Southern District of New York

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Division of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of a complaint charging three defendants with allegedly engaging in conspiracy to commit wire fraud and wire fraud in a scheme known as “forced posting.”  Two defendants, LATOYA ROBINSON and DASHAWN JOHNSON, were arrested and presented yesterday before United States Magistrate Lisa Margaret Smith.  Defendant TANYA HATWOOD remains at large.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, the defendants took advantage of a security feature of the debit card processing system, which allowed for nearly $1 million in fraudulent merchandise charges.  Thanks to our federal and local law enforcement partners, the scam is over and the defendants face significant criminal charges.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said: “As technology continues to evolve, the complexity of fabricated schemes evolves almost faster than humans can keep up.  Nevertheless, the FBI remains committed to investigating fraud in its many facets. By allegedly using fictitious codes in the attempt to take more than $900,000 in merchandise, the defendants believed their scheme would go undetected.  However, now that the two defendants are facing federal charges today, it is clear that their misguided criminal behavior was wrong.”

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

When a customer presents a debit card to purchase merchandise at a store and the card is swiped at an electronic card reader maintained by the merchant, electronic signals are routed from the merchant to the brand of the customer’s debit card, and then routed to the underlying bank that issued the debit card.  The bank then verifies whether the customer has sufficient funds in the account to cover the requested transaction, which is then relayed back to the merchant.  When there are insufficient funds on the debit card presented by the customer, the card reader will display a message that the transaction request was denied.  

Many card readers have a functionality, though, that allows someone to input a code that serves to take the card reader offline, overriding the denial message and verifying the transaction.  Malign actors can take advantage of this functionality by inputting a fictitious code not provided by the issuing bank under the guise of entering a pin code or other authorization code, which could cause the card reader to show that the transaction was authorized.  The merchant may then let the customer leave with any merchandise the customer attempted to purchase; the merchant would not learn that the code was fictitious and the transaction invalid until days or even months later.  The process by which a customer could take advantage of the functionality is called “forced posting” or “forcing the off.”

Bank records, corroborated by interviews with more than 30 merchants, show that from 2013 up to May 2018, LATOYA ROBINSON, DASHAWN JOHNSON, and TANYA HATWOOD, together and separately, performed forced posting on dozens of occasions, and schemed to take or attempt to take more than $900,000 in merchandise in total. 

*                *                *

ROBINSON, 29, of the Bronx, JOHNSON, 25, of Manhattan, and HATWOOD, 27, of the Bronx, are each charged with one count of conspiracy to commit wire fraud and one count of wire fraud.  Each count carries a maximum sentence of 20 years.  The statutory maximum sentences 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 outstanding investigative work of the FBI, the Yonkers Police Department, the New York City Police Department, and the Nassau County Police Department.

These case is being handled by the Office’s White Plains Division.  Assistant United States Attorney Samuel L. Raymond is in charge of the prosecution.

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JOSEPH STERN was sentenced to 24 months in prison for his role laundering money related to his concealment of narcotics proceeds generated in the United States through the purchase and sale of luxury watches by the company at which STERN was employed.  A jury convicted STERN on May 26, 2017, following a 10-day trial before U.S. District Judge John G. Koeltl, who imposed today’s sentence.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Joseph Stern ran his own shadow banking system to turn dirty drug money into new luxury watches, allowing millions of drug dollars to be laundered through the U.S. and back to Mexican drug cartels.  Thanks to the dedicated work of the DEA, the time has come for Stern to pay for his money laundering crimes.”    

According to the charging documents filed in the case, as well as the evidence developed at STERN’s trial and statements made during the sentencing proceedings and earlier court appearances:

For years prior to his arrest in May 2016, STERN fostered and profited from a cycle of crime and money designed to facilitate the secretive movement of funds from the U.S. to Mexico under the cover of a seemingly legitimate business.  As part of that cycle, narcotics organizations based in, or with contacts in, Mexico, sold narcotics, including heroin and marijuana, for cash in the U.S., including in the Bronx, Manhattan, Brooklyn, and Baltimore.  Money couriers then transported the cash from those sales to the defendant, who would accept bulk cash in amounts as large as $200,000 in clandestine hand-offs taking place on the street or in isolated areas within his workplace. 

STERN disposed of that drug money in various ways, principally by using the cash to extinguish debts owed to his employer by Mexico-based customers who, in turn, had incurred debts to Mexico-based narcotics operations.  STERN’s Mexico-based customers would sell watches, sourced from STERN, to narcotics organizations, which used those items and purchases as a substitute for the narcotics proceeds earned by their organizations in the United States. 

Through this cycle of drugs and money, STERN facilitated a shadow banking system for international drug organizations, while taking a percentage of the cash that he moved on behalf of this criminal network.         

*                      *                     *

In addition to the prison term, STERN, 62, of Brooklyn, New York, was sentenced to three years of supervised release, including six months of home confinement, and was ordered to forfeit $1,899,700. 

Mr. Berman praised the outstanding work of the Drug Enforcement Administration in the investigation of this case.

This case is being handled by this Office’s Money Laundering and Asset Forfeiture Unit.  Assistant United States Attorneys Noah Falk, Benet Kearney, and Andrew C. Adams are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that DARIN WEBB pled guilty to defrauding a Manhattan-based literary agency (the “Agency”) and its clients of over $3.3 million.  WEBB provided bookkeeping services for the Agency and carried out his scheme by making unauthorized transfers from the Agency’s bank accounts, and then making changes to the Agency’s accounting system to evade detection.  WEBB pled guilty to one count of wire fraud before U.S. District Judge Edgardo Ramos.

U.S. Attorney Geoffrey S. Berman said:  “As he admitted today, Darin Webb was cooking the books for his employer when his duty was to provide bookkeeping services.  Webb stole over $3 million that belonged to the literary agency and its clients, and he now awaits sentencing for his crime.”

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

From in or about 2001 through in or about March 2018, DARIN WEBB, the defendant, was engaged as a bookkeeper for the Agency.  From at least January 2011 through March 2018, WEBB used his position as the Agency’s bookkeeper to transfer more than $3.3 million of funds, belonging to the Agency and the Agency’s clients, from the Agency’s bank accounts to bank accounts that WEBB controlled.  In order to evade detection of his criminal conduct and carry out his scheme, WEBB made changes to the Agency’s accounting records to disguise the nature of the transfers.

*                    *                    *

WEBB, 47, of Manhattan, New York, 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 would be determined by the Court.

WEBB is scheduled to be sentenced on November 26, 2018, at 11:30 a.m.

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 U.S. Attorney Christine I. Magdo is in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Angel M. Melendez, the Special Agent-in-Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced the unsealing today of an Indictment charging 12 members of a crew operating in and around the Murphy Houses and the Lambert Houses in the Bronx with participating in a narcotics conspiracy. 

A total of eight defendants were taken into custody today; seven were arrested in the Bronx, and one defendant was arrested in Delaware.  Four defendants remain at large.  The seven defendants arrested in the Bronx will be presented and arraigned before U.S. Magistrate Judge James L. Cott later today.  The case is assigned to U.S. District Judge Katherine Polk Failla.   

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, the defendants conspired to sell narcotics in a number of locations, including the Murphy Houses, a NYCHA development.  NYCHA residents, and all New Yorkers, should be free to go about their daily lives free from the scourge of narcotics trafficking.  Thanks to the excellence of our partners at HSI and the NYPD, these defendants now face federal charges for bringing drugs to our buildings and to our streets.”

HSI Special Agent-in-Charge Angel M. Melendez said:  “These crew members allegedly pushed crack cocaine and heroin in low income neighborhoods of the Bronx.  The alleged dealers have no regard for their neighbors as long as they are making a profit, which is why we will continue to partner with NYPD in these investigations to remove the drugs, and those who push it, off city streets.”

NYPD Commissioner James P. O’Neill said:  “Today’s indictment is a perfect example of how well the law enforcement community works together to dismantle drug organizations and put these criminals behind bars.  Removing them from our streets sends a clear message to others who many choose to engage in similar activity.  These substances cause immeasurable damage in our neighborhoods, and we will remain vigilant in our commitment to expose and arrest anyone who poses such a threat to the safety of New Yorkers.”

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

*          *          *

From 2016 up to June 2018, KAWAIN NELSON, a/k/a “Kobe,” a/k/a “Kobi,” a/k/a “Slope,” JAMES CROOMS, a/k/a “Butter,” ANTHONY CORLEY, a/k/a “Tone,” ALBERT COLLINS, a/k/a “A,” DARRELL HUDSON, a/k/a “Skip,” JONATHAN PADILLA, SILVIO CIPRIAN, a/k/a “T.P.,” LAMAR GRIFFIN, a/k/a “Louch,” JACKIE COOPER, a/k/a “Jack,” SHARON HATCHER, ALLEN WALKER, a/k/a “Fat Boy,” and EFRAIN REYES, a/k/a “Stone,” participated in a conspiracy to distribute and possess with the intent to distribute crack cocaine, heroin, marijuana in and around the Murphy Houses, a public housing complex, and the Lambert Houses, an affordable housing development, in the Bronx. 

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

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

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

MAX. PENALTIES

1

Narcotics

Conspiracy

21 U.S.C. § 846

KAWAIN NELSON, 32

JAMES CROOMS, 31

ANTHONY CORLEY, 35

ALBERT COLLINS, 28

DARRELL HUDSON, 28

JONATHAN PADILLA, 29

SILVIO CIPRIAN, 30

LAMAR GRIFFIN, 28

JACKIE COOPER, 53

SHARON HATCHER, 51

ALLEN WALKER, 38

EFRAIN REYES, 49

Life in prison

Mandatory minimum of 10 years in prison

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Angel M. Melendez, Special Agent in Charge of Immigration and Customs Enforcement’s Homeland Security Investigations in New York (“HSI”), announced today the arrest of BRANDON MARTIN and TAMEKO LINDO for money laundering and conspiracy to commit money laundering in connection with their ownership and operation of Flawless Escorts, a nationwide business offering prostitution services, as well as the seizure of Flawless Escorts’ website.  MARTIN and LINDO will be presented today in Fort Lauderdale federal court.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Brandon Martin and Tameko Lindo ran a nationwide prostitution ring, requiring their ‘employees’ to service as many as seven clients a day.  However, the fatal flaw in Martin and Lindo’s alleged scheme was their underestimation of law enforcement’s ability to detect and halt their illicit activities.” 

HSI Special Agent in Charge of Angel M. Melendez said:  “In just under four years, these defendants are alleged to have secured more than three thousand hotel bookings to use in the furtherance of their prostitution scheme.  In this case, members of HSI’s El Dorado Task Force were able to follow the money, tracking the advertising funds, payments and movement of dollars to locate the perpetrators, and they now face prosecutions for their actions.”

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

From 2014 to the present, MARTIN and LINDO have operated an online prostitution service through their website, www.flawlessescorts.com (the “Website”).  As part of their prosecution business, MARTIN and LINDO arranged for escorts to travel throughout the United States to engage in prostitution, securing more than 3,000 hotel bookings under the names of various women.  MARTIN and LINDO also required escorts to follow certain protocols when traveling on behalf of the Website, including an expectation that each escort would see a minimum of seven clients per day.  MARTIN and LINDO also required escorts to deposit the proceeds of their commercial sex acts into a number of corporate and personal bank accounts that they controlled. 

MARTIN and LINDO then used the proceeds of the prostitution scheme for personal gain and to further their illegal prostitution business.  They paid, for example, over $180,000 from bank accounts under their control to advertise for the Website and to pay expenses of individual escorts.   

*                      *                     *

MARTIN, 42, and LINDO, 38, of Parkland, Florida, are charged with one count of conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison, and two counts of money laundering, each of which carries a maximum sentence of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Berman praised the outstanding investigative work of HSI, the New York City Police Department, and the Broward County Sherrif's Office.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Tara M. La Morte and Kyle A. Wirshba are in charge of the prosecution.

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

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

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 unsealing of an Indictment charging Diyora Ashirova, Elvin Baghir-Pur, Kirill Dedusev, Roman Eliozashvili, Sarkhan Imamverdiyev, Mikheil Inadze, Aziza Jalolova, Elvin Javadzade, Igor Kalinitchev, a/k/a “Irvin Kalinitchev,” Tengiz Khukhiashvili, Yelena Kudaibergenova, Mishel Levinski, Stanislav Lisitskiy, a/k/a “Giedrius Girnius,” Aleksei Livadnyi, Durra Mehdiyeva, Mikhail Morozov, Ielyzaveta NAzina, Gocha Paposhvili, Matiss Puke, Ketevan Sepiashvili, Aleksandr Starikov, Igor Stasovskiy, Nikolay Tupikin, Karlis Vitols, and Melvut Yazici with conspiracy to commit wire fraud and conspiracy to commit concealment money laundering.  Eleven of the defendants were arrested on these charges today in New York.  These defendants will be presented and arraigned today before United States Magistrate Judge James L. Cott in Manhattan federal court.  BAGHIR-PUR was arrested in Miami this morning and will be there presented there later today.  KHUKIASHVILI is in custody on state charges in Alachua County, Florida, and PUKE and VITOLS are in custody on state charges in Charlevoix County, Michigan.  All three will be transferred to federal custody.  DEDUSEV, ELIOZASHVILI, KUDAIBERGENOVA, LISITSKIY, LIVADNYI, MOROZOV, STARIKOV, and TUPIKIN remain at large.  The case has been assigned to United States District Judge George B. Daniels.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, the defendants participated in a nationwide scheme to defraud, duping victims who responded to fake internet advertisements designed to resemble advertisements posted by legitimate merchants.  Then the defendants allegedly created dozens of shell companies to receive victim payments and withdrew the funds and sent them out of the country.  Thanks to the hard work of the FBI, these defendants will now face prosecution.”

FBI Assistant Director William F. Sweeney Jr. said:  “Trusting that they were conducting legitimate business with automotive dealers, these victims lost over $4 million as a result of this scheme.  While allegedly operating under this façade, the defendants were diligent in the theft of the funds, but showed no regard to the financial impact on the victims. As shown by the charges brought today, the FBI will continue to work tirelessly with our law enforcement partners to uncover duplicitous conspiracies, regardless of the vast intricacy of their cover-ups.”

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

From November 2016 through July 2018, the defendants carried out a wide-ranging fraudulent scheme that typically involved impersonating legitimate sellers of cars, tricking victims into providing payment for those cars, withdrawing the funds from banks around the country using efforts designed to evade scrutiny, and wiring the proceeds outside the United States.

The fraud most commonly operated as follows: first, co-conspirators impersonated automotive dealers and collectors and claimed to be selling classic cars on various well-known internet auction and trading websites.  Victims responding to the ads were in fact corresponding with a fraud scheme participant.  After the victims and co-conspirators came to terms on a sale price, including down payment and shipping costs, victims were next directed to purported automotive transportation companies and were told that these companies would accept payment and transport the cars.  These companies were in fact shell corporations established by the conspiracy to help perpetrate the fraud, whose corporate bank accounts were established and controlled by the defendants, awaiting wired funds from the fraud’s victims.  After victims had wired payment, the defendants went to the banks to drain the victim’s funds, often starting the same day payment had been transmitted.  The defendants would draw money from different bank branches in numerous withdrawals on the same day, in denominations that were varied and often kept to an amount they believed would prevent the financial institutions from recording and reporting the fraud.  The co-conspirators then sent the fraud proceeds outside the United States to Eastern European countries, from where many of the conspirators originated.  Victims never received the goods they believed they had purchased, and many were unable to recover their money or were left paying loans for cars that were never truly for sale.  The defendants’ scheme defrauded victims of more than $4.5 million.

*                      *                      *

Each of the defendants is charged with one count of conspiracy to commit wire fraud, which carries a maximum sentence of 30 years in prison, and one count of conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge. The table below lists the name, age, nationality, and residence of each defendant.

Mr. Berman praised the outstanding investigative work of the FBI, Customs and Border Protection, the New York Police Department, and U.S. Immigration and Customs Enforcement’s Enforcement and Removal Operations.

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

The prosecution is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Jeffrey C. Coffman, Thane Rehn, and Matthew J.C. Hellman 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.

Name

Age

Nationality

Residence

ASHIROVA

27

Kazakhstan

Brooklyn

BAGHIR-PUR

24

Azerbaijan

Brooklyn

ELIOZASHVILI

44

Georgia

Brooklyn

IMAMVERDIYEV 

30

Azerbaijan

Brooklyn

INADZE

37

Georgia

Brooklyn

JALOLOVA

23

Kazakhstan

Brooklyn

JAVAZADE

30

Azerbaijan

Brooklyn

LEVINSKI

23

United States

Brooklyn

KHUKIASHVILI

63

Georgia

Brooklyn

KHUDAIBERGENOVA

48

Kazakhstan

Brooklyn

KALINITCHEV

62

Ukraine

Brooklyn

MEHDIYEVA

23

Azerbaijan

Brooklyn

NAZINA

29

Ukraine

Brooklyn

PAPOSHVILI

43

Georgia

Brooklyn

SEPIASHVILI

64

Georgia

Brooklyn

STASOVSKIY

58

Russia

Brooklyn

YAZICI

36

Turkey

Brooklyn

PUKE

31

Latvia

Delray Beach, FL

VITOLS

29

Latvia

Delray Beach, FL

DEDUSEV

29

Russia

Los Angeles

LISITSKIY

30

Russia

Los Angeles

LIVADNYI

39

Russia

Los Angeles

TUPIKIN

32

Russia

Los Angeles

MOROZOV

29

Russia

Moscow

STARIKOV

34

Russia

Moscow

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and William V. Grady, Dutchess County District Attorney, announced today that DAVONTE HAMILTON, a/k/a “Vont,” an alleged member of the “Uptown” street gang operating in Poughkeepsie, New York, was arrested in connection with the December 2012 murder of Daquelle LeBlanc.  The defendant is charged in a Superseding Indictment with racketeering conspiracy, murder in aid of racketeering activity, and a firearms offense.  HAMILTON was arrested tooday and arraigned in White Plains federal court before United States Magistrate Judge Lisa Margaret Smith.

Twelve members and associates of the Uptown gang, and 19 members and associates of the rival Downtown gang, which also operates in Poughkeepsie, New York, were previously charged in separate Indictments – United States v. Douglas Owens et al., 17 Cr. 506 (NSR) and United States v. Ronald Johnson et al., 17 Cr. 505 (VLB) – in August 2017 with murders, attempted murders, racketeering, narcotics, and firearms offenses.  The Superseding Indictment adds HAMILTON as the third defendant charged with murder in aid of racketeering activity and firearms offenses in connection with the 2012 murder of LeBlanc.    

U.S. Attorney Geoffrey S. Berman stated:  “As alleged, Devonte Hamilton aided and abetted the murder of Daquelle LeBlanc nearly six years ago.  Together with our law enforcement partners, we will continue to pursue justice for victims like Mr. Leblanc against all involved in such violent offenses.”

FBI Assistant Director William F. Sweeney Jr. said:  “The work done on this investigation is a perfect example of how our law enforcement partnerships have a positive impact helping innocent people.  Getting these alleged gang members, dealers, and murderers off the streets has made Poughkeepsie safer.  The FBI Hudson Valley Safe Streets Task Force won’t let up on our pursuit of these alleged violent criminals until we stop their destructive hold on the community.”

Dutchess County District Attorney William V. Grady said:  “I would like to compliment the City of Poughkeepsie Police Department and their law enforcement partners for their dedication in pursuing this important homicide investigation since 2012.  Thanks to our additional partnership with the United States Attorney’s Office on this case, we have been able to charge those individuals we feel responsible for this homicide.”

