in a U.S. court.”

DEA Administrator Michele M. Leonhart said: “It is especially despicable when someone like Soborski, who was trained by his nation to protect his countrymen from harm, uses that very training as a mercenary for hire by criminals whose alleged drug trafficking activities harm individuals, families and communities, both in the United States and around the world. Soborski’s alleged drug trafficking crimes deserve to face the close scrutiny of trial and judgment in the United States’ criminal justice system. The DEA takes pride in having helped thwart his deadly business, secure his arrest and expedite his prosecution.”

According to the Superseding Indictment:

All five defendants have previously served in the armed forces of their respective nations. SOBORSKI served in the Polish armed forces until 2011, and was trained as a sniper. Hunter served as a sniper instructor and a senior drill sergeant, training other soldiers in marksmanship and tactics. Since leaving the U.S. Army in 2004, Hunter has acted as a “contract killer” and successfully arranged for the murder of a number of people.

During meetings in Asia, Africa, and the Caribbean, beginning in January 2013 and continuing through late September 2013, Hunter communicated with three confidential sources (the “CSs”) working with the DEA, who purported to be Colombian narcotics traffickers. Hunter agreed to serve as the head of security for the CSs’ purported narcotics trafficking organization, and assembled a “security team” consisting of Vamvakias, Gogel, Filter, and SOBORSKI. Hunter also told the CSs that he had previously been involved in contract killings – referred to as “bonus jobs” – and that some team members wanted to do as much “bonus work” as possible.

Hunter and his co-defendants, including SOBORSKI, thereafter agreed, in meetings and communications with the CSs, to provide security and surveillance services to the narcotics trafficking organization. Communications between the defendants and the CSs occurred by telephone, over e-mail, and in a series of surreptitiously audio-recorded and videotaped meetings over an approximately nine-month period.

Hunter and his four co-defendants provided a variety of services to the CSs’ purported narcotics organization. In late March 2013, in Thailand, at Hunter’s direction, SOBORSKI, Gogel, and Filter surveilled a vessel on behalf of the CSs’ purported narcotics trafficking organization. In April 2013, in Mauritius, at the direction of the CSs, SOBORSKI, Gogel, and Filter provided security for a meeting at which the participants discussed the distribution of illegal narcotics to the United States and in late June 2013, in the Bahamas, SOBORSKI, Vamvakias, Gogel, and Filter conducted surveillance of a purported U.S.-registered aircraft at the direction of the third CS (“CS-3”), who posed as a member of the CSs’ narcotics trafficking organization. CS-3 informed the defendants that the aircraft was to be loaded with 300 kilograms of cocaine to be shipped to New York.

With respect to the murder-for-hire scheme, in mid-May 2013, at a meeting with the CSs in Thailand, Hunter, SOBORSKI, Vamvakias, and Gogel were told that a “bonus job” – that is, a contract killing – was in the offing, due to a leak within the CSs’ narcotics trafficking organization. In late May 2013, in e-mail communications, Hunter confirmed that his team would be willing to murder both a U.S. law enforcement agent and a source (a boat captain) who was providing information to U.S. law enforcement authorities. Hunter confirmed by e-mail that his team would kill both the DEA agent and the informant who was providing information to law enforcement about the CSs’ narcotics trafficking organization. At a meeting in late June 2013, in the Bahamas, CS-3 explained to Vamvakias and Gogel that “the job is to kill a U.S. DEA agent and a source with the DEA,” who would be located in Liberia. Vamvakias and Gogel discussed the weapons that could be used and masks to be worn for the murders, and Vamvakias stated that it would be better to “hit the agent first” and then “the snitch.” In early July 2013, Hunter sent via e-mail a list of the items needed for the murders, including “[t]wo Submachine Guns with silencers . . .[t]wo .22 pistols with Silencers.”

In late September 2013, Gogel and Vamvakias arrived in Liberia to commit the planned murders-for-hire, where they were ultimately arrested. On the same day, SOBORSKI was arrested in Estonia, with Filter, in coordination with Estonian authorities, and remained in the custody of Estonian authorities until his extradition today to the United States.

SOBORSKI, 42, is charged with one count of conspiracy to import cocaine into the United States, and one count of conspiracy to distribute cocaine on board an aircraft. Each count carries 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 defendant would be determined by the judge. The case is assigned to U.S. District Judge Laura Taylor Swain. Trial has been set for October 6, 2014.

The charges, arrests, and transfers of the defendants were the result of the close cooperative efforts of the United States Attorney’s Office for the Southern District of New York; DEA’s Special Operations Division; DEA’s Bangkok, Ghana, Pretoria, Bucharest, Manila, Nassau and Copenhagen Offices; the Royal Thai Police Narcotics Suppression Bureau and Crime Suppression Division; Royal Thai Immigration; the Royal Thai Attorney General's Office; Republic of Liberia’s National Security Agency; the Republic of Liberia’s Attorney General's Office; the Estonian Police and Border Guard Board; the Estonian National Criminal Police, Investigative Bureau; the Estonian State Prosecutor’s Office; the Royal Bahamas Police Force and Drug Enforcement Unit; the Romanian National Police; Interpol; and the U.S. Department of Justice Office of International Affairs.

