Southern District of New York

Audrey Strauss, Acting United States Attorney for the Southern District of New York, announced today that FRANCIS J. O’REILLY, a Carmel attorney, was sentenced in White Plains federal court to 18 months in prison for committing tax evasion and failing to pay over payroll taxes for the tax year 2015 as part of a long-running tax fraud scheme that cost the U.S. Treasury over $800,000, including penalties and interests.  O’REILLY previously pled guilty before U.S. Magistrate Judge Lisa Margaret Smith.  U.S. District Judge Kenneth M. Karas, who accepted O’REILLY’s guilty plea, imposed today’s sentence.

Acting U.S. Attorney Audrey Strauss said:  “Francis O’Reilly, an attorney for three decades, knew his obligations under the law to pay over payroll taxes and to report and pay income tax when due.  Having admitted his crimes, O’Reilly will now pay the consequences in jail time.”

According to the allegations contained in the Information to which O’REILLY pled guilty, court filings, and statements made in public court proceedings:    

In or about 1989, O’REILLY was admitted to practice law in New York State.  At all relevant times, O’REILLY was a self-employed attorney who maintained a law practice in Putnam County, New York, that specialized in, among other things, bankruptcy, foreclosure defense, and criminal defense.

O’REILLY operated his law practice as a sole proprietorship and exercised control over its financial affairs.  In particular, O’REILLY was responsible under federal law for collecting, truthfully accounting for, and paying over payroll taxes to the Internal Revenue Service (“IRS”) for his employees.  Instead of fulfilling this responsibility, O’REILLY engaged in a decades-long scheme to defraud the IRS of the payroll taxes that were due and owing for his law practice.  Between 1997 and 2018, O’REILLY failed to pay over a total of approximately $155,771 in payroll taxes, resulting in a liability of approximately $232,283 after interest and penalties.

In addition to failing to pay over payroll taxes, O’REILLY also engaged in substantial personal tax evasion.  Between 2013 and 2017, O’REILLY withdrew a total of approximately $481,673 in untaxed funds from his attorney trust account for personal use, none of which he reported on his tax returns for those years.  In addition to substantially underreporting his income and tax liabilities, O’REILLY failed to pay even those taxes that he did report, accruing large unpaid liabilities.  In total, during the tax years 2007 through 2018, O’Reilly evaded approximately $566,027 in personal federal income taxes, including interest and penalties.

In or about late 2016, in an effort to settle with the IRS, O’REILLY submitted an offer in compromise to the IRS proposing to settle at least approximately $691,561 in outstanding tax liabilities for merely $12,400.  In the 2016 offer in compromise, which O’REILLY signed under penalty of perjury, O’REILLY made several material misstatements and omissions regarding his income and assets.  Among other things, O’REILLY’s offer in compromise: (a) failed to disclose the existence of O’REILLY’s attorney trust account, from which, as described above, O’REILLY drew substantial income; (b) failed to disclose real property and land that O’REILLY owned in Socorro County, New Mexico; and (c) failed to disclose a 2010 Lincoln vehicle that O’REILLY had recently purchased for approximately $16,000.

In all, O’REILLY caused the IRS to incur losses of over $800,000, including penalties and interest. 

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In addition to the prison term, Judge Karas ordered O’REILLY, 62, of Danbury, Connecticut, to serve two years of supervised release, and to pay restitution to the IRS in the amount of $801,969, which represents O’REILLY’s unpaid tax liabilities, as well as certain penalties and interest, relating to his personal income taxes for the calendar years 2007 through 2018, payroll taxes for the calendar years 1997 through 2018, and Federal Unemployment Tax Act (FUTA) taxes for the calendar years 1998 through 2017. 

Ms. Strauss praised the outstanding work of IRS Criminal Investigation in this case.

This case is being prosecuted by the Office’s White Plains Division.  Assistant U.S. Attorney Olga I. Zverovich is in charge of the prosecution.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, 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 that DANIEL KAMENSKY, the founder and manager of New York-based hedge fund Marble Ridge Capital (“Marble Ridge”), was charged in a Complaint in Manhattan federal court with securities fraud, wire fraud, extortion, and obstruction of justice.  KAMENSKY’s alleged criminal acts occurred  in connection with his scheme to pressure a rival bidder to abandon its higher bid for assets in connection with Neiman Marcus’s bankruptcy proceedings so that Marble Ridge could obtain those assets for a lower price.  KAMENSKY then attempted to persuade the rival bidder to cover up the scheme.  KAMENSKY was arrested today and is expected to be presented before Magistrate Judge James L. Cott this afternoon.

Acting Manhattan U.S. Attorney Audrey Strauss said:  “As alleged, Daniel Kamensky disregarded his fiduciary responsibility to unsecured creditors of Neiman Marcus – and broke the law – when he attempted to coerce a competitor to withdraw a higher bid for assets of the bankruptcy estate.  As further alleged, acknowledging the illegality of his actions, Kamensky then attempted to obstruct an investigation by trying to persuade the competitor to change his account of the coercion, telling the competitor that otherwise ‘this is going to the U.S. Attorney’s Office.’  As today’s charges show, Kamensky was right about that.”

FBI Assistant Director-in-Charge William F. Sweeney said:  “As alleged, Kamensky intentionally violated his fiduciary duty as a member of the Official Committee of Unsecured Creditors in the Neiman Marcus bankruptcy by preventing the sale of securities to an investment bank so he could acquire the same securities at a significantly lower price for his own fund.  In a conversation with an employee of the investment bank, Kamensky went as far as to say, ‘Maybe I should go to jail.’  Today, we’ve removed the ‘maybe,’ and forced him to answer for his conduct.”

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

DANIEL KAMENSKY was the principal of Marble Ridge, a hedge fund with assets under management of more than $1 billion that invested in securities in distressed situations, including bankruptcies.  Prior to opening Marble Ridge, KAMENSKY worked for many years as a bankruptcy attorney at a well-known international law firm, and as a distressed debt investor at prominent financial institutions.

The Neiman Marcus Bankruptcy

Neiman Marcus, an American chain of luxury department stores with stores located across the United States, filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) in May 2020.  At the outset of the bankruptcy, Marble Ridge, through KAMENSKY, applied to be on the Official Committee of Unsecured Creditors (the “Committee”) and was thereafter appointed to be a member of the Committee.  As a member of the Committee, KAMENSKY had a fiduciary duty to represent the interests of all unsecured creditors as a group.

During the bankruptcy process, the Committee had negotiated with the owners of Neiman Marcus to obtain certain securities, known as MyTheresa Series B Shares (the “MYT Securities”), and ultimately, the Committee was successful in coming to a settlement to obtain 140 million shares of MYT Securities for the benefit of certain unsecured creditors of the bankruptcy estate.  In July 2020, KAMENSKY was negotiating with the Committee for Marble Ridge to offer 20 cents per share to purchase MYT Securities from any unsecured creditor who preferred to receive cash, rather than MYT Securities, as part of that settlement.

KAMENSKY’s Fraudulent Scheme 

On July 31, 2020, KAMENSKY learned that a diversified financial services company headquartered in New York, New York (the “Investment Bank”) had informed the Committee that it was interested in bidding a price between 30 and 40 cents per share – substantially higher than KAMENSKY’s bid – to purchase the MYT Securities from any unsecured creditor who was interested in receiving cash.

That afternoon, KAMENSKY sent messages to a senior trader at the Investment Bank (“IB Employee-1”) telling him not to place a bid, and followed those messages up with a phone call with IB Employee-1 and a senior analyst of the Investment Bank (“IB Employee-2,” and collectively the “Employees”).  During that call, KAMENSKY asserted that Marble Ridge should have the exclusive right to purchase MYT Securities, and threatened to use his official role as co-chair of the Committee to prevent the Investment Bank from acquiring the MYT Securities.  KAMENSKY also stated that Marble Ridge had been a client of the Investment Bank in the past but that if the Investment Bank moved forward with its bid, then Marble Ridge would cease doing business with the Investment Bank.

The Investment Bank thereafter decided to not make a bid to purchase MYT Securities, and informed the legal adviser to the Committee of its decision.  The Investment Bank further told the legal adviser they made that decision because KAMENSKY – a client of the Investment Bank – had asked them not to.

Advisers to the Committee informed counsel for Marble Ridge of their call with the Employees, and after speaking with KAMENSKY, counsel for Marble Ridge falsely informed the advisers that KAMENSKY had not asked the Employees not to bid, but instead had told them to place a bid only if they were serious.  Later that evening, KAMENSKY contacted IB Employee-1 and attempted to influence what IB Employee-1 would tell others, including the Committee and law enforcement, about KAMENSKY’s attempt to block the Investment Bank’s bid for the MYT Securities.  KAMENSKY said at the outset of the call, in substance, “this conversation never happened.”  During the call, KAMENSKY asked IB Employee-1 to falsely say that IB Employee-1 had been mistaken and that KAMENSKY had actually suggested that the Investment Bank bid only if it were serious, and made comments including the following:  “Do you understand…I can go to jail?”  “I pray you tell them that it was a huge misunderstanding, okay, and I’m going to invite you to bid and be part of the process.”  “But I’m telling you…this is going to the U.S. Attorney’s Office.  This is going to go to the court.”  “[I]f you're going to continue to tell them what you just told me, I'm going to jail, okay? Because they're going to say that I abused my position as a fiduciary, which I probably did, right? Maybe I should go to jail. But I'm asking you not to put me in jail.”

During a subsequent interview with the Office of the United States Trustee, which was conducted under oath and in the presence of counsel, KAMENSKY stated that his calls to IB Employee-1 were a “terrible mistake” and “profound errors in lapses of judgment.”

After this series of events, Marble Ridge resigned from the Committee and has advised its investors that it intended to begin winding down operations and returning investor capital.

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KAMENSKY, 47, of Roslyn, New York, is charged with one count of fraud in the offer or sale of securities, which carries a maximum sentence of five years in prison, one count of wire fraud, which carries a maximum sentence of 20 years in prison, one count of extortion and bribery in connection with a bankruptcy, which carries a maximum sentence of five years in prison, and one count of obstruction of justice, 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 the judge.

Ms. Strauss praised the work of the FBI.  Ms. Strauss further thanked the Office of United States Trustee and the Securities and Exchange Commission for their cooperation and assistance in this investigation.  She added that the FBI’s investigation is ongoing. 

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Richard Cooper and Daniel Tracer are in charge of the prosecution.   

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

[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, Acting United States Attorney for the Southern District of New York, and Kenneth R. Dieffenbach, Special Agent in Charge of the Fraud Detection Office of the Department of Justice Office of the Inspector General (“DOJ-OIG”), announced today the unsealing of a Complaint charging a disbarred attorney with theft of government funds.  GUSTAVO L. VILA, the defendant, allegedly stole approximately $1 million that the Department of Justice’s 9/11 Victim Compensation Fund had awarded to the defendant’s client, a 9/11 first responder.  The defendant was arrested today and presented in White Plains federal court before United States Magistrate Judge Paul E. Davison.

Acting U.S. Attorney Audrey Strauss said:  “As alleged, Gustavo Vila stole money awarded to his client – an NYPD officer and 9/11 first responder – by the 9/11 Victim Compensation Fund.  Vila allegedly lied to his client, telling the client for more than three years that the money Vila stole had yet to be released by the Fund.  Further, Vila lied to his client about his standing, continuing to hold himself out as an attorney even after he had been disbarred.  Now Gustavo Vila has been charged with theft of government funds.”

DOJ-OIG Fraud Detection Office Special Agent in Charge Kenneth R. Dieffenbach said:  “Vila allegedly attempted to profit off of the suffering of a retired NYPD officer who risked his life at Ground Zero. Because of Vila’s alleged greed, the victim never received about $1 million he was awarded from the 9/11 Victims Compensation Fund.”

As alleged in the Complaint unsealed today in White Plains federal court[1]:

In the wake of the September 11 terrorist attacks, Congress created the September 11th Victim Compensation Fund (“VCF”) to provide compensation with federal government funds to any individual who suffered physical harm or was killed as a result of the terrorist attacks, or as a result of the debris removal efforts that took place in the immediate aftermath of those attacks.  The original VCF operated from 2001-2004.  President Obama and President Trump reactivated the VCF, authorizing it to operate through October 2016, and December 2020, respectively.  Claimants seeking compensation from the VCF were authorized to work with an attorney and have the attorney, on the claimant’s behalf, submit a claim to, and receive the claimant’s award from, the VCF.  An attorney’s fees were limited to 10% of a VCF award. 

From at least in or about 2012 through at least in or about 2019, GUSTAVO L. VILA, the defendant, represented a retired New York City Police Department Officer (“Victim-1”) in connection with Victim-1’s claim for compensation from VCF.  Victim-1 was diagnosed with, and suffered from, serious, life-threatening medical conditions, including cancer, as a result of rescue and recovery work he performed at Ground Zero.  Throughout his representation of Victim-1, VILA held himself out as an attorney to Victim-1 and to VCF, despite the fact that in 2015, VILA was disbarred.   

In or about May 2013, GUSTAVO L. VILA, the defendant, submitted a claim to VCF on behalf of Victim-1.  VILA also submitted forms to the VCF authorizing the VCF to deposit Victim-1’s compensation award directly into a bank account controlled by VILA’s law firm (the “Bank Account”).  On or about September 13, 2016, the VCF authorized an award to Victim-1 of approximately $1,030,622.04. 

On or about October 12, 2016, the VCF deposited the full amount of Victim-1’s award into the Bank Account.  At that point, VILA was required to distribute all of that money, less 10% for his purported attorney’s fees, to Victim-1.  VILA, however, did not distribute any of that money to Victim-1 or otherwise inform Victim-1 about this deposit.  Rather, VILA allegedly kept almost the entire amount of that award for himself and used that money for his own personal benefit, including to pay his own taxes.  From in or about October 2016 to in or about February 2020, VILA falsely represented to Victim-1 that the VCF had not yet released the majority of Victim-1’s VCF award, when in fact, the entire award had been released for Victim-1’s benefit in October 2016.

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VILA, 62, of Yorktown Heights, New York, is charged with one count of theft of government funds, in violation of Title 18, United States Code, Sections 641 and 2, which carries a maximum sentence of 10 years in prison.  The maximum potential sentence is prescribed by Congress and is 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 DOJ-OIG’s Fraud Detection Office. 

The prosecution of this case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorney Sarah L. Kushner 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.

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

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that KARIM ELKORANY, a former communications specialist with the United Nations (“UN”) in Iraq, was charged in an Indictment in Manhattan federal court with two counts of making false statements to special agents of the FBI in an effort to conceal his drugging and sexual assault of multiple women while he worked for the UN.  ELKORANY was arrested in New Jersey today and is expected to be presented before Magistrate Judge James L. Cott this afternoon.  The case is assigned to District Judge Naomi Reice Buchwald.

Acting Manhattan U.S. Attorney Audrey Strauss said:  “Karim Elkorany, a former United Nations communications specialist, was accused of furtively drugging and sexually assaulting several women.  When questioned by the FBI, Elkorany compounded his alleged unconscionable conduct by making false statements to the special agents investigating the assaults.  Thanks to the diligence of the FBI, Elkorany now faces serious time in an American federal prison.  We urge any individuals who may have information concerning Elkorany or any similar conduct to please contact the FBI at 1-800-CALL- FBI or tips.fbi.gov.”

FBI Assistant Director William F. Sweeney Jr. said:  “Investigated by UN officials for allegedly drugging and sexually assaulting a woman in Iraq in 2016, Elkorany caught the eye of the FBI.  Elkorany’s conduct, as detailed in today’s charges, is abhorrent, and the false statements made to the FBI Special Agents conducting this investigation are federal offenses. Our investigation continues, and if anyone has information about Elkorany, please contact us at 1-800-CALL- FBI or via our tipline at tips.fbi.gov.”

According to the Indictment unsealed today in Manhattan federal court and publicly available information:[1]

Since at least in or about 2005 up to at least in or about April 2018, ELKORANY worked in international aid, development, and/or foreign relations.  From in or about October 2013 up to in or about April 2016, ELKORANY worked for the UN Children’s Fund in Iraq.  From in or about July 2016 up to in or about April 2018, ELKORANY worked as a Communications Specialist for the UN in Iraq. 

In or about November 2016, ELKORANY drugged and sexually assaulted a woman (“Victim-1”) in Iraq, where he was stationed while working for the UN.  Victim-1 had food and alcoholic beverages with ELKORANY at a restaurant, after which ELKORANY brought Victim-1 to his apartment.  While at ELKORANY’s apartment, Victim-1 was rendered unconscious.  Victim-1 regained consciousness for brief periods, during which she observed ELKORANY sexually assaulting her but was physically unable to stop him.  ELKORANY, among other things, put his penis in Victim-1’s mouth and anally penetrated Victim-1. 

In or around December 2016, Victim-1 reported the sexual assault to the UN.  The UN initiated an investigation, through which ELKORANY was notified of the substance of Victim-1’s allegations against him.

Federal agents subsequently uncovered evidence that ELKORANY had engaged in a pattern of similar conduct involving other women.  In each instance, ELKORANY drugged the victim before sexually assaulting or attempting to sexually assault the victim while the victim was unconscious or partially conscious.  In particular, between in or around 2009 and in or around 2016, ELKORANY sexually assaulted or attempted to sexually assault at least five victims after the victims were rendered unconscious after consuming alcoholic beverages prepared by ELKORANY.  When some of the victims regained consciousness, some or all of their clothing had been removed.  In some instances, after they awoke, ELKORANY informed the victims, in substance and in part, that they had sexual intercourse, oral sex, and/or anal sex with him.  In some instances, when or after the victims regained consciousness, the victims experienced genital and anal discomfort and pain.

On or about November 3, 2017, special agents working with the New York Field Office of the FBI conducted a voluntary interview of ELKORANY outside of his residence in New Jersey.  Agents conducting the interview identified themselves and informed ELKORANY that they were investigating, among other things, his interactions with Victim-1.  During that interview, ELKORANY, who expressed familiarity with the nature and substance of the allegations made by Victim-1 to the UN, stated that the allegations Victim-1 had made to the UN were false.  ELKORANY also stated that he had not used drugs with Victim-1 or provided Victim-1 with any drugs.

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ELKORANY, 37, of West Orange, New Jersey, is charged with two counts of making false statements to federal law enforcement agents, each of which carries a maximum sentence of five years in prison. The maximum potential 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.

Acting U.S. Attorney Strauss praised the outstanding work of the FBI.  Ms. Strauss also thanked the United States Department of State and the UN for their assistance, and noted that the investigation is ongoing.  Any individuals who believe they have information concerning ELKORANY or any similar conduct should contact the FBI at 1-800-CALL- FBI or tips.fbi.gov.           

The case is being prosecuted by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys Daniel C. Richenthal, Amanda L. Houle, and Lara Pomerantz are in charge of the prosecution.

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

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

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, Susan A. Gibson, the Special Agent in Charge of the New Jersey Division of the Drug Enforcement Administration (“DEA”), and James Buthorn, the Inspector in Charge of the New Jersey Office of the United States Postal Inspection Service (“USPIS”), announced today that JOSE FRANCISCO GUZMAN-CABRERA, a citizen of the Dominican Republic, was extradited yesterday from the Dominican Republic. GUZMAN-CABRERA is charged with conspiracy to distribute controlled substances, including oxycodone, hydrocodone, the fentanyl analogue p-fluoroisobutyryl fentanyl, and the synthetic opioid U-47700, distribution of controlled substances over the Internet, and conspiracy to commit money laundering, in connection with a large-scale drug distribution operation  purporting to be an online pharmacy.  GUZMAN-CABRERA was arrested on July 3, 2020, in the Dominican Republic, and was presented today before U.S. Magistrate Judge James L. Cott.  GUZMAN-CABRERA’s case is assigned to U.S. District Judge Sidney H. Stein. 

Acting U.S. Attorney Audrey Strauss said:  “As alleged, Jose Francisco Guzman-Cabrera was the kingpin of a drug trafficking organization that distributed dangerous opioids to individuals throughout the United States through a website purporting to be an online pharmacy. Thanks to the outstanding investigative work of the DEA and USPIS, Guzman-Cabrera is now in United States custody and facing prosecution in this District.”  

DEA Special Agent in Charge Susan A. Gibson said:  “This investigation reinforces the dangers of purchasing narcotics through the internet. Mr. Guzman-Cabrera may have felt he was safe allegedly operating his drug trafficking organization from a foreign country, but great investigative work led to his arrest and extradition to the United States to face justice.”

USPIS Inspector in Charge James Buthorn:  “As alleged, Guzman-Cabrera put citizens across the United States in harm’s way through his criminal syndicate, intentionally disregarding people’s safety.  No border will stop the United States Postal Inspection Service from bringing alleged criminals like Guzman-Cabrera to justice.  We are proud of our partnerships both domestic and international, as well as our technological and analytical advancements in the recent years that are bringing positive results, making cases like this possible.  Illicit narcotics traffickers, utilizing the open web or dark web, should know we are coming for you.  I would also like to stress to the public the need to research your online pharmaceutical vendors, ensuring the medicines you order are safe.  I commend the agents and inspectors on the successful outcome of this case.” 

According to the allegations in the Indictment unsealed today in Manhattan federal court,[[1]] other court filings, and statements made during court proceedings:

Law enforcement agents began investigating an online pharmacy website (the “Pharmacy Website”) following an overdose death of a victim in Boise, Idaho, on or about March 17, 2017, whose death was caused by elevated levels of multiple prescription opioids as well as fentanyl. The victim’s computer showed that he had repeatedly ordered painkillers from the Pharmacy Website, paying thousands of dollars for these drugs.  The subsequent investigation revealed that the Pharmacy Website was selling pills to customers located throughout the United States, and that GUZMAN-CABRERA led the drug trafficking organization that operated the Pharmacy Website.  In the course of the investigation, undercover law enforcement agents conducted multiple purchases of controlled substances from the Pharmacy Website.  The substances purchased by undercover law enforcement agents included oxycodone and hydrocodone.

The investigation has revealed that in some cases, customers purchased what they believed to be prescription drugs such as alprazolam or oxycodone from the Pharmacy Website, but instead received pills containing other substances.  In 2018, law enforcement agents searched a residence in New Jersey that the Pharmacy Website used as a distribution center, and seized approximately 100,000 pills, including pills containing the fentanyl analogue p-fluoroisobutyryl fentanyl and pills containing U-47700, both of which are powerful synthetic opioids that have no recognized medical use in the United States.

As alleged, GUZMAN-CABRERA, from at least 2013 through 2018, was the head of the drug trafficking organization that operated the Pharmacy Website.  GUZMAN-CABRERA, who was based in the Dominican Republic, coordinated the purchase of pills and tablets from sources overseas, and shipped these drugs to co-conspirators who operated drug distribution centers located in the United States.  After customers placed orders for drugs on the Pharmacy Website, GUZMAN-CABRERA directed his co-conspirators to mail the drugs to these customers.  The drug trafficking organization then sent the proceeds from the sales, totaling millions of dollars, from the United States to the Dominican Republic through a variety of means, including money remitters, money couriers, and wire transfers between United States and Dominican Republic-based shell company bank accounts.

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GUZMAN-CABRERA, 41, of the Dominican Republic, has been charged with one count of conspiracy to distribute controlled substances, one count of distribution of controlled substances over the Internet, and one count of conspiracy to commit money laundering, each of which carries a maximum sentence of 20 years in prison.  The maximum potential 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 outstanding investigative work of the DEA’s New Jersey Division, its Boise Division, and its Santo Domingo Country Office, and the USPIS.  She also thanked the Dominican Government’s National Directorate for Drug Control (DNCD) and the United States Marshals Service for their assistance in the case, as well as the U.S. Department of Justice’s Office of International Affairs of the Department’s Criminal Division for its significant assistance in securing the defendant’s extradition from the Dominican Republic.

This case is being handled by the Office’s Narcotics Unit.  Assistant U.S. Attorney Thane Rehn is in charge of the prosecution.

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

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

Herbalife Nutrition Ltd. (Herbalife), a U.S.-based publicly traded global nutrition company, has agreed to pay total penalties of more than $122 million to resolve the government’s investigation into violations of the Foreign Corrupt Practices Act (FCPA).  The resolution arises out of Herbalife’s scheme to falsify books and records and provide corrupt payments and benefits to Chinese government officials for the purpose of obtaining, retaining, and increasing Herbalife’s business in China.  This includes a criminal penalty of over $55 million and approximately $67 million to be paid to the U.S. Securities and Exchange Commission (SEC) in a related matter.    

Herbalife entered into a deferred prosecution agreement with the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of New York in connection with a criminal information filed today in the Southern District of New York charging Herbalife with one count of conspiracy to violate the books and records provision of the FCPA. 

“By engaging in a decade-long scheme to falsify its books and records to conceal corrupt and other improper payments to Chinese officials and state-owned entities, Herbalife misrepresented important information made available to investors,” said Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division.  “The integrity of our financial markets depends on the timely and accurate disclosure of material information about companies’ operations.  Today’s resolution reflects the department’s ongoing commitment to combating international corruption and ensuring that investors can trust the accuracy of the financial statements of publicly traded companies.”

“As admitted in the deferred prosecution agreement entered into today, Herbalife approved the extensive and systematic corrupt payments to Chinese government officials over a 10-year period to promote and expand Herbalife’s business in China,” said Acting U.S. Attorney Audrey Strauss of the Southern District of New York.  “Moreover, in an effort to conceal this widespread corruption scheme, Herbalife maintained false accounting records to mischaracterize these improper payments as permissible business expenses.  In addition to admitting its criminal conduct, Herbalife has agreed to pay combined penalties of more than $123 million.  This case signifies this Office’s commitment to ensuring that companies operating in the United States do not gain an unfair advantage through corruption and illegal bribes of foreign officials.”

According to its admissions, between 2007 and 2016, Herbalife knowingly and willfully conspired with others in a scheme to falsify its books and records and provide corrupt payments and benefits to Chinese government officials.  Herbalife carried out the scheme for the purpose of obtaining, retaining, and increasing Herbalife’s business in China by, among other things, (1) obtaining and retaining certain direct selling licenses for its wholly-owned subsidiaries in China (Herbalife China); (2) improperly influencing certain Chinese governmental investigations into Herbalife China’s compliance with Chinese laws; and (3) improperly influencing certain Chinese state-owned and state-controlled media for the purpose of removing negative media reports about Herbalife China. 

For example, in late 2006 through early 2007, during the time period that Herbalife China’s application for its first direct selling license was pending, Herbalife China provided corrupt payments and benefits to Chinese government officials, including government officials responsible for awarding that direct selling license, and falsely recorded and booked those corrupt expenses.  Around the same time period, an officer and high-level executive of Herbalife suggested to a high-level executive of Herbalife China that Herbalife China personnel falsify expense reimbursement documents in connection with entertainment of Chinese government officials.

Thereafter, Herbalife continued to provide improper payments and benefits to Chinese government officials.  Herbalife also continued to falsely record certain improper payments and benefits as “travel and entertainment expenses” and to maintain false Sarbanes-Oxley sub-certification letters in Herbalife’s books, records, and accounts.

As part of the agreement, Herbalife agreed to continue to cooperate with the U.S. government in any ongoing or future criminal investigations concerning Herbalife, its executives, employees, or agents.  In addition, under the agreement, Herbalife agreed to enhance its compliance program and to report to the government on the implementation of its enhanced compliance program. 

The government reached this resolution with Herbalife based on a number of factors, including the failure to timely disclose the conduct that triggered the investigation; the nature and seriousness of the offense, which spanned approximately a decade and involved high level employees; the lack of an effective compliance program at the time of the misconduct; and credit for the company’s cooperation.  Herbalife also engaged in remedial measures, including terminating and disciplining individuals who orchestrated the misconduct, adopting heightened controls and anti-corruption protocols, and significantly increasing the resources devoted to compliance.

The criminal monetary penalty for Herbalife reflects a 25 percent reduction off the bottom of the U.S. Sentencing Guidelines fine range because of Herbalife’s full cooperation with the government’s investigation.

In a related matter with the SEC, Herbalife agreed to pay the SEC disgorgement and prejudgment interest totaling approximately $67 million.

The FBI’s New York Field Office investigated the case.  Trial Attorney Jason Manning of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Joshua A. Naftalis and Scott A. Hartman of the U.S. Attorney’s Office for the Southern District of New York are prosecuting the case.

The department appreciates the significant cooperation provided by the SEC in this case.  The Justice Department’s Office of International Affairs provided assistance.

The Fraud Section is responsible for investigating and prosecuting all FCPA matters.  Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal-fraud/foreign-corrupt-practices-act.

