Southern District of New York

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that MICHAEL CAMPANA, a construction manager for a global financial firm, pled guilty today to charges of evading taxes on more than $350,000 in bribes he received from building sub-contractors.  The bribes included payments of more than $75,000 to cover expenses associated with CAMPANA’s wedding.  CAMPANA is scheduled to be sentenced on March 6, 2020, before United States District Judge Denise Cote.  Thereafter, he also faces sentencing in New York State court on money laundering charges for his participation in the bribery scheme.

U.S. Attorney Geoffrey S. Berman said:  “Bribery and tax evasion often go hand-in-hand, forcing both the bribery victims and the taxpaying public to unfairly bear the hidden costs of corruption.  Today, Michael Campana admitted to federal tax evasion for failing to report his income from an illegal bribery scheme to which he already pled guilty.”

According to the criminal Information filed today, as well as other public documents and today’s court proceeding:

Between 2013 and 2017, CAMPANA was a construction manager for a global financial firm engaged in various building projects in New York City and elsewhere.  He and others participated in a scheme to obtain bribes from construction sub-contractors, who paid bribes in exchange for being awarded various construction contracts and sub-contracts.  In all, CAMPANA received bribes in excess of $350,000 between 2014 and 2017.  Some of those bribes related to CAMPANA’s 2017 wedding, including payments of approximately $40,000 from sub-contractors directly to a catering hall in New Jersey, over $13,000 directly to a photography studio, and over $23,000 directly to a travel agent for airline tickets purchased in connection with CAMPANA’s honeymoon.  Other payments, totaling more than $100,000, were made in cash, which CAMPANA stashed in a safe.  CAMPANA evaded federal income tax on this bribery income, by failing to declare it on his income tax returns for the years 2014 through 2017.

In connection with the underlying bribery scheme, the Manhattan District Attorney’s Office charged CAMPANA and 13 others in December 2018 with numerous felonies, including charges of conspiracy, commercial bribery, and money laundering.  Last week, on November 19, CAMPANA pled guilty in the state court case to money laundering in the third degree.  (New York v. Guzzone, et al., case no. 04037-2018 (N.Y. Sup. Ct.), count 44).  He is awaiting sentencing in that case as well. 

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CAMPANA, 33, of Tuckahoe, New York, pled guilty today to a single count of tax evasion.  That charge carries a maximum sentence of five years in prison, a maximum fine of $250,000 or twice the gross gain or loss from the offense, and an order of restitution.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.           

Mr. Berman praised the excellent work of the Internal Revenue Service.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Philip R. Bartlett, Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced today the unsealing of an Indictment in Manhattan federal court charging PARKER H. “PETE” PETIT and WILLIAM TAYLOR, the respective former chief executive officer and chief operating officer of MiMedx Group, Inc. (“MiMedx”), a publicly traded biopharmaceutical company, with securities fraud offenses for engaging in a scheme to fraudulently inflate MiMedx’s revenue.  The case is assigned to U.S. District Judge Jed S. Rakoff.

PETIT and TAYLOR are expected to be presented later today in Atlanta federal court.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Parker Petit and William Taylor deceived the SEC, auditors, and the investing public by repeatedly misrepresenting the financial condition of a publicly traded company.  They allegedly conspired, through secret agreements and financial inducements with four distributors, to misstate sales revenue.  The alleged conduct resulted in serious criminal charges Petit and Taylor now face.”

USPIS Inspector-in-Charge Philip R. Bartlett said:  “As alleged, Petit and Taylor’s fraudulent scheme to falsely inflate revenue could not withstand the pressure of meeting their own aggressive goals.  The investing public relied on Petit and Taylor’s misrepresentations.  Investors should not have any doubts or concerns with information distributed by a publicly traded company.  The U.S. Postal Inspection Service will not tolerate this criminal behavior and will seek out and bring to justice anyone who breaks the system of laws designed to protect the investing public.”

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

MiMedx was headquartered in Marietta, Georgia, and its securities traded under the symbol “MDXG” on the NASDAQ.  MiMedx sold regenerative biologic products, such as skin grafts and amniotic fluid, both directly to end users, such as public and private hospitals, and to various stocking distributors, which, in turn, resold the product to end users. 

One of the most critical financial metrics disclosed in MiMedx’s public filings with the Securities and Exchange Commission (“SEC”), and touted in MiMedx’s accompanying press releases, was MiMedx’s quarterly and annual sales revenue.  Under Generally Accepted Accounting Principles (GAAP) and SEC guidance, a company like MiMedx that engages in the sale of products through a distributor may recognize revenue upon transfer of the product to a distributor if certain requirements are satisfied, including that delivery has occurred or services have been rendered, the seller’s price to the buyer is fixed or determinable, and collectability of payment is reasonably assured.  PETIT and TAYLOR repeatedly demonstrated and touted their understanding of these rules governing revenue recognition.  They also publicly identified revenue as the principal metric reflecting MiMedx’s growth, and touted MiMedx’s consistent record of quarter-over-quarter revenue growth and meeting or exceeding revenue guidance in 17 consecutive quarters, from 2011 through year-end 2015.  By 2015, however, it became increasingly difficult for MiMedx to reach its revenue guidance due to decreased demand from certain distributors and the increasingly aggressive revenue targets that MiMedx had publicly announced. 

Confronted with the difficulties faced by MiMedx in meeting its quarterly and annual revenue guidance by legitimate means, PETIT and TAYLOR engaged in a fraudulent scheme to falsely recognize revenue upon the shipment of MiMedx product to four stocking distributors (“Distributor-1” through “Distributor-4”) in the second through fourth quarters of 2015.  PETIT and TAYLOR caused MiMedx to report fraudulently inflated revenue figures to the investing public in order to ensure that the reported figures fell within MiMedx’s publicly announced revenue guidance, and to fraudulently convey to the investing public that MiMedx was accomplishing consistent growth quarter after quarter, as PETIT and TAYLOR had falsely touted to the investing public.  The fraudulent scheme involved the following central features:

• As to Distributor-1, in the second quarter of 2015, PETIT and TAYLOR caused MiMedx fraudulently to recognize $1.4 million in revenue by (1) making a $200,000 sham “consulting” payment to Distributor-1’s owner to induce Distributor-1 to buy MiMedx product and (2) secretly agreeing to send Distributor-1 approximately $1.2 million of product it did not want and did not intend to sell, while promising that Distributor-1 could return the product to MiMedx and swap it for different product in a subsequent quarter.  PETIT and TAYLOR entered into the sham “consulting” agreement to conceal that the payment was an inducement to purchase product, and Distributor-1’s owner performed no consulting work for the payment.  Neither PETIT nor TAYLOR disclosed to MiMedx’s outside auditors the “consulting” payment or product swap.  

• As to Distributor-2, in the third quarter of 2015, PETIT and TAYLOR caused MiMedx fraudulently to recognize $4.6 million in revenue by (1) reaching a secret agreement with Distributor-2’s owner to excuse Distributor-2’s contractual obligation to pay for the product Distributor-2 had purchased within 30 days of shipment and (2) booking the revenue despite understanding that Distributor-2 would not make a timely payment for the product, and certainly would not do so within contractual terms.  To hide from MiMedx’s auditors that the collectability of payment from Distributor-2 was questionable, during the fourth quarter 2015, PETIT arranged for his adult children to use a shell company to loan money to Distributor-2 (money that came from a trust fund established by PETIT for their benefit), with the understanding that the loan proceeds would be used in substantial part to pay down Distributor-2’s debt to MiMedx.  PETIT did not disclose the loan to MiMedx’s outside auditors and made false and misleading statements to the auditors about Distributor-2’s ability to pay MiMedx.

• As to Distributor-3, in the third and fourth quarters of 2015, PETIT and TAYLOR caused MiMedx improperly to recognize $2.6 million of revenue, where they (1) failed to agree with Distributor-3 on the essential terms of the deal, including when payment was due; (2) reached a secret understanding that Distributor-3 could swap or return unwanted product in subsequent quarters; and (3) understood that Distributor-3 could not pay for the product in a timely fashion.  In fact, PETIT granted the right of return to Distributor-3 in a back-dated letter he hid from MiMedx’s internal accountants and outside auditors.  Ultimately, Distributor-3 paid MiMedx less than 10 percent of the value of product it had purchased.   

• As to Distributor-4, in the fourth quarter of 2015, TAYLOR caused MiMedx improperly to recognize $2.2 million in revenue by making an undisclosed promise to Distributor-4 that it could return any product that it could not sell and that MiMedx would not leave Distributor-4 with any losses.  To carry out the scheme, TAYLOR sent two emails four seconds apart to Distributor-4.  The first was a “cover story” that purported to require payment within a fixed period, as required by MiMedx’s accountants.  TAYLOR forwarded the first email to MiMedx’s accounting department.  The second email, sent only four seconds after the first, memorialized the true terms of deal, which involved an agreement to defer payment and take back product if it could not be sold.  TAYLOR hid the second email from MiMedx’s internal accountants and outside auditors.  TAYLOR also arranged for a false audit “confirmation,” which falsely represented that Distributor-4 was required to pay within a fixed period and omitted the true terms of the deal, to be provided to MiMedx’s outside auditors.

 

PETIT’s and TAYLOR’s fraudulent manipulation of MiMedx’s revenue caused MiMedx to report materially inflated revenue in the second, third, and fourth quarters of 2015, and for the full year 2015.  In its 2015 10-K, MiMedx reported annual revenue that was fraudulently inflated by approximately $9.5 million, or approximately five percent.  Absent this fraudulent inflation of revenue, MiMedx would have missed both (1) its quarterly revenue guidance in the third and fourth quarters of 2015 and annual revenue guidance for 2015 and (2) analyst revenue consensus for the second through fourth quarters of 2015 and the full year 2015.

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PARKER H. “PETE” PETIT, 80, and WILLIAM TAYLOR, 51, both of Roswell, Georgia, were charged in the Indictment with one count of conspiracy to commit securities fraud, make false filings with the SEC, and improperly influence the conduct of audits, and one count of securities fraud.  The conspiracy charge carries a maximum prison term of five years.  The securities fraud charge carries a maximum prison term of 20 years.   

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 work of the investigative work of USPIS.  Mr. Berman also thanked the SEC, which brought a separate civil action.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Edward A. Imperatore, Scott A. Hartman, and Daniel M. Tracer are in charge of the prosecution.  

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

 

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[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the 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, and Peter C. Fitzhugh, the Special Agent in Charge of the New York Field Office of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), announced that VICTOR MONES CORO (“MONES CORO”) pled guilty today to participating in a conspiracy with former Venezuelan vice president Tareck Zaidan El Aissami Maddah (“El Aissami”) and Venezuelan businessman Samark Jose Lopez Bello (“Lopez Bello”), among others, to violate and evade sanctions imposed by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) pursuant to the Foreign Narcotics Kingpin Designation Act (“Kingpin Act”).  MONES CORO pled guilty today before U.S. Magistrate Judge Robert W. Lehrburger, and he will be sentenced by U.S. District Judge Alvin K. Hellerstein on February 26, 2020, at 10:30 a.m.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Victor Mones Coro has now admitted that he conspired to circumvent U.S. sanctions to help former Venezuelan vice president Tareck El Aissami, Samark Lopez Bello, and others obtain international transport via private jet.  Together with HSI, OFAC, and all of our law enforcement partners, we will continue to vigorously enforce sanctions to protect our national security.”

Special Agent in Charge Peter C. Fitzhugh said:  “We take a great deal of pride in working alongside the US Attorney’s Office and the Department of the Treasury to ensure that the integrity and intent of U.S. sanctions is preserved both at home and abroad.  HSI, through myriad authorities, conducts criminal investigations to maintain the viability of the American financial system and prevent its misuse by foreign corrupt officials and narcotics traffickers. Today, we are reminded of our steadfast commitment to holding those willing to violate such sanctions accountable.  And to those who intend to circumvent our laws to gain power and further their corrupt practices through international crime, know you will be brought to justice.”

According to the allegations contained in the Indictment and statements made at MONES CORO’s guilty plea[1]:

 Between in or about February 2017 and March 2019, MONES CORO conspired to violate and evade OFAC’s sanctions by providing travel services, including private jet charters, to El Aissami and Lopez Bello, as well as their relatives and associates.  El Aissami and Lopez Bello paid for these services at times through intermediaries who delivered bulk cash in Venezuela.

El Aissami became the Vice President of Venezuela in approximately January 2017 and is currently Venezuela’s Minister of Industry and National Production.  In February 2017, OFAC designated El Aissami and Lopez Bello as Specially Designated Narcotics Traffickers pursuant to the Kingpin Act and related regulations.  As a result of OFAC’s designations, U.S. persons are generally prohibited from, among other things, engaging in transactions with or providing services to El Aissami and Lopez Bello absent authorization from OFAC. 

MONES CORO and others used American Charter Services LLC and its affiliates, all U.S. companies, to evade OFAC’s Kingpin Act sanctions in connection with transportation services provided to El Aissami and Lopez Bello.  For example, in September 2018, MONES CORO used an American Charter Services account in the United States to pay expenses for an upcoming private flight for Lopez Bello.  Similarly, MONES CORO, El Aissami, Lopez Bello, and Alejandro Miguel Leon Maal used SVMI Solution, LLC, another U.S. company, to receive payments for transportation services provided to El Aissami and Lopez Bello in violation of the Kingpin Act and the OFAC sanctions, such as a July 2018 funds transfer sent from Manhattan, New York to an SVMI Solution account in Florida. 

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MONES CORO, 51, of Florida, pled guilty to one count of conspiracy to violate and evade the Foreign Narcotics Kingpin Designation Act and the Kingpin Act regulations, as an officer of an entity that participated in the violations, which carries a maximum sentence of 30 years in prison. 

Alejandro Antonio Leon Maal and Michols Orsini Quintero are currently detained while El Aissami, Lopez Bello, and Alejandro Antonio Quintavalle Yrady remain at liberty.

Mr. Berman praised the outstanding efforts of U.S. Customs and Border Protection, and the DEA’s Special Operations Division Bilateral Investigations Unit.  Mr. Berman also thanked the Counterintelligence and Export Control Section of the Department of Justice’s National Security Division, and OFAC.

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

The charges contained in the Indictment against El Aissami, Lopez Bello, Alejandro Antonio Leon Maal, Michols Orsini Quintero, and Alejandro Antonio Quintavalle Yrady are merely accusations, and El Aissami, Lopez Bello, Leon Maal, Orsini Quintero, and Quintavalle Yrady are presumed innocent unless and until proven guilty.

 

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[1] The descriptions set forth below of conduct by co-defendants Tareck Zaidan El Aissami Maddah, Samark Jose Lopez Bello, Alejandro Miguel Leon Maal, Michols Orsini Quintero, and Alejandro Antonio Quintavalle Yrady constitute only allegations, and every fact described should be treated as an allegation with respect to these defendants.

 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, John B. DeVito, Special Agent in Charge of the New York Field Office of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”), and James P. O’Neill, Commissioner of the Police Department for the City of New York (“NYPD”), announced that WILFREDO SEPULVEDA, a/k/a “Dionico de la Cruz Rodriguez,” a/k/a “Tonito,” was sentenced yesterday in Manhattan federal court by United States Circuit Judge Richard J. Sullivan to 24 years in prison.  SEPULVEDA was convicted of narcotics and robbery charges after a five-day trial in March 2019. 

U.S. Attorney Geoffrey S. Berman said:  “The defendant carried out a violent robbery to steal drugs and cash.  In doing so, he threatened the lives of multiple innocent victims.  I would like to extend my gratitude to the ATF and NYPD for their outstanding work in ensuring that the defendant faced the justice he deserved.”

            ATF Special Agent-in-Charge John B. DeVito stated:  “The defendant committed various acts of violence where he brandished knives and firearms and terrorized others for narcotics and money.  These acts threatened the lives of both rival dealers and innocent citizens on the street.  The core of the ATF mission is to protect the public from violent crime.  To that end, we will work tirelessly with our partners to bring individuals bent on committing violent acts to justice.  I would like to thank the members of the ATF/ NYPD SPARTA Task Force for their diligent work on this case.  I would also like to extend my gratitude to the United States Attorney’s Office for their work in prosecuting the case.”

NYPD Commissioner James P. O’Neill stated:  “I want to commend our law enforcement partners for bringing justice in this violent case.  Working together, our quest to investigate and solve crime, and to keep New York and its residents safe, continues.”

According to the allegations contained in the Indictments, evidence presented at trial, and other court documents previously filed in Manhattan federal court:

In the spring of 2018, SEPULVEDA spent months plotting to rob his source of narcotics.  On May 14, 2018, SEPULVEDA disguised himself in a wig and a dress, armed himself with a gun and a knife, and went to his drug dealer’s apartment to commit the robbery.  Inside the apartment, SEPULVEDA encountered the dealer’s 83-year-old mother-in-law, who, at the time, was home alone.  SEPULVEDA brandished the knife and firearm, threatened that elderly victim’s life, and then ransacked the apartment. After SEPULVEDA found approximately 1.5 kilograms of narcotics and $13,000 in cash, he fled the apartment and encountered a neighbor who attempted to intervene.  The neighbor chased SEPULVEDA onto the street where SEPULVEDA engaged in a struggle with the neighbor near a school.  During the struggle, SEPULVEDA brandished a firearm and threatened the neighbor’s life.  Shortly thereafter, police responded to the scene of the crime, placed SEPULVEDA under arrest, and recovered the firearm, narcotics, and cash, as well as the dress and wig SEPULVEDA had used as a disguise.

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In addition to his prison term, SEPULVEDA, 41, of the Bronx, New York, was also sentenced to five years of supervised release.

Mr. Berman praised the investigative work of the NYPD and the ATF, and in particular the Strategic Patterned Armed Robbery Technical Apprehension (“SPARTA”) Task Force, which is composed of agents and officers of the ATF and the NYPD.

The prosecution is being handled by the General Crimes Unit of the U.S. Attorney’s Office for the Southern District of New York.  Assistant U.S. Attorneys Kyle A. Wirshba and Elinor L. Tarlow are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Peter C. Fitzhugh, the Special Agent in Charge of the New York Office of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), announced today the filing of a criminal indictment against CHRISTIAN ERAZO for conspiring with others to commit wire fraud and computer intrusion, as well as committing aggravated identity theft, by hacking a music producer’s social networking account to impersonate the producer in order to solicit and obtain unreleased music from other artists, which he then directed the artists to send to a fake email account in the producer’s name.  In addition, ERAZO hacked the online accounts of two music management companies in order to steal unreleased music of numerous music industry professionals.  ERAZO was arrested today in Austin, Texas.  He will be presented in federal court in the Western District of Texas tomorrow before United States Magistrate Judge Mark Lane.           

U.S. Attorney Geoffrey S. Berman said:  “Christian Erazo and his co-conspirators allegedly hacked the accounts of music producers and management companies in order to steal over 50 gigabytes of content – including some music that had yet to be publicly released – and leaked it on the internet.  Not only did this scheme cause the companies, producers, and artists financial harm, Erazo deprived the artists of the ability to release their own exclusive content at their discretion.  Erazo’s conduct is a reminder of the potential destruction hackers can inflict, and the need for all users to practice strong measures against cyber intrusions.”

HSI Special Agent in Charge Peter C. Fitzhugh said:  “Erazo’s alleged involvement in a hacking scheme to commit wire fraud and downloading 50 gigs of music, some unreleased, has affected the finances and reputations of a producer and several recording artists.  Fraud schemes like this don’t just affect the victim, but can also trickle down negative effects to the consumer.  New York’s robust cyber capabilities allow agents to track down criminals hiding behind their computer screen anywhere in the world to face the consequences of their actions.”

According to the Superseding Indictment filed today in Manhattan federal court:

From at least in or about late 2016 through at least in or about April 2017, CHRISTIAN ERAZO, the defendant, and others known and unknown, unlawfully obtained unauthorized access to Internet cloud storage service accounts of two music management companies and a music producer (“Producer Victim-1”) by, among other things, using the credentials, or usernames and passwords, of individuals with authorized access to those accounts.  From those accounts, ERAZO and his co-conspirators stole over approximately 50 gigabytes of music, including music that had not yet been publicly released from over 20 recording artists, as well as usernames and passwords to other online accounts, among other things.  ERAZO and his co-conspirators also leaked on public online forums music that had not yet been publicly released, causing financial and reputational harm to Producer Victim-1 and other recording artists.

In addition, from at least in or about late 2016 through at least in or about late 2017, CHRISTIAN ERAZO, and others known and unknown, unlawfully accessed without authorization a social networking account belonging to Producer Victim-1, from which ERAZO and a co-conspirator (“CC-1”) impersonated Producer Victim-1 and sent private messages to numerous recording artists to solicit music from them that they had not yet released.  ERAZO and CC-1 directed these artists to send their music to a fake email account that ERAZO created that incorporated Producer Victim-1’s professional name, which numerous artists did.

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ERAZO, 27, of Austin, Texas, is charged with one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years; one count of conspiracy to commit computer intrusion, which carries a maximum sentence of five years; and one count of aggravated identity theft, which carries a mandatory minimum term of imprisonment of two years.  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 outstanding investigative work of HSI.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Kristy J. Greenberg and Alexandra N. Rothman are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that LISA BERSHAN was sentenced to 7 years in prison on Friday, November 22 by U.S. District Judge Jed S. Rakoff for participating in two schemes to defraud more than 50 investors in the Starship Snacks Corporation and the All American Pet Company of more than $2.9 million, by making false and fraudulent representations about, among other things, the status of the companies’ products, guarantees that purportedly backed the investments, and the interest of large multi-national corporations in acquiring the companies.  BERSHAN was also sentenced for using the stolen identities of three individuals to commit the All American Pet Company scheme, money laundering, illegally receiving a firearm in New York without the proper licenses, and conspiracy to distribute and to possess with the intent to distribute cocaine.

U.S. Attorney Geoffrey Berman said:  “Lisa Bershan defrauded more than 50 investors of more than $2.9 million by making materially false representations about the snack and pet food companies she purportedly ran.  As part of her schemes, she and her co-conspirators used other people’s identities and created a slew of falsified documents to lure their victims.  When victims poured money into purported business bank accounts Bershan controlled, she used those bank accounts as her personal piggy bank, spending the money to finance her lavish lifestyle of luxury real estate, jewelry, plastic surgery, and clothing.  But Bershan’s crimes didn’t end with fraud.  She also pled guilty to and was sentenced for serious firearms and narcotics distribution offenses.  Lisa Bershan’s crime spree has come to an end, and she now faces a significant prison term for her crimes.”

According to the allegations contained in the superseding Information filed against LISA BERSHAN and statements made in related court filings and proceedings, including the trial of co-defendant Joel Margulies:

The All American Pet Company Fraud Scheme

From October 2013 through May 2017, BERSHAN, Joel Margulies, and a co-conspirator raised more than $575,000 in purported loans for the All American Pet Company (“AAPT”), a penny-stock company that produced, marketed, and sold food bars and other products for dogs, based on the following misrepresentations, among others: (a) that the Internal Revenue Service (“IRS”) had accepted an “offer in compromise” from AAPT that significantly reduced the back taxes AAPT owed to the IRS; (b) that BERSHAN had paid to the IRS the amount of this offer in compromise and had thus absolved AAPT of its outstanding tax liability; (c) that BERSHAN was the beneficial owner of a bank account containing over $6.9 million; (d) that BERSHAN would personally guarantee some of the loans; and (e) that Nestlé USA had proposed various business deals with AAPT.  BERSHAN held herself out as president and chief executive officer of AAPT at various times. 

Although BERSHAN and her co-conspirators had promised investors that they would use the loans to help improve AAPT’s manufacturing and distribution capacities, the conspirators instead used those funds largely for their personal expenses, including the rental of a luxury villa in the Bel Air neighborhood of Los Angeles where all three of them lived.

In connection with the AAPT fraud scheme, BERSHAN used the stolen identities of three individuals – an IRS employee, a Nestlé Purina employee, and a Manhattan attorney – to create false and fraudulent letters that were sent to AAPT investors to induce them to make loans to AAPT.

The Starship Snack Corporation Fraud Scheme

From approximately August 2015 through August 2017, BERSHAN, Margulies, and a co-conspirator, Barry Schwartz, raised more than $2.3 million from investors in a company originally called the Awake Company and later renamed Starship Snacks Corporation (“Starship”), which purported to be in the business of developing and manufacturing caffeinated snack products, based on the following misrepresentations, among others: (a) that investments in Starship were guaranteed against losses by BERSHAN; (b) that Starship was going to be acquired by Monster Beverage (“Monster”) in a one-for-one stock exchange; (c) that Starship was engaged in actual product development and had procured samples of candies infused with caffeine; (d) that BERSHAN and others at Starship had entered into non-disclosure agreements with Monster that prohibited them from discussing Starship’s purported acquisition by Monster and its purported product development.  BERSHAN held herself out as the chief executive officer, president, and founder of Starship. 

After receiving funds from Starship investors, BERSHAN and her co-conspirators used those funds to maintain their own extravagant lifestyles, spending hundreds of thousands of dollars on things like luxury clothing, plastic surgery, interior decorating, the rental of a high-end apartment in New York City, and the down payment for a multimillion-dollar house in Florida. 

Money Laundering, Illegal Receipt of a Firearm, and Distribution of Narcotics

In addition to the fraud and identity theft charges set forth above, BERSHAN was sentenced for money laundering in connection with the AAPT and Starship schemes.  She was also sentenced for illegally receiving a firearm and ammunition in New York that her co-conspirator, Margulies, sent to her from Tennessee via commercial courier.  Neither BERSHAN nor Margulies held federal firearms licenses that would have allowed them to effect such a transfer legally.  Finally, BERSHAN was also sentenced for conspiring to distribute cocaine from October 2015 through August 2017, during which conspiracy BERSHAN caused quantities of cocaine to be sent to her and Margulies via commercial courier in interstate commerce.

In addition to the prison term, BERSHAN, 62, was sentenced to five years of supervised release.  BERSHAN was also ordered to forfeit $2,926,702.54 and to make restitution in the amount of $2,926,702.54. 

Barry Schwartz previously pled guilty and is scheduled to be sentenced before Judge Rakoff on December 12, 2019.  Margulies was convicted following a seven-day jury trial before Judge Rakoff and is scheduled to be sentenced on December 16, 2019. 

Mr. Berman praised the work of the Federal Bureau of Investigation, and thanked the Securities and Exchange Commission for its assistance.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Ruth M. Mendonça, the Assistant Inspector in Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced the arrest today of JEROME DIMITRIOU, the former executive director of a non-profit religious organization (“Organization-1”), on wire fraud charges.  Specifically, DIMITRIOU is charged with committing two embezzlement schemes:  In one, he allegedly embezzled more than $488,000 from Organization-1 by directing subordinates to issue him unauthorized excess salary payments; in the other, he allegedly charged hundreds of personal expenses to his Organization-1 credit card, without authorization, costing Organization-1 at least tens of thousands of dollars.  DIMITRIOU will be presented today in federal court in the Southern District of New York before United States Magistrate Judge Robert W. Lehrburger.

