Southern District of New York

Audrey Strauss, United States Attorney for the Southern District of New York, and Walter Mugdan, Acting Regional Administrator of the U.S. Environmental Protection Agency (“EPA”), announced today that the United States has filed a civil lawsuit against E.I. DUPONT DE NEMOURS AND COMPANY (“DuPont”), D & D SALVAGE CORPORATION (“D & D”), OXY USA INC. (“Oxy”), and W.A. BAUM COMPANY, INC. (“W.A. Baum”) (collectively, the “Defendants”), and has simultaneously filed a consent decree settling the lawsuit.  In the complaint, brought pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §§ 9601-9675 (“CERCLA”) – commonly known as the Superfund statute – the United States alleged that the Defendants arranged for the disposal or treatment of mercury by Port Refinery, Inc. (“Port Refinery”), a mercury refining business in the Village of Rye Brook, New York, which led to releases of mercury into the environment.  The consent decree provides for a combined payment of $1,412,255 by the Defendants for costs incurred by EPA in conducting clean-up activities at the site.

U.S. Attorney Audrey Strauss said: “DuPont, D & D, Oxy, and W.A. Baum contributed to contamination in a residential community by arranging for the treatment or disposal of over 7,000 pounds of toxic mercury, and now each is paying a share of the costs that EPA had to incur to clean up this site.  This Office will continue to hold responsible parties accountable for their share of the costs at the site.”

EPA Acting Regional Administrator Walter Mugdan said: “EPA is recovering more than $1.4 million that the Agency spent to clean up mercury pollution released in the Village of Rye Brook, and that is good news for taxpayers as we are holding the polluter responsible for the cost.  The funds can be put back into the Superfund to assist with cleanup of other sites. This case shows that EPA can take immediate action to protect people while still holding polluters responsible by recovering some of the money down the road.  We don’t have to choose between protecting people and taking appropriate legal action – they go hand-in-hand.”

As alleged in the complaint filed yesterday in White Plains federal District Court, each of the Defendants arranged for Port Refinery’s treatment or disposal of used, surplus, or scrap mercury and mercury-containing materials at the Site.  Port Refinery’s treatment and processing of mercury sent by the Defendants and other parties led to extensive releases of mercury into the environment, necessitating two separate clean-up actions by EPA.  In connection with the second clean-up, EPA incurred costs at the Site for investigative and removal activities, including, among other things, excavating and disposing of more than 9,300 tons of mercury-contaminated soil from the site.

In the consent decree filed yesterday, the Defendants admit and accept responsibility for the following:

• EPA has determined that from the 1970s through the early 1990s, Port Refinery engaged in, among other things, the business of mercury reclaiming, refining, and processing.
• Port Refinery operated in the Village of Rye Brook out of a two-story garage bordered by private residences on its south, east, and west sides.
• EPA has determined that Port Refinery took virtually no environmental precautions or safety measures during its mercury refinement process.
• EPA has determined that Port Refinery released a significant amount of mercury into the environment, contaminating the Site.
• EPA has determined that mercury from the Defendants’ mercury-containing products was comingled at the Site and contributed to the mercury released into the environment.

Moreover, in the consent decree each Defendant admits and accepts responsibility for directly or indirectly delivering mercury to Port Refinery as follows:

• DuPont delivered 3,291 pounds of mercury, which included virgin, unused, scrap, used, and contaminated mercury, to Port Refinery during Port Refinery’s period of operations.
• D & D delivered 2,150 pounds of scrap mercury to Port Refinery during Port Refinery’s period of operations.
• Oxy sold 190 pounds of surplus mercury and mercury-containing materials to a third-party scrap dealer during Port Refinery’s period of operations, and EPA has determined that those surplus mercury and mercury-containing materials came to be located at the Site.
• W.A. Baum delivered 1,425 pounds of “dirty” mercury to Port Refinery during Port Refinery’s period of operations.

Pursuant to the consent decree, the Defendants will pay a total of $1,412,255 in costs incurred by EPA, consisting of $658,639 to be paid by DuPont, $430,352 to be paid by D & D, $38,031 to be paid by Oxy, and $285,233 to be paid by W.A. Baum.

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This lawsuit is the United States’ sixth lawsuit against responsible parties to recover clean-up costs for the second clean-up at the Site.  With this settlement, the United States has recovered a total of $2,382,137 from responsible parties. 

The consent decree will be lodged with the District Court for a period of at least 30 days before it is submitted for the Court’s approval, to provide public notice and to afford members of the public the opportunity to comment on the consent decree.

This case is being handled by the Office’s Environmental Protection Unit.  Assistant U.S. Attorney Anthony J. Sun is in charge of the case.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced today that OMAR AMANAT, an associate of codefendant Kaleil Isaza Tuzman, the former chairman and chief executive officer of the technology start-up company KIT digital, Inc. (“KITD”), was sentenced today by U.S. District Judge Paul G. Gardephe to five years in prison for participating in various securities fraud-related offenses.  AMANAT and Tuzman were found guilty in 2017 after a two-month trial presided over by Judge Gardephe.  AMANAT was convicted of conspiracy to commit wire fraud, wire fraud, aiding and abetting investment advisor fraud, and conspiracy to commit securities fraud. 

U.S. Attorney Audrey Strauss said: “Omar Amanat defrauded investors of millions of dollars through years of lies and deceit.  Among his many fraudulent tactics, Amanat teamed up with Kaleil Tuzman and others to manipulate stock prices and hide investment losses through years of false account statements.  When finally caught, Amanat doubled down on his lies by introducing fake emails into the trial record as ‘exculpatory’ evidence.  Neither the Government nor the jury was fooled.  Amanat was convicted on all counts and remanded by the Court into federal custody, where he will remain until his sentence is served.” 

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

The Scheme to Defraud Maiden Capital Investors

Stephen Maiden[1] was the managing member of Maiden Capital, a hedge fund that managed portfolios of securities.  Between in or about February 2009 and in or about June 2012, AMANAT, along with Maiden and others, devised and carried out a scheme to hide from Maiden Capital investors the fact that Maiden Capital’s investments in Enable – an investment fund run by AMANAT’s brother and codefendant, Irfan Amanat, for which AMANAT raised money (based, in part, on false and misleading representations) – had been lost.  To facilitate the scheme, Maiden, with the knowledge and approval of AMANAT, generated false client account statements that failed to disclose the Enable losses.  In addition, AMANAT wired hundreds of thousands of dollars to a Maiden Capital bank account to support Maiden Capital, including to allow Maiden to repay investors whose redemption requests could not be forestalled and thus to continue to keep secret from Maiden Capital investors the Enable losses for over three years. 

The Market Manipulation Scheme

Between in or about December 2008 and in or about September 2011, AMANAT, Tuzman, and Maiden engaged in efforts to artificially inflate the share price and trading volume of KITD shares.  During this time period, KITD shares traded on the OTC Bulletin Board and on the NASDAQ.  Maiden, at Tuzman and AMANAT’s direction, purchased and sold shares of KITD through Maiden Capital, for the purpose of manipulating KITD’s stock price and creating the illusion of greater volume in the trading for KITD shares. 

For instance, Maiden, with Tuzman’s knowledge and approval, frequently engaged in match trading in which Maiden caused an account under Maiden’s control to buy or sell KITD stock, and on the same day caused an account under Maiden’s control to take the opposite position.  Tuzman also directed Maiden to make timely purchases of KITD stock in an effort to manipulate the price of KITD shares at certain critical times, including, for example, when KITD was seeking to raise additional capital and in the weeks before KITD’s stock was uplisted to the NASDAQ.  At times, Maiden was responsible for nearly all of the day’s trading activity in KITD stock.

Amanat’s Fabrication of Evidence 

Evidence at trial also revealed that AMANAT produced to the Government and entered into evidence at trial emails that had been fabricated.  After two evidentiary hearings, the Court allowed the Government to present to the jury evidence of AMANAT’s use of false and fabricated email evidence during the trial.  After the verdict, Judge Gardephe revoked AMANAT’s bail and ordered him remanded into custody, citing numerous factors, including that “substantial evidence was introduced at trial that Mr. Amanat fabricated emails” showing “disdain for the court” and its procedures.

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AMANAT, 48, was also sentenced to three years of supervised release and ordered of pay a fine of $175,000.

Tuzman, 49, is scheduled to be sentenced by Judge Gardephe on September 10, 2021, at 12:00 p.m.

Irfan Amanat, 50, was convicted at a separate trial before Judge Gardephe in October 2018.  He is scheduled to be sentenced by Judge Gardephe on September 8, 2021, at 1:00 p.m.

Ms. Strauss praised the investigative work of the Federal Bureau of Investigation and the U.S. Postal Inspection Service.  She also thanked the Securities and Exchange Commission for its assistance. 

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Andrea M. Griswold, Joshua A. Naftalis, and Daniel M. Tracer are in charge of the prosecution.       

 

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[1] Maiden pled guilty to various offenses for his role in the schemes and cooperated with the Government. 

Audrey Strauss, the United States Attorney for the Southern District of New York, Michael J. Driscoll, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation, and Bruce Campbell, Chief of the Town of Newburgh Police Department, announced that VERNON E. COPELAND III, was indicted today for transporting a minor from Bridgeport, Connecticut, to Newburgh, New York, with the intent to engage in criminal sexual activity with the minor.  COPELAND was charged by criminal complaint on November 20, 2020, and arrested on August 3, 2021, in Tampa, Florida.  COPELAND will be transported to the Southern District of New York for arraignment and prosecution.

U.S. Attorney Audrey Strauss said: “As alleged, Vernon Copeland preyed on a 13-year-old, whom he transported from Bridgeport to Newburgh to engage in sex.  Thanks to the FBI and the Town of Newburgh Police, Copeland is in custody and facing this serious federal charge.”

FBI Assistant Director Michael J. Driscoll said: “A 13-year-old child should be spending time playing sports and going to school, not worrying about being used by an alleged criminal for his own sexual gratification. We must do better as adults in protecting these innocent children because even one being victimized by a predator is too many. A first step in helping someone who may be a victim - call 1-800-CALL-FBI if you have any information about Mr. Copeland.”

According to the allegations contained in the Indictment returned today[1]:

On or about February 7, 2020, COPELAND transported a 13-year-old minor (“Victim-1”) from Bridgeport, Connecticut, to Newburgh, New York, where he engaged, and attempted to engage, in illegal sexual activity with Victim-1.

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COPELAND 36, of Newburgh, New York, is charged with one count of transporting a minor with intent to engage in criminal sexual activity, which carries a minimum sentence of 10 years in prison and a maximum sentence of life in prison.  The statutory minimum and maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Ms. Strauss praised the efforts of the FBI and the Town of Newburgh Police Department.  She added that the investigation is ongoing.

Any individuals who believe they have information that may be relevant to this investigation should contact the FBI at 1-800-CALL-FBI (225-5324) or https://tips.fbi.gov/.

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorney Lindsey Keenan is in charge of the prosecution.

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

 

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[1] As the introductory phrase signifies, the entirety of the text of the Indictment, and the description set forth herein, constitute only allegations, and every fact described should be treated as an allegation.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced today that the United States has settled civil fraud claims against TOWER MAINTENANCE CORP. (“TOWER”), a Long Island-based steel painting company.  The settlement resolves the United States’ allegations that TOWER fraudulently obtained payments on two federally funded construction projects by causing misrepresentations of compliance with Disadvantaged Business Enterprise (“DBE”) rules, which require participation of businesses owned by women and minorities.  Specifically, the United States alleged that TOWER, a certified DBE, caused the prime contractors on the projects to misrepresent that TOWER, as a DBE, was solely performing work on the two projects, when in fact the work was managed and supervised by codefendant Spectrum Painting Corp. (“Spectrum”), a non-DBE.   

Under the settlement approved by U.S. District Judge Analisa Torres, TOWER admits and accepts responsibility for conduct alleged in the Government’s amended complaint and agrees to pay $150,000 to the United States.  The settlement amount is based on the Office’s assessment of TOWER’s ability to pay based on the financial information it provided.  The Office previously reached settlements to resolve its fraud claims against the codefendants in the lawsuit, Spectrum and Ahern Painting Contractors Co. (“Ahern”), under which Spectrum and Ahern were required to pay a total of $3.4 million.

Manhattan U.S. Attorney Audrey Strauss said: “With this settlement, my Office paints a clear picture that we will pursue any contractor that participates in an unlawful scheme to exploit the Disadvantaged Business Enterprise program.  All contractors are on notice that we are committed to rooting out public works contracting fraud.”

As alleged in the amended complaint filed in Manhattan federal court in August 2019, TOWER performed steel painting work on two federally funded projects to renovate the Brooklyn Bridge and Queens Plaza.  Contracts for both projects required Ahern to hire DBEs to perform a percentage of the work and to adhere to the DBE regulations.  The DBE regulations require DBEs to manage and supervise their own work.  Yet TOWER hired Spectrum, a non-DBE painting subcontractor, to manage and supervise the DBE work that was supposed to be performed solely by TOWER.  Further, to conceal this scheme, TOWER passed off Spectrum employees as its own in project documents.  

As part of the settlement, TOWER admits, acknowledges, and accepts responsibility for the following conduct alleged in the amended complaint:

• In early 2010, TOWER knew that Ahern entered into an agreement with Skanska Koch Inc. (“Skanska”) for industrial painting and rehabilitation work on the Brooklyn Bridge Project.  TOWER understood that as a subcontractor on the Brooklyn Bridge Project, Ahern was obligated to meet or exceed Ahern’s DBE participation goal on the project.  TOWER also knew that Ahern expected to use TOWER, a certified DBE, to fulfill a substantial part of Ahern’s DBE participation goal for the Brooklyn Bridge Project.  In mid-2010, TOWER in fact entered into a subcontract with Ahern to perform painting and blasting work on the Brooklyn Bridge Project, which TOWER expected would be counted toward Ahern’s DBE participation goal for the project.
   
• In connection with the Brooklyn Bridge Project, TOWER signed and submitted to Ahern various documents stating that the DBE work subcontracted to TOWER would be performed by TOWER alone. 
   
• In mid-2011, TOWER knew that Ahern entered into a contract with the MTA to provide overcoat painting on the elevated structure at the Queens Plaza subway station, and that Ahern was obligated to meet or exceed its DBE participation goal for the Queens Plaza Project.  TOWER also knew that Ahern was going to use TOWER as the DBE contractor on the Queens Plaza Project to meet Ahern’s DBE participation goal.  In 2011, TOWER entered into a subcontract with Ahern to perform painting and blasting work on the Queens Plaza Project, which TOWER expected would be counted toward Ahern’s DBE participation goal for that project.
   
• In May and June 2011, TOWER and Spectrum memorialized two “consulting agreements” for painting and blasting work on the Brooklyn Bridge and Queens Plaza Projects.  The key terms of the consulting agreements between TOWER and Spectrum – including TOWER’s agreement to pay Spectrum 50% of all of its profits from the two projects, Spectrum’s agreement to provide project management support, and Spectrum’s agreement to furnish equipment to TOWER for the projects – were not formally disclosed in writing to Ahern, nor were they disclosed in any way to Skanska, NYC-DOT, or MTA.
   
• Consistent with the consulting agreements, TOWER requested that Spectrum provide project management support for the DBE work that TOWER was retained to perform on the Brooklyn Bridge and Queens Plaza Projects.
   
• In addition to the Spectrum employee who assisted TOWER in preparing the bid TOWER submitted to Ahern for its anticipated work as a DBE subcontractor on the Brooklyn Bridge project (the “Spectrum Manager), Spectrum had two other employees providing project management support to TOWER for the DBE work subcontracted to TOWER on the Brooklyn Bridge and Queens Plaza Projects: a superintendent (the “Spectrum Superintendent”) and a health and safety supervisor (the “Spectrum Safety Supervisor”).
   
• In documents that TOWER submitted to Ahern in 2010, TOWER identified the Spectrum Manager as a “Tower VP” or as a TOWER employee working on the Brooklyn Bridge Project.  And in documents TOWER submitted to Ahern in 2011 in connection with the Queens Plaza Project, TOWER identified the Spectrum Manager as a “Director” of TOWER.  In addition, the Spectrum Manager, the Spectrum Superintendent, and the Spectrum Safety Supervisor identified themselves to others working on the Brooklyn Bridge and Queens Plaza Projects as TOWER employees.
   
• In addition to informing Ahern that Spectrum would perform work on the Brooklyn Bridge and Queens Plaza projects, TOWER should have disclosed Spectrum’s work to the NYC-DOT and MTA DBE officers designated on the projects, and it should have sought clarification from Ahern regarding whether Ahern disclosed Spectrum’s involvement in accordance with Ahern’s obligations.

 

• TOWER should have proactively disclosed to the relevant DBE officer the details of its financial arrangement with Spectrum relative to the Brooklyn Bridge and Queens Plaza Projects, including that TOWER and Spectrum’s agreements relative to the projects included profit sharing and provisions for Spectrum to provide TOWER financing for TOWER’s performance of work on the projects.

Ms. Strauss praised the outstanding investigative work of the United States Department of Transportation Office of Inspector General, the New York City Department of Investigation, and the Inspector General of the Metropolitan Transportation Authority. 

This case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorneys Mónica P. Folch and David J. Kennedy are in charge of this case.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that a jury returned a guilty verdict today against MEDGHYNE CALONGE, on one count of intentionally causing damage to a protected computer, and one count of accessing a protected computer and recklessly causing damage.  Both counts relate to CALONGE’s deletion of tens of thousands of human resources records of her former employer (“Employer-1”).  U.S. District Judge Gregory H. Woods presided over the six-day trial.

U.S. Attorney Audrey Strauss said: “As a unanimous jury found today, Medghyne Calonge intentionally and maliciously caused severe damage to the computers of her former employer.  Her actions wiped out information vitally important to the employer company, and cost the company money and time to repair.  Now Calonge awaits sentencing for her crimes.”

According to the Indictment and the evidence at trial:

In January 2019, CALONGE was hired by Employer-1, a Manhattan-based online provider of professional services, to serve as the head of human resources in their St. Petersburg, Florida, office.  On June 28, 2019, CALONGE was terminated for failing to meet the minimum requirements of her job after, among other things, she improperly downgraded a colleague’s access to a computer system following an argument with the colleague.   

While she was being terminated, and just before she was escorted from the building, CALONGE was observed by two employees of Employee-1 repeatedly hitting the delete key on her desktop computer.  Several hours later, CALONGE logged into a system (“System-1”) used by Employer‑1 to receive and manage applications for employment with the company, which the company had invested two years and over $100,000 to build.  During the next two days, CALONGE rampaged through System-1, deleting over 17,000 job applications and resumes, and leaving messages with profanities inside the system.  Ultimately, CALONGE completely destroyed all of Employer-1’s data in System-1.  Employer-1 subsequently spent over $100,000 to investigate and respond to the incident and to rebuild System-1.  To this day, Employer-1 has been unable to recover all of its data.  

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CALONGE, 41, of Tampa, Florida, was convicted of one count of intentionally damaging computers, which carries a maximum prison term of 10 years, and one count of recklessly damaging computers, which carries a maximum prison term of five years. 

The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

Ms. Strauss praised the outstanding work of the Federal Bureau of Investigation. 

The case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Timothy V. Capozzi and Louis A. Pellegrino are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, and Peter C. Fitzhugh, the Special Agent-in-Charge of the New York Field Office of Homeland Security Investigations (“HSI”), announced the unsealing of a Complaint charging MARTIN RUIZ with investment adviser fraud in connection with his fraudulent scheme to defraud investors using his investment advisory firm, Carter Bain Wealth Management (“CBWM”).  RUIZ was arrested yesterday morning and presented yesterday afternoon before Magistrate Judge Barbara C. Moses.

Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Martin Ruiz promised his elderly investment advisory clients safe investments but in fact stole his clients’ retirement savings and lined his own pockets.  Now, for this alleged violation of the law and of his fiduciary duty to his clients, Ruiz faces federal criminal charges.”

Special Agent-in-Charge Peter C. Fitzhugh said: “As alleged, with more than $8 million in misappropriated funds, Ruiz acted with impunity while building his own personal investments.  Ruiz allegedly padded his lavish lifestyle by defrauding investors, many of them elderly working-class retirees, out of their life savings.  No one should live their own version of ‘Lifestyles of the Rich and Famous’ by swindling others out of their hard-earned money.  HSI New York’s El Dorado Task Force worked closely with the United States Attorney’s Office for the Southern District of New York to see that Ruiz will now face the consequences of these alleged actions.”  

According to the allegations contained in the Complaint[1] unsealed yesterday in Manhattan federal court:

From at least in or about March 2011 through in or about the present, RUIZ induced multiple individual investment advisory clients of CBWM, many of whom are elderly, to retain RUIZ and CBWM to advise them on how they should invest their retirement savings.  While ostensibly acting in his fiduciary capacity as their investment adviser, RUIZ instead induced more than a dozen such clients to invest more than $10 million in an investment fund called RAM Fund through the purchase of limited partnership interests.  RUIZ did not disclose to those clients that RUIZ controlled RAM Fund and that he planned to misappropriate their funds.  

In fact, rather than invest the funds in legitimate investment projects and real estate, as he represented to clients, RUIZ misappropriated more than $8 million of client funds from the RAM Fund, transferred those funds through a series of entities RUIZ also controlled, and spent the vast majority of the funds on personal expenses, including the purchase of a home, rent payments on several apartments, and the payment of his personal credit card bills.  In so doing, he violated his fiduciary duty to act in his clients’ best interest and avoid self-dealing.

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RUIZ, 45, of New York, New York, and Santa Fe, New Mexico, is charged with one count of investment adviser fraud.  RUIZ faces a maximum sentence of five years in prison.

The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of a defendant will be determined by the judge.

Ms. Strauss praised the investigative work of HSI.  Ms. Strauss also thanked the Securities & Exchange Commission, which brought a related civil action against RUIZ.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorney Kiersten A. Fletcher 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.

 

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[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced today that JAIME SANTANA, a/k/a “Smiley,” a high-ranking member of Mara Salvatrucha, or MS-13, was sentenced by U.S. District Judge Vernon S. Broderick to 110 months in prison.  SANTANA previously pled guilty to participating in a racketeering conspiracy, and participating in a conspiracy to distribute and possess with intent to distribute methamphetamine and cocaine. 

U.S. Attorney Audrey Strauss said: “Jaime Santana, a leader of the L.A. Program of MS-13, trafficked in weapons and cocaine and helped plan a cross-border methamphetamine distribution network.  Santana was also party to an extortion in which he and others threatened to murder the victim.  Thanks to our partners at HSI and the NYPD, Santana was arrested, convicted, and has now been sentenced to prison for his crimes.”

According to the Indictment, other filings in this case, and statements during court proceedings:

SANTANA is a member of MS-13, a transnational racketeering enterprise that operates throughout North and Central America, including in El Salvador, Mexico, New York, California, Texas, Virginia, Tennessee, and North Carolina.  In order to enrich the enterprise, protect and expand its criminal operations, enforce discipline among its members, and retaliate against members of rival gangs, members and associates of MS-13 committed, conspired, attempted, and threatened to commit acts of violence, distributed and possessed with intent to distribute narcotics, including methamphetamine and cocaine, and obtained, possessed, and used firearms.

MS-13 is organized into chapters called “cliques.”  Groups of cliques, in turn, are aligned as “programs.”  Each program is governed by a group of senior gang leaders known as the “table.”  SANTANA is a high-ranking member of the table of the “L.A. Program” of MS-13.

In July and September 2019, SANTANA sold a 9mm handgun, a .40 caliber handgun, a .45 caliber handgun, boxes of ammunition, and cocaine to individuals working at the direction of law enforcement.

Furthermore, in the summer and fall of 2019, SANTANA was involved, with other high-ranking members of MS-13, in planning for the establishment of a methamphetamine distribution network that started in Mexico and operated throughout the United States, including North Carolina, New York, Virginia, and Tennessee.

In addition, in September 2019, SANTANA and other senior members of MS-13 conspired to extort another gang member, who was told that he either had to repay money or be “green lit” (i.e., killed) for introducing a “bad connection” who supplied poor quality narcotics to the gang.           

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In addition to the prison term, Judge Broderick sentenced SANTANA, 41, of Galatin, Tennessee, to five years of supervised release.

Ms. Strauss praised the investigative work of Homeland Security Investigations and the New York City Police Department.

This prosecution is part of an Organized Crime Drug Enforcement Task Forces (OCDETF) operation.  OCDETF identifies, disrupts, and dismantles the highest-level criminal organizations that threaten the United States using a prosecutor-led, intelligence-driven, multi-agency approach.  Additional information about the OCDETF Program can be found at https://www.justice.gov/OCDETF.

This case is being handled by the Office’s Violent & Organized Crime Unit.  Assistant United States Attorneys Michael D. Longyear, Justin V. Rodriguez, and Jacob Warren are in charge of the prosecution.

Ilan Graff, Attorney for the United States, Acting under Authority Conferred by 28 U.S.C. § 515, announced today the guilty plea of JEFFREY HASTINGS, the former chief executive officer and chairman of the board of directors of SAExploration Holdings, Inc. (“SAEX” or the “Company”), a publicly traded seismic data company based in Houston, Texas, for his role in a scheme to fraudulently and materially inflate the publicly reported revenue of SAEX by tens of millions of dollars, in 2015 and 2016, and also for misappropriating millions of dollars from the Company.  HASTINGS pled guilty before U.S. District Judge Gregory H. Woods to conspiracy to commit securities fraud and wire fraud offenses.

Ilan Graff, Attorney for the United States, said: “As he acknowledged in court today, Jeffrey Hastings schemed to inflate his company’s revenue, making it appear more profitable than it was.  Hastings then stole money from the company for his own use.  Hastings now awaits sentencing for his admitted fraud and deception.”

According to the allegations contained in the Superseding Information, the Superseding Indictment, and the Complaint filed in this case, and statements made during the plea proceeding:           

At all times relevant to the Information until August 2016, HASTINGS was the executive chairman of the board of directors of SAEX (the “Board”).  After August 2016, HASTINGS served as both the chairman of the Board and the chief executive officer (“CEO”) of SAEX until he separated from the company in August 2019.  SAEX was a publicly traded seismic data acquisition company headquartered in Houston, Texas, that traded under the symbol “SAEX” on the NASDAQ.  In May 2020, SAEX was delisted from the NASDAQ and, in December 2020, was taken private.  SAEX provided land- and marine-based seismic acquisition services, including program design, planning and permitting, camp services, survey, drilling, recording, and processing.  Seismic data is used by oil and gas companies to identify and analyze drilling prospects and maximize successful drilling.

From February 2015 through May 2019, HASTINGS, together with Brent Whiteley, the then chief financial officer and general counsel of SAEX, Michael Scott, the then executive vice president of operations at SAEX, and “CC-1,” the founder and at various times president, CEO, and chief operating officer of SAEX, devised and carried out a scheme to defraud SAEX’s shareholders, bondholders, and the investing public by artificially and materially inflating SAEX’s reported revenue by making it appear that Alaskan Seismic Ventures, LLC (“ASV”) was an independent and reliable source of tens of millions of dollars of revenue.

In February 2015, HASTINGS and Whiteley discussed finding a way for SAEX to take advantage of certain tax credits offered by the State of Alaska to seismic data library companies, to offset the costs of exploring for oil and gas in Alaska (the “Alaska Tax Credits”).  The Board of SAEX was opposed to operating its own data library company because of concerns about the ability to ensure payment to SAEX, including through the monetization of Alaska Tax Credits, among other reasons.  To avoid the appearance that SAEX was operating a data library company that licensed data to third parties, HASTINGS and Whiteley set up ASV, to purport to operate as an independent customer purchasing seismic data from SAEX and licensing it to third parties.  HASTINGS recruited an acquaintance to serve as the owner and sole employee of ASV.  In truth and in fact, and as hidden from investors, ASV was not independent and could not pay SAEX for its seismic data.

