Southern District of New York

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”), Brian R. Crowell, the Special-Agent-in-Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), and Toni Weirauch, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), today announced the unsealing of a protective order authorizing the seizure of approximately 144,336 Bitcoins found on computer hardware belonging to ROSS WILLIAM ULBRICHT, a/k/a “Dread Pirate Roberts,” a/k/a “DPR,” a/k/a “Silk Road,” the alleged owner and operator of “Silk Road,” a hidden website designed to enable its users to buy and sell illegal drugs and other unlawful goods and services anonymously and beyond the reach of law enforcement. Along with a prior seizure of approximately 29,655 Bitcoins, federal law enforcement agents have now seized a total of approximately 173,991 Bitcoins in connection with the Silk Road case, which, at today’s Bitcoin exchange rate, are worth over $33.6 million.

The Bitcoins have been seized in connection with a civil action previously filed in Manhattan federal court on September 30, 2013, seeking the forfeiture of all assets of Silk Road, including its website and all of its Bitcoins because those assets allegedly were used to facilitate money laundering and constitute property involved in money laundering. Also in connection with that civil action, federal law enforcement agents previously seized the Silk Road website itself. In addition to the civil action, a criminal Complaint against ULBRICHT was filed in Manhattan federal court charging him with one count of narcotics conspiracy, one of count of conspiracy to commit computer hacking, and one count of money laundering conspiracy. ULBRICHT was arrested in San Francisco, California, on October 1, 2013, he was subsequently ordered detained, and he is expected to appear in Manhattan federal court within the next few weeks. ULBRICHT has also been charged in a separate indictment pending in federal court in Baltimore, Maryland.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Ross William Ulbricht operated Silk Road – a global illegal cyber business designed to broker criminal transactions – protected by a presumed anonymity and motivated by profit. With his arrest and our subsequent seizures of millions of dollars worth of Silk Road’s Bitcoins, we have sent a clear message to him and everyone else running criminal enterprises on the dark web: we are determined and equipped to hold you to account.”

FBI Assistant Director-in-Charge Venizelos said: “As alleged in court documents, the creator of Silk Road, Ross William Ulbricht, created a black market bazaar for drugs and illegal services where customer service and anonymity were added value to shoppers and sellers. This market generated millions in illegal profits for Ulbricht in the form of Bitcoins. However, what Ulbricht didn’t count on was that Silk Road’s coffers would not be out of reach of the FBI and our partners to seize. We want to thank our law enforcement partners here and abroad for their support and work on this case.”

DEA Special-Agent-in-Charge Brian R. Crowell said: “The Silk Road underground website was the global venue for drug trafficking and money laundering, producing millions in dirty profits. DEA and others followed the money throughout this investigation, leading to this seizure. The website was used by drug dealers to put illicit drugs into our communities and literally at our doorsteps nationwide. 200,000 people die annually from drug abuse throughout the world, and our investigators worked tirelessly to bring to justice a facilitator who made every effort to hide behind highly encrypted technology while providing 24/7 anonymous services to global drug traffickers and money launderers. Ulbricht’s goals were to make millions from drug use and money laundering while protecting the world’s criminals from law enforcement. Our goal is to shut these people down and protect our children and DEA will continue to be relentless in this effort.”

IRS Special-Agent-in-Charge Toni Weirauch said: “This seizure sends a clear notice to those who think they can commit crimes and conceal the fruits of their criminal activities in digital anonymity. The resolve of the government to uncover criminality and identify criminal proceeds is strong and its investigative capabilities are magnified when different federal agencies, each with its own areas of expertise, unite to achieve a common objective.”

According to the allegations in the Complaint, the civil forfeiture action, and the application and protective order unsealed today in Manhattan federal court:

Background on Silk Road and ROSS WILLIAM ULBRICHT

Since approximately January 2011, ROSS WILLIAM ULBRICHT owned and operated the underground website known as Silk Road, which emerged as the most sophisticated and extensive criminal marketplace on the Internet. Throughout the time that ULBRICHT controlled Silk Road, it served as a sprawling black-market bazaar where unlawful goods and services, including illegal drugs of virtually every variety, were bought and sold regularly by the site’s users.

During its approximately two-and-a-half years in operation, Silk Road was used by several thousand drug dealers and other unlawful vendors to distribute hundreds of kilograms of illegal drugs and other unlawful goods and services to well over a hundred thousand buyers, and to launder hundreds of millions of dollars derived from these unlawful transactions. All told, the site generated sales revenue of more than 9.5 million Bitcoins and collected commissions from these sales totaling more than 600,000 Bitcoins. Although the value of Bitcoins has varied over time, these figures are roughly equivalent to approximately $1.2 billion in sales and approximately $80 million in commissions, using the Bitcoin exchange rate in effect when the Silk Road website was seized.

ULBRICHT deliberately operated Silk Road as an online criminal marketplace designed to enable its users to buy and sell drugs and other illegal goods and services anonymously and outside the reach of law enforcement. He sought to anonymize transactions on Silk Road in two principal ways. First, ULBRICHT operated Silk Road on what is known as “The Onion Router,” or “Tor” network, a special network of computers on the Internet, distributed around the world, designed to conceal the true IP addresses and therefore the identities of the networks' users. The Tor network is designed to make it practically impossible to physically locate the computers hosting or accessing websites on the network. Second, ULBRICHT required that all transactions on Silk Road be paid with Bitcoins, an electronic currency that is as anonymous as cash. Although Tor and Bitcoins have known legitimate uses, they were intentionally used by Silk Road to further the site’s unlawful goals.

The Silk Road website provided a sales platform that allowed vendors and buyers using the site to conduct transactions online. Silk Road is believed to have been visited by hundreds of thousands of unique users from countries across the globe, nearly 30 percent of whom indicated upon registering on the site that they were from the United States. The illegal nature of the items sold on the website was readily apparent to any user browsing through its offerings. Indeed, the vast majority of the items for sale on Silk Road were illegal drugs, which were openly advertised as such on the site. As of September 23, 2013, Silk Road had nearly 13,000 listings for controlled substances, listed under such categories as “Cannabis,” “Dissociatives,” “Ecstasy,” “Intoxicants,” “Opioids,” “Precursors,” “Prescription,” “Psychedelics,” and “Stimulants.” From November 2011 to September 2013, law enforcement agents made more than 100 individual undercover purchases of controlled substances from Silk Road vendors. These purchases included heroin, cocaine, ecstasy, and LSD, among other illegal drugs, and were filled by vendors believed to be located in more than ten different countries, including the United States, Germany, the Netherlands, Canada, the United Kingdom, Spain, Ireland, Italy, Austria and France.

In addition to illegal narcotics, other illicit goods and services were also openly bought and sold on Silk Road. For example, as of September 23, 2013, there were: 159 listings under the category “Services,” most of which offered computer-hacking services, such as a listing by a vendor offering to hack into social networking accounts of the customer’s choosing; 801 listings under the category “Digital goods,” including malicious software, hacked accounts at various online services, and pirated media content; and 169 listings under the category “Forgeries,” including offers to produce fake driver’s licenses, passports, Social Security cards, utility bills, credit card statements, car insurance records, and other forms of false identification documents.

The only form of payment accepted on Silk Road was Bitcoins, an anonymous, decentralized form of electronic currency, existing entirely on the Internet and not in any physical form. Silk Road’s payment system essentially consisted of an internal Bitcoin “bank,” where every Silk Road user had to hold an account in order to conduct transactions on the site. Every Silk Road user had at least one Silk Road Bitcoin address associated with the user’s Silk Road account. These addresses were stored on wallets maintained on servers controlled by Silk Road. In order to make a purchase on Silk Road, a user had to obtain Bitcoins (typically through a Bitcoin exchanger) and then send those Bitcoins to a Bitcoin address associated with his or her Silk Road account. Once a user’s account was funded in this way, the user was free to make purchases on Silk Road. When a purchase was made, the user’s Bitcoins were first transferred to an escrow account maintained by Silk Road, pending completion of the transaction. When the transaction was completed, the buyer’s Bitcoins were transferred from the escrow account to the Silk Road Bitcoin address of the vendor involved in the sale. Silk Road also used a so-called “tumbler” which, as the site explained, “sen[t] all payments through a complex, semi-random series of dummy transactions…making it nearly impossible to link your payment with any coins leaving the site.” Silk Road charged a commission for every transaction conducted by its users. The commission rate varied depending on the size of the transaction, but generally ranged from 8 to 15 percent of the total sales price.

Using the online moniker “Dread Pirate Roberts,” or “DPR,” ULBRICHT controlled and oversaw every aspect of Silk Road. ULBRICHT, for example, maintained the computer infrastructure and programming code underlying the Silk Road website; determined vendor and customer policies, including deciding what can be sold on the site; managed a small staff of online administrators who assisted with the day-to-day operation of the site; and controlled the enormous profits generated from the operation of the site. ULBRICHT did so while fully aware of the illegal nature of the enterprise; indeed, he deliberately sought to ensure the anonymity of the drug dealers and other illegal vendors operating on the site, as well as to conceal his own identity as the site’s owner and operator.

ULBRICHT was also willing to use violent means to protect the Silk Road enterprise and the anonymity of its users. For example, in March and April 2013, ULBRICHT solicited a murder-for-hire of a Silk Road vendor, known as “FriendlyChemist,” who was threatening to reveal the real names and addresses of a long list of Silk Road users unless ULBRICHT paid him $500,000. Upon receiving the threat from “FriendlyChemist” to expose the names of Silk Road users, ULBRICHT wrote to another Silk Road user, telling that user that “FriendlyChemist” is “causing me problems,” and adding: “I would like to put a bounty on his head if it’s not too much trouble for you. What would be an adequate amount to motivate you to find him? Necessities like this do happen from time to time for a person in my position.” ULBRICHT later explained that the threat by “FriendlyChemist” to expose the names of Silk Road users “is unforgivable to me. Especially here on Silk Road, anonymity is sacrosanct.” However, there is no record of a homicide at or about that time in the area where “FriendlyChemist” supposedly lived.

The Seizure of Computer Hardware Belonging to ROSS WILLIAM ULBRICHT

ROSS WILLIAM ULBRICHT was arrested in San Francisco, California, on October 1, 2013. At the time of his arrest, ULBRICHT was using a laptop computer, which was seized in connection with his arrest and subsequently searched pursuant to a search warrant. ULBRICHT’s residence was also searched on October 1, 2013, pursuant to a search warrant, and federal law enforcement agents conducting that search found several pieces of computer hardware belonging to ULBRICHT (collectively, along with ULBRICHT’s laptop, the “computer hardware”). Through forensic analysis of the computer hardware, federal law enforcement agents recovered a Bitcoin wallet containing approximately 144,336 Bitcoins.

ULBRICHT, 29, of San Francisco, California, is charged with one count of narcotics conspiracy, which carries a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison; one of count of conspiracy to commit computer hacking, which carries a maximum sentence of five years in prison; and one count of money laundering conspiracy, which carries a maximum sentence of 20 years in prison.

Mr. Bharara praised the outstanding investigative work of the FBI and its New York Special Operations and Cyber Division, as well as the outstanding investigative work of the DEA’s New York Organized Crime Drug Enforcement Strike Force, which is comprised of agents and officers of the DEA, the IRS, the New York City Police Department, U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), the New York State Police, the Bureau of Alcohol, Tobacco, Firearms and Explosives, the U.S. Secret Service, the U.S. Marshals Service, Office of Foreign Assets Control, and NY Department of Taxation. Mr. Bharara also thanked the Chicago field office of ICE-HSI for its assistance and support, as well as the Department of Justice’s Computer Crime and Intellectual Property Section. Additionally, Mr. Bharara praised the foreign law enforcement partners whose contributions to the success of the investigation and prosecution have been invaluable, namely, the Reykjavik Metropolitan Police of the Republic of Iceland and the French Republic’s Central Office for the Fight Against Crime Linked to Information Technology and Communication.

Mr. Bharara also noted that the investigation remains ongoing.

The prosecution of this case is being handled by the Office’s Complex Frauds Unit. Assistant United States Attorney Serrin Turner is 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 Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

U.S. v. Ross William Ulbricht Application for Second Post-Complaint Protective Order - Silk Road
U.S. v. Ross William Ulbricht Second Post-Complaint Protective Order - Silk Road

Preet Bharara, the United States Attorney for the Southern District of New York, and Derek Maltz, the Special Operations Division Agent in-Charge of the United States Drug Enforcement Administration (“DEA”), today announced the unsealing of charges against REZA OLANGIAN, a dual citizen of the United States and Iran, in connection with his efforts to acquire surface-to-air missiles (“SAMs”) for the government of Iran. OLANGIAN was arrested in Estonia on October 10, 2012, pursuant to a U.S. request for his provisional arrest, and he was extradited to the United States on March 26, 2013. The case is assigned to U.S. District Judge Loretta A. Preska.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, after having been thwarted in his first attempt, Reza Olangian seized on a second opportunity to help arm the Iranian military with surface-to-air missiles and airline parts in violation of international trade sanctions and other laws. Thanks to the outstanding work of our law enforcement partners, Olangian struck out on his second attempt and he will now answer for his alleged willingness to jeopardize this country’s national security.”

DEA Special Operations Division Agent in-Charge Derek Maltz said: “Mr. Olangian’s conspiracy could have put American lives at risk, as well as those of our friends across the globe, if put into action. DEA possesses the unique ability to direct complex undercover operations thanks to our intelligence capabilities, close partnerships, and vast informant network around the world. These tools have allowed us to infiltrate global criminal networks that threaten America's security.”

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

In 2007, OLANGIAN worked with Iranian officials to obtain approximately 100 SAMs for use by the Iranian government. Ultimately, that missile deal was unsuccessful.

Beginning in early 2012, OLANGIAN worked to negotiate a separate missile deal, this time with a confidential source working with the DEA (the “CS”), who purported to be a weapons and aircraft broker. From his base of operations in Tehran from approximately May 2012 through October 2012, OLANGIAN arranged for the purchase of “IGLA-S” SAMs and various aircraft components. During a covertly recorded meeting in May 2012, and in subsequent recorded conversations and e-mails with the CS, he described in detail his plans for procuring the SAMs and aircraft parts and then smuggling them over land into Iran, from Afghanistan or from another neighboring country.

OLANGIAN’s 2012 negotiations included his participation in a videoconference with the CS, during which OLANGIAN remotely inspected a bona fide SAM, which the CS presented as a sample of the larger quantity of SAMs that OLANGIAN sought to purchase. After inspecting the SAM and inquiring about its specifications, OLANGIAN stated that he would want “at least 200 . . . minimum 200” of such SAMs. In his communications with the CS, OLANGIAN also indicated that he was arranging for a missile expert to inspect and test the SAMs.

During October of 2012, OLANGIAN traveled to Estonia, where he was arrested. Following his arrest, OLANGIAN stated, among other things, that he had been working with Iranian government officials; that the SAMs he had arranged to purchase were being obtained for the Iranian government; and that the aircraft parts he attempted to acquire were to be used in Iranian military aircraft.

The Indictment charges OLANGIAN in four Counts. Counts One and Two charge him with conspiring to acquire and transfer surface-to-air missile systems and attempting to acquire and transfer surface-to-air missile systems. Counts Three and Four charge him with conspiring to violate the International Emergency Economic Powers Act (“IEEPA”) and attempting to violate IEEPA.

If convicted, OLANGIAN faces a maximum sentence of life in prison on each of Counts One and Two, including a mandatory minimum sentence of 25 years in prison on each count. He faces a maximum sentence of 20 years in prison on each of Counts Three and Four.

Mr. Bharara praised the outstanding efforts of the Special Operations Division of the DEA and the DEA Copenhagen Country Office. Mr. Bharara also thanked 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 Sean Buckley and Shane Stansbury are in charge of the prosecution.

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

U.S. v. Reza Olangian Indictment (12 Cr 798)
U.S. v. Reza Olangian Amended Complaint (12 Mag 2553)

“Almost a year to the day after we brought suit, a unanimous jury has found Countrywide, Bank of America, and senior executive Rebecca Mairone liable for making disastrously bad loans and systematically removing quality checks in favor of its own balance. As demonstrated at trial, they adopted a program that they called “the Hustle,” which treated quality control and underwriting as a joke.

In a rush to feed at the trough of easy mortgage money on the eve of the financial crisis, Bank of America purchased Countrywide, thinking it had gobbled up a cash cow. That profit, however, was built on fraud, as the jury unanimously found.

In this case, Bank of America chose to defend Countrywide’s conduct with all its might and money, claiming there was no case here. The jury disagreed. This Office will never hesitate to go to trial to expose fraudulent corporate conduct and to hold companies accountable, particularly when it has caused such harm to the public.

I want to thank the members of the jury for their service in this important trial. And I commend the Assistant U.S. Attorneys in the Office's Civil Division for their dedication, skill, and tireless efforts.”

Preet Bharara, the United States Attorney for the Southern District of New York, Christy Romero, the Special Inspector General for the Troubled Asset Relief Program (“SIGTARP”), and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an Indictment in Manhattan federal court charging GUY SAMUEL, the co-owner of a company that purported to provide mortgage modification services, and four former employees of the company, ANTHONY BLACKWELL, ANGEL GONZALEZ, JONATHAN LYONS, and AREN GOLDFADEN, for their alleged participation in a multimillion-dollar scheme that victimized more than 500 financially struggling homeowners across the country. The defendants were arrested earlier this morning and will be presented in Manhattan federal court this afternoon before U.S. Magistrate Judge Frank Maas. The case is assigned to U.S. District Judge George B. Daniels.

Also unsealed today were the guilty pleas of SCOTT SCHREIBER and DARRELL KEYS in connection with their participation in the scheme. SCHREIBER pled guilty pursuant to an Information before U.S. District Judge Robert P. Patterson on October 16, 2013, and KEYS pled guilty pursuant to an Information before U.S. District Judge Robert W. Sweet on September 19, 2013.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, these defendants told one lie after another, purporting to help struggling homeowners looking for an end to their financial troubles but instead defrauding them out of millions. This Office has zero tolerance for those who would target already distressed borrowers in hopes of turning a profit at their expense, and we will continue to work to hold these and like-minded defendants accountable.”

Special Inspector General of SIGTARP Christy Romero said: “Samuel and his coconspirators stand charged today with ripping off struggling homeowners desperately trying to keep a roof over their heads in the midst of the nation’s housing crisis. They allegedly claimed their ‘business’ was affiliated with TARP’s housing program, HAMP, and instructed victims to stop paying their mortgages immediately, transfer thousands of dollars in upfront frees to their company in exchange for false promises of a guaranteed mortgage modification, and cease all communication with their mortgage lenders. After allegedly swindling more than 500 struggling homeowners nationwide out of $2.3 million in ill-gotten proceeds, Samuel refused to provide refunds to victims for whom he and others did little if any work. Instead, Samuel purportedly spent hundreds of thousands of dollars on vacations, entertainment, and personal expenses. I commend U.S. Attorney Bharara and his team for their efforts in prosecuting this case, and let this be a warning to anyone allegedly engaged in fraud related to TARP; if guilty, you will be held accountable and brought to justice by SIGTARP and our law enforcement partners.”

FBI Assistant-Director-in-Charge George Venizelos said: “Struggling homeowners became easy prey for these defendants, who allegedly lured their victims into a false sense of security by promising to save them from financial burden in exchange for a fee. Those charged allegedly conspired to divert these funds into their own pockets and hid behind the façade of a legitimate federal assistance program with which they were not affiliated. This type of criminal activity is not only devastating to victims, but poses a serious threat to the integrity of our marketplace. Today we remind everyone of our commitment to identify sophisticated schemes that take advantage of vulnerable homeowners; those responsible will not go unpunished.”

According to the allegations contained in the Indictment, the Informations unsealed today, and statements made in related proceedings:

From approximately January 2009 to June 2011, the defendants perpetrated a scheme to defraud homeowners who were in danger of losing their homes because they could not afford to pay their residential mortgages. Through a company located in Long Island, New York (“Company-1”), and its successor companies (the “Mortgage Modification Companies”), the defendants and other employees falsely promised to help financially struggling residential mortgage holders refinance their mortgages for lower interest rates and monthly payments. Despite the defendants’ claims, however, the Mortgage Modification Companies delivered little or no service to their customers, diverting most, if not all, of the customers’ payments to the Mortgage Modification Companies’ owners and employees rather than using those funds to assist customers in procuring mortgage modifications. Through their scheme, the Mortgage Modification Companies obtained at least $2.3 million from more than 500 homeowners throughout the United States.

The Mortgage Modification Companies charged customers thousands of dollars in up-front fees—in violation of New York State law—and made fraudulent claims about the companies’ services, including that the Mortgage Modification Companies guaranteed that they would either: (i) secure a mortgage modification that would result in a significant reduction in the customer’s interest rate and/or monthly payments; or (ii) provide the customer’s money back. Through the Mortgage Modification Companies, the defendants and other employees also falsely claimed to be affiliated with the federal government’s Home Affordable Modification Program (“HAMP”), a federally-funded mortgage assistance program that is part of the Troubled Asset Relief Program and is available to homeowners free of charge.

SAMUEL, the co-owner and operator of the Mortgage Modification Companies, purchased on behalf of those companies tens of thousands of “leads” containing names and contact information for homeowners who had fallen behind or were in danger of falling behind in making mortgage payments on their homes. SAMUEL, BLACKWELL, who held himself out as an attorney for the Mortgage Modification Companies despite not having a valid law license for most of the relevant period, and GONZALEZ, a sales manager, instructed the companies’ sales representatives—who were responsible for calling, and answering calls from, struggling homeowners—to make materially false or misleading representations to convince prospective clients to pay upfront fees to the companies. Those false or misleading representations included that the Mortgage Modification Companies were associated with HAMP; that a mortgage modification was guaranteed and would take only approximately thirty to sixty days; and that the Mortgage Modification Companies would issue a full refund of the upfront fee to any client whose mortgage was not successfully modified in the stated time period. At the direction of SAMUEL, BLACKWELL, and GONZALEZ, the Mortgage Modification Companies routinely refused to provide refunds to customers despite the fact that those customers did not obtain mortgage modifications as promised.

SAMUEL, BLACKWELL, and GONZALEZ also personally met with and spoke directly to customers and told similar lies. They sought to cover up their fraudulent scheme by, among other things, directing sales representatives to assuage customers by falsely claiming that work was being done on the customer’s behalf and that the company just needed more time to obtain a mortgage modification, when, in fact, little or no work was being done to provide a mortgage modification to the customers. SAMUEL also made materially false and misleading statements in a deposition conducted by the New York State Attorney General’s Office in connection with an investigation of complaints by the Mortgage Modification Companies’ customers.

LYONS, GOLDFADEN, and KEYS worked as sales representatives for the Mortgage Modification Companies. SCHREIBER was the co-owner of Company-1.

SAMUEL, 32, of Richmond Hill, New York; BLACKWELL, 47, of Manhattan, New York; GONZALEZ, 31, of Rosedale, New York; LYONS, 51, of Rockville Center, New York; and GOLDFADEN, 36, of East Rockaway, New York, are each charged with one count of conspiracy to commit wire fraud, and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison.