U.S. Attorney Geoffrey S. Berman stated:  “As the executive director of a non-profit religious organization, Jerome Dimitriou was supposed to serve the organization, not himself.  As alleged, over several years, he abused his leadership position and embezzled over half a million dollars through two different schemes.  This Office is committed to protecting non-profit organizations from those who allegedly steal rather than serve.”

USPIS Assistant Inspector in Charge Ruth M. Mendonça said:  “Mr. Dimitriou allegedly used his position of trust at a religious organization to steal from his employer.  His undoing came when Postal Inspectors used their trusted and sworn law enforcement position to bring him to justice.”

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

From in or around 2000 until late 2017, JEROME DIMITRIOU was the executive director of Organization-1.  While serving as executive director, DIMITRIOU engaged in at least two separate, long-running embezzlement schemes.  One of his fraud schemes involved his unauthorized use of an Organization-1 credit card to pay for at least hundreds of personal expenses.  For instance, from in or around May 2011 through in or around September 2017, DIMITRIOU charged the following to his Organization-1 credit card: at least approximately 204 charges for airline travel with his family (who were not employed by Organization-1); at least approximately 552 iTunes charges; at least approximately 71 charges for a gym membership at David Barton Gym; and at least approximately 44 retail charges, including at such stores as Sears, Home Depot, CVS, Duane Reade, Walgreens, and Vitamin Shoppe.  The value of the airline travel with his family, for instance, was at least approximately $61,286.20. 

Another of DIMITRIOU’s fraud schemes involved directing subordinates to issue him excess salary and paychecks, over many years, without the authorization or approval of Organization-1.  During just 2013 through September 2017, for instance, the total value of these excess salary and paychecks was at least approximately $488,290.  During the period of DIMITRIOU’s embezzlement schemes, Organization-1 was enduring financial difficulties, a fact of which DIMITRIOU was well aware.

*              *             *

DIMITRIOU, 55, of Greenlawn, New York, is charged with two counts of wire fraud, each of which carries a maximum sentence of 20 years in prison.  The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. 

Mr. Berman praised USPIS for its outstanding work on this case and noted that the investigation is ongoing.

This matter is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Michael D. Neff and Michael C. McGinnis are in charge of the prosecution.

 

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[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth 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., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Scott Lampert, Special Agent in Charge of the U.S. Department of Health and Human Services, Office of Inspector General’s (“HHS-OIG”) New York Region, announced today that AMEET GOYAL, M.D. (“GOYAL”), an ophthalmologist with practices in Rye, Mt. Kisco, and Wappingers Falls, New York, and Greenwich, Connecticut, has been indicted for healthcare fraud.  Mr. Berman’s Office also today filed a civil fraud complaint against GOYAL and the entity that owns his medical practice, AMEET GOYAL, M.D, P.C. d/b/a/ THE EYE ASSOCIATES GROUP (the “Practice”), under the False Claims Act. 

Specifically, the Indictment charges GOYAL with fraudulently billing patients, Medicare, and private insurance programs millions of dollars, between 2010 and 2017, for complex eye surgeries that GOYAL had not actually performed.  The Civil Complaint further alleges that GOYAL and his Practice engaged in widespread healthcare fraud by consistently “upcoding” these and other surgical procedures, examinations, and tests in fraudulent billings submitted to Medicare and Medicaid.  As alleged, GOYAL also falsified patient medical records, pressured other employees in his Practice to engage in the scheme, and initiated debt collection proceedings against patients who did not pay the full amounts of his fraudulently billed charges.

GOYAL was arrested this morning and was arraigned in federal court today before United States Magistrate Judge Paul E. Davison.  The case is assigned to U.S. District Judge Cathy Seibel.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Dr. Ameet Goyal repeatedly upcoded minor ophthalmological procedures, defrauding insurers and patients by grossly overbilling, netting millions in ill-gotten gains in the process.  As further alleged, Goyal also billed for tests and procedures that were never performed, falsified medical records, bullied others in his practice to abet the scheme, and intimidated patients who questioned their bills.  Thanks to our law enforcement partners, Goyal’s conduct has come into focus.  Ameet Goyal now faces criminal prosecution and civil sanctions for his conduct.”

FBI Assistant Director William F. Sweeney Jr. said:  “When we go to the doctor, we have to put our faith in their knowledge because they have expertise we don’t.  Dr. Goyal allegedly lied to patients about what they were being billed for, forced them to pay for treatments they didn’t receive, and then threatened his staff if they expressed alarm about taking part in the fraud.  Medical practitioners who are more concerned with their profits than with the health of their patients are going against the oath they took, they are doing harm and they should be held accountable.”

HHS-OIG Special Agent in Charge Scott Lampert said:  “Goyal’s reprehensible conduct compromised patient care and undermined the integrity of the Medicare program.  Along with our law enforcement partners, HHS-OIG will continue to protect the public and ensure that those who bill for services provided by taxpayer funded health care programs do so in an honest manner.”

According to the Indictment[1]:

From at least in or about January 2010 through in or about March 2017, GOYAL systematically submitted false and fraudulent claims that misrepresented the services provided to patients of the Practice and falsely billed for higher-paying surgical treatments than the lower-paying, minor procedures actually performed.  

For example, GOYAL and others at the Practice routinely treated patients for an excision of a chalazion, a small bump on an eyelid, typically removed in less than 15 minutes.  An excision of chalazion, when billed truthfully under its associated code, paid the Practice approximately $200 on average from patients and insurance programs.  However, GOYAL systematically billed an excision of chalazion and other similar superficial eyelid procedures as if he had performed an orbitotomy together with a conjunctivoplasty, which are complex surgeries into the orbit of the eye, often to remove an orbital tumor, that typically take an hour or more to perform.  These substantial surgeries, as billed, paid the Practice approximately $1,400 on average from a combination of insurance and patient out-of-pocket payments.  Goyal also upcoded certain superficial procedures as an excision and repair of eyelid, a type of higher-paying eyelid surgery involving reconstruction or removal of certain lesions other than chalazions.  During the relevant time period, GOYAL billed less than 40 chalazions under the billing code designated for excision of chalazion, while billing over 1,400 orbitotomies, over 700 bundled conjunctivoplasties, and over 1,600 excision and repair of eyelid surgeries, all of which he claimed to have performed personally. 

To further effectuate the scheme, GOYAL directed other employees of the Practice, including other ophthalmologists, to upcode minor procedures into higher-paying surgeries.  GOYAL threatened the livelihood of employees who were reluctant to comply with these directions.

Between about January 2010 through about March 2017, GOYAL caused the Practice to bill insurance programs and patients over $8 million for supposedly performed orbitotomies, bundled conjunctivoplasties, and excisions and repair of eyelid.  The Practice received over $3 million in payments for these claims, a substantial portion of which were fraudulently billed. 

According to the Civil Complaint, in addition to falsely billing for orbitotomies and conjunctivoplasties and other related codes:

GOYAL and his Practice routinely submitted fraudulent claims to Medicare and Medicaid for a wide range of other surgical procedures, examinations, and tests purportedly performed by GOYAL that were not actually performed, not medically necessary, not documented in the medical records, and/or failed to otherwise comply with Medicare and Medicaid rules and regulations.  In order to justify this billing, GOYAL falsified patient diagnoses and prepared operative reports that falsely described the procedures performed on patients.  The lawsuit seeks to recover treble damages and civil penalties under the False Claims Act.

*                      *                      *

GOYAL, 56, of Rye, New York, is charged with three counts in the 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; the third count charges making false statements relating to health care matters, which carries a maximum sentence of five years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.           

Mr. Berman praised the outstanding investigative work of the FBI and HHS-OIG.     

This criminal 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.  The civil lawsuit 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 Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

 

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

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”), and Carl E. Dubois, Sheriff of Orange County, announced the arrest today of CHASKEL LANDAU, ALTER LANDAU, and JOSEPH NEUMAN in connection with a multimillion-dollar scheme to operate an unlicensed money transmitting business for the purpose of transmitting proceeds derived from illegal activity.  The defendants are scheduled to appear before U.S. Magistrate Paul E. Davison in federal court later today.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “The defendants allegedly engaged in a brazen scheme to unlawfully transmit and conceal millions of dollars of proceeds that they believed to be derived from illegal activity.  They allegedly did so for personal profit and with the aim of avoiding law enforcement detection.  This Office is committed to rooting out such criminal activity.”

FBI Assistant Director William F. Sweeney Jr. said:  “Making money illegally is criminal in and of itself, but operating an unlicensed money remitting business, especially from outside of the United States, will almost certainly result in federal criminal charges.  Whenever someone needs to hide and move money, there’s a pretty good chance something’s afoot.  The FBI is committed to working with our law enforcement partners to ensure this type of behavior ceases to exist.”         

Sheriff Carl E. Dubois said:  “We continue to work closely with the FBI and our other federal partners, and the success of this long term investigation is proof of the benefits in these relationships.  Illegal financial systems pose a great risk to our residents and their financial institutions.  Law enforcement must continue work together to deter criminals from operating and engaging with organizations that allow them to evade banking regulations.”

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

CHASKEL LANDAU, ALTER LANDAU, and JOSEPH NEUMAN were arrested following an FBI sting operation.  As alleged, from approximately in or about September 2014 to in or about August 2016, CHASKEL LANDAU, ALTER LANDAU, and JOSEPH NEUMAN engaged in a series of conversations and meetings with a confidential witness (the “CW”).  In order to induce the CW to invest approximately $6 million in property owned by CHASKEL LANDAU and his family, the defendants agreed to receive and transmit what they believed to be millions of dollars of funds that the CW had illegally obtained from his business.  The defendants agreed to conceal the source of the CW’s money by transmitting the CW’s money to third parties, with the expectation that it would be returned to the CW, in return for a 10% “fee.”

The scheme was two-pronged.  First, the defendants agreed to take cash from the CW, exchange the cash for checks written from real estate companies controlled by JOSEPH NEUMAN, and make the checks payable to a third party bank account purportedly controlled by the CW.   Second, the defendants agreed to use charitable organizations under their control to transmit the CW’s overseas money into the United States.  Over the course of the conspiracy, the defendants transmitted approximately $500,000 of what they believed to be stolen property, and agreed to transmit approximately $6 million total.

*                *                *

CHASKEL LANDAU, 45, ALTER LANDAU, 64, and JOSEPH NEUMAN, 78, are each charged with one count of conspiracy to operate an unlicensed money transmitting business and one count of operating an unlicensed money transmitting business, each of which carries a maximum term of five years in prison.  

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

Mr. Berman praised the work of the FBI, the Orange County Sherriff’s Department, the Orange County District Attorney’s Office, and the Internal Revenue Service, Criminal Investigation Division.

This case is being handled by the White Plains Division.  Assistant United States Attorneys Mathew Andrews and James McMahon are in charge of the prosecution.      

 

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[1] As the introductory phrase signifies, the entirety of the texts 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, announced that STANISLAV VITALIYEVICH LISOV, a/k/a “Black,” a/k/a “Blackf” (“LISOV”), was sentenced to 48 months in prison today for conspiring to deploy and use a type of malicious software known as NeverQuest to infect the computers of unwitting victims, steal their login information for online banking accounts, and use that information to steal money out of the victims’ accounts.  NeverQuest has been responsible for millions of dollars’ worth of attempts by hackers to steal money out of victims’ bank accounts.  LISOV was sentenced by U.S. District Judge Valerie E. Caproni, who presided over his guilty plea earlier this year.

U.S. Attorney Geoffrey S. Berman stated:  “Stanislav Vitaliyevich Lisov, a Russian hacker, used malware to infect victims’ computers, obtain their login credentials for online banking accounts, and steal money from their accounts.  This type of cybercrime threatens personal privacy and harms financial institutions.  Lisov’s arrest, extradition, conviction, and prison sentence should send an unmistakable message about this Office’s firm commitment to prosecuting hackers – domestic and foreign alike.”

According to the allegations in the Indictment to which LISOV pled guilty, public court filings, and statements made in court:

NeverQuest is a type of malicious software, or malware, known as a banking Trojan.  It can be introduced to victims’ computers through social media websites, phishing emails, or file transfers.  Once surreptitiously installed on a victim’s computer, NeverQuest is able to identify when a victim attempted to log onto an online banking website and transfer the victim’s login credentials – including his or her username and password – back to a computer server used to administer the NeverQuest malware.  Once surreptitiously installed, NeverQuest enables its administrators remotely to control a victim’s computer and log into the victim’s online banking or other financial accounts, transfer money to other accounts, change login credentials, write online checks, and purchase goods from online vendors.

Between June 2012 and January 2015, LISOV was responsible for key aspects of the creation and administration of a network of victim computers known as a “botnet” that was infected with NeverQuest.  Among other things, LISOV maintained infrastructure for this criminal enterprise, including by renting and paying for computer servers used to manage the botnet that had been compromised by NeverQuest.  Those computer servers contained lists with approximately 1.7 million stolen login credentials – including usernames, passwords, and security questions and answers – for victims’ accounts on banking and other financial websites.  LISOV had administrative-level access to those computer servers.

LISOV also personally harvested login information from unwitting victims of NeverQuest malware, including usernames, passwords, and security questions and answers.  In addition, LISOV discussed trafficking in stolen login information and personally identifying information of victims.

On January 13, 2017, LISOV was arrested in Spain pursuant to a provisional arrest warrant.  On January 19, 2018, LISOV was extradited from Spain to the United States.

*                *                *

In addition to his prison term, LISOV, 34, a citizen of Russia, was sentenced to three years of supervised release, and was ordered to pay forfeiture of $50,000 and restitution of $481,388.04.

Mr. Berman praised the outstanding investigative efforts of the Federal Bureau of Investigation. 

The 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.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and James O’Neill, the Commissioner of the New York City Police Department (“NYPD”), today announced the unsealing of an indictment charging JOHNNY NUNEZ GARCIA, a/k/a “Superior,” with the June 5, 2009, gang-related murder of Jonathan Ruiz, 17, in the Bronx, New York.  NUNEZ GARCIA is currently serving a separate federal sentence.  He was transferred yesterday to the Southern District of New York and presented before Magistrate Judge Sarah Netburn.  The case is assigned to United States District Judge Andrew L. Carter Jr.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged in the indictment, more than ten years ago Nunez Garcia shot and killed Jonathan Ruiz in connection with Nunez Garcia’s membership in the Dominicans Don’t Play gang.  Thanks to the persistence of our partners at the NYPD, Nunez Garcia will now face justice for his alleged role in this heinous crime.”

Police Commissioner James O’Neill said:  “This indictment is the result of the close partnership that exists between the NYPD and our law-enforcement partners. I commend the members of the NYPD Detective Bureau and the U.S. Attorney’s Office for the Southern District of New York whose hard work resulted in this indictment.”

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

NUNEZ GARCIA was a member of the Dominicans Don’t Play (or “DDP”) gang, a criminal enterprise, members of which engaged in criminal acts involving murder, robbery, and narcotics dealing throughout the Bronx.  They committed these crimes to enrich themselves and to preserve and promote their widespread criminal activity.  As a member of the gang, on June 5, 2009, NUNEZ GARCIA shot and killed Jonathan Ruiz near East 165th Street and Tiffany Street.

*                      *                     *

NUNEZ GARCIA, 28, of the Bronx, is charged with one count of murder in aid of racketeering and aiding and abetting murder in aid of racketeering.  He faces a mandatory minimum sentence of life in prison.  The 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.

Mr. Berman praised the outstanding work of the NYPD.

The case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Frank Balsamello and Adam Hobson are in charge of the prosecution.

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

 

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[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 Cyrus R. Vance Jr., the District Attorney for New York County, announced the conviction today of MARK S. SCOTT, following a three-week trial before the Honorable Edgardo Ramos.  SCOTT, a former equity partner at the law firm Locke Lord LLP, laundered approximately $400 million in proceeds of a massive international fraud scheme known as “OneCoin” through fraudulent investment funds that SCOTT set up and operated for that purpose.  SCOTT was paid more than $50 million for his money laundering services, which he used to buy luxury cars, a yacht, and several seaside homes.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Mark S. Scott, an equity partner at a prominent international law firm, used his specialized knowledge as an experienced corporate lawyer to set up fake investment funds, which he used to launder hundreds of millions of dollars of fraud proceeds.  He lined his pockets with over $50 million of the money stolen from victims of the OneCoin scheme.  Scott, who boasted of earning ‘50 by 50’ now faces 50 years in prison for his crimes.” 

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

“OneCoin” is a massive pyramid fraud scheme.  OneCoin Ltd. was co-founded in or about 2014 by Ruja Ignatova, and is based in Sofia, Bulgaria.  SCOTT was introduced to Ignatova in late 2015, and began laundering OneCoin fraud proceeds in 2016.  Ignatova served as OneCoin’s top leader until her disappearance from public view, in or about October 2017.

OneCoin Ltd. operates as a multi-level marketing network through which members receive commissions for recruiting others to purchase cryptocurrency packages.  OneCoin Ltd. has claimed to have over three million members worldwide, including victims living in the Southern District of New York.  Records obtained in the course of the investigation show that, between the fourth quarter of 2014 and the third quarter of 2016 alone, OneCoin Ltd. generated €3.353 billion in sales revenue and earned “profits” of €2.232 billion.  OneCoin continues to operate to this day.

Among a number of other representations, OneCoin Ltd. has claimed that the OneCoin cryptocurrency is “mined” using mining servers maintained and operated by the company, and that the value of OneCoin is based on market supply and demand.  The purported value of a OneCoin steadily grew from €0.50 to approximately €29.95 per coin, as of in or about January 2019.  In fact, the value of OneCoin is determined internally and not based on market supply and demand, and OneCoins are not mined using computer resources.  Moreover, the investigation has revealed that Ignatova and her co-founder conceived of and built the OneCoin business fully intending to use it to defraud investors.

SCOTT – who was employed between June 2015 and September 2016 as an equity partner at Locke Lord LLP, a prominent international law firm – was first introduced to Ignatova in September 2015.  Beginning in 2016, SCOTT formed a series of fake private equity investment funds in the British Virgin Islands known as the “Fenero Funds.”  SCOTT then disguised incoming transfers of approximately $400 million into the Fenero Funds as investments from “wealthy European families,” when in fact the money represented proceeds of the OneCoin fraud scheme.  SCOTT layered the money through various Fenero Fund bank accounts in the Cayman Islands and the Republic of Ireland.  SCOTT subsequently transferred the funds back to Ignatova and other OneCoin associated entities, this time disguising the transfers as outbound investments from the Fenero Funds.  As part of the scheme, SCOTT and his co-conspirators lied to banks and other financial institutions all over the world, including to banks in the United States, to cause those institutions to make transfers of OneCoin proceeds and evade anti-money laundering procedures.

SCOTT, who boasted about earning “50 by 50,” was paid more than $50 million for his money laundering services.  He used that money to purchase, among other things, a collection of luxury watches worth hundreds of thousands of dollars, a Ferrari and several Porsches, a 57-foot Sunseeker yacht, and three multimillion-dollar seaside homes in Cape Cod, Massachusetts.

SCOTT was arrested near one of his seaside homes in Barnstable, Massachusetts, on September 5, 2018.

*                *                *

SCOTT, 51, of Coral Gables, Florida, was convicted of one count of conspiracy to commit money laundering, which carries a maximum potential sentence of 20 years in prison, and one count of conspiracy to commit bank fraud, which carries a maximum potential sentence of 30 years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as the sentencing of the defendant will be determined by the judge.  Sentencing before Judge Ramos is scheduled for February 21, 2020.

Mr. Berman and Mr. Vance praised the outstanding investigative work of IRS-CI and the FBI, which jointly conducted this investigation with the Special Agents from the U.S. Attorney’s Office.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Christopher J. DiMase and Nicholas Folly, and Special Assistant United States Attorney Julieta V. Lozano of the New York County District Attorney’s Office, are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced the arrest of VICTOR PHILLIPS, STEPHEN ODIBOH, and ANTHONY COLLIER for money laundering, money laundering conspiracy, and conspiracy to commit bank bribery.  PHILLIPS, ODIBOH, and COLLIER were arrested in and around Atlanta, Georgia, and are expected to be presented this afternoon before U.S. Magistrate Judge Janet F. King in the Northern District of Georgia.  Their case is assigned to U.S. District Judge J. Paul Oetken of the Southern District of New York.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, banker Victor Phillips conspired with two money launderers, Stephen Odiboh and Anthony Collier, to facilitate the laundering of what they all thought were the proceeds of criminal activity.  Thanks to the FBI, all three are now in custody and facing serious criminal charges.”

FBI Assistant Director William F. Sweeney Jr. said:  “It’s not bad enough that there are those who wish to launder money at the expense of other people and institutions, but when bank insiders join in to facilitate these transactions, it’s particularly troubling.  This behavior won’t be tolerated, and the FBI will continue to investigate these illegal acts so long as criminals continue to conduct themselves in this way.”

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

Between at least June 2019 and September 2019, PHILLIPS, who is employed at an Atlanta-area branch of a national bank (“Bank-1”), opened bank accounts in the names of shell companies and fictitious persons in exchange for a percentage of the fraud proceeds laundered through the accounts.  ODIBOH controlled one PHILLIPS-created account, and he and COLLIER agreed to launder $15,500 through it, hoping that this transaction that would be the first in a series laundering up to $2 million that they believed was stolen from a company by its employees.  When the first payment arrived, they paid their bribe to PHILLIPS, divided a share for themselves, and returned half to the senders.  In fact, the FBI sent the payment as part of a sting operation. 

ODIBOH, 47, and COLLIER, 57, are each charged with one count of money laundering conspiracy and one count of money laundering, each of which carries a maximum punishment of 20 years in prison.  ODIBOH, COLLIER, and PHILLIPS, 39, are each charged with one count of conspiracy against the United States, which carries a maximum punishment of five years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

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

Mr. Berman praised the outstanding investigative work of the FBI’s New York Money Laundering Investigation Squad.  

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

 

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[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth 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, James P. O’Neill, Commissioner of the New York City Police Department (“NYPD”), and Raymond Donovan, Special Agent in Charge of the New York Office of the Drug Enforcement Administration (“DEA”), announced today the unsealing of an indictment charging LUIS MERCED, WILLIAM SKINNER, and DORIAN BROOKS, a/k/a “Kool-Aid,” with murder in furtherance of drug trafficking in connection with the murder of Efren Cardenas on February 10, 1989 in Brooklyn, New York.  MERCED and SKINNER were arrested yesterday evening and early this morning and will be presented this afternoon before U.S. Magistrate Judge Sarah Netburn.  BROOKS is in state custody on other charges and will be presented in federal court at a later date.  The case is assigned to U.S. District Judge Edgardo Ramos.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “For over 30 years, the family of Efren Cardenas has been waiting for justice.  Today, thanks to the extraordinary partnership of the NYPD, the DEA, and the Special Agents of our office, the defendants are charged in federal court for this decades-old murder.”

NYPD Commissioner James P. O’Neill said:  “Today’s charges demonstrate the NYPD’s vigilance in bringing justice to victims and their families. The NYPD, our colleagues at the Drug Enforcement Administration and the U.S. Attorney’s Office for the Southern District of New York will continue to vigorously pursue and bring to justice individuals responsible for violent criminal activity."

DEA Special Agent in Charge Raymond Donovan said:  “Today’s arrests demonstrate that time does not diminish a crime, especially murder.  Thirty years have passed, but law enforcement’s dogged pursuits have brought justice to the victim while sending a message that law enforcement won’t stop until perpetrators are brought to justice.  I commend the men and women of the DEA, NYPD, and U.S. Attorney’s Office, Southern District of New York, on their tenacity and diligent efforts throughout this investigation.” 

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

On February 10, 1989, MERCED, SKINNER, and BROOKS killed Efren Cardenas, 30.  MERCED, SKINNER, and BROOKS committed the murder in furtherance of a conspiracy to distribute more than five kilograms of cocaine and more than 280 grams of crack cocaine.

            *                *                *

MERCED, 48, and BROOKS, 50, each from Brooklyn, New York, and SKINNER, 49, of Amityville, New York, are each charged with one count of murder in furtherance of drug trafficking, which carries a maximum sentence of death or life in prison, and a mandatory minimum sentence of 20 years in prison. 

Mr. Berman praised the investigative work of the Special Agents of the United States Attorney’s Office for the Southern District of New York, the NYPD’s Cold Case Squad, and the DEA.  Mr. Berman added that the investigation is continuing.

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Andrew K. Chan and Adam S. Hobson are in charge of the prosecution.

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Jonathan D. Larsen, the Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today the unsealing of an indictment charging ROGER RALSTON – the CEO of DirectView, Inc., a video surveillance and security company based in Florida – with wire fraud and money laundering charges relating to his role in a telemarketing scheme involving the fraudulent sale of DirectView stock and carbon credits to victims in the United Kingdom.  RALSTON was arrested this morning in Orlando, Florida, and will be presented in Magistrate Court in the Middle District of Florida later today.  The case is assigned to United States District Judge Jesse M. Furman.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Roger Ralston preyed on retirees in the United Kingdom with promises of safe, environmentally friendly investments with big returns.  The victims allegedly received nothing but worthless paper certificates in exchange for their life savings, while Ralston and his criminal associates hid the proceeds in the United States and overseas.  After today, there is no more hiding for Ralston, who now faces many years in prison for his alleged crimes.”

IRS-CI Special Agent in Charge Jonathan D. Larsen said:  “The elderly members of society are too often the victims of financial fraud.  As alleged, Mr. Ralston defrauded these victims and then laundered the ill-gotten gains through domestic and foreign bank accounts.  IRS-CI special agents will continue to follow the money around the world and prosecute those individuals who prey on the elderly.”

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

At all times relevant to the charges in the Indictment, RALSTON was the CEO of DirectView Holdings, Inc. (“DirectView”), a Florida-based corporation.

From in or about 2009 up to and including in or about 2015, RALSTON and other co-conspirators engaged in a scheme to defraud victims in the United Kingdom through the sale of false, fraudulent, and materially misleading investments, and to launder the proceeds through bank accounts in the United States and foreign countries.  RALSTON used the services of telemarketing call centers to identify and cold-call potential victims, who were primarily individuals residing in the United Kingdom.  Many of the victims were elderly or retired.  Over a series of telephone calls, the telemarketers persuaded victims to invest money under various false and misleading pretenses, including the promise of short-term, high-yield, no-risk returns, when in fact the investments were high-risk, illiquid, and in some instances, entirely fictitious.  Many victims were persuaded to make additional investments under the false pretense that they would not be permitted to sell their holdings until they purchased more.  In reliance on the false representations and promises, the victims wired funds to various bank accounts in the United States, including in the Southern District of New York, in the names of corporate entities controlled by RALSTON.  RALSTON then mailed and emailed documents related to the fraudulent investments, including purchase contracts and investment certificates, to the victims.  Victims who tried to sell their investments found they were unable to do so.  The victims never received a refund on their principal or any return on their investments.  In total, RALSTON’s accounts received approximately $9 million from victims. 

In order to conceal the nature, location, source, ownership, and control of the proceeds of the fraudulent scheme, RALSTON regularly transferred a substantial portion of the fraud proceeds from bank accounts in the United States, including in the Southern District of New York, to overseas bank accounts, including accounts in Cyprus, Switzerland, and the United Kingdom, in the names of various shell companies.

