Southern District of New York

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that the United States has settled its federal Fair Housing Act (“FHA”) lawsuit against BEDFORD DEVELOPMENT LLC, CARNEGIE CONSTRUCTION CORP., JOBCO INC., ROBERT PASCUCCI, and WARSHAUER MELLUSI WARSHAUER ARCHITECTS, P.C. (collectively, “Defendants”).  The settlement requires Defendants to pay up to $195,000 for retrofits at the Sutton Manor condominium in Mount Kisco, New York, in order to make the individual units and the common areas of the building more accessible to individuals with disabilities, and to pay $330,000 to compensate aggrieved persons and to reimburse attorneys’ fees.  The resolution of this lawsuit was approved today by U.S. District Judge Kenneth M. Karas. 

U.S. Attorney Geoffrey S. Berman said:  “For almost 30 years, the Fair Housing Act has required newly built residential buildings to be accessible to people with disabilities, but some housing providers continue to disregard that requirement.  The flouting of the accessibility requirements was particularly egregious here, where the condominium was specifically advertised to older New Yorkers.  This Office will continue to use all legal tools available to enforce the Fair Housing Act and ensure that persons with disabilities have full access to residential buildings in this district.”

The Fair Housing Act’s accessible design and construction provisions require new multifamily housing complexes constructed after 1991 to have basic features accessible to persons with disabilities.  According to the allegations in the complaint, Sutton Manor was designed and constructed by Defendants with numerous inaccessible features, including insufficiently wide door openings, lobby doors requiring excessive force to operate, excessively high thresholds at the entrances to the patios or balconies, insufficiently wide doors leading to patios or balconies in individual units, excessively high thresholds at the entrance to showers, and insufficiently clear floor space in the hallways and kitchens for maneuvering by persons who use wheelchairs.

Among the aggrieved persons who will be compensated through this settlement are Michael and Linda Tracey, Mark and Gloria Koller, and Ina Grober (“Intervenor-Plaintiffs”), who each purchased and moved into units at Sutton Manor in 2007, in part because certain of the Defendants advertised Sutton Manor as being accessible to persons with disabilities.  The Intervenor-Plaintiffs initiated this action by filing an administrative complaint with the U.S. Department of Housing and Urban Development (“HUD”) and then, after HUD determined that there was reasonable cause to believe that the Fair Housing Act had been violated, electing to have HUD’s determination resolved in federal court.  In these circumstances, the Fair Housing Act authorizes the Department of Justice to commence an action in the United States District Court on behalf of the complainants and assert other claims as warranted. 

Other aggrieved persons may be entitled to monetary compensation from the fund created through today’s settlement.  Aggrieved persons may include those who:

• Were discouraged from living at Sutton Manor because of the lack of accessible features;
• Have been hurt in any way by the lack of accessible features at Sutton Manor;
• Paid to have an apartment at Sutton Manor made more accessible to persons with disabilities; or
• Otherwise were discriminated against on the basis of disability at Sutton Manor as a result of the inaccessible design and construction of the properties.

Any individual who may be entitled to compensation can file a claim by contacting the Civil Rights Complaint Line at (212) 637-0840, using the Civil Rights Complaint Form available on the United States Attorney’s Office’s website http://www.justice.gov/usao/nys/civilrights.html, emailing us at USANYS-CivilRights@usdoj.gov, or by sending a written claim to:

                        U.S. Attorney’s Office, Southern District of New York

                        86 Chambers Street, 3rd Floor

                        New York, New York  10007

                        Attention:  Chief, Civil Rights Unit

Since 2010, the Office has filed nearly 30 lawsuits to enforce the FHA to combat racial, gender, and disability discrimination in housing, including in the areas of design and construction, sexual harassment, and fair lending.

Mr. Berman thanked HUD for its efforts in the investigation.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that WILLIAM TIERNEY was sentenced to two years in prison for conspiring to defraud tens of thousands of victims of more than $1 million in connection with political action committees falsely purporting to support causes including autism awareness, law enforcement support, and the pro-life movement.  TIERNEY was also ordered to pay more than $1.5 million in forfeiture and restitution to victims, as well as an additional $50,000 fine.  TIERNEY pled guilty on November 2, 2018, before United States District Judge Jesse M. Furman, who also imposed the sentence.

U.S. Attorney Geoffrey S. Berman said:  “The successful prosecution of William Tierney demonstrates the commitment of the federal government to rooting out fraud and corruption in political action committees.  Today’s sentence sends a clear warning to anyone engaged in fraudulent political fundraising:  Scam PACs are a crime and those perpetrating them will go to prison.”

According to the Information, other filings in Manhattan federal court, and evidence presented in court at sentencing:

TIERNEY defrauded tens of thousands of donors to six political action committees that he established, controlled, and operated.  These scam PACs were fraudulent entities operated to enrich the defendant, targeting victims across the country to raise funds on the basis of false and misleading representations.  The scam PACs purported to support voter education regarding – and the political campaigns of those who supported – various causes, including autism awareness, law enforcement, and pro-life causes, including through purported “coast to coast” education and advocacy campaigns, working with local groups and organizations, and “investing every penny . . . in the big races to come.”  In truth, virtually all of the money raised was either paid to TIERNEY or used to perpetuate the fraud through additional telemarketing, fundraising, and overhead expenditures.  Less than 1 percent of the money obtained by the scam PACs was contributed to candidates for office.

TIERNEY carried out the fraud through a web of shell pass-through entities utilized to conceal and disguise the scheme.  Donated funds were transferred to these shell entities, which were given names that suggested activities related to marketing, consulting, and communications efforts, including for issue-specific causes.  As a result, payments to the shell entities appeared to be for legitimate expenditures, including when publicly disclosed in Federal Election Commission (“FEC”) filings.  In at least one instance, a website was created for one of the shell entities, falsely stating that the entity provided direct marketing and political consulting services to trade associations, candidate campaigns, political action committees, and nonprofit organizations.  In fact, these and the other shell entities TIERNEY created had no active operations or employees, were retained by no outside “clients,” and served only to funnel and disguise financial transactions involving money donated to certain scam PACs.

To facilitate the fraud, TIERNEY used the false identity “Bill Johnson” when meeting and corresponding with certain vendors.  Another fake identity, “Emma Smith,” was used in fundraising solicitations, and was described as a “Volunteer Coordinator” for one of the PACs.  In fact, neither Emma Smith nor the position of “Volunteer Coordinator” actually existed.  TIERNEY also undertook efforts to avoid press coverage of the scam PACs more generally, despite the scam PACs’ claims in solicitation materials of national advocacy and awareness campaigns.

*                *                *

In addition to the prison term, Judge Furman ordered TIERNEY, 47, to pay restitution in the amount of $1,175,417.23, forfeiture in the amount of $410,649.18, and a fine in the amount of $50,000.  TIERNEY was also sentenced to one year of supervised release.

TIERNEY pled guilty on November 2, 2018, to one count of conspiracy to commit wire fraud.

Mr. Berman praised the outstanding investigative work of the Special Agents of the United States Attorney’s Office for the Southern District of New York, and thanked the Federal Bureau of Investigation for its contributions to the investigation.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Christian J. Schurman, Director of the U.S. Department of State’s Diplomatic Security Service (“DSS”) at the United States Department of State, announced today the arrest of MARIA LUISA ESTRELLA JAIDI (“JAIDI”), who was charged by complaint along with her brother, RAMON SINGSON ESTRELLA (“ESTRELLA”), for their involvement in a conspiracy to commit visa fraud, make materially false statements, and induce aliens to illegally come to, enter, and reside in the United States.  JAIDI was arrested today in Ancramdale, New York, and will be presented this afternoon in White Plains federal court before the U.S. Magistrate Judge Paul E. Davison.  ESTRELLA remains at large.

U.S. Attorney Geoffrey S. Berman stated:  “As alleged, the defendants abused our nation’s process for admitting consular officials in order to bring domestic workers into this country for their own monetary gain and lifestyle.  On top of that, Maria Luisa Estrella Jaidi exploited these workers by not providing them the critical protections and benefits they would have been entitled to had they been properly brought to this country with the appropriate visas.  Today’s charges demonstrate that fraud and abuse of this type will not be tolerated.”

DSS Director Christian J. Schurman said:  “DSS demonstrated its commitment to protecting the integrity of U.S. travel documents and the rights of foreign nationals visiting the United States.  We will continue to pursue those who abuse domestic worker visas to manipulate and exploit their employees for personal gain.  DSS’s strong relationship with our law enforcement partners and the U.S. Attorney’s Office for the Southern District of New York, continues to be essential in the pursuit of justice.”

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

From approximately 2006 up to 2016, JAIDI and ESTRELLA conspired with an individual not named as a defendant in the Complaint (“CC-1”) to fraudulently procure visas for at least seven Filipino domestic workers (the “Domestic Workers”).  CC-1 is a diplomatic agent accredited to the Permanent Mission of the Kingdom of Morocco to the United Nations (the “Moroccan Mission”) with the rank of Ambassador.  From approximately 1980 through approximately 2016, CC-1 and JAIDI were married. 

In order to fraudulently obtain visas for the Domestic Workers, JAIDI and CC-1 caused the Domestic Workers to submit visa applications containing materially false statements and to submit fraudulent employment contracts in support of those visa applications.  ESTRELLA – who is JAIDI’s brother and who resides in the Philippines – helped recruit several of the Domestic Workers in the Philippines to work for JAIDI and CC-1 in the United States and instructed the Domestic Workers to make false statements in their visa applications and to officials at the U.S. Embassy in Manila.  

In particular, ESTRELLA, JAIDI, and CC-1 caused five of the Domestic Workers to falsely state in their visa applications that they would be employed as secretaries, administrative assistants, or technicians at the Moroccan Mission or at the Consulate General of the Kingdom of Morocco in Manhattan.  In addition, ESTRELLA, JAIDI, and CC-1 caused each of the Domestic Workers to submit fraudulent employment contracts to the State Department in support of their visa applications.  The fraudulent employment contracts also overstated the Domestic Workers’ salaries, understated their hours, and falsely guaranteed benefits, including, among others, sick leave, dental insurance, and medical insurance. 

Once the Domestic Workers arrived in the United States, JAIDI and CC-1 employed the workers as their personal drivers, domestic helpers, farmhands, and assistants at their residence in Bronxville, New York, as well as at their farm in Ancramdale, New York.  JAIDI and CC-1 paid the Domestic Workers significantly less than the minimum salary required by law and regularly compelled them to work far in excess of 40 hours per week.  In addition, JAIDI and CC-1 generally denied the Domestic Workers the benefits set forth in their employment contracts, compelled the Domestic Workers to work seven days a week, and required the Domestic Workers to surrender their passports. 

*                *                *

JAIDI, 60, of Bronxville, New York, and ESTRELLA 55, of Manila, Philippines, are each charged with one count of conspiracy to commit visa fraud and make materially false statements, which carries a maximum sentence of five years, and one count of conspiracy to induce aliens to illegally come to, enter, and reside in the United States, which carries a maximum sentence of 10 years.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Berman praised the outstanding work of the DSS Criminal Fraud Investigations Branch, the DSS Saint Albans Resident Office, the DSS New York Field Office, Homeland Security Investigations, the U.S. Department of Labor’s Wage and Hour Division from the Albany District Office, the Yonkers Police Department, and the New York State Police.  In addition, Mr. Berman thanked the U.S. Attorney’s Office in the Northern District of New York, the Community Development Project at the Urban Justice Center, and the Human Trafficking Program at the Worker Justice Center of New York for their assistance in this investigation.

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Sam Adelsberg and Gillian Grossman 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.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced the unsealing today of an Indictment charging five members and associates of the “Jack Boyz” street gang with racketeering and firearm offenses in connection with the shooting of an off-duty NYPD officer.  PATRICK AVILA, a/k/a “Pat,” JALEN COLDS, a/k/a “Jay Gunz,” NAZAE BLANCHE, a/k/a “Zae,” and DONNELL JENKINS, a/k/a “Nellz,” were taken into custody this morning and will be presented before U.S. Magistrate Judge Gabriel W. Gorenstein later today.  LEON SMALLS, a/k/a “Smoove,” remains at large.  The case is assigned to U.S. District Judge Valerie E. Caproni.

U.S. Attorney Geoffrey S. Berman said:  “As alleged in the indictment, this gang committed a brazen act of violence, and one of New York City’s finest was struck by their gunfire.  Thanks to the extraordinary work of the NYPD, these defendants will now face justice in federal court.”

NYPD Commissioner James P. O’Neill said:  “When an off-duty cop was driving home from work in October, he was struck in the chest during a gang-related shooting. This further highlighted our efforts to precisely investigate and rid from New York City streets such brazen criminals. We stand with our local, state and federal law enforcement partners ready to identify and bring to justice drug dealers and gang members who are at the root of crime and violence in our city. With these arrests, we continue to make significant progress in our work to make the streets of New York safer for everyone.”

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

The Jack Boyz are a criminal enterprise involved in committing numerous acts of violence, including shootings, in and around the Bronx.  Members and associates of the Jack Boyz engage in violence to retaliate against rival gangs, to promote the standing and reputation of the Jack Boyz, and to protect the gang’s narcotics business.  Members and associates of the Jack Boyz enrich themselves by committing robberies and selling drugs.

On October 30, 2018, AVILA, COLDS, BLANCHE, JENKINS, and SMALLS shot at gang rivals in the vicinity of East 137th Street and Brown Place.  During the course of that shooting, an off-duty NYPD officer was struck in the chest.  

*                *                *

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

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

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Karin Portlock and Michael Longyear are in charge of the prosecution.

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

COUNT

CHARGE

DEFENDANTS

AGES

MAX. SENTENCE

1

Attempted murder in aid of racketeering

 

 

18 U.S.C. § 1959

PATRICK AVILA

JALEN COLDS

NAZAE BLANCHE

DONNELL JENKINS

LEON SMALLS

 

19

19

19

19

23

20 years in prison

2

Using or carrying a firearm during and in relation to, or possessing a firearm in furtherance of, a crime of violence, which firearm was discharged

 

18 U.S.C. § 924(c)

 

PATRICK AVILA

JALEN COLDS

NAZAE BLANCHE

DONNELL JENKINS

LEON SMALLS

 

 

Life in prison

 

Mandatory minimum of 10 years in prison

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Angel M. Melendez, the Special Agent-in-Charge of the New York Field Office of the Homeland Security Investigations (“HSI”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced the unsealing of a federal indictment charging JAMAL BRISSETT, a/k/a “Trigger” with murdering Leshaun Gordon, 19, in the Bronx, New York, on June 30, 2009.  BRISSETT was arrested yesterday and is expected to be presented before Chief U.S. Magistrate Judge Gabriel W. Gorenstein in federal court later today.

U.S. Attorney Geoffrey Berman said:  “As alleged, Jamal Brissett killed 19-year-old Leshaun Gordon during a drug deal.  Ten years may have passed, but we have not forgotten.  Thanks to the determination of our partners at HSI and the NYPD, Brissett must now answer for his alleged crimes.”

HSI Special Agent in Charge Angel M. Melendez said:  “In a scheme for revenge, Brissett is alleged to have robbed and shot a man, then later set the car on fire to cover up the crime.  Nearly ten years ago a man was slain on the streets of New York City, but the crime was not forgotten.  No matter how long it takes or how cold the case, HSI and its law enforcement partners will not stop pursuing perpetrators who threaten the safety of this great city.”

Police Commissioner James P. O’Neill said:  “The ability of investigators to achieve justice for this young man and provide a sense of closure to his family is paramount.  The identification and arrest of the suspect in this case was a team effort that resulted from the close partnership that exists between the NYPD and our law-enforcement partners.  I thank and commend the Southern District of New York, and the investigators of HSI and the NYPD whose hard work in the case demonstrate that our efforts remain determined, and precisely-focused.”

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

On or about June 30, 2009, BRISSETT shot and killed Gordon in the course of a drug-trafficking crime and a robbery in the vicinity of Mickle Avenue and Chester Street in the Bronx, New York.  BRISSETT then caused the car where the murder occurred to be set on fire in order to destroy evidence of his crime.

*          *          *

BRISSETT, 30, of the Bronx, New York, is charged with one count of using a firearm to commit murder during a crime of violence and a drug-trafficking crime, which carries a maximum penalty of death or life imprisonment, and one count of using arson to obstruct justice, which carries a maximum penalty of 20 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 HSI and the NYPD.

The prosecution of this case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Hagan Scotten and Danielle Sassoon are in charge of the prosecution.

The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless proved 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, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), Philip R. Bartlett, the Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), and James P. O’Neill, the Commissioner of the Police Department for the City of New York (“NYPD”), announced today that RICHARD CASTRO, a/k/a “Chemsusa,” a/k/a “Chems_usa,” a/k/a “Chemical_usa,” and LUIS FERNANDEZ, have been charged with participating in a conspiracy to distribute carfentanil, fentanyl, and a fentanyl analogue over the “dark web,” including on AlphaBay and Dream Market.  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.  CASTRO was arrested this morning in Windermere, Florida, and appeared before Magistrate Judge Leslie Hoffman in Orlando.  FERNANDEZ was arrested this morning in the Bronx, New York, and is expected to be presented today before Chief U.S. Magistrate Judge Gabriel W. Gorenstein.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Fentanyl is a chief culprit in the opioid crisis and carfentanil is 100 times stronger than fentanyl.  Carfentanil is intended to be a tranquilizer for large animals.  These were two of the terrifying drugs that Richard Castro and Luis Fernandez allegedly distributed in large quantities, including over the dark web, where they thought they could hide.  I want to thank our partners at the FBI, USPIS, and NYPD for bringing this dark web conspiracy to light.”

FBI Assistant Director William F. Sweeney Jr. said:  “Carfentanil is 10,000 more times potent than morphine.  Nothing that dangerous and potentially lethal should be in the hands of users who don’t know what they’re taking, and don’t realize how quickly it can kill someone.  The FBI New York and our law enforcement partners use sophisticated methods to seek out these secret and well-hidden operations, to stop the deadly epidemic sweeping through our communities and country right now.”

USPIS Inspector-in-Charge Philip R. Bartlett said:  “The defendants allegedly thought they could use the mail to distribute deadly narcotics, specifically carfentanil and fentanyl, for their own profit, without concern for the communities they destroy.  Their customers allegedly placed orders on the Dark Web, and encrypted email.  As alleged, the defendants were counting on the anonymity of the Dark Web to conceal their crimes.  Despite their best attempts at hiding their crimes, today they learned the price for using the mail to ship drugs – JUSTICE and possibly JAIL.”

NYPD Commissioner James P. O’Neill said:  “As long as individuals – wherever they operate – are involved in narcotics trafficking, the NYPD and our partners will relentlessly work to stop the threat to public safety.  Anyone who deals in illegal opioids should understand that the nation’s best investigators will stop at nothing to keep our community safe.  I commend our colleagues at the Southern District of New York, and the investigators of the New York Office of the U.S. Postal Inspection Service, and the Joint Organized Crime Task Force for their work in this investigation.”

According to the allegations contained in the Complaint[1] charging RICHARD CASTRO and LUIS FERNANDEZ:

From at least in or about November 2015 through the present, CASTRO and FERNANDEZ conspired to distribute carfentanil, fentanyl, and phenyl fentanyl (an analogue of fentanyl).  For most of this period, the conspiracy dealt drugs over the dark web, using the monikers “Chemsusa,” “Chems_usa,” and “Chemical_usa.”  CASTRO was an operator of these online monikers and was paid in bitcoin.  On one dark web marketplace, Dream Market, “Chemsusa” boasted that it had completed more than 3200 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, “Chems_usa” informed its customers that it was moving its business off dark net 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-conspirator, FERNANDEZ, shipped narcotics on behalf of the conspiracy, including from New York City.  From November 2018 to the present, at least 94 packages have been linked to this conspiracy; several of them have tested positive for carfentanil or fentanyl.  All of these packages were shipped using USPS Priority Mail envelopes, and for most of them, the sender’s purported return address was a law office or a governmental entity.

CASTRO also laundered his narcotics proceeds, including by funneling more than approximately $1.77 million through bitcoin wallets of his, and by buying approximately 100 quadrillion Zimbabwe bank notes, among other valuables, which were shipped to his residence.

*                *                *

RICHARD CASTRO, 36, of Windermere, Florida, and LUIS FERNANDEZ, 41, of the Bronx, New York, are each charged with one count of conspiracy to distribute and possess with the intent to distribute three controlled substances – carfentanil, phenyl fentanyl, and fentanyl – as well as one count of distributing these controlled substances via the Internet.  Each of these counts carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison.  CASTRO is also charged with one count of laundering narcotics proceeds, which carries a maximum sentence of 20 years in prison.  The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Berman praised the FBI, USPIS, and NYPD for their outstanding work on the investigation.  Mr. Berman also thanked the Internal Revenue Service and the Orange County, Florida Sheriff’s Office for their assistance in this investigation.  He added that the investigation is continuing.  

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.

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

Kim Anh Vo, a.k.a. “F@ng,” a.k.a. “SyxxZMC,” a.k.a. “Zozo,” a.k.a. “Miss.Bones,” a.k.a. “Sage Pi,” a.k.a. “Kitty Lee,” was arrested this morning in Hephzibah, Georgia.  Vo was charged by a criminal Complaint with conspiring to provide material support to the Islamic State of Iraq and al-Sham (ISIS), a designated foreign terrorist organization.  Vo is expected to be presented later today before Magistrate Judge Brian K. Epps in Augusta, Georgia, federal court.

Assistant Attorney General John C. Demers for National Security, U.S. Attorney Geoffrey S. Berman for the Southern District of New York, Assistant Director-in-Charge William F. Sweeney Jr. of the FBI New York Field Office and Commissioner James P. O’Neill of the Police Department for the City of New York (NYPD) made the announcement.  

As alleged in the criminal Complaint, unsealed today:

In April 2016, Vo joined the United Cyber Caliphate (UCC), an online group that pledged allegiance to ISIS and committed to carrying out online attacks and cyber intrusions against Americans.  Since that time, the UCC and its sub-groups have disseminated ISIS propaganda online, including “kill lists,” which listed the names of individuals – for example, soldiers in the United States Armed Forces and members of the State Department – whom the group instructed their followers to kill.  For example, on or about April 21, 2016, the UCC posted online the names, addresses, and other personal identifying information of approximately 3,602 individuals in the New York City area and included a message that stated:  “List of most important citizens of #New York and #Brooklyn and some other cities . . . We Want them #Dead.”  

Between April 2016 and May 2017, Vo worked on behalf of the UCC to recruit others to join the group and assist with the group’s hacking efforts.  Between January and February 2017, Vo recruited other individuals – including a minor residing in Norway – to create online content in support of ISIS, including a video (Video-1) threating a non-profit organization based in New York, New York, which was formed to find and combat the online promotion of extremist ideologies.  Video-1 contained messages such as, “You messed with the Islamic State, SO EXPECT US SOON,” followed by a scene displaying a photograph of the organization’s chief executive officer and former U.S. Ambassador (CEO), along with the words:  “[CEO], we will get you.”

On or about April 2, 2017, the UCC posted online a kill list containing the names and personal identifying information of over 8,000 individuals, along with a links to another video (Video-2).  Video-2 displayed messages stating, in part:  “We have a message to the people of the U.S., and most importantly, your president Trump:  Know that we continue to wage war against you, know that your counter attacks only makes stronger.  The UCC will start a new step in this war against you. . . .” and “We will release a list with over 8000 names, addresses, and email addresses, of those who fight against the US.  Or live amongst the kuffar.  Kill them wherever you find them!”  In subsequent scenes, Video-2 contains what appears to be a graphic depiction of the decapitation of a kneeling man. 

*                      *                      *

Vo, 20, of Georgia, is charged with one count of conspiring to provide material support to a designated foreign terrorist organization, which carries a maximum sentence of 20 years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Mr. Demers and Mr. Berman praised the outstanding efforts of the FBI New York Field Office, New York Joint Terrorism Task Force, and Atlanta Field Office’s Augusta Resident Agency.  Mr. Demers and Mr. Berman also thanked the United States Attorney’s Office for the Southern District of Georgia.

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Shawn G. Crowley, Sidhardha Kamaraju, and Jane Kim are in charge of the prosecution, with assistance from Trial Attorney Elisabeth Poteat of the Counterterrorism Section.

The charges contained in the Complaint are merely

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, John C. Demers, the Assistant Attorney General for National Security, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York 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 KIM ANH VO, a/k/a “F@ng,” a/k/a “SyxxZMC,” a/k/a “Zozo,” a/k/a “Miss.Bones,” a/k/a “Sage Pi,” a/k/a “Kitty Lee,” was arrested this morning in Hephzibah, Georgia.  VO was charged by a criminal Complaint with conspiring to provide material support to the Islamic State of Iraq and al-Sham (“ISIS” or the “Islamic State”), a designated foreign terrorist organization.  VO is expected to be presented later today before Magistrate Judge Brian K. Epps in Augusta, Georgia, federal court.