SCHREIBER, 30, of Brooklyn, New York, pled guilty to one count of conspiracy to commit wire fraud and one count of wire fraud, and he faces a maximum sentence of 40 years in prison. KEYS, 51, of Uniondale, New York, pled guilty to one count of conspiracy to commit wire fraud, and he faces a maximum sentence of 20 years in prison.

Mr. Bharara praised SIGTARP and the FBI for their outstanding work in the investigation. Mr. Bharara also thanked the New York State Attorney General’s Office 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 matter is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Janis Echenberg is charge of the case.

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, and Carl J. Kotowski, the Special Agent-in-Charge of the New Jersey Division of the U.S. Drug Enforcement Administration (“DEA”), today announced charges against nine individuals – PAUL WISEBERG, ROBERT KALABA, GERALD WISEBERG, STEPHANIE TOMASINI, LANA WISEBERG, EMMANUEL ANTONIO, and three pharmacists, DANIEL PODELL, HOWARD HIRSH, and LAWRENCE ZASLOW – for their alleged participation in a multi million-dollar oxycodone distribution ring. The alleged conspiracy involved the distribution of oxycodone and other controlled substances from three pharmacies in New York and New Jersey to customers in Florida who had no legitimate medical need for the drugs.

All the defendants were arrested this morning. KALABA, PODELL, HIRSH, and ZASLOW will be presented in Manhattan federal court later today. PAUL WISEBERG, GERALD WISEBERG, LANA WISEBERG, TOMASINI, and ANTONIO will appear in the Southern District of Florida later today. In addition to the arrests, multiple search warrants were executed and bank accounts restrained in connection with today’s charges.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, these nine defendants, including three licensed pharmacists, created and operated a ring for the illegitimate distribution of prescription painkillers on the East Coast. Prescription drug abuse is our nation’s fastest-growing drug epidemic, and it is especially egregious when, as alleged in this Indictment, health care professionals perpetuate this danger to society.”

DEA Special Agent-in-Charge Carl J. Kotowski said: “Today, DEA and its law enforcement partners delivered another blow to alleged rogue pharmacists who choose to sacrifice their ethics for the almighty dollar. They will now have to deal with the consequences of their alleged decisions.”

According to the Indictment unsealed today in Manhattan federal court:

From at least November 2011 up to and including October 2013, PAUL WISEBERG, LANA WISEBERG, and KALABA, none of whom is a medical professional, purchased and operated pharmacies in New York and New Jersey (the “Pharmacies”), through which they ordered bulk quantities of highly addictive painkillers such as oxycodone, hydromorphone, and morphine sulfate. PAUL WISEBERG and KALABA then sold and distributed those pain killers via a mail order program at significantly marked-up prices to individuals, mostly in Florida, who had no legitimate medical need for the painkillers.

On average, the Pharmacies would charge from approximately $6 to $9 per pill of oxycodone. A 28-day prescription for oxycodone, which could contain approximately 158 pills, could cost a patient between $948 and $1,400. The same prescription at a retail pharmacy would typically cost less than $200.

PAUL WISEBERG, LANA WISEBERG, and KALABA are not registered with the DEA, and as such, could not themselves obtain oxycodone and other controlled substances from distributors. They relied on ANTONIO and PODELL to obtain hundreds of thousands of oxycodone pills and other controlled substances from distributors. PODELL, a licensed pharmacist, signed the necessary forms, and ANTONIO interacted with the distributors to arrange for the shipments of bulk quantities of painkillers to the Pharmacies.

GERALD WISEBERG and TOMASINI recruited pain clinics in Florida that had patients who were willing to pay substantially marked-up prices for the painkillers, and that would thereafter have the prescriptions sent directly to the Pharmacies. At one of the Florida pain clinics, patients were told to mail the prescriptions enclosing money orders and that no insurance or checks would be accepted. They were further instructed not to call or visit the Pharmacies.

PODELL, HIRSH, and ZASLOW, all licensed pharmacists, filled prescriptions for hundreds of thousands of highly addictive painkillers, knowing that the prescriptions were not issued for a legitimate medical purpose. The drugs were then mailed to the customers in Florida. In several instances, prescription drugs were mailed to addresses different from those set forth in the prescriptions. In addition, prescriptions for multiple people were also sometimes sent to the same address.

The Indictment also alleges that PAUL WISEBERG, KALABA, GERALD WISEBERG, TOMASINI, and ANTONIO conspired to launder the proceeds of the narcotics conspiracy by both concealing the nature and source of the proceeds, and promoting the distribution of the narcotics.

Mr. Bharara praised the investigative work of the DEA New Jersey Division’s Tactical Diversion Squad, which consists of DEA Agents, Diversion Investigators, and Task Force Officers from the Elizabeth Police Department, Essex County Sheriff’s Office, Toms River Police Department, Clinton Township Police Department, Marlboro Township Police Department, and West Orange Police Department, and the DEA New Jersey Division Diversion Group I. Mr. Bharara also thanked the Internal Revenue Service-Criminal Investigation, participating in the investigation as a member of the El Dorado Task Force, the DEA West Palm Beach Tactical Diversion Squad, the DEA Baltimore Tactical Diversion Squad, and the New Jersey Division of Consumer Affairs, which is part of the New Jersey Office of the Attorney General.

The prosecution is being handled by the Office’s Narcotics Unit. Assistant U.S. Attorneys Carolina A. Fornos and Daniel Tehrani 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. Paul Wiseberg et al. Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that STAN GREENBERG 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. GREENBERG was charged in April 2013 along with 33 other alleged members and associates of two Russian-American organized crime enterprises – the Taiwanchik-Trincher Organization and the Nahmad-Trincher Organization – in an indictment which included racketeering, money laundering, extortion, and various gambling offenses. He pled guilty before U.S. District Judge Jesse M. Furman.

Manhattan U.S. Attorney Preet Bharara said: “With his guilty plea today, Stan Greenberg is now the latest member of this Russian-American organized crime ring to be convicted, but we expect he will not be the last. We remain committed to pursuing and prosecuting those involved in this international enterprise.”

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. GREENBERG was a U.S.-based participant in the enterprise. In this capacity, he assisted the Taiwanchik-Trincher Organization in laundering the proceeds of their international sportsbook into various investment vehicles, including real estate purchases and hedge funds, in the United States.

GREENBERG, 48, of New York, NY, faces a maximum of 20 years in prison and three years of supervised release. As part of his plea agreement, GREENBERG agreed to forfeit the proceeds from his racketeering activity. He is scheduled to be sentenced by Judge Furman on February 27, 2014 at 3:00 p.m.

GREENBERG is the 12th 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; and
• Yugeshwar Rajkumar pled guilty to gambling charges on October 18, 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, and Brian R. Crowell, Special Agent in Charge of the New York Division of the United States Drug Enforcement Administration (“DEA”), today announced the extraditions of four defendants charged with international narcotics trafficking offenses: ERICSON VARGAS CARDONA, extradited from Colombia on charges of conspiring to traffic in cocaine and using weapons, including machine guns, assault rifles, and rocket-propelled grenades, in furtherance of the cocaine trafficking conspiracy; DIEGO VALLEJO-REYES, extradited from Colombia on charges of conspiring to traffic in cocaine; and RICARDO QUINTERO and JESUS DOMINGUEZ GALLARDO, extradited from Mexico on charges of conspiring to traffic in methamphetamine and cocaine.

VARGAS CARDONA and VALLEJO-REYES both arrived in the Southern District of New York on October 16, 2013 and were separately presented and arraigned before Magistrate Judge Sarah Netburn yesterday. QUINTERO and DOMINGUEZ GALLARDO arrived in the Southern District of New York on October 11, 2013 and were presented and arraigned before Magistrate Judge Gabriel W. Gorenstein on October 12, 2013 and ordered detained.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, what these four defendants had in common was the criminal intent and wherewithal to import large quantities of cocaine into the United States. Now, having been successfully extradited, they themselves are in the United States. These cases demonstrate the resolve of the DEA and this Office to bring before the bar of American justice those who pour cocaine and other illegal drugs into the flow of American commerce.”

DEA Special Agent in Charge Brian R. Crowell said: “Ricardo Quintero-Muett and Jesus Dominguez-Gallardo are now on American soil to face justice for their roles in sending hundreds of pounds of narcotics into the United States. This three year multi-national drug investigation has brought to justice two key distributors for the Mexican La Familia Michoacan Drug Cartel for their alleged conspiracy in trafficking over one ton of methamphetamine and hundreds of pounds of cocaine, heroin and marijuana into the United States and into our communities, while making millions of dollars poisoning Americans. The United States Attorney’s Office Southern District of New York, the NY Organized Crime Drug Enforcement Strike Force, and our global DEA offices have worked tirelessly to bring both defendants to justice in the country they poisoned. I commend the DEA’s Special Operations Division, San Diego Field Division, Carlsbad Resident Office, Mexico Country Office, Tijuana Resident Office, Los Angeles Field Division, Bogota Colombia Country Office, Interpol, the U.S. Department of Justice Office of International Affairs and the San Diego District Attorney’s Office.”

VARGAS CARDONA

As alleged in the Indictment previously unsealed in Manhattan federal court and documents publicly filed in Colombia in extradition proceedings:

From approximately 2000 to August 2012, VARGAS CARDONA was a member of La Oficina de Envigado (“Oficina”) a Colombia-based narcotics trafficking organization that served as a debt-collection agency for narcotics traffickers, by means including violence, invested in shipments of narcotics, and manufactured cocaine. Oficina distributed thousands of kilograms of cocaine from Colombia to locations worldwide, including the United States. As a member of Oficina, VARGAS CARDONA, among other things, engaged in debt collection activities, established a cocaine laboratory, and participated in acts of violence on behalf of Oficina. In approximately 2008, VARGAS CARDONA assumed control of Oficina. While a member and as a leader of Oficina, he conspired with others to export and to distribute cocaine, and possessed firearms in furtherance of that crime, including semiautomatic assault weapons, machineguns and destructive devices – including rocket-propelled grenades and grenade launchers – and carried explosive devices, including electric and manual detonators.

VALLEJO-REYES

As alleged in the Indictment previously unsealed in Manhattan federal court and documents publicly filed in Colombia in extradition proceedings:

Beginning in at least 2011, VALLEJO-REYES and his co-defendant Elver Hernan Roa-Avila conspired to transport thousands of kilograms of cocaine using numerous airplanes, including airplanes registered in the United States, from Colombia and Venezuela to points in Central America, particularly Honduras, and the Caribbean and, on occasion, to Africa. The airplanes typically were loaded at and departed from clandestine airstrips located in the Apure region of Venezuela. In addition, in September and October 2012, VALLEJO and Roa-Avila conspired to sell approximately 339 kilograms of cocaine in Bogota, Colombia, which the defendants understood would be imported to the United States and distributed. In connection with this conspiracy, 339-kilograms of cocaine supplied by VALLEJO-REYES and Roa-Avila were seized by law enforcement authorities in Colombia.

QUINTERO and DOMINGUEZ GALLARDO

As alleged in the Indictment previously unsealed in Manhattan federal court and documents publicly filed in connection with Mexican extradition proceedings:

QUINTERO and DOMINGUEZ GALLARDO were members of a drug trafficking organization affiliated with the La Familia Michoacana cartel, a violent drug trafficking organization based in the state of Michoacan in southwestern Mexico. The cartel has imported vast quantities of methamphetamine and cocaine into the United States from Mexico, and utilizes violence, including assault, murder and kidnaping, to support its narcotics trafficking activities. In that capacity, QUINTERO and DOMINGUEZ GALLARDO were responsible for the transport of large quantities of methamphetamine and cocaine from Michoacan, Mexico, into Tijuana, Mexico, and ultimately across the United States border into California, primarily by secreting those narcotics in concealed compartments contained within vehicles. In the course of the investigation, law enforcement agents seized hundreds of kilograms of methamphetamine and cocaine belonging to the organization.

QUINTERO, 39, and DOMINGUEZ GALLARDO, 44, have each been charged with conspiring to import methamphetamine and cocaine into the United States and conspiring to distribute methamphetamine and cocaine, knowing that those substances would be imported into the United States (Count One). The charge carries a maximum penalty of life in prison and a mandatory minimum term of 10 years in prison. The case is assigned to U.S. District Judge Paul A. Crotty.

VARGAS CARDONA, 40, has been charged with conspiracy to import cocaine into the United States (Count One); conspiracy to distribute cocaine (Count Two); possessing and discharging M50 machineguns, AUG assault rifles, rocket-propelled grenades and grenade launchers, submachine guns, shotguns, and other firearms, some of which were equipped with silencers, in furtherance of the conspiracy to import cocaine (Count Three); and carrying explosive compounds, grenades, rocket-propelled grenades, and electric and manual detonators during the commission of the conspiracy to import cocaine (Count Four). Counts One and Two carry a maximum penalty of life in prison and a mandatory minimum penalty of 10 years in prison. Count Three carries a maximum penalty of life in prison and a mandatory minimum penalty of 30 years in prison, to run consecutively to any other penalty imposed. Count Four carries a maximum penalty of life in prison and a mandatory minimum penalty of 10 years in prison, to run consecutively to any other penalty imposed. The total mandatory minimum sentence VARGAS CARDONA faces if convicted of all four counts is 50 years in prison. The case is assigned to U.S. District Judge Harold Baer.

VALLEJO-REYES, 56, has been charged with conspiring to import cocaine and to possess cocaine on board a U.S.-registered aircraft with the intent to distribute it (Count One) and with distributing cocaine knowing and intending that it would be imported into the United States (Counts Two and Three). Each count carries a maximum penalty of life in prison and a mandatory minimum term of 10 years in prison. The case is assigned to U.S. District Judge Andrew L. Carter, Jr.

Roa-Avila remains in the custody of Colombian authorities.

The arrests and transfers of the defendants were the result of the close cooperative efforts of the United States Attorney’s Office for the Southern District of New York; DEA’s New York Field Office; DEA’s New York Organized Crime and Drug Enforcement Strike Force; DEA’s Special Operations Division; DEA’s San Diego Field Division, Carlsbad Resident Office; DEA’s Tijuana, Mexico Country Office; DEA’s Bogota, Colombia Country Office; DEA’s Los Angeles Field Division; Interpol; the U.S. Department of Justice Office of International Affairs; and the San Diego District Attorney’s Office. The DEA’s New York Organized Crime Drug Enforcement Strike Force is comprised of agents and officers of the U. S. Drug Enforcement Administration, the New York City Police Department, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, the New York State Police, the U. S. Internal Revenue Service Criminal Investigation Division, the Federal Bureau of Investigation, the Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S. Secret Service, the U.S. Marshal Service, New York National Guard, Office of Foreign Assets Control and the New York Department of Taxation and Finance. The Strike Force is partially funded by the New York/New Jersey High Intensity Drug Trafficking Area, which is a federally funded crime fighting initiative. Mr. Bharara thanked Colombia’s Cuerpo Técnico de Investigación, a division of La Fiscalía General de la Nación, and the Mexican Military Forces from the 28th Battalion and the Policia Estatal Preventiva for their assistance in this investigation.

These prosecutions are being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Edward Y. Kim and Michael Ferrara are in charge of the prosecution of VARGAS CARDONA. Assistant United States Attorneys Edward Y. Kim, Michael D. Lockard, and Adam Fee are in charge of the prosecution of VALLEJO-REYES. Assistants Jenna Dabbs and Aimee Hector are in charge of the prosecution of QUINTERO and DOMINGUEZ GALLARDO.

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

U.S. v. Ericson Vargas Cardona Indictment
U.S. v. Rafael Antonio Garavito-Garcia and Gustavo Perez-Garcia S5 Indictment
U.S. v. Diego Vellejo-Reyes and Elver Hernan Roa-Avila S5 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Raymond W. Kelly, the Police Commissioner of the City of New York (“NYPD”), announced today the arrests of ELFEGO BOYD and NORMAN DARBY in connection with sex trafficking of minor girls. BOYD was arrested yesterday in the Bronx, New York, and DARBY was arrested yesterday in Manhattan. Both defendants were presented yesterday before U.S. Magistrate Judge Sarah Netburn and ordered detained pending trial.

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

From September 2010 through June 2012, the BOYD and DARBY have been engaged in a criminal sex trafficking enterprise that recruited and exploited minor girls, and then prostituted them using an online classifieds website for the defendants’ profit. The defendants lured minor girls into prostitution by, among other things, targeting runaways, offering the victims shelter, and romancing them. They then took provocative pictures of the minor victims, which the defendants then posted online in an effort to sell the victims for sex.

Minor Victim-1

In September 2010, Minor Victim-1, who was 15 years old at the time, met BOYD in Times Square, after running away from her home in Pennsylvania to New York City. BOYD, who introduced himself as “Kush da Dawn,” asked Minor Victim-1 if she wanted to prostitute for him and she agreed. He then provided food and shelter to Minor Victim-1. While staying with BOYD, Minor Victim-1 also met DARBY, who introduced himself as “Black.” Both BOYD and DARBY placed advertisements offering Minor Victim-1 for sex using an online classifieds website. The ads did not receive any responses and Minor Victim-1 left New York City and returned to Pennsylvania a short while later.

In the spring of 2011, Minor Victim-1 traveled from Pennsylvania to New York City where she again encountered BOYD and stayed at his apartment in the Bronx. BOYD told Minor Victim-1 that he loved her and that they were boyfriend-girlfriend. He then posted online advertisements offering Minor Victim-1 for sex in exchange for money. At BOYD’s direction, Minor Victim-1 had sex in exchange for money with multiple men who responded to those ads, after which BOYD took all the money.

Later, BOYD took Minor Victim-1 to a house in Long Island where she stayed along with BOYD, DARBY and others, for several months. During that period, DARBY and Minor Victim-1 posted advertisements offering her for sex online in exchange for money. At BOYD and DARBY’s direction, Minor Victim-1 had sex in exchange for money with several men who responded to those ads at hotels.

Eventually, BOYD returned to New York City with Minor Victim-1. At BOYD’s direction, Minor Victim-1 continued to have sex in exchange for money with multiple men who responded to online advertisements, after which BOYD took all the money. Minor Victim-1, who turned 16 years old during the period she was being offered for sex by BOYD and DARBY, told BOYD her age on one or more occasions.

In November 2011, after getting into an argument with BOYD, Minor Victim-1 ran away from him.

Minor Victim-2 and Minor Victim-3

Minor Victim-2, who was 15 years old, along with Minor Victim-3, who was 17 years old, met BOYD, who identified himself as “Kush da Dawn,” in Manhattan in the spring of 2012 after running away from Oklahoma (the “Oklahoma Victims”). BOYD told the Oklahoma Victims he had “connections” and could help them rent a room at a hotel. Instead, BOYD took the Oklahoma Victims to his apartment in the Bronx.

BOYD took provocative pictures of the Oklahoma Victims in lingerie he provided and posted the pictures in advertisements online prostituting them. At BOYD’s direction, the Oklahoma Victims had sex in exchange for money with multiple men who responded to online advertisements, after which BOYD took half of the money.

Minor Victim-3 informed BOYD that she was 17 years old at the time he was prostituting her. In response, BOYD told Minor Victim-3 that he was the only one who needed to know her age.

BOYD, 27, of the Bronx, NY, is charged with one count of conspiracy to commit sex trafficking, three counts of sex trafficking of minors, and two counts of use of interstate facilities to promote a sex trafficking and prostitution enterprise. DARBY, 32, of the Bronx, NY, is charged with one count of conspiracy to commit sex trafficking, one count of sex trafficking of minors, and one count of use of interstate facilities to promote a sex trafficking and prostitution enterprise. Both defendants face a maximum sentence of life in prison.

Mr. Bharara praised the outstanding investigative work of the FBI and the NYPD, and noted that the investigation is continuing.

The prosecution of this case is being overseen by the Office’s General Crimes Unit. Assistant United States Attorneys Andrea Griswold and Amy Garzon are in charge of the prosecution.

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

US v. Elfego Boyd and Norman Darby Complaint

“Anas al Liby was transferred to law enforcement custody this weekend and was brought directly to the Southern District of New York where he has been under indictment for more than a decade. The Government expects that he will be presented before a judicial officer tomorrow.”

Preet Bharara, the United States Attorney for the Southern District of New York, announced that RAWSON EDWARD WATSON, a citizen of the United Kingdom, pled guilty today in Manhattan federal court to conspiring to distribute cocaine using aircraft registered in the United States. WATSON arrived in the Southern District of New York on November 9, 2012, from the Dominican Republic, where he was apprehended on December 15, 2011. WATSON pled guilty before U.S. District Judge Richard J. Sullivan.

Manhattan U.S. Attorney Preet Bharara stated: “Today’s guilty plea ensures that Rawson Edward Watson will be punished for his role in attempting to further the international drug trade using U.S. aircraft.”

According to the Indictment to which WATSON pled guilty and other documents filed in Manhattan federal court:

In late 2011, WATSON and others made arrangements for an aircraft registered in the United States to be flown from the Dominican Republic to Belgium. WATSON was arrested on December 15, 2011 in the Dominican Republic after he boarded a U.S.-registered aircraft that was loaded with 1,000 kilograms of cocaine. The DEA has estimated that the quantity of cocaine on board the aircraft where WATSON was arrested has a wholesale market value of at least $30,000,000.

WATSON, 48, pled guilty to one count of conspiring to possess with intent to distribute five kilograms or more of cocaine on board an aircraft registered in the United States. WATSON faces a maximum sentence of life in prison, and a mandatory minimum sentence of 10 years in prison. Sentencing before Judge Sullivan is scheduled for January 31, 2014, at 10:00 a.m.

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

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

U.S. v. Watson, Epskamp, and Fawaz S1 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that SABIRHAN HASANOFF was sentenced today in Manhattan federal court to 18 years in prison for providing and attempting to provide material support to al Qaeda associates in Yemen and elsewhere, and for conspiring to provide material support to al Qaeda over the course of nearly three years. HASANOFF, who was arrested in the United Arab Emirates in 2010 and transferred to United States custody, pled guilty in June 2012 to one count of providing and attempting to provide material support and resources to al Qaeda, and one count of conspiracy to provide material support and resources to al Qaeda. He pled guilty before U.S. District Judge Kimba M. Wood, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara stated: “Today’s sentence reflects the egregiousness of Sabirhan Hasanoff’s conduct. The defendant not only funneled equipment capable of being used for nefarious purposes and thousands of dollars to al Qaeda operatives abroad, he also travelled to U.S. soil to surveil a major New York landmark for a potential terrorist attack. We will not hesitate to continue, with our law enforcement partners, to pursue individuals engaged in similar behavior, and do what we can to ensure they are brought to justice.”

