Southern District of New York

Robert S. Khuzami, the Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced that HERZEL MEIRI and AMIR MEIRI pled guilty yesterday to conspiracy to commit wire fraud and bank fraud before the U.S. District Judge Edgardo Ramos, in connection with their scheme to fraudulently induce distressed homeowners to sell their homes for little or no consideration to a company they owned and controlled.  The defendants will be sentenced by Judge Ramos on July 27, 2018.

According to allegations in the contained documents filed in federal court, including the Indictment and Complaint:

From 2013 to 2015, HERZEL MEIRI and AMIR MEIRI defrauded distressed homeowners throughout the Bronx, Brooklyn, and Queens.  The MEIRIs and others falsely represented to these homeowners – some of whom were elderly or in poor health – that they could assist them with a loan modification or similar relief from foreclosure that could result in the homeowners saving their homes.  But rather than actually assisting these homeowners, the defendants deceived them into selling their homes for less than the homes’ actual values to Launch Development LLC (“Launch Development”), a for-profit company owned and controlled by the MEIRIs.

Specifically, the MEIRIs’ direction fraudulently induced the homeowners to engage in a type of short sale in which the homeowner would sell the property to Launch Development.  The MEIRIs and their conspirators falsely assured the homeowners that their homes would be returned to them after a short period, and that they could remain in their homes throughout the entire process.  At the closing that followed, homeowners were encouraged to sign fraudulent documents, that unbeknownst to the homeowners transferred the homes Launch Development.  Homeowners often were then forced to vacate their homes, and in many cases had no other place to live. Launch Development resold many of the homes, which were purchased at fraudulently deflated prices, for an enormous profit.     

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HERZEL MEIRI, 64, pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum sentence of 30 years in prison and a maximum fine of $1,000,000 or twice the gross gain or loss from the offense.  He also consented to forfeit $6,469,291.41, as well as 31 real properties, four bank accounts, and one escrow account, as proceeds traceable to the offense.

AMIR MEIRI, 35, pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum sentence of 30 years in prison and maximum fine of $1,000,000 or twice the gross gain or loss from the offense.  He also consented to forfeit the same 31 real properties, four bank accounts, and one escrow account, as proceeds traceable to the offense.  

Mr. Khuzami praised the outstanding work of the Federal Bureau of Investigation, the Special Inspector General for the Troubled Asset Relief Program, and the New York State Department of Financial Services for their investigative efforts and ongoing support and assistance with the case.

The prosecution of this case is being overseen by the Office’s General Crimes Unit.  Assistant U.S. Attorneys Andrew Thomas and Sheb Swett are in charge of the case.

Robert S. Khuzami, the Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced the filing of a Superseding Indictment against defendants JAMES GATTO, a/k/a “Jim,” MERL CODE, and CHRISTIAN DAWKINS in United States v. Gatto, 17 Cr. 686 (LAK).  The Superseding Indictment (“the Indictment”) expands the scope of the charged wire fraud conspiracy to include alleged payments to the families of six student-athletes in connection with those players’ decisions to attend four different NCAA Division I Universities – the University of Louisville, the University of Miami, the University of Kansas, and North Carolina State University – all of which were sponsored by the same major athletic apparel company (“Company-1”).[1]

The investigation remains ongoing.  The FBI strongly encourages anyone with information they believe to be relevant to contact the FBI by calling a special hot line established to receive tips in connection with this investigation: 212-384-2135.

The case is being handled by the Office’s Public Corruption Unit.  Assistant United States Attorneys Edward B. Diskant, Noah Solowiejczyk, Eli J. Mark, Robert L. Boone, and Aline Flodr are in charge of the prosecution.

[1] As the paragraph above indicates, the entirety of the text of the Superseding Indictment constitute only allegations, and every fact described therein should be treated as an allegation.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that SPYROS PANOS, a former orthopedic surgeon, who was previously convicted of health care fraud, was charged with wire fraud, health care fraud, and aggravated identity theft, in connection with a scheme in which he assumed the identity of a licensed orthopedic surgeon and obtained over $860,000 in payments for reviewing patient files in Workers Compensation cases.  PANOS was arrested this morning at his home in Hopewell Junction, New York, and was presented before U.S. Magistrate Judge Paul E. Davison in White Plains federal court this morning.

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

SPYROS PANOS, the defendant, was an orthopedic surgeon practicing in Dutchess County and residing in Hopewell Junction (the “PANOS Residence”).  In or about August 2013, PANOS surrendered his license to practice medicine, and on or about October 31, 2013, he pled guilty, in United States District Court for the Southern District of New York, to a health care fraud charge (the “Health Care Fraud Charge”).  In or about April 2014, PANOS began serving a 54-month sentence.  On or about September 16, 2016, PANOS was released to a halfway house and then, about a month later, to home confinement.  Since March 2017, he has been serving a two-year term of supervised release. 

In connection with medical treatment relating to Workers’ Compensation claims, a peer review may be conducted when a treating physician requests a variance in treatment.  The doctor performing the peer review is a licensed independent doctor who reviews the patient file but does not examine the patient, and writes a report opining whether the variance is appropriate.  There are companies that supply doctors who conduct such peer reviews.  Prior to being assigned to perform peer reviews, the doctor must establish that he/she has the proper credentials by providing, among other things: the schools from which the doctor earned his/her degrees and other educational credentials, the states in which he/she is licensed to practice medicine, and other pedigree and background information such as birth date and social security number.

In or about December 2013 (which was after PANOS pled guilty on October 31, 2013, and before he surrendered to serve his sentence on April 2, 2014) a company called Excel O LLC (hereafter “Excel O”) was formed.  The registered agent for Excel O is a family member of PANOS and is not a licensed physician (“Family Member-1”).

An orthopedic surgeon purporting to be practicing medicine at “Excel Orthopedics” (the “Excel Doctor”) performed peer reviews for several review companies.  The same credentialing information for the Excel Doctor was submitted to five of the Review Companies (the “Five Review Companies”), and they paid for the Excel Doctor’s peer review services by checks made out to Excel O LLC or Excel Orthopedics.  The Excel Doctor communicated with them using the same email address (the “Email Account”) that is subscribed to by the Excel Doctor and was created on or about September 13, 2013, approximately one month before SPYROS PANOS, the defendant, pled guilty to the Health Care Fraud Charge.  Thereafter, PANOS communicated with at least two of the companies by email and logging on to the companies’ secure servers through an IP address assigned to PANOS’s residence.

On or about December 21, 2013, approximately six months before PANOS surrendered to serve his prison sentence, an account in the name of Excel O was opened at a local credit union (“Excel O Account-1”).  Family Member-1 is the only name associated with the account. Between the time Excel O Account-1 was opened until about three months after PANOS surrendered to serve his sentence for the Health Care Fraud Charge, checks totaling over $239,000, issued by one of the above review companies, as well as a sixth review company, made out to Excel O LLC or Excel Orthopedics, were deposited into Excel O Account-1.  No further checks from peer review companies were deposited into Excel O Account-1.

On or about December 2, 2016, approximately two months after PANOS was released from prison, a second Excel O account was opened at the same credit union (“Excel O Account-2”) and, again, Family Member-1 is the only name associated with the account.  Between in or about December 2016 and in or about October 2017, over $636,500 in checks issued by the Five Review Companies, made out to Excel O LLC or Excel Orthopedics, were deposited into Excel O Account-2.

After the Review Companies’ checks were deposited into these accounts, money was removed through withdrawals of cash or checks that were made out to Family Member-1, drawn on the accounts, and then deposited into a third account (the “Family Account”).  The Family Account is in the name of Family Member-1 and two other members of PANOS’s family, neither of whom is a licensed physician.  From the Family Account, some money was withdrawn and over $100,000 was transferred to bank accounts in Hong Kong.  A member of PANOS’s family deposited Review Company checks into Excel O Account-2, withdrew money from that account, and transferred money into the Family Account.  And, on several occasions in September and October of 2017, PANOS and Family Member-1 went to the credit union and wire transferred money out of the Family Account. 

The doctor whose credentialing information was submitted to the review companies and represented to be the Excel Doctor’s credentials (“Doctor-1”) is a licensed physician who is an orthopedic surgeon employed by a practice in Westchester County, not Excel Orthopedics. Doctor-1 did not submit his/her credentialing information to the review companies referred to above, did not conduct any peer reviews, did not authorize PANOS or anyone else to use his/her credentialing information to conduct peer reviews, and did not receive any of the review company fees for services he/she was falsely represented to have performed.  

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PANOS, 49, is charged in three counts.  The first count charges him with wire fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.  The second count charges him with health care fraud, which carries a maximum sentence of 10 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.  The third count charges him with aggravated identity theft, which requires a two year prison term to be served consecutive to a sentence imposed for the wire and health care fraud charges.  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 U.S. Postal Inspection Service, the Office of the Inspector General of the U.S. Department of Health and Human Services, and the New York Inspector General for their assistance.

The case is being prosecuted by the Office’s White Plains Division.  Assistant U.S. Attorneys Margery B. Feinzig and Kathryn Martin 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.

[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 Jesse Garcia, Assistant Andean Regional Director of the U.S. Drug Enforcement Administration (“DEA”), announced today that four members and associates of the Revolutionary Armed Forces of Colombia (the “FARC”)—SEUXIS PAUCIS HERNANDEZ-SOLARTE, a/k/a “Jesus Santrich,” MARLON MARIN, ARMANDO GOMEZ, a/k/a “El Doctor,” and FABIO SIMON YOUNES ARBOLEDA—were arrested yesterday in Colombia for conspiring and attempting to import cocaine into the United States.  The United States is seeking the defendants’ extradition from Colombia. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, these defendants conspired to ship thousands of kilograms of cocaine from Colombia to the streets of the U.S.  Thanks to the investigative work of the DEA, they are now under arrest and face significant criminal charges.”

Assistant Regional Director Jesse Garcia said:  “This significant enforcement operation demonstrates that there remains within the Government of Colombia willing partners, determined to support the United States and DEA’s counter drug mission in Colombia, who are also willing to pursue justice no matter where the investigations lead.  This investigation was heavily supported by DEA’s Sensitive Investigative Unit (SIU) program and Colombian Attorney General Nestor Humberto Martinez.”

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

From June 2017 up to April 2018, HERNANDEZ-SOLARTE, MARIN, GOMEZ, and YOUNES ARBOLEDA worked together to produce and distribute approximately 10,000 kilograms of cocaine from Colombia to the United States and elsewhere.  During this time, the defendants were members and associates of the FARC.  HERNANDEZ-SOLARTE was a high-ranking member of the FARC leadership and a candidate to be seated in Colombia’s House of Representatives.  During the course of their cocaine trafficking, HERNANDEZ-SOLARTE, MARIN, GOMEZ, and YOUNES ARBOLEDA represented that they had access to laboratories to supply the cocaine and to U.S.-registered airplanes to transport the drugs within and through Colombia.  The defendants also supplied kilograms of cocaine to others as, among other things, a demonstration of their access to ton quantities of cocaine. 

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The Indictment charges HERNANDEZ-SOLARTE, 51, MARIN, 39, GOMEZ, 70, and YOUNES ARBOLEDA, 72, all of Colombia, with one count of conspiring to import cocaine into the United States, and two counts of attempting to import cocaine into the United States.  If convicted, the defendants face a mandatory minimum sentence of 10 years in prison and a maximum term of life in prison on each count. 

Mr. Berman praised the outstanding efforts of the DEA’s Sensitive Investigation Unit, Bogota Country Office, and Miami Field Office, as well as the U.S. Department of Justice’s Office of International Affairs.  He also thanked the Criminal Division’s Narcotics and Dangerous Drugs Section Judicial Attaches in Colombia, who provided substantial assistance. 

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

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

[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 a federal jury today found MICHAEL LITTLE guilty of charges that he participated in an 11-year tax fraud scheme in which he advised and helped an American family to defraud the Internal Revenue Service by hiding approximately $14 million in overseas Swiss bank accounts and by other means, failed to file his own personal tax returns, and assisted in the filing of false tax returns.  The three-week-long trial took place before U.S. District Judge P. Kevin Castel, who is scheduled to sentence LITTLE on September 6, 2018.

U.S. Attorney Geoffrey S. Berman stated:  “Michael Little assisted an American family in evading taxes on $14 million in undeclared offshore inheritance money.  Over the course of a decade, he helped the family illegally funnel millions of dollars of that inheritance from Swiss bank accounts into the United States, in order to avoid IRS detection.  Especially at this time of year, this case serves as a reminder that failure to pay one’s fair share of taxes can result in a felony conviction.”           

According to the allegations contained in the Complaint, Indictment, and the evidence presented in Court during the trial:

LITTLE, a British attorney who resides in England and is licensed to practice law in New York, was a business associate of the patriarch of the Seggerman family, an American family residing in the United States.  In August 2001, after the patriarch died, LITTLE and a lawyer from Switzerland (the “Swiss Lawyer”) met with his widow and adult children at a hotel in Manhattan, and advised them that the patriarch had left them approximately $14 million in overseas accounts that had never been declared to U.S. taxing authorities.  LITTLE and the Swiss lawyer also advised the various family members on steps they could take to continue hiding these assets from the IRS.  In particular, LITTLE discussed with the family members various methods by which they could bring the money into the United States from the Swiss accounts while evading detection by the IRS.  Among other means, he advised family members that they could bring money back to the United States in small increments, or “little chunks,” through means such as traveler’s checks, or by disguising money transfers to the United States as being related to the sales of artwork or jewelry.  Various members of the Seggerman family agreed to work together with LITTLE and the Swiss Lawyer to repatriate the offshore funds. 

In accordance with the plan he orchestrated, LITTLE assisted in opening an undeclared Swiss account for the purpose of holding and hiding the widow’s inheritance funds.  LITTLE also enlisted the assistance of a New Jersey accountant to prepare false and fraudulent tax returns and to keep falsified accounting records for a corporate entity in the United States, controlled by the widow and used to receive inheritance funds repatriated from the Swiss account.  Between 2001 and 2010, LITTLE caused over $3 million to be sent surreptitiously from the undeclared Swiss account to the United States corporate entity for the widow’s benefit.  LITTLE also worked with the New Jersey accountant to establish a sham mortgage that allowed another Seggerman family member to access approximately $600,000 of undeclared inheritance funds held in a Swiss account.

In or about 2010, LITTLE became aware of an IRS criminal investigation into the scheme.  In an attempt to cover up his involvement, LITTLE communicated with a tax attorney and the accounting firm that had prepared the widow’s individual tax returns.  LITTLE provided false information to the tax lawyer and the accounting firm about the nature of the transfers from the Swiss account to the United States, claiming that the transfers represented “pure gifts” from a non-U.S. person who had “absolutely no relationship” to the widow.  Based on LITTLE’s misrepresentations, the accounting firm filed inaccurate tax returns for the years 2001 through 2010, which categorized the transfers of over $3 million to the widow as foreign gifts.

LITTLE has been a lawful permanent resident of the United States, also known as a green card holder, since 1972.  As a lawful permanent resident, he had an obligation to file annual tax returns reporting his worldwide income to the IRS.  In or about 2005, LITTLE was admitted to the New York State Bar as an attorney.  Between 2005 and at least late 2008, LITTLE resided full time in New York City, where he worked and earned hundreds of thousands of dollars of income as an attorney representing clients.  During the period of 2001 to 2010, LITTLE also earned other legal fees, along with hundreds of thousands of dollars more in fees for his work on behalf of the Seggerman family.  LITTLE failed to file any tax returns with the IRS between 2005 and 2010.  He further failed to file, for years 2007 through 2010, annual Reports of Foreign Bank and Financial Accounts (“FBARs”) in connection with foreign bank accounts he controlled, which held in excess of $10,000 each year.

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LITTLE, 67, who resides in Hampshire, England, was convicted of obstructing and impeding the due administration of the internal revenue laws, failing to file personal income tax returns from 2005 to 2010, willfully failing to file reports of foreign bank and financial accounts, conspiracy to defraud the United States, and aiding and assisting the preparation of false tax returns.  The failure to file personal income tax returns charges each carry a maximum sentence of one year in prison, the obstruction charge and the aiding and assisting the preparation of false tax returns charges each carry a maximum sentence of three years in prison, and the willful failure to file reports of foreign bank and financial accounts and conspiracy charges each carry a maximum sentence of five years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Berman praised the outstanding investigative work of the IRS.  Mr. Berman also thanked the U.S. Department of Homeland Security, Office of Fraud Detection and National Security, United States Citizenship and Immigration Services, New York State Department of Taxation and Finance, and FinCEN for their substantial assistance in the investigation and trial.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Christopher DiMase, Dina McLeod, and Andrew Dember are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced the arrest and unsealing of a Complaint charging KASHAWN LYONS with distributing the fentanyl that resulted in the death of Matthew Azimi, a public school teacher in the Bronx.  The Complaint also alleges that LYONS and a co-defendant, TERRICK WHITAKER, distributed heroin and fentanyl together between February and March 2018 in the Bronx.  LYONS was arrested yesterday by the NYPD, and will be presented later today before U.S. Magistrate Judge Henry B. Pitman in Manhattan federal court.  TERRICK WHITAKER remains at large.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Kashawn Lyons and Terrick Whitaker peddled potentially lethal heroin and fentanyl near the grounds of a Bronx public school.  Additionally, Lyons allegedly sold a dose that was in fact lethal and resulted in the overdose death of a teacher at the school.  Working with the NYPD we will continue to combat the epidemic of lethal opioids that is killing people from all walks of life.”

According to the allegations in the Complaint[1]:

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

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

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LYONS, 31, of the Bronx, was charged with distribution and possession with intent to distribute heroin and fentanyl, and with conspiring to distribute heroin and fentanyl with WHITAKER.  LYONS faces a maximum sentence of life in prison and a mandatory minimum sentence of 20 years in prison based upon his distribution of the fentanyl that killed Mr. Azimi.

WHITAKER, 31, of the Bronx, was charged with distribution and possession with intent to distribute heroin and fentanyl, and with conspiring to distribute heroin and fentanyl with LYONS, each of which carries a statutory maximum sentence of 20 years in prison. 

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

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

This case is being handled by the Office’s Narcotics Unit.  Assistant United States Attorney Jacob Warren 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 FRANK MERCEDES was sentenced today to life in prison plus 10 years for murder in connection with a drug conspiracy, murder-for-hire, murder-for-hire conspiracy, and use of a firearm resulting in death, in connection with his role in the murder of Richard Diaz, 28, in Manhattan in 1999.  MERCEDES was convicted after a one-week jury trial before U.S. District Judge Richard J. Sullivan, who imposed today’s sentence.

U.S. Geoffrey S. Berman said:  “Frank Mercedes callously ordered the murder of someone who had stolen from his drug business.  As a result of that order, 28-year-old Richard Diaz—an innocent man who had nothing to do with Mercedes’ drug trafficking—was brutally killed in the summer of 1999.  Today’s proceeding is a reminder that this Office will never stop working to obtain justice on behalf of those affected by this type of senseless violence. We hope that today’s sentence, almost 20 years after Mr. Diaz’s death, brings some small measure of peace to Mr. Diaz’s family.”

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

FRANK MERCEDES, a/k/a “Jabao,” ran a significant drug enterprise in Upper Manhattan in the late 1990s.  In the summer of 1999, MERCEDES hired three men, including Jose Luis Gracesqui, a/k/a “Muffler,” to kill one of his drug customers (the “Intended Victim”) after the Intended Victim and a number of his associates stole heroin and money from MERCEDES.

On the night of July 19, 1999, after tracking the Intended Victim for days, Gracesqui and another member of the crew saw the Intended Victim in a car and followed the car through Manhattan.  When the car with the Intended Victim stopped at a red light, Gracesqui approached the passenger’s side window and began shooting.  The shots hit both the Intended Victim and Richard Diaz, who was driving the car.  Mr. Diaz was able to drive a short distance to the Henry Hudson Parkway, until he lost consciousness and died.  The Intended Victim sustained serious injuries, although he survived.  Shortly thereafter, MERCEDES met with Gracesqui and the other members of the hit team to pay them tens of thousands of dollars for committing the murder. 

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MERCEDES, 51, from the Dominican Republic, was sentenced to three concurrent life sentences, to be followed by a consecutive term of ten years.

Gracesqui was previously convicted in January 2016 of charges relating to his role in the murder of Richard Diaz, and also is currently serving a life sentence. 

Mr. Berman praised the investigative work of the U.S. Drug Enforcement Administration (DEA) New York Drug Enforcement Task Force, which comprises agents, detectives, and investigators from the DEA, the New York City Police Department, and the New York State Police.  Mr. Berman also thanked the Special Agents of the United States Attorney’s Office for the Southern District of New York.