After setting up ASV, HASTINGS and Whiteley created and caused to be created a number of shell companies (the “Shell Companies”) for the purpose of secretly transferring funds from SAEX into ASV.  One of the Shell Companies, Global Equipment Solutions (“Global Equipment”), was purportedly an equipment rental company from which SAEX rented seismic acquisition equipment.  In truth and in fact, and as HASTINGS and his co-conspirators well knew, SAEX did not rent any equipment from Global Equipment and did not owe Global Equipment any money.  The co-conspirators took steps to make the payments from SAEX to Global Equipment appear legitimate to others at SAEX.  For example, Whiteley drafted a lease agreement between SAEX and Global Equipment, and Scott caused fake purchase orders to be created that purported to show expenses incurred by SAEX as a result of renting equipment from Global Equipment.

By the end of 2015, SAEX had recorded on its books approximately $12 million in payables to Global Equipment.  HASTINGS and his co-conspirators ultimately routed approximately $5.8 million of SAEX’s funds through Global Equipment and the other Shell Companies to ASV.  That money then went from ASV back to SAEX to pay outstanding receivables.  The fact that these funds belonged to and originated with SAEX was not disclosed to investors.  HASTINGS and his co-conspirators referred to this portion of the scheme as “round-tripping.”  In addition, HASTINGS and Whiteley then misappropriated more than $5 million of the funds that SAEX transferred to Global Equipment for their own use, including making payments to Scott and CC-1, among others.   

*                *                *

HASTINGS, 63, of Anchorage, Alaska, and British Columbia, Canada, pled guilty to one count of conspiracy to commit securities fraud, to make false statements in annual and quarterly SEC reports, and to make false statements to SAEX’s auditors, which carries a maximum sentence of five years in prison, and one count of conspiracy to commit wire fraud, which carries a maximum sentence of five years in prison.  The maximum potential penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

HASTINGS is scheduled to be sentenced by Judge Woods on November 15, 2021, at 1:00 p.m. 

Whiteley and Scott have already pled guilty and await sentencing before Judge Woods.

Mr. Graff praised the investigative work of the Federal Bureau of Investigation.  He also thanked the Securities and Exchange Commission, which has filed a civil enforcement action against the defendant, for its assistance in the investigation.

The case is being overseen by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Christine I. Magdo, Gina Castellano, and Robert Boone are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that defendants JORGE NAVARRO and KRISTIAN RHEIN have pled guilty to their respective roles in the distribution of adulterated and misbranded drugs with the intent to defraud and mislead, in connection with the charges filed in United States v. Navarro et al., 20 Cr. 160 (MKV).  NAVARRO pled guilty today and RHEIN pled guilty on August 3, 2021, both before U.S. District Judge Mary Kay Vyskocil.  RHEIN will be sentenced by Judge Vyskocil on December 2, 2021, and NAVARRO will be sentenced by Judge Vyskocil on December 17, 2021.

Manhattan U.S. Attorney Audrey Strauss said: “Kristian Rhein and Jorge Navarro represent the supply side and the customer side of the market in performance enhancing substances that have corrupted much of the horse racing industry.  As he admitted today, Navarro, a licensed trainer and the purported ‘winner’ of major races across the world, was in fact a reckless fraudster whose veneer of success relied on the systematic abuse of the animals under his control.  Rhein previously admitted that he flouted his oath as a veterinarian to protect the animals under his care, choosing instead to pursue money through the sale and administration of unregulated substances used by trainers engaged in fraud and animal abuse.  These latest convictions demonstrate the continued commitment of this Office and our partners at the FBI to the investigation and prosecution of corruption, fraud, and endangerment at every level of the horse racing industry.”

According to the allegations contained in the Superseding Indictment, the Superseding Information charging RHEIN, prior charging instruments, and other filings in this case[1], and statements during court proceedings:

The charges in the Navarro case arise from an investigation of widespread schemes by racehorse trainers, veterinarians, performance enhancing drug (“PED”) distributors, and others to manufacture, distribute, and receive adulterated and misbranded PEDs and secretly administer those PEDs to racehorses competing at all levels of professional horseracing.  By evading PED prohibitions and deceiving regulators and horse racing officials, participants in these schemes sought to improve race performance and obtain prize money from racetracks throughout the United States and other countries, including in New York, New Jersey, Florida, Ohio, Kentucky, and the United Arab Emirates (“UAE”), all to the detriment and risk of the health and well-being of the racehorses.  Trainers, like NAVARRO, who participated in the schemes stood to profit from the success of racehorses under their control by earning a share of their horses’ winnings, and by improving their horses’ racing records, thereby yielding higher trainer fees and increasing the number of racehorses under their control.  Veterinarians, including RHEIN, who was the head veterinarian and owner of Empire Veterinary Group, profited from the sale and administration of these medically unnecessary, misbranded, and adulterated substances.

NAVARRO operated his doping scheme covertly, importing misbranded “clenbuterol” that he both used and distributed to others, avoiding explicit discussion of PEDs during telephone calls, and working with others to coordinate the administration of PEDs at times that racing officials would not detect such cheating.  Among the horses that NAVARRO trained and doped was XY Jet, a thoroughbred horse that won the 2019 Golden Shaheen race in Dubai.  Among NAVARRO’s preferred PEDs were various “blood building” drugs, which, when administered before intense physical exertion, can lead to cardiac issues or death.

Among the misbranded and adulterated PEDs promoted, sold, and administered by RHEIN were an illegally distributed prescription drug, Clenbuterol, used as a bronchodilator and the drug “SGF-1000,” which was compounded and manufactured in unregistered facilities and contained growth factors that the defendants knew to be undetectable through regular drug screens.  SGF-1000 was an intravenous drug promoted as, among other things, a vasodilator capable of promoting stamina, endurance, and lower heart rates in horses through the purported action of “growth factors” supposedly derived from sheep placenta.           

The horse “Maximum Security,” briefly considered the winner of the 2019 Kentucky Derby (though later disqualified), was among the horses that RHEIN assisted in doping.  On June 5, 2019, New Jersey racing regulators tested Maximum Security for performance enhancing drugs a short time after Maximum Security had received a shot of SGF-1000.  The testing occurred in advance of a race scheduled for June 16, 2019, in which Maximum Security competed and placed second.  On an intercepted call following that test, RHEIN asserted that Maximum Security would not test positive for the presence of the drug: “[t]hey don’t even have a test for it [SGF-1000] . . . There’s no test for it in America.”

Through their pleas, NAVARRO has agreed to the payment of restitution in the amount of $25,860,514, reflecting winnings obtained through his fraudulent doping scheme, and RHEIN has agreed to pay restitution in the amount of $729,716 in connection with fraud committed through a false billing practice related to RHEIN’s drug misbranding scheme.  RHEIN, and others working under RHEIN’s direction, created false billing records to be provided to horse owners that did not reflect the drugs that RHEIN and others had actually injected into racehorses under their “care.”  Through this false billing scheme, RHEIN attempted to conceal from potential investigators and horse owners the true nature and means of administration of the PEDs that he and others provided and administered.

*                *                *

Ms. Strauss praised the outstanding investigative work of the FBI New York Office’s Eurasian Organized Crime Task Force and its support of the Bureau’s Integrity in Sports and Gaming Initiative.

This case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant United States Attorneys Sarah Mortazavi, Andrew C. Adams, Benet Kearney, and Anden Chow are in charge of the prosecution.                   

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[1] As to Navarro and Rhein’s codefendants, the entirety of the texts of the Indictments and the descriptions of the Indictments set forth herein constitute only allegations, and every fact described should be treated as an allegation.

Audrey Strauss, the United States Attorney for the Southern District of New York, Jacqueline Maguire, the Acting Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Miriam E. Rocah, Westchester County District Attorney, announced today the arrest of ROBERT POPE for persuading, inducing, enticing and coercing a 16-year-old minor to engage in sexual activity.   POPE was arrested yesterday morning and presented before U.S. Magistrate Judge Paul E. Davison in White Plains federal court.

Manhattan U.S. Attorney Audrey Strauss said:  “The alleged conduct in this case underlines the urgent need for law enforcement to continue its efforts to protect children from those who prey on them. We have zero tolerance for the exploitation of children and we will prosecute and punish those who engage in this conduct. Any individuals who may have relevant information concerning Robert Pope should please contact the FBI at 1-800-CALL-FBI.”

FBI Acting Assistant Director Jacqueline Maguire said:  "Adults who are entrusted with educating and instructing children usually have the child's best interest at heart. As we allege, Mr. Pope instead chose to abuse his position of authority as a baseball coach to coerce and entice a child into having sex with him. We believe there may be other victims who haven't yet come forward, and we're asking any potential victims and their parents or guardians to contact us at 1-800-CALL-FBI or online at tips.fbi.gov. Your information could help our investigation, and help us hold Mr. Pope accountable."

Westchester County District Attorney Miriam E. Rocah said: "As alleged in this case, Robert Pope abused his position of trust to take advantage of the most vulnerable for his own sexual gratification. We are proud to work together with the Southern District of New York, the New York FBI and the Mount Vernon Police Department to aggressively prosecute sexual abuse of minors and will use all of our collective resources to ensure sexual predators are stopped and held accountable.”

According to the Complaint[1] filed on August 9, 2021 in White Plains federal court and unsealed yesterday:

Between at least on or about September 1, 2020, up to and including at least on or about April 11, 2021, POPE communicated with a 16-year-old minor (“Victim-1”) by cellphone and persuaded Victim-1 to meet POPE in person in Westchester County, New York on more than one occasion to engage in sexual activities with POPE. 

On or about June 15, 2021, ROBERT POPE was charged in Westchester County, New York, with three counts of Criminal Sexual Act in violation of New York Penal Law 130.40(2).  

Ms. Strauss stated that the investigation is ongoing.  Ms. Strauss requests that any individuals who may have relevant information concerning ROBERT POPE contact the Federal Bureau of Investigation at 1-800-CALL-FBI (225-5324). 

*          *          *

POPE, 30, of  Mount Vernon, New York, is charged with one count of coercion and enticement, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life imprisonment.  The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Ms. Strauss praised the efforts of the FBI, the Westchester County District Attorney’s Office, the Westchester County Safe Streets Task Force, and the Mount Vernon Police Department in connection with this investigation.  She added that the investigation is ongoing.

This case began as an investigation in Westchester County District Attorney’s Office by Assistant District Attorneys Marissa Morra Wynn and Christine Hatfield. The prosecution is being handled by the Office’s White Plains Division.  Assistant United States Attorney Marcia S. Cohen is in charge of the prosecution.  

 

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[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.

Audrey Strauss, United States Attorney for the Southern District of New York, announced today that SHENG-WEN CHENG, a/k/a “Justin Cheng,” a/k/a “Justin Jung,” was sentenced to 72 months in prison for multiple fraud schemes he perpetrated.  In particular, CHENG engaged in a scheme to fraudulently obtain over $7 million in Government-guaranteed loans designed to provide relief to small businesses during the COVID-19 pandemic.  CHENG also solicited and obtained investments in Alchemy Coin Technology Limited and related companies controlled by CHENG through materially false and misleading statements and omissions.  Finally, CHENG fraudulently obtained due diligence fees from dozens of start-up companies as part of an advance fee scheme.  CHENG was sentenced earlier today before U.S. District Judge Alison J. Nathan.

U.S. Attorney Audrey Strauss said: “Sheng-Wen Cheng fraudulently applied for over $7 million in government-guaranteed loans under programs designed to provide relief for financially struggling small businesses hurt by the COVID pandemic.  Further, Cheng committed securities fraud by lying to investors in his blockchain-based peer-to-peer lending platform, and wire fraud by engaging in an advance fee scheme.  Now Cheng has been sentenced to prison for his multitude of crimes.”

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

The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act is a federal law enacted on March 29, 2020, designed to provide emergency financial assistance to the millions of Americans who are suffering the economic effects caused by the COVID-19 pandemic.  One source of relief provided by the CARES Act was the authorization of hundreds of billions of dollars in forgivable loans to small businesses for job retention and certain other expenses through the SBA’s Paycheck Protection Program (“PPP”).  Pursuant to the CARES Act, the amount of PPP funds a business is eligible to receive is determined by the number of employees employed by the business and their average payroll costs.  The CARES Act also expanded the separate Economic Injury Disaster Loan (“EIDL”) Program, which provided small businesses with low-interest loans that can provide vital economic support to help overcome the temporary loss of revenue they are experiencing due to COVID-19.

CHENG, a Taiwanese national who entered the United States on a student visa, was a self-proclaimed “serial entrepreneur” who attended Pennsylvania State University (“Penn State”).  From at least in or about April 2020 through at least on or about August 13, 2020, CHENG used the identity of other individuals to submit online applications to the SBA and at least five financial institutions for a total of over $7 million in government-guaranteed loans through the SBA’s PPP and EIDL Program for several companies controlled by CHENG, namely Alchemy Finance, Inc., Alchemy Guarantor LLC d/b/a “Celer Offer,” Celeri Network, Inc., Celeri Treasury LLC, Wynston York LLC, and Neo Bellum Industries Inc. (collectively, the “Cheng Companies”).  In connection with these loan applications, CHENG represented, among other things, that other individuals were the sole owners of the Cheng Companies and that the Cheng Companies together had over 200 employees and paid a total of approximately $1.5 million in wages to those employees on a monthly basis.  In fact, however, the Cheng Companies appear to have had a total of no more than 14 employees. 

In order to support the false representations in the loan applications about the number of employees at and the wages paid by the Cheng Companies, CHENG submitted fraudulent and doctored tax records that were never actually filed with the IRS and payroll records containing the forged electronic signature of a payroll company employee.  CHENG also submitted a payroll summary for one of his companies that listed the names of more than 90 purported employees, several of which consisted of current and former athletes, artists, actors, and public figures.  For example, the list of purported employee names included a co-anchor on Good Morning America, a former National Football League player, and a prominent former Penn State football coach who is now deceased.

Based on the fraudulent PPP loan applications submitted by CHENG, a total of more than $3.7 million in PPP loans were approved for the Cheng Companies and approximately $2.8 million in PPP loan proceeds were deposited into bank accounts solely controlled by CHENG.  Instead of using the PPP loan proceeds for payroll costs, mortgage interest, rent, and/or utilities for the purported Cheng Companies as required by the PPP, CHENG transferred over $1 million abroad, withdrew approximately $360,000 in cash and/or cashier’s checks, and spent at least approximately $279,000 in PPP loan proceeds on personal expenses.  These personal expenses included the purchase of an 18-carat gold Rolex watch for approximately $40,000, rent and move-in fees for a $17,000 per month luxury condominium used by CHENG, approximately $50,000 of furnishings for the condominium, a portion of the purchase of a 2020 S560X4 Mercedes, and purchases totaling approximately $37,000 at Louis Vuitton, Chanel, Burberry, Gucci, Christian Louboutin, and Yves Saint Laurent.

In addition to the COVID-19 pandemic loan fraud described above, from at least in or about 2017 through at least in or about 2019, CHENG committed securities fraud by soliciting and obtaining approximately $400,000 in investments in Alchemy Coin Technology Limited and related companies (“Alchemy Coin”) controlled by CHENG.  These investments were obtained through materially false and misleading statements and omissions regarding Alchemy Coin’s access to capital, use of investor proceeds, the product readiness of its purported blockchain-based peer-to-peer lending platform, and the registration of its tokens as part of an initial coin offering. 

Finally, from at least in or about 2018 through at least in or about 2019, CHENG committed wire fraud by fraudulently obtaining a total of approximately $380,000 in so-called “due diligence fees” from dozens of start-up companies as part of an advance fee scheme.  CHENG falsely told these companies seeking investors that, in exchange for a due diligence fee that was fully refundable, CHENG would perform due diligence on the companies and assess them for investments or otherwise assist them in securing funding.  However, CHENG had no interest in or financial ability to invest in any of the victim companies, did not return the purportedly refundable fees despite repeated requests from victims, and used the fees for personal expenses as opposed to performing any due diligence.  When CHENG was confronted by victims to return the fees after they realized that no investments were forthcoming, CHENG falsely told the victims that he did not have the fees and that a third-party due diligence company he had employed had stolen the fees.

*                *                *

CHENG, 25 of New York, New York, pled guilty on April 20, 2021, to one count of major fraud against the United States, one count of bank fraud, one count of securities fraud, and  one count of wire fraud. 

In addition to the prison term, CHENG was sentenced to three years of supervised release and ordered to forfeit luxury items seized in connection with his arrest, including a Mercedes, a Rolex watch, and a diamond engagement ring.  The amount of restitution to victims of the offense will be set at a later date.  CHENG also consented to removal from the United States upon his release from prison.

Ms. Strauss praised the investigative work of the Federal Bureau of Investigation, the Office of the Inspector General of the U.S. Small Business Administration, and the Internal Revenue Service Criminal Investigation.  Ms. Strauss also thanked the United States Securities and Exchange Commission, U.S. Customs and Border Protection, and the New York State Department of Labor for their assistance.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorney Sagar K. Ravi is in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, Peter C. Fitzhugh, Special Agent in Charge of Homeland Security Investigations (“HSI”) in New York, and Dermot Shea, Police Commissioner of the City of New York (“NYPD”), announced the unsealing of an indictment today charging eight individuals with participating in a conspiracy to distribute crack cocaine in the vicinity of Times Square.  JOHNNY PEREZ, a/k/a “Ghost,” AARON STARKS, a/k/a “Duke,” SEKOU SIMPSON, a/k/a “Tre,” FRED JOHNSON, a/k/a “Trinny,” DAVON MIAL, a/k/a “Smooth,” and DONNELL BRUNS, a/k/a “Mac,” were arrested on Monday evening in the New York area, and will be presented today before U.S. Magistrate Judge Barbara Moses. FRAYVON YOUNG, a/k/a “Harlem” and ROBERT MASON remain at large. The case is assigned to United States District Judge Paul A. Engelmayer.

Manhattan U.S. Attorney Audrey Strauss said: “As alleged, the defendants operated a veritable 24-hour open-air bazaar for the sale of crack cocaine in Times Square.  We recall the bad old days of a much seedier Times Square that was unwelcoming, and we are committed to working with our law enforcement partners to ensure that those days remain just a memory.”

HSI Special Agent in Charge Peter C. Fitzhugh said: “This crew gave new meaning to the slogan for New York City as the ‘city that never sleeps,’ by allegedly operating a 24-hour drug distribution ring.  Working in shifts nearly around the clock, they preyed on the addictions and vulnerabilities of others. HSI New York and our partners at the NYPD worked closely with the U.S. Attorney’s Office for the Southern District of New York to ensure that those arrested today will face the full weight of our justice system and be held accountable for the actions of their criminal enterprise.”  

NYPD Commissioner Dermot Shea said: “Our officers work night and day to keep every corner of New York free from the scourge of illegal narcotics, including in the crossroads of the world. Today’s federal indictment highlights the continuing commitment our NYPD investigators, prosecutors from the United States Attorney’s Office from the Southern District of New York and law enforcement partners have to that continuing mission.”

As alleged in the Indictment[1] unsealed today in Manhattan federal court and in other court papers and proceedings:

Between at least December 2019 and August 2021, the defendants sold crack cocaine nearly around-the-clock in the vicinity of 43rd Street and 8th Avenue in Manhattan, near Times Square.  One ‘shift’ arrived in the late morning and made sales through the late afternoon, and then other defendants arrived and sold through the evening and nighttime.  Although there was no set composition of defendants for the two shifts, defendant AARON STARKS was often present and overseeing the first shift, and defendant JOHNNY PEREZ was often present and overseeing the second shift.

An undercover law enforcement officer purchased quantities of crack cocaine from the defendants on dozens of occasions, including multiple purchases from each defendant.  Law enforcement surveillance showed nearly continuous sales from the late morning through the nighttime and shift changes.  In addition, surveillance video from the vicinity of 43rd Street and 8th Avenue showed the defendants conducting hundreds of hand-to-hand sales of crack cocaine. For example, during a period of 11 days in March and April 2021, the defendants conducted more than 650 hand-to-hand sales.  In January 2020, law enforcement officers arrested STARKS in the Times Square area and seized from him approximately 312 capsules of crack cocaine and 52 twists of crack cocaine.

*                *                *

PEREZ, 37, of the Bronx, New York, STARKS, 36, of the Bronx, SIMPSON, of Brooklyn, New York, JOHNSON, 43, of Manhattan, MIAL, 32, of the Bronx, YOUNG, 34, of the Bronx, MASON, 39, of the Bronx, and BRUNS, 42, of the Bronx, are each charged with one count of conspiracy to distribute and possess with intent to distribute 280 grams and more of mixtures and substances containing a detectable amount of crack cocaine.  That charge carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as the sentencing of the defendants will be determined by a judge.

Ms. Strauss praised the outstanding investigative work of HSI and the NYPD.

This case is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Christy Slavik and Kedar S. Bhatia are in charge of the prosecution.

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

 

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[1] As the introductory phrase signifies, the entirety of the text of the Indictment, and the description set forth herein, constitute only allegations, and every fact described should be treated as an allegation.

Audrey Strauss, the United States Attorney for the Southern District of New York, and Jacqueline Maguire, the Acting Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the arrest of JESUS CONCEPCION, a/k/a “Mr. C.,” for enticing four minor victims to engage in sexual activity, transporting those minor victims across state lines to engage in illegal sexual acts, and inducing one minor victim to produce child pornography.  CONCEPCION was arrested on August 7, 2021, in Charlotte, North Carolina, and was presented today in the Western District of North Carolina.

Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Jesus Concepcion abused his position as a teacher at a public school in the Bronx to engage in sexual relationships with several of his students.  Concepcion sexually exploited those students, who were minors, at the public school, in and around the Bronx, and in other states.  Together with our partners in the FBI, we will work tirelessly to ensure that anyone who engages in this type of conduct will be subject to the full force of the law.”

FBI Acting Assistant Director Jacqueline Maguire said: “Teachers serve as trusted figures to their students as they work to educate and prepare them for the future. As alleged, Mr. Concepcion egregiously breached that trust as he abused his position to coerce students – some as young as 12 years old – into having sex with him.  Parents deserve to send their children to school each day knowing they will be safe as they receive an education – and not be exploited and assaulted by a so-called educator who only sees students as his potential victims.”

According to the allegations contained in the Indictment filed on July 28, 2021, and unsealed today[1]:

CONCEPCION was a music teacher and orchestra instructor at a public charter middle school located in the Bronx, New York (“School-1”), from in or about 2000 up to and including in or about 2007.  CONCEPCION lured four of his students at School-1 into sexual relationships (“Minor Victim-1,” “Minor Victim-2,” “Minor Victim-3,” and “Minor Victim-4,” and together the “Minor Victims”).  The Minor Victims were as young as 12 years old at the time of the abuse.

From at least in or about 2002 through at least in or about 2007, CONCEPCION singled out the Minor Victims for personal attention.  He gave them money, clothing, jewelry, and other gifts, and he provided them with alcohol.  He told several of the Minor Victims that they were in romantic relationships with him and provided each of the Minor Victims with a cellphone so that they could communicate with him without their parents’ knowledge. CONCEPCION used the cellphones he provided and other devices to maintain his “relationships” with the Minor Victims and to arrange sexual encounters.

CONCEPCION engaged in sexual intercourse with the Minor Victims in various locations, including in School-1’s music room, in the back room of School-1’s auditorium, in his car, at motels, at his residences, and, after some of the Minor Victims left School-1, at their out-of-state high schools.  On numerous occasions, CONCEPCION brought the Minor Victims from School-1 or other locations in the Bronx to motels in New Jersey.  On at least one occasion, CONCEPCION had sexual intercourse with Minor Victim-3 in a New Jersey motel against her will.

CONCEPCION also instructed Minor Victim-3 to take naked photographs of herself and to send them to him.  CONCEPCION directed Minor Victim-3 how to pose, to touch herself in a sexually explicit manner, and to photograph her genitalia. CONCEPCION also attempted to induce another one of the Minor Victims, Minor Victim-4, to take sexually explicit photographs. When Minor Victim-4 resisted, CONCEPCION showed Minor Victim-4 the photographs sent to him by Minor Victim-3 and told Minor Victim-4 that these were the sort of photographs CONCEPCION sought.

*                *                *

CONCEPCION, 48, of Simpsonville, South Carolina, is charged with four counts of enticing a minor to engage in illegal sexual activity and four counts of transporting a minor to engage in illegal sexual activity, each of which carry a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison.  CONCEPCION also is charged with inducing a minor to produce child pornography, which carries a mandatory minimum sentence of 15 years in prison and a maximum sentence of life in prison. 

The statutory minimum and maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Ms. Strauss praised the efforts of FBI and the New York City Police Department (“NYPD”) for their outstanding work in this matter, particularly the FBI-NYPD New York Child Exploitation and Human Trafficking Task Force.  She also thanked the FBI’s Charlotte Office and U.S. Customs and Border Protection for their assistance.  She added that the investigation is ongoing.             

Any individuals who believe they have information that may be relevant to this investigation should contact FBI at 1-800-CALL-FBI or https://tips.fbi.gov/.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Elinor L. Tarlow and Camille L. Fletcher are in charge of the prosecution. 

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[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth in this release constitute only allegations, and every fact described should be treated as an allegation.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that a jury returned a guilty verdict Friday against KASHEEN SAMUELS, a/k/a “Kash,” a/k/a “JR,” on five counts, including charges relating to the felony murder of Andrew Torres during an armed robbery, as well as other charges relating to robbery, robbery conspiracy, and narcotics conspiracy.  U.S. District Judge Edgardo Ramos presided over the 9-day trial.

U.S. Attorney Audrey Strauss said: “Kasheen Samuels planned and carried out dangerous gunpoint robberies for years.  He spread addiction in our communities by selling crack cocaine and heroin.  A young man was shot and killed during one of his robberies, and Kasheen Samuels now stands convicted of that murder by a unanimous jury.  We will continue our work with law enforcement partners to vigorously prosecute gun violence and drug trafficking crimes, and to pursue justice for the victims of violent crimes.”

According to the Superseding Indictment and the evidence at trial:

In June 2017, Kasheen Samuels and others conspired to rob a man of money and jewelry in the Bronx, New York and Middlesex County, New Jersey. The robbery took place in a New Jersey hotel, during which a young man was shot and killed. SAMUELS assisted in planning the robbery, provided a gun that was used during the robbery, and obtained jewelry stolen from one of the victims.

In addition, during April 2016, SAMUELS and others conspired to steal drug-trafficking proceeds near an autobody shop in the Bronx.  SAMUELS also conspired to distribute large quantities of heroin and crack cocaine in the Bronx and Burlington, Vermont, from 2015 to 2018. 

*                      *                      *

SAMUELS, 34, was convicted of conspiracy to commit robbery in April 2016, which carries a maximum prison term of twenty years; conspiracy to commit robbery in June 2017, which carries a maximum prison term of twenty years; robbery on June 21, 2017, which carries a maximum prison term of twenty years; murder through the use of a firearm on June 21, 2017, which carries a mandatory consecutive prison term of five years and a maximum prison term of life; and conspiring to distribute and possess with intent to distribute crack cocaine and heroin, which carries a mandatory minimum prison term of ten years and a maximum prison term of life.  SAMUELS was acquitted of one count of attempted robbery in April 2016 and one count of using a firearm in connection with that attempted robbery.

The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

Ms. Strauss praised the outstanding work of the Special Agents of the U.S. Attorney’s Office.  Ms. Strauss also thanked the Middlesex County Prosecutor’s Office of New Jersey, the Drug Enforcement Administration, the Federal Bureau of Investigation, the New York State Police, the Burlington Police Department, the New York City Police Department, and the Yonkers Police Department for their assistance.