According to various public filings and sworn statements made by the defendant during proceedings in Manhattan federal court:

From 2007 through late 2009, HASANOFF, supported al Qaeda in a variety of ways. HASANOFF and his co-defendant, Wesam El-Hanafi, sent equipment, including remote-controlled devices capable of use in an explosives attack, to terrorist operatives abroad. In addition, HASANOFF and El-Hanafi together funneled approximately $67,000 to al Qaeda operatives overseas. HASANOFF and El-Hanafi collected some of this money from a third individual who resided in the United States. During this time, both defendants used aliases to disguise the source of their money when making cash donations to their terrorist contacts, and made extensive plans for travel to engage in jihad in Somalia, Afghanistan, and Iraq.

In August 2008, HASANOFF entered the United States from abroad, travelled to New York City, and performed surveillance on the New York Stock Exchange – all on instructions from overseas terrorists who were considering the location for a possible attack. The information that HASANOFF gathered on the Stock Exchange was then sent to the terror operatives.

In addition to his prison term, HASANOFF, 37, a dual citizen of the United States and Australia, who resided in Brooklyn, New York, was sentenced to three years of supervised release. He was also ordered to pay a $200 special assessment fee and forfeiture in the amount of $70,000.

El-Hanafi pled guilty in June 2012 to one count of providing and attempting to provide material support and resources to al Qaeda, and one count of conspiracy to provide material support and resources to al Qaeda. He faces a maximum sentence of 20 years in prison.

Mr. Bharara praised the outstanding investigative work of the New York-based Joint Terrorism Task Force – which principally consists of special agents of the Federal Bureau of Investigation and detectives of the New York City Police Department. Mr. Bharara thanked the Department of Justice’s National Security Division and Office of International Affairs, the Kansas City-based JTTF, and the United States Attorney’s Office for the Western District of Missouri for their extraordinary assistance in this matter.

This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys John P. Cronan, Aimee Hector, Glen Kopp, Michael Lockard, and Brendan R. McGuire are in charge of the prosecution.

“The bone-chilling allegations in today's Indictment read like they were ripped from the pages of a Tom Clancy novel. The charges tell a tale of an international band of mercenary marksmen who enlisted their elite military training to serve as hired guns for evil ends. Three of the defendants were ready, willing and eager to take cold hard cash to commit the cold-blooded murders of a DEA agent and an informant. Thanks to the determined, skillful and intrepid efforts of the DEA's Special Operations Division, an international hit team has been neutralized by agents working on four continents.”

Preet Bharara, the United States Attorney for the Southern District of New York, and Michele M. Leonhart, the Administrator of the United States Drug Enforcement Administration (“DEA”), today announced the arrests of three defendants – JOSEPH MANUEL HUNTER and TIMOTHY VAMVAKIAS, both citizens of the United States, and DENNIS GOGEL, a citizen of Germany. HUNTER is expected to arrive in the Southern District of New York this evening and will be presented before a U.S. Magistrate Judge in Manhattan federal court tomorrow. VAMVAKIAS and GOGEL arrived in the Southern District of New York yesterday and were presented in U.S. Magistrate Court yesterday afternoon. As part of the same case, SLAWOMIR SOBORSKI and MICHAEL FILTER, citizens of Poland and Germany, respectively, were arrested in Estonia at the request of the United States on September 25, 2013.

HUNTER, VAMVAKIAS, and GOGEL are charged in five separate counts with conspiracy to import cocaine into the United States; conspiracy to murder a law enforcement agent and a person assisting a law enforcement agent; conspiracy to kill a person to prevent communications to law enforcement agents; conspiracy to possess a firearm in furtherance of a crime of violence; and conspiracy to distribute cocaine on board an aircraft. SOBORSKI and FILTER are charged with conspiracy to import cocaine into the United States and conspiracy to distribute cocaine on board an aircraft.

On September 25, 2013, the DEA’s Special Operations Division (SOD), Bilateral Investigative Unit (BIU) Narco-Terrorism Group (NTG), concluded a long-standing undercover operation conducted in Asia, Africa, the Caribbean, Europe and elsewhere. HUNTER was arrested in Thailand; VAMVAKIAS and GOGEL were arrested in Liberia and all three subsequently were expelled to the United States. SOBORSKI and FILTER were arrested in Estonia, where they remain, pending extradition to the United States.

Manhattan U.S. Attorney Preet Bharara said: “The bone-chilling allegations in today's Indictment read like they were ripped from the pages of a Tom Clancy novel. The charges tell a tale of an international band of mercenary marksmen who enlisted their elite military training to serve as hired guns for evil ends. Three of the defendants were ready, willing and eager to take cold hard cash to commit the cold-blooded murders of a DEA agent and an informant. Thanks to the determined, skillful and intrepid efforts of the DEA's Special Operations Division, an international hit team has been neutralized by agents working on four continents.”

DEA Administrator Michele M. Leonhart said: “The targets of this investigation were hardened global criminals involved in everything from drug and arms trafficking to contract assassinations. Besides being international cocaine traffickers, members of this criminal organization conspired in an elaborate scheme to murder a DEA Special Agent and an informant for a six figure payday. Their intent was to commit the most serious and ruthless crime that can be directed against any law enforcement officer, and one which has our highest investigative priority. I wish to thank our foreign law enforcement partners for their outstanding efforts and partnership in completely dismantling this sophisticated and dangerous international criminal enterprise.”

According to the Indictment against HUNTER, VAMVAKIAS, GOGEL, SOBORSKI, and FILTER unsealed today:

All five defendants have previously served in the armed forces of their respective nations. HUNTER and VAMVAKIAS served in the U.S. Army until 2004; GOGEL and FILTER served in the German armed forces until 2010 and 2009, respectively, and SOBORSKI served in the Polish armed forces until 2011. HUNTER served as a sniper instructor and a senior drill sergeant, training other soldiers in marksmanship and tactics; VAMVAKIAS attained the rank of sergeant and served both as an infantryman and a military police officer; GOGEL, SOBORSKI and FILTER were trained as snipers.

Since leaving the U.S. Army in 2004, HUNTER has acted as a “contract killer” and successfully arranged for the murder of a number of people.

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

HUNTER and his co-defendants thereafter agreed, in meetings and communications with the CSs, to provide security and surveillance services to the narcotics trafficking organization. Furthermore, HUNTER, VAMVAKIAS, and GOGEL agreed to commit murder-for-hire in Liberia by assassinating both a Special Agent of the DEA and a person who purportedly was providing information to the DEA about the CSs’ narcotics trafficking organization. In exchange for the murders, HUNTER, VAMVAKIAS, and GOGEL were together to be paid approximately $700,000, and HUNTER was to receive an additional $100,000 for his leadership role. Communications between the defendants and the CSs occurred by telephone, over e-mail, and in a series of surreptitiously audio-recorded and videotaped meetings over an approximately nine-month period.

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

With respect to the murder-for-hire scheme, in mid-May 2013, at a meeting with the three CSs in Thailand, HUNTER,

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

In mid-August 2013, at a meeting in Thailand, HUNTER told CS-3 that VAMVAKIAS and GOGEL would commit the murders. HUNTER, VAMVAKIAS, and GOGEL discussed in detail the weapons that would be used and the possibility of entering Liberia without having their passports stamped. They suggested that CS-3 fly them out of the country via private plane following the murders. VAMVAKIAS stated that among other weapons, a sub-machine gun and two .22 caliber pistols would be needed for the murders, and CS-3 agreed to deliver the weapons to Liberia. The next day, at a meeting with GOGEL, CS-3 confirmed that an order for the requested weapons had been made. Later that same day, GOGEL met again with CS-3 and provided CS-3 with two highly sophisticated latex facemasks, which can make the wearer appear to be of another race, for CS-3 to transport to Liberia.

In late September 2013, GOGEL and VAMVAKIAS arrived in Liberia to commit the planned murders-for-hire.

HUNTER, 48, VAMVAKIAS, 42, GOGEL, 27, FILTER, 29, and SOBORSKI, 40, have each been charged with conspiracy to import cocaine into the United States (Count One). HUNTER, VAMVAKIAS, and GOGEL are also charged with conspiracy to murder a law enforcement agent and a person assisting a law enforcement agent (Count Two); conspiracy to kill a person to prevent communications to law enforcement agents (Count Three); and conspiracy to possess a firearm in furtherance of a crime of violence (Count Four). VAMVAKIAS, GOGEL, FILTER, and SOBORSKI are also charged with conspiracy to distribute cocaine on board an aircraft (Count Five). Each count carries a maximum penalty of life imprisonment. The case is assigned to U.S. District Judge Laura Taylor Swain.

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

This prosecution is being handled by the Office's Terrorism and International Narcotics Unit. Assistant United States Attorneys Michael Lockard, Aimee Hector and Anna Skotko are in charge of the prosecution.

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

U.S. v. Joseph Hunter, et al S7 Indictment

U.S. v. Joseph Hunter et al. S7 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), Cheryl Garcia, the Acting Special Agent-in-Charge for the New York Regional Office of the U.S. Department of Labor’s Office of the Inspector General, Office of Labor Racketeering and Fraud Investigations (“DOL-OIG”), and Jonathan Kay, the Regional Director for the New York Regional Office of the United States Department of Labor, Employee Benefits Security Administration (“DOL-EBSA”) announced that PAUL J. KONIGSBERG was arrested today for his role in the scheme to falsify books and records at Bernard L. Madoff Investment Securities (“Madoff Securities”), through which Bernard L. Madoff ran his multibillion-dollar Ponzi scheme. KONIGSBERG was also charged in connection with his role in creating a fictitious, no-show job through which a co-conspirator received hundreds of thousands of dollars in compensation from Madoff. KONIGSBERG was presented in Manhattan federal court this afternoon.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Paul Konigsberg threw aside his ethical duties as an accountant in favor of his role as a false bookkeeper, which included allegedly participating in a scheme of back-dating client account statements to show fictitious trades and conjuring profits and losses of millions of dollars. With today’s indictment, he will be made to answer for his alleged conduct as yet another player on Madoff’s team.”

FBI Assistant Director-in-Charge George Venizelos said: “Sadly, as is often the case in a financial fraud, there was someone to help ‘cook the books’ in the Madoff scheme. Paul Konigsberg was arrested by FBI agents for his alleged role in the multibillion-dollar Ponzi scheme run by Bernard Madoff. Konigsberg allegedly falsified books and records and created a no-show job so a co-conspirator could receive thousands of dollars in compensation. The FBI will continue to investigate and arrest those involved with the Madoff scheme in an attempt to bring some justice to the victims of this devastating fraud.”

DOL-OIG Acting Special Agent-in-Charge Cheryl Garcia said: “Today’s arrest highlights our commitment to work with our law enforcement partners to investigate those who allegedly defraud employee benefit plans and seek to conceal their crimes by falsifying documents required by the Employee Retirement Income Security Act.”

DOL-EBSA New York Regional Director Jonathan Kay said: “Accurate reporting is an essential part of maintaining employee benefit plan integrity. EBSA’s efforts in this case exemplify our commitment to protecting employee benefits and working in coordination with fellow federal agencies.”

In a separate action, the United States Securities and Exchange Commission (“SEC”) announced civil charges against KONIGSBERG.

According to a superseding indictment unsealed today in Manhattan federal court:

KONIGSBERG, a lawyer and Certified Public Accountant, was the senior tax partner of Konigsberg Wolf & Co., P.C. (“Konigsberg Wolf”) and a minority shareholder of Madoff Securities International Limited (“Madoff International”), Madoff’s London-based affiliate. KONIGSBERG was the only person outside of the Madoff family to hold an ownership interest in either Madoff Securities or Madoff International.

Beginning in at least the early 1990s, Madoff began to steer many of his investors towards KONIGSBERG’s accounting practice, particularly certain long-time investors in whose accounts Madoff executed the most glaringly fraudulent transactions. By December 2008, when Madoff’s scheme collapsed, Konigsberg Wolf provided accounting services in connection with more than approximately 300 Madoff Securities accounts. As their accountant, KONIGSBERG typically received duplicate copies of his client’s Madoff Securities account statements, and sometimes the only copy.

After the death of one long-time Madoff client – who had recruited investors and had been promised by Madoff corresponding annual commission payments in the form of guaranteed returns – Madoff encouraged the client’s widow to use KONIGSBERG as her accountant. KONIGSBERG, Madoff, and Frank DiPascali, Jr. – who pled guilty for his role in the fraud and is cooperating with the Government – agreed on an investment “strategy” for the widow’s account. Under the “strategy,” the widow’s money would be “invested” in United States Treasury bonds and cash equivalents for the first 11 months of each year, and then in December, DiPascali would fabricate back-dated options trades in order to generate the promised returns. For instance, one of the widow’s accounts was invested in Treasuries and money market funds in January through November of 2003, resulting in net equity at the end of November 2003 of approximately $860,000. In January 2004, however, DiPascali back-dated fake options trades purportedly executed in December 2003 to generate an additional approximately $825,000, nearly doubling the value of the account. Each December, over the course of several years, KONIGSBERG spoke with DiPascali to ensure that DiPascali arranged for the back-dated trades necessary to ensure the widow’s promised returns.

Similarly, in May 2003, KONIGSBERG requested that another co-conspirator who worked at Madoff Securities (“CC-1”) create back-dated trades in a second client’s account, retroactive to December 2002, in order to generate losses for tax purposes. A Madoff Securities worksheet reflecting the specific composition of the back-dated trades bears the notation “Paul OK’d this,” and an associated note reads, “Jan losses were for 2002 Tax & were put on in May 2003.” The Madoff Securities computer system confirms that in May 2003, CC-1 back-dated the precise trades that “Paul OK’d” to December 2002.

From time to time, moreover, Madoff “amended” the holdings of certain of his oldest clients, replacing statements reflecting one set of securities with revised statements, for the exact same time period, reflecting entirely different holdings and values. Because the existence of multiple, vastly different account statements for the same time risked exposing the fraud, Madoff could only ask certain trusted clients to return their statements in favor of the “amended” ones. Because KONIGSBERG serviced many of Madoff’s most important accounts, he frequently returned statements in favor of the “amended” ones. For example, in late 2002 or early 2003, KONIGSBERG sent back an entire year’s worth of statements for one client in favor of new ones. The new statements reflected millions of dollars in additional profitable trading activity for the client. Likewise, in 2008, KONIGSBERG sent back several months’ worth of statements for a different client, in favor of new ones reflecting millions of dollars in losses.

In addition to being paid for his accounting services by the dozens of clients referred to him by Madoff, for over a decade, KONIGSBERG also received payments directly from Madoff Securities of approximately $15,000 to $25,000 per month for KONIGSBERG’S work in connection with one client in particular. That client, one of Madoff’s oldest and largest, deposited and withdrew tens of billions of dollars into Madoff Securities over the years, and Madoff executed glaringly fraudulent trades in his accounts, such as back-dating an entire year’s worth of statements into accounts that did not previously exist.

Beginning in approximately 1992, Madoff offered KONISBERG, the defendant, an additional cash payment of approximately $20,000 per year. Rather than receiving this money in the form of trading profits, KONIGSBERG instructed Madoff to pay a relative of KONIGSBERG’s (“CC-2”), who had previously worked at Madoff Securities. CC-2 received salary, health, and retirement benefits from Madoff Securities, despite the fact that in recent years CC-2 earned hundreds of thousands of dollars at an overseas hedge fund. Between approximately 1992 until December 2008, CC-2 received more than approximately $320,000 in cash compensation on account of CC-2’s “no show” job at Madoff Securities, plus health and retirement benefits to which CC-2 was not entitled.

KONIGSBERG, 77, was arrested in New York, New York. He is charged in two counts of conspiracy, one count of falsifying the books and records of a broker-dealer, one count of falsifying the books and records of an investment advisor, and one count of making false statements in a document required to be kept by ERISA. He faces a maximum sentence of 40 years in prison. He is also subject to mandatory restitution and criminal forfeiture, and faces criminal fines up to twice the gross gain or loss derived from the offense.

Mr. Bharara praised the work of the FBI, the DOL, and the Internal Revenue Service – Criminal Investigation. He also thanked the SEC.

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 .

This case is 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, and Christopher D. Frey are in charge of the prosecution.

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

U.S. v. Paul Konigsberg S11 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that THOMAS HAMPTON, formerly the Managing Director of Hampton Capital Markets, LLC (“Hampton Capital” or the “Fund”), was sentenced today in Manhattan federal court to 30 months in prison in connection with an investment scheme in which HAMPTON concealed millions of dollars in losses he incurred trading various securities, including S&P 500 futures contracts tied to the S&P 500 stock index. HAMPTON pled guilty in April 2013 to one count of commodities fraud before U.S. Magistrate Judge James C. Francis. He was sentenced today by U.S. District Judge Robert W. Sweet.

Manhattan U.S. Attorney Preet Bharara said: “Lying to investors is never acceptable and, as Thomas Hampton now knows after being convicted and sentenced for doing so, it is a federal crime that carries stiff penalties.”

According to the charging instruments in this case and statements made in open court and at the plea proceeding:

From September 2010 through September 2011, HAMPTON was the Managing Director of Hampton Capital, an Arizona limited liability company that had more than $4 million in assets under management. Hampton Capital engaged in the business of buying and selling exchange traded funds (“ETFs”). An ETF is an investment fund that holds assets such as stocks, commodities or bonds, and typically tracks – or attempts to replicate the performance of – an underlying benchmark or index, such as the S&P 500 equities market index. Hampton Capital purported to utilize specially designed computer software to trade ETFs based on pricing inefficiencies. In his role as Managing Director, HAMPTON bought and sold various securities, including S&P 500 E-mini futures contracts, on behalf of the Fund.

When the Fund began to suffer substantial losses as a result of HAMPTON’s trading, he concealed those losses from investors by, among other things, falsely representing that the investments continued to earn profits. For example, HAMPTON provided monthly statements to investors as early as April 2011 that falsely reflected a positive return for the Fund instead of disclosing the actual losses suffered. Based on his misrepresentations and omissions, Hampton Capital investors did not seek to redeem or withdraw their investments. In fact, some investors provided additional investment capital. As a result of the scheme, more than 50 investors lost in total almost $5 million.

In addition to his prison term, HAMPTON, 45, of St. Louis, Missouri, was sentenced to three years of supervised release. He was also ordered to pay restitution in the amount of $4,879,627.98, and to forfeit this amount.

Mr. Bharara praised the investigative work of the FBI. He also thanked the U.S. Commodity Futures Trading Commission for their 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 Jillian B. Berman and Emil J. Bove, III, are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ALWAR POURYAN, 38, a U.S. citizen, was sentenced today in Manhattan federal court to 25 years in prison for conspiring to provide material support to the Taliban and conspiring to acquire anti-aircraft missiles. The case arose out of a U.S. Drug Enforcement Administration (“DEA”) undercover operation in which POURYAN and a co-defendant, Oded Orbach, also a U.S. citizen, agreed to provide various military-grade weapons, including heat-seeking surface-to-air missiles, to an individual they believed to represent the Taliban. POURYAN and Orbach were convicted in August 2013 after a two-week bench trial. U.S. District Judge Naomi Reice Buchwald presided over the trial and imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara stated: “Alwar Pouryan was an American who was all too willing to do business with the Taliban – agreeing to provide that narco-terrorist organization with lethal, military-grade weapons that would have put countless innocent lives at risk. The sentence handed down today is a just and appropriate penalty for an individual who so callously sold out his country.”

According to evidence at trial and documents previously filed in Manhattan federal court:

Beginning in the fall of 2010, and continuing through their arrest on February 10, 2011, POURYAN and Orbach communicated with a confidential source (the “CS”) working with the DEA who purported to represent the Taliban. The communications occurred by telephone, via email, and in a series of audio-recorded and videotaped meetings over several months.

During meetings in Ghana, Ukraine, and Romania beginning in November 2010, POURYAN and Orbach, at different times, agreed to arrange the sale of weapons to the CS for the Taliban’s use against U.S. military forces in Afghanistan. At the meetings, POURYAN and Orbach discussed weapons specifications, pricing, and the provision of training for the various weapons, including, among others, “Stinger” surface-to-air missiles, anti-tank missiles, grenade launchers, and M-16 assault rifles. POURYAN and Orbach were informed that the surface-to-air missiles, in particular, were needed to protect Taliban heroin laboratories against attacks by U.S. helicopters. The defendants also offered to provide regular shipments of ammunition. In total, POURYAN and Orbach agreed to provide over $25 million in weapons, ammunition, and training, and expected to make over $800,000 in commissions in connection with the transaction.

The evidence also included internal e-mail and Skype communications between the defendants, which showed them discussing the various weapons requested by the purported Taliban representative, drafting price lists and payment schedules for the weapons, and creating internal budget documents that reflected the expenses and anticipated income from the weapons deal. The evidence also included emails from Orbach to third-party weapons suppliers seeking to obtain certain of the requested weapons.

Following the final meeting in Bucharest, Romania, on February 10, 2011, POURYAN and Orbach were arrested by Romanian authorities in coordination with the DEA. On April 29, 2011, the defendants were transferred by the Government of Romania to the custody of the United States to face charges in the Southern District of New York.

In addition to the prison term, POURYAN was sentenced to 10 years of supervised release and ordered to pay a $200 special assessment.

Orbach is scheduled to be sentenced by Judge Buchwald on November 1, 2013.

The charges, arrest, transfer, and prosecution of POURYAN were the result of close cooperation among the U.S. Attorney’s Office for the Southern District of New York, the Special Operations Division of the DEA, the DEA Warsaw Country Office, the DEA Ghana Country Office, the DEA Athens Country Office, the DEA SECI (South East European Cooperative Initiative Regional Center for Combating Transborder Crime), the Criminal Division’s Office of International Affairs and the National Security Division of the U.S. Department of Justice, the U.S. Attorney’s Office for the Northern District of Illinois, the U.S. Department of State, U.S. Immigration and Customs Enforcement, and the governments of Romania and Ukraine.

Mr. Bharara expressed his sincere gratitude for the work of the Romanian National Prosecutor’s Directorate for Investigating Organized Crime and Terrorism, the Romanian Prosecutor’s Office of the Court of Appeals, and the Romanian National Police Directorate for Investigating Organized Crime.

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

Preet Bharara, United States Attorney for the Southern District of New York, announced that IGOR TSIMERMAN, ROSTISLAV BELYANSKY (“SLAVA”), and DAVID BINMAN pled guilty in proceedings yesterday and today in Manhattan federal court to conspiring to bribe New York State Assemblymember Eric Stevenson in connection with a scheme to obtain Stevenson’s assistance in drafting, proposing, and agreeing to enact legislation favorable to their business. TSIMERMAN also pled guilty to conspiring to bribe former New York State Assemblymember Nelson Castro. TSIMERMAN, SLAVA, and BINMAN were arrested in April 2013. TSIMERMAN and SLAVA pled guilty yesterday before U.S. District Judge William H. Pauley III, and BINMAN pled guilty today before Judge Pauley.

Manhattan U.S. Attorney Preet Bharara said: “With these additional guilty pleas, we are holding accountable individuals who wanted the law to be for sale and the legislature to be a bazaar. This Office will continue in its work to prosecute and punish those who attempt to corrupt the legislative process in New York.”