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Michael Lockard, Aimee Hector, and Anna Skotko 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. Joseph Hunter, et al S7 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States filed a federal civil rights lawsuit in Manhattan federal court alleging that THE DURST ORGANIZATION, INC. (“DURST”), a major real estate developer based in New York City, has engaged in a pattern and practice of developing rental apartment buildings that are inaccessible to persons with disabilities. The suit alleges that DURST, along with its affiliate THE HELENA ASSOCIATES, LLC, and the architecture firm, FXFOWLE ARCHITECTS, P.C., designed and constructed the Helena, a Manhattan building with 595 rental apartment units, in violation of the design and construction provisions of the federal Fair Housing Act. The relevant provisions of the Fair Housing Act have been in effect since March 1991, and the Helena was built in 2005. The suit additionally alleges that, as evidenced by the inaccessible conditions at the Helena, DURST engaged in a pattern and practice of discriminatory conduct, which may result in inaccessible conditions at DURST’s other rental properties in New York City, and that unless DURST’s discriminatory practices are enjoined, the inaccessible conditions at the Helena will likely be repeated in current projects, including rental complexes at 855 Avenue of the Americas and on West 57th Street between 11th and 12th Avenues.

Manhattan U.S. Attorney Preet Bharara said: “This is now the eighth lawsuit we have filed in recent years to address the failure of real estate developers in New York City to comply with the law. Today’s lawsuit demonstrates our continued commitment to ensuring that the long-established federal laws that protect the rights of people with disabilities to accessible housing are enforced. Developers and architects who show an unwillingness to design and construct housing that complies with the law can no longer seek to evade the consequences of their actions.”

According to the allegations contained in the Complaint and other information in the public record:

DURST has been involved in real estate development in New York City for decades. In addition to The Helena, DURST has developed several other multi-family dwellings in Manhattan, including The Epic in the Chelsea neighborhood of Manhattan, 1214 Fifth Avenue on the Upper East Side, and several buildings along Front Street in Lower Manhattan.

DURST has engaged in a pattern and practice of developing its rental properties without regard to their accessibility to people with disabilities. For example, at The Helena, which is located on Manhattan’s Upper West Side, DURST designed and constructed a complex, which contains 595 rental apartment units and public and common use areas, with scores of inaccessible conditions. These conditions include excessively high thresholds that interfere with accessible routes in the common areas and within individual units, kitchens that lack sufficient width for maneuvering by people in wheelchairs, electrical outlets and mailboxes that are not fully usable by people in wheelchairs, and bathrooms that lack sufficient clear floor space for people in wheelchairs to maneuver.

To ensure that DURST’s current and future residential housing developments are accessible to people with disabilities and to redress its history of non-compliance with the Fair Housing Act, the United States seeks a court order enjoining DURST from designing and constructing multi-family housing, such as 855 Avenue of the Americas, without the accessibility features required by federal law and requiring DURST to retrofit the inaccessible conditions at all the rental properties it has developed to make them accessible. The United States also seeks damages for persons harmed by DURST’s unlawful practices, and a civil penalty to vindicate the public interest.

In addition, the United States asserts claims against FXFOWLE ARCHITECTS, P.C., based on their inaccessible designs for The Helena. Specifically, the United States seeks to enjoin FXFOWLE ARCHITECTS, P.C., from designing multi-family housing without the accessibility features required by federal law, as well as damages for persons harmed by their inaccessible designs and civil penalties.

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

U.S. v. Durst Organization, Inc. et al Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced that RAWSON EDWARD WATSON, a citizen of the United Kingdom, was sentenced today in Manhattan federal court to 17 years in prison for conspiring to distribute approximately 1,000 kilograms of cocaine using an aircraft registered in the United States. WATSON arrived in the Southern District of New York on November 9, 2012, from the Dominican Republic, where he was apprehended on December 15, 2011. WATSON pled guilty in September 2013 before U.S. District Judge Richard J. Sullivan, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara stated: “Rawson Edward Watson admitted to conspiring to use a U.S.-registered plane to distribute more than a ton of cocaine, worth over $30 million. As a result of today’s sentence, the defendant will spend 17 years in prison for his crime.”

According to the Indictment to which WATSON pled guilty, statements in open court, and other court documents:

In late 2011, WATSON traveled to the Dominican Republic and worked with others to arrange a private aircraft registered in the United States to be flown with cocaine from the Dominican Republic to Belgium. For almost two months, WATSON coordinated with various co-conspirators in the Dominican Republic and elsewhere to ensure that the cocaine was safely loaded onto the aircraft and transported out of the country without detection from law enforcement. On December 15, 2011, the day on which the flight ultimately was scheduled to depart, Watson was arrested at an airport in the Dominican Republic after he had boarded the U.S.-registered aircraft dressed as a flight attendant. The aircraft was loaded with suitcases containing approximately 1,000 kilograms of cocaine. The DEA has estimated that the quantity of cocaine on board the aircraft where WATSON was arrested has a wholesale market value of at least $30,000,000.

WATSON, 48, was sentenced to 17 years in prison with no supervised release to follow. WATSON faced a mandatory minimum sentence of 10 years in prison.

Mr. Bharara praised the investigative work of the New Jersey Division of the DEA, the Caribbean Division of the DEA, and the DEA Dominican Republic Country Office. Mr. Bharara also thanked the Government of the Dominican Republic for its assistance, and the U.S. Department of Justice, Office of International Affairs.

