Southern District of New York

Preet Bharara, Loretta E. Lynch, and Wifredo A. Ferrer – the United States Attorneys for the Southern District of New York (“SDNY”), Eastern District of New York (“EDNY”), and Southern District of Florida (“SDFL”), respectively – Michele M. Leonhart, the Administrator of the U.S. Drug Enforcement Administration (“DEA”), James Dinkins, the Executive Assistant Director of the U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), and Raymond W. Kelly, the Police Commissioner of the City of New York (“NYPD”), announced today the extradition of DANIEL BARRERA BARRERA, also known as “Loco,” a citizen of Colombia, to the U.S. on charges that for decades he manufactured hundreds of tons of cocaine annually in Colombia and trafficked it to various parts of the world, including the U.S., and laundered tens of millions of dollars in proceeds from that narcotics trafficking activity. BARRERA arrived in the Southern District of New York this afternoon. He will be presented and arraigned in the Southern District of New York before U.S. District Judge Alvin K. Hellerstein on July 10, 2013, at 11:00 a.m., and in the Eastern District of New York before U.S. District Judge I. Leo Glasser on July 11, 2013, at 3:30 p.m. Following his prosecution in New York, BARRERA will be presented and arraigned in the Southern District of Florida.

In March 2010, the U.S. Department of the Treasury’s Office of Foreign Assets Control designated BARRERA as a “Special Designated Narcotics Trafficker,” pursuant to the Foreign Narcotics Kingpin Designation Act. BARRERA was arrested in Venezuela on September 18, 2012. Thereafter, he was sent to Colombia, from where the U.S. sought BARRERA’s extradition. The extradition of BARRERA is the result of an ongoing Organized Crime Drug Enforcement Task Forces (OCDETF) investigation led by DEA and HSI. The principal mission of the OCDETF program is to identify, disrupt and dismantle the most serious drug trafficking, weapons trafficking and money laundering organizations, and those primarily responsible for the nation’s illegal drug supply.

U.S. Attorney Preet Bharara said: “For more than a decade, as alleged, Daniel Barrera Barrera has operated at the center of a truly evil web spun between his narcotics trafficking organization and two violent and sworn enemy terrorist organizations – the AUC and the FARC. By purchasing raw cocaine paste from the FARC, which he processed in laboratories in areas controlled by the AUC, to whom he paid fees, Barrera’s behemoth cocaine organization reached an annual production rate of upwards of 400 tons, enriching itself and the two terrorist organizations it paid off, as the indictment describes. This was truly cocaine with blood in its background. With his arrival in the U.S., Barrera must now answer for his alleged crimes, and we will continue to work with our law enforcement partners, both here and abroad, to prosecute him and other alleged titans of the transnational drug trade.”

U.S. Attorney Loretta E. Lynch said: “As alleged in the three indictments on which he was extradited, Daniel “Loco” Barrera Barrera was the kingpin of a stunningly prolific Colombian drug cartel, which flooded the globe with its deadly product. Barrera also allegedly wrought destruction closer to home, working with not one but two terrorist organizations responsible for decades of death and destruction in Colombia, all to ensure his deadly business ran smoothly. His extradition to the United States marks the fall of the last don of an organization marked by its worldwide reach, ruthless criminality, and staggering profits. This investigation exemplifies the global cooperation necessary to combat international drug traffickers and our commitment to dismantle these criminal organizations from the highest levels down.”

U.S. Attorney Wifredo A. Ferrer said: “Daniel “Loco” Barrera Barrera’s arrest and extradition is the direct result of strong international cooperation with Colombian authorities. It also reflects the hard work and perseverance of our law enforcement partners – both at home and abroad – whose dedicated efforts led to the capture of one of the world’s most notorious drug traffickers. While Barrera evaded capture for several years, the time has finally come for him to answer for his crimes and face justice. As this case confirms, the United States will never tire in its pursuit of those who profit from the illegal drug trade.”

DEA Administrator Michele M. Leonhart said: “Daniel Barrera allegedly worked with both the FARC and AUC terrorist organizations in operating his drug trafficking syndicate, becoming one of the most prolific drug traffickers of the past twenty years. Charged with manufacturing upwards of 400 tons of cocaine a year, Barrera’s alleged impact on the global trade of cocaine was immense – but so was DEA’s response. Thanks to the cooperative efforts of our Colombian and U.S. law enforcement counterparts, Barrera’s criminal career is over as he now faces charges that may bring him a life behind bars.”

ICE HSI Executive Assistant Director James Dinkins said: “Mr. Barrera and his co-conspirators stand accused of running one of the largest cocaine trafficking operations in history. His extradition to the United States represents a major victory for the rule of law. While Mr. Barrera may have thought he was safe hiding and conducting his illicit activities in South American countries, an international team of law enforcement agencies worked tirelessly and cooperatively towards bringing him to justice.”

NYPD Commissioner Raymond W. Kelly said: “If any one case epitomizes the nexus between terrorism and drug trafficking and the destructive impact on Colombian society, this is it; not to mention the crime and suffering cocaine addiction has fueled on the demand-side of the equation in the streets of New York. Barrera’s extradition is a milestone, and we’re indebted to the detectives, agents, and prosecutors who’ve made it possible.”

As alleged in the Superseding Indictment filed in the Southern District of New York (S1 07 Cr. 862 (AKH)), the Superseding Indictment filed in the Eastern District of New York (S2 10 Cr. 288 (ILG)), the Superseding Indictment filed in the Southern District of Florida (S1 10 Cr. 20587 (DLG)), other documents filed in these cases, and information in the public record:

Since 1998, BARRERA has run a cocaine manufacturing and trafficking syndicate which each month processed approximately 30,000 kilograms of raw cocaine base into about the same amount of cocaine powder – in total, up to approximately 400 tons of cocaine annually.

BARRERA purchased the raw cocaine base or paste from the designated terrorist group Fuerzas Armadas Revolucionarias de Colombia (Revolutionary Armed Forces of Colombia, or the “FARC”), which has been the world’s largest supplier of cocaine and which has engaged in bombings, massacres, kidnappings, and other acts of violence within Colombia.

BARRERA converted the raw cocaine into powder at laboratories he owned and operated in an area of Colombia controlled by the since demobilized terrorist group, Autodefensas Unidas de Colombia (the “AUC”). For years, the AUC’s main political objective was to defeat the FARC in armed conflict, and it financed its terrorist activities through the proceeds of cocaine trafficking in AUC-controlled regions of Colombia.

Although BARRERA purchased raw materials for cocaine production from the FARC, he was able to maintain his network of cocaine-processing laboratories in AUC-controlled territory, in part by paying monthly “taxes” to the AUC. The fees BARRERA paid to the AUC also allowed him to safely move the processed cocaine through and out of Colombia, into locations on four continents – including into the U.S.

BARRERA reaped tens of millions of dollars of profits from cocaine trafficking, which he laundered through illicit means.

The FARC and the AUC are both designated by the U.S. Department of State as Foreign Terrorist Organizations.

BARRERA, 44, is charged in the Southern District of New York with one count of conspiring to distribute and manufacture cocaine knowing it would be unlawfully imported into the U.S. On that count, BARRERA faces a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison.

BARRERA is charged in the Eastern District of New York with one count of conspiracy to launder money. On that count, BARRERA faces a maximum sentence of 20 years in prison.

BARRERA is charged in the Southern District of Florida with one count of conspiring to import cocaine into the U.S. and one count of conspiring to manufacture and distribute cocaine knowing that it would be unlawfully imported into the U.S. On those counts, BARRERA faces a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison.

Mr. Bharara, Ms. Lynch, and Mr. Ferrer praised the outstanding work of the OCDETF, working in cooperation with HSI New York’s El Dorado Task Force, the DEA’s Bogota Country Office, the DEA’s Caracas Country Office, the DEA’s Miami Field Division, the DEA’s New York Drug Enforcement Task Force – which is comprised of agents and officers of the DEA, the New York City Police Department, and the New York State Police – as well as HSI Bogota. Mr. Bharara, Ms. Lynch, and Mr. Ferrer also thanked the Colombian National Police, the U.S. Marshals Service, and the U.S. Department of Justice’s Office of International Affairs for their ongoing assistance.

The Southern District of New York case is being handled by that office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Jenna Dabbs, Benjamin Naftalis, and Andrea Surratt are in charge of the prosecution. The Eastern District of New York case is being handled by that office’s International Narcotics Strike Force. Assistant United States Attorneys Justin Lerer, Soumya Dayananda, and Amir Toossi are in charge of the prosecution. The Southern District of Florida case is being handled by that office’s Narcotics Unit. Assistant United States Attorney Adam Fels is in charge of the prosecution.

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

US v. Daniel Barrera Barrera SDNY Indictment
US v. Daniel Barrera Barrera, et al EDNY Indictment
US v. Daniel Barrera Barrera, et al SDFL Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that TREVOR WHITTINGHAM, an owner of parking lots in Manhattan, pled guilty in Manhattan federal court to failing to pay payroll taxes to the Internal Revenue Service (“IRS”). WHITTINGHAM was arrested in January 2013 and pled guilty today before U.S. District Judge Richard J. Sullivan.

According to the Indictment and statements made in open court today at the plea proceeding:

WHITTINGHAM owned and controlled two companies, EZ Going Park Here and We Have Cars II, through which he operated parking lots in Harlem and other parts of upper Manhattan, New York. He was responsible for collecting, accounting for, and paying payroll taxes on behalf of both of these companies. From December 2006 through June 2009, WHITTINGHAM caused EZ Going Park Here and We Have Cars II to deduct and collect payroll taxes from its employees. The majority of those payroll taxes, however, were not paid over to the IRS as required. Instead, WHITTINGHAM used the corporate funds of EZ Going Park Here and We Have Cars II to pay for various personal items and otherwise finance a lavish lifestyle. As a result, from 2005 through 2009, EZ Going Park Here and We Have Cars II accumulated approximately $251,265 in unpaid payroll tax liabilities.

WHITTINGHAM, 63, of Fort Lee, New Jersey, pled guilty to one count of willfully failing to pay over payroll taxes to the IRS. He faces a maximum sentence of five years in prison. He will be sentenced by Judge Sullivan on November 15, 2013 at 10:30 a.m. WHITTINGHAM also agreed to make restitution to the IRS in the amount of $251,265.

Mr. Bharara praised the IRS, Criminal Investigation 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.

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

Preet Bharara, the United States Attorney for the Southern District of New York, Martin J. Dickman, Inspector General of the Railroad Retirement Board (“RRB-OIG”), George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Barry L. Kluger, Inspector General of the New York State Metropolitan Transportation Authority (“MTA-OIG”), announced that ROBERT ELLENSOHN, a former bridges and buildings inspector for the Long Island Railroad (“LIRR”), pled guilty today for his role in 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. ELLENSOHN pled guilty in Manhattan federal court before U.S. District Judge Sidney H. Stein. He is the 33rd defendant to be charged, and the 25th defendant to plead guilty in the case, which alleges a pervasive pattern of fraudulent disability claims being filed with the U.S. Railroad Retirement Board (“RRB”) by retiring LIRR employees.

According to the Information filed today and statements made in other public filings and in court:

The LIRR Disability Fraud Scheme

The 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, one has died and one, Dr. Peter J. Ajemian, pled guilty and admitted that he declared “large numbers of Long Island Railroad employees” to be disabled even though they were not disabled and could have continued working in their railroad jobs. Dr. Ajemian was sentenced in May 2013 to eight years in prison.

ELLENSOHN, 59, of North Merrick, New York, pled guilty to one count of conspiracy to commit mail fraud, wire fraud, and health care fraud; one count of conspiracy to defraud the United States and the RRB; and one count of wire fraud. He faces a maximum sentence of 45 years in prison. ELLENSOHN is scheduled to be sentenced by Judge Stein on January 8, 2014.

Thirty-three people have been charged in connection with the LIRR disability fraud scheme, 25 of whom have now pled guilty. Of the 25 defendants that have pled guilty, two have been sentenced. The charges against the remaining defendants are merely allegations, and they are all presumed innocent unless and until proven guilty.

Mr. Bharara praised the work of the RRB-OIG, the FBI, and the MTA-OIG 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 Justin Weddle, Nicole Friedlander, and Daniel Tehrani are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, Martin J. Dickman, Inspector General of the Railroad Retirement Board (“RRB-OIG”), George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Barry L. Kluger, Inspector General of the New York State Metropolitan Transportation Authority (“MTA-OIG”), announced that ROBERT ELLENSOHN, a former bridges and buildings inspector for the Long Island Railroad (“LIRR”), pled guilty today for his role in 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. ELLENSOHN pled guilty in Manhattan federal court before U.S. District Judge Sidney H. Stein. He is the 33rd defendant to be charged, and the 25th defendant to plead guilty in the case, which alleges a pervasive pattern of fraudulent disability claims being filed with the U.S. Railroad Retirement Board (“RRB”) by retiring LIRR employees.

According to the Information filed today and statements made in other public filings and in court:

The LIRR Disability Fraud Scheme

The 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, one has died and one, Dr. Peter J. Ajemian, pled guilty and admitted that he declared “large numbers of Long Island Railroad employees” to be disabled even though they were not disabled and could have continued working in their railroad jobs. Dr. Ajemian was sentenced in May 2013 to eight years in prison.

ELLENSOHN, 59, of North Merrick, New York, pled guilty to one count of conspiracy to commit mail fraud, wire fraud, and health care fraud; one count of conspiracy to defraud the United States and the RRB; and one count of wire fraud. He faces a maximum sentence of 45 years in prison. ELLENSOHN is scheduled to be sentenced by Judge Stein on January 8, 2014.

Thirty-three people have been charged in connection with the LIRR disability fraud scheme, 25 of whom have now pled guilty. Of the 25 defendants that have pled guilty, two have been sentenced. The charges against the remaining defendants are merely allegations, and they are all presumed innocent unless and until proven guilty.

Mr. Bharara praised the work of the RRB-OIG, the FBI, and the MTA-OIG 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 Justin Weddle, Nicole Friedlander, and Daniel Tehrani are in charge of the prosecution.

U.S. v. Robert Ellensohn Information

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that DANIEL FERNANDEZ, 35, was found guilty yesterday in Manhattan federal court of marijuana trafficking. FERNANDEZ was convicted following a two-and-a-half-week jury trial before U.S. District Judge Laura Taylor Swain.

Manhattan U.S. Attorney Preet Bharara said: “As a member of a sophisticated network of drug traffickers, Daniel Fernandez profited handsomely from many years of distributing truckloads of marijuana to the New York City area. He now stands convicted, along with more than 50 other defendants whose massive drug dealing network was stopped as a result of a successful, multi-agency law enforcement effort.”

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

On August 21, 2012, this Office announced the unsealing of a 40-count Racketeering Influenced Corrupt Organizations Indictment (the “RICO Indictment”) charging nine individuals with participating in a massive racketeering organization led by Manuel Geovanny Rodriguez-Perez (the “Rodriguez Enterprise”) whose members allegedly sold massive quantities of marijuana; engaged in murders and other violent acts; transported and laundered millions of dollars; obstructed justice and committed perjury; and engaged in firearms offenses.

FERNANDEZ, a Miami-based marijuana broker, was one of Rodriguez-Perez’s principal suppliers of marijuana. From at least 2007 through October 2010, he directly supplied Rodriguez-Perez with over a ton of marijuana, which was funneled into Washington Heights, New York for distribution throughout the New York City area.

FERNANDEZ was convicted of one count of conspiracy to distribute 1,000 kilograms and more of marijuana, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life. The charges against him arose out of a multi-year investigation titled “Operation Green Venom,” a coordinated multi-agency investigation that was led by Immigration and Customs Enforcement’s Homeland Security Investigations (“ICE HSI”) and first announced in October 2010. With his conviction, a total of more than 50 defendants have been convicted in United States v. Manuel Geovanny Rodriguez-Perez, et al., 10 Cr. 905 (LTS), and related cases. Those defendants include former Rock-a-fella music founder Kareem Burke, a/k/a “Biggs,” who received a sentence of 60 months in prison, and High Times Magazine editor Matthew Woodstock Stang, a/k/a “Magazine Guy,” who has not yet been sentenced. Trial of the defendants charged in the RICO Indictment is scheduled for March 2014. The charges against these remaining defendants are merely accusations, and they are presumed innocent unless and until proven guilty.

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

The prosecution of the cases arising from “Operation Green Venom” is being overseen by the Office’s Violent Crimes Unit. Assistant U.S. Attorneys Amie N. Ely, Sarah E. McCallum, Jessica Ortiz, and Sarah Paul are in charge of the prosecution. Assistant U.S. Attorney Michael D. Lockard is responsible for the forfeiture proceedings.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that FELIX RODRIGUEZ, a licensed physician in Manhattan, was sentenced to a term of 37 months’ imprisonment by U.S. District Judge Kenneth M. Karas in White Plains federal court for distributing Oxycodone, a Schedule II controlled substance.

Manhattan U.S. Attorney Preet Bharara stated: “The abuse of diverted prescription pain medication is the fastest growing drug problem in our country, now killing more people than illegal street drugs like heroin and cocaine combined. We cannot tolerate the fueling of this epidemic by crooked doctors who flout their oath to care for, not harm, their patients. The sentence imposed today sends a strong message to those doctors engaged in the criminal distribution of pain killers that they too, like dealers of illegal street drugs, will feel full force of the law. We will continue to work with federal, state, and local law enforcement organizations to eradicate this nationwide problem harming so many in our communities.”

According to documents filed in White Plains federal court in this case:

From May 2010 through February 2011, RODRIGUEZ, who was a licensed physician, working out of a medical office in Manhattan, provided Oxycodone prescriptions made out in the names of various other individuals, including individuals who RODRIGUEZ never met or examined to an individual who then used these prescriptions to obtain the drugs for illegal distribution. When RODRIGUEZ wrote these prescriptions, he knew that by doing so he was violating generally accepted medical practice. Oxycodone is a powerful painkiller with a high potential for addiction and abuse.

In addition to the term of imprisonment imposed, RODRIGUEZ, 52, of the Bronx, New York, was sentenced to three years of supervised release.

Mr. Bharara praised the investigative efforts of the U.S. Drug Enforcement Administration, the Westchester County District Attorney’s Office, the Westchester County Department of Public Safety, the U.S. Marshals Service, the New York State Police, the Yonkers Police Department, and the Mount Vernon Police Department.

This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Jeffrey Alberts and Abigail S. Kurland are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that FELIX RODRIGUEZ, a licensed physician in Manhattan, was sentenced to a term of 37 months’ imprisonment by U.S. District Judge Kenneth M. Karas in White Plains federal court for distributing Oxycodone, a Schedule II controlled substance.

Manhattan U.S. Attorney Preet Bharara stated: “The abuse of diverted prescription pain medication is the fastest growing drug problem in our country, now killing more people than illegal street drugs like heroin and cocaine combined. We cannot tolerate the fueling of this epidemic by crooked doctors who flout their oath to care for, not harm, their patients. The sentence imposed today sends a strong message to those doctors engaged in the criminal distribution of pain killers that they too, like dealers of illegal street drugs, will feel full force of the law. We will continue to work with federal, state, and local law enforcement organizations to eradicate this nationwide problem harming so many in our communities.”

According to documents filed in White Plains federal court in this case:

From May 2010 through February 2011, RODRIGUEZ, who was a licensed physician, working out of a medical office in Manhattan, provided Oxycodone prescriptions made out in the names of various other individuals, including individuals who RODRIGUEZ never met or examined to an individual who then used these prescriptions to obtain the drugs for illegal distribution. When RODRIGUEZ wrote these prescriptions, he knew that by doing so he was violating generally accepted medical practice. Oxycodone is a powerful painkiller with a high potential for addiction and abuse.

In addition to the term of imprisonment imposed, RODRIGUEZ, 52, of the Bronx, New York, was sentenced to three years of supervised release.

Mr. Bharara praised the investigative efforts of the U.S. Drug Enforcement Administration, the Westchester County District Attorney’s Office, the Westchester County Department of Public Safety, the U.S. Marshals Service, the New York State Police, the Yonkers Police Department, and the Mount Vernon Police Department.

This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Jeffrey Alberts and Abigail S. Kurland are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), today announced the arrest of INGRID LEDERHAAS-OKUN, a former Vice President of Product Development at a high-end jewelry company, for stealing over $1.3 million worth of jewelry from her former employer. LEDERHAAS-OKUN was arrested this morning at her residence in Darien, Connecticut, and will be presented in Manhattan federal court later today before U.S. Magistrate Judge James C. Francis.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Ingrid Lederhaas-Okun went from a Vice President at a high-end jewelry company to jewel thief. She abused her access to valuable jewelry in order to steal and then resell over one million dollars’ worth of items that she falsely represented as her own, as the complaint describes. Her arrest shows that no matter how privileged their position in a company, employees who steal will face the full consequences of the law.”