According to the allegations contained in the Complaint, the Superseding Indictment, and statements made in court:

Stevenson has served as a member of the New York State Assembly since 2011 representing District 79, which includes various neighborhoods in the Bronx. Castro is a former member of the New York State Assembly who has been cooperating in this investigation. In August 2013, pursuant to a cooperation agreement, Castro pled guilty in federal court to making false statements to law enforcement agents and also pled guilty in state court to committing perjury in connection with registering New York City residents to vote.

TSIMERMAN, SLAVA, and BINMAN, and co-defendant Igor Belyansky, are business partners who, during 2012 and 2013, were trying to open and manage adult day care centers in the Bronx, New York, including a center on Westchester Avenue (the “Westchester Avenue Center”), within Stevenson’s Assembly District, and another center on Jerome Avenue (the “Jerome Avenue Center”), within Castro’s Assembly District. In connection with their efforts to open and operate both centers, TSIMERMAN, SLAVA, and BINMAN, together with Belyansky, made cash bribe payments to Stevenson. TSIMERMAN and Belyansky also made a cash bribe payment to Castro, who was cooperating with the Government at the time.

At a January 27, 2012 meeting at a restaurant in the Bronx, TSIMERMAN and Belyansky paid Castro $12,000 in cash in exchange for Castro’s assistance in helping TSIMERMAN and Belyansky open an adult day care center in Castro’s district. Immediately following this meeting, Castro met with an individual who was working with TSIMERMAN, SLAVA, Belyansky, and BINMAN on their adult day care centers and who later began cooperating with the Government (the “CW”). Castro told the CW, in sum and substance, “Whatever [TSIMERMAN and Belyansky] need, legislatively, whatever. . . . .” The CW interrupted Castro and stated, in sum and substance, “they call me. I call you. That’s it and it’s how we work.”

At a September 7, 2012 meeting at a steakhouse in the Bronx, SLAVA and Belyansky offered to pay Stevenson $10,000 in exchange for calling Con Edison to expedite the installation of a gas line and assisting with obtaining a Certificate of Occupancy from the New York City Buildings Department at the Jerome Avenue Center, and for assistance recruiting senior citizens to attend the Westchester Avenue Center. Stevenson agreed, but when Belyansky attempted to hand him the $10,000 in cash in an envelope, Stevenson indicated that he was concerned that there might be surveillance cameras in the restaurant, so the transaction was conducted outside. After the group walked outside the restaurant, Belyansky handed Stevenson the envelope of cash, after which Stevenson stuffed the envelope into his front pants pocket and covered his front pocket with the bottom of his shirt.

On January 9, 2013, the CW told Belyansky that Stevenson wanted $10,000 for introducing legislation that would establish a temporary moratorium on the construction and/or opening of new adult day care centers (the “Moratorium Legislation”), which would have the effect of eliminating competition with the Jerome Avenue Center and the Westchester Avenue Center, thereby substantially increasing the profits earned by those two centers. Two days later, on January 11, 2013, at the Westchester Avenue Center, TSIMERMAN, SLAVA, BINMAN, and Belyansky, gave the CW $5,000 cash to be delivered to Stevenson.

At a January 31, 2013 meeting, Stevenson showed the CW a draft of the Moratorium Legislation. On February 11, 2013, Stevenson told the CW: “We got the bill [the Moratorium Legislation] back today . . . [t]he bill is done now, it’s going out to the members . . . to the committee and . . . we’re gonna . . . try to push it to get it to the floor.” On February 16, 2013, in a hotel room in Albany, SLAVA gave $5,000 in cash to the CW, which the CW gave to Stevenson after taking a $500 cut.

Stevenson introduced and sponsored Assembly Bill Number A05139, which places a temporary moratorium on the construction and/or opening of new adult day care centers within New York City, on February 20, 2013.

TSIMERMAN, 47, of Staten Island, New York, SLAVA, 43, of the Bronx, New York, and BINMAN, 52, of Glendale, New York, each pled guilty to conspiring to commit honest services wire fraud, which carries a maximum sentence of 20 years in prison and three years of supervised release. TSIMERMAN also pled guilty to travel act conspiracy, which carries a maximum sentence of five years in prison and three years of supervised release. TSIMERMAN, SLAVA, and BINMAN further agreed to forfeit any proceeds of their crimes and pay restitution in an amount ordered by the Court. TSIMERMAN, SLAVA, and BINMAN will be sentenced by Judge Pauley on January 24, 2014, at 2:00 p.m.

On Monday, September 23, 2013, Belyansky pled guilty before Judge Pauley to conspiring to commit honest services wire fraud and conspiring to violate the travel act. Belyansky is scheduled to be sentenced by Judge Pauley on January 24, 2014, at 2:00 p.m. The charges against Stevenson remain pending and are merely accusations. Stevenson is presumed innocent unless and until proven guilty.

Mr. Bharara expressed his appreciation for the outstanding efforts of the Bronx County District Attorney's Office, the partner in this case.

This prosecution is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Paul M. Krieger and Brian A. Jacobs and Assistant District Attorney Pishoy Yacoub of the Bronx County District Attorney’s Office are in charge of the prosecution.

U.S. v. Eric Stevenson et al. S2 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, Brian R. Crowell, the Special-Agent-in-Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), Aaron Ford, the Special-Agent-in-Charge of the Newark Office of the Federal Bureau of Investigation (“FBI”), Raymond W. Kelly, the Commissioner of the New York City Police Department (“NYPD”), Joseph A. D’Amico, the Superintendent of the New York State Police (“NYSP”), and Gaetano T. Gregory, the Acting Prosecutor of Hudson County, today announced the filing of a Superseding Indictment (the “S2 Indictment”)in Manhattan federal court charging BENNY LISOJO and WILFREDO SUAREZ, two additional alleged members of an armed robbery crew who impersonated police officers, with robbery conspiracy and firearms offenses. LISOJO is a Hudson County Corrections Officer. A third defendant named in the S2 Indictment, ANTHONY SERRANO, was arrested on August 1, 2013. LISOJO and SUAREZ were taken into custody today and will be presented this afternoon before Magistrate Judge Debra Freeman.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, these defendants committed armed robberies while pretending to be police officers. In doing so, as charged, the defendants – one of whom sadly was a law enforcement officer -- both endangered the public and added to the workload of the real police. This Office and our partners will continue our efforts to pursue and prosecute those who perpetrate alleged violent crime.”

DEA Special-Agent-in-Charge Brian R. Crowell said: “This nine month investigation has culminated in the announcement of three additional arrests of a home invasion crew that posed as police officers, carrying loaded weapons and committing robberies in New York and New Jersey. One crew member did not have to pretend he was a police officer – because Benny Lisojo was a Hudson County Corrections Officer while committing these alleged crimes. Law enforcement efforts on all levels, have successfully identified, investigated and arrested twenty members of this brutal crew to rid the streets of this public menace.”

FBI Special-Agent-in-Charge Aaron Ford said: “These alleged actions are an erosion of the public's ability to trust the law enforcement personnel who have taken oath to protect against such egregious, criminal activity. The FBI will continue to support this ongoing investigation, so the members of the public can continue to trust in the vast majority of law enforcement officials who respect their oath and are committed to public service.”

NYPD Commissioner Raymond W. Kelly said: “These brazen criminals were allegedly responsible for multiple violent crimes including car jackings and robberies at gunpoint. I commend the members of the New York Drug Enforcement Task Force, including NYPD detectives, and the prosecutors in the U.S. Attorney's office for their work in bringing to justice these violent robbers who even posed as law enforcement in the commission of their crimes.”

NYSP Superintendent Joseph A. D’Amico said: “Once again the hard work of law enforcement partners working together has resulted in getting allegedly dangerous individuals off of our streets. Not only did these suspects allegedly commit these violent acts, but they posed as law enforcement, making traffic stops to pull off their robberies. The alleged actions of these crews will never be tolerated, especially those impersonating officers. I commend and thank the U.S. Attorney's Office, the Drug Enforcement Administration, the Federal Bureau of Investigation, the New York City Police Department and Hudson County Prosecutor's Office for their continued partnerships.”

According to the allegations contained in the Superseding Indictment unsealed today:

On October 14, 2012, SERRANO and other co-conspirators, while pretending to be police officers, stopped two victims who were traveling in a vehicle in New York, New York, and robbed the victims at gunpoint.

On November 22, 2012, LISOJO and SUAREZ and other co-conspirators, while pretending to be police officers, stopped five victims who were traveling in a vehicle in New Jersey after departing from New York, New York, restrained four of the victims, and robbed them at gunpoint.

SERRANO, 39, of Jersey City, New Jersey, LISOJO, 31, of Newark, New Jersey, and SUAREZ, 31, of Jersey City, New Jersey, are each charged with one count of robbery conspiracy, and one count of brandishing a firearm in connection with a robbery conspiracy. They each face up to 20 years in prison on the robbery charge and life in prison on the firearms charge.

The arrests and charges are part of an ongoing investigation of an armed robbery crew that impersonated police officers and targeted individuals believed to be engaged in narcotics trafficking and/or engaged in businesses that affected interstate and international commerce. Seventeen other members of the same robbery crew were arrested in January 2013, in possession of, among other things: six loaded guns, shirts bearing the word “Police,” a hydraulic ram similar to those used by law enforcement to break down doors, handcuffs, walkie talkies, a purported law enforcement shield, a baseball bat, ski masks, and GPS units similar to those used by law enforcement to track suspects. Sixteen of these 17 defendants have pleaded guilty.

Mr. Bharara praised the DEA, the FBI, the NYPD, the NYSP, and the Hudson County Prosecutor’s Office for their work in the investigation.

The case is being prosecuted by the Office’s Narcotics Unit. Assistant United States Attorneys Rachel Maimin and Rahul Mukhi are in charge of the prosecution.

The charges contained in the S2 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, and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced that WARREN STELMAN, a/k/a “Dave Ford,” was sentenced today to 75 months in prison for his participation in a Dominican-based telemarketing fraud scheme that targeted elderly victims throughout the United States and defrauded those victims of nearly $1 million. STELMAN was arrested in the Dominican Republic in August 2012 and was subsequently extradited to the United States. He pled guilty in January 2013 to one count of wire fraud. Today’s sentence was imposed by U.S. District Judge Lewis A. Kaplan.

Manhattan U.S. Attorney Preet Bharara said: “Warren Stelman admitted scheming in the Dominican Republic to fleece elderly people in the U.S. His pitch, dangling fictitious sweepstakes winnings, was persuasive enough to victimize many of these people repeatedly. Today he has been ordered to pay for his crime against these vulnerable victims in money and time.”

FBI Assistant Director-in-Charge George Venizelos said: “The defendant hid behind his telephone to prey upon his victims, many of whom were elderly, with promises of money and prizes. Although the victims never met the defendant, they relied upon his representations of wealth and in exchange, turned over their hard earned money. This case should be a reminder to the public to be cautious of get-rich-quick opportunities, many of which are merely schemes to defraud and take advantage of our unsuspecting community.”

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

STELMAN and his co-conspirators, including his wife Lana Stelman, operated boiler rooms in the Dominican Republic, from which they telephoned victims in the United States, most of whom were elderly. They informed the victims falsely that they had won substantial amounts of cash through a sweepstakes or some other type of promotion, but that in order to claim their prize, they first needed to wire thousands of dollars in “fees” to the Dominican Republic. In reality, however, there were no cash prizes, neither STELMAN nor his co-conspirators worked in connection with a sweepstakes or other promotion, and none of the victims ever received any money in exchange for their fees.

The victims were typically told to send the money for the purported fees by, among other means, Western Union or Money Gram. After victims sent money to cover the supposed fees, STELMAN and his co-conspirators typically contacted them again and, using further fraudulent representations, persuaded them to send more money to pay for other costs. In some instances, when victims said that they had run out of money to pay additional fees, STELMAN and his associates urged the victims to come up with more money by borrowing from friends and relatives, taking cash advances on credit cards, and obtaining loans against their homes and vehicles.

The fraudulent scheme targeted U.S. residents who had previously subscribed to sweepstakes. STELMAN and his co-conspirators identified these victims by purchasing from U.S.-based brokers copies of sweepstakes entry forms the victims had previously filled out. These entry forms, which the conspirators referred to as “leads,” were typically written on narrow slips of paper that included the names, addresses, and telephone numbers for sweepstakes entrants. The conspirators used various Internet-based phone methods to mask their locations and identities, and communicated with the victims through numbers assigned to voicemail boxes located in Manhattan. In total, 78 victims – 54 of whom were over the age of 70 – were defrauded out of nearly $1 million.

In addition to the prison term, Judge Kaplan sentenced STELMAN, 54, of the Dominican Republic, to three years of supervised release. STELMAN was also ordered to forfeit $996,659.30 and to pay a total of $996,659.30 in restitution to 78 victims.

Four other defendants – Lana Stelman, Romeo Rawlins, Juana Santana and Lickenson Brooks – were also charged for their participation in the scheme. Lana Stelman and Brooks pled guilty and are awaiting sentencing. Charges remain pending against Rawlins and Santana, and they are presumed innocent until and unless they are proven guilty.

In related cases, Janice Pemberton, Peter Gruman, Randy Ortzman, and Avraham Fried were charged with participating in similar telemarketing fraud schemes from the Dominican Republic. All of these defendants have pled guilty. Fried was sentenced on September 10, 2013 by U.S. District Judge William H. Pauley to 44 months in prison. Pemberton, Gruman, and Ortzman are awaiting sentencing.

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

The prosecution of this case is being handled by the Office’s Complex Frauds Unit. Assistant United States Attorneys Thomas G. A. Brown and Rosemary Nidiry are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that JOSE LAGOS, a 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 40 years in prison. LAGOS’s criminal conduct, for which he was sentenced, included three murders, shootings, brandishing firearms, assaults, drug distribution, and other acts of racketeering. LAGOS, 23, is one of 35 members and associates of the gang who were charged in the case, all of whom have been convicted, 26 of whom have been sentenced. The remaining top two leaders of the gang, Wilson Pagan and Christian Sanchez, were convicted at trial of murder, racketeering, firearms, and narcotics offenses, and each faces a mandatory life sentence.

U.S. Attorney Preet Bharara stated: “With this sentencing, and the pending sentencing of Lagos’s two key accomplices, the leadership of the gang that deprived the citizens of Newburgh of their well-being has been decapitated. This result was only accomplished by the unflagging efforts of the federal, state and local law enforcement personnel and the prosecution team. Today, Newburgh is a safer place but we are not relenting in our efforts to lift the shadow that gangs cast over its streets.”

According to the Indictment to which LAGOS pled guilty, statements made during the plea and sentencing proceedings, other court documents, and evidence presented during related trials:

On May 6, 2008, LAGOS, then a leader of the Newburgh Latin Kings, ordered two others to shoot a member of a rival gang, the Bloods. The subordinates followed LAGOS’s orders, but mistakenly shot and killed Jeffrey Zachary, a 15-year-old boy, who had nothing to do with the gang dispute.

On March 11, 2010, LAGOS, then still a leader of the Newburgh Latin Kings, ordered, along with others, two others to shoot a member of the Bloods. The subordinates followed LAGOS’s and the other leaders’ orders, but one of the subordinates, Jerome Scarlett, was instead mistakenly shot and killed.

On March 12, 2010, LAGOS, along with other leaders of the Newburgh Latin Kings, ordered the killing of John Maldonado, whom they suspected had killed Scarlett. LAGOS helped to obtain a gun while other members of the gang plotted the murder. Another member of the gang shot Maldonado, unsuspecting, in the back, killing him.

LAGOS carried out the murders as part of his participation in the criminal affairs of the Newburgh Latin Kings. Among the gang’s criminal objectives was selling drugs, including by controlling corners in the City of Newburgh where they regularly met with drug customers to sell crack, cocaine, heroin, and marijuana. Gang members, and leaders such as LAGOS, conspired together to protect their drug turf, and to attempt to expand the gang’s drug turf, including by using violence to kill, hurt, or intimidate the gang’s rivals or other enemies of the gang.

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 S. Kurland and Nicholas McQuaid are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that EVERETTE L. SCOTT, JR., a New Jersey attorney, was sentenced today in Manhattan federal court to 30 months in prison for engaging in securities and wire fraud in connection with two separate schemes. In the larger of the two schemes, SCOTT and co-defendant Tyrone L. Gilliams, Jr., solicited and misappropriated $5 million in investments in a bogus U.S. 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. SCOTT and Gilliams were found guilty following a jury trial in February 2013, and Scott was sentenced today by U.S. District Judge Deborah A. Batts.

Manhattan U.S. Attorney Preet Bharara said: “With his sentence today, Everette Scott meets the just punishment that befalls an attorney who uses a law license as a vehicle for fraud – time in federal prison. This Office will continue to make sure the perpetrators of fraud are brought to justice and pay the price for their crimes.”

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’s general counsel.

In the summer of 2010, Gilliams solicited $5 million dollars 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’s 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 – “Joy to the World,” involving an album release party with Jamie Foxx at the Vault nightclub in Philadelphia, and culminating in a red carpet, black tie gala at the Philadelphia Ritz-Carlton, headlined for a $120,000 fee by Sean “Diddy” Combs, and the “Gatta Be Jokin’ Comedy Jam,” a December 2010 comedy performance in Nassau, Bahamas.

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 investors 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 his 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’s 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 SCOTT, 52, of Sewell, New Jersey, to three years of probation. He was also ordered to make restitution in the amount of $1,005,000, and pay a $300 special assessment fee.

Gilliams is scheduled to be sentenced by Judge Batts on October 31, 2013, at 10:30 a.m.

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 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.

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, announced that SATNARINE SEEBACHAN, formerly a program director at Bronx Shepherds Restoration Corporation (“Bronx Shepherds”), a not-for-profit corporation in the Bronx, New York, was found guilty yesterday of soliciting and accepting a bribe in the form of labor and materials for the renovation of his residence from a contractor who received federally funded contracts from Bronx Shepherds. SEEBACHAN was convicted after a five-day jury trial before U.S. District Judge George B. Daniels.

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

SEEBACHAN was employed as a program director by Bronx Shepherds, a not-for-profit corporation that provides housing restoration for low-income individuals in the Bronx, New York. As program director, SEEBACHAN was responsible for administering two federally funded home improvement programs, namely, the Weatherization Assistance Program (“Weatherization Program”) and the Home Program (“Home Program”) (collectively, the “Programs”).

The Weatherization Program is a federal program funded by the U.S. Department of Energy and the U.S. Department of Health and Human Services. The Weatherization Program provides weatherization assistance, such as improved lighting and heating systems, window caulking, and wall and ceiling insulation, to buildings with low-income residents in order to make the buildings more energy efficient. The Home Program is a federal program funded by the U.S. Department of Housing and Urban Development. The Home Program provides renovation assistance to low-income individuals who reside in small family homes, such as repairs to ceilings, bathrooms, kitchens, windows, and sidewalks. As a program director for Bronx Shepherds, SEEBACHAN was in charge of the bidding process to select the construction companies hired to perform the necessary work on the buildings, apartments, and houses that Bronx Shepherds had selected to participate in the Programs.

Towards the end of 2005, SEEBACHAN purchased a residence in Glen Cove, New York. In 2006, 2007, and again in 2010, at the direction of SEEBACHAN, a construction company that bid for and received contracts from Bronx Shepherds to perform renovation work under the Programs (the “Contractor”) supplied materials and labor for construction and renovation work performed at SEEBACHAN’s residence. Specifically, the Contractor paid for marble that was installed in SEEBACHAN’s residence and did extensive concrete beautification renovations to the driveway, front walkway, and back patio and pool area.

At the time the Contractor paid for the marble and performed the concrete work at SEEBACHAN’s residence, SEEBACHAN promised the Contractor that he would ensure the Contractor received lucrative contracts to perform repairs on apartment buildings Bronx Shepherds owned and managed. The total dollar value of the labor and materials that SEEBACHAN obtained from the Contractor was more than $100,000. SEEBACHAN was found guilty of one count of bribery concerning an organization that receives federal program funds.

SEEBACHAN, 51, of Glen Cove, New York, faces a maximum sentence of 10 years in prison. A sentencing hearing has been scheduled for January 30, 2014, at 10:00 a.m. before Judge Daniels.

Mr. Bharara praised the investigative work of the New York State Inspector General’s

Office.

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

U.S. v. Satnarine Seebachan Indictment

Preet Bharara, United States Attorney for the Southern District of New York, announced that IGOR BELYANSKY pled guilty today in Manhattan federal court to conspiring to bribe New York State Assemblymember Eric Stevenson in connection with a scheme to obtain Stevenson’s assistance in drafting, proposing, and agreeing to enact legislation favorable to BELYANSKY’s business. BELYANSKY also pled guilty to conspiring to bribe former New York State Assemblymember Nelson Castro. BELYANSKY was arrested in April 2013, and pled guilty before U.S. District Judge William H. Pauley III.

Manhattan U.S. Attorney Preet Bharara said: “Igor Belyansky tried to corrupt the legislative process by bribing two New York state lawmakers, and attempted to buy from one of them a self-serving law designed to advance his own business interests. As the prosecution of this case shows, our Office will do everything in its power to ensure that democracy is not for sale in New York. With his guilty plea today, Belyansky becomes the first defendant to admit his role in this egregious scheme.”

According to the allegations contained in the Complaint, the Superseding Indictment, and statements made in court:

Stevenson has served as a member of the New York State Assembly since 2011 representing District 79, which includes various neighborhoods in the Bronx. Castro is a former member of the New York Assembly who has been cooperating in this investigation. In August 2013, pursuant to a cooperation agreement, Castro pled guilty in federal court to making false statements to law enforcement agents and also pled guilty in state court to committing perjury in connection with registering New York City residents to vote.

BELYANSKY and co-defendants Rostislav Belyansky (a/k/a “Slava”), Igor Tsimerman, and David Binman are business partners who, during 2012 and 2013, were trying to open and manage adult day care centers in the Bronx, New York, including a center on Westchester Avenue (the “Westchester Avenue Center”), within Stevenson’s Assembly District, and another center on Jerome Avenue (the “Jerome Avenue Center”), within Castro’s Assembly District. In connection with their efforts to open and operate both centers, BELYANSKY, together with Slava, Tsimerman, and Binman, made cash bribe payments to Stevenson. BELYANSKY and Tsimerman also made a cash bribe payment to Castro, who was cooperating with the Government at the time.

At a January 27, 2012 meeting at a restaurant in the Bronx, BELYANSKY and Tsimerman paid Castro $12,000 in cash in exchange for Castro’s assistance in helping BELYANSKY and Tsimerman open an adult day care center in Castro’s district. Immediately following this meeting, Castro met with an individual who was working with BELYANSKY, Tsimerman, Slava, and Binman on their adult day care centers and who later began cooperating with the Government (the “CW”). Castro told the CW, in sum and substance, “Whatever [Tsimerman and BELYANSKY] need, legislatively, whatever. . . . .” The CW interrupted Castro and stated in sum and substance, “they call me. I call you. That’s it and it’s how we work.”

