Southern District of New York

Illegally Distributed Nearly 44 Million Cigarettes, Which Resulted in Over $7 Million in Lost Tax Revenue

Preet Bharara, the United States Attorney for the Southern District of New York, and James T. Hayes, Jr., the Special Agent-in-Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), announced today the unsealing of a three-count Indictment charging 37 members of a Chinese marijuana and contraband cigarette trafficking organization (the “Organization”) that operated throughout the United States. The Organization allegedly conspired to manufacture and distribute over $45 million worth of marijuana, and to illegally distribute nearly 44 million cigarettes, which resulted in over $7 million in lost tax revenue. Thirty-two members of the Organization were arrested this morning in New York, New Jersey, California, Tennessee, Alabama, and Rhode Island as part of a coordinated operation involving federal, state, and local law enforcement officers. The Indictment has been assigned to U.S. District Judge Miriam Goldman Cedarbaum; the 14 defendants arrested in New York and New Jersey will appear before Judge Cedarbaum this afternoon in Manhattan federal court. The remaining 18 defendants will appear before U.S. Magistrate Judges in the Eastern and Central Districts of California, the Northern District of Alabama, the Middle District of Tennessee, and the District of Rhode Island. One additional defendant is scheduled to surrender in Arkansas this afternoon, and four others are still at large.

Manhattan U.S. Attorney Preet Bharara said: “Today’s arrests deal a blow to an organization that allegedly conspired to manufacture multi-million dollar quantities of marijuana that they would then distribute, along with millions of contraband cigarettes, nationwide. Thanks to the coordinated efforts of federal, state, and local law enforcement around the country, this alleged supply chain has effectively been broken.”

ICE HSI Special Agent-in-Charge James T. Hayes, Jr., said: “This alleged drug trafficking organization was a highly organized network. These allegedly corrupt people were savvy in their alleged scheme to move hundreds of thousands of dollars and drugs throughout the United States. While some may mistakenly perceive smuggling and trafficking in narcotics as a path to a quick profit, these arrests demonstrate the serious consequences that await those who engage in the smuggling and sale of illegal drugs.”

As alleged in the Indictment and other court documents:

Since 2010, the defendants were part of a nationwide organization that produced and distributed marijuana, and distributed contraband cigarettes from California to various places throughout the U.S., including the New York City area. PAUL COONG LAY and his brother CHAN COONG LAY maintained a network of marijuana grow locations throughout California and elsewhere. For example, in October 2012, law enforcement executed a search warrant at one such location in Porterville, California – after observing PAUL and CHAN LAY visiting the premises – seizing more than 200 pounds of processed marijuana and approximately 185 live marijuana plants.

Marijuana grown by the LAY brothers, along with contraband cigarettes, were then shipped by tractor trailer from the Los Angeles region throughout the U.S., using a trucking company owned and operated by STEVEN QU and his wife YUN XING (the “Trucking Company”). QU’s trucks were followed by law enforcement to locations in Colorado, Tennessee, and New York, where they off-loaded hundreds of pounds of marijuana and/or cases of cigarettes. For example, in the New York area, law enforcement observed on numerous occasions WAI C. AU-YEUNG, RU XIANG MEI, and XIUZHEN LIN meet and unload QU’s trucks at a warehouse in Jersey City, New Jersey. AU-YEUNG, MEI, and LIN then transported the contraband to locations in Manhattan and Brooklyn, where it was distributed. During the course of the investigation, law enforcement seized in excess of 120 pounds of marijuana, 1,816 cartons of contraband cigarettes, and 545,860 counterfeit cigarette tax stamps from the New York arm of the Organization alone.

In the Tennessee area, law enforcement observed on various occasions DENISE RAGLAND and others unloading the trucks at a warehouse maintained by QU’s Trucking Company. Earlier this month, for example, law enforcement observed CHAN LAY – who had traveled from California to Tennessee to supervise the shipment – and OAKLEY SIMPSON, among others, unloading one of the Organization’s trucks. Law enforcement subsequently arrested SIMPSON, who was in possession of approximately 80 pounds of marijuana.

Money generated by the sale of the Organization’s marijuana and contraband cigarettes was also laundered by members of the Organization through a variety of means. For example, members regularly flew from New York and elsewhere to California carrying hundreds of thousands of dollars. In October 2011, for instance, law enforcement seized approximately $180,000 from WAI C. AU-YEUNG, XIUZHEN LIN, and HOA PHAN as they were about to board a flight from New York to California. Other members of the Organization shipped cash from the East Coast back to California using the trucks registered to QU’s Trucking Company. For example, in September 2012, law enforcement seized approximately $110,000 in cash from PAUL LAY, which was concealed in cardboard shipping boxes otherwise filled with lollipops.

Other members of the Organization laundered proceeds of the marijuana and cigarette operations through financial institutions. For example, in September 2012, law enforcement seized approximately $114,000 from TONGMIAO YAN. According to YAN, those funds belonged to JIA QIAO. A review of QIAO’s bank records, among other sources of information, revealed that QIAO and her husband, JAMES CHEN, have been laundering funds for the Organization through two entities that they control.

In conjunction with today’s arrests, law enforcement also seized the contents of 17 banks accounts used by the Organization to launder the proceeds of its marijuana and contraband cigarette distribution business, including accounts belonging to STEVEN QU’s Trucking Company and to the entities controlled by JAMES CHEN and JIA QIAO. Law enforcement also seized a number of vehicles, including four tractor trailers registered to the Trucking Company.

A chart containing the names, ages, residence information, charges against the defendants, and the maximum penalties they face, is attached.

Mr. Bharara praised the outstanding investigative work of ICE HSI. He also thanked the Nassau County Police Department, the Los Angeles Police Department, the U.S. Marshals, and the Internal Revenue Service – Criminal Investigations for their assistance in the case.

This case is being handled by the Office’s Narcotics Units. Assistant United States Attorneys Matthew L. Schwartz, Paul Monteleoni, and Eun Young Choi are in charge of the prosecution.

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

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U.S. v. Paul Coong Lay, et al. Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, and Richard T. Vignogna, the Acting Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced that CRAIG L. BERKMAN was arrested today for perpetrating two separate securities fraud schemes involving the purported sale of pre-Initial Public Offering (“IPO”) shares of Facebook, Inc. stock that neither he nor the entities he controlled owned. BERKMAN received a total of at least $8 million from these schemes – the majority of which he misappropriated for his own benefit. He was arrested at his home in Odessa, Florida, this morning, and is expected to be presented today in federal court in Tampa, Florida.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Craig Berkman seized on the interest in a highly coveted investment opportunity to swindle investors out of millions. With his arrest, this Office continues our work to identify the perpetrators of financial fraud, hold them accountable, and protect investors.”

USPIS Acting Inspector-in-Charge Richard T. Vignogna said: “Today's arrest of Mr. Berkman for allegedly using the popularity of the social networking site Facebook to defraud investors out of millions of dollars is an example of the investigative tenacity of Postal Inspectors to bring to justice anyone who uses the US Mail for fraud.”

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

According to a criminal complaint unsealed today in Manhattan federal court:

Beginning in December 2010, BERKMAN created Ventures Trust II, LLC, a Delaware private equity investment limited liability company that he also controlled. He falsely represented to investors that Ventures Trust II owned shares in Facebook, which at the time was privately held. Owning interests in Facebook stock was a particularly attractive opportunity for investors because of the expectation that it would soon go public through an IPO.

In reality, Ventures Trust II never had any interest in Facebook except for a small indirect interest through another investment fund (“Fund-1”). In early 2012, Fund-1 discovered that Ventures Trust II management had been showing investors a forged letter that purported to be from Fund-1’s lawyer, and which misrepresented Ventures Trust II’s true interest in Fund-1. As a result, Fund-1 terminated Ventures Trust II’s interest.

As recently as August 2012 – after Facebook’s IPO, when investors were beginning to try to redeem their investments – a lawyer acting on behalf of Ventures Trust II wrote to investors to reassure them that the company still owned Facebook stock through Fund-1, and insisted that Ventures Trust II “is not a Ponzi scheme.” Based on misrepresentations by BERKMAN and others, more than 50 investors sent approximately $5.5 million to various accounts in the name of Ventures Trust II, which were controlled by BERKMAN.

In a separate but related fraud, beginning in March 2012, BERKMAN created Face Off Acquisitions LLC, an entity that, according to its offering materials, was designed to acquire a New York-based LLC that already held more than 1 million pre-IPO shares of Facebook (“Fund-2”). BERKMAN told investors that the acquisition would cost approximately $40 to $50 million. He also falsely stated that a prominent billionaire investor had already committed to invest in Face Off, when in fact the billionaire investor had never heard of Face Off. BERKMAN obtained approximately $2.5 million from at least 14 Face Off investors, and then falsely told those investors that Face Off had successfully acquired Fund-2, although he had held only exploratory conversations with Fund-2 intermittently over a period of about two years.

The approximately $5.5 million BERKMAN acquired from the Ventures Trust II investors and the approximately $2.5 million that he acquired from the Face Off investors were subsequently transferred to his personal account. Instead of using the investor funds to acquire shares of Facebook, BERKMAN misappropriated a substantial portion of the money for his own benefit and the benefit of others. He transferred several million dollars of investor funds to lawyers representing him in bankruptcy proceedings, apparently to fund an altogether different settlement with his creditors.

BERKMAN, 71, was arrested at his home in Odessa, Florida. He is charged with two counts of securities fraud and two counts of wire fraud. He faces a maximum sentence of 20 years in prison on each of the four counts in the complaint. He also faces a fine of the greater of $5 million or twice the gross gain or gross loss from the offense on the securities fraud charges, as well as fines of lesser amounts on the wire fraud charges.

Mr. Bharara praised the work of the Criminal Investigators of the United States Attorney’s Office and the USPIS, which jointly investigated this case. He also thanked the SEC.

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. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

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.

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

U.S. v. Craig Berkman Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced that WILLIAM LANDBERG, former Chairman and Chief Executive Officer (“CEO”) of West End Financial Advisors, LLC (“West End”), was sentenced today to 42 months in prison in connection with an $8.7 million investment scheme. LANDBERG pled guilty in November 2011 to one count of securities fraud before U.S. District Judge Laura Taylor Swain, who also imposed today’s sentence.

According to the Information filed in Manhattan federal court:

West End was a boutique financial services firm located in New York, New York, specializing in alternative investment opportunities and traditional asset management for various types of clients, including institutions and high net worth individuals. West End served as the investment manager for various partnerships it established as investment vehicles or investment funds and raised money for them through the sale of limited partnership interests. In addition to serving as West End's Chairman, CEO, and Manager, LANDBERG also served as the Chairman of Sentinel Investment Management Corporation (“Sentinel”), an investment adviser registered with the U.S. Securities and Exchange Commission (the “SEC”) that shared office space with West End.

Among the funds managed by West End was the West End/Mercury Short Term Mortgage Fund LP (the “Hard Money Fund”). According to a private placement memorandum issued to investors by the Hard Money Fund (the “Hard Money Fund PPM”), its objective was to “achieve short term, high-yield interest income through the making, servicing, purchasing, selling and repurchasing, and purchasing and selling participation in, mortgage loans” (the “Mortgage Loans”). According to the Hard Money Fund PPM, the Hard Money Fund would sell mortgage loans on particular properties to MCC Funding, Inc. (“MCC Funding”), a wholly owned subsidiary of the Hard Money Fund. MCC Funding would purchase the Mortgage Loans using capital contributions made to MCC Funding by Hard Money Fund investors, as well as principal and interest advances it received from the New York branch of West LB AG (“West LB”), a bank headquartered in Germany. In return, West LB would receive the Mortgage Loans as collateral for the fund advances.

The Hard Money Fund PPM specifically stated that MCC Funding would use the proceeds from West LB “only to purchase Mortgage Loans from the [Hard Money] Fund and to satisfy reserve and fee obligations under the Credit and Security Agreement.” Instead, from January 2009 to April 2009, LANDBERG obtained three loan advances from West LB totaling $8.7 million – all purportedly for Hard Money Fund transactions – and diverted the funds to other uses, including for his own benefit. He also put some of the money into a separate fund managed by West End.

In addition to his prison term, LANDBERG, 61, of New York, New York, was sentenced to three years of supervised release, with 18 months on home confinement. He was also ordered to forfeit $8.7 million, which is the amount he misappropriated during the scheme, and pay $1.125 million in restitution.

Mr. Bharara praised the work of the Federal Bureau of Investigation and thanked the SEC for its assistance 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.

Assistant United States Attorney Jenna Dabbs is in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that SOL NAIMARK, an attorney, pled guilty to his role in two separate conspiracies to defraud private insurance companies under New York’s no-fault automobile insurance law, including one charge related to the largest single no-fault automobile insurance fraud scheme ever charged. NAIMARK pled guilty yesterday before U.S. District Judge J. Paul Oetken. Recently, ALEXANDER SANDLER, an owner and controller of several fraudulent no-fault clinics, GREGORY MIKHALOV, an owner and controller of medical clinics, LYNDA TADDER, a manager at a no-fault clinic, and CHAD GREENSHNER, a licensed chiropractor, also pled guilty to conspiracy to commit mail fraud and health care fraud in connection with the scheme before Judge Oetken.

The five defendants were arrested in February 2012, along with 31 others, and charged with conspiracy to commit mail fraud and health care fraud in connection with a systemic scheme to defraud private insurance companies of more than $279 million under New York’s no-fault automobile insurance law. Some of the defendants were also charged with racketeering and money laundering. A total of 10 defendants, including one licensed doctor, have now pled guilty. NAIMARK also pled guilty to a separate conspiracy to commit health care fraud.

Manhattan U.S. Attorney Preet Bharara said: “Sol Naimark actively solicited clients for whom he could churn out bogus lawsuits as part of a multi-million dollar insurance fraud scheme. It is particularly egregious when an attorney uses his license to perpetrate a fraud.”

According to the Superseding Information and other publicly filed information in the case, and the defendants’ statements in open court:

Under New York State Law, every vehicle registered in New York State is required to have no-fault automobile insurance, which enables the driver and passengers of a registered and insured vehicle to obtain benefits of up to $50,000 per person for injuries sustained in an automobile accident, regardless of fault, (the “No-Fault Law”). The No-Fault Law requires prompt payment for medical treatment, thereby obviating the need for claimants to file personal injury lawsuits in order to be reimbursed. Under the No-Fault Law, patients can assign their right to reimbursement from an insurance company to others, including medical clinics that provide treatment for their injuries. New York State Law also requires that all medical clinics in the State be incorporated, owned, operated, and/or controlled by a licensed medical practitioner in order to be eligible for reimbursement under the No-Fault Law. Insurance companies will not honor claims for medical treatments from a medical clinic that is not actually owned, operated, and controlled by a licensed medical practitioner.

In order to mislead New York authorities and private insurers, some of the defendants in this case who were the true owners of these medical clinics (“No-Fault Clinic Controllers”) paid licensed medical practitioners, including doctors, to use their licenses to form the professional corporations through which the medical clinics would then bill the private insurers for the bogus medical treatments. SANDLER owned, operated, and controlled at least four of these no-fault clinics, and TADDER was a manager at one of the clinics.

The No-Fault Clinic Controllers also instructed the clinic doctors to prescribe excessive and unwarranted referrals for various “modality treatments” for nearly every patient they saw. The treatments included physical therapy, acupuncture and chiropractic treatments – as much as five times per week for each – and treatments for psychology, neurology, orthopedics, and range of motion, in addition to functional capacity tests. Clinic doctors also prescribed unnecessary MRI’s, x-rays, orthopedics, and medical supplies. The No-Fault Clinic Controllers received thousands of dollars in kickbacks for patient referrals from the owners of the modality clinics (“Modality Controllers”). MIKHALOV was a Modality Controller who admitted to owning modality clinics that purported to be owned by licensed doctors, as required by New York Law. GREENSHNER was a chiropractor who provided unnecessary medical treatments at one of the modality clinics.

Patients were also referred to personal injury lawyers to file lawsuits against the insurance companies arising out of their exaggerated injuries from automobile accidents. The success of these lawsuits hinged on how many medical treatments the patients received, providing the necessary incentive for the patients to receive multiple treatments at the no-fault and modality clinics. NAIMARK admitted to paying a No-Fault Clinic Controller to refer him patients that received unnecessary treatments so that he could file personal injury lawsuits on behalf of the patients.

The second charge to which NAIMARK pled guilty relates to payments he made to a runner to bring him no-fault patients so that he could file personal injury lawsuits on their behalf.

NAIMARK, 54, of Flushing, New York, pled guilty to two counts of conspiracy to commit health care fraud. He faces a maximum sentence of 20 years in prison. He is scheduled to be sentenced by Judge Oetken on July 22, 2013.

SANDLER and MIKHALOV each pled guilty to conspiracy to commit health care fraud and conspiracy to commit mail fraud, and each faces a maximum sentence of five years in prison. TADDER pled guilty to conspiracy to commit health care fraud and conspiracy to commit mail fraud and faces a maximum sentence of 30 years in prison. GREENSHNER pled guilty to conspiracy to commit health care fraud, and faces a maximum sentence of 10 years in prison.

GREENSHNER, MIKHALOV, SANDLER, and TADDER are scheduled to be sentenced by Judge Oetken on July 1, 2013, July 8, 2013, July 9, 2013, and September 27, 2013, respectively.

U.S. Attorney Preet Bharara thanked the Federal Bureau of Investigation and the New York City Police Department for their continued outstanding work in this investigation.

The case is being prosecuted by the Office’s Organized Crime Unit. Assistant U.S. Attorneys Daniel S. Goldman, Nicholas L. McQuaid, Carolina A. Fornos and Daniel S. Noble are in charge of the prosecution. Assistant U.S. Attorneys Jason L. Cowley and Martin Bell of the Office’s Asset Forfeiture Unit are responsible for the forfeiture of assets.

U.S. v. Sol Naimark S11 Information

Preet Bharara, the United States Attorney for the Southern District of New York, announced today the appointment of Michael A. Levy as Chief of the Appeals Unit. Mr. Levy will replace Katherine P. Failla, who was recently confirmed by the U.S. Senate to serve as a federal judge in the Southern District of New York.

Mr. Levy joined the Office in October 2002. Prior to being named Chief of the Appeals Unit, he was a member of the Office’s Securities and Commodities Fraud Task Force. Mr. Levy was also Deputy Chief of the Appeals Unit from 2009 to 2010, and served in the Public Corruption, Major Crimes, Narcotics, and General Crimes Units. During his time in the Office, Mr. Levy successfully prosecuted Joseph Collins for his participation in the $2.4 billion Refco fraud, Efrain Gonzalez, Jr., a former New York State senator from the Bronx, for fraudulently using two not-for-profit organizations to pay his personal expenses, and all three defendants in U.S. v. Jorge Cedeno, et al. for their roles as armed gunmen in a truck hijacking ring that operated in the tri-state area.

After law school, Mr. Levy clerked for the Honorable Jed S. Rakoff of the U.S. District Court for the Southern District of New York, and worked as an associate at Sidley Austin LLP. Mr. Levy is a graduate of Harvard College and the University of Virginia School of Law.

In making this appointment, Mr. Bharara stated: “Michael Levy has established a track record of excellence more than a decade-long during his tenure in this Office. I have no doubt he will continue his exceptional work as Chief of the Appeals Unit and I thank him for his service.”

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”), Robert Panella, the Special Agent-in-Charge of the New York Field Office of the U.S. Department of Labor's Office of Inspector General, Office of Labor Racketeering and Fraud Investigations ("DOL-OIG"), and Vanessa Jones-Allen, the Assistant Special Agent-in-Charge of the New York Area Office of Criminal Enforcement for the United States Environmental Protection Agency ("EPA") announced the filing of a four-count criminal Complaint charging JOVER NARANJO, the owner and president of Enviro & Demo Masters, Inc. (“Enviro”), and his father, LUPERIO NARANJO, SR., a foreman for Enviro, for allegedly perpetrating a scheme to underpay employees in violation of the federal prevailing wage law. NARANJO and NARANJO, SR. were arrested this morning in Queens, New York, and are expected to be presented in Manhattan federal court before U.S. Magistrate Judge Ronald L. Ellis later today.

Manhattan U.S. Attorney Preet Bharara said: “Federal contracts come with certain legal obligations, and in this case, one of them was to pay the prevailing wage – a legal requirement this father and son allegedly violated. Protecting workers and ensuring that federal funds are not abused by dishonest contractors is a priority of this office.”

DOI Commissioner Rose Gill Hearn said: “These defendants worked overtime to spin a web of lies around their employees and the City taxpayers, according to the criminal complaint. Their charged conduct is not the way to do business in New York City. DOI was pleased to join its federal partners to expose and stop the fraud and protect workers.”

