Southern District of New York

Audrey Strauss, Acting United States Attorney for the Southern District of New York, William F. Sweeny Jr., Assistant Director-in-Charge, New York Division, Federal Bureau of Investigation (“FBI”), and Andriana Vamvakas, Northeastern Regional Director, U.S. Department of Labor Office of Labor-Management Standards (“DOL-OLMS”), announced the arrest of KENNETH WYNDER Jr., a former New York State Trooper and the president of the Law Enforcement Employees Benevolent Association (“LEEBA”), a labor union for law enforcement officers employed by the City of New York (the “City”), for defrauding union members by misappropriating money from LEEBA’s Annuity Fund.  STEVEN WHITTICK, LEEBA’s treasurer and a police officer for New York City’s Department of Environmental Protection (“DEP”), was charged separately with obstructing the investigation into fraud in connection with LEEBA and the Annuity Fund and making false statements to federal agents.  Both defendants are expected to appear before U.S. Magistrate Judge Robert W. Lehrburger in Manhattan federal court this afternoon.

Acting U.S. Attorney Audrey Strauss said:  “Today we have charged two leaders of a union that represents local law enforcement officers for engaging in criminal conduct, something they and their membership are sworn to combat.  As alleged, Kenneth Wynder abused his position as the union’s president and its annuity fund’s administrator and trustee to raid his members’ retirement accounts.  As further alleged, Steven Whittick, the union’s treasurer, took repeated steps to obstruct a federal investigation aimed at uncovering those financial improprieties.”

FBI Assistant Director William F. Sweeny Jr. said:  “As alleged, both law enforcement and civilian members of multiple city agencies had their retirement savings compromised by two individuals who prioritized their own financial well-being over that of the hardworking men and women who dedicated their livelihood to serving the public. Most people only get one chance to put aside enough money to last them into retirement. To think the money these individuals worked so hard for could allegedly be swindled by the very people who play a role in managing it is disturbing beyond belief. Today’s arrests bring us one step closer to making sure justice is served in this case.”

DOL-OLMS Northeastern Regional Director Andriana Vamvakas said:  “Union officials are required to use the union’s funds only for legitimate purposes, not their own personal gain. Financial misappropriation by union officials not only breaks the law, it betrays the trust placed in them by their membership.  OLMS was proud to work with its partners at the Office of the U.S. Attorney for the Southern District of New York and the Federal Bureau of Investigation in investigating this case.”

According to the allegations contained in the two Complaints unsealed in Manhattan federal court, publicly available information, and prior court filings:[1]

Law Enforcement Employees Benevolent Association and the Annuity Fund

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

The Annuity Fund is a LEEBA fund that received monthly contributions from the City for the benefit of LEEBA’s members, and maintained separate accounts for each fund member.  These accounts were functionally similar to employer-sponsored 401(k) retirement accounts.  Both WYNDER and WHITTICK were Trustees of the Annuity Fund and signatories to agreements that governed the fund.  Under the relevant agreements and plans, the money in the Annuity Fund could be used for no purpose other than funding individual members’ retirement accounts and defraying reasonable administra­tive expenses of the Annuity Fund itself.

WYNDER

WYNDER, a former New York State Trooper, is the President of LEEBA and a member of LEEBA’s board of directors.  WYNDER has also served as the Fund Administrator of the Annuity Fund and as a member of the board of trustees of the Annuity Fund, pursuant to which he owed a fiduciary duty to act in the best interests of the Annuity Fund and its account holders.  WYNDER also was on the board of trustees of the LEEBA Welfare Fund (the “Welfare Fund,” and collectively with the Annuity Fund, the “LEEBA Funds”), which provided supplemental insurance benefits to its members.  While occupying those positions, WYNDER centralized and controlled major decision-making authority for LEEBA and the LEEBA Funds, often acting without the proper approval of their respective boards of directors or trustees.  WYNDER’s de facto dominance of LEEBA and the LEEBA Funds enabled him to make decisions in his own self-interest and contrary to the interests of the Annuity Fund and individual members.

WHITTICK

WHITTICK, a DEP police officer, is the Treasurer of LEEBA, and a member of the board of directors of LEEBA and the boards of trustees of the LEEBA Annuity Fund and the LEEBA Welfare Fund.  As LEEBA’s Treasurer, WHITTICK had responsibi­lity for LEEBA’s financial matters and accounts, arranging for LEEBA to pay its payroll through an outside payroll processing firm starting in 2016, as well as having signatory authority over LEEBA’s main operating bank account. 

            WYNDER’s Alleged Fraud Scheme

            From at least in or about 2012 up to and including the date of this Complaint, WYNDER participated in a scheme to steal, embezzle, and misappropriate money from the Annuity Fund and individual members’ retirement accounts.  Specifically, WYNDER made hundreds of thousands of dollars of fraudulent transfers from the Annuity Fund to LEEBA’s operating account, which he controlled, and regularly used the funds, once transferred from the Annuity Fund, to enrich himself at union members’ expense, including through unauthorized and excessive checks to himself and cash withdrawals for his own benefit.  In addition, WYNDER caused the union to pay for various personal expenses such as a second residence, clothing, travel expenses, and the purchase of a personal automobile, all paid for by the union, and none of which were contemporaneously reported to the Internal Revenue Service (“IRS”), as required.

To accomplish this fraudulent scheme, WYNDER, acting in his capacity as the Annuity Fund’s Plan Administrator, repeatedly made false and misleading statements to a third-party retirement plan manager that served as the custodian for the Annuity Fund and the retirement accounts of individual union members, including through emails and faxes that WYNDER used to withdraw increasingly large sums of money from the Annuity Fund, effectively causing such withdrawals to be made from the retirement accounts of individual members.  From in or about 2014 through in or about 2019, WYNDER caused the withdrawal of more than $500,000 from the individual retirement accounts that constitute the Annuity Fund, thereby wiping out the entire balance of certain members’ accounts.  Without these improper withdrawals from the Annuity Fund, the LEEBA operating account would have been insolvent, and would have had insufficient funds to pay for WYNDER’s excessive checks to himself and cash withdrawals and the personal expenses he caused to be charged to that account.

In addition, throughout the duration of this scheme, WYNDER repeatedly made and approved false and misleading statements to LEEBA’s members and prospective members about how he was purportedly using and protecting their retirement accounts and the LEEBA Annuity Fund.  WYNDER further concealed his scheme by causing LEEBA to fail to timely file mandatory reports and financial disclosures with the City and public reports to the Annuity Fund’s members, and by making false statements to the Annuity Fund’s auditors and accountants.

WHITTICK’s Alleged Obstruction of Justice

From at least in or about 2017 through in or about August 2019, while serving as LEEBA’s Treasurer, and after learning of the federal investigation into LEEBA’s finances including the embezzlement scheme described above, WHITTICK repeatedly lied to federal agents in an effort to obstruct that investigation.  WHITTICK did so despite personal involvement in some of the financial improprieties with which WYNDER is charged.  For example, as alleged, on at least two occasions, on or about February 1, 2018, and March 30, 2018, WHITTICK withdrew $16,000 in cash from a LEEBA bank account, and on each occasion deposited $15,000 cash into WYNDER’s personal bank account and $1,000 cash into WHITTICK’s own personal bank account. 

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

*                *                *

WYNDER, 56, of Stroudsburg, Pennsylvania, is charged with one count of wire fraud, which carries a maximum penalty of 20 years in prison.

WHITTICK, 50, of Kingston, New York, is separately charged with one count of obstruction of justice, which carries a maximum penalty of 20 years in prison, and two counts of false statements to federal investigators, each of which carries a maximum penalty of five years in prison.

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

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

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

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

[1] As the introductory phrase signifies, the entirety of the text of the Complaints, and the description of the Complaints 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, Raymond P. Donovan, the Special Agent-in-Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), and Dermot Shea, Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of a criminal Complaint in Manhattan federal court charging PURIFICACION CRISTOBAL, a nurse practitioner who operated a medical clinic in the Bronx, New York, with illegally distributing large quantities of oxycodone.  CRISTOBAL was taken into custody this morning and is expected to be presented before Magistrate Judge Sarah Netburn later today.

Acting U.S. Attorney Audrey Strauss said:  “As alleged, Purificacion Cristobal wrote prescriptions for highly addictive and potentially lethal opioids not based on medical necessity but on the payment of cash ‘gratuities’ by the ‘patients.’”

DEA Special Agent-in-Charge Raymond P. Donovan said:  “This investigation reiterates that drug traffickers can hide in plain sight, as was allegedly done by Purificacion Cristobal, a nurse practitioner who worked at a medical clinic in the Bronx.  Allegedly, Cristobal enabled opioid users by writing hundreds of unnecessary prescriptions, putting tens of thousands of oxycodone tablets into unsupervised hands.  Law enforcement is committed to identifying drug traffickers at all levels to keep our communities safe from the dangers of drug abuse, drug addiction, and drug-related violence.”   

NYPD Commissioner Dermot Shea said:  “These charges represent an alleged betrayal of medicine and the law for an illegal profit.  They highlight law enforcement’s ongoing commitment to investigate and prosecute anyone charged with illegally peddling opioids.”

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

Since June 2019, PURIFICACION CRISTOBAL has illicitly diverted large quantities of oxycodone, unlawfully writing numerous prescriptions resulting in the distribution of tens of thousands of oxycodone pills to individuals she knew had no legitimate medical need for the pills.  In exchange for these prescriptions, CRISTOBAL and her staff at the Bronx clinic received cash payments or “gratuities” from the purported patients.

As alleged in the Complaint, CRISTOBAL, a certified nurse practitioner, operated a medical clinic in the Bronx.  Despite being certified to practice in psychiatry, family medicine, and pediatrics, CRISTOBAL regularly wrote more than 100 prescriptions for oxycodone per month, including prescriptions for some of the staff in her practice.  In total, from January 2019 to June 2020, CRISTOBAL wrote over 1,700 prescriptions for oxycodone, accounting for over 140,000 oxycodone tablets.

As detailed in the allegations set forth in the Complaint, CRISTOBAL performed little to no physical examination on purported patients receiving oxycodone prescriptions.  For example, on one occasion, without having performed any examination, CRISTOBAL asked a patient to choose which prescription drugs the patient preferred.  On another occasion, CRISTOBAL prescribed oxycodone after confirming it was the patient’s “favorite” drug.  CRISTOBAL even sometimes wrote prescriptions for oxycodone when the patients did not ever enter the clinic for a visit, so long as they paid the cash fees due for the illicit oxycodone.

*                *                *

PURIFICACION CRISTOBAL, 73, of Lyndhurst, New Jersey, is charged with one count of participating in a conspiracy to illicitly distribute narcotics, which carries a maximum sentence of 20 years in prison.  The maximum potential penalty 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 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.

This case is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Jun Xiang and Kyle A. Wirshba 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, Acting United States Attorney for the Southern District of New York, announced that TELEMAQUE LAVIDAS, an entrepreneur and pharmaceutical company executive, was sentenced on July 2 to one year and one day in prison for his role in an international insider trading scheme.  LAVIDAS was convicted after trial in January 2020 of insider trading offenses for stealing inside information that he obtained from his father, a member of the board of directors of a pharmaceutical company, and illegally tipping his close friend and co-defendant Georgios Nikas with that inside information.  The sentence was imposed by United States District Judge Denise Cote.

Acting U.S. Attorney Audrey Strauss said:  “Telemaque Lavidas was the pipeline for material nonpublic information he illegally relayed from his father to his friend, a scheme that earned its participants more than $15 million in illicit profits.”   

According to the Superseding Indictment, evidence presented at trial, statements made in open court, and court filings:           

By 2013, Athanase Lavidas, the father of TELEMAQUE LAVIDAS, was a prominent Greek businessman and was a member of the board of directors of Ariad Pharmaceuticals, Inc. (“Ariad”), a pharmaceutical company headquartered in Cambridge, Massachusetts, that developed and marketed a leukemia medication named Iclusig.  In violation of his duties of confidentiality to Ariad, Athanase Lavidas provided TELEMAQUE LAVIDAS with tips about three major corporate developments at Ariad.  On each of those occasions, TELEMAQUE LAVIDAS provided that inside information to his close friend Georgios Nikas so that Nikas could make timely, profitable trades ahead of Ariad’s public announcements.

The first tip was in October 2013, when Athanase Lavidas learned that the U.S. Food and Drug Administration (“FDA”) was concerned about adverse health issues for patients using a newly approved cancer drug called Iclusig.  Athanase Lavidas contacted TELEMAQUE LAVIDAS to pass this secret information, and TELEMAQUE LAVIDAS passed that tip to Georgios Nikas, who had previously amassed a large long position in Ariad securities.  After receiving the inside information from TELEMAQUE LAVIDAS, Nikas sold his Ariad securities and took a substantial short position.  When Ariad publicly announced the patient safety issues, its stock declined by over 65% and Nikas made over $3.2 million in profits and avoided almost $800,000 in losses.  Ariad discontinued sales of Iclusig later in October.

The second tip was in November and December 2013, when Athanase Lavidas learned that Ariad and the FDA were making significant progress toward returning Iclusig to the market.  Athanase Lavidas passed this secret information to TELEMAQUE LAVIDAS, who in turn passed the tips to Georgios Nikas.  Nikas bought Ariad securities based on these tips, and when Ariad publicly announced at the end of December that Iclusig was returning to the market, its stock rose and Nikas made over $1.3 million in profits.

The third tip was in July and August 2015, when Ariad received an unsolicited takeover offer from another pharmaceutical company.  Again, Athanase Lavidas learned of the offer in his capacity as a board member, and informed TELEMAQUE LAVIDAS, who in turn passed the tip to Georgios Nikas.  Nikas again bought Ariad securities based on this tip, and when a news article was published in late August reporting on the takeover offer, Ariad’s stock rose and Nikas made over $2 million in profits.

Nikas also passed the tips he received from TELEMAQUE LAVIDAS to a series of stock traders.  In total, Nikas and the traders he tipped earned over $15 million in profits from the inside information that TELEMAQUE LAVIDAS provided.

*                *                *

In addition to the prison term, LAVIDAS, 39, was ordered to pay restitution of $186,430.99 and a fine of $50,000.

Ms. Strauss praised the work of the Federal Bureau of Investigation and also thanked the Securities and Exchange Commission.   

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.          

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and Peter C. Fitzhugh, the Special Agent-in-Charge of the New York Field Office of Homeland Security Investigations (“HSI”), announced today the unsealing of an Indictment charging JOSE SERGIO MARTINEZ-AGUILAR, a/k/a “Orejon,” a/k/a “Andy,” a/k/a “Pa,” VLADIMIR PULSTILINKOV, a/k/a “The Russian,” MIGUEL LOVOS, SEBASTIAN RAMOS, a/k/a “Nimo,” and RICARDO RUIZ-SALINAS with narcotics trafficking offenses based on their alleged participation in an international drug trafficking organization that distributed large quantities of cocaine, fentanyl, heroin, and methamphetamine.  MARTINEZ-AGUILAR, PULSTILINKOV, and LOVOS also are charged with possessing and using firearms in connection with the narcotics trafficking.

MARTINEZ-AGUILAR and LOVOS were previously charged in Complaints filed in the Southern District of New York, and were taken into custody in California on June 26, 2020, and subsequently presented before magistrate judges in the Central District of California.  RAMOS and RUIZ-SALINAS were taken into custody in New York earlier today, and will be presented before Magistrate Judge Sarah Netburn today in Manhattan federal court.  PULSTILINKOV currently remains at large.  The case is assigned to U.S. District Judge Laura Taylor Swain.

Acting U.S. Attorney Audrey Strauss said:  “As alleged, Jose Sergio Martinez-Aguilar led an international drug trafficking organization that imported potentially lethal drugs from Mexico and distributed them throughout the U.S., including right here in New York.  Now, thanks to the efforts of HSI, Martinez-Aguilar and his co-defendants are in custody and facing serious federal charges.”

HSI Special Agent-in-Charge Peter C. Fitzhugh said:  “As alleged, Martinez-Aguilar and his crew funneled highly addictive drugs across the southern border and from coast to coast, seeking to make a hefty profit off those addicted to his product.  This case makes it clear that HSI’s capabilities across borders and across the country leave no one safe from the long arm of the law, and justice will be served.”

As alleged in the Indictment unsealed today in Manhattan federal court, the Complaints charging MARTINEZ-AGUILAR and LOVOS, other court filings related to this matter, and statements made in court[1]:

Since at least June 2019, MARTINEZ-AGUILAR has led a drug trafficking organization (“DTO”) that imports narcotics into California from Mexico, and then distributes those narcotics in California and other parts of the country, including New York City.  The DTO is responsible for distributing large quantities of cocaine, fentanyl, heroin, and methamphetamine.  PULSTILINKOV, LOVOS, RAMOS, and RUIZ-SALINAS are members of the DTO who worked with MARTINEZ-AGUILAR to traffic the DTO’s narcotics.

During the investigation, communications among members of the DTO intercepted pursuant to court orders revealed a significant drug trafficking operation, led by MARTINEZ-AGUILAR, that imported and distributed multi-kilogram quantities of narcotics across the country.  On one occasion, LOVOS discussed with MARTINEZ-AGUILAR obtaining a job near the U.S.-Mexican border, “because things are hot over there” and he could “cross people” and narcotics into the United States.  On another occasion, MARTINEZ-AGUILAR bragged to an associate that narcotics distributed by other drug trafficking crews “[wa]s not even half the quality of what I have.”  The DTO supplied drugs to dealers for distribution on the streets of New York City.  For example, in June 2020, law enforcement seized a package shipped by MARTINEZ-AGUILAR and his DTO associates from California to the New York City area that was found to contain over nine kilograms of fentanyl and more than a kilogram of a heroin/fentanyl mixture. 

On June 26, 2020, law enforcement searched a stash house operated by the DTO in California, pursuant to a court-authorized warrant.  During the search, law enforcement recovered a stash of heroin, methamphetamine, and other suspected narcotics, as well as multiple handguns and assault rifles.  LOVOS was found and arrested at the stash house during the execution of the warrant.  LOVOS, MARTINEZ-AGUILAR, and PULSTILINKOV possessed and used firearms in connection with the DTO’s narcotics trafficking business.

*                      *                     *

MARTINEZ-AGUILAR, 39, of Thermal, California, and LOVOS, 31, of Indio, California, are each charged with three counts of narcotics conspiracy and one count of firearms possession in connection with drug trafficking.  PULSTILINKOV, 44, of Indio, California, is charged with two counts of narcotics conspiracy and one count of firearms possession in connection with drug trafficking.  RAMOS, 29, and RUIZ-SALINAS, 43, of Brooklyn, New York, are each charged with one count of narcotics conspiracy.  A chart containing the charges and maximum and minimum penalties for the defendants is set forth below.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.

Count

Charge

Defendant(s)

Maximum/Minimum Penalties

1

Conspiracy to Distribute Narcotics – Cocaine

21 U.S.C. §§ 846, 841(b)(1)(A)

JOSE SERGIO MARTINEZ-AGUILAR

VLADIMIR PULSTILINKOV

MIGUEL LOVOS

SEBASTIAN RAMOS

RICARDO RUIZ-SALINAS

Life imprisonment

Mandatory minimum of 10 years’ imprisonment

2

Conspiracy to Distribute Narcotics – Fentanyl, Heroin

21 U.S.C. §§ 846, 841(b)(1)(A)

JOSE SERGIO MARTINEZ-AGUILAR

MIGUEL LOVOS

Life imprisonment

Mandatory minimum of 10 years’ imprisonment

3

Conspiracy to Distribute Narcotics - Methamphetamine

21 U.S.C. §§ 846, 841(b)(1)(A)

JOSE SERGIO MARTINEZ-AGUILAR

VLADIMIR PULSTILINKOV

MIGUEL LOVOS

Life imprisonment

Mandatory minimum of 10 years’ imprisonment

4

Firearms Offense

18 U.S.C. § 924(c)

JOSE SERGIO MARTINEZ-AGUILAR

MIGUEL LOVOS

Life imprisonment

Mandatory minimum of 5 years’ imprisonment

5

Firearms Offense

18 U.S.C. § 924(c)

VLADIMIR PULSTILINKOV

Life imprisonment

Mandatory minimum of 5 years’ imprisonment

*          *          *

Ms. Strauss praised the outstanding investigative work of HSI, the New York City Police Department, the Pennsylvania State Police, and the Riverside County Sheriff’s Department.  She also thanked the U.S. Attorney’s Office for the Central District of California, the U.S. Attorney’s Office for the Southern District of California, the San Diego County Sheriff’s Department, and the U.S. Marshals Service for their assistance in connection with the arrests of certain of the defendants.

The prosecution of this case is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Rushmi Bhaskaran and Jarrod L. Schaeffer are in charge of the prosecution.

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

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

                   Additionally Charged With Perjury in Connection With 2016 Depositions

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, 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, Commissioner of the New York City Police Department (“NYPD”), announced that GHISLANE MAXWELL was arrested this morning and charged with enticing a minor to travel to engage in criminal sexual activity, transporting a minor with the intent to engage in criminal sexual activity, conspiracy to commit both of those offenses, and perjury in connection with a sworn deposition.  The Indictment unsealed today alleges that between at least in or about 1994 through 1997, MAXWELL and co-conspirator Jeffrey Epstein exploited girls as young as 14, including by enticing them to travel and transporting them for the purpose of engaging in illegal sex acts.  As alleged, knowing that Epstein had a preference for young girls, MAXWELL played a critical role in the grooming and abuse of minor victims that took place in locations including New York, Florida, and New Mexico.  In addition, as alleged, MAXWELL made several false statements in sworn depositions in 2016.  MAXWELL is expected to be presented this afternoon in the in federal court in New Hampshire. This case is assigned to U.S. District Judge Alison J. Nathan.

Acting U.S. Attorney Audrey Strauss said:  “As alleged, Ghislaine Maxwell facilitated, aided, and participated in acts of sexual abuse of minors.  Maxwell enticed minor girls, got them to trust her, and then delivered them into the trap that she and Jeffrey Epstein had set. She pretended to be a woman they could trust.  All the while, she was setting them up to be abused sexually by Epstein and, in some cases, Maxwell herself.  Today, after many years, Ghislaine Maxwell finally stands charged for her role in these crimes.”

FBI Assistant Director William F. Sweeney Jr. said:  “Preserving the innocence of children is among the most important responsibilities we carry as adults.  Like Epstein, Ms. Maxwell chose to blatantly disregard the law and her responsibility as an adult, using whatever means she had at her disposal to lure vulnerable youth into behavior they should never have been exposed to, creating the potential for lasting harm. We know the quest for justice has been met with great disappointment for the victims, and that reliving these events is traumatic. The example set by the women involved has been a powerful one. They persevered against the rich and connected, and they did so without a badge, a gun, or a subpoena - and they stood together. I have no doubt the bravery exhibited by the women involved here has empowered others to speak up about the crimes of which they've been subjected.”

NYPD Commissioner Dermot Shea said:  “The heinous crimes these charges allege are, and always will be abhorrent for the lasting trauma they inflict on victims. I commend our investigators, and law enforcement partners, for their continuing commitment to bringing justice to the survivors of sexual assault, everywhere.”

If you believe you are a victim of the sexual abuse perpetrated by Jeffrey Epstein, please contact the FBI at 1-800-CALL FBI, and reference this case.

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

From at least 1994 through at least 1997, GHISLAINE MAXWELL assisted, facilitated, and participated in Jeffrey Epstein’s abuse of minor girls by, among other things, helping Jeffrey Epstein to recruit, groom, and ultimately abuse victims known to MAXWELL and Epstein to be under the age of 18.  The victims were as young as 14 years old when they were groomed and abused by MAXWELL and Epstein, both of whom knew that their victims were in fact minors.  As a part and in furtherance of their scheme to abuse minor victims, MAXWELL and Epstein enticed and caused minor victims to travel to Epstein’s residences in different states, which MAXWELL knew and intended would result in their grooming for and subjection to sexual abuse.

As alleged, MAXWELL enticed and groomed minor girls to be abused in multiple ways. For example, MAXWELL attempted to befriend certain victims by asking them about their lives, taking them to the movies or taking them on shopping trips, and encouraging their interactions with Epstein.  MAXWELL also acclimated victims to Epstein’s conduct simply by being present for victim interactions with Epstein, which put victims at ease by providing the assurance and comfort of an adult woman who seemingly approved of Epstein’s behavior.  Additionally, to make victims feel indebted to Epstein, MAXWELL would encourage victims to accept offers of financial assistance from Epstein, including offers to pay for travel or educational expenses.  MAXWELL also normalized and facilitated sexual abuse by discussing sexual topics with victims, encouraging them to massage Epstein, and undressing in front of a victim.

As MAXWELL and Epstein intended, these grooming behaviors left minor victims vulnerable and susceptible to sexual abuse by Epstein.  MAXWELL was then present for certain sexual encounters between minor victims and Epstein, such as interactions where a minor victim was undressed, and ultimately MAXWELL was present for sex acts perpetrated by Epstein on minor victims.  That abuse included sexualized massages during which a minor victim was fully or partially nude, as well as group sexualized massages of Epstein involving a minor victim where MAXWELL was present.

As alleged, minor victims were subjected to sexual abuse that included, among other things, the touching of a victim’s breasts or genitals, placing a sex toy such a vibrator on a victim’s genitals, directing a victim to touch Epstein while he masturbated, and directing a victim to touch Epstein’s genitals.  MAXWELL and Epstein’s victims were groomed or abused at Epstein’s residences in New York, Florida, and New Mexico, as well as MAXWELL’s residence in London, England.

Additionally, in 2016, while testifying under oath in a civil proceeding, MAXWELL repeatedly made false statements, including about certain specific acts and events alleged in the Indictment.

*                      *                      *

GHISLAINE MAXWELL, 58, is charged with one count of enticing a minor to travel to engage in illegal sex acts, which carries a maximum sentence of five years in prison, one count of conspiracy to entice a minor to travel to engage in illegal sex acts, which carries a maximum sentence of five years in prison, one count of transporting a minor with the intent to engage in criminal sexual activity, which carries a maximum sentence of 10 years in prison, one count of conspiracy to transport a minor with the intent to engage in criminal sexual activity, which carries a maximum sentence of five years in prison, and two counts of perjury, each of which carries a maximum sentence 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 the NYPD.

This case is being handled by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys Alex Rossmiller, Alison Moe, and Maurene Comey are in charge of the prosecution.

The charges contained in the Indictment are merely accusations.  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 set forth herein, constitute only allegations, and every fact described therein should be treated as an allegation.  The defendant is presumed innocent unless and until proven guilty.

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”), Gregory E. Demske, Chief Counsel to the Inspector General of the United States Department of Health and Human Services, Office of the Inspector General (“HHS-OIG”), Scott J. Lampert, Special Agent in Charge of HHS-OIG’s New York Regional Office, 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 the Department of Veterans Affairs, Office of Inspector General, Northeast Field Office (“VA OIG”), announced today that the United States has settled a civil fraud lawsuit against NOVARTIS PHARMACEUTICALS CORPORATION (“NOVARTIS”), part of Swiss drug manufacturer Novartis International AG, alleging that NOVARTIS violated the federal False Claims Act and Anti-Kickback Statute by providing doctors with cash payments, recreational outings, lavish meals, and expensive alcohol to induce them to prescribe NOVARTIS cardiovascular and diabetes drugs reimbursed by federal healthcare programs.  Specifically, the Government alleged that NOVARTIS organized tens of thousands of sham educational events at high-end restaurants and other venues, paid exorbitant speaker fees to doctors who gave no meaningful presentations, and provided expensive meals and alcohol to doctor attendees and their guests.  When those doctors then prescribed NOVARTIS’s cardiovascular and diabetes drugs, federal healthcare programs paid hundreds of millions of dollars in reimbursements for these tainted prescriptions.  As part of the settlement, approved today by U.S. District Judge Paul G. Gardephe, NOVARTIS will pay the United States and various States a total of $678 million.  NOVARTIS also made extensive factual admissions in the settlement and agreed to strict limitations on any future speaker programs, including reductions to the amount it may spend on such programs. 

Acting U.S. Attorney Audrey Strauss said:  “For more than a decade, Novartis spent hundreds of millions of dollars on so-called speaker programs, including speaking fees, exorbitant meals, and top-shelf alcohol that were nothing more than bribes to get doctors across the country to prescribe Novartis’s drugs.  Giving these cash payments and other lavish goodies interferes with the duty of doctors to choose the best treatment for their patients and increases drug costs for everyone.  This Office will continue to be vigilant in cracking down on kickbacks, however they may be dressed up, throughout the pharmaceutical industry.”

FBI Assistant Director-in-Charge said:  “Not only did Novartis incentivize doctors to host these speaking events, reps bribed the doctors to write more prescriptions of the company’s drugs to give Novartis an advantage over competitors within their field.  Greed replaced the responsibility the public expects from those who practice medicine, not to mention the potential for an erosion of trust in the pharmaceutical industry as a whole.  This conduct was reprehensible and dishonest.  Patients and consumers deserve better, and our office will continue to pursue any similar allegations of this kind.”

HHS-OIG Chief Counsel Gregory Demske said:  “OIG will continue to work closely with the Department of Justice to investigate and pursue kickbacks regardless of the form they take.  To address Novartis’s conduct and the widely-recognized compliance risks associated with paid speaker programs, the CIA requires Novartis to make fundamental changes to its speaker program practices.  Under the CIA, Novartis must significantly reduce the number of programs and the number of paid physicians, and can no longer pay for inherently-risky in-person programs.” 