At a September 7, 2012 meeting at a steakhouse in the Bronx, BELYANSKY and Slava offered to pay Stevenson $10,000 in exchange for calling Con Edison to expedite the installation of a gas line and assisting with obtaining a Certificate of Occupancy from the New York City Buildings Department at the Jerome Avenue Center, and for assistance recruiting senior citizens to attend the Westchester Avenue Center. Stevenson agreed, but when BELYANSKY attempted to hand him the $10,000 in cash in an envelope, Stevenson indicated that he was concerned that there might be surveillance cameras in the restaurant, so the transaction was conducted outside. Outside the restaurant, BELYANSKY handed Stevenson the envelope of cash, after which Stevenson stuffed the envelope into his front pants pocket and covered his front pocket with the bottom of his shirt.

On January 9, 2013, the CW told BELYANSKY that Stevenson wanted $10,000 for introducing legislation that would establish a temporary moratorium on the construction and/or opening of new adult day care centers (the “Moratorium Legislation”), which would have the effect of eliminating competition with the Jerome Avenue Center and the Westchester Avenue Center, thereby substantially increasing the profits earned by those two centers. Two days later, on January 11, 2013, at the Westchester Avenue Center, BELYANSKY, Slava, Tsimerman, and Binman gave the CW $5,000 cash to be delivered to Stevenson.

Stevenson had a draft of the Moratorium Legislation prepared by January 31, 2013, which he showed the CW at a meeting in his office. On February 11, 2013, Stevenson told the CW: “We got the bill [the Moratorium Legislation] back today . . . [t]he bill is done now, it’s going out to the members . . . to the committee and . . . we’re gonna . . . try to push it to get it to the floor.” On February 16, 2013, in a hotel room in Albany, Slava gave $5,000 in cash to the CW, which the CW gave to Stevenson after taking a $500 cut.

Stevenson introduced and sponsored Assembly Bill Number A05139, which places a temporary moratorium on the construction and/or opening of new adult day care centers within New York City, on February 20, 2013.

BELYANSKY, 42, of the Bronx, New York, pled guilty to conspiring to commit honest services wire fraud, which carries a maximum sentence of 20 years in prison and three years of supervised release. He also pled guilty to travel act conspiracy, which carries a maximum sentence of five years in prison and three years of supervised release. BELYANSKY further agreed to forfeit any proceeds of his crimes and to pay restitution in an amount ordered by the Court. BELYANSKY will be sentenced by Judge Pauley on January 24, 2014, at 2:00 p.m.

The charges against Stevenson, Slava, Tsimerman, and Binman remain pending and are merely accusations. Those defendants are presumed innocent unless and until proven guilty.

Mr. Bharara expressed his appreciation for the outstanding efforts of the Bronx County District Attorney's Office, the partner in this case.

This prosecution is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Paul M. Krieger and Brian A. Jacobs and Assistant District Attorney Pishoy Yacoub of the Bronx County District Attorney’s Office are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Raymond W. Kelly, the Police Commissioner of the City of New York (“NYPD”), announced today the unsealing of charges in Manhattan federal court against seven additional alleged members and associates of the Genovese and Bonanno organized crime families, including a Genovese “Capo,” for offenses including narcotics trafficking conspiracy and loan sharking. Five other defendants, including a solider in the Genovese organized crime family, were charged in a prior Indictment with narcotics trafficking.

In connection with the Superseding Indictment unsealed today, six defendants have been arrested in New York. The six defendants taken into custody today in New York were presented and arraigned in Manhattan federal court before U.S. Magistrate Judge Henry B. Pitman this afternoon. An additional defendant, ELON VALENTINE, was previously arrested on state charges and remains detained.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, these defendants, all of whom were members and associates of the Genovese and Bonanno families, operated a narcotics trafficking scheme that ran across the country and onto our streets, on one hand, and a conspiracy to make extortionate loans, on the other. This Office is committed to rooting out any and all organized crime activity wherever we find it.”

FBI Assistant Director-in-Charge George Venizelos said: “Today’s charges show that the wise guys in New York tried to take a ‘higher,’ albeit illegal, approach to make money along with their usual loan sharking ways. Allegedly, members and associates of the Genovese and Bonanno organized crime families along with their cohorts ran a large scale marijuana operation that included the transport of marijuana from California to New York. However wise they thought their alleged antics would be, today, the FBI stands with our law enforcement partners announcing charges to end this cross country drug trade.”

NYPD Police Commissioner Raymond Kelly said: “I commend the NYPD Organized Crime Investigations Division and their FBI partners in the Joint Organized Crime Task Force for seeing this case through, as well as the prosecutors in U.S. Attorney Bharara’s office for their work on this case.”

According to the allegations in the Indictments unsealed today in Manhattan federal court and other court documents and proceedings:

Narcotics Trafficking

VINCENT BASCIANO, JR., STEPHEN BASCIANO, GEORGE KOKENYEI, JOEY BASCIANO, and VALENTINE conspired to distribute hundreds, and in some cases, thousands, of pounds of marijuana. For example, KOKENYEI arranged for large shipments of marijuana to be sent from California to New York, while BASCIANO, JR., ran a marijuana route in the Bronx, New York, that distributed hundreds of pounds of marijuana.

Loan Sharking

PASQUALE FALCETTI, a “capo” in the Genovese crime family, and THOMAS JOY conspired to make extortionate loans to victims in the Bronx, New York, and elsewhere.

A chart containing the ages and charges against the defendants, as well as the maximum penalties they face is attached.

Mr. Bharara thanked the FBI and the NYPD, specifically the FBI-NYPD Joint Organized Crime Task Force, for their work in the investigation.

The case is being prosecuted by the Office’s Organized Crime Unit. Assistant U.S. Attorneys Rebecca Mermelstein and Peter Skinner of the Organized Crime Unit 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.

Click here to view chart(s)

U.S. v. Vincent Basciano et al S3 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that CHAN MING FON (“CHAN”), a former bank vice president based in Singapore, pled guilty today in connection with his participation in a scheme to defraud investors and auditors regarding the financial condition of Olympus Corporation (“Olympus”). CHAN, who was arrested in December 2012, pled guilty before U.S. District Judge Laura Taylor Swain, pursuant to a cooperation agreement.

According to the Information to which CHAN pled guilty and other court documents:

Olympus is a major manufacturer of medical devices and cameras. Olympus common stock is listed on the Tokyo Stock Exchange. In addition, Olympus American Depository Receipts are traded in the United States. Olympus owns, both fully and in part, numerous subsidiaries and related companies, located in many countries, including the United States.

From 1995 through 2004, CHAN was employed as an executive at two different international financial institutions (“Bank-1” and “Bank-2”). While employed at Bank-1, CHAN served as the relationship manager for Olympus. While employed at Bank-2, he facilitated a loan for hundreds of millions of dollars to a special purpose entity established by Olympus known as Easterside. Olympus did not disclose to its auditor, investors or shareholders the existence of this loan or that it was collateralized by Olympus’s deposits.

Subsequently, from 2005 through 2010, CHAN participated in a scheme to disguise hundreds of millions of dollars that Olympus purportedly invested in government bonds and other secure investments (the “Investment Portfolio”). He served as the manager of a fund – known as SG Bond – that held the Investment Portfolio and, at the direction of Olympus’s executives, transferred the Investment Portfolio to Easterside, which then liquidated the bonds and used the proceeds, in part, to repay the loan from Bank-2.

As the manager of Olympus’s purported investment, CHAN submitted, and caused to be submitted, false and misleading documents to Olympus’s outside auditor (“Auditor”) regarding the Investment Portfolio. Specifically, CHAN prepared and provided several false and misleading confirmations of the Investment Portfolio’s value. He did not disclose in these confirmations that the Investment Portfolio had been transferred to Easterside, nor did he disclose that the Investment Portfolio had been liquidated. In June 2009, he provided the Auditor with a confirmation of the Investment Portfolio’s net asset value and a list of assets that purportedly constituted the Investment Portfolio. At the direction of a co-conspirator, CHAN forged a signature on the confirmation to make it appear that it had been signed by a bank representative. CHAN submitted these false and misleading documents, including the confirmation with the forged signature, to deceive the Auditor into believing that Olympus’s purported investment in bonds and fixed income securities was safe and secure at SG Bond.

In 2010, Olympus-controlled entities transferred hundreds of millions of dollars to an entity controlled by CHAN. In turn, he used these funds to purchase bonds and other securities that were similar to the assets that originally had constituted the Investment Portfolio. Upon acquiring these bonds and securities, he caused the assets to be transferred to Easterside, which in turn transferred the assets to SG Bond in order to replace the Investment Portfolio that SG Bond had purportedly held for Olympus since 2005.

In consideration for his assistance to Olympus including in this accounting fraud scheme, CHAN received in excess of $10,000,000 from Olympus or entities controlled by Olympus.

CHAN, 50, resides in Singapore and is a citizen of Taiwan. He pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum potential penalty of five years in prison. CHAN is scheduled to be sentenced by Judge Swain on January 10, 2014.

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

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

U.S. v. Chan Ming Fon Information

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that United States District Judge Katherine B. Forrest has issued a decision granting summary judgment in favor of the United States’ claims for forfeiture of the 36-story Midtown Manhattan office building located at 650 Fifth Avenue, New York, New York (“the Building”), as the result of violations of the Iranian Transactions Regulations promulgated under the International Emergency Economic Powers Act (“IEEPA”), and the federal money laundering statutes. The Court found that the partners of the Building’s owner, the Alavi Foundation and Assa Corp., committed the IEEPA violations and money laundering offenses.

Claims against the building in this consolidated action by private parties holding judgments against the Government of Iran remain pending.

Manhattan U.S. Attorney Preet Bharara said: “The Judge’s opinion upholds what was the contention of this Office from outset: ‘Assa was (and is) a front for Bank Melli, and thus a front for the Government of Iran.’ The Judge’s ruling that Alavi and Assa committed IEEPA and money laundering violations paves the way for the largest-ever terrorism-related forfeiture, and provides a means of compensating victims of Iranian-sponsored terrorism.”

According to the amended civil forfeiture Complaint and the oral and written opinions issued by Judge Forrest in this case:

Overview

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

IEEPA confers upon the President the authority to take certain actions, defined in 50 U.S.C. § 1702, in response to declared national emergencies. The President has declared national emergencies with respect to the actions and policies of the Government of Iran: Executive Orders 12957, 12959, and 13059, and with respect to the proliferation of weapons of mass destruction (“WMD”), Executive Orders 12938 and 13382. The Treasury Department’s Iranian Transactions Regulations (“ITR”), 31 C.F.R. Part 560, and Weapons of Mass Destruction Proliferators Sanctions Regulations, 31 C.F.R. Part 544, implement these Executive Orders.

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

Following the Iranian revolution of 1979, the Islamic Republic of Iran established the Bonyad Mostazafan, also known as the Bonyad Mostazafan va Janbazan (“Bonyad Mostazafan”), to centralize, take possession of, and manage property expropriated by the revolutionary government. The Bonyad Mostazafan was created in March 1979 by order of the Ayatollah Khomeini and approved by the Revolutionary Council of the Islamic Republic of Iran, and is controlled by the Government of Iran. The Bonyad Mostazafan sought to take control of the Shah’s property, including the assets of the Pahlavi Foundation. The Bonyad Mostazafan reports directly to the Ayatollah.

Between approximately October 1978 and approximately October 1979, all five previous directors of the Pahlavi Foundation resigned, and four new directors took their places. On February 25, 1980, an amended Certificate of Incorporation for the Pahlavi Foundation was filed renaming the Foundation “The Mostazafan Foundation of New York.” The Mostazafan Foundation of New York later renamed itself the Alavi Foundation.

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

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

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

The Iranian Government’s control of the Alavi Foundation has continued. In 1989, Kamal Kharrazi was named as the new Iranian Ambassador to the United Nations. As a result of tension between the new Ambassador and the Alavi Foundation president, the Ambassador eventually demanded the president’s resignation. According to the minutes of a May 16, 1991, board meeting held in Zurich, Switzerland, the head of the Bonyad Mostazafan explained that, as directed by the Supreme Leader, several board members were to resign. In a letter, the Alavi Foundation’s president described how, a few days later, the Ambassador called the president and another board member to his office. The Ambassador said that “the Foundation from here on out is under the oversight of Haj Agha, not Mr. Rafighdoost [then the head of the Bonyad Mostazafan]. . . . [F]rom now on, the role of the Managing Director and the role of the Board of Directors will be just a formality and he [the Ambassador] will be conducting all of its [the Foundation’s] affairs.” The president of the Alavi Foundation then wrote a letter to the Ayatollah cautioning that although the Ambassador’s “appointment to a position of responsibility connected to the Foundation’s affairs presents enormous political, security, and economic dangers, we feel assured that the Supreme Leader has made this decision with discernment, unique insight, and a thorough knowledge of all pertaining aspects.” In July 1991, the president resigned his position and he was replaced that August by an individual who served as president until the summer of 2007.

In 1992, the Alavi Foundation’s new president met in New York and in Tehran with Bank Melli officials concerning $1.7 million in real estate taxes owed by 650 Fifth Avenue Company and $2.2 million in unpaid distributions owed by the partnership to Assa Corp. The Tehran meeting was attended by a Bank Melli board member, the head of Bank Melli’s Overseas Network Supervisory Department, the head of Bank Melli’s New York branch, and the head of Bank Melli’s Foreign Affairs. The head of the board of directors and managing director of Bank Melli forwarded the minutes of the Tehran meeting to the head of the Bonyad Mostazafan along with a cover letter stating, among other things, that “It is hoped that your firm instructions and the extra attention of the brothers from that esteemed Foundation, who are responsible for the Alavi Foundation of New York, will resolve the partnership’s mutual problems quickly . . . .”

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

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

The Original Complaint

On December 17, 2008, this Office filed a civil Complaint seeking forfeiture of the 40 percent interest held by Assa Corporation in 650 Fifth Avenue Company. In the Amended Complaint, the United States seeks to forfeit all right, title and interest in 650 Fifth Avenue Company, including the Alavi Foundation’s 60 percent interest in the company. The United States also seeks to forfeit the contents of bank accounts held by 650 Fifth Avenue Company, the Alavi Foundation, and Assa Corporation, as well as other real properties owned by the Alavi Foundation.

The Obstruction of Justice Allegations Against the Former President of the Alavi Foundation

On December 19, 2008, Farshid Jahedi, who at the time was the president of the Alavi Foundation, was arrested for obstruction of justice for allegedly destroying documents required to be produced under a grand jury subpoena concerning the Alavi Foundation’s relationship with Bank Melli and the ownership of the Building. Jahedi pled guilty in December 2009. On April 30, 2010, he was sentenced by U.S. District Judge Shira A. Scheindlin to three months in prison and ordered to pay a $3,000 fine.

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

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

In re 650 Fifth Avenue and Related Properties - Opinion and Order

Preet Bharara, the United States Attorney for the Southern District of New York, announced that art dealer GLAFIRA ROSALES pled guilty today in Manhattan federal court to participating in a scheme to sell more than 60 fake works of modern art to two New York art galleries. Her victims paid more than $80 million for the fake works. ROSALES also pled guilty to conspiracy to sell the fake works, conspiracy to commit money laundering, money laundering, and several tax crimes related to the fake art scheme. ROSALES pled guilty before U.S. District Court Judge Katherine P. Failla.

Manhattan U.S. Attorney Preet Bharara said: “With her guilty plea today, Glafira Rosales acknowledges her role in a sprawling fraud that involved the commission of phony artworks she represented as real, and her efforts to hide the proceeds of this massive scam in foreign bank accounts. Rosales’s plea shows that no matter how wide-ranging the deception, this Office will continue to bring the perpetrators of fraud to justice.”

According to the allegations contained in the Complaint, Indictment, superseding Indictment, and statements made in court:

ROSALES was an art dealer who, starting in 1994 and continuing through 2009, sold more than 60 never-before-exhibited and previously unknown works of art (the “Works”) that she claimed were by the hand of some of the most famous artists of the twentieth century, such as Jackson Pollock, Mark Rothko, and Robert Motherwell. She sold the Works to two prominent Manhattan art galleries for approximately $33.2 million. The galleries, in turn, sold the Works to victims of ROSALES’s crime for more than $80 million.

The Works were fakes created by a painter (the “Painter”) who resided in Queens, New York. ROSALES conspired with her long-time companion, identified as a co-conspirator (“CC-1”) in the superseding Indictment, to procure and sell the Works and to launder the proceeds of the fraud. CC-1 first met and befriended the Painter in Manhattan in the 1980s while the Painter was painting on the street. The Painter, who received formal art training at an art school in New York, created the Works for ROSALES and CC-1 at the Painter’s home in Queens. In some instances, the Painter signed the purported artist’s name to the Works, such as Jackson Pollock, but in other cases, CC-1 applied the false signatures. After ROSALES and CC-1 retrieved the Works from the Painter, CC-1 gave the Works the false patina of age by subjecting the Works to a number of different treatments.

The provenance that ROSALES supplied for the Works was also false. In selling some of the Works, she purported to represent a particular client who was associated with Switzerland, had inherited the paintings and wanted to sell them, but also wished to remain anonymous (the “Purported Swiss Client”). For the remainder of the paintings, ROSALES purported to represent a Spanish collector (the “Purported Spanish Collector”). She further claimed that a portion of the price paid by the Manhattan galleries would be a commission to her for selling the paintings and that the remainder would be passed along to her clients. In truth and fact, the Purported Swiss Client never existed and the Purported Spanish Collector never actually owned any of the Works.

ROSALES also filed tax returns that falsely and fraudulently tended to show that she had not kept all or substantially all of the proceeds from the sale of the Works, when, in fact, ROSALES kept several million dollars of the proceeds.

ROSALES received most of the proceeds from the sale of the Works in a foreign bank account that she hid from, and failed to report to, the IRS. United States taxpayers are required to report to the IRS the existence of any foreign bank account that holds more than $10,000 at any time during a given year by the filing of a Report of Foreign Bank and Financial Accounts, Form TD F 90-22.1.

ROSALES, 57, of Sands Point, New York, pled guilty to nine counts, including: one count of conspiracy to commit wire fraud, one count of wire fraud, one count of conspiracy to commit money laundering, and one count of money laundering, each of which carries a maximum sentence of 20 years in prison; three counts of filing false federal income tax returns, each of which carries a maximum sentence of three years in prison; and two counts of willful failure to file Report of Foreign Bank and Financial Accounts, Form TD F 90-22.1, each of which carries a maximum sentence of five years in prison. ROSALES’s total maximum term of imprisonment is 99 years. She also agreed to forfeit $33,200,000, including her home in Sands Point, New York, and to pay restitution in an amount not to exceed $81 million. Rosales will be sentenced by Judge Failla on March 18, 2014 at 2:30 p.m.

Mr. Bharara praised the outstanding efforts of the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigation in the investigation, which he noted is ongoing.

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

Rosales, Glafira S1 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, Kathryn Keneally, the Assistant Attorney General for the Tax Division of the Department of Justice, and Richard Weber, the Chief of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today the filing of federal criminal charges against MICHAEL J. MITROW and MATTHEW J. MITROW, former executives of a New Jersey-based marketing agency, and ROBERT T. MADISON, a Phoenix-based businessman, for their roles in a kickback scheme in which MICHAEL and MATTHEW MITROW received more than $1 million in kickbacks for steering the marketing agency’s business to a company owned by MADISON. MADISON, who was originally charged by complaint in November 2012, is also charged with defrauding the marketing agency by submitting false invoices. MICHAEL MITROW is also charged with a separate scheme to submit false invoices to the marketing agency, as well as tax evasion and obstructing the IRS. MICHAEL and MATTHEW MITROW surrendered to the IRS-CI today. The case is assigned to U.S. District Judge Paul A. Engelmayer.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, in exchange for steering business to his company, Robert Madison footed the bill for more than $1 million in personal expenses of Michael and Matthew Mitrow, including private jet travel, home renovation, and even a $19,000 tab at a New York City club. The indictment further charges that to fund the kickbacks, Madison fraudulently billed the marketing agency for more than $7 million in services he never, or barely, provided, and defrauded another company that had legitimately purchased the services. Michael Mitrow also allegedly conducted overlapping, separate schemes in which he defrauded his own marketing agency and failed to report income to the IRS. These defendants allegedly perpetrated fraud at every turn, and with today’s superseding indictment, this Office and our law enforcement partners begin to hold them to account.”

IRS-CI Chief Richard Weber said: “This indictment underscores the importance of holding accountable those who allegedly participate in kickback schemes that subvert the competitive process and hide their illicit proceeds from the IRS. The defendants are high-level executives who allegedly abused their positions of trust to fraudulently obtain more than $1 million in undisclosed kickbacks from a vendor. Together with our partners at the U.S. Attorney’s Office and the Department of Justice Tax Division, we will continue to pursue business executives who abuse and corrupt their positions to steal corporate funds and conceal their corrupt income from the IRS.”

According to the allegations in the Superseding Indictment filed in Manhattan federal court:

In approximately 1998, MICHAEL MITROW started a marketing agency that provided marketing services to pharmaceutical companies by targeting labor unions and their members with direct mail services that touted the benefits of the pharmaceutical companies’ products. In 2007, MICHAEL MITROW and his partners, including MATTHEW MITROW, sold a controlling interest in the marketing agency to a private equity firm. As part of the sale, MICHAEL MITROW and his brother, MATTHEW MITROW, stayed on at the agency as CEO and Executive Vice President, respectively.

The marketing agency used a Phoenix-based printing and direct-mailing company owned by MADISON for printing and mailing services related to various pharmaceutical marketing campaigns. From February 2007 through January 2009, MICHAEL MITROW, MATTHEW MITROW, and MADISON engaged in a scheme in which MADISON paid more than $1 million in undisclosed kickbacks to MICHAEL and MATTHEW MITROW in exchange for MICHAEL and MATTHEW MITROW steering business from the marketing agency to MADISON’s company. As part of the kickback scheme, MADISON paid more than $1 million in personal expenses of MICHAEL MITROW, including more than $750,000 for private jet travel. MADISON also paid MATTHEW MITROW’s personal expenses, including home renovation expenses, credit card bills, and a $19,000 bill at a New York City club. The defendants also took various steps to conceal the kickbacks from the marketing agency.

MADISON obtained the money used to pay the kickbacks by fraudulently billing the marketing agency for more than $7 million in services that he either failed to perform or substantially underperformed. In doing so, MADISON defrauded a large New York City-based pharmaceutical company out of tens of millions of dollars for services it had purchased from the marketing agency.

MICHAEL MITROW also engaged in another scheme to defraud the marketing agency. Specifically, from approximately June 2008 through May 2009, in order to generate funds to pay for private jet travel for himself and others, MICHAEL MITROW conspired with the owner of a private jet charter business to fraudulently bill the marketing agency for bogus consulting services that were never rendered. On eight separate occasions, he directed the owner of the private jet charter business to submit bogus invoices to the marketing agency, ranging from $66,000 to $85,000, in the name of fake pharmaceutical consultants for purported consulting services. After MICHAEL MITROW personally approved these invoices, the money was funneled through a Florida-based collection agency and then diverted to pay outstanding and ongoing debts arising from his and others’ personal use of private jets.