The case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Jessica K. Fender, Mollie Bracewell, Christopher Brumwell, and Jason Swergold, and paralegal specialist Christopher Sykes, are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, Jacqueline Maguire, the Acting Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Dermot Shea, Police Commissioner of the City of New York (“NYPD”), announced the arrests of PHYO HEIN HTUT and YE HEIN ZAW for conspiracy to assault and make a violent attack upon Myanmar’s Permanent Representative to the United Nations.  HTUT and ZAW were charged in two separate complaints and will be presented later today in the U.S. District Court in White Plains before U.S. Magistrate Judge Andrew E. Krause.

U.S. Attorney Audrey Strauss said: “As alleged, Phyo Hein Htut and Ye Hein Zaw plotted to seriously injure or kill Myanmar’s ambassador to the United Nations in a planned attack on a foreign official that was to take place on American soil.  We commend the tireless work of our law enforcement partners at all levels of government to ensure the safety of foreign diplomats and officials.”

FBI Acting Assistant Director Jacqueline Maguire said: “Time was of the essence when we received information about a threat to Myanmar’s Ambassador to the United Nations.  I would like to thank our Westchester Safe Streets Task Force and each of our partner law enforcement agencies that worked quickly and diligently to track down the men allegedly hired in this plot to harm and potentially kill a foreign diplomat on U.S. soil.  Our laws apply to everyone in our country, and these men will now face the consequences of allegedly breaking those laws.”  

NYPD Commissioner Dermot Shea said: “As alleged in today’s federal charges, these defendants reached across borders and oceans in designing a violent plot against an international leader on United States soil.  But our NYPD investigators and prosecutors from the United States Attorney’s Office in the Southern District of New York worked relentlessly with our law enforcement partners to bring them to justice before any harm could be done.”     

According to the allegations in the two Complaints filed today[1]:

Between at least in or about July 2021 through at least on or about August 5, 2021, HTUT and ZAW, citizens of Myanmar currently residing in New York, conspired to injure or kill Myanmar’s Permanent Representative to the United Nations (the “Ambassador”).  During the conspiracy, HTUT communicated with an arms dealer in Thailand (the “Arms Dealer”) who sells weapons to the Burmese military, which overthrew Myanmar’s civilian government in or about February 2021.  In the course of those conversations, HTUT and the Arms Dealer agreed on a plan in which HTUT would hire attackers to hurt the Ambassador in an attempt to force the Ambassador to step down from his post.  If the Ambassador did not step down, then the Arms Dealer proposed that the attackers hired by HTUT would kill the Ambassador.

Shortly after agreeing on the plan, ZAW contacted HTUT by cellphone and transferred approximately $4,000 to HTUT through a money transfer app as an advance payment on the plot to attack the Ambassador.  Later, during a recorded phone conversation with ZAW, HTUT discussed how the planned attackers would require an additional $1,000 to conduct the attack on the Ambassador in Westchester County, and for an additional payment the attackers could, in substance, “finish off” the Ambassador.  In response, ZAW agreed, in substance, to pay the additional $1,000 and to try to obtain the additional money.

HTUT, 28, and ZAW, 20, both citizens of Myanmar, are each charged in separate complaints with one count of conspiracy to assault and make a violent attack upon a foreign official, which carries a maximum sentence of five years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Ms. Strauss praised the outstanding investigative work of the FBI’s Westchester Safe Streets Task Force, which comprises special agents and task force officers from the FBI, NYPD, United States Probation Office, New York State Police, New York State Department of Corrections and Community Supervision, Westchester County Department of Public Safety, Westchester County District Attorney’s Office, Putnam County Sheriff’s Office, and the police departments of Yonkers, Mount Vernon, New Rochelle, Greenburgh, White Plains, Peekskill, Ramapo, and Clarkstown.  Ms. Strauss also thanked the Pelham Manor Police Department and the U.S. Department of State’s Diplomatic Security Service for their assistance in the investigation.

Ms. Strauss said that the investigation is ongoing, and asked any individuals with relevant information to contact the FBI at (800)-CALL-FBI.

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

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

---

[1] As the introductory phrase signifies, the entirety of the texts of the Complaints and the description of the Complaints set forth in this release constitute only allegations, and every fact described should be treated as an allegation.

Audrey Strauss, the United States Attorney for the Southern District of New York, Jacqueline Maguire, the Acting Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Thomas Fattorusso, Acting Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced that TOUREY AHMED RUFAI, a/k/a “Joe Thompson,” a/k/a “Joe Terry,” a/k/a “Rufai A Tourey,” a/k/a “Ahmed Rufai Tourey,” who was previously sentenced to four years in prison and fled to the Republic of Ghana (“Ghana”) prior to surrendering to serve his sentence, was arrested in Ghana on April 14, 2021, and extradited to the United States earlier today to serve his sentence.  RUFAI’s sentence of four years was imposed by U.S. District Judge Denise L. Cote on April 12, 2019, in connection with RUFAI’s participation in a fraud scheme based in Ghana involving the theft of over $10 million through business email compromises and romance scams that targeted elderly victims from at least 2014 through 2018.

Manhattan U.S. Attorney Audrey Strauss said:  “When a defendant released on bail like Tourey Ahmed Rufai cuts his ankle bracelet and flees the country, it is an affront to the victims of his crimes and the Court.  Thanks to the extraordinary work of the FBI, IRS-CI, and our law enforcement partners both in the United States and in Ghana, this fugitive was apprehended in Ghana and has been returned to the United States to serve his four-year sentence.”  

FBI Acting Assistant Director Jacqueline Maguire said:  “Justice will now rightfully be delivered – both to Mr. Rufai as he serves his prison sentence, and to the innocent victims from whom he stole millions of dollars. When Mr. Rufai decided to cut off his ankle bracelet and flee the United States, he did not understand the FBI’s ability to find fugitives in foreign nations through our extraordinary international law enforcement partnerships. We thank everyone involved, and especially our IRS-CI colleagues and our Ghanaian partners, in ensuring Mr. Rufai will be held accountable for his crimes.”

IRS-CI Acting Special Agent in Charge Thomas Fattorusso said: “This extradition reflects that despite his best efforts, Tourey Ahmed Rufai could not outrun justice, even after two years on the run, and by fleeing to another continent.  Tourey Ahmed Rufai perpetrated an elaborate scheme driven by insatiable greed and a blatant disregard for the tremendous damage inflicted on innocent victims.  He will now rightfully serve out the prison term as originally handed down.”

According to court filings in Manhattan Federal Court:

Between 2014 and 2018, RUFAI, a Ghanaian national who was residing in the Bronx, New York, was a member of a criminal enterprise (the “Enterprise”) based in Ghana that was involved in defrauding more than 100 American businesses and individuals of more than $10 million through business email compromises and romance scams.  RUFAI and his co-conspirators received or otherwise directed the receipt of millions of dollars in fraud proceeds from victims of the Enterprise in bank accounts that they controlled in the Bronx, New York.  Some of these bank accounts were opened using fake names, stolen identities, or shell companies in order to avoid detection and hide the true identities of the members of the Enterprise controlling those accounts.  Once the defendants received the fraud proceeds in bank accounts under their control, the defendants withdrew, transported, and laundered those fraud proceeds to other members of the Enterprise, including those located in Ghana.     

RUFAI was released on bail shortly after his arrest on January 9, 2018, on conditions including a $150,000 bond co-signed by three individuals, surrender of all travel documents, and home detention with electronic monitoring through an ankle bracelet.  At his sentencing on April 12, 2019, RUFAI was sentenced to four years in prison and ordered to self-surrender to prison on May 24, 2019.  Then, on May 12, 2019, 12 days prior to his surrender date, U.S. Pretrial Services learned that the defendant’s ankle bracelet had been removed and that the defendant had fled.  A bench warrant was thereafter issued for the defendant’s arrest.

On April 14, 2021, after the defendant’s bond was forfeited, the defendant was arrested in Ghana pending his extradition to the United States to serve his sentence.  

*                *                *

RUFAI, 33, of the Bronx, New York, pled guilty to conspiracy to commit wire fraud on  January 9, 2019.  In addition to a prison term of four years, he was also sentenced to three years of supervised release and ordered to forfeit $109,868.61 and pay restitution of $320,449.97 to victims. 

Ms. Strauss praised the outstanding investigative work of the FBI and IRS-CI in locating RUFAI in Ghana so that he could be arrested by Ghanaian law enforcement.  Ms. Strauss also thanked the FBI Legal Attaché in Accra, Ghana, U.S. Customs and Border Protection, the Department of Justice’s Office of International Affairs of the Department’s Criminal Division, the U.S. Marshals Service, Ghana’s Economic and Organised Crime Office, Interpol - Ghana Police Service’s Criminal Investigative Division, Ghana National Security, and the Ministry of Justice & Attorney General’s Office of Ghana, for their assistance in the extradition of RUFAI to the United States.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorney Sagar K. Ravi is in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that a jury returned a guilty verdict yesterday against SYDNEY SCALES, a/k/a “Moe Black,” a/k/a “Sid,” on five counts in a Superseding Indictment, including charges of murder-for-hire conspiracy, narcotics conspiracy, a firearms offense, and two counts of distributing crack cocaine.  SCALES is scheduled to be sentenced on November 18, 2021, by U.S. District Judge Jed S. Rakoff, who presided over the 11-day trial. 

U.S. Attorney Audrey Strauss said: “Sydney Scales was the leader of a violent drug operation that peddled drugs and brought guns and violence to our streets.  Scales caused at least one drug-related shooting, and he hired a hitman in an attempt to murder rival drug dealers who were having a barbecue in front of a neighborhood barbershop.  We continue our daily work with our law enforcement partners to keep our communities safe by vigorously investigating and prosecuting acts of violence and drug trafficking.”

According to the Superseding Indictment and the evidence at trial:

Between in or about 2016 and in or about 2019, SCALES participated in a conspiracy to distribute crack cocaine, powder cocaine, heroin, fentanyl, and marijuana in the Bronx and elsewhere.  SCALES also used, carried, and possessed firearms, which were brandished and discharged, in connection with the narcotics conspiracy, and aided and abetted such firearms offenses.  For example, the Government offered evidence that on December 1, 2016, SCALES caused a shooting at rival drug dealers standing in front of a convenience store located next to the entrance of the West Farms subway station.

In addition, in or about June 2017, SCALES conspired to commit murder for hire, agreeing to compensate another individual in return for locating and killing at least one rival drug dealer. 

*                      *                      *

SCALES, 42, was convicted on five counts: (1) conspiring to distribute and possess with intent to distribute crack cocaine, powder cocaine, heroin, fentanyl, and marijuana, which carries a mandatory minimum prison term of 10 years and a maximum prison term of life; (2) murder-for-hire conspiracy, which carries a maximum prison term of 10 years; (3) using and carrying firearms during, and possessing firearms in furtherance of, the narcotics conspiracy, which carries a mandatory consecutive prison term of 10 years and a maximum prison term of life; and (4) two counts of distribution and possession with intent to distribute crack cocaine, each of which carries a maximum prison term of 20 years.  SCALES was acquitted of one count of murder in furtherance of drug trafficking and one count of murder using a firearm.

The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

Ms. Strauss praised the outstanding investigative work of Homeland Security Investigations and the New York City Police Department.

The case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Frank Balsamello, Mathew Andrews, Andrew K. Chan, Sarah Krissoff, and Gina Castellano, and paralegal specialist Claudia Hernandez, are in charge of the prosecution.            

Audrey Strauss, the United States Attorney for the Southern District of New York, announced today that WILLIAM VAZQUEZ-BAEZ, a former member of the Puerto Rico Police Department (“PRPD”), pled guilty today in Manhattan federal court in connection with his years of corrupt assistance to a criminal enterprise known as La Organización de Narcotraficantes Unidos (“La ONU”), including his participation in the May 9, 2007, murder of Anthony Castro-Carrillo in Carolina, Puerto Rico.  U.S. District Judge Jesse M. Furman accepted the defendant’s guilty plea.

U.S. Attorney Audrey Strauss said: “William Vazquez-Baez perverted his official position for personal gain, and in so doing brought deadly violence into the homes of the very people he was sworn to protect.  Today’s plea represents a milestone in holding Vazquez-Baez responsible for the cold-blooded, murderous violence he wrought.”

According to the allegations in the Information and other filings and statements made in court:

From approximately 1994 until his arrest in connection with this case in May 2017, VAZQUEZ-BAEZ was an active police officer with the PRPD.  From in or about 2004 until in or about 2016, members of La ONU shipped thousands of kilograms of cocaine from Puerto Rico to New York, including cocaine that was then distributed out of a Bronx daycare center, and protected their territory and trade through numerous acts of violence.  Members of La ONU paid VAZQUEZ-BAEZ a salary to corruptly use his position as a police officer to further the interests of La ONU.  For example, VAZQUEZ-BAEZ provided narcotics and intelligence, including information obtained from the police narcotics unit.  Members of La ONU would also contact VAZQUEZ-BAEZ, among others, when transporting large quantities of cocaine within the San Juan, Puerto Rico, area to ensure the shipment avoided areas of police activity.  VAZQUEZ-BAEZ also distributed payments to other corrupt police officers who assisted La ONU.

VAZQUEZ-BAEZ also assisted La ONU in acts of violence:

In or about 2006 or 2007, VAZQUEZ-BAEZ alerted La ONU members that Freddy Mendez-Rivera, a local resident, had complained to police about drug dealing occurring in his neighborhood, which led to members of La ONU kidnapping and then killing Mendez-Rivera.  Around the same time, VAZQUEZ-BAEZ alerted a senior member of La ONU that the kidnapping was being reported over the police radio.  VAZQUEZ-BAEZ advised that, because the fact that Mendez-Rivera had spoken with the police was known throughout the Carolina Narcotics division, it was important that the body never be discovered.  When later updated about what had happened, VAZQUEZ-BAEZ laughed and remarked, in substance, that Mendez-Rivera would not be giving the police information any further.

On or about May 9, 2007, members of La ONU hired VAZQUEZ-BAEZ to participate in the murder of Anthony Castro-Carrillo in Carolina, Puerto Rico, in exchange for a cash bonus.  VAZQUEZ-BAEZ and members of La ONU stormed Castro-Carrillo’s residence while dressed as police officers and shot and killed him.

In or about 2007, VAZQUEZ-BAEZ delivered a confidential informant, who was in VAZQUEZ-BAEZ’s custody, to members of La ONU, who pretended to be other police officers. Those members of La ONU then shot and killed the informant.           

*                *                *

VAZQUEZ-BAEZ, 52, pled guilty to one count of racketeering conspiracy, in violation of 18 U.S.C. § 1962(d), which carries a maximum penalty of 20 years in prison, and one count of conspiracy to commit murder for hire, in violation of 18 U.S.C. § 1958, which carries a maximum penalty of 10 years in prison.  The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

VAZQUEZ-BAEZ is scheduled to be sentenced before Judge Furman on December 2, 2021, at 3:00 p.m.

Ms. Strauss praised the investigative work of the U.S. Postal Inspection Service, the Drug Enforcement Administration, the Bureau of Alcohol, Tobacco, Firearms and Explosives, and the New York City Police Department.  Ms. Strauss also thanked the United States Attorney’s Office in the District of Puerto Rico and the Puerto Rico Police Department for their support in this ongoing investigation. 

The prosecution is being handled by the Office’s Violent and Organized Crime Unit.   Assistant U.S. Attorneys Lara Pomerantz, Justin Rodriguez, and Andrew Thomas are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced today that SALLY SPINOSA pled guilty in Manhattan federal court to one count of theft of public money related to her false application for benefits related to the attack on New York on September 11, 2001.  SPINOSA pled guilty before U.S. District Judge Paul A. Engelmayer.

U.S. Attorney Audrey Strauss said:  “As she has now admitted, Sally Spinosa stole money for programs intended to benefit the brave men and women of the NYPD, and first-responders across the city, who were injured in the rescue and recovery efforts following September 11, 2001.  She did so by repeatedly lying about the time she spent in the rescue and recovery effort, and will now face the consequences of such brazen lies.”

According to the allegations in the Complaint, court filings, and statements during court proceedings:

Following the attacks on New York and Washington, D.C., on September 11, 2001, Congress created certain programs to provide monetary compensation and medical treatment for victims of the attacks.  Specifically, Congress created the September 11th Victim Compensation Fund (the “VCF”) to provide compensation for any individual who suffered physical harm or was killed as a result of either the September 11th attacks or the debris removal and recovery efforts that took place in the immediate aftermath of the attacks.  Congress also created the World Trade Center Health Program (“WTCHP”) to provide, among other things, monitoring and medical treatment benefits for individuals who have or may develop health conditions due to exposure at disaster or recovery sites tied to the September 11th attacks.  Both the VCF and the WTCHP are funded by Congress.  An individual can be deemed eligible for a VCF award either by submitting medical documents and proof-of-presence documents directly to the VCF, or by going through the WTCHP’s process for having a medical condition certified.

SALLY SPINOSA served as an NYPD officer from in or about July 1986 until July 2019, and was a sergeant in the investigations unit of the NYPD’s Patrol Services Bureau of Staten Island (the “Staten Island Investigations Unit”) on September 11, 2001.  In 2010, SPINOSA participated in a screening interview with the WTCHP in which she falsely stated that she worked for hundreds of hours at the Fresh Kills Landfill in Staten Island, New York (the “Landfill”), from September 2001 to June 2002.  Similarly, in 2014, SPINOSA applied for a monetary award from the VCF, falsely claiming that she was at the Landfill for two hours each day for 62 straight days from September 20, 2001, to November 20, 2001.  In support of her application, SPINOSA submitted proof-of-presence documents, including an affidavit purportedly signed by one of her supervisors at the Staten Island Investigations Unit (“Officer-1”) stating that Officer-1 frequently visited the Landfill with SPINOSA to supervise subordinates (the “Officer-1 Affidavit”).

However, contrary to SPINOSA’s representations to the WTCHP and the VCF, in fact SPINOSA spent little to no time at the Landfill.  Indeed, during much of the time SPINOSA claimed to be working at the Landfill, SPINOSA was pregnant and doing limited work outside the Staten Island Investigations Unit’s offices, or was out of the office entirely on parental leave. Moreover, the Officer-1 Affidavit that SPINOSA submitted in support of her VCF application was fraudulent and was never signed by Officer-1.  

Nevertheless, and based on her false and fraudulent misrepresentations, in or around 2017 the WTCHP granted her benefits.  The WTCHP has since paid for certain medical visits and prescription drugs for SPINOSA.  While SPINOSA’s original fraudulent application to the VCF was denied in 2014, she reapplied in 2017 and 2018 relying on the same false and fraudulent information.  SPINOSA’s VCF claim remains pending.

*                *                *

SPINOSA, 55, of Freehold, New Jersey, pled guilty to one count of theft of public money, which carries a maximum penalty of 10 years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as the defendant’s sentence will be determined by the judge.

SPINOSA is scheduled to be sentenced by Judge Engelmayer on December 1, 2021, at 10:30 a.m.

Ms. Strauss praised the investigative work of the NYPD’s Internal Affairs Bureau and DOJ-OIG.

This case is being handled by the Office’s Public Corruption Unit.  Assistant United States Attorneys Kedar S. Bhatia and Catherine E. Ghosh are in charge of the prosecution.

Deputy Attorney General Lisa O. Monaco joined Audrey Strauss, the United States Attorney for the Southern District of New York, John B. DeVito, Special Agent in Charge of the New York Field Division of the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), and Dermot Shea, Police Commissioner for the City of New York (“NYPD”), for the announcement today of a third superseding indictment charging JAMES THOMAS, a/k/a “Spazz,” DUVAUGHN WILSON, a/k/a “Dupree,” COURTNEY SCHLOSS, a/k/a “Bway,” a/k/a “Balenci,” KEN ALEXANDER, a/k/a “Ryu,” ARGAM TAJ, a/k/a “Sour,” SAMUEL TAJ, a/k/a “Sosa,” CHRISTOPHER MACHADO, a/k/a “Chris Elite,” HARLIE RAMOS, a/k/a “White Girl,” and JAMEL THOMAS, a/k/a “Mel,” with conspiracy to commit gun trafficking and gun trafficking, in connection with their involvement in a scheme to illegally transport firearms from Georgia for resale to residents of New York.  THOMAS, WILSON, and SCHLOSS were also charged with interstate travel with intent to engage in gun trafficking.  This case is assigned to United States District Judge Sidney H. Stein.

JAMEL THOMAS and ARGAM TAJ were arrested this morning in SDNY and will be presented before U.S. Magistrate Judge Robert W. Lehrburger later today.  KEN ALEXANDER was arrested this morning in the District of Massachusetts and will be presented before a magistrate judge in Boston later today.  WILSON, SCHLOSS, and JAMES THOMAS were previously charged; SCHLOSS and JAMES THOMAS are currently in custody.  HARLIE RAMOS, SAMUEL TAJ, and CHRISTOPHER MACHADO remain at large.

Manhattan U.S. Attorney Audrey Strauss said: “Today’s arrests shut down the alleged gun pipeline of these nine defendants.  These arrests should also send a message to anyone who is thinking about illegally selling guns to New Yorkers or illegally bringing guns to New York: We and our law enforcement partners are watching.  And we will prosecute gun traffickers to the fullest extent of the law.” 

ATF Special Agent in Charge John B. DeVito said: “The individuals named in the indictment are alleged to have participated in a trafficking scheme which flooded our New York City Streets with illegal firearms. Combatting firearms trafficking lies at the heart of ATF’s strategy to stop violent gun crime.  Exploitation of Crime Gun Intelligence along with effective collaboration with our law enforcement partners will allow us to disrupt and dismantle groups such as this that in turn fuel the violence in our communities.  I would like to thank the New York Police Department for their partnership on this case and the United States Attorney’s Office for their leadership.”

Police Commissioner Dermot Shea said: “The NYPD continues to work closely with our law enforcement partners to drive down gun violence and stop the trafficking of illegal firearms in New York City. I commend the work of the investigators and prosecutors whose hard work resulted in these arrests, firearms seizures, and indictment.”

According to the allegations in the Superseding Indictment unsealed today in Manhattan federal court:[1]

From at least in or around August 2020 up to and including April 2021, the defendants used Georgia resident DUVAUGHN WILSON, a/k/a “Dupree,” as a straw purchaser to buy at least 87 firearms from at least six federal firearms licensees (“FFLs”) in Georgia.  Over the course of the scheme, during which WILSON completed approximately 30 different transactions, WILSON attested that he was the true purchaser of the firearms, when in fact he was buying the guns on behalf of the defendants, who in turn illegally resold many of the guns to others.

Prior to purchases, the defendants coordinated with WILSON to place orders for specific firearms and pay for the weapons using cash, mobile banking applications, and through wire payments.  When communicating about the firearms, the defendants used coded language, referring to the weapons as “tvs,” “knocks,” and “situations.”  In some instances, the defendants referred to the caliber or model of a firearm by referencing the jersey numbers of famous athletes.

After purchasing the weapons, WILSON transferred the firearms to defendants JAMES THOMAS, a/k/a “Spazz,” COURTNEY SCHLOSS, a/k/a “Bway” a/k/a “Balenci,” and others who (i) sold some of the guns in Georgia and (ii) transported other firearms, primarily by bus, to New York for resale.  In many instances, the guns were transferred to members of the Brooklyn-based “Blixky Gang” – a group composed primarily of aspiring rappers.  Some of these guns later appeared in music videos filmed by members of the Blixky Gang.  The videos, which include some of the defendants charged today, show Blixky Gang members brandishing loaded firearms and displaying stacks of cash.

On some occasions, law enforcement successfully interdicted firearms being transported by the defendants before they reached New York.  For example, in November 2020, law enforcement in South Carolina stopped a bus in Wellford, South Carolina, from which they seized five firearms, four pistol magazines, a high capacity .40 caliber magazine, and a nine-millimeter drum magazine – all of which were being transported by the defendants in a single backpack.

Law enforcement in New York City seized other firearms purchased in Georgia by WILSON.  On at least two occasions, in the wake of violent crimes, the NYPD seized firearms trafficked to New York as part of this scheme.  As alleged, in February 2021, the NYPD seized a gun that WILSON had bought after a fleeing suspect discharged it at responding officers in the Bronx.  And in April 2021, following a shooting in the Bronx, the NYPD seized another pistol purchased by WILSON.

To date, law enforcement authorities across numerous jurisdictions have recovered a total of 18 firearms purchased by WILSON in the course of the scheme.

A chart containing the names, charges, and maximum and minimum penalties for the defendants is set forth below.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Ms. Strauss praised the outstanding investigative work of the ATF and the New York City Police Department.  Ms. Strauss thanked Lisa O. Monaco, the Deputy Attorney General of the United States, for the Department of Justice’s support and leadership in the area of gun trafficking.  Ms. Strauss also thanked local law enforcement partners as well as those in Georgia, Virginia, Pennsylvania, and South Carolina, including the ATF’s Greenville Field Office, Boston Field Division, and Atlanta Field Division; the Manhattan District Attorney’s Office; the New York/New Jersey Regional Fugitive Task Force; the Duncan Police Department, Wellford Police Department, and Spartanburg County Sheriff’s Office in South Carolina; the Clayton County Sherriff’s Office in Georgia; the Rockingham County Sherriff’s Office and Virginia State Police in Virginia; the Pennsylvania State Police; the United States Marshals Service; and the United States Attorney’s Offices in the Eastern District of New York, the Northern District of Georgia, the District of South Carolina, and the District of Massachusetts.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Ashley C. Nicolas and Matthew J. King are in charge of the prosecution.

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

Count

Charge

Defendants

Max. Penalty

1

Conspiracy to Commit (i) Gun Trafficking, and (ii) Illegal Transportation or Receipt in State of Residency of Firearm Purchased or Acquired Outside of State of Residency

JAMES THOMAS, a/k/a “Spazz,”

 

DUVAUGHN WILSON,

 a/k/a “Dupree,”

 

COURTNEY SCHLOSS, a/k/a “Bway,” a/k/a “Balenci,”

 

KEN ALEXANDER, a/k/a “Ryu,”

 

ARGAM TAJ, a/k/a “Sour,”

 

 SAMUEL TAJ, a/k/a “Sosa,”

 

CHRISTOPHER MACHADO, a/k/a “Chris Elite,”

 

HARLIE RAMOS, a/k/a “White Girl,”

 

JAMEL THOMAS, a/k/a “Mel”

 

Five years

2

Gun Trafficking

JAMES THOMAS, a/k/a “Spazz,”

 

DUVAUGHN WILSON,

 a/k/a “Dupree,”

 

COURTNEY SCHLOSS, a/k/a “Bway,” a/k/a “Balenci,”

 

KEN ALEXANDER, a/k/a “Ryu,”

 

ARGAM TAJ, a/k/a “Sour,”

 

 SAMUEL TAJ, a/k/a “Sosa,”

 

CHRISTOPHER MACHADO, a/k/a “Chris Elite,”

 

HARLIE RAMOS, a/k/a “White Girl,”

 

JAMEL THOMAS, a/k/a “Mel”

Five years

3

Interstate Travel With Intent to Engage in Gun Trafficking

JAMES THOMAS, a/k/a “Spazz,”

 

DUVAUGHN WILSON,

 a/k/a “Dupree,”

 

COURTNEY SCHLOSS, a/k/a “Bway,” a/k/a “Balenci,”

10 years

 

 

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[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth in this release constitute only allegations, and every fact described should be treated as an allegation.