FBI Assistant Director-in-Charge George Venizelos said: “As alleged, Ingrid Lederhaas-Okun took advantage of the access her employment afforded her to expensive jewelry. She allegedly stole numerous items, sold them for over a million dollars, then engaged in a series of lies in an attempt to cover up the theft. A privileged position in a prestigious company does not insulate a thief from arrest and prosecution.”

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

From at least January 2011 until February 2013, LEDERHAAS-OKUN worked as a Vice President of Product Development at the midtown Manhattan headquarters of one of the world’s premier high-end jewelers (the “Jewelry Company”). Her duties and responsibilities included ensuring that product designs could be manufactured and, to that end, she had authority to check out jewelry belonging to the Jewelry Company for work-related reasons, such as to provide the jewelry to potential manufacturers to determine the cost of production.

Between November 2012 and February 2013, LEDERHAAS-OKUN abused her position and authority at the Jewelry Company to check out over 165 pieces of jewelry with a retail value of over $1.2 million, including numerous diamond bracelets, platinum or gold diamond drop and hoop earrings, platinum diamond rings, and platinum and diamond pendants. She then sold some if not all of this jewelry for $1.3 million to another company, a leading international buyer and reseller of jewelry with an office in midtown Manhattan (the “Jewelry Reseller”). The Jewelry Reseller paid for the merchandise that LEDERHAAS-OKUN had stolen either by paying her or her husband, in transactions arranged either by LEDERHAAS-OKUN or a friend working on her behalf.

In addition to this jewelry, in November 2012, following an announcement by the Jewelry Company that it was going to undertake a full physical inventory review, LEDERHAAS-OKUN also reported that approximately $1.5 million worth of jewelry which she had checked out would have to be written off. However, none of that jewelry was ever returned to the Jewelry Company, contrary to the usual practice of accounting for inventory, such as damaged jewelry, that would have to be written off because it had been rendered unusable in some way.

To conceal her theft, LEDERHAAS-OKUN made repeated false statements to the Jewelry Company. For example, after her termination in February 2013, she told the Jewelry Company that she had only recently checked out the missing jewelry in anticipation of creating a PowerPoint presentation for her supervisor, and that a draft of the presentation could be found on her office computer. However, the missing pieces of jewelry had been checked out months earlier, her supervisor was unaware of any such presentation being worked on by LEDERHAAS-OKUN, and there was no draft presentation on her computer. In addition, LEDERHAAS-OKUN claimed the jewelry in question could be found in a white envelope in her office, but a search of her office shortly after her departure did not yield any white envelope.

LEDERHAAS-OKUN, 46, of Darien, Connecticut, is charged with one count of wire fraud, which carries a maximum penalty of 20 years in prison, and one count of interstate transportation of stolen property, which carries a maximum penalty of 10 years in prison.

Mr. Bharara praised the investigative work of the FBI. Mr. Bharara also noted the investigation is ongoing.

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

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

Lederhaas-Okun, Ingrid Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ABDUL WALJI and RENIERO FRANCISCO, the Chief Executive Officer and President, respectively, of Arista LLC (“Arista”), a California investment fund, pled guilty today in Manhattan federal court to defrauding and misappropriating nearly $10 million from more than 35 investors by misrepresenting the nature and performance of the fund, and issuing fraudulent account statements to investors to cover up massive losses. WALJI also pled guilty to perpetrating a multi-million dollar fraudulent scheme with pension plan funds that he managed through three California-based trusts: Allied Benefits, Inc., Allied Benefits Trust, and Stone Lamm Trust (collectively, the “Trusts”). Both defendants were charged in December 2012, and pled guilty today before U.S. District Judge Denise Cote.

Manhattan U.S. Attorney Preet Bharara said: “Abdul Walji and Reniero Francisco told one lie after another in order to squeeze millions of dollars out of their investors, even as they misappropriated nearly $10 million, including at least $2.7 million solely for their own personal benefit. Walji even went a step further and orchestrated a second scheme that ultimately cost his victims another approximately $9.5 million. With today’s guilty pleas, they will begin to be held responsible for their actions and repay those wronged by their unlawful conduct.”

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

The Arista Fraudulent Scheme

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

In early 2010, WALJI and FRANCISCO began to solicit individuals to invest in Arista. From 2010 through 2011, the defendants carried out their fraudulent scheme through three methods. First, WALJI and FRANCISCO misrepresented to several Arista investors the nature of the company’s investments and the returns that investors would receive from investing in Arista. For example, WALJI and FRANCISCO falsely told investors that their money would be invested in safe, risk-free securities, when in fact much of the money was invested in options and futures. Second, WALJI and FRANCISCO sent fraudulent account performance statements to Arista investors that misrepresented the value of their investments. In an effort to secure additional contributions, the defendants also concealed Arista’s trading losses, and told investors that they were profiting from their investments when they were actually losing money. Finally, WALJI and FRANCISCO misappropriated at least $2.7 million from Arista’s investors through fees to which they were not entitled, and which WALJI and FRANCISCO diverted for their own personal benefit. Based on their false representations, WALJI and FRANCISCO collected nearly $10 million from over 35 investors, and they ultimately misappropriated a large portion of the money.

Walji’s Pension Plan Fraudulent Scheme

From early 2008 through June 2013, WALJI also perpetrated a separate fraudulent scheme using pension plan funds that he administered. Similar to the scheme set forth above, WALJI executed his fraudulent scheme through three principal methods. First, WALJI made oral misrepresentations to existing and potential clients of the Trusts concerning: (i) the nature of the Trusts’ pension plan investments; (ii) the investment value and past performance of the pension plans; and (iii) the source of funds distributed to plan participants who had reached retirement and/or who had requested distributions. Second, WALJI distributed fraudulent statements to clients concerning the value of their accounts and the prior performance of their pension plans in order to forestall redemption requests, induce new clients to contribute to the plans, and induce existing clients to make additional contributions. As selected clients reached retirement age or requested disbursements, WALJI sent those clients money that he represented to be proceeds of their individual pensions, when in fact he knew that the purported disbursements were often funds contributed by other clients. Third, WALJI misappropriated approximately $300,000 of client funds for his personal use. In total, this scheme caused losses to approximately 35 additional victims in an aggregate amount of approximately $9.5 million.

WALJI, 60, of San Juan Capistrano, California, pled guilty to one count of conspiracy to commit securities fraud and wire fraud, one count of commodities fraud, and one count of securities fraud. The securities fraud charge carries a maximum sentence of 20 years in prison; the commodities fraud charge carries a maximum sentencing of 10 years in prison; and the conspiracy charge carries a maximum sentence of five years in prison. FRANCISCO, 57, of Newport Coast, California, pled guilty to one count of conspiracy to commit securities fraud and wire fraud and one count of securities fraud.

In connection with their guilty pleas, WALJI consented to forfeit $13.6 million and FRANCISCO consented to forfeit $4.1 million. The defendants also agreed to forfeit the proceeds of several bank and trading accounts.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation and also thanked the U.S. Commodities Futures Trading Commission for its assistance.

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

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys David I. Miller and Christopher D. Frey are in charge of the prosecution. Assistant U.S. Attorney Paul Monteleoni is in charge of the asset forfeiture related to the prosecution.

U.S. v. Abdul Walji S1 Information
US v. Abdul Walji & Reniero Francisco Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that STEVEN KNOWLES, 25, was convicted today in White Plains of various racketeering charges, murder, conspiracy to murder, attempted murder, narcotics conspiracy, and firearms offenses following a four-week jury trial before the U.S. District Judge Kenneth M Karas. The jury convicted KNOWLES of charges arising out of his involvement, from 2000 through 2013, in the criminal activities of the Elm Street Wolves gang (the “Wolves”) – a violent street gang that was involved in drug-trafficking and multiple acts of violence, including murder and attempted murder, in Yonkers, New York.

Manhattan U.S. Attorney Preet Bharara said: “It was four years ago almost to the day, July 4, 2009, that Steven Knowles shot down rival gang member Christopher Cokley, killing him in cold blood. With today’s verdict, Knowles is now held accountable for not only Cokley’s murder, but for the years of violence and drug dealing committed by Knowles on the streets of Yonkers. This conviction is a continuation of the long-standing commitment by federal, state, and local law enforcement authorities to rid Yonkers and other communities in the Southern District of New York of violent drug gangs. Law enforcement has pledged itself to this cause for several years now and has not stood down.”

According to the Superseding Indictment and evidence admitted at trial:

From 2000 through 2013, KNOWLES was a member, and then leader, of a racketeering enterprise – the Elm Street Wolves. As part of his participation in that enterprise, KNOWLES conspired to murder a member of a rival gang, the Strip Boyz, which culminated in the violent murder by KNOWLES and others of Christopher Cokley on July 4, 2009. On October 14, 2007, KNOWLES also participated in an attempted murder of Tremaine Garrison, a/k/a “Triggermain,” also a member of the Strip Boyz. Further, KNOWLES participated in a more than decade-long conspiracy to distribute kilograms of crack cocaine within a several block radius of Elm Street and Oak Street in Southwest Yonkers, New York. The evidence at trial also showed that KNOWLES and other members of the Wolves possessed, brandished, and discharged a number of firearms in connection with their drug trafficking and racketeering activities with the Elm Street Wolves gang.

KNOWLES was convicted of one count of racketeering, one count of racketeering conspiracy, one count of conspiracy to murder in aid of racketeering, one count of murder in aid of racketeering, one count of conspiracy to distribute or possess with intent to distribute 280 grams and more of crack cocaine, two counts of discharging a firearm in furtherance of a crime of violence or a drug-trafficking crime, and one count of discharging a firearm in connection with the murder of Christopher Cokley on July 4, 2009. He was acquitted of one count of conspiracy to commit murder, one count of attempted murder, and one count of possession, use, and carrying a firearm in furtherance of a crime of violence, all stemming from shooting another member of the Strip Boyz. KNOWLES faces a mandatory sentence of life in prison, plus 35 years. KNOWLES is scheduled to be sentenced on May 29, 2014, at 10:00 a.m. before Judge Karas.

Mr. BHARARA praised the outstanding investigative work of the FBI and the Yonkers Police Department. He also thanked the Westchester County Department of Public Safety and the Westchester County District Attorney’s Office for their assistance in the case. He added that the investigation is continuing.

This case is being handled by the Office’s White Plains Division and Violent Crimes Unit. Assistant United States Attorneys Andrew Bauer and Jessica Ortiz are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that MARK ANTHONY LONGORIA, a former employee of Advanced Micro Devices (“AMD”) and a consultant for the expert networking firm Primary Global Research (“PGR”), and WALTER SHIMOON, a former employee of Flextronics International, Ltd. (“Flextronics”) and also a consultant for PGR, were each sentenced today to time served plus two years of supervised release for their participation in insider trading schemes during which they provided material, nonpublic information (“Inside Information”) obtained from their employers to certain PGR clients who were money managers. In addition, SHIMOON also provided Inside Information to John Kinnucan, who operated a research firm and then provided the information to certain money managers.

LONGORIA pled guilty pursuant to a cooperation agreement in June 2011 to one count of conspiracy to commit securities fraud, one count of conspiracy to commit wire fraud, one count of securities fraud, and one count of false statements. SHIMOON pled guilty pursuant to a cooperation agreement in July 2011 to two counts of conspiracy to commit securities and wire fraud and one count of securities fraud. LONGORIA and SHIMOON were sentenced today in Manhattan federal court by U.S. District Judge Jed S. Rakoff.

According to the Informations and statements made during the defendants’ plea proceedings and sentencings:

From 2007 and 2010, LONGORIA worked as a supply chain manager at AMD, a company that produced microprocessor chips. While employed at AMD, LONGORIA engaged in consultation calls with PGR employees and clients. For two quarters in 2009, he provided top line revenue and gross margin information for AMD during some of these calls. Throughout the period, he also routinely provided average sales prices and product sales figures for all of the company’s product lines. For example, between July 2008 and November 2009, LONGORIA provided AMD Inside Information to a hedge fund located in New York, New York (the “New York Hedge Fund”), that executed securities transactions, based in whole or in part, on LONGORIA’s information. The New York Hedge Fund earned approximately $2 million in profits using LONGORIA’s information. In 2006, in connection with a separate but related scheme, LONGORIA also provided confidential business information concerning the business of Western Digital to PGR employees and its clients in his capacity as a PGR consultant.

From 2008 to 2010, SHIMOON worked as a Director of Business Development at Flextronics, a technology company that designed, engineered and manufactured electronics products. During that time, SHIMOON obtained confidential information, including Inside Information, concerning Flextronics; customers of Flextronics, including Apple, Inc. (“Apple”); and suppliers of Flextronics, including OmniVision Technologies, Inc. (“OVTI”). SHIMOON then provided this information to employees and clients of PGR and to Kinnucan. For example, SHIMOON provided Inside Information concerning OVTI’s revenues to an employee of a hedge fund located in White Plains, New York. The hedge fund subsequently executed securities transactions in OVTI and earned profits of over $750,000. On another occasion, SHIMOON disclosed to Kinnucan, and, separately, to a cooperating witness who claimed to represent a PGR client, that Apple would be launching a new iPhone in 2010 that would contain two cameras. The cameras would give iPhone users the ability to videoconference, which was a significant enhancement over prior generations of the iPhone. SHIMOON knew that disclosure of this and other information violated fiduciary duties he owed to Flextronics, and/or violated non-disclosure agreements executed between Flextronics and Apple. PGR paid SHIMOON approximately $18,000 for the consultation services he provided to PGR clients from mid-2008 to 2010, and Kinnucan paid SHIMOON approximately $27,500 for providing confidential information, including Inside Information.

In addition to the terms of supervised release imposed, LONGORIA, 46, of Round Rock, Texas, was sentenced to forfeiture of $170,000, and a $400 special assessment. SHIMOON, 41, of San Diego, California, was also sentenced to forfeiture of $45,500, and a $300 special assessment.

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

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

The cases are being handled by the Office's Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Antonia M. Apps and Katherine Goldstein are in charge of the prosecutions.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that MARIO VILLANUEVA MADRID, the former governor of the Mexican state of Quintana Roo, was sentenced today in Manhattan federal court. VILLANUEVA MADRID received a sentence of 131 months in prison for conspiring to launder millions of dollars in narcotics bribe payments that he received from the Juarez Cartel – one of Mexico’s most notorious and violent cocaine cartels – through accounts at banks in the United States and other countries. VILLANUEVA MADRID, 65, was extradited from Mexico in May 2010. He pled guilty on August 2, 2012, before U.S. District Judge Victor Marrero, who also imposed today’s sentence. Judge Marrero stated that he viewed the appropriate sentence to be 204 months’ imprisonment, less 73 months for the time VILLANUEVA MADRID spent in Mexican custody on related Mexican charges, and he therefore imposed a final sentence of 131 months’ imprisonment in the United States.

Manhattan U.S. Attorney Preet Bharara stated: “Mario Villanueva Madrid was entrusted to serve the public in Mexico, but instead, in return for millions of dollars in bribes, he provided safe passage to a brutal drug cartel allowing it to move massive amounts of cocaine through the state he governed. With his sentence today, Villanueva Madrid completes his descent from elected government official to corrupted official to incarcerated felon. This Office and our law enforcement partners will not relent in our efforts to prosecute and punish corrupt public officials who violate U.S. law, wherever they operate.”

According to Indictments previously returned in this case, and statements made during court proceedings:

In the mid- to late-1990s, the Juarez Cartel transported over 200 tons of cocaine into the United States across the Southwest U.S. border. In 1994, the Cartel established operations in the eastern Mexican state of Quintana Roo, where the resort city of Cancun is located.

VILLANUEVA MADRID, who had previously served as mayor of Cancun, was elected governor of Quintana Roo in April 1993. In 1994, he entered into an agreement with the Juarez Cartel that would ensure its cocaine shipments traveled safely through Quintana Roo without interference from law enforcement. Under the agreement, VILLANUEVA MADRID was paid between $400,000 and $500,000 for each shipment of cocaine that the Cartel transported through Quintana Roo.

From 1994 through 1999, the Juarez Cartel paid VILLANUEVA MADRID millions of dollars in narcotics proceeds. By late 1995, in an effort to hide the illicit funds, he began transferring them to bank and brokerage accounts in the United States, Switzerland, the Bahamas, Panama, and Mexico, many of which were held in the names of British Virgin Islands shell corporations. In April 1999, shortly before his term as Governor was to expire and while under investigation by Mexican authorities, VILLANUEVA MADRID fled. He remained a fugitive for over two years.

In connection with his flight, VILLANUEVA MADRID liquidated the millions of dollars in narcotics proceeds he had deposited at Lehman Brothers Inc. (“Lehman”), through a series of wire transfers totaling over $11 million. These transfers were made through an account at the Mexican bank Banamex that had been secretly opened for him in the name of “Lehman Brothers Private Client Services.” A large portion of the illicit proceeds – over $7 million – were then deposited into an account at Lehman that a banker had opened in the names of a non-existent Mexican family.

In May 2001, VILLANUEVA MADRID was arrested and subsequently convicted in Mexico on organized crime and corruption offenses. All of his illicit funds at Lehman and in other U.S. accounts, totaling over $17 million, were seized and later forfeited by U.S. authorities.

In addition to the prison term, Judge Marrero ordered VILLANUEVA MADRID to pay a $100 special assessment fee.

Mr. Bharara praised the extraordinary investigative efforts of the U.S. Drug Enforcement Administration’s (“DEA”) New York Organized Crime Drug Enforcement Strike Force (“the Strike Force”) – which is comprised of agents and officers of the DEA, the New York City Police Department, Immigration and Customs Enforcement – Homeland Security Investigations (HSI), 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, and the U.S. Marshals Service – as well as the DEA’s Mexico City Country Office and Merida, Mexico, Resident Office, which together led the investigation. 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 also recognized the DEA’s Offices in Houston and Pittsburgh, as well as the United States Attorney’s Office in Houston, for their invaluable assistance in the investigation. Mr. Bharara also thanked the U.S. Marshals Service and the Department of Justice's Office of International Affairs for their assistance in this matter.

This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Glen Kopp and Anna Skotko are in charge of the prosecution.

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 Field Office of the U.S. Drug Enforcement Administration (“DEA”), today announced that FELIX TRUJILLO-MANRIQUE was extradited yesterday from Colombia for allegedly conspiring to import heroin from Colombia into the U.S. TRUJILLO-MANRIQUE, a citizen of Colombia, was arrested by Colombian National Police in October 2010, at the request of the U.S. He will be presented and arraigned today in federal court before U.S. Magistrate Judge Andrew J. Peck. U.S. District Court Judge J. Paul Oetken is assigned to the case.

As alleged in the Indictment unsealed yesterday in Manhattan federal court and other court documents:

TRUJILLO-MANRIQUE was a leader of an international conspiracy to traffic kilogram quantities of heroin from Colombia through Ecuador and ultimately into the U.S. TRUJILLO-MANRIQUE, who was based in Colombia, supplied couriers in Ecuador with heroin which they then smuggled into the U.S. via international flights, including flights into John F. Kennedy International Airport in New York City. In connection with the investigation into TRUJILLO-MANRIQUE, more than ten kilograms of heroin were seized in South America and New York City.

The Indictment charges TRUJILLO-MANRIQUE, 42, with one count of conspiracy to distribute heroin and one count of conspiracy to import heroin into the United States. If convicted, TRUJILLO-MANRIQUE faces a maximum sentence of life in prison.

Mr. Bharara praised the outstanding efforts of the DEA’s New York Drug Enforcement Task Force Group T-23, which conducted the investigation along with U.S. Immigration and Customs Enforcement’s Homeland Security Investigations New York Narcotics Group II. The DEA’s New York Drug Enforcement Task Force is comprised of members of the DEA, the New York City Police Department, and the New York State Police. Mr. Bharara also thanked U.S. Customs and Border Protection, the New Jersey Field Division of the Federal Bureau of Investigation, the DEA Bogota Country Office, the DEA Guayaquil Resident Office, the DEA Baltimore District Office, the U.S. Attorney’s Office for the Eastern District of New York, the Colombian National Police, the U.S. Department of Justice Office of International Affairs, the U.S. Department of State, and Interpol for their assistance in this matter.

The case is being handled by the Narcotics Unit. Assistant United States Attorney Robert L. Boone is 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. Felix Trujillo-Manrique Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, and Michele M. Leonhart, the Administrator of the U.S. Drug Enforcement Administration (“DEA”), announced today a settlement of a civil forfeiture and money laundering lawsuit brought by the United States against the Lebanese Canadian Bank (“LCB”) and its assets. The Government’s action, filed on December 15, 2011, alleges a widespread, international scheme in which Lebanese financial institutions with links to Hizballah, including the now defunct LCB, used the U.S. financial system to launder narcotics trafficking and other criminal proceeds through West Africa and back into Lebanon. The settlement order requires LCB to forfeit $102 million to the United States. The settlement order was entered in Manhattan federal court today by U.S. District Judge Paul A. Engelmayer.