This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Shane T. Stansbury, Michael D. Lockard, and Anna M. Skotko are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that FENG LING LIU, VANESSA BANDRICH, and RUI YANG, were found guilty yesterday in Manhattan federal court of one count of conspiracy to commit immigration fraud. LIU, BANDRICH, and YANG, who were initially charged in December 2012, were convicted following a nineteen-day jury trial presided over by U.S. District Judge Ronnie Abrams.

Manhattan U.S. Attorney Preet Bharara said: “As the jury found, Feng Ling Liu, Vanessa Bandrich, and Rui Yang assisted immigrants in obtaining asylum status under false pretenses, including by using concocted tales of persecution. These defendants will now join the twenty-seven others who have been convicted in connection with this sprawling immigration fraud scheme.”

According to the Indictment filed in Manhattan federal court, public court filings, and the evidence admitted at trial:

LIU, a lawyer, operated two law firms – the Law Offices of Feng Ling Liu and Moslemi and Associates, Inc. – both of which assisted aliens from China in obtaining asylum status through fraud. LIU and her employees profited by creating and submitting asylum applications containing false stories of persecution purportedly suffered by alien applicants. BANDRICH worked as a lawyer at one of LIU’s firms, Moslemi and Associates, Inc. In that capacity, she prepared certain clients to tell false stories of persecution in immigration court proceedings related to their asylum application. BANDRICH also opened a separate law firm, Bandrich and Associates, Inc., (“Bandrich Firm”) that assisted clients in obtaining asylum status through fraud. YANG was an office worker at the Bandrich Firm and helped the firm’s clients prepare their false asylum applications.

The defendants each face a maximum sentence of five years in prison on the count of conspiracy to commit immigration fraud. LIU, 48, of Manhattan, New York, is scheduled to be sentenced by Judge Abrams on July 25, 2014. BANDRICH, 34, of Manhattan, New York, is scheduled to be sentenced by Judge Abrams on July 31, 2014. YANG, 30, of Flushing, New York, is scheduled to be sentenced by Judge Abrams on August 1, 2014. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as the defendants’ sentences will be determined by the judge.

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

The case is being handled by the Office’s Organized Crime Unit. Assistant U.S. Attorneys Rebecca Mermelstein, Robert Boone and Patrick Egan are in charge of the prosecution.

Feng Ling Liu et al Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, and Brian M. Hickey, the Special Agent-in-Charge of the Northeastern Region of the United States Department of Education’s Office of Inspector General (“ED-OIG”), today announced a number of civil and criminal actions relating to a fraudulent scheme to submit false claims for reimbursement on behalf of THE ACADEMIC ADVANTAGE (“ACADEMIC ADVANTAGE”), an educational services provider, in connection with a federally-funded program that provided after-school tutoring services to public school children. The civil actions announced today include: (1) the filing of a civil fraud lawsuit against ACADEMIC ADVANTAGE and nine of its former employees — ARLETTE HERNANDEZ, EDWIN GUZMAN, LUZ MERCEDES, NILSA DALMASI, KRISTIN JOYNER, RAYVON JONES, ALICIA MCKAY, TERESA OSORIO and AYESHA YOUNG (collectively, “INDIVIDUAL DEFENDANTS”) — in connection with the company’s submission of fraudulent claims for reimbursement between 2010 and 2012; (2) the settlement of the civil claims against ACADEMIC ADVANTAGE for $2 million and admissions of wrongdoing; and (3) the settlement of the civil claims against EDWIN GUZMAN and LUZ MERCEDES for $61,819 and $101,758, respectively, and admissions of wrongdoing. The criminal actions include: (1) the filing of a Criminal Complaint charging ARLETTE HERNANDEZ with fraud; and (2) the guilty pleas of EDWIN GUZMAN and LUZ MERCEDES to criminal fraud charges.

U.S. District Judge Lewis A. Kaplan approved the civil settlements with ACADEMIC ADVANTAGE, GUZMAN and MERCEDES yesterday. HERNANDEZ was arrested on March 5, 2014, and presented that day before U.S. Magistrate Judge James L. Cott. GUZMAN pled guilty to a Criminal Information before U.S. District Judge Andrew L. Carter on January 9, 2014, and MERCEDES pled guilty to a Criminal Information before U.S. Magistrate Judge Kevin N. Fox on February 6, 2014.

Manhattan U.S. Attorney Preet Bharara said: “With the actions announced today, we continue our push to clean up corruption in the tutoring of our school kids. Having previously exposed schemes by Princeton Review and TestQuest to fraudulently bill the government for tutoring services that they never provided, we now hold a third company, Academic Advantage, accountable for engaging in identical misconduct. And we also hold nine former employees of Academic Advantage to account – criminally, civilly or both – for their roles in the fraudulent billing scheme. This should serve as a reminder both to educational services providers and their employees that if they seek to cheat the system, we will hold them accountable.”

ED-OIG Special Agent-in-Charge Brian M. Hickey said: “The Supplemental Education Services (SES) program provides critical resources for deserving students who seek to improve their academic performance. The actions announced today against Academic Advantage and nine of its employees allege that Academic Advantage billed and retained SES payments for students it did not tutor. That is unacceptable. Tracking down those who would cheat this important program is a priority of our office.”

