Southern District of New York

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 Division of the Federal Bureau of Investigation (“FBI”), and Eric M. Thorson, Inspector General for the Department of Treasury, announced today the filing of a criminal complaint charging NATALIE MAYFLOWER SOURS EDWARDS, a/k/a “Natalie Sours,” a/k/a “Natalie May Edwards,” a/k/a “May Edwards,” who is a Senior Advisor at the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”), with unlawfully disclosing Suspicious Activity Reports (“SARs”) and conspiracy to do the same.  EDWARDS was arrested yesterday and will be presented this afternoon in the United States District Court for the Eastern District of Virginia.

U.S. Attorney Geoffrey S. Berman said:  “Natalie Mayflower Sours Edwards, a senior-level FinCEN employee, allegedly betrayed her position of trust by repeatedly disclosing highly sensitive information contained in Suspicious Activity Reports (SARs) to an individual not authorized to receive them.  SARs, which are filed confidentially by banks and other financial institutions to alert law enforcement to potentially illegal transactions, are not public documents, and it is an independent federal crime to disclose them outside of one’s official duties.  We hope today’s charges remind those in positions of trust within government agencies that the unlawful sharing of sensitive documents will not be tolerated and will be met with swift justice by this Office.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “In her position, Edwards was entrusted with sensitive government information.  As we allege here today, Edwards violated that trust when she made several unauthorized disclosures to the media.  Today's action demonstrates that those who fail to protect the integrity of government information will be rightfully held accountable for their behavior.”

Treasury Department Inspector General Eric Thorson said:  “Our criminal investigators have been at the center of this investigation as a core part of our responsibility to detect and prevent threats to the integrity and efficiency of Treasury programs and operations.  We are committed to working with our law enforcement partners and with FinCEN and other Treasury officials, and appreciate their cooperation and support.”

Treasury Under Secretary for Terrorism and Financial Intelligence Sigal Mandelker said:  “Protecting sensitive information is one of our most critical responsibilities, and it is a role that we take very seriously.  We have fully and proactively supported Treasury’s Office of Inspector General’s investigation of leaks of protected information, and thank them for their hard work with the U.S. Attorney’s Office to hold accountable those responsible.”

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

The mission of FinCEN is to “safeguard the financial system from illicit use and combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities.”[2]  Among other things, FinCEN manages the collection and maintenance of SARs regarding potentially suspicious financial transactions, which, under the Bank Secrecy Act, U.S. financial institutions and other parties are required by law to generate and deliver to FinCEN.  Under the BSA and its implementing regulations, willful disclosure of a SAR or its contents by government employees or agents except as necessary to fulfill official duties is a felony.

Beginning in approximately October 2017, and lasting until the present, EDWARDS unlawfully disclosed numerous SARs to a reporter (“Reporter-1”), the substance of which were published over the course of approximately 12 articles by a news organization for which Reporter-1 wrote (“News Organization-1”).  The illegally disclosed SARs pertained to, among other things, Paul Manafort, Richard Gates, the Russian Embassy, Mariia Butina, and Prevezon Alexander.  EDWARDS had access to each of the pertinent SARs and saved them – along with thousands of other files containing sensitive government information – to a flash drive provided to her by FinCEN.  She transmitted the SARs to Reporter-1 by means that included taking photographs of them and texting the photographs to Reporter-1 over an encrypted application.  In addition to disseminating SARs to Reporter-1, EDWARDS sent Reporter-1 internal FinCEN emails appearing to relate to SARs or other information protected by the BSA, and FinCEN non-public memoranda, including Investigative Memos and Intelligence Assessments published by the FinCEN Intelligence Division, which contained confidential personal, business, and/or security threat assessments. 

At the time of EDWARDS’s arrest, she was in possession of a flash drive appearing to be the flash drive on which she saved the unlawfully disclosed SARs, and a cellphone containing numerous communications over an encrypted application in which she transmitted SARs and other sensitive government information to Reporter-1.

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EDWARDS, 40, of Quinton, Virginia, is charged with one count of unauthorized disclosures of suspicious activity reports and one count of conspiracy to make unauthorized disclosures of suspicious activity reports, both of which carry a maximum sentence of five years in prison.  The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the judge.

Mr. Berman praised the investigative work of the Federal Bureau of Investigation, the Treasury Department, and the Treasury Department’s Office of Inspector General.  He also thanked the United States Attorney’s Office for the Eastern District of Virginia for its assistance with the investigation.

This case is being handled by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys Kimberly J. Ravener and Daniel C. Richenthal are in charge of the prosecution.

 

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[1] The charges contained in the Complaint are merely accusations, and EDWARDS is presumed innocent unless and until proven guilty.

[2] www.fincen.gov/about/mission

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that MICHAEL WHITE, a leader of two violent street gangs, “MBG,” and the “Young Gunnaz,” was convicted of racketeering conspiracy, attempted murder and assault with a deadly weapon in aid of racketeering, and a firearms offense.  WHITE was convicted following a two-week trial before U.S. District Judge Robert W. Sweet. 

U.S. Attorney Geoffrey S. Berman said:  “Michael White, a leader of two gangs, committed a spree of shootings in and around New York City Housing Authority’s Mill Brook Houses.  He shot rival gang members in front of a public school, in a community center, and in a subway station.  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.”

According to the evidence presented in court during the trial:

From 2007 through October 2017, WHITE was a member of MBG, also known as “Money Bitches Guns,” a local gang based in the Mill Brook Houses.  From 2010 through October 2017, WHITE was a member of the Young Gunnaz set of the YGz gang also based in the Mill Brook Houses.  As part of his membership in both gangs, WHITE shot seven people.  Specifically, on January 25, 2010, WHITE shot and injured a 16-year-old rival on a street corner in the Mill Brook Houses.  On January 31, 2010, WHITE shot and injured an 18-year-old rival at a baby shower.  Later on January 31, 2010, WHITE shot a rival gang member near a building in the Mill Brook Houses, causing the individual to suffer life threatening injuries.  On February 12, 2010, WHITE shot and injured an 18-year-old rival outside a public school.  On October 28, 2012, WHITE shot and injured three individuals in the Cypress Avenue Subway Station.

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WHITE, 30, of the Bronx, New York, was convicted of two counts of racketeering conspiracy, each of which carries a maximum sentence of 20 years in prison; one count of violent crime in aid of racketeering, which carries a maximum sentence of 20 years in prison; and one count of use of a firearm during a violent crime, 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 sentence for the defendant will be determined by the judge.

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 Jordan Estes, Gina Castellano, and Alexandra Rothman are in charge of the prosecution. 

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

Manhattan U.S. Attorney Geoffrey S. Berman said:  “In the wake of the accounting fraud scandals of the early 2000s, Congress passed important laws to ensure the quality and accuracy of auditing work performed on publicly traded companies so that investors could have confidence in the reported financial results of those companies.  The SEC was vested with the responsibility and authority of executing these laws and the PCAOB was created to play a key role:  To audit the auditors.  HOLDER undermined the work of the SEC and the PCAOB by stealing confidential inspection information from her former employer, the PCAOB, and helping insiders at her new employer, KPMG, to cheat the regulatory system put in place to protect the investing public.  This was a revolving door tainted by fraud and today we hold the defendant accountable for her conduct.”

According to the allegations contained in the Indictment filed against HOLDER, along with her co-conspirators, David Middendorf, David Britt, Thomas Whittle, and Jeffrey Wada, and statements made in related court filings and proceedings:[1]     

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

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

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

In March 2016, HOLDER obtained the PCAOB’s confidential 2016 inspection selections for KPMG from Wada, who was still working at the PCAOB but who had recently been passed over for a promotion.  Wada – who was not responsible for KPMG inspections at the PCAOB – accessed and stole valuable confidential information from the PCAOB and passed it on to HOLDER.  HOLDER, in turn, provided the 2016 inspection selections to Sweet, who passed them to Middendorf, Whittle, and Britt.  Middendorf, Whittle, Britt, and Sweet then agreed to launch a stealth program to “re-review” the audits that had been selected.  In order to cover up their illicit conduct, Britt gave other KPMG engagement partners a false explanation for the re-reviews.  The stealth re-review program allowed KPMG to double-check its audit work, strengthen its work papers, and, in some cases, identify deficiencies or perform new audit work that had not been done during the live audit.

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

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

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

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HOLDER, 52, pled guilty to one count of conspiracy to defraud the United States, which carries a maximum sentence of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense; one count of conspiracy to commit 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; and two counts of wire fraud, which each carry 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.  Sentencing is scheduled for April 5, 2019 at 10:30 a.m. 

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

Trial against the remaining defendants is scheduled to begin on February 11, 2019, before the Honorable J. Paul Oetken.

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

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Rebecca Mermelstein, Amanda Kramer, and Jessica Greenwood 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 PETER GALBRAITH KELLY JR., a former executive at Competitive Power Ventures (“CPV”), was sentenced to 14 months in prison for defrauding CPV by misrepresenting that the former Executive Deputy Secretary to the Governor, Joseph Percoco, had obtained state ethics approval for his wife to work at CPV.  Co-defendants Percoco and Steven Aiello were convicted of charges relating to bribery on March 13, 2018, after an eight-week jury trial.  The jury was deadlocked on the charges against KELLY.  Joseph Gerardi, who was acquitted of all charges at the trial with Percoco, was convicted of all charges in a related trial earlier this year.  KELLY pled guilty on May 11, 2018, to one count of conspiracy to commit wire fraud before U.S. District Judge Valerie E. Caproni, who imposed today’s sentence.

U.S. Attorney Geoffrey Berman said:  “Braith Kelly admitted to giving the spouse of one of the most powerful men in Albany, Joseph Percoco, a low-show job at his company in order to ingratiate himself and his company with Percoco.  Many consider this type of behavior to be ‘the way things are done’ in government.  But our Office does not, and neither does the court.” 

In imposing today’s sentence, Judge Caproni stated:  “I hope the sentence will be heard in government affairs offices everywhere…you have to play by the rules.”

According to the evidence introduced at trial, other proceedings in this case, and documents previously filed in Manhattan federal court:

KELLY hired Percoco’s wife to a low-show job at CPV, and ran monthly payments to Percoco and his wife through a consultant who worked for CPV in order to disguise the source of the payments.  KELLY also made sure that Percoco’s wife’s photograph and full name were not included in promotional materials for CPV, and he falsely told his superiors at CPV – on two separate occasions – that Percoco had obtained an ethics opinion from the Governor’s Office approving of Percoco’s wife’s employment with CPV, when in fact no such opinion existed.  

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In addition to the prison term, KELLY, 55, of Canterbury, Connecticut, was sentenced to three years of supervised release.  He was also ordered to pay $247,000 in restitution to CPV.

On September 20, 2018, Judge Caproni sentenced Percoco to six years in prison.  Aiello is scheduled to be sentenced on November 29, 2018.  Gerardi is scheduled to be sentenced on December 6, 2018.

U.S. Attorney Berman praised the work of the Buffalo Field Office of the Federal Bureau of Investigation and New York Office of the Internal Revenue Service-Criminal Investigation, which jointly conducted this investigation with special agents from the U.S. Attorney’s Office. 

This case is being prosecuted by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys Janis Echenberg, Robert Boone, David Zhou, and Matthew Podolsky are in charge of the prosecution.

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 Division of the Federal Bureau of Investigation (“FBI”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of a complaint charging HARBIR PARMAR with kidnapping and wire fraud.  PARMAR will be presented in White Plains federal court this afternoon before United States Magistrate Judge Judith C. McCarthy.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Harbir Parmar was hired to transport a woman from Manhattan to her home in White Plains.  Instead, Parmar kidnapped, terrorized, and assaulted the woman before dumping her on the side of an interstate.  No one – man or woman – should fear such an attack when they simply hire a car service.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “The victim in this case utilized a ride sharing service trusting that her driver would provide a safe ride home.  Instead, as we allege today, Harbir Parmar made an outrageous choice, deciding to unlawfully take advantage of his passenger at a moment of vulnerability for his own selfish motives.  This kind of behavior should never be tolerated, and the FBI will continue to work tirelessly with our partners to bring justice to those who would shamelessly and illegally take advantage of others.”

Commissioner James P. O’Neill said:  “The criminal acts outlined in this complaint are reprehensible.  This individual’s behavior goes far beyond ridesharing companies’ efforts to revise their ethics codes and put stronger emphasis on background checks for their drivers.  The people we serve deserve much better.  These charges are appalling, and such behavior will never be tolerated by the NYPD or any of our local, state, or federal law enforcement partners.”

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

On February 21, 2018, an individual (“Victim-1”) ordered a vehicle through a ridesharing company (“Company-1”) to pick her up in Manhattan, New York, and take her to White Plains, New York, where she resided at the time.  At approximately 11:30 p.m., Victim-1 entered a vehicle driven by PARMAR, who was licensed to use Company-1’s software as a driver.  Victim-1 fell asleep in 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 Massachusetts.  When Victim-1 awoke, the vehicle was on the side of the road and PARMAR was in the backseat of the vehicle with her, with his hand under her shirt touching the top of her breast.  Upon Victim-1 waking up, PARMAR got back into the driver’s seat and continued driving.  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 allegedly false information about the destinations of Company-1’s customers through Company-1’s mobile application on at least 11 occasions.   He also sent false information about the application of a cleaning fee to be applied to the accounts of Company-1’s customers on at least three occasions.  In these instances, customers of Company-1 filed complaints with Company-1 about being overcharged for their rides.  These instances have resulted in over $3,600 in improper charges to the accounts of Company-1’s customers. 

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PARMAR, 24, of Howard Beach, New York, is charged with 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.

There may be more victims of this alleged conduct.  If you have information to report, contact the FBI’s Westchester Resident Agency at (914) 925-3888.

Mr. Berman praised the outstanding investigative work of FBI’s Westchester County Safe Streets Task Force, which is comprised of 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. 

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, and William F. Sweeney, Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that JASON RHODES was arrested this morning on conspiracy, securities fraud, wire fraud, and investment adviser fraud charges stemming from his participation in a scheme to defraud investors by lying to investors in his hedge fund (the “Hedge Fund”) and using investor funds for his own personal use and to make repayments to earlier investors in a Ponzi-like manner.   

RHODES is expected to be presented today in Magistrate Court before the Honorable Gabriel W. Gorenstein. 

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Rhodes participated in a scheme to solicit investors’ money by promising to use it for a stated purpose — to invest in securities — instead, he used it to line his own pockets. In typical Ponzi-like fashion, Rhodes allegedly kept his scheme operating by using investor funds to make payments to other investors who were demanding their money.  Jason Rhodes now faces serious time in federal prison for his deceitful conduct.”

FBI Assistant Director-in-Charge William F. Sweeney, Jr. said:  “Time and time again, we see Ponzi-like investment schemes fail and their perpetrators brought to justice.  As we allege today, Jason Rhodes is just the latest example of someone who allowed greed to guide his actions as he defrauded investors of more than $19 million.  The FBI will continue to aggressively investigate these cases as long as misguided individuals continue to foolishly pursue these fraudulent schemes.”

According to the Complaint[1]:

Beginning in at least November 2013 and through in or about December 2016, RHODES, together with his co-conspirators, solicited investments in the Hedge Fund by falsely representing to investors that their funds would be used for legitimate, specified, investment purposes, namely purchasing securities.  In fact, RHODES failed to invest the investor monies as promised, but rather diverted investor funds to his own personal use and the personal use of his co-conspirators and to make repayments to other investors who were demanding their money.  Through this scheme, RHODES and his co-conspirators defrauded approximately 25 investors out of a total of approximately $19.6 million.

Among other fraudulent acts, RHODES and a co-conspirator falsified an investor account statement using a computer software program to conceal the fact that most of the $4.2 million the investor had sent to the Hedge Fund had been misappropriated, including through transfers of the funds to, among other places, the personal bank accounts of RHODES and a co-conspirator, and to previous investors.  After this investor discovered the fraudulent nature of the account statement, RHODES, working with others, obtained funds from yet another investor in order to make payments to this previous investor. 

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RHODES, 46, of Rowayton, Connecticut, was arrested this morning.  RHODES is charged with one count of conspiracy to commit securities fraud and wire fraud, one count of securities fraud, one count of wire fraud, and one count of investment adviser fraud.  The conspiracy count carries a maximum sentence of 5 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.  The securities fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $5 million or twice the gross gain or loss from the offense.  The wire fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.  The investment adviser fraud count carries a maximum sentence of 5 years in prison and a maximum fine of $10,000.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Berman praised the work of the FBI.  He 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 Elisha J. Kobre and Jared Lenow are in charge of the prosecution.  

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

 

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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, Philip R. Bartlett, Inspector-In-Charge for the New York Division of the U.S. Postal Inspection Service (“USPIS”), and Timothy W. Dumas, the Special Agent in Charge of the New York Field Office of the U.S. Department of State’s Diplomatic Security Service (“DSS”) of the U.S. Department of State, announced today that KWANG KYU KIM, a/k/a “Kevin,” HYUN KYUNG HAN, a/k/a “Jay Hee,” HONG NAE YI, a/k/a “Diane Yi,” BEIRNE LOWRY, a/k/a “Michael,” TIEN CHIH WANG, and ZHENGYI LU, a/k/a “Allen,” were charged with money laundering and conspiring to commit money laundering in connection with a scheme to provide financing and other support services to brothels in the New York metropolitan area.  The defendants were arrested this morning and were presented before a U.S. Magistrate judge in federal court in Manhattan this afternoon.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “These individuals allegedly offered support to independent owners of illegal brothels in the form of financing, website maintenance, and other administrative assistance to help the brothels function.  By allegedly offering their support, they contributed to the commercial sex industry, an industry notorious for heinous victimization of young women.”

USPIS Inspector-in-Charge Philip R. Bartlett said:  “As alleged in the complaint, the suspects thought they could hide their crimes by laundering their illicit proceeds using money orders and other financial instruments; but their tricks were uncovered when they underestimated the resolve of law enforcement to follow the trail of money no matter where it leads.  Postal Inspectors and their law enforcement partners are doing their part to, ‘turn off the red light,’ on the sex trafficking trade.”

DSS Special Agent in Charge Timothy W. Dumas said:  “DSS continues to disrupt and dismantle transnational criminal organizations seeking to profit from the entry and illicit activities of vulnerable foreign nationals.  This investigation demonstrates the global reach of the Diplomatic Security Service.”

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

Since 2012, the Diplomatic Security Service, United States Postal Inspection Service, United States Customs and Border Protection, and the United States Attorney’s Office for the Southern District of New York have been investigating money laundering in connection with a network of Korean brothels that are located in the New York metropolitan area.

These brothels, which are independently owned and operated, receive financing and advertising from common sources.  KWANG KYU KIM, a/k/a “Kevin,” HYUN KYUNG HAN, a/k/a “Jay Hee,” and HONG NAE YI, a/k/a “Diane Yi,” provide financing for several brothels in Manhattan, including by issuing loans with high interest rates to Korean brothel owners and employees.  KIM and YI also operate rotating credit associations in which individuals, who are often involved in the commercial sex industry, contribute a fixed amount each month and then receive the lump sum on a rotating basis.  KIM, HAN, and YI have collectively provided or assisted in providing hundreds of thousands of dollars to finance new and existing brothels in Manhattan.

BEIRNE LOWRY, a/k/a “Michael,” TIEN CHIH WANG, and ZHENGYI LU, a/k/a “Allen,” provide advertising services to Korean brothels in Manhattan.  LOWRY, WANG, and LU create and maintain individual websites for brothels, which include sexually suggestive photographs and coded language for specific commercial sex activities.  LOWRY also registered and promoted a website that aggregated information and advertising for brothels in the New York metropolitan area.  WANG and LU further coordinated online reviews for the brothels’ commercial sex services and facilitated the brothels’ purchase of commercial sex advertisements on third-party websites. 

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The defendants, KWANG KYU KIM, a/k/a “Kevin,” 62, of Queens, New York, HYUN KYUNG HAN, a/k/a “Jay Hee,” 49, of Queens, New York, HONG NAE YI, a/k/a “Diane Yi,” 59, of Queens, New York, BEIRNE LOWRY, a/k/a “Michael,” 59, of Manhattan, New York, TIEN CHIH WANG, 44, of Queens, New York, and ZHENGYI LU, a/k/a “Allen,” 35, of Queens, New York, are each charged with one count of conspiring to commit money laundering and one count of committing money laundering.  Each count 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.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Nathan Rehn, Danielle Sassoon, and Elinor Tarlow 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 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 CARL DAVID STILLWELL was sentenced to life in prison in connection with his participation in the murder of a woman in the Philippines.  STILLWELL and his co-defendants, Adam Samia and Joseph Hunter, were convicted following a 12-day jury trial before U.S. District Judge Ronnie Abrams of the Southern District of New York on April 18, 2018. 

U.S. Attorney Geoffrey S. Berman said:  “Like the plot of some blockbuster novel or movie, this case is nearly unbelievable:  a former Army sniper recruits two others to commit a murder-for-hire in a foreign land.  But every aspect of this troubling case is true, including a murder victim in the Philippines.  Carl Stillwell played a role in that murder, and will now spend the rest of his life behind bars.”

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

Hunter served in the U.S. Army from 1983 to 2004, 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 has arranged for the murders of multiple victims in exchange for money, among other completed acts of violence undertaken for pay. 

Samia is a self-described “personal protection/security industry” professional.  According to Samia’s résumé, he has 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 has 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 (“Victim-1”) – a Filipino woman – in the Philippines by shooting her multiple times in the face.  After killing Victim-1, Samia and STILLWELL disposed of her body on a pile of garbage, where local authorities later found it.  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.

*          *          *

Hunter, 52, of Owensboro, Kentucky, Samia, 43, of Roxboro, North Carolina, and STILLWELL, 50, 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 maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of HUNTER and SAMIA will be determined by the judge. 

Sentencing has been scheduled for Hunter on February 15, 2019, and for Samia on October 31, 2018, before Judge Abrams. 

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 Emil J. Bove III, Rebekah Donaleski, and Patrick Egan, are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that WILLIAM McFARLAND was sentenced today in Manhattan federal court to 6 years in prison for the following criminal conduct to which he had pled guilty: one count of wire fraud in connection with a scheme to defraud investors in a company controlled by McFARLAND, Fyre Media Inc. (“Fyre Media”), as well as its subsidiary (“Fyre Festival LLC”), which was formed to organize a music festival over two weekends in the Bahamas; one count of wire fraud in connection with a scheme to defraud a ticket vendor for the Fyre Festival; one count of wire fraud, in connection with his operation of a sham ticket scheme in which he purported to sell tickets to exclusive fashion, music, and sporting events though NYC VIP Access, a company controlled by McFARLAND; one count of bank fraud for writing a check with the name and account number of one of his employees without authorization; and one count of making false statements to a federal law enforcement agent in which McFARLAND, among other things, falsely denied the wire fraud and bank fraud conduct to which he pled guilty.  McFARLAND pled guilty on March 6, 2018 and July 26, 2018 before U.S. District Judge Naomi Reice Buchwald, who imposed today’s sentence.