According to the Superseding Indictment[1] filed on July 18, 2018, in White Plains and Manhattan federal court and other documents in the public record:

The Superseding Indictment arose from a joint investigation by the FBI’s Hudson Valley Safe Streets Task Force, the City of Poughkeepsie Police Department, the Dutchess County District Attorney’s Office, and the Dutchess County Sherriff’s Office into a gang war between Uptown and Downtown, which led to multiple fatal and non-fatal shootings between 2012 and 2017 in the City of Poughkeepsie.

Uptown is a criminal organization whose members referred to themselves by, and were known by, several different names, including “Spready Gang,” the “400 Savages,” the “Boogotti Boys,” the “Young Bosses” or “YB’s,” and the “Mob Stars.”  Uptown is based within the eastern portion of Poughkeepsie, from east of Hamilton Street to the city line and, more specifically, within the Hudson Gardens housing development (commonly referred to as the “Bricks”). Uptown gang members and associates control the narcotics trade within the Bricks, distributing heroin, crack cocaine, and marijuana primarily.  Uptown gang members stored shared guns in various locations known to gang members to protect the narcotics business, to protect each other from rival gangs, and to strike against rival gangs.  

In addition to many non-fatal acts of violence against rival gang members and innocent victims, the rivalry between Uptown and Downtown led to the murder of Downtown gang member Daquelle LeBlanc, a/k/a “Hamo,” who was killed by a single gunshot wound to the chest at the age of 16 in the vicinity of Main Street, between Academy and North Hamilton Streets, on or about December 23, 2012.  According to the allegations contained in the Superseding Indictment, HAMILTON and two other defendants – who were charged and arrested in connection with the August 2017 Indictments – murdered LeBlanc to enhance their position in Uptown and advance the criminal objectives of that organization.

*                *                *

HAMILTON, a/k/a “Vont,” was in custody on state charges and was transferred to federal custody this morning.  If convicted, HAMILTON faces a maximum sentence of 20 years in prison on Count One (Racketeering Conspiracy), a maximum sentence of life in prison on Count Three (Murder in Aid of Racketeering Activity), and a mandatory minimum sentence of five years in prison and a maximum sentence of life in prison on Count Five (Murder Through Use of a Firearm in Furtherance of a Crime of Violence).[2]  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 Hudson Valley Safe Streets Task Force, the City of Poughkeepsie Police Department, the Dutchess County Sheriff’s Office, the Dutchess County Drug Task Force, as well as the United States Marshals’ Service, the New York State Police, and the New York State Department of Corrections and Community Supervision for their assistance in today’s arrests.  Mr. Berman also thanked the Bureau of Alcohol, Tobacco, Firearms, and Explosives for their assistance in the investigation.

The prosecution is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Christopher J. Clore, Maurene Comey, and Emily Deininger are in charge of the prosecution.

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

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

[2] DAVONTE HAMILTON was charged only in Counts One, Three, and Five of the thirteen-count Superseding Indictment.  The other counts of the Superseding Indictment relate solely to other, previously arrested members of the Uptown gang.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JON E. MONTROLL, a/k/a “Ukyo,” pled guilty today to securities fraud and obstruction of justice.  MONTROLL, who issued and sold securities related to a bitcoin investment platform that he ran through false statements about the success of the business, later provided false sworn testimony to the United States Securities and Exchange Commission (the “SEC”) and provided the SEC with a false document during the course of the SEC’s investigation into his operation of the bitcoin investment platform.  MONTROLL’s plea was taken by U.S. Magistrate Judge James L. Cott.  The case is assigned to U.S. District Judge Richard M. Berman.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As he admitted today, Jon Montroll deceived his investors and then attempted to deceive the SEC.  He repeatedly lied during sworn testimony and misled SEC staff to avoid taking responsibility for the loss of thousands of his customers’ bitcoins.”

According to the Information, the allegations in the Complaint, and statements made during the proceedings in Manhattan federal:

JON E. MONTROLL operated two online bitcoin services:  WeExchange Australia, Pty. Ltd. (“WeExchange”) and BitFunder.com (“BitFunder”).  WeExchange functioned as a bitcoin depository and currency exchange service.  BitFunder facilitated the purchase and trading of virtual shares of business entities that listed their virtual shares on the BitFunder platform.

Between the launch of Bitfunder, in or about December 2012, and at least in or about July 2013, MONTROLL converted a portion of WeExchange users’ bitcoins to his personal use without the users’ knowledge or consent.  For example, MONTROLL exchanged numerous bitcoins taken from WeExchange into United States dollars, then spent those funds on personal expenses, such as travel and groceries.

Beginning on or about July 18, 2013, MONTROLL promoted a security referred to as “Ukyo.Loan.”  As described by MONTROLL in a public post about Ukyo.Loan, MONTROLL encouraged investors to “think of [Ukyo.Loan] as a sort of round-about investment” in BitFunder and WeExchange and, at the same time, described Ukyo.Loan as “a personal loan” and “for private investment purposes.”  MONTROLL further promised to pay purchasers of Ukyo.Loan daily interest on their investment and promised shares could be “redeemed at face value anytime upon request.”

During the summer of 2013, one or more individuals (the “Hackers”) exploited a weakness in the BitFunder programming code to cause BitFunder to credit the Hackers with profits they did not, in fact, earn (the “Exploit”).  As a result, the Hackers were able to wrongfully withdraw from WeExchange approximately 6,000 bitcoins, with the majority of those coins being wrongfully withdrawn between July 28, 2013, and July 31, 2013.  As a result of the Exploit, BitFunder and WeExchange lacked the bitcoins necessary to cover what MONTROLL owed to users.

Notwithstanding the scope of the Exploit, MONTROLL failed to disclose the Exploit to users of BitFunder and WeExchange, or investors in Ukyo.Loan.  Instead, MONTROLL continued to promote and sell Ukyo.Loan to customers and, on at least one occasion, falsely represented to customers that BitFunder was commercially successful.  As a result of his omissions and misrepresentations, MONTROLL raised approximately 978 bitcoins through Ukyo.Loan after his discovery of the Exploit.

The SEC’s New York Regional Office began an investigation into BitFunder and the Exploit.  During the course of the investigation, MONTROLL provided the SEC with a falsified screenshot purportedly documenting, among other things, the total number of bitcoins available to BitFunder users in the WeExchange Wallet as of October 13, 2013.  Additionally, during sworn investigative testimony on both November 14, 2013, and October 6, 2015, MONTROLL provided materially false and misleading answers to certain questions about, among other things, the timing of MONTROLL’s discovery of the Exploit.

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MONTROLL, 37, of Saginaw, Texas, pled guilty to one count of securities fraud and one count of obstruction of justice.  Each charge carries a maximum penalty of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

MONTROLL will be sentenced by Judge Berman at a date to be determined.

U.S. Attorney Geoffrey S. Berman praised the outstanding work of the Federal Bureau of Investigation.  He also thanked the SEC, which previously filed civil charges against MONTROLL in a separate action.

The prosecution of this case is being overseen by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorney Andrew Thomas is in charge of the case.                  

Geoffrey S. Berman, the United States Attorney for the Southern District of New York,  James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), and Ashan M. Benedict, the Special Agent-in-Charge of the New York Field Division of the Bureau of Alcohol, Tobacco, Firearms, and Explosives, announced that KENNETH RUDGE, 28, of the Bronx, New York, received a sentence of 420 months’ imprisonment from District Judge Kimba M. Wood at a proceeding held today in Manhattan federal court.  Rudge previously pleaded guilty to firearms charges arising from his use of a firearm in the murder of Nelson Dubon on January 21, 2016.  Rudge murdered Dubon in the course of a robbery in the South Bronx, which Rudge and other members of the violent street crew “YNR” committed as part of that crew’s drug business.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Kenneth Rudge and his YNR crew inflicted violence and death upon our community.  Thanks to the extraordinary efforts of the NYPD and the ATF, Rudge will now spend the next 35 years in prison.”

According to the charging documents filed in the case, as well as statements made during the plea proceedings and earlier court appearances:

Since at least 2012, a group of young men and women living in the vicinity of 188th Street and Webster Avenue, and referring to itself as “YNR,” engaged in a conspiracy to distribute crack cocaine and heroin to addicts in that area.  YNR managed to bring large quantities of crack cocaine and heroin into its neighborhood and to inflict mindless and, ultimately, deadly violence on its community. 

RUDGE personally organized and participated in multiple acts of narcotics sales by junior members of YNR, including groups of minors working at RUDGE’s direction.  RUDGE also instigated multiple acts of drug-related violence.  Those incidents included the following, each of which was committed in the Bronx, New York:  1) a robbery in or about 2015, of a marijuana dealer in that marijuana dealer’s apartment, during which robbery a victim was pistol-whipped by one of RUDGE’s co-conspirator; 2) a robbery, in or about 2015, of a marijuana dealer, resulting in a shooting by RUDGE and others in order to thwart the victim’s attempt to retaliate for that robbery; 3) an attempted armed robbery, on or about January 21, 2016, of a marijuana stash apartment; and 4) a robbery, on or about January 21, 2016, of a narcotics dealer and others located inside a billiards club, during which RUDGE shot and killed Nelson Dubon.

Following his arrest by the NYPD in connection with the murder of Dubon, RUDGE attempted to corruptly influence and silence witnesses against him, including by attempting to have other YNR members find and silence an eyewitness to the murder.  RUDGE also continued his firearms use and violence in the days after the murder of Dubon, including through the pistol-whipping of a livery cab driver in a failed attempt to rob that person of his fares on or about January 25, 2016, in the Bronx. 

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Mr. Berman praised the outstanding work of the NYPD and ATF for their investigative efforts and ongoing support and assistance with the case.

The prosecution of this case is being overseen by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Andrew C. Adams and Sarah Krissoff are in charge of the case.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that KATHY SCOTT and GEORGE SANTIAGO JR., both former New York State Correction Officers, were sentenced today by U.S. District Judge Kenneth M. Karas to 100 months and 87 months, respectively, for the November 12, 2013, beating of Kevin Moore, an inmate at the Downstate Correctional Facility in Fishkill, New York, and for falsifying records to cover up the beating.

SCOTT and SANTIAGO were convicted on November 20, 2017, following a two-week jury trial, of assaulting Moore in violation of his rights under the United States Constitution by repeatedly punching and kicking him in the head and body as he lay restrained on the floor.  Moore was hospitalized for two weeks with multiple serious injuries from the beating, including facial bone fractures, five broken ribs, and a collapsed lung.  SCOTT and SANTIAGO were also convicted of conspiring to violate Moore’s civil rights, as well as falsifying and conspiring to falsify Department of Correction records concerning the assault.  SCOTT and SANTIAGO were taken into custody immediately after sentencing.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Kathy Scott and George Santiago participated in a vicious beating of inmate Kevin Moore within an inch of his life.  Then they concocted a phony story to hide what they did, repeatedly lying in Department of Correction records and even creating a fake injury.  The U.S. Constitution protects all of us, including those in prison.  Correction officers who physically abuse inmates and lie about it will be punished as criminals.  Today, Scott and Santiago were held accountable for their crimes.”

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 correction officers.  After Moore yelled, in sum and substance, “I’m a monster,” multiple officers, including SANTIAGO, 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, SANTIAGO, who was wearing boots, cocked back his leg and delivered a soccer-style kick to Moore’s face.  SANTIAGO also 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 then a sergeant and the supervising officer on the scene, was present for the entire beating and was 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 continued to kick and punch him.  During the beating, Moore repeatedly cried out in pain and begged SCOTT and the other officers to stop hurting him.

Immediately after the beating, SANTIAGO 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 one of the officers and that another officer 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 the officer’s back by pushing the officer backward onto a table.  But because nothing of the sort had occurred, they created a phony injury.  Specifically, SANTIAGO hit one of the other officers repeatedly on the back with a baton 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 SANTIAGO, and submitted the false report to her superiors.  SCOTT and SANTIAGO also repeatedly 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.

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SCOTT, 44, of Saugerties, New York, was sentenced to 100 months in prison and one year of supervised release.  SANTIAGO, 36, of Fremont Center, New York, was sentenced to 87 months in prison and one year supervised release.

Three other former Downstate correction officers pled guilty to the same offenses in connection with the beating and cover-up.  Andrew Lowery pled guilty on July 27, 2016, Donald Cosman pled guilty on August 31, 2016, and Carson Morris pled guilty on November 1, 2017.  Lowery and Morris are scheduled to be sentenced on July 25, 2018, and September 14, 2018, respectively.  The sentencing of Cosman has not yet been scheduled.

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 New York State Department of Correction 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.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, James D. Robnett, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), and Nonie Manion, Acting Commissioner of the New York State Department of Taxation and Finance (“NYSDTF”), announced today the arrest of TOM SHIN on charges of aiding the preparation of a false tax return and wire fraud.  The Complaint charges that SHIN, a tax preparer in New York, participated in a scheme to obtain over $1.3 million of his clients’ money that was intended to be paid to the IRS and NYSDTF for taxes the clients owed.  SHIN was arrested this morning and will be presented today in Manhattan federal court before U.S. Magistrate Judge Debra Freeman.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, the defendant betrayed his clients’ trust and engaged in a brazen scheme to defraud his clients of more than $1.3 million that was intended to be used to pay taxes owed to the federal and state governments.  Thanks to the investigative work of the IRS and the NYSDTF, the defendant will be prosecuted for his actions.”

IRS-CI Special Agent-in-Charge James D. Robnett said:  “The IRS enforces the nation’s tax laws, but also takes particular interest in cases where someone, for their own personal gain, allegedly takes what belongs to others.  Our special agents are uniquely qualified to assist state and federal law enforcement agencies with these types of investigations by following the money.”

NYSDTF Acting Commissioner Nonie Manion said:  “The blatant deceit and theft allegedly carried out by this tax preparer is unconscionable. The honesty and integrity New Yorkers expect from their tax preparer must never be compromised, which is why we’ll continue to work with all levels of law enforcement to root out unscrupulous preparers and hold them accountable.” 

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

SHIN was hired to prepare joint federal and state tax returns for two individuals (the “Clients”) for tax year 2017.  SHIN showed the Clients completed tax return forms indicating that the Clients owed approximately $1.3 million in taxes.  However, SHIN actually filed false returns on behalf of the Clients without their knowledge, which concealed the Clients’ tax liability.  SHIN then, in connection with applications for extensions of time to file his personal tax returns, directed tax authorities to withdraw approximately $1.3 million from the Clients’ bank account, and then filed personal tax returns seeking an approximately $1.3 million refund.  The net result of the alleged scheme would have been a transfer of approximately $1.3 million from the Clients’ bank account to SHIN.

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SHIN, 36, of Staten Island, New York, is charged with one count of aiding the preparation of a false tax return, which carries a maximum penalty of three years in prison, and one count of wire fraud, which carries a maximum penalty of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorney Brett M. Kalikow 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 forth herein 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, said:  “Yet again, a New York jury heard a sordid tale of bribery, extortion, and the abuse of power by a powerful public official of this State.  And yet again, a jury responded with a unanimous verdict of guilt, in this case of Dean Skelos and his son Adam – sending the resounding message that political corruption will not be tolerated.”

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, 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 New York City Police Department (“NYPD”), announced the arrest of DAYVON CHESTNUT, a/k/a “Dayvon Denaris Wynez Chestnut,” for trafficking in firearms, including the trafficking of firearms from South Carolina to the New York City area.  CHESTNUT was arrested this morning in South Carolina by the ATF and the NYPD, and will be presented today on a complaint in federal court in the District of South Carolina.

U.S. Attorney Geoffrey S. Berman said:  “A big part of keeping our city safe is curtailing the flow of illegal guns to our streets.  As alleged, until today, trafficking in illegal firearms was Dayvon Chestnut’s stock in trade.  Now, thanks to the ATF and NYPD, he is in custody and awaiting prosecution by our Office.”

ATF Special Agent-in-Charge Ashan M. Benedict said:  “As alleged, Dayvon Chestnut conspired to traffic firearms into the state of New York.  Those who traffic in firearms are a direct focus of the ATF mission to combat violent crime.  ATF and its partners at the NYPD work together every day to disrupt and dismantle these organizations and groups that circumvent the law by putting illegal firearms on the streets of New York.  I would like to thank the Special Agents and NYPD Detective Task Force Officers of the ATF Crime Gun Intelligence Center for their diligent work on this case. I would also like to extend my gratitude to the United States Attorney’s Office for their work in prosecuting the case.”

According to the allegations in the Complaint[1]:

Since in or about 2016 through the present, CHESTNUT has been purchasing firearms in South Carolina, and directing others to purchase firearms in South Carolina, and selling those firearms to other individuals.  CHESTNUT utilizes Facebook communications and phone communications, among other methods, to communicate with some of his co-conspirators.  In April and May 2018, CHESTNUT traveled to the New York City area on at least four occasions to distribute those firearms. 

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CHESTNUT, 25, of Bishopville, South Carolina, is charged with conspiracy to traffic in firearms and firearms trafficking, each of which carries a maximum statutory penalty of five years in prison. 

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

Mr. Berman praised the efforts of the ATF and NYPD in this case.

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorney Sarah Krissoff 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 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 Raymond P. Donovan, the Special Agent in Charge of the Special Operations Division of the U.S. Drug Enforcement Administration (“DEA”), announced today that charges have been filed in Manhattan federal court against Honduran congressman MIDENCE OQUELI MARTINEZ TURCIOS and, in a separate indictment, ARNALDO URBINA SOTO, CARLOS FERNANDO URBINA SOTO, and MIGUEL ANGEL URBINA SOTO.  The charges in each indictment include conspiring to import cocaine into the United States and related weapons offenses involving the use and possession of machineguns and destructive devices.  The United States is seeking the defendants’ extraditions from Honduras.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, these defendants include a Honduran congressman and a former Honduran mayor.  All are charged with conspiring to import cocaine into the U.S. and conspiring to use and carry machineguns and destructive devices in furtherance of cocaine importation.  Politically connected defendants in Honduras allegedly working in league with violent drug cartels is a recipe for harm here in the U.S.  We are committed to working with the DEA to police and prosecute such conduct.”

Special Agent in Charge Raymond P. Donovan said:  “DEA and our partners continue to expose drug-related corruption across the world, which fuels violence and insurgency while upending the rule of law.  These Honduran elected officials and their associates allegedly conspired with the Sinaloa Cartel and flooded American communities with huge amounts of deadly poison.  DEA looks forward to their extradition to the United States to face American justice and answer for their many alleged crimes.”

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

From at least in or about 2004, up to and including in or about 2014, multiple drug trafficking organizations in Honduras and elsewhere worked together, and with support from MARTINEZ TURCIOS, the Urbina Soto defendants, and others, to receive multi-hundred-kilogram loads of cocaine sent to Honduras via air and maritime routes from, among other places, Venezuela and Colombia.  The cocaine shipments were transported westward within Honduras toward the border with Guatemala and eventually imported into the United States, often in coordination with high-ranking members of Mexico’s Sinaloa Cartel.

MARTINEZ TURCIOS is a legislator, referred to as a diputado, in the National Congress of Honduras.  MARTINEZ TURCIOS is the second Honduran congressman to be charged in connection with the DEA’s investigation of politically connected drug trafficking in Honduras.  In January 2018, Honduran congressman Fredy Renan Najera Montoya was also charged with conspiring to import cocaine into the United States and related firearms offenses.  See United States v. Najera Montoya, S1 15 Cr. 378 (PGG).

MARTINEZ TURCIOS was a member of a violent Honduran drug trafficking organization known as the Cachiros.  Between in or about 2004 and in or about 2014, MARTINEZ TURCIOS received a total of over $1 million in bribes and other payments from the leaders of the Cachiros, which he used to, among other things, enrich himself and fund his campaign activities and political operations.   MARTINEZ TURCIOS helped provide the appearance of legitimacy to the leaders of the Cachiros by virtue of his political position and authority, and by acting at times as a nominal partial owner of one of the organization’s money laundering front companies, Ganaderos Agricultores del Norte, S. de R.L. de C.V.  MARTINEZ TURCIOS also provided direct support for violent drug trafficking activities by the Cachiros.  For example, MARTINEZ TURCIOS personally escorted some Cachiros cocaine shipments as they were transported through Honduras, managed heavily armed security teams responsible for protecting large quantities of drugs, participated in weapons training provided to paid Cachiros assassins recruited from the gang known as Mara Salvatrucha, or MS-13, and helped plan and participated in acts of violence perpetrated by members and associates of the Cachiros.