This case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Rebekah Donaleski, Jessica K. Fender, and Laurie A. Korenbaum are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Ronald G. Gardella, Special Agent-in-Charge of the New York Field Office of the Department of Justice Office of the Inspector General (“DOJ OIG”), announced today the unsealing of a criminal Complaint in Manhattan federal court charging federal correctional officer VICTOR CASADO with taking bribes in exchange for smuggling contraband into the Metropolitan Correctional Center (“MCC”), a Manhattan detention facility that houses federal inmates.  CASADO was arrested this morning and will be presented today before Magistrate Judge Henry B. Pitman.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, correctional officer Victor Casado had a duty to ensure the safety and security of the Metropolitan Correctional Center and federal inmates in his care.  Instead he allegedly abused the trust placed in him by taking bribes to smuggle contraband to federal inmates.  Casado now transitions from Justice Department employee to defendant.”  

FBI Assistant Director William F. Sweeney Jr. said:  “As alleged, Casado served as a gateway for the introduction of contraband into a federal prison. Not only did his actions violate federal laws and prison protocol, but they posed additional risks for other prison guards who would be responsible for removing these items if found and disciplining those who were in possession. Casado’s alleged crime is a serious offense that will be me with just scrutiny.”

DOJ OIG Special Agent-in-Charge Ronald G. Gardella said:  “The DOJ OIG takes allegations of contraband smuggling into our federal prison system very seriously.  We will continue to vigorously investigate such allegations and work with our law enforcement partners to identify and bring to justice any Justice Department employee involved in a smuggling scheme.”

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

CASADO has been employed as a correctional officer at the MCC since 2012.

On multiple occasions in 2016 and 2017, CASADO smuggled cellphones, alcohol, over-the-counter medications, and food into the MCC in exchange for bribe payments.  These bribes were funneled to CASADO by non-incarcerated relatives or associates of the inmates, either in cash or by wire transfer.  For example, on multiple occasions, CASADO received bribes from an inmate (“Inmate-1”), transferred by one of Inmate-1’s attorneys, totaling more than $45,000 in exchange for smuggling alcohol and cellphones, among other contraband, into the MCC for Inmate-1.  Additionally, CASADO also requested and received thousands of dollars in payments from another inmate (“Inmate-5”), which were delivered to CASADO by Inmate-5’s relatives and a paralegal who worked for him.  Inmate-5 paid CASADO at CASADO’s insistence, ostensibly to fund travel by CASADO to the Dominican Republic.           

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CASADO, 35, of the Bronx, New York, has been charged in the Complaint with one count of conspiracy to commit bribery and to introduce contraband into prison, which carries a maximum prison term of five years; one count of bribery, which carries a maximum prison term of 15 years; one count of introducing contraband into prison, which carries a maximum prison term of one year; one count of conspiracy to commit honest services wire fraud, which carries a maximum prison term of 20 years; and one count of honest services wire fraud, which carries a maximum prison term of 20 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 investigative work of the FBI and the DOJ Office of the Inspector General in this investigation.

This case is being handled by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys Jessica Lonergan and Nicolas Roos 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.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that STEVEN BROWN pled guilty today to defrauding victims of over $9.5 million by participating in a fraudulent scheme to solicit investments in feature-length films and documentaries based on misrepresentations and fraudulent documents.  BROWN pled guilty before United States Magistrate Judge Henry B. Pitman and is scheduled to be sentenced on July 18, 2018, at 2:00 p.m., before U.S. District Judge Kimba M. Wood. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As he admitted today, Steven Brown defrauded investors of millions of dollars by convincing them to invest in Hollywood films and documentaries with false promises and fraudulent documents.  Even after he was arrested, he continued his fraud and induced yet another investor to provide additional money using the same fraudulent tactics.  Now Brown’s scheme has been revealed, and he faces significant time for his scheme.”        

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

From 2009 through 2017, STEVEN BROWN participated in a scheme in which he, along with co-conspirators, solicited investments in the marketing and production of feature-length films and documentaries from investors, including by furnishing them with fraudulent documents and by promising guaranteed returns, which never materialized.

In order to solicit these investments, BROWN and others made material misrepresentations about, among other things, their own investments in the films for which they were soliciting money, as well as investments that they claimed to have received from other investors.  To support their claims, BROWN and his coconspirators at times sent the victims falsified financial records that reflected investments in the films that had never actually been made.  BROWN and his coconspirators also told certain victims that their investments would be guaranteed by a fictitious entity, and provided falsified documents in support of these purported guarantees.  On one occasion, Brown sent an email to a victim attaching what purported to be a current bank statement for an account held by the fictitious entity, as well as an email from an executive at the fictitious entity guaranteeing the victim’s investment.  In fact, neither the account nor the executive actually existed.

BROWN continued to solicit investments in film projects based on misrepresentations even after being arrested on the criminal charges brought in this case.  In 2017, BROWN solicited an investment from a victim of the scheme in a film production and distribution company with which BROWN was purportedly involved by promising the victim a 50 percent return on the investment.  The victim’s funds were never returned and were, in part, used to pay expenses unrelated to any film projects.    

In total, BROWN and his co-conspirators solicited millions of dollars from their victims, allegedly to be used for either marketing or production costs associated with the various films.  In reality, however, the money that was received from these investors was primarily used to fund other projects, to pay back previously defrauded investors, and to pay the personal expenses of BROWN and his co-conspirators, including, among other things, the purchase of a condominium for BROWN.

*                *                *

BROWN, 48, of Los Angeles, California, pled guilty to one count of conspiring to commit wire fraud, which carries a maximum term of 20 years in prison.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

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

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Katherine Reilly, Noah Solowiejczyk, and Ryan Finkel are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that NICO BURRELL, a/k/a “Zico Nico,” a leader of a violent street gang in the Bronx called the “Big Money Bosses” (“BMB”) was sentenced yesterday to 150 months in prison on racketeering charges.  BURRELL was sentenced by United States District Judge Alison J. Nathan.

U.S. Attorney Geoffrey S. Berman said: “Burrell played a leadership role in the violent BMB street gang, and himself participated in the gang’s violence and drug dealing.  This violence included a shooting in February 2009 in which Burrell shot a rival gang member and an innocent bystander.  In addition, Burrell was responsible for BMB’s extensive distribution of oxycodone.  Yesterday’s sentence serves as a reminder that, together with our law enforcement partners, we will continue to aggressively prosecute all those who engage in these senseless acts of violence and drug dealing in our communities.”

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

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

BURRELL was a leader of BMB.  On February 11, 2009, he attempted to murder a rival gang member by shooting him in the back.  One of BURRELL’s bullets also struck a woman waiting at a bus stop.  Both victims survived.  BURRELL was also responsible for the distribution of significant quantities of oxycodone by BMB.

BURRELL, 25, was arrested in this case as a result of a multi-year investigation by the New York City Police Department’s Bronx Gang Squad (the “Bronx Gang Squad”), the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations Violent Gang Unit (“HSI”), the New York Field Division of the Drug Enforcement Administration (“DEA”), and the Joint Firearms Task Force of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”) into gang violence in the Northern Bronx.  On April 27, 2016, Indictment 15 Cr. 95 (AJN) was unsealed, charging 63 members and associates of BMB with racketeering conspiracy, narcotics conspiracy, narcotics distribution, and firearms charges.  One defendant remains in the case, scheduled for trial in May 2018.

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Mr. Berman praised the outstanding work of NYPD’s Bronx Gang Squad, HSI, DEA, and ATF.  He also thanked the Bronx County District Attorney’s Office, the Department of Investigation, NYCHA Inspector General’s Office, and the New York State Department of Parole for their ongoing support in this investigation.

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

Robert Khuzami, the Deputy 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 arrests of, and unsealing of a criminal complaint charging, SOHRAB SHARMA, a/k/a “Sam Sharma,” and ROBERT FARKAS, a/k/a “Bob,” two co-founders of a startup company called Centra Tech, Inc. (“Centra Tech”), with conspiring to commit, and the commission of, securities and wire fraud in connection with a scheme to induce victims to invest more than $25 million in investments through material misrepresentations and omissions. 

SHARMA and FARKAS were arrested Sunday evening in the Southern District of Florida and were presented yesterday in that District.

Manhattan Deputy U.S. Attorney Robert Khuzami said:  “As alleged, Sohrab Sharma and Robert Farkas took advantage of widespread investor interest in the rapidly growing cryptocurrrency market to raise millions of dollars in investments in a startup company based on a false sales pitch.  While the cryptocurrency industry may be a new frontier, it is subject to the same laws against investor fraud as any other type of company.” 

FBI Assistant Director William F. Sweeney Jr. said:  “As alleged, Sharma and Farkas created a false sense of security for investors of Centra Tech ICO by misrepresenting their product and lying about relationships they had with credible financial institutions. While they’re not backed by physical commodities, trading in virtual currencies is perfectly legal. But, as today’s charges prove, investors must exercise the same degree of due diligence when making an investment in an ICO as they would with any traditional security.” 

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

From July 2017 through March 2018, SHARMA and FARKAS, two co-founders of Centra Tech, began soliciting investors to purchase Centra Tech tokens, a bespoke cryptocurrency that functions as an unregistered security in Centra Tech, through a so-called “initial coin offering” or “ICO.”  As part of this effort, SHARMA and FARKAS, in oral and written offering materials that were disseminated via the internet, represented that Centra Tech had developed a debit card, the “Centra Card,” that allowed users to load the Centra Card with the cryptocurrency of their choice and then use the Centra Card to make purchases at any establishment that accepts Visa or Mastercard.  As part of their sales pitch, SHARMA and FARKAS represented that Centra Tech had formed a partnership with Bancorp to have Bancorp issue Centra Cards licensed by Visa or Mastercard, and that Centra Tech held the requisite financial servicing licenses in 38 states, among other claims.  Based in part on these claims, victims provided more than $25 million in investments for the purchase of Centra Tech tokens. 

The claims that SHARMA and FARKAS made to help secure these investments, however, were false.  In fact, Centra Tech had no relationships with Bancorp, Visa, or Mastercard, and at least seven of those 38 states have no record of any such licenses being issued to Centra Tech. 

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

*                      *                      *

SHARMA, 26, and FARKAS, 31, are residents of Florida.  SHARMA and FARKAS are each charged in a four-count criminal complaint with one count of conspiracy to commit securities fraud, which carries a maximum potential sentence of five years in prison; one count of conspiracy to commit wire fraud, which carries a maximum potential sentence of 20 years in prison; one count of securities fraud, which carries a maximum potential sentence of 20 years in prison; and one count of wire fraud, which carries a maximum potential sentence of 20 years in prison.  The maximum potential 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. Khuzami 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 United States Attorneys Negar Tekeei and Samson Enzer is in charge of the prosecution. 

The allegations 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, and Ann Calvaresi Barr, Inspector General for the U.S. Agency for International Development (“USAID”), announced today the filing and settlement of a civil fraud complaint against NORWEGIAN PEOPLE’S AID (“NPA”), a non-profit, non-governmental organization headquartered in Norway, that receives funding from USAID.  The settlement resolves claims that NPA violated the False Claims Act (the “FCA”) by providing material support to Iran, Hamas, the Popular Front for the Liberation of Palestine (“PFLP”), and the Democratic Front for the Liberation of Palestine (“DFLP”), contrary to federal funding requirements.  At all times relevant to the lawsuit, Iran was included on the U.S. Department of State’s list of state sponsors of terrorism (the “State Sponsors of Terrorism List”), and Hamas, PFLP, and DFLP were included on the U.S. Office of Foreign Assets Control’s specially designated nationals and blocked persons list (the “SDN List”).  The State Sponsors of Terrorism List includes countries that have repeatedly provided support for acts of international terrorism, and the SDN List includes individuals and entities that support terrorism or otherwise engage in conduct antithetical to U.S. interests. 

On March 30, U.S. District Court Judge Gregory H. Woods approved a settlement agreement that resolves the Government’s claims against NPA.  Under the settlement, NPA is required to pay $2.025 million to the United States (that amount is based on an analysis of NPA’s ability to pay a monetary settlement), and it has revised its internal policies to ensure that it complies with applicable U.S. sanctions laws and the terms of its USAID grants.  In addition, in connection with the settlement, NPA has admitted to and accepted responsibility for its conduct.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “For years, Norwegian People’s Aid obtained grant money from USAID by falsely representing that it had not provided, and would take reasonable steps to ensure that it did not knowingly provide, material support to prohibited parties under U.S. law.  With this settlement, NPA is being made to pay a significant financial penalty for its conduct, and importantly, has admitted to its conduct and agreed to put proper precautions in place to ensure that it does not happen again.”

USAID Inspector General Ann Calvaresi Barr said:  “USAID depends on the integrity of its contractors and grantees to effectively reduce poverty, promote economic growth and democratic values, and deliver aid in crises worldwide.  Making false representations to secure grant funding not only violates U.S. law, it is a serious breach of trust.  And, when false claims hide an organization’s material support to designated terrorist organizations and a state sponsor of terrorism, the violation is all the more severe.  My office makes these cases a top priority and we will continue to investigate them aggressively.”

As alleged in the Government’s complaint and set forth in the parties’ settlement agreement, both of which have been filed in Manhattan federal court:

Since at least 2012, NPA has received monetary grants from USAID to fund various projects and programs.  As a condition of receiving those grants, NPA submitted certifications to USAID each year in which it represented that, “to the best of its current knowledge, it did not provide within the previous ten years, and will take all reasonable steps to ensure that it does not and will not knowingly provide, material support or resources to any individual or entity that commits, attempts to commit, advocates, facilitates, or participates in terrorist acts . . . .”  In these annual certifications, NPA also represented that “[b]efore providing any material support or resources to an individual or entity,” it would (1) “verify that the individual or entity does not appear . . . on the [SDN List],” and (2) “consider all information about that individual or entity . . . that is reasonably available to it or of which it should be aware.”  The annual certifications defined “material support and resources” to include “training [and] expert advice or assistance.” 

Notwithstanding the above-referenced certifications, NPA provided training and expert advice or assistance to Iran, as well as to Hamas, PFLP, and DFLP.  With respect to Iran, from 2001 through 2008, NPA performed mine clearance activities in Iran that were integral to an Iranian oil development project.  Among other things, NPA (1) conducted risk assessments of the areas in Iran where the oil exploration and processing activities were to occur, (2) surveyed those areas for landmines and other unexploded ordnance, (3) trained members of the Iranian Army on how to conduct mine clearance activities, (4) accompanied and advised members of the Iranian Army as they conducted mine clearance activities in the relevant areas, and (5) conducted some mine clearance activities itself. 

With respect to Hamas, PFLP, and DFLP, from 2012 through 2016, NPA provided representatives of those three SDN List entities with training and expert advice or assistance by funding a project called “Youth of Today . . . Leaders of Tomorrow.”  Through this project, young people in the Gaza Strip, aged 15 through 28, who were affiliated with one of the project’s partner political parties – which included Hamas, PFLP, and DFLP – received training aimed at making them more effective participants in the political process.  Such training included programs intended to improve the participants’ ability to organize, debate, negotiate, advocate for their positions, and resolve conflicts.  In addition, through the Youth of Today project, NPA funded numerous workshops attended by young people in the Gaza Strip and senior officials from the partner political parties, including Hamas, PFLP, and DFLP.  Hamas, PFLP, and DFLP used information that they obtained from these workshops to alter their behavior in order to become more attractive to youth and, thereby, benefit from increased youth support. 

Because NPA provided training and expert advice or assistance to Iran (through the above-referenced oil development project), as well as to Hamas, PFLP, and DFLP (through the Youth of Today project), its certifications to USAID that, to the best of its knowledge, it had not provided and would take all reasonable steps to ensure that it did not knowingly provide material support or resources to any prohibited parties were false.  As a result of those false certifications, NPA induced USAID to provide it with grant funding that, but for the false certifications, USAID would not have provided.

As part of the settlement, NPA admitted, acknowledged, and accepted responsibility for its conduct, including that: (1) “NPA’s participation in the [Iranian] oil development project was inconsistent with its Certifications to USAID”; and (2) “[t]he ‘Youth of Today . . . Leaders of Tomorrow’ training programs and workshops were conducted in a manner that was inconsistent with NPA’s Certifications to USAID, in that they were attended by representatives of entities that were prohibited parties under U.S. law, including entities that were identified on the SDN List as prohibited parties.”

In connection with the settlement, NPA has also revised its internal policies to ensure that it complies with applicable U.S. laws and the terms of any grants it receives.  Such revisions include changes to its “Policy on Compliance with USAID Grants and U.S. Economic Sanctions Programs” to provide for additional training of NPA managers and administrative staff on compliance with applicable U.S. laws and grant terms; regular audits by an external auditor of NPA’s compliance with applicable U.S. laws and grant terms; and periodic reviews for purposes of making appropriate updates to relevant NPA internal policies and procedures.  Moreover, upon request by USAID or any other U.S. agency that provides NPA with grants or any other type of funding, NPA shall provide such agency with, among other things, a written report, prepared by the external auditor, of the results of each of the above-referenced audits, and a description of any actions taken by NPA in response to such audits.

In connection with the filing of the lawsuit and settlement, the Government joined a private whistleblower lawsuit that previously had been filed under seal pursuant to the False Claims Act. 

This is the second case that this Office has pursued successfully against a recipient of USAID grant funds based on allegations that it provided material support to prohibited parties under U.S. law.  In March 2017, the Office resolved a similar case against the American University of Beirut.

*                      *                     * 

Mr. Berman thanked the USAID Office of Inspector General for its investigative efforts and assistance with the case.

The case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorney Christopher B. Harwood is in charge of the case.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JOSEPH MELI was sentenced today in Manhattan federal court to 78 months in prison by the Honorable Kimba M. Wood.  Between 2015 and 2017, MELI solicited approximately $100 million in investments from 130 investors through false representations that MELI would use investor funds to purchase tickets to various live events for resale at a profit on the secondary market.  MELI pled guilty before U.S. Magistrate Judge Barbara C. Moses on October 31, 2017.

U.S. Attorney Geoffrey S. Berman said:  “Joseph Meli directed his own version of a Broadway production, where the lead character deceives investors into giving him money that he pockets and spends on himself, or uses to pay off other investors.  Today, however, Meli’s Ponzi scheme is over, and he will serve prison time for his crimes.”

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

From 2015 through January 2017, MELI conducted a scheme to defraud more than 130 investors who invested a total of more than approximately $100 million through false representations that MELI would use investor funds to purchase tickets to various live events for resale at a profit on the secondary market.  In fact, MELI utilized a substantial portion of the investor funds he obtained for his personal expenses – including payments for a $3 million house in East Hampton, New York, a 2017 Porsche convertible, and expensive watches and jewelry – and to make payments, in a Ponzi-like manner, to previous investors in MELI’s ticket fraud scheme and in an unrelated hedge fund.

In furtherance of the fraudulent scheme, MELI falsely represented to investors that he had entered into written agreements with production companies for popular Broadway shows and with management companies for popular singers and music bands (together, the “Production and Management Companies”) to purchase large blocks of tickets to the shows and performances.  As part of this deception, MELI provided investors with falsified documents purporting to reflect agreements between MELI’s company, Advance Entertainment, LLC, and the Production and Management Companies.  In truth and in fact, MELI had not entered into such agreements and did not have any contractual rights to purchase such tickets from the Production and Management Companies.    

*                      *                      *

In addition to his prison sentence, MELI, 43, of New York, New York, was sentenced to three years of supervised release; ordered to forfeit $104,765,565, representing the amount of proceeds obtained as a result of his fraudulent scheme; and ordered to pay restitution.

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that DARCY WEDD was sentenced yesterday to 10 years in prison for his participation in a fraudulent scheme to charge mobile phone customers millions of dollars in monthly fees for unsolicited, recurring text messages without the customers’ knowledge or consent – a practice known as “auto-subscribing.”  The fraud committed by WEDD and his co-conspirators resulted in the theft of over $150 million from consumers throughout the United States.  WEDD was convicted by a jury on December 15, 2017, following a two-week trial, and was sentenced yesterday in Manhattan federal court by the Honorable Katherine B. Forrest. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Darcy Wedd was convicted of engaging in a large-scale auto-subscribing scheme that forced mobile phone users to pay charges for unsolicited and unwanted text messaging services.  The conduct of Wedd and his co-conspirators ultimately netted over $150 million in illegal profits.  Today’s sentence reflects the seriousness of Wedd’s predatory consumer fraud.”