Audrey Strauss, the United States Attorney for the Southern District of New York, Stuart M. Goldberg, Acting Deputy Assistant Attorney General of the Justice Department’s Tax Division, and James C. Lee, Chief of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today that Bank of N.T. Butterfield & Son Limited (“BUTTERFIELD”) entered into a non-prosecution agreement (“NPA”) with the U.S. Attorney’s Office and agreed to pay $5.6 million to the United States for assisting U.S. taxpayer-clients in opening and maintaining undeclared foreign bank accounts from 2001 through 2013.  The NPA was based on BUTTERFIELD’s extraordinary cooperation, including its efforts in providing 386 client files for non-compliant U.S. taxpayer-clients, and provides that BUTTERFIELD will not be criminally prosecuted.  The NPA requires BUTTERFIELD to forfeit $4.896 million to the United States, representing certain fees that it earned by assisting its U.S. taxpayer-clients in opening and maintaining these undeclared accounts, and to pay $704,000 in restitution to the IRS, representing the approximate unpaid taxes arising from the tax evasion by BUTTERFIELD’s U.S. taxpayer-clients.

Manhattan U.S. Attorney Audrey Strauss said: “Butterfield admits to helping its clients conceal their ownership of foreign bank accounts to avoid their U.S. tax obligations.  Butterfield allowed its U.S. clients to use sham entities that assisted those U.S. clients in funneling money between U.S.- and Cayman Islands-based accounts.  The resolution of this matter through a non-prosecution agreement, along with forfeiture and restitution, reflects Butterfield’s cooperation in our investigation and demonstrates that cooperation, including assistance in providing U.S. taxpayer client files, has tangible benefits.  We will continue to pursue financial services firms around the world that help their clients evade U.S. taxes.”

Acting Deputy Assistant Attorney General Stuart M. Goldberg said: “As part of the resolution announced today, Butterfield has facilitated the production of approximately 386 unredacted client files.  Taxpayers contemplating hiding money offshore and those who would facilitate their fraud should take note – nothing remains hidden forever.”

IRS-CI Chief James C. Lee said: “As a result of the successful resolution of this investigation, Butterfield has agreed to turn over account files relating to U.S. taxpayer-clients who maintained undeclared assets overseas. This agreement marks yet another significant step forward in combating offshore tax evasion.  Anyone who is hiding money or assets offshore with the intent of committing tax evasion will be found and prosecuted. It’s not a matter of ‘if,’ it’s a matter of ‘when.’”

As part of the NPA, BUTTERFIELD admitted various facts concerning its wrongful conduct and the remedial measures that it took to cease that conduct.  Specifically, BUTTERFIELD admitted that it knew or should have known certain U.S. taxpayers were using their BUTTERFIELD accounts to evade their U.S. tax obligations, in violation of U.S. law.  BUTTERFIELD acknowledged that it helped certain U.S. taxpayer-clients conceal from the IRS their beneficial ownership of undeclared assets maintained in foreign bank accounts by: (i) maintaining undeclared accounts for U.S. taxpayer-clients that were held by sham entities – structures that had no legitimate business purpose – even though Bank personnel knew, or should have known, that the entities were being used to conceal the identities of the true account owners; and (ii) opening accounts and facilitating the transfer of funds for U.S. taxpayer-clients despite obvious red flags that the U.S. clients were using the accounts to maintain undeclared assets or commit tax evasion.

The NPA recognizes that, in 2013, BUTTERFIELD implemented a series of remedial measures to stop assisting U.S. taxpayers evading federal income taxes.  The NPA further recognizes BUTTERFIELD’s cooperation, including its efforts to facilitate the production of approximately 386 client files for non-compliant U.S. taxpayers, which included the identities of those U.S. taxpayers.

As part of the NPA, BUTTERFIELD has agreed to forfeit $4.896 million to the United States, representing the gross revenues from services that it provided to U.S. taxpayers with undeclared foreign bank accounts from 2001 through 2013.  In connection with this forfeiture, BUTTERFIELD has agreed not to contest a civil forfeiture action filed by the United States.

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

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

This investigation is being overseen by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorney Kiersten A. Fletcher is in charge of the matter.

A New York federal court today entered a judgment of forfeiture regarding the M/T Courageous, a 2,734-ton oil-products tanker used to make illicit deliveries of petroleum products through ship-to-ship transfers with vessels flagged in the Democratic People’s Republic of Korea (DPRK or North Korea) and direct shipments to the North Korean port of Nampo.

According to court documents, payments to purchase the Courageous, to obtain oil for supplying to North Korea using the Courageous, and to procure necessary services for the Courageous were made using U.S. dollars through unwitting U.S. banks, in violation of U.S. law and United Nations Security Council resolutions. On April 23, 2021, a civil forfeiture action was filed against M/T Courageous. Criminal charges of conspiracy to evade economic sanctions on the DPRK and money laundering conspiracy are pending against the alleged owner and operator of the Courageous, Kwek Kee Seng, a Singaporean national who remains at large.

Pursuant to the International Emergency Economic Powers Act (IEEPA) and the North Korea Sanctions and Policy Enhancement Act of 2016 (NKSPEA), the DPRK and individuals or entities that the Department of the Treasury, Office of Foreign Assets Control (OFAC), has determined are involved in the facilitation of proliferation of weapons of mass destruction are prohibited from engaging in transactions with U.S. persons or using the U.S. financial system. The United Nations Security Council has similarly imposed economic sanctions on North Korea, prohibiting among other things the conduct of ship-to-ship transfers with DPRK-flagged vessels and the provision of petroleum products to the DPRK.

According to documents filed in the civil forfeiture action and allegations contained in the criminal complaint, Kwek and his co-conspirators engaged in an extensive scheme to evade these U.S. and U.N. sanctions by using vessels under their control to covertly transport fuel to North Korea, thereby providing a critical resource for the North Korean government and for DPRK-based companies. One of those vessels was M/T Courageous — formerly known as the Sea Prima — which was purchased by Kwek through front companies to further the scheme to evade sanctions and launder money. Among other things, for a four-month period between August and December 2019, M/T Courageous illicitly stopped transmitting information regarding its location, during which time satellite imagery shows that M/T Courageous both engaged in a ship-to-ship transfer of more than $1.5 million worth of oil to a North Korean ship, the Saebyol, which had been designated by OFAC, and traveled to the North Korean port of Nampo. Kwek and his co-conspirators allegedly took additional steps to hide the scheme by (1) operating a series of shell companies, (2) lying to international shipping authorities about M/T Courageous’s dealings with North Korea, and (3) falsely identifying M/T Courageous as another ship in order to evade detection.

In furtherance of the scheme, Kwek and his co-conspirators arranged for a variety of payments denominated in U.S. dollars that were processed through U.S.-based correspondent accounts to purchase oil – including more than $1.5 million to purchase the oil that was transferred to the Saebyol, over $500,000 to buy M/T Courageous, and thousands more dollars to procure necessary services for M/T Courageous and another vessel, including registration fees, ship materials, and salary payments for crewmembers. Kwek and his co-conspirators overseas sought to conceal these sanctions-evading transactions by, among other things, using front companies to disguise the nature of the transactions; disguising location information for vessels carrying illicit shipments; and conducting ship-to-ship fuel transfers on the open sea in an attempt to hide their counterparties, such as the Saebyol.

Cambodian authorities seized M/T Courageous in March 2020 and held the vessel pursuant to a U.S. seizure warrant, which was issued under seal on April 2, 2020. On April 23, 2021, the U.S. Attorney’s Office for the Southern District of New York filed a civil forfeiture complaint against M/T Courageous and the case was subsequently assigned to District Judge Hon. Valerie Caproni, who issued today’s judgment of forfeiture.

Acting Assistant Attorney General Mark J. Lesko of the Justice Department’s National Security Division, U.S. Attorney Audrey Strauss for the Southern District of New York and Assistant Director-in-Charge Michael J. Driscoll for the FBI’s New York Field Office made the announcement.

The FBI’s New York Field Office, Counterintelligence Division, is investigating the case, with valuable assistance provided by the FBI Legal Attaché Office in Phnom Penh, Cambodia; the Justice Department’s National Security Division, Counterintelligence and Export Control Section, Money Laundering and Asset Recovery Section’s Program Operations Unit, and Office of International Affairs; the U.S. Coast Guard; the Cambodian Ministry of Justice; and the Cambodian National Police.

Assistant U.S. Attorneys David W. Denton Jr. and Kimberly J. Ravener for the Southern District of New York and Trial Attorney Matthew McKenzie of the National Security Division’s Counterintelligence and Export Control Section are prosecuting the case.

An indictment is merely an allegation, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

Audrey Strauss, the United States Attorney for the Southern District of New York, Mark J. Lesko, the Acting Assistant Attorney General for National Security, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the entry of a judgment of forfeiture regarding the M/T Courageous, a 2,734-ton oil products tanker used to make illicit deliveries of petroleum products through ship-to-ship transfers with vessels flagged in the Democratic People’s Republic of Korea (“DPRK” or “North Korea”) and direct shipments to the North Korean port of Nampo.  Payments to purchase the Courageous, to obtain oil for supplying to North Korea using the Courageous, and to procure necessary services for the Courageous were made using U.S. dollars through unwitting U.S. banks, in violation of U.S. law and United Nations Security Council resolutions.  On April 23, 2021, a civil forfeiture action was filed against M/T Courageous.  Criminal charges of conspiracy to evade economic sanctions on the DPRK and money laundering conspiracy are pending against the alleged owner and operator of the Courageous, KWEK KEE SENG, a Singaporean national who remains at large.  U.S. District Judge Valerie E. Caproni issued today’s judgment of forfeiture. 

The M/T Courageous

M/T Courageous

Manhattan U.S. Attorney Audrey Strauss said:  “Today’s judgment reflects that the sanctions-evading ship, the Courageous, has been forfeited to the United States and will no longer be used to enable North Korea’s pattern of evading the global community’s prohibitions on support for that regime.  Thanks to the extraordinary cooperation between U.S. and Cambodian law enforcement authorities, the Courageous is permanently out of service.”

According to documents filed in the civil forfeiture action and the allegations contained in the criminal complaint filed against KWEK KEE SENG in Manhattan federal court:[1]

Pursuant to the International Emergency Economic Powers Act (“IEEPA”) and the North Korea Sanctions and Policy Enhancement Act of 2016 (“NKSPEA”), the DPRK and individuals or entities that the Department of the Treasury, Office of Foreign Assets Control (“OFAC”) has determined are involved in the facilitation of proliferation of weapons of mass destruction are prohibited from engaging in transactions with U.S. persons or using the U.S. financial system.  The United Nations Security Council has similarly imposed economic sanctions on North Korea, prohibiting among other things the conduct of ship-to-ship transfers with DPRK-flagged vessels and the provision of petroleum products to the DPRK.

KWEK and his co-conspirators engaged in an extensive scheme to evade these U.S. and U.N. sanctions by using vessels under their control to covertly transport fuel to North Korea, thereby providing a critical resource for the North Korean government and for DPRK-based companies.  One of those vessels was M/T Courageous – formerly known as the Sea Prima – which was purchased by KWEK through front companies in order to further KWEK and his co-conspirators’ scheme to evade sanctions and launder money.  Among other things, for a four-month period between August and December 2019, M/T Courageous illicitly stopped transmitting information regarding its location, during which time satellite imagery shows that M/T Courageous both engaged in a ship-to-ship transfer of more than $1.5 million worth of oil to a North Korean ship, the Saebyol, which had been designated by OFAC, and traveled to the North Korean port of Nampo.  KWEK and his co-conspirators took additional steps to hide the scheme by (1) operating a series of shell companies, (2) lying to international shipping authorities about M/T Courageous’s dealings with North Korea, and (3) falsely identifying M/T Courageous as another ship in order to evade detection.

In furtherance of the scheme, KWEK and his co-conspirators arranged for a variety of payments denominated in U.S. dollars that were processed through U.S.-based correspondent accounts to purchase oil – including more than $1.5 million to purchase the oil that was transferred to the Saebyol, over $500,000 to buy M/T Courageous, and thousands more dollars to procure necessary services for M/T Courageous and another vessel, including registration fees, ship materials, and salary payments for crewmembers.  KWEK and his co-conspirators overseas sought to conceal these sanctions-evading transactions by, among other things, using front companies to disguise the nature of the transactions; disguising location information for vessels carrying illicit shipments; and conducting ship-to-ship fuel transfers on the open sea in an attempt to hide their counterparties, such as the Saebyol. 

Cambodian authorities seized M/T Courageous in March of 2020, and held the vessel pursuant to a U.S. seizure warrant, which was issued under seal on April 2, 2020.  On April 23, 2021, the U.S. Attorney’s Office filed a civil forfeiture complaint against M/T Courageous and the case was subsequently assigned to Judge Caproni, who issued today’s judgment of forfeiture.

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Ms. Strauss praised the outstanding investigative work of the FBI and its New York Field Office, Counterintelligence Division.  Ms. Strauss also thanked the FBI Legal Attaché Office in Phnom Penh, Cambodia; the Department of Justice’s National Security Division, Counterintelligence and Export Control Section, Money Laundering and Asset Recovery Section’s Program Operations Unit, and Office of International Affairs; the United States Coast Guard; the Cambodian Ministry of Justice; and the Cambodian National Police, for their assistance.

The cases are being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys David W. Denton Jr. and Kimberly J. Ravener are in charge of the cases, with assistance from Trial Attorney Matthew McKenzie of the Counterintelligence and Export Control Section.

The charges in the complaint against KWEK are merely accusations, and KWEK is presumed innocent unless and until proven guilty.         

 

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[1] As the introductory phrase signifies, the entirety of the text of the criminal complaint filed against KWEK and the description of that complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation as against KWEK.

Audrey Strauss, the United States Attorney for the Southern District of New York, and Anne Milgram, Administrator of the U.S. Drug Enforcement Administration (“DEA”), announced today the extradition of Maulabaksh Gorgeech and Niamatullah Gorgeech for attempting to import heroin into the United States.  The defendants, both citizens of Pakistan, were taken into custody by Thai authorities in Bangkok, Thailand, on April 11, 2021, and extradited to the United States today from Thailand.  They will be presented before United States Magistrate Judge Sarah Netburn later today. 

U.S. Attorney Audrey Strauss said: “As alleged, Maulabaksh Gorgeech and Niamatullah Gorgeech trafficked in wholesale importation of heroin to the United States.  Thanks to the DEA’s global reach and the assistance of law enforcement authorities in Thailand, the defendants are in U.S. custody and facing serious federal charges.”           

DEA Administrator Anne Milgram said: “At a time when the United States is facing an opioid overdose epidemic of unprecedented proportions, it is critical that DEA stop the flow of heroin into the country before it makes its way to our communities.  Directly because of DEA’s efforts, Maulabaksh Gorgeech and Niamatullah Gorgeech are now on American soil, facing significant criminal charges for their alleged crimes.”

According to the allegations contained in the Complaints charging the defendants,[1] which were unsealed today in Manhattan federal court:

Beginning in late 2019, MAULABAKSH GORGEECH and NIAMATULLAH GORGEECH, Asia-based drug traffickers, began communicating and meeting with individuals whom they believed were heroin traffickers interested in purchasing multi-kilogram quantities of heroin for importation into the United States.  Those individuals were, in fact, confidential sources working at the DEA’s direction, and an undercover DEA agent posing as a New York-based heroin distributor.  In March 2019, NIAMATULLAH GORGEECH caused a sample of approximately seven kilograms of heroin to be delivered in Afghanistan, with the understanding that those drugs would be transported to and sold in the United States.  In July 2019, MAULABAKSH GORGEECH offered to provide as many as 100 kilograms of heroin for importation to the United States.  In September 2019, MAULABAKSH GORGEECH caused another sample of approximately seven kilograms of heroin to be delivered in Afghanistan, for importation and sale in the United States.  Following these sample shipments, MAULABAKSH GORGEECH and NIAMATULLAH GORGEECH planned to supply larger quantities of heroin for importation to and distribution within the United States.

*                *                *

MAULABAKSH GORGEECH, 43, and NIAMATULLAH GORGEECH, 37, each a citizen of Pakistan, are charged with one count of attempting to import heroin into the United States, and MAULABAKSH GORGEECH is also charged with a second count of conspiracy to import heroin into the United States.  Each count carries a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison.  The statutory minimum and maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.

Ms. Strauss praised the outstanding investigative efforts of the DEA’s Special Operations Division Bilateral Investigations Unit, and the OCDETF New York Strike Force; the DEA’s Bangkok, Islamabad, Kabul, and Bucharest Country Offices, and Guam Resident Office; the United States Central Command; U.S. Embassy in Bangkok’s Consul General’s Office and Diplomatic Security Service; the Royal Thai Government’s Office of the Attorney General - International Affairs Department, Royal Thai Police Narcotics Suppression Bureau - Sensitive Investigative Unit, and Ministry of Foreign Affairs; and the Australian Criminal Intelligence Commission.  Ms. Strauss also thanked the U.S. Department of Justice’s Office of International Affairs for its ongoing assistance.

This prosecution is part of an Organized Crime Drug Enforcement Task Forces (OCDETF) operation.  OCDETF funds investigations that identify, disrupt, and dismantle the highest-level criminal organizations that threaten the United States using a prosecutor-led, intelligence-driven, multi-agency approach.  Additional information about the OCDETF Program can be found at https://www.justice.gov/OCDETF.

The case is being prosecuted by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Kimberly J. Ravener and Benjamin Woodside Schrier are in charge of the prosecution.

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

 

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[1] As the introductory phrase signifies, the entirety of the text of the Complaints and the description of the Complaints set forth below constitute only allegations and every fact described should be treated as an allegation.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that CHUKWUEMEKA OKPARAEKE, a/k/a “Emeka,” was sentenced today to 180 months in prison for importing and trafficking fentanyl analogues and other synthetic opioids through the dark web.  OKPARAEKE previously pled guilty to distributing U-47700, a controlled substance analogue of AH-7921; importing 100 grams and more of acryl fentanyl, a controlled substance analogue of fentanyl, from Hong Kong; and making false statements to the Government regarding the proceeds of his offenses.  Through his guilty plea, OKPARAEKE admitted that in November 2016, he sold U-47700 to an 18-year-old individual (the “Victim”), who died from an overdose after using the drug.  OKPARAEKE further admitted that his narcotics offenses involved over 9 kilograms of acryl fentanyl, nearly 6 kilograms of U-47700, over a kilogram of furanyl fentanyl, as well as 12 grams of 4-ANPP.  OKPARAEKE was sentenced in White Plains federal court by U.S. District Judge Nelson S. Román, who previously accepted OKPARAEKE’s guilty plea. 

U.S. Attorney Audrey Strauss said: “Chukwuemeka Okparaeke previously admitted that he peddled highly addictive opioids over the darknet, including to an 18-year-old who died from them.  Okparaeke also lied to agents and prosecutors about the whereabouts of Bitcoins representing millions of dollars in poison-peddling proceeds.  Now Okparaeke will forfeit those proceeds and go to prison for his crimes.”

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

From at least July 2016 through March 2017, OKPARAEKE imported kilogram quantities of fentanyl analogues, including acryl fentanyl and furanyl fentanyl, and other synthetic opioids, including U-47700, from Hong Kong and China into the United States.  To transact with customers and coordinate his narcotics sales, OKPARAEKE used a darknet website known as AlphaBay Market (“AlphaBay”), accessible only through a special software program that allows users to mask their identities and anonymize their internet traffic.  Under the AlphaBay vendor name “Fentmaster,” OKPARAEKE engaged in more than 7,000 sales of synthetic opioids, which he shipped to customers throughout the United States using the U.S. Postal Service.  OKPARAEKE’s narcotics trafficking generated criminal proceeds of at least 680.60963624 Bitcoins, worth millions of dollars.

In November 2016, OKPARAEKE sold three grams of U-47700 to the Victim, an 18-year-old living in Vancouver, Washington, in an AlphaBay transaction.  The Victim used the drugs purchased from OKPARAEKE and died in a U-47700 overdose on November 10, 2016. 

OKPARAEKE – who attended medical school before he began selling synthetic opioids on AlphaBay – used extensive measures to conceal his identity, including software to encrypt his internet traffic and communications sent from his cellphone.  Using alter egos, he boasted online about his exploits as a darknet drug trafficker, offered advice to other drug dealers, and published a short story describing his criminal activities and his strategies for evading law enforcement.  In January 2017, Customs and Border Protection (“CBP”), in conjunction with Homeland Security Investigations (“HSI”) and United States Postal Inspection Service (“USPIS”), intercepted several packages containing kilogram quantities of fentanyl analogues that OKPARAEKE had imported from Hong Kong.  Subsequently, in March 2017, law enforcement searched a drug premises OKPARAEKE maintained in Kearny, New Jersey.  During the search, law enforcement seized more than 10 kilograms of U-47700, acryl fentanyl, and furanyl fentanyl, as well as a quantity of 4-ANPP and approximately 82 mailing envelopes containing smaller amounts of those substances that OKPARAEKE had packaged for distribution to his customers.

On September 15, 2020, OKPARAEKE met with representatives of the U.S. Attorney’s Office for the Southern District of New York.  During that meeting, OKPARAEKE falsely represented that the approximately 680 Bitcoins – worth millions of dollars – generated by his narcotics sales on AlphaBay were no longer in his possession and control, and that a third party had stolen the Bitcoins from him through hacking and other unauthorized access to OKPARAEKE’s electronic accounts.  OKPARAEKE subsequently surrendered the 680 Bitcoins to USPIS and agreed to forfeit those proceeds as part of his plea agreement.

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In addition to the prison term, OKPARAEKE, 32, of Middletown, New York, was sentenced to five years of supervised release and ordered to forfeit $105,177.30 in United States currency and 680.60963624 Bitcoins, presenting proceeds of his narcotics trafficking.

Ms. Strauss praised the outstanding efforts of the USPIS, HSI, CBP, the Federal Bureau of Investigation, the Fairfax County, Virginia, Police Department, the Virginia Office of the Attorney General, the Middletown Police Department, and the Vancouver, Washington, Police Department for their investigative work and ongoing support and assistance with the case. 

The case is being prosecuted by the Office’s White Plains Division.  Assistant United States Attorneys Gillian Grossman, Olga I. Zverovich, and Sagar Ravi are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, David A. Hubbert, Acting Assistant Attorney General for the Justice Department’s Tax Division, and Charles P. Rettig, Commissioner of the Internal Revenue Service (“IRS”), announced that U.S. District Judge Gregory H. Woods entered an order yesterday authorizing the IRS to issue summonses requiring multiple couriers and financial institutions to produce information about U.S. taxpayers who may have used the services of Panama Offshore Legal Services (“POLS”) and its associates (together, the “POLS Group”) to evade federal income taxes.  Specifically, the IRS summonses seek to trace courier deliveries and electronic fund transfers between the POLS Group and its clients, in order to identify the POLS Group’s U.S. taxpayer clients who have used the POLS Group’s services to create or control foreign assets and entities to avoid compliance with their U.S. tax obligations.

Manhattan U.S. Attorney Audrey Strauss said:  “This action underscores our Office’s commitment to hold accountable those who use offshore service providers to avoid U.S. taxes.  In issuing these John Doe summonses, we continue our joint efforts with the IRS to investigate tax evaders who use foreign financial accounts and sham foreign entities to hide their assets.”

Acting Assistant Attorney General David A. Hubbert said:  “The Department of Justice, working alongside the IRS, is dedicated to unearthing the use of foreign bank accounts to evade U.S. taxes.  We will use the many tools available to us, including John Doe summonses like the ones authorized today, to ensure that taxpayers are fully meeting their responsibilities.”

IRS Commissioner Charles P. Rettig said:  “These court-ordered summonses should put on notice every individual and business seeking to avoid paying their fair share of taxes by hiding assets in offshore accounts and companies.  These records will empower the IRS and the Department of Justice to find those attempting to skirt their tax obligations and ensure their compliance with the U.S. tax laws.”

Federal tax law requires U.S. taxpayers to pay taxes on all income earned worldwide.  U.S. taxpayers must also disclose certain foreign financial accounts and assets.  According to the allegations set forth in the documents filed in support of the petition to authorize the John Doe summonses, and other information in the public record:

POLS is a Panamanian law firm that advertises services, including to U.S.-based clients, to assist in concealing ownership of offshore entities and accounts.  Among other services, POLS and its associates offer assistance with forming corporations and foundations and creating offshore financial accounts, for purposes of asset protection.  POLS highlights secrecy as a key advantage of its entity formation services, promising its clients “100% anonymity, privacy and confidentiality.”  Other members of the POLS Group similarly advertise that they can assist clients with concealing assets and avoiding taxes.  For example, one POLS Group member assures clients that “a carefully designed corporate strategy allows you to care for your loved ones free from probate, inheritance taxes, and other legal and tax problems.”  The IRS has learned of at least one identified U.S. taxpayer who used POLS’s services to create an unreported offshore entity and account in Panama, through the IRS’s Offshore Voluntary Disclosure Program (“OVDP”).  The OVDP allows U.S. taxpayers to voluntarily disclose foreign accounts or entities used to evade tax in exchange for fixed penalties.

In this action, the Court granted the IRS permission to serve what are known as “John Doe” summonses on 10 entities: Federal Express Corporation; FedEx Ground Package System, Inc.; DHL Express; United Parcel Service, Inc.; the Federal Reserve Bank of New York; The Clearing House Payments Company LLC; HSBC Bank USA, N.A.; Citibank, N.A.; Wells Fargo Bank, N.A.; and Bank of America, N.A.  There is no allegation in this action that the summons recipients have engaged in any wrongdoing.  Rather, the IRS uses John Doe summonses to obtain information about possible violations of internal revenue laws by individuals whose identities are unknown.  The John Doe summonses direct these couriers and financial entities to produce records that will enable the IRS to identify U.S. taxpayers who have used the POLS Group’s services, along with other documents relating to the POLS Group’s business.

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This case is being handled by the Office’s Tax and Bankruptcy Unit.  Assistant U.S. Attorney Talia Kraemer is in charge of the case.

Audrey Strauss, the United States Attorney for the Southern District of New York, and Phillip R. Bartlett, Inspector-in-Charge of the New York Division of the United States Postal Inspection Service (“USPIS”), announced today the unsealing of a criminal indictment charging TREVOR MILTON with securities and wire fraud in connection with his scheme to defraud and mislead investors about the development of products and technology by the company he founded, Nikola Corporation (“Nikola”).

Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Trevor Milton brazenly and repeatedly used social media, and appearances and interviews on television, podcasts, and in print, to make false and misleading claims about the status of Nikola’s trucks and technology.  But today’s criminal charges against Milton are where the rubber meets the road, and he now will be held accountable for his allegedly false and misleading statements to investors.”

Inspector-in-Charge Phillip R. Bartlett said:  “This defendant allegedly concealed the progress and success of Nikola’s technology, when he lied to investors and lured them into believing that they had invested at the ground floor of a company that had already developed viable Nikola One and Badger prototypes that were ready to be produced.  The one thing fraudsters have in common – they’re liars, cheaters and thieves.”

MILTON surrendered this morning and will be presented later today before United States Magistrate Judge Sarah Netburn.  The case is assigned to U.S. District Judge Edgardo Ramos.

According to the allegations in the Indictment unsealed today in Manhattan federal court:[1]

Overview

From at least in or about November 2019 up through and including at least in or about September 2020, TREVOR MILTON engaged in a scheme to defraud investors by inducing them to purchase shares of Nikola Corporation (“Nikola”), the electric- and hydrogen-powered vehicle and energy company that MILTON founded, through false and misleading statements regarding Nikola’s product and technology development.  MILTON’s scheme targeted individual, non-professional investors – so-called “retail investors” – by making false and misleading statements directly to the investing public through social media and television, print, and podcast interviews.