Manhattan U.S. Attorney Geoffrey Berman said:  “Billy McFarland has shown a disturbing pattern of deception, which resulted in investors and customers losing over $26 million in two separate fraud schemes.  As he had previously admitted, Billy McFarland did not deliver on his promises to his investors and customers.  Today, McFarland found out the hard way that empty promises don’t lead to jet-setting, champagne, and extravagant parties – they lead to federal prison.”

According to the allegations in the Complaints and the First and Second Superseding Informations to which McFARLAND pled guilty, as well as statements made in court proceedings:

McFARLAND was the founder and chief executive officer of Fyre Media.  In 2016, McFARLAND started Fyre Media to build a digital application that would allow individuals organizing commercial events, such as concerts, to bid for artist and celebrity bookings at such events.  From at least in or about 2016, up to and including in or about May 2017, McFARLAND conducted a scheme to defraud individuals by inducing them to invest millions of dollars in Fyre Media.  Through this scheme, McFARLAND caused losses to at least 80 victim-investors, totaling more than $24 million dollars. 

In furtherance of the scheme, McFARLAND repeatedly made materially false statements to investors about Fyre Media’s revenue and income, and manipulated Fyre Media’s financial statements and supporting documentation to hide Fyre Media’s true financial condition.  For example, McFARLAND represented to investors that Fyre Media had earned millions of dollars of revenue solely from talent bookings; a review of Fyre Media’s records showed that those numbers were significantly overstated.  McFARLAND also provided falsified income statements to investors that purported to show that from approximately April 2016 to February 2017, Fyre Media had earned millions of dollars in income from talent bookings.  In reality, Fyre Media’s income from talent bookings from approximately May 2016 to April 2017 was only $57,443.  In addition, McFARLAND provided falsified documents to investors showing over 2,500 confirmed talent bookings in a single month when, in fact, there were only 60 confirmed talent bookings in the entire year.   

McFARLAND repeatedly made misrepresentations to investors designed to overstate Fyre Media’s financial condition and stability.  For example, McFARLAND told investors that a reputable venture capital firm (the “VC Firm”) had completed its due diligence process and had decided to invest in Fyre Media.  To the contrary, a VC Firm employee communicated to McFARLAND that the VC Firm would not invest in Fyre Media without first completing its due diligence, which the VC Firm had not done due to McFARLAND’s failure to provide many of the requested Fyre Media documents. 

In late 2016, McFARLAND established a subsidiary, Fyre Festival LLC, to hold a music festival called the “Fyre Festival” over two weekends in the Bahamas.  McFARLAND made repeated misrepresentations to investors with respect to their investments in Fyre Festival LLC. McFARLAND overstated the Festival’s receivables that he used as collateral for numerous investments to cover Festival expenses.  McFARLAND also secured numerous investments in Fyre Festival LLC by claiming that investors would have the rights to payouts from Festival event cancellation insurance policies when, in reality, no event cancellation insurance policies had been executed for the Festival.  Ultimately, the Festival was canceled and widely deemed to have been a failure.

McFARLAND also repeatedly made materially false statements to investors about his own financial condition.  For example, in order to induce several investors to make an investment in Fyre Media, McFARLAND provided an altered stock ownership statement to inflate the number of shares he purportedly owned in a publicly traded company to make it appear that McFARLAND could personally guarantee the investment.  In addition, despite the fact that McFARLAND’s applications to two banks (“Bank-1” and “Bank-2”) for millions in personal loans had not been approved, McFARLAND misrepresented to investors that the monies from those bank loans could serve as collateral for their investments.  On one occasion, McFARLAND sent an investor a snapshot of an email purporting to be from a Bank-1 banker (“Banker-1”) to McFARLAND approving a $3 million dollar loan.  Not only had Banker-1 not sent that email, Bank-1 had not approved McFARLAND’s loan application.

McFarland also made materially false statements to certain of Fyre Media’s investors about Magnises, a credit card and private club for millennials that was founded and run by McFARLAND.  McFARLAND told certain of Fyre Media’s investors that he had sold Magnises for approximately $40 million and made a profit of several million dollars personally from the sale, when in reality, McFARLAND had not sold Magnises.  McFARLAND also falsely stated to certain of Fyre Media’s investors that specific individuals were the acquirers of Magnises, when in fact, they were not.  McFarland also falsely stated to certain of Fyre Media’s investors that a group of acquiring partners were forming a new company to purchase Magnises, when in fact, no such group existed.

In or about April 2017, McFARLAND defrauded a ticket vendor (“Vendor-1”) by inducing Vendor-1 to pay $2 million for a block of advance tickets for future Festivals over the next three years.  McFARLAND also provided Vendor-1 with a fraudulent income statement for Fyre Media that grossly inflated the Company’s revenue and income.

On March 6, 2018, McFARLAND pled guilty before Judge Buchwald to one count of wire fraud in connection with a scheme to defraud over 80 investors in Fyre Media and Fyre Festival LLC of over $24 million, and one count of wire fraud in connection with a scheme to defraud a ticket vendor for the Fyre Festival of $2 million, in the case captioned United States v. William McFarland, 17 Cr. 600 (NRB).  In connection with that case, McFARLAND was on pretrial release from July 1, 2017, to June 12, 2018.

Subsequently, from late 2017 through March 2018, McFARLAND owned and operated NYC VIP Access, a company based in New York, New York.  NYC VIP Access purported to be in the business of obtaining and selling for profit tickets to various exclusive events such as fashion galas, music festivals, and sporting events, including the following events, among others: the 2018 Met Gala, Burning Man 2018, Coachella 2018, the 2018 Grammy Awards, Super Bowl LII, and a Cleveland Cavaliers game and team dinner with Lebron James.  McFARLAND, while on pretrial release, perpetrated a scheme to defraud attendees of the Fyre Festival, former customers of Magnises (another company operated by McFARLAND), and other customers by soliciting them to purchase tickets from NYC VIP Access to these exclusive events when, in fact, no such tickets existed. 

In furtherance of the fraudulent ticket scheme and to conceal his involvement in NYC VIP Access, McFARLAND took steps to make NYC VIP Access appear as it if were controlled and operated by other individuals.  For example, in soliciting ticket sales, McFARLAND used an email account in the name of a then-employee (“Employee-1”) and a fake employee (the “Fake Employee”) to communicate with customers.  In addition, McFARLAND did not personally meet or speak with customers.  Instead, at the direction of McFARLAND, Employee-1 met and spoke with customers to solicit ticket sales.  McFARLAND also directed Employee-1 to sign the contracts between NYC VIP Access and the customers for the sham ticket sales.  

McFARLAND also took steps to conceal his receipt of the proceeds from the scheme.  For example, McFARLAND arranged for customer payments to be made by wire transfer, or through a payment processor, to bank accounts to which McFARLAND or his associates had access, including bank accounts belonging to Employee-1 and McFARLAND’s driver (the “Driver”).  Alternatively, McFARLAND used mobile payment service accounts belonging to other NYC VIP Access employees to receive customers’ payments for tickets. Employee-1, the Driver, and other NYC VIP Access employees then provided the ticket sale proceeds to McFARLAND in cash.  After McFARLAND induced customers to pay for the tickets, McFARLAND either did not provide tickets at all, or did not provide tickets as advertised.  Altogether, McFARLAND obtained approximately $150,000 in fraudulent ticket sales from at least 30 customer-victims of NYC VIP Access.

In or about March 2018, McFARLAND provided a forged check in the name of Employee-1 to the Driver, which the Driver attempted to deposit into the Driver’s bank account and would have resulted in the unauthorized withdrawal of funds from Employee-1’s bank account.

On or about June 20, 2018, in an in-person interview with a federal law enforcement agent about his involvement in NYC VIP Access, McFARLAND falsely stated, among other things, that (i) McFARLAND did not think that he would defraud customers from his prior businesses, Magnises and Fyre Festival, when he solicited them to buy tickets for NYC VIP Access; and (ii) Employee-1 authorized McFARLAND to write a check from Employee-1’s bank account for $25,000 in the name of Employee-1 to the Driver for the Driver to deposit into the Driver’s bank account.           

*                *                *

McFARLAND, 26, of New York, New York, was sentenced to 6 years in prison, to be followed by 3 years of supervised release, and a $500 special assessment.  Judge Buchwald also ordered McFARLAND to forfeit $26,191,306.28. 

Mr. Berman praised the outstanding investigative work of the FBI’s New York Field Office, and thanked the U.S. Securities and Exchange Commission for its assistance. 

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United State Attorney Kristy J. Greenberg is in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, James J. Hunt, the Special Agent-in-Charge of the New York Field Office of the Drug Enforcement Administration (“DEA”), James D. Robnett, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), Scott Lampert, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services (“HHS-OIG”), James P. O'Neill, Commissioner of the New York City Police Department (“NYPD”), and Mark G. Peters, Commissioner of the New York City Department of Investigations (“DOI”), announced today the unsealing five Indictments and a criminal Complaint in Manhattan federal court charging a total of 10 defendants with illegally distributing oxycodone.

U.S. Attorney Geoffrey S. Berman said:  “These doctors and other health professionals should have been the first line of defense against opioid abuse, but as alleged in today’s charges, instead of caring for their patients, they were drug dealers in white coats.  They hid behind their medical licenses to sell addictive, dangerous narcotics.  This Office will do everything in its power to bring to justice anyone responsible for fueling the opioid epidemic that has taken so many lives.”    

DEA Special Agent-in-Charge James J. Hunt said:  “From drug cartels to street distributors, law enforcement is targeting all levels of drug traffickers amidst the worst drug crisis in American history.   The worst villains in the fight against drug abuse are doctors whose criminal actions fuel addiction and overdoses.  As a result of separate investigations from three DEA offices, five doctors, a pharmacist, a nurse practitioner and three associates have been arrested for their role in distributing millions of unnecessary oxycodone pills, allegedly. SAC Hunt commends the men and women from DEA’s Tactical Diversion Squads, our law enforcement partners and Southern District of New York for their commitment and hard work.” 

IRS-CI Special Agent-in-Charge James D. Robnett said:  “Medical professionals and others callously placed individuals in harm’s way simply because of greed. It takes a special kind of person to prey on the sick and vulnerable. The special agents of IRS Criminal Investigation will continue their mission to disrupt the flow of ill-gotten gains from these criminals.” 

HHS-OIG Special Agent-in-Charge Scott Lampert said:  “These individuals allegedly engaged in a greed-fueled scheme that put lives at risk and callously contributed to the opioid epidemic that continues to plague our society.  These charges should serve as a warning to medical professionals that act like drug dealers and profit off of the vulnerable individuals they should be helping.  Along with our law enforcement partners we are committed to ending the illegal distribution of opioids in this country and protecting the public’s health and welfare.”

NYPD Commissioner James P. O’Neill said:  “Our entire country is suffering through an opioid abuse crisis, and we need to do everything we can to save as many lives as possible.  We need to help people from falling into a black hole of addiction and fatal overdoses.  We have to push New York City and our nation to thrive, and to turn this epidemic around.  A good step in that direction is to investigate and put away the criminals who have so clearly betrayed their professional oaths – who have put illegal profits above their own integrity, and above the well-being of their fellow man.  I commend each of our law enforcement partners on the Drug Enforcement Task Force, and all the New Yorkers who alert the police when they suspect criminality.  This is how each of us – cops, prosecutors, and all the people we serve – are sharing the responsibility for public safety.  And this is how we are making our way forward.”    

DOI Commissioner Mark G. Peters said: “These joint investigations demonstrate the scourge that opioid abuse has on our community and the emphatic response from law enforcement: Any individual who seeks to promote prescription fraud and drug abuse will be exposed, arrested and prosecuted. DOI stands firmly with its federal partners on this serious issue and we will continue to work together to stop this crime and save lives.”

According to the allegations in the five Indictments and one Complaint unsealed today: [[1]]

DANTE A. CUBANGBANG, JOHN F. GARGAN, MICHAEL KELLERMAN, and LOREN PIQUANT, who together operated a medical clinic in Queens, were arrested yesterday evening and will be presented in Manhattan federal court today.   According to the allegations in the Indictment unsealed today, CUBANGBANG, a physician, and GARGAN, a nurse practitioner, prescribed over 6 million oxycodone pills to individuals they knew did not need the medication for any legitimate medical reason.  CUBANGBANG and GARGAN prescribed more than twice as many oxycodone pills that were paid for by Medicare and Medicaid than the next highest prescriber in New York.  CUBANGBANG and GARGAN doled out these prescriptions during office visits that lasted no more than a few minutes and involved little to no physical examination.  Together with KELLERMAN and PIQUANT, who worked in the clinic and recruited patients, the defendants collected more than $5 million in all-cash office visit fees, which they laundered and divided amongst themselves. 

CARL ANDERSON, a Staten Island physician, and ARTHUR GRANDE were arrested yesterday evening and will be presented in Manhattan federal court today.  According to the allegations in the Indictment unsealed today, ANDERSON prescribed nearly a million oxycodone pills to patients he knew had no legitimate medical need for the medication, including GRANDE, who sold the pills on the streets of New York.  ANDERSON often saw his patients, some of whom displayed visible signs of drug addiction, without appointments and with little notice, in the middle of the night, and required that they pay hundreds of dollars in cash for each prescription.  Noisy crowds of pill-seeking patients often gathered outside of ANDERSON’s office and in his waiting room, prompting occasional 911 calls from neighbors.  Even after some of ANDERSON’s patients died of drug overdoses, he did not alter his prescribing practices. 

ANTHONY PIETROPINTO, a psychiatrist residing in Manhattan, was arrested this morning and will be presented today before Magistrate Judge James L. Cott.  According to the allegations in the Complaint unsealed today in Manhattan federal court, PIETROPINTO wrote thousands of medically unnecessary oxycodone prescriptions in exchange for $50 to $100 in cash per visit.  PIETROPINTO wrote these prescriptions to drug-addicted individuals, including one patient who overdosed on drugs, and who had previously been prescribed by PIETROPINTO both oxycodone and naloxone, a medication used to block the effects of opioid overdoses, because PIETROPINTO was aware of, but disregarded, that patient’s addiction issues.  PIETROPINTO saw these patients in a rented office space after hours, and instructed his patients to not fill prescriptions at large chain pharmacies because pharmacists at those pharmacies would call and question PIETROPINTO about why he wrote prescriptions for large amounts of oxycodone. 

NKANGA NKANGA, a Staten Island physician, was arrested this morning and will be presented in Manhattan federal court today.  According to the allegations in the Indictment unsealed today, in exchange for cash payments, NKANGA wrote thousands of oxycodone prescriptions for patients, some of whom displayed visible signs of drug addiction, without conducting any physical examination, or even seeing them in an examination room.  NKANGA also wrote prescriptions in the names of patients who did not even visit his medical office.  On one occasion, for instance, NKANGA asked a patient, “how many people are you representing today,” and then wrote prescriptions in the names of people, even though three were not present.  NKANGA regularly prescribed over 100 oxycodone pills per patient per month until July 2018 when he reduced all patients’ monthly allotment, telling one patient he was “very worried” about scrutiny from law enforcement.    

NADEM J. SAYEGH, a physician with offices in the Bronx and Westchester, was arrested this morning and will be presented in Manhattan federal court today.  According to the allegations in the Indictment unsealed today, SAYEGH maintained a corrupt relationship with a co-conspirator, issuing oxycodone prescriptions in his name, variations of his name, his family members’ names, and the names of other individuals in exchange for thousands of dollars in cash, expensive dinners, high-end whisky, cruises, and all-expense-paid trips.  SAYEGH wrote some of these prescriptions, for which there was no legitimate medical purpose, for individuals who did not visit his medical office, including a patient who was overseas and another patient who was incarcerated.        

MARC KLEIN, a pharmacist in White Plains, was arrested this morning and will be presented in Manhattan federal court.  According to the allegations in the Indictment unsealed today, KLEIN filled oxycodone prescriptions that he knew were illegitimate, including prescriptions filled by a customer in multiple variations of his name and date of birth, and prescriptions filled in the names of individuals who never were present in the pharmacy.  KLEIN filled thousands of these oxycodone prescriptions, “fronted” controlled substances, and made false reports to New York State authorities, in exchange for cash payments and a vacation.   KLEIN admitted, in substance, that he and his employees could be called “licensed drug dealers” because “oxy pays the bills” at KLEIN’s pharmacy. 

*                      *                     *

CUBANGBANG, 50, of Franklin Square, New York, GARGAN, 62, of Manhattan, New York, KELLERMAN, 54, of Queens, New York, and PIQUANT, 37, of Bronx, New York, have been charged in an Indictment with one count of conspiracy to distribute controlled substances, which carries a maximum sentence of 20 years in prison.  CUBANGBANG, GARGAN, and KELLERMAN are also charged with one count of conspiracy to commit health care fraud, which carries a maximum sentence of 10 years in prison, and conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison.

ANDERSON, 57, of Staten Island, New York, and GRANDE, 53, of Staten Island, New York, have been charged in an Indictment with one count of conspiracy to distribute controlled substances, which carries a maximum sentence of 20 years in prison. 

PIETROPINTO, 80, of Manhattan, New York, has been charged in a Complaint with one count of conspiracy to distribute controlled substances, which carries a maximum sentence of 20 years in prison, and two counts of distribution of controlled substances, each of which carries a maximum sentence of 20 years in prison.

NKANGA, 65, of Staten Island, New York, has been charged in an Indictment with one count of conspiracy to distribute controlled substances, which carries a maximum sentence of 20 years in prison, and four counts of distribution of controlled substances, each of which carries a maximum sentence of 20 years in prison.

SAYEGH, 64, of Yonkers, New York, has been charged in an Indictment with one count of conspiracy to distribute controlled substances, which carries a maximum sentence of 20 years in prison; one count of distribution of controlled substances, which carries a maximum sentence of 20 years in prison; one count of health care fraud, which carries a maximum sentence of 10 years in prison; making false statements, which carries a maximum sentence of five years in prison; and aggravated identity theft, which carries a two year mandatory minimum prison sentence to be served consecutive to any other term of imprisonment. 

KLEIN, 47, of White Plains, New York, has been charged in an Indictment with one count of conspiracy to distribute controlled substances, which carries a maximum sentence of 20 years in prison, and 14 counts of distribution of controlled substances, each of which carries a maximum sentence of 20 years in prison.

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

Mr. Berman praised the investigative work of the DEA Tactical Diversion Squads in New York, Long Island and Newark as well as HHS, DOI and IRS.  DEA’s Tactical Diversion Squad, New York (Group TDS-NY) comprises agents and officers from the DEA, the NYPD, the New York State Police, New York State Department of Financial Services and New York City Department of Investigation.  DEA’s Long Island Tactical Diversion Squad (LIDO –TDS) comprises agents and officers of the DEA, Nassau County Police Department, Rockville Centre Police Department, Suffolk County Police Department, Port Washington Police Department and Internal Revenue Service.  Newark Tactical Diversion Squad (Newark-TDS) comprises agents and officers from the DEA, Elizabeth Police Department, Essex County Sheriff’s Office, Toms River Police Department, Clinton Police Department, West Orange Police Department, Pohatcong Police Department, Long Branch Police Department, and Marlboro Police Department.  Assistance was also provided by the Yonkers Police Department and Greenburgh Police Department.

Parts of this cases 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 and money laundering organizations and those primarily responsible for the nation’s illegal drug supply.

These cases are being handled by the Office’s Narcotics Unit.  Assistant U.S. Attorneys Michael Krouse and Louis Pellegrino are in charge of the prosecution in United States v. Cubangbang et al., Assistant U.S. Attorneys Stephanie Lake and Nicolas Roos are in charge of the prosecution in United States v. Pietropinto, and Assistant U.S. Attorney Nicolas Roos is in charge of the prosecutions in United States v. Anderson et al., United States v. Nkanga, United States v. Sayegh, and United States v. Klein.      

The charges contained in the Indictment and 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 texts of the Indictments and Complaint, and the description of the Indictments and Complaint set forth herein 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, John H. Durham, United States Attorney for the District of Connecticut, William F. Sweeney, Assistant Director in Charge of the New York Division of the Federal Bureau of Investigation (“FBI”), James J. Hunt, Special Agent in Charge of the New York Division of the Drug Enforcement Administration (“DEA”), Brian D. Boyle, Special Agent in Charge of the New England Division of the DEA, Brian C. Turner, Special Agent in Charge of the FBI, New Haven, and Joseph F. Schaller, the Commissioner of the New Rochelle Police Department, announced the results of a coordinated operation earlier today, in which federal, state, and local law enforcement officers arrested six defendants in Westchester County, New York, and three defendants in Fairfield County, Connecticut. 

Ten defendants are charged in two federal indictments, unsealed today.  Seven of the defendants were charged in the Southern District of New York with conspiracy to distribute five kilograms and more of cocaine and 50 grams and more of methamphetamine in and around New Rochelle, New York, since at least April 2018.  The U.S. Attorney’s Office for the District of Connecticut has charged an additional three defendants with narcotics offenses, including conspiracy to distribute 500 grams and more of cocaine.  Those defendants arrested today who are charged in the federal indictment in the Southern District of New York were presented in White Plains federal court today before Magistrate Judge Paul E. Davison. 

Manhattan U.S. Attorney Geoffrey S. Berman stated:  “Our Office is committed to ridding New York neighborhoods of highly addictive and extremely dangerous drugs.  And we will continue to help coordinate our efforts with other U.S. Attorney’s Offices and local and federal law enforcement agencies.”

Connecticut U.S. Attorney John H. Durham stated:  “We allege that these individuals were responsible for bringing significant amounts of cocaine and methamphetamine into our state.  I thank our federal, state and local law enforcement partners for their diligent efforts in these cases, and our counterparts in the Southern District on New York for coordinating with us in these investigations and today’s take down of the most significant members of this organization.”

FBI Assistant Director-in-Charge of the New York Field Office William F. Sweeney stated:  “The distribution of illegal narcotics continues to be a scourge on our communities.  As alleged, these defendants profited from trafficking cocaine and methamphetamines at the expense of those subjected to all the negatives wrought by these substances.  Today’s charges should serve as a reminder that the FBI, through our Westchester County Safe Streets task force, will continue to target these offenders and the impact they are having on our communities.”

FBI Special Agent-in-Charge of the New Haven Office Brian C. Turner stated:  “Despite the ongoing battle against the opioid crisis in our communities, this indictment should make it abundantly clear that we at the FBI, along with all of our law enforcement partners, have not lost sight of the other illicit drugs and those that traffic them.  Together we will continue to pursue those that seek to pollute our communities.”         

DEA New York Special Agent-in-Charge James J. Hunt stated:  “Earlier this year, DEA joined forces with FBI and the New Rochelle Police Department to dismantle a drug trafficking organization operating in Westchester and Fairfield Counties.  By shutting down this family-run methamphetamine operation, lives will be saved.  I applaud the efforts of our law enforcement partners and the US Attorney’s Offices Southern District of New York and District of Connecticut.”