As alleged in a separate Indictment, between in or about 2005 and in or about 2014, ARNALDO URBINA SOTO, CARLOS FERNANDO URBINA SOTO, and MIGUEL ANGEL URBINA SOTO operated a drug trafficking organization based in Yoro, Honduras, where ARNALDO URBINA SOTO acted as mayor between in or about 2009 and in or about 2014.  The Urbina Soto defendants capitalized on their power in the Yoro Department and aligned with other major Honduran criminal syndicates, such as the Cachiros and the Copan-based group led by Miguel Arnulfo Valle Valle and Luis Alonso Valle Valle, to receive cocaine-laden aircraft at various locations in Honduras, including clandestine airstrips in remote areas as well as public roads in the vicinity of Yoro.  The Urbina Soto defendants coordinated – and at times personally joined – heavily armed security details that oversaw the unloading of the planes and the transportation of the illicit cargo in connection with importing massive quantities of cocaine into the United States.  

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MARTINEZ TURCIOS, 57, is charged in three counts:  (1) conspiring to import cocaine into the United States, (2) using and carrying machineguns and destructive devices during, and possessing machineguns and destructive devices in furtherance of, the cocaine importation conspiracy, and (3) conspiring to use and carry machineguns and destructive devices during, and to possess machineguns and destructive devices in furtherance of, the cocaine importation conspiracy.  If convicted, MARTINEZ TURCIOS faces a mandatory minimum sentence of 10 years in prison and a maximum term of life in prison on Count One, a mandatory minimum sentence of 30 years in prison and a maximum term of life in prison on Count Two, and a maximum term of 20 years in prison on Count Three.

The second Indictment charges CARLOS FERNANDO URBINA SOTO, 44, and MIGUEL ANGEL URBINA SOTO, 39, with violating the same statutes as MARTINEZ TURCIOS.  ARNALDO URBINA SOTO, 37, is charged in two counts:  (1) conspiring to import cocaine into the United States, and (2) conspiring to use and carry machineguns and destructive devices during, and to possess machineguns and destructive devices in furtherance of, the cocaine importation conspiracy.  If convicted, CARLOS FERNANDO URBINA SOTO and MIGUEL ANGEL URBINA SOTO each face a mandatory minimum sentence of 10 years in prison and a maximum term of life in prison on Count One, a mandatory minimum sentence of 30 years in prison and a maximum term of life in prison on Count Two, and a maximum term of 20 years in prison on Count Three.  If convicted, ARNALDO URBINA SOTO faces a mandatory minimum sentence of 10 years in prison and a maximum term of life in prison on Count One, and a maximum term of 20 years in prison on Count Three.

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

Mr. Berman praised the outstanding efforts of the DEA’s Special Operations Division 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 and the U.S. Attorney’s Office for the Eastern District of Virginia.

These cases are being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Emil J. Bove III and Mathew J. Laroche are in charge of the prosecutions.

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

[1] As the introductory phrase signifies, the entirety of the text of the Indictment charging Martinez, and the separate Indictment charging Arnaldo Urbina Soto, Carlos Fernando Urbina Soto, and Miguel Angel Urbina Soto, as well as the descriptions of the Indictments set forth herein, constitute only allegations, and every fact described should be treated as an allegation.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced the arrest and unsealing of a complaint charging JOHN GERACI with investment adviser fraud, securities fraud, wire fraud, and conspiracy in connection with a scheme to defraud clients of his company, Meridian Capital Asset Management.  GERACI caused two clients (“Victim-1” and “Victim-2”) to invest in a hedge fund called the Meridian Matrix Long Short Fund (the “Meridian Matrix Fund”).  Between in or about December 2015 and November 2016, GERACI provided fictitious account statements and updates to Victim-1 and Victim-2, telling them that their investment was worth millions when, in reality, GERACI knew that large portions of it had been stolen by the Meridian Matrix Fund’s administrator.  GERACI eventually liquidated the Meridian Matrix Fund and misappropriated significant portions of the remaining funds.  Although he had recovered over $1 million of Victim-1 and Victim-2’s investment, GERACI falsely told them that their entire investment had been lost, and improperly used their money to pay his own personal and business expenses.

In a separate action, the Securities and Exchange Commission (“SEC”) filed civil charges against GERACI.  

U.S. Attorney Geoffrey S. Berman said:  “As alleged, when John Geraci realized that Nicholas Mitsakos was a con artist, he withheld this fact from investors he had solicited for the purportedly high-yield fund run by Mitsakos.  Geraci allegedly concealed Mitsakos’s fraud because it was lucrative for him.  Mitsakos is now a convicted felon in this district, and Geraci faces prosecution for his alleged crimes.”

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

JOHN GERACI was the principal and founder of a company called Meridian Capital Asset Management, which provided investment advice to clients.  In or about February 2015, GERACI was introduced to another individual, Nicholas Mitsakos, who purported to operate a hedge fund called Matrix Capital (“Matrix”).  Mitsakos told GERACI that Matrix had tens of millions of dollars under management and had achieved annual returns between 19.4% and 66.3% from 2012 to 2014.  GERACI and Mitsakos subsequently entered into an arrangement whereby GERACI would raise money for Mitsakos; Mitsakos would manage that money through a new vehicle, the Meridian Matrix Fund; and GERACI and Mitsakos would then split any fees that the Meridian Matrix Fund generated.  As part of this arrangement, GERACI convinced Victim-1 and Victim-2 to invest approximately $2 million in the Meridian Matrix Fund, in large part by relying on Mitsakos’s claims about his supposed fund’s assets under management and performance returns.

In or about December 2015, however, GERACI learned that Mitsakos had only invested approximately $1.2 million of Victim-1 and Victim-2’s investment, and had misappropriated significant portions of the remaining money.  GERACI also learned that Mitsakos never had any actual assets under management, and that his performance returns were accordingly fictitious and misleading.  Nonetheless, GERACI never told Victim-1 or Victim-2 that their investment was in jeopardy or had been solicited with misleading information.  To the contrary, GERACI sent Victim-1 and Victim-2 updates that hid Mitsaskos’s misappropriation and falsely claimed that their investment had appreciated.  GERACI sent these fictitious updates even after Mitsakos sustained significant trading losses and even after GERACI himself had liquidated the Meridian Matrix Fund’s trading positions in or about June 2016. 

In or about August 2016, Mitsakos was charged in this District with securities fraud and other offenses.  In or about September 2016, GERACI changed course: instead of providing fictitious account updates to Victim-1 and Victim-2, GERACI told them, in substance and in part, that their entire investment had been wiped out through Mitsakos’s fraud.  GERACI did this even though he had ultimately received approximately $1.1 million of Victim-1 and Victim-2’s investment back from Mitsakos after liquidating the Meridian Matrix Fund’s trading positions.  Rather than returning this amount to Victim-1 and Victim-2, GERACI used it to pay for his own personal and business expenses, including, for example, payments on a BMW automobile, a gym membership, gas, groceries, travel expenses, and his cellphone bill. 

In addition to sending false account updates to Victim-1 and Victim-2 even after learning that Mitsakos had lied about his fund’s assets and performance and that Mitsakos had stolen significant portions of Victim-1 and Victim-2’s investment, GERACI continued to try to raise money for the Meridian Matrix Fund.  In attempting to do so, moreover, GERACI relied on the same representations about Matrix’s assets and performance that he knew to be false.    

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GERACI, 61, of Miami, Florida, is charged with one count of investment adviser fraud, one count of securities fraud, one count of wire fraud, and one count of conspiring to commit securities and wire fraud. The investment adviser fraud and conspiracy charges each carry a maximum term of five years in prison.  The securities and wire fraud charges each carry a maximum term of 20 years in prison.  The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.  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 exceptional work of the Office’s Special Agent criminal investigators and thanked the SEC for its assistance. 

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant United States Attorney Robert Allen is 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.

[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.

Robert Khuzami, Attorney for the United States, acting under authority conferred by 28 U.S.C. § 515, announced the convictions of former New York State Senate Majority Leader DEAN SKELOS and his son ADAM SKELOS on bribery, extortion, and honest services fraud counts, following a five-week jury trial before the U.S. District Judge Kimba M. Wood.  As a unanimous jury found for a second time, DEAN SKELOS repeatedly abused his official position to obtain more than $300,000 in bribes and extortion payments made to his son, ADAM SKELOS.  The defendants had previously been found guilty of the same offenses by a jury in December 2015, but their convictions were overturned by the U.S. Court of Appeals for the Second Circuit as a result of the Supreme Court’s decision in McDonnell v. United States.

Deputy U.S. Attorney Robert Khuzami said:  “Yet again, a New York jury heard a sordid tale of bribery, extortion, and the abuse of power by a powerful public official of this State.  And yet again, a jury responded with a unanimous verdict of guilt, in this case of Dean Skelos and his son Adam – sending the resounding message that political corruption will not be tolerated.”

According to the evidence introduced at trial, court filings, and statements made in Manhattan federal court:

From 2011 to 2015, DEAN SKELOS served as Majority Leader and Co-Majority Leader of the New York State Senate, a position that gave him significant power over the operation of New York State government.  DEAN SKELOS repeatedly used this power to pressure companies with business before New York State to make payments to his son, ADAM SKELOS, who substantially depended on these companies for his income.  DEAN SKELOS and ADAM SKELOS were able to secure these illegal payments through implicit and explicit representations that DEAN SKELOS would use his official position to benefit those who made the payments, and punish those who did not.  In total, DEAN SKELOS obtained over $300,000 in payments to ADAM SKELOS through persistent and repeated pressure applied to senior executives of three different companies that needed legislation passed in the New York State Senate and other official actions from DEAN SKELOS. 

The Glenwood Scheme

Beginning in late 2010, and continuing for approximately two years, DEAN SKELOS repeatedly solicited payments for ADAM SKELOS from representatives of Glenwood Management Corp. (“Glenwood”), a major New York City real estate company.  DEAN SKELOS’s solicitations for payments to ADAM SKELOS took place during the same meetings when Glenwood’s representatives were asking for DEAN SKELOS’s assistance with New York State legislation that was crucial to Glenwood’s profitability.  As a result of the sustained pressure from DEAN SKELOS, representatives of Glenwood arranged for a $20,000 direct payment to ADAM SKELOS and further arranged for Abtech Industries (“Abtech”), an Arizona-based stormwater technology company in which Glenwood’s founding family owned a stake, to make $4,000 monthly payments to ADAM SKELOS.  Glenwood arranged for these payments to ADAM SKELOS due to the company’s substantial dependence on DEAN SKELOS for real estate tax abatements and other real estate legislation favorable to Glenwood, and based in part on statements from DEAN SKELOS that he would punish those in the real estate industry who defied him. 

The Abtech Scheme

After successfully obtaining ADAM SKELOS’s Abtech consulting contract for $4,000 per month, DEAN SKELOS and ADAM SKELOS then threatened to use DEAN SKELOS’s official powers to block Abtech’s bid for a Nassau County contract unless the company sharply increased ADAM SKELOS’s payments.  Abtech ultimately agreed to increase ADAM SKELOS’s payments to $10,000 per month because the company feared that, if it did not meet the defendants’ demands, it would lose the Nassau County contract that was critical to its business.  In return for the payments to ADAM SKELOS, DEAN SKELOS took and agreed to take numerous official actions to benefit Abtech. 

For example, when Abtech and ADAM SKELOS believed Nassau County was withholding funding due to Abtech under its contract, DEAN SKELOS pressured Nassau County officials to make additional funds available.  In January 2015, DEAN SKELOS was intercepted in a call with the Nassau County Executive in which he raised the issue, complaining on behalf of ADAM SKELOS that “somebody feels like they’re getting jerked around the last two years.”  The next day, DEAN SKELOS traveled with the County Executive and his Deputy to the funeral of a New York City Police Department officer, where DEAN SKELOS reiterated in person his demand that the County make payments to Abtech, which the County subsequently did. 

DEAN SKELOS also used his official position in an attempt to direct State funding that had been recovered in litigation with financial services companies (the “Settlement Funds”) in a way that would benefit water projects and contracts being pursued by Abtech.  For example, at the same time ADAM SKELOS was attempting to obtain additional Abtech stormwater projects with local municipalities by claiming that the projects could be funded with State money, DEAN SKELOS advocated for a portion of the Settlement Funds to be allocated for stormwater projects. 

The PRI Scheme

During the same time period as the Glenwood and Abtech schemes, DEAN SKELOS solicited payments for his son ADAM SKELOS from yet another company, Physician Reciprocal Insurers (“PRI”).  PRI, a medical malpractice insurance firm whose existence depends on the renewal of certain New York State legislation, complied with the request, giving ADAM SKELOS a full-time job with benefits.  Even though ADAM SKELOS was expected to work 40 hours per week, he treated his PRI position as a “no show” job from the outset of his employment.  When ADAM SKELOS’s supervisor told ADAM SKELOS that he was expected to show up to work, ADAM SKELOS berated him and said, “Guys like you couldn’t shine my shoes. Guys like you will never amount to anything, and if you talk to me like that again, I’ll smash your f**king head in.”  When the CEO of PRI told DEAN SKELOS that ADAM SKELOS was not showing up to work and was mistreating the other employees, DEAN SKELOS expressed no concern about ADAM SKELOS’s conduct and simply told the CEO to “work it out.”  Based on this conversation, among others, the CEO understood that if he did not continue to pay ADAM SKELOS, despite his non-performance and misconduct at work, he was risking DEAN SKELOS taking legislative action against PRI.

During the time period that PRI was paying ADAM SKELOS, DEAN SKELOS repeatedly voted to extend PRI’s legislative protection from liquidation as well as other legislation that was being sought by PRI.

*                *                *

DEAN SKELOS, 70, and ADAM SKELOS, 36, each face a maximum sentence of 20 years in prison on Count One (conspiracy to commit extortion), a maximum sentence of 20 years in prison on Count Two (conspiracy to commit honest services fraud), a maximum sentence of 20 years in prison on each of Counts Three through Five (extortion), and a maximum sentence of 10 years in prison on each of Counts Six through Eight (bribery).  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 Judge Wood.  Both defendants are scheduled to be sentenced on October 24, 2018.

Mr. Khuzami praised the work of the Criminal Special Agent Investigators of the United States Attorney’s Office and the Federal Bureau of Investigation, who jointly conducted this investigation.  

This case was prosecuted by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys Edward B. Diskant, Thomas McKay, and Douglas S. Zolkind are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that VIRGINIA BLANCO was found guilty on all counts of a three-count Indictment yesterday that charged her with participating in the robbery of a Wells Fargo Bank branch in Yonkers, New York, in October 2013, and with aiding and abetting the discharge of a firearm in furtherance of the robbery.  The verdict came following a four-day jury trial in White Plains federal court before U.S. District Judge Cathy Seibel. 

U.S. Attorney Geoffrey S. Berman said:  “The robbery of the Wells Fargo Bank branch in Yonkers was an inside job.  With yesterday’s verdict, Virginia Blanco, the insider who made the violent robbery possible, stands convicted.”

According to the Superseding Indictment and the evidence at trial:           

In or about October 2013, BLANCO was working as a teller at a Wells Fargo Bank branch located at 500 Odell Avenue in Yonkers, New York (the “Wells Fargo Branch”).  She conspired with co-defendant Giovanny Marte to rob the Wells Fargo Branch and provided critical information to Marte that allowed him and his co-conspirators to carry out the robbery successfully.  On October 29, 2013, at approximately 3:17 p.m., Marte and three co-conspirators arrived at the Wells Fargo Branch.  One co-conspirator remained in the car while Marte and two co-conspirators entered the bank.  Marte and another robber each brandished a firearm and the third robber brandished a wood saw.  During the robbery, Marte fired two shots but did not hit anyone.  He accessed the vault, filled a laundry bag with approximately $303,500 in cash, and fled the Wells Fargo Branch with the other robbers.  Following the robbery, BLANCO and Marte took a trip together to Aruba using proceeds from the robbery.

*                *                *

BLANCO, 29, faces a maximum sentence of five years in prison on Count One (conspiracy), a maximum sentence of 20 years in prison on Count Two (bank robbery); and a maximum sentence of life in prison, with a mandatory minimum of 10 years, on Count Three (firearm offense).  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.  Judge Seibel remanded BLANCO following her conviction and she is scheduled to be sentenced on October 19, 2018.

Mr. Berman praised the outstanding investigative work of the FBI’s Westchester County Safe Streets Task Force, which comprises agents and detectives of the FBI, United States Probation, the City of Yonkers Police Department, the City of Peekskill Police Department, the City of Mount Vernon Police Department, the New York City Police Department, the Westchester County Police, the Greenburgh Police Department, New York State Police, and the Westchester County District Attorney’s Office.

The prosecution is being handled by the Office’s White Plains Division.  Assistant U.S. Attorneys Sam Adelsberg, Jamie Bagliebter, Margery Feinzig, Douglas Zolkind, and James McMahon are in charge of the prosecution.

Geoffrey S. Berman, United States Attorney for the Southern District of New York announced that RODOLFO SABLON, a/k/a “Rudy,” pled guilty today before United States Magistrate Judge Debra Freeman to conspiracy to commit securities fraud and fraud in connection with a tender offer for his role in an insider trading scheme based on material, nonpublic information misappropriated from an investment bank by Daniel Rivas, a former employee at the bank. In August 2017, SABLON, Michael Siva, Roberto Rodriguez, and Jeffrey Rogiers were arrested and charged in a 54-count Indictment for their involvement in three insider trading schemes, all stemming from information misappropriated by Rivas.[1]  Rivas and an additional participant, James Moodhe, have pled guilty and are cooperating with the Government in this investigation. 

U.S. Attorney Geoffrey S. Berman said:  “As Rodolfo Sablon admitted today, he traded on his friend’s confidential corporate information, reaping millions of dollars in illegal profits.  Further, Sablon and his co-conspirators intended to use their profits to create an investment fund with the intention of sharing further illicit profits with their insider friend.  They were arrested before they could do so.  Our Office is committed to identifying and prosecuting inside information-sharing networks that undermine our nation’s securities markets.”

According to the allegations contained in the Indictment filed against SABLON and his co-conspirators, and statements made in related court filings and proceedings:

The Investment Bank and Rivas

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

Overview of Insider Trading Schemes

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

The Sablon Tipping Chain

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

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

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

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

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

*                *                *

SABLON, 38, of Miami, Florida, pled guilty to one count of conspiracy to commit securities fraud and fraud in connection with a tender offer (Count Twenty-One), which carries a maximum sentence of five years in prison and a maximum fine of $250,000, or twice the gross gain from the offense.  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.  SABLON will be sentenced before U.S. District Alison J. Nathan. 

Trial against defendants Siva, Rodriguez, Zoquier, and Rogiers is scheduled for September 10, 2018, before Judge Nathan, on charges of conspiracy to commit securities fraud and fraud in connection with a tender offer, conspiracy to commit wire fraud, multiple counts of securities fraud, and tender offer fraud.  The allegations contained in the Indictment as to those defendants are merely accusations, and they are presumed innocent unless and until proven guilty.

Mr. Berman praised the investigative work of the Federal Bureau of Investigation, and thanked the Securities and Exchange Commission for their assistance.  He added that the investigation is continuing.