MILTON made these false and misleading statements regarding Nikola’s products and capabilities to induce retail investors to purchase Nikola stock.  Among the retail investors who ultimately invested in Nikola were investors who had no prior experience in the stock market and had begun trading during the COVID-19 pandemic to replace or supplement lost income or to occupy their time while in lockdown, and some of the retail investors that MILTON’s fraudulent scheme targeted suffered tens and even hundreds of thousands of dollars in losses, including, in certain cases, the loss of their retirement savings or funds that they had borrowed to invest in Nikola.  Moreover, MILTON took advantage of the fact that Nikola went public by merging with a Special Purpose Acquisition Company or “SPAC,” rather than through a traditional IPO, by making many of his false and misleading claims during a period where he would have not been allowed to make public statements under rules that govern IPOs.

MILTON made false claims regarding nearly all aspects of Nikola’s business, including: (a) false and misleading statements that the company had early success in creating a “fully functioning” semi-truck prototype known as the “Nikola One,” when MILTON knew the prototype was inoperable; (b) false and misleading statements that Nikola had engineered and built an electric- and hydrogen-powered pickup truck known as “the Badger” from the “ground up” using Nikola’s parts and technology, when MILTON knew that was not true; (c) false and misleading statements that Nikola was producing hydrogen and was doing so at a reduced cost, when MILTON knew that in fact no hydrogen was being produced at all by Nikola, at any cost; (d) false and misleading statements that Nikola had developed batteries and other important components in-house, when MILTON knew that Nikola was acquiring those parts from third parties; and (e) false and misleading claims that reservations made for the future delivery of Nikola’s semi-trucks were binding orders representing billions in revenue, when the vast majority of those orders could be cancelled at any time or were for a truck Nikola had no intent to produce in the near-term.

Nikola One

Throughout in or about 2020, MILTON promoted a false and exaggerated narrative that Nikola was a first mover in the zero-emissions-trucking business.  Specifically, MILTON emphasized that Nikola had defied expectations as a young, disruptive company when it managed to build its prototype Nikola One, which Nikola unveiled on or about December 1, 2016, at a large event that was filmed and broadcast on the internet.  During that event and later, MILTON claimed that the prototype Nikola One was a fully functioning truck, and emphasized that early purported success as a defining event for Nikola.  For example, at the unveiling event for the Nikola One, MILTON claimed the Nikola One “fully functions and works, which is really incredible.”

In fact, the Nikola One prototype was not completed, let alone tested and validated, by the time of the unveiling event.  Rather, the prototype was wholly missing significant parts, including gears and motors, and the control system (i.e., the system that communicates the driver’s directions to the vehicle) was incomplete.  The infotainment system in the cab was also incomplete.  Instead, for the purpose of the unveiling event, tablet computers or other computer screens were mounted into the areas where the screens for the infotainment would be, and the screens were set to display images created to have the appearance of infotainment screens, with speedometers, maps, and other information displayed.

Later, in or about January 2018, and despite the fact that the Nikola One prototype was never completed or operational, MILTON had Nikola publish on Twitter and also published on his own Twitter account a video in which the Nikola One appeared to be driving on its own power down a road with no incline.  In fact, to film these clips, the Nikola One was towed to the top of hill, at which point the “driver” released the brakes, and the truck rolled down the hill until being brought to a stop in front of the stop sign.

The Badger

From in or about February 2020 up through and including at least in or about September 2020, MILTON promoted a new electric pickup truck called the Badger through false and misleading claims about the Badger’s engineering and development.  In particular, MILTON repeatedly and falsely stated that Nikola engineered and built the Badger from the “ground up” as a “clean sheet” vehicle using Nikola’s in-house components and intellectual property, that the company had been working on the program for years and had tapped into billions of dollars in Nikola engineering, that the building of prototype vehicles was complete and they were “real” trucks and “fully functioning vehicle inside and outside,” and that an original equipment manufacturer partner (the “OEM Partner”) would mass-produce the vehicle using Nikola’s prototype design and engineering.

In fact, the production of Badger prototypes was outsourced, at MILTON’s direction, to third parties, and the components were not being built from the ground up.  Rather, Nikola purchased several Ford F-150 pickup trucks – a highly popular model to which MILTON had claimed his Badger would compare favorably – to use as “donor” or “surrogate” vehicles, and used the vehicles’ chasses and bodies as the base for constructing the Badger prototypes.  At MILTON’s direction and with his approval, engineers working on the Badger prototypes took steps to hide from the public that Ford donor vehicles were used to produce the prototypes.  And the two prototype Badgers that ultimately were built were little more than show cars and not real consumer vehicles.  For example, the Badger prototypes could not be driven on roads because some of the parts of the body were carbon fiber composite and because they had not undergone safety testing.  The Badger prototypes also lacked certain parts, such as airbags and an operable HVAC.  Similarly, many of the lights in the interior of the Badger prototypes were not operable and were merely backlit.

Moreover, despite MILTON’s claims that Nikola’s OEM Partner would manufacture the Badgers that Nikola had designed and engineered, and that the vehicles would be “70 percent Nikola 30 percent [the OEM Partner],”  the OEM Partner planned to build the Badger based on one of its own electric vehicle platforms.  In fact, the OEM Partner planned to use no Nikola technology or engineering, except for the general aesthetic and potentially the infotainment system.  No one at the OEM Partner ever saw the Badger prototypes that Nikola had been working on and they were not part of the OEM Partner’s engineering or development plans.

Hydrogen Production

MILTON also made numerous false and misleading claims regarding Nikola’s hydrogen business.  Specifically, and among other things, MILTON made false and misleading claims regarding the status of Nikola’s production of hydrogen, the current cost of producing hydrogen, the cost of electricity to produce hydrogen, Nikola’s ability to produce hydrogen using clean energy, and the status of permits related to hydrogen production. 

For example, in or about March 12, 2020, MILTON stated, “Up until Nikola came in the market, hydrogen was around $16 a kilogram, U.S. dollars. Now Nikola is producing it well below $4 a kilogram.” In fact, Nikola has never produced any hydrogen at any price, nor at the time could it have produced hydrogen for below $4 per kilogram.  To the contrary, Nikola has never obtained a permit to produce hydrogen or installed the equipment necessary to produce hydrogen.  At the time that MILTON was claiming that Nikola was producing hydrogen for less than $4 per kilogram, it was in fact purchasing hydrogen from a supplier for $16 per kilogram.

As another example, in a July 17, 2020, podcast, MILTON stated, among other things, that when Nikola first started, hydrogen production stations “were going to be 50 to 60 million,” but now Nikola is “down to, you know, 14, 14 million bucks” due to the “standardization of a hydrogen station.”  In truth and in fact, Nikola had not built a single hydrogen production station, much less “standardized” hydrogen production stations.  At the time, due to the high cost of electricity in California, Nikola was seriously considering moving away from its plan to produce hydrogen on-site at all of its fueling stations, and instead was considering producing hydrogen at a central location through liquefaction.  Milton was well aware of the issues with Nikola’s hydrogen station plan, but directed that Nikola employees “[k]eep the liquefaction discussions quiet from the market.”

In House Technology

MILTON has repeatedly claimed that Nikola has intellectual property rights over important components of its semi-truck line.  While MILTON has stated that Nikola outsources many parts of the trucks, like its tires or windshield, MILTON has also repeatedly stated that Nikola makes the most important parts, including batteries and the powertrain, of the semi-trucks “in house.”  For example, in or about June 2020, MILTON tweeted, “We do our own batteries at Nikola and have since day 1,” and “All the technology, software, controls, E axle, inverters etc. we do internally.” 

In fact, although Nikola has partnered with various companies to try to develop proprietary battery technology, these efforts were not successful, and Nikola has not successfully developed technology internally, and the batteries it has planned to use in its semi-trucks were developed and manufactured by third parties.  Similarly, Nikola has not produced an inverter in house and the inverters it planned to use in its semi-trucks were developed and manufactured by third parties.

Reservations

MILTON has also repeatedly misstated the nature of Nikola’s reservations to suggest that reservations made for its semi-trucks are firm and binding.  For example, in or about July 2020, MILTON claimed that Nikola had “billions and billions of dollars with the contracts” and that these reservations were not “just like, a non-committal thing,” but instead were “like, sign on the dotted line, billions and billions and billions and billions of dollars in orders.”

In fact, although Nikola did have 14,000 reservations for its sleeper semi-truck, with the exception of a reservation for approximately 800 semi-trucks, which is binding provided that Nikola meets certain conditions, these reservations were non-binding and cancellable at any time for any reason.

Milton’s False and Misleading Statements Induced Retail Investors to Purchase Nikola Stock 

After MILTON made the false and misleading statements regarding Nikola’s products and capabilities described above, tens of thousands of retail investors purchased Nikola’s stock between in or around March and September 2020.  During this same period, certain institutional investors who had access to more complete information regarding Nikola’s products and technology, including some who received Nikola shares as part of the SPAC transaction, were able to sell their stock for a significant profit.

The value of Nikola’s stock plummeted after the fact that certain of MILTON’s statements had been false and misleading was disclosed to the market in or around September 2020.  As a result, many Nikola stockholders, including the retail investors who were the target of MILTON’s scheme, suffered significant financial losses, in some cases totaling in the tens or hundreds of thousands of dollars and compromising their financial security or retirement savings. 

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MILTON, 39, of Oakley, Utah, is charged with two counts of securities fraud and one count of wire fraud.  The securities fraud counts carry maximum penalties of 20 and 25 years in prison, respectively. The wire fraud count carries a maximum penalty of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Ms. Strauss praised the outstanding work of the USPIS, which jointly conducted this investigation with special agents from the U.S. Attorney’s Office.  Ms. Strauss further thanked the U.S. Securities and Exchange Commission, which today filed a parallel civil action.

The prosecution of this case is being overseen by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Jordan Estes, Matthew Podolsky, Nicolas Roos are in charge of the case.

If you believe you are a victim of Trevor Milton or have relevant information, please email: USANYS.NIKOLAVICTIMS@USDOJ.GOV.

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

 

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[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth herein constitute only allegations, and every fact described should be treated as an allegation. 

Audrey Strauss, United States Attorney for the Southern District of New York, announced that CHAIM DEUTSCH, a former New York City Council Member, was sentenced today in Manhattan federal court to three months in prison for filing a false tax return in connection with outside income he received from his real estate management corporation.  DEUTSCH previously pled guilty before United States Magistrate Judge James L. Cott, who imposed today’s sentence.

U.S. Attorney Audrey Strauss said: “Chaim Deutsch, a former New York City Council Member, violated his oath of office and the law when he defrauded the IRS in connection with income from his real estate business.  At the same time he was serving as an elected official and community leader, Deutsch concealed his true business income to avoid paying his fair share of taxes.  Appropriately, Deutsch has been sentenced to prison for his criminal conduct.” 

According to the allegations contained in the Information to which DEUTSCH pled guilty, other court filings, statements made during public court proceedings, and publicly available information:

From in or about January 2014 through April 2021, DEUTSCH served as the New York City Council Member for the 48th District, which includes portions of Brooklyn.  DEUTSCH was also the sole owner of Chasa Management, Inc., a real estate management business, and he received more than $120,000 annually in outside income from that business, until the end of 2017 when a change in the law prohibited council members from maintaining outside employment.  On or about April 27, 2021, subsequent to his plea in the instant case, DEUTSCH was determined to have vacated his elected office as a result of violating his oath of office by defrauding the federal government in connection with the instant tax offense.

During the tax years 2013 through 2015, DEUTSCH filed false individual and corporate tax returns that decreased his tax liability by claiming false and fictitious business deductions.  In particular, DEUTSCH falsely deducted personal expenses as business expenses, including rental payments for an apartment that he maintained in the 48th District in order to obtain residency for his council position; utility, water, repair, maintenance, automobile, and phone expenses; as well as routine living expenses such as groceries and clothing.  In addition, DEUTSCH further decreased his tax liability by filing fraudulent schedules to his personal income tax forms that declared fictitious business expenses, including for additional purported rent, vehicles, phones, and utility expenses. 

As a result of the false deduction schemes, DEUTSCH received federal tax refunds in each of the relevant tax years.  Specifically, in tax year 2013, DEUTSCH’s false filings generated a federal tax refund of $1,937; in tax year 2014, DEUTSCH’s false filings generated a federal tax refund of $262; and in tax year 2015, DEUTSCH’s false filings generated a federal tax refund of $7,511.

In preparing his personal tax returns and the books and tax returns of Chasa Management, DEUTSCH employed a tax preparer and accounting firm based in Brooklyn, and DEUTSCH would direct the firm to classify or reclassify expenses as business-related to decrease his tax liability.  Only after DEUTSCH was satisfied that the purported business expenses had sufficiently decreased his tax liability were the tax returns finalized and filed.  After DEUTSCH learned of the investigation, he used a different tax preparer to assist in the preparation of his subsequent years’ tax returns.

In total, for tax years 2013 through 2015, DEUTSCH claimed approximately $157,000 in false business expenses on Chasa Management’s returns and an additional approximately $111,000 in false business expenses on his individual income tax returns.  DEUTSCH’s failure to properly pay taxes on his business income evaded approximately $82,076 in taxes due to the Internal Revenue Service (“IRS”), not including interest and penalties. 

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In addition to the prison term, Judge Cott ordered DEUTSCH, 52, of Brooklyn, New York, to serve one year of supervised release, to pay a fine in the amount of $5,500, and to pay restitution to the IRS in the amount of $107,007.05. 

Ms. Strauss praised the outstanding work of IRS Criminal Investigation and the Special Agents of the U.S. Attorney’s Office.  Ms. Strauss also thanked the New York City Department of Investigation for its assistance in the investigation.

The case is being prosecuted by the Office’s Public Corruption Unit.  Assistant U.S. Attorney Eli J. Mark is in charge of the prosecution.

Audrey Strauss, United States Attorney for the Southern District of New York, announced the guilty plea today of JOHN PIERRE DUPONT, a/k/a “John Gary Rinaldo,” in connection with a years-long scheme to defraud thousands of donors to scam political action committees that impersonated numerous U.S. Senate campaigns and candidates.  DUPONT pled guilty to wire fraud and aggravated identity theft before U.S. District Judge Richard M. Berman.

U.S. Attorney Audrey Strauss said: “In impersonating campaigns and candidates to raise money for fake political action committees, John Pierre Dupont took advantage of thousands of vulnerable individual donors who believed they were contributing to causes they believed in.  Instead, hundreds of thousands of dollars that were intended to be legitimate donations were instead stolen by the defendant for his own personal enrichment.  With today’s guilty plea, Dupont has admitted to his scheme and now faces a significant term of incarceration.”

According to the allegations in the Indictment, court filings, and statements made during court proceedings:

From 2015 through 2019, DUPONT defrauded thousands of donors who believed they were donating to three political action committees established by DUPONT (the “Scam PACs”), or to campaigns the Scam PACs falsely claimed to support.  DUPONT’s scheme resulted in hundreds of thousands of dollars being donated through websites he controlled and operated, none of which was donated to campaigns or causes.

The websites purported to be raising money in support of senate campaigns and candidates, a candidate for governor, and a candidate for president.  Another website operated by DUPONT purported to be raising money “to unite immigrant families,” falsely claiming that donations to the Foundation for Sanity in Politics PAC would “go to help pay our volunteer attorneys’, doctors’, nurses’ and social workers’ costs and pay for transportation to unite immigrant families.”  In fact, that PAC had no volunteers or staff, and dedicated no funds to paying for any action or advocacy.

DUPONT’s scheme targeted victims throughout the country, raising funds based on fraudulent representations that the donations would support the relevant causes, candidates, and campaigns.  In reality, all of the money raised was kept and used by DUPONT, including to continue perpetrating the fraud through additional fundraising and overhead expenditures.  None of the money donated to the Scam PACs was spent on political contributions, and DUPONT failed to report the donations, as required, in filings with the Federal Election Commission.

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DUPONT, 82, of Blythe, Ca, pled guilty to one count of wire fraud, which carried a maximum sentence of 20 years in prison, and one count of aggravated identity theft, which carries a mandatory two years in prison consecutive to any other sentence imposed.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as the defendant’s sentence will be determined by the judge.  Sentencing before Judge Berman is scheduled for October 21, 2021, at 10:00 a.m.

Ms. Strauss praised the outstanding investigative work of the Special Agents of the United States Attorney’s Office for the Southern District of New York.

If you think you are a victim of the scheme alleged in this press release, please contact Wendy Olsen, Victim & Witness Services for the U.S. Attorney’s Office for the Southern District of New York, at 866-874-8900.           

This case is being handled by the Office’s Public Corruption Unit.  Assistant U.S. Attorney Alex Rossmiller is in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, Peter C. Fitzhugh, the Special Agent in Charge of the New York Office of Homeland Security Investigations (“HSI”), and Marty Raybon, Acting Director, Field Operations, New York, U.S. Customs and Border Protection (“CBP”), announced today that the United States has settled civil fraud claims brought under the False Claims Act against STARGATE APPAREL, INC. (now named EXCEL APPAREL CORP.) (“STARGATE”), RIVSTAR APPAREL, INC. (“RIVSTAR”), and JOSEPH BAILEY.  Stargate and Rivstar are apparel companies headquartered in New York, New York, and BAILEY is the companies’ former CEO and owner.   As alleged in the Government’s lawsuit, filed in 2019, BAILEY, STARGATE, and RIVSTAR employed a variety of schemes to defraud the United States by submitting invoices to CBP that falsely understated the true value of the clothing that they imported into the United States in order to avoid paying millions of dollars in customs duties.  RIVSTAR is no longer operating.

Under the civil settlement approved today by U.S. District Judge J. Paul Oetken, BAILEY will pay $3.2 million to the United States, and STARGATE, RIVSTAR, and the employee stock ownership plan that currently owns the companies will together pay a total of $2.8 million to the United States.  BAILEY, STARGATE, and RIVSTAR admitted and accepted responsibility for their conduct as further described below.  As part of the settlement, STARGATE and RIVSTAR (to the extent that it resumes operations) will also implement a written compliance policy that will include measures designed to ensure that they pay duties on the full, actual value of all future imports and otherwise comply with applicable customs laws and regulations.  Last year, BAILEY pled guilty and was sentenced to six months in prison for engaging in certain of the conduct related to STARGATE imports that is at issue in the Government’s civil complaint.  This civil settlement is in addition to the $1,661,617 forfeiture amount that BAILEY was ordered to pay in the criminal proceedings. 

U.S. Attorney Audrey Strauss said: “Stargate, Rivstar, and their former president engaged in a variety of fraudulent schemes to short-change the Government of customs duties owed for imported clothing by falsely under-reporting its value.  This settlement, along with the separate criminal action against Bailey, demonstrate that our Office will hold companies, as well as their executives, accountable when they try to evade paying the legally required custom duties on imported goods.”

HSI Special Agent in Charge Peter C. Fitzhugh said: “For over a decade these clothing companies used ‘double-invoice’ schemes to underpay customs duties that were owed to the U.S. for garments being imported into the country, resulting in millions of dollars in customs duties lost.  HSI worked closely with U.S. Customs and Border Protection and the U.S. Attorney’s Office for the Southern District of New York to achieve this settlement, requiring the defendants not just to accept responsibility, but also to pay the Government $6 million and enhance their compliance policies.”

CBP Acting Director of New York Field Operations Marty Raybon said: “The settlement reached today is a testament to the dedication of our partners in the United States Attorney's Office, Homeland Security Investigations, and the men and women of CBP in enforcing our nation’s trade laws and punishing those perpetrating this type of fraud.”

The Government’s complaint alleges that in order to avoid customs duties, from 2004 through 2015 (the “Covered Period”), STARGATE, RIVSTAR, and BAILEY engaged in two types of “double invoicing” schemes to fraudulently underpay customs duties owed to the United States in connection with the garments that they brought into the country.  Under the first scheme, the exporter would provide one invoice that reflected the amount Defendants actually paid the exporter for the goods, and a second invoice that fraudulently reflected a fabricated lower amount that was submitted to CBP.  These two invoices were virtually identical (e.g., same invoice number, description of goods, quantity of goods), except that they included different prices for the same shipments of goods.  Under the second scheme, the exporter also would provide two invoices, which together reflected the actual price paid for the shipment.  However, Defendants would only submit one of the invoices to CBP.  The other invoice, which purported to be for “samples,” “accessories,” “commissions,” or “testing costs,” reflected an additional payment made by Defendants for the same goods described in the first invoice and was not submitted to CBP.  The purpose of each of these two schemes was the same – to fraudulently under-report the value of the goods in order to pay less duties.   

As part of the settlement, BAILEY, STARGATE, and RIVSTAR admit, acknowledge, and accept responsibility for the following conduct:

STARGATE Conduct:

• During the Covered Period, Stargate’s primary supplier was Taizhou Jiali Garments Co. Ltd. and its affiliated manufacturers (collectively, “Taizhou”), which are all located in China.  At the direction of BAILEY, STARGATE engaged in two different fraudulent schemes that involved the preparation and use of false and inaccurate invoices to underreport the actual value of goods imported from Taizhou in order to avoid paying the customs duties due.  BAILEY knew that this conduct was wrong and in violation of customs laws.
• As part of the first scheme, from 2007 through 2010, at BAILEY’S direction, Taizhou provided STARGATE with two sets of invoices for each shipment of goods.  One invoice, referred to in email communications as the “pay by” invoice, reflected the actual price paid by STARGATE for the goods.  The second invoice reflected a fake, lower price for the goods and was the invoice that STARGATE presented to CBP through its customs broker.  Stargate, at the direction of Bailey, routinely declared this false, lower value on CBP entry forms in order to pay lower customs duties on goods imported from Taizhou.
• Beginning around 2010 and continuing through at least 2015, BAILEY and STARGATE engaged in a second scheme.  At BAILEY’S direction, Taizhou provided two separate sets of invoices for a given shipment that together reflected the true price Stargate actually paid for the goods.  The first invoice, typically entitled the “commercial invoice,” described the goods purchased, and was submitted to CBP by STARGATE’s customs broker.  The second invoice purported to reflect amounts paid by Stargate for “sample” goods and was not submitted to CBP.  The “sample” invoice was not, in fact, for samples actually purchased by STARGATE.  Rather, STARGATE used the “sample” invoice to make an additional payment to Taizhou for the goods purchased by STARGATE that were described in the “commercial invoice,” while hiding the full value of those goods from CBP.  STARGATE, at the direction of BAILEY, routinely declared only the values recorded on the “commercial invoices,” which were less than the full price paid for the goods, on CBP entry forms in order to pay lower customs duties on goods imported from Taizhou.
• During the Covered Period, STARGATE also imported goods that it purchased from Tex-Prime International, Ltd., and its affiliated manufacturers (collectively “Tex-Prime”), which are located in China.  Beginning in at least 2004 and continuing through 2014, STARGATE, at the direction of BAILEY, also engaged in two different fraudulent schemes that involved the preparation and use of false and inaccurate invoices to underreport the actual value of goods imported from Tex-Prime in order to avoid paying the customs duties due.
• The first scheme involved Tex-Prime providing two nearly identical invoices for each shipment that differed only in the stated price.  The first invoice reflected the amount that STARGATE actually paid for the imported goods.  The second invoice (frequently identified by a “C” suffix following the invoice number, or the term “Custom” following the invoice number in the file name), reflected a false and inaccurate lower price and was the invoice that STARGATE submitted to CBP through STARGATE’s customs broker.  STARGATE, at the direction of BAILEY, routinely declared the values recorded on this second, false invoice on CBP entry forms in order to pay lower customs duties on goods imported from Tex-Prime.
• The second scheme also involved Tex-Prime providing two invoices.  In this scheme, the two invoices together reflected the actual price paid by STARGATE for the shipment.  The first invoice, entitled a “commercial invoice,” described the goods purchased and was submitted to CBP by STARGATE’s customs broker.  The second invoice, entitled a “statement,” purported to be an invoice for accessories charges, commissions, testing charges, or samples.  This second invoice was not submitted to CBP and in reality reflected an additional payment made by STARGATE to Tex-Prime for the same shipment.  STARGATE, at the direction of BAILEY, routinely declared only the values recorded on the “commercial invoices,” which were less than the full price paid for the goods, on CBP entry forms in order to pay lower customs duties on goods imported from Tex-Prime.
• Through the practices described above, STARGATE misrepresented the value of the goods it purchased and imported into the United States.  STARGATE and BAILEY were aware at all times that the reported information was incorrect and grossly understated the actual value of the imported goods, but continued to make the incorrect entries in order to reduce the amount of duties owed.  As a result of their conduct, STARGATE and BAILEY underpaid customs duties that were due and owing to the United States. 

RIVSTAR Conduct:

• During the Covered Period, RIVSTAR imported goods purchased from Pacific Potential Trading Co., Ltd., and its affiliated entities (together, “Pacific Potential”), as well as from Dongguan Bestsign and Trading Co., Ltd., and its affiliated entities (together, “Bestsign”), all of which are located in China.
• During the Covered Period, at RIVSTAR’s request and BAILEY’s direction, Pacific Potential and Bestsign provided two sets of invoices for each shipment imported into the United States by RIVSTAR.  The first invoice described the goods imported and was submitted to CBP by RIVSTAR’s customs broker.  The price reflected on the invoices declared to Customs did not reflect the full price RIVSTAR paid for the merchandise.  The second invoice purported to be for “testing costs” relating to the imported goods and was not submitted to CBP.  Together, the two invoices reflected the true total price that RIVSTAR paid for the goods; RIVSTAR, however, did not declare the amount reflected on the invoice for “testing costs” to CBP.  For the most part, the amounts reflected on the invoice for “testing costs” were not for actual testing, but instead reflected an additional payment made by RIVSTAR to Pacific Potential and Bestsign for the same shipment that was not declared to CBP.  To the extent that any such payments actually related to testing costs, such charges were still dutiable and should have been declared to CBP. 
• Through these practices, RIVSTAR at BAILEY’s direction misrepresented the value of the goods it purchased and imported into the United States.  RIVSTAR and BAILEY were aware at all times that the reported information was incorrect and grossly understated the actual value of the imported goods, but continued to make the incorrect entries in order to reduce the amount of duties owed. As a result of their conduct, RIVSTAR and BAILEY underpaid customs duties that were due and owing to the United States.

The conduct in this matter was first brought to the attention of federal law enforcement by a whistleblower who filed a lawsuit under the False Claims Act.

Ms. Strauss thanked U.S. Customs and Border Protection and Homeland Security Investigations for their assistance with the case.

The civil case is being handled by the Office’s Civil Frauds Unit, and Assistant U.S. Attorney Dominika Tarczynska is in charge of the matter.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that ULYSSES LOPEZ was sentenced today by U.S. District Judge Nelson S. Román to 87 months in prison for leading a drug trafficking conspiracy that distributed kilograms of cocaine out of a grocery store located in New Rochelle, New York.  LOPEZ pled guilty before U.S. Magistrate Judge Judith C. McCarthy on August 27, 2020. 

Manhattan U.S. Attorney Audrey Strauss said: “Today’s sentence sends a message that destructive drug trafficking in our communities will not be tolerated.  We will continue to work with our law enforcement partners to keep our neighborhoods free of addictive and dangerous narcotics.”

According to the allegations in the Indictment, and statements made in court filings and during court proceedings:

From April 2018 up to October 2018, ULYSSES LOPEZ, together with six charged co-defendants, conspired to distribute five kilograms and more of powder cocaine.  LOPEZ was the leader and organizer of the drug trafficking conspiracy, which operated out of several buildings in the vicinity of, and including, the SuperMercado Mexico located in New Rochelle, New York, which was owned and operated by LOPEZ and his father and co-defendant, Valentino Lopez (“Valentino”). 