DEA New England Special Agent-in-Charge Brian D. Boyle stated:  “DEA is committed to investigating and dismantling large-scale poly drug trafficking organizations like this one operating in the Bridgeport, Connecticut, area.  As we all know, drug trafficking, along with the gun and physical violence that often accompanies it, ravages the very foundations of our families and communities.  This investigation demonstrates the strength of collaborative local, state, and federal law enforcement efforts to seek and bring to justice anyone who engages in these crimes.”

New Rochelle Police Commissioner Joseph F. Schaller stated:  “This is another example of the excellent work being performed by the joint federal, state and local drug enforcement task forces operating in Westchester and Fairfield Counties.  The City of New Rochelle and the New Rochelle Police Department thank our law enforcement partners in this operation for their exceptional efforts and invaluable assistance in removing a significant number of dangerous drug traffickers from the streets of our city.”

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

From April 2018 up to October 2018, ULYSSES LOPEZ, VALENTINO LOPEZ, and CHRISTIAN LOPEZ conspired to distribute five kilograms and more of powder cocaine and 50 grams and more of methamphetamine, and FELIPE BARAJAS, a/k/a “Felipe Barajas Gallegos,” JOSE OCEGUERA, a/k/a “Cande,” FELIPE CORTES, and SATURNINO OLIVER FARIAS, a/k/a “Genaro Robles,” conspired to distribute five kilograms and more of powder cocaine.

As alleged in the Indictment unsealed today in New Haven federal court:

From March 2018 through June 26, 2018, RAFAEL LOPEZ-MACIAS, a/k/a “Rafa,” a/k/a “Martin Sanchez,” JAIME LOPEZ, a/k/a “Compa,” and JUAN CARLOS FIGUEROA, a/k/a “Chaito,” conspired to distribute 500 grams or more of powder cocaine.  In addition, on June 26, 2018, RAFAEL LOPEZ-MACIAS possessed with intent to distribute 500 grams and more of methamphetamine, and on June 7, 2018, JAIME LOPEZ possessed with intent to distribute a quantity of cocaine. 

The defendants charged in White Plains federal court each face a maximum sentence of life imprisonment, and a mandatory minimum term of 10 years in prison.  The defendants charged in New Haven federal court each face a maximum sentence of 40 years 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 sentencings of the defendants would be determined by the respective judges.

Mr. Berman and Mr. Durham praised the outstanding investigative work of the FBI, DEA, the Connecticut State Police, and the New Rochelle, Norwalk and Stamford Police Departments.  Mr. Berman also thanked the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations for their assistance and the U.S. Attorney’s Office for the District of Connecticut for its ongoing coordination in the case.

This case is also the result of the ongoing efforts by the Organized Crime Drug Enforcement Task Force (OCDETF) a partnership that brings together the combined expertise and unique abilities of federal, state and local law enforcement agencies.  The principal mission of the OCDETF program is to identify, disrupt, dismantle and prosecute high level members of drug trafficking, weapons trafficking and money laundering organizations and enterprises.

These cases are being prosecuted by Assistant United States Attorneys Emily Deininger and Celia Cohen of Southern District of New York’s White Plains Division, and by Assistant United States Attorneys Anthony Kaplan and Lauren Clark of the District of Connecticut.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that JAMES BECKISH and JOSEPH ANTHONY DEMARIA pled guilty to one count of conspiracy to commit wire fraud in connection with a scheme to make unauthorized charges on credit cards through sham companies that purportedly offered nutraceutical products for sale over the internet.  BECKISH and DEMARIA pled guilty before United States District Judge Edgardo Ramos.

According to the Complaint, the Information to which BECKISH and DEMARIA pled guilty, and statements made during the proceedings today:

Between 2013 and 2017, BECKISH, DEMARIA and others, created and operated dozens of companies that purported to sell dietary supplements and similar products called “nutraceuticals” over the internet.  The websites of the defendants’ companies purported to sell products like dietary supplements but, in reality, were primarily used to repeatedly bill consumers who never ordered their products, or even if they did, almost never received them.  The defendants used these websites as a cover for unauthorized and recurring charges that were placed on thousands of credit card numbers that the defendants had purchased or obtained, or had acquired from consumers who had attempted to order the products in question.  For example, in one email, DEMARIA asked BECKISH: “Are we shipping these guys actual nutra products? Lol.”  To which BECKISH responded:  “Nope.” 

BECKISH, DEMARIA, and others created these different companies and websites, because they knew that credit card processors would stop doing business with them over time as consumers noticed the unauthorized charges and sought refunds.  These refunds, called “chargebacks” by credit card processors, are generally low for legitimate businesses but reached extremely high percentages for many of the companies associated with the defendants’ scheme.  In certain instances, the chargeback rates quickly approached or even exceeded 20 percent – that is, consumers were seeking refunds of more than 20 percent of the charges placed by certain of the defendants’ companies.  Credit card processors, in turn, paid millions of dollars in refunds for fraudulent charges associated with the defendants’ companies between 2013 and 2017 in attempts to refund affected consumers.

In total, BECKISH and DEMARIA both pled guilty to causing more than $7 million in loss during the duration of the scheme.  

 

*                *                *

BECKISH, 32, of Miami, Florida, and DEMARIA, 33, of Miami, Florida, each plead guilty to one count of conspiracy, which carries a maximum sentence of five years in prison.  BECKISH and DEMARIA also agreed to pay restitution and to forfeit $7,231,878.  Sentencing for BECKISH is scheduled for January 16, 2019 at 12:30 p.m. before Judge Ramos. Sentencing for DEMARIA is scheduled for January 18, 2019 at 12:30 p.m. before Judge Ramos.

The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentence imposed on the defendants will be determined by the judge.

Mr. Berman praised the investigative work of the Secret Service. 

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Danielle Sassoon, Olga Zverovich, and Michael McGinnis 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 Office of the Federal Bureau of Investigation (“FBI”), announced that PAUL M. ROSENFELD has been charged in U.S. District Court for the Southern District of New York in connection with manufacturing an explosive device in his Rockland County residence.  The defendant was presented before U.S. Magistrate Judge Paul E. Davison in White Plains federal court this afternoon.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Paul M. Rosenfeld concocted a twisted plan to draw attention to his political ideology by killing himself on the National Mall in Washington, D.C.—risking harm to many others in the process.  Rosenfeld’s alleged plan for an Election Day detonation cut against our democratic principles.  Thanks to outstanding coordination between local and federal law enforcement, Rosenfeld’s alleged plot was thwarted and he is now in federal custody.” 

Assistant Director-in-Charge William F. Sweeney Jr. said:  “As alleged in the complaint, Paul M. Rosenfeld planned to detonate a large explosive to kill himself and draw attention to his radical political beliefs.  Had he been successful, Rosenfeld’s alleged plot could have claimed the lives of innocent bystanders and caused untold destruction.  Fortunately, his plans were thwarted by the quick action of a concerned citizen and the diligent work of a host of our law enforcement partners and the FBI’s Joint Terrorism Task Force.  I’d like to extend particular thanks to our partners with the Orangetown Police Department, the Rockland County Sheriff’s Office, the Rockland County District Attorney, the New York State Police, the New York City Police Department, and the Stony Point Police Department for their respective roles in bring this investigation to a safe conclusion.”

As alleged in the Complaint:[[1]]

In August and September 2018, ROSENFELD sent letters and text messages to an individual in Pennsylvania (“Individual-1”).  These letters and text messages stated that ROSENFELD planned to build an explosive device and detonate it on November 6, 2018, on the National Mall in Washington, D.C.  ROSENFELD’s stated reason for these acts was to draw attention to his political belief in “sortition,” a political theory that advocates the random selection of government officials. 

On October 9, 2018, law enforcement agent stopped a car driven by ROSENFELD.  ROSENFELD agreed to answer questions and, in an interview with law enforcement, stated that he ordered large quantities of black powder—an explosive substance—over the Internet, which he transported from a location in New Jersey to his home in Tappan, New York (the “Residence”).  ROSENFELD stated, among other things, that he used approximately eight pounds of black powder to construct a large explosive device in the basement of the Residence, and that he installed certain components in the explosive device to ensure that he was killed in the blast.  ROSENFELD reported that he had previously constructed smaller explosive devices and had conducted test detonations.  He also indicated that he planned to detonate the larger explosive device on November 6, 2018, on the National Mall in Washington, D.C. in order to draw attention to sortition. 

On October 9, 2018, law enforcement agents conducted a search of the Residence pursuant to a judicially authorized search warrant.  In the basement, law enforcement agents found what appeared to be a functional explosive device weighing approximately 200 pounds (the “Explosive Device”).  FBI bomb technicians removed the Explosive Device from the basement of the Residence and transported it to a safe location.  Within the Residence, law enforcement agents also found, among other things, a fusing system for triggering explosive devices and what appeared to be empty canisters of black powder.

*                      *                     *

PAUL M. ROSENFELD, 56, of Tappan, New York, has been charged with one count of unlawfully manufacturing a destructive device, which carries a maximum sentence of 10 years in prison, and one count of interstate transportation and receipt of an explosive, which carries a maximum sentence of 10 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Berman praised the outstanding investigative work of the FBI’s New York Joint Terrorism Task Force, which consists principally of agents of the FBI and detectives of the New York City Police Department.  Mr. Berman also thanked the Rockland County Sheriff’s Office, the Stony Point Police Department, the Rockland County District Attorney’s Office, New York State Police, and the Orangetown Police Department for their valuable assistance.

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant United States Attorney Michael K. Krouse is in charge of the prosecution.

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the Indictment of CARLOS BATISTA JR., charging him with strangling and suffocating the woman he was dating. 

U.S. Attorney Geoffrey S. Berman said:  As alleged, Carlos Batista Jr. assaulted his girlfriend while on a cruise, grabbing and choking her until she passed out.  Thankfully others on the ship came to her aid.  Now Batista is back on New York soil and must answer for his alleged criminal actions.”

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

As alleged in the criminal Complaint and the Indictment, following a dispute on September 8, 2018, with his girlfriend, BATISTA grabbed, dragged, pushed, and pulled the victim through the hallways of the cruise ship.  When the victim screamed for help, BATISTA covered her mouth and restricted her breathing, at one point causing the victim’s body to go limp.  Ultimately, BATISTA dragged the victim into his cabin and continued to assault her until others on the ship, who responded to the screaming, were able to open BATISTA’s cabin door where they found BATISTA with his arm around the victim’s neck.

*          *          *

BATISTA, 22, of Elmhurst, New York, has been charged with one count of assault of a spouse, intimate partner, or dating partner by strangling or suffocating, which carries a maximum sentence of 10 years.  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 work of the FBI.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorney Ryan B. Finkel and Mathew Hellman are in charge of the prosecution.

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Philip Bartlett, Inspector-In-Charge for the New York Division of the U.S. Postal Inspection Service (“USPIS”), announced today that STEVEN L. HENNING, a certified public accountant who was a Managing Partner at a Manhattan accounting firm, was charged with wire fraud in connection with a scheme in which he falsely claimed to have entered into multimillion-dollar intellectual property deals and defrauded investors out of $2 million.  HENNING was arrested in St. Johns, Florida, yesterday afternoon and presented before a U.S. Magistrate judge in federal court in Jacksonville, Florida, this afternoon.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Steven Henning, a CPA at a Manhattan accounting firm, established his own firm called OpportunIP, which he allegedly told victims was a company specializing in assisting other entities in taking intellectual property to the market.  Henning allegedly induced victims to invest in OpportunIP by providing them with false documents showing OpportunIP’s involvement in multi-million dollar transactions that would reap millions of dollars in future profits.   Ultimately, the victims learned that the deals did not exist and they were victims of an alleged scheme to defraud them out of millions of dollars.”

USPIS Inspector-in-Charge Philip R. Bartlett said:  “Mr. Henning’s claims were nothing more than a bag of lies.  Law enforcement reminds investors to research all investment opportunities thoroughly to avoid being scammed.”

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

HENNING, a certified public accountant, was a managing partner at an accounting firm in Manhattan (the “Accounting Firm”).  He was the Partner-in-Charge of Advisory Services and served on the firm’s Executive Committee.  Previously, HENNING was employed as a Professor of accounting at a Texas university (the “University”) and he served as an Academic Fellow in the Office of the Chief Accountant at the U.S. Securities and Exchange Commission.

In June 2008, while employed at the Accounting Firm, HENNING formed what would later become known as OpportunIP, LLC (“OpportunIP”), a business that, at different times, had offices in Purchase and Tarrytown, New York.  HENNING was the Chief Executive Officer and owned an interest in OpportunIP through an entity known as the Henning Family Partnership (“HFP”).  Members of the Accounting Firm also owned interests in OpportunIP.

In May 2012, HENNING told one of his prior students from the University (“Victim-1”) about an endeavor he was involved in, OpportunIP.  HENNING described OpportunIP as a business venture through which HENNING established partnerships with owners or developers of intellectual property (“IP”) and assisted them in taking the IP to market in exchange for a substantial percentage share of future profits.  Over the next few years, HENNING provided Victim-1 with information about OpportunIP, including a series of IP opportunities that were in various stages of implementation.  For example, he claimed that OpportunIP had signed an escrow agreement with two multi-national corporations (“MNC-1” and “MNC-2”) relating to the “license-out” of certain IP that was being represented by OpportunIP (the “Escrow Agreement”).

In fall 2014, HENNING presented Victim-1 with an opportunity to invest in OpportunIP and asked Victim-1 to help secure bridge financing for an IP owner (“IP Owner-1”) who was in financial distress and needed temporary financing while he brought his IP to market.  HENNING represented that the IP owner needed a $500,000 loan to get him past certain financial hurdles and would repay the loan in six months. 

Thereafter, there were ongoing communications relating to Victim-1’s purchase of an interest in OpportunIP and, at around the same time, HENNING disclosed another multi-million dollar OpportunIP License-Out deal involving an agreement between an IP owner represented by OpportunIP and a global automobile manufacturer (“AM-1”).  HENNING provided Victim-1 with a copy of the License-Out Agreement (“AM-1 License Agreement) and an AM-1 corporate guarantee (the “AM-1 Guarantee”).  In addition, he provided an agreement in which a second global automobile manufacturer (“AM-2”) agreed to license the same technology (“AM-2 License Agreement”).

On October 31, 2014, HENNING listed IP deals for which he had “signed deals and minimum guarantees” and proposed that Victim-1 acquire 5 percent of OpportunIP for $2 million.  On November 2, 2014, Victim-1 indicated his willingness to proceed and on November 7, 2014, HENNING sent Victim-1 the purported License-in Agreement between OpportunIP and MNC-1 (“MNC-1 License Agreement”) and the “License-out Agreement” between OpportunIP and MNC-2 (“MNC-2 License Agreement”).  Three days later, on November 10, 2014, HENNING emailed Victim-1 the Escrow Agreement, in which MNC-1, MNC-2, and OpportunIP purportedly agreed that, pursuant to the license agreements, $35 million would be held in escrow and OpportunIP would receive $2 million no later than December 31, 2014.

The AM-1 Guarantee, AM-1 Licensing Agreement, and the Escrow Agreement were all fraudulent documents and the deals never existed.  However, based on the information and documentation provided by HENNING, on November 21, 2014, Victim-1 sent HENNING $500,000, which was the beginning of the funding for HENNING’s proposal for Victim-1 to purchase an interest in OpportunIP and was a loan to HENNING.  On November 26, 2014, Victim-1 had another $500,000 wired to a bank account controlled by IP Owner-1, in order to fund the purported loan to IP Owner-1.

HENNING and Victim-1 continued to communicate about HENNING’s proposal to have Victim-1 purchase an interest in OpportunIP.  HENNING proposed forming a new company with the same goals and business model as OpportunIP.  Victim-1 brought in his relative (“Victim-2”) and Victim-2’s family.  In spring 2015, Victim-1, Victim-2, another investor (“Victim-3”), and a corporate attorney working on the transaction on their behalf (“Attorney-1”), were communicating with HENNING about the creation of a new corporate entity through which HENNING would transfer control of the company from his Accounting Firm partners to HENNING and Victim-1. 

Thereafter, the Victims’ families agreed that they, through their joint and separate investment entities, would fund an additional loan to the new HENNING venture, based largely upon confidence in the purported MNC-1 and AM-1 agreements and HENNING’s additional representations of future business opportunities. 

After discussions relating to the structure of the company and requests for information from the Victims’ corporate attorney, on June 3, 2015, HENNING sent purported electronic bank records for the months of April and May for a bank account in the name of OpportunIP (the “OpportunIP Account”).  He represented that “the April statement shows the amount coming in from [MNC-1] ($2 million plus remaining interest from the escrow account).”  The bank statements were also fraudulent and there was no deposit of over $2 million during those months.

On October 9, 2015, Victim-1 and Victim-2 had $1 million transferred to an account in the name of an entity that was set up to be the holding branch of the new OpportunIP.  Thereafter, nearly all of the $1 million was transferred to accounts controlled by HENNING. 

Meanwhile, HENNING continued to make false representations about the supposed progress he was making in securing deals for OpportunIP and he indicated that he was ready to have Victim-1 become more involved in OpportunIP’s operations.  Consequently, in Summer/Fall 2016, Victim-1 left his job at an investment bank to become Chief Operating Officer of OpportunIP.  But, despite HENNING’s representations that business was going well, he insulated his alleged business contacts from direct interaction with Victim-1 or Victim-2 and provided them with excuses for why deals were delayed.  In addition, in at least one instance in November 2016, HENNING made it appear that he had scheduled a meeting between HENNING, Victim-1 and an MNC-1 Executive (the “MNC-1 Executive”) when he actually had not.  Victim-1 traveled to New York and came to the Purchase office of OpportunIP to subsequently meet with HENNING and the MNC-1 Executive.  But, that meeting was never actually scheduled.  To make it appear that it had been, on November 18, 2016, HENNING forwarded a fabricated email to Victim-1, which was purportedly sent from the MNC-1 Executive to HENNING, and canceled the meeting.

In August 2017, during a search of HENNING’s office at the Accounting Firm, the Escrow Agreement, the AM-1 Guarantee, and the AM-1 License-out agreement were all recovered and contained taped-on signatures of executives on their signature pages.

*                *                *

HENNING, 57, is charged with 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.

Mr. Berman praised the outstanding investigative work of the USPIS and the SEC Office of Inspector General. 

The case is being prosecuted by the Office’s White Plains Division.  Assistant U.S. Attorney Margery B. Feinzig is in charge of the prosecution.

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that GARY DAVIS, a/k/a “Libertas,” pled guilty today to conspiring to distribute massive quantities of narcotics, a charge arising out of his role as a member of the small administrative staff of “Silk Road.”  During its operation from 2011 until 2013, Silk Road was used by thousands of drug dealers and other unlawful vendors to distribute illegal drugs and other illicit goods and services to more than 100,000 buyers, and to launder hundreds of millions of dollars derived from those unlawful transactions.  DAVIS pled guilty before United States District Judge Jesse M. Furman.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Silk Road was a secret online marketplace for illegal drugs, hacking services, and a whole host of other criminal activity.  As he admitted today, Gary Davis served as an administrator who helped run the Silk Road marketplace.  Davis’s arrest, extradition from Ireland, and conviction should send a clear message: the purported anonymity of the dark web is not a protective shield from prosecution.”

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

From January 2011, up to October 2, 2013, the “Silk Road” website hosted a sprawling black-market bazaar on the Internet, where illegal drugs and other illicit goods and services were regularly bought and sold by the site’s users.  During its more than two-and-a-half years in operation, Silk Road was used by several thousand drug dealers and other unlawful vendors to distribute hundreds of kilograms of illegal drugs and other illicit goods and services to well over 100,000 buyers, and to launder hundreds of millions of dollars derived from these unlawful transactions.

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

From May 2013 up to June 2013, DAVIS served as a forum moderator for Silk Road.  From June 2013 up to October 2, 2013, DAVIS worked as a site administrator on Silk Road.  In his role as a site administrator, DAVIS’s responsibilities included (1) responding to customer support requests from Silk Road users who needed assistance with their buyer or seller accounts on the marketplace; (2) serving as an arbitrator by resolving disputes that arose between drug dealers and buyers on the site; and (3) enforcing the rules for doing business on Silk Road, which had been set by Ulbricht.  For instance, there was a rule against “out of escrow” sales—i.e., sellers and buyers arranging payments off the site to avoid paying Silk Road commissions.  When violations of this rule were discovered, DAVIS could terminate the vendor’s account, demote the vendor, or otherwise restrict the vendor’s privileges, and he typically reported such incidents to Ulbricht.  DAVIS was paid a weekly salary for his work as a site administrator.

*                *                *

DAVIS, 30, of Wicklow, Ireland, pled guilty to one count of conspiracy to distribute narcotics, which carries a maximum sentence of 20 years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  DAVIS is scheduled to be sentenced by Judge Furman on January 17, 2019 at 3:30 p.m.

*                *                *

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

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

 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that DAVID SHALAM was sentenced to 20 years in prison today for the sexual exploitation of minors. SHALAM pled guilty on March 15, 2018.  The sentence was imposed by United States District Judge Alvin K. Hellerstein.   

Manhattan U.S. Attorney Geoffrey S. Berman said:  “David Shalam previously admitted to the unconscionable crime of instructing others to engage in sexual acts with young children. Today’s sentence of twenty years in prison fittingly underscores the craven nature of Shalam’s acts. This Office will continue to aggressively bring perpetrators of crimes against children to swift and resolute justice.”

As set forth in the Superseding Information, the Complaint, and statements made during the plea proceeding:

Between April and December 2015, SHALAM paid a woman in Romania (referred to in the Complaint as “Jane Doe”) to participate in a series of live video chats over Skype, during which SHALAM directed Jane Doe to engage in specific sexually explicit conduct with her minor children, who at the time were approximately six and eight years old.  SHALAM referred to Jane Doe’s real time sexual abuse of her children as “shows,” at least one of which SHALAM recorded.

In conjunction with Romanian authorities, the FBI recovered logs of instant messages between SHALAM and Jane Doe over Skype, during which SHALAM and Jane Doe discussed the kinds of sex acts SHALAM wanted to see performed, when the children would be home from school so that the “shows” could take place, and the cost of each “show.” SHALAM wired payments to Jane Doe through a Western Union branch in midtown, Manhattan, a few blocks from the office where SHALAM worked for a retail clothing company.

In addition to his conduct with Jane Doe, SHALAM also engaged in similar conduct with an individual located in Colombia, who engaged in sexually explicit conduct with minor children during live video sessions with SHALAM in exchange for payments.

*                      *                      *

In addition to the prison term, SHALAM, 51, of Brooklyn, New York, was also sentenced to five years of supervised release.

Mr. Berman praised the investigative work of the FBI. 

This case is being handled by the Office’s General Crimes Unit.  Assistant U.S. Attorney Alison Moe is in charge of the prosecution.  

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that ABELL OUJADDOU pled guilty to participating in a scheme to trade in the stock of the Valspar Corporation (“Valspar”) based on material nonpublic information relating to another’s company’s efforts to acquire Valspar.  OUJADDOU pled guilty to one count of conspiracy to commit securities fraud before U.S. District Judge Jed S. Rakoff.