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

[1] As for the defendants who have not pled guilty (Michael Siva, Roberto Rodriguez, Jhonatan Zoquier and Jeffrey Rogiers), the charges described herein constitute only allegations.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Paul D. Delacourt, the Assistant Director-in-Charge of the Los Angeles Field Office of the Federal Bureau of Investigation (“FBI”), announced the indictment late yesterday of MICHAEL YIN, a/k/a “Shaohua Yin,” on charges of conspiracy to commit securities fraud and securities fraud in connection with an insider trading scheme relating to the securities of Lattice Semiconductor Corporation (“Lattice”).  YIN remains at large.  The case is assigned to U.S. District Judge John G. Koeltl. 

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Michael Yin reaped illegal gains of more than $5 million by trading on inside information he received from his friend and business associate Benjamin Chow in breach of Chow’s duties to Lattice.  Yin and Chow executed their scheme through text message exchanges neither ever thought would see the light of day and in meetings far away in Beijing, China.  Thanks to the efforts of law enforcement, Yin’s abuse of the United States markets has been uncovered and he stands indicted for his crimes.”

FBI Assistant Director Paul Delacourt said:  "Yin’s alleged use of material, nonpublic information as a road to revenue produced millions in unlawful proceeds. The FBI and our partners at the Securities and Exchange Commission will continue to investigate subjects who use criminal tactics that illegally create overnight millionaires and threaten the credibility of the marketplace."

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

From approximately March 2016 to February 2017, YIN obtained from a friend and business associate, Benjamin Chow, material nonpublic information relating to a potential merger between Lattice and successive private equity firms managed by Chow, one based in Beijing, China (“Firm-1”), and one based in Palo Alto, California, with offices in Beijing, China (“Firm-2”).  YIN used such information to make more than $5 million in profitable securities trades through accounts opened in the names of YIN’s family members and associates. 

Specifically, as Managing Director of Firm-1 and later Managing Partner of Firm-2, Chow obtained material nonpublic information regarding potential merger agreements between Lattice and Firm-1 and later Firm-2.  Information concerning the potential merger agreements was subject, among other things, to nondisclosure agreements executed between Lattice and Chow on behalf of Firm-1 and later Firm-2. 

Through multiple meetings in Beijing, China, voice messages, and text exchanges, YIN obtained from Chow material nonpublic information regarding the potential merger between Lattice and Firm-1 and later Firm-2, which Chow provided to YIN in violation of the nondisclosure agreements Chow executed with Lattice on behalf of Firm-1 and Firm-2.  YIN made profitable trades in Lattice shortly after receiving the material nonpublic information from Chow, yielding a total of at least approximately $5 million in profits.  For example, on one occasion, Chow told YIN, in substance and as transcribed and translated from Chinese, that Chow should soon be able to execute a merger agreement with Lattice.  Beginning the following day, and over the course of the next three weeks, YIN purchased more than 2.2 million shares of Lattice stock. 

Chow was previously charged in this District and found guilty in a jury trial of several offenses for his role in the scheme and is presently awaiting sentencing in front of U.S. District Judge Gregory H. Woods. 

*                *                *

YIN, 45, of Beijing, China, is charged with one count of conspiring to commit securities fraud, which carries a maximum prison sentence of five years in prison, and 13 counts of securities fraud, which carry maximum sentences of 20 and 25 years in prison.  The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.  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 exceptional work of the Federal Bureau of Investigation, and thanked the Securities and Exchange Commission for its assistance.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant United States Attorneys Max Nicholas, Scott Hartman, and Elisha J. Kobre are in charge of the prosecution. 

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that DUANE MARTINEZ pled guilty today in Manhattan federal court to conspiring to distribute more than one kilogram of heroin between 2015 and 2017.  As part of that conspiracy, MARTINEZ arranged to deliver heroin to a 41-year-old woman, Ivy Katz, while she was a patient in a hospital rehabilitation clinic, causing Katz to overdose and die.

U.S. Attorney Geoffrey S. Berman said:  “The trafficking of heroin and other opioids is a serious crime that often leads to the tragic overdoses that are a public health crisis in our city and around the country.  Duane Martinez sold large amounts of heroin over a long period of time, and he arranged for his heroin to be delivered to an inpatient rehabilitation clinic located inside a hospital.  Martinez’s disregard led to a tragic death and undermined the efforts of health professionals to provide treatment for someone with the courage to seek it.  Thanks to the outstanding investigative work of our partners in the New York City Police Department, Duane Martinez is out of business, and heroin dealers should know that they cannot escape the consequences of their crimes.”

According to the allegations contained in the Complaint, the Indictment, and statements made in court and publicly available documents:

From at least in or about November 2015 through in or about April 2017, in the Southern District of New York and elsewhere, MARTINEZ and others conspired to sell more than one kilogram of heroin. 

In particular, on or about January 1, 2017, MARTINEZ arranged for heroin to be delivered to Ivy Katz at an inpatient rehabilitation clinic located in a hospital in Manhattan.  In mid-December 2016, Katz had voluntarily checked herself into the hospital’s inpatient rehabilitation program for opioid dependence.  MARTINEZ arranged for another individual to deliver heroin to Katz in the hospital, evading measures designed to prevent patients in recovery from receiving drugs.  Approximately 30 minutes after the person sent by MARTINEZ left the hospital, Katz was found comatose in her room with a needle containing heroin in her arm.  Katz never regained consciousness and ultimately died on or about January 16, 2017.

*              *             *

DUANE MARTINEZ, 44, faces a maximum sentence of life in prison, and a mandatory term of 10 years in prison.  The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge. MARTINEZ is scheduled to be sentenced by Judge Caproni on October 25, 2018.

Charges against the other individual named in the indictment – Anthony Dodaj – are pending.  The charges and allegations against Dodaj are merely accusations, and he is presumed innocent unless and until proven guilty.

Mr. Berman praised the outstanding investigative work of the New York City Police Department’s Manhattan South Narcotics Heroin Overdose Team.

This matter is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys David W. Denton Jr. and Stephanie Lake are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that ANTON SALJANIN was sentenced today by U.S. District Judge Kenneth M. Karas to 48 months in prison for participating in a scheme to steal, transport, and sell a shipment of approximately 1,200 computers, valued at over $1 million, that were bound for two public high schools in New Jersey.  SALJANIN pled guilty on October 18, 2017, before U.S. Magistrate Judge Lisa Margaret Smith to one count of conspiracy to commit theft from an interstate shipment, interstate transportation of stolen property, and receipt, possession, and sale of stolen property and one count of theft from an interstate shipment.

U.S. Attorney Geoffrey S. Berman said:  “Anton Saljanin was the ringleader and insider in an inside job that resulted in the theft of over $1 million worth of computers meant for school kids.  Now, having admitted his role in this truck hijacking scheme, he has been sentenced to prison for his crimes.”

According to the Complaint and Superseding Indictment filed in White Plains federal court, as well as materials submitted in connection with the plea and sentencing proceedings:

On or about January 15, 2014, ANTON SALJANIN, a driver for a shipping company, drove a truck from Yorktown Heights, New York, to a technology company located in Massachusetts to pick up a shipment of approximately 1,200 computers.  SALJANIN brought his brother, Gjon Saljanin, with him.  The computers were being shipped to two public high schools located in New Jersey, and were valued at over $1 million.

The next morning, SALJANIN reported to the Yorktown Police Department that the truck had been stolen from a parking lot located in Yorktown Heights.  Later that day, SALJANIN reported to Yorktown Police that he had been driving around looking for the truck when he happened to spot it from the highway in a parking lot in Danbury, Connecticut.  The truck would not have been visible in the Danbury parking lot to a driver passing by on the highway.  Furthermore, historical cell site data for SALJANIN’s cellphone contradicts his claims about the route he took to look for the truck.

Yorktown Police detectives examined the truck and found that a window had been broken.  The detectives found broken glass on the scene in the Danbury parking lot but found no broken glass on the scene in the Yorktown Heights parking lot, suggesting that the window had been broken at the Danbury parking lot rather than at the Yorktown Heights parking lot.

During interviews with the Yorktown Police, SALJANIN and Gjon Saljanin both falsely claimed that on the night of January 15, 2014, they drove directly from a convenience store outside of Yorktown Heights to the Yorktown Heights parking lot.  Security camera footage from various locations in Yorktown Heights shows that a truck matching the description of the truck driven by ANTON SALJANIN and Gjon Saljanin departed from their claimed route, and instead traveled in the direction of the residence of Ujka Vulaj, a long-time friend of ANTON SALJANIN.  The video surveillance footage also shows that the duration of the detour corresponds to the approximate length of time it would have taken to drive to Vulaj’s residence, unload the computers from the truck, and return to the route to the Yorktown Heights parking lot.

From in or about January 2014 through at least in or about April 2014, Vulaj sold the stolen computers, some with the help of a co-worker, Carlos Caceres.  They sold the computers, which had a retail value of approximately $1,000 each, for far below the market price.  Vulaj and Caceres charged approximately $500 to $800 in cash for each computer, and handed over each computer in plain brown cardboard packaging.

*                *                *

In addition to the prison sentence, SALJANIN, 46, of Yorktown Heights, New York, was sentenced to three years of supervised release.  Judge Karas also ordered ANTON SALJANIN to forfeit $989,424.15 in ill-gotten gains and to pay $989,424.15 in restitution.

ANTON SALJANIN’s co-defendants have been convicted and sentenced.  Vulaj, 56, of Yorktown Heights, New York, pled guilty on June 17, 2016, to one count of conspiracy to commit theft from an interstate shipment, interstate transportation of stolen property, and receipt, possession, and sale of stolen property, and was sentenced by Judge Karas on May 12, 2017, to 12 months and one day in prison and two years of supervised release (including 6 months of home confinement).  Judge Karas also ordered Vulaj to forfeit $989,424.15 in ill-gotten gains and to pay $989,424.15 in restitution.

Caceres, 40, of the Bronx, New York, pled guilty on July 21, 2016, to one count of conspiracy to commit receipt, possession, and sale of stolen property, and was sentenced by Judge Karas on January 6, 2017, to 27 months in prison and three years of supervised release.  Judge Karas also ordered Caceres to forfeit $331,188 in ill-gotten gains and to pay $331,188 in restitution.

Gjon Saljanin, 43, of Yorktown Heights, New York, pled guilty on October 16, 2017, to one count of conspiracy to commit theft from an interstate shipment, interstate transportation of stolen property, and receipt, possession, and sale of stolen property, and was sentenced by Judge Karas on May 4, 2018, to 12 months and one day in prison and two years of supervised release.  Judge Karas also ordered Gjon Saljanin to forfeit $989,424.15 in ill-gotten gains and to pay $989,424.15 in restitution.

Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation, the Yorktown Police Department, the Westchester County Police Department, and the New York City Police Department.  He also thanked the Bronx County District Attorney’s Office for its assistance.

This case is being handled by the Office’s White Plains Division.  Assistant U.S. Attorneys Won S. Shin, Benjamin Allee, and Scott Hartman are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that VEDOUTIE HOOBRAJ, a/k/a “Shivonie Deokaran,” was sentenced today to 24 months in prison for wire fraud in connection with her scheme to defraud donors by falsely claiming that she had been diagnosed with terminal cancer and needed money to pay for her treatments.   HOOBRAJ pled guilty to an Information on January 12, 2018, before U.S. Magistrate Judge Lisa Margaret Smith.  HOOBRAJ was sentenced by U.S District Judge Vincent L. Briccetti.                                               

U.S. Attorney Geoffrey S. Berman said:  “In a cynical exploitation of people’s generosity, Vedoutie Hoobraj created an elaborate fiction about having cancer to reap charitable contributions from well-meaning donors.  Hoobraj even falsified medical records to conceal the fraud.  Today, she has learned to the price of such brazen conduct.”

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

From 2014 through 2016 in Westchester County, New York, and elsewhere, HOOBRAJ, then a resident of Dobbs Ferry, New York, solicited donations by falsely stating that she had been diagnosed with terminal stage leukemia, had been given only 18 months left to live, and needed money for medical care and other expenses.  HOOBRAJ obtained donations through two GoFundMe fundraising websites, direct giving, and a fundraising event hosted by parents and students of Ardsley High School, the high school attended by both of her sons.  HOOBRAJ publicized her fundraisers in press interviews, online postings, and emails, among other means.  HOOBRAJ received in excess of $50,000 in donations from over 400 individuals in Ardsley, New York, and elsewhere based her misrepresentations. 

When questioned by the Ardsley Police Department on or about January 20, 2016, HOOBRAJ falsely stated, among other things, that she had been diagnosed with terminal cancer by a specific oncologist who she claimed died in an earthquake in Nepal in April 2015.  Subsequently, HOOBRAJ checked herself into Jacobi Medical Center in the Bronx, New York, (“Jacobi”) for an examination.  HOOBRAJ then provided donors forged lab work from that examination, indicating that her hemoglobin, platelet counts, and red blood cell counts were supposedly consistent with a cancer patient’s.  In fact, the actual medical record provided by Jacobi to HOOBRAJ stated, “Your labs turned out to show no abnormalities.”  

*                      *                      *

In addition to the prison, term, HOOBRAJ, 38, of Orlando, Florida, was sentenced to three years of supervised release and ordered to pay forfeiture in the amount of $51,938 and restitution to victims in the amount of $47,741.20. 

Mr. Berman praised the investigative work of the Federal Bureau of Investigation and the Ardsley Police Department.  Mr. Berman also thanked the Westchester County District Attorney’s Office for its assistance. 

This case is being handled by the Office’s White Plains Division.  Assistant U.S. Attorney Vladislav Vainberg is in charge of the prosecution.   

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that GARY DAVIS, a/k/a “Libertas,” was extradited from the Republic of Ireland to the United States.  DAVIS was arrested in January 2014 for charges arising out of his role as a member of the 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 is expected be presented this afternoon in Manhattan federal court, before U.S. Magistrate Judge Sarah Netburn.  DAVIS’s case is assigned to U.S. District Judge Jesse M. Furman.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Gary Davis allegedly served as an administrator who helped run the Silk Road, a secret online marketplace for illegal drugs, hacking services, and an assortment of other criminal activities.  Thanks to our partner agencies here and abroad, Davis now faces justice in an American court.”

According to the allegations in the Superseding Indictment[1], court filings, 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 June 2013 up to October 2, 2013, GARY DAVIS, a/k/a “Libertas,” the defendant, worked as a site administrator on Silk Road.  In that role, 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 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.

*                *                *

The charges in the Superseding Indictment against DAVIS, 30, of Wicklow, Ireland, include: one count of conspiracy to distribute narcotics, which carries a maximum sentence of life in prison and a mandatory minimum of 10 years in prison; one count of conspiracy to commit computer intrusion, which carries a maximum sentence of five years in prison; and one count of conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

*                *                *

Mr. Berman praised the outstanding joint efforts of the Federal Bureau of Investigation and its New York Special Operations and Cyber Division, 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 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 and are in charge of the prosecution.

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

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

Manhattan U.S. Attorney Geoffrey S. Berman said:  “The inscription, ‘The true administration of justice is the firmest pillar of good government,’ is set in stone in the New York County courthouse.  Those words have never been more poignant for the citizens of New York, as in quick succession less than four months apart they have seen this Office secure convictions in separate prosecutions against the State Assembly Speaker, a close confidant and executive aide to the governor, and now the president of SUNY Polytech, the executive leading the expansive ‘Buffalo Billion’ initiative.  The guiding principle of the Southern District holds that true justice can only be achieved through independence from politics or influence, and that has never been more important than today. I commend the career prosecutors of our Public Corruption unit for their enduring commitment to true justice in our government.”

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 of a stolen painting, Untitled, created in 1967 by Robert Motherwell.

Manhattan U.S. Attorney Geoffrey Berman said:  “The storied past of this magnificent piece may never be known.  But now, thankfully, 40 years after Robert Motherwell began painting this piece, this work of art is where it should be:  with the Dedalus Foundation and for the benefit of the public.”

FBI Assistant Director-in-Charge William F. Sweeny Jr. said:  “Robert Motherwell was an influential and iconic artist of his time.  His love of the abstract inspired him to create works enjoyed by many still today.  Unfortunately, several of his paintings went missing about four decades ago – the 1967 Untitled piece is but one of them.  Motherwell never titled this work of art before it vanished.  Maybe, after all, that’s part of its story – one that begins a new chapter here today.  We are honored to restore this extraordinary piece to the Dedalus Foundation, so that those who appreciate the value of fine art may now come to know the true narrative of the painting’s past, present, and future.”

Robert Motherwell, a 20th century American painter, printmaker, and editor, was among a group of visual artists – including Willem de Kooning, Jackson Pollock, and Mark Rothko – often considered together as the “New York School.”  Throughout much of the 1960s and 1970s, Motherwell exclusively employed the Santini Moving Company (“Santini”) to transport and store his artwork.  In or around 1978, Motherwell changed storage companies, and in the process of preparing and itemizing his artwork for the move, identified dozens of paintings, including Unitled, as missing or stolen. 

Following Motherwell’s death in 1991, virtually all of his paintings were deeded to the Dedalus Foundation (“Dedalus”).   In 2017, the son of a former and now deceased Santini worker contacted the Dedalus Foundation regarding the authenticity of Untitled, which had been in his father’s possession for the past 30 years.  After being contacted by Dedalus, the FBI approached that individual, who voluntarily relinquished Untitled to a special agent assigned to the FBI’s Art Crime Team.  The U.S. Attorney’s Office and the FBI are now returning the painting to its rightful owners.

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that NAVNOOR KANG, the former Director of Fixed Income and Head of Portfolio Strategy at the New York State Common Retirement Fund (“NYSCRF”), was sentenced today in Manhattan federal court to 21 months in prison for participating in a massive “pay-to-play” bribery scheme involving the nation’s third largest public pension fund.  KANG pled guilty to conspiracy to commit securities fraud and conspiracy to commit honest services wire fraud on November 8, 2017, before U.S. District Judge J. Paul Oetken, who also imposed today’s sentence.   

U.S. Attorney Geoffrey S. Berman said:  “Combining public corruption with securities fraud, Navnoor Kang betrayed his duty to safeguard public retirement money, bought off with jewelry, cash, drugs, strippers, and prostitutes.  His crimes have bought him a prison sentence.”

According to the Indictment charging KANG, other filings in Manhattan federal court, and statements made during the sentencing proceeding:

The NYSCRF is a pension fund administered for the benefit of public employees of the State of New York.  From January 2014 through February 2016, KANG served as Director of Fixed Income and Head of Portfolio Strategy for the NYSCRF.  In that capacity, KANG was responsible for investing more than $53 billion in fixed-income securities and was entrusted with discretion to manage those investments on behalf of the NYSCRF.  KANG owed a fiduciary duty to the NYSCRF and its members and beneficiaries, and was required to make investment decisions in their best interests and free of any conflict of interest.  New York State law and NYSCRF policies prohibited KANG and other NYSCRF employees from receiving any bribes, gifts, benefits, or consideration of any kind.

KANG’s Scheme to Steer NYSCRF Fixed-Income Business in Exchange for Secret Bribes

From 2014 through 2016, KANG and others participated in a scheme to defraud the NYSCRF and its members and beneficiaries, and to deprive the NYSCRF of its intangible right to KANG’s honest services.  The scheme involved, among other things, an agreement among KANG, Deborah Kelley, a managing director of institutional fixed income sales at a New York-based broker-dealer (“Broker-Dealer-1”), and Gregg Shonhorn, a vice president of fixed income sales at a New York-based broker-dealer (“Broker-Dealer-2”), to pay KANG bribes – in the form of entertainment, travel, lavish meals, prostitutes, nightclub bottle service, narcotics, tickets to sports games and other events, luxury gifts, and cash payments for strippers and KANG’s personal expenses – in exchange for fixed-income business from the NYSCRF.  Such bribes – which totaled more than $100,000 – were strictly forbidden by the NYSCRF, and were paid secretly and without any disclosure to the NYSCRF and its members and beneficiaries concerning the conflicts of interest inherent therein. 