According to the Civil Complaint against ACADEMIC ADVANTAGE and the INDIVIDUAL DEFENDANTS, the allegations in the Criminal Complaint against HERNANDEZ, the Criminal Informations against GUZMAN and MERCEDES, and the Civil Settlements with ACADEMIC ADVANTAGE, GUZMAN, and MERCEDES, all of which were filed in Manhattan federal court:

 

From 2010 through 2012 (“Covered Period”), the New York City Department of Education (“NYCDOE”) received funds from the federal government to pay for Supplemental Educational Services (“SES”), which included after-school tutoring for students attending underperforming public schools. The NYCDOE entered into contracts with private entities to provide SES tutoring to students in New York City public schools. Students were eligible to receive SES tutoring if they met certain criteria, such as attending a school that had been identified as needing improvement or restructuring for at least two years. Private entities contracted by the NYCDOE to provide SES tutoring were required to have each student who attended a tutoring class sign a daily attendance sheet. A representative from the entity was also required to sign the attendance sheet, certifying that SES tutoring had been provided to all of the students whose signatures appeared on the attendance sheet.

ACADEMIC ADVANTAGE

During the Covered Period, ACADEMIC ADVANTAGE contracted with the NYCDOE to provide SES tutoring to students in New York City. ACADEMIC ADVANTAGE employed individuals whom it referred to as “Site Managers” to supervise its SES program at particular New York City public schools. The Site Managers supervised other employees, known as “Program Aides,” who were also assigned to those schools. Employees with the title “Director” supervised the Site Managers and Program Aides. Of the INDIVIDUAL DEFENDANTS, AYESHA YOUNG was a Director and the rest were Site Managers.

The Billing Scheme

During the Covered Period, ACADEMIC ADVANTAGE obtained federal funds by falsely reporting that it had provided SES tutoring to certain students when no SES tutoring had, in fact, been provided to those students. As part of the scheme, ACADEMIC ADVANTAGE repeatedly submitted to the NYCDOE bills for students who had not actually received any tutoring.

As part of the civil settlements, ACADEMIC ADVANTAGE admitted that:

• Site Managers routinely forged student signatures on daily attendance sheets to make it appear that more students had attended Academic Advantage’s SES tutoring classes than had, in fact, attended;
• Site Managers instructed Program Aides to forge student signatures on daily attendance sheets;
• Program Aides followed the instructions they received from those Site Managers and forged student signatures on daily attendance sheets;
• Site Managers and Program Aides instructed students to sign daily attendance sheets for SES tutoring classes that those Site Managers and Program Aides knew the students either had not attended or would not be attending; and
• Site Managers routinely signed false certifications on daily attendance sheets, falsely certifying that after-school tutoring had been provided to all of the students whose purported signatures appeared on the sheets, even though the Site Managers knew that tutoring had not been provided to many of those students.

ACADEMIC ADVANTAGE further admitted that some Directors knew – while others deliberately ignored or recklessly disregarded – that Site Managers and Program Aides were forging student signatures on daily attendance sheets or otherwise falsifying student attendance records. ACADEMIC ADVANTAGE also admitted that it used the falsified daily attendance sheets to prepare invoices that it then submitted in connection with its SES tutoring program, and that the invoices ultimately resulted in ACADEMIC ADVANTAGE being paid federal funds for SES tutoring that it never provided.

HERNANDEZ has been charged civilly and criminally with forging student signatures on daily attendance sheets, with instructing Program Aides to forge student signatures on daily attendance sheets, and with signing false certifications on daily attendance sheets. During the Covered Period, HERNANDEZ was observed by others forging student signatures on daily attendance sheets. She was also observed possessing a completed daily attendance sheet for a tutoring session that had not yet taken place. Moreover, during the Covered Period, there were more than 200 instances where HERNANDEZ reported students as being present for after-school tutoring on days when the students were absent from school.

In connection with his guilty plea and civil settlement, GUZMAN has admitted to forging student signatures on daily attendance sheets, to instructing Program Aides to forge student signatures on daily attendance sheets, and to signing false certifications on daily attendance sheets. GUZMAN has agreed to the entry of a judgment against him in the amount of $61,819.

Similarly, in connection with her guilty plea and civil settlement, MERCEDES has admitted to forging student signatures on daily attendance sheets and to signing false certifications on daily attendance sheets. MERCEDES has agreed to the entry of a judgment against her in the amount of $101,758.

The remaining INDIVIDUAL DEFENDANTS have been charged civilly with, among other things, forging student signatures on daily attendance sheets, prompting Site Managers or Program Aides to forge student signatures on daily attendance sheets, and/or signing false certifications on daily attendance sheets. The charges against them remain pending.

HERNANDEZ, 32, of New York, New York, was charged with one count of conspiring to make false statements and one count of making false statements, and faces a maximum sentence of 10 years in prison.

GUZMAN, 39, of New York, New York, pled guilty to one count of conspiring to make false statements, and LUZ MERCEDES, 48, of New York, New York, pled guilty to two counts of conspiring to make false statements and one count of making false statements. GUZMAN faces a maximum sentence of five years in prison, while MERCEDES faces a maximum sentence of 15 years in prison.