The nature of the particular fraudulent investment vehicles being marketed to the victims changed over time.  From in or about 2009 until in or about 2011, RALSTON and his co-conspirators sold DirectView stock to the victims based on telemarketers’ false representations and promises that the shares were a no-risk, short-term investment in a debt-free company, and that the shares were likely to increase over 100 percent in value in a short period of time.  In contrast to what RALSTON represented to victims, DirectView’s annual report filed with the United States Securities and Exchange Commission (“SEC”) for the year ending December 31, 2010, contained dire warnings about the poor fiscal health of DirectView and the risk attendant in purchasing stock, including that the company “may be forced to cease operations” due to losses and cash flow problems, and purchasers “may find it extremely difficult or impossible to resell our shares.”

From in or about 2011 until in or about 2015, RALSTON and his co-conspirators engaged in the sale of fraudulent “carbon credits.”  “Carbon credits,” which are issued as part of governmental and voluntary regulatory regimes, are permits representing the right to emit a certain number of tons of carbon dioxide into the atmosphere.  “Carbon offsets,” which are tied to particular carbon dioxide emissions-reducing projects, represent a reduction in carbon dioxide emissions, and can be purchased by individuals and companies to “offset” their or third parties’ “carbon-footprints.”  The victims were falsely promised that the carbon-related investments they purchased could be easily sold, carried no risk, and would yield a significant, short-term return.  In fact, the carbon credits and offsets that were sold to the victims were fake, and did not represent any actual carbon credits or offsets.

*                      *                      *

RALSTON, 51, of Riviera Beach, Florida, is charged with conspiracy to commit mail and wire fraud, substantive mail fraud, and substantive wire fraud, with a penalty enhancement for telemarketing, each of which carries a maximum sentence of 30 years; conspiracy to commit money laundering and two counts of money laundering, each of which carries a maximum sentence of 20 years; and one count of  engaging in monetary transactions in property derived from specified unlawful activity, which carries a maximum sentence of 10 years.           

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 outstanding investigative work of IRS Criminal Investigation in this case.

This case is being prosecuted by the Office’s Money Laundering and Transnational Criminal Enterprises and Complex Frauds and Cybercrime Units.  Assistant U.S. Attorneys Jessica Feinstein and Olga I. Zverovich are in charge of the prosecution.

 

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[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth 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., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced the unsealing of five Indictments charging 30 defendants with committing various narcotics and firearms offenses in Manhattan and the Bronx.   

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

United States v. Neury Abreu, et al., 19 Cr. 821

Between January 2016 and November 2019, NEURY ABREU, 26, ALEXANDER DEJESUS, 27, JOSHUA PEREZ, 27, ALEXANDER BAEZ, 46, IVAN BREA, 28, JOSE CRUZ, 22, LUIS ESPINAL, 30, and ANTHONY MELO, 19, conspired to sell 280 grams or more of crack cocaine, cocaine, Oxycodone, and marijuana.  Members of the conspiracy distributed narcotics in and around the Inwood neighborhood of Manhattan.  

Between January 2016 and November 2019, ABREU, DEJESUS, and PEREZ used and carried firearms during and in relation to, and possessed firearms in furtherance of, the narcotics conspiracy charged in the Indictment.  PEREZ also possessed a firearm on or about July 8, 2019, and on or about July 11, 2019, after having previously been convicted of a felony.  

United States v. Alexander Melo, et al., 19 Cr. 818

Between April 2019 and November 2019, ALEXANDER MELO, 28, JAVIER JANIEL, 23, FRANMY LUNA, 24, and JUAN PERALTA, 25, conspired to sell 280 grams or more of crack cocaine, and cocaine.  Members of the conspiracy distributed narcotics in and around the Inwood neighborhood of Manhattan.  

On or about October 9, 2018, MELO possessed a shotgun after having been convicted of a felony, and having had three convictions for three serious drug offenses, all of which were committed on occasions different from one another, in violation of the Armed Career Criminal Act. 

United States v. Mario Delgado, et al., 19 Cr. 817

Between October 2018 and November 2019, MARIO DELGADO, 32, DANIEL CUEVAS, 27, and EDWARD RODRIGUEZ, 30, conspired to sell 100 grams and more of Acetyl Fentanyl (which is an analogue of Fentanyl), Fentanyl, and Oxycodone.  Members of the conspiracy distributed narcotics in and around the Washington Heights neighborhood of Manhattan.  

United States v. Roberto Sanchez, et al., 19 Cr. 820

Between January 2019 and November 2019, ROBBERTO SANCHEZ, 41, and JULIO ABREU, 28, conspired to sell heroin, cocaine, and marijuana.  Members of the conspiracy distributed narcotics in and around the Washington Heights neighborhood of Manhattan.  

United States v. Alberto Marte, 19 Cr. 795

From at least in or about 2018 through in or about 2019, ALBERTO MARTE, a/k/a “Scotty,” a/k/a “Skylet,” 42, JUNIOR RODRIGUEZ, a/k/a “Skrilla,” 23, ERICK MELENCIANO, a/k/a “Gualey,” 26, NICHOLAS FALU, a/k/a “Nico,” 31, KEVIN ROSADO, a/k/a “Malda,” 26, GUERY CRUZ, a/k/a “Capo,” 24, JONATHAN RODRIGUEZ, a/k/a “Nathan,” 31, OMAR BAEZ, a/k/a “Smokey,” 23, SAMUEL SOSA, a/k/a “Sammy,” 21, YOAN DELACRUZ, a/k/a “Johan,” 29, RAYMER CASILLA, a/k/a “Ray Savage,” 23, KEVIN MELENDEZ, a/k/a “Freaky,” 26, and JOSE BAUTISTA, a/k/a “Nelo,” a/k/a “Echo,” 30, conspired to sell oxycodone and possessed firearms in furtherance of that conspiracy.

*                      *                      *

Thirteen of the 30 defendants were arrested this morning and will be presented later today before U.S. Magistrate Judge Sarah Netburn in Manhattan federal court.  Twelve of the 30 defendants, charged in connection with United States v. Alberto Marte, were arrested on November 13, 2019, and presented before U.S. Magistrate Judge Katharine H. Parker.  JOSHUA PEREZ was already in federal custody and will be presented at a later date. 

Charts containing the names, charges, and maximum penalties for the defendants are 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-NYPD Metro Safe Streets Task Force, the NYPD’s Narcotics Borough Manhattan North and the NYPD’s Manhattan North Gang Squad.  He also thanked the New York City Department of Investigation for its assistance in the case. 

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Frank Balsamello, Adam Hobson, Jacob Warren, Celia Cohen, and Dominick Gentile are in charge of the prosecutions.

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

 

United States v. Neury Abreu, et al., 19 Cr. 821

 

COUNT

CHARGE

DEFENDANTS

MAX. PENALTIES

1

Narcotics trafficking conspiracy

 

21 U.S.C. § 846

NEURY ABREU,

ALEXANDER DEJESUS, JOSHUA PEREZ,

ALEXANDER BAEZ,

IVAN BREA,

JOSE CRUZ,

LUIS ESPINAL, and

ANTHONY MELO

Life in prison

 

Mandatory minimum of 10 years in prison

2

Using or carrying a firearm during and in relation to, or possessing a firearm in furtherance of, a narcotics trafficking crime

 

18 U.S.C. § 924(c)

NEURY ABREU,

ALEXANDER DEJESUS, JOSHUA PEREZ

 

 

Life in prison

 

Mandatory minimum of 5 years in prison

3

Felon in possession of a firearm

 

18 U.S.C. § 922(g)(1)

JOSHUA PEREZ

10 years in prison

4

Felon in possession of a firearm

 

18 U.S.C. § 922(g)(1)

JOSHUA PEREZ

10 years in prison

 

United States v. Alexander Melo, et al., 19 Cr. 818

COUNT

CHARGE

DEFENDANTS

MAX. PENALTIES

1

Narcotics trafficking conspiracy

 

21 U.S.C. § 846

ALEXANDER MELO,

JAVIER JANIEL,

FRANMY LUNA, and

JUAN PERALTA,

Life in prison

 

Mandatory minimum of 10 years in prison

2

Armed Career Criminal Act

 

18 U.S.C. §§ 922(g)(1) and 924(e)

ALEXANDER MELO

 

 

Life in prison

 

Mandatory minimum of 15 years in prison

 

United States v. Mario Delgado, et al., 19 Cr. 817

COUNT

CHARGE

DEFENDANTS

MAX. PENALTIES

1

Narcotics trafficking conspiracy

 

21 U.S.C. § 846

MARIO DELGADO,

DANIEL CUEVAS, and EDWARD RODRIGUEZ

Life in prison

 

Mandatory minimum of 10 years in prison

 

United States v. Roberto Sanchez, et al., 19 Cr. 820

COUNT

CHARGE

DEFENDANTS

MAX. PENALTIES

1

Narcotics trafficking conspiracy

 

21 U.S.C. § 846

ROBERTO SANCHEZ, and

JULIO ABREU

20 years in in prison

 

 

United States v. Alberto Marte, 19 Cr. 795

COUNT

CHARGE

DEFENDANTS

MAX. PENALTIES

1

Narcotics trafficking conspiracy

 

21 U.S.C. § 846

ALBERTO MARTE,

JUNIOR RODRIGUEZ,

ERICK MELENCIANO,

NICHOLAS FALU,

KEVIN ROSADO,

GUERY CRUZ,

JONATHAN RODRIGUEZ,

OMAR BAEZ,

SAMUEL SOSA,

YOAN DELACRUZ,

RAYMER CASILLA,

KEVIN MELENDEZ,

JOSE BAUTISTA

20 years in prison

 

2

Using or carrying a firearm during and in relation to, or possessing a firearm in furtherance of, a narcotics trafficking crime

 

18 U.S.C. § 924(c)

 ALBERTO MARTE,

JUNIOR RODRIGUEZ,

ERICK MELENCIANO,

NICHOLAS FALU,

KEVIN ROSADO,

GUERY CRUZ,

JONATHAN RODRIGUEZ,

OMAR BAEZ,

SAMUEL SOSA,

YOAN DELACRUZ,

RAYMER CASILLA,

KEVIN MELENDEZ,

JOSE BAUTISTA

Life in prison

 

Mandatory minimum of 5 years in prison

 

 

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[1] As the introductory phrase signifies, the entirety of the texts of the Indictments constitute only allegations, and every fact described herein 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 Field Office of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), and James P. O’Neill, Commissioner of the New York City Police Department (“NYPD”), announced the unsealing of an Indictment charging ANTHONY CHEEDIE, CHAD ALLEN, SHANE HANNA, CAMERON BREWSTER, KEVIN HANDREN, JOSEPH CIACCIO, a/k/a “Joseph Gallagher,” JOSEPH MINETTO, JOSEPH DEPAOLA, a/k/a “Joe Hall,” DERREK LARKIN, a/k/a “Derrek Martin,” and MATTIE CIRILO with conspiracy to commit wire fraud in connection with telemarketing.  LARKIN and CIRILO also are charged with obstruction of justice.  The case has been assigned to United States District Judge Victor Marrero.

Nine of the defendants were arrested this morning.  CHEEDIE, MINETTO, DEPAOLA, LARKIN, and CIRILO will be presented this afternoon in Manhattan federal court before United States Magistrate Judge Sarah Netburn.  ALLEN and HANNA will be presented this afternoon in Phoenix federal court before United States Magistrate Judge Deborah M. Fine.  BREWSTER will be presented this afternoon in Las Vegas federal court before United States Magistrate Judge Elayna J. Youchah.  HANDREN will be presented in Salt Lake City federal court before United States Magistrate Judge Evelyn J. Furse.  CIACCIO will be presented at a later date.

Manhattan U.S. Attorney Geoffrey S. Berman said: “As alleged, these 10 defendants, motivated by greed and the possibility of a quick payday, aggressively targeted the elderly and other vulnerable victims throughout the United States by convincing them to invest their money in various businesses, and then scammed those victims again after pushing them deep into debt.  In reality, allegedly these so-called opportunities were just fraudulent schemes to steal victims’ money, and the so-called ‘debt relief’ only further abused the trust innocent victims placed in the defendants.  Now, the defendants face time in prison for their alleged crimes.”

HSI Special Agent-in-Charge Peter C. Fitzhugh said:  “Those charged in this investigation are purported to have taken advantage of our aging population by posing as telemarketers.  This criminal organization allegedly strategically gave false promises to continue their swindle and get as much money as possible while destroying the lives of their victims.  HSI will not stand by while the elderly, or anyone else, are defrauded out of their hard earned money.  HSI and our law enforcement partners will continue to investigate and arrest those responsible to end their telemarketing scams.  Today, these individuals are done making calls unless they are calling their lawyer.”

Police Commissioner James P. O’Neill said:  “These charges reflect how criminals exploit the elderly and other individuals through telemarking schemes.  I commend the NYPD detectives, our federal partners, and prosecutors of the U.S. Attorney, Southern District, for their efforts and cooperation in this investigation.  Together, we will continue to be relentless in fighting crime that impacts the people we serve wherever, and however, it occurs.”

According to the allegations in the Indictment:

The Business Opportunity Scheme

From at least 2012 until at least November 2019, CHEEDIE, ALLEN, HANNA, BREWSTER, HANDREN, CIACCIO, MINETTO, DEPAOLA, LARKIN, and CIRILO carried out a wide-ranging telemarketing scheme that defrauded hundreds of victims (the “Victims”) throughout the United States, many of whom were over age 70, by selling those Victims so-called “business services” in connection with the Victims’ purported online businesses (the “Business Opportunity Scheme”). 

To perpetrate the Business Opportunity Scheme, certain of the defendants and their co-conspirators sold “services” purporting to make the management of Victims’ businesses more efficient or profitable, including tax preparation or website design services, notwithstanding that many Victims were elderly and did not own a computer.  At the outset of the Business Opportunity Scheme, certain participants employed by a “fulfillment” company sent the Victims electronic or paper “pamphlets” or provided so-called “coaching sessions” regarding these purported online businesses, but at no point did the Victims actually earn any of the promised return on their intended investment. 

In order to perpetrate the Business Opportunity Scheme, the defendants and their co-conspirators engaged in a widespread, coordinated effort to traffic in lists of potential victims, or “leads,” many of whom had previously made an initial investment to create an online business with other participants in the Scheme.  As a general matter, leads were initially generated by sales floors operating in, among other places, Arizona, Nevada, and Utah, including those sales floors operated by ALLEN, HANNA, BREWSTER, and HANDREN.  ALLEN, HANNA, BREWSTER, and HANDREN operated in coordination with several telemarketing sales floors in the New York and New Jersey area, including in Manhattan, and provided lead lists and fulfillment services to other co-conspirators operating those floors, including CHEEDIE, CIACCIO, and MINETTO.  BREWSTER, for example, provided lead lists through a website referred to by BREWSTER and other co-conspirators as the “Money Sucking Website” or “MSW.”  CIACCIO and MINETTO employed several salespeople who sold the so-called business services to Victims of the Business Opportunity Scheme and worked to prevent Victims from receiving refunds on their investments, including DEPAOLA, LARKIN, and CIRILO.

Certain participants in the Business Opportunity Scheme, including ALLEN and HANNA, also told Victims that the Victims had qualified for a government grant, often in connection with starting a small business, and that the Victims should purchase the business services offered as part of the Business Opportunity Scheme as a way to earn money while waiting for the Victim’s grant money to be received.  In truth and in fact, no such government grants existed.

The Debt Relief Scheme

When there were no more services to sell the Victim as part of the Business Opportunity Scheme and/or the Victim had reached the maximum limit on his or her credit cards, the defendants and their co-conspirators effectively refinanced their Victims’ participation in the Business Opportunity Scheme into a new scheme, capitalizing on the Business Opportunity Scheme Victims’ credit card debts by offering to consolidate or settle the Victims’ debt in exchange for an up-front payment (the “Debt Relief Scheme”).  The perpetrators of the Debt Relief Scheme entered into revenue-sharing agreements with certain participants in the Business Opportunity Scheme by which the perpetrators of the Debt Relief Scheme paid certain participants for leads based on a percentage of the sales made to Victims.  In truth and in fact, the perpetrators of the Debt Relief Scheme did not settle or consolidate the Victims’ debt. 

Obstruction of Justice 

In or about January 2019, law enforcement conducted a search of the telemarketing sales floor at which LARKIN and CIRILO were employed.  During the search, law enforcement seized several electronic devices from LARKIN and CIRILO.  Following the search, LARKIN and CIRILO knowingly deleted, and attempted to delete, the data on those devices in an effort to prevent law enforcement from using that data in the instant investigation into the Business Opportunity Scheme.

*                      *                      *

CHEEDIE, 34, of Jersey City, New Jersey, ALLEN, 41, of Laveen, Arizona, HANNA, 40, of El Mirage, Arizona, BREWSTER, 39, of Las Vegas, Nevada, HANDREN, 37, of Sandy, Utah, CIACCIO, 30, of Hillsdale, New Jersey, MINETTO, 32, of Washington, New Jersey, DEPAOLA, 30, of Hillsdale, New Jersey, LARKIN, 36, of Elmwood Park, New Jersey, and CIRILO, 28, of Elmwood Park, New Jersey, are each charged with one count of conspiracy to commit wire fraud in connection with telemarketing through which they targeted and victimized 10 or more persons over the age of 55, which carries a maximum sentence of 30 years in prison.  LARKIN and CIRILO also are each charged with obstruction of justice, which carries a maximum sentence of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.  

Mr. Berman praised the outstanding investigative work of HSI’s El Dorado Task Force and the NYPD. 

This case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant United States Attorneys Kiersten A. Fletcher, Benet J. Kearney, and Robert B. Sobelman are in charge of the prosecution. 

If you believe you have been a victim of the scheme described above, including a victim entitled to restitution, and you wish to provide information to law enforcement and/or receive notice of future developments in the case or additional information, please contact Wendy Olsen-Clancy, the Victim Witness Coordinator at the United States Attorney’s Office for the Southern District of New York, at 866-874-8900 or wendy.olsen@usdoj.gov.  You may also report it to Detective Christopher Bastos at 917-480-7167 or christopher.bastos@nypd.org.

 

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

Audrey Strauss, the Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced that JEREMY SHOR, a former trader at Premium Point Investments L.P. (“PPI”), was sentenced to 40 months in prison in connection with his conviction following a jury trial for engaging in a securities mismarking scheme from 2014 to 2016.  The jury convicted SHOR and Anilesh Ahuja, a/k/a “Neil,” the founder, chief executive officer, and chief investment officer of PPI, on securities fraud-related offenses relating to their participation in a scheme to inflate the net asset value (“NAV”) reported to investors for hedge funds managed by PPI by more than $100 million.  SHOR was sentenced yesterday by U.S. District Judge Katherine Polk Failla, who presided over the six-week jury trial.  Ahuja is scheduled to be sentenced by Judge Failla on November 25, 2019.

Ms. Strauss said:  “Jeremy Shor, a former trader at Premium Point Investments L.P., was convicted by a federal jury for inflating the net asset value – a critical metric for investors – of funds under his management by more than $100 million.  By doing so, Premium Point was able to charge higher management and performance fees, and hide its true financial health from investors.  Had investors known the truth, they likely would have redeemed their investments. Shor’s prison sentence underscores the seriousness of his crimes and the need for honest, accurate reporting by financial institutions to their investors.”

According to the Indictment, evidence presented at trial, and court filings:

Premium Point Investments

In or about 2008, Ahuja co-founded PPI, where he was the chief executive officer and chief investment officer.  PPI managed hedge funds focused primarily on structured credit products, including residential mortgage backed securities (“RMBS”).   PPI’s flagship mortgage credit fund (the “Hedge Fund”) was launched in or about October 2009.  A segregated ERISA fund held the same positions as the Mortgage Credit Fund.  In 2013, PPI launched a new fund (the “New Issue Fund”) that purchased and securitized pools of mortgages that were not issued or guaranteed by a government agency.  At various relevant times between 2008 and 2016, PPI managed billions in assets.  SHOR was employed by PPI as a trader, where he focused on non-agency RMBS – i.e., RMBS securities that were not issued by a government agency.   

The Scheme to Mismark Securities

From at least in or about 2014 through at least in or about 2016, Ahuja and SHOR participated in a scheme to defraud PPI’s investors and potential investors in the Hedge Fund and the New Issue Fund by deceptively mismarking each month the value of certain securities held in these funds, and thus fraudulently inflating the NAV of those funds as reported to investors and potential investors. 

PPI fraudulently obtained inflated quotes, including from corrupt brokers, and manipulated its valuation process to inflate the purported value of securities held by the funds.    The effect of the mismarking scheme was to materially overstate the reported NAV – at times by more than $100 million across the funds managed by PPI.  This benefited PPI in at least two ways.  First, PPI was able to charge its investors higher management and performance fees.  Second, PPI was able to forestall redemptions by investors who would have requested a return of their funds had they known PPI’s true performance and operating health.

The mismarking scheme evolved as a result of demands by Ahuja that PPI maintain its track record of success and keep pace with the performance of peer funds, regardless of market conditions or the actual performance of the funds.  To achieve the goal of posting competitive returns, Ahuja, along with another partner, set an inflated “target” return for the Hedge Fund and New Issue Fund at the end of each month, which was at times based in part on the performance of peer funds.  The traders at PPI were then tasked with “reverse engineering” marks to meet the “targets.”

*                *                *

As part of the sentence imposed by Judge Failla, SHOR, 48, of New York, New York, was further sentenced to 3 years of supervised release.

Ms. Strauss praised the work of the Federal Bureau of Investigation, and thanked the Securities and Exchange Commission for its assistance. 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Guido Modano, Special Agent in Charge of the Department of Justice Office of the Inspector General, New York Field Office (“DOJ OIG”), and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an indictment charging federal correctional officers TOVA NOEL and MICHAEL THOMAS with making false records and conspiring to make false records and to defraud the United States by impairing the lawful functions of the Metropolitan Correctional Center (“MCC”), a Manhattan detention facility that houses federal inmates.  NOEL and THOMAS surrendered this morning.  The case is assigned to Southern District of New York U.S. District Judge Analisa Torres.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, the defendants had a duty to ensure the safety and security of federal inmates in their care at the Metropolitan Correctional Center.  Instead, they repeatedly failed to conduct mandated checks on inmates, and lied on official forms to hide their dereliction.”

DOJ OIG Special Agent in Charge Guido Modano said:  “Correctional Officers swear an oath to carry out their duties.  Completing rounds to verify inmate counts and certifying the accuracy of logs are important tasks to ensure the safety and security of institutions and the wellbeing of inmates.  Those who shirk their duties but falsely state they have completed them place the institution, fellow employees, inmates, and the public at risk.”

FBI Assistant Director William F. Sweeney Jr. said: “Security protocols are in place to protect the public, fellow officers and inmates being held in the MCC.  We allege these officers falsified records to create the appearance they were following those protocols.  The security risks created by this type of behavior are immense. The message here is simple - citizens place their trust in those who have taken an oath to serve and protect the public, and when that trust is deliberately violated by public servants, who instead choose to break those regulations, then they will be held accountable.”

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

On August 10, 2019, NOEL and THOMAS repeatedly failed to complete mandated counts of prisoners under their watch in the MCC’s Special Housing Unit (“SHU”).  Instead, for substantial portions of their shifts, NOEL and THOMAS sat at their desk, browsed the internet, and moved around the common area of the SHU.  To conceal their failure to perform their duties, NOEL and THOMAS repeatedly signed false certifications attesting to having conducted multiple counts of inmates that they did not do.  As a result of those false statements, the MCC believed prisoners in the SHU were being regularly monitored when, in fact, as a result of the defendants’ conduct, no correctional officer conducted any count or round of the SHU from approximately 10:30 p.m. on August 9 until approximately 6:30 a.m. on August 10, at which time, NOEL and THOMAS discovered the body of MCC inmate Jeffrey Epstein, who had committed suicide overnight while unobserved.

Background on Relevant Individuals & Entities

The MCC is a federal administrative detention facility located in Manhattan that is run by the Federal Bureau of Prisons.  The MCC employs correctional officers, whose primary duty is to ensure the care, custody, and control of the inmate population of the MCC.  NOEL has been employed as a correctional officer at the MCC since approximately 2016, and THOMAS has been employed as a correctional officer at the MCC since approximately 2007.  Both NOEL and THOMAS were regularly assigned to work shifts in the SHU at the MCC. 

Correctional officers assigned to guard inmates in the SHU – and throughout the MCC – are required to conduct institution-wide counts of inmates at regular, scheduled intervals to ensure that each inmate is alive and accounted for within the MCC.  Two officers are required to complete the institutional count for each housing unit, including the SHU, and are further required to document their performance of the count on an official MCC form called a count slip.  In addition to the institutional count, MCC correctional officers assigned to the SHU are required to complete rounds every thirty minutes to ensure that each inmate is alive and accounted for within his cell.  Correctional officers working in the SHU are required to complete a form documenting the date and time of each 30-minute round in each area of the SHU.  

On July 6, 2019, Epstein was arrested and detained at the MCC on sex trafficking charges, and was subsequently assigned to the SHU due to risk factors for suicidality and safety concerns.  After an apparent suicide attempt on July 23, 2019, Epstein was transferred to suicide watch and then psychological observation.  Upon being moved back to the SHU on July 30, 2019, the MCC took steps to guard against future suicide attempts by Epstein, including by assigning Epstein to the cell closest to the correctional officers’ desk.  Conducting the required institutional counts and thirty-minute rounds in the SHU were also part of the MCC’s procedures for ensuring the safety of inmates, including Epstein.    

The Events of August 9-10, 2019

On August 9, 2019, NOEL was assigned to work in the SHU from 4:00 p.m. on August 9, 2019, to 8:00 a.m. on August 10, 2019.  THOMAS was assigned to work with NOEL in the SHU from 12:00 a.m. until 8:00 a.m. on August 10, 2019.  From 4:00 p.m. on August 9 to 8:00 a.m. on August 10, the officers on duty in the SHU, including NOEL and THOMAS, were responsible for conducting five institutional counts at 4:00 p.m. and 10:00 p.m. on August 9, and at 12:00 a.m., 3:00 a.m., and 5:00 a.m. on August 10.  NOEL and THOMAS were also responsible for completing forms attesting to the completion of each of those counts.  In fact, NOEL, and then NOEL and THOMAS, repeatedly failed to complete mandated counts in the SHU.  Instead for substantial portions of their 12:00-8:00 a.m. shifts, NOEL and THOMAS sat at their desk, browsed the internet, and moved around the common area of the SHU.  During that time period, NOEL and THOMAS were the only correctional officers assigned to the SHU.  Aside from two other officers who briefly visited the common area of the SHU, as confirmed by video surveillance, no one else entered the SHU, no one conducted any counts or rounds throughout the night, and no one entered the area in which Epstein was housed.

To conceal their failure to complete their duties, NOEL signed false certifications attesting to having conducted counts of inmates at 4:00 p.m. and 10:00 p.m., and NOEL and THOMAS signed false certifications attesting to having conducted counts of inmates at 12:00 a.m., 3:00 a.m., and 5:00 a.m. when, in truth and in fact, they never conducted such counts.  As a result of those false reports, the MCC believed prisoners in the SHU were being regularly monitored and accounted for when, in fact, no correctional officer conducted any count or round of the SHU from approximately 10:30 p.m. on August 9 until approximately 6:30 a.m. on August 10, at which time, NOEL and THOMAS discovered the body of Epstein, who had committed suicide by hanging himself earlier that morning while unobserved.