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

In April 2016, VO joined the United Cyber Caliphate (the “UCC”), an online group that pledged allegiance to ISIS and committed to carrying out online attacks and cyber intrusions against Americans.  Since that time, the UCC and its sub-groups have disseminated ISIS propaganda online, including “kill lists,” which listed the names of individuals – for example, soldiers in the United States Armed Forces and members of the State Department – whom the group instructed their followers to kill.  For example, on or about April 21, 2016, the UCC posted online the names, addresses, and other personal identifying information of approximately 3,602 individuals in the New York City area and included a message that stated:  “List of most important citizens of #New York and #Brooklyn and some other cities . . . We Want them #Dead.” 

Between April 2016 and May 2017, VO worked on behalf of the UCC to recruit others to join the group and assist with the group’s hacking efforts.  Between January and February 2017, VO recruited other individuals – including a minor residing in Norway – to create online content in support of ISIS, including a video (“Video-1”) threating a non-profit organization based in New York, New York, which was formed to find and combat the online promotion of extremist ideologies.  Video-1 contained messages such as, “You messed with the Islamic State, SO EXPECT US SOON,” followed by a scene displaying a photograph of the organization’s chief executive officer and former U.S. Ambassador (the “CEO”), along with the words:  “[CEO], we will get you.”

On or about April 2, 2017, the UCC posted online a kill list containing the names and personal identifying information of over 8,000 individuals, along with links to another video (“Video-2”).  Video-2 displayed messages stating, in part:  “We have a message to the people of the U.S., and most importantly, your president Trump:  Know that we continue to wage war against you, know that your counter attacks only makes stronger.  The UCC will start a new step in this war against you. . . .” and “We will release a list with over 8000 names, addresses, and email addresses, of those who fight against the US.  Or live amongst the kuffar.  Kill them wherever you find them!”  In subsequent scenes, Video-2 contains what appears to be a graphic depiction of the decapitation of a kneeling man. 

*                      *                      *

VO, 20, of Georgia, is charged with one count of conspiring to provide material support to a designated foreign terrorist organization, which carries a maximum sentence of 20 years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Mr. Berman praised the outstanding efforts of the FBI New York Field Office, New York Joint Terrorism Task Force, and Atlanta Field Office’s Augusta Resident Agency.  Mr. Berman also thanked the United States Attorney’s Office for the Southern District of Georgia and the Counterterrorism Section of the Department of Justice’s National Security Division.

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Shawn G. Crowley, Sidhardha Kamaraju, and Jane Kim are in charge of the prosecution, with assistance from Trial Attorney Elisabeth Poteat 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 below are 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 DAVID MIDDENDORF, who was the National Managing Partner for audit quality at the accounting firm KPMG LLP (“KPMG”), and JEFFREY WADA a former employee of the Public Company Accounting Oversight Board (the “PCAOB”), were convicted of wire fraud charges in connection with their scheme to defraud 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. 

U.S. Attorney Geoffrey S. Berman said:  “As this trial revealed, David Middendorf and Jeffrey Wada were two links in a chain of corruption, where confidential PCAOB inspection information was taken at the behest of high-level executives at KPMG so they could cheat on inspections.  This confidential information was critical to the PCAOB and its core mission of ensuring audit quality.  As a unanimous jury found, the actions of Middendorf and Wada defrauded the PCAOB.”

According to the evidence presented during the trial:

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, commonly referred to as an inspection.  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. 

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 at least in or about 2015, KPMG was engaged in efforts to improve its performance in PCAOB inspections, including but not limited to recruiting and hiring former PCAOB personnel.  At the time, MIDDENDORF was head of KPMG’s National Office, also known as the Department of Professional Practice (the “DPP”), which was broadly responsible for the quality of KPMG’s audits and KPMG’s performance in PCAOB inspections. 

KPMG’s efforts to improve inspection results, however, were not limited to legitimate means.  Instead, between 2015 and 2017, MIDDENDORF and others worked illicitly to 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, beginning in 2015, Brian Sweet, a former PCAOB employee who had joined KPMG, provided MIDDENDORF, Thomas Whittle, and others with the PCAOB’s confidential 2015 list of inspection selections, at MIDDENDORF’s request, so that the information could be used by MIDDENDORF, Whittle, and others, to improve KPMG’s performance on PCAOB inspections. 

WADA was an Inspections Leader at the PCAOB, who was obligated to keep confidential the PCAOB’s nonpublic information.  WADA joined the conspiracy in the fall of 2015 and began passing confidential information to KPMG.  In March 2016, WADA provided Cynthia Holder, a KPMG employee, with confidential information on certain of the PCAOB’s 2016 inspection selections.  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, and agreed to keep their stealth re-reviews within their “circle of trust.”  In order to cover up their illicit conduct, other KPMG engagement partners were given a false explanation for the re-reviews.  The stealth re-review program allowed KPMG to strengthen its work papers.

In January 2017, WADA, who had 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, referring to it in a voicemail as the “grocery list.”  At the same time, WADA provided Holder with his resume and sought her assistance in helping him to acquire employment at KPMG.  Sweet internally shared the preliminary inspection selections provided by WADA with Whittle, another co-conspirator, who in turn shared it with MIDDENDORF, who approved its use to improve the audits on the list.

In February 2017, WADA texted Holder saying, “I have the grocery list. . . . All the things you’ll need for the 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, so that it could be acted upon to improve the audits on the list. 

In 2017, a KPMG partner learned from Sweet that one of her audits was on the PCAOB inspection list, and she reported the matter to her supervisor.  The matter was then ultimately reported to KPMG’s Office of General Counsel.

*                      *                      *

MIDDENDORF, 54, was convicted of one count of conspiracy to commit wire fraud (Count Two) and three counts of wire fraud (Counts Three, Four, and Five).  WADA, 43, was convicted of one count of conspiracy to commit wire fraud (Count Two) and two counts of wire fraud (Counts Four and Five).  The conspiracy to commit wire fraud and wire fraud charges each carry a maximum prison term of 20 years.  MIDDENDORF and WADA were each acquitted of one count of conspiracy to defraud the United States (Count One). 

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

Mr. Berman praised the outstanding investigative work of the United States Postal Inspection Service and also thanked the Securities and Exchange Commission.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that HARBIR PARMAR pled guilty in White Plains federal court to kidnapping and wire fraud.  PARMAR was arrested on October 16, 2018, and pled guilty today before U.S. District Judge Vincent L. Briccetti.

U.S. Attorney Geoffrey S. Berman said:  “Last year, Harbir Parmar took advantage of a vulnerable woman who utilized a ridesharing service by kidnapping and terrorizing her.  In addition, he charged many of his ridesharing customers with fraudulent fees.  Today, he admitted his guilt in open court, and will now be held accountable for his brazen crimes.”  

According to the Indictment and statements made during today’s plea proceedings:

On February 21, 2018, PARMAR, who worked as a driver for a ridesharing company (“Company-1”), picked up an individual (“Victim-1”) in Manhattan, New York, who sought to be driven to White Plains, New York.  After Victim-1 fell asleep in the backseat of the vehicle, PARMAR changed Victim-1’s destination in Company-1’s mobile application to an address in Boston, Massachusetts, and proceeded to drive toward that location.  When Victim-1 awoke, the vehicle was in Connecticut.  Victim-1 requested that she be taken to White Plains or to the police station, but PARMAR refused.  PARMAR instead dropped Victim-1 off on the side of I-95 in Branford, Connecticut.  Victim-1 went to a nearby convenience store where she sought assistance.    

In addition, from December 2016 through February 2018, PARMAR sent false information about the destinations of Company-1’s customers through Company-1’s mobile application on several occasions.  At times, he also sent false information about the application of a cleaning fee to be applied to the accounts of Company-1’s customers.  In these instances, customers of Company-1 filed complaints with Company-1 about being overcharged for their rides.  These instances have resulted in thousands of dollars in improper charges to the accounts of Company-1’s customers. 

*              *             *

PARMAR, 25, of Howard Beach, New York, pled guilty to one count of kidnapping, which carries a maximum sentence of life in prison, and one count of wire fraud, which carries a maximum sentence of 20 years in prison.  The maximum potential sentence in this case is prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

PARMAR is scheduled to be sentenced by United States District Judge Vincent L. Briccetti Honorable Vincent L. Briccetti on June 24, 2019. 

Mr. Berman praised the outstanding investigative work of FBI’s Westchester County Safe Streets Task Force, which comprises investigators from the FBI, U.S. Probation Office, New York State police, Westchester County Department of Public Safety, Westchester County District Attorney’s Office, the New York City Police Department, Yonkers Police Department, Greenburgh Police Department, Mount Vernon Police Department, and the Peekskill Police Department.    

The case is being handled by the Office’s White Plains Division.  Assistant United States Attorney Jamie Bagliebter is 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 U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), announced today that former Venezuelan Vice President TARECK ZAIDAN EL AISSAMI MADDAH (“EL AISSAMI”) and Venezuelan businessman SAMARK JOSE LOPEZ BELLO were charged in Manhattan federal court with criminal violations of the Foreign Narcotics Kingpin Designation Act (“Kingpin Act”) and sanctions imposed in February 2017 by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) pursuant to the Kingpin Act.  Related charges under the Kingpin Act were also filed against VICTOR MONES CORO, ALEJANDRO MIGUEL LEON MAAL, MICHOLS ORSINI QUINTERO, and ALEJANDRO ANTONIO QUINTAVALLE YRADY.  The case is assigned to U.S. District Judge Alvin K. Hellerstein.  MONES CORO and ORSINI QUINTERO were arrested this morning in Florida.  MONES CORO appeared this morning before a United States Magistrate Judge in West Palm Beach, and ORSINI QUINTERO appeared this morning before a United States Magistrate Judge in Fort Lauderdale.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “International sanctions restrain the activities of individuals and countries deemed to have policies and practices incompatible with the U.S. from receiving the full benefit of economic, political, humanitarian, and other support the U.S. provides globally.  Former Venezuelan Vice President Tareck Zaidan El Aissami Maddah allegedly evaded the sanctions imposed by OFAC by employing U.S. companies to provide international transport via private jet.  The enforcement of these sanctions is critical to the national security interests of the U.S., and I commend our law enforcement partners for their vigilance and assistance in bringing today’s charges.”

Special Agent in Charge Melendez said:  “Tareck Zaidan El Aissami Maddah has held key positions in the Government of Venezuela, including that of former Vice President and current Minister of Industry and National Production.  He has used his position of power to engage in international drug trafficking, earning him the designation of Specially Designated Narcotics Trafficker, along with his business partner Samark Lopez Bello. It is alleged that those arrested today, looking to fill their pockets with dirty money, aided El Aissami and Lopez Bello in circumventing sanctions and violating the Kingpin Act, an OFAC designation targeting those who pose a threat to the national security, foreign policy, and economy of the United States. El Aissami and Lopez Bello allegedly used private jets to set up private meetings around the globe including Turkey and Russia. It is necessary to impose sanctions against foreign persons seeking to gain power and control by circumventing the law, and today’s indictments reflect HSI New York’s El Dorado Task Force resolve in holding those willing to violate such sanctions accountable.  Both El Aissami and Lopez Bello will have to think twice before leaving Venezuela, as they are wanted to face justice here in New York.”

As alleged in the Indictment and Superseding Indictments unsealed in federal court:[1]

EL AISSAMI became the Vice President of Venezuela in approximately January 2017.  In February 2017, OFAC designated EL AISSAMI and LOPEZ BELLO as Specially Designated Narcotics Traffickers pursuant to the Kingpin Act and related regulations.  As a result of OFAC’s designations, U.S. persons are generally prohibited from, among other things, engaging in transactions with or providing services to EL AISSAMI and LOPEZ BELLO absent authorization from OFAC.  EL AISSAMI and LOPEZ BELLO nevertheless worked with, among others, U.S. citizens MONES CORO and LEON MAAL, as well as ORSINI QUINTERO and QUINTAVALLE YRADY, who held U.S. visas at the time of the crimes, in an effort to violate and evade OFAC’s sanctions by obtaining travel services, including private jet charters for EL AISSAMI, LOPEZ BELLO, and their relatives and associates.  EL AISSAMI and LOPEZ BELLO paid for these services at times through intermediaries who delivered bulk cash in Venezuela. 

EL AISSAMI, LOPEZ BELLO, MONES CORO, and LEON MAAL used American Charter Services LLC and its affiliates, all U.S. companies, in connection with the transportation services provided to EL AISSAMI and LOPEZ BELLO in violation of the Kingpin Act and the OFAC sanctions.  For example, in September 2018, MONES CORO used an American Charter Services account in the United States to pay expenses for an upcoming private flight by LOPEZ BELLO.  EL AISSAMI, LOPEZ BELLO, MONES CORO, and LEON MAAL also used SVMI Solution, LLC, another U.S. company, to receive payments for transportation services provided to EL AISSAMI and LOPEZ BELLO in violation of the Kingpin Act and the OFAC sanctions, such as a July 2018 funds transfer sent from Manhattan, New York to an SVMI Solution account in Florida.  Earlier this year, LEON MAAL helped EL AISSAMI charter a private flight from Vnukovo International Airport in Russia to Simón Bolívar International Airport in Venezuela on February 23, 2019. 

*                *                *

EL AISSAMI, 44, of Venezuela, LOPEZ BELLO, 44, of Venezuela, MONES CORO, 51, of Florida, and LEON MAAL, 41, of Florida, are each charged in five counts:  (1) conspiring to use American Charter Services LLC and SVMI Solution, LLC to engage in transactions prohibited by the Kingpin Act and related regulations, and to evade sanctions imposed by OFAC pursuant to the Kingpin Act and related regulations, (2) using American Charter Services LLC to engage in transactions prohibited by the Kingpin Act and related regulations, (3) using American Charter Services LLC to evade and attempt to evade sanctions imposed by OFAC pursuant to the Kingpin Act and related regulations, (4) using SVMI Solution, LLC to engage in transactions prohibited by the Kingpin Act and related regulations, and (5) using SVMI Solution, LLC to evade and attempt to evade sanctions imposed by OFAC pursuant to the Kingpin Act and related regulations.  If convicted, each of the five counts carries a maximum penalty of 30 years in prison, for a total maximum of 150 years in prison on all accounts faced by EL AISSAMI, LOPEZ BELLO, MONES CORO, and LEON MAAL.

ORSINI QUINTERO, 42, of Florida, and QUINTAVALLE YRADY, 36, of Panama, are each charged with one count of conspiring to use American Charter Services LLC and SVMI Solution, LLC to engage in transactions prohibited by the Kingpin Act and related regulations, and to evade sanctions imposed by OFAC pursuant to the Kingpin Act and related regulations.  If convicted, this count carries a maximum penalty of 30 years in prison.

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

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

The charges contained in the Indictment and Superseding Indictments are merely allegations, and the defendants are presumed innocent unless and until proven guilty.  The potential maximum sentences in this case are prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Cyrus R. Vance Jr., the District Attorney for the County of New York, John R. Tafur, the Special Agent in Charge of the Newark Field Office of the Internal Revenue Service-Criminal Investigation (“IRS-CI”), William F. Sweeney Jr., and the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that KONSTANTIN IGNATOV was arrested March 6, 2019, at the Los Angeles International Airport, on a wire fraud conspiracy charge stemming from his role as the leader of an international pyramid scheme that involved the marketing of a fraudulent cryptocurrency called “OneCoin.”  An Indictment charging IGNATOV’s sister, RUJA IGNATOVA – a founder and original leader of OneCoin – with wire fraud, securities fraud, and money laundering offenses was unsealed yesterday.  As a result of misrepresentations that IGNATOV, IGNATOVA, and others made about OneCoin, victims invested billions of dollars worldwide in the fraudulent cryptocurrency.  Following his arrest, IGNATOV appeared in Magistrate Court in the Central District of California, and was detained on the charge contained in the Complaint.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, these defendants created a multibillion-dollar ‘cryptocurrency’ company based completely on lies and deceit.  They promised big returns and minimal risk, but, as alleged, this business was a pyramid scheme based on smoke and mirrors more than zeroes and ones.  Investors were victimized while the defendants got rich.  Our Office has a history of successfully targeting, arresting, and convicting financial fraudsters, and this case is no different.”

New York County District Attorney Cyrus R. Vance Jr., said:  “As alleged in the indictment, these defendants executed an old-school pyramid scheme on a new-school platform, compromising the integrity of New York’s financial system and defrauding investors out of billions.  Our Office urges all crypto investors to scrutinize investment opportunities, recognize the prevalence of fraud in this underregulated space, and proceed with caution.  I commend U.S. Attorney Berman and my Office’s Major Economic Crimes Bureau for their globe-spanning investigative work and shared commitment to protecting our markets from sophisticated white-collar fraudsters.”

IRS Special Agent in Charge John R. Tafur said:  “This is an old scam with a virtual twist.  As alleged in court documents, the cryptocurrency OneCoin was established for the sole purpose of defrauding investors.  IGNATOV and IGNATOVA allegedly convinced victims to invest in OneCoin based on complete lies about the virtual currency.  IRS Criminal Investigation is committed to investigating cryptocurrency scams in an effort to protect the American public and bring cryptocurrency crooks to justice.”

FBI Assistant Director-in-Charge William Sweeney Jr. said:  “As we allege, OneCoin was a cryptocurrency existing only in the minds of its creators and their co-conspirators.  Unlike authentic cryptocurrencies, which maintain records of their investors’ transaction history, OneCoin had no real value.  It offered investors no method of tracing their money, and it could not be used to purchase anything.  In fact, the only ones who stood to benefit from its existence were its founders and co-conspirators.  Whether you’re dealing with virtual currency or cold, hard cash, we urge the public to exercise due diligence with any investment.”

According to the allegations contained in the Complaint charging KONSTANTIN IGNATOV and the Indictment charging RUJA IGNATOVA, and in other court papers, and other documents in the public record:[1]

IGNATOV currently serves as the top leader of OneCoin Ltd., a company marketing a purported cryptocurrency named “OneCoin,” which the investigation has revealed is in fact a fraudulent pyramid scheme.  OneCoin Ltd. was co-founded in 2014 by IGNATOVA, and is based in Sofia, Bulgaria.  IGNATOVA served as OneCoin’s top leader until her disappearance from public view, in October 2017.  Starting in late 2017, IGNATOV, who is IGNATOVA’s younger brother, assumed high-level positions at OneCoin, rising to the top leadership position by mid-2018.

OneCoin Ltd. operates as a multi-level marketing network through which members receive commissions for recruiting others to purchase cryptocurrency packages.  This multi-level marketing structure appears to have influenced rapid growth of the OneCoin member network.  Indeed, OneCoin Ltd. has claimed to have more than 3 million members worldwide, including victims living and/or working within the Southern District of New York.  OneCoin continues to operate to this day.

As a result of misrepresentations made by IGNATOV, IGNATOVA, and other OneCoin representatives, victims throughout the world wired investment funds to OneCoin-controlled bank accounts in order to purchase OneCoin packages.  Records obtained in the course of the investigation show that, between the fourth quarter of 2014 and the third quarter of 2016 alone, OneCoin Ltd. generated €3.353 billion in sales revenue and earned “profits” of €2.232 billion.

Among a number of other representations, OneCoin Ltd. has claimed that the OneCoin cryptocurrency is “mined” using mining servers maintained and operated by the company, and that the value of OneCoin is based on market supply and demand.  The purported value of a OneCoin has steadily grown from €0.50 to approximately €29.95 per coin, as of January 2019.  In fact, the value of OneCoin is determined internally and not based on market supply and demand; and OneCoins are not mined using computer resources.  Moreover, the investigation has revealed that IGNATOVA and her co-founder conceived of and built the OneCoin business fully intending to use it to defraud investors.  For example, in one email between IGNATOVA and her co-founder, IGNATOVA described her thoughts on the “exit strategy” for OneCoin.  The first option that IGNATOVA listed was, “Take the money and run and blame someone else for this . . . .”

Additionally, OneCoin Ltd. has claimed to have a private “blockchain,” or a digital ledger identifying OneCoins and recording historical transactions.  The investigation has revealed that OneCoin lacks a true blockchain, that is, a public and verifiable blockchain.[2] Moreover, by approximately March 2015, IGNATOVA and her co-founder had started allocating to OneCoin members coins that did not even exist in OneCoin’s purported private blockchain, referring to those coins as “fake coins.”

As the founder and leader of OneCoin Ltd., IGNATOVA participated in efforts to market OneCoin to U.S. victim-investors.  For example, on July 4, 2015, IGNATOVA participated in an online webinar, later posted to YouTube.com, in which IGNATOVA announced the official opening of the United States market for OneCoin.

Since taking over leadership of OneCoin following IGNATOVA’s disappearance from publicly running the company, IGNATOV has himself made false representations to OneCoin members to solicit trader package purchases and investments into the company.  For example, IGNATOV has repeatedly represented that an “initial public offering” of OneCoin would occur on various dates in 2018 and 2019, in an effort to generate excitement and solicit additional investments from member victims.  However, the purported offering was repeatedly postponed, and no such offering has taken place.  Moreover, IGNATOV has been personally involved in manually setting and increasing the purported Euro value of OneCoin, contradicting claims that the value is set by supply and demand.  Finally, the investigation has revealed that IGNATOV is aware that OneCoin-derived funds have been routed through a series of purported “investment fund” accounts used to hide the origin of the money, i.e., to launder OneCoin fraud proceeds.

Between February 27, 2019, and March 6, 2019, IGNATOV travelled to the United States to conduct OneCoin-related business, including in Las Vegas, Nevada, where he stayed at a casino resort.  While in Las Vegas, IGNATOV met with a number of OneCoin affiliates.  During the meeting, one of the first questions posed to IGNATOV was when OneCoin members would be able to monetize, or “cash out,” their OneCoins.  IGNATOV reportedly responded, “if you are here to cash out, leave this room now, because you don’t understand what this project is about.” 

IGNATOVA, a third defendant, MARK S. SCOTT, and others agreed to launder the proceeds of the OneCoin fraud scheme.  Specifically, IGNATOVA, SCOTT, and others agreed with others to conduct transactions involving OneCoin fraud proceeds in order to conceal and disguise the nature, location, source, ownership, and control of the proceeds.  SCOTT, a former partner of a major United States law firm, assisted IGNATOVA and others in laundering more than $400 million through a series of purported investment funds holding bank accounts at financial institutions in the Cayman Islands and the Republic of Ireland, among other locations.  The indictment charging SCOTT was previously unsealed, and SCOTT was arrested in Barnstable, Massachusetts, on September 5, 2018.  SCOTT’s case is currently pending before U.S. District Judge Edgardo Ramos.

*                *                *

IGNATOVA, 38, of Sofia, Bulgaria, is charged with one count each of wire fraud, conspiracy to commit wire fraud, securities fraud, and conspiracy to commit money laundering, each of which carries a maximum sentence of 20 years sentence, and one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison.  IGNATOVA remains at large.

IGNATOV, 33, of Sofia, Bulgaria, is charged by Complaint with one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison. 

SCOTT, 50, of Coral Gables, Florida, is charged by Indictment with one count of conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison.

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

Mr. Berman and Mr. Vance praised the outstanding investigative work of IRS-CI and the FBI, which jointly conducted this investigation with the Special Agents from the U.S. Attorney’s Office and analysts from the New York County DA’s Office Major Economic Crimes Bureau.

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

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

If you think you may have been a victim in this case or have additional information, please contact the United States Attorney’s Office at 866-874-8900, or by email at USANYS.OneCoin@usdoj.gov.

 

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

[2]  OneCoin Ltd.’s private blockchain may be contrasted with Bitcoin’s blockchain, which is decentralized and public.

Robert Khuzami, Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced that JOHN GALANIS was sentenced today by the U.S. District Judge Ronnie Abrams to 10 years 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. 

Mr. Khuzami said:  “This complex and brazen securities fraud scheme lined the pockets of John Galanis and his co-defendants but left the Native American tribal entity, the Wakpamni Lake Community Corporation, $60 million in debt, and numerous pension funds with bonds they never wanted and could not sell.  A jury saw the defendant’s lies for what they were, and John Galanis, a career fraudster, now faces a significant prison term as a result of his crimes.”

According to the allegations contained in the Indictment filed against JOHN GALANIS and statements made in related court filings and proceedings, including the trial of JOHN GALANIS and two co-defendants in May and June of 2018:

From March 2014 through April 2016, JOHN GALANIS, Jason Galanis, Gary Hirst, Bevan Cooney, Michelle Morton, Hugh Dunkerley, and others engaged in a fraudulent scheme to misappropriate the proceeds of bonds issued by the Wakpamni Lake Community Corporation (“WLCC”), a Native American tribal entity (the “Tribal Bonds”), and to use funds in the accounts of 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.

The WLCC was convinced to issue the Tribal Bonds through false and fraudulent representations by JOHN GALANIS.  Simultaneously, Jason Galanis, JOHN GALANIS’s son, with the backing of other co-conspirators, worked to acquire Hughes Capital Management (“Hughes”), a registered investment adviser.  Hirst and Morton were installed as Hughes’s chief investment officer and chief executive officer, respectively.  Within weeks of taking control of Hughes, Hirst and Morton placed the entire $28 million first series of Tribal Bonds with Hughes clients but failed to disclose material facts about the Tribal Bonds, including that the Tribal Bonds fell outside the investment parameters set forth in the investment advisory contracts of certain Hughes clients.  In addition, Hughes’ 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. 