U.S. Attorney Geoffrey Berman said: “Abell Oujaddou, a salon owner and hairstylist, pled guilty today to receiving favorable material nonpublic information about Valspar’s stock, and then trading on that information before it became public, netting nearly $200,000 in illegal gains.  As he admitted today, Oujaddou – who had never previously traded Valspar stock – was given the tip by his co-defendant, who worked at a rating agency and had access to inside information about the acquisition of Valspar.  Our Office will continue to fight insider trading and ensure that those who cheat in our financial markets are held to account.”

According to the allegations contained in the Complaint and Indictment filed against OUJADDOU and his co-conspirators, and statements made in related court filings and proceedings:[1]

Rating Evaluation Services and the Insider

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

In March 2016, a credit rating agency in Manhattan (the “Firm”) assigned Sebastian Pinto-Thomaz, a credit ratings analyst, to work on an RES for the Sherwin-Williams Company (“Sherwin-Williams”) in advance of its contemplated but unannounced acquisition of the Valspar Corporation (“Valspar”).  In connection with this assignment, Pinto-Thomaz had access to confidential information about Sherwin-Williams’ acquisition of Valspar prior to the public announcement of the acquisition.  The Firm’s written policies prohibited the unauthorized disclosure of confidential information, which included the information about the possible acquisition of Valspar (the “Inside Information”).  During his tenure at the Firm, Pinto-Thomaz reviewed and certified his duties of loyalty and confidentiality to the Firm and its clients.

The Insider Trading Scheme

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

OUJADDOU is a Manhattan hairstylist and salon owner who has a close relationship with Pinto-Thomaz, as well as with a member of Pinto-Thomaz’s immediate family (the “Relative”).  Pinto-Thomaz repeatedly provided OUJADDOU with Inside Information about the Valspar acquisition, oftentimes shortly after Pinto-Thomaz became aware of the Inside Information through his work at the Firm.  From March 10, 2016, through March 18, 2016, OUJADDOU, who had never previously purchased Valspar or Sherwin-Williams’ securities, used the Inside Information he had received from Pinto-Thomaz to purchase 8,630 shares of Valspar stock.  After the acquisition was publicly announced, OUJADDOU sold his Valspar shares for approximately $192,080 in profits.  OUJADDOU admitted that he agreed to give Pinto-Thomaz a portion of OUJADDOU’s trading profits in exchange for the Inside Information.

Millul is a Manhattan jeweler who has a close personal friendship with Pinto-Thomaz and the Relative.  Pinto-Thomaz also provided Millul with Inside Information about the Valspar acquisition.  Although Millul had never owned a brokerage account in the United States and had never traded in U.S. securities prior to March 2016, he opened a brokerage account on March 13, 2012, and shortly thereafter purchased 480 shares of Valspar common stock.  On March 18, 2016, the last trading day before the acquisition was publicly announced, Millul also purchased 75 Valspar out-of-the-money call options. After the acquisition was publicly announced, Millul sold his Valspar stock and options for approximately $106,806 in profits. In December 2016, Millul gave Pinto-Thomaz $3,500 in cash.

Pinto-Thomaz Makes False Statements About OUJADDOU and Millul in Connection with a FINRA Inquiry

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

*                    *                    *

ABELL OUJADDOU, 55, of New York, New York, pled guilty to one count of conspiracy to commit securities fraud, which carries a maximum sentence of five 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 are provided here for informational purposes only, as any sentencing of the defendant would be determined by the Court.

OUJADDOU is scheduled to be sentenced on February 5, 2019 at 4 p.m.

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

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

 

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[1] As for the defendants who have pled not guilty, Sebastian Pinto-Thomaz and Jeremy Millul, the description of the charges set forth herein constitute only allegations.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that LEONARD MATHEWS was convicted by a jury of assault with a dangerous weapon in aid of racketeering, as well as firearms, ammunition, and crack cocaine distribution offenses.  The verdict followed a seven-day trial before the Honorable J. Paul Oetken.     

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

MATHEWS is a leader, or “big homie,” in the Gangsta Milla Bloods, or “GMB,” a subset of the United Bloods Nation gang that operates in the Bronx and engages in racketeering activity, including narcotics distribution.  On October 20, 2017, MATHEWS ordered a subordinate gang member to shoot someone with whom MATHEWS previously had a physical altercation.  The shooting resulted in the injury of three innocent bystanders on Morris Avenue between East Kingsbridge Road and East 196th Street in the Bronx.  On the night of the shooting, following a closed-door meeting with MATHEWS and other members of the gang, the same Bloods foot soldier that MATHEWS ordered to do the shooting stabbed and left for dead one of the principal witnesses to the shooting. 

*              *             *

MATHEWS, 27, of the Bronx, New York, was convicted of aiding and abetting or willfully causing assault with a dangerous weapon in aid of racketeering, which carries a maximum sentence of  20 years in prison; aiding and abetting or willfully causing the discharge of a firearm during and in relation to a crime of violence, which has a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison; aiding and abetting or willfully causing the possession of ammunition by a felon, which carries a maximum sentence of 10 years in prison; and distribution and possession with intent to distribute crack cocaine, which carries a maximum sentence of 20 years in prison.  MATHEWS will be sentenced by Judge Oetken on January 17, 2019.       

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

Mr. Berman praised the investigative efforts of the Bronx Violent Crimes Squad of the New York City Police Department.

The case is being prosecuted by the Office’s General Crimes Unit.  Assistant United States Attorneys Justin V. Rodriguez, Dominic A. Gentile, and Emil Bove are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Angel M. Melendez, Special Agent in Charge for U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), Ashan M. Benedict, the Special Agent in Charge of the New York Field Division of the Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), and James P. O’Neill, the Commissioner of the Police Department for the City of New York (“NYPD”), announced that five defendants—SIRA ABASSI, KENLEE GALVEZ, DAVID BRADFORD, JEREMIAS MUNOZ, and LUIS MONSANTO-GERMOSEN—pleaded guilty to participating in a conspiracy to commit Hobbs Act robbery during August and September of 2017.  Each defendant pleaded guilty before United States District Judge Deborah A. Batts.

U.S. Attorney Geoffrey S. Berman stated:  “During August and September of 2017, a rotating crew of armed robbers committed nearly a dozen armed robberies in New York City, victimizing businesses and homes alike.  During one home invasion robbery in the middle of the night, a victim was stabbed in the torso.  Thanks to our law enforcement partners, this robbery crew has been dismantled and all five defendants in this case have admitted to taking part in this brazen scheme.”

HSI Special Agent-in-Charge Angel M. Melendez said:  “This crew conducted nearly a dozen armed robberies.  They preyed on local businesses for their own greedy gain and used physical force whenever they deemed necessary.  HSI’s El Dorado Task Force, which includes task force officers from the Westchester County DA’s office, worked closely with the NYPD and ATF to apprehend these criminals, ensuring that they face justice for their criminal actions.”

ATF Special Agent-in-Charge Ashan M. Benedict said:  “The defendants were members of an organized ring of armed robbers that committed numerous brazen acts of violence all across the city.  Thanks to the investigative work of the ATF/NYPD Joint Robbery Task Force and the collaborative efforts of our state and federal partners, they will no longer prey on the innocent in their community.  ATF remains steadfast in its commitment to protecting citizens from violence and the lasting effects it has on communities.  I would also like to thank the United States Attorney’s Office for prosecuting this case.”

NYPD Commissioner James P. O'Neill said:  “Today’s guilty pleas reflect the highly-effective work of our NYPD investigators and our law enforcement partners at the Southern District, whose precise focus on the real drivers of crime in New York City is relentless. It is imperative that we continue to strongly collaborate in this way — that is how we will keep New Yorkers safe in every neighborhood.”

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

For approximately two months—August and September of 2017—a rotating crew of robbers committed at least 11 successful armed robberies in New York City and attempted several more.  They targeted primarily Asian-owned businesses in Brooklyn and Queens, such as billiards halls and internet cafes.  They also committed home invasion robberies of at least two residences in Queens believed to be locations of gambling operations.  The robbers typically conducted these robberies at night.  For each robbery, they were armed with at least one knife and BB-gun, which they brandished and pointed at victims.  At times, they forced victims to open cash registers at knifepoint, while clutching a victim’s neck.

During these robberies, the robbers physically injured at least two victims.  During a home invasion robbery, one victim—who was asleep when the robbers entered—woke up, resisted, and was stabbed in the torso during the ensuing scuffle; his bloodied shirt, and his doubling over in pain, are visible on video surveillance.  Second, during a robbery of a commercial establishment, a perpetrator hit a resisting victim in the head with a BB gun.  Over the course of the conspiracy, the robbers used force, and the threat of force, to take the following items from victims: a total of more than approximately $20,000, approximately 20 cellphones, credit cards, a wallet, driver’s licenses, a social security card, and other electronic devices.  They took cellphones so that victims could not call 911.

The scheme continued until the night of September 29, 2017, when four defendants—ABASSI, GALVEZ, BRADFORD, and MUNOZ—were caught red-handed en route to another robbery.  They were found in possession of, among other things, a BB-gun, two screwdrivers, three masks, two pairs of gloves, backpacks to fill with robbery proceeds, attire that matched that of the robbers on video from a robbery earlier that week, and a spiral notebook containing handwritten notes (e.g., “gold,” “straight cash,” “doctor,” and “drugs!”) including names, addresses, and physical descriptions of apparent robbery targets.

*              *             *

SIRA ABASSI, 21, of Bayside, New York, pled guilty to conspiracy to commit Hobbs Act robbery, which carries a maximum sentence of 20 years in prison. 

KENLEE GALVEZ, 23, of Flushing, New York, pled guilty to conspiracy to commit Hobbs Act robbery and to Hobbs Act robbery, each of which carries a maximum sentence of 20 years in prison.

DAVID BRADFORD, 31, of New York, New York, pled guilty to conspiracy to commit Hobbs Act robbery, which carries a maximum sentence of 20 years in prison.

JEREMIAS MUNOZ, 19, of Brooklyn, New York, pled guilty to conspiracy to commit Hobbs Act robbery, which carries a maximum sentence of 20 years in prison.

LUIS MONSANTO-GERMOSEN, 23, of Corona, New York, pled guilty to conspiracy to commit Hobbs Act robbery, 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 sentencings of the defendants will be determined by Judge Batts.  Sentencings are scheduled for different dates in 2019.

Mr. Berman praised the outstanding investigative work of the ATF, the Strategic Pattern Armed Robbery Technical Apprehension (“SPARTA”) Task Force, the NYPD, and HSI.

If you believe you were a victim of this offense, please contact the U.S. Attorney’s Office’s Victim/Witness Coordinators at (212) 637-2200.

This matter is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Jessica Greenwood and Michael D. Neff are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, James J. Hunt, Special Agent in Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced today the arrest of MICHAEL JONES and the unsealing of an Indictment charging him with distributing the heroin and fentanyl that resulted in the death of Diana Haikova in Manhattan on December 7, 2017.  The Indictment also alleges that JONES distributed heroin in Manhattan on February 14, 2018.  JONES was arrested this morning in Miami, Florida, by the DEA and NYPD, and will be presented tomorrow in federal court in Miami. 

U.S. Attorney Geoffrey S. Berman said:  “As alleged, the heroin and fentanyl Michael Jones distributed resulted in the tragic overdose of 29-year-old Diana Haikova.  Even more abhorrent, Jones allegedly continued to sell the same drugs that contributed to Haikova’s death.  Working with the NYPD and DEA, we will continue to target and charge drug dealers that profit from the lethal opioid epidemic that is killing so many people.”

DEA Special Agent-in-Charge James J. Hunt said: “This investigation led us into the underbelly of emo rap and its glorification of opioid use.  Today, a team of DEA agents and NYPD Detectives arrested Michael Jones, known as the ‘realnewjerzeydevil’ for allegedly distributing a fatal dose of fentanyl mixed with heroin.  Behind every lethal overdose is a victim whose death becomes a catalyst for raising awareness of the dangers of opioid misuse.  The DEA extends condolences to the victim’s family and reemphasizes our commitment to bringing drug dealers to justice to face the consequences of their crimes.” 

According to the allegations in the Indictment and statements made during court proceedings in this matter [1]:

On December 7, 2017, Diana Haikova was found dead in her apartment in Manhattan, New York.  Following an investigation by the NYPD and DEA, law enforcement agents identified JONES as the person who distributed heroin and fentanyl to Haikova on December 5, 2017, that resulted in her death.

As further alleged in the Indictment, JONES continued to distribute narcotics in Manhattan after Haikova’s death, and distributed heroin on February 14, 2018.

*                *                *

JONES, 24, of Camden, New Jersey, was charged with distribution and possession with intent to distribute heroin and fentanyl, and with distribution and possession with intent to distribute heroin.  JONES faces a maximum sentence of life in prison and a mandatory minimum sentence of 20 years in prison based upon his alleged distribution of the heroin and fentanyl that resulted in Ms. Haikova’s death.

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

Mr. Berman praised the outstanding investigative work of the NYPD and DEA in this case.  Assistance was provided by the DEA’s Miami Field Division and the DEA Tactical Diversion Squad-NY, comprising agents from the DEA, the NYPD, the New York State Police, New York State Department of Financial Services, and New York City Department of Investigation. 

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

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that WILLIAM BURBANK was arrested on wire fraud charges stemming from a scheme in which he solicited funds from investors based on false and fraudulent pretenses to purportedly invest in dinar, the currency of Iraq.  Upon obtaining the funds, BURBANK either lost or misappropriated them, and then lied to investors about the state of their investments.  BURBANK was arrested this morning, and will appear later this afternoon in federal court in the Eastern District of Virginia.  This case has been assigned to U.S. District Court Judge Richard M. Berman.

U.S. Attorney Geoffrey Berman said:  “William Burbank allegedly misrepresented to his investors – many of whom were veterans and their families – that their funds would be used to invest in Iraqi dinar, a foreign currency.  Instead, Burbank allegedly engaged in a classic Ponzi-like scheme to pay out early investors and use the rest for unauthorized trading or for his own personal expenses.  As with most alleged Ponzi schemes, the result was Burbank’s clients suffering a loss of their investments.  Now William Burbank stands charged of the crime of wire fraud and faces time in federal prison.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “As alleged, Burbank engaged in a multimillion-dollar fraud scheme that ultimately unraveled and led to the charges he faces today.  What makes this case particularly egregious is that many of Burbank’s alleged victims were U.S. military veterans and their families whose trust Burbank cultivated by shamelessly touting his own military service.  Fraud cases remain a priority for the FBI as we continue to identify and investigate those who commit financial crimes against unwitting victims.”

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

From February 2010 through June 2018, BURBANK engaged in a Ponzi-like scheme to defraud more than 150 individual investors, including many U.S. military veterans and their families, of more than $2 million by soliciting funds through false and fraudulent pretenses.  Specifically, BURBANK falsely claimed to potential investors that their funds would be used to trade in off-exchange foreign currency, namely, to purchase quantities of the Iraqi dinar, through an Iraqi bank headquartered in Bagdad.  In truth and in fact, upon receiving investor funds, BURBANK used those funds to trade in his own brokerage accounts, to make payments to earlier investors, and for his personal expenses, among other things.  Additionally, during the course of his scheme, BURBANK hid from investors the fact that he had misappropriated and lost their funds.  In order to conceal the truth from investors, BURBANK provided them false information regarding the status of their investment, and engaged in a Ponzi-like scheme in which he used money obtained from new investors to make redemption payments to previous investors.

BURBANK, 62, of Virginia Beach, Virginia, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

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

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant United States Attorney Christine I. Magdo is 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 therein should be treated as an allegation.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that TERRY JOHNSON, a former auditor and owner of a registered public accounting firm, was sentenced to five months’ imprisonment for falsifying records in an investigation within the jurisdiction of a federal agency.  Specifically, JOHNSON submitted falsely backdated documents to the United States Securities and Exchange Commission (“SEC”) during an SEC investigation into his auditing practices.  In response to SEC document requests, JOHNSON sent unsigned versions of the documents at issue to two of the companies he had audited and obtained backdated signatures on them.  JOHNSON then submitted the backdated documents to the SEC as though they were authentic, and later lied about his submission of these false documents during sworn SEC testimony.  JOHNSON pled guilty on May 31, 2018.

According to the Information, SEC public filings, and statements made during the plea proceeding:

At all relevant times, JOHNSON owned and ran an accounting firm that ostensibly audited the financial statements of publicly traded companies’ financial statements in order to ascertain whether the statements were accurate, truthful, and complete in accordance with Generally Accepted Accounting Principles (“GAAP”).  JOHNSON did so under the oversight of the SEC and the Public Company Accounting Oversight Board (“PCAOB”), a non-profit corporation created by the Sarbanes-Oxley Act of 2002.  JOHNSON was registered with the PCAOB.

Through his firm, JOHNSON audited several companies concerning their 2013 year-end financial statements, releasing audit reports for them in April 2014.  In August 2014, the SEC’s Division of Enforcement sent a voluntary document request to JOHNSON, announcing that it was conducting a non-public fact finding inquiry and requesting that JOHNSON provide certain categories of backup documentation and work papers concerning his audits as part of that inquiry.  In October 2014, the SEC issued a subpoena to JOHNSON, seeking substantially the same categories of documents, each of which was a critical part of the audit process.

JOHNSON provided documents responsive to the voluntary document request in September 2014 and additional documents responsive to both the voluntary request and the subpoena in November 2014.  The documents were supposed to have been those generated or obtained in the course of producing the April 2014 audit reports.  In truth, certain of the requested documentation did not exist.  Rather than admit this to the SEC, upon receiving the SEC’s requests for documents, JOHNSON created certain of the requested documents, sent unsigned copies of the documents to officials at the relevant client companies, and requested that the documents be signed and backdated to a date consistent with JOHNSON having obtained the signed documents during the course of his relevant audit work.  When JOHNSON received the signed and backdated documents, he submitted them to the SEC as though they were authentic.

In March 2015, JOHNSON, during sworn testimony before the SEC, lied repeatedly under oath concerning his submission of the backdated documents.  Ultimately, the SEC inquiry resulted in an SEC order sanctioning JOHNSON for committing securities fraud and improper professional conduct.  JOHNSON was assessed financial penalties and barred from appearing or practicing before the SEC as an accountant.          

*                *                *

In addition to the prison term, JOHNSON, 60, of Casselberry, Florida, was also sentenced to two years of supervised release.  

Mr. Berman thanked the SEC and praised the investigative work of the SEC’s Office of the Inspector General and the Criminal Investigators of the United States Attorney’s Office.

This case is being handled by the Office’s Securities and Commodities Task Force.  Assistant United States Attorney Martin S. Bell is in charge of the prosecution.

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,” pled guilty today to two felony counts of computer fraud 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 before U.S. District Judge Laura Taylor Swain.

U.S. Attorney Geoffrey S. Berman said:  “Billy Anderson hacked the websites of the New York City Comptroller and West Point, one of the most prestigious military academies in the world.  He has now pled guilty to those crimes and faces time in federal prison.  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 allegations contained in the Information to which ANDERSON pled guilty and statements made at the plea proceeding:

Website defacements are acts of computer intrusion in 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 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 Combating Terrorism Center at West Point and the NYC Comptroller.

On 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 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. 

ANDERSON also committed unauthorized intrusions of thousands of web servers located around the world by surreptitiously installing malicious code on victim web servers that provided ANDERSON with administrative rights to the victimized web servers, thereby enabling ANDERSON to commit defacements and to maintain persistent unauthorized access to the victimized web servers.  

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ANDERSON, 41, of Torrance, California, pled guilty to two counts of computer fraud for causing damage to a protected computer, each of which carries a maximum sentence of 10 years in prison.  Sentencing before Judge Swain is scheduled for February 13, 2019, at 2:00pm.

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

Mr. Berman praised the outstanding investigative work of the FBI.  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, the United States Attorney for the Southern District of New York, and Raymond Donovan, Special Agent in Charge of the Drug Enforcement Administration’s Special Operations Division, announced today that Carlos ALBERTO VALLADARES GARCIA, a former high-ranking member of the Honduran National Police, was sentenced yesterday to 14 years in prison for conspiring to import cocaine into the United States and for conspiring to possess firearms in furtherance of his drug-trafficking activities.  VALLADARES pled guilty April 24, 2018, and was sentenced by U.S. District Judge Lorna G. Schofield. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Carlos Alberto Valladares Garcia, a former Honduran National Police chief, worked from the inside to ensure a criminal enterprise operated with impunity.  Not only did he provide clearance for a drug trafficking organization’s drugs to flow through his country and into the United States, but Valladares – a sworn law enforcement officer – participated directly in drug-related murders and cover ups.  For his heinous acts, Valladares will serve 14 years in an American prison.”

Special Agent in Charge Raymond Donovan said:  “The sentencing of Carlos Alberto Valladares Garcia sends a strong message to drug traffickers across the globe.  As a member of the Honduran National Police, Valladares betrayed the trust of the people he served.  This case confirms that anyone who associates and benefits from drug trafficking can and will be held accountable.”

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

From approximately 1995 through 2013, VALLADARES served as a member of the Honduran National Police, holding positions including, among others, Chief of the Homicide Division in San Pedro Sula; Chief of Police for the city El Progreso, Yoro Department; and Chief of Police for the city of Quimistan, Santa Barbara Department.  Between at least approximately 2005 and 2013, VALLADARES worked with members of a drug-trafficking organization known as the Cachiros, which was a prolific and violent criminal syndicate that relied on connections to politicians, military personnel, and law enforcement to transport cocaine to, within, and from Honduras.  During that time, and while VALLADARES was purportedly enforcing the law as a police officer, VALLADARES participated in the Cachiros’ criminal enterprise by engaging in acts of violence, including several murders, and supporting their drug-trafficking activities.

For example, in approximately 2008, VALLADARES participated in a shootout in a nightclub that left several people dead.  Prior to the shooting, the then-leaders of the Cachiros—Devis Leonel Rivera Maradiaga and Javier Eriberto Rivera Maradiaga—and a Honduran congressman also working with the Cachiros agreed to kill an individual in retaliation for drug-related violence.  Leonel Rivera and Javier Rivera lured the intended victim to a nightclub in San Pedro Sula where a shootout occurred in which VALLADARES participated by firing his weapon.  Several members of the intended victim’s security team were killed during this incident.  VALLADARES also participated in additional acts of violence with the Cachiros.  In October 2011, VALLADARES drove Leonel Rivera to an airport in San Pedro Sula to observe a shootout between members of the Cachiros and rival drug traffickers, which left six people dead.  Prior to the shooting, Leonel Rivera told VALLADARES that he would be witnessing a “war.”  And in approximately 2012, VALLADARES helped Leonel Rivera kill two individuals by identifying them as perpetrators of a murder and assisting in their kidnapping.