Finally, in addition to concealing from the IRS the income he derived from the above schemes, MICHAEL MITROW misused his corporate credit card to pay for personal expenses, including airfare, lodging, dining and retail purchases. He concealed the personal nature of these expenses by falsely labeling them as business expenses and billing the expenses to his employer. As a result, MICHAEL MITROW concealed his true income from the IRS, and failed to pay a substantial amount of income taxes in 2008.

MICHAEL MITROW, 46, of Whitehouse Station, New Jersey, is charged with two counts of conspiracy to commit wire fraud, which each carry a maximum sentence of 20 years in prison, one count of tax evasion, which carries a maximum sentence of five years in prison, and one count of obstructing and impeding the IRS, which carries a maximum sentence of three years in prison.

MATTHEW MITROW, 40, of Westfield, New Jersey, is charged with one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison.

MADISON, 42, of Henderson, Nevada, is charged with two counts of conspiracy to commit wire fraud, which each carry a maximum sentence of 20 years in prison.

Mr. Bharara praised the work of IRS-CI for its outstanding work in the investigation. He also thanked the U.S. Department of Justice’s Tax Division for their significant assistance in the investigation, and the U.S. Postal Inspection Service.

This case is being handled by the Office’s Complex Frauds Unit. Nanette Davis and Andrew Young, Trial Attorneys with the Tax Division and Special Assistant U.S. Attorneys in the Southern District of New York, are in charge of the prosecution.

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

U.S. v. Mitrow, et al Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that TRENT MARTIN, a former research analyst at an international financial services firm, pled guilty today in Manhattan federal court to charges arising from his involvement in an insider trading scheme. The scheme involved the misappropriation of material, non-public information (“Inside Information”) concerning IBM’s acquisition of a software company, SPSS, Inc., in 2009. MARTIN was arrested on these charges in Hong Kong in December 2012 and extradited to the United States in March 2013. He pled guilty today before U.S. District Judge Andrew L. Carter, Jr., pursuant to a cooperation agreement.

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

The Inside Information concerning IBM’s acquisition of SPSS originated from a corporate lawyer who was part of the legal team that represented IBM in the transaction (“Attorney-1”) in 2009. On May 31, 2009, Attorney-1 shared Inside Information concerning the transaction, including the names of the parties and the fact that IBM was going to acquire SPSS for a significant premium over SPSS’s market price, with his close friend, MARTIN. The information was shared in confidence. Based on their longstanding history of sharing confidences, Attorney-1 expected that MARTIN would not share the information or use it to trade.

However, thereafter, MARTIN bought SPSS common stock based on the Inside Information he was given by Attorney-1 and, in turn, shared the tip with his roommate, Thomas Conradt, who worked as a stock broker at a securities trading firm (“Securities Trading Firm-1”). Conradt bought SPSS common stock and tipped David J. Weishaus, his co-worker at Securities Trading Firm-1. Weishaus allegedly bought call option contracts in SPSS based on the Inside Information. In addition, it is alleged that Conradt and Weishaus tipped their co-workers at Securities Trading Firm-1 (“CC-1 and CC-2”), who also bought SPSS call option contracts based on the Inside Information.

On July 23, 2009, MARTIN told Attorney-1 that he had purchased SPSS common stock and call options on the basis of the Inside Information that Attorney-1 had disclosed to him.

When IBM announced its acquisition of SPSS on July 28, 2009, the share price of SPSS common stock rose by 41% in one day, from the prior day’s closing price of $35.09 per share to a closing price of $49.45 per share. Thereafter, MARTIN, Conradt, Weishaus, CC-1, and CC-2 sold their SPSS positions, yielding profits of $7,900, $2,538, $129,290, $629,954, and $254,360, respectively, for a total profit in excess of $1 million.

In the fall of 2010, after the U.S. Securities and Exchange Commission (“SEC”) had begun investigating insider trading in SPSS, MARTIN told Attorney-1 that he had profited approximately $8,000 from the Inside Information concerning IBM’s acquisition of SPSS and had disclosed it to his roommate, Conradt, before the transaction was publicly announced. MARTIN also told Attorney-1 that MARTIN believed Conradt had taken a large position in SPSS before the announcement and had, in turn, shared the Inside Information with others.

MARTIN, 34, of Sydney, Australia, pled guilty to one count of conspiracy to commit securities fraud. The conspiracy count carries a maximum sentence of five years in prison and a fine of $250,000, or twice the gross gain or loss from the offense. As part of his plea agreement, MARTIN agreed to forfeit his share of the proceeds obtained from the offense. He is scheduled to be sentenced by Judge Carter on March 14, 2014 at 2:00 p.m.

Conradt pled guilty to one count of conspiracy to commit securities fraud and two counts of securities fraud on April 3, 2013. He is scheduled to be sentenced on October 3, 2013 at 10:00 a.m.

The charges against Weishaus remain pending and he is presumed innocent unless and until proven guilty. Weishaus is next scheduled to appear before Judge Carter on October 3, 2013 at 10:00 a.m.

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

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 John T. Zach and David B. Massey are in charge of the prosecution.

U.S. v. Trent Martin Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, and Janet DiFiore, the Westchester County District Attorney, announced that ALEJANDRO GARCIA was sentenced today in White Plains federal court to 17 years and six month in prison by U.S. District Judge Kenneth M. Karas in connection with his conviction on charges related to the 2009 beating deaths of Ben Novack and his mother, Bernice Novack.

In June 2010, GARCIA pled guilty to an Information charging him with Interstate Domestic Violence resulting in the death of Ben Novack. In accordance with his plea agreement, GARCIA was sentenced in connection with that crime and also in connection with his admitted participation in the assault upon Bernice Novack that resulted in her death. GARCIA was a cooperating witness who testified for the Government in the June 2012 trial of Narcisa Veliz Novack and Cristobal Veliz. Novack and Veliz, siblings, were convicted following the trial for their roles in engineering and executing the schemes resulting in the beating deaths of Ben Novack (Novack’s husband) and Bernice Novack (her mother-in-law). GARCIA was hired by Veliz as a hit man in both homicides. Both Novack and Veliz were sentenced to life in prison without parole.

According to the trial evidence and other information in the public record:

Ben and Bernice Novack were members of the family that built the Fontainebleau Hotel in Miami Beach, Florida. Ben Novack, who was 52 at the time of his death, owned Novack Enterprises, Inc., which did business as Convention Concepts Unlimited, a company that organized and oversaw conventions held by various businesses. Bernice Novack, who was 86 at the time of her death, was the secretary of Novack Enterprises, Inc.

On April 4, 2009, after being recruited by Veliz for the job, GARCIA surprised Bernice Novack as she started to get out of her car in the garage of her home in Fort Lauderdale, Florida, and hit her in the head and mouth with a monkey wrench. She died of her wounds shortly thereafter.

In July 2009, Veliz arranged for GARCIA and another man, Joel Gonzalez, to travel from Florida to the Rye Town Hilton in Rye Brook, New York, where Ben Novack was staying with his wife while his company oversaw a convention at the hotel. Early on the morning of July 12, 2009, Narcisa Veliz Novack let the two men into the Novacks’ room, where Garcia and Gonzalez then attacked her husband in his bed and on the floor, striking him with dumbbells and using a box-cutter to cut his eyes. The hit men silenced his screams with a pillow given to them by his wife, tied him up, and used duct tape to cover his mouth. Ben Novack died of asphyxiation and blunt force trauma.

Gonzalez, also a cooperating witness who testified at the June 2012 trial of Novack and Veliz, was previously sentenced to 10 years in prison. Two getaway drivers in the Ben Novack homicide, Denis Ramirez (Veliz’s son-in-law) and Francisco Picado (Ramirez’s cousin), also pled guilty and testified as cooperating witnesses at the trial. Ramirez and Picado were both sentenced to time served.

In addition to the prison term, Judge Karas ordered GARCIA, 36, originally of Nicaragua, to forfeit $25,500, the amount of money he was paid for his role in both homicides.

Mr. Bharara thanked Westchester County District Attorney Janet DiFiore and the prosecutors and investigators from her office for their cooperative work in this investigation and prosecution. He also praised the Federal Bureau of Investigation, the Rye Brook Police Department, the Westchester County Department of Public Safety, and the Florida Department of Law Enforcement.

Assistant U.S. Attorneys Elliott B. Jacobson, Andrew S. Dember, Jeffrey Alberts, and Special Assistant U.S. Attorney Perry Perrone of the Westchester County District Attorney’s Office, cross-designated for this case, are in charge of the prosecution.

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”), and Cyrus R. Vance, Jr., the District Attorney for New York County (“DANY”), announced today the filing of a civil forfeiture complaint against the assets of nine corporations controlling real estate in Manhattan, including four luxury residential units and two high-end commercial spaces, as well as against the assets of two related companies, and seeking the imposition of civil money laundering penalties. The Complaint filed today in Manhattan federal court alleges that these corporations laundered a portion of the proceeds of a $230 million Russian tax refund fraud scheme involving corrupt Russian officials that was uncovered by Sergei Magnitsky, a Russian lawyer who died in pretrial detention in Moscow under suspicious circumstances.

Manhattan U.S. Attorney Preet Bharara said: “Today's forfeiture action is a significant step towards uncovering and unwinding a complex money laundering scheme arising from a notorious foreign fraud. As alleged, a Russian criminal enterprise sought to launder some of its billions in ill-gotten rubles through the purchase of pricey Manhattan real estate. While New York is a world financial capital, it is not a safe haven for criminals seeking to hide their loot, no matter how and where their fraud took place.”

ICE HSI Special Agent-in-Charge James T. Hayes, Jr. said: “The complaint announced today further displays the U.S. Government's resolve in combating alleged corruption globally. ICE HSI will continue to aggressively pursue civil and criminal actions targeting those attempting to launder illicit profits.”

District Attorney Cyrus R. Vance, Jr. said: “Manhattan may have some of the most desirable real estate in the world, but it is not the place to purchase it if you are allegedly doing so with dirty money. We are very grateful to the United States Attorney’s Office for its close partnership on this matter, and pleased to have developed and referred this asset forfeiture and civil money laundering case to the federal government.”

As alleged in the Complaint and other court documents:

In 2007, a Russian criminal organization engaged in an elaborate tax refund fraud scheme resulting in a fraudulently-obtained tax refund of approximately $230 million from the Russian treasury. As part of the fraud scheme, members of the organization stole the corporate identities of portfolio companies of the Hermitage Fund, a foreign investment fund operating in Russia. The organization’s members then used these stolen identities to make fraudulent claims for tax refunds.

In order to procure the refunds, the criminal organization fraudulently re-registered the Hermitage companies in the names of members of the organization, and then orchestrated sham lawsuits against these companies. These sham lawsuits involved members of the organization as both the plaintiffs (representing sham commercial counterparties suing the Hermitage companies) and the defendants (purporting to represent the Hermitage companies). In each case, the members of the organization purporting to represent the Hermitage companies confessed full liability in court, leading the courts to award large money judgments to the plaintiffs.

The purpose of the sham lawsuits was to fraudulently generate money judgments against the Hermitage companies. Members of the organization purporting to represent the Hermitage companies then used those money judgments to seek tax refunds. The basis of these refund requests was that the money judgments constituted losses eliminating the profits the Hermitage companies had earned, and thus the Hermitage companies were entitled to a refund of the taxes that had been paid on these profits. The requested refunds totaled 5.4 billion rubles, or approximately $230 million.

Members of the organization who were officials at two Russian tax offices corruptly approved the requests within one business day, and approximately $230 million was disbursed to members of the organization, purportedly on behalf of the Hermitage companies, two days later.

After perpetrating this fraud, members of the organization undertook illegal actions in order to conceal this fraud and retaliate against individuals who attempted to expose it. After learning of the lawsuits against its portfolio companies, Hermitage retained attorneys, including Russian lawyer Sergei Magnitsky, to investigate. Magnitsky and other attorneys for Hermitage uncovered the refund fraud scheme, and the complicity of Russian governmental officials in it, and were subject to retaliatory criminal proceedings. Magnitsky was arrested and died approximately a year later in pretrial detention.

Members of the criminal organization, and associates of those members, have also engaged in a broad pattern of money laundering in order to conceal the proceeds of the fraud scheme. In a complex series of transfers through shell corporations, the $230 million from the Russian treasury was laundered into numerous accounts in Russia and other countries. A portion of the funds stolen from the Russian treasury passed through several shell companies into PREVEZON HOLDINGS, LTD., a Cyprus-based real estate corporation that is a defendant in the forfeiture action. PREVEZON HOLDINGS laundered these fraud proceeds into its real estate holdings, including investment in multiple units of high-end commercial space and luxury apartments in Manhattan, and created multiple other corporations, also subject to the forfeiture action, to hold these properties.

A chart containing the names of the companies subject to the forfeiture action and their known Manhattan real estate holdings is attached.

Mr. Bharara praised the outstanding investigative work of ICE HSI. He also thanked DANY for its assistance in the case.

This case is being handled by the Office’s Asset Forfeiture Unit. Assistant United States Attorneys Paul Monteleoni and Christine Magdo are in charge of the case.

Click here to view chart(s)

U.S. v. Prevezon et al. Exhibit B
U.S. v Prevezon et al. Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced that EDWIN TING and JUSTIN SMITH pled guilty today in Manhattan federal court for their respective roles in high-stakes illegal gambling businesses connected to organized crime enterprises. TING pled guilty before U.S. District Court Judge Jesse M. Furman to conducting an illegal gambling business, an illegal poker game. SMITH pled guilty before Judge Furman to accepting a financial instrument in connection with unlawful Internet gambling, an illegal sportsbook.

TING and SMITH were 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 various gambling offenses.

Manhattan U.S. Attorney Preet Bharara said: “Edwin Ting and Justin Smith ran high-stakes poker and sportsbook operations, respectively, that handled many millions of dollars in illegal gambling. They were part of an underground enterprise trying to be invisible to law enforcement. Their guilty pleas are an important step toward the resolution of this case.”

According to the Indictment, other documents filed in this case, and statements made at various conferences in this case:

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

SMITH assisted Hillel Nahmad, Illya Trincher, and others in operating their own high-stakes sportsbook in New York that catered to millionaires and billionaires. Those clients typically placed bets online through various accounts maintained on gambling websites that were operating illegally in the United States. Tens of millions of dollars in bets were placed through those online accounts each year.

TING and SMITH each face a maximum sentence of five years in prison and three years of supervised release. As part of his plea agreement, TING agreed to forfeit $2,000,000 to the United States. As part of his plea agreement, SMITH agreed to forfeit $500,000 to the United States. TING and SMITH are both scheduled to be sentenced by Judge Furman on January 7, 2014 at 2:30 p.m. and 3:30 p.m., respectively.

TING and SMITH are the fourth and fifth defendants to plead guilty in the case. The following defendants have previously pled guilty and will also be sentenced by Judge Furman:

• Bryan Zuriff pled guilty on July 26, 2013 and is scheduled to be sentenced on November 25, 2013 at 3:00 p.m.;
• William Barbalat pled guilty on August 14, 2013 and is scheduled to be sentenced on December 16, 2013 at 3:30 p.m.; and
• Kirill Rapoport pled guilty on August 16, 2013 and is scheduled to be sentenced on December 18, 2013 at 3:00 p.m.

The charges against the remaining 29 defendants are merely accusations, and these defendants are presumed innocent unless and until proven guilty

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

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, today announced the appointment of James M. Margolin as the Office’s Chief Public Information Officer.

Mr. Margolin comes to the Office from the Federal Bureau of Investigation (“FBI”), where he has been a Public Information Officer for the New York field office since 1996. During his tenure with the FBI Public Information Office, Mr. Margolin handled a broad range of media matters related to FBI cases, including the investigations and prosecutions related to the 1998 al Qaeda bombings of American embassies in Nairobi, Kenya, and Dar es Salaam, Tanzania; the 2001 al Qaeda attacks on the World Trade Center towers; the Martha Stewart-Imclone securities fraud investigation; the investigation and prosecution of former NYPD commissioner Bernard Kerik; the investigation and prosecution of Bernard L. Madoff and others; and the “Operation Perfect Hedge” investigations and prosecutions of insider trading, including the prosecutions of Raj Rajaratnam, Rajat Gupta and others. He further oversaw FBI media operations related to the investigations and prosecutions of attempted Times Square bomber Faisal Shahzad, former New York State Senator Carl Kruger, and three individuals charged with critical roles in creating and distributing the Gozi Virus, among many other cases. From 1988 to 1996, Mr. Margolin also served as a Special Agent in the Organized Crime Branch of the New York FBI office, where he investigated Asian gangs and La Cosa Nostra for extortion, racketeering, and murder.

Prior to joining the FBI, Mr. Margolin worked as an Assistant Vice President and Counsel at First Fidelity Bank, in Newark, NJ, from 1987 to 1988, and an Associate at Hawkins, Delafield & Wood, in New York, New York, from 1981 to 1987. He is a 1978 cum laude graduate of Dartmouth College, and a 1981 graduate of the Columbia University School of Law.

In making the appointment, Manhattan U.S. Attorney Preet Bharara said: “Jim has been a great representative of the FBI and a great partner to this Office for many years. He is admired and respected by law enforcement and by journalists with whom he deals on a daily basis, for his professionalism, integrity and candor. We are thrilled that he is joining us and will be leading our Public Information Office and the terrific people in it.”

Additionally, Manhattan U.S. Attorney Preet Bharara announced the appointment of Jerika Richardson, a Public Affairs Specialist, as the Office’s Senior Public Affairs Officer & Director of New Media. Ms. Richardson has served in the Public Information Office as a Public Affairs Specialist since 2011. Prior to coming to the Office, Ms. Richardson worked at ABC News, in New York, NY, from 2007 to 2011, where she covered law and justice, financial, and breaking news as a Field Producer and Off-Air Reporter. Some of her more notable stories include the 2011 Tucson Shooting, the Bernard Madoff Case, and the Gulf Oil Spill. Ms. Richardson also served as a producer for the network during the 2010 midterm and 2008 general elections. She is a 2003 cum laude graduate of Spelman College, and a 2007 graduate of the University of Michigan Law School.

In making the appointment, Manhattan U.S. Attorney Preet Bharara said: “Jerika has been a tremendous resource in the Public Information Office, and in addition to enjoying a great reputation among journalists, she has been a driving force in the Office’s efforts to enhance its outreach to the public through new media.”

Preet Bharara, the United States Attorney for the Southern District of New York, Mythili Raman, the Acting Assistant Attorney General for the Criminal Division of the United States Department of Justice (“DOJ”), and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today that ERNESTO LUJAN, JOSE ALEJANDRO HURTADO, and TOMAS ALBERTO CLARKE BETHANCOURT 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. These charges relate to a scheme to bribe a foreign official named Maria de los Angeles Gonzalez de Hernandez (“Gonzalez”) at Banco de Desarrollo Económico y Social de Venezuela (“BANDES”), a state economic development bank in Venezuela, in exchange for receiving trading business from BANDES. LUJAN, HURTADO, and CLARKE each also pled guilty to an additional charge of conspiring to violate the FCPA in connection with a similar scheme to bribe a foreign official employed by Banfoandes (the “Banfoandes Foreign Official”), another state economic development bank in Venezuela, and to conspiring to obstruct an examination by the U.S. Securities and Exchange Commission (“SEC”) of the New York-based broker-dealer (the “Broker-Dealer”) where all three defendants had worked, to conceal the true facts of the Broker-Dealer’s relationship with BANDES. LUJAN and CLARKE entered their guilty pleas yesterday before U.S. Magistrate Judge James C. Francis, IV, and HURTADO pled guilty today, also before Judge Francis.

According to the Informations against LUJAN, HURTADO, and CLARKE filed this week, the allegations in the previously filed criminal Complaints, statements made during the plea proceedings, and other documents filed in Manhattan federal court:

At all times relevant to the charges, LUJAN, CLARKE, and HURTADO worked or were associated with the Broker-Dealer, principally through its Miami offices. In 2008, the Broker-Dealer established a group called the Global Markets Group, which included LUJAN, CLARKE, and HURTADO, and which offered fixed income trading services to institutional clients.

One of the Broker-Dealer’s clients was BANDES, which operated under the direction of the Venezuelan Ministry of Finance. The Venezuelan government had a majority ownership interest in BANDES and provided it with substantial funding. Gonzalez was an official at BANDES and oversaw the development bank’s overseas trading activity. At her direction, BANDES conducted substantial trading through the Broker-Dealer. Most of the trades executed by the Broker-Dealer on behalf of BANDES involved fixed income investments for which the Broker-Dealer charged the bank a mark-up on purchases and a mark-down on sales.

The Broker-Dealer also conducted business with Banfoandes, another state development bank in Venezuela that, along with its 2009 successor, Banco Bicentenario, operated under the direction of the Venezuelan Ministry of Finance. Banfoandes acted as a financial agent of the Venezuelan government in order to promote economic and social development by, among other things, offering credit to low-income Venezuelans. The Banfoandes Foreign Official was responsible for some of Banfoandes’s foreign investments.

The Defendants’ Bribery Schemes

From early 2009 through 2012, LUJAN, CLARKE, and HURTADO, participated in a bribery scheme in which Gonzalez directed trading business she controlled at BANDES to the Broker-Dealer, and in return, agents and employees of the Broker-Dealer split the revenue the Broker-Dealer generated from this trading business with Gonzalez. During this time period, the Broker-Dealer generated over $60 million in mark-ups and mark-downs from trades with BANDES. Agents and employees of the Broker-Dealer, including LUJAN, CLARKE and HURTADO, 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 kickback payments from Broker-Dealer agents and employees.

To further conceal the scheme, the kickbacks to Gonzalez were often paid using intermediary corporations and offshore accounts that she held in Switzerland, among other places. For instance, LUJAN, CLARKE, and HURTADO used accounts they controlled in Switzerland to transfer funds to an account Gonzalez controlled in Switzerland. Additionally, HURTADO and his spouse received substantial compensation from the Broker-Dealer, portions of which HURTADO transferred to an account held by Gonzalez in Miami and to an account held by an associate of Gonzalez in Switzerland. HURTADO also sought and received reimbursement from Gonzalez for the U.S. income taxes he had paid on money that he used to make kickback payments to Gonzalez. LUJAN and CLARKE also derived substantial profit from their roles in the bribery scheme.

The Defendants’ Efforts to Obstruct the SEC Examination

Finally, beginning in or about November 2010, the SEC commenced a periodic examination of the Broker-Dealer, and from November 2010 through March 2011 the SEC’s examination staff made several visits to the Broker-Dealer’s offices in Manhattan. In early 2011, LUJAN, CLARKE, and HURTADO discussed their concern that the SEC was examining the Broker-Dealer’s relationship with BANDES and asking questions regarding certain emails and other information that the SEC examination staff had discovered. LUJAN, CLARKE, and HURTADO agreed that they would take steps to conceal the true facts of the Broker-Dealer’s relationship with BANDES, including deleting emails. LUJAN, CLARKE, and HURTADO then, in fact, deleted emails. Additionally as part of this effort to obstruct the SEC examination, CLARKE lied to SEC examination staff in response to an interview question about his relationship to an individual who had received purported foreign associate payments relating to BANDES.

