Southern District of New York

“The jury has found what this Office alleged from the outset: these defendants were at the heart of a conspiracy to steal from New York City and its taxpayers. Awarded a lucrative contract to design a streamlined payroll system for the City, instead they built a money-making machine for themselves. These three defendants and their partners in crime thought they had made off with nearly $100 million in taxpayer money, far more than they could have made by burglarizing banks, with a fraction of the effort. What they now stand to reap is lengthy prison terms.”

Preet Bharara, the United States Attorney for the Southern District of New York, announced that KAREEM SERAGELDIN, the former Managing Director/Global Head of Structured Credit in the Investment Banking Division of Credit Suisse Group (“Credit Suisse”), was sentenced today to 30 months in prison in connection with a scheme to hide more than $100 million in losses in a mortgage-backed securities trading book at Credit Suisse. The bonds at issue in Credit Suisse’s trading book comprised subprime residential mortgage backed securities (“RMBS”) and commercial mortgage backed securities (“CMBS”). Once discovered, SERAGELDIN’s manipulation of these bond prices contributed to Credit Suisse taking a $2.65 billion write-down of its 2007 year-end financial results. In April 2013, SERAGELDIN was extradited from the United Kingdom and pled guilty to conspiring to falsify the books and records of the bank before U.S. District Judge Alvin K. Hellerstein. SERGAGELDIN’s co-conspirators, David Higgs and Salmaan Siddiqui, have also pled guilty and are awaiting sentencing.

Manhattan U.S. Attorney Preet Bharara said: “With today’s sentence Kareem Serageldin will now pay a steep price for the role he played in a conspiracy to cover up more than one hundred million dollars in subprime mortgage-related losses – the loss of his liberty.”

According to the Indictment filed against SERAGELDIN and the Informations to which Higgs and Siddiqui pled guilty, other court documents, and statements made during court proceedings:

SERAGELDIN was employed at Credit Suisse as a Managing Director. He held the position of Global Head of the Structured Credit Group in the Securities Department of Credit Suisse’s Investment Banking Division, and divided his time between the company’s New York and London offices. The Structured Credit Group held and traded ABS (“Asset Backed Security”) cash bonds, which included RMBS and CMBS. SERAGELDIN oversaw and

managed a number of trading books, including a trading book known as “ABN1.” The ABN1 book comprised primarily several thousand individual long and short subprime-related positions, as well as other securities. The long positions consisted of, among other things, various types of cash securities, including AAA-rated and non-AAA-rated cash bonds. Until March 2008, ABN1 had a net asset value of approximately $5.35 billion, approximately $3.71 billion of which consisted of ABS cash bonds, including RMBS and CMBS positions.

Pricing of Mortgage-Backed Securities

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

The Bond Pricing Scheme

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

By late November 2007, SERAGELDIN was aware that the market for mortgage-backed securities had declined enormously. On November 28, 2007, SERAGELDIN told Higgs, Siddiqui, and a co-conspirator (“CC-1”) that “the housing market [was] going down the tubes” and that they had to “find a way to sell these bonds,” i.e., mortgage-backed bonds in ABN1. As SERAGELDIN recognized, “[t]hose bonds are going to start trading worse than the [ABX] Index.” SERAGELDIN and his co-conspirators did not sell the bonds because the market prices for the bonds were substantially below the inflated value at which they marked the bonds.

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

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

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

The February 2008 Mark-Down

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

In addition to the prison term, Judge Hellerstein sentenced SERAGELDIN, 40, a citizen of the United Kingdom, to two years of supervised release. SERAGELDIN also was ordered to pay forfeiture in the amount of $1 million, a $150,000 fine, and a $100 special assessment.

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

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorney Eugene Ingoglia is in charge of the prosecution. 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.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that JOVER NARANJO, the owner and president of Enviro & Demo Masters, Inc. (“Enviro”), and LUPERIO NARANJO, SR., a foreman for Enviro, were found guilty today in Manhattan federal court of perpetrating a scheme to underpay employees in violation of the federal prevailing wage law. The jury also found that JOVER NARANJO and LUPERIO NARANJO, SR., tampered with witnesses and used other people’s identities to further their fraudulent scheme. In addition, the jury found that JOVER NARANJO made false statements to a government agent in connection with the scheme. They were convicted after a two-week trial before U.S. District Judge Jed S. Rakoff.

Manhattan U.S. Attorney Preet Bharara said: “Today, Jover Navanjo, and Luperio Naranjo, Sr. stand convicted of deceiving government agencies through fraudulent payrolls that hid the unlawful underpayment of their employees, and then concealing their fraud. The Office has zero tolerance for contractors who unlawfully take advantage of their staff, abuse federal funds, and then lie about it to cover their tracks. With today’s verdict, Jover Naranjo and Luperio Naranjo, Sr., will be punished for their conduct.”

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

In August 2009, Enviro was awarded a sub-contract by the general contractor on a New York City project (the “Project”) to demolish five buildings in Manhattan (the “Contract”) that was funded in part with federal stimulus money. From August 2009 through February 2010, JOVER NARANJO and LUPERIO NARANJO, SR., participated in a scheme to submit fraudulent certified payrolls to the New York City Department of Housing Preservation and Development (“HPD”) and the U.S. Department of Labor in connection with the Contract. These certified payrolls were fraudulent in at least three respects. First, they listed relatives as the demolition workers on the Project, when in fact, these relatives did no work. Second, the certified payrolls did not list the actual individuals who worked on the Project. Third, the certified payrolls misrepresented the wages being paid to Enviro’s workers.

In this regard, the fraudulent certified payrolls indicated that Enviro was paying its employees the federal prevailing wage, as required by federal law, but in reality, they were being paid far less. Although the applicable federal prevailing wages for Enviro employees working on the Contract were approximately $49 and $33 per hour for demolition laborers, JOVER NARANJO and LUPERIO NARANJO, SR., paid their demolition workers as little as $13 per hour. The total amount of salary underpaid by the defendants to Enviro employees working on the Contract was in excess of approximately $650,000.

JOVER NARANJO and LUPERIO NARANJO, SR., also employed a number of measures to conceal their fraud. For example, they submitted supporting documentation with the certified payrolls that included time sheets on which they forged workers’ signatures, and canceled checks that they had doctored to make it appear that workers were earning the prevailing wage. In addition, they hid their workers from investigators and told some to lie about their identities, work schedules, and/or pay rates if they were questioned by investigators. When an employee truthfully told investigators that the employee was paid below the prevailing wage, JOVER NARANJO and LUPERIO NARANJO, SR., fired the employee and the employee’s relative.

JOVER NARANJO, 37, and LUPERIO NARANJO, SR., 65, both of Queens, New York, were each convicted of mail fraud, conspiracy to commit mail fraud, witness tampering, conspiracy to commit witness tampering, and aggravated identity theft. JOVER NARANJO was also convicted of one count of making false statements.

JOVER NARANJO faces a total maximum sentence of 87 years in prison, including a mandatory minimum sentence of two years. LUPERIO NARANJO, SR., faces a total maximum sentence of 82 years in prison, including a mandatory minimum sentence of two years. The defendants also each face a maximum fine of $250,000 or twice the gross gain or loss from the offense on each count except aggravated identity theft.

The defendants are scheduled to be sentenced by Judge Rakoff on March 24, 2014 at 4:00 p.m.

Mr. Bharara praised the outstanding investigative work of the New York Field Office of the U.S. Department of Labor’s Office of Inspector General, Office of Labor Racketeering and Fraud Investigations, the New York City Department of Investigation, and the United States Environmental Protection Agency Criminal Investigation Division.

This case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorneys Brian A. Jacobs and Brent S. Wible are in charge of the prosecution.

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”), today announced charges against 14 defendants for engaging in a bank fraud scheme involving deposits of thousands of counterfeit checks and withdrawals of at least $8 million in fraudulent proceeds. Seven defendants were arrested this morning and are expected to be presented in Manhattan federal court before U.S. Magistrate Judge Kevin Nathaniel Fox this afternoon. Two additional defendants were arrested – one in Buffalo, New York, and one in Lawrenceville, Georgia. Defendants HAMID KHAN, AKTHER RAHMAN, ABDUR RAZZAK, KHAIRUL ISLAM and MD REZA are still at large.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, for three years the 14 defendants charged in this multimillion-dollar check-kiting scheme attempted to fly under the radar and conceal their illicit activity through false identification documents, counterfeit checks, and sham companies. But law enforcement uncovered their alleged bank fraud, and now they will be made to answer for their actions.”

ICE HSI Special Agent-in-Charge James T. Hayes, Jr. said: “The defendants arrested today are alleged to have perpetrated a scheme involving the theft of at least $8,000,000 from 15 financial institutions. HSI New York’s El Dorado Task Force, the largest financial investigation task force in the world, partners with prosecutors and law enforcement agencies every day to detect and dismantle transnational criminal organizations working to steal from financial institutions and disrupt America’s economic system.”

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

From approximately June 2009 through November 2012, the defendants and their co-conspirators allegedly engaged in a bank fraud scheme in which they created counterfeit checks, deposited those counterfeit checks into bank accounts they had opened in the names of sham companies in order to fraudulently inflate the balances in those accounts, and then withdrew funds from those bank accounts before the financial institutions were able to determine the fraudulent nature of the checks. The scheme entailed the deposit of thousands of counterfeit checks into bank accounts at approximately 15 different banks, resulting in aggregate losses to those banks of at least $8 million.

As part of the scheme, the defendants incorporated sham companies and then opened bank accounts in the names of those sham companies. The individuals opening the accounts (the “accountholders”) often used false identities, including names and social security numbers, and presented false identification documents, including fake United States visas. The accountholders were generally instructed to make small legitimate deposits at first so that the banks would make funds immediately available upon future fraudulent deposits.

The defendants obtained copies of legitimate checks and then used the payor account information that appeared on those checks to create counterfeit checks made payable to the sham companies they had incorporated as part of the scheme. The accountholders deposited the counterfeit checks into the sham company bank accounts at various banks. The accountholders often made deposits at numerous branches of the same bank on the same day. These deposits often were made on a Thursday or Friday so that the defendants could withdraw the illegal proceeds over the weekend when the banks were closed and were less likely to determine that the checks were counterfeit.

Once the defendants confirmed that funds from the counterfeit checks were available for withdrawal, the accountholders were directed to withdraw the funds from the counterfeit checks, typically over the weekend and often in amounts just under $10,000. The defendants often withdrew the funds from global cash access machines at casinos in Atlantic City, New Jersey, which did not have daily withdrawal limits. The accountholders often used false identification documents, including fake United States visas, when making the withdrawals.

Each of the defendants was charged with one count of conspiracy to commit bank fraud, which carries a maximum sentence of 30 years in prison. Certain of the defendants were also charged with one count of conspiracy to commit fraud in connection with identification documents, which carries a maximum sentence of 15 years in prison. A chart listing the age, place of residence, and charges for each of the 14 charged defendants is attached.

In addition to the defendants charged in the Indictment unsealed today, six other defendants have been charged and have pled guilty in connection with the scheme.

Manhattan U.S. Attorney Bharara praised the investigative work of ICE HSI. He also thanked the Queens County District Attorney’s office, the New Jersey State Police, the New York City Police Department, the New York State Police, the United States Secret Service, and the New York City Taxi and Limousine Commission for their assistance in the matter.

The prosecution of this case is being handled by the Office’s Complex Frauds Unit. Assistant United States Attorneys Lisa Korologos and Elisha Kobre, and Special Assistant United States Attorney Jason Wong, 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.

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U.S. v. Zaman Mahabub, et al. Indictment 13 cr 908.

In Parallel State Prosecution, New York State Attorney General Charges 10 Additional Defendants

Preet Bharara, the United States Attorney for the Southern District of New York, 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”), Nirav Shah, the Commissioner of the New York State Department of Health (“NYS DOH”), and Eric T. Schneiderman, the New York State Attorney General, today announced charges against 16 defendants for defrauding the federal Special Supplemental Nutrition Program for Women, Infants and Children (“WIC”) out of millions of dollars. All of the defendants, who were owners or employees of nine different grocery stores in Manhattan, Queens, and Brooklyn, New York, were charged with participating in fraud schemes from 2011 to the present in which they exchanged WIC vouchers for cash while keeping a portion of that cash for themselves. Ten of the defendants charged today are married couples or family members. Twelve defendants were arrested this morning and are expected to be presented in Manhattan federal court before U.S. Magistrate Judge Kevin Nathaniel Fox this afternoon. An additional defendant was also arrested and will be presented at a later date. Defendants QIGUANG ZHANG, HUILAN LIU, and LAN LU JIANG are still at large. In a parallel state prosecution, today the New York State Attorney General’s Office arrested 10 additional individuals who were owners and employees of stores located in Brooklyn, Queens, and Manhattan.

A civil forfeiture complaint was also filed this morning in the Southern District of New York against 19 businesses in the New York City area, real property located at 6101 Fifth Avenue, Brooklyn, New York, and 19 bank accounts. The 19 bank accounts were seized by law enforcement, as they contained proceeds of the WIC fraud described herein and were used to promote and conceal the WIC fraud.

Manhattan U.S. Attorney Preet Bharara said: “As alleged in the complaints unsealed today, the defendants defrauded a vital federal program that provides a lifeline to women, mothers, and young children in need throughout New York. This Office will continue its work to prosecute corruption and protect taxpayer-funded programs, particularly at this time of scarce government resources and where it involves vulnerable victims.”

ICE HSI Special Agent-in-Charge James T. Hayes, Jr. said: “Business owners and their employees arrested today allegedly committed a series of fraud against the American taxpayer. We will continue to work hard to ensure that social programs meet the needs of their intended beneficiaries.”

New York State Department of Health Commissioner Nirav Shah said: "New York State takes an aggressive stance against any and all fraud. This case is a testament to the effectiveness of the collaborative investigation by the State Health Department, the NYS Office of the Attorney General, the US Department of Homeland Security, and the U.S. Attorney’s Office – Southern District of New York. We are committed to protecting public funds through fraud prevention, detection and prosecution to support this critical program which serves 500,000 women, infants and children throughout New York State.”

New York State Attorney General Eric Schneiderman said: “These crimes are a betrayal of the trust of the people of New York and those who rely on the WIC program to ensure the health and well-being of their children. This joint investigation by my office in conjunction with the New York State Department of Health, the United States Department of Homeland Security and the United States Attorney’s Office for the Southern District of New York sends a clear message that fraud against New York State benefits programs will not be tolerated. The conduct charged here is particularly egregious in light of the fact that the defendants stole monies intended to provide nutrition for infants, young children and pregnant mothers. My office is dedicated to seeking justice against perpetrators who defraud the public and to preserving the integrity of important benefits programs such as WIC.”

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

The “WIC” Program and the Defendants’ Scheme to Defraud

WIC is a federally funded program through which the U.S. Department of Agriculture provides grants to states for supplemental foods, health care referrals, and nutrition education for low-income pregnant women, mothers of young children, and children up to age five who are found to be at nutritional risk. Grants are administered in New York by the New York State Department of Health, Division of Nutrition (the “NYS DOH”). Participants in the WIC program receive vouchers which may only be used to purchase certain specified food items such as infant formula, milk or juice. Participants can exchange these vouchers for food items specified on the vouchers at grocery stores run by licensed vendors.

Only vendors who are licensed by the state may accept WIC vouchers. Because the purpose of the program is to provide food to low-income women, mothers, and children at nutritional risk, WIC vendors are prohibited from exchanging WIC vouchers for cash, but instead must provide specified food items in exchange for WIC vouchers.

The 16 defendants named in the three Complaints unsealed today are the owners, operators, or employees of nine grocery stores located in Manhattan, Queens, and Brooklyn, New York. The schemes to defraud charged in these Complaints involve store owners and employees purchasing WIC vouchers for cash—typically paying 80-85 percent of the face value of the WIC vouchers—and then redeeming those WIC vouchers from the NYS DOH for their full face value. Grocery stores involved in these schemes accepted WIC vouchers regardless of whether they were licensed by the state. In the aggregate, the corrupt owners, operators, and employees of these nine grocery stores have redeemed approximately $30 million worth of WIC vouchers.

The “Six-Store Network” Complaint

TUNG CHA YO, SUNG MAN CHAN, YING ZHENG, QIGUANG ZHANG, FENG ZHENG, SAU WA YEUNG, SAU CHAN, ZHAOJUN LIN, HUILAN LIU, and YU WANG were the owners, operators, or employees of six grocery stores located in Manhattan, Brooklyn, and Queens, New York, only two of which had WIC licenses that were active and in use in 2013. YO and SAU CHAN are married to one another. YEUNG is the mother of SAU CHAN and SUNG MAN CHAN. SUNG MAN CHAN is married to FENG ZHENG, whose sister is YING ZHENG.

Owners or employees at each of those six grocery stores purchased WIC vouchers for cash from confidential informants on numerous occasions between March and November 2013. All of those checks were funneled to one of the stores that had a WIC license, which redeemed them, received payment from the WIC program, and then distributed the proceeds to the other members of this network of stores.

Since 2009, these defendants have opened and closed grocery stores in different names at the same locations. In many instances, the defendants obtained WIC licenses, redeemed significant volumes of WIC checks using those licenses, and then terminated those licenses only to use a different store to obtain a WIC license and repeat this pattern. Based on figures obtained from the NYS DOH, it is estimated that these six stores and their predecessors redeemed more than $19 million from the WIC program since 2009.

All of these defendants are charged with conspiracy to commit theft of government funds, which carries a maximum term of five years in prison. TUNG CHA YO, SAU WA YEUNG, and ZHAOJUN LIN are charged with theft of government funds, which carries a maximum term of 10 years in prison. TUNG CHA YO, SUNG MAN CHAN, YING ZHENG, and QIGUANG ZHANG are also charged with conspiracy to commit money laundering and money laundering, which both carry a maximum term of 20 years in prison.

The “Two-Store” Network Complaint

GIGI DONG, SHUMIN DONG, LAN LU JIANG, and ANIY LI were the owners, operators, or employees of two grocery stores located in Brooklyn, one of which had a WIC license that was active and in use after March 2013. SHUMIN DONG and GIGI DONG are married to one another. Owners or employees at both of those stores purchased WIC vouchers for cash from confidential informants on numerous occasions between March and November 2013. All of those checks were funneled to the store that had a WIC license, which redeemed them and received payment from the WIC program.

These defendants engaged in a fraudulent scheme similar to the scheme described in the first Complaint, only this time alternating their WIC license between stores at two locations. Based on figures obtained from the NYS DOH, it is estimated that these two stores and their predecessors redeemed more than $9 million from the WIC program since 2009.

All of these defendants are charged with conspiracy to commit theft of government funds, which carries a maximum term of five years in prison.

B & B Grocery Commits WIC Fraud

YONG LIN and QIAO FANG ZHENG operate a grocery store located in Brooklyn, New York. LIN and ZHENG are married to one another. LIN obtained a WIC license in February 2010, and over $1.3 million worth of WIC vouchers were redeemed through that store until the license was terminated in February 2012. ZHENG then obtained a new WIC license in the name of a different store at the same location, and redeemed over $540,000 worth of WIC vouchers. ZHENG purchased WIC vouchers for cash from confidential informants on numerous occasions between April and September 2013.

Both of these defendants are charged with conspiracy to commit theft of government funds, which carries a maximum term of five years in prison.

A chart listing the age, place of residence, and charges for each of the 16 charged defendants is attached.

Manhattan U.S. Attorney Bharara praised the investigative work of ICE HSI, the United States Department of Agriculture, Office of the Inspector General, the New York State Department of Health, Division of Nutrition, as well as the New York State Attorney General’s Office.

The Office’s General Crimes Unit is handling the case. Special Assistant U.S. Attorney Jason Wong and Assistant U.S. Attorneys Patrick Egan and Richard Cooper are in charge of the prosecution. Assistant U.S. Attorney Carolina A. Fornos of the Office’s Asset Forfeiture Unit is responsible for the forfeiture aspects of the case.

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

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WIC Fraud Complaints
WIC Fraud Civil Forfeiture Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, and Michele M. Leonhart, Administrator of the United States Drug Enforcement Administration (“DEA”), today announced the arrests of five defendants – SCOTT STAMMERS and PHILIP SHACKELS, citizens of the United Kingdom; YE TIONG TAN LIM, a citizen of the People’s Republic of China; KELLY ALLAN REYES PERALTA, a citizen of the Philippines; and ALEXANDER LNU, a/k/a “Alexander Checov,” a/k/a “Alexander Semencov,” a resident of Thailand (“ALEXANDER”). STAMMERS, SHACKELS, LIM, REYES PERALTA, and ALEXANDER are each charged with conspiring to import 100 kilograms of North Korean-produced methamphetamine into the United States.

Each of the defendants was arrested in Thailand in September. The five defendants were extradited from Thailand, arrived in the Southern District of New York yesterday evening, and are expected to be presented in U.S. Magistrate Court later today.

Manhattan U.S. Attorney Preet Bharara said: “Methamphetamine is a dangerous, potentially deadly drug, whatever its origin. If it ends up in our neighborhoods, the threat it poses to public health is grave whether it is produced in New York, elsewhere in the U.S., or in North Korea. This investigation shows our determination to close a potential floodgate of supply.”

DEA Administrator Michele M. Leonhart said: “Like many international criminal networks, these drug traffickers have no respect for borders, and no regard for either the rule of law or who they harm as a result of their criminal endeavors. This investigation continued to highlight the emergence of North Korea as a significant source of methamphetamine in the global drug trade. I wish to thank the Thai Government for their outstanding efforts and partnership in completely dismantling this sophisticated and dangerous international criminal enterprise.”

According to the allegations in the Indictment against STAMMERS, SHACKELS, LIM, REYES PERALTA, and ALEXANDER:

In 2012, LIM and REYES PERALTA – members of a Hong Kong-based criminal organization – sold over 30 kilograms of methamphetamine that had been produced in North Korea. STAMMERS and SHACKELS were responsible for storing the methamphetamine after it had been sold by LIM and REYES PERALTA. This North Korean methamphetamine was later seized by law enforcement agents in Thailand and in the Philippines. The North Korean methamphetamine tested at more than 99% pure.

In 2013, LIM and REYES PERALTA again agreed to provide North Korean methamphetamine, this time agreeing to supply 100 kilograms of the methamphetamine to confidential sources working at the direction of the DEA (the “CSes”) for importation to the United States. As LIM explained, his criminal organization is the only one currently able to obtain methamphetamine from North Korea: “Because before, there were eight [other organizations]. But now only us, we have the NK product. . . . [I]t’s only us who can get from NK.” LIM further explained that, because of recent international tensions, the North Korean government had destroyed some methamphetamine labs, leaving behind only the labs of LIM’s organization: “And all the, the NK government already burned all the labs. Only our labs are not closed. . . . To show Americans that they [the North Korean government] are not selling it any more, they burned it. Then they transfer to another base.” LIM explained that his organization had stockpiled one ton of North Korean methamphetamine in the Philippines for storage, “[b]ecause we already anticipated this thing would happen . . . [whereby] we cannot bring out our goods right now.”