In exchange for the bribes paid by Kelley, Schonhorn, and others, KANG used his position as Director of Fixed Income and Head of Portfolio Strategy at the NYSCRF to promote the interests of Kelley, Schonhorn, and their respective brokerage firms.  KANG steered more than $2 billion in fixed-income business to Broker-Dealer-1 and Broker-Dealer-2, from which Kelley, Schonhorn, and their respective employers earned millions of dollars in commissions from the NYSCRF.  In so doing, KANG, with the knowledge and approval of Kelley and Schonhorn, breached his fiduciary duty to make investment decisions in the best interest of the NYSCRF and its members and beneficiaries, and free of conflict, and deprived the NYSCRF of its intangible right to KANG’s honest services.

As the bribes paid by Schonhorn to KANG increased, so too did Broker-Dealer-2’s fixed-income business with the NYSCRF.  The value of the NYSCRF’s domestic bond transactions with Broker-Dealer-2 skyrocketed from zero in the fiscal year ending March 31, 2013, to approximately $1.5 million in the fiscal year ending March 31, 2014, to approximately $858 million in the fiscal year ending March 31, 2015, and to approximately $2.378 billion in the fiscal year ending March 31, 2016.  Broker-Dealer-2 became the third largest broker-dealer with which the NYSRCF executed domestic bond transactions for the fiscal year ending March 31, 2016, having not even been on the approved list in the fiscal year ending March 31, 2013.  As the NYSCRF’s third largest broker-dealer in this asset class, Broker-Dealer-2 brokered approximately eight percent of the total value of the NYSCRF’s domestic bond transactions – a figure greater than that of all but two of the major international banks and brokerage houses on the list.  Similarly, the value of NYSCRF’s domestic bond transactions with Broker-Dealer-1 increased from zero in the fiscal year ending March 1, 2014, to approximately $156 million in the fiscal year ending March 1, 2015, and to approximately $179 million in the fiscal year ending March 1, 2016. 

KANG’s Obstruction of Justice

In late 2015, the Securities and Exchange Commission (“SEC”) opened an investigation into the entertainment and benefits that Kelley had provided KANG, and the SEC subpoenaed both KANG and Kelley for their testimony.  In advance of their testimony, KANG and Kelley agreed to align their stories and each testified falsely under oath before the SEC about expenses Kelley had paid for KANG.  Moreover, after a federal grand jury investigation was opened, KANG instructed Schonhorn to testify falsely before the grand jury, and KANG admitted that he had hidden relevant evidence. 

*                *                *

KANG, 39, of Los Angeles, California, was also sentenced to three years of supervised release, ordered to forfeit $ $78,716, and to pay restitution to the NYSCRF in the amount of $242,724.17. 

Kelley and Schonhorn have each pled guilty for participating in the scheme.  Kelley was sentenced by Judge Oetken to three years of probation. 

Mr. Berman praised the investigative work of the Federal Bureau of Investigation.   He also thanked the SEC, which filed civil charges against Kang, Kelley, and Schonhorn in a separate civil action, and the Office of Inspector General for the Office of the New York State Comptroller, for their assistance.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Edward A. Imperatore 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 that ALAIN KALOYEROS, the former president of the State University of New York Polytechnic Institute (“SUNY Poly”), was convicted of defrauding and conspiring to defraud a SUNY Poly-affiliated not-for-profit organization in connection with Buffalo Billion construction projects worth hundreds of millions of dollars.  LOUIS CIMINELLI, STEVEN AIELLO, and JOSEPH GERARDI – three executives of real estate development companies based in Syracuse and Buffalo – were also convicted of fraud and conspiracy.   

U.S. Attorney Geoffrey S. Berman said:  “The inscription, ‘The true administration of justice is the firmest pillar of good government,’ is set in stone in the New York County Courthouse.  Those words have never been more poignant for the citizens of New York, as in quick succession less than four months apart they have seen this Office secure convictions in separate prosecutions against the State Assembly Speaker, a close confidant and executive aide to the governor, and now the president of SUNY Poly, the executive leading the expansive ‘Buffalo Billion’ initiative.  The guiding principle of the Southern District holds that true justice can only be achieved through independence from politics or influence, and that has never been more important than today.  I commend the career prosecutors of our Public Corruption unit for their enduring commitment to true justice in our government.”

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

KALOYEROS conspired with AIELLO and GERARDI, two top executives at Syracuse-based COR Development Company (“COR Development”), and CIMINELLI, the head of Buffalo-based LPCiminelli Inc. (“LPCiminelli”), to deceive Fort Schuyler Management Corporation (“Fort Schuyler”), a State-funded entity charged with awarding State contracts worth hundreds of millions of dollars, by secretly rigging the bidding process so that the contracts would be awarded to those two companies.

KALOYEROS, who oversaw the application process for many of the State grants awarded under the Buffalo Billion and similar programs, retained Todd Howe to assist with developing the projects and identifying developers for those projects.  KALOYEROS, Howe, AIELLO, GERARDI, and CIMINELLI worked together to deceive Fort Schuyler by, among other things, secretly tailoring the required qualifications for those development deals so that COR Development and LPCiminelli would be awarded contracts in Syracuse and Buffalo, respectively, without any meaningful competition, while falsely representing to Fort Schuyler that the bidding process was fair, open, and competitive. 

More specifically, in or about October 2013, Fort Schuyler issued requests for proposals (“RFPs”) to solicit bids from interested and qualified developers for the Syracuse and Buffalo projects.  KALOYEROS, with Howe’s assistance, oversaw the drafting of the RFPs and, unbeknownst to Fort Schuyler, KALOYEROS and Howe secretly solicited from AIELLO, GERARDI, and CIMINELLI qualifications of COR Development and LPCiminelli to put in the RFPs so that the RFPs would request qualifications specifically held by those companies.  For example, the Syracuse RFP requested the use of specific project management software used by COR Development.  After Howe emailed GERARDI and AIELLO a draft of the Syracuse RFP approximately two weeks before its public issuance, GERARDI sent back a handwritten mark-up of the draft RFP, on which GERARDI had, among other things, underlined the software names and wrote “too telegraphed??”  For its part, the Buffalo RFP, as initially issued, required 50 years of experience by a local developer – a qualification touted by LPCiminelli in promotional materials provided to KALOYEROS.  This requirement was later changed and claimed to be a “typographical error.”  LPCiminelli also was provided internal State documents to use in drafting its response to the RFP.

In or about fall 2015, after the FBI interviewed other real estate development and construction companies that expressed interest in the Buffalo RFP, KALOYEROS deleted from his Gmail account numerous emails involving Howe, including emails in which KALOYEROS and Howe exchanged “vitals” for COR Development and LPCiminelli during the drafting of the RFPs.  In addition, CIMINELLI deleted a number of emails between himself and KALOYEROS, including an email in which KALOYEROS, from his Gmail account, sent a draft of the Buffalo RFP to CIMINELLI and promised to “fine tune the developer requirements to fit.”

*                *                *

KALOYEROS was convicted of one count of conspiracy to commit wire fraud, and two counts of wire fraud, each of which carries a maximum sentence of 20 years in prison.  CIMINELLI, AIELLO, and GERARDI were each convicted of one count of conspiracy to commit wire fraud and one count of wire fraud, each of which carries a maximum sentence of  20 years in prison.  GERARDI was also convicted of one count of making false statements, which carries a maximum sentence of five years in prison.

KALOYEROS is scheduled to be sentenced on October 11, 2018; AIELLO is scheduled to be sentenced on October 12, 2018; GERARDI is scheduled to be sentenced on October 15, 2018; and CIMINELLI is scheduled to be sentenced on October 17, 2018.  All defendants will be sentenced by U.S. District Judge Valerie E. Caproni, who presided over the trial. 

Mr. Berman praised the work of the FBI Buffalo Field Office and Internal Revenue Service-Criminal Investigation, which jointly conducted this investigation with the 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 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 the Office 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).  Pursuant to the revised deadline, applications must be received by this Office by September 12, 2018.

Applications will 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 James P. O’Neill, Commissioner of the New York City Police Department (“NYPD”), announced today the arrest of SHANNADE CLERMONT on charges of wire fraud, access device fraud, and aggravated identity theft.  The Complaint charges that CLERMONT stole and fraudulently used the debit card information of a man she had visited for a prostitution date and who was found dead in his apartment the next morning from a drug overdose.  CLERMONT will be presented today in Manhattan federal court before U.S. Magistrate Sarah Netburn.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Shannade Clermont, a former cast member of the ‘Bad Girls Club,’ lived up to her reality series reputation.  She allegedly stole debit card information from a man found dead – the victim of a drug overdose – in his Manhattan apartment and used his identity to make tens of thousands of dollars in fraudulent purchases.  Thanks to the skilled investigative work of the NYPD, Clermont’s new reality is federal prosecution for her alleged nefarious conduct.”      

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

The NYPD and the United States Attorney’s Office for the Southern District of New York have been investigating the overdose death of a male individual (the “Victim”), who was found dead on the morning of February 1, 2017, in his apartment at 250 East 53rd Street in Manhattan, New York (the “Victim Apartment”).  During the course of that investigation, law enforcement learned that CLERMONT visited the Victim for a prostitution date at the Victim Apartment the previous evening (January 31, 2017), and used the Victim’s debit card information to make or attempt to make more than $20,000 in fraudulent purchases during the months following the Victim’s death.  Specifically, CLERMONT stole the information for two debit cards of the Victim found in his wallet in the Victim Apartment, and used that stolen debit card information for, among things, payments of her rent and phone bills, flight purchases, and several online purchases of thousands of dollars of clothing and other merchandise.

CLERMONT also created and used a fake email account in the Victim’s name to falsely represent to third parties that she was the Victim, in order to commit wire fraud using the Victim’s identity.  Specifically, on or about April 3, 2017, approximately two months after the Victim’s death, the fake email account was used to register an account with Western Union in the name of the Victim and to initiate a fraudulent money transfer of $1,000 from the Victim to CLERMONT. 

*                      *                      *

CLERMONT, 24, is charged with one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison; one count of access device fraud, which carries a maximum sentence of 15 years; and one count of aggravated identity theft, which carries a mandatory consecutive minimum sentence 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 the judge.

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

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

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that ROBERT DIAZ, a/k/a “Facey,” a/k/a “Face,” was sentenced today by U.S. District Judge Alison J. Nathan to 120 months in prison for distributing heroin and other narcotics, including heroin that caused serious bodily injury to a victim who overdosed from using the heroin and was revived only after the administration of naloxone.  DIAZ pled guilty on February 14, 2018, before U.S. Magistrate Judge Debra Freeman.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “For years, Robert Diaz peddled heroin and other drugs in and around Rockland County, contributing to the opioid crisis plaguing our community today and causing at least one victim to overdose.  Today’s sentence should serve as a message to those seeking to profit off of this tragic epidemic.”

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

DIAZ and eight co-defendants – Rene Sanchez, a/k/a “Renny,” Pablo Perez, a/k/a “Menor,” Christian Cardenas, a/k/a “Chris,” a/k/a “Spoonie,” David Almonte, a/k/a “Elli,” Ronald Bolanos, a/k/a “Ronny,” a/k/a “ET,” Rolando Paulino, a/k/a “Santana Paulino,” Theresa Keefe, a/k/a “Terry,” and Nicole Munderville, a/k/a “Nicki” – were charged with participating in a drug trafficking organization that distributed significant quantities of narcotics, including heroin, fentanyl, cocaine, and crack cocaine, in and around Rockland County, New York, and obtained those narcotics for resale from the Bronx, Brooklyn, and Queens, New York. 

DIAZ sold retail quantities of drugs to users in Rockland County during the period from approximately 2012 to approximately May 2017.  On or about December 15, 2016, DIAZ provided heroin to an individual (“Victim-1”) who overdosed after using the heroin.  Medical personnel were required to administer naloxone to reverse the effects of the overdose, saving Victim-1’s life.

On multiple occasions during the course of the conspiracy, DIAZ indicated that he was well aware that the narcotics he and others were distributing contained fentanyl, were particularly dangerous, and had caused adverse reactions in multiple drug customers, including the overdose of Victim-1.  DIAZ nevertheless continued obtaining and selling heroin, expressing on one occasion, subsequent to Victim-1’s overdose, that his customers were doing the “fentanyl dance” and that he had a “new connect” for “straight up fentanyl” that his customers “love[d].” 

*              *             *

In addition to his prison sentence, DIAZ, 50, was sentenced to four years of supervised release. 

Pablo Perez, Ronald Bolanos, and Theresa Keefe previously pled guilty and were sentenced to 90 months, 80 months, and 40 months in prison, respectively.  Rene Sanchez, Christian Cardenas, Rolando Paulino, and Nicole Munderville previously pled guilty and are awaiting sentencing.

Mr. Berman praised the investigative work of the Drug Enforcement Administration and the Rockland County Drug Task Force, and thanked the Rockland County District Attorney’s Office for their assistance in this investigation.

This matter is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Elizabeth Hanft, Jane Kim, and Jason Richman are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that SCOTT McKINNEY, a former flight attendant, pled guilty today to conspiring both to violate airport security requirements and to operate an unlicensed money transmitting business. 

U.S. Attorney Geoffrey S. Berman said:  “Scott McKinney abused his privileges as an airline employee, including misusing the known crewmember lane, to smuggle bulk cash through security and then across the country, in furtherance of an illegal money transmitting business.  McKinney’s scheme is now grounded, and he faces the possibility of time in a federal prison.”

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

Between July and November 2017, McKINNEY, a flight attendant based in California, conspired with others to operate an unlicensed money transmitting business and to violate airport security requirements.  On several occasions, McKINNEY flew from California to New York to pick up packages containing $50,000 or more in cash at JFK Airport or other locations in New York City.  McKINNEY then flew back to California with the cash.  On some of these occasions, McKINNEY was on the ground at JFK Airport for two hours or less before flying back to California.  At the time of these trips, McKINNEY did not have a money transmitting license in New York or California, and was not registered as a money transmitter with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network.  In a statement to agents of Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”) on or about September 15, 2017, McKINNEY admitted that he was aware of the licensing requirement and lacked such a license.

To facilitate his illegal money transmitting business, McKINNEY used the Known Crewmember (“KCM”) lane to bypass regular airport security screening.  The KCM lane allows approved airline crewmembers to pass through security more quickly and, typically, without having their carry-on luggage screened.  On several occasions, McKINNEY wore his crewmember uniform and used the KCM security lane – even though he was not working on those occasions – to smuggle bulk cash through airport security. 

*              *             *

McKINNEY, 49, of San Diego, California, pled guilty to one count of conspiring both to violate airport security requirements and to operate an unlicensed money transmitting business, which carries a maximum sentence of five years in prison.  The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  McKINNEY is scheduled to be sentenced by Judge Failla on October 31, 2018, at 3:30 p.m.

Mr. Berman praised HSI for its outstanding work on this case.

This matter is being handled by the Office’s Narcotics 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, Valerie Nickerson, the Special Agent in Charge of the New Jersey Office of the Drug Enforcement Administration (“DEA”), and Judy Ramos, the Acting Inspector in Charge of the New Jersey Office of the United States Postal Inspection Service (“USPIS”), announced today that EVELIN BRACY and JORGE RODRIGUEZ LOPEZ were arrested and charged in Manhattan federal court with conspiracy to distribute controlled substances, including oxycodone, hydrocodone, and more than 40 grams of the fentanyl analogue U-47700, distribution of controlled substances over the Internet, and conspiracy to commit money laundering, in connection with a large-scale drug distribution operation  purporting to be an online pharmacy.  BRACY and RODRIGUEZ LOPEZ were both arrested this morning.  Both defendants will be presented today before U.S. Magistrate Judge Sarah Netburn. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, Evelin Bracy and Jorge Rodriguez Lopez distributed controlled substances to individuals throughout the United States as part of a drug trafficking organization that sold pharmaceuticals through a website purporting to be an online pharmacy.  Bracy and Rodriguez Lopez allegedly conspired to distribute oxycodone, hydrocodone, and a fentanyl analogue, and laundered hundreds of thousands of dollars in narcotics trafficking proceeds. Thanks to the outstanding investigative work of the DEA and USPIS, these two defendants are now facing prosecution.”  

DEA Special Agent in Charge Valerie Nickerson said:  “The two individuals arrested allegedly have been distributing powerful narcotics not just in New Jersey, but across the United States, based on orders place through a supposed online pharmacy.  This very profitable, alleged illegal endeavor has come to an end thanks to the hard work of the men and women of the DEA and the USPIS.  Whether on a street corner or in cyberspace we will continue to pursue those pushing these drugs in our communities.”

USPIS Acting Inspector in Charge Judy Ramos said:  “Postal Inspectors, federal prosecutors and our law enforcement partners have diligently worked to identify and disrupt the activities of an online pharmacy suspected of peddling illegal pills and money laundering.  Postal Inspectors will continue to tirelessly investigate these types of crimes that utilize the U.S. Postal Service to facilitate illicit transactions.”

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

Law enforcement agents began investigating an online pharmacy website (the “Pharmacy Website”) following an overdose death of a victim in Boise, Idaho, on or about March 17, 2017, whose death was caused by elevated levels of multiple prescription opioids as well as fentanyl. The victim’s computer showed that he had repeatedly ordered painkillers from the Pharmacy Website, and that he had wired thousands of dollars to a bank account in connection with these purchases.  Law enforcement subsequently discovered that this bank account was being used by BRACY and RODRIGUEZ LOPEZ.  Bank records show that this bank account and several others used by BRACY have received over $750,000 in apparent narcotics proceeds, and that BRACY and RODRIGUEZ LOPEZ have withdrawn hundreds of thousands of dollars in cash from these accounts, and have also used these bank accounts to pay for costs associated with the drug distribution operation, including the costs of shipping controlled substances.

In the course of the investigation, undercover law enforcement agents conducted multiple purchases of controlled substances from the Pharmacy Website, and received instructions to send payment for these drugs to BRACY and RODRIGUEZ LOPEZ.  The substances purchased by undercover law enforcement agents included substances that tested positive for oxycodone and hydrocodone.

The investigation has revealed that in some cases customers purchased what they believed to be prescription drugs such as alprazolam or oxycodone from the Pharmacy Website, but instead received pills containing other substances.  In the course of the investigation, law enforcement agents seized a package that had been sent to RODRIGUEZ LOPEZ, and recovered over 200 pills weighing over 40 grams.  These pills tested positive for U-47700, which is a fentanyl analogue listed on Schedule I.

*                *                *

BRACY, 34, and RODRIGUEZ LOPEZ, 32, who both reside in New Brunswick, New Jersey, have each been charged with one count of conspiracy to distribute controlled substances including at least 40 grams of the fentanyl analogue U-47700, which carries a maximum sentence of 40 years in prison and a mandatory minimum sentence of five years in prison, one count of distribution of controlled substances over the Internet, which carries a maximum sentence of 40 years in prison and a mandatory minimum sentence of five years in prison, and one count of conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge. 

Mr. Berman praised the investigative work of the DEA and USPIS in this investigation. He added that the investigation is continuing.

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

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced the filing of a civil complaint against SAMUEL GENTLE, who was previously convicted of preparing fraudulent federal tax returns through a tax preparation business, to prohibit him from preparing tax returns for others or engaging in activities that substantially interfere with the administration of federal tax laws. 

U.S. Attorney Geoffrey S. Berman said:  “A tax return preparer who has repeatedly cheated the tax system by filing fraudulent tax returns should not be permitted to continue business as usual.  This Office is committed to ensuring the integrity of the federal tax system that depends on truthful, accurate reporting.”