VALLADARES also was a significant part of the Cachiros’ drug-trafficking operations.  On several occasions, VALLADARES accompanied Leonel Rivera during the transportation of drugs; was present at airstrips when substantial quantities of drugs were received by the Cachiros; and communicated with Leonel Rivera while the Cachiros transported drugs through Honduras.  VALLADARES also carried a firearm during some of this conduct and was present with security teams that were armed with assault rifles. 

To commit these crimes, VALLADARES took advantage of his position as a member of the Honduran National Police.  The abuse of his position began in approximately 2004 when VALLADARES met Leonel Rivera and agreed to end an investigation that had identified Leonel Rivera as the perpetrator of a homicide.  Over the next decade, and while VALLADARES rose through the ranks of the Honduran National Police and received awards for his purportedly honorable conduct, VALLADARES continued to use his position to assist the Cachiros.  For example, Valladares (i) convinced a witness to not press charges against Leonel Rivera for a homicide; (ii) provided information to the Cachiros concerning police checkpoints; (iii) recruited other Honduran National Police officers to assist the Cachiros; (iv) worked with other corrupt cops to remove a seized truck from a secure premises to recover approximately 100 kilograms of cocaine in exchange for approximately $80,000 in U.S. currency; and (v) recovered $2 million in U.S. currency in drug-trafficking proceeds that was seized by law enforcement and returned it to the Cachiros.

*                *                *

In addition to the prison term, VALLADARES, 43, was sentenced to four years of supervised release.            

Six other former members of the Honduran National Police, including, among others, Mario Guillermo Mejia Vargas, Victor Oswaldo Lopez Flores, Ludwig Criss Zelaya Romero, Juan Manuel Avila Meza, and Carlos Jose Zavala Velasquez, are also charged in this case with firearms and/or drug trafficking offenses relating to a separate conspiracy to import cocaine into the United States.  Each of those individuals have pled guilty in federal court, along with co-conspirator Fabio Porfirio Lobo.  On September 5, 2017, Lobo was sentenced to 24 years in prison; on February 6, 2018, Flores was sentenced to five years in prison; and on June 27, 2018, Velasquez was sentenced to 12 years in prison.  The remaining defendants await sentencing by Judge Schofield.  

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that DONQUE TYRELL, a/k/a “Polo Rell,” a member of a violent street gang in the Bronx called the “Big Money Bosses” (“BMB”), was sentenced today on racketeering, murder, and other charges.  TYRELL was sentenced to the mandatory minimum sentence of life plus 55 years in prison for, among other crimes, aiding and abetting the June 22, 2014, murder of 17-year-old Keshon Potterfield.  TYRELL was sentenced by United States District Judge Jed S. Rakoff.

U.S. Attorney Geoffrey S. Berman said:  “As a result of the BMB gang’s wave of violence, Keshon Potterfield – a teenager, just beginning his life – was senselessly killed.  Today, the defendant has been sentenced for his role in this terrible murder.  We will continue to work with our law enforcement partners to prevent gang violence and keep our streets safe.”

TYRELL was convicted of murder in aid of racketeering, racketeering conspiracy, and other offenses in connection with his membership in BMB after a six-day jury trial.

According to court documents, as well the evidence at trial and statements made during other public proceedings in this case:

BMB is a subset of the “Young Bosses,” or “YBz” street gang, which operates throughout New York City.  Between 2007 and 2016, members and associates of BMB committed numerous acts of violence against rival gang members in the Bronx – including murders, attempted murders, and armed robberies – and sold crack cocaine, marijuana, and oxycodone.   

TYRELL was a member of BMB.  On June 22, 2014, TYRELL and other members of BMB attended a birthday party in the backyard of a residence on East 232nd Street in the Bronx.  TYRELL obtained a gun from an associate at the party, pointed it in Keshon Potterfield’s direction, and then passed it to another BMB member who shot and killed Potterfield in connection with a gang rivalry.  TYRELL celebrated Potterfield’s murder in public Facebook postings and in rap music videos posted on YouTube in which he taunted rival gang members and threatened future violence.  

In addition to the murder in aid of racketeering conviction, TYRELL was convicted of conspiring to commit racketeering as a result of his membership in BMB, conspiring to sell narcotics, selling narcotics within 1000 feet of schools and playgrounds, using firearms in connection with the gang and drug offenses, an attempted assault with a firearm in connection with his BMB membership, and attempting to rob a livery cab driver in the Bronx by hitting him in the head with a firearm. 

*                      *                     *

TYRELL was arrested in this case as a result of a multi-year investigation by the New York City Police Department’s (“NYPD”) Bronx Gang Squad, the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations Violent Gang Unit (“HSI”), the New York Field Division of the Drug Enforcement Administration (“DEA”), and the Joint Firearms Task Force of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”) into gang violence in the Northern Bronx. 

Mr. Berman praised the outstanding work of the NYPD’s Bronx Homicide Task Force, the NYPD’s 47th Precinct Detective Squad, the NYPD’s Bronx Gang Squad, HSI, DEA, and ATF.  

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Rachel Maimin, Hagan Scotten, Jessica Feinstein, Drew Skinner, and Allison Nichols are in charge of the prosecution.

 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that EZRA CHOWAIKI was sentenced to 18 months in prison for his role in an elaborate scheme to defraud art dealers and collectors of millions of dollars.  CHOWAIKI fleeced his victims by entering into fraudulent agreements with dealers and collectors to buy or sell artwork through a private art gallery located on Park Avenue in New York, New York (the “Gallery”), and by using these dealers’ and collectors’ funds and artwork for unauthorized purposes, such as to repay other dealers to whom CHOWAIKI had outstanding debts.  CHOWAIKI pled guilty on May 3, 2018, before United States District Judge Jed S. Rakoff, who imposed today’s sentence.

U.S. Attorney Geoffrey S. Berman said:  “Ezra Chowaiki ran a multimillion-dollar fraud on art dealers and collectors around the country.  He sold clients’ artwork without authorization, and he took clients’ money for the purchase of artwork he never purchased.  Chowaiki has now been sentenced to prison, and ordered to forfeit the spoils of his scheme and make restitution to his victims.”

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

Until November 2017, EZRA CHOWAIKI was the president and the minority owner of the Gallery.  CHOWAIKI founded the Gallery in 2004 and thereafter used the Gallery to facilitate the purchase, sale, and consignment of works of fine art, as well as for hosting various art exhibitions featuring works of art and sculptures by well-known artists such as Pablo Picasso, Alexander Calder, Marc Chagall, Edgar Degas, and others.  CHOWAIKI lost control of the Gallery in November 2017 when the Gallery filed for bankruptcy and was taken over by a trustee to oversee its liquidation.

Between 2015 and 2017, through the Gallery, CHOWAIKI engaged in a scheme to deceive other dealers and collectors of fine artwork into sending him money or valuable artwork under the false pretenses that CHOWAIKI would engage in legitimate transactions such as the purchase, sale, or consignment of these and other artworks.  In truth, however, CHOWAIKI did not, and often could not, conduct the transactions as promised, and instead kept funds and artwork for himself and the Gallery, or sold or consigned them to others both in and outside the United States, without authorization.  Through these fraudulent transactions, CHOWAIKI fraudulently transferred millions of dollars’ worth of artwork.     

*                *                *

In addition to the prison term, CHOWAIKI, 49, of New York, New York, was sentenced to three years of supervised release and ordered to forfeit his interest in more than 20 works of art that had been fraudulently transferred, including works by Picasso, Degas, and Calder.  Restitution amount was deferred to a later date. 

Mr. Berman praised the outstanding work of the Federal Bureau of Investigation.  To date, the FBI has seized millions of dollars of artwork that was fraudulently transferred through CHOWAIKI’s scheme.  Any person who believes he/she is a victim of this crime is encouraged to send an email to NYArtCrime@fbi.gov.  Mr. Berman also thanked the Chapter 7 trustee and his attorneys at Togut, Segal & Segal LLP for their assistance.

The case is being prosecuted by the Office’s Money Laundering and Asset Forfeiture Unit.  Assistant U.S. Attorney Daniel M. Tracer is in charge of the prosecution.  

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that LEWIS STAHL, the owner of a Manhattan medical technology company, pled guilty to tax evasion based on his failure to report over $21 million in business income to the IRS, and his evasion of over $6.3 million in income taxes.  STAHL pled guilty before U.S. District Judge Ronnie Abrams.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Lewis Stahl, the owner of a successful medical technology company, earned over $21 million in profit.  However, despite amassing personal wealth in the tens of millions, Stahl grossly underreported his income to the IRS, reporting income as low as less than $10,000 for the 2011 tax year.  Stahl has now pled guilty to tax evasion and faces serious time in federal prison.  This case is a prime example that attempting to conceal earned income is far costlier than paying your fare share like honest taxpayers.”

According to the Information to which STAHL pled guilty, and statements made during the proceedings today:

Since at least in or about 2010, STAHL has owned and operated a medical technology company located in New York, New York (the “Medical Technology Company”), a limited liability company that develops and sells medical software applications.  The Medical Technology Company holds itself out as a provider of “computer ready” and “fully mobile” applications, which allow physicians to prescribe medications and to order and view diagnostic information, lab results, and cardiology/radiology images.

Between in or about 2010 and in or about 2014, the Medical Technology Company earned over $32 million in gross income.  These earnings resulted in over $21 million in business income to STAHL, which he accessed by using business bank accounts and business credit cards.  STAHL used this money to fund the purchase of personal items for himself such as clothing, jewelry, watches, real estate rentals, country club benefits, and a firearms collection.  Prior to 2015, despite earning this business income from the Medical Technology Company, STAHL failed to file individual tax returns reporting any of the income to the IRS.  The Medical Technology Company, likewise, failed to file partnership or corporate tax returns reporting any of the income to the IRS.

In or around March of 2015, an IRS revenue agent (the “IRS Revenue Agent”) contacted STAHL regarding his failure to file for the tax years 2010 through 2014, and asked STAHL to address the situation by filing delinquent Form 1040s for those years (the “Delinquent Returns”).  Shortly thereafter, STAHL retained a certified public accountant (the “Accountant”) to file the Delinquent Returns for STAHL.  STAHL, however, falsely stated to his Accountant, in sum and substance, and in part, that he was a “W-2” employee only of the Medical Technology Company, that his W-2 income was his only income, and that he had no ownership interest in the Medical Technology Company.  In truth and in fact, STAHL had an ownership interest in the Medical Technology Company, and had earned over $21 million in business income from the company, well beyond the income reported on his W-2s.

The Accountant subsequently filed the Delinquent Returns for STAHL, which, as a result of the lies that STAHL told the Accountant, were false and fraudulent.  Specifically, the Delinquent Returns falsely claimed that STAHL’s total income was $38,652 in 2010; $7,115 in 2011; $84,615 in 2012; $100,000 in 2013; and $100,000 in 2014.  The Delinquent Returns further falsely reported that STAHL did not receive any business income in any of these years, and failed to include a Schedule C detailing the significant amount of business income that STAHL earned from the Medical Technology Company.  STAHL’s failure to report over $21 million in business income to the IRS – first by failing to file returns, and then by causing the false Delinquent Returns to be filed by the Accountant – resulted in a loss to the IRS of over $6.3 million in taxes due and owing. 

            *                *                *

STAHL, 62, of Florida, pled guilty to one count of attempt to evade or defeat tax, which carries a maximum sentence of five years in prison.  STAHL has agreed to pay restitution to the IRS, representing the additional tax due and owing as a result of STAHL’s conduct, in the amount of at least $6,349,689.  Sentencing before Judge Abrams is scheduled for January 25, 2019, at 2:30.

The statutory maximum sentence is prescribed by Congress and is provided here for information purposes only, as any sentence imposed on the defendant will be determined by the judge.

Mr. Berman praised the outstanding investigative work of IRS-CI in this case.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Sarah E. Paul and Jennifer L. Beidel are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that MICHAEL WRIGHT pled guilty in Manhattan federal court to 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 before U.S. Magistrate Judge Stewart D. Aaron. 

U.S. Attorney Geoffrey S. Berman said:  “Michael Wright admitted today that he and his partners in crime conducted an elaborate ticket-buying scheme to defraud investors of millions of dollars.  From creating phony contracts to outright lies, Wright and his cohorts ensured that the money his backers thought they were investing actually went directly into his and his co-defendant’s pockets.  Now, Wright has pled guilty to his audacious crimes and faces time in prison for his misdeeds.”

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.

The Hedge Fund then sent $700,000 to an entity controlled by Meli (the “Meli Entity”) to finance the purchase of tickets.  Meli, however, then sent this money to a bank account controlled by WRIGHT, who then, on December 12, 2016, sent $200,000 to Carton’s personal bank account (the “Carton Bank Account”), which Carton then wired to a casino.  Also on December 12, WRIGHT sent another $500,000 to an individual who had previously lent Carton $500,000, which was due to be repaid that day.

Later in December 2016, Carton induced the Hedge Fund to wire $2 million to the Sports and Entertainment Company, based purportedly on an agreement he had with the Sports and Entertainment Company (the “Sports and Entertainment Company 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, 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. After the money was rewired to that account, WRIGHT wired $966,000 to WRIGHT’s personal bank account and $700,000 to the Carton Bank Account.  Carton then wired approximately $188,000 from the Carton Bank Account, including at least $133,000 in wires to several casinos.

*                *                *

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 is scheduled for trial on October 29, 2018, before the U.S. District Court Judge Colleen McMahon.  The pending charges against Carton are merely accusations, and he is presumed innocent unless and until proven guilty.

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 MICHAEL SCRONIC, the former manager of the Scronic Macro Fund (the “Fund”), was sentenced to 96 months in prison today in connection with his scheme to defraud the Fund’s 45 investors of more than $22 million.

U.S. Attorney Berman said:  “For years, Scronic lied to his investors about his Fund’s return, but he has now been brought to justice.  We will continue to pursue aggressively frauds like this one, which caused millions of dollars in losses, in order to preserve investor confidence in our capital markets.”

According to the allegations contained in the Indictment and the defendant’s plea hearing:

SCRONIC raised more than $22 million from 45 investors in the Scronic Macro Fund (the “Fund”) from April 2010 to the October 2017.  SCRONIC told investors that the Fund had positive returns in all but one of the 22 quarters from January 2012 through June 2017, with the highest reported quarterly return being 13.4 percent in the fourth quarter of 2014.  In reality, the Fund lost money in 28 out of 29 quarters of its operation, with a total net loss of about $15.7 million before commissions.  The Fund’s only positive quarter was its first quarter of operation in 2010.

As a result of these trading losses, the total assets SCRONIC claimed the Fund had in each quarter far exceeded its actual assets.  For example, SCRONIC sent account statements to investors that together showed total fund assets of $21.7 million as of June 30, 2017.  In actuality, on that date, the combined balance of SCRONIC’s brokerage and bank accounts was just $102,376.

In addition to losing money on trades, SCRONIC used investor money for personal expenses.  His personal expenditures averaged more than $500,000 annually, including monthly rent of $12,275 for his primary residence in Westchester, New York, mortgage payments on a vacation home in Stratton, Vermont, fees for multiple beach and country clubs, including a $30,000 payment to the Stratton Mountain Club in July 2017, and miscellaneous items charged to credit cards in amounts averaging more than $15,000 a month.

As of the summer of 2017, SCRONIC was unable to pay redemptions requested by Fund investors because he did not have sufficient funds on hand.  He told investors seeking redemptions that he would pay redemptions only at quarter-end, that he was too busy and preoccupied with a relative’s medical condition to pay redemptions, and that he was unavailable to pay redemptions because he was on vacation.  In some cases, SCRONIC ignored redemption requests.

*                *                *

In addition to the prison term, SCRONIC, 46, of New York, New York, was sentenced to

3 years of supervised release, and ordered to pay $22,026,427 in restitution to his victims.

Mr. Berman praised the investigative work of the Federal Bureau of Investigation and also thanked the Securities & Exchange Commission for its assistance in the investigation.

The criminal case is being prosecuted by the Office’s White Plains Division.  Assistant U.S. Attorneys James McMahon and Daniel Loss are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that earlier today, ROBERT PIZARRO and JUAN RIVERA were convicted of murdering a witness to prevent reporting to law enforcement, kidnapping conspiracy, kidnapping resulting in death, robbery conspiracy, robbery, and firearms offenses, arising out of the murder of federal cooperating witness Robert Bishun on September 20, 2016. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Just over two years ago, Robert Bishun was violently kidnapped and brutally murdered by the defendants because he was a federal cooperating witness.  Today, the jury in this case returned a unanimous verdict holding the defendants accountable for their heinous crimes.  We hope that today’s result brings some small measure of peace to Robert Bishun’s family.”

According to the proof introduced at trial:

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

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

*              *             *

PIZARRO, 38, of the Bronx, faces a mandatory minimum sentence of life in prison plus 32 years.  RIVERA, 41, also of the Bronx, faces a mandatory minimum sentence of life in prison plus 7 years.  

Mr. Berman praised the investigative efforts of the DEA and the NYPD, and the Special Agents of the United States Attorney’s Office for the Southern District of New York.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Michael C. Mikulka, Special Agent-in-Charge, New York Region, U.S. Department of Labor Office of Inspector General (“DOL-OIG”), Thomas Licetti, Acting 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 ROCCO FAZZOLARI, who previously served as the president of a labor union (the “Union”) and a trustee of the Union’s employee welfare benefit plan (the “Plan”), pled guilty today to embezzling from the Union and the Plan and to participating in a kickback scheme involving the Plan.  Through these embezzlement and kickback schemes, FAZZOLARI and a co-conspirator illegally obtained a total of more than $1.3 million from the Union and the Plan.  FAZZOLARI pled guilty before United States District Judge Analisa Torres.

U.S. Attorney Geoffrey S. Berman said:  “Rocco Fazzolari abused his position as the president of a labor union to line his own pockets.  As he admitted today, he embezzled funds and he engaged in a kickback scheme that cost an employee benefit plan – which was established to provide medical care for union members – more than $1 million.  Our Office is committed to prosecuting those who misuse positions of trust for their own gain.”

DOL-OIG New York Region Special Agent-in-Charge Michael C. Mikulka said:  “While president of a labor union, Rocco Fazzolari stole union assets to pay for lavish personal items, including designer clothing, spa treatments, and a second vehicle for his family, betraying the members of the union.  We will continue to work with our law enforcement partners and the U.S. Department of Labor’s Office of Labor-Management Standards and the Employee Benefits Security Administration to protect the financial integrity of labor unions and their benefit plans.”

DOL-EBSA Acting New York Regional Director Thomas Licetti said:  “Plan administrators and trustees of union sponsored health plans have a fiduciary obligation under ERISA to provide health benefits to union members and plan participants.  In this case, the plan administrator intentionally broke that promise in order to serve his own interest.  EBSA will pursue strong enforcement action against those responsible for depriving employees of the benefits to which they are entitled.”

DOL-OLMS New York Regional Director Andriana Vamvakas said:  “Combatting financial fraud and investigating embezzlement of union funds helps safeguard financial integrity in labor unions.  This is a major priority for the U.S. Department of Labor’s Office of Labor-Management Standards.  We will work with our investigative partners to identify criminal violations and pursue appropriate legal action whenever anyone puts personal financial gain ahead of the best interests of union members.”

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

From at least in or about 2012 through in or about June 2016, FAZZOLARI repeatedly used Union funds to pay for his personal expenses, including payments for spa treatments, a gym membership, a second car, medical expenses, dues for an actors’ union, personal credit card charges, and ATM cash withdrawals.  FAZZOLARI then “reimbursed” the Union with funds from the Plan.  The Plan was established to provide, among other things, medical, surgical, and hospital care or benefits to Union members.  In total, FAZZOLARI embezzled more than $128,000 from the Union over approximately four years, and improperly transferred more than $89,000 from the Plan to “reimburse” the Union. 

In addition, from at least in or about 2000 through in or about June 2016, FAZZOLARI engaged in a kickback scheme with another individual (“CC-1”).  Using Plan funds, FAZZOLARI paid CC-1’s company, Acclaim Administrators, Inc. (“Acclaim”), more than $1.1 million for purported services, even though Acclaim did not actually provide the Plan with these services.  CC-1 then kicked back the vast majority of these payments to FAZZOLARI.

Under the terms of his plea agreement, FAZZOLARI has agreed to a 13-year ban, pursuant to 29 U.S.C. §§ 504 and 1111, which generally prohibits him from, among other things, being employed by a labor union or employee benefit plan.  FAZZOLARI has also agreed to forfeit $941,828 and to pay restitution to the Union and the Plan.

*              *             *

ROCCO FAZZOLARI, 58, of Manhasset Hills, New York, pled guilty to three counts: embezzlement from a labor organization, embezzlement from an employee benefit plan, and conspiracy to embezzle from an employee benefit plan, each of which carries a maximum sentence of five years in prison. 

The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  Sentencing before Judge Torres is scheduled for January 28, 2019, at 11:40 a.m.

Mr. Berman praised the Department of Labor’s Office of Inspector General, Employee Benefits Security Administration, Office of Chief Accountant, and Office of Labor-Management Standards for their outstanding investigative work.  Mr. Berman also thanked the Federal Bureau of Investigation and the Department of Justice’s Labor-Management Racketeering Unit of the Organized Crime and Gang Section for their assistance in this case.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JOSEPH DATELLO pled guilty today before United States District Judge Cathy Seibel to numerous acts of racketeering, including attempting to kill a witness against him.  In May 2017, DATELLO and 18 other members and associates of the Luchese Family of La Cosa Nostra were arrested and charged in a nine-count Indictment.  Since the unsealing of the Indictment, DATELLO and 12 other defendants have pled guilty, and have been or will be sentenced by Judge Seibel.

U.S. Attorney Geoffrey S. Berman said:  “Witness safety is paramount to ensuring the prosecution of criminal organizations.  Thanks to the FBI’s Joint Organized Crime Task Force, who uncovered Datello’s crimes without risking the security of the witness, Datello now faces life in prison for threatening a federal witness.”

According to the plea agreement DATELLO signed as part of his guilty plea, his statements when pleading guilty, the allegations in the Indictment, and statements made in related court filings and proceedings:

In 2002, an individual (the “Witness”) who had been working with DATELLO and Steven L. Crea, a leader in the Luchese Family, provided information to state and federal authorities concerning DATELLO’s and Crea’s participation in racketeering activity.  That information, and other evidence, led to the successful prosecution of DATELLO, Crea, and others.  In October 2016, DATELLO learned information that he thought revealed the Witness’s current whereabouts.  DATELLO travelled to what he believed was the Witness’s address and waited there, trying to find the Witness.  Had DATELLO found the Witness, he intended, with the blessing of Crea, to kill the Witness.

Crea is also charged with attempting to have the Witness killed, and other crimes, and is scheduled to begin trial before Judge Seibel in 2019.

*                      *                     *

DATELLO, 67, of Staten Island, New York, pled guilty to one count of conspiracy to commit racketeering, and as part of that plea admitted racketeering acts including the attempted murder of the Witness, narcotics trafficking, and collecting debts through the threat of violence.  These crimes carry a maximum sentence of life in prison.  DATELLO will be sentenced before Judge Seibel.