*                      *                      *

NOEL, 31, and THOMAS, 41, are each charged with one count of conspiring to defraud the United States by impairing, obstructing, and defeating the lawful functions of the MCC, and to make false records, which carries a maximum sentence of five years in prison.  NOEL is also charged with five counts of making false records, and THOMAS is also charged with three counts of making false records, each of which carries a maximum sentence of five years in prison. 

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

Mr. Berman praised the outstanding investigative work of the Office of the Inspector General, the FBI, and the New York City Police Department.

This case is being handled by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys Rebekah Donaleski and Nicolas Roos are in charge of the prosecution.

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York announced the arrest today of STUART FINKELSTEIN on charges of mail fraud, aggravated identity theft, false declarations to a court, and obstruction of justice.  Specifically, FINKELSTEIN has been charged with stealing the identities of two individuals in order to file hundreds of fraudulent lawsuits pursuant to the Americans with Disabilities Act (“ADA”) that those individuals never authorized.  In addition, FINKELSTEIN has been charged with making false declarations and obstructing justice in proceedings in the United States District Court for the Southern District of New York. FINKELSTEIN was presented today in federal court in Fort Lauderdale, Florida before Magistrate Judge Patrick Hunt.  

U.S. Attorney Geoffrey S. Berman said:  “Stuart Finkelstein, a practicing attorney, appeared to be advocating on his clients’ behalf by allegedly filing lawsuits claiming they were unable to access public establishments due to ADA noncompliance. This was false. Not only did he allegedly fabricate the underlying facts of the lawsuits – the victims never actually tried to access the establishments – Finkelstein stole their identities and didn’t even represent them as an attorney. Finkelstein’s galling scheme, which was as profitable as it was brazen, allegedly netting him $930,000 in attorney’s fees, has come to an end. If you feel you may be a victim of Stuart Finkelstein, please avail yourself to the information provided below.”

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

FINKELSTEIN is a lawyer who has filed, or has caused to be filed, over 300 lawsuits pursuant to the ADA on behalf of two purported plaintiffs, Victim-1 and Victim-2.  These lawsuits were filed in the United States District Courts for the Southern District of Florida and the Southern District of New York against various public establishments (the “Victim Public Establishments”).  Each of these lawsuits made representations that Victim-1 and Victim-2 were represented by FINKELSTEIN or an associate.  Furthermore, each of these lawsuits alleged that Victim-1 and Victim-2 attempted to visit the Victim Public Establishments, but were unable to do so because of those establishments’ alleged noncompliance with the ADA.  The lawsuits sought attorney’s fees and injunctive relief to address the alleged noncompliance with the ADA.

FINKELSTEIN’s lawsuits on behalf of Victim-1 and Victim-2, however, were fraudulent.  Victim-1 and Victim-2 neither retained nor authorized FINKELSTEIN to file ADA lawsuits on their behalf.  Contrary to FINKELSTEIN’s representations, Victim-1 and Victim-2 never attempted to visit the Victim Public Establishments.  Instead, FINKELSTEIN stole the identities of Victim-1 and Victim-2, made numerous false representations to the Victim Public Establishments and the courts in the Southern District of New York and the Southern District of Florida, obstructed official judicial proceedings, and then settled these fake lawsuits in order to collect approximately $930,000 in attorney’s fees.  

           *                      *                     *

FINKELSTEIN, 65, of Davie, Florida, is charged with one count of mail fraud, which carries a maximum penalty of twenty years in prison; one count of aggravated identity theft, which carries a mandatory term of imprisonment of two years in addition to the sentence imposed for the mail fraud charge; two counts of obstruction of justice, each of which carries a maximum penalty of twenty years in prison; and two counts of false declarations to a court, each of which carries a maximum penalty of five years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Berman praised the outstanding investigative work of Special Agents from the U.S. Attorney’s Office for the Southern District of New York.

If you believe you were a victim of this crime, including a victim entitled to restitution, and you wish to provide information to law enforcement and/or receive notice of future developments in the case or additional information, please contact Wendy Olsen-Clancy, the Victim Witness Coordinator at the United States Attorney’s Office for the Southern District of New York, at (866) 874-8900, or Wendy.Olsen@usdoj.gov. For additional information, go to: http://www.usdoj.gov/usao/nys/victimwitness.html.

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

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

 

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[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth 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 the arrest today of BRUCE BAGLEY on charges of conspiracy to commit money laundering and money laundering.  BAGLEY allegedly participated in a conspiracy to launder the proceeds of a Venezuelan bribery and corruption scheme into the United States.  BAGLEY will be presented today in federal court in Miami, Florida.  The case is assigned to U.S. District Judge Jed S. Rakoff in the Southern District of New York.

U.S. Attorney Geoffrey S. Berman said:  “Bruce Bagley, a college professor and author of the book Drug Trafficking, Organized Crime, and Violence in the Americas Today, allegedly opened bank accounts for the express purpose of laundering money for corrupt foreign nationals.  Moreover, the funds Bagley was allegedly laundering were the proceeds of bribery and corruption, stolen from the citizens of Venezuela.  Today’s charges of money laundering and conspiracy should serve as an object lesson for Bruce Bagley, who now faces a potential tenure in federal prison.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “Criminals employ a host of methods to launder the proceeds of their crimes, but in order to be successful, they need a way to hide and move their money.  As we allege, Bagley, an American professor, contributed to the success of illegal activity overseas, carried out against the Venezuelan people, by facilitating access to illicitly obtained funds, and profiting from his role in the crime.  About the only lesson to be learned from Professor Bagley today is that involving oneself in public corruption, bribery, and embezzlement schemes is going to lead to an indictment.”

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

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.  BAGLEY and Individual-1 would visit the bank together to complete these transactions.  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”).  BAGLEY and Individual-1 discussed the fact that they were moving Individual-2’s funds and that the funds represented the proceeds of foreign bribery and embezzlement stolen from the Venezuelan people.  Despite this fact, BAGLEY continued to receive money from accounts belonging to Individual-2, and continued to pass the majority of those funds to Individual-1.  Moreover, BAGLEY entered into sham contracts that purported to justify the transfer of Individual-2’s funds into Account-1.

In or about October 2018, Account-1 was shut down for suspicious activity.  Nevertheless, in or about December 2018, BAGLEY provided Individual-1 with information for a new bank account (“Account-2”) in order to transfer additional money belonging to Individual-2.  On two occasions, BAGLEY received funds into Account-2 after Individual-1 had told BAGLEY that the funds represented the proceeds of bribery and public corruption.  BAGLEY transferred the majority of these funds to Individual-1 but retained approximately 10 percent as a commission for his services.

*                      *                     *

BAGLEY, 73, of Coral Gables, Florida, is charged with one count of conspiracy to commit money laundering, and 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.

Mr. Berman praised the outstanding investigative work of Special Agents from the FBI’s New York Money Laundering Investigation Squad.  

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.

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

 

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[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth 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, announced that MATTHEW MADONNA, STEVEN L. CREA, CHRISTOPHER LONDONIO, and TERRENCE CALDWELL, were convicted today, after a six-week jury trial, of murder, conspiracy to commit racketeering, and other felonies.  Fifteen other defendants have previously pled guilty to related charges.

U.S. Attorney Geoffrey S. Berman said:  “The violent and disturbing acts of these four organized crime figures included the brutal murder of associate Michael Meldish. Fittingly, all four defendants have been found guilty of their heinous acts of fraud, extortion, and murder on the six-year anniversary of Meldish’s death. Thanks to the outstanding investigative work of the FBI and NYPD, we will continue our commitment to making organized crime a thing of a bygone era.”

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

Until his arrest in this case, MADONNA was the Acting Boss of the Luchese Family of La Cosa Nostra, one of the “Five Families” that constitute the Mafia in the New York City area.  In 2013, MADONNA became displeased with Michael Meldish, a longtime organized crime associate who had refused to collect debts owed to MADONNA.  MADONNA ordered Meldish killed, leading to Meldish’s murder on this date six years ago.  As the Acting Boss of the Family, MADONNA also received payments from a host of other illegal activities, including the extortion of labor union members, loansharking, illegal gambling operations, and drug-trafficking.

CREA is the official Underboss, or second-in-command, of the Luchese Family.  As the Underboss, he participated in MADONNA’s decision to kill Meldish, and relayed the order to lower-ranking members of the Family.  As a member of the Family’s leadership, or “administration,” CREA also profited from the same illegal activities as MADONNA.  CREA was personally involved in several criminal schemes, including fraud and extortion in a large construction project at a public hospital, the extortion of one of his subordinates, and ordering the assault of a relative.

LONDONIO is a made member of the Luchese Family.  Acting under the orders of MADONNA and CREA, LONDONIO helped setup Meldish—a personal friend of LONDONIO’s—to be killed, and acted as the getaway driver for the murder.  LONDONIO also carried firearms and other weapons, beat an associate of a rival crime family with a baseball bat, and personally participated in extortion, operating illegal gambling businesses, and drug-trafficking, among other crimes.

CALDWELL is an associate of the Luchese Family, who participated in its crimes but was not formally inducted as a member.  On May 29, 2013, CALDWELL ambushed a member of the rival Bonanno Family in Manhattan.  CALDWELL fired several shots into the victim’s car at close range and struck him once in the chest, but the victim survived.  On November 15, 2013, CALDWELL carried out MADONNA’s and CREA’s orders to kill Michel Meldish.  CALDWELL met Meldish and drove with him to a Bronx neighborhood to meet LONDONIO.  As Meldish got out of his car, CALDWELL shot him once in the head, killing him instantly.  CALDWELL then drove off with LONDONIO.

*                      *                     *

MADONNA, 84, of the Bronx, New York; CREA, 72, of Crestwood, New York; LONDONIO, 45, of Hartsdale, New York; and CALDWELL, 61, of Manhattan, New York, were each found guilty of one count of racketeering conspiracy, which carries a maximum sentence of life in prison; conspiracy to commit murder in aid of racketeering, which carries a maximum sentence of ten years in prison; murder in aid of racketeering, which carries a mandatory minimum sentence of life in prison; and use of a firearm in furtherance of murder in aid of racketeering, which carries a mandatory minimum sentence of five years in prison and a maximum sentence of life in prison.

CREA was acquitted of one count of attempted murder and assault in aid of racketeering and one count of use of a firearm in furtherance of attempted murder and assault in aid of racketeering. 

LONDONIO was also found guilty of one count of conspiracy to distribute narcotics, which carries a maximum sentence of twenty years in prison.  LONDONIO was acquitted of one count of attempting to escape from the Metropolitan Detention Center.  

CALDWELL was also found guilty of one count of attempted murder in aid of racketeering, which carries a maximum sentence of twenty years in prison, and one count of discharging a firearm in furtherance of attempted murder in aid of racketeering, which carries a mandatory minimum sentence of ten years in prison and a maximum sentence of life in prison.

Mr. Berman praised the outstanding investigative work of the FBI, the NYPD, the Department of Homeland Security Homeland Security Investigations, the Waterfront Commission of New York Harbor, and the Bureau of Prisons.

The case is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Hagan Scotten, Celia V. Cohen, Alexandra N. Rothman, Scott Hartman, and Jaqueline Kelly are in charge pf the prosecution; paralegal specialist Shannon Becker provided additional support.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced the arrest of RICHARD LIRIANO for installing a malicious software program known as a “keylogger” on dozens of his coworkers’ computers at a New York City area hospital, obtaining unauthorized access to his victims’ email, social media and other online accounts, and using that unauthorized access to steal private and confidential files.  Using his victims’ stolen credentials, LIRIANO repeatedly compromised their password-protected online accounts, and pilfered their sensitive personal photographs and other private documents.

LIRIANO was arrested yesterday and arraigned in federal court before United States Magistrate Judge Katharine H. Parker. 

U.S. Attorney Geoffrey S. Berman said:  “Richard Liriano, an information technology professional at a New York hospital, is alleged to have installed a ‘keylogger’ program onto dozens of his coworkers’ computers in order to spy on and steal personal information from them.  Liriano allegedly used the access he gained through the malicious software to steal photos, tax records, and other personal information from his coworkers and people associated with them.  As information technology increasingly becomes an integral part of our workplaces, ensuring the integrity of those systems becomes even more critical.  The arrest of Liriano should serve as an error message to any information technology professionals seeking to capitalize on their trusted access to information:  As in this case, you will be caught and prosecuted.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said: “Whatever alleged motivation the subject in this case had, hacking into his co-workers lives, albeit extremely disturbing, wasn't the most egregious act.  He allegedly installed a harmful program on computers that house vital and critical healthcare information for hospital patients, without a thought to what he could be compromising in his attempts to spy on people.”

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

From at least in or about 2017, up to and including at least about in or about September 28, 2018, LIRIANO misused administrative access provided to him as an information technology employee at a New York City-area hospital (“Hospital-1”), to log in to employee accounts, and copy other employees’ personal documents, including tax records, and personal photographs onto his own workspace computer for his own personal use. 

To further his efforts to steal personal information from Hospital-1’s employees, LIRIANO, without authorization, secretly installed a malicious program known as a keylogger on the accounts of other, primarily female, employees.  This program recorded and sent victim employees’ keystrokes to LIRIANO, which included the usernames and passwords those employees entered to access their personal web-based email accounts.  Through the course of this conduct, LIRANO stole usernames and passwords for at least approximately 30 email accounts belonging to Hospital-1 employees or persons associated with those employees (the “Compromised Accounts”). 

LIRIANO then used those stolen usernames and passwords to log in to the Compromised Accounts and obtain unauthorized access to other password-protected email, social media, photographs, and online accounts to which the Compromised Accounts were registered.  Among other things, LIRIANO conducted searches for personal photographs in the Compromised Accounts.

*                      *                      *

LIRIANO, 33, of Bronx, New York, is charged in three counts.  The first count charges him with transmitting a program to a protected computer that intentionally caused damage, which carries a maximum sentence of 10 years in prison.  The second count charges him with intentionally accessing a protected computer without authorization and recklessly causing damage, which carries a maximum sentence of five years in prison.  The third count is aggravated identity theft, which requires a two year prison term to be served consecutive to any sentence imposed on the computer intrusion charges.  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.

Mr. Berman praised the extraordinary work of the FBI and the New York City Police Department.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorney Vladislav Vainberg is in charge of the prosecution.  

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that KASHAWN LYONS was sentenced to 210 months in prison in connection with his sale of the fentanyl that resulted in the death of Matthew Azimi, a public school teacher in the Bronx.  LYONS pled guilty to narcotics conspiracy on January 14, 2019.  As part of his guilty plea, LYONS stipulated that he sold the drugs that resulted in the death of Mr. Azimi.  U.S. District Judge Andrew L. Carter, Jr. imposed today’s sentence.

U.S. Attorney Geoffrey S. Berman said:  “Kashawn Lyons admitted to selling a fatal dose of fentanyl to Matthew Azimi, a public school teacher in the Bronx, who overdosed inside of his schoolhouse at the age of 36. The tragic death of a public educator is a reminder of the pervasiveness of the opioid epidemic and its destructive effect on our society. Today’s sentence serves as a reminder that lengthy prison terms will result from dealing deadly opioids.”

According to court documents and statements made in open court:

On November 30, 2017, Matthew Azimi, age 36, was found dead inside a faculty bathroom at a special education public school in the Bronx (the “School”) where Mr. Azimi was a teacher.  The New York City Police Department (“NYPD”) responded to the School and began investigating Mr. Azimi’s death.  An autopsy conducted following Mr. Azimi’s death revealed that he died from a lethal dose of fentanyl.  NYPD officers recovered a syringe and a pink glassine bag with no stamp or other distinctive marking next to Mr. Azimi’s body.  NYPD also recovered Mr. Azimi’s cellphone.

The NYPD was able to trace the last three completed calls that Mr. Azimi made before he overdosed on November 30, 2017 to a cellphone used by LYONS.  Through surveillance, the NYPD learned that LYONS continued to sell fentanyl and heroin in the vicinity of the School.  In February 2018, the NYPD made undercover buys of fentanyl and heroin from LYONS in close proximity to the School.  The fentanyl and heroin purchased from LYONS was packaged in the same unique pink glassine bags as the one that was found next to Mr. Azimi’s body.

*                *                *

In addition to the prison term, LYONS, 33, of the Bronx, New York, was sentenced to five years of supervised release.   

Mr. Berman praised the outstanding investigative work of the NYPD in this case.

This case is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Justin V. Rodriguez and Jacob Warren are in charge of the prosecution.

Geoffrey S. Berman, 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”), Margaret Garnett, Commissioner of the New York City Department of Investigation (“DOI”), and Michael Schmidt, New York State Commissioner of Taxation and Finance (“DTF”), announced the indictment of five individuals in a scheme to steal and deposit more than 4,000 rent subsidy checks worth more than $2.7 million issued by the New York City Human Resources Administration (“HRA”), and the indictment of one person in a related scheme to defraud the New York State Department of Taxation and Finance.  SALIFOU CONDE, SEKHOU TOURE, and SYLVAIN GNALI GNAHORE were arrested on September 16, 2019.  ABRAHIM DUKURAY and ABOUBAKAR BAKAYOKO were arrested today and are expected to appear before U.S. Magistrate Judge Katharine H. Parker later today.  ALSENY KEITA remains at large.  The case is assigned to U.S. District Judge Valerie E. Caproni.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, these defendants carried out a reverse Robin Hood scheme, stealing funds intended to aid those in need of financial assistance to line their own pockets.  The alleged thefts are an affront to the very notion of offering a helping hand; these people had their hands in the till.  Now they face serious criminal charges.”

FBI Assistant Director William F. Sweeney Jr. said:  “Public assistance programs are established to help less fortunate families overcome their socio-economic challenges.  When the system is corrupted by any means, to include fraud against the agencies that provide the financial assistance, everyone loses out.  Not only is there less money available for those who need it most, but the taxpayers who fund these programs have been taken advantage of as well.  As alleged, those arrested for their role in this scheme took money that didn’t belong to them. They’ve since learned the consequences of their alleged actions.”

DOI Commissioner Margaret Garnett said:  “The City’s Human Resources Administration relied on Salifou Conde to provide a service, delivering to HRA unclaimed rental supplement checks to ensure funds could be appropriately redistributed to New Yorkers.  Instead, the defendant allegedly used his access to steal thousands of checks, and with his co-conspirators, pocket millions in taxpayer dollars, according to the charges.  DOI is proud to work with its partners, including the U.S. Attorney for the Southern District, to uncover schemes to defraud the government and steal public funds.”

Commissioner of Taxation and Finance Michael Schmidt said:  “Individuals who attempt to defraud New York State and illegally pocket money they’re not entitled to must be held accountable.  The fraudulent scheme alleged in this case unfairly places an additional tax burden on honest New Yorkers and will not be tolerated.  We’ll continue to work with all levels of law enforcement to ensure a level playing field for all taxpayers.”

As alleged in the Indictment, which was unsealed today, and the previously filed criminal Complaints:[1] 

HRA is an agency of the City of New York responsible for administering certain of the City’s public assistance programs.  Among other things, HRA provides rental assistance to individuals and families with social service and economic needs.  For individuals who qualify, HRA provides rental assistance by sending monthly rent supplement checks to landlords to cover a portion of the cost of documented expenses such as rent or storage costs.

HRA rent supplement checks that are undeliverable are sent back to the same P.O. Box in New York, New York.  From there, a courier takes them from the P.O. Box back to HRA. CONDE took these undeliverable checks out of the mail.

Since in or about 2015, more than 4,000 HRA rent supplement checks worth more than $2.7 million were fraudulently deposited into more than 50 bank accounts.  CONDE, DUKURAY, KEITA, TOURE, and BAKAYOKO were part of a scheme to open these accounts using fictitious identities, obtain HRA supplement checks that could not reach their destination, deposit the checks into bank accounts, and then quickly withdraw cash.

 GNAHORE was a member of a related scheme to obtain tax refund checks issued by the New York State Department of Taxation and Finance, manipulate the checks, deposit them in fraudulently opened bank accounts, and then quickly withdraw funds from those accounts.

*                      *                      *

CONDE, 29, DUKURAY, 40, KEITA, 37, TOURE, 35, BAKAYOKO, 32, and GNAHORE, 43, are each charged with one count of wire fraud, which carries a maximum punishment of 20 years in prison; one count of bank fraud, which carries a maximum punishment of 30 years in prison; and one count of conspiracy to commit wire fraud and bank fraud, which carries a maximum punishment of 30 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Mr. Berman praised the outstanding work of the FBI, DOI, and DTF.

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

 

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

The former head of the China subsidiary of a publicly traded international multi-level marketing company (Company-1) and the former head of the external affairs department of the China subsidiary of the same company were charged today for their roles in a scheme to violate the anti-bribery and the internal control provisions of the Foreign Corrupt Practices Act (FCPA).    

Yanliang Li, aka “Jerry Li,” 51, a citizen of China, the former head and managing director of the China subsidiary of Company-1, was charged with one count of conspiracy to violate the FCPA, one count of perjury and one count of destruction of records in federal investigations.  Hongwei Yang, aka “Mary Yang,” 51, also a citizen of China, the former head of the external affairs department of the China subsidiary of Company-1, was charged with one count of conspiracy to violate the FCPA.

“Li and Yang allegedly led a brazen, decade-long corruption scheme, bribing foreign Chinese officials and then covering it up by providing false sworn testimony to the SEC and wiping clean computer files,” said Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division.  “The Department of Justice will continue to hold individuals accountable who undermine the integrity of our financial markets by participating in these corrupt bribery schemes.”

“Li and Yang, both former top executives of a global multi-level marketing company headquartered in Los Angeles, allegedly approved the extensive and systematic payments of bribes to Chinese government officials over a 10-year period to promote and expand the company’s business in China and to avoid regulatory scrutiny in China,” said U.S. Attorney Geoffrey S. Berman of the Southern District of New York.  “Moreover, in an effort to obstruct the government’s investigation into this widespread corruption scheme, Li lied under oath about the bribe payments when interviewed by the SEC and also destroyed evidence.  This case signifies this office’s commitment to ensuring that companies operating in the U.S. do not gain an unfair advantage through corruption and illegal bribes of foreign officials.”

According to the allegations in the indictment, from approximately 2007 through February 2017, Li, Yang and others agreed to pay, and paid bribes to Chinese officials for the purpose of obtaining and retaining licenses for Company-1 to operate as a direct-selling enterprise in provinces throughout China.  The conspirators also are alleged to have paid bribes to corruptly influence Chinese governmental investigations into Company-1’s compliance with Chinese laws and to corruptly influence Chinese state-owned and state-controlled media for the purpose of suppressing negative media reports about the company. 

In order to carry out the scheme, Li, Yang and others allegedly obtained reimbursement for the bribes they paid to Chinese officials by submitting false and fraudulent expense claims designed to conceal the true nature of the expenditures at issue, thereby circumventing Company-1’s internal accounting controls.  In addition, Li made false statements under oath in sworn investigative testimony before the U.S. Securities and Exchange Commission in New York, New York. Additionally, the indictment alleges that during the course of the federal SEC and DOJ investigations Li, with knowledge of these investigations, installed a “Wiping Application” onto his Company-1 issued laptop, which enabled him to erase 200 files from the laptop in a manner that would render the deleted files unrecoverable.   

The charges contained in the indictment are merely accusations, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

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

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

To learn more about the government’s FCPA enforcement efforts, go to www.justice.gov/criminal/fraud/fcpa.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York (“SDNY”), Assistant Attorney General Brian A. Benczkowski of the Criminal Division of the United States Department of Justice (“DOJ”), and William F. Sweeney Jr., Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of charges against YANLIANG LI, a/k/a “Jerry Li,” the former head and managing director of the China subsidiary (the “China Subsidiary”) of a publicly traded international multi-level marketing company (“Company-1”), and HONGWEI YANG, a/k/a “Mary Yang,” the former head of the external affairs department of the China Subsidiary, in connection with a scheme, from in or about 2007 through in or about February 2017, to pay bribes and circumvent Company-1’s internal accounting controls in violation of the Foreign Corrupt Practices Act (“FCPA”).  LI and YANG are each charged with one count of conspiring to violate the FCPA.  LI is also charged with one count of perjury and one count of destruction of records in federal investigations.  LI and YANG remain at large.  The case is assigned to U.S. District Judge Vernon S. Broderick. 

U.S. Attorney Geoffrey S. Berman said:  “Li and Yang, both former top executives of a global multi-level marketing company headquartered in Los Angeles, allegedly approved the extensive and systematic payments of bribes to Chinese government officials over a ten-year period to promote and expand the company’s business in China and to avoid regulatory scrutiny in China.  Moreover, in an effort to obstruct the Government’s investigation into this widespread corruption scheme, Li lied under oath about the bribe payments when interviewed by the SEC and also destroyed evidence.  This case signifies this Office’s commitment to ensuring that companies operating in the U.S. do not gain an unfair advantage through corruption and illegal bribes of foreign officials.”

Assistant Attorney General Benczkowski said:  “Today’s charges further demonstrate that the Department of Justice will hold accountable those who undermine the integrity of our financial markets by paying bribes and circumventing the internal controls of publicly traded companies.  Furthermore, these charges send a clear message that committing perjury and destroying records to thwart SEC and grand jury investigations will not be tolerated.” 

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

Relevant Persons and Entities

Company-1 was a publicly traded multi-level marketing company that sold health care, personal care, and other products in more than 90 countries around the world, including China.  Company-1 was headquartered in Los Angeles, California, and its shares traded on the New York Stock Exchange.  Company-1 conducted business operations in China through a group of wholly owned subsidiaries based in China (collectively, the “China Subsidiary”). 

Company-1 operated as a multi-level marketing business, including in the United States, but multi-level marketing was prohibited under Chinese law.  Chinese law did, however, permit a company to engage in “direct selling” – selling a company’s products through independent sales representatives – subject to certain requirements.  In particular, as relevant here, before engaging in direct selling in any Chinese province, Chinese law required a company to obtain a direct-selling license from national authorities and local authorities in that province.  The China Subsidiary received its first direct-selling license in or about March 2007, and subsequently received additional direct-selling licenses for other Chinese provinces.  By in or about 2016, the China Subsidiary was responsible for approximately 20 percent of Company-1’s worldwide net sales, which exceeded $4 billion.   

The China Subsidiary’s external affairs department (“EA”) was responsible for interfacing with Chinese governmental agencies and Chinese media entities, including Chinese government-owned media entities, on behalf of Company-1 in China.  EA employees frequently entertained Chinese government officials at meals and other events and provided gifts to Chinese government officials.  Between in or about 2007 and in or about 2016, the China Subsidiary reimbursed EA employees more than $25 million for entertaining and gift-giving to Chinese Government officials.

From in or about 2004 through in or about December 2007, LI was the director of sales and/or sales vice president at the China Subsidiary.  From in or about December 2007 through in or about May 2017, LI was the managing director of the China Subsidiary, where LI was primarily responsible for many of the China Subsidiary’s day-to-day operations, including sales.  LI was Company-1’s most senior executive in China.  From in or about February 2006 through in or about May 2017, YANG was the head of EA.  LI was YANG’s direct supervisor. 

