Southern District of New York

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that CYNTHIA HOLDER, a former Public Company Accounting Oversight Board (“PCAOB”) Inspections Leader and KPMG Executive Director, was sentenced today to 8 months in federal prison for participating in a scheme to defraud the Securities and Exchange Commission (the “SEC”) and the PCAOB by obtaining, disseminating, and using confidential lists of which KPMG audits the PCAOB would be reviewing so that KPMG could improve its performance in PCAOB inspections, the results of which were shared with, and utilized by, the SEC in carrying out its governmental functions.  HOLDER pled guilty October 16, 2018, before U.S. District Judge J. Paul Oetken, who imposed today’s sentence.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As a former employee of the PCAOB, Cynthia Holder understood the importance of the organization’s work:  to protect investors and the public by overseeing the audits of public companies.  But she undermined the Board’s and the SEC’s regulatory missions when she stole confidential inspection information and provided it to KPMG, her new employer.  KPMG, in turn, used this confidential information to cheat on PCAOB inspections.  Holder’s sentence should be an example to others that stealing confidential information and corrupting regulatory processes are crimes that this Office takes very seriously.”

According to the allegations contained in the Indictment filed against HOLDER and statements made in related court filings and proceedings:

The PCAOB is a nonprofit corporation overseen by the SEC that inspects the audit work performed by registered accounting firms (“Auditors”) with respect to the financial statements of publicly traded companies (“Issuers”).  The PCAOB inspects the largest U.S. accounting firms on an annual basis.  As part of the inspection process, the PCAOB chooses a selection of audits performed by the accounting firm for a closer review.  Until shortly before an inspection occurs, the PCAOB does not disclose which audits are being inspected, or the focus areas for those inspections, because it wants to ensure that an Auditor does not perform additional work or modify its work papers in anticipation of an inspection.  Following the completion of an inspection, the PCAOB issues an Inspection Report containing any negative findings or “comments” with respect to both the specific audits reviewed and the accounting firm more generally.  The PCAOB transmits these Inspection Reports to the SEC, which utilizes them in carrying out its agency functions.     

KPMG is one of the largest accounting firms in the world.  In recent years, KPMG fared poorly in PCAOB inspections and in 2014 received approximately twice as many comments as its competitor firms.  By 2015, KPMG was engaged in efforts to improve its performance in PCAOB inspections, including but not limited to recruiting and hiring former PCAOB personnel such as HOLDER and HOLDER’s co-conspirator, Brian Sweet. 

KPMG’s efforts to improve inspection results, however, were not limited to legitimate means.  Instead, between 2015 and 2017, HOLDER, David Middendorf, Thomas Whittle, Jeffrey Wada, Sweet, and others worked to illicitly acquire valuable confidential PCAOB information concerning which KPMG audits would be inspected, in an effort to game the system and improve inspection results.  For example, after Sweet began employment at KPMG, but while HOLDER was still employed by the PCAOB, HOLDER fed Sweet confidential PCAOB information about certain pending inspections.  HOLDER did so while simultaneously seeking employment at KPMG.  During the pendency of her efforts to obtain employment at KPMG, HOLDER – in violation of PCAOB rules – continued to work on KPMG inspections at the PCAOB.  Once she secured a job at KPMG, HOLDER stole valuable confidential information on her way out of the PCAOB and then passed it on to Sweet, her new boss at KPMG.     

In March 2016, HOLDER obtained the PCAOB’s confidential 2016 inspection selections for KPMG from Wada, who was still working at the PCAOB but who had recently been passed over for a promotion.  Wada – who was not responsible for KPMG inspections at the PCAOB

– accessed and stole valuable confidential information from the PCAOB and passed it on to HOLDER.  HOLDER, in turn, provided the 2016 inspection selections to Sweet, who passed them to Middendorf, Whittle, and others.  Middendorf, Whittle, Sweet, and others then agreed to launch a stealth program to “re-review” the audits that had been selected.  In order to cover up their illicit conduct, the KPMG engagement partners were given a false explanation for the re-reviews.  The stealth re-review program allowed KPMG to double-check its audit work, strengthen its work papers, and, in some cases, identify deficiencies or perform new audit work that had not been done during the live audit.

In January 2017, Wada, who had again been passed over for promotion at the PCAOB, again stole valuable confidential PCAOB information, misappropriating a preliminary list of confidential 2017 inspection selections for KPMG audits and passing it on to HOLDER.  At the same time, Wada provided Holder with his resume and sought her assistance in helping him to acquire employment at KPMG.  Sweet shared the preliminary inspection selections provided by Wada with Whittle and Britt, while noting that the information was only preliminary.  Whittle’s response was to ask Sweet to confirm that they would get the final list as well.

In February 2017, Wada texted HOLDER saying, “I have the grocery list. . . . All the things you’ll need for this year.”  Wada then spoke to HOLDER and provided her with the full confidential 2017 final inspection selections.  HOLDER again shared the stolen information with Sweet, who shared it with Middendorf, Whittle, and others.  Middendorf, Whittle, and Sweet agreed to inform engagement partners on the list so that extra attention could be paid to these audits in light of the forthcoming PCAOB inspections. 

In 2017, a KPMG partner who received early notice that her engagement was on the confidential 2017 inspection list reported the matter, as a result of which KPMG’s Office of General Counsel launched an internal investigation.  Thereafter, HOLDER and Sweet took a number of steps to destroy or fabricate evidence relevant to the investigation.  For example, HOLDER deleted a number of relevant text messages, emails, and documents, and said she was going to purchase a “burner phone” so her conversations could not be monitored.  Similarly, Sweet burned evidence of the 2017 inspection list and provided a falsified version of the list to KPMG counsel.

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In addition to a prison term, HOLDER, 53, of Houston, Texas, was sentenced to 2 years of supervised release. Restitution amount was deferred to a later date.

Mr. Berman praised the investigative work of the United States Postal Inspection Service and also thanked the Securities and Exchange Commission, which has brought an administrative proceeding against Holder. 

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Rebecca Mermelstein, Jordan Estes, Martin Bell, and Margaret Graham are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York announced today that RICHARD JOSEPHBERG was sentenced to 42 months in prison for evading hundreds of thousands of dollars in taxes for the calendar year 2011 and willfully failing to file tax returns for the calendar years 2013 through 2015.  JOSEPHBERG previously pleaded guilty to these crimes before U.S. Circuit Judge Richard J. Sullivan, who imposed today’s sentence.

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

JOSEPHBERG was previously convicted in September 2007, in the U.S. District Court for the Southern District of New York, of 16 counts of tax fraud and one count of health care fraud, which resulted in a sentence of 50 months in prison and three years’ supervised release.  JOSEPHBERG was released from custody and commenced his term of supervised release in late October 2010.  While on supervised release, JOSEPHBERG began committing the tax crimes for which he was sentenced today. 

Specifically, starting in late 2010, JOSEPHBERG began employment with an investor relations firm called CEOcast in Manhattan.  Through the individual who operated CEOcast, JOSEPHBERG secured a commission-based arrangement with another investment firm, Socius Capital Group LLC (“Socius”).  Socius agreed to pay JOSEPHBERG a commission of approximately 15 percent of any profit generated by Socius on financing deals originated by JOSEPHBERG.  For originating one such financing deal, JOSEPHBERG was entitled to commission payments totaling approximately $1.57 million in 2011.  After receiving payments totaling approximately $35,725 in his own name, JOSEPHBERG directed Socius to issue the remaining commission payments in the name of a newly formed corporate entity called “Almorli Advisors Inc.”  JOSEPHBERG opened a new bank account in the name of Almorli Advisors Inc. (“Almorli Bank Account-1”), and deposited payments totaling approximately $1.53 million into that account.

In March 2012, while preparing to file 2011 federal income tax returns, JOSEPHBERG took steps to evade paying hundreds of thousands of dollars in federal income taxes by disguising and concealing the type of income that JOSEPHBERG had received from Socius.  On or about March 27, 2012, JOSEPHBERG formed a second corporate entity called “Almorli Advisors NY LLC,” which served as a shell company to insulate JOSEPHBERG from IRS scrutiny.  JOSEPHBERG caused his accountant to prepare a false 2011 partnership income tax return, Form 1065, in the name of Almorli Advisors NY LLC (the “2011 Form 1065”), listing JOSEPHBERG as a 99 percent partner and JOSEPHBERG’s son as a one percent partner.  To evade a substantial part of the income taxes due and owing for 2011, JOSEPHBERG caused the 2011 Form 1065 falsely to report the commission payments from Socius, totaling approximately $1,574,922, as a long-term capital gain, rather than ordinary income.  JOSEPHBERG’s purported 99 percent share of this false long-term capital gain flowed through to his 2011 individual income tax return, Form 1040.  JOSEPHBERG’s fraudulent misclassification of this income resulted in a reported tax liability that was hundreds of thousands of dollars lower than the true tax liability because individual long-term capital gains were taxed at a significantly lower rate than ordinary income.   

JOSEPHBERG also engaged in a scheme to evade the assessment of federal income taxes for calendar years 2013 through 2016.  During those years, JOSEPHBERG received substantial income from performing consulting and other professional services.  Despite earning substantial income, JOSEPHBERG failed timely to file any federal income tax returns for the calendar years 2013 through 2016 until after IRS agents informed JOSEPHBERG in May 2017 that he was under investigation.  In addition to not timely filing any tax returns, JOSEPHBERG took various affirmative steps to evade the assessment of taxes.  Among other things, JOSEPHBERG routed substantial amounts of income through Almorli Bank Account-1 and another bank account in the name of Almorli Advisors Inc., which bank accounts JOSEPHBERG controlled and used to pay for his personal expenses. 

In all, through the crimes to which he pleaded guilty and relevant conduct, JOSEPHBERG caused the Internal Revenue Service (“IRS”) to incur losses of approximately $1.2 million.  JOSEPHBERG’s scheme also caused a loss of $75,744.28 to the New York State Department of Taxation and Finance (“NYSDTF”), based in large part on JOSEPHBERG’s failure to timely file any state tax returns for 2013 through 2016.

 

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In addition to the term of prison imprisonment, Judge Sullivan ordered JOSEPHBERG to serve 3 years of supervised release. Judge Sullivan deferred restitution to a later date.

Mr. Berman praised the outstanding investigative work of IRS Criminal Investigation in this case.

This case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Olga I. Zverovich is in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that FERNANDO GOMEZ and JOSE MARTINEZ-DIAZ, a/k/a “Tony Zinc,” pled guilty in Manhattan federal court to charges related to a decade-long narcotics conspiracy.  GOMEZ, who was an active agent with the Drug Enforcement Administration (“DEA”) until his arrest in December 2018, pled guilty today to a narcotics conspiracy involving the distribution of cocaine.  As part of his plea, Gomez agreed that he supplied guns to MARTINEZ-DIAZ.  MARTINEZ-DIAZ pled guilty on July 29 to his participation in a racketeering conspiracy involving the enterprise known as La Organizacion de Narcotraficantes Unidos (“La ONU”).  As part of his plea, MARTINEZ-DIAZ agreed that his participation in the enterprise involved the distribution of at least 450 kilograms of cocaine and two attempted murders. 

U.S. Attorney Geoffrey S. Berman said:  “DEA Special Agent Fernando Gomez violated the very laws he swore to enforce.  Rather than uphold the nation’s drug laws, for over a decade he helped a major drug trafficker, Jose Martinez-Diaz, get away with his crimes. This case exemplifies the enduring commitment of this Office, along with our law enforcement partners, of preserving the highest degree of integrity for law enforcement from within. And with the guilty pleas of Gomez and Martinez-Diaz, justice will now be served.”

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

GOMEZ, while working as a detective with the City of Evanston Police Department in Illinois, transported firearms to Puerto Rico and provided those firearms to MARTINEZ-DIAZ.  After joining the DEA, GOMEZ helped members of the narcotics conspiracy, including MARTINEZ-DIAZ, evade detection by law enforcement.    

La ONU was a criminal enterprise involved in the trafficking of cocaine from Puerto Rico to the Bronx, New York.  The cocaine was distributed in New York, including out of a daycare center in the Bronx, New York.  Members and associates of La ONU also engaged in acts of violence, including murder, to protect and expand the enterprise’s criminal operations and in connection with rivalries with other criminal organizations. 

MARTINEZ-DIAZ was a high volume cocaine trafficker who supplied La ONU members with drugs that were transported from the Dominican Republic.  La ONU further distributed the cocaine, including in the Southern District of New York.  Martinez-Diaz smuggled the narcotics from the Dominican Republic, usually by boat.  In connection with his membership in La ONU, Martinez-Diaz was involved in the distribution of over 5,000 kilograms of cocaine.

Martinez-Diaz funded and assisted La ONU in its fight against its rival, La Rompe ONU.  For example, Martinez-Diaz provided money to La ONU members to purchase firearms.  In addition, Martinez-Diaz and others created a fake Puerto Rico Police Department patrol car. Members of La ONU used the fake patrol car to harass and intimidate members of La Rompe ONU, and to conduct shootings. 

In or about 2007, Martinez-Diaz ordered a shootout in Puerto Rico.  The target of the shootout was shot but survived.

On another occasion, Martinez-Diaz paid an individual $5,000 in connection with the attempted murder of a rival drug dealer. 

 

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FERNANDO GOMEZ, 42, of Chicago, Illinois, pled guilty to one count of participating in a narcotics conspiracy involving the distribution of cocaine, which carries a maximum sentence of 20 years in prison.  MARTINEZ-DIAZ, of San Juan, Puerto Rico, pled guilty to one count of participating in a racketeering conspiracy, which carries a maximum sentence of 20 years in prison.  Sentencing for GOMEZ is scheduled for November 21, 2019; sentencing for MARTINEZ-DIAZ is scheduled for November 26, 2019 at 3:30 p.m.

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

Mr. Berman praised the outstanding investigative work of United States Postal Inspection Service, DEA, Bureau of Alcohol, Tobacco, Firearms, and Explosives, Department of Justice Office of the Inspector General, and the Special Agents of the United States Attorney’s Office for the Southern District of New York.

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Jordan Estes, Andrew Thomas, Lara Pomerantz, and Allison Nichols are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that FABIO BRETAS DE FREITAS pled guilty today before U.S. District Judge Laura T. Swain to defrauding a group of investors (the “Victims”) by soliciting funds for investment in the commodity futures markets, but instead using the funds for personal and other expenses.  BRETAS lulled his Victims and furthered the scheme by distributing fictitious financial statements to the Victims, purporting to show their investments’ position and growth under his management.  When his companies were audited by regulators, the Commodities Futures Trading Commission (“CFTC”) and the National Futures Association (“NFA”), BRETAS lied to the regulators in order to cover up his crimes, going so far as to steal the identity of one Victim and to impersonate that Victim in email communications with the NFA.

Manhattan U.S. Attorney Geoffrey Berman said:  “Fabio Bretas De Freitas solicited investor funds from several companies he operated by touting his prolific ability to profit from his futures market trading strategies.  In reality, Bretas’ core strategy was swindling investors, using the funds to line his own pockets while doing minimal trading for his investors. Bretas now faces serious time in prison, and this case is a prime example of the inevitability of getting caught when defrauding investors.”

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

BRETAS operated a group of investment companies, including Phynance Capital Management LLC (“Phy Cap”), Phy Global Partners Fund LLC (“PGP”), Absolute Experience LLC (“Absolute”), and Global Partners Investors LLC (“GPI”), that he used to solicit investments from.  Phy Cap was a commodity pool operator and commodity trading advisor, registered with the NFA, as required by CFTC.  In his companies’ marketing materials, BRETAS represented that he used “statistical analysis and mathematical modeling of historical data to develop quantitative systematic methodologies applied to managed futures strategies.”  In fact, while BRETAS solicited more than $7.5 million from individual investors, he conducted only a minimal level of trading; his predominant use of his companies was the theft of investor money, using it to cover his personal expenses and transferring investor funds abroad.  In order to continue the scheme, and solicit additional investments, BRETAS prepared false monthly statements, purporting to demonstrate the investments’ growth, and distributed them to the Victims. When his regulators, the CFTC and NFA, initiated an audit in 2017, BRETAS lied about his affiliation with Absolute, falsely claimed that the funds that the Victims invested in PGP were mere loans to his company, lied about the use of those funds and the solicitation of investments, and ultimately created a fraudulent email account for the purpose of impersonating one victim in communications with the NFA. 

BRETAS, 53, of Miami, Florida, pled guilty to one count of conspiracy to commit wire fraud and commodities fraud.  That offense carries a maximum prison term of 25 years. 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.  BRETAS is scheduled to be sentenced by Judge Swain on December 17, 2019.

Mr. Berman praised the outstanding investigative work of the FBI’s New York Money Laundering Investigation Squad, and thanked the attorneys and investigators at the CFTC whose expertise and diligence were integral to the development of this investigation and today’s successful guilty plea.

This case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant United States Attorney Benet J. Kearney is in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that COREY ROPER was sentenced today to 13 years in prison for sex trafficking of minor females.  ROPER was sentenced by U.S. District Judge Naomi Reice Buchwald, before whom he previously pled guilty to one count of sex trafficking minor victims.  As part of his plea, ROPER acknowledged that he trafficked three minor females, and also trafficked another female by force.

Manhattan U.S. Attorney Geoffrey S. Berman stated:  “Self-proclaimed pimp, Corey Roper, perpetrated awful acts against young women.  Roper subjected his victims – some as young as 13 years old – to what he called ‘pimp rules,’ and punished them through cruel physical violence and depriving them of food and sleep if they didn’t comply with his abhorrent commands.  Because of his unconscionable conduct against these vulnerable victims, Roper now ironically finds himself subject to a code of conduct that he’s forced to comply with – prison rules.”  

According to the Indictment and other court documents filed in Manhattan federal court:

The defendants were members of or affiliated with the Snow Gang, a gang based in Queens, New York, which was engaged in a myriad of criminal activities, including violence, drug trafficking, credit card fraud, and sex trafficking of young women.  Between February 2015 and March 2017, the defendants worked together to traffic minor female victims, using methods of force, fraud, and coercion.  Members of this conspiracy used brutal violence to capture and control their victims, and used firearms to protect their illegal sex trafficking business.

ROPER was a violent pimp who controlled his victims through force and intimidation.  ROPER’s victims included minor females as young as 13 years old, who were subjected to ROPER’s code of “pimp rules,” that, for example, prohibited his victims from speaking to other men, from keeping any money they earned, and from eating if they did not make ROPER enough money.  If any of the rules were broken, ROPER punished his victims through violence, including choking, hitting, punching, and kicking his victims.  One victim—identified in court documents as “Minor Victim-4”—was regularly abused by ROPER, including being beaten with a cord, being forced to kneel on uncooked rice for hours as a form of punishment, and being held in a windowless room in Brooklyn where she was physically abused by ROPER and forced to have sex with customers of his choosing.  Another victim—identified in court documents as “Victim-1”—was beaten by ROPER when she initially refused to work for him.  ROPER responded by slapping her, refusing to let her leave, and denying her food.  When Victim-1 angered Roper by disobeying him, he disciplined her, including by making her stand in the corner of a room for hours and depriving her of food and sleep.     

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In addition to his prison sentence, ROPER, 27, was sentenced to five years of supervised release.

ROPER is the seventh defendant to be sentenced in this case by Judge Buchwald for his participation in sex trafficking minors.  The other defendants in this case—David Hightower, Nashean Folds, Antwone Washington, Terrell Clarke, Tremain Moore, and Gregory Luck—pled guilty to and have been sentenced in connection with various offenses, including participating in a conspiracy to commit sex trafficking of minors.

Mr. Berman praised the outstanding work of the New York City Police Department’s Human Trafficking Team and the Federal Bureau of Investigation.  He also thanked the Georgia Bureau of Investigation, the Department of Homeland Security Investigations, the Nassau County Police Department, and the Edison New Jersey Police Department for their support and cooperation in this case.

The prosecution is being handled by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Amanda L. Houle and Lara Pomerantz are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and James P. O’Neill, the Commissioner of the Police Department for the City of New York (“NYPD”), announced the unsealing of an Indictment charging ELIJAH BILAL, a/k/a “Karate Kid,” with the April 15, 2012, murder of Terrance Martin, 25, in the Bronx, New York.  BILAL was arrested this morning and is expected to be presented before U.S. Magistrate Judge Debra Freeman in federal court later today.  This case is assigned to U.S. District Judge Paul J. Oetken.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, Elijah Bilal murdered Terrance Martin nine years ago in connection with his drug dealing.  Now, thanks to the outstanding work of the NYPD, the defendant has been charged with this heinous crime.”

NYPD Commissioner James P. O’Neill said:  “Today’s charges demonstrate that the investigative efforts of New York City law enforcement are far-reaching, precisely-focused, and patient.  As long as individuals are involved in the sale of illegal narcotics and gun violence, the NYPD and our partners will work to stop the threat to public safety.  I commend and thank the U.S. Attorney’s Office for the Southern District for their assistance in bringing Elijah Bilal to justice.”

According to the allegations in the Indictment unsealed in Manhattan federal court:

On April 15, 2012, in the vicinity of 285 East 156th Street in the Bronx, New York, BILAL shot and killed Martin in connection with a conspiracy to distribute heroin and crack cocaine.

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BILAL, 27, of the Bronx, New York, is charged with one count of using a firearm to commit murder during a drug-trafficking crime, which carries a maximum sentence of death or life in prison, and a mandatory minimum term of five years in prison.  The maximum and minimum 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 the NYPD.