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

This is the third coordinated proceeding this Office has brought against New York City SES providers and their employees for falsifying attendance records and billing for tutoring they did not provide. In 2012 and 2013, this Office filed civil charges against The Princeton Review, Inc. (“Princeton Review”), and civil and criminal charges against several of its former employees. In 2013, this Office filed civil charges against TestQuest, Inc. (“TestQuest”), and civil and criminal charges against several of its former employees. Princeton Review settled the civil charges against it by admitting misconduct and committing to pay the Government up to $10 million. TestQuest settled with the Government for $1.75 million and admissions of wrongdoing. The following former employees of Princeton Review and TestQuest have pled guilty to criminal fraud charges, settled civil fraud charges, or both: Robert Stephen Green, Ana Azocar, Zorayma Azocar, Michael Logan, and Sandra Allen.

Mr. Bharara thanked the Office of the ED-OIG for its extraordinary assistance in this case.

The criminal cases are being handled by the Complex Frauds Unit, and Assistant U.S. Attorneys Joseph P. Facciponti and Christopher B. Harwood are in charge of the prosecution.

The civil cases are being handled by the Civil Frauds Unit, and Assistant U.S. Attorney Christopher B. Harwood is in charge of each of the matters.

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

U.S. v. Academic Advantage, et al. Complaint
U.S. v. Academic Advantage, et al. Settlement
U.S. v. Mercedes Court-Endorsed (Academic Advantage) Settlement Agreement
U.S. v. Arlette Hernandez Complaint
U.S. v. Luz Mercedes Information
U.S. v. Edwin Guzman Information

Preet Bharara, the United States Attorney for the Southern District of New York, David O’Neil, the Acting Assistant Attorney General for the Criminal Division of the United States Department of Justice, and George Venizelos, Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced the arrests and indictment of BENITO CHINEA and JOSEPH DEMENESES, the former Chief Executive Officer and former Managing Director, respectively, of a United States broker-dealer (the “Broker-Dealer”), on felony charges arising from a conspiracy to pay bribes to Maria De Los Angeles Gonzalez De Hernandez (“Gonzalez”), who was a senior official in Venezuela’s state economic development bank, Banco de Desarrollo Económico y Social de Venezuela (“BANDES”). CHINEA and DEMENESES, working with others, arranged the bribe payments to Gonzalez in exchange for her directing BANDES’s financial trading business to the Broker-Dealer. DEMENESES was also charged with participating in a conspiracy to obstruct justice by concealing facts about the scheme from the U.S. Securities and Exchange Commission (“SEC”) during a periodic examination of the Broker-Dealer.

CHINEA, 47, was arrested today in Manalapan, New Jersey, where he resides, and DEMENESES, 44, was arrested today in Fairfield, Connecticut, where he resides. Both defendants were presented today in Manhattan federal court before Judge Denise L. Cote.

Manhattan U.S. Attorney Preet Bharara said: “These two defendants, senior executives at a U.S. brokerage firm, are the fifth and sixth people to be charged in an alleged conspiracy to corrupt the trading business of a state-run economic development bank of Venezuela. They are alleged to have bribed a willing officer at the bank to steer its overseas trading business to the defendants’ brokerage firm, reaping millions for these defendants and their partners in crime. This Office will not tolerate the kind of outright bribery and concealment that characterized this scheme.”

Acting Assistant Attorney General O’Neil said: “These senior Wall Street executives are accused of paying six-figure bribes to an official in Venezuela to secure foreign business for their firm. Today’s charges show once again that we will aggressively pursue individual executives, all the way up the corporate ladder, when they try to bribe their way ahead of the competition.”

FBI Assistant Director-in-Charge George Venizelos said: “As alleged in the indictment, Chinea and Demeneses bribed Gonzalez to secure bank Bandes's financial trading business. Demeneses compounded the Broker-Dealer's illegal activities by conspiring to obstruct an investigation by regulators. The arrests today of Chinea and Demeneses should be a reminder to all those in the business community that engaging in bribery schemes to secure business and make a profit is illegal. Together with our law enforcement partners, the FBI will continue to investigate bribery and fraud at all levels.”

According to the allegations in the Indictment unsealed today, and other documents previously filed in Manhattan federal court:

Background on the Broker-Dealer and BANDES

At all times relevant to the charges, CHINEA was the chief executive officer and DEMENESES was a managing director in the Broker Dealer, which was headquartered in New York, with offices in Miami, Florida. In 2008, the Broker-Dealer established a group called the Global Markets Group, which included DEMENESES, Ernesto Lujan (“Lujan”), and Tomas Alberto Clarke Bethancourt (“Clarke”), and which offered fixed income trading services to institutional clients. One of the Broker-Dealer’s clients was BANDES, which operated under the direction of the Venezuelan Ministry of Finance. The Venezuelan government had a majority ownership interest in BANDES and provided it with substantial funding. Gonzalez was an official at BANDES and oversaw the development bank’s overseas trading activity. At her direction, BANDES conducted substantial trading through the Broker-Dealer. Most of the trades executed by the Broker-Dealer on behalf of BANDES involved fixed income investments for which the Broker-Dealer charged BANDES a mark-up on purchases and a mark-down on sales.