HHS-OIG Special Agent in Charge Scott J. Lampert said:  “The various kickback schemes employed by Novartis threatened the impartiality of medical decision-making and the financial integrity of Medicare and Medicaid.  Greed must never play a part in patient care.  Along with our law enforcement partners, HHS-OIG will continue to hold pharmaceutical companies accountable when they step over the line to maximize their market share at the expense of taxpayer-funded federal health care programs.”

DCIS Special Agent in Charge Leigh-Alistair Barzey said:  “Protecting the integrity of TRICARE, the healthcare system for military members and their dependents, is a top priority for the DCIS.  When pharmaceutical corporations offer kickbacks and engage in other fraudulent activity to induce medical professionals to prescribe their products, they undermine the integrity of TRICARE and other healthcare plans.  The settlement agreement announced today is the result of a joint effort and demonstrates the DCIS’s ongoing commitment to work with its law enforcement partners and the U.S. Attorney’s Office, to investigate and prosecute companies that seek to profit by engaging in schemes such as those identified in this case.”

VA-OIG Special Agent in Charge Christopher Algieri said:  “Kickback schemes undermine our federal healthcare programs, including healthcare benefits administered by the U.S. Department of Veterans Affairs.  We will continue to work collaboratively with our law enforcement partners and the U.S. Attorney’s Office to protect the quality of veterans’ healthcare and integrity of VA’s programs.”  

In its Complaint in this lawsuit, the Government alleged that between 2002 and 2011 (the “Relevant Period”), NOVARTIS hosted tens of thousands of speaker programs and related events under the guise of providing educational content, when in fact the events served as nothing more than a means to provide bribes to doctors.  NOVARTIS paid physicians honoraria, purportedly as compensation for delivering a lecture regarding a NOVARTIS medication, but, as NOVARTIS knew, many of these programs were nothing more than social events held at expensive restaurants, with little or no discussion about the NOVARTIS drugs.  Indeed, some of the so-called speaker events never even took place; the speaker was simply paid a fee in order to induce the speaker to prescribe NOVARTIS drugs. 

The Government’s complaint further alleged that NOVARTIS sales representatives, on the instruction of their managers, selected high-volume prescribers to serve as the paid “speakers” at these events with the intent to induce them to write more – or keep writing many – NOVARTIS prescriptions.  The sales representatives then pressured the speakers to increase their prescriptions of NOVARTIS drugs, and often dropped doctors from the program if they failed to do so.  Further, the Government alleged that this widespread kickback scheme was the result of decisions made by top management at NOVARTIS’s North American headquarters in New Jersey.   

As part of the settlement, NOVARTIS admitted and accepted responsibility for certain conduct alleged by the Government including the following:

• Some NOVARTIS sales representatives intended the honoraria paid to doctors to be an inducement to these doctors to prescribe more NOVARTIS drugs.
• NOVARTIS paid many high-prescribing doctors tens or hundreds of thousands of dollars in honoraria. 
• In thousands of instances, NOVARTIS paid for the same group of doctors, often colleagues or friends, to have dinners together repeatedly.  Doctors in these groups would sometimes rotate being the speaker and receiving the honorarium payment.
• NOVARTIS sales representatives hosted programs at some of the most expensive restaurants in the United States, intending to induce the doctors in attendance to continue to write NOVARTIS prescriptions.  These restaurants included some of the most high-end restaurants in the country, such as Masa, Daniel, Gramercy Tavern, Il Mulino, Babbo, Peter Luger, Le Bernardin, and Eleven Madison Park in New York City; Charlie Palmer’s in Washington, D.C.; Morton’s Steakhouse and the Four Seasons in Chicago; Joe’s Stone Crab in Miami; Abacus, Nobu, and the Four Seasons in Dallas; Gary Danko in San Francisco; Patina and Matsuhisa in Los Angeles; Grill 225 in South Carolina; and Commander’s Palace in New Orleans.
• Throughout the Relevant Period, more than 12,000 speaker programs and roundtables had meal spends that were considerably in excess of the $125 per person limit set by NOVARTIS’s compliance policies. 
• For example, in 2008, at a speaker program held at Ruth’s Chris Steakhouse in Pikesville, Maryland, NOVARTIS held an event with only one doctor in the audience for the speaker’s presentation, at which it spent $448 per person on food and alcohol, in addition to the $1,000 honorarium payment provided to the speaker.
• During the Relevant Period, some NOVARTIS sales representatives conducted programs at venues where the focus was on entertainment, including fishing trips, sporting events, wine tastings, and hibachi tables.  NOVARTIS conducted hundreds of events at wineries and golf clubs.
• Sales representatives also conducted events at Hooters.
• At many of NOVARTIS’s speaker programs, the sales representative hosting the event did not require the speaker, who was being paid an honorarium, to deliver a presentation at all, or allowed the speaker to click through the power point presentation in a matter of minutes.  In those instances, the majority of the time was spent socializing and enjoying dinner.
• NOVARTIS in a number of instances paid doctors honoraria for purportedly speaking at events that never took place.
• On Long Island, at least one NOVARTIS sales representative organized fraudulent speaker programs by arranging for a restaurant to create fake receipts to make it appear that a dinner had taken place, and then using the budgeted funds to purchase gift cards that were distributed to high-prescribing doctors.  Doctors were then also paid honoraria for “speaking” at these sham events.
• NOVARTIS’s compliance training materials suggested that emails advocating illegal kickbacks were improper in part because they “reflect[] ignorance of the import of written communications, and put[] the Company at risk.” NOVARTIS’s Chief Compliance Officer also stated in training presentations:  “If you don't have to write it, don’t.  Consider using the phone.”

Under the settlement, NOVARTIS will pay a total of $678,000,000, of which (i) $591,442,008.92 will be paid to the United States as False Claims Act damages, (ii) $38,406,717.42 will be forfeited to the United States as proceeds of violations of the Anti-Kickback Statute; and (iii) $48,151,273.66 will be paid to various States.

The settlement also requires NOVARTIS to reform its business practices. Contemporaneously with this settlement, NOVARTIS has entered into a corporate integrity agreement (“CIA”) with HHS-OIG that will significantly curtail the company’s ability to conduct speaker programs going forward, and will dramatically reduce the amount of money that NOVARTIS may spend on such programs.  Under the five-year CIA, NOVARTIS speaker programs are only permitted under limited circumstances and must be conducted in a virtual format such as a webinar.  The CIA also requires multi-faceted monitoring of NOVARTIS’s operations and obligates company executives and Board members to certify compliance annually with the terms of the CIA.  The strict limitations on speaker programs imposed by the CIA are also incorporated into the settlement.  The settlement provides procedures for the Government to raise violations of these requirements with the district court.

This matter was initially brought to the Government’s attention by a whistleblower who filed a complaint pursuant to the False Claims Act.

Ms. Strauss praised the investigative work of the FBI, HHS-OIG, and DCIS.  She also thanked the Commercial Litigation Branch of the U.S. Department of Justice’s Civil Division in Washington, D.C., and the Office of Counsel to the Inspector General of HHS for their critical assistance in this case.

The case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorneys Jeannette Vargas, Pierre Armand, Mónica Folch, Jacob Lillywhite, Jennifer Jude, and Jacob Bergman are in charge of the case, and Assistant U.S. Attorney Alex Wilson of the Money Laundering and Transnational Criminal Enterprises Unit is responsible for the forfeiture aspects of the case. 

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 entered into a Consent Decree settling a civil lawsuit against Chestnut Petroleum Distributors, Inc., and its affiliates CPD Energy Corp., CPD NY Energy Corp., Chestnut Mart of Gardiner, Inc., Chestnut Marts, Inc., Greenburgh Food Mart, Inc., Middletown Food Mart, Inc., and NJ Energy Corp. (collectively, “Defendants”), for violating the Resource Conservation and Recovery Act (“RCRA”) in connection with their ownership or operation of underground storage tanks at 20 separate gas stations within the Southern District of New York and adjoining districts. 

Acting U.S. Attorney Audrey Strauss said:  “Today’s settlement holds Chestnut Petroleum Distributors, Inc., and its affiliates accountable for repeatedly failing to comply with regulations designed to prevent gasoline leaks from injuring public health and the environment, and ensures ongoing oversight of the defendants’ operations to protect the public in the future.”    

EPA Regional Administrator Peter D. Lopez said:  “Failure to regularly monitor underground storage tanks and address possible leaks risks contaminating groundwater, which is one of our most valuable natural resources. This settlement requires the companies to follow laws in place to mitigate safety threats and protect the environment.”                  

Petroleum products such as gasoline contain chemical compounds that pose substantial threats to human health.  Service stations typically store gasoline in underground storage tanks.  When operated conscientiously and monitored closely, underground storage tanks are a safe and effective means to store gasoline.  But when those tanks are not subjected to basic operational safeguards, they can endanger the public and the environment, for example by leaking petroleum into the water supply, discharging toxic vapors into the air, or even triggering fires or explosions.  EPA’s regulations under RCRA are designed to protect the public by requiring underground storage tank operators to reduce the likelihood of leaks, monitor for leaks so they can promptly be addressed, and maintain adequate insurance to conduct corrective action and compensate injured third parties should a leak occur.

The Consent Decree, which is subject to public comment and approval by the district court, resolves a lawsuit filed by the United States in May 2019, which alleges that Defendants repeatedly violated RCRA and related regulations at various times between 2011 and 2014 with respect to their ownership and/or operation of underground storage tanks at 20 gas stations. 

*                *                *

In the Consent Decree filed today, Defendants admit, acknowledge, and accept responsibility for failing to perform required actions at one or more facilities on various specified dates between 2011 and 2014.  This includes:

• failing to perform release (i.e., leak or spill) detection;
• failing to maintain and provide records of release detection monitoring;
• failing to operate corrosion protection systems (including inspecting and testing) for steel underground storage tank systems and failing to maintain and provide records of corrosion protection monitoring;
• failing to cap and secure underground storage tanks that were temporarily closed;
• failing to perform release detection for underground storage tanks that were temporarily closed;
• failing to report suspected releases or unusual operating conditions for underground storage tanks;
• failing to conduct release investigations and confirm suspected releases or unusual operating conditions; and
• failing to maintain insurance policies sufficient to take corrective action and compensate third parties for bodily injury and property damage caused by accidental releases arising from the operation of the underground storage tanks.  

Pursuant to the Consent Decree, Defendants are required to comply with the regulations applicable to underground storage tanks for all underground storage tanks at the facilities at issue, and to take various measures to ensure such compliance, including undertaking inspections, maintaining and operating an electronic environmental management system providing centralized electronic monitoring of release detection at all underground storage tanks at the facilities, monitoring the under-dispenser containment systems at all underground storage tanks at the facilities, and providing semi-annual reports to EPA.  Defendants also agree to undertake certain measures with respect to newly acquired facilities containing underground storage tanks, including providing notice to EPA of the planned acquisition, conducting a pre-acquisition assessment, and ensuring that all underground storage tanks at newly acquired facilities are promptly brought into compliance with all applicable regulations.
 
In addition to this injunctive relief, Defendants will pay a civil penalty of $187,500.  Defendants will also be subject to substantial penalties if they fail to comply with the terms of the Consent Decree.
 
The Consent Decree will be lodged with the District Court for a period of at least 30 days, and notice of the Consent Decree will be published in the Federal Register before the Consent Decree is submitted for the Court’s approval.  This will afford members of the public the opportunity to submit comments on the Consent Decree to the Department of Justice.
 
Acting U.S. Attorney Strauss thanked EPA’s attorneys and staff for their critical work on this matter.
 
This case is being handled by the Office’s Environmental Protection Unit.  Assistant United States Attorneys Christopher Connolly, Rachael Doud, and Jennifer C. Simon are in charge of the case.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that STEFAN GILLIER, a/k/a “Stephan Gillier,” a/k/a “Stefan R.R. Gillier,” a/k/a “Roland Gillier,” a/k/a “Roland Van Gorp,” a Belgian citizen, was extradited today from Italy to the United States.  GILLIER was arrested on May 26, 2019, for engaging in a scheme in which he and a co-conspirator fraudulently obtained millions of dollars’ worth of aircraft parts through two aircraft part dealerships that they operated, RTF International, Inc. (“RTF”), and UN Air Service, Inc. (“UAS”).  GILLIER is expected be presented this afternoon in Manhattan federal court before Chief U.S. Magistrate Judge Gabriel W. Gorenstein.  GILLIER’s case is assigned to U.S. District Judge Richard M. Berman.

Acting U.S. Attorney Audrey Strauss said:  “As alleged, from 2004 until 2010, Stefan Gillier conspired to defraud manufacturers and distributors of aircraft parts out of millions of dollars’ worth of aircraft parts.  Gillier and his co-conspirator allegedly effectuated the scheme through fraudulent companies, phony references, stop orders on checks after they had received valuable parts, lucrative resales, and transferring criminal proceeds from corporate bank accounts to personal bank accounts once a victim company got wise to the fraud.  Thanks to our partner agencies here and abroad, Gillier now faces justice in an American court.”

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

GILLIER and his co-conspirator (“CC-1”) were co-presidents of RTF, a Delaware corporation that was registered to do business in New York, which dealt in aircraft parts.[2]  GILLIER ran the day-to-day business activities of RTF and was a signatory on RTF’s bank accounts.  RTF began obtaining aircraft parts from Honeywell International, Inc. (“Honeywell”), in June 2004.  Starting in 2005, RTF began increasing the number of parts it ordered from Honeywell, paying for them by check.  RTF paid with checks written for amounts well above the cost of the parts, which created an apparent credit balance in RTF’s favor.  RTF wrote approximately $16.6 million worth of checks to Honeywell, but stopped payment on approximately $15.8 million worth of them.  As a result, RTF was able to obtain approximately $8 million worth of aircraft parts without paying for them, and RTF turned a profit when reselling those fraudulently obtained parts to customers for less than the price that Honeywell had charged RTF.

To execute the scheme, GILLIER signed checks to Honeywell on behalf of RTF, but repeatedly caused stop payment orders to be placed after Honeywell shipped the parts to RTF.  When questioned by Honeywell’s employees about these stop payment orders, GILLIER, using an alias, falsely represented that the stop payment orders were the result of a misunderstanding with the bank and that he would check with RTF’s finance department.  In fact, as GILLIER knew, he had issued the stop payment orders, and RTF did not have a finance department.  In June 2006, when Honeywell began seeking civil relief against RTF, GILLIER caused various large transfers of fraud proceeds into other bank accounts – accounts that, by way of example, belonged either to GILLIER, his relative, or CC-1’s relatives.

After Honeywell discovered that it was being victimized by RTF, GILLIER and CC-1 continued their fraud scheme through a new corporate entity, UAS.  (Despite its name, “UN Air Service, Inc.” had no relation to the United Nations.)  CC-1 was the president and owner of UAS, a Delaware corporation that dealt in aircraft parts, which CC-1 ran out of an apartment in Manhattan.  GILLIER helped CC-1 obtain the Manhattan apartment that was used to continue the fraud scheme by providing a reference for CC-1 (using an alias) and by paying CC-1’s initial rental fees.  In 2006, UAS began obtaining aircraft parts from Pratt & Whitney Component Solutions, Inc. (“Pratt & Whitney”).  Like RTF, UAS began stopping payment on checks it had written to Pratt & Whitney for the aircraft parts; like RTF, UAS sold those aircraft parts to third parties for less than the price that Pratt & Whitney had charged UAS.

GILLIER, 47, a citizen of Belgium, is charged with eight counts: (1) one count of conspiracy to commit mail fraud, wire fraud, interstate transportation of stolen property, and money laundering, which carries a maximum potential penalty of five years in prison; (2) one count of mail fraud, which carries a maximum potential penalty of 20 years in prison; (3) one count of wire fraud, which carries a maximum potential penalty of 20 years in prison; (4) one count of interstate transportation of stolen property, which carries a maximum potential penalty of 10 years in prison; and (5) and four counts of money laundering, each of which carries a maximum potential penalty of 10 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 Homeland Security Investigations and the U.S. Department of Defense, Defense Criminal Investigative Service.  She also thanked the Federal Bureau of Investigation, the U.S. Marshals Service, the U.S. Department of Commerce, law enforcement and prosecutorial authorities in Italy, including the Italian Ministry of Justice and Interpol Rome, Honeywell, and Pratt & Whitney 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 Italy.

This matter is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorney Michael D. Neff is in charge of the prosecution.

[1] As the introductory phrase signifies, the entirety of the text of the Complaint and Indictment, and the descriptions of them set forth below, constitute only allegations, and every fact described should be treated as an allegation.  The defendant is presumed innocent unless and until proven guilty.

[2] CC-1 died in March 2010, a few weeks after being arrested in this case and released on bail.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, Dermot Shea, the Commissioner of the New York City Police Department (“NYPD”), Peter C. Fitzhugh, Special Agent-in-Charge of the New York Field Office of Homeland Security Investigations (“HSI”), and Raymond P. Donovan, Special Agent in Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), today announced a Superseding Indictment in United States v. Lawrence, et al. 19 Cr. 761 (JPO).  In the initial indictment, unsealed on October 24, 2019, 13 defendants were charged in connection with the activities of the Mac Baller Brims gang that operated in and around the Mount Hope section of the Bronx between 2017 and 2019.  In the Superseding Indictment, defendants DERRICK CASADO, a/k/a “Big Bank,” a/k/a “Papa D,” and CARLOS ROSARIO, a/k/a “Baby Bottle,” a/k/a “Carlito,” a/k/a “Barlito,” a/k/a “Barlos,” are charged with offenses relating an October 5, 2019 robbery in Manhattan, during which ROSARIO shot and killed Jonathan Rodriguez, 27.  A racketeering conspiracy charge was added against defendant JUAN TEJEDA, a/k/a “Gotti.”  The case is proceeding before U.S. District Judge J. Paul Oetken. 

Acting U.S. Attorney Audrey Strauss said:  “As charged in the Superseding Indictment, Carlos Rosario and Derrick Casado were responsible for the murder of Jonathan Rodriguez.  This is one of many acts of violence alleged to have been committed by members and associates of the Mac Baller Brims gang.  Thanks to the outstanding work of our law enforcement partners at the NYPD, HSI, and DEA, Rosario and Casado now face federal charges for murder.”

Police Commissioner Dermot Shea said:  “Today’s indictment reflects our continued focus on keeping criminal gangs off the city’s streets.  I thank our NYPD detectives, agents, and prosecutors for their sustained work on this case.”

HSI Special Agent-in-Charge Peter C. Fitzhugh said:  “Members of the Mac Baller Brims allegedly brandished firearms and fired those guns in order to preserve their territory and protect their illicit business.   As alleged, in this case, gang members Derrick Casado and Carlos Rosario are charged with murder, after having shot and killed Jonathan Rodriguez in a Manhattan robbery.  HSI New York’s strong partnerships with the NYPD and DEA, and the continued collaboration in criminal investigations, has led to the arrest of these two individuals and they will now face the consequences for their alleged deadly act.”

DEA Special Agent in Charge Raymond P. Donovan said:  “With many acts of violence alleged to be committed by members of the Mac Baller Brims Gang – none were as savage as the murder of Jonathan Rodriguez.  Gang violence threatens the safety of New Yorkers and puts communities in the crosshairs of drug trafficking and drug-related crime.  I applaud our partners at the US Attorney’s Office, the NYPD, and HSI for their diligent work.”

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

The Mac Baller Brims was a criminal enterprise, and its members and associates committed numerous acts of violence, including shootings, in and around the Bronx.  They engaged in such acts to preserve and protect their power, territory, and profits, and to promote and enhance the gang and its criminal activities.  Members of the gang also enriched themselves by committing robberies and by selling drugs, such as crack cocaine, heroin, fentanyl, cocaine, oxycodone, and marijuana, including in New York and in Maine.  While conducting their drug business, members and associates of the gang used, carried, and possessed firearms, and members of the gang brandished and fired those guns on multiple occasions since 2017.

On October 5, 2019, CASADO and ROSARIO robbed two victims in the vicinity of 20 East 116th Street in New York, New York, and in the course of that robbery and the immediate flight therefrom, ROSARIO shot and killed a third victim, Jonathan Rodriguez.  The Superseding Indictment charges CASADO and ROSARIO with one count of assault in aid of racketeering, and aiding and abetting the same; one count of brandishing a firearm, and aiding and abetting the same; one count of murder in aid of racketeering, and aiding and abetting the same; and one count of murder through use of a firearm, and aiding and abetting the same.  CASADO and ROSARIO face a maximum sentence of life in prison.            

In addition, the Superseding Indictment charges JUAN TEJEDA with conspiring to conduct and participate in the conduct and affairs of the Mac Ballers enterprise through a pattern of racketeering activity.  The maximum sentence for this charge is life in prison. 

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

Ms. Strauss praised the outstanding work of the NYPD, HSI, and DEA on this investigation.

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Frank Balsamello and Jamie Bagliebter 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.

[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, announced that AMEET GOYAL, M.D., an ophthalmologist in Rye, New York, previously indicted in this District for healthcare fraud offenses in November 2019, has been charged in a Superseding Indictment with fraudulently obtaining Government-guaranteed loans intended to help small businesses during the COVID-19 pandemic while he was on pretrial release. 

Under the rules of the Paycheck Protection Program (“PPP”) administered by the U.S. Small Business Administration (“SBA”), GOYAL and the ophthalmology practice he owned (the “Practice”) were ineligible for PPP relief due to GOYAL’s pending criminal charges.  In April 2020, in order to gain access to PPP funding, GOYAL falsely represented on two separate applications to the SBA and a financial institution headquartered in New York, New York (“Bank-1”), that he was not subject to any pending indictment.  The PPP also limited each business to one loan, with a maximum loan amount, and required applicants to certify that they have not and will not receive another PPP loan until December 31, 2020.  While making that certification, GOYAL circumvented the single-loan requirement by submitting two separate applications, with different business names, email addresses, business identification numbers, and loan amounts, for the same underlying Practice, while disclaiming on each application that he owned any other business.  Due to these misrepresentations, GOYAL successfully obtained two PPP loans totaling over $630,000.  GOYAL will be arraigned on June 26 in White Plains federal court before U.S. District Judge Cathy Seibel.

Acting U.S. Attorney Audrey Strauss said:  “While already facing charges for allegedly defrauding patients and insurers of millions of dollars, GOYAL allegedly used his practice to commit a new fraud in the midst of the COVID-19 pandemic.  As alleged, Goyal blatantly lied on multiple loan applications that he was not subject to any indictment, and on top of that, fraudulently double-dipped into the limited assets of the Paycheck Protection Program by pretending to apply on behalf of two separate businesses.  In so doing, Goyal allegedly looted over $630,000 in federal funds earmarked for legitimate small businesses in dire financial straits.”

According to the allegations contained in the Superseding Indictment[1] filed today in White Plains federal court:

During the relevant time period, GOYAL owned and operated Ameet Goyal, M.D. P.C., an ophthalmology practice doing business as Eye Associates Group, Rye Eye Associates, and other business names.  On November 21, 2019, an indictment (the “Indictment”) was returned in the action United States of America v. Ameet Goyal, 19 Cr. 844 (CS) (S.D.N.Y.), charging GOYAL with healthcare fraud, wire fraud, and making false statements relating to healthcare matters.  On November 22, 2019, GOYAL was arraigned on the Indictment and placed on pretrial release pursuant to an order that notified GOYAL of the potential effect of committing a criminal offense while on pretrial release.

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. 

Applicants with pending criminal charges are ineligible for PPP loans.  One question on the PPP borrower application form (the “Pending Charges Question”) requires the applicant to answer “Yes” or “No” and put their initial next to the response to the following question:  “Is the Applicant (if an individual) or any individual owning 20% or more of the equity of the Applicant subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction, or presently incarcerated, or on probation or parole?”  The application expressly advises that if the Pending Charges Question is answered “Yes,” then “the loan will not be approved.”

The PPP also limits each eligible borrower to one loan, and a maximum loan amount calculated based on a business’s average monthly payroll expenses.  The PPP application requires the applicant to certify and initial the representation that “During the period beginning on February 15, 2020 and ending on December 31, 2020, the Applicant has not and will not receive another loan under the Paycheck Protection Program.”

In or about April 2020, GOYAL applied to the SBA and Bank-1, a federally insured institution, for over $630,000 in Government-guaranteed loans through the SBA’s PPP.  Specifically, on or about April 21, 2020, GOYAL applied for a loan (“Loan-1”) in the amount of $358,700 for the business “Ameet Goyal,” doing business as “Eye associates.”  GOYAL represented the applicant as a C-corporation with a business address in Rye, New York (“Business Address-1”), and supplied his own social security number as the applicant’s business identification number. 

On or about April 29, 2020, GOYAL applied for a second loan (“Loan-2”) from Bank-1 under the PPP, this time in the amount of $278,500.  On this application, GOYAL listed the applicant’s name as “Rye eye associates,” a sole proprietorship also located at Business Address-1.   For the applicant’s business identification number, GOYAL reported the Employer Identification Number for Ameet Goyal, M.D. P.C.  To substantiate each loan, however, GOYAL submitted the exact same underlying payroll expense report, showing the same employees and payroll costs. 

On each application, GOYAL stated that he was the president and 100% owner of the respective applicant, and that he did not own any business other than the listed applicant.  On both applications, GOYAL falsely answered “No” to the Pending Charges Question, and electronically placed his initials “AG” directly under his “No” response.  GOYAL also falsely certified, among other things, that the applicant will not receive another PPP loan until the end of the year.  

After processing each of GOYAL’s signed and certified applications, which used different business names, business identification numbers, email addresses, and loan amounts, Bank-1 advised GOYAL that the respective application was approved by the SBA, and that the applicant would need to execute a loan note in order for the loan to be funded.  Bank-1’s signing instructions to each loan note advised, “REMINDER: The Small Business Administration, in consultation with the Secretary of the Treasury, has determined that no eligible borrower may receive more than one PPP loan. A one loan per borrower limitation is necessary to help ensure that as many eligible borrowers as possible obtain PPP loans. If you have already received a PPP loan, you may not execute a loan note for another.” 

On or about May 3, 2020, GOYAL executed the Loan-1 loan note for $358,700, and received the funds in full on or about May 4, 2020.   On or about May 2 and 4, 2020, GOYAL executed multiple identical versions of the loan note for Loan-2 for $278,500, and received those funds in full on or about May 11, 2020.                        

*                      *                      *

GOYAL, 57, of Rye, New York, is charged with six counts in the Superseding Indictment.  The first count charges healthcare fraud, which carries a maximum sentence of 10 years in prison; the second count charges wire fraud, which carries a maximum sentence of 20 years in prison; and the third count charges making false statements relating to health care matters, which carries a maximum sentence of five years in prison.  Counts four, five, and six charge that while on pretrial release, the defendant committed the following offenses, respectively: bank fraud, which carries a maximum sentence of 30 years in prison; making false statements on a loan application, which carries a maximum sentence of 30 years in prison; and making false statements in a matter within the jurisdiction of the executive branch of the Government of the United States, which carries a maximum sentence of five years in prison.  Additionally, a conviction under counts four, five, and six, if committed while on pretrial release, provides for an additional maximum sentence of 10 years in prison consecutive to any other sentence of imprisonment.

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 work of the Federal Bureau of Investigation, the U.S. Department of Health and Human Services, Office of Inspector General, and the Office of the Inspector General of the SBA in connection with this investigation.

This case is being handled by the Office’s White Plains Division.  Assistant U.S. Attorneys Vladislav Vainberg, David Felton, and Margery Feinzig are in charge of the prosecution.  A civil fraud lawsuit relating to healthcare fraud under the False Claims Act is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorney Jeffrey K. Powell is in charge of the civil case.

The charges contained in the Superseding 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 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, announced that FRANK GIOVINCO was sentenced yesterday to 48 months in prison for extortion conspiracy and participating in a racketeering conspiracy in connection with the Genovese Crime Family’s control of two local chapters of a labor union.  GIOVINCO was convicted on December 3, 2019, following a six-day trial before U.S. District Judge Jed S. Rakoff, who also sentenced GIOVINCO. 

Acting U.S. Attorney Audrey Strauss said:  “For years, Frank Giovinco, as a member of the Genovese Crime Family, instilled fear in victims and perpetrated kickback schemes to tighten the Family’s stranglehold over two labor unions.  For committing these crimes, Giovinco will now spend four years in prison.”

According to the Indictment, evidence admitted at trial, court filings, and statements made in open court:

La Cosa Nostra, also known as the “Mob” or the “Mafia,” operates through entities known as “Families.”  The largest of the families operating in the New York City area is the Genovese Crime Family.  In the early 1990s, GIOVINCO was inserted by the Genovese Crime Family into a scheme to control the waste carting industry in New York City, and as far back as the late-1990s, GIOVINCO was a member of the Genovese Crime Family.