JOHN GALANIS and his co-conspirators then misappropriated the proceeds of the first Tribal Bond issuance.  Specifically, although the Tribal Bonds were supposed to be invested in an annuity, the proceeds were deposited into an account opened by Hirst and over which both Hirst and Dunkerley had signatory authority.  Hirst and Dunkerley, at the direction of Jason Galanis, then transferred significant amounts of the bond proceeds from that account to support the defendants’ business and personal interests.  Jason Galanis, for example, used a portion of the proceeds of the first Tribal Bond issuance to finance the purchase of a $10 million luxury apartment in Tribeca.  JOHN GALANIS, similarly, 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. 

In addition, JOHN GALANIS induced the WLCC to issue a second round of Tribal Bonds, which were purchased using $20 million of bond proceeds from the first 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.  In addition, millions of dollars in bond proceeds from the bond issuances were used to finance the acquisition of companies that the defendants and their co-conspirators acquired as part of their aspiration to build a financial 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 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 hope to build a financial conglomerate and to make payments to one of the broker dealers in which certain co-conspirators had interests.  

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In addition to the prison term, JOHN GALANIS, 75, was sentenced to three years of supervised release.  JOHN GALANIS was also ordered to forfeit $2,585,000 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 96 months in prison on September 7, 2018.  Michelle Morton, who pled guilty to conspiracy to commit securities fraud and investment adviser fraud, is awaiting sentencing.  Bevan Cooney, who was convicted with JOHN GALANIS at trial of conspiracy to commit securities fraud and securities fraud, is scheduled to be sentenced on April 4, 2019.  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 scheduled to be sentenced on July 19, 2019.

This conviction represents JOHN GALANIS’s fourth conviction in this District for fraud-related offenses.  JOHN GALANIS is currently serving a 72-month sentence imposed by the Honorable P. Kevin Castel in February 2017, resulting from GALANIS’s involvement in a scheme to manipulate the stock price of Gerova Financial Group, a publicly traded company listed on the New York Stock Exchange, and to defraud the shareholders of that company.  At today’s sentencing, Judge Abrams directed that 48 months of the sentence she imposed today be served consecutive to the sentence in the Gerova matter.  Previously, in July 1988, JOHN GALANIS was convicted after trial of offenses related to his involvement in another fraudulent scheme and sentenced to 324 months’ in prison.  In February 1973, JOHN GALANIS was convicted of conspiring to make false statements to the Securities and Exchange Commission and committing mail fraud. 

Mr. Khuzami 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, announced today that JOSEPH MANUEL HUNTER was sentenced to life in prison in connection with his participation in the murder of a woman in the Philippines.  HUNTER and his co-defendants, Adam Samia and Carl David Stillwell, were convicted on April 18, 2018, following a 12-day trial before U.S. District Judge Ronnie Abrams of the Southern District of New York.  Judge Abrams sentenced HUNTER today and had previously sentenced both Stillwell and Samia to mandatory life terms. 

U.S. Attorney Geoffrey S. Berman said:  “With zero regard for human life, Joseph Hunter callously helped to arrange the murder of a Filipino woman in exchange for money.  He and his co-defendants have now been sentenced to life behind bars for their heartless crimes.”

According to the Superseding Indictment against HUNTER, Samia, and Stillwell, other filings in Manhattan federal court, and the evidence admitted at trial:

HUNTER served from 1983 to 2004 in the U.S. Army, where he attained the rank of sergeant first class.  While in the Army, HUNTER led air-assault and airborne infantry squads; served as a sniper instructor; and trained soldiers in marksmanship and tactics as a senior drill sergeant.  Since leaving the Army in 2004, HUNTER arranged for the murders of multiple victims in exchange for money, among other completed acts of violence undertaken for pay. 

Samia was a self-described “Personal Protection/Security Industry” professional.  According to Samia’s résumé, he worked as an “Independent Contractor” for clients in the Philippines, China, Papua New Guinea, the Democratic Republic of the Congo, and the Republic of the Congo; and had training in tactics and weapons, including handguns, shotguns, rifles, sniper rifles, and machineguns.  Stillwell also purported to have training and experience in the field of information technology and to have worked at a firm in North Carolina that provides firearms training.

In 2011 and 2012, HUNTER, Samia, and Stillwell agreed to commit murders-for-hire in overseas locations in exchange for salaries and bonus payments for each victim.  In early 2012, Samia and Stillwell traveled from North Carolina to the Philippines, where HUNTER provided them with, among other things, information about their intended victims and firearms to use to commit the murders. 

In January and February 2012, Samia and Stillwell surveilled their intended victims in the Philippines as they formulated their murder plans.  On February 12, 2012, Samia and Stillwell killed one of their intended victims – a Filipino woman – in the Philippines by shooting her multiple times in the face (“Victim-1”).  After killing Victim-1, Samia and Stillwell disposed of her body on a pile of garbage, where it was later found by local authorities.  HUNTER paid Samia and Stillwell $35,000 each for completing the murder, and Samia and Stillwell sent thousands of dollars from the payments they received to the United States using, among other methods, structured wire transfers in amounts under $10,000. 

In late February and early March 2012, Samia and Stillwell returned from the Philippines to North Carolina, where they continued to reside until their July 2015 arrests on these charges.

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HUNTER, 53, of Owensboro, Kentucky, Samia, 44, of Roxboro, North Carolina, and Stillwell, 51, of Roxboro, North Carolina, were each convicted of one count of conspiring to commit murder-for-hire and one count of committing murder-for-hire, each of which carries a maximum sentence of life in prison and mandatory minimum sentence of life in prison; and one count of conspiring to murder and kidnap in a foreign country and one count of using and carrying a firearm during and in relation to a crime of violence, each of which carries a maximum sentence of life in prison.  Samia and Stillwell were also each convicted of conspiring to commit money laundering, which carries a maximum sentence of 20 years in prison.  

The charges against the defendants were the result of the close cooperative efforts of the United States Attorney’s Office for the Southern District of New York; DEA’s Special Operations Division, Bilateral Investigations Unit; DEA’s Manila Country Office; DEA’s Atlanta Field Division, Raleigh Resident Office; DEA’s Louisville Field Division; the Durham Police Department; the Raleigh Police Department; the Harnett County Sherriff’s Office; the Wake County Sherriff’s Office; the Person County Sherriff’s Office; the Cary Police Department; the North Carolina State Bureau of Investigations; the Bureau of Alcohol, Tobacco, Firearms and Explosives, Greensboro Field Office; the Customs and Border Protection’s National Targeting Center; the Royal Thai Police; the Philippines National Bureau of Investigation; and the Philippines National Police; and the Department of Justice’s Office of International Affairs.  Mr. Berman also thanked the United States Attorney’s Office for the Middle District of North Carolina and the Department of Justice’s Computer Crime and Intellectual Property Section for their support and assistance.

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant United States Attorneys Patrick Egan, Emil J. Bove III, and Rebekah Donaleski were in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that MICHAEL WRIGHT was sentenced to 21 months in federal prison for his participation in a scheme to defraud investors who invested millions of dollars based on false representations that their funds would be used to purchase tickets to various live events for re-sale at a profit on the secondary market.  WRIGHT pled guilty on September 27, 2018 before Magistrate Judge Stewart D. Aaron to one count of wire fraud.   His plea was accepted by Chief U.S. District Judge Colleen McMahon, who also imposed today’s sentence. 

U.S. Attorney Geoffrey S. Berman said:  “Michael Wright previously admitted to his conduct related to an elaborate ticket-buying scheme to defraud investors of millions of dollars.  Wright and his co-defendants induced their clients to invest in their phony business through false representations and lies, when in fact, it was a Ponzi-like enterprise.  While Michael Wright’s ticket-buying business operated as a fiction, now a 21 month term in federal prison will be his stark reality.”

According to allegations in an Indictment filed in Manhattan federal court, previous court filings, and statements made in public court proceedings:           

WRIGHT participated in a scheme along with Craig Carton and Joseph Meli to induce investors to provide them with millions of dollars, based on representations that the investor funds would be used to purchase blocks of tickets to concerts and other live events, which would then be re-sold on the secondary market.  Carton and Meli purportedly had access to those blocks of tickets based on agreements that Meli had with a company that promotes live music and entertainment events (the “Concert Promotion Company”) and that Carton had with a company that operates two arenas in the New York metropolitan area (the “Sports and Entertainment Company”).  In fact, neither the Concert Promotion Company nor the Sports and Entertainment Company had any such agreement with Carton, Wright, or Meli, or any entity associated with them.  After receiving the investor funds, Carton, Wright, and Meli misappropriated those funds, using them to, among other things, pay personal debts and repay prior investors as part of a Ponzi-like scheme.  

For example, on December 8, 2016, a New York-based hedge fund (the “Hedge Fund”) and Carton executed a revolving loan agreement (the “Revolving Loan Agreement”), under which the Hedge Fund agreed to provide Carton with up to $10 million, for the purpose of funding investments in the purchase of tickets of events.  The Revolving Loan Agreement provided, in sum and substance, that the proceeds of the loan would be used only to purchase tickets pursuant to agreements for the acquisition of tickets and for limited business expenses. The Hedge Fund would receive a share of the profits from the resale of the tickets.

Later in December 2016, Carton induced the Hedge Fund to wire $2 million to the Sports and Entertainment Company, based on a purported agreement he had with the Sports and Entertainment Company (the “Sports and Entertainment Company Agreement”).  Under this supposed agreement, the Sports and Entertainment Company Agreement gave an entity controlled by Carton (the “Carton Entity”) the right to purchase $2 million of tickets to concerts at one of the venues operated by the Sports and Entertainment Company.  Carton, among other things, sent the Hedge Fund a copy of the Sports and Entertainment Company Agreement that purportedly had been signed by the chief executive officer of the Sports and Entertainment Company.  However, this agreement was fraudulent and had never been entered into by the Sports and Entertainment Company or signed by the chief executive officer. 

On December 20, 2016, when the Hedge Fund wired the $2 million to the Sports and Entertainment Company for the purchase of tickets, Carton contacted the Sports and Entertainment Company and told them, in sum and substance, that the wire had been sent in error and should be sent to the bank account for an entity operated by Carton and WRIGHT, for which WRIGHT is the signatory. The prior day, December 19, 2016, WRIGHT had e-mailed Carton wire information for this account.   After the Sports and Entertainment Company’s $2 million investment was diverted to that account, WRIGHT wired $966,000 to WRIGHT’s bank account, of which WRIGHT sent approximately $690,000 to repay a gambling loan of Carton’s which WRIGHT had guaranteed and approximately $250,000 to repay WRIGHT’s personal home equity line of credit.  WRIGHT further diverted $40,000 of the Hedge Fund’s investment for his own personal expenses, including to pay off credit card debt, and nearly $1 million to Carton’s personal bank account.

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WRIGHT, 42, of Upper Saddle River, New Jersey, pled guilty to one count of wire fraud, which 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.

Carton was convicted on November 7, 2018, of securities fraud, wire fraud, and conspiracy to commit those offenses, and will be sentenced before Chief U.S. District Court Judge Colleen McMahon on April 5, 2019. 

Meli pled guilty to securities fraud in October 2017 and is currently serving a 78-month sentence imposed by U.S. District Court Judge Kimba M. Wood in April 2018.  

Mr. Berman praised the investigative work of the Federal Bureau of Investigation and thanked the Boston Regional Office of the U.S. Securities and Exchange Commission.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that YESSENIA JIMENEZ, an officer in the New York City Police Department (“NYPD”), was found guilty today of conspiring to distribute heroin, fentanyl, and cocaine, possession of heroin and fentanyl, and using a firearm in furtherance of drug trafficking.  A unanimous jury convicted JIMENEZ on all three counts after a one-week trial before United States District Judge Valerie E. Caproni. 

U.S. Attorney Geoffrey S. Berman said:  “As proven at trial, Yessenia Jimenez, an NYPD officer, trafficked heroin, fentanyl, and cocaine in New York City, a city she took an oath to serve and protect, and used her NYPD service firearm to carry out her drug dealing.  Simply put, Jimenez was a drug dealer in a cop’s uniform.  Thankfully, Jimenez now stands convicted and faces at least 15 years in prison.”

According to court documents and the evidence at trial:

This case arises from a Drug Enforcement Administration (“DEA”) investigation into a large-scale narcotics trafficking operation that brought heroin, fentanyl, and cocaine across the border from Mexico into the United States, and then into New York City.  From at least June 2017 through March 2018, JIMENEZ, an NYPD officer, participated in the conspiracy.  JIMENEZ used her apartment in the Bronx, New York, to store multiple kilograms of heroin, fentanyl, and cocaine that were brought into the city by other members of the conspiracy.  Along with other co-conspirators, JIMENEZ distributed these drugs in New York and also in the Boston area.  Over the course of the conspiracy, she collected hundreds of thousands of dollars in drug profits, which she also stored in her apartment, and delivered large amounts of cash to other co-conspirators to bring back to drug suppliers in Mexico.  On March 13, 2018, the DEA and NYPD apprehended JIMENEZ and a co-conspirator as they returned to her apartment carrying approximately $52,000 in U.S. currency, which represented the proceeds from narcotics transactions in Boston.  JIMENEZ, who was not in uniform and was off duty, was carrying her loaded NYPD service firearm in her purse, alongside approximately $25,000 of the drug proceeds.  At the time of her arrest, JIMENEZ lied to law enforcement, telling them she was “on the job,” meaning on official NYPD business at the time.  Following the arrest, law enforcement agents obtained a search warrant for JIMENEZ’s apartment and discovered approximately 250 grams of heroin and fentanyl.

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JIMENEZ, 32, of the Bronx, New York, was convicted of one count of conspiracy to distribute at least one kilogram of heroin and fentanyl, and at least five kilograms of cocaine, which carries a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison, one count of possession of at least 100 grams of heroin and fentanyl with intent to distribute, which carries a maximum sentence of 40 years in prison and a mandatory minimum sentence of five years in prison, and one count of using a firearm in furtherance of narcotics trafficking, which carries a maximum sentence of life in prison and a consecutive mandatory minimum sentence of five years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. 

Mr. Berman praised the investigative work of the DEA, NYPD, and New York State Police in this investigation.

This case is being handled by the Office’s Narcotics Unit.  Assistant U.S. Attorneys Thane Rehn and Louis Pellegrino are in charge of the prosecution.

Moscow-based Mobile TeleSystems PJSC (MTS), the largest mobile telecommunications company in Russia and an issuer of publicly traded securities in the United States, and its wholly owned Uzbek subsidiary, KOLORIT DIZAYN INK LLC (KOLORIT), have entered into resolutions with the Department of Justice and Securities and Exchange Commission (SEC) and agreed to pay a combined total penalty of $850 million to resolve charges arising out of a scheme to pay bribes in Uzbekistan.  In addition, charges were unsealed today against a former Uzbek official who is the daughter of the former president of Uzbekistan and against the former CEO of Uzdunrobita LLC, another MTS subsidiary, for their participation in a bribery and money laundering scheme involving more than $865 million in bribes from MTS, VimpelCom Limited (now VEON) and Telia Company AB (Telia) to the former Uzbek official in order to secure her assistance in entering and maintaining their business operations in Uzbekistan’s telecommunications market.

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, Special Agent in Charge Raymond Villanueva of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) Washington, D.C. and Chief Don Fort of IRS Criminal Investigation (IRS-CI) made the announcement.

Gulnara Karimova, 46, a citizen of Uzbekistan, was charged in an indictment filed in the Southern District of New York on March 7 with one count of conspiracy to commit money laundering.  Karimova is a former Uzbek official who allegedly had influence over the Uzbek governmental body that regulated the telecom industry.  Bekhzod Akhmedov, 44, a citizen of Uzbekistan and the former Uzbek executive, was charged in the same indictment with one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA), two counts of violating the FCPA, and one count of conspiracy to commit money laundering.  Karimova’s and Akhmedov’s case is assigned to U.S. District Judge Kimba Wood of the Southern District of New York.  

“Gulnara Karimova stands accused of exploiting her official position to solicit and accept more than $865 million in bribes from three publicly traded telecom companies, and then laundering those bribes through the U.S. financial system,” said Assistant Attorney General Benczkowski.  “The indictment and corporate resolution announced today, together with two prior corporate resolutions involving bribes allegedly paid to Karimova, demonstrate the Department’s comprehensive approach to foreign corruption: we will aggressively pursue both corrupt foreign officials and the companies and individuals who bribe them in order to gain unfair business advantages, and we will do everything we can to keep the proceeds of that corruption out of the U.S. financial system.”

“This is the third installment in a trilogy of cases arising from an almost $1 billion bribery scheme that reached the highest echelons of the Uzbekistan government and was orchestrated by some of the largest telecommunications companies in the world,” said U.S. Attorney Berman.  “By funneling multimillion-dollar bribe payments through the U.S. financial system, the companies and individual defendants corruptly tried to tip the global economy in their favor and line their own pockets.  But they are now paying the price.  Today, my Office and our law enforcement partners are sending a bold, unequivocal message that the U.S. financial system is not in business to enable foreign bribery or money laundering.  This Office stands ready to prevent, prosecute, and penalize foreign corrupt practices wherever in the world we find them.”

“Corruption of this level and reach poisons our integrity as a participant in the global marketplace,” said HSI Washington Special Agent in Charge Villanueva.  “Thanks to our skillful and collaborative investigators at HSI and the IRS-CI, Karimova and Ahkmedov’s exploitive crimes will be presented before the just eye of our courts and no longer will such corruption be permitted to metastasize across our borders.” 

“With the increase in globalization and ease with which funds can be moved, criminals think their financial transactions cannot be tracked—but they would be wrong,” said IRS-CI Chief Fort.  “We will continue to investigate violations of the Foreign Corrupt Practices Act to ensure our country’s financial institutions are not used for devious purposes.  We are committed to aggressively pursuing all who engage in corruption, money laundering, and bribery for their own personal gain and at the expense of the U.S. government.”

According to the indictment against Karimova and Akhmedov, in or around the early 2000s, they agreed that Akhmedov would solicit and facilitate corrupt bribe payments from telecommunications companies seeking to enter the Uzbek market.  In exchange, Karimova allegedly used her influence over Uzbek authorities to help the telecommunications companies obtain and retain lucrative business opportunities in the Uzbek telecommunications market.  In total, Akhmedov conspired with the telecom companies and others to pay Karimova more than $865 million in bribes, and Akhmedov and Karimova conspired with others to launder and conceal those funds to, from and through bank accounts in the United States, in order to promote the ongoing bribery scheme, the indictment alleges. 

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

MTS entered into a deferred prosecution agreement with the Department of Justice in connection with a criminal information filed yesterday in the Southern District of New York charging the company with one count of conspiracy to violate the anti-bribery and books and records provisions of the FCPA and one count of violating the internal controls provisions of the FCPA.  KOLORIT pleaded guilty to a one-count criminal information filed in the Southern District of New York, charging the company with conspiracy to violate the anti-bribery and books and records provisions of the FCPA.  Pursuant to its agreement with the department, MTS agreed to pay a total criminal penalty of $850 million to the United States, including a $500,000 criminal fine and $40 million in criminal forfeiture that MTS agreed to pay on behalf of KOLORIT.  MTS also agreed to the imposition of an independent compliance monitor for a term of three years and to implement rigorous internal controls and cooperate fully with the Department’s ongoing investigation, including its investigation of individuals such as Akhmedov and Karimova.  The case against MTS and KOLORIT is assigned to U.S. District Judge J. Paul Oetken of the Southern District of New York.  

In related proceedings, MTS reached a settlement with the SEC.  Under the terms of its agreement with the SEC, MTS agreed to pay a $100 million civil penalty.  Consistent with Coordination of Corporate Resolution Penalties in Parallel and/or Joint Investigations and Proceedings Arising from the Same Misconduct (Justice Manual 1-12.100), the Department of Justice agreed to credit the civil penalty paid to the SEC as part of its agreement with MTS.  Thus, the combined total amount of criminal and regulatory penalties paid by MTS and KOLORIT to U.S. authorities will be $850 million.

According to the companies’ admissions, MTS and KOLORIT, through various managers and employees within MTS, MTS’s Uzbek subsidiaries Uzdunrobita LLC and KOLORIT, and other affiliated entities, paid approximately $420 million in bribes to Karimova, who had influence over the Uzbek governmental body that regulated the telecom industry.  The bribes were paid on multiple occasions between 2004 and 2012 so that MTS could enter the Uzbek market through the acquisition of Uzdunrobita and so that Uzdunrobita could gain valuable telecom assets and continue operating in Uzbekistan.  The companies admittedly structured and concealed the bribes through payments to shell companies that members of MTS’s and Uzdunrobita’s management knew were beneficially owned by Karimova.  MTS and Uzdunrobita also acquired KOLORIT, knowing that the price MTS and Uzdunrobita paid was inflated, in order to bribe Karimova in exchange for Uzdunrobita’s continuing to operate in Uzbekistan.  Uzdunrobita made payments to purported charities and for sponsorships to entities related to Karimova.  The Uzbek government expropriated Uzdunrobita in 2012 as a result of MTS’s, Uzdunrobita’s and KOLORIT’s failure to meet Karimova’s demands for additional payments.

A number of factors contributed to the Department’s criminal resolution with the companies, including (1) the companies did not voluntarily disclose; (2) the companies’ level of cooperation and remediation was lacking, not proactive; (3) the nature and seriousness of the office, including $420 million in bribes to a high-level Uzbek official; and (4) the mitigating factors present in this case, including that the Uzbek government expropriated the companies’  telecommunications assets in Uzbekistan, resulting in no realized pecuniary gain to the companies as a result of the misconduct.

The resolution, reached in coordination with the SEC’s resolution, marks the third such resolution by a major international telecommunications provider for bribery in Uzbekistan.  On Feb. 18, 2016, Amsterdam-based VimpelCom and its Uzbek subsidiary, Unitel LLC, entered into resolutions with the Department of Justice and admitted to a conspiracy to make more than $114 million in bribery payments to Karimova between 2006 and 2012.  On Sept. 21, 2017, Stockholm-based Telia and its Uzbek subsidiary, Coscom LLC, also entered into resolutions with the Department and admitted to a conspiracy to make more than $331 million in bribery payments to Karimova.  The investigation has thus far yielded a combined total of over $2.6 billion in global fines and disgorgement, including over $1.3 billion in criminal penalties to the United States.  In related actions, the Department has also filed civil complaints seeking the forfeiture of more than $850 million held in bank accounts in Switzerland, Belgium, Luxembourg and Ireland, which constitute bribe payments made by MTS, VimpelCom and Telia, or funds involved in the laundering of those corrupt payments to Karimova.

The IRS-CI and HSI are investigating the cases as part of the IRS Global Illicit Financial Team in Washington, D.C.  Assistant Chief Ephraim Wernick and Senior Litigation Counsel Nicola J. Mrazek of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Edward Imperatore and Daniel Noble of the Southern District of New York are prosecuting the case against MTS and KOLORIT.  Assistant Chief Wernick and Trial Attorney Elina Rubin-Smith of the Fraud Section and Assistant U.S. Attorneys Imperatore and Noble are prosecuting the case against Karimova and Akhmedov.  Trial Attorney Michael Khoo of the Criminal Division’s Money Laundering and Asset Recovery Section (MLARS) is prosecuting the forfeiture case with substantial assistance from former MLARS Trial Attorney Marie M. Dalton, now an Assistant U.S. Attorney in the Western District of Washington.

Law enforcement authorities in Austria, Belgium, Cyprus, France, Ireland, Isle of Man, Latvia, Luxembourg, Norway, the Netherlands, Switzerland, Sweden and the United Kingdom have provided valuable assistance in this case.  The Criminal Division’s Office of International Affairs provided significant assistance as well.  The SEC referred the matter to the Department and also provided extensive cooperation and assistance.

The Criminal Division’s 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.

Individuals with information about possible proceeds of foreign corruption located in or laundered through the United States should contact federal law enforcement or send an email to kleptocracy@usdoj.gov.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Douglas Shoemaker, regional Special Agent-in-Charge of the United States Department of Transportation Office of Inspector General (“USDOT-OIG”), Margaret Garnett, the Commissioner of the New York City Department of Investigation (“DOI”), and Barry L. Kluger, Inspector General of the Metropolitan Transportation Authority (“MTA-OIG”), announced that the United States filed a civil fraud lawsuit against three New York-area painting contractors, AHERN PAINTING CONTRACTORS CO. (“AHERN”), SPECTRUM PAINTING CORP. (“SPECTRUM”), and TOWER MAINTENANCE CORP. (“TOWER”).  The lawsuit alleges that these companies fraudulently obtained payments on two federally funded projects in New York City by lying about compliance with Disadvantaged Business Enterprise (“DBE”) rules, which require participation of businesses owned by women or minorities.  Specifically, as alleged in the complaint, the defendants made it appear that TOWER, a certified disadvantaged business enterprise, was executing millions of dollars of steel painting work at the Brooklyn Bridge and the Queens Plaza transit line when in fact much of the work was performed by SPECTRUM, a non-DBE.  In return for being included in the projects, SPECTRUM paid kickbacks to AHERN in the form of a $10,000 “commission payment” and a free trip to Atlantic City.  By repeatedly submitting false statements to the New York City Department of Transportation (“NYC-DOT”) mischaracterizing Tower’s work at these projects, the defendants received millions of dollars in federal funds to which they were not entitled.