After being arrested, and while detained at the Westchester County Jail, LOPEZ attempted to obstruct justice by encouraging one of his charged codefendants, Felipe Barajas, to provide false statements to the Government regarding their relationships and Barajas’s use of his residence to store cocaine on LOPEZ’s behalf.  

Six of the charged defendants, including LOPEZ, Valentino, and Barajas, have pled guilty and been sentenced.  Valentino was sentenced on June 25, 2021, to 60 months in prison for his role in the drug trafficking conspiracy.  The seventh defendant remains a fugitive. 

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In addition to his prison sentence, LOPEZ, 41, of New Rochelle, New York, was sentenced to four years of supervised release, and forfeiture of $150,000 and a Mercedes Benz ML350.

Ms. Strauss praised the excellent work of the Federal Bureau of Investigation and the Drug Enforcement Administration.

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Emily Deininger, David Felton, and Celia Cohen are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that CHRISTIAN NIEVES, a/k/a “Eric Rosario,” a/k/a “White Boy,” was sentenced today to three years in prison in connection with his retaliation against a witness who had testified at a previous federal murder trial by slashing the witness across the neck with a blade.  NIEVES was convicted on April 23, 2021, following an approximately eight-day jury trial presided over by U.S. District Judge Jed S. Rakoff, who also imposed today’s sentence.

U.S. Attorney Audrey Strauss said:  “Christian Nieves’s violent assault of a witness to federal crimes was a naked attempt to subvert the administration of justice, sow fear through the community, and prevent future witnesses from coming forward.  Today’s sentence proves that justice will prevail, and sends a clear signal to other gang members that witness retaliation will not be tolerated.” 

According to court documents, the evidence at trial, and statements made in court proceedings:

NIEVES was a member of the Trinitarios street and prison gang, a criminal enterprise with written rules, oath, and constitution.  The gang has a strict prohibition on cooperation with law enforcement (“snitching”), and violations of the gang’s rules are punished by acts of violence.  Among other governing principles, the Trinitarios mandate a “code of silence,” meaning that members are prohibited from cooperating with law enforcement and speaking about the gang in general.

The Trinitarios had an ongoing rivalry with another Dominican gang, Dominicans Don’t Play (“DDPs”).  In 2018, a member of the DDPs, Stiven Siri-Reynoso, was convicted following a jury trial before U.S. District Judge Colleen McMahon of charges including the murder of Jessica White, a Bronx mother who was inadvertently hit during a shooting on a playground as part of the rivalry between the DDPs and the Trinitarios.  Significant evidence at that July 2018 trial focused on the DDP-Trinitario rivalry.  The victim of NIEVES’s retaliation was among the witnesses who testified about the inner workings of the Trinitarios gang (the “Victim”).  In the course of his testimony, the Victim testified about crimes that he had committed with NIEVES, including an incident in 2009 when the Victim took a gun from NIEVES after a Trinitarios-related shooting that had resulted in the death of Issi Dominguez.  The Victim’s testimony violated the Trinitarios’ longtime prohibition against testifying against members of the gang.

Following his testimony, around 7:00 p.m. on the evening of February 5, 2019, the Victim was walking on Grand Concourse in the Bronx when he saw NIEVES and other Trinitarios gang members on the steps of a building near the sidewalk.  As the Victim walked past, one of the group called out to him, and NIEVES and at least one other person began following the Victim.  NIEVES caught up to the Victim, took out a razor blade, and slashed at the Victim’s face, cutting him down the jawline.  During the attack, NIEVES told the Victim “this is happening to you because you are a snitch.”  The Victim received prompt medical attention, including stitches to close the wound.

Ms. Strauss praised the investigative work of the Federal Bureau of Investigation and the New York City Police Department.

The prosecution is being handled by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Allison Nichols and Jun Xiang are in charge of the prosecution.

            Audrey Strauss, the United States Attorney for the Southern District of New York, and Dermot Shea, Police Commissioner for the City of New York (“NYPD”), announced the unsealing of a Superseding Indictment charging VICTOR RIVERA, 30, and JOHAN ARAUJO, 40, with conspiracy to commit robbery, robbery, attempted robbery, attempted extortion, interstate transportation of stolen property, money laundering, and firearms offenses.  ARAUJO was arrested on July 23 and presented and arraigned before United States Magistrate Judge Katharine H. Parker.  RIVERA was previously charged in an Indictment in November 2020 and is currently in custody.  This case is assigned to United States District Judge Alvin K. Hellerstein.           

U.S. Attorney Audrey Strauss said: “As alleged in the Indictment, the defendants committed a series of armed robberies and attempted robberies of jewelers and other owners of luxury watches in and around New York City.  In one of these robberies, a victim was shot.  Thanks to the outstanding work of the NYPD and Special Agents of our Office, time ran out on the defendants, who now face federal charges for their alleged crimes.”

NYPD Commissioner Dermot Shea said: “The charges show that while criminals often believe they can operate in plain sight with apparent impunity, the NYPD and our law enforcement partners exist to shatter that notion and bring those responsible to justice.  I thank our colleagues at the United States Attorney’s Office in the Southern District of New York for their dedication and hard work building this case and ensuring these two alleged dangerous criminals will be held to account.”

As alleged in the Indictment unsealed last Friday in Manhattan federal court and based on statements made in court proceedings and filings[1]:

From at least in or about October 2019 up to and including November 2020, RIVERA, ARAUJO, and others known and unknown agreed to rob victims of luxury watches worth up to hundreds of thousands of dollars each.  The watches owned by victims targeted in the robberies included Richard Mille, Rolex, Audemars Piguet, and Patek Philippe as part of the jewelers’ businesses based in Manhattan’s Diamond District.  RIVERA used guns to commit several of the robberies, and in one robbery, shot a victim, who survived. 

The 11 robberies and attempted robberies included the following: 

1. On October 3, 2019, RIVERA and a co-conspirator robbed a jeweler in Long Island City, New York, of, among other things, a Richard Mille watch worth over $250,000.
2. On October 25, 2019, RIVERA and a co-conspirator robbed a jeweler in Jamaica, New York, of, among other things, a Rolex watch worth over $150,000.
3. On December 10, 2019, RIVERA, ARAUJO, and a co-conspirator robbed a jeweler in Brooklyn, New York, of, among other things, a Patek Philippe watch worth over $160,000 and a diamond necklace worth over $77,000.  During the robbery, a firearm was shown to the victim.
4. On January 14, 2020, RIVERA and a co-conspirator robbed of a jeweler in Rego Park, New York, of, among other things, a Richard Mille watch worth over $500,000.
5. On February 16, 2020, RIVERA and ARAUJO robbed a jeweler in Jamaica Estates, New York, of, among other things, an Audemars Piguet watch worth over $28,000.
6. On February 20, 2020, RIVERA and a co-conspirator robbed an individual in Long Island City, New York, of, among other things, an Audemars Piguet watch worth over $125,000.
7. On June 11, 2020, RIVERA and ARAUJO robbed a jeweler in Brooklyn, New York, of, among other things, a Richard Mille watch worth over $148,000.  During the robbery, a firearm was shown to the victim and a victim was shot.
8. On July 6, 2020, RIVERA and a co-conspirator robbed a jeweler in Hoboken, New Jersey, of, among other things, a Richard Mille watch worth over $81,000.  Following the robbery, RIVERA and others transported the stolen watch from New Jersey to New York.
9. On July 20, 2020, RIVERA and a co-conspirator participated in an attempted robbery of a jeweler in Queens, New York, attempting to steal a Richard Mille watch worth over $180,000.
10. On August 2, 2020, RIVERA and a co-conspirator robbed an individual in the vicinity of Englewood Cliffs, New Jersey, of, among other things, a Richard Mille watch worth over $250,000.  During the robbery, a firearm was shown to a victim.  Following the robbery, RIVERA and others transported the stolen watch from New Jersey to New York.
11. On October 27, 2020, RIVERA and a co-conspirator robbed a jeweler in the vicinity of Woodbury, New York, of, among other things, an Audemars Piguet watch worth over $26,000 and assorted jewels and gold links worth over $60,000.  During the robbery, a firearm was shown to a victim.           

*                *                *

A chart containing the names, charges, and maximum and minimum penalties for the defendants is set forth below.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Ms. Strauss praised the outstanding investigative work of the New York City Police Department and the Special Agents of the U.S. Attorney’s Office for the Southern District of New York.  Ms. Strauss also thanked the Bergen County Prosecutor’s Office, the Englewood Cliffs Police Department, the Weehawken Police Department, and the Nassau County Police Department for their assistance.

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Mathew Andrews, Andrew K. Chan, and Celia Cohen 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.

COUNT

CHARGE

DEFENDANTS

MAX. PENALTY

  Count One

Hobbs Act Robbery Conspiracy

18 U.S.C. § 1951

VICTOR RIVERA

JOHAN ARAUJO

20 years in prison

Count Two

Money Laundering Conspiracy

18 U.S.C. § 1956(h)

VICTOR RIVERA

20 years

Count Three

Hobbs Act Robbery

18 U.S.C. §§ 1951 and 2

VICTOR RIVERA

20 years

Count Four

Hobbs Act Robbery

18 U.S.C. §§ 1951 and 2

VICTOR RIVERA

20 years

Count Five

Hobbs Act Robbery

18 U.S.C. §§ 1951 and 2

VICTOR RIVERA

JOHAN ARAUJO

20 years

Count Six

Firearms offense

18 U.S.C. §§ 924(c) and 2

VICTOR RIVERA

Life in prison

Mandatory minimum of seven years in prison

Count Seven

Hobbs Act Robbery

18 U.S.C. §§ 1951 and 2

VICTOR RIVERA

20 years

Count Eight

Hobbs Act Robbery

18 U.S.C. §§ 1951 and 2

VICTOR RIVERA

JOHAN ARAUJO

20 years

Count Nine

Hobbs Act Robbery

18 U.S.C. §§ 1951 and 2

VICTOR RIVERA

JOHAN ARAUJO

20 years

Count Ten

Firearms offense

18 U.S.C. §§ 924(c) and 2

VICTOR RIVERA

Life in prison

Mandatory minimum of 10 years in prison

Count Eleven

Attempted Hobbs Act Robbery

18 U.S.C. §§ 1951 and 2

VICTOR RIVERA

20 years

Count Twelve

Interstate Transportation of Stolen Property

18 U.S.C. §§ 2314 and 2

VICTOR RIVERA

10 years

Count Thirteen

Attempted Hobbs Act Robbery and Extortion

18 U.S.C. §§ 1951 and 2

VICTOR RIVERA

20 years

Count Fourteen

Hobbs Act Robbery

18 U.S.C. §§ 1951 and 2

VICTOR RIVERA

20 years

Count Fifteen

Firearms offense

18 U.S.C. §§ 924(c) and 2

VICTOR RIVERA

Life in prison

Mandatory minimum of seven years in prison

Count Sixteen

Interstate Transportation of Stolen Property

18 U.S.C. §§ 2314 and 2

VICTOR RIVERA

10 years

Count Seventeen

Hobbs Act Robbery

18 U.S.C. §§ 1951 and 2

VICTOR RIVERA

20 years

Count Eighteen

Firearms offense

18 U.S.C. §§ 924(c) and 2

VICTOR RIVERA

Life in prison

Mandatory minimum of seven years in prison

 

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[1] As the introductory phrase signifies, the entirety of the text of the Indictment, the description of the Indictment, and the statements made in related court filings and proceedings set forth herein constitute only allegations, and every fact described should be treated as an allegation.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that defendant MICHAEL KEGLEY JR. pled guilty today to his role in the distribution of adulterated and misbranded drugs with the intent to defraud and mislead, in connection with the charges filed in United States v. Navarro et al., 20 Cr. 160 (MKV).  KEGLEY pled guilty before U.S. District Judge Mary Kay Vyskocil, and will be sentenced by Judge Vyskocil on November 22, 2021.

Manhattan U.S. Attorney Audrey Strauss said:  “Michael Kegley promoted and sold unregulated performance enhancing substances intended for use by those engaged in fraud and unconscionable animal abuse in the world of professional horseracing. This conviction underscores that our Office and our partners at the FBI are committed to the prosecution and investigation of corruption, fraud, and endangerment at every level of the horse racing industry.”

According to the allegations contained in the Superseding Information, the prior Indictments[1], other filings in this case, and statements during court proceedings:

The charges in the Navarro case arise from an investigation of widespread schemes by racehorse trainers, veterinarians, performance-enhancing drug (“PED”) distributors, and others to manufacture, distribute, and receive adulterated and misbranded PEDs and to secretly administer those PEDs to racehorses competing at all levels of professional horseracing. By evading PED prohibitions and deceiving regulators and horse racing officials, participants in these schemes sought to improve race performance and obtain prize money from racetracks throughout the United States and other countries, including in New York, New Jersey, Florida, Ohio, Kentucky, and the United Arab Emirates (“UAE”), all to the detriment and risk of the health and well-being of the racehorses.  Trainers who participated in the schemes stood to profit from the success of racehorses under their control by earning a share of their horses’ winnings, and by improving their horses’ racing records, thereby yielding higher trainer fees and increasing the number of racehorses under their control. Veterinarians and drug distributors, such as KEGLEY, who worked as the director of sales for an unregistered distributor of equine drugs, profited from the sale and administration of these medically unnecessary, misbranded, and adulterated substances.

Among the misbranded and adulterated PEDs marketed and sold by KEGLEY was the drug “SGF-1000,” which was compounded and manufactured in unregistered facilities. SGF-1000 was an intravenous drug promoted as, among other things, a vasodilator capable of promoting stamina, endurance, and lower heart rates in horses through the purported action of “growth factors” supposedly derived from sheep placenta. Despite marketing, selling, and administering SGF-1000, KEGLEY acknowledged in intercepted calls that he, along with a co-defendant involved in the sale of SGF-1000, did not know the actual contents of SGF-1000. Nevertheless, KEGLEY’s sales of that drug persisted, aided by the claim that SGF-1000 would be untestable in horses by law enforcement.

*                *                *

U.S. Attorney Strauss praised the outstanding investigative work of the FBI New York Office’s Eurasian Organized Crime Task Force and its support of the FBI’s Integrity in Sports and Gaming Initiative.

This case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant United States Attorneys Sarah Mortazavi, Andrew C. Adams, Anden Chow, and Benet Kearney are in charge of the prosecution.

 

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[1] As to Kegley’s co-defendants, the entirety of the texts of the Indictments and the descriptions of the Indictments set forth herein constitute only allegations and every fact described should be treated as an allegation.

 

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that BRANDON GREEN, a/k/a “Light,” was sentenced today to approximately 24.5 years in prison by U.S. District Judge Paul G. Gardephe in connection with his leadership of the Blood Hound Brims, a violent street and prison gang that operated in New York City and elsewhere, and his participation in narcotics trafficking and firearms offenses.  GREEN was convicted on March 27, 2019, following an approximately five-week jury trial before Judge Gardephe, who also imposed today’s sentence. 

U.S. Attorney Audrey Strauss said:  “Brandon Green, one of the leaders of a ruthlessly violent gang, was responsible for extensive narcotics trafficking throughout the city and state of New York.  Today’s lengthy sentence sends an important message to the Blood Hound Brims and other gang members that they will be arrested, prosecuted and face justice for their crimes.” 

According to court documents, the evidence at trial, and statements made in court proceedings:

The Blood Hound Brims was a criminal enterprise that operated principally in the greater New York area, from at least 2005 up to and including 2016. The BHB was a faction of the Bloods street gang, which operates nationwide, and is under the New York Blood Brim Army (“NYBBA”).  The BHB operated within and around various locations in New York, including New York City, Westchester County, Elmira, and in Pennsylvania, as well as within and outside federal and state penal systems. 

The BHB used a hierarchical structure that was organized, in part, by New York City borough, and that was maintained, in part, through the payment of dues.  The founder and leader of the gang was Latique Johnson, and other members and associates of the BHB referred to Johnson as the “Godfather.” The gang was divided into several “pedigrees,” each of which had its own leadership structure which was approved by Johnson.  Leadership positions within the pedigrees included, among others, treasurers who collected dues from members of a particular pedigree, and individuals who performed security and disciplinary functions for the pedigree. 

Members of the BHB had regular meetings, sometimes called “pow wows” or “9-11s,” at which members were required to pay dues.  Some of the meetings were among members of a particular pedigree, and other meetings were for all members of the Enterprise.  Word of the meetings was disseminated via text message, word-of-mouth, and flyers.  The BHB’s business, including rivalries with other gangs, shootings, the arrest of gang members, guns, and drugs, was regularly discussed at these meetings.  “Kitty dues” – money that paid for commissary funds, lawyers, guns, and drugs, and that served as tribute to Johnson – were collected at these meetings.  The BHB maintained its own rules and constitution that new members were required to learn.  Members of the BHB also used code words and secret phrases to communicate with each other both while in prison and on the street in order to avoid detection by law enforcement.   

One of the BHB’s principal objectives was to sell cocaine base, commonly known as “crack cocaine,” powder cocaine, and heroin, which members and associates of the BHB sold throughout the greater New York area and in Pennsylvania. 

Members and associates of the BHB engaged in multiple acts of violence against rival gangs.  These acts of violence included assaults and attempted murders, which were committed to protect the Gang’s drug territory, to retaliate against members of rival gangs who had encroached on the territory controlled by the BHB, and to otherwise promote the standing and reputation of the Gang vis-à-vis rival gangs.  These acts of violence also included assaults and attempted murders against members and associates of the BHB itself, as part of internal power struggles within the Gang.

GREEN, 38, of the Bronx, New York, was one of BHB’s primary suppliers of cocaine and heroin, providing other Gang members with redistribution quantities of narcotics for resale in New York City and Elmira, New York. GREEN also maintained a supply of firearms, which he sometimes made available to other members of the Gang.  At the time of GREEN’s arrest in May 2017, U.S. Marshals recovered six loaded firearms from the residence where he was living.

                                    *                      *                     *                    

Latique Johnson, a/k/a “La Brim,” 41, of the Bronx, New York, the Gang’s founder, was convicted following a jury trial of of racketeering conspiracy, assault in aid of racketeering, attempted murder in aid of racketeering, narcotics conspiracy, and firearms. Johnson was sentenced in 2019 to 30 years in prison.

Donnell Murray, 41, of the Bronx, New York, a BHB leader was convicted following a jury trial of racketeering conspiracy, assault in aid of racketeering, narcotics conspiracy, and a firearms offense.  Murray was sentenced in 2019 to 20 years in prison.

David Cherry, 40, of the Bronx, New York, a BHB leader, was convicted following a guilty plea to a firearms offense.  Cherry was sentenced in June to 10 years in prison.

Ms. Strauss praised the outstanding investigative work of the Federal Bureau of Investigation, the New York City Police Department, and the Special Agents of the United States Attorney’s Office for the Southern District of New York.

The prosecution is being handled by the Violent and Organized Crime Unit of the U.S. Attorney’s Office for the Southern District of New York.  Assistant U.S. Attorneys Jessica Feinstein, Allison Nichols, and Andrew Chan are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that EDDIE COTTO, a/k/a “Eddie Diamond,” was found guilty yesterday in Manhattan federal court following a week-long jury trial before U.S. District Judge Jed S. Rakoff.  COTTO is scheduled to appear for sentencing before Judge Rakoff on November 3, 2021.

U.S. Attorney Audrey Strauss said:  “As a unanimous jury swiftly determined, Eddie Cotto peddled poison in a public housing building for over a year, disrupting the lives of New Yorkers.  Cotto’s distribution of heroin, cocaine, and fentanyl and his callous disregard for its consequences have resulted in today’s conviction.”

As reflected in the Indictment, public filings, and other evidence presented at trial:

EDDIE COTTO was the leader of a drug trafficking organization (the “DTO”) that operated in New York, New York, and controlled drug sales of heroin, cocaine, and fentanyl in and around a New York City Housing Authority building at 1760 Lexington Avenue (the “Building”).  COTTO supervised and coordinated the supply of narcotics to his co-defendants, and stored the DTO’s narcotics in the locked janitorial closets of the Building.  COTTO acted as the gatekeeper of the Building generally from the safety of a Winnebago that COTTO parked in the vicinity of the Building.  From the early morning hours, COTTO would direct his co-defendants, generally via walkie-talkie, to serve customers whom COTTO was sending to the Building to complete narcotics transactions. 

*                *                *

COTTO, 61, of New York, New York, was convicted of one count of narcotics conspiracy in violation of 21 U.S.C § 846 and four counts of narcotics distribution in violation of 21 U.S.C. §§ 841(a)(1) and 841(b)(1)(C).  COTTO faces a mandatory minimum term of five years’ imprisonment and a total maximum sentence for all counts of conviction of 120 years in prison.

Other members of the conspiracy in this case who have been sentenced include SAMMY MCCOY, 64, of New York, New York, who was sentenced to 98 months in prison on May 19, 2019, ERVIN ORTIZ, 62, of New York, New York, who was sentenced to 66 months in prison on May 20, 2021, and JJIMMY RIVAS, 28, of New York, New York, who was sentenced to 24 months in prison on October 11, 2019.  MCCOY and RIVAS were sentenced by U.S. District Judge Victor Marrero and ORTIZ was sentenced by Judge Rakoff.

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

The prosecution is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Timothy V. Capozzi, Rebecca T. Dell, Aline R. Flodr, and Emily A. Johnson are in charge of the prosecution. 

The U.S. Department of Justice today launched five cross-jurisdictional strike forces to help reduce gun violence by disrupting illegal firearms trafficking in key regions across the country.  Leveraging existing  resources, the regional strike forces will better ensure sustained and focused coordination across jurisdictions and help stem the supply of illegally trafficked firearms from source cities, through other communities, and into five key market regions:  New York, Chicago, Los Angeles, the San Francisco Bay Area/Sacramento Region and Washington, D.C.

Each strike force region will be led by designated United States Attorneys, who will collaborate with the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) and with state and local law enforcement partners within their own jurisdiction (where firearms are used in crimes) as well as law enforcement partners in areas where illegally trafficked guns originate. These officials will use the latest data, evidence, and intelligence from crime scenes to identify patterns, leads, and potential suspects in violent gun crimes.

“All too often, guns found at crime scenes come from hundreds or even thousands of miles away. We are redoubling our efforts as ATF works with law enforcement to track the movement of illegal firearms used in violent crimes.  These strike forces enable sustained coordination across multiple jurisdictions to help disrupt the worst gun trafficking corridors,” said Attorney General Merrick B. Garland. “The Department of Justice will use all of its tools – enforcement, prevention, intervention, and investment – to help ensure the safety of our communities – the department’s highest priority.”

According to gun trace data, the vast majority of firearms recovered in New York City originate outside the state and are illegally trafficked into New York. The new strike force, led by Audrey Strauss, the U.S. Attorney for the Southern District of New York, and Jacquelyn M. Kasulis, the Acting U.S. Attorney for the Eastern District of New York, will help ensure sustained and focused coordination between law enforcement and prosecutors in New York City with their counterparts in locations where many of the firearms originate.

U.S. Attorney Audrey Strauss said: “Disrupting the flow of guns into New York City is an important part of our anti-violence efforts.  We look forward to working with our federal and state partners to investigate and prosecute gun trafficking cases.  Because many of the firearm source locations for New York City overlap with the source locations for firearms recovered in the District of Columbia, we will coordinate our efforts with our D.C. counterparts.”

U.S. Attorney Jacquelyn M. Kasulis said: “Gun violence has taken a terrible, unacceptable toll on our communities, and it must be stopped.  Stemming the flow of illegal guns into New York City is critical to eradicating gun violence in our city.  We are committed to working with our federal and state partners to investigate and prosecute gun trafficking to the fullest extent of the law.”

The strike forces represent one important, concrete step in implementing the Department’s Comprehensive Violent Crime Reduction Strategy, which was announced on May 26, 2021. The comprehensive strategy supports local communities in preventing, investigating, and prosecuting gun violence and other violent crime – and requires U.S. Attorneys’ offices to work with federal, state, local and tribal law enforcement, as well as the communities they serve, to address the most significant drivers of violence in their districts. In guidance to federal agents and prosecutors as part of that comprehensive strategy, the Deputy Attorney General made clear that firearms traffickers providing weapons to violent offenders are an enforcement priority across the country.

Audrey Strauss, the United States Attorney for the Southern District of New York, Ray Donovan, Special Agent in Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), John B. DeVito, Special Agent in Charge of the New York Field Office of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”), Philip R. Bartlett, Inspector-in-Charge of the New York Office of the United States Postal Inspection Service (“USPIS”), Dermot Shea, Commissioner of the New York City Police Department (“NYPD”), and Kevin P. Bruen, Superintendent of the New York State Police (“NYSP”), announced today the unsealing of a superseding indictment in Manhattan federal court charging PEDRO GUZMAN MARTINEZ, a/k/a “Peter,” ABEL MONTILLA, a/k/a “Coche Bomba,” JORGE MIRANDA-SANG, a/k/a “Chinito,” and LUIS GOMEZ ORTIZ, a/k/a “Kiké,” with participating in a drug trafficking organization that shipped approximately 4,500 kilograms of cocaine from Puerto Rico to the continental United States, including to New York, Massachusetts, Florida, and Connecticut, for sale and distribution over a period of approximately 10 months.  GUZMAN MARTINEZ and MIRANDA-SANG were arrested this morning in Puerto Rico and are expected to be presented before a magistrate judge in the District of Puerto Rico later today.  GOMEZ ORTIZ was arrested this morning in Florida and is expected to be presented before a magistrate judge in the Middle District of Florida later today.  MONTILLA was arrested this morning in Springfield, Massachusetts, and is expected to be presented before U.S. Magistrate Judge Katharine H. Parker in the Southern District of New York later today.  The case is assigned to U.S. District Judge P. Kevin Castel.    

U.S. Attorney Audrey Strauss said: “These defendants allegedly hid nearly five tons of cocaine in furniture so they could ship it from Puerto Rico to New York City and elsewhere.  As alleged, for a time, the defendants were able to hide their cocaine, but they were unable to hide the scheme from our law enforcement partners.  We will continue to focus on prosecuting large-scale traffickers of illegal drugs.”

DEA Special Agent in Charge Ray Donovan said: “Traffickers have always found new and innovative methods of smuggling drugs into the United States. In this case, they allegedly concealed cocaine into hollowed out furniture. This nearly three-year investigation has dismantled an international drug trafficking organization that allegedly has been shipping thousands of kilograms of cocaine, ultimately destined for our communities.  I applaud our law enforcement partners from the US Attorney’s Office in the Southern District of New York, the ATF and the USPIS for their efforts in bringing this organization to justice.”

ATF Special Agent in Charge John B. DeVito said: “The defendants are alleged to run a drug trafficking organization which conspired to flood our streets with unprecedented levels of illegal narcotics. Thankfully, through the diligent efforts of our law enforcement partners, their alleged operation has been disrupted and dismantled successfully. ATF is committed to the fight against the illegal drug trade and will stand shoulder to shoulder with all of our local, state and federal partners to see that these organizations are eradicated from our communities. I would like to thank the United States Attorney’s Office for their leadership during this investigation.”

USPIS Inspector-in-Charge Philip R. Bartlett: said: “Winning the battle against illicit drugs is a top priority for the Postal Inspection Service and our law enforcement partners. Our objectives are to rid society of illicit drug trafficking and the associated violence, and most importantly, provide a safe environment for the American public.”

Police Commissioner Dermot Shea said: “Today’s charges demonstrate that the investigative efforts of New York City law enforcement are far-reaching, precisely-focused, and patient. As long as individuals – wherever they are based – are involved in illegal narcotics trafficking, the NYPD and our partners will relentlessly work to stop the spread of illegal narcotics on our streets. I commend our colleagues at the United States Attorney’s Office in the Southern District of New York, and our law enforcement partners at the DEA, ATF and USPIS for their dedication and hard work to bring these individuals to justice.”