In more recent years, and continuing until 2017, GIOVINCO conspired with other members and associates of the Genovese Crime Family to commit a wide range of crimes to enrich themselves and the Genovese Crime Family, including multiple acts of extortion, honest services fraud, and bribery.  GIOVINCO’s activity for the Genovese Crime Family was centered on two local chapters (the “Unions”) of a labor union.  GIOVINCO participated in a host of schemes designed to manipulate and siphon money from the Unions for the benefit of the Genovese Crime Family.  Among other things, GIOVINCO extorted a financial adviser (the “Adviser”) and a labor union official (“Official-1”) for a cut of commissions made from union investments.  Audio recordings captured GIOVINCO planning to “rattle the cage” of a victim, and to have another victim’s “feet held to the fire.”  When Official-1 failed to pay the commissions demanded by GIOVINCO and other members of the Genovese Crime Family, Official-1’s life was threatened by GIOVINCO and his co-conspirators.  GIOVINCO further plotted to profit from union investments by paying kickbacks to Official-1 and others, in exchange for a cut of future commissions.  GIOVINCO also participated in the long-running extortion of a union president (“Official-2”) for annual tribute payments of more than $10,000, and sought a job at the union for the purpose of exerting control over Official-1 on the Genovese Crime Family’s behalf, and threatening to replace Official-1.

*                *                *

In addition to the prison term, GIOVINCO, 52, of Syosset, New York, was sentenced to three years of supervised release.

Ms. Strauss praised the outstanding investigative work of the Federal Bureau of Investigation, the U.S. Department of Labor’s Office of Inspector General and Office of Labor-Management Standards, the New York City Police Department, and the Special Agents of the United States Attorney’s Office for the Southern District of New York.

The case is being prosecuted by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Kimberly J. Ravener, Jason A. Richman, and Justin V. Rodriguez are in charge of the prosecution. 

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and Richard P. Donoghue, the United States Attorney for the Eastern District of New York, announced today that special telephone numbers have been set up to receive complaints of possible violations of federal election laws relating to tomorrow’s primary election in New York City and other counties in their districts. 

Their Offices will be available to receive complaints at the following numbers on Tuesday, June 23, 2020:

(646) 369-4739                       (for Manhattan, Bronx, Dutchess, Orange, Putnam, Rockland, Sullivan, and Westchester counties) and  

(718) 254-6790                       (for Brooklyn, Queens, Staten Island, Nassau, and Suffolk counties)

In addition, complaints of possible violations of federal election laws may be made directly to the Federal Bureau of Investigation at (212) 384-1000.

The Department of Justice has an important role in deterring election fraud and discrimination at the polls, and combating these violations whenever and wherever they occur.  The Department’s long-standing Election Day Program furthers these goals, and also seeks to ensure public confidence in the integrity of the election process by providing local points of contact within the Department for the public to report possible election fraud and voting rights violations while the polls are open on Election Day.

Federal law protects against such crimes as intimidating or bribing voters, buying and selling votes, impersonating voters, altering vote tallies, stuffing ballot boxes, and marking ballots for voters against their wishes or without their input.  It also contains special protections for the rights of voters, and provides that they can vote free from acts that intimidate or harass them.  For example, actions of persons designed to interrupt or intimidate voters at polling places by questioning or challenging them, or by photographing or videotaping them, under the pretext that these are actions to uncover illegal voting, may violate federal voting rights law.  Further, federal law protects the right of voters to mark their own ballot or to be assisted by a person of their choice.

The franchise is the cornerstone of American democracy.  We all must ensure that those who are entitled to the franchise exercise it if they choose, and that those who seek to corrupt it are brought to justice. 

The United States Attorneys also noted that the following additional telephone numbers are available for citizens to call for routine inquiries, such as where to vote or how late the polls are open, or to register complaints that may concern violations of New York State election laws:

IN NEW YORK CITY

City Board of Elections

Main Office                             (866) 868-3692 - TTY #: 212-487-5496

IN COUNTIES OUTSIDE NEW YORK CITY

County Boards of Elections

Dutchess                                (845) 486-2473

Nassau                                   (516) 571- 8683

Orange                                   (845) 360-6500

Orange (Spanish language)     (855) 331-2444

Putnam                                   (845) 808-1300

Rockland                                 (845) 638-5172

Suffolk                                    (631) 852-4500

Sullivan                                   (845) 807-0400

Westchester                            (914) 995-5700

Assistant United States Attorneys David J. Kennedy and Nicolas Roos are responsible for overseeing the handling of complaints of voting rights abuses and election fraud for the Southern District of New York.

Assistant United States Attorney Erik Paulsen is responsible for overseeing the handling of complaints of voting rights abuses and election fraud for the Eastern District of New York.

The Department of Justice announced today the unsealing of an indictment charging Ethan Melzer, 22, of Louisville, Kentucky, for allegedly planning an attack on his U.S. Army unit by sending sensitive details about the unit – including information about its location, movements, and security – to members of an extremist organization named Order of the Nine Angles (O9A), an occult-based neo-Nazi and white supremacist group.   Melzer is charged with conspiring and attempting to murder U.S. nationals, conspiring and attempting to murder military service members, providing and attempting to provide material support to terrorists, and conspiring to murder and maim in a foreign country.  The FBI and the U.S. Army thwarted Melzer’s plot in late-May 2020, and the FBI arrested Melzer on June 10, 2020.  The case is assigned to U.S. District Judge Gregory Woods.

“As the indictment lays out, Ethan Melzer plotted a deadly ambush on his fellow soldiers in the service of a diabolical cocktail of ideologies laced with hate and violence,” said Assistant Attorney General for National Security John C. Demers.  “Our women and men in uniform risk their lives for our country, but they should never face such peril at the hands of one of their own.  The National Security Division is proud to support the efforts of those who disrupted this planned attack and to seek justice for these acts.”

“As alleged, Ethan Melzer, a private in the U.S. Army, was the enemy within.  Melzer allegedly attempted to orchestrate a murderous ambush on his own unit by unlawfully revealing its location, strength, and armaments to a neo-Nazi, anarchist, white supremacist group,” said Acting U.S. Attorney Audrey Strauss for the Southern District of New York.  “Melzer allegedly provided this potentially deadly information intending that it be conveyed to jihadist terrorists.  As alleged, Melzer was motivated by racism and hatred as he attempted to carry out this ultimate act of betrayal.  Thanks to the efforts of the agents and detectives of the JTTF, our partners in the Departments of Defense and State, and the career prosecutors of this office, a hate-fueled terrorist attack against American soldiers has been thwarted.”

“As alleged, Ethan Melzer sought to facilitate a deadly mass attack on his fellow service members by disclosing sensitive information to multiple extremists, including al-Qa’ida.  The FBI’s top priority remains protecting Americans from terrorist attacks, at home and abroad, and this case highlights the outstanding work of the FBI’s Joint Terrorism Task Forces, along with our U.S. military partners, to identify and disrupt threats like this one against our men and women in uniform,” said Assistant Director Jill Sanborn of the FBI's Counterterrorism Division.

“Melzer declared himself to be a traitor against the United States, and described his own conduct as tantamount to treason.  We agree.  He turned his back on his county and his unit while aligning himself with members of the neo-Nazi group O9A,” said FBI Assistant Director-in-Charge of the New York Office William F. Sweeney Jr.  “Today, he is in custody and facing a lifetime of service – behind bars – which is appropriate given the severity of the conduct we allege today.” 

“This case is another example of the international responsibilities of the Federal Bureau of Investigation’s New York Joint Terrorism Task Force,” said Dermot Shea, the Commissioner of the New York City Police Department.  “Its FBI agents and New York City police detectives will travel anywhere in the world to bring terrorists to justice, in this case a soldier who is alleged to have forsaken his oath to the United States military and his fellow soldiers.”

According to the criminal complaint and the indictment charging Melzer, which were unsealed today in Manhattan federal court:

Melzer joined the U.S. Army in approximately 2018, and he joined O9A by approximately 2019.  Members and associates of O9A have espoused violent, neo-Nazi, anti-Semitic, and Satanic beliefs, and have expressed admiration for both Nazis, such as Adolf Hitler, and Islamic jihadists, such as Osama Bin Laden, the now-deceased former leader of al Qaeda.  Members and associates of O9A have also participated in acts of violence, including murders.

In approximately October 2019, Melzer deployed abroad with the Army.  Prior to planning the attack, Melzer consumed propaganda from multiple extremist groups, including O9A and the Islamic State of Iraq and al-Sham, which is also known as ISIS.  For example, in connection with the investigation, the FBI seized from an iCloud account maintained by Melzer an ISIS-issued document with a title that included the phrase “HARVEST OF THE SOLDIERS” and described attacks and murders of U.S. personnel in approximately April 2020.

In approximately April 2020, the Army informed Melzer of plans for a further foreign deployment by his unit.  Melzer thereafter sought to facilitate a deadly attack on his fellow service members.  After he was notified of the assignment, Melzer used an encrypted application to send messages to members and associates of O9A and a related group known as the “RapeWaffen Division,” including communications regarding Melzer’s commitment to O9A and sensitive information related to his unit’s anticipated deployment such as locations, movements, and security, for purposes of facilitating an attack on Melzer’s unit.  Melzer and his co-conspirators planned what they referred to as a “jihadi attack” during the deployment, with the objective of causing a “mass casualty” event victimizing his fellow service members.  Melzer acknowledged in electronic communications that he could be killed during the attack, and, describing his willingness to die, wrote “who gives a [expletive] [. . .] it would be another war . . . I would’ve died successfully . . . cause [] another 10 year war in the Middle East would definitely leave a mark.”  

On or about May 17, 2020, Melzer exchanged electronic communications regarding passing information about the anticipated deployment to a purported member of al Qaeda.  Between approximately May 24 and May 25, 2020, Melzer sent additional electronic messages with specific information about his unit’s anticipated deployment, including, among other things, the number of soldiers who would be traveling, the location of the facility to which Melzer expected the unit would be deployed, and information about the facility’s surveillance and defensive capabilities.  Melzer promised to leak more information once he arrived at the location of the new deployment in order to try to maximize the likelihood of a successful attack on his unit. 

During a voluntary interview with military investigators and the FBI, Melzer admitted his role in plotting the attack.  Melzer said that he intended the planned attack to result in the deaths of as many of his fellow service members as possible.  Melzer also declared himself to be a traitor against the United States, and described his conduct as tantamount to treason.    

Melzer is charged in the Indictment with (1) conspiring to murder U.S. nationals, in violation of 18 U.S.C. § 2332(b)(2), which carries a maximum sentence of life in prison; (2) attempting to murder U.S. nationals, in violation of 18 U.S.C. § 2332(b)(1), which carries a maximum sentence of 20 years in prison; (3) conspiring to murder U.S. military service members, in violation of 18 U.S.C. § 1117, which carries a maximum sentence of life in prison; (4) attempting to murder U.S. military service members, in violation of 18 U.S.C. § 1114, which carries a maximum sentence of 20 years in prison; (5) attempting to provide and providing material support to terrorists, in violation of 18 U.S.C. § 2339A, which carries a maximum sentence of 15 years in prison; and (6) conspiring to murder and maim in a foreign country, in violation of 18 U.S.C. § 956, which carries a maximum sentence of life in prison.  The statutory 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.

Assistant Attorney General Demers and Acting U.S. Attorney 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; the FBI’s Legal Attaché Office in Rome, Italy; the Air Force Office of Special Investigations; U.S. Army Counterintelligence; U.S. Army Criminal Investigation Command; Attorneys from the U.S. Army Africa Office of the Staff Judge Advocate and 173rd Airborne Brigade; and the U.S. Department of State Diplomatic Security Service.

This prosecution is being handled by the office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Sam Adelsberg, Matthew Hellman, and Sidhardha Kamaraju are in charge of the prosecution, with assistance from Trial Attorney Alicia Cook of the Counterterrorism Section.

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

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, John C. Demers, the Assistant Attorney General for National Security, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Dermot Shea, the Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of an indictment charging ETHAN MELZER for allegedly planning an attack on his U.S. Army unit by sending sensitive details about the unit – including information about its location, movements, and security – to members of an extremist organization named Order of the Nine Angles (“O9A”), an occult-based neo-Nazi and racially motivated violent extremist group.  MELZER is charged with conspiring and attempting to murder U.S. nationals, conspiring and attempting to murder military service members, providing and attempting to provide material support to terrorists, and conspiring to murder and maim in a foreign country.  The FBI and the U.S. Army thwarted MELZER’s plot in late-May 2020, and the FBI arrested MELZER on June 10, 2020.  The case is assigned to United States District Judge Gregory H. Woods.

Acting U.S. Attorney Audrey Strauss said:  “As alleged, Ethan Melzer, a private in the U.S. Army, was the enemy within.  Melzer allegedly attempted to orchestrate a murderous ambush on his own unit by unlawfully revealing its location, strength, and armaments to a neo-Nazi, anarchist, white supremacist group.  Melzer allegedly provided this potentially deadly information intending that it be conveyed to jihadist terrorists.  As alleged, Melzer was motivated by racism and hatred as he attempted to carry out this ultimate act of betrayal.  Thanks to the efforts of the agents and detectives of the JTTF, our partners in the Departments of Defense and State, and the career prosecutors of this Office, a hate-fueled terrorist attack against American soldiers has been thwarted.”

Assistant Attorney General John C. Demers said:  “As the indictment lays out, Ethan Meltzer plotted a deadly ambush on his fellow soldiers in the service of a diabolical cocktail of ideologies laced with hate and violence.  Our women and men in uniform risk their lives for our country, but they should never face such peril at the hands of one of their own.  The National Security Division is proud to support the efforts of those who disrupted this planned attack and to seek justice for these acts.”

FBI Assistant Director William F. Sweeney Jr. said:  “Melzer declared himself to be a traitor against the United States, and described his own conduct as tantamount to treason.  We agree.  He turned his back on his county and his unit while aligning himself with members of the neo-Nazi group O9A.  Today, he is in custody and facing a lifetime of service – behind bars – which is appropriate given the severity of the conduct we allege today.”

NYPD Commissioner Dermot Shea said:  “This case is another example of the international responsibilities of the Federal Bureau of Investigation’s New York Joint Terrorism Task Force.  Its FBI agents and New York City police detectives will travel anywhere in the world to bring terrorists to justice, in this case a soldier who is alleged to have forsaken his oath to the United States military and his fellow soldiers.”

According to the criminal Complaint and the Indictment charging Melzer,[1] which were unsealed today in Manhattan federal court:

MELZER joined the U.S. Army in approximately 2018, and he joined O9A by approximately 2019.  Members and associates of O9A have espoused violent, neo-Nazi, anti-Semitic, and Satanic beliefs, and have expressed admiration for both Nazis, such as Adolf Hitler, and Islamic jihadists, such as Usama Bin Laden, the now-deceased former leader of al Qaeda.  Members and associates of O9A have also participated in acts of violence, including murders.

In approximately October 2019, MELZER deployed abroad with the Army.  Prior to planning the attack, MELZER consumed propaganda from multiple extremist groups, including O9A and the Islamic State of Iraq and al-Sham, which is also known as ISIS.  For example, in connection with the investigation, the FBI seized from an iCloud account maintained by MELZER an ISIS-issued document with a title that included the phrase “HARVEST OF THE SOLDIERS” and described attacks and murders of U.S. personnel in approximately April 2020.

In approximately April 2020, the Army informed MELZER of plans for a further foreign deployment by his unit.  MELZER thereafter sought to facilitate a deadly attack on his fellow service members.  After he was notified of the assignment, MELZER used an encrypted application to send messages to members and associates of O9A and a related group known as the “RapeWaffen Division,” including communications regarding MELZER’s commitment to O9A and sensitive information related to his unit’s anticipated deployment such as locations, movements, and security, for purposes of facilitating an attack on MELZER’s unit.  MELZER and his co-conspirators planned what they referred to as a “jihadi attack” during the deployment, with the objective of causing a “mass casualty” event victimizing his fellow service members.  MELZER acknowledged in electronic communications that he could be killed during the attack, and, describing his willingness to die, wrote “who gives a fuck [. . .] it would be another war . . . I would’ve died successfully . . . cause [] another 10 year war in the Middle East would definitely leave a mark.”  

On or about May 17, 2020, MELZER exchanged electronic communications regarding passing information about the anticipated deployment to a purported member of al Qaeda.  Between approximately May 24 and May 25, 2020, MELZER sent additional electronic messages with specific information about his unit’s anticipated deployment, including, among other things, the number of soldiers who would be traveling, the location of the facility to which MELZER expected the unit would be deployed, and information about the facility’s surveillance and defensive capabilities.  MELZER promised to leak more information once he arrived at the location of the new deployment in order to try to maximize the likelihood of a successful attack on his unit. 

During a voluntary interview with military investigators and the FBI, MELZER admitted his role in plotting the attack.  MELZER said that he intended the planned attack to result in the deaths of as many of his fellow service members as possible.  MELZER also declared himself to be a traitor against the United States, and described his conduct as tantamount to treason.      

*                      *                      *

MELZER, 22, of Louisville, Kentucky, is charged in the Indictment with (1) conspiring to murder U.S. nationals, in violation of 18 U.S.C. § 2332(b)(2), which carries a maximum sentence of life in prison; (2) attempting to murder U.S. nationals, in violation of 18 U.S.C. § 2332(b)(1), which carries a maximum sentence of 20 years in prison; (3) conspiring to murder U.S. military service members, in violation of 18 U.S.C. § 1117, which carries a maximum sentence of life in prison; (4) attempting to murder U.S. military service members, in violation of 18 U.S.C. § 1114, which carries a maximum sentence of 20 years in prison; (5) attempting to provide and providing material support to terrorists, in violation of 18 U.S.C. § 2339A, which carries a maximum sentence of 15 years in prison; and (6) conspiring to murder and maim in a foreign country, in violation of 18 U.S.C. § 956, which carries a maximum sentence of life in prison.  The statutory 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 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; the FBI’s Legal Attaché Office in Rome, Italy; the Air Force Office of Special Investigations; U.S. Army Counterintelligence; U.S. Army Criminal Investigation Command; Attorneys from the U.S. Army Africa Office of the Staff Judge Advocate and 173rd Airborne Brigade; and the U.S. Department of State Diplomatic Security Service.

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Sam Adelsberg, Matthew Hellman, and Sidhardha Kamaraju are in charge of the prosecution, with assistance from Trial Attorney Alicia Cook of the Counterterrorism Section.

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

“In light of Attorney General Barr’s decision to respect the normal operation of law and have Deputy U.S. Attorney Audrey Strauss become Acting U.S. Attorney, I will be leaving the U.S. Attorney’s Office for the Southern District of New York, effective immediately.  It has been the honor of a lifetime to serve as this District’s U.S. Attorney and a custodian of its proud legacy, but I could leave the District in no better hands than Audrey’s.  She is the smartest, most principled, and effective lawyer with whom I have ever had the privilege of working.  And I know that under her leadership, this Office’s unparalleled AUSAs, investigators, paralegals, and staff will continue to safeguard the Southern District’s enduring tradition of integrity and independence.”

“I learned in a press release from the Attorney General tonight that I was ‘stepping down’ as United States Attorney.  I have not resigned, and have no intention of resigning, my position, to which I was appointed by the Judges of the United States District Court for the Southern District of New York.  I will step down when a presidentially appointed nominee is confirmed by the Senate.  Until then, our investigations will move forward without delay or interruption.  I cherish every day that I work with the men and women of this Office to pursue justice without fear or favor – and intend to ensure that this Office’s important cases continue unimpeded.”

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, John B. DeVito, the Special Agent-in-Charge of the New York Field Division of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”), Dermot Shea, the Commissioner of the New York City Police Department (“NYPD”), and Daniel A. Nigro, the Commissioner of the New York City Fire Department (“FDNY”), announced today the arrest of VICTOR A. SANCHEZ-SANTA in connection with his attempts to destroy a police car in midtown Manhattan.  SANCHEZ-SANTA was arrested this morning and will be presented in Manhattan federal court before U.S. Magistrate James L. Cott later today.

U.S. Attorney Geoffrey S. Berman stated:  “As alleged, the defendant selected a clearly marked NYPD vehicle, walked up beside it, started a fire under the vehicle, and fled the scene.  In allegedly doing so, he maliciously targeted law enforcement.  Arson is also a threat to more than its immediate victim, with the potential to destroy and terrify far beyond the place where a fire is set.  We have the quick response of members of the NYPD, FDNY, and ATF to thank for controlling the fire and identifying the defendant so he can face the significant charge for his alleged crime.”

ATF Special Agent-in-Charge John B. DeVito said:  “The use of fire as a weapon places our communities at risk and greatly endangers our citizens.  ATF and our partners will vigorously investigate and bring those responsible to justice by means of the Strategic Explosive Arson Response (SEAR) Task Force.”

NYPD Commissioner Dermot Shea said:  “Torching an NYPD vehicle, as alleged, is not just an isolated crime but a threat to all New Yorkers.  The hard work of our detectives and law enforcement partners in this case ensures there will be justice.”

Fire Commissioner Daniel A. Nigro said:  “Arson is a callous act that senselessly puts the lives of New Yorkers and first responders in danger.  The excellent teamwork of our Fire Marshals, the NYPD, and ATF continues to seek justice against those who use fire to harm others and destroy property.”

According to the allegations in the Complaint[1]:

On June 9, 2020, at approximately 1:20 a.m., SANCHEZ-SANTA stopped his car beside a marked NYPD vehicle on West 42nd Street in Manhattan.  He got out of his car, took a cloth glove in his hand and held the glove to a flame until it ignited.  He then put the burning glove underneath the NYPD vehicle, and got back into his car, leaving the glove burning beneath the police car.

*                *                *

SANCHEZ-SANTA, 19, of Queens, New York, is charged with one count of arson, which carries a mandatory minimum sentence of five years in prison and a maximum sentence of 20 years in prison.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

Mr. Berman praised the outstanding investigative work of the Strategic Explosive and Arson Response 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 Josiah Pertz 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 herein, constitute only allegations, and every fact described should be treated as an allegation.

Craig Stewart, Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced that ROBERT JOSEPH FARKAS, a/k/a “RJ,” pled guilty today before U.S. Magistrate Judge James L. Cott to conspiring to commit securities and wire 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 that purported to offer cryptocurrency-related financial products.  FARKAS 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 an initial coin offering (“ICO”) beginning in approximately July 2017.   

Mr. Stewart said:  “Farkas and his co-conspirators duped ICO investors into investing digital currency worth millions of dollars based on fictitious claims about their company, including misrepresentations relating to its purported digital technologies and its relationships with legitimate businesses in the financial services sector.  Whether in the context of traditional equity IPOs or newer cryptocurrency-related ICOs, raising capital through lies and deceit is a crime.”

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

In or about July 2017, FARKAS, along with co-defendants Sohrab Sharma and Raymond Trapani, 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 30, 2017, through October 5, 2017, FARKAS 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 a so-called “initial coin offering” or “ICO.”  As part of this effort, FARKAS and his co-defendants represented, in oral and written offering materials that were disseminated via the internet: (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 ICO, 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 FARKAS 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.

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 during its ICO based on fraudulent misrepresentations and omissions. 

*                *                *

FARKAS, 33, pled guilty to one count of securities fraud conspiracy and one count of wire fraud conspiracy, 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.  FARKAS will be sentenced by U.S. District Judge Lorna G. Schofield on a date to be determined.

Mr. Stewart praised the work of the FBI, and thanked the U.S. Securities and Exchange Commission for its assistance.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Dermot Shea, the Police Commissioner of the City of New York (“NYPD”), and Peter C. Fitzhugh, the Special Agent in Charge of the New York Office of Homeland Security Investigations (“HSI”), announced the return today of an Indictment charging DERRICK RICHARDSON, a/k/a “J Rocc,” with the September 19, 2015, murder of Nestor Suazo, 25, in the vicinity of East Tremont Avenue and Clinton Avenue in the Bronx, New York. 

U.S. Attorney Geoffrey S. Berman said:  “Nearly five years ago, Nestor Suazo’s life was senselessly taken.  As alleged in the Indictment, Derrick Richardson was one of those responsible for that terrible crime.  Now, thanks to the determination of our law enforcement partners at the NYPD and HSI, Richardson faces federal murder charges.”

NYPD Commissioner Dermot Shea said:  “The ability of investigators to bring about justice for this young man and provide a sense of closure to his family is paramount.  The identification and arrest of the suspect in this case was a joint effort that would not have been possible without the collaboration between the NYPD and our law enforcement partners.  I thank the U.S. Attorney and the NYPD Detectives and HSI agents involved in this case.”

HSI Special Agent in Charge Peter C. Fitzhugh said:  “Derrick Richardson is charged with the horrible crime of murdering Nestor Suazo in the Bronx in 2015.  As alleged in the indictment, Richardson is a member of the Rollin' 30s Crip, a gang that committed and threatened to commit acts of violence in order to promote its interests.  HSI stands united with its law enforcement partners to bring closure to the families of those lost to gang violence by finding and arresting the alleged offenders and seeking justice for their criminal acts.”

As alleged in the Indictment returned today[1]: 

RICHARDSON was a member of a racketeering enterprise known as the Rollin’ 30s Crips.  In order to fund the enterprise, protect and expand its interests, and promote its standing, members and associates of the Rollin’ 30s committed, conspired, attempted, and threatened to commit acts of violence, including murder and robbery; they conspired to distribute and possess with intent to distribute narcotics; and they obtained, possessed, and used firearms, including by brandishing and discharging them.

In connection with his membership in the gang, on or about September 19, 2015, RICHARDSON shot and killed Nestor Suazo in the vicinity of East Tremont Avenue and Clinton Avenue in the Bronx, New York.

*                *                *

RICHARDSON, 27, of the Bronx, New York, is charged with murder in aid of racketeering, which carries a mandatory minimum sentence of life in prison, and murder through the use of a firearm, which carries a maximum penalty of life in prison and a mandatory minimum sentence of five years in prison.  

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

Mr. Berman praised the outstanding investigative work of the NYPD and HSI. 

The case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Jessica K. Fender, Anden Chow, and Jacqueline C. Kelly 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 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.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of a Complaint in Manhattan federal court charging INIGO PHILBRICK, an art dealer specializing in post-war and contemporary fine art, with galleries in London, United Kingdom, and Miami, Florida, with engaging in a multi-year scheme to defraud various individuals and entities in order to finance his art business.  In total, PHILBRICK allegedly fraudulently obtained more than $20 million as a result of the scheme.

Federal law enforcement agents took PHILBRICK into custody yesterday in Vanuatu, after Vanuatu authorities expelled PHILBRICK from Vanuatu at the request of the U.S. Embassy in Papua New Guinea in light of the charges in the Complaint.  PHILBRICK was then transported to Guam, where he is expected to be presented in federal court on June 15, 2020.     

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Inigo Philbrick was a serial swindler who misled art collectors, investors, and lenders out of more than $20 million.  You can’t sell more than 100 percent ownership in a single piece of art, which Philbrick allegedly did, among other scams.  When his schemes began to unravel, Philbrick allegedly fled the country.  Now he is in U.S. custody and facing justice.”

FBI Assistant Director William F. Sweeney Jr. said:  “Mr. Philbrick allegedly sought out high-dollar art investors, sold pieces he didn’t own, and played games with millions of dollars in other people’s money.  The game ended when investors began wondering where their money went.  Hats off to the FBI NY Joint Major Theft Task Force/Art Crime Team who worked diligently to track down Mr. Philbrick and bring him back to the U.S., where, if convicted, he might have to trade in his jet-set life for a drab federal prison cell.”

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

From approximately 2016 through 2019, to finance his art business, PHILBRICK engaged in a scheme to defraud multiple individuals and entities in the art market located in the New York metropolitan area and abroad.  PHILBRICK made material misrepresentations and omissions to art collectors, investors, and lenders to access valuable art and obtain sales proceeds, funding, and loans (the “Fraud Scheme”).  PHILBRICK knowingly misrepresented the ownership of certain artworks, for example, by selling a total of more than 100 percent ownership in an artwork to multiple individuals and entities without their knowledge; and by selling artworks and/or using artworks as collateral on loans without the knowledge of co-owners, and without disclosing the ownership interests of third parties to buyers and lenders. PHILBRICK furnished fraudulent contracts and records to investors to artificially inflate the artworks’ value and conceal his scheme, including a contract that listed a stolen identity as the seller.

PHILBRICK obtained millions of dollars in loans and sale proceeds in connection with the Fraud Scheme.  Artworks about which PHILBRICK made these fraudulent misrepresentations in furtherance of the Fraud Scheme include, among others, a 1982 painting by the artist Jean-Michel Basquiat titled “Humidity,” a 2010 untitled painting by the artist Christopher Wool, and an untitled 2012 painting by the artist Rudolf Stingel depicting the artist Pablo Picasso.

By in or about the fall of 2019, PHILBRICK’s Fraud Scheme began to come to light as various investors and lenders learned about the fraudulent records PHILBRICK had provided and the material misrepresentations and omissions he had made.  By in or about mid-October, a lender officially notified PHILBRICK that he was in default of approximately a $14 million loan, and by November 2019, various investors had filed civil lawsuits in multiple jurisdictions regarding PHILBRICK’s Fraud Scheme in connection with various artworks.  At around the same time, PHILBRICK’s art galleries in Miami and London closed, and PHILBRICK stopped responding to legal process.  Flight records show that PHILBRICK departed the United States shortly before public reporting began about the lawsuits.  Based on information provided by Vanuatu, PHILBRICK has been residing in Vanuatu since in or about late October 2019.          

*                *                *

PHILBRICK, 33, a U.S. citizen previously residing in London, United Kingdom, and a fugitive since October 2019, was charged in the Complaint with one count of wire fraud and one count of aggravated identity theft.  The wire fraud charge carries a maximum prison term of 20 years.  The aggravated identity theft charge carries a mandatory sentence of two years in prison.