The year 2020 marks the 150th anniversary of the Department of Justice.  Learn more about the history of our agency at www.Justice.gov/Celebrating150Years.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York (“SDNY”), and Acting Assistant Attorney General Brian C. Rabbitt of the Criminal Division of the United States Department of Justice (“DOJ”) announced today the filing of criminal charges against HERBALIFE NUTRITION, LTD. (“HERBALIFE”), a multinational corporation headquartered in Los Angeles, for conspiring to violate the books and records provisions of the Foreign Corrupt Practices Act (“FCPA”).  The charges arise out of a decade-long scheme by HERBALIFE to falsify books and records and provide corrupt payments and benefits to Chinese government officials for the purpose of obtaining, retaining, and increasing HERBALIFE’s business in China.  In connection with the filed charges, SDNY and DOJ entered into a deferred prosecution agreement (“DPA”) with HERBALIFE.  Pursuant to the DPA, HERBALIFE admitted to participating in the charged conspiracy and will pay a criminal fine of $55,743,093.

Acting U.S. Attorney Audrey Strauss said:  “As admitted in the deferred prosecution agreement entered into today, Herbalife approved the extensive and systematic corrupt payments to Chinese government officials over a 10-year period to promote and expand Herbalife’s business in China.  Moreover, in an effort to conceal this widespread corruption scheme, Herbalife maintained false accounting records to mischaracterize these improper payments as permissible business expenses.  In addition to admitting its criminal conduct, Herbalife has agreed to pay combined penalties of more than $123 million.  This case signifies this Office’s commitment to ensuring that companies operating in the U.S. do not gain an unfair advantage through corruption and illegal bribes of foreign officials.”

Acting Assistant Attorney General Brian C. Rabbitt said:  “By engaging in a decade-long scheme to falsify its books and records to conceal corrupt and other improper expenditures, Herbalife misrepresented the information available to investors.  Today’s resolution reflects the department’s ongoing commitment to combating corruption and ensuring that investors can trust the accuracy of the financial statements of publicly traded companies.”

According to the allegations contained in the criminal Information, which was filed today in Manhattan federal court, the statement of facts set forth in the DPA, and other publicly available information:

HERBALIFE conducts business operations in China through a group of wholly owned subsidiaries based in China (collectively, “Herbalife China”).  By 2016, Herbalife China was responsible for approximately $860 million, or approximately 20 percent, of HERBALIFE’s worldwide annual net sales, which exceeded $4 billion.  In China, to engage in direct selling – selling a company’s products through independent sales representatives – Chinese law required a company to obtain a direct selling license from national authorities as well as local authorities for each province in which a company intended to engage in direct selling.  From March 2007 through 2016, Herbalife China obtained licenses to engage in direct sales in 28 provinces. 

Yanliang Li, a/k/a “Jerry Li,” was the director of sales and/or sales vice president at Herbalife China from in or about 2004 through in or about December 2007, and then the managing director of Herbalife China from in or about December 2007 through in or about April 2017.  From in or about December 2012 through in or about February 2017, Li also held the title of senior vice president at HERBALIFE.  Hongwei Yang, a/k/a “Mary Yang,” was a high-level executive at Herbalife China and the head of external affairs from in or about 2006 through in or about April 2017.

Beginning in or about at least 2007 through in or about 2016, HERBALIFE, through Li, Yang, and others, engaged in a scheme to falsify books and records and provide corrupt payments and benefits to Chinese government officials, including officials of Chinese government agencies and a state-owned media outlet, for the purpose of obtaining, retaining, and increasing HERBALIFE’s business in China by, among other things, (1) obtaining and retaining certain of Herbalife China’s direct selling licenses; (2) improperly influencing certain Chinese governmental investigations into Herbalife China’s compliance with Chinese laws applicable to its business; and (3) improperly influencing certain Chinese state-owned and state-controlled media for the purpose of removing negative media reports about Herbalife China.

During the course of the scheme, in order to conceal these improper payments and benefits, HERBALIFE, through Li, Yang, and others, knowingly and willfully conspired and agreed with others to maintain false accounting records that did not accurately and fairly reflect the transactions and dispositions of HERBALIFE’s assets, by, among other things, falsely recording certain improper payments and benefits as “travel and entertainment expenses” and maintaining false Sarbanes Oxley sub-certification letters in HERBALIFE’s books, records, and accounts. 

*                *                *

In a related matter with the Securities and Exchange Commission (“SEC”), HERBALIFE agreed to pay to the SEC disgorgement and prejudgment interest totaling approximately $67,313,497.

In November 2019, the Government unsealed related criminal charges against Li and Yang, both of whom remain at large.  See United States v. Li and Yang, 19 Cr. 760 (VSB).

Ms. Strauss praised the outstanding work of the Federal Bureau of Investigation and the U.S. Department Justice’s Office of International Affairs of the Department’s Criminal Division, and also thanked the SEC for its assistance and cooperation in this investigation. 

This case is being handled by the Office’s Securities and Commodities Fraud Task Force and the FCPA Unit of the Fraud Section of DOJ’s Criminal Division.  Assistant United States Attorneys Joshua A. Naftalis and Scott A. Hartman, and Trial Attorney Jason Manning of the FCPA Unit, are in charge of the prosecution.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that HABEEB AUDU, a/k/a “Dickson,” a dual citizen of the United Kingdom and Nigeria, was extradited today from the United Kingdom.  AUDU was charged with participation in a series of fraud schemes from at least in or about 2013 until at least April 2019, involving the theft and laundering of more than $2 million.  AUDU was arrested in London, England, on June 26, 2019, on a provisional arrest warrant, and is the fourth defendant charged in this case.  AUDU is expected to be presented on Monday, August 31, before U.S. Magistrate Judge James L. Cott.  AUDU’s case is assigned to U.S. District Judge Katherine Polk Failla.

Acting U.S. Attorney Audrey Strauss said:  “As alleged, Habeeb Audu played a key role in an international fraud conspiracy that victimized businesses and individuals by using stolen identities and social engineering to access victims’ bank accounts, and by engaging in business email compromise schemes.  Thanks to the FBI and our international partners, including the Italian National Police, Audu is now in U.S. custody and facing charges in this District.”

FBI Assistant Director William F. Sweeney Jr. said:  “Today’s indictment outlines the alleged fraudulent conduct of Habeeb Audu and other conspirators who, over the course of nearly six years, robbed the bank accounts of both individuals and businesses here in the United States, sometimes from locations nearly halfway across the world. Using traditional spoofing techniques and business email compromise schemes, these crimes collectively brought in more than $2 million in proceeds. While today’s charges bring about a victory in this case, let it be a warning to the public to remain extra vigilant with respect to their personal and professional finances. The market is unfortunately rife with this type of crime.”   

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

From at least 2013 through in or about 2018, AUDU and various other conspirators (collectively, the “Conspirators”), located in countries including the United States, Canada, Italy, the United Kingdom, and the United Arab Emirates, were involved in a scheme to fraudulently access individuals’ and corporations’ bank accounts and to conduct financial transactions using those bank accounts without the knowledge or authority of the accounts’ legitimate owners (the “Bank Scheme”).  As part of the Bank Scheme, the Conspirators placed thousands of calls to various United States banks, holding themselves out as legitimate accountholders of particular targeted bank accounts and using the stolen personal identifying information belonging to those accountholders.  Using a particular telephone number “spoofing” service, and voice-altering technology, the Conspirators would deceive bank representatives into believing that the Conspirators were actual accountholders.  In so doing, they convinced multiple U.S. banks to, among other things:  move money from a victim’s savings account to the victim’s checking account (so that the Conspirators could more easily access the funds and conduct unauthorized transactions); falsely note on the account that the accountholder was traveling abroad (making the bank less likely to void suspicious international transactions made by the Conspirators); have “replacement” credit cards mailed to international addresses controlled by the Conspirators (whereupon the Conspirators could use them to make unauthorized purchases); and authorize foreign purchases made by the Conspirators.

AUDU, from at least December 2018 through April 2019, was also involved in separate schemes to defraud United States-based businesses and banks by means of business email compromise schemes (the “BEC Fraud Schemes”).  For example, AUDU defrauded an Ohio-based restaurant chain (the “Restaurant Victim”) into wiring nearly $2 million to a bank account controlled by AUDU’s co-conspirators (the “AUDU Account”).  He did so by tricking the Restaurant Victim into believing that one of its legitimate vendors had changed bank accounts to the AUDU Account, such that payments for the vendor’s services were made to the AUDU Account.  These funds were thereafter quickly withdrawn from the AUDU Account and dispersed to other accounts controlled by AUDU and his co-conspirators.

Thereafter, in connection with an FBI undercover operation, AUDU and others each agreed, for a substantial fee, to launder moneys that they believed to be fraud proceeds, through bank accounts controlled by AUDU and his co-conspirators.  In doing so, AUDU and his co-conspirators agreed to conceal the nature of those purportedly fraudulent proceeds. 

*                      *                     *

AUDU, 5­­­3, of the United Kingdom and Nigeria, is charged with one count of conspiracy to commit bank and wire fraud, which carries a maximum sentence of 30 years in prison; four counts of conspiracy to commit money laundering and money laundering, each of which carries a maximum of 20 years in prison; one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison; and one count of aggravated identity theft, which carries a mandatory sentence of two years in prison, to be served consecutively to any other sentence.  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.

Other defendants charged in this case include Abdulai Kennedy Saaka, a/k/a “Kenny,” of Atlanta, Georgia, who pled guilty to one count of money laundering conspiracy in January 2020; Alade Kazeem Sodiq, a/k/a “Eluku,” a citizen of the United Arab Emirates, whose case remains pending; and Dominic Francis Labiran, a citizen of the United Kingdom, who remains at large.

Ms. Strauss praised the outstanding investigative work of the FBI.  She also thanked United States Customs and Border Protection, Italian judicial law enforcement authorities, including the Prosecutor of the Republic of Naples and the Servizio Centrale Operativo of the Italian National Police, the Metropolitan Police Service, London, United Kingdom, and the United Kingdom’s Crown Prosecution Service for their assistance in this case.  The U.S. Department of Justice’s Office of International Affairs of the Department’s Criminal Division provided significant assistance in securing the defendant’s extradition from the United Kingdom.

The prosecution of this case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant United States Attorneys Kiersten A. Fletcher, Jonathan E. Rebold, and Andrew A. Rohrbach 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.        

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

Audrey Strauss, Acting United States Attorney for the Southern District of New York, and Peter D. Lopez, Regional Administrator of the U.S. Environmental Protection Agency (“EPA”), announced today that the United States has filed a civil lawsuit against CYTEC INDUSTRIES, INC. (“Cytec”) and KEYSPAN GAS EAST CORPORATION d/b/a NATIONAL GRID (“National Grid”) (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.  Through the lawsuit, EPA sought to collect the costs that it has incurred since April 2004 in connection with its clean-up of mercury at the Port Refinery Superfund Site (the “Site”) in the Village of Rye Brook in Westchester County, New York.  The consent decree, which provides for a combined payment of $142,653 by the Defendants, has been lodged with the District Court for a period of at least 30 days, after which it will be submitted for the Court’s approval.

Acting United States Attorney Audrey Strauss said:  “Both Cytec and National Grid contributed to contamination in a residential community by arranging for the treatment or disposal of toxic mercury, and now they are each paying a share of the costs they have imposed on the community.  This Office will continue to hold responsible parties accountable for their share of the costs at the Site.”

Regional Administrator Peter D. Lopez said:  “These companies sent mercury-containing materials to this site where they were improperly handled, resulting in mercury being released into the environment and putting people in the area at risk.  Thankfully, EPA was able to take action to address the risk, and this settlement holds the companies accountable, ensuring that taxpayers don’t bear the full burden of the cleanup at this site.”

As alleged in the complaint filed yesterday in White Plains federal District Court, each of the Defendants arranged for the sale and transport of used or scrap mercury, or mercury-containing products, directly or indirectly to Port Refinery.  Port Refinery then processed these materials as part of a mercury refining business it operated out of a residence in Rye Brook, New York.  Port Refinery’s treatment and processing of the scrap mercury sent by the Defendants and other parties led to extensive releases of mercury, a hazardous substance, requiring two separate clean-up actions by EPA.  In connection with the second clean-up, which began in 2004, EPA has incurred costs at the Site for a variety of 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.
• Defendants delivered materials containing scrap mercury to Port Refinery during its period of operations.

Pursuant to the consent decree, the Defendants will pay a total of $142,653 in costs incurred by EPA, consisting of $93,076 to be paid by Cytec, and $49,577 to be paid by National Grid.

*                *                *

This lawsuit is the United States’ fifth lawsuit against responsible parties to recover clean-up costs for the second clean-up at the Site.  Prior to this settlement, the United States had recovered $827,229 from other responsible parties.  The United States is continuing to pursue its claims against additional potentially 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 Acting United States Attorney for the Southern District of New York, announced that STEVEN L. CREA, the Underboss of the Luchese Family, was sentenced today to life in prison, a $400,000 fine, and the forfeiture of $1 million following his conviction for the 2013 murder of Michael Meldish, conspiracy to commit racketeering, and other felonies.  A jury convicted CREA and three co-defendants on November 15, 2019, following a six-week trial before U.S. District Judge Cathy Seibel, who also imposed today’s sentence.

Acting U.S. Attorney Audrey Strauss said:  “Steven L. Crea – the Underboss of the Luchese Family – is the last of a dozen made men arrested in 2017 to be sentenced for his crimes.  For his role in the 2013 murder of Michael Meldish and other crimes, Crea will now spend the rest of his life behind bars.  Thanks to the outstanding investigative work of the FBI and NYPD, we continue our commitment to render La Cosa Nostra a thing of the past.”

According to the evidence presented at trial, the admissions of defendants who pled guilty, and other court documents:

STEVEN L. CREA was the Underboss, or second-in-command, of the Luchese Family of La Cosa Nostra, one of the “Five Families” that constitute the Mafia in the New York City area.  From 2000 to his arrest in 2017, CREA helped lead the Luchese Family, which made millions of dollars in profit from crimes committed by the Family’s members and associates in New York City, Westchester, Long Island, New Jersey, and elsewhere.  In 2013, CREA helped orchestrate the murder of Michael Meldish.

In May 2017, charges were filed against 12 members of the Luchese Family, including the Acting Boss, Underboss, Consigliere, four captains, and five soldiers, for their commission of a wide array of crimes with the Mafia from at least in or about 2000 up to and including in or about 2017.  With the exception of one captain who died before his case was resolved, every Luchese Family member charged in this case either pled guilty or was convicted at trial.  With CREA’s sentencing today, all have now been sentenced by Judge Seibel.  Eight Mafia associates were also charged.  All subsequently pled guilty or were convicted at trial, and seven have now been sentenced.  The defendants were convicted of being leaders, members and associates of the Mafia, and committing crimes including the murder of Michael Meldish; three attempted murders – including the attempted murder of a former witness against the Mafia; multiple assaults; trafficking oxycodone, cocaine, and other drugs; extortion; millions of dollars in fraud against a public hospital in the Bronx; loansharking; operating illegal gambling businesses; and other crimes.  A chart containing the ages, residency information, convictions, and sentences of the defendants is attached.   

*                      *                     *

Ms. Strauss praised the outstanding investigative work of the Federal Bureau of Investigation, the New York City Police Department, Homeland Security Investigations, the Waterfront Commission of New York Harbor, and the U.S. Bureau of Prisons.

The case is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Scott Hartman, Hagan Scotten, Jacqueline Kelly, Celia V. Cohen, and Alexandra N. Rothman are in charge of the prosecution.

DEFENDANT

AGE

CITY OF RESIDENCE

CHARGES OF CONVICTION

SENTENCE

Madonna, Matthew

84

Incarcerated

Racketeering conspiracy, murder in aid of racketeering, conspiracy to commit murder in aid of racketeering, aiding and abetting use of a firearm to commit murder

Life in prison

Crea, Steven L.

73

Crestwood, NY

Racketeering conspiracy, murder in aid of racketeering, conspiracy to commit murder in aid of racketeering, aiding and abetting use of a firearm to commit murder

Life in prison, $400,000 fine,

$1 million forfeiture

Londonio, Christopher

46

Incarcerated

Racketeering conspiracy, murder in aid of racketeering, conspiracy to commit murder in aid of racketeering, aiding and abetting use of a firearm to commit murder, conspiracy to distribute narcotics

Caldwell, Terrence

62

Incarcerated

Racketeering conspiracy, murder in aid of racketeering, conspiracy to commit murder in aid of racketeering, use of a firearm to commit murder, attempted murder in aid of racketeering, use of a firearm during a crime of violence

Datello, Joseph

69

Staten Island, NY

Racketeering conspiracy

168 months' imprisonment

Crea, Steven D.

48

New Rochelle, NY

Racketeering conspiracy, conspiracy to commit murder in aid of racketeering, attempted assault with a deadly weapon in aid of racketeering

156 months' imprisonment, $50,000 fine

Bruno, Vincent

36

Incarcerated

Attempted murder in aid of racketeering, racketeering conspiracy

136 months' imprisonment

Vaughan, Brian

54

Matawan, NJ

Racketeering conspiracy

84 months' imprisonment

O’Connor, Richard

66

Staten Island, NY

Conspiracy to distribute narcotics

72 months' imprisonment

Garcia, Carmine

Deceased

Hawthorne, NJ

Racketeering conspiracy, conspiracy to commit assault in aid of racketeering

60 months' imprisonment, $250,000 fine

DiNapoli, Joseph

84

Bronx, NY

Racketeering conspiracy

52 months' imprisonment, $250,000 fine

Castelucci, John

60

Staten Island, NY

Racketeering conspiracy

37 months' imprisonment, $150,000 fine

Maffucci, James

72

New York, NY

Extortion, Extortionate extension of credit

37 months' imprisonment

Corso, Tindaro

59

Staten Island, NY

Racketeering conspiracy

30 months' imprisonment, $10,000 fine

Venice, Joseph

59

Yonkers, NY

Racketeering conspiracy

18 months' imprisonment, $10,000 fine

Cassano, Paul

41

Yonkers, NY

Conspiracy to commit assault in aid of racketeering

18 months' imprisonment

Camilli, Robert

63

Briarcliff Manor, NY

Extortionate extension of credit

One year supervised release; $35,000 fine

Incatasciato, John

45

Elmsford, NY

Extortionate collection of credit

Two years' supervised release; 100 hours' community service

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and Philip R. Bartlett, Inspector-in-Charge of the New York Office of the United States Postal Inspection Service (“USPIS”), announced today that EVA CHRISTINE RODRIGUEZ and SERGIO LORENZO RODRIGUEZ, mother and son, of Orange County, California, were arrested and charged with wire fraud offenses in connection with a fraudulent foreclosure rescue scheme that took in more than $5 million in prohibited advance fees from thousands of financially distressed homeowners.

Acting Manhattan U.S. Attorney Audrey Strauss said:  “As alleged, Eva Christine Rodriguez and Sergio Lorenzo Rodriguez preyed on vulnerable homeowners at risk of foreclosure by making false and misleading promises that they knew they would not or could not keep.  They allegedly continued to do so even after they were barred from the debt relief industry by a federal court in California.  They now face serious criminal charges.”

USPIS Inspector-in-Charge Philip R. Bartlett said:  “Loan Modification Scams are a cruel fraud targeting very desperate homeowners faced with losing their homes. While a loan modification may appear to be a lifeline, these scams often become a nightmare. This is allegedly what happened to victims who did business with Eva and Sergio Rodriguez. Postal Inspectors remain on alert for fraud scams targeting consumers, bringing fraudsters to justice worldwide.”

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

From approximately March 2014 through April 2018, EVA CHRISTINE RODRIGUEZ and SERGIO LORENZO RODRIGUEZ (the “Defendants”) owned and/or managed a series of mortgage modification companies through which they perpetrated a scheme to defraud and attempt to defraud financially distressed consumers who were facing or were at imminent risk of foreclosure through deceptive marketing practices.  Those companies were National Servicing Center, American Home Servicing Center, National Advocacy Center, National Advocacy Group, and Capital Home Advocacy Center (collectively, the “Companies”).  Among other ways, the Defendants charged desperate homeowners thousands of dollars in prohibited advance fees by tricking them into believing that they had been pre-approved by their lender or servicer for a mortgage modification; falsely represented prohibited advance fees to be closing costs or other non-prohibited costs; fraudulently claimed that the Companies achieved success rates of 95 percent or higher for mortgage modifications; and made empty promises of a no-risk money back guarantee.  As a result of their intentional misrepresentations, and misrepresentations that they encouraged their subordinates to make, the Defendants induced thousands of homeowners to pay an aggregate of more than $5 million in prohibited advance fees to the Companies, including a large number of consumers who were ultimately denied mortgage modifications or who received modification offers that were less favorable than they had been led to expect at the time they paid advance fees.

In February 2018, the Federal Trade Commission brought a civil lawsuit against EVA CHRISTINE RODRIGUEZ and SERGIO LORENZO RODRIGUEZ, among others, in federal court in Santa Ana, California.  That civil action resulted first in a temporary restraining order and then a permanent injunction barring EVA CHRISTINE RODRIGUEZ and SERGIO LORENZO RODRIGUEZ from marketing and selling all debt relief products and services.  As alleged in the Complaint, the Defendants flouted those judicial orders by having a relative create another mortgage modification company named 1st Premier Asset Solutions, which the Defendants operated using aliases and some of the same deceptive practices. 

EVA CHRISTINE RODRIGUEZ and SERGIO LORENZO RODRIGUEZ will be presented in federal court in Santa Ana later today.

*                *                *

EVA CHRISTINE RODRIGUEZ, 65, of Laguna Hills, California, and SERGIO LORENZO LAWRENCE, 46, of Laguna Niguel, California, are each charged with one count of conspiracy to commit wire fraud and one count of wire fraud.  Each count carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.  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 investigative work of the USPIS and thanked the Federal Trade Commission and the United States Trustee for Region 5 for their assistance.

This case is being handled by the Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorney Sarah Lai is in charge of the prosecution.

If you believe you are a potential victim of this fraud, please contact Postal Inspector Brandy King-Gonzalez of the USPIS at bnking-gonzalez@uspis.gov, or (212) 330-5252.

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

[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 Acting United States Attorney for the Southern District of New York, Peter C. Fitzhugh, Special Agent-in-Charge of the New York Field Office of Homeland Security Investigations (“HSI”), and Philip R. Bartlett, Inspector-in-Charge of the New York Office of the United States Postal Inspection Service (“USPIS”), announced today the unsealing of indictments charging UMAR AHMAD a/k/a “Artist,” GEORGE BRIDI, and JONATAN CORREA, a/k/a “Raid,” with copyright infringement, and as to BRIDI, wire fraud, for their involvement in the Sparks Group, an international piracy group involved in illegally distributing movies and television shows on the Internet.  BRIDI, a citizen of the United Kingdom, was arrested on Sunday in Cyprus on an INTERPOL Red Notice based on the U.S. criminal charges. The United States will seek BRIDI’s extradition to stand trial in the United States.  CORREA was arrested yesterday in Olathe, Kansas, where he will be presented in federal court.  AHMAD, a citizen of Norway, remains at large.  The case is assigned to United States District Judge Richard M. Berman. 

In coordination with law enforcement authorities in 18 other countries and supported by Eurojust and Europol, dozens of servers controlled by the Sparks Group were taken offline today around the world, including in North America, Europe, and Asia.  The Sparks Group utilized these servers to illegally store and disseminate copyrighted content to members around the globe. 

Acting U.S. Attorney Audrey Strauss said:  “As alleged, the defendants were members of an international video piracy ring that was sophisticated and widespread.  The group allegedly circumvented copyright protections on nearly every movie released by major production studios, as well as television shows, and distributed them by way of a worldwide network of servers.  Thanks to the efforts of HSI, the Postal Inspection Service, Eurojust, Europol, and our law enforcement partners in 18 countries on three continents, key members of this group are in custody, and the servers that were the pipeline for wholesale theft of intellectual property are now out of service.”

HSI Special Agent-in-Charge Fitzhugh said:  “As alleged, Sparks Group members reproduced and disseminated hundreds of movies and television shows prior to their retail release date, including nearly every movie released by major production studios, causing millions of dollars in losses to the film and television industry.  This investigation shows – in high definition – that despite the online platform and international nature of this scheme, we are committed to stop those who use the cyber world for illicit gain.  HSI New York’s El Dorado Task Force, in collaboration with the U.S. Postal Inspection Service, leveraged their global network of law enforcement partners to shut down this criminal organization’s cyber piracy network and arrest those allegedly responsible.”

USPIS Inspector-in-Charge Philip R. Bartlett said:  “Copyright criminals have come a long way from bootlegging movies in local theaters and selling inferior quality videos and DVD’s on the streets of New York City for $5.00.  The movies and TV shows allegedly stolen by these defendants not only represent a body of work ripped off from those who spent years developing their craft and working their way to stardom, but deprives the studios and actors of the fruits of their labor.”

Ladislav Hamran, President of Eurojust, said:  “This case is an excellent example of what can be achieved if we work together across borders and continents. Thanks to the long-standing partnership between the U.S. and the European authorities, we managed to deal a significant blow to online piracy. My sincere congratulations go out to all countries involved in yesterday’s joint action day.”

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

Between 2011 and the present, UMAR AHMAD a/k/a “Artist,” GEORGE BRIDI, JONATAN CORREA, a/k/a “Raid,” and others known and unknown were members of the Sparks Group, a criminal organization that disseminated on the Internet movies and television shows prior to their retail release date, including nearly every movie released by major production studios, after compromising the content’s copyright protections.

In furtherance of its scheme, the Sparks Group fraudulently obtained copyrighted DVDs and Blu-Ray discs from wholesale distributors in advance of their retail release date by, among other things, making various misrepresentations to the wholesale distributors concerning the reasons that they were obtaining the discs prior to the retail release date.   

Sparks Group members then used computers with specialized software to compromise the copyright protections on the discs, a process referred to as “cracking” or “ripping,” and to reproduce and encode the content in a format that could be easily copied and disseminated over the Internet.  They thereafter uploaded copies of the copyrighted content onto servers controlled by the Sparks Group, where other members further reproduced and disseminated the content on streaming websites, peer-to-peer networks, torrent networks, and other servers accessible to the public.  The Sparks Group identified its reproductions by encoding the filenames of reproduced copyrighted content with distinctive tags, and also uploaded photographs of the discs in their original packaging to demonstrate that the reproduced content originated from authentic DVDs and Blu-Ray discs.

AHMAD and BRIDI arranged for discs to be picked up, mailed, or delivered from distributors located in Manhattan, Brooklyn, and New Jersey to other members of the Sparks Group, including CORREA, prior to their official release date.  AHMAD, BRIDI, and CORREA then reproduced, and aided and abetted the reproduction of, these discs by using computer software that circumvented copyright protections on the discs and reproducing the copyrighted content for further distribution on the Internet. 

The Sparks Group has caused tens of millions of dollars in losses to film production studios.

*              *             *

AHMAD, 39, BRIDI, 50, and CORREA, 36, are each charged with copyright infringement conspiracy, which carries a maximum penalty of five years in prison.  BRIDI is also charged with wire fraud conspiracy, which carries a maximum penalty of 20 years in prison, and conspiracy to transport stolen property interstate, 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 HSI and USPIS.  She also thanked Europol and Eurojust as well as law enforcement authorities in the following countries for their assistance in the investigation:  Canada, Cyprus, Czech Republic, Denmark, France, Germany, Italy, Republic of Korea, Latvia, Netherlands, Norway, Poland, Portugal, Romania, Spain, Sweden, Switzerland, and the United Kingdom. 

The case is being prosecuted by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Andrew K. Chan, Mollie Bracewell, and Christy Slavik are in charge of the prosecution.  The U.S. Department Justice’s Office of International Affairs (OIA) of the Department’s Criminal Division provided significant and ongoing assistance with facilitating the execution of dozens of mutual legal assistance requests in 18 different countries necessary for taking down servers and gathering evidence.  OIA also provided critical support in working with Eurojust and Europol in planning the coordinated operation yesterday.

The charges contained in the Indictments 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 Indictments and the description of the Indictments set forth herein constitute only allegations and every fact described should be treated as an allegation.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Jonathan D. Larsen, Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced that DEBORAH MENSAH, a Ghanaian citizen, was extradited from the Republic of Ghana (“Ghana”) to the United States on August 21, 2020.  MENSAH was arrested on January 16, 2020, in Accra, Ghana for charges in connection with a fraud conspiracy based in Ghana involving the theft of over $10 million through business email compromises and romance scams that targeted the elderly from at least in or about 2014 through in or about 2018.  MENSAH is the eighth defendant charged in the case.  MENSAH was presented this morning in Manhattan federal court before U.S. Magistrate Judge Debra Freeman.  MENSAH’s case is assigned to U.S. District Judge Denise L. Cote.