As a prelude to the 2013 100-kilogram methamphetamine deal described above, LIM and REYES PERALTA arranged to have a sample of the methamphetamine delivered to SHACKLES, who sent that sample (along with a second sample from another supplier) to an address from which the methamphetamine samples would be sent to the United States. These two methamphetamine samples tested at more than 98% and more than 96% pure.

LIM and REYES PERALTA agreed to deliver the 100 kilograms of North Korean methamphetamine in Thailand, from where they understood it would be shipped to the United States by boat. LIM and REYES PERALTA arranged for a “dry run,” sending a shipping container of tea leaves from the Philippines to Thailand in order to test delivery channels that would later be used for the shipment of methamphetamine.

STAMMERS, SHACKELS, and ALEXANDER agreed to provide security, transportation, and storage for the 100 kilograms of methamphetamine once it arrived in Thailand. ALEXANDER, the Sergeant-at-Arms of the Outlaw Motorcycle Club (“OMC”) in Thailand, was to be the “ground commander,” supervising an armed crew of OMC members providing security for the methamphetamine. STAMMERS and SHACKELS were to arrange for the 100 kilograms to be taken to a warehouse, counted, re-packaged, and delivered to a marina in Thailand, to be transferred to a boat that would deliver the methamphetamine to the United States.

In September 2013, LIM and REYES PERALTA traveled to Thailand in order to receive payment for the 100 kilogram methamphetamine deal. STAMMERS, LIM, PERALTA REYES, SHACKELS, and ALEXANDER were each arrested by Thai law enforcement on September 25, 2013.

STAMMERS, 44, LIM, 53, REYES PERALTA, 41, SHACKELS, 30, and ALEXANDER, 43, have each been charged with conspiracy to import methamphetamine into the United States. The case is assigned to United States District Judge Andrew L. Carter, Jr.

If convicted, each of the defendants faces a mandatory minimum sentence of ten years’ imprisonment and a maximum term of life imprisonment.

Mr. Bharara praised the outstanding work of the Special Operations Division of the DEA. Mr. Bharara also thanked DEA’s Bangkok, Manila, Ghana, Pretoria, Bucharest, Nassau, and Copenhagen Country Offices; the Thai Police Narcotics Suppression Bureau and Crime Suppression Division; the Royal Thai Immigration Bureau; the Royal Thai Attorney General's Office; the Republic of Liberia’s National Security Agency; the Republic of Liberia’s Attorney General's Office; 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 D. Lockard, Aimee Hector and Anna M. 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.

US v Stammers et al S8 13 Cr 579 Indictment

Preet Bharara, United States Attorney for the Southern District of New York, and Carl W. Hoecker, Inspector General of the Securities and Exchange Commission, Office of the Inspector General (“SEC-OIG”), today announced charges against STEVEN GILCHRIST, a Securities and Exchange Commission (“SEC”) Compliance Examiner in the SEC’s New York Regional Office, for making false statements to the SEC regarding his ownership of various securities he was prohibited from holding under SEC ethical rules. GILCHRIST was arrested this morning and will be presented in Manhattan federal court before U.S. Magistrate Judge Kevin Nathaniel Fox this afternoon.

Manhattan U.S. Attorney Preet Bharara said: “As an SEC examiner, Steven Gilchrist had a duty to avoid conflicts of interest that might compromise or even appear to compromise his integrity. Instead, as alleged, he violated the SEC’s internal rules about stock ownership and repeatedly lied to the SEC about his holdings. We will not tolerate abuses of trust and violations of law by individuals tasked with safeguarding our markets.”

SEC Inspector General Carl Hoecker said: “Making false statements to government agencies undermines the foundation of public integrity. My office investigates these matters thoroughly and today’s arrest exemplifies our commitment to working with the SEC to improve and protect its programs and operations.”

According to the allegations contained in the Criminal Complaint unsealed today:

Among a Compliance Examiner’s duties in the SEC’s New York Regional Office are overseeing broker-dealers, investment advisers, investment companies, clearing agencies, and others regarding their compliance with the nation’s securities laws. As an SEC employee, Gilchrist is subject to rules promulgated by the SEC (“SEC Ethical Rules”) designed to prevent conflicts of interest between employees’ conduct and the SEC’s mission of enforcing the securities laws and regulating the markets.

Beginning in August 2010, changes to the SEC Ethical Rules prohibited SEC employees from purchasing or holding stock in entities directly regulated by the SEC, and required employees to submit any proposed personal transactions in securities to the SEC prior to executing them. The prohibited securities included those of several banks and broker-dealers, including banks with broker-dealer subsidiaries. Individuals who held such stock at the time the changes were implemented were directed to divest their holdings, and provided with instructions on how to do so.

GILCHRIST held stock in several such prohibited companies. As the rule changes took effect, GILCHRIST did not divest his holdings as required. Instead, he transferred his stocks into a new joint brokerage account he shared with a family member and over which he had complete control (the “Joint Account”). In addition, he purchased additional prohibited stock (the “Additional Stock”) without pre-clearing the purchase with the SEC.

On three occasions in 2013, GILCHRIST made false statements to the SEC regarding his stock holdings. First, in January 2013, he falsely certified through an electronic SEC compliance system that as of December 31, 2012, his holdings were in compliance with SEC regulations. Second, on February 13, 2013, he submitted an Executive Branch financial disclosure form that falsely stated that he “no longer held” certain of his prohibited stock holdings, and that omitted any mention of the Additional Stock. Third, on February 22, 2013, GILCHRIST falsely certified through an electronic SEC compliance system that he had sold certain other prohibited stocks. In reality, GILCHRIST continued to hold prohibited stock in six different companies at all relevant times throughout this period. Specifically, the stocks that GILCHRIST claimed he no longer held had only been transferred to the Joint Account, which he controlled.

GILCHRIST, 48, of Bethpage, New York, is charged with three counts of making false statements. He faces a maximum sentence of 15 years in prison.

Mr. Bharara praised the investigative work of the SEC-OIG, and the Criminal Investigators of the United States Attorney’s Office. He also thanked the SEC for its assistance in the investigation.

The case is being prosecuted 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.

Preet Bharara, United States Attorney for the Southern District of New York, and Carl W. Hoecker, Inspector General of the Securities and Exchange Commission, Office of the Inspector General (“SEC-OIG”), today announced charges against STEVEN GILCHRIST, a Securities and Exchange Commission (“SEC”) Compliance Examiner in the SEC’s New York Regional Office, for making false statements to the SEC regarding his ownership of various securities he was prohibited from holding under SEC ethical rules. GILCHRIST was arrested this morning and will be presented in Manhattan federal court before U.S. Magistrate Judge Kevin Nathaniel Fox this afternoon.

Manhattan U.S. Attorney Preet Bharara said: “As an SEC examiner, Steven Gilchrist had a duty to avoid conflicts of interest that might compromise or even appear to compromise his integrity. Instead, as alleged, he violated the SEC’s internal rules about stock ownership and repeatedly lied to the SEC about his holdings. We will not tolerate abuses of trust and violations of law by individuals tasked with safeguarding our markets.”

SEC Inspector General Carl Hoecker said: “Making false statements to government agencies undermines the foundation of public integrity. My office investigates these matters thoroughly and today’s arrest exemplifies our commitment to working with the SEC to improve and protect its programs and operations.”

According to the allegations contained in the Criminal Complaint unsealed today:

Among a Compliance Examiner’s duties in the SEC’s New York Regional Office are overseeing broker-dealers, investment advisers, investment companies, clearing agencies, and others regarding their compliance with the nation’s securities laws. As an SEC employee, Gilchrist is subject to rules promulgated by the SEC (“SEC Ethical Rules”) designed to prevent conflicts of interest between employees’ conduct and the SEC’s mission of enforcing the securities laws and regulating the markets.

Beginning in August 2010, changes to the SEC Ethical Rules prohibited SEC employees from purchasing or holding stock in entities directly regulated by the SEC, and required employees to submit any proposed personal transactions in securities to the SEC prior to executing them. The prohibited securities included those of several banks and broker-dealers, including banks with broker-dealer subsidiaries. Individuals who held such stock at the time the changes were implemented were directed to divest their holdings, and provided with instructions on how to do so.

GILCHRIST held stock in several such prohibited companies. As the rule changes took effect, GILCHRIST did not divest his holdings as required. Instead, he transferred his stocks into a new joint brokerage account he shared with a family member and over which he had complete control (the “Joint Account”). In addition, he purchased additional prohibited stock (the “Additional Stock”) without pre-clearing the purchase with the SEC.

On three occasions in 2013, GILCHRIST made false statements to the SEC regarding his stock holdings. First, in January 2013, he falsely certified through an electronic SEC compliance system that as of December 31, 2012, his holdings were in compliance with SEC regulations. Second, on February 13, 2013, he submitted an Executive Branch financial disclosure form that falsely stated that he “no longer held” certain of his prohibited stock holdings, and that omitted any mention of the Additional Stock. Third, on February 22, 2013, GILCHRIST falsely certified through an electronic SEC compliance system that he had sold certain other prohibited stocks. In reality, GILCHRIST continued to hold prohibited stock in six different companies at all relevant times throughout this period. Specifically, the stocks that GILCHRIST claimed he no longer held had only been transferred to the Joint Account, which he controlled.

GILCHRIST, 48, of Bethpage, New York, is charged with three counts of making false statements. He faces a maximum sentence of 15 years in prison.

Mr. Bharara praised the investigative work of the SEC-OIG, and the Criminal Investigators of the United States Attorney’s Office. He also thanked the SEC for its assistance in the investigation.

The case is being prosecuted 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.

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”), Ramon Bethencourt Jr., the Chief of the City of Middletown Police Department, and Joseph A. D’Amico, the Superintendent of the New York State Police, announced the arrest of 14 defendants and the unsealing of an Indictment charging a conspiracy to distribute kilogram quantities of heroin in and around Middletown, New York.

U.S. Attorney Preet Bharara stated: “This case is yet another example of this Office’s unrelenting efforts at purging the Hudson Valley of alleged violent drug trafficking gangs through the coordinated efforts of the FBI and our state and local law enforcement partners.”

FBI Assistant Director-in-Charge George Venizelos stated: “The arrests today target individuals who allegedly were involved in moving heroin into Middletown. These types of crimes are all too common in this area and the FBI’s Safe Streets Taskforce will continue to work with our partners to eradicate violent gangs and drugs in our communities.”

Middletown Police Department Chief Ramon Bethencourt Jr. stated: “Along with Mayor DeStefano, I want to praise the work of all of the law enforcement agencies involved. Once again our commitment to working together will have a positive influence on the quality of life for our residents. By ridding our streets of these drugs we are reducing the violent crimes that go along with them, making the City of Middletown a safer community.”

New York State Police Superintendent Joseph A. D’Amico stated: “A significant amount of heroin will not make it onto the streets of Middletown as a result of the dedication and due diligence of local, state and federal investigators and prosecutors working collaboratively to put a stop to these types of drug operations. It is through this cooperative effort among our partners in law enforcement that we will continue to target, and remove from our streets those who choose to engage in this type of illegal and dangerous activity. I thank all of the members of this team for their hard work and dedication to the citizens of New York.”

According to allegations in the Indictment unsealed in White Plains federal court today:

Fourteen people, MIGUEL MARGOLLA, 29, JESUS IRIZARRY NEGRON, a/k/a/ “Pablo,” 22, MARIO MARGOLLA, 32, ROBERTO MARGOLLA, 22, CARLOS MARTINEZ, a/k/a “B-Way,” 33, SHARLIM OMAR MORALES, a/k/a “Moreno,” 32, RICARDO RAMOS-MENDEZ, a/k/a “Keeke,” a/k/a “Brian,” 23, TEDDY RIVERA, a/k/a “Teddy Guns,” a/k/a “TG,” 20, CHRISTINA RODRIGUEZ, 23, JOHNATHAN RODRIGUEZ, a/k/a “J-Whispers,” a/k/a “Bigz,” 26, MANUEL SANTIAGO, 28, JESSICA SLOCUM, 24, ALEX TORRES, a/k/a “Broccoli,” a/k/a “Broc,” 28, and CHRISTIAN VERA MALDONADO, 22, are charged with conspiring to distribute, and possess with intent to distribute, kilogram quantities of heroin. As the Indictment describes, the defendants operated a large-scale heroin trafficking organization that distributed heroin throughout Middletown, New York since at least 2007. As further alleged, during the investigation, the defendants unwittingly sold heroin to confidential informants and an agent in an undercover capacity. As further alleged, one member of the conspiracy also discussed the possible murder of two individuals in or around Middletown.

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

All of the defendants charged in the Indictment were arrested last night or today, or have previously been taken into custody. Twelve of the defendants are to be presented in White Plains federal court this afternoon before U.S. Magistrate Judge Lisa Margaret Smith. One defendant is to be presented in the United States District Court for the District of New Hampshire, and one defendant is to be presented in the United States District Court for the District of Puerto Rico.

Mr. Bharara praised the outstanding investigative work of the FBI, the City of Middletown Police Department, the New York State Police, the Orange County Sheriff’s Department, the Town of Wallkill Police Department, and the Town of Ramapo Police Department. Mr. Bharara also thanked the Orange County District Attorney’s Office for its invaluable coordination and continuing support.

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 WILSON PAGAN, 27, the founder and top leader of the Latin Kings gang in Newburgh, New York (the “Newburgh Latin Kings”), was sentenced today by U.S. District Judge Cathy Seibel in White Plains federal court to life plus 85 years in prison. PAGAN was convicted of murder; racketeering; conspiracy to distribute crack, cocaine, and heroin; assault, and using and carrying firearms in connection with violent crimes. PAGAN is one of 35 members and associates of the gang who were charged in the case, all of whom have been convicted, 28 of whom have thus far been sentenced.

U.S. Attorney Preet Bharara stated: “Mr. Pagan was a gang leader, and what he led his followers to was a gang member’s life filled with death, blood, guns, drugs, and jail – and for him the gangster life in the street has become the inmate’s life in prison, forever. Gang leaders, members, associates, and wannabes in Newburgh and throughout the Hudson Valley need to understand: We will not tolerate gang violence. You will go to prison for it, potentially for the rest of your life.”

According to the Indictment and evidence presented at trial:

PAGAN founded the Newburgh Latin Kings, and grew the gang from roughly a dozen members in 2008 to more than 50 members and associates by early 2010. On May 6, 2008, PAGAN ordered aspiring gang members to go on a so-called mission, during which they committed a drive-by shooting and killed, mistakenly, Jeffrey Zachary, a 15-year old boy who was an innocent bystander. PAGAN sold crack and heroin, and helped other members and associates of his gang sell drugs, including at spots the Latin Kings controlled, such as the corner of Benkard Avenue and William Street in Newburgh. PAGAN also assaulted rivals of his gang, and carried guns and instructed others to carry guns to protect PAGAN and the Newburgh Latin Kings’ drug turf. In leading the gang, PAGAN recruited and inducted new members, instructed the members how to behave in order to protect and conceal the gang’s criminal activities, and issued orders to gang members to shoot and assault others. PAGAN organized and led gang meetings for this purpose. During one such meeting, according to papers filed with the court, PAGAN told more than 20 assembled gang members: “[W]e don’t even live by rules of society. . . .”

Mr. Bharara thanked the Hudson Valley Safe Streets Task Force for their work on the Latin Kings investigation. The Task Force is led by the Federal Bureau of Investigation (“FBI”), and combines the resources of dozens of law enforcement officers from federal, state, and local agencies and departments, including: agents and officers of the FBI; the U.S. Bureau of Alcohol, Tobacco, Firearms, and Explosives; the City of Newburgh Police Department; the U.S. Department of Homeland Security, Homeland Security Investigations; the Middletown Police Department; the Orange 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. Attorneys Benjamin Allee, Abigail Kurland, and Nicholas McQuaid are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today the start of the process for victims of the fraud perpetrated through Bernard L. Madoff Investment Securities LLC (“Madoff Securities”) to make claims against the $2.35 billion Madoff Victim Fund (the “MVF”). Victims may file claims under this process immediately. The MVF is funded through recoveries by the U.S. Attorney’s Office in various criminal and civil forfeiture actions, and is overseen by Richard Breeden, the former Chairman of the United States Securities and Exchange Commission, in his capacity as Special Master appointed by the Department of Justice to assist in connection with the victim remission proceedings.

The MVF also announced Department of Justice-approved eligibility criteria for granting victim claims. For the first time since Madoff Securities collapsed in December 2008, victims of the Madoff Securities fraud who invested through “feeder funds,” investment groups, and other pooled investment vehicles will be eligible to recover for their losses alongside direct investors in Madoff Securities.

Manhattan U.S. Attorney Bharara said: “This was an epic fraud and the process of compensating victims has been complex, but significant steps have been taken, and the Government is continuing its investigation to ensure that assets are recovered for the benefit of Madoff’s victims. With today’s announcement, we take a great step forward in returning the $2.35 billion collected so far to Madoff’s victims, and we hope to return even more. The process we have put in place opens the door for thousands of defrauded victims who otherwise might never have recovered anything. We have made eligibility to recover far more inclusive, and more equitable, than ever before. We will continue to work tirelessly with our partners from the FBI and the IRS to track down any and all proceeds of Madoff’s Ponzi scheme and return them to their rightful owners.”

Of the approximately $2.35 billion currently in the MVF, approximately $2.2 billion was collected as part of the historic December 2010 civil forfeiture recovery from the estate of deceased Madoff investor Jeffry Picower. The remaining funds were collected through a civil forfeiture action against investor Carl Shapiro and his family, and from civil and criminal forfeiture actions against Bernard L. Madoff, Peter B. Madoff, and their co-conspirators. In addition, there are a number of pending civil and criminal matters being pursued by the U.S. Attorney’s Office that, along with other pending matters, could lead to further collections and resultant distributions from the MVF.

Under the eligibility criteria announced today, subject to limited exceptions, anyone that lost his or her own funds that were invested in Madoff Securities at the time of its collapse, and who can document their net loss, will be eligible to recover from the MVF. That may include the more than 10,000 investors whose claims were denied in the Madoff Securities bankruptcy as “indirect” claims. Victim claims must be received by the MVF no later than February 28, 2014. Information about the MVF, including detailed eligibility criteria and instructions for filing a claim, can be found on its website at www.madoffvictimfund.com. Further questions about the eligibility criteria or filing procedures should be directed to the office of the Special Master, by phone, at (866) 624-3670, or by e-mail, at info@madoffvictimfund.com.

Mr. Bharara praised the work of the FBI and the IRS in connection with collecting the funds to be distributed, and thanked the Asset Forfeiture and Money Laundering Section of the Department of Justice for its assistance in the remission proceedings.

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.

The Madoff Securities cases are being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Matthew L. Schwartz, Randall W. Jackson, John T. Zach, Arlo Devlin-Brown, Christopher Frey, and Paul M. Monteleoni are in charge of the cases.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today the start of the process for victims of the fraud perpetrated through Bernard L. Madoff Investment Securities LLC (“Madoff Securities”) to make claims against the $2.35 billion Madoff Victim Fund (the “MVF”). Victims may file claims under this process immediately. The MVF is funded through recoveries by the U.S. Attorney’s Office in various criminal and civil forfeiture actions, and is overseen by Richard Breeden, the former Chairman of the United States Securities and Exchange Commission, in his capacity as Special Master appointed by the Department of Justice to assist in connection with the victim remission proceedings.

The MVF also announced Department of Justice-approved eligibility criteria for granting victim claims. For the first time since Madoff Securities collapsed in December 2008, victims of the Madoff Securities fraud who invested through “feeder funds,” investment groups, and other pooled investment vehicles will be eligible to recover for their losses alongside direct investors in Madoff Securities.

Manhattan U.S. Attorney Bharara said: “This was an epic fraud and the process of compensating victims has been complex, but significant steps have been taken, and the Government is continuing its investigation to ensure that assets are recovered for the benefit of Madoff’s victims. With today’s announcement, we take a great step forward in returning the $2.35 billion collected so far to Madoff’s victims, and we hope to return even more. The process we have put in place opens the door for thousands of defrauded victims who otherwise might never have recovered anything. We have made eligibility to recover far more inclusive, and more equitable, than ever before. We will continue to work tirelessly with our partners from the FBI and the IRS to track down any and all proceeds of Madoff’s Ponzi scheme and return them to their rightful owners.”

Of the approximately $2.35 billion currently in the MVF, approximately $2.2 billion was collected as part of the historic December 2010 civil forfeiture recovery from the estate of deceased Madoff investor Jeffry Picower. The remaining funds were collected through a civil forfeiture action against investor Carl Shapiro and his family, and from civil and criminal forfeiture actions against Bernard L. Madoff, Peter B. Madoff, and their co-conspirators. In addition, there are a number of pending civil and criminal matters being pursued by the U.S. Attorney’s Office that, along with other pending matters, could lead to further collections and resultant distributions from the MVF.

Under the eligibility criteria announced today, subject to limited exceptions, anyone that lost his or her own funds that were invested in Madoff Securities at the time of its collapse, and who can document their net loss, will be eligible to recover from the MVF. That may include the more than 10,000 investors whose claims were denied in the Madoff Securities bankruptcy as “indirect” claims. Victim claims must be received by the MVF no later than February 28, 2014. Information about the MVF, including detailed eligibility criteria and instructions for filing a claim, can be found on its website at www.madoffvictimfund.com. Further questions about the eligibility criteria or filing procedures should be directed to the office of the Special Master, by phone, at (866) 624-3670, or by e-mail, at info@madoffvictimfund.com.

Mr. Bharara praised the work of the FBI and the IRS in connection with collecting the funds to be distributed, and thanked the Asset Forfeiture and Money Laundering Section of the Department of Justice for its assistance in the remission proceedings.

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.

The Madoff Securities cases are being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Matthew L. Schwartz, Randall W. Jackson, John T. Zach, Arlo Devlin-Brown, Christopher Frey, and Paul M. Monteleoni are in charge of the cases.

Preet Bharara, the United States Attorney for the Southern District of New York, and Mythili Raman, the Acting Assistant Attorney General for the Criminal Division of the United States Department of Justice (“DOJ”), announced today that MARIA DE LOS ANGELES GONZALEZ DE HERNANDEZ (“GONZALEZ”) pled guilty in Manhattan federal court to charges relating to a scheme in which GONZALEZ, formerly a foreign official at Banco de Desarrollo Económico y Social de Venezuela (“BANDES”), a state economic development bank in Venezuela, accepted bribes from officers and agents of a New York-based broker-dealer (the “Broker-Dealer”) in exchange for GONZALEZ directing BANDES’s security-trading business to the Broker-Dealer. GONZALEZ pled guilty today before U.S. District Judge Paul A. Engelmayer to conspiring to violate the Travel Act and to commit money laundering, as well as substantive counts of these offenses.