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

Mr. Berman praised the investigative work of the FBI NY Joint Major Theft Task Force/Art Crime Team.  In addition, Mr. Berman thanked authorities in Vanuatu, including the Vanuatu Police Force, Vanuatu Immigration Services, and the Ministry of Foreign Affairs, International Cooperation, and External Trade of the Republic of Vanuatu, as well as the United States Justice Department’s Office of International Affairs of the Department’s Criminal Division, the U.S. State Department, the U.S. Embassy in Papua New Guinea, the Regional Security Office Port Moresby, the FBI’s Legal Attaché in Canberra, Australia, the FBI’s Guam Resident Agency, and the U.S. Marshals Service in Guam for their assistance.    

This case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant United States Attorneys Jessica K. Feinstein and Cecilia E. Vogel are in charge of the prosecution.

To report information related to this case, please contact the FBI's Art Crime Team at NYArtCrime@fbi.gov.

The allegations 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 descriptions of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Peter C. Fitzhugh, Special Agent in Charge of the New York Office of Homeland Security Investigations (“HSI”), announced today the arrest of JONATHAN WEISS, a/k/a “Ian_Jameson.”  WEISS is charged with communicating with three different underage victims online and directing them to take sexually explicit images and send them to WEISS.  WEISS was arrested this morning and presented today before U.S. Magistrate Judge Judith C. McCarthy in Manhattan federal court and detained.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Jonathan Weiss’s alleged crimes are abhorrent and predatory.  Using a common social media app, Weiss allegedly sexually exploited three 13-year-olds.  We will continue to work with our partners at Homeland Security Investigations to vigorously investigate and prosecute defendants who prey on children.”

HSI Special Agent in Charge Peter C. Fitzhugh said:  “Jonathan Weiss allegedly posed as a minor and directed his teenage victims to take and send sexually explicit photographs to him through Snapchat.  It is horrific for anyone to prey on our most vulnerable.  HSI New York’s Child Exploitation Investigation Unit is resolute in the pursuit of alleged predators lurking within our communities, and we will continue to work with our partners in the U.S. Attorney’s Office for the Southern District of New York to protect our community from predators seeking to pull them into their dark, evil world.”

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

In September 2019, WEISS, a/k/a “Ian_Jameson,” communicated online via Snapchat with a 13-year-old minor (“Victim-1”) and directed Victim-1 to take and send sexually explicit photographs of Victim-1 to WEISS.   WEISS engaged in the same type of activity with another 13-year-old minor (“Victim-2”) in August 2019 and a third 13-year-old minor (“Victim-3”) in May 2020.

During his communications with his victims, WEISS utilized the Snapchat screen name “Ian_Jameson” and posed as a minor.  WEISS allegedly told Victim-1 that if she did not send more nude pictures to WEISS, he would send the pictures she had already sent to others.  In response to the threats to send her pictures to others, Victim-1 “blocked” “Ian_Jameson” on Snapchat.  Shortly thereafter, people began telling her that they had received her nude images.   

There may be more victims of this alleged conduct.  If you have information to report, contact Homeland Security Investigations through its toll-free Tip Line at 1-866-DHS-2423 or by completing its online tip form.  Both are staffed around-the-clock by investigators.  From outside the U.S. and Canada, callers should dial 802-872-6199.  Hearing-impaired users can call TTY 802-872-6196.           

*                *                *

WEISS, 29, of Middletown, New York, is charged with three counts of sexual exploitation of a minor, each carrying a minimum sentence of 15 years in prison and a maximum sentence of 30 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.

Mr. Berman praised the efforts of Homeland Security Investigations, the Putnam County Sheriff’s Office, the Clay County Sheriff’s Office in Orange Park, Florida, and the Longview Police Department in Longview, Texas, in connection with this investigation.  He 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 charges 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.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Dermot Shea, Commissioner of the New York City Police Department (“NYPD”), 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 ISMAEL IGARTUA, a/k/a “Ismeal John,” a/k/a “John Igartua,” and JOSE RODRIGUEZ have been arrested for their participation in an armed robbery of a jewelry store in Manhattan on Saturday, June 6, 2020. IGARTUA and RODRIGUEZ were apprehended shortly after the robbery and were presented in Manhattan federal court before U.S. Magistrate Judge Debra Freeman today.

U.S. Attorney Geoffrey S. Berman stated:  “As alleged, the defendants participated in a brazen daytime robbery, in which a victim was threatened at gunpoint and tied up.  The defendants’ alleged scheme – impersonating NYPD officers and asking to check the victim’s firearm due to recent incidents of looting – took advantage of uncertain conditions in our community, preying on the fears of a small business owner and his trust in law enforcement.  This alleged criminal conduct is intolerable, and thanks to the work of the NYPD and the FBI, the defendants face significant federal charges for their alleged crimes.”

NYPD Commissioner Dermot Shea said:  “Posing as police officers to prey on a city business during an international pandemic, as alleged, is dangerous to civilians and law enforcement officers.  Arrests like these highlight the indispensable work of our NYPD detectives, and federal partners, in ensuring justice for New Yorkers.”           

FBI Assistant Director William F. Sweeney Jr. said:  “Well done to the detectives and agents who worked to solve this quickly and bring justice to a business owner in the community.  It speaks highly of the work done by the NYPD’s 19th Precinct Detective Squad and the FBI-NYPD Joint Major Theft Task Force that the only jewelry these men will wind up with are metal bracelets.”

According to the allegations in the Complaint[1]:

On the afternoon of June 6, 2020, IGARTUA and RODRIGUEZ robbed a jewelry store located on the Upper East Side of Manhattan.  While dressed as and identifying themselves as NYPD officers, IGARTUA and RODRIGUEZ asked for permission to enter the jewelry store and requested to examine the store owner’s properly permitted firearm, claiming that, due to the recent looting of commercial establishments in New York, firearms were at risk of being stolen. Once the store owner gave IGARTUA and RODRIGUEZ his firearm, the robbers, who were armed with two firearms of their own, restrained and tied up the store owner, and stole his firearm and jewelry valued at over $150,000.  IGARTUA and RODRIGUEZ were apprehended a short time later in a subway station several blocks from the jewelry store.

*                *                *

IGARTUA, 59, of Queens, New York, and JOSE RODRIGUEZ, 59, of the Bronx, New York, are each charged with one count of robbery conspiracy, which carries a maximum sentence of 20 years in prison; one count of robbery, which carries a maximum sentence of 20 years in prison; one count of brandishing a firearm, which carries a maximum sentence of life in prison; and one count of being a felon in possession of a firearm, which 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 would be determined by a judge.

Mr. Berman praised the outstanding investigative work of the FBI-NYPD Joint Major Theft Task Force and the NYPD’s 19th Precinct Detective Squad.

The prosecution of this case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Kaylan E. Lasky 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.

Today, Prince Andrew yet again sought to falsely portray himself to the public as eager and willing to cooperate with an ongoing federal criminal investigation into sex trafficking and related offenses committed by Jeffrey Epstein and his associates, even though the Prince has not given an interview to federal authorities, has repeatedly declined our request to schedule such an interview, and nearly four months ago informed us unequivocally – through the very same counsel who issued today’s release – that he would not come in for such an interview.  If Prince Andrew is, in fact, serious about cooperating with the ongoing federal investigation, our doors remain open, and we await word of when we should expect him. 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Stacy Amin, Chief Counsel for the U.S. Food and Drug Administration (“FDA”), announced today that the United States District Court for the Southern District of New York has entered an injunction against defendants RAHSAN A. HAKIM (“Hakim”) and ADONIIAH A. RAHSAN (“Rahsan”) (collectively, the “Defendants”) for repeated violations of the Food, Drug, and Cosmetic Act.  HAKIM and RAHSAN do business as Sundial Herbal Products (“Sundial”). 

U.S. Attorney Geoffrey S. Berman said:  “If you threaten the public health by selling unapproved or misbranded drugs, we will stop you.  There is no place for modern-day snake oil salesmen.”

FDA Chief Counsel Stacy Amin said:  “Americans expect and deserve medical treatments that have been scientifically proven to be safe and effective.  Making claims that unproven drugs can cure or prevent diseases places consumers’ health at risk.  We remain committed to pursuing and taking swift action against those who attempt to subvert the regulatory functions of the FDA by repeatedly disregarding the law and distributing unapproved products.” 

The Complaint

According to the Government’s complaint, Defendants manufactured and sold various herbal products – often referred to as “tonics” and “herbal teas” – that constitute unapproved new drugs.  Defendants claimed that these products cure, treat, and/or prevent numerous diseases and conditions, including HIV, cancer, syphilis, diabetes, high blood pressure, arthritis, asthma, and heart disease.  None of Defendants’ products had been tested or approved by the FDA for safety or effectiveness.  These products were also “misbranded” in that they failed to include instructions for their safe use.  Defendants’ sale of such products pose a threat to public health because the products’ disease treatment claims may cause consumers to delay appropriate medical care for these serious medical issues.  Sundial had been inspected by the FDA multiple times, including during the pendency of the lawsuit, and, despite repeated promises to do so, Defendants failed to correct their violations of the Food, Drug, and Cosmetic Act (“FDCA”).

The United States filed this lawsuit seeking to enjoin Defendants from manufacturing and selling drugs in violation of the FDCA.

The District Court’s Findings

On May 26, 2020, the District Court found that Defendants have repeatedly violated the law by distributing unapproved new and misbranded drugs.  Among other things, the Court concluded that:

• “The labels that the FDA collected . . . indisputably establish that Defendants claimed that their products were intended for use in diagnosing, curing, mitigating, treating, and/or preventing a wide variety of diseases.”
   
• The drugs sold by Defendants were “unapproved new drugs” because, among other things, they are “not generally recognized as safe and effective” and have not been approved by the FDA.
   
• Defendants’ drugs were “misbranded” because “the record shows that many of Defendants’ drugs are intended for treating serious diseases or conditions such as HIV, cancer, and Ebola, all of which require diagnosis and management by a physician . . . . As such, they are only safe for use under the supervision of a physician, which brings them within the definition of prescription drugs.”  Furthermore, “Defendants’ drugs are also misbranded because they lack adequate instructions for lay use.”
   
• “Defendants’ past violations are also egregious, as they made claims that their products could cure cancer, HIV, and Ebola, among other serious diseases,” and “absent injunctive relief, nothing prevents Defendants from returning to their old ways.”
   

Permanent Injunction 

After finding that Defendants had committed “egregious” violations of the law, the Court entered a permanent injunction prohibiting Defendants from manufacturing or selling these products or any drug unless and until either: (1) a new drug application is approved for their drugs; or (2) they meet various requirements demonstrating compliance with the FDCA.  Such requirements include that Defendants must:

• Remove all claims in labels, promotional material, websites, and social media pages that these herbal remedies diagnose, cure, mitigate, treat, or prevent disease.
   
• Recall and destroy, at their own cost, under the FDA’s supervision, all drugs manufactured, packed, labeled, held, and distributed from 2014 through the present.
   
• Retain, at their own cost, a qualified, trained, and experienced drug labeling expert to review and report to the FDA on Defendants’ compliance with the issued injunction and FDCA.
   
• Arrange for annual audits by an independent third-party to confirm ongoing compliance.

*                      *                      *

Mr. Berman thanked the investigators and attorneys of the FDA for their valuable assistance on this matter.

This case was handled by the Environmental Protection Unit of the Office’s Civil Division.  Assistant U.S. Attorney Emily Bretz is in charge of this case.   

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that ANTONIO DIMARCO was sentenced in Manhattan federal court today to 54 months in prison for participating in a conspiracy to commit wire fraud, based on his attempt to fraudulently acquire millions of dollars’ worth of artworks from art galleries, auction houses, and private collectors from around the world.  U.S. District Judge Valerie E. Caproni presided over the defendant’s sentencing.

U.S. Attorney Geoffrey S. Berman said:  “Antonio DiMarco was a serial conman and deceiver who stole people’s identities, placed winning bids on renowned artworks he couldn’t afford, and defrauded lenders and insurers with false claims of ownership.  As the Court noted today, DiMarco would lie to anyone if it suited his interests.  DiMarco received a prison sentence commensurate with the severity of his crimes.” 

As alleged in the underlying Complaint, Indictment, public filings, and statements made in open court:

From at least as early as November 2017 through and including October 2018, DIMARCO and a co-conspirator attempted to acquire millions of dollars’ worth of artworks from around the world using a variety of methods, including through appropriating the identity and financial information of a particular victim, and creating and presenting a slew of fraudulent documents. 

For example, in November 2017, DIMARCO attempted to purchase artworks by Mark Rothko and Ad Reinhardt at an auction house located in New York, New York.  DIMARCO obtained access to the auction through the use of an elderly victim’s identity documents, including her passport, and bank account information showing that the victim held liquid assets in excess of $7 million.  DIMARCO and his co-conspirator further presented false information indicating that the victim had authorized DIMARCO to bid on her behalf, when in reality, the victim knew nothing about DIMARCO’s plan to purchase artworks in her name.  DIMARCO won the auction, bidding close to $6.5 million for the Rothko work, and $1,155,000 for the Reinhardt work.  As DIMARCO in fact lacked funds to pay for the art, however, the auction house suffered a loss of close to $1.4 million.

Continuing throughout late 2017 through at least May 2018, DIMARCO and his co-conspirator attempted to purchase artworks from approximately 20 galleries and collectors throughout the world.  Indeed, DIMARCO and his co-conspirator entered into completed sales agreements for more than 60 artworks totaling in excess of $150 million.  Among other works, DIMARCO entered into a contract for a $16.5 million Matisse painting.  None of these works was ever paid for, yet to entice the galleries and collectors to continue to hold the artwork for DIMARCO and his co-conspirator, they passed strings of false excuses for non-payment.  This also caused galleries and collectors to suffer monetary losses.

Having failed to obtain valuable artworks that he had contracted to buy but never paid for, DIMARCO then began to seek out ways to monetize artworks that he had not acquired, by creating a series of false documents designed to deceive financiers and insurers into believing that in fact he owned the artworks.  DIMARCO did this in hopes of obtaining funds based on the value of those artworks.  DIMARCO was arrested in the course of executing this scheme, after having arranged a showing of high-value artwork he convinced others that he owned.

DIMARCO further orchestrated two additional frauds conducted in the midst of the art scheme: a ploy to deprive a victim of hundreds of thousands of dollars through false representations concerning the purposes for providing the funds, and a scheme to purchase a high-end property in Manhattan using a fraudulently altered bank statement.    

*              *             *

In addition to his prison term, DIMARCO was also sentenced to three years of supervised release and ordered to pay $2,384,050.00 in restitution.

Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation’s Art Crime Team and encourages anyone with information relating to theft, looting, or fraud in the art market to contact the FBI’s Art Crime Team in New York at (212) 384-1000.

These cases are being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant United States Attorneys Tara M. La Morte and Abigail S. Kurland are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that BRUCE BAGLEY pled guilty today before U.S. District Judge Jed S. Rakoff to two counts of money laundering.  BAGLEY used bank accounts in his name and in the name of a company he created in Florida to launder over $2 million in proceeds of a Venezuelan bribery and corruption scheme into the United States. 

U.S. Attorney Geoffrey S. Berman said:  “Bruce Bagley, a college professor and author, went from writing the book on crime – literally writing a book on drug trafficking and organized crime – to committing crimes.  Professor Bagley admitted today to laundering money for corrupt foreign nationals – the proceeds of bribery and corruption, stolen from the citizens of Venezuela.  Bagley now faces the possibility of a long tenure in prison.”

According to the Indictment and other filings in the case:

In or about November 2016, BRUCE BAGLEY, a professor of international studies with publication credits including the book Drug Trafficking, Organized Crime, and Violence in the Americas Today, opened a bank account (“Account-1”) on behalf of a company (“Company-1”) that BAGLEY owned and controlled.  Between in or about November 2016 and in or about November 2017, Account-1 had minimal activity.  In or about November 2017, Account-1 began receiving monthly deposits of hundreds of thousands of dollars from bank accounts located in Switzerland and the United Arab Emirates (the “Overseas Accounts”).  Each month, BAGLEY would receive a deposit of approximately $200,000 from one of the Overseas Accounts into Account-1.  Thereafter, he would withdraw approximately 90 percent of the funds in the form of a cashier’s check, payable to an account held by another individual (“Individual-1”).  BAGLEY would send the remainder of the funds to his personal account.  Between in or about November 2017 and in or about October 2018, Account-1 received approximately $2.5 million from the Overseas Accounts. 

The Overseas Accounts belonged to a Colombian individual (“Individual-2”).  In or about December 2018, Individual-1 had a conversation with BAGLEY regarding the fact that BAGLEY was moving Individual-2’s funds into the United States and that the funds represented the proceeds of foreign bribery and embezzlement stolen from the Venezuelan people.  Nevertheless, in or about December 2018, BAGLEY created a new bank account (“Account-2”) in order to transfer additional money belonging to Individual-2.  BAGLEY continued to receive hundreds of thousands of dollars from the Overseas Accounts after opening Account-2.  BAGLEY transferred the majority of these funds to Individual-1 but retained a commission for his services.

*                      *                     *

BAGLEY, 73, of Coral Gables, Florida, pled guilty to two counts of money laundering, 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.

BAGLEY is scheduled to be sentenced by Judge Rakoff on October 1, 2020, at 4:00 p.m.

Mr. Berman praised the work the FBI.  

The prosecution of this case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant United States Attorneys Thane Rehn and Sheb Swett are in charge of the prosecution.

Geoffrey S. Berman, United States Attorney for the Southern District of New York, announced that JOSEPH OLIVIERI, a physician who practiced in Manhattan, was sentenced to 40 months in prison for participating in a scheme to illegally distribute oxycodone and other controlled substances.  OLIVIERI previously pled guilty before U.S. District Judge Paul A. Crotty, who also imposed today’s sentence.  Matthew Brady, OLIVIERI’s co-defendant, was previously sentenced to 36 months in prison for his role in the same scheme.

U.S. Attorney Geoffrey S. Berman said:  “Joseph Olivieri hid behind his medical license to sell addictive, dangerous narcotics.  In doing so, he violated his oath to practice medicine for the sole purpose of improving his patients’ health, and put peoples’ lives at risk to line his own pockets.  He now will serve time in prison for his crimes.”

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

OLIVIERI, a physician who practiced in New York, New York, participated in a five-year-long scheme to illegally distribute oxycodone and other controlled substances.  OLIVIERI was one of the top 15 prescribers of opioids in New York State during much of the scheme.  He prescribed over 250,000 pills of controlled substances, including highly addictive opioids such as oxycodone, oxymorphone, and morphine sulfate, to individuals he knew did not have a legitimate medical need for them.  OLIVIERI was paid in cash for these prescriptions, often by other individuals, including co-defendant Brady, who arranged with OLIVIERI for individuals posing as “patients” to obtain the prescriptions from OLIVIERI, and then collected the pills for their unlawful re-sale.  OLIVIERI deposited more than $1 million in cash into his bank accounts during the scheme.

*                *                *

OLIVIERI, 73, of Scranton, Pennsylvania, pled guilty to one count of conspiracy to distribute controlled substances outside the scope of professional practice and not for a legitimate medical purpose.  In addition to the prison term, OLIVIERI was sentenced to three years of supervised release and ordered to forfeit $500,000.

Brady, 35, of Staten Island, New York, pled guilty to one count of conspiracy to unlawfully distribute controlled substances.  In addition to the prison term, Brady was sentenced to three years of supervised release and ordered to forfeit $100,000.

Mr. Berman praised the outstanding investigative work of the New York City Police Department, Homeland Security Investigations, the Federal Bureau of Investigation, and the Office of Inspector General of the United States Department of Health and Human Services.

The case is being handled by the Office’s Narcotics Unit.  Assistant U.S. Attorneys Tara La Morte, Robert B. Sobelman, and Daniel C. Richenthal are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Timothy J. Shea, Acting Administrator U.S. Drug Enforcement Administration (“DEA”), announced today that ADEL EL ZABAYAR was charged in Manhattan federal court with participating in a narco-terrorism conspiracy, a cocaine importation conspiracy, and related weapons offenses involving the use and possession of machineguns and destructive devices, all based on his support of the Venezuelan Cártel de Los Soles and designated Foreign Terrorist Organizations Fuerzas Armadas Revolucionarias de Colombia (“FARC”), Hizballah, and Hamas.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, Adel El Zabayar was part of the unholy alliance of government, military, and FARC members using violence and corruption to further their narco-terrorist aims.  El Zabayar was allegedly a key part of the apparatus that conspired to export literally tons of cocaine into the U.S.  We further allege today, for the first time, that the Cártel de Los Soles sought to recruit terrorists from Hizballah and Hamas to assist in planning and carrying out attacks on the U.S., and that El Zabayar was instrumental as a go-between.  Allegedly, El Zabayar obtained from the Middle East a cargo planeload of military-grade weaponry.  With today’s charges, El Zabayar joins the rogues’ gallery of defendants we charged two months ago, and he faces the possibility of life in a U.S. prison if and when he is apprehended.”

DEA Acting Administrator Timothy J. Shea said:  “Today’s charges against Adel El Zabayar for trading arms for cocaine, and recruiting extremists, further demonstrates the corruption inside the Maduro regime.  The actions charged in the complaint show that Maduro’s administration operates with no regard for its own citizens, instead choosing to flood the United States with cocaine and other drugs while enriching itself.  As the layers of the Maduro regime are exposed, so is its immoral, unethical, and dangerous actions.”

According to the allegations contained in the Complaint charging EL ZABAYAR and in the related Superseding Indictment charging Maduro Moros and others in the Southern District of New York, which was unsealed on March 26, 2020[1]:

EL ZABAYAR is a member of the Cártel de Los Soles, or “Cartel of the Suns.”  The Cartel’s name refers to the sun insignias affixed to the uniforms of high-ranking Venezuelan military officials.  For more than two decades, Cartel members, including EL ZABAYAR and Maduro Moros, have abused the Venezuelan people and corrupted the legitimate institutions of Venezuela – including parts of the military, intelligence apparatus, legislature, and the judiciary – to facilitate the importation of tons of cocaine into the United States.  The Cartel sought not only to enrich its members and enhance their power, but also to “flood” the United States with cocaine and inflict the drug’s harmful and addictive effects on users in the United States. 

The Cártel de Los Soles has worked in coordination with designated Foreign Terrorist Organizations, including the FARC, Hizballah, and Hamas.  EL ZABAYAR, in particular, has, among other things, participated in weapons-for-cocaine negotiations with the FARC, obtained anti-tank rocket launchers from the Middle East for the FARC as partial payment for cocaine, and recruited terrorists from Hizballah and Hamas for the purpose of helping to plan and organize attacks against United States interests.    

For example, in or about 2014, EL ZABAYAR participated in several meetings with Diosdado Cabello Rondón, the president of Venezuela’s National Constituent Assembly and a member of the Cártel de Los Soles, at a military base in Caracas, Venezuela.  During the meetings, Cabello Rondón directed EL ZABAYAR to travel to the Middle East to obtain weapons and recruit members of Hizballah and Hamas to train at clandestine training camps located in Venezuela.  Cabello Rondón explained during the meeting, among other things, that the purpose of recruiting members of Hizballah and Hamas to train in Venezuela was to create a large terrorist cell capable of attacking United States interests on behalf of the Cártel de Los Soles.  EL ZABAYAR agreed.  Several months later, after EL ZABAYAR returned to Venezuela from the Middle East, EL ZABAYAR, Cabello Rondón, and others traveled together to a hangar controlled by Maduro Moros at the Simón Bolívar International Airport in Maiquetía, Venezuela, where EL ZABAYAR received a Lebanese cargo plane full of weapons, including rocket-propelled grenade launchers, AK-103s, and sniper rifles, that EL ZABAYAR had obtained while he was in the Middle East, as Cabello Rondón had directed.   

During the course of EL ZABAYAR’s activities on behalf of the Cártel de Los Soles, EL ZABAYAR also acted as a liaison between the Venezuelan government and Syrian president Bashar Hafez al-Assad, fought in Syria on behalf of Assad’s Hizballah-backed forces in or about 2013, and appeared in at least two interviews released by Al Manar, Hizballah’s terrorist-designated propaganda arm, in or about 2013 and 2014.

*                      *                     *

The Complaint charges EL ZABAYAR, 56, with: (1) participating in a narco-terrorism conspiracy, which carries a 20-year mandatory minimum sentence and a maximum of life; (2) conspiring to import cocaine into the United States, which carries a 10-year mandatory minimum sentence and a maximum of life; (3) using and carrying machine guns and destructive devices during and in relation to, and possessing machine guns and destructive devices in furtherance of, the narco-terrorism and cocaine importation conspiracies, which carries a 30-year mandatory minimum sentence and a maximum of life; and (4) conspiring to use and carry machine guns and destructive devices during and in relation to, and to possess machine guns and destructive devices in furtherance of, the narco-terrorism and cocaine importation conspiracies, which carries a maximum sentence of life.  The potential mandatory minimum and maximum sentences in this case are prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Berman praised the outstanding investigative work of the DEA’s Special Operations Division Bilateral Investigations Unit and New York Strike Force.

This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Amanda L. Houle, Matthew J. Laroche, Jason A. Richman, and Kyle Wirshba are in charge of the prosecution.

The charges in the Complaint and Superseding Indictment S2 11 Cr. 205 are merely accusations, and EL ZABAYAR and the defendants named in the Superseding Indictment are presumed innocent unless and until proven guilty.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Margaret Garnett, the Commissioner of the New York City Department of Investigation (“DOI”), announced the arrest of RONALD ROMANO for attempting to deceive and price gouge New York City (the “City”) into paying him and his co-conspirators approximately $45 million for personal protective equipment that ROMANO did not possess and was not authorized to sell.  ROMANO committed this scheme in an attempt to exploit NYC as it was trying to manage the impact of the COVID-19 pandemic and obtain these resources to help protect the lives of hospital and other frontline workers.  ROMANO is charged in a criminal Complaint, unsealed today, with one count of conspiring to commit wire fraud, one count of wire fraud, and one count of conspiring to violate the Defense Production Act.  ROMANO will be presented this afternoon in Manhattan federal court before U.S. Magistrate Judge Ona T. Wang.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, used car salesman Ronald Romano saw the current health emergency as an opportunity to cash in, using lies and deception in what he envisioned as a get-rich-quick scheme.  Romano allegedly lied repeatedly about his authority and ability to sell large quantities of personal protective equipment to the City – equipment he knew was desperately needed for use by frontline medical workers and first responders.  And he allegedly offered to sell this phantom equipment to the City at grossly inflated prices.  Now Ronald Romano’s short-lived second career as a purveyor of vital protective gear is over.”

DOI Commissioner Margaret Garnett said:  “At a time when the pandemic was ravaging New York City, this defendant greedily preyed on the City’s desperate need for protective equipment to stop the spread of the virus. But, instead of reaping millions of dollars, the scheme received a dose of old-fashioned, New York City skepticism from procurement specialists at the City’s Department of Citywide Administrative Services (DCAS), when the City called the supposed manufacturer to confirm the astronomical asking price. The defendant’s ruse unraveled, and these City workers proved that heroes have an array of titles. I thank the Office of the United States Attorney for the Southern District of New York for its partnership on this important investigation, one that demonstrates there is no tolerance, at any time, in particular during this crisis, for individuals who seek to victimize this City by holding essential workers’ safety hostage to price-gouging and fraud.”

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

In approximately February 2020, ROMANO, a used car dealer, began attempting to obtain for resale large quantities of personal protective equipment (“PPE”), including N95 respirators.  In furtherance of the scheme, ROMANO, among other things, created a fictitious authorization letter in March 2020, which falsely represented that ROMANO’s company was authorized to sell millions of units of 3M-brand PPE.  Shortly thereafter, in mid-March 2020, brokers acting on ROMANO’s behalf approached New York City (the “City”), which at the time was in critical need of legitimate, potentially lifesaving PPE, including respirators, in order to supply frontline healthcare workers and first responders during the COVID-19 public health emergency.  During ensuing negotiations, ROMANO and others repeatedly made false and fraudulent representations regarding, among other things, their authority and ability to supply 3M-brand PPE manufactured in the United States, and their track record in other PPE deals.  In an effort to close a deal for seven million N95 respirators, ROMANO, among other things, submitted a false and misleading references document to the City, which, among other things, listed a PPE deal with the Florida Division of Emergency Management (the “FDEM”) that had never occurred and separately provided a co-conspirator as a reference.  ROMANO hoped to get profit quickly through the scheme.  As he described in a message to a co-conspirator, “I’m working on a few deals that if I get any of them you might be buying a Ferrari.” 

In furtherance of this scheme, ROMANO attempted to sell PPE at prices far above the prices at which he hoped to acquire the PPE, including after such PPE was designated as scarce materials under the Defense Production Act on March 25, 2020.  ROMANO offered three-ply N99 facemasks to FDEM at prices marked up by more than 500% from the manufacturer’s prices, and he separately offered the City millions of 3M-brand N95 respirators at more than a 400% markup from the list price for such respirators.

*                *                *

ROMANO, 58, of Manalapan, New Jersey, is charged with one count of conspiring to commit wire fraud and one count of wire fraud, each of which carries a maximum sentence of 30 years in prison, and one count of conspiring to violate the Defense Production Act, which carries maximum sentence of not more than one year 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.