Manhattan U.S. Attorney Preet Bharara said: “Today’s settlement shows that banks laundering money for terrorists and narco-traffickers will face consequences for their actions, wherever they may be located. This type of money laundering network fuels the operations of both terrorists and drug traffickers, and we will continue to use every resource at our disposal to sever the connection between terrorists, narco-traffickers, and those who fund their lethal agenda.”

DEA Administrator Michele M. Leonhart said: “Regardless of how or where, DEA will relentlessly pursue global drug criminals and their huge profits, in particular those associated with terror networks such as Hizballah. This settlement is significant and addresses the role the Lebanese Canadian Bank played in facilitating illicit money movement from the United States to West Africa to Hizballah-controlled money laundering channels. Drug trafficking profits and terror financing often grow and flow together. One of DEA’s highest priorities will always be to promote U.S. and global security by disrupting these narco-terror schemes and protecting the systems they abuse.”

According to an Amended Complaint filed in Manhattan federal court in October 2012, and other documents filed in the case:

From approximately January 2007 to early 2011, at least $329 million was transferred by wire from LCB and other financial institutions, primarily two Lebanese money exchange houses, to the United States for the purchase of used cars that were then shipped to West Africa. Cash from the sale of the cars, along with the proceeds of narcotics trafficking, were funneled to Lebanon through Hizballah-controlled money laundering channels. LCB played a key role in these money laundering channels and conducted business with a number of Hizballah-related entities. Hizballah is a U.S. Department of State designated Foreign Terrorist Organization, a Specially Designated Terrorist, and a Specially Designated Global Terrorist.

On February 10, 2011, the U.S. Department of the Treasury, Financial Crimes Enforcement Network (“FinCEN”) issued a finding and proposed rule, pursuant to the USA Patriot Act, that LCB is a financial institution of primary money laundering concern, based on, among other things, FinCEN’s determination that there was reason to believe that LCB had been routinely used by drug traffickers and money launderers operating in various countries in Central and South America, Europe, Africa, and the Middle East. FinCEN also determined that there was reason to believe that LCB managers were complicit in the network’s money laundering activities.

Following the FinCEN action, another Lebanese financial institution, Société Générale de Banque au Liban (“SGBL”), acquired most of the assets of LCB. In connection with the purchase, $150 million was placed in an escrow account at Banque Libano Française SAL (“BLF”) in Lebanon. In August 2012, the Government seized $150 million from a BLF correspondent account in the United States based on a provision of U.S. law allowing seizure of such funds as a substitute for the funds held in escrow in Lebanon (the “Seized Funds”).

The settlement order requires LCB to forfeit $102 million of the Seized Funds to the United States. The settlement order also provides that, to settle claims brought by SGBL for $90 million of the Seized Funds, LCB will be required to pay SGBL an additional $12 million, and make provisions for additional payments based on separate agreements between LCB and SGBL. SGBL will also receive the remaining $48 million of the Seized Funds.

In addition, a second settlement order was entered in this action on June 20, 2013, regarding claims against the Hassan Ayash Exchange Company (“Ayash”), one of the Lebanese money exchange houses allegedly involved in the money laundering scheme. Under this settlement order, Ayash will forfeit more than $720,000 to the United States.

The settlement orders resolve only claims relating to LCB, Ayash, and their assets. The civil forfeiture and money laundering action continues against other alleged participants in the money laundering scheme.

Mr. Bharara thanked the DEA for its leadership and praised the New York Organized Crime Drug Enforcement Strike Force for its outstanding work on this investigation, which he noted is ongoing. The DEA’s New York Organized Crime Drug Enforcement Strike Force (the “Strike Force”) is comprised of agents and officers of the U. S. Drug Enforcement Administration, the New York City Police Department, Immigration and Customs Enforcement – Homeland Security Investigations (HSI), 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, and the U.S. Marshals Service. The Strike Force is partially funded by the New York/New Jersey High Intensity Drug Trafficking Area (HIDTA), which is a federally funded crime fighting initiative. Mr. Bharara also thanked the U.S. Department of State, the U.S. Department of the Treasury, the Federal Bureau of Investigation, and the New Jersey State Police for their assistance.

This matter is being handled by the Office’s Asset Forfeiture Unit. Assistant U. S. Attorneys Sharon Cohen Levin, Michael Lockard, Jason Cowley, and Alexander Wilson are in charge of the case.

U.S. v. Lebanese Canadian Bank Settlement Order
U.S. v. Lebanese Canadian Bank, et al. Amended Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced that CRAIG L. BERKMAN pled guilty today in Manhattan federal court to securities fraud and wire fraud in connection with a more than $13 million scheme to defraud investors through false ownership claims of stock in Facebook, Inc. (“Facebook”); Groupon, Inc. (“Groupon”); LinkedIn, Inc. (“LinkedIn”); and Zynga, Inc. (“Zynga”) before their respective initial public offerings, and in other private companies. BERKMAN was arrested in March 2013 in connection with the scheme, and pled guilty today before United States Magistrate Judge Kevin Nathaniel Fox.

Manhattan U.S. Attorney Preet Bharara stated: “Through various misrepresentations, Craig Berkman enticed investors with highly coveted investment opportunities, and then swindled them out of millions of dollars, using much of it for his personal benefit. Today’s guilty plea ensures that he will be held to account for his conduct.”

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

From 2010 until his arrest in March 2013, BERKMAN served as the managing member of a series of limited liability companies, which he effectively controlled, including Face-Off Acquisitions, LLC; Assensus Capital, LLC; and several LLCs with variations of the words “Ventures Trust” in their names (the “Ventures Trust LLCs”). Beginning in about October 2010, BERKMAN and others offered investors the opportunity to purchase units of each of these LLCs. In doing so, BERKMAN misrepresented to investors that the LLCs either owned or would soon acquire pre-initial public offering shares in various technology companies, including Facebook, Groupon, LinkedIn, and Zynga. BERKMAN also misappropriated millions of dollars of investor funds for his own use and benefit.

The ways in which BERKMAN carried out his scheme often varied with each of the LLCs. In one instance, BERKMAN represented to investors that various Ventures Trust LLCs held large quantities of pre-IPO shares of Facebook, Groupon, LinkedIn, and Zynga. In fact, the Ventures Trust LLCs held no shares of Groupon, LinkedIn, or Zynga, and held only a small, indirect interest in pre-IPO Facebook shares. In another example, BERKMAN falsely told investors with Face-Off Acquisitions, LLC that their money would be used to purchase an existing special purpose vehicle, which already held a significant stake in Facebook. BERKMAN also misrepresented to Assensus Capital Investors, LLC investors that he would use their money to fund various start-ups, including technology, medical device, and energy companies, and that the investors’ funds would be partially secured by interests in pre-IPO Facebook stock. In fact, BERKMAN misappropriated most, if not all, of the investors’ money for his own use and benefit.

Ultimately, BERKMAN raised at least approximately $13.2 million in funds from more than 120 different investors, which he used for various unauthorized purposes. BERKMAN used approximately $6 million in stolen investor funds to pay off creditors in his personal bankruptcy, and in doing so, he misrepresented the source of those funds to the Bankruptcy Court. BERKMAN also used approximately $4.8 million of new investor money to pay off earlier investors, and spent approximately $1.6 million on legal fees, travel, other personal expenses, and in cash withdrawals, among other things.

BERKMAN, 71, of Odessa, Florida, pled guilty to one count of securities fraud and one count of wire fraud. He faces a maximum sentence of 20 years in prison on each count, a fine of the greater of $5 million or twice the gross gain or gross loss from the offense on the securities fraud charge, and a fine of a lesser amount on the wire fraud charge. In connection with his guilty plea, BERKMAN agreed to pay restitution to the victims of his offenses and consented to forfeit approximately $13.2 million. He will be sentenced before U.S. District Court Judge Shira A. Scheindlin on October 1, 2013.

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

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

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

US v. Craig Berkman Information

Preet Bharara, the United States Attorney for the Southern District of New York, announced that STEVEN GAGLIANO, a former Long Island Railroad signalman, pled guilty today to charges related to the allegedly massive fraud scheme in which Long Island Rail Road (“LIRR”) workers claimed to be disabled upon early retirement so that they could receive disability benefits to which they were not entitled. GAGLIANO pled guilty in Manhattan federal court before U.S. Magistrate Judge Andrew J. Peck. He is the 24th defendant to plead guilty in the case, which alleges a pervasive pattern of fraudulent disability claims being filed with the U.S. Railroad Retirement Board (“RRB”) by retiring LIRR employees.

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

The 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, one has died and one, Dr. Peter J. Ajemian, has pled guilty and admitted that he declared “large numbers of Long Island Railroad employees” to be disabled even though they were not disabled and could have continued working in their railroad jobs. Dr. Ajemian was sentenced in May 2013 to eight years in prison.

GAGLIANO, 55, of North Babylon, New York, pled guilty to one count of conspiracy to commit mail fraud, wire fraud, and health care fraud; one count of conspiracy to defraud the United States and the RRB; one count of health care fraud; and one count of wire fraud. He faces a maximum sentence of 55 years in prison, and has agreed to make restitution to the RRB in the amount of $242,466.73.

Thirty-two people have been charged in connection with the LIRR disability fraud scheme, 24 of whom have now pled guilty. Of the 24 defendants that have pled guilty, two have been sentenced. The charges against the remaining defendants 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 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 Justin Weddle, Nicole Friedlander, and Daniel Tehrani are in charge of the prosecution.

US v. Lesniewski, et al S14 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that JOHN A. MATTERA was sentenced in Manhattan federal court to 11 years in prison for his role in a $13 million scheme to defraud investors through false ownership claims of stock in Facebook, Inc. (“Facebook”) and Groupon, Inc. (“Groupon”) before their initial public offerings, and in other private companies. MATTERA pled guilty to securities fraud and wire fraud charges in October 2012, and he agreed to pay restitution to the victims of his offense and consented to the entry of a $13 million forfeiture order. MATTERA was sentenced today by U.S. District Judge Richard J. Sullivan.

Manhattan U.S. Attorney Preet Bharara stated: “John Mattera enjoyed a lavish lifestyle, funded by approximately $13 million he procured from investors with false promises of profit from high-profile stocks. He then took millions for dollars for himself. Today’s sentence ensures he will pay a substantial price for his fraud.”

According to the charging instruments filed in this case and statements made during court proceedings:

In 2010 and 2011, MATTERA served as Chairman of the Advisory Board of Praetorian Global Fund Ltd. (“Praetorian”), a professional mutual fund, where he was responsible for the day-to-day management decisions. Beginning in the late summer of 2010, MATTERA and others offered investors the opportunity to invest in special purpose entities related to Praetorian (the “G Power Entities”). MATTERA falsely represented that the G Power Entities owned shares in companies such as Facebook and Groupon when they were still private. Ownership of stock in these private companies was particularly attractive to certain investors because, as MATTERA and others communicated, there was an expectation that initial public offerings would soon occur, thereby potentially increasing the value of the shares. In reality, neither MATTERA, Praetorian, nor the G Power Entities held these shares of stock.

Based on the misrepresentations of MATTERA and others, investors sent more than $11 million into “escrow accounts” maintained at a Florida bank. MATTERA reassured investors that their money would be held in the escrow accounts until either the offering was completed or another triggering event took place. Investors were told they would then receive their ownership interest in the particular special purpose entity. However, instead of maintaining the investor money in the escrow accounts as MATTERA promised, MATTERA caused the vast majority of the funds to be transferred to other entities with which he was associated. Ultimately, MATTERA misappropriated approximately $13 million of investor money, spending nearly $4 million on personal items for himself and his family, such as expensive jewelry, interior decorating, and luxury cars.

In addition to the prison term, Judge Sullivan sentenced MATTERA, 51, of Boca Raton, Florida, to three years of supervised release. MATTERA was also ordered to forfeit $11.8 million and pay restitution to be determined, as well as a $400 special assessment fee.

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

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

Assistant United States Attorneys Eugene Ingoglia, David Miller, and Paul Monteloni are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation ("FBI"), announced today that SETH BEOKU BETTS, a principal of Betts and Gambles Global Equities, LLC (“Betts and Gambles”), was arrested today on the charge of wire fraud for operating a scheme to defraud a public university (the “University”) in the Midwest of more than $8 million. BETTS is alleged to have solicited the money from the University for the purposes of trading in collateralized mortgage obligations (“CMOs”). He then misappropriated the funds, including at least $2 million to purchase luxury automobiles and a personal residence in Florida. BETTS was arrested in Durham, North Carolina this morning, and is expected to be presented in federal court in the Eastern District of North Carolina, Western Division, this afternoon.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, the main investment Seth Betts made was in himself. He induced a public university to make a large investment on which he promised a quick, safe return, but instead he pocketed the university’s money to buy luxury cars, property and to fund other expenses, delivering a full-fledged fraud as the university’s only return, as described in the complaint. With his arrest, this Office continues its work to hold financial professionals accountable for cheating investors.”

FBI Assistant Director-in-Charge George Venizelos said: “Seth Betts allegedly committed the most brazen form of investment fraud. Worse than misrepresenting how he would invest the University’s money, Betts made few investments at all – other than in luxury goods for himself. You can’t take someone’s money to invest in mortgages and spend it on Maseratis.”

According to a Complaint unsealed today in Manhattan federal court:

Between July 2008 and December 2008, BETTS presented himself to the University as a principal of Betts and Gambles. In that capacity, he solicited the University’s investment in CMOs, which he would then sell to third-party buyers in short order at predicted profits. CMOs are fixed income mortgage-backed securities which permit investment in different tranches based upon the maturity of the underlying mortgages. As a result of his solicitation, the University invested approximately $8.165 million dollars of the University’s money with BETTS.

BETTS misappropriated the money and never delivered any CMOs to the University or returned any funds. For example, on December 10, 2008, BETTS transferred $325,000 of the University’s investment money to a car dealership for the purchase of a Ferrari automobile and a Maserati automobile. Approximately one week later, he transferred $1,545,000 of the University’s investment money to an attorney trust account in connection with his purchase of a personal residence in Florida. BETTS also spent at least $455,000 on additional personal expenses, including more than $150,000 in additional payments to car dealerships.

BETTS, 37, of Boynton Beach, Florida, is charged with one count of wire fraud. The charge carries a maximum sentence of 20 years in prison, or twice the gross gain or loss from the offense.

Mr. Bharara praised the work of the Criminal Investigators of the United States Attorney's Office and the FBI, which jointly investigated this case.

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

This case is being handled by the Office's Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Michael A. Levy and Telemachus P. Kasulis are in charge of the prosecution.

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

Betts, Seth Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced that LARISA MEDZON, ANNA MAKOVETSKAYA, and SVETLANA MAZER pled guilty today to various felony offenses in connection with their roles in facilitating a fraud, kickback, and money laundering scheme that targeted the City of New York’s CityTime information technology project. In connection with their pleas, the defendants agreed to forfeit their interests in over $27 million in cash held in 91 bank accounts and five safe deposit boxes, as well as four real properties worth over $4 million, all of which constitute crime proceeds. MEDZON, MAKOVETSKAYA, and SVETLANA MAZER pled guilty in Manhattan federal court before U.S. District Judge George B. Daniels.

Manhattan U.S. Attorney Preet Bharara said: “Through lies and subversion, each of these three defendants served as highly paid enablers of an epic fraud against the City of New York. And with their pleas today and multi-million dollar forfeitures, they will be stripped of their ill-gotten gains and potentially their liberty. Thanks to the efforts of prosecutors from this Office and our partners at the Department of Investigation, the City recouped more than $500 million that was lost to the CityTime fraud, and we continue to hold the perpetrators of this brazen scheme to account.”

According to the criminal Informations filed earlier today in Manhattan federal court, and as alleged in the Superseding Indictment in United States v. Mark Mazer et al., (the “Mazer Indictment”), and other public filings in the case:

The CityTime project was a City initiative intended to modernize timekeeping and payroll systems across City agencies. In 2000, Science Applications International Corporation (“SAIC”) became the lead contractor on CityTime. Beginning in 2003, SAIC appointed Gerard Denault as Program Manager for CityTime. At Denault’s behest, SAIC hired Technodyne LLC (“Technodyne”) as a “single source” subcontractor on the CityTime project. In exchange for agreeing to steer work to Technodyne, Denault and Carl Bell, SAIC’s Chief Systems Engineer in the New York office of SAIC, began receiving kickbacks from Technodyne via its principals, Reddy Allen and Padma Allen, which were laundered through affiliates of Technodyne located in India.

Beginning in 2005, Mark Mazer, who had been retained by the City to help manage the CityTime project, began demanding and obtaining a separate kickback stream via two subcontractors of Technodyne to which he steered work: D.A. Solutions, run by Mark Mazer’s uncle, Dimitry Aronshtein, and Prime View, run by Victor Natanzon. As a result of the scheme, Denault and Bell obtained approximately $15 million in kickbacks and Mark Mazer obtained approximately $30 million in kickbacks. Technodyne also obtained over $325 million in revenue from the scheme. Denault, Mark Mazer, Padma Allen, Reddy Allen, and the Allens’ company, Technodyne, among others, worked together to defraud the City by causing it to overpay for the CityTime project in order to increase their illicit profits from the scheme. The fraudulent scheme helped cause the cost of the CityTime project to balloon from under $100 million to a final cost of close to $700 million.

Mark Mazer and Aronshtein, among others, helped launder millions of dollars in proceeds of the fraud and kickback scheme by routing the funds through shell companies controlled by Mark Mazer’s relatives MEDZON, MAKOVETSKAYA, and SVETLANA MAZER, and by causing millions of dollars in proceeds to be routed through other companies and offshore accounts located in Latvia, among other means. MEDZON, Mark Mazer’s mother, withdrew over $200,000 in cash derived from the scheme through hundreds of ATM transactions that were designed to evade currency transaction reporting requirements, while MAKOVETSKAYA, Mark Mazer’s cousin, lied to employees of a federally-insured bank so that the bank would agree to open up accounts in the name of a shell company that was used to facilitate the scheme. SVETLANA MAZER, Mark Mazer’s wife, also attempted to obstruct the Government’s investigation of the CityTime scheme by omitting her role in controlling shell companies used to facilitate the scheme from sworn disclosures she submitted to the City.

MEDZON, 68, of Forest Hills, New York, pled guilty to intentionally structuring cash transactions to avoid currency reporting requirements, which carries a maximum potential penalty of five years in prison. MAKOVETSKAYA, 42, of Forest Hills, New York, pled guilty to conspiracy to make false statements to a bank, which carries a maximum potential penalty of five years in prison. SVETLANA MAZER, 47, of Manhasset, New York, pled guilty to obstruction of justice, which carries a maximum potential penalty of 20 years in prison. In connection with their pleas, the defendants agreed to entry of preliminary orders of forfeiture forfeiting their interests in a total of over $27 million in cash held in 91 bank accounts and five safe deposit boxes, and in four real properties worth more than $4 million, derived from the scheme.

Today’s pleas follow several other developments in the case, including: (1) guilty pleas by Carl Bell and Victor Natanzon, who are cooperating with the Government’s investigation; (2) the Office’s entry into a deferred prosecution agreement with SAIC, in which SAIC agreed to forfeit over $500 million, cooperate with the Government’s investigation, and accept responsibility for illegal conduct by its employees on the CityTime project; (3) the Office’s forfeiture of several million dollars in cash and property seized from Padma Allen and Reddy Allen after they fled the country to avoid prosecution; and (4) the return of approximately $500 million in forfeited funds to the City and its agencies.

Mr. Bharara praised the New York City Department of Investigation (“DOI”) for its outstanding work in this investigation, specifically the efforts of Commissioner Rose Gill Hearn and teams led by Chief of Investigations John Kantor, Deputy Commissioner for Legal Affairs Marjorie Landa, and Associate Commissioner Yuval Hibshoosh.

The charges against the remaining defendants in the Mazer Indictment, including Denault, Mark Mazer, Aronshtein, Padma Allen, Reddy Allen, and Technodyne, are merely allegations, and they are presumed innocent unless and until proven guilty.

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

U.S. v. Svetlana Mazer S4 Information
U.S. v. Larisa Medzon S3 Information
U.S. v. Anna Makovetskaya S5 Information

“Through lies and subversion, each of these three defendants served as highly paid enablers of an epic fraud against the City of New York. And with their pleas today and multi-million dollar forfeitures, they will be stripped of their ill-gotten gains and potentially their liberty. Thanks to the efforts of prosecutors from this Office and our partners at the Department of Investigation, the City recouped more than $500 million that was lost to the CityTime fraud, and we continue to hold the perpetrators of this brazen scheme to account.”

