Southern District of New York

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Philip R. Bartlett, the Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service, announced the unsealing yesterday of an Indictment in Manhattan federal court charging DAVID MIDDENDORF, THOMAS WHITTLE, and DAVID BRITT, former executives of accounting firm KPMG LLP (“KPMG”), CYNTHIA HOLDER, a former employee of KPMG and the Public Company Accounting Oversight Board (the “PCAOB”), and JEFFREY WADA, a former employee of the PCAOB, with conspiracy and wire fraud charges in connection with their scheme to defraud the Securities and Exchange Commission (the “SEC”) and the PCAOB by obtaining, disseminating, and using confidential lists of which KPMG audits the PCAOB would be reviewing so that KPMG could improve its performance in PCAOB inspections.  MIDDENDORF was arrested yesterday morning in Marietta, Georgia, and was presented before a Magistrate Judge in Atlanta.  HOLDER was taken into custody yesterday morning in Houston, Texas, and presented before a Magistrate Judge in Houston.  WADA was arrested yesterday morning in Tustin, California, and presented before a Magistrate Judge in Santa Ana.  WHITTLE was arrested yesterday morning in Gladstone, New Jersey.  BRITT surrendered yesterday morning in New York, New York.  WHITTLE and BRITT were presented and arraigned before Magistrate Judge Andrew J. Peck in Manhattan federal court.  The case is assigned to U.S. District Judge John Paul Oetken.

BRIAN SWEET pled guilty to conspiracy and wire fraud charges in connection with this scheme before Magistrate Judge Robert W. Lehrburger on January 5, 2018.  The Information to which Sweet pled guilty was also unsealed yesterday.  His case is assigned to U.S. District Judge Katherine B. Forrest.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “These defendants were each meant to be the watchmen of our financial system.  The defendants who formerly worked for KPMG were vested with the responsibility to audit publicly filed financial statements and issue audit opinions relied upon by the investing public.  The defendants who formerly worked for the PCAOB were supposed to help ensure the quality of the work behind those audits.  But, as alleged, these defendants chose to cheat the system and to undermine the safeguards put in place to protect investors.  We will work tirelessly with our law enforcement partners to root out corruption like this wherever it is found.”

Inspector-in-Charge Philip R. Bartlett said:  “As alleged, the defendants took advantage of confidential information stolen from the PCAOB and used it to tip off KPMG partners of impending audit inspections.  This undermined the overall integrity of the program.  The PCAOB was created by Congress as part of the Sarbanes Oxley Act to reduce accounting scandals but, in this case, certain former employees and KPMG insiders created their own corruption scandal.  The Postal Inspection Service stands committed to helping to ensure the integrity of information that affects the marketplace.”

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

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

KPMG is one of the largest accounting firms in the world.  In recent years, KPMG fared poorly in PCAOB inspections and in 2014 received approximately twice as many comments as its competitor firms.  By at least in or about 2015, KPMG was engaged in efforts to improve its performance in PCAOB inspections, including but not limited to recruiting and hiring former PCAOB personnel such as SWEET.  At the time, MIDDENDORF was head of KPMG’s Department of Professional Practice (the “DPP”), which was broadly responsible for the quality of KPMG’s audits and KPMG’s performance in PCAOB inspections.  BRITT was a partner in the audit group within the DPP and WHITTLE was head of the inspections group within the DPP.

KPMG’s efforts to improve inspection results, however, were not limited to legitimate means.  Instead, between 2015 and 2017, MIDDENDORF, WHITTLE, BRITT, HOLDER, WADA, and SWEET worked to illicitly acquire valuable confidential PCAOB information concerning which KPMG audits would be inspected, in an effort to game the system and improve inspection results.  For example, beginning in SWEET’s first week of employment at KPMG in 2015, MIDDENDORF, WHITTLE, and BRITT began asking SWEET for confidential PCAOB information about which KPMG audits would be inspected by the PCAOB that year.