Various Chinese provincial and central government officials at the Ministry of Commerce (collectively, “MOFCOM”) were responsible, at least in part, for issuing licenses required for companies, such as the China Subsidiary, to conduct direct selling in China.  Various Chinese provincial and central government officials of the State Administration for Industry and Commerce (collectively, “AIC”) were responsible, at least in part, for enforcing compliance with Chinese laws applicable to direct-selling companies, such as the China Subsidiary.  AIC had the authority to conduct investigations into direct-selling companies and to impose fines and other penalties against direct-selling companies, such as the China Subsidiary, that it deemed not to be in compliance with applicable laws.

The Scheme to Pay Bribes and Circumvent Internal Accounting Controls

From at least in or about 2007 through in or about February 2017, LI, YANG, and others participated in a scheme to pay bribes and to circumvent Company-1’s internal accounting controls.  The scheme involved, among other things, bribing Chinese government officials for the benefit of Company-1, obtaining reimbursements from Company-1 relating to the illicit bribes through fraudulent reimbursement requests, and circumventing Company-1’s internal accounting controls that were intended to prevent bribery and fraud.

More specifically, LI, YANG, and others paid and agreed to pay bribes to Chinese government officials, including MOFCOM officials, AIC officials, and officials of a media company owned by the Chinese government, for the purpose of obtaining, retaining, and increasing Company-1’s business in China by, among other things, (1) obtaining and retaining the China Subsidiary’s licenses to operate as a direct-selling enterprise in provinces throughout China, (2) corruptly influencing Chinese governmental investigations into the China Subsidiary’s compliance with Chinese laws applicable to direct-selling enterprises, and (3) corruptly influencing Chinese state-owned and state-controlled media for the purpose of suppressing negative media reports about the China Subsidiary.

In order to carry out the scheme, LI, YANG, and others obtained reimbursement for the bribes they paid to Chinese officials from the China Subsidiary through fraudulent expense claims designed to conceal the true nature of the expenditures at issue.  In doing so, LI, YANG, and others circumvented Company-1’s internal accounting controls related to EA’s expenditure on gifts and entertainment for Chinese government officials.  These internal accounting controls, among other things, prohibited the payment of bribes, established limits on the value, frequency, and nature of expenditures on government officials, and required EA employees to provide receipts and other specific information, including the names of the government officials involved, in order to obtain approval and reimbursement for their expenditures.  LI, YANG, and others agreed to, and did, submit and approve fraudulent reimbursement requests, obtain reimbursement for those fraudulent requests, and conceal their fraud from Company-1’s internal audit department.

Perjury

In or about 2013, the U.S. Securities and Exchange Commission (the “SEC”) opened a formal investigation into Company-1 for violations of the federal securities laws.  On or about October 20 and 21, 2016, LI testified under oath before the SEC in New York, New York, in connection with the SEC’s investigation of Company-1. 

During his sworn testimony before the SEC, LI was asked whether he had offered any payment to any government officials at MOFCOM or AIC, and whether he was aware of any such payments offered by anyone at the China Subsidiary.  In response, LI, in sum and substance, falsely denied having knowledge of the China Subsidiary’s employees paying bribes or circumventing Company-1’s internal accounting controls.

During LI’s sworn testimony before the SEC, SEC staff also played for LI audio recordings of LI, including (a) a recording of a conversation from in or about 2006 in which LI and YANG discussed LI’s approval of giving “red envelopes” – i.e., cash gifts – to AIC officials, and (b) a recording of a conversation from in or about March 2007 in which LI and YANG agreed to making bribe payments of 35,000 yuan to various Chinese government officials, including 10,000 yuan to an official whom LI identified as an AIC deputy director.  In response to questions posed to him by SEC staff regarding these recordings, LI, in sum and substance, again falsely denied having knowledge of the China Subsidiary’s employees paying bribes or circumventing Company-1’s internal accounting controls.

The SEC also asked LI whether he had a personal email account, and whether he used any email account other than his Company-1 email account.  LI falsely stated, “No,” in response to both questions.  In truth and in fact, LI had a personal email account (the “LI Gmail Account”), LI had used the LI Gmail Account throughout 2016, and LI had sent multiple emails from the LI Gmail Account approximately 16 days prior to his testimony before the SEC.  LI had used the LI Gmail Account for, among other things, correspondence related to his work at the China Subsidiary.

Destruction of Records in Federal Investigations

In addition to the SEC’s investigation into Company-1, in or about 2013, a federal grand jury investigation in the Southern District of New York relating to Company-1 was also initiated. 

LI received multiple notices from Company-1 attorneys informing him of his obligation to retain all Company-1 documents dating back to at least January 1, 2007, in connection with, among other things, pending U.S. governmental investigations and potential litigation.  Those directives were initially sent beginning in 2012 and remained in place up to and including at least through February 2017.  On or about January 20, 2017, Company-1 stated, in a public filing with the SEC, that, in sum and substance, the SEC had requested documents and other information related to Company-1’s anti-corruption compliance in China; Company-1 was undertaking its own review of that subject; and Company-1 had discussed these matters with the United States Department of Justice (the “DOJ”).  LI received emails in or about late January 2017 that informed him of the pending SEC and DOJ investigations. 

On or about February 11, 2017, LI was informed he would be interviewed by Company-1 attorneys in connection with an internal investigation into potential misconduct at the China Subsidiary.  A few days later, on or about February 17, 2017, LI installed an application (the “Wiping Application”) onto the laptop that Company-1 had issued to him (the “LI Laptop”).  The Wiping Application enabled a user to erase files in a manner that would render the deleted files unrecoverable.  That same day, LI utilized the Wiping Application to delete approximately 200 files from the LI Laptop. 

*                      *                      *

LI, 51, a citizen of China, and YANG, 51, a citizen of China, were each charged with one count of conspiracy to violate the FCPA, which carries a maximum sentence of five years in prison.  LI was also charged with one count of perjury, which carries a maximum sentence of five years in prison, and one count of destruction of records in federal investigations, which carries a maximum sentence of 20 years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentences would be determined by a judge.  

Mr. Berman and Mr. Benczowski praised the outstanding work of the FBI and also thanked the SEC for its assistance and cooperation in this investigation. 

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

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

 

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[1] As the introductory phrase signifies, the entirety of the texts of the Indictment and the descriptions of the Indictment 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 Peter C. Fitzhugh, the Special Agent-in-Charge of the New York Field Office of the Homeland Security Investigations (“HSI”) announced the arrest of GARY PAMPERIEN for possession of child pornography.  PAMPERIEN was arrested yesterday and presented before United States Magistrate Judge Lisa Margaret Smith. 

U.S. Attorney Geoffrey S. Berman said:  “Child pornography victimizes society’s most innocent and vulnerable.  Massage therapist Gary Pamperien was arrested for allegedly possessing child pornography.  Sexualizing young children is despicable, and this Office and our law enforcement partners will continue to utilize all of the expertise and resources available to bring to justice those who possess child pornography.”

HSI Special Agent-in Charge Peter C. Fitzhugh said:  “Pamperien allegedly purchased explicit photos of children, repeatedly victimizing each child with just the click of a button. Perhaps thinking he could conceal these heinous alleged acts, he allegedly used his work computer as a means to mask his identity.  HSI has a firm commitment to tracking down those perpetrators who exploit children to satisfy their own horrid desires and we will bring them to justice.”

According to the allegations in the Complaint[1]:

Between at least August 2017 and December 2018, PAMPERIEN, a massage therapist, purchased access to thousands of files containing child pornography through a password-protected, fee-based website hosted outside the United States.  The child pornography included depictions of nude prepubescent children posing lasciviously.  PAMPERIEN made his purchases from an IP address associated with a non-profit educational retreat center in Rhinebeck, New York, where PAMPERIEN has lived and worked.  Additionally, on November 13, 2019, law enforcement officers uncovered at least a dozen images and one video containing child pornography on a laptop belonging to PAMPERIEN.

PAMPERIAN, 65, of Hicksville, New York, is charged with one count of possession of child pornography, which carries a maximum sentence of 10 years in prison or 20 years in prison if any image of child pornography involved in the offense involved a prepubescent minor or a minor who had not attained 12 years of age.  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.

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

Mr. Berman praised Homeland Security Investigations for their outstanding investigative work. 

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Sam Adelsberg and Benjamin A. Gianforti are in charge of the prosecution.

 

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

 

The Department of Justice announced that Behzad  Pourghannad was sentenced yesterday to 46 months in prison for participating in a conspiracy to export carbon fiber from the United States to Iran between 2008 and 2013.  Pourghannad pleaded guilty on Aug. 29, 2019,before United States Magistrate Judge Paul E. Davison.  United States District Judge Vincent L. Briccetti imposed yesterday’s sentence. 

“Pourghannad falsified shipment documents and used front companies to export carbon fiber to Iran in violation of U.S. sanctions,” said Assistant Attorney of National Security John C. Demers.  “Carbon fiber is used by the Iranian Regime to further its nuclear, military, and aerospace programs.  We continue to thwart the efforts of the Iranian regime to evade our sanctions and work steadfastly with our international partners to investigate, prosecute and bring sanctions violators to justice.”

"Behzad Pourghannad conspired to circumvent U.S. export controls on carbon fiber, a substance with numerous military and aerospace applications,” said U.S. Attorney Geoffrey Berman for the Southern District of New York. “The significant sentence Pourghannad received should send a message that such violations, which threaten our national security, will incur stiff penalties.”

According to the Indictment and other documents filed in the case, including statements made during the plea and sentencing proceedings:

Between 2008 and July 2013, Pourghannad and his two codefendants, Ali Reza Shokri and Farzin Faridmanesh, lived and worked in Iran.  During that period, they worked together to obtain carbon fiber from the United States and surreptitiously export it to Iran via third countries in violation of United States sanctions.  In particular, Shokri worked to procure many tons of carbon fiber from the United States; Pourghannad agreed to serve as the financial guarantor for large carbon fiber transactions; and Faridmanesh agreed to serve as the trans-shipper. Carbon fiber has a wide variety of uses, including in missiles, aerospace engineering, and gas centrifuges that enrich uranium. 

In or about late 2007 and early 2008, Shokri and a Turkey-based co-conspirator (CC-2) successfully arranged for the illegal export and transshipment of carbon fiber from the United States to an Iranian company Shokri operated (Iranian Company-1).  Specifically, CC-2 contacted a United States supplier of carbon fiber, who in turn enlisted a third individual (Individual-1) for assistance with the transaction.  Through Individual-1, CC-2 purchased carbon fiber from the United States supplier and arranged for the shipment of the carbon fiber from the United States, through Europe and Dubai, United Arab Emirates, to Iranian Company-1 in Iran.

In or about May 2009, Pourghannad and Shokri attempted to arrange another illegal purchase and transshipment of carbon fiber from the United States to Iran.  Specifically, Individual-1 returned a signed contract to Pourghannad for Shokri’s purchase of a large quantity of carbon fiber.  Individual-1 then purchased the carbon fiber from a United States supplier and arranged for the carbon fiber to be exported from the United States to a third country (Country-1), en route to Iran.  Country-1 authorities, however, interdicted the carbon fiber shipment before it could be trans-shipped to Iran.

In or about 2013, Pourghannad, Shokri, and Faridmanesh again attempted to illegally procure and export carbon fiber from the United States to Iran.  In the 2013 transaction, Shokri and Pourghannad negotiated with Individual-1 for the purchase and trans-shipment to Iran of more than five tons of carbon fiber.  Faridmanesh and Pourghannad further agreed with Individual-1 that the carbon fiber would be trans-shipped from the United States to Iran through Tbilisi, Georgia, with Faridmanesh to serve as the trans-shipper.  Faridmanesh specifically instructed Individual-1 to change the shipping labels on the carbon fiber to reference “acrylic” or “polyester,” rather than “carbon fiber.”  Pourghannad provided Individual-1 with the bank guarantee that was to serve as surety for a portion of the carbon fiber.  In or about June 2013, Individual-1 informed Pourghannad, Shokri, and Faridmanesh that the carbon fiber would soon be shipped from Manhattan and that Individual-1 would replace the carbon fiber labels with shipping labels referencing “acrylic” to evade U.S. export controls.

No one involved in these transactions obtained permission from the U.S. Department of Treasury, Office of Foreign Assets Control to export the carbon fiber from the United States. 

Mr. Berman praised the investigative work of the FBI and the U.S. Department of Commerce, and thanked the U.S. Department of Justice’s National Security Division, Criminal Division's Office of International Affairs, the U.S. Marshals Service, and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations for their assistance. 

This case is being handled by the Office’s Terrorism and International Narcotics Unit, with assistance from the Counterintelligence and Export Control Section of the National Security Division.  Assistant U.S. Attorney Gillian Grossman and Trial Attorney Matthew McKenzie are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and John C. Demers, the Assistant Attorney General for National Security, announced that BEHZAD POURGHANNAD was sentenced yesterday to 46 months in prison for participating in a conspiracy to export carbon fiber from the United States to Iran between 2008 and 2013.  POURGHANNAD pled guilty on August 29, 2019, before United States Magistrate Judge Paul E. Davison.  United States District Judge Vincent L. Briccetti imposed the sentence. 

Manhattan U.S. Attorney Geoffrey Berman said: “Behzad Pourghannad conspired to circumvent U.S. export controls on carbon fiber, a substance with numerous military and aerospace applications.  The significant sentence Pourghannad received should send a message that such violations, which threaten our national security, will incur stiff penalties.”

Assistant Attorney General John Demers said:  “Pourghannad falsified shipment documents and used front companies to export carbon fiber to Iran in violation of U.S. sanctions.   Carbon fiber is used by the Iranian Regime to further its nuclear, military, and aerospace programs.  We continue to thwart the efforts of the Iranian regime to evade our sanctions and work steadfastly with our international partners to investigate, prosecute and bring sanctions violators to justice.”

According to the Indictment and other documents filed in the case, including statements made during the plea and sentencing proceedings:

Between 2008 and July 2013, POURGHANNAD and his two codefendants, Ali Reza Shokri and Farzin Faridmanesh, lived and worked in Iran.  During that period, they worked together to obtain carbon fiber from the United States and surreptitiously export it to Iran via third countries in violation of United States sanctions.  In particular, Shokri worked to procure many tons of carbon fiber from the United States; POURGHANNAD agreed to serve as the financial guarantor for large carbon fiber transactions; and Faridmanesh agreed to serve as the trans-shipper.  Carbon fiber has a wide variety of uses, including in missiles, aerospace engineering, and gas centrifuges that enrich uranium. 

In or about late 2007 and early 2008, Shokri and a Turkey-based co-conspirator (“CC-2”) successfully arranged for the illegal export and transshipment of carbon fiber from the United States to an Iranian company Shokri operated (“Iranian Company-1”).  Specifically, CC-2 contacted a United States supplier of carbon fiber, who in turn enlisted a third individual (“Individual-1”) for assistance with the transaction.  Through Individual-1, CC-2 purchased carbon fiber from the United States supplier and arranged for the shipment of the carbon fiber from the United States, through Europe and Dubai, United Arab Emirates, to Iranian Company-1 in Iran.

In or about May 2009, POURGHANNAD and Shokri attempted to arrange another illegal purchase and transshipment of carbon fiber from the United States to Iran.  Specifically, Individual-1 returned a signed contract to POURGHANNAD for Shokri’s purchase of a large quantity of carbon fiber.  Individual-1 then purchased the carbon fiber from a United States supplier and arranged for the carbon fiber to be exported from the United States to a third country (“Country-1”), en route to Iran.  Country-1 authorities, however, interdicted the carbon fiber shipment before it could be trans-shipped to Iran.

In or about 2013, POURGHANNAD, Shokri, and Faridmanesh again attempted illegally to procure and export carbon fiber from the United States to Iran.  In the 2013 transaction, Shokri and POURGHANNAD negotiated with Individual-1 for the purchase and transshipment to Iran of more than five tons of carbon fiber.  Faridmanesh and POURGHANNAD further agreed with Individual-1 that the carbon fiber would be trans-shipped from the United States to Iran through Tbilisi, Georgia, with Faridmanesh to serve as the trans-shipper.  Faridmanesh specifically instructed Individual-1 to change the shipping labels on the carbon fiber to reference “acrylic” or “polyester,” rather than “carbon fiber.”  POURGHANNAD provided Individual-1 with the bank guarantee that was to serve as surety for a portion of the carbon fiber.  In or about June 2013, Individual-1 informed POURGHANNAD, Shokri, and Faridmanesh that the carbon fiber would soon be shipped from Manhattan and that Individual-1 would replace the carbon fiber labels with shipping labels referencing “acrylic” to evade U.S. export controls.

No one involved in these transactions obtained permission from the U.S. Department of Treasury, Office of Foreign Assets Control, to export the carbon fiber from the United States. 

*                *                *           

Mr. Berman praised the investigative work of the Federal Bureau of Investigation and the U.S. Department of Commerce, and thanked the U.S. Department of Justice’s National Security Division and the Criminal Division’s Office of International Affairs, the U.S. Marshals Service, Homeland Security Investigations, and Immigration and Customs Enforcement for their assistance. 

This case is being handled by the Office’s Terrorism and International Narcotics Unit, with assistance from the Counterintelligence and Export Control Section of the National Security Division.  Assistant United States Attorney Gillian Grossman and Trial Attorney Matthew McKenzie are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that RALPH MANCINI, the owner and operator of County Waste Management, a waste disposal business based in Harrison, New York, pled guilty today to mail fraud before U.S. Magistrate Judge Lisa Margaret Smith.  MANCINI admitted as part of his plea that he had defrauded numerous commercial customers by overbilling them for the waste collected and dumped on their behalf.

U.S. Attorney Geoffrey S. Berman said:  “For more than eight years, Ralph Mancini, the owner and operator of County Waste Management, illegally overbilled local businesses that contracted with him to do their waste disposal.  Mancini has now pled guilty to hauling in over $800,000 from his victims, and faces serious time in prison.”

According to the Information, other court documents, and statements made in Court, from in or about 2008 through 2016, MANCINI overbilled a total of approximately 17 commercial customers, including educational institutions, department stores, grocery stores, and other establishments, by more than $800,000.  MANCINI sent the fraudulent invoices by U.S. mail, which fabricated the tonnage of waste collected and thereby charged customers for waste services that had not actually been performed.

*                *                *

MANCINI, age 57, of Harrison, pleaded guilty to one count of mail fraud, which carries a maximum sentence of 20 years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

 MANCINI is scheduled to be sentenced by U.S. District Judge Nelson S. Román on February 14, 2020, at 11:00 a.m.

Mr. Berman praised the investigative work of the Federal Bureau of Investigation.  He also thanked the Westchester County Department of Public Safety and the Westchester County Solid Waste Commission for their assistance in the investigation.

This case is being prosecuted by the Office’s White Plains Division. Assistant U.S. Attorneys Daniel Loss is in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Raymond P. Donovan, Special Agent in Charge of the New York Office of the Drug Enforcement Administration (“DEA”), Peter C. Fitzhugh, Special Agent in Charge of the New York Office of Homeland Security Investigations (“HSI”), Keith M. Corlett, Superintendent of the New York State Police (“NYSP”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced that a grand jury returned an Indictment today charging JEANLUC JOILES with distributing fentanyl that resulted in the death of 29-year-old Rachel Spiteri on or about June 19, 2019, in New York, New York.  JOILES and a co-defendant, JAIME ROSARIO JR., are also charged with participating in a conspiracy to traffic methamphetamine, fentanyl, and cocaine, and ROSARIO is charged with possessing firearms in connection with a drug trafficking offense.  JOILES and ROSARIO were previously charged by criminal complaints and arrested on October 15, 2019, and October 25, 2019, respectively.  Both defendants are detained.  The case is assigned to United States District Judge Loretta A. Preska.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, Jeanluc Joiles sold the drugs that killed a young woman.  He and co-defendant Jaime Rosario Jr. allegedly conspired to traffic in a variety of potentially lethal drugs, and Rosario allegedly possessed guns in connection with that trafficking.  The potential penalties for these alleged crimes befit the seriousness of the allegations.”

DEA Special Agent in Charge Raymond P. Donovan said:  “Earlier this month, DEA issued a national alert on counterfeit pill trafficking across America and how fatal overdoses follow its path.  Reiterating the warning, counterfeit pills threaten New York because they mimic legitimate prescription medication, but contain unregulated amounts of fentanyl.  I applaud the diligent efforts of the law enforcement community to bring justice to victims of drug traffickers and their families.”

HSI Special Agent in Charge Peter C. Fitzhugh said:  “As alleged, these two men showed no regard for human life when they allegedly concocted and laced pills with fentanyl, which led to yet another needless death from an overdose.  HSI is committed to working with the DEA’s Strike Force and law enforcement partners to ensure that people who allegedly deal these poisons within our communities are arrested and prosecuted for their careless acts.”

According to the allegations in the Indictment, underlying complaints, and information in the public record[1]:

On June 20, 2019, Rachel Spiteri was found dead in her apartment in New York, New York.  Following an investigation by the NYPD and DEA, law enforcement agents identified JOILES as the dealer who sold Ms. Spiteri what she believed to be oxycodone pills, but in fact contained fentanyl and acetylfentanyl, a fentanyl analogue.  Following Ms. Spiteri’s death, law enforcement officers later purchased additional narcotics from both JOILES and ROSARIO, including fentanyl pills masquerading as oxycodone, and methamphetamine that was sold as cocaine. 

On October 16, 2019, law enforcement officers executed a search warrant at ROSARIO’s apartment and found more than 500 grams of methamphetamine and cocaine, as well as four firearms.

*                      *                      *

JOILES, 36 of Queens, New York, is charged with conspiracy to traffic in narcotics and with distribution and possession with intent to distribute fentanyl resulting in death.  ROSARIO, 42, of Queens, New York, is charged with conspiracy to traffic in narcotics and with possession of firearms in connection with a drug trafficking offense.  A chart setting forth the maximum and mandatory minimum penalties for the defendants is set forth below.  The statutory maximum penalties 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 and the NYPD.  The charges are the result of an investigation by the New York Strike Force, a crime-fighting unit comprising federal, state, and local law enforcement agencies supported by the Organized Crime Drug Enforcement Task Force (OCDETF) and the New York/New Jersey High Intensity Drug Trafficking Area (HIDTA).  

The Strike Force is housed at the DEA’s New York Division and includes agents and officers of the DEA, the NYPD, the New York State Police, Immigration and Customs Enforcement – Homeland Security Investigations, the U. S. Internal Revenue Service Criminal Investigation Division, the Bureau of Alcohol, Tobacco, Firearms, and Explosives, U.S. Customs and Border Protection, U.S. Secret Service, the U.S. Marshals Service, New York National Guard, the Clarkstown Police Department, U.S. Coast Guard, Port Washington Police Department, and New York State Department of Corrections and Community Supervision.

This case is being handled by the Office’s Narcotics Unit.  Assistant United States Attorney Daniel G. Nessim is in charge of the prosecution.

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

 

Count

Defendant(s)

Maximum Penalties

Conspiracy to distribute narcotics

JEANLUC JOILES

 

JAIME ROSARIO JR.

Life; mandatory minimum term of 10 years in prison

Distribution of Fentanyl Resulting in Death

JEANLUC JOILES

Life; mandatory minimum term of 20 years in prison

Firearms Offense

JAIME ROSARIO JR.

Life; consecutive mandatory minimum term of five years in prison

                                                       

 

 

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[1] As the introductory phrase signifies, the entirety of the text of the Indictment and Complaints, and the description of the Indictment and Complaints 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 today that, pursuant to an order issued by the Honorable Valerie E. Caproni, United States District Court Judge, victims of the securities fraud scheme relating to World Com that was carried out by Bernard J. Ebbers and others have the opportunity to provide the Court with their views regarding Ebbers’s pending motion for a sentence reduction.  A copy of the Court-approved notice to victims is attached (the “Notice”). 

As set forth in the Notice, on July 13, 2005, defendant Bernard J. Ebbers was sentenced to a term of imprisonment of 25 years.  Ebbers began to serve this term of imprisonment on September 26, 2006.  Assuming credit for good conduct while incarcerated, Ebbers has an anticipated release date of approximately July 4, 2028. 

On September 5, 2019, Ebbers filed a motion with the Court for a sentencing reduction pursuant to 18 U.S.C. § 3582 and the First Step Act.  The motion, which seeks Ebbers’s immediate release from prison, is based on Ebbers’s numerous medical conditions and his advanced age.  The Government has opposed Ebbers’s motion.  A copy of the briefs relating to Ebbers’s motion for a sentence reduction can be found at:

https://www.justice.gov/usao-sdny/united-states-v-bernard-ebbers

If you are a victim of Ebbers’s fraud and you wish to provide your views to Judge Caproni with respect to Ebbers’s motion for a sentence reduction, you may do so. 

Please address any such correspondence to the Court, but send the correspondence to the Victim/Witness coordinator for the U.S. Attorney’s Office for the Southern District of New York (the “Office”) by email as follows:

Ms. Wendy Olsen-Clancy

Victim/Witness Coordinator

United States Attorney’s Office

Southern District of New York

email:

Wendy.Olsen@usdoj.gov

The Office will then provide a copy of any correspondence received to the Court and counsel for Ebbers.  The Court has imposed a deadline of November 15, 2019 to receive any correspondence from victims.  Accordingly, to be considered by the Court, any such correspondence must be received by the United States Attorney’s Office by no later than November 14, 2019.

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”), and Jay N. Lerner, Inspector General of the Federal Deposit Insurance Corporation (“FDIC”), announced today the unsealing of an Indictment charging attorney MENDEL ZILBERBERG, a former director of Park Avenue Bank (the “Bank”), and ARON FRIED with bank fraud and related charges for perpetrating a fraudulent scheme to obtain a $1.4 million loan from the Bank.  The defendants caused the Bank to issue the loan to a straw borrower on the basis of false statements and misrepresentations, when in fact the defendants received and used the loan proceeds, resulting in a loss of over $1 million to the Bank when the loan defaulted.  ZILBERBERG was also separately charged with embezzlement and misappropriation of Bank funds while he was a director and insider of the Bank.  ZILBERBERG and FRIED were arrested this morning and will be presented later today before U.S. Magistrate Judge Katharine H. Parker.  The case has been assigned to U.S. District Judge George B. Daniels.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, Mendel Zilberberg and Aron Fried conspired with another to defraud the bank where Zilberberg served as a director.  In a textbook case of self-dealing and breach of fiduciary duty, Zilberberg allegedly exploited his position at the bank to grease the skids for a loan given under blatantly false pretenses, a huge chunk of the proceeds of which he himself dipped into.”