DOL-OIG Special Agent-in-Charge Robert Panella said: “Today’s charges are the result of our commitment to investigate those who would allegedly falsify payroll records to avoid paying their workers the required prevailing wage. The Office of Inspector General will continue to work closely with its law enforcement partners to this end.”

EPA Assistant Special Agent-in-Charge Vanessa Jones-Allen said: “Through the course of this investigation, we were able to uncover an illegal scheme and stop a business owner who cut workers’ pay and benefits to make a profit. While EPA federal agents focus on investigating allegations of environmental crimes, we also readily provide support and expertise to our state and federal colleagues in developing cases that protect Americans from criminal activity that threatens their lives or livelihoods.”

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

In August 2009, NARANJO was awarded a sub-contract by the general contractor on a New York City project to demolish buildings in Upper Manhattan (the “Contract”) that was federally-funded. From August 2009 through February 2010, he and NARANJO, SR. participated in a scheme to submit fraudulent certified payrolls to the New York City Department of Housing Preservation and Development (“HPD”) in connection with the Contract.

The fraudulent certified payrolls indicated that Enviro was paying its employees the federal prevailing wage, as required by federal law, but in reality, they were being paid far less. Although the lowest applicable federal prevailing wage for Enviro employees working on the Contract was $20.74 per hour for demolition laborers, NARANJO and NARANJO, SR. paid their demolition workers as little as $13 per hour. In the six-month period charged in the Complaint, the total amount of salary underpaid by NARANJO and NARANJO, SR. to Enviro employees working on the Contract was in excess of $650,000.

NARANJO and NARANJO, SR. took a number of steps to conceal their fraud. For example, they told their employees to lie about their identities, work schedules, and pay rates if they were questioned by investigators. When an employee truthfully told investigators that the employee was paid below the prevailing wage, NARANJO and NARANJO, SR. fired the employee and the employee’s relative.

On certain occasions when the defendants did pay their employees the prevailing wage, it was part of a kickback arrangement. The defendants paid the prevailing wage by check to document their supposed compliance with the law, but then required employees to return the portion of the check that was above and beyond the employees’ illegally low wage.

NARANJO, 36, and NARANJO, SR., 65, both of Queens, New York, are each charged with one count of mail fraud, conspiracy to commit mail fraud, witness tampering, and conspiracy to commit witness tampering. Each faces a maximum total sentence of 65 years in prison if convicted.

Mr. Bharara praised the investigative work of DOL-OIG, DOI, and the EPA.

The case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorney Alvin Bragg is in charge of the prosecution.

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

U.S. v. Jover Naranjo et al. Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced that TAI NGUYEN was sentenced today in Manhattan federal court to one year and one day in prison for conspiring to commit securities fraud and wire fraud in connection with an insider trading scheme in which NGUYEN, the president of Insight Research, LLC, an investment research firm, and a paid consultant of an expert networking firm, provided material, nonpublic information to members of the investment community. NGUYEN obtained the information which concerned quarterly financial results for Abaxis Inc., a California biotechnology company (the “Abaxis Inside Information”), from a family member employed in Abaxis’s Finance Department (the “Abaxis Insider”). He pled guilty in June 2012. NGUYEN was sentenced by U.S. District Judge Naomi Reice Buchwald.

Manhattan U.S. Attorney Preet Bharara said: “Tai Nguyen exploited a family member’s access to confidential and proprietary information to make a quick buck for himself, and to curry favor with others who could help his business. And now he is the latest in a long line of privileged professionals who has lost his liberty as a result.”

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

From 2006 through mid-2009, NGUYEN obtained detailed information from the Abaxis Insider about the company’s anticipated revenues, earnings, gross margins, and other financial results prior to the company’s quarterly announcements. On multiple occasions, NGUYEN provided the Abaxis Inside Information to Noah Freeman, a research analyst at a hedge fund based in Boston, Massachusetts, and to Samir Barai, a portfolio manager at two separate hedge funds in New York, New York.

As a result of NGUYEN having provided the Abaxis Inside Information, Freeman’s hedge fund earned more than $4.5 million between July 2006 and May 2009, and Barai’s hedge fund earned over $1.7 million between July 2008 and September 2009. In exchange for the Abaxis Inside Information, Freeman’s and Barai’s hedge funds paid Insight Research and/or NGUYEN consulting fees of several thousand dollars per month. At various times, Insight Research earned consulting fees of more than $15,000 a month from just one of these hedge fund clients.

In addition to passing on the Abaxis Inside Information to Freeman and Barai, NGUYEN used the information to trade Abaxis stock in his personal brokerage account on numerous occasions between 2006 and 2009. As a result of his own trading activity, NGUYEN earned over $147,000 during that time period.

In addition to the prison term, Judge Buchwald sentenced NGUYEN, 49, of Oregon City, Oregon, to one year of supervised release. NGUYEN was also ordered to forfeit $400,000 and pay a $100 special assessment fee.

Freeman, 37, of Boston, Massachusetts, pled guilty in February 2011 to one count of conspiracy to commit securities fraud and wire fraud, and one count of securities fraud. He is awaiting sentencing.

Barai, 41, of New York, New York, pled guilty in May 2011 to one count of conspiracy to commit securities fraud and wire fraud, one count of securities fraud, one count of wire fraud, and one count of obstruction of justice. He is awaiting sentencing.

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.

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.

Preet Bharara, the United States Attorney for the Southern District of New York, Joseph Anarumo, Jr., Special-Agent-in-Charge of the New York Division of the United States Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), and Raymond W. Kelly, the Police Commissioner of the City of New York (“NYPD”), announced that JEFFREY OKINE, MARQUIS DANIELS, RAYSHAUN JONES, and TYQUEZ HARRELL were arrested today on robbery and gun charges in connection with their alleged January 2013 attempt to rob employees at a used car dealership in the Bronx, including off-duty NYPD Police Officer Juan Pichardo. Officer Pichardo was allegedly shot in the leg by OKINE during the course of the robbery. OKINE, DANIELS, JONES, and HARRELL were arrested and taken into federal custody today at Rikers Island, where they were being held since January 4, 2013, on state charges for these offenses. All four defendants will be presented in Manhattan federal court before U.S. Magistrate Judge Ronald L. Ellis this afternoon.

Manhattan U.S. Attorney Preet Bharara said: “Officer Juan Pichardo was true to his NYPD badge, even off duty, when he bravely resisted this alleged armed robbery and it was sheer luck that he was not fatally injured doing so. These four defendants, who are alleged to have engaged in a robbery spree in the Bronx, will now have to answer for their conduct.”

ATF Special Agent-in-Charge Joseph Anarumo, Jr. said: “Gun violence in our community is unacceptable. Particular to this arrest, allegations involving the use of firearms in a violent act to include the shooting of an off-duty NYPD Officer will not be tolerated. The United States Attorney’s Office, NYPD and ATF have worked jointly on this matter to ensure that these perpetrators are punished severely under federal law. I commend all who have participated in this investigation.”

NYPD Commissioner Raymond W. Kelly said: “Officer Pichardo was one of three NYPD officers shot in separate incidents in Brooklyn and the Bronx within one hour on Jan. 3. Despite their injuries, he and his colleagues took swift and courageous action to prevent harm from coming to others. The arrests of Officer Pichardo’s alleged assailants show that the New York City police and prosecutors will not relent in bringing to justice those who wield illegal guns and squander the public’s safety.”

According to the allegations in the Complaint unsealed today in Manhattan federal court and other documents in the public record:

OKINE, DANIELS, JONES, and HARRELL robbed employees at a variety of commercial establishments in the Bronx. During a January 3, 2013, robbery, OKINE and HARRELL went to a car dealership and posed as potential buyers. When the off-duty officer and another employee brought them into the dealership’s office, HARRELL took out a gun and ordered the employees to empty their pockets. OKINE and HARRELL took their money and cellphones. HARRELL then gave OKINE the gun and went to inspect a safe. OKINE got into a skirmish with the off-duty police officer and shot him in the leg. He then tried to flee, but two other employees stopped him. HARRELL managed to run away and got into a getaway car, but NYPD officers apprehended and arrested him along with DANIELS and JONES. Among the items recovered from the car was the off-duty officer’s cell phone.

OKINE, 21, DANIELS, 23, JONES, 25, and HARRELL, 22, have all been charged with one count of Hobbs Act robbery conspiracy, which carries a maximum sentence 20 years in prison, and one count of using, possessing and discharging a firearm in relation to a crime of violence, which carries a maximum sentence of life in prison.

Mr. Bharara praised the ATF and the NYPD for their work in this investigation.

The prosecution is being overseen by the Office's Violent Crimes Unit. Assistant United States Attorneys Jessica Ortiz and Parvin Moyne are in charge of the prosecution.

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

U.S. v. Jeffrey Okine, et al. Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States has retained the Garden City Group (“GCG”) to serve as Claims Administrator to oversee the process of compensating eligible victims of the fraud committed by Full Tilt Poker against United States players that was set forth in both the civil money laundering and forfeiture action United States v. PokerStars, et al., and the indictment United States v. Bitar, et. al.

Manhattan U.S. Attorney Preet Bharara said “The Garden City Group brings a track record of handling the administration of some of the country’s largest and most complicated settlements. With their selection, we take a significant step forward in the process of compensating victims of the Full Tilt Poker scheme.”

In July 2012, the United States entered into settlement agreements with Full Tilt Poker and PokerStars – two of the three online poker companies named as defendants in a civil forfeiture action brought by the United States alleging bank fraud, wire fraud, money laundering, and illegal gambling offenses. Under the terms of the settlement with Full Tilt Poker, the company agreed to forfeit virtually all of its assets to the United States (the “Forfeited Full Tilt Assets”) in order to fully resolve the action. The amended complaint filed in that action alleged that Full Tilt Poker defrauded its players by misrepresenting to the public that player funds held by Full Tilt Poker were safe, secure and available for withdrawal at any time. In reality, the company did not maintain funds sufficient to repay all of its players and instead, utilized player funds to finance more than $400 million in dividend payments to Full Tilt’s owners.

Under the terms of the settlement with PokerStars (the “PokerStars Settlement”), the company agreed, among other things, to forfeit $547 million to the United States and to assume Full Tilt Poker’s liability for the approximately $184 million owed by Full Tilt to foreign players. The PokerStars Settlement also provides that PokerStars will acquire the Forfeited Full Tilt Assets from the Government and also precludes PokerStars from offering online poker for real money in the United States unless and until it becomes permissible to do so under relevant law.

Utilizing funds forfeited from PokerStars in this action, the Department of Justice will establish a process by which eligible U.S. fraud victims will be able to seek compensation for their losses (“Petitions for Remission”). The Garden City Group has been selected as Claims Administrator by the United States to process Petition for Remission claims submitted by the U.S. Full Tilt fraud victims.

GCG is a class action settlement and bankruptcy administration company that has provided comprehensive legal administration services for nearly three decades. GCG has worked on numerous complex administrations, including the Gulf Coast Claims Facility; the Deepwater Horizon Economic and Property Damage Settlement; the Visa Check/MasterMoney Antitrust Litigation; the WorldCom Securities Litigation; and the IPO Securities Litigation.

Eleven defendants were charged criminally in connection with the original Internet poker Indictment, eight of whom have been arrested. The defendants who have been arrested are: Brent Beckley; Raymond Bitar; Nelson Burtnick; John Campos; Chad Elie; Bradley Franzen; Ryan Lang; and Ira Rubin. Seven of the arrested defendants previously pled guilty and four have been sentenced. Beckley was sentenced to 14 months in prison in July 2012, Rubin was sentenced to 36 months in prison in July 2012, Campos was sentenced to three months in prison in June 2012, and Elie was sentenced to five months in prison in October 2012. Burtnick, Franzen, and Lang await sentencing. The charges against Bitar remain pending as do the charges against Isai Scheinberg, Paul Tate, and Scott Tom, who remain at large. The charges and accusations against them are allegations and they are presumed innocent unless and until proven guilty.

U.S. Attorney Preet Bharara praised the Federal Bureau of Investigation for its outstanding leadership in the investigation, which he noted is ongoing.

The victim claims process will begin shortly. Information about the claims administration will be posted on the dedicated website GCG has established in connection with the victim compensation process, www.FullTiltPokerClaims.com. Information is also available from the toll-free hotline number at (866) 250-2640.

This matter is being handled by the Office’s Asset Forfeiture and Complex Frauds Unit. Assistant U.S. Attorneys Sharon Cohen Levin, Michael Lockard, Jason Cowley, and Andrew Goldstein are in charge of the civil money laundering and forfeiture action. Assistant U.S. Attorneys Arlo Devlin-Brown, Nicole Friedlander and Niketh Velamoor are in charge of the criminal case.

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“Today, a unanimous jury found that Gilberto Valle’s detailed and specific plans to abduct women for the purpose of committing grotesque crimes were very real, and that he was guilty as charged. The Internet is a forum for the free exchange of ideas, but it does not confer immunity for plotting crimes and taking steps to carry out those crimes. I want to thank the jury for their time, their diligence, and their willingness to serve on a case of this nature, and I want to thank the dedicated prosecutors from my office who did such an outstanding job investigating and prosecuting this disturbing case.”

Gilberto Valle Verdict Statement - U.S. Attorney Preet Bharara Audio 3.12.13 (mp3)
Gilberto Valle Verdict Statement - U.S. Attorney Preet Bharara Audio 3.12.13 (wav)

Preet Bharara, the United States Attorney for the Southern District of New York, announced that MARCEL ACEVEDO SARMIENTO was sentenced today in Manhattan federal court to 12 years in prison for conspiring to import cocaine into the United States. ACEVEDO, whose prosecution was part of “Operation Relentless,” the historic, joint undercover operation undertaken by the United States and the Government of Liberia, pled guilty in April 2012. He was sentenced today by U.S. District Judge Jed. S. Rakoff.

Manhattan U.S. Attorney Preet Bharara said: “With today’s sentencing of Marcel Acevedo Sarmiento for his role in an international cocaine distribution conspiracy, we continue to bear the fruits of our unprecedented partnership with the Government of Liberia. International cooperation is essential to our efforts to stamp out the drug trade, and there can be no better example of the results that can be achieved when we work together than this case.”

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

During the last decade, drug trafficking organizations based in South America have increasingly used countries along or near the West African coast as trans-shipment hubs for importing massive quantities of cocaine to be later distributed in Europe or elsewhere within Africa. Through a combination of privately owned aircraft and maritime vessels, these organizations, predominantly based in Colombia and Venezuela, have transported hundreds of tons of cocaine, worth billions of dollars, to West African countries including Liberia.

ACEVEDO, a cocaine supplier based in Colombia and Venezuela, had the capacity to transport thousand-kilogram loads of cocaine from South America to various locations in West Africa, for later distribution within Africa, Europe, and elsewhere. The conspiracy in which he participated involved a 4,000 kilogram shipment of cocaine, with a retail value of over $100 million, which was to be flown from Venezuela to Monrovia, Liberia.

ACEVEDO, 48, a citizen of Colombia, also coordinated efforts to arrange a cocaine shipment of over 2,000 kilograms by aircraft from Venezuela to Liberia, during recorded telephone conversations with a confidential source (“the CS”) working for the Drug Enforcement Administration (“DEA”). ACEVEDO confirmed to the CS that the cocaine shipment had been protected by the Fuerzas Armadas Revolucionarias de Colombia, an international terrorist group dedicated to the violent overthrow of the democratically elected Government of Colombia.

On May 29, 2010, ACEVEDO indicated that Venezuelan authorities had seized a plane he owned worth $35 million, as well as the cocaine on board the plane, and had directed him to leave the country. He informed the CS of the seizure and then invited the CS to participate in a new cocaine shipment from Bolivia, understanding that the CS would import the CS’s 500-kilogram share of the shipment into New York.

None of the three cocaine shipments that ACEVEDO conspired to transport to Liberia actually occurred.

Mr. Bharara praised the work of the Special Operations Division of the DEA, the DEA Lagos Country Office, the U.S. Department of Justice Office of International Affairs, and the U.S. State Department. He also thanked the U.S. Embassy in Liberia and the Republic of Liberia and its National Security Agency for their efforts.

This prosecution is being handled by the Office's Terrorism and International Narcotics Unit. Assistant United States Attorneys Randall Jackson and Jenna M. Dabbs are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that former New York City Police Officer GILBERTO VALLE was found guilty today in Manhattan federal court of conspiracy to kidnap and illegally accessing the federal National Crime Information Center (“NCIC”) database. The jury found that VALLE, who was an active-duty officer with the New York City Police Department (“NYPD”) at the time of his arrest, conspired with more than one individual to kidnap, rape, torture, kill, and cannibalize a number of women, and that he illegally used the NCIC database to obtain information about one of his intended victims. He was convicted after a three-week trial before U.S. District Judge Paul G. Gardephe.

Manhattan U.S. Attorney Preet Bharara said: “Today, a unanimous jury found that Gilberto Valle’s detailed and specific plans to abduct women for the purpose of committing grotesque crimes were very real, and that he was guilty as charged. The Internet is a forum for the free exchange of ideas, but it does not confer immunity for plotting crimes and taking steps to carry out those crimes. I want to thank the jury for their time, their diligence, and their willingness to serve on a case of this nature, and I want to thank the FBI and the dedicated prosecutors from my office who did such an outstanding job investigating and prosecuting this disturbing case.”

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

In September 2012, the FBI learned that VALLE was sending e-mail and instant messages discussing plans with multiple co-conspirators to kidnap, rape, torture, kill, and cannibalize a number of women. A court-authorized search of his computer revealed that VALLE had created files pertaining to at least 80 women and containing multiple photographs of each woman. The computer also contained personal information about some of these women - including relevant addresses, physical descriptions, and photographs - and electronic communications in which VALLE and co-conspirators detailed their plans. Additionally, VALLE used the NCIC database and other methods to locate potential victims, surveilled a victim, drafted an “operation plan” to abduct and “cook” an identified woman, researched methods of disabling and drugging women, and agreed with at least one other individual to kidnap a woman in exchange for $5,000.

Victim-1

In July 2012, VALLE had a series of online communications with a co-conspirator (“CC-1”) in which they discussed how best to kidnap, murder, and cannibalize Victim-1, including where to find a recipe for chloroform. During this time period, VALLE also created a document entitled “Abducting and Cooking [Victim-1]: a Blueprint.” The document contains pedigree information about Victim-1—including her name, ethnicity, height, weight, and bra size. The document also contains a section called “Materials Needed” in which VALLE wrote, in part, the following:

Car (I have it)

Chloroform (refer to website for directions)

Rope (Strongest kind to tie her up)

In subsequent instant message conversations, CC-1 asked VALLE, “How was your meal?” to which VALLE immediately responded, “I am meeting her [i.e., Victim-1] on Sunday.” On the following Sunday, VALLE met with Victim-1 at a restaurant for brunch. Following this meeting, VALLE communicated with CC-1 regarding the brunch with Victim-1 and said that “[Victim-1] looked absolutely mouthwatering.”

Victim-2

VALLE also had conversations with another co-conspirator (“CC-2”) in late February 2012, in which they negotiated and agreed to a price for which VALLE would kidnap another woman (“Victim-2”). In those conversations, VALLE insisted upon a price no less than $5,000 and assured CC-2 that Victim-2 would be bound, gagged, and alive when he delivered her. In a post-arrest statement to the FBI, VALLE admitted that, in early March 2012, he was present on the block in Manhattan where Victim-2’s apartment building is located. When the FBI later interviewed Victim-2, she stated that she has never invited VALLE to her home and does not know him well.

The NCIC Database

On May 31, 2012, VALLE accessed the NCIC database and obtained information about a woman (“Victim-3”) whose name matched the name of one of the Individual Files he created. VALLE did not have authorization to perform that search or to access any information about Victim-3.

VALLE, 28, was convicted of one count of conspiracy to commit kidnapping, which carries a maximum sentence of life in prison, and a maximum fine of $250,000 or twice the gross gain or loss from the offense. He was also convicted of one count of intentionally and knowingly accessing a computer without authorization and exceeding his authorized access, thereby obtaining information from a department and agency of the United States. This count carries a maximum sentence of one year in prison, and a maximum fine of $100,000. VALLE is scheduled to be sentenced by Judge Gardephe on June 19, 2013 at 11:00 a.m.

Mr. Bharara praised the outstanding investigative work of the Federal Bureau of Investigation and the New York City Police Department.

This case is being handled by the Office’s Violent Crimes Unit. Assistant United States Attorneys Hadassa Waxman and Randall W. Jackson are in charge of the prosecution.

U.S. v. Gilberto Valle Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that DENNIS LERNER, a former employee of the Internal Revenue Service (“IRS”), pled guilty yesterday in Manhattan federal court to violating a criminal conflict of interest law and to illegally disclosing confidential audit information during the time he was an IRS employee. LERNER was arrested in September 2012. He pled guilty before U.S. District Judge John F. Keenan.