Mr. Berman praised the Special Agents of the United States Attorney’s Office for the Southern District of New York for their outstanding investigative work, and thanked the New York City Department of Investigation for their invaluable assistance with this matter.  Mr. Berman also thanked the 3M Company for its assistance in the investigation.

Mr. Berman thanked the Department of Justice’s COVID-19 Hoarding and Price Gouging Task Force.  Attorney General William P. Barr created the COVID-19 Hoarding and Price Gouging Task Force, led by Craig Carpenito, United States Attorney for District of New Jersey, who is coordinating efforts with the Antitrust Division and U.S. Attorneys across the country wherever illegal activity involving protective personal equipment occurs. 

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Nicholas W. Chiuchiolo and Timothy V. Capozzi 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.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Peter C. Fitzhugh, the Special Agent in Charge of the New York Office of Homeland Security Investigations (“HSI”), Philip R. Bartlett, Inspector in Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), and Raymond Donovan, Special Agent in Charge of the New York Office of the Drug Enforcement Administration (“DEA”), announced the arrest today of RICHARD SCHIRRIPA, a/k/a “the Mask Man,” a licensed pharmacist, on charges of violating the Defense Production Act by hoarding and price gouging scarce N95 masks; making two false statements to law enforcement; committing healthcare fraud; and committing aggravated identity theft.  SCHIRRIPA surrendered today and will be presented before U.S. Magistrate Judge Ona T. Wang in Manhattan federal court.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, Richard Schirripa exploited an unprecedented crisis to engage in profiteering.  He allegedly spent over $200,000 accumulating N95 masks and then sold masks at inflated prices, charging customers up to 50% more than he had paid to acquire those N95 masks.  As alleged, during a sale to an undercover officer, Schirripa said, ‘I feel like a drug dealer.’  He also allegedly committed several additional, unrelated crimes, including lying to law enforcement, defrauding Medicare and Medicaid, and exploiting the personal information of his pharmacy’s customers to fill prescriptions.”

HSI Special Agent in Charge Peter C. Fitzhugh said:  “At this time when our nation is battling the COVID-19 pandemic and we expect that our healthcare professionals are standing in solidarity with us, the defendant, Richard Schirripa, a licensed pharmacist, allegedly sought to capitalize and profit from the suffering of others.  As the pandemic was starting to take shape in March and April of 2020, Schirripa allegedly began hoarding desperately needed Personal Protection Equipment (PPE).  As demand for the PPE was peaking, he then purportedly took the opportunity to sell the hoarded PPE at prices as much as 50% above his acquisition costs.  HSI, along with law enforcement partners, and the United States Attorney’s Office, Southern District of New York, will tirelessly pursue those in our society who choose to put their personal greed and gain ahead of the laws of the United States and our fellow citizens.”

USPIS Inspector in Charge Philip R. Bartlett said:  “As alleged, Mr. Schirripa chose to amass a stockpile of PPE, specifically N95 masks, which were desperately needed for the safety of frontline workers.  He then allegedly used this crisis to jack up the price of this equipment. Thankfully, the ‘mask man’ has been unmasked by law enforcement and brought to justice for his alleged greedy crimes.”

DEA Special Agent in Charge Raymond Donovan said:  “There is no place in our city for a licensed pharmacist to allegedly victimize New Yorkers, especially at a time when people’s priority is their health and safety.   I applaud our law enforcement partners for their collaborative efforts throughout this investigation.” 

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

SCHIRRIPA engaged in at least three different criminal schemes: (1) hoarding and price gouging of thousands of N95 masks in late March and April 2020, in violation of the Defense Production Act (“DPA”); (2) lying to officers of the Drug Enforcement Administration (“DEA”) on two occasions in early 2020; and (3) causing Medicare and Medicaid to be billed for prescriptions based on false representations, from 2014 to 2019, as well as using his pharmacy patients’ identifying information, without authorization, in connection with his health care fraud scheme.

As for the first scheme, from at least late March to April 2020, during the COVID-19 global pandemic, SCHIRRIPA engaged in hoarding and price gouging of thousands of 3M N95 masks.  Between February and April 8, 2020, SCHIRRIPA purchased at least approximately $200,000 worth of N95 masks.  On March 25, 2020, the DPA was invoked, making it a crime to engage in hoarding or price gouging of specified equipment, including the types of masks SCHIRRIPA had.  SCHIRRIPA admitted to law enforcement that he was aware of the DPA and its restrictions on price gouging and hoarding.  Nevertheless, in the two weeks after March 25, 2020, SCHIRRIPA (1) continued to add to his stockpile of N95 masks by buying thousands of additional N95 masks; and (2) charged his customers inflated prices in connection with at least approximately 50 sales that, together, yielded approximately $50,000 in sales revenue.  For instance, SCHIRRIPA charged up to $25 per mask for a mask that he purchased for $20 per mask and that generally costs an end-user only approximately $1.27, according to 3M, the manufacturer.  Moreover, SCHIRRIPA purchased another model of 3M N95 mask for $10 and repeatedly resold it for as much as $15, which constitutes a markup of 50%.  His customers were in eight states and included funeral homes and doctors.  Agents recovered approximately 6,660 masks from SCHIRRIPA.

SCHIRRIPA made various statements during this scheme.  During a recorded call with an undercover agent (the “UC”), SCHIRRIPA said, “We’re in a time of emergency and shortage,” but added, “when you have something no one else has, it’s not a high price.”  In a text message dated April 2, 2020, SCHIRRIPA bragged to a potential customer that he “saw it coming” and the “good thing is no one has them.”  SCHIRRIPA repeatedly sold masks out of his car, including to the UC; during that sale, SCHIRRIPA told the UC, “I feel like a drug dealer standing out here.” 

Second, in both January and February 2020, SCHIRRIPA made material false statements to the DEA.  On each occasion, SCHIRRIPA falsely represented that as part of the recent closure of his pharmacy in New York, New York, he had transferred to others, sold, or destroyed all controlled substances.  In fact, SCHIRRIPA remained in possession of thousands of controlled substance pills/patches, including fentanyl, oxycodone, and oxymorphone.  These substances were all recovered from a safe in SCHIRRIPA’s home.  When agents executed a search warrant at SCHIRRIPA’s home in April 2020, SCHIRRIPA acknowledged that these controlled substances were from his pharmacy and he needed to destroy them.  There were nearly 4,000 pills/patches, in total.

Third, SCHIRRIPA caused Medicare and Medicaid to be billed for these controlled substance prescriptions, and he falsely represented that these prescriptions were for patients of his pharmacy.  In fact, these prescriptions were not for patients of his pharmacy, and SCHIRRIPA himself possessed those prescriptions at his home on Long Island.  In connection with this scheme, SCHIRRIPA used the personal identifying information of his pharmacy’s patients, without their authorization.

*                *                *

SCHIRRIPA, 66, of Fort Salonga, New York, is charged with one count of violating the Defense Production Act, which carries a maximum sentence of one year in prison; two counts of making false statements, each of which carries a maximum sentence of five years in prison; one count of healthcare fraud, which carries a maximum sentence of 20 years in prison; and one count of aggravated identity theft, which carries a mandatory minimum sentence of two years in prison, which must run consecutively to any other sentence of imprisonment.

Mr. Berman praised the outstanding investigative work of HSI-NY, working in conjunction with the U.S. Postal Inspection Service, the DEA, the New York City Police Department, U.S. Customs and Border Protection, the Internal Revenue Service, and the Port Authority Police Department.  He also expressed gratitude to the U.S. Department of Health and Human Services, the New York State Department of Corrections and Community Supervision, and the Northvale, New Jersey, Police Department.  He noted that the investigation is ongoing.

Mr. Berman thanked the Department of Justice’s COVID-19 Hoarding and Price Gouging Task Force.  Attorney General William P. Barr created the COVID-19 Hoarding and Price Gouging Task Force, led by Craig Carpenito, United States Attorney for District of New Jersey, who is coordinating efforts with the Antitrust Division and U.S. Attorneys across the country wherever illegal activity involving protective personal equipment occurs. 

This matter is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorney Michael D. Neff 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.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of a Complaint in Manhattan federal court charging WILLIAM SADLEIR, the former chairman and chief executive officer of Aviron Pictures, LLC, a movie production and distribution company based in Los Angeles, California, with engaging in multiple fraudulent schemes relating to investments made by a New York-based investment fund (the “Fund”) in Aviron Pictures, LLC and its affiliated entities (collectively, “Aviron”). 

SADLEIR is expected to be presented later today before U.S. Magistrate Judge Alexander F. MacKinnon in Los Angeles federal court.

United States Attorney Geoffrey S. Berman said:  “As alleged, William Sadleir orchestrated a massive fraud, embezzling approximately $14 million of investor funds from his film company to pay for a Beverly Hills estate, among other fraudulent acts.  Thanks to the dedicated work of our law enforcement partners at the FBI, Sadleir will be held accountable for his behind-the-scenes misdeeds.”

FBI Assistant Director William F. Sweeney Jr. said:  “William Sadlier, the chairman and CEO of Aviron Pictures, is charged today for his alleged role in a nearly $30 million fraud scheme.  He allegedly even went so far as to pose as a female employee of the sham New-York based company he created to further his illegal activity.  Today’s arrest serves as a reminder of the FBI’s dedication to holding people accountable for egregious financial crimes of this nature.”

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

The Fund is a publicly traded, closed-end investment fund.  Shares in the Fund trade on the New York Stock Exchange.  As of in or about December 2019, the Fund had approximately $649.1 million in assets.

WILLIAM SADLEIR was the chairman and chief executive officer of Aviron, and oversaw its operations from in or about 2015 until in or about December 2019.  Aviron participated in the distribution of a number of films in the United States, including My All American (2015), Kidnap (2017), The Strangers: Prey at Night (2018), A Private War (2018), Destination Wedding (2018), Serenity (2019), and After (2019).

SADLEIR engaged in two fraudulent schemes relating to an approximately $75 million investment made by the Fund in Aviron.

In one of the schemes (the “Advertising Scheme”), SADLEIR misappropriated millions of dollars in funds from Aviron that had been invested in Aviron by the Fund.  SADLEIR represented to the Fund that this money had been invested by Aviron in pre-paid media credits with the advertising placement company MediaCom Worldwide, LLC (“MediaCom”), which is a subsidiary of the advertising and media agency GroupM Worldwide Inc. (“GroupM Worldwide”).  Instead, SADLEIR, using the bank account for a sham entity he had created, illicitly transferred out of Aviron over $25 million of those funds.  Specifically, SADLEIR created a sham New York-based company called GroupM Media Services, LLC (the “Sham GroupM LLC”) designed to appear as if it was the legitimate entity, GroupM Worldwide, and a corresponding bank account in the name of that sham entity.  SADLEIR then used a significant portion of those illicitly transferred funds for his personal benefit, including to purchase a private residence in Beverly Hills for approximately $14 million.  SADLEIR then falsely represented to the Fund that Aviron had purchased an approximately $27 million balance in pre-paid media credits with MediaCom that were available to promote future Aviron films, and pledged a portion of those credits to the Fund as collateral for additional loans, when in fact the claimed credits did not exist due to SADLEIR’s misappropriation.  As part of these false representations, SADLEIR also created a fake identity of a purported New York-based female employee of the Sham GroupM LLC named “Amanda Stevens” who corresponded with a representative of the Fund, ensuring the Fund that Aviron had an approximately $27 million balance in pre-paid media credits with the Sham GroupM LLC.  In fact, SADLEIR himself posed as Amanda Stevens when engaging in email exchanges with a representative from the Fund.

In the other scheme (the “UCC Scheme”), SADLEIR engineered the illicit and fraudulent sale and refinancing of assets worth an estimated $3 million that secured the Fund’s loans to Aviron.  The Fund had secured its investment in Aviron by, among other means, obtaining UCC liens in 2017 and 2018 on certain intellectual property and other assets relating to Aviron’s films.  In 2019, SADLEIR used the forged signature of one of the Fund’s portfolio managers on releases to remove the Fund’s UCC liens on certain of these secured assets in order to sell or refinance them without the Fund’s consent, thus depriving the Fund of its collateral on outstanding loans, loans on which Aviron ultimately defaulted.         

*                *                *

SADLEIR, 66, of Beverly Hills, California, was charged in the Complaint with two counts of wire fraud and one count of aggravated identity theft.  The wire fraud charges each carry a maximum prison term of 20 years.  The aggravated identify theft charge carries a mandatory sentence of two years in prison.

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

Mr. Berman praised the investigative work of the FBI.  Mr. Berman also thanked the SEC Division of Enforcement, which brought a separate civil action.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorney Jared Lenow is in charge of the prosecution.  

Today’s charges are just the latest in a string of prosecutions by this Office – unrelated to today’s – of individuals either in the entertainment industry or victimizing individuals or entities in the entertainment industry, or both.  The Office successfully prosecuted former radio host Craig Carton, musician Daniel Hernandez (aka “Tekashi 6ix 9ine”), musician and actor Earl Simmons (aka “DMX”), hacker Christian Erazo (for theft of intellectual property from recording artists), and fraudster concert impresario William McFarland.  The Office also has pending charges against Behzad Mesri, an Iranian national who had previously hacked computer systems for the Iranian military (for allegedly infiltrating HBO’s systems and stealing proprietary data, including scripts and plot summaries for unaired “Game of Thrones” episodes), and against nine leaders, members, and associates of the Tehran-based Mabna Institute (for a massive hacking campaign that allegedly included among its victims two major U.S. media and entertainment companies).

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 descriptions of the Indictment constitute only allegations, and every fact described should be treated as an allegation.

Geoffrey S. Berman, the 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, Eastern Region Special Agent-in-Charge of the 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 MUGE MA, a/k/a “Hummer Mars,” a Chinese national residing in Manhattan, for a fraudulent scheme to obtain over $20 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, MA falsely represented to the SBA and five financial institutions that his companies, New York International Capital LLC (“NYIC”) and Hurley Human Resources LLC (“Hurley”), had hundreds of employees and paid millions of dollars in wages to those employees, when, in fact, MA appears to have been the only employee of his companies.  MA’s company NYIC also fraudulently represented that it was representing New York State in procuring COVID-19 test kits and personal protective equipment to respond to the COVID-19 pandemic.  MA was arrested this morning and will be presented later today before U.S. Magistrate Judge Kevin Nathaniel Fox.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Muge Ma, a/k/a ‘Hummer Mars,’ allegedly attempted to secure over $20 million in Government-guaranteed loans intended for businesses devastated by the coronavirus/COVID-19 pandemic.  In furtherance of the scheme, Ma allegedly falsely represented in his applications to banks and the SBA to own two companies with hundreds of employees to whom he paid millions in wages.  As alleged, Ma described one of the companies as a ‘patriotic American’ firm, and said of the other company that it would ‘help the country reduce the high unemployment rate caused by the pandemic by helping unemployed American workers and unemployed American fresh graduates find jobs as quickly as possible.’  In truth, Ma appears to be the only employee of either company and had no legitimate claim to the funds for which he applied.  Ma’s alleged attempts to secure funds earmarked for legitimate small businesses in dire financial straits are as audacious as they are callous, and now he now faces federal prosecution.  Small businesses are facing uncertainty and unprecedented challenges, the least of which should be opportunists attempting to loot the federal funds meant to assist them.  This Office, along with our law enforcement partners, will continue to vigilantly protect the integrity of those critical loan programs.”

FBI Assistant Director William F. Sweeney Jr said:  “There are many people in desperate need of federal money right now to get them through an unbelievably difficult time. The last thing they need to hear is that a fraudster allegedly tried to steal millions of dollars for his own selfish use. We hope this serves as a demonstration to other criminals plotting a similar scam – we are acting and investigating in real time to stop anyone using this crisis as a means to rip off the federal government and the tax payers who fund that government.”

SBA OIG Eastern Region Special Agent-in-Charge Kevin Kupperbusch said:  “Providing false statements to gain access to SBA’s programs will be aggressively investigated by our office.  SBA OIG and its law enforcement partners are poised to root out fraud in SBA’s programs and bring wrongdoers to justice.  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 many American businesses are struggling to survive during these difficult times, it is alleged that Mr. Ma sought to steal millions of dollars in loans intended to assist legitimate businesses. Make no mistake about it, IRS-CI is committed to investigating and bringing to justice those individuals who defraud coronavirus relief programs.”

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 provides small businesses with low-interest loans of up to $2 million 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 loan under the CARES Act, the applicant must have suffered “substantial economic injury” from COVID-19.

From at least in or about March 2020 through at least on or about May 15, 2020, MA applied to the SBA and at least five banks for a total of over $20 million in Government-guaranteed loans for the his companies NYIC and Hurley (together, the “Ma Companies”) through the SBA’s PPP and EIDL Program.  In connection with these loan applications, MA represented, among other things, that he was the sole owner and executive director of the Ma Companies, that the Ma Companies were located on the sixth floor of his luxury condominium building in New York, New York, and that NYIC and Hurley together had hundreds of employees and paid millions of dollars in wages to those employees on a monthly basis.  In fact, however, MA appears to have been the only employee of NYIC since at least in or about 2019, and Hurley does not appear to have any employees.  In order to support the false representations made by MA in the loan applications about the number of employees at, and the wages paid by, the Ma Companies, MA submitted fraudulent and doctored bank records, tax records, insurance records, payroll records, and/or audited financial statements to five different banks, and also provided links to the Ma Companies’ websites, which describe them as purportedly “global” companies.  In the course of these loan applications, MA also misrepresented that he was a United States citizen, when, in fact, he is a Chinese national with lawful permanent resident status in the United States.

Before the discovery of the fraudulent conduct by MA, the SBA approved a $500,000 EIDL Program loan for NYIC and a $150,000 EIDL Program loan for Hurley, and at least a $10,000 loan advance was provided to NYIC.  In addition, a bank approved and disbursed over approximately $800,000 in PPP loan funds for Hurley, which were frozen in connection with this investigation.  As a result, MA sought to withdraw his loan applications from the banks and return the funds.

MA and individuals purporting to work for NYIC have also fraudulently represented to a COVID-19 test kit manufacturer and a medical equipment supplier that NYIC is representing the New York State Government and the Governor of New York in procuring COVID-19 test kits and personal protective equipment (“PPE”) to respond to the COVID-19 pandemic.  Among other incidents, in a recorded call that took place on or about May 18, 2020, MA represented, in substance and in part, that his company NYIC was a registered vendor for New York State, among other state governments, and that NYIC had a big team working on a deal for the State.  NYIC is not, however, an authorized vendor of New York State, nor has NYIC been authorized to represent New York State in connection with the procurement of COVID-19 supplies.

*                *                *

MA, 36 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, and one count of making false statements to the SBA, which carries a maximum sentence of two 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.

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’s 24/7 Cyber Complaint Center at (855) 292-3937.

Mr. Berman praised the investigative work of the FBI’s Financial Cybercrimes Task Force, SBA-OIG, and IRS-CI, and noted that the investigation remains ongoing.  Mr. Berman also thanked the New York City Police Department, the Office of the New York State Comptroller, 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.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that RAYMOND REID COLLINS JR. was sentenced yesterday to 18 months in prison for his possession of files containing sexually explicit images of a minor.  COLLINS pled guilty on November 25, 2019, before U.S. District Judge Alison J. Nathan, who imposed yesterday’s sentence.   

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Raymond Reid Collins Jr. has rightly been sentenced to prison for possession of thousands of images of child pornography, including images of infants and toddlers being sexually abused and exploited.”

According to court filings and statements made at public court proceedings, between approximately August 2016 and October 2016, COLLINS possessed an online cloud storage account that contained approximately 12,600 files known to contain child pornography, including depictions of prepubescent children.  Approximately 2,100 of those files involved depictions of infants and toddlers engaged in sexual activity. 

*                *                *

In addition to the prison term, COLLINS, 59, of Madison, New Jersey, was sentenced to five years of supervised release, and will be required to pay restitution.

Mr. Berman praised the Federal Bureau of Investigation for its outstanding investigative work.  Mr. Berman also thanked the New York City Police Department and the Manhattan District Attorney’s Office for their invaluable assistance with this matter.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that the United States has settled a federal civil rights lawsuit alleging that the NEW YORK CITY DEPARTMENT OF EDUCATION (the “DOE”) engaged in a pattern and practice of discrimination and retaliation in violation of Title VII.  Specifically, as alleged in the Government’s complaint, the DOE and Superintendent Juan Mendez permitted Principal Minerva Zanca to discriminate against all three African American teachers who worked at Pan American International High School (“Pan American”) and retaliate against an assistant principal who spoke out against the discrimination.  In connection with the settlement agreements, which were approved by U.S. District Judge Lewis A. Kaplan, the DOE agreed to pay a total of $1,187,500 to the four victims of DOE’s discrimination and retaliation, and provide training to all DOE superintendents regarding DOE’s anti-discrimination policies and procedures.  

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Title VII expressly prohibits employers from discriminating against individuals on the basis of their race or retaliating against individuals who protest such discrimination.  The discrimination in this case was invidious, unlawful, and counter to our core values.  This Office will remain vigilant in ensuring that employers who do not comply with Title VII are held to account.” 

According to the Complaint, in August 2012, Superintendent Mendez selected Minerva Zanca as Pan American’s new principal.  During the 2012-2013 school year, Pan American employed 27 teachers, three of whom were African American.  Throughout that school year, Principal Zanca purposely targeted John Flanagan and Heather Hightower, Pan American’s two untenured African American teachers, for unsatisfactory lesson ratings.  Principal Zanca also made derogatory racial comments about Mr. Flanagan and Ms. Hightower to Assistant Principal Anthony Riccardo.  Specifically, Principal Zanca asked whether Assistant Principal Riccardo had seen Mr. Flanagan’s “big lips quivering” during a meeting, that Ms. Hightower “looked like a gorilla in a sweater,” and that she could “never” have “fucking nappy hair” like Ms. Hightower.  Principal Zanca also discriminated against Lisa-Erika James, a tenured African American teacher, by cutting the highly successful theater program Ms. James oversaw.

During the spring of 2013, when Assistant Principal Riccardo refused to give an unsatisfactory rating to a lesson taught by Ms. Hightower, Principal Zanca accused him of “sabotaging her plan,” and called school security to have him removed from the building. Subsequently, Principal Zanca initiated two complaints against Assistant Principal Riccardo with the DOE’s internal investigatory offices.  Those offices determined that Principal Zanca’s allegations did not warrant any charges against Assistant Principal Riccardo.  In June of 2013, Principal Zanca gave Assistant Principal Riccardo, Mr. Flanagan, and Ms. Hightower annual performance ratings of “unsatisfactory.”  Principal Zanca’s misconduct was brought to the attention of Superintendent Mendez, but the DOE did not take any disciplinary action against Principal Zanca.  Even after the U.S. Equal Employment Opportunity Commission (“EEOC”) found reasonable cause to believe that the DOE had discriminated and retaliated against Ms. James, Mr. Riccardo, and Ms. Hightower, Principal Zanca was allowed to remain in charge of Pan American.  Neither Ms. Hightower, Mr. Flanagan, Ms. James, nor Mr. Riccardo worked at Pan American after the 2012-2013 school year.

Title VII authorizes the Department of Justice to commence an action in the United States District Court against the DOE to remedy discrimination and retaliation for opposing discrimination.  The Government’s lawsuit sought declaratory and injunctive relief, as well as compensatory damages on behalf of Mr. Flanagan, Ms. James, Ms. Hightower, and Assistant Principal Riccardo, all of whom also filed their own lawsuits regarding the discrimination and retaliation they suffered at the hands of DOE.  Attorneys for the complainants, Erica L. Shnayder, Arcé Law Group, PC, and Noah A. Kinigstein, Law Office of Noah A. Kinigstein, assisted in the litigation and resolution of this matter.

The settlements, which resolve both the United States’ suit and the private lawsuits, require the DOE to pay the four victims a combined total of $1,187,500, and provide additional training for DOE superintendents to ensure that employment decisions are properly handled and that this type of discrimination and retaliation in New York City schools will not go unchecked.

More information on the obligations of employers with respect to discrimination and retaliation is available at www.eeoc.gov.

Mr. Berman thanked the EEOC for its initial investigation of the Complaint.

The case is being handled by the Office’s Civil Rights Unit.  Assistant United States Attorneys Christine S. Poscablo and Natasha Waglow Teleanu are in charge of the case.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that FRED ELM, a/k/a “Frederic Elmaleh,” the founder and manager of Elm Tree Investment Advisors LLC (“ETIA”), pled guilty before U.S. District Judge Edgardo Ramos to securities fraud charges stemming from his role in a scheme to defraud investors in multiple investment funds created and controlled by ELM and Ahmad Naqvi, ETIA’s chief operating officer.  Among other illicit activity, ELM and Naqvi fraudulently induced more than 50 investors to invest over $18 million based on the false representation that ELM and Naqvi would invest that money, through the funds, in the shares of privately held technology companies, like Twitter, Alibaba, Uber, and Square, before their initial public offerings (“IPOs”).  Naqvi pled guilty to his role in the scheme before Judge Ramos on May 4, 2020.   

U.S. Attorney Geoffrey S. Berman said:  “Fred Elm, founder and head of Elm Tree Investment Advisors, admitted today to defrauding investors out of more than $18 million by promising big returns from investments in hot tech companies, like Twitter and Uber, before their initial public offerings. In reality, Elm and his co-defendant Ahmed Naqvi lied about their access to pre-IPO investments, and they invested only a portion of the funds in money-losing trades and spent the rest on their own extravagant lifestyles, including a Bentley, a Maserati, and a Range Rover. After fleeing to Canada, Elm has now been brought to justice. He faces serious prison time for his high-flying scheme, which never earned a profit and left his investors high and dry. ”

According to the Superseding Indictment charging ELM and Naqvi, and other filings in the case:

From at least June 2013 through December 2014, ELM and Naqvi engaged in a scheme to defraud investors in funds that ELM and Naqvi created and controlled at ETIA, where ELM was the founder and manager, and Naqvi was the chief operating officer.  ELM and Naqvi raised more than $18 million from over 50 investors in four limited partnerships for which ETIA acted as the fund manager:  Elm Tree Investment Fund, LP; Elm Tree Emerging Growth Fund, LP; Elm Tree ‘e’Conomy Fund, LP; and Elm Tree Motion Opportunity, LP (collectively the “Elm Tree Funds”). 

ELM and Naqvi falsely represented that the Elm Tree Funds used investor capital to purchase shares in privately held technology companies before their IPOs.  These companies included Twitter, Inc., Alibaba Group Holding Limited, Uber Technologies, Inc., Square, Inc., Pinterest, Inc., and GoDaddy Group, Inc.  Moreover, ELM and Naqvi falsely represented that they had access to these pre-IPO shares because of their relationships with leading venture capital firms, such as Kleiner Perkins Caufield & Byers, Benchmark Capital, and Silver Lake Management, L.L.C.  In truth and in fact, ELM and Naqvi did not invest in the pre-IPO shares of these companies and did not have relationships with these venture capital firms.

ELM and Naqvi comingled the approximately $18 million that was invested in the Elm Tree Funds in a single investment account and then invested only a portion of the money, approximately $7.1 million.  At no point did any of the Elm Tree Funds return a profit.  Instead, for example, between January 2014 and November 2014, the Elm Tree Funds lost approximately $3.9 million in trading.

Moreover, of the investor funds that ELM and Naqvi did not lose in securities trading, ELM routinely converted investor funds to his own use in the form of cash withdrawals and to pay personal expenses, including to purchase a multimillion-dollar home, high-end furnishings, and other personal items, such as jewelry, daily living expenses, and luxury automobiles, including a Bentley, a Maserati, and a Range Rover.

The conversion of investors’ funds was contrary to the representations that ELM and Naqvi made to investors concerning their and ETIA’s fees.  ELM and Naqvi falsely represented that they and ETIA would take a two percent annual management fee plus a performance fee of 20 percent of any profits that the Elm Tree Funds earned.  In truth and in fact, ELM converted investor money that far exceeded the two percent management fee.  Moreover, because the Elm Tree Funds never returned a profit, ELM, Naqvi, and ETIA were not entitled to a percentage of any profits.

ELM and Naqvi also used approximately $5.2 million of new investor funds to make payments to earlier investors in a Ponzi-like fashion.  To prevent or forestall redemptions, and continue to raise money to fund their scheme, ELM and Naqvi also generated fictitious account statements and made oral and written misrepresentations that their trading strategies were generating consistently positive returns. 

For example, beginning in mid-2013, ELM and Naqvi began to solicit Victim-1 to invest with ETIA in the Elm Tree Funds.  On June 11, 2013, Naqvi sent Victim-1 a series of emails regarding the Elm Tree Emerging Growth Fund, in which he falsely represented, among other things, that the fund would invest in pre-IPO Twitter shares, and that ELM, Naqvi, and ETIA had “key contacts” with venture capital firms like Kleiner Perkins Caufield & Byers and Benchmark Capital.  ELM and Naqvi subsequently had in-person meetings and telephone calls with Victim-1 about this investment.  On October 9, 2013, Victim-1 invested approximately $52,500 in the Elm Tree Emerging Growth Fund.  Following Twitter’s IPO on November 6, 2013, Twitter’s stock price rose, and Naqvi subsequently told Victim-1 that ELM, Naqvi, and ETIA had used an options strategy to lock in Victim-1’s profits in Twitter.  Because the fund had not invested in pre-IPO Twitter shares, there were no profits to lock in.  Thereafter, ELM and Naqvi sent fraudulent account statements to Victim-1, including one sent on March 7, 2014.  The statement falsely indicated that Victim-1’s investment in the fund was valued at $274,550 (up from $52,500), and that the Elm Tree Emerging Growth Fund was valued at $68,115,855. 