State Police Superintendent Kevin P. Bruen said: “These arrests are the result of a sustained investigation into a narcotics trafficking organization that was allegedly shipping large quantities of cocaine into the United States, including New York. I want to thank our members and our law enforcement partners for their work on this case and their commitment to stopping the flow of illegal drugs into our country.”

According to the allegations contained in a Superseding Indictment unsealed today in Manhattan federal court and other filings in the case[1]: 

Between at least September 2018 and June 2019, GUZMAN MARTINEZ, MONTILLA, MIRANDA-SANG, and GOMEZ ORTIZ were members of a drug trafficking organization (“DTO”) who conspired to distribute and possess with intent to distribute five kilograms and more of cocaine.

The defendants operated the drug trafficking scheme by arranging for the shipment of approximately 70 large parcels from Puerto Rico to the continental United States.  The cocaine was concealed in custom tables and other furniture, and the packages containing the cocaine were represented to be furniture on shipping documentation, but the hollowed-out furniture in fact concealed hundred-kilogram quantities of cocaine.  In total, the trafficking organization shipped approximately 4,500 kilograms of cocaine, worth approximately $144 million on the street.

GUZMAN MARTINEZ was responsible for delivering the packaged cargo (containing hollowed-out furniture filled with cocaine) to co-conspirators whom GUZMAN MARTINEZ hired to facilitate the shipping logistics using a false company name.

MIRANDA-SANG and GOMEZ ORTIZ identified and hired individuals in the continental United States to receive and sign for DTO shipments, to unpack and distribute the cocaine to other DTO members as directed, and to dispose of the packaging materials to evade detection by law enforcement.

MONTILLA was a Massachusetts-based coordinator of cocaine deliveries who traveled to many delivery locations and coordinated the delivery of cocaine shipments with package recipients.  At least a dozen packages were sent to addresses affiliated with MONTILLA.

*                *                *

MONTILLA, 48, of Springfield, Massachusetts, and GUZMAN MARTINEZ, 47, MIRANDA-SANG, 42, and GOMEZ ORTIZ, 29, all of Puerto Rico, are each charged with one count of conspiracy to distribute and possess with the intent to distribute narcotics, which carries a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison.  The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.

Ms. Strauss praised the outstanding investigative work of the DEA, ATF, USPIS, NYPD, and NYSP in this investigation.

The prosecution is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Juliana N. Murray, Ryan B. Finkel, and Peter J. Davis are in charge of the prosecution.

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

 

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[1] As the introductory phrase signifies, the entirety of the text of the Superseding Indictment and the description of the Superseding Indictment set forth herein constitute only allegations, and every fact described should be treated as an allegation.

Audrey Strauss, the United States Attorney for the Southern District of New York, and William W. Richards, Special Agent in Charge of the United States Air Force Office of Procurement Fraud Investigations, Joint Base Andrews, announced today that RAYMOND WHITE,  a/k/a “John Raymond Anthony White,” a/k/a “Raymond Alexander White,” was arrested by agents from the Air Force Office of Special Investigations and the Army Major Procurement Fraud Unit this morning at his residence in New York, New York.  WHITE is charged by complaint with submitting false information regarding WHITE’s general contractor business’s finances and prior performance of contracts in order to obtain a contract to build a munitions load crew training facility at Joint Base Andrews, Maryland, and submitting false information to the United States Small Business Administration (SBA) in order to induce the SBA to guarantee 80% of the performance and payment bonds issued in connection with the contract.  The contract was worth in excess of $4.8 million.

Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Raymond White lied and provided false documentation and credentials to the military and the Small Business Administration in procuring a multimillion-dollar contract he was not qualified to fulfill.  Among other fabrications, White allegedly provided a report from an independent accounting firm that appears not to exist.  White also allegedly provided as a reference the owner of a prior $9 million contracting project, but both the owner and the prior project appear to have been made up out of whole cloth.  As alleged, Raymond White’s actual specialty appears to be the construction of fantastical falsehoods.”

Office of Procurement Fraud Investigations Special Agent in Charge William W. Richards said: “The Office Procurement Fraud Investigations, along with our law enforcement and prosecutorial partners, will work tirelessly to combat fraud threatening the Department of the Air Force.”

According to the allegations in the Complaint unsealed today in Manhattan federal court[1]:

Beginning on or about May 12, 2019, through at least in or about September 2020, WHITE, president and chief executive officer of a construction management and general contractor company (the “Contractor), submitted a bid to the District of Columbia Army National Guard (“DCARNG”) on a contract (the “Contract”) to build a munitions load crew training facility at Joint Base Andrews, Maryland.  Between September 21, 2019, and September 30, 2019, in response to a pre-award questionnaire sent by the contract specialist, WHITE emailed several documents, including an “Independent Accountants’ Report,” a “Construction Contractor Experience Data,” and a “Firm Dossier” to the contract specialist for the DCARNG.  The contract was awarded to September 30, 2019, to the Contractor for $4,801,000.  These documents contained false financial reports regarding the Contractor’s finances, false information regarding past performance of contracts by the Contractor, and false information regarding members of the management team for the Contractor.  The contract was terminated on or about September 16, 2020, for providing false information to the DCARNG, and no construction work had been performed yet on the site.

As required by federal law, WHITE was required to obtain performance and payment bonds provided by an insurer (generally referred to in the business as a surety) for the Contract. On or about October 23, 2019, the Contractor received a performance and payment bond from a bond insurance company (the “Surety”), and the Surety required that the Contractor obtain a guarantee of the bond from the United States Small Business Administration (“SBA”), so that in the event of default on the bond, the Surety would be reimbursed 80%-90% of any loss incurred by the SBA.  In or around October 2019, WHITE emailed the SBA bond guarantee application materials to a surety bond broker to submit to the SBA.  The application materials included, among other documents, financial statements and a statement of personal history for WHITE.  These documents contained fictitious financial reports regarding the Contractor’s finances and false information regarding past contracts performed by the Contractor.  WHITE also falsely represented in the Statement of Personal History that he never had been convicted of any criminal offense, when WHITE was previously convicted on April 21, 2011, in the Southern District of New York of mail fraud (18 USC § 1341), major fraud against the United States (18 USC § 1031), false statements (18 USC § 1001(a)), and tampering with a witness (18 USC § 1512(b)(3)).  WHITE also listed his name as “Raymond Alexander White” and provided a social security number and date of birth different from those listed in his Bureau of Prisons records.  On or about October 31, 2019, the Contractor obtained a guarantee from the SBA of 80% of the payment and performance bond.  As a result of Contract termination, the SBA has fulfilled three claims that the Surety has submitted to the SBA pursuant to the guarantee provided by the SBA to the bonds issued by the Surety, totaling $242,827.53 as of January 26, 2021.

*                *                *

WHITE, 56, of New York, New York, is charged with one count of major fraud against the United States, which carries a maximum sentence of 10 years in the prison, and two counts of wire fraud, each of which carries a maximum sentence of 20 years in prison.  

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

Ms. Strauss praised the work of the Air Force Office of Procurement Fraud Investigations and the Army Major Procurement Fraud Unit in this investigation.

The case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorney Edward C. Robinson Jr. 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.

 

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[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described herein should be treated as an allegation as to the defendants charged in the Complaint.

Audrey Strauss, the United States Attorney for the Southern District of New York, and Ray Donovan, Special Agent in Charge of the New York Division of the U.S. Drug Enforcement Administration (“DEA”), announced charges today against seven individuals involved in laundering tens of millions of dollars for drug trafficking organizations selling illegal narcotics throughout the United States.  YING SUN, JIAN WANG, FRANK LIU, DIELONG WU, LARRY LAI, and JIE LIN, are charged with conspiracy to commit money laundering and conspiracy to operate an unlicensed money transmission business; STEVEN WOO was also charged as part of the conspiracy to operate an unlicensed money transmission business.  SUN, LIU, and WOO were arrested in California and will be presented in the Central District of California this afternoon before Magistrate Judge John D. Early.  WU and LAI were arrested today in New York and will be presented in the Southern District of New York before Magistrate Judge Katharine H. Parker.  WANG and LIN remain at large.  During the investigation, law enforcement agents seized over $6.5 million from the defendants’ money laundering organization, and, in coordination with unsealing the charges today, seized an additional $8 million in assets traceable to the illicit proceeds laundered by the organization.  The case is assigned to U.S. District Judge Sidney H. Stein.

U.S. Attorney Audrey Strauss said: “Like drug dealers, those who launder the proceeds of drug trafficking profit from the sale of dangerous narcotics that wreak havoc in communities throughout the United States.  As alleged, the individuals arrested today facilitated drug traffickers by concealing millions of dollars of their ill-gotten profits.  Our Office will continue to work closely with the DEA and our law enforcement partners to go after the money networks that are necessary to the operations of the international drug trade.”

DEA Special Agent in Charge Ray Donovan said: “One of the most powerful criminal elements of transnational drug trafficking organizations is money laundering. Like any business, the ultimate goal of drug trafficking is to profit. These money laundering networks provide an invaluable service to traffickers, transferring their ill-gotten gains across the globe. The men and women of the DEA are focused on bringing to justice not only drug traffickers, but anyone who facilitates the drug trade.”

According to the allegations in the Indictment unsealed today[1]:

From at least November 2019 through May 2021, SUN coordinated the activities of a money laundering organization (“MLO”), communicating with drug trafficking organizations (“DTOs”) throughout the United States and in Mexico to receive large quantities of cash to be laundered.  From April 2020 through April 2021, SUN organized more than 130 money pickups in 23 states involving over $20 million in drug trafficking proceeds.  WANG, LIU, WU, LAI, LIN, and WOO facilitated the MLO’s operations by conducting these money pickups, transporting the cash, depositing the money into the retail banking system, and/or transferring the money to different individuals or entities.

During the course of the investigation, law enforcement agents conducted numerous seizures of bulk currency in connection with the money pickups conducted by the MLO, and seized over $6.5 million.

*                *                *

SUN, 65, of Arcadia, California, WANG, 52, of Rosemead, California, LIU, 65, of Yorba Linda, California, WU, 58, of Staten Island, New York, LAI, 69, of Queens, New York, and LIN, 58, of Upland, California, are each charged with one count of conspiracy to commit money laundering, which carries a maximum penalty of 20 years in prison, and, along with WOO, 69, of Montebello, California, one count of conspiracy to operate an unlicensed money transmission business, which carries a maximum penalty of five years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Ms. Strauss praised the outstanding work of the DEA.  She also thanked the Internal Revenue Service and the U.S. Attorney’s Office for the Central District of California for their assistance.

This case is being handled by the Office’s Narcotics Unit.  Assistant United States Attorney Brett M. Kalikow 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.

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[1]   As the introductory phrase signifies, the entirety of the text of the Indictment, and the description of the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.

 

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that DONALD LAGUARDIA was sentenced today to 60 months in prison for his securities fraud and misappropriation scheme.  LAGUARDIA was the chief executive and co-founder of a New York-based investment firm, L-R Managers, LLC, which managed the LR Global Frontier Master Fund and two related feeder funds (collectively, the “Frontier Funds”).  LAGUARDIA was found guilty of securities fraud, investment adviser fraud, and wire fraud following a trial last November before United States District Judge Lewis A. Kaplan, who imposed today’s sentence.

U.S. Attorney Audrey Strauss said: “Donald LaGuardia pitched his clients on frontier market investments, but the Frontier Funds turned out to be a front for fraud.  LaGuardia betrayed his clients’ trust by diverting millions to other uses, including his own personal and business expenses.  Now LaGuardia has been sentenced to prison for his crimes.”

According to statements in the Indictment, evidence presented during the trial, and other filings and statements at public court proceedings in the case:

From in or about 2013 through in or about 2017, LAGUARDIA solicited approximately $6.4 million from investors for Frontier Funds, which had a stated focus on investments in “frontier” markets in Latin America, Central and Eastern Europe, the Middle East, Africa, and Asia.  Contrary to LAGUARDIA’s representations, and in breach of his duties to investors in the Frontier Funds, LAGUARDIA misappropriated investors’ money to finance L-R Managers’ payroll, pay rent for its office space on Park Avenue in Manhattan, and pay hundreds of thousands of dollars in charges on the firm’s credit card, among other unauthorized expenses.  Hundreds of thousands of dollars went to the benefit of LAGUARDIA personally.

In one example, in 2013, LAGUARDIA solicited an $800,000 investment in the Frontier Funds from an investor (“Investor-1”).  Upon receipt of Investor-1’s money, an L-R Managers employee sent an email to LAGUARDIA and another person asking for approval to forward the $800,000 to the Frontier Funds.  LAGUARDIA responded, “Dont [sic] wire anything yet!”  LAGUARDIA then caused approximately $390,000 of Investor-1’s investment never to be transmitted to the Frontier Funds, but instead to be used to pay himself approximately $52,000 and for various other personal and business expenses.

By September 2015, L-R Managers faced substantial financial difficulties.  On September 1, 2015, an L-R Managers principal sent an email to LAGUARDIA and others at the firm stating that it would be “ethically troubling to accept money into the [Frontier Funds] when [L-R Managers] can no longer support . . . payroll and mission critical services.”  Nevertheless, just a few days later, a new investor solicited by LAGUARDIA (“Investor-2”) made a $2 million investment into the Frontier Funds.  Prior to this investment, LAGUARDIA concealed his firm’s near insolvency from Investor-2 and did not disclose that the Frontier Funds had been paying substantial expenses for L-R Managers, contrary to the representations in the funds’ offering documents.  LAGUARDIA then proceeded, over the course of several months, to use a substantial portion of Investor-2’s investment in the Frontier Funds to continue paying himself and subsidizing his firm’s business expenses.

*                *                *

LAGUARDIA, 54, of Lavallette, New Jersey, was also sentenced to three years of supervised release.  He was further ordered to forfeit $2,571,500 and pay restitution to victims in the amount of $4,039,872.46.

Ms. Strauss praised the investigative work of the U.S. Postal Inspection Service and thanked the U.S. Securities and Exchange Commission for its assistance.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant United States Attorneys Margaret Graham and Daniel Loss are in charge of the prosecution.

Audrey Strauss, United States Attorney for the Southern District of New York, announced that STEVEN WHITTICK, the former treasurer of the Law Enforcement Employees Benevolent Association (“LEEBA”) and an officer with the New York City (the “City”) Department of Environmental Protection (“DEP”), pled guilty today before United States District Judge P. Kevin Castel, to charges of conspiring to evade more than $250,000 in federal taxes, including payroll taxes owed by LEEBA and its employees, and his own personal income taxes.  WHITTICK also pled guilty to lying to federal officers during the course of the investigation in this case.  LEEBA is a labor union that represents certain law enforcement officers employed by the City, including officers from DEP, the City Department of Sanitation, and the City Department of Transportation. 

U.S. Attorney Audrey Strauss said: “Steven Whittick today pled guilty to charges that reflect a betrayal of his duties as a law enforcement officer, his legal obligations as a union official, and his responsibilities as a taxpayer.  As a police officer, Whittick swore to uphold the law, not to obstruct it.  As a union official, he betrayed the rank-and-file membership by paying himself off the books.  As a taxpayer, Whittick evaded his legal obligation to pay what was owed.  Now, Steven Whittick awaits sentencing for his crimes.”

According to the Indictment and the underlying complaints filed in this case, as well as other publicly available information and prior court filings, and recent court proceedings:

Law Enforcement Employees Benevolent Association

LEEBA is a labor union that has acted as the collective bargaining representative principally for law enforce­ment personnel at various City agencies, and has entered into agreements on behalf of those law enforcement employees, including agreements for insurance and retirement benefits.  The City agencies whose employees LEEBA represented included, at various times, DEP, the Department of Sanitation, and the Department of Transportation.           

WHITTICK

WHITTICK is a DEP police officer, the former treasurer of LEEBA, and a member of the board of directors of LEEBA and the boards of trustees of the LEEBA Annuity Fund and the LEEBA Welfare Fund.  As LEEBA’s treasurer, WHITTICK had responsibility for LEEBA’s financial matters and accounts, including arranging for LEEBA to pay its payroll through an outside payroll processing firm (the “Payroll Processor”) starting in 2016.  WHITTICK also held signatory authority over LEEBA’s main operating bank account.

            The Tax Evasion Conspiracy

As charged in Count Two of the Indictment, to which WHITTICK pled guilty today, from at least in or about 2015 through 2019, WHITTICK participated in a conspiracy with Kenneth Wynder Jr.,[1] the president of LEEBA, to cause LEEBA to make payments to WHITTICK and Wynder, by check and in cash, and to conceal such payments from the Internal Revenue Service (“IRS”).  WHITTICK further conspired to ensure that such payments were made outside of LEEBA’s Payroll Processor.  He then concealed these payments from the IRS – including off-the-books payments to himself of more than $100,000 and off-the-books payments to Wynder of more than $400,000 – in order to evade his own personal income taxes and the personal income taxes of Wynder, and to evade the payroll taxes that were owed by LEEBA and certain LEEBA employees.

WHITTICK’s False Statements to Federal Agents

In or about October 2019, while serving as LEEBA’s Treasurer and after learning of a federal investigation into LEEBA’s finances – including the investigation of an alleged embezzlement scheme that ultimately resulted in wire fraud charges against Wynder – WHITTICK repeatedly lied to federal agents in an effort to obstruct that investigation.  WHITTICK did so despite personal involvement in some of the financial improprieties with which Wynder is charged.  For example, as alleged, on at least two occasions, on or about February 1, 2018, and March 30, 2018, WHITTICK withdrew $16,000 in cash from a LEEBA bank account, and on each occasion deposited $15,000 cash into Wynder’s personal bank account and $1,000 cash into WHITTICK’s own personal bank account. 

 

            After the FBI executed a search warrant of LEEBA’s offices in September 2019, WHITTICK attempted to obstruct and to influence the ongoing federal investigation by making, in two different interviews with law enforcement agents, false statements about, among other subjects, cash withdrawals he made from LEEBA’s bank accounts, unauthorized withdrawals from LEEBA’s Annuity Fund and from the individual retirement accounts of Fund participants, and LEEBA’s payment for certain travel and entertainment expenses for union officers, including WHITTICK and Wynder.

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WHITTICK, 51, of Kingston, New York, pled guilty today to: (1) one count of conspiracy to evade personal and payroll taxes for the tax years 2015 through 2018 and the first three quarters of 2019; and (2) one count of lying to federal investigators.  Each of those charges carries a maximum sentence of five years in prison, a maximum fine of $250,000 or twice the gross gain or loss from the offense, and an order of restitution.  WHITTICK is scheduled to be sentenced by Judge Castel on November 17, 2021, at 11:00 a.m. 

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

Ms. Strauss praised the outstanding work of the FBI, IRS-Criminal Investigation, and the Department of Labor Office of Labor Managements Standards.  Ms. Strauss also thanked the New York City Comptroller’s Office and the New York City Department of Investigation for their assistance.

The case is being prosecuted by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys David Raymond Lewis and Eli J. Mark are in charge of the prosecution.

 

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[1] Wynder is charged in six counts of the same Indictment in which WHITTICK was charged.  The charges against Wynder contained in the Indictment are accusations only.  Wynder remains presumed innocent unless and until proven guilty.

Audrey Strauss, the United States Attorney for the Southern District of New York, and George M. Crouch Jr., Special Agent-in-Charge of the Newark Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an Indictment charging DILLON JORDAN, a/k/a “Daniel Jordan,” a/k/a “Daniel Maurice Hatton, a/k/a “Daniel Bohler, with conspiracy to violate the Mann Act, substantive Mann Act and Travel Act violations, and money laundering in connection with operating a prostitution business and laundering the proceeds of that prostitution business through two front companies – a purported party and event planning company and an actual movie production company.  JORDAN was arrested today in San Bernardino County, California, and will be presented today in the Central District of California.

Manhattan U.S. Attorney Audrey Strauss said: “As alleged, for years, Dillon Jordan operated an extensive and far-reaching prostitution business, using a purported event planning company and a movie production company to conceal the proceeds he made from exploiting women.  Now the party is over and the film is a wrap.”

FBI Special Agent-in-Charge George M. Crouch Jr. said: “This defendant apparently thought he could hide his alleged criminal dealings behind a supposedly legitimate business.  But the FBI, in its mission to protect our citizens, uses every tool at its disposal to unmask those who violate federal law and assist the impacted victims.  We encourage anyone who was victimized by this defendant, and anyone with additional information, to contact our Newark field office.”

As alleged in the Indictment unsealed today in Manhattan federal court:[1]

From in or about 2010 through at least in or about May 2017, JORDAN operated a prostitution business throughout the United States and abroad.  JORDAN maintained a roster of women who resided around the United States and who, in exchange for payment, performed sexual acts for JORDAN’s clients at locations throughout the United States, including the Southern District of New York, and abroad.  JORDAN communicated with the clients of his prostitution business by email to coordinate the prostitution services, which included sending to clients photos of women who were available for hire for prostitution services, discussing the price of prostitution services, and overseeing travel logistics for women to travel to engage in prostitution.  At times, JORDAN himself arranged the interstate travel from the women to engage in prostitution, and at other times, clients, at JORDAN’s direction, arranged the interstate travel for the women whom JORDAN directed to those clients.  To facilitate his prostitution business, JORDAN also coordinated with a United Kingdom-based madam by sharing and referring customers and prostitutes.

JORDAN primarily managed the finances of the prostitution business through two front companies – a purported party and event planning company and a movie production company – incorporated in California.  JORDAN opened multiple bank accounts for these companies, which he used to accept cash, wire, and check payments for prostitution services from clients and to pay for the expenses of the prostitution business, including paying the women for their prostitution services by cash and check.  By using the two front companies to receive deposits from the prostitution business, JORDAN ensured that transactions involving those proceeds from the prostitution business would disguise the nature, source, and origin of those proceeds.    

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JORDAN, 49, of Lake Arrowhead, California, is charged with: one count of conspiracy to violate the Mann Act, which carries a maximum sentence of five years in prison; one count of enticement, which carries a maximum sentence of 20 years in prison; one count of use of interstate commerce to promote unlawful activity, which carries a maximum sentence of five years in prison; and one count of money laundering, which carries a maximum sentence of 20 years in prison.  The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge. 

We urge anyone who feels she may be a victim of, or have information related to, the conduct in this case to please contact the FBI at NK-Victim-Assistance@fbi.gov or (973) 792-3000.

Ms. Strauss praised the investigative work of the FBI.  This case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant United States Attorney Cecilia E. Vogel is in charge of the prosecution.

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

 

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[1] As the introductory phrase signifies, the entirety of the text of the Indictment, and the description of the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.

Audrey Strauss, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an Indictment in Manhattan federal court charging MICHAEL PALLESCHI, the former Chief Executive Officer of FTE Networks, Inc. (“FTE”), and DAVID LETHEM, the former Chief Financial Officer of FTE, with conspiracy, securities fraud, and wire fraud, improperly influencing the conduct of an audit and aggravated identity theft.  These charges stem from the defendants’ years-long scheme to inflate FTE’s revenue, to conceal liabilities and expenses, and to embezzle company funds.  PALLESCHI was arrested this morning in the Northern District of New York and will be presented today in that district.  LETHEM was arrested this morning in the Middle District of Florida and will be presented today in that district. 

U.S. Attorney Audrey Strauss said:  “When corporate executives sell their company’s stock to the public, they assume the responsibility under federal law of making full and accurate disclosures about their company’s financial condition to investors.  Palleschi and Lethem instead chose to lie about FTE’s finances to make the company appear more financially healthy than it was, thus defrauding FTE’s stockholders and lenders. Instead of forthrightness with their investors, Palleschi and Lethem chose the easy way to cash in by obfuscating FTE’s true financial health through fake documents and forged signatures. This Office is committed to ensuring the integrity of our capital markets through vigorous enforcement of federal securities laws.”

FBI Assistant Director William F. Sweeney Jr. said:  “Concealing a company’s true financials from investors is not only an unscrupulous business practice, but in the case of Palleschi and Lethem, as we allege today, it amounted to a federal crime. Financial fraud schemes are all too common, and in order to maintain investor confidence, we need to hold accountable those who perpetrate them.” 

According to the Indictment unsealed today in Manhattan federal court:[1]

FTE was a telecommunications company based in Naples, Florida and Manhattan.  As of December 2017, its stock traded on the NYSE American market.  From 2014 to 2019, PALLESCHI was the chairman of FTE’s Board of Directors and its Chief Executive Officer.  LETHEM served as FTE’s Chief Financial Officer from 2014 through 2019.

Fraud with Respect to Convertible Notes

From 2016 to early 2019, PALLESCHI and LETHEM caused FTE to issue approximately 70 notes with a total principal balance of more than $22 million to private lenders that the lenders could convert to FTE’s common stock, either upon demand or upon default.  Issuers of such convertible notes must recognize on their financial statements liabilities and expenses that arise from the notes’ conversion features.  PALLESCHI and LETHEM caused FTE to recognize only the principal amounts and resulting interest expense on the company’s books but not the substantial liabilities and expenses arising from the notes’ conversion features.

In furtherance of the scheme, PALLESCHI and LETHEM took several steps to conceal the notes’ conversion features:

Rather than provide FTE’s accountants and auditors with copies of the actual convertible notes, the defendants created fake notes with the same lenders, principal amounts and other terms as the convertible notes and gave the fake notes to the auditors and accountants.  PALLESCHI and LETHEM created more than 35 such fake notes with a total principal balance of more than $14 million. 

PALLESCHI and LETHEM also created fake resolutions of FTE’s Board of Directors that purportedly authorized the company to issue the convertible notes on which they forged the Directors’ signatures.  The defendants then provided these forged Board resolutions to FTE’s lenders. 

On four occasions in June 2017, LETHEM forged the signature of a representative of FTE’s transfer agent on letters that he provided to lenders.  The transfer agent kept records of who owned FTE’s stock and held stock shares that the company had not yet issued.  The forged letters purported to confirm that the transfer agent would hold a sufficient number of shares of FTE’s stock in reserve to pay a convertible lender in case the lender decided to convert a convertible note into FTE stock.  These letters protected convertible lenders by ensuring that enough shares of FTE’s stock would be available to pay off the convertible notes.  Convertible lenders generally required their borrowers to provide them with such letters before funding a convertible note.

PALLESCHI and LETHEM lied repeatedly to FTE’s auditors by falsely denying that the company had issued convertible debt.  In April 2018, LETHEM falsely denied to the auditors that FTE had issued two specific convertible notes.  Three days later, both PALLESCHI and LETHEM repeated this false denial to the auditors in a management representation letter related to the audit of FTE’s 2017 year end financial statements.  PALLESCHI and LETHEM also falsely denied to the auditors in April 2018 and again in November 2018 that a $1.4 million note FTE had entered into in April 2018 was convertible.  When the auditors asked to see a copy of the $1.4 million note, LETHEM falsely claimed that his sole electronic copy of the note was lost because the electronic file had become corrupted.  When the auditors continued to ask for the note, LETHEM concealed that he had the note all along by sending the note to a company attorney and arranged for the attorney to send it back to him.  LETHEM then forwarded the attorney’s email to a company Director, who forwarded it to the auditors with the notation that “[the attorney] found the note!”  When the auditors then asked that the attorney review her files for other notes, LETHEM and the attorney falsely responded that the attorney did not know of, or possess, additional convertible notes.

As a result of this fraud with respect to convertible notes, the defendants caused FTE to understate its debt derivative liabilities and warrant derivative liabilities and to fail to recognize losses on conversion derivative liabilities and losses on issuance of notes in 2017 and 2018.  For example, FTE’s year end 2017 financial statements understated FTE’s debt derivative liabilities by $48 million and warrant derivative liabilities by $16 million.  FTE also failed to recognize a $35 million loss on conversion derivative liabilities and a $42 million loss on issuance of notes for the year ending 2017. 