Manhattan U.S. Attorney Preet Bharara said: “Dennis Lerner betrayed the trust put in him as a public servant by parlaying his position at the IRS into a high-powered job at a bank he was auditing through a scheme that may now land him in prison. We will not tolerate corrupt government employees and will prosecute and punish them to the full extent of the law.”

According to the allegations in the Criminal Complaint and the Criminal Information, along with statements made during today’s plea proceeding in Manhattan federal court:

From June 2010 through August 2011, LERNER worked as an International Examiner in the New York office of the IRS. For several months leading up to his resignation from the IRS, one of his chief responsibilities involved conducting an audit of an international bank (“Bank 1”) related to approximately $1 billion in allegedly unreported income. Shortly before his resignation, LERNER led negotiations on behalf of the IRS which resulted in a proposed $210 million settlement between Bank 1 and the IRS. The settlement was still pending final approval at the time of his departure. Unbeknownst to his colleagues and supervisors, LERNER applied for, interviewed for, and accepted the position of Tax Director at Bank 1 during the time period in which he was representing the IRS in the Bank 1 settlement discussions. He also sent multiple emails to an individual in which he expressed both his dissatisfaction with his job at the IRS and his hope that he would secure the Bank 1 job. At no time did he notify the IRS of his efforts to obtain employment with Bank 1.

LERNER also engaged in improper disclosure of IRS tax return information during the time period that he worked as an IRS International Examiner. Specifically, he revealed the identity of a bank he was auditing to an individual who was not employed by the IRS.

LERNER, 60, of Edgewater, New Jersey, faces a maximum sentence of 10 years in prison. He is scheduled to be sentenced by Judge Keenan on July 11, 2013 at 11 a.m.

Mr. Bharara praised the outstanding investigative work of the Treasury Inspector General for Tax Administration, which included the assistance and cooperation of IRS management.

The case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorney Randall W. Jackson is in charge of the prosecution.

U.S. v. Dennis Lerner Information

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that GARY SATIN, a former electrician with the Long Island Railroad (“LIRR”), was sentenced today to 20 months in prison for his participation in a 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. SATIN previously pled guilty to his participation in the scheme as well as to perjury for making false statements to the grand jury that was hearing evidence in this case. SATIN was sentenced by U.S. District Judge Victor Marrero.

Manhattan U.S. Attorney Preet Bharara said: “With his sentence today, Gary Satin becomes the first in a long line of perpetrators to learn the price for his participation in this reprehensible scheme, but he will not be the last.”

According to the Complaint and the Superseding Information:

The LIRR Disability Fraud Scheme

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 oath 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 2004 through 2008, 61% of LIRR employees who stopped working and began receiving RRB disability benefits were between the ages of 50 and 55. In contrast, only 7% of employees at Metro-North who stopped working and received disability benefits during the same time period were between the ages of 50 and 55.

SATIN’s Fraud

GARY SATIN was an LIRR electrician who retired in June 2005 at the age of 55. In his last year of employment, SATIN received approximately $84,000 in compensation. After retirement, he sought and obtained sickness and disability benefits from the RRB. In 2010, he received approximately $32,000 in LIRR pension payments and approximately $36,000 from his RRB disability annuity, for a total of $68,000 in annual benefits.

In applying for disability benefits, SATIN claimed that he was unable to perform his railroad job and that indoor and outdoor chores were “difficult.” However, as SATIN admitted in his plea allocution, no medical condition prevented him from performing his railroad job. Instead, SATIN had pre-planned his false disability to supplement his retirement income. In fact, in the 18 months prior to his retirement, SATIN did not take a single day of sick leave, and in the five months prior to his retirement, he worked approximately 154 overtime hours. In the years after his retirement, SATIN performed landscaping, contracting, and electrical work for pay. SATIN also exploited his false disability to obtain other benefits to which he was not entitled, such as a handicapped parking pass from New York State, claiming that his disability “severely limited” his “ability to walk.”

SATIN’s Perjury

On April 28, 2011, SATIN appeared before a grand jury in the Southern District of New York. After swearing to tell the truth, and after having been advised of his rights and his obligation to provide truthful testimony, SATIN intentionally provided false and misleading testimony on material matters, including falsely denying that he performed landscaping, contracting, and electrical work post-retirement.

In addition to the prison term, Judge Marrero sentenced SATIN, 63 of Mooresville, North Carolina, to three years of supervised release and ordered him to pay restitution and forfeiture in the amount of $247,000, and a $200 special assessment.

Manhattan U.S. Attorney 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.

Thirty-two people have been charged in connection with the LIRR disability fraud scheme, 22 of whom have pled guilty. The charges against the remaining defendants are merely allegations and they are all presumed innocent unless and until proven guilty.

The Office’s Complex Frauds Unit is handling the case. 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, announced that POLINA STAROSELETSKY and ASYA GALINDO pled guilty today in Manhattan federal court to conspiring to defraud programs administered by the Conference on Jewish Material Claims Against Germany, Inc. (the “Claims Conference”), established to aid the survivors of Nazi persecution, out of more than $57 million. STAROSELETSKY was arrested in November 2010, and GALINDO was arrested in October 2011, as part of an ongoing investigation that has resulted in charges against a total of 31 defendants, 10 of whom were former Claims Conference employees, including a former director. STAROSELETSKY pled guilty before U.S. District Judge Thomas P. Griesa, and GALINDO pled guilty before U.S. Magistrate Judge Sarah Netburn.

Manhattan U.S. Attorney Preet Bharara said: “The sad drumbeat continues in this appalling, multi-million dollar fraud scheme against an organization dedicated to providing aid to victims of the Nazis, with 25 of the 31 defendants charged now having pled guilty. We will continue to aggressively prosecute each and every individual who allegedly played a role in this fraud, and we will not stop until justice is served.”

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

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

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

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

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

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

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

While employed as a caseworker in the Article 2 Fund program at the Claims Conference, STAROSELETSKY knowingly processed fraudulent applications in return for payments from her co-conspirators. In addition, after she was no longer employed by the Claims Conference, STAROSELETSKY passed materials, including identification documents, to a co-conspirator still employed at the Claims Conference to support fraudulent Hardship Fund applications.

GALINDO recruited individuals to provide identification documents that were subsequently used in connection with the preparation of fraudulent Hardship Fund and Article 2 Fund applications, in exchange for a portion of the money paid out to those applicants.

With today’s pleas, a total of 25 defendants charged in the scheme have pled guilty, including seven former Claims Conference employees. Charges remain pending against the remaining six defendants in the case, who are presumed innocent unless and until proven guilty.

STAROSELETSKY, 50, of Brooklyn, New York, and GALINDO, 73, of Sherman Oaks, California, each face a maximum sentence of 20 years in prison. STAROSELETSKY and GALINDO are scheduled to be sentenced by Judge Griesa on August 14 and August 27, 2013, respectively.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation (“FBI”). He also thanked the Claims Conference for bringing this matter to the FBI’s attention and for its extraordinary continued cooperation in this investigation, which he noted is ongoing.

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

U.S. v. Semen Domnitser, et al S1 Indictment

Sulaiman Abu Ghayth, a/k/a “Suleiman Abu Gayth”, a former associate of Usama Bin Laden, has been arrested and charged in an indictment unsealed today in New York City with conspiracy to kill U.S. nationals, announced Attorney General Eric Holder, Assistant Attorney General for National Security Lisa Monaco, U.S. Attorney for the Southern District of New York Preet Bharara, the Assistant Director-in-Charge of the FBI’s New York Field Office George Venizelos, and the Police Commissioner of the City of New York (NYPD) Raymond W. Kelly. Abu Ghayth is expected to be presented and arraigned tomorrow, March 8, 2013, at 10:00 a.m. before U.S. District Judge Lewis A. Kaplan.

Attorney General Eric Holder said: “No amount of distance or time will weaken our resolve to bring America's enemies to justice. To violent extremists who threaten the American people and seek to undermine our way of life, this arrest sends an unmistakable message: There is no corner of the world where you can escape from justice because we will do everything in our power to hold you accountable to the fullest extent of the law.”

Assistant Attorney General Lisa Monaco said: “The arrest of Abu Ghayth is an important milestone in our ongoing counterterrorism efforts. I applaud the many agents, analysts and prosecutors responsible for bringing about this significant case and arrest.”

Manhattan U.S. Attorney Preet Bharara said: “The law has a long arm and justice has a long memory. It has been 13 years since Abu Ghayth allegedly worked alongside Usama Bin Laden in his campaign of terror, and 13 years since he allegedly took to the public airwaves, exhorting others to embrace al Qaeda’s cause and warning of more terrorist attacks like the mass murder of 9/11. The memory of those attacks is indelibly etched on the American psyche, and today’s action is the latest example of our commitment to capturing and punishing enemies of the United States, no matter how long it takes.”

FBI Assistant Director-in-Charge George Venizelos said: “Sulaiman Abu Ghayth held a key position in al Qaeda, comparable to the consigliere in a mob family or propaganda minister in a totalitarian regime. He used his position to persuade others to swear loyalty to al Qaeda’s murderous cause. He used his position to threaten the United States and incite its enemies. His apprehension is another important step in the campaign to limit the reach of al Qaeda and enhance our national and international security.”

NYPD Commissioner Raymond W. Kelly said: “While New York City must remain vigilant to continued terrorist threats against it, Abu Ghayth's apprehension and prosecution promises to close another chapter in al Qaeda's notoriously violent history of killing Americans. This case also represents another success in the ongoing partnership between Federal agents and NYPD detectives through the JTTF.”

As alleged in the Superseding Indictment that has been filed against Abu Ghayth in federal court:

Since around 1989, al Qaeda has been an international terrorist organization, dedicated to opposing non-Islamic governments with force and violence. Usama Bin Laden served as the leader or “emir” of al Qaeda until his death on or about May 2, 2011. Members of al Qaeda typically have pledged an oath of allegiance, called bayat, to Bin Laden and to al Qaeda.

The core purpose of al Qaeda, as stated by Bin Laden and other leaders, is to support violent attacks against property and nationals, both military and civilian, of the United States and other countries. Between 1989 and 2001, al Qaeda established training camps, guest houses, and business operations in Afghanistan, Pakistan, and other countries for the purpose of training and supporting its agenda of violence and murder. Members and associates of al Qaeda have executed a number of terrorist attacks, all in furtherance of the organization’s stated conspiracy to kill Americans, including the attacks on the United States on September 11, 2001 in New York, Virginia, and Pennsylvania, which killed approximately 2,976 people.

From at least May 2001 up to around 2002, Abu Ghayth served alongside Usama Bin Laden, appearing with Bin Laden and his then-deputy Ayman al-Zawahiri, speaking on behalf of the terrorist organization and in support of its mission, and warning that attacks similar to those of September 11, 2001 would continue.

In particular, around May 2001, Abu Ghayth urged individuals at a guest house in Kandahar, Afghanistan, to swear bayat to Bin Laden. On the evening of September 11, 2001, after the terrorist attacks on the United States, Bin Laden summoned Abu Gayth and asked for his assistance and he agreed to provide it. On the morning of September 12, 2001, Abu Ghayth, appeared with Bin Laden and Zawahiri, and spoke on behalf of al Qaeda, warning the United States and its allies that “[a] great army is gathering against you” and called upon “the nation of Islam” to do battle against “the Jews, the Christians and the Americans.” Also, after the September 11, 2001 terrorist attacks, Abu Ghayth delivered a speech in which he addressed the then-U.S. Secretary of State and warned that “the storms shall not stop, especially the Airplanes Storm,” and advised Muslims, children, and opponents of the United States “not to board any aircraft and not to live in high rises.”

Abu Gayth arranged to be, and was, successfully smuggled from Afghanistan into Iran in 2002.

The indictment charges Abu Ghayth with participating in a conspiracy to kill United States nationals, in violation of Title 18, United States Code, Section 2332(b). The offense carries a maximum term of imprisonment of life. No trial date has yet been set in the case.

The charges and arrest of Abu Ghayth are the result of the close cooperative efforts of the U.S. Attorney’s Office for the Southern District of New York, the FBI’s Joint Terrorism Task Force – which principally consists of agents and detectives of the FBI and the New York City Police Department – the United States Marshals Service and the National Security Division of the U.S. Department of Justice. The Justice Department’s Office of International Affairs and the U.S. Department of State also provided assistance.

The prosecution is being handled by Assistant United States Attorneys John P. Cronan and Michael Ferrara of the Terrorism and International Narcotics Unit of the U.S. Attorney’s Office for the Southern District of New York, with assistance from Trial Attorney Jolie Zimmerman of the National Security Division’s Counterterrorism Section.

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

U.S. v. Sulaiman AbuGhayth Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that JACQUES WAJSFELNER was sentenced today to six months of probation, including three months of home confinement, for willfully failing to file Reports of Foreign Bank and Financial Accounts (“FBARs”) with the IRS, regarding Swiss bank accounts that he maintained and controlled. WAJSFELNER used the services of Beda Singenberger, a Swiss financial adviser who was charged in July 2011 with conspiring with various U.S. taxpayers and others to hide more than $184 million offshore at various Swiss banks. WAJSFELNER also had undeclared accounts at Wegelin & Co., a Swiss bank sentenced yesterday for conspiring to evade taxes, file false tax returns, and defraud the IRS in the Southern District of New York, and Credit Suisse. As part of his resolution of the criminal charges against him, WAJSFELNER agreed to pay a civil penalty of over $2.8 million, representing 50% of the high value of the accounts that he maintained. Today’s sentence was imposed by U.S. District Judge Naomi Reice Buchwald.

According to the Information filed in Manhattan federal court, other court documents, and statements made in connection with WAJSFELNER’s guilty plea and sentencing:

Under federal law, when filing Individual Income Tax Returns, form 1040, U.S. taxpayers are required to report their worldwide income. Taxpayers who have a financial interest in, or signature or other authority over, a bank account in a foreign country with an aggregate value of more than $10,000 at any time during a particular year, are required to file FBARs every year for each qualifying account. The FBAR requires the disclosure of the financial institution where the account is held, the type of account, the account number, and the maximum value of the account during the calendar year for which it is being filed.

Beginning in 1995, WAJSFELNER held an account in his own name at Credit Suisse, a Swiss bank with its headquarters in Zurich, Switzerland. In June 2006, with the assistance of Singenberger, WAJSFELNER opened an undeclared account at Credit Suisse in the name of a sham corporation formed under the laws of Hong Kong, Ample Lion Ltd. (“Ample Lion”). By opening the Ample Lion account at Credit Suisse, WAJSFELNER was attempting to obscure his ownership of the assets in the account from the IRS. As of December 31, 2007, WAJSFELNER’s account at Credit Suisse in the name of Ample Lion held assets valued at nearly $5.7 million.

In the fall of 2008, Credit Suisse began the process of exiting its U.S. cross-border banking business. In order to continue hiding money in Switzerland, in June 2009, WAJSFELNER opened an undeclared account at Wegelin. With Singenberger’s assistance, WAJSFELNER then transferred the assets from his account at Credit Suisse into his account at Wegelin. As of December 31, 2010, WAJSFELNER’s account at Wegelin held assets valued at nearly $5.5 million.

For each of the calendar years from 1995 through 2011, WAJSFELNER failed to file an FBAR with the IRS disclosing his authority over his accounts at the Credit Suisse and at Wegelin. His tax returns for the years 2005 through 2011 were similarly false in omitting the information about his Swiss bank accounts. WAJSFELNER’s sentencing is the latest in a series of prosecutions in the Southern District of New York of U.S. taxpayers who held undeclared accounts in Switzerland at UBS, Wegelin, Credit Suisse, and/or other Swiss banks, and who failed to make timely voluntary disclosures to the IRS as part of the IRS’s Voluntary Disclosure Program.

In addition to his probation, WAJSFELNER, 83, of Weston, Massachusetts, was also ordered to pay back taxes of $419,940 and a fine of $20,000.

The case against Singenberger is pending. The charge and allegations against him are merely accusations, and he is presumed innocent unless and until proven guilty.

Wegelin was sentenced yesterday and ordered to pay approximately $58 million to the United States. Together with the April 2012 forfeiture of more than $16.2 million from Wegelin’s U.S. correspondent bank account, this amounts to a total recovery to the United States of approximately $74 million.

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States has filed a lawsuit against PARK AVENUE MEDICAL ASSOCIATES (“PAMA”) and PARK AVENUE MEDICAL ASSOCIATES, P.C. (“PAMA PC”), and related entities, alleging that they billed Medicare for services purportedly provided to elderly, mentally ill patients that were not medically necessary, were not documented in the medical record, and/or failed otherwise to comply with Medicare rules and regulations. The Government’s Complaint alleges that, as a consequence of the conduct of PAMA and PAMA PC, the entity that allegedly submitted claims to Medicare on behalf of PAMA, Medicare paid the defendants for thousands of claims that were not eligible for payment, resulting in over $1 million in damages.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Park Avenue Medical Associates inundated Medicare with bogus claims, including bills for unnecessary psychiatric services for vulnerable elderly patients, who did not have the ability to benefit from the services. We will continue our efforts to protect this taxpayer-funded program and the people who rely on it for care from fraud and abuse.”

According to the Complaint filed today in Manhattan federal court:

PAMA directly employs physicians, nurses, and other medical professionals who provide services to elderly patients at hospitals, including inpatient psychiatric facilities, nursing homes, assisted living facilities, and other types of long-term care facilities. The patients and residents at these facilities suffer from various chronic health conditions, including Alzheimer’s disease, dementia, schizophrenia, psychosis, depression, and anxiety. The doctors and nurses employed by PAMA receive a salary from PAMA, which contracts with the facilities. In addition to their regular salaries, psychiatrists and psychologists employed by PAMA receive bonuses based on how many services they provide and the level of reimbursement they generate for PAMA from government and other insurance providers, including Medicare.

Medicare prohibits payment for services that are not reasonable and necessary for the diagnosis or treatment of an illness or injury. Medicare also prohibits payment for any claim without adequate documentation substantiating the reasonableness and necessity of the services provided. In particular, Medicare does not cover psychotherapy services rendered to patients with Alzheimer’s disease or dementia unless the patient’s dementia is mild, the patient has the capacity to recall what occurred at the therapy from one session to the next, and that capacity is documented in the patient’s record. Psychotherapy services are not covered when dementia has produced a severe enough cognitive deficit to prevent them from being effective. In addition, Medicare provides that psychiatric diagnostic examinations are generally covered only once for each episode of illness or suspected illness in a patient and must be medically necessary.

In violation of Medicare policies, as well as its own policies, PAMA provided psychotherapy to patients who lacked the capacity to benefit from it due to severe dementia. In addition, PAMA PC billed for psychiatric evaluations that were duplicative, failed to comply with Medicare rules, and reflected a lack of coordination of care both among PAMA’s own psychiatrists, psychologists and nurses, and between PAMA’s employees and staff at the facilities with which PAMA contracted to provide services. Moreover, PAMA PC billed for services for which it lacked any documentation whatsoever. PAMA PC billed Medicare for a far larger number of services per psychiatrist and psychologist during the period 2001 through 2012 than any other provider with a similar patient population in the New York area.

This case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorneys Heidi A. Wendel and Mara E. Trager are in charge of the case.

U.S. v. Park Ave Medical Associates, et al. Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced that THEODORE L. FREEDMAN, a former senior partner at a major international law firm (the “Law Firm”), pled guilty today in Manhattan federal court to four counts of tax fraud for under-reporting his partnership income at the Law Firm by a total of approximately $2 million from 2001 to 2004. FREEDMAN pled guilty before U.S. District Judge Deborah A. Batts.

Manhattan U.S. Attorney Preet Bharara stated: “Theodore Freedman was an attorney at a high-powered and prestigious law firm who lied about his multi-million dollar compensation in order to avoid paying taxes, breaking the law and violating his professional code of conduct. Two things are certain: Freedman will now have to pay his taxes and more; and Freedman is now an admitted felon who has sacrificed his reputation, career, and potentially his liberty, for a few dollars. Others should not make the same bad calculation.”

According to the Indictment and statements made at today’s plea proceeding:

FREEDMAN was a senior partner in the New York office of a major international law firm, where he was a member of the Law Firm’s restructuring group. In that capacity, FREEDMAN received income that was calculated as a percentage of the Law Firm’s partnership income for a given year. The Law Firm issued FREEDMAN the IRS form that reports an individual partner’s share of income or loss from the partnership. According to the form, FREEDMAN's aggregate income for calendar years 2001 through 2004 was approximately $5,388,699.

FREEDMAN self-prepared, signed, and filed tax returns for calendar years 2001 through 2004. Rather than reporting the true and correct amount of partnership income he received from the Law Firm for the years in question, FREEDMAN falsely and fraudulently under-reported his income in the aggregate amount of approximately $2,097,211.