According to the Information against GONZALEZ, the allegations in a previously filed criminal Complaint, statements made during the plea proceedings, and other documents filed in Manhattan federal court:

At all times relevant to the charges, BANDES was a state-run economic development bank in Venezuela. 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 the bank a mark-up on purchases and a mark-down on sales.

From early 2009 through 2012, GONZALEZ participated in a bribery scheme in which she directed trading business she controlled at BANDES to the Broker-Dealer, and in return, agents and employees of the Broker-Dealer shared 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 devised a split with GONZALEZ of the commissions paid by BANDES to the Broker-Dealer. Emails, account records, and other documents collected from the Broker-Dealer and other sources reveal that GONZALEZ received a substantial share of the revenue generated by the Broker-Dealer for BANDES-related trades. Specifically, GONZALEZ received millions in bribe payments from Broker-Dealer agents and employees.

In addition, GONZALEZ paid a portion of the bribe payments she received to another BANDES employee who was also involved in the scheme.

To further conceal the scheme, the kickbacks to GONZALEZ were often paid using intermediary corporations and offshore accounts that GONZALEZ and others held in Switzerland, among other places.

GONZALEZ, 55, of Caracas, Venezuela, pled guilty to five offenses. A chart containing the charges and maximum penalties is attached. Sentencing for GONZALEZ is scheduled for August 15, 2014 before Judge Engelmayer.

Previously, three former officers or employees of the Broker-Dealer, Ernesto Lujan, Jose Alejandro Hurtado, and Tomas Alberto Clarke Bethancourt, each pled guilty in Manhattan federal court to conspiring to violate the Foreign Corrupt Practices Act (the “FCPA”), to violate the Travel Act, and to commit money laundering, as well as substantive counts of these offenses relating, among other things, to the scheme involving bribe payments to GONZALEZ. Sentencing for Lujan and Clarke is scheduled for February 11, 2014, before U.S. District Judge Paul G. Gardephe. Hurtado is scheduled for sentencing before U.S. District Judge Harold Baer, Jr., on October 30, 2014.

Mr. Bharara praised DOJ’s Criminal Division Fraud Section and Office of International Affairs, and the Federal Bureau of Investigation, for their work in the investigation. Mr. Bharara also thanked the U.S. Securities and Exchange Commission for its assistance in this case, and noted that the investigation is continuing.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force and the Fraud Section of the DOJ Criminal Division. Assistant United States Attorneys Harry A. Chernoff and Jason H. Cowley, and Fraud Section Assistant 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.

Click here to view chart(s)

US v Maria Gonzalez 13 Cr 901 (PAE) Criminal Information

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ANATOLY GOLUBCHIK pled guilty today in Manhattan federal court to participating in a racketeering conspiracy in connection with his role as a member of a Russian-American organized crime enterprise. ILLYA TRINCHER also pled guilty today in Manhattan federal court in connection with his leadership role in the operation of a high-stakes illegal sports gambling business. GOLUBCHIK and TRINCHER 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. They pled guilty before U.S. District Judge Jesse M. Furman.

Manhattan U.S. Attorney Preet Bharara said: “With Anatoly Golubchik and Illya Trincher’s guilty pleas today, 18 of the 34 defendants charged in this case now stand convicted. We remain committed to making sure that everyone charged in connection with this alleged Russian-American organized crime ring is 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 guilty plea:

The Taiwanchik-Trincher Organization is a nationwide criminal enterprise with strong ties to Russia and Ukraine. The leadership of the organization ran an international sportsbook that catered primarily to Russian oligarchs living in Russia and Ukraine and throughout the world. The Taiwanchik-Trincher Organization laundered tens of millions of dollars in proceeds from the gambling operation from Russia and the Ukraine through shell companies and bank accounts in Cyprus, and from Cyprus into the United States. Once the money arrived in the United States, it was either laundered through additional shell companies or invested in seemingly legitimate investments, such as hedge funds or real estate. GOLUBCHIK was a U.S.-based participant in the enterprise. As part of his plea, GOLUBCHIK acknowledged that in furtherance of the Taiwanchik-Trincher Organization, GOLUBCHIK laundered the proceeds of their international sportsbook and assisted in the operation of the illegal gambling business.

TRINCHER and co-defendant Hillel Nahmad ran a high-stakes illegal gambling business that catered primarily to millionaire and billionaire clients. Their business utilized several online gambling websites that operated illegally in the United States to generate tens of millions of dollars of sports bets each year. The gambling operation was financed through a host of American and international bank accounts, including accounts associated with Nahmad , defendants John Hanson and Noah Siegel, a/k/a “The Oracle,” and a plumbing company in the Bronx that was acquired in repayment of a $2 million gambling debt. As part of his guilty plea, TRINCHER acknowledged that he was a leader and organizer of the illegal sports gambling business, he supervised the illegal gambling business, and he conducted numerous financial transactions on behalf of the illegal gambling business.

GOLUBCHIK, 57, of Fort Lee, New Jersey, faces a maximum of 20 years in prison and three years of supervised release. As part of his plea agreement, GOLUBCHIK agreed to forfeit cash and property worth over $20,000,000.00. He is scheduled to be sentenced by Judge Furman on March 25, 2014, at 3:00 p.m.

TRINCHER, 28, of Los Angeles, California, faces a maximum of five years in prison and three years of supervised release. As part of his plea agreement, TRINCHER agreed to forfeit cash and property worth over $6,000,000.00 and a black 2012 Porsche Cayenne. He is scheduled to be sentenced by Judge Furman on March 25, 2014, at 3:45 p.m.

GOLUBCHIK is the 17th defendant in this case to plead guilty. TRINCHER is the 18th defendant in this case to plead guilty. The defendants who have pled to date have agreed to forfeit, in total, more than $66,000,000.00. The following defendants previously pled guilty and await sentencing:

• Bryan Zuriff pled guilty to gambling charges on July 26, 2013;
• William Barbalat pled guilty to gambling charges on August 14, 2013;
• Kirill Rapoport pled guilty to gambling charges on August 16, 2013;
• Edwin Ting and Justin Smith pled guilty to gambling charges on September 4, 2013;
• Dmitry Druzhinsky and David Aaron pled guilty to gambling charges on October 4, 2013;
• Alexander Zaverukha pled guilty to gambling charges on October 10, 2013;
• Nicholas Hirsch pled guilty to conspiring to commit wire fraud on October 16, 2013;
• Anatoly Shteyngrab pled guilty to conspiring to commit money laundering on October 17, 2013;
• Yugeshwar Rajkumar pled guilty to gambling charges on October 18, 2013;
• Stan Greenberg pled guilty to conspiring to commit racketeering on October 22, 2013;
• Arthur Azen pled guilty to conspiring to commit money laundering and conspiring to collect extensions of credit by extortionate means on November 5, 2013;
• Hillel Nahmad pled guilty to gambling charges on November 12, 2013;
• Vadim Trincher pled guilty to conspiring to commit racketeering on November 14, 2013; and
• Eugene Trincher pled guilty to gambling charges on November 14, 2013.

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 Organized Crime Unit. Assistant U.S. Attorneys Harris M. Fischman, Joshua A. Naftalis, Peter Skinner, and Kristy J. Greenberg of the Organized Crime Unit are in charge of the prosecution. Assistant U.S. Attorneys Alexander Wilson and Christine Magdo of the Office’s Asset Forfeiture Unit are responsible for the forfeiture aspects of the case.

U.S. v. Alimzhan Tokhtakhounov, et al. Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that PETER LECONTE pled guilty in Manhattan federal court to participating in a conspiracy to commit extortion 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. LECONTE, who was among 32 defendants charged in the case in January 2013, pled guilty today before U.S. District Judge P. Kevin Castel.

Manhattan U.S. Attorney Preet Bharara said: “Today, Peter Leconte became the fourteenth defendant to be convicted in this scheme to control parts of the waste disposal industry that reached across the New York City metropolitan area and into New Jersey. We remain committed to ensuring that all those connected to this conspiracy are held to account.”

According to the Indictment against LECONTE, other documents filed in Manhattan federal court, and statements made at related court proceedings:

LECONTE who is a made member of the Genovese Crime Family, participated 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. As part of his involvement in the scheme, LECONTE demanded that a waste disposal company owner turn over a percentage of his company to LECONTE and his associates by threatening that the waste hauling company would be economically harmed if the owner did not comply with LECONTE’s demands.

LECONTE, 43, of Lodi, New Jersey, pled guilty to one count of participating in a conspiracy to commit extortion, and he faces a maximum sentence of 20 years in prison. LECONTE is scheduled to be sentenced by Judge Castel on April 4, 2014, at 11:00 a.m.

Eight other defendants have also recently pled guilty before Judge Castel in connection with this case:

• JONATHAN GREENE, 48, of Teaneck, New Jersey, pled guilty on September 19, 2013, to participation in a conspiracy to transport stolen waste hauling containers across state lines. He faces a maximum sentence of five years in prison and is scheduled to be sentenced on March 7, 2014, at 2:00 p.m.
• JOSEPH BERTOLINO, 47, of Wantage, New Jersey, pled guilty on September 26, 2013, to participation in a conspiracy to transport stolen waste hauling containers across state lines. He faces a maximum sentence of five years in prison and is scheduled to be sentenced on March 28, 2014, at 2:30 p.m.
• ROBERT ZARZUELA, 39, of North Bergen, New Jersey, pled guilty on September 26, 2013, to participation in a conspiracy to transport stolen waste hauling containers across state lines. He faces a maximum sentence of five years in prison and is scheduled to be sentenced on March 28, 2014, at 11:30 a.m.
• WILLIAM RIVERA, 48, of Queens Village, New York, pled guilty on October 18, 2013, to misprision of extortion. He faces a maximum sentence of three years in prison and is scheduled to be sentenced on March 14, 2014, at 11:00 a.m.
• BRIAN PETROLL, 47, of Columbia, New Jersey, pled guilty on October 21, 2013, to participation in a conspiracy to transport stolen waste hauling containers across state lines. He faces a maximum sentence of five years in prison and is scheduled to be sentenced on March 20, 2014, at 11:00 a.m.
• ROBERT FRANCO, 51, of Hartsdale, New York, pled guilty on October 21, 2013, to one count of participating in a conspiracy to transport stolen waste hauling containers across state lines and one count of participating in a conspiracy to transport stolen cardboard across state lines. He faces a maximum sentence of five years in prison on each count and is scheduled to be sentenced on March 21, 2014, at 12:00 p.m.
• STEPHEN MOSCATELLO, 53, of Piermont, New York, pled guilty on November 4, 2013, to participation in a conspiracy to transport stolen waste hauling containers across state lines. He faces a maximum sentence of five years in prison and is scheduled to be sentenced on April 11, 2014, at 2:00 p.m.
• HOWARD ROSS, 54, of Brooklyn, New York, pled guilty on November 5, 2013, to participation in a conspiracy to commit extortion. He faces a maximum sentence of 20 years in prison and is scheduled to be sentenced on March 26, 2014, at 11:00 a.m.

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

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation and the Westchester County Police Department.

The prosecution of this case is being handled by the Office’s Organized Crime Unit.

Assistant United States Attorneys Brian R. Blais, Natalie Lamarque, and Patrick Egan are in charge of the prosecution. Assistant United States Attorney Micah Smith of the Office’s Asset Forfeiture Unit is responsible for the forfeiture aspects of the case.

U.S. v. Carmine Franco et al. Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ROYCE CORLEY, of New York, New York, was found guilty today in Manhattan federal court of sex trafficking of minors and possessing child pornography. CORLEY was convicted after a four-day jury trial before U.S. District Judge Robert P. Patterson.

U.S. Attorney Preet Bharara stated: “Sexually exploiting underage runaways by selling them for prostitution is a heinous and unfortunately all too common crime. Today’s guilty verdict against Royce Corley is a victory for the vulnerable girls he exploited, and for the larger fight to put an end to the sex trafficking of children.”

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

Between at least June 2011 and January 2012, using the alias “Ron Iron,” the defendant ran a prostitution ring in Manhattan that sold underage girls for sex. CORLEY’s victims included at least three 16-year-old runaway girls who had no place to stay when they met CORLEY (the “Minor Victims”). He prostituted each of his Minor Victims using the same methods. CORLEY photographed them in sexually-explicit poses, created advertisements for prostitution on Backpage.com, provided the Minor Victims with cell phones to communicate with potential clients, and furnished them with apartments all over Manhattan in which they were to meet clients for paid sex. CORLEY posted the advertisements to Backpage.com from his home and work computers.

For six months in the fall of 2011, CORLEY made thousands of dollars a week from trafficking his Minor Victims for sex on Backpage.com, all while CORLEY knew that they were each 16 years old.

On January 25, 2011, CORLEY was arrested by members of the New York City Police Department following an undercover sting which rescued one of the Minor Victims. At the time of his arrest, CORLEY had in his pocket a thumb drive, which contained child pornography of one of his Minor Victims.

CORLEY, 29, of Manhattan, New York, was found guilty of three counts of sex trafficking of minors and one count of possessing child pornography. He faces a mandatory minimum term of 10 years in prison, and a maximum term of life in prison. CORLEY is scheduled to be sentenced by Judge Patterson on February 20, 2014.

Mr. Bharara praised the efforts of the Federal Bureau of Investigation, the New York City Police Department, and the New York County District Attorney’s Office for their work in this case.

This case is being handled by the Office’s Organized Crime Unit. Assistant U.S. Attorneys Tatiana R. Martins and Amanda Kramer are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that JEREMY HAMMOND, a/k/a “Anarchaos,” was sentenced in Manhattan federal court to 10 years in prison in connection with his role in, among other hacks, the December 2011 hack of Strategic Forecasting, Inc. (“Stratfor”), a global intelligence firm in Austin, Texas, that affected hundreds of thousands of victims, including employees and subscribers. HAMMOND was also sentenced in connection with his involvement in multiple additional hacks, including computer intrusions into the Federal Bureau of Investigation’s Virtual Academy, the Arizona Department of Public Safety, the Boston Police Patrolmen’s Association, and the Jefferson County, Alabama, Sheriff’s Office. HAMMOND pled guilty in May 2013, and was sentenced today by Chief U.S. District Judge Loretta A. Preska.

Manhattan U.S. Attorney Preet Bharara stated: “As he admitted through his plea of guilty, Jeremy Hammond launched a series of computer hacks that stole confidential information pertaining to companies, law enforcement agencies, and thousands of innocent individuals. His sentence underscores that computer hacking is a serious offense with damaging consequences for victims, and this Office is committed to punishing the perpetrators of such crimes.”

According to the Complaint, the Superseding Indictment, the Superseding Information, and statements made in other public filings and in court:

In December 2011, HAMMOND and other members of “AntiSec” – an off-shoot of “Anonymous,” a loose confederation of computer hackers and others – hacked into computer systems used by Stratfor. HAMMOND and his co-conspirators stole confidential information from those computer systems, including Stratfor employees’ emails as well as account information for approximately 860,000 Stratfor subscribers or clients. HAMMOND and his co-conspirators also stole credit card information for approximately 60,000 credit card users and used some of the stolen data to make more than $700,000 in unauthorized charges.

In addition, at his guilty plea, HAMMOND admitted his involvement in multiple additional hacks, including: the June 2011 hack of computer systems used by the Federal Bureau of Investigation’s Virtual Academy; the June 2011 hack of computer systems used by the Arizona Department of Public Safety, a state law enforcement agency in Arizona; the July 2011 hack of computer systems owned by Brooks-Jeffrey Marketing, Inc., a company based in Mountain Home, Arkansas, and various law enforcement-related websites; the August 2011 hack of computer systems used by Special Forces Gear, a company based in California; the August 2011 hack of computer systems used by Vanguard Defense Industries, a company based in Texas; the October 2011 hack of computer systems used by the Jefferson County, Alabama Sheriff’s Office; the October 2011 hack of computer systems used by the Boston Police Patrolmen’s Association; and the February 2012 hack of computer systems used by the Combined Systems, Inc., a company based in Pennsylvania.

HAMMOND and his co-conspirators publicly disclosed some of the confidential information they had stolen from these various hacks, including personal information such as the home addresses of hundreds of current and retired law enforcement officers and financial information such as the credit card data of thousands of individuals.

HAMMOND, 28, of Chicago, Illinois, was sentenced in connection with his guilty plea to one count of conspiracy to engage in computer hacking. Restitution will be determined at a later date.

The Office’s Complex Frauds Unit is handling the case.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ABDUL WALJI and RENIERO FRANCISCO, the Chief Executive Officer and President, respectively, of Arista LLC (“Arista”), a California investment fund, were sentenced today in Manhattan federal court to 151 months and 97 months, respectively, in connection with a multimillion-dollar fraud scheme. WALJI and FRANCISCO defrauded 40 investors of approximately $10 million through a series of misrepresentations concerning the nature and performance of the investment fund, and issued fraudulent account statements to investors to cover up massive losses. WALJI also perpetrated a separate multimillion-dollar scheme involving pension plan funds that he managed through three California-based trusts: Allied Benefits, Inc., Allied Benefits Trust, and Stone Lamm Trust (collectively, the “Trusts”). Both defendants were charged in December 2012, and pled guilty on July 2, 2013 before U.S. District Judge Denise Cote, who also imposed today’s sentences.

Manhattan U.S. Attorney Preet Bharara said: “Abdul Walji and Reniero Francisco defrauded dozens of investors who put trust – and millions of dollars – in their hands. The crimes they committed have earned them more than two decades of collective prison time.”

According to the three-count Superseding Information to which WALJI pled guilty, the Indictment to which FRANCISCO pled guilty, the defendants’ plea agreements, other documents in the public record, and statements made during their guilty pleas:

The Arista Fraud Scheme

Arista began operations as an investment firm in February 2010, with its principal place of business in Newport Coast, California. In April 2011, Arista became a registered commodity pool operator with the United States Commodity Futures Trading Commission (“CFTC”), and a member of the National Futures Association.

In early 2010, WALJI and FRANCISCO began to solicit individuals to invest in Arista. From 2010 through 2011, the defendants carried out a fraudulent scheme through three main methods. First, WALJI and FRANCISCO misrepresented to several Arista investors the nature of the company’s investments and the returns that investors would receive from investing in Arista. For example, WALJI and FRANCISCO falsely told investors that their money would be invested in safe, risk-free securities, when in fact much of the money was invested in options and futures. Second, WALJI and FRANCISCO sent fraudulent account performance statements to Arista investors that misrepresented the value of their investments. In an effort to secure additional contributions, the defendants also concealed Arista’s trading losses, and told investors that they were profiting from their investments when they were actually losing money. Finally, WALJI and FRANCISCO misappropriated at least $2.7 million from Arista’s investors through fees to which they were not entitled, and which WALJI and FRANCISCO diverted for their own personal benefit. Based on their false representations, WALJI and FRANCISCO collected $10 million from 40 investors, and they ultimately misappropriated a large portion of the money.

Walji’s Pension Plan Fraudulent Scheme

From early 2008 through June 2013, WALJI also perpetrated a separate fraudulent scheme using pension plan funds that he administered. Similar to the scheme set forth above, WALJI executed his fraudulent scheme through three principal methods. First, WALJI made oral misrepresentations to existing and potential clients of the Trusts concerning: (i) the nature of the Trusts’ pension plan investments; (ii) the investment value and past performance of the pension plans; and (iii) the source of funds distributed to plan participants who had reached retirement and/or who had requested distributions. Second, WALJI distributed fraudulent statements to clients concerning the value of their accounts and the prior performance of their pension plans in order to forestall redemption requests, to induce new clients to contribute to the plans, and to induce existing clients to make additional contributions. As selected clients reached retirement age or requested disbursements, WALJI sent those clients money that he represented to be proceeds of their individual pensions, when in fact he knew that the purported disbursements were often funds contributed by other clients. Third, WALJI misappropriated approximately $300,000 of client funds for his personal use. In total, this scheme caused losses to approximately 40 additional victims in an aggregate amount of approximately $11.3 million.

In addition to their prison terms, Judge Cote sentenced WALJI to three years of supervised release, and FRANCISCO to three years of supervised release. WALJI was also ordered to forfeit $13.6 million and to pay over $21 million in restitution. FRANCISCO was ordered to forfeit $4.1 million. The defendants also agreed to forfeit the proceeds of several bank and trading accounts.

WALJI, 60, of San Juan Capistrano, California, pled guilty in July 2013 to one count of conspiracy to commit securities fraud and wire fraud, one count of commodities fraud, and one count of securities fraud. FRANCISCO, 57, of Newport Coast, California, pled guilty in July 2013 to one count of conspiracy to commit securities fraud and wire fraud and one count of securities fraud.

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

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 U.S. Attorneys David I. Miller and Christopher D. Frey are in charge of the prosecution. Assistant U.S. Attorney Paul Monteleoni is in charge of the forfeiture-related aspects of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, today announced that BENJAMIN CHOUCHANE, a former sales broker, was sentenced in Manhattan federal court to two years in prison on charges of conspiracy to commit securities fraud and wire fraud. CHOUCHANE – along with Marek Leszczynski and Henry Condron – defrauded clients out of millions of dollars by misrepresenting the prices at which securities were bought and sold. In doing so, the brokerage firm for which they worked earned illegitimate and illegal trading profits, and CHOUCHANE, Leszczynski, and Condron were awarded lucrative bonuses. CHOUCHANE pled guilty to conspiracy to commit securities fraud and wire fraud in June 2013, and was sentenced today by U.S. District Judge John F. Keenan.

Manhattan U.S. Attorney Preet Bharara said: “Benjamin Chouchane misrepresented the price of trade executions in order to make illegal profits for his firm and to increase his own bonus. With his sentence today, he joins the ranks of disgraced professionals to be punished for abusing the trust of clients.”

According to the Complaint, Indictment, statements made during CHOUCHANE’s guilty plea, and other court documents:

From 2005 through November 2010, CHOUCHANE, Leszczynski, and Condron worked at a broker-dealer that was headquartered in London, England, with offices in major cities in Europe, Asia, and the United States (“Broker-Dealer 1”). Among other services offered, Broker-Dealer 1 bought and sold securities on behalf of institutional clients, such as commercial banks and investment firms located throughout the United States and in various European cities.

Leszczynski and CHOUCHANE worked as sales brokers for Broker-Dealer 1’s Cash Equity Desk in New York, New York. In that capacity, they were responsible for receiving orders to buy or sell securities from Broker-Dealer 1’s clients, relaying those orders to traders who executed the trades, communicating with clients as their orders were being filled, and sending trading confirmations to the clients that showed the prices at which securities were bought or sold – including any commissions that Broker-Dealer 1 charged. Condron worked as an execution trader and a middle office manager. In that capacity, Condron was responsible for executing buy and sell orders at the instructions of sales brokers, such as Leszczynski and CHOUCHANE, and inputting trading data into Broker-Dealer 1’s bookkeeping system.