Acting Manhattan U.S. Attorney Audrey Strauss said:  “Deborah Mensah is alleged to have been a participant in a conspiracy that resulted in the theft of millions of dollars from businesses and vulnerable individuals across the United States, and the laundering of that money through a network of bank accounts in the Bronx to co-conspirators in Ghana.  Now she is in the United States and facing charges under U.S. law.”

FBI Assistant Director William F. Sweeney Jr. said:  “Ms. Mensah may have believed hiding in Ghana protected her from facing justice for her alleged role in this scheme.  She now knows the FBI’s reach is global through our formidable network of law enforcement partners.  Others should take heed – we won’t go away simply because it may take time to go get you.  If you break our laws, you will pay the price.”

IRS-CI Special Agent in Charge Jonathan D. Larsen said:  “As alleged in the criminal complaint, Ms. Mensah’s desire for money drove her to prey upon the vulnerable in our society. Thanks to the financial expertise of IRS-CI special agents working side-by-side with our law enforcement partners, the long arm of the law caught up to Ms. Mensah in Ghana, and she will now face the consequences of her alleged actions.”

According to allegations in the Complaint and the Indictment and other filings in the case[1]:

From at least in or about 2014 through in or about 2018, MENSAH was a member of a  criminal enterprise (the “Enterprise”) based in Ghana that committed a series of business email compromises and romance scams against individuals and businesses located across the United States, including in the Southern District of New York. 

The objective of the Enterprise’s business email compromise fraud scheme was to trick and deceive businesses into wiring funds into accounts controlled by the Enterprise.  First, members of the Enterprise created email accounts with slight variations of email accounts used by employees of a victim company or third parties engaged in business with a company to “spoof” or impersonate those employees or third parties.  These fake email accounts were specifically designed to trick other employees of the company with access to the company’s finances into thinking the fake email accounts were authentic.  The fake email accounts were used to send instructions to wire money to certain bank accounts and also included fake authorization letters for the wire transfers that contained forged signatures of company employees.  By using this method of deception, the Enterprise sought to trick the victims into transferring hundreds of thousands of dollars to bank accounts the victims believed were under the control of legitimate recipients of the funds as part of normal business operations, when in fact the bank accounts were under the control of members of the Enterprise, including MENSAH.

The Enterprise conducted the romance scams by using electronic messages sent via email, text messaging, or online dating websites that deluded the victims, many of whom were vulnerable older men and women who lived alone, into believing the victim was in a romantic relationship with a fake identity assumed by members of the Enterprise.  Once members of the Enterprise had gained the trust of the victims using the fake identity, they used false pretenses, such as a shipment of gold or receiving a portion of an investment, to cause the victims to wire money to bank accounts the victims believed were controlled by their romantic interests, when in fact the bank accounts were controlled by members of the Enterprise.  At times, the members of the Enterprise also used false pretenses to cause the victims to receive funds into the victims’ bank accounts, which, unbeknownst to the victims, were fraud proceeds, and to transfer those funds to accounts under the control of members of the Enterprise.  The members of the Enterprise, posing as the romantic interest of the victims, also introduced the victims to other individuals purporting to be, for example, consultants or lawyers, who then used false pretenses to cause the victims to wire money to bank accounts controlled by members of the Enterprise.

MENSAH and her co-conspirators received or otherwise directed the receipt of over $10 million in fraud proceeds from victims of the Enterprise in bank accounts that she and other members of the Enterprise 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 MENSAH received the fraud proceeds in bank accounts under her control, she withdrew, transported, and laundered those fraud proceeds to other members of the Enterprise, including those located in Ghana.  MENSAH also used the name and identity of another person to withdraw or otherwise direct the withdrawal of stolen funds.

                                                            *                      *                      *

MENSAH, 33, a citizen of Ghana, is charged with one count of conspiracy to commit wire fraud, one count of wire fraud, and one count of conspiracy to commit money laundering, which each carry a maximum sentence of 20 years in prison; one count of receipt of stolen money, which carries a maximum sentence of 10 years in prison; one count of conspiracy to receive stolen money, which carries a maximum sentence of five years in prison; and one count of aggravated identity theft, which carries a mandatory sentence of two years in prison to be served consecutively to any other sentence imposed.  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.

Other defendants in this case who have been sentenced include Muftau Adamu, a/k/a “Muftau Adams,” a/k/a “Muftau Iddrissu,” 32, of the Bronx, New York, who was sentenced to 51 months in prison on June 7, 2019; Prince Nana Aggrey, 45, of the Bronx, New York, who was sentenced to 30 months in prison on May 10, 2019; and Assana Traore, 41, of the Bronx, New York, who was sentenced to 15 months in prison on October 8, 2019.   Adamu and Aggrey each pled guilty to one count of conspiracy to commit wire fraud, and Traore pled guilty to one count of conspiracy to receive stolen money.  Each of the defendants was sentenced by Judge Cote.  

Any businesses or individuals who believe they may have been the victim of a business email compromise or a romance scam or have information regarding such crimes should file a complaint with the FBI’s Internet Crime Complaint Center (“IC3”) at https://www.ic3.gov or contact their local FBI office.

Ms. Strauss praised the outstanding investigative work of the FBI and IRS-CI.  Ms. Strauss also thanked the United States Marshals Service, the FBI Legal Attaché in Accra, Ghana, U.S. Customs and Border Protection, the Office of the Attorney-General & Ministry of Justice of Ghana, and Ghana’s Economic and Organised Crime Office, for their assistance in this case.  The U.S. Department of Justice’s Office of International Affairs of the Department’s Criminal Division provided significant assistance in securing the defendant’s extradition from Ghana.

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

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

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

Audrey Strauss, the Acting 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 that SEPEHR SARSHAR was charged this morning with securities fraud and other fraud offenses in connection with SARSHAR’s scheme to provide inside information to his friends and family so they could trade in the securities of a pharmaceutical company SARSHAR founded and of which he was a member of the board of directors.

Acting Manhattan U.S. Attorney Audrey Strauss said:  “As alleged, Sepehr Sarshar, aware of an impending tender offer for his company, tipped off friends and a close relative, enabling them to reap nearly three-quarters of a million dollars in illegal profits.  My Office and the FBI remain resolute in our commitment to policing and prosecuting insider trading.”

FBI Assistant Director William F. Sweeney Jr. said:  “It seems intuitive that material nonpublic information should never be shared with the public, or traded on, prior to shareholder knowledge. Still, time and time again we see where those privy to a company’s inside information pass it on to family and friends. As alleged today, Sepehr Sarshar, a founder and board member of Auspex Pharmaceuticals, Inc., tipped off his own inner circle to an anticipated tender offer for the company. His associates traded on this information, and profited by the hundreds of thousands. Upsetting the market balance in this way puts all investors at a disadvantage. I think the message here is pretty clear – insider trading is risky business, and it’s a crime that’s typically met with hefty fines or significant jail time.”  

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

Between in or about January 2015 and March 2015, SARSHAR, a founder, former chief executive officer, and member of the board of directors of Auspex Pharmaceuticals, Inc. (“Auspex”), misappropriated material nonpublic information (“MNPI”) from Auspex relating to an anticipated tender offer for Auspex by Teva Pharmaceutical Industries Ltd. (“Teva”).  SARSHAR passed that MNPI on to friends and family – including a college friend, his then girlfriend, another long-time friend, and a close family relative  (collectively, the “Associates”) – so they could execute profitable securities trades based on that MNPI, and otherwise caused the Associates to execute trades based on the MNPI he misappropriated.  In turn, the Associates’ trading in the shares of Auspex generated an aggregate of more than approximately $700,000 in illicit profits.

To conceal his illegal scheme, SARSHAR later lied to the Financial Industry Regulatory Authority (“FINRA”) in an investigation conducted by FINRA into insider trading in Auspex securities during the period preceding Teva’s tender offer for Auspex.  Among other things, SARSHAR falsely stated that he could recall no contact with two of the Associates during the period preceding the tender offer whereas, in truth and in fact, SARSHAR had substantial communications with those individuals, including regarding the forthcoming tender offer.  

SARSHAR will be presented later today in federal court in San Diego.

*                *                *

SARSHAR, 53, of Encinitas, California, is charged with one count of securities fraud, one count of wire fraud, and one count of fraud in connection with a tender offer.  The securities fraud count carries a maximum sentence of 25 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.  The wire fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.  The fraud in connection with a tender offer count carries a maximum sentence of 20 years in prison and a maximum fine of $5 million.  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 investigative work of the FBI and thanked the Philadelphia Regional Office of the SEC, which has filed civil charges against SARSHAR in a separate action.  She added that the FBI’s investigation is ongoing.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Elisha J. Kobre and Martin Bell are in charge of the prosecution.

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

[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 Acting United States Attorney for the Southern District of New York, and Philip R. Bartlett, Inspector-in-Charge of the New York Field Office of the United States Postal Inspection Service (“USPIS”), announced the unsealing of an indictment charging BRIAN KOLFAGE, STEPHEN BANNON, ANDREW BADOLATO, and TIMOTHY SHEA for their roles in defrauding hundreds of thousands of donors in connection with an online crowdfunding campaign known as “We Build the Wall” that raised more than $25 million.  The defendants were arrested this morning.  KOLFAGE will be presented today before U.S. Magistrate Judge Hope T. Cannon in the Northern District of Florida.  BANNON will be presented today in the Southern District of New York.  BADOLATO will be presented today before U.S. Magistrate Judge Thomas Wilson in the Middle District of Florida.  SHEA will be presented today before U.S. Magistrate Judge Kristen L. Mix in the District of Colorado.  The case is assigned to U.S. District Judge Analisa Torres in the Southern District of New York.

Acting U.S. Attorney Audrey Strauss said:  “As alleged, the defendants defrauded hundreds of thousands of donors, capitalizing on their interest in funding a border wall to raise millions of dollars, under the false pretense that all of that money would be spent on construction.  While repeatedly assuring donors that Brian Kolfage, the founder and public face of We Build the Wall, would not be paid a cent, the defendants secretly schemed to pass hundreds of thousands of dollars to Kolfage, which he used to fund his lavish lifestyle.  We thank the USPIS for their partnership in investigating this case, and we remain dedicated to rooting out and prosecuting fraud wherever we find it.”

Inspector-in-Charge Philip R. Bartlett said:  “The defendants allegedly engaged in fraud when they misrepresented the true use of donated funds.  As alleged, not only did they lie to donors, they schemed to hide their misappropriation of funds by creating sham invoices and accounts to launder donations and cover up their crimes, showing no regard for the law or the truth.   This case should serve as a warning to other fraudsters that no one is above the law, not even a disabled war veteran or a millionaire political strategist.”

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

Starting in approximately December 2018, BRIAN KOLFAGE, STEPHEN BANNON, ANDREW BADOLATO, and TIMOTHY SHEA, and others, orchestrated a scheme to defraud hundreds of thousands of donors, including donors in the Southern District of New York, in connection with an online crowdfunding campaign ultimately known as “We Build The Wall” that raised more than $25 million to build a wall along the southern border of the United States.  In particular, to induce donors to donate to the campaign, KOLFAGE repeatedly and falsely assured the public that he would “not take a penny in salary or compensation” and that “100% of the funds raised . . . will be used in the execution of our mission and purpose” because, as BANNON publicly stated, “we’re a volunteer organization.”

Those representations were false.  In truth, KOLFAGE, BANNON, BADOLATO, and SHEA received hundreds of thousands of dollars in donor funds from We Build the Wall, which they each used in a manner inconsistent with the organization’s public representations.  In particular, KOLFAGE covertly took for his personal use more than $350,000 in funds that donors had given to We Build the Wall, while BANNON, through a non-profit organization under his control (“Non-Profit-1”), received over $1 million from We Build the Wall, at least some of which BANNON used to cover hundreds of thousands of dollars in BANNON’s personal expenses.  To conceal the payments to KOLFAGE from We Build the Wall, KOLFAGE, BANNON, BADOLATO, and SHEA devised a scheme to route those payments from We Build the Wall to KOLFAGE indirectly through Non-Profit-1 and a shell company under SHEA’s control, among other avenues.  They did so by using fake invoices and sham “vendor” arrangements, among other ways, to ensure, as KOLFAGE noted in a text message to BADOLATO, that his pay arrangement remained “confidential” and kept on a “need to know” basis.  

*                *                *

KOLFAGE, 38, of Miramar Beach, Florida, BANNON, 66, of Washington, D.C., BADOLATO, 56, of Sarasota, Florida, and SHEA, 49, of Castle Rock, Colorado, are each charged with one count of conspiracy to commit wire fraud and one count of conspiracy to commit money laundering, each of which carries a maximum penalty of 20 years in prison. 

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

Ms. Strauss praised the outstanding investigative work of the USPIS and the Special Agents of the United States Attorney’s Office for the Southern District of New York.  She also thanked the U.S Attorney’s Office for the Northern District of Florida for their assistance.

The case is being handled by the Office’s Public Corruption Unit.  Assistant United States Attorneys Nicolas Roos, Alison G. Moe, and Robert B. Sobelman are in charge of the prosecution.

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

[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 therein should be treated as an allegation.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, Philip Bartlett, Inspector-in-Charge of the New York Division of the United States Postal Inspection Service (“USPIS”), and Dermot Shea, the Commissioner of the New York City Police Department (“NYPD”), announced charges against SAIBO SIDIBEH, MOUKHAMED FALL, MAMADY DANFAKHA, ALHANSA HYDARA, MAMADOU DIALLO, DEMBA DIAKITE, MOHAMMED SABALY, BANGALY DOUMBIA, and ABUBACKR DANSO for their involvement in a bank fraud scheme involving the deposit of more than $700,000 of fraudulent checks and the subsequent withdrawal of funds.  SIDIBEH, FALL, HYDARA, and DANSO were arrested on August 12, 2020, and presented before U.S. Magistrate Judge Ona T. Wang.  DANFAKHA, DIALLO, DIAKITE, and DOUMBIA were arrested this morning and are expected to be presented later today before U.S. Magistrate Judge Stewart D. Aaron in Manhattan federal court.  SABALY remains at large.

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

Between at least July 2018 and at least August 2019, SAIBO SIDIBEH, MOUKHAMED FALL, MAMADY DANFAKHA, ALHANSA HYDARA, MAMADOU DIALLO, DEMBA DIAKITE, MOHAMMED SABALY, BANGALY DOUMBIA, and ABUBACKR DANSO engaged in a scheme to defraud banks by depositing fraudulent, forged, or altered checks into the bank accounts of third parties at ATMs in the Bronx, Manhattan, and elsewhere.  Before the bank realized that a check was invalid, the defendants withdrew the funds, typically by purchasing postal money orders.  In total, the defendants deposited more than $700,000 in fraudulent checks.

*                *                *

A chart containing the names, charges, and 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 USPIS and the NYPD.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorney Andrew A. Rohrbach is in charge of the prosecution.

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

Count

Charge

Defendant(s)

Maximum/minimum penalties

1

Conspiracy to commit bank fraud

18 U.S.C. § 1349

MOUKHAMED FALL,

 MAMADY DANFAKHA,

MAMADOU DIALLO,

 ALHASANA HYDARA,

DEMBA DIAKITE

30 years

2

Bank fraud

18 U.S.C. §§ 1344 and 2

MOUKHAMED FALL,

 MAMADY DANFAKHA,

MAMADOU DIALLO,

 ALHASANA HYDARA,

DEMBA DIAKITE

30 years

3

Aggravated identity theft

18 U.S.C. §§ 1028A(a)(1), 1028A(b), and 2

MOUKHAMED FALL,

 MAMADY DANFAKHA,

MAMADOU DIALLO,

 ALHASANA HYDARA,

DEMBA DIAKITE

Mandatory two-year consecutive sentence

4

Bank fraud

18 U.S.C. §§ 1344 and 2

MOHAMMED SABALY

30 years

5

Aggravated identity theft

18 U.S.C. §§ 1028A(a)(1), 1028A(b), and 2

MOHAMMED SABALY

Mandatory two-year consecutive sentence

6

Bank fraud

18 U.S.C. §§ 1344 and 2

SAIBO SIDIBEH

30 years

7

Aggravated identity theft

18 U.S.C. §§ 1028A(a)(1), 1028A(b), and 2

SAIBO SIDIBEH

Mandatory two-year consecutive sentence

8

Bank fraud

18 U.S.C. §§ 1344 and 2

BANGALY DOUMBIA

30 years

9

Aggravated identity theft

18 U.S.C. §§ 1028A(a)(1), 1028A(b), and 2

BANGALY DOUMBIA

Mandatory two-year consecutive sentence

10

Bank fraud

18 U.S.C. §§ 1344 and 2

ABUBACKR DANSO

30 years

11

Aggravated identity theft

18 U.S.C. §§ 1028A(a)(1), 1028A(b), and 2

ABUBACKR DANSO

Mandatory two-year consecutive sentence

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

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and Peter C. Fitzhugh, Special Agent-in-Charge of the New York Field Office of Homeland Security Investigations (“HSI”), announced the indictment and arrest today of YOEL ABRAHAM, HESHL ABRAHAM, ZISHE ABRAHAM, and SHMUEL ABRAHAM, who are brothers, on charges of engaging in a scheme to systematically defraud Amazon.com, LLC, (“Amazon”), an online retailer and e-commerce platform.  Through the course of the scheme, the defendants manipulated Amazon’s vendor system in attempts to fraudulently induce Amazon to pay for goods that Amazon had not ordered.  In executing the scheme, the defendants fraudulently attempted to obtain at least approximately $32 million and successfully obtained at least approximately $19 million.  YOEL ABRAHAM, HESHL ABRAHAM, ZISHE ABRAHAM, and SHMUEL ABRAHAM were arrested this morning and will be presented and arraigned later today before U.S. Magistrate Judge Stewart D. Aaron.  The case is assigned to U.S. District Judge Ronnie Abrams.

Acting Manhattan U.S. Attorney Audrey Strauss said:  “The indictment alleges that Yoel, Heshl, Zishe, and Shmuel Abraham came up with a new twist on an old trick, but the use of complex technology did not hide the simple fact that the defendants were bilking Amazon for goods they never provided.  The more our economic life moves online, the more we must ensure the integrity of our digital markets, which my Office is committed to doing.” 

HSI Special Agent-in-Charge Peter C. Fitzhugh said:  “The four charged today allegedly attempted to defraud Amazon out of tens of millions of dollars though a sophisticated and layered fraudulent invoicing scheme.  Invoice fraud is not a victimless crime.  Millions of dollars in lost revenue negatively impacts a company’s ability to provide cost effective services to legitimate customers who use the vendor’s platform.  HSI works closely with our private partners to ensure that this type of fraud is mitigated, and those criminals are prosecuted for their actions.”

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

The defendants, who purportedly operated wholesale businesses, opened vendor accounts with Amazon to sell the company small quantities of goods.  By accepting a purchase order, the defendants agreed to supply specific goods, at specific prices, in specific quantities.  Instead, they manipulated Amazon’s vendor system, and then, in the most egregious iteration of the scheme, invoiced the company for substitute goods at grossly inflated prices and excessive quantities.  The defendants frequently shipped and invoiced for more than 10,000 units of an item when Amazon had requested, and the defendants had agreed to ship, fewer than 100.

The defendants communicated about the scheme, extended help and advice to one another, and helped one another evade detection using an encrypted group texting chain on WhatsApp, a messaging application.  For example, on or about May 1, 2018, YOEL ABRAHAM, the defendant, stated to the group “I’m so in the mood to fuck Amazon,” and asked “Did anyone try to overship and make a million profit in a week?”  ZISHE ABRAHAM, the defendant, asked how YOEL ABRAHAM would do it (“Come in [sic] how to do it?”). SHMUEL ABRAHAM, the defendant, offered his advice on how to carry out such a large fraudulent transaction, noting he “didn’t tried this yet but tried already different things and it worked.”  SHMUEL ABRAHAM cautioned, however, “[j]ust make sure you have another account.  But you can fuck them a lot.  When it’s to [sic] big numbers fast they will lock you out.”  ZISHE ABRAHAM, the defendant, also offered his thoughts on how best to perpetrate such a large overshipment.

Once Amazon detected the pattern of fraudulent overshipping, it suspended the vendor accounts engaged in the fraud; in response, the defendants tried to open other vendor accounts and disguise their identities by registering them in fake names, using different email addresses, and using virtual private servers (“VPSs”) to obfuscate their connection to previously suspended accounts and frustrate Amazon’s ability to detect and mitigate their fraudulent activity.  For instance, on or about November 1, 2018, the defendants discussed that Amazon’s increasing enforcement was going to force them to give up the fraudulent invoicing scheme altogether and go into a legitimate line of business (YOEL ABRAHAM: “This shit is massed up, looks like will have to build a legit business”).  They also discussed new ways to evade detection and how to continue to perpetrate the fraud (YOEL ABRAHAM: “Open account under dummy names and they can go look for no one.”  ZISHE ABRAHAM: “Yup need to do that. . . . The problem the first accounts was under real names.”). A few days later, HESHL ABRAHAM circulated a link to a “VPS company I use now. . . . This is how I know because they linked both of my vendor accounts.”). 

*                      *                      *

YOEL ABRAHAM, 28, of Suffern, New York, HESHL ABRAHAM, 32, of Spring Valley, New York, ZISHE ABRAHAM, 30, of Spring Valley, New York, and SHMUEL ABRAHAM, 24, of Airmont, New York, are each charged with conspiracy to commit wire fraud, wire fraud, and money laundering.  Wire fraud and wire fraud conspiracy carry a maximum sentence of 20 years in prison, and money laundering carries a maximum sentence of 10 years in prison.  The maximum potential sentences 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 work of the Department of Homeland Security, Homeland Security Investigations, the New York City Police Department, U.S. Customs and Border Protection, the Rockland County Sheriff’s Department, and the Waterfront Commission of New York Harbor, and thanked Amazon for its cooperation with the investigation.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorney Jilan J. Kamal 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. 

[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, Acting United States Attorney for the Southern District of New York,  and Peter C. Fitzhugh, Special Agent-in-Charge of the New York Field Office of Homeland Security Investigations (“HSI”), announced the unsealing of an indictment charging PABLO RENATO RODRIGUEZ, GUTEMBERG DOS SANTOS, SCOTT HUGHES, CECILIA MILLAN, and JACKIE AGUILAR for their roles in an internationally coordinated fraud and money laundering ring involved in defrauding individuals through investments in AirBit Club, a purported cryptocurrency mining and trading company.

The case has been assigned to U.S. District Judge George B. Daniels.  RODRIGUEZ and HUGHES are expected to be presented today before U.S. Magistrate Judge John Early of the Central District of California, MILLAN is expected to be presented today before U.S. Magistrate Judge L. Patrick Auld of the Middle District of North Carolina, and AGUILAR is expected to be presented today before U.S. Magistrate Judge Christine A. Nowak of the Eastern District of Texas.  DOS SANTOS was arrested in Panama City, Panama, and is pending extradition to the United States. 

Acting United States Attorney Audrey Strauss said:  “As alleged, the defendants put a modern-day spin on an age-old investment scam, promising extraordinary rates of guaranteed return on phantom investments in cryptocurrencies.  Thanks to HSI, the defendants are in custody and facing serious criminal charges.”

HSI Special Agent-in-Charge Peter C. Fitzhugh said:  “Those arrested today have not only been charged with running a multimillion-dollar cryptocurrency investment fraud and money laundering ring, but also for allegedly spending their victim’s money on luxury cars, jewelry, and homes. These alleged fraudsters pulled out all the stops to sell their scheme to their victims with enticing recruitment events, then shamelessly used proceeds of their scheme to recruit additional victims through even more aggressive and lavish marketing pitches. As today’s arrests show, HSI New York’s El Dorado Task Force investigates financial crimes of every type, and will stop those who prey on unsuspecting investors who entrust their hard-earned savings to so-called financial advisors.  Those who violate this trust for their personal gain will face consequences for their actions.”

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

RODRIGUEZ, DOS SANTOS, HUGHES, MILLAN, and AGUILAR participated in a coordinated scheme in which victim-investors (the “Victims”) were induced to invest in AirBit Club based on the promise of guaranteed profits in exchange for cash investments in club “memberships” (the “AirBit Club Scheme” or the “Scheme”).  Beginning in late 2015, AirBit Club, through its founders, RODRIGUEZ and DOS SANTOS, as well as its promoters (the “Promoters”), including MILLAN and AGUILAR, marketed AirBit Club as a multilevel marketing club in the cryptocurrency industry.  Promoters falsely promised Victims that AirBit Club earned returns on cryptocurrency mining and trading and that Victims would earn passive, guaranteed daily returns on any membership purchased.

RODRIGUEZ, DOS SANTOS, HUGHES, MILLAN, and AGUILAR traveled throughout the United States, and around the world to places in Latin America, Asia, and Eastern Europe, where they hosted lavish expos and small community presentations aimed at convincing Victims to purchase AirBit Club memberships.  In furtherance of the AirBit Club Scheme, the Victims were induced to buy memberships in cash, including in the Southern District of New York.  Following a Victim’s investment, a Promoter provided the Victim with access to an online AirBit Club portal to view the purported returns on memberships (the “Online Portal”).  While Victims saw “profits” accumulate on their Online Portal, those representations were false: no Bitcoin mining or trading on behalf of Victims in fact took place.  Instead, RODRIGUEZ, DOS SANTOS, MILLAN, and AGUILAR enriched themselves, and spent Victim money on cars, jewelry, and luxury homes, and financed more extravagant expos to recruit more Victims. 

HUGHES, an attorney licensed to practice law in California, had previously represented RODRIGUEZ and DOS SANTOS in a Securities and Exchange Commission investigation related to another investment scheme known as Vizinova before aiding RODRIGUEZ and DOS SANTOS in perpetrating the AirBit Club Scheme by, among other things, helping to remove negative information about AirBit Club and Vizinova from the internet. 

In many instances, as early as 2016, Victims who attempted to withdraw money from the AirBit Club Online Portal and complained to a Promoter were met with excuses, delays, and hidden fees amounting to more than 50% of the Victim’s requested withdrawal, if they were able to make any withdrawal at all.  In one instance, AGUILAR told one Victim of the AirBit Club Scheme who was complaining about her inability to withdraw AirBit Club returns that she should “bring new blood” into the AirBit Club Scheme in order to receive her returns.

In April 2020, another victim received a notice on the AirBit Club Online Portal that his account was closed – and principal investment lost – due to “execution of financial sustainability Reserve, policy #34 of the Airbit Club Terms and Conditions, due to the economic and financial crisis caused by (Covid-19).”

RODRIGUEZ, DOS SANTOS, HUGHES, and MILLAN sought to conceal the AirBit Club Scheme, as well as their respective control of the proceeds of that Scheme, by requesting that Victims purchase memberships in cash, using third-party cryptocurrency brokers, and by laundering the Scheme’s proceeds through several domestic and foreign bank accounts, including an attorney trust account managed by HUGHES (the “Hughes Trust Account”).  The Hughes Trust Account was ostensibly intended to maintain custody of HUGHES’s law practice’s client funds.  Instead, the Hughes Trust Account was used by RODRIGUEZ, DOS SANTOS, HUGHES, and MILLAN to conceal the nature and origin of the AirBit Club Scheme’s illicit proceeds.  Through that account, HUGHES directed Victim funds to the personal expenses of RODRIGUEZ, DOS SANTOS, MILLAN, and himself, and funded promotional events and sponsorships designed to further promote the AirBit Club Scheme.  In total, the defendants laundered at least $20 million in proceeds of the Scheme through these various methods.

*                      *                     *

RODRIGUEZ, 37, of Irvine, California, DOS SANTOS, 45, of Panama City, Panama, and MILLAN, 37, of Greensboro, North Carolina, are each charged with one count of conspiracy to commit wire fraud, one count of conspiracy to commit bank fraud, and one count of conspiracy to commit money laundering.   HUGHES, 44, of Newport Beach, California, is charged with one count of conspiracy to commit bank fraud and one count of conspiracy to commit money laundering.  AGUILAR, 55, of Plano, Texas, is charged with one count of conspiracy to commit wire fraud.

The wire fraud conspiracy and money laundering conspiracy charges each carry a maximum term of 20 years in prison, and the bank fraud conspiracy charge carries a maximum term of 30 years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the judge. 

Ms. Strauss praised the outstanding investigative work of Special Agents from Homeland Security Investigations’ El Dorado Task Force, HSI Panama, the HSI Panama City Transnational Criminal Investigative Unit, and HSI New Orleans.  Ms. Strauss further thanked the attorneys and investigators at the Securities and Exchange Commission whose expertise and diligence were integral to the development of this investigation.