FREEDMAN, 65, of Pine Plains, New York, faces a maximum sentence of three years in prison on each of the tax fraud counts, for a total maximum sentence of 12 years in prison. As part of his plea agreement, FREEDMAN is also required to pay more than $671,000 in restitution to the IRS and more than $169,000 in restitution to New York State. He is scheduled to be sentenced by Judge Batts on September 17, 2013, at 10:30 a.m.

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

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

U.S. v. Theodore L. Freedman Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that WILSON PAGAN, a/k/a “King Gunz,” and CHRISTIAN SANCHEZ, a/k/a “King Chi Chi,” leaders of the Latin Kings gang in Newburgh, New York (the “Newburgh Latin Kings”), were found guilty today before U.S. District Judge Cathy Seibel in White Plains federal court of 29 counts, including murder, racketeering, drug, firearms, and witness tampering charges, after a six-week jury trial. Judge Seibel set July 11, 2013 for sentencing, at which time PAGAN and SANCHEZ will both face mandatory terms of life in prison.

PAGAN and SANCHEZ are two of 35 members and associates of the Newburgh Latin Kings originally indicted in connection with the case, all of whom have been convicted. Among other charges, PAGAN was found guilty of the May 6, 2008 murder of Jeffrey Zachary, and SANCHEZ was found guilty of the March 11, 2010 murder of Jerome Scarlett, a/k/a “Rudeboy,” and the murder of John Maldonado, a/k/a “Tarzan,” less than 24 hours later, on March 12, 2010.

“U.S. Attorney Preet Bharara stated: For far too long, the residents of Newburgh were plagued by lethal violence and narcotics trafficking at the hands of these two defendants and their cronies, and in just nine hours, the jury unanimously found them guilty of a catalogue of crimes, including the tragic murder of an innocent 15-year-old boy who was in the wrong place at the wrong time. Their reign of terror is now over for good and everyone can breathe easier as a result. Today’s guilty verdicts are the latest example of how we are making good on our promise to eradicate the scourge of gangs and to give neighborhoods back to their residents, and together with our federal, state, and local law enforcement partners, we will continue our fight.”

According to the evidence at trial before Judge Seibel:

Between 2007 and 2011, the Newburgh Latin Kings and their trusted associates sold crack cocaine, heroin, powder cocaine, and marijuana at drug spots in Newburgh, including the areas of Benkard Avenue and William Street, and South Miller Street and Broadway. Gang members and associates protected the gang’s drug turf, drugs, and drug money, with guns and violence. The violence included frequent shootings, stabbings, and assaults of rival drug dealers, including members of another gang in Newburgh known as the Bloods, as well as witnesses and suspected Government witnesses within their own gang.

The Newburgh Latin Kings were governed by a council of five officers, who were referred to as crowns (collectively, the “Crown Council”). PAGAN and SANCHEZ each served as the First Crown, and overall head of the Newburgh Latin Kings -- PAGAN from 2008 through January 2010 and SANCHEZ from February 2010 through February 2011.

The Newburgh Latin Kings had regular chapter meetings at which attendance was mandatory and members were required to pay dues. At the meetings, members discussed their criminal activities and alleged transgressions of chapter rules. They also directed punishments, known as “violations,” against members who were determined to have committed transgressions. Furthermore, at the meetings the Newburgh Latin Kings discussed conflicts with other gangs. In some instances, the Crown Council used meetings to order attacks on individuals and rival gangs.

On May 6, 2008, two members of the Newburgh Latin Kings were ordered by PAGAN and another leader of the gang to shoot a member of the Bloods on Dubois Street in Newburgh. The members of the gang then drove to the vicinity of Dubois Street and shot at individuals they mistakenly believed were members of the Bloods, including Jeffrey Zachary, a 15-year old, who was shot and killed.

The Latin Kings violence continued after the Zachary murder, and included a violent altercation on November 1, 2008 when PAGAN ordered other members of the Latin Kings to bring a gun to South Miller Street in Newburgh, resulting in another member of the gang discharging a gun; the stabbing of a gang member, on orders from PAGAN, in January 2010; and the attempted stabbing of a gang member, who was believed cooperating with law enforcement, on orders from SANCHEZ in February 2010.

The violence culminated in March 2010 with the shooting deaths of Scarlett and Maldonado on back-to-back nights of bloodshed. SANCHEZ along with other leaders of the Newburgh Latin Kings ordered the murder of Maldonado. SANCHEZ spoke on the phone with other members of the gang at they walked Maldonado to the intersection of Benkard and Little Monument Street, where a shooter, recruited by gang members that same day, lay in wait to gun Maldonado down. After the shooting, the same leaders of the gang spoke to SANCHEZ on the phone as they stood over Maldonado, who lay dying in the street.

Finally, in September 2010, SANCHEZ shot another member of the gang during a violent confrontation over the leadership of the gang.

The investigation resulting in the prosecution of members and associates of the Newburgh Latin Kings was conducted by the Federal Bureau of Investigation’s (“FBI”) Hudson Valley Safe Streets Task Force, which combined the efforts of dozens of law enforcement officers from federal, state, and local agencies and departments, including agents and officers with the FBI, the U.S. Bureau of Alcohol, Tobacco, Firearms, and Explosives, the City of Newburgh Police Department, Immigration and Customs Enforcement’s Homeland Security Investigations, the Middletown Police Department, the Orange County Sheriff’s Office, the New York State Police, and the Town of Newburgh Police Department. Mr. Bharara thanked the member agencies of the Task Force for their work in the investigation.

The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Nicholas McQuaid, Benjamin Allee, and Abigail Kurland are in charge of the prosecution.

U.S. v. Wilson Pagan, et al. S20 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, and Kathryn Keneally, the Assistant Attorney General for the Tax Division of the Department of Justice, announced that WEGELIN & CO. (“WEGELIN”), a Swiss private bank, was sentenced today and ordered to pay approximately $58 million to the United States for conspiring with U.S. taxpayers and others to hide approximately $1.5 billion in secret Swiss bank accounts, and the income generated in the accounts, from the Internal Revenue Service (the “IRS”). Together with the April 2012 forfeiture of more than $16.2 million from WEGELIN’s U.S. correspondent bank account, this amounts to a total recovery to the United States of approximately $74 million. WEGELIN pled guilty in January 2013 to one count of conspiracy to defraud the IRS, file false federal income tax returns, and evade federal income taxes before U.S. District Judge Jed S. Rakoff, who also imposed today’s sentence. This case represents the first time that a foreign bank has been indicted for facilitating tax evasion by U.S. taxpayers and the first guilty plea and sentencing of such a bank.

Manhattan U.S. Attorney Preet Bharara said: “Wegelin has now paid a steep price for aiding and abetting tax fraud that should be heeded by other banks, bankers, and advisers who engage in the same conduct. U.S. taxpayers with undeclared accounts – wherever those accounts may be – should know that their bank may be next, and they should pay what they owe the IRS before we come find them.”

Assistant Attorney General Keneally said: “When the IRS offered the opportunity to come into compliance through the Offshore Voluntary Disclosure Initiative, some people thought that they could beat the system by instead looking for banks that promised further concealment. We are following that money, and time is rapidly running out for taxpayers who think that they can still hide.”

According to the Superseding Indictment, the forfeiture Complaint filed against the funds in WEGELIN’s correspondent bank account, other court documents filed in the case, and statements made during the guilty plea and sentencing proceedings:

Founded in 1741, WEGELIN is Switzerland’s oldest bank. It provided private banking, asset management, and other services to clients around the world, including U.S. taxpayers living in the Southern District of New York. WEGELIN had no branches outside Switzerland, but it directly accessed the U.S. banking system through a correspondent bank account that it held at UBS AG (“UBS”) in Stamford, Connecticut. As of December 2010, WEGELIN had approximately $25 billion in assets under management.

From 2002 through 2011, WEGELIN conspired with various U.S. taxpayers and others, to hide from the IRS the existence of bank accounts held at WEGELIN, and the income generated in those secret accounts. WEGELIN carried out this scheme through client advisers and others.

In 2008 and 2009, WEGELIN opened and serviced dozens of new undeclared accounts for U.S. taxpayers in an effort to capture clients lost by UBS in the wake of widespread news reports that UBS was being investigated by U.S. authorities for helping U.S. taxpayers evade taxes and hide assets in Swiss bank accounts. By mid-2008, UBS had stopped servicing undeclared accounts for U.S. taxpayers, and WEGELIN took a number of steps to capitalize on the opportunity to assist U.S. taxpayers hide their assets from the U.S. government.

To further the goals of the conspiracy from 2002 through 2011, WEGELIN took steps that included the following:

• Opening and servicing undeclared accounts for U.S. taxpayer-clients in the names of sham corporations and foundations formed under the laws of Liechtenstein, Panama, Hong Kong, and other jurisdictions for the purpose of concealing some clients’ identities from the IRS;
• Accepting documents that falsely declared that the sham entities were the beneficial owners of certain accounts, when in fact the accounts were beneficially owned by U.S. taxpayers, and making the false documents part of WEGELIN’s client files;
• Permitting certain U.S. taxpayer-clients to open and maintain undeclared accounts at WEGELIN using code names and numbers to minimize references to the actual names of the U.S. taxpayers on Swiss bank documents;
• Ensuring that account statements and other mail for U.S. taxpayer-clients were not mailed to them in the United States;
• Communicating with some U.S. taxpayer-clients using their personal email accounts to reduce the risk of detection by law enforcement; and
• Issuing checks drawn on, and executing wire transfers through, its U.S. correspondent bank account for the benefit of U.S. taxpayers with undeclared accounts at WEGELIN and at least two other Swiss banks. In so doing, WEGELIN sometimes separated the transactions into batches of checks or multiple wire transfers in amounts that were less than $10,000 to reduce the risk that the IRS would detect the undeclared accounts.

At the time of Wegelin’s guilty plea before Judge Rakoff on January 3, 2013, Wegelin managing partner Otto Bruderer admitted on behalf of Wegelin that “[f]rom about 2002 through about 2010, Wegelin agreed with certain U.S. taxpayers to evade the U.S. tax obligations of these U.S. taxpayer clients, who, among other things, filed false tax returns with the IRS.” Bruderer also admitted that “[i]n furtherance of its agreement to assist U.S. taxpayers to commit tax evasion in the United States, Wegelin opened and maintained accounts at Wegelin in Switzerland for U.S. taxpayers who did not complete W-9 tax disclosure forms,” which are IRS forms U.S. taxpayers can use to identify themselves as such to a bank, thereby causing the bank to report income generated in the U.S. taxpayers’ account to the IRS. Bruderer further admitted that “Wegelin knew that certain U.S. taxpayers were maintaining non-W-9 accounts at Wegelin in order to evade their U.S. tax obligations, in violation of U.S. law, and Wegelin knew of the high probability that other U.S. taxpayers who held non-W-9 accounts at Wegelin also did so for the same unlawful purpose.” Bruderer also admitted that “Wegelin intentionally opened and maintained non W-9 accounts for [certain U.S.] taxpayers with the knowledge that, by doing so, Wegelin was assisting these taxpayers in violating their legal duties” and that “Wegelin was aware that this conduct was wrong.”

U.S. taxpayers are required to report the existence of any foreign bank account on their federal income tax returns if it holds more than $10,000 at any time during a given year, as well as any income it earns.

By the end of 2009, the collective maximum value of the assets in undeclared accounts beneficially owned by U.S. taxpayer-clients of WEGELIN was approximately $1.5 billion, with many accounts holding more than $10,000 in any one year.

The April 2012 forfeiture of approximately $16.2 million from WEGELIN’s correspondent bank account was the result of a civil forfeiture Complaint filed in February 2012. As alleged in the Complaint, WEGELIN used its correspondent bank account at UBS to help U.S. taxpayers with undeclared accounts repatriate money that they had hidden at WEGELIN. This was often done in a manner designed to evade detection by U.S. authorities. For example, U.S. taxpayers routinely asked WEGELIN to issue and send them checks, which were drawn on WEGELIN’S correspondent bank account, and that represented funds held in their secret accounts at the bank. Further, WEGELIN permitted at least two other Swiss banks to issue checks drawn on its correspondent bank account for the benefit of U.S. taxpayers holding undeclared accounts at these other banks. The sheer volume of transactions in WEGELIN’s correspondent bank account served to conceal the repatriation of money from U.S. taxpayers’ undeclared accounts at WEGELIN and the other banks. On April 24, 2012, U.S. District Judge Laura Taylor Swain entered an order forfeiting over $16.2 million seized from the U.S. correspondent account of WEGELIN. As part of its plea agreement, WEGELIN agreed not to contest the April 2012 forfeiture.

The components of today’s order to pay approximately $58 million to the United States include approximately $20 million in restitution to the IRS; a fine of $22.05 million; and forfeiture in the approximate amount of $15.8 million, representing the gross fees earned by the bank on the undeclared accounts of U.S. taxpayers. Wegelin paid the civil forfeiture amount of $15.8 million to the United States on January 4, 2013.

WEGELIN is headquartered in St. Gallen, Switzerland.

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

This criminal case is being handled by the Office’s Complex Frauds Unit and the civil forfeiture proceedings are being handled by the Office’s Asset Forfeiture Unit. Assistant U.S. Attorneys David B. Massey, Daniel W. Levy, and Jason H. Cowley are in charge of the prosecution and civil forfeiture proceedings.

Charges remain pending against client advisers Michael Berlinka, Urs Frei, and Roger Keller, who all reside in Switzerland and have not been arrested. The charges and allegations 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, Toni Weirauch, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), and George Venizelos, the Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (“FBI”), announced that former City of Yonkers Republican Party Chairman ZEHY JEREIS pled guilty today in White Plains federal court to a one-count Information charging him with failing to pay more than $60,000 in payroll taxes to the IRS. JEREIS surrendered this morning in the federal courthouse in White Plains and was presented and arraigned before U.S. Magistrate Judge George A. Yanthis. The case was assigned to U.S. District Judge Edgardo Ramos, who presided over the guilty plea hearing this morning.

Manhattan U.S. Attorney Preet Bharara stated: “On the very day he is surrendering to serve a prison term of 48 months in connection with his conviction on public corruption charges, Zehy Jereis is back in court admitting he defrauded the IRS. Mr. Jereis has a lot to answer for, and today he begins doing so.”

IRS Special Agent-in-Charge Toni Weirauch stated: “The tax law is very clear – employers are responsible for withholding employment taxes from the salaries of their employees. IRS-Criminal Investigation takes payroll tax fraud seriously because it both deprives the United States government of tax revenue and it reduces the future benefits that employees would otherwise be entitled to, including Social Security and Medicare.”

FBI Assistant Director-in-Charge George Venizelos stated: “Jereis, in two separate cases, has been shown to have used a business plan that included cheating. Businessmen who succeed by committing tax fraud and bribing public officials don’t earn our admiration; they go to prison.”

According to the Information and statements made during today’s proceeding:

JEREIS was a part owner and operator of a combination car wash, gas station, auto repair shop, and convenience store located in Brooklyn, New York, known as Atlantic Gas and Wash, LLC (“Atlantic”). Atlantic employed a substantial number of employees to wash and repair cars and to sell gasoline and other products at the convenience store. As an employer, JEREIS was obligated to withhold and pay to the IRS certain payroll taxes and to file accurate quarterly payroll tax forms that reported the wages and other compensation received by employees of Atlantic, and the taxes withheld.

During the tax years 2007 through 2009, JEREIS paid numerous employees of Atlantic, including undocumented aliens, a total of at least $403,127 in cash and failed to report such cash payments to the IRS. He did so in order to avoid his legal obligation to withhold taxes and to pay approximately $61,678 in payroll taxes to the IRS.

JEREIS, 41, of Scarsdale, New York, pled guilty to one count of aiding and assisting in the preparation of false and fraudulent payroll tax returns. He faces a maximum sentence of three years in prison and a maximum fine of the greater of $250,000 or twice the gross gain derived or loss that resulted from the crime. JEREIS will be sentenced by Judge Ramos on June 4, 2013 at 11 a.m.

On March 29, 2012, after a seven-week jury trial before U.S. District Judge Colleen McMahon, JEREIS was convicted of conspiracy, bribery, and extortion in connection with a scheme to bribe a Yonkers City Councilwoman to flip her vote on two real estate development projects. On November 19, 2012, JEREIS was sentenced in that case to 48 months in prison. He is scheduled to begin serving that sentence today.

Mr. Bharara praised the work of the IRS-Criminal Investigation and the FBI in the investigation.

This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Perry A. Carbone and Jason P.W. Halperin are in charge of the prosecution.

13-067

Preet Bharara, the United States Attorney for the Southern District of New York, Toni Weirauch, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), and George Venizelos, the Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (“FBI”), announced that former City of Yonkers Republican Party Chairman ZEHY JEREIS pled guilty today in White Plains federal court to a one-count Information charging him with failing to pay more than $60,000 in payroll taxes to the IRS. JEREIS surrendered this morning in the federal courthouse in White Plains and was presented and arraigned before U.S. Magistrate Judge George A. Yanthis. The case was assigned to U.S. District Judge Edgardo Ramos, who presided over the guilty plea hearing this morning.

Manhattan U.S. Attorney Preet Bharara stated: “On the very day he is surrendering to serve a prison term of 48 months in connection with his conviction on public corruption charges, Zehy Jereis is back in court admitting he defrauded the IRS. Mr. Jereis has a lot to answer for, and today he begins doing so.”

IRS Special Agent-in-Charge Toni Weirauch stated: “The tax law is very clear – employers are responsible for withholding employment taxes from the salaries of their employees. IRS-Criminal Investigation takes payroll tax fraud seriously because it both deprives the United States government of tax revenue and it reduces the future benefits that employees would otherwise be entitled to, including Social Security and Medicare.”

FBI Assistant Director-in-Charge George Venizelos stated: “Jereis, in two separate cases, has been shown to have used a business plan that included cheating. Businessmen who succeed by committing tax fraud and bribing public officials don’t earn our admiration; they go to prison.”

According to the Information and statements made during today’s proceeding:

JEREIS was a part owner and operator of a combination car wash, gas station, auto repair shop, and convenience store located in Brooklyn, New York, known as Atlantic Gas and Wash, LLC (“Atlantic”). Atlantic employed a substantial number of employees to wash and repair cars and to sell gasoline and other products at the convenience store. As an employer, JEREIS was obligated to withhold and pay to the IRS certain payroll taxes and to file accurate quarterly payroll tax forms that reported the wages and other compensation received by employees of Atlantic, and the taxes withheld.

During the tax years 2007 through 2009, JEREIS paid numerous employees of Atlantic, including undocumented aliens, a total of at least $403,127 in cash and failed to report such cash payments to the IRS. He did so in order to avoid his legal obligation to withhold taxes and to pay approximately $61,678 in payroll taxes to the IRS.

JEREIS, 41, of Scarsdale, New York, pled guilty to one count of aiding and assisting in the preparation of false and fraudulent payroll tax returns. He faces a maximum sentence of three years in prison and a maximum fine of the greater of $250,000 or twice the gross gain derived or loss that resulted from the crime. JEREIS will be sentenced by Judge Ramos on June 4, 2013 at 11 a.m.

On March 29, 2012, after a seven-week jury trial before U.S. District Judge Colleen McMahon, JEREIS was convicted of conspiracy, bribery, and extortion in connection with a scheme to bribe a Yonkers City Councilwoman to flip her vote on two real estate development projects. On November 19, 2012, JEREIS was sentenced in that case to 48 months in prison. He is scheduled to begin serving that sentence today.

Mr. Bharara praised the work of the IRS-Criminal Investigation and the FBI in the investigation.

This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Perry A. Carbone and Jason P.W. Halperin are in charge of the prosecution.

U.S. v. Zehy Jereis Information

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ALICIA HOLMES pled guilty yesterday to a three-count Indictment, charging HOLMES with devising and operating a scheme to defraud individuals and entities of hundreds of thousands of dollars in accommodations, goods, services, and money. HOLMES pled guilty to one count of wire fraud, one count of mail fraud, and one count of providing a false address in furtherance of fraud today in White Plains federal court before U.S. District Judge Kenneth M. Karas, who set a sentencing date for June 24, 2013.

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

From at least in or about April 2007 through in or about May 2011, HOLMES made false and fraudulent representations to hotel managers and staff, real estate brokers, property builders, home owners, and school administrators, among others, through emails, telephone calls, and letters, including statements that:

• she owned and/or was in the process of purchasing certain high-end properties, including homes valued between approximately $6,255,000 and $17,000,000;
• she had assets of great value that she would gain access to in as soon as a few days;
• she required financial assistance from the victims until she was in possession of those assets, and
• once she was in possession of her purported assets, she would use those assets to purchase certain high-end properties from some of the victims, or to pay money that she owed to the victims.