Manhattan U.S. Attorney Geoffrey Berman said:  “Disadvantaged Business Enterprise regulations serve the important purpose of increasing legitimate participation by businesses owned by women and minorities that have been historically disadvantaged in federal contracting.  We will not tolerate fraudulent schemes that exploit the DBE program and undermine its purpose.  Contractors who lie about who is actually doing the work will be held to account.”

USDOT-OIG regional Special Agent-in-Charge Douglas Shoemaker said: “Disadvantaged Business Enterprise (DBE) fraud harms law-abiding contractors by disrupting the level playing field in which legitimate disadvantaged businesses seek to fairly compete for contracts.  We remain steadfast in our commitment to preserve the integrity of the Department’s DBE program.  Working with our law enforcement and prosecutorial partners, we will continue to protect the taxpayers’ investment in our nation’s infrastructure from DBE fraud schemes that undermine DOT-funded programs and projects and the public trust.”

DOI Commissioner Margaret Garnett said:  “These defendants used trickery, false documents, and a kickback scheme to game the Disadvantaged Business Enterprise program – stealing millions of dollars in federal funds.  DOI was proud to assist in this investigation with our federal and state partners to ensure guidelines that empower legitimate Disadvantaged Business Enterprises are obeyed and businesses who attempt to take advantage of these programs are made to pay for their actions.  DOI remains committed to the shared City and federal mission of protecting programs that safeguard inclusive hiring practices on public construction projects.”

MTA Inspector General Barry L. Kluger said:  “Today’s filing of a civil complaint alleging Disadvantaged Business Enterprise fraud clearly reflects the firm commitment of our prosecutorial and investigative partners to utilize all avenues to ensure compliance with DBE requirements.  I wish to thank the U.S. Attorney for devoting substantial resources and efforts to create and maintain a level playing field on which all qualified DBEs have a fair and equal opportunity to bid for and participate in construction projects.”

In 1980, the United States Department of Transportation (“USDOT”) issued regulations in connection with a program to increase the participation of minority and disadvantaged business enterprises in federally funded public construction contracts.  To become certified as a DBE, a company must, among other things, be owned and controlled by socially and economically disadvantaged individuals, be an independent business whose viability does not depend on its relationship with other firms, employ its own work force and own equipment necessary to perform its work, and be able to meet its financial obligations.

Recipients of USDOT construction grants, such as the New York City Department of Transportation (“NYC-DOT”) and the MTA, are required to establish a DBE program that sets goals for the percentage of a project’s work that should be awarded to DBEs (“DBE goals”).  NYC-DOT and MTA both have established DBE programs aimed at increasing the participation of minority- and women-owned businesses.  Pursuant to the DBE programs, general contractors on federally funded public construction projects must make good faith efforts to encourage participation of DBEs in public works contracts.

General contractors can count funds paid to DBEs toward the attainment of the DBE goals only if the DBEs performed a “commercially useful function.”  A DBE subcontractor performs a commercially useful function only when it is responsible for the execution of the work of the contract; actually performs, manages, and supervises the work involved; and furnishes the supervision, equipment, and labor necessary to perform its work. 

As set forth in the complaint, AHERN, a steel painting company, was a contractor on the Brooklyn Bridge and Queens Plaza projects.  Contracts for both projects required AHERN to hire DBEs to do a percentage of the work involved and adhere to the DBE regulations.  Instead of making good faith efforts to hire qualified DBEs to do this work, AHERN agreed with SPECTRUM and TOWER to use TOWER’s status as a DBE to take credit for millions of dollars of DBE work.  But TOWER did not perform a “commercially useful function” on the projects, as required under the DBE regulations.  Rather, it was SPECTRUM, a non-DBE, that did much of the work, including directing, managing, and supervising the DBE work on the projects. 

Defendants concealed their violations of the DBE regulations by, among other things, repeatedly having SPECTRUM employees pretend to be TOWER employees, wearing Tower vests, carrying Tower identification, and telling others on the worksites that they were Tower employees.  In addition, AHERN and TOWER repeatedly submitted false statements and records to NYC-DOT and MTA misrepresenting that TOWER alone did all of the DBE work allocated to it and that TOWER did not hire a subcontractor to perform any of that work.  SPECTRUM also paid kickbacks to AHERN in the form of a $10,000 “commission payment” and a free trip to Atlantic City.  As a result of the false statements and records, the defendants obtained millions of dollars of federal money to which they were not entitled.

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Margaret Garnett, the Commissioner of the New York City Department of Investigation (“DOI”), announced today the unsealing of a criminal complaint charging CORDELL FITTS, a former New York City Department of Homeless Services (“DHS”) police sergeant, in the assault of an individual at a homeless shelter.  FITTS was charged with using excessive force against an individual seeking services (“Victim-1”) at the Bellevue Men’s Homeless Shelter in Manhattan (the “Bellevue Shelter”), in violation of Victim-1’s rights under the United States Constitution, and for filing a false report in order to cover up the assault.  During an altercation with Victim-1, FITTS used excessive and unnecessary force, including by kicking, punching, and stomping on the head of Victim-1 more than 10 times.  FITTS was arrested today and is expected to be presented before the U.S. Magistrate Judge Debra Freeman in federal court later today.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, Cordell Fitts, a former sergeant in the New York City Department of Homeless Services Police Department, used excessive force against an individual seeking services at a city facility.  Fitts’s alleged conduct not only betrayed his duty as an officer to protect those under his charge, but also violated the law.  When the constitutional rights of individuals experiencing homelessness are violated, particularly by law enforcement officers, we will act aggressively to bring wrongdoers to justice.”

DOI Commissioner Margaret Garnett said:  “Instead of upholding the law, this sworn officer allegedly broke it by violently attacking a man seeking assistance at a Manhattan homeless shelter, according to the charges.  Shelters should provide a safe environment for the homeless of our City, not one where clients fear the officers employed to protect them.  DOI thanks the Office of the U.S. Attorney for the Southern District of New York for its partnership on this investigation and prosecution.”

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

The Bellevue Shelter is a men’s homeless shelter located in Manhattan, New York.  It is maintained by DHS and its security is provided for by, among others, DHS police officers.  On the night of March 6, 2017, Victim-1 was seeking services at the Bellevue Shelter.

At the time of the incident Victim-1 was in the lobby of the Bellevue Shelter and interacting with approximately three DHS officers, including FITTS.  In the initial moments of the interaction, FITTS and Victim-1 exchanged words for approximately five to ten seconds, and FITTS gestured toward an exit area of the Bellevue Shelter.  FITTS then reached toward Victim-1, putting his hands on or about the chest area of Victim-1, and Victim-1 responded by swinging at FITTS with what appear to be closed fists.

For approximately 30 seconds, FITTS and other officers struggled with Victim-1 in a physical altercation, which resulted in Victim-1 being taken to the floor of the lobby.  When Victim-1 was taken to the ground, two officers were on the legs and back of Victim-1, and FITTS was standing next to Victim-1.  At this point, with Victim-1 on the ground and two other officers on top of Victim-1, FITTS punched Victim-1 in the area of his head approximately two times.  Subsequently, while Victim-1 remained on the ground, FITTS kicked and stomped on the head of Victim-1 approximately 11 times.

After kicking and stomping on Victim-1’s head, FITTS backed away from Victim-1 for approximately 10 seconds, as two other officers were attempting to place handcuffs on Victim-1 while he was face-down on the floor.  Following that brief period of disengagement, FITTS walked back to Victim-1 and punched him in the area of his head approximately two additional times.

In connection with this incident, FITTS dictated a report about the incident that stated, among other things, that “necessary force” was used to “safely detain” Victim-1.  The Report also stated:  “After initial medical assessment [Victim-1] stated ‘I am off my psych medication and going through a lot.’”  These statements were false and were included in the report by FITTS in order to cover up and justify the assault.

*                      *                      *

CORDELL FITTS, 34, of Manhattan, New York, is charged with one count of deprivation of rights under color of law through use of excessive force, which carries a maximum penalty of 10 years in prison, and one count of falsifying a report, which carries a maximum penalty of 20 years in prison.

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

Mr. Berman praised the investigative work of the Special Agents at the United States Attorney’s Office and thanked the New York City Department of Investigations for its assistance.

This case is being handled by the Office’s Civil Rights and Public Corruption Units.  Assistant U.S. Attorneys Alex Rossmiller and Jennifer Jude are in charge of the prosecution.

The charges and allegations 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 (“SDNY”), Brian A. Benczkowski, the Assistant Attorney General for the Criminal Division of the Department of Justice (“DOJ”), Don Fort, Chief of the Criminal Investigation Division, Internal Revenue Service (“IRS-CI”), and Patrick J. Lechleitner, Special Agent in Charge of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”) Washington, D.C, announced today the filing of criminal charges against GULNARA KARIMOVA, a former Uzbek government official who is the daughter of the former president of Uzbekistan, and BEKHZOD AKHMEDOV, the former general director of Uzdunrobita, an Uzbek subsidiary of Moscow-based MOBILE TELESYSTEMS PJSC (“MTS”), the largest mobile telecommunications company in Russia and an issuer of publicly traded securities in the United States, in connection with one of the largest Foreign Corrupt Practices Act (“FCPA”) bribery schemes ever charged, a decade-long corrupt scheme to pay KARIMOVA more than $865 million in bribes.  AKHMEDOV, who helped orchestrate the massive bribery scheme on behalf of MTS and two other telecommunications companies, VimpelCom Ltd. (“VimpelCom”) and Telia Company AB (“Telia”), and their Uzbek subsidiaries, is charged with one count of conspiracy to violate the FCPA and two counts of violating the FCPA.  KARIMOVA and AKHMEDOV are each charged with one count of conspiracy to commit money laundering based on numerous international financial transactions they conducted to promote and conceal the bribery scheme.  The case is assigned to U.S. District Judge Kimba Wood.

Yesterday afternoon, criminal charges were filed against MTS and another of its Uzbek subsidiaries, KOLORIT DIZAYN INK LLC (“KOLORIT”), for conspiring to violate the FCPA by paying more than $420 million in bribes through AKHMEDOV to KARIMOVA.  KOLORIT pled guilty yesterday in Manhattan federal court before U.S. District Judge J. Paul Oetken to a criminal Information charging the company with conspiracy to violate the anti-bribery and books and records provisions of the FCPA.  MTS entered into a deferred prosecution agreement (“DPA”) with SDNY and DOJ in connection with a criminal Information charging the company with one count of conspiracy to violate the anti-bribery and books and records provisions of the FCPA and one count of violating the internal controls provisions of the FCPA.  Pursuant to the DPA, MTS agreed to pay a total criminal penalty of $850 million to the United States, including a $500,000 criminal fine and $40 million in criminal forfeiture that MTS agreed to pay on behalf of KOLORIT.  MTS also agreed to the imposition of an independent compliance monitor for a term of three years and to implement rigorous internal controls and cooperate fully with SDNY’s and DOJ’s ongoing investigation, including their investigation of individuals such as KARIMOVA and AKHMEDOV.

In related proceedings, MTS reached a civil settlement with the SEC.  Under the terms of its agreement with the SEC, MTS agreed to pay a $100 million civil penalty, which SDNY and DOJ agreed to credit toward the financial penalties imposed as part of their agreement with MTS.  Thus, the combined total amount of criminal and regulatory penalties paid by MTS to U.S. authorities in connection with the FCPA bribery scheme will be $850 million.

U.S. Attorney Berman said:  “This is the third installment in a trilogy of cases arising from an almost $1 billion bribery scheme that reached the highest echelons of the Uzbekistan government and was orchestrated by some of the largest telecommunications companies in the world.  By funneling multimillion-dollar bribe payments through the U.S. financial system, the companies and individual defendants corruptly tried to tip the global economy in their favor and line their own pockets.  But they are now paying the price.  Today, my Office and our law enforcement partners are sending a bold, unequivocal message that the U.S. financial system is not in business to enable foreign bribery or money laundering.  This Office stands ready to prevent, prosecute, and penalize foreign corrupt practices wherever in the world we find them.”

Assistant Attorney General Benczkowski said:  “Gulnara Karimova stands accused of exploiting her official position to solicit and accept more than $865 million in bribes from three publicly traded telecom companies, and then laundering those bribes through the U.S. financial system.  The indictment and corporate resolution announced today, together with two prior corporate resolutions involving bribes allegedly paid to Karimova, demonstrate the Department’s comprehensive approach to foreign corruption: we will aggressively pursue both corrupt foreign officials and the companies and individuals who bribe them in order to gain unfair business advantages, and we will do everything we can to keep the proceeds of that corruption out of the U.S. financial system.”

IRS-CI Chief Don Fort said:  “With the increase in globalization and ease with which funds can be moved, criminals think their financial transactions cannot be tracked – but they would be wrong.  We will continue to investigate violations of the Foreign Corrupt Practices Act to ensure our country’s financial institutions are not used for devious purposes.  We are committed to aggressively pursuing all who engage in corruption, money laundering, and bribery for their own personal gain and at the expense of the United States government.”

HSI Special Agent in Charge Lechleitner said:  “Corruption of this level and reach poisons our integrity as a participant in the global marketplace.  Thanks to our skillful and collaborative investigators at ICE and the IRS-CI, Karimova and Ahkmedov’s exploitive crimes will be presented before the resolute and just eye of our courts and no longer will such corruption be permitted to metasticize across our borders.”

According to allegations contained in the Indictment filed today against KARIMOVA and AKHMEDOV and criminal Informations filed yesterday against MTS and KOLORIT, the Statement of Facts set forth in the DPA, and statements made during public proceedings in Manhattan federal court:

Between approximately 2001 and 2012, KARIMOVA and AKHMEDOV agreed that AKHMEDOV would solicit and obtain corrupt bribes for KARIMOVA from telecommunications companies, including MTS and KOLORIT, so that the companies could obtain and retain telecommunications business in Uzbekistan.  The bribes were paid to KARIMOVA, who, in exchange, exercised her corrupt influence over Uzbek telecommunications industry regulators to allow the telecommunications companies to obtain lucrative business and operate in the Uzbek market.  MTS and KOLORIT structured and concealed the bribes through various payments to shell companies that certain members of MTS and KOLORIT management knew were beneficially owned by KARIMOVA.  In total, AKHMEDOV and others conspired to pay KARIMOVA more than $865 million in bribes.  KARIMOVA, AKHMEDOV, and others agreed to launder those funds in order to promote and conceal the bribery scheme.  For their part, MTS, KOLORIT, and affiliated entities paid KARIMOVA more than $420 million in bribes.  A substantial portion of the illicit funds were transmitted through financial institutions in the Southern District of New York before they were deposited into bank accounts controlled by KARIMOVA in various countries around the world.

The resolution with MTS and KOLORIT, reached in coordination with the SEC, marks the third such resolution by a major international telecommunications company for bribery in Uzbekistan.  On February 18, 2016, Amsterdam-based VimpelCom and its Uzbek subsidiary, Unitel LLC, entered into a resolution with SDNY and DOJ and admitted to conspiring to pay more than $114 million in bribes to KARIMOVA between 2005 and 2012.  On September 21, 2017, Stockholm-based Telia and its Uzbek subsidiary, Coscom LLC, entered into a resolution with SDNY and DOJ and admitted to conspiring to pay more than $331 million in bribes to KARIMOVA between 2007 and 2010. 

The investigation has thus far yielded a combined total of more than $2.6 billion in global fines and disgorgement, including more than $1.3 billion in criminal penalties paid to the United States.  In related actions, DOJ has also filed civil complaints seeking the forfeiture of more than $850 million held in bank accounts in Switzerland, Belgium, Luxembourg, and Ireland, which constitute bribe payments made by MTS, VimpelCom, and Telia, or funds involved in the laundering of those bribes, to KARIMOVA

*                *                *

KARIMOVA, 46, a citizen of Uzbekistan, was charged with one count of conspiracy to commit money laundering.  AKHMEDOV, 44, a citizen of Uzbekistan currently residing in Russia, was charged with one count of conspiracy to violate the FCPA, two counts of violating the FCPA, and one count of conspiracy to commit money laundering.  KARIMOVA and AKHMEDOV remain at large.

KOLORIT was charged with, and pled guilty to, one count of conspiracy to violate the anti-bribery and books and records provisions of the FCPA.  MTS was charged with one count of conspiracy to violate the anti-bribery and books and records provisions of the FCPA and one count of violating the internal controls provisions of the FCPA.

Mr. Berman thanked the Fraud Section of the DOJ’s Criminal Division for their collaboration and praised the outstanding investigative work of IRS-CI, the IRS Global Illicit Financial Team, and HSI.  Mr. Berman also thanked the SEC’s Division of Enforcement for its assistance and cooperation in the investigation.  Mr. Berman expressed his appreciation to the DOJ’s Office of International Affairs for its significant assistance in this matter and to law enforcement colleagues in Austria, Belgium, Cyprus, France, Ireland, Isle of Man, Latvia, Luxembourg, Norway, the Netherlands, Switzerland, Sweden, and the United Kingdom. 

The prosecution of this case is being handled by SDNY’s Complex Frauds and Cybercrime Unit and the FCPA Unit of the Fraud Section of DOJ’s Criminal Division.  Assistant U.S. Attorney Edward A. Imperatore, Assistant Chief Ephraim Wernick, Senior Litigation Counsel Nicola Mrazek, and Trial Attorney Elina Rubin-Smith are in charge of the prosecution.  Trial Attorney Michael Khoo of the DOJ Criminal Division’s Money Laundering and Asset Recovery Section (“MLARS”) is prosecuting the forfeiture case with substantial assistance from former MLARS Trial Attorney Marie M. Dalton, now an Assistant U.S. Attorney in the Western District of Washington.

The charges contained in the Indictment against KARIMOVA and AKHMEDOV are merely accusations, and the defendants are presumed innocent unless proved guilty.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that CHRISTOPHER HOWARD, a/k/a “Juju,” a member of a violent, Bronx-based street gang known as “Money, Bitches, Guns” (“MBG”), was convicted yesterday of racketeering conspiracy, assault with a deadly weapon in aid of racketeering, and a firearms offense.  HOWARD was convicted following a one-week trial before U.S. District Judge Robert W. Sweet.

U.S. Attorney Geoffrey S. Berman said:  “Christopher Howard was a member of a violent street gang that operated in and around NYCHA’s Mill Brook Houses.  In August 2014, he shot into a crowd of people in the Mill Brook Houses, injuring three individuals.  Now he stands convicted for his crimes.  We thank the New York City Police Department and the Drug Enforcement Administration for their tireless efforts to secure this important conviction.”

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

From 2007 through October 2017, HOWARD was a member of MBG, a local street gang based in the Mill Brook Houses in the Bronx that was responsible for narcotics trafficking and several acts of violence.  As part of his membership in MBG, Howard boasted about his gang membership on social media and shot at a rival gang member.  Specifically, in the early morning hours of August 17, 2014, HOWARD, aiming for a rival gang member who had previously broken HOWARD’s jaw, shot into a crowd of people gathering in a small courtyard in the Mill Brook Houses. Three people were injured as a result of the shooting, including HOWARD’s intended target.

*                *                *

HOWARD, 26, of the Staten Island, New York, faces a mandatory minimum sentence of 10 years in prison and a maximum potential sentence of life in prison. 

Mr. Berman praised the outstanding investigative work of the New York City Police Department and the Drug Enforcement Administration.  

The case is being prosecuted by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Alexandra Rothman, Christopher Clore, and Jordan Estes 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 charges today against seven individuals in fraud and money laundering conspiracies dating from July 2017 through September 2018.  LINKOY BENNETT, RENNEIL WILLIAMS, DWAYNE BORELAND, TIFFANY RANDOLPH, and OSHANE ROYE, and their associates allegedly engaged in a scheme to defraud elderly victims by telling them they won the Publishers Clearing House Sweepstakes, but needed to prepay their taxes to obtain their winnings.  BENNETT, WILLIAMS, BORELAND, and RANDOLPH, as well as FABIAN ROBINSON, and HARRIANN MITCHELL, were also charged in a money laundering conspiracy related to the fraudulent scheme. Seven defendants were arrested in the Southern District of New York and will be presented today before United States Magistrate Judge Paul E. Davison.    

U.S. Attorney Geoffrey S. Berman said:  “These seven defendants allegedly engaged in the scheme to contact elderly victims under the guise of winning a sweepstakes, imploring them to prepay taxes on their ‘winnings’ before they could collect.  In reality, this was a coldhearted scheme to bilk over $1 million from over 30 victims.  Linkoy Bennet and his co-defendants played the lottery with the law and their luck has run out, as they now face up to 20 years in federal prison.”

FBI Assistant Director in Charge William F. Sweeney Jr. said:  “Unfortunately, many elderly citizens find themselves in less than desirable financial situations, creating within them a constant worry about money. This is one of the many reasons they’re targeted by criminals as attractive victims. Crimes like the one our defendants are charged with today not only provide false hope for their prey, but have the potential to inflict severe emotional wounds. An important step in avoiding being victimized is educating the public about the many scams targeting the elderly. If you believe you are a victim of fraud, or know a senior who may be, regardless of financial loss, immediately report the incident to your local FBI field office or law enforcement agency.”

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

From at least in or about July 2017 through in or about September 2018, LINKOY BENNETT, RENNEIL WILLIAMS, DWAYNE BORELAND, TIFFANY RANDOLPH, OSHANE ROYE, FABIAN ROBINSON, and HARRIANN MITCHELL, collected the proceeds of a fraudulent scheme.  During the scheme, unnamed co-conspirators called elderly victims throughout the United States, and falsely told the victims they won the Publishers Clearing House Sweepstakes, but needed to prepay taxes and fees to receive their winnings.  The victims sent cash, postal money orders, wire transfers, personal and cashier’s checks to the defendants at various addresses in the Southern District of New York.  The defendants collected the proceeds of the scheme, and remitted them to an unnamed co-conspirator.  

*                *                *

BENNETT, 22, of the Bronx, New York, WILLIAMS, 32, of the Bronx, New York, BORELAND, 37, of the Bronx, New York, RANDOLPH, 30, of White Plains, New York, and ROYE, 23, of the Bronx, New York,  are each charged with one count of conspiracy to commit wire fraud and mail fraud.  BENNETT, WILLIAMS, BORELAND, and RANDOLPH, as well as FABIAN ROBINSON, 33, of the Bronx, New York, and HARRIANN MITCHELL, 38, of the Bronx, New York, are charged with a conspiracy launder the proceeds of the scheme.  Each charge carries a maximum penalty of 20 years in prison.  The maximum potential sentence in this case is prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

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

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

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

 

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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 partial summary judgment has been granted in favor of plaintiffs and the Government in a lawsuit brought under the Americans with Disabilities Act (“ADA”) by private plaintiffs (Bronx Independent Living Services et al. v. MTA) in which the United States intervened.  U.S. District Judge Edgardo Ramos ruled that the Metropolitan Transportation Authority’s (the “MTA”) replacement of the stairways at the Middletown Road subway station in the Bronx affected the station’s usability, thus triggering the MTA’s obligation under the ADA to install elevators, without regard to cost, unless it is technically infeasible to do so.

U.S. Attorney Geoffrey S. Berman said:  “The MTA is now on notice that whenever it renovates a subway station throughout its system so as to affect the station’s usability, the MTA is obligated to install an elevator, regardless of the cost, unless it is technically infeasible.  Individuals with disabilities have the same rights to use the New York City subway system as every other person.  The Court’s decision marks the end of the MTA treating people with disabilities as second-class citizens.  My Office will continue to work to ensure that the provisions of the Americans with Disabilities Act are enforced, and that everyone enjoys equal access to public transit in this District.”

The ADA, signed into law in 1990, prohibits discrimination against individuals with disabilities in all areas of public life, including jobs, schools, transportation, and all public and private places that are open to the general public.  Under its provisions, the ADA requires state and local government agencies to make alterations to public transit facilities readily accessible to, and usable by, individuals with disabilities, including those who use wheelchairs.

In March 2018, this Office intervened in a private lawsuit brought by Disability Rights Advocates regarding the MTA’s refusal to install elevators at the Middletown Road station, despite undertaking a substantial renovation of the entire station, including the staircases.  The Department of Transportation, Federal Transit Authority (“FTA”), had declined the MTA’s request for federal funds for the renovation because the MTA’s refusal to install elevators violated the ADA.

Judge Ramos ruled that MTA’s renovation of the Middletown Road station was an alteration that triggered the ADA’s requirement to install an elevator unless it is technically not feasible to do so.  Specifically, Judge Ramos concluded that when a public transit authority alters a station in a way that affects its “usability,” the public transit authority must follow the requirements in 49 C.F.R. § 37.43(a)(1), requiring the installation of an elevator where technically feasible regardless of cost.  The Court rejected the MTA’s argument that the governing regulation permitted it to avoid installing an elevator based on cost considerations.

Mr. Berman thanked Disability Rights Advocates for its work in this case, as well as FTA for its continued assistance with this matter.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that former Orange County attorney JOSEPH SCALI was sentenced to seven years in prison in connection with SCALI’s conviction for mail fraud, structuring cash transactions, making false statements to the IRS, obstructing the IRS, tax evasion, obstruction of justice, and perjury following a four-week jury trial.  SCALI was sentenced today by U.S. District Judge Nelson S. Román, who presided over the trial. 