From 2005 until December 2008, CHOUCHANE, Leszczynski, and Condron misrepresented the execution prices at which securities were bought and sold. For example, when Broker-Dealer 1 received a buy order from a client, the defendants and their co-conspirators caused the purchase price of the security that would be reported back to the client to be “marked up” from its actual purchase price. Conversely, when Broker-Dealer 1 received a sell order from a client, the defendants and their co-conspirators caused the sale price of the security that would be reported back to the client to be “marked down” from its actual sale price. The difference between the actual execution prices and the false prices reported to clients was hidden from Broker-Dealer 1’s clients, enabling Broker-Dealer 1 to earn millions in trading profits to which it was not entitled. As a result of the fraudulent scheme, CHOUCHANE, Leszczynski, and Condron were paid inflated bonuses.

In addition to the prison term, Judge Keenan sentenced CHOUCHANE, 39, of New York, New York, to two years of supervised release. CHOUCHANE was also ordered to forfeit $5 million, to pay a $100 special assessment fee, and to make restitution in an amount to be fixed at a later date.

Leszczynski, 44, of Miami, Florida, who previously pled guilty to one count of conspiracy to commit securities fraud and wire fraud, is scheduled to be sentenced on December 19, 2013, by Judge Keenan. Condron, 34, of New York, New York, who previously pled guilty to one count of securities fraud and two counts of conspiracy to commit securities fraud, is scheduled to be sentenced on January 16, 2014, by U.S. District Judge Naomi Reice Buchwald.

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

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which U.S. Attorney 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 is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed 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.

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that JOSEPH LOMBARDO, the founder and managing director of Prim Capital Corporation (“Prim”), pled guilty in Manhattan federal court to mail fraud and conspiracy to obstruct a grand jury investigation in connection with an attempt to defraud the National Basketball Players Association (“NBPA”) through the use of a fraudulent retention contract. LOMBARDO, who was arrested in April 2013, along with Carolyn Kaufman, a principal at Prim, pled guilty today before U.S. District Judge Jesse M. Furman.

Manhattan U.S. Attorney Preet Bharara said: “Joseph Lombardo engaged in an elaborate fraud involving the creation of a fake contract with the professional basketball players who had entrusted him to manage their union’s assets. He then lied to a federal grand jury about his illegal actions and told others to do the same. His guilty plea today shows that such fraud and obstruction will not go unpunished.”

According to the Complaint, Indictment, previously filed documents, and today’s plea proceeding:

Prim was founded by LOMBARDO. From 2001 until 2013, Prim was the primary outside investment advisory firm entrusted with the NBPA’s investments and finances. In that capacity, Prim performed various services for the NBPA, including assisting with the management of up to $250 million of the NBPA’s assets, reviewing the investments of individual NBA players, and conducting financial seminars for NBA players.

In May of 2012, as part of a U.S. Department of Labor (“DOL”) investigation, Prim was served with a grand jury subpoena requesting, among other things, copies of all agreements between Prim and the NBPA. In response, Prim produced a copy of a 2005 contract between the NBPA and Prim, under which Prim’s fee was $350,000 per year. The 2005 contract was signed by the Executive Director of the NBPA, the Treasurer of the NBPA, and LOMBARDO, and was renewable annually upon agreement of the parties. That was the only contract that Prim produced at the time.

Several months later, in January of 2013, after Prim learned that a law firm’s review of the NBPA was going to be made public in the near future, Prim then produced to the DOL a previously undisclosed contract with the NBPA (the “Purported 2011 Contract”). Prim’s fee under this contract was $602,000 per year for a five-year term, for a total of $3,010,000. The Purported 2011 Contract also contained a provision indicating that it could not be cancelled for any reason by the NBPA. The Purported 2011 Contract was purportedly signed in March 2011 by LOMBARDO, Gary Hall, the former NBPA General Counsel, and one other NBPA employee.

An investigation revealed that the signature of Hall was not authentic, and that the Purported 2011 Contract was actually created at Prim months after the death of Gary Hall. The investigation also revealed that LOMBARDO arranged for the creation of a signature stamp capable of stamping the signature “Gary A. Hall,” and used the stamp to falsify Hall’s signature months after his death.

In addition, the investigation revealed that LOMBARDO and Kaufman had agreed and attempted to obstruct a grand jury investigation. During the course of the investigation, both LOMBARDO and Kaufman appeared before the grand jury and provided false and misleading testimony. Kaufman testified, among other things, that she had not spoken with anyone regarding her testimony prior to testifying. However, in a recorded conversation prior to appearing before the grand jury, LOMBARDO gave her specific instructions on how to answer questions before the grand jury, and said that his “life is in [her] hands.” In another recorded conversation, LOMBARDO instructed another individual that, if he provided certain false information to the grand jury about the creation of the contract,“[w]e’re home free.” In a third recorded conversation, LOMBARDO instructed another individual to provide false information and said, “It’s important that we didn’t doctor this document up, okay?”

LOMBARDO, 72, of Gates Mills, Ohio, pled guilty to one count of mail fraud and one count of conspiracy to obstruct justice. He faces a maximum sentence of 20 years in prison on the mail fraud count, a maximum sentence of five years in prison on the conspiracy to obstruct justice count, and a maximum fine of $250,000, or twice the gross gain or gross loss from the offense, on each count. LOMBARDO is scheduled to be sentenced by Judge Furman on March 20, 2014.

Kaufman has been charged in a superseding indictment with one count of conspiracy to obstruct justice, one count of obstruction of justice, and one count of perjury for her alleged role in the agreement to obstruct, and obstruction of, the grand jury investigation. She is scheduled to stand trial beginning on December 2, 2013, before Judge Furman.

Mr. Bharara praised the outstanding investigative work of the U.S. Department of Labor’s Office of Inspector General, Office of Labor Racketeering and Fraud Investigations, and the U.S. Department of Labor’s Office of Labor-Management Standards. Mr. Bharara added that the investigation is continuing.

This case is being handled by the Public Corruption Unit of the U.S. Attorney’s Office. Assistant United States Attorneys Daniel C. Richenthal and Paul M. Krieger are in charge of the prosecution.

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

Lombardo, Joseph and Carolyn Kaufman Indictment 13 Cr 411.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that VADIM TRINCHER pled guilty today in Manhattan federal court to participating in a racketeering conspiracy in connection with his role as a member of a Russian-American organized crime enterprise. VADIM TRINCHER’s son, EUGENE TRINCHER, also pled guilty today to operating an illegal gambling business. VADIM TRINCHER and EUGENE TRINCHER 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. They pled guilty before U.S. District Judge Jesse M. Furman.

Manhattan U.S. Attorney Preet Bharara said: “Vadim Trincher played a critical role in the Taiwanchik-Trincher Organization – by helping both to launder tens of millions of dollars in proceeds from the organization's sportsbook and to run the illegal gambling business. His son Eugene ran a high stakes illegal card game in New York City for more than two years. We will not stop until, like Vadim and Eugene Trincher, everyone involved in this international crime ring is held to account.”

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

The Taiwanchik-Trincher Organization is a nationwide criminal enterprise with strong ties to Russia and Ukraine. The leadership of the organization ran an international sportsbook that catered primarily to Russian oligarchs living in Russia and Ukraine and throughout the world. The Taiwanchik-Trincher Organization laundered tens of millions of dollars in proceeds from the gambling operation from Russia and the Ukraine through shell companies and bank accounts in Cyprus, and from Cyprus into the United States. Once the money arrived in the United States, it was either laundered through additional shell companies or invested in seemingly legitimate investments, such as hedge funds or real estate. VADIM TRINCHER was a U.S.-based participant in the enterprise. As part of his plea, VADIM TRINCHER acknowledged that he, in furtherance of the Taiwanchik-Trincher Organization, laundered the proceeds of the organization’s international sportsbook and assisted in the operation of the illegal gambling business.

EUGENE TRINCHER ran a high stakes illegal poker game in New York City from 2010 through April 2013. At these games, the pots frequently reached tens of thousands of dollars or more. The operators of these poker games, including EUGENE TRINCHER, collected percentages of the pots known as Arakes.@ Each of the poker games employed at least five or more people to assist with the operation of the poker games, payments of debts, and collection of debts.

VADIM TRINCHER, 52, of New York, New York, faces a maximum of 20 years in prison and three years of supervised release. As part of his plea agreement, VADIM TRINCHER agreed to forfeit cash and property worth over $20 million. He is scheduled to be sentenced by Judge Furman on March 20, 2014, at 3:45 p.m.

EUGENE TRINCHER, 27, of Beverly Hills, California, faces a maximum of five years in prison and three years of supervised release. As part of his plea agreement, EUGENE TRINCHER agreed to forfeit the proceeds of his illegal gambling business. He is scheduled to be sentenced by Judge Furman on March 24, 2014, at 3:00 p.m.

VADIM TRINCHER is the 15th defendant in this case to plead guilty. EUGENE TRINCHER is the 16th defendant in this case to plead guilty. The following defendants previously pled guilty and await sentencing:

• Bryan Zuriff pled guilty to gambling charges on July 26, 2013;
• William Barbalat pled guilty to gambling charges on August 14, 2013;
• Kirill Rapoport pled guilty to gambling charges on August 16, 2013;
• Edwin Ting and Justin Smith pled guilty to gambling charges on September 4, 2013;
• Dmitry Druzhinsky and David Aaron pled guilty to gambling charges on October 4, 2013;
• Alexander Zaverukha pled guilty to gambling charges on October 10, 2013;
• Nicholas Hirsch pled guilty to conspiring to commit wire fraud on October 16, 2013;
• Anatoly Shteyngrab pled guilty to conspiring to commit money laundering on October 17, 2013;
• Yugeshwar Rajkumar pled guilty to gambling charges on October 18, 2013;
• Stan Greenberg pled guilty to conspiring to commit racketeering on October 22, 2013;
• 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
• Hillel Nahmad pled guilty to gambling charges on November 12, 2013.

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

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

U.S. v. Alimzhan Tokhtakhounov, et al. Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that MELVIN DUARTE was sentenced today in Manhattan federal court to 10 years in prison for his role in a scheme to fraudulently generate and then steal more than $50 million in federal tax refund checks. DUARTE was originally arrested in 2008 and subsequently fled the U.S. He was extradited from the Dominican Republic and arrived in the U.S. in January 2013. DUARTE pled guilty in June 2013 to one count of conspiracy to defraud the United States, one count of conspiracy to steal mail, and one count of mail theft, and he was sentenced today by U.S. Circuit Court Judge Denny Chin, sitting by designation.

Manhattan U.S. Attorney Preet Bharara said: “Melvin Duarte stole Puerto Rican identities and used those identities fraudulently to obtain more than $50 million in federal tax refund checks to which he was not entitled. In doing so, he contributed to the millions of dollars in losses to the IRS resulting from this case. Duarte’s integral role in one of the largest known tax refund fraud schemes has now earned him a prolonged stay in prison.”

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

DUARTE was charged as part of an investigation into a massive tax and mail theft scheme. As part of the scheme, co-conspirators operating out of the Dominican Republic and other places electronically filed thousands of fraudulent federal tax returns, seeking tens of millions of dollars in tax refunds. The fraudulent returns were filed using Social Security numbers and other identifying information stolen from residents of Puerto Rico. Participants in the scheme targeted Social Security numbers assigned to residents of Puerto Rico because they are generally not required to file federal tax returns with the Internal Revenue Service (“IRS”), as long as their income is derived solely from Puerto Rican sources. In so doing, the co-conspirators minimized the risk that legitimate federal tax returns were already filed by the holders of the Social Security numbers that they were using in the scheme.

Each of the tax returns at issue falsely represented that the taxpayer resided at an address in the Bronx, New York, where the refund check requested in the return was to be sent. The checks were then stolen by letter carriers assigned to the mail routes where the checks were sent who had been recruited beforehand to participate in the scheme. The letter carriers participating in the scheme were paid a kickback for each check they stole. The letter carriers passed the checks on to other co-conspirators, who cashed them at various banks and check-cashing businesses located in the U.S. and the Dominican Republic.

Over the course of the scheme, thousands of false and fraudulent federal tax returns were filed seeking more than $50 million of fraudulent tax refunds from the IRS.

DUARTE was previously convicted in 2002 for conspiracy to steal federal funds, based on substantially similar conduct, and was sentenced to three years of probation.

In addition to the prison term, Judge Chin ordered DUARTE, 38, to pay forfeiture of $15 million and to serve a term of three years of supervised release to follow his prison sentence.

Mr. Bharara praised the work of the Internal Revenue Service, Criminal Investigation, the Federal Bureau of Investigation, the United States Postal Inspection Service, and the United States Postal Service Office of Inspector General, and thanked them for their work in this case. He also thanked the Dominican National Police for their significant assistance in the investigation.

This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Serrin Turner is in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today the filing and settlement of a lawsuit against the owners and operators of the two Manhattan locations of the popular Carmine’s restaurant chain for violations of the Americans With Disabilities Act of 1990 (“ADA”). The defendant owners and operators of the Carmine’s Restaurants and owners of the buildings in which the Carmine’s Restaurants are located are GREYSTONE OWNER LLC, CARMINE’S BROADWAY FEAST INC., PARAMOUNT LEASEHOLD L.P., LITTLE FISH CORP., and THE ALICART RESTAURANT GROUP. The settlement, in the form of a consent decree, was docketed today, November 12, 2013 and approved Friday November 8, 2013 by U.S. District Judge Kimba M. Wood.

The lawsuit was brought as part of the Manhattan Restaurants ADA Compliance Initiative, announced in September 2011. As part of the initiative, the U.S. Attorney’s Office is reviewing and evaluating the ADA compliance of the “most popular” restaurants in Manhattan as designated by the 2011 Zagat Guide. Pursuant to the initiative, the U.S. Attorney’s Office resolved its lawsuit against three ROSA MEXICANO locations by Consent Decree entered on January 30, 2013.

Manhattan U.S. Attorney Preet Bharara said: “As this suit and settlement demonstrate, we remain committed to ensuring that the owners and operators of New York City’s restaurants and cultural venues comply with the ADA.”

According to the Complaint and Consent Decree filed in Manhattan federal court:

The U.S. Attorney’s Office identified numerous violations of the ADA at each of Carmine’s Manhattan locations: 2450 Broadway (“Carmine’s Upper West Side”) and 200 West 44th Street (“Carmine’s Theater District”). Most significantly, Carmine’s Upper West Side lacks an accessible main entrance, its “alternate entrance” is also non-compliant in several respects, and it lacks an accessible restroom. The accessible restrooms in Carmine’s Theater District are also non-compliant in multiple respects.

The Consent Decree requires the restaurants to improve the accessibility of their entrances, waiting areas, bar areas, dining areas, restrooms, coat checks, and hostess stations. The Consent Decree provides for renovations to the main and alternate entrances and construction of an accessible restroom at Carmine’s Upper West Side, and alterations to the restrooms at Carmine’s Theater District. In addition, the owners and operators of the restaurants will pay a $10,000 civil penalty to the United States.

Since President George H.W. Bush signed the ADA into law in 1990, the U.S. Attorney’s Office for the Southern District of New York has taken a leading role in bringing numerous New York City institutions into compliance with the ADA regulations. They include Avery Fisher Hall at Lincoln Center, the Metropolitan Opera, Yankee Stadium, Madison Square Garden, the Apollo Theater, the Puck Building, the Shubert Theaters, the Rainbow Room, and Radio City Music Hall.

Mr. Bharara thanked the Disability Rights Section of the Department of Justice, in particular its architectural staff, for their assistance in this matter.

The Restaurants Initiative is being handled by the Office’s Civil Rights Unit. Assistant U.S. Attorneys Amy A. Barcelo, Christopher Connolly, and Cristine Irvin Phillips are in charge of the Initiative.

To file a complaint alleging that a restaurant or any other place of public accommodation within the Southern District of New York is not accessible to persons with disabilities, use the Civil Rights Complaint Form available on the United States Attorney’s Office’s website, www.usdoj.gov/usao/nys. Complaints should be sent to:

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

86 Chambers Street, 3rd Floor

New York, New York, 10007

Attention: Chief, Civil Rights Unit

U.S. v. Greystone Owners, LLC, et al. Complaint
U.S. v. Greystone Owners, LLC, et al. Executed Consent Decree 2013.11.8

Preet Bharara, the United States Attorney for the Southern District of New York, announced that HILLEL NAHMAD, a/k/a “Helly,” pled guilty today in Manhattan federal court in connection with his leadership role in the operation of a high-stakes illegal sports gambling business. NAHMAD was charged in April 2013 in a 34-defendant indictment charging members and associates of two Russian-American organized crime enterprises with various crimes including racketeering, money laundering, extortion, and gambling offenses. He pled guilty before U.S. District Court Judge Jesse M. Furman.

Manhattan U.S. Attorney Preet Bharara said: “Helly Nahmad headed an illegal sports gambling business with ties to a Russian-American organized crime ring. Nahmad bet that he would never get caught and he lost. His guilty plea today has dealt a substantial blow to this international enterprise.”

According to the Indictment, other documents filed in this case and statements made at various conferences in this case, including today’s guilty plea:

NAHMAD is the son of a billionaire art dealer from Europe, and he operates the Helly Nahmad Gallery out of the Carlyle Hotel in New York, New York. NAHMAD and defendant Illya Trincher ran a high-stakes illegal gambling business that catered primarily to millionaire and billionaire clients. Their business utilized several online gambling websites that operated illegally in the United States to generate tens of millions of dollars of sports bets each year. The gambling operation was financed through a host of American and international bank accounts, including accounts associated with NAHMAD, defendants John Hanson and Noah Siegel, a/k/a “The Oracle,” and a plumbing company in the Bronx that was acquired in repayment of a $2 million gambling debt. As part of his guilty plea, NAHMAD acknowledged that he was a leader and organizer of the illegal sports gambling business, that he was the primary source of financing for that business, and that he was entitled to a substantial share of its profits.

NAHMAD, 35, of New York, New York, faces a maximum sentence of five years in prison and three years of supervised release. As part of his plea agreement, NAHMAD agreed to forfeit $6,427,000.00 and all right, title and interest of the defendant in the painting Carnaval à Nice, 1937 by Raoul Dufy to the United States. NAHMAD is scheduled to be sentenced by Judge Furman on March 19, 2014 at 3:00 p.m.

NAHMAD is the 14th defendant in this case to plead guilty. The following defendants previously pled guilty and await sentencing:

• Bryan Zuriff pled guilty to gambling charges on July 26, 2013;
• William Barbalat pled guilty to gambling charges on August 14, 2013;
• Kirill Rapoport pled guilty to gambling charges on August 16, 2013;
• Edwin Ting and Justin Smith pled guilty to gambling charges on September 4, 2013;
• Dmitry Druzhinsky and David Aaron pled guilty to gambling charges on October 4, 2013;
• Alexander Zaverukha pled guilty to gambling charges on October 10, 2013;
• Nicholas Hirsch pled guilty to conspiring to commit wire fraud on October 16, 2013;
• Anatoly Shteyngrob pled guilty to conspiring to commit money laundering on October 17, 2013;
• Yugeshwar Rajkumar pled guilty to gambling charges on October 18, 2013;
• Stan Greenberg pled guilty to conspiring to commit racketeering on October 22, 2013; and
• Arthur Azen pled guilty to conspiring to commit money laundering and conspiring to collect extensions of credit by extortionate means on November 5, 2013.

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 Organized Crime Unit. Assistant U.S. Attorneys Harris M. Fischman, Joshua A. Naftalis, Peter Skinner, and Kristy J. Greenberg of the Organized Crime Unit are in charge of the prosecution. Assistant U.S. Attorneys Alexander Wilson and Christine Magdo of the Office=s Asset Forfeiture Unit are responsible for the forfeiture aspects of the case.

U.S. v. Alimzhan Tokhtakhounov, et al. Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, Kathryn Keneally, the Assistant Attorney General for the Justice Department’s Tax Division, and Danny Werfel, the Acting Commissioner of the Internal Revenue Service (“IRS”), announced today that U.S. District Judge Kimba M. Wood entered an order on November 7, 2013, authorizing the IRS to issue summonses requiring Bank of New York Mellon (“Mellon”) and Citibank, NA (“Citibank”), to produce information about U.S. taxpayers who may be evading or have evaded federal taxes by holding interests in undisclosed accounts at Zurcher Kantonalbank and its affiliates (collectively, “ZKB”) in Switzerland; and U.S. District Judge Richard M. Berman entered an order today authorizing the IRS to issue summonses requiring Mellon, Citibank, JPMorgan Chase Bank, NA (“JPMorgan”), HSBC Bank USA, NA (“HSBC”), and Bank of America, NA (“Bank of America”), to produce similar information in connection with undisclosed accounts at The Bank of N.T. Butterfield & Son Limited and its affiliates (collectively, “Butterfield”) in the Bahamas, Barbados, Cayman Islands, Guernsey, Hong Kong, Malta, Switzerland, and the United Kingdom.

In these actions, the Court granted the IRS permission to serve what are known as “John Doe” summonses on Mellon, Citibank, JPMorgan, HSBC, and Bank of America. The IRS uses John Doe summonses to obtain information about possible tax fraud by individuals whose identities are unknown. The John Doe summonses direct these five banks to produce records identifying U.S. taxpayers with accounts at ZKB, Butterfield, and their affiliates, including other foreign banks that used ZKB and Butterfield’s U.S. correspondent accounts at Mellon, Citibank, JPMorgan, HSBC, and Bank of America to service U.S. clients.

Manhattan U.S. Attorney Preet Bharara said: “These actions show that the use of foreign banks for tax evasion remains a high investigative priority of this Office and U.S. citizens should understand that loud and clear. By issuing these John Doe summonses, we continue our joint efforts with the IRS to identify and hold accountable those who try to evade their legal responsibility to pay taxes.”

Assistant Attorney General Kathryn Keneally said: “These cases once again demonstrate the Department’s resolve to uncover and identify taxpayers who tried to hide money overseas as a way to avoid federal taxes. These John Doe Summonses will provide information about individuals using financial institutions from Switzerland to the Cayman Islands to Hong Kong to avoid their U.S. tax obligations. U.S. taxpayers still holding accounts who have not come clean should come forward and do the right thing before it’s too late.”

IRS Acting Commissioner Danny Werfel said: “International issues remain a major focus for the IRS, and we are continuing our efforts to fight tax evaders who use offshore accounts to skirt the law. These John Doe summonses for correspondent account records show our determination to pursue evaders using offshore accounts even if the person hiding money overseas chooses a bank that has no offices on U.S. soil.”