As alleged in the Government’s complaint filed in federal district court today:

From 2008 to 2014, GENTLE systematically and intentionally filed fraudulent federal tax returns on behalf of customers through his tax return preparation business, GenGen, Inc.  In preparing these tax returns, GENTLE repeatedly invented charitable donations, claimed phony business losses for nonexistent businesses, and fabricated unreimbursed employee business expenses.  GENTLE, who filed an average of 3,200 federal tax returns each year and whose profits depended on word-of-mouth referrals, prepared and fraudulently filed false tax returns in order to reduce his customers’ tax liabilities or obtain tax refunds to which his clients were not entitled.  GENTLE’s conduct caused the United States to lose millions of dollars in understated taxes and fraudulent refunds.  In 2016, a jury found GENTLE guilty of 38 counts of aiding and assisting in the preparation of false and fraudulent federal tax returns.  The Government is now seeking an injunction against GENTLE that would, among other things, permanently bar him from preparing or filing federal tax returns on behalf of others.

*                      *                     *

Mr. Berman thanked the Internal Revenue Service for its assistance with this case.

The case is being handled by the Tax and Bankruptcy Unit in the Office’s Civil Division.  Assistant U.S. Attorney Jennifer C. Simon is in charge of the case.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Major Pamela Smith, Commander, New York Field Office of the U.S. Park Police, and James P. O’Neill, Commissioner of the New York City Police Department (“NYPD”), announced today the arrest of THERESE OKOUMOU on charges of trespassing, interference with government agency functions, and disorderly conduct.  The Information charges that OKOUMOU climbed the base of the Statue of Liberty and resisted orders to come down, causing the evacuation of Liberty Island on the Fourth of July and posing substantial danger to NYPD officers who were required to retrieve her.  OKOUMOU was arrested Wednesday, 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 in the Information, the defendant staged a dangerous stunt that alarmed the public and endangered her own life and the lives of the NYPD officers who responded to the scene.  While we must and do respect the rights of the people to peaceable protest, that right does not extend to breaking the law in ways that put others at risk.  I commend the Park Police for the orderly evacuation of Liberty Island yesterday, and the NYPD for their bravery and effectiveness in bringing yesterday’s events to a safe conclusion.”

U.S. Park Police Major Pamela Smith said:  “This incident caused disruption to thousands of visitors on one of the busiest days of the year at the Statue of Liberty.  We are grateful that the matter was resolved with no one sustaining injuries or causing major damage to the monument.”

*                *                *

OKOUMOU, 44, of Staten Island, New York, is charged with one count of trespassing, one count of interference with agency functions, and one count of disorderly conduct.  Each charge carries a maximum penalty of six months 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.

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

The charges contained in the Information 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, and David J. Downing, Special Agent in Charge of the Los Angeles Division of the U.S. Drug Enforcement Administration (“DEA”), announced today that LUIS EDUARDO RODRIGUEZ has been charged for his role in laundering hundreds of thousands of dollars in narcotics proceeds through Las Vegas real estate, and through multiple Nevada shell corporations, in order to send those proceeds to narcotics traffickers and money launderers based in Mexico.  RODRIGUEZ was arrested this morning in Las Vegas, and will be presented in federal court today in the District of Nevada.

The criminal complaint, which was filed under seal on June 28, 2018, alleges that RODRIGUEZ worked at the direction of Jesus Rodriguez-Jimenez, the leader of an international money laundering and narcotics trafficking organization (the “Organization”).  In June 2017, Rodriguez-Jimenez pled guilty to laundering in excess of $250 million in drug proceeds on behalf of drug cartels in Mexico and Central America through a variety of methods, including through seemingly “legitimate” corporations, shell bank accounts, and money couriers based in the United States and Europe.  RODRIGUEZ served as one conduit through which the Organization laundered drug money.    

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Luis Eduardo Rodriguez assisted a major international drug trafficking organization in laundering the proceeds of its illegal operations.  Rodriguez allegedly laundered drug proceeds through Las Vegas real estate transactions, and assisted in recruiting people to act as straw-man ‘managers’ of shell companies for the trafficking organization.  Now, thanks to the DEA, Rodriguez is in custody and facing prosecution.”

DEA SAC David J. Downing said:  “The actions of the accused illustrate the methods drug trafficking organizations utilize to infiltrate our communities and attempt to legitimize their criminal enterprise, but this arrest exemplifies the tremendous steps taken by law enforcement to uproot and remove them.”

According to the allegations in the criminal complaint [1], and statements made in Court:

The Investigation

Since July 2013, the DEA has been investigating the Organization and its cartel clients, which together have been involved in trafficking hundreds of kilograms of cocaine and heroin, among other narcotics, and laundering narcotics proceeds through a variety of methods.  The Organization has ties to Panama, Mexico, Italy, Spain, and the United States, among other locations, and its members are believed to include the defendant.  Eight members of the Organization have previously been charged in the Southern District of New York, including in the indictment captioned United States v. Rodriguez-Jimenez et al., 16 Cr. 644 (KBF) filed on September 22, 2016.

In furtherance of the money laundering activities of the Organization, RODRIGUEZ, through his real estate business, purchased, renovated, and sold residential properties in Las Vegas at the direction of Jesus Rodriguez-Jimenez.  Jesus Rodriguez-Jimenez funded these transactions with drug dollars, and held his interest through a shell corporation, Innova Properties LLC (“Innova”).  During the first half of 2016, RODRIGUEZ “flipped” at least three properties in this way for Jesus Rodriguez-Jimenez; the last of these was purchased by Innova for approximately $220,000 and then sold two months later for approximately $226,000.

In or about October 2015, RODRIGUEZ assisted Jesus Rodriguez-Jimenez in recruiting individuals to allow their identities to be used by the Organization:  these individuals were listed with the State of Nevada as “managers” of various Organization-controlled shell corporations, and appeared as signatories on domestic bank accounts affiliated with those shell corporations.  In exchange for the use of their identities, these individuals each received $1,000 per month in cash.  These accounts were then utilized by the Organization for the movement of hundreds of thousands of dollars in narcotics proceeds.

In July 2016, after the raid of an Organization stash house by law enforcement in Philadelphia, which resulted in the seizure of $500,000 in narcotics proceeds, Jesus Rodriguez-Jimenez traveled from Monterrey, Mexico, to Las Vegas to meet with a purported associate to discuss the seizure.  In fact, that associate was an undercover DEA agent, and Jesus Rodriguez-Jimenez was arrested when he arrived for the meeting.  RODRIGUEZ accompanied Jesus Rodriguez-Jimenez to the meeting to discuss the seizure.

*                *                *

RODRIGUEZ faces up to 20 years in prison on the charges contained in the criminal complaint.  The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

Mr. Berman praised the DEA for its work in the investigation. 

This case is being handled by the Office’s Money Laundering and Asset Forfeiture Unit. Assistant United States Attorneys Noah Falk and Jonathan E. Rebold are in charge of the prosecution.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Angel M. Melendez, Special Agent in Charge of the New York Field Office of Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), and James P. O’Neill, Commissioner of the New York City Police Department (“NYPD”), announced today the arrest of JESSE RODRIGUEZ on charges of attempted enticement of a minor to engage in sexual activity.  The Complaint charges that RODRIGUEZ communicated with an individual he believed to be the mother of two minor girls via email and chat messages, and made plans to meet the mother at a coffee shop in Manhattan and then go to her apartment to engage in sexual activity with her minor daughters.  RODRIGUEZ was arrested Sunday after he arrived at the designated meeting place, and was presented today in Manhattan federal court before U.S. Magistrate Judge Ona T. Wang, where he was ordered detained pending trial. 

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Jesse Rodriguez traveled to New York yesterday in the evil yet erroneous belief that he would engage in sex with two children.  He allegedly possessed condoms and restraints for that purpose.  Thanks to HSI and the NYPD, he was the one who was handcuffed, and now faces prosecution.”

Special Agent in Charge Angel M. Melendez said:  “Rodriguez allegedly sought out the mother of two young daughters in order to perform sex acts with the girls. It is incomprehensible that a former public servant, employed to protect, would allegedly seek to take advantage on the vulnerability of a child.  Law enforcement continuously targets child predators to ensure a child does not become a victim, and now, in this case, this man is behind bars and will need to face justice for his alleged actions.”

Police Commissioner James P. O’Neill said:  “Jesse Rodriguez’s alleged shameful attempt to pay for sex with two underage girls displays a disgusting, utter disregard for the rule of law in civilized society. The NYPD and our federal partners at Homeland Security Investigations and the Southern District will stop at nothing to identify, arrest, and prosecute anyone who engages in such alleged depraved behavior.”

According to the allegations in the Complaint sworn out today in Manhattan federal court and statements made during court proceedings:[1]

Between April 4, 2018, through July 1, 2018, RODRIGUEZ, a former federal inspector with the Federal Protective Service of the Department of Homeland Security, exchanged chat messages with a law enforcement officer operating in an undercover capacity, posing as the mother of a 13-year-old and an eight-year-old girl.  During the course of these conversations, RODRIGUEZ told the undercover officer that he was interested in engaging in sexual activities with the minor girls.  RODRIGUEZ described the explicit sexual activity that he intended to engage in with the purported minor daughters of the undercover officer and made a plan to travel from Minnesota to meet at a coffee shop in Manhattan to then go to a nearby apartment for purposes of engaging in sexual activity with the minor girls.  RODRIGUEZ was arrested outside the coffee shop while in possession of condoms, lubricant, and restraints. 

*                      *                     *

RODRIGUEZ, 62, of St. Paul, Minnesota, is charged with one count of attempted enticement of a minor to engage in sexual activity, which carries a mandatory minimum term of 10 years in prison and a maximum of life 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.

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,  William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (“FBI”), Thomas P. DiNapoli, New York State Comptroller,  and George P. Beach II, Superintendent of the New York State Police, announced today that ROBERT M. GARCIA, the former president and chief of the Briarcliff Manor Fire Department in Briarcliff Manor, New York (“BMFD”), pled guilty to embezzlement of more than $120,000 from the BMFD.  GARCIA pled guilty today in White Plains federal court before U.S. District Judge Cathy Seibel.

U.S. Attorney Geoffrey S. Berman said:  “As he admitted today, Robert Garcia abused his positions of trust with the Briarcliff Manor Fire Department and Fire Council to engage in flagrant self-dealing.  He lined his pockets with Fire Department and Fire Council money to pay personal expenses, and then lied about it to cover his tracks.  Now Garcia may be facing prison time for his crime.”

FBI Assistant Director William F. Sweeney Jr. said:  “As a fire department official, Garcia was expected to be trustworthy and reliable, but, as he admitted today, he proved himself unprincipled by his deceitful actions.  For approximately four years, Garcia abused his elected position to channel over $120,000 into his personal accounts.  Instead of tending to the needs of the community, Garcia tended to his own needs.  Corruption may be a deep-rooted plant in parts of our society, but as today’s plea demonstrates, we are committed to rooting out corruption in all of its forms.”

Comptroller Thomas P. DiNapoli said:  “Mr. Garcia has admitted brazenly writing checks to himself for $122,000 from the Briarcliff Manor Fire Department.  Thanks to my ongoing partnership with United States Attorney Geoffrey S. Berman, the FBI and the State Police, he will now be held accountable.  This is a reminder to employ strong checks and balances and internal controls to guard public funds.”

According to the Information and statements made in related court filings and proceedings:

GARCIA was elected to the position of second assistant chief of the BMFD in or about April 2013.  His election to that position also made him an officer of the Briarcliff Manor Fire Council, which oversees the BMFD.  GARCIA was thereafter elected to different administrative and operational positions within the BMFD, including first assistant chief, chief, treasurer, and president.  As a result, GARCIA was also an officer of the Fire Council from in or about April 2013 through in or about April 2017.  GARCIA was given signatory authority over bank accounts held by the Fire Council and the BMFD starting in April 2013.

From in or about May 2013 to in or about March 2017, GARCIA embezzled money from the BMFD and the Fire Council by writing checks drawn on the BMFD’s and Fire Council’s bank accounts that he made payable to himself.  GARCIA then deposited these checks into his personal bank accounts.  He used the embezzled proceeds to pay personal expenses.  GARCIA covered up his thefts by making material misstatements regarding the purposes and payees of the checks he had written to himself on written reports he gave to the Fire Council when he acted as the BMFD’s treasurer from in or about 2014 through in or about April 2017.  GARCIA embezzled more than $120,000 from the BMFD and the Fire Council by writing approximately 150 checks to himself.

GARCIA, 51, of Ossining, New York, pled guilty to one count of embezzlement theft concerning a program receiving federal funds, which carries a maximum sentence of 10 years in prison.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as the sentence will be determined by the court.

GARCIA is scheduled to be sentenced before Judge Seibel on November 15, 2018, at 3:30 p.m.

Mr. Berman praised the outstanding investigative work of the FBI, New York State Comptroller and New York State Police.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Peter D. Lopez, Regional Administrator of the U.S. Environmental Protection Agency (“EPA”), announced today that the United States has filed a civil lawsuit against the City of Mount Vernon, New York (“Mount Vernon”) for violating the Clean Water Act.  The lawsuit alleges that Mount Vernon has long failed to comply with Clean Water Act storm sewer permit requirements designed to prevent raw sewage and other illicit pollutants from flowing from the City’s storm sewer system to the Hutchinson and Bronx Rivers.

U.S. Attorney Geoffrey S. Berman stated:  “For years, Mount Vernon has discharged raw sewage and other illicit pollutants from its storm sewer system into the Hutchinson and Bronx Rivers.  Mount Vernon has consistently failed to comply with permit requirements intended to prevent these discharges, and has flouted EPA administrative orders intended to address the problem.  Today’s lawsuit will protect the waters of this district by obtaining a judicial order compelling Mount Vernon to bring its sewers into compliance with the Clean Water Act.”

EPA Regional Administrator Peter D. Lopez said:  “The City of Mount Vernon must take the appropriate actions to protect its residents and downstream communities from threats posed by raw sewage and other pollutants.  EPA and New York State will continue to work together with the city to ensure that Mount Vernon understands how to fix the problems with its storm sewer system.  In addition, we support efforts by the city to seek funding to assist Mount Vernon in getting the necessary work completed.  This complaint gets to the core of EPA’s mission of protecting people’s health, and we will continue to work with the state and city to carry out that mission.”

As alleged in the complaint filed today in White Plains federal court, the Clean Water Act generally prohibits discharges of pollutants into navigable waters, absent a permit.  Many municipalities, like Mount Vernon, operate “municipal separate storm sewer systems” that carry storm water and discharge it without treatment into nearby waters.  Because separate storm sewer systems do not treat the water they discharge, a municipality is required by its Clean Water Act permit to maintain a program for identifying and eliminating any sewage or other illicit pollutants that are flowing into the storm sewers.

The lawsuit filed today alleges that since at least January 2012, Mount Vernon has failed to comply with these permit obligations and, as a result, has allowed raw sewage to flow into its storm sewer system, and then to be discharged into the Hutchinson and Bronx Rivers.  Mount Vernon has also failed to comply with two EPA Administrative Orders issued to compel the City’s compliance with these requirements. 

The lawsuit seeks an injunction compelling Mount Vernon to comply with applicable Clean Water Act requirements and an order imposing civil penalties for Mount Vernon’s violations to date.

The State of New York and the Commissioner of the New York State Department of Environmental Conservation are co-plaintiffs in this lawsuit, asserting parallel claims under state law. 

*          *         *

Mr. Berman thanked EPA for its invaluable efforts in this matter.

This case is being handled by the Office’s Environmental Protection Unit.  Assistant United States Attorney Natasha W. Teleanu is in charge of the case.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Peter Rendina, Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced today the arrest of STEVEN CARSON and DEREK BROWN, both of whom were charged in a complaint with stealing mail from Postal Service mailboxes.  In addition, CARSON was charged with using a stolen mail box key to steal mail.  Both CARSON and BROWN will be presented today in White Plains federal court before the Honorable Judith C. McCarthy.

U.S. Attorney Geoffrey S. Berman stated:  “Thanks to the work of the United States Postal Inspection Service and U.S. Postal Service Office of Inspector General, Brown and Carson’s alleged mail theft spree has come to an end.”  

USPIS Inspector-in-Charge Peter Rendina stated:  “The crime of mail theft is a violation of the trusted tradition our customers place in the delivery and receipt of the U.S. Mail.  No matter how long it takes or the rhetoric spoken, Postal Inspectors are watching and always on the investigative forefront in keeping the U.S. Mail safe from theft.”

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

On April 2, 2018, BROWN redeemed a stolen gift card at a Gap store the same day that a Bronxville victim mailed the card.  Two days later, on April 4, 2018, CARSON deposited two money orders stolen from the mail into an account in BROWN’s name.  Then, on April 20, 2018, CARSON and BROWN fled from police officers during a traffic stop in Eastchester, New York, after the officers recovered a bag full of mail in their car.  In total, the bag contained more than $66,000 in stolen checks and money orders taken from the mail.  CARSON was also captured on video surveillance on four separate occasions – April 18, 19, 20 and May 4, 2018 – opening locked Postal Service boxes and stealing mail in Bronxville.  The investigation is continuing.

*          *          *

CARSON, 27, and BROWN, 28, of Yonkers, New York, are each charged with one count of mail theft, which carries a maximum sentence of five years in prison.  CARSON is also charged with one count of stealing a Postal Service key, 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 defendants will be determined by the judge.

Mr. Berman praised the outstanding work of the U.S. Postal Inspection Service, U.S. Postal Service Office of Inspector General, the U.S. Secret Service, the Yonkers Police Department, the Bronxville Police Department, the Eastchester Police Department, and the Westchester County District Attorney’s Office.

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

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JUDIE OLIVERA was sentenced today to a term of 40 years in prison for her role in the May 2012 home-invasion robbery of victim Miles Klein, which resulted in Klein’s death.  On June 26, 2018, GIBRON LOPEZ was sentenced to a term of 40 years in prison, which must run consecutively to a prior prison sentence of five years, for his role in the home-invasion robbery.  Both sentences were imposed by United States District Judge Katherine Polk Failla.  LOPEZ and OLIVERA were convicted of Hobbs Act robbery and Hobbs Act robbery conspiracy following a jury trial in October 2017 before Judge Failla.

U.S. Attorney Geoffrey S. Berman said:  “The defendants committed a violent home-invasion robbery, resulting in the brutal death of Miles Klein.  Having been convicted at trial, the defendants will now spend decades in prison for this horrific crime.  We thank our remarkable partners at the ATF and NYPD for their tireless efforts to bring these defendants to justice.”                       

According to the Indictment, other filings in Manhattan federal court, and the evidence admitted at trial: 

In May 2012, OLIVERA, who had a preexisting relationship with Klein, set up a home invasion robbery, which targeted Klein’s drugs and drug proceeds.  OLIVERA recruited LOPEZ and another man to commit the robbery.  On May 15, 2012, OLIVERA gained access to Klein’s apartment in the Bronx, and LOPEZ and the other man, armed with a wrench and a rubber mallet, respectively, followed her there.  LOPEZ and the other man struggled with Klein at the door, striking him in the head repeatedly with the wrench and the mallet, binding his eyes and mouth with duct tape, and gagging him.  During the assault, OLIVERA stole a safe containing cash, among other items, from Klein’s apartment.  LOPEZ and the other man then dragged Klein’s body to the bathroom, where they left him.   They discarded the murder weapons and their bloody clothes in a sewer, and later split the proceeds of the robbery.  Police responded to the scene on May 16, 2012, after receiving a 911 call from concerned family members.  Klein was ultimately pronounced dead as a result of the blunt force trauma to the head and obstruction of his airway.

*                *                *

In addition to prison terms, LOPEZ, 37, and OLIVERA, 40, both of the Bronx, New York, were each sentenced to three years of supervised release. 

Mr. Berman praised the outstanding investigative work of the Bureau of Alcohol, Tobacco, Firearms, and Explosives, the Strategic Pattern Armed Robbery Task Force, and the New York City Police Department. 