The allegations contained in the Indictment as to Crea and the other defendants who have not pled guilty are merely accusations, and these defendants are presumed innocent unless and until proven guilty.

Mr. Berman praised the outstanding investigative work of the FBI’s Joint Organized Crime Task Force, which comprises agents and detectives of the FBI, NYPD, Homeland Security Investigations, and the Waterfront Commission of New York Harbor.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JOSEPH PERCOCO, the former executive deputy secretary to the Governor of the State of New York, was sentenced to six years in prison for soliciting and accepting more than $315,000 in bribes in return for taking official state action to benefit energy company Competitive Power Ventures (“CPV”) and Syracuse-based real estate developer COR Development (“COR”).  On March 13, 2018, PERCOCO was convicted of two counts of honest services fraud conspiracy and one count of bribery following an eight-week trial before United States District Judge Valerie E. Caproni, who imposed today’s sentence.   

U.S. Attorney Geoffrey S. Berman said:  “Joseph Percoco, the former executive deputy secretary to the Governor, was a powerful New York State official who sold his influence and his office in exchange for more than $300,000 in bribes.  For those crimes, he will now serve time in federal prison.  Today’s sentence sends a strong message that public officials who violate their duties to faithfully serve the citizens of New York will be held accountable for their corrupt actions.”

Judge Caproni stated during the sentencing:  “I hope this sentence will be heard in Albany.”

According to the evidence introduced at trial, other proceedings in this case, and documents previously filed in Manhattan federal court:                                                                

PERCOCO, who served as the executive deputy secretary to the Governor between January 2012 and mid-2014, and again in 2015, abused his official position and extensive influence within the executive branch of New York State (the “State”) by seeking and accepting bribe payments from executives at companies that were seeking benefits and business from the State, in exchange for PERCOCO’s use of his official authority and influence to benefit those companies. 

PERCOCO solicited the bribe payments from executives at two clients of Todd Howe – CPV and COR – both of which had retained Howe as a consultant to help them obtain official State action.  In email correspondence between PERCOCO and Howe, PERCOCO and Howe referred to the bribe payments as “ziti,” a reference to a term for money used by the characters in the television show “The Sopranos.” 

Bribes from CPV

PERCOCO, Howe, and others conspired for PERCOCO to receive more than $287,000 in bribe payments in exchange for PERCOCO’s official assistance for CPV on an as-needed basis. 

State action was critical to CPV’s business.  Starting as early as 2010, CPV provided personal benefits to PERCOCO, including expensive meals and a Hamptons fishing trip, in an effort to cultivate access to PERCOCO.  In response to CPV’s requests for official State assistance, PERCOCO, who was experiencing financial difficulties at the time, requested that CPV hire his then-unemployed wife.  In or around the end of 2012, CPV executive Peter Galbraith Kelly Jr. created a position for PERCOCO’s wife that paid approximately $90,000 per year while requiring PERCOCO’s wife to do little work.  In exchange for these payments, PERCOCO agreed to use his official position and influence, and did in fact use his official position and influence, to help CPV with specific State matters as the opportunities arose. 

Among other things, PERCOCO agreed to use his official position and influence to assist the CPV’s efforts to obtain (i) a valuable agreement from the State allowing CPV to buy lower-cost emissions credits in New York for a power plant proposed to be built in New Jersey and (ii) a long-term power purchase agreement with the State guaranteeing a buyer for the power to be produced at a power plant proposed to be built in New York, which was expected to save CPV approximately $100 million in development costs.

CPV’s payments to PERCOCO’s wife were concealed in various ways to hide their true source.  For example, monthly payments to PERCOCO and his wife were made through a consultant who worked for CPV in order to disguise the source of the payments.  For his part, PERCOCO concealed the criminal scheme by failing to include CPV as the source of payments on his State-mandated financial disclosure forms. 

Bribes from Aiello and the Syracuse Developer

Beginning in early 2014, PERCOCO was also paid bribes totaling approximately $35,000 from COR.  These bribe payments were orchestrated by Steven Aiello, the COR president.  Aiello arranged for the payment of these bribes in exchange for PERCOCO’s official assistance for COR on an as-needed basis. 

Specifically, PERCOCO agreed to, and did, take official action for the benefit of COR to (a) reverse an adverse decision by the Empire State Development Corporation, which is the State’s main economic development agency, that would have required COR to enter into a costly labor peace agreement for a development project in Syracuse, (b) free up a backlog of more than $14 million in State funds that had already been awarded to COR but were delayed in payment, and (c) secure a substantial pay raise for Aiello’s son, who worked in the executive chamber.

To disguise the nature and source of the bribe payments, COR’s bribes to PERCOCO were funneled through bank accounts and a shell company set up by Howe.

*                *                *

In addition to the prison term, PERCOCO, 49, of South Salem, New York, was sentenced to three years of supervised release.  Restitution and forfeiture amounts will be determined at a later date.

PERCOCO is the first defendant who has been sentenced after being convicted in this case.  Steven Aiello, who was found guilty at the same trial of one count of honest services fraud conspiracy, will be sentenced on November 29, 2018.  Peter Galbraith Kelly Jr., who pled guilty on May 11, 2018, to one count of conspiracy to commit wire fraud, will be sentenced on October 16, 2018.     

Mr. Berman praised the outstanding work of the Buffalo Field Office of the Federal Bureau of Investigation and the New York Office of the Internal Revenue Service, Criminal Investigation, as well as the Special Agents from the U.S. Attorney’s Office, who jointly conducted the investigation.

This case is being handled by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys Janis Echenberg, Robert Boone, David Zhou, and Matthew Podolsky are in charge of the prosecution.       

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that MARK CINA, a former comptroller of two Poughkeepsie companies, was sentenced to 41 months in prison for mail fraud and tax evasion.  CINA pled guilty on April 11, 2018, before U.S. District Judge Cathy Seibel, who imposed today’s sentence. 

U.S. Attorney Geoffrey S. Berman stated:  “Mark Cina embezzled millions of dollars to line his pockets at the great expense and suffering of his trusting employer, a Hudson Valley entrepreneur and small businessman.  Theft like the defendant’s is intolerable, and today’s sentencing shows that an employee’s choice to engage in such a crime is a choice to go to prison.”

As set forth in the Complaint and Information in the case, other court filings, and during court proceedings:

During all times relevant to the case, two manufacturing companies were in operation, with plants located in the Town of Poughkeepsie (“Company-1” and “Company-2,” collectively the “Companies”).  Company-1 designed and manufactured solar energy products such as solar-powered roof shingles.  Company-1’s work included, for example, a solar-powered ring of lights encircling the top of MetLife Stadium, in New Jersey.  Company-2 fabricated molded plastic.

The Companies were founded by an entrepreneur (“Victim-1”).  Victim-1 was the primary investor in, and owner of, the Companies. 

In 2008, Victim-1 hired CINA as a part-time bookkeeper for Company-1.  In 2010, CINA became employed full-time for the Companies as comptroller.  In his position, CINA was responsible for the day-to-day financial operations of the Companies.  CINA had authority to sign checks for the Companies and to carry and use the Companies’ credit cards and ATM cards.  CINA remained so employed until August 2015, when he was terminated.

In September 2015, Victim-1 appeared at a New York State Police barracks in Dutchess County.  Victim-1 reported, in part and substance, that a former employee of the Companies had stolen company funds.  Thereafter, the New York State Police commenced an investigation, which federal law enforcement officers later joined.  As summarized in the Complaint, the investigation yielded voluminous evidence showing that CINA had defrauded Victim-1, via the Companies, of millions of dollars over the course of at least seven years.  CINA did so by, among other things, using the Companies’ funds for himself to gamble, pay his rent, drive rental cars, dine out, get his car washed, bail out an arrestee, and, in one instance, pay a phone charge for an inmate’s call.

According to, among other things, business and financial records obtained during the criminal investigation, and a forensic report prepared by an accounting firm, CINA made the following disbursements of the Companies’ funds, from 2009 through 2015, which were not authorized, and which had no apparent or recorded business purpose:

• Payments to a mini-mart (approximately $457,000)
• Payments to a gas station (approximately $180,000)
• Payment of CINA’s rent (approximately $25,000)
• Payment of CINA’s personal credit card bills (approximately $125,000)
• Checks payable to CINA (non-payroll) (approximately $599,000)
• Checks payable to cash (approximately $282,000)
• Cash withdrawals (approximately $825,000)
• Additional unauthorized charges (including charges to pharmacies, medical and dental facilities, a rental car company, a car wash facility, an inmate phone service, and for purported loans from family members of CINA)

*                *                *

In addition to the prison term, CINA, 56, of Poughkeepsie, New York, ordered to pay restitution in the total amount $3,385,665 and forfeiture in the total amount $2,548,820.

Mr. Berman praised the outstanding investigative efforts of the United States Postal Inspection Service, the New York State Police, the Internal Revenue Service, Criminal Investigation, and the Office’s Special Agents.  He also thanked the Dutchess County District Attorney’s Office for their assistance. 

The case is being handled by the Office’s White Plains Division.  Assistant U.S. Attorneys Kathryn Martin and Benjamin Allee are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that REYNALDO LOPEZ, a former New York City Police Department (“NYPD”) officer, was sentenced to four years in prison in connection with narcotics, credit card fraud, identity theft, and counterfeiting offenses.  LOPEZ previously pled guilty to the charges on February 16, 2018, in Manhattan federal court before United States District Judge Edgardo Ramos, who also imposed LOPEZ’s sentence.

U.S. Attorney Geoffrey S. Berman said:  “Reynaldo Lopez betrayed and abused the trust placed in him by the NYPD and the people of New York.  He swore to protect the public from criminal activity, only to turn around and participate in significant crimes of his own, including not only credit card and identity fraud, but also agreeing to distribute multiple kilograms of heroin.  His sentence today is a reminder that this Office and its law enforcement partners will continue to fight this kind of corruption, and that no one is above the law.”

In sentencing LOPEZ, Judge Ramos said: “[LOPEZ] is an individual that we as a society trusted to enforce our laws, trusted him enough to give him a weapon, trusted him enough to go out into the streets and protect our communities, our children, our businesses, etc.  He is an individual with excellent resources who absolutely did not have to do what he did, absolutely did not have to engage in these crimes.”

According to the allegations in the Information to which LOPEZ pled guilty, a criminal complaint filed against LOPEZ, and other filings made in the case, and statements made during the plea and other proceedings in the case:

During the time periods charged, LOPEZ was an NYPD police officer assigned to the Anti-Terrorism Unit of the Transit Bureau.

On November 29, 2017, LOPEZ attempted to traffic approximately three kilograms of heroin from a location in New Jersey to the Bronx, New York.  LOPEZ agreed to transport and protect what he believed were three kilograms of heroin to a drug dealer located in the Bronx under LOPEZ’s protection as an NYPD police officer.  During the attempted transaction, LOPEZ described having previously engaged in narcotics trafficking and stated that “with me it’s guaranteed, they know for sure, they just send me out, do your thing, get an address, meet the person, do your thing, and I’m gone.”  LOPEZ was arrested when he attempted to make the delivery.

In addition, from May 2017 through November 2017, LOPEZ engaged in a scheme to create and utilize fraudulent credit cards, including by using stolen identity information.  He was part of a counterfeit credit card operation whose participants used stolen or otherwise illicitly obtained personal identifying information to create fraudulent credit cards, and then used those cards to purchase merchandise for themselves.  As part of his role in these crimes, LOPEZ also possessed and used a device that applies electronic data to blank physical credit cards.

Also from May 2017 through November 2017, LOPEZ possessed and used counterfeit United States currency.  In multiple recorded conversations, LOPEZ discussed his possession of counterfeit money and provided a sample to an undercover NYPD officer, stating that he previously had successfully used the counterfeit currency.

*                      *                      *

In addition to the prison term, LOPEZ, 27, of Brooklyn, New York, was sentenced to three years of supervised release.

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

This case is being handled by the Office’s Public Corruption Unit.  Assistant U.S. Attorney Alex Rossmiller is in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, James P. O’Neill, Commissioner of the New York City Police Department (“NYPD”), and William Cheung, the Acting Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today the arrest of STEPHEN SHERAK in connection with a scheme to fraudulently deposit checks in various national banks, including a $3.3 million corporate tax refund check that SHERAK had fraudulently obtained.  SHERAK was arrested this morning and will be presented today in Manhattan federal court before U.S. Magistrate Judge Ona T. Wang. 

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Stephen Sherak deposited thousands of dollars’ worth of counterfeit checks into accounts for his own use.  Additionally, Sherak allegedly caused the filing of a falsified tax return that resulted in a $3.3 million fraudulent refund.  Thanks to the coordinated efforts of the NYPD and the IRS, Sherak will now have to answer for his alleged dishonest acts.” 

IRS-CI Acting Special Agent-in-Charge William Cheung said:  “Filing false tax returns to receive a fraudulent tax refund steals from all Americans.  IRS-CI Special Agents will investigate and bring these perpetrators to justice.”

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

From 2017 through June 2018, SHERAK deposited or attempted to deposit in several national banks approximately $270,000 worth of checks he knew to be counterfeit or that otherwise would not clear due to insufficient funds.

In addition, from February 2018 through May 2018, SHERAK caused the filing of a fraudulent corporate tax return for an entity SHERAK incorporated and controlled, Gavnet, Inc., by falsely claiming that his company had prepaid millions of dollars in taxes and was therefore owed a tax refund.  Upon receiving a tax refund check in the amount of approximately $3.3 million, SHERAK worked with others to open new bank accounts at a number of different financial institutions in order to deposit the refund check, before the fraud was ultimately detected.

*                      *                     *

SHERAK, 41, of Philadelphia, Pennsylvania, is charged with one count of bank fraud, which carries a maximum sentence of 30 years in prison, and one count of conspiracy to commit theft of government funds, which carries a maximum sentence of five years in prison.  The statutory maximum penalties 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.

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

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

 

---

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that LAJBAR LAJAWARD KHAN, a/k/a “Haji Lajaward,” and AMAL SAID SAID ALAM SHAH, a/k/a “Haji Zar Mohammad,” were sentenced to 15 years and 131 months in prison, respectively, for conspiring to import large quantities of heroin into the United States, and for distributing heroin intending that the heroin would be imported into the United States.  On September 12, 2018, LAJAWARD was sentenced to 15 years in prison, and on September 17, 2018, SAID was sentenced to 131 months in prison.  LAJAWARD and SAID pled guilty to a Superseding Indictment on June 26, 2017, before U.S. District Judge Kimba M. Wood, who also imposed these sentences.

U.S. Attorney Geoffrey S. Berman said: “The defendants conspired and attempted to import heroin into the United States from Afghanistan.  Their ‘sample’ shipment alone was three kilograms of heroin, and they spoke of the ability to import a thousand kilos.  We will continue to work with the DEA and international law enforcement partners to curb the importation of potentially lethal heroin.”

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

LAJAWARD and SAID, two Afghan nationals, were part of a drug trafficking organization (the “DTO”) based in Afghanistan that produced and distributed large quantities of heroin.  Between approximately May 2014 and June 2015, LAJAWARD and SAID worked together in an effort to import large quantities of heroin – in the range of 1,000 kilograms – from Afghanistan into the United States. 

In August 2014, LAJAWARD began communicating by telephone with an individual he understood to be a New York-based narcotics trafficker, who was in fact an undercover agent of the DEA (the “UC”).  LAJAWARD, in sum and substance, told the UC that he was interested in supplying large quantities of high-quality heroin for importation into the United States, where it would be sold for millions of dollars.  In the course of the calls between LAJAWARD and the UC, LAJAWARD introduced the UC to one of LAJAWARD’s heroin-trafficking associates, SAID.

On October 30, 2014, LAJAWARD and the UC met in person in Dubai, United Arab Emirates.  In the course of that recorded meeting, in sum and substance, LAJAWARD continued to express his interest in supplying large quantities of heroin to the UC for importation into the United States, and LAJAWARD offered to supply a sample of heroin to the UC, as a test shipment to be sold in the United States.  In the months following that meeting in Dubai, in the course of recorded telephone calls with the UC, LAJAWARD and SAID arranged to supply a three-kilogram sample of heroin in Kabul, Afghanistan (the “Heroin Sample”).

During those recorded calls, LAJAWARD, SAID, and the UC agreed that the delivery of the three-kilogram Heroin Sample would occur in Kabul on or about January 15, 2015.  On that day, an undercover Afghan law enforcement officer, acting at the direction of the DEA and posing as an associate of the UC, met with LAJAWARD and one of LAJAWARD’s associates in Kabul and received delivery of the three-kilogram Heroin Sample.  In parallel, over 1,000 miles away in Dubai, the UC met with another associate of LAJAWARD to pay for the Heroin Sample, as had been arranged during recorded calls between the UC and LAJAWARD.  At that meeting, which was recorded, the UC paid $10,500 to the associate, at the direction of LAJAWARD, for the Heroin Sample. 

About two weeks later, on January 28, 2015, SAID met with the UC in Dubai.  During that recorded meeting, in sum and substance, SAID discussed the Heroin Sample that the DTO had recently supplied for importation into the United States, stated that the DTO was prepared to supply 1,000 kilograms of heroin to the UC, and indicated that it would take the DTO only about 15 days to produce 100 kilograms of heroin for shipment to the United States.

On April 2, 2015, SAID met again with the UC in Dubai.  During that recorded meeting, SAID and the UC negotiated additional details of the agreement for the DTO to supply massive quantities of heroin for importation into the United States, including that LAJAWARD and SAID would share in the profits generated from the sale of the heroin in the United States.  SAID also agreed, in sum and substance, that he and LAJAWARD would meet the UC in Thailand, for purposes of finalizing the heroin deal, and for LAJAWARD and SAID to receive their share of the profits generated from the purported sale in the United States of the three-kilogram Heroin Sample previously supplied by the DTO.

In June 2015, LAJAWARD and SAID traveled to Bangkok, Thailand, to meet with the UC.  On June 13, 2015, LAJAWARD and SAID were arrested in Bangkok by Thai authorities based on the charges in this case, at the request of U.S. authorities.  LAJAWARD and SAID were later brought to the United States to face the charges against them.

*                *                *

In addition to the prison terms, LAJAWARD, 53, and SAID, 47, both of Afghanistan, were each sentenced to five years of supervised release. 

Mr. Berman praised the outstanding investigative work of the DEA’s Special Operations Division; the DEA’s Kabul, Dubai, Tokyo, and Bangkok Country Offices; the DEA’s New York Field Division; the CNP-A Sensitive Investigative Unit of the Afghan Ministry of the Interior; the Dubai Police Department and the Anti-Narcotics Unit of the Emirati Ministry of Interior; Japan’s National Police Agency and the Saitama Prefectural Police; Thailand’s Sensitive Investigative Unit of the Royal Thai Police Narcotics Suppression Bureau; Thailand’s Attorney General’s Office; Thailand’s Ministry of Foreign Affairs; INTERPOL; the U.S. Department of State; and the U.S. Department of Justice’s Office of International Affairs.

This case is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Rebekah Donaleski and George D. Turner 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 Division of the Federal Bureau of Investigation (“FBI”), and Donald Halmy, the Chief of the Peekskill Police Department, announced that EDWARD HOLLIMAN was sentenced to 135 months in prison for conspiring to distribute crack cocaine in Peekskill, New York, between 2013 and 2017.  Holliman pled guilty on April 24, 2018, before U.S. District Court Judge Cathy Seibel, who imposed today’s sentence.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Edward Holliman used a housing project in Peekskill as his personal market, peddling his drugs with no regard to their addictive destruction.  Thanks to the coordinated efforts of the FBI and the Peekskill Police Department, Holliman’s marketplace is closed for good.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “The malignant creep of illegal drugs and violence into the once peaceful suburbs is a major focus of our FBI Westchester County Safe Streets Task Force.  Our goal is to build strong and lasting partnerships with local law enforcement agencies like Peekskill Police to be a force multiplier, stopping the dealers and pushers from further infecting the community.”

Peekskill Police Chief Donald Halmy said:  “Edward Holliman has been a persistent threat to the public safety of Peekskill residents and a major distributor of crack cocaine in Bohlmann Towers for the past 15 years.  His arrest and successful prosecution will surely serve to improve the quality of life of residents of the building.  I’d like to praise the City of Peekskill detective division, FBI Safe Streets Task Force and the Office of the United States Attorney for their tireless efforts in this investigation.”

According court filings and statements made at public court proceedings:

Over the course of many years, HOLLIMAN supplied and distributed crack cocaine in and around Bohlmann Towers, a large housing project in Peekskill, New York.  To facilitate his narcotics distribution business, HOLLIMAN had several “workers,” co-conspirators whom Holliman managed and supervised, and who distributed crack cocaine that HOLLIMAN supplied to them to users.  HOLLIMAN used his mother’s apartment in Bohlmann Towers to store crack cocaine.  During the execution of a search warrant at that apartment on the day of HOLLIMAN’s arrest in October 2017, law enforcement recovered more than 50 grams of cocaine belonging to HOLLIMAN.  Between 2013 and 2017, HOLLIMAN sold and distributed between 2.8 and 8.4 kilograms of crack cocaine as part of the charged conspiracy.

*                *                *

In addition to the prison term, HOLLIMAN, 63, of Peekskill, New York, was sentenced to five years of supervised release and ordered to pay forfeiture in the amount of $30,000.

Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation and the Peekskill Police Department. 

This case is being handled by the Office’s White Plains Division.  Assistant United States 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 PETER B. JOHNSON was sentenced to 30 months in prison for leading a scheme to defraud a group of lenders (the “Banks”) by submitting false “borrowing base” reports designed to secure and maintain a $400 million line of credit for his family’s cocoa trading company, Transmar Commodity Group Ltd. (“Transmar” or the “Company”).  JOHNSON pled guilty on March 9, 2018, to one count of conspiracy to commit bank fraud and wire fraud affecting a financial institution.  The sentence was imposed by United States District Judge Jed S. Rakoff.

U.S. Attorney Geoffrey S. Berman said:  “Peter B. Johnson conspired to defraud lenders by misrepresenting how much credit-eligible collateral his company had.  When the company went bankrupt, it owed its lenders over $360 million.  For his role in lying to lenders, Johnson has been sentenced to prison.”

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

Transmar was a closely held, family-run cocoa commodity trading company founded by the PETER B. JOHNSON’s father, Peter G. Johnson.  PETER B. JOHNSON was an officer of Transmar, as well as responsible for the operations of Transmar affiliate Euromar Commodities GMBH (“Euromar”). 

From at least 2014 through at least December 2016, Transmar maintained a credit facility from the Banks that varied from approximately $250 million to approximately $400 million.  To secure and maintain these hundreds of millions of dollars in credit, PETER B. JOHNSON, Peter G. Johnson, Transmar’s Vice President of Finance, Thomas Reich, and others schemed to misrepresent material information about Transmar’s finances, making it appear that Transmar had far more credit-eligible collateral than it actually had.