IRS Offshore Voluntary Disclosure programs and initiatives enable U.S. taxpayers to resolve their tax liabilities and minimize their chances of criminal prosecution by voluntarily disclosing previously undisclosed foreign accounts and income. To date, U.S. taxpayers have identified 371 previously undisclosed accounts at ZKB and 81 such accounts at Butterfield. In addition, a number of U.S. taxpayers with beneficial ownership and control over funds held in accounts at ZKB and Butterfield have admitted failure to report income earned from their offshore accounts on their federal tax returns. The IRS has reason to believe that other U.S. taxpayers who held or presently hold similar accounts at ZKB, Butterfield, and their affiliates have done the same, in violation of federal tax law. In December 2012, three employees of ZKB were indicted for conspiring with U.S. taxpayers and others to hide at least $423 million from the IRS in secret Swiss bank accounts.

Federal tax law requires U.S. taxpayers to pay taxes on all income earned worldwide. U.S. taxpayers must also report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year. Willful failure to report a foreign account can result in a fine of up to 50 percent of the amount in the account at the time of the violation.

These cases are being handled by the Office’s Tax and Bankruptcy Unit. Assistant U.S. Attorney Tomoko Onozawa is in charge of the Butterfield case and Assistant U.S. Attorney Christopher B. Harwood is in charge of the ZKB case.

Preet Bharara, the United States Attorney for the Southern District of New York, Kathryn Keneally, the Assistant Attorney General for the Justice Department’s Tax Division, and Danny Werfel, the Acting Commissioner of the Internal Revenue Service (“IRS”), announced today that U.S. District Judge Kimba M. Wood entered an order on November 7, 2013, authorizing the IRS to issue summonses requiring Bank of New York Mellon (“Mellon”) and Citibank, NA (“Citibank”), to produce information about U.S. taxpayers who may be evading or have evaded federal taxes by holding interests in undisclosed accounts at Zurcher Kantonalbank and its affiliates (collectively, “ZKB”) in Switzerland; and U.S. District Judge Richard M. Berman entered an order today authorizing the IRS to issue summonses requiring Mellon, Citibank, JPMorgan Chase Bank, NA (“JPMorgan”), HSBC Bank USA, NA (“HSBC”), and Bank of America, NA (“Bank of America”), to produce similar information in connection with undisclosed accounts at The Bank of N.T. Butterfield & Son Limited and its affiliates (collectively, “Butterfield”) in the Bahamas, Barbados, Cayman Islands, Guernsey, Hong Kong, Malta, Switzerland, and the United Kingdom.

In these actions, the Court granted the IRS permission to serve what are known as “John Doe” summonses on Mellon, Citibank, JPMorgan, HSBC, and Bank of America. The IRS uses John Doe summonses to obtain information about possible tax fraud by individuals whose identities are unknown. The John Doe summonses direct these five banks to produce records identifying U.S. taxpayers with accounts at ZKB, Butterfield, and their affiliates, including other foreign banks that used ZKB and Butterfield’s U.S. correspondent accounts at Mellon, Citibank, JPMorgan, HSBC, and Bank of America to service U.S. clients.

Manhattan U.S. Attorney Preet Bharara said: “These actions show that the use of foreign banks for tax evasion remains a high investigative priority of this Office and U.S. citizens should understand that loud and clear. By issuing these John Doe summonses, we continue our joint efforts with the IRS to identify and hold accountable those who try to evade their legal responsibility to pay taxes.”

Assistant Attorney General Kathryn Keneally said: “These cases once again demonstrate the Department’s resolve to uncover and identify taxpayers who tried to hide money overseas as a way to avoid federal taxes. These John Doe Summonses will provide information about individuals using financial institutions from Switzerland to the Cayman Islands to Hong Kong to avoid their U.S. tax obligations. U.S. taxpayers still holding accounts who have not come clean should come forward and do the right thing before it’s too late.”

IRS Acting Commissioner Danny Werfel said: “International issues remain a major focus for the IRS, and we are continuing our efforts to fight tax evaders who use offshore accounts to skirt the law. These John Doe summonses for correspondent account records show our determination to pursue evaders using offshore accounts even if the person hiding money overseas chooses a bank that has no offices on U.S. soil.”

IRS Offshore Voluntary Disclosure programs and initiatives enable U.S. taxpayers to resolve their tax liabilities and minimize their chances of criminal prosecution by voluntarily disclosing previously undisclosed foreign accounts and income. To date, U.S. taxpayers have identified 371 previously undisclosed accounts at ZKB and 81 such accounts at Butterfield. In addition, a number of U.S. taxpayers with beneficial ownership and control over funds held in accounts at ZKB and Butterfield have admitted failure to report income earned from their offshore accounts on their federal tax returns. The IRS has reason to believe that other U.S. taxpayers who held or presently hold similar accounts at ZKB, Butterfield, and their affiliates have done the same, in violation of federal tax law. In December 2012, three employees of ZKB were indicted for conspiring with U.S. taxpayers and others to hide at least $423 million from the IRS in secret Swiss bank accounts.

Federal tax law requires U.S. taxpayers to pay taxes on all income earned worldwide. U.S. taxpayers must also report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year. Willful failure to report a foreign account can result in a fine of up to 50 percent of the amount in the account at the time of the violation.

These cases are being handled by the Office’s Tax and Bankruptcy Unit. Assistant U.S. Attorney Tomoko Onozawa is in charge of the Butterfield case and Assistant U.S. Attorney Christopher B. Harwood is in charge of the ZKB case.

ZKB Order
Butterfield Order

“Subject to the Court’s acceptance, today four SAC Capital companies pled guilty to serious federal crimes that undermined the integrity of our securities markets. Financial institutions should know that they are not automatically immune from prosecution, and we will hold companies, as well as individuals, accountable wherever appropriate.”

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”) that are responsible for the management of a group of affiliated hedge funds, collectively (the “SAC Hedge Fund” or “SAC”), pled guilty to each count in which they are charged in an indictment (the “Indictment”) unsealed in July of this year. The Indictment charges the SAC Companies with securities fraud and wire fraud in connection with a large-scale insider trading scheme. The SAC Companies pled guilty today before U.S. District Judge Laura T. Swain, pursuant to a plea agreement. Sentencing is scheduled for March 14, 2014, before Judge Swain, who reserved on the decision of whether to accept the pleas.

Manhattan U.S. Attorney Preet Bharara said: “Subject to the Court’s acceptance, today four SAC Capital companies pled guilty to serious federal crimes that undermined the integrity of our securities markets. Financial institutions should know that they are not automatically immune from prosecution, and we will hold companies, as well as individuals, accountable wherever appropriate.”

As alleged in the Indictment, 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.

The plea agreement in this case was one of two component parts of an overall Agreement (the “Agreement”) reached by the parties and announced earlier this week. The Agreement imposes an additional $1.184 billion financial penalty on the SAC Companies, on top of the $616 million the SAC Companies have already agreed to pay to the U.S. Securities & Exchange Commission (“SEC”). The financial penalty – the largest insider trading penalty in history – is split between a fine in the criminal case (the “Criminal Case”), and a forfeiture judgment in a civil money laundering and forfeiture action (the “Forfeiture Action”) filed by the Government simultaneously with the criminal charges. It also provides that the SAC Companies and their affiliates will no longer accept outside investor funds and will shut down operations as an investment adviser.

The Agreement between the Government and the SAC Companies to plead guilty to all of the charges in the Indictment in which they are charged and resolve the Forfeiture Action was submitted to the Courts subject to judicial review and approval. Judge Swain received the pleas in the Criminal Case, United States v. S.A.C. Capital Advisors, L.P., et al., 13 Cr 541 (LTS), earlier today. U.S. District Judge Richard J. Sullivan, who is presiding over the Forfeiture Action, captioned United States v. S.A.C. Capital Advisors, L.P., et al., 13 Civ. 5182 (RJS), approved on Wednesday, November 6, 2013, the stipulation and proposed order to resolve the civil money laundering and forfeiture claims in the Forfeiture Action.

The remaining terms of the Agreement provide for the following:

• The total financial penalty is $1.8 billion, consisting of a $900 million fine in the Criminal Case and a $900 million judgment in the Forfeiture Action. Because the SAC Companies have already agreed to pay $616 million to the SEC to resolve related civil insider trading charges, that amount will be credited against the $900 million judgment in the Forfeiture Action, and therefore, the additional payment required under this Agreement will be approximately $1.184 billion. The SAC Companies have further agreed that neither they nor any other person or entity paying any portion of the financial penalty shall claim any tax deduction or credit for any money paid in resolving the Criminal Case and the Forfeiture Action.
• The SAC Companies will no longer accept third party investor funds and will terminate operations as an investment adviser.
• The SAC Companies will each be 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 will 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.

The Agreement resolves the criminal charges against the SAC Companies but does not provide any individual with immunity from prosecution. Under the terms of the Agreement, the Government is not prevented from charging any individual with insider trading offenses and seeking the maximum prison term authorized by law for such offenses.

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 is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed 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 U.S. Attorneys Arlo Devlin-Brown, Antonia M. Apps 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.

The pleas announced today relate only to the pending charges against the SAC Companies and relate only to the guilt of the SAC Companies. The pleas do not include any admissions pertaining to individual defendants. All criminal defendants are presumed innocent unless and until proven guilty.

U.S. v. SAC Capital Advisors LLP, et al. Cover Ltr, Plea Agt, and Stip

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that EDWIN VARGAS, a detective with the New York City Police Department (“NYPD”), pled guilty to computer hacking crimes. Specifically, VARGAS paid others to hack into e-mail accounts, including e-mail accounts belonging to other NYPD officers and employees, and also accessed a federal law enforcement database without authorization to obtain information about other NYPD officers. VARGAS was arrested in Bronxville, New York, in May 2013. He pled guilty before U.S. District Judge P. Kevin Castel.

Manhattan U.S. Attorney Preet Bharara said: “Detective Edwin Vargas broke the law, instead of upholding it as he swore to do. He accessed a law enforcement database without authorization and paid hackers to illegally obtain e-mail login information for his fellow officers and others. Vargas’s guilty plea today and his forthcoming punishment make clear that those who illegally invade others’ privacy, including members of law enforcement, will not escape prosecution. ”

According to the Complaint and Information filed against VARGAS in Manhattan federal court and statements made in related court proceedings:

Between April 2010 and October 2012, VARGAS, an NYPD detective assigned to a precinct in the Bronx, hired e-mail hacking services to hack into various e-mail accounts so he could obtain log-in credentials, such as the password and username, for those accounts. In total, VARGAS purchased hacks of at least 43 personal e-mail accounts and one cellular phone belonging to at least 30 different individuals, including 20 current or former NYPD officers and an NYPD administrative employee. After receiving the log-in credentials he had purchased from the e-mail hacking services, VARGAS accessed at least one personal e-mail account belonging to an NYPD officer. VARGAS paid a total of more than $4,000 to entities associated with the e-mail hacking services.

VARGAS also admitted to accessing the National Crime Information Center (NCIC) database, a federal database, to obtain information about at least two NYPD officers without authorization to do so. The e-mail accounts of those two officers were among the e-mail accounts VARGAS paid the e-mail hacking services to hack into so he could obtain log-in credentials.

VARGAS, 42, of Bronxville, New York, pled guilty to one count of conspiring to commit computer hacking and one count of computer hacking. Each count carries a maximum sentence of one year in prison. He is scheduled to be sentenced by Judge Castel on March 14, 2014, at 2:00 p.m.

Mr. Bharara praised the investigative work of the FBI and thanked the Internal Affairs Bureau of the New York City Police Department for its cooperation and assistance in the investigation.

The prosecution of this case is being handled by the Office’s Complex Frauds Unit. Assistant United States Attorney Rosemary Nidiry is in charge of the prosecution.

U.S. v. Edwin Vargas Information

Preet Bharara, the United States Attorney for the Southern District of New York, and James T. Hayes, Jr., the Special Agent-in-Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), today announced the filing of a civil complaint seeking the forfeiture of four bank accounts and 47 luxury cars tied to a scheme to purchase new cars for immediate export overseas through a fraud on car dealerships and car insurance companies. The civil forfeiture complaint (the “Complaint”) was filed in Manhattan federal court following the seizure of approximately $3.7 million from the four bank accounts, and the seizure of 20 of the 47 luxury cars, which include BMWs and Mercedes Benzes. The scheme described in the Complaint is alleged to have been carried out by a vehicle broker known as Efans Trading Corporation (“Efans”), which recruited straw buyers to purchase luxury cars that were paid for in full on the date of the sale by cashier’s checks draw on an Efans bank account. The straw buyers, according to the Complaint, did not use, and frequently never even saw, the cars, which were exported by sea immediately after being purchased and netted double or triple their domestic value when sold in overseas markets. The Complaint further alleges that when the cars were purchased, Efans caused materially false statements to be made to the dealerships and insurance companies, in an effort to remove the cars from the dealerships without revealing that they were being purchased for immediate export overseas, rather than for the use of drivers in the United States.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Efans defrauded dealerships, insurance companies, and authorities in its scheme to export luxury automobiles in violation of the law. With this forfeiture complaint, this Office continues its work to protect the markets and consumers from illegal export schemes.”

ICE HSI Special Agent-in-Charge James T. Hayes, Jr. said: “Consumers are the ultimate victims of fraud schemes like the one these perpetrators allegedly carried out. The HSI New York BEST task force brings law enforcement agencies together in New York City to put criminal organizations who seek profit from unlawful cross-border activity out of business.”

According to the allegations in the Complaint:

Automobile manufacturers generally have contractual agreements with their dealerships that new cars made for sale within the United States may not be sold to individuals or companies intending to export the new cars outside the United States. Automobile manufacturers impose this prohibition on exporting new automobiles because unauthorized exports of their new automobiles cause numerous financial problems to the manufacturers by circumventing the manufacturers’ distribution markets, causing market infringement issues, harming franchise dealerships, and complicating the process of vehicle recall registration and service. The contractual agreements between automobile manufacturers and dealerships often carry monetary penalties, commonly called “charge backs,” which automobile manufacturers may assess against dealerships if the manufacturers determine that dealerships are selling new automobiles to purchasers who intend to export them rather than use them in the United States. To avoid the appearance that a car is intended for immediate export, a vehicle broker, such as Efans, will recruit a straw buyer to purchase and title the car. The straw buyers are typically unwitting individuals who receive minimal compensation for their cooperation.

Efans directed the straw buyers it recruited to go to car dealerships and purchase luxury cars, which were paid for in full on the date of the purchase by cashier’s checks drawn on an Efans bank account. The straw buyers purchased the cars, typically without test driving them or negotiating price, and immediately upon the purchase of the cars the straw buyers turned them over to Efans for immediate export from the country. Efans exported the cars from the country, typically to destinations in China, where the cars could be sold for double or triple their domestic value. As part of Efans’ scheme to purchase the cars in this manner, Efans caused materially false statements to be made to the car dealerships concerning the straw buyers’ intended use of the cars. In some cases, for instance, the straw buyer signed a form representing to the dealership that the car would not be exported out of the United States for a period of at least twelve months. Moreover, before the car could leave the dealership, the straw buyer was usually required to show that he or she had purchased insurance for the car. Accordingly, Efans caused an insurance policy for the car to be acquired in the name of the straw buyer, which, typically, was cancelled after the car left the dealership but before any payments were made on the policy. When the insurance policy was acquired, materially false statements were made to the insurance company with respect to the straw buyer’s intended use of the vehicle, for example, that the car would be garaged at the home of the straw buyer, even though the car would never even arrive at the straw buyer’s home. After the cars were purchased and the false statements were made, Efans caused Shippers Export Declarations for the cars to be submitted to U.S. Customs and Border Protection, which furthered the scheme to defraud by concealing the cars’ Vehicle Identification Numbers, thus preventing automobile manufacturers from tracking which cars were leaving the country.

The Complaint seeks the forfeiture of the four bank accounts and the 47 cars on several bases, including that Efans attempted to export the cars from the United States contrary to law, and that the bank accounts were used to facilitate the purchase of, and contain the proceeds of, cars that Efans exported from the United States contrary to law.

Mr. Bharara thanked HSI’s Border Enforcement Security Task Force and the NYPD for their leadership and work on this investigation, which he noted is ongoing. Mr. Bharara also thanked U.S. Customs and Border Protection for its work.

This matter is being handled by the Office’s Asset Forfeiture Unit. Assistant U. S. Attorney Sarah E. Paul is in charge of the case.

Efans Trading Corporation et al. Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, and Michelle M. Leonhart, the Administrator of the Drug Enforcement Administration (DEA), today announced the unsealing of a Superseding Indictment against DINO BOUTERSE, a citizen of Suriname who held himself out as Commander of that country’s Counter-Terrorism Unit, for attempting to provide material support and resources to Hezbollah, a designated terrorist organization. BOUTERSE and a second defendant (“Defendant-1”) were previously charged with conspiring to import cocaine into the United States, and BOUTERSE was also previously charged with using, carrying, and brandishing a rocket launcher during, and in relation to, the cocaine importation conspiracy. BOUTERSE was arrested in Panama on August 29, 2013, and arrived in the United States on August 30, 2013. The case is assigned to United States District Judge Shira A. Scheindlin.

Manhattan U.S. Attorney Preet Bharara said: “Today we add an additional charge of attempting to support Hezbollah to Dino Bouterse’s alleged crimes connected to a cocaine-smuggling conspiracy. We will be relentless in our efforts, working with our law enforcement partners around the world, to pursue and prosecute those who seek to support terrorist organizations.”

DEA Administrator Michelle M. Leonhart said: “Drug trafficking organizations and terror networks are joined at the hip in many parts of the world. DEA must relentlessly pursue these dangerous individuals and criminal groups that attempt to use drug trafficking profits to fuel and fund terror networks, such as Hezbollah. Alleged criminals like Bouterse and his facilitators pose a direct threat to the safety and security of the United States. Together with our law enforcement partners, DEA is dismantling narco-terror around the world and putting the criminals responsible behind bars where they belong.”

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

In 2013, BOUTERSE used his position to assist individuals he believed were members of Hezbollah. In exchange for a multimillion-dollar pay-off, BOUTERSE agreed to allow large numbers of purported Hezbollah operatives to use Suriname as a permanent base for, among other things, attacks on American targets. In furtherance of his efforts to assist Hezbollah, BOUTERSE supplied a false Surinamese passport for the purpose of making clandestine travel easier, including travel to the United States; began determining which heavy weapons he might provide to Hezbollah; and indicated how Hezbollah operatives, supplied with a Surinamese cover story, might enter the United States.

In June 2013, BOUTERSE and Defendant-1 met in Suriname with DEA confidential sources (the “CSes”), in a local government office. During the meeting, BOUTERSE showed the CSes a rocket launcher and a kilogram of cocaine.

Approximately one month later, BOUTERSE and Defendant-1 worked to provide transportation and security for cocaine being sent through Suriname to the United States. As a test run, BOUTERSE and Defendant-1 sent ten kilograms of cocaine on a commercial flight departing from Suriname. BOUTERSE personally verified the arrangements for the 10-kilogram cocaine shipment in a text message. The cocaine was intercepted by law enforcement officials after it departed Suriname.

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

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

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

The Indictment charges BOUTERSE in three Counts. Count One charges BOUTESRE with attempting to provide material support to Hezbollah, a designated foreign terrorist organization. Court Two charges BOUTERSE (and also Defendant-1) with conspiring to import cocaine into the United States and to distribute cocaine, knowing and intending that it would be imported to the United States. Count Three charges BOUTERSE with using, carrying, and brandishing firearms and a destructive device – a rocket launcher – during and in relation to the narcotics conspiracy alleged in Count Two.

If convicted, BOUTERSE faces a maximum sentence of 15 years in prison on Count One and a maximum sentence of life in prison on each of Counts Two and Three. Counts Two and Three also carry a total mandatory minimum term of 40 years in prison.

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

This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Edward Y. Kim, Michael D. Lockard, and Adam Fee 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. Dino Bouterse S2 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States, the State of Michigan, and the State of Ohio have settled environmental claims and liabilities asserted against DPH HOLDINGS CORPORATION, formerly known as Delphi Corporation (“Delphi”), and its corporate affiliates (collectively, “DPH”), under the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act (also known as the Superfund law), and state environmental laws.

U.S. Attorney Preet Bharara stated: “As a result of today’s settlement, Delphi will pay for the clean-up of four sites contaminated with hazardous waste. This settlement demonstrates again that the United States will pursue all available remedies to prevent polluters from escaping their environmental liabilities through the bankruptcy process.”

Under the Settlement Agreement filed today in bankruptcy court in White Plains, DPH will pay approximately $23.1 million in cash for the clean-up of four properties in Michigan and Ohio contaminated with hazardous waste. The remaining approximately $158,000 will be paid to the United States to reimburse the United States Environmental Protection Agency (“EPA”) for prior environmental clean-up work performed at an additional property in Ohio.

In October 2005, Delphi, one of the largest auto parts manufacturers in the world, filed chapter 11 bankruptcy petitions in the United States Bankruptcy Court for the Southern District of New York; Delphi expects to complete its bankruptcy process and dissolve by year-end. The four properties that are the subject of the settlement are among the last assets owned by DPH. Under the settlement, an environmental response trust will be established to take ownership of, and oversee clean-up at, the four properties. The $23.1 million payment by DPH will fund the administrative costs of the trust and the clean-up of the properties.

Three of the four properties are the sites of former auto parts manufacturing plants: the former Delphi Automotive Systems Dort Highway Flint East Plant 400 and Plant 500 in Flint, Michigan, and the former Delphi Saginaw Division Plant 2 in Saginaw, Michigan. Through the settlement, DPH will pay for the clean-up of both soil and groundwater contamination at these sites. The fourth site is an inactive asbestos landfill in Rootstown, Ohio, formerly operating under Delphi’s Packard Electric/Electronic Architecture Division. The funds provided by DPH in the settlement will pay for groundwater monitoring and ensure continued public safety and security at this property.

The Settlement Agreement will be filed with the Bankruptcy Court for a period of 15 days before its entry to provide public notice and to afford members of the public the opportunity to comment on the Settlement Agreement.

This is the second environmental settlement in this bankruptcy. In 2011, the United States recovered more than $857,000 in a settlement of other environmental liabilities in the case.

Mr. Bharara praised the efforts of EPA, the State of Michigan, the State of Ohio, and the Environment and Natural Resources Division of the U.S. Department of Justice in this case.

Assistant United States Attorney Cristy Irvin Phillips is in charge of the case, which has been handled by the Office’s Environmental Protection Unit and Tax and Bankruptcy Unit.