The Bribery Scheme

From 2008 through 2012, CHINEA and DEMENESES, along with Lujan, Clarke, Jose Alejandro Hurtado (“Hurtado”), and Gonzalez, participated in a bribery scheme in which Gonzalez directed trading business she controlled at BANDES to the Broker-Dealer, and in return, agents and employees of the Broker-Dealer, including CHINEA and DEMENESES, split the revenue the Broker-Dealer generated from this trading business with Gonzalez. During this time period, the Broker-Dealer generated over $60 million in mark-ups and mark-downs from trades with BANDES. Agents and employees of the Broker-Dealer, including CHINEA, DEMENESES, Lujan, Clarke and Hurtado, devised a split with Gonzalez of the commissions paid by BANDES to the Broker-Dealer.

To further conceal the scheme, the kickbacks to Gonzalez were often paid using intermediary corporations and offshore accounts that she held in Switzerland, among other places. For example, DEMENESES, Lujan and Clarke used an account in Switzerland to transfer at least $1.5 million to an account Gonzalez controlled in Switzerland. In addition to Gonzalez receiving the bribe payments, CHINEA and DEMENESES, as well as other coconspirators, received millions in proceeds from the scheme.

The Conspirators’ Efforts to Obstruct the SEC Examination

Finally, beginning in or about November 2010, the SEC commenced a periodic examination of the Broker-Dealer, and from November 2010 through March 2011, the SEC’s exam staff made several visits to the Broker-Dealer’s offices in New York, New York. In or about early 2011, DEMENESES discussed with others that the SEC was examining the Broker-Dealer’s relationship with BANDES and that the SEC was asking questions regarding certain emails and other information that its exam staff had discovered. DEMENESES, Lujan, Clarke, and Hurtado agreed that they would take steps to obstruct justice by concealing the true facts of the Broker-Dealer’s relationship with BANDES, including by deleting emails.

Previously, on May 3, 2013, Gonzalez, along with two employees of the Broker-Dealer, Clarke and Hurtado, were arrested on charges relating to this bribery scheme. On June 12, 2013, a managing director of the Broker-Dealer, Lujan, was arrested on related charges as well. Each of these four defendants has since entered guilty pleas pursuant to cooperation agreements.

A chart containing the charges and maximum penalties for CHINEA and DEMENESES is attached below. 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 DOJ’s Criminal Division and the FBI for their work in the investigation. He also thanked the SEC for its assistance in this case and noted that the investigation is continuing. In a separate action, the SEC announced civil charges against CHINEA and DEMENESES.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.StopFraud.gov.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorneys Harry A. Chernoff and Jason H. Cowley, and Fraud Section Deputy Chief James Koukios and Trial Attorney Maria Gonzalez Calvet are in charge of the prosecution. Assistant United States Attorney Carolina Fornos is responsible for the forfeiture aspects of the case.

Additional information about the Justice Department’s FCPA enforcement efforts can be

found at www.justice.gov/criminal/fraud/fcpa.

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

Click here to view chart(s)

U.S. v. Chinea & Demeneses Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, and Travis LeBlanc, Acting Enforcement Bureau Chief of the Federal Communications Commission (“FCC”), announced the unsealing of two complaints seeking the forfeiture of radio transmission and production equipment allegedly used in the illegal broadcast of pirate radio stations on a total of four different FM frequencies, and further announced that on April 2, 2014, FCC agents and Deputy U.S. Marshals, pursuant to warrants, seized the radio transmission and production equipment identified in the two complaints.

The Communications Act of 1934 makes it unlawful to operate radio broadcasting equipment above certain low-intensity thresholds without having a license issued by the FCC, and authorizes the seizure and forfeiture of any equipment used with willful and knowing intent to broadcast without an FCC license.

FCC Acting Enforcement Bureau Chief Travis LeBlanc said: “As alleged, these pirate radio stations were for-profit businesses that broke the law to line their own pockets while disrupting legitimate broadcasters. They should be out of business and off the air.”

According to the two Complaints unsealed in Manhattan federal court, and various unsealed documents associated with the two warrants executed on April 2:

FCC agents identified a commercial space at 80-84 West 181st Street in the Bronx as the production studio for “Rika FM,” which illegally broadcasts its programming on 94.5 and 94.9 MHZ. FCC agents also identified a residence at 1370 St. Nicholas Avenue in Manhattan as the location of the radio transmission equipment by means of which “Rika FM” was illegally broadcast.

FCC agents also identified radio transmission equipment at a second residence at 1370 St. Nicholas Avenue in Manhattan that was being used to illegally broadcast on 95.3 MHZ and 100.1 MHZ.

Mr. Bharara praised the investigative work of the Federal Communications Commission and also thanked the United States Marshals Service for its assistance.

Assistant United States Attorney Arastu K. Chaudhury is in charge of these cases.

FCC Seizure Complaint 1
FCC Seizure Complaint 2

Preet Bharara, the United States Attorney for the Southern District of New York, Christina Scaringi, the Special Agent-in-Charge of the Northeastern Region of the U.S. Department of Housing and Urban Development (“HUD”), Office of Inspector General (“OIG”), 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 that NOVELETTE “PAT” CAMPBELL, a manager of the federally subsidized Tricham Houses in Manhattan, was found guilty on Friday, April 11, 2014, of accepting bribes in connection with federal program funds, conspiracy to accept bribes in connection with federal program funds, and four counts of false statements relating to HUD certifications. The investigation that led to CAMPBELL’s arrest and her conviction last week was undertaken by HUD-OIG. CAMPBELL was convicted after a one-week jury trial before U.S. District Judge George B. Daniels.