FBI Assistant Director-in-Charge William F. Sweeney Jr said:  “As alleged, when Fried and his co-conspirator realized they wouldn’t be able to secure a loan the traditional way – by legitimately obtaining the money from an authorized financial institution – they brought a straw borrower and bank director into their circle to effectively carry out the fraudulent activity.  As alleged, Mendel Zilberberg, the bank’s director, played a key role in carrying out this scheme, driving the loan through the approval process while shrouding the details in secrecy.  When the bank realized a loss of more than $1 million, the defendants allegedly walked away with the money from the defaulted loan.  Making false statements and misrepresentations on a loan application is a federal crime, a lesson those charged today have learned the hard way. Furthermore, bank insiders, of all people, should model the legal and ethical obligations of the financial institutions they serve, instead of breaking the law.”

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

In or about 2009, ARON FRIED and a co-conspirator not named in the Indictment (“CC-1”) sought to obtain a fraudulent loan from the Bank in Manhattan in order to finance an investment in a home health care business.  However, knowing that CC-1 would not be credit-worthy and had a criminal record, FRIED and CC-1 used a straw borrower (the “Straw Borrower”) for the loan application who was recruited by CC-1.  To effectuate the scheme, FRIED and CC-1 partnered with MENDEL ZILBERBERG, then a director of the Bank, who had the power to personally shepherd the fraudulent loan through the Bank’s approval process and guard it from scrutiny.  Together, the defendants concocted a false premise for the loan, supported the loan application with false representations, and set up pass-through bank accounts to funnel the proceeds of the fraudulent loan to themselves.  Specifically, the defendants made or otherwise caused false statements to be made to the Bank regarding, among other things, (a) that the borrower on the loan was the Straw Borrower, when in fact the actual borrowers and beneficiaries of the loan were ZILBERBERG, FRIED, and CC-1; and (b) that the purpose of the loan was for business investments by the Straw Borrower, when in fact the actual purpose of the loan was to benefit ZILBERBERG, FRIED, and CC-1.  

Based on the false representations made to the Bank and ZILBERBERG’s involvement in the loan approval process, the Bank issued a $1.4 million loan to the Straw Borrower, which was quickly disbursed to the defendants through multiple bank accounts and transfers.  In total, ZILBERBERG received at least approximately $466,000 of the loan proceeds, FRIED received at least approximately $434,000 of the loan proceeds, and CC-1 received the remainder of the loan proceeds.  The loan ultimately defaulted, resulting in a loss of over $1 million.

*                *                *

ZILBERBERG, 61 of Monsey, New York, and FRIED, 46 of Toms River, New Jersey, are each charged with one count of conspiracy to commit bank fraud, one count of bank fraud, and one count of making false statements to a bank, each of which carries a maximum sentence of 30 years in prison, as well as one count of conspiracy to make false statements to a bank, which carries a maximum sentence of five years in prison.  ZILBERBERG is also charged with one count of embezzlement and misappropriation of bank funds, which carries a maximum sentence of 30 years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Berman praised the investigative work of the FBI and the FDIC, Office of the Inspector General, and noted that the investigation remains ongoing.  Mr. Berman also thanked the Office of the Special Inspector General for the Troubled Asset Relief Program (“SIGTARP”) and the New York State Department of Financial Services 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 Attorneys Kimberly Ravener and Sagar K. Ravi are in charge of the prosecution.

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

 

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[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 Scott J. Lampert, Special Agent in Charge of the U.S. Department of Health and Human Services Office of Inspector General (“HHS-OIG”) New York Regional Office, announced today that the United States filed and settled a civil fraud lawsuit against LENOX HILL HOSPITAL (“Lenox Hill”) and its corporate parent NORTHWELL HEALTH, INC. (“Northwell”) (together, “Defendants”).  The Government’s Complaint-in-Intervention (the “Complaint”) alleges that Defendants violated the False Claims Act by fraudulently billing Medicare for healthcare services that did not comply with Medicare law.  The Complaint specifically alleges that in conjunction with Defendants’ employment of Lenox Hill’s former chair of the Department of Urology, David B. Samadi (“Samadi”), Defendants submitted claims for: (1) endoscopic procedures that were performed, at least in part, by insufficiently supervised medical residents; (2) robotic surgeries for which, at some point during the surgery, Samadi left the patient improperly unattended in order to supervise a different surgery; (3) medically unnecessary hospital services; and (4) designated health services referred to Lenox Hill by Samadi when his compensation arrangement violated the federal Stark Law. 

Under the settlement, approved by U.S. District Judge Denise Cote, Defendants agreed to pay $12.3 million to resolve the allegations in the Complaint.  As part of the settlement, Defendants also admitted, acknowledged, and accepted responsibility for conduct alleged in the Complaint, including that “Defendants’ practices resulted in the submission of several million dollars of inappropriate claims to Medicare.”

Manhattan U.S. Attorney Geoffrey S. Berman said: “Patients put great trust in hospitals, particularly when it comes to surgery.  Hospitals cannot pay surgeons for their referrals, and they cannot run their operating rooms like assembly lines.  Defendants prioritized maximizing their own revenues over regulatory compliance.  This Office will not tolerate such behavior, and today’s settlement makes clear that the Government will hold hospitals accountable when they engage in such misconduct.”

HHS-OIG Special Agent in Charge Scott J. Lampert said:  “Lenox Hill Hospital elected to increase their profits by paying handsomely for referrals without any regard to patient care – ultimately violating Medicare rules and regulations.  The Medicare program is designed to protect both beneficiaries and taxpayers.  We will continue working with our law enforcement partners to enforce these rules.”    

As alleged in the Complaint, from July 2013 through June 2018 (the “Covered Period”), Samadi oversaw Lenox Hill’s Department of Urology, including the training of its medical residents.  During Samadi’s tenure, Defendants encouraged and facilitated surgical practices that violated Medicare’s rules and regulations that govern a teaching physician’s presence and availability during both endoscopy and high-risk, complex surgery.  Although Medicare allows teaching institutions to utilize medical residents in the provision of surgical care, the law requires that a board certified senior surgeon provide adequate supervision.  Throughout the Covered Period, in order to maximize the revenues that Samadi generated for Lenox Hill, Defendants allowed Samadi to engage in an overlapping surgical practice wherein he was insufficiently available to provide the supervisory oversight required by Medicare.  Specifically, Defendants would schedule Samadi to perform two separate surgeries, one endoscopic and one robotic, at the exact same time.  During the course of the two surgeries, a medical resident would remain with the patient undergoing an endoscopic procedure or operation.  Meanwhile, Samadi himself would travel back and forth between the endoscopic room, and an adjacent operating room in which Samadi conducted high-risk, complex, surgeries utilizing a surgical robot.  This practice not only violated Medicare law, it also violated Northwell’s own resident supervision policy – and it resulted in Defendants’ submission of false claims.  Moreover, Samadi’s patients were never informed that their surgeries were scheduled to overlap with another of Samadi’s scheduled surgeries.

Samadi’s operating room practices also resulted in the submission of medically unnecessary claims.  In a further effort to maximize Samadi’s availability to perform revenue-generating surgeries, Defendants allowed Samadi to perform minor diagnostic procedures in a Lenox Hill operating room.  Operating room services, such as the services provided by operating room nurses and/or anesthesiologists, were medically unnecessary in the case of these minor procedures.  Nonetheless, in conjunction with the minor diagnostic procedures that Samadi’s patients underwent in a Lenox Hill operating room, Defendants submitted claims to Medicare for the medically unnecessary operating room services provided.  These unnecessary services were also ineligible for Medicare reimbursement.

Lastly, Defendants submitted claims for health services that violated the Stark Law.  The Stark Law is a federal law that prohibits a hospital from receiving Medicare reimbursement for services referred by a physician with whom the hospital has a prohibited financial relationship.  The law is intended to prevent conflicts of interest in physician referrals.  Throughout the Covered Period, Defendants paid Samadi a guaranteed salary of over two million dollars each year, as well as an annual incentive bonus of an additional two to five million dollars each year.  This compensation grossly exceeded fair market value because it factored in the value of Samadi’s referrals to Lenox Hill.  In addition, in calculating Samadi’s incentive bonus, Lenox Hill included revenues from services not personally performed by Samadi.  This inclusion of non-personally performed services in a physician’s incentive compensation also violated the Stark Law.  Given these facts, Samadi and Lenox Hill had a prohibited financial relationship under the Stark Law throughout the Covered Period.  Defendants therefore were not permitted to submit to Medicare reimbursement claims for the health services referred to them by Samadi.

As part of the settlement, Defendants admitted conduct alleged in the Complaint, including that:

• At the time of Samadi’s recruitment and hiring, Defendants prepared internal documents that contained analyses of Samadi’s future referrals to Lenox Hill for designated health services.  These documents projected revenues of over four million dollars a year attributable to Samadi’s future referrals.  These documents also projected that, without taking into account these revenues, Lenox Hill would operate Samadi’s medical practice at a loss of over one million dollars each year.

 

• Throughout the Covered Period, taking into account only the value of Samadi’s own collections, Lenox Hill operated Samadi’s medical practice at a loss of over one million dollars each year.

 

• From October 2016 through at least July 1, 2017, Northwell had an internal policy stating that “[w]hen a Teaching Physician is not present during non-Critical non-Key Portions of the procedure and is participating in another surgical procedure, he/she must arrange for another qualified surgeon to immediately assist the resident in the other case should the need arise.”  The policy further stated, under the section titled “Teaching Physician Requirements for Endoscopy,” that “[t]he Teaching Physician must be present in the room for the entire viewing from the time the scope is inserted to the time the scope is removed.”

 

• During much of the Covered Period, Samadi performed surgical operations and procedures at Lenox Hill in the following manner:
  • Samadi performed procedures in two operating rooms – OR 21 and OR 25, and sequenced the order of procedures such that portions of procedures performed in OR 21 overlapped with procedures performed in OR 25, and vice versa. 
  • During the portions of OR 21 and OR 25 procedures that overlapped, Samadi generally performed complex, robotic surgical procedures in OR 25, and residents assigned to be supervised by Samadi performed endoscopic operations and procedures in OR 21.
  • Samadi rarely designated another attending urologist to assist in OR 21 for the portions of the procedure from which Samadi himself was absent because of his participation in another surgical procedure occurring in OR 25.
  • In instances when Samadi stepped away from a procedure in OR 25 to supervise a procedure in OR 21, Samadi would freeze or pause the robotic equipment in OR 25 and leave the patient under the care of the anesthesiologist, operating room staff, and, in some instances, a urology resident.  No other attending urologist was present in OR 25 for the portion of time that Samadi was absent, even though the surgery had not yet concluded.  Samadi also did not inform any other attending urologist of the specific times during a surgery when he was absent from OR 25.
  • It was not Samadi’s personal practice to inform his patients when their surgeries were scheduled to overlap with another of Samadi’s scheduled surgeries.
     
• Samadi performed cystograms and cystoscopies on patients in OR 21 in certain instances when it was not medically necessary to perform these procedures in an operating room setting.  Lenox Hill submitted to Medicare claims for payment associated with the services rendered by operating room staff in conjunction with these procedures.

 

• Defendants’ practices resulted in the submission of several million dollars of inappropriate claims to Medicare.

 

Mr. Berman praised the outstanding investigative work of HHS-OIG.  This case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorneys Jessica Jean Hu and Arastu K. Chaudhury are in charge of the case.

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”), Anthony A. Scarpino Jr., the Westchester County District Attorney, Keith M. Corlett, Superintendent of the New York State Police (“NYSP”), and James P. O’Neill, Commissioner of the New York City Police Department (“NYPD”), announced the arrest today of 27 individuals – including five 911 operators and a uniformed police officer employed by the New York City Police Department (“the NYPD Defendants”) – in connection with a multimillion-dollar scheme to commit bribery and violate the Health Insurance Portability and Accountability Act (“HIPAA”) (the “No-Fault Scheme”).  Twenty-three of the 27 defendants were arrested this morning in New York and New Jersey and are scheduled to appear before U.S. Magistrate Gabriel Gorenstein in federal court later today.  Defendant LATIFAH ABDUL-KHALIQ will be presented today before a U.S. Magistrate Judge in North Carolina, and defendant KOURTNEI WILLIAMS will be presented today before a U.S. Magistrate Judge in Miami, Florida.  Defendant LEON BLUE, a/k/a “Boochie,” is in custody in New Jersey and will be presented in Manhattan at a later date.  Defendant TARA ROSE, a/k/a “Christine Waters,” a/k/a “Christine Hinds,” a/k/a “Taylor Hinds,” was also arrested this morning, and will be presented in Manhattan at a later date.  The case is assigned to U.S. District Judge Paul G. Gardephe.

As part of the scheme, the alleged ringleader, defendant ANTHONY ROSE, a/k/a “Todd Chambers,” and his co-conspirators bribed 911 operators, medical personnel, and police officers for the confidential information of tens of thousands of motor vehicle accident victims.  Using this information, ROSE and his co-conspirators contacted victims, lied to them, and steered them to clinics and lawyers handpicked by ROSE and his associates. These clinics and lawyers then paid ROSE kickbacks for these referrals, which ROSE distributed to co-conspirators as payments and bribes.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Anthony Rose and his associates masterminded a brazen scheme that involved bribing 911 operators, medical personnel, and police officers for the confidential information of tens of thousands of motor vehicle accident victims.  These actions have undermined the integrity of our emergency and medical first responders.  This Office is committed to rooting out corruption wherever it is found, and will not rest until those who seek to profit by corrupting our public institutions are bought to justice.” 

FBI Assistant Director William F. Sweeney Jr. said:  “The charges alleged in today’s indictment describe a scheme that blatantly violated HIPAA laws and actively targeted those the act was established to protect. May today’s arrests be a reminder to everyone that capitalizing on the pain and suffering of others won’t win you any favors in the court of law.”

Westchester District Attorney Anthony A. Scarpino Jr. said:  “This five-year-long collaborative investigation, initiated by my Office and the New York State Police, is significant as it has exposed the systematic flaws in the no-fault insurance laws and those who seek to abuse them.  My Office is committed to uncovering fraud and prosecuting those who profit by abuse.  The nature of this fraud and bribery results in higher insurance premiums and unnecessary medical costs which impacts us all.  Hopefully, this prosecution will act as a deterrent to those who seek to profit illegally by gaming the system.  I want to thank our law enforcement partners – U.S. Attorney Berman and the Southern District, the New York State Police, the National Insurance Crime Bureau, New York State Department of Financial Services and the F.B.I. – in rooting out this extensive corruption and bringing those responsible to justice.” 

State Police Superintendent Keith M. Corlett said:  “It is unconscionable for any entrusted public official to use their authority or position as a public servant to take advantage of others, especially in the manner alleged.  I commend our State Police members and all of our law enforcement partners for their outstanding investigative work on this case.  It sends a clear message that no one is above the law, and such alleged abuse of power, especially when it involves the manipulation of victims, will not be tolerated.”

NYPD Commissioner James P. O’Neill said: “Corruption, in all forms, is intolerable within the NYPD and we continue to work with our law enforcement partners to expose these sorts of schemes. Insurance fraud costs companies and policy holders millions upon millions of dollars a year and I want to thank the FBI, the U.S. Attorney’s Office in the Southern District of New York, the New York State Police, the National Insurance Crime Bureau, the NYC Department of Financial Services, the Westchester County D.A.’s office and our NYPD investigators who brought justice for victims in this case.”

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

Background of the Scheme

The charges in the Indictment result from a multi-year investigation of a widespread bribery, corruption, and kickback scheme relating to New York and New Jersey no fault automobile insurance.  Since 2017, the U.S. Attorney’s Office for the Southern District of New York, the FBI, and the Westchester County District Attorney’s Office have been investigating a criminal enterprise that utilizes the New York and New Jersey no-fault automobile insurance regime to earn millions of dollars in illegal profits.

New York and New Jersey no-fault insurance laws require a driver’s automobile insurance company to pay automobile insurance claims automatically for certain types of motor vehicle accidents, provided the claim is legitimate, and is below a particular injury or damages threshold.  Pursuant to these requirements, insurance companies will often pay medical service providers directly for the treatment they provide to automobile accident victims, without the need to bill the victims themselves.  This process resolves automobile claims without apportioning blame or fault for the accident, thereby avoiding protracted disputes, and the costs associated with an extended investigation of the accident.  ANTHONY ROSE, a/k/a “Todd Chambers,” and his associates, exploited these procedures by bribing individuals with access to confidential information about motor vehicle accident victims, using this information to contact victims under false pretenses, and steering these victims to seek treatment at medical clinics and legal representation from lawyers who were willing to pay kickbacks for the referrals.   

Since at least in or about 2014, ROSE and his co-conspirators have bribed as many as 50 people, whom they called “lead sources” who, at the time they accepted the bribes, were working for federally funded hospitals (the “Hospital Defendants”), the NYPD (the “NYPD Defendants”), and other entities.  ROSE paid these lead sources as much as $4,000 per month, and continuously worked to identify new lead sources, largely through word of mouth, and through the extensive corrupt network he established.  Lead sources were paid in cash and “off the books.” In return, these lead sources unlawfully disclosed protected, confidential information to ROSE and his co-conspirators including victims’ names, contact information, and medical information.

After receiving the confidential victim information from the lead sources, ROSE and his associates provided the information to co-conspirators working at Rose’s Call Center (the “Call Center Defendants”) located in Brooklyn, New York.  The Call Center was staffed with 10 to 15 “employees,” who contacted the accident victims on a daily basis and steered them to seek medical treatment at clinics and law firms handpicked by ROSE.  The Call Center Defendants followed a pre-established “script” during these communications.  Among other things, the Call Center Defendants falsely told accident victims that they were calling from an organization affiliated with the New York Department of Transportation, and that their organization had obtained the victims’ contact information through a so-called Personal Injury Hotline. The Call Center Defendants also brazenly lied that they were calling to protect victims from people who obtain victims’ information illegally and mislead victims into seeking treatment with certain providers.  In actuality, the true perpetrators of these illegal acts were none other than ROSE and his co-conspirators.

In selecting which motor vehicle accident victims to call, ROSE instructed the Call Center Conspirators to target victims from low-income neighborhoods because, in ROSE’s view, these individuals could be more easily brought into the scheme. 

Scope and Participants In the Scheme

From at least in or about 2014 to the present, ROSE and his co-conspirators illegally steered more than 6,000 motor vehicle accident victims to participating clinics and lawyers, who paid kickbacks in return for the referrals.  In addition, this figure is a fraction of the number of actual accident victims whose confidential information was unlawfully disclosed as part of the No-Fault Scheme.  The Call Center Conspirators successfully induced approximately 1 in 10 accident victims to seek treatment or representation from participating clinics and lawyers. Thus, the No-Fault Scheme resulted in the improper disclosure of the confidential information of at least 60,000 motor vehicle accident victims. ROSE and co-conspirators further earned, on average, approximately $3,000 per successful referral.

ROSE and the co-conspirators went to elaborate lengths to conceal the No-Fault Scheme from law enforcement.  Among other deceptive tactics, the co-conspirators generally referred to one another only by aliases;  used “burner” phones with temporary and unidentifiable phone numbers, switched their phone every 60 days; set up numerous fictitious companies; corresponded through encrypted mobile applications; and utilized concealed spreadsheets, which tracked the bribe payments to lead sources, in secret email accounts that co-conspirators could access remotely.  The members of the conspiracy also assigned unique code names to each lead source, such as “J1,” “P2,” and “G6,” and used these code names to refer to lead sources during communications rather than using their true names. 

The Indictment, unsealed today, charges ROSE and the Hospital Defendants with conspiracy to violate the Travel Act, unlawful disclosure of protected health care information, and bribery.  Six other leaders of the conspiracy, including members of ROSE’s family, and the five Call Center Defendants were charged with conspiracy to violate the Travel Act.  In addition, the six NYPD Defendants were charged with conspiracy to violate the Travel Act and bribery.  The names of the defendants, the charges against them, and other information is set forth below.  

*                *                *

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

Mr. Berman praised the work of the FBI, the New York State Police, the New York City Police Department, the New York City Department of Financial Services, the Westchester County District Attorney’s Office, and the National Insurance Crime Bureau.  Mr. Berman noted that the investigation is ongoing.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit, and the White Plains Division.  Assistant United States Attorneys Mathew Andrews, Louis A. Pellegrino, Celia Cohen, and Courtney Heavey are in charge of the prosecution.

 

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

 

Defendant

Age

Hometown

Charges (Potential Maximum Term of Imprisonment)

ANTHONY ROSE,

a/k/a “Todd Chambers” 

51

Jamaica, New York

 

 

Travel Act conspiracy, Wrongful disclosure of healthcare information, federal programs bribery.

(25 years)

 

 

 

JELANI WRAY,

a/k/a “Lani”

a/k/a “J.R.” 

35

Brooklyn, New York

 

 

Travel Act Conspiracy.

(5 years)

 

 

NATHANIEL COLES,

a/k/a “Nat”

 

66

Cortlandt Manor, New York

 

 

Travel Act conspiracy, Wrongful disclosure of healthcare information, federal programs bribery.

(25 years)

 

 

TARA ROSE,

a/k/a “Christine Waters,”     

a/k/a “Christine Hinds,”     

a/k/a “Taylor Hinds”

48

Jamaica, New York

Travel Act Conspiracy.

(5 years)

 

ANTHONY ROSE, Jr.,

a/k/a “Sean Wells”

32

Cambria Heights, New York

 

 

Travel Act conspiracy, federal programs bribery.

(15 years)

 

 

CHRISTINA GARCIA,

a/k/a “Cindy”

35

Jersey City, New Jersey

 

 

Travel Act Conspiracy.

(5 years)

 

 

LUIS VILELLA,

a/k/a “Angel Martinez”

32

Bronx, New York

 

 

Travel Act Conspiracy.

(5 years)

 

 

LEON BLUE,

a/k/a “Boochie”

54

Brooklyn, New York

 

 

Travel Act conspiracy, Wrongful disclosure of healthcare information, federal programs bribery.

(25 years)

 

 

CLARENCE FACEY,

a/k/a “Face”

34

Brooklyn, New York

 

 

Travel Act Conspiracy.

(5 years)

 

 

 

ANA RIVERA,

a/k/a “Melissa Ramos”

  

41

Woodhaven, New York

 

 

Travel Act Conspiracy.

(5 years)

 

 

 

DEJAHNEA BROWN,

a/k/a “Michelle Williams”

 

29

Saint Albans, New York

 

 

Travel Act Conspiracy.

(5 years)

 

 

 

TONYA THOMAS,

a/k/a “Karen Schwartz”

 

48

Brooklyn, New York

 

 

Travel Act Conspiracy.

(5 years)

 

 

 

ANGELA MELECIO,

a/k/a “Angie,”

a/k/a “P5”

 

40

Amityville, New York

 

 

Travel Act conspiracy, Wrongful disclosure of healthcare information, federal programs bribery.

(25 years)

 

 

 

STEPHANIE PASCAL,

a/k/a “Steph,”

a/k/a “P2”

 

47

Brooklyn, New York

 

 

Travel Act conspiracy, Wrongful disclosure of healthcare information, federal programs bribery.

(25 years)

 

 

MAKEBA SIMMONS

 

29

Bridgeport, Connecticut

 

 

Travel Act conspiracy, Wrongful disclosure of healthcare information, federal programs bribery.

(25 years)

 

 

 

EDWARD ABAYEV,

a/k/a “Eddie”

 

51

Staten Island, New York

 

 

Travel Act conspiracy, Wrongful disclosure of healthcare information, federal programs bribery.

(25 years)

 

 

 

GRACIELA BORRERO,

a/k/a “Grace,”

a/k/a “P8”

 

42

 

Brooklyn, New York

 

 

Travel Act conspiracy, Wrongful disclosure of healthcare information, federal programs bribery.

(25 years)

 

 

 

BARRINGTON REID,

a/k/a “P9”

 

60

Bronx, New York

 

 

Travel Act conspiracy, Wrongful disclosure of healthcare information, federal programs bribery.

(25 years)

 

 

 

TONJA LEWIS,

a/k/a “J1”

 

53

Belleville, New Jersey

 

 

Travel Act conspiracy, Wrongful disclosure of healthcare information, federal programs bribery.

(25 years)

 

 

 

RAYMOND PARKER,

a/k/a “Andre”

a/k/a “J2”

 

41

Newark, New Jersey

 

 

Travel Act conspiracy, Wrongful disclosure of healthcare information, federal programs bribery.

(25 years)

 

BERLISA BRYAN,

a/k/a “Lisa”

 

53

Edison, New Jersey

 

 

Travel Act conspiracy, Wrongful disclosure of healthcare information, federal programs bribery.

(25 years)

 

ANGELA MYERS,

a/k/a “Angie”

 

37

Brooklyn, New York

 

 

Travel Act conspiracy, federal programs bribery.

(15 years)

 

 

 

LATIFAH ABDUL-KHALIQ

 

47

Raleigh,  North Carolina

 

 

Travel Act conspiracy, federal programs bribery.

(15 years)

 

 

 

SHAKEEMA FOSTER

 

27

Brooklyn, New York

 

 

Travel Act conspiracy, federal programs bribery.

(15 years)

 

 

 

KOURTNEI WILLIAMS

 

33

Brooklyn, New York

 

 

Travel Act conspiracy, federal programs bribery.

(15 years)

 

 

 

 

MAKKAH SHABAZZ, a/k/a “Mecca”

 

43

Long Island City, New York

 

 

Travel Act conspiracy, federal programs bribery.

(15 years)

 

 

 

YANIRIS DELEON, a/k/a “Jen”

           

29

New York, New York

 

 

Travel Act conspiracy, federal programs bribery.

(15 years)

 

 

 

 

 

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”), and 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 the Inspector General (“HHS-OIG”), announced today that the United States has settled a civil healthcare fraud lawsuit against LIFE SPINE INC. (“LIFE SPINE”), MICHAEL BUTLER (“BUTLER”), the founder, president, and chief executive officer of LIFE SPINE, and RICHARD GREIBER (“GREIBER”), the vice president of business development of LIFE SPINE, alleging that LIFE SPINE paid kickbacks in the form of millions of dollars of consulting fees, royalties, and intellectual property acquisition fees to surgeons to induce them to use LIFE SPINE’s spinal implants, devices, and equipment.  The surgeons who received these kickbacks accounted for approximately half of Life Spine’s domestic sales of spinal products from 2012 through 2018.  In the settlement, LIFE SPINE agreed to pay $5.5 million, BUTLER agreed to pay $375,000, and GREIBER agreed to pay $115,000.  Each defendant also made admissions and acknowledged and accepted responsibility for conduct alleged in the Government’s complaint as described further below.  The amounts paid by LIFE SPINE and GREIBER under the settlement are based on the Office’s assessment of their ability to pay based on the financial information they provided.

The settlement was approved by U.S. District Judge Jed S. Rakoff.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “The settlement reflects this Office’s commitment to stopping companies like Life Spine, and the individuals who run them, from engaging in unlawful kickback schemes.  Such conduct seriously undermines the public’s confidence in medical treatment decisions made by doctors whose judgment may be compromised by illegal kickbacks.  This Office will continue vigorously to pursue companies and individuals who pay health care providers to induce them to use their products or services.”

HHS-OIG Special Agent in Charge Scott J. Lampert said:  “Medical treatment should be based on the patient’s best interest and not on illegal kickbacks.  We will continue working with our law enforcement partners to protect patients and taxpayers from individuals who place profits before the needs of patients.”   