HOLMES did not have or reasonably expect to have access to assets of great value, did not own any high-end properties, and knew that her representations were false at the time she made them.

HOLMES, 49, is eligible for enhanced penalties at sentencing because she continued her offense while on pretrial release. She faces a maximum term of imprisonment of 65 years, fines of up to $250,000 or twice the gross pecuniary gain or loss resulting from the offense, restitution to victims, and forfeiture of the proceeds of her offenses.

Mr. Bharara praised the investigative work of the United States Postal Inspection Service and the Federal Bureau of Investigation.

This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Ilan Graff, Lee Renzin, and Anna M. Skotko are in charge of the criminal prosecution.

If you think you may have been a victim in this case or have additional information, please call Postal Inspector Patricia Thornton at 914-993-1930.

U.S. v. Alicia Holmes S2 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, Steven Miller, the Acting Commissioner of the Internal Revenue Service (“IRS), and Tamara Ashford, the Deputy Assistant Attorney General for the Tax Division of the Department of Justice, announced today that Ernst & Young LLP (“E&Y”) has admitted wrongful conduct by certain E&Y partners and employees in connection with the firm’s participation, from 1999 to 2004, in four tax shelters that were used by approximately 200 E&Y clients in an effort to defer, reduce, or eliminate tax liabilities of more than $2 billion.

E&Y entered into a non-prosecution agreement (the “NPA”) with the United States, in which the company agreed to pay $123 million to the United States and acknowledged a detailed Statement of Facts in which it admitted the wrongful conduct of certain partners and employees. E&Y also agreed to certain permanent restrictions and controls on its tax practice, including a prohibition against planning, promoting or recommending any “listed transaction.” A "listed transaction" is a transaction that is the same as, or substantially similar to, one that the IRS has determined to be a tax avoidance transaction. The NPA also requires E&Y’s continued cooperation with the Government’s investigation. In exchange, the United States agreed not to criminally prosecute E&Y for its participation in the tax shelter scheme. The NPA applies only to E&Y and not to any individuals. E&Y has cooperated with the Government’s investigation into these tax shelters since approximately 2003. In the event that the firm violates the NPA, the U.S. Attorney’s Office may prosecute E&Y.

According to the Statement of Facts to which E&Y has admitted, and as proven at the criminal trial of certain former E&Y partners:

Beginning in 1999 and ending in 2002, E&Y, in conjunction with various law firms, banks, and investment advisers, developed, marketed and implemented four tax shelter products called COBRA, CDS, CDS Add-On, and PICO. E&Y implemented these four tax shelter products for approximately 200 high net worth clients in an effort to defer, reduce, or eliminate $2 billion in aggregate tax liabilities. E&Y prepared tax returns reflecting tax losses claimed to have been derived from those tax shelter products and subsequently defended certain of its clients in connection with audits of those transactions by the IRS.

A small group within E&Y known as the Strategic Individual Solutions Group (“SISG”) was primarily responsible for supervising and coordinating the marketing, implementation and defense of E&Y’s tax shelter products. Certain SISG tax shelter products were designed to appear to the IRS to be substantive investments that had favorable tax consequences when, in reality, the products were actually designed and marketed to clients as a series of preplanned steps that would defer, reduce or eliminate their tax liabilities. The typical client participating in these shelters was primarily, if not exclusively, motivated to achieve a desired tax savings.

In order to deceive the IRS as to the true nature of the tax strategies, and to bolster arguments that the transactions had economic substance, some SISG personnel agreed upon and directed other E&Y employees to participate in a concerted effort not to create, disseminate, or publicize documents reflecting the tax motivation behind the strategies, or the preplanned sequence of steps necessary to effect the strategies. These SISG personnel thereby sought to prevent the IRS from detecting their clients’ purposes in employing these strategies. For example, in certain instances, members of SISG falsely portrayed the transactions under examination as purely investment-driven transactions, and falsely denied a tax motivation for the transactions in response to IRS Information Document Requests and in testimony to the IRS.

Further, in implementing the sale of tax shelter products, certain members of SISG also prepared documents or correspondence that falsely and inaccurately reflected events or conversations, and that were designed to improperly influence the IRS’s view of the merits of the transactions in the event of an audit. These activities continued into 2003 and 2004.

Mr. Bharara thanked the IRS for their outstanding work in the investigation of this matter. He also thanked the Department of Justice’s Tax Division for its assistance.

This investigation is being overseen by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Richard C. Tarlowe, and Senior Litigation Counsel John E. Sullivan of the Tax Division, are in charge of the prosecution.

EY NPA

Preet Bharara, the United States Attorney for the Southern District of New York, announced that DONNA GUERIN, an attorney, was sentenced today to eight years in prison on conspiracy and tax evasion charges stemming from her work on the design, marketing, and implementation of fraudulent tax shelters that allowed her clients to claim billions of dollars in fraudulent tax losses. GUERIN pled guilty in September 2012 and was sentenced by U.S. District Judge William H. Pauley III.

Manhattan U.S. Attorney Preet Bharara said: “Donna Guerin abused her position as an attorney to help clients flout the law she swore to uphold, which contributed to the loss of billions of dollars in tax revenue. With her sentence today, she joins the other professionals who built and perpetrated this fraud, but did not find shelter from justice.”

According to the Indictment previously filed in Manhattan federal court and statements made during GUERIN’s guilty plea and sentencing proceedings:

GUERIN was a partner at Altheimer & Gray (“A&G”), a Chicago law firm, between 1994 and 1998, and later moved with a small group of A&G attorneys to the newly-formed Chicago office of Jenkens & Gilchrist (“J&G”), a Texas-based law firm with offices throughout the United States. At different times between 1999 and 2005, GUERIN was a shareholder or partner at J&G.

Between 1996 and 2004, GUERIN and other attorneys at J&G worked on the design, marketing and implementation of high-fee tax strategies for individual clients. Those strategies, or “tax shelters,” were designed to allow high-net-worth clients to eliminate, reduce, or defer taxes on significant income or gains. GUERIN and other J&G attorneys worked together with brokers from a financial institution, partners and employees of the accounting firm BDO Seidman, and other entities, in marketing and implementing the tax shelters.

Among the fraudulent tax shelters designed, marketed, and implemented by GUERIN and her co-conspirators were “Short Sales,” “Short Options Strategy” (“SOS”), “Swaps,” and “HOMER.” The Short Sale tax shelter was marketed and sold from 1994 through 1999 to at least 290 wealthy individuals, and generated at least $2.6 billion in false and fraudulent tax losses. The SOS tax shelter was marketed and sold from 1998 through 2000 to at least 550 wealthy individuals, and generated at least $3.9 billion in false and fraudulent tax losses. The Swaps tax shelter was marketed and sold in 2001 and 2002 to at least 55 wealthy individuals, and generated more than $420 million in false and fraudulent tax losses.

In return for receiving a fee from tax shelter clients based on a percentage of their purported tax losses – usually 5% for ordinary losses and 4% for capital losses – GUERIN and others at J&G assisted clients in implementing all of the stages of the fraudulent tax shelters, including setting up bank accounts and entities such as corporations and partnerships. GUERIN and others at J&G also provided the tax shelter clients a “more likely than not” legal opinion from J&G.

In addition to her involvement in the marketing and implementation of the fraudulent tax shelters, GUERIN also took part in the illegal back-dating of certain tax shelter transactions when attorneys at Jenkens & Gilchrist realized, after the close of certain tax years, that certain steps of the tax shelter transaction had been done improperly. GUERIN and others helped create documents after the close of the tax year and back-dated them using “as of” dates --- effectively treating the documents as if they had been signed prior to the close of the tax year, in violation of tax accounting rules.

GUERIN was paid in excess of $17 million from 1998 to 2002 as a result of her involvement in the tax shelter conspiracy.

In addition to her prison term, GUERIN, 52, of Scottsdale, Arizona, was sentenced to three years of supervised release and ordered to pay restitution in the amount of $190 million.

GUERIN and co-defendants Paul Daugerdas, Denis Field, and David Parse were convicted of various tax fraud charges in May 2011 after an 11-week jury trial trial. GUERIN, Daugerdas, and Field were granted a new trial as a result of certain juror misconduct. David Parse is scheduled to be sentenced on March 22, 2013. The retrial of Daugerdas and Field is scheduled to begin on September 9, 2013. The charges against these two defendants are merely accusations, and they are presumed innocent unless and until proven guilty.

Former J&G partner Erwin Mayer pled guilty to related charges of conspiracy and personal tax evasion in October 2010. Former BDO Seidman Vice Chairman and board member Charles W. Bee, Jr., pled guilty in June 2009 to related charges of conspiracy to defraud the Internal Revenue Service (“IRS”), tax evasion, and perjury. Michael Kerekes, another principal of BDO Seidman and also a former member of BDO's TSG and Tax Opinion Committee, pled guilty in February 2009 to related conspiracy and tax evasion charges. Adrian Dicker, a former Vice Chairman of BDO Seidman and TSG member, pled guilty in March 2009 to related conspiracy and tax evasion charges. BDO partner Robert Greisman pled guilty in July 2009 to related conspiracy, tax evasion, and IRS obstruction charges. BDO partner Mark Bloom pled guilty in July 2009 to a related IRS obstruction charge.

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States has filed and simultaneously settled a federal civil rights lawsuit alleging that NEW YORK CITY (the “City”), and specifically the NEW YORK CITY POLICE DEPARTMENT (“NYPD”), violated the Americans with Disabilities Act of 1990 (“ADA”) in the course of its failure to hire an applicant for a School Crossing Guard position. The settlement agreement, in the form of a Consent Decree, was filed today by U.S. District Judge Paul A. Crotty.

Manhattan U.S. Attorney Preet Bharara said: “The ADA expressly prohibits medical and psychological exams until a conditional offer of employment has been made – so that an applicant will know if his or her disability is the reason he or she didn’t get the job. This transparency in the hiring process is crucial because it protects the applicant from disability-based discrimination that might otherwise be masked by an employer.”

According to the Complaint filed Tuesday in Manhattan federal court, the applicant applied for the position of School Crossing Guard, and immediately after doing so was directed to report for medical testing. At the time the NYPD directed the applicant to report for medical testing, it had not extended the applicant a conditional offer of employment, in clear violation of the ADA which generally prohibits medical and psychological exams until a conditional offer of employment has been made. After a conditional offer has been made, an employer may then require a prospective employee to undergo a medical examination. The purpose of this two-step process is so that an applicant will be able to discern if he or she was rejected for medical or psychological reasons.

In the Consent Decree, the City admits and acknowledges that it had a hiring procedure at the time that violated the ADA, and agrees to make the applicant a conditional offer of employment and pay her $65,000.

More information on the obligations of employers with respect to job applicants with disabilities is available at www.ada.gov and www.eeoc.gov .

Mr. Bharara thanked the Equal Employment Opportunity Commission for its initial investigation of the Complaint.

The case is being handled by the Office’s Civil Rights Unit. Assistant United States Attorney David J. Kennedy is in charge of the case.

US v.City of New York ADA Settlement Consent Decree
US v. City of New York ADA Settlement Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, Joseph Anarumo, Jr., the Special Agent-in-Charge of the New York Field Office of the Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), and Raymond W. Kelly, the Police Commissioner for the City of New York (“NYPD”), announced today the unsealing of an Indictment charging seven members and associates of a drug trafficking organization (the “Organization”) that operated in the Bronx with narcotics trafficking. Six of the defendants are also charged with possessing, brandishing, and discharging firearms in connection with their drug trafficking.

One of the defendants charged, ADONY NINA, was originally arrested by ATF agents in April 2012 for possession of ammunition by a convicted felon and has been in federal custody since that time. Three additional defendants, CANDIDO ANTOMATTEI, JORGE CRUZ, and TIARA FELIX, were arrested last night. Two additional defendants, STEPHANIE MESA and JASON MORALES, who are already in custody on state charges, will be transferred to federal custody tomorrow. One defendant, EDUARDO RODRIGUEZ, remains at large. The three defendants arrested last night are expected to be presented and arraigned today in Manhattan federal court before U.S. Magistrate Judge Frank Maas. The case has been assigned to U. S. District Judge Richard J. Sullivan.

Manhattan U.S. Attorney Preet Bharara said: “With today’s takedown in the Bronx, we are once again reminded of the connection between narcotics trafficking, guns and violence. These defendants allegedly conspired to blanket a section of the Bronx with heroin and crack cocaine, using guns as their calling cards. Today’s arrests represent the latest coordinated work of law enforcement to clean the drug trade and the people who peddle drugs out of our neighborhoods and to make those communities safe for their residents.”

ATF Special Agent-in-Charge Joseph Anarumo, Jr. said: “This investigation is extremely vital not only because it has resulted in the arrests of violent individuals known to be using firearms in furtherance of their drug trafficking, but also because it exemplifies inter-agency cooperation at its best. By combining the investigative resources and techniques of the NYPD and ATF, an organized and defined heroin and crack trafficking operation has been effectively dismantled. The essence of law enforcement is realized when we can rid the streets of criminals and also cause the initiation of additional investigations into even more serious offenders.”

NYPD Commissioner Raymond W. Kelly said: “Police investigated the source of New Year’s Day gunfire and discovered alleged crack cocaine and heroin trafficking, much of it occurring within feet of a school and playground. Law-abiding New Yorkers in nearby public housing and elsewhere in the Bronx bore the brunt of the subjects’ drug dealing and gun violence - until NYPD detectives, their ATF partners, and Federal prosecutors stepped in. I commend their dedication to public safety, and congratulate them on the arrests in this case.”

According to the allegations in the Indictment filed in Manhattan federal court, other publicly filed documents, and statements made in court earlier today:

From 2008 through 2012, the Organization’s members sold crack cocaine and heroin to street level drug customers, and supplied those drugs to other Bronx drug dealers, primarily in the vicinity of Longwood Avenue and Beck and Kelly Streets in the Bronx.

For example, in October 2011, JORGE CRUZ sold a quantity of crack cocaine to an NYPD undercover officer. And in March 2010, JASON MORALES was in possession of four firearms, at least one of which was brandished and discharged in connection with a drug trafficking crime.

The federal investigation into the Organization’s narcotics trafficking began in concert with the arrest of ADONY NINA by NYPD officers after he allegedly fired a handgun into the air early on the morning of January 1, 2012 in the Bronx. NINA is a leading member of the Organization.

All of the defendants are charged with one count of conspiring to distribute, and possess with the intent to distribute, crack cocaine and heroin, which carries a mandatory minimum sentence of 10 years in prison and a potential maximum sentence of life in prison. In addition, six of the defendants are charged with possessing firearms, which were brandished and discharged, in connection with their drug trafficking, which carries a mandatory minimum sentence of 10 years in prison. A chart containing the names, ages, residences, and charges for the defendants is attached.

Mr. Bharara praised the outstanding investigative work of the ATF, and added that the investigation is continuing.

The prosecution is being handled by the Office’s Violent Crimes Unit. Assistant U.S. Attorneys Daniel Noble and Laurie Korenbaum are in charge of the prosecution.

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

Click here to view chart(s)

US v Nina et al Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that LEIB GLANZ, a former New York City Department of Corrections chaplain who conspired with his brother MENASHE GLANZ to defraud the government of more than $220,000 in federal housing subsidies, was sentenced today in Manhattan federal court to 45 days in prison. He previously pled guilty to making false statements to the U.S. Department of Housing and Urban Development (“HUD”) with the intent to defraud and was sentenced by U.S. District Judge P. Kevin Castel. MENASHE GLANZ previously pled guilty to theft of government funds and was sentenced to six months in prison last week by Judge Castel.

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

LEIB GLANZ is a former Chaplain with the New York City Department of Corrections, who previously worked at the Brooklyn Detention Complex, in Brooklyn, New York, and the Manhattan Detention Complex, in Manhattan, New York, from October 2006 through June 2009.

LEIB and MENASHE GLANZ participated in a scheme to fraudulently obtain Section Eight Program housing benefits. Under the Section Eight Program, HUD subsidizes the rent of low-income tenants who meet certain income and eligibility requirements. In New York City, this program is administered by the New York City Housing Authority (“NYCHA”) and the New York City Department of Housing Preservation and Development (“HPD”).

As part of this scheme, MENASHE GLANZ applied for and obtained Section Eight housing benefits to live at an apartment located in Brooklyn, New York (the “Section Eight Apartment”). While MENASHE GLANZ received these benefits, his brother LEIB GLANZ actually resided at this apartment from 1996 through September 2011, while MENASHE GLANZ lived at another apartment that was not subsidized by the Section Eight Program. Additionally, according to documents submitted to NYCHA and HPD, LEIB GLANZ previously signed contracts with NYCHA on behalf of the landlord of the Section Eight Apartment, the United Talmudical Academy, which also purportedly employed MENASHE GLANZ. In the course of this scheme, LEIB and MENASHE GLANZ defrauded NYCHA and HPD of a total of approximately $222,985, with LEIB GLANZ responsible for defrauding NYCHA and HPD of approximately $36,484, and MENASHE GLANZ responsible for defrauding NYCHA and HPD of approximately $186,501.

In addition to the prison term, Judge Castel sentenced LEIB GLANZ, 54, of Brooklyn, New York to one year of supervised release and ordered him to pay a fine of $3,000 and restitution in the amount of $36,484. Judge Castel sentenced MENASHE GLANZ, 51, of Brooklyn, New York, to 6 months’ home confinement to be followed by three years’ supervised release in addition to his prison term, ordered him to pay a fine of $3,000, and ordered restitution and forfeiture in the amount of $186,501.

Mr. Bharara praised the investigative work of the New York City Department of Investigation and NYCHA in this investigation.

This matter is being handled by the Office’s Public Corruption Unit. Assistant United States Attorneys Steve C. Lee and Justin Anderson are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and Brian C. Crowell, the Special-Agent-in-Charge of the New York Division of the Drug Enforcement Administration (“DEA”), announced today that FELIX RODRIGUEZ, a licensed medical doctor, pled guilty to a one-count Information charging RODRIGUEZ with distribution of more than 1,000 pills of Oxycodone, a Schedule II controlled substance. RODRIGUEZ pled guilty today in White Plains federal court before U.S. District Judge Kenneth M. Karas, who set a sentencing date for May 20, 2013.

Manhattan U.S. Attorney Preet Bharara stated: “This doctor took an oath to do no harm and then violated his oath by using his position of trust to distribute Oxycodone outside the scope of his professional medical practice. The abuse of diverted prescription pain medication is the fastest growing drug problem in our country. We will continue to work with federal, state, and local law enforcement organizations to identify and investigate those responsible at all levels.”

DEA Special-Agent-in-Charge Brian C. Crowell stated: “Felix Rodriguez should not be called a doctor by his peers or patients for illegally distributing prescriptions for pain killers to individuals he never examined. Rodriguez made a deal with the devil and profited by the sale of powerful pain medication for illegitimate use. According to the Centers for Disease Control and Prevention painkillers now take the lives of more Americans than heroin and cocaine combined, and since 2008 drug-induced deaths have outstripped those from traffic accidents. Federal, State and Local law enforcement will not tolerate any illegal drug distribution that puts our community in peril.”

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

From May 2010 through February 2011, FELIX RODRIGUEZ, a doctor who worked out of a medical office in Manhattan, provided Oxycodone prescriptions to individuals who he had never met or examined. When RODRIGUEZ wrote these prescriptions, he knew that by doing so he was violating the law and generally accepted medical practice. Oxycodone is a powerful painkiller with a high potential for addiction and abuse.

FELIX RODRIGUEZ, 52, of Bronx, New York, is a medical doctor who practiced in Manhattan, New York. RODRIGUEZ faces a maximum term of imprisonment of 20 years.

Mr. Bharara praised the efforts of the DEA’s New York City Tactical Diversion Squad; comprised of agents and officers from the DEA, the New York City Police Department, and the New York State Department of Financial Services, and the Westchester County Department of Public Safety. He also praised the assistance of the Westchester County District Attorney’s Office, the U.S. Marshals Service, the New York State Police, the Yonkers Police Department, and Mount Vernon Police Department in this case.

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.

Rodriguez, Felix Information

Preet Bharara, the United States Attorney for the Southern District of New York, Thomas P. Zugibe, the Rockland County District Attorney, George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Chief Michael Sullivan of the Clarkstown Police Department, announced today the filing of federal and state criminal charges today against LAWRENCE MULQUEEN of Nanuet, New York. MULQUEEN faces federal charges for threatening to kill federal officials and others, and separate state charges for criminal possession of a weapon. He was initially taken into custody on the state charges on February 21, 2013, and was charged federally today. He is scheduled to appear before a U.S. Magistrate Judge in White Plains federal court tomorrow.