Preet Bharara, the United States Attorney for the Southern District of New York, today announced that ANTHONY BOYKIN and JUSTIN SIMMONS were convicted yesterday in Manhattan federal court of various racketeering, murder, attempted murder, narcotics conspiracy, and firearms offenses following a four-week jury trial before the U.S. District Judge Colleen McMahon. The jury convicted BOYKIN and SIMMONS of charges arising out of their involvement, from 2006 through 2013, in the criminal activities of the Bloods gang (the “Newburgh Bloods”) – a violent street gang that was involved in drug-trafficking and multiple acts of violence, including murders and attempted murders, in Newburgh, New York.

Manhattan U.S. Attorney Preet Bharara said: “The Bloods in Newburgh – including Anthony Boykin, the gang’s leader, and Justin Simmons, a soldier – have laid siege to that city, making victims not only out of those who they shot, stabbed, and killed, but also out of every Newburgh resident who has had to live with the terror wrought by the Bloods’ legacy of drugs and violence. These convictions show that it does not matter if you are at the top of a gang or merely work within it – if you choose to engage in drug-dealing and gang violence, you will be held accountable for your actions and deprived of your liberty.”

According to the Superseding Indictment and evidence admitted at trial:

From 2006 through 2013, BOYKIN was a member, and then leader, of a racketeering enterprise – the Newburgh Bloods. As part of his participation in that enterprise, BOYKIN conspired to murder Lamont Young, a local marijuana dealer, which culminated in Young’s murder on March 4, 2009. He participated in two additional conspiracies to commit murder, which culminated in the vicious attacks of Ishmael Gillian and David Freeman on August 24, 2008 and September 20, 2008, respectively. BOYKIN also robbed a suspected narcotics dealer in August 2009.

From 2007 through 2011, BOYKIN and SIMMONS, a soldier of the Newburgh Bloods, participated in a conspiracy to distribute crack cocaine on Landers Street in Newburgh, New York and throughout the city. They also possessed firearms in connection with their drug trafficking and racketeering activities with the Newburgh Bloods gang.

BOYKIN was convicted of one count of racketeering, one count of racketeering conspiracy, three counts of conspiracy to murder in aid of racketeering, one count of murder in aid of racketeering, one count of assault in aid of racketeering, one count of conspiracy to distribute or possess with intent to distribute 280 grams and more of crack cocaine, and two counts of possessing, using, and carrying a firearm in furtherance of a crime of violence or a drug-trafficking crime. He was acquitted of one count of murder, one count of conspiracy to commit murder, two counts of attempted murder, one count of assault, and two counts of possession, use, and carrying a firearm in furtherance of a crime of violence or a drug-trafficking crime. BOYKIN faces a mandatory minimum sentence of life in prison, and is scheduled to be sentenced on November 14, 2013, at 2:00 p.m. before Judge McMahon.

SIMMONS was convicted of one count of racketeering conspiracy, one count of conspiracy to distribute or possess with intent to distribute 280 grams and more of crack cocaine, and two counts of possession, use, and carrying a firearm in furtherance of a crime of violence or a drug-trafficking crime. He was acquitted of one count of murder, one count of conspiracy to commit murder, one count of assault, and one count of possession, use, and carrying a firearm in furtherance of a crime of violence or a drug-trafficking crime. SIMMONS faces a mandatory minimum sentence of 50 years in prison and a maximum sentence of life in prison. He is scheduled to be sentenced on October 17, 2013, at 4:00 p.m. before Judge McMahon.

Mr. Bharara praised the outstanding efforts of the Hudson Valley Safe Streets Task Force, including the FBI, the City of Newburgh Police Department, the Orange County Sheriff’s Office, and the New York State Police, in connection with this investigation.

Assistant United States Attorneys Michael D. Maimin, Amie N. Ely, and Emil J. Bove III are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director in Charge of the New York Office of the Federal Bureau of Investigation (“FBI”) announced the arrest today of William S. Belfar, a licensed psychiatrist in New York, on charges that he distributed oxycodone, a prescription painkiller, for cash and without a medical purpose. BELFAR was presented today in Manhattan federal court before U.S. Magistrate Judge Andrew J. Peck.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, William Belfar, a licensed psychiatrist, contributed to the growing epidemic of prescription drug abuse and addiction by writing prescriptions in exchange for cash – conduct which he had described as illegal when discussing other doctors. This Office will not tolerate medical professionals who exploit their licenses to fuel the prescription drug problem.”

FBI Assistant Director-in-Charge George Venizelos said: “William Belfar, a licensed physician and mental health professional, allegedly exploited the addictive nature of oxycodone – the very thing he warned of on television – to make money. He violated the oath of his profession and broke the law in peddling oxycodone prescriptions. The Health Care Fraud Task Force was formed in part to protect the public from unscrupulous doctors who put profiteering ahead of professional responsibility.”

According to the Complaint unsealed today in Manhattan federal court:

BELFAR operated a medical office in Manhattan, New York, from which he sold prescriptions for oxycodone and other medications for cash. On three occasions from May 2011 to April 2013, he sold prescriptions of oxycodone pills and other medications to an FBI confidential informant and two undercover FBI officers. BELFAR sold the prescriptions for up to $1,000 per prescription. On one occasion when BELFAR sold an oxycodone prescription, he stated to the informant: “[I]t is a very easy way to make money, but it’s an easy way for me to go to jail too.” BELFAR prescribed the oxycodone to the confidential informant even though he said he believed the informant was a “dealer.”

In February and March 2013, around the same time that BELFAR was selling oxycodone prescriptions, he appeared on two television shows as an interview guest on the subject of oxycodone addiction. During those interviews, BELFAR discussed cases of celebrities becoming addicted to oxycodone, including one situation where the “doctor essentially became [a] drug dealer.” BELFAR also stated during one interview that “This is a big business. . . . On the street . . . each [oxycodone] pill is $30. . . . Patients will pay a lot of money just to get these pills. . . . The doctors prescribe it. Yes, some do it for money. Some do it because they just don’t know what they are doing. . . . [T]hey just shouldn’t be doing it.”

Oxycodone, a Schedule II controlled substance, is a powerful painkiller with a high potential for addiction and abuse. It is sold on the street as a substitute for heroin and other illegal drugs.

BELFAR, 49, of Huntington, New York, is charged with three counts of distributing oxycodone. Each count carries a maximum sentence of 20 years in prison.

Mr. Bharara praised the investigative work of the FBI, the FBI’s Boston Field Office, the FBI Boston-Lakeville RA, the New York City Police Department, and the FBI’s New York Health Care Fraud Task Force. The FBI’s New York Health Care Fraud Task Force was formed in 2007 in an effort to combat health care fraud in the greater New York City area. The task force is composed of agents, officers and investigators of the FBI, NYPD, New York State Insurance Fraud Bureau, U.S. Department of Labor, U.S. Office of Personnel Management Inspector General, U.S. Food and Drug Administration, NYS Attorney General’s Office, NYS-Office of Medicaid Inspector General, NYC Health and Hospitals Inspector General, and the National Insurance Crime Bureau.

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

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

U.S. v. William Belfar Complaint

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

Manhattan U.S. Attorney Preet Bharara said: “The $50 million tax refund fraud scheme Melvin Duarte orchestrated is among the largest known cases of its kind, and Duarte’s guilty plea today is a significant victory in our fight to hold tax refund fraudsters to account. Our commitment to prosecuting those who engage in this type of scheme – the use of stolen Puerto Rican identities to fraudulently obtain tax refunds – is unwavering. We have aggressively pursued these schemes since at least 2008, and in just the last 12 months have charged at least 55 defendants who allegedly sought to cause approximately $230 million in losses to the IRS.”

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

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

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

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

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

DUARTE, 37, resided in Bronx, New York, prior to his 2008 flight to the Dominican Republic. He faces a maximum sentence of 10 years in prison on the charge of conspiracy to defraud the United States with respect to claims, a maximum sentence of five years in prison on the charge of conspiracy to steal mail, and a maximum sentence of five years in prison on the substantive theft of mail charge. DUARTE also faces a maximum of three years of supervised release and a fine of the greatest of $250,000, twice the gross pecuniary gain derived from the offense, or twice the gross pecuniary loss to persons other than the defendant resulting from the offense on each of the charges. He is scheduled to be sentenced by Judge Chin on October 24, 2013 at 11:00 a.m.

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

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

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

Manhattan U.S. Attorney Preet Bharara said: “The $50 million tax refund fraud scheme Melvin Duarte orchestrated is among the largest known cases of its kind, and Duarte’s guilty plea today is a significant victory in our fight to hold tax refund fraudsters to account. Our commitment to prosecuting those who engage in this type of scheme – the use of stolen Puerto Rican identities to fraudulently obtain tax refunds – is unwavering. We have aggressively pursued these schemes since at least 2008, and in just the last 12 months have charged at least 55 defendants who allegedly sought to cause approximately $230 million in losses to the IRS.”

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

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

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

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

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

DUARTE, 37, resided in Bronx, New York, prior to his 2008 flight to the Dominican Republic. He faces a maximum sentence of 10 years in prison on the charge of conspiracy to defraud the United States with respect to claims, a maximum sentence of five years in prison on the charge of conspiracy to steal mail, and a maximum sentence of five years in prison on the substantive theft of mail charge. DUARTE also faces a maximum of three years of supervised release and a fine of the greatest of $250,000, twice the gross pecuniary gain derived from the offense, or twice the gross pecuniary loss to persons other than the defendant resulting from the offense on each of the charges. He is scheduled to be sentenced by Judge Chin on October 24, 2013 at 11:00 a.m.

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

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

US v. Melvin Duarte S2 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, Rose Gill Hearn, the Commissioner of the New York City Department of Investigation (“DOI”), and Brian R. Crowell, Special Agent-in-Charge of the New York Field Office of the U.S. Drug Enforcement Administration (“DEA”), today announced the arrests of Correction Officers AUSTIN ROMAIN and KHALIF PHILLIPS for engaging in marijuana dealing inside Rikers Island prison facilities. It is alleged that, while on duty as Correction Officers, ROMAIN and PHILLIPS smuggled marijuana and scalpels into two different maximum security Rikers Island prison facilities and sold them to inmates. ROMAIN and PHILLIPS were arrested today while at work on Rikers Island and will be presented in Manhattan federal court before U.S. Magistrate Judge Kevin Nathaniel Fox tomorrow.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, correction officers Austin Romain and Khalif Phillips had a duty to ensure the security and safety of the prisons and inmates in their care, but instead they compromised it in the name of personal profit by smuggling and aiding in the selling of drugs, scalpels, and other contraband. We will not tolerate misuse of authority by those entrusted with supervising incarcerated individuals and keeping them safe, but who instead choose to join them in unlawful activity.”

DOI Commissioner Rose Gill Hearn said: “With 30 contraband arrests involving DOC employees in the past 10 years, DOI has worked hard to send the message that those who smuggle drugs and weapons into the City’s jails will face criminal penalties. The Correction Officers arrested today allegedly subverted jail safety and made their fellow-officers' jobs more difficult and dangerous. We will continue to investigate this insidious form of corruption and work with our colleagues in the U.S. Attorney’s Office, the DEA, other law enforcement agencies, and the Department of Corrections to ensure this kind of abuse is rooted out.”

DEA Special Agent-in-Charge Brian Crowell stated: “This two year investigation into an illicit contraband distribution ring operating within the jail cells of Rikers Island uncovered two Correction Officers allegedly responsible for smuggling contraband into the jail. The alleged contraband distribution ring supplied inmates with drugs, scalpels and various illicit products that were requested and paid for through an evasive money wiring system the officers oversaw outside the jails walls. Their alleged actions endangered their fellow officers. I commend the diligent investigation by the NYC Department of Investigation and the New York Drug Enforcement Task Force.”

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

ROMAIN has worked as a Correction Officer for the New York City Department of Corrections since August 2007 and during all relevant time periods was assigned to two different maximum security facilities on Rikers Island, the George R. Vierno Center (the “GRVC”) and the Otis Bantum Correctional Center (the “OBCC”). PHILLIPS has worked as a Correction Officer since February 2006 and was assigned to the GRVC.

On multiple occasions during the past year, ROMAIN and PHILLIPS have smuggled marijuana into the GRVC and the OBCC and sold it to numerous inmates housed in those facilities who in turn sold it to other inmates. ROMAIN and PHILLIPS also smuggled scalpels and tobacco into the facilities and sold them to other inmates.

While ROMAIN and PHILLIPS worked independently from each other, both of them essentially supplied the inmates with marijuana in the same manner. In general, the defendants would contact the inmates’ wives and girlfriends via cellphone numbers provided to them by the inmates and arrange to pick up the marijuana, tobacco, and scalpels from them. ROMAIN and PHILLIPS charged the inmates a fee to bring them the marijuana, scalpels, and tobacco. The inmates then sold the marijuana and other contraband that ROMAIN and PHILLIPS supplied to them.

ROMAIN, 31, and PHILLIPS, 31, both of Brooklyn, New York, are each charged with one count of engaging in a conspiracy to distribute and possess with the intent to distribute a controlled substance and one count of distributing and possessing with the intent to distribute a controlled substance. They each face a maximum sentenced of 10 years in prison (five years on each count).

Mr. Bharara praised the investigative work of the DOI and the DEA’s New York Drug Enforcement Task Force, comprised of members of the DEA, the New York City Police Department, and the New York State Police.

This case is being handled by the Office's Public Corruption and Narcotics Units. Assistant United States Attorneys Carrie H. Cohen and Russell Capone are in charge of the prosecutions.

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

U.S. v. Austin Romain and Khalif Phillips Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States Attorney’s Office and the City of New York (the “City”) have entered into a settlement agreement (the “Proposed Settlement Agreement”) that, if approved by the Court, would resolve the issues raised in the class action lawsuit brought under the Uniformed Services Employment and Reemployment Rights Act of 1994 (“USERRA”) alleging unlawful calculation of the pensionable earnings of New York City Police Department (“NYPD”) officers who have performed active military service since September 11, 2001.

Manhattan U.S. Attorney Preet Bharara said: “The Proposed Settlement Agreement is an important step forward in the process of ensuring that the brave men and women who unselfishly serve both their city and their country receive the pensions they have earned, will earn, and to which they are entitled. Under the law, these dedicated public servants should not be penalized with a reduction in pension benefits for fulfilling a service to their nation. This Office believes that the Proposed Settlement Agreement achieves the best possible result not only for NYPD officers, but for all employees of the City who have chosen or may in the future choose to devote themselves to military service, and we commend the City for reaching an agreement.”

According to the Amended Complaint filed in Manhattan federal court:

The United States filed the class action lawsuit on August 2, 2012 against the City, the NYPD, and the New York City Police Pension Fund on behalf of all current and retired NYPD officers who have performed active military service since September 11, 2001, or who will do so in the future. The suit alleges that the City unlawfully calculates the pensionable earnings of NYPD officers called to active military duty by relying exclusively on their base pay rate, instead of including the overtime or night shift differential compensation they would have earned had they not been on active military duty, as required by USERRA. As a result, service members are being deprived of pension benefits they would have been reasonably likely to receive, but for their military service.

The lawsuit came in the form of an amended Complaint to three separate lawsuits previously filed by the U.S. Attorney’s Office on behalf of David Goodman, Michael Doherty, and Robert Black, three NYPD officers who were called to active military service during the time they worked for the NYPD, and whose pension benefits were unlawfully calculated. In the course of discovery in these matters, the Government learned that approximately 1,500 officers were called to active military service since September 11, 2001. The United States then moved to amend Goodman’s complaint to raise allegations on behalf of a class of similarly situated individuals. On July 30, 2012, The Honorable Richard J. Sullivan ruled that Goodman could amend his complaint to assert a class action lawsuit against the City.

In addition to the NYPD, the Proposed Settlement Agreement encompasses all municipal workers who have performed active military service since September 11, 2011. The Proposed Settlement Agreement provides the following relief:

• All retired NYPD officers who are members of the proposed class will receive the past pension benefits that they are entitled to under USERRA, as well as have their future pension benefit payments adjusted to reflect any increase that results from the recalculation.
• All active NYPD officers who have been, or will be, called to active military service will have their future pensionable earnings calculated in accordance with USERRA, and can request in writing to have their past pensionable earnings recalculated.
• The City will implement the terms of the Proposed Settlement Agreement in all of the City’s other retirement systems so that every qualified municipal worker will have his or her pensionable earnings appropriately calculated under the law.

The Court must approve the Proposed Settlement Agreement in order for it to take effect.

The Proposed Settlement Agreement has been filed with the Court as part of the plaintiffs’ motion requesting that the Court conditionally certify a class of relevant retired NYPD officers; approve the Proposed Settlement Agreement and the forms of class notice to be sent to the NYPD Class Members notifying them of the settlement and of their other rights with respect to the class action; and set a date for a hearing on the fairness of the Proposed Settlement Agreement.

The Proposed Settlement Agreement can be found on the website of the United States Attorney for the Southern District of New York at http://www.justice.gov/usao/nys/pressreleases/June13/USERRASettlementAgreement.php. More information can also be obtained by calling the civil rights hotline number at (212) 637-0840, or e-mailing usanys.userra@usdoj.gov.

This case is being handled by the Office’s Civil Rights Unit. Assistant United States Attorneys Tara M. La Morte and Arastu K. Chaudhury are in charge of the case.

Goodman et al. v. City of New York et al. Settlement Agreement

Goodman et al. v. City of New York et al. Settlement Agreement

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States obtained a restitution order against ARNOLD MAURICE BENGIS, DAVID BENGIS, and JEFFREY NOLL in the amount of nearly $29.5 million and in favor of the Republic of South Africa. This is the largest known restitution order in a Lacey Act case in history. The restitution order follows the Government’s successful appeal to the U.S. Court of Appeals for the Second Circuit of the District Court’s 2007 orders that restitution was not available for crimes prosecuted under the Lacey Act. The Lacey Act is a federal statute that makes it a crime to, among other things, import into the U.S. any fish, wildlife, or plants taken in violation of state or foreign law. After a credit of more than $7 million already paid to South Africa as part of a separate criminal case there, the total restitution to be paid by the defendants is approximately $22.5 million. The restitution was ordered by U.S. District Judge Lewis A. Kaplan. In addition, Judge Kaplan also restrained the defendants from depleting accounts in the Channel Islands to amounts below the approximately $22.5 million restitution to be paid.

Manhattan U.S. Attorney Preet Bharara said: “As today’s order demonstrates, those who violate the environmental laws of another country by illegally taking fish, wildlife, or plants and then import these items into the U.S. will be required to pay back the victims of their offenses. This Office remains committed to ensuring, no matter how long it takes, that those who would damage another country’s environment and seek to profit in the U.S. market will have to remedy their violations of law and repay those foreign governments.”

According to documents filed in Manhattan federal court and in the U.S. Court of Appeals for the Second Circuit:

ARNOLD MAURICE BENGIS was the Managing Director and Chairman of Hout Bay Fishing Industries (PTY) Ltd. (“HBFI”) in Cape Town, South Africa, and he also exercised control over Icebrand Seafoods, Inc. (“Icebrand”) and Associated Sea Fisheries Inc. (“Associated”) in Manhattan. NOLL was the Chairman and President of both Associated and Icebrand in New York. DAVID BENGIS was the President of Icebrand Seafoods Maine Inc. in Portland, Maine.

From 1987 to August 1, 2001, ARNOLD MAURICE BENGIS, his son DAVID BENGIS, NOLL, and their co-conspirators, engaged in an elaborate scheme to, among other things, harvest illegally large quantities of South and West Coast rock lobster, far in excess of applicable quotas, and then to export the illegally harvested lobster from South Africa to the U.S.

The defendants underreported the fish harvested to South African authorities and bribed South African fisheries inspectors to help them carry out their illegal harvesting scheme. They also submitted false export documents to South African authorities to conceal their overharvesting.

As part of the scheme, the defendants arranged for previously-disadvantaged South African citizens who did not have valid U.S. working permits to work for low wages at their fish processing facility in Portland, Maine, where the employees were required to process, among other things, illegally harvested South African rock lobster.

In 2003, all three defendants were charged with importing, among other things, illegally-harvested South African South Coast and West Coast rock lobster into the U.S. The Indictment alleged, among other things, that the lobster had been harvested in violation of both South African law and international convention, by being caught in amounts well in excess of the quota established by South African law or without required permits.

In April 2004, ARNOLD MAURICE BENGIS and NOLL each pled guilty to one count of conspiracy to violate the Lacey Act and to commit smuggling, and three separate counts of violating the Lacey Act. In April 2004, DAVID BENGIS pled guilty to one misdemeanor count of conspiracy to violate the Lacey Act.

In July 2004, Judge Kaplan sentenced each of the defendants to a term of imprisonment, specifically: ARNOLD MAURICE BENGIS – 46 months; JEFFREY NOLL – 30 months; and DAVID BENGIS – 1 year. As part of their sentences, ARNOLD MAURICE BENGIS and NOLL forfeited $5.9 million to the Government. DAVID BENGIS forfeited the proceeds of the sale of his fish-processing factory in Portland, a sum of $1.5 million. Each of the defendants was also sentenced to a term of supervised release. The defendants have all completed their prison terms and supervised release.