U.S. Attorney Geoffrey S. Berman said:  “Joseph Scali, a former attorney, was convicted of embezzling $850,000 from his attorney trust account that held third party funds from an uncompleted real estate transaction.  Instead of returning the funds – which he was required to do by law – Scali used them on his personal expenses, including sports tickets and international travel.  Scali also filed false tax returns and made false sworn statements to the court.  Joseph Scali violated his responsibilities as a lawyer and a taxpayer, and now will have seven years in federal prison to reflect on his wide array of financial crimes and failure to act ethically before the court.”

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

From January 2011 through August 2012, SCALI – then a licensed, practicing attorney – perpetrated a scheme to defraud a prospective buyer of land and mineral rights in Pennsylvania.  SCALI represented the seller in the land transaction and was entrusted to hold the buyer’s funds in his attorney trust account pending closing, which never took place.  Instead of preserving the buyer’s funds and returning them when the transaction fell through, SCALI embezzled $850,000 of the buyer’s money from his attorney trust account and spent the majority on personal expenses, including season sports tickets, luxury clothing items, and trips abroad.

After defrauding the buyer, SCALI engaged in tax evasion for the years 2011 and 2012 by, among other things, deliberately withholding from the IRS his attorney trust account records, which would have revealed the funds he had misappropriated and made him liable for hundreds of thousands of dollars in unpaid federal income taxes.

In addition, between 2006 and November 2013, SCALI corruptly endeavored to obstruct the IRS by (a) providing materially false, incomplete, and misleading information to an IRS Revenue Officer about his tax filing history and income; (b) commingling client funds and personal funds in his attorney trust account; (c) paying for personal items directly out of his attorney trust account; (d) structuring $32,400 in cash deposits into his attorney trust account.  In addition, SCALI failed to timely file U.S. Individual Income Tax Returns, Forms 1040, for the years 2006 through 2012, as well as U.S. Corporate Income Tax Returns, Forms 1120, for his law firm, Joseph G. Scali, P.C., for the years 2007 through 2012, notwithstanding that he was required by law to file a return for each year.  SCALI was also separately convicted of making false statements to the IRS and structuring cash deposits.

In all, SCALI caused the IRS to incur losses of over $500,000, not including penalties and interest.            

SCALI also committed obstruction of justice and perjury when, in seeking to set aside his disbarment by the U.S. District Court for the Southern District of New York, he lied under oath to that court about the reason for his 2013 suspension from the practice of law in New York State. 

In 2014 and 2015, SCALI perpetrated a second mail fraud scheme by fraudulently undertaking a legal representation of a client for a fee without disclosing his 2013 suspension from the practice of law in New York State. 

On July 6, 2016, SCALI was disbarred by the Second Judicial Department of the Appellate Division of the New York State Supreme Court. 

*                *                *

In addition to the prison term, Judge Román ordered SCALI to serve three years of supervised release and to pay restitution totaling $1,511,534.73 to the victims of his mail fraud schemes and the IRS. 

Mr. Berman praised the work of the IRS, the U.S. Postal Inspection Service, and the Special Agents of the U.S. Attorney’s Office in this investigation.  Mr. Berman also thanked the Orange County District Attorney’s Office, the New York State Department of Taxation and Finance, the New York State Police, the Counsel for the Grievance Committee for the Ninth Judicial District of New York State, the Counsel for the Committee on Grievances for the U.S. District Court for the Southern District of New York, and the Counsel for the IOLA Fund of New York for their assistance and cooperation in the investigation. 

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Olga Zverovich, Vladislav Vainberg, and Daniel Noble 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 Field Office of the Federal Bureau of Investigation (“FBI”), announced the conviction yesterday of ROBERT MERLO, a New Jersey-based insurance agent who participated in a scheme to steal more than $2 million in stock certificates from the apartment of a deceased Manhattan woman, open a brokerage account in her name in order to liquidate the stocks, and then use those stolen assets to attempt to purchase over $2 million worth of gold coins, following a four-day trial before the Honorable Lewis A. Kaplan.           

U.S. Attorney Geoffrey S. Berman said:  “We are gratified that the jury reached a swift and just verdict in this case.  The conduct of the defendant was the financial equivalent of grave-robbing.”

FBI Assistant Director William F. Sweeney Jr. said:  “There are few things more disturbing than stealing from the deceased.  The conviction of Robert Merlo is a welcome conclusion – one that highlights our resolve to defend the truly defenseless.”     

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

From approximately March 2016 to February 2017, MERLO engaged in a scheme with others known and unknown designed to steal over $2 million from a deceased Manhattan woman (the “Victim”).  As part of the scheme, MERLO’s co-conspirators stole stock certificates valued at over $2 million from the Victim’s Manhattan apartment after the Victim’s death.  In August 2016, MERLO agreed with others to make false representations to a financial institution (“Company-1”) in order to open a brokerage account (the “Account”) in the Victim’s name, deposit the stolen stock certificates into the Account, and sell the shares in the brokerage account, resulting in a cash balance of over $2 million.  MERLO agreed to help launder the cash balance in the brokerage account, approaching several individuals to carry out his plan.  MERLO and his co-conspirators then attempted to purchase $2 million in gold coins using the assets in the Account.  MERLO and his co-conspirators met several times over the course of months and communicated using prepaid or “burner” phones regarding the fraudulent scheme. 

*                *                *

MERLO, 55, of Secaucus, New Jersey, was convicted of one count of wire fraud and one count of conspiracy to commit wire fraud, each of which carries a maximum sentence of 20 years in prison; and one count of aggravated identity theft, which carries a mandatory sentence of two years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as the sentencing of the defendant will be determined by the judge.  Sentencing before Judge Kaplan is scheduled for June 10, 2019.   

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

This case is being handled by the Office’s General Crimes Unit.  Assistant U.S. Attorneys Cecilia Vogel, Sarah Mortazavi, Dina McLeod, and Alexandra Rothman are in charge of the prosecution.

Robert S. Khuzami, the Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced today that former Adidas director of global sports marketing for basketball, JAMES GATTO, a/k/a “Jim,” was sentenced to nine months in prison, former Adidas consultant MERL CODE was sentenced six months in prison, and sports business manager CHRISTIAN DAWKINS was sentenced to six months in prison, after having been found guilty in October 2018 by a federal jury of wire fraud and wire fraud conspiracy charges.  The defendants were sentenced in Manhattan federal court by U.S. District Judge Lewis A. Kaplan, who also presided over the jury trial.

Attorney for the United States Robert Khuzami said:  “The sentences imposed today only begin to reflect the magnitude of the harm these defendants caused through a scheme that not only defrauded multiple public universities but upended the lives of young student-athletes and corrupted a game cherished by so many.  Today’s sentences send a clear message to those who might be similarly tempted to corrupt collegiate athletics for their own personal gain that defrauding schools in connection with athletic scholarships is not just a rules violation but a crime, one that will result in a prison term.”

According to the allegations contained in the Complaint, Indictment, Superseding Indictment, evidence presented during the trial, and statements made in Manhattan federal court: 

Overview of the Scheme

GATTO, CODE, and DAWKINS, including with the assistance of Thomas Gassnola, a former Adidas consultant, and Munish Sood, a financial adviser, brokered and facilitated payments funded by Adidas to the families of high school and college-aged basketball players in connection with decisions by those players to commit to Adidas-sponsored schools and a promise that the players also would retain the services of DAWKINS and sign lucrative endorsement deals with Adidas upon turning professional.  The payments, which the defendants took great lengths to conceal from the victim-universities, served to defraud the relevant universities in several ways.  

First, because the illicit payments to the families of student-athletes rendered those student-athletes ineligible to participate in collegiate athletics, scheme participants conspired to conceal these payments from the universities, thereby causing them to provide or agree to provide athletic-based scholarships and financial aid under false and fraudulent pretenses.  Indeed, the defendants and their co-conspirators, who included the families of the student-athletes and, in certain instances, one or more corrupt coaches at the universities, knew that, for the scheme to succeed and the athletic scholarships to be awarded, the illicit payments had to be concealed from the universities, and that certifications would be submitted to the universities falsely representing that the student-athletes were eligible to compete in Division I athletics.

Second, the scheme participants further defrauded the universities by depriving the universities of significant and necessary information regarding the non-compliance with NCAA rules by the relevant student-athletes and their families, and, in some cases, by certain corrupt coaches involved in the scheme.  In doing so, the scheme participants interfered with the universities’ ability to control their assets and created a risk of tangible economic harm to the universities, including, among other things, decision-making about the distribution of their limited athletic scholarships; the possible disgorgement of certain profit-sharing by the NCAA; monetary fines; restrictions on athlete recruitment and the distribution of athletic scholarships; and the potential ineligibility of the universities’ basketball teams to compete in NCAA programs generally, and the ineligibility of certain student-athletes in particular.

The University of Louisville Scheme

Beginning in approximately May 2017, GATTO, CODE, DAWKINS, and others worked together to illicitly funnel approximately $100,000 from Adidas to the father of Brian Bowen, then a top-rated high school basketball player, in connection with Bowen’s commitment to play at the University of Louisville, a school whose athletic programs are sponsored by Adidas.  Because the payments to the family of Bowen were both in violation of NCAA rules and illegal, the defendants took steps to conceal them from the University, including funneling the money indirectly through an amateur team affiliated with CODE and a corporation controlled by DAWKINS.  The payments were all funded by Adidas pursuant to phony invoices approved by GATTO, and the first installment was delivered to Bowen’s father in cash in July 2017 in a parking lot in New Jersey.

The University of Kansas Scheme

Between 2016 and 2017, GATTO and Gassnola worked together to funnel approximately $90,000 from Adidas to the family of Billy Preston, then a high school basketball player, in connection with Preston’s commitment to play at the University of Kansas, a university whose athletic programs are sponsored by Adidas.  To conceal the payments from the University, GATTO routed the money to Billy Preston’s family indirectly, through an Adidas-sponsored amateur team affiliated with Gassnola, and pursuant to sham invoices approved by GATTO.

In addition, in the summer of 2017, GATTO and Gassnola agreed to funnel money to the legal guardian of Silvio De Sousa, then a high school basketball player, in connection with De Sousa’s commitment to play at the University of Kansas.  In one instance, GATTO and Gassnola were intercepted over a wiretap discussing a $20,000 payment to the legal guardian.

The North Carolina State University Scheme

In approximately November 2015, GATTO and Gassnola agreed to funnel approximately $40,000 from Adidas to the family of Dennis Smith Jr., then a high school basketball player, in order to stop Smith Jr. from de-committing from North Carolina State University, a university whose athletic programs are sponsored by Adidas.  Gassnola flew to North Carolina to personally deliver the money in cash to a basketball coach at North Carolina State University, who then routed the money to Smith Jr.’s family.  After Gassnola made the payment, GATTO reimbursed Gassnola via his Adidas-sponsored amateur team.

*          *          *

In addition to the prison sentences, Judge Kaplan ordered CODE, 45, of Greer, South Carolina, and DAWKINS, 26, of Atlanta, Georgia, to each pay restitution to the University of Louisville in the amount of $28,261.  The court reserved the decision on the restitution for GATTO, 48, of Wilsonville, Oregon, and set a conference for April 9, 2019, at 10 a.m.  Each of the three defendants was sentenced to two years of supervised release. 

Gassnola and Sood have previously pled guilty and are awaiting sentence. 

Mr. Khuzami thanked the FBI and the Special Agents of the U.S. Attorney’s Office of the Southern District of New York for their tireless efforts during the investigation and prosecution of this case.

The case was prosecuted by the Office’s Public Corruption Unit.  Assistant United States Attorneys Edward B. Diskant, Noah Solowiejczyk, Eli J. Mark, and Aline R. Flodr are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, 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”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced the unsealing of superseding federal indictments charging RICHARD DRAYTON, a/k/a “Rad,” FRANKIE REYES, a/k/a “Biscuit,” ALFREDO RODRIGUEZ, a/k/a “Fetti,” TEVIN MABLE, a/k/a “Tot,” and JORGE IRIZARRY, a/k/a “Gito,” with gang-related crimes, including the March 13, 2015, murder of Johnathan Martinez, 18, in the Bronx, New York.

U.S. Attorney Geoffrey Berman said:  “As alleged, the defendants were members of a violent gang who killed a young man from their neighborhood in a pointless, gang-related dispute.  We thank HSI and the NYPD for their outstanding work investigating this terrible murder.  We will continue our efforts with our law enforcement partners to prevent such senseless acts of violence.”

HSI Special Agent in Charge Angel M. Melendez said:  “As alleged, the individuals charged are members of the Crips gang who gunned down an 18-year-old man in the Bronx to bolster their street credibility.  For this alleged violent crime, if convicted, they could face life sentences that would put an end to their racketeering and murderous ways.  HSI remains committed to working alongside NYPD’s Bronx Violent Crime Squad.”

NYPD Commissioner James P. O’Neill said:  “The ability of investigators to bring about justice for this young man and provide a sense of closure to his loved ones is paramount.  The identification and arrest of these defendants was a team effort that would not have been possible without the close partnership that exists between the NYPD and our law-enforcement partners.  I thank and commend the NYPD investigators, the Southern District of New York, and Homeland Security Investigations for their relentless work in this case.”

According to the Indictment[1]: 

DRAYTON, REYES, RODRIGUEZ, MABLE, and IRIZARRY were members of the “Wild Card” set of the Crips gang.  The defendants sold drugs and used guns to further the aims of the Wild Cards.  On March 13, 2015, the defendants took part in the shooting murder of Johnathan Martinez in order to maintain and increase their reputation in the Wild Cards.

*                      *                     *

IRIZARRY, 25, of the Bronx, New York, was arrested on March 2, 2019, near Ocala, Florida.  He was presented in federal court in the Middle District of Florida earlier today, and will be transported to the Southern District of New York to face charges.  MABLE, 26, of the Bronx, New York, was arrested on February 28, 2019, near Kinston, North Carolina.  He was presented in federal court in the Eastern District of North Carolina, and will also be transported to the Southern District of New York to face charges.  DRAYTON, 43, of the Bronx, New York, was arrested in the Bronx on Friday, February 22, 2019, and presented in this District before United States Magistrate Judge Ona Wang the same day.  REYES, 24, and RODRIGUEZ, 27, both of the Bronx, New York, were already in federal custody on other charges.  This case is assigned to United States District Judge Loretta A. Preska.

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

Mr. Berman praised the outstanding investigative work of the NYPD’s Bronx Violent Crime Squad and HSI’s Violent Gang Unit.

The prosecution of this case is being handled by the Office’s Violent and Organize Crime Unit.  Assistant United States Attorneys Hagan Scotten, Gina Castellano, and Adam Hobson are in charge of the prosecution.

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

COUNT

DEFENDANT(S)

MAX. TERM OF IMPRISONMENT

Count One: Conspiracy to Commit Racketeering

(18 U.S.C. § 1962(d))

Richard Drayton

 

Frankie Reyes

 

Alfredo Rodriguez

 

Tevin Mable

 

Jorge Irizarry

 

Life Imprisonment

Count Two: Murder in Aid of Racketeering

(18 U.S.C. § 1959(a)(1))

 

Richard Drayton

 

Frankie Reyes

 

Alfredo Rodriguez

 

Tevin Mable

 

Jorge Irizarry

 

Mandatory Minimum Sentence of Death or Life Imprisonment

 

Count Three: Use of a Firearm to Commit Murder (18 U.S.C. § 924(j)(1))

 

Richard Drayton

 

Frankie Reyes

 

Alfredo Rodriguez

 

Tevin Mable

 

Jorge Irizarry

 

Death or Life Imprisonment; Mandatory Minimum Sentence of 5 Years

 

Count Four: Use and Discharge of Firearms in Furtherance of Racketeering Conspiracy (18 U.S.C. § 924(c)(1)(A)(iii))

 

Richard Drayton

 

Frankie Reyes

 

Alfredo Rodriguez

 

Jorge Irizarry

Life Imprisonment; Mandatory Minimum Sentence of 10 Years

 

Count Five: Conspiracy to Distribute Narcotics (21 U.S.C. §§ 846 and 841(b)(1)(A))

Richard Drayton

 

Frankie Reyes

 

Jorge Irizarry

 

Tevin Mable

 

Life Imprisonment; Mandatory Minimum Sentence of 10 Years

 

Count Six: Use and Discharge of Firearms in Furtherance of Narcotics Conspiracy (18 U.S.C. § 924(c)(1)(A)(iii))

Richard Drayton

 

Frankie Reyes

 

Jorge Irizarry

 

Tevin Mable

Life Imprisonment; Mandatory Minimum Sentence of 10 Years

 

 

 

---

[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, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), and Geraldine Hart, Commissioner of the Suffolk County Police Department, announced today the unsealing of an indictment charging 11 defendants with 15 counts of participating in the sex trafficking of, and related conduct victimizing, at least 10 young women.  Nine defendants were arrested today and will be presented this afternoon before the Honorable Ona T. Wang, United States Magistrate Judge.  Two additional defendants are in state custody and will be presented in federal court on a future date.

U.S. Attorney Geoffrey S. Berman said:  “The alleged conduct of these 11 defendants against women is as callous as it is alarming.  Today’s indictment alleges they operated a pay-for-sex business with their clients, while they threatened, intimidated, and coerced their female ‘employees’ to participate in commercial sex acts for money.  The unconscionable crime of sex trafficking is a societal problem that disproportionally preys upon our communities’ most vulnerable: women and children.  If you have knowledge of sex trafficking crimes, you should immediately call 212-384-5000.”

FBI Assistant Director William F. Sweeney Jr. said:  “There is a common belief that the victims of human sex trafficking aren’t truly victims.  However evidence in this investigation shows the suspects allegedly used whatever means necessary to control and abuse these victims just to make money.  The FBI New York Child Exploitation and Human Trafficking Task Force not only goes after the pimps and others involved in human trafficking, but we do all we can to help those girls who are being sold to start their lives again.”

Suffolk County Police Commissioner Geraldine Hart said:  “The takedown of this alleged sex trafficking ring in Suffolk County is crucial in stopping predators who target the vulnerable for financial gain as well as support the victims in getting the necessary assistance they deserve.  The success of this operation is why we work with our law enforcement partners and I commend the commitment of our department’s Human Trafficking Investigations Unit, NYPD, and the FBI, which led the investigation.” 

New York City Police Commissioner James P. O'Neil said: “Today’s charges further affirm the NYPD’s unwavering commitment to protecting the survivors of sex trafficking. This crime is among the most heinous in our society. Our job is to ensure that anyone who would seek to profit through the abuse and exploitation of another human being be brought to justice swiftly and successfully. To that end, I thank and commend the U.S. Attorney’s Office for the Southern District, the FBI, and the Suffolk County Police Department for their support in building this critical case. Together, we will continue to make the safest large city in the nation even safer.”

As alleged, defendants LORENZO RANDALL, JUSTIN RIVERA, DWAYNE ANTHONY CONLEY, RICARDA DIAMOND, and BRIAN SMITH conspired to commit sex trafficking through force, threats of force, fraud, or coercion.  In furtherance of the conspiracy, RANDALL allegedly punched, choked, and spit on certain of the victims.  The indictment further alleges that RIVERA physically assaulted and brandished a dangerous weapon at a second victim. Allegedly knowing that this second victim was addicted to heroin, RIVERA withheld heroin from her unless she engaged in commercial sex acts at his direction and for his profit.  Similarly, CONLEY is alleged to have physically assaulted a third victim, who was also a heroin addict, and provided her with heroin in exchange for her engagement in commercial sex acts on his behalf.

DIAMOND allegedly conspired with RANDALL to transport a victim to locations where she engaged in commercial sex acts caused by RANDALL’s force and threats of force.  And SMITH allegedly arranged for hotels rooms to be used by women, including the first victim, who were engaging in commercial sex acts on RANDALL’s behalf.

Defendants RANDALL, CARL ANDREWS, GERALDINE FAUSTIN, and FRANKLYN FRANCISCO are alleged to have been members of a second conspiracy to commit sex trafficking through force, threats of force, fraud, or coercion.  As alleged, FRANCISCO recruited a victim to engage in commercial sex acts on behalf of ANDREWS, knowing that the victim was addicted to controlled substances.  ANDREWS is alleged to have falsely represented to that victim that ANDREWS would compensate her financially for engaging in commercial sex acts on his behalf.  ANDREWS is also alleged to have withheld from that victim the controlled substances to which she was addicted unless she engaged in commercial sex acts at his direction and for his profit.  RANDALL allegedly reserved a hotel room for the purpose of the fourth victim engaging in a commercial sex act, and FAUSTIN allegedly transported the fourth victim to locations where she engaged in commercial sex acts.

In addition, RANDALL is charged with four separate counts of sex trafficking by force, threats of force, fraud, or coercion, in connection with the trafficking of three victims.  ANDREWS is also charged with one count of sex trafficking of a victim by force, threats of force, fraud, or coercion.

Defendants ANTHONY DARBY and KARI PARKER are charged with two counts of violating the Mann Act for knowingly transporting two victims to multiple states, including New York and Connecticut, with the intent that those victims engage in prostitution.  DIAMOND is also charged with a violation of the Mann Act for knowingly transporting a victim to multiple states, including New York and Connecticut, with the intent that the victim engage in prostitution.

Along with defendant MAGEN MOREAU, DARBY is further charged with conspiracy to violate the Travel Act.  Specifically, MOREAU and DARBY allegedly published advertisements on the Internet offering commercial sex acts in the Southern District of New York and elsewhere.

DARBY and PARKER are also charged with conspiracy to violate the Travel Act.  As alleged, DARBY and PARKER used an account held by PARKER with a classifieds website to publish advertisements on the Internet offering commercial sex acts in the Southern District of New York and elsewhere.

In addition to the six charges against him discussed previously, RANDALL is charged with two counts of conspiring to violate the Travel Act.  With respect to the first of those conspiracies, RANDALL allegedly used a telephone to direct a co-conspirator not named in the indictment to promote, manage, establish, carry on, and facilitate the promotion, management, establishment, and carrying on of prostitution.  Regarding the second, RANDALL allegedly instructed ANDREWS – who is also charged in the second Travel Act conspiracy – how to purchase and publish an advertisement for a commercial sex act on the Internet, which ANDREWS ultimately did.  Lastly, in the ninth charge filed against him in the indictment, RANDALL is charged with violating the Travel Act, with respect to illegal prostitution.

According to the indictment, at least 10 young women were victims of the defendants’ crimes.  The charged conduct occurred, as detailed in the indictment, between 2012 and 2018. 

*                *                *

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

Mr. Berman praised the outstanding investigative work of Special Agents from the U.S. Attorney’s Office for the Southern District of New York, detectives from the Suffolk County Police Department, and Special Agents from the FBI’s New York Child Exploitation and Human Trafficking Task Force. 

The prosecution of this case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Daniel H. Wolf and Benjamin Woodside Schrier are in charge of the prosecution.