The case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant United States Attorneys Kiersten A. Fletcher, Cecilia E. Vogel, and Elizabeth A. Espinosa 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.        

[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 Acting United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), Kevin Kupperbusch, Special Agent-in-Charge of the Eastern Region Office of the Inspector General of the U.S. Small Business Administration (“SBA”), and Jonathan D. Larsen, Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today the arrest of SHENG-WEN CHENG, a/k/a “Justin Cheng,” a/k/a “Justin Jung,” a Taiwanese national residing in New York, New York, for a fraudulent scheme to obtain over $7 million in government-guaranteed loans designed to provide relief to small businesses during the novel coronavirus/COVID-19 pandemic.  In connection with loan applications for relief available from the Paycheck Protection Program (“PPP”) and the Economic Injury Disaster Loan (“EIDL”) Program, CHENG used the identities of other individuals to falsely represent to the SBA and five financial institutions that companies controlled by him had a total of over 200 employees and paid $1.5 million in monthly wages, when, in fact, his companies appear to have a total of no more than 14 employees.  Of the approximately $2.8 million in PPP loan proceeds that CHENG has received to date, CHENG transferred over $880,000 abroad, withdrew approximately $360,000 in cash and/or cashier’s checks, and spent over $275,000 on personal expenses.  CHENG was charged with several counts of fraud, including major fraud against the United States, wire fraud, and bank fraud, as well as one count of aggravated identity theft for forging the electronic signature of a payroll company employee in payroll documents provided to financial institutions.  CHENG was arrested this morning and will be presented later today before U.S. Magistrate Judge Stewart D. Aaron.

Acting U.S. Attorney Audrey Strauss said:  “At a time when so many small businesses and their employees are facing dire financial straits, Sheng-Wen Cheng allegedly saw not an emergency lifeline but a gravy train.  As alleged, Cheng fraudulently applied for over $7 million in government-guaranteed loans under programs designed to provide relief for small businesses financially strapped by the COVID-19 pandemic.  Cheng allegedly lied to the Small Business Administration and several financial institutions about ownership of his companies, the number of people the companies employed, and how any loan proceeds would be applied, and he used forged and fraudulent documents in the process.  Of the nearly $3 million he actually received, Cheng allegedly transferred nearly $1 million to overseas accounts, and spent nearly $300,000 on personal luxury items such as an 18-carat gold Rolex, a $17,000-a-month luxury condo, and a Mercedes.  The paid vacation ended with his arrest this morning.”

FBI Assistant Director William F. Sweeney Jr said:  “While small business owners throughout the country sought loans from the Paycheck Protection Program in order to pay employee wages and maintain basic business functions, Justin Cheng, a self-proclaimed ‘serial entrepreneur,’ acquired more than $3 million in financial relief, which he then used for personal benefit, as alleged today. True entrepreneurs who have been trying to keep their businesses afloat during these trying times are directly affected by this type of fraud, while the taxpaying citizens of this country are indirectly impacted by all those who siphon money illegitimately from this multibillion-dollar program. This isn’t the first case of SBA fraud we’ve seen, and it won’t be the last, but rest assured those who try to buck the system will be met with federal criminal charges wherever and whenever possible.”

SBA Special Agent-in-Charge Kevin Kupperbusch, said:  “This is a critical time for our nation’s small businesses.  Our Office will continue to combat fraud schemes that involve SBA’s programs for personal gain and greed.  I want to thank the U.S. Attorney’s Office and our law enforcement partners for their dedication and pursuit of justice.” 

IRS-CI Special Agent in Charge Jonathan D. Larsen said:  “As alleged in the criminal complaint, Mr. Cheng fraudulently took advantage of programs meant to help those in need during a world-wide pandemic. IRS-CI will continue to prioritize investigations where criminals seek to steal money from well-deserving citizens amidst this ongoing public health crisis.”    

According to the allegations contained in the Complaint[1] unsealed today 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 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.  Businesses applying for a PPP loan must provide documentation to confirm that they have previously paid employees the compensation represented in the loan application.  The CARES Act also expanded the separate 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.  To qualify for an EIDL Program loan under the CARES Act, the applicant must have suffered “substantial economic injury” from COVID-19.

CHENG, a Taiwanese national who entered the United States on a student visa, is a self-proclaimed “serial entrepreneur” who earned a Bachelor’s Degree from Pennsylvania State University (“Penn State”).  From at least in or about April 2020 through at least on or about August 13, 2020, CHENG appears to have used the identities 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, and Wynston York LLC (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 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 whom are 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 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 as of on or about August 13, 2020.  Based on bank records received to date, 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 used a portion of the $2.8 million in loan proceeds he received as follows: 

• A total of at least approximately $881,000 in PPP loan proceeds was transferred to accounts of different individuals and entities located at banks based in Taiwan, the United Kingdom, South Korea, and Singapore.

• A total of at least approximately $360,000 in PPP loan proceeds appears to have been withdrawn in cash and/or cashier’s checks.
   
• A total of at least approximately $279,000 in PPP loan proceeds was spent on personal expenses, including 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 for CHENG, approximately $50,000 of furnishings for CHENG’s condominium, at least approximately $80,000 toward 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.
   
• A total of at least approximately $160,000 in PPP loan proceeds was transferred to Alchemy Marketplace, another company owned and controlled by CHENG, in international accounts.

*                *                *

CHENG, 24 of New York, New York, is charged with one count of bank fraud, one count of wire fraud, and one count of making false statements to a bank, each of which carries a maximum sentence of 30 years in prison; one count of major fraud against the United States, which carries a maximum sentence of 10 years in prison; one count of making false statements, which carries a maximum sentence of five years in prison; one count of making false statements to the SBA, which carries a maximum sentence of two years in prison; and one count of aggravated identity theft, which carries a mandatory sentence of two years in prison to be served consecutively to any other sentence imposed.  The maximum potential 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.

Any businesses or individuals who believe they may have been a victim in this investigation or have information regarding this investigation should call the FBI at 1-800-CALL-FBI (225-5324).

Ms. Strauss praised the investigative work of the FBI, SBA-OIG, and IRS-CI, and noted that the investigation remains ongoing.  Ms. Strauss also thanked U. S. Customs and Border Protection and the New York State Department of Labor for their assistance with the investigation.

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.

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

[1] As the introductory phrase signifies, the entirety 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 Acting 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 that DONNELL RUSSELL, manager of music recording artist Robert Sylvester Kelly, better known as “R. Kelly,” was charged in two counts with threatening physical harm by interstate communication, and conspiracy to do the same, for placing a threatening phone call to a theater in Manhattan to prevent the December 4, 2018, screening of a docuseries exploring allegations of R. Kelly’s sexual abuse of minor girls and adult women.  RUSSELL is expected to make his initial appearance later today before U.S. Magistrate Judge Ona T. Wang.

Acting U.S. Attorney Audrey Strauss said:  “As alleged, Donnell Russell used threats of violence to stop a screening of a docuseries devoted to exploring allegations of sexual abuse against women and minor girls by the recording artist R. Kelly.  By allegedly threatening a shooting at the theater, Russell prevented the screening, which was attended by a number of R. Kelly’s alleged victims.  Threats of gun violence aimed at intimidating and silencing victims of sexual abuse are unlawful as well as unacceptable.  We are committed to aggressively investigating and prosecuting such crimes.”

FBI Assistant Director William F. Sweeney Jr. said:  “It defies logic that a threat like the one alleged here could stop victims from speaking about their alleged abuse.  The violence Mr. Russell allegedly threatened succeeded in shutting down one airing of the documentary, but he was unable to silence the women featured in the film.  Each and every day, we do everything in our power to make sure victims of sexual abuse have the opportunity to be heard, and will continue to do so regardless of those who allegedly use violence as a means to stop them.”

According to the allegations contained in the Complaint[1] unsealed today in Manhattan federal court and publicly available documents:

DONNELL RUSSELL, then-manager for R. Kelly, participated in a coordinated effort, including through the use of threats of violence, to prevent the screening in December 2018 of a multi-part documentary or “docuseries” entitled “Surviving R. Kelly” at NeueHouse, a theater in New York, New York (the “Screening”).  The docuseries explores allegations that R. Kelly engaged in abusive sexual relationships with minor girls and adult women.

Throughout the day of the Screening, RUSSELL, who was located in Chicago, Illinois, worked with, among others, another individual associated with R. Kelly (“CC-1”) who was in New York the day of the Screening, to draft correspondence to an executive at the Lifetime television channel discouraging the executive from airing the docuseries.  Additionally, RUSSELL admitted that he sent NeueHouse a “cease and desist” letter to stop the Screening from going forward.  When that failed to stop the Screening, RUSSELL attempted to contact various law enforcement agencies in and around the theater, seemingly in a further effort to disrupt the Screening.  RUSSELL contacted a NeueHouse employee directly, via a landline associated with RUSSELL’s home address in Chicago, to threaten that there was a person in the theater with a gun prepared to shoot up the Screening (the “Threat Call”).  After receiving the Threat Call, the NeueHouse employee called 911.  NeueHouse cancelled the Screening and evacuated the theater.

*                *                *

RUSSELL, 45, of Chicago, Illinois, is charged with one count of conspiracy to threaten physical harm by interstate communication and one count of threatening physical harm by interstate communication, each of which carries a maximum penalty of five 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.

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

This case is being handled by the Office’s Public Corruption Unit.  Assistant United States Attorneys Peter J. Davis and Lara Pomerantz are in charge of the prosecution.

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

[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 Acting United States Attorney for the Southern District of New York, Patrick Freaney, Deputy Special Agent in Charge of the New York Field Office of the United States Secret Service (“Secret Service”), William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Troy Miller, Director of New York Field Operations for United States Customs and Border Protection (“CBP”), announced today the unsealing of a Superseding Indictment charging SUNDAY OKORO, COLLINS ENEH, and IKECHUKWU ELENDU with money laundering and bank fraud schemes.  The case has been assigned to United States District Judge Denise L. Cote.  SUNDAY OKORO will be presented before a United States Magistrate Judge in the Middle District of Georgia tomorrow and IKECHUKWU ELENDU will be presented before a United States Magistrate Judge in the Northern District of California tomorrow.  A third defendant, COLLINS ENEH, remains at large.  A prior Indictment in the case charged 11 additional defendants.

Acting U.S. Attorney Audrey Strauss said:  “As alleged, three more defendants have been implicated in a conspiracy to launder the criminal proceeds of schemes to defraud corporate and individual victims of multiple millions of dollars.  Thanks to the efforts of the Secret Service, the FBI, CBP, and Special Agents of my Office, the defendants face federal charges.”           

Secret Service Deputy Special Agent in Charge Patrick Freaney said:  “The U.S. Secret Service is committed to working with our law enforcement partners to combat cyber-enabled fraud.  The continued success of this investigation is the result of this collaborative effort and highlights the relentless investigative pursuit by the U.S. Secret Service and our partners as we address the ever evolving threat posed by cyber-crime.”    

FBI Assistant Director William F. Sweeney Jr. said:  “The threat of a business email compromise is a cyber iceberg that will inflict serious losses on a victim company.  This type of cyber threat is a constant hazard lurking below the surface to every business, regardless of its size, and many cannot sustain the damage it will cause.  Companies small and large should continue to educate their workforce on cyber threats.  Well done to the investigative teams involved in bringing today’s charges.”

CBP Director of New York Field Operations Troy Miller said:  “U.S. Customs and Border Protection is proud of the expertise we provide in support of investigations that result in the takedown of criminal enterprises.  It is through interagency partnerships and collaborative efforts, like the one leading to today’s arrests, that law enforcement successfully combats today’s criminal organizations.”

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

From at least in or about March 2018 up to and including at least in or about January 2020, OKORO, ENEH, and ELENDU conspired to launder the proceeds of at least seven business email compromise schemes and one romance scheme in which corporate, organizational, and individual victims were fraudulently induced to send over $10 million to bank accounts controlled by members of the conspiracy, in the mistaken belief that those accounts belonged to the intended recipients of the funds.  Members of the conspiracy received the victim funds by opening bank accounts in the names of the intended recipients, transferred the funds through additional accounts to hide the origin and fraudulent nature of the proceeds, and ultimately transferred most of those proceeds to foreign bank accounts or withdrew them in cash.

*                *                *

OKORO, ENEH, and ELENDU are each charged with one count of conspiracy to commit money laundering, which carries a maximum term of 20 years in prison, and one count of conspiracy to commit bank fraud, which carries a maximum term of 30 years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the judge. 

Ms. Strauss praised the outstanding investigative work of the FBI, the Secret Service and its Electronic Crimes Task Force, CBP, and special agents of the United States Attorney’s Office for the Southern District of New York.  The prosecution of this case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Jun Xiang and Kevin Mead 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.

Defendant

Age

Hometown

Charges

SUNDAY OKORO

41

Jonesboro, GA

Money laundering conspiracy; bank fraud conspiracy

COLLINS ENEH

32

Long Beach, CA

Money laundering conspiracy; bank fraud conspiracy

IKECHUKWU ELENDU

41

San Leandro, CA

Money laundering conspiracy; bank fraud conspiracy

[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 Acting 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 Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”), Dermot Shea, Commissioner of the New York City Police Department (“NYPD”), and Daniel A. Nigro, Commissioner of the New York City Fire Department (“FDNY”), announced today the arrest of COREY SMITH and ELAINE CARBERRY in connection with their destruction of a marked NYPD Homeless Outreach Unit van in Greenwich Village in Manhattan.  SMITH and CARBERRY were arrested this morning and will be presented in Manhattan federal court before U.S. Magistrate Ona T. Wang later today.

Acting U.S. Attorney Audrey Strauss said:  “As alleged, Corey Smith and Elaine Carberry deliberately set fire to an NYPD van, then minutes later returned to the vehicle and – once again using an accelerant – ensured its complete destruction.  Thanks to the NYPD, the Fire Department, and the ATF, there was not further damage to life or property.  The defendants are now in custody.”

ATF Special Agent-in-Charge John B. DeVito said:  “These defendants, as alleged, set fire to a marked NYPD van under the cover of darkness, endangering the lives of all New Yorkers.  ATF and our partners in the Arson and Explosives Task Force remain dedicated to seeking justice against those intent on using fire as a weapon.”

Police Commissioner Dermot Shea said:  “Setting a police car on fire endangers police officers, firefighters, and nearby residents and properties.  These organized efforts are not a form of protest, they are crimes.  They cost the taxpayer and damage the cause of those engaged in legitimate protest.  I commend the hard work of our detectives in this case together with our law enforcement and city partners, the United States Attorney for the Southern District of New York, the Bureau of Alcohol, Tobacco & Firearms, and the New York Fire Department.”

Fire Commissioner Daniel A. Nigro said:  “Deliberately setting fires to damage property or harm others has no place in our city, or anywhere.  The act of arson endangers the lives of New Yorkers and all first responders.  I commend the excellent teamwork of our Fire Marshals, the NYPD, and ATF to apprehend those who needlessly destroy property and risk the lives of others.”

According to the allegations in the Complaint[1]:

On July 15, 2020, at approximately 4:35 a.m., using ignitable liquid, SMITH and CARBERRY set on fire a marked NYPD Homeless Outreach Unit van on the northwest corner of 12th Street and University Place.  More specifically, as surveillance footage shows, at approximately 4:37 a.m., the NYPD van ignited in flames, and CARBERRY and SMITH walked away from the NYPD van.  As they walked away, SMITH handed CARBERRY what appeared to be a bottle, which CARBERRY put in her purse.  Minutes later, CARBERRY handed SMITH a bottle from her purse, and SMITH again walked towards the NYPD van, with CARBERRY following behind.  Shortly after SMITH approached the NYPD van the second time, a larger fire appeared to ignite.  CARBERRY and SMITH again walked away from the NYPD van, and SMITH again handed CARBERRY an object that appeared to be a bottle, which CARBERRY put in her purse. 

An analysis of the materials found in the NYPD van confirmed the presence of an accelerant.  The FDNY ultimately confirmed that the fire was deliberately set as an act of arson, resulting in the complete destruction of the NYPD van. 

*                *                *

SMITH, 24, of Brooklyn, New York, and CARBERRY, 36, of Brooklyn, New York, are each charged with one count of conspiracy to commit arson and one count of arson, each of which carries a mandatory minimum sentence of five years in prison and a maximum sentence of 20 years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants would be determined by the judge.

Ms. Strauss praised the outstanding investigative work of the New York City Arson and Explosion Task Force of the ATF, the NYPD, and the FDNY. 

The prosecution of this case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Christy Slavik is in charge of the prosecution.

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

[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, Acting United States Attorney for the Southern District of New York, announced that JOSHUA IKEJIMBA, a/k/a “Johnson Ifeanyi Gbono,” a/k/a “Alfred Henshaw,” a/k/a “Peterson Kamara Lawson,” a/k/a “Ganiru Paul Thompson,” pled guilty and was sentenced in Manhattan federal court today for conspiring to commit wire fraud as part of a wide-ranging, international business email compromise (“BEC”) syndicate.  IKEJIMBA was sentenced to 24 months in prison by U.S. District Judge Jesse M. Furman.

Acting U.S. Attorney Audrey Strauss said:  “As he admitted in court today, Joshua Ikejimba played a key role in an international business email compromise conspiracy.  For his admitted crime, Ikejimba will serve a two-year prison sentence and be compelled to make restitution to the victims of his fraud.”

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

During the relevant time period, IKEJIMBA, his co-defendants, and others engaged in a fraudulent BEC scheme that deceived numerous victims, including international companies, individuals, and an intergovernmental organization headquartered in New York City, into diverting payments to bank accounts controlled by the syndicate.

The defendants executed this fraudulent scheme by, among other things, obtaining fraudulent passports in false names, registering and incorporating shell companies, and opening fake bank accounts at various banks throughout the United States.  A substantial number of victims were tricked by fake emails and fraudulent wiring instructions into sending funds to the syndicate’s bank accounts, and those amounts were then withdrawn by members of the conspiracy and dissipated.  During the period from about 2016 through about July 2018, it appears the defendants obtained approximately $8 million by defrauding numerous victims.

IKEJIMBA had a multi-faceted role in the BEC scheme, which included using fraudulent identities and false identification documents to open bank accounts; using those accounts to receive funds from victims; and forming a shell corporation to launder hundreds of thousands of dollars in additional fraud proceeds, principally by purchasing or depositing cashier’s checks that represented stolen funds.  Through his participation in the scheme, IKEJIMBA was personally responsible for receiving and laundering approximately $1.25 million in fraud proceeds.

*                *                *

IKEJIMBA, 25, of Houston, Texas, pled guilty to, and was sentenced on, one count of conspiracy to commit wire fraud.  In addition to the 24-month prison term, IKEJIMBA was sentenced to three years of supervised release.  IKEJIMBA was further ordered to forfeit $1,250,766.03, and to pay restitution to his victims in the amount of $1,238,748.93.

Ms. Strauss praised the outstanding investigative work of the Federal Bureau of Investigation.  The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Olga I. Zverovich and Jarrod L. Schaeffer are in charge of the prosecution.

The Department of Justice announced today that Jesus Wilfredo Encarnacion, a/k/a “Jihadistsoldgier,” “Jihadinhear,” “Jihadinheart,” “Lionofthegood,” was sentenced to 15 years in prison for attempting to provide material support to Lashkar e-Tayyiba (LeT), a Pakistan-based designated foreign terrorist organization responsible for multiple high-profile attacks, including the infamous Mumbai attacks in November 2008.  In addition, Encarnacion was sentenced to a lifetime term of supervised release.  Encarnacion pleaded guilty on Jan. 22, 2020, before United States District Judge Ronnie Abrams, who also imposed today’s sentence.

“Unfortunately, individuals continue to attempt to travel to foreign countries to support terrorist organizations.  Encarnacion’s sentence reflects the seriousness with which the justice system takes these efforts,” said Assistant Attorney General for National Security John C. Demers.  “The National Security Division remains committed to identifying and holding accountable those who seek to join and support designated foreign terrorist organizations.”

“Jesus Encarnacion plotted to travel abroad, to join and train with Lashkar e-Tayyiba, infamous worldwide for the jihadist murder of innocent civilians, and to carry out shootings, bombings, and beheadings in behalf of that terrorist organization,” said Acting U.S. Attorney Audrey Strauss for the Southern District of New York.  “Thanks to the FBI, the NYPD, and the Joint Terrorist Task Force, Encarnacion has been sentenced to a lengthy prison term for his crime.”

According to the criminal complaint, indictment, other court filings, and statements during court proceedings:

In November 2018, Encarnacion expressed his desire to join a terrorist group in an online group chat, where he met another individual (CC-1).  CC-1 introduced Encarnacion to an individual who, unbeknownst to CC-1 or Encarnacion, was in fact an undercover FBI employee (UC-1).  Encarnacion repeatedly expressed, in the course of recorded communications through a social media service with CC-1 and through an encrypted messaging service with UC-1, his allegiance to and support for LeT, which, since approximately 2001, has been designated as a Foreign Terrorist Organization by both the United States Secretary of State and the Immigration and Nationality Act. 

Over several months, Encarnacion discussed his desire and plans to join LeT overseas so that he could receive training and participate in violent acts of terrorism.  For example, Encarnacion told UC-1 that he was “ready to kill and die in the name of Allah” and sought UC-1’s assistance to help Encarnacion travel abroad to serve as an “executioner” for LeT, stating, “I want to execute.  I want to behead.  Shoot.”  Encarnacion further stated that he aspired to commit terrorist attacks (“a bombing and shooting”) in the United States, but lacked “guidance” and “guns” to do so.

By early 2019, Encarnacion and UC-1 agreed on a plan that Encarnacion believed would allow him to join LeT in Pakistan.  Encarnacion told UC-1 that he had made arrangements to travel to a particular city in Europe (the “European City”), as the first step in traveling to Pakistan to join LeT.  Encarnacion purchased an airline ticket for a flight scheduled to depart on Feb.7, 2019, from John F. Kennedy International Airport (JFK Airport) to the European City.  On Feb. 7, 2019, Encarnacion traveled to JFK Airport, where he was arrested by the FBI after he attempted to board that flight.

In addition to the prison term, Encarnacion was also sentenced to serve a life term of supervised release.

Assistant Attorney General Demers and Ms. Strauss praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force, which principally consists of agents from the FBI and detectives from the New York City Police Department.  Ms. Strauss also thanked the Counterterrorism Section of the Department of Justice’s National Security Division, as well as the New York Office of U. S. Customs and Border Protection.

This prosecution is 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 prosecution, with assistance from Bridget Behling of the National Security Division’s Counterterrorism Section.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and John C. Demers, the Assistant Attorney General for National Security, announced today that JESUS WILFREDO ENCARNACION, a/k/a “Jihadistsoldgier,” “Jihadinhear,” “Jihadinheart,” “Lionofthegood,” was sentenced to 15 years in prison for attempting to provide material support to Lashkar e-Tayyiba (“LeT”), a Pakistan-based designated foreign terrorist organization responsible for multiple high-profile attacks, including the infamous Mumbai attacks in November 2008.  ENCARNACION pled guilty on January 22, 2020, before U.S. District Judge Ronnie Abrams, who also imposed today’s sentence.

Acting Manhattan U.S. Attorney Audrey Strauss said:  “Jesus Encarnacion plotted to travel abroad, to join and train with Lashkar e-Tayyiba, infamous worldwide for the jihadist murder of innocent civilians, and to carry out shootings, bombings, and beheadings on behalf of that terrorist organization.  Thanks to the FBI, the NYPD, and the Joint Terrorism Task Force, Encarnacion has been sentenced to a lengthy prison term for his crime.”

Assistant Attorney General John C. Demers said:  “Unfortunately, individuals continue to attempt to travel to foreign countries to support terrorist organizations.  Encarnacion’s sentence reflects the seriousness with which the justice system takes these efforts.  The National Security Division remains committed to identifying and holding accountable those who seek to join and support designated foreign terrorist organizations.”

According to the criminal Complaint, Indictment, other court filings, and statements during court proceedings:

In November 2018, ENCARNACION expressed his desire to join a terrorist group in an online group chat, where he met another individual (“CC-1”).  CC-1 introduced ENCARNACION to an individual who, unbeknownst to CC-1 or ENCARNACION, was in fact an undercover FBI employee (“UC-1”).  ENCARNACION repeatedly expressed, in the course of recorded communications through a social media service with CC-1 and through an encrypted messaging service with UC-1, his allegiance to and support for LeT, which, since approximately 2001, has been designated as a Foreign Terrorist Organization by both the United States Secretary of State and the Immigration and Nationality Act. 

Over several months, ENCARNACION discussed his desire and plans to join LeT overseas so that he could receive training and participate in violent acts of terrorism.  For example, ENCARNACION told UC-1 that he was “ready to kill and die in the name of Allah” and sought UC-1’s assistance to help ENCARNACION travel abroad to serve as an “executioner” for LeT, stating, “I want to execute.  I want to behead.  Shoot.”  ENCARNACION further stated that he aspired to commit terrorist attacks (“a bombing and shooting”) in the United States, but lacked “guidance” and “guns” to do so.

By early 2019, ENCARNACION and UC-1 agreed on a plan that ENCARNACION believed would allow him to join LeT in Pakistan.  ENCARNACION told UC-1 that he had made arrangements to travel to a particular city in Europe (the “European City”), as the first step in traveling to Pakistan to join LeT.  ENCARNACION purchased an airline ticket for a flight scheduled to depart on February 7, 2019, from John F. Kennedy International Airport (“JFK Airport”) to the European City.  On February 7, 2019, ENCARNACION traveled to JFK Airport, where he was arrested by the Federal Bureau of Investigation (“FBI”) after he attempted to board that flight.

*                      *                      *

In addition to the prison term, ENCARNACION was also sentenced to serve a life term of supervised release.

Ms. Strauss praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force, which consists of investigators and analysts from the FBI, the New York City Police Department, and over 50 other federal, state, and local agencies.  Ms. Strauss also thanked the Counterterrorism Section of the Department of Justice’s National Security Division, as well as the New York Office of U. S. Customs and Border Protection.

This prosecution is 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 prosecution, with assistance from Bridget Behling of the National Security Division’s Counterterrorism Section.

The Department of Justice announced that Zachary Clark, a/k/a “Umar Kabir,” a/k/a “Umar Shishani,” a/k/a “Abu Talha,” pleaded guilty to attempting to provide material support to the Islamic State of Iraq and al-Sham (ISIS).  Clark pled guilty today in Manhattan federal court before U.S. District Judge Naomi Reice Buchwald.  Judge Buchwald is scheduled to sentence Clark on Feb. 9, 2021, at 12:00 p.m.

“Having pledged allegiance to ISIS, Clark provided specific instructions for how to conduct attacks in New York City, instructing others on knifing and bomb-making,” said Assistant Attorney General for National Security John C. Demers.  “We must remain vigilant to the threat of terrorism.  We must remain committed to identifying and holding accountable those who threaten our communities because of their support for foreign terrorist organizations.”

“As he admitted in court today, Zachary Clark pledged allegiance to ISIS and posted calls for attacks on the public and institutions in New York on encrypted pro-ISIS chatrooms,” said Acting U.S. Attorney Audrey Strauss for the Southern District of New York.   “He also posted detailed instructions for carrying out those violent acts.  Thanks to the Joint Terrorism Task Force, Clark’s efforts to incite deadly violence on behalf of ISIS have been silenced, and he now awaits sentencing for his crimes.”

“Today’s plea by Mr. Clark is yet one more example of the resolve of the FBI’s JTTF in New York, and our many law enforcement partners, to protect this city and our citizens from the danger of lone wolf attacks,” said FBI Assistant Director William F. Sweeney Jr.   “Many thanks to all of our partners who work side by side with us every day to neutralize threats of this nature.”