In 2007, Judge Kaplan rejected the Government’s application for restitution and held, among other things, that South Africa did not have a property interest in the illegally harvested rock lobster and that South Africa was not a victim within the meaning of the applicable restitution statutes.

In January 2011, the U.S. Court of Appeals for the Second Circuit overturned Judge Kaplan’s 2007 ruling and held instead that: (1) South Africa had a property interest in illegally harvested rock lobsters and, therefore, that the defendants had committed an “offense against property,” thereby entitling South Africa to restitution; and (2) South Africa was a victim within the meaning of the applicable restitution statutes. The Court of Appeals left the determination of the precise amount of restitution to the District Court on remand.

In August 2012, U.S. Magistrate Judge Andrew J. Peck recommended to Judge Kaplan that he order more than $54.8 in restitution to South Africa. Today’s order by Judge Kaplan adopts Judge Peck’s report and recommendation in substantial part by ordering the defendants to pay restitution in the amount of $29,495,800 for illegally harvested West Coast lobster that was imported into the United States. As part of separate criminal prosecution in South Africa, HBFI paid South Africa $7,049,080 for its illegal conduct. Judge Kaplan credited that amount against the restitution of $29,495,800, to arrive at a total amount to be paid by the defendants to South Africa of $22,446,720.

ARNOLD MAURICE BENGIS, 77, and his son DAVID BENGIS, 43, reside in London, England. JEFFREY NOLL, 62, resides in Boca Raton, Florida.

Mr. Bharara praised the outstanding efforts of the Department of Homeland Security, Bureau of Immigration and Customs Enforcement, and the National Oceanic and Atmospheric Administration, Office of Law Enforcement.

Mr. Bharara also thanked the Office of the Attorney General of Jersey, the States of Jersey Police, and the South African Department of Justice and Constitutional Development for their outstanding assistance in the restitution proceedings.

This criminal case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Daniel W. Levy is in charge of the prosecution.

U.S. v. Arnold Bengis et al. Opinion
U.S. v. Arnold Bengis et al. Order

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that MARIA RUSIN, the office manager for disability doctor Peter J. Ajemian, was sentenced today in Manhattan federal court to three years of probation, including six months of home detention, for obstructing the investigation of the alleged massive fraud scheme in which Long Island Railroad (“LIRR”) workers claimed to be disabled upon early retirement so that they could receive disability benefits to which they were not entitled. RUSIN pled guilty in January 2013 to one count of obstructing a health care fraud investigation before U.S. Magistrate Judge Henry Pitman. She was sentenced by U.S. District Judge Victor Marrero.

Manhattan U.S. Attorney Preet Bharara stated: “As Dr. Peter J. Ajemian’s office manager, Maria Rusin understood the office process through which the LIRR disability fraud scheme was carried out, but when questioned by criminal investigators about her knowledge of the scheme, she denied any and told one lie after another. Obstructing the Government’s search for the truth is a serious crime, and as Rusin now knows, it is one that carries consequences.”

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

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.

RUSIN was the office manager for Peter J. Ajemian, a Board-certified orthopedist who was instrumental in helping LIRR retirees receive disability benefits to which they were not entitled. Between the late 1990s and 2008, Ajemian declared as disabled over 94% of the LIRR employees he saw as patients. As part of the massive fraud scheme, Ajemian prepared false documentation purporting to show the LIRR employees’ steady decline toward disability exactly at the time they pre-planned their retirement. He then provided to those LIRR employees a narrative for submission to the RRB that claimed they should receive a disability annuity. These medical narratives were completely fabricated or grossly exaggerated so that Ajemian could recommend a set of restrictions that, if legitimate, would render it impossible for the LIRR employees to continue performing their jobs. Many of the purportedly “objective” findings from the tests he conducted showed nothing more than normal degenerative changes one would expect to see in patients within the relevant age bracket. In his plea agreement, Ajemian stipulated that the total intended losses from his fraud were between $100 and $200 million, and that the actual losses suffered by victims to date total $116.5 million.

On August 30, 2010, in an interview with criminal investigators participating in the Southern District of New York’s investigation of this disability fraud scheme, RUSIN falsely denied knowing that Ajemian’s LIRR patients were retiring at the same time that they were claiming occupational disability from the RRB; falsely claimed that she was never told that an LIRR patient was planning to retire except when the patient was directed to see her to pay for a narrative; falsely claimed that this notice of an LIRR’s patient’s planned retirement usually occurred at the end of the process of seeing Ajemian; and falsely claimed that she had no understanding about how an occupational disability would affect the payout for a worker who was retiring. In fact, RUSIN had day-to-day exposure to Ajemian’s disability practice, and she fully understood how the process worked and what the financial incentives were for the LIRR employees.

In addition to her term of probation, RUSIN, 57, of Farmingdale, New York was also ordered to pay a $3,000 fine and a $100 special assessment.

Thirty-two people have been charged in connection with the LIRR disability fraud scheme, 23 of whom have now pled guilty. Two defendants have been sentenced. Peter J. Ajemian was sentenced in May 2013 to 96 months in prison and ordered to forfeit $116,500,000. Gary Satin was sentenced in March 2013 to 20 months in prison and ordered to forfeit $247,000. The charges against the remaining defendants are merely allegations and they are all presumed innocent unless and until proven guilty.

Mr. Bharara praised the Railroad Retirement Board Office of 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 Office’s Complex Frauds Unit is handling the case. Assistant U.S. Attorneys Justin Weddle, Daniel Tehrani, and Nicole Friedlander are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that JUSTIN MILLS was sentenced today in Manhattan federal court to six years in prison for trafficking in tens of thousands of access devices, including stolen credit card numbers and stolen login information for online accounts at Paypal and other financial websites. MILLS pled guilty on January 3, 2013, and was sentenced today by U.S. District Judge P. Kevin Castel.

Manhattan U.S. Attorney Preet Bharara said: “With his sentence today, Justin Mills joins the growing ranks of cybercriminals to be punished for abusing the Internet to access and exploit people’s personal financial information. Together with our law enforcement partners, including the extraordinary efforts of the FBI, this Office continues its work to disrupt the networks that incubate the expanding cyber threat.”

According to the Information, the Complaint previously filed in the case, and statements made during today’s sentencing proceeding:

MILLS was arrested in June 2012 as part of “Operation Card Shop,” an international law enforcement operation in which 30 defendants were ultimately arrested in 13 countries for their involvement in various “carding” crimes – offenses in which the Internet is used to traffic in and exploit stolen credit card, bank account, and other personal identification information. As part of the investigation, from June 2010 to May 2012, the Federal Bureau of Investigation (“FBI”) operated an undercover carding forum (the “UC Site”), which, like other underground forums commonly used by carders, enabled its users to discuss various topics related to carding, and to buy, sell, and exchange goods and services related to carding, including stolen credit card data. The FBI established the UC Site in an effort to identify cybercriminals engaged in carding and to detect and investigate their crimes. The UC Site was configured to allow the FBI to monitor and to record the discussion threads posted to the site, as well as private messages sent through the site between registered users.

MILLS was a user of the UC Site who used malicious software to steal usernames and passwords from Internet users that could be used to access various types of online accounts, including financial accounts at banks and online payment services such as Paypal. MILLS trafficked in this stolen login information, advertising to others on the UC Site that he had login information for well over 100,000 online accounts for sale, including accounts at Amazon, Facebook, Ebay, and other popular websites. A search of MILLS’ computer following his arrest recovered login information for 15,000 Paypal accounts alone, along with login information for tens of thousands of online accounts associated with other online services. MILLS also trafficked in stolen credit card data. In addition to trafficking in stolen login information and credit card accounts, MILLS himself used the access devices he stole to effect fraudulent purchases of gift cards and goods on the Internet, which he sold to others.

In addition to the prison term, Judge Castel sentenced MILLS, 20, of Smyrna, Delaware, to three years of supervised release. MILLS was also ordered to pay restitution and forfeiture of $50,000.

In sentencing Mills, Judge Castel said, “This man was running a business, and a business that was spreading misery and had the potential of further spreading misery to people throughout the country. Think of the disruption to the individuals, think of the losses to those who have to make good on credit card transactions, or online transactions, or frauds. There was a ripple effect that flowed from it.”

Judge Castel added, “There is also a need to deter others from crimes of this nature. This is an offense which is very difficult to detect, very difficult to find people who perpetrate it, and when they are unmasked, it is important that the word go forth that the punishments are severe.”

Mr. Bharara praised the investigative work of the FBI’s Cyber Crime Task Force.

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

Preet Bharara, the United States Attorney for the Southern District of New York, Barry Kluger, the Inspector General of the Metropolitan Transportation Authority (“MTA”), and Douglas Shoemaker, Regional Special Agent-in-Charge of the U.S. Department of Transportation, Office of the Inspector General (“USDOT-OIG”), announced today that the United States has filed and simultaneously settled a civil fraud lawsuit against a subcontractor, KLEINBERG ELECTRIC INC. (“KLEINBERG”), for engaging in fraudulent conduct designed to take advantage of the Disadvantaged Business Enterprise Program in order to secure a subcontract on a federally-funded project for the design and construction of the Fulton Street Transit Center Dey Street Concourse (the “Dey Street Project”). KLEINBERG caused the prime contractor of the Dey Street Project to falsely represent to the MTA that KLEINBERG paid hundreds of thousands of dollars to a disadvantaged business enterprise (“DBE”) to perform legitimate work on the contract when, in reality, the DBE did not perform a “commercially useful function,” as required by the program’s regulations, and instead received a commission for the fraudulent use of its DBE status. As part of the settlement, KLEINBERG admitted and accepted responsibility for violating the DBE regulations governing the Dey Street Project and agreed to pay $936,000. The settlement was approved yesterday in Manhattan federal court by U.S. District Judge P. Kevin Castel.

Manhattan U.S. Attorney Preet Bharara said: “Kleinberg Electric painted a veneer of legitimacy on a subcontract that did not comply with the Disadvantaged Business Enterprise Program, and in doing so, subverted the aim of helping qualified minority and women-owned businesses succeed. Today’s settlement will help to ensure that all contractors who receive federal funds, whether they are prime contractors or subcontractors, follow the law.”

MTA Inspector General Barry Kluger said: “The civil settlement announced today is the result of the joint efforts of the Office of the United States Attorney, my Office, and the USDOT-OIG to combat construction fraud and protect the integrity of the federal Disadvantaged Business Enterprise Program. Today’s announcement demonstrates our continued commitment to create and maintain a level playing field in which all qualified disadvantaged business enterprises have a fair and equal opportunity to bid for, receive, and participate in MTA projects. I wish to thank the United States Attorney for the Southern District of New York and his staff for their strong and sustained efforts and our continuing partnership.”

USDOT-OIG Regional Special Agent-in-Charge Douglas Shoemaker said: “The Disadvantaged Business Enterprise Program is a business assistance program of the USDOT which helps economically and socially disadvantaged small businesses compete in the marketplace. Disadvantaged Business Enterprise fraud harms the integrity of the program and adversely impacts law-abiding small business contractors trying to compete on a level playing field. Working with our federal, state, and local law enforcement and prosecutorial colleagues, we will vigorously pursue those who violate the law, and expose and shut down fraud schemes that adversely affect public trust and USDOT-assisted transit programs.”

Background on DBEs

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

Recipients of USDOT construction grants, such as the MTA, are required to establish a DBE program that sets goals for the percentage of a project’s work that should be awarded to DBEs (“DBE goals”). General contractors on construction projects must make good faith efforts to meet the relevant DBE goals. The MTA has established a DBE program and requires companies that are awarded public works contracts to meet certain DBE goals.

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

A DBE does not perform a “commercially useful function” if “its role is limited to that of an extra participant in a transaction, contract, or project through which funds are passed in order to obtain the appearance of DBE participation.”

Kleinberg’s Fraud

According to the allegations in the complaint:

The MTA set the DBE participation goal for the Dey Street Project at 10 percent of the project (or approximately $12.7 million). KLEINBERG was hired as a subcontractor for the Dey Street Project by the prime contractor, Slattery Skanska (“Skanska”). KLEINBERG expressly represented to Skanska that it would contract with J&R Rey as a second-tier DBE subcontractor for $600,000 in order to help Skanska reach its DBE goal for the contract. Between September 2005 and April 2007, at least 34 monthly requisitions were submitted to the MTA for the Dey Street Project including certifications of progress towards meeting the contract’s DBE participation goal. Relying on representations from KLEINBERG, Skanska reported to the MTA that J&R Rey was performing legitimate work on the contract. In reality, KLEINBERG never intended for J&R Rey to perform any legitimate tasks on the contract and J&R Rey never in fact performed any work on the contract. Indeed, the President of J&R Rey confirmed to the MTA’s Office of Inspector General that J&R Rey never performed a commercially useful function on the Dey Street Project. Instead, KLEINBERG paid J&R Rey “commissions” for the sole purpose of fraudulently using J&R Rey’s DBE status to earn DBE credit for the prime contractor.

Under the settlement agreement, KLEINBERG admitted, acknowledged, and accepted responsibility for causing false certifications to be submitted to the MTA representing that J&R Rey performed certain work and received certain payments, when in fact, J&R Rey never performed any work and received a commission from KLEINBERG for the fraudulent use of its DBE status. KLEINBERG also agreed to pay the United States $936,000 in damages.

Mr. Bharara praised the work of the MTA Office of Inspector General and the USDOT office of Inspector General for their invaluable work on this case.

The case is being handled by the Office’s Civil Frauds Unit.

Assistant U.S. Attorneys Lara Eshkenazi, Mara Trager, and Ellen London are in charge of the case.

U.S. v. Kleinberg Electric Complaint
U.S. v. Kleinberg Electric Stipulation and Order of Dismissal

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, and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), today announced the arrest of ERNESTO LUJAN (“LUJAN”), a managing partner of a U.S. broker-dealer (the “Broker-Dealer”), on felony charges arising from a conspiracy to pay bribes to Maria De Los Angeles Gonzalez De Hernandez (“Gonzalez”), a senior official in Venezuela’s state economic development bank, Banco de Desarrollo Económico y Social de Venezuela (“BANDES”). LUJAN, among others, allegedly arranged the bribe payments to Gonzalez in exchange for her directing BANDES’s financial trading business to the Broker-Dealer. LUJAN, 50, was arrested this morning in Wellington, Florida, where he resides and was presented in federal court in West Palm Beach, Florida.

On May 3, 2013, Gonzalez, along with two employees of the Broker-Dealer, Tomas Alberto Clarke Bethancourt (“Clarke”) and Jose Alejandro Hurtado (“Hurtado”) were arrested on separate charges relating to this bribery scheme. On May 6, 2013, the Government filed a civil forfeiture action in Manhattan federal court seeking the forfeiture of assets held in a number of bank accounts associated with the scheme, including several bank accounts located in Switzerland, and the forfeiture of several properties in the Miami, Florida, area related to Hurtado that were purchased with his proceeds from the scheme. That same day, the Court also issued seizure warrants for multiple bank accounts and a restraining order relating to those Miami properties.

Manhattan U.S. Attorney Preet Bharara stated: “From his perch as managing partner Ernesto Lujan allegedly engaged in a bribery scheme designed to drum up foreign trading business for his firm. Along with his alleged cohorts, three of whom were arrested last month, he pocketed millions from the alleged scheme which was executed through kickbacks to a Venezuelan government official and through money laundering.”

Acting Assistant Attorney General Mythili Raman said: “The huge bribes Mr. Lujan and others allegedly paid funneled millions to his firm and into his own pockets. Bribery corrupts markets, and this arrest – just the latest in the Department’s recent series of anti-corruption charges in various districts – is yet another demonstration that, at the end of the day, the real dividends bribe payors reap are criminal charges.”

FBI Assistant Director-in-Charge George Venizelos said: “As alleged, Lujan led a conspiracy to bribe a foreign government bank official to steer business to his firm. As previously alleged, much of this trading activity was conducted solely to generate fees for the firm. Lujan personally reaped millions in profits, and used Swiss bank accounts to conceal both the bribes and his own proceeds of the scheme.”

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

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

Background on the Broker-Dealer and BANDES

LUJAN, a managing partner of the Broker Dealer, which was headquartered in New York City, was the branch manager of 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, a BANDES official, 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 Bribery Scheme

From December 2008 through October 2010, LUJAN, along with Clarke, Hurtado, and Gonzalez, participated in a bribery scheme in which Gonzalez directed trading business she controlled at BANDES to the Broker-Dealer, and in return, agents and employees of the Broker-Dealer, including LUJAN, 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.

To further conceal the scheme, the kickbacks to Gonzalez were often paid using intermediary corporations and offshore accounts that she held in Switzerland, among other places. For example, at least $9.5 million was transferred from the Broker-Dealer to a Swiss bank account controlled by Clarke, who in turn transferred at least $6.5 million to a Swiss bank account controlled by LUJAN. LUJAN then transferred at least $1.5 million of these proceeds to a Swiss bank account controlled by Gonzalez.

A chart containing the charges and maximum penalties LUJAN faces is attached below.

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

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

Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.

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

U.S. v. Ernesto Lujan Complaint

Click here to view chart(s)

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States has settled a civil rights lawsuit in Manhattan federal court against the developer, architect, and current owner of RiverEast, a residential apartment complex in Manhattan, alleging that the apartment complex is inaccessible to persons with disabilities. Specifically, the lawsuit alleges that THE JOHN BUCK COMPANY, LLC; BUCK DEVELOPMENT LLC; BUCK 92ND/1ST LLC; BUCK INVESTORS I, LLC; 92ND & FIRST RESIDENTIAL TOWER LLC; and THE JBC ACQUISTION & DEVELOPMENT FUND 1, LP (collectively, the “JOHN BUCK ENTITIES”), the developers of RiverEast, and SLCE ARCHITECTS LLP (“SLCE”), the architectural firm that designed the building, violated the design and construction provisions of the federal Fair Housing Act, which require that new multi-family housing complexes include certain features to make them accessible to persons with disabilities. The United States also sued RIVER EAST APARTMENTS INVESTORS, LLC, the current owner of RiverEast, to ensure that retrofits making the apartment complex accessible to persons with disabilities could be implemented. The consent decree was approved yesterday by U.S. District Judge Lorna G. Schofield.

Manhattan U.S. Attorney Preet Bharara said: “Developers and architects working in New York City have no excuse for failing to comply with the Fair Housing Act, and this Office will find and pursue offenders aggressively, particularly repeat offenders as we had here. Today’s settlement ensures that RiverEast will be made accessible to people with disabilities, and that people who were unlawfully denied full use of the complex will be compensated appropriately.”

According to the allegations contained in the Complaint:

RiverEast, a 196-unit apartment building located at 408 East 92nd Street in Manhattan, was designed and constructed with many inaccessible features. These include insufficient clear floor space in trash rooms and within bathrooms for maneuvering at lavatories and toilets; impediments to the installation of bathroom grab bars; kitchen and bathroom electrical outlets not fully usable to persons with mobility impairments; mailboxes that are too high for people who use wheelchairs; and inaccessible common area bathrooms. Inaccessible features at RiverEast were first brought to the attention of the United States by testing performed by the Fair Housing Justice Center. The U.S. Attorney’s Office frequently relies on testers to determine whether property owners are engaging in discrimination on the basis of race, disability, or other protected characteristics, and frequently files lawsuits based on the results of such testing. This is the ninth case filed by the Office in recent years based on testing.

The consent decree approved today requires the JOHN BUCK ENTITIES and SLCE to retrofit inaccessible features throughout the property and train employees on the requirements of the Fair Housing Act.

In addition, because one of the JOHN BUCK ENTITIES previously entered into a consent decree with the United States in the Northern District of Illinois to resolve allegations of Fair Housing Act violations, the United States sought increased penalties for this repeat violation of the Fair Housing Act. The JOHN BUCK ENTITIES and SLCE agreed to pay an increased civil penalty of $72,000, and to dedicate $125,000 to compensate people who have been harmed by inadequate accessibility at RiverEast.

Under the settlement, a person may be entitled to receive monetary compensation if he or she was:

• Discouraged from living at RiverEast because of a lack of accessible features;
• Limited in the full use or enjoyment of an apartment or amenity at RiverEast due to a lack of accessible features;
• Financially affected by having to make an apartment at RiverEast more accessible to persons with disabilities;
• Prevented from having visitors because of a lack of accessible features at RiverEast; or
• Otherwise injured by the lack of accessible features or discriminated against on the basis of disability at RiverEast.