This case is being prosecuted by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Gina M. Castellano, Christopher J. DiMase, and Justina L. Geraci are in charge of the prosecution.

ROBERT KHUZAMI, Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced that JOHN GALANIS, a/k/a “Yanni,” DEVON ARCHER, and BEVAN COONEY were each convicted today of conspiracy to commit securities fraud and securities fraud, following a five and half week trial before U.S. District Judge Ronnie Abrams.

Mr. Khuzami said:  “As a unanimous jury swiftly found, these defendants orchestrated a highly complex scheme to defraud a Native American community and multiple pension funds, all to corruptly bankroll their own personal and business interests.  This Office remains steadfast in its commitment to prosecuting the most complex financial frauds and protecting the investing public.”

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

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

The WLCC was convinced to issue the Tribal Bonds through false and fraudulent representations by JOHN GALANIS.  Simultaneously, Jason Galanis, with the backing of ARCHER and COONEY, worked to acquire Hughes Capital Management (“Hughes”), a registered investment adviser.  Morton and Hirst were installed respectively as Hughes’ chief executive officer and chief investment officer.  Within weeks of taking control of Hughes, Morton and Hirst caused the entire $28 million first series of Tribal Bonds to be purchased by Hughes clients, primarily pension funds, but never disclosed to these clients material facts about the Tribal Bonds, including the fact that the Tribal Bonds fell outside the investment parameters set forth in the investment advisory contracts of certain Hughes clients.  In addition, Hughes’s clients were not told about substantial conflicts of interest with respect to the issuance and placement of the Tribal Bonds before the Tribal Bonds were purchased on these clients’ behalf. 

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

In addition, after JOHN GALANIS induced the WLCC to issue a second round of Tribal Bonds, 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, a loan he subsequently failed to repay.  In addition, millions of dollars in bond proceeds from the first and second issuances were used finance the acquisition of companies that the defendants and their co-conspirators acquired as part of a strategy to build a financial services conglomerate.

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

Jason Galanis, Michelle Morton, Gary Hirst, and Hugh Dunkerley each pled guilty prior to trial to participation in the scheme.

*                *                *

Defendants’ Ages and Residences

Defendant

Residence

Age

John Galanis

Oceanside, California

74

Devon Archer

Brooklyn, New York

44

Bevan Cooney

Missoula, Montana

45

            Mr. Khuzami praised the work of the Federal Bureau of Investigation and the United States Postal Inspection Service, and thanked 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 Rebecca Mermelstein, Brendan F. Quigley, and Negar Tekeei are in charge of the prosecution.  

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Angel M. Melendez, Special Agent in Charge of Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), announced today that IGNACIO FONCILLAS pled guilty to operating an unlicensed money transmitting business in connection with his transfer of over $9 million between the United States and Mexico.  This illegal scheme allowed FONCILLAS’s customers to secretly send money to Mexico while avoiding anti-money laundering safeguards and obligations imposed upon legal money services businesses. FONCILLAS surrendered to federal agents this morning and his plea was taken by U.S. District Judge George B. Daniels. 

U.S. Attorney Geoffrey S. Berman said:  “As he admitted today, Ignacio Foncillas, an attorney, established an illegal money transmitting service between the U.S. and Mexico.  Foncillas did not register his company with FinCEN, the regulatory agency that oversees the U.S. financial system and reports suspicious financial transactions.  Attempts by individuals or corporations to circumvent their regulatory obligations will be met with swift justice.” 

HSI Special Agent in Charge Angel M. Melendez said:  “Foncillas operated a transnational money transmitting business, moving millions without ever ensuring he had the proper licensing. The movement of money is regulated to limit fraudulent and criminal activity, which is why law enforcement is paying close attention to those operating without a license, and looking even more closely at money transactions crossing borders.”

According to the Information and statements made during proceedings in Manhattan federal court:

IGNACIO FONCILLAS is a lawyer in New York, New York.  Between approximately September 2013 and September 2014, FONCILLAS used a company he had previously incorporated in Delaware (the “Company”) to transfer millions of dollars from the United States to Mexico.  During this time, the Company was not registered with the Financial Crimes Enforcement Network (FinCEN), a component of the U.S. Department of the Treasury, or any of the states in which the Company operated, including New York, Delaware, or California, as required by both state and federal laws applicable to money transmitting businesses like the Company.  

Unlicensed money transmitting businesses like the Company enable entities and individuals to move money into and through the U.S. financial system while avoiding licensed U.S. financial institutions that monitor for suspicious activity and report it to U.S. authorities, including through suspicious activity reports, or SARs.  Instead, by going through unlicensed entities like the Company, foreign businesses ensure that suspicious patterns of transmissions will not be detected and reported as potential money laundering activity or other financial crime.

In order to move money in this manner, FONCILLAS opened bank accounts in the name of the Company at banks including Bank of America, Citibank, and Wells Fargo.  When opening these accounts, FONCILLAS provided false and contradictory descriptions of the Company’s business, including investment, consulting, and wholesale trade.  On many occasions, individuals around the country, mainly in the Southern California region, who had no affiliation with FONCILLAS or the Company, deposited cash into the Company’s bank accounts.  On other occasions, FONCILLAS deposited cash he had received from others into the Company’s bank accounts in New York.  At times, FONCILLAS lied to the banks about the purpose of these large cash deposits, including telling a bank teller that a cash deposit of over $150,000 was money he had been paid for a loan. 

Following these deposits, FONCILLAS directed the transfer of that money to individuals and entities in Mexico, minus a fee.  This fee was retained by FONCILLAS as payment for this money transmitting service and used to pay personal expenses such as credit cards and other bills.  Through this conduct, the defendant and the Company have functioned as an unregulated financial institution, allowing others to move funds through and out of the U.S. with impunity, including not being subject to the filing of SARs that licensed transmitting businesses are required to file.

*                      *                      *

FONCILLAS, 50, of New York, New York, pled guilty to one count of operating an unlicensed money transmitting business.  The charge carries a maximum penalty of five years in prison.  The maximum potential sentence in this case are prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

FONCILLAS is scheduled to be sentenced November 8, 2018.

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that the Office is soliciting 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).  

Pursuant to the terms of the consent decree, the Government is to 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.  Applications must be received by this Office by July 11, 2018.

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, Robert E. Perez, Director, Field Operations, New York, U.S. Customs and Border Protection (“CBP”), and Angel M. Melendez, the Special Agent-in-Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), announced today that the United States filed and settled civil fraud claims brought under the False Claims Act against TEMPLE ST. CLAIR LLC (“TEMPLE ST. CLAIR”), a fine jewelry designer, manufacturer, and importer based in New York, New York, with merchandise sold in retail stores and online throughout the United States.  As alleged in the Government’s complaint, TEMPLE ST. CLAIR systematically and unlawfully avoided payment of customs duties it owed on goods imported from Thailand, Sri Lanka, and Italy by falsely stating to CBP that the value of the goods was substantially less than the true value, and by senior leadership of TEMPLE ST. CLAIR hand-carrying jewelry into the United States for commercial purposes without declaring it to CBP.  Additionally, TEMPLE ST. CLAIR failed to properly affix to jewelry that was manufactured in Sri Lanka and Thailand permanent markings indicating its country of origin, in violation of CBP regulations.  As part of the settlement, approved yesterday in Manhattan federal court by U.S. District Judge Katherine Polk Failla, TEMPLE ST. CLAIR admitted to and accepted responsibility for underpaying customs duties and failing to properly mark its merchandise, and agreed to pay $796,000 to the United States and implement corrective measures to prevent future customs violations.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “This Office is committed to pursuing customs fraud and holding importers accountable for evading customs duties and disregarding CBP requirements.”

ICE HSI Special Agent-in-Charge Angel M. Melendez said:  “Temple St. Clair LLC employed fraudulent schemes that resulted in the underpayment of customs duties and the significant loss of revenue to the U.S. government.  Unfair trade practices hurt industries and consumers alike.  HSI stands committed with CBP, to vigorously investigate those people and businesses that seek to make a larger profit by circumventing, or even disregarding, customs regulations.”

CBP Director of New York Field Operations Robert E. Perez said:  “Today’s settlement is a testament to the dedication of our partners in the United States Attorney's Office, Homeland Security Investigations, and the men and women of CBP in enforcing our nation’s trade laws and taking effective action against those who seek to defraud the government.”  

As part of the settlement, TEMPLE ST. CLAIR admitted, acknowledged, and accepted responsibility for engaging in the following conduct:

• From January 2011 through July 2016, TEMPLE ST. CLAIR repeatedly understated the actual value of jewelry it imported from Italy, Sri Lanka, and Thailand in documents presented to CBP to establish the import duties owed on the jewelry.
• From January 2011 through July 2016, to obtain duty-free treatment pursuant to the Generalized System of Preferences trade-preference program, TEMPLE ST. CLAIR misrepresented to the United States that at least 35% of the value of jewelry was added in Sri Lanka or Thailand.
• In 2017, TEMPLE ST. CLAIR failed to ensure that the jewelry it was importing from Sri Lanka and Thailand was permanently marked with its country of origin at the time of entry.
• Between 2011 and 2016, TEMPLE ST. CLAIR senior management brought jewelry into the country for commercial purposes, and improperly failed to declare those items to CBP.  As a result, TEMPLE ST. CLAIR improperly avoided paying import duties for those items.

The settlement also requires TEMPLE ST. CLAIR to implement procedures to properly mark its jewelry with the country of origin.  TEMPLE ST. CLAIR must affix markings to the jewelry prior to the time of importation and with sufficient permanence to withstand normal shipping and handling. 

The allegations of fraud stated in the Complaint were first brought to the attention of federal law enforcement by a whistle-blower who filed a lawsuit under the False Claims Act. 

Mr. Berman praised the investigative work of HSI on this case.  He also thanked CBP for its assistance.

This case is being handled by the Office’s Civil Frauds Unit.  Assistant United States Attorneys Kirti Vaidya Reddy and Peter Aronoff are in charge of the case.

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 that Carlos Jose Zavala Velasquez, a former high-ranking member of the Honduran National Police, was sentenced yesterday to 12 years in prison for conspiring to import cocaine into the United States.  VELASQUEZ previously pled guilty before U.S. District Judge Lorna G. Schofield, who imposed yesterday’s sentence. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Carlos Jose Zavala Velasquez was a high-ranking Honduran police official who betrayed his duty and sold his office and sensitive law enforcement information to drug traffickers.  Velasquez assisted a major trafficking organization and its leader by tipping them off about investigations and even accompanying them during a shipment of cocaine.  Now he has been sentenced for his crimes.”

Special Agent in Charge Raymond Donovan said:  “Any corrupt law enforcement official who contributes to instability and drug-related violence around the world deserves American justice and that is what Mr. Velasquez will get.  Velasquez helped facilitate huge cocaine shipments bound for the United States and elsewhere and was a key facilitator for a significant Honduran drug trafficking and criminal network.  DEA is pleased at the result of this investigation and we will continue to pursue and attack those who threaten the United States and do damage to countless lives, families, and communities.”

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

From approximately 1991 through 2016, VELASQUEZ served as a member of the Honduran National Police, holding positions including, among others, second in command to the Chief of Police for the city San Pedro Sula; Chief of Police for the city Villanueva; Chief of Regional Special Services, a position responsible for investigations into organized crime; and the officer in charge of the “COBRAs” in San Pedro Sula, a commando-style unit dedicated to combatting organized crime.  Between at least approximately 2009 and 2012, VELASQUEZ facilitated the drug trafficking activities of an organization operated by one of the most significant drug traffickers in Central America, Hector Emilio Fernandez Rosa, a/k/a “Don H.”  On numerous occasions, and while VELASQUEZ was purportedly responsible for investigating Fernandez Rosa, VELASQUEZ provided information to Fernandez Rosa’s organization regarding ongoing law enforcement investigations so that the traffickers could plan transportation routes through Honduras for large loads of cocaine.  On at least one occasion, VELASQUEZ accompanied members of the drug trafficking organization during the transportation of a load of cocaine.  VELASQUEZ was paid between $5,000 and $20,000 each time he assisted the organization. 

Six other former members of the Honduran National Police, including Mario Guillermo Mejia Vargas, Victor Oswaldo Lopez Flores, Ludwig Criss Zelaya Romero, Juan Manuel Avila Meza, and Carlos Alberto Valladares, 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 has pled guilty in federal court, along with co-conspirator Fabio Porfirio Lobo.  On September 5, 2017, Lobo was sentenced to 24 years in prison, and on February 6, 2018, Flores was sentenced to five years in prison.  The remaining defendants await sentencing by Judge Schofield.  

*                *                *

In addition to the prison term, VELASQUEZ, 46, was sentenced to three years of supervised release. 

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 DAVID BERGSTEIN, a film producer and entrepreneur, was sentenced today in Manhattan federal court to 8 years in prison for defrauding investors of more than $26 million.  BERGSTEIN was found guilty on March 1, 2018 following a four-week jury trial before U.S. District Court Judge P. Kevin Castel, who imposed today’s sentence.    

Manhattan U.S. Attorney Berman said:  “As a Hollywood film producer and entrepreneur, David Bergstein is versed in common themes for fictional writing.  Deception, truth, and lies fit the narrative for Bergstein’s real life scheme to bilk investors of more than $26 million.  A unanimous jury has found Bergstein’s plot to be full of holes, and he has now been sentenced to 8 years in federal prison.”

The jury found Bergstein guilty of all counts of the Indictment, which charged him with one count of conspiracy to commit investment adviser fraud and securities fraud, two counts of investment adviser fraud, two counts of securities fraud, one count of conspiracy to commit wire fraud, and one count of wire fraud. 

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

From 2011 through 2012, BERGSTEIN engaged in a scheme to defraud investors in Weston Capital Asset Management (“WCAM”), a New York-based registered investment adviser, by (i) concealing material information from Weston investors about financial transactions involving their money; (ii) transferring funds from one pool of Weston’s investors to make payments to, provide a security interest for, or otherwise benefit, another pool of Weston’s investors, without the required disclosures to investors concerning conflicts of interest; and (iii) misappropriating a portion of funds transferred from investor accounts for their own and others’ benefit.  BERGSTEIN orchestrated this scheme in part through two transactions involving Weston investors’ assets: first, a loan from a Weston fund called the Partners 2 (or “P2”) Fund, and, second, a swap agreement with a Weston fund called the Wimbledon TT Portfolio (the “TT Portfolio”). 

The Partners 2 Loan Scheme

In 2010, Weston agreed to a transaction with an entity named Gerova Financial Corporation (“Gerova”), an international reinsurance company, in which Weston sent assets from one of its hedge funds (the Wimbledon Financing Fund, or “WFF”) to Gerova in exchange for restricted shares of Gerova stock.  This exchange was intended to replace illiquid hedge fund assets with stock, which could be bought and sold more easily.  In 2011, however, Gerova’s stock price plummeted.  Weston subsequently sought to unwind the transaction, and Weston’s president was introduced to BERGSTEIN for this purpose.  BERGSTEIN and Weston’s principals subsequently formulated the outlines of a structure in which Weston would return its Gerova stock, receive its assets back from Gerova, and place those assets into another entity called Arius Libra Inc. (“Arius Libra”) as part of an investment in a separate business.  Certain payments would be made along the way to facilitate the transfers.  

In order to complete this transaction, BERGSTEIN and Weston’s principals agreed to loan money from the P2 Fund, another Fund operated and managed by Weston, to Arius Libra.  The purpose of this loan (the “P2 Loan”) was purportedly (i) to pay certain debts associated with Gerova, and (ii) to fund Arius Libra’s purported medical billing businesses.  Bergstein arranged for the P2 Loan to be secured by certain of the assets of WFF.  Thus, in the event the P2 Loan was not repaid, the P2 Fund had the ability to liquidate WFF assets to make P2 investors whole, to the detriment of investors in WFF.  In total, approximately $9 million in investor money was disbursed from the P2 Fund pursuant to the P2 Loan. 

As BERGSTEIN well knew, however, P2 Fund investors were neither informed of the existence of the P2 Loan nor given any information about Arius Libra.  And no disclosures were made to inform either P2 Fund or WFF investors of the conflict of interest arising from the P2 Fund’s security interest in WFF assets, as BERGSTEIN also knew.  And although BERGSTEIN had represented to Weston that disbursements made pursuant to the P2 Loan would be used both to pay off Gerova creditors and to fund Arius Libra’s medical billing businesses, in fact, BERGSTEIN misappropriated millions of dollars of P2 Loan proceeds and used them to pay for, among other things, his own personal expenses, including credit card bills and attorney’s fees.

The TT Portfolio Swap Agreement Scheme
 

In late 2011, BERGSTEIN and Weston’s principals secretly arranged for Weston’s TT Portfolio to enter into a swap agreement with an entity controlled by BERSTEIN known as Swartz IP Services (“Swartz IP”), a transaction that was not disclosed to TT Portfolio investors.  As part of this swap agreement, Bergstein arranged for approximately $17.7 million from the TT Portfolio to be transferred to Swartz IP.  In exchange, BERGSTEIN agreed to provide certain investment returns and to meet investor redemption requests.  Bergstein induced this transaction by misrepresenting to Weston’s principals that a wealthy investor had capitalized Swartz IP and guaranteed the transaction.

The TT Portfolio transaction was completed without disclosure to investors, even though, for other swap agreements, Weston had amended the TT Portfolio offering memorandum to reflect the particular swap agreement at issue.  Of the money that was transferred to Swartz IP, BERGSTEIN directed that approximately $3 million be transferred to the P2 Fund to pay back part of the P2 Loan.  BERGSTEIN thus arranged for money from one set of Weston’s investors (the TT Portfolio investors) to be used to pay back part of a debt owed to another set of Weston’s investors (the P2 Fund investors) – another conflict of interest that was not disclosed to P2 or TT Portfolio investors.

As a further part of the scheme, BERGSTEIN made false representations about Swartz IP’s assets and ability to meet redemption requests and secretly diverted TT Portfolio investor proceeds to pay BERGSTEIN’s personal expenses, including credit card bills, impressionist artwork, and private jets.

*          *          *

In addition to his prison term, BERGSTEIN, 55, of Hidden Hills, California, was sentenced to three years of supervised release, forfeiture and restitution amounts to be determined at a later time.  BERGSTEIN was remanded on March 1, 2018, following the return of the jury’s verdict, and he remains in custody. 

Mr. Berman praised the investigative work of the FBI, the IRS, and the Office’s Criminal Investigators.  He also thanked the Securities and Exchange Commission for its assistance. 

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Edward A. Imperatore, Robert W. Allen, and Elisha J. Kobre are in charge of the prosecution. 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), Angel M. Melendez, the Special Agent-in-Charge of the New York Field Office of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), and Peter R. Rendina, Inspector-in-Charge of the New York Field Division of the U.S. Postal Inspection Service (“USPIS”), announced today that JONATHAN RIENDEAU and JADE PLANTE have been charged with operating websites that sold more than $1 million of synthetic cannabinoids throughout the United States.  Both defendants were arrested this morning.  RIENDEAU will be presented today in federal court in the Southern District of California.  PLANTE will be presented today in federal court in the Southern District of Florida.  The case has been assigned to United States District Judge Naomi Reice Buchwald.

U.S. Attorney Geoffrey S. Berman said:  “Trafficking of synthetic cannabinoids – sometimes called K2 or Spice – is on the rise and poses a serious threat to public health and safety.  Packaged attractively to appeal to teenagers and young adults, synthetic cannabinoids are in reality a toxic cocktail that can be very dangerous to consume.  As alleged, Jonathan Riendeau and Jade Plante used the internet to peddle massive quantities of synthetic cannabinoids.  Thanks to our law enforcement partners, Riendeau and Plante have been arrested and their dangerous business has been dismantled.”