According to the allegations in the indictment, complaint, other court filings, and statements made during court proceedings:

Clark pledged allegiance to ISIS twice, first in July 2019, to ISIS’s then-leader Abu Bakr al-Baghdadi, and then in October 2019, to ISIS’s new leader, Abu Ibrahim al-Sashemi al-Qurayshi, who ISIS promoted after al-Baghdadi’s death.  Beginning in at least March 2019, Clark disseminated ISIS propaganda through, among other avenues, encrypted chatrooms intended for members, associates, supporters, and potential recruits of ISIS.  Clark’s propaganda included, among other things, calls for ISIS supporters to commit lone wolf attacks in New York City.  For example, on Aug. 3, 2019, Clark posted instructions about how to conduct such an attack, including directions on how to select an attack target, how to conduct preoperational surveillance, how to conduct operational planning, and how to avoid attracting law enforcement attention when preparing for and conducting the attack.  On another occasion, Clark posted a manual entitled “Knife Attacks,” which stated, among other things, that discomfort at “the thought of plunging a sharp object into another person’s flesh” is “never an excuse for abandoning jihad” and that “[k]nives, though certainly not the only weapon for inflicting harm upon the kuffar [non-believers], are widely available in every land and thus readily accessible.”  Clark urged the participants in encrypted chatrooms to attack specific targets, posting maps and images of the New York City subway system and encouraging ISIS supporters to attack those locations.  Clark’s guidance also included posting a manual entitled “Make a bomb in the kitchen of your Mom,” which was issued by al-Qaeda in the Arabian Peninsula and included detailed instructions about constructing bombs using readily available materials. 

Clark, 41, of Brooklyn, New York, pled guilty to one count of attempting to provide material support or resources to a designated foreign terrorist organization, namely, ISIS, which carries a maximum sentence of 20 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 the defendant will be determined by a judge. 

Assistant Attorney General Demers and Ms. Strauss praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force, which consists of investigators and analysts from the FBI, the NYPD, and over 50 other federal, state and local agencies.  Ms. Strauss also thanked the Counterterrorism Section of the Department of Justice’s National Security Division.

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Gillian Grossman, Matthew Hellman, and Sidhardha Kamaraju are in charge of the prosecution, with assistance from the National Security Division’s Counterterrorism Section.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, John C. Demers, Assistant Attorney General for National Security, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Dermot Shea, the Commissioner of the Police Department for the City of New York (“NYPD”), announced that ZACHARY CLARK, a/k/a “Umar Kabir,” a/k/a “Umar Shishani,” a/k/a “Abu Talha,” pled guilty to attempting to provide material support to the Islamic State of Iraq and al-Sham (“ISIS”).  CLARK pled guilty today in Manhattan federal court before U.S. District Judge Naomi Reice Buchwald.  CLARK is scheduled to be sentenced by Judge Buchwald on February 9, 2021, at 12:00 p.m.

Acting U.S. Attorney Audrey Strauss said:  “As he admitted in court today, Zachary Clark pledged allegiance to ISIS and posted calls for attacks on the public and institutions in New York on encrypted pro-ISIS chatrooms.  He also posted detailed instructions for carrying out those violent acts.  Thanks to the Joint Terrorism Task Force, Clark’s efforts to incite deadly violence on behalf of ISIS have been silenced, and he now awaits sentencing for his crimes.”

Assistant Attorney General John C. Demers said:  “Having pledged allegiance to ISIS, Clark provided specific instructions for how to conduct attacks in New York City, instructing others on knifing and bomb-making.  We must remain vigilant to the threat of terrorism.  We must remain committed to identifying and holding accountable those who threaten our communities because of their support for foreign terrorist organizations.”

FBI Assistant Director William F. Sweeney Jr. said:  “Today’s plea by Mr. Clark is yet one more example of the resolve of the FBI’s JTTF in New York, and our many law enforcement partners,  to protect this city and our citizens from the danger of lone wolf attacks. Many thanks to all of our partners who work side by side with us every day to neutralize threats of this nature.”

Police Commissioner Dermot Shea said:  “The defendant, by trying to support a designated foreign terrorist organization, represents the way New York City remains a top terrorist target. I commend the work of the NYPD investigators, the FBI agents, and the prosecutors from the U.S. Attorney for the Southern District in bringing this case.”

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

CLARK pledged allegiance to ISIS twice, first in July 2019, to ISIS’s then-leader Abu Bakr al-Baghdadi, and then in October 2019, to ISIS’s new leader, Abu Ibrahim al-Sashemi al-Qurayshi, whom ISIS promoted after al-Baghdadi’s death.  Beginning in at least March 2019, CLARK disseminated ISIS propaganda through, among other avenues, encrypted chatrooms intended for members, associates, supporters, and potential recruits of ISIS.  CLARK’s propaganda included, among other things, calls for ISIS supporters to commit lone wolf attacks in New York City.  For example, on August 3, 2019, CLARK posted instructions about how to conduct such an attack, including directions on how to select an attack target, how to conduct preoperational surveillance, how to conduct operational planning, and how to avoid attracting law enforcement attention when preparing for and conducting the attack.  On another occasion, CLARK posted a manual entitled “Knife Attacks,” which stated, among other things, that discomfort at “the thought of plunging a sharp object into another person’s flesh” is “never an excuse for abandoning jihad” and that “[k]nives, though certainly not the only weapon for inflicting harm upon the kuffar [non-believers], are widely available in every land and thus readily accessible.”  CLARK urged the participants in encrypted chatrooms to attack specific targets, posting maps and images of the New York City subway system and encouraging ISIS supporters to attack those locations.  CLARK’s guidance also included posting a manual entitled “Make a bomb in the kitchen of your Mom,” which was issued by al-Qaeda in the Arabian Peninsula and included detailed instructions about constructing bombs using readily available materials.       

*                      *                      *

CLARK, 41, of Brooklyn, New York, pled guilty to one count of attempting to provide material support or resources to a designated foreign terrorist organization, namely, ISIS, which carries a maximum sentence of 20 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 the defendant will be determined by a judge.  

Ms. Strauss and Assistant Attorney General Demers praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force, which consists of investigators and analysts from the FBI, the NYPD, and over 50 other federal, state, and local agencies.  Ms. Strauss also thanked the Counterterrorism Section of the Department of Justice’s National Security Division.

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Gillian Grossman, Matthew Hellman, and Sidhardha Kamaraju are in charge of the prosecution, with assistance from Trial Attorneys Jason Denney and Chad Davis of the National Security Division’s Counterterrorism Section.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that SPRINGFIELD MEDICAL AESTHETIC P.C. d/b/a ADVANCED COSMETIC SURGERY OF NEW YORK (“ADVANCED COSMETIC”), and EMMANUEL O. ASARE, M.D. (“ASARE”), a plastic surgery practice and surgeon in that practice, were found by federal district judge Analisa Torres, after a bench trial, to have engaged in discrimination on the basis of disability in violation of Title III of the Americans with Disabilities Act of 1990 (“Title III of the ADA”).  Specifically, Judge Torres concluded that ADVANCED COSMETIC, which has offices in Manhattan and Long Island, and ASARE, had an unlawful policy of denying services to individuals who are, or perceived to be, living with HIV, and applied that policy to unlawfully deny services to three prospective patients (the “Patients”) on the basis of their disability.  The Court further concluded that ADVANCED COSMETIC and ASARE engaged in an unlawful practice of testing every preoperative patient for HIV, in violation of the ADA.  Judge Torres awarded each of the three Patients $125,000 for emotional distress suffered as a result of ADVANCED COSMETIC’s and ASARE’s conduct, and imposed $15,000 in civil penalties.  The Court also enjoined ADVANCED COSMETIC and ASARE from continuing to engage in practices that violate the ADA.

 Acting U.S. Attorney Audrey Strauss said:  “This verdict marks a significant victory in our continuing efforts to enforce the ADA and eliminate discriminatory practices against individuals living with HIV.  The three patients who bravely testified at trial should not have had to suffer the discrimination they did when seeking medical services, and medical providers are reminded again that they are prohibited by law from treating individuals living with HIV differently from anyone else.” 

Title III of the ADA prohibits discrimination by doctors, lawyers, hospitals, restaurants, retail stores, hotels, private transportation providers, and other private businesses and nonprofit organizations that provide services to the public.  All of these entities are prohibited from excluding individuals with disabilities from their services and programs because they are living with a serious medical condition, such as HIV.

On May 6, 2015, the United States filed a Complaint in Manhattan federal court, alleging that ADVANCED COSMETIC and ASARE denied cosmetic surgery services to individuals living with HIV, in violation of the ADA.  On February 10, 2016, one of the Patients filed an intervenor complaint alleging that ADVANCED COSMETIC and ASARE denied him cosmetic surgery services on the basis of his HIV status in violation of the ADA and the New York City Human Rights Law.  At the bench trial held in October 2018, the Patients testified that they were denied services by ADVANCED COSMETIC and ASARE because they were either living with HIV, or, in the case of one Patient, perceived to be living with HIV.  The Court’s findings of fact after trial included the following:

     (1) Defendants refused cosmetic surgery services to the three Patients;

     (2) Defendants did so when they became aware that each Patient was either living with HIV, potentially living with HIV, or living with HIV and taking antiretroviral drugs;

     (3) Defendants tested the Patients without their consent in order to ascertain their HIV status; and

     (4) each Patient suffered emotional distress as a result of Defendants’ actions.

The Court concluded that the above conduct violated the ADA.  The Court further found that the testimony of the Patients detailed “severe psychological and emotional consequences of Defendants’ actions,” and awarded each Patient $125,000 in damages.  The Court also awarded the United States $15,000 in civil penalties due in part to Defendants’ “troubling” practice of testing all prospective patients for HIV without their express consent.   Finally, to prevent ADVANCED COSMETIC and ASARE from continuing to engage in unlawful practices, the Court permanently enjoined Defendants from (1) performing HIV testing on every patient as a routine practice, and (2) conducting HIV testing on any patient without the patient’s express consent.

This case is being handled by the Office’s Civil Rights Unit.  Assistant U.S. Attorneys Arastu Chaudhury and Lara K. Eshkenazi are in charge of the case.

Assistant Attorney General for National Security John C. Demers, Audrey Strauss, the Acting U.S. Attorney for the Southern District of New York, and Jonathan Carson, Special Agent in Charge of the New York Field Office of the U.S. Department of Commerce, Office of Export Enforcement (OEE), announced the arrests today of Chong Sik Yu, a/k/a “Chris Yu,” and Yunseo Lee.  Yu and Lee are charged with conspiring to unlawfully export dual-use electronics components, in violation of the Export Control Reform Act, and to commit wire fraud, bank fraud, and money laundering.  Yu and Lee were arrested this morning and are expected to be presented later today before U.S. Magistrate Judge Kevin Nathaniel Fox in Manhattan federal court.

“The Department’s fight against illegal technology transfer to China is no more critical than in areas like those involved in this case — controlled items used in missile and nuclear technology,” said Assistant Attorney General for National Security John C. Demers.  “We will do everything in our power to disrupt illegal exports like these that jeopardize our national security.”  

“Chong Sik Yu and Yunseo Lee are accused of violating U.S. export laws by sending electronics components with military applications to Hong Kong and China,” said Acting U.S. Attorney Audrey Strauss.   “Together with the Commerce Department and all of our law enforcement partners, we will continue to protect our national security by preventing dual-use technologies from being sent abroad without the required licenses.” 

“A top priority of the Office of Export Enforcement is identifying and disrupting the illicit export of items to Hong Kong and China that undermine the national security of the United States,” said OEE Special Agent in Charge Jonathan Carson.  “We will continue to work with our law enforcement partners using criminal prosecutions to keep the most dangerous goods out of the most dangerous hands.”

As alleged in the criminal Complaint,[1] unsealed today in Manhattan federal court:

Since at least 2019, a U.S. company named America Techma Inc. (ATI) has illegally exported electronic components from the United States to Hong Kong for apparent re-export to other countries, including China, in violation of the Export Control Reform Act of 2018 (ECRA).  Pursuant to the ECRA controls, the Department of Commerce administers export-licensing and other requirements for the export of goods, software, and technologies from the United States to foreign countries.  These requirements restrict the export of items that could make a significant contribution to the military potential of other nations or that could be detrimental to the foreign policy or national security of the United States.  The Commerce Department identifies the most sensitive items subject to EAR controls on the Commerce Control List (CCL), which is categorized by Export Control Classification Number (ECCN).

Yu is ATI’s President, and Lee is an ATI Sales Representative.  Yu and Lee worked together and with others to ship what they knew to be export-controlled items to Hong Kong and China.  For instance, in June 2019, ATI obtained electronics components — which are export-controlled under the CCL for missile technology, nuclear nonproliferation, and anti-terrorism reasons —from a U.S. supplier (U.S. Supplier-1), and then sent those components to a trading company in Hong Kong (Hong Kong Trading Company-1).  In January 2020, ATI attempted to send to Hong Kong Trading Company-1 several electronic components, which are export-controlled under the CCL for anti-terrorism, national security, regional stability, missile technology, nuclear nonproliferation, and anti-terrorism.  After the January 2020 package was detained by law enforcement, Yu and Lee discussed methods for evading future law enforcement scrutiny by, for instance, transshipping packages through South Korea, and by using a separate company based in New Jersey (the “New Jersey Reshipper”) to send shipments to Hong Kong in an attempt to avoid customs scrutiny of ATI’s shipments.

For instance, on Feb. 12, 2020, Lee sent an email to another ATI customer located in Hong Kong (Hong Kong Company-2) stating that: “[W]e had delivery issue currently with customs, so we’ve decided to release all items to South Korea first and release to HK from Korea temporarily.”  The next day, Lee received a response, which stated, in part, “Most of the items we buy from ATI are under ECCN restriction, so I guess ATI will stock in and release to [ATI’s branch in South Korea], and then ship to HK . . . am I correct?”  Lee replied, “Yes you are right.” 

On March 5, 2020, Lee responded to Hong Kong Company-2’s inquiry regarding whether ATI could sell certain components to China.  Lee’s response, which copied Yu, stated: “We’ve sold” the requested parts “to China customer many times. . . But currently we have customs issue so we don’t know how to handle it. [W]e are thinking we release all controlled parts to South Korea first then release to HK from Korea[.]”

Hong Kong Trading Company-1 also advised ATI on steps to take in order to evade U.S. export controls.  For instance, Hong Kong Trading Company-1 advised Yu and Lee to use a marker to cover ATI’s name on labels, to cover each component with an electro-static discharge (ESD) bag, to remove all original documentation from the package, and to use the New Jersey Reshipper to send the shipment.  On March 14, 2020, Lee sent an email to Hong Kong Trading Company‑1, copying Yu, stating: “We will follow your direction like adjusting invoice or removed label. But we do not have responsible if it will have problem during the transit to you. But for sure, we will do everything what you want for preparing shipments.  We just hope that there is no more detained package.” 

In April 2020, ATI sent a package of components to Hong Kong Trading Company-1 using the New Jersey Reshipper.  The package was inspected and detained by U.S. customs authorities.  Consistent with Hong Kong Trading Company-1’s instructions, the components had been placed in ESD bags labeled with part numbers different from the actual part numbers.  One of the components in the April 2020 shipment was export-controlled under the CCL for national security and anti-terrorism. 

Financial and shipping records establish that ATI has had a long-standing relationship with Hong Kong Trading Company-1.  Between August 2016 and July 2020, ATI shipped more than 200 packages to Hong Kong Trading Company-1.  In the one-year period between May 2019 and June 2020, Hong Kong Trading Company-1 transferred over $800,000 into ATI’s bank account in the United States.     

No one involved in any of these transactions obtained the licenses required under the ECRA to export these dual-use components.  

Yu, 58, of Oradell, New Jersey, and Lee, 33, of Fort Lee, New Jersey, are charged with one count of conspiring to unlawfully export dual-use electronics components, which carries a maximum sentence of 20 years in prison, one count of conspiring to commit wire fraud and bank fraud, which carries a maximum sentence of 30 years in prison, and one count of conspiring to commit money laundering, 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 defendants will be determined by a judge.

Assistant Attorney General Demers and Ms. Strauss praised the extraordinary investigative work of the U.S. Department of Commerce, Office of Export Enforcement, New York Field Office. 

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant United States Attorneys Michael K. Krouse and Michael D. Lockard are in charge of the prosecution, with assistance from Trial Attorney David Recker of the Counterintelligence and Export Control Section. 

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

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

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, John C. Demers, Assistant Attorney General for National Security, and Jonathan Carson, Special Agent in Charge of the New York Field Office of the U.S. Department of Commerce, Office of Export Enforcement (“OEE”), announced the arrests today of CHONG SIK YU, a/k/a “Chris Yu,” and YUNSEO LEE.  YU and LEE are charged with conspiring to unlawfully export dual-use electronics components, in violation of the Export Control Reform Act, and to commit wire fraud, bank fraud, and money laundering.  YU and LEE were arrested this morning and are expected to be presented later today before U.S. Magistrate Judge Kevin Nathaniel Fox in Manhattan federal court.

Acting U.S. Attorney Audrey Strauss said:  “Chong Sik Yu and Yunseo Lee are accused of violating U.S. export laws by sending electronics components with military applications to Hong Kong and China.  Together with the Commerce Department and all of our law enforcement partners, we will continue to protect our national security by preventing dual-use technologies from being sent abroad without the required licenses.” 

Assistant Attorney General for National Security John C. Demers said:  “The Department’s fight against illegal technology transfer to China is no more critical than in areas like those involved in this case – controlled items used in missile and nuclear technology.  We will do everything in our power to disrupt illegal exports like these that jeopardize our national security.” 

OEE Special Agent in Charge Jonathan Carson said:  “A top priority of the Office of Export Enforcement is identifying and disrupting the illicit export of items to Hong Kong and China that undermine the national security of the United States.  We will continue to work with our law enforcement partners using criminal prosecutions to keep the most dangerous goods out of the most dangerous hands.”

As alleged in the criminal Complaint,[1] unsealed today in Manhattan federal court:

Since at least 2019, a U.S. company named America Techma Inc. (“ATI”) has illegally exported electronic components from the United States to Hong Kong for apparent re-export to other countries, including China, in violation of the Export Control Reform Act of 2018 (“ECRA”).  Pursuant to the ECRA controls, the Department of Commerce administers export-licensing and other requirements for the export of goods, software, and technologies from the United States to foreign countries.  These requirements restrict the export of items that could make a significant contribution to the military potential of other nations or that could be detrimental to the foreign policy or national security of the United States.  The Commerce Department identifies the most sensitive items subject to Export Administration Regulations (“EAR”) on the Commerce Control List (“CCL”), which is categorized by Export Control Classification Number (“ECCN”).

YU is ATI’s president, and LEE is an ATI sales representative.  YU and LEE worked together and with others to ship what they knew to be export-controlled items to Hong Kong and China.  For instance, in June 2019, ATI obtained electronics components – which are export-controlled under the CCL for missile technology, nuclear nonproliferation, and anti-terrorism reasons – from a U.S. supplier (“U.S. Supplier-1”), and then sent those components to a trading company in Hong Kong (“Hong Kong Trading Company-1”).  In January 2020, ATI attempted to send to Hong Kong Trading Company-1 several electronic components, which are export-controlled under the CCL for national security, regional stability, missile technology, nuclear nonproliferation, and anti-terrorism reasons.  After the January 2020 package was detained by law enforcement, YU and LEE discussed methods for evading future law enforcement scrutiny by, for instance, transshipping packages through South Korea, and by using a separate company based in New Jersey (the “New Jersey Reshipper”) to send shipments to Hong Kong in an attempt to avoid customs scrutiny of ATI’s shipments.

For instance, on February 12, 2020, LEE sent an email to another ATI customer located in Hong Kong (“Hong Kong Company-2”) stating that: “[W]e had delivery issue currently with customs, so we’ve decided to release all items to South Korea first and release to HK from Korea temporarily.”  The next day, LEE received a response, which stated, in part, “Most of the items we buy from ATI are under ECCN restriction, so I guess ATI will stock in and release to [ATI’s branch in South Korea], and then ship to HK . . . am I correct?”  LEE replied, “Yes you are right.” 

On March 5, 2020, LEE responded to Hong Kong Company-2’s inquiry regarding whether ATI could sell certain components to China.  LEE’s response, which copied YU, stated: “We’ve sold” the requested parts “to China customer many times. . . But currently we have customs issue so we don’t know how to handle it. [W]e are thinking we release all controlled parts to South Korea first then release to HK from Korea[.]”

Hong Kong Trading Company-1 also advised ATI on steps to take in order to evade U.S. export controls.  For instance, Hong Kong Trading Company-1 advised YU and LEE to use a marker to obscure ATI’s name on labels, to cover each component with an electro-static discharge (“ESD”) bag, to remove all original documentation from the package, and to use the New Jersey Reshipper to send the shipment.  On March 14, 2020, LEE sent an email to Hong Kong Trading Company‑1, copying YU, stating: “We will follow your direction like adjusting invoice or removed label. But we do not have responsible if it will have problem during the transit to you. But for sure, we will do everything what you want for preparing shipments.  We just hope that there is no more detained package.” 

In April 2020, ATI sent a package of components to Hong Kong Trading Company-1 using the New Jersey Reshipper.  The package was inspected and detained by U.S. customs authorities.  Consistent with Hong Kong Trading Company-1’s instructions, the components had been placed in ESD bags labelled with part numbers different from the actual part numbers.  One of the components in the April 2020 shipment was export-controlled under the CCL for national security and anti-terrorism. 

Financial and shipping records establish that ATI has had a long-standing relationship with Hong Kong Trading Company-1.  Between August 2016 and July 2020, ATI shipped more than 200 packages to Hong Kong Trading Company-1.  In the one-year period between May 2019 and June 2020, Hong Kong Trading Company-1 transferred over $800,000 into ATI’s bank account in the United States.      

No one involved in any of these transactions obtained the licenses required under the ECRA to export these dual-use components.  

*                      *                      *

YU, 58, of Oradell, New Jersey, and LEE, 33, of Fort Lee, New Jersey, are each charged with one count of conspiring to unlawfully export dual-use electronics components, which carries a maximum sentence of 20 years in prison, one count of conspiring to commit wire fraud and bank fraud, which carries a maximum sentence of 30 years in prison, and one count of conspiring to commit money laundering, 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 defendants will be determined by a judge.

Ms. Strauss praised the extraordinary investigative work of the New York Field Office of the Department of Commerce, Office of Export Enforcement.  Ms. Strauss also thanked the Newark Field Offices of Homeland Security Investigations and U.S. Customs and Border Protection for their assistance in the investigation, as well as the Counterintelligence and Export Control Section of the Department of Justice’s National Security Division.

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant United States Attorneys Michael K. Krouse and Michael D. Lockard are in charge of the prosecution, with assistance from Trial Attorney David Recker of the Counterintelligence and Export Control Section. 

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

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

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced today that the United States has entered into an agreement (“Remedial Order”) with New York City and the New York City Department of Correction (“DOC”) to address ongoing non-compliance with core provisions of a Court-ordered Consent Judgment entered in October 2015 to reduce violence in NYC jails on Rikers Island and ensure the safety and well-being of inmates.  The Remedial Order, which is subject to the final approval of the Court, requires DOC to implement operational reforms to fix systemic deficiencies that have continued to plague the jail system.  Specifically, under the Remedial Order, DOC must adopt numerous new measures designed to reduce the unnecessary use of force against inmates, improve staff supervision, enhance the quality and timeliness of investigations into use of force incidents, ensure that correction officers are held accountable for their misconduct, and better manage and supervise the youngest inmates in custody.  The independent federal monitor overseeing the Consent Judgment will assess compliance with the requirements of the Remedial Order. 

Acting Manhattan U.S. Attorney Audrey Strauss said:  “Five years ago, this Office entered into a groundbreaking, Court-enforceable agreement requiring the City and the Department of Correction to implement sweeping, comprehensive reforms to protect the constitutional rights of inmates and ensure their safety.  As documented repeatedly through the federal monitor’s reports to the Court, the City and DOC have failed to fulfill core obligations under that agreement.  While this Office recognizes that changing a decades-long culture of violence is not a simple task, the City and DOC must do better.  By agreeing to adopt the measures set forth in this Remedial Order, they have taken a step in the right direction.  This Office will continue to closely monitor the implementation of the required reforms and vigilantly enforce the requirements of the Remedial Order and the underlying Consent Judgment.”

In August 2014, after completing a multi-year investigation, this Office issued a report that concluded that “a deep-seated culture of violence is pervasive throughout the adolescent facilities at Rikers, and DOC staff routinely utilize force not as a last resort, but instead as a means to control the adolescent population and punish disorderly or disrespectful behavior.”  The United States proceeded to join a class action lawsuit against the City, Nunez v. City of New York, which alleged that DOC engaged in a pattern and practice of using unnecessary and excessive force against inmates throughout the jail system.  In October 2015, Judge Laura Taylor Swain entered a Consent Judgment requiring DOC to develop and implement myriad new practices, systems, policies, and procedures to reduce violence and the use of excessive and unnecessary force.  The Consent Judgment is subject to the oversight of the Court and an independent federal monitor.

Notwithstanding these Court-mandated reforms, the frequency with which correction officers use force against inmates has increased dramatically since the Consent Judgment was entered, with the average monthly use of force rate increasing by more than 100% from 2016 to 2019.  In recent bi-annual reports to the Court, the federal monitor has found the City and DOC to be in non-compliance with numerous key provisions of the Consent Judgment.  For instance, in his report filed on May 29, 2020, the federal monitor found that DOC “continues to struggle to properly manage Staff’s use of force” and went on to conclude that “a pattern of unprofessional conduct and hyper-confrontational behavior by Staff, an overreliance on alarms and the Probe Team, misuse of OC spray [i.e., pepper spray], use of painful escort techniques, and improper use of head strikes have all plagued the agency’s use of force since the Effective Date [of the Consent Judgment].”

The Remedial Order requires DOC, among other things, to:

• Improve the level of supervision of Captains by substantially increasing the number of Assistant Deputy Wardens assigned to jails. 
   
• Evaluate inmates who have been involved in a significant number of use of force incidents to determine whether their mental health needs are being adequately addressed, and whether existing security and management protocols are appropriate for these inmates.
   
• Develop a new protocol governing the composition and deployment of Facility Emergency Response Teams (i.e., probe teams) in order to minimize unnecessary or avoidable uses of force by staff.
   
• By the end of the year, complete all outstanding investigations into use of force incidents that have been pending for a lengthy period of time. 
   
• Utilize a recently created unit of trained investigators to investigate all use of force incidents within 25 business days to determine whether staff violated the use of force policy, or whether further investigation is necessary.
   
• Consistently not exceed caseload targets approved by the federal monitor for investigators responsible for investigating use of force incidents.  
   
• Impose immediate corrective action on staff for violations of the use of force policy when recommended by the federal monitor.   

• Expedite the prosecution of disciplinary cases involving violations of the use of force policy by, among other things, ensuring that at least 50 cases are heard each month by the Office of Administrative Trials and Hearings (“OATH”).

• With respect to units housing 18-year-old inmates, improve the staff assignment system such that the same correction officers, Captains, and Assistant Deputy Wardens are consistently assigned to work in the same housing unit and on the same tour, to the extent feasible.
   
• With respect to units housing 18-year-old inmates, implement a system that includes a variety of short-term and long-term rewards and consequences to incentivize positive inmate behavior and sanction negative conduct.

While this Office remains extremely concerned with DOC’s ongoing failure to comply with core requirements of the Consent Judgment, the Office recognizes that the agency has made some significant improvements in other areas since the Consent Judgment became effective.  For example, DOC has installed thousands of wall-mounted video surveillance cameras throughout the jails to ensure complete camera coverage; created and provided a wide range of new training programs for staff; developed a new computerized case management system to track a wide range of information relating to use of force incidents; eliminated the use of punitive segregation for inmates under the age of 22; and stopped housing youths under the age of 18 on Rikers Island.

This case is being handled by the Office’s Civil Rights Unit.  Assistant U.S. Attorneys Jeffrey K. Powell and Lara K. Eshkenazi are in charge of the case.

Audrey Strauss, the Acting 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, the Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of an Indictment charging MARIO REYNOSO-HICIANO, JOEL CABRERA, a/k/a “Gordo,” a/k/a “Oso,” VLADIMIR REYES, YUDITH REYNOSO-HICIANO, a/k/a “La Classica,” and PEDRO REYNOSO with kidnapping, narcotics, and firearm offenses.  Three defendants were taken into custody earlier today and will be presented before U.S. Magistrate Judge Kevin Nathaniel Fox.  A fourth defendant remains at large, and a fifth defendant is already in federal custody in connection with another matter and will be presented and arraigned at a later date.  The case is assigned to U.S. District Judge Denise L. Cote.

Acting U.S. Attorney Audrey Strauss said:  “As alleged, the defendants were involved in conspiracies to traffic in cocaine and/or to kidnap someone they believed had shortchanged them in a drug transaction.  This case illustrates once again how drug trafficking and gun violence so often go hand-in-hand.  Thanks to the efforts of HSI and the NYPD, people charged with violent crimes are in custody and facing federal charges.”