People who may be entitled to compensation should file a claim by contacting the Civil Rights Complaint Line at (212) 637-0840 (a TDD line is available at (212) 637-0039), using the Civil Rights Complaint Form available on the U.S. Attorney’s Office’s website, http://www.justice.gov/usao/nys/civilrights.html, or sending a written claim to:

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

86 Chambers Street, 3rd Floor

New York, New York, 10007

Attention: Chief, Civil Rights Unit

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

U.S. v. RiverEast et al. Consent Order

Preet Bharara, the United States Attorney for the Southern District of New York, announced that EDWARD ADAMS, a New York-based attorney, pled guilty today in Manhattan federal court to conspiracy to commit wire fraud in connection with his participation in a fraudulent real estate scheme. As part of that scheme, ADAMS and a co-conspirator misappropriated millions of dollars in escrow funds that should have been safeguarded for investors in a real estate development project. The real estate project was never developed and investors lost all of their money. ADAMS pled guilty before U.S. District Judge John G. Koeltl.

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

Beginning in early 2008, ADAMS and James Monahan, a former sergeant in the New York City Police Department and the owner of a real estate investment company called Panam Management Group, Inc., negotiated with another real estate investment company to solicit investors for a project Monahan claimed to be constructing in the Dominican Republic. In connection with the project, ADAMS and Monahan executed agreements that required investor funds to be deposited into escrow accounts that were to be managed by ADAMS. From October 2008 through February 2009, approximately $4.7 million in investor funds were deposited into the escrow accounts. Shortly after the deposits were made, the funds were improperly withdrawn by ADAMS and Monahan without disclosure to investors.

In an effort to hide the fact that the funds had been removed from the escrow account, Monahan mailed a forged letter on the stationery of a major bank to investors in May 2009 claiming that their money was safely deposited with that bank. However, by June 2009, all of the investor funds had been taken from the escrow accounts. At that point, almost no work had been performed on the purported project in the Dominican Republic. None of the money was returned to investors.

ADAMS, 69, of New York, New York, pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum potential penalty of five years in prison and a fine of $250,000, or twice the gross gain or loss from the offense. He is scheduled to be sentenced by Judge Koeltl on October 18, 2013 at 10:00 a.m.

Monahan pled guilty on May 29, 2013 and is scheduled to be sentenced by Judge Koeltl on October 4, 2013 at 10 a.m.

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

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

U.S. v. Edward Adams S1 Information

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that MICHAEL LOGAN, a former manager of TESTQUEST, INC. (“TESTQUEST”), an educational services company that provided tutoring services to public school children as part of a federally funded program, pled guilty in Manhattan federal court for his role in a scheme to defraud the federal government by falsely submitting claims for payment for tutoring services that were never actually provided. LOGAN pled guilty before U.S. District Judge John F. Keenan.

Manhattan U.S. Attorney Preet Bharara said: “The federal government devotes important resources to a program intended to benefit students in need, and not intended to be manipulated by people like Michael Logan for their own benefit. To make matters worse, rather than focusing on the instruction of children, Logan focused on instructing witnesses to lie. With his guilty plea today, he will now face the consequences of his shameful exploitation of this vitally important program.”

According to the Criminal Complaint and Criminal Information filed against LOGAN, and a Civil Complaint that was filed against TESTQUEST and LOGAN earlier this year:

Each year during the time period at issue, 2005 through 2012, the New York City Department of Education (“NYCDOE”) received funds from the federal government to pay for New York City’s Supplemental Educational Services program (“SES”), which included after-school tutoring and other remedial and supplemental academic enrichment services for students attending underperforming public schools. NYCDOE entered into contracts with private entities and organizations to provide SES tutoring to public school students. Students were eligible to receive SES tutoring if they met certain criteria, such as attending a school that had been identified as needing improvement or restructuring for at least two years. Private entities contracted by NYCDOE to provide SES tutoring were required to have each student who attended a class sign a standard attendance form. The tutor was also required to sign the form, attesting to the fact that he or she provided SES tutoring to those students. Further, as a condition of getting paid for providing tutoring, the private entities were required to certify to the NYCDOE that their attendance records were “true and accurate.”

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

MICHAEL LOGAN was an employee of TESTQUEST responsible for managing its SES tutoring program at Monroe and later at Columbus. LOGAN also worked as a long-term substitute teacher and computer technician at Monroe and sometimes coached its baseball team. LOGAN instructed TESTQUEST employees to forge student signatures on attendance forms and to have students sign attendance forms for tutoring classes they had not attended. On some occasions, LOGAN caused TESTQUEST employees to fraudulently obtain students’ signatures by collecting them from students assembled in the school cafeteria or participating in afterschool activities such as baseball or basketball practice. For example, LOGAN would direct employees to participate in this fraud by saying, “if you can’t find the students, sign them in,” and “make them sign or you won’t get paid.” Further, when LOGAN learned of the criminal investigation, he coached others to lie. In one recorded conversation, LOGAN encouraged another witness to lie about teaching classes that occurred when he and the witness were actually coaching after-school sports. As a result of LOGAN’s conduct, TESTQUEST employees repeatedly submitted bills to NYCDOE for tutoring that never occurred and for which TESTQUEST was paid substantial sums of money.

LOGAN, 48, of White Plains, New York, pled guilty to one count of conspiracy to defraud the United States and the U.S. Department of Education. He faces a maximum sentence of five years in prison, and is scheduled to be sentenced by Judge Keenan on October 9, 2013. The charges in the Civil Complaint against LOGAN and TESTQUEST remain pending.

Mr. Bharara thanked the U.S. Department of Education’s Office of Inspector General for its extraordinary assistance in this case.

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

U.S. v. Michael Logan Information

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ADEM ARICI pled guilty today in White Plains federal court to participating in a tax fraud conspiracy in which more than $50 million in gross receipts from the fine foods supermarkets in which he had an ownership interest was hidden from federal and state tax authorities. ARICI also pled guilty to four counts of subscribing to false and fraudulent federal personal income tax returns, nine counts of aiding and assisting in the preparation of false and fraudulent federal corporate, partnership, and payroll tax returns, and one count of witness tampering. ARICI pled guilty before U.S. Magistrate Judge Paul E. Davison. He is the seventh member of the conspiracy to plead guilty, and cases are pending against two additional co-conspirators who remain at large.

Manhattan U.S. Attorney Bharara stated: “Adem Arici and his co-conspirators appeared to be running a legitimate and very successful business, but in reality he was little more than a serial and flagrant tax cheat – failing to pay either personal or business-related taxes on millions of dollars in income. This Office has absolutely no tolerance for those who violate the tax laws and fail to pay their fair share.”

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

ARICI had an ownership interest and played an active management role in the following gourmet food markets (the “Markets”) in New York, New Jersey, and Connecticut:

• Zeytuna, located in New York, New York.
• The Amish Market, located in New York, New York.
• Zeytinia Gourmet, located in Croton-on-Hudson, New York.
• Zeytinia Fine Food Store, located in Oakland, New Jersey.
• Zeytinia Fine Food Store, located in Atlantic City, New Jersey.
• Zeytinia Gourmet Market in Wilton, Connecticut.

The Markets’ customers typically paid for their purchases with either cash or credit cards. Credit card payments, and a small portion of the cash receipts, were deposited into bank accounts maintained by each Market. The remaining cash was diverted from the books and records of the Markets and used to pay business expenses, including the Markets’ employee payrolls. The owners of the Markets paid numerous employees, including undocumented foreign workers, in cash. They then took the remaining cash and divided it up amongst themselves.

The owners of the Markets failed to withhold payroll taxes and to pay those taxes to the IRS and caused the preparation and filing with the IRS of forms that falsely and fraudulently understated the true salaries paid to employees. In many cases, the owners failed to report the salaries of employees entirely. The owners also maintained a second set of books and other records which recorded the true income and expenses of the Markets and reflected the cash that was skimmed. The second set of books showed that the owners of the Markets failed to report in excess of $50 million in gross receipts during the years 2004 through 2009.

With respect to the witness tampering count, on November 18, 2011, ADEM ARICI counseled an individual with whom he had unlawfully traveled to Cuba to tell law enforcement agents with the Department of Homeland Security, among other things, that the individual did not travel to Cuba, did not know ARICI, and had not met with ARICI in Cuba, all of which was untrue.

ARICI, 51, of Easton, Connecticut, is scheduled to be sentenced by Chief United States District Judge Loretta A. Preska on September 17, 2013. He faces a sentence of up to 54 years in prison and also faces restitution and forfeiture orders each in the amount of up to $15 million.

Mr. Bharara praised the outstanding efforts of the Internal Revenue Service, Criminal Investigation, and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations. He also thanked U.S. Department of Justice’s Tax Division for its significant assistance in the investigation.

This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Jeffrey Alberts, Lee Renzin, and Perry A. Carbone are in charge of the prosecution.

The charges and allegations contained in the Indictment against the remaining defendants, Omer Ipek and Atilla Yayla, and Marc Verzani, 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, the Special Operations Division Special Agent-in-Charge of the United States Drug Enforcement Administration (“DEA”), today announced the unsealing of charges against SAMUEL ANTONIO PINEDO-RUEDA, SOLOMON ADELAQUAYE, FRANK MUODUM, and CELESTINE OFOR ORJINWEKE on charges that they conspired to import heroin into the United States. PINEDO-RUEDA, 72, a citizen of Colombia, was apprehended in Colombia on May 16, 2013 pursuant to a Red Notice issued at the request of the United States, and is awaiting extradition. ADELAQUAYE, 48, a citizen of Ghana, and MUODUM, 44, and ORJINWEKE, 53, citizens of Nigeria, were arrested in New York on May 9, 2013, and were presented and arraigned before U.S. Magistrate Judge Gabriel W. Gorenstein. The case is assigned to U.S. District Judge Ronnie Abrams.

Manhattan U.S. Attorney Preet Bharara said: “These alleged narco-traffickers assumed they had secured safe passage for their heroin from West Africa to the United States by paying off an airport insider, but unbeknownst to them, the people on the other side of their transaction were law enforcement insiders working for the DEA. Together with our partners, we remain committed to thwarting these plots before they are executed and to apprehending and prosecuting those responsible.”

DEA Special Operations Division Special Agent-in-Charge Derek Maltz said: “Drug trafficking in West Africa has become a plague. These criminal groups and their facilitators pose a direct threat to the safety and security of innocent Americans. Together with our law enforcement partners, DEA is dismantling illicit drug networks in western Africa and around the world, and putting the criminals who operate them behind bars where they belong.”

According to the Indictment unsealed today in Manhattan federal court:

In February 2012, in Accra, Ghana, PINEDO-RUEDA, MUODUM, and ORJI NWEKE sold one kilogram of heroin to two confidential sources (“the CSs”) working for the DEA. In meetings in connection with the heroin sale, one of the CSs purported to be a Colombian narcotics trafficker in search of heroin to sell to customers in New York City; the other CS purported to be a courier for that trafficker, who would transport the heroin to New York for distribution. ADELAQUAYE, who was responsible for security at the international airport in Ghana, agreed to facilitate the movement of the heroin through the airport without detection, in exchange for a $10,000 payment.

In May 2013, ADELAQUAYE, MUODUM, and ORJINWEKE further agreed that one of the CSs would supply them with 3,000 kilograms of cocaine and that in exchange, they would supply the CS with a quantity of heroin of equivalent value, to be delivered to the United States in 25-kilogram increments.

The Indictment charges each of the defendants with one count of conspiring to import heroin and to distribute heroin, knowing and intending that it would be imported into the United States. The charge carries a maximum sentence of life in prison.

The charges and arrests of the defendants are the result of the close cooperative efforts of the United States Attorney’s Office for the Southern District of New York and the DEA’s Special Operations Division, the DEA Ghana Country Office, and the DEA Bogota Country Office. Mr. Bharara praised the outstanding investigative work of the DEA and thanked the U.S. Department of Justice Office of International Affairs for its assistance. Mr. Bharara also thanked the Government of Ghana for its cooperation.

The prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorney Michael Ferrara is in charge of the prosecution.

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

U.S. v. Pinedo-Rueda et al. S5 Indictment

“Manssor Arbabsiar was an enemy among us – the key conduit for, and facilitator of, a nefarious international plot concocted by members of the Iranian military to assassinate the Saudi Ambassador to the United States and as many innocent bystanders as necessary to get the job done. And but for the vigilance of our FBI and DEA partners, his plot, and the unspeakable harm it would have caused, may well have come to fruition, which is exactly why our commitment to using every resource we have to root out, prosecute and punish people like Arbabsiar, who act as emissaries for our enemies, remains unflagging.”

Preet Bharara, the United States Attorney for the Southern District of New York, and John Carlin, the Acting Assistant Attorney General for National Security at the U.S. Department of Justice (“DOJ”), announced that MANSSOR ARBABSIAR, a/k/a “Mansour Arbabsiar,” was sentenced today in Manhattan federal court to 25 years in prison for participating in a plot to murder the Saudi Arabian Ambassador to the U.S., while the Ambassador was in the U.S. ARBABSIAR, a 58 - year-old naturalized U.S. citizen holding both Iranian and U.S. passports, was arrested on September 29, 2011 at John F. Kennedy International Airport. He pled guilty on October 17, 2012 to one count of murder-for-hire, one count of conspiracy to commit murder-for-hire, and one count of conspiracy to commit an act of terrorism transcending national boundaries before U.S. District Judge John F. Keenan, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara stated: “Manssor Arbabsiar was an enemy among us – the key conduit for, and facilitator of, a nefarious international plot concocted by members of the Iranian military to assassinate the Saudi Ambassador to the United States and as many innocent bystanders as necessary to get the job done. And but for the vigilance of our FBI and DEA partners, his plot, and the unspeakable harm it would have caused, may well have come to fruition, which is exactly why our commitment to using every resource we have to root out, prosecute and punish people like Arbabsiar, who act as emissaries for our enemies, remains unflagging.”

Acting Assistant Attorney General for National Security John Carlin stated: “Thanks to the collaborative efforts of many U.S. law enforcement and intelligence professionals, Manssor Arbabsiar is today being held accountable for his role in this assassination plot. I applaud all those responsible for ensuring that Arbabsiar and his co-conspirators in Iran’s Qods Force failed in their efforts. Today’s sentencing serves as a reminder of the evolving threat environment we face.”

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

From the spring of 2011 to October 2011, ARBABSIAR and his Iran-based co-conspirators, including members of Iran’s Qods Force, plotted the murder of the Saudi Arabian Ambassador to the U.S. In furtherance of this conspiracy, ARBABSIAR met on a number of occasions in Mexico with a DEA confidential source (“CS-1”) who posed as an associate of a violent international drug trafficking cartel. ARBABSIAR arranged to hire CS-1 and CS-1’s purported accomplices to murder the Ambassador with the awareness and approval of his Iran-based co-conspirators. ARBABSIAR wired approximately $100,000 to a bank account in the U.S. as a down payment to CS-1 for the anticipated killing of the Ambassador, which was to take place in the U.S, also with the approval of his co-conspirators.

The Qods Force is a branch of the Iranian Islamic Revolutionary Guard Corps (the “IRGC”), which conducts sensitive covert operations abroad, including terrorist attacks, assassinations, and kidnappings, and is believed to have sponsored attacks against Coalition Forces in Iraq. In October 2007, the U.S. Treasury Department designated the Qods Force as a terrorist supporter for providing material support to the Taliban and other terrorist organizations.

ARBABSIAR met with CS-1 in Mexico on several occasions between May 2011 and July 2011. During the course of these meetings, he inquired as to CS-1’s knowledge with respect to explosives and explained that he was interested in, among other things, attacking an embassy of Saudi Arabia and the murder of the Saudi Ambassador to the U.S. In a July 14, 2011 meeting in Mexico, CS-1 told ARBABSIAR that he would need to use at least four men to carry out the Ambassador’s murder and that his price for doing so was $1.5 million. ARBABSIAR agreed and stated that the murder of the Ambassador should be handled first, before the execution of other attacks that he had discussed with CS-1. ARBABSIAR also indicated that he and his associates had $100,000 in Iran to give CS-1 as a first payment toward the assassination.

During the same meeting, ARBABSIAR also described to CS-1 his cousin in Iran, who he said had requested that ARBABSIAR find someone to carry out the Ambassador’s assassination. ARBABSIAR indicated that his cousin was a “big general” in the Iranian military; that he focuses on matters outside of Iran, and that he had taken certain unspecified actions related to a bombing in Iraq.

In a July 17, 2011 meeting in Mexico, CS-1 noted to ARBABSIAR that one of his workers had already traveled to Washington, D.C., to surveil the Ambassador. CS-1 also raised the possibility of innocent bystander casualties. ARBABSIAR made it clear that the assassination needed to go forward, despite mass casualties, telling CS-1, “They want that guy [the Ambassador] done [killed], if the hundred go with him f**k ‘em.” CS-1 and ARBABSIAR discussed bombing a restaurant in the U.S. that the Ambassador frequented. When CS-1 noted that others could be killed in the attack, including U.S. senators who dine at the restaurant, ARBABSIAR dismissed these concerns as “no big deal.”

On August 1 and August 9, 2011, ARBABSIAR caused two overseas wire transfers totaling approximately $100,000 to be sent to an FBI undercover account as a down payment for CS-1 to carry out the assassination. Later, ARBABSIAR explained to CS-1 that he would provide the remainder of the $1.5 million after the assassination. On September 20, 2011, CS-1 told ARBABSIAR that the operation was ready and requested that he either pay one half the agreed upon price ($1.5 million) for the murder or that ARBABSIAR personally travel to Mexico as collateral for the final payment of the fee. ARBABSIAR agreed to travel to Mexico to guarantee final payment for the murder.

On September 28, 2011, ARBABSIAR flew to Mexico, and he was refused entry into the country and placed on a return flight destined for his last point of departure. The following day, ARBABSIAR was arrested by federal agents during a flight layover at JFK International Airport in New York. Several hours after his arrest, ARBABSIAR was advised of his Miranda rights and he agreed to waive those rights and speak with law enforcement agents. During a series of Mirandized interviews, ARBABSIAR confessed to his participation in the murder plot.

In addition, ARBABSIAR admitted to agents that, in connection with this plot, he was recruited, funded, and directed by men he understood to be senior officials in Iran’s Qods Force. He said these Iranian officials were aware of, and approved of, the use of CS-1 in connection with the plot, as well as payments to CS-1, the means by which the Ambassador would be killed in the U.S., and the casualties that would likely result.

ARBABSIAR also told agents that his cousin, whom he had long understood to be a senior member of the Qods Force, had approached him in the early spring of 2011 about recruiting narco-traffickers to kidnap the Ambassador. He told agents that he then met with CS-1 in Mexico and discussed assassinating the Ambassador. ARBABSIAR said that afterwards, he met several times in Iran with Gholam Shakuri, a/k/a “Ali Gholam Shakuri,” a co-conspirator and Iran-based member of the Qods Force, and another senior Qods Force official, where ARBABSIAR explained that the plan was to blow up a restaurant in the U.S. frequented by the Ambassador and that numerous bystanders would be killed. According to Arbabsiar, the plan was approved by these officials.

In October 2011, after his arrest, ARBABSIAR made phone calls at the direction of law enforcement to Shakuri in Iran that were monitored. During these calls, Shakuri confirmed that ARBABSIAR should move forward with the plot to murder the Ambassador and that he should accomplish the task as quickly as possible, stating on October 5, 2011, “[j]ust do it quickly, it’s late…” Shakuri also told ARBABSIAR that he would consult with his superiors about whether they would be willing to pay CS-1 additional money. Shakuri, who was also charged in the plot, remains at large.

In addition to the prison term, Judge Keenan sentenced ARBABSIAR to three years of supervised release. ARBABSIAR was also ordered to pay forfeiture in the amount of $125,000 and a $300 special assessment fee.

Mr. Bharara thanked the FBI Houston Division, the DEA Houston Division, and the FBI New York Joint Terrorism Task Force for their outstanding investigative work on this case and thanked the Department of Justice’s Office of International Affairs, its National Security Division, and the Department of State for their assistance. Mr. Bharara also thanked the Government of Mexico for its cooperation.

This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Glen Kopp, Edward Kim, and Stephen Ritchin are in charge of the prosecution with assistance from the Counterterrorism Section of the National Security Division.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that JAMES MONAHAN, the owner of a real estate investment company called Panam Management Group, Inc., and a former sergeant in the New York City Police Department (“NYPD”), pled guilty today in Manhattan federal court to wire fraud, mail fraud, and conspiracy to commit wire and mail fraud in connection with his participation in a fraudulent real estate scheme. As part of that scheme, MONAHAN misappropriated approximately $4.7 million he obtained from investors for a real estate development project he claimed to be constructing in the Dominican Republic. The real estate project was never developed and investors lost all of their money. MONAHAN pled guilty before U.S. District Judge John G. Koeltl.

Manhattan U.S. Attorney Preet Bharara said: “Like the real estate development project he promoted, James Monahan was a phony who exploited his past association with the NYPD to woo investors, only to trade that badge of pride for a badge of fraud. There is a price to be paid for defrauding investors, and this Office will continue its work to prosecute and punish bogus professionals.”