MIDDENDORF told SWEET to remember where his paycheck came from and to be loyal to KPMG, while WHITTLE told SWEET that he was most valuable to KPMG at that moment and would soon be less valuable.  As requested, SWEET shared the PCAOB’s confidential 2015 list of inspection selections.  Shortly thereafter, SWEET helped his former PCAOB colleague, HOLDER, get a job at KPMG, where she reported to SWEET.  During the pendency of her efforts to obtain employment at KPMG, HOLDER – in violation of PCAOB Rules – continued to work on KPMG inspections at the PCAOB.  Once she secured a job at KPMG, HOLDER, like SWEET before her, stole valuable confidential information on her way out of the PCAOB and then passed it on to SWEET, her new boss at KPMG.

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

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

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

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

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

Count One of the Indictment charges MIDDENDORF, WHITTLE, BRITT, HOLDER, and WADA with participating in a conspiracy to defraud the United States.  Count Two charges MIDDENDORF, WHITTLE, BRITT, HOLDER, and WADA with participating in a conspiracy to commit wire fraud.  Count Three charges MIDDENDORF, WHITTLE, and BRITT with wire fraud.  Counts Four and Five charge MIDDENDORF, WHITTLE, BRITT, HOLDER, and WADA with wire fraud.

*                      *                      *

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

Mr. Berman praised the investigative work of the United States Postal Inspection Service and also thanked the Securities and Exchange Commission, which has brought an administrative proceeding against the defendants.  Mr. Berman also thanked Trial Attorney Heidi Boutros Gesch of the Department of Justice’s Public Integrity Section for her assistance in the investigation.

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

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

DEFENDANT

AGE

RESIDENCE

CHARGES

MAXIMUM PENALTY

DAVID MIDDENDORF

53

Marietta, Georgia

Conspiracy to

defraud the United States;

Conspiracy to

commit wire fraud;

Wire fraud (three counts)

85 years in prison

THOMAS WHITTLE

54

Gladstone, New Jersey

Conspiracy to

defraud the United States;

Conspiracy to

commit wire fraud;

Wire fraud (three counts)

85 years in prison

DAVID BRITT

54

New Canaan, Connecticut

Conspiracy to

defraud the United States;

Conspiracy to

commit wire fraud;

Wire fraud (three counts)

85 years in prison

CYNTHIA HOLDER

51

Jersey Village, Texas

Conspiracy to

defraud the United States;

Conspiracy to

commit wire fraud;

Wire fraud (two counts)

65 years in prison

JEFFREY WADA

42

Tustin, California

Conspiracy to

defraud the United States;

Conspiracy to

commit wire fraud;

Wire fraud (two counts)

65 years in prison

[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 CHRISTOPHER CERVINO, a/k/a “Smitty,” was sentenced to one year and one day in prison, and SHEIK F. KHAN, a/k/a “Abida Khan,” was sentenced to 53 months in prison for their roles in a securities fraud scheme involving the shares of a publicly traded company called VGTel, Inc. (“VGTL”).  CERVINO and KHAN were convicted after a three-week jury trial before U.S. District Judge Andrew L. Carter, who imposed yesterday’s sentence. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Securities broker Christopher Cervino and investment adviser Sheik Khan created a massive web of lies to defraud investors of millions of dollars.  They manipulated the market, and their clients’ trust, to ensure they made money.  Thankfully their days of deceptive trading and investing are over, and they will spend time in prison for their crimes.”

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

The securities fraud scheme was conceived and led by Edward Durante, a recidivist securities fraud defendant, who pled guilty in August 2016 to various crimes related to the scheme, including conspiracy, securities fraud, money laundering, and perjury.  As part of the scheme, Durante, CERVINO, KHAN, and others conspired to control and manipulate the public stock of VGTL in order to artificially inflate the stock price and trading volume so as to profit from sales of VGTL stock and to further induce investments in private shares of VGTL. 