Manhattan U.S. Attorney Preet Bharara said: “As a unanimous jury found, for over a decade, Novelette “Pat” Campbell exploited her position as a manager of the Tricham Houses in Manhattan by illegally trading prime spots on the waiting list for federally subsidized apartments in exchange for cash. Her bribery scheme was uncovered by the dedicated investigators at HUD OIG and ICE HSI, and she now stands convicted after trial for her crimes.”

HUD OIG Special Agent-in-Charge Christina Scaringi said: “Friday’s verdict should send a strong message to those individuals who fail to exercise integrity in connection with HUD, we will vigorously pursue investigation and prosecution of all involved in order to maintain the integrity of our programs. Ms. Campbell’s case is especially egregious in that not only did she intentionally violate the Department's trust, she violated the trust of dozens of eligible families who followed the rules and waited years for a decent place to call home. Working in partnership with the U.S. Department of Homeland Security, Office of Homeland Security Investigations, the U.S. Attorney’s Office, and HUD OIG, we will continue to aggressively pursue allegations of corrupt management agent behavior.”

ICE HSI Special Agent-in-Charge James T. Hayes, Jr. said: “Instead of helping applicants who sought affordable housing, Ms. Campbell and her associates helped themselves to thousands of dollars in bribes and gifts from individuals who knew they were ineligible to receive government assistance. HSI and its law enforcement partners will continue to preserve the integrity of federally funded programs.”

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 Tricham Housing. Rather than maintain the integrity of the waiting list and process applications in 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, but never received apartments because CAMPBELL sold their spots for bribes. 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.

CAMPBELL, 55, of Bronx, New York, was convicted of six counts relating to accepting bribes in connection with federal program funds, conspiracy to accept bribes in connection with federal program funds, and four counts of false statements to HUD. The charges relating to accepting bribes in connection with federal program funds carry a maximum penalty of 10 years in prison and a fine of $250,000, or twice the gross gain or loss from the offense. The count charging conspiracy to accept bribes in connection with federal program funds carries a maximum penalty of five years in prison and a fine of $250,000, or twice the gross gain or loss from the offense. Each of the counts charging false statements funds carries a maximum penalty of five years in prison and a fine of $250,000, or twice the gross gain or loss from the offense. CAMPBELL is scheduled to be sentenced by Judge Daniels on August 12, 2014, at 10:00 a.m. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the investigative work of HUD OIG and ICE HSI. 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.

U.S. v. Novelette Campbell Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, and Terence S. Opiola, the Special Agent in Charge, U.S. Immigration and Customs Enforcement (ICE) Office of Professional Responsibility (OPR) Northeast, announced today that CARL OSBORNE pled guilty to five counts of impersonating a federal officer in order to detain others. OSBORNE pled guilty in White Plains Federal Court before United States District Judge Cathy Seibel.

Manhattan U.S. Attorney Preet Bharara stated: “The public needs to know that the men and women of law enforcement who are authorized can be trusted to do the vital jobs they carry out for us every day. Carl Osborne’s criminal actions of impersonating federal agents to stop motorists put himself and others in harm’s way and cannot be tolerated.”

Special Agent in Charge Terence S. Opiola of the U.S. Immigration and Customs Enforcement (ICE) Office of Professional Responsibility (OPR) Northeast, stated: “The men and women who have legitimately earned the badges they wear have sworn an oath to protect and defend this nation. Imposters who purport themselves to be special agents and officers of the law undermine the public trust and prey on the vulnerable. This conduct will never be tolerated and all individuals engaged in these acts will be brought to justice.”

According to the criminal Information and related court proceedings:

Between August 2012 and May 2013, on five separate occasions, OSBORNE, who was not an officer of the United States, represented himself to be a federal agent of the United States Department of Homeland Security. In the guise of a federal officer, complete with fake uniform, credentials and phony gun, and driving a vehicle equipped with lights and sirens, OSBORNE pulled over several vehicles in the Bronx and Westchester County.

OSBORNE, 37, of the Bronx, New York, pled guilty to five counts of impersonating a federal agent or officer and detaining individuals. All five counts carry a maximum term of 3 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. The sentencing before Judge Seibel is scheduled for July 18, 2014.

Mr. Bharara praised the outstanding investigative work of the Department of Homeland Security, Immigration and Customs Enforcement Office of Professional Responsibility.

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

U.S. v. Carl Osborne Information

“After due consideration, the Court has accepted the guilty plea and imposed sentence on SAC, including the payment of $1.184 billion in financial penalties. Today marks the day of reckoning for a fund that was riddled with criminal conduct. SAC fostered pervasive insider trading and failed, as a company, to question or prevent it. So far, this Office has successfully convicted eight SAC employees of insider trading, and when so much criminal conduct takes place within one institution, it is appropriate to impose criminal liability on the institution itself. Today’s sentence affirms that when institutions flout the law in such a colossal way, they will pay a heavy price.”