According to the Complaint filed in Manhattan federal court: 

LIFE SPINE is a Delaware corporation with its principal place of business in Huntley, Illinois.  LIFE SPINE designs, develops, manufactures, and markets medical devices and equipment primarily used in spinal surgeries performed by orthopedic surgeons and neurosurgeons, including implants and instruments (“Life Spine Products”). 

LIFE SPINE paid surgeons to induce them to use Life Spine Products during their surgeries.  LIFE SPINE aggressively recruited surgeons who had the potential to use a high volume of Life Spine Products to enter into agreements to serve as paid consultants and/or to transfer their patents and patent applications to LIFE SPINE in exchange for payments and promised support from LIFE SPINE to bring the surgeons’ new products to market.  These agreements took different forms, including agreements under which the surgeons were purportedly paid to provide training and/or educational services; agreements under which the surgeons were purportedly paid to provide input on new products and then would receive royalties on future sales of the product; and agreements under which the surgeons were paid large up-front acquisition fees for their patents/patent applications and then would receive royalties on the sales of any products developed based on the patents.  LIFE SPINE tied these agreements and the associated payments – as well as the company’s continued commitment to devote resources to the surgeons’ product development projects – to the surgeons’ usage of Life Spine Products.  

The kickback scheme was successful and these surgeons used Life Spine Products during procedures performed on Medicare and Medicaid patients, which resulted in the submission of kickback-tainted false claims to Medicare and Medicaid.

As part of the settlement, LIFE SPINE admits, acknowledges, and accepts responsibility for the following conduct: 

• Between 2012 and 2018 (the “relevant period”), LIFE SPINE entered into agreements with dozens of surgeons and paid these surgeons, and entities owned in whole or in part by the surgeons, millions in consulting fees, royalties, and intellectual property (“IP”) acquisition payments.  Most of the surgeons who received these payments substantially increased their usage of Life Spine Products after entering into agreements with LIFE SPINE.
• Many of the surgeons who received consulting fees, royalties, and IP acquisition payments were high-volume users of Life Spine Products.  Approximately 21 of the top 30 users of Life Spine Products during the relevant period received consulting fees, royalties, and/or IP acquisition payments.  In addition, approximately half of LIFE SPINE’s domestic sales of spinal products during the relevant period were attributable to surgeries performed by surgeons who received consulting fees, royalties, and IP acquisition payments from LIFE SPINE. 
• During the relevant period, LIFE SPINE generated reports for management that reflected both the payments made to surgeons and the surgeons’ usage of Life Spine Products during a given time period.  On one occasion a report included an “ROI” column that calculated LIFE SPINE’s return on investment by dividing the sales revenue associated with each surgeon’s usage of Life Spine Products by the total amount paid to that surgeon in consulting fees and royalties during the same period.  When surgeons’ usage decreased, senior sales managers would contact the surgeons, or their distributors, to urge the surgeons to use Life Spine Products more frequently.

BUTLER admits, acknowledges, and accepts responsibility for the following conduct: 

• BUTLER was involved in identifying and retaining some of the surgeons who served as paid consultants for LIFE SPINE.  He reviewed many of the patents that LIFE SPINE considered purchasing from surgeons and was involved in some of the negotiation of the terms of the IP purchase agreements, in some instances including the initial acquisition fee and royalty rates. 
• On multiple occasions, BUTLER received reports that reflected both the payments made to surgeons and the surgeons’ usage of Life Spine Products during a given time period.   When surgeons’ usage of Life Spine Products decreased, on occasion, BUTLER would contact the surgeons, or their distributors, to encourage them to increase their usage of Life Spine Products.

GREIBER admits, acknowledges, and accepts responsibility for the following conduct:

• GREIBER was one of the LIFE SPINE managers responsible for reviewing the qualifications of, selecting, and approving surgeons who served as paid consultants for LIFE SPINE. 
• LIFE SPINE entered into an IP purchase agreement under which LIFE SPINE licensed a patent for a static compression plate owned by a company associated with a surgeon who wanted to develop the product and bring it to market.  GREIBER was one of the two LIFE SPINE managers who signed the agreement on behalf of LIFE SPINE.  LIFE SPINE spent hundreds of thousands of dollars to attempt to develop and bring the compression plate to market but encountered a number of setbacks.  The surgeon accounted for over $3.7 million in Life Spine Product sales from 2012 through 2016. 
• In 2016, GREIBER participated in two discussions with the surgeon during which LIFE SPINE’s continued funding of the project and the surgeon’s recent decreased usage of Life Spine Products were discussed.  During the calls, while discussing the funding of the compression plate, GREIBER suggested that the surgeon should increase his usage of Life Spine Products.  On one call, GREIBER asked the surgeon to consider using Life Spine “more vigorously” than he recently had been.  Later in the discussion, the surgeon suggested that the company and he “renew our vows to each other.” 

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 the FBI and HHS-OIG for their assistance with the case.

The case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorneys Jennifer Jude, Jeffrey K. Powell, Lara K. Eshkenazi, and Rachael Doud are in charge of the case.

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 that ANTONIO DIMARCO pled guilty in Manhattan federal court today to 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 guilty plea.

U.S. Attorney Geoffrey S. Berman said:  “As he admitted in court today, Antonio DiMarco was a serial swindler, using stolen identities to access auctions, place winning bids on multimillion-dollar artworks, and defraud lenders and insurers into believing that he owned artworks he never actually acquired.  Now the self-portrait DiMarco painted has been revealed to be a sham.”

FBI Assistant Director William F. Sweeney Jr. said:  “Allegedly preying on an elderly woman, stealing her identity and using her financial information to commit a crime is simply despicable behavior.  Mr. DiMarco is accused of trying to get money based on the value of artwork he didn’t own, and in his attempts he is alleged to have caused the victims in this investigation millions of dollars in losses.  Whether it’s a scheme to steal a few dollars, or millions in precious works of art, criminals deserve to face justice and pay for their 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 multitude 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 $7,000,000.  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 $6,500,000 for the Rothko work, and $1,155,000 for the Reinhardt work.  However, because DIMARCO in fact lacked funds to pay for the art, the auction house suffered a loss of close to $1,400,000.

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 $150,000,000.  Among other works, DIMARCO entered into a contract for a $16,500,000 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 provided strings of false excuses for non-payment.  This 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. DIMARCO created 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.

Through his plea today, DIMARCO further acknowledged 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.    

*              *             *

DIMARCO, 43, of Florida, was arrested on December 6, 2018, by law enforcement authorities in Florida, and subsequently transferred to federal custody.  DIMARCO pled guilty to one count of conspiring to commit wire fraud, which carries a maximum sentence of 20 years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

DIMARCO is scheduled to be sentenced by Judge Caproni on February 7, 2020.

Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation. 

These cases are being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant United States Attorneys Noah Falk, 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, Peter C. Fitzhugh, the Special Agent-in-Charge of the New York Field Office of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, and Philip R. Bartlett, Inspector-in-Charge of the New York Field Division of the United States Postal Inspection Service (“USPIS”), announced today the unsealing of an Indictment in Manhattan federal court charging RULESS PIERRE with securities fraud, wire fraud, and structuring charges.  The Indictment alleges that PIERRE engaged in two separate fraud schemes.  In the first scheme, PIERRE, as the owner of his own consulting firm, R. Pierre Consulting Group LLC (“RPCG”), solicited money from investors by falsely promising them that he would earn a 20% return on their initial investment every 60 days through stock trading.  In truth and in fact, PIERRE lost most of the money he traded on behalf of his investors, while falsely reporting to investors that their funds were growing as promised.  Also contrary to his representations, PIERRE secretly used investor funds to purchase luxury vehicles and even a fast food franchise for himself.  He also used funds from new investors to make payments to other investors to avoid his scheme being detected.  Through his lies, PIERRE obtained over $2 million from over 100 investors.  In the second scheme, PIERRE defrauded his former employers, two hotels, by regularly embezzling funds out of bank accounts belonging to those hotels and then depositing those funds through structured transactions, into bank accounts PIERRE controlled.  In total, PIERRE stole over $400,000 from the hotels.  PIERRE was arrested yesterday in Nanuet, New York, and will be presented this afternoon before Chief Magistrate Judge Gabriel W. Gorenstein in Manhattan federal court. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, Ruless Pierre engaged in two separate schemes.  In one scheme, Pierre allegedly promised an improbable 20% return on investors’ money, every 60 days, through stock trading.  In reality, Pierre’s stock trading consistently generated losses for investors, and Pierre secretly used investors’ funds for his own personal use, including the purchase of luxury cars and even a fast food franchise.  In another scheme, Pierre simply stole money from his former employers, brazenly moving money from their bank accounts to his personal bank accounts.  Thanks to the outstanding efforts of our law enforcement partners, Pierre’s schemes have come to an end, and he now faces serious time in federal prison.” 

Special Agent-in-Charge Fitzhugh said:  “It is alleged Pierre perpetrated a securities fraud and embezzlement scheme that swindled investors out of millions of dollars and misappropriated even more from his employers’ business.  He then flashed his illicit gains by buying high-end luxury vehicles and his own fast food franchise.  Pierre’s deceptive business practices left more than a hundred victims in its wake, but HSI and its law enforcement partners have put an end to his criminal acts, leaving him to face the consequences for his actions.”

Inspector-in-Charge Bartlett said:  “Mr. Pierre used his ties to the Haitian community, his trusted reputation in that community, and convincing pitch to target and cheat hundreds of victims in an illegal Investment Ponzi scheme. Postal Inspectors remind consumers if an investment promises unusually high returns, it’s likely bogus. Don’t let greed override common sense.”

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

The Investment Fraud Scheme

From at least November 2016 through October 2019, PIERRE solicited money from investors of RPCG by falsely promising them that he would earn a 20% return on their initial investment every 60 days through stock trading.  The investments were memorialized in documents known as “Investment Promissory Notes.”  These investment contracts generally promised that the investor would be paid 20% interest every 60 days and that the investor could withdraw all funds from the investment with 30 days’ notice.  Based on these documents and the false representations of PIERRE, the investors understood that their principal and interest were guaranteed.   

During the course of the investment fraud scheme, PIERRE fraudulently obtained at least $2,049,230 from over 100 investors.  After receiving money from investors, PIERRE deposited the money into one of his personal bank accounts or bank accounts of RPCG.  PIERRE then transferred the money to trading accounts, where he engaged in unprofitable day trading.  From November 2016 through February 2019, PIERRE’s day trading generated approximately $1.4 million in losses.  Despite these losses, PIERRE repeatedly and falsely represented to investors, including in investment statements containing fictitious balances, that the trading was profitable and that their investments were growing as promised.  In addition to simply losing their money, PIERRE also used investors’ funds to purchase luxury vehicles and a fast food franchise for himself.  Additionally, PIERRE further concealed the truth from investors by using money obtained from new investors to make redemption payments to previous investors, in Ponzi-like fashion.

The Embezzlement Fraud Scheme

In the second scheme alleged in the Indictment, PIERRE is charged with embezzling money from his former employers.  From approximately 2007 until February 2016, PIERRE was the director of finance for two different hotels, which were owned by the same company (“Company-1”).  One hotel was located in the Palisades, New York (“Hotel-1”), while the other was located in Armonk, New York (“Hotel-2”) (collectively, “the Hotels”).  As the director of finance, PIERRE was the signatory on several bank accounts held in the name of the management company that managed the Hotels (“Management Company-1”). 

In February 2016, Company-1 sold Hotel-1, and the management of Hotel-1 was transferred from Management Company-1 to another management company (“Management Company-2”).  Subsequently, Management Company-2 opened new bank accounts to operate Hotel-1 (the “New Operating Accounts”).  However, the Legacy Operating Accounts for Hotel-1 remained open until in or about 2019.  PIERRE took advantage of the existence of the Legacy Operating Accounts, and his position as director of finance for Hotel-1, by regularly writing checks payable to “cash” or “petty cash” from one of Hotel-1’s Legacy Operating Accounts.  PIERRE generally wrote the checks for under $10,000 in order to avoid triggering the filing of currency transaction reports for transactions in excess of $10,000.  PIERRE continued to work for Hotel-1 as the director of finance from February 2016 through August 2018.

In 2017, the management of Hotel-2 was transferred from Management Company-1 to Management Company-2.  PIERRE stopped working for Hotel-2 in February 2016, before it changed management.  Nevertheless, after PIERRE’s employment with Hotel-2 ended, he regularly transferred money from the Legacy Operating Accounts of Hotel-2 to the Legacy Operating Accounts of Hotel-1.  PIERRE then wrote himself checks payable to cash from those funds.    

PIERRE continued using the Legacy Operating Accounts for Hotel-1 and Hotel-2 even after his employment with Management Company-2 terminated in or about August 2018, thus ending his association with either Hotel.  For example, from August 2018 through March 2019, PIERRE wrote approximately 94 checks to “cash” or “petty cash” from one of the Legacy Operating Accounts for Hotel-1, for a total of approximately $403,890.  The memo lines for the checks falsely stated that the checks were “reimbursements” connected to Hotel-1.

In addition, from March 2017 through 2019, PIERRE deposited large amounts of cash into his personal bank accounts in amounts that were generally less than $10,000.  The deposits were conducted at various bank locations and typically took place on the same day, consecutive days, or within a short period of time.  For example, in just seven months, from June 2018 through December 2018, PIERRE deposited approximately $225,612, through 138 cash deposits all under $10,000, into a bank account in the name of RPCG.

PIERRE, 50, of Nanuet, New York, is charged with one count of securities fraud, which carries a maximum sentence of 20 years in prison, one count of wire fraud, which carries a maximum sentence of 20 years in prison, and one count of structuring, 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.

Anyone with information about the crimes charged in the Indictment should call the United States Attorney’s Office at 866-874-8900.

*                      *                      *

Mr. Berman praised the investigative work of Homeland Security Investigations.  Mr. Berman also thanked the United States Postal Inspection Service, the United States Internal Revenue Service, the New York City Police Department, and the New York City Sherriff’s Office, which assisted in the investigation.  Mr. Berman also thanked the Securities and Exchange Commission, which has brought and filed a civil enforcement action against the defendant. 

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Jordan Estes and Robert L. Boone 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.

 

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

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 Field Office of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), today announced charges against ASA SAINT CLAIR for his participation in an investment scheme tied to a purported digital coin offering called IGOBIT.  SAINT CLAIR allegedly participated in a scheme to defraud victims into providing loans tied to the launch of IGOBIT by World Sports Alliance, a purported intergovernmental organization focused on promoting international development through sports, and falsely promised investors guaranteed returns and an ownership interest in IGOBIT.

The case has been assigned to U.S. District Judge P. Kevin Castel.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, Asa Saint Clair used World Sports Alliance, a sham affiliate of the United Nations, as a vehicle to defraud lenders.  Saint Clair allegedly defrauded investors in IGOBIT, a digital currency he claimed WSA was developing, but which turned out to be the fraudulent bait with which to lure victim investors.  What’s real is the felony charge Saint Clair now faces.”

Special Agent-in-Charge Fitzhugh said:  “Saint Claire allegedly touted his company as promoting the values of sports and peace for a better world, yet defrauded all those who invested in his sham company.  As alleged, Saint Claire used the money he earned through deceit to fund a lavish lifestyle for him and his family.  Through the HSI New York El Dorado Task Force and its strong partnerships, Saint Claire will face time for his actions, and it won’t be in the luxury or comfort he has grown accustomed to.”

According to the allegations in the Indictment unsealed late yesterday in Manhattan federal court[1] and the previously filed Complaint:

From 2017 through September 2019, SAINT CLAIR solicited investors for the launch of IGOBIT through promised investment returns and representations about World Sports Alliance’s development projects around the world.  World Sports Alliance did not in fact participate in any international development projects and SAINT CLAIR did not dedicate investor funds to IGOBIT.  Instead, SAINT CLAIR diverted those funds to other entities controlled by him and members of his family, as well as to pay his personal expenses, including dinners at Manhattan restaurants, airline tickets, and online shopping.

*                      *                     *

SAINT CLAIR, 47, of New York, New York, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Berman praised the outstanding work of HSI on this investigation.

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

 

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[1] As the introductory phrase signifies, the entirety of the text of the Indictment, and the description of the Indictment set forth 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 HUGH BRIAN HANEY pled guilty in Manhattan federal court today to money laundering charges, based on his attempt to launder the proceeds of a narcotics trafficking operation that HANEY ran on the Dark Web site known as “Silk Road.”  U.S. District Judge Jed S. Rakoff presided over the defendant’s guilty plea.

U.S. Attorney Geoffrey S. Berman said:  “Hugh Haney used Silk Road as a means to sell drugs to people all over the world.  Then he laundered more than $19 million in profits through cryptocurrency.  Peddling drugs on the Dark Web does not provide anonymity forever, as Hugh Haney can attest.”

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

Silk Road was an online criminal marketplace designed to be outside the reach of law enforcement or governmental regulation.  All transactions on Silk Road could be completed only through use of the cryptocurrency Bitcoin.  During its two-and-a-half years in operation, Silk Road was used by several thousand drug dealers and other unlawful vendors to distribute hundreds of kilograms of illegal drugs and other illicit goods and services to well over 100,000 buyers, and to launder hundreds of millions of dollars deriving from these unlawful transactions.  Law enforcement shut down Silk Road in or about October 2013. 

One prominent narcotics vendor on Silk Road was called “Pharmville.”  The operators of Pharmville supplied a dedicated community of individuals who often traded illicit narcotics.  Pursuant to a judicially authorized warrant of HANEY’s house in Ohio in 2018, law enforcement agents found evidence that HANEY was a high-ranking member of Pharmville, involved in large-scale narcotics trafficking on Silk Road.  Among the documents found on a computer in HANEY’s house was a document entitled “HBH DAILY TO DO LIST,” which, among other things, referred to Silk Road, Pharmville, and large-scale narcotics trafficking, including of the deadly opioid fentanyl.

In 2017 and 2018, HANEY transferred Bitcoins representing narcotics proceeds that he had earned through his control of Pharmville from Bitcoin addresses connected to Silk Road to an account HANEY controlled at a company involved in the exchange of Bitcoins and other digital currency (“Company-1”).  In correspondence with Company-1, HANEY falsely claimed that he had legitimately earned these Bitcoins through cryptographically creating them and from fair transfers with others, while in reality the Bitcoin were derived from transfers from Silk Road.  After HANEY transferred the Bitcoins to cash worth more than $19 million through Company-1, law enforcement seized the money pursuant to a judicially authorized seizure warrant from a custodial account at a bank (“Bank-1”).

*              *             *

HANEY, 61, of Ohio, was arrested July 18, 2019, and has been in federal custody since.  HANEY pled guilty to one count of concealment money laundering, which carries a maximum sentence of 20 years in prison, and one count of engaging in a financial transaction in criminally derived property, which carries a maximum sentence 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.

HANEY is scheduled to be sentenced by Judge Rakoff on is February 12, 2020.

Mr. Berman praised the outstanding investigative work of the Department of Homeland Security, Homeland Security Investigations. 

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 Samuel L. Raymond are in charge of the prosecutions.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that SHAHBAZ KHAN (“KHAN”) was sentenced to 15 years for conspiring and attempting to import massive quantities of heroin into the United States.  KHAN was taken into custody by Liberian authorities on December 1, 2016, and expelled to the United States later that day, based on a pending Complaint in this District.  He previously pled guilty before U.S. District Judge Lorna G. Schofield, who imposed today’s sentence.    

U.S. Attorney Geoffrey S. Berman stated:  “Shahbaz Khan was an international drug kingpin who distributed staggering quantities of narcotics from southwest Asia to countries throughout the world.  In 2016, he agreed to transport tens of thousands of kilograms of heroin to New York City.  Today’s sentence shows that we will continue to seek justice against those who flood our communities with heroin and other deadly, highly addictive drugs that fuel the opioid epidemic plaguing this city.”

According to the Complaint, the Superseding Indictment, and other filings in this case:

KHAN, a Pakistani national, was the leader of a drug trafficking organization (the “DTO”) based in Afghanistan and Pakistan that produced and distributed massive quantities of narcotics around the world.  In 2007, KHAN was designated a Narcotics Kingpin under the Foreign Narcotics Kingpin Designation Act by then-President George W. Bush.  In total, KHAN and the DTO distributed hundreds of tons of drugs. 

Between approximately August and December 2016, KHAN conspired to send tens of thousands of kilograms of heroin hidden in maritime shipping containers and air cargo shipments to New York City.  KHAN spent weeks negotiating the shipments with individuals he understood to be customers of the DTO, who were in fact confidential sources (the “CSes”) working for the Drug Enforcement Administration (the “DEA”).  The CSes told KHAN that they worked with a New York City-based drug trafficker – who, unbeknownst to KHAN, was a DEA undercover agent (“UC-1”) – and that UC-1 was looking for a new source of supply for large quantities of heroin.  In August 2016, the CSes told KHAN that UC-1 was interested in purchasing up to 300 kilograms of heroin per week from KHAN and the DTO.  KHAN bragged to the CSes about his decades-long experience in international drug trafficking, including that he had once transported 114 tons of drugs in a single year, including 64 tons of hashish. 

Within weeks of first meeting the CSes, KHAN traveled to the Maldives to meet with UC-1 and the CSes.  During the course of these meetings, KHAN explained the various ways that he could transport heroin to UC-1.  KHAN suggested, for example, that he could ship heroin from Pakistan to a transshipment point in Africa, where UC-1 would receive the heroin and have it shipped to the United States.  KHAN further explained that he could ship narcotics “wherever” UC-1 wanted, and emphasized that “if you tell me America, I will send it to America.”

In October 2016, KHAN provided a five-kilogram sample of high-quality heroin to the CSes in Kabul, Afghanistan.  Within weeks of providing the sample, KHAN traveled to Liberia to meet with UC-1 and to examine a supposed warehouse that could serve as a transshipment point for their future heroin deals.  While in transit to Liberia, KHAN explained to UC-1 that he could ship up to 10,000 kilograms at a time, and that it was just as easy for him to ship 10,000 kilograms as it was to ship 1,000 kilograms.  Once KHAN landed in Liberia, he was arrested and expelled to the United States.   

*                *                *

In addition to the prison term, KHAN, 71, was sentenced to five years of supervised release.

Mr. Berman praised the outstanding investigative efforts of the DEA’s Special Operations Division’s Bilateral Investigations Unit; the DEA Accra, Canberra, Sydney, Dubai, Islamabad, Kabul, Nairobi, and New Delhi Country Offices; the DEA New York Organized Crime Drug Enforcement Task Force Financial Investigative Team; the Government of Liberia; the Liberian Drug Enforcement Agency; the DEA Nairobi Country Office Kenyan Vetted Unit; the Australian Criminal Intelligence Commission; and the Maldives Police Service. 

The case is being prosecuted by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Shawn G. Crowley, Rebekah Donaleski, and Jason A. Richman are in charge of the prosecution.

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 Field Office of Homeland Security Investigations (“HSI”), Raymond Donovan, the Special Agent in Charge of the New York Division of the U.S. Drug Enforcement Administration (“DEA”), and James P. O’Neill, Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of an indictment charging JOSE RODRIGUEZ, a/k/a “Hov,” a/k/a “Hov Goon,” with murder in aid of racketeering, conspiracy to commit murder in aid of racketeering, and firearms offenses in connection with the murder of Daquan Cooper on June 25, 2015, in the Bronx.  RODRIGUEZ was already in federal custody serving a sentence for other charges. RODRIGUEZ will be presented later today before U.S. Magistrate Judge Gabriel W. Gorenstein.  The case is assigned to U.S. District Judge Alvin K. Hellerstein.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged in the indictment, Jose Rodriguez and others were responsible for the cold-blooded murder of Daquan Cooper in the Parkchester neighborhood of the Bronx in 2015.  We commend the extraordinary efforts of our law enforcement partners to bring this defendant to justice.”           

HSI Special Agent in Charge Peter C. Fitzhugh said:  “Rodriguez allegedly ran with a gang whose calling card was violence and drug trafficking, and he is now charged with murder in aid of racketeering for his involvement in a 2015 homicide.  As alleged, he may have thought he was in the clear four years later, but strong law enforcement partnerships ensure that no one will get away with murder.  You commit a crime, you will be arrested and you will be prosecuted.”

DEA Special Agent in Charge Raymond Donovan said:  “Too often we see murder as a byproduct of gang violence and drug trafficking.  This investigation is a result of combined law enforcement efforts to thwart violent crime and bring answers to victims’ families.” 

NYPD Commissioner James P. O’Neill said:  “Our obligation is not just to ensure that New Yorkers in every neighborhood are safe, but that they feel safe.  To that end, our work identifying and dismantling gangs and crews, and preventing the violence so often associated with their activities, continues to be of paramount importance.  I thank our NYPD investigators, and our law enforcement partners in the U.S. Attorney’s Office for the Southern District, HSI, and the DEA, for their dedication and vital work in this case.”

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

RODRIGUEZ was a member or associate of a racketeering enterprise known as the Beach Avenue Crew, a criminal organization whose members and associates engaged in, among other things, murder, attempted murder, and narcotics trafficking. 

On June 25, 2015, RODRIGUEZ and others murdered Daquan Cooper in the vicinity of 1595 Unionport Road in the Parkchester neighborhood of the Bronx.                

*                *                *

RODRIGUEZ, 27, from the Bronx, New York, is charged with one count of murder in aid of racketeering, which carries a maximum sentence of death or life in prison, and a mandatory minimum sentence of life in prison; one count of conspiracy to commit murder in aid of racketeering, which carries a maximum sentence of 10 years in prison; one count of murder through use of a firearm, which carries a maximum sentence of death or life in prison, and a mandatory minimum sentence of five years in prison; and one count of being a felon in possession of ammunition, which carries a maximum sentence of 10 years in prison. 

Mr. Berman praised the investigative work of HSI, DEA, and the NYPD.  Mr. Berman added that the investigation is continuing.

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Maurene Comey, Jacob Warren, and Andrew K. Chan 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.

 

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[1] As the introductory phrase signifies, the entirety of the text of the Superseding Indictment constitutes only allegations, and every fact described herein 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”), Keith M. Corlett, Superintendent of the New York State Police (“NYSP”), and William Worden, Chief of the Port Jervis Police Department (“PJPD”), announced today an indictment charging ROBERT CIERVO with selling fentanyl and heroin that resulted in the death of a 36-year-old Orange County resident ("the Victim"). 

The indictment alleges that on or about July 3, 2019, CIERVO distributed heroin and fentanyl that resulted in the death of the Victim.  The indictment also alleges that CIERVO participated in a conspiracy to distribute heroin and fentanyl between October 2018 and September 2019. The grand jury returned the indictment on October 29, 2019, and CIERVO was arraigned today before United States Magistrate Judge Paul E. Davison.

CIERVO previously was arrested on September 29, 2019, and charged by complaint in White Plains federal court with participating in a conspiracy to distribute heroin and fentanyl with MARGARET FLOOD, 38, of Sparrow Bush, New York, ROBERT FLOOD, 39, of Sparrow Bush, New York, and TRAVIS HOPPER, 24, of Matamoras, Pennsylvania.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Robert Ciervo allegedly sold the fentanyl that killed an Orange County resident.  Now he faces prosecution for that crime and drug distribution conspiracy.  Thanks to the Port Jervis Police Department, the FBI, and the State Police for their tireless efforts to stem the tide of lethal opioids.”