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

 

 

COUNT

DEFENDANT(S)

AGE & PLACE OF RESIDENCE

MAX. TERM OF IMPRISONMENT

Count One: Conspiracy to Commit Sex Trafficking

(18 U.S.C. § 1594(c))

Lorenzo Randall

 

Justin Rivera

 

Dwayne Conley

 

Ricarda Diamond

 

Brian Smith

 

Age 29, Bay Shore, NY

 

Age 29, Bay Shore, NY

 

Age 50, Bay Shore, NY

 

Age 37, Mastick, NY

 

Age 30, Central Islip

 

Life

Count Two: Conspiracy to Commit sex Trafficking

(18 U.S.C. § 1594(c))

 

Lorenzo Randall

 

Carl Andrews

 

Geraldine Faustin

 

Franklyn Francisco

Age 29, Bay Shore, NY

 

Age 45, Bay Shore, NY

 

Age 30, West Babylon, NY

 

Age 38, Central Islip, NY

Life

 

Count Three: Sex Trafficking by Force, Threats of Force, Fraud, or Coercion (18 U.S.C. §§ 1591(a), (b)(1) and 2)

 

Lorenzo Randall

 

Age 29, Bay Shore, NY

 

Life; Mandatory Minimum Sentence of 15 Years

 

Count Four: Sex Trafficking by Force, Threats of Force, Fraud, or Coercion (18 U.S.C. §§ 1591(a), (b)(1) and 2)

 

Lorenzo Randall

Age 29, Bay Shore, NY

 

Life; Mandatory Minimum Sentence of 15 Years

 

Count Five: Sex Trafficking by Force, Threats of Force, Fraud, or Coercion (18 U.S.C. §§ 1591(a), (b)(1) and 2)

Lorenzo Randall

Age 29, Bay Shore, NY

 

Life; Mandatory Minimum Sentence of 15 Years

 

Count Six: Sex Trafficking by Force, Threats of Force, Fraud, or Coercion (18 U.S.C. §§ 1591(a), (b)(1) and 2)

Lorenzo Randall

Age 29, Bay Shore, NY

 

Life; Mandatory Minimum Sentence of 15 Years

 

Count Seven: Sex Trafficking by Force, Threats of Force, Fraud, or Coercion (18 U.S.C. §§ 1591(a), (b)(1) and 2)

Carl Andrews

Age 45, Bay Shore, NY

 

Life; Mandatory Minimum Sentence of 15 Years

 

Count Eight: Mann Act (18 U.S.C. §§ 2421(a) and 2)

Anthony Darby

 

Kari Parker

Age 26, Mastick, NY

 

Age 22, Mastick,  NY

10 Years

 

Count Nine: Mann Act (18 U.S.C. §§ 2421(a) and 2)

Anthony Darby

 

Kari Parker

Age 26, Mastick, NY

 

Age 22, Mastick,  NY

10 Years

 

 

Count Ten: Mann Act (18 U.S.C. §§ 2421(a) and 2)

Ricarda Diamond

Age 37, Mastick, NY

 

10 Years

 

Count Eleven: Conspiracy to Violate the Travel Act (18 U.S.C. § 371)

Anthony Darby

 

Magen Moreau

Age 26, Mastick, NY

 

Age 29, Bay Shore, NY

5 Years

 

Count Twelve: Conspiracy to Violate the Travel Act (18 U.S.C. § 371)

Anthony Darby

 

Kari Parker

Age 26, Mastick, NY

 

Age 22, Mastick,  NY

5 Years

 

Count Thirteen: Conspiracy to Violate the Travel Act (18 U.S.C. § 371)

Lorenzo Randall

Age 29, Bay Shore, NY

 

5 Years

 

Count Fourteen: Conspiracy to Violate the Travel Act (18 U.S.C. § 371)

Lorenzo Randall

 

Carl Andrews

Age 29, Bay Shore, NY

 

Age 45, Bay Shore, NY

5 Years

 

Count Fifteen: Travel Act (18 U.S.C. § 371)

Lorenzo Randall

 

Age 29, Bay Shore, NY

 

5 Years

 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Raymond Donovan, Special Agent in Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), James D. Robnett, Special Agent in Charge of the New York Office of the Internal Revenue Service, Criminal Investigation Division, (“IRS-CI”), Angel M. Melendez, Special Agent in Charge of the New York Office of Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), Keith M. Corlett, Acting Superintendent of the New York State Police (“NYSP”), and James P. O’Neill, Police Commissioner of the City of New York (“NYPD”), announced today that ADALBERTO VELAZQUEZ, a/k/a “Joe,” RAYMOND RESTO, a/k/a “Tone,” SAL CASTRO, a/k/a “Floss,” JOEL LOPEZ, a/k/a “Rompiendoe,” a/k/a “Paul,” a/k/a “Po,” WILLIS LLERAS, a/k/a “Willy,” REINALDO ROMAN, a/k/a “Papo,” JAIME GARCIA, a/k/a “Jimmy,” ANTONIO BURGOS, a/k/a “Anthony,” and MARILYN ADINO have been charged with participating in a conspiracy to distribute heroin, fentanyl, and cocaine.  The defendants arrested today are expected to be presented this afternoon before United States Magistrate Judge Ona T. Wang.  The case has been assigned to United States District Judge Ronnie Abrams.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, these defendants were a network that outwardly offered to fix cars but was really an organization that would supply a fix of heroin or cocaine.  Thanks to the work of the DEA and its Strike Force partners, we have delivered a body blow to these allegedly drug-peddling body shops.”

DEA Special Agent in Charge Raymond Donovan said:  “These arrests will have a significant impact on the heroin/fentanyl supply in the Bronx.  DEA’s goal is to keep the public safe from the dangers of drug abuse.  One way of doing that is to target local distribution organizations responsible for attracting new users, enabling addiction and contributing to overdoses in our city.  I applaud the Strike Force and U.S. Attorney’s Office, Southern District of New York, for their diligent work throughout this investigation.”

According to the allegations in the Indictment[1] and statements made in Court:

The defendants were members of a drug trafficking organization (the “DTO”) that packaged and sold narcotics out of multiple auto body shops and garages in the Bronx, New York.  From 2015 to February 2019, the DTO is estimated to have distributed hundreds of kilograms of cocaine and heroin.  Much of the heroin that the DTO distributed was mixed with fentanyl. 

*                      *                      *

VELAZQUEZ, 50, RESTO, 43, CASTRO, 39, LLERAS, 63, ROMAN, 55, GARCIA, 53, BURGOS, 46, and ADINO, 49, each of the Bronx, New York, and LOPEZ, 39, of New York, New York, are each charged with one count of conspiring to distribute cocaine, heroin, and fentanyl, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.  

Mr. Berman praised the outstanding investigative work of the DEA.  The arrest was the result of an investigation by the New York Strike Force, a crime-fighting unit comprising federal, state, and local law enforcement agencies supported by the Organized Crime Drug Enforcement Task Force (OCDETF) and the New York/New Jersey High Intensity Drug Trafficking Area (HIDTA).  

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

The prosecution is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Michael K. Krouse and Adam S. Hobson are in charge of the prosecution. 

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

 

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[1]   As the introductory phrase signifies, the entirety of the text of the Indictment, 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 BILLY RIBEIRO ANDERSON, a/k/a “Anderson Albuquerque,” a/k/a “AlfabetoVirtual,” was sentenced today to three months in prison for obtaining unauthorized access to and committing defacements of the websites for the Combating Terrorism Center at the United States Military Academy in West Point, New York (“West Point”), and the Office of the New York City Comptroller (the “NYC Comptroller”).  ANDERSON pled guilty on October 2, 2018, to two felony counts of computer fraud before U.S. District Judge Laura Taylor Swain, who also imposed today’s sentence.   

U.S. Attorney Geoffrey S. Berman said:  “Billy Anderson was a sophisticated hacker who compromised and defaced the websites of the New York City Comptroller, West Point, and more than 11,000 other military, government, and business websites around the world under his online pseudonym “AlfabetoVirtual.”  Anderson will now serve time in federal prison under his true name.  This case demonstrates that those who seek to commit cyber intrusions of government websites will be prosecuted to the fullest extent of the law.”  

According to the Indictment and other public court filings and proceedings:

Website defacements are acts of computer intrusion during which a hacker obtains unauthorized access to computers hosting Internet websites and then replaces the publicly available contents of the website with content generated by the hacker, thereby “defacing” the website.  Hackers frequently claim responsibility for defacements by listing their online pseudonyms as part of the defaced content.

From in or about 2015 through at least March 13, 2018, ANDERSON took responsibility for obtaining unauthorized access to, and committing more than 11,000 defacements of, various U.S. military, government, and business websites around the world under the online pseudonym “AlfabetoVirtual,” including websites for the NYC Comptroller and the Combating Terrorism Center at West Point.

On or about July 10, 2015, a website owned by the NYC Comptroller was defaced, and ANDERSON, using the online pseudonym “AlfabetoVirtual,” claimed responsibility for the intrusion and defacement.  The contents of the NYC Comptroller website were modified to display the text “Hacked by AlfabetoVirtual,” “#FREEPALESTINE” and “#FREEGAZA.”  The defacement was performed by exploiting security vulnerabilities associated with the version of a plugin being used on the website.   

On or about October 4, 2016, a website for the Combating Terrorism Center at West Point was defaced, and ANDERSON, using the online pseudonym “AlfabetoVirtual,” claimed responsibility for the intrusion and defacement.  The content of the Combating Terrorism Center website was modified to display the text “Hacked by AlfabetoVirtual.”  The defacement was performed by an unauthorized administrative account that exploited a known cross-site script vulnerability, thereby enabling ANDERSON to bypass access controls and target an internal Combating Terrorism Center website address.   

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In addition to the prison term, ANDERSON, 42, of Torrance, California, was sentenced to three years of supervised release, 200 hours of community service, and ordered to pay restitution to victims of his offense.

Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation.  Mr. Berman also thanked the Computer Crime Investigative Unit of the United States Army Criminal Investigation Command and the Brazilian Federal Police Cyber Crime Unit for their assistance with the investigation.  

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, United States Attorney for the Southern District of New York, announced that STIVEN SIRI-REYNOSO was sentenced today to life plus five years in prison for his role in the June 11, 2016, murder of Jessica White.  Ms. White, 28, was killed by a stray bullet while sitting next to her mother and watching her three young children play in the playground of the John Adams Houses in the Bronx, New York.  SIRI-REYNOSO gave the order for that shooting, which targeted a gang rival.  On July 30, 2018, SIRI-REYNOSO was convicted of conspiring to commit racketeering, conspiring to sell narcotics, murder in aid of racketeering, and murder through the use of a firearm after an eight-day trial before Chief U.S. District Judge Colleen McMahon.

U.S. Attorney Geoffrey S. Berman said:  “On June 11, 2016, Jessica White was murdered in a playground before her mother and her children, the victim of horrific and senseless gang violence.  Stiven Siri-Reynoso ordered that shooting and was responsible for Jessica’s death.  As a result, he will now spend the rest of his life in a federal prison.  We extend our deepest condolences to the members of Jessica’s family, who have experienced tragedy beyond words.  We thank our partners at the FBI and NYPD, who worked tirelessly to achieve this measure of justice for Jessica and her family.  And we affirm our continued efforts to rid our neighborhoods of intolerable gang violence.”

According to the allegations in the Indictment and the evidence at trial:

On June 11, 2016, Jessica White was struck and killed by a stray bullet while sitting on a bench next to her mother and watching her three children play on a playground at the John Adams Houses, where her mother lived.  SIRI-REYNOSO was a member of the “Dominicans Don’t Play” or “DDP” street gang.  The DDP gang was engaged in a dispute between with the rival Trinitarios street gang involving, among other things, SIRI-REYNOSO’s drug sales near the John Adams Houses. 

On the night of June 11, 2016, Trinitarios members tried to attack SIRI-REYNOSO.  In retaliation, SIRI-REYNOSO sent another individual to shoot at the Trinitarios.  SIRI-REYNOSO ensured the shooter had a gun and a mask, and arranged for other gang members to be waiting in a getaway car nearby.  As the shooter began firing, Jessica White got up and called out for her children.  She was struck by one of the bullets and killed.     

SIRI-REYNOSO also committed other crimes in connection with his membership in the DDPs, including drug selling and robbery.

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In addition to the prison term, SIRI-REYNOSO, 26, of the Bronx, was sentenced to five years of supervised release.

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

The case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Drew Skinner, Allison Nichols, and Frank Balsamello are in charge of the prosecution.

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Geoffrey S. Berman, United States Attorney for the Southern District of New York, announced that MICHAEL SIVA, a former stock broker, was sentenced today to eighteen months in prison for his involvement in an insider trading scheme based on material, nonpublic information misappropriated from an investment bank by Daniel Rivas, a former employee at the bank.  SIVA pled guilty on October 18, 2018, to one count of conspiracy to commit securities fraud and fraud in connection with a tender offer before U.S. District Judge Alison J. Nathan, who also imposed today’s sentence.

U.S. Attorney Geoffrey Berman said:  “Michael Siva corrupted his position as a stock broker to place trades in the accounts of his brokerage clients based on inside information misappropriated from an investment bank.  Siva committed insider trading to make himself look like a talented stock selector.  The illegal trading by Siva resulted in millions in illicit profits.  This Office is committed to identifying and prosecuting inside information-sharing networks that undermine our nation’s securities markets.”

According to the Indictment, other filings in Manhattan federal court, and statements made in court filings and proceedings:

In August 2017, SIVA, Roberto Rodriguez, Rodolfo Sablon, Jhonatan Zoquier, and Jeffrey Rogiers were arrested and charged in a 54-count Indictment for their involvement in three overlapping insider trading schemes, generating more than $5 million in illicit profits, all stemming from information misappropriated by Rivas.  Prior to the unsealing of the Indictment last year, Rivas and an additional participant, James Moodhe, pled guilty and both have been cooperating with the Government in this investigation.  Since the unsealing of the Indictment, all of the charged defendants have pled guilty. 

The Investment Bank and Rivas

From August 2013 through May 2017, Rivas was employed as a technology consultant in the Research and Capital Markets Technology Group of an investment bank (the “Investment Bank”).  In this role, Rivas had access to an internal, proprietary system maintained by the Investment Bank (the “Deal Tracking System”) containing material, nonpublic information (“Inside Information”) about potential and unannounced merger and acquisition transactions, including tender offers, involving the Investment Bank.  The Investment Bank’s written policies prohibited the unauthorized disclosure of confidential information, which included Inside Information.  Rivas had a duty, among other obligations, to maintain the confidentiality of all of the Investment Bank’s confidential information, including the Inside Information. 

Overview of Insider Trading Schemes

From August 2014 through April 2017, Rivas violated the duties of confidentiality he owed to the Investment Bank by serially misappropriating material, nonpublic information from the Investment Bank’s Deal Tracking System and passing that information along to friends so that they could utilize it to make profitable trades.  On more than 50 occasions between August 2014 and April 2017, Rivas provided Inside Information about contemplated but unannounced merger and acquisition transactions and tender offer transactions involving clients and prospective clients of the Investment Bank to friends who used that information to purchase and sell securities.  In total, the insider trading based on Inside Information misappropriated by Rivas resulted in illicit profits of more than $5 million through trading in more than two dozen securities. The Inside Information was passed through three tipping chains.   

The Rivas-Moodhe-Siva Tipping Chain

SIVA was a member of the first of three tipping chains outlined in the Indictment.  In this tipping chain, Rivas passed inside information to Moodhe, the father of the woman with whom Rivas was living and dating.  Moodhe then passed the inside information to SIVA, a broker and financial adviser at a global investment bank headquartered in Manhattan, New York.  Moodhe and SIVA had known each other for more than a decade and SIVA also became Moodhe’s broker. 

Between 2015 and 2017, Moodhe shared with SIVA the inside information he received from Rivas so that SIVA could execute profitable trades on behalf of his financial advisory clients and himself.  By at least early 2016, SIVA understood that the source of the stock tips provided by Moodhe was a corporate insider at an investment bank with whom Moodhe was friends.   

In order to keep their scheme from being exposed, including by SIVA’s employer, Moodhe and SIVA developed code phrases to use on the telephone so that Moodhe could surreptitiously provide SIVA with updated inside information.  To further hide their scheme, SIVA and Moodhe began going to various diners outside of New York City so that Moodhe could provide stock tips to SIVA in person.  During these meetings, Moodhe read from pieces of paper provided to him by Rivas, which contained detailed information about confidential impending deals, including ticker symbols, deal values and expected announcement dates.  In order to hide the fact that SIVA was placing trades in his client accounts based on illicit stock tips from Moodhe, SIVA also instructed Moodhe to mark his dirty trades “solicited” in his firm’s online trading platform, so that it would appear that SIVA had directed the trades as opposed to the suggestion coming from Moodhe.  On occasion, SIVA also instructed Moodhe to wait to trade on a tip from Rivas until SIVA could first trade in the security on behalf of his financial advisory clients, thereby making it look like SIVA had originated the idea. 

In total, between 2015 and 2017 SIVA and Moodhe used Inside Information Rivas provided to trade ahead of the public announcements of more than two dozen transactions, including numerous tender offers, allowing SIVA and Moodhe to generate illicit profits in excess of $3 million.  SIVA also earned thousands of dollars in commissions on the illegal trades entered on behalf of his clients.

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In addition to the prison term, SIVA, 57, of Morristown, New Jersey, was sentenced to 2 years of supervised release and ordered to forfeit $35,000.

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

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant United States Attorneys Andrea M. Griswold and Samson Enzer 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 that STANISLAV VITALIYEVICH LISOV, a/k/a “Black,” a/k/a “Blackf” (“LISOV”), pled guilty today to conspiring to deploy and use a type of malicious software known as NeverQuest to infect the computers of unwitting victims, steal their login information for online banking accounts, and use that information to steal money out of the victims’ accounts.  NeverQuest has been responsible for millions of dollars’ worth of attempts by hackers to steal money out of victims’ bank accounts.  LISOV pled guilty before United States District Judge Valerie E. Caproni.

U.S. Attorney Geoffrey S. Berman said:  “As he admitted today, Stanislav Vitaliyevich Lisov used malware to infect victims’ computers, obtain their login credentials for online banking accounts, and steal money out of their accounts.  This type of cybercrime extends across borders, poses a malicious threat to personal privacy, and causes widespread financial harm.  For his audacious crime, this Russian hacker now faces justice in an American court.”

FBI Assistant Director William F. Sweeney Jr. said:  “'In addition to creating and maintaining a botnet infected with NeverQuest malware, Stanislav Lisov, a Russian national, gathered personally identifiable information of NeverQuest victims and discussed illegally trafficking that information.  As today's plea should demonstrate, the FBI and our partners will continue to bring these actors to justice, regardless of where they may hide.”

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

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

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

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

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

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LISOV, 33, a citizen of Russia, pled guilty to one count of conspiracy to commit computer hacking, which carries a maximum sentence of five years in prison.  The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  LISOV’s sentencing is scheduled for June 27, 2019 at 11:00 a.m. before Judge Caproni.

Mr. Berman praised the outstanding investigative efforts of the FBI.  Mr. Berman also thanked the DOJ Office of International Affairs for its assistance in this case.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced the conviction yesterday of ERNESTO LOPEZ, a New York-licensed medical doctor who wrote thousands of medically unnecessary prescriptions for oxycodone and fentanyl over an approximately three-year period, following an eight-day trial before the Honorable Denise L. Cote.  LOPEZ was remanded into custody following his conviction.  Audra Baker, a medical assistant who worked in one of LOPEZ’s medical offices, and who was tried with LOPEZ, was acquitted of all charges against her.

U.S. Attorney Geoffrey S. Berman stated:  “As the jury unanimously recognized, Ernesto Lopez betrayed his patients and the public, peddling dangerous opioids to addicts and drug dealers for his own personal financial profit.  His flagrant drug dealing is all the more shocking coming as it did from a licensed medical professional who has taken an oath to do no harm to his patients.”

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

From approximately 2015 until his arrest in November 2017, LOPEZ operated medical clinics in New York, New York, Jackson Heights, New York, and Franklin Square, New York, where LOPEZ, who purported to specialize in pain management, wrote thousands of prescriptions for oxycodone and fentanyl in exchange for cash payments.  In total, LOPEZ wrote prescriptions for nearly one million oxycodone pills, with a street value of approximately $20 million.  LOPEZ typically charged $200 to $300 in cash for patient visits, despite the fact that nearly 80 percent of his patients had health insurance.  During many patient visits, LOPEZ neither performed a meaningful physical examination of patients, nor attempted to diagnose them.  Instead, a typical such patient visit consisted primarily of recording a patient’s vital signs and sometimes involved the brief movement of a patient’s limbs.  LOPEZ then prescribed large quantities of oxycodone, most frequently 120 30-milligram tablets, and fentanyl patches. 

In addition to prescribing oxycodone and fentanyl patches to patients without a  legitimate medical need, LOPEZ also prescribed to many patients a fentanyl-based spray, called Subsys, which was intended to treat breakthrough cancer pain, for which those patients – many of whom did not have cancer – had no legitimate medical need.  In connection with these prescriptions, LOPEZ submitted an application to INSYS Therapeutics to join a so-called “speaker’s program,” where doctors received payments in exchange for prescribing the fentanyl-based spray to patients.

LOPEZ also provided loose oxycodone pills, without a prescription, directly to at least one patient on multiple occasions, instructed an employee to fill a prescription for oxycodone pills and then to give the pills to LOPEZ, and instructed the same employee to crush an oxycodone pill and put the resulting powder into a urine sample, so as to cheat a drug test.

At the time of LOPEZ’s arrest, law enforcement agents recovered, among other things, hundreds of fentanyl sprays and patches from his residence, along with approximately $729,000 in cash in boxes.

After the verdict was announced, Judge Cote said:  “Lives were destroyed and damaged.  People have suffered enormously because of what the doctor chose to do for those years.”

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LOPEZ, 75, of Flushing, New York, was convicted of one count of conspiring to distribute oxycodone and fentanyl outside the usual course of professional practice and without legitimate medical need, and eight counts of distributing oxycodone outside the usual course of professional practice and without legitimate medical need.  Each count 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 the sentencing of the defendant will be determined by Judge Cote on June 11, 2019.   

Mr. Berman praised the outstanding investigative work of the Drug Enforcement Administration’s New York Tactical Diversion Squad.  Mr. Berman also thanked the New York City Police Department, the Department of Health and Human Services, the New York City Department of Investigation, the New York State Office of the Medicaid Inspector General, the New York City Human Resources Administration, the Nassau County Police Department and Asset Forfeiture Unit, the Nassau County District Attorney’s Office, the New York County District Attorney’s Office, and the New York State Department of Financial Services for their work on the investigation.

Parts of this case were conducted under the auspices of the Organized Crime Drug Enforcement Task Force (OCDETF), a partnership between federal, state, and local law enforcement agencies.  The principal mission of the OCDETF program is to identify, disrupt, and dismantle the most serious drug trafficking, weapons trafficking, and money laundering organizations and those primarily responsible for the nation’s illegal drug supply.

This case is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Nicholas Folly, Elizabeth Hanft, and Michael McGinnis are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that TYRONE WOOLASTON was found guilty yesterday of conspiring to distribute more than five kilograms of cocaine, and using a firearm in furtherance of cocaine trafficking, in connection with a multi-year scheme to smuggle cocaine into the United States through Newark International Airport.  A unanimous jury convicted WOOLASTON after a two-week trial before United States District Judge Robert W. Sweet. 

U.S. Attorney Geoffrey S. Berman said:  “As proven at trial, Tyrone Woolaston abused his position as an airline employee with secure access to restricted areas of Newark International Airport.  In reality, Woolaston was also a drug dealer, who smuggled large cocaine shipments through the airport and into the United States. To protect his drug dealing operation, Woolaston possessed an arsenal of weapons, including a .40 caliber Glock pistol equipped with a laser sight.  Thankfully, Woolaston now stands convicted and faces at least 15 years in prison.”   

According to court documents and the evidence at trial:

WOOLASTON was a lead baggage handler for a commercial airline at Newark Liberty International Airport (the “Airport”). From in or about 2013 through February 2018, WOOLASTON conspired to smuggle shipments of cocaine into the United States. WOOLASTON abused his secure access to the restricted areas of the airport to remove suitcases containing shipments of multiple kilograms of cocaine from international flights and smuggle them through the Airport for distribution in the New York City area.

In 2017 and 2018, agents from the New Jersey Office of the Department of Homeland Security, Homeland Security Investigations (“HSI”) conducted an undercover operation to investigate cocaine smuggling at the Airport. As part of the investigation, a confidential source met with WOOLASTON to arrange a cocaine shipment, and WOOLASTON agreed to bring a suitcase containing five kilograms of cocaine through the Airport. On February 10, 2018, HSI agents placed a suitcase containing approximately five kilograms of sham cocaine on an international flight from the Cayman Islands to the Airport. WOOLASTON was working on the tarmac when the flight arrived at the Airport, and took possession of the suitcase and carried the sham cocaine shipment through the Airport, evading customs screening. The following day, WOOLASTON carried a .40 caliber Glock pistol, equipped with a laser sight, to deliver the sham cocaine to the confidential source.

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WOOLASTON, 35, of Orange, New Jersey, was convicted of one count of conspiracy to distribute at least five kilograms of cocaine, which carries a maximum sentence of life in prison and a mandatory minimum sentence of ten years in prison, and one count of using a firearm in furtherance of narcotics trafficking, which carries a maximum sentence of life in prison and a mandatory minimum sentence of five years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. 

Mr. Berman praised the investigative work of the Newark Field Office of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations. The U.S. Customs and Border Protection and Port Authority Police Department assisted in the investigation.

This case is being handled by the Office’s Narcotics Unit.  Assistant U.S. Attorneys Thane Rehn and Alison Moe are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeny Jr., Assistant Director-in-Charge, New York Division, Federal Bureau of Investigation (“FBI”), 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 Andriana Vamvakas, New York Regional Director, U.S. Department of Labor Office of Labor-Management Standards (“DOL-OLMS”), announced that JOHN ULRICH, who previously served as the vice president of International Brotherhood of Teamsters Local 812 (the “Union”) and as a trustee of the Union’s employee health benefit plan (the “Plan”), was charged in an indictment unsealed today with soliciting tens of thousands of dollars in bribe payments from an executive with the Plan’s Third Party Administrator (the “TPA-1”), in exchange for using his influence to ensure the Union’s continued retention of TPA-1 as its Plan administrator.  ULRICH was arrested this morning, and will be presented this afternoon in Manhattan federal court before United States Magistrate Judge Ona T. Wang.  ULRICH’s case is assigned to United States District Judge Analisa Torres.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, John Ulrich abused his position as the vice president of a labor union and trustee for its health plan by selling his influence to the Union’s health care administrator.  As part of this alleged scheme, Ulrich betrayed the trust of the Union members who elected him in order to line his pockets with bribe money.  This Office is committed to prosecuting those who abuse their positions of trust for their own financial benefit.”

FBI Assistant Director William F. Sweeny Jr. said:  “Instead of advocating for the best possible benefit programs for the union members he represented, Ulrich allegedly entered into a quid-pro-quo arrangement that served to advance his needs and the needs of the Plan’s third-party administrator.  In his official role, he was charged with protecting the interests of his fellow union employees, but as we allege today, this trustee couldn’t be trusted.”

DOL-OIG New York Region Special Agent-in-Charge Michael C. Mikulka said:  “An important mission of the Office of Inspector General is to investigate allegations relating to corruption within labor unions and their affiliated employee benefit plans.  We will continue to work with our law enforcement partners to investigate these types of allegations.” 