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

Beginning in early 2008, MONAHAN negotiated with another real estate investment company to solicit investors for a project he claimed to be constructing in the Dominican Republic. During the negotiations, MONAHAN repeatedly touted his prior service with the NYPD as proof of his trustworthiness and as a reason to invest in the project.

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

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

MONAHAN, 43, of New York, New York, pled guilty to one count each of wire fraud, mail fraud, and conspiracy to commit wire and mail fraud, each of which carries a maximum potential penalty of 20 years in prison and a fine of $250,000, or twice the gross gain or loss from the offense.

MONAHAN is scheduled to be sentenced by Judge Koeltl on October 4, 2013 at 10 a.m. Adams is scheduled to go to trial starting July 8, 2013.

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

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

Monahan, James and Adams, Edward Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that LAWRENCE MULQUEEN pled guilty to an Indictment charging him with making threats against federal officials in messages that he posted on the online social networking site “Facebook.” MULQUEEN threatened to kill members of the U.S. Congress, state and local elected officials, and others. He was charged in February 2013 and pled guilty today before U.S. District Judge Kenneth M. Karas.

U.S. Attorney Preet Bharara said: “As we have stated time and time again, social media, and the internet generally, are powerful tools for communication, but the fact that you face a screen and not a person does not give Lawrence Mulqueen, or anyone else, a license to make threats and incite others to commit acts of violence. The fact that a threat is made remotely does not mean that the chance of prosecution is remote. With his plea today, Mulqueen has learned that.”

According to the Complaint, Indictment, and statements made at today’s guilty plea proceeding in White Plains federal court:

In February 2013, MULQUEEN posted numerous messages on his Facebook page in which he threatened to kill members of the U.S. Congress, state and local elected officials, and others. For example, on February 20, 2013 he posted a message stating that he “[could] not wait to start killing” multiple U.S. Senators and members of the U.S. House of Representatives, as well as a Governor and Mayor. MULQUEEN instructed people commenting on his posts to secure a “high powered rifle,” and recommended a particular Italian-manufactured shotgun as “very light and . . . semi-automatic, [with] no need to pump or reload.” He added that readers should “[u]se blades when you can to conserve bullets.” In other posts, MULQUEEN commanded readers to seek out and kill Latinos and at least one political activist.

MULQUEEN, 50, of Nanuet, NY, pled guilty to one count of threatening federal officials and one count of transmitting threatening communications. He faces a sentence of up to 15 years in prison and a fine of up to $500,000 and will be sentenced by Judge Karas on October 16, 2013. Separate state charges against MULQUEEN for criminal possession of a weapon remain pending in Rockland County Court.

Mr. Bharara praised the work of the Federal Bureau of Investigation, the United States Secret Service, and the Clarkstown Police Department in this investigation.

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that JEREMY HAMMOND, a/k/a “Anarchaos,” pled guilty in Manhattan federal court to conspiracy to engage in computer hacking for his role in the December 2011 hack of Strategic Forecasting, Inc. (“Stratfor”), a global intelligence firm in Austin, Texas, that affected approximately 860,000 victims, including employees and subscribers. During his guilty plea, HAMMOND also admitted his involvement in multiple additional hacks, including computer intrusions into the Federal Bureau of Investigation’s Virtual Academy, the Arizona Department of Public Safety, the Boston Police Patrolmen’s Association, and the Jefferson County, Alabama Sheriff’s Office. HAMMOND pled guilty today before Chief U.S. District Judge Loretta A. Preska.

Manhattan U.S. Attorney Preet Bharara stated: “While he billed himself as fighting for an anarchist cause, in reality, Jeremy Hammond caused personal and financial chaos for individuals whose identities and money he took and for companies whose businesses he decided he didn’t like. He was nothing more than a repeat offender cybercriminal who thought that because of his computer savvy he was above the law that binds and protects all of us – the same law that assured his rights in a court of law and allowed him to decide whether to admit his guilt or assert his innocence. Computer hacking is a very serious crime that violates the privacy and economic security of its victims and disrupts legitimate commerce. We will continue to make the prosecution and punishment of cybercriminals like Jeremy Hammond a top priority.”

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

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

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

HAMMOND, 28, of Chicago, Illinois, pled guilty to one count of conspiracy to engage in computer hacking and faces a maximum of 10 years in prison. He has also agreed to pay up to $2.5 million in restitution. He will be sentenced by Judge Preska on September 6, 2013 at 10 a.m.

Charges against four other hackers who were originally charged with HAMMOND, RYAN ACKROYD, JAKE DAVIS, DARREN MARTYN, and DONNCHA O’CEARRBHAIL – all of whom identified themselves as members of Anonymous or its offshoots, including “Internet Feds,” “LulzSec,” and “AntiSec” – remain pending. The charges are merely accusations, and the defendants are presumed innocent unless and until proven guilty. ACKROYD and DAVIS were convicted for cybercrimes by a British court in May 2013 and are serving their sentences there.

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

U.S. v. Jeremy Hammond S2 Information

Preet Bharara, the United States Attorney for the Southern District of New York, Michele M. Leonhart, Administrator of the Drug Enforcement Administration, 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 extradition of ALFONSO PORTILLO, the former President of Guatemala, who is charged with conspiring to launder millions of dollars he embezzled from the Government of Guatemala through bank accounts located in the United States. Portillo arrived in the Southern District of New York last Friday and will be presented today before U.S. District Judge Robert P. Patterson.

United States Attorney Preet Bharara said: “After three years of fighting his extradition, Alfonso Portillo has finally arrived in the United States to answer for his alleged misappropriation of millions of dollars intended for the benefit of the people of Guatemala and which he laundered through United States banks. Our ability to hold him to account for his alleged criminality and corruption is the result of the unrelenting commitment and dedication of our prosecutors and our law enforcement partners in both the United States and Guatemala.”

DEA Administrator Michele M. Leonhart said: “Former President Portillo has been extradited to the United States for violations of money laundering. In his role as President, Mr. Portillo used our banking system to launder illegal proceeds, which is a violation of law that DEA will always aggressively investigate. Thanks to the work of many in law enforcement and DEA’s strong and cooperative relationships with the Guatemalan government, Mr. Portillo will now face justice in a U.S. courtroom.”

IRS-CI Special Agent-in-Charge Toni Weirauch said: “IRS-Criminal Investigation is dedicated to working with our law enforcement partners and sharing our financial investigative expertise to combat and disrupt criminal organizations and individuals that commit crimes against our society and the world economy, including international money laundering. To that end, we are a proud participant in the DEA’s New York Organized Crime Drug Enforcement Strike Force. These money laundering allegations are truly international in nature, as the American financial system was misused and harmed in the concealment of money embezzled from the government of Guatemala and ultimately, its people.”

According to the Indictment previously unsealed in Manhattan federal court:

PORTILLO served as the President of Guatemala from January 14, 2000, to January 14, 2004. In that capacity, he embezzled tens of millions of dollars in public funds, a substantial portion of which he laundered through American and European bank accounts.

PORTILLO misappropriated public money in at least three different ways:

First, in 2000 and 2002, PORTILLO embezzled approximately $2.5 million dollars provided by the Government of Taiwan's Embassy in Guatemala. In 2000, the Taiwanese Embassy issued three checks totaling $1.5 million, drawn upon a New York bank account created for the purpose of funding a Guatemalan program designed to purchase books for school libraries, Bibliotecas Para La Paz ("Libraries for Peace"). PORTILLO endorsed these checks and caused them to be deposited in a bank account in Miami, Florida. None of the money from the Government of Taiwan was applied towards the Libraries for Peace program; almost $1 million of the donation was ultimately diverted, through a series of transactions and transfers intended to conceal the source and origin of the funds, to bank accounts in the name of PORTILLO's former wife and daughter at Banco Bilbao Vizcaya Argentaria ("BBVA") in Paris, France. The money transferred into the BBVA Accounts was further laundered through financial institutions in Luxembourg and Switzerland, among other places.

Second, in 2001, PORTILLO embezzled approximately 30 million Quetzales (equivalent at that time to approximately $3.9 million) from the Guatemalan Ministry of Defense. PORTILLO arranged for this money to be delivered to one of Guatemala's national banks, Credito Hipocaterio Nacional ("CHN"), to which PORTILLO had previously appointed a co-conspirator ("CC-1") as the bank’s president. With the assistance of CC-1, PORTILLO directed the disbursement of the military funds to, among other things, finance a private land deal, disguise a loan to an associate, and issue checks to a company controlled by another co-conspirator. That co-conspirator then transferred a portion of that money to the BBVA accounts controlled by PORTILLO's former wife and daughter through a Miami bank account.

Finally, from approximately 2000 through 2003, PORTILLO misappropriated funds from the publicly financed reserves of CHN. PORTILLO and his co-conspirators created overdrafts in CHN accounts belonging to companies established by CC-1 and other co-conspirators. Through the use of these overdrafts, PORTILLO and his co-conspirators withdrew and transferred money from CHN accounts in excess of the accounts' otherwise existing balances. PORTILLO used these overdraft withdrawals and transfers to purchase, among other things, various personal items –- including expensive watches and cars –- for himself and his associates. On other occasions, PORTILLO and his co-conspirators used the overdrafts on CHN accounts to transfer and launder funds into business and personal accounts, maintained in the United States and elsewhere, belonging to co-conspirators. Relying on the CHN overdrafts, PORTILLO also transferred money to help prop up two failing banks that were principally owned by a close associate and political supporter of PORTILLO's, Banco Promotor and Banco Metropolitano.

If convicted of the money laundering conspiracy count with which he is charged, PORTILLO, 61, faces a maximum term of 20 years in prison and a maximum fine of the greater of $500,000, or twice the value of the monetary instruments or funds involved in the money laundering transactions.

Mr. Bharara specifically thanked the DEA’s New York Organized Crime Drug Enforcement Strike Force – which is comprised of agents and officers of the DEA, the New York City Police Department, Immigration and Customs Enforcement’s Homeland Security Investigations, the New York State Police, IRS-CI, the Federal Bureau of Investigation, the Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S. Secret Service and the U.S. Marshals Service – the Department of State, and the U.S. Department of Justice's Office of International Affairs for their work in this investigation. Mr. Bharara also recognized and thanked the United Nations Commission Against Impunity in Guatemala ("CICIG"), the Guatemalan Special Prosecutor's Office for the CICIG, and the Ministerio Público in Guatemala for their assistance in this investigation.

This prosecution is being handled by the Office's Terrorism and International Narcotics Unit. Assistant United States Attorneys Rachel Kovner and Adam Fee are in charge of the prosecution.

The charge contained in the Indictment is merely an accusation and the defendant is presumed innocent unless and until proven guilty.

U.S. v. Alfonso Portillo Indictment

Investigation and Takedown Believed to Be the Largest International Money Laundering Prosecution in History, Involving Law Enforcement Actions in 17 Countries

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 U.S. Department of Justice (“DOJ”), Steven G. Hughes, the Special Agent-in-Charge of the New York Office of the U.S. Secret Service, Richard Weber, the Chief of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), and James T. Hayes, Jr., the Special Agent-in-Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), announced today the unsealing of an indictment charging LIBERTY RESERVE, a company that operated one of the world’s most widely used digital currency services, and seven of its principals and employees with money laundering and operating an unlicensed money transmitting business. LIBERTY RESERVE is alleged to have had more than one million users worldwide, including more than 200,000 users in the U.S, who conducted approximately 55 million transactions – virtually all of which were illegal – and laundered more than $6 billion in suspected proceeds of crimes including credit card fraud, identity theft, investment fraud, computer hacking, child pornography, and narcotics trafficking.

Five defendants were arrested on May 24, 2013, including ARTHUR BUDOVSKY, the principal founder of LIBERTY RESERVE, who was arrested in Spain; VLADIMIR KATS, the co-founder of LIBERTY RESERVE, who was arrested in Brooklyn, New York; AZZEDDINE EL AMINE, a manager of LIBERTY RESERVE’s financial accounts, who was arrested in Spain; and MARK MARMILEV and MAXIM CHUKHAREV, who helped design and maintain LIBERTY RESERVE’s technological infrastructure, who were arrested in Brooklyn, New York, and Costa Rica, respectively. Two other defendants, AHMED YASSINE ABDELGHANI (“YASSINE”) and ALLAN ESTEBAN HIDALGO JIMENEZ (“HIDALGO”), are at large in Costa Rica.

In addition to the criminal charges brought in the Indictment, five domain names were seized, namely, the domain name of LIBERTY RESERVE and the domain names of four exchanger websites that were controlled by one or more of the defendants; 45 bank accounts were restrained or seized; and a civil action was filed against 35 exchanger websites (see attached list) seeking the forfeiture of the exchangers’ domain names because the websites were used to facilitate the LIBERTY RESERVE money laundering conspiracy and constitute property involved in money laundering. The four exchangers whose domain names were seized, as well as the 35 exchangers whose domain names are the subjects of the civil forfeiture action, were all exchangers that transacted business with LIBERTY RESERVE and were listed on LIBERTY RESERVE’s website as “pre-approved exchangers.” The investigation and takedown involved law enforcement action in 17 countries, including Costa Rica, the Netherlands, Spain, Morocco, Sweden, Switzerland, Cyprus, Australia, China, Norway, Latvia, Luxembourg, the United Kingdom, Russia, Canada, and the U.S.

In a coordinated action, the U.S. Department of the Treasury and its Financial Crimes Enforcement Network today announced that LIBERTY RESERVE has been named as a financial institution of primary money laundering concern under Section 311 of the USA PATRIOT Act. This action includes a notice to the Federal Register proposing to prohibit covered U.S. financial institutions from opening or maintaining correspondent or payable-through accounts for foreign banks that are being used to process transactions involving LIBERTY RESERVE.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, the only liberty that Liberty Reserve gave many of its users was the freedom to commit crimes – the coin of its realm was anonymity, and it became a popular hub for fraudsters, hackers, and traffickers. The global enforcement action we announce today is an important step towards reining in the ‘Wild West’ of illicit Internet banking. As crime goes increasingly global, the long arm of the law has to get even longer, and in this case, it encircled the earth.”

Acting Assistant Attorney General Mythili Raman said: “As charged, Liberty Reserve operated, on an enormous scale, a digital currency system designed to provide cyber and other criminals with a way to launder their profits without leaving a trace. The company’s very purpose was to launder its users’ criminal proceeds through the U.S. and global financial system. By indicting Liberty Reserve and its principals, restraining over $25 million in criminal proceeds, forfeiting domain names, and seizing servers in countries around the globe, our message is clear: money launderers can run, but they can’t hide from the U.S. justice system. Combating the threat of global illicit finance requires using every tool we have at our disposal, and today we demonstrate our resolve to ensure that criminals who exploit the U.S. and global financial system will be held to account.”

Secret Service Special Agent-in-Charge Steven G. Hughes said: “These arrests are an example of the Secret Service’s commitment to investigate and apprehend criminals engaged in the misuse of virtual currencies to conduct global monetary fraud. Cyber criminals should be reminded today that they are unable to hide behind the anonymity of the Internet to avoid regulated financial systems. We are grateful to our many law enforcement partners throughout the world for assistance in this investigation, especially in Costa Rica, Spain and the Netherlands.”

IRS-CI Chief Richard Weber said: “We are now entering the cyber age of money laundering. Technology advancements over the past several years have dramatically increased opportunities for criminals to move, conceal and enjoy their ill-gotten gains. Liberty Reserve and its principals have been charged with operating a sophisticated and complex system for structuring financial transactions which catered to those engaged in such criminal activity. What they did not anticipate was our robust partnerships with domestic and foreign law enforcement that allowed us collectively to follow the cyber money trail in the United States and around the world.”

ICE HSI Special Agent-in-Charge James T. Hayes, Jr. said: “The actions of the U.S. Secret Service, IRS, and HSI in dismantling the Liberty Reserve operation are critical because transnational criminal organizations can succeed only so long as they can funnel their illicit proceeds freely and without detection. HSI is proud of its partnership through the Global Illicit Financial Team and will continue to aggressively target financial institutions that deliberately enable businesses and individuals to evade global financial systems in furtherance of criminal schemes.”

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

Background

LIBERTY RESERVE was incorporated in Costa Rica in 2006 and operated the digital currency commonly referred to as “LR.” While the company billed itself as the Internet’s “largest payment processor and money transfer system,” serving “millions” of people around the world, including the U.S., at no time did the company register with the U.S. Department of the Treasury as a money transmitting business, as required by law.

BUDOVSKY, the principal founder of LIBERTY RESERVE, directed and supervised its operations, finances, and corporate strategy. KATS, a co-founder, helped operate the company until 2009. The day-to-day operations of LIBERTY RESERVE were managed, at different times, by HIDALGO and YASSINE. EL AMINE managed various financial accounts controlled by LIBERTY RESERVE, while MARMILEV and CHUKHAREV were primarily responsible for designing and maintaining the company’s technological infrastructure.

Overview of Liberty Reserve’s Money Laundering Operation

The defendants created, structured, and operated LIBERTY RESERVE as a criminal bank-payment processor designed to help users conduct illegal transactions anonymously and launder the proceeds of their crimes. It emerged as one of the principal money transfer agents used by cyber criminals around the world to distribute, store, and launder the proceeds of their illegal activity. The company grew into a financial hub of the cybercrime world, facilitating a broad range of online criminal activity, including credit card fraud, identity theft, investment fraud, computer hacking, child pornography, and narcotics trafficking. LIBERTY RESERVE was used extensively for illegal purposes, functioning as the bank of choice for the criminal underworld because it provided an infrastructure that enabled cyber criminals around the world to conduct anonymous and untraceable financial transactions.

The defendants also protected the criminal infrastructure of LIBERTY RESERVE by, among other things, lying to anti-money laundering authorities in Costa Rica and pretending to shut down LIBERTY RESERVE after learning the company was being investigated by U.S. law enforcement. They then continued operating the business through a set of shell companies, and moved tens of millions of dollars through shell company accounts maintained in Cyprus, Russia, China, Hong Kong, Morocco, Spain, Australia, and elsewhere.

The Criminal Design of Liberty Reserve

In order to use LR currency, a user first had to open an account through the LIBERTY RESERVE website and provide basic identifying information. Unlike traditional banks or legitimate online processors, LIBERTY RESERVE did not require users to validate their identities. Users routinely established accounts under false names, including such blatantly criminal names as “Russia Hackers” and “Hacker Account.” As part of the investigation, a law enforcement agent opened and executed transactions through an undercover account at LIBERTY RESERVE in the name of “Joe Bogus” and the address “123 Fake Main Street” in “Completely Made Up City, New York.”

Once an account was established, the user could conduct transactions with other LIBERTY RESERVE users. In these transactions, the user could receive transfers of LR from other users’ accounts, and transfer LR from his or her own account to other users, including any “merchants” that accepted LR as payment. LIBERTY RESERVE charged a one-percent fee up to a maximum of $2.99, every time a user transferred LR to another user through the LIBERTY RESERVE system. For an additional “privacy fee” of 75 cents per transaction, a user could hide his or her own LIBERTY RESERVE account number when transferring funds, effectively making the transfer completely untraceable, even within LIBERTY RESERVE’s already opaque system.

To add an additional layer of anonymity, LIBERTY RESERVE did not permit users to fund their accounts by transferring money to the company directly through a credit card transfer or other means. Users also could not withdraw funds from their accounts directly. Instead, LIBERTY RESERVE users were required to make any deposits or withdrawals through the use of third-party “exchangers,” which enabled the company to avoid collecting any information about its users through banking transactions or other activity that would leave a centralized financial paper trail. BUDOVSKY, KATS, and EL AMINE owned and operated certain LIBERTY RESERVE exchanger services.

The LIBERTY RESERVE website recommended a number of “pre-approved” exchangers, which tended to be unlicensed money transmitting businesses operating in countries without significant governmental money laundering oversight or regulation, such as in Malaysia, Russia, Nigeria, and Vietnam. The exchangers charged transaction fees for their services that were much higher than the fees charged by mainstream banks or payment processors for comparable money transfers.

The Criminal Use of Liberty Reserve

To further enable the use of LIBERTY RESERVE for criminal activity, its website offered a “shopping cart interface” that “merchant” websites could use to accept LR currency as a form of payment. The “merchants” who accepted LR currency were overwhelmingly criminal in nature. They included traffickers of stolen credit card data and personal identity information, peddlers of various types of online Ponzi and get-rich-quick schemes, computer hackers for hire, unregulated gambling enterprises, and underground drug-dealing websites.

In addition to being used to process payments for illegal goods and services online, LIBERTY RESERVE was also used by cyber criminals to launder criminal proceeds and transfer funds among criminal associates. For example, LIBERTY RESERVE was used by credit-card theft and computer-hacking rings operating in countries around the world, including Vietnam, Nigeria, Hong Kong, China, and the U.S., to distribute proceeds of these conspiracies among the members involved.