In re DPH Holdings - Settlement Agreement with Exhibit A

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that SANDEEP AGGARWAL, a former equity research analyst for a financial services firm located in San Francisco, California (“the Firm”), pled guilty today in Manhattan federal court to charges arising from his involvement in an insider trading scheme. The scheme involved the improper disclosure of material, nonpublic information (“Inside Information”) concerning a strategic partnership in internet search and advertising between Microsoft Corporation and Yahoo! Inc. (the “Partnership”). AGGARWAL was arrested in connection with this scheme on July 29, 2013, and he pled guilty today before U.S. Magistrate Judge Ronald L. Ellis, pursuant to a cooperation agreement.

According to the Superseding Information to which AGGARWAL pled guilty, statements made during today’s guilty plea proceeding and other court documents:

From April 2008 up through March 2010, AGGARWAL was a senior internet analyst at the Firm. The Inside Information concerning the Partnership originated from an executive in Microsoft’s internet search business (the “Microsoft Insider”), who was a friend of AGGARWAL. On various occasions between March 2009 and July 2009, AGGARWAL had discussions with the Microsoft Insider about the likelihood of the Partnership. During this same period, two senior sales executives at the Firm arranged meetings and telephone calls between AGGARWAL and the Firm’s clients. These meetings and calls were for the purpose of facilitating the transmission of information AGGARWAL learned about the status of the Partnership.

For example, on the evening of July 9, 2009, AGGARWAL learned from the Microsoft Insider that discussions about the Partnership had recommenced and that a transaction was likely within the next few weeks. The very next day, on July 10, AGGARWAL provided the Inside Information about the Partnership to the senior sales executives at the Firm, who then arranged for AGGARWAL to provide the Information to representatives of certain hedge fund clients of the Firm. One of the representatives to whom AGGARWAL provided the Information was Richard Lee, then a portfolio manager at S.A.C. Capital Advisors, L.P.

On July 10, 2009, following the conversations AGGARWAL had with hedge fund clients, the portfolios managed by certain portfolio managers of those clients, including Richard Lee, purchased shares of Yahoo securities. Following press reports confirming that a transaction between Microsoft and Yahoo could be announced within one week, the portfolios managed by certain of the portfolio managers, including Richard Lee, sold Yahoo stock and generated substantial profits.

AGGARWAL, 40, of Gurgon, India, pled guilty to one count of conspiracy to commit securities fraud and one count of securities fraud. The conspiracy count carries a maximum sentence of five years in prison and a fine of the greater of $250,000, or twice the gross gain or loss from the offense. The securities fraud count carries a maximum sentence of 20 years in prison and a fine of the greater of $5,000,000, or twice the gross gain or loss from the offense. AGGARWAL will be sentenced on May 15, 2014 before United States District Judge Colleen McMahon.

Richard Lee pled guilty on July 23, 2013, to an Information charging him with one count of conspiracy and one count of securities fraud in connection with insider trading between April 2009 and 2010.

Mr. Bharara praised the investigative work of the FBI. He also thanked the U.S. Securities and Exchange Commission. He also noted that the investigation is continuing.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which U.S. Attorney 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 is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed 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.

The case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys John J. O’Donnell and Arlo Devlin-Brown are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that JOHN R. REYNOLDS, the former Chief Executive Officer (“CEO”) of the Hospital for Special Surgery (the “Hospital”), was sentenced today in Manhattan federal court to 18 months in prison for participating in a fraudulent scheme in which he was paid nearly $300,000 in undisclosed kickbacks from a subordinate Hospital employee. REYNOLDS pled guilty in July 2013 to one count of wire fraud and one count of making false statements to a law enforcement agent. He was sentenced by U.S. District Judge Harold Baer, Jr.

Manhattan U.S. Attorney Preet Bharara said: “During his tenure as CEO of a world-renowned New York hospital, John Reynolds shamelessly put his own personal interests above those of the institution he was charged with running. The successful prosecution of Mr. Reynolds reaffirms the Office’s unwavering commitment to stamping out corruption, particularly by those who abuse positions of power and authority.”

According to the allegations in the Indictment and Superseding Information filed in Manhattan federal court, as well as statements made during court proceedings:

From 1986 until 1997, REYNOLDS served as the Chief Financial Officer of the Hospital, the oldest orthopedic hospital in the United States. In 1997, he was promoted to the position of CEO, and served in that capacity as a full-time Hospital employee until October 2006. In order to effectuate a smooth transition in Hospital leadership to a newly hired CEO, REYNOLDS served as a contract employee in the same position from October 2006 through December 2008.

Between 2000 and 2005, REYNOLDS demanded and received approximately $298,500 in kickbacks from a subordinate employee of the Hospital in exchange for negotiating payment of that employee’s annual bonus. During this same time period, REYNOLDS also repeatedly made false statements to, and deliberately withheld information from, the Hospital’s board of directors about certain conflicts of interest, including his undisclosed financial arrangement with the subordinate Hospital employee.

In addition, in May 2008, during the course of the investigation of his involvement in this fraudulent scheme, REYNOLDS made a number of false statements to an agent of the New York Office of the U.S. Department of Health and Human Services, Office of Inspector General (“HHS-OIG”), about his relationship with that Hospital employee and the funds he had received from that employee.

In addition to his prison term, REYNOLDS, 64, of Venice, Florida, was sentenced to two years of supervised release. REYNOLDS was also ordered to forfeit $718,500. A final determination on restitution is scheduled before Judge Baer on December 11, 2013 at 10:30 a.m.

Mr. Bharara praised the investigative work of the HHS-OIG.

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

Preet Bharara, the United States Attorney for the Southern District of New York, Thomas P. DiNapoli, the New York State Comptroller, Richard Condon, the Special Commissioner of Investigation for New York City’s Department of Education, 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”), announced today the arrest of CHEON PARK, owner and executive director of Bilingual SEIT, a federal, New York State, and New York City funded provider of special education services and preschool programs to New York City preschool children. PARK was arrested this afternoon and presented in Manhattan federal court before U.S. Magistrate Judge Ronald L. Ellis.

Manhattan U.S. Attorney Preet Bharara said: “Cheon Park allegedly orchestrated multiple schemes to enrich himself by taking funds intended for special needs children and diverting them into his own coffers. As today’s arrest makes clear, we will not tolerate individuals who cheat local, state, and federal government under the guise of helping children, and will do everything in our power to hold them accountable.”

New York State Comptroller Thomas P. DiNapoli said: “As alleged, Cheon Park blatantly ripped off taxpayers for hundreds of thousands of dollars, partly through kickbacks, to support his lavish lifestyle, even going as far as using the public’s money to clean his house. Our audits and investigations of special education providers have uncovered too much fraud and abuse that is depriving students with special needs of the resources intended for them. I urge the Governor to sign our bill that mandates an audit of every provider and give taxpayers assurance their money is being well-spent. I commend U.S. Attorney Preet Bharara for prosecuting Park and bringing abusers of the special education system to justice. I look forward to continuing this partnership.”

SCI Special Commissioner Richard J. Condon said: “As alleged, Park, through Bilingual SEIT, used a contract with the New York City Department of Education to misappropriate public funds for his own benefit. At the same time, Park allegedly deprived the neediest of preschool students of essential mandated services. This is one of a series of investigations that my office is conducting with the U.S. Attorney for the Southern District of New York.”

ED-OIG Special Agent-in-Charge Brian M. Hickey said: “Today’s arrest relates to allegations that Mr. Park not only knowingly and willfully abused his position of trust for personal gain, but did so at the expense of special needs students. That is completely unacceptable. Tracking down those who would cheat the children and families that rely on special education programs is a priority of our office.”

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

Between 2005 and 2012, PARK engaged in a conspiracy to defraud the federal government, New York State, and New York City of millions of dollars by deliberately inflating both the amount of compensation Bilingual SEIT paid certain of its employees and contractors, and the type of work performed by certain employees on annual certified consolidated fiscal reports (“CFRs”) and financial statements submitted to the New York State Education Department (“NYSED”) and the New York City Department of Education (“NYCDOE”).

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

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

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

In fact, PARK engaged in several schemes designed to inflate the costs Bilingual SEIT represented it incurred, resulting in more public money for Bilingual SEIT, much of which, as set forth below, was kicked back to PARK.

Specifically, PARK engaged in three different fraudulent schemes. First, PARK fraudulently received funds from New York State and New York City to pay multiple individuals who performed little or no work for Bilingual SEIT. At PARK’s request and direction, these individuals then kicked back as much as 50% of the salary they fraudulently received from Bilingual SEIT to PARK. For example, PARK asked an individual who sporadically evaluated children for Bilingual SEIT (“Individual-3”) to accept payment from Bilingual SEIT in exchange for kicking back 50% of the payments to PARK. Individual-3 agreed, and kicked back approximately $3,500 a month in cash to PARK each month during the period between 2005 and 2008. During the Comptroller’s audit, PARK asked Individual-3 to sign various documents that falsely indicated that Individual-3 actually worked for Bilingual SEIT during the years 2007 through 2009.

Second, PARK fraudulently received funds from New York State and New York City to deliberately overpay other individuals who worked for Bilingual SEIT. At PARK’s request and direction, these individuals also kicked back a portion of the overpayment to PARK on a regular basis. For example, in 2006, PARK hired an individual as an office worker for Bilingual SEIT (“Individual-4”). Shortly after Individual-4 began working for Bilingual SEIT, PARK asked Individual-4 to kick back to PARK approximately $2,200 a month from Individual-4’s monthly salary. Individual-4 agreed to do so, and kicked-back approximately $2,200 a month to Park until Individual-4 stopped working for Bilingual SEIT in 2011.

Third, in addition to receiving kickbacks, PARK used Bilingual SEIT funds for his personal benefit in other ways. PARK arranged for Bilingual SEIT to pay his ex-wife and ex-sister-in-law for work they did not perform. According to various CFRs filed with the NYSED, PARK’s ex-wife served as Bilingual SEIT’s “Assistant Executive Director,” the second most senior executive at Bilingual SEIT. For the years 2006 through 2012, PARK’s ex-wife was one of the most highly compensated employees at Bilingual SEIT. According to witness interviews, as well as the audit performed by the Comptroller, PARK’s ex-wife did not function as the “Assistant Executive Director,” and, to the extent she performed any functions at all at Bilingual SEIT, she was an office worker. PARK also arranged to have Bilingual SEIT pay his ex-sister-in-law, who, according to witnesses, never worked at Bilingual SEIT. Finally, PARK also arranged for Bilingual SEIT to pay for tutoring for PARK’s children and for a Bilingual SEIT employee to clean PARK’s home twice a week.

PARK, 46, of Manhasset, New York, is charged with conspiracy to commit mail fraud, which carries a maximum term of 20 years in prison, and one count of mail fraud, which also carries a maximum term of 20 years in prison.

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

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

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

U.S. v. Cheon Park Complaint 13Mag2624

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States has filed, and simultaneously settled, a civil forfeiture lawsuit against the assets of Mid Hudson Medical Group, P.C. (“MHMG”). The Government’s action alleges that MHMG received millions of dollars in proceeds from two schemes to defraud Medicare, the New York State Insurance Fund, and private health insurance providers (collectively, the “Health Insurance Providers”). The stipulation and order of settlement (the “Settlement”) requires MHMG to forfeit $5 million to the United States. The Government submitted the Settlement for approval this afternoon to U.S. District Judge Vincent L. Briccetti, who is presiding over the matter, captioned United States v. $5,000,000.00 in U.S. Currency, 13 Civ. 7898 (VB).

Manhattan U.S. Attorney Preet Bharara said: “The laws are clear and formidable when it comes to the bilking of health insurance providers: you cannot be permitted to keep and enjoy illicit proceeds of fraud. This Office and its partners will make every effort to intercept such activity wherever we find it.”

According to the Verified Complaint and other publicly filed documents:

Between at least 2006 and July 2011, Spyros Panos, an orthopedic surgeon and MHMG shareholder, engaged in an unlawful scheme to defraud Health Insurance Providers, in which Panos submitted, and caused MHMG to submit, fraudulent information to the Health Insurance Providers regarding the nature and details of surgical procedures he performed. As a result, the Health Insurance Providers paid MHMG millions of dollars more than MHMG was entitled to receive for the actual work that Panos did perform. On October 31, 2013, Panos pled guilty to one count of engaging in a scheme to commit health care fraud, in a criminal case captioned United States v. Spyros Panos, 13 Cr. 800 (NSR).

Additionally, from approximately 2009 through June 2012, certain employees of MHMG, who were responsible for submitting requests for pre-authorization/certification from certain Health Insurance Providers for Magnetic Resonance Imaging tests (“MRIs”), submitted requests to Health Insurance Providers in which the employees included details regarding patients’ history that the employees knew were necessary in order to obtain the approvals, but which the employees had no reason to know was or was not truthful, and which in at least some cases was not truthful. As a result, Health Insurance Providers paid MHMG more for MRI tests than MHMG was entitled to receive.

Under the terms of the Settlement, MHMG is awarded credits for reimbursements it has already made to certain Health Insurance Providers, and MHMG is required to transfer an additional $3.67 million to the United States pursuant to an agreed-upon schedule. The Settlement amount represents an estimate of the amount of proceeds MHMG obtained from Health Insurance Providers as a result of the alleged unlawful activity and is not a final determination by the Government as to the loss amounts incurred by all Health Insurance Providers, collectively or individually, as a result of the unlawful activity.

Mr. Bharara praised the work of the United States Postal Inspection Service, the United States Department of Health and Human Services – Office of Inspector General, and the Federal Bureau of Investigation, and thanked the United States Department of Health and Human Services, Office of Counsel to the Inspector General and Office of General Counsel, the New York State Insurance Fund, and the New York Workers’ Compensation Board Office of the Fraud Inspector General for their assistance.

This case is being handled by the White Plains Division. Assistant United States Attorneys Lee Renzin and Daniel Filor are in charge of the case.

MHMG Forfeiture Stip Settlement.Filed
MHMG Forfeiture Complaint.Filed

Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), Charles Gardner, the Commissioner of the Yonkers Police Department, and George N. Longworth, the Commissioner of the Westchester County Department of Public Safety, announced today the unsealing of an Indictment charging 11 defendants with a series of crimes, including the distribution of narcotics and the use of firearms in Yonkers, New York.

U.S. Attorney Preet Bharara stated: “Our drive to remove armed drug gangs from Yonkers remains unrelenting, as evidenced by today’s arrests and charges. With motivated and cooperative law enforcement partners involved, we are a step closer to our goals.”

FBI Assistant Director-in-Charge George Venizelos stated: “Combating the scourge of drugs in our cities remains a focus for this office. Like we’ve seen so many times before, these drugs also brought guns and violence. We will continue to work with any law enforcement agency to clean up our cities’ streets.”

Yonkers Police Commissioner Charles Gardner stated: “This operation is yet another example of our successful partnership with federal authorities in targeting a violent street gang on a local level. It should be a warning to any other groups in Yonkers who choose to engage in this activity. I want to thank U.S. Attorney Preet Bharara, the F.B.I. and the Westchester County Department of Public Safety for their efforts in this investigation.”

Westchester Public Safety Commissioner George N. Longworth stated: “This is another example of the tremendous results that occur when federal and local law enforcement work together to maximize our resources to combat drug trafficking and the violence that goes along with it. We remain committed to working with all our law enforcement partners to keep the people of Westchester safe.”

A two-count Indictment, United States v. Joaquin Thatcher, et al., charges 11 members and associates of a violent street gang hailing from Riverdale Avenue, known both as “Two Gunz Up” and simply “Riverdale,” with narcotics and firearms offenses. Specifically, the following 11 members of Two Gunz Up – JOAQUIN THATCHER, a/k/a “Wu,” PAUL FOSTER, a/k/a “Pauly Pistols,” CHARLIE JIMINEZ, a/k/a “350,” a/k/a “Gucci,” TORREL SMITH, a/k/a “Assassin,” CRAIG MAJOR, a/k/a “Millz,” REESE MOORE, a/k/a “Loc,” ANTHONY OLIVER, a/k/a “Ant Pooh,” DAQUON POWELL, a/k/a “DP,” DWAYNE CARR, a/k/a “Weezy,” JIMMIE HUGHES, a/k/a “Jim Jim,” and ALEXANDER MCCRAY, a/k/a “AWOL” – are charged with conspiring to distribute, and possess with intent to distribute, crack cocaine and marijuana from about 2006 up to about October 2013. Eight of these defendants are also charged with using, carrying, possessing, and discharging firearms during the narcotics conspiracy.

The Indictment is the result of a long-term investigation conducted by federal, state, and local law enforcement officers working with the United States Attorney’s Office for the Southern District of New York and supported by the Department of Justice’s Organized Crime and Drug Enforcement Task Force. As part of that investigation, in March 2009, this Office obtained Indictments charging three members of Two Gunz Up and the Elm Street Wolves, an allied Yonkers street gang -- Gregory Fuller, Davon Young, and Thomas Chambliss -- with the January 2008 murder of a narcotics dealer in northern Yonkers. Fuller, Young, and Chambliss were each convicted after trial of murder, conspiracy to distribute crack cocaine, robbery, and firearms offenses and were sentenced to 100, 65 and 45 years of imprisonment, respectively.

In August 2011, 66 Yonkers gang members – 47 members and associates of the Elm Street Wolves, 12 members and associates of the Cliff Street Gangsters and 7 other individuals -- were charged with narcotics trafficking and firearm offenses. Five of the Elm Street Wolves defendants were also charged with the murder of Christopher Cokley, a/k/a “Bracks,” a leading member of the Strip Boyz, a rival Yonkers gang. Each of those defendants has since been convicted, many of them facing mandatory minimum sentences of between 10 and 18 years of imprisonment. Only one of those defendants, Steven Knowles, the leader of the Elm Street Wolves, proceeded to trial. After trial, Knowles was convicted of murder, racketeering, narcotics and firearms offenses and now faces a mandatory term of life imprisonment.

Two Gunz Up, from Riverdale Avenue, has historically been aligned with other street gangs, including the Elm Street Wolves and the Cliff Street Gangsters, in a violent dispute with a number of rival gangs, including the Strip Boyz from the nearby Schlobohm Housing Project on Schroeder Street in Yonkers. In June 2012, 23 members and associates of the Strip Boyz were arrested and charged with narcotics trafficking and firearm offenses. Fifteen of these defendants have pled guilty, with all but one facing mandatory minimum sentences of between 5 and 12 years of imprisonment. The remaining cases are not yet resolved.

All 11 defendants charged in the Indictment unsealed today were arrested today or have previously been taken into custody. They were presented in White Plains federal court this afternoon. The case is assigned to United States District Judge Vincent L. Briccetti.

Mr. BHARARA praised the outstanding investigative work of the FBI and the Yonkers Police Department. He added that the investigation is continuing.

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

Riverdale Takedown.Indictment
Riverdale Takedown.Indictment

Preet Bharara, 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 the unsealing of a two-count Complaint charging JOSEPH KRZEMINSKI, the Village of Port Chester Police Chief, with tampering with, and retaliating against, a witness in a federal investigation being conducted by the FBI. The Complaint alleges that the FBI is conducting an investigation into allegations surrounding the disappearance of over $26,000 in cash and narcotics from the evidence room at the Port Chester Police Department, and other allegations of theft and misconduct. The Complaint further alleges that KRZEMINSKI, age 62, physically threatened and retaliated against the Port Chester Police Department’s Acting Chief, who has been cooperating with the FBI in its investigation. KRZEMINSKI was arrested yesterday afternoon and was presented before United States Magistrate Judge Lisa Margaret Smith in White Plains federal court. KRZEMINSKI was released pursuant to a $100,000 personal recognizance bond to the custody of his son.

According to the Complaint unsealed in White Plains federal court:

Since early September 2013, the FBI has been investigating the theft of more than $26,000 in cash from one of the evidence rooms at the Port Chester (Westchester County, New York) Police Department headquarters and additional matters. Shortly after the investigation began, KRZEMINSKI was directed by the Village of Port Chester "not to exercise any of the authority, responsibilities and duties associated with being the Chief of Police" until he was authorized to return to duty. The Village also appointed a Captain of the Port Chester Police Department to the position of Acting Chief. After assuming his duties, the Acting Chief provided information to the FBI relating to possible violations of federal law.

On October 28, 2013, KRZEMINSKI forced his way inside the Acting Chief's home in Port Chester and shouted that the Acting Chief was a "rat" and a "rat bastard." KRZEMINSKI also stated to the Acting Chief, “Who do you think you are telling those people what's going on?" and further said that the Acting Chief did not have the authority to make such reports. KRZEMINSKI also stated, in substance and in part, that he would fire the Acting Chief when KRZEMINSKI returned to duty. During the encounter, KRZEMINSKI put his hands on the Acting Chief's shoulders near his neck. At another point during the encounter, KRZEMINSKI made a fist and cocked his arm, as if he intended to strike the Acting Chief.

On the same day, KRZEMINSKI placed a call to the Port Chester Police Department and told a supervisory police officer that “if [the Acting Chief] doesn’t think I’m coming back he’s dreaming” and that “the first thing I’m gonna do is retaliate against him.” KRZEMINSKI further explained that when he returned to work he would immediately place the Acting Chief on unpaid leave. KRZEMINSKI repeatedly told the supervisory police officer to tell the Acting Chief what he had said.

The Port Chester Village Board met in the late afternoon of October 31, 2013. As the Board was about to go into executive session, KRZEMINSKI forced his way into the room and refused to leave. After the Acting Chief warned KRZEMINKSI that he would be arrested if he did not leave, KRZEMINSKI stated "Go fuck yourself. Don't you tell me you gonna arrest me." KRZEMINSKI then stated, "Let me tell you what this scumbag did to me." The Acting Chief then directed police officers who were present to arrest KRZEMINSKI. KRZEMINSKI resisted arrest, but was handcuffed and removed.

KRZEMINSKI faces, upon conviction, a maximum sentence of 20 years' imprisonment on each of the two counts charged in the Complaint, which charge KRZEMINSKI with witness tampering and retaliating against a witness.

This prosecution is being handled by the Office's White Plains Division. Assistant U.S. Attorney James McMahon 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.

KrzeminskiJoseph.Complaint

U.S. v. SAC Capital Advisors, LP, et al. Indictment
U.S. v. SAC Capital Advisors, LP, et al. Complaint - 13 Civ 5182
U.S. v. SAC Capital Advisors, LP, et al. Change of Plea Order
U.S. v. SAC Capital Advisors LP, et al. Cover Ltr, Plea Agt, and Stip

Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today an agreement (the “Agreement”) to resolve insider trading charges against four companies – 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”) – that are responsible for the management of a group of affiliated hedge funds, collectively (the “SAC Hedge Fund” or “SAC”).