NYPD Commissioner James P. O’Neill said:  “As NYPD detectives continue to do remarkable work in investigating those responsible for directing smokeable synthetic cannabinoids onto our streets – and the resulting scourge of related overdoses – we are grateful for the collaboration of our federal partners, whose reach and expertise greatly strengthens our impact on this crisis.  The composition of these toxic chemicals varies by batch, and the results of taking them are unpredictable. What is predictable, however, is our relentless investigation of anyone who produces or sells so-called ‘synthetic marijuana’ in New York City or anywhere else in America.”

HSI Special Agent-in-Charge Angel M. Melendez said:  “These individuals allegedly sold and distributed massive quantities of laced smokeable synthetic cannabinoids, throughout the country using the internet.  These arrests are so timely, considering amount of K2 related overdoses we have experienced here in New York City.  Law enforcement is full steam ahead on investigations to bring down those online drug dealers and prosecute them to the fullest extent of the law.”

USPIS Inspector-in-Charge Peter R. Rendina said:  “Dealers in synthetic drugs never think of the lasting impact on the lives destroyed and the communities devastated by their greedy and illegal operation. Their only goal is to make money off of the users. Whether it be a clever name or packaging, these illegal operations will never go unnoticed by law enforcement.  Today’s arrests are a strong message to drug traffickers that Postal Inspectors and their law enforcement partners will spare no resource or expense to protect our customers and the sanctity of the U.S. Mail.”

According to the allegations in the Indictment[1]:

From February 2014 until June 2018, RIENDEAU and PLANTE operated a scheme to distribute massive quantities of smokeable synthetic cannabinoids (“SSC”), containing controlled substances and controlled substance analogues, throughout the United States.  SSC, which can be addictive, are often marketed as safe, legal alternatives to marijuana.  In fact, SSC are not safe and may affect the brain much more powerfully than marijuana; their actual effects can be unpredictable and, in some cases, more dangerous or even life-threatening.

RIENDEAU and PLANTE operated three different websites on which they sold SSC, colloquially referred to as “K2” or “Spice,” which included dried, shredded plant material onto which synthetic cannabinoid chemicals had been sprayed, and liquids containing synthetic cannabinoid chemicals for users to vaporize and inhale with e-cigarettes or other similar devices.  The SSC distributed by the scheme were branded with colorful graphics and distinctive names, including “Dead Man Walking,” “Brainfreeze,” “Klimax,” “Twilite,” “Delirium,” “Purple Haze,” “Diablo,” “AK-47,” “ScoobySnax,” “F*cking Crazy,” and “Dafuq.”  Many of the SSC were marketed as having flavors, including chocolate, apple, and strawberry.  The SSC were sometimes marked “not for human consumption,” or “potpourri.”

Over the course of the scheme, RIENDEAU and PLANTE shipped approximately 6,000 packages of SSC through the United States mail to customers throughout the U.S., including locations in Manhattan, the Bronx, and all 50 states, containing a total of more than 120 kilograms of SSC.  RIENDEAU and PLANTE were paid more than $1 million for SSC in the course of the scheme.

*                      *                      *

RIENDEAU, 38, of San Diego, California, is charged with three counts of conspiring to distribute narcotics.  PLANTE, 39, of Port Saint Lucie, Florida, is charged with one count of conspiring to distribute narcotics.  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.  

Mr. Berman praised the outstanding investigative work of HSI, USPIS, and the NYPD, and thanked the Drug Enforcement Administration for its assistance.  The long-term investigation of this case was partially funded by the New York/New Jersey High Intensity Drug Trafficking Area (“HIDTA”), which is a federally funded crime fighting initiative and part of the Organized Crime Drug Enforcement Task Force program.

The prosecution is being handled by the Office’s Narcotics Unit.  Assistant United States Attorney Robert B. Sobelman is in charge of the prosecution. 

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

[1]   As the introductory phrase signifies, the entirety of the text of the Indictment, and the 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, James P. O’Neill, the Commissioner of the Police Department for the City of New York (“NYPD”), and James J. Hunt, the Special Agent-in-Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), announced the unsealing today of a Superseding Indictment charging a total of 20 members and associates of a branch of the MacBallas street gang operating primarily in and around the Andrew Jackson and Melrose Houses in the Bronx with racketeering, narcotics, robbery, and firearms offenses.  Two defendants are charged with the 2011 murder of Daniel Delgado.

A total of 12 defendants were taken into custody today; three other defendants were already in federal custody; and three are in state custody.  Fourteen of the 20 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 Denise L. Cote.   

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged in the Indictment, the defendants brought violence, fear, and drugs to the streets of New York.  The people of this city will not stand for it, and neither will we.  Thanks to the extraordinary work of the NYPD and DEA, the defendants will now face justice for their alleged crimes.” 

NYPD Commissioner James P. O’Neill said:  “Gang and crew activity, particularly in the Bronx as we’ve seen of late, is responsible for much of the violence in our city.  This behavior will never be tolerated by New Yorkers, and I thank our federal partners at the DEA and the Southern District for strengthening the NYPD’s relentless efforts to rid our streets of these criminals.”

DEA Special Agent-in-Charge James J. Hunt said:  “Gang violence begets violence and turns neighborhoods into battlegrounds.  Law enforcement knows that shutting down gangs’ drug and gun networks lays a foundation for safer communities.  Today’s arrests demonstrate that we are proactively safeguarding our communities by dismantling one gang at a time.”

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

From 2011 through June 2018, in the Southern District of New York and elsewhere, TOSHNELLE FOSTER, a/k/a “Tosh,” CHRISTOPHER ASHE, a/k/a “Chips,” DAWAYNE BELL, JASON CHRISTIAN, a/k/a “Hungry,” NAVONE DOZIER, a/k/a “Dollaz,” KEVON GAITHER, a/k/a “KK,” CLARENCE GLASGO, a/k/a “Chuck,” XAVIER HOLMAN, a/k/a “Rico,” JAFARI JONES, a/k/a “JJ,” SEAN JONES, a/k/a “S Dot,” KEENAN MCFARLAND, AUSTIN MORRISHOW, a/k/a “Chuckey,” DEANDRE MORRISON, a/k/a “D Nice,” DEONTE MORRISON, a/k/a “Suki,” KEITH OUTLAW, a/k/a “Keefy,” LASYAH PALMER, a/k/a “Timbo,” JASON RAMOS, a/k/a “Chico,” FRANCISCO TORRES, a/k/a “Baby,” and BO WILLIAMS, a/k/a “Boski,” were all members and associates of the MacBallas street gang, whose territory was centered in and around the Andrew Jackson and Melrose housing projects in the Bronx, New York.  In order to fund the gang, protect its territory, and promote its standing, members of the MacBallas engaged in, among other things, narcotics trafficking, robbery, and other acts of violence, including murder.  MacBallas members sold heroin, crack cocaine, and marijuana in the gang’s territory, promoted their gang affiliation on social media sites like Facebook, possessed shared firearms, and engaged in shootings as part of their gang membership.

In particular, on August 1, 2011, DEANDRE MORRISON and NATHANIEL FLUDD murdered Daniel Delgado in order to maintain and increase their status in the MacBallas gang.

Members of the MacBallas gang also participated in a conspiracy to distribute narcotics in and around the MacBallas territory in the Bronx.  In particular, CHRISTIAN, ASHE, DOZIER, GAITHER, JAFARI JONES, SEAN JONES, McFARLAND, MORRISHOW, DEONTE MORRISON, OUTLAW, PALMER, RAMOS, TORRES, and WILLIAMS participated in a conspiracy to distribute heroin, marijuana, and more than 280 grams of crack cocaine.

*          *          *

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

Mr. Berman praised the outstanding investigative work of the NYPD’s Bronx Violent Crimes Squad and the New York Field Division of the DEA.

The case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Jordan Estes, Maurene Comey, and Christopher Clore 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

MAX. PENALTIES

1

Racketeering

Conspiracy

18 U.S.C. § 1962(d) 

TOSHNELLE FOSTER, 26

CHRISTOPHER ASHE, 21

DAWAYNE BELL, 27

JASON CHRISTIAN, 37

NAVONE DOZIER, 23

KEVON GAITHER, 22

CLARENCE GLASGO, 23

XAVIER HOLMAN, 28

JAFARI JONES, 23

SEAN JONES, 28

KEENAN McFARLAND, 22

AUSTIN MORRISHOW, 20

DEANDRE MORRISON, 26

DEONTE MORRISON, 24

KEITH OUTLAW, 26

LASYAH PALMER, 29

JASON RAMOS, 23

FRANCISCO TORRES, 27

BO WILLIAMS, 27

20 years

2

Narcotics

Conspiracy

21 U.S.C. § 846

JASON CHRISTIAN

CHRISTOPHER ASHE

NAVONE DOZIER

KEVON GAITHER

JAFARI JONES

SEAN JONES

KEENAN McFARLAND

AUSTIN MORRISHOW

DEONTE MORRISON

KEITH OUTLAW

LASYAH PALMER

JASON RAMOS

FRANCISCO TORRES

BO WILLIAMS

Life in prison

Mandatory minimum of 10 years in prison

3

Murder in Aid of

Racketeering

18 U.S.C. § 1959(a)(1)

NATHANIEL FLUDD

DEANDRE MORRISON

Death, or Life in prison

4

Causing Death through use of a Firearm

18 U.S.C. § 924(j)

NATHANIEL FLUDD

DEANDRE MORRISON

Death, or Life in prison

5

Violent Crime in Aid of Racketeering

18 U.S.C. §§ 1959(a)(3), 1959(a)(5) and 2

SEAN JONES

NAVONE DOZIER

DAWAYNE BELL

CLARENCE GLASGO

20 years in prison

6

Firearms Offense

18 U.S.C. § 924(c)(1)(A)(iii) and 2

SEAN JONES

NAVONE DOZIER

DAWAYNE BELL

CLARENCE GLASGO

Life in prison

Mandatory minimum of 10 years in prison

7

Hobs Act Robbery

18 U.S.C. § 1951

JAFARI JONES

20 years in prison

8

Firearms Offense

18 U.S.C. §§ 924(c)(1)(A)(iii) and 2

JAFARI JONES

Life in prison

Mandatory minimum of 10 years in prison

9

Violent Crime in Aid of Racketeering

18 U.S.C. §§ 1959(a)(3), 1959(a)(5) and 2

KEITH OUTLAW

20 years in prison

10

Firearms Offense

18 U.S.C. §§ 924(c)(1)(A)(iii) and 2

KEITH OUTLAW

Life in prison

Mandatory minimum of 10 years in prison

11

Violent Crime in Aid of Racketeering

18 U.S.C. §§ 1959(a)(3), 1959(a)(5) and 2

DEONTE MORRISON

20 years in prison

12

Firearms Offense

18 U.S.C. §§ 924(c)(1)(A)(iii) and 2

DEONTE MORRISON

Life in prison

Mandatory minimum of 10 years in prison

13

Violent Crime in Aid of Racketeering

18 U.S.C. §§ 1959(a)(3), 1959(a)(5) and 2

TOSHNELLE FOSTER

20 years in prison

14

Firearms Offense

18 U.S.C. §§ 924(c)(1)(A)(iii) and 2

TOSHNELLE FOSTER

Life in prison

Mandatory minimum of 10 years in prison

15

Violent Crime in Aid of Racketeering

18 U.S.C. §§ 1959(a)(3), 1959(a)(5) and 2

KEITH OUTLAW

20 years in prison

16

Violent Crime in Aid of Racketeering

18 U.S.C. §§ 1959(a)(3), 1959(a)(5) and 2

XAVIER HOLMAN

20 years in prison

17

Firearms Offense

18 U.S.C. §§ 924(c)(1)(A)(iii) and 2

XAVIER HOLMAN

Life in prison

Mandatory minimum of 10 years in prison

18

Felon in Possession of Ammunition

18 U.S.C. § 922(g)

XAVIER HOLMAN

10 years in prison

19

Felon in Possession of Ammunition

18 U.S.C. § 922(g)

KEENAN McFARLAND

10 years in prison

20

Firearms Offense

18 U.S.C. § 924(c)(1)(A)(iii) and 2

JASON CHRISTIAN

KEENAN McFARLAND

AUSTIN MORRISHOW

LASYAH PALMER

JASON RAMOS

FRANCISCO TORRES

BO WILLIAMS

Life in prison

Mandatory minimum of 10 years in prison

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the arrests of SEBASTIAN PINTO-THOMAZ, ABELL OUJADDOU, and JEREMY MILLUL for their participation in a scheme to trade on material, nonpublic information (the “Inside Information”) misappropriated by PINTO-THOMAZ from his employer, a credit rating agency based in New York (the “Firm”).  The scheme yielded almost $300,000 in illegal profits.

PINTO-THOMAZ, OUJADDOU, and MILLUL were arrested this morning in New York, New York, and will be presented today before United States Magistrate Judge Nathaniel Kevin Fox.  In a separate action, the Securities and Exchange Commission (“SEC”) filed civil charges against PINTO-THOMAZ, OUJADDOU and MILLUL.

U.S. Attorney Geoffrey Berman said:  “As alleged, Sebastian Pinto-Thomaz used his position with a credit rating agency, where he was privy to business acquisition plans before they were publicly announced, to provide inside information to two friends who traded on the information and reaped thousands in profits.  Then, when asked about this illicit trading, Pinto-Thomaz painted himself into a corner, falsely denying any relationship with his two co-conspirators.  Our Office has always been – and remains – committed to ensuring that the nation’s securities markets remain fair for everyone, not just those who have friends in the know.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:   “Aiming to fill their pockets, the defendants allegedly conspired to use Inside Information to advance their greedy agendas.  This alleged fraud triangle produced nearly $300,000 in profit among the three defendants.  As alleged, Pinto-Thomaz abandoned his duties of loyalty and confidentiality by passing material nonpublic information to his co-conspirators who then made illegal trades. We hope that today’s arrests will show all like-minded schemers that this alleged behavior ultimately does get you to the inside – of a federal prison.”

According to the allegations contained in the Complaint unsealed today in Manhattan federal court[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 affect a company’s credit rating.  All the major rating agencies offer a product – 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 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 Inside Information about Sherwin-Williams’s 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 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 the Sherwin-Williams acquisition of Valspar and passed it to OUJADDOU and MILLUL so 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.

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, 2016, and shortly thereafter purchased 480 shares of Valspar common stock.  On March 18, 2016, the last trading day before the acquisition was publicly announced, MILLUL also purchased 75 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 who 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. 

*                    *                    *

PINTO-THOMAZ, 32, ABELL OUJADDOU, 55, and JEREMY MILLUL, 31, all of New York, New York, are each charged with 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, and one count of securities fraud, which 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 maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants would be determined by the Court.

In addition, the Government, pursuant to Court authorized seizure warrants, has seized $100,000 from a bank account belonging to MILLUL, and over 25,000 shares of BlackBerry stock from brokerage accounts belonging to OUJADDOU, as these assets constitute, or are traceable to, proceeds of the illegal conduct alleged in the Complaint.

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.

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

[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint 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 non-prosecution agreements (the “Agreements”) with tribal corporations controlled by two Native American tribes: the Modoc Tribe of Oklahoma and the Santee Sioux Tribe of Nebraska.  As part of the Agreements, the tribal corporations agreed to forfeit, collectively, $3 million in proceeds from the illegal payday lending enterprise owned and operated by Scott Tucker.  As part of the Agreements, the tribal corporations acknowledged, among other things, that Tucker used his agreements with the tribal corporations to evade state usury laws and that representatives of the tribes filed affidavits containing false statements in state enforcement actions against parts of Tucker’s payday lending enterprise.

Mr. Berman also announced that monies forfeited to the Office in connection with its investigation of Tucker’s scheme, including monies recovered as part of the Agreements, will be remitted to the Federal Trade Commission (“FTC”) for distribution to victims of the payday lending scheme.  In total, the U.S. Attorney’s Office expects to remit in excess of $500 million to the FTC for victims.

U.S. Attorney Geoffrey S. Berman stated:  “To hide their criminal payday lending scheme, Scott Tucker and Timothy Muir tried to claim their business was owned and operated by Native American tribes.  Today’s settlements with two of those tribes will add $3 million to the hundreds of millions already recovered – from Tucker, from U.S. Bancorp, and from a non-prosecution agreement with a third native American tribe – to compensate Tucker’s millions of victims.”           

Tucker’s Payday Lending Scheme

On January 5, 2018, Tucker was sentenced to 200 months in prison for operating a nationwide internet payday lending enterprise that systematically evaded state laws for more than 15 years in order to charge illegal interest rates as high as 1,000 percent on loans.  Tucker’s co-defendant, Timothy Muir, an attorney, was sentenced to 84 months in prison for his participation in the scheme.  In addition to their willful violation of state usury laws across the country, Tucker and Muir lied to millions of customers regarding the true cost of their loans to defraud them out of hundreds, and in some cases, thousands of dollars.  In furtherance of their multi-year effort to evade law enforcement, Tucker and Muir formed sham relationships with Native American tribes and laundered billions of dollars obtained from customers through bank accounts nominally held by the tribes in order to hide Tucker’s ownership and control of the business.  Tucker and Muir were sentenced following their convictions on all 14 counts against them after a five-week jury trial that concluded on October 13, 2017.

The Sham Tribal Ownership of Tucker’s Businesses

In response to complaints that Tucker’s payday lending enterprise was extending abusive loans in violation of their usury laws, several states filed actions to enjoin the enterprise from operating in their states.  To thwart these state actions, Tucker devised a scheme to claim that his lending businesses were protected by sovereign immunity, a legal doctrine that, among other things, generally prevents states from enforcing their laws against Native American tribes.  Beginning in 2003, Tucker entered into agreements with several Native American tribes (the “Tribes”), including the Modoc Tribe of Oklahoma, the Santee Sioux Tribe of Nebraska, and the Miami Tribe of Oklahoma.  The purpose of these agreements was to make it appear that the Tribes owned and operated parts of Tucker’s payday lending enterprise so that when states sought to enforce laws prohibiting usurious loans, Tucker’s lending businesses could claim to be protected by sovereign immunity.  In return, the Tribes received payments from Tucker, typically one percent of the revenues from the portion of Tucker’s payday lending business that the Tribes purported to own. 

Recovery and Distribution of Money for Victims of Tucker’s Payday Lending Scheme

Through various actions, the U.S. Attorney’s Office has recovered hundreds of millions of dollars that will be remitted to victims of Tucker’s scheme.  In addition to the recoveries from the Modoc and Santee Sioux Tribes announced today, the Office has also recovered $48 million pursuant to a non-prosecution agreement with the Miami Tribe of Oklahoma and tens of millions of dollars in cash and properties from Tucker.  In addition, as announced on February 15, 2018, the Office intends to remit money recovered by the Government from U.S. Bancorp for Bank Secrecy Act (“BSA”) violations to victims of the scheme.  In total, the Office has recovered in excess of $500 million for victims.

To facilitate distributions to victims, the Office is transferring the recovered funds to the FTC, which successfully brought a related civil action against Tucker and various entities involved in the illegal payday lending scheme.  Monies recovered by this Office will be pooled with monies recovered by the FTC and distributed to victims by the FTC according to terms and in a manner to be announced later this year.  Victims seeking restitution are encouraged to visit www.ftc.gov/amg for updated information regarding the FTC’s redress program and to sign up to receive email updates.  www.ftc.gov/news-events/press-releases/2018/06/statement-ftc-chairman-simons-dojs-remitting-more-500-million-ftc

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

*                      *                     *

Mr. Berman praised the outstanding investigative work of the St. Louis Field Office of the Internal Revenue Service-Criminal Investigation.  Mr. Berman also thanked the Criminal Investigators at the United States Attorney’s Office, the Federal Bureau of Investigation, and the Federal Trade Commission for their assistance with the case.

The prosecution is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Niketh Velamoor, Hagan Scotten, and Sagar Ravi are in charge of the prosecution.