Durante, through entities he controlled, held a majority of the publicly traded stock of VGTL.  Durante recruited CERVINO, a broker, to open brokerage accounts associated with Durante-controlled entities and investors who were clients of KHAN, an investment adviser.  Many of KHAN’s clients had no idea that KHAN and Durante had opened accounts on their behalf with CERVINO.  KHAN, along with Durante, then induced her clients to purchase VGTL stock through CERVINO – sometimes without the clients’ knowledge or permission – while Durante and CERVINO ensured that many of these purchases were matched with sales of VGTL stock by Durante-controlled accounts.  The reality of these transactions was that Durante and his co-conspirators were effectively taking both sides of a single transaction in VGTL stock in order to artificially control VGTL’s stock price.  The defendants’ efforts to artificially inflate the market for VGTL increased the stock price from approximately $.25 per share to as much as $1.90 during the course of the scheme, and dramatically inflated the trading volume, which increased the defendants’ abilities to raise private investments in VGTL and to unload Durante-controlled shares at artificially high prices at the expense of victim investors.  To compensate CERVINO for his efforts to control and manipulate the market in VGTL, Durante made at least two cash payments to CERVINO totaling $35,000, in addition to the substantial commissions CERVINO received for executing trades in VGTL.  For her part, KHAN received more than $400,000 from Durante, including more than $100,000 in payments for liquidating her clients’ investments in safe annuities so that the money could then be invested into VGTL.  In total, CERVINO purchased more than $3.5 million of VGTL shares in client accounts controlled by KHAN and/or Durante.  The VGTL shares were ultimately worthless and clients lost the entirety of their investments.

*                      *                      *

In addition to the prison term, CHRISTOPHER CERVINO, 45, was sentenced to three years of supervised release and ordered to forfeit $35,000.

In addition to the prison term, SHEIK F. KHAN, 54, was sentenced to three years of supervised release and ordered to forfeit $290,787.

Restitution for both defendants will be determined at a later date.

Mr. Berman praised the work of the Federal Bureau of Investigation and the U.S. Postal Inspection Service, 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 Andrea M. Griswold and Rebecca Mermelstein are in charge of the prosecution.  

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Raymond Donovan, the Special Agent in Charge of the Special Operations Division of the U.S. Drug Enforcement Administration (“DEA”), announced that Honduran congressman Fredy Renan Najera Montoya (“NAJERA”) was charged yesterday in Manhattan federal court with conspiring to import cocaine into the United States and related weapons offenses involving the use and possession of machineguns and destructive devices. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, Fredy Renan Najera Montoya used his power and influence as a Honduran congressman to help facilitate the transport of huge quantities of cocaine from Colombia through Honduras, and ultimately to the streets of the United States.  Along with the DEA, we are committed to attacking the drug trade at every level, regardless of a defendant’s status.  We look forward to trying Najera on U.S. soil.”

Special Agent in Charge Raymond Donovan said:  “As alleged, Fredy Renan Najera Montoya used his position in the Honduran Congress to facilitate huge amounts of drug trafficking and corruption, while using security teams possessing dangerous and deadly weapons that threaten the rule of law and innocent lives.  DEA will continue to go after these dangerous criminal individuals and their violent networks with our counterparts across the world utilizing every law enforcement tool at our disposal.” 

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

 From 2009 up to 2014, multiple drug trafficking organizations in Honduras and elsewhere worked together, and with support from NAJERA and others, to receive multi-hundred-kilogram loads of cocaine sent to Honduras from, among other places, Colombia via air and maritime routes, and to transport the drugs westward in Honduras toward the border with Guatemala and eventually to the United States.  For protection from official interference, and in order to facilitate the safe passage through Honduras of multi-hundred-kilogram loads of cocaine, drug traffickers paid bribes to public officials, including certain members of the National Congress of Honduras.