HSI Special Agent-in-Charge Peter C. Fitzhugh said:  “The safety and well-being of New York City residents remains the primary focus of HSI and our partners.  Today’s indictment alleging narcotics trafficking and kidnapping by the defendants, and use of a firearm by one of them, marks yet another positive step in ridding alleged criminals from our community.  HSI’s continued collaboration with the NYPD to investigate violent crimes and dismantle criminal organizations will ensure the safe removal of guns, drugs and bad actors from our neighborhoods.”

NYPD Commissioner Dermot Shea said:  “The illegal narcotics trade and associated violence alleged in this federal indictment are crimes that erode the fabric of city life. I commend our NYPD investigators, and federal partners, for their work in this successful case.”

According to the allegations in the Indictment[1]:

In or about May 2019, MARIO REYNOSO-HICIANO, JOEL CABRERA, and VLADIMIR REYES engaged in a conspiracy to distribute cocaine.  A dispute arose between MARIO REYNOSO-HICIANO and another individual who had brokered the sale of cocaine (“Victim-1”) because MARIO REYNOSO-HICIANO believed that he had been paid less than the full negotiated purchase price for the cocaine. 

As part of that dispute, MARIO REYNOSO-HICIANO, YUDITH REYNOSO-HICIANO, PEDRO REYNOSO, and others kidnapped Victim-1, tied him to a chair inside an apartment in the Bronx (“Apartment-1”), threatened to and did physically assault Victim-1, and demanded that Victim-1 provide information relating to the aforementioned cocaine transaction.  Portions of the kidnapping were recorded with a cellphone by YUDITH REYNOSO-HICIANO.

In the early morning of May 31, 2019, CABRERA brandished and discharged a firearm in connection with the cocaine transaction that occurred the day before.

*                *                *

A chart containing the names, charges, and maximum 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 HSI and the NYPD.

This case is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Daniel H. Wolf and Alexander N. Li 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. PENALTIES

1

Narcotics distribution conspiracy

21 U.S.C. §§ 846,  841(b)(1)(B)

MARIO REYNOSO-HICIANO (age 35)

JOEL CABRERA (age 25)

VLADIMIR REYES (age 37)

40 years

Mandatory minimum of five years in prison

2

Kidnapping conspiracy

18 U.S.C. § 1201(c)

MARIO REYNOSO-HICIANO

YUDITH REYNOSO-HICIANO (age 41)

PEDRO REYNOSO (age 21)

Life

3

Kidnapping

18 U.S.C. §§ 1201(a)(1), 1201(d) and 2

MARIO REYNOSO-HICIANO

YUDITH REYNOSO-HICIANO

PEDRO REYNOSO

Life

4

Firearms offense

18 U.S.C. §§ 924(c)(1)(A)(i), 924(c)(1)(A)(ii), 924(c)(1)(A)(iiii),  and 2

JOEL CABRERA

Life

Mandatory minimum of 10 years in prison

[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 Acting United States Attorney for the Southern District of New York, Brenda Smith, Executive Assistant Commissioner for U.S. Customs and Border Protection’s (“CBP”) Office of Trade, and Troy Miller, Director, CBP Field Operations New York, announced today that the United States has filed a civil fraud lawsuit against ANAYA GEMS, INC. (“ANAYA GEMS”), a company that sold jewelry to retailers and was previously based in Long Island City, New York, and its former president, ANSHUL GANDHI (“GANDHI”), for defrauding the United States by falsely underreporting to CBP the value of jewelry imported from Hong Kong and Thailand, and thereby avoiding customs duties owed on the goods.  Specifically, the Government alleges that ANAYA GEMS did not report the value of the diamonds contained in the jewelry, or grossly understated their value.  The Hong Kong and Thailand companies that assembled the finished jewelry shipped to ANAYA GEMS used diamonds that were obtained from India-based companies owned, operated, and/or controlled by GANDHI’s family members.

Simultaneous with the filing of the lawsuit, the United States has resolved the claims against GANDHI pursuant to a settlement agreement approved today by U.S. District Judge Edgardo Ramos.  Under the settlement, GANDHI will pay $415,000 to the United States and made admissions regarding his conduct and the company’s conduct.  Specifically, GANDHI admitted that ANAYA GEMS routinely and knowingly underpaid customs duties for jewelry containing diamonds imported from Hong Kong and Thailand.  The amount paid by GANDHI under the settlement is based on the Office’s assessment of his ability to pay based on the financial information he provided.  ANAYA GEMS is no longer operating.

Acting U.S. Attorney Audrey Strauss said:  “Anaya Gems and its former president engaged in a fraudulent scheme to short-change the Government of customs duties owed for imported jewelry by falsely reporting its value.  Our Office will continue to hold companies, as well as their executives, accountable when they try to evade paying the legally required custom duties on imported goods.” 

Executive Assistant Commissioner Brenda Smith said:  “U.S. Customs and Border Protection maintains a zero-tolerance policy for trade fraud and other unfair trade practices that undermine the competitiveness of U.S. businesses.  Our auditors, attorneys, and analysts in New York played an important role in this investigation, and I want to recognize their outstanding work.  We are proud to partner with the U.S. Attorney’s Office to level the playing field for legitimate traders by steadfastly enforcing U.S. trade laws.”

CBP Field Operations Director Troy Miller said:  “This case is a great example of CBP’s historical mission of protecting the revenue of the United States and coincides with the 231st anniversary of the creation of the United States Customs Service.  I would like to thank our partners for their efforts in this priority trade enforcement action.”

The Complaint filed in Manhattan federal court alleges that from 2010 through 2017, ANAYA GEMS and GANDHI engaged in a scheme to fraudulently underpay customs duties on jewelry containing diamonds imported from Hong Kong and Thailand.  They carried out this scheme by causing false representations to be made concerning the value of the jewelry on entry documents filed with CBP, and by submitting invoices that did not reflect the true value of the jewelry.  ANAYA GEMS’ own records reflected the fraudulent scheme, showing the difference between the true values of the jewelry and the false values that were declared to CBP, as well as the duty that ANAYA GEMS would have been required to pay if it had lawfully reported the actual value of the jewelry.  In many instances, upon receipt of a shipment of jewelry from Hong Kong or Thailand, an ANAYA GEMS employee would handwrite on the manufacturer’s receipt the actual value of the diamonds contained in the imported merchandise so that the company could track this information.  ANAYA GEMS then provided its customs broker with the versions of these invoices without the handwriting – and without the actual value of the diamonds – and the customs broker submitted those invoices to CBP. 

As part of the settlement approved today by Judge Ramos, GANDHI admits, acknowledges, and accepts responsibility for the following conduct: 

• As the president of the company during the period relevant to the Government’s allegations, GANDHI was closely involved in managing the day-to-day operations of ANAYA GEMS.
   
• ANAYA GEMS imported jewelry containing diamonds (the “Jewelry”) from manufacturers based in Hong Kong and Thailand (collectively, the “Manufacturers”).  The diamonds used in the Jewelry assembled by the Manufacturers were obtained from companies that shared common ownership with ANAYA GEMS, including India-based companies Antrix Diamond Exports, Ltd., Shubh Exports, and Netaya Jewels PVT Ltd. (collectively, the “Diamond Suppliers”).  GANDHI’s family members, including his father, owned, operated and/or controlled the Diamond Suppliers. 

• The Manufacturers used the diamonds provided by the Diamond Suppliers to create the finished Jewelry that was exported to ANAYA GEMS.  The Manufacturers were not billed for, and did not pay for, the diamonds that they used to assemble the finished Jewelry.
   
• ANAYA GEMS routinely and knowingly underpaid customs duties for the Jewelry imported from Hong Kong and Thailand.  The entry documents submitted by ANAYA GEMS for the Jewelry imported from Hong Kong and Thailand were false.  ANAYA GEMS regularly and knowingly misrepresented the actual value of the Jewelry on entry documents filed by its customs broker with CBP by not including the value of the diamonds, or grossly understating the value of the diamonds, contained in the Jewelry. 
   
• ANAYA GEMS also, through its customs broker, submitted to CBP inaccurate invoices to support the declared values, which omitted the value of the diamonds or grossly understated the value of the diamonds.
   
• GANDHI was involved in pricing the Jewelry for purposes of selling the merchandise to retailers.  When calculating the prices to sell merchandise to retailers, GANDHI and ANAYA GEMS staff used the actual value of the pieces – including the value of the diamonds – as opposed to the values reported to CBP.  
   
• GANDHI was aware of ANAYA GEMS’ obligation to report the accurate value of the imported Jewelry to the CBP, which included the full value of any diamonds included in the Jewelry.  GANDHI knew that the invoices used by ANAYA GEMS’ customs broker to record the value of the merchandise declared on the entry summary forms did not include the full value of the diamonds contained in the Jewelry.  GANDHI was aware that ANAYA GEMS did not accurately report the value of Jewelry imported from Hong Kong and Thailand and that this resulted in the underpayment of customs duties that were due and owing to the United States.

In connection with the filing of the lawsuit and settlement, the Government joined a private whistleblower lawsuit that had previously been filed under seal pursuant to the False Claims Act.

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

The case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorney Jeffrey K. Powell is in charge of the case.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and Scott Lampert, the Special Agent in Charge for the New York Office of Inspector General of the U.S. Department of Health and Human Services (“HHS-OIG”), announced today the entry of two settlements in a Medicaid billing fraud lawsuit against New York City (the “City”) and Computer Sciences Corporation (“CSC”).  The settlements resolved allegations brought by the United States and the State of New York that defendants knowingly failed to take reasonable measures to obtain private insurance coverage before billing Medicaid for early intervention program (“EIP”) services, such as speech and physical therapy, for young children. 

Under the settlements, which were approved yesterday by U.S. District Judge Jed S. Rakoff, the City and CSC agreed to pay a total sum of $2.775 million, with $1,585,435 being paid to the United States and the remaining amount to the State of New York.  As part of the settlements, defendants admitted, acknowledged, and accepted responsibility for conduct that resulted in the City having received payments from Medicaid for EIP services that Medicaid would not otherwise have made pursuant to its payment regulations and procedures.

 Acting U.S. Attorney Audrey Strauss said:  “Medicaid covers vitally needed medical care for millions of people in New York.  Compliance with billing requirements ensures the financial integrity of the Medicaid program.  This Office is committed to holding recipients of Medicaid funding and their billing agents responsible for complying with these billing requirements.”

HHS-OIG Special Agent in Charge Scott J. Lampert said:  “Millions of people in New York depend on Medicaid for vital services, and taxpayers across the state pay for that care.  HHS-OIG will continue close cooperation with our State and Federal law enforcement partners to preserve this essential funding and ensure that it is used properly.”

As alleged in the complaint filed by the United States in September 2016, the City was responsible for paying for EIP services for young children in New York City and then was permitted to seek reimbursement from private insurers, Medicaid, and other funding sources.  In 2007, the City retained CSC as its billing agent to submit EIP reimbursement claims.  Although the City and CSC knew that Medicaid rules required them to take reasonable measures to obtain private insurance coverage before submitting EIP claims to Medicaid, they frequently ignored that billing requirement.  For example, although the City knew that it received no response from private insurers for many EIP claims, the City and CSC failed to contact those insurers in a significant number of cases to follow up on the claims and determine the reason for the lack of a response.  Instead, the City instructed CSC to treat those claims as having been denied by the private insurers and submit them to Medicaid using a code – known as “0Fill” – to indicate there was in fact no private insurance coverage.

In the two settlements, the City and CSC made numerous factual admissions.  The City admitted, acknowledged, and accepted responsibility for, among others, the following conduct:

• the City was responsible for the provision of EIP services to eligible children in New York City, including preparing individualized family service plans, contracting with and paying treating providers such as audiologists and speech therapists who delivered EIP services, and seeking reimbursement for the EIP services provided to eligible children;
• in 2005, the City issued a request for proposal for a new fiscal agent for EIP, and a corporate predecessor of CSC responded to that request for proposal;
• between 2005 and 2007, the City and CSC engaged in discussions about the City’s expectations for CSC as the City’s EIP fiscal agent, during which the City advised CSC that when seeking reimbursement for EIP services for an eligible child with health coverage from both private insurance and Medicaid (“dual-eligible EIP beneficiaries”), the sequence of billing was to be: 1) private insurance, 2) Medicaid, and 3) EIP funds from New York State;
• in September 2007, the City and CSC signed a fiscal agent contract, after which CSC began developing systems and computer programs for the City; and
• from 2009 to 2012, the City received reports from CSC regarding instances where there had been no responses from private insurers for EIP claims involving dual-eligible beneficiaries; in a significant number of such cases, the City did not inquire with private insurers to determine the cause(s) for their lack of response, and did not direct CSC to so inquire.

CSC also admitted, acknowledged, and accepted responsibility for, among others, the following:

• in or about September 2010, CSC and the City discussed a plan to develop a procedure for designating claims as “denied” in CSC’s internal EIP database once those claims had been pending with private insurers for 90 days without an adjudication;
• the City approved that plan, and CSC proceeded to populate the claims that had received no response from private insurers after 90 days with the “denial” designation in its claims database;
• CSC also obtained permission from the City to submit those claims to Medicaid with the “0Fill” modifier – which, according to Medicaid’s claim submission guide, was to be used either for “when it is known that the primary payer or any other payer prior to Medicaid[] does not cover the services and so will not pay any amount towards the claim,” or for claims that “have been denied (the services were not covered) or were paid zero (the entire charge was adjusted, for example, applied to deductible) by any prior payer;” and
• as result, the City received payments from Medicaid for EIP services that Medicaid would not otherwise have made pursuant to its payment regulations and procedures.

These settlements arise from a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act, which allow private persons – known as “relators” – to file civil actions on behalf of the United States and share in any recovery.  

Ms. Strauss praised the outstanding investigative work of the HHS-OIG, and she thanked the Medicaid Fraud Control Unit at the New York State Attorney General’s Office for its extensive collaboration in the investigation and litigation of this case.

This case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorneys Li Yu and Arastu Chaudhury are in charge of this case.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that RONALD OLSON, a vice president and deputy operation manager for Turner Construction Company (“Turner”), pled guilty today to charges of evading taxes on more than $1.5 million in bribes he received from building sub-contractors.  OLSON is scheduled to be sentenced on December 9, 2020, at 11:00 a.m., before United States District Judge P. Kevin Castel.  In related proceedings, co-conspirator Michael Campana, a subordinate construction manager at Bloomberg, LLC (“Bloomberg”), was sentenced last Friday, July 24, 2020, by the Honorable Denise L. Cote to 24 months in prison, for evading taxes on more than $420,000 in the same scheme.  In addition, two managers of a construction contractor – Anthony Guzzone and Vito NiGro – were respectively charged on July 14 and July 22, 2020, for evading taxes on more than $1.4 million and $1.8 million in bribes that they respectively received in the same scheme.[1]

Acting U.S. Attorney Audrey Strauss said:  “When bribery is coupled with tax evasion, both the bribery victims and the taxpaying public are forced to bear the hidden, unfair costs of corruption.  This investigation has resulted in charges of such conduct by four defendants, one of whom pled guilty today, one of whom previously pled guilty and was sentenced last week, and the other two of whom were charged earlier this month.”

According to the four criminal Informations filed in these federal cases, as well as other public documents and recent court proceedings:

Between 2011 and 2017, GUZZONE was a construction project manager for Bloomberg, a global financial firm that was engaged in various building projects in New York City and elsewhere, while OLSON and NIGRO were executives at Turner, which performed construction projects for Bloomberg.  For most of that time, beginning in 2013, CAMPANA was also a construction manager at Bloomberg.  Each of the defendants participated in a scheme to obtain bribes from construction sub-contractors, who paid kickbacks to the defendants in exchange for being awarded various construction contracts and sub-contracts performed for Bloomberg.

In all, the defendants are charged with failing to pay taxes, between 2010 and 2017, on bribes exceeding $5.1 million.  The defendants received such bribes in various forms, including millions of dollars in cash, as well as construction labor and materials for work on their individual homes and properties, and the direct payment of personal expenses.  Such personal expenses included charges related to CAMPANA’s 2017 wedding, such as approximately $40,000 paid by sub-contractors to a catering hall in New Jersey, over $13,000 to a photography studio, and over $23,000 to a travel agent for airline tickets purchased in connection with CAMPANA’s honeymoon, as well as Super Bowl tickets worth almost $8,000 provided to GUZZONE.  Each of the defendants evaded federal income tax on this bribery income, by failing to declare it on income tax returns for various years between 2010 and 2017.

In connection with the underlying bribery scheme, the Manhattan District Attorney’s Office charged OLSON, CAMPANA, GUZZONE, NIGRO, and 10 others in December 2018 with numerous felonies, including charges of conspiracy, commercial bribery, and money laundering.  On November 19, 2019, CAMPANA pled guilty in the State court case to money laundering in the third degree for his participation in the bribery scheme.  (New York v. Guzzone, et al., case no. 04037-2018 (N.Y. Sup. Ct.), count 44).  He is awaiting sentencing in that case, while the State charges remain pending against OLSON, GUZZONE, and NIGRO. 

*                       *                      *

OLSON, 53, of Massapequa, New York, pled guilty today to a single count of tax evasion for the tax years 2011 through 2017.  That charge 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.  The maximum potential 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.

CAMPANA, 34, of Tuckahoe, New York, pled guilty to a tax evasion charge on November 26, 2019, for the tax years 2014 thought 2017, and was sentenced last week, on July 24, 2020, to 24 months in prison, three years of supervised release, restitution of $155,000 in unpaid taxes (which he has repaid), and a fine of $10,000. 

GUZZONE, 51, and NIGRO, 59, both of Middletown, New Jersey, were each charged in criminal informations, respectively on July 14 and 16, 2020, with a single count of tax evasion.  The charges against GUZZONE pertained to the tax years 2010 through 2017, while the charges against NIGRO pertained to 2011 through 2017.  Those charges carry 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.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judges.

Ms. Strauss praised the excellent work of the Internal Revenue Service.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorney David Raymond Lewis, and Stanley J. Okula, Assistant Chief of the Criminal Appeals & Tax Enforcement Policy Section of the Tax Division of the Department of Justice, are in charge of the prosecution.  

[1]  In addition, all four defendants have been charged in New York State Supreme Court for their participation in the underlying bribery scheme, where CAMPANA has pled guilty in that case and is awaiting sentencing.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced the arrest today of FRANCIS HUGHES.  HUGHES, 65, a pastor at a religious institution in Queens, New York, is charged with receiving images of child pornography via text from a 15-year-old minor in Westchester, New York, with whom Hughes was engaging in sexually explicit text communications.  HUGHES was arrested this morning and will be presented later today before U.S. Magistrate Judge Lisa Margaret Smith in White Plains federal court.

Acting U.S. Attorney Audrey Strauss said:  “The allegations against Francis Hughes are chilling and frightening to any parent.  A person who, by the nature of his profession, is presumed to be trustworthy allegedly victimized a child.  Thanks to the FBI, Hughes now faces a serious federal charge.”

FBI Assistant Director William F. Sweeney Jr. said:  “We expect adults, especially those in positions of trust like Francis Hughes, to protect our children, not victimize them.  Sadly, these allegations demonstrate there are still predators out there who abuse this trust.  If you or anyone you know may have been a victim of Rev. Hughes, we are asking you contact us at 1-800-CALL-FBI.  If you are a parent or guardian, please take a moment to have a discussion with your children about protecting themselves and about how they can report the type of predatory behavior that is alleged here today.”

According to the Complaint[1] filed today in White Plains federal court:

On February 16, 2020, HUGHES communicated by text messages with a 15-year-old boy (“Minor-1”).  During the course of the text communications, among other things, Minor-1 sent HUGHES three images of Minor-1’s penis.  Upon receiving one of the images, HUGHES responded, among other things, “Yummmmm I will suck you so much” and “Make you cum.”  During the communications, HUGHES told Minor-1 that he was a part-time college professor and a counselor.

There may be more victims of this alleged conduct.  If you have information to report, contact the Federal Bureau of Investigation at 1-800-CALL-FBI.           

*                       *                      *

HUGHES, 65, of Glendale, New York, is charged with one count of receipt and distribution of child pornography, which carries a mandatory minimum sentence of five years in prison and a maximum sentence of 20 years in prison.  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 and its Westchester County Safe Streets Task Force, and thanked the Greenburgh Police Department for its assistance.  She added that the investigation is ongoing.                     

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.  

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

[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 Acting United States Attorney for the Southern District of New York, announced today that SAVRAJ GATA-AURA (“GATA-AURA”) was sentenced yesterday to four years in prison for participating in a scheme to defraud more than 800 investors of more than $40 million by making false and fraudulent representations about, among other things, the management, profitability, and operations of a co-working space company called Bar Works Inc. and related entities (“Bar Works”).  GATA-AURA previously pled guilty to conspiracy to commit wire fraud before United States District Judge Jed S. Rakoff, who also imposed the sentence.

Acting U.S. Attorney Audrey Strauss said:  “For more than a year-and-a-half, Savraj Gata-Aura lured hundreds of victims to invest approximately $40 million into a massive Ponzi scheme.  He concealed from investors that Bar Works was run by Renwick Haddow, who has pled guilty for his role in this and another fraud scheme, instead listing the fictional CEO ‘Jonathan Black’ in offering documents.  By the time the scheme collapsed, Gata-Aura had personally made close to $3 million from unsuspecting investors.”

According to the allegations contained in the Superseding Indictment filed against SAVRAJ GATA-AURA and statements made in related court filings and proceedings, including the trial of co-defendant James Moore:

From approximately September 2015 to June 2017, GATA-AURA partnered with Renwick Haddow, who is also a British citizen, in soliciting investments into Bar Works through material misrepresentations concerning, among other things, the identity of Bar Works’ management and the financial condition of that company.  Previously, Haddow had been disqualified as a director of any U.K. company for eight years, and sued by the Financial Conduct Authority, a British regulator, for operating investment schemes through misrepresentations that lost investors substantially all of their money.  These sanctions and lawsuit were publicized extensively online.

In order to conceal his role at Bar Works because of the negative publicity on the internet related to past investment schemes and government sanctions in the United Kingdom, Haddow adopted the alias “Jonathan Black.”  Notwithstanding Haddow’s control over Bar Works, GATA-AURA and others knowingly distributed the Bar Works offering materials listing Black as the chief executive officer of Bar Works and claiming that Black had an extensive background in finance and past success with start-up companies.  As GATA-AURA well knew, “Jonathan Black,” was an entirely fictitious person, created to mask Haddow’s control of Bar Works. 

Among other things, GATA-AURA helped devise and distribute pitch materials that contained the misrepresentation, coordinated a substantial sales force to recruit investors knowing that the materials contained the falsehood, advised Haddow as to how to continue to conceal the truth concerning the identity of “Jonathan Black,” and affirmatively represented to sub-agents for investors that he was communicating with CEO “Jonathan Black.”  GATA-AURA and his agent network were directly responsible for raising approximately $40 million from investors in Bar Works.  GATA-AURA received in excess of $2.9 million in commissions out of victim funds for his participation in the scheme.

In sentencing GATA-AURA, Judge Rakoff remarked that the defendant “lied, cheated, and as a result many victims were left destitute or deprived of money that was important to them. . . . His primary motivation was greed.”

In addition to the prison term, GATA-AURA, 33, was sentenced to three years of supervised release.  GATA-AURA was also ordered to pay forfeiture of $2,988,225.  The Court will also enter a restitution order at a later date.  

Renwick Haddow, 51, pled guilty on May 23, 2019, to one count each of wire fraud and wire fraud conspiracy relating to the Bar Works scheme, and one count each of wire fraud and wire fraud conspiracy relating to a separate investment scheme involving Bitcoins.  Haddow’s sentencing is scheduled for October 23, 2020.

James Moore, 58, was convicted of one count of wire fraud and one count of wire fraud conspiracy for his participation in the scheme on June 7, 2019, following a week-long jury trial before Judge Richard M. Berman.  Moore’s sentencing date is pending.

Ms. Strauss praised the investigative work of the Federal Bureau of Investigation and thanked the Securities and Exchange Commission, which has separately brought civil actions against GATA-AURA, Haddow, and Moore, for its assistance. 

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Vladislav Vainberg and Martin S. Bell are in charge of the prosecution.  

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that MATTHEW MADONNA, the Acting Boss of the Luchese Family, CHRISTOPHER LONDONIO, a soldier in the Luchese Family, and TERRENCE CALDWELL, an associate of the Luchese Family, were sentenced today to life in prison following their conviction for the 2013 murder of Michael Meldish, conspiracy to commit racketeering, and other felonies.  A jury convicted MADONNA, LONDONIO, CALDWELL, and Steven L. Crea, the Underboss of the Luchese Family, on November 15, 2019, following a six-week trial before U.S. District Judge Cathy Seibel, who also imposed today’s sentences.  CREA will be sentenced at a later date.[1] 

Acting U.S. Attorney Audrey Strauss said:  “Matty Madonna, Christopher Londonio, and Terrence Caldwell – respectively, the Acting Boss, a soldier, and an associate of the Luchese Family – were responsible for the execution-style murder of Michael Meldish seven years ago.  Madonna ordered it, Londonio set it up, and Caldwell pulled the trigger.  Now all three have been sentenced to serve the rest of their lives in federal prison.  Thanks to the outstanding investigative work of the FBI and NYPD, we continue our commitment to render La Cosa Nostra a thing of the past.”

According to the evidence presented at trial, and other court documents:

Until his arrest in this case, MADONNA was the Acting Boss of the Luchese Family of La Cosa Nostra, one of the “Five Families” that constitute the Mafia in the New York City area.  In 2013, MADONNA became displeased with Michael Meldish, a longtime organized crime associate who had refused to collect debts owed to MADONNA.  MADONNA ordered Meldish killed.  Acting under the orders of MADONNA and Crea, LONDONIO helped set up Meldish – a personal friend of LONDONIO’s – to be killed, and acted as the getaway driver for the murder.  CALDWELL carried out MADONNA’s and Crea’s orders to kill Meldish.  CALDWELL met Meldish and drove with him to a Bronx neighborhood to meet LONDONIO.  As Meldish got out of his car, CALDWELL shot him once in the head, killing him instantly.  CALDWELL then drove off with LONDONIO.  For their participation in the Meldish murder, MADONNA, LONDONIO, and CALDWELL were each convicted at trial of conspiracy to commit murder in aid of racketeering, murder in aid of racketeering, and use of a firearm in furtherance of murder in aid of racketeering.

In addition, MADONNA, 84, of the Bronx, New York, LONDONIO, 45, of Hartsdale, New York, and CALDWELL, 61, of New York, New York, were also convicted of racketeering conspiracy; CALDWELL was convicted of attempted murder in aid of racketeering and discharging a firearm in furtherance of attempted murder in aid of racketeering arising out of his May 29, 2013, ambush of a member of the rival Bonanno Family in Manhattan; and LONDONIO was convicted of conspiracy to distribute narcotics.

*                      *                     *

Ms. Strauss praised the outstanding investigative work of the Federal Bureau of Investigation, the New York City Police Department, Homeland Security Investigations, the Waterfront Commission of New York Harbor, and the U.S. Bureau of Prisons.

The case is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Hagan Scotten, Celia V. Cohen, and Alexandra N. Rothman, were in charge of the trial and sentencings.

[1] Like MADONNA, LONDONIO, and CALDWELL, Crea is subject to a mandatory sentence of life in prison.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, today hailed the 30th anniversary of the passage of the Americans with Disabilities Act of 1990 (“ADA”), which was signed into law by President George H.W. Bush on July 26, 1990. The ADA is a transformative law that prohibits discrimination on the basis of disability in places of public accommodation, including all hotels, restaurants, retail stores, theaters, health care facilities, convention centers, parks, and places of recreation (Title III), in all activities of state and local governments (Title II), and in employment (Title I).  The ADA empowers the Department of Justice to investigate, litigate, and resolve complaints of discrimination as well as authorizing the Government to conduct compliance reviews of covered entities.

Acting U.S. Attorney Audrey Strauss said:  “Since the passage of the ADA, this Office has taken a leading role in bringing major New York City landmarks into compliance with the ADA to improve access for people with disabilities.  As we mark the 30th anniversary of this landmark civil rights law this weekend, and notwithstanding the limitations imposed by COVID, we continue to investigate and litigate significant ADA cases.”

Since the passage of the ADA in 1990, the U.S. Attorney’s Office has brought numerous New York City institutions into compliance with the ADA, through court-approved consent decrees and voluntary compliance agreements.  Through hundreds of ADA cases, the Office has required places of public accommodation to eliminate barriers to access, alter or amend policies or procedures, and agree to welcome service animals.  In addition, the Office has required state and local governments to make public services and facilities more accessible to people with disabilities and compelled state and local government employers who discriminated against people with disabilities to remedy their conduct and compensate victims.  Major accomplishments include:

• THE VESSEL:  On December 20, 2019, the Office entered into a voluntary compliance agreement with Related Companies, the developer of Hudson Yards, to increase the accessibility of New York City’s newest public landmark, the Vessel.  Because the Vessel is a multi-story, open air structure composed of a network of interconnected stairways, it is inaccessible to individuals with mobility impairments.  The settlement requires Related to install a one-of-a-kind platform lift, allowing individuals with disabilities, including those who use wheelchairs, to traverse the stairways and platforms at the top two levels of the Vessel, all on a single platform lift. 
   