ELM and Naqvi made similar misrepresentations with respect to Victim-1’s subsequent investments in the Elm Tree ‘e’Conomy Fund and Elm Tree Motion Opportunity, falsely indicating that those funds invested in Alibaba, Uber, Square, Pinterest, and GoDaddy, and that Victim-1’s investments were growing.  ELM and Naqvi also falsely represented that the value of the Elm Tree ‘e’Conomy Fund as of December 12, 2014, was $125,484,750 and that the value of Elm Tree Motion Opportunity as of December 18, 2014, was $77,286,220 – falsely claiming that the total value of the Elm Tree Funds was more than $270 million.

ELM was initially arrested in April 2016 and released on bail.  In June 2017, approximately one week before his then-scheduled guilty plea, ELM fled to Canada.  ELM was subsequently arrested in Canada and extradited to the United States in January 2020.  Naqvi, who had been a fugitive since his indictment in 2016, was arrested in Canada and extradited to the United States in November 2019. 

*                      *                      *

ELM, 51, pled guilty to one count of securities fraud conspiracy and one count of securities fraud, which carry a maximum sentence of five years and twenty years in prison, respectively.  The charges also carry a maximum fine of $5,000,000, or twice the gross gain or loss from the offenses.  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.  ELM also agreed to forfeit $8,318,840.07.  ELM is scheduled to be sentenced by Judge Ramos on August 7, 2020, at 11:00 a.m.

Mr. Berman praised the work of Homeland Security Investigations and the U.S. Department of Justice’s Office of International Affairs, and thanked the U.S. Securities and Exchange Commission for its assistance.  Mr. Berman also thanked Canadian law enforcement for its support and assistance.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorney Joshua A. Naftalis is in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that AHMAD NAQVI, the chief operating officer of Elm Tree Investment Advisors LLC (“ETIA”), pled guilty before U.S. District Judge Edgardo Ramos to securities fraud charges stemming from his role in a scheme to defraud investors in multiple investment funds created and controlled by NAQVI and Fred Elm, a/k/a “Frederic Elmaleh,” the founder and manager.  Among other illicit activity, Elm and NAQVI fraudulently induced more than 50 investors to invest over $18 million based on the false representation that Elm and NAQVI would invest that money, through the funds, in the shares of privately held technology companies, like Twitter, Alibaba, Uber, and Square, before their initial public offerings (“IPOs”).   

U.S. Attorney Geoffrey S. Berman said:  “As he has now admitted in court, Ahmad Naqvi deceived investors with claims that the Elm Tree Funds would generate huge profits from investments in privately-held technology companies.  In fact, the funds never invested in these pre-IPO companies and never returned a profit, and the fraction of investor money actually invested in securities resulted in massive losses.  Now Naqvi awaits sentencing for his crime, and faces the loss of his freedom.”

According to the Superseding Indictment charging Elm and NAQVI, and other filings in the case:

From at least June 2013 through December 2014, Elm and NAQVI engaged in a scheme to defraud investors in funds that Elm and NAQVI created and controlled at ETIA, where Elm was the founder and manager, and NAQVI was the chief operating officer.  Elm and NAQVI raised more than $18 million from over 50 investors in four limited partnerships for which ETIA acted as the fund manager:  Elm Tree Investment Fund, LP; Elm Tree Emerging Growth Fund, LP; Elm Tree ‘e’Conomy Fund, LP; and Elm Tree Motion Opportunity, LP (collectively the “Elm Tree Funds”). 

Elm and NAQVI falsely represented that the Elm Tree Funds used investor capital to purchase shares in privately held technology companies before their IPOs.  These companies included Twitter, Inc., Alibaba Group Holding Limited, Uber Technologies, Inc., Square, Inc., Pinterest, Inc., and GoDaddy Group, Inc.  Moreover, Elm and NAQVI falsely represented that they had access to these pre-IPO shares because of their relationships with leading venture capital firms, such as Kleiner Perkins Caufield & Byers, Benchmark Capital, and Silver Lake Management, L.L.C.  In truth and in fact, Elm and NAQVI did not invest in the pre-IPO shares of these companies and did not have relationships with these venture capital firms.

Elm and NAQVI comingled the approximately $18 million that was invested in the Elm Tree Funds in a single investment account and then invested only a portion of the money, approximately $7.1 million.  At no point did any of the Elm Tree Funds return a profit.  Instead, for example, between January 2014 and November 2014, the Elm Tree Funds lost approximately $3.9 million in trading.

Moreover, of the investor funds that Elm and NAQVI did not lose in securities trading, Elm routinely converted investor funds to his own use in the form of cash withdrawals and to pay personal expenses, including to purchase a multimillion-dollar home, high-end furnishings, and other personal items, such as jewelry, daily living expenses, and luxury automobiles, including a Bentley, a Maserati, and a Range Rover.

The conversion of investors’ funds was contrary to the representations that Elm and NAQVI made to investors concerning their and ETIA’s fees.  Elm and NAQVI falsely represented that they and ETIA would take a two percent annual management fee plus a performance fee of 20 percent of any profits that the Elm Tree Funds earned.  In truth and in fact, Elm converted investor money that far exceeded the two percent management fee.  Moreover, because the Elm Tree Funds never returned a profit, Elm, NAQVI, and ETIA were not entitled to a percentage of any profits.

Elm and NAQVI also used approximately $5.2 million of new investor funds to make payments to earlier investors in a Ponzi-like fashion.  To prevent or forestall redemptions, and continue to raise money to fund their scheme, Elm and NAQVI also generated fictitious account statements and made oral and written misrepresentations that their trading strategies were generating consistently positive returns. 

For example, beginning in mid-2013, Elm and NAQVI began to solicit Victim-1 to invest with ETIA in the Elm Tree Funds.  On June 11, 2013, NAQVI sent Victim-1 a series of emails regarding the Elm Tree Emerging Growth Fund, in which he falsely represented, among other things, that the fund would invest in pre-IPO Twitter shares, and that Elm, NAQVI, and ETIA had “key contacts” with venture capital firms like Kleiner Perkins Caufield & Byers and Benchmark Capital.  Elm and NAQVI subsequently had in-person meetings and telephone calls with Victim-1 about this investment.  On October 9, 2013, Victim-1 invested approximately $52,500 in the Elm Tree Emerging Growth Fund.  Following Twitter’s IPO on November 6, 2013, Twitter’s stock price rose, and NAQVI subsequently told Victim-1 that Elm, NAQVI, and ETIA had used an options strategy to lock in Victim-1’s profits in Twitter.  Because the fund had not invested in pre-IPO Twitter shares, there were no profits to lock in.  Thereafter, Elm and NAQVI sent fraudulent account statements to Victim-1, including one sent on March 7, 2014.  The statement falsely indicated that Victim-1’s investment in the fund was valued at $274,550 (up from $52,500), and that the Elm Tree Emerging Growth Fund was valued at $68,115,855. 

Elm and NAQVI made similar misrepresentations with respect to Victim-1’s subsequent investments in the Elm Tree ‘e’Conomy Fund and Elm Tree Motion Opportunity, falsely indicating that those funds invested in Alibaba, Uber, Square, Pinterest, and GoDaddy, and that Victim-1’s investments were growing.  Elm and NAQVI also falsely represented that the value of the Elm Tree ‘e’Conomy Fund as of December 12, 2014, was $125,484,750 and that the value of Elm Tree Motion Opportunity as of December 18, 2014, was $77,286,220 – falsely claiming that the total value of the Elm Tree Funds was more than $270 million.

NAQVI, who had been a fugitive since his indictment in 2016, was arrested in Canada and extradited to the United States in November 2019.  Elm was initially arrested in April 2016 and released on bail.  In June 2017, approximately one week before his then-scheduled guilty plea, Elm fled to Canada.  Elm was subsequently arrested in Canada and extradited to the United States in January 2020. 

*                      *                      *

NAQVI, 51, pled guilty to one count of securities fraud conspiracy, which carries a maximum sentence of five years in prison.  The charge also carries a maximum fine of $250,000, or twice the gross gain or loss from the offenses.  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.  NAQVI is scheduled to be sentenced by Judge Ramos on June 29, 2020, at 10:30 a.m.

Mr. Berman praised the work of Homeland Security Investigations and the U.S. Department of Justice’s Office of International Affairs, and thanked the U.S. Securities and Exchange Commission for its assistance.  Mr. Berman also thanked Canadian law enforcement for its support and assistance.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorney Joshua A. Naftalis is in charge of the prosecution.

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

Jeffrey A. Rosen, the Deputy Attorney General of the United States, Richard E. Zuckerman, the Principal Deputy Assistant Attorney General of the Justice Department’s Tax Division, Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Don Fort, the Chief of the Internal Revenue Service, Criminal Investigation (IRS-CI), announced today the guilty plea of Bank Hapoalim (Switzerland) Ltd. and filing of criminal charges against Bank Hapoalim B.M. for conspiring with U.S. taxpayers and others to hide more than $7.6 billion in more than 5,500 secret Swiss and Israeli bank accounts and the income generated in these accounts from the Internal Revenue Service (the IRS).  BHS’s Chief Executive Officer appeared on behalf of the bank to enter the guilty plea before U.S. District Judge Mary Kay Vyskocil.

As part of today’s resolutions, along with resolutions entered into with state and federal partners, Bank Hapoalim B.M. (BHBM), Israel’s largest bank, and Bank Hapoalim (Switzerland) Ltd. (BHS), its Swiss subsidiary, agreed to pay approximately $874.27 million to the U.S. Treasury, the Federal Reserve, and the New York State Department of Financial Services. Today’s resolution is the second-largest recovery by the Department of Justice in connection with its investigations since 2008 into facilitation of offshore U.S. tax evasion by foreign banks.

“Today’s resolutions and payment of $874 million make clear that tax evasion cannot be taken lightly,” said Deputy Attorney General Jeffrey A. Rosen. “A fair tax system requires even-handed compliance, and honest conduct by all participants in the system.”

“The Department of Justice continues to aggressively prosecute banks and other financial institutions that help U.S. taxpayers conceal their income and assets in offshore bank accounts,” said Principal Deputy Assistant Attorney General Richard E. Zuckerman.  “Today, Bank Hapoalim is being held accountable for its conduct – it has admitted to its crimes and will surrender all fees it earned, repay the United States for lost tax revenue, and pay a substantial fine.”

“Israel’s largest bank, Bank Hapoalim, and its Swiss subsidiary have admitted not only failing to prevent but actively assisting U.S. customers to set up secret accounts, to shelter assets and income, and to evade taxes,” said U.S. Attorney Geoffrey S. Berman of the Southern District of New York.  “The combined payment approaching $1 billion reflects the magnitude of the tax evasion by the Bank’s U.S. customers, the size of the fees the Bank collected to provide this illegal service, and the gravity of the illegal conduct.”

“There is no excuse for a foreign financial institution to unlawfully assist wealthy Americans in flouting their responsibilities to pay their taxes,” said IRS Criminal Investigation Chief Don Fort. “With today’s guilty plea, Bank Hapoalim is taking responsibility for their role in deliberately breaking the law and undermining the integrity of this nation’s tax system. Offshore tax evasion is a top priority for IRS Criminal Investigation and we are wholeheartedly committed to bringing offenders to justice. Today’s resolution serves as proof that financial institutions engaging in tax fraud face dire criminal and financial consequences for their behavior.”

“The vast majority of New Yorkers follow the rules and pay their taxes, thereby contributing their fair share towards critical state and federal government operations and public services,” said Superintendent Linda A. Lacewell of New York State Department of Financial Services. “There are some, however, who went to great lengths to avoid paying their share, and Bank Hapoalim offered a whole array of services to U.S. citizens, including New Yorkers, that knowingly facilitated their tax evasion. DFS will not tolerate such behavior from banks that operate in the State of New York. DFS thanks our federal partners at the U.S. Department of Justice, U.S. Department of the Treasury, and the Federal Reserve Board for their assistance and coordination during this investigation.”

Today’s resolutions include agreements with BHBM and BHS (collectively, the “Bank”) under which the Bank agreed to accept responsibility for its conduct by stipulating to the accuracy of extensive Statements of Facts. BHBM further agreed to refrain from all future criminal conduct, implement remedial measures, and cooperate fully with further investigations into hidden bank accounts. Assuming BHBM’s continued compliance with its agreement, the Government has agreed to defer prosecution of BHBM for a period of three years, after which time the Government will seek to dismiss the charge against BHBM. 

According to documents filed today in Manhattan federal court:

BHBM is Israel’s largest bank and operates primarily as a retail bank with approximately 250 branches throughout Israel and more than 2.5 million accounts. In addition to retail banking services, BHBM offered private banking services for onshore and offshore customers through its retail branches and its Global Private Banking Center. BHBM also wholly owned Poalim Trust Services Ltd., which provided trust formation and management services. Outside Israel, BHBM owned BHS, a Swiss subsidiary that provided private banking. BHS is headquartered in Zurich and at times during the prosecution period had branches in Geneva, Luxembourg, and Singapore. BHBM also had branches in New York, Miami, the Cayman Islands, the United Kingdom, and Jersey.

From at least in or about 2002, and continuing until at least in or about 2014, the Bank conspired with employees, U.S. customers, and others to: (1) defraud the United States with respect to taxes; (2) file false federal tax returns; and (3) commit tax evasion. Employees of BHBM and BHS assisted U.S. customers in concealing their ownership and control of assets and funds held at the Bank, which enabled those U.S. customers to evade their U.S. tax obligations, by engaging in the following conduct:

• Assisting U.S. customers with opening and maintaining accounts in the names of pseudonyms, code names, trust accounts, and offshore nominee entities;
• Opening customer accounts for known U.S. customers using non-U.S. forms of identification;
• Enabling U.S. taxpayers to evade U.S reporting requirements on securities’ earnings in violation of the Bank’s agreements with the IRS;
• Providing “hold mail” services for a fee, avoiding any correspondence regarding the undeclared account being sent to the U.S.;
• Offering back-to-back loans for U.S. taxpayers to enable them to access funds in the United States that were held in offshore accounts at the Bank in Switzerland and Israel; and
• Processing wire transfers or issuing checks in amounts of less than $10,000 that were drawn on the accounts of U.S. taxpayers or entities in order to avoid triggering scrutiny.

At least four senior executives of the Bank, including two former members of BHS’s board of directors, were directly involved in aiding and abetting tax evasion of U.S. taxpayers.

Under today’s resolutions, the Bank is required to cooperate fully with ongoing investigations and affirmatively disclose any information it may later uncover regarding U.S.-related accounts. The Bank is also required to disclose information consistent with the Department of Justice’s Swiss Bank Program relating to accounts closed between Jan. 1, 2009, and Dec. 31, 2019. The agreements provide no protection from criminal or civil prosecution for any individuals.

BHBM will pay a total of $214.38 million, which has three parts. First, BHBM has agreed to pay $77,877,099 in restitution to the IRS, which represents the unpaid taxes resulting from BHBM’s participation in the conspiracy. Second, BHBM has agreed to forfeit $35,696,929 to the United States, which represents gross fees (not profits) that the bank earned on its undeclared accounts between 2002 and 2014. Finally, BHBM has agreed to pay a penalty of $100,811,585.

BHS will pay a total of $402.53 million, which also has three parts. First, BHS has agreed to pay $138,908,073 in restitution to the IRS, which represents the unpaid taxes resulting from BHS’s participation in the conspiracy. Second, BHS has agreed to forfeit $124,628,449 in gross fees to the United States.  Finally, BHS has agreed to pay a fine of $138,998,399. These payments were approved by Judge Vyskocil today in connection with BHS’s plea and sentencing.

Both the penalty and fine amounts take into consideration that the Bank, after initially providing deficient cooperation through an inadequate internal investigation and the provision of incomplete and inaccurate information and data to the Government, thereafter conducted a thorough internal investigation, provided client-identifying information, and cooperated in ongoing investigations and prosecutions. The Bank further implemented remedial measures to protect against the use of its services for tax evasion in the future.

The Board of Governors of the Federal Reserve System is also announcing today that it has reached a resolution with BHBM, by which BHBM has agreed to a consent order, certain remedial steps to ensure its compliance with U.S. law in its ongoing operations, and a civil monetary penalty of $37.35 million. Additionally, the New York State Department of Financial Services is announcing a similar resolution by which BHBM has agreed to a cease and desist order and a monetary penalty of $220 million.

This agreement marks the third time an Israeli bank has admitted to similar criminal conduct. The Bank Leumi Group (in December 2014) and Mizrahi-Tefahot Bank Ltd. (in March 2019) entered into DPAs with the Department of Justice admitting that they conspired with U.S. taxpayers to prepare and present false tax returns to the IRS by hiding income and assets in offshore bank accounts in Israel and elsewhere around the world.

Deputy Attorney General Rosen, Principal Deputy Assistant Attorney General Zuckerman, U.S. Attorney Berman, and Chief Fort commended special agents of IRS-Criminal Investigation, who investigated this case, and Assistant Chief Todd A. Ellinwood and Senior Litigation Counsel Nanette Davis of the Tax Division, and Assistant U.S. Attorneys Sagar K. Ravi and Timothy V. Capozzi of the United States Attorney’s Office for the Southern District of New York, who prosecuted this case. Principal Deputy Assistant Attorney General Zuckerman also thanked Assistant Chief Kathleen Barry and former Trial Attorney Timothy Russo of the Tax Division for their substantial assistance. 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Jeffrey A. Rosen, the Deputy Attorney General of the United States, Richard E. Zuckerman, the Principal Deputy Assistant Attorney General of the Justice Department’s Tax Division, and Don Fort, the Chief of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today the guilty plea of Bank Hapoalim (Switzerland) Ltd. and entry of criminal charges against Bank Hapoalim B.M. for conspiring with U.S. taxpayers and others to hide more than $7.6 billion in more than 5,500 secret Swiss and Israeli bank accounts and the income generated in these accounts from the Internal Revenue Service (the “IRS”). 

As part of today’s resolutions, along with resolutions entered into with state and federal partners, Bank Hapoalim B.M. (“BHBM”), Israel’s largest bank, and its Swiss subsidiary Bank Hapoalim (Switzerland) Ltd. (“BHS”) (collectively, the “Bank”), agreed to pay approximately $874.27 million to the U.S. Treasury, the Federal Reserve, and the New York State Department of Financial Services.  Today’s resolution is the second-largest recovery by the Department of Justice in connection with its investigations since 2008 into facilitation of offshore U.S. tax evasion by foreign banks.  Officers of BHBM and BHS appeared on behalf of the Bank to enter the guilty plea before U.S. District Judge Mary Kay Vyskocil.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Israel’s largest bank, Bank Hapoalim, and its Swiss subsidiary have admitted not only failing to prevent but actively assisting U.S. customers to set up secret accounts, to shelter assets and income, and to evade taxes.  The combined payment approaching $1 billion reflects the magnitude of the tax evasion by the Bank’s U.S. customers, the size of the fees the Bank collected to provide this illegal service, and the gravity of the illegal conduct.”

Deputy Attorney General Jeffrey A. Rosen said:  “Today’s resolutions and payment of $874 million make clear that tax evasion cannot be taken lightly.  A fair tax system requires even-handed compliance, and honest conduct by all participants in the system.”

Principal Deputy Assistant Attorney General Richard E. Zuckerman said:  “The Department of Justice continues to aggressively prosecute banks and other financial institutions that help U.S. taxpayers conceal their income and assets in offshore bank accounts.  Today, Bank Hapoalim is being held accountable for its conduct – it has admitted to its crimes and will surrender all fees it earned, repay the United States for lost tax revenue, and pay a substantial fine.”

IRS-CI Chief Don Fort said:  “There is no excuse for a foreign financial institution to unlawfully assist wealthy Americans in flouting their responsibilities to pay their taxes. With today’s guilty plea, Bank Hapoalim is taking responsibility for their role in deliberately breaking the law and undermining the integrity of this nation’s tax system.  Offshore tax evasion is a top priority for IRS Criminal Investigation and we are wholeheartedly committed to bringing offenders to justice.  Today’s resolution serves as proof that financial institutions engaging in tax fraud face dire criminal and financial consequences for their behavior.”

Today’s resolutions include agreements with BHBM and BHS under which the Bank agreed to accept responsibility for its conduct by stipulating to the accuracy of extensive Statements of Facts.  BHBM further agreed to refrain from all future criminal conduct, implement remedial measures, and cooperate fully with further investigations into hidden bank accounts.  Assuming BHBM’s continued compliance with its agreement, the Government has agreed to defer prosecution of BHBM for a period of three years, after which time the Government will seek to dismiss the charge against BHBM. 

According to documents filed today in Manhattan federal court:

BHBM is Israel’s largest bank and operates primarily as a retail bank with approximately 250 branches throughout Israel and more than 2.5 million accounts.  In addition to retail banking services, BHBM offered private banking services for onshore and offshore customers through its retail branches and its Global Private Banking Center.  BHBM also wholly owned Poalim Trust Services Ltd., which provided trust formation and management services.  Outside Israel, BHBM owned BHS, a Swiss subsidiary that provided private banking.  BHS is headquartered in Zurich and at times during the prosecution period had branches in Geneva, Luxembourg, and Singapore.  BHBM also had branches in New York, Miami, the Cayman Islands, the United Kingdom, and Jersey.

From at least in or about 2002, and continuing until at least in or about 2014, the Bank conspired with employees, U.S. customers, and others to:  (1) defraud the United States with respect to taxes; (2) file false federal tax returns; and (3) commit tax evasion.  Employees of BHBM and BHS assisted U.S. customers in concealing their ownership and control of assets and funds held at the Bank, which enabled those U.S. customers to evade their U.S. tax obligations, by engaging in the following conduct:

·          Assisting U.S. customers with opening and maintaining accounts in the names of pseudonyms, code names, trust accounts, and offshore nominee entities;

·          Opening customer accounts for known U.S. customers using non-U.S. forms of identification;

·          Enabling U.S. taxpayers to evade U.S reporting requirements on securities’ earnings in violation of the Bank’s agreements with the IRS;

·          Providing “hold mail” services for a fee, avoiding any correspondence regarding the undeclared account being sent to the U.S.;

·          Offering back-to-back loans for U.S. taxpayers to enable them to access funds in the United States that were held in offshore accounts at the Bank in Switzerland and Israel; and

·          Processing wire transfers or issuing checks in amounts of less than $10,000 that were drawn on the accounts of U.S. taxpayers or entities in order to avoid triggering scrutiny.

At least four senior executives of the Bank, including two former members of BHS’s board of directors, were directly involved in aiding and abetting tax evasion of U.S. taxpayers.

Under today’s resolutions, the Bank is required to cooperate fully with ongoing investigations and affirmatively disclose any information it may later uncover regarding U.S.-related accounts.  The Bank is also required to disclose information consistent with the Department of Justice’s Swiss Bank Program relating to accounts closed between Jan. 1, 2009, and Dec. 31, 2019.  The agreements provide no protection from criminal or civil prosecution for any individuals.

BHBM will pay a total of $214.38 million, which has three parts.  First, BHBM has agreed to pay $77,877,099 in restitution to the IRS, which represents the unpaid taxes resulting from BHBM’s participation in the conspiracy.  Second, BHBM has agreed to forfeit $35,696,929 to the United States, which represents gross fees (not profits) that the bank earned on its undeclared accounts between 2002 and 2014.  Finally, BHBM has agreed to pay a penalty of $100,811,585.

BHS will pay a total of $402.53 million, which also has three parts.  First, BHS has agreed to pay $138,908,073 in restitution to the IRS, which represents the unpaid taxes resulting from BHS’s participation in the conspiracy.  Second, BHS has agreed to forfeit $124,628,449 in gross fees to the United States.  Finally, BHS has agreed to pay a fine of $138,998,399.  These payments were approved by Judge Vyskocil today in connection with BHS’s plea and sentencing.

Both the penalty and fine amounts take into consideration that the Bank, after initially providing deficient cooperation through an inadequate internal investigation and the provision of incomplete and inaccurate information and data to the Government, thereafter conducted a thorough internal investigation, provided client-identifying information, and cooperated in ongoing investigations and prosecutions.  The Bank further implemented remedial measures to protect against the use of its services for tax evasion in the future.

The Board of Governors of the Federal Reserve System is also announcing today that it has reached a resolution with BHBM, by which BHBM has agreed to a cease and desist order, certain remedial steps to ensure its compliance with U.S. law in its ongoing operations, and a civil monetary penalty of $37.35 million.  Additionally, the New York State Department of Financial Services is announcing a similar resolution by which BHBM has agreed to a consent order and a monetary penalty of $220 million.

*                *                *

Mr. Berman praised the outstanding investigative work of the special agents of IRS-Criminal Investigation, and thanked the Justice Department’s Tax Division for their partnership on this case.

This prosecution is being handled by the Tax Division and the Complex Frauds and Cybercrime Unit of the United States Attorney’s Office for the Southern District of New York.  Assistant Chief Todd A. Ellinwood and Senior Litigation Counsel Nanette Davis of the Tax Division, and Assistant U.S. Attorneys Sagar K. Ravi and Timothy V. Capozzi of the United States Attorney’s Office for the Southern District of New York, are in charge of the prosecution.  Principal Deputy Assistant Attorney General Zuckerman also thanked Assistant Chief Kathleen Barry and former Trial Attorney Timothy Russo of the Tax Division for their substantial assistance. 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Wendy Woolcock, Special Agent in Charge of the Special Operations Division of the U.S. Drug Enforcement Administration (“DEA”), announced today that JUAN CARLOS BONILLA VALLADARES, a/k/a “El Tigre,” was charged in Manhattan federal court with conspiring to import cocaine into the United States, and related weapons offenses involving the use and possession of machineguns and destructive devices. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Juan Carlos Bonilla Valladares, the former chief of the Honduran National Police, allegedly abused his positions in Honduran law enforcement to flout the law and play a key role in a violent international drug trafficking conspiracy.  As alleged, on behalf of convicted former Honduran congressman Tony Hernandez and his brother the president, Bonilla Valladares oversaw the transshipment of multi-ton loads of cocaine bound for the U.S., used machineguns and other weaponry to accomplish that, and participated in extreme violence, including the murder of a rival trafficker, to further the conspiracy. Now Bonilla Valladares has been marked as an outlaw and charged with crimes that could send him to a U.S. prison for life.”

DEA Special Agent in Charge Wendy Woolcock said:  “Juan Carlos Bonilla-Valladares allegedly used his high ranking position to influence those working for him and violently protect the politically connected drug traffickers who would smuggle cocaine destined for the United States.  As alleged, this was a blatant and horrific violation of the oath taken by Bonilla-Valladares to protect the citizens of Honduras.  The filing of these charges is another positive action taken by the United States to bring corrupt officials to justice.”

According to the allegations contained in the Complaint charging BONILLA VALLADARES, evidence presented at the October 2019 trial of Juan Antonio Hernandez Alvarado in the Southern District of New York, and statements in open court during the prosecution of Hernandez Alvarado[1]:

Between approximately 2003 and 2020, multiple drug trafficking organizations in Honduras and elsewhere worked together, and with support from certain prominent public and private individuals, including Honduran politicians and law enforcement officials, to receive multi-ton loads of cocaine sent to Honduras from, among other places, Colombia and Venezuela via air and maritime routes, and to transport the drugs westward in Honduras toward the border with Guatemala and eventually to the United States.  For protection from law enforcement interference, and in order to facilitate the safe passage through Honduras of multi-ton loads of cocaine, drug traffickers paid bribes to public officials, including certain presidents, members of the National Congress of Honduras, and personnel from the Honduran National Police, including BONILLA VALLADARES.  For example, following an October 2019 trial in the Southern District of New York, former Honduran congressman Juan Antonio Hernandez Alvarado was convicted of drug trafficking, weapons, and false statements charges related to his role in the conspiracy described in the charges against BONILLA VALLADARES.  Hernandez Alvarado is scheduled to be sentenced by U.S. District Judge P. Kevin Castel on June 29, 2020. 

BONILLA VALLADARES was a member of the Honduran National Police between approximately 1985 and approximately 2016.  During his tenure, he held high-ranking positions, including Regional Police Chief with authority over locations in western Honduras that were strategically important to drug traffickers, and Chief of the Honduran National Police for all of Honduras between approximately 2012 and approximately 2013.  BONILLA VALLADARES corruptly exploited these official positions to facilitate cocaine trafficking, and used violence, including murder, to protect the particular cell of politically connected drug traffickers he aligned with, including Hernandez Alvarado and at least one of Hernandez Alvarado’s brothers, who is a former Honduran congressman and the current president of Honduras referred to in the Complaint charging BONILLA VALLADARES as “CC-4.”  For example, in exchange for bribes paid in drug proceeds, BONILLA VALLADARES directed members of the Honduran National Police, who were armed with machineguns, to let cocaine shipments pass through police checkpoints without being inspected or seized.  BONILLA VALLADARES, in coordination with Hernandez Alvarado and others, also provided members of their conspiracy with sensitive law enforcement information to facilitate cocaine shipments, including information regarding aerial and maritime interdiction operations.