In a related scheme, from 2008 through mid-2009, LUJAN, CLARKE, and HURTADO paid bribes to the Banfoandes Foreign Official, who, in exchange, directed Banfoandes trading business to the Broker-Dealer.

LUJAN, 50, CLARKE, 43, and HURTADO, 38, each pled guilty to the same six offenses. A chart containing the charges and the maximum penalties they carry is attached. 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 March 6, 2014.

Gonzalez was charged in a criminal Complaint and arrested on May 3, 2013, in connection with the BANDES bribery scheme. The charges against Gonzalez are merely accusations and she is presumed innocent unless and until proven guilty.

Mr. Bharara praised DOJ's Criminal Division’s Fraud Section and Office of International Affairs and the FBI for their work in the investigation. He also thanked the SEC for its assistance in this case and noted that the investigation is continuing.

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)

U.S. v. Ernesto Lujan Information
U.S. v. Tomas Alberto Bethancourt Clarke Information
U.S. v. Jose Alejandro Hurtado Information

Preet Bharara, the United States Attorney for the Southern District of New York, and Derek Maltz, Special-Agent-in-Charge of the Special Operations Division of the United States Drug Enforcement Administration (“DEA”), announced today that on August 29, 2013, Panamanian authorities arrested DINO BOUTERSE in the Republic of Panama and turned him over to U.S. authorities to face charges that he conspired to import cocaine into the United States. BOUTERSE will be presented and arraigned in Manhattan federal court before U.S. Magistrate Judge James C. Francis IV later today.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Dino Bouterse conspired to send cocaine to the United States in a suitcase, and brandished a destructive weapon during the act. With his arrest, this Office continues to make sure that those who attempt to transport drugs into our country are apprehended and brought to justice, no matter where they live.”

DEA Special-Agent-in-Charge Derek Maltz said: “Bouterse is a significant drug trafficker who allegedly possessed dangerous weapons. Bouterse has a history of drug and weapons trafficking, having been convicted of similar charges in his home country of Suriname in 2005. Thanks to our vast network of law enforcement and informants around the world, DEA and our partners disrupted this drug trafficking conspiracy and he and Muntslag will now face justice here in the United States.”

According to the allegations in the Indictment, BOUTERSE conspired to import cocaine into the United States. As part of this conspiracy, BOUTERSE caused a suitcase containing 10 kilograms of cocaine to be transported out of Suriname aboard a commercial flight, and in the course of engaging in the drug transaction possessed an antitank weapon.

EDMUND QUINCY MUNTSLAG, who is also charged in the Indictment, was separately arrested yesterday in Trinidad and Tobago.

The indictment charges BOUTERSE, 40, of Paramaribo, Suriname, in two counts. Count One charges BOUTERSE with conspiring to import cocaine into the United States. Count Two charges BOUTERSE with carrying a firearm or destructive device during and in relation to a drug-trafficking crime. Counts One and Two each carry a maximum penalty of life in prison.

MUNTLSAG, 29, of Suriname, is charged with conspiring to import cocaine into the United States. The charge carries a maximum sentence of life in prison.

Mr. Bharara praised the outstanding investigative work of the DEA’s Special Operations Division. Mr. Bharara also thanked the DEA’s Panama City Country Office, the DEA’s Port of Spain Country Office, the Government of the Republic of Panama, and the U.S. Department of Justice’s Office of International Affairs.

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. 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.

Preet Bharara, the United States Attorney for the Southern District of New York, and Derek Maltz, Special-Agent-in-Charge of the Special Operations Division of the United States Drug Enforcement Administration (“DEA”), announced today that on August 29, 2013, Panamanian authorities arrested DINO BOUTERSE in the Republic of Panama and turned him over to U.S. authorities to face charges that he conspired to import cocaine into the United States. BOUTERSE will be presented and arraigned in Manhattan federal court before U.S. Magistrate Judge James C. Francis IV later today.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Dino Bouterse conspired to send cocaine to the United States in a suitcase, and brandished a destructive weapon during the act. With his arrest, this Office continues to make sure that those who attempt to transport drugs into our country are apprehended and brought to justice, no matter where they live.”

DEA Special-Agent-in-Charge Derek Maltz said: “Bouterse is a significant drug trafficker who allegedly possessed dangerous weapons. Bouterse has a history of drug and weapons trafficking, having been convicted of similar charges in his home country of Suriname in 2005. Thanks to our vast network of law enforcement and informants around the world, DEA and our partners disrupted this drug trafficking conspiracy and he and Muntslag will now face justice here in the United States.”

According to the allegations in the Indictment, BOUTERSE conspired to import cocaine into the United States. As part of this conspiracy, BOUTERSE caused a suitcase containing 10 kilograms of cocaine to be transported out of Suriname aboard a commercial flight, and in the course of engaging in the drug transaction possessed an antitank weapon.

EDMUND QUINCY MUNTSLAG, who is also charged in the Indictment, was separately arrested yesterday in Trinidad and Tobago.

The indictment charges BOUTERSE, 40, of Paramaribo, Suriname, in two counts. Count One charges BOUTERSE with conspiring to import cocaine into the United States. Count Two charges BOUTERSE with carrying a firearm or destructive device during and in relation to a drug-trafficking crime. Counts One and Two each carry a maximum penalty of life in prison.

MUNTLSAG, 29, of Suriname, is charged with conspiring to import cocaine into the United States. The charge carries a maximum sentence of life in prison.

Mr. Bharara praised the outstanding investigative work of the DEA’s Special Operations Division. Mr. Bharara also thanked the DEA’s Panama City Country Office, the DEA’s Port of Spain Country Office, the Government of the Republic of Panama, and the U.S. Department of Justice’s Office of International Affairs.

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. 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 and Edmund Quincy Muntslag Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), 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 Eric Timberman, the Acting United States Marshal for the Southern District of New York (“USMS”), announced today the filing of federal criminal charges against ANTONIO OLMEDA. OLMEDA, who was arrested by the New York City Police Department in December of 2011 in connection with his alleged attempt to shoot two police officers, faces federal charges for being a convicted felon in possession of various firearms, and for possessing unregistered machine guns and an unregistered short-barreled shotgun. OLMEDA, who remains in state custody, was charged in a six-count indictment on August 14, 2013, and was presented yesterday in Manhattan federal court before U.S. Magistrate Judge James C. Francis IV.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Antonio Olmeda, a convicted felon, possessed a veritable arsenal including multiple machine guns and a sawed-off shotgun. Olmeda, who has been separately charged in the state for shooting at police officers, was prohibited from having any firearms much less the kind of firepower alleged in the indictment at his disposal. This Office will continue to work with our partners to remove firearms from the hands of convicted criminals as the law and public safety demand.”

FBI Assistant Director-in-Charge George Venizelos said: “As alleged, Antonio Olmeda illegally amassed an arsenal of weapons, to include semi-automatic handguns, machine guns and a shotgun. Gone undetected, these weapons, in the hands of a convicted felon, posed a danger not only to law enforcement, but to the unsuspecting public, who may have come in contact with Olmeda. His arrest demonstrates the ongoing commitment by the FBI and our law enforcement partners to keep the public safe by removing firearms from individuals who are not authorized to use or possess them.”

ATF Special Agent-in-Charge Joseph Anarumo, Jr. said: “The unlawful possession of firearms by a convicted felon is a federal violation that ATF takes very seriously as it threatens the safety of our city. ATF has had a long and productive relationship with our local, state and federal law enforcement partners in combating violent crime. Consequently, and as a united front, the arrest of these types of alleged violent offenders is now much more commonplace, making the collective goal of a safer community an attainable reality.”

Acting United States Marshal Eric Timberman said: “The Olmeda case is a shining example of the U.S. Marshals Service working closely with all agencies, federal, state, and local, to ensure the safety of our community and the administration of justice. These law enforcement partners will continue to work closely together in an effort to continue to take criminals and illegal weapons off our streets.”

According to the allegations in the Indictment filed in Manhattan federal court, OLMEDA, a convicted felon, possessed the following firearms, all of which have been seized by the Government:

• Springfield Armory Ultra Compact .45-caliber semi-automatic handgun
• Taurus 85 Ultralite .38-caliber revolver
• Olympic Arms PCR03 .223-caliber fully-automatic rifle
• Smith & Wesson .40-caliber semi-automatic pistol
• Beretta 92SB Compact 9-mm Luger semi-automatic pistol
• Cobray Industries M-11 9-mm Luger fully-automatic pistol
• Remington model Mohawk 600 .308-caliber rifle
• Roggio Arsenal model RA-15 rifle receiver/frame
• Interarms rifle
• Springfield Armory model 1911A1 .45-caliber pistol
• Springfield Armory model 1911A1 .45-caliber pistol
• Springfield Armory model 1911A1 .45-caliber pistol
• Sig Sauer model SP 2022 9mm-caliber pistol
• Taurus model PT140 Millenium .40-caliber pistol
• Smith & Wesson model 4006 .40-caliber pistol
• Star Bonifacio Echeverria model Firestar 9mm-caliber pistol
• Charter Arms model Police Undercover .32-caliber revolver
• Walther model PPK/S .380-caliber pistol
• Vulcan Arms model V15 7.62x39mm-caliber machinegun
• Norinco AK-type 7.62x39mm-caliber machinegun
• Mossberg model 500A 12-gauge shotgun

OLMEDA, 55, of New York, New York, is charged with three counts of possession of firearms by a convicted felon, two counts of possession of unregistered machine guns, and one count of possession of an unregistered short-barreled shotgun. Each count carries a maximum sentence of 10 years in prison. OLMEDA faces a maximum sentence of 60 years in prison.

In addition, OLMEDA is separately charged by the state with two counts of attempted murder in the first degree, two counts of attempted assault on a police officer with a deadly weapon, one count of criminal possession of a weapon in the second degree, and two counts of attempted assault in the first degree, all arising from his alleged attempt to shoot two police officers in Queens, New York on December 2, 2011.

The charges and arrest of OLMEDA are the result of the close cooperative efforts of the United States Attorney’s Office for the Southern District of New York, the Joint Terrorism Task Force – which principally consists of agents and detectives of the FBI and the New York City Police Department (“NYPD”) – the ATF, and the USMS. Mr. Bharara also thanked the NYPD and the Yonkers Police Department for their ongoing assistance.

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

The case is being handled jointly by the Office’s Violent Crimes Unit and Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Michael D. Maimin and John P. Cronan are in charge of the prosecution.

U.S. v. Antonio Olmeda Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that HENRY SEGGERMAN pled guilty today in Manhattan federal court to charges related to his participation in a scheme with family members to hide in secret Swiss bank accounts, and not reveal to the Internal Revenue Service (“IRS”), over $12 million that had been left to SEGGERMAN and his family members by SEGGERMAN’s father. SEGGERMAN pled guilty before U.S. Magistrate Judge James C. Francis IV.

Manhattan U.S. Attorney Preet Bharara said: “Henry Seggerman and three of his siblings inherited and continued a family tax fraud scheme. Now, four members of this family stand convicted of tax crimes. We will continue to aggressively investigate and prosecute U.S. taxpayers, and those that assist them, in evading their obligations by hiding money in secret offshore accounts.”

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

SEGGERMAN was the son of a prominent New York businessman (“the Businessman”) who, upon passing away in May 2001, left an estate valued in excess of $24 million, more than half of which was maintained in secret and undeclared foreign bank accounts. Working with a Swiss lawyer and others, the Businessman arranged for over $12 million in the undeclared accounts to be left to his surviving spouse and five of his children, including SEGGERMAN. As a result of the successful implementation of that plan, and to hide the undeclared funds from the IRS, SEGGERMAN, who, together with three of his siblings, was an executor of his father’s estate, signed a tax return for his father’s estate that falsely under-reported the gross assets of the Businessman’s estate. In particular, the estate tax return fraudulently failed to report over $5 million left to the Businessman’s wife and over $7.5 million to be split among five of his children.

In addition, the Swiss lawyer thereafter assisted SEGGERMAN’s siblings, including Suzanne Seggerman, Yvonne Seggerman, and Edmund Seggerman, in setting up undeclared Swiss bank accounts to hold the money left to them by their father. SEGGERMAN assisted his brother in surreptitiously transferring funds from the brother’s Swiss account to a bank account for a foundation controlled by SEGGERMAN, who thereafter filtered the funds to the brother in the United States, labeling the transfer as “loans.”

SEGGERMAN, 60, of New York, New York, and Los Angeles, California, pled guilty to one count of conspiracy to defraud the United States, one count of subscribing to a false and fraudulent estate tax return, and one count of aiding and assisting in the preparation of false tax returns for his brother. He faces a total maximum sentence of 11 years in prison. The case is assigned to U.S. District Judge Alvin K. Hellerstein, and no sentencing date has been set. In addition, SEGGERMAN agreed as part of his guilty plea to make a payment of approximately $600,000 at the time of his sentencing, in partial satisfaction of the ultimate restitution obligation he faces at sentencing.

Suzanne Seggerman, Yvonne Seggerman, and Edmund Seggerman each previously pled guilty to one count of conspiracy to defraud the United States, and two counts of subscribing to false and fraudulent tax returns. Each faces a maximum sentence of 11 years in prison. Suzanne Seggerman, 51, of New York, New York, pled guilty before U.S. District Judge Kevin Thomas Duffy on October 14, 2010 and awaits sentencing. Yvonne Seggerman, 58, of Cumberland, Rhode Island, pled guilty before U.S. District Judge Paul A. Engelmayer on March 14, 2013 and awaits sentencing. Edmund Seggerman, 50, of Washington, D.C., pled guilty before U.S. District Judge Thomas P. Griesa on March 21, 2013 and awaits sentencing.

Mr. Bharara praised the investigative efforts of the Internal Revenue Service, Criminal Investigation.

The case is being prosecuted by the Office’s Complex Frauds Unit. Assistant United States Attorney Stanley J. Okula, Jr. is in charge of the prosecution.

U.S. v. Henry Seggerman Information

Preet Bharara, the United States Attorney for the Southern District of New York, announced that LOUIS MCINTOSH, 32, was convicted today of 11 robbery and firearms counts after a nine-day trial before United States District Judge Sidney H. Stein in Manhattan federal court.

Manhattan U.S. Attorney Preet Bharara stated: “Today’s verdict marks the close of Louis McIntosh’s lengthy and violent crime spree of armed robberies, shootings, pistol-whipping and stun gun abuses in Westchester County and elsewhere. The close cooperation between federal and local law enforcement, as happened here, is one of our best weapons against violent crime.”

According to the indictment and the evidence at trial:

On or about April 30, 2010, MCINTOSH and other co-conspirators robbed narcotics dealers in the vicinity of Cliff Street in Yonkers, New York, during which robbery MCINTOSH fired a shotgun and a co-conspirator fired a handgun. A victim was shot multiple times in the lower body. On or about September 26, 2010, MCINTOSH and other co-conspirators robbed an individual business owner in his home in Lynbrook, New York, during which robbery MCINTOSH held the victim at gunpoint and assaulted him with a stun gun. On or about October 28, 2010, MCINTOSH and other co-conspirators robbed a card game at a men’s club in Poughkeepsie, New York, during which MCINTOSH pistol-whipped two victims and discharged a firearm.

MCINTOSH, 32, of the Bronx, New York, was convicted of the following 11 counts: (1) participating in a conspiracy to commit robberies from in or about 2009 through in or about 2012: (2) using, carrying, or possessing firearms in connection with the robbery conspiracy; (3) committing a robbery on or about April 30, 2010, in Yonkers; (4) using, carrying, possessing, and discharging firearms in connection with the April 30, 2010 robbery; (5) committing a robbery on or about September 26, 2010, in Lynbrook; (6) using, carrying, possessing, and brandishing firearms in connection with the September 26, 2010 robbery; (7) committing a robbery on or about October 28, 2010, in Poughkeepsie; (8) using, carrying, possessing, and discharging firearms in connection with the October 28, 2010 robbery; (9) possessing a Cugir .223 caliber auto-loading rifle after having been previously convicted of a felony; (10) possessing a Ruger 9 millimeter handgun after having been previously convicted of a felony; and (11) possessing a Bushmaster .223 caliber rifle after having been previously convicted of a felony.

Mr. Bharara praised the outstanding investigative work of the Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), and the Westchester County Department of Public Safety, and thanked the Westchester County District Attorney’s Office for its assistance in the investigation.

MCINTOSH faces a maximum penalty of life in prison, and a mandatory minimum sentence of 85 years in prison. MCINTOSH’s sentencing is scheduled for November 21, 2013, at 4:30 p.m. before Judge Stein.

A number of co-conspirators were also prosecuted in connection with this case. Among other individuals, Turhan Jessamy previously pleaded guilty to using, carrying, possessing, and discharging firearms, and was sentenced by United States District Judge Kenneth M. Karas to 10 years in prison. Tyrell Rock previously pleaded guilty to using, carrying, possessing, and discharging firearms, and was sentenced by Judge Karas to 10 years in prison. Neil Morgan previously pleaded guilty to using, carrying, possessing, and discharging firearms, and was sentenced by Judge Karas to 10 years in prison. Quincy Williams previously pleaded guilty to using, carrying, possessing, and brandishing firearms, and was sentenced by Judge Karas to 7 years in prison.

The prosecution is being handled by the Office’s Violent Crimes Unit. Assistant U.S. Attorneys Sarah Krissoff and Jessica Masella are in charge of the prosecution.

McIntosh et al. S3

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that DOMINCK PIETRANICO and JOSEPH SARCINELLA pled guilty to loansharking in connection with their roles in a scheme to exert control over the commercial waste-hauling industry in the greater New York City metropolitan area and in parts of New Jersey. Additionally, WILLIAM CALI pled guilty to participating in a conspiracy to commit extortion as part of the same scheme. PIETRANICO, SARCINELLA, and CALI, who were among 32 defendants charged in the case in January 2013, pled guilty today in Manhattan federal court before U.S. District Judge P. Kevin Castel. PIETRANICO, SARCINELLA, and CALI are the third, fourth, and fifth defendants to plead guilty in this case.

Manhattan U.S. Attorney Preet Bharara said: “Three more defendants now stand convicted of federal crimes for their willingness to aid the mob in maintaining control over the waste disposal industry, but they will not be the last. We will continue to be vigilant in our efforts to sweep the remnants of organized crime from our streets, and today’s guilty pleas underscore that commitment.”

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

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

PIETRANICO and SARCINELLA, who are made members of the Genovese Crime Family, provided protection and “backing” to a witness cooperating with the Government (the “CW”) who operated a waste disposal company, and made an extortionate loan at a rate of interest exceeding one hundred percent annually. CALI, a Genovese Crime Family associate, provided protection and “backing” to the CW in exchange for regular payments made under the threat of harm.

PIETRANICO, 82, of Mahopac, New York, and SARCINELLA, 79, of Scarsdale, New York, each pled guilty to one count of making an extortionate extension of credit. CALI, 60, of Queens, New York, pled guilty to one count of participating in a conspiracy to commit extortion. PIETRANICO, SARCINELLA, and CALI each face a maximum sentence of 20 years in prison. PIETRANICO, SARCINELLA and CALI are scheduled to be sentenced by Judge Castel on January 9, 2014 at 11:00 a.m.

Two other defendants, Kenneth Lopez and Joseph Antico, have already pled guilty in connection with this case are. Lopez pled guilty on May 1, 2013, before U.S. District Judge Laura Taylor Swain to being a felon in possession of a firearm. He faces a maximum sentence of 10 years in prison and is scheduled to be sentenced on September 19, 2013, at 2:00 p.m. Antico pled guilty on June 24, 2013, before U.S. Magistrate Judge Andrew J. Peck to participating in a conspiracy to traffic contraband cigarettes. He faces a maximum sentence of five years in prison. Antico’s sentencing date has not yet been scheduled.

The charges against the remaining 27 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, Rebecca G. Mermelstein, and Natalie Lamarque 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 CRAIG B. HABER, a former partner of a global accounting firm, pled guilty today in Manhattan federal court to stealing nearly $4 million in client payments intended for the firm. HABER pled guilty before U.S. District Judge P. Kevin Castel.

Manhattan U.S. Attorney Preet Bharara said: “Craig Haber committed a flagrant fraud against his accounting firm and its clients by directing millions of dollars in payments intended for the firm to his personal bank accounts. With his plea today, he joins the ranks of disgraced financial professionals who put their own interests before the organizations and clients they were supposed to serve.”

According to the Complaint, the Information, and statements made in court:

From 1993 through July 2012, HABER was a partner at a global accounting firm headquartered in Chicago, Illinois, that provided a variety of auditing, accounting, and tax preparation services to businesses and individuals in the United States and abroad (the “Accounting Firm”). HABER worked at the Accounting Firm’s office in New York, New York, and provided tax preparation and advisory services.

The Accounting Firm’s bills to clients ordinarily included payment instructions directing clients to pay the firm by wire transfer or by sending checks to its headquarters in Chicago. However, on multiple occasions from 2004 through July 2012, HABER instead provided instructions to his clients directing them to send checks to him at the Accounting Firm’s New York, New York office.

Upon receiving those checks, HABER deposited a number of them into a bank account that he had opened in the name of a sham business whose name was very similar to the name of the Accounting Firm. After depositing the clients’ checks into that account, HABER then transferred the money from that account to two personal bank accounts which he used to pay various personal expenses, including mortgage payments for his residence in New York, New York.

HABER stole a total of nearly $4 million in client payments.

HABER, 59, of New York, New York, pled guilty to one count of mail fraud, which carries a maximum sentence of 20 years in prison. He is scheduled to be sentenced by Judge Castel on December 13, 2013 at 2:00 p.m.

Mr. Bharara praised the outstanding investigative work of the U.S. Postal Inspection Service.

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

Haber, Craig Information

Preet Bharara, the United States Attorney for the Southern District of New York, announced that MAREK LESZCZYNSKI, a former sales broker, pled guilty today in Manhattan federal court to conspiring with others to commit securities fraud and wire fraud. Along with other individuals, LESZCZYNSKI defrauded clients out of millions of dollars by misrepresenting the prices at which securities were bought and sold, thereby enabling his former employer to earn undisclosed trading profits and himself and his co-conspirators to be awarded lucrative bonuses. LESZCZYNSKI pled guilty before U.S. District Judge John F. Keenan this afternoon.

Manhattan U.S. Attorney Preet Bharara stated: “Along with his cohorts, Marek Leszczynski sold his firm’s clients a bill of goods by repeatedly misrepresenting the prices of trade executions, all so he could increase firm profits and secure a hefty bonus. Ultimately, Leszczynski’s lies were exposed, and today’s conviction ensures he’ll be punished for his fraud.”