NAJERA is a member of the National Congress of Honduras who participated in and supported the drug trafficking activities of large-scale drug traffickers in Honduras and high-ranking members of Mexico’s Sinaloa Cartel.  For example, NAJERA facilitated the receipt of cocaine-laden aircraft at clandestine landing strips in Honduras that were protected by heavily armed security personnel so that the cocaine could be transported through Honduras, sold to the Sinaloa Cartel, and imported into the United States.  NAJERA also participated in a maritime cocaine trafficking venture that involved a $50,000 bribe paid to Fabio Porfirio Lobo, whose father was the President of Honduras at the time of the payment.  On September 5, 2017, in United States v. Lobo, No. 15 Cr. 174 (LGS), U.S. District Judge Lorna G. Schofield sentenced Lobo principally to 24 years in prison based on his conviction for participating in a conspiracy to import cocaine into the United States.

*                *                *

The Superseding Indictment charges NAJERA, 41, with three counts:  (1) conspiring to import cocaine into the United States, which carries a mandatory minimum sentence of 10 years in prison and a maximum term of life imprisonment; (2) using and carrying machine guns and destructive devices during, and possessing machine guns and destructive devices in furtherance of, the cocaine-importation conspiracy, which carries a mandatory minimum sentence of 30 years in prison and a maximum term of life imprisonment; and (3) conspiring to use and carry machine guns and destructive devices during, and to possess machine guns and destructive devices in furtherance of, the cocaine-importation conspiracy, which carries a maximum term of life imprisonment. 

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

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

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Dana J. Boente, Acting Assistant Attorney General for National Security, announced that XU JIAQIANG was sentenced yesterday to five years in prison for economic espionage and theft of a trade secret, in connection with XU’s theft of proprietary source code from XU’s former employer, with the intent to benefit the National Health and Family Planning Commission of the People’s Republic of China.  XU previously pled guilty to all six counts with which he was charged.  Yesterday’s sentence was imposed by U.S. District Judge Kenneth M. Karas in White Plains federal court. 

U.S. Attorney Geoffrey S. Berman said:  “As he previously admitted in federal court, Xu Jiaqiang stole high-tech trade secrets from a U.S. employer, intending to benefit the Chinese government.  The laws governing economic espionage and trade secrets exist, in part, to protect the sanctity of American ingenuity and property.  Xu’s prison sentence should be a red flag for anyone attempting to illegally peddle American expertize and intellectual property to foreign bidders.”

Acting Assistant Attorney General Dana J. Boente said:  “Xu, a Chinese national, is being held accountable for engaging in economic espionage against an American company.  Xu not only stole high tech trade secrets from his U.S. employer – a federal crime – he did so both for his own profit and intending to benefit the Chinese government.  Xu’s sentence clearly demonstrates that the National Security Division will not hesitate to pursue and prosecute those who steal from American businesses.  I thank the many people who worked hard to bring this result.”

According to the allegations contained in the Complaint and the Superseding Indictment filed against XU, as well as statements made in related court filings and proceedings:

From November 2010 to May 2014, XU worked as a developer for a particular U.S. company (the “Victim Company”).  As a developer, XU enjoyed access to certain proprietary software (the “Proprietary Software”), as well as that software’s underlying source code (the “Proprietary Source Code”).  The Proprietary Software is a clustered file system developed and marketed by the Victim Company in the United States and other countries.  A clustered file system facilitates faster computer performance by coordinating work among multiple servers.  The Victim Company takes significant precautions to protect the Proprietary Source Code as a trade secret.  Among other things, the Proprietary Source Code is stored behind a company firewall and can be accessed only by a small subset of the Victim Company’s employees.  Before receiving Proprietary Source Code access, Victim Company employees must first request and receive approval from a particular Victim Company official.  Victim Company employees must also agree in writing at both the outset and the conclusion of their employment that they will maintain the confidentiality of any proprietary information.  The Victim Company takes these and other precautions in part because the Proprietary Software and the Proprietary Source Code are economically valuable, which value depends in part on the Proprietary Source Code’s secrecy. 