• NYC SUBWAYS:  On March 6, 2019, the Office prevailed in a motion for partial summary judgment against the Metropolitan Transportation Authority and New York City Transit for their failure to install elevators during the renovation of the Middletown Road subway station in the Bronx.  In a landmark decision, the court ruled that the ADA required the MTA to install elevators during the renovation of the station, without regard to cost, unless it was technically infeasible to do so.
   
• NEW YORK STATE DIABETES GUIDANCE:  On May 30, 2017, the Office announced that it had resolved complaints filed by parents of children with diabetes that recently developed guidelines from the New York State Education Department (“NYSED”) interfered with their children’s diabetes treatment while in school, in violation of the ADA.  The guidelines prompted schools to reject certain types of orders issued by physicians treating children with diabetes because the orders authorized parents and guardians to be involved in the adjustment of their child’s diabetes medication administered by the school healthcare team.  NYSED agreed to amend the guidelines and provided a model form for physicians to use to authorize the involvement of parents and guardians in adjustment decisions where appropriate.
   
• NEDERLANDER THEATERS:  On January 29, 2014, the Office entered into a Consent Decree with the Nederlander Organization, Inc., which owns and operates nine landmarked Broadway theaters:  the Brooks Atkinson, the Gershwin, the Lunt Fontanne, the Marquis, the Minskoff, the Nederlander, the Neil Simon, the Palace, and the Richard Rodgers.  Under the Consent Decree, the Nederlander Organization agreed to make these theaters accessible to people with disabilities in compliance with the ADA by providing accessible seating, restrooms, and other facilities.
   
• NYC RESTAURANTS INITIATIVE:  In 2013, the Office announced that it had entered into two Consent Decrees with major New York City restaurants to improve compliance with the ADA, particularly with regard to entrances, seating, and restroom facilities.  The restaurants were Rosa Mexicano, on January 30, 2013, and Carmine’s, on November 12, 2013.  These resolutions were reached as part of the Office’s Restaurants Initiative, which investigated whether NYC’s top 50 Zagat-rated restaurants, some of which had more than one location, complied with the ADA.  As a result of the Restaurants Initiative, the Office entered into Consent Decrees with five restaurants, voluntary compliance agreements with 20 restaurants, and letters of resolution with 26 restaurants.
   
• LINCOLN CENTER:  On June 28, 2012, the Office announced a Consent Decree with Avery Fisher Hall, under which that theater agreed to install additional wheelchair and companion seating, renovate restrooms, and remove barriers to access, among other things, to make the venue more accessible to people with disabilities.  Similarly, on January 13, 2011, the Office announced a Consent Decree with the Metropolitan Opera, under which the Opera agreed to install additional wheelchair and companion seating, renovate restrooms, and remove barriers to access, among other things, to make the venue more accessible to people with disabilities.
   
• TIMES SQUARE HOTELS INITIATIVE:  On July 26, 2010, the Office marked the 20th anniversary of the ADA by announcing that as a result of a compliance initiative, it had entered into a number of voluntary compliance agreements with Times Square hotels to increase the accessibility of hotel rooms and common areas.  As a result of the Hotels Initiative, the Office entered into Consent Decrees with five hotels, and voluntary compliance agreements with 41 hotels.
   
• YANKEE STADIUM:  On April 14, 2009, the Office announced that it had completed its review of the new Yankee Stadium, resulting in an agreement with the Yankees to provide over 500 wheelchair spaces and 500 companion seats, accessible entrances, ticket windows, bars, lounges, restrooms, and other amenities.  The Office had joined a lawsuit against the old Yankee Stadium for being inaccessible to people with disabilities; a Consent Decree resolving that suit and bringing the Stadium into closer compliance with the ADA was entered in December 1999.         
             
• MADISON SQUARE GARDEN:  On November 5, 2007, the Office entered into a comprehensive Consent Decree with Madison Square Garden, under which the Garden agreed for the first time to provide seating for people with disabilities at a variety of seating areas in the Garden.  The Garden further agreed to pay a $55,000 penalty for operating out of compliance with the ADA.                
   
• APOLLO THEATER:  On June 28, 2005, the Office entered into a Consent Decree with the historic Apollo Theater, under which the theater, for the first time in its storied history, agreed to provide seating locations for wheelchair users and renovate its entrances, bathrooms, and other amenities so that they would be fully accessible to people with disabilities.               
   
• SHUBERT THEATERS:  On September 25, 2003, the Office entered into a Consent Decree with the Shubert Organization, Inc., which owns and operates 16 landmarked Broadway theaters:  the Ambassador, the Barrymore, the Belasco, the Booth, the Broadhurst, the Broadway, the Cort, the Golden, the Imperial, the Longacre, the Lyceum, the Music Box, the Plymouth, the Royale, the Shubert, and the Winter Garden.  Under the Consent Decree, the Shubert Organization agreed to make these theaters accessible to people with disabilities in compliance with the ADA by providing accessible seating, restrooms, and other facilities.
   
• RADIO CITY MUSIC HALL:  On February 11, 1999, the Office entered into a Consent Decree with Radio City Music Hall, requiring it to provide a wide range of accessibility improvements, including 50 wheelchair and companion seats, 240 assistive listening devices, and accessible restrooms, concession stands, and bathrooms.

 
For more information about the 30th Anniversary of the ADA, please visit www.ada.gov.

The Office’s Civil Rights Unit handles complaints of noncompliance with the ADA. Members of the public with a complaint relating to ADA compliance may use the following link to submit a complaint: https://www.justice.gov/usao-sdny/civil-rights

Audrey Strauss, Acting United States Attorney for the Southern District of New York, Special Inspector General John F. Sopko, of the Special Inspector General for Afghanistan Reconstruction (“SIGAR”), and Peter C. Fitzhugh, Special Agent-in-Charge of the New York Field Office of Homeland Security Investigations (“HSI”), announced today that NAIM ISMAIL, 60, a native of Afghanistan and a United States citizen, was arrested Wednesday evening in Los Angeles in connection with his participation in various investment schemes that defrauded victims of over $15 million.

The case has been assigned to U.S. District Judge Analisa Torres.  ISMAIL is expected to be presented today before United States Magistrate Judge Alicia G. Rosenberg of the Central District of California.

Acting Manhattan U.S. Attorney Audrey Strauss said:  “As alleged, Naim Ismail defrauded investors of more than $15 million through false promises about how investors’ money would be invested and what kind of return they could expect on their investment.  Now Ismail is in U.S. custody and facing serious federal charges.”

Special Inspector General John F. Sopko said:  “Afghanistan is a country struggling to create strong financial institutions and a viable economy after decades of war. The last thing it needs is to have one of its banks victimized in a Ponzi scheme. This scheme also targeted many U.S. victims.  I’m proud that SIGAR special agents and our partners at HSI, the FBI and the Southern District of New York are working hard to bring justice in this case.”

Special Agent-in-Charge Peter C. Fitzhugh said:  “As alleged in the indictment which was unsealed today, Ismail defrauded individual and corporate victims out of approximately $15 million dollars.  Investors were allegedly duped into investing large amounts of money for investment and real estate projects that did not exist.  Instead of investing the money and delivering returns, Ismail allegedly engaged in a Ponzi s scheme to fund his own lavish lifestyle.  The law enforcement partnerships under HSI New York’s El Dorado Task Force are integral in combatting complex financial frauds and it is with these continued partnerships that we are able to bring individuals like Ismail to justice, to hold him accountable for his criminal acts and seek restitution for the victims.”

According to the allegations in the Indictment unsealed today in Manhattan federal court,[1] and other publicly filed documents:

From February 2007 through July 2016, ISMAIL fraudulently induced individual and corporate victims – including the New York-based subsidiary of an Afghanistan-based bank – to loan large sums of money to entities operated by ISMAIL and others.  ISMAIL did so by claiming that these funds would be used in a particular investment strategy as well as several real estate development projects.  ISMAIL promised investors a generous fixed annual rate of return and promised to return the investors’ principal on a specified timeline.  In fact, ISMAIL and his companies did not invest these funds as promised, nor did ISMAIL repay many of his victims.  Instead, ISMAIL used investor funds to pay the so-called interest payments due to earlier investors in the scheme, as well as for his own personal expenses and investments. 

During the course of the fraudulent scheme, ISMAIL deprived the scheme’s victims of over $15 million. 

*                      *                     *

ISMAIL, 60, most recently of Los Angeles, California, is charged with one count each of bank fraud, wire fraud affecting a financial institution, and conspiracy to commit bank and wire fraud.  Each charge carries a maximum sentence of 30 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 SIGAR and HSI on this investigation.  She also thanked the Federal Bureau of Investigation for their assistance in the investigation.

This case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant U.S. Attorneys Kiersten A. Fletcher and Jonathan E. Rebold are in charge of the prosecution. 

[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, Acting United States Attorney for the Southern District of New York, announced that Joseph Guagliardo, a/k/a “Joseph Gagliardo,” a former New York City Police Department (“NYPD”) officer and former member of the supervisory committee (the “Supervisory Committee”) of Municipal Credit Union (“MCU”), a non-profit financial institution, was sentenced today in Manhattan federal court to 27 months in prison for abusing his leadership position at MCU to embezzle more than $400,000.  Guagliardo previously pled guilty to defrauding a federally insured credit union before U.S. District Judge Denise L. Cote, who imposed today’s sentence.

Acting U.S. Attorney Audrey Strauss said:  “For years, Joseph Guagliardo betrayed the trust of MCU’s members, who elected him to supervise and protect MCU, by abusing his position to steal hundreds of thousands of dollars.  Guagliardo did so with the complicity of the now imprisoned former CEO of the credit union, whom he provided with a steady stream of painkillers.  Guagliardo will now serve a substantial prison sentence for his crime.”

According to the allegations contained in the Complaint, the Information, other filings in Manhattan federal court, statements made in court, and publicly available documents:           

MCU is a non-profit financial institution headquartered in New York, New York, which is federally insured by the National Credit Union Administration (“NCUA”).  MCU is the oldest credit union in New York State and one of the oldest and largest in the country, providing banking services to more than 500,000 members, and with more than $2.9 billion in member accounts, each of which is federally insured for at least $250,000 by the National Credit Union Share Insurance Fund, which is administered by the NCUA.  Membership in MCU is generally available to employees of New York City and its agencies, employees of the federal and New York State governments who work in New York City, and employees of hospitals, nursing homes, and similar facilities located within New York State.

GUAGLIARDO is a former officer with the NYPD and a former Supervisory Committee member of MCU, a volunteer position.  In or about 1993, GUAGLIARDO joined the Supervisory Committee, and remained in that position until he was removed from that position by the New York State Department of Financial Services on or about May 24, 2018, except for a brief period of time when he served as a member of MCU’s Board of Directors in or about 2008. 

Under New York banking law, the Supervisory Committee’s duties included supervision of the actions of MCU’s Board of Directors and officers.  MCU’s written conflict of interest policy, which was regularly distributed to Board members, Supervisory Committee members, and others, provided, among other things, that members of MCU’s “Board of Directors and Supervisory Committee may not do business with the Credit Union, either individually or as representative of any business entity.”

From 2009 through May 2018, in violation of MCU policy and his fiduciary duty as a member of the Supervisory Committee, GUAGLIARDO engaged in a scheme to obtain money from MCU to which he knew he was not entitled, and took steps to conceal his efforts.  Among other things, GUAGLIARDO caused MCU to direct more than $250,000 to a security company created and controlled by GUAGLIARDO, but operated in another’s name, and then directed that money from that company be paid to him and to his family members.  GUAGLIARDO also over-billed MCU more than $200,000 for purported web advertising services provided by a non-profit organization that GUAGLIARDO also controlled.

In addition, during substantially the same period in which GUAGLIARDO was committing these offenses, GUAGLIARDO unlawfully distributed controlled substances to the former chief executive officer of MCU, Kam Wong, in the form of prescription drugs, some of which were obtained from GUAGLIARDO’s spouse, who worked as a doctor affiliated with a public hospital, and some of which were obtained from a different doctor affiliated with the NYPD.

*                *                *

In addition to his prison term, GUAGLIARDO, 63, of Brooklyn, New York, was sentenced to two years of supervised release, and was ordered to forfeit $425,514, and to pay $468,189 in restitution to MCU and a fine of $10,000. 

Ms. Strauss praised the outstanding work of the Special Agents of the United States Attorney’s Office.  Ms. Strauss also thanked the New York County District Attorney’s Office, the New York State Department of Financial Services, and the New York City Police Department Internal Affairs Bureau for their assistance.  She noted that the investigation is ongoing.

The case is being prosecuted by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys Eli J. Mark and Daniel C. Richenthal are in charge of the prosecution, with assistance of Special Assistant U.S. Attorney Alona Katz from the New York County District Attorney’s Office.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, Raymond Donovan, the Special Agent-in-Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), Leigh-Alistair Barzey, Special Agent in Charge of the Northeast Field Office of the U.S. Department of Defense - Office of Inspector General’s Defense Criminal Investigative Service (“DCIS”), and Dermot Shea, Commissioner of the New York City Police Department (“NYPD”), announced that DMITRY DONSKY, a doctor who practiced in New York, pled guilty today to an Information charging him with conspiring to illegally distribute large quantities of oxycodone from a medical clinic in Brooklyn, New York.  DONSKY pled guilty before U.S. District Judge Paul A. Crotty in Manhattan federal court. 

Acting U.S. Attorney Audrey Strauss said:  “As he admitted in court today, Dmitry Donsky violated the oath of his profession and broke the law by peddling more than half a million oxycodone pills to ‘patients’ he knew had no medical need for them.  Now he awaits sentencing for his crime.”

DEA Special Agent-in-Charge Raymond Donovan said:  “Dr. Donsky’s plea is evidence that he knows the difference between right and wrong. As a trusted medical professional he betrayed his patients, their loved ones, and his community. I commend our law enforcement partners, and the Southern District of New York, for their diligent efforts identifying, investigating, and prosecuting this case.”

DCIS Special Agent in Charge Leigh-Alistair Barzey said:  “The risks created by the improper prescription of oxycodone are well documented and tragically real.  Today’s guilty plea is the result of a joint effort and demonstrates the DCIS’s ongoing commitment to work with the U.S. Attorney’s Office, the DEA, and other law enforcement partners, to protect U.S. military members and their dependents from the dangers posed by medical professionals who illegally prescribe oxycodone.”

NYPD Commissioner Dermot Shea said:  “Our work here stopped a doctor who betrayed his oath to victimize vulnerable New Yorkers.  The case highlights the NYPD’s continuing fight, with our law enforcement partners, against this ongoing epidemic.”

According to the allegations contained in the Information and statements made during today’s plea proceeding:

DONSKY, a licensed physician, practiced at a medical clinic in Brooklyn.  From 2014 to 2019, despite specializing in internal medicine and pediatrics, DONSKY illicitly prescribed over 500,000 oxycodone 30-milligram pills to individuals he knew had no legitimate medical need for the pills.  DONSKY often performed little or no physical examination on purported patients receiving the illicit oxycodone prescriptions.  Patients received as many as 360 oxycodone 30-milligram pills each month, and several patients even received duplicate monthly prescriptions of oxycodone from DONSKY.

*                      *                      *           

DONSKY, 60, of Marlboro, New Jersey, pled guilty to one count of narcotics distribution conspiracy, 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 sentence for the defendant will be determined by the judge.

DONSKY is scheduled to be sentenced by Judge Crotty on October 22, 2020.

Ms. Strauss praised the outstanding investigative work of DCIS and of the DEA’s New York Tactical Diversion Squad, which comprises agents and officers from the DEA, the NYPD, the New York State Police, New York State Department of Financial Services, New York National Guard, New York City Department of Investigation, and New York State Department of Health Bureau of Narcotics Enforcement.  Ms. Strauss also thanked the U.S. Department of Health and Human Services - Office of Inspector General for its assistance.

This case is being handled by the Office’s Narcotics Unit.  Assistant United States Attorney Juliana N. Murray is in charge of the prosecution.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, Scott J. Lampert, Special Agent in Charge of the New York Regional Office of the U.S. Department of Health, Office of Inspector General (“HHS OIG”), Leigh-Alistair Barzey, Special Agent in Charge of the Northeast Field Office of the U.S. Department of Defense - Office of Inspector General’s Defense Criminal Investigative Service (“DCIS”), and Christopher Algieri, Special Agent in Charge of the Department of Veterans Affairs (“VA”), Office of Inspector General, Northeast Field Office (“VA OIG”), announced today a $49 million settlement with PROGENITY, INC. (“PROGENITY”), a San Diego-based biotechnology company that provides molecular and diagnostic tests.  The settlement resolves claims that PROGENITY fraudulently billed federal healthcare programs for prenatal tests and provided kickbacks to physicians to induce to them to order PROGENITY tests for their patients.  The Office’s lawsuit filed in Manhattan federal court alleges that PROGENITY overbilled Medicaid and the VA by fraudulently using a billing code that misrepresented the tests provided.  The lawsuit further alleges that PROGENITY provided illegal kickbacks in the form of excessive “draw fees” to physicians, meals and happy hours for physicians and their staff, and the improper reduction or waiver of patient coinsurance and deductible payments.   

Under the settlement approved today by U.S. District Judge Loretta A. Preska, PROGENITY will pay $19,449,316 to the United States to resolve the kickback claims and the Medicaid and VA fraudulent billing claims, and also makes extensive admissions regarding the company’s conduct.  PROGENITY will also pay $13,150,684 to various states to resolve these claims.  In addition, PROGENITY will pay $16.4 million to resolve similar fraudulent billing claims related to TRICARE and the Federal Employees Health Benefits Program through a separate civil settlement with the United States Attorney’s Office for the Southern District of California (“USAO SDCA”), and has entered into a Non-Prosecution Agreement with that office.  

Acting U.S. Attorney Audrey Strauss said:  “Progenity received millions of dollars from federal healthcare programs through its fraudulent billing and kickback schemes.  The company misrepresented the tests it performed, and tried to get doctors to order Progenity tests by paying them excessive fees and providing meals and happy hours for them and their staff.  Our Office will continue to hold healthcare providers accountable when they engage in fraud and other illegal conduct.” 

HHS-OIG Special Agent in Charge Scott J. Lampert said:  “Kickbacks and fraudulent billing schemes undermine the integrity of our healthcare system, compromise patient care, and increase the financial burden on taxpayers.  Along with our law enforcement partners, HHS-OIG will continue to ensure that those billing federal health insurance programs do so in an honest manner.” 

DCIS Special Agent in Charge Leigh-Alistair Barzey said:  “Ensuring the integrity of TRICARE, the U.S. Defense Department's healthcare system for military members and their families, is top priority for the DCIS.  This settlement agreement is the result of a joint effort and demonstrates the DCIS’s commitment to work with the USAO-SDNY and its law enforcement partners to investigate and prosecute kickbacks and other fraudulent schemes that impact TRICARE.”

VA-OIG Special Agent in Charge Christopher Algieri said:  “VA OIG will vigorously pursue those who engage in unjust kickback and billing schemes, which generate profits at the expense of veterans and taxpayers.  We appreciate the United States Attorney’s Office and our agency partners for this collaborative effort.”

As alleged in the Complaint filed in Manhattan federal court:

Fraudulent Billing

When submitting claims for payment, healthcare providers use Current Procedural Terminology (“CPT”) codes to identify the nature of the medical procedure or services rendered.   Government healthcare payors rely on the CPT code to determine whether the procedure or service is covered, as well as the level of reimbursement.  From March 2014 through April 2016, PROGENITY fraudulently used CPT code 88271 to seek reimbursement for noninvasive prenatal tests (“NIPTs”) that screen for genetic disorders and abnormalities when this code misrepresented the services PROGENITY actually provided.  As a result, PROGENITY received payments for non-reimbursable tests, or received substantially higher payments than it was entitled to receive.  PROGENITY knew that many patients did not meet the medical necessity criteria for NIPTs, and that it could circumvent those requirements by billing under the incorrect billing code. 

Kickbacks

PROGENITY induced physicians to order PROGENITY tests by engaging in three kickback schemes.  First, from January 2012 through March 2016, PROGENITY paid “draw fees” to physicians or physician offices for blood specimens collected for PROGENITY tests.  These fees exceeded the fair market value of the services performed.  The total draw fees paid to physicians depended on the volume of blood specimens collected, so physicians would receive more money if they ordered more PROGENITY tests.

Second, from 2012 through 2018, PROGENITY sales representatives provided food and alcohol to physicians and their staff at gatherings, including happy hours and birthday or holiday parties, that often involved little or no educational content.  For the vast majority of the relevant period, PROGENITY did not limit or even monitor the total amount its sales representatives spent on a physician.  One former sales representative spent $65,658 on meals and alcohol for physicians during a single year.

Third, from January 2012 through April 2018, to market its expensive tests, PROGENITY routinely reduced or waived coinsurance and deductible payments without making the required individualized determination of financial need or reasonable collection efforts.  Sales representatives informed physicians and their staff, as well as patients, that PROGENITY would waive coinsurance and deductibles, or limit the patient’s payment to a certain maximum out-of-pocket amount.  And PROGENITY had agreements with several physicians that it would not collect any payments from their patients.

As part of the settlement approved today by Judge Preska, PROGENITY admits, acknowledges, and accepts responsibility for the following conduct: 

Miscoding:

• From March 2014 through April 2016, PROGENITY knowingly submitted false claims for payment to Medicaid and the VA by using CPT code 88271 to obtain reimbursement for NIPTs.
   
• PROGENITY improperly used CPT code 88271, which applies to fluorescence in situ hybridization (“FISH”) procedures, knowing that its genetic tests were cell-free DNA sequencing-based NIPTs that are not FISH procedures and that CPT code 88271 did not accurately represent the tests performed. 
   
• As a result of fraudulently using CPT code 88721 and misrepresenting the type of test performed when submitting claims for payment to Medicaid and the VA for NIPTs, PROGENITY received payments for non-reimbursable tests, or received substantially higher payments than it was entitled to receive for the genetic testing services provided.  

            Kickbacks:

• From January 2012 through March 2016, PROGENITY knowingly made “draw fee” payments to physicians or physicians’ offices for the collection of blood specimens for PROGENITY tests performed on federal healthcare program beneficiaries.  In total, PROGENITY paid over $1.7 million in draw fees during this period. 
   
• The draw fees paid by PROGENITY exceeded the fair market value of the services performed when collecting blood specimens.  PROGENITY frequently paid physicians $20 or more for each blood draw.  PROGENITY paid dozens of physicians and physician offices thousands of dollars in above fair market draw fee payments during the relevant time period.

• From 2012 through 2018, PROGENITY knowingly provided meals and happy hours to physicians who ordered PROGENITY tests for federal healthcare program beneficiaries, as well to individuals who worked in physicians’ offices.  The value of these meals and happy hours exceeded Stark Law limits.  In total, PROGENITY expended millions of dollars on food and drinks for physicians and their staff during this period.

• During the vast majority of the relevant period, PROGENITY did not have effective systems in place to ensure that the company’s expenses for meals and happy hours for physicians and their employees complied with the Stark Law and the Anti-Kickback Statute.  For example, PROGENITY did not (i) reliably track the amount it spent on meals and happy hours for physicians or their staff, (ii) maintain accurate sign-in sheets reflecting attendance at PROGENITY-sponsored gatherings, (iii) keep records of materials or topics that were discussed during PROGENITY-sponsored gatherings, and (iv) implement and enforce limits on the total nonmonetary compensation that could be provided to physicians.

• From January 2012 through April 2018, PROGENITY knowingly routinely reduced or waived federal healthcare program beneficiaries’ coinsurance and deductible payments without making the required individualized determinations of financial need or reasonable collection efforts.  PROGENITY offered to reduce or waive coinsurance and deductible payments as part of its sales efforts. 
   

In connection with the filing of the lawsuit and settlement, the Government joined a private whistleblower lawsuit that had previously been filed under seal pursuant to the False Claims Act, which alleged that PROGENITY engaged in illegal kickback schemes.  PROGENITY has also entered into a Corporate Integrity Agreement (“CIA”) with HHS-OIG.  The CIA promotes compliance with the statutes, regulations, program requirements, and written directives of federal healthcare programs.  Among other things, the CIA requires that for the next five years PROGENITY must retain an Independent Review Organization to annually review the accuracy of the company’s claims for services furnished to federal healthcare program beneficiaries and monitor its arrangements with other individuals and entities.

Ms. Strauss thanked HHS-OIG, VA-OIG, DCIS, USAO SDCA, and the Medicaid Fraud Control Unit of the New York State Attorney General’s Office for their assistance with the case. 

The case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorneys Jeffrey K. Powell and Kirti Vaidya Reddy are in charge of the case.

Audrey Strauss, Acting United States Attorney for the Southern District of New York, announced that JOHN ULRICH, the former vice president of International Brotherhood of Teamsters Local 812 (the “Union”) and former trustee of the Union’s employee health benefit plan (the “Plan”), was sentenced today in Manhattan federal court to 18 months in prison for soliciting tens of thousands of dollars in bribe payments from an executive with the Plan’s Third Party Administrator (the “TPA-1”) in exchange for using his influence to ensure the Union’s continued retention of TPA-1 as its Plan administrator.  United States District Judge Analisa Torres imposed today’s sentence.

Acting U.S. Attorney Audrey Strauss said:  “For years, John Ulrich betrayed the trust of the Union members who elected him in order to line his pockets with bribe money.  For abusing his position of trust for his own financial benefit, Ulrich has been sentenced to federal prison.”

According to the allegations in the Indictment, other filings in Manhattan federal court, statements made in court and publicly-available documents:

The Union has more than approximately 3,000 members, and represents workers in the beverage industry throughout the New York metropolitan area.  The Union’s members are covered by the Plan, which provides, among other things, life insurance, health insurance, dental, vision, and disability benefits to Union members and their families.  As the Plan’s third-party administrator, TPA-1 processed health insurance claims for participants in the Plan.  At all times relevant to the Indictment, ULRICH was a member and officer of the Union and a trustee of the Plan.

In or about 2013, ULRICH was experiencing financial difficulties, and solicited bribe payments from an executive with TPA-1 (“Executive-1”) of $5,000 per quarter in exchange for using his influence to maintain TPA-1 as the Plan’s third-party administrator.  Before ULRICH solicited these bribes, the Plan had issued a request for proposals for a new third-party administrator, and TPA-1 was at risk of losing the Plan’s business.  ULRICH told Executive-1 that ULRICH would use his influence with the Union to ensure that the Plan continued to use TPA-1 to administer the Union’s health care plan.  Executive-1 agreed to make $5,000 quarterly payments to ULRICH, and began doing so.  Subsequently, despite receiving multiple bids from other third-party administrators, the Plan continued to work with TPA-1.   

In or about 2014, ULRICH demanded increased bribe payments from Executive-1.  In part, ULRICH told Executive-1 that these increased bribe payments were needed for another trustee of the Plan, and Executive-1 began making such increased payments.  On or about September 19, 2015, ULRICH again solicited additional bribe payments for this trustee.  In an email of the same date, ULRICH referred to the bribe payments as “pizza,” and explained that the additional payments for the other trustee would be “good insurance” for them.

After a special board meeting convened by the Plan in February 2016, ULRICH was terminated as vice president and trustee of the Union and Plan, respectively.  In total, ULRICH demanded, and Executive-1 paid, tens of thousands in bribes before ULRICH was removed from office.

*                *                *

In addition to his prison term, ULRICH, 50, of Newburgh, New York, was sentenced to two years of supervised release, and was ordered to forfeit $55,000, and to pay restitution in an amount to be determined later.  As a result of ULRICH’s conviction, for a period of 13 years he is prohibited from, among other things, being employed by a labor union or employee benefit plan, pursuant to 29 U.S.C. §§ 504 and 1111.

Ms. Strauss praised the Federal Bureau of Investigation, the U.S. Department of Labor Office of Inspector General, the U.S. Department of Labor Employee Benefits Security Administration, and the U.S. Department of Labor Office of Labor-Management Standards for their outstanding investigative work in this case.

This matter is being handled by the Office’s Public Corruption Unit.  Assistant United States Attorneys Eli J. Mark and Louis A. Pellegrino are in charge of the prosecution.