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

From 2005 through December 2008, LESZCZYNSKI worked at a broker-dealer that was headquartered in London, England, with offices in Europe, Asia, and New York, New York (“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 major European cities. LESZCZYNSKI worked as a sales broker for Broker-Dealer 1’s Cash Equity Desk in New York. In that capacity, he was responsible for, among other things, 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 out trading confirmations back to the clients that showed the prices at which securities were bought or sold, including the commissions, if any, that Broker-Dealer 1 charged.

Instead of accurately recording and reporting the actual execution prices of the securities, LESZCZYNSKI and his co-conspirators, Chouchane and Condron, who worked alongside LESZCZYNSKI at Broker-Dealer 1, misrepresented the prices of trade executions. Where Broker-Dealer 1 received a buy order from a client, LESZCZYNSKI and his 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. Additionally, where Broker-Dealer 1 received a sell order from a client, LESZCZYNSKI and his 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. These markups and markdowns were not disclosed to Broker-Dealer 1’s clients and were separate and apart from the agreed-upon commissions that were disclosed on trading confirmations sent to Broker-Dealer 1’s clients.

As a result of this fraudulent scheme, Broker-Dealer 1 earned millions in undisclosed trading profits to which it was not entitled. LESZCZYNSKI and his co-conspirators were paid inflated bonuses.

LESZCZYNSKI, 44, of Miami, Florida, pled guilty to one count of conspiracy to commit securities fraud and wire fraud. He faces a maximum sentence of five years in prison, as well as a maximum fine of $250,000 or twice the gross gain or loss from the offense. In addition, LESZCZYNSKI has agreed to forfeit $1.5 million as part of his guilty plea. LESZCZYNSKI is scheduled to be sentenced before Judge Keenan on December 19, 2013 at 11:30 a.m.

Chouchane, 39, of New York, New York, pled guilty before Judge Keenan on June 12, 2013, to one count of conspiracy to commit securities and wire fraud. He is scheduled to be sentenced before Judge Keenan on October 24, 2013.

Condron, 34, of Yorktown Heights, New York, pled guilty before U.S. District Judge Naomi Reice Buchwald on October 5, 2012, to two counts of conspiracy to commit securities fraud and one count of securities fraud. Condron’s sentencing date is pending.

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

The case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Chi T. Steve Kwok is in charge of the prosecution.

U.S. v. Marek Leszcynski and Benjamin Chouchane Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that DONALD ALEVAS, a former director of shop equipment planning for the Long Island Railroad (“LIRR”), pled guilty today in Manhattan federal court to charges related to the allegedly massive fraud scheme in which LIRR workers claimed to be disabled upon early retirement so that they could receive disability benefits to which they were not entitled. ALEVAS pled guilty before U.S. Magistrate Judge Michael H. Dolinger. He is the 26th defendant to plead guilty in the case. Three other defendants were convicted after a jury trial in August 2013.

According to the Complaint, the Superseding Indictments, the Superseding Informations, and statements made in other public filings and court proceedings:

The Railroad Retirement Board (“RRB”) is an independent U.S. agency that administers benefit programs, including disability benefits, for the nation’s railroad workers and their families. A unique LIRR contract allowed employees to retire at the relatively young age of 50 – the age of eligibility has since changed to 55 – if they had been employed by the LIRR for at least 20 years. Eligible employees are entitled to receive an LIRR pension, which is a portion of the full retirement payment for which they are eligible at 65. In addition, at full retirement age (between age 60 and age 65 depending on years of service), they are eligible to receive an RRB retirement pension. For LIRR workers who retired at 50 with only an LIRR pension, they would receive less than their prior salary and substantially lower pension payments than those to which they would be entitled at full retirement age. However, LIRR employees who retired and claimed disability could receive a disability payment from the RRB on top of their LIRR pension, regardless of age. A retiree’s LIRR pension, in combination with RRB disability payments, can be roughly equivalent to the base salary earned during his or her career.

Hundreds of LIRR employees have allegedly exploited the overlap between the LIRR pension and the RRB disability program by pre-planning the date on which they would falsely declare themselves disabled so that it would coincide with their projected retirement date. These false statements, made under penalty of prosecution in disability applications, allowed LIRR employees to retire as early as age 50 with an LIRR pension, supplemented by the fraudulently obtained RRB disability annuity. From 1995 through 2011, more than 75% of LIRR employees stopped working and began receiving RRB disability benefits, whereas during this same period, only 25% of retiring Metro-North employees stopped working and began receiving RRB disability benefits. During the period 2004 through 2008, only three doctors were responsible for approximately 86% of the disability claims submitted by LIRR retirees. Of these three doctors, one is deceased; one, Dr. Peter J. Ajemian, pled guilty and was sentenced in May 2013 to eight years in prison; and the other, Dr. Peter Lesniewski, was convicted after a jury trial in August 2013 and awaits sentencing.

ALEVAS, a LIRR retiree who received disability benefits, made materially false statements about his ability to perform certain daily activities in his disability application submitted to the RRB.

ALEVAS, 54, of Patchogue, New York, pled guilty to one count of making false statements. He faces a maximum sentence of five years in prison and is scheduled to be sentenced by U.S. District Judge Kimba M. Wood on January 7, 2014, at 11:00 a.m.

Thirty-three people have been charged in connection with the LIRR disability fraud scheme; 26 have pled guilty and three have been convicted following trial. Of the 26 defendants who have pled guilty, four have been sentenced: Dr. Peter J. Ajemian received a sentence of eight years in prison; William McAleavey, a former conductor for the LIRR, received a sentence of 30 months in prison; Gary Satin, a former electrician for the LIRR, received a sentence of 20 months in prison; and Maria Rusin, who was Dr. Ajemian’s office manager, received a sentence of probation. The charges against the remaining defendants, Kevin Neville, Frederick Catalano, Jr., Thomas Coscetta, and Michael Costanza, are merely allegations, and they are all presumed innocent unless and until proven guilty.

Mr. Bharara praised the work of the RRB Office of the Inspector General, the Federal Bureau of Investigation, and the Office of the Inspector General of the Metropolitan Transportation Authority for their outstanding work in the investigation, which he noted is ongoing. He also acknowledged the previous investigation conducted by the New York State Attorney General’s Office into these pension fraud issues.

The case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Nicole Friedlander, Tatiana Martins, Edward Imperatore, Justin Weddle, and Daniel Tehrani are in charge of the prosecution.

U.S. v. Donald Alevas S6 Information

Preet Bharara, the United States Attorney for the Southern District of New York, announced that WILLIAM BARBALAT and KIRILL RAPOPORT pled guilty for their roles in the operation of high-stakes illegal poker games in New York City. BARBALAT pled guilty on August 14, 2013 before U.S. District Court Judge Jesse M. Furman to traveling in interstate commerce in aid of an unlawful activity, the operation of an illegal poker game. RAPOPORT pled guilty today before Judge Furman to conducting an illegal gambling business, an illegal poker game.

Manhattan U.S. Attorney Preet Bharara said: “For three years, William Barbalat and Kirill Rapoport oversaw illegal gambling enterprises in the Southern District of New York. With their pleas, we move closer to holding to account all those who participated in this wide-ranging network of criminal conduct linked to organized crime.”

BARBALAT and RAPOPORT were 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 various gambling offenses.

According to the Indictment, a superseding information filed against RAPOPORT, other documents filed in this case, and statements made at various conferences in this case:

BARBALAT and RAPOPORT each ran a high-stakes illegal poker game in New York City from 2010 through 2012, and 2012 through 2013, respectively. At these games, the pots frequently reached tens of thousands of dollars or more. The operators of these games, including BARBALAT and RAPOPORT, collected percentages of the pots known as “rakes.” Each of the poker games employed at least five or more people to assist with the operation of the games, payments of debts, and collection of debts.

BARBALAT and RAPOPORT each face a maximum sentence of five years in prison and three years of supervised release. As part of his plea agreement, BARBALAT agreed to forfeit $150,000 to the United States. RAPOPORT agreed to forfeit $250,000 to the United States. BARBALAT and RAPOPORT are scheduled to be sentenced by Judge Furman on December 16, 2013 at 3:30 p.m. and December 18, 2013 at 3:00 p.m., respectively.

BARBALAT and RAPOPORT are the second and third defendants to plead guilty in the case. Bryan Zuriff pled guilty on July 26, 2013 and is scheduled to be sentenced by Judge Furman on November 25, 2013 at 3:00 p.m.

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

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. Kirill Rapoport S1 Information
U.S. v. Alimzhan Tokhtakhounov et al. Indictment

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

announced that EDGAR PALTZER, a former partner at a Swiss law firm (the “Swiss Law Firm”), pled guilty today in Manhattan federal court to conspiring with U.S. taxpayer-clients and others to help U.S. taxpayers hide millions of dollars in offshore accounts from the IRS, and to evade U.S. taxes on the income earned in those accounts. PALTZER, who was originally charged in April 2013 along with his co-defendant Stefan Buck, was arrested at John F. Kennedy Airport in August 2013. He pled guilty before U.S. Magistrate Judge Ronald L. Ellis.

According to the Superseding Information, the Indictment, statements made during the plea proceeding, and other documents filed in Manhattan federal court:

PALTZER is a U.S.-trained lawyer who began to practice at the Swiss Law Firm in 1998, in the fields of international private client work, wealth transfer planning, successions, trusts and foundations, and eventually became a partner. PALTZER is also licensed to practice in New York State.

United States taxpayers are required to report on their individual tax returns the existence of any foreign bank account that holds more than $10,000 at any time during a given year, as well as any income earned in such accounts.

PALTZER conspired with various U.S. taxpayers and others to ensure that their clients could hide their Swiss bank accounts and the income generated in them from the IRS. PALTZER, acting as a financial intermediary, helped U.S. taxpayers maintain undeclared assets in Swiss banks by, among other things, working with these U.S. taxpayers to create and maintain sham foundations and other entities to nominally hold the U.S. taxpayers’ accounts in Swiss banks. When certain Swiss banks required that these U.S. taxpayers close their accounts, PALTZER worked with these U.S. taxpayers and others to move their accounts to other Swiss banks that were still willing to maintain accounts for U.S. taxpayers with undeclared assets.

PALTZER also helped to repatriate funds to the U.S. taxpayers from their undeclared accounts in Switzerland in ways that were designed to ensure that U.S. authorities would not discover these undeclared accounts. For example, PALTZER helped a U.S. taxpayer repatriate assets in the form of jewelry in order to avoid detection of an account in Switzerland.

PALTZER, 56, a dual U.S.-Swiss citizen, pled guilty pursuant to a plea agreement to one count of conspiracy charging him with conspiring with U.S. taxpayers and others to evade federal income taxes and file false tax returns. He faces a maximum sentence of five years in prison, and is scheduled to be sentenced before U.S. District Judge Victor Marrero on February 21, 2014.

Buck, PALTZER’s co-defendant, has not been arrested and remains at large. The charges against Buck are merely accusations and he is presumed innocent unless and until proven guilty.

Mr. Bharara praised the outstanding investigative work of the Internal Revenue Service, Criminal Investigation. He also thanked the Department of Justice’s Tax Division for their significant assistance in the investigation.

This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Jason H. Cowley, Daniel W. Levy, David Massey, Sarah Paul, and Sarah McCallum are in charge of the prosecution.

U.S. v. Edgar Paltzer S1 Information

Preet Bharara, the United States Attorney for the Southern District of New York, announced today the settlement of a civil forfeiture action against a six-story Chinatown building, appraised at approximately $17 million, located at 35-37 East Broadway (the “Building”) in New York City. The settlement between the United States and the owner of the Building, Won & Har Realty Corporation (“Won & Har”) followed a ruling, by U.S. District Judge Harold Baer, Jr., that the Building was subject to forfeiture because it had been used in furtherance of illegal gambling and Won & Har was not an innocent owner. Judge Baer also approved today’s settlement.

According to public documents filed in Manhattan federal court:

For at least the two years prior to the filing of a civil forfeiture complaint in May 2012, the Building consistently hosted a group of illegal gambling operators offering various gambling options, including pai gow poker and computer-based slot machine games. For nearly a year after a search conducted by law enforcement in 2011, which resulted in the seizure of hundreds of thousands of dollars in gambling proceeds, illegal gambling continued to be conducted openly in the Building, within full view of any passersby in the Building’s public hallways. In addition, a large sign advertising gambling was displayed on the front of the Building.

In its ruling, the Court rejected Won & Har’s “innocent owner” defense, finding that despite Won & Har’s knowledge of the ongoing gambling in the Building, the company failed to take all reasonable steps to terminate the illegal conduct. The Court cited Won & Har’s failure to investigate whether gambling was continuing in the Building in drawing the conclusion that Won & Har was willfully blind to the illegal use of its Building.

Pursuant to the terms of the agreement, Won & Har will forfeit the Building to the United States. The United States will sell the Building, retain 65% of the proceeds of the sale after accounting for the costs of selling the Building, and return the remainder of the proceeds to Won & Har.

Mr. Bharara praised the efforts of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) New York Asset Identification and Removal Group, HSI New York’s Gang Unit, the New York City Police Department’s (NYPD) Manhattan Vice Unit, NYPD’s Asset Forfeiture Unit, and U.S. Customs and Border Protection’s Air Unit. He also thanked the New York County District Attorney’s Office for their assistance.

Assistant United States Attorneys Alexander J. Wilson and Christine I. Magdo are in charge of the civil forfeiture action.

U.S. v. 35-37 Settlement PR Stipulation and Order of Settlement

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that ROBERT TERDJANIAN was sentenced yesterday to 125 months in prison for his role in a multi-million dollar Medicare fraud scheme, among other offenses including extortion and immigration fraud. TERDJANIAN pled guilty to racketeering in December 2011 before U.S. District Judge Paul G. Gardephe, who also imposed yesterday’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “Robert Terdjanian and his many convicted co-conspirators were a cancer of fraud inside the Medicare system at a time of increasing scarcity in public resources. With his sentence, we continue our work to ensure that all those responsible for this reprehensible scheme are punished.”

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

From 2008 through 2010, TERDJANIAN participated in a nationwide Medicare scam that fraudulently billed Medicare for over $100 million. As part of the conspiracy, the defendant and others created “phantom clinic” health care providers that existed only on paper, had no doctors, and treated no patients. The total scheme involved at least 118 fraudulent Medicare providers that were located in approximately 25 states, and that submitted fraudulent bills for at least approximately $100 million, and received over $30 million in reimbursements from Medicare. TERDJANIAN directed the New York-based members of the enterprise in this scheme and other criminal conduct, including no-fault insurance fraud and access device fraud.

In addition to the prison term, Judge Gardephe sentenced TERDJANIAN, 40, of Brooklyn, New York, to three years of supervised release, and imposed a $100 special assessment. Judge Gardephe also ordered TERDJANIAN to forfeit $1,169.680.55.

Of the 28 defendants charged in U.S. v. Armen Kazarian, et al., 20 have now been sentenced. Four others have pled guilty and are awaiting sentencing. Charges have been dismissed against two defendants, and remain pending against two defendants. The charges pending against the two outstanding defendants are merely allegations, and the defendants are presumed innocent unless and until proven guilty.

Mr. Bharara thanked the Federal Bureau of Investigation, the U.S. Department of Health and Human Services, Office of Inspector General, the New York City Police Department, and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations for their work in the investigation.

The prosecution is being handled by the Office’s Organized Crime Unit. Assistant U.S. Attorneys Jennifer Burns, Arlo Devlin-Brown and Harris Fischman 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”), James T. Hayes, Jr., the Special Agent-in-Charge of the New York Field Office of U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), Kenneth Siegler, the Resident Agent-in-Charge of the New York Office of the Defense Criminal Investigative Service (“DCIS”), Sidney Simon, the Special Agent-in-Charge of the U.S. Commerce Department, Bureau of Industry and Security’s Office of Export Enforcement New York Field Office (“OEE”), and Robert E. Perez, Director of New York Field Operations for U. S. Customs and Border Protection (CBP), announced that SEYED AMIN GHORASHI SARVESTANI, an Iranian national, was sentenced yesterday in Manhattan federal court to 30 months in prison for conspiring to export goods, including satellite technology and hardware, from the United States to Iran, in violation the International Emergency Economic Powers Act. GHORASHI was arrested on October 3, 2012, and pled guilty on May 8, 2013 before U.S. District Judge Paul G. Gardephe, who also imposed yesterday’s sentence.

According to the Complaint, the Information to which GHORASHI pled guilty, and statements made during the plea proceeding:

GHORASHI, an Iranian national, was an owner of, and served as a managing director and director of, two related companies based in the United Arab Emirates. In that capacity, he worked with others to export electronic equipment used for satellite communications and data transfer, as well as other goods, from the United States to Iran, without the requisite approval from the U.S. Department of Treasury, Office of Foreign Assets Control.

GHORASHI and others conspired to acquire satellite technology and hardware from a supplier based in the United States, for shipment to Iran. To conceal the true destination of the goods from the U.S. supplier, GHORASHI and his co-conspirators arranged for the items to be shipped first to the United Arab Emirates and subsequently shipped to Iran.

Mr. Bharara praised the investigative work of the New York Offices of the FBI, ICE-HSI, DCIS, and OEE. Mr. Bharara also thanked CBP for their assistance.

In addition to the prison term, GHORASHI, 46, was ordered to pay a $100,000 fine and to forfeit $54,000. Judge Gardephe also ordered him to pay a $100 special assessment.

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that LOUIS TOMASETTA, the founder and former CEO of Vitesse Semiconductor Corporation (“Vitesse”), a publicly-traded company, and EUGENE HOVANEC, the former Chief Financial Officer and Vice President of Vitesse, pled guilty in Manhattan federal court to conspiring to destroy, alter, or falsify records relating to Vitesse’s April and October 2001 stock option grants with the intent to obstruct a contemplated investigation by the U.S. Securities and Exchange Commission (“SEC”). TOMASETTA and HOVANEC pled guilty before U.S. District Judge Jed S. Rakoff to a one-count Superseding Information, which was filed today.

Manhattan U.S. Attorney Preet Bharara said: “With today’s guilty pleas, Louis Tomasetta and Eugene Hovanec answer as felons for their attempts to use their positions of power to obstruct an investigation they expected the SEC to conduct into their company’s accounting practices. As this case demonstrates, we will not hesitate to reach into corporate board rooms and executives suites to shine a light on corrupt practices.”

According to the Superseding Information, evidence in prior court proceedings, and statements made during today’s guilty plea proceeding:

During 2001 to 2006, Vitesse’s Board of Directors, specifically the Compensation Committee of the Board (the “Compensation Committee”), administered shareholder approved stock options plans (the “Plans”) and had the authority under the Plans to grant stock option awards. Vitesse’s public filings for the 2001 to 2005 year-end period indicated that the exercise price of all stock options was at least equal to the fair market value of Vitesse’s stock price on the date of the grant. During this time period, TOMASETTA, HOVANEC, and others, generally initiated and oversaw the option grant process.

Controversy Concerning the April and October 2001 Option Grants

In November 2005, Yatin Mody (“Mody”), then Vitesse’s Chief Financial Officer, contacted Vitesse’s then-outside law firm (“Law Firm-1”) concerning a press inquiry about Vitesse’s stock option practices. After reviewing documents related to stock option grants in April 2001 and October 2001, Law Firm-1 advised Mody and TOMASETTA that it had concerns about those option grants, and specifically concern about whether Vitesse had properly accounted for these option grants. For example, Vitesse’s April 12, 2001 Compensation Committee meeting minutes memorialized option grants with an exercise price at the April 6, 2001 closing price of Vitesse’s stock, which was lower than the April 12 closing price. These minutes raised a question about whether the options were in fact granted on the day of the meeting (April 12) or on the earlier date (April 6), and potentially affected the accounting treatment of the options in a way that would require adjustments to Vitesse’s financial reports. Similarly, the Compensation Committee meeting minutes from October 25, 2001 memorialized option grants with an exercise price at the October 2, 2001 closing price, which was lower than the October 25 closing price.

In late November 2005, after discussions with TOMASETTA and HOVANEC, Mody created minutes of the Compensation Committee meetings allegedly held on April 6, 2001 and October 2, 2001. Mody then provided copies of these minutes to Law Firm-1, and specifically advised Law Firm-1 that they were prepared in November 2005 to reflect what had actually occurred at those meetings.

Tomasetta and Hovanec Alter and Fabricate Records Regarding the 2001 Option Grants

On March 18, 2006, the Wall Street Journal published an article that raised questions about stock option practices at various companies, including Vitesse. Following the article, Law Firm-1 raised concerns to Vitesse’s directors and management, including TOMASETTA and HOVANEC, about Vitesse’s option grants and specifically, about the fact that Compensation Committee minutes had been created years after the fact. Law Firm-1 informed TOMASETTA and HOVANEC that because of the Wall Street Journal article, there was a significant possibility of an SEC investigation into Vitesse’s option practices and disclosures.

At a meeting on April 11, 2006, Law Firm-1 also advised Vitesse’s directors and management, including TOMASETTA and HOVANEC, that Mody’s after-the-fact creation of Compensation Committee meeting minutes raised questions about whether the meetings had actually occurred. That same day, Vitesse’s Audit Committee retained a law firm (“Law Firm-2”) to conduct an independent investigation into Vitesse’s stock option grants. Law Firm-2 requested that Vitesse provide it with access to the computer used by the Vitesse employee who was responsible for actually typing the minutes of the Compensation Committee meetings when they occurred (the “Assistant’s Computer”).

With an understanding that Law Firm-2 would access the Assistant’s Computer, on April 12, 2006, TOMASETTA, HOVANEC, and Mody created documents that purported to be minutes of meetings of Vitesse’s Compensation Committee on April 6, 2001 and October 2, 2001, authorizing option grants at those meetings. After creating these documents, they transferred electronic copies of the documents containing the two recently created sets of minutes to the Assistant’s Computer and, in an effort to make it appear that the minutes were created at an earlier time, TOMASETTA, HOVANEC, and Mody reset the computer’s internal clock to backdate the creation date of these purported minutes. TOMASETTA and HOVANEC engaged in this action to obstruct Law Firm-2’s internal investigation, knowing that there was likely to be an SEC investigation of Vitesse’s option grant practices and disclosures.

TOMASETTA, 64, Ojai, California, and HOVANEC, 61, Westlake Village, California, each pled guilty to one count of conspiracy to destroy, alter, or falsify records in contemplation of a federal investigation, which carries a maximum term of five years in prison.

Yatin Mody, 50, of Westlake Village, California, pled guilty in December 2010, before U.S. District Judge John G. Koeltl, to an Information charging him with securities fraud, making false entries in the financial records of a corporation, and conspiracy pursuant to a cooperation agreement with the Government. He awaits sentencing.

Mr. Bharara praised the investigative work of the U.S. Postal Inspection Service and the Criminal Investigators of the U.S. Attorney’s Office, which jointly investigated this case. He also thanked the SEC 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.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys John J. O’Donnell, Katherine R. Goldstein and David I. Miller are in charge of the prosecution.

U.S. v. Eugene Hovanec & Louis Tomasetta S2 Superseding Information