FBI Assistant Director William F. Sweeney Jr. said:  “Those who engage in the distribution of illegal drugs destroy our communities and ruin lives, and as we allege here today, the heroin and fentanyl Ciervo distributed indeed resulted in the victim's death.  This is another sad example of the reality we face – sellers pushing heroin laced with fentanyl to create a more powerful, and in this case, deadly high.  The FBI’s Hudson Valley Safe Streets Task Force, along with our federal, state, and local partners, will be relentless in doing everything we can to protect our communities from the scourge of these deadly substances.”

NYSP Superintendent Keith M. Corlett said:  “This indictment is the result of the dedication of law enforcement partners at all levels to stem the tide of drugs and drug related violence on our streets.  This defendant allegedly knowingly sold highly addictive substances to an individual that, sadly, resulted in the individual’s death.  The sale of drugs such as fentanyl and heroin perpetuate a cycle of substance abuse which poses a significant threat to safety and quality of life within our communities, and it will not be tolerated.  I commend our members and our law enforcement partners for their hard work in bringing this individual to justice.”

PJPD Chief William J. Worden said:  “The City of Port Jervis has been directly affected by the opiate epidemic and have tragically lost too many residents from fatal heroin/fentanyl related overdoses.  The Port Jervis City Police Department is committed to working with our law enforcement partners to combat the illicit sales of heroin and fentanyl that are harming our community and hold illicit narcotics traffickers legally accountable for their actions.”

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

CIERVO participated in a conspiracy to distribute more than one kilogram of heroin and more than 40 gram of mixtures and substances containing fentanyl, between October 2018 and September 2019.  In addition, on or about July 3, 2019, CIERVO distributed such substances to the Victim, and the Victim's use of the substances resulted in his death.

*              *             *

CIERVO, 25, of Montague, New Jersey, has been charged with participating in a conspiracy to distribute narcotics, which distribution resulted in the death of another.  This charge carries a maximum sentence of life in prison, and a mandatory minimum 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 sentence for the defendant will be determined by the judge.

Mr. Berman praised the outstanding work of the FBI, the Port Jervis Police Department, and the New York State Police for their investigative efforts and ongoing support and assistance with the case.

The prosecution of this case is being overseen by the Office’s White Plains Division. Assistant U.S. Attorney Lindsey Keenan is in charge of the case.

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

 

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[1] As the introductory phrase signifies, the entirety of the texts of the Indictment and Complaint, and the descriptions of the Indictment and 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, Douglas Shoemaker, regional Special Agent-in-Charge of the United States Department of Transportation Office of Inspector General (“USDOT-OIG”), Margaret Garnett, the Commissioner of the New York City Department of Investigation (“DOI”), and Carolyn Pokorny, Inspector General of the Metropolitan Transportation Authority (“MTA-OIG”), announced today that the United States has settled civil fraud claims against New York-area painting contractor AHERN PAINTING CONTRACTORS CO. (“AHERN”).  The settlement resolves the United States’ allegations in a False Claims Act lawsuit that AHERN fraudulently obtained payments on two federally funded construction projects by misrepresenting compliance with Disadvantaged Business Enterprise (“DBE”) rules, which require participation of businesses owned by women and minorities.  Specifically, the United States alleged that AHERN misrepresented that co-defendant TOWER MAINTENANCE CORP. (“TOWER”), a certified DBE, was solely performing millions of dollars of work on the two projects when in fact much of that work was performed by co-defendant SPECTRUM PAINTING CORP. (“SPECTRUM”), a non-DBE.  As part of the settlement approved by U.S. District Judge Deborah A. Batts, AHERN admits and accepts responsibility for conduct alleged in the Government’s complaint and agrees to pay $3 million to the United States.  The case against defendants TOWER and SPECTRUM is ongoing.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Contractors who exploit the Disadvantaged Business Enterprise program to unlawfully obtain millions of dollars in federal funding will be held to account.  Today’s settlement reflects this Office’s commitment to root out fraud in federally funded contracts, so that legitimate minority- and women-owned businesses can participate in public construction projects.”

USDOT-OIG regional Special Agent-in-Charge Douglas Shoemaker said:  “Today’s settlement is a positive step on the way to closing the chapter on this egregious fraud scheme involving federally funded contracts administered through the New York City Department of Transportation and the Metropolitan Transportation Authority.  While the damage to the integrity of DOT’s DBE program in this instance has been done, it only serves to strengthen our resolve in pursuing those whose greed prevents the legitimate participation of disadvantaged businesses in federal contracting on public transportation projects.” 

DOI Commissioner Margaret Garnett said:  “Today’s multimillion-dollar settlement demonstrates that law enforcement has its sights on exposing fraud by companies that exploit City and Federal programs aimed at increasing the participation of disadvantaged businesses in public construction projects.  DOI and its partners will continue to protect the integrity and effectiveness of these programs with investigations that uncover and deter dishonest conduct.”

MTA Inspector General Carolyn Pokorny said:  “Disadvantaged Business Enterprise regulations enable honest competition in construction contracts by ensuring an equal and inclusive playing field for all.  Today’s DBE fraud settlement highlights the commitment of the Office of the MTA Inspector General, along with all of our prosecutorial and investigative partners, towards prohibiting and rooting out discrimination.”

As alleged in the complaint filed in Manhattan federal court on March 2, 2019, AHERN was a contractor on two federally funded steel painting projects to renovate the Brooklyn Bridge and Queens Plaza.  Contracts for both projects required AHERN to hire DBEs to do a percentage of the work involved and adhere to the DBE regulations.  Instead of hiring qualified DBEs to perform the allotted DBE work, AHERN allowed SPECTRUM and TOWER to use TOWER’s status as a DBE to take credit for millions of dollars of work performed, managed, and supervised by non-DBE SPECTRUM.  To conceal this scheme, SPECTRUM employees repeatedly identified themselves as TOWER employees in documents that AHERN passed along to supervisors on the project.  AHERN and TOWER repeatedly submitted false statements and records to NYC-DOT and MTA misrepresenting that TOWER alone did all of the work allocated to DBEs and that TOWER did not hire a subcontractor to perform any of that work.

As part of the settlement, AHERN admits, acknowledges, and accepts responsibility for conduct alleged in the complaint as described below:

• Over the course of the Brooklyn Bridge and Queens Plaza projects, AHERN was aware of the following facts regarding the involvement of SPECTRUM, a non-DBE, in the projects:

 

• In March 2010, AHERN’s superintendent met with a TOWER manager and a SPECTRUM manager to do a walk-through of the Brooklyn Bridge worksite.  AHERN’s superintendent understood that the SPECTRUM manager would assist TOWER in preparing the bid TOWER submitted for its work as a DBE subcontractor on the Brooklyn Bridge Project;

 

• • In documents that AHERN received from TOWER and then submitted to Skanska in 2010, TOWER identified the individual who AHERN knew to be a SPECTRUM manager as a “TOWER VP” or as a TOWER employee working on the Brooklyn Bridge Project.  In documents AHERN received from TOWER and then submitted to the MTA in 2011, TOWER identified the individual AHERN knew to be a SPECTRUM manager as TOWER’s superintendent for the Queens Plaza Project; 

 

• • Throughout the Brooklyn Bridge and Queens Plaza Projects, AHERN managers communicated directly with the SPECTRUM manager regarding the management and supervision of the projects, including scheduling and inspecting TOWER’s DBE work, ordering materials for TOWER’s DBE work, and payment for TOWER’s DBE work.  An AHERN executive also communicated directly with SPECTRUM’s owner regarding the Brooklyn Bridge and Queens Plaza Projects.

 

• AHERN recklessly disregarded facts showing that SPECTRUM managed and supervised TOWER’s DBE work on the Brooklyn Bridge and Queens Plaza Projects.

 

• • AHERN failed to seek clarification regarding the financial and other arrangements between TOWER and SPECTRUM or request a copy of any contract or agreement between TOWER and SPECTRUM regarding SPECTRUM’s role.  If AHERN had done so, and TOWER had responded truthfully, AHERN would have learned that TOWER and SPECTRUM had entered into written agreements specifying that SPECTRUM would provide project management support and furnish equipment on the Brooklyn Bridge and Queens Plaza Projects, that TOWER and SPECTRUM would split any profits from the TOWER DBE work on the Brooklyn Bridge and Queens Plaza Projects, and that in addition to the SPECTRUM manager, two other individuals AHERN believed to be TOWER managers were in fact employed by SPECTRUM.

 

• • AHERN failed to assess whether SPECTRUM’s actual involvement in the projects was substantial enough to jeopardize TOWER’s standing as a DBE performing a “commercially useful function” under the applicable DBE regulations.

Mr. Berman praised the outstanding investigative work of the USDOT-OIG, DOI, and MTA-OIG. 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that LUIS FERNANDEZ was sentenced to 151 months in prison for participating in a conspiracy to distribute carfentanil, fentanyl, and a fentanyl analogue over the “dark web,” and for possessing a firearm after being convicted of a felony.  Fentanyl is a synthetic opioid that is significantly stronger than heroin, and carfentanil is a fentanyl analogue that is approximately 100 times stronger than fentanyl.  FERNANDEZ was also ordered to forfeit $269,623 in narcotics proceeds.  FERNANDEZ pled guilty on July 30, 2019, before U.S. District Judge Denise L. Cote, who imposed today’s sentence. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Luis Fernandez and his co-defendant Richard Castro sold large quantities of fentanyl and carfentanil to hundreds of individuals across the country, including over the dark web.  Today’s sentence should be another clear reminder that any short-term profits from drug dealing are not worth the long-term price.”

According to the allegations in the Superseding Information to which FERNANDEZ pled guilty, public court filings, and statements made in court:

From at least in or about November 2015 through March 2019, FERNANDEZ and his co-defendant Richard Castro[1] conspired to distribute carfentanil, fentanyl, and phenyl fentanyl (an analogue of fentanyl).  For most of this period, the conspiracy dealt drugs over the dark web, using the monikers “Chemsusa”, “Chems_usa”, and “Chemical_usa.”  Castro was an operator of these online monikers and the leader of this conspiracy.  On one dark web marketplace, Dream Market, Castro boasted that he had completed more than 3,200 transactions on other dark web markets, including more than 1,800 on AlphaBay.  The customer feedback for “Chemsusa” included, “Extremely potent and definitely the real Carf,” as well as “The Carfent is unbelievably well synthesized, keep up the amazing work.”  In June 2018, Castro, using the “Chemsusa” moniker, informed customers that he was moving his business off of dark web marketplaces and would accept purchase requests for narcotics only via encrypted email.  To learn the off-market email address, “Chems_usa” required willing customers to pay a fee.  An undercover law enforcement officer paid this fee, obtained the encrypted email address, and placed orders with Castro.  Castro’s customers paid him in Bitcoin.

FERNANDEZ managed the conspiracy’s stash house, packaged narcotics, and shipped the narcotics via U.S. mail from the New York City area to hundreds of individuals throughout the United States.  For example, in early March 2019, FERNANDEZ was observed dropping several envelopes in a mailbox in Coney Island, New York; law enforcement seized and searched these envelopes, each of which contained carfentanil. 

In mid-March 2019, law enforcement searched FERNANDEZ’s residence in the Bronx, New York.  During this search, officers found, among other things, the following evidence in FERNANDEZ’s bedroom: (1) mailing labels similar to those found on packages connected to the conspiracy, (2) addresses of customers who had received packages from the conspiracy, and (3) approximately 78 grams of fentanyl analogues and 307.5 grams of u-47700 (an opioid analgesic that is approximately 7.5 times more potent than morphine).  Law enforcement also recovered a fumigation mask and rubber gloves.  In a different bedroom of FERNANDEZ’s residence, law enforcement recovered a Model R-73 handgun.  Because FERNANDEZ had previously been convicted of a felony (stemming from his sale of cocaine), he was legally prohibited from possessing this handgun.

*                *                *

In imposing sentence, the Court stated that the defendant played a “critical” role in the conspiracy and that he was responsible for “shipping death.”

In addition to his prison term, FERNANDEZ, 42, of the Bronx, was sentenced to four years of supervised release.

Mr. Berman praised the Federal Bureau of Investigation, the U.S. Postal Inspection Service, and the New York City Police Department for their outstanding investigative work.  Mr. Berman also thanked the Internal Revenue Service and the Orange County, Florida, Sheriff’s Office for their valuable assistance.  

This matter is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Michael D. Neff, Aline R. Flodr, and Ryan B. Finkel are in charge of the prosecution.

 

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[1] Castro pled guilty to money laundering and narcotics distribution conspiracy on July 25, 2019.  

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that EFRAIN GRANADOS-CORONA, a/k/a “Chavito,” a/k/a “Cepillo,” pled guilty today before U.S. District Judge Andrew L. Carter to sex trafficking by use of force, fraud, or coercion.  Five additional defendants in this case – JULIO SAINZ-FLORES, a/k/a “Rogelio,” JUAN ROMERO-GRANADOS, a/k/a “Chegoya,” a/k/a “El Guero,” ALAN ROMERO-GRANADOS, a/k/a “El Flaco,” PEDRO ROJAS-ROMERO, and EMILIO ROJAS-ROMERO – pled guilty to sex trafficking offenses last month before U.S. District Judge Andrew L. Carter.

U.S. Attorney Geoffrey S. Berman said:  “These defendants systematically preyed on innocent women and girls in Mexico, smuggled them into the United States, and forced them into prostitution – depriving them of their freedom and dignity.  The devastation to these victims caused by the defendants is beyond comprehension.  With the defendants’ guilty pleas, we seek to deliver justice for the victims, and to deter others from engaging in this reprehensible conduct.”

According to the allegations in the Indictment to which each defendant pled guilty, public court filings, and statements made in court: 

EFRAIN GRANADOS-CORONA, a/k/a “Chavito,” a/k/a “Cepillo,” JULIO SAINZ-FLORES, a/k/a “Rogelio,” JUAN ROMERO-GRANADOS, a/k/a “Chegoya,” a/k/a “El Guero,” ALAN ROMERO-GRANADOS, a/k/a “El Flaco,” PEDRO ROJAS-ROMERO, and EMILIO ROJAS-ROMERO, the defendants, are members of an international sex trafficking organization (the “STO”).  Many of the members of the STO are related by blood, marriage and community. 

Between at least in or about 2000 and 2016, members of the STO (the “Traffickers”) have used false promises, physical and sexual violence, threats of the same, lies, and coercion to force and coerce adult and minor women (the “Victims”) to work in prostitution in both Mexico and the United States.

In most cases, a Trafficker enticed a Victim – frequently a minor – in Mexico.  The Trafficker then used multiple means to isolate the Victim from her family.  In some cases, the Trafficker used romantic promises to induce the Victim to leave her family and live with him.  In other cases, the Trafficker raped the Victim, making it difficult for her to return to her family due to the associated stigma of the rape.  Once a Victim was separated from her family, the Trafficker frequently monitored her communications, kept her locked in an apartment, left her without food, and engaged in physical or sexual violence against the Victim.  Traffickers often told Victims that the Traffickers owed a significant debt and that the Victim must work in prostitution to assist in repaying the debt.  Traffickers typically began forcing the Victims to work in prostitution in Mexico.  Victims were often required to see at least 20 to 40 customers per day.  Traffickers monitored the number of clients a Victim saw by surveilling the Victim, communicating with brothel workers, and by counting the number of condoms provided to a Victim.  Traffickers typically required the Victims to turn over all of the prostitution proceeds to the Traffickers. 

After a Victim worked in prostitution in Mexico for some time, Traffickers typically arranged for the Victim to be smuggled into the United States.  Members of the STO assisted one another in making smuggling arrangements.  In many cases, multiple Traffickers and multiple Victims were smuggled into the United States together.  In other cases, one Trafficker remained in Mexico while arranging for a Victim to be smuggled together with another Trafficker and other Victims.

Once in the United States, the members of the STO generally maintained their Victims at one of several shared apartments in New York City.  Victims living in the same apartment were frequently forbidden to communicate with one another.  Once in the United States, Traffickers continued to use physical and sexual violence, threats of the same, lies, and coercion to force the Victims to work in prostitution. 

In most cases, the Trafficker or another member of the STO provided a Victim with contact information with which to find work.  The Victims typically worked weeklong shifts either in a brothel, or in a “delivery service.”  In a delivery service, the Victim was delivered to a customer’s home by a “driver.”  These brothels and delivery services were located both within New York and in surrounding states, including but not limited to Connecticut, Maryland, Virginia, New Jersey, and Delaware.

Generally, each customer paid $30-35 for 15 minutes of sex.  Of that, half of the money typically went to the driver (in the case of a delivery service) or to the brothel.  The other $15 went to the Victim, who was then typically forced to give all of the proceeds to the Trafficker.  When a Trafficker was unavailable, a Victim might also give the proceeds to another member of the STO.

The Traffickers then frequently sent, or had their Victims send, some of the prostitution proceeds to Traffickers’ family members and associates in Mexico by wire transfer.  Such transfers provided financial assistance to the Traffickers’ families and provided financial support to the Traffickers themselves if they returned to Mexico. 

*                      *                     *                      

EFRAIN GRANADOS-CORONA, 43, of Mexico, pled guilty to sex trafficking by force, fraud, and coercion, which carries a mandatory minimum sentence of 15 years in prison and a maximum sentence of life imprisonment.

JULIO SAINZ-FLORES, 37, of Mexico, pled guilty to sex trafficking of a minor, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life imprisonment.

JUAN ROMERO-GRANADOS, 33, ALAN ROMERO-GRANADOS, 28, PEDRO ROJAS-ROMERO, 40, and EMILIO ROJAS-ROMERO, 37, all of Mexico, pled guilty to conspiring to commit sex trafficking by force, fraud, and coercion, which carries a maximum sentence of life imprisonment.

The defendants are scheduled to be sentenced by Judge Carter in early 2020.

The prosecution is being handled by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Jacqueline C. Kelly and Elinor L. Tarlow are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that Vito Gallicchio, 50, a Staten Island resident, was sentenced yesterday to 144 months in prison for conspiring to distribute oxycodone.  GALLICCHIO was also ordered to forfeit $2,190,840 in drug proceeds he obtained during the period of the conspiracy.  GALLICCHIO pled guilty in Manhattan federal court on October 18, 2018, before United States District Judge Andrew L. Carter, who imposed GALLICCHIO’s sentence.    

U.S. Attorney Geoffrey S. Berman said:  “Vito Gallicchio sold hundreds of thousands of oxycodone pills on the streets of New York, and masterminded a ring of purported ‘patients’ who faked injuries to get pills.  As Gallicchio’s sentence makes clear, those who fuel the opioid epidemic face prosecution and stiff sentences.”

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

Oxycodone is a highly addictive, narcotic opioid that is used to treat severe and chronic pain conditions.  Oxycodone prescriptions are in high demand and have significant cash value to drug dealers.  In fact, oxycodone tablets can be resold on the street for thousands of dollars.  For example, 30-milligram oxycodone tablets have a current street value of approximately $30 per tablet in New York City, with street prices even higher in other parts of the country. 

From at least approximately January 2012 until his arrest in 2017, GALLICCHIO obtained medically unnecessary oxycodone prescriptions from Dr. David Taylor, who operated a medical clinic in Staten Island, New York, and was subsequently convicted of conspiring to distribute oxycodone.  GALLICCHIO traded cash and other gifts, such as liquor, in exchange for Dr. Taylor writing prescriptions for GALLICCHIO and his crew.  During approximately the same period, GALLICCHIO filled the medically unnecessary prescriptions at a Staten Island pharmacy, and also purchased wholesale quantities of oxycodone from the pharmacist without prescriptions.  GALLICCHIO subsequently sold the oxycodone pills for millions of dollars in profit, which he used to make significant renovations on his home and purchase several expensive cars, including, a Corvette, a Lincoln Navigator, a Lincoln LS, a Jeep Grand Cherokee, and a Bentley. 

At the sentencing proceeding, Judge Carter found Gallicchio was responsible for distributing more than 180,000 30-milligram oxycodone pills and that he obstructed justice by seeking to intimidate at least two government witnesses.    

*                      *                     *

GALLICCHIO’s co-defendant, David Taylor, is scheduled to be sentenced on January 16, 2020.  

Mr. Berman praised the investigative work of the DEA Tactical Diversion Squad in New York, which comprises agents and officers from the DEA, the New York City Police Department, the New York State Police, Town of Orangetown Police Department, Rockland County Drug Task Force, Westchester County Police Department, and New York City Department of Investigation.  He also acknowledged the assistance of the Department of Health & Human Services. 

The case is being prosecuted by the Office’s Narcotics Unit.  Assistant U.S. Attorneys Kiersten A. Fletcher, Justin Rodriguez, and Nicolas Roos are in charge of the prosecution. 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that WILLIAM BAZEMORE pled guilty today to sex trafficking of a female victim by force, fraud, or coercion.  BAZEMORE pled guilty before U.S. District Judge Analisa Torres.  

U.S. Attorney Geoffrey S. Berman said:  “William Bazemore used violence and coercion to force a woman to engage in commercial sex for his own profit.  With Bazemore’s guilty plea today, we seek to deliver justice for a victim of sex trafficking and exploitation, and to deter others from engaging in this heinous criminal conduct.”

According to the Indictment, as well as statements made during BAZEMORE’s plea proceeding:

In or about 2017, BAZEMORE was the leader of a criminal enterprise (the “Organization”) involved in various criminal acts, including drug distribution and sex trafficking, in and around New York City, Maine, and Connecticut.  Members and associates of the Organization transported heroin and crack cocaine between New York, Connecticut, and Maine, at times using women suffering from drug addiction as drug couriers to secrete drugs on their persons and transport drugs and drug proceeds in vehicles controlled by the Organization.  In addition, BAZEMORE and other members and associates of the Organization used force and coercion to cause a female drug customer (“Victim-1”) to engage in commercial sex for their financial gain, and took actions to prevent Victim-1 and others from cooperating with law enforcement against the Organization.  

*                      *                     *           

BAZEMORE, 39, of New York, New York, was arrested on March 3, 2019, while in state custody in Maine, and has been in federal custody since.  BAZEMORE pled guilty to one count of sex trafficking by force, fraud, or coercion, which carries a maximum sentence of life in prison and a mandatory minimum sentence of 15 years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

BAZEMORE is scheduled to be sentenced by Judge Torres on March 12, 2020.

BAZEMORE’s co-defendant, Warren Bryant, is scheduled for trial on December 9, 2019. 

Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation, the New York City Police Department, and the Special Agents of the U.S. Attorney’s Office for the Southern District of New York.

This case is being prosecuted by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Jacqueline Kelly, Danielle Sassoon, and Lauren Schorr Potter are in charge of the prosecution.

 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JOHN F. GARGAN and LOREN PIQUANT were convicted Wednesday after a two-week jury trial for conspiring together and with others to unlawfully distribute oxycodone from a medical clinic in Queens, New York.  DANTE A. CUBANGBANG and MICHAEL KELLERMAN previously pled guilty to narcotics, health care fraud, and money laundering charges in connection with their participation in the oxycodone distribution scheme at that same clinic.  From 2012 to 2018, CUBANGBANG, a physician, and GARGAN, a nurse practitioner, prescribed over 6.3 million oxycodone 30-milligram pills to individuals they knew did not need the oxycodone for any legitimate medical reason.  The vast majority of these pills were diverted and sold to others on the street. 

U.S. Attorney Geoffrey S. Berman said:  “These health professionals should have been the first line of defense against opioid abuse, but instead they were drug dealers operating out of a medical clinic.  They hid behind their medical licenses and positions within the clinic to sell addictive, dangerous narcotics.  This Office will do everything in its power to bring to justice anyone responsible for fueling the opioid epidemic that has taken so many lives.”    

According to the evidence presented during the trial and other court documents:                  

Oxycodone is a highly addictive and dangerous opioid narcotic, which is often diverted and sold to individuals who do not have a legitimate medical need for the drug.  The most lucrative pill for street sales is the 30-milligram (“mg”) oxycodone pill, which is fast-acting and powerful.  CUBANGBANG and GARGAN were medical professionals who had the authority to prescribe controlled substances, including oxycodone.

CUBANGBANG, GARGAN, KELLERMAN, and PIQUANT worked out of a medical clinic in Queens, known as EPOH Medical P.C. (“EPOH”).  Although the defendants tried to make EPOH appear as a legitimate medical clinic, in reality, it was a pill mill that was prescribing medically unnecessary oxycodone 30 mg pills on a massive scale. 

EPOH had approximately 600 “patients.”  These patients traveled from all five boroughs of New York City, from other counties in New York, and even from other states, to obtain medically unnecessary oxycodone.  There were typically large crowds of patients in EPOH’s waiting area, and patients often had to wait hours to be seen for their “office visit.”  The visit itself lasted no more than a few minutes and involved no physical examinations or questions about pain.  Patients were required to pay $300 in cash for this visit and, in return, they received a prescription for as many as 180 oxycodone 30 mg pills each month.  Most of these prescriptions was paid for by Medicare or Medicaid.  From just the $300 patient visit fee, EPOH generated approximately $2 million in cash each year. 

The vast majority of the patients seen at EPOH had no medical need for the oxycodone 30 mg pills they were prescribed, and those pills were either abused or sold.  Testimony at trial established that these purported patients sold their pills for up to $19 per pill to individuals who would then resell them to street-level drug dealers.  From 2012 to 2018, CUBANGBANG and GARGAN together prescribed over 6.3 million oxycodone 30 mg pills to individuals they knew did not need the pills for any legitimate medical reason.  At approximately $19 per pill, the value of these illegally obtained pills prescribed by CUBANGBANG and GARGAN at EPOH was approximately $120 million.  PIQUANT, who worked as a receptionist at EPOH, personally sold hundreds of oxycodone 30 mg pills each month.  PIQUANT obtained most of these pills through prescriptions that GARGAN wrote to PIQUANT, to members of PIQUANT’s family, and to PIQUANT’s neighbors.  PIQUANT also recruited purported patients for the clinic.   

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CUBANGBANG, 51, of Queens, and KELLERMAN, 55, of Queens, each pled guilty to one count of narcotics distribution conspiracy, which carries a maximum sentence of 20 years in prison; one count of health care fraud conspiracy, which carries a maximum sentence of 10 years in prison; and one count of money laundering conspiracy, which carries a maximum sentence of 20 years in prison.

GARGAN, 63, of New York, New York, and PIQUANT, 38, of the Bronx, New York, each were convicted at trial of one count of narcotics distribution conspiracy, which carries a maximum sentence of 20 years in prison.

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

Mr. Berman praised the outstanding investigative work of the Drug Enforcement Administration’s (“DEA”) New York Tactical Diversion Squad, the U.S. Department of Health and Human Services-Office of the Inspector General, the Internal Revenue Service, and the New York City Police Department (“NYPD”).  DEA’s Tactical Diversion Squad (Group TDS-NY) comprises agents and officers from the DEA, the NYPD, the New York State Police, New York State Department of Financial Services, and New York City Department of Investigation.

This case is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Michael Kim Krouse, Juliana N. Murray, Sheb Swett, and Louis A. Pellegrino III are in charge of the prosecution.