The defendants were well aware that LIBERTY RESERVE functioned as an unlawful money-laundering enterprise. In an online chat between KATS and YASSINE that was captured by law enforcement, KATS explicitly described LIBERTY RESERVE’s activities as “illegal” and noted that “everyone in USA” such as “DOJ” knows “LR is [a] money laundering operation that hackers use.”

LIBERTY RESERVE, BUDOVSKY, 39, a citizen of Costa Rica who resides in the Netherlands, KATS, 41, of Brooklyn, New York, YASSINE, 42, of Costa Rica, HIDALGO, 28, of Costa Rica, EL AMINE, 46, of Costa Rica, MARMILEV, 33, of Brooklyn, New York, and CHUKHAREV, 27, of Costa Rica, are each charged with one count of conspiracy to commit money laundering, which carries a maximum term of 20 years in prison, one count of conspiracy to operate an unlicensed money transmitting business, which carries a maximum term of five years in prison, and operation of an unlicensed money transmitting business, which carries a maximum term of five years in prison. The terms of incarceration apply to the individual defendants.

Mr. Bharara praised the outstanding investigative work of the Secret Service, the IRS-CI, and ICE HSI, which worked together in this case as part of the Global Illicit Financial Team. He also thanked the Secret Service’s New York Electronic Crimes Task Force for their extraordinary assistance with the investigation. Additionally, Mr. Bharara specially thanked all the international law enforcement agencies that assisted this investigation, in particular, the Judicial Investigation Organization in Costa Rica, the National High Tech Crime Unit in the Netherlands, the Spanish National Police, Financial and Economic Crime Unit, the Cyber Crime Unit at the Swedish National Bureau of Investigation, and the Swiss Federal Prosecutor’s Office. Mr. Bharara also thanked the Shadowserver Foundation for acting as the hosting provider for the domain names that were seized pursuant to the Court-authorized seizure warrants.

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

If you believe you were a victim of a crime and were defrauded of funds through the use of Liberty Reserve, and you wish to provide information to law enforcement and/or receive notice of future developments in the case or additional information, please contact (888) 238-0696 or (212) 637-1583.

The prosecution of this case is being handled by the Office’s Complex Frauds Unit and Asset Forfeiture Unit.

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

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U.S. v. Liberty Reserve, et al. Indictment - Redacted
U.S. v. Liberty Reserve, et al. Redacted AUSA Appln
U.S. v. Liberty Reserve, et al. Redacted Domain SW
U.S. v. Liberty Reserve, et al. Redacted Injunction Order

U.S. v. Liberty Reserve, et al. Redacted AUSA Appln with Exhibits
U.S. v. Liberty Reserve, et al. Redacted Domain SW
U.S. v. Liberty Reserve, et al. Redacted Injunction Order
U.S. v. Liberty Reserve, et al. Redacted PIRO
Liberty Reserve, et al. Related Exchanger Website Domain Names Redacted Filed Complaint 13CV3565
U.S. v. Liberty Reserve, et al. Indictment - Redacted

Preet Bharara, the United States Attorney for the Southern District of New York, announced that INOCENCIA ORTEGA was sentenced today in Manhattan federal court to 13 years in prison for conspiring to sexually exploit a child and making false statements related to sex offenses. ORTEGA pled guilty in June 2012. She was sentenced today by U.S. District Judge Paul A. Engelmayer.

Manhattan U.S. Attorney Preet Bharara stated: “Inocencia Ortega facilitated the exploitation of a child, and then compounded her crime by lying to investigators. With her sentence today, this Office continues its work to prosecute and punish child predators and those who enable their heinous crimes.”

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

In July 2011, ORTEGA and her co-defendant, Luciano Mendez-Rojas, engaged in sexually explicit conduct together in their home in the Bronx, New York, while their minor child filmed videos of their conduct at the direction of Mendez-Rojas.

On October 19, 2011, ORTEGA falsely stated to two federal agents that her children never told her that they had seen child pornography downloaded by Mendez-Rojas. However, her minor child had already told ORTEGA that he had seen a video containing child pornography.

In addition to the prison term, Judge Engelmayer sentenced ORTEGA, 36, a citizen of Mexico, to three years of supervised release. She must also register as a sex offender, and was ordered to pay a $200 special assessment.

Mr. Bharara praised the investigative work of Immigration and Customs Enforcement’s

(ICE) Homeland Security Investigations (HSI) and the New York City Police Department.

The case is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Kristy J. Greenberg and Daniel C. Richenthal are in charge of the prosecution.

ICE HSI encourages the public to report suspected child predators and any suspicious

activity through its toll-free hotline at 1-866-347-2423. This hotline is staffed around the clock

by investigators.

Suspected child sexual exploitation or missing children may be reported to the National Center for Missing and Exploited Children, an Operation Predator partner, at 1-800-843-5678 or http://www.cybertipline.com.

Preet Bharara, the United States Attorney for the Southern District of New York, today announced that RICHARD AMMAR CHICHAKLI, an associate of the convicted international arms dealer Viktor Bout, was extradited from Australia on charges that he allegedly conspired with Bout and others to violate the International Emergency Economic Powers Act (“IEEPA”) by attempting to purchase two aircraft from companies located in the United States, in violation of economic sanctions that prohibited such financial transactions. CHICHAKLI is also charged with money laundering conspiracy, wire fraud conspiracy, and six separate counts of wire fraud in connection with the attempted aircraft purchases. CHICHAKLI, a citizen of Syria and the United States, was arrested by Australian authorities on January 9, 2013, at the request of the United States. He will appear before U.S. Magistrate Judge Sarah Netburn for presentment and arraignment on May 25, 2013.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Richard Chichakli and Viktor Bout had common cause – the purchase of aircraft in violation of international sanctions against them for their involvement in facilitating arms delivery to some of the world’s most lethal combat zones. With his extradition today to face charges for his flagrant violation of international sanctions and other crimes, he will now face the same American justice Viktor Bout did.”

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

CHICHAKLI was a close associate of Viktor Bout since the mid-1990s. Bout is currently serving a 25-year prison term as a result of his November 2011 conviction in the Southern District for conspiring to sell millions of dollars of weapons to the Fuerzas Armadas Revolucionarias de Colombia (the “FARC”), a designated foreign terrorist organization based in Colombia. Prior to his arrest on those charges in March 2008, in Thailand, and since the 1990s, Bout was an international weapons trafficker. He carried out his massive weapons-trafficking business by assembling a fleet of cargo airplanes capable of transporting weapons and military equipment to various parts of the world, including Africa, South America, and the Middle East. CHICHAKLI assisted Bout in the operations and financial management of his network of aircraft companies.

The arms Bout sold or brokered have fueled conflicts and supported regimes in Afghanistan, Angola, the Democratic Republic of the Congo, Liberia, Rwanda, Sierra Leone and Sudan. As a result of Bout’s role in pouring arms into these international conflicts, his relationship with CHICHAKLI, and Bout and CHICHAKLI’s close relationship with former Liberian President Charles Taylor, both Bout and CHICHAKLI have been the subject of United Nations Security Council (“UNSC”) sanctions restricting their travel and their ability to conduct business around the world. In addition, more than 25 companies affiliated with Bout and CHICHAKLI have been listed by the UNSC as subject to similar restrictions concerning their assets and financial transactions.

In 2004, consistent with the sanctions previously adopted by the UNSC concerning Liberia, the President of the United States issued an executive order prohibiting any transactions or dealings within the United States by individuals affiliated with former President Taylor. Accordingly, the U.S. Department of Treasury, pursuant to its authority under IEEPA, prohibited Bout from conducting any business in the U.S. In 2005, that prohibition was extended to CHICHAKLI.

The United Nations and IEEPA sanctions encumbered CHICHAKLI’s and Bout’s efforts to conduct business within their existing corporate structures. Accordingly, CHICHAKLI and Bout took steps to form new companies, and to register these companies in the names of other individuals in order to create the false appearance that they had no affiliation with them.

One such company – Samar Airlines – was created in 2004, right after the majority of United Nations and IEEPA sanctions became effective. CHICHAKLI and Bout were personally involved in the operational and business affairs and decisions of Samar Airlines, though they held out other individuals as being the officers of the company. In 2007, in violation of the IEEPA sanctions to which they were subject at the time, CHICHAKLI and Bout, acting through Samar Airlines, contracted to purchase two Boeing aircraft from companies located in the United States.

In connection with the purchase of these aircraft and related services, CHICHAKLI and Bout electronically transferred more than $1.7 million through banks in New York and into bank accounts located in the United States. They did so through a number of front companies, the assets of which were also owned and controlled by Bout, in order to evade the UNSC’s sanctions regime and IEEPA prohibitions. Upon the discovery that CHICHAKLI was connected to Samar Airlines, the U.S. Treasury Department blocked the funds that had been transferred into the bank accounts of the U.S. aviation companies.

The Superseding Indictment charges CHICHAKLI with nine separate offenses:

• Count One: Conspiracy to violate the International Emergency Economic Powers Act;
• Count Two: Money laundering conspiracy;
• Count Three: Wire fraud conspiracy; and
• Counts Four through Nine: Wire fraud.

If convicted, CHICHAKLI faces a maximum sentence of 20 years in prison on each of the nine counts. The case is assigned to U.S. District Judge William H. Pauley, III.

Mr. Bharara praised the outstanding investigative efforts of the DEA and thanked the Australian Federal Police, the Victoria State Police, the Australian Attorney General’s Department, the U.S. Department of Justice Office of International Affairs, the U.S. Department of State, and Interpol for their assistance in this matter.

The case is being handled by the Terrorism and International Narcotics Unit. Assistant United States Attorneys Jenna M. Dabbs and Christian R. Everdell 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. Richard Ammar Chichakli S2 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that PETER J. AJEMIAN, a Board-certified orthopedist, was sentenced today in Manhattan federal court to eight years in prison for his role in the alleged massive fraud scheme in which Long Island Railroad (“LIRR”) workers claimed to be disabled upon early retirement so that they could receive disability benefits to which they were not entitled. Between the late 1990s and 2008, AJEMIAN recommended that at least 734 retiring LIRR employees receive disability benefits, and was responsible for treating nearly half of all LIRR employees who retired and received disability benefits in one four-year period. AJEMIAN pled guilty in January 2013 to one count of conspiracy to commit mail fraud, wire fraud, and health care fraud, and one count of health care fraud before U.S. District Judge Victor Marrero, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara stated: “Today Dr. Ajemian begins to pay the price for being a key facilitator of a massive disability fraud on the LIRR, that he admitted resulted in losses of millions of dollars. This Office will continue to pursue those who participated in this scheme to abuse LIRR’s disability system and gain benefits to which they were not entitled.”

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

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.

AJEMIAN is a Board-certified orthopedist who was instrumental in helping LIRR retirees receive disability benefits to which they were not entitled. Between the late 1990s and 2008, he declared over 94% of the LIRR employees he saw as patients disabled. As part of the massive fraud scheme, AJEMIAN prepared false documentation purporting to show the LIRR employees’ steady decline toward disability exactly at the time they pre-planned their retirement. He then provided to those LIRR employees a narrative for submission to the RRB that claimed they should receive a disability annuity. These medical narratives were completely fabricated or grossly exaggerated so that AJEMIAN could recommend a set of restrictions that, if legitimate, would render it impossible for the LIRR employees to continue performing their jobs. Many of the purportedly “objective” findings from the tests he conducted showed nothing more than normal degenerative changes one would expect to see in patients within the relevant age bracket.

AJEMIAN received approximately $800 to $1,200, often in cash, for these fraudulent assessments and narratives, as well as millions of dollars in health insurance payments for unnecessary medical treatments and fees for preparing fraudulent medical support for the claimed disabilities. Of approximately 453 LIRR annuitants studied, AJEMIAN received approximately $2.5 million in related payments from patients and insurance companies. In turn, those patients have received over $90 million in RRB disability benefit payments. In his plea agreement, Ajemian stipulated that the total intended losses from his fraud were between $100 and $200 million, and that the actual losses suffered by victims to date total $116.5 million.

In addition to his prison term, AJEMIAN, 63, of Oyster Bay Cove, New York was also sentenced to three years of supervised release. He has also agreed to forfeit $116.5 million and pay $116.5 million in restitution, and was ordered to pay a $200 special assessment.

In sentencing AJEMIAN, Judge Marrero said, “Putting all of these circumstances together conveys the gravity of Dr. Ajemian's criminal conduct in its grittiest perspective. Dr. Ajemian corrupted the license publicly granted to him to practice medicine, and betrayed the public trust embodied in that privilege. By his fraudulent actions, he not only distorted his professional duties, but flipped the physician's medical function on its head and made health care a mockery. In the cases encompassed by the charged conspiracy, Dr. Ajemian generally treated not ill employees, but fit ones. He provided physician's services not to restore these patients to good health, or prevent sickness, but to turn able-bodied employees into fully-pensioned annuitants falsely afflicted by certified lifetime disabilities.”

Thirty-two people have been charged in connection with the LIRR disability fraud scheme, 23 of whom have now pled guilty. The charges against the remaining defendants are merely allegations and they are all presumed innocent unless and until proven guilty.

Mr. Bharara praised the RRB-OIG, the FBI, and the MTA-OIG 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 Office’s Complex Frauds Unit is handling the case. Assistant U.S. Attorneys Justin Weddle, Daniel Tehrani, and Nicole Friedlander are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ERIN DAVIS, former sales manager for the now defunct Buy-A-Home real estate brokerage business, was sentenced today in Manhattan federal court to 24 months in prison for participating in a multi-million dollar mortgage fraud scheme. DAVIS and Buy-A-Home’s owner, Mitchell Cohen, were indicted in July 2012. DAVIS pled guilty in January 2013 to one count of conspiracy to commit mail, wire and bank fraud, and was sentenced today before U.S. District Judge Denise L. Cote.

Manhattan U.S. Attorney Preet Bharara stated: “At the ground level of the mortgage crisis were people like Erin Davis, a top manager at Buy-A-Home, who orchestrated falsehoods and moved money around to generate millions of dollars of fraudulently obtained mortgages. This Office remains committed to using every legal means available to hold to account those who helped contribute to the home mortgage crisis and to FHA’s dire financial straits.”

According to the Indictment and statements made during court proceedings:

From 2007 through 2010, the U.S. Department of Housing and Urban Development’s Federal Housing Administration (“HUD-FHA”) provided mortgage insurance to borrowers seeking residential mortgages. Unlike conventional loans, FHA-insured loans required little cash investment from borrowers and were more flexible in income and payment ratio requirements. To qualify for FHA mortgage insurance, a potential borrower had to meet HUD requirements regarding his or her creditworthiness and ability to make mortgage payments. No undisclosed payments could be made or promised in connection with a residential mortgage transaction. Additionally, certain private lenders were authorized to make commitments for the provision of FHA mortgage insurance on behalf of HUD. They did so through the execution and ultimate submission to HUD of various mortgage documents, forms, and supporting documentation. Because FHA-backed mortgages were valuable commodities, lenders typically sold them to banks that pooled them and then resold them to institutional investors.

From April 2007 through October 2010, DAVIS was a sales manager for a real estate brokerage business in Queens, New York known, at various times, as Buy-a-Home, LLC and First Home Brokerage, LLC (“Buy-a-Home”). During that time period, DAVIS and Cohen engaged in a widespread conspiracy to defraud HUD into issuing FHA mortgage insurance and to defraud banks into purchasing the FHA-backed mortgages issued to Buy-a-Home’s clients in order to earn substantial profits. DAVIS, Cohen and others at Buy-a-Home recruited unsophisticated buyers of modest means and induced them into purchasing the same homes at inflated prices. To insure that the deals for these properties would go through, DAVIS, Cohen and others schemed to make the Buy-a-Home clients – who did not and could not qualify to receive FHA mortgage insurance – seem more creditworthy.

In furtherance of this scheme, DAVIS directed Buy-a-Home employees to pay off borrowers’ debts, often with cash funneled through bank accounts of borrowers’ relatives, in order to make the borrowers appear more creditworthy and to make it seem that their debts had been paid by an appropriate source; directed Buy-a-Home employees to provide cash to borrowers so that they could obtain certified checks falsely showing that they had sufficient funds to close; prepared false gift affidavits to make it seem that the borrowers’ debts had lawfully been paid off, or that the borrowers’ funds for closing had been appropriately provided by relatives, when in fact they had unlawfully paid off the debts themselves or through Buy-a-Home; and advised borrowers to make other false statements on loan applications submitted to HUD. In so doing, DAVIS concealed the borrowers’ true financial condition from HUD and the banks that subsequently bought the FHA-backed mortgages, all in an effort to insure that they and Buy-a-Home could profit from the deals.

Through this scheme, DAVIS, Cohen and others defrauded HUD into issuing, and banks into purchasing, over $7.5 million dollars in fraudulent loans. Furthermore, because the FHA insurance was based on false statements made to HUD, and the borrowers could not really afford their mortgages, many of the homes went into foreclosure proceedings, forcing HUD to pay out over $1.5 million in insurance payments.

In addition to the prison term, Judge Cote sentenced DAVIS, 44, of Yonkers, New York, to three years of supervised release. DAVIS was also ordered to forfeit $2,416,597, and to pay $117,992.19 in restitution to HUD-FHA. She will surrender on July 5, 2013, at 2 p.m.

On April 26, 2013, Judge Cote sentenced DAVIS’s co-defendant, Mitchell Cohen, to 70 months in prison. Cohen was also ordered to forfeit $7,515,966, and to pay $1,574,259.43 in restitution to HUD-FHA. He will surrender on June 28, 2013, at 2:00 p.m. COHEN also settled a related civil case. The civil judgment against Cohen consists of $2.2 million in damages and $500,000 in penalties, and is the fifth and final settlement in the civil action. In four prior settlements entered in 2011 and 2012, the Government recovered $1.55 million in damages and penalties from the lender and the appraisers. The lender, the lender’s principals and key employees, and the appraisers all agreed to be barred from all HUD programs either permanently or for a term of up to 10 years.

Mr. Bharara praised HUD-OIG and FHFA-OIG for their outstanding work in the investigation.

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. Attorneys Janis Echenberg and Nicole Friedlander are in charge of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that ANAND SEKARAN, the President and Director of Wasson Capital Ltd. (“Wasson”), an investment fund, was sentenced today in Manhattan federal court to 30 months for engaging in a $2.3 million scheme to defraud Wasson’s investors. SEKARAN misled Wasson investors concerning the fund’s value, distributed funds to investors that were contributed from other investors, and issued fraudulent account and fund performance statements. He pled guilty in November 2012, and was sentenced today by U.S. District Judge Robert P. Patterson.

Manhattan U.S. Attorney Preet Bharara said: “Anand Sekaran spun a web of lies and engineered a Peter-to-pay-Paul scheme all designed to deceive existing investors, lure new investors and cover-up his market losses while he benefited financially. Sekaran left many of his investors to suffer dire financial consequences, and now it is Sekaran who will suffer the consequences of his actions.”

According to the Information and statements made during the guilty plea and other court proceedings:

In 1997, SEKARAN formed Wasson as an asset management firm in New York, New York, that would invest client money primarily in the U.S. options market, and he solicited investors from 1999 through 2010. As a result of both the substantial losses Wasson incurred and several redemption requests, SEKARAN defrauded investors, by diverting their funds, and perpetrating a “Ponzi” scheme using two different methods, from 2009 through June 2011.

First, SEKARAN misrepresented Wasson’s investment value and past performance, the ways investor funds were being used to existing and potential investors, and the source of funds distributed to investors who had requested redemptions. Specifically, he misrepresented that Wasson was stable and doing well so that he could secure additional contributions. Further, in response to certain investor redemption requests, SEKARAN used money from other investors to pay off the redeeming investors.

Second, SEKARAN distributed fraudulent statements to investors in order to forestall redemption requests, induce new investors to contribute to Wasson, and induce existing investors to provide additional contributions. For example, he caused misleading and fabricated account statements to be sent to several Wasson investors that falsely inflated the value of their investments. SEKARAN also created and distributed fraudulent performance statements purporting to show that the Wasson fund was performing well, when in fact, it was suffering losses.

In the course of his scheme, SEKARAN misappropriated approximately $500,000 of investor funds. Further, more than 10 investors lost a total of approximately $2 million.

In addition to the prison term, Judge Patterson sentenced SEKARAN, 44, of Miami, Florida, to three years of supervised release. SEKARAN was also ordered to pay $2.3 million in forfeiture, to make restitution in the amount of $2,264,998.12, and to pay a $200 special assessment fee.

Mr. Bharara praised the investigative work of the Criminal Investigators of the United States Attorney’s Office and the U.S. Postal Inspection Service, which jointly investigated this case. He also thanked the Securities and Exchange Commission for its assistance.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which 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. Attorney David I. Miller is in charge of the prosecution.