In May 2014, XU voluntarily resigned from the Victim Company.     XU subsequently communicated with one undercover law enforcement officer (“UC-1”), who posed as a financial investor aiming to start a large-data storage technology company, and another undercover law enforcement officer (“UC-2”), who posed as a project manager, working for UC-1.  In these communications, XU discussed his past experience with the Victim Company and indicated that he had experience with the Proprietary Software and the Proprietary Source Code.  On March 6, 2015, XU sent UC-1 and UC-2 a code, which XU stated was a sample of XU’s prior work with the Victim Company.  A Victim Company employee (“Employee-1”) later confirmed that the code sent by XU included proprietary Victim Company material that related to the Proprietary Source Code.

XU subsequently informed UC-2 that XU was willing to consider providing UC-2’s company with the Proprietary Source Code as a platform for UC-2’s company to facilitate the development of its own data storage system.  XU informed UC-2 that if UC-2 set up several computers as a small network, then XU would remotely install the Proprietary Software so that UC-1 and UC-2 could test it and confirm its functionality.

In or around early August 2015, the FBI arranged for a computer network to be set up, consistent with XU’s specifications.  Files were then remotely uploaded to the FBI-arranged computer network (the “Xu Upload”).  Thereafter, on or about August 26, 2015, XU and UC-2 confirmed that UC-2 had received the Xu Upload.  In September 2015, the FBI made the Xu Upload available to a Victim Company employee who has expertise regarding the Proprietary Software and the Proprietary Source Code (“Employee-2”).  Based on Employee-2’s analysis of technical features of the Xu Upload, it appeared to Employee-2 that the Xu Upload contained a functioning copy of the Proprietary Software.  It further appeared to Employee-2 that the Xu Upload had been built by someone with access to the Proprietary Source Code who was not working within the Victim Company or otherwise at the Victim Company’s direction.

On December 7, 2015, XU met with UC-2 at a hotel in White Plains, New York (the “Hotel”).  XU stated, in sum and substance, that XU had used the Proprietary Source Code to make software to sell to customers, that XU knew the Proprietary Source Code to be the product of decades of work on the part of the Victim Company, and that XU had used the Proprietary Source Code to build a copy of the Proprietary Software, which XU had uploaded and installed on the UC Network (i.e., the Xu Upload).  XU also indicated that XU knew the copy of the Proprietary Software that XU had installed on the UC Network contained information identifying the Proprietary Software as the Victim Company’s property, which could reveal the fact that the Proprietary Software had been built with the Proprietary Source Code without the Victim Company’s authorization.  XU told UC-2 that XU could take steps to prevent detection of the Proprietary Software’s origins – i.e., that it had been built with stolen Proprietary Source Code – including writing computer scripts that would modify the Proprietary Source Code to conceal its origins. 

Later on December 7, 2015, XU met with UC-1 and UC-2 at the Hotel.  During that meeting, XU showed UC-2 a copy of what XU represented to be the Proprietary Source Code on XU’s laptop.  XU noted to UC-2 a portion of the code that indicated it originated with the Victim Company as well as the date on which it had been copyrighted.  XU also stated that XU had previously modified the Proprietary Source Code’s command interface to conceal the fact that the Proprietary Source Code originated with the Victim Company and identified multiple specific customers to whom XU had previously provided the Proprietary Software using XU’s stolen copy of the Proprietary Source Code. 

*                *                *

In addition to the five-year prison term, XU, 32, formerly of Beijing, China, was ordered to pay a $100 special assessment.

Mr. Berman and Mr. Boente praised the Federal Bureau of Investigation’s outstanding investigative efforts.  He also thanked the U.S. Department of Justice’s National Security Division. 

The case is being handled by the Office’s Terrorism and International Narcotics Unit and its White Plains Division.  Assistant U.S. Attorneys Benjamin Allee and Ilan Graff, with assistance from Trial Attorney David Aaron of the National Security Division’s Counterintelligence and Export Control Section, are in charge of the prosecution.