U.S. Attorney Bharara stated: “As alleged, Lawrence Mulqueen used the power and reach of Facebook to make incendiary threats, including the use of deadly force, against federally-elected officials and others. He even provided his like-minded Facebook friends with a virtual ‘how to’ on the most effective weapons to use in making good on those threats. The internet is a forum for free expression, but it does not give anyone a carte blanche to break the law.”

Rockland County District Attorney Zugibe stated: "In our fast-paced world of status updates and tweets, behavior of this type must be treated seriously and investigated promptly to ensure that all threats or indications of potential violence are mitigated and do not escalate. Overt threats of the sort made by this defendant against our elected leaders are especially troubling and must be dealt with to the fullest extent of the law. I want to thank U.S. Attorney Bharara and his team for their good work and partnership in bringing this dangerous individual to justice."

FBI Assistant Director-in-Charge George Venizelos stated: “The defendant is alleged not only to have threatened to kill elected officials. He did the virtual equivalent of standing in the town square with a megaphone, using his Facebook page to exhort others to carry out these assassinations. Freedom of speech is a fundamental right, but making overt threats is not protected speech, it’s a crime.”

Clarkstown Police Chief Sullivan stated: “ We’re pleased and proud to work with other local and federal law enforcement agencies to bring this person into custody and to protect our elected officials and all other citizens.”

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

In February 2013, MULQUEEN posted numerous messages to his page on the online social networking site “Facebook,” threatening to kill members of the United States Congress, state and local elected officials, and others. Among other things, MULQUEEN posted on February 20 that he “[could] not wait to start killing” multiple United States Senators and Members of the United States House of Representatives, as well as a Governor and Mayor, adding that their “dirt nap [was] coming very soon.”

MULQUEEN instructed people who commented 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 other individuals, including at least one political activist.

According to the allegations in the Indictment returned today in Rockland County Court:

MULQUEEN is charged with criminal possession of a weapon in the third degree, a class D felony. MULQUEEN faces a maximum term of three and a half to seven years on this charge

MULQUEEN, 49, is charged with one count of threatening to kill federal officials and one count of transmitting threats in interstate commerce. He faces a maximum federal penalty of 15 years in prison.

Mr. Bharara and Mr. Zugibe praised the investigative efforts of the Federal Bureau of Investigation and the Clarkstown Police Department.

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

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

Mulqueen Complaint Signed

Preet Bharara, the United States Attorney for the Southern District of New York, announced that Dr. ROBERTO AYMAT, a medical doctor, pled guilty today in Manhattan federal court to participating in a scheme to defraud Medicare out of approximately $8.5 million through the use of fraudulent HIV/AIDS clinics in New York. As part of the scheme, AYMAT and others billed Medicare for medications that were never administered or that were administered but were medically unnecessary. He pled guilty before U.S. District Judge George B. Daniels. Three other participants in the scheme, Asmed Barrera, Augusto Guzman, and Jorge Rivero, previously pled guilty.

Manhattan U.S. Attorney Preet Bharara said: “Roberto Aymat used his medical license to perpetrate a multi-million dollar fraud on Medicare – a program that provides a lifeline to its beneficiaries and that is struggling financially to stay afloat. His exploitation of this vital, taxpayer-funded program was egregious and with his plea today, he has been held to account.”

According to the Complaint and the Indictment filed in this case:

AYMAT, along with Barrera, Guzman, Rivero, also a medical doctor, and others operated three medical clinics in New York City that purported to provide drug treatments to Medicare-eligible HIV/AIDS patients, but that were, in reality, healthcare fraud mills.

The defendants executed the fraudulent scheme by recruiting HIV/AIDS patients eligible for Medicare, and paying them kickbacks in exchange for signing on as patients at the clinics. The defendants then used these patients’ status as Medicare beneficiaries to submit claims for reimbursement to Medicare for drugs that had been prescribed to these patients. In fact, these medications were never purchased and never administered, or were administered, but were medically unnecessary.

From January 2007 to April 2009, AYMAT and his co-conspirators billed Medicare for more than 10 times the number of units of prescription drugs they actually purchased, defrauding the Medicare system of at least $8.5 million.

AYMAT, 44, a resident of Manhattan, pled guilty to conspiring to commit fraud in connection with a health care benefits program, and to committing healthcare fraud and mail fraud. He faces a penalty of up to 50 years in prison and is scheduled to be sentenced by Judge Daniels on June 18, 2013.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation and the Department of Health and Human Services, Office of Inspector General, New York Region.

The prosecution is being handled by the Office’s Complex Frauds Unit. Assistant United States Attorneys Kan M. Nawaday and Jason H. Cowley are in charge of the prosecution.

Aymat, Roberto, et al. Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that CLIFFE R. BODDEN was sentenced today in Manhattan federal court to 74 months in prison for participating in an investment scheme that defrauded foreign investors out of nearly $1 million. As part of the scheme, investors were lured with false promises that their funds would be safely invested in the U.S. financial markets through a legitimate broker-dealer. Instead, the money was misappropriated, used to pay certain expenses, and transferred to, among other places, entities related to BODDEN. He pled guilty in September 2012 to one count of conspiracy to commit wire fraud and one count of wire fraud and was sentenced by U.S. District Judge Katherine B. Forrest.

Manhattan United States Attorney Preet Bharara said: “With today’s sentence, Cliffe Bodden now knows there is a price to be paid for lying to investors, no matter where the victims live. Our ongoing efforts to prosecute the perpetrators of investment fraud are not limited by geographic boundaries.”

According to the court filings and statements made in court:

BODDEN held himself out as a Managing Director of Lempert Capital Management, Ltd., a corporation purportedly incorporated in the Cayman Islands. Starting in approximately 2005, foreign investors were lured into sending nearly $1 million to Lempert Capital’s purported management company Lempert Brothers under the pretense that those funds would be invested in the U.S. financial markets by Lempert Brothers, which was a registered broker-dealer. To induce investors into wiring funds, among other false promises, investors were told that the funds would be safeguarded, and that if the value of the funds dropped more than 20%, the money would be frozen and all remaining funds available for return to investors. In fact, the nearly $1 million of investor funds were misappropriated and diverted to, among other things, entities affiliated with BODDEN.

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

In addition to the prison sentence of 37 months on each count to run consecutive for a total term of imprisonment of 74 months, Judge Forrest sentenced BODDEN, 49, of Tampa, Florida to two years of supervised release to run consecutively and ordered him to pay a fine of $25,000 and a special assessment of $200. Judge Forrest ordered restitution and forfeiture in the amount of $946,509, which represents the amount of the crime proceeds.

The charges against BODDEN’s co-defendant S. George Milter, 34, of New York, New York, are pending. These charges and the allegations against Milter are merely accusations, and he is presumed innocent unless and until proven guilty.

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, and Keith Milke, the Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced today that JAMES TAGLIAFERRI, who managed and controlled TAG Virgin Islands, Inc. (“TAG”), an SEC-registered investment adviser, was arrested today for executing a scheme to defraud TAG clients. Through TAG, TAGLIAFERRI received undisclosed payments in exchange for causing his clients to invest in certain securities; used client funds for improper purposes, including making payments to other clients who were demanding their funds; and caused false and fictitious securities instruments to be placed in client accounts. In total, TAGLIAFERRI received more than $3 million in undisclosed payments in connection with the fraud. He was arrested in St. Thomas, U.S. Virgin Islands, and is expected to be presented today in federal court in St. Thomas.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, James Tagliaferri concocted an elaborate scheme to defraud his clients, including taking millions of dollars in undisclosed compensation in exchange for placing their hard-earned money in certain investments. Financial advisers have a professional and legal responsibility to act in their clients’ best interests which is exactly the opposite of the conduct in which Tagliaferri allegedly engaged.”

Inspector-in-Charge Keith Milke said: “Today's arrest of James Tagliaferri for allegedly investing client funds in risky ventures, then using part of their investments as a ‘fee’ violated the trust his clients placed with him, leaving many financially scarred. His arrest should serve as a reminder that whenever someone uses the US Mail for illegal activities Postal Inspectors will bring them to justice.”

According to an Indictment unsealed today in Manhattan federal court:

Beginning in or about 2007, TAGLIAFERRI opened TAG in the Virgin Islands and began offering investment advisory services to clients through that company. He exercised substantial discretion over client investment accounts which, at times, totaled more than $250 million in assets under his management.

Beginning in or about 2007, TAGLIAFERRI executed a multi-faceted scheme to defraud TAG clients. First, he began taking payments he was legally required to disclose but did not, in exchange for placing client funds in investments with certain companies. He received at least $1.6 million in secret fees for causing clients to invest in securities relating to a company located in Garden City, New York (“Company 1”). He also received at least $1.75 million in undisclosed compensation in exchange for placing client funds in investments with several companies affiliated with an associate of his (“Associate 1”).

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

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

Third, TAGLIAFERRI caused false and fictitious securities to be placed in client accounts. He signed a series of investment instruments relating to a company located in Pennsylvania (the “Pennsylvania Company”). According to these instruments, the Pennsylvania Company was obligated to make payments to certain TAG clients based on a note agreement between the Pennsylvania Company and TAG. In reality, however, the Pennsylvania Company never executed any agreement with TAG that obligated it to make payments to TAG or TAG clients. As TAGLIAFERRI well knew, these investment instruments, and the obligation they referenced, were false and fictitious.

TAGLIAFERRI, 73, of St. Thomas, has been charged with one count of investment adviser fraud, one count of securities fraud, five counts of wire fraud, and eight counts of violating the Travel Act. The penalties for each of the charged offenses are listed in the attached chart.

Mr. Bharara praised the work of USPIS and the Criminal Investigators of the United States Attorney’s Office, 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. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Jason H. Cowley and Richard C. Tarlowe 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.

Click here to view chart(s)

Tagliaferri, James Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that VALENTINA ROMASHOVA, a/k/a “Tina Rome,” was sentenced today in Manhattan federal court to two years in prison for her participation in a $57 million fraud scheme that targeted programs administered by the Conference on Jewish Material Claims Against Germany, Inc. (the “Claims Conference”), and that were established to aid the survivors of Nazi persecution. ROMASHOVA pled guilty in October 2012 to one count of conspiracy to commit mail fraud. She was sentenced by U.S. District Judge Thomas P. Griesa.

Manhattan U.S. Attorney Preet Bharara said: “Valentina Romashova traded on her position at a law firm to manufacture applicants for funds that were intended to compensate victims of one of the darkest periods in world history – the Holocaust – all so she could get a cut of the proceeds. The fraud that she helped perpetrate is reprehensible, and the fact that she did so from a law office makes it that much worse.”

According to the Superseding Indictment, the Complaint, and statements made during court proceedings:

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

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

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

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

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

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

ROMASHOVA worked at a law firm in New York City that advertised in Russian-language newspapers that it could assist people with applying for compensation from the Claims Conference. While employed at this firm, ROMASHOVA used her position to steer applicants who may have been eligible to receive compensation from the Hardship Fund to the Article 2 Fund, and submitted, or caused to be submitted, fraudulent Article 2 Fund applications on their behalf, in exchange for tens of thousands of dollars in fees.

Since 2010, a total of 31 individuals have been charged with participating in the scheme to defraud the Article 2 Fund and Hardship Fund programs. Twenty-three defendants, including ROMASHOVA, have pled guilty, and a total of nine defendants have now been sentenced. Charges remain pending against the remaining eight defendants in the case, and they are presumed innocent unless and until proven guilty.

In addition to her prison term, ROMASHOVA, 65, of Brooklyn, New York, was sentenced to one year of supervised release. She was also ordered to forfeit $150,110 and pay restitution in the amount of $3,278,154.65.

In sentencing ROMASHOVA, Judge Griesa said, “…the fraudulent conduct committed here was of a uniquely serious character and the sentence should reflect that.”

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation (“FBI”). He also thanked the Claims Conference for bringing this matter to the FBI’s attention and for its extraordinary continued cooperation in this investigation, which he noted is ongoing.

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that HENRY GORDIN pled guilty today in Manhattan federal court to conspiring to defraud programs administered by the Conference on Jewish Material Claims Against Germany, Inc. (the “Claims Conference”), established to aid the survivors of Nazi persecution, out of more than $57 million. GORDIN was arrested in October 2011, as part of an ongoing investigation that has resulted in charges against a total of 31 defendants, 10 of whom were former Claims Conference employees, including a former director. He pled guilty today before U.S. District Judge Thomas P. Griesa.

Manhattan U.S. Attorney Preet Bharara said: “Henry Gordin was supposed to help survivors of the Holocaust be financially supported in their waning years, but instead he used his position to defraud the Claims Conference and help himself to money intended for victims of the Nazis. With his plea today, we are closer to holding to account all those who participated in this repulsive fraud.”

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

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

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

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

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

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

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

While employed as a caseworker in the Hardship Fund program at the Claims Conference, GORDIN knowingly processed fraudulent applications in return for payments from his co-conspirators. In addition, after he left the employ of the Claims Conference, GORDIN passed materials, including identification documents, to a co-conspirator still employed at the Claims Conference to support other fraudulent Hardship Fund applications.

GORDIN is the 23rd of the 31 defendants charged in the scheme to plead guilty, including six former Claims Conference employees. Charges remain pending against the remaining eight defendants in the case, who are presumed innocent unless and until proven guilty.

GORDIN, 75, of Brooklyn, New York, faces a maximum sentence of 20 years in prison. He is scheduled to be sentenced by Judge Griesa on August 7, 2013 at 4:30 p.m.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation (“FBI”). He also thanked the Claims Conference for bringing this matter to the FBI’s attention and for its extraordinary continued cooperation in this investigation, which he noted is ongoing.

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

U.S. v. Domnitser, et al. S1 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of Indictments charging three automotive parts suppliers with selling counterfeit replacement parts. The three men – SHASHI MALHOTRA, FADI KILANI, and RICHARD DININNI – were arrested at their homes earlier this morning. MALHOTRA and KILANI will be presented in Manhattan federal court before U.S. Magistrate Judge Gabriel W. Gorenstein this afternoon. DININNI will be presented in federal court in Allentown, Pennsylvania.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, these defendants sold the automobile replacement parts equivalent of designer knock-offs, but represented to their unsuspecting customers that they were buying the ‘name brand.’ And while their replacement parts may have been no different from many other generic parts sold every day in the aftermarket, they were able to command the same higher prices charged by the automobile manufacturers’ whose names they stole. We encourage those who think they may have purchased counterfeit parts from these defendants or from anyone else to call the numbers listed at the end of this release.”

FBI Assistant Director-in-Charge George Venizelos said: “While it is not generally against the law to sell replicas or imitations, it is illegal to try to pass them off as authentic or original. Likewise, there is a legitimate market for aftermarket auto parts, but these defendants allegedly packaged parts to appear to be original manufacturer equipment and sold them as such. That isn’t legitimate; it’s fraud.”

According to the allegations in the Indictments unsealed in Manhattan federal court earlier today:

 

New automobiles sold to consumers are equipped with automotive parts that are manufactured or provided by the automobile’s manufacturer (“Original Equipment Manufacturer” or “OEM”). When a consumer needs to replace a part in an automobile, he or she can purchase either: parts made by OEMs which are sold under the OEMs’ brand names; or generic parts made by other manufacturers that are commonly referred to as “aftermarket” parts. Generic parts are regularly bought and sold lawfully as aftermarket parts, typically at lower prices than OEM parts. Many types of aftermarket parts – including those sold and falsely packaged as OEM parts by MALHOTRA, KILANI, and DININNI – do not have to meet independent federal safety standards.

MALHOTRA and KILANI

From October 2011 through February 2013, MALHOTRA, who operated Worldwide Auto Parts and S&S International Products and Manufacturing in Paterson, New Jersey, and KILANI, who operated Cypros Trading and Shipping in Paterson, New Jersey, conspired to sell counterfeit OEM parts. Specifically, the defendants and their co-conspirators deceptively packaged and caused to be packaged certain aftermarket automotive parts – including brakes, brake pads, brake shoes, ignition coils, water pumps, window regulators, suspension sway bar links, wheel hubs, anti-lock braking sensors, control arm bushings, transmission filters, pitman arms, tie rod ends, and suspension air springs – to falsely make it appear as though these parts had been manufactured by OEMs such as Ford Motor Company, General Motors, and Federal Mogul (the “Manufacturers”). They sold these parts to individuals and entities that they understood would re-sell them to the general public and to certain automotive repair shops, including repair shops that service New York City’s taxis and limousines, which are subject to separate and regularly scheduled safety testing by the New York City Taxi and Limousine Commission. MALHOTRA obtained some of these counterfeit parts from China, and KILANI exported some of these counterfeit parts to Saudi Arabia.

DININNI

Similarly, from November 2011 through June 2012, DININNI, who operated Professional Parts USA in Easton, Pennsylvania, also conspired to sell counterfeit OEM parts. Along with his co-conspirators, DININNI also deceptively packaged and caused to be packaged certain aftermarket automotive parts, including brake pads and water pumps to falsely make it appear as though these parts had been manufactured by OEMs. DININNI and his co-conspirators then sold these parts to individuals and entities that they understood would re-sell them to the general public and to certain automotive repair shops, including repair shops that service New York City’s taxis and limousines.

MALHOTRA, 67, of Norwood, New Jersey, KILANI, 28, of Englewood, New Jersey, and DININNI, 57, of Easton, Pennsylvania, are each charged with one count of conspiracy to traffic in counterfeit goods, which carries a maximum sentence of five years in prison, and one count of trafficking in counterfeit goods, which carries a maximum sentence of 10 years in prison.

As the U.S. Attorney’s Office and the FBI identify individuals and entities that may have purchased counterfeit automotive parts from these defendants, both will make appropriate notifications. If you believe you may have purchased any counterfeit automotive parts from these defendants or anyone else, you may wish to have your car inspected at an authorized and qualified vehicle inspection facility to determine whether the parts in question are counterfeit.

Mr. Bharara praised the outstanding investigative work of the FBI. He also thanked U.S. Customs and Border Protection, Immigration and Customs Enforcement’s Homeland Security Investigations, and the U.S. Department of Commerce for their assistance with this investigation.

This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Joseph Facciponti and Christopher D. Frey are in charge of the prosecution. Assistant U.S. Attorney Paul Monteleoni is in charge of the asset forfeiture aspects of the case.

If you have questions, you may call the victim witness hotline for the U.S. Attorney’s Office at (866) 874-8900 or the FBI at (212) 384-2135. Several original equipment manufacturers have also established numbers which you may call with questions. You may call Ford Motor Company at (313) 337-3663, Federal Mogul at (877) 489-6659, and Chrysler at (855) 818-7612.

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

U.S. v. Shashi Malhotra and Fadi Kilani Indictment
U.S v. Richard Dininni Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that five defendants have pled guilty for their roles in a systematic scheme to defraud private insurance companies of more than $400 million under New York’s no-fault automobile insurance law. The case is the largest single no-fault automobile insurance fraud scheme ever charged. Earlier today, ANDREY ANIKEYEV, an owner and controller of various acupuncture clinics, pled guilty before U.S. District Judge J. Paul Oetken to conspiracy to commit mail fraud and health care fraud. Yesterday, DMITRY SLOBODYANSKY, who owned and controlled chiropractic clinics, also pled guilty before Judge Oetken to conspiracy to commit mail fraud and health care fraud. SERGEY GABINSKY, a medical doctor, pled guilty before Judge Oetken earlier this month, and PAVEL POZNANSKY, an acupuncturist, and CONSTANTINE VOYTENKO, a chiropractor, pled guilty before Judge Oetken in December 2012. All five were arrested in February 2012 with 31 other defendants, some of whom were also charged with racketeering and money laundering. The 36 defendants include 10 doctors and three attorneys.

Manhattan U.S. Attorney Preet Bharara said: “These five defendants piled up fraud to the tune of $400 million in a scheme to exploit New York’s no-fault auto insurance laws. We remain committed to ensuring that all their alleged co-conspirators, including the corrupt medical and legal professionals charged with using their professional licenses and training to facilitate this brazen fraud, see justice.”

According to the Indictment, Superseding Informations, and other publicly filed information in the case:

Under New York State Law, every vehicle registered in New York State is required to have no-fault automobile insurance, which enables the driver and passengers of a registered and insured vehicle to obtain benefits of up to $50,000 per person for injuries sustained in an automobile accident, regardless of fault (the “No-Fault Law”). The No-Fault Law requires prompt payment for medical treatment, thereby obviating the need for claimants to file personal injury lawsuits in order to be reimbursed. Under the No-Fault Law, patients can assign their right to reimbursement from an insurance company to others, including medical clinics that provide treatment for their injuries. New York State law also requires that all medical clinics in the State be incorporated, owned, operated, and/or controlled by a licensed medical practitioner in order to be eligible for reimbursement under the No-Fault Law. Insurance companies will not honor claims for medical treatments from a medical clinic that is not actually owned, operated, and controlled by a licensed medical practitioner.