The scheme centered on periodic “borrowing base” reports (“BB Reports”) that the Banks required Transmar to submit, sometimes as frequently as weekly, as a condition to continued credit extension.  The BB Reports were supposed to accurately reflect and quantify those portions of Transmar’s collateral that qualified for financing under the terms of credit agreements between Transmar and the Banks. 

Beginning no later than 2014, Transmar employees, acting with JOHNSON’s knowledge and at his direction, manipulated the BB Reports and related documents to give the false impression that Transmar had sufficient eligible collateral to support the amount of credit the Banks were extending.  The manipulation involved, among other devices, counting inventory that Transmar had already sold or was otherwise ineligible for inclusion, counting accounts receivable for which Transmar had already received payment, recording fake accounts receivable, and arranging “circle” transactions through which amenable third-party intermediaries agreed to “buy” goods from Transmar with Transmar’s own money, funneled to the third parties through Euromar. 

Following the discovery of the fraud, Transmar filed for bankruptcy in December 2016.  At that time, the Company owed the Banks approximately $360 million.

*                      *                      *

In addition to the prison term, PETER B. JOHNSON, 39, of Morristown, New Jersey, was also sentenced to two years of supervised release, and ordered to forfeit $1,790,000.

Peter G. Johnson, 69 of Harding Township, New Jersey was sentenced by Judge Rakoff on August 13, 2018 to three years in prison.

Thomas Reich, 60, of Montvale, New Jersey, pled guilty to the same offenses for his participation in the scheme to defraud the Banks.  He is scheduled to be sentenced on September 21, 2018.

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

This case is being handled by the Office’s Money Laundering and Asset Forfeiture Unit.  Assistant U.S. Attorneys Benet J. Kearney and Daniel M. Tracer are in charge of the prosecution.   

 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that VINCENT BRUNO pled guilty today before United States Magistrate Judge Paul E. Davison to attempting to kill, and conspiring to kill, a Bronx man in 2012.  In May 2017, BRUNO and 18 other members and associates of the Luchese Family of La Cosa Nostra were arrested and charged in a nine-count Indictment, for their involvement in offenses including racketeering, murder, attempted murder, narcotics trafficking, and gun crimes.  Since the unsealing of the Indictment, BRUNO and nine other defendants have pled guilty, and have been or will be sentenced by U.S. District Judge Cathy Seibel.

U.S. Attorney Geoffrey S. Berman said:  “Bruno’s attempt to murder a man at the behest of his mob superiors has ended where it should:  With Bruno behind bars.  We will continue to work with the FBI and our other partners in law enforcement to stamp out the remnants of La Cosa Nostra.”

According to the superseding information to which BRUNO pled guilty, his statements when pleading guilty, the allegations in the Indictment, and statements made in related court filings and proceedings:

In 2012, armed members and associates of the Bonanno Family of La Cosa Nostra forced their way into a Bronx social club controlled by the Luchese Family.  During the ensuing confrontation, one of the Bonanno Family associates (the “Associate”) acted in a manner that a leader of the Luchese Family, Steven L. Crea (“Crea Sr.”), perceived as a personal affront. To avenge this supposed offense, Crea Sr. ordered his son, Steven D. Crea (“Crea Jr.”), to have the Associate killed.  Crea Jr. passed the order to Paul Cassano Jr., a/k/a “Paulie Roast Beef,” and BRUNO.  On a subsequent night, BRUNO and Cassano travelled to the Associate’s Bronx residence.  There BRUNO, armed with a gun, tried to find the Associate in order to kill him, but failed.  The dispute between the rival families was then resolved before the murder was carried out.

In conjunction with this incident, Cassano pled guilty to attempted assault in aid of racketeering in 2017.   Crea Sr. and Crea Jr. are also charged with attempting to have the Associate killed and other crimes, and are scheduled to begin trial before Judge Seibel in 2019.

*                      *                     *

BRUNO, 34, pled guilty to one count of attempted murder in aid of racketeering, and one count of conspiracy against the United States.  In total, the counts to which BRUNO pled guilty carry a maximum sentence of 15 years.  BRUNO will be sentenced before Judge Seibel.

The allegations contained in the Indictment as to Crea Sr., Crea Jr., and the other defendants who have not pled guilty are merely accusations, and these defendants are presumed unless and until proven guilty.

Mr. Berman praised the outstanding investigative work of the FBI’s Joint Organized Crime Task Force, which comprises agents and detectives of the FBI, NYPD, Homeland Security Investigations, and the Waterfront Commission of New York Harbor.  He also thanked the Queens County District Attorney’s Office.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and James D. Robnett, the Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today the unsealing of an indictment charging RICHARD JOSEPHBERG with five counts of tax evasion and four counts of willful failure to file tax returns.  JOSEPHBERG was arrested earlier this morning and is expected to be presented and arraigned later this afternoon in Manhattan federal court before United States District Judge Richard J. Sullivan. 

U.S. Attorney Geoffrey S. Berman said:  “Richard Josephberg allegedly defrauded the IRS and evaded taxes by disguising more than $1.5 million in income as long-term capital gain.  He also allegedly failed to file tax returns for four years.  Working with IRS Criminal, we are determined to ensure that everyone meets his tax obligations.”

IRS-CI Special Agent in Charge James D. Robnett said:  “The IRS enforces the nation’s tax laws and Special Agents are experts at following the money through multiple entities and complex structures. People who create elaborate schemes designed to mislead the IRS run the very high risk of arrest and criminal prosecution.”

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

In late 2010, JOSEPHBERG began working for an investor relations firm (“Firm-1”) in Manhattan.  Through the owner of Firm-1, JOSEPHBERG secured a commission-based arrangement with another investment firm (“Firm-2”), which agreed to pay JOSEPHBERG a commission of approximately 15 percent of any profit generated by Firm-2 on financing deals originated by JOSEPHBERG.  For originating one such financing deal, JOSEPHBERG was entitled to commission payments totaling approximately $1.57 million in 2011.  After receiving payments totaling approximately $35,725 in his own name, JOSEPHBERG directed Firm-2 to issue the remaining the commission payments in the name of a newly formed nominee corporate entity called “Almorli Advisors Inc.”  JOSEPHBERG opened a new bank account in the name of Almorli Advisors Inc. (“Almorli Bank Account-1”), and deposited payments totaling approximately $1.53 million into that account.

In March 2012, while preparing to file 2011 federal income tax returns, JOSEPHBERG took steps to evade paying hundreds of thousands of dollars in federal income taxes by disguising and concealing the type of income that JOSEPHBERG had received from Firm-2.  On or about March 27, 2012, JOSEPHBERG formed a second entity called “Almorli Advisors NY LLC.”  JOSEPHBERG caused his accountant to prepare a false 2011 partnership income tax return, Form 1065, in the name of Almorli Advisors NY LLC (the “2011 Form 1065”), listing JOSEPHBERG as a 99 percent partner and JOSEPHBERG’s son as a one percent partner.  To evade a substantial part of the income taxes due and owing for 2011, JOSEPHBERG caused the 2011 Form 1065 falsely to report the commission payments from Firm-2, totaling approximately $1,574,922, as a long-term capital gain, rather than ordinary income.  JOSEPHBERG’s purported 99 percent share of this false long-term capital gain flowed through to JOSEPHBERG’s 2011 individual income tax return, Form 1040.  JOSEPHBERG’s fraudulent misclassification of this income resulted in a reported tax liability that was hundreds of thousands of dollars lower than the true tax liability because individual long-term capital gains were taxed at a significantly lower rate than ordinary income.   

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

*                      *                      *

JOSEPHBERG, 71, of Greenwich, Connecticut, is charged with five counts of tax evasion, each of which carries a maximum sentence of five years in prison, and four counts of willful failure to file tax returns, each of which carries a maximum sentence of one year in prison. 

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

Mr. Berman praised the 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.

 

---

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that CARSON MORRIS, a former New York State Correction Officer, was sentenced yesterday by U.S. District Judge Kenneth M. Karas to 40 months in prison for the November 12, 2013, beating of Kevin Moore, a 54-year-old inmate at the Downstate Correctional Facility in Fishkill, New York, and for falsifying records to cover up the beating.

MORRIS pled guilty on November 1, 2017, to assaulting Moore in violation of Moore’s rights under the United States Constitution by repeatedly striking him as he lay restrained on the floor.  Moore was hospitalized for approximately two weeks with multiple serious injuries from the beating, including facial bone fractures, five broken ribs, and a collapsed lung.  MORRIS also pled guilty to conspiring to violate Moore’s civil rights, as well as to falsifying and conspiring to falsify Department of Corrections and Community Supervision (“DOCCS”) records concerning the assault.

 Manhattan U.S. Attorney Geoffrey S. Berman said:  “Carson Morris participated in a brutal gang-style assault of inmate Kevin Moore, who lay defenseless on the prison floor begging for mercy.  Morris and other officers then made up a false cover story to hide what they did, repeatedly lying in Corrections Department records and even creating a phony injury.  All American citizens, including prisoners, are protected by the Constitution.  Correction officers are not above the law, and when they beat inmates in their custody and lie about it, they are criminals and will be punished as criminals.”

Four other former New York State Correction Officers were charged in connection with the assault and cover-up.  On November 20, 2017, Kathy Scott and George Santiago Jr. were convicted following a two-week jury trial of violating and conspiring to violate Moore’s Constitutional rights by repeatedly kicking and punching him as he law restrained on the floor; as well as falsifying and conspiring to falsify records in an attempt to cover up the beating.  On July 21, 2018, Judge Karas sentenced Scott, who was a sergeant and the commanding officer on the scene, to 100 months in prison, and Santiago to 87 months in prison.  Former Correction Officers Andrew Lowery and Donald Cosman pled guilty to the same charges pursuant to cooperation agreements with the United States on July 27, 2016, and August 31, 2016, respectively.  On July 25, 2018, U.S. District Judge Nelson S. Román sentenced Lowery to a three-year term of supervised release.  Cosman’s sentencing has not yet been scheduled.

According to the evidence introduced at trial:

On November 12, 2013, Kevin Moore, then 54 years old, was brought to the 1D Housing Unit at Downstate Correctional Facility to be housed overnight.  Moore objected to his cell assignment and a verbal dispute ensued between Moore and a group of corrections officers.  After Moore yelled, in sum and substance, “I’m a monster,” multiple officers, including MORRIS, forced Moore to the floor, restrained him, and then proceeded to assault Moore as he lay there, repeatedly punching and kicking Moore in the head and body.  At no time did Moore ever try to attack, touch, or even make a threatening gesture toward any of the officers.  While Moore lay defenseless on the floor, MORRIS repeatedly kneed, punched, and kicked Moore in the torso.  Santiago, who was wearing boots, delivered a soccer-style kick to Moore’s face and continued to strike Moore after Moore was handcuffed.  During the beating, Santiago laughed and taunted Moore, yelling “Who’s the monster now.” 

Scott, who was a sergeant and the supervising officer on the scene, was present for the entire beating and was legally required to stop the excessive force being used by her subordinates.  Instead of taking action to stop the unlawful violence, Scott encouraged it, ordering an officer to hold Moore down on the floor while other officers, including MORRIS, continued to knee, kick, and punch him.  During the beating, Moore repeatedly cried out in pain and begged the officers to stop hurting him.

Immediately after the beating, MORRIS and other officers, led by Scott, engaged in an elaborate cover-up of the crime they had committed.  They made up a false cover story that Moore had attacked Cosman and that MORRIS had to strike Moore once in the head to save his fellow officer.  To make this lie believable, the officers claimed that Moore had injured Cosman’s back by pushing him backward onto a table.  But because nothing of the sort had occurred, they created a phony injury.  Specifically, Santiago hit Cosman repeatedly on the back with a baton, MORRIS rubbed the area with his hand to make the baton marks look worse, and Scott photographed the fake injury.  Scott then prepared a false Use of Force Report describing the incident and incorporating the photos and false statements from herself and other officers, including MORRIS, and submitted the false report to her superiors.  Scott, Santiago, and MORRIS also pressured other officers to lie to investigators about what had occurred.

Moore was severely injured, suffering multiple facial fractures, five broken ribs, and a collapsed lung, among other injuries.  According to the medical evidence, Moore received at least four forceful blows to the face and torso, including one crushing strike to the right eye that was consistent with a kick from a boot.

*                *                *

MORRIS, 33 of Coconut Creek, Florida, was sentenced to 40 months in prison and one year of supervised release.  MORRIS must surrender to the custody of the Bureau of Prisons on December 10, 2018.

Mr. Berman praised the investigative work of the Federal Bureau of Investigation and the Special Agents at the United States Attorney’s Office.  Mr. Berman also thanked the DOCCS Office of Special Investigation and the Dutchess County District Attorney’s Office for their assistance in the investigation.

This case is being handled by the Office’s Civil Rights Unit and the White Plains Division.  Assistant U.S. Attorneys Andrew Dember and Pierre Armand are in charge of the prosecution.

Robert Khuzami, the Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced today that DAVID BLASZCZAK, a political intelligence consultant, was sentenced to 12 months and one day in prison; CHRISTOPHER WORRALL, a government employee at the Centers for Medicare and Medicaid Services (“CMS”), was sentenced to 20 months in prison; and THEODORE HUBER and ROBERT OLAN, two partners and analysts at Deerfield Management Company, L.P., a healthcare-focused hedge fund in New York, New York (“Deerfield”), were each sentenced to 36 months in prison, respectively, in connection with their convictions following a four-week jury trial. 

BLASZCZAK, WORRALL, HUBER, and OLAN each participated in a scheme to obtain confidential information from CMS, which was then used execute profitable trades at Deerfield.  Specifically, as part of the scheme, BLASZCZAK obtained confidential and nonpublic information from CMS employees, including his friend, CHRISTOPHER WORRALL, who worked at CMS, and who breached his duties as a CMS employee by providing confidential information to BLASZCZAK.  BLASZCZAK then provided this material nonpublic information in advance of market-moving CMS announcements to employees at Deefield, including HUBER, OLAN, and Jordan Fogel, who recommended trades on the basis of the information.  Fogel, a former partner and analyst at Deerfield, previously pled guilty and is cooperating with the Government.  As a result of these trades, Deerfield reaped more than $7 million in profits.

In a separate scheme, BLASZCZAK also obtained confidential and nonpublic CMS information about cuts in CMS’s reimbursement rates for home health providers, and provided that information to Christopher Plaford, a portfolio manager at Visium Asset Management, L.P., another healthcare-focused hedge fund in New York, New York (“Visium”).  Plaford then used BLASZCZAK’s information to execute trades, resulting in approximately $330,000 in profits.  Plaford has previously pled guilty to this conduct and is also cooperating with the Government. 

Deputy U.S. Attorney Robert Khuzami said:  “Blaszczak, Worrall, Huber, and Olan conspired to steal highly sensitive and confidential government information and profit from that theft.  This scheme was carried out through Blaszczak’s purported ‘political intelligence’ firm, but nothing about this scheme was intelligent.  When you steal confidential information from the Government and use it to make illicit millions in the stock market, you will get caught.”           

According to the allegations in the charging documents, the evidence and testimony at trial, and statements made in court proceedings:

CMS

CMS, a component of the United States Department of Health and Human Services (“HHS”), administers Medicare and Medicaid, among other things.  CMS is also responsible for setting Medicare reimbursement rates for healthcare providers.  CMS spends more than $1 trillion annually and pays approximately one-third of the country’s health expenditures.  Accordingly, CMS rulemaking decisions, including decisions that affect how much the federal government will pay to reimburse medical providers for services rendered, have a substantial, market-moving impact on publicly traded companies that depend on government healthcare spending. 

WORRALL began working at CMS in or about 1999.  Beginning in January 2012, WORRALL worked in the Director’s Office for the Center for Medicare (“CM”), which gave WORRALL broad access to CMS’s confidential deliberations about upcoming reimbursement decisions.  WORRALL also served as a project manager for a confidential CMS database that contained CMS’s most up-to-date claims data that CMS used to inform its decision-making. 

David Blaszczak

At all relevant times, BLASZCZAK served as a consultant at a number of Washington, D.C.-based firms that, in exchange for a fee, provided so-called “political intelligence,” which included analysis about how changes in Government reimbursement rates would impact publicly traded healthcare-related companies.  Before becoming a political intelligence consultant, BLASZCZAK worked at CMS, eventually serving as a special assistant to the CMS Administrator.  BLASZCZAK met WORRALL while the two worked at CMS. 

As a former CMS employee, BLASZCZAK was well aware of CMS’s rules governing the dissemination of nonpublic information. 

Deerfield Management Company, L.P. 

At all relevant times, Deerfield managed multiple hedge funds specializing in healthcare-related investments.  As of 2017, Deerfield had more than $7 billion in assets under management.  HUBER, OLAN, and Fogel were partners and analysts at Deerfield, where their job was to analyze investment decisions and recommend potentially profitable trades for Deerfield.  Deerfield’s compliance manual prohibited its employees from committing insider trading.  

The Scheme to Convert and Use Confidential CMS Information 

The Scheme

From at least in or about 2009 through in or about 2014, BLASZCZAK, WORRALL, HUBER, OLAN, Fogel, and others participated in a scheme to convert to their own use confidential and material nonpublic information from CMS concerning, among other things, CMS’s internal deliberations regarding coverage and reimbursement decisions.           

During this time period, Deerfield retained BLASZCZAK as a consultant who provided political intelligence related to, among other things, the content, likelihood, and timing of CMS reimbursement decisions.  As part of the scheme, HUBER, OLAN, and Fogel encouraged BLASZCZAK to obtain confidential and material nonpublic information from CMS insiders.  As HUBER, OLAN, and Fogel knew, these CMS insiders included BLASZCZAK’s former colleagues with whom he had close personal relationships, who were prohibited from disclosing such information to CMS outsiders.

BLASZCZAK obtained material nonpublic information from his close friend and former CMS colleague WORRALL.  BLASZCZAK and WORRALL were friends since their time working together at CMS.  BLASZCZAK also frequently offered to help WORRALL find lucrative private sector employment opportunities, in exchange for WORRALL giving BLASZCZAK confidential government information.  

BLASZCZAK conveyed the information obtained from WORRALL to HUBER, OLAN, and Fogel, who – knowing that BLASZCZAK had obtained the information improperly from a CMS insider – used the information to trade.  In exchange for being provided with this inside information, HUBER, OLAN, and Fogel caused Deerfield to pay BLASZCZAK more than $800,000 in consulting fees.

The Verdict 

The jury found BLASZCZAK guilty of 10 counts, HUBER and OLAN guilty of five counts each, and WORRALL guilty of two counts.  Specifically, with respect to Count One (conspiracy to convert government property, to commit securities fraud, and to defraud the United States relating to Deerfield) and Count Two (conspiracy to commit wire fraud and securities fraud relating to Deerfield), the jury found BLASZCZAK, HUBER, and OLAN guilty.  With respect to Count Three (conversion of government property) and Count Nine (wire fraud), the jury found all four defendants guilty.  With respect to Count Ten (securities fraud), the jury found BLASZCZAK, HUBER, and OLAN guilty. With respect to Count Thirteen (conversion of government property), Count Fifteen (wire fraud), Count Sixteen (securities fraud), Count Seventeen (conspiracy to convert government property and to defraud the United States relating to Visium), and Count Eighteen (conversion of government property), the jury found BLASZCZAK guilty on each count.

*                      *                      *

In addition to his prison sentence, BLASZCZAK, 42, of Isle of Palms, South Carolina, was sentenced to two years of supervised release, including one year of home confinement, and ordered to forfeit $727,500 and pay restitution to CMS in the amount of $1,644.26.

WORRALL, 40, of Linthicum Heights, Maryland, was sentenced to one year of supervised release, and ordered to pay restitution to CMS in the amount of $1,644.26.

HUBER, 56, of Westport, Connecticut, was sentenced to two years of supervised release, and ordered to forfeit $87,078, pay restitution to CMS in the amount of $1,644.26, and pay a fine of $1.25 million.

OLAN, 47, of Rumson, New Jersey, was sentenced to two years of supervised release, and ordered to forfeit $98,244, pay restitution to CMS in the amount of $1,644.26, and pay a fine of $1.25 million.

Mr. Khuzami praised the work of the Federal Bureau of Investigation and U.S. Department of Health and Human Services, Office of the Inspector General, and thanked the Securities and Exchange Commission for its assistance. 

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant United States Attorneys Ian McGinley and Joshua A. Naftalis are in charge of the prosecution.  

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that the United States Attorney’s Office for the Southern District of New York has extended the deadline for receiving applications from qualified individuals to serve as Court-appointed monitor in connection with a proposed consent decree submitted to the Court for approval in the case of United States v. New York City Housing Authority, 18 Civ. 5213 (WHP).  Specifically, applications will be accepted until the date that the Court enters the proposed consent decree.

Applications will continue to be considered on a rolling basis as they are submitted, and applicants are encouraged to submit applications as soon as possible.  In addition, individuals who have already submitted applications are invited to supplement those applications as appropriate.

Pursuant to the terms of the consent decree, the Government will propose a monitor for approval by the Court.  As set forth at greater length in the proposed consent decree, the monitor will be responsible for the remediation of extensive health and safety deficiencies in NYCHA housing, as well as oversight and reform of NYCHA management, controls, and operations.  

The application and related materials, and instructions for submission, are available at https://www.justice.gov/usao-sdny/monitors-receivers-claims-administrators. 

The consent decree remains subject to review and approval by the Court.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeny Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the return to its rightful owner of a painting looted by the Nazis during World War II.  The painting, Deux Femmes Dans Un Jardin, painted in 1919 by Pierre Auguste Renoir (the “Renoir”), was stolen by the Nazis from a bank vault in Paris in 1941.  Mme. Sylvie Sulitzer, the last remaining heir of her grandfather Alfred Weinberger, a prominent art collector in pre-war Paris from whom the Renoir was stolen, received the work today during a ceremony at the Museum of Jewish Heritage in New York City.

Manhattan U.S. Attorney Geoffrey Berman said:  “Today, as we celebrate the just return of this painting to its rightful owner, we also remember the uniqueness of the Holocaust and reaffirm our commitment to ensure that the words ‘never forget, never again’ never ring hollow.  Hopefully this event brings some measure of justice to Madame Sylvie Sulitzer and her family.”  

FBI Assistant Director-in-Charge William F. Sweeny Jr. said:  “The atrocities that took place during World War II at the hands of the Nazis cannot be summed up in a few words.  They murdered, tortured, and plundered during their attempt to take over Europe and the world.  In the process, they also carried out smaller acts of evil behavior, stealing hundreds of thousands of these pieces of priceless artwork.  Some of those pieces are lost to our culture forever.  However, we take a bit of pride in returning a painting looted during the war, and helping repair some of the destruction decades ago.”

During World War II, the Nazis created a division known as the Einsatzstab Reichleiter Rosenberg (the “ERR”) in order to “study” Jewish life and culture as part of the Nazis’ propagandist mission against the Jews.  Principally, the ERR confiscated artworks and other cultural holdings of “the enemies of the Reich” on a massive scale, and meticulously registered and identified those artworks – even photographing them – thereby leaving behind a detailed record of the works that they stole.