Xu Jiaqiang, 31, formerly of Beijing, China, was sentenced yesterday to five years in prison, for economic espionage and theft of a trade secret in connection with Xu’s theft of proprietary source code from Xu’s former employer, with the intent to benefit the National Health and Family Planning Commission of the People’s Republic of China.  Xu previously pleaded guilty to all six counts with which he was charged. 

Acting Assistant Attorney General for National Security Dana J. Boente and U.S. Attorney Geoffrey S. Berman for the Southern District of New York made the announcement.  The sentence was imposed by U.S. District Judge Kenneth M. Karas in White Plains, New York federal court. 

“Xu, a Chinese national, is being held accountable for engaging in economic espionage against an American company,” said Acting Assistant Attorney General Boente. “Xu not only stole high tech trade secrets from his U.S. employer – a federal crime – he did so both for his own profit and intending to benefit the Chinese government.  Xu’s sentence clearly demonstrates that the National Security Division will not hesitate to pursue and prosecute those who steal from American businesses.  I thank the many people who worked hard to bring this result.”

“As he previously admitted in federal court, Xu Jiaqiang stole high-tech trade secrets from a U.S. employer, intending to benefit the Chinese government,” said U.S. Attorney Berman.  “The laws governing economic espionage and trade secrets exist, in part, to protect the sanctity of American ingenuity and property.  Xu’s prison sentence should be a red flag for anyone attempting to illegally peddle American expertize and intellectual property to foreign bidders.”

According to the allegations contained in the Complaint and the Superseding Indictment filed against Xu, as well as statements made in related court filings and proceedings:

From November 2010 to May 2014, Xu worked as a developer for a particular U.S. company (the Victim Company).  As a developer, Xu enjoyed access to certain proprietary software (the Proprietary Software), as well as that software’s underlying source code (the Proprietary Source Code).  The Proprietary Software is a clustered file system developed and marketed by the Victim Company in the United States and other countries.  A clustered file system facilitates faster computer performance by coordinating work among multiple servers.  The Victim Company takes significant precautions to protect the Proprietary Source Code as a trade secret.  Among other things, the Proprietary Source Code is stored behind a company firewall and can be accessed only by a small subset of the Victim Company’s employees.  Before receiving Proprietary Source Code access, Victim Company employees must first request and receive approval from a particular Victim Company official.  Victim Company employees must also agree in writing at both the outset and the conclusion of their employment that they will maintain the confidentiality of any proprietary information.  The Victim Company takes these and other precautions in part because the Proprietary Software and the Proprietary Source Code are economically valuable, which value depends in part on the Proprietary Source Code’s secrecy. 

In May 2014, Xu voluntarily resigned from the Victim Company.  Xu subsequently communicated with one undercover law enforcement officer (UC-1), who posed as a financial investor aiming to start a large-data storage technology company, and another undercover law enforcement officer (UC-2), who posed as a project manager, working for UC-1.  In these communications, Xu discussed his past experience with the Victim Company and indicated that he had experience with the Proprietary Software and the Proprietary Source Code.  On March 6, 2015, Xu sent UC-1 and UC-2 a code, which Xu stated was a sample of Xu’s prior work with the Victim Company.  A Victim Company employee (Employee-1) later confirmed that the code sent by Xu included proprietary Victim Company material that related to the Proprietary Source Code.

Xu subsequently informed UC-2 that Xu was willing to consider providing UC-2’s company with the Proprietary Source Code as a platform for UC-2’s company to facilitate the development of its own data storage system.  Xu informed UC-2 that if UC-2 set up several computers as a small network, then Xu would remotely install the Proprietary Software so that UC-1 and UC-2 could test it and confirm its functionality.