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that S.A.C. CAPITAL ADVISORS, L.P. (“SAC Capital LP”), S.A.C. CAPITAL ADVISORS, LLC (“SAC Capital LLC”), CR INTRINSIC INVESTORS, LLC (“CR Intrinsic”), and SIGMA CAPITAL MANAGEMENT, LLC (“Sigma Capital”) (collectively, the “SAC Companies”), which are responsible for the management of a group of affiliated hedge funds, (collectively the “SAC Hedge Fund” or “SAC”), were sentenced today by U.S. District Judge Laura T. Swain. The District Court accepted the guilty plea entered by the defendants on November 8, 2013, and approved the parties’ Plea Agreement. The Court imposed a sentence that included a criminal fine of $900 million (which is not tax-deductible), a statutory maximum five-year term of probation for each of the SAC Companies, the condition that the SAC Hedge Fund terminate its investment advisory business, effectively closing the hedge fund to outside investors, and a requirement that the defendants, and any successor entities, employ the compliance procedures necessary to identify and prevent insider trading, and that the defendants retain an independent compliance consultant, who will review, revise, and report to the Government on those compliance procedures. Together with the settlement of the civil forfeiture action, which was approved by U.S. District Judge Richard J. Sullivan on November 6, 2013, the SAC Hedge Fund is required to pay an additional $1.184 billion financial penalty on top of the $616 million the SAC Companies have already agreed to pay to the U.S. Securities & Exchange Commission (“SEC”).

Manhattan U.S. Attorney Preet Bharara said: “After due consideration, the Court has accepted the guilty plea and imposed sentence on SAC, including the payment of $1.184 billion in financial penalties. Today marks the day of reckoning for a fund that was riddled with criminal conduct. SAC fostered pervasive insider trading and failed, as a company, to question or prevent it. So far, this Office has successfully convicted eight SAC employees of insider trading, and when so much criminal conduct takes place within one institution, it is appropriate to impose criminal liability on the institution itself. Today’s sentence affirms that when institutions flout the law in such a colossal way, they will pay a heavy price.”

As alleged in the Indictment, the forfeiture Complaint filed against the funds, other court documents filed in the case, and statements made during the guilty plea and sentencing proceedings:

From 1999 through at least 2010, numerous employees of the SAC Companies obtained and traded on material, non-public information that they were not permitted to have (“Inside Information”), or recommended trades based on such information to SAC Portfolio Managers (“SAC PMs”) or the SAC Owner. Specifically, the Indictment charges the SAC Companies with insider trading offenses committed by numerous employees, occurring over the span of more than a decade, and involving the securities of more than 20 publicly-traded companies across multiple sectors of the economy. As charged in the Indictment, the systematic insider trading engaged in by SAC PMs and Research Analysts was the predictable and foreseeable result of multiple institutional failures. The failures alleged included hiring practices heavily focused on recruiting employees with networks of public company insiders, the failure of SAC management to question employees about trades that appeared to be based on Inside Information, and ineffective compliance measures that failed to prevent or detect such trading, particularly prior to late 2009.

At the guilty plea hearing on November 8, 2013, the SAC Companies pled guilty to all five Counts in the Indictment, and admitted that the six employees who had previously pled guilty to insider trading engaged in that criminal conduct while acting within the scope of their employment of the SAC Companies and for the benefit of the firm. The Plea Agreement does not provide immunity from prosecution for any individual and does not restrict the Government from charging any individual for any criminal offense and seeking the maximum term of imprisonment applicable to any such violation of criminal law. In fact, since the time of the guilty plea and prior to today’s sentencing, two additional SAC portfolio managers, Michael Steinberg and Matthew Martoma, were convicted of insider trading after separate jury trials.

Indeed, the total criminal fine imposed by the Court exceeded a Sentencing Guidelines range that was, in turn, based on all of the illicit profits gained and losses avoided resulting from all of the insider trading alleged in the Indictment. Neither the criminal fine nor the forfeiture amount to be paid in the civil forfeiture case can be claimed as a tax deduction or credit by the SAC Companies or their owner.

The Court further imposed a series of non-financial penalties on the SAC Companies that include the following:

• The SAC Companies will no longer accept third party investor funds and will terminate operations as an investment adviser.
• The SAC Companies were each sentenced to a five-year term of probation – the maximum allowed by law – with a provision to end probation earlier if the SAC Companies cease operating entirely. The terms of probation require, among other conditions, that the SAC Companies employ appropriate compliance measures to identify and prevent insider trading. Additionally, the insider trading compliance measures of the SAC Companies and any related entities trading securities will be reviewed by an independent compliance expert who will direct the SAC Companies to correct identified deficiencies, and who will report to the United States Attorney’s Office as to the progress of the corrective measures undertaken.

Mr. Bharara praised the efforts of the Federal Bureau of Investigation and also thanked the SEC for its assistance in the 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. Attorneys Antonia M. Apps, Arlo Devlin-Brown, and John T. Zach are in charge of the prosecution, and Assistant U.S. Attorneys Sharon Cohen Levin, Chief of the Asset Forfeiture Unit, Micah Smith, and Christine Magdo are responsible for the forfeiture aspects of the case.

U.S. v. SAC Capital Advisors, LP et al. Stipulation and Order of Settlement
U.S. v. SAC Capital Advisors LLP, et al. Cover Ltr, Plea Agt, and Stip