In or about 2010, Hernandez Alvarado told a cooperating witness (“CW-1”) that Hernandez Alvarado and CC-4 helped BONILLA VALLADARES advance his position within the Honduran National Police, and that BONILLA VALLADARES protected their drug trafficking activities in return.  Hernandez Alvarado also told CW-1 that BONILLA VALLADARES was very violent, and that Hernandez Alvarado and CC-4 trusted BONILLA VALLADARES with special assignments, including murder.

For example, in or about July 2011, BONILLA VALLADARES participated in the murder of a rival drug trafficker at the request of Hernandez Alvarado and others because the rival trafficker had attempted to prevent Hernandez Alvarado and other members of the conspiracy from transporting cocaine through a region of western Honduras near the border with Guatemala.  Claiming to investigate the murder at the time, BONILLA VALLADARES reportedly told a member of the media, in substance, that the murder was a well planned surprise attack that had been carried out efficiently and that the perpetrators had cleaned the murder scene thoroughly.  BONILLA VALLADARES reportedly added that the perpetrators of the murder had used 40-millimeter grenade launchers, M-16 assault rifles, and Galil assault rifles.  The latter two types of weapons were issued by the Honduran government to some members of the Honduran National Police.

*                      *                     *

The Complaint charges BONILLA VALLADARES, 60, with: (1) conspiring to import cocaine into the United States, (2) using and carrying machine guns and destructive devices during and in relation to, and possessing machine guns and destructive devices in furtherance of, the cocaine importation conspiracy; and (3) conspiring to use and carry machine guns and destructive devices during and in relation to, and to possess machine guns and destructive devices in furtherance of, the cocaine importation conspiracy.  If convicted, BONILLA VALLADARES faces a mandatory minimum sentence of 10 years in prison and a maximum term of life in prison on Count One, a mandatory minimum sentence of 30 years in prison and a maximum term of life in prison on Count Two, and a maximum term of life in prison on Count Three. 

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

Mr. Berman praised the outstanding investigative work of the DEA’s Special Operations Division Bilateral Investigations Unit and Strike Force.

This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Amanda L. Houle, Matthew J. Laroche, Jason A. Richman, and Elinor L. Tarlow are in charge of the prosecution.

The charges in the Complaint are merely accusations, and BONILLA VALLADARES 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.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that TORRIE JOHNSON was sentenced today in Manhattan federal court to 78 months in prison for trafficking 25 firearms from South Carolina into New York City.  In May 2019, JOHNSON was arrested, charged, and detained.  In January 2020, JOHNSON pled guilty to one count of firearms trafficking before United States District Judge Naomi Reice Buchwald, who also imposed the sentence.

U.S. Attorney Geoffrey S. Berman said:  “Torrie Johnson illegally sold more than two dozen firearms in New York City without regard for where they ended up or how they would be used.  Thanks to the work of the ATF and the NYPD, the guns were taken off the street, and now Torrie Johnson is headed to prison.”

According to the allegations set forth in the Complaint, the Indictment, and the Superseding Information filed against JOHNSON in Manhattan federal court, as well as statements made in public court filings and proceedings, including JOHNSON’s sentencing hearing:

On at least five occasions between January 23, 2019, and May 9, 2019, JOHNSON sold firearms to an undercover New York City Police Department (“NYPD”) detective (the “UC”).  In total, JOHNSON sold 25 firearms to the UC in Manhattan and the Bronx, including a variety of 9 millimeter, .32, .38, .40, .45, and .380 caliber pistols and revolvers, as well as hundreds of rounds of assorted ammunition.

JOHNSON purchased the firearms in South Carolina, and transported them to New York City for the purpose of selling them here.  On at least two occasions, the UC specifically told JOHNSON that the UC was planning to transport at least some of the firearms that JOHNSON had sold to the UC to a foreign country, and resell them there for a profit.  JOHNSON told the UC that he was attempting to obtain for sale to the UC a Century Arms Mini Draco AK-47 semi‑automatic pistol.

In addition to his prison term, JOHNSON, 42, of Sumter, South Carolina, was sentenced to three years of supervised release.

Mr. Berman praised the outstanding investigative work of the Bureau of Alcohol, Tobacco, Firearms, and Explosives, the NYPD, and the Joint Firearms Task Force.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Jeffrey E. Peterson, the Special Agent-in-Charge of the Anchorage, Alaska, Field Office of the Federal Bureau of Investigation (“FBI”), announced criminal charges against Industrial Bank of Korea (“IBK” or the “Bank”) consisting of a one-count felony information charging IBK with violating the Bank Secrecy Act (the “BSA”) by willfully failing to establish, implement, and maintain an adequate anti-money laundering (“AML”) program at IBK’s New York branch (“IBKNY”), a failure that permitted the processing of more than $1 billion in transactions in violation of the International Emergency Economic Powers Act (“IEEPA”).  The case is assigned to United States District Judge Denise L. Cote. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As they have admitted today, the Industrial Bank of Korea and its New York branch enabled years-long access to and exploitation of the U.S. banking system for prohibited transactions.  As detailed in an extensive Statement of Facts, IBK failed to institute the effective anti-money laundering program repeatedly requested by its own New York-based compliance officer.  As a result, IBKNY failed to detect and report $10 million in illegal U.S. dollar payments from Korean entities to Iranian ones.  Nor did IBK report the balance of the $1 billion of such sanctioned transactions between those parties.  Banks conducting business in the U.S. have a responsibility to ensure that they establish safeguards against the exploitation of the banking system by sanctioned entities that foster, promote, or engage in terrorism.  This Office remains committed to enforcing the law against banks that willfully fail to do so.”

FBI Anchorage Special Agent-in-Charge Jeffrey E. Peterson said:  “Today’s forfeiture is another important step in the FBI’s investigation of the Industrial Bank of Korea’s illegal movement of millions of dollars through the U.S. financial system on behalf of sanctioned Iranian entities. The FBI remains committed to protecting and upholding the integrity of the American financial system and ensuring global banking institutions adhere to U.S. laws, including sanctions against potentially hostile countries.”

Mr. Berman also announced an agreement (the “Agreement”) under which IBK agreed to accept responsibility for its conduct by stipulating to the accuracy of an extensive Statement of Facts, pay penalties totaling $86 million to prosecutors and regulators, refrain from all future criminal conduct, and implement remedial measures as required by its regulators.  Assuming IBK’s continued compliance with the Agreement, the Government has agreed to defer prosecution for a period of two years, after which time the Government will seek to dismiss the charges. 

The federal penalty shall be collected through IBK’s forfeiture to the United States of $51 million in a civil forfeiture action also filed today.  Of that amount, one half shall be transferred to the United States Victims of State Sponsored Terrorism Fund, pursuant to the Justice for United States Victims of State Sponsored Terrorism Act.  In addition, IBK has reached a separate agreement with the New York State Department of Financial Services (“DFS”) covering various regulatory violations, under which it shall pay an additional $35 million penalty.

The Government entered into this resolution due, in part, to IBK’s acceptance and acknowledgement of responsibility under the laws of the United States for its conduct, as exhibited by its undertaking of a thorough internal investigation and transactional analysis, providing frequent and regular updates to the U.S. Attorney’s Office, collecting and producing evidence located in other countries to the full extent permitted under applicable laws and regulations, and making employees located in other countries available for interviews in the United States.  These factors and IBK’s willingness to enter into the commitments set forth in the Agreement, along with all other relevant factors and considerations, collectively weighed in favor of deferral of prosecution, and outweighed in this particular case IBK’s failure to self-report the full extent of its involvement in processing transactions that violated United States sanctions laws, failure to preserve certain electronic evidence relevant to those transactions, and failure to remediate fully and promptly the deficiencies in its compliance programs, as described below.

According to the documents filed today in Manhattan federal court:

IBK and IBKNY’s Failure to Maintain an Adequate AML Program

From at least in or about 2011, and continuing until at least in or about 2014, IBK and IBKNY violated United States law by willfully failing to establish, implement, and maintain an adequate AML program at IBKNY.  Among other things, despite requests and admonitions from regulators and IBKNY’s own compliance officer (the “Compliance Officer”), IBK and IBKNY failed to provide the resources, staffing, and training necessary to maintain an adequate AML program by declining to take steps to implement an automated transaction review program or to provide the Compliance Officer with any support staff or assistance.  This failure permitted, among other things, the processing through IBKNY and other U.S. financial institutions of approximately $1 billion in transactions on behalf of one or more IBK customers that violated IEEPA.

From at least 2006 until approximately January 2013, IBKNY used a manual process for reviewing transactions processed by the branch.  By at least early 2010, both outside regulators and the Compliance Officer had come to view the manual review as insufficient and flagged the need to enhance the branch’s transaction monitoring system with additional resources.  In 2010 and 2011, the Compliance Officer made repeated requests, including to IBKNY’s branch manager and to IBK’s Compliance Committee for an automated transaction review system, at one point noting that the “current [manual review] process is manually intensive, excessively time consuming to complete and prone to error, thereby exposing IBKNY to significant Bank Regulatory Sanctions.” 

In 2010 and 2011, the Compliance Officer was the only compliance employee at IBKNY.  During the same time period when the Compliance Officer was documenting the deficiencies in the IBKNY transaction review program, the Compliance Officer also made “a formal request for one additional IBKNY professional compliance staff” member.  In response, IBKNY senior leadership, including IBKNY’s branch manager, first proposed assigning bank interns to assist the Compliance Officer, and ultimately assigned one of IBKNY’s IT employees to assist the Compliance Officer on a part-time basis while still maintaining responsibility for IT work.  That employee, who had limited English language ability, had no experience in compliance and was of limited use to the Compliance Officer.

In March 2011, the Compliance Officer wrote another memo, in which he highlighted the significant problems caused by the continued need to engage in manual review of all transactions, adding that he had fallen so far behind at that point that “it would take approximately six months to get caught up enough to meet regulatory expectations.”  The Compliance Officer thus wrote that “it is imperative that IBKNY immediately recruit additional experienced AML/BSA resources” and recommended that, given the delay in starting the automated review of transactions, IBKNY hire additional experienced BSA/AML staff.  No meaningful action was taken on the Compliance Officer’s request for additional personnel.  Rather, the Branch Manager agreed to authorize overtime for the Compliance Officer and the IT employee assisting him so that they could devote extra hours to the manual review process. 

Due to the lack of an automated screening program and the lack of sufficient, adequately trained compliance staff to engage in the manual review process, the Compliance Officer fell months behind in his review of transactions being processed on behalf of IBK through IBKNY.  As a result, IBKNY did not detect or flag significant suspicious transactions that were processed through the branch until months after those transactions had been completed. 

IEEPA-Violating Transactions by Kenneth Zong and His Co-Conspirators

In particular, IBKNY and IBK failed to promptly identify a series of transactions that violated the United States’ economic sanctions against Iran (the “Zong Transactions”):  From January 2011 until July 2011, Kenneth Zong,[1] an American citizen, and various primarily Iranian co-conspirators exploited bank accounts that had been established at IBK and at another bank to permit certain forms of trade between Korea-based entities and Iran (the “CBI Won Accounts”), to transfer U.S. Dollars (“USD”) unlawfully to Iranian-controlled entities.  In order to evade U.S. sanctions, Zong and his co-conspirators set up shell companies in Korea, Iran, and elsewhere, which engaged in sham trade transactions and submitted fictitious documentation to Korean banks, including IBK, in order to facilitate the transfer of Iranian funds from the CBI Won Accounts to Korean entities’ accounts, the conversion of the funds into USD, and the subsequent transfer of USD from those entities through U.S. financial institutions to other accounts controlled by Zong and his co-conspirators and/or for the benefit of Zong and his co-conspirators.

IBKNY did not review and identify the Zong Transactions as unlawful until more than five months after they began to be processed through IBK, after IBK had already processed more than $1 billion worth of such transactions.

IBK and IBKNY’s Continued Failure to Implement an Adequate AML Program  

Shortly after the Compliance Officer flagged the Zong Transactions, he again alerted IBK’s management to the dire state of IBKNY’s AML program, noting in a memo to senior leadership at IBK’s Head Office that:

[C]urrently the branch AML monitoring program is behind 8 monthly BSA reviews due to insufficient resources.  Branch management has refused to accept my repeated recommendation to increase resources. . . .  Regulation H of the Federal Reserve mandates a branch have a BSA program that includes an effective BSA review process with sufficient resources to be able to detect and report suspicious activity within a reasonable time frame.  Under these requirements, the branch is deficient in both areas.

Nevertheless, IBKNY did not take immediate steps to remedy these deficiencies.  While IBK initiated a process to select a vendor to install an automated system in August 2011, the system did not become operational for another 18 months.  Moreover, while the system commenced operation in January 2013, it was not validated by IBKNY’s external auditor until 2014.  Nor did IBKNY hire even a second full-time compliance employee until October 2014. 

Even after these fundamental improvements were made, IBK did not fully remediate IBKNY’s broader BSA/AML deficiencies for years, even after entering into a Written Agreement with their primary regulators to correct such deficiencies in February 2016.

IBK’s Failure to Disclose Its Wrongdoing in a Timely Manner

While IBKNY filed a suspicious activity report regarding the subset of Zong’s transactions that had been processed through IBKNY (approximately $10 million worth of transactions) and made a disclosure regarding those transactions to the U.S. Department of the Treasury, Office of Foreign Assets Control (“OFAC”) in August 2011, IBK never self-reported to OFAC its involvement in the remaining $990 million worth of Zong’s illegal transactions.  Similarly, IBK did not self-disclose its willful violations of the Bank Secrecy Act prior to the Government’s investigation.

*                *                *

Mr. Berman praised the outstanding investigative work of the Anchorage Field Office of the FBI.  He also thanked the United States Attorney’s Office for the District of Alaska, the Federal Reserve Bank of New York, and the New York State Department of Financial Services for their assistance with this matter.  The Office of the New York State Attorney General also conducted its own investigation alongside the United States Attorney’s Office for the Southern District of New York on this investigation.

The prosecution is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant U.S. Attorneys Edward B. Diskant, Benet J. Kearney, and Alexander Wilson are in charge of the prosecution. 

[1] On or about December 14, 2016, Zong was indicted in the District of Alaska and charged with violations of IEEPA and money laundering offenses.  The entirety of the text of that indictment and the description of the indictment set forth herein constitute only allegations, and every fact described should be treated as an allegation.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (“FBI”), announced today that the Madoff Victim Fund established by the Department of Justice began its fifth distribution to victims of funds forfeited to the United States Government in connection with the Bernard L. Madoff Investment Securities LLC (“BLMIS”) fraud scheme.  The distribution will include $378.5 million in additional funds, bringing the total distributed to date to approximately $2.7 billion.  The funds will be sent to more than 26,000 victims worldwide, the fifth payment to victims that will bring their total recovery from all sources of compensation to 73.65 % of their losses.  The Madoff Victim Fund will ultimately return to victims more than $4 billion in assets that have been recovered as compensation for losses suffered by the collapse of BLMIS, following the largest fraud in history.  Another $5 billion in assets recovered by the U.S. Attorney’s Office are being separately paid to Madoff victims through the BLMIS Customer Fund administered by the Securities Investor Protection Act Trustee.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “This Office continues its efforts to seek justice for victims of history’s largest Ponzi scheme.  Today’s additional payment of more than $378 million by this Office and the U.S. Department of Justice Criminal Division’s Money Laundering and Asset Recovery Section represents the fifth in an on-going series of distributions that will leave victims with compensation for more than 73 percent of their losses.  But our work is not yet finished, and this extraordinary level of recovery represents this Office’s ongoing and tireless commitment to compensating the victims who suffered as a result of Madoff’s predatory criminal scheme.”

Assistant Attorney General Brian A. Benczkowski said:  “It is entirely fitting during this Crime Victims’ Rights Week that the department is able to make the latest distribution from the Madoff Victims Fund.  With the $378 million distributed today, the department has now returned $2.7 billion to Madoff’s victims, allowing them to recover almost 74 percent of their losses.  All of this has been made possible by the department’s steadfast commitment to the pursuit of the proceeds of fraud through civil forfeiture.”  

Since the early 1970s, BERNARD L. MADOFF (“MADOFF”) used his position as Chairman of BLMIS, the investment advisory business he founded, to steal billions from his clients.  On March 12, 2009, MADOFF pled guilty to 11 federal felonies, admitting that he had turned his wealth management business into the world’s largest Ponzi scheme, benefitting himself, his family, and select members of his inner circle.  On June 29, 2009, United States District Judge Denny Chin sentenced MADOFF to 150 years in prison for running the largest fraudulent scheme in history.  Judge Chin ordered MADOFF to forfeit $170,799,000,000 as part of MADOFF’s sentence.   

The Madoff Victim Fund is funded through recoveries by the U.S. Attorney’s Office in various criminal and civil forfeiture actions, and is overseen by Richard Breeden, the former Chairman of the United States Securities and Exchange Commission, in his capacity as Special Master appointed by the Department of Justice to assist in connection with the victim remission proceedings.

Of the approximately $4.05 billion that will be made available to victims through the Madoff Victim Fund, approximately $2.2 billion was collected as part of the civil forfeiture recovery from the estate of deceased MADOFF investor Jeffry Picower.  An additional $1.7 billion was collected as part of a Deferred Prosecution Agreement with JPMorgan Chase Bank N.A. for MADOFF-related Bank Secrecy Act violations.  Additional funds were collected through criminal and civil forfeiture actions against MADOFF and his co-conspirators, and certain MADOFF investors.

Mr. Berman praised the work of the FBI and the Madoff Victim Fund, and thanked the Money Laundering and Asset Recovery Section of the Department of Justice’s Criminal Division for their assistance.

For more information about the Madoff Victim Fund, compensation to victims of BLMIS, eligibility criteria, and payment information, please visit www.madoffvictimfund.com.

The case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant United States Attorney Louis A. Pellegrino is in charge of the case.  The remission of these forfeited funds is being handled by the Office and the U.S. Department of Justice Criminal Division’s Money Laundering and Asset Recovery Section.

At the start of National Crime Victims’ Rights Week, the Department of Justice today announced that on April 20, the Madoff Victim Fund (MVF) began its fifth distribution of approximately $378.5 million in funds forfeited to the U.S. Government in connection with the Bernard L. Madoff Investment Securities LLC (BLMIS) fraud scheme, bringing the total distributed to over $2.7 billion to nearly 38,000 victims worldwide. 

In this distribution, payments will be sent to over 26,000 victims across the globe, bringing their total recovery to 73.65 percent.  This distribution represents the fifth in a series of payments that will eventually return over $4 billion to victims as compensation for losses they suffered from the collapse of the BLMIS.  The MVF has received over 65,000 petitions from victims in 136 countries.

“It is entirely fitting during this Crime Victims’ Rights Week that the department is able to make the latest distribution from the Madoff Victims Fund,” said Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division.  “With the $378 million distributed today, the department has now returned $2.7 billion to Madoff’s victims, allowing them to recover almost 74 percent of their losses.  All of this has been made possible by the department’s steadfast commitment to the pursuit of the proceeds of fraud through civil forfeiture.”  

“This office continues its efforts to seek justice for victims of history’s largest Ponzi scheme.  Today’s additional payments of more than $378 million by this office and the U.S. Department of Justice Criminal Division’s Money Laundering and Asset Recovery Section represents the fifth in an on-going series of distributions that will leave victims with compensation for more than 73 percent of their losses,” said U.S. Attorney Geoffrey S. Berman of the Southern District of New York.  “But our work is not yet finished, and this extraordinary level of recovery represents this Office’s ongoing and tireless commitment to compensating the victims who suffered as a result of Madoff’s heinous crimes.”

For decades, Bernard L. Madoff used his position as Chairman of BLMIS, the investment advisory business he founded in 1960, to steal billions from his clients.  On March 12, 2009, Madoff pleaded guilty to 11 federal felonies, admitting that he had turned his wealth management business into the world’s largest Ponzi scheme, benefitting himself, his family and select members of his inner circle.  On June 29, 2009, U.S. District Judge Denny Chin sentenced Madoff to serve 150 years in prison for running the largest fraudulent scheme in history.  Of the approximately $4.05 billion that will be made available to victims, approximately $2.2 billion was collected as part of the historic civil forfeiture recovery from the estate of deceased Madoff investor Jeffry Picower.  An additional $1.7 billion was collected as part of a deferred prosecution agreement with JPMorgan Chase Bank N.A. and civilly forfeited in a parallel action.  The remaining funds were collected through a civil forfeiture action against investor Carl Shapiro and his family, and from civil and criminal forfeiture actions against Bernard L. Madoff, Peter B. Madoff and their co-conspirators.

The MVF’s payouts would not have been possible without the extraordinary efforts of the Criminal Division’s Money Laundering and Asset Recovery Section, the U.S. Attorney’s Office for the Southern District of New York, and the FBI in the prosecution of these crimes and the recovery of assets supporting the forfeiture in this case.  The MVF is overseen by Richard Breeden, former Chairman of the U.S. Securities and Exchange Commission, in his capacity as Special Master appointed by the Department of Justice to assist in connection with the victim remission proceedings.  The Department of Justice also acknowledges the sacrifice of numerous individuals during this period of quarantine due to COVID-19 to ensure that this distribution occurred and remained on schedule.  

More information about MVF and its compensation to victims of BLMIS is available on the MVF website at www.madoffvictimfund.com, such as eligibility criteria, process updates, and frequently asked questions.  Further questions may be directed to the MVF at 866-624-3670 or info@madoffvictimfund.com.

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.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Lt. Gen. Ronald J. Place, Director of the Defense Health Agency of the U.S. Department of Defense (“DoD”), Scott J. Lampert, Special Agent in Charge of the New York Regional Office of the U.S. Department of Health and Human Services, Office of Inspector General (“HHS-OIG”), Michael Mikulka, Special Agent-in-Charge of the Office of Investigations, Labor Racketeering and Fraud, of the U.S. Department of Labor, Office of Inspector General (“DOL-OIG”), and Thomas W. South, Deputy Assistant Inspector General for Investigations of the U.S. Office of Personnel Management, Office of Inspector General (“OPM-OIG”), announced today that the United States has filed a lawsuit and simultaneously settled civil healthcare fraud claims against FPR SPECIALTY PHARMACY LLC and MEAD SQUARE PHARMACY, INC. (“MEAD SQUARE” and together, the “Pharmacies”), and their owners, CHRISTOPHER K. CASEY and WILLIAM RUE (collectively, “Defendants”), for their submission of fraudulent claims for reimbursement to federal healthcare programs for compounded prescription drugs in violation of the False Claims Act and the Anti-Kickback Statute.  Specifically, as alleged in the Government’s complaint, the Pharmacies sold prescription drugs to federal healthcare program beneficiaries in states in which the Pharmacies were not licensed, improperly induced patients to purchase expensive custom compounded medications by waiving all or part of the substantial co-payments required under the federal healthcare programs, and paid sales representatives per-prescription commissions to illegally induce more prescriptions to be written.  In connection with the settlement agreements, which were approved today by U.S. District Judge Paul A. Engelmayer, Defendants agreed to pay a total of $426,000, and admitted to and accepted responsibility for the conduct alleged in the complaint.  The amounts paid by Defendants under the settlements are based on the Office’s assessment of their ability to pay based on the financial information they provided.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Pharmacies, like other participants in the healthcare industry, must follow the rules.  The defendants here brazenly flouted basic rules on licensing and kickbacks to line their pockets with dollars from federal healthcare programs.  That is a prescription for intervention by my Office and our partners.”

According to the complaint filed in Manhattan federal court:

During the relevant period, from 2011 through 2015, the Pharmacies dispensed a compounded prescription analgesic cream known as Focused Pain Relief from their facility in Victor, New York, to patients around the country.  Many of the Pharmacies’ patients were beneficiaries of federal healthcare programs such as TRICARE, Medicare, federal employee workers’ compensation programs overseen by DOL, and the Federal Employee Health Benefit Program.  CASEY and RUE co-owned and managed FPR SPECIALTY PHARMACY, while CASEY owned and managed MEAD SQUARE, for which RUE also worked for a time. 

The rules governing federal healthcare programs require pharmacies dispensing prescriptions to their members to be licensed with the appropriate state authorities in order to request reimbursement for the cost of the medications.  The Pharmacies violated the False Claims Act by dispensing and requesting reimbursement for hundreds of prescriptions of Focused Pain Relief dispensed to federal healthcare program beneficiaries located in states where the Pharmacies were not licensed to operate by the appropriate state authorities, and by failing to disclose that they were not licensed.  The Pharmacies also violated the False Claims Act by billing federal healthcare programs for prescriptions dispensed in states in which they had obtained their state licenses under false pretenses, including by failing to inform state authorities that they had previously dispensed drugs in the states without a license and by failing to disclose CASEY’s criminal history on pharmacy license applications.

In addition, the Pharmacies violated the Anti-Kickback Statute by engaging in two separate illegal practices.  First, the Pharmacies regularly charged federal healthcare program beneficiaries co-payments substantially below program requirements (which often exceeded $100) in order to induce them to purchase expensive prescriptions of Focused Pain Relief, for which the federal healthcare programs paid hundreds and sometimes thousands of dollars each.  And second, the Pharmacies often paid illegal kickbacks to their sales representatives in the form of sales commissions tied to the number of Focused Pain Relief prescriptions written by the physicians to whom each representative marketed. 

As part of the settlement agreements, Defendants agreed and accepted responsibility for the following:

• The Pharmacies sold prescriptions to customers covered by federal healthcare programs who were located in several states in which they were not licensed or no longer licensed by the relevant state pharmacy boards to operate as out-of-state mail-order pharmacies or otherwise sell prescription drugs to residents of those states.
   
• The Pharmacies did not disclose, in connection with their applications to state pharmacy boards, which were usually signed by CASEY, when they had previously sold mail-order prescription drugs to residents of those states where the Pharmacies either were not licensed or had license applications pending but were not yet licensed.

• The Pharmacies often did not charge customers who were covered by federal healthcare programs the required co-pays or coinsurance payments mandated by those programs for prescription drugs, in connection with their sales of Focused Pain Relief to those customers.

• The Pharmacies entered into agreements with independent sales agents and distributors to solicit physicians to prescribe Focused Pain Relief.  These agreements, which were often signed by RUE, generally provided that the Pharmacies would pay the sales agents and distributors specific sums as sales commissions for each prescription of Focused Pain Relief prescribed by a physician assigned to the particular agent or distributor.  The Pharmacies actually paid their sales agents and distributors sales commissions on a per-prescription basis, in accordance with these agreements.

*                      *                      *

As part of today’s settlement, MEAD SQUARE also entered into a corporate integrity agreement with HHS-OIG, through which it agreed to implement compliance measures and submit to monitoring.  FPR SPECIALTY PHARMACY dissolved in 2016.

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

Mr. Berman thanked DoD, HHS-OIG, DOL-OIG, and OPM-OIG for their assistance with the case.

The case is being handled by the Office’s Civil Frauds Unit.  Assistant United States Attorney Jean-David Barnea is in charge of the case.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, 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, Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of an indictment charging KEVIN TAYLOR, GARY ROBLES, and MICHAEL MAZUR with the October 31, 2011, murder of Joshua Rubin in Brooklyn, New York.  All three defendants were arrested today and will be presented this afternoon before United States Magistrate Judge Ona T. Wang.  The case is assigned to United States District Judge Laura Taylor Swain.

U.S. Attorney Geoffrey S. Berman said:  “Over eight years ago, Joshua Rubin’s life was taken.  As alleged in the Indictment, these defendants were responsible for that terrible crime.  Now, thanks to the determination of our law enforcement partners and the Special Agents of our Office, the defendants are charged in federal court with murder.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “After years of wondering what led to Mr. Rubin disappearing from his Brooklyn neighborhood, and his body being found in rural Pennsylvania, his family and the community may finally get some answers.  The passage of time makes cold cases difficult, but the people who committed the crimes are still out there, and they will be held accountable.  I want to commend agents and detectives on the FBI New York Joint Violent Crimes Task Force and the NYPD Cold Case Homicide Unit for never giving up, and never forgetting the victim deserves justice.”

NYPD Commissioner Dermot Shea said:  “When a life is violently taken, law enforcement is there to speak for the voiceless. From the moment of Joshua Rubin’s disappearance and murder, in 2011, our NYPD investigators and federal and local law enforcement partners never stopped working to bring justice for him and all who knew him.”

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

On October 31, 2011, TAYLOR, ROBLES, and MAZUR robbed Rubin of marijuana in the vicinity of 1021 McDonald Avenue, Brooklyn, New York, and in the course of that robbery Rubin was shot and killed.

*              *             *

TAYLOR, 27, ROBLES, 37, and MAZUR, 26, are each charged with murder through the use of a firearm, which carries a maximum penalty of death or life in prison and a mandatory minimum sentence of five years in prison.  

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

 Mr. Berman praised the outstanding work of the FBI, NYPD, and the Special Agents of the United States Attorney’s Office for the Southern District of New York.  He also thanked the Lehigh County District Attorney’s Office, the Pennsylvania State Police, and the South Whitehall Township Police Department for their assistance in the investigation.