Under the Agreement, which is subject to Court approval, the SAC Companies will plead guilty to each count in which they are charged of an indictment (the “Indictment”) unsealed in July of this year charging the SAC Companies with securities fraud and wire fraud in connection with a large-scale insider trading scheme. The Agreement imposes a $1.8 billion financial penalty on the SAC Companies – the largest insider trading penalty in history – split between a $900 million fine in the criminal case (the “Criminal Case”), and a $900 million forfeiture judgment in a civil money laundering and forfeiture action (the “Forfeiture Action”) filed by the Government simultaneously with the criminal charges. It also provides that the SAC Companies and their affiliates will no longer accept outside investor funds and will shut down operations as an investment adviser.

The Agreement between the Government and the SAC Companies to plead guilty to all of the charges in the Indictment in which they are charged and resolve the Forfeiture Action is subject to judicial review and approval. The Government submitted the Agreement this morning to U.S. District Judge Laura T. Swain, who is presiding over the Criminal Case, captioned United States v. S.A.C. Capital Advisors, L.P., et al., 13 Cr 541 (LTS), and U.S. District Judge Richard J. Sullivan, who is presiding over the Forfeiture Action, captioned United States v. S.A.C. Capital Advisors, L.P., et al., 13 Civ. 5182 (RJS). The Agreement has no force unless and until it is approved by the district judges.

Manhattan U.S. Attorney Preet Bharara said: “As I said four years ago, at the time of our first major insider trading arrests, greed sometimes is not good. And there are at least 75 convicted insider trading defendants who, today, would likely agree. But individual guilt is not the whole of our mission. Sometimes, blameworthy institutions need to be held accountable too. No institution should rest easy in the belief that it is too big to jail. That is a moral hazard that a just society can ill afford. Today, SAC Capital, one of the world’s largest and most powerful hedge funds, agreed to plead guilty, shut down its outside investment business, and pay the largest fine in history for insider trading offenses. That is the just and appropriate price for the pervasive and unprecedented institutional misconduct that occurred here.”

FBI Assistant Director-in-Charge George Venizelos said: “What SAC Capital’s plea demonstrates is that cheating and breaking the law were not only permitted but allowed to persist. The result is $1.8 billion in fines and forfeiture, the largest penalty in an insider trading case ever, and termination of their investment advisory business. The problem of insider trading is real. For companies that willfully turn a blind eye, be on notice: how your employees make money is just as important as how much they make. The FBI’s investigation into insider trading on Wall Street, on Main Street, in hedge funds, at expert networking firms, and anywhere else, continues.”

As alleged in the Indictment, 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.

The Complaint in the Forfeiture Action alleges that the SAC Companies engaged in money laundering by commingling the illegal profits from insider trading with other assets, using the profits to promote additional insider trading, and transferring the profits with the assistance of financial institutions.

The Agreement announced today has two component parts: first, a plea agreement to resolve the Criminal Case, and second, a stipulation and proposed order to resolve the civil money laundering and forfeiture claims in the Forfeiture Action. Both documents have been submitted to the district judges for review. If approved, the Agreement would provide for the following:

• The SAC Companies will plead guilty to all counts of the Indictment in which they are charged, which include a securities fraud and wire fraud count for each of the SAC companies.
• The SAC Companies will pay a $1.8 billion financial penalty, consisting of a $900 million fine in the Criminal Case and a $900 million judgment in the Forfeiture Action. Because the SAC Companies have already agreed to pay $616 million to the U.S. Securities & Exchange Commission to resolve related civil insider trading charges, that amount will be credited against today’s penalty, and therefore, the additional payment required under this Agreement will be approximately $1.2 billion. The SAC Companies have further agreed that neither they nor any other person or entity paying any portion of the $1.8 billion financial penalty shall claim any tax deduction or credit for any money paid in resolving the Criminal Case and the Forfeiture Action.
• The SAC Companies will no longer accept third party investor funds and will terminate operations as an investment adviser.
• The SAC Companies will each be sentenced to five-year terms 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 will 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.

The Agreement would resolve the criminal charges against the SAC Companies but does not provide any individual with immunity from prosecution. Under the terms of the Agreement, the Government is not prevented from charging any individual with insider trading offenses and seeking the maximum prison term authorized by law for such offenses.

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 is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed 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 U.S. Attorneys Arlo Devlin-Brown, Antonia M. Apps 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.

The Agreement relates only to the guilt of the SAC Companies and resolves pending charges against only the SAC Companies – it does not include any admissions pertaining to individual defendants. All criminal defendants are presumed innocent unless and until proven guilty.

U.S. v. SAC Capital Advisors LLP, et al. Cover Ltr, Plea Agt, and Stip

Preet Bharara, the United States Attorney for the Southern District of New York, announced that SEMEN DOMNITSER was sentenced today in Manhattan federal court to eight years in prison for his participation in a $57 million fraud scheme that targeted programs administered by the Conference on Jewish Material Claims Against Germany, Inc. (the “Claims Conference”), and that were established to aid the survivors of Nazi persecution. DOMNITSER, a former employee of the Claims Conference who served as the Director of the relevant programs from 1999 to 2010, was convicted on May 8, 2013 of one count of conspiracy to commit mail fraud and one count of mail fraud, following a four-week trial. He was sentenced today by U.S. District Judge Thomas P. Griesa.

Manhattan U.S. Attorney Preet Bharara said: “As the highest ranking insider to participate in this despicable fraud against the Holocaust Claims Conference, Mr. Domnitser played an integral role in the scheme by processing fraudulent applications to the Conference and turning a profit of thousands of dollars for himself. With today’s sentence, he will be held to account for victimizing Holocaust survivors by diverting funds meant to help them to his own pocket and contributing to this $57 million scheme.”

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

The Claims Conference, a not-for-profit organization that provides assistance to victims of Nazi persecution, supervises and administers several funds that make reparation payments to victims of the Nazis, including “the Hardship Fund” and “the Article 2 Fund,” both of which are funded by the German government. Applications for disbursements through these funds are processed by employees of the Claims Conference’s office in Manhattan, New York, and the employees are supposed to confirm that the applicants meet the specific criteria for payments under the funds.

As part of the charged scheme, a network of individuals systematically defrauded the Article 2 Fund and Hardship Fund programs for over a decade. The Claims Conference first suspected the fraud in November 2009, and immediately reported their suspicions to law enforcement, which conducted a wide-reaching investigation.

The Hardship Fund pays a one-time payment of approximately $3,500 to victims of Nazi persecution who evacuated the cities in which they lived and were forced to become refugees. Members of the conspiracy submitted fraudulent applications for people who were not eligible. Many of the recipients of fraudulent funds were born after World War II, and at least one person was not even Jewish. Some members of the conspiracy recruited other individuals to provide identification documents, such as passports and birth certificates, which were then fraudulently altered and submitted to corrupt insiders at the Claims Conference, who then processed those applications. When the applicants received their compensation checks, they kept a portion of the money and passed the rest back up the chain, to their recruiters and others involved in the scheme.

From the investigation to date, the Claims Conference has determined that at least 3,839 Hardship Fund applications appear to be fraudulent. These applications resulted in a loss to the Hardship Fund of approximately $12.3 million.

The Article 2 Fund makes monthly payments of approximately $400 to survivors of Nazi persecution who make less than $16,000 per year, and either lived in hiding or under a false identity for at least 18 months; lived in a Jewish ghetto for 18 months; or were incarcerated for six months in a concentration camp or a forced labor camp. The fraud involved doctored identification documents in which the applicant’s date and place of birth had been changed. The fraud also involved more sophisticated deception, including altering documents that the Claims Conference obtained from outside sources to verify a person’s persecution by the Nazis. Some of the detailed descriptions of persecution in the fraudulent Article 2 Fund applications were completely fabricated.

From the investigation to date, the Claims Conference has determined that at least 1,112 Article 2 Fund cases it processed have been determined to be fraudulent. Those cases have resulted in a loss to the Claims Conference of approximately $45 million.

DOMNITSER was an Article 2 Fund caseworker from 1994 until 1999, and as a caseworker, helped process fraudulent applications. In 1999, DOMNITSER became the Director of both the Article 2 Fund and the Hardship Fund, and continued to serve in that role until his termination in February 2010. As Director, DOMNITSER approved fraudulent applications and received thousands of dollars in payments – typically in the form of money orders – from applicants who had received money from the funds to which they were not entitled.

In addition to his prison term, DOMNITSER, 55, of Brooklyn, New York, was sentenced to three years of supervised release. He was also ordered to forfeit $59,230 and pay restitution in the amount of $57.3 million.

Since 2010, a total of 31 individuals have been charged with participating in the scheme to defraud the Article 2 Fund and Hardship Fund programs. Twenty-eight defendants pled guilty and three—DOMNITSER, Luba Kramrish, and Oksana Romalis—were convicted after trial. Kramrish was sentenced by Judge Griesa on September 20, 2013, to 37 months in prison, and Romalis is scheduled to be sentenced before Judge Griesa on November 26, 2013, at 11:00 a.m.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation (“FBI”). He also thanked the Claims Conference for bringing this matter to the FBI’s attention and for its continued cooperation.

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that S. GEORGE MILTER pled guilty today in Manhattan federal court to participating in an investment scheme that defrauded foreign investors out of nearly $1 million. As part of the scheme, MILTER lured investors with false promises that their funds would be safely invested in the U.S. financial markets through a legitimate broker-dealer. Instead, MILTER and his co-defendant Cliffe R. Bodden misappropriated the money by transferring it to related individuals and entities and using it to pay certain personal expenses. MILTER pled guilty today before U.S. District Judge Katherine B. Forrest.

Manhattan U.S. Attorney Preet Bharara said: “George Milter lied to foreign investors about the safety and performance of their funds while he diverted their money for his own purposes. With his guilty plea today, he joins the disgraced ranks of those convicted for perpetrating investment fraud.”

According to the Indictment against MILTER and Bodden, and statements made during MILTER’s plea allocution today, and prior court proceedings:

MILTER held himself out as the Chief Executive Officer of Lempert Brothers International U.S.A., a registered broker-dealer in Manhattan, and President and Chief Executive Officer of Lempert Capital Management, Ltd., which purportedly was incorporated in the Cayman Islands and managed by Lempert Brothers. Bodden held himself out as a Managing Director of Lempert Capital.

Starting in approximately 2005, MILTER lured foreign investors into sending at least $946,509 to Lempert Brothers under the pretense that those funds would be invested in the U.S. financial markets. To induce investors into wiring funds, MILTER falsely told them that the funds would be safeguarded, and that if the value of the funds dropped more than 20%, the money would be frozen and all remaining funds available for return to investors. In fact, MILTER and Bodden misappropriated the nearly $1 million of investors’ funds by using the money to pay their personal expenses and diverting the funds to a member of MILTER’s family and entities affiliated with Bodden.

To keep the scheme going, MILTER and Bodden sent fraudulent monthly account statements to the investors. These statements falsely reflected that the investors’ funds were invested and earning substantial income. When the investors attempted to withdraw money from their accounts at Lempert Brothers, MILTER and Bodden made additional false and fraudulent representations as to why the funds could not be returned when requested. For example, they falsely told investors that their money was illiquid because it had been invested in various companies that had not yet gone public.

MILTER, 35, of New York, New York, pled guilty to one count of wire fraud and faces a maximum sentence of 20 years in prison. In addition, he has agreed to a money judgment of $946,509 representing the amount of the crime proceeds. Milter is scheduled to be sentenced by Judge Forrest on March 7, 2014 at 2:00 p.m.

Bodden pled guilty in September 2012 to one count of conspiracy to commit wire fraud and one count of wire fraud for his participation in the investment scheme. He was sentenced by Judge Forrest in February 2013 to 74 months in prison and ordered to pay a money judgment and restitution of $946,509 representing the amount of the crime proceeds, as well as a fine of $25,000.

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

This case is being handled by the Office’s Complex Frauds Unit. Assistant United States Attorney Carrie H. Cohen is in charge of the prosecution.

Milter, Bodden Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, Ronald A. Cimino, Deputy 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 PAUL M. DAUGERDAS was convicted in Manhattan federal court for his role in a tax shelter scheme in which he and his co-conspirators designed, marketed, and implemented fraudulent tax shelters used by wealthy individuals to avoid paying taxes to the IRS. The 10-year scheme generated over $7 billion of fraudulent tax losses and netted DAUGERDAS approximately $95 million in profits. DAUGERDAS was convicted following a seven-week jury trial, presided over by U.S. District Judge William H. Pauley III.

Manhattan U.S. Attorney Preet Bharara said: “Paul Daugerdas concocted an elaborate web of lies in orchestrating a fraudulent tax shelter scheme that spanned a decade, generated more than $7 billon in phony tax losses, and made the defendant $95 million in profits. With yesterday’s guilty verdict, the defendant will now be punished for his actions.”

DAAG Ronald Cimino said: “The jury's guilty verdict of Paul Daugerdas reaffirms the principle that an individual who utilizes his expertise, training and skills to create and market fraudulent tax schemes will be prosecuted to the full extent of the law and ultimately held accountable for the crimes that he committed.”

IRS-CI Chief Richard Weber said: “Mr. Daugerdas’s use of convoluted mechanisms to conceal income from the IRS is criminal activity. He designed and marketed tax shelters making him $95 million in illegal profits from the ten-year scheme. Taxpayers deserve our vigilance in making sure everyone pays their fair share of tax.”

According to the evidence admitted at trial and other documents filed in the case:

From 1994 through 2004, DAUGERDAS, a lawyer, certified public accountant, and the former head of the Chicago office of the Jenkens & Gilchrist law firm (“J&G”) and its tax practice, participated in a scheme to defraud the IRS by designing, marketing, implementing, and defending fraudulent tax shelters.

As part of the scheme, DAUGERDAS and others undertook to prevent the IRS from: (i) detecting their clients’ use of these shelters; (ii) understanding how the transactions operated to produce the tax results reported by the clients; (iii) learning that the shelters were marketed as cookie-cutter products designed to eliminate or reduce large tax liabilities; (iv) learning that the clients were not seeking profit-making investment opportunities, but were instead seeking huge tax benefits; and (v) learning that, from the outset, all the clients intended to complete a pre-planned series of steps that had been designed to lead to the specific tax benefits sought by the clients. DAUGERDAS and others created, and assisted in creating, transactional documents and other materials that falsely and fraudulently described their clients’ motivations for entering into the tax shelters and for taking various steps in order to yield the tax benefits.

As a result of the scheme, the defendant and his co-conspirators made millions of dollars in fees and bonuses. Specifically, DAUGERDAS made $95 million in profits but used tax shelters to reduce the taxes he paid to less than $8,000; without the shelters, he would have owed over $32 million in taxes.

DAUGERDAS, 63, of Wilmette, Illinois, was convicted of conspiring to defraud the IRS, to evade taxes, and to commit mail and wire fraud, and of corruptly endeavoring to obstruct and impede the internal revenue laws. He was also convicted of four counts of tax evasion relating to the use of various tax shelters for specified clients, and of mail fraud.

DAUGERDAS faces a maximum sentence of 58 years in prison. He is scheduled to be sentenced by Judge Pauley on March 21, 2014, at 2:15 pm.

DAUGERDAS’s co-defendant at trial, Denis M. Field, was acquitted of all charges.

In connection with this same scheme, David Parse, a former broker at Deutsche Bank was convicted of various tax fraud charges in May 2011 after an 11-week jury trial, and was sentenced in March 2013 to 46 months in prison. Donna Guerin, a former lawyer at J&G’s Chicago tax practice pled guilty for her role in the scheme to various tax fraud charges in September 2012. She was sentenced in March 2013 to eight years in prison.

Former J&G partner Erwin Mayer, former BDO Seidman Vice Chairman and board member Charles W. Bee, Jr., former BDO principal and former member of BDO Seidman’s TSG and Tax Opinion Committee Michael Kerekes, former BDO Seidman Vice Chairman and TSG member Adrian Dicker, BDO Seidman partner Robert Greisman, and BDO Seidman partner Mark Bloom have all previously been convicted in connection with the scheme.

Mr. Bharara thanked the IRS and the Tax Division of the Department of Justice for their work on this case.

This case is being prosecuted by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Stanley J. Okula, Jr. and Niketh Velamoor, and DOJ Tax Division Assistant Chief Nanette L. Davis, are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that DR. SPYROS PANOS, an orthopedic surgeon, pled guilty today in White Plains federal court before U.S. District Judge Nelson S. Roman to operating a long-running health care fraud scheme in which PANOS defrauded Medicare, the New York State Insurance Fund, and numerous private health insurance providers (the “Health Insurance Providers”) out of over $2.5 million by systematically lying about the nature and scope of the surgical procedures that he performed.

Manhattan U.S. Attorney Preet Bharara said: “Dr. Panos was brazen in his fraud on federal, state, and private health insurance providers. He filed claims for thousands of surgical procedures, often more than 20 a day, billing a total of over $35 million, when he actually performed lesser procedures, or none at all. We and our law enforcement partners finally put a halt to his abuses.”

According to the Information and other documents filed in this case:

PANOS was a board certified orthopedic surgeon licensed to practice medicine in the State of New York who was part a medical group with offices in Dutchess County, New York, (the “Medical Group”) and performed orthopedic surgical procedures (“Surgical Procedures”) at hospitals in Poughkeepsie, New York. From at least 2006 through July 2011, PANOS maintained a high-volume orthopedic practice, which enabled him to carry out his fraud scheme on a large scale. Panos performed thousands of Surgical Procedures, and often as many as 20 or more in a single day, for which he and the Medical Group submitted claims in excess of $35 million to Health Care Providers. Health Care Providers paid the Medical Group in excess of $13 million on these claims.

To receive payments for Surgical Procedures from the Health Insurance Providers, PANOS was required to submit, and caused the Medical Group to submit, information to the Health Insurance Providers regarding the nature and details of the Surgical Procedures. With respect to many of the Surgical Procedures he performed, PANOS furnished, and caused the Medical Group to furnish, false information to Health Insurance Providers that resulted in the Health Insurance Providers paying the Medical Group at least $2.5 million more than PANOS and the Medical Group were entitled to receive based on the true nature and details of the Surgical Procedures PANOS performed. Among PANOS’s false representations were the following:

a. PANOS claimed he performed open surgeries, when in fact PANOS performed the surgeries arthroscopically;

b. PANOS claimed he used certain techniques and procedures during the course of the Surgical Procedures, when in fact PANOS did not, either because they were not medically necessary or because PANOS used other techniques and procedures that would have resulted in lower payments, if any, from the Health Insurance Providers; and

c. PANOS removed body tissue, known in the medical field as loose bodies, in excess of certain size criteria, when in fact PANOS either removed no loose bodies or removed loose bodies that were smaller than the thresholds set by the Health Insurance Providers for payment.

PANOS, was compensated handsomely -- during the years 2007 through 2011, he was paid over $7.5 million by the Medical Group, a number that was inflated as a result of his fraud scheme.

Beginning in or about December 2010, PANOS attempted to conceal his scheme by, among other things, falsely representing to the Medical Group that the Fraudulent Claims were the result of clerical errors.

PANOS, 45, of Hopewell Junction, New York, faces a maximum sentence of 10 years in prison. PANOS agreed to the entry of a $5 million order of forfeiture against him, representing the approximate proceeds of his charged crime. As a result of his conviction, PANOS is subject to mandatory exclusion from participation in any Federal health care program, including Medicare and Medicaid, and he has agreed not to oppose a request by the Government that, as part of his sentence, the Court prohibit him from practicing medicine as a condition of probation or supervised release. Following the uncovering of the scheme, Panos surrendered his New York State medical license. As part of his plea agreement, PANOS must take any reasonable steps necessary to ensure that his Connecticut, Pennsylvania, and Virginia medical licenses are revoked, surrendered, or suspended by the time of sentencing. PANOS is scheduled to be sentenced by U.S. District Court Judge Roman on March 7, 2014.

Mr. Bharara praised the work of the United States Postal Inspection Service, the United States Department of Health and Human Services – Office of Inspector General, and the Federal Bureau of Investigation, and thanked the United States Department of Health and Human Services, Office of Counsel to the Inspector General, the New York State Insurance Fund, and the New York Workers’ Compensation Board Office of the Fraud Inspector General for their extraordinary assistance in the investigation.

This case is being handled by the White Plains Division. Assistant United States Attorneys Lee Renzin and Daniel Filor are in charge of the prosecution.

Panos, Spyros Information

Preet Bharara, the United States Attorney for the Southern District of New York, and Mythili Raman, Acting Assistant Attorney General for the Justice Department’s Criminal Division, announced that VLADIMIR KATS pled guilty today in Manhattan federal court to money laundering and operating an unlicensed money transmitting business for his role in running LIBERTY RESERVE, a company that operated one of the world’s most widely used digital currency services and allegedly laundered more than $6 billion in suspected proceeds of crimes. KATS was arrested in Brooklyn, New York, in May 2013. KATS pled guilty today before U.S. District Judge Denise L. Cote.

Manhattan U.S. Attorney Preet Bharara said: “As a co-founder and operator of Liberty Reserve, Vladimir Kats served as a global banker for criminals, giving them an anonymous, online forum to hide the proceeds of their illegal and dangerous activities. With his guilty plea today, we take a significant step toward punishing those responsible for creating and running this international den of cybercrime.”

Acting Assistant Attorney General Mythili Raman said: “Vladimir Kats, by his own admission, helped to create and operate an anonymous digital currency system that provided cybercriminals and others with the means to launder criminal proceeds on an unprecedented scale. His conviction reinforces what we said when Liberty Reserve was first brought down: banking systems that allow criminals to conduct illegal transactions anonymously will not be allowed to stand, and professional money launderers will be brought to justice.”

According to allegations contained in the Indictment filed against LIBERTY RESERVE, KATS, and six other individual defendants, the Superseding Information against KATS, and statements made in related court proceedings:

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

Before being shut down by the Government in May 2013, LIBERTY RESERVE had more than one million users worldwide, including more than 200,000 users in the United States, who conducted approximately 55 million transactions through its system and laundered more than $6 billion in suspected proceeds of crimes, including credit card fraud, identity theft, investment fraud, computer hacking, child pornography, and narcotics trafficking. KATS co-founded LIBERTY RESERVE and helped operate the company until in or about 2009.

KATS, 41, of Brooklyn, New York, pled guilty to one count of conspiring to commit money laundering, which carries a maximum sentence of 20 years in prison; one count of conspiring to operate an unlicensed money transmitting business, which carries a maximum sentence of five years in prison; one count of operating an unlicensed money transmitting business, which carries a maximum sentence of five years in prison; one count of receiving child pornography, which carries a maximum sentence of 40 years in prison and a mandatory minimum sentence of fifteen years in prison; and one count of marriage fraud, which carries a maximum sentence of five years in prison. A sentencing date has not yet been scheduled.