In order to mislead New York authorities and private insurers, some of the defendants in this case who were the true owners of these medical clinics (“No-Fault Clinic Controllers”) paid licensed medical practitioners, including doctors, to use the practitioners’ licenses to incorporate the professional corporations through which the medical clinics billed the private insurers for the bogus medical treatments. GABINSKY was one such doctor who admitted in open court to prescribing unnecessary medical treatments and to allowing co-conspirators to use his medical license to unlawfully open medical clinics in order to defraud insurance companies. POZNANSKY and VOYTENKO were medical practitioners who billed insurance companies for treatments to patients that were unnecessary.

The No-Fault Clinic Controllers also instructed the clinic doctors to prescribe excessive and unwarranted referrals for various “modality treatments” for nearly every patient they saw. The treatments included physical therapy, acupuncture and chiropractic treatments – as much as five times per week for each – and treatments for psychology, neurology, orthopedics and audiology. Clinic doctors also prescribed unnecessary MRI’s, x-rays, orthopedics, and medical supplies. The No-Fault Clinic Controllers received thousands of dollars in kickbacks for patient referrals from the owners of the modality clinics (“Modality Controllers”). ANIKEYEV and SLOBODYANSKY were two such Modality Controllers who admitted to billing insurance companies for treatments that patients did not need.

ANIKEYEV, 38, of Fort Lee, New Jersey; SLOBODYANSKY, 42, of Brooklyn, New York; GABINSKY, 55, of Brooklyn, New York; POZNANSKY, 53, of Brooklyn, New York; and VOYTENKO, 41, of Brooklyn, New York, each face a maximum penalty of five years’ imprisonment, a maximum fine of $250,000, a maximum term of supervised release of three years, and a mandatory special assessment of $100. POZNANSKY, VOYTENKO, GABINSKY, ANIKEYEV, and SLOBODYANSKY are scheduled to be sentenced by Judge Oetken on April 23, 2013, April 24, 2013, June 12, 2013, June 28, 2013, and June 13, 2013, respectively.

U.S. Attorney Preet Bharara thanked the Federal Bureau of Investigation and the New York City Police Department for their continued outstanding work in this investigation.

The case is being prosecuted by the Office’s Organized Crime Unit. Assistant U.S. Attorneys Daniel S. Goldman, Nicholas L. McQuaid, Carolina A. Fornos, and Daniel Noble are in charge of the prosecution. Assistant U.S. Attorneys Jason L. Cowley and Martin Bell of the Office’s Asset Forfeiture Unit are responsible for the forfeiture of assets.

Zemlyansky, Mikhail et al. - Indictment
Anikeyev, Andrey Superseding Information
Slobodyansky, Dmitry Superseding Information

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that JONATHAN FELIZ, the former leader of the Manhattan branch of the “Trinitarios,” a violent street and prison gang , and LOUINSKY MINIER, who was also a member of the Trinitarios, were sentenced today for racketeering and firearms offenses. MINIER was also sentenced for the murder of a rival gang member, Roy Abreu, in November 2006. FELIZ was charged with 41 others in March 2009, and MINIER was charged in June 2010. FELIZ and MINIER were each sentenced today by U.S. District Judge George B. Daniels. FELIZ received a sentence of 30 years’ imprisonment. MINIER received a sentence of 220 months’ imprisonment, to be served after he completes a seven-year sentence he is currently serving on related New York state charges.

Manhattan United States Attorney Preet Bharara said: “For much of the past decade, the Trinitarios street gang strangled pockets of Upper Manhattan in its cold-blooded grip infesting neighborhoods with drugs and lethal violence. With today’s sentencings, Jonathan Feliz and Louinsky Minier will be off the streets for years to come, and other gang members should be on notice that we will continue working to end their brutal reigns and see that they are punished.”

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

FELIZ was the leader of the Manhattan faction of the Trinitarios gang, and in that capacity, he ordered acts of violence to be committed by other gang members, acquired and stored guns, and managed a large-scale narcotics trafficking network in Washington Heights. The gang worked with other associates, collectively known as the “Washington Heights Marijuana Organization,” (the “WHMO”) to control drug trafficking – in particular, the trafficking of marijuana – on several blocks in the Washington Heights section of Manhattan. Members and associates of the WHMO operated a business that distributed and sold marijuana and other narcotics, and committed, conspired, attempted, and threatened to commit acts of violence, including murder, against rival traffickers, competitors, and individuals who stole narcotics proceeds from the enterprise. Members and associates of the WHMO conspired and attempted to kill at least two people in addition to Roy Abreu and, on November 23, 2006, MINIER shot Abreu to death. According to arguments made at sentencing, MINIER shot and killed Abreu, and shot another man, in connection with a dispute over $150,000 of drug proceeds that had been stolen from the WHMO. FELIZ and MINIER are half-brothers.

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

The case is being handled by the Office’s Violent Crimes Unit. Assistant U.S. Attorneys Nola B. Heller and Michael D. Maimin are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that FEDERCK C. PETRO, the former President of the American Federation of Government Employees, Local 2094 (the “VA Hospital Workers Union”), pled guilty today to theft of union funds, and JOHN V. McNAMEE, the former President/Secretary-Treasurer of the Stage and Picture Operators, AFL-CIO Exhibition Employees, Local Union 829 (the “Stage and Picture Operators Union”), was sentenced yesterday in Manhattan federal court to one year and one day in prison for embezzling union funds. PETRO was arrested in December 2011 in connection with the scheme, and pled guilty today before U.S. District Judge George B. Daniels. McNAMEE pled guilty in October 2012 to one count of embezzling funds of a labor organization, and was sentenced by U.S. District Judge Kimba M. Wood.

According to the court filings and statements made in court:

From February 2006 through July 2008, while serving as the President of the VA Hospital Workers Union, PETRO wrote approximately 187 checks to himself from the VA Hospital Workers Union’s checking account, totaling approximately $112,477. The VA Hospital Workers Union checking account contained the monthly dues paid to the union by its members.

From January 2004 through February 2011, while serving as the Stage and Picture Operators Union’s President/Secretary-Treasurer, McNAMEE charged $150,000 in personal expenses on the Stage and Picture Operators Union’s corporate credit cards. These personal expenses included jewelry and clothing purchases, restaurant bills, entertainment tickets, and medical, vacation, and party expenses for himself and his family. McNAMEE paid for the personal charges he made on the corporate credit cards by writing checks from the Stage and Picture Operators Union’s checking account to cover the credit card bills. The Stage and Picture Operators Union checking account contained the monthly dues paid to the union by its members.

PETRO, 59, of Brooklyn, New York, pled guilty to one count of theft of union funds while on United States property. He faces a maximum penalty of five years in prison. PETRO is scheduled to be sentenced by Judge Daniels on June 4, 2013 at 10:00 a.m.

In addition to the prison sentence, Judge Wood sentenced McNAMEE, 53, of New York, New York, to two years of supervised release and ordered him to pay a fine of $25,000 and a $100 special assessment fee. McNAMEE also has made restitution to the Stage and Picture Operators Union of $150,000, representing the amount he embezzled from it.

Mr. Bharara praised the investigative work of the New York District of the U.S. Department of Labor’s Office of Labor-Management Standards and the Northeast Field Office of the U.S. Department of Veterans Affairs, Office of the Inspector General.

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

Preet Bharara, the United States Attorney for the Southern District of New York, and Ignacia S. Moreno, the Assistant Attorney General for the Environment and Natural Resources Division of the Department of Justice, announced that DAVID HAUSMAN, an antiques dealer in Manhattan, was sentenced today in Manhattan federal court to six months in prison for obstruction of justice and creating false records, in connection with illegal Rhinoceros horn trafficking. In his July 2012 guilty plea, HAUSMAN admitted that he committed these offenses while holding himself out to the U.S. Fish & Wildlife Service (FWS) as an antiques expert who purportedly wanted to help the agency investigate Rhinoceros horn trafficking. HAUSMAN was arrested in February 2012 as part of “Operation Crash,” a nationwide, multi-agency crackdown on those involved in the black market trade of endangered rhinoceros horn. He was sentenced today by U.S. District Judge J. Paul Oetken.

Manhattan U.S. Attorney Preet Bharara said: “With today’s sentence, David Hausman now knows that trafficking in endangered, and legally protected species, and obstructing law enforcement’s ability to do its job have grave consequences.”

Assistant Attorney General for the Environment and Natural Resources Division of the Department of Justice, Ignacia S. Moreno said: “Mr. Hausman’s blatant deception of officers conducting a federal investigation was illegal and reprehensible. He posed as someone who was protecting this endangered species when he was really obtaining and using inside information to further the illegal trade in black rhino horns. We will vigorously prosecute all those who violate the wildlife protection laws enacted by Congress to protect endangered species like the black rhinoceros from extinction.”

Rhinoceros are an herbivore species of prehistoric origin and one of the largest remaining mega-fauna on earth. They have no known predators other than humans. All species of Rhinoceros are protected under United States and international law and all Black Rhinoceros species are endangered.

Since 1976, trade in Rhinoceros horn has been regulated under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (“CITES”), a treaty signed by over 170 countries around the world to protect fish, wildlife, and plants that are or may become imperiled due to the demands of international markets. The demand for Rhinoceros horn and black market prices have skyrocketed in recent years due to the value that some cultures have placed on ornamental carvings, good luck charms, or alleged medicinal elements made from the horn. This has led to an almost complete decimation of the global Rhinoceros population.

Operation Crash is a continuing investigation being conducted by the Department of the Interior’s FWS, in coordination with other federal and local law enforcement agencies including U.S. Immigration and Customs Enforcement’s Homeland Security Investigations. A “crash” is the term for a herd of Rhinoceros. Operation Crash is an ongoing effort to detect, deter, and prosecute those engaged in the illegal killing of Rhinoceros and the unlawful trafficking of Rhinoceros horns.

Hausman’s Offenses

According to the Information, plea agreement, and statements made during court proceedings:

In December 2010, HAUSMAN – while purporting to help the Government crack down on illegal rhinoceros trading – advised FWS that the taxidermied head of a Black Rhinoceros containing two horns had been illegally sold by a Pennsylvania auction house. Upon learning that the sale was not finalized, HAUSMAN covertly purchased the rhinoceros mount himself, using a “straw buyer” to conceal his identification as the true purchaser, because federal law prohibits interstate trafficking in endangered species. HAUSMAN instructed the straw buyer not to communicate with him about the matter by email to avoid creating a paper trail that could be followed by law enforcement. After the purchase was completed, HAUSMAN directed the straw buyer to remove the horns and mail them to him. He then made a realistic set of fake horns using synthetic materials and directed the straw buyer to attach them on the Rhinoceros head in order to deceive law enforcement in the event that they conducted an investigation. After his arrest, HAUSMAN contacted the straw buyer and they agreed that the Rhinoceros mount should be burned or concealed.

In a second incident, in September 2011, HAUSMAN responded to an internet offer to sell a (different) taxidermied head of a Black Rhinoceros containing two horns. Unbeknownst to HAUSMAN, the on-line seller was an undercover federal agent. Before purchasing the horns on November 15, 2011, HAUSMAN directed the undercover agent to send him an email falsely stating that the mounted Rhinoceros was over 100 years old, even though the agent had told him that the rhinoceros mount was only 20 to 30 years old. There is an antique exception for certain trade in rhinoceros horns that are over 100 years old. By falsifying the age of the horns, HAUSMAN sought to conceal his illegal conduct. HAUSMAN also insisted on a cash transaction and told the undercover agent not to send additional emails so there would be no written record. After buying the Black Rhinoceros mount at a truck stop in Princeton, Illinois, agents followed HAUSMAN and observed him sawing off the horns in a motel parking lot.

At the time of his arrest, FWS agents seized four Rhinoceros heads from HAUSMAN’s apartment as well as six Black Rhinoceros horns – two of which were the horns he was seen sawing off in the parking lot – numerous carved and partially carved Rhinoceros horns, fake Rhinoceros horns, and $28,000 in cash.

In addition to the prison term, Judge Oetken sentenced HAUSMAN, 67, of New York, New York, to one year of supervised release. HAUSMAN was also ordered to pay a $10,000 fine to the Lacey Act Reward Fund, $18,000 to the Rhino Tiger Conservation Fund, and a $200 special assessment fee.

Mr. Bharara and Ms. Moreno commended the United States Fish and Wildlife Service and the United States Immigration and Customs Enforcement’s Homeland Security Investigations in Newark for their outstanding work in this investigation. The investigation is being led by the Special Investigations Unit of the FWS Office of Law Enforcement and involves a nationwide task force of agents focused on rhino trafficking.

The case is being handled by the U.S. Attorney’s Complex Frauds Unit and the Environmental Crimes Section of the U.S. Department of Justice’s Environment and Natural Resources Division. Assistant U.S. Attorney Janis M. Echenberg and Richard A. Udell, a Senior Trial Attorney with the Environmental Crimes Section are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that GENRIKH KOLONTYRSKIY, MOYSEY KUCHER, and DORA KUCHER pled guilty today in Manhattan federal court to conspiring to defraud programs administered by the Conference on Jewish Material Claims Against Germany, Inc. (the “Claims Conference”), established to aid the survivors of Nazi persecution, out of more than $57 million. MOYSEY KUCHER and DORA KUCHER were arrested in February 2011, and KOLONTYRSKIY was arrested in October 2011, as part of an ongoing investigation that has resulted in charges against a total of 31 participants in the scheme. To date, 10 former Claims Conference employees have been charged, including a former director of the programs that were victimized. All three pled guilty today before U.S. District Judge Thomas P. Griesa.

Manhattan U.S. Attorney Preet Bharara said: “Our efforts to hold to account all of the individuals who participated in defrauding an organization that exists solely for the purpose of aiding victims of Nazi atrocities continues. Today’s guilty pleas today underscore that commitment.”

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

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

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

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

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

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

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

While employed as a caseworker in the Article 2 Fund program at the Claims Conference, KOLONTYRSKIY knowingly processed fraudulent applications in return for payments from his co-conspirators.

MOYSEY KUCHER and DORA KUCHER both recruited individuals to provide identification documents that were subsequently used in connection with the preparation of fraudulent Hardship Fund and Article 2 Fund applications, in exchange for a portion of the money paid out to those applicants. In addition, MOYSEY KUCHER received payments from both the Article 2 Fund and the Hardship Fund based on fraudulent applications submitted to those programs in his own name, while DORA KUCHER received the one-time payment from the Hardship Fund based on a fraudulent application in her name.

With today’s pleas, a total of 22 defendants charged in the scheme have pled guilty. Charges remain pending against the remaining nine defendants in the case, who are presumed innocent unless and until proven guilty.

KOLONTYRSKIY, 80, of Brooklyn, New York, faces a maximum sentence of 40 years in prison. MOYSEY KUCHER, 66, and DORA KUCHER, 58, who also reside in Brooklyn, each face a maximum sentence of 20 years in prison. All three defendants are scheduled to be sentenced by Judge Griesa on August 8, 2013 at 2:30 p.m.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation (“FBI”). He also thanked the Claims Conference for bringing this matter to the FBI’s attention and for its extraordinary continued cooperation in this investigation, which he noted is ongoing.

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

U.S. v. Domnitser, et al. S1 Indictment
U.S. v. Domnitser, et al. Complaint
Claims Conference Fraud Takedown Remarks (11-09-2010)

WASHINGTON – Three people have been charged this week in Newark, Miami and New York City with wildlife smuggling and related charges for their alleged roles in an international rhino horn smuggling ring, the Department of Justice announced today. The arrests and charges are the result of “Operation Crash”, a nationwide effort led by the U.S. Fish & Wildlife Service (FWS) and the Justice Department to investigate and prosecute those involved in the black market trade of endangered rhinoceros horns.

Federal grand juries in Newark, N.J., and Miami have indicted ZHIFEI LI for international smuggling of rhinoceros horns. SHUSEN WEI, a 44 year old Chinese business executive and an associate of LI, has also been charged with offering to bribe a federal agent in the LI case. QING WANG was charged today in a related criminal complaint in federal court in the Southern District of New York for his role in smuggling libation cups carved from rhinoceros horns from New York to LI via Hong Kong.

According to the indictment filed in Newark on Feb. 11, 2013, LI, a 28 year-old Chinese national, conspired to smuggle more than 20 raw rhinoceros horns from the United States to Hong Kong in 2011 and 2012. LI wired hundreds of thousands of dollars over at least a year to a co-conspirator in the United States to fund purchases of rhinoceros horns. LI’s co-conspirator smuggled the rhino horns in porcelain vases and mailed them to Hong Kong and China to a person other than LI, in an effort to evade detection by U.S. officials. LI and his co-conspirator bought many of the horns in New Jersey from other members of the conspiracy. LI was arrested in January on charges previously filed in New Jersey.

LI also was indicted on Feb. 12, 2013, in Miami on wildlife trafficking and smuggling charges. According to court records and government statements made in court, shortly after arriving in Florida in January 2013 for the Original Miami Beach Antique Show, LI purchased two endangered black rhinoceros horns from an undercover U.S. Fish & Wildlife Service agent in a Miami Beach hotel room for $59,000. LI asked if the undercover officer could procure additional rhinoceros horns and mail them to his company in Hong Kong.

Also arrested on a related criminal complaint filed in Miami was SHUSEN WEI, a Chinese business executive, who also was attending the antique show and sharing a hotel room with LI. According to documents filed in court in Miami, WEI was interviewed by agents after LI’s arrest and admitted to knowing about LI’s smuggling activities and to purchasing rhinoceros carvings from LI that apparently had been purchased in and smuggled from the United States. After being served with a grand jury subpoena to appear in New Jersey, WEI left Miami for New York en route to China. Prior to leaving Miami, WEI allegedly asked an undercover informant to invite a FWS special agent out to dinner in Miami and offer her money to assist LI. After a series of recorded phone calls and text messages, WEI was arrested as he attempted to board a flight bound for China at JFK International Airport in New York on Saturday, Feb. 3, 2013, on charges of bribing a federal official. According to documents filed in court, WEI proposed that the undercover informant offer the agent as much as $10,000.

QING WANG is scheduled to appear in court today to face charges in a criminal complaint in the Southern District of New York for his role in smuggling libation cups carved from rhinoceros horns from New York to LI in Hong Kong. According to documents unsealed today, WANG was one of several that purchased items in the United States for LI. In China, there is a tradition dating back centuries of intricately carved rhinoceros horn cups . Drinking from such a cup was believed to bring good health and such carvings are highly prized by collectors. WANG is alleged to have been smuggling rhinoceros horn cups as well as ivory carvings to LI in Hong Kong.

An indictment or criminal complaint contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty.

Rhinoceros are an herbivore species of prehistoric origin and one of the largest remaining mega-fauna on earth. They have no known predators other than humans. All species of rhinoceros are protected under United States and international law, and all black rhinoceros species are endangered. Since 1976, trade in rhinoceros horn has been regulated under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), a treaty signed by more than 175 countries around the world to protect fish, wildlife and plants that are or may become imperiled due to the demands of international markets. Nevertheless, the demand for rhinoceros horn and black market prices have skyrocketed in recent years due to the value that some cultures have placed on ornamental carvings, good luck charms or alleged medicinal purposes, leading to a decimation of the global rhinoceros population. As a result, rhino populations have declined by more than 90 percent since 1970. South Africa, for example, has witnessed a rapid escalation in poaching of live animals, rising from 13 in 2007 to more than 618 in 2012.

Operation Crash (named for the term used to describe a herd of rhinoceros) is an ongoing multi-agency effort to detect, deter and prosecute those engaged in the illegal killing of rhinoceros and the unlawful trafficking of rhinoceros horns. The investigation resulting in the charges announced today has been conducted by the Special Investigations Unit of the FWS Office of Law Enforcement, with assistance from the Department of Homeland Security. The LI case is being prosecuted by the U.S. Attorney’s Office of the District of New Jersey by Assistant U.S. Attorney Kathleen O’Leary. The WEI case is being prosecuted by Assistant U.S. Attorney Tom Watts-FitzGerald in the Southern District of Florida. The WANG case is being prosecuted by Assistant U.S. Attorney Janis Echenberg in the U.S. Attorney’s Office of the Southern District of New York. Senior Trial Attorney Richard A. Udell of the Environmental Crimes Section of the U.S. Department of Justice is assisting in and coordinating all of the prosecutions. Additional support has been provided by the U.S. Attorney’s Office in the Eastern District of New York.