In December 1941, during the Nazi occupation of Paris, the ERR seized the Renoir, along with numerous other works, from a bank vault where Alfred Weinberger had stored his collection when he fled Paris at the outset of the war.  In the decades that followed, Mr. Weinberger sought to recover his property, registering his claim to the Renoir with the French restitution authorities in 1947 and the German restitution authorities in 1958.

The Renoir resurfaced after the war at an art sale in Johannesburg, South Africa, in 1975.  It subsequently found its way to London, where it was sold again in 1977, and then appeared at a sale in Zurich, Switzerland, in 1999.  Ultimately, the Renoir found its way to Christie’s Gallery in New York, where it was put up for auction by a private collector in 2013.  It was then that Mme. Sulitzer learned of the pending sale and made a claim to the work as part of her grandfather’s collection.  Christie’s alerted the FBI, and ultimately the purported owner of the work voluntarily agreed to relinquish its claim.  The U.S. Attorney’s Office and the FBI are now returning the painting to Mme. Sulitzer.

Mr. Berman thanked the FBI’s Art Crime Team for their assistance. 

The case is being handled by the Office’s Money Laundering and Asset Forfeiture Unit.  Assistant U.S. Attorney Noah Falk is in charge of the case.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, James J. Hunt, the Special Agent-in-Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), James P. O’Neill, the Commissioner of the Police Department for the City of New York (“NYPD”), and George P. Beach II, the Superintendent of the New York State Police (“NYSP”), announced the unsealing today of a Superseding Indictment charging 10 members and associates of Manhattan robbery crews with racketeering, narcotics, robbery, burglary, and firearms offenses.  Six of the charged defendants are members of a street gang known as the 200, operating in and around northern Manhattan.  One of those defendants is also charged with the 2014 murder of Orlando Rivera in furtherance of the 200 gang.

A total of five defendants were taken into custody today; one other defendant was already in federal custody.  Five of the 10 defendants will be presented and arraigned before U.S. Magistrate Judge Kevin N. Fox later today.  The case is assigned to U.S. District Judge Laura Taylor Swain.   

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged in the Indictment, the defendants wreaked havoc on their northern Manhattan neighborhood for years through a litany of crimes that harmed local businesses, injured robbery victims, and killed an innocent man.    Thanks to the extraordinary work of the DEA, the NYPD, and the State Police, the defendants will now face justice for their crimes.” 

DEA Special Agent-in-Charge James J. Hunt said:  “DEA’s investigations have a knack for exposing violent crime; evident in our arrests of MS-13 members, Trinitarios, Sinaloa Cartel members and today’s 200 Crew.  The 200 Crew’s alleged reign of terror is responsible for a rap sheet of crimes ranging from robbery to racketeering and murder.  I commend the New York Drug Enforcement Task Force REDRUM unit and U.S. Attorney’s Office Southern District of New York on today’s arrests.”  

NYPD Commissioner James P. O’Neill said:  “Dismantling violent street gangs and ending the criminal activities that support them will always be a priority for the NYPD and our law enforcement partners.  I thank the detectives, special agents, and others involved in this important case, and commend the DEA and the Southern District for sharing our vision of a New York City in which all those we serve become more safe each year, and feel more safe in every neighborhood, as well.”

NYSP Superintendent George P. Beach II said:  “These charges are a direct result of the hard work and cooperation among law enforcement at all levels and I applaud all of our partners for their dedication to fighting organized crime.  The disruption of this alleged illegal operation serves as a strong reminder that gang and related activities such as racketeering, drug trafficking, burglary, and the violence that is perpetuated by such crimes, will not be tolerated.”

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

From 2014 through September 2018, in the Southern District of New York and elsewhere, MILTON CHARDON, a/k/a “Blanquito,” CHRISTIAN PABON, a/k/a “Banga,” BRYAN CASTILLO, a/k/a “True,” GEORGE CITRONELLE, a/k/a “CY,” a/k/a “BY,” JEREMY ESTEVEZ, a/k/a “Jerm Racks,” and YASMIL FERTIDES, a/k/a “Little Half,” were all members and associates of the 200 street gang. In order to fund the gang, protect its territory, and promote its standing, members of the 200 engaged in, among other things, narcotics trafficking, robbery, and other acts of violence, including murder.  200 members sold heroin, cocaine, marijuana, and OxyContin in the gang’s territory, possessed shared firearms, and engaged in shootings as part of their gang membership. 

In particular, on October 2, 2014, PABON murdered Orlando Rivera in the vicinity of 1653 Saint Nicholas Avenue in Manhattan, in order to maintain and increase his status in the 200 gang.  Additionally, on December 17, 2015, CHARDON and FERTIDES shot at and attempted to kill an individual in the vicinity of the intersection of Sickles Street and Sherman Avenue in Manhattan, and on November 21, 2016, CITRONELLE shot at victims of a robbery he carried out with other 200 members and associates in the vicinity of the intersection of Academy Street and Nagle Avenue in Manhattan.

Members of the 200 gang also participated with others in a conspiracy to commit robberies, a conspiracy to commit pharmacy burglaries, and a conspiracy to distribute oxycodone, all between 2011 and 2018.  CHARDON and FERTIDES participated in these conspiracies with SAMANTHA BATISTA, NOEL MARTINEZ, a/k/a “Crazy,” DOMINGO TOLENTINO, a/k/a “Juvi,” and JUAN CALDERON, a/k/a “Priva.”  BATISTA, MARTINEZ, and TOLENTINO robbed a marijuana dealer on or about November 8, 2016, at 510 West 188th Street in Manhattan, during which a firearm was discharged.  The pharmacies that the crew targeted included a pharmacy in the vicinity of 1985 University Avenue in the Bronx, which CHARDON and CALDERON targeted on October 8, 2016; a pharmacy in the vicinity of 1985 University Avenue in the Bronx, which FERTIDES and CALDERON targeted on June 15, 2017; and a pharmacy in the vicinity of 212 Nagle Avenue in Manhattan, which CHARDON, TOLENTINO, and CALDERON targeted on October 10, 2016.

*          *          *

Defendants CHARDON, CASTILLO, CITRONELLE, MARTINEZ, and CALDERON were arrested in New York yesterday and today.  They will be arraigned later this afternoon in Manhattan federal court.  FERTIDES will be arraigned September 21, 2018, before Judge Swain.

Charts containing the names, charges, and maximum and minimum 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 DEA’s New York Drug Enforcement Task Force, comprising agents and officers of the DEA, NYPD, and NYSP, and the Special Agents of the United States Attorney’s Office for the Southern District of New York.  Mr. Berman also thanked the Manhattan District Attorney’s Office for its assistance in the investigation.

The case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Hagan Scotten, Margaret Graham, Maurene Comey, and Karin Portlock are in charge of the prosecution.

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

COUNT

CHARGE

DEFENDANTS

MAXIMUM AND MINIMUM PENALTIES

1

Racketeering

Conspiracy

 

18 U.S.C. § 1962(d) 

MILTON CHARDON, 25

CHRISTIAN PABON, 26

BRYAN CASTILLO, 23

GEORGE CITRONELLE, 23

JEREMY ESTEVEZ, 21

YASMIL FERTIDES, 29

Maximum (Pabon):

Life

 

Maximum

(other defendants):

20 years in prison

 

2

Murder in Aid of

Racketeering

 

18 U.S.C. §§ 1959(a)(1) and 2

CHRISTIAN PABON

Minimum:

Death, or Life in prison

3

Causing Death through Use of a Firearm

 

18 U.S.C. §§ 924(j) and 2

CHRISTIAN PABON

Maximum:

Death, or Life in prison

 

Minimum:

5 years in prison

 

4

Violent Crime in Aid of Racketeering

 

18 U.S.C. §§ 1959(a)(5) and 2

MILTON CHARDON

YASMIL FERTIDES

Maximum:

10 years in prison

5

Firearms Offense

 

18 U.S.C. §§ 924(c)(1)(A)(iii) and 2

MILTON CHARDON

YASMIL FERTIDES

Maximum:

Life in prison

 

Minimum:

10 years in prison

 

6

Violent Crime in Aid of Racketeering

 

18 U.S.C. §§ 1959(a)(6) and 2

GEORGE CITRONELLE

Maximum:

3 years in prison

7

Firearms Offense

 

18 U.S.C. §§ 924(c)(1)(A)(iii) and 2

GEORGE CITRONELLE

Maximum:

Life in prison

 

Minimum:

10 years in prison

 

8

Narcotics

Conspiracy

 

21 U.S.C. § 846

MILTON CHARDON

GEORGE CITRONELLE

YASMIL FERTIDES

Maximum (Fertides):

Life in prison

 

Minimum (Fertides):

10 years in prison

 

Maximum

(other defendants):

40 years in prison

 

Minimum

(other defendants):

5 years in prison

 

9

Robbery Conspiracy

 

18 U.S.C. § 1951

MILTON CHARDON

YASMIL FERTIDES

SAMANTHA BATISTA, 26

NOEL MARTINEZ, 23

DOMINGO TOLENTINO, 24

JUAN CALDERON, 29

Maximum:

20 years in prison

10

Robbery

 

18 U.S.S. §§ 1951 and 2

SAMANTHA BATISTA

NOEL MARTINEZ

DOMINGO TOLENTINO

Maximum:

20 years in prison

11

Firearms Offense

 

18 U.S.C. §§ 924(c)(1)(A)(iii) and 2

SAMANTHA BATISTA

NOEL MARTINEZ

DOMINGO TOLENTINO

Maximum:

Life in prison

 

Minimum:

10 years in prison

 

12

Narcotics Conspiracy

 

21 U.S.C. § 846

SAMANTHA BATISTA

NOEL MARTINEZ

DOMINGO TOLENTINO

Maximum:

5 years in prison

13

Pharmacy Burglary Conspiracy

 

18 U.S.C. § 2118(d)

MILTON CHARDON

YASMIL FERTIDES

SAMANTHA BATISTA

NOEL MARTINEZ

DOMINGO TOLENTINO

JUAN CALDERON

Maximum:

20 years in prison

14

Narcotics Conspiracy

 

21 U.S.C. § 846

MILTON CHARDON

YASMIL FERTIDES

SAMANTHA BATISTA

NOEL MARTINEZ

DOMINGO TOLENTINO

JUAN CALDERON

Maximum:

20 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, announced that ONYEKACHI EMMANUEL OPARA was sentenced today in Manhattan federal court to 60 months in prison based upon OPARA’s participation in fraudulent business email compromise scams that targeted thousands of victims in the United States and around the world.  Through these scams, OPARA and his co-conspirators attempted to defraud victims of over $25 million.  On April 11, 2018, OPARA pled guilty to conspiracy to commit wire fraud and wire fraud before U.S. District Judge Paul A. Crotty, who imposed today’s sentence. 

U.S. Attorney Geoffrey S. Berman said:  “From halfway around the world, Onyekachi Emmanuel Opara ran a global email scam business that victimized thousands of people out of millions of dollars.  The global reach of our Office and the FBI ensured that Opara will serve time in the United States for his crimes.”       

According to the allegations in the Indictment to which OPARA pled guilty and statements made at the plea and sentencing proceedings:

Between 2014 and 2016, OPARA and his co-defendant, David Chukwuneke Adindu (“Adindu”), participated in multiple business email compromise (“BEC”) scams that targeted thousands of victims around the world, including in the United States, the United Kingdom, Australia, Switzerland, Sweden, New Zealand, and Singapore.  OPARA sent bogus emails to employees of the victim companies directing that funds be transferred to specified bank accounts.  The emails purported to be from supervisors at those companies or from third party vendors with whom the companies did business.  In reality, the emails were either sent from email accounts with domain names very similar to those of the companies and vendors, or the metadata for the emails was modified to make it appear as if the emails had been sent from legitimate email addresses.  After victims transferred the funds as directed in the bogus emails, the funds were quickly withdrawn or transferred to other bank accounts controlled by scheme participants.  In total, the BEC scam participants attempted to steal more than $25 million from victims around the world.

In furtherance of the BEC scams, OPARA created accounts on dating websites and entered into online romantic relationships with individuals in the United States by portraying himself as a young attractive woman named “Barbara.”  “Barbara” would then instruct these individuals in the United States to send their money overseas and/or to receive money from BEC scams and forward the proceeds to other scheme participants located overseas.  For example, one victim with whom OPARA struck up a romantic relationship sent over $600,000 of the victim’s own money to bank accounts controlled by scheme participants at OPARA’s direction.  OPARA also attempted to recruit at least 14 other individuals via dating websites to receive funds from BEC scams into their bank accounts and then transfer the proceeds to overseas bank accounts. 

OPARA was arrested on December 22, 2016, in Johannesburg, South Africa, and was extradited to the Southern District of New York on January 26, 2018. 

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In addition to the prison term, OPARA, 30, of Lagos, Nigeria, was sentenced to two years of supervised release and was ordered to pay $2.5 million in restitution. 

On June 20, 2017, Adindu pled guilty to one count of conspiracy to commit wire fraud and one count of conspiracy to commit identity theft.  On December 14, 2017, Judge Crotty sentenced Adindu to 41 months in prison and ordered him to pay approximately $1.4 million in restitution.

Mr. Berman praised the investigative work of the Federal Bureau of Investigation.  Mr. Berman also thanked Oath’s E-Crime Investigations Team, the National Prosecuting Authority for South Africa, the South African Police Service, and the United States Marshals Service.  Mr. Berman noted that the investigation is ongoing.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Andrew K. Chan and Daniel Loss 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 David E. Beach, Special Agent in Charge of the U.S. Secret Service New York Field Office (“USSS”) announced today that ANDREI TYURIN, a/k/a “Andrei Tiurin,” was extradited from the country of Georgia.  TYURIN was arrested by Georgian authorities at the request of the United States for charges arising from his participation in a massive computer hacking campaign targeting U.S. financial institutions, brokerage firms, financial news publishers, and other American companies.  These hacks included the largest theft of customer data from a U.S. financial institution in history.  TYURIN is charged with committing these crimes with Gery Shalon, a/k/a “Garri Shalelashvili,” a/k/a “Gabriel,” a/k/a “Gabi,” a/k/a “Phillipe Mousset,” a/k/a “Christopher Engeham”; Joshua Samuel Aaron, a/k/a “Mike Shields”; and Ziv Orenstein, a/k/a “Aviv Stein,” a/k/a “John Avery,” in furtherance of securities market manipulation, illegal online gambling, and payment processing fraud schemes perpetrated by Shalon, Aaron, Orenstein, and their co-conspirators. 

TYURIN, a Russian citizen, arrived in the Southern District of New York earlier today, and will be presented this afternoon in Manhattan federal court before United States Magistrate Judge Henry B. Pitman.  TYURIN is expected to appear before United States District Judge Laura Taylor Swain on September 25, 2018, at 2:00 PM. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Andrei Tyurin, a Russian national, is alleged to have participated in a global hacking campaign that targeted major financial institutions, brokerage firms, news agencies, and other companies.  Tyurin’s alleged hacking activities were so prolific, they lay claim to the largest theft of U.S. customer data from a single financial institution in history, accounting for a staggering 80 million-plus victims.  As Americans increasingly turn to online banking, theft of online personal information can cause devastating effects on their financial wellbeing, sometimes taking years to recover.  Today’s extradition marks a significant milestone for law enforcement in the fight against cyber intrusions targeting our critical financial institutions.”

FBI Assistant Director William F. Sweeney Jr. said:  “Andrei Tyurin allegedly engaged in a long-running effort to hack into the systems of U.S. based financial institutions, brokerage firms and financial news publishers, all from the perceived safety of operating outside our borders.  As alleged, his illegal acts included the historically largest theft of customer data from a U.S. financial institution.  Today’s charges and extradition should serve as a lesson to all those who would conspire to engage in similar activity that the FBI and our partners will continue to bring these hackers to justice, regardless of where they may hide.  I’d like to specifically thank our partners with the United States Secret Service, whose collaboration was crucial to seeing this case to fruition.”

U.S. Secret Service Special Agent in Charge David E. Beach said:  “This case represents the core of the U.S. Secret Service’s integrated mission to secure our nation’s cyber related financial infrastructure and protect our nation’s leadership.  The collaboration between the Secret Service New York Field Office Electronic Crimes Task Force, FBI New York Office Cyber Division and our global law enforcement partners demonstrates the commitment to combating cyber-enabled financial crimes and ensuring those responsible are held accountable.”

According to the allegations contained in the superseding indictments unsealed today in Manhattan federal court[1], other filings in this case, and statements made during court proceedings:

From approximately 2012 to mid-2015, TYURIN engaged in an extensive computer hacking campaign targeting financial institutions, brokerage firms, and financial news publishers in the United States, including the theft of personal information of over 100 million customers of the victim companies.  TYURIN’s hack of one financial institution headquartered in Manhattan resulted in the theft of personal information of over 80 million customers, making it the largest theft of customer data from a U.S. financial institution in history.  TYURIN engaged in these crimes at the direction of Shalon and in furtherance of other criminal schemes overseen and operated by Shalon and his co-conspirators, including securities fraud schemes in the United States.  For example, in an effort artificially to inflate the price of certain stocks publicly traded in the United States, Shalon and his co-conspirators marketed the stocks in a deceptive and misleading manner to customers of the victim companies whose contact information TYURIN stole in the intrusions.

In addition to the U.S. financial sector hacks, TYURIN also conducted cyberattacks against numerous U.S. and foreign companies in furtherance of various criminal enterprises operated by Shalon and his co-conspirators, including unlawful internet gambling businesses and international payment processors.  Nearly all of these illegal businesses, like the securities market manipulation schemes, exploited the fruits of TYURIN’s computer hacking campaigns.  Through these various criminal schemes, TYURIN, Shalon, and their co-conspirators obtained hundreds of millions of dollars in illicit proceeds.

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TYURIN, 35, of Moscow, Russia, is charged with one count of conspiracy to commit computer hacking, which carries a maximum prison term of five years; one count of wire fraud, which carries a maximum prison term of 30 years; four counts of computer hacking, each of which carries a maximum prison term of five years; one count of conspiracy to commit securities fraud, which carries a maximum prison term of five years; one count of conspiracy to violate the Unlawful Internet Gambling Enforcement Act, which carries a maximum prison term of five years; one count of conspiracy to commit wire fraud and bank fraud, which carries a maximum prison term of 30 years; and aggravated identity theft, which carries a mandatory consecutive term of imprisonment of two years. 

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 Judge Swain.

Mr. Berman praised the investigative work of the Federal Bureau of Investigation and the U.S. Secret Service, and expressed his sincere gratitude to the Chief Prosecutor’s Office of Georgia and the Ministry of Justice of Georgia for their support and assistance with the extradition proceedings.  He also thanked the Securities and Exchange Commission, Homeland Security Investigations, the Financial Industry Regulatory Authority, the Office of International Affairs of the U.S. Department of Justice for its assistance with the extradition, and the Financial Services Information Sharing and Analysis Center, which significantly aided the investigation by facilitating information-sharing among the victim institutions.

The prosecution of this case is being overseen by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Eun Young Choi, Noah Solowiejczyk, and Sarah Lai are in charge of the prosecution.  Assistant U.S. Attorney Daniel Tracer is in charge of the forfeiture aspects of the case.

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

 

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

Robert Khuzami, Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced that GARY HIRST was sentenced today by U.S. District Judge Ronnie Abrams to 8 years imprisonment for defrauding a Native American tribal entity and numerous pension fund investors of tens of millions of dollars in connection with the issuance of bonds by the tribal entity.  HIRST pled guilty May 15, 2018, to conspiracy to commit securities fraud, securities fraud, investment adviser fraud, and conspiracy to commit investment adviser fraud before U.S. Magistrate Judge Barbara Moses. 

Attorney for the United States Robert Khuzami said:  “This complex and brazen securities fraud scheme lined the pockets of Gary Hirst and his co-defendants but left the Native American tribal entity, the Wakpamni Lake Community Corporation $60 million in debt.  Hirst, who is already in prison for a separate securities scheme prosecuted by this Office, now faces additional time behind bars for this criminal conspiracy.”

According to the allegations contained in the Indictment filed against HIRST and statements made in related court filings and proceedings, including the trial of co-defendants John Galanis, Devon Archer, and Bevan Cooney:

From March 2014 through April 2016, HIRST, Jason Galanis, John Galanis, Devon Archer, Bevan Cooney, Michelle Morton, and Hugh Dunkerley, 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, with the backing of Archer and Cooney, 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.  Indeed, HIRST himself signed the trade tickets to purchase the bonds after other employees of Hughes refused to do so.  In addition, Hughes’s clients were not told about substantial conflicts of interest with respect to the issuance and placement of the Tribal Bonds before the Tribal Bonds were purchased on these clients’ behalf. 

The defendants and their co-conspirators then misappropriated the proceeds of 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, after John Galanis induced the WLCC to issue a second round of Tribal Bonds, Archer and Cooney used $20 million of bond proceeds from the first issuance to buy the entirety of the second issuance.  As a result of the use of recycled proceeds to purchase additional issuances of Tribal Bonds, the face amount of Tribal Bonds outstanding increased and the amount of interest payable by the WLCC increased, but the actual bond proceeds available for investment on behalf of the WLCC did not increase.  The bonds purchased by Archer and Cooney were then used to meet net capital requirements at two broker dealers in which Archer and Cooney had interests.  Cooney also obtained a $1.2 million loan based on his purported ownership of the bonds, which he subsequently failed to repay.  In addition, millions of dollars in bond proceeds from the bond issuances were used to finance the acquisition of companies that the defendants and their co-conspirators acquired as part of a strategy 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, Archer, and others – in consultation with HIRST – 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, among other things, to finance the defendants’ acquisition of another company in furtherance of their plan to build a financial conglomerate and to make payments to one of the broker dealers in which Archer and Cooney had interests.  HIRST also directed that significant portions of the bond proceeds be funneled through other secret accounts and used to purchase significant portions of a technology stock’s IPO – which was itself secretly controlled by several of the defendants.

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In addition to the prison term, GARY HIRST, 66, was sentenced to 3 years of supervised release.  HIRST was also ordered to forfeit $1.3 million 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.  Michelle Morton, who pled guilty to conspiracy to commit securities fraud and investment adviser fraud, is scheduled to be sentenced on November 30, 2018.  John Galanis, who was convicted at trial of conspiracy to commit securities fraud and securities fraud, is scheduled to be sentenced on November 2, 2018.  Devon Archer and Bevan Cooney, who were convicted at trial of conspiracy to commit securities fraud and securities fraud, are scheduled to be sentenced on November 9, 2018.  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 March 8, 2019.

This conviction represents HIRST’s second conviction in this District in a little more than a year.  On August 3, 2017, following his conviction at trial, HIRST was sentenced by U.S. District Judge P. Kevin Castel to 78 months in prison in connection with his participation in a scheme to manipulate the market for Gerova Financial Group, Ltd., a publicly traded company listed on the New York Stock Exchange, and to defraud the shareholders of that company. 

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.