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

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

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

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

Kats, Vladimir S6 Information

Preet Bharara, the United States Attorney for the Southern District of New York, announced that TYRONE L. GILLIAMS, JR., a Philadelphia businessman, was sentenced today in Manhattan federal court to 10 years in prison after having been found guilty at trial in February 2013 of engaging in securities and wire fraud in connection with two separate schemes. In the larger of the two schemes, GILLIAMS and co-defendant Everette L. Scott, Jr., solicited and misappropriated $5 million in investments in a bogus United States Treasury Strips investment program. In the other scheme, the defendants solicited and misappropriated a $450,000 investment in a Utah coal mine. In addition to buying luxury cars, jewelry, and other items, GILLIAMS spent hundreds of thousands of dollars of investor money organizing and promoting a multi-day festival in Philadelphia that headlined Sean “Diddy” Combs. GILLIAMS was sentenced today by U.S. District Judge Deborah A. Batts.

Manhattan U.S. Attorney Preet Bharara stated, “With the lengthy sentence imposed today, Tyrone Gilliams has been dealt a penalty appropriate to his unlawful scheme, which took advantage of well-meaning investors and used their money to satisfy his own appetite. Our office is committed to pursuing and prosecuting those who commit similar offenses that victimize innocent investors.”

According to the Indictment and the evidence presented at trial:

In 2009 and 2010, GILLIAMS was the owner of TL Gilliams, LLC, which purported to engage in transactions in commodities like oil and gold. Scott was an attorney at a small law firm in New Jersey and acted as TL Gilliams, LLC’s general counsel.

In the summer of 2010, GILLIAMS solicited $5 million from two investors for purposes of trading in U.S. Treasury Strips, which are a derivative of U.S. Treasury Bonds. GILLIAMS and Scott arranged for the investors to make their investments by wiring them into an attorney trust account maintained by Scott’s law firm. Upon receiving the money, Scott – at GILLIAMS’s direction – misappropriated more than $700,000 to satisfy expenses stemming from an unrelated and failed venture to buy a coal mine in Utah. Scott also claimed $50,000 of the investment money for himself as purported fees. At GILLIAMS’ direction, Scott transferred most of the remainder to bank and brokerage accounts that GILLIAMS controlled.

At most, GILLIAMS purchased $250,000 worth of Treasury Strips with the more than $4 million in investment money transferred by Scott. Over a span of less than six months, GILLIAMS spent more than $1.6 million on an unrelated gold investment; more than $200,000 to purchase a commercial warehouse in Denver; at least $100,000 to buy or lease luxury cars; at least $50,000 for construction work on his home; at least $100,000 on luxury hotel and travel expenses; and more than $500,000 promoting two events. The first event was a festival called “Joy to the World,” which involved an album release party with Jamie Foxx at the Vault nightclub in Philadelphia, and a red carpet, black tie gala at the Philadelphia Ritz-Carlton, headlined for a $120,000 fee by Sean “Diddy” Combs. The second event was a December 2010 comedy performance in Nassau, Bahamas, called the “Gatta Be Jokin’ Comedy Jam.”

GILLIAMS did not engage in any trading of Treasury Strips and, as a result, did not derive any profits. Nonetheless, during the period when he was spending investor money, GILLIAMS provided them with false reports of trades and profits, and made occasional, nominal payments that he falsely claimed represented profits from Treasury Strips trading. Other than these purported profit payments, which totaled approximately $100,000, neither investor received any of their combined $5 million investment back.

In a separate scheme, GILLIAMS and Scott arranged in late 2009 for an investor to transfer $450,000 to Scott’s attorney trust account, to be held in escrow until used in connection with a venture to purchase the assets of a bankrupt Utah coal mine. Once the money was in Scott’s account, he secretly misappropriated approximately $112,000 by claiming it as purported fees, and transferred the rest to GILLIAMS or other individuals and entities at GILLIAMS’ direction. Until August 2010, GILLIAMS and Scott falsely assured the victim that his $450,000 remained safely in escrow, long after Scott’s escrow account had been emptied. Although the victim repeatedly demanded the return of his funds, GILLIAMS and Scott pacified him by producing forged bank documents and a false attorney attestation letter written by Scott purporting to show that GILLIAMS was in possession of the millions of dollars necessary to purchase and operate the Utah coal mine. In August 2010, after an attorney for the victim threatened Scott with professional discipline for his failure to return the escrowed funds, GILLIAMS and Scott paid the victim $450,000 using funds they raised for investment in Treasury Strips.

In addition to the prison term, Judge Batts sentenced GILLIAMS, 46, of Philadelphia, Pennsylvania, to three years of supervised release. GILLIAMS was also ordered to make restitution in the amount of $5 million, to forfeit $5 million, and to pay a $300 special assessment fee.

In September 2013, Scott, 51, of Sewell, New Jersey, was sentenced to a 30 months in prison, to be followed by three years of supervised release.

Mr. Bharara praised the work of the Criminal Investigators of the United States Attorney’s Office and the Federal Bureau of Investigation, which jointly investigated this case. He also thanked the U.S. Securities and Exchange Commission.

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 U.S. Attorneys Michael A. Levy and David B. Massey are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, Joseph Anarumo, Jr., Special-Agent-in-Charge of the New York Division of the United States Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), and Raymond W. Kelly, the Police Commissioner of the City of New York (“NYPD”), announced that HECTOR RAYMOND PEÑA and JOSE PEÑA were found guilty yesterday of conspiracy to commit murder-for-hire, murder-for-hire, and the use of a firearm in connection with murder-for-hire. HECTOR RAYMOND PEÑA and JOSE PEÑA were convicted after a 10-day jury trial before U.S. District Judge Victor Marrero.

Manhattan U.S. Attorney Preet Bharara said: “Hector Raymond Peña and Jose Peña were cold-blooded contract killers who went to great lengths – even impersonating law enforcement – to commit their brutal murders. Yesterday’s swift convictions by the jury ensure that they will spend the rest of their lives behind bars paying for the lives they took.”

ATF Special Agent-in-Charge Joseph Anarumo, Jr. said: “The Solid Gold investigation exemplifies the power of inter-agency cooperation like no other. The case has endured the test of time and has closed homicides that have – up until this point – been open, cold cases. Now, after approximately 16 years, the resolve and determination of the investigators and prosecution team have finally given closure to the victims’ families. Justice has been done.”

NYPD Commissioner Raymond W. Kelly said: “Although New York City has vastly improved from the murderous days of the 1990s when these defendants committed their vicious acts, the NYPD never let up its investigation and secured the arrests that followed. Yesterday’s verdict represents unrelenting work by detectives with the support of U.S. Attorney Preet Bharara’s office, whose prosecutors also are to be commended for delivering justice.”

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

HECTOR RAYMOND PEÑA and others were hired by a drug organization to murder Pedro Medina in the spring of 1997. On May 9, 1997, HECTOR RAYMOND PEÑA and others carried out that murder contract by impersonating police officers, abducting Mr. Medina in front of his home, executing him by shooting him in the head twice, and dumping his body on the side of the Harlem River Drive in Manhattan, New York.

HECTOR RAYMOND PEÑA, JOSE PEÑA, and others were hired by a different drug organization to murder members of a robbery crew in the summer of 1997. On June 25, 1997, HECTOR RAYMOND PEÑA, JOSE PEÑA, and others carried out that murder contract by impersonating police officers, abducting Jose Suarez and Juan Carmona, executing them by shooting them in the head, and burning their bodies beyond recognition inside a vehicle they left on the side of the Henry Hudson Parkway in Manhattan, New York.

HECTOR RAYMOND PEÑA and JOSE PEÑA face mandatory minimum sentences of life in prison. They are scheduled to be sentenced by Judge Marrero on February 28, 2014, at 2:00 p.m.

Mr. Bharara praised the investigative work of the Bureau of Alcohol, Tobacco, Firearms & Explosives and the New York City Police Department.

This case is being prosecuted by the Office’s Violent Crimes Unit. Assistant United States Attorneys Laurie A. Korenbaum, Timothy D. Sini, and Micah W. J. Smith 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 Field Office of the Federal Bureau of Investigation (“FBI”), and Raymond W. Kelly, the Commissioner of the New York City Police Department (“NYPD”) announced today the unsealing of charges against 13 members of a burglary ring (the “Burglary Ring”) alleged to be responsible for more than 125 burglaries and attempted burglaries of pharmacies in Manhattan, the Bronx, Queens, and Brooklyn since 2010. BRYAN ALTAGARCIA, EDWIN ARAUJO, MARTIN AVALO, ALVARADO DOMINGUEZ, ALAN FELIZ, DAVID SANTIAGO, and CARLOS VALLEJO were arrested today in Manhattan and the Bronx, and are expected to be presented and arraigned in Manhattan federal court before U.S. Magistrate Judge Michael H. Dolinger later this afternoon. MIGUEL ARAUJO was arrested today in Boston, and is expected to be presented and arraigned later this afternoon in federal district court in the District of Massachusetts. GUILLLERMO ARAUJO, JOSE GONZALEZ, and ESFRAIN SILVA are already in custody in connection with pending cases. Two other defendants, CHRISTIAN LORA and ANDY MACCOW, remain at large.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, this group of defendants went to extreme lengths to break into pharmacies across New York City in order to feed their voracious appetite for cash and prescription drugs to peddle. This Office has zero tolerance for those who contribute to the growing prescription drug abuse epidemic, and thanks to our partners at the NYPD and FBI, this ring of alleged offenders has been apprehended and will be prosecuted.”

FBI Assistant Director-in-Charge George Venizelos said: “As alleged in the indictment, the defendants participated in a complex burglary scheme to steal controlled prescription drugs and money from numerous victim pharmacies. Allegedly using technology and physical surveillance to perpetuate their illegal activity, this band of thieves thought they could outsmart law enforcement. The defendants’ downfall was that they underestimated the dedication and commitment of the FBI’s Health Care Fraud Task Force and the NYPD. Using traditional investigative techniques and the defendants’ own technology against them, the FBI and its law enforcement partners put an end to their alleged criminal enterprise.”

NYPD Commissioner Raymond W. Kelly said: “Criminals who exploit drug addiction for profit will be pursued and prosecuted as any perpetrator of more immediately devastating offenses. That these individuals are alleged to have used luxury vehicles – from multiple Mercedes-Benzes to a Bentley – purchased from the proceeds of their narcotics sales illustrates the scope of their activity. I commend the detectives in the NYPD’s Major Case Squad and Financial Crimes Task Force, and their partners in U.S. Attorney Bharara’s office on their work in stopping this operation.”

According to the Indictment filed in Manhattan federal court and other information in the public record:

ALTAGARCIA, EDWIN ARAUJO, GUILLERMO ARAUJO, MIGUEL ARAUJO, AVALO, DOMINGUEZ, FELIZ, GONZALEZ, LORA, MACCOW, SANTIAGO, SILVA, and VALLEJO were members of a sophisticated Burglary Ring that stole controlled prescription drugs with a street value in the millions of dollars, and hundreds of thousands of dollars in cash.

The burglaries involved the entry and attempted entry into pharmacies through ceilings, walls, window bars, and doors. In some instances, the victimized pharmacies were in locations that provided cover for the defendants while they penetrated the exteriors of the pharmacies with crowbars, axes, and other tools. In others, the pharmacies were adjacent to commercial establishments that the defendants broke into and then used tools to enter the pharmacies through common walls.

The members of the Burglary Ring wore dark clothing, including hooded sweatshirts, masks, and gloves, and employed sophisticated planning and counter-surveillance techniques to avoid apprehension. They frequently circumvented or disabled burglar alarms and surveillance cameras. By communicating by cellphone with each other and with lookouts who were monitoring police scanners during the burglaries, they were able to escape the pharmacies with the stolen goods and cash before law enforcement was able to apprehend them.

The Indictment unsealed today is a result of a joint investigation by the FBI and NYPD that began in 2011 and continues. In addition to information provided by a cooperating witness who committed burglaries with various defendants, DNA evidence links AVALO, VALLEJO, and SILVA to three of the pharmacy burglaries, and cellphone data links various combinations of the defendants to more than 50 of the pharmacy burglaries. Through sophisticated analysis of cellphone information, law enforcement identified dozens of cellular telephones the burglars used during the burglaries. Extensive evidence demonstrates that the various defendants were the users of those cellphones during more than 50 of those burglaries. In addition, numerous photographs recovered from cellphones belonging to various defendants and searched pursuant to warrants depict the defendants holding large amounts of U.S. currency, wearing expensive jewelry, associating with one another, and possessing high-end luxury automobiles.

The Indictment seeks the forfeiture of several luxury cars used by the defendants to commit the burglaries and purchased with proceeds of narcotics trafficking, including a Bentley, which was captured on surveillance video being used by some of the defendants as a getaway vehicle during several recent pharmacy burglaries, and several Mercedes-Benz vehicles and a BMW.

In connection with the arrests today, the FBI and NYPD also executed search warrants on the residences of EDWIN ARAUJO on Wadsworth Avenue, AVALO on Saint Nicholas Avenue, DOMINGUEZ on West 188th Street, and VALLEJO on Audubon Avenue in New York, New York.

BRYAN ALTAGARCIA, 22, of the Bronx, New York; EDWIN ARAUJO, 30, of New York, New York; GUILLERMO ARAUJO, 24, of New York, New York; MIGUEL ARAUJO, 22, of the Bronx, New York; AVALO, 34, of New York, New York; DOMINGUEZ, 27, of New York, New York; FELIZ, 35, of New York, New York; JOSE GONZALEZ, 30, of New York, New York; CHRSTIAN LORA, 25, of New York, New York; ANDY MACCOW, 29, of New York, New York; DAVID SANTIAGO, 30 of New York, New York; SILVA, 20, of the Bronx, New York; and VALLEJO, 26, of New York, New York are each charged with one count of conspiracy to burglarize pharmacies of controlled substances, which carries a maximum sentence of 10 years in prison. SILVA faces an additional penalty of up to 10 years in prison for committing this offense while on bail in another federal case. All of the defendants except SILVA are also charged with conspiracy to distribute and possess with the intent to distribute controlled substances, which carries a maximum sentence of 20 years in prison. In addition, EDWIN ARAUJO, GONZALEZ, and MACCOW are charged with witness tampering in connection with the beating of a cooperating witness in a federal case against SILVA, which carries a maximum sentence of 30 years in prison.

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

Mr. Bharara praised the efforts of the FBI's Health Care Fraud Task Force and the Bronx Major Case Squad of the NYPD. 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 is composed of 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. Mr. Bharara also thanked the Boston Field Office of the FBI for its assistance in locating and arresting MIGUEL ARAUJO.

The case is being prosecuted by the Office’s Organized Crime Unit. Assistant U.S. Attorneys Jason A. Masimore and Russell Capone are in charge of the prosecution. Assistant U.S. Attorney Carolina Fornos of the Office’s Asset Forfeiture Unit is responsible for the forfeiture of assets.

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. Edwin Araujo et al. Indictment

Preet Bharara, United States Attorney for the Southern District of New York, and Toni Weirauch, the 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 nine-count Complaint charging New York political consultant MELVIN LOWE with fraud and tax violations. The Complaint alleges that LOWE defrauded the New York Democratic Senate Campaign Committee ("DSCC") and its contributors of $100,000 by causing a vendor to submit a false invoice for printing services to the DSCC. According to the Complaint, LOWE instructed the vendor to send $75,000 of the proceeds to LOWE and $20,000 to a political consultant and to keep $5,000 for himself. The Complaint further alleges that the $20,000 payment came days after a State Senator promised to pay a benefit to the consultant for assistance the consultant had previously provided to the Senator. In addition to this fraud charge, the Complaint charges LOWE with income tax violations for his failure to report more than $2 million in consulting income. He is also charged with causing his bank to make a false statement to his mortgage lender, and also for defrauding a Yonkers resident of $66,000. LOWE was arrested this morning and will be presented later today before United States Magistrate Judge Paul E. Davison in White Plains federal court.

Manhattan U.S. Attorney Preet Bharara stated: “Today’s Complaint alleges that New York's culture of political corruption extends beyond elected officials to the relatively unknown professional political insiders who work behind the scenes to carry out corrupt schemes. Our investigation will continue and we will continue bringing to justice every corrupt official we find, as well as those who allegedly execute their unlawful plots."

IRS-CI Special Agent-in-Charge Toni Weirauch stated: “Elected politicians and others involved in the political process, such as political consultants and insiders, must comply with the same laws as the rest of the American public. IRS-Criminal Investigation investigates tax crimes and other financial crimes to ensure that those who are involved in making the rules, directly or indirectly, are held accountable when they do not follow them.”

According to the allegations in the Complaint unsealed today in White Plains federal court:

Fraud on the Democratic Senate Campaign Committee

In June 2010, MELVIN LOWE, a political consultant who had been retained by the DSCC, caused a New Jersey based political consulting firm (the "Vendor") to submit to the DSCC a false invoice for printing services in the total amount of $100,000. LOWE told a representative of the Vendor to send a total of $75,000 to a bank account held by one of LOWE's companies, $20,000 to another New York political consultant (the "Consultant") and to keep $5,000 for himself. The Complaint alleges further that LOWE used the $75,000 he received to pay for the installation of a pool and other renovations at his second home in Georgia and to give $5,000 to a Manhattan community board member.

The Complaint charges that the Consultant received the $20,000 wire transfer from the Vendor several days after a State Senator, identified as "Senator #1," promised the Consultant a benefit for assistance that the Consultant previously had provided to the Senator. The Consultant, who is further described as a former staff member to elected officials in New York City, did not know the Vendor, had done no work for the Vendor and was not owed any money by the DSCC. The Complaint alleges that days after the Senator promised the Consultant a benefit, the Consultant learned of the $20,000 deposit into his bank account in a telephone call from LOWE.

Tax Violations

The Complaint also charges LOWE with three counts of subscribing to false tax returns for each of the years 2007 through 2009 and three counts of failing to file tax returns for each of the years 2010 through 2012. In total, LOWE is charged with failing to report more than $2 million in income from consulting services over a period of six years.

False Statement in Connection with Mortgage Loan Application

The Complaint charges further that LOWE caused an employee of Commerce Bank to make a false statement to LOWE's mortgage lender regarding the balance of LOWE's checking account at Commerce Bank. In 2007, LOWE obtained a mortgage loan from Premium Capital in the principal amount of approximately $225,000 that was secured by his second home in Georgia. As part of the loan application process, LOWE signed a form in which he represented that he had more than $80,000 in his checking account at Commerce Bank and authorized Commerce Bank to confirm that balance, as well as the average balance in the account over the previous two months, to Premium Capital. LOWE then asked an Assistant Manager at his local Commerce Bank branch to confirm that he had more than $80,000 in his checking account. The Assistant Manager did so, despite the fact that LOWE had less than $2,200 in that account at that time. The Complaint alleges that LOWE's fraudulently inflated checking account balance was a material misstatement in that it allowed LOWE to appear to have a positive net worth when, in fact, LOWE had a negative net worth at the time he closed on his mortgage loan. LOWE's mortgage loan balance remains above $225,000 today and the loan is now in foreclosure.

Fraud on Yonkers Resident

The Complaint alleges that LOWE also defrauded a Yonkers resident who is identified as "John Doe," of $66,000. LOWE told John Doe that he needed $66,000 in connection with his purchase of his second home in Georgia and that he would repay the loan within a few days. When John Doe asked LOWE to repay the loan, LOWE gave John Doe a check that was returned due to insufficient funds. Thereafter, LOWE promised to repay the loan at various times but failed to do so. He told John Doe on multiple occasions that he did not have the money to repay the loan when he, in fact, did have the money, the Complaint alleges.

LOWE, 52, of New York City, faces upon conviction a maximum sentence of 20 years' imprisonment on the count charging wire fraud in connection with the scheme to defraud the DSCC; a maximum sentence of 30 years' imprisonment on the count charging him with causing an employee of a federally insured bank to make a false report; a maximum of three years' imprisonment on each of the three counts charging him with subscribing to false tax returns; a maximum of one year's imprisonment on each of the three counts charging him with failure to file tax returns; and a maximum of 20 years' imprisonment on the count charging wire fraud in connection with the scheme to defraud the Yonkers resident.

Mr. Bharara praised the investigative work of IRS-CI and the investigators from the United States Attorney's Office for the Southern District of New York.

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

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

LoweMelvin.Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, and Raymond W. Kelly, the Police Commissioner of the City of New York (“NYPD”), announced today the unsealing of an Indictment charging six members of an armed robbery crew operating in the Bronx, Brooklyn and Queens, with robbery conspiracy and firearms offenses. Five of the defendants charged in the Indictment – HENRY JAMES, EDWARD MATTHEWS, KELVIN GREEN, UNTRA JONES JR., and TYRELL JONES – were previously charged by complaint in September 2013. Of the five defendants charged in September 2013, all but HENRY JAMES were previously arrested, remanded, and remain in custody. JAMES and previously uncharged defendant JEROME ORTIZ were arrested on Wednesday and presented before U.S. Magistrate Judge Frank Maas yesterday. JAMES and ORTIZ were detained.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, the defendants unleashed a rash of robberies at gunpoint across three boroughs, in which they stole money and cell phones while dressed in disguise. The perpetrators of violence cannot hide from the law, as the arrests of these defendants show.”

NYPD Commissioner Raymond W. Kelly said: “New York City is a safer place for residents and businesses because of our continued efforts to stop the source of violent crime. In this case, our investigators tracked down and apprehended a gang that allegedly robbed numerous stores across three boroughs at gunpoint. I commend our detectives for their diligent efforts as well as our federal partners and the prosecutors with the U.S. Attorney’s Office for their fine work throughout this investigation.”

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

Between approximately July 2013 and October 2013, members of the robbery crew engaged in a series of over 30 armed robberies and attempted armed robberies of cellular phone stores located throughout the Bronx, Queens, and Brooklyn.

The robberies followed a simple but violent pattern: On each occasion, two or three members of the crew would enter a cellular phone store, often wearing masks, wigs and other disguises; each member of the crew would have a gun; and the robbers would brandish their guns and demand money and cellular phones from employees of the stores.

JAMES, 45, of Brooklyn, New York; ORTIZ, 40, of Brooklyn, New York; MATTHEWS, 61, of Brooklyn, New York; GREEN, 44, of Brooklyn, New York; TYRELL JONES, 26, of Bronx, New York; and UNTA JONES, 27, of Brooklyn, New York, are each charged with one count of Hobbs Act robbery conspiracy, which carries a maximum sentence of life in prison, and one count of brandishing a firearm in furtherance of the Hobbs Act robbery conspiracy, which carries a maximum sentence of life in prison.

Mr. Bharara praised the investigative work of the NYPD, especially detectives from the Bronx Robbery Squad and Brooklyn Robbery Squad. Mr. Bharara also thanked the U.S. Marshals Service Fugitive Squad for their outstanding assistance in the pursuit and arrest of JAMES.

The case is being prosecuted by the Office’s Violent Crimes Unit. Assistant United States Attorneys Andrew Bauer and Andrea Griswold 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. Henry James et al. Indictment