Preet Bharara, the United States Attorney for the Southern District of New York, Steven G. Hughes, the Special Agent-in-Charge of the New York Office of the U.S. Secret Service, and Kenneth Siegler, the Resident Agent-in-Charge of the New York Office of the Defense Criminal Investigative Service (“DCIS”), announced today the arrest of AMADOU DIA for participating in an international telecommunications fraud scheme that used stolen identity information to activate fraudulent mobile telephone accounts and then make telephone calls to fraudulent overseas telephone numbers that charged a premium connection fee. The scheme allegedly compromised more than 1,000 identities – nearly half of them belonging to members of the U.S. military – and caused at least $8 million in losses to mobile telecommunications providers including AT&T and T-Mobile. DIA was arrested this morning in Manhattan and is expected to be presented in Manhattan federal court before United States Magistrate Judge James L. Cott later today.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Amadou Dia and his co-conspirators dialed for dollars - many millions of them - by stealing countless identities, including hundreds belonging to U.S. military personnel, and racking up international phone bills in their names that left telecom service providers holding the bag. Identity theft is an epidemic of global proportions and we are bound and determined to identify and prosecute those who engage in this illegal conduct.”

Special Agent-in-Charge Steven G. Hughes said: "This investigation is just one example that proves the power of agency partnerships in combating financial fraud and identity theft. This indictment and arrest should serve as a reminder to criminals that law enforcement will continue to pursue individuals engaged in stealing the identities of innocent Americans for financial gain.”

DCIS Resident Agent-in-Charge Kenneth Siegler said: "Today's arrest demonstrates the ongoing commitment of Defense Criminal Investigative Service and its partners in law enforcement to aggressively pursue these crimes and to support their prosecution to the fullest. As a team, we will continue to methodically investigate these allegations, work to ensure confidence in the system, and protect America's war fighters’ identities."

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

From 2001 through January 2013, DIA participated in an identity theft and international telecommunications scheme in which he and his co-conspirators obtained stolen identification information from individuals, including names, dates of birth, and social security numbers. He would then activate fraudulent cellular service accounts in their names.

Once the accounts were activated, DIA and members of the fraud ring would create SIM cards and insert them into mobile handsets. They then called premium international telephone numbers that they acquired and controlled, presumably to generate fees for the members of the scheme. The premium numbers were either dead when dialed, or simulated a ringing sound to appear as if a call was not yet connected. The premium numbers – the equivalent of 900 numbers in the United States – charged significant connection fees of as much as $1 per minute that the international carrier then charged to U.S.-based cellular providers such as AT&T and T-Mobile. While the U.S. provider would normally bill subscribers for the calls, in this case the U.S. provider was forced to pay for the calls because the accounts were registered to identity theft victims. The international carrier provided a share of the fees to the holders of the fraudulent international premium telephone numbers, who are believed to be the members of the fraud ring.

Since 2008, approximately 3,400 fraudulent telephone accounts have been activated involving stolen identification information from more than 1,000 individual identity theft victims. According to records maintained by the U.S. Department of Defense, at least 450 or nearly half, of the identity theft victims targeted during the course of this scheme are active duty or retired United States military personnel. The scheme has caused at least $8 million dollars in losses to U.S.-based telephone providers.

DIA, 49, of Manhattan, is charged with one count of conspiracy to commit wire fraud, which carries a maximum of 20 years in prison, one count of conspiracy to commit identity theft, which carries a maximum sentence of 15 years in prison, and one count of aggravated identity theft, which carries a mandatory minimum of two years in prison.

Mr. Bharara praised the Secret Service and DCIS for its outstanding work investigating this case. He also thanked AT&T and T-Mobile USA for their cooperation in the investigation.

This case is being prosecuted by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Timothy T. Howard 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.

Dia, Amadou Arrest PR

Preet Bharara, the United States Attorney for the Southern District of New York, announced that STEVEN FORTUNA, who co-founded the hedge fund S2 Capital LLC (“S2”), was sentenced today to two years of probation for his participation in an insider trading scheme in which he obtained and traded on material, nonpublic information (“Inside Information”) about various publicly-traded companies from employees at other hedge funds. FORTUNA pled guilty in October 2009 to three counts of conspiracy to commit securities fraud and one count of securities fraud pursuant to a cooperation agreement with the Government. He was sentenced today in Manhattan federal court by U.S. District Judge Sidney H. Stein.

According to the Information, statements made during FORTUNA’s guilty plea proceeding, and the Government’s sentencing submission in his case:

From July 2008 through March 2009, while working as a portfolio manager at a hedge fund he co-founded, FORTUNA obtained Inside Information concerning various technology companies from employees at other hedge funds for the purpose of trading on that information. The Inside Information was disclosed by company insiders in breach of their duties to their respective employers.

For example, in July and August 2008, FORTUNA obtained Inside Information concerning Akamai, Inc. (“Akamai”) from Danielle Chiesi, a portfolio manager at New Castle Partners, a hedge fund. Chiesi told FORTUNA that Akamai planned to report that its revenue guidance for the following quarter would miss expectations and that, internally, the company believed that its stock price would fall following the quarterly earnings announcement. FORTUNA executed trades based on that Inside Information, and earned approximately $2.4 million in profits for S2.

As part of the conditions of his probation, FORTUNA, 50, of Westwood, Massachusetts, was ordered to serve six months on home confinement with electronic monitoring, and 120 hours of community service during each of the years of his probation. He was also ordered to pay forfeiture in the amount of $200,000, and a $400 special assessment fee.

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. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

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

Preet Bharara, the United States Attorney for the Southern District of New York, and Steven G. Hughes, the Special Agent-in-Charge of the New York Field Office of the United States Secret Service, announced today the filing of an Indictment against ANTONIO GABOR and SIMION TUDOR PINTILLIE, two alleged leaders of an international scheme to steal customer bank account information using sophisticated “skimming” technology that secretly recorded the data of customers who used Automated Teller Machines (“ATMs”) at banks in New York, New Jersey, Illinois, and Wisconsin. GABOR and PINTILLIE were arrested in Skokie, Illinois on December 6, 2012 and have been in federal custody. GABOR is being transported to New York for arraignment and will arrive at a date to be determined. PINTILLIE will be arraigned before U.S. District Judge Alison J. Nathan on Tuesday, February 19 at 9:30 a.m.

Manhattan U.S. Attorney Preet Bharara said: “While traditional bank robberies may be on the wane, the charges we bring today are a reminder of the threat that cybercrime poses to banks and their customers. Together with our law enforcement partners, we remain committed to stopping these alleged high-tech bank robbers in their tracks.”

U.S. Secret Service Special Agent-in-Charge Steven G. Hughes said: “The U.S. Secret Service is committed to preventing and mitigating financial crimes against our nation’s financial infrastructure. Such threats involve a wide variety of schemes including the emerging trend of ATM compromises. The U.S. Secret Service is focused on investigating these crimes and bringing those responsible to justice.”

According to the allegations of the Indictment filed in Manhattan federal court earlier today:

From at least April 2012 through December 2012, GABOR and PINTILLIE were the leaders of an ATM skimming ring based in New York and Chicago. GABOR, PINTILLIE, and at least nine other co-conspirators placed electronic devices, which GABOR obtained from Hungary, on security card readers that secretly recorded a customer’s bank account data when the customer used an ATM. The co-conspirators also installed hidden “pin hole” video cameras on ATM machines that secretly recorded customers’ Personal Identification Numbers (PINs) as the customers pressed these numbers on ATM keypads in order to access their accounts. After a period of time, the co-conspirators would remove the skimming devices and provide them to GABOR and PINTILLIE, who would use the stolen bank account and PIN numbers in order to create new bank cards that could be used to withdraw funds from victim accounts.

GABOR and PINTILLIE also maintained stash locations at multiple self-storage facilities where they stored skimming devices and other equipment and materials necessary to execute the scheme. At one location in Queens, New York, GABOR and PINTILLIE stored computer equipment that contained hundreds of hours of video camera footage of individual customers inputting PIN numbers onto ATM keypads, over 1,000 plastic cards encoded with stolen account information, and components for ATM skimming devices and pin hole cameras.

GABOR and PINTILLIE targeted J.P. Morgan Chase (“Chase”), and Capital One, N.A. banks. Throughout the course of the scheme, they engaged in over 50 skimming incidents that resulted in the compromise of over approximately 6,000 individual bank accounts, from which the defendants made and attempted to make over approximately $3 million in unauthorized withdrawals.

GABOR, 30, allegedly a citizen of Denmark, and PINTILLIE, 32, a Romanian citizen, are each charged with one count of conspiracy to commit bank fraud, which carries a maximum of 30 years in prison, one count of conspiracy to commit access device fraud, which carries a maximum of seven and one half years, and one count of aggravated identity theft, which carries a mandatory minimum of two years in prison.

Mr. Bharara praised the Secret Service for its outstanding work investigating this case. He also thanked J.P. Morgan Chase Bank, Capital One Bank, N.A., and Prairie du Sac Bank for their cooperation in the investigation.

This case is being prosecuted by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Timothy T. Howard 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.

US v. Gabor, Pintillie Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation ("FBI"), announced today that JASON J. KONIOR, the founder and manager of a number of related business entities in New York City, collectively referred to as “Absolute,” was arrested today for orchestrating a Ponzi scheme. Through Absolute, KONIOR stole approximately $1,500,000 from three hedge fund investors and used the proceeds to pay off prior investors and to pay himself. He was arrested in Manhattan, and is expected to be presented in Manhattan federal court before United States Magistrate Judge James L. Cott on Wednesday.

According to a Complaint unsealed today in Manhattan federal court:

From late 2011 through May 2012, KONIOR organized and managed a Ponzi scheme in which he misappropriated $1.5 million in funds he had solicited from three hedge fund investors. He represented to these hedge funds that Absolute would provide additional trading funds of up to nine times the investment they made in Absolute. As part of Absolute’s “first loss” investment program, KONIOR claimed that he would place the combined funds – the investors’ funds and the additional funds to be provided by Absolute – in a brokerage account designated by Absolute. According to KONIOR, the hedge fund investors would then be able to trade securities utilizing that brokerage account. Under the arrangement, the hedge funds would be responsible for trading losses, and they would share any profits with Absolute.

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

KONIOR, 39, of Manhattan, has been charged with one count each of securities fraud and wire fraud. The maximum potential penalty for securities fraud is 20 years in prison and a fine of $5,000,000 or twice the gross gain or loss from the offense. The maximum potential penalty for wire fraud is 20 years in prison and a fine of $250,000 or twice the gross gain or loss from the offense.

Mr. Bharara praised the work of the FBI and the 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. President OBAMA established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

This case is being handled by the Office's Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys John T. Zach and Jason H. Cowley are in charge of the prosecution.

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

Konior, Jason Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ALI FAR, a former employee of Galleon Group and founder/portfolio manager of Spherix Capital Partners, was sentenced today to one year of probation for his participation in multiple insider trading schemes during which he obtained, shared, and traded based on material, nonpublic information (“Inside Information”) stolen from several public companies. FAR pled guilty in October 2009 to one count of conspiracy to commit securities fraud and one count of securities fraud pursuant to a cooperation agreement with the government. He was sentenced today in Manhattan federal court by U.S. District Judge Robert P. Patterson.

According to the Information and statements made during FAR’s guilty plea proceeding and his sentencing:

Between 2003 and March 2009 – a period that spanned FAR’s tenure at Galleon and Spherix – he solicited Inside Information from a number of sources who provided the information in breach of duties to their employers, for purposes of trading securities. FAR traded on the Inside Information for the benefit of the hedge funds where he worked. He also shared certain Inside Information with others in the hedge fund industry in exchange for trading ideas and other Inside Information. Together, he and his co-conspirator at Spherix gained approximately $5,209,464 for their hedge fund by placing trades in Spherix accounts based on Inside Information.

For example, FAR solicited Inside Information from Ali Hariri, a family friend and technology executive, who pleaded guilty and was sentenced to prison as a result of his participation in illegal insider trading. On multiple occasions, beginning in 2008, Hariri provided FAR with Inside Information about the business performance of Hariri’s company, and FAR traded based on that Inside Information, reaping hundreds of thousands of dollars in illegal profits.

In addition to his probation, FAR, 51, of Saratoga, California, was sentenced to a fine of $100,000, a $200 special assessment, and 100 hours of community service.

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. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ARMEN KAZARIAN was sentenced today in Manhattan federal court to 37 months in prison for his involvement with the Mirzoyan-Terdjanian Organization, an Armenian-American organized crime enterprise engaged in a wide range of criminal activity. KAZARIAN pled guilty to racketeering conspiracy in July 2011, and was sentenced today by U.S. District Judge Paul G. Gardephe.

Manhattan U.S. Attorney Preet Bharara said: “Armen Kazarian sat at the top of a criminal organization and now he will sit in a jail cell for a long time. International mobsters who think they can export their criminal enterprises to the United States and target our government programs and our citizens are in for a rude awakening – they will face U.S. justice and be made to answer for their crimes.”

According to the Indictment, other documents filed in this case, and statements made during the guilty plea proceeding:

KAZARIAN was a “Vor,” a term translated as “Thief-in-Law.” The term refers to a member of a select group of high-level criminals from Russia and the countries that had been part of the former Soviet Union, including Armenia. “Vors” offer prestige and protection to criminal organizations in return for a share of criminal earnings, and use their position of authority to resolve disputes among criminals. KAZARIAN used his status as a “Vor” within the criminal community to assist the Mirzoyan-Terdjanian Organization, an Armenian-American organized crime ring that engaged in an extensive range of criminal offenses including the operation of a $100 million dollar Medicare fraud billing ring. As part of his involvement with the group, KAZARIAN engaged in extortion on the Organization’s and his own behalf.

In addition to the prison term, Judge Gardephe sentenced KAZARIAN, 47, of Glendale, California, to three years of supervised release. He was also ordered to pay a $60,000 fine.

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

The prosecution is being handled by the Office’s Organized Crime Unit. Assistant U.S. Attorneys Jennifer Burns, Arlo Devlin-Brown, and Harris Fischman are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States has filed and simultaneously settled a health care fraud lawsuit under the False Claims Act against the ST. LUKE’S-ROOSEVELT HOSPITAL CENTER (the “Hospital”), CONTINUUM HEALTH PARTNERS, INC., and SLR PSYCHIATRIC ASSOCIATES (“SLR”) (collectively, “ST. LUKE’S”) for improperly billing Medicare and Medicaid for out-patient services provided at its mental health clinics. As part of the settlement, ST. LUKE’S agreed to pay $2,325,000 to settle the Government’s claims for damages and penalties under the False Claims Act, with $1,258,115.17 of that amount to be paid to the United States and the balance to the State of New York for its share of the Medicaid overpayment. The settlement was approved yesterday by United States Circuit Court Judge Denny Chin, sitting by designation.

Manhattan U.S. Attorney Preet Bharara stated: “As they admitted today, St. Luke’s engaged in billing shenanigans that siphoned millions of taxpayer dollars out of government health care programs intended to benefit elderly and low-income individuals. Medicare and Medicaid fraud divert precious and dwindling resources from those who truly need help, and this Office will keep protecting those resources.”

According to the Complaint and Settlement filed in this case:

ST. LUKE’S double-billed the United States for psychiatric services provided by the Hospitals’ physicians at SLR, one of its out-patient mental health clinics, in two ways: (1) the Hospital sought and received reimbursement pursuant to Medicare for non-reimbursable costs relating to outpatient psychiatric visits conducted by SLR during the period 1999 to 2002; and (2) the Hospital billed out-patient psychiatric services to Medicaid as a rate-based service, which included the care provided by the physician and all other related costs. At the same time, SLR billed the Government on a fee-for-service basis for the same care provided by the physician. As a result, ST. LUKE’S received Medicare and Medicaid payments that it was not entitled to receive.

As part of the settlement, ST. LUKE’S has admitted, acknowledged, and accepted responsibility for the following conduct:

• During the period 1999 to 2002, the Hospital sought and received reimbursement pursuant to Medicare for non-reimbursable costs relating to outpatient psychiatric visits conducted by SLR.
• During the period from on or about February 1998 through 2002, the Hospital and SLR overbilled the United States and New York State in connection with claims for reimbursement under Medicaid relating to outpatient psychiatric visits conducted by SLR; specifically, SLR submitted claims and received reimbursement under Medicaid for costs that were already included in, and reimbursed to the Hospital pursuant to, separate claims submitted by the Hospital.
• From 2003 through 2010, the Hospital submitted claims and received reimbursement under Medicaid relating to services furnished by physicians in the Hospital’s outpatient mental health clinic. Department of Social Services regulations provide that “[t]he costs of routine physicians' services are included in facilities' rate or fee and shall not be billed separately.” The Hospital billed for such physician services separately, although the Hospital had removed the physician costs from its institutional cost report.

Pursuant to the settlement, ST. LUKE’S will pay $1,258,115.17 to the United States and $1,066,884.83 to the State of New York in damages and civil penalties within ten days of the settlement.

Mr. Bharara thanked the Office of the Inspector General for the U.S. Department of Health and Human Services and the Centers for Medicare and Medicaid Services for their assistance with the case. He also thanked the Medicaid Fraud Control Unit of the Office of the New York State Attorney General.

This case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorney Joseph A. Pantoja is in charge of the case.

US v. St. Luke's Roosevelt Complaint
US v. St. Luke's Hospital Order of Settlement and Dismissal
US v. St Luke's Hospital Order of Settlement and Release

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 filing of a three-count criminal Complaint charging CHARLES HUGGINS, CHRISTOPHER BUTCHKO, and ANNE THOMAS for allegedly perpetrating a $2.5 million Ponzi scheme involving investments in gold and diamonds purportedly mined in West Africa for sale in the United States. HUGGINS and THOMAS were arrested this morning in Edgewater, New Jersey, and Cliffside Park, New Jersey, respectively. BUTCHKO was arrested this morning in Murrieta, California. HUGGINS and THOMAS are expected to be presented in Manhattan federal court before Magistrate Judge Debra Freeman later today, and BUTCHKO is expected to be presented in federal court in the Central District of California later today.

Manhattan U.S. Attorney Preet Bharara said: “The promise of riches mined in Africa was fool’s gold that these defendants allegedly dangled in front of investors in what was nothing more than a scam. For those Ponzi schemers who have yet to get the message, be aware that you will be exposed by law enforcement and punished accordingly.”

Assistant Director-in-Charge George Venizelos said: “As alleged, these defendants lied about their intentions regarding investors’ money, pocketing most of it for personal use. So long as there are people with money to invest, there will likely be investment swindlers eager to take their money under false pretenses. There will also be the FBI to arrest the swindlers.”

According to the Complaint filed in Manhattan federal court:

From 2008 through September 2011, HUGGINS, BUTCHKO, and THOMAS solicited $2.5 million from various investors through companies known as JYork Industries Inc. (“JYork”) and Urogo Inc. (“Urogo”). HUGGINS and

BUTCHKO and others repeatedly made false and misleading representations about how they would use the investors’ money to mine gold and diamonds from Sierra Leone and Liberia, and promised high rates of return, based on the profits they said would be generated by the sale of the gold and diamonds in the United States.

HUGGINS, BUTCHKO, and THOMAS misappropriated the majority of the money they raised and kept it for themselves or used it to repay other investors. For example, investor funds were diverted to Orpheus Inc., a record label owned by HUGGINS, and VASNC Pvt Ltd., a petroleum company owned by BUTCHKO, and used to pay monthly apartment rental payments, restaurant bills, personal credit card bills, and other expenses. THOMAS personally received more than $90,000 in cash and disbursed more than $830,000 in investor proceeds through wire transfers to the Bahamas and checks repeatedly issued in amounts less than $10,000 in an apparent attempt to avoid the reporting threshold. Contrary to the defendants’ representations, only a small portion of the money they raised was transferred to Africa.

When investors complained that they had not received the return on their investment that they were promised, HUGGINS, BUTCHKO, and THOMAS frequently converted or offered to convert their investment into restricted shares of Oraco Resources, a publicly traded company of which HUGGINS, BUTCHKO, and THOMAS were majority shareholders. The investigation has revealed that only one investor to date has been made whole. That investor received the principal of his investment only after he threatened to bring civil litigation.

HUGGINS, 66, of Edgewater, New Jersey, and BUTCHKO, 43, of Murrieta, California, are each charged in the Complaint with one count of conspiracy to commit wire fraud and one count of wire fraud. Those counts each carry a maximum potential penalty of 20 years in prison and a fine of the greater of $250,000 or twice the gross gain or loss derived from the offense. THOMAS, 68, of Cliffside Park, New Jersey, is charged with one count of conspiracy to commit wire fraud and one count of money laundering. The money laundering count carries a maximum potential penalty of 20 years in prison and a fine of the greater of $500,000 or twice the value of the property involved in the money laundering transactions.

Mr. Bharara praised the investigative work of the FBI in this case. He added that the investigation is ongoing.

The case is being handled by the General Crimes Unit of the United States Attorney's Office. Assistant United States Attorney Edward A. Imperatore is in charge of the prosecution.

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

Huggins, Butchko, Thomas Complaint