Fraudulent Revenue Recognition

PALLESCHI and LETHEM also caused FTE to recognize more than $13 million in fraudulent revenue:

This fraudulent revenue included more than $10 million in “unbilled” revenue that the defendants represented FTE had earned from services it had supposedly provided to a large customer that would not yet accept bills for those services.  FTE never provided any such services.

In addition, the defendants caused FTE to recognize approximately $2.6 million as an account receivable for which there was no support.  When FTE’s auditors said that the account receivable should be written off, PALLESCHI and LETHEM  created a fake email from a representative of the customer saying that the customer would “expedite payments” for more than $1.5 million for projects completed by FTE in 2016 and 2017.  The defendants caused this fake email to be sent to FTE’s auditors so that FTE could continue to recognize the receivable. 

PALLESCHI and LETHEM caused FTE to recognize another $600,000 in accounts receivable for work the defendants falsely claimed FTE performed.  When FTE’s auditor sought confirmation of this account receivable from the customer, LETHEM gave the auditor the name and email address of an FTE director who also was an employee of the customer.  PALLESCHI and LETHEM then attempted to persuade the FTE director to sign the confirmation but the director refused to do so.  LETHEM then emailed PALLESCHI in part “should I just send plan b?”  Later that day, LETHEM emailed PALLESCHI an audit confirmation containing the director’s forged signature.  A few days later, LETHEM emailed the auditor a confirmation containing the director’s forged signature.

As a result of the defendants’ fraudulent recognition of revenue, FTE’s financial statements overstated the company’s accounts receivable by between 18% and 120% for each of the quarters in 2017 and 2018 and by approximately 477% for 2016.

Embezzlement of Corporate Funds

PALLESCHI and LETHEM also embezzled corporate funds.  This embezzlement included payments for private jet use, luxury automobiles, personal credit cards, unauthorized wire transfers and stock issuances.  PALLESCHI and LETHEM used a bank account in the name of another entity to hide their diversion of corporate funds. 

PALLESCHI, 46, of Naples, Florida; and LETHEM, 62, of Ft. Myers, Florida, are charged with 1) conspiring to commit securities fraud, wire fraud, making false statements in SEC filings and improperly influencing the conduct of audits, which carries a maximum sentence of 5 years in prison; 2) securities fraud, which carries a maximum sentence of 20 years in prison; 3) wire fraud, which carries a maximum sentence of 20 years in prison; 4) improperly influencing the conduct of audits, which carries a maximum sentence of 20 years in prison; and 5) aggravated identity theft, which carries a mandatory minimum term of 2 years in prison.  The maximum potential sentences in this case are prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

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Ms. Strauss praised the investigative work of the FBI.  Ms. Strauss further thanked the U.S. Securities and Exchange Commission, which today filed a parallel civil action.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Elisha Kobre, James McMahon and Negar Tekeei 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.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced today that JASON DONES-GONZALEZ, an enforcer for La Organización de Narcotraficantes Unidos (“La ONU”), was sentenced by U.S. District Judge Jesse M. Furman to 35 years in prison.  DONES-GONZALEZ previously pled guilty to participating in a racketeering conspiracy, participating in a conspiracy to commit murder, and unlawfully possessing a machine gun.  

U.S. Attorney Audrey Strauss said: “Jason Dones-Gonzalez was a ruthless murderer who carried out numerous acts of wanton and depraved violence as an enforcer for La ONU.  As just one example, Dones-Gonzalez and an accomplice beat a man until he appeared to be dead, but just to be sure, he and the accomplice stuffed the victim’s body into a suitcase, transported it elsewhere, shot it, and lit it on fire.  This degree of cold-blooded indifference to – indeed, apparent pleasure at – taking another human life merits a firm reckoning.  Today Jason Dones-Gonzalez was rightly sentenced to 35 years in prison for his horrific crimes.”

According to the Indictment, other filings in this case, and statements during court proceedings:

From at least in or about 2004 until 2016, DONES-GONZALEZ was a member and enforcer of La ONU, a criminal enterprise involved in shipping thousands of kilograms of cocaine from Puerto Rico to New York.  Cocaine supplied by La ONU was then distributed in New York City, including out of a daycare center in the Bronx, New York.  Members and associates of La ONU also engaged in acts of violence, including murder, to protect and expand the enterprise’s criminal operations and in connection with rivalries with other criminal organizations.  In particular, members of the enterprise were ordered to shoot and kill suspected rival drug trafficking members.

As an enforcer for La ONU, DONES-GONZALEZ participated in the murder of at least seven people between approximately 2006 and 2010.  Those murders involved heinous and brazen acts of violence, including, for example, kidnapping and killing individuals, strangling two individuals believed to be spies, interrogating them for information, and then shooting them, choking and shooting an individual believed to be cooperating with law enforcement, and assaulting an individual, placing that individual’s body in a suitcase, and shooting and lighting the suitcase on fire.  Specifically:

In approximately 2006 or 2007, members of La ONU kidnapped and killed Freddy Mendez-Rivera after learning from corrupt law enforcement officers working for La ONU that Mendez-Rivera had complained to law enforcement about drug dealing occurring in his neighborhood.  DONES-GONZALEZ and two other individuals put Mendez-Rivera into a van and killed him.

In 2007, DONES-GONZALEZ and three other individuals strangled two men alleged to be spies with twisted-up t-shirts while interrogating them for information.  DONES-GONZALEZ and the others then shot the men, one of whom died.

In approximately 2008 or 2009, DONES-GONZALEZ and four other individuals dressed up as police officers and kidnapped an individual known as “Gabi,” a leader of a rival drug trafficking organization, from his home and killed him.

In 2009, DONES-GONZALEZ and another individual killed an individual known as “Sacca Grippe,” because they thought that he was cooperating with law enforcement.  They choked and shot him.

On March 20, 2009, DONES-GONZALEZ and other members of La ONU murdered Carlos Barbosa on the orders of a leader of La ONU because Barbosa was threatening to take control of certain drug territory from that leader.  DONES-GONZALEZ used a FN pistol, which is designed to fire multiple rounds upon a single pull of the trigger, and which fires ammunition that can penetrate body armor.

On November 27, 2009, DONES-GONZALEZ and other La ONU members assaulted Emanuel Correa Romero until he appeared dead.  The leadership of a local housing project gang, after consulting with other leaders of La ONU, had decided that Correa Romero should be killed because he had murdered the friend of a leader of a component of La ONU.  After the assault, DONES-GONZALEZ and another individual placed Correa Romero’s body into a suitcase, removed it from the housing project, and later reported back that they shot the suitcase and then lit it on fire.

On July 1, 2010, a leader of La ONU ordered the murder of Victor Alexis Rivera Santiago, a reggaeton singer who participated in narcotics trafficking, for stealing a kilogram of cocaine from the son of the leader’s friend and killing the son in the process.  DONES-GONZALEZ and others tied Rivera Santiago up in the leader’s presence, transported him to an apartment, questioned him, and killed him.           

*                *                *

In addition to the prison term, Judge Furman sentenced DONES-GONZALEZ, 41, of Puerto Rico, to three years of supervised release.

Ms. Strauss praised the investigative work of the U.S. Postal Inspection Service, the Drug Enforcement Administration, the Bureau of Alcohol, Tobacco, Firearms and Explosives, and the New York City Police Department.  Ms. Strauss also thanked the United States Attorney’s Office in the District of Puerto Rico and the Puerto Rico Police Department for their support in this ongoing investigation. 

The prosecution is being handled by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Lara Pomerantz, Justin Rodriguez, and Andrew Thomas are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced today the filing of a civil complaint seeking forfeiture of a 10th Century Khmer sandstone statue – Skanda on a Peacock – for the purpose of returning it to the Kingdom of Cambodia.  The statue was stolen from the Prasat Krachap temple at Koh Ker in Cambodia, and sold by antiquities dealer Douglas Latchford into the international art market. Skanda on a Peacock is considered to be a masterpiece of artistic achievement and a valuable part of the Cambodian cultural heritage. The owner of Skanda on a Peacock has voluntarily relinquished possession of the statue to the custody of HSI.

Manhattan U.S. Attorney Audrey Strauss said: “Skanda on a Peacock is a work of great historical, religious, and artistic significance to the people of Cambodia. With this action, we reaffirm our commitment to ending the sale of illegally trafficked antiquities in the United States, and begin the process of returning Skanda on a Peacock to its rightful home.”

According to the Complaint filed in Manhattan Federal Court on July 15, 2021:

From 928 to 944 A.D., Koh Ker was the capital of the ancient Khmer empire in Cambodia.  The Cambodian state under King Jayavarman IV constructed a vast complex of sacred monuments at Koh Ker, including the Prasat Krachap temple and its statuary. Koh Ker statuary was revolutionary for its time. Many of the statues, including Skanda on a Peacock, were huge, often shown in movement, and were free-standing or in high-relief.  Skanda on a Peacock depicts the Hindu god of war, Skanda, riding on the back of a peacock. The body and tail of the peacock are decorated with intricate engraved patterns. Khmer cultural experts believe that the face of the Skanda on the statue may in fact be a portrait of a royal family member, such as Harshavarman II, the son of King Jayavarman IV.

During the civil conflicts of late 20th century, statues and other artifacts were stolen from Koh Ker and entered the international art market through an organized looting network.   Local teams of looters would first remove the statues from the original location at Koh Ker. The statues would then be transported to the Cambodia-Thailand border, and transferred to brokers, who would in turn transport them to dealers in Khmer artifacts located in Thailand, particularly Bangkok.  These dealers would sell the artifacts to local or international customers, who would either retain the pieces or sell them on the international art market.

Skanda on a Peacock, along with several other significant statues, was stolen from Prasat Krachap in or about 1997 by a former member of the Khmer Rouge leading a team of looters (“Looter-1”). Looter-1 transported Skanda on a Peacock by oxcart to the house of a broker near the Thai border. Looter-1 was aware that the broker sold antiquities to a foreign national called “Sia” (which means “lord” in Thai) “Ford” – the British/Thai antiquities dealer Douglas Latchford, a/k/a “Pakpong Kriangsak.” In 2019, Latchford was charged by the Office with wire fraud conspiracy and other crimes related to a many-year scheme to sell looted Cambodian antiquities on the international art market, primarily by creating false provenance documents and falsifying invoices and shipping documents. The indictment was ultimately dismissed due to the death of Latchford.

On or about April 10, 2000, Latchford sold Skanda on a Peacock and, thereafter, it was imported into the United States.  After the most recent owner was contacted by the United States regarding Skanda on a Peacock, the owner agreed to relinquish possession of the statue and to waive all claims of right, title, and interest in it.  Skanda on a Peacock is currently in the possession of the United States Department of Homeland Security.

*                *                *

Ms. Strauss thanked HSI for its outstanding work on this investigation, which she noted is ongoing, and praised its ongoing efforts to find and repatriate stolen and looted cultural property. Ms. Strauss also thanked the Kingdom of Cambodia’s Ministry of Culture and Fine Arts for its assistance with this investigation.

This announcement supports the Memorandum of Understanding first signed between the U.S. and Cambodia in 2003, and last renewed in 2018.

This matter is being handled by the Office’s Money Laundering and International Criminal Enterprises Unit. Assistant U. S. Attorney Jessica Feinstein is in charge of the case.

The allegations contained in the Complaint are merely accusations.

Audrey Strauss, United States Attorney for the Southern District of New York, and Aaron C. Rouse, Special Agent in Charge of the Las Vegas Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an indictment charging YOSEF COHEN, a/k/a “Joe,” VAGUE SHAGENOVICH TERGALSTANYAN, a/k/a “Vahe,” a/k/a “Vic,” and IGAL BEN HANAN with conspiracy to commit money laundering. 

TERGALSTANYAN and COHEN were arrested and presented in California on July 9, 2021, and July 12, 2021, respectively, and will be arraigned in Manhattan federal court at a later date.  BEN HANAN was arrested on July 12, 2021, and will be presented later today in Nevada.  The case is assigned to U.S. District Judge Laura Taylor Swain.

Manhattan U.S. Attorney Audrey Strauss said: “As alleged, the defendants conspired to launder millions of dollars of illicit proceeds.  Thanks to the hard work of the FBI, the defendants face serious federal charges.”

FBI Special Agent-in-Charge Aaron C. Rouse said: “This case is an outstanding example that demonstrates the strength of the FBI’s partnerships with national and international law enforcement.  The FBI takes pride in combating the most dangerous crime organizations in the world.  This should be a wake-up call to criminals that regardless of where they think they can hide, the FBI and our partners will find them and bring them to justice.” 

According to the allegations in the Indictment:[1]

COHEN, TERGALSTANYAN, and BEN HANAN worked on behalf of organized criminal enterprises operating in several countries around the world.  In recorded conversations with undercover law enforcement officers (the “UCs”) who represented themselves to be members of an international organized criminal enterprise that distributed narcotics and laundered money, the defendants planned money laundering transactions of narcotics proceeds and discussed moving tens of millions of dollars of illicit money on behalf of international criminal organizations.  The defendants conspired to execute, and did execute, money laundering transactions with the UCs and others known and unknown.

On several occasions, the defendants arranged for the UCs to pick up narcotics proceeds, in cash, from locations in the United States and then deliver the cash to the defendants, minus a percentage-based fee paid to the UCs for laundering the proceeds.  For example, as arranged by the defendants, the UCs picked up approximately $208,000 in cash in Medford, New York, and delivered the cash, minus an arranged fee, to TERGALSTANYAN in California.  In addition to discussing money laundering transactions with a UC who was in New York, New York, TERGALSTANYAN later proposed that the UCs pick up and launder one to two million dollars of marijuana proceeds in cash every week in Manhattan. 

In another scheme, for example, the defendants conspired to fraudulently obtain a business visa for BEN HANAN so that BEN HANAN could move to the United States.  In order for BEN HANAN to obtain a business visa, BEN HANAN’s purported business needed funds on deposit that appeared to be legitimate investments.  COHEN proposed that the UCs provide COHEN with $150,000 in cash, and COHEN would use COHEN’s purported businesses to provide funds to BEN HANAN’s purported business.  The UCs provided the cash to COHEN, which was represented to be narcotics proceeds that had not yet been laundered.  Subsequent wire transfers sent by the defendants to the UCs as repayment were falsely described by the defendants as accounting for a particular month or time period, so as to appear like legitimate business transactions.

*          *          *

YOSEF COHEN, 58, of Calabasas, California, VAGUE SHAGENOVICH TERGALSTANYAN, 38, of Glendale, California, and IGAL BEN HANAN, 43, of Las Vegas, Nevada, were each charged with one count of conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h), which carries a maximum sentence of 20 years in prison.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendants would be determined by a judge.

Ms. Strauss praised the outstanding investigative work of the FBI.  This prosecution is part of an Organized Crime Drug Enforcement Task Forces (OCDETF) operation.  OCDETF identifies, disrupts, and dismantles the highest-level criminal organizations that threaten the United States using a prosecutor-led, intelligence-driven, multi-agency approach.  Additional information about the OCDETF Program can be found at https://www.justice.gov/OCDETF.

This case is being handled by the Office’s Narcotics Unit.  Assistant United States Attorney Micah F. Fergenson is in charge of the prosecution.

 

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[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth in this release constitute only allegations, and every fact described should be treated as an allegation.

Audrey Strauss, United States Attorney for the Southern District of New York, announced today that AQUILINO TORRES was convicted of kidnapping, kidnapping of a minor, and stalking for the October 2020 kidnapping and stalking of an adult female victim (“Victim-1”) and the kidnapping of Victim-1’s 7-year-old son (“Minor Victim-1”).  TORRES was convicted following a one-week jury trial before U.S. District Judge Denise L. Cote.

Manhattan U.S. Attorney Audrey Strauss said: “Aquilino Torres threatened to kill a 7-year-old child in carrying out a brutal kidnapping of the child and his mother.  Torres then held his victims captive and physically abused both mother and child.  Thanks to the FBI and NYPD, Torres was apprehended, prosecuted, and now stands convicted of these horrific crimes.”

As reflected in the Indictment, documents previously filed in the case, and evidence introduced at trial:

On or about October 5, 2020, TORRES texted and called Victim-1 hundreds of times, including a text threatening to “kick [Minor Victim-1’s] teeth out.”  Later that night, TORRES took Victim-1 and Minor Victim-1 to a motel in the Bronx, where he hit Minor Victim-1 in the face and assaulted Victim-1, breaking her jaw.  While TORRES assaulted Victim-1, he told Victim-1, in sum and substance, that he would hang Victim-1 and that Minor Victim-1 would be found dead in the river.  For the next five days, TORRES held Victim-1 and Minor Victim-1 against their will at an apartment in Washington Heights, without medical treatment for Victim-1’s broken jaw.  On or about October 10, 2020, Victim-1 and Minor Victim-1 escaped from the apartment and were admitted to a hospital shortly thereafter.  In response to their escape, between on or about October 10, 2020, and on or about October 13, 2020, TORRES once again sent Victim-1 hundreds of threatening text messages and called Victim-1 hundreds of times.  For example, TORRES texted Victim-1, in sum and substance, that, if he made the decision to go looking for her, “there won’t be turning back.”  TORRES followed through on those threats and attempted to track down Victim-1 and Minor Victim-1 after they escaped. 

*                *                *

TORRES, 27, was found guilty of (i) one count of kidnapping, in violation of 18 U.S.C. §§ 1201(a)(1) and (b), which carries a maximum sentence of life in prison, (ii) one count of kidnapping of a minor, in violation of 18 U.S.C. §§ 1201(a)(1), (b), and (g), which carries a maximum sentence of life and a mandatory minimum sentence of 20 years, and (iii) one count of stalking, in violation of 18 U.S.C. §§ 2261A(2)(A) and (B), 2261(b)(3), and 2265A, which carries a maximum sentence of 20 years. 

Ms. Strauss praised the outstanding investigative work of the FBI-NYPD Violent Crimes Task Force.  

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys David J. Robles, Sarah L. Kushner, and Andrew S. Dember, and paralegal specialist Ariella Fetman, are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced today the filing and settlement of a lawsuit in Manhattan federal court against JUJAMCYN THEATERS LLC, the owners and operators of five of Broadway’s most historic theaters, the AL HIRSCHFELD, the AUGUST WILSON, the EUGENE O’NEILL, the ST. JAMES, and the WALTER KERR, involving violations of the Americans With Disabilities Act (the “ADA”).  The settlement, in the form of a consent decree, was entered yesterday by U.S. District Judge Analisa Torres.

U.S. Attorney Strauss said: “As New York City begins to reopen and welcome the world once again, we are pleased that Jujamcyn Theaters has worked collaboratively with the Office to improve accessibility at its historic venues, so that all patrons are able to enjoy Broadway.  As a result of this suit and settlement, coupled with similar lawsuits filed by the Office against the Shubert Theaters in 2003, and the Nederlander Theaters in 2014, all three of the major Broadway theater organizations have committed to making their venues significantly more accessible to people with disabilities.”

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

In the course of an investigation and negotiation over several years, the U.S. Attorney’s Office identified numerous ADA violations at each of the five theaters operated by JUJAMCYN THEATERS LLC, all of which were opened in the 1920s.  The ADA generally requires that, for facilities constructed prior to the effective date of the ADA in 1993, barriers to accessibility be removed where it is readily achievable to do so.  Throughout the Government’s investigation and the negotiation of the Consent Decree, JUJAMCYN THEATERS LLC agreed to remove hundreds of barriers to accessibility.

Under the Consent Decree, JUJAMCYN THEATERS LLC agrees to continue its efforts to improve accessibility at its theaters, as the schedules of shows at the theaters permit. Specifically, JUJAMCYN THEATERS LLC has agreed to do the following:

• provide a total of 44 wheelchair accessible seating locations, and direct its ticket vendors to accord priority to persons with disabilities in selling those seating locations;
   
• provide a total of 54 aisle transfer seating locations for persons who are able to transfer from a wheelchair into a seat, and direct its ticket vendors to accord priority to persons with disabilities in selling those seating locations; and
   
• eliminate approximately 200 individual barriers to accessibility in theater restrooms, concession counters, waiting areas, and box offices.

In addition, JUJAMCYN THEATERS LLC will pay a $40,000 civil penalty to the United States.
 
Since President George H.W. Bush signed the ADA into law, the U.S. Attorney’s Office for the Southern District of New York has played a significant role in bringing numerous New York City institutions into compliance with the ADA and its regulations.  The Office’s enforcement efforts include, among many others, Yankee Stadium, Madison Square Garden, Radio City Music Hall, the Shubert Theaters, the Nederlander Theaters, Avery Fisher Hall at Lincoln Center, the Metropolitan Opera, the Apollo Theater, the Puck Building, the Rainbow Room, and The Vessel at Hudson Yards.
 
To file a complaint alleging that any place of public accommodation within the Southern District of New York is not accessible to persons with disabilities, use the Civil Rights Complaint Form available on the United States Attorney’s Office’s website, www.usdoj.gov/usao/nys. Complaints should be sent to:   U.S. Attorney’s Office, Southern District of New York
86 Chambers Street, 3rd Floor
New York, New York, 10007
Attention: Chief, Civil Rights Unit
 

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

Audrey Strauss, the United States Attorney for the Southern District of New York, Brian Gallagher, Acting Special Agent-in-Charge, Northeastern Region, United States Department of Transportation Office of Inspector General (“USDOT-OIG”), Margaret Garnett, the Commissioner of the New York City Department of Investigation (“DOI”), and Carolyn Pokorny, Inspector General of the Metropolitan Transportation Authority (“MTA-OIG”), announced today that the United States has settled civil fraud claims against New York-area painting contractor SPECTRUM PAINTING CORP. (“SPECTRUM”).  The settlement resolves the United States’ allegations that SPECTRUM fraudulently obtained payments on two federally funded construction projects by causing misrepresentations of compliance with Disadvantaged Business Enterprise (“DBE”) rules, which require participation of businesses owned by women and minorities.  Specifically, the United States alleged that SPECTRUM caused the prime contractors on the projects to misrepresent that codefendant Tower Maintenance Corp. (“Tower”), a certified DBE, was solely performing work on the two projects, when in fact much of that work was performed by SPECTRUM, a non-DBE.  As part of the settlement approved yesterday by U.S. District Judge Analisa Torres, SPECTRUM admits and accepts responsibility for conduct alleged in the Government’s amended complaint and agrees to pay $400,000 to the United States.

Manhattan U.S. Attorney Audrey Strauss said: “The Disadvantaged Business Enterprise program is intended to increase participation of minority- and women-owned businesses that historically have been disadvantaged in federal contracting.  This settlement reflects this Office’s commitment to root out DBE fraud in federally funded contracts so that legitimate DBEs can compete fairly for public construction projects.”

USDOT-OIG Acting Special Agent-in-Charge Brian Gallagher said: “The Disadvantaged Business Enterprise (DBE) Program of the U.S. Department of Transportation is designed to create a level playing field for small, disadvantaged businesses to participate in federally-funded construction projects. We will hold accountable those who conspire to misrepresent their compliance with program requirements to obtain taxpayer supported contracts, thereby undermining the DBE program’s goal of expanding opportunities for small businesses.”

DOI Commissioner Margaret Garnett said: “This settlement rightly holds accountable a subcontractor that intentionally deceived the government and blatantly disregarded the regulations in place to ensure equal access by disadvantaged-owned businesses. Developing a fair and equal environment is how we do business in New York City and that is why contractors must follow the laws advancing participation by minority- and women-owned businesses. DOI thanks the U.S. Attorney’s Office for the Southern District of New York and the rest of our law enforcement partners on this matter for this successful result.”

MTA Inspector General Carolyn Pokorny said: “It is outrageous and against the law to use a minority- or women-owned business as a front to swindle precious taxpayer dollars from the Disadvantaged Business Enterprise program, which is meant to ensure an equal playing field for DBEs.  This scheme was an affront to taxpayers, MTA riders, and the many honest DBEs that legitimately qualify for the federal program that these companies defrauded.  I am proud to stand with our law enforcement partners to protect the integrity of this vital program.”

As alleged in the amended complaint filed in Manhattan federal court in August 2019, SPECTRUM performed steel painting work on two federally funded projects to renovate the Brooklyn Bridge and Queens Plaza.  Contracts for both projects required codefendant Ahern Painting Contractors Co. (“Ahern”) to hire DBEs to perform a percentage of the work and to adhere to the DBE regulations.  SPECTRUM was not a certified DBE, so SPECTRUM and Tower used Tower’s status as a DBE to take credit for work that was performed, managed, and supervised by SPECTRUM.  Further, to conceal this scheme, SPECTRUM employees represented themselves as Tower employees in project documents.  The case against Ahern was resolved in a settlement approved by Judge Torres in October 2019, and the case against Tower is ongoing. 

As part of the settlement, SPECTRUM admits, acknowledges, and accepts responsibility for the following conduct alleged in the amended complaint:

• In or about March 2010, a manager at Spectrum (the “Spectrum Manager”) and a principal at Tower agreed that the two firms would work together on the Brooklyn Bridge Project.  Pursuant to that agreement, the Spectrum Manager conducted a walk-through of the Brooklyn Bridge worksite with the Tower principal and an Ahern superintendent for the Brooklyn Bridge Project.  The Spectrum Manager understood the he participated in the walk-through to assist Tower in preparing the bid Tower later submitted to Ahern for its anticipated work as a DBE subcontractor for the Brooklyn Bridge project.
   
• In May and June 2011, SPECTRUM and Tower memorialized two “consulting agreements” for work on the Brooklyn Bridge and the Queens Plaza Projects.  Pursuant to those agreements, SPECTRUM and Tower agreed that SPECTRUM would “perform certain consulting services,” including “providing project management support,” and would furnish equipment to Tower for the two projects.  The agreements further provided that SPECTRUM would receive 50% of all profits from the Tower DBE work on the projects. 
   
• The key terms of the consulting agreements between Tower and SPECTRUM – including Tower’s agreement to pay SPECTRUM 50 percent of all of its profits from the two projects, or SPECTRUM’s agreement to furnish equipment to Tower for the projects – were not disclosed to Ahern, NYC-DOT, or MTA. 
   
• Throughout the Brooklyn Bridge and Queens Plaza Projects, the SPECTRUM Manager managed and supervised the DBE work that Tower was retained to perform on each project, such as setting the work schedule, ordering materials for the work, hiring the foreman, inspecting the work performed, and coordinating payment for the work. 
   
• The SPECTRUM Manager also hired other supervisors on the Brooklyn Bridge and Queens Plaza Projects.  For example, the SPECTRUM Manager hired the superintendent for the DBE work assigned to Tower for the Brooklyn Bridge Project and the Queens Plaza Project (the “SPECTRUM Superintendent”).  The SPECTRUM Manager also hired an individual to oversee health and safety issues related to the DBE work on the two projects (the “SPECTRUM Safety Supervisor”).  Both the SPECTRUM Superintendent and the SPECTRUM Safety Supervisor were paid by SPECTRUM and not by Tower. 

• The SPECTRUM Manager, SPECTRUM Superintendent, and SPECTRUM Safety Supervisor were all SPECTRUM employees.  On the Brooklyn Bridge and Queens Plaza Projects, they identified themselves to others working on the projects as Tower employees, including by wearing Tower vests and security identification.  In documents submitted to Ahern to obtain security clearances, the SPECTRUM Manager identified himself as a “Tower VP” or as a Tower employee. 
   

Ms. Strauss praised the outstanding investigative work of the USDOT-OIG, DOI, and MTA-OIG. 

This case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorneys Mónica P. Folch, Li Yu, and David J. Kennedy are in charge of this case.