The case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorney Christopher Clore 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.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that JOHN LAMBERT, a/k/a “Eric Pope,” pled guilty this afternoon before U.S. District Judge Valerie E. Caproni to one count of conspiracy to commit wire fraud, in connection with a scheme to defraud consumers of legal advice and services.

U.S. Attorney Geoffrey S. Berman said:  “John Lambert represented himself to clients as a prominent New York attorney with a law degree from an elite law school.  But Lambert’s de facto career was one of a grifter:  he had never been to law school and certainly wasn’t an attorney.  Today, Lambert admitted to his crimes and faces time in prison for his misdeeds.”

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

From August 2016 through April 2018, LAMBERT perpetrated a scheme to defraud consumers of legal advice and services, by falsely representing, through web-based platforms for freelancing services, websites, emails, phones calls, and other means, that he was an experienced attorney who had attended an elite law school, when in fact he was not an attorney and had never attended law school.  Having misled his victims into believing that he was a highly qualified attorney, LAMBERT then provided legal advice and services to his victims, in exchange for which his victims paid him money.

LAMBERT’s victims included at least six individuals and corporations who paid him money for purported legal advice and services.  The victims hired LAMBERT to provide legal advice and services on a wide range of subjects, including issues with their credit reports, drafting a will, corporate and intellectual property law, and a dispute with a former employee.  One of the victims withdrew money from his 401(k) account to pay LAMBERT.

LAMBERT used the alias “Eric Pope” when communicating with the victims, and falsely represented to at least some of them that he was an attorney at a law firm called “Pope and Dunn;” had attended an elite law school; was an expert in corporate, finance, and property law; had worked with hundreds of clients, including “tech moguls” and “entrepreneurs,” in the United States and Europe; and was located in New York City.  But LAMBERT was not and had never been an attorney, and was not located in New York City.

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LAMBERT, 23, of Bristol, Tennessee, pleaded guilty to one count of conspiracy 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.  LAMBERT is scheduled to be sentenced by Judge Caproni on November 18, 2019.

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that STEVEN BROWN, a/k/a “BI,” pled guilty today to participating in a murder in connection with a drug crime for his role in the August 2, 2009, murder of Derrick Moore in the Bronx.  BROWN pled before U.S. District Judge Katherine Polk Failla.

Manhattan U.S. Attorney Geoffrey Berman said:  “Almost 10 years ago to the day, Steven Brown, the leader of a violent, drug-dealing street crew, ordered the killing of rival street crewmember, Derrick Moore.  We are committed to combating gang violence, and today’s guilty plea shows that no passage of time will stop us from bringing perpetrators of violence to justice.”

According to the allegations contained in the Indictment and statements made in court:

The Taylor Avenue Crew was a criminal enterprise that operated principally in and around the Bronx from at least 2007 up to and including 2015.  The Taylor Avenue Crew sold cocaine base, commonly known as “crack cocaine,” primarily in and around Taylor Avenue in the Bronx.  The Taylor Avenue Crew controlled crack cocaine sales within this area by prohibiting and preventing non-members, outsiders, and rival narcotics dealers from distributing crack cocaine in the area controlled by the Crew.  The Taylor Avenue Crew also committed acts of violence in the area against rival gangs, including assaults, attempted murder, and murder.

Members and associates of the Taylor Avenue Crew also allied themselves with crews from nearby areas of the Bronx.  One such crew included the Creston Avenue Crew, a criminal enterprise that operated principally in and around the Bronx, New York, from at least 2003 up to and including 2011 and whose members sold cocaine and marijuana primarily in and around Creston Avenue in the Bronx.  Members of the Taylor and Creston Avenue Crews associated with each other and assisted each other by, among other things, carrying out acts of violence on each other’s behalf upon request by the leaders of the respective crews.  One such act of violence was the murder of 22-year-old Derrick Moore.  In August 2009, after escalating violence between the Taylor Avenue Crew and a rival crew, BROWN, who was the head of the Taylor Avenue Crew, ordered the murder of Moore.  To carry out the murder, BROWN requested the assistance of the Creston Avenue Crew, whose members then shot and killed Moore.

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BROWN, 40, of the Bronx, New York, pled guilty to one count of murder while engaged in a narcotics trafficking offense, which carries a maximum sentence of life imprisonment and a mandatory minimum sentence of 20 years in prison.  He will be sentenced by Judge Failla on December 4, 2019.

Luis Ortiz, one of BROWN’s co-defendants, pled guilty on July 24, 2019, to murder through use of a firearm in connection with a drug crime, and faces a maximum sentence of life imprisonment and a mandatory minimum sentence of five years in prison.  Ortiz is scheduled to be sentenced on October 18, 2019.

Trial for an additional co-defendant, Rafael Reyes, is scheduled to begin on September 30, 2019.  The description of the offense set forth in this release are merely allegations and Reyes is innocent until proven guilty.

Mr. Berman praised the outstanding investigative work of the New York City Police Department, the Drug Enforcement Administration, Homeland Security Investigations, and the FBI.  Mr. Berman also thanked the United States Attorney’s Office for the Middle District of Pennsylvania for their assistance.

Assistant U.S. Attorneys Maurene Comey, Jessica Lonergan, and Jason Swergold are in charge of the prosecution.  The case is being handled by the Office’s Violent and Organized Crime Unit.

Cesar Altieri Sayoc was sentenced yesterday to 20 years in prison in connection with his mailing of 16 improvised explosive devices to victims across the country.  SAYOC pled guilty to a 65-count Superseding Information on March 21, 2019, before U.S. District Judge Jed S. Rakoff, who also imposed today’s sentence. 

Assistant Attorney General for National Security John C. Demers said:  “Time and again, we have seen individuals attempt to express political views and resolve political disagreements through violence.  Cesar Sayoc has now been sentenced for acts of domestic terrorism that are repulsive to all Americans who cherish a society built on respectful and non-violent political discourse.  Our democracy depends on our debating our strongly held views peacefully and respectfully, and when someone does not, on our prosecuting and punishing those who do not abide by these values.  I applaud the efforts of so many in our law enforcement community whose alertness and tirelessness led to the prompt arrest of the defendant before he was able to injure anyone, as well as those whose efforts led to this sentence.”

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Cesar Sayoc assembled and mailed explosive devices to high-ranking officials and former elected leaders to incite fear and to terrorize his victims.  Though thankfully no one was hurt by his actions, Sayoc’s domestic terrorism challenged our nation’s cherished tradition of peaceful political discourse.  For his wanton disregard of the safety of so many people, Sayoc will now spend 20 years in prison.”

“I could not be more proud of the work by our Joint Terrorism Task Forces across the country, our partners including the U.S. Postal Inspection Service and U.S. Secret Service, and the FBI’s Laboratory and Counterterrorism Divisions to bring Cesar Sayoc to justice,” said Assistant Director Michael McGarrity of the FBI’s Counterterrorism Division. "This case should serve as a warning to anyone looking to intimidate or hurt those they disagree with that the FBI will stop at nothing to protect the communities we serve from the threat of domestic terrorism."

FBI Assistant Director William F. Sweeney Jr. said:  “Sayoc’s crimes were intended to incite fear among his targets and uncertainty among the general public, leading to a significant deployment of various law enforcement resources in a nationwide search to find him.  When called upon, our FBI JTTFs across the country – along with our partner agencies – did what we do best, working swiftly, and side by side, to bring him to justice.  Unlike most of our investigations, this case played out in plain view from beginning to end.  Today's sentencing is as good a time as any to remind the public that our JTTFs are working behind the scenes on a daily basis, in much the same way, to keep our communities safe.”

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

In October 2018, Sayoc mailed from Florida 16 padded envelopes, each containing an improvised explosive device (IED), to addresses in New York, New Jersey, Washington, D.C., Delaware, Georgia, and California.  In alphabetical order, Sayoc’s intended victims (the Victims) were former Vice President Joseph Biden, Senator Cory Booker, former CIA Director John Brennan, former Director of National Intelligence James Clapper, former Secretary of State Hillary Clinton, CNN, Robert De Niro, Senator Kamala Harris, former Attorney General Eric Holder, former President Barack Obama, George Soros, Thomas Steyer, and Representative Maxine Walters.  Between October 22 and Nov. 2, 2018, the FBI and the U.S. Postal Service recovered all of the 16 IEDs mailed by Sayoc.

Each of the IEDs mailed by Sayoc contained a mix of explosive powder from fireworks, shards of glass, and pool chemicals, designed to maximize potential injuries, damage, and the burning of his intended Victims’ skin.  On the outside of each IED, Sayoc placed photographs of each of the Victims, and sometimes their families and others, with a red “X” over their faces.  Sayoc also affixed black flags, similar in appearance to banners used by ISIS and other foreign terrorist organizations, to the outside of the IEDs.    

Sayoc had posted incendiary comments about liberal political figures online since at least 2011.  In the months prior to mailing the IEDs, Sayoc incited violence against the Victims, conveyed direct threats against them, and researched where and how to carry out his attack.  For example, in April 2016, he wrote that former President Barack Obama’s “head need[ed] to be chopped off” and he wished “death” to George Soros and former Attorney General Eric Holder.  In April 2017, Sayoc wished “Death” to “all Clintons” and in November 2017 posted “Your days are number[ed] Steyer[].”  Beginning in December 2017, Sayoc researched the Victims and their addresses.  For example, on Dec. 23, 2017, Sayoc searched for the address of Congresswoman Maxine Waters, and, over the course of the ensuing months, Sayoc repeatedly searched for the “home address” or “address” of several of the Victims, and Sayoc intensified these searches in the days before his attack.  Finally, Sayoc researched online how to make a “letter bomb” and watched videos depicting explosions.    

The FBI arrested Sayoc in Plantation, Florida, on Oct. 26, 2018—less than five days after the October 22 recovery of the first IED, which Sayoc mailed to Soros in New York. 

In addition to his prison sentence, Sayoc, 57, of Florida, was sentenced to five of supervised release.

Assistant Attorney General Demers and U.S. Attorney Berman praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force, which principally consists of agents from the FBI and detectives from the New York City Police Department, and the U.S. Postal Inspection Service. Assistant Attorney General Demers and U.S. Attorney Berman also thanked the U.S. Attorney’s Offices for the Southern District of Florida, the District of Columbia, the District of Delaware, the District of New Jersey, the Central District of California, the Eastern District of California, the Northern District of California, and the Northern District of Georgia for their assistance in the investigation.  

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Sam Adelsberg, Emil J. Bove III, Jane Kim, and Jason A. Richman are in charge of the prosecution, with assistance from Trial Attorney David Cora of the Counterterrorism Section of the Department of Justice’s National Security Division.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Mark H. Watson Jr., U.S. Department of Labor (“DOL”) Wage and Hour Division Northeast Regional Administrator, announced today a settlement of a civil fraud lawsuit against NAGAN CONSTRUCTION, INC. (“NAGAN”), a construction contractor based in Inwood, New York, for underpaying workers on two federally funded construction projects and submitting false certified payroll reports that misclassified thousands of hours of work performed by these workers.  The United States’ Complaint alleges that NAGAN violated federal prevailing wage requirements by paying 20 employees the wage rate applicable to “laborer” work – which typically involves unskilled tasks such as cleaning and transporting materials and equipment – when the employees had performed skilled work, such as carpentry and bricklayer tasks, which entitled them to a substantially higher wage rate. 

As part of the settlement approved by U.S. District Judge Analisa Torres, NAGAN has agreed to pay the United States a sum of $435,000, $242,375.60 of which will be distributed to the current and former NAGAN employees who were underpaid.  In addition, NAGAN admitted and accepted responsibility for conduct alleged in the Complaint, including underpaying its employees and improperly misclassifying thousands of hours of work they performed.  NAGAN also agreed to implement specific measures designed to ensure future compliance with applicable federal prevailing wage laws, including conducting periodic internal compliance audits and ensuring that supervisors are fully trained on federal labor standards. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “On two large construction projects funded by the government, Nagan Construction violated federal labor laws – as well as its contracts – by failing to pay skilled employees the wages they were owed and then falsely describing the nature of the employees’ work in reports submitted to the government.  This office will hold companies accountable when they cheat workers out of the wages they rightfully earn and then submit false reports to the government to justify the lower wage rate.”   

DOL Wage and Hour Division Regional Administrator Mark H. Watson Jr. said: “Federal contractors must properly classify their employees and pay them the correct required rates and benefits.  Not doing so not only denies workers their hard-earned wages, it also places law-abiding employers at a competitive disadvantage.  The U.S. Department of Labor will utilize all available legal options and work cooperatively with our fellow law enforcement agencies to hold those who commit violations accountable.  We encourage all employers to reach out to us for guidance, and to use the wide variety of tools we provide to help them comply with the law and avoid violations like those found in this case.”         

The Davis-Bacon Act (the “DBA”) requires workers on federally funded construction projects in excess of $2,000 to be paid the local “prevailing wage.”  The DOL issues wage determinations setting forth the applicable local prevailing wages for different work classifications on a project.  The DBA requirements and applicable wage determinations are incorporated into project contracts.  The construction contractor must submit certified payroll records to the federal contracting agency reflecting the employees who worked on a project each day, the hours each employee worked, the classification of the work performed, and the rate and total amount each employee was paid.

As alleged in the Complaint filed in Manhattan federal court:

In 2012, NAGAN entered into a contract with the United States Merchant Marine Academy (“USMMA”) to renovate a dining facility called Delano Hall located in Kings Point, New York (the “Delano Hall Project”).  In 2014, NAGAN entered into a contract with the DOL to renovate the South Bronx Job Corps Center located in Bronx, New York (the “Job Corps Center Project”).  NAGAN served as the prime contractor on the Delano Hall Project and the Job Corps Center Project, which were completed in or about March 2015 and February 2018, respectively.

During the course of the projects, NAGAN submitted monthly reports to the USMMA and the DOL requesting payment and describing the work performed during the month.  NAGAN regularly submitted false certified payroll reports that misclassified thousands of hours of skilled work as “laborer” work.

NAGAN knowingly underpaid 20 employees working on the two projects and failed to pay them the prevailing wages they were entitled to based on the nature of the work the employees performed.  NAGAN routinely paid its employees the wage rate applicable to “laborer” work – which typically involves unskilled tasks such as cleaning and transporting materials and equipment – when in fact the employees had performed skilled work, such as carpentry and bricklayer tasks.  The prevailing wage rates for carpentry, bricklayer, and other skilled work were substantially higher than the wage rate for laborer work on both projects.

In the settlement agreement, NAGAN admits, acknowledges, and accepts responsibility for the following conduct:

• NAGAN’s president and CEO, as well as other senior NAGAN managers, were aware of the requirement to pay workers the prevailing wage rates listed in the applicable wage determinations.
• NAGAN underpaid 20 employees who worked on the Delano Hall Project and the Job Corps Center Project.  NAGAN improperly misclassified thousands of hours of the work these employees performed on the two projects.  NAGAN paid these employees for this work using the prevailing laborer wage, instead of the higher prevailing wage to which they were entitled for the carpentry, bricklayer, and other skilled work the employees had actually performed.
• NAGAN failed to adequately train its supervisors and managers on how to properly classify work in order to comply with DBA requirements.
• NAGAN failed to implement effective systems and mechanisms to verify that the company properly classified its employees and consistently paid them the correct prevailing wage as required by federal law.

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 DOL’s Wage and Hour Division for its investigative efforts and significant assistance with the case.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and John C. Demers, Assistant Attorney General for National Security, announced today that CESAR ALTIERI SAYOC was sentenced today to 20 years in prison in connection with his mailing of 16 improvised explosive devices to victims across the country.  SAYOC pled guilty to a 65-count Superseding Information on March 21, 2019, before U.S. District Judge Jed S. Rakoff, who also imposed today’s sentence. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Cesar Sayoc assembled and mailed explosive devices to high-ranking officials and former elected leaders to incite fear and to terrorize his victims.  Though thankfully no one was hurt by his actions, Sayoc’s domestic terrorism challenged our nation’s cherished tradition of peaceful political discourse.  For his wanton disregard of the safety of so many people, Sayoc will now spend 20 years in prison.”

Assistant Attorney General for National Security John C. Demers said:  “Time and again, we have seen individuals attempt to express political views and resolve political disagreements through violence.  Cesar Sayoc has now been sentenced for acts of domestic terrorism that are repulsive to all Americans who cherish a society built on respectful and non-violent political discourse.  Our democracy depends on our debating our strongly held views peacefully and respectfully, and when someone does not, on our prosecuting and punishing those who do not abide by these values.  I applaud the efforts of so many in our law enforcement community whose alertness and tirelessness led to the prompt arrest of the defendant before he was able to injure anyone, as well as those whose efforts led to today’s sentence.”

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

In October 2018, SAYOC mailed from Florida 16 padded envelopes, each containing an improvised explosive device (“IED”), to addresses in New York, New Jersey, Washington, D.C., Delaware, Georgia, and California.  In alphabetical order, SAYOC’S intended victims (the “Victims”) were former Vice President Joseph Biden, Senator Cory Booker, former CIA Director John Brennan, former Director of National Intelligence James Clapper, former Secretary of State Hillary Clinton, CNN, Robert De Niro, Senator Kamala Harris, former Attorney General Eric Holder, former President Barack Obama, George Soros, Thomas Steyer, and Representative Maxine Walters.  Between October 22 and November 2, 2018, the Federal Bureau of Investigation (“FBI”) and the U.S. Postal Service recovered all of the 16 IEDs mailed by SAYOC.

Each of the IEDs mailed by SAYOC contained a mix of explosive powder from fireworks, shards of glass, and pool chemicals, designed to maximize potential injuries, damage, and the burning of his intended Victims’ skin.  On the outside of each IED, SAYOC placed photographs of each of the Victims, and sometimes their families and others, with a red “X” over their faces.  SAYOC also affixed black flags, similar in appearance to banners used by ISIS and other foreign terrorist organizations, to the outside of the IEDs.    

SAYOC had posted incendiary comments about liberal political figures online since at least 2011.  In the months prior to mailing the IEDs, SAYOC incited violence against the Victims, conveyed direct threats against them, and researched where and how to carry out his attack.  For example, in April 2016, he wrote that former President Barack Obama’s “head need[ed] to be chopped off” and he wished “death” to George Soros and former Attorney General Eric Holder.  In April 2017, SAYOC wished “Death” to “all Clintons” and in November 2017 posted “Your days are number[ed] Steyer[].”  Beginning in December 2017, SAYOC researched the Victims and their addresses.  For example, on December 23, 2017, SAYOC searched for the address of Congresswoman Maxine Waters, and, over the course of the ensuing months, SAYOC repeatedly searched for the “home address” or “address” of several of the Victims, and SAYOC intensified these searches in the days before his attack.  Finally, SAYOC researched online how to make a “letter bomb” and watched videos depicting explosions.    

The FBI arrested SAYOC in Plantation, Florida, on October 26, 2018—less than five days after the October 22 recovery of the first IED, which SAYOC mailed to Soros in New York. 

*                      *                      *

In addition to his prison sentence, SAYOC, 57, of Florida, was sentenced to five years of supervised release.

Mr. Berman praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force, which principally consists of agents from the FBI and detectives from the New York City Police Department, and the U.S. Postal Inspection Service.  Mr. Berman also thanked the U.S. Attorney’s Offices for the Southern District of Florida, the District of Columbia, the District of Delaware, the District of New Jersey, the Central District of California, the Eastern District of California, the Northern District of California, and the Northern District of Georgia for their assistance in the investigation.  

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Sam Adelsberg, Emil J. Bove III, Jane Kim, and Jason A. Richman are in charge of the prosecution, with assistance from Trial Attorney David Cora of the Counterterrorism Section of the Department of Justice’s National Security Division.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Jonathan D. Larsen, Special Agent in Charge of the New York Office of the Internal Revenue Service, Criminal Investigation Division (“IRS-CI”), 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 arrests today of MEHDI MOSLEM and SAAED MOSLEM, father-and-son operators of the Exclusive Motor Sports car dealership in Central Valley, New York.  The defendants will be presented before United States Magistrate Judge Lisa Margaret Smith. 

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Mehdi and Saaed Moslem defrauded the United States by understating income and inventory of their auto dealership, and they defrauded lenders by overstating their net worth in loan applications.  Whether allegedly understating or overstating, father and son were falsifying – and committing crimes.”           

IRS-CI Special Agent in Charge Jonathan D. Larsen said:  “Today’s arrests show that underreporting business gross receipts to conceal millions of dollars of income is a serious criminal offense.  IRS Criminal Investigation will pursue those individuals who break the law and violate the American tax system.”

FBI Assistant Director William F. Sweeney Jr. said:  “Lying to financial institutions and skirting the regulations put in place by U.S. tax laws is a violation of federal law, crimes both Mehdi and Saaed Moslem are charged with today.  The popular saying about certainties in life omits a third guarantee – when the FBI and IRS catch you engaging in fraudulent behavior and illegal business practices, you will be charged.”           

As alleged in the Indictment, which was unsealed today in White Plains federal court:[1]

From 2009 through 2016, MEHDI MOSLEM and SAAED MOSLEM conspired to defraud the United States by concealing millions of dollars of profits relating to Exclusive Motor Sports from the IRS.  To falsely lower their business income, MEHDI MOSLEM and SAAED MOSLEM caused their accountant to prepare partnership tax returns that significantly understated Exclusive Motor Sports’ gross receipts and inventory.  The fraudulent business income figures passed through to MEHDI MOSLEM’s and SAAED MOSLEM’s personal tax returns filed with the IRS, resulting in a substantial underreporting of the amount of tax due.  SAAED MOSLEM then used his fraudulent income tax returns and made other false statements to conceal his assets from creditors when he filed for bankruptcy in 2015.

From 2011 through 2017, MEHDI MOSLEM and SAAED MOSLEM also conspired to defraud multiple financial institutions by submitting falsely inflated net worth statements and fabricated tax returns in connection with loan applications, including for a $1.2 million mortgage on the Exclusive Motor Sports property in Central Valley, on which they later defaulted. 

*                *                *

MEHDI MOSLEM, 70, of Central Valley, New York, and SAAED MOSLEM, 35, of Central Valley, New York, are each charged with one count of conspiracy to defraud the United States, which carries a maximum sentence of five years in prison, and one count of bank fraud conspiracy, which carries a maximum sentence of 30 years in prison.  SAAED MOSLEM is also charged with two counts of making false statements to a lender, each of which carries a maximum sentence of 30 years in prison, and one count of concealing assets and making false declarations in a bankruptcy case, which carries a maximum sentence of five 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 outstanding investigative work of the IRS-CI and the FBI.

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

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that DIALECTI VOUDOURIS, a doctor who practiced in Manhattan, pled guilty today to conspiracy to violate the Anti-Kickback Statute, in connection with a scheme to prescribe Subsys, a potent fentanyl-based spray, in exchange for bribes and kickbacks from Subsys’s manufacturer, Insys Therapeutics.  VOUDOURIS pled guilty before U.S. Magistrate Judge Ona T. Wang.  The case is assigned to U.S. District Judge Kimba M. Wood.

U.S. Attorney Geoffrey S. Berman said:  “As she admitted today, Dialecti Voudouris, a prominent Manhattan oncologist, prescribed her patients Subsys, a powerful fentanyl drug, in exchange for over $100,000 in bribes and kickbacks from the drug’s manufacturer, Insys.  Today’s guilty plea – the third in this case – once again demonstrates that when a doctor’s best medical judgment is compromised by bribes, this Office will hold that physician to account, especially when a dangerous opioid like fentanyl is involved.”

According to the allegations contained in the Indictment against VOUDOURIS and filings in related proceedings:

The Insys Speakers Bureau

Subsys, which is manufactured by Insys, is a powerful painkiller approximately 50 to 100 times more potent than morphine.  The FDA approved Subsys only for the management of breakthrough pain in cancer patients.  Prescriptions of Subsys typically cost thousands of dollars each month, and Medicare and Medicaid, as well as commercial insurers, reimbursed prescriptions written by VOUDOURIS.

In or about August 2012, Insys launched a “Speakers Bureau,” a roster of doctors who would conduct programs (“Speaker Programs”) purportedly aimed at educating other practitioners about Subsys.  In reality, Insys used its Speakers Bureau to induce the doctors who served as speakers to prescribe large volumes of Subsys by paying them Speaker Program fees.  Speakers were supposed to conduct an educational slide presentation for other health care practitioners at each Speaker Program.  In reality, many of the Speaker Programs were predominantly social affairs where no educational presentation about Subsys occurred.  Attendance sign-in sheets for the Speaker Programs were frequently forged by adding the names and signatures of health care practitioners who had not actually been present.

VOUDOURIS’s Participation in the Scheme

VOUDOURIS, a doctor specializing in oncology and hematology who worked at a private medical office on the Upper East Side, received approximately $119,400 in Speaker Program fees from Insys in exchange for prescribing large volumes of Subsys.  During a September 2014 dinner with several Insys executives and managers, a senior Insys executive told VOUDOURIS, who had recently been nominated by Insys as a Speaker, that he wanted her to prescribe Subsys to one new patient every day, and that VOUDOURIS would be allocated Speaker Programs if she continued prescribing Subsys.  In a conversation with an Insys manager and sales representative soon thereafter, VOUDOURIS was once again informed that Insys expected her to write more Subsys prescriptions.  In the months that followed the dinner and this conversation, VOUDOURIS’s Subsys prescriptions rose significantly.  By the end of the first quarter of 2015, VOUDOURIS – who had prescribed very minimal quantities of Subsys prior to becoming a Speaker for Insys – was approximately the 10th-highest prescriber of Subsys nationally, accounting for total net sales of Subsys of approximately $581,500 in that quarter alone.

*          *          *

VOUDOURIS, 48, of Queens, New York, pled guilty to one count of conspiracy to violate the Anti-Kickback Statute, which carries a maximum sentence of five years in prison.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  VOUDOURIS is scheduled to be sentenced by Judge Wood on January 3, 2020.

Mr. Berman praised the investigative work of the Federal Bureau of Investigation, and thanked the Department of Health and Human Services’ Office of Inspector General for its participation in the investigation.

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Noah Solowiejczyk and David Abramowicz are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Michael Machak, Acting Special Agent in Charge of the Drug Enforcement Administration’s Special Operations Division, announced today that HECTOR EMILIO FERNANDEZ ROSA, a/k/a “Don H,” was sentenced to life in prison for conspiring to distribute and possess with intent to distribute controlled substances.  FERNANDEZ ROSA made approximately $50 million in connection with the distribution of 135 tons of cocaine and 20 tons of methamphetamine precursor chemicals, which he was ordered to forfeit in connection with sentencing.  FERNANDEZ ROSA was provisionally arrested in Honduras in October 2014, and extradited to the United States in September 2015.  FERNANDEZ ROSA previously pled guilty before U.S. Circuit Judge Richard J. Sullivan, who imposed today’s sentence while sitting by designation.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Hector Emilio Fernandez Rosa, operating with impunity in Honduras, trafficked more than 135 tons of cocaine to the United States over the course of 17 years.  By paying millions of dollars in bribes to Honduran officials, including the former president, he ensured safe passage of his drugs to the U.S.  He also protected his trafficking organization by eliminating his rivals, murdering 19 people, including Honduran Congressman Mario Fernando Hernández Bonilla in 2008.  Today, one of the most prolific and violent drug traffickers has been brought to justice.”

Acting Special Agent in Charge Michael Machak said:  “Bringing to justice and putting behind bars individuals like Fernandez Rosa not only makes our country safer, but keeps enormous quantities of dangerous drugs off our streets.  This should serve as a message that DEA will not tolerate and will prosecute dangerous drug traffickers that wreak havoc on our country.”

According to court filings and statements made during court proceedings: 

In approximately 1998, FERNANDEZ ROSA started to participate in drug trafficking in Honduras with a cell of traffickers distributing approximately five tons of cocaine per year.  By 2003, FERNANDEZ ROSA assumed a management position in the group, which increased the volume of cocaine it was distributing to approximately 10 tons per year until at least 2013.  FERNANDEZ ROSA coordinated the payment of large bribes to members of the Honduran National Police and at least one Honduran military official who helped escort and assure safe passage of large drug shipments.  For example, in approximately 2005, FERNANDEZ ROSA and other co-conspirators paid a Honduran presidential candidate more than $2 million in narcotics proceeds in an effort to install one of FERNANDEZ ROSA’s allies as the Vice Minister of Security in Honduras.  The candidate prevailed in the election, but did not follow through on his promise to FERNANDEZ ROSA.  During the same period, FERNANDEZ ROSA and other co-conspirators spent approximately $100,000 on bribes to law enforcement in connection with each of their drug shipments.

Between 2008 and 2010, FERNANDEZ ROSA diversified his operations by working to receive approximately 20 tons of ephedrine at Puerto Cortés, which is the biggest commercial port in Honduras.  In connection with this scheme, FERNDNEZ ROSA worked with key lieutenants of Joaquin El Chapo Guzman, a/k/a “El Chapo,” to help the Sinaloa Cartel manufacture large quantities of methamphetamine in Honduras and Guatemala, which was then transported north over land, like the cocaine, and imported into the United States. 

In November 2008, following a seizure of related ephedrine in France, FERNANDEZ ROSA ordered the murder of Honduran Congressman Mario Fernando Hernández Bonilla.  The assassination was one of 19 murders that FERNANDEZ ROSA ordered or carried out.  In 2003, for example, FERNANDEZ ROSA directed his drug trafficking workers to kidnap a man who worked for a rival trafficker.  After the victim was kidnapped, FERNANDEZ ROSA’s workers tortured him and, as FERNANDEZ ROSA watched, placed him in a recently dug grave while he was still alive.  FERNANDEZ ROSA and his workers than executed the victim.  In 2013, FERNANDEZ ROSA deployed an assassin to murder someone FERNANDEZ ROSA suspected had helped kill a relative, and the assassin coordinated a large attack that resulted in killing FERNANDEZ ROSA’s target and approximately nine additional victims.

*                      *                      *

In addition to the prison term, FERNANDEZ ROSA, 46, of Honduras, was also sentenced to five years of supervised release and ordered to pay forfeiture in the amount of $50,000,000. 

Mr. Berman praised the outstanding efforts of the DEA’s Special Operations Division Bilateral Investigations Unit, New York Strike Force, and Tegucigalpa Country Office, as well as the U.S. Department of Justice’s Office of International Affairs.

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Emil J. Bove III and Matthew J. Laroche are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that ROILAND GOTIANGCO was arrested on fraud and aggravated identity theft charges in connection with his embezzlement from the security and protection company (the “Company”) where he previously worked as the Head of Collections.  Specifically, GOTIANGCO has been charged with wire fraud and aggravated identity theft for falsifying customer refund requests and pocketing the refunds, and with wire fraud for accepting payments from certain Company customers in exchange for concealing the amounts those customers owed the Company.  GOTIANGCO was arrested today in River Edge, New Jersey, and was presented before Magistrate Ona T. Wang in Manhattan federal court.

Manhattan U.S. Geoffrey S. Berman said: “Roiland Gotiangco abused his position and lined his own pockets to the tune of over $1.3 million.  The means were sophisticated but the motive was simple:  greed.  We will continue to work with our law enforcement partners to root out fraud wherever it is found.”

*                *                *

ROILAND GOTIANGCO, 38 of River Edge, New Jersey, is charged with two counts of wire fraud and one count of aggravated identity theft.  The wire fraud counts each carry a maximum potential sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.  The aggravated identity theft charge carries a mandatory minimum sentence of two years in prison consecutive to any other term of imprisonment imposed and a maximum fine of $250,000.  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 the FBI.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that HECTOR MAY, the president of Executive Compensation Planners, Inc. (“ECP”), a registered investment adviser and financial planning firm located in New City, New York, was sentenced to 13 years in prison for participating in a conspiracy to defraud certain investment advisory clients (the “Victims”) out of more than $11 million.  MAY was sentenced yesterday by United States District Judge Vincent Briccetti. 

U.S. Attorney Berman also announced the return of an indictment charging VANIA MAY BELL, MAY’s daughter and former comptroller of ECP, with participating in the conspiracy to defraud certain investment advisory clients.  She was arraigned this afternoon before U.S. District Court Judge Nelson S. Roman.

U.S. Attorney Geoffrey S. Berman said:  “For more than two decades, May conceived and orchestrated a multimillion-dollar Ponzi scheme.  His conduct was marked by extreme cunning, ruthlessness, and utter disregard for the well-being of his victims, including aging couples, close friends, relatives, and an employment pension plan.”  

At the sentencing hearing, Judge Briccetti said that MAY is “a fraud and a thief,” and that his conduct was “appalling, reprehensible, and evil.”

According to the allegations in the Information to which MAY pled guilty, court filings, statements made in court, and the Indictment charging BELL[1]:      

Since 1982, MAY was the president of ECP and provided financial advisory services to numerous clients.  Since 1994, MAY was a registered representative of a broker dealer (“Broker Dealer-1”).  In its role as a broker dealer, Broker Dealer-1 facilitated the buying and selling of securities for clients of Broker Dealer-1’s registered representatives, including clients of MAY.  To that end, Broker Dealer-1 and associated clearing firms maintained securities accounts for ECP’s clients and, through those accounts, held ECP’s clients’ money, executed their securities trades, produced account statements reflecting activity in the clients’ accounts, and forwarded these account statements to ECP’s clients.

In order to obtain money from the Victims’ securities accounts with Broker Dealer-1, MAY advised the Victims, among other things, that they should use money from those accounts to have ECP, rather than Broker Dealer-1, purchase bonds on their behalf.  He further represented that by purchasing bonds through ECP directly, the Victims could avoid transaction fees.  Because MAY lacked the authority to withdraw money directly from the Victims’ accounts with Broker Dealer-1, he persuaded the Victims to withdraw the money themselves and to forward that money to an ECP “custodial” account (the “ECP Custodial Account”), so that he could use the money to purchase bonds on their behalf. 

With the assistance of BELL, MAY guided the Victims, first, to withdraw their money from their Broker Dealer-1 accounts, and second, to send that money to the ECP Custodial Account by wire transfer or check.  At times, MAY falsely represented that the funds being withdrawn from Victims’ Broker Dealer-1 accounts were the proceeds of prior bond purchases MAY had made.  After the Victims sent their money to the ECP Custodial Account, MAY did not use the money to purchase bonds.  Instead, MAY and BELL spent the money on business expenses, personal expenses, and to make payments to certain Victims in order to perpetuate the scheme and conceal the fraud. 

Specifically, in some cases, MAY used Victims’ funds to make purported bond interest payments to other Victims.  In other cases, MAY used Victims’ funds to make payments to other Victims who wished to withdraw funds from their accounts.  MAY and BELL also created phony “consolidated” account statements that they issued through ECP and sent to the Victims.  These “consolidated” account statements purported to reflect the Victims’ total portfolio balances and included the names of bonds MAY falsely represented that he purchased for the Victims and the amounts of interest the Victims were supposedly earning on the bonds.  In order to create the phony consolidated account statements, MAY provided BELL with bond names and false interest earnings, and BELL created ECP computerized account statements and distributed them to the Victims.

To keep track of the money that the co-conspirators were taking from the Victims, BELL processed the Victims’ payments for the purported bonds, entered them in a computerized accounting program, and, through that program, kept track of how MAY and BELL received and spent the Victims’ stolen money.  In this way, from the late 1990’s through March 9, 2018, MAY and BELL induced Victims to forward them more than $11,400,000.

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In addition to his prison term, MAY, 78, of Orangeburg, New York, was ordered to serve three years of supervised release, pay $8,041,233 in restitution, and forfeit $11,452,185.

BELL, 54, of Montvale, New Jersey, is charged with one count each of conspiracy to commit wire fraud and wire fraud.  Each count carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.  The maximum potential 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 investigative work of the U.S. Postal Inspection Service, Special Agents of the United States Attorney’s Office, and the Federal Bureau of Investigation.  He also thanked the Securities and Exchange Commission, which initiated civil proceedings against MAY and BELL, for its assistance.

The criminal case is being prosecuted by the Office’s White Plains Division.  Assistant U.S. Attorneys Margery B. Feinzig and Vlad Vainberg are in charge of the prosecution.

 

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

 

Audrey Strauss, Attorney for the United States acting under authority conferred by 28 U.S.C. § 515 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 MICHAEL CARROLL and MICHAEL PAPPAGALLO, the respective former chief executive officer and chief financial officer of Brixmor Property Group (“Brixmor”), a publicly traded real estate investment trust (“REIT”), with fraud.  Specifically, CARROLL and PAPPAGALLO were charged with securities fraud in connection with their participation in a scheme to fraudulently “smooth” a key metric reported in Brixmor’s public filings and used by the investing public to evaluate the financial performance of publicly traded REITs such as Brixmor.  The case is assigned to U.S. District Judge Colleen McMahon.

MICHAEL CARROLL and MICHAEL PAPPAGALLO are expected to be presented later today before Judge McMahon in Manhattan federal court.

Deputy U.S. Attorney Audrey Strauss said:  “As alleged, the most senior executives at Brixmor engaged in a years-long scheme to cook the books and deceive the investing public.  When executives allegedly lie to the investing public about their company’s performance and thereby harm the integrity of the market, they must be held accountable.”

USPIS Inspector-in-Charge Philip R. Bartlett said:  “By devising schemes to make Brixmor more appealing to the investing public, Carroll and Pappagallo not only committed criminal acts, their actions led them down a path of distrust from shareholders.  The investing public depends on the veracity of information released by publicly traded companies and the U.S. Postal Inspection Service is devoted in protecting the integrity of this information.”

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

Brixmor is a publicly-traded REIT headquartered in New York, New York.  At all relevant times, Brixmor owned and operated hundreds of commercial shopping centers located in cities around the United States.  From the time of its initial public offering in 2013 until 2015, MICHAEL CARROLL served as Brixmor’s chief executive officer, MICHAEL PAPPAGALLO served as Brixmor’s chief financial officer, Steven Splain served as Brixmor’s chief accounting officer, and Michael Mortimer served as a senior vice president for management accounting.  As a publicly traded company, Brixmor was required to file, and filed, quarterly and annual reports with the U.S. Securities and Exchange Commission (the “SEC”) that were also available to the investing public.  These reports contained important information regarding Brixmor’s financial performance for the relevant reporting period.  As the respective CEO and CFO of the company, CARROLL and PAPPAGALLO were required to sign these reports and file certifications entitled “Certification of Periodic Report Under Section 302 of the Sarbanes-Oxley Act of 2002” that attested to, among other things, the veracity of Brixmor’s SEC filings.  Brixmor, like many public companies, also filed, and otherwise released to the investing public, supplemental documents along with their periodic filings that provided additional representations regarding Brixmor’s performance and financial condition.

In addition to financial metrics governed by Generally Accepted Accounting Principles (“GAAP”), Brixmor, like many REITs, reported a non-GAAP metric related to its financial performance known as Same Store Net Operating Income (“SS-NOI”).  SS-NOI measures the amount of income derived from a set group of properties (the “Property Pool”).  In addition to SS-NOI, Brixmor also reported a metric that tracked the increase (or decrease) in SS-NOI (“SS-NOI Growth”) for a set group of properties between one period and the same period in the prior year.  More specifically, SS-NOI Growth is derived from comparing SS-NOI in a particular reporting period (the “Current Period”) with SS-NOI in a past period, for example, the same quarter in the prior year, (the “Comparison Period”) for the same Property Pool.  SS-NOI Growth was a key performance metric utilized by investors when assessing investments in publicly traded REITs such as Brixmor.  Because of the importance of this metric, Brixmor also provided forecasts to the investing public on what it expected SS-NOI Growth to be for each annual reporting period, often narrowing that guidance over the course of a given year.    

From 2013 through 2015, CARROLL and PAPPAGALLO regularly touted Brixmor’s consistent SS-NOI Growth from quarter to quarter and understood that the investing public paid significant attention to this metric.  For example, on August 6, 2014, CARROLL stated during a quarterly earnings call for the second quarter of 2014 that Brixmor had “a steady state portfolio with a large same property pool that is delivering consistent organic growth. . . . As I said, we are consistent, transparent and easy to understand.”  Similarly, on September 17, 2015, PAPPAGALLO spoke publicly at an industry conference in New York, New York, stating that “[S]ame-property NOI, which is certainly a metric which is looked at very, very carefully by REIT investors, it’s been at or above 3.4% for 12 quarters.  Very consistent same-property NOI growth coming from our primary drivers.”  CARROLL and PAPPAGALLO also understood that the investing public paid careful attention to whether Brixmor’s SS-NOI Growth fell within previously forecasted guidance for the year.  For every quarter between the fourth quarter of 2013 and the third quarter of 2015, Brixmor’s reported SS-NOI that fell squarely within its forecasted guidance for the year. 

In reality, however, Brixmor’s SS-NOI Growth was not as steady and consistent quarter over quarter as represented to the public, and instead fluctuated significantly – often outside the bounds of what Brixmor’s guidance was for the relevant year.   From 2013 through 2015, however, CARROLL, PAPPAGALLO, Splain, and Mortimer engaged in a scheme to hide that volatility from the investing public and instead report SS-NOI Growth numbers each quarter that showed even growth and that always fell in line within the annual guidance.  Rather than report the true results of their operations, CARROLL and PAPPAGALLO dictated where Brixmor’s reported SS-NOI Growth should land each quarter, and others, including Splain and Mortimer, carried out the necessary manipulation to reach those results. 

CARROLL, PAPPAGALLO, Splain, and Mortimer engaged in this manipulation of SS-NOI Growth through three primary means.  First, in quarters in which Brixmor generated more than enough income to meet the bottom, or in some cases middle, of its guidance range, it illicitly “stored” reportable income instead of immediately recognizing it, a deceptive practice often referred to as “cookie jar” accounting.  In fact, certain Brixmor employees frequently referred to a particular account that was used to hold such income as the “cookie jar.”  Brixmor employees then utilized that income in later quarters as necessary to inflate SS-NOI Growth in order to report the desired steady and smooth SS-NOI Growth to the investing public.  For example, on April 6, 2015, PAPPAGALLO emailed Splain, Mortimer, and others to schedule a meeting “regarding same property NOI planning” the “objective” of which was “to try to make decisions on 1Q number – push a little or squirrel away stuff for 2Q & 3Q.” 

Second, Brixmor reported in all of its public filings that it did not take lease termination income (“LSI”) into account when calculating SS-NOI.  LSI is money that a tenant pays as a lump sum payment upon the early termination of a lease.  Notwithstanding these representations, CARROLL, PAPPAGALLO, Splain, and Mortimer included some portion of LSI within SS-NOI when doing so helped show steady SS-NOI Growth or to meet guidance. 

Third, CARROLL, PAPPAGALLO, Splain, and Mortimer at times removed payments that had been included in SS-NOI in a prior Comparison Period in order to the boost SS-NOI Growth for the current period.  Because SS-NOI Growth effectively measures the SS-NOI change from one period to another, retroactively reducing the SS-NOI for a prior Comparison Period has the effect of creating a bigger spread to SS-NOI in the current period, thereby increasing the SS-NOI Growth metric for the current period.  For example, after the close of the third quarter of 2015 but before reporting SS-NOI Growth for that period, CARROLL instructed certain Brixmor employees as to what SS-NOI Growth figures he wanted the company to show for the third and fourth quarters of the year.  CARROLL, PAPPAGALLO, Splain, Mortimer, and others then went to work manipulating Brixmor’s SS-NOI Growth number for the third quarter, including by making multiple changes to the Comparison Period, in order to report the SS-NOI Growth number that had been pre-determined by CARROLL – a number that showed consistent growth over the year and was within guidance.  Toward the end of these discussions, on October 6, 2015, PAPPAGALLO sent an email to Splain and Mortimer, stating “[Splain] and [Mortimer] LLC Bratwurst at its Finest,” to which Mortimer responded with an image of a man holding a batch of sausage.

As a result of these manipulations, Brixmor reported steady quarter-by-quarter SS-NOI Growth between 2013 and 2015 that consistently fell within the company’s public annual guidance.  The below chart shows Brixmor’s reported SS-NOI Growth as compared to reported guidance:

 

The below chart shows the actual SS-NOI Growth figures absent manipulation:

 

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MICHAEL CARROLL, 51, of New York, New York, and MICHAEL PAPPAGALLO, 60, of Trumbull, Connecticut, were each charged in the Indictment with conspiracy to commit securities fraud and other offenses (Count One), securities fraud (Count Two), making false statements in filings with the SEC (Counts Three and Four); and filing false certifications (Counts Five and Six).  The securities fraud, false filings charges, and false certification charges each carry a maximum prison term of 20 years.  The charge of conspiracy carries a maximum prison term of five years.

Steven Splain, 57, of Cheshire, Connecticut, pled guilty on July 16, 2019, before United States District Judge Vernon S. Broderick to one count of conspiracy to commit securities fraud and to make false filings with the SEC, and one count of securities fraud.  The conspiracy charge carries a maximum prison term of five years and the securities fraud charge carries a maximum prison term of 20 years.

Michael Mortimer, 49, of Yardley, Pennsylvania, pled guilty on July 10, 2019, before United States District Judge Valerie E. Caproni to one count of conspiracy to commit securities fraud and to make false filings with the SEC, and one count of securities fraud.  The conspiracy charge carries a maximum prison term of five years and 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 sentencings of the defendants will be determined by the judge.

Ms. Strauss praised the investigative work of the U.S. Postal Inspection Service, and thanked the Federal Bureau of Investigation for its assistance.  She also thanked the Securities and Exchange Commission, which has brought a civil action against the defendants.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Martin S. Bell, Daniel M. Tracer, and Rebecca Mermelstein 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 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, announced today that EMEKA NNAWUBA, a/k/a “Benjamin Alabie,” who is a member of the United States Army Reserves, has pled guilty to participating in a scheme to launder the proceeds of frauds perpetrated against dozens of victims.  NNAWUBA pled guilty today before United States District Judge Katherine Polk Failla, who will impose sentence on January 7, 2020.

U.S. Attorney Geoffrey S. Berman said:  “Emeka Nnawuba admitted today that he received over $1 million from unsuspecting women in internet romance scams and laundered those proceeds to conceal their origin.  Nnawuba callously preyed upon victims looking for companionship, only to come away as victims of theft.  Nnawuba tried his luck in love and lost, as he now faces time in prison.”

According to the allegations in the Superseding Indictment and statements made in court:

From at least 2016 until 2018, NNAWUBA participated in a scheme to launder the proceeds of frauds perpetrated against dozens of victims.  Among other things, NNAWUBA used false identities and false passports to open bank accounts, received or attempted to receive more than $2,000,000 in fraud proceeds, withdrew tens of thousands of dollars of fraud proceeds in cash, and transferred more than $1 million of fraud proceeds to bank accounts controlled by co-conspirators in an effort to conceal the source of funds.

The funds laundered by NNAWUBA were procured principally by (a) romance scams, in which members of the scheme trolled dating websites to find unsuspecting women and stole their money on false pretenses, and (b) business compromise scams, in which members of the scheme impersonated individuals, professionals, or businesses in the course of otherwise ordinary financial transactions, and then fraudulently induced the counterparties to those transactions to transfer funds to bank accounts controlled and operated by NNAWUBA or other members of the scheme.

*                      *                      *

NNAWUBA, 29, of Fayetteville, Arkansas, pled guilty to one count of participating in a conspiracy to commit money laundering, 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 defendants will be determined by the judge.  

Five other individuals previously were charged and pled guilty in connection with their participation in the scheme. 

On February 12, 2018, Ifeanyi Ezeji pled guilty to participating in a conspiracy to commit money laundering.  On May 31, 2018, Judge Failla sentenced Ifeanyi Ezeji to 40 months in prison and three years of supervised release, and ordered him to forfeit $2,080,347.14 and pay restitution in the amount of $873,891.31.

On May 31, 2018, Christopher Ezeji pled guilty to passport counterfeiting.  On October 4, 2018, Judge Failla sentenced Christopher Ezeji to five years of probation, and ordered him to forfeit $500.00 and pay restitution in the amount of $873,891.31.

On June 22, 2018, Peter Abbah pled guilty to aggravated identity theft.  On October 2, 2018, Judge Failla sentenced Abbah to 24 months in prison and one year of supervised release, and ordered him pay restitution in the amount of $218,498.76.

On July 27, 2018, Michael Akhiero pled guilty to participating in a conspiracy to commit bank fraud.  On April 22, 2019, Judge Failla sentenced Akhiero to seven months in prison and three years of supervised release, and ordered him to forfeit $600.00 and pay restitution in the amount of $143,192.99.

On January 11, 2019, Okechukwu Peter Ezika pled guilty to engaging in monetary transactions in property derived from specified unlawful activity.  Ezika’s sentencing has not yet been scheduled.

*                      *                      *

Mr. Berman praised the outstanding investigative work of the U.S. Secret Service, and thanked United States Immigration and Customs Enforcement’s Homeland Security Investigations for its assistance. 

The prosecution is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Juliana N. Murray and Robert B. Sobelman are in charge of the prosecution. 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Attorney General Bill Barr, Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (“FBI”), announced today that the Madoff Victim Fund established by the Department of Justice began its fourth distribution to victims funds forfeited to the United States Government in connection with the Bernard L. Madoff Investment Securities LLC (“BLMIS”) fraud scheme.  The distribution will include $469.6 million in additional funds, bringing the total distributed to date to approximately $2.4 billion.  The funds will be sent to more than 25,000 victims worldwide, the fourth of four payments to victims that will bring their total recovery from all source of compensation to 66.85% of their losses.  The Madoff Victim Fund will ultimately return to victims more than $4 billion in assets that have been recovered as compensation for losses suffered by the collapse of BLMIS, following the largest fraud in history.  Another $5 billion in assets recovered by the U.S. Attorney’s Office are being separately paid to Madoff victims through the BLMIS Customer Fund administered by the Securities Investor Protection Act Trustee.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Bernie Madoff committed the largest Ponzi scheme in history.  Today’s additional payment of more than $469 million by this Office and the U.S. Department of Justice Criminal Division’s Money Laundering and Asset Recovery Section represents the fourth in an on-going series of distributions that will leave victims with compensation for more than 65 percent of their losses.  This extraordinary level of recovery represents this Office’s tireless commitment to compensating the victims who suffered as a result of Madoff’s heinous crimes.”

Assistant Attorney General Brian A. Benczkowski said:  “The upheaval and devastation wrought by Bernie Madoff’s massive fraud continue to reverberate across the United States and the globe.  This fourth distribution of payments shows that the Department remains steadfast in its pursuit of proceeds of that fraud through civil forfeiture.  Madoff’s victims, many of whom once believed they had lost everything, have now seen close to a 67 percent recovery of their loss amounts.”

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

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

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

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

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

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

 

The Department of Justice today announced that on July 31, the Madoff Victim Fund (MVF) began its fourth distribution of $469.6 million in funds forfeited to the U.S. Government in connection with the Bernard L. Madoff Investment Securities LLC (BLMIS) fraud scheme, bringing the total distributed to $2.4 billion to nearly 32,000 victims worldwide.  In this distribution, payments will be sent to over 25,000 victims across the globe, bringing their total recovery to 66.85 percent.  This distribution represents the fourth in a series of payments that will eventually return over $4 billion to victims as compensation for losses they suffered from the collapse of the BLMIS.  The MVF has received over 65,000 petitions from victims in 136 countries.

“The upheaval and devastation wrought by Bernie Madoff’s massive fraud continue to reverberate across the United States and the globe,” said Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division.  “This fourth distribution of payments shows that the Department remains steadfast in its pursuit of proceeds of that fraud through civil forfeiture. Madoff’s victims, many of whom once believed they had lost everything, have now seen close to a 67 percent recovery of their loss amounts.”

“Bernie Madoff committed the largest Ponzi scheme in history,” said U.S. Attorney Geoffrey S. Berman for the Southern District of New York.  “Today’s additional payment of more than $469 million by this Office represents the fourth in an on-going series of distributions that will leave victims’ with compensation for more than 65 percent of their losses.  This extraordinary level of recovery represents this Office’s tireless commitment to compensating the victims who suffered as a result of Madoff’s heinous crimes.”

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

The MVF’s payouts would not have been possible without the extraordinary efforts of the U.S. Department of Justice Criminal Division’s Money Laundering and Asset Recovery Section, the U.S. Attorney’s Office for the Southern District of New York, and the FBI in the prosecution of these crimes and the recovery of assets supporting the forfeiture in this case.  The MVF is overseen by Richard Breeden, former Chairman of the U.S. Securities and Exchange Commission, in his capacity as Special Master appointed by the Department of Justice to assist in connection with the victim remission proceedings.

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

Audrey Strauss, Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced that BEVAN COONEY was sentenced today by the U.S. District Judge Ronnie Abrams to 30 months in prison for defrauding a Native American tribal entity and various investment advisory clients of tens of millions of dollars in connection with the issuance of bonds by the tribal entity and the subsequent sale of those bonds through fraudulent and deceptive means.   

Ms. Strauss said:  “Bevan Cooney was part of a conspiracy that orchestrated a complex and corrupt scheme to defraud a Native American community and the clients of two asset management firms.  Today he learned the cost of committing those crimes.  This Office is committed to protecting the investing public by appropriately prosecuting market predators.”

According to the allegations in the charging documents and statements made in court proceedings:

From March 2014 through April 2016, COONEY, John Galanis, Jason Galanis, Gary Hirst, Michelle Morton, Hugh Dunkerley, and others engaged in a fraudulent scheme that involved (a) causing the Wakpamni Lake Community Corporation (“WLCC”), a Native American tribal entity, to issue a series of bonds (the “Tribal Bonds”) through lies and misrepresentations; (b) deceptively causing clients of asset management firms controlled by Hirst, Morton, and others to purchase the Tribal Bonds, which the clients were then unable to redeem or sell because the bonds were illiquid and lacked a ready secondary market; and (c) misappropriating the proceeds resulting from those bond sales.

The WLCC was convinced to issue the Tribal Bonds through false and fraudulent representations by John Galanis.  Simultaneously, Jason Galanis, with the backing of COONEY and others, worked to acquire Hughes Capital Management (“Hughes”), a registered investment adviser.  Morton and Hirst were installed as Hughes’s chief executive officer and chief investment officer, respectively.  Within weeks of taking control of Hughes, Morton and Hirst placed the entire $28 million first series of Tribal Bonds with Hughes clients but failed to disclose material facts about the Tribal Bonds, including the fact that the Tribal Bonds fell outside the investment parameters set forth in the investment advisory contracts of certain Hughes clients.  In addition, Hughes’s clients were not told about substantial conflicts of interest with respect to the issuance and placement of the Tribal Bonds before the Tribal Bonds were purchased on these clients’ behalf. 

The defendants and their co-conspirators then misappropriated the proceeds of first Tribal Bond issuance.  Specifically, although the Tribal Bonds were supposed to be invested in an annuity, Dunkerley, at the direction of Jason Galanis, transferred significant amounts of the bond proceeds to support the defendants’ business and personal interests.  John Galanis, for example, secretly received $2.35 million in proceeds of the first bond issuance, which he spent on a variety of personal expenses and luxury items, including cars, jewelry, and hotel expenses.  Similarly, Jason Galanis used a portion of the proceeds of the first Tribal Bond issuance to finance the purchase of a $10 million luxury apartment in Tribeca.

In addition, after John Galanis induced the WLCC to issue a second round of Tribal Bonds, COONEY and others used $20 million of bond proceeds from the first issuance to buy the entirety of the second issuance.  As a result of the use of recycled proceeds to purchase additional issuances of Tribal Bonds, the face amount of Tribal Bonds outstanding increased and the amount of interest payable by the WLCC increased, but the actual bond proceeds available for investment on behalf of the WLCC did not increase.  The bonds purchased by COONEY and others were then used to meet net capital requirements at two broker dealers in which COONEY and others had interests.  COONEY also obtained a $1.2 million loan based on his purported ownership of the bonds, which he subsequently failed to repay.  In addition, millions of dollars in bond proceeds from the first and second issuances were used finance the acquisition of companies that the defendants and their co-conspirators acquired as part of a strategy to build a financial services conglomerate.

In the spring of 2015, John Galanis induced the WLCC to issue an additional $16 million worth of Tribal Bonds.  Simultaneously, Jason Galanis and others purchased a second investment adviser, Atlantic Asset Management (“Atlantic”), and installed Morton as the chief executive officer.  Within days of obtaining control of Atlantic, Morton placed the entirety of the $16 million Tribal Bond issuance with an Atlantic client, without the client’s consent and without disclosing the fact that the Tribal Bonds were outside the client’s investment parameters and that numerous conflicts of interest existed.  The proceeds of the $16 million issuance were again not invested in an annuity as promised, but instead were diverted to, among other things, finance the defendants’ acquisition of another company in furtherance of their plan to build a financial services conglomerate, to pay $75,000 to COONEY, and make payments to one of the broker dealers in which COONEY and others had interests.

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In addition to the prison term, COONEY, 46, was sentenced to three years of supervised release.  COONEY was also ordered to forfeit $9,527,000 and to make restitution in the amount of $43,785,176.

Jason Galanis, who pled guilty to conspiracy to commit securities fraud, securities fraud, and investment adviser fraud, was sentenced to a term of 173 months in prison on August 11, 2017.  Gary Hirst, who pled guilty to securities fraud, conspiracy to commit securities fraud, investment adviser fraud, and conspiracy to commit investment adviser fraud, was sentenced to 84 months in prison on September 7, 2018.  John Galanis, who was convicted after trial of securities fraud and conspiracy to commit securities fraud, was sentenced to 120 months in prison on March 8, 2019.  Michelle Morton, who pled guilty to conspiracy to commit securities fraud and investment adviser fraud, is awaiting sentencing.  Hugh Dunkerley, who pled guilty to conspiracy to commit securities fraud, two counts of securities fraud, bankruptcy fraud, and falsification of records with the intent to obstruct a government investigation, is also awaiting sentencing. 

Ms. Strauss praised the work of the U.S. Postal Inspection Service and the Federal Bureau of Investigation, and thanked the Securities and Exchange Commission.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Rebecca Mermelstein, Brendan F. Quigley, and Negar Tekeei 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 EDUARDO TALENTINO.  TALENTINO is charged with transporting a minor from Monroe, New York, to West Virginia with the intent to engage in criminal sexual activity with the minor.  TALENTINO, who was convicted of Rape of a Child in 1997 in Massachusetts, is also charged with being a felon in possession of a firearm.  TALENTINO was arrested yesterday and was presented today before U.S. Magistrate Judge Judith McCarthy in White Plains federal court and was detained without bail.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “This case underlines the urgent need for law enforcement to continue its efforts to protect children from those who prey on them.  As today’s arrest shows, we will use every tool available to law enforcement to investigate and prosecute those who allegedly sexually exploit children.”

FBI Assistant Director William F. Sweeney Jr. said:  “As alleged, Talentino sexually abused a minor child, one who had been entrusted to his care, in the most horrifying way imaginable.  While today's arrest certainly isn't his first run-in with the law, it is the first time he's been charged with a federal crime – one that carries a maximum sentence of life in prison. There's no excuse for this type of behavior.  The FBI is asking victims in this and all cases to come forward with information that could help put child sexual predators behind bars.  The number to call is 1-800-CALL-FBI.”

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

From in or about June 22, 2018, to June 25, 2018, TALENTINO transported a 16-year-old minor (“Victim-1”) from Monroe, New York, to West Virginia, where he engaged, and attempted to engage, in illegal sexual activity with Victim-1.

From in or about August 2018 up to and including in or about February 2019, TALENTINO possessed a Colt Pocket Positive .32 caliber revolver at his home in Monroe, New York.

On or about February 8, 2019, TALENTINO was arrested and charged in Orange County with unauthorized practice of a profession.

In or about August 1997, TALENTINO was convicted in Massachusetts of Rape of a Child, a felony, and sentenced to a prison term of four years and one day.

If you have information to report, please contact the Federal Bureau of Investigation at 800-CALL-FBI.

*                *                *

TALENTINO, 54, of Monroe, New York, is charged with one count of transporting a minor with intent to engage in criminal sexual activity, which carries a minimum sentence of 10 years in prison and a maximum sentence of life in prison.  The statutory minimum and maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Berman praised the efforts of the FBI, the Orange County District Attorney’s Office, the New York State Police, the Orange County Child Abuse Unit, Orange County Child Protective Services, and the Orange County Sheriff’s Office in connection with this investigation.  Mr. Berman also thanked the Sullivan County District Attorney’s Office for their assistance.  He added that the investigation is ongoing.

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that ROBERT PIZARRO and JUAN RIVERA were sentenced today for the attempted robbery, kidnapping, and murder of federal cooperating witness Robert Bishun on September 20, 2016.  PIZARRO was also sentenced for his role in an earlier 2015 robbery attempt.  PIZARRO, 39, of the Bronx, received a sentence of life in prison plus 14 years.  RIVERA, 42, also of the Bronx, was sentenced to life in prison plus seven years.  PIZARRO and RIVERA were convicted by a jury following a twelve-day trial before U.S. District Judge Alison J. Nathan, who imposed today’s sentence.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As the evidence at trial established, the defendants viciously kidnapped and murdered Robert Bishun because he was a federal cooperating witness.  While we cannot undo the terrible acts committed by these defendants, we firmly believe that today’s sentences further the cause of justice.  We thank the DEA, NYPD, and the Special Agents of our Office for their extraordinary and tireless efforts in pursuit of justice.”

According to the evidence introduced at trial:

On September 20, 2016, PIZARRO and RIVERA attempted to rob Robert Bishun at gunpoint inside his auto body shop in the Bronx, during which two customers in his shop were bound with zip ties and locked in the trunks of separate vehicles inside the shop.  Upon learning during the robbery that Bishun was a federal cooperating witness, PIZARRO and RIVERA kidnapped Bishun from his shop and strangled him to death with a plastic zip tie, before abandoning Bishun’s body in the back of his own vehicle on the side of the road.

On a prior occasion, in January 2015, PIZARRO and another accomplice stormed into Bishun’s auto body shop and robbed Robert Bishun at gunpoint, taking approximately $10,000 in cash from Bishun.  During the course of the robbery, two customers were bound with zip ties.

*              *             *

Mr. Berman praised the investigative efforts of the Drug Enforcement Administration, the New York City Police Department, and the Special Agents of the United States Attorney’s Office for the Southern District of New York.

The case is being prosecuted by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Jason Swergold, Jessica Fender, Jared Lenow, and Margaret Graham are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that a federal jury found SHIVANAND MAHARAJ guilty of honest services wire fraud, paying kickbacks in connection with an employee benefit plan, and conspiracy, following a two-week trial before U.S. District Judge John G. Koeltl.  MAHARAJ’s co-conspirator, ENRICO RUBANO, a/k/a “Rick Rubano,” who was a director of information technology at a large union pension and health benefit fund (the “Funds”), pled guilty in connection with the same crimes shortly before trial.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “For years, Shivanand Maharaj bribed an insider at a pension and health fund to approve hundreds of invoices for information technology work that was never done at all.  He now stands rightly convicted for depriving hardworking individuals out of millions of dollars of health and retirement benefits.”

According to the allegations contained in the Indictment and evidence presented during the trial in Manhattan federal court:

From 2009 through 2015, RUBANO was the co-head of information technology for the Funds and had the authority to approve the payment of invoices from third-party vendors.  Beginning in at least 2009, and continuing through 2015, MAHARAJ and RUBANO devised a scheme in which three different companies MAHARAJ owned or controlled submitted to the Funds invoices for millions of dollars in information technology services that were never performed or that had, in fact, been performed by employees of the Funds or other vendors.  RUBANO, in his position as co-head of information technology, approved these fraudulent invoices and received kickbacks from MAHARAJ.  MAHARAJ, by submitting hundreds of invoices and recruiting another co-conspirator to receive additional criminal proceeds, fraudulently received in excess of $2 million through this scheme.

*                *                *

MAHARAJ, 39, of Cresskill, New Jersey, was convicted of one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison; one count of wire fraud, which carries a maximum sentence of 20 years; one count of giving kickbacks to influence the operation of an employee benefit plan, which carries a maximum sentence of three years; and conspiracy to give kickbacks to influence the operation of an employee benefit plan, which carries a maximum sentence of five years.

MAHARAJ will be sentenced by Judge Koeltl on December 6, 2019.

RUBANO, 50, of Tappan, New York, who engaged in additional kickback and fraud schemes with other co-conspirators, pled guilty to three counts of conspiracy to commit wire fraud, each of which carries a maximum sentence of 20 years in prison.

RUBANO will be sentenced by Judge Koeltl on November 8, 2019.

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 thanked the U.S. Postal Inspection Service for their outstanding work in this matter.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Matthew Podolsky and Aline R. Flodr are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that SEBASTIAN PINTO-THOMAZ, a former credit ratings analyst at Standard & Poor’s, was sentenced today in Manhattan federal court to 14 months in prison for participating in two schemes to trade on material, nonpublic information in advance of the Sherwin-Williams Company’s acquisition of the Valspar Corporation.  PINTO-THOMAZ was convicted on April 26, 2019, following a jury trial before U.S. District Judge Jed S. Rakoff, who also imposed today’s sentence.

U.S. Attorney Geoffrey Berman said:  “As an employee of Standard & Poor’s, Sebastian Pinto-Thomaz was privy to potentially lucrative information about business acquisition plans.  Instead of protecting that information, as he had sworn to do, he shared it with a friend and with his hairdresser.  In turn, they bet on a stock that they knew to be a sure thing, and raked in nearly $300,000 in profits.  Pinto-Thomaz painted himself into a corner when he and his co-defendants exploited insider information to reap illegal profits.  Now they all face time in prison for their misdeeds.”

According to the evidence presented during the trial and statements made in related court filings and proceedings:

 

Rating Evaluation Services and the Insider

 

When a company announces an acquisition, the acquiring company often seeks the opinion of a credit rating agency regarding the potential impact that the acquisition could have on the acquiring company’s creditworthiness.  Therefore, companies often contact rating agencies before an acquisition is publicly announced in order to secure the rating agency’s views on how a possible acquisition could impact a company’s credit rating.  All the major rating agencies offer a service – sometimes known as a Rating Evaluation Service (“RES”) – that provides the company with a rating committee decision with respect to a proposed acquisition.

In March 2016, Standard and Poor’s (“S&P”), a credit rating agency in New York, New York, assigned PINTO-THOMAZ to work on an RES for the Sherwin-Williams Company (“Sherwin-Williams”) in advance of its contemplated but unannounced acquisition of the Valspar Corporation (“Valspar”).  In connection with this assignment, PINTO-THOMAZ received material, nonpublic information (the “Inside Information”) about Sherwin-Williams’s planned acquisition of Valspar prior to the public announcement of the acquisition.  S&P’s written policies prohibited the unauthorized disclosure of confidential information, which included the Inside Information.  During his tenure at S&P, PINTO-THOMAZ reviewed and certified his duties of loyalty and confidentiality to S&P and its clients.

 

The Insider Trading Scheme

 

In March 2016, PINTO-THOMAZ misappropriated the Inside Information about Sherwin-Williams’s acquisition of Valspar and passed it to Jeremy Millul, his friend, and Abell Oujaddou, his hairdresser, so that they could use it to make profitable trades in Valspar stock and options.  On March 21, 2016, the first trading day after the public announcement of the acquisition, the price of Valspar stock increased approximately 23 percent over the prior day’s close.

Millul is a Manhattan jeweler who had a close personal friendship with PINTO-THOMAZ.  After receiving a tip about the impending Valspar deal from PINTO-THOMAZ, Millul opened a brokerage account on March 13, 2016, and shortly thereafter purchased 480 shares of Valspar common stock.  On March 18, 2016, the last trading day before the acquisition was publicly announced, Millul also purchased 75 out-of-the-money Valspar call options.  After the acquisition was publicly announced, Millul sold his Valspar stock and options for approximately $106,806 in profits.

Oujaddou is a Manhattan hairstylist and salon owner who has known PINTO-THOMAZ for years, and who is close friends with PINTO-THOMAZ’s mother.  During a haircut on March 8, 2016, or March 9, 2016, PINTO-THOMAZ provided Oujaddou with the Inside Information about the impending Valspar deal in exchange for a portion of his trading profits.  Then, from March 10, 2016, through March 18, 2016, Oujaddou, who had never previously purchased Valspar or Sherwin-Williams securities, used the Inside Information he had received from PINTO-THOMAZ to purchase 8,630 shares of Valspar stock.  After the acquisition was publicly announced, Oujaddou sold his Valspar shares for approximately $192,080 in profits.  Following his successful trading, Oujaddou met PINTO-THOMAZ in the paint aisle of a hardware store and paid him a kickback.

Later, in June 2016, the Financial Industry Regulatory Authority (“FINRA”) sent S&P a list of individuals and entities that had traded in Valspar in advance of the public announcement of the acquisition (the “List”).  S&P forwarded the List to its employees who had worked on the Sherwin-Williams RES, including PINTO-THOMAZ, asking the employees to respond by stating whether they had a past or present relationship with any individual or entity on the List.  Although both Oujaddou and Millul were on the List, PINTO-THOMAZ denied having a relationship with anyone on the List.

*                *                *

In addition to his prison term, PINTO-THOMAZ, 34, of New York, New York, was sentenced to 3 years of supervised release and ordered to pay a fine of $15,000 and a forfeiture money judgment in the amount of $7,500.  

Jeremy Millul and Abell Oujaddou each previously pled guilty and await sentencing before Judge Rakoff on July 30, 2019, and September 5, 2019, respectively.

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

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

 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Michael C. Mikulka, Special Agent-in-Charge, New York Region, U.S. Department of Labor Office of Inspector General (“DOL-OIG”), Darren Cohen, New York Regional Director, U.S. Department of Labor Employee Benefits Security Administration (“DOL-EBSA”), and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that GLENN BLICHT, who currently serves as the president of a labor union (the “Union”), was arrested today for honest services fraud and a violation of the Taft-Hartley Act for demanding and accepting at least $150,000 in bribe payments from an employer (the “Employer”).  BLICHT will be presented today before U.S. Magistrate Judge Stewart D. Aaron. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, Glenn Blicht abused his position as the president of a labor union to line his own pockets.  He allegedly demanded and received bribes and, in return, he did not fight for his union members – the hard-working individuals whose interests he was duty-bound to protect.  Together with our law enforcement partners, this Office is committed to rooting out corruption in union leadership.”

DOL-OIG New York Region Special Agent-in-Charge Michael C. Mikulka said:  “Labor racketeering investigations that involve bribing union officials are an important part of the U.S. Department of Labor Office of Inspector General’s mission.  We will continue to work with our law enforcement partners to vigorously investigate all types of labor racketeering allegations.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “Criminals are asked to do things all the time for money, but sometimes they’re asked not to do things for money.  Glenn Blicht was supposed to be representing the best interests of hundreds of people who had faith in the fact that he was helping them, but he allegedly decided to help himself to bribes the other side was offering him.  It’s often hard to see what’s actually going on just under the surface, but as the FBI, we have the ability to dig into criminal behavior and expose fraudsters for what they truly are.”    

According to the allegations contained in the Complaint against GLENN BLICHT[1]:

From 2009 through the present, BLICHT served as an officer of the Union, including as its president for many years.  In that role, BLICHT had a duty to act in the best interests of the Union and its members, including by avoiding personal financial conflicts of interest with the Union.  Nevertheless, BLICHT demanded and received cash payments from the Employer, which employed a number of members of the Union.  In exchange for these bribes, BLICHT declined to file arbitration claims on behalf of Union members.  In total, BLICHT received at least approximately $150,000 in bribes from the Employer over approximately 10 years. 

In communications, a number of which were recorded, BLICHT repeatedly referred to the bribe payments as “tickets,” in which each ticket equaled a $1,000 bribe.  BLICHT instructed an official of the Employer (the “Official”) as to the number of “tickets” to pay BLICHT each time.  Indeed, during the past year, the Official met with BLICHT several times and paid him bribes on approximately three occasions, at the direction of law enforcement.  Each of these meetings was recorded.

*                *                *

BLICHT, 57, of Wilton, Connecticut, is charged with one count of honest services fraud, which carries a maximum sentence of 20 years in prison, and one count of demanding or receiving prohibited payments as a labor union official, which carries a maximum sentence of five 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 the Internal Revenue Service-Criminal Investigation Division, DOL-OIG, IRS-CI, FBI, and DOL-EBSA for their outstanding work on the investigation.  He added that the investigation is continuing.  

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

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

 

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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.

John C. Demers, Assistant Attorney General for National Security, Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Michael McGarrity, Assistant Director of the FBI's Counterterrorism Division, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the FBI, and James P. O’Neill, the Commissioner of the Police Department for the City of New York (NYPD), announced that Delowar Mohammed Hossain was arrested today at John F. Kennedy International Airport (JFK Airport) in Queens, New York. Hossain was charged in a criminal Complaint today with attempting to provide material support for acts of terrorism, specifically in support of killing U.S. nationals located overseas.  Hossain was presented today before Magistrate Judge Stewart D. Aaron in Manhattan federal court.

“As alleged, Hossain planned to travel overseas and join the Taliban in order to kill American soldiers,” said Assistant Attorney General Demers.  “The threat of terrorism at home and abroad remains, and the National Security Division is committed to preventing individuals from carrying out deadly plans such as this.  I want to thank the agents, analysts, and prosecutors who are responsible for this case.”

“As alleged, Delowar Hossain plotted to travel to Afghanistan to join the Taliban, specifically so he could commit acts of terrorism,” said U.S. Attorney Berman.  “Hossain wanted to kill Americans, and particularly wanted to target members of our armed forces, serving our nation overseas.  The excellent work of the FBI and NYPD stopped Hossain’s alleged deadly plan to join the Taliban before he took flight, and he now faces federal terrorism charges.”

“The criminal complaint in this case reveals Delowar Hossain had a despicable goal. He wanted to make his way to Afghanistan, join up with Taliban forces, and kill Americans,” said Assistant Director McGarrity.  “But he failed because members of the FBI's Joint Terrorism Task Force interrupted his plans. The FBI is committed to working with our law enforcement partners to stop those who want to commit acts of terrorism here in the U.S. or overseas.”

“The lure of radical ideologies comes from many sources, and just because the Taliban may seem like an old and out of vogue extremist group, it shouldn't be underestimated,” said Director-in-Charge Sweeney Jr.  “The FBI New York Joint Terrorism Task Force stopped Mr. Hossain from traveling overseas to allegedly support a deadly organization, and kept him from his alleged plan to kill innocent people.”

“As we continue to see time and again, attempting to support terrorist attacks will lead to arrest,” said NYPD Commissioner O’Neil.  “I commend the dedication of the NYPD detectives and FBI agents who, through the Joint Terrorism Task Force, remain relentless in their focus to keep New York City and our nation safe.”

As alleged in the criminal Complaint filed today in Manhattan federal court, beginning in the fall of 2018, Hossain expressed his desire to join the Taliban and fight against American forces.  Over the months that followed, Hossain attempted to recruit a confidential source of the FBI (CS-1) to travel with Hossain from the United States to Pakistan, and then to cross the border into Afghanistan to join the Taliban.  Hossain told CS-1 that his purpose was to “fight the American government from there . . . combined with the Taliban,” and that “I want to kill some kufars [non-believers] before I die.”  Hossain described to CS-1 steps he had taken to prevent detection of his plan, such as planning to reach Pakistan by first flying to Thailand, which Hossain believed would conceal his ultimate goal of joining the Taliban.  At the same time, Hossain made preparations to fight in Afghanistan, including buying equipment such as walkie-talkies and trekking gear and instructing CS-1 to save money “to buy weapons” after reaching Afghanistan. 

Hossain purchased an airline ticket for a flight scheduled to depart on July 26, 2019, from JFK Airport, to Thailand, for the first leg of the route to Afghanistan that Hossain had described to CS-1.  On July 26, Hossain traveled to JFK Airport, where the FBI arrested him after he attempted to board that flight.

Hossain, 33, of the Bronx, is charged with one count of attempting to provide material support for terrorism, which carries a maximum 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 a judge.

Assistant Attorney General John Demers and U.S. Attorney Berman praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force, which consists principally of agents from the FBI and detectives from the NYPD. 

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys David W. Denton, Jr. and Michael K. Krouse are in charge of the prosecution, with assistance from Trial Attorney Jennifer Burke of the Counterterrorism Section.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, John C. Demers, Assistant Attorney General for National Security, Michael McGarrity, Assistant Director of the FBI’s Counterterrorism Division, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and James P. O’Neill, the Commissioner of the Police Department for the City of New York (“NYPD”), announced that DELOWAR MOHAMMED HOSSAIN was arrested today at John F. Kennedy International Airport (“JFK Airport”) in Queens, New York.  HOSSAIN was charged in a criminal Complaint today with attempting to provide material support for acts of terrorism, specifically in support of killing U.S. nationals located overseas.  HOSSAIN was presented today before Magistrate Judge Stewart D. Aaron in Manhattan federal court.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Delowar Hossain plotted to travel to Afghanistan to join the Taliban, specifically so he could commit acts of terrorism.  Hossain allegedly wanted to kill Americans, and particularly wanted to target members of our armed forces serving our nation overseas.  The excellent work of the FBI and NYPD stopped Hossain’s alleged deadly plan to join the Taliban before he took flight, and he now faces federal terrorism charges.”

Assistant Attorney General John C. Demers said:  “As alleged, Hossain planned to travel overseas and join the Taliban in order to kill American soldiers.  The threat of terrorism at home and abroad remains, and the National Security Division is committed to preventing individuals from carrying out deadly plans such as this.  I want to thank the agents, analysts, and prosecutors who are responsible for this case.”

FBI Assistant Director of Counterterrorism Michael McGarrity said:  “The criminal complaint in this case reveals Delowar Hossain had a despicable goal.  He wanted to make his way to Afghanistan, join up with Taliban forces, and kill Americans.  But he failed because members of the FBI's Joint Terrorism Task Force interrupted his plans.  The FBI is committed to working with our law enforcement partners to stop those who want to commit acts of terrorism here in the U.S. or overseas.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “The lure of radical ideologies comes from many sources, and just because the Taliban may seem like an old and out of vogue extremist group, it shouldn't be underestimated.  The FBI New York Joint Terrorism Task Force stopped Mr. Hossain from traveling overseas to allegedly support a deadly organization, and kept him from his alleged plan to kill innocent people.”

NYPD Commissioner James P. O’Neill said:  “As we continue to see time and again, attempting to support terrorist attacks will lead to arrest.  I commend the dedication of the NYPD detectives and FBI agents who, through the Joint Terrorism Task Force, remain relentless in their focus to keep New York City and our nation safe.”

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

Beginning in the fall of 2018, HOSSAIN expressed his desire to join the Taliban and fight against American forces.  Over the months that followed, HOSSAIN attempted to recruit a confidential source of the FBI (“CS-1”) to travel with HOSSAIN from the United States to Pakistan, and then to cross the border into Afghanistan to join the Taliban.  HOSSAIN told CS-1 that his purpose was to “fight the American government from there . . . combined with the Taliban,” and that “I want to kill some kufars [non-believers] before I die.”  HOSSAIN described to CS-1 steps he had taken to prevent detection of his plan, such as planning to reach Pakistan by first flying to Thailand, which HOSSAIN believed would conceal his ultimate goal of joining the Taliban.  At the same time, HOSSAIN made preparations to fight in Afghanistan, including buying equipment such as walkie-talkies and trekking gear and instructing CS-1 to save money “to buy weapons” after reaching Afghanistan. 

HOSSAIN purchased an airline ticket for a flight scheduled to depart on July 26, 2019, from JFK Airport, to Thailand, for the first leg of the route to Afghanistan that HOSSAIN had described to CS-1.  On July 26, HOSSAIN traveled to JFK Airport, where the FBI arrested him after he attempted to board that flight.

*                      *                      *

HOSSAIN, 33, of the Bronx, New York, is charged with one count of attempting to provide material support for terrorism, which carries a maximum 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 a judge.

Mr. Berman and Assistant Attorney General John Demers praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force, which consists principally of agents from the FBI and detectives from the NYPD.  

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys David W. Denton Jr. and Michael K. Krouse are in charge of the prosecution, with assistance from Trial Attorney Jennifer Burke of the Counterterrorism Section.

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

 

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

Geoffrey S. Berman, United States Attorney for the Southern District of New York, announced that RICHARD CASTRO, a/k/a “Chemsusa,” a/k/a “Chems_usa,” a/k/a “Chemical_usa,” a/k/a “Jagger109,” pled guilty today to money laundering and to participating in a conspiracy to distribute carfentanil, fentanyl, and a fentanyl analogue over the “dark web,” including on AlphaBay and Dream Market.  CASTRO also agreed to forfeit more than $4 million in criminal proceeds.  CASTRO pled guilty before U.S. District Judge Denise L. Cote.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As he admitted today, for years, Richard Castro used the dark web to distribute prolific quantities of powerful opioids, including fentanyl and carfentanil.  Castro thought he could hide behind the anonymity of the internet, and use online pseudonyms to deal drugs – like ‘Chems_usa’ and ‘Chemical_usa.’  Thanks to our law enforcement partners, ‘Chems_usa’ is now in U.S. prison.”

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

From November 2015 through March 2019, CASTRO conspired to distribute carfentanil, fentanyl, and phenyl fentanyl (an analogue of fentanyl).  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.  For most of the conspiracy, CASTRO and a co-conspirator 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 his customers that he was moving his business off 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 co-defendant, Luis Fernandez, shipped narcotics on behalf of the conspiracy, including from New York City. 

CASTRO’s customers paid him in Bitcoin.  CASTRO laundered his narcotics proceeds in several ways, including by funneling millions of dollars through his Bitcoin wallets and by buying approximately 100 quadrillion Zimbabwe bank notes, among other valuables.

Under the terms of his plea agreement, CASTRO has agreed forfeit $4,156,198.18, including the funds or currency in seven different Bitcoin wallet addresses.

*                *                *

RICHARD CASTRO, 36, of Windermere, Florida, pled guilty to one count of conspiracy to distribute and possess with the intent to distribute three controlled substances – carfentanil, phenyl fentanyl, and fentanyl, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison; and one count of money laundering, which carries a maximum sentence of 20 years in prison.  The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  Sentencing is scheduled for October 25, 2019, at 2:30 p.m. before Judge Cote.

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 assistance in this case.

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.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of a Complaint in Manhattan federal court charging JON BARRY THOMPSON, a/k/a “J. Barry Thompson,” the principal of the cryptocurrency escrow company Volantis Escrow Platform LLC and the related company Volantis Market Making LCC (collectively “Volantis”) with commodities fraud and wire fraud offenses.  As alleged, THOMPSON took over $7 million from two victim companies after making false representations in connection with Bitcoin transactions.  THOMPSON was arrested this morning in Easton, Pennsylvania, and will be presented later today before United States District Judge Joseph Leeson in the Eastern District of Pennsylvania.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Jon Thompson induced investors to engage in cryptocurrency transactions through his company, Volantis Market Making, by touting a transaction structure that would eliminate any risk of loss during the purchase.  As his clients soon realized, however, Thompson’s representations were false, and these cryptocurrency investors ultimately lost all of the money they had entrusted with him because of his lies. Whether a transaction involves cryptocurrency, or any other type of currency, commodity or security, this Office is committed to rooting out fraud and protecting the integrity of our markets.”

FBI Assistant Director-in-Charge Sweeney said:  “Thompson allegedly thought no one would ask where their actual money went when they trusted him to invest in Bitcoin.  Using phrases and terminology that the victim companies didn't understand, he allegedly preyed on their ignorance of the emerging cryptocurrency.  Our job at the FBI is to investigate fraud and follow the money wherever it leads.”

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

THOMPSON claimed in promotional materials that Volantis “minimize[d] settlement default risk” in cryptocurrency transactions.  THOMPSON claimed that because Volantis acted as a custodian of assets for “both sides of the transaction, there is no risk of default.” 

In June and July 2018, THOMPSON induced one victim company (“Company-1”) to send Volantis over $3 million to fund the purchase of Bitcoin for Company-1 after falsely assuring Company-1 that THOMPSON had the Bitcoin in hand and Company-1’s money could not be lost.  After taking Company-1’s money and failing to provide any Bitcoin in return, THOMPSON lied for days about why the deal had not worked out and the location of Company-1’s Bitcoin and money, which was never returned.  Among other things, THOMPSON provided Company-1 with a false account statement purporting to show Company-1’s money held for it by THOMPSON, when in fact THOMPSON had already misappropriated thousands of dollars of Company-1’s money.  Additionally, even though THOMPSON had told Company-1 that before any transaction “cash is with me, coin is with me,” THOMPSON sent over $3 million of Company-1’s money to a third-party entity purportedly in exchange for Bitcoin without first receiving any of the Bitcoin in hand.  THOMPSON never returned Company-1’s money, nor provided it with any Bitcoin. 

In July 2018, THOMPSON induced another victim company (“Company-2”) to send Volantis over $4 million to fund the purchase of Bitcoin for Company-2 based on false representations.  After receiving Company-2’s money, THOMPSON sent a substantial portion of the money to a third party—about whom THOMPSON was aware of several warning signs—without first receiving any Bitcoin in return.  THOMPSON never provided Company-2 with any Bitcoin, nor did he return Company-2’s money.  THOMPSON also lied to Company-2 about the location of the Bitcoin and the reasons the transaction was not completed.

*                      *                      *

THOMPSON, 48, of Easton, Pennsylvania, is charged with two counts of commodities fraud, each of which carries a maximum sentence of 10 years in prison, and two counts of wire fraud, each of which carries a maximum sentence of 20 years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Mr. Berman praised the investigative work of the Federal Bureau of Investigation and also thanked the Commodity Futures Trading Commission for its assistance. 

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

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that GARY DAVIS, a/k/a “Libertas,” was sentenced today to 78 months in prison for his role as a member of the small administrative staff of the “Silk Road” website.  Silk Road was an online black market of unprecedented scope.  During its operation from 2011 until 2013, Silk Road was used by thousands of drug dealers and other unlawful vendors to distribute over $200 million worth of illegal drugs and other illicit goods and services to more than 115,000 buyers, and to launder hundreds of millions of dollars derived from those unlawful transactions.  DAVIS previously pled guilty before United States District Judge Jesse M. Furman, who also imposed today’s sentence.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Gary Davis helped run the Silk Road website – a dark web marketplace for illegal drugs, hacking services, and other criminal activity.  Davis’s arrest, extradition from Ireland, conviction, and prison sentence should send an unmistakable message: the dark web does not cast shadows long enough to protect criminals from the long arm of the law.”

According to the allegations in the Superseding Indictment, court filings, statements made in court, and evidence presented during the 2015 trial of Ross Ulbricht, Silk Road’s founder:

From approximately January 2011 until October 2, 2013, the Silk Road website hosted a sprawling black market bazaar on the Internet, where illegal goods and services were regularly bought and sold by the site’s users.  During its more than two-and-a-half years in operation, Silk Road was used by nearly 4,000 vendors to distribute illicit goods and services to more than 115,000 buyers, including hundreds of kilograms of illegal drugs, fake IDs and passports, computer hacking tools and services, counterfeit goods and pirated media, and money laundering services.  In total, more than 1.5 million transactions were conducted over Silk Road, with a total value of more than $213 million in U.S. currency.  Nearly 95 percent of those sales (approximately $183 million worth) were for illegal drugs.

The owner and operator of Silk Road, Ross William Ulbricht, a/k/a “Dread Pirate Roberts,” a/k/a “DPR,” a/k/a “Silk Road,” ran the website with the assistance of a small support staff, including both site administrators and forum moderators.  The site administrators were responsible for, among other things, monitoring user activity on Silk Road for problems, responding to customer service inquiries, and resolving disputes between buyers and vendors.  The forum moderators were responsible for, among other things, monitoring user activity on discussion forums associated with the site, providing guidance to forum users concerning how to conduct business on Silk Road, and reporting any significant problems discussed on the forums to the site administrators and to Ulbricht. 

From approximately May 2013 until June 2013, GARY DAVIS, a/k/a “Libertas,” served as a forum moderator for Silk Road.  From approximately June 2013 until October 2, 2013, DAVIS worked as a site administrator on Silk Road.  In his role as a site administrator, DAVIS’s responsibilities included (1) responding to customer support requests from Silk Road users who needed assistance with their buyer or seller accounts on the marketplace; (2) investigating disputes that arose between vendors (e.g., drug dealers) and buyers, including reporting his findings to Ulbricht; and (3) helping enforce the rules for doing business on Silk Road, which had been set by Ulbricht.  For instance, there was a rule against “out of escrow” sales – i.e., sellers and buyers arranging payments off the site to avoid paying Silk Road commissions.  When violations of this rule were discovered, DAVIS had the ability to demote a vendor or refer the vendor (e.g., to Ulbricht) for further discipline.  Ulbricht paid DAVIS a weekly salary for his work as a site administrator.

Shortly after law enforcement shut down the original Silk Road in early October 2013, its virtually identical successor – Silk Road 2.0 – was launched.  From approximately November 2013 until December 2013, DAVIS served as an administrator for Silk Road 2.0.

*                *                *

In addition to his prison term, GARY DAVIS, 31, of Wicklow, Ireland, was ordered to serve three years of supervised release and to forfeit $25,000.

Mr. Berman praised the outstanding joint efforts of the Federal Bureau of Investigation and its New York Special Operations and Cyber Division, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations - Chicago-O’Hare, the Drug Enforcement Administration’s New York Field Division, and the Internal Revenue Service - Criminal Investigation’s New York Field Office.  Mr. Berman also thanked both the Irish Republic’s Computer Crime Investigation Unit of the An Garda Siochana and the U.S. Department of Justice’s Office of International Affairs for their valuable assistance and support.

This case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Michael D. Neff, Eun Young Choi, and Timothy T. Howard are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that MARCOS ELIAS, a Brazilian citizen and resident, was sentenced to three-and-a-half years in prison for participating in a scheme to fraudulently obtain more than $750,000 at financial institutions headquartered in Manhattan using false representations and the stolen identities of Brazilian account holders at those institutions.  U.S. District Judge Gregory H. Woods imposed today’s sentence.   

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Using a stolen identity and bogus documents, Marcos Elias conned his friend’s company to transfer more than $750,000 to an account in the name of a fake company that he controlled.  Instead of living off of his ill-gotten gains, he will now spend the next three-and-a-half years in prison for his crimes.”

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

Since 2012, a Brazilian company (the “Client”) held an account at a financial institution headquartered in Manhattan (the “Firm”).  Beginning in June 2014, cooperating witness Evandro Dos Reis Jr. (“Dos Reis”), who was then a Senior Vice President at the Firm, communicated with ELIAS, a longtime friend, regarding the Client’s account.  Shortly thereafter, Dos Reis began receiving emails to his Firm email account purportedly from an employee of the Client (the “Client Employee”) instructing Dos Reis to transfer the Client’s money to a bank account in Luxembourg (the “Luxembourg Account”) that appeared to be in the name of the Client.  Those emails were sent from an email address that was never used by the Client Employee and contained bogus wire instructions with the forged signature of the Client Employee.  On July 15, 2014, as a result of the false documentation provided to Dos Reis which he forwarded to another Firm employee to be executed, the Firm transferred approximately $752,000 from the Client’s account at the Firm to the Luxembourg Account (the “Fraudulent Transfer”), believing it to be a legitimate transfer requested by the Client.

In actuality, the Client did not authorize the Fraudulent Transfer, did not have any bank accounts in Luxembourg, and did not send the emails to Dos Reis requesting the transfer.  Rather, it was ELIAS who sent the emails purporting to be from the Client Employee that contained forged wire instructions to Dos Reis.  Further, the Luxembourg Account that received the Fraudulent Transfer was beneficially owned by ELIAS and opened in the name of a company formed in Panama at ELIAS’s direction the week prior to the Fraudulent Transfer.  The Panama company used by ELIAS to open the Luxembourg Account contained the name of the Client in order to create the false impression that the Client’s funds were being transferred to an account beneficially owned by the Client, when in fact such account was beneficially owned by ELIAS. 

In addition to the scheme to defraud the Firm, ELIAS and Dos Reis also attempted to fraudulently obtain money from accounts at a second financial institution headquartered in Manhattan using the identities of the Client Employee and other members of the Client Employee’s family without their authority.

*                      *                      *

ELIAS, 47, of São Paulo, Brazil, was extradited from Switzerland, where he was initially arrested, to the Southern District of New York on August 28, 2018.  ELIAS previously entered pleas of guilty to one count of conspiracy to commit wire fraud and one count of aggravated identity theft before U.S. District Judge Laura Taylor Swain on February 4, 2019.  In addition to the prison sentence, ELIAS was ordered to pay forfeiture in the amount of $752,384.57 and restitution in the amount of $938,367.87.  ELIAS was also sentenced to two years of supervised release.

Dos Reis, a former employee of the Firm, previously pled guilty to one count of conspiracy to commit wire fraud and one count of wire fraud pursuant to a cooperation agreement with the Government in connection with this scheme and is awaiting sentencing. 

Mr. Berman praised the outstanding investigative work of the FBI.  Mr. Berman also thanked Switzerland’s Federal Office of Justice and the Zurich Police (Kantonspolizei Zürich), and the U.S. Department of Justice’s Office of International Affairs, for their assistance with the extradition.

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

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 BARBARA MEYZEN, a/k/a “Bobbie Meyzen,” the owner and operator of La Crémaillère Restaurant in Banksville, New York, on multiple fraud charges.  MEYZEN was arrested earlier today in Connecticut and will be presented this afternoon before United States Magistrate Judge Lisa Margaret Smith.

U.S. Attorney Geoffrey S. Berman said:  “When Barbara Meyzen’s upscale clientele of bankers, celebrities, and other notable figures frequented her restaurant, they saw a stately French manor in a serene Westchester suburb.  What they did not see was the alleged rampant financial fraud that was happening.  As a result of her alleged fraud, Barbara Meyzen has potentially earned herself a reservation for one in federal prison.”

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

MEYZEN has owned and operated the La Crémaillère Restaurant in Banksville, New York, since 1993.  From August 2015 to July 2016, MEYZEN submitted applications for credit on behalf of La Crémaillère to at least nine lenders, factors, and financiers.  In support of those applications, MEYZEN gave the potential lenders La Crémaillère’s bank statements that she had modified to change negative balances to positive balances; to remove references to checks returned for insufficient funds; and to reduce service fees.  For example, MEYZEN modified one month’s statement to change a negative beginning balance of $32,865.57 to a positive beginning balance of $27,766.29; to change from negative to positive the negative ending balance for that month of $5,268.13; and to change service charges of $2,385.60 to $8.00.  When one lender discovered that MEYZEN had altered the bank statements, MEYZEN created an email account in the name of one of the bank’s officers and sent the lender an email in which she, in the guise of the bank officer, told the lender that the statements were genuine.

MEYZEN also falsely represented to the same lender that the second mortgage on the restaurant’s property in Banksville had been discharged.  She created a false satisfaction of mortgage on which she forged the signature of a representative of the restaurant’s second mortgagee, who is MEYZEN’s relative by marriage.  MEYZEN filed the false satisfaction of mortgage with the Westchester County Clerk, paid the clerk’s filing fee, and sent a copy of the filed satisfaction of mortgage to the lender.  MEYZEN later denied filing the false satisfaction of mortgage or paying the filing fee when she was interviewed by Special Agents of the FBI.  She told the FBI that she believed a loan broker with whom she had worked in the past, and whom she identified by name, had filed the false satisfaction of mortgage.

Throughout the summer of 2017, MEYZEN charged more than $80,000 in food and restaurant supplies to one of the restaurant’s customers who had left her credit card number on file at the restaurant.  When the customer discovered the charges, MEYZEN claimed the charges were a mistake and repeatedly promised to resolve the problem.  MEYZEN gave the customer two checks in a total amount of $32,000 but the checks bounced.  When she was interviewed by the FBI, MEYZEN denied knowing anything about unauthorized charges to the customer’s credit card or ever speaking with the customer about the unauthorized charges.  MEYZEN also denied giving the customer checks.

Meyzen Family Realty Associates, LLC, which owns the real property from which the restaurant operates, filed for bankruptcy in the U.S. Bankruptcy Court in White Plains in September 2018.  La Crémaillère Restaurant Corp., which operates the restaurant, filed for bankruptcy in April 2019.  MEYZEN is a part owner of both entities.  In May 2019, MEYZEN misled the office of the United States Trustee, which oversees bankruptcy cases, about insurance coverage on the restaurant property.  MEYZEN caused her bankruptcy counsel to give the United States Trustee and an attorney for Meyzen Family Realty’s largest creditor documents indicating that the property was insured when, in fact, the insurance coverage had been canceled months earlier for nonpayment.  MEYZEN knew that the coverage had been canceled because her insurance broker had communicated with her several times about the cancellation of the policies.  In June 2019, MEYZEN falsely testified under oath in a deposition conducted by the United States Trustee that she was not aware that the insurance had been canceled when she caused her attorney to turn the documents over to the United States Trustee. 

Two days after La Crémaillère filed for bankruptcy in April 2019, MEYZEN opened a bank account in her name and diverted more than $40,000 of the restaurant’s credit card receipts to that account.  MEYZEN used a portion of that money to make payments to a food distributor and to an in-home nursing service.  This account was closed on May 1, 2019.  On May 7, 2019, MEYZEN opened an account in the name of Honey Bee Farm, LLC, at another bank and diverted La Crémaillère’s credit card receipts, as well as $20,000 in advances on La Crémaillère’s future credit card revenue, to that account.  MEYZEN used a portion of that money to make a payment on Meyzen Family Realty’s mortgage and to pay food distributors, two wine wholesalers, a commercial trash service, a tableware and china company, and an employee of La Crémaillère.

*                *                *

MEYZEN, 57, of Redding, Connecticut, has been charged with one count of aggravated identity theft, which carries a maximum sentence of 20 years in prison and a mandatory minimum sentence of two years in prison; one count of wire fraud and one count of mail fraud, each of which carries a maximum sentence of 20 years in prison; one count of credit card fraud, which carries a maximum sentence of 15 years in prison; two counts of making false statements, each of which carries a maximum sentence of five years in prison; and one count of concealing a debtor’s property, 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 a judge.

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

Mr. Berman praised the outstanding investigative work of the FBI and the United States Trustee’s Office for Region 2.

The prosecution of this case is being handled by the Office’s White Plains Division.  Assistant United States Attorney James McMahon is in charge of the prosecution.

 

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[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth 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 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 filed a civil healthcare fraud lawsuit against LIFE SPINE INC. (“LIFE SPINE”), MICHAEL BUTLER, the founder, president, and chief executive officer of LIFE SPINE, and RICHARD GREIBER, the vice president of business development of LIFE SPINE.  The Government’s complaint seeks damages and civil penalties under the False Claims Act for paying 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 lawsuit alleges that the surgeons who received these payments accounted for approximately half of LIFE SPINE’s total domestic sales of spinal products from 2012 through 2018.  As set forth in the complaint, these payments violated the Anti-Kickback Statute and, as a result of this unlawful conduct, LIFE SPINE, BUTLER, and GREIBER caused hospitals and surgeons to submit false claims for payment to Medicare and Medicaid. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, Life Spine and its senior management flagrantly ignored the law by paying surgeons millions of dollars in fees and royalties to get them to use Life Spine products during spinal surgeries.  Kickbacks to doctors can alter or compromise their judgment about the medical care and services to provide to patients, and can increase healthcare costs.  This office will continue to hold companies and the people who run them accountable when they make improper payments to doctors.”

FBI Assistant Director William F. Sweeney Jr. said:  "Cases like this are why patients sometimes distrust the care they receive because they don’t know if it’s what the doctor actually thinks, or if there is a company pushing a new drug or new device.  People seeking medical treatment are dependent on the advice they get, they don’t have the expertise to question the doctors.  The FBI does all it can to stop those companies who overlook the patient who is just hoping to get better, and only sees the dollar signs.”

HHS-OIG Special Agent in Charge Scott J. Lampert said:  “Paying kickbacks to physicians as a means to boost company profits, as alleged in this case, compromises medical judgement and drives up healthcare costs.  Our agency, working closely with our law enforcement partners, will continue to investigate such illegal activities.”

The following allegations are based on the Complaint that was filed in Manhattan federal court and unsealed today: 

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”).  BUTLER is the founder, president, and chief executive officer of LIFE SPINE and is its majority shareholder.   BUTLER was closely involved in overseeing the operations of LIFE SPINE.  From 2012 to 2015, GREIBER was involved in selecting and approving surgeons who served as paid “consultants” for LIFE SPINE.

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/patent applications to LIFE SPINE in exchange for payments and promised support to bring the surgeons’ new products to market.  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.  LIFE SPINE and BUTLER expected surgeons to commit to using Life Spine Products at a certain level in exchange for the consulting fees, royalties, and intellectual property acquisition fees paid to them. 

LIFE SPINE, with the knowledge, involvement, and participation of BUTLER and GREIBER, entered into agreements with dozens of surgeons.  These agreements included medical education agreements under which the surgeons were paid to provide training and/or educational services; product development agreements under which the surgeons were paid to purportedly provide input on new products and then would receive royalties on future sales of the product; and intellectual property agreements under which the surgeons were paid large up-front acquisition fees for their patents/patent applications and then would receive royalties on sales of any products developed based on the patents.  Life Spine paid surgeons millions of dollars in consulting fees, royalties, and intellectual property acquisitions pursuant to these agreements.

BUTLER informed LIFE SPINE staff that he expected surgeons who were paid for their consulting services to commit to using Life Spine Products.  LIFE SPINE’s senior management, including BUTLER, closely tracked surgeons’ usage of Life Spine Products to ensure that the payments to surgeons were generating sufficient sales revenues for the company and that the surgeons were fulfilling their “commitment” to use Life Spine Products.  LIFE SPINE went so far as to generate a report that compared surgeon consulting, royalty, and intellectual property payments to surgeon product usage levels, and then calculated an “ROI” (return on investment) for each surgeon based on those figures.  If a surgeon’s usage was too low, LIFE SPINE managers, including BUTLER, pressured the surgeon to use more Life Spine Products during his or her surgeries.

The kickback scheme was successful.  Surgeons who received payments from LIFE SPINE accounted for approximately half of LIFE SPINE’s total domestic sales of spinal products between 2012 and 2018.  Most of these surgeons substantially increased their usage of Life Spine Products after entering into agreements with LIFE SPINE.  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.

The Government intervened in a private whistleblower lawsuit before Judge Jed S. Rakoff that had previously 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, and Lara K. Eshkenazi are in charge of the case.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of a complaint charging GARRETT KELSEY with sending threats to a Manhattan-based Jewish organization (the “Victim Organization”) by email and phone.  KELSEY was arrested in Cedar Rapids, Iowa, this morning and is expected to be presented before a Magistrate Judge in the Northern District of Iowa later today. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, Garrett Kelsey repeatedly conveyed obscenity-laden and hate-filled threats to a Jewish organization by phone and email.  The alleged conduct is not protected speech.  As charged, the conduct – making interstate threats – is a federal crime punishable by years in prison.”

FBI Assistant Director William F. Sweeney Jr. said:  “The FBI will always follow threats that cross the line of free speech and threaten the safety of individuals and groups, especially when those threats are based on a religion or race.  The fact that Mr. Kelsey allegedly continued his threatening behavior even after being informed that his previous actions were not protected speech makes his actions more abhorrent.”

Police Commissioner James P. O’Neill said:  “The investigative efforts of New York City law enforcement are relentless and far-reaching.  Whenever individuals – wherever they are based – pose a threat, the NYPD and our partners will work tirelessly to keep people safe.  I thank our colleagues at the FBI and the Southern District for their partnership.”

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

In late May 2019, KELSEY made violent threats by phone and email to the Victim Organization.  On May 23, KELSEY called the Victim Organization and spoke briefly with one of its employees.  A short time later, KELSEY called that employee’s number back and left a voicemail for the Victim Organization stating, “My people have fucking slaughtered your fucking people before and we will do it again. And right now, you are giving us incentive to do that . . . . Filthy fucking Jews.” 

Later that same day, KELSEY sent the Victim Organization an email demanding that the Victim Organization remove a video about Nordic Neo-Nazis that the Victim Organization had uploaded to the Internet.  KELSEY wrote: “Everywhere Jews go in the world they cause trouble. You have 3 days to remove this video and offer an apology to the Asatru community or we will be taking action against your organization full of degenerates.”  “Asatru” appears to have been a reference to a religious movement recently linked to anti-Semitic and other racist groups.

The next day, KELSEY participated in a voluntary interview with law enforcement, during which he admitted to sending the threatening email and voicemail to the Victim Organization. 

Approximately one week after his voluntary law enforcement interview, KELSEY changed the cover photograph associated with his Facebook account.  The new cover photograph depicted Jewish residents of a ghetto in Warsaw, Poland, lined up facing a wall with their hands up.  Those residents were detained after an uprising during World War II and ultimately were transferred to Nazi concentration camps.

*                *                *

KELSEY, 31, of Cedar Rapids, Iowa, is charged with one count of interstate transmission of threats to injure a person, which carries a maximum sentence of five years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Berman praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force, which principally consists of agents from the FBI and detectives from the New York City Police Department.  Mr. Berman also thanked the U.S. Attorney’s Office for the Northern District of Iowa.  Mr. Berman noted that the case is ongoing.

This case is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant United States Attorney Stephanie Lake is in charge of the prosecution.

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

 

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

U.S. Attorney Geoffrey S. Berman said:  “Robert Morgenthau, the legendary U.S. Attorney and Manhattan District Attorney, passed away yesterday just 10 days shy of his 100th birthday.  Mr. Morgenthau’s contributions to law enforcement and to the Southern District of New York were extraordinary.  Among his many achievements during his tenure as U.S Attorney, Mr. Morgenthau created the Securities Fraud Unit and helped establish the framework for sophisticated, international investigations that still guides our career prosecutors.  Whether he was charging landmark public corruption or organized crime cases, Mr. Morgenthau worked tirelessly to instill public confidence in the integrity of the Office.

Mr. Morgenthau remained active and engaged until he passed.  Indeed, less than a year ago he was kind enough to join the Office in the repatriation of a Renoir painting stolen by the Nazis during WWII.  At that ceremony, which took place at the Robert Morgenthau wing of the Museum of Jewish Heritage, Mr. Morgenthau spoke movingly about the importance of bringing some measure of justice, even a half century later, to the victims of the Holocaust and their heirs.

Every day as I enter my office I pass a portrait of Mr. Morgenthau and I am inspired by his lifelong dedication to public service and the law.”

19-227            

Microsoft Magyarország Számítástechnikai Szolgáltató és Kereskedelmi Kft. (Microsoft Hungary), a wholly owned subsidiary of Microsoft Corporation, has agreed to pay a criminal penalty of more than $8.7 million to resolve the government’s investigation into violations of the Foreign Corrupt Practices Act (FCPA) arising out of a bid rigging and bribery scheme in connection with the sale of Microsoft software licenses to Hungarian government agencies.

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Geoffrey S. Berman of the Southern District of New York and Assistant Director Robert Johnson of the FBI’s Criminal Investigative Division made the announcement.

According to Microsoft Hungary’s admissions, beginning by at least 2013 and continuing until at least 2015, a senior executive and other employees of Microsoft Hungary participated in a scheme to inflate margins in the Microsoft sales channel in connection with the sale of Microsoft software licenses to Hungarian government agencies.  In furtherance of that scheme, Microsoft Hungary executives and employees falsely represented to Microsoft that steep discounts were necessary to conclude deals with resellers who bid for the opportunity to sell Microsoft licenses to government customers.  In actuality, the savings were not passed on to the government customers, but instead were used for corrupt purposes and were falsely recorded as “discounts” and stored in various tools and databases on Microsoft servers in the United States in violation of the Foreign Corrupt Practices Act. 

Microsoft Hungary entered into a nonprosecution agreement and agreed to pay a criminal penalty of $8,751,795 to resolve the matter.  The Department reached this resolution based on several factors.  Although Microsoft Hungary did not voluntarily self-disclose the misconduct, Microsoft Hungary received credit for its and Microsoft Corporation’s substantial cooperation with the Department’s investigation and for taking extensive remedial measures.  For example, Microsoft Hungary terminated four licensing partners and Microsoft Corporation has implemented an enhanced system of compliance and internal controls, company-wide, to address and mitigate corruption risks.  Accordingly, the criminal penalty reflects a 25 percent reduction off the bottom of the applicable U.S. Sentencing Guidelines fine range for the company’s full cooperation and remediation.

In a related matter with the Securities and Exchange Commission (SEC), Microsoft Corporation agreed to pay to the SEC disgorgement and prejudgment interest totaling approximately $16,565,151 for conduct in Hungary.

The case is being investigated by the FBI’s New York Field Office. Trial Attorneys Derek J. Ettinger and Della Sentilles of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Sarah Lai of the Southern District of New York are handling 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.

Geoffrey S. Berman, 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 that Microsoft Magyarország Számítástechnikai Szolgáltató és Kereskedelmi Kft. (Microsoft Hungary), a wholly owned subsidiary of Microsoft Corporation, has agreed to pay a criminal fine of more than $8.7 million to resolve the government’s investigation into violations of the Foreign Corrupt Practices Act (FCPA) arising out of a bid rigging and bribery scheme in connection with the sale of Microsoft software licenses to Hungarian government agencies and the false recording of the corrupt payments as legitimate customer discounts on Microsoft Corporation’s financial records.

U.S. Attorney Geoffrey S. Berman said:  “U.S. multinational corporations must have robust policies and practices to prevent their foreign subsidiaries from participating in bribery that result in false and misleading entries in the books and records of the parent company.  We will hold subsidiaries and, where appropriate, the parent corporations accountable wherever FCPA violations occur.”

FBI Assistant Director William F. Sweeney Jr. said:  “Microsoft Hungary created a conduit for illegal activity, one that permeated the layers of oversight put in place to protect against violations of the Foreign Corrupt Practices Act.  The $8.7 million penalty imposed today makes it abundantly clear that any alleged violation of the FCPA, whether on behalf of an individual or entity, will not be taken lightly.”

According to Microsoft Hungary’s admissions, Microsoft Hungary contracts with third party companies to sell licenses for Microsoft products to Hungarian government agencies.  These intermediaries purchase the licenses from Microsoft Hungary, then resell the licenses to the end customers.  Beginning at least 2013 and continuing until at least 2015, senior executives and other employees of Microsoft Hungary participated in a bribery and bid rigging scheme in connection with the sale of Microsoft software licenses to Hungarian government agencies.  In furtherance of that scheme, certain Microsoft Hungary executives and employees falsely represented to Microsoft that steep discounts were necessary to conclude deals with resellers who bid for the opportunity to sell Microsoft licenses to government customers.  As a result, those discounts were falsely recorded in Microsoft Corporation’s financial records as legitimate business expenses.  In actuality, the savings were not passed on to the government customers, but were used by the resellers, in part, to pay bribes to Hungarian government officials.  The tainted deals resulted in at least $14,586,325 in profits to Microsoft Corporation.

Microsoft Hungary entered into a nonprosecution agreement and agreed to pay a criminal fine of $8,751,795 to resolve the matter.  This resolution was based on several factors.  Although Microsoft Hungary did not voluntarily self-disclose the misconduct, Microsoft Hungary received credit for its and Microsoft Corporation’s substantial cooperation with the investigation and for taking extensive remedial measures.  For example, Microsoft Hungary terminated four licensing partners, and Microsoft Corporation has implemented an enhanced system of compliance and internal controls, company-wide, to address and mitigate corruption risks.  Accordingly, the criminal fine reflects a 25 percent reduction off the bottom of the applicable U.S. Sentencing Guidelines fine range for the company’s full cooperation and remediation.

In a related matter with the Securities and Exchange Commission (SEC), Microsoft Corporation agreed to pay to the SEC disgorgement and prejudgment interest totaling approximately $16,565,151 for conduct including Hungary.

Mr. Berman praised the outstanding investigative work of the FBI.

The case is being handled by the Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorney Sarah Lai is in charge of the prosecution, with support from Trial Attorneys Derek J. Ettinger and Della Sentilles of the Criminal Division’s Fraud Section.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that VINCENT ESPOSITO was sentenced today to 24 months in prison by U.S. District Judge Victor Marrero for conspiring to commit racketeering offenses with members and associates of the Genovese Crime Family of La Cosa Nostra.  Judge Marrero also imposed financial penalties, including approximately $3.8 million in forfeiture, a $20,000 fine, and restitution to be determined.  ESPOSITO previously pled guilty on April 10, 2019, before U.S. Magistrate Judge Sarah Netburn. 

U.S. Attorney Geoffrey S. Berman said:  “By his own admission, for more than a decade Vincent Esposito made millions with members of the Genovese Crime Family by extorting payments, demanding kickbacks, committing fraud, and instilling fear.  Today Esposito has been sentenced to prison for racketeering conspiracy.”

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

La Cosa Nostra, also known as the “Mob” or the “Mafia,” operates through entities known as “Families.”  One of the Families operating in the New York City area is the Genovese Crime Family.  For years, continuing until 2017, ESPOSITO conspired with other members and associates of the Genovese Crime Family to commit a wide range of crimes to enrich themselves, including multiple acts of extortion, honest services fraud, and bribery.  Among other things, ESPOSITO directed the long-running extortion of a union official (“Official-1”) for annual tribute payments of more than over $10,000, and had a number of lower-ranking members of the enterprise collect money and convey threats to Official-1 on Esposito’s behalf.  In another extortion scheme, ESPOSITO’s co-conspirators extorted a different union official (“Official-2”) and a financial adviser (the “Adviser”) for a cut of commissions made from union investments.

At the time of ESPOSITO’s arrest, the Federal Bureau of Investigation (“FBI”) executed a search warrant on his home and seized more than $3.8 million in U.S. currency hidden throughout the residence, along with an unregistered handgun, ammunition, brass knuckles, and lists of made members of the Genovese Crime Family.  Under the terms of his guilty plea, ESPOSITO agreed to forfeit the more than $3.8 million seized by the FBI as criminal proceeds resulting from the offense. 

*                *                *

In addition to the prison term, ESPOSITO, 51, of New York, NY, was sentenced to three years of supervised release, and was ordered to forfeit $3,816,685.59 and to pay a fine of $20,000.

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

The case is being prosecuted by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Kimberly J. Ravener, Jared Lenow, and Jason M. Swergold are in charge of the prosecution. 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Peter D. Lopez, Regional Administrator of the U.S. Environmental Protection Agency (“EPA”), announced today that the United States has filed and simultaneously entered into two consent decrees settling a civil lawsuit against HOPEWELL PRECISION, INC. (“HOPEWELL”) and JOHN B. BUDD (collectively, the “Defendants”).  The lawsuit, brought pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) – commonly known as the Superfund statute – seeks to collect costs that EPA has incurred since March 2003 in connection with its cleanup of trichloroethene and other hazardous substances at the HOPEWELL Precision Superfund Site (the “Site”) in the Town of East Fishkill, Dutchess County, New York.  The two consent decrees (one against each Defendant) provide for a combined payment of $1,247,700 by the Defendants.

U.S. Attorney Geoffrey S. Berman said:  “Polluters must pay for the costs they have imposed on the community.  Together, these defendants released toxic chemicals into the environment, which then contaminated the nearby groundwater and adversely affected the surrounding neighborhoods.  Today’s lawsuit and consent decrees demonstrate that we will hold polluters responsible for their conduct.”

Regional Administrator Peter D. Lopez said:  “The Superfund program operates on the principle that polluters pay for cleanups, and this settlement allows EPA to recover some of the taxpayer money that was spent at this site to address the contamination.  Defendants’ actions led directly to contamination of groundwater, which migrated to people’s wells and caused hazardous vapors to seep into their homes.  EPA stepped in and took the necessary actions to protect residents in the area, initially by installing treatment systems at homes, and now we are working toward a permanent remedy through the creation and extension of a new public water supply system in the community.  This settlement, however, reimburses only a portion of the money EPA is spending at the site because of the limitations of the Defendants’ financial resources.”           

As alleged in the complaint filed today in federal court, since 1972, HOPEWELL has been engaged in the business of custom sheet metal and machining fabrication at two properties that, together with the surrounding area into which contamination has migrated, make up the Site.  BUDD owns one of the two properties and was the president and sole shareholder of HOPEWELL from 1972 until 1985, as well as the 80 percent owner from 1985 until 1991.  In connection with its operations, until approximately 1998, HOPEWELL used chemical solvents, including trichloroethene (“TCE”) and 1,1,1-trichloroethane (“1,1,1-TCA”), to clean and degrease machine parts, generating a hazardous solvent waste that was at times disposed into the ground behind the facility.  Additionally, during certain years, HOPEWELL employees poured paints and other chemicals into the ground behind the facility.  As a result of these operations, solvents including TCE and 1,1,1-TCA were released into the environment, including the structures and soils at the HOPEWELL properties, and they leached into the groundwater and migrated beyond the properties, affecting drinking wells and homes in an area extending approximately one-and-a-half miles from the properties.  EPA has incurred millions of dollars of costs in connection with cleaning up the Site.  Work continues at the Site, including restoration of the contaminated groundwater aquifer and construction of an alternative water supply to serve properties with private drinking water wells that have been or may be affected by the groundwater contamination.

In the consent decrees filed today, the Defendants admit and accept responsibility for the following:

• In connection with its operations, until 1998, HOPEWELL used a vapor degreasing machine to clean and degrease parts, and, until at least 1991, used TCE and 1,1,1-TCA in that machine.
• As a result of HOPEWELL’s operations while BUDD was its owner and president, solvents including TCE and 1,1,1 TCA were released into the environment, including the structures and soils at the HOPEWELL properties.   
• Contamination from the HOPEWELL properties has migrated beyond the properties into the area’s groundwater, contaminating approximately 66 private drinking water wells in the neighborhood as well as ponds in the path of the contaminated groundwater.

            Pursuant to the consent decrees, the Defendants will pay a total of $1,247,700 in costs incurred by EPA, consisting of $963,750 to be paid by BUDD and $283,950 to be paid by HOPEWELL.  These settlement amounts were based on a financial analysis of what the Defendants were capable of paying.

*                *                *

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

This case is being handled by the Environmental Protection Unit of the Office’s Civil Division.  Assistant U.S. Attorneys Dominika Tarczynska and Rachael Doud are in charge of the case.

Geoffrey S. Berman, United States Attorney for the Southern District of New York, and James P. O’Neill, Commissioner of the New York City Police Department (“NYPD”) announced the unsealing today of an Indictment charging RAKIM BROWN, a/k/a “Ra,” with the January 28, 2018, shooting of a woman in connection with a drug conspiracy, resulting in injuries to her face and leg.  BROWN will be presented and arraigned today before U.S. Magistrate Judge Kevin Nathaniel Fox.  The case is assigned to U.S. District Judge Sidney H. Stein. 

U.S. Attorney Geoffrey S. Berman said:  “Working with the NYPD and our other law enforcement partners, we will continue to investigate and prosecute drug trafficking and the violence that so often accompanies it.  The indictment of Rakim Brown for a drug-related shooting demonstrates that link between drugs and guns.”

NYPD Commissioner James P. O’Neill said:  “The NYPD and its law enforcement partners pursue – unrelentingly and with precision – those who carry guns and those who traffic illegal drugs.  I want to thank the investigators and prosecutors who worked to obtain today’s indictment.  Their work helps make our city safer.”

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

Between 2016 up to and including 2018, RAKIM BROWN, a/k/a “Ra,” was involved in a conspiracy to distribute crack cocaine.  Between April 2017 up to and including 2018, BROWN used, carried, and discharged a firearm during and in furtherance of that drug conspiracy, including on January 28, 2018, when, in connection with a dispute with a rival drug crew, he shot at a woman and caused injuries to her face and leg. 

*                      *                     *

BROWN, 24, of the Bronx, New York, is charged with one count of conspiracy to distribute crack cocaine, which carries a maximum sentence of 20 years in prison, and one count of using and carrying a firearm, which was brandished and discharged, in connection with the narcotics conspiracy, which carries a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison.  The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

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

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorney Danielle R. Sassoon 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 descriptions of the Indictment constitute only allegations, and every fact described should be treated as an allegation.

Geoffrey S. Berman, United States Attorney for the Southern District of New York, and James P. O’Neill, Commissioner of the New York City Police Department (“NYPD”), announced the unsealing today of an Indictment charging ANTONIO MORA, a/k/a “Chucky,” and BRIAN MORA, a/k/a “Dottie,” with the September 17, 2018, shooting of a rival drug dealer in connection with a drug conspiracy, after pulling his daughter from his hands.  ANTONIO MORA will be presented today before U.S. Magistrate Judge Kevin Nathaniel Fox.  BRIAN MORA is already in federal custody.  The case is assigned to U.S. District Judge J. Paul Oetken. 

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Antonio and Brian Mora dealt heroin and crack cocaine in the Bronx.  During a dispute with a rival drug crew, the defendants allegedly ripped the victim’s daughter out of his arms before shooting him.  Thanks to our partners at the NYPD, the defendants now face federal charges for their brazen and callous crimes.”

NYPD Commissioner James P. O’Neill stated:  “This case illustrates the extreme violence that too often accompanies gang activity and the drug trade, and why we must be vigilant in keeping our communities safe.  I want to thank the law enforcement professionals whose hard work and dedication secured these federal indictments.”

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

Between 2016 and 2018, ANTONIO MORA and BRIAN MORA were involved in a conspiracy to distribute crack cocaine and heroin.  During that same time period, ANTONIO MORA and BRIAN MORA used, carried, and discharged a firearm during and in furtherance of that drug conspiracy, including on September 17, 2018, when, in connection with a dispute with a rival drug crew, they shot a man after they pulled his daughter from his arms. 

*                      *                     *

ANTONIO MORA, 25, of the Bronx, New York, and BRIAN MORA, 24, of the Bronx, New York, are each charged with one count of conspiracy to distribute crack cocaine and heroin and one count of using and carrying a firearm, which was brandished and discharged, in connection with the narcotics conspiracy, each of which carries a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison.  The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants would be determined by the judge.

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

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorney Danielle R. Sassoon is in charge of the prosecution.

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

 

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[1]  As the introductory phrase signifies, the entirety of the text of the Indictment and the 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, announced today that JOSEPH SABELLA, a/k/a “Joe Valet,” was sentenced to 87 months in prison by U.S. District Judge Alvin K. Hellerstein for his role as a captain in the Bonanno Organized Crime Family of La Cosa Nostra.

Manhattan U.S. Attorney Geoffrey S. Berman stated:  “As he admitted in open court, Joseph Sabella was an active member of the Bonanno Crime Family who engaged in numerous racketeering acts.  He will now spend years in prison for his crimes.  Together with our law enforcement partners, we will continue to aggressively prosecute members of La Cosa Nostra who intimidate, threaten, and harm members of our community.”

According to the Indictment, documents filed in this case and statements made in related court proceedings:

La Cosa Nostra (“LCN”), also known as the “Mob” or the “Mafia,” operates through entities known as “Families.”  In the New York City area, there are five LCN Families, namely, the Bonanno Family, the Genovese Family, the Luchese Family, the Colombo Family, and the Gambino Family.  Members and associates of one La Cosa Nostra family at times work together with other La Cosa Nostra families in jointly undertaken criminal ventures.

The Bonanno Family, like other LCN Families, operates through a group of individuals known as “crews,” each of which is led by a “capo” or “captain.”  The crews are composed of “made” members, called “soldiers,” and trusted non-members called “associates.”  Above the capos are the highest-ranking members – the boss or acting boss, the underboss, and the consigliere, or counselor – who oversee the Family.

Between 2012 and January 2018, SABELLA acted as soldier and then captain in the Bonanno Family.  As a member of the Bonanno Family, SABELLA engaged in numerous racketeering acts, including extortion, fraud, and physical assaults.  In particular, SABELLA participated in the long-term extortion of a New York-based demolition company (“Company-1”) that netted the Bonanno Family thousands of dollars a year for nearly three decades.  SABELLA also participated in the physical assault of the owner of a strip club (“Victim-1”) and the subsequent extortion of Victim-1 out of his legitimate and illegitimate business interests.

SABELLA, 54, of Monroe, New Jersey, previously pled guilty on February 12, 2019, to conspiracy to commit racketeering.  As part of his guilty plea, SABELLA admitted to his involvement in the extortion of Company-1, the extortion of Victim-1, a large-scale, multi-year fraud at a construction site on Staten Island, and the physical assaults on Victim-1 and one of Sabella’s former business partners, all as part of his participation in the Bonanno Family.

Mr. Berman praised the outstanding investigative work of the Department of Homeland Security – Homeland Security Investigations, the Department of Labor, the Diplomatic Security Service, the Federal Bureau of Investigation, the New York City Police Department, and the Special Agents of the United States Attorney’s Office for the Southern District of New York.

This prosecution is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Jason M. Swergold, Gina Castellano, and Jacob R. Fiddelman are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Angel M. Melendez, the Special Agent-in-Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), announced the arrest and unsealing of a complaint charging HUGH BRIAN HANEY with money laundering, derived from the proceeds of his narcotics trafficking on the Dark Web site known as “Silk Road,” where illegal drugs and other illicit goods and services were regularly bought and sold by the site’s vendors and customers.  HANEY was arrested this morning near Columbus, Ohio, and was presented before a magistrate judge in the Southern District of Ohio.

U.S. Attorney Geoffrey S. Berman said:  “Working side by side with our law enforcement partners, our Office has shut down Silk Road, the secret online marketplace for illegal drugs, hacking services, and a whole host of other criminal activity.  As alleged, Hugh Haney used Silk Road as a means to sell drugs to people all over the world.  Then he allegedly laundered his profits – more than $19 million – through cryptocurrency.  Today’s arrest should be a warning to dealers peddling their drugs on the dark web that they cannot remain anonymous forever, especially when attempting to legitimize their illicit proceeds.”

HSI Special Agent-in-Charge Angel M. Melendez said:  “In 2013, Silk Road was put out of business, and as a result of that, cyber criminals sought ways to continue their criminal activities and more importantly launder their illicit digital currency.  Haney was allegedly one of those criminals  who was still holding on to a stash of cyber gold.  HSI special agents employed blockchain analytics to uncover and seize bitcoins valued at $19 million and usher Haney out of the dark web shadows to face justice in the Southern District of New York.”

As alleged in the Complaint to be unsealed today[1]:

Silk Road was designed to be an online criminal marketplace 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 more than 100,000 buyers, and to launder hundreds of millions of dollars derived from these unlawful transactions. All told, the site generated sales revenue totaling more than approximately 9.5 million Bitcoins. 

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.  Agents and officers of the Drug Enforcement Administration made multiple controlled purchases of narcotics, including oxycontin, from Pharmville in 2011 and 2012.  Pursuant to a judicially authorized search of HANEY’s house in Ohio in 2018, agents with HSI found evidence that HANEY was a high-ranking member or administrator of Pharmville, involved in large-scale narcotics trafficking on Silk Road.

Because Silk Road’s payment system essentially involved a Bitcoin “bank” internal to the site, every user had to hold an account in order to conduct transactions on the site.  Vendors seeking to sell items, including narcotics, on Silk Road each had a Silk Road Bitcoin address, or multiple addresses, associated with the user’s Silk Road account.  Once a transaction was complete, a vendor who had been paid by another user through the transfer of the user’s Bitcoins could then withdraw Bitcoins from the vendor’s Silk Road Bitcoin address by sending them to a different Bitcoin address, outside Silk Road, such as the Bitcoin addresses the vendor personally controlled.

In 2017 and 2018, HANEY transferred Bitcoins representing narcotics proceeds he had earned through his control of Pharmville from Silk Road to an account held at a company involved in the exchange of Bitcoins and other digital currency (“Company-1”).  In correspondence with Company-1, HANEY claimed falsely that the source of these Bitcoins was his own “mining” of Bitcoins – which is the process by which new Bitcoins are created cryptographically – and from “individuals [he] met online,” while in truth and in fact, the Bitcoins were derived from transfers from Silk Road.  After HANEY transferred the Bitcoins to cash worth more than $19 million through Company-1, HSI seized the money pursuant to a judicially authorized seizure warrant from a custodial account at a bank (“Bank-1”) that was located in the Southern District of New York.

*              *             *

HANEY, 60, of Columbus, Ohio,  is charged with 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.

Mr. Berman praised the outstanding investigative work of HSI. 

This case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant United States Attorneys Samuel L. Raymond and Tara M. La Morte are in charge of the prosecution.

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

_____________________

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that ELIANA BAUTA, GERALDINE PEREZ, and ERIC GONZALES have been sentenced for their involvement in a scheme to steal over $300,000 in funds from the New York City Human Resources Administration (“HRA”).  BAUTA, who perpetrated the offenses in her capacity as an HRA employee, was sentenced today by U.S. District Judge Valerie E. Caproni to two years in prison.  PEREZ was previously sentenced by Judge Caproni to nine months in prison.  GONZALES was previously sentenced by Judge Caproni to two years of probation. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “The defendants have now been convicted of stealing money that was intended to be used to help some of New York’s neediest residents.  As this prosecution makes clear, we are committed to rooting out those who would abuse the public trust and to ensuring that funds from public programs go to their intended recipients, not the pockets of unscrupulous employees and their co-conspirators.”

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

HRA is an agency of the City of New York responsible for administering the majority of the City’s public assistance programs.  Among other things, HRA provides temporary, emergency cash assistance to individuals and families with social service and economic needs to assist them in reaching self-sufficiency.  The emergency assistance is funded by the federal government as well as by New York State and the City.

Since 2015, the New York City Department of Investigation ("DOI") has been investigating two related schemes in which an HRA employee – BAUTA – defrauded HRA and the City by using her position to commit public assistance fraud.  BAUTA worked as a Job Opportunity Specialist for HRA from approximately January 2008 to on or about May 23, 2018.  As a Job Opportunity Specialist, BAUTA was at various points responsible for interviewing benefits applicants, compiling and submitting applicants’ paperwork, and disbursing applicants’ benefits.

In the first of the two schemes, BAUTA caused the fraudulent issuance of emergency benefits funds to relatives and acquaintances, including GERALDINE PEREZ and ERIC GONZALES, among others, who in truth and in fact did not qualify for those funds.  For example, BAUTA altered a police report submitted by an actual HRA client by changing the name of the victim to a family member’s name, and then entered the doctored report into HRA systems in support of a request for benefits to be issued to that family member.  On another occasion, BAUTA submitted a request for emergency benefits to be issued to an individual after an alleged disaster, but no such disaster had occurred.  Both PEREZ and GONZALEZ were knowing recipients of such fraudulently issued funds and shared the proceeds with BAUTA.

In the second scheme, BAUTA obtained access to and misappropriated emergency benefits checks issued to actual HRA clients.  Instead of providing the checks to the legitimate clients in need of emergency funding, BAUTA gave them to PEREZ and GONZALES, among other of BAUTA’s relatives and associates, who deposited the checks in their own bank accounts and withdrew the funds, and then shared the proceeds with BAUTA.  In total, the two schemes resulted in losses to HRA of at least $309,000 in public funds.

In addition to obtaining stolen HRA checks into her bank account and the bank accounts of family members, PEREZ also deposited or caused to be deposited into these same accounts improperly obtained United States Treasury checks that were issued to other individuals as tax refunds.  In total, 23 such checks worth more than $91,000 were deposited into bank accounts of PEREZ and her family members and associates.  PEREZ then split the proceeds with a tax preparer who assisted in the scheme.

*                *                *

In addition to the prison term, BAUTA, 36, of the Bronx, New York, was sentenced to three years of supervised release, and was ordered to forfeit $256,348.46 and to pay $312,408.60 in restitution. 

PEREZ, 61, of the Bronx, New York, was sentenced by Judge Caproni on June 11, 2019, to nine months in prison and three years of supervised release (including six months of home detention), and was ordered to forfeit $233,259.34 and to pay $233,259.34 in restitution. 

GONZALES, 27, of the Bronx, New York, was sentenced by Judge Caproni on June 20, 2019, to two years of probation (including 150 hours per year of community service), and was ordered to forfeit $998.33 and to pay $37,767.64 in restitution.

Mr. Berman praised the investigative work of DOI and the Internal Revenue Service.  

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, John C. Demers, the Assistant Attorney General for National Security, John Brown, Assistant Director of the FBI’s Counterintelligence Division, 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 extradition of BEHZAD POURGHANNAD and the unsealing today of a three-count indictment charging POURGHANNAD, ALI REZA SHOKRI, and FARZIN FARIDMANESH with exporting carbon fiber from the United States to Iran.  POURGHANNAD, an Iranian national, was arrested on those charges on May 3, 2017, in Germany and was extradited to the U.S.  POURGHANNAD arrived in the Southern District of New York yesterday, and was presented today in White Plains federal court before U.S. Magistrate Judge Judith C. McCarthy.  SHOKRI and FARIDMANESH remain at large.

U.S. Attorney Geoffrey Berman stated:  “Carbon fiber has many aerospace and defense applications, and is strictly controlled to ensure that it doesn’t fall into the wrong hands.  Pourghannad and his co-defendants allegedly went to great lengths to circumvent these controls and the United States’ export laws.  Together with our law enforcement partners, we will continue to protect our nation’s assets and protect our national security.”

Assistant Attorney General John Demers said: “Pourghannad is alleged to have sought to procure for Iran large amounts of carbon fiber — a commodity that can be used in the enrichment of uranium.  U.S. sanctions exist to prevent behavior, like this, which endangers our country, and the Department is committed to vigorously enforcing them.  Pourghannad and others who would attempt to thwart these laws need to know that their actions, which benefit Iran’s destabilizing efforts and make Americans less safe, will not go unpunished.”

Assistant Director John Brown of the FBI’s Counterintelligence Division said:  “This case shows the FBI aggressively pursues those who allegedly break the law and violate sanctions against Iran.  Iran remains determined to acquire U.S. technology with military applications, and the FBI is just as determined to stop such illegal activity.  The charges against these three Iranian nationals, and the extradition of Mr. Pourghannad, demonstrate we take Iran's actions extremely seriously and will work with our partners to defeat them.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “Iran’s continued pursuit of technology and materials to advance its nuclear program remains a threat to the US and the rest of the world.  The FBI New York and SDNY will continue to pursue these illicit proliferation activities, and bring the full investigative and law enforcement capabilities of the U.S. to bear on those who would help Iran advance its dangerous agenda.  If you aid Iran in its efforts, you will be held accountable.”

According to the allegations contained in the Indictment, unsealed in White Plains federal court[1]:

Between 2008 and July 2013, POURGHANNAD, SHOKRI, and FARIDMANESH lived and worked in Iran.  During that period, they worked together to obtain carbon fiber from the U.S. and surreptitiously export it to Iran via third countries.  In particular, SHOKRI worked to procure many tons of carbon fiber from the U.S.; 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 late 2007 and early 2008, SHOKRI and a Turkey-based co-conspirator (“CC-2”) successfully arranged for the illegal export and trans-shipment of carbon fiber from the U.S. to an Iranian company associated with SHOKRI (“Iranian Company-1”).  Specifically, CC-2 contacted a U.S. 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 U.S. supplier and arranged for the shipment of the carbon fiber from the U.S., through Europe and Dubai, United Arab Emirates, to Iranian Company-1, operated by SHOKRI, in Iran.

In May 2009, POURGHANNAD and SHOKRI attempted to arrange another illegal purchase and trans-shipment of carbon fiber from the U.S. 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 U.S. supplier and arranged for the carbon fiber to be exported from the U.S. 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 2013, POURGHANNAD, SHOKRI, and FARIDMANESH again attempted to illegally procure and export carbon fiber from the U.S. to Iran.  In the 2013 transaction, SHOKRI and POURGHANNAD negotiated with Individual-1 for the purchase and trans-shipment to Iran of more than 5 tons of carbon fiber.  FARIDMANESH and POURGHANNAD further agreed with Individual-1 that the carbon fiber would be trans-shipped from the U.S. 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 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 U.S. 

*                *                *

POURGHANNAD, 65, SHOKRI, 61, and FARIDMANESH, 48, all of whom are Iranian citizens, are each charged with one count of conspiracy to violate the International Emergency Economic Powers Act (“IEEPA”), which carries a maximum sentence of 20 years in prison, and two counts of violation and attempted violation of IEEPA, each of which also 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 the FBI, and thanked the New York Field Office of the U.S. Department of Commerce, the U.S. Department of Justice’s National Security Division and Office of International Affairs, the U.S. Marshals Service, Homeland Security Investigations, and Immigration and Customs Enforcement for their assistance.  Mr. Berman also thanked German law enforcement for their assistance in the arrest and apprehension of POURGHANNAD.

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 is in charge of the prosecution.

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

 

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[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the 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, announced that a federal jury yesterday found LLOYD KIDD, a/k/a “Chris Kidd,” a/k/a “Gerard Agard,” a/k/a “Red,” guilty of sex trafficking of a minor and enticement of a minor to engage in sexually explicit conduct for the purpose of producing a visual depiction of such conduct, following a six-day jury trial before U.S. District Judge Victor Marrero.

Manhattan U.S. Attorney Geoffrey Berman said:  “Lloyd Kidd has rightly been convicted of the shameless and exploitive victimization of an underage girl.  Kidd preyed on a particularly vulnerable victim, recruiting a minor residing at a foster care facility.  He now awaits sentencing for his appalling crimes.”

According to the allegations contained in the Indictment and evidence presented during the trial in Manhattan federal court:

From at least in or about spring 2015 through at least February 2017, KIDD engaged in sex trafficking of a minor and enticement of a minor to engage in sexually explicit conduct for the purpose of producing a visual depiction of such conduct.  The defendant recruited, enticed, harbored, transported, provided, obtained, and maintained a minor victim (“Victim-1”) for the purpose of commercial sex.

The defendant recruited Victim-1 when she was living in a foster care facility in New York, New York.  The defendant used Backpage.com to post advertisements of Victim-1 for commercial sex, and then directed Victim-1 to meet customers to engage in commercial sex out of his apartment in Brooklyn, New York.  

In addition, the defendant produced sexually explicit images and a video recording of Victim-1 performing sexually explicit activities, which constituted child pornography.  The defendant used at least one of the sexually explicit images of Victim-1 to advertise her for commercial sex.    

This prosecution is part of an ongoing investigation that, including KIDD, has charged 19 defendants, set forth in eight indictments, for the sex trafficking of at least 13 minor girls and young adults in New York State’s social services system. 

*                *                *

KIDD, 28, of Brooklyn, New York, was convicted of one count of sex trafficking of a minor, which carries a mandatory minimum sentence of 10 years in prison and a statutory maximum sentence of life in prison, and one count of enticement of a minor to engage in sexually explicit conduct for the purpose of producing a visual depiction of such conduct, which carries a mandatory minimum sentence of 15 years and a statutory maximum sentence of 30 years.  The mandatory minimum sentences and maximum potential sentences are prescribed by Congress and are provided for informational purposes only, as any sentencing of the defendant will be determined by the judge. 

KIDD will be sentenced by Judge Marrero on November 1, 2019. 

Any individuals who believe that they have information that may be relevant to this investigation should contact the Federal Bureau of Investigation (“FBI”) at 1-212-384-1000 or https://tips.fbi.gov/.

Mr. Berman thanked the FBI and the New York City Police Department for their outstanding work in this matter and, in particular, the New York Child Exploitation and Human Trafficking Task Force.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Mollie Bracewell, Elinor Tarlow, Jacob Gutwillig, and Sagar Ravi are in charge of the prosecution. 

Assistant Attorney General for National Security John C. Demers, U.S. Attorney Geoffrey S. Berman for the Southern District of New York, Assistant Director John Brown of the FBI’s Counterintelligence Division and Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office announced the extradition of Behzad Pourghannad and the unsealing today of a three-count indictment charging Pourghannad, Ali Reza Shokri and Farzin Faridmanesh with exporting carbon fiber from the United States to Iran.  Pourghannad, an Iranian national, was arrested on those charges on May 3, 2017, in Germany and was extradited to the U.S.  Pourghannad arrived in the Southern District of New York yesterday, and was presented today in White Plains federal court before U.S. Magistrate Judge Judith C. McCarthy.  Shokri and Faridmanesh remain at large.

“Pourghannad is alleged to have sought to procure for Iran large amounts of carbon fiber — a commodity that can be used in the enrichment of uranium,” said Assistant Attorney General Demers.  “U.S. sanctions exist to prevent behavior, like this, which endangers our country, and the Department is committed to vigorously enforcing them.  Pourghannad and others who would attempt to thwart these laws need to know that their actions, which benefit Iran’s destabilizing efforts and make Americans less safe, will not go unpunished.”

“Carbon fiber has many aerospace and defense applications, and is strictly controlled to ensure that it doesn’t fall into the wrong hands,” said U.S. Attorney Geoffrey Berman.  “Pourghannad and his co-defendants allegedly went to great lengths to circumvent these controls and the United States’ export laws.  Together with our law enforcement partners, we will continue to protect our nation’s assets and protect our national security.”

“This case shows the FBI aggressively pursues those who break the law and violate sanctions against Iran,” said Assistant Director Brown.  “Iran remains determined to acquire U.S. technology with military applications, and the FBI is just as determined to stop such illegal activity.  The charges against these three Iranian nationals, and the extradition of Mr. Pourghannad, demonstrate we take Iran's actions extremely seriously and will work with our partners to defeat them.”

“Iran’s continued pursuit of technology and materials to advance its nuclear program remains a threat to the US and the rest of the world,” said Assistant Director in Charge Sweeney.  “The FBI New York and SDNY will continue to pursue these illicit proliferation activities, and bring the full investigative and law enforcement capabilities of the U.S. to bear on those who would help Iran advance its dangerous agenda.  If you aid Iran in its efforts, you will be held accountable.”

According to the allegations contained in the Indictment, unsealed in White Plains federal court[1]:

Between 2008 and July 2013, Pourghannad, Shokri and Faridmanesh lived and worked in Iran.  During that period, they worked together to obtain carbon fiber from the U.S. and surreptitiously export it to Iran via third countries.  In particular, Shokri worked to procure many tons of carbon fiber from the U.S.; 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 late 2007 and early 2008, Shokri and a Turkey-based co-conspirator (CC-2) successfully arranged for the illegal export and trans-shipment of carbon fiber from the U.S. to an Iranian company associated with Shokri (Iranian Company-1).  Specifically, CC-2 contacted a U.S. 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 U.S. supplier and arranged for the shipment of the carbon fiber from the U.S., through Europe and Dubai, United Arab Emirates, to Iranian Company-1, operated by Shokri, in Iran.

In May 2009, Pourghannad and Shokri attempted to arrange another illegal purchase and trans-shipment of carbon fiber from the U.S. 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 U.S. supplier and arranged for the carbon fiber to be exported from the U.S. 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 2013, Pourghannad, Shokri, and Faridmanesh again attempted to illegally procure and export carbon fiber from the U.S. to Iran.  In the 2013 transaction, Shokri and Pourghannad negotiated with Individual-1 for the purchase and trans-shipment to Iran of more than 5 tons of carbon fiber.  Faridmanesh and Pourghannad further agreed with Individual-1 that the carbon fiber would be trans-shipped from the U.S. 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 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 U.S. 

*                *               *

Pourghannad, 65, Shokri, 61, and Faridmanesh, 48, all of whom are Iranian citizens, are each charged with one count of conspiracy to violate the International Emergency Economic Powers Act (IEEPA), which carries a maximum sentence of 20 years in prison, and two counts of violation and attempted violation of IEEPA, each of which also 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. Demers and Mr. Berman praised the outstanding investigative work of the FBI, and thanked the New York Field Office of the U.S. Department of Commerce, the U.S. Department of Justice’s Office of International Affairs, the U.S. Marshals Service, Homeland Security Investigations, and Immigration and Customs Enforcement for their assistance.  Mr. Demers and Mr. Berman also thanked German law enforcement for their assistance in the arrest and apprehension of Pourghannad.

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 is in charge of the prosecution.

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

---

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

Geoffrey S. Berman, United States Attorney for the Southern District of New York, Susan Bodine, Assistant Administrator for Enforcement and Compliance Assurance for the U.S. Environmental Protection Agency (“EPA”), and David Bernhardt, Secretary of the U.S. Department of the Interior (“DOI”), announced today that the United States has entered into a settlement agreement with the bankruptcy trustee for the estates of debtor MAGNESIUM CORPORATION OF AMERICA (“MAGCORP”) and RENCO METALS, INC. (“RENCO METALS”), resolving claims and liabilities related to environmental contamination at a former magnesium production facility in Rowley, Utah.  The settlement agreement remains subject to court approval.

U.S. Attorney Geoffrey S. Berman said:  “Polluters will be held to account, even in bankruptcy, for contaminating the environment.  As a result of today’s settlement, MagCorp and Renco Metals will pay more than $33 million to fund clean-up of the hazardous substances at the US Magnesium Superfund Site.”   

EPA Assistant Administrator for Enforcement and Compliance Assurance Susan Bodine said:  “Settlement of this long running litigation is a significant step forward in the effort to address the environmental issues at the U.S. Magnesium site.  The resources secured will help fund remediation of the site.”

DOI Secretary David Bernhardt said:  “At the Department of the Interior, we are focused on addressing environmental challenges, so we can provide the highest quality of life to all Americans.  If approved by the Court, the funding recovered through this settlement will be used to reclaim and restore access to 58,000 acres of BLM-managed public lands, which were damaged and abandoned by MagCorp over two decades ago.”     

In its proofs of claim filed in this bankruptcy, the United States asserted that MAGCORP and RENCO METALS (collectively, the “debtors”) were liable to EPA and DOI’s Bureau of Land Management (“BLM”) under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) (commonly known as the Superfund statute) for the cost of clean-up of hazardous substances released at a 4,525-acre site adjacent to the Great Salt Lake in Rowley, Utah, where MAGCORP had previously operated a magnesium production facility (the “US Magnesium Site”).  The United States also asserted on behalf of BLM and DOI’s Fish and Wildlife Service that the debtors were liable under CERCLA for natural resource damages caused by these hazardous substances; on behalf of EPA that the debtors were liable for civil penalties under the Resource Conservation and Recovery Act (“RCRA”); and on behalf of BLM that the debtors were liable for reclamation of land owned by the United States that MAGCORP used in connection with its operations.  Finally, the United States on behalf of BLM sought to recover from the debtors unpaid rent due in connection with a federal right-of-way and compensation for unpermitted removal of minerals from federal land. 

The settlement agreement filed in Manhattan Bankruptcy Court today substantially resolves these proofs of claim and, among other things, provides substantial funding for the remediation of the US Magnesium Site and affected federal land.  Pursuant to the agreement, the United States will receive allowed bankruptcy claims in the amount of $82,135,812, which is expected to result in a distribution of approximately $28.2 million dollars to fund remediation at the US Magnesium Site or reclamation of federal land used by MAGCORP in its operations, and more than $400,000 in compensation for natural resource damages, unpaid rent, and the unpermitted removal of minerals from federal land.  The agreement also secures the commitment of the current operator of the magnesium production facility, US Magnesium LLC, and its parent entities, to use more than $5.8 million that they are recovering from the debtors for environmental activities at the US Magnesium Site. 

*                *                *

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

Mr. Berman thanked the Environment and Natural Resources Division of the U.S. Department of Justice, EPA, DOI and the State of Utah for their assistance in this case.  

This case is being handled by the Office’s Environmental Protection Unit.  Assistant United States Attorney Christine S. Poscablo is in charge of the case.

Geoffrey S. Berman, United States Attorney for the Southern District of New York, announced that ROBERT ACOSTA and JOSE DIAZ were sentenced in Manhattan federal court today.  Both men were sentenced to life in prison for their roles in the December 22, 1997, murders for hire of Alex Ventura, 25, and Aneudis Almonte, 20, in the Bronx, New York.  The defendants were convicted following a three-week trial before U.S. District Judge P. Kevin Castel, who imposed today’s sentences.

U.S. Attorney Geoffrey S. Berman said:  “As the jury found, Acosta and Diaz committed two brutal murders in the Bronx more than 20 years ago.  As a result of the skill and determination of our law enforcement partners, the defendants will now spend the rest of their lives behind bars for their horrible crimes.”

According to the evidence presented during the trial:

In the 1990’s, ROBERT ACOSTA was the leader of a large-scale drug trafficking organization that distributed hundreds of kilograms of cocaine out of several buildings in northern Manhattan.  In the summer of 1997, the murder victims stole drug money from ACOSTA.  To retaliate, ACOSTA hired JOSE DIAZ to kill both men. 

On December 22, 1997, DIAZ and a co-conspirator (“CC-1”) lured the victims to an apartment building in the Bronx, ambushed them in a stairwell, and murdered them both.  CC-1 stabbed Almonte six times, including once in the chest.  DIAZ shot Ventura in the head from point-blank range.  In exchange for these murders, ACOSTA paid DIAZ approximately $12,000.

*                      *                      *

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

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Laurie A. Korenbaum, Michael K. Krouse, and Nicholas W. Chiuchiolo are in charge of the prosecution.