The case is being prosecuted by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Alexandra Rothman, Mollie Bracewell, and Dominic A. Gentile 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 herein constitute only allegations and every fact described should be treated as an allegation.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that the United States filed a civil fraud lawsuit today against ANTHEM, INC. (“ANTHEM”), alleging that ANTHEM falsely certified the accuracy of the diagnosis data it submitted to the Centers for Medicare and Medicaid Services (“CMS”) for risk-adjustment purposes under Medicare Part C and knowingly failed to delete inaccurate diagnosis codes.  As a result of these acts, ANTHEM caused CMS to calculate the risk-adjustment payments to ANTHEM based on inaccurate, and inflated, diagnosis information, which enabled ANTHEM to obtain millions of dollars in Medicare funds to which it was not entitled.

Manhattan U.S. Attorney Geoffrey Berman said:  “The integrity of Medicare’s payment system is critical to our healthcare.  This Office is dedicated to vigorously using all of the legal tools available, including the False Claims Act, to ensure the integrity of Medicare payments.  The case against Anthem today is an illustration of that commitment.” 

As set forth in the Complaint, Medicare Part C, also known as Medicare Advantage, provides health insurance coverage for tens of millions of Americans who opt out of traditional Medicare.  Under Medicare Part C, Medicare Advantage Organizations (“MAOs”), typically private insurers like ANTHEM, provide coverage for Medicare beneficiaries.  In return, MAOs receive capitated payments from CMS based on the patients’ medical conditions and demographic factors.  More specifically, MAOs like ANTHEM submit diagnosis data, typically passed along from beneficiaries’ healthcare providers, to CMS.  CMS then uses that diagnosis data, in conjunction with demographic factors, to calculate a “risk score” for each beneficiary and, in turn, the amount of the capitated payment that the MAO will receive for covering that beneficiary.

The Complaint alleges that ANTHEM, as one of the nation’s largest MAOs, operated dozens of Medicare Part C plans, including the Empire MediBlue plan in New York.  To supplement its collection of diagnosis codes besides what it received from healthcare providers, ANTHEM implemented a “retrospective chart review” program using a vendor called Medi-Connect.  Specifically, ANTHEM paid Medi-Connect to collect medical records from healthcare providers corresponding to services they rendered to ANTHEM’s Part C beneficiaries and then review those records to identify all diagnosis codes supported by the medical records.  ANTHEM then submitted to CMS any diagnosis codes identified by Medi-Connect that ANTHEM had not already submitted to CMS based on what providers initially reported. 

The Complaint further alleges that when ANTHEM asked healthcare providers to provide records to Medi-Connect, ANTHEM characterized its chart review program as an “oversight activity” that would “help ensure that the [diagnosis] codes have been reported accurately.”  In fact, however, ANTHEM did not use the information it received from Medi-Connect to check the accuracy of diagnosis codes it had submitted to CMS.  Specifically, when Medi-Connect’s review did not validate diagnosis codes that ANTHEM previously submitted to CMS, ANTHEM did not make any effort to verify or delete those codes. 

According to the Complaint, ANTHEM did not do so because deleting invalid diagnosis codes would have substantially reduced the additional revenue the chart review program generated for ANTHEM, which frequently exceeded $100 million per year.  Instead, ANTHEM treated its chart review program solely as a tool for revenue enhancement and viewed it as ANTHEM’s “cash cow.”    

As alleged in the Complaint, ANTHEM not only knowingly failed to delete diagnosis codes shown by its chart review program to be unsupported by the medical records, but also repeatedly made false statements to CMS.  Specifically, ANTHEM made false annual attestations to CMS certifying that its risk-adjustment data submissions were “accurate” according to its “best knowledge, information and belief.”  ANTHEM also falsely told CMS that it would “research and correct” risk adjustment data discrepancies.  As result of its false statements and its failure to delete inaccurate diagnosis codes, ANTHEM improperly obtained or retained millions of dollars in payments from CMS to which it was not entitled, in violation of the False Claims Act.

Mr. Berman thanked the Office of Counsel to the Inspector General for the Department of Health and Human Services and the Commercial Litigation Branch at the Civil Division of the Department of Justice for their extensive assistance.

This case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorneys Li Yu, Peter Aronoff, and Rachael Doud are in charge of this case.

William Barr, the Attorney General of the United States, Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Brian Benczkowski, Assistant Attorney General for the Criminal Division of the Department of Justice, Uttam Dhillon, Acting Administrator of the United States Drug Enforcement Administration (“DEA”), and Alysa D. Erichs, U.S. Immigration and Customs Enforcement’s Acting Executive Associate Director for Homeland Security Investigations (“HSI”), announced the unsealing of two separate indictments charging current and former Venezuelan officials and FARC leadership.  One Superseding Indictment includes narco-terrorism, drug trafficking, and weapons charges against NICOLÁS MADURO MOROS, Diosdado CABELLO RONDÓN, HUGO ARMANDO CARVAJAL BARRIOS, a/k/a “El Pollo,” CLÍVER ANTONIO ALCALÁ CORDONES, LUCIANO MARÍN ARANGO, a/k/a “Ivan Marquez,” and SEUXIS PAUCIS HERNÁNDEZ SOLARTE, a/k/a “Jesús Santrich.”  The other Superseding Indictment alleges violations of the International Emergency Economic Powers Act (“IEEPA”) and the Foreign Narcotics Kingpin Designation Act (“Kingpin Act”), and a related conspiracy to defraud the U.S. Department of the Treasury, the Office of Foreign Assets Control (“OFAC”), against TARECK ZAIDAN EL AISSAMI MADDAH, JOSELIT RAMIREZ CAMACHO, and SAMARK LOPEZ BELLO.  The charges are contained in separate Superseding Indictments unsealed today in Manhattan federal court.  Both cases are pending before U.S. District Judge Alvin K. Hellerstein.

The U.S. Department of State, through its Narcotics Rewards Program, is offering rewards of up to $15 million for information leading to the arrest and/or conviction of MADURO MOROS, up to $10 million for information leading to the arrest and/or conviction of CABELLO RONDÓN, CARVAJAL BARRIOS, and ALCALÁ CORDONES, and up to $5 million for information leading to the arrest and/or conviction of MARÍN ARANGO.  Anyone with information that may lead to the arrest and/or conviction of Maduro Moros, Cabello Rondón, Carvajal Barrios, or Marín Arango can email the DEA at CartelSolesTips@usdoj.gov, or message the DEA at 1-202-681-8187 using text messages, WhatsApp, or Signal. 

The U.S. Department of State is also offering rewards of up to $10 million for information leading to the arrest and/or conviction of EL AISSAMI MADDAH.  Anyone with information that may lead to the arrest and/or conviction of EL AISSAMI MADDAH can contact HSI 1-866-347-2423.

Attorney General William Barr said: “The Venezuelan regime, once led by Nicolás Maduro Moros, remains plagued by criminality and corruption. For more than 20 years, Maduro and a number of high-ranking colleagues allegedly conspired with the FARC, causing tons of cocaine to enter and devastate American communities. Today’s announcement is focused on rooting out the extensive corruption within the Venezuelan government – a system constructed and controlled to enrich those at the highest levels of the government. The United States will not allow these corrupt Venezuelan officials to use the U.S. banking system to move their illicit proceeds from South America nor further their criminal schemes.”

U.S. Attorney Geoffrey S. Berman said:  “Today we announce criminal charges against Nicolas Maduro for running, together with his top lieutenants, a narco-terrorism partnership with the FARC for the past 20 years.  The scope and magnitude of the drug trafficking alleged was made possible only because Maduro and others corrupted the institutions of Venezuela and provided political and military protection for the rampant narco-terrorism crimes described in our charges.  As alleged, Maduro and the other defendants expressly intended to flood the United States with cocaine in order to undermine the health and wellbeing of our nation.  Maduro very deliberately deployed cocaine as a weapon.  While Maduro and other cartel members held lofty titles in Venezuela’s political and military leadership, the conduct described in the Indictment wasn’t statecraft or service to the Venezuelan people.   As alleged, the defendants betrayed the Venezuelan people and corrupted Venezuelan institutions to line their pockets with drug money.”

DEA Acting Administrator Uttam Dhillon said:  “These indictments expose the devastating systemic corruption at the highest levels of Nicolas Maduro’s regime.  These officials repeatedly and knowingly betrayed the people of Venezuela, conspiring, for personal gain, with drug traffickers and designated foreign terrorist organizations like the FARC. Today’s actions send a clear message to corrupt officials everywhere that no one is above the law or beyond the reach of U.S. law enforcement.  The Department of Justice and the Drug Enforcement Administration will continue to protect the American people from ruthless drug traffickers – no matter who they are or where they live.”

ICE Acting Executive Associate Director for HSI Alysa D. Erichs said:  “The collaborative nature of this investigation is representative of the ongoing work HSI and international law enforcement agencies perform each day, often behind the scenes and unknown to the public, to make our communities safer and free from corruption.  Today’s announcement highlights HSI’s global reach and commitment to aggressively identify, target and investigate individuals who violate U.S. laws, exploit financial systems, and hide behind cryptocurrency to further their illicit criminal activity. Let this indictment be a reminder that no one is above the law - not even powerful political officials.”

According to the allegations contained in the Superseding Indictment charging MADURO MOROs and others, other court filings, and statements made during court proceedings[1]:

Since at least 1999, MADURO MOROS, DIOSDADO CABELLO RONDÓN, HUGO CARVAJAL BARRIOS, a/k/a “El Pollo,” and CLÍVER ALCALÁ CORDONES, acted as leaders and managers of the Cártel de Los Soles, or “Cartel of the Suns.”  The Cartel’s name refers to the sun insignias affixed to the uniforms of high-ranking Venezuelan military officials. MADURO MOROS and the other charged Cartel members abused the Venezuelan people and corrupted the legitimate institutions of Venezuela – including parts of the military, intelligence apparatus, legislature, and the judiciary – to facilitate the importation of tons of cocaine into the United States.  The Cártel de Los Soles sought not only to enrich its members and enhance their power, but also to “flood” the United States with cocaine and inflict the drug’s harmful and addictive effects on users into the United States.

MARÍN ARANGO and HERNÁNDEZ SOLARTE are leaders of the FARC.  Beginning in approximately 1999, while the FARC was purporting to negotiate toward peace with the Colombian government, FARC leaders agreed with leaders of the Cártel de Los Soles to relocate some of the FARC’s operations to Venezuela under the protection of the Cartel.  Thereafter, the FARC and the Cártel de Los Soles dispatched processed cocaine from Venezuela to the United States via transshipment points in the Caribbean and Central America, such as Honduras.  By approximately 2004, the United States Department of State estimated that 250 or more tons of cocaine were transiting Venezuela per year.  The maritime shipments were shipped north from Venezuela’s coastline using go-fast vessels, fishing boats, and container ships.  Air shipments were often dispatched from clandestine airstrips, typically made of dirt or grass, concentrated in the Apure State.  According to the United States Department of State, approximately 75 unauthorized flights suspected of drug trafficking activities entered Honduran airspace in 2010 alone, using what is known as the “air bridge” cocaine route between Venezuela and Honduras.

In his role as a leader of the Cártel de Los Soles, MADURO MOROS negotiated multi-ton shipments of FARC-produced cocaine; directed that the Cártel de Los Soles provide military-grade weapons to the FARC; coordinated foreign affairs with Honduras and other countries to facilitate large-scale drug trafficking; and solicited assistance from FARC leadership in training an unsanctioned militia group that functioned, in essence, as an armed forces unit for the Cártel de Los Soles.

The Defendants

MADURO MOROS is the former president of Venezuela.  He previously held a seat in the Venezuelan National Assembly between approximately 2000 and approximately 2006, acted as the Venezuelan foreign minister between approximately 2006 and approximately 2013, and acted as the vice president of Venezuela in approximately 2013.  MADURO MOROS succeeded to the Venezuelan presidency after Hugo Chávez died in 2013 and, during his presidency, continued to participate in cocaine trafficking with the Cártel de Los Soles and the FARC.  In approximately 2018, MADURO MOROS declared victory in a presidential election in Venezuela.  In approximately 2019, the National Assembly of Venezuela invoked the Venezuelan constitution and declared that MADURO MOROS had usurped power and was not the president of Venezuela.  Since approximately 2019, more than 50 countries, including the United States, have refused to recognize MADURO MOROS as Venezuela’s head of state and instead recognized Juan Guaidó as the interim president of Venezuela.  In approximately January 2020, the U.S. State Department certified the authority of Guaidó, as the interim president of Venezuela, to receive and control property in accounts at the United States Federal Reserve maintained by the Venezuelan government and the Central Bank of Venezuela.

CABELLO RONDÓN is president of Venezuela’s National Constituent Assembly, and a member of the Venezuelan armed forces.  CABELLO RONDÓN previously acted as chief of staff to Chávez in approximately 2001, vice president of Venezuela in approximately 2002, governor of Venezuela’s Miranda State between approximately 2004 and approximately 2008, and president of Venezuela’s National Assembly between approximately 2012 and approximately 2016.

CARVAJAL BARRIOS is a Venezuelan citizen and was the director of Venezuela’s military intelligence agency, which was known as the Dirección de Inteligencia Militar (“DIM”), between approximately 2004 and approximately 2011.  In approximately April 2011, the United States Attorney’s Office for the Southern District of New York filed the original indictment in this case, charging CARVAJAL BARRIOS with drug trafficking, 11 Cr. 205 (AKH).  Nonetheless, in approximately 2013, MADURO MOROS made CARVAJAL BARRIOS the director of the DIM for a second time.  Between approximately January 2014 and approximately June 2014, CARVAJAL BARRIOS held the title of Venezuela’s consul general to Aruba.  In approximately January 2016, despite being a fugitive on the above-described drug trafficking charges, CARVAJAL BARRIOS was elected to the Venezuelan National Assembly.  As of today, CARVAJAL BARRIOS remains a fugitive on pending charges in underlying indictments in the Southern District of New York and subject to a lawful order of extradition issued by Spain in approximately 2019.

ALCALÁ CORDONES is a former general in the Venezuelan military.

MARÍN ARANGO joined the FARC in approximately 1985.  In approximately 2006, the United States Attorney’s Office for the Southern District of New York filed a drug trafficking charge against 50 leaders of the FARC, including MARÍN ARANGO.  As of today, MARÍN ARANGO is a fugitive on that charge and a member of the FARC’s Secretariat, which is the FARC’s highest leadership body.

HERNÁNDEZ SOLARTE joined the FARC in approximately 1991.  As of today, HERNÁNDEZ SOLARTE is a member of the FARC’s Central High Command, which is the FARC’s second-highest leadership body.  As described below, in approximately 2018, the United States Attorney’s Office for the Southern District of New York filed drug trafficking charges against HERNÁNDEZ SOLARTE.  HERNÁNDEZ SOLARTE remains a fugitive on those charges.

*                *                *

MADURO MOROS, 57, CABELLO RONDÓN, 56, CARVAJAL BARRIOS, 59, ALCALÁ CORDONES, 58, MARÍN ARANGO, 64, and HERNÁNDEZ SOLARTE, 53, have each been charged with: (1) participating in a narco-terrorism conspiracy, which carries a 20-year mandatory minimum sentence and a maximum of life; (2) conspiring to import cocaine into the United States, which carries a 10-year mandatory minimum sentence and a maximum of life; (3) using and carrying machine guns and destructive devices during and in relation to, and possessing machine guns and destructive devices in furtherance of, the narco-terrorism and cocaine importation conspiracies, which carries a 30-year mandatory minimum sentence and a maximum of life; and (4) conspiring to use and carry machine guns and destructive devices during and in relation to, and to possess machine guns and destructive devices in furtherance of, the narco-terrorism and cocaine importation conspiracies, which carries a maximum sentence of life.  The potential mandatory minimum and maximum sentences in this case are prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Berman praised the outstanding investigative work of the DEA’s Special Operations Division Bilateral Investigations Unit, New York Strike Force, and Miami Field Division, as well as the U.S. Department of Justice’s Office of International Affairs and the National Security Division’s Counterterrorism Section. 

This case is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Amanda L. Houle, Matthew J. Laroche, Jason A. Richman, and Kyle A. Wirshba are in charge of the prosecution.

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

*                *                *

A separate Superseding Indictment unsealed today in Manhattan federal court charges TARECK ZAIDAN EL AISSAMI MADDAH, Venezuela’s vice president for the economy, JOSELIT RAMIREZ CAMACHO, Venezuela’s superintendent of cryptocurrency (Sunacrip), and SAMARK LOPEZ BELLO, a Venezuelan businessman, with violations of IEEPA, the Kingpin Act, and other offenses related to efforts to evade sanctions imposed by OFAC against MADURO MOROS, EL AISSAMI MADDAH, and LOPEZ BELLO. 

According to the allegations contained in the Superseding Indictment charging EL AISSAMI MADDAH and others, other court filings, and statements made during court proceedings[2]:

From February 2017 until March 2019, EL AISSAMI MADDAH and RAMIREZ CAMACHO worked with U.S. persons and U.S.-based entities to provide private flight services for the benefit of MADURO MOROS’s 2018 presidential campaign, in violation of OFAC’s sanctions targeting MADURO MOROS after he organized elections for the illegitimate National Constituent Assembly that CABELLO RONDÓN now leads. 

*                *                *

EL AISSAMI MADDAH, 45, RAMIREZ CAMACHO, 33, and LOPEZ BELLO, 45, are charged with: (1) conspiracy to obstruct the lawful governmental functions of OFAC, which carries a maximum of 5 years’ imprisonment; (2) conspiracy to violate the Kingpin Act, which carries a maximum of 30 years’ imprisonment; and (3) four substantive violations of the Kingpin Act, each of which carries a maximum of 30 years’ imprisonment.  EL AISSAMI MADDAH and RAMIREZ CAMACHO are also charged with: (4) conspiracy to violate IEEPA, which carries a maximum of 20 years’ imprisonment; and (5) conspiracy to commit money laundering, which carries a maximum of 20 years’ imprisonment. The potential mandatory minimum and maximum sentences in this case are prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Berman praised the outstanding investigative work of HSI’s New York Field Office, as well as OFAC, the U.S. Department of Justice’s Office of International Affairs, and the Counterintelligence and Export Control Section of the Department of Justice’s National Security Division. 

This case is also being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Sam Adelsberg and Amanda L. Houle are in charge of the prosecution.

The charges in the Superseding 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.

[2] 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.    

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that ISAI SCHEINBERG, the founder and former executive of PokerStars, an online poker company, pled guilty today to running a multimillion-dollar unlawful internet gambling business.  SCHEINBERG pled guilty before U.S. Magistrate Judge Sarah L. Cave.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Ten years ago, this Office charged 11 defendants who operated, or provided fraudulent payment processing services to, three of the largest online poker companies then operating in the United States – PokerStars, Full Tilt Poker, and Absolute Poker – with operating illegal gambling businesses and other crimes.  As Isai Scheinberg’s guilty plea today shows, the passage of time will not undermine this Office’s commitment to holding accountable individuals who violate U.S. law.” 

As alleged in the Indictment filed in March 2011 in Manhattan federal court, PokerStars was founded in approximately 2001, with headquarters in the Isle of Man.  PokerStars offered online poker games to players around the world, including in New York, New York.  SCHEINBERG was PokerStars’ founder and principal.  On October 13, 2006, the United States enacted the Unlawful Internet Gambling Enforcement Act (“UIGEA”), making it a federal crime for gambling businesses to “knowingly accept” most forms of payment “in connection with the participation of another person in unlawful Internet gambling.”  With the enactment of UIGEA, leading internet gambling businesses – including the leading internet poker company doing business in the United States at that time – terminated their United States operations.  However, PokerStars, along with Full Tilt Poker and Absolute Poker, continued illegally to make internet poker available to U.S. customers through March 2011.  

In pleading guilty today, SCHEINBERG admitted that he knew operating a business that offered internet poker to New Yorkers violated state law, and that it was the clear position of the U.S. government that offering online poker in the United States violated federal law.  Nonetheless, Scheinberg decided to continue running his multimillion-dollar online poker business in the United States. 

In 2012, PokerStars and its related companies (the “PokerStars Companies”) agreed to settle a civil forfeiture and civil money laundering action brought by the Office.  That settlement involved, among other things, the PokerStars Companies forfeiting $547 million to the United States and assuming approximately $184 million in foreign player liabilities of another online poker company subject to the settlement.  Additionally, in June 2013, Mark Scheinberg, ISAI SCHEINBERG’s son, agreed to forfeit to the United States an additional $50 million of distributions he received from the operation of the PokerStars Companies.

*                *                *

SCHEINBERG, 73, a dual Canadian and Israeli national, was arrested in Switzerland on June 7, 2019, based on the U.S. charges.  In early October 2019, SCHEINBERG was ordered to be extradited to the United States by the Swiss Federal Office of Justice, a decision he initially appealed.  SCHEINBERG subsequently withdrew his appeal and surrendered to U.S. federal agents on January 17, 2020.  He was arraigned before United States Magistrate Judge Katharine H. Parker on the same day.

SCHEINBERG pled guilty to one count of operating an illegal gambling business, in violation of 18 U.S.C. § 1955.  SCHEINBERG faces a maximum sentence of five years in prison.  He is scheduled to be sentenced by United States District Judge Lewis A. Kaplan on a date to be determined.

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

Mr. Berman thanked the Federal Bureau of Investigation and Homeland Security Investigations for their outstanding work and perseverance in the investigation and prosecution of this case, and Swiss authorities and the Department of Justice Criminal Division’s Office of International Affairs for their assistance with SCHEINBERG’s arrest and extradition proceedings.

With SCHEINBERG’s guilty plea, all 11 defendants – including Raymond Bitar, Scott Tom, Brent Beckley, Nelson Burtnick, Paul Tate, Ryan Lang, Bradley Franzen, Ira Rubin, Chad Elie, and John Campos – originally charged in the Indictment have now pled guilty.  All but SCHEINBERG have been sentenced.

This matter is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Olga Zverovich, Sarah Lai, and Jason Cowley are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Ray Donovan, Special Agent in Charge of the New York Division of the U.S. Drug Enforcement Administration (“DEA”), Keith M. Corlett, Superintendent of the New York State Police (“NYSP”), and Thomas Pape, Chief of Police for the City of Poughkeepsie, announced charges today against MICHAEL NICHOLAS, a/k/a “Pop,” DARREN PARKER, a/k/a “Born,” REGINA CUMMINGS, a/k/a “Gina,” and JAQUON DANCY, a/k/a “Wiz,” with various narcotics-related offenses.  During search warrant operations of NICHOLAS’s residence in Poughkeepsie, New York, law enforcement recovered approximately 15 kilograms of narcotics, including powder cocaine, heroin, crack cocaine, and approximately 1.5 kilograms of substances containing fentanyl.  Three firearms were also recovered from NICHOLAS’s residence. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, these defendants trafficked in large amounts of fentanyl and other narcotics in and around Dutchess County.  Fentanyl is one of the leading causes of overdose deaths and it has devastated communities across Dutchess County and the Southern District of New York.  I commend our law enforcement partners in stopping those who allegedly traffic in fentanyl and other narcotics.”

DEA Special Agent in Charge Ray Donovan said:  “The fact that these individuals are facing charges today demonstrates the degree of danger their alleged drug trafficking was to the City of Poughkeepsie.  I commend our law enforcement partners who continue to keep our cities safe.”

NYSP Superintendent Keith M. Corlett said:  “Once again, excellent police work by our federal, state and local departments has dismantled an alleged drug operation, put four allegedly dangerous individuals behind bars and seized drugs, cash and weapons. As alleged, these dealers were selling and transporting fentanyl, heroin and crack cocaine throughout the Poughkeepsie area. I applaud the hard work of the members involved in this investigation and together we will continue the fight to keep drugs off our streets.”

As alleged in the Indictments unsealed today and statements made in Court proceedings[1]:

From at least September 2018 till February 2020, MICHAEL NICHOLAS and DARREN PARKER conspired to distribute 400 grams or more of mixtures and substances containing fentanyl.

In addition, from at least January 2020 up to and including March 2020, NICHOLAS and REGINA CUMMINGS conspired to distribute 28 grams or more of crack cocaine. 

Finally, in March 2020, JAQUON DANCY conspired with others to distribute 40 grams or more mixtures and substances containing fentanyl.

The defendants were arrested early this morning.  Law enforcement recovered approximately 15 kilograms of narcotics and three firearms during search operations.

*                *                *

NICHOLAS, 33, of Poughkeepsie, New York, is charged with one count of conspiring to distribute 400 grams or more of mixtures and substances containing fentanyl, which carries a mandatory minimum of 10 years in prison and a maximum sentence of life in prison.  He is also charged with one count of conspiring to distribute 28 grams or more of crack cocaine, which carries a maximum sentence of 40 years in prison.

PARKER, 51, of Poughkeepsie, New York, is charged with one count of conspiring to distribute 400 grams or more of mixtures and substances containing fentanyl, which carries a mandatory minimum of 10 years in prison and a maximum sentence of life in prison. 

CUMMINGS, 51, is charged with one count of conspiring to distribute 28 grams or more of crack cocaine, which carries a mandatory minimum of five years in prison and a maximum sentence of 40 years in prison.

DANCY, 25, is charged with one count of conspiring to distribute 40 grams or more of mixtures and substances containing fentanyl, which carries a mandatory minimum of five years in prison and a maximum sentence of 40 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.

Mr. Berman praised the outstanding investigative work of the DEA, the NYSP, and the City of Poughkeepsie Police Department. 

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

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 descriptions of the Indictments set forth below constitute only allegations, and every fact described should be treated as an allegation.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, 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, Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of a Superseding Indictment charging NAZEEM FRANCIS, a/k/a “Naz,” JONATHAN COLON, a/k/a “Johnny Blaze,” a/k/a “JB,” JULIO OZUNA, a/k/a “JJ,” a/k/a “Josh Balla,” a/k/a “Chocolate,” PRINCE GAINES, a/k/a “Poodie,” ERICK OLEAGA, a/k/a “E.D.,” VICTOR MARTINEZ, and KHALIL SUGGS, a/k/a “KI,” with crimes including murder, robbery, robbery conspiracy, narcotics distribution conspiracy, and firearms offenses. 

Five defendants were arrested today and will be presented this afternoon before United States Magistrate Judge Sarah L. Cave.  Two defendants were already in custody and will be presented at a later date.  The case has been assigned to United States District Judge Mary Kay Vyskocil. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged in the indictment, the defendants brought violence and drugs to the streets of the Bronx.  Now, thanks to our outstanding law enforcement partners at the FBI and the NYPD, these defendants face charges in federal court.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said: "This investigation illustrates the extremes violent gang members will go to, all in the pursuit of making easy money.  The arrests and announcement today also demonstrate that while much of the world is rightly slowing down, FBI special agents and detectives on the New York FBI Metro Safe Streets Gang Task Force will continue the extremely critical work of keeping criminals from putting more lives in danger."

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

On or about September 3, 2018, FRANCIS, COLON, and OZUNA aided and abetted the shooting and killing of Christopher Pierce in the Bronx, New York, following the attempted robbery of Pierce’s friend, a marijuana dealer.  FRANCIS, COLON, and OZUNA are also charged with attempted robbery and robbery conspiracy based on their participation in the botched robbery that led to Pierce’s death.

COLON, OZUNA, GAINES, OLEAGA, MARTINEZ, and SUGGS are charged with participating in a conspiracy to distribute cocaine and crack cocaine from in or about 2018 through in or about March 2020. 

On or about November 18, 2019, SUGGS brandished a firearm, and aided and abetted the same, in furtherance of the drug trafficking conspiracy.

On or about January 19, 2020, OZUNA robbed an individual at gunpoint.  OZUNA is charged with robbery, robbery conspiracy, and brandishing a firearm based on his participation in that gunpoint robbery.

*                *                *

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

Mr. Berman praised the outstanding investigative work of the FBI’s Safe Streets Task Force, as well as NYPD’s 43rd Police Precinct and Bronx Narcotics.

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Allison Nichols and Jamie Bagliebter are in charge of the prosecution.

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

COUNT

CHARGE

DEFENDANTS

MAX. PENALTY

Count One

Murder through the Use of a Firearm

18 U.S.C. §§ 924(j) and 2

NAZEEM FRANCIS

JONATHAN COLON

JULIO OZUNA

Death or life imprisonment;

Mandatory minimum of five years’ imprisonment

Count Two

Attempted Robbery

18 U.S.C. §§ 1951 and 2

NAZEEM FRANCIS

JONATHAN COLON

JULIO OZUNA

20 years’ imprisonment

Count Three

Robbery Conspiracy

18 U.S.C. § 1951

NAZEEM FRANCIS

JONATHAN COLON

JULIO OZUNA

20 years’ imprisonment

Count Four

Narcotics Conspiracy

21 U.S.C. § 846

JONATHAN COLON

JULIO OZUNA

PRINCE GAINES

KHALIL SUGGS

ERICK OLEAGA

VICTOR MARTINEZ

40 years’ imprisonment

Mandatory minimum of 5 years’ imprisonment

Count Five

Firearm Offense

18 U.S.C. §§ 924(c) and 2

KHALIL SUGGS

Life

Mandatory minimum of 7 years’ imprisonment

Count Six

Robbery

18 U.S.C. §§ 1951 and 2

JULIO OZUNA

20 years’ imprisonment

Count Seven

Robbery conspiracy

18 U.S.C. § 1951

JULIO OZUNA

20 years’ imprisonment

Count Eight

 Firearm Offense

18 U.S.C. §§ 924(c) and 2

JULIO OZUNA

Life

Mandatory minimum of 7 years’ imprisonment

[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.