       “Twice convicted by unanimous juries for abusing his powerful state office to enrich himself, Sheldon Silver will now finally report to prison to begin serving a sentence that can begin to repair the harm his conduct caused to the people of this District and to their trust in local government.  I commend the career prosecutors and agents who have seen this case through two trials and two appeals, ensuring that Silver’s crimes did not go unpunished and proving once again that this Office and our law enforcement partners will never stop pursuing corruption, without fear or favor, at all levels of government.”

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and Philip R. Bartlett, Inspector in Charge of the New York Field Office of the United States Postal Inspection Service (“USPIS”), announced the arrests of ANTHONY RICCARDI, PATRICIA RICCARDI, ERIN VERESPY, and VANESSA BATTLE, former managers and employees of Employee Benefit Solutions LLC (“EBS”), for defrauding clients by misappropriating over $17 million in client funds intended for employee healthcare claims.  ANTHONY RICCARDI, PATRICIA RICCARDI, and ERIN VERESPY appeared before Chief U.S. Magistrate Judge Paul E. Davison in White Plains federal court last week, and VANESSA BATTLE appeared before Judge Davison this morning.

Acting U.S. Attorney Audrey Strauss said:  “As alleged in the criminal complaint, the defendants abused their positions as administrators of client healthcare plans for years by creating false and inflated invoices and then misappropriating millions of dollars for their own uses.  As further alleged, the defendants sought to conceal this fraud by creating false bank statements and checks.  Our Office will continue to work with our law enforcement partners to expose and prosecute egregious fraud schemes.”

Inspector in Charge Philip R. Bartlett said:  “The magnitude and the level of the alleged dishonesty by these individuals is truly unfathomable.  The defendants allegedly enriched themselves with money transferred to EBS intended for the payment of medical expenses.  Once Postal Inspectors caught this case they swiftly uncovered the theft scheme and brought those allegedly responsible to justice for their criminal behavior.”           

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

ANTHONY RICCARDI, PATRICIA RICCARDI, ERIN VERESPY, and VANESSA BATTLE are managers and employees of EBS, a company based in Wilton, Connecticut, that offered a variety of healthcare insurance-related services to clients.  EBS, among other things, provided third party healthcare claims administration (“TPA”) services to clients that elected to “self-fund” (or self-insure) their employee healthcare plans.  As a TPA, EBS would purportedly administer, process, and pay healthcare claims for its clients’ employees in exchange for an administrative fee.

Between at least 2015 and continuing through 2019, EBS represented an automobile dealership chain (“Company-1”) headquartered in Westchester County, New York.  During this time period, EBS served as a TPA for Company-1’s self-funded employee healthcare program and purported to process and pay claims to medical providers that treated Company-1’s employees.  To do this, EBS generated bimonthly “check register” invoices for Company-1 that listed all employee healthcare expenses from healthcare providers during that two-week period.  EBS also administered a bank account on Company-1’s behalf for the express purpose of paying Company-1 healthcare claims.  Company-1 would fund each check register by paying the invoiced amount, expecting that EBS would promptly pay the claims to the healthcare providers.  During this time period, Company-1 transferred approximately $26 million to EBS for the payment of healthcare claims.

In reality, a significant amount of purported checks listed on the EBS “check register” invoices were never actually deposited by the healthcare providers.  Instead, approximately $17.87 million in Company-1 healthcare payments were misappropriated, with the overwhelming majority simply transferred by EBS into its own operating account, where they were used for non-healthcare expenses by the defendants.  For example, a review of bank records indicates that Company-1 healthcare funds were used by ANTHONY RICCARDI and PATRICIA RICCARDI to pay their home mortgage expenses, as well as a personal credit card account with expenses relating to boating and golf.

EBS, through the defendants, made decisions of what few Company-1 healthcare claims they did pay based on which healthcare providers were likely to complain if they did not receive payment, or if the claims were connected to Company-1 executives.  PATRICIA RICCARDI and VERESPY, for example, discussed the timing of payments for Company-1 “VIPs” as well as a “Not VIP” claim that was nonetheless the subject of complaining phone calls.

The “check registers” sent to Company-1 also contained millions of dollars in fraudulent or inflated healthcare claims that were eventually paid by Company-1.  Such efforts were directed by ANTHONY RICCARDI and assisted by BATTLE, who among other things, manually entered a majority of claims relating to a specific pharmacy network that were billed to Company-1, despite approximately $3 million of those claims being fictitious.  Furthermore, on at least one occasion, BATTLE sent an auditor for Company-1’s insurance underwriter a series of pharmacy network claims that were billed to Company-1 despite being significantly inflated from the pharmacy network’s records.

The defendants also took steps to conceal their fraud from Company-1 by creating and sending manipulated and fabricated bank statements and checks to create the appearance that healthcare claims were being paid by EBS, when in reality they were not.  In approximately January 2019, for example, ANTHONY RICCARDI sent multiple bank statements to Company-1 that purported to show healthcare claims being paid out from the account EBS created on Company-1’s behalf.  Such bank statements were significantly altered from the actual bank statements and hid, for example, the millions of dollars that EBS transferred from the Company-1 account into the EBS operating account.  BATTLE sent similar copies of the altered bank statements to an auditor for Company-1’s insurance underwriter.  VERESPY and ANTHONY RICCARDI also exchanged emails showing the creation of altered bank statements on behalf of another client in or about 2018.  Furthermore, on at least one occasion, ANTHONY RICCARDI sent Company-1 an image of an altered check to create the appearance that EBS was handling a delayed healthcare payment.  In so doing, ANTHONY RICCARDI also emailed PATRICIA RICCARDI and BATTLE to ask whether they needed to “make more . . . checks.”

ANTHONY RICCARDI, 42, PATRICIA RICCARDI, 53, and VANESSA BATTLE, 65, each of New Canaan, Connecticut, and ERIN VERESPY, 49, of Trumbull, Connecticut, are each charged with one count of conspiracy to commit wire fraud and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison. 

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 investigative work of the U.S. Postal Inspection Service and the Special Agents of the United States Attorney’s Office.  Ms. Strauss also thanked the U.S. Department of Labor, Employee Benefits Security Administration; U.S. Department of Labor, Office of Inspector General; and the United States Secret Service, which are assisting in the investigation, as well as the U.S. Attorney’s Office for the District of Connecticut.

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 Complaint are merely accusations and the defendants are presumed innocent unless and until proven guilty.

[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.

Ilan T. Graff, Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced that SOHRAB SHARMA, a/k/a “Sam Sharma,” pled guilty today before U.S. Magistrate Judge Robert W. Lehrburger to conspiring to commit securities fraud, wire fraud, and mail fraud in connection with a scheme to induce victims to invest more than $25 million dollars’ worth of digital funds in Centra Tech, Inc. (“Centra Tech”), a Miami-based company he co-founded and which purported to offer cryptocurrency-related financial products.  SHARMA, a leader of the scheme, and his co-conspirators used material misrepresentations and omissions to solicit investors to purchase securities, in the form of digital tokens issued by Centra Tech, through, among other means, an initial coin offering (“ICO”) beginning in approximately July 2017.  In connection with his plea agreement, SHARMA has also agreed to forfeit 100,000 Ether units, consisting of digital funds raised from victims who purchased digital tokens issued by Centra Tech based on fraudulent misrepresentations and omissions.

Mr. Graff said:  “As he has now admitted, Sharma and his co-conspirators lured victims into investing digital currencies worth millions of dollars based on false claims about their company and its purported products.  Sharma and his co-conspirators concocted a fake CEO, fake partnerships, and fake licenses.  Fraud is fraud, whether it occurs in digital securities markets or over traditional exchanges, and Sharma now faces a federal sentence for his role in this fraudulent scheme.”

According to the Superseding Information, and other filings and statements at public court proceedings in the case:

In or about July 2017, SHARMA, along with co-defendants Raymond Trapani and Robert Farkas, founded a company called Centra Tech that claimed to offer cryptocurrency-related financial products, including a purported debit card, the “Centra Card,” that supposedly allowed users to make purchases using cryptocurrency at establishments accepting Visa or Mastercard payment cards.  From approximately July 2017 through October 2017, SHARMA and his co-defendants solicited investors to purchase unregistered securities, in the form of digital tokens issued by Centra Tech (“Centra tokens” or “CTR tokens”), through, among other means, a so-called “initial coin offering” or “ICO.”  As part of their fundraising efforts, SHARMA and his co-defendants in oral and written offering materials that were disseminated via the internet, represented: (a) that Centra Tech had an experienced executive team with impressive credentials, including a purported CEO named “Michael Edwards” with more than 20 years of banking industry experience and a master’s degree in business administration from Harvard University, (b) that Centra Tech had formed partnerships with Bancorp, Visa, and Mastercard to issue Centra Cards licensed by Visa or Mastercard, and (c) that Centra Tech had money transmitter and other licenses in 38 states, among other claims.  Based in part on these claims, victims provided millions of dollars’ worth of digital funds in investments for the purchase of Centra Tech tokens.  In or about October 2017, at the end of Centra Tech’s fundraising efforts, those digital funds raised from victims were worth more than $25 million.  At certain times in 2018, as the defendants’ fraud scheme was ongoing, those funds were worth more than $60 million.

The claims that SHARMA and his co-conspirators made to help secure these investments, however, were false.  In fact, the purported CEO “Michael Edwards” and another supposed member of Centra Tech’s executive team were fictional people who were fabricated to dupe investors, Centra Tech had no such partnerships with Bancorp, Visa, or Mastercard, and Centra Tech did not have such licenses in a number of those states.

SHARMA and his co-defendants were well aware of the falsity of such claims.  For example, with respect to Centra Tech’s purported CEO “Michael Edwards,” SHARMA text messaged Trapani and Farkas on or about July 29, 2017, that they “Need to find someone who looks like Michael,” “Team photos,” “He’s real lol,” “Everyone real,” “Except Jessica,” “And Mike.”  Similarly, SHARMA later wrote during that same exchange:  “Gonna kill both Ceo and her,” “Gonna say they were married and got into an accident.” 

With respect to Centra Tech’s purported partnerships with Bancorp, Visa, and Mastercard, SHARMA engaged in a cellphone text message conversation with Trapani and Farkas on or about July 31, 2017, in which they discussed Centra Tech’s lack of actual partnerships with banks or credit card companies.  Similarly, on or about September 29, 2017 –  the date on which the United States Securities and Exchange Commission (the “SEC”) announced that it filed a civil complaint charging a company, among others, with defrauding investors in an unregistered offering of securities styled as an initial coin offering – SHARMA asked via a group text message conversation with Trapani and Farkas that they remove certain materials from Centra Tech’s website that contained “fufu,” or fake information, about Centra Tech’s purported relationship with Visa because, according to SHARMA, “I rather cut any fufu,” “Off right own,” “Now,” “Then worry,” “Anything that doesn’t exist current,” “We need to remove.”  Later that day, SHARMA text messaged Trapani and Farkas:  “I want a product page like [another company],” “Theirs is so nice.”  Trapani wrote “Lol yeah no real product,” to which SHARMA responded “Yea but it doesn’t say much,” “And looks good,” “We don’t have a real product either right now,” “So I wanna tighten up ship asap.”

With respect to Centra Tech’s purported money transmitter and other licenses in 38 states, SHARMA had a text message conversation with Trapani and Farkas on or about August 30, 2017, about applying for state licenses that Centra Tech had previously represented it already held in 38 states.  For example, SHARMA wrote in one message on or about August 30, 2017, to Trapani and Farkas:  “Gotta apply for all licenses,” “Should I even say this.”

On or about May 2018 and October 2018, this Office and the Federal Bureau of Investigation (“FBI”) seized, pursuant to judicially authorized seizure warrants, 100,000 Ether units, consisting of digital funds raised from victims who purchased digital tokens issued by Centra Tech based on fraudulent misrepresentations and omissions. 

*                *                *

SHARMA, 29, pled guilty to one count of conspiracy to commit securities fraud, one count of conspiracy to commit wire fraud, and one count of conspiracy to commit mail fraud, each of 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 defendant will be determined by the judge.  SHARMA will be sentenced by U.S. District Judge Lorna G. Schofield on a date to be determined.

Mr. Graff praised the work of the FBI, and thanked the SEC for its assistance.

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

Audrey Strauss, the Acting 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 filing of an Information charging DAVID HU, a managing partner and the chief investment officer of the New York-based investment advisory firm International Investment Group (“IIG”), with investment adviser fraud, securities fraud, and wire fraud offenses.  As alleged, over a period of more than 10 years, HU perpetrated an over $100 million scheme to defraud investors in IIG’s funds, including by creating fictitious investments and overvaluing investments used to generate funds to pay off earlier investors in a Ponzi-like manner.  HU was arrested today and was presented and arraigned before Magistrate Judge Robert W. Lehrburger.  The case has been assigned to U.S. District Judge Alvin K. Hellerstein.   

Acting Manhattan U.S. Attorney Audrey Strauss said:  “As alleged, David Hu directed a multimillion-dollar, years-long scheme to defraud investors.  Putting profit ahead of his fiduciary duties, Hu allegedly mismarked millions of dollars of loan assets to cover up millions in losses. Hu also created fake entities and loans, and falsified paperwork to deceive auditors and avoid detection.  Now David Hu stands charged with federal crimes and faces time in federal prison.”

FBI Assistant Director William F. Sweeney Jr. said:  “As alleged, for nearly a decade, David Hu misled investors about the value of their investments, including the creation and sale of fictitious fund portfolios to raise capital to prop up his schemes.  His alleged actions serve as an example of the lengths some will go to in these all-too-common fraud cases.  The FBI is committed to investigating those who prey upon trusting individuals for their own personal gain.”

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

As alleged in the Information and based on statements made in Manhattan federal court in this case:[1]

            Background of IIG 

HU and a co-conspirator (“CC-1”) founded IIG in 1994.  HU was a managing partner and the chief investment officer of IIG.  IIG, an SEC-registered investment adviser, provided investment management and advisory services, including for three private funds that it operated: (1) the IIG Trade Opportunities Fund N.V. (“TOF”), (2) the IIG Global Trade Finance Fund, Ltd. (“GTFF”), and (3) the IIG Structured Trade Finance Fund, Ltd. (“STFF”).  IIG also advised the Venezuela Recovery Fund (“VRF”), a fund that managed the remaining assets of a failed Venezuelan bank (VRF, together with TOF, GTFF, and STFF, the “IIG Funds”).  In March 2018, IIG reported to the SEC that it had approximately $373 million in assets under management.

IIG advertised itself as specializing in global trade financing, particularly in providing trade finance loans to small and medium-sized businesses.  IIG’s principal investment advisory strategy, including with respect to the IIG Funds, was investing in trade finance loans that it also originated.  Trade finance loans are used by small and medium-sized companies, typically exporters and importers, to facilitate international trade.  IIG’s purported expertise was in trade finance loans to borrowers located in Central or South America, and in a variety of industries, with a stated focus on “soft commodities,” such as coffee, agriculture, fishing, and other food products.  IIG’s trade finance loans were purportedly secured by collateral, such as the underlying traded goods, assets held by the borrowers, or expected payments by third parties.

Investments in TOF, STFF, and GTFF were marketed by IIG to institutional investors, such as pension funds, hedge funds, and insurers.  In offering memoranda and communications with investors, IIG advertised strict risk controls, such as promises to use diligence to carefully select borrowers or issuers with trusted management and marketable assets, and portfolio concentration limits based on borrower, developing country, and industry.

IIG purported to value the trade finance loans in the IIG Funds on a regular basis.  IIG and, in turn, HU, received a performance fee with respect to the IIG Funds, as well as a management fee, which was calculated as a percentage of the assets under management held in the Funds.

The Scheme

From approximately 2007 to 2019, HU conspired to defraud investors in IIG-managed funds by: (i) overvaluing distressed loans held by the IIG Funds, (ii) falsifying paperwork to create a series of fake loans that were classified, fraudulently, as positively performing loans, and to otherwise hide losses, (iii) selling overvalued and fake loans to a collateralized loan obligation trust and new private funds established and advised by IIG, and (iv) using the proceeds from those fraudulent sales to generate liquidity required to pay off earlier investors in a Ponzi-like manner.

The scheme HU participated in involved, among other things:

• Mismarking Defaulted Loans.  HU and CC-1 caused IIG to mismark the value of multiple loans that had, in reality, defaulted (the “Defaulted Loans”).  Instead of acknowledging the defaulted status of these loans, HU and CC-1 instead caused IIG to mark the Defaulted Loans at par plus accrued interest, even though HU and CC-1 knew that the borrowers’ default significantly impaired the true value of these loans.  HU and CC-1 certified these false valuations and caused them to be reported to investors.
   
• Mismarking Distressed Loans.  HU and CC-1 caused IIG to mismark multiple loans that were distressed (the “Distressed Loans”).  These Distressed Loans included, for example, loans for which the borrowers had missed multiple scheduled payments.  Even though HU and CC-1 knew that the non-performing status of the loans significantly impaired their true value, they nevertheless caused IIG to continue to mark the loans at par plus accrued interest.
   
• Creating Fictitious Loans.  With respect to TOF, in order to hide the losses resulting from the Defaulted Loans, including from auditors reviewing TOF’s financials, HU and CC-1 removed the Defaulted Loans from the TOF portfolio, replacing them with tens of millions of dollars in fictitious loans to purported borrowers in foreign countries (the “Fake Loans”).  HU and CC-1 also created or directed the creation of documents to keep in IIG’s files as purported documentation of the Fake Loans.  To pass auditor scrutiny, HU and CC-1 also directed purported borrowers – sham foreign entities that were controlled by IIG’s business associates and that did not engage in actual business – to provide confirmations of the Fake Loans to auditors, including by arranging for TOF to pay a monthly fee to one purported borrower in exchange for providing false confirmations.  In reality, these purported borrowers did not receive a loan from TOF, and were not expected to make any payments to TOF.
   
• Using a CLO Trust to Create Liquidity through Investments in Fraudulent Loans.  In or about 2014, HU and CC-1 obtained approximately $220 million in bank financing to create a collateralized loan obligation trust (the “CLO Trust”), for which IIG served as an investment adviser.  HU and CC-1 then engaged in various deceptive acts, using the CLO Trust, to hide TOF’s losses and generate liquidity for TOF, which was facing investor redemption requests and demands for repayment of loans that IIG had taken from international development banks.  For example, in its capacity as investment adviser for the CLO Trust, IIG, through the efforts of HU and CC-1, caused the newly-created CLO Trust to purchase loans from the TOF portfolio, including Defaulted Loans, Distressed Loans, and Fake Loans, which generated liquidity for TOF.  After the CLO Trust purchased loans in the TOF portfolio, IIG, through the efforts of HU and CC-1, generated additional liquidity by causing the CLO Trust to issue securitized debt instruments based on these loans, payable in various tranches to investors in the CLO Trust.
   
• Using the CLO Trust and Panamanian Shell Entities to Cover Up Losses.  IIG, through the efforts of HU and CC-1, also caused the CLO Trust to create new fraudulent trade finance loans, and used those new fraudulent loans to cover up TOF’s losses.  Specifically, HU caused the creation of shell entities domiciled in Panama (“Panamanian Shell Entities”) that were controlled by an IIG nominee.  Then, HU caused the CLO Trust to enter into fake loan transactions with the Panamanian Shell Entities.  HU caused the creation of fake promissory notes and other paperwork to conceal the fraudulent nature of the loans to the Panamanian Shell Entities.  Finally, under the guise of the fake loan transactions with the Panamanian Shell Entities, the CLO Trust disbursed funds that HU and CC-1 diverted to TOF in order to pay off TOF’s various debts and obligations.
   
• Generating Liquidity By Selling Fraudulent Loans to Newly Created Funds Backed by a New Investor.  In or about 2017, HU and CC-1 targeted a foreign institutional investor (“Institutional Investor-1”) to raise money for two new private IIG managed funds: GTFF and STFF. Institutional Investor-1 provided $70 million as the seed investment for GTFF, and, later, $130 million as the seed investment for STFF.  HU and CC-1 caused GTFF and STFF to purchase at least approximately $100 million in fake, distressed, defaulted or otherwise fraudulent loans.  
   
• Inducing a Retail Mutual Fund to Invest in a Fictitious $6 Million Loan.  In or about December 2012, IIG became an investment adviser to an open-ended mutual fund marketed to retail investors (the “Retail Fund”). As an investment adviser to the Retail Fund, IIG made investment recommendations, including recommendations that the Retail Fund invest in trade finance loans originated by IIG.  In or about February 2017, a borrower (the “Argentine Borrower”) had failed to pay the principal on an approximately $6 million loan (“Loan-1”) in which the Retail Fund had invested and which was nearing its maturity date.  In or about March 2017, HU caused approximately $6 million to be transferred into an account associated with the Argentine Borrower from the account of a different borrower (“Borrower-1”), and further directed the funds from Borrower-1’s account to pay off the debt owed by the Argentine Borrower to the Retail Fund.  To replace the funds from Borrower-1’s account that were used to make it appear as though the Argentine Borrower had repaid its debt to the Retail Fund, HU fraudulently induced the Retail Fund to invest in a new, fake $6 million loan to the Argentine Borrower (the “New Loan”).  HU then directed that the proceeds from the fraudulently induced New Loan be transferred into Borrower-1’s account, effectively reimbursing the account for the earlier $6 million transfer to the Retail Fund.  To further conceal the fraudulent nature of the New Loan, HU caused the creation of forged documents to make it appear as though the New Loan was a legitimate loan to the Argentine Borrower.

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DAVID HU, 62, of West Orange, New Jersey, is charged with one count of conspiracy to commit investment adviser fraud, securities fraud, and wire fraud, which carries a maximum sentence of five years in prison; one count of securities fraud, which carries a maximum sentence of 20 years in prison; and one count of wire fraud, which carries a maximum sentence of 20 years in prison.  The maximum potential 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.

Ms. Strauss praised the investigative work of the FBI and also thanked the SEC for its assistance. 

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Drew Skinner and Negar Tekeei are in charge of the prosecution.

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

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

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Margaret Garnett, the Commissioner of the New York City Department of Investigation (“DOI”), announced today that JOSHUA ALBA pled guilty before United States Magistrate Judge Robert W. Lehrburger to one count of conspiring to commit honest services wire fraud, for his role in smuggling packages containing contraband to inmates detained at the Anna M. Kross Center (“AMKC”) on Rikers Island, in return for thousands of dollars in cash bribes. 

Acting U.S. Attorney Audrey Strauss said:  “As he has now admitted, Joshua Alba abused his authority as a correctional officer to smuggle contraband into a prison facility in return for cash bribes.  Contraband smuggling schemes threaten the security of our prisons and jeopardize the safety of inmates and other guards, and my office will continue to aggressively pursue those correctional officers who betray their duties for the lure of easy money.”

FBI Assistant Director William F. Sweeney Jr. said:  “Keeping illegal contraband out of our jails is an ongoing challenge for corrections officers. It’s hard to imagine why an insider on the job would assist with this process, the results of which put everyone in the facility at risk. There’s no excuse for this type of irresponsible and illegal behavior. Today’s arrest has effectively landed Alba on the other side of the law.”

DOI Commissioner Margaret Garnett said:  “This former City Correction Officer allegedly used his access and influence to funnel contraband into Rikers Island in exchange for thousands of dollars in cash, according to the charges. This scheme isn’t original; it isn’t inventive, but it is dangerous for staff and inmates and must be acted on swiftly through rigorous investigation and prosecution. DOI thanks the Acting U.S. Attorney for the Southern District of New York and the New York Field Office of the FBI for their partnership in uncovering this alleged crime.”

According to allegations in the criminal complaint, the information, and other documents filed in federal court, as well as statements made in public court proceedings:

Rules and regulations promulgated by the New York City Department of Correction (“NYCDOC”) prohibit correction officers and other staff from introducing or delivering contraband into NYCDOC facilities, and provide that “[e]mployees shall not enter into any transaction with an inmate, nor carry, convey, or make accessible to an inmate within a facility/command any intoxicant, opiate, narcotic, or other contraband article, nor traffic with an inmate in any manner.”

As alleged in the Information and Complaint, and as he admitted today in court, at various points during the course of this scheme JOSHUA ALBA flouted those rules and regulations by agreeing to deliver contraband, including tobacco, to a particular inmate (“Inmate-1”), who was housed in the section of the AMKC to which ALBA typically was assigned during his tours of duty in return for cash bribes.  ALBA obtained the contraband from an individual in the Bronx (“CC-1”), who arranged the deliveries in coded conversations with Inmate-1 that occurred over recorded prison phone calls.  ALBA made these contraband deliveries from at least December 2018 until July 2019, in return for at least $5,000 in cash bribes.

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ALBA, 30, of Queens, New York, pled guilty to one count of conspiracy to commit honest services wire fraud, which carries a maximum sentence of 20 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 the defendant will be determined by the judge. ALBA is scheduled to be sentenced by United States District Judge Lorna G. Schofield on a date to be determined.

Ms. Strauss praised the outstanding investigative work of the FBI and DOI. 

The prosecution of this case is being handled by the Office’s Public Corruption Unit.  Assistant United States Attorneys Lara Pomerantz and Jarrod L. Schaeffer are in charge of the prosecution.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced today that the United States has entered into a consent decree to settle a federal civil rights lawsuit brought by the United States against 111 EAST 88TH STREET PARTNERS (“111 PARTNERS”), for violating the Fair Housing Act.  Specifically, the lawsuit alleges that 111 PARTNERS discriminated against a disabled, rent-controlled tenant (the “Tenant”) by refusing to permit the Tenant to live with an assistance animal to accommodate the Tenant’s disability, as a reasonable accommodation to defendant’s policies, and by interfering with the Tenant’s exercise of his rights under the Fair Housing Act. 

Acting U.S. Attorney Audrey Strauss said:  “This is yet another lawsuit brought to enforce the rights of tenants with disabilities to live with an assistance animal.  With this resolution, we again emphasize that condominiums, cooperatives, landlords, and property managers are required by federal law to provide reasonable accommodations to people with disabilities.”

The Fair Housing Act makes it unlawful to discriminate in the terms and conditions of the sale or rental of, or to otherwise make unavailable or deny, a dwelling based on the prospective buyer or renter’s disability.  The law also mandates that reasonable accommodations in rules, policies, practices, and services be provided when necessary to afford equal housing opportunities to persons with disabilities.

According to the allegations in the Amended Complaint filed in federal court:

111 Partners is the owner of certain units in a 61-unit condominium located in New York, New York, and the landlord of the rent-controlled apartment that the Tenant occupies in the building.  The Tenant, now 58 years old, has resided in that apartment his entire life and has a long history of depression.  In 2006, the Tenant adopted a dog to help alleviate his depression and requested a reasonable accommodation to defendant’s “no pets” policy to allow him to reside with his dog in the apartment.  Defendant not only denied the request, but also initiated eviction proceedings against him.  While those proceedings were underway, in spring 2015, the Tenant was diagnosed with End Stage Renal Disease, and his depression worsened.  The Tenant promptly sought another reasonable accommodation to 111 Partners’ “no pets” policy to allow him to keep his dog in the apartment given the substantial emotional assistance the dog provided and the Tenant’s changed circumstances.  111 Partners constructively denied the request by requiring the onerous disclosure of detailed medical records and other information, despite the Tenant’s already well-substantiated request and defendant’s familiarity with his condition.  In June 2017, after his dog died and during the pendency of this litigation, the Tenant again requested a reasonable accommodation to 111 Partners’ “no pets” policy to permit him to adopt another dog for emotional support, and once again, 111 Partners constructively denied the request – requiring extensive documentation despite the fact that the Tenant had continued to provide documents, expert opinions, medical records, and sworn testimony in support of his request. 

Under the consent decree approved by U.S. District Court Judge Paul G. Gardephe on July 14, 2020, 111 PARTNERS must:

• Adopt a reasonable accommodation policy regarding requests for assistance animals;
• Comply with certain notice, training, and recordkeeping requirements to ensure that its employees are knowledgeable about and comply with the requirements of the Fair Housing Act;
• Allow the United States to monitor compliance with the consent decree;
• Dismiss all pending state court litigation against the Tenant, including the eviction proceedings commenced in 2006 regarding his request to keep an emotional support animal and termination proceedings commenced in 2019 regarding apartment conditions, and waive all claims to attorney’s fees and costs;
• Grant the Tenant a reasonable accommodation for the remainder of his tenancy, such that he can adopt and reside with a dog for as long as the Tenant lives in the apartment, without submitting any further reasonable accommodation requests.

The case is being handled by the Office’s Civil Rights Unit.  Assistant U.S. Attorney Brandon Waterman is in charge of the case.