In or around early August 2015, the FBI arranged for a computer network to be set up, consistent with Xu’s specifications.  Files were then remotely uploaded to the FBI-arranged computer network (the Xu Upload).  Thereafter, on or about Aug. 26, 2015, Xu and UC-2 confirmed that UC-2 had received the Xu Upload.  In September 2015, the FBI made the Xu Upload available to a Victim Company employee who has expertise regarding the Proprietary Software and the Proprietary Source Code (Employee-2).  Based on Employee-2’s analysis of technical features of the Xu Upload, it appeared to Employee-2 that the Xu Upload contained a functioning copy of the Proprietary Software.  It further appeared to Employee-2 that the Xu Upload had been built by someone with access to the Proprietary Source Code who was not working within the Victim Company or otherwise at the Victim Company’s direction.

On Dec. 7, 2015, Xu met with UC-2 at a hotel in White Plains, New York (the Hotel).  Xu stated, in sum and substance, that Xu had used the Proprietary Source Code to make software to sell to customers, that Xu knew the Proprietary Source Code to be the product of decades of work on the part of the Victim Company, and that Xu had used the Proprietary Source Code to build a copy of the Proprietary Software, which Xu had uploaded and installed on the UC Network (i.e., the Xu Upload).  Xu also indicated that Xu knew the copy of the Proprietary Software that Xu had installed on the UC Network contained information identifying the Proprietary Software as the Victim Company’s property, which could reveal the fact that the Proprietary Software had been built with the Proprietary Source Code without the Victim Company’s authorization.  Xu told UC-2 that Xu could take steps to prevent detection of the Proprietary Software’s origins – i.e., that it had been built with stolen Proprietary Source Code – including writing computer scripts that would modify the Proprietary Source Code to conceal its origins. 

Later on Dec. 7, 2015, Xu met with UC-1 and UC-2 at the Hotel.  During that meeting, Xu showed UC-2 a copy of what Xu represented to be the Proprietary Source Code on Xu’s laptop.  Xu noted to UC-2 a portion of the code that indicated it originated with the Victim Company as well as the date on which it had been copyrighted.  Xu also stated that Xu had previously modified the Proprietary Source Code’s command interface to conceal the fact that the Proprietary Source Code originated with the Victim Company and identified multiple specific customers to whom Xu had previously provided the Proprietary Software using Xu’s stolen copy of the Proprietary Source Code. 

*                *                *

 Mr. Boente and Mr. Berman praised the FBI’s outstanding investigative efforts.  Mr. Berman also thanked the U.S. Department of Justice’s National Security Division. 

Assistant U.S. Attorneys Benjamin Allee and Ilan Graff of the Southern District of New York, with assistance from Trial Attorney David Aaron of the National Security Division’s Counterintelligence and Export Control Section, are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an indictment charging NICOLAS DE-MEYER with the interstate transportation of stolen property for DE-MEYER’s theft of more than $1.2 million of fine wine.  DE-MEYER was arrested last night at Los Angeles International Airport and will be presented today in federal court in Los Angeles.  The case has been assigned to United States District Judge Paul G. Gardephe in the Southern District of New York.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged,  Nicolas De-Meyer, personal assistant to a Manhattan-based employer, stole over a million dollars’ worth of some of the world’s finest wines from his boss.  We thank our law enforcement partners at the FBI for their excellent investigative work on this case.” 

FBI Assistant Director William F. Sweeney Jr. said:  “Rare wines have a very specific market, but even given the narrow chance of making money illegally, thieves will find a way to break the law.  The theft in this case, however, was no small amount, totaling more than a million dollars.  The FBI Art Crime Team is tasked with investigating and recovering rare and many times invaluable items, and bringing to justice criminals who believe no one is watching.  We would like to thank the East Hampton Village Police Department for its partnership in this case.”