According to the Superseding Indictment filed in Manhattan federal court, the evidence presented at trial, and statements made in connection with WEDD’s sentencing:

WEDD was the chief operating officer, and eventually the chief executive officer, of Mobile Messenger, a U.S. aggregation company in the mobile phone industry.  In the relevant time period, mobile aggregators like Mobile Messenger compiled, or “aggregated,” charges for premium text messaging services – such as monthly horoscopes, celebrity gossip, and trivia facts – on consumers’ mobile phone bills.  Between 2011 and 2013, WEDD and others engaged in a massive scheme to defraud ordinary consumers by placing unauthorized charges for premium text messaging services on their cell phone bills, through a practice known as auto-subscribing.

The auto-subscribing scheme essentially involved two main players in the mobile phone industry: mobile aggregators, such as Mobile Messenger, and content providers, which sent consumers the unwanted text messages that ultimately resulted in them being billed for services they had not authorized.  Mobile Messenger worked with four different content providers in the scheme, each of which was essential to the scheme’s success.  WEDD participated in auto-subscribing through three of those content providers:  Tatto, which was operated by co-conspirator Lin Miao, and CF Enterprises and DigiMobi, which were operated by co-conspirator Eugeni Tsvetnenko, a/k/a “Zhenya.” 

In or about 2010, Miao, who was the CEO of Tatto, decided to begin auto-subscribing mobile phone users to Tatto’s premium text messaging services in order to boost Tatto’s sagging revenues.  Miao and others built a computer program that could spoof the required consumer authorizations for premium text messaging services – i.e., a program that could generate the text message correspondence that one would ordinarily see if a consumer was genuinely signing up to receive the services, which was operational by in or about the middle of 2011.  In or about October 2011, Miao met with WEDD and told him, in sum and substance, that Miao wanted to auto-subscribe consumers through Mobile Messenger’s billing platform and needed phone numbers to do so.  WEDD agreed to assist Miao.  WEDD further told Miao, in sum and substance, that co-conspirator Michael Pajaczkowski, who was the Vice President of Compliance and Consumer Protection at Mobile Messenger, would provide phone numbers and assistance to Miao, and that all payments made in connection with the scheme needed to go through Pajaczkowski.  WEDD later received his portion of the payments from Miao through Pajaczkowski.

In or about early 2012, WEDD, Pajaczkowski, and two other co-conspirators, Erdolo Eromo and Fraser Thompson, who were also Mobile Messenger executives, had discussions about how to increase revenue at Mobile Messenger in the wake of the decreasing profitability of premium text messaging services.  Tsvetnenko had been kicked off Mobile Messenger’s aggregation platform in the past due to suspicious subscribing practices, including past incidents of auto-subscribing.  Nevertheless, in early 2012, WEDD, Pajaczkowski, Eromo, and Thompson agreed to allow Tsvetnenko to establish two new content providers, CF Enterprises and DigiMobi, to conduct a scheme to auto-subscribe on Mobile Messenger’s aggregation platform.  WEDD, Pajaczkowski, Eromo, and Thompson also devised a method of receiving and distributing their cut of the proceeds from the auto-subscribing scheme through multiple layers of shell companies, in an effort to conceal the nature and purpose of the money. 

The auto-subscription scheme, through all of the content providers that it involved, affected hundreds of thousands of consumers and generated over $150 million in proceeds, which the co-conspirators apportioned among themselves and used to fund lavish lifestyles of expensive vacations, luxury cars, and gambling.  WEDD, moreover, personally received over $1.7 million in fraud proceeds as a result of his participation in the illegal scheme. 

*                *                *

In addition to the 10-year prison term, WEDD, 40, of New York, New York, was sentenced to three years of supervised release.

To date, eight defendants, Andrew Bachman, Miao, Pajaczkowski, Eromo, Jonathan Murad, Francis Assifuah, Jason Lee, and Christopher Goff have pled guilty in connection with their participation in the fraud.  One additional defendant, Thompson, was convicted by a jury on September 5, 2017, following a three-week trial. 

Mr. Berman praised the investigative work of the Internal Revenue Service-Criminal Investigation Division and the Federal Bureau of Investigation, and expressed his sincere gratitude to the Federal Trade Commission for their support and assistance with the investigation.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that STEVEN SIMMONS was sentenced today in Manhattan federal court to 37 months in prison by U.S. District Judge Kimba M. Wood.  Between 2013 and January 2017, SIMMONS solicited over $6 million in investments for a hedge fund (the “Hedge Fund”).  SIMMONS, however, misappropriated nearly $2 million of these funds for his own use and that of a co-conspirator.  As SIMMONS well knew, other investor funds solicited by SIMMONS were used by the owner of the Hedge Fund in a Ponzi-like scheme to make payments to prior Hedge Fund investors.  SIMMONS pled guilty before U.S. Magistrate Judge Barbara C. Moses on October 30, 2017.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Steven Simmons lied to investors about how their money would be used and what returns they could expect.  He used investor funds for his own personal use – including the purchase of a house – and provided other investor funds for use in paying back earlier investors.  Now Simmons has been sentenced to more than three years in prison for his crimes.”

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

Between 2013 and January 2017, SIMMONS solicited investments by falsely representing to investors that their funds would be used by the Hedge Fund for legitimate, specified investment purposes, that they would receive specific rates of return, and that their investments would not be placed at risk or commingled with other funds.  In fact, SIMMONS diverted a substantial portion of investor funds for his own use and the use of a co-conspirator, while the remaining funds were used by the Hedge Fund to repay earlier investors who were demanding the return of their money.  

Among other false and misleading statements, SIMMONS told one investor, a single mother of three children whose source of funds was an alimony payment received in a recent divorce (“Victim-1”), that her capital would be invested with the Hedge Fund in securities, her principal investment would be preserved and not commingled with other investor funds, and that she would receive a return of at least 15% on the investment.  Contrary to these representations, SIMMONS stole much of Victim-1’s investment, using $700,000 of that money within two months of Victim-1’s investment to buy a house in Wilton, Connecticut, and wiring $700,000 to the personal account of a co-conspirator.

SIMMONS told another investor, a family investment office (“Victim Entity-2”), that its funds would be placed by the Hedge Fund with a highly successful group of portfolio managers and provided performance information for these portfolio managers.  In truth and in fact, SIMMONS solicited those investment funds from Victim Entity-2 for the purpose of repaying an earlier investor in the Hedge Fund who had demanded the return of its investment.  Much of Victim Entity-2’s funds were, within minutes of their receipt by the Hedge Fund, wired to the earlier investor.  The following day, $50,000 was wired by the Hedge Fund to an account controlled by SIMMONS.  As part of the fraudulent scheme, Simmons also created and provided investors with false monthly statements.

*                      *                      *

In addition to his prison sentence, SIMMONS, 49, of Wilton, Connecticut, was sentenced to three years of supervised release, ordered to forfeit $6,900,000, representing the amount of proceeds obtained as a result of the conspiracy, including the forfeiture of property SIMMONS bought in Wilton, Connecticut with proceeds of the fraud, and ordered to pay restitution to the victims of the offense.   

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that FEI YAN, who works as a post-doctoral associate at a major research university in Cambridge, Massachusetts, was sentenced today in Manhattan federal court to 15 months in prison by U.S. District Judge Katherine B. Forrest.  In 2016, YAN made almost $120,000 in connection with trading in stocks and options of publicly traded companies, based on misappropriated material nonpublic information. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Fei Yan blatantly circumvented the securities laws that are in place to deter people from doing exactly what he did – trading on nonpublic information to give him a leg up over other investors.  Even after searching the internet on ways to get away with his crime, Yan was apprehended for his insider trading, and will now spend time in prison for his crimes.”

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

YAN’s spouse (the “Spouse”) worked at the New York office of an international law firm (the “Law Firm”).  In the summer of 2016, the Law Firm was retained by a mining company (the “Mining Company”) to represent it in negotiations to acquire Stillwater Mining Company, a publicly traded company whose shares are traded on the New York Stock Exchange under the symbol “SWC.”  On August 25, 2016, in connection with the Spouse’s work at the Law Firm, the Spouse learned of the negotiations between the Mining Company and Stillwater Mining and continued to work on the transaction through December 9, 2016, when it was publicly announced for the first time that the Mining Company would be acquiring Stillwater Mining.  While working on the transaction during the fall of 2016, the Spouse had access to material, nonpublic information regarding the potential acquisition.  

The Law Firm required its employees, including the Spouse, to abide by a confidentiality policy, which prohibited disclosure of “information received from and about . . . clients . . . [and] other parties involved in transactions with clients.”  In addition, YAN and the Spouse had a history, pattern, and practice of sharing confidences. 

In early and mid-November 2016, the Spouse billed dozens of hours working on the potential merger between the Mining Company and Stillwater Mining, and YAN and the Spouse were in frequent phone contact.  During this period, YAN conducted Internet searches for “yahoo swc” and “stillwater merger,” even though the Mining Company’s potential acquisition of Stillwater Mining had not yet been publicly announced. 

On November 22, 2016, the Spouse participated in a call at the Law Firm regarding the potential acquisition.  That same day, YAN, using a brokerage account he had previously set up in his mother’s name, bought 71 options to buy Stillwater Mining stock.  The next day, there were two phone calls between YAN and the Spouse.  After these calls, YAN bought an additional 200 options to buy Stillwater Mining stock. 

Negotiations between the Mining Company, represented by the Law Firm, and Stillwater Mining continued to progress, and the Spouse continued to work on the transaction.  On December 1, 2016, after a 78-minute phone call with the Spouse the night before, YAN purchased an additional 100 Stillwater Mining options. 

The following day, YAN conducted multiple Internet searches and research related to mergers and acquisitions, including searches for “process of acquisition” and “company acquisition process.”  Several minutes after conducting these searches, YAN called the Spouse.

YAN and the Spouse also spoke on the phone multiple times on the night of December 5 and the early morning hours of December 6, 2016.  Later on the morning of December 6, 2016, YAN bought an additional 341 options to buy Stillwater Mining stock.  Later that day, YAN conducted internet research related to insider trading.  For example, YAN searched for “how sec detect unusual trade” and accessed at least three articles on financial websites related to insider trading.  YAN also searched for the name of an individual who was charged in this District in May 2016 with insider trading. 

The next day, shortly after speaking with the Spouse on the phone for approximately 30 minutes, YAN conducted an Internet search for “insider trading with international account” and, shortly thereafter, viewed articles entitled “U.S. Insider Trading Enforcement Goes Global” and “Want to Commit Insider Trading? Here’s How Not to Do It.”  The following day, YAN bought an additional 54 options to buy Stillwater Mining stock.

Early on the morning of December 9, 2016, it was publicly announced that the Mining Company would acquire Stillwater Mining for $18 per share.  Beginning at approximately 9:33 a.m. Eastern time, minutes after the open of regular market trading, YAN sold the Stillwater Mining options he had previously purchased, resulting in a profit of approximately $109,420.  Also that day, YAN conducted Internet searches for “insider trading cases,” and “insider trading options.” 

*                *                *

In addition to his prison sentence, YAN, 31, was sentenced to three years of supervised release and ordered to forfeit $119,428.50, representing the amount of proceeds obtained as a result of trading in Stillwater Mining and related relevant conduct involving trades in the Mattress Firm. 

Mr. Berman praised the investigative work of the Federal Bureau of Investigation, and thanked the Securities Exchange Commission, which has filed civil charges in a separate action.  Mr. Berman also thanked the FBI’s Boston Office and the U.S. Attorney’s Office for the District of Massachusetts for their assistance in this investigation. 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced the conviction in Manhattan federal court of SALVATORE DELLIGATTI, a/k/a “Fat Sal,” a/k/a “Jay,” for racketeering conspiracy, conspiracy to commit murder in aid of racketeering, attempted murder in aid of racketeering, murder-for-hire conspiracy, participation in an illegal gambling operation, and a firearms offense.  The jury convicted DELLIGATTI yesterday on all six counts of the Indictment following a three-week trial before U.S. District Judge Katherine B. Forrest. 

U.S. Attorney Geoffrey S. Berman said:  “Salvatore Delligatti, in order to increase his standing in the Genovese Family, recruited a group of hitmen to murder an individual.  But Delligatti’s hitmen were caught red-handed by the Nassau County Police Department and the Nassau County District Attorney’s Office before they could carry out their hit.  Delligatti now stands convicted of this foiled murder plot and other crimes he committed with the Genovese Family.  We thank our partners in Nassau County and at the FBI.”

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

From at least in or about 2008 through in or about May 2016, DELLIGATTI was an associate of the Genovese Organized Crime Family of La Cosa Nostra.  During this period, DELLIGATTI conspired with others to participate in and conduct the affairs of the Genovese Family through a pattern of racketeering activity that included a murder conspiracy, an extortion conspiracy, and the operation of an illegal sports betting business.  For example, as part of DELLIGATTI’s participation in the Genovese Family, DELLIGATTI committed the following crimes:     

From in or about May 2014 through in or about June 2014, DELLIGATTI conspired with Robert DeBello, a “made” soldier, and Ryan Ellis, an associate of the Genovese Family, to murder a neighborhood “tough guy” from the Whitestone section of Queens.  DELLIGATTI sought and obtained permission from DeBello to murder the intended victim.  However, instead of carrying out the murder himself, as DeBello had authorized him to do, DELLIGATTI hired a crew of hitmen from the Bronx to ambush and kill the intended victim at his residence.  DELLIGATTI provided the hitmen with a loaded .38 revolver and a get-away vehicle, and offered to pay them several thousand dollars for the murder.  As a result of wiretap surveillance of DELLIGATTI by the Nassau County Police Department and the Nassau County District Attorney’s Office, the crew of hitmen was apprehended in the get-away vehicle just a few blocks from the intended victim’s residence on June 8, 2014.  In their vehicle, law enforcement recovered the loaded revolver, a spray bottle containing a bleach solution, and other materials.

From in or about April 2014 through in or about May 2014, DELLIGATTI and others in the Genovese Family, including DeBello and Ellis, participated in a conspiracy to use threats of violence and economic harm to extort the owners and promoter of a night club located on the rooftop of a hotel in Queens.  

From at least in or about 2013 through in or about 2015, DELLIGATTI participated with others in the Genovese Family, including DeBello and Ellis, in a large-scale bookmaking and sports betting operation that took bets from bettors in Manhattan and Queens, among other locations, and made use of an offshore wireroom.  During and in furtherance of this gambling operation, DELLIGATTI and Ellis brought envelopes filled with cash to DeBello, the “made” soldier with whom they were committing these crimes.

*                *                *

DELLIGATTI, 40, was found guilty of conspiring to participate in the Genovese Family through a pattern of racketeering activity, conspiring to murder and attempting to murder Joseph Bonelli in aid of racketeering, conspiring to commit murder-for-hire, possessing a firearm in furtherance of those crimes of violence, and participation in an illegal gambling operation.  DELLIGATTI faces a maximum potential sentence of life in prison.  DELLIGATTI is scheduled to be sentenced by Judge Forrest on August 16, 2018.  

DELLIGATTI’s co-defendants, Robert DeBello and Ryan Ellis, previously pled guilty before Judge Forrest to racketeering conspiracy offenses for their roles in the murder conspiracy, the extortion conspiracy, and the illegal gambling operation that are described above.

Mr. Berman praised the outstanding investigative work of the Nassau County Police Department and the Federal Bureau of Investigation.  He also thanked the Nassau County District Attorney’s Office and the United States Department of State, Diplomatic Security Service, for their assistance with the prosecution.  

The case is being prosecuted by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Samson Enzer, Jordan Estes, and Jason Swergold are in charge of the prosecution. 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that EARL SIMMONS, an internationally known recording artist, performer, and actor known professionally as “DMX” and “X,” was sentenced today in Manhattan federal court to one year in prison for tax fraud in connection with evading the payment of income taxes in the period from 2010 through 2016.  In total, during that time period SIMMONS concealed millions of dollars of income from the IRS and avoided paying $1.7 million of tax liabilities.  SIMMONS pled guilty on November 30, 2017, before United States District Judge Jed S. Rakoff, who imposed today’s sentence.

U.S. Attorney Geoffrey S. Berman said:  “Earl Simmons, the recording artist and performer known as DMX, stole from the American taxpayers when he earned millions of dollars but failed to pay any taxes on his income.  Today’s sentence shows that star power does not entitle people to a free pass.  Together with our partners at the IRS, we will vigorously enforce our tax laws to make sure that people pay their fair share.”

According to the Indictment and statements made in open court:

SIMMONS worked as a recording artist, performer, and actor.  Beginning in 1997, SIMMONS released a series of hip-hop albums that sold millions of records.  Many of his albums went platinum and occupied the top positions on musical charts.  During his career, SIMMONS has performed at venues across the United States and around the world, and has acted in motion pictures.

As a result of the income SIMMONS earned from sources including musical recordings and performances, from 2002 through 2005 he incurred federal income tax liabilities of approximately $1.7 million.  Those liabilities went unpaid, and in 2005, the IRS began efforts to collect SIMMONS’s unpaid tax liabilities. 

During the period from 2010 through 2015, SIMMONS earned more than $2.3 million, but SIMMONS did not file personal income tax returns during that time period.  Instead, he orchestrated a scheme to evade payment of his outstanding tax liabilities, largely by maintaining a cash lifestyle, avoiding the use of a personal bank account, and using the bank accounts of nominees, including his business managers, to pay personal expenses.  For example, SIMMONS received hundreds of thousands of dollars of royalty income from his music recordings.  SIMMONS caused that income to be deposited into the bank accounts of his managers, who then disbursed it to him in cash or used it to pay his personal expenses.  SIMMONS also participated in the “Celebrity Couples Therapy” television show in 2011 and 2012 and was paid $125,000 for his participation.  When taxes were withheld from the check for the first installment of that fee by the producer, SIMMONS refused to tape the remainder of the television show until the check was reissued without withholding taxes.

SIMMONS took other steps to conceal his income from the IRS and others, including by filing a false affidavit in U.S. Bankruptcy Court that listed his income as “unknown” for 2011 and 2012, and as $10,000 for 2013.  In fact, SIMMONS received hundreds of thousands of dollars of income in each of those years.

*                      *                     *

In addition to his prison sentence, SIMMONS, 47, of Yonkers, New York, was sentenced to three years of supervised release and ordered to pay $ 2,292,200 in restitution to the IRS.  

Mr. Berman praised the work of the Internal Revenue Service, Criminal Investigation.

This case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorney Richard Cooper 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 U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), and Patricia Menges, Director of the U.S. Citizenship and Immigration Services New York Asylum Office, announced that yesterday ANDREEA DUMITRU, a/k/a “Andreea Dumitru Parcalaboiu,” an immigration attorney based in Queens, New York, was charged with asylum fraud and making false statements.  The case has been assigned to U.S. District Court Judge Lewis A. Kaplan.

U.S. Attorney Geoffrey S. Berman said:  “Andreea Dumitru, an immigration attorney, is alleged to have submitted fraudulent forms for over 180 clients, each containing statements and representations she knew to be false.  She now faces prison time for her alleged crimes.”

HSI Special Agent-in-Charge Angel M. Melendez said:  “Dumitru is alleged to have used her trusted position to defraud the government, submitting fraudulent documents to claim asylum.  Her alleged actions took up time and resources while those with valid asylum claims waited in line.  Now, Dumitru will enter a courtroom as a defendant to face the consequences for her alleged actions.”

Director Patricia Menges said:  “U.S. Citizenship and Immigration Services is proud of the hard work of our fraud detection officers that leads to important cases like this one, and ensures that those who try to commit immigration fraud will face justice.  USCIS is also grateful for the outstanding collaboration with ICE-HSI and our other law enforcement partners.”

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

Between 2012 and 2017, DUMITRU participated in a scheme to submit fraudulent I-589 Forms in connection with applications for asylum.  Specifically, DUMITRU submitted over 180 applications in which she knowingly made false statements and representations about, among other things, the applicants’ criminal histories, personal narratives of alleged persecution, and/or locations.  Nevertheless, DUMITRU certified each application as true and correct under penalty of perjury.

*                      *                      *

DUMITRU, 42, of Queens, New York, is charged with one count of asylum fraud, which carries a maximum sentence of 10 years in prison, and one count of making false statements, which carries a maximum sentence of five years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

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

Mr. Berman praised the outstanding investigative work of HSI and United States Citizenship and Immigration Services, and thanked the Federal Bureau of Investigation for its assistance.