DOL-EBSA New York Regional Director Darren Cohen said:  “Trustees of union sponsored health benefit plans have a fiduciary obligation to perform their duties solely in the interests of union members and plan participants.  In this case, the plan trustee allegedly abdicated this responsibility in order to serve his own interest.  EBSA will pursue plan trustees and other officials when they engage in criminal schemes to defraud private sector benefit plans.  EBSA is very pleased to have had the opportunity to work collaboratively with our law enforcement partners in the Labor Department’s Office of the Inspector General and Office of Labor-Management, the Federal Bureau of Investigation, and the U.S. Attorney’s Office to protect plan participants.”

DOL-OLMS New York Regional Director Andriana Vamvakas said:  “Investigating corruption and ensuring financial integrity in labor organizations is a major priority for the U.S. Department of Labor’s Office of Labor-Management Standards.  We will continue to work with our investigative partners to ensure that those who are affiliated with labor organizations adhere to the highest standards of conduct to protect the assets of union members and do not misuse their positions of trust for their own personal gain.”

According to the allegations in the Indictment[1]:

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

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

In or about 2014, ULRICH demanded increased bribe payments from Executive-1.  In part, ULRICH told Executive-1 that these increased bribe payments were needed for another trustee of the Plan, and Executive-1 began making such increased payments.  On or about September 19, 2015, ULRICH again solicited additional bribe payments for this trustee.

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

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ULRICH, 48, of Newburgh, New York, is charged in four counts with conspiracy to solicit and receive bribe payments to influence the operation of an employee benefit plan, which carries a maximum penalty of five years in prison; soliciting and receiving bribe payments to influence the operation of an employee benefit plan, which carries a maximum penalty of three years in prison; conspiracy to commit honest services health care fraud, which carries a maximum penalty of 10 years in prison; and honest services health care fraud, which carries a maximum penalty of 10 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. 

Mr. Berman praised the FBI, DOL-OIG, DOL-EBSA, and DOL-OLMS for their outstanding investigative work in this case.

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

 

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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 ALVARADO DOMINGUEZ, a/k/a “Jochi,” 32, was sentenced today to 279 months in prison for his participation in the “Hot Boys” robbery crew, including an October 27, 2006, robbery that resulted in the murder of Kelly Diaz.  DOMINGUEZ pled guilty on August 13, 2018, before Magistrate Judge Stewart D. Aaron to participating in a racketeering conspiracy and conspiring to distribute marijuana.  His plea was accepted today by U.S. District Judge Valerie E. Caproni, who also imposed sentence.

U.S. Attorney Geoffrey Berman said:  “Alvarado Dominguez and the members of his crew conducted terrifying, armed home invasions in upper Manhattan and the Bronx.  During one of those robberies, Kelly Diaz was murdered.  Today’s sentence protects the public from Dominguez for a long time to come.”

According to the Indictment, other filings in Manhattan federal court, and evidence presented in court in connection with the sentencing:

From at least 2006 through 2017, ALVARADO DOMINGUEZ, a/k/a “Jochi,” and other members and associates of a racketeering enterprise known as the “Hot Boys,” committed murder, assault, robbery and burglary, used firearms, and distributed controlled substances, including cocaine, heroin, marijuana, and prescription opiates. 

On October 27, 2006, DOMINGUEZ and other members of the Hot Boys robbed Diaz and his wife in their home in Washington Heights.  In the course of that robbery, Diaz was shot and killed.

*                *                *

Mr. Berman praised the outstanding work of the FBI and the NYPD’s Grand Larceny Division in this investigation. 

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Hagan Scotten and David W. Denton Jr. are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, 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”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced the unsealing today of an Indictment charging SYDNEY SCALES, a/k/a “Sid,” a/k/a “Moe Black,” with conspiracy to commit murder for hire, as well as narcotics and firearms offenses.  A second defendant on the Indictment, ERNEST HORGE, a/k/a “Ern,” a/k/a “Mac,” is charged with narcotics and firearms offenses.

SCALES was arrested this morning in the Middle District of Pennsylvania and will be presented today in Manhattan federal court before U.S. Magistrate Judge Ona T. Wang.  Horge was arrested in the Northern District of New York, and he will be presented there today.  The case has been assigned to the Honorable Laura Taylor Swain. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged in the indictment, Scales and Horge were responsible for significant narcotics – including fentanyl – and firearms offenses.  Scales allegedly then conspired to kill a rival drug dealer.  This alleged drug dealing and violence are intolerable, and thanks to the outstanding work of HSI and the NYPD, Scales and Horge now face significant federal charges.”

HSI Special Agent-in-Charge Angel M. Melendez said:  “This man is alleged to have contracted the killing of a rival drug dealer to further his position in the dark world of narcotics distribution and gun wielding.  There is no place in our communities for an individual pushing drugs onto our streets and using guns for intimidation.  Law enforcement has strengthened partnerships across to board to rid our neighborhoods of those who choose to plague our city with violence and drugs.”

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

From in or about 2016 through in or about 2019, both SCALES and HORGE participated in a narcotics conspiracy involved in the distribution of crack cocaine, cocaine, heroin, and fentanyl, in the Bronx and elsewhere.  SCALES and HORGE also used, carried, and possessed firearms, which were brandished and discharged, in connection with the narcotics conspiracy.  In addition, in or about June 2017, SCALES conspired to commit murder for hire, agreeing to compensate other individuals in return for their locating and killing at least one rival drug dealer.  SCALES also used, carried, and possessed firearms in connection with the conspiracy to commit murder for hire.          

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

Mr. Berman praised the outstanding investigative work of HSI and the NYPD’s Bronx Violent Crimes Squad.

The case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Frank Balsamello, Sarah Krissoff, and Gina Castellano are in charge of the prosecution.

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

19-048                                                                                                                                                                                                             

 

COUNT

CHARGE

DEFENDANTS

MAX. PENALTIES

1

Narcotics

Conspiracy

 

 

21 U.S.C. § 846

SYDNEY SCALES

ERNEST HORGE

 

Life in prison

 

Mandatory minimum of 10 years in prison

 

2

Using, Carrying, and Possession of Firearms, which were Brandished and Discharged, in Connection with a Drug Trafficking Crime

 

18 U.S.C. §§ 924(c)(1)(A)(iii), 2

SYDNEY SCALES

ERNEST HORGE

Life in prison

 

Mandatory minimum of 10 years in prison

3

Conspiracy to Commit Murder For Hire

 

18 U.S.C. § 1958(a)

SYDNEY SCALES

10 years in prison

4

Using, Carrying, and Possession of Firearms, in Connection with the Conspiracy to Commit Murder for Hire

 

18 U.S.C. §§ 924(c)(1)(A)(i), 2

SYDNEY SCALES

Life in prison

 

Mandatory minimum of 5 years in prison

###

 

---

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Mark Tasky, Special Agent in Charge of the New York Regional Office of the Department of Homeland Security Office of Inspector General (“DHS-OIG”), and Margaret Garnett, Commissioner, New York City Department of Investigation (“DOI”), announced today that the United States filed a civil fraud lawsuit today against the CITY OF NEW YORK (the “City”) alleging that the NEW YORK CITY DEPARTMENT OF TRANSPORTATION (“NYCDOT”) fraudulently obtained millions of dollars from the Federal Emergency Management Agency (“FEMA”) by falsely claiming that numerous NYCDOT vehicles were damaged during Superstorm Sandy (“Sandy”).  The United States also submitted a proposed settlement of the lawsuit to the U.S. District Court for review and approval.  Under the proposed settlement, the City agreed to pay and revert to the United States a total of $5,303,624 and admitted to conduct alleged in the Government’s complaint, including seeking reimbursement from FEMA for vehicles that were not damaged by Sandy.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “FEMA serves a critical role in providing emergency relief to those who are tragically struck by disaster.  When people lie to FEMA about the cause of property damage in order to reap a windfall, it compromises FEMA’s ability to provide financial assistance to legitimate disaster victims in desperate need.  This Office will take decisive enforcement action to protect FEMA and its vital programs from fraud, waste, and abuse.”

DHS-OIG Special Agent in Charge Mark Tasky said:  “Taking advantage of Federal funds intended for disaster relief misappropriates taxpayer dollars, reduces funds available to true victims, and erodes public confidence in relief efforts. Through DHS OIG’s criminal and civil investigative oversight function of DHS programs, and working closely with our partners in the New York City’s Department of Investigation and the United States Attorney’s Office for the Southern District of New York, we ensured that over $5.3 million in disaster relief funds were repaid to the United States, and ultimately the U.S. taxpayer. With so many New York residents impacted by Superstorm Sandy, it is critical to ensure every dollar of appropriated relief funds are properly used and accounted for.”

DOI Commissioner Margaret Garnett said:  “Today’s settlement is the successful outcome of a joint investigation with our federal partners, which uncovered falsified submissions by the City to the federal government that allowed the City to wrongly obtain millions of dollars in federal emergency funds.  Our investigation found that a lack of vigilant management and inadequate training of City personnel at the City Department of Transportation led to this wrongdoing in connection with a federal public assistance program.  As New York City’s independent watchdog, DOI is grateful for our effective partnership with the United States Attorney’s Office for the Southern District of New York and the New York Regional Office of the United States Department of Homeland Security Office of the Inspector General on this investigation.”

According to the Government’s Complaint, the City participated in FEMA’s Public Assistance program, which allows municipalities to obtain indemnification funds from FEMA to repair or replace property damaged by natural disasters, such as Sandy.  As part of the program, the City was required to certify that the property damage was incurred as a direct result of the disaster.  The City was also required to provide training to employees on program rules and requirements, including the importance of ensuring that costs for which indemnification is sought are directly attributable to a disaster.

Following Sandy, the NYCDOT created a list of vehicles within the agency’s fleet that had been damaged by the storm and submitted it to FEMA for indemnification pursuant to the Public Assistance program.  The NYCDOT personnel responsible for generating the list of damaged vehicles, to whom the City provided no training on the Public Assistance program, made no effort to inspect the vehicles or otherwise determine whether any reported damage was attributable to Sandy.  In fact, a number of the vehicles included on this list were inoperable long before Sandy.

In 2014, based on this faulty list, the City submitted a request for indemnification to FEMA seeking to recover the full cost of replacing 132 NYCDOT vehicles.  The City submitted a certification to FEMA as part of the program and a request for indemnification that falsely attested that all costs were incurred as a direct result of Sandy.  Many of the vehicles for which the City sought full replacement costs had been nonoperational or not in use prior to the storm.  As a result of these false certifications, FEMA paid the City millions of dollars to which it was not entitled.

As part of the proposed settlement, the City will pay the United States a total of $5,303,624.  Specifically, the City will make a cash payment of $4,126,227.34 and relinquish rights to an additional $1,177,396.66 that FEMA had previously approved for disbursement.  During this Office’s investigation, the City withdrew another $3,196,376 in indemnity requests, acknowledging that the costs were ineligible for reimbursement.

In connection with the proposed settlement, the City also admitted conduct alleged in the Complaint, including:

• The Deputy Commissioner from NYCDOT who signed the certification lacked personal knowledge about the vehicles sufficient to make a certification about how and when they were damaged and did not personally undertake or direct others to undertake any investigation of the vehicles prior to signing the certification.
   
• The list of vehicles for which the City was seeking reimbursement included a number of vehicles that were not damaged as a direct result of Sandy to a state beyond repair.  A number of the vehicles that the City included had not been operational prior to Sandy.
   
• Prior to making the submission and certification to FEMA, neither the City nor NYCDOT undertook a sufficient review to ascertain whether all of the vehicles listed had been operational and in use prior to Sandy; or whether the amounts presented to FEMA for reimbursement accurately represented the losses the City incurred from Sandy.
   
• In June 2014, a NYCDOT employee notified the Deputy Commissioner that certain of the vehicles for which the City had sought reimbursement from FEMA were not eligible. Yet, it was not until after it became aware of this Office’s investigation that the City took steps to notify FEMA.

The proposed settlement must be approved by the District Court.

Mr. Berman praised the outstanding investigative work of DHS-OIG and DOI.  This case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorney Jessica Jean Hu is in charge of the case.

Geoffrey S. Berman, United States Attorney for the Southern District of New York, announced that ROBERTO RODRIGUEZ was sentenced today one year and one day in prison for his involvement in an insider trading scheme based on material, nonpublic information misappropriated from an investment bank by Daniel Rivas, a former employee at the bank.  RODRIGUEZ pled guilty on September 7, 2018, to one count of conspiracy to commit securities fraud and fraud in connection with a tender offer before Magistrate Judge Henry B. Pitman.  His plea was thereafter accepted by U.S. District Judge Alison J. Nathan, who also imposed today’s sentence.

U.S. Attorney Geoffrey Berman said:  “Roberto Rodriguez reaped millions of dollars trading on confidential corporate information stolen by a longtime friend at an investment bank.  Our Office is committed to identifying and prosecuting insider trading networks that undermine our nation’s securities markets.”

According to the Indictment, other filings in Manhattan federal court, and statements made in court filings and proceedings:

In August 2017, RODRIGUEZ, Michael Siva, Rodolfo Sablon, Jhonatan Zoquier, and Jeffrey Rogiers were arrested and charged in a 54-count Indictment for their involvement in three overlapping insider trading schemes, generating more than $5 million in illicit profits, all stemming from information misappropriated by Rivas.  Prior to the unsealing of the Indictment last year, Rivas and an additional participant, James Moodhe, pled guilty and both have been cooperating with the Government in this investigation.  Since the unsealing of the Indictment, all of the charged defendants have pled guilty.  

The Investment Bank and Rivas

From August 2013 through May 2017, Rivas was employed as a technology consultant in the Research and Capital Markets Technology Group of an investment bank (the “Investment Bank”).  In this role, Rivas had access to an internal, proprietary system maintained by the Investment Bank (the “Deal Tracking System”) containing material, nonpublic information (“Inside Information”) about potential and unannounced merger and acquisition transactions, including tender offers, involving the Investment Bank.  The Investment Bank’s written policies prohibited the unauthorized disclosure of confidential information, which included Inside Information.  Rivas had a duty, among other obligations, to maintain the confidentiality of all of the Investment Bank’s confidential information, including the Inside Information.  

Overview of Insider Trading Schemes 

From August 2014 through April 2017, Rivas violated the duties of confidentiality he owed to the Investment Bank by serially misappropriating material, nonpublic information from the Investment Bank’s Deal Tracking System and passing that information along to friends so that they could utilize it to make profitable trades.  On more than 50 occasions between August 2014 and April 2017, Rivas provided Inside Information about contemplated but unannounced merger and acquisition transactions and tender offer transactions involving clients and prospective clients of the Investment Bank to friends who used that information to purchase and sell securities.  In total, the insider trading based on Inside Information misappropriated by Rivas resulted in illicit profits of more than $5 million through trading in more than two dozen securities. The Inside Information was passed through three tipping chains.    

The Rodriguez Tipping Chain

RODRIGUEZ was a member of the second of three tipping chains outlined in the Indictment.  In this tipping chain, Rivas passed inside information to RODRIGUEZ, a childhood friend of Rivas with whom Rodriguez had maintained a close relationship as adults, and Sablon. 

Since 2014, RODRIGUEZ lived and worked in Miami, Florida, with Sablon, with whom he was also friends.  In 2015, RODRIGUEZ introduced Rivas to Sablon.  Rivas and Sablon then communicated with each other directly and developed an independent relationship. 

In the fall of 2015, Rivas disclosed to RODRIGUEZ that Rivas had access to Inside Information by virtue of his position as a corporate insider at the Investment Bank.  At RODRIGUEZ’s request, Rivas also agreed to share Inside Information with Sablon.  While Rivas had originally agreed to divulge Inside Information to RODRIGUEZ because of their history of friendship, Rivas also learned that RODRIGUEZ and Sablon intended to start an investment fund with the proceeds of the insider trading scheme.  Rivas understood that in exchange for the Inside Information Rivas was providing to RODRIGUEZ and Sablon, Rivas would be invited to join the investment fund as a partner once it was successfully launched.

At first, Rivas communicated with RODRIGUEZ and Sablon primarily via phone and text message.  As the scheme progressed, however, RODRIGUEZ and Sablon increased their efforts to hide their illegal activity.  On several occasions, Rivas met personally with RODRIGUEZ and/or Sablon in Miami in order to provide them with Inside Information.  Rivas also provided RODRIGUEZ and Sablon with Inside Information using an encrypted mobile messaging application, which allows users to set a timer to messages to irretrievably “self-destruct.”

In order to maximize the illicit profits that could be earned using Rivas’s Inside Information, RODRIGUEZ and Sablon, in consultation with Rivas, initiated an aggressive strategy of purchasing short-term, out-of-the money call options.  In total, from 2015 through April 2017, RODRIGUEZ and Sablon earned more than $2 million in illicit profits through insider trading in more than two dozen securities based on Inside Information divulged by Rivas.

*                *                *

In addition to the prison term, RODRIGUEZ, 34, of Miami, Florida, was sentenced to two years of supervised release.

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

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant United States Attorneys Andrea M. Griswold and Samson Enzer are in charge of the prosecution.   

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JOHN FARCHIONE, a former manager at a public utility company, was sentenced last Friday to seven years in prison for fraud and identity theft offenses in connection with his theft of more than $6 million from his employer and its customers.  FARCHIONE pled guilty on August 6, 2018, following the commencement of trial, before United States District Judge J. Paul Oetken, who also imposed the sentence.

U.S. Attorney Geoffrey S. Berman said:  “John Farchione exploited his position to steal millions of dollars from his employer, a public utility company relied upon by millions of New Yorkers.  His conduct was corrosive to the integrity of the utility, and today’s sentence sends an important message to any other person in a position of financial trust that fraud and abuse of those positions will lead to severe consequences.”

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

From at least 2005 through November 2016, FARCHIONE engaged in fraudulent schemes resulting in the theft of more than $6 million from his public utility employer (the “Public Utility”) and its customers.

FARCHIONE, who was employed by the Public Utility as a manager in Customer Operations, devised and implemented the schemes using his knowledge of the Public Utility’s billing and payment processes.  FARCHIONE carried out the scheme with a co-conspirator who also has pled guilty in connection with the scheme.  FARCHIONE’s co-conspirator operated a business that aggregated payments from customers of the Public Utility for the purpose of passing such payments on to the Public Utility.  FARCHIONE conspired to submit fraudulent checks and payments to the Public Utility, in amounts owed by customers who provided cash believing the payments would be submitted to the Public Utility on their behalf. 

In fact, however, FARCHIONE and his co-conspirator kept the customer cash for themselves and submitted fraudulent checks to the Public Utility that purported to convey aggregated payments by multiple customers of the Public Utility.  FARCHIONE, by virtue of his position as an employee of the Public Utility, was able to conceal the nature of the fraudulent checks, and thereby perpetuate the fraudulent scheme, through his knowledge of and access to the Public Utility’s account payment system. 

*                *                *

In addition to the prison term, Judge Oetken ordered FARCHONE, 66, to pay restitution in the amount of $7,223,641.46.  FARCHIONE was also sentenced to three years of supervised release.

FARCHIONE pled guilty on August 6, 2018, to one count each of honest services fraud, mail fraud, conspiracy to commit honest services and mail fraud, and aggravated identity theft.

Mr. Berman praised the outstanding work of the Federal Bureau of Investigation in this investigation.

This case is being handled by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys Alex Rossmiller and Sidhardha Kamaraju are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that GARY TURNER pled guilty this afternoon in Manhattan federal court to the murder of Samuel Ozuna, 17, outside the George Washington Carver Houses in New York, New York on April 24, 2018.  United States District Judge Jesse M. Furman presided over the defendant’s guilty plea today.

U.S. Attorney Geoffrey S. Berman said:  “Last April, Gary Turner murdered 17-year-old Samuel Ozuna.  Today, Turner admitted in open court to committing that terrible act of violence.  We will continue our daily work with the NYPD to keep the streets safe and vigorously to investigate and prosecute those who bring murder and mayhem to our communities.”

As alleged in the Indictment and statements made in open court:

On April 24, 2018, GARY TURNER shot and killed Samuel Ozuna in the vicinity of 60 East 104th Street in Manhattan.  TURNER committed this killing in order to maintain his position in a violent gang that was operating in the residential neighborhood surrounding the George Washington Carver Houses. 

*                *                *

TURNER, 24, of Manhattan, pled guilty to using a firearm to commit murder in aid of racketeering, which carries a maximum sentence of death or life in prison, and a mandatory minimum term of five years in prison.  The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

Mr. Berman praised the outstanding investigative work of the New York City Police Department.

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Lauren Schorr and Jacob Warren are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that ALEXANDRU BURDUCEA, 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 (“Insys”).  BURDUCEA pled guilty before U.S. Magistrate Judge Kevin Nathaniel Fox.  The case is assigned to U.S. District Judge Kimba M. Wood.

U.S. Attorney Geoffrey S. Berman said:  “As he admitted today, Alexandru Burducea, a prominent Manhattan pain management doctor, accepted tens of thousands of dollars in speaker fees from Insys in exchange for prescribing large volumes of Insys’s powerful fentanyl-based spray, Subsys.  The corrupting influence of money has no place in medicine, especially when it comes to prescribing fentanyl and other dangerous opioids.  Like many other doctors around the country, Dr. Burducea is now being held to account for his participation in this corrupt kickback scheme.”           

According to the allegations contained in the Indictment against BURDUCEA 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 U.S. Food and Drug Administration (“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 BURDUCEA.

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 medical 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 medical practitioners who were not present.

BURDUCEA’s Participation in the Scheme

BURDUCEA, a doctor certified in pain management and anesthesiology, was an Assistant Professor of Anesthesiology at a large Manhattan hospital.  BURDUCEA also practiced at an anesthesiology and pain management office associated with the hospital.  From in or about September 2014 until in or about June 2015, BURDUCEA received approximately $68,400 in Speaker Program fees from Insys in exchange for prescribing large volumes of Subsys.  In addition, Insys hired BURDUCEA’s then-girlfriend, now wife, to work as BURDUCEA’s sales representative, and the company paid her large commissions based on the volume of Subsys prescribed by her assigned doctors, including BURDUCEA. 

BURDUCEA, who had never prescribed Subsys before in or about September 2014, became approximately the 14th-highest prescriber of Subsys nationally in the second quarter of 2015, accounting for total net sales of the drug of approximately $621,345 in that quarter.

*                *                *

BURDUCEA, 42, of Little Neck, 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.  BURDUCEA is scheduled to be sentenced by Judge Wood on May 22, 2019, at 11:00 a.m.

Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation and thanked the U.S. Department of Health and Human Services Office of Inspector General for its assistance 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, announced today that Manhattan art gallery owner MARY BOONE was sentenced to 30 months in prison for filing false tax returns as part of a multi-year tax fraud scheme that cost the U.S. Treasury over $3 million.  BOONE previously pled guilty to two counts of filing false tax returns in 2011 before U.S. District Judge Alvin K. Hellerstein, who imposed today’s sentence.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As Manhattan art gallery owner Mary Boone has admitted, her personal tax returns were more a work of impressionism than realism.  Seemingly in order from afar, the picture Boone painted of her profits, losses, and expenses was, upon closer inspection, a palette of lies and misrepresentations mixed together to avoid paying over $3 million in taxes.  Today, Boone was sentenced to 30 months in prison for failing to pay her fair share in taxes.”

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

BOONE, the owner of Mary Boone Gallery (the “Gallery”) in Manhattan, engaged in a multi-year scheme to evade paying millions of dollars in federal income taxes for the calendar years 2009 through 2011.  During each of these years, BOONE regularly provided false records to her accountant and thereby caused the accountant to prepare false tax returns for BOONE and the Gallery. 

BOONE’s tax fraud scheme had two principal components.  First, BOONE converted the Gallery’s funds to her own personal use and then falsely claimed these personal expenses as business deductions.  In 2011, BOONE used business funds to pay approximately $1.28 million in personal expenses, including $793,003 to remodel BOONE’s Manhattan apartment; $120,856 for rent and expenses for a second Manhattan apartment; and approximately $300,000 in personal credit card charges.  To evade paying federal income taxes on this personal income, BOONE fraudulently characterized these expenses as tax-deductible business expenses on the handwritten check registers that BOONE provided to her accountant.  For example, BOONE falsely characterized a $500,000 payment to a contractor for remodeling BOONE’s apartment as a “commission.”  In addition, BOONE withdrew over $560,000 in cash from the Gallery’s accounts between 2009 and 2011.  BOONE either falsely reported the withdrawals as business payments to a printing company or failed to report them at all.

Second, BOONE artificially inflated the Gallery’s stated expenses and, to a lesser degree, the Gallery’s stated income, in order to fraudulently generate business losses when, in reality, the Gallery was generating profits each year.  In furtherance of this aspect of the tax fraud scheme, BOONE engaged in complex financial machinations and further falsification of the check registers that BOONE provided to her accountant.  For example, in 2011, BOONE transferred approximately $9.5 million from one business bank account to another, and falsely characterized these transfers as tax-deductible business expenses, such as commissions to artists, on the check registers that Boone provided to the accountant.

In all, BOONE caused the Internal Revenue Service (“IRS”) to incur losses of over $3 million, not including penalties and interest.