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

From 2008 to November 2016, NICOLAS DE-MEYER worked as a personal assistant to a Manhattan-based individual (the “Victim”) who collects rare and expensive wine.  From at least 2014 to approximately October 2016, DE-MEYER stole from the Victim hundreds of bottles of wine worth more than $1.2 million.  During that time, DE-MEYER used an alias to sell the wine that he stole from the Victim to a North Carolina-based wine dealer.  Among the wine DE-MEYER stole were bottles of wine from the French estate Domaine de la Romanée-Conti (“DRC”), whose wines are widely considered among the best, most expensive, and rarest wines in the world.  For example, in October 2016, DE-MEYER stole from the Victim seven bottles of DRC wine that the Victim had previously purchased for $133,650.

*                *                *

NICOLAS DE-MEYER, 40, of New York, New York, is charged with one count of interstate transportation of stolen property, which carries a maximum sentence of 10 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.

U.S. Attorney Berman praised the outstanding investigative work of the FBI’s Art Crime Team.

This case is being handled by the Office’s Money Laundering and Asset Forfeiture Unit.  Assistant United States Attorney Justin V. Rodriguez is in charge of the prosecution.

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today the guilty plea of MACHLI JOSEPH in connection with his embezzlement of over $700,000 in funds intended for Baruch College for the rental of their athletic facilities.  JOSEPH pled guilty before U.S. District Judge Paul A. Crotty to conversion and misapplication of money from a program receiving federal funds.    

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As he admitted today, Machli Joseph, Baruch College’s former basketball coach, stole hundreds of thousands of dollars meant for Baruch that he instead spent largely on himself.  This Office is committed to ensuring that our city’s schools are not taken advantage of by the very individuals meant to support them.”

According to the Information and Complaint filed in this case, and statements made during the plea proceeding:     

MACHLI JOSEPH served as an athletic department official at Baruch College between 2002 and 2016.  He served as Baruch’s women’s basketball head coach between 2004 and 2014, its men’s basketball coach in 2002, as assistant athletic director from 2003 to 2011, and as associate athletic director from 2011 until August 2016.  At times when the Baruch College gym was not being used by the school’s athletic teams, it could be rented out to outside parties.  In his administrative capacity, JOSEPH had control over those gym rentals and their scheduling.

On numerous occasions between 2010 and 2016, JOSEPH rented the gym to outside parties, ostensibly on behalf of Baruch College.  In instructing the renting parties on how to provide payment, however, JOSEPH directed that payment be made to entities that were not, in fact, connected to Baruch College.  Instead, they were entities with bank accounts over which JOSEPH had personal control, some of which merely sounded like Baruch-affiliated entities.  On several occasions, JOSEPH simply directed that payment be made directly to him or individual associates of his.  Many of these funds were ultimately spent on personal expenses and items for JOSEPH and his family, including renovations to his home in New Jersey.  All told, the scheme improperly diverted over $700,000 of payments intended for Baruch College.

*                *                *

JOSEPH, 43, of Elizabeth, New Jersey, pled guilty to one count of embezzlement and misapplication concerning a program receiving federal funds.  The charge carries a maximum term of 10 years in prison.  JOSEPH is scheduled to be sentenced by Judge Crotty on April 17, 2018.  The maximum potential penalty 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 Department of Education – Office of the Inspector General and the New York State Inspector General’s Office.  

This case is being handled by the Office’s Public Corruption Unit.  Assistant United States Attorneys Catherine E. Geddes and Martin S. Bell are in charge of the prosecution.

A Superseding Indictment charging Christian Ganczarski, aka Abu Mohamed, aka Abu Mohamed al Amani, aka Ibrahim, aka Ibrahim the German (Ganczarski), 51, with conspiracy to kill U.S. nationals, providing and conspiring to provide material support and resources to terrorists, and conspiring to provide material support and resources to al Qaeda, a designated foreign terrorist organization, was unsealed today in the Southern District of New York.  The United States is seeking Ganczarski’s extradition from France.

Acting Assistant Attorney General for National Security Dana J. Boente, U.S. Attorney Geoffrey S. Berman for the Southern District of New York, Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Office and Police