This case is being prosecuted by the Office’s General Crimes Unit.  Assistant U.S. Attorneys Alison G. Moe and Robert B. Sobelman are in charge of the prosecution. 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Rene Febles, Deputy Inspector General for Investigations for the Federal Housing Finance Agency (“FHFA-OIG”), announced today that the United States has filed a complaint-in-intervention against Rosicki, Rosicki & Associates, P.C. (“ROSICKI”), a foreclosure law firm in New York, and its wholly owned affiliates, Enterprise Process Service, Inc. (“ENTERPRISE”) and Paramount Land, Inc. (“PARAMOUNT”), for engaging in a scheme to generate false and inflated bills for foreclosure-related expenses and causing those expenses to be submitted to and paid for by the Federal National Mortgage Association, known colloquially as Fannie Mae.  The case is assigned to U.S. District Judge Jed S. Rakoff.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged in the complaint, for years the Rosicki law firm exploited its relationship with Fannie Mae, a Government-sponsored entity, for its own financial gain by knowingly causing Fannie Mae to pay artificially inflated costs for foreclosure-related services.  This lawsuit demonstrates this Office’s continued commitment to root out fraud in all of its forms.”

FHFA Deputy Inspector General for Investigations Rene Febles said:  “FHFA-OIG recognizes that the best deterrent against fraud is a proactive and visible law enforcement effort.  We are vigilant and remain committed to conducting vigorous investigations and working closely with prosecutors to hold those organizations and persons accountable who waste, steal, or abuse funds in connection with FHFA or any of the entities that it regulates.”         

As alleged in the complaint:

From May 2009 through the present (“Covered Period”), ROSICKI, a law firm based in Plainview, New York, that specializes in mortgage foreclosures, acted as counsel to various mortgage servicing companies, and in that capacity effectuated mortgage foreclosures on Fannie Mae-owned loans.  ENTERPRISE was a service-of-process company wholly owned and controlled by the two founding partners of ROSICKI, and PARAMOUNT was a title search company also wholly owned and controlled by the same ROSICKI partners. 

Throughout the Covered Period, ROSICKI, ENTERPRISE, and PARAMOUNT perpetrated a scheme whereby ROSICKI exclusively engaged ENTERPRISE and PARAMOUNT purportedly to serve process and perform title searches that were required to complete mortgage foreclosures on Fannie Mae-owned loans.  In reality, however, ENTERPRISE and PARAMOUNT engaged third-party vendors to perform the majority of the work, and then applied exponential markups, as much as 750%, to those vendors’ bills for foreclosure-related services, while adding little if any value to the services that the vendors had performed.  ENTERPRISE and PARAMOUNT submitted their marked-up expenses, which significantly exceeded market rates, to ROSICKI.  ROSICKI in turn billed the mortgage servicers for those inflated expenses, which ROSICKI represented were the actual expenses incurred for the foreclosure-related services, with knowledge that the mortgage servicers would submit claims to Fannie Mae for full reimbursement of the expenses.  Defendants’ submission of these fraudulently inflated expenses caused Fannie Mae to pay millions of dollars for falsely inflated foreclosure expenses.   

This matter was initiated by a relator pursuant to the qui tam provisions of the False Claims Act, 31 U.S.C. § 3729 et seq.

*                *                *

Mr. Berman thanked the FHFA-OIG for its efforts and ongoing support and assistance with the case.

The case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorneys Cristy Irvin Phillips, Andrew E. Krause, and Lauren A. Lively are in charge of the case.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Scott J. Lampert, Special Agent in Charge for the New York Office of Inspector General of the U.S. Department of Health and Human Services (“HHS-OIG”), announced today a settlement of a civil fraud lawsuit against CenterLight Healthcare, Inc. (“CENTERLIGHT”), for collecting monthly Medicaid payments for 186 adult home residents who frequently did not receive required services while enrolled in CENTERLIGHT’s managed long-term care plan. 

The settlement resolves allegations that CENTERLIGHT submitted false claims to Medicaid to receive these payments.  Under the terms of the settlement approved yesterday by U.S. District Judge Lewis A. Kaplan, CENTERLIGHT must pay a total sum of $10 million, with $4 million going to the United States and the remaining amount going to the State of New York.  In the settlement, CENTERLIGHT admits that the 186 adult home residents did not receive community-based long-term care services during certain months that they were enrolled in CENTERLIGHT’s managed long-term care plan.  “CENTERLIGHT also admits that it failed to timely dis-enroll these adult home residents from its plan and that, as a result, CENTERLIGHT collected Medicaid payments to which it was not entitled.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “CenterLight Healthcare collected millions of dollars in Medicaid payments to provide long-term care services to adult home residents in its managed care plan, but frequently failed to deliver these services.  This Office is committed to holding recipients of government health care funds accountable when they fail to provide the care and services the government pays them to provide.” 

HHS-OIG Special Agent in Charge Scott J. Lampert said:  “CenterLight’s conduct compromised the integrity of the Medicaid program and failed to ensure that quality health care services were provided to those that needed them most.  HHS-OIG is committed to holding providers accountable for their practices.”

CENTERLIGHT administered a managed long-term care plan for Medicaid beneficiaries pursuant to a contract with the New York State Department of Health (the “Contract”).  To be eligible for enrollment into a managed long-term care plan, a Medicaid beneficiary must, among other things, be assessed as needing community-based long-term care services for more than 120 days from the effective date of enrollment.  These services include nursing services in the home, therapies in the home, home health aide services, personal care services in the home, and adult day health care.  In exchange for arranging and providing these services, CENTERLIGHT received monthly payments of approximately $3,600 - $3,800 for each member.  CENTERLIGHT contracted with licensed home care services agencies that were supposed to provide skilled nursing and home health aide services to the hundreds of adult home residents enrolled in CENTERLIGHT’s managed long-term care plan.  

As alleged in the United States’ Complaint filed in Manhattan federal court, CENTERLIGHT did not ensure that these agencies consistently provided required services to adult home residents, and failed to ensure that these vulnerable members’ medical needs were met.  Despite being aware that some of the agencies it hired provided a substandard level of care and did not maintain proper documentation reflecting the services provided, CENTERLIGHT failed to promptly take necessary steps to address these issues.  With respect to the 186 adult home residents who are the subject of the settlement (the “186 Members”), CENTERLIGHT submitted or caused to be submitted claims to Medicaid for payments for months during which no community-based long-term care services were provided to the member.  Indeed, many of the 186 Members did not receive any community-based long-term care services for most of the months during which they were enrolled in CENTERLIGHT’s managed care plan.

As part of the settlement, CenterLight Healthcare admits, acknowledges, and accepts responsibility for the following conduct:

• The 186 Members did not receive required community-based long-term care services during certain months that they were enrolled in CENTERLIGHT’s managed long-term care plan. 

• CENTERLIGHT failed to timely dis-enroll the 186 Members even though they were no longer eligible for its managed long-term care plan and, as a result, CENTERLIGHT received capitation payments to which it was not entitled.

• CENTERLIGHT failed to adequately oversee and monitor the care provided by the home care services agencies to the 186 Members to ensure that these members received the services required by the Contract.

In connection with the filing of the lawsuit and settlement, the Government joined a private whistleblower lawsuit that had been filed under seal pursuant to the False Claims Act.  The Government previously intervened in this whistleblower lawsuit and, in January 2016, entered into a $46.7 million settlement with CENTERLIGHT to resolve allegations relating to the use of social adult day care centers to enroll ineligible members in CENTERLIGHT’s managed long-term care plan.  CENTERLIGHT sold its managed long-term care plan in early 2017.

*                *                *

Mr. Berman thanked the Office of the Inspector General for HHS for its assistance.  Mr. Berman also thanked the Medicaid Fraud Control Unit of the New York State Attorney General’s Office for its investigative efforts and work on the case.    

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JASON NISSEN pled guilty today to defrauding victims of more than $60 million by falsely representing that he was using the victims’ money to further a profitable, multimillion-dollar wholesale ticket business.  NISSEN pled guilty before U.S. District Judge Paul A. Engelmayer, and is scheduled to be sentenced on August 21, 2018.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As he admitted in court today, Jason Nissen’s pitch to investors about access to premium sports and entertainment tickets was a sham.  His investment scheme was really a Ponzi scheme.  Now he awaits sentencing for his admitted swindle.”        

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

Since at least in or about 2010, JASON NISSEN has operated a ticket resale business (the “Ticket Company”) through which NISSEN purchased large quantities of premium tickets for sporting and entertainment events, and then resold such tickets for a profit.

The Ticket Company is a ticket resale business located in Manhattan, New York, of which NISSEN was the chief executive officer and president.  The Ticket Company’s website stated that “[The Ticket Company] is an industry leader in providing VIP access and premium tickets to all concerts, Broadway theatre, red carpet premieres and sporting events worldwide . . . the Ticket Company stocks one of the largest revolving inventories for sports, concerts, and theatre worldwide.”

From at least in or about 2015 to in or about May 2017, NISSEN defrauded multiple investors in ticket deals arranged by the Ticket Company of tens of millions of dollars.  NISSEN represented to these investor victims that he would use their money to purchase bulk quantities of premium tickets to sporting and entertainment events such as the Super Bowl (football), the World Cup (soccer), the U.S. Open (tennis), and “Hamilton” (Broadway musical), and then resell the tickets at a profit.  However, in truth and in fact, NISSEN used the victims’ money in large part to repay other victims and to enrich himself. 

To further perpetuate his fraudulent scheme and to raise additional sums from victims, NISSEN falsified financial documents and inflated accounts receivable ledgers, which NISSEN presented to certain victims as purported proof that their money was being used to purchase premium tickets for resale. 

In total, JASON NISSEN defrauded victims of more than $60 million.     

*                *                *

NISSEN, 45, of Roslyn, New York, pled guilty to one count of wire fraud, which carries a maximum term of 20 years in prison.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

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

This case is being handled by the Office’s Public Corruption Unit.  Assistant United States Attorneys Douglas S. Zolkind and Lara Pomerantz are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Angel M. Melendez, Special Agent in Charge of the Department of Homeland Security, Homeland Security Investigations (“HSI”), and James P. O’Neill, Commissioner of the New York City Police Department (“NYPD”), announced the arrest of STANLEY ROGERS for conspiring to rob a Federal Express truck transporting diamonds from wholesale jewelry centers in the diamond district.  ROGERS was arrested Monday in Brooklyn, New York, and was presented before Magistrate Judge Barbara C. Moses in Manhattan federal court.   

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Stanley Rogers concocted a potentially dangerous scheme to assault a FedEx truck driver with a tranquilizer and then steal the precious gems inside the truck.  Thankfully his alleged scheme was foiled when he attempted to seek the assistance of an undercover police officer.”

Special Agent in Charge Angel M. Melendez, said  “Through our New York City Airport Border Enforcement Security Task Force, HSI and its partners have been able to thwart what could have been a very dangerous situation involving a robbery attempt in broad daylight on the busy streets of this city.  Allegedly looking to make off with diamonds and precious stones, Rogers’s plan to get rich quick put the lives of several people at risk.  We are happy the jewels, and more importantly, the people of New York, remain safe.”

According to the allegations in the Complaint[1]:

ROGERS conspired to rob a Federal Express truck in Manhattan while the truck was transporting diamonds and other precious stones on behalf of various merchants in Manhattan’s diamond district.  ROGERS planned to administer near-lethal dosages of a veterinary tranquilizer to the truck’s operator, and steal the truck and its contents.

ROGERS’s arrest came after he sought the assistance of an undercover NYPD detective to help him kill an associate he believed might reveal the details of the robbery.

*          *          *

ROGERS, 36, of Brooklyn, New York, is charged with one count of conspiracy to commit a Hobbs Act robbery, which carries a maximum sentence of 20 years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.   

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

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

[1] As the introductory phrase signifies, the entirety of the texts 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, Bethanne M. Dinkins, Special Agent-in-Charge of the U.S. Department of Agriculture, Office of Inspector General (“USDA-OIG”), and Daniel D. Brownell, the Commissioner of the New York City Business Integrity Commission (“BIC”), announced today the unsealing of a complaint charging ROBERT GUILIANO and RODIN DIAZ with wire fraud and conspiracy to commit wire fraud in connection with a scheme to steal more than $900,000 from produce growers, shipping services providers, and others.  GUILIANO and DIAZ were arrested this morning and were presented this afternoon before Magistrate Judge Barbara C. Moses in federal court in Manhattan.  

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, Robert Guiliano and Rodin Diaz engaged in a long-term fraud, stealing nearly $1 million in sweet potatoes, peppers, and other goods and services from small farms and businesses located across the United States.  Thanks to the hard work of the BIC, NYPD, and USDA, their scheme has come to an end.”  

USDA-OIG Special Agent-in-Charge Dinkins said:  “The USDA strives to ensure integrity within the produce industry through its administration of the Perishable Agricultural Commodities Act, which protects businesses dealing in fruits and vegetables by establishing and enforcing a code of fair business practices and helping to resolve disputes.  When presented with evidence of extensive fraud being committed against hardworking produce growers by entities not licensed under PACA, we were glad to assist our investigative partners in identifying and holding accountable those responsible.”

Business Integrity Commission Commissioner Daniel D. Brownell said:  “The defendants’ alleged actions undermine the integrity of New York City’s wholesale markets.  The NYC Business Integrity Commission, along with our law enforcement partners, will continue to protect the markets and their participants from those who seek to prey on them through fraudulent schemes such as the one the defendants have been charged with today.”

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

GUILIANO and DIAZ used multiple corporate entities and fictitious names in order to obtain produce and shipping services on credit, for which the defendants did not pay.  To further their scheme, GUILIANO and DIAZ represented that they were independent businessmen operating within the produce industry when, in fact, they were co-conspirators working together to defraud victims of goods and services worth over $900,000. 

*                *                *

GUILIANO, 40, of the Bronx, New York, and DIAZ, 53, of Staten Island, New York, are each charged with one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison, and one count of wire fraud, which carries a maximum sentence of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

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

Mr. Berman praised the outstanding investigative work of the Business Integrity Commission, the New York City Police Department, and the United States Department of Agriculture. 

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

[1] As the introductory phrase signifies, the entirety of the texts 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 PINCUS DAVID CARLEBACH, a bankruptcy attorney, pled guilty today in Manhattan federal court to embezzling funds from a client’s bankruptcy estate.  From January 2016 through February 2016, CARLEBACH, whose client was in bankruptcy proceedings in the United States Bankruptcy Court for the Southern District of New York, caused the transfer of $30,000 in estate assets to himself for his own use.  CARLEBACH pled guilty before U.S. District Judge Jesse M. Furman to one count of embezzlement from a bankruptcy estate.

Manhattan U.S. Attorney Geoffrey S. Berman stated:  “Pincus David Carlebach abused his position as a bankruptcy attorney for his own financial gain.  As he admitted in Manhattan federal court today, Carlebach caused the unlawful transfer of $30,000 from his client’s bankruptcy estate to himself.  Our Office is committed to prosecuting those who misuse positions of trust for their own gain, including attorneys who do so in violation of their professional duties.”       

*                *                *

CARLEBACH, 57, of Brooklyn, New York, faces a maximum sentence of five years in prison and three years of supervised release.  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. 

Mr. Berman praised the Office of the United States Trustee for the Southern District of New York and the United States Marshals Service for their work on the case. 

The prosecution of this case is being handled by the Office’s General Crimes Unit.  Assistant U.S. Attorney Timothy V. Capozzi is in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), 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 GUI YOU WU, a/k/a “David, a/k/a “Michael,” YOUMEI CHEN, a/k/a “Ah Mei,” a/k/a “You Mei Chen,” GUIXIA WU, and HONG ZHONG, a/k/a “5023,” a/k/a “023,” stemming from a conspiracy to engage in the interstate trafficking of women, primarily Chinese nationals, for the purposes of prostitution.  GUIXIA WU was arrested in Bronxville, New York, and the other three defendants were arrested in Flushing this morning.  They will be presented today before U.S. Magistrate Judge Paul E. Davison in White Plains federal court.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, these defendants promoted and managed a multi-state prostitution business through an extensive network of operators who worked in different locations to advertise and facilitate prostitution.  These defendants then allegedly raked in millions dollars from their illegal and exploitive activities.”

FBI Assistant Director-in-Charge William F. Sweeney said:  “Prostitution is a serious and harmful offense. And, in some cases prostitution can serve as a gateway for criminals with direct connections to human trafficking, organized crime, and other illegal activities. The migratory nature of these crimes makes it critical for law enforcement entities to work together to tackle this widespread dilemma. We will continue to support our law enforcement partners who play a critical role in combating this type of criminal activity.” 

HSI Special Agent-in-Charge Angel M. Melendez said:  “For years these individuals allegedly used women as a commodity, selling them for sex and transporting the women from hotel to motel and state to state.  For those who choose trafficking of people as a profession, you will be arrested, you will be prosecuted, and you will face the consequences of your actions.”

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

Between about 2013 and 2017, GUI YOU WU was the manager of a business engaged in the interstate trafficking of women, primarily Chinese nationals, for the purposes of prostitution (the “Prostitution Business”).  As part of the Prostitution Business, GUI YOU WU and others transported women for the purposes of prostitution to and from hotels and motels in multiple states, including New York, Connecticut, Delaware, Maryland, Virginia, Colorado, Missouri, and elsewhere, by means of vehicles and through the purchase of airline tickets. 

The Prostitution Business recruited customers through the placement and purchase of advertisements for escort services on classified websites such as Backpage.com.  CHEN, GUIXIA WU, and ZHONG assisted GUI YOU WU in the promotion and management of the Prostitution Business through, among other things, payment for hotels and other business expenses, placement of advertisements, coordination of travel, communication with women working as prostitutes, and the movement and receipt of proceeds from the Prostitution Business. 

GUI YOU WU also employed several individuals, including ZHONG, as telephone operators for the Prostitution Business (the “Operators”).  The Operators placed advertisements to recruit customers for the Prostitution Business and used cellphones to coordinate between the customers and the prostitutes.

*                *                *

GUI YOU WU, 46, of Flushing, CHEN, 51, of Flushing, GUIXIA WU, 49, of Bronxville, and ZHONG, 37, of Flushing, are each charged with one count of conspiring to violate the Mann Act and the Travel Act by conspiring to transport an individual or individuals in interstate commerce with the intent that such persons engage in prostitution, or any sexual activity for which a person can be charged with a criminal offense, and by traveling in interstate commerce or causing someone else to travel in interstate commerce or using or causing to be used the mail and facilities in interstate and foreign commerce, with the intent to promote, manage, establish, carry on, and facilitate unlawful prostitution and promotion of prostitution, which carries a statutory maximum penalty of 10 years in prison.  GUI YOU WU is also charged with violating the Mann Act by knowingly transporting an individual in interstate commerce with the intent that the individual engage in prostitution and sexual activity on or about February 25, 2016, which carries a statutory maximum penalty of 10 years in prison.

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

Any individuals who believe they have information that may be relevant to the investigation should contact the FBI at 212-384-1000 or https://tips.fbi.gov/.

Mr. Berman praised the work of the FBI and HSI and thanked the Orange County District Attorney’s Office, the Sullivan County District Attorney’s Office, and the Orange County Sheriff’s Office for their assistance with this investigation.  He added that the investigation is continuing.

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Jessica Feinstein, Allison Nichols, and Jamie Bagliebter 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.

[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, 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 Police Commissioner of the City of New York (“NYPD”), announced the arrest of MARIO POWELL for the armed robbery and shooting of a livery cab driver on March 17, 2018.  POWELL was arrested on Friday, March 23, 2018, by the ATF and the NYPD, and was presented before U.S. Magistrate Judge Kevin Nathaniel Fox in Manhattan federal court on March 24, 2018.  

According to the allegations in the Complaint:[1]

On March 17, 2018, POWELL called a livery cab in the Bronx, and directed the driver to a particular destination.  After arriving at the drop-off location, POWELL threatened the driver with a gun and demanded cash.  The driver handed over $23 in cash.  POWELL exited the cab and then shot the driver seven times. 

*          *          *

POWELL, 27, of the Bronx, New York, is charged with one count of Hobbs Act robbery, which carries a maximum sentence of 20 years in prison, and one count of discharging a firearm during a Hobbs Act robbery, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the 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 General Crimes Unit.  Assistant United States Attorney Mollie Bracewell is in charge of the prosecution.

[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.

An Indictment charging Gholamreza Rafatnejad, 38; Ehsan Mohammadi, 37; Abdollah Karima, aka Vahid Karima, 39; Mostafa Sadeghi, 28; Seyed Ali Mirkarimi, 34; Mohammed Reza Sabahi, 26; Roozbeh Sabahi, 24; Abuzar Gohari Moqadam, 37; and Sajjad Tahmasebi, 30, all citizens and residents of Iran, was unsealed today.  The defendants were each leaders, contractors, associates, hackers-for-hire or affiliates of the Mabna Institute, an Iran-based company that, since at least 2013, conducted a coordinated campaign of cyber intrusions into computer systems belonging to 144 U.S. universities, 176 universities across 21 foreign countries, 47 domestic and foreign private sector companies, the U.S. Department of Labor, the Federal Energy Regulatory Commission, the State of Hawaii, the State of Indiana, the United Nations, and the United Nations Children’s Fund.  Through the defendants’ activities, the Mabna Institute stole more than 31 terabytes of academic data and intellectual property from universities, and email accounts of employees at private sector companies, government agencies, and non-governmental organizations.  The defendants conducted many of these intrusions on behalf of the Islamic Republic of Iran’s (Iran) Islamic Revolutionary Guard Corps (IRGC), one of several entities within the government of Iran responsible for gathering intelligence, as well as other Iranian government and university clients.  In addition to these criminal charges, today the Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated the Mabna Institute and the nine defendants for sanctions for the malicious cyber-enabled activity outlined in the Indictment.

The charges were announced by Deputy Attorney General Rod J. Rosenstein; Assistant Attorney General for National Security John C. Demers; U.S. Attorney Geoffrey S. Berman for the Southern District of New York; FBI Director Christopher A. Wray; Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Division; and Treasury Under Secretary for Terrorism and Financial Intelligence Sigal Mandelker.

“These nine Iranian nationals allegedly stole more than 31 terabytes of documents and data from more than 140 American universities, 30 American companies, five American government agencies, and also more than 176 universities in 21 foreign countries,” said Deputy Attorney General Rosenstein.  “For many of these intrusions, the defendants acted at the behest of the Iranian government and, specifically, the Iranian Revolutionary Guard Corps.  The Department of Justice will aggressively investigate and prosecute hostile actors who attempt to profit from America’s ideas by infiltrating our computer systems and stealing intellectual property.  This case is important because it will disrupt the defendants’ hacking operations and deter similar crimes.”

“Today, in one of the largest state-sponsored hacking campaigns ever prosecuted by the Department of Justice, we have unmasked criminals who normally hide behind the ones and zeros of computer code,” said U.S. Attorney Berman.  “As alleged, this massive and brazen cyber-assault on the computer systems of hundreds of universities in 22 countries and dozens of private sector companies and governmental organizations was conducted on behalf of Iran’s Islamic Revolutionary Guard.  The hackers targeted innovations and intellectual property from our country’s greatest minds.  These defendants are now fugitives from American justice, no longer free to travel outside Iran without risk of arrest.  The only way they will see the outside world is through their computer screens, but stripped of their greatest asset – anonymity.”   

“This investigation involved a complex threat in a dynamic landscape, but today’s announcement highlights the commitment of the FBI and our partners to vigorously pursue those that threaten U.S. property and security,” said Director Wray.  “Today, not only are we publicly identifying the foreign hackers who committed these malicious cyber intrusions, but we are also sending a powerful message to their backers, the Government of the Islamic Republic of Iran: your acts do not go unnoticed.  We will protect our innovation, ideas and information, and we will use every tool in our toolbox to expose those who commit these cyber crimes.  Our memory is long; we will hold them accountable under the law, no matter where they attempt to hide.”

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

Background on the Mabna Institute

Gholamreza Rafatnejad and Ehsan Mohammadi, the defendants, founded the Mabna Institute in approximately 2013 to assist Iranian universities and scientific and research organizations in stealing access to non-Iranian scientific resources.  In furtherance of its mission, the Mabna Institute employed, contracted, and affiliated itself with hackers-for-hire and other contract personnel to conduct cyber intrusions to steal academic data, intellectual property, email inboxes and other proprietary data, including Abdollah Karima, aka Vahid Karima, Mostafa Sadeghi, Seyed Ali Mirkarimi, Mohammed Reza Sabahi, Roozbeh Sabahi, Abuzar Gohari Moqadam, and Sajjad Tahmasebi.  The Mabna Institute contracted with both Iranian governmental and private entities to conduct hacking activities on their behalf, and specifically conducted the university spearphishing campaign on behalf of the IRGC.  The Mabna Institute is located at Tehran, Sheikh Bahaii Shomali, Koucheh Dawazdeh Metri Sevom, Plak 14, Vahed 2, Code Posti 1995873351.

University Hacking Campaign

The Mabna Institute, through the activities of the defendants, targeted more than 100,000 accounts of professors around the world.  They successfully compromised approximately 8,000 professor email accounts across 144 U.S.-based universities, and 176 universities located in foreign countries, including Australia, Canada, China, Denmark, Finland, Germany, Ireland, Israel, Italy, Japan, Malaysia, Netherlands, Norway, Poland, Singapore, South Korea, Spain, Sweden, Switzerland, Turkey and the United Kingdom.  The campaign started in approximately 2013, continued through at least December 2017, and broadly targeted all types of academic data and intellectual property from the systems of compromised universities.  Through the course of the conspiracy, U.S.-based universities spent more than approximately $3.4 billion to procure and access such data and intellectual property.

The members of the conspiracy used stolen account credentials to obtain unauthorized access to victim professor accounts, which they used to steal research, and other academic data and documents, including, among other things, academic journals, theses, dissertations, and electronic books.  The defendants targeted data across all fields of research and academic disciplines, including science and technology, engineering, social sciences, medical, and other professional fields.  The defendants stole at least approximately 31.5 terabytes of academic data and intellectual property, which they exfiltrated to servers outside the United States that were under the control of members of the conspiracy.

In addition to stealing academic data and login credentials for the benefit of the Government of Iran, the defendants also sold the stolen data through two websites, Megapaper.ir (Megapaper) and Gigapaper.ir (Gigapaper).  Megapaper was operated by Falinoos Company, a company controlled by Abdollah Karima, aka Vahid Karima, the defendant, and Gigapaper was affiliated with Karima.  Megapaper sold stolen academic resources to customers within Iran, including Iran-based public universities and institutions, and Gigapaper sold a service to customers within Iran whereby purchasing customers could use compromised university professor accounts to directly access the online library systems of particular U.S.-based and foreign universities.

Accompanying Mitigation Efforts

Prior to the unsealing of the Indictment, the FBI provided foreign law enforcement partners with detailed information regarding victims within their jurisdictions, so that victims in foreign countries could be notified and foreign partners could assist in remediation efforts.

Also, in connection with the unsealing of the Indictment, today the FBI provided private sector partners detailed information regarding the vulnerabilities targeted and the intrusion vectors used by the Mabna Institute in their campaign against private sector companies.  This information will assist the public in its network defense and mitigation efforts.

*                *                *

Rafatnejad, Mohammadi, Karima, Sadeghi, Mirkarimi, Sabahi, Sabahi, Moqadam and Tahmasebi was each is charged with one count of conspiracy to commit computer intrusions, which carries a maximum sentence of five years in prison; one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison; two counts of unauthorized access of a computer, each of which carries a maximum sentence of five years in prison; two counts of wire fraud, each of which carries a maximum sentence of 20 years in prison; and one count of aggravated identity theft, which carries a mandatory sentence of two years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the assigned judge.

Mr. Rosenstein and Mr. Berman praised the outstanding investigative work of the FBI, the assistance of the United Kingdom’s National Crime Agency (NCA), and the support of the OFAC.  Assistant U.S. Attorneys Timothy T. Howard, Jonathan Cohen and Richard Cooper are in charge of the prosecution, with assistance provided by Trial Attorneys Heather Alpino and Jason McCullough of the National Security Division’s Counterintelligence and Export Control Section.

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

For the U.S. Department of Treasury’s press release announcing corresponding sanctions click here.

Rod J. Rosenstein, the Deputy Attorney General of the United States, Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (“FBI”), and John C. Demers, Assistant Attorney General for National Security, announced today the unsealing of an indictment charging GHOLAMREZA RAFATNEJAD, EHSAN MOHAMMADI, ABDOLLAH KARIMA, a/k/a “Vahid Karima,” MOSTAFA SADEGHI, SEYED ALI MIRKARIMI, MOHAMMED REZA SABAHI, ROOZBEH SABAHI, ABUZAR GOHARI MOQADAM, and SAJJAD TAHMASEBI.  The defendants were each leaders, contractors, associates, hackers-for-hire, and affiliates of the Mabna Institute, an Iran-based company that was responsible for a coordinated campaign of cyber intrusions that began in at least 2013 into computer systems belonging to 144 U.S.-based universities, 176 universities across 21 foreign countries, 47 domestic and foreign private sector companies, the United States Department of Labor, the Federal Energy Regulatory Commission, the State of Hawaii, the State of Indiana, the United Nations, and the United Nations Children’s Fund.  Through the activities of the defendants, the Mabna Institute conducted these intrusions to steal over 30 terabytes of academic data and intellectual property from universities, and email inboxes from employees of victim private sector companies, government victims, and non-governmental organizations.  The defendants conducted many of these intrusions on behalf of the Islamic Republic of Iran’s (“Iran”) Islamic Revolutionary Guard Corps (“IRGC”), one of several entities within the government of Iran responsible for gathering intelligence, as well as other Iranian government clients.  In addition to these criminal charges, today the Department of Treasury’s Office of Foreign Assets Control (OFAC) designated the Mabna Institute and the nine defendants for sanctions for the malicious cyber-enabled activity outlined in the Indictment.

Deputy Attorney General Rod J. Rosenstein said:  “These nine Iranian nationals allegedly stole more than 31 terabytes of documents and data from more than 140 American universities, 30 American companies, five American government agencies, and also more than 176 universities in 21 foreign countries.  For many of these intrusions, the defendants acted at the behest of the Iranian government and, specifically, the Iranian Revolutionary Guard Corps.  The Department of Justice will aggressively investigate and prosecute hostile actors who attempt to profit from America’s ideas by infiltrating our computer systems and stealing intellectual property.  This case is important because it will disrupt the defendants’ hacking operations and deter similar crimes.”

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Today, in one of the largest state-sponsored hacking campaigns ever prosecuted by the Department of Justice, we have unmasked criminals who normally hide behind the ones and zeros of computer code.  As alleged, this massive and brazen cyber-assault on the computer systems of hundreds of universities in 22 countries, including the United States, and dozens of private sector companies and governmental organizations was conducted on behalf of Iran’s Islamic Revolutionary Guard.  The hackers targeted innovations and intellectual property from our country’s greatest minds.  These defendants are now fugitives from American justice, no longer free to travel outside Iran without risk of arrest.  The only way they will see the outside world is through their computer screens, but stripped of their greatest asset – anonymity.”     

FBI Assistant Director William F. Sweeney Jr. said:  “The numbers alone in this case are staggering, over 300 universities and 47 private sector companies both here in the United States and abroad were targeted to gain unauthorized access to online accounts and steal data.  An estimated 30 terabytes was removed from universities’ accounts since this attack began, which is roughly equivalent of 8 billion double-sided pages of text.  It is hard to quantify the value on the research and information that was taken from victims but it is estimated to be in the billions of dollars. The nine Iranians indicted today now find themselves wanted by the FBI and our partner law enforcement agencies around the globe – and like other cyber criminals they will soon learn their ability to freely move was just limited to the virtual world only.” 

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

Background on the Mabna Institute

GHOLAMREZA RAFATNEJAD and EHSAN MOHAMMADI, the defendants, founded the Mabna Institute in approximately 2013 to assist Iranian universities and scientific and research organizations in stealing access to non-Iranian scientific resources.  In furtherance of its mission, the Mabna Institute employed, contracted, and affiliated itself with hackers-for-hire and other contract personnel to conduct cyber intrusions to steal academic data, intellectual property, email inboxes and other proprietary data, including ABDOLLAH KARIMA, a/k/a “Vahid Karima,” MOSTAFA SADEGHI, SEYED ALI MIRKARIMI, MOHAMMED REZA SABAHI, ROOZBEH SABAHI, ABUZAR GOHARI MOQADAM, and SAJJAD TAHMASEBI.  The Mabna Institute contracted with both Iranian governmental and private entities to conduct hacking activities on their behalf, and specifically conducted the university spearphishing campaign on behalf of the IRGC.  The Mabna Institute is located at Tehran, Sheikh Bahaii Shomali, Koucheh Dawazdeh Metri Sevom, Plak 14, Vahed 2, Code Posti 1995873351.

University Hacking Campaign

The Mabna Institute, through the activities of the defendants, targeted over 100,000 accounts of professors around the world.  They successfully compromised approximately 8,000 professor email accounts across 144 U.S.-based universities, and 176 universities located in foreign countries, including Australia, Canada, China, Denmark, Finland, Germany, Ireland, Israel, Italy, Japan, Malaysia, Netherlands, Norway, Poland, Singapore, South Korea, Spain, Sweden, Switzerland, Turkey, and the United Kingdom.  The campaign started in approximately 2013, and has continued through at least December 2017, and broadly targeted all types of academic data and intellectual property from the systems of compromised universities, including, among other things, academic journals, theses, dissertations, and electronic books.  Through the course of the conspiracy, U.S.-based universities spent over approximately $3.4 billion to procure and access such data and intellectual property.

The hacking campaign against universities was conducted across multiple stages.  First, the defendants conducted online reconnaissance of university professors, including to determine these professors’ research interests and the academic articles they had published.  Second, using the information collected during the reconnaissance phase, the defendants created and sent spearphishing emails to targeted professors, which were personalized and created so as to appear to be sent from a professor at another university.  In general, those spearphishing emails indicated that the purported sender had read an article the victim professor had recently published, and expressed an interest in several other articles, with links to those additional articles included in the spearphishing email.  If the targeted professor clicked on certain links in the email, the professor would be directed to a malicious Internet domain named to appear confusingly similar to the authentic domain of the recipient professor’s university.  The malicious domain contained a webpage designed to appear to be the login webpage for the victim professor’s university.  It was the defendants’ intent that the victim professor would be led to believe that he or she had inadvertently been logged out of his or her university’s computer system, prompting the victim professor for his or her login credentials.  If a professor then entered his or her login credentials, those credentials were then logged and captured by the hackers.

Finally, the members of the conspiracy used stolen account credentials to obtain unauthorized access to victim professor accounts, through which they then exfiltrated intellectual property, research, and other academic data and documents from the systems of compromised universities, including, among other things, academic journals, theses, dissertations, and electronic books.  The defendants targeted data across all fields of research and academic disciplines, including science and technology, engineering, social sciences, medical, and other professional fields.  At least approximately 31.5 terabytes of academic data and intellectual property from compromised universities were stolen and exfiltrated to servers under the control of members of the conspiracy located in countries outside the United States.

In addition to stealing academic data and login credentials for university professors for the benefit of the Government of Iran, the defendants also sold the stolen data through two websites, Megapaper.ir (“Megapaper”) and Gigapaper.ir (“Gigapaper”).  Megapaper was operated by Falinoos Company (“Falinoos”), a company controlled by ABDOLLAH KARIMA, a/k/a “Vahid Karima,” the defendant, and Gigapaper was affiliated with KARIMA.  Megapaper sold stolen academic resources to customers within Iran, including Iran-based public universities and institutions, and Gigapaper sold a service to customers within Iran whereby purchasing customers could use compromised university professor accounts to directly access the online library systems of particular United States-based and foreign universities.

Prior to the unsealing of the Indictment, the FBI provided foreign law enforcement partners with detailed information regarding victims within their jurisdictions, so that victims in foreign countries could be notified and so that foreign partners could assist in remediation efforts.

Private Sector Hacking Victims

In addition to targeting and compromising universities, the Mabna Institute defendants targeted and compromised employee email accounts for at least approximately 36 United States-based private companies, and at least approximately 11 private companies based in Germany, Italy, Switzerland, Sweden, and the United Kingdom, and exfiltrated entire email mailboxes from compromised employees’ accounts.  Among the United States-based private sector victims were three academic publishers, two media and entertainment companies, one law firm, 11 technology companies, five consulting firms, four marketing firms, two banking and/or investment firms, two online car sales companies, one healthcare company, one employee benefits company, one industrial machinery company, one biotechnology company, one food and beverage company, and one stock images company.

In order to compromise accounts of private sector victims, members of the conspiracy used a technique known as “password spraying,” whereby they first collected lists of names and email accounts associated with the intended victim company through open source Internet searches.  Then, they attempted to gain access to those accounts with commonly-used passwords, such as frequently used default passwords, in order to attempt to obtain unauthorized access to as many accounts as possible.  Once they obtained access to the victim accounts, members of the conspiracy, among other things, exfiltrated entire email mailboxes from the victims.  In addition, in many cases, the defendants established automated forwarding rules for compromised accounts that would prospectively forward new outgoing and incoming email messages from the compromised accounts to email accounts controlled by the conspiracy.

U.S. Government and NGO Hacking Victims

In the same time period as the university and private sector hacking campaigns described above, the Mabna Institute also conducted a computer hacking campaign against various governmental and non-governmental organizations within the United States.  During the course of that campaign, employee login credentials were stolen by members of the conspiracy through password spraying.  Among the victims were the following, all based in the United States:  the United States Department of Labor, the Federal Energy Regulatory Commission, the State of Hawaii, the State of Indiana, the State of Indiana Department of Education, the United Nations, and the United Nations Children’s Fund.  As with private sector victims, the defendants targeted for theft email inboxes of employees of these organizations.

*                *                *

GHOLAMREZA RAFATNEJAD, EHSAN MOHAMMADI, ABDOLLAH KARIMA, a/k/a “Vahid Karima,” MOSTAFA SADEGHI, SEYED ALI MIRKARIMI, MOHAMMED REZA SABAHI, ROOZBEH SABAHI, ABUZAR GOHARI MOQADAM, and SAJJAD TAHMASEBI, the defendants, are citizens and residents of Iran.  Each is charged with one count of conspiracy to commit computer intrusions, which carries a maximum sentence of five years in prison; one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison; two counts of unauthorized access of a computer, each of which carries a maximum sentence of five years in prison; two counts of wire fraud, each of which carries a maximum sentence of 20 years in prison; and one count of aggravated identity theft, which carries a mandatory sentence of two years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the assigned judge.

Mr. Berman praised the outstanding investigative work of the FBI, the assistance of the United Kingdom’s National Crime Agency (NCA), and the support of the OFAC.  The case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Timothy T. Howard, Jonathan Cohen, and Richard Cooper are in charge of the prosecution, with assistance provided by Heather Alpino and Jason McCullough of the National Security Division’s Counterintelligence and Export Control Section.

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, and Mark G. Peters, the Commissioner of the New York City Department of Investigation (“DOI”), announced the arrest of ERIC LUNA, an employee of the New York City Department of Youth and Community Development (“DYCD”), and IGOR GOLDSHTEYN, an employee of the New York City Fire Department (“FDNY”), for the theft of government funds and wire fraud.  GOLDSHTEYN was arrested at his residence in Staten Island, New York, and LUNA was arrested outside the Manhattan headquarters of the DYCD.  Both men were presented today before Magistrate Judge Kevin Nathaniel Fox in Manhattan federal court.   

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, Eric Luna and Igor Goldshteyn, New York City employees, betrayed the trust placed in them and abused their powers to make purchases for their respective City agencies.  They allegedly sold over the internet hundreds of mobile phones intended for official use, and pocketed the proceeds of those illegal sales.  Now, thanks to DOI investigators, Luna and Goldshteyn are charged with serious crimes.”

Commissioner Mark G. Peters said:  “Abusing their authority to make purchases for their agencies, these defendants acted in separate schemes to greedily line their own pockets, by stealing hundreds of mobile devices meant for City use and selling them on online marketplaces for hundreds of thousands of dollars in profit, according to the charges. DOI thanks the United States Attorney for the Southern District and Verizon Wireless for their assistance and partnership in this investigation.”

According to the allegations in the Complaints[1]:

In April 2017, DOI investigators discovered that from at least in or about August 2015, hundreds of mobile telecommunications devices purchased by the FDNY and DYCD for use by agency personnel were being improperly diverted by LUNA and GOLDSHTEYN.  Both the FDNY and DYCD receive federal funds – the FDNY through grants from the Department of Homeland Security, and DYCD through grants from the Department of Housing and Urban Development.  LUNA and GOLDSHTEYN offered the devices for sale through third-party vendors over the internet.  The proceeds from the sales of these mobile devices went into LUNA’s and GOLDSHTEYN’s personal checking and online accounts.  

*                *                *

In separate complaints, GOLDSHTEYN, 42, of Staten Island, New York, and LUNA, 35, of Bronx, New York, are each charged with the theft of federal funds, and wire fraud.  The maximum statutory penalty for the theft of federal funds is 10 years in prison, and the maximum statutory penalty for wire fraud is 20 years in prison.  The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants would be determined by the judge.

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that AVINOAM LUZON was sentenced this afternoon to 110 months in prison for selling fentanyl that resulted in the overdose death of Gabriel Tramiel, 32, of Manhattan, on October 22, 2016.  LUZON was sentenced today by United States District Judge Lewis A. Kaplan.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Today, Avinoam Luzon was sentenced to prison for selling a lethal dose of fentanyl that took the life of Gabriel Tramiel.  He committed this crime as a trained medical doctor and while enrolled as a graduate student in public health at a university in Manhattan.  Luzon’s conduct helped fuel the nation’s most serious health crisis, the opioid abuse epidemic.”

According to the Information and other documents filed in federal court, as well as statements made during LUZON’s plea proceeding and sentencing:

In the early morning hours of October 23, 2016, Gabriel Tramiel was found dead by his wife.  The medical examiner determined the cause of Tramiel’s death to be acute fentanyl intoxication.  The night before, LUZON and Tramiel met at a drug store on the Upper West Side of Manhattan where LUZON sold Tramiel a quantity of fentanyl.  Tramiel then purchased a nasal spray bottle, and the two went to a nearby restaurant where Tramiel used the drugs in the restaurant bathroom.  When Tramiel returned to the table, he was visibly inebriated from the effects of the narcotic.  Shortly thereafter, surveillance video recovered from the apartment building where Tramiel died showed Tramiel inhaling the contents of the nasal spray bottle in the elevator.  Tramiel died a few hours later.  When LUZON learned of Tramiel’s death the following morning, LUZON called Tramiel’s wife and said he “might be responsible” but claimed he had given Tramiel “liquid morphine.”  The contents of the nasal spray bottle used by Tramiel were tested and determined to be fentanyl.  Law enforcement later searched LUZON’s dorm room and recovered over 160 grams of fentanyl and numerous nasal spray bottles. 

In November 2017, LUZON pled guilty before United States Magistrate Judge Debra Freeman.  At his guilty plea, LUZON admitted that he had intentionally and knowingly distributed fentanyl to Tramiel on October 22, 2016.  Tramiel was found dead the next morning.

*                *                *

In addition to the prison term, LUZON, 33, of Mountain View, California, was sentenced to three years of supervised release.

Mr. Berman praised the outstanding work of the New York City Police Department.  Mr. Berman also thanked the New York State Department of Health’s Bureau of Narcotics Enforcement for their assistance with this investigation.

This case is being handled by the Office’s Narcotics Unit.  Assistant U.S. Attorneys Karin Portlock and Matthew Podolsky are in charge of the case.

Geoffrey S. Berman, United States Attorney for the Southern District of New York, announced today that EVETTE MERCED, a Staff Sergeant in the New York Army National Guard, was sentenced to 36 months in prison, and her husband, DARRYL HARRISON, a Sergeant First Class in the New York Army National Guard, was sentenced to 33 months in prison, for leading a scheme designed to fraudulently obtain recruiting bonuses intended to reward those who legitimately recruited soldiers to the Army National Guard.  MERCED and HARRISON pled guilty on June 16, 2017, before U.S. Magistrate Judge James C. Francis IV to conspiracy to commit theft of government funds and aggravated identity theft.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “While most join the military to serve their country, Evette Merced and Darryl Harrison enriched themselves by fraudulently obtaining recruiting bonuses.  Today, they were sentenced to prison for defrauding the military and American taxpayers.”

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

In September 2005, the Army National Guard established a recruiting bonus program, referred to as the Guard Recruiting Assistance Program (G-RAP), administered by a private company, Document and Packaging Broker, Inc. (Docupak).  The G-RAP was designed to offer referral bonus payments to Army National Guard soldiers not otherwise involved in Army National Guard recruitment efforts for civilians the soldiers successfully convinced to serve in the Army National Guard.  A participating soldier, also known as a Recruiting Assistant (“RA”), could receive up to $2,000 in bonus payments for referring another individual to join.  To participate in the program, a soldier was required to establish an online account in his or her name to record the referral and recruitment efforts.  The RA would input the personal identifying information of each recruit into the account.  Based on certain milestones achieved by the referred soldier, a participating soldier could then receive payment through direct deposit into the participating soldier’s designated bank account.  Soldiers who were themselves serving as paid recruiters for the Army National Guard as part of the National Guard’s standard recruitment program were not eligible to participate in the G-RAP or to receive a referral bonus payment, as the G-RAP was intended to be a supplement to the National Guard’s standard recruiting program.   

Beginning in 2007, MERCED and HARRISON abused their positions as members of the Army National Guard then serving as full-time salaried recruiters for the Army National Guard by providing the personal identifying information of potential soldiers to various RAs in exchange for thousands of dollars in kickbacks.  The RAs then used their respective online RA accounts to falsely claim that they were responsible for referring those soldiers to the New York Army National Guard.  After making those false claims, those RAs received referral bonus payments totaling more than $77,000 from the G-RAP, and kicked back a significant portion of those payments to MERCED and HARRISON. 

*              *             *  

In addition to their prison terms, MERCED, 47, and HARRISON, 53, both of Charlotte, North Carolina, were each sentenced to two years of supervised release.  MERCED was also ordered to pay forfeiture in the amount of $28,000 and restitution in the amount of $77,000.  HARRISON was ordered to pay forfeiture in the amount of $10,250 and restitution in the amount of $77,000. 

Mr. Berman praised the investigative work of the Federal Bureau of Investigation and the Army Criminal Investigation Command. 

This case is being handled by the Office’s Public Corruption Unit.  Assistant United States Attorney Robert L. Boone is in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that COLLYER GOODMAN, a/k/a “West,” was sentenced to 10 years in prison for his role in supplying at least 14 other drug dealers with cocaine and crack cocaine in Middletown, New York.  GOODMAN was convicted after a jury trial in October of conspiracy to distribute cocaine and crack cocaine.  Numerous other members of the conspiracy, including Juan Beniquez, a/k/a “Johnny,” have already been sentenced.  Beniquez was sentenced to 9 years in prison.  U.S. District Court Judge Cathy Seibel imposed the sentences.  Several other members of the conspiracy, including Oscar Boria Jr., and Damon Wheeler, are expected to be sentenced this spring. 

U.S. Attorney Geoffrey S. Berman said:  “Collyer Goodman has persistently sold crack and cocaine in Middletown and elsewhere at great risk to the community.  Today’s sentence shows that drug dealers will neither profit from nor get away with their crimes.”

According to the Indictment, other filings in White Plains federal court, evidence at trial, and statements made in court proceedings:

Collyer Goodman supplied packages of redistribution quantities of cocaine to co-conspirators Oscar Boria Jr., Damon Wheeler, and Juan Beniquez, among others.  All of those individuals were drug dealers with their own customers who repackaged the cocaine, in some cases cooked it into crack cocaine, and resold it to mid-level and street-level dealers and to drug users.  Goodman sometimes also sold crack cocaine directly to his customers.

Over the period from 2015 through August 2016, Goodman distributed in excess of five kilograms of cocaine and 28 grams of crack cocaine.

*                *                *

In addition to the prison sentence, GOODMAN was sentenced to five years of supervised release and ordered to forfeit $226,260. 

Mr. Berman praised the work of the Federal Bureau of Investigation Hudson Valley Safe Streets Task Force and the Middletown Police Department.

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Anden Chow and Allison Nichols are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, James J. Hunt, the Special Agent in Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), George P. Beach II, the Superintendent of the New York State Police (“NYSP”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced that TINA BATISTA, a former school safety agent with the New York City Police Department (“NYPD”), was sentenced today to one year and one day in prison for conspiring to distribute and possess with intent to distribute more than one kilogram of heroin in Manhattan.  BATISTA pled guilty to the Indictment on November 15, 2017.  U.S. District Judge Alison J. Nathan imposed today’s sentence. 

BATISTA’s co-defendants, Lazaro Mallet and Ruben Luciano De Los Santos have also pled guilty to participating in the conspiracy.  On February 23, 2018, De Los Santos was sentenced to two years in prison by Judge Nathan.  Mallet, who is facing a mandatory minimum sentence of 10 years in prison, is scheduled to be sentenced by Judge Nathan on April 27, 2018.   

U.S. Attorney Geoffrey S. Berman said:  “Tina Batista was an NYPD school safety agent entrusted with safeguarding our city’s schools and its students.  But she violated that trust by committing a serious narcotics crime involving a large quantity of heroin and lying to law enforcement about her crimes.  Thanks to the outstanding investigative work of the DEA and the NYPD, Batista will serve time in prison for her crimes.”        

DEA Special Agent in Charge James J. Hunt said:  “Honest men and women in law enforcement work hard to keep our community safe from all perils, drugs included.   And through this investigation, the New York Drug Enforcement Task Force identified a member of law enforcement who put this city at risk by using her shield to facilitate drug trafficking.”         

Superintendent George P. Beach II said,  “Thanks to the hard work and partnership of law enforcement at the federal, state and local level, we have put three people behind bars who were supplying dangerous drugs to our communities. Today’s sentencing involved a school safety agent, who was trusted to keep our children safe, and was also conspiring to distribute heroin. We will continue to aggressively pursue criminals who profit from illegal drugs at the expense of the safety and security of our neighborhoods.”

According to the Complaint, the Indictment, other documents filed in this case:

On December 20, 2016, BATISTA, who was then a school safety agent with the NYPD, drove her boyfriend Mallet and De Los Santos from the Bronx to the vicinity of 115th Street and Fifth Avenue in Manhattan where Mallet had arranged to sell more than a kilogram of heroin to a confidential source working in an undercover capacity with federal law enforcement (the “CS”).  The car that BATISTA drove had a visible NYPD parking permit with the NYPD logo indicating that the vehicle was associated with law enforcement.  BATISTA had obtained the parking permit through her employment with the NYPD.

After the CS entered BATISTA’s vehicle and spoke with Mallet about the heroin in Spanish and in English, Mallet provided the CS with a Gucci shopping bag containing approximately 1.3 kilograms of heroin.  BATISTA, Mallet, and De Los Santos then waited in the area for approximately one hour to receive payment for the heroin until they were arrested.

During an interview that was conducted after BATISTA’s arrest, BATISTA lied multiple times to federal agents, falsely stating, in substance and in part, that she was not aware of any drugs, that the Gucci bag only contained sandals, and that she did not speak Spanish.

BATISTA had also previously conducted unauthorized inquiries in NYPD databases at the request of Mallet using a supervisor’s security code.

After her arrest in this case, BATISTA’s employment with the NYPD was terminated.

*          *         *

In addition to the prison sentence, BATISTA, 37, of the Bronx, was sentenced to two years of supervised release.

Mr. Berman praised the outstanding investigative work of the New York Drug Enforcement Task Force, which comprises agents and officers of the DEA, the NYPD, and the NYSP.    

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the unsealing today of an Indictment in Manhattan federal court charging five Manhattan doctors, GORDON FREEDMAN, JEFFREY GOLDSTEIN, TODD SCHLIFSTEIN, DIALECTI VOUDOURIS, and ALEXANDRU BURDUCEA, with participating in a scheme to receive bribes and kickbacks in the form of fees for sham educational programs (“Speaker Programs”) from a pharmaceutical company (“Pharma Company-1”) in exchange for prescribing millions of dollars’ worth of a potent fentanyl-based spray manufactured by Pharma Company-1 (the “Fentanyl Spray”), among other offenses.  FREEDMAN, GOLDSTEIN, SCHLIFSTEIN, VOUDOURIS, and BURDUCEA were arrested this morning.  All are expected to be presented before U.S. Magistrate Judge Sarah Netburn in Manhattan this afternoon.

Also unsealed today were the guilty pleas of two former Pharma Company-1 employees, Jonathan Roper and Fernando Serrano, in connection with their participation in the bribery and kickback scheme.  Both Roper and Serrano are cooperating with the Government. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “These prominent doctors swore a solemn oath to place their patients’ care above all else.  Instead, they engaged in a malignant scheme to prescribe Fentanyl, a dangerous and potentially fatal narcotic 50 to 100 times more potent than morphine, in exchange for bribes in the form of speaker fees. Payments from pharmaceutical companies should not influence how doctors prescribe --- especially when a potent and dangerous drug like Fentanyl is involved.  This scheme to use their patients as an instrument for profit has resulted in the indictment of five physicians.”    

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “A substance as powerful as Fentanyl should be prescribed based only on doctors’ own independent medical judgment. In this case, as alleged, a series of doctors were convinced to push aside their ethical obligations and prescribe a drug for profit to patients who turned to them for help. Doctors and medical professionals everywhere should be reminded of the faith and trust placed upon them, and that the health and safety of their patients is not for sale.”

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

The Fentanyl Spray

The Fentanyl Spray, which is manufactured by Pharma Company-1, is a powerful painkiller that is approximately 50 to 100 times more potent than morphine.  The FDA approved the Fentanyl Spray only for the management of breakthrough pain in cancer patients.  Prescriptions of the Fentanyl Spray typically cost thousands of dollars each month, and Medicare and Medicaid, as well as commercial insurers, reimbursed prescriptions written by the defendants.

The Speaker Program Bribery and Kickback Scheme

Pharma Company-1 launched a “Speakers Bureau” in or about August 2012.  While the Speakers Bureau was purportedly aimed at educating other practitioners about the Fentanyl Spray, in reality Pharma Company-1 used its Speakers Bureau to induce the doctors to prescribe large volumes of the Fentanyl Spray by paying them Speaker Program fees. 

Speakers were supposed to conduct a slide presentation for other health care practitioners regarding the Fentanyl Spray at each Speaker Program.  In reality, many of the Speaker Programs led by the defendants were predominantly social affairs where no educational presentation about the Fentanyl Spray occurred.  Attendance sign-in sheets for the Speaker Programs were frequently forged by adding the names and signatures of health care practitioners who had not actually been present.

Freedman’s Participation in the Scheme

FREEDMAN was a doctor certified in pain management and anesthesiology who owned a private pain management office on Manhattan’s Upper East Side.  FREEDMAN, who was also an Associate Clinical Professor at a large hospital in Manhattan (“Hospital-1”), received approximately $308,600 in Speaker Program fees from Pharma Company-1 in exchange for prescribing large volumes of the Fentanyl Spray. 

In March 2013, a Regional Sales Manager for Pharma Company-1 sent an email to FREEDMAN informing him that he would receive more Speaker Programs in the coming months because Pharma Company-1 wanted prescriptions of the Fentanyl Spray to increase, and urging FREEDMAN to put more patients on the Fentanyl Spray.  FREEDMAN responded, in part, “Got it,” and significantly increased his Fentanyl Spray prescriptions in the following months, during which he received approximately $33,600 in Speaker Program fees. 

In 2014, FREEDMAN’s prescriptions of the Fentanyl Spray rose even further, and he was the fourth-highest prescriber of the Fentanyl Spray nationally in the final quarter of 2014, accounting for approximately $1,132,287 in overall net sales of the Fentanyl Spray in that quarter.  During 2014, FREEDMAN was the highest-paid Pharma Company-1 Speaker in the nation, receiving approximately $143,000. 

GOLDSTEIN’s Participation in the Scheme

GOLDSTEIN was a doctor of osteopathic medicine who owned a private medical office on the Upper East Side.  GOLDSTEIN received approximately $196,000 in Speaker Program fees from Pharma Company-1 in exchange for prescribing large volumes of the Fentanyl Spray.  After GOLDSTEIN began prescribing a competitor painkiller, Pharma Company-1 pressured him to stop doing so and switch patients to the Fentanyl Spray, which GOLDSTEIN did.

In 2014, GOLDSTEIN was approximately the fifth-highest-paid Pharma Company-1 Speaker nationally. He was the sixth-highest prescriber of the Fentanyl Spray in the last quarter of 2014, accounting for approximately $809,275 in overall net sales of the Fentanyl Spray in that quarter.

SCHLIFSTEIN’s Participation in the Scheme

SCHLIFSTEIN was a doctor certified in physical medicine and rehabilitation who co-owned with GOLDSTEIN a private medical office on the Upper East Side.  SCHLIFSTEIN, who also worked as an attending physiatrist and consulting physician at two other Manhattan hospitals, received approximately $127,100 in Speaker Program fees from Pharma Company-1 in exchange for prescribing large volumes of the Fentanyl Spray. 

In or about October 2013, SCHLIFSTEIN expressed an interest in becoming a Speaker for Pharma Company-1.  So a senior Pharma Company-1 executive traveled to New York, and took SCHLIFSTEIN, GOLDSTEIN, and others, to a Manhattan strip club where Pharma Company-1 spent approximately $4,100 on a private room, alcoholic drinks, and “lap dances” for SCHLIFSTEIN and GOLDSTEIN.  In the month following that outing and SCHLIFSTEIN’s nomination as a Speaker, SCHLIFSTEIN’s Fentanyl Spray prescriptions increased substantially.    

In late 2014, Pharma Company-1 significantly decreased SCHLIFSTEIN’s Speaker Programs in order to send a message to SCHLIFSTEIN that he would need to prescribe larger volumes of the Fentanyl Spray.  In response, SCHLIFSTEIN repeatedly requested more Speaker Programs.  Pharma Company-1 told SCHLIFSTEIN it would assign him more Speaker Programs only if he prescribed larger volumes of the Fentanyl Spray.  SCHLIFSTEIN’s Fentanyl Spray prescriptions then increased substantially, and Pharma Company-1 rewarded him with more Speaker Programs.

By the end of the second quarter of 2015, SCHLIFSTEIN was approximately the 19th-highest prescriber of the Fentanyl Spray nationally, accounting for approximately $593,373 in net sales in that quarter.

VOUDOURIS’s Participation in the Scheme

VOUDOURIS was a doctor specializing in oncology and hematology who worked at a private medical office on the Upper East Side, and was an Assistant Clinical Professor at Hospital-1.  VOUDOURIS received approximately $119,400 in Speaker Program fees from Pharma Company-1 in exchange for prescribing large volumes of the Fentanyl Spray. 

In September 2014, VOUDOURIS, who had recently been nominated as a Speaker, had dinner with, among others, several Pharma Company-1 executives, as well as Roper and Serrano.  During the dinner, the Pharma Company-1 Vice-President of Sales told VOUDOURIS that he wanted her to prescribe the Fentanyl Spray to one new patient every day, and that VOUDOURIS would be allocated Speaker Programs if she continued prescribing the Fentanyl Spray.  

In the week that followed the dinner, VOUDOURIS did not prescribe what Pharma Company-1 viewed as an adequate quantity of the Fentanyl Spray.  Roper and Serrano met with VOUDOURIS and told her that Pharma Company-1 expected VOUDOURIS to write more Fentanyl Spray prescriptions.  In the months that followed the dinner and this conversation, VOUDOURIS’s Fentanyl Spray prescriptions rose significantly. 

By the end of the first quarter of 2015, VOUDOURIS was approximately the 10th-highest prescriber of the Fentanyl Spray nationally, accounting for total net sales of the Fentanyl Spray of approximately $581,500 in that quarter.

BURDUCEA’s Participation in the Scheme

BURDUCEA was a doctor certified in pain management and anesthesiology, was an Assistant Professor of anesthesiology at Hospital-1, and practiced at an anesthesiology and pain management office associated with Hospital-1.  BURDUCEA received approximately $68,400 in Speaker Program fees from Pharma Company-1 in exchange for prescribing large volumes of the Fentanyl Spray.  In addition, Pharma Company-1 hired BURDUCEA’s then-girlfriend, now wife (“CC-1”), to work as BURDUCEA’s sales representative and paid her in large part based on the volume of Fentanyl Spray prescribed by her assigned doctors, including BURDUCEA. 

By the end of the end of the second quarter of 2015, BURDUCEA was approximately the 14th-highest prescriber of the Fentanyl Spray nationally, accounting for total net sales of the Fentanyl Spray of approximately $621,345 in that quarter.

*          *          *

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

Mr. Berman praised the investigative work of the FBI, and thanked HHS OIG and the New York City Police Department for their participation in the investigation.

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Noah Solowiejczyk and David Abramowicz are in charge of the prosecution; paralegal specialist Jake Sidransky provided additional support.

Defendant

Age

Hometown

Charges (Potential Maximum Term of Imprisonment)

GORDON FREEDMAN

57

Mount Kisco, NY

Anti-Kickback conspiracy (5 years), Violation of the Anti-Kickback Statute (5 years), and Honest services fraud conspiracy (20 years)

JEFFREY GOLDSTEIN

48

New Rochelle, NY

Anti-Kickback conspiracy (5 years), Violation of the Anti-Kickback Statute (5 years), Honest services fraud conspiracy (20 years), Aggravated identity theft (2 years mandatory), Wrongful disclosure of individually identifiable health information (1 year)

TODD SCHLIFSTEIN

49

New York, NY

Anti-Kickback conspiracy (5 years), Violation of the Anti-Kickback Statute (5 years), Honest services fraud conspiracy (20 years), Wrongful disclosure of individually identifiable health information (1 year)

DIALECTI VOUDOURIS

47

Long Island City, NY

Anti-Kickback conspiracy (5 years), Violation of the Anti-Kickback Statute (5 years), Honest services fraud conspiracy (20 years), Aggravated identity theft (2 years mandatory), Wrongful disclosure of individually identifiable health information (1 year)

ALEXANDRU BURDUCEA

41

Little Neck, NY

Anti-Kickback conspiracy (5 years), Violation of the Anti-Kickback Statute (5 years), Honest services fraud conspiracy (20 years), False statements to federal officers (5 years), Wrongful disclosure of individually identifiable health information (1 year)

[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 MICHAEL SCRONIC, a former hedge fund manager, pleaded guilty today to securities fraud before U.S. District Judge Cathy Seibel.  SCRONIC admitted as part of his plea that he had defrauded the 45 investors in his Scronic Macro Fund of more than $22 million.

Manhattan U.S. Attorney Geoffrey S. Berman stated:  “Michael Scronic lied about the performance of his investment fund, telling investors that his returns were as high as 13 percent.  But, in fact, his fund was wholly unsuccessful, resulting in millions of dollars in losses.  And what wasn’t lost in the market, Scronic used for his own personal expenses.  Now he faces significant time in prison for his fraud.”

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

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

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

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

*          *         *

SCRONIC, 46, of Manhattan, New York, pleaded guilty to one count of securities fraud, 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.

SCRONIC is scheduled to be sentenced by Judge Seibel on July 9, 2018, at 11:00 a.m.

Mr. Berman praised the investigative work of the FBI. He also thanked the U.S. Securities and Exchange Commission for their assistance in the investigation.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that BRANDON JONES, a/k/a “Brandon McGeer,” a/k/a “Brandon Jones-McGeer,” was convicted on all counts charged in a three-count Indictment of passing fictitious government obligations, wire fraud, and conspiracy to commit wire fraud, following an eight-day jury trial presided over by U.S. District Judge Alison J. Nathan.

Manhattan U.S. Attorney Geoffrey Berman stated:  “As a unanimous jury found today, Brandon Jones went to great lengths to portray himself as a government official.  In doing so, he manipulated businesses to obtain goods and services through fake ‘government’ documents and requests.  Now that Jones has been convicted of his crimes, there will be nothing fictitious about the prison time he faces.” 

According to the evidence introduced at trial:

In early January 2016, the United States Postal Inspection Service undertook an investigation into JONES, the self-proclaimed “Commissioner” of the “Office of the Commissioner, an IGO.”  The “Office of the Commissioner” was an organization JONES created, which purported to be an “Intergovernmental Organization,” and which he claimed was funded by the federal government in doing work with the United Nations.  In his role as the “Commissioner,” JONES obtained hundreds of thousands of dollars in goods and services using fake government purchase orders, government transportation requests, and other government payment documents.  Among many others, JONES defrauded a former Ambassador to the United Nations, who JONES lured into providing consulting services while working to secure funding for a humanitarian aid project that, due to JONES’ fraud, never came to fruition.  JONES also obtained hundreds of thousands of dollars in free hotel stays, airline tickets, and other goods and services.

*                *             *

JONES, 35, of Philadelphia, stands convicted of one count of wire fraud, which carries a maximum sentence of 20 years in prison; one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison; and one count of passing fictitious obligations, which carries a maximum sentence of 25 years in prison.  The three charges each also carry a maximum fine of $250,000, 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.

In March 2015, an investigation undertaken with the United States Secret Service into one of JONES’s employees, an alleged “Deputy Commissioner” of the “Office of the Commissioner, an IGO,” Sandra Zongo, led to Zongo being charged with one count of impersonating an official or employee of the United States government; one count of wire fraud; one count of passing fictitious obligations; and one count of attempted benefits fraud.  Zongo was convicted in January 2017 of all charges after a jury trial before U.S. Senior District Judge Kimba M. Wood.      

Mr. Berman praised the outstanding investigative work of the USPIS.  He added that the investigation is continuing.

The prosecution is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Kiersten A. Fletcher, Jessica K. Fender, and Tara M. La Morte are in charge of the prosecution; paralegal specialists Jenny Satinover and Haley Zovickian provided additional support.

The USPIS encourages the public to report any information it has regarding JONES or the Office of the Commissioner at 1-877-876-2455.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JAMEL UPSON, a/k/a “Flynt,” was sentenced today to 40 years in prison for racketeering offenses arising out of his participation in the “Boss Playa Family” or “BPF” street gang based in Mount Vernon, New York, including the murders of two members of a rival gang in 2008.  UPSON pled guilty to a Superseding Information on October 5, 2017, before U.S. District Judge Kenneth M. Karas, who imposed today’s sentence.

U.S. Attorney Geoffrey S. Berman said:  “Jamel Upson lead a gang that posed a grave threat to the people of Mount Vernon.  Upson has admitted to personally slaying two rival gang members in the course of gang activities.  Jamel Upson’s disturbing indifference to the lives of others has been met with a fittingly stiff prison sentence that will take him off the streets for 40 years.”

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

UPSON was the leader of the BPF street gang, a criminal enterprise that operated in the Mount Vernon area from approximately 2007 to 2014.  BPF members sought to increase the gang’s power, protect and expand its territory, and enrich its members through an array of criminal activities, including shootings, assaults, larcenies, arson, and the distribution of cocaine and marijuana.  In particular, BPF sought to assert its dominance over rival Mount Vernon street gangs, principally the “Goonies” gang, through acts of violence including numerous shootings.

On two occasions in 2008, UPSON murdered a member of the rival Goonies gang.  In the early morning hours of August 13, 2008, UPSON shot and killed 19-year-old Shomari Knox, a Goonies member.  UPSON, on foot, ambushed a vehicle driven by Knox near Ninth Avenue and Third Street in Mount Vernon.  UPSON fired at the vehicle with a handgun, striking Knox in the neck.  When first responders arrived at the scene, Knox was dead.

On December 14, 2008, UPSON shot and killed 21-year-old Cory Cabiness, another member of the Goonies.  UPSON, on foot and armed with a handgun, ambushed Cabiness near Seventh Avenue and Third Street in Mount Vernon, as Cabiness was walking home from a nightclub in the early morning hours.  UPSON shot Cabiness in the head and leg.  Cabiness died from the gunshot wounds about two weeks later.

In addition to the murders of Knox and Cabiness, UPSON committed several other shootings targeting members and associates of the rival Goonies gang between 2008 and 2010.  UPSON, along with multiple other BPF members, also carried out a theft of jewelry valued at over $40,000 from a mall in Bergen County, New Jersey in January of 2009.    

*               *               *

In addition to the prison term, UPSON, 33, of Mount Vernon, was sentenced to three of supervised release.

To date, five other defendants in this case have been sentenced following guilty pleas to racketeering conspiracy and other offenses arising out of their participation in the BPF gang.  Samuel Carlos, 29, of Mount Vernon, was sentenced to three years in prison and three years of supervised release; Tyrone McCallum, 30, of Mount Vernon, was sentenced to 105 months in prison and five years of supervised release; Portland Ramseur, 33, of Mount Vernon, was sentenced to seven years in prison and three years of supervised release; Gorham Valentine, 33, of Mount Vernon, was sentenced to four years in prison and three years of supervised release; and Jason White, 34, of Mount Vernon, was sentenced to 160 months in prison and five years of supervised release.        

Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation and the Mount Vernon Police Department.  He also thanked the Westchester County District Attorney’s Office for its participation and support in this case.

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

The former Technical Manager of the Major Projects division of Siemens Business Services GmbH & Co. OGH (SBS), a wholly owned subsidiary of Siemens Aktiengesellschaft (Siemens AG), pleaded guilty today to conspiring to pay tens of millions of dollars in bribes to Argentine government officials to secure, implement and enforce a $1 billion contract to create national identity cards.

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, U.S. Attorney Geoffrey S. Berman of the Southern District of New York and Assistant Director in Charge Andrew W. Vale of the FBI’s Washington, D.C. Field Office made the announcement. 

Eberhard Reichert, 78, of Munich, Germany, was employed by Siemens AG from 1964 until 2001.  Beginning in approximately 1990, Reichert was the Technical Manager of the Major Projects division of SBS.  Reichert pleaded guilty today in the Southern District of New York to one count of conspiring to violate the anti-bribery, internal controls and books and records provisions of the Foreign Corrupt Practices Act (FCPA) and to commit wire fraud.  Reichert was arraigned last December on a three-count indictment filed in December 2011 charging him and seven other individuals.  He will be sentenced by U.S. District Judge Denise L. Cote of the Southern District of New York, who accepted his plea today.

“Far too often, companies pay bribes as part of their business plan, upsetting what should be a level playing field and harming companies that play by the rules,” said Acting Assistant Attorney General Cronan.  “In this case, one of the largest public companies in the world paid staggeringly large bribes to officials at the uppermost levels of the government of Argentina to secure a billion-dollar contract.  Eberhard Reichert’s conviction demonstrates the Criminal Division’s commitment to bringing both companies and corrupt individuals to justice, wherever they may reside and regardless of how long they may attempt to avoid arrest.”

“Eberhard Reichert tried to sidestep laws designed to root corruption out of the government contracting process,” said U.S. Attorney Berman.  “As he admitted in Manhattan federal court today, Reichert helped to conceal tens of millions of dollars in bribes that were paid to unfairly secure a lucrative contract from the Argentine government.  Today’s plea should be a warning to others that our office is committed to bringing corrupt criminals to justice, no matter how long they run from the law.”

In 1998, the government of Argentina awarded to a subsidiary of Siemens AG a contract worth approximately $1 billion to create state-of-the-art national identity cards (the Documento Nacional de Identidad or DNI project).  The Argentine government terminated the DNI project in 2001.  In connection with his guilty plea, Reichert admitted that he engaged in a decade-long scheme to pay tens of millions of dollars in bribes to Argentine government officials in connection with the DNI project, which was worth more than $1 billion to Siemens.  Reichert admitted that he and his co-conspirators concealed the illicit payments through various means, including using shell companies associated with intermediaries to disguise and launder the funds.

Reichert also admitted that he used a $27 million contract between a Siemens entity and a company called MFast Consulting AG that purported to be for consulting services to conceal bribes to Argentine officials.

In 2008, Siemens AG, a German entity, pleaded guilty to violating the books and records provisions of the FCPA; Siemens Argentina pleaded guilty to conspiracy to violate the books and records provisions of the FCPA; and Siemens Bangladesh Limited and Siemens S.A. – Venezuela each pleaded guilty to conspiracy to violate the anti-bribery and books and records provisions of the FCPA.  As part of the plea agreements, the Siemens companies paid a total of $450 million in criminal fines.  The U.S. Securities and Exchange Commission (SEC) also brought a civil case against Siemens AG alleging that it violated the anti-bribery, books and records and internal controls provisions of the FCPA.  In resolving the SEC case, Siemens AG paid $350 million in disgorgement of wrongful profits.  The Munich Public Prosecutor’s Office also resolved similar charges with Siemens AG that resulted in a fine of $800 million.  In August 2009, following these corporate resolutions with U.S. and German authorities, Siemens AG withdrew its claim to the more than $200 million arbitration award.

The FBI’s International Corruption Squad in Washington, D.C. is investigating the case.  The case is being prosecuted by Trial Attorney Michael Culhane Harper of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Niketh Velamoor of the Southern District of New York.  The Criminal Division’s Office of International Affairs, the SEC, Croatian authorities and the Munich Public Prosecutor’s Office also provided significant assistance. 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and John P. Cronan, the Acting Assistant Attorney General of the Justice Department’s Criminal Division, announced that EBERHARD REICHERT, a former executive at Siemens Aktiengesellschaft (“Siemens AG”), pled guilty today in Manhattan federal court to conspiring to pay $100 million in bribes to senior Argentine government officials to secure, implement, and enforce a $1 billion contract between Siemens and the Argentine government to produce national identity cards.  He is the second individual defendant to plead guilty in the massive scheme.  REICHERT, a citizen of Germany, pled guilty to one count of conspiring to violate the Foreign Corrupt Practices Act’s anti-bribery, internal controls, and books and records provisions, and to commit wire fraud, before U.S. District Judge Denise L. Cote.  His guilty plea followed his September arrest in Croatia and subsequent voluntary extradition to the United States in December. 

Manhattan U.S. Attorney Geoffrey S. Berman stated:  “Eberhard Reichert tried to sidestep laws designed to root corruption out of the government contracting process.  As he admitted in Manhattan federal court today, Reichert helped to conceal tens of millions of dollars in bribes that were paid to unfairly secure a lucrative contract from the Argentine government.  Today’s plea should be a warning to others that our office is committed to bringing corrupt criminals to justice, no matter how long they run from the law.”

Acting Assistant Attorney General John P. Cronan said:  “Far too often, companies pay bribes as part of their business plan, upsetting what should be a level playing field and harming companies that play by the rules.  In this case, one of the largest public companies in the world paid staggeringly large bribes to officials at the uppermost levels of the government of Argentina to secure a billion-dollar contract.  Eberhard Reichert’s conviction demonstrates the Criminal Division’s commitment to bringing both companies and corrupt individuals to justice, wherever they may reside and regardless of how long they may attempt to avoid arrest.”

According to the Indictment and statements made at today’s plea hearing:

REICHERT was employed by Siemens AGfrom 1964 until 2001.  Beginning in approximately 1990, REICHERT was the Technical Manager of the Major Projects division of Siemens Business Services GmbH & Co. OGH (“SBS”), a subsidiary of Siemens AG. 

In 1994, the government of Argentina issued a tender for bids to replace an existing system of manually created national identity booklets with state-of-the-art national identity cards (the DNI project).  The value of the DNI project was $1 billion.  In order to obtain the project, Siemens committed to paying nearly $100 million in bribes to sitting officials of the Argentine government, members of the opposition party, and candidates for office who were likely to come to power during the performance of the project.  In 1998, the Argentine government awarded the DNI project to Siemens, and REICHERT was one of the individuals in charge of the project.

REICHERT and his co-conspirators worked to approve and conceal the illicit payments through various means, including by funneling the payments through shell companies associated with bribe recipients to disguise the true purpose for the payments.  REICHERT also admitted to approving a $27 million sham contract between a Siemens entity and a company called MFast Consulting AG that was being used as a vehicle to funnel money to Carlos Sergi, REICHERT’s co-defendant, for bribe payments.  Several years after leaving the company, SERGI initiated a Swiss arbitration to collect on the contract.  REICHERT testified on SERGI’s behalf and, ultimately, REICHERT’s co-conspirators caused Siemens to pay an additional $8.8 million in 2007 to settle the arbitration.

In May 1999, the Argentine government suspended the DNI project, due in part to instability of the local economy and an impending presidential election.  When a new government took power in Argentina, and in the hopes of getting the DNI project resumed, members of the conspiracy committed Siemens to paying additional bribes to the incoming officials, and to satisfying existing obligations to officials of the outgoing administration, many of whom remained in influential positions within the government.  When the project was terminated in May 2001, members of the conspiracy nevertheless sought to recover the anticipated proceeds of the DNI project by causing Siemens AG to file a fraudulent arbitration claim against the Republic of Argentina in Washington, D.C.  Members of the conspiracy also continued the bribe scheme, in part to prevent disclosure of the bribery in the arbitration but also to ensure Siemens’ ability to secure future government contracts in Argentina and elsewhere in the region.  In four installments between 2002 and 2007, members of the conspiracy allegedly caused Siemens to pay approximately $28 million in further satisfaction of the obligations. 

Siemens’s corrupt procurement of the DNI project was not exposed during the lifespan of the conspiracy, and, in February 2007, the arbitration tribunal in Washington sided with Siemens AG, awarding the company nearly $220 million on its DNI claims, plus interest.  The company, however, never claimed the award money, because after Siemens reached corporate resolutions with the U.S. and German authorities, Siemens AG agreed to forego its right to receive the award.

*          *         *

REICHERT, 78, of Munich, Germany, faces a maximum sentence of five years in prison and three years of supervised release. 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. 

Andres Truppel, who was charged in the same indictment, pleaded guilty in 2015 and is yet to be sentenced.  Charges against the other individuals named in the indictment – Uriel Sharef, Herbert Steffen, Ulrich Bock, Stephan Signer, Carlos Sergi, and Miguel Czysch – are pending.  The charges and allegations against these other individuals are merely accusations, and these defendants are presumed innocent unless and until proven guilty.

On December 15, 2008, Siemens AG and Siemens Argentina entered guilty pleas to criminal violations of the FCPA.  As part of the plea agreement, Siemens AG and Siemens Argentina agreed to pay fines of $448.5 million and $500,000, respectively.

Mr. Berman praised the Federal Bureau of Investigation’s New York and Washington D.C. Field Offices for their work on the case. 

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorney Niketh Velamoor and Trial Attorney Michael Culhane Harper of the Criminal Division’s Fraud Section are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that DAVID SHALAM pleaded guilty today before U.S. Magistrate Judge Sarah Netburn to a Superseding Information charging him with the production of child pornography.  U.S. District Court Judge Alvin K. Hellerstein will impose sentencing.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “David Shalam paid a woman to perform sex acts via internet video, eventually further urging her to engage in acts of sexual molestation of her own minor children of six and eight years old.  Depraved acts such as this can have profoundly damaging effects on victims, the aftermath often leading to years of suffering psychological torment and anguish.  Today’s plea holds David Shalam accountable for these reprehensible acts.”

According to the allegations in the Superseding Information, and the Complaint filed on March 9, 2017:

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

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

*                      *                      *

SHALAM, 51, of Brooklyn, New York, pled guilty to one count of sexual exploitation of minors, which carries a mandatory minimum sentence of fifteen years in prison, and a maximum sentence of thirty years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Berman praised the investigative work of the FBI. 

This case is being handled by the Office’s General Crimes Unit.  Assistant U.S. Attorneys Alison Moe and Mollie Bracewell are in charge of the prosecution.  

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that EDWIN CABAN, a former Protective Security Officer, pleaded guilty yesterday to creating a false incident report in which CABAN intentionally omitted the fact that CABAN had repeatedly punched a member of the public at a branch of the Social Security Administration (“SSA”), despite knowing that this omission was unlawful. CABAN pled guilty to a Superseding Indictment before U.S. District Court Judge Lorna G. Schofield, who will impose sentencing.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Protective Security Officers are charged with protecting those who enter federal facilities.  But, as he admitted in court, Protective Security Officer Edwin Caban repeatedly punched a visitor and then filed a false incident report omitting that fact.  Caban betrayed the public trust and violated the law.”

According to the allegations in the Superseding Indictment, to which CABAN pled guilty today as to Count Two, and the related Complaint in which he was originally charged on April 24, 2017:

The SSA has multiple branch offices located throughout New York City, where claimants may request SSA services and make inquiries regarding social security benefits and Social Security cards.  One branch office is located at 123 William Street (the “123 William Office”), in Manhattan.  The 123 William Office is staffed by two Protective Security Officers, who are employees of a contractor for the Federal Protective Service of the United States Department of Homeland Security.  The 123 William Office has several surveillance cameras, which captured the incident.

The Incident

At approximately 12:37 p.m. on June 22, 2016, the victim (“Victim-1”) entered the 123 William Office, wheeling an elderly gentleman in a wheelchair into the reception area.  CABAN attempted to move the wheelchair, which Victim-1 asked him not to do.  After CABAN stepped away, Victim-1 withdrew a cellphone from his pocket.  CABAN then walked back to Victim-1 and repeatedly accused him of taking a picture with his cellphone, which Victim-1 denied.

As recorded by security camera footage obtained from the SSA, CABAN at this point reached out toward Victim-1, and Victim-1 put both of his hands up in the air, with his palms facing CABAN.  CABAN then took hold of Victim-1’s waist with both hands, pivoted, turned Victim-1 around, and then pushed Victim-1 backward toward the elevator bank.  CABAN continued to push Victim-1 backward, toward a desk adjacent to the opening to the elevator bank, until Victim-1 fell backward over the desk.  CABAN then took hold of Victim-1’s arms, and, as Victim-1 struggled to shake free of CABAN’s hold, CABAN took Victim-1 into the elevator bank.

After a brief struggle in the elevator bank, CABAN pushed Victim-1 up against a wall. Placing his left hand at the base of Victim-1’s throat, CABAN pinned Victim-1 against the wall. As Victim-1 stood there, not moving, with his hands up in the air in a gesture of surrender, CABAN punched Victim-1 four times in the chest and ribs.  Victim-1 collapsed forward, and CABAN continued to hold on to Victim-1 as Victim-1 remained bent forward, clutching his abdomen.

At this point, CABAN’s partner, another protective security officer (“PSO-1”), arrived in the elevator bank from a back area of the office and approached CABAN and Victim-1.  CABAN let go of Victim-1, who remained against the wall, not moving.  As PSO-1 stood a few feet away, CABAN punched Victim-1 again in the chest.  After several minutes passed, CABAN and PSO-1 escorted Victim-1 out of the elevator bank and back into the main floor area, back toward where the man in the wheelchair was waiting.

As a result of the attack, Victim-1 suffered bodily injuries, including fractured ribs, bruising, and physical pain.

Shortly after the incident, Victim-1 called 911 and two New York City Police Department officers responded.  One of these officers (“Officer-1”) entered the 123 William Office and spoke with CABAN about Victim-1’s allegations.  CABAN stated to Officer-1 that he put his hands on Victim-1 to remove him from the office, at which point Victim-1 “flopped” onto the desk, knocking things over.  CABAN denied touching Victim-1 after that point and denied entering the elevator bank during the incident.

That same afternoon, CABAN placed a telephone call to an FPS reporting center, in which CABAN made an oral report about the incident.  CABAN stated that there was “a disruptive client in here that needed to be escorted out;” he did not disclose that he struck Victim-1.

CABAN wrote and submitted a Security Incident Report.  In that report, CABAN stated that, as he “attempted to guide [Victim-1] out” of the office, Victim-1 “yelled and jumped onto the security desk flairing [sic] arms and legs knocking equipment around.”  CABAN then stated that he placed Victim-1 in an “arm bar” and “took him by the elevator banks,” that Victim-1 “tried to break [his] hold” at which point CABAN “grabbed him under his chin” and “mainta[ined] a hold of his arm.”  CABAN stated that PSO-1 then arrived.  CABAN reported no other use of force against Victim-1.  In particular, nowhere in the report did CABAN state that he struck Victim-1.

*                      *                      *

CABAN, 56, of Astoria, New York, pled guilty to one count of filing a false form, which carries a maximum sentence of five years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Berman praised the investigative work of the FPS. 

This case is being handled by the Office’s Public Corruption and Civil Rights Units.  Assistant U.S. Attorneys Alison Moe and Jacob Lillywhite are in charge of the prosecution.  

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, James J. Hunt, the Special Agent-in-Charge of the New York Division of the Drug Enforcement Administration (“DEA”), James P. O’Neill, Police Commissioner of the City of New York (“NYPD”), and George P. Beach II, the Superintendent of the New York State Police (“NYSP”), announced that YESSENIA JIMENEZ, a New York City Police Department Officer, and LUIS SOTO, were arrested and charged yesterday in Manhattan federal court with heroin trafficking and firearms offenses.  JIMENEZ and SOTO were presented yesterday before Magistrate Judge Sarah Netburn. 

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Yessenia Jimenez, a New York City Police Department officer, along with Luis Soto, trafficked heroin in New York City, the city she took an oath to serve and protect, and used her police department service weapon to carry out her illegal activities. Thanks to the outstanding investigative work of the DEA, NYPD, and the New York State Police, Jimenez and Soto have been arrested and can no longer contribute to the opioid epidemic plaguing this city.”

DEA Special Agent-In-Charge James J. Hunt said:  “Allegedly, this New York City Police officer and her co-defendant pushed heroin onto the streets at the same time that other law enforcement officers across the nation are fighting an opioid epidemic.  I commend the men and women at the New York Drug Enforcement Task Force and Southern District of New York for their tireless efforts in dismantling drug trafficking crews throughout this city and nation.”  

Commissioner James P. O’Neill said:  “Cops are charged with enforcing the law, not breaking it.  Today’s arrest—for serious allegations of trafficking heroin—are troubling.”

Superintendent George P. Beach II said:  “The charges brought today against these two individuals are the direct result of the vigilant work done by our law enforcement partners at all levels.  These partnerships are key when it comes to shutting down illegal drug trafficking operations, keeping dangerous drugs off of our streets, and stopping the heinous crimes that are associated with these activities.  This sends a clear message that such crimes will not be tolerated especially when they are perpetuated by individuals who have been entrusted with enforcing and upholding the law. Such criminals will be prosecuted to the fullest.”

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

Following a months’ long investigation into heroin trafficking, the DEA identified SOTO as an individual believed to traffic in kilogram quantities of heroin, and to collect narcotics proceeds.  The investigation uncovered that SOTO was working with JIMENEZ, an NYPD officer, to carry out his drug trafficking activities.  Following extensive surveillance and GPS tracking, the DEA, the NYPD, and the NYSP apprehended JIMENEZ and SOTO in possession of approximately $50,000, which represent proceeds from the sale of narcotics.  JIMENEZ, who was not in uniform and was off duty, was carrying her loaded NYPD service firearm in her purse, alongside approximately $25,000 of the drug proceeds. Following the arrest, law enforcement agents obtained a search warrant for the defendants’ apartment and discovered approximately 250 grams of heroin.

*                      *                     *

JIMENEZ, 31, of the Bronx, New York, and SOTO, 34, of the Bronx, New York, are each charged with one count of conspiracy to distribute at least 100 grams of heroin, which carries a maximum sentence of 40 years in prison and a mandatory minimum sentence of five years in prison; one count of possession of at least 100 grams of heroin with intent to distribute, which carries a maximum sentence of 40 years in prison and a mandatory minimum sentence of five years in prison; and one count of using and carrying a firearm in relation to their heroin trafficking, which carries a maximum sentence of life in prison and a mandatory minimum sentence of five years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. 

Mr. Berman praised the investigative work of the DEA and NYPD 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 that REZA OLANGIAN, a dual citizen of the United States and Iran, was sentenced today to 25 years in federal prison, after being found guilty in November 2016, of conspiring and attempting to send surface-to-air missiles (“SAMs”) and military aircraft parts to the Government of Iran.  OLANGIAN was arrested in Estonia on October 10, 2012, pursuant to a U.S. request for his provisional arrest, and he was extradited to the United States on March 26, 2013.  OLANGIAN was convicted after a two-week jury trial before U.S. District Judge Loretta A. Preska, who imposed today’s sentence.

Manhattan U.S. Attorney Geoffrey S. Berman said: “Reza Olangian was convicted by a unanimous jury for attempting to assist the Iranian government in brokering deals for missiles capable of destroying aircraft from the ground.  Olangian’s actions were in violation of critical international sanctions designed to protect our national security.  Today he was sentenced to 25 years for his efforts to support a designated state-sponsor of terror in obtaining deadly military weapons and other items.”

According to the evidence presented during the trial:

In 2008, OLANGIAN worked with Iranian officials to obtain approximately 375 SAMs for use by the Iranian government.  Ultimately, that missile deal was unsuccessful.

Beginning in early 2012, OLANGIAN worked to negotiate another, separate missile deal, this time with a confidential source (the “CS”), who was working with the Drug Enforcement Administration (“DEA”) and who purported to be a weapons and aircraft broker.  From his base of operations in Tehran, and from approximately May 2012 through October 2012, OLANGIAN arranged for the purchase of “IGLA-S” SAMs and various aircraft components.  During covertly recorded meetings in May 2012, and in subsequent recorded conversations and e-mails with the CS, OLANGIAN described in detail his plans for procuring the SAMs and aircraft parts and then smuggling them over land into Iran, from Afghanistan or from another neighboring country.  OLANGIAN also expressed his interest in purchasing numerous other types of weapons and military parts for the Iranian government, including the so-called “S-300” missile defense system and Russian-made naval vessels.

OLANGIAN’s 2012 negotiations included his participation in a videoconference with the CS, during which OLANGIAN remotely inspected a missile that the CS presented as a sample of the larger quantity of the SAMs that OLANGIAN sought to purchase.  After inspecting the sample missile and inquiring about its specifications, OLANGIAN stated that he would want “at least 200 . . . minimum 200” of such SAMs.  In his communications with the CS, OLANGIAN also indicated that he was arranging for a missile expert to inspect and test the SAMs.

At the same time that he was negotiating with the CS, OLANGIAN was also working with other individuals, both inside and outside Iran, to acquire numerous other items for the Iranian government and Iran-based entities.  For example, OLANGIAN worked with individuals and entities in China, Russia, and Europe to acquire commercial aircraft for use by Iranian airlines.  In one of these commercial aircraft deals, OLANGIAN and his coconspirators planned to purchase aircraft for $80 million and sell them to an Iranian company for $110 million.

During October 2012, OLANGIAN traveled to Estonia in connection with the SAMs deal and in anticipation of later traveling to Russia in connection with one of the aircraft deals.  He was arrested in Estonia, and following his arrest, he was interviewed by U.S. law enforcement agents.  OLANGIAN stated, among other things, that he had been working with Iranian government officials, that the SAMs he had arranged to purchase were being obtained for the Iranian government, and that the aircraft parts he attempted to acquire were to be used in Iranian military aircraft.

*           *         *

In addition to today’s sentence, OLANGIAN, 57, was sentenced to 5 years of supervised release. 

Mr. Berman praised the outstanding investigative work of the DEA’s Special Operations Division, Bilateral Investigations Unit.  Mr. Berman also thanked the DEA’s Copenhagen Country Office, as well as the U.S. Department of Justice’s Office of International Affairs and its National Security Division.

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorney Sean S. Buckley is in charge of the prosecution, with assistance from Robert E. Wallace of the National Security Division’s Counterintelligence and Export Control Section.       

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that the United States has filed a Complaint-in-Intervention (the “Complaint”) in a lawsuit, Bronx Independent Living Services v. Metropolitan Transit Authority, filed against the Metropolitan Transit Authority (“MTA”) and the New York City Transit Authority (“NYCTA”) to remedy violations of Title II of the Americans with Disabilities Act of 1990 (the “ADA”).  The United States’ Complaint alleges that the MTA and NYCTA violated the ADA when they altered the Middletown Road subway station on the number 6 line in the Bronx without insuring that the station was rendered readily accessible to and usable by individuals with disabilities, including individuals who use wheelchairs, to the maximum extent feasible.  Due to the failure to comply with the ADA, the Federal Transit Administration (“FTA”) concluded that it would not provide any funding for the cost of the renovation of the Middletown Road station.  The Complaint seeks declaratory and injunctive relief requiring MTA and NYCTA to install elevators at the Middletown Road station.

U.S. Attorney Geoffrey S. Berman said:  “There is no justification for public entities to ignore the requirements of the ADA 28 years after its passage.  The subway system is a vital part of New York City’s transportation system, and when a subway station undergoes a complete renovation, MTA and NYCTA must comply with its obligations to make such stations accessible to the maximum extent feasible.” 

The United States’ Complaint alleges that MTA and NYCTA violated the ADA by failing to install an elevator at the Middletown Road subway station serving the Pelham Bay neighborhood in the Bronx, despite spending more than $27 million on renovations of the station.  The renovations included replacing floors, walls, ceilings, and stairs leading to the street and platform.  Prior to beginning construction, the FTA and the U.S. Department of Transportation corresponded with MTA and NYCTA about their obligation to install an elevator at the station unless the MTA and NYCTA could demonstrate that it was technically infeasible to do so.  While that dialogue continued, and after the FTA had informed NYCTA that NYCTA’s analysis of the feasibility of installing an elevator was insufficient, MTA and NYCTA completed the renovation without installing an elevator and sought reimbursement from FTA for the cost of the renovation.  FTA ultimately concluded that it would have been technically feasible for MTA and NYCTA to install one or more elevators at the station.  As a result of MTA’s and NYCTA’s failure to install an elevator at the Middletown Road station, individuals with mobility impairments, including individuals who use wheelchairs, are unable to access the station. 

Mr. Berman thanked the FTA for its assistance with this matter.

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

“Joseph Percoco was found guilty of taking over $300,000 in cash bribes by selling something priceless that was not his to sell – the sacred obligation to honestly and faithfully serve the citizens of New York.  As every schoolchild knows, but he corruptly chose to disregard, government officials who sell their influence to select insiders violate the basic tenets of a democracy.  We will continue relentlessly to bring to justice those public officials who violate their oaths by engaging in this especially offensive misconduct.”

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, Commissioner of the New York City Police Department (“NYPD”), announced that GARY DIMICK, a teacher’s assistant at an elementary school in Fort Lee, New Jersey, pled guilty today before U.S. District Court Judge Deborah A. Batts to distribution and possession with intent to distribute oxycodone.  

U.S. Attorney Geoffrey S. Berman said: “Gary Dimick admitted in federal court today that he sold tens of thousands of highly addictive opiates to others over a period of seven years.  He now faces serious prison time for his actions.”

HSI Special Agent-in-Charge Angel M. Melendez said:  “The addiction to pain killers is a nationwide epidemic and this individual sold more than 25,000 oxycodone tablets over seven years, preying on the vulnerabilities of others.  Dimick made his acts more egregious by selling these highly addictive pills on the school grounds where he was employed.  It is time that he face the consequences of his actions.”

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

Oxycodone is a highly addictive, narcotic opioid that may be prescribed by medical professionals to treat severe and chronic pain conditions.  Because of its addictive properties, however, users can abuse oxycodone, and prescriptions are in high demand, and have significant cash value to drug dealers.  From approximately 2010 to 2017, DIMICK, while employed as a teacher’s assistant at an elementary school in Fort Lee, New Jersey, sold more than 25,000 30-milligram oxycodone tablets for approximately $20 to $30 per tablet.  DIMICK made some of his oxycodone sales on the grounds of the elementary school where he is employed.

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DIMICK, 33, of North Bergen, NJ, pled guilty to one count of possession with intent to distribute oxycodone, which carries a maximum sentence of 20 years in prison.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

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

This case is being prosecuted by the Office’s General Crimes Unit.  Assistant U.S. Attorneys Kiersten A. Fletcher and Robert B. Sobelman are in charge of the prosecution. 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JOSEPH PERCOCO, the former Executive Deputy Secretary to the Governor of the State of New York, was convicted of soliciting and accepting more than $315,000 in bribes in return for taking official state action to benefit energy company Competitive Power Ventures (“CPV”) and Syracuse-based real estate developer COR Development (“COR”) after an eight-week trial.  STEVEN AIELLO, a COR executive, was also convicted of bribery conspiracy.      

U.S. Attorney Geoff Berman said:  “Joseph Percoco was found guilty of taking over $300,000 in cash bribes by selling something priceless that was not his to sell – the sacred obligation to honestly and faithfully serve the citizens of New York.  As every schoolchild knows, but he corruptly chose to disregard, government officials who sell their influence to select insiders violate the basic tenets of a democracy.  We will continue relentlessly to bring to justice those public officials who violate their oaths by engaging in this especially offensive misconduct.”         

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

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

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

Bribes from CPV

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

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

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

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

Bribes from AIELLO and the Syracuse Developer

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

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

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

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The jury was deadlocked on the charges against Kelly.  Joseph Gerardi, a COR executive, was acquitted of all charges.

PERCOCO is scheduled to be sentenced on June 11, 2018, and AIELLO is scheduled to be sentenced on June 14, 2018.  Both defendants will be sentenced by U.S. District Judge Valerie E. Caproni, who presided over the trial. 

A chart containing the names, ages, residences, counts of conviction, and maximum penalties for the defendants is attached.  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. 

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

This case is being prosecuted by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys Janis Echenberg, Robert Boone, David Zhou, and Matthew Podolsky are in charge of the prosecution; paralegal specialists Sylvia Lee and Aashna Rao provided additional support.

DEFENDANT

AGE

RESIDENCE

CONVICTED

CHARGE(S)

MAXIMUM SENTENCE(S)

JOSEPH PERCOCO

47

South Salem, NY

Conspiracy to Commit Honest Services Fraud, (Count Three and Four)

Solicitation of Bribes and Gratuities,

(Counts Five)

20 years each count

10 years

PETER GALBRAITH KELLY, JR.

53

Canterbury, CT

STEVEN AIELLO

58

Fayetteville, NY

Conspiracy to Commit Honest Services Fraud

20 years

JOSEPH GERARDI

57

Fayetteville, NY

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that ROBERT WALTER MURRAY was sentenced today to 24 months in prison for manipulating the market for the stock of Fitbit, Inc. (“Fitbit”), by filing a sham tender offer with the Securities and Exchange Commission (“SEC”) in November 2016.  MURRAY’s sham tender offer resulted in a temporary change in Fitbit’s market capitalization of over $100 million.  MURRAY pled guilty on November 7, 2017, before U.S. District Judge Katherine B. Forrest, who imposed today’s sentence.

U.S. Attorney Geoffrey S. Berman said:  “Robert Murray manipulated the market in Fitbit stock by making a false filing with the SEC about a tender offer.  Hoping to take a quick profit from trading in Fitbit stock options, Murray’s attempt to game the system has instead earned him a federal prison sentence.” 

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

On November 8, 2016, MURRAY, falsely purporting to be an officer at a China-based entity called ABM Capital, created an account on the SEC’s Electronic Data Gathering, Analysis, and Retrieval (or “EDGAR”) system.  The next day, MURRAY submitted a filing on EDGAR that reported that ABM Capital had offered to purchase Fitbit for approximately $12.50 a share, a significant premium to the price of Fitbit stock at the time.  This filing was made public on November 10, 2016, and, when it was, Fitbit’s stock temporarily increased in response to the news.  While Fitbit’s stock had closed at approximately $8.55 a share on November 9, 2016, it reached a high of approximately $9.27 per share, with significantly increased trading volume, after MURRAY’s fake tender offer filing was made public.  This resulted in a temporary increase of Fitbit’s market capitalization of around $100 million.  The tender offer that MURRAY filed, however, was entirely fictitious, and was instead meant only to increase the value of options in Fitbit stock that MURRAY had purchased just days earlier. 

MURRAY also took significant steps to hide his connection to the tender offer filing.  For example, he created a separate email account to register with the SEC and to file the sham tender offer, and took efforts to disguise his IP address when accessing that account. 

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In addition to the prison sentence, MURRAY, 25, of Chesapeake, Virginia, was sentenced to two years of supervised release.  The Court further ordered MURRAY to forfeit a sum of $3,914.08. 

Mr. Berman praised the exceptional work of the Office’s criminal investigators, and thanked the U.S. Postal Inspection Service and the Securities and Exchange Commission for their assistance. 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that PETER G. JOHNSON and PETER B. JOHNSON pled guilty today to defrauding a group of lenders (the “Banks”) by submitting false “borrowing base” reports designed to secure and maintain a $400 million line of credit for their cocoa trading company, Transmar Commodity Group Ltd. (“Transmar” or the “Company”).  The defendants each pled guilty before U.S. District Judge Jed S. Rakoff.                                               

U.S. Attorney Geoffrey S. Berman said:  “As they admitted today, Peter G. and Peter B. Johnson, executives of a cocoa company that supplied some of the world’s largest chocolate companies, defrauded lenders out of hundreds of millions of dollars by continuously and repeatedly lying about the collateral According to the allegations in the Indictment and other documents filed in federal court, as well as statements made in public court proceedings:           

Transmar was a closely held, family-run cocoa commodity trading company.  PETER G. JOHNSON was Transmar’s president and chief executive officer.  PETER B. JOHNSON, the son of PETER G. JOHNSON, was an officer of Transmar, as well as responsible for the operations of Transmar affiliate Euromar Commodities GMBH (“Euromar”). 

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

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

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

The defendants acknowledged their manipulative devices in internal Transmar correspondence.  For example, on or about July 31, 2015, PETER G. JOHNSON sent an email to PETER B. JOHNSON discussing the use of “multiple circles” or “borrowing games” in connection with the BB Reports, and suggesting that Transmar “clean the book of these in due course and before they get questioned and exposed.”  On June 14, 2016, PETER B. JOHNSON responded to an email regarding a circle transaction by lamenting, “this is the problem with fake circles and non-existent last minute intermediary deals, there is never a payment to settle them.”  PETER B. JOHNSON then suggested that Transmar “reissue the invoices (ie change the date of issuance” because “[t]here isn’t going to be an audit [of the BB Report] for a year and its [sic] causing huge problems to keep writing up fictitious contracts and paperwork.” 

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

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PETER G. JOHNSON, 69, of Harding Township, New Jersey, PETER B. JOHNSON, 38, of Morristown, New Jersey, each pled guilty to one count of conspiracy to commit bank fraud and wire fraud affecting a financial institution.  That offense carries a maximum prison term of 30 years.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

The defendants are scheduled to be sentenced by Judge Rakoff on August 6, 2018.

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

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