*                *                *

In addition to the prison term, Judge Hellerstein ordered BOONE to serve one year of supervised release, including 180 hours of community service.  Boone previously paid court-ordered restitution to the IRS in the amount of $3,097,160, which represents the additional tax due and owing as a result of BOONE’s filing of false individual and corporate income tax returns for calendar years 2009, 2010, and 2011.

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 ASHRAF HASAN-HAFEZ and ILYA KOGAN were sentenced yesterday to 45 and 50 months, respectively, in prison for their participation in a scheme to defraud the Medicare and Medicaid programs.  HASAN-HAFEZ, the owner of a physical therapy practice in Brooklyn, and KOGAN, the owner of an acupuncture company in Brooklyn, received approximately $1.3 million from Medicare and the New York State Medicaid Program after falsely submitting bills for services that were not provided as billed, or which were rendered by unlicensed and unsupervised individuals.  In a separate scheme, KOGAN also obtained nearly $300,000 from no-fault insurance companies based on billing by fraudulently incorporated acupuncture companies.  HASAN-HAFEZ and KOGAN were sentenced yesterday by United States District Judge Robert W. Sweet. 

According to the Indictment filed in Manhattan federal court, as well as previous court filings and statements made in public court proceedings:

Between at least January 2010 and August 2013, HASAN-HAFEZ was the owner of a physical therapy practice which operated out of a basement on East 18th Street in Brooklyn, New York.  HASAN-HAFEZ employed individuals who provided physical therapy services to patients, and was involved in the clinic’s management and billing.  KOGAN was the owner of an acupuncture company which operated its practice out of the same location on East 18th Street.

HASAN-HAFEZ and KOGAN committed fraud against Medicare and Medicaid by pressuring employees to add services to the bills that were submitted to these entities so that Medicare and Medicaid were billed for physical therapy services that were never in fact provided; billed for reimbursable physical therapy services even though only unreimbursable acupuncture had been provided; and billed for physical therapy services provided by unlicensed practitioners.    When the employees resisted KOGAN’s directions to create such fraudulent billing, HASAN-HAFEZ directed the employees to follow KOGAN’s instructions.  HASAN-HAFEZ had leverage over these employees because he sponsored their employment in the United States and they were therefore dependent on him for continued employment—and legal status—in the United States. 

In total, Medicare and Medicaid suffered actual losses of $1,297,000 as a result of this fraudulent scheme. 

In addition, KOGAN participated in a separate scheme to defraud no-fault insurance companies.  No-fault insurance provides benefits to individuals injured in motor vehicle accidents under certain conditions.  Between approximately March 2014 and June 2016, KOGAN controlled two acupuncture businesses that had been set up, at his request, under the name of another acupuncturist (“Individual-1”).  KOGAN coached Individual-1 how to lie under oath about KOGAN’s involvement in the businesses when Individual-1 was questioned by representatives of a no-fault insurer.  KOGAN had previously entered into settlement agreements with two of the largest no-fault insurance providers to resolve certain claims against him.  Pursuant to one of the settlement agreements, KOGAN agreed not to submit any future billing—under his name, or under the name of any entity in which he had direct or indirect ownership or control—without giving advance notice to the insurer. 

A total of $293,851 was paid to two no-fault insurers for services performed by Individual-1’s companies.  Had the insurers known the truth—that the acupuncture clinics were in fact controlled by KOGAN despite being registered in Individual-1’s name—they would not have paid the claims due to the fraudulent incorporation of the companies. 

*                *                *

ASHRAF HASAN-HAFEZ, 47, of Brooklyn, New York, pled guilty to health care fraud and conspiracy to commit health care fraud on March 16, 2018.  ILYA KOGAN, 44, of Watchung, New Jersey, pled guilty to health care fraud and conspiracy to commit health care fraud on March 16, 2018, and pled guilty to conspiracy to commit mail fraud on June 25, 2018.  In addition to the prison terms, Judge Sweet ordered HASAN-HAFEZ and KOGAN to forfeit $1,297,000 and pay restitution of $1,297,000 to Medicare and Medicaid.  KOGAN was also ordered to forfeit $293,851 and pay restitution of $293,851 to victims of the no-fault insurance fraud scheme. 

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

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Noah Solowiejczyk, Catherine Ghosh, and Jessica Greenwood are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that BRENT BORLAND, the owner and principal of a New York-based investment fund known as Belize Infrastructure Fund I LLC (“Belize Fund”), pled guilty to perpetrating a $22 million investment fraud scheme against dozens of Belize Fund investors.   BORLAND pled guilty today before U.S. District Judge Katherine Polk Failla to conspiring to commit, and the commission of, securities fraud and wire fraud. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Brent Borland solicited funds from investors for a project to build a new airport in Belize.  In doing so, Borland promised a high rate of return and assured investors that their funds were secured by real property.  Not only was he not truthful about the collateral for their investments, Borland used a substantial portion of investors’ funds to support his own lavish lifestyle.  Today, Brent Borland admitted to investor fraud to the tune of $22 million, and faces substantial time in federal prison.”

According to the Complaint and Indictment:

From 2014 through March 2018, BORLAND and others solicited and received approximately $21.9 million through Belize Fund from approximately 40 investors based upon representations that BORLAND would use the investors’ money to construct an airport in Belize.  BORLAND promised investors high rates of return on their investments, which he represented were temporary “bridge financing.”  BORLAND also represented to investors that their investments would be fully secured by real property in Belize that was unencumbered by any liens or obligations.

In fact, however, BORLAND misappropriated millions of dollars of investors’ funds and used those funds for his own personal benefit.  BORLAND diverted at least approximately 30 percent of the approximately $21.9 million invested by victims to himself to pay for a variety of personal expenses, including his mortgage payments, credit card bills, luxury automobiles, a beach club membership, and private school tuition for his children.  In contrast to BORLAND’s representations that investors would receive high rates of return within a specified time frame, all known investors in the scheme lost money.  And while BORLAND represented that the investments would be secured by real property, the property purportedly serving as collateral was improperly pledged to multiple investors and, in some cases, did not even exist. 

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BORLAND, 48, pled guilty to one count of conspiracy to commit securities fraud and wire fraud, which carries a maximum potential sentence of five years in prison; one count of securities fraud, which carries a maximum potential sentence of 20 years in prison; and one count of wire fraud, which carries a maximum potential sentence of 20 years in prison.  The maximum potential penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.  BORLAND is scheduled to be sentenced before Judge Failla on June 21, 2019.

Mr. Berman praised the investigative work of the U.S. Postal Inspection Service and thanked the Securities and Exchange Commission. 

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

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

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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”), Troy Miller, Director, Field Operations, New York, U.S. Customs and Border Protection (“CBP”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced a multinational operation involving 10 arrests in the United States and three other countries, and the unsealing of Indictments and filing of a related Complaint charging MARTINS APSKALNS, PAVELS BERNCS, JANIS BERNS, RAITIS GRIGORJEVS, SERGEJS LOGINS, DIANA MAKSIMOVIC, AGRIS PETROVS, IGORS PIRINS, VALTERS VOLKSONS, and VLADISLAV ZAPOLSKIJ with conspiracy to commit wire and bank fraud and conspiracy to commit money laundering. PAVELS BERNCS was arrested in Helsinki, Finland, and VLADISLAV ZAPOLSKIJ was arrested in Vilnius, Lithuania, and both are pending extradition to the United States; MARTINS APSKALNS and IGORS PIRINS were arrested in Kuldiga, Latvia, extradited to the United States, and arraigned before U.S. Magistrate Judge Debra Freeman on December 21, 2018; DIANA MAKSIMOVIC was arrested in Vilnius, Lithuania, and SERGEJS LOGINS was arrested in Riga, Latvia, and both were extradited to the United States and arraigned before U.S. District Judge Jesse M. Furman on February 4, 2019; and JANIS BERNS, RAITIS GRIGORJEVS, AGRIS PETROVS, and VALTERS VOLKSONS were arrested in Queens, New York, and presented before Magistrate Judge Ona T. Wang on December 3, 2018.  APSKALNS, BERNCS, LOGINS, MAKSIMOVIC, PIRINS, and ZAPOLSKIJ are charged by Indictment, and BERNS, GRIGORJEVS, PETROVS, and VOLKSONS are charged by Complaint.  The case has been assigned to United States District Judge Jesse M. Furman.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, the defendants used an elaborate network of fictitious classic car dealers and collectors to take their victims for a ride financially.  Thinking they were remitting money to purchase rare automobiles, victims were instead sending large sums to bogus auto transport companies that were really just vehicles from which the defendants allegedly vacuumed up the proceeds of their fraudulent scheme.  Thanks to our law enforcement partners here in New York and in Latvia, Lithuania, and Finland, the defendants’ once-lucrative joyride is over.”

FBI Assistant Director William F. Sweeney Jr. said:  “Victims of this fraud not only believed they were getting what they paid for, they were often stuck paying for the classic automobiles they never received.  The FBI New York Eurasian Organized Crime Task Force would never have been able to bring these criminals to justice without the help of our task force partners, but also the work and partnership with our international partners in Latvia, Lithuania and Finland.  We cannot stress enough how important it is for these suspects to understand the FBI has the ability to bring them back to the United States to face justice and punishment for their crimes.”

CBP New York Director of Field Operations Troy Miller said:  “CBP, working in partnership with U.S. Attorney’s office, FBI, and the New York Police Department, demonstrated vigilance and exceptional skill in targeting and detecting this scheme, directly leading to the apprehension and prosecution of the alleged conspirators.”

NYPD Commissioner James P. O’Neill said:  “In this increasingly connected world, it has never been more important for the NYPD and our law enforcement partners, in America and abroad, to work in concert toward our shared public-safety goals. It is due to that close cooperation that – after more than two years and across multiple continents – this investigation into international wire fraud and money laundering has successfully resulted in arrests. I commend and thank the attorneys from the Southern District for bringing this case forward, and all the FBI, CBP, and NYPD investigators for their dedication. Together, we will continue to be relentless in fighting crime that impacts the people we serve wherever, and however, it occurs.”

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

From at least January 2016 through December 2018, the defendants participated in a fraudulent scheme that most commonly operated as follows: first, co-conspirators impersonated automotive dealers and collectors and claimed to be selling classic cars on various well-known internet auction and trading websites.  Victims responding to the ads were in fact corresponding with a fraud scheme participant.  After the victims and co-conspirators came to terms on a sale price, including down payment and shipping costs, victims were next directed to purported automotive transportation companies and were told that these companies would accept payment and transport the cars.  These companies were in fact shell corporations established by the conspiracy to help perpetrate the fraud, whose corporate bank accounts were established and controlled by the defendants and co-conspirators, awaiting wired funds from the fraud’s victims.  After victims had wired payment, the defendants and co-conspirators went to the banks to drain the victim’s funds, often starting the same day payment had been transmitted, withdrawing from different bank branches in numerous withdrawals on the same day, and withdrawing in denominations that were varied and often kept to an amount that they believed would prevent the financial institutions from recording and reporting the fraud.  The defendants and other co-conspirators then sent the fraud proceeds outside the United States to Eastern European countries, from where the defendants and many of their co-conspirators originated.  Some of the defendants maintained managerial roles, recruiting co-conspirators to participate and providing directions and victim information to scheme participants once the co-conspirators were inside the United States.  Victims never received the goods they believed they had purchased, and many were unable to recover their money or were left paying loans for cars that were never truly for sale. 

Each of the defendants is charged with one count of conspiracy to commit wire fraud and bank fraud, which carries a maximum sentence of 30 years in prison, and one count of conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.  The charges contained in the Indictments and the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

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The investigation was conducted in close cooperation with the International Cooperation Department and the Criminal Investigation Department of the Central Criminal Police Department, State Police of Latvia; Prosecutor’s General Office of Latvia, International Cooperation Division; Police Department of Lithuania, Vilnius County Police Headquarters, Crimes Against Property Board; Lithuanian Criminal Police Bureau, International Liaison Board; Prosecutor General’s Office of the Republic of Lithuania; Vilnius Regional Prosecution Office; and the National Bureau of Investigation of Finland.  The Department of Justice Criminal Division’s Office of International Affairs also provided significant assistance. 

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

The prosecution is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Jeffrey Coffman, Matthew Hellman, Emily Johnson, Daniel Nessim, and Thane Rehn are in charge of the prosecution.

 

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[1] As the introductory phrase signifies, the entirety of the texts of the Indictments and the Complaint, and the descriptions of the Indictments and 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, Anthony A. Scarpino, Jr., the Westchester County District Attorney, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), Joseph F. Schaller, Commissioner of the New Rochelle Police Department, and James J. Heavey, Town of Greenwich Chief of Police, announced today the arrest of JAVIER ENRIQUE DA SILVA ROJAS (the “defendant” or “Da Silva”), who was charged by complaint with the kidnapping of Valerie Reyes (the “Victim”) in New Rochelle, New York, and unlawfully transporting her to Greenwich, Connecticut.  The defendant was arrested in Flushing, Queens, on February 11, 2019, and was presented in White Plains federal court before the U.S. Magistrate Judge Lisa Margaret Smith today. 

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Javier Da Silva is charged with committing a gruesome kidnapping that resulted in the death of a young woman.  Thanks to the excellent work of the FBI and its local law enforcement partners, Da Silva will need to answer for his alleged actions in court.”  

District Attorney Anthony A. Scarpino, Jr. said:  “From the start of this investigation into the death of Valerie Reyes, the Westchester County District Attorney’s Office has worked closely with Greenwich and New Rochelle Police Departments and the Connecticut State’s Attorney.  The Assistant District Attorney and investigators assigned to the case worked tirelessly in an effort to bring swift justice for the victim of this horrendous crime and her family here in Westchester.  We will continue to work with our law enforcement partners, including the FBI and the U.S. Attorney for the Southern District, to ensure the strength of the case.”

FBI Assistant Director William F. Sweeney Jr. said:  “Together with our partners from the Greenwich and New Rochelle Police Departments, we were able to swiftly identify Javier Da Silva, an alleged murderer, and place him behind bars.  But while today’s arrest is certainly a welcome conclusion, it in no way alleviates the pain and suffering Valerie’s family will continue to feel for years to come.  The reality of their situation is utterly unimaginable, as is the crime with which Da Silva is charged.”

New Rochelle Deputy Police Chief Robert Gazzola said:  “The arrest of Javier Da Silva is a result of the outstanding work and cooperation between members of the New Rochelle Police Department, the Greenwich Police Department, and the F.B.I. Safe Streets Task Force.  This was a complicated case, and the efforts of the members who worked tirelessly on it should be applauded.   I hope that this arrest will bring some degree of closure to the family of Valerie Reyes.” 

Town of Greenwich Chief of Police James J. Heavey said:  “From the moment Valerie was found in Greenwich, detectives from New Rochelle and Greenwich have worked tirelessly pursuing multiple investigative leads.  We are pleased that this investigation and subsequent prosecution may bring justice for Valerie and some level of peace to her family.  The New Rochelle and Greenwich communities can be proud of the collaborative work of their detectives and how they brought this investigation to a successful conclusion.”

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

On or about January 30, 2019, the Victim was reported missing to the New Rochelle Police Department by her mother, father, and boyfriend.  A few days later, on or about February 5, 2019, her body was recovered in a suitcase alongside a public road in the Town of Greenwich, Connecticut.

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DA SILVA, 24, of Flushing, Queens, is charged with one count of kidnapping resulting in death, which carries a sentence of death or life in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Berman praised the outstanding work of the FBI Westchester County Safe Streets Task Force, the FBI New Haven Division, the New Rochelle Police Department, the Greenwich Police Department, the Westchester County District Attorney’s Office, the Westchester County Department of Public Safety, and the Westchester County Real Time Crime Center.

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Mathew Andrews and Sam Adelsberg 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 today that MURRAY HUBERFELD was sentenced to 30 months in prison for his role in a scheme to submit false paperwork to Platinum Partners (“Platinum”), a hedge fund founded by HUBERFELD, in order to facilitate a bribe to Norman Seabrook, the former president of the nation’s largest municipal correction officers union.  HUBERFELD previously pled guilty to conspiring to commit wire fraud and thereby causing Platinum to fund a $60,000 bribe payment to Seabrook, which HUBERFELD intentionally concealed by falsely documenting the payment as one for courtside tickets to New York Knicks basketball games.  As a result of the bribe, Seabrook caused the investment of millions of dollars of union funds into Platinum. Today’s sentence was imposed by U.S. District Judge Alvin K. Hellerstein.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Not content with being a successful businessman, Murray Huberfeld sought to grow his fund through fraud and deception, playing a critical role in a pernicious kickback scheme.  His conduct was not only corrupt and criminal, but led to the loss of millions of dollars of union retirement benefits.  The sentence imposed today reflects the magnitude of his crimes and untold pain his conduct caused to others.”

According to the Superseding Information, Superseding Indictment, Indictment, and Complaint filed in this case, other public filings, statements made during the plea proceeding, and evidence and testimony presented at trial proceedings in the fall of 2017 and the summer of 2018:

HUBERFELD was a founder of Platinum, a hedge fund that he had founded and continued to control unofficially even after his formal affiliation with the fund had ceased.  In late 2013, HUBERFELD and Jona Rechnitz, an acquaintance and real estate businessman, sought to attract public and institutional investors to the fund.  In late 2013, Rechnitz told HUBERFELD that a contact of his – Norman Seabrook president of the Correction Officers’ Benevolent Association (“COBA” or the “Union”) – would likely invest COBA money in Platinum if HUBERFELD were willing to pay Seabrook money.  Over the next few months, Seabrook caused COBA to invest approximately $20 million of its funds into Platinum, including $15 million from a retirement benefits program funded by the City of New York that invests money for correction officers’ retirements.

In or around December 2014, arrangements were made to pay Seabrook for the millions of dollars the Union had invested over the course of that year.  Rechnitz paid Seabrook $60,000 in cash, delivered to Seabrook in a men’s luxury handbag.  HUBERFELD and Rechnitz arranged for Platinum’s management company to receive a fraudulent invoice for $60,000 – generated by Rechnitz – that, on its face, billed Platinum for seven pairs of courtside tickets to New York Knick games given to Platinum by Rechnitz, who owned Knicks season tickets.  In truth, and as HUBERFELD knew, the reason given to Platinum was false, and no Knicks tickets had changed hands.  The real purpose of the payment was to reimburse Rechnitz, who had paid Seabrook for his efforts in securing COBA’s investments.  Three days later, Platinum issued Rechnitz a $60,000 check.  Over the next few months, Rechnitz, HUBERFELD, and Jeremy Reichberg, another co-conspirator, continued to work together to lobby Seabrook for more money.  However, after a lawsuit filed by a former COBA board member referred to the Platinum investments, and the U.S. Attorney’s Office grand jury investigation resulted in subpoenas to Platinum and COBA in May 2015, no further investments were made.  Ultimately, Platinum collapsed, and COBA lost $19 million of its investment.

Seabrook was convicted of honest services fraud and conspiracy on August 18, 2018, after a 10-day trial in Manhattan federal court.  On February 8, 2019, Judge Hellerstein sentenced Seabrook to 58 months in prison and ordered him to pay restitution in the amount of $19 million.

On January 2, 2019, Reichberg was found guilty of honest services fraud, conspiracy, and obstruction of justice in connection with a separate scheme in which he and Rechnitz provided gifts and benefits to a number of high-level officers of the New York City Police Department (“NYPD”) in exchange for official police action for themselves and their associates.  He is due to be sentenced by U.S. District Judge Gregory H. Woods on April 4, 2019.

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In addition to the prison term, HUBERFELD, 58, of Lawrence, New York, was sentenced to three years of supervised release, and ordered to pay restitution in the amount of $19 million.

Mr. Berman praised the investigative work of the Federal Bureau of Investigation and the NYPD Internal Affairs Division.

This case is being handled by the Office’s Public Corruption Unit.  Assistant United States Attorneys Martin S. Bell, Russell Capone, and Lara Pomerantz are in charge of the prosecution.

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 Jonathan D. Larsen, the Acting Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced that MUFTAU ADAMU, a/k/a “Muftau Adams,” a/k/a “Muftau Iddrissu,” pled guilty today to one count of conspiracy to commit wire fraud in connection with a fraud scheme based in the Republic of Ghana (“Ghana”) involving the theft of over $10 million through business email compromises and romance scams that targeted the elderly from at least in or about 2014 through in or about 2018.  ADAMU is the fifth defendant to plead guilty in the case.  Four other defendants – TOUREY AHMED RUFAI, a/k/a “Joe Thompson,” a/k/a “Joe Terry,” a/k/a “Rufai A Tourey,” a/k/a “Ahmed Rufai Tourey,” PRINCE NANA AGGREY, ABDUL RASHID MASOUD, and MUBARAK BATURI, a/k/a “Eben Karsah,” were arrested in 2018 and also pled guilty earlier this year.  RUFAI, AGGREY, and BATURI pled guilty on January 9, January 28, and February 8, 2019, respectively, to one count of conspiracy to commit wire fraud.  MASOUD pled guilty on January 18, 2019, to one count of receiving stolen property.  ADAMU pled guilty before U.S. Magistrate Judge Kevin Nathaniel Fox.  The case is assigned to U.S. District Judge Denise L. Cote. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “These five defendants admitted to participating in a conspiracy that involved stealing millions of dollars from U.S. businesses and individuals across the United States and laundering that money to their co-conspirators in Ghana through a network of bank accounts in the Bronx, many of which were opened using fake names and businesses.  The conspiracy’s commission of fraud through business email compromises and the targeting of elderly victims through romance scams is particularly egregious.  These defendants now await sentencing for their crimes.”     

FBI Assistant Director William F. Sweeney Jr. said:  “There’s often a misconception that financial schemes, such as those detailed in this case, are easy to spot.  This is especially true for companies with a high level of awareness about business email compromises, and those individuals who are caught off guard by a scammer willing to capitalize on their trust and compassion.  This fraud alone involved the alleged theft of more than $10 million, proving there’s often a way around the general safeguards put in place by businesses and individuals alike.  Today’s announcement is a good reminder for all to stay alert and remember, if something doesn’t feel right, chances are it’s the wrong thing to do.”

IRS-CI Acting Special Agent in Charge Jonathan D. Larsen said:  “Every defendant in today’s announcement shares one trait in common – greed. This desire for money drove them to prey upon the vulnerable in our society. Thanks to the financial expertise and diligence of IRS-CI special agents, who worked side-by-side with our law enforcement partners to uncover these schemes, these criminals are off the street and will now face the consequences of their actions.”

According to allegations in the Complaints and the Indictment filed in the case:

Between 2014 and 2018, ADAMU, RUFAI, AGGREY, MASOUD, and BATURI were members of a criminal enterprise (the “Enterprise”) based in Ghana that committed a series of business email compromises and romance scams against individuals and businesses located across the United States, including in the Southern District of New York. 

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

The Enterprise conducted the romance scams by using electronic messages sent via email, text messaging, or online dating websites that deluded the victims, many of whom were vulnerable men and women over the age of 60 who lived alone, into believing the victims were in romantic relationships, when in fact the correspondents were members of the Enterprise using fake identities.  Once members of the Enterprise had gained the trust of the victims using the fake identity, they used false pretenses, such as a shipment of gold or receiving a portion of an investment, to cause the victims to wire money to bank accounts the victims believed were controlled by their romantic interests, when in fact the bank accounts were controlled by members of the Enterprise.  At times, the members of the Enterprise also used false pretenses to cause the victims to receive funds into the victims’ bank accounts, which, unbeknownst to the victims, were fraud proceeds, and to transfer those funds to accounts under the control of members of the Enterprise.  The members of the Enterprise, posing as the romantic interests of the victims, also introduced the victims to other individuals purporting to be, for example, consultants or lawyers, who then used false pretenses to cause the victims to wire money to bank accounts controlled by members of the Enterprise. 

ADAMU, RUFAI, AGGREY, MASOUD, BATURI, and their co-conspirators received or otherwise directed the receipt of over $10 million in fraud proceeds from victims of the Enterprise in bank accounts that they controlled in the Bronx, New York.  Some of these bank accounts were opened using fake names, stolen identities, or shell companies in order to avoid detection and hide the true identities of the members of the Enterprise controlling those accounts.  Once the defendants received the fraud proceeds in bank accounts under their control, the defendants withdrew, transported, and laundered those fraud proceeds to other members of the Enterprise, including those located in Ghana.     

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ADAMU, 30, RUFAI, 33, AGGREY, 43, and BATURI, 29, all of the Bronx, New York, pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison.  MASOUD, 36, of the Bronx, New York, pled guilty to one count of conspiracy to receive stolen money, which carries a maximum sentence of five years. 

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

ADAMU is scheduled to be sentenced on June 7, 2019, at 10:30 a.m.  RUFAI is scheduled to be sentenced on April 12, 2019, at 11:00 a.m.  MASOUD is scheduled to be sentenced on April 19, 2019, at 11:00 a.m.  BATURI and AGGREY are scheduled to be sentenced on May 10, 2019, at 10:30 a.m. and 2:00 p.m., respectively.  Each of the defendants will be sentenced by Judge Cote.

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

Mr. Berman praised the outstanding investigative work of the FBI and IRS-CI.  Mr. Berman also thanked U.S. Customs and Border Protection, Ghana’s Economic and Organised Crime Office, and the FBI Legal Attaché in Accra, Ghana, for their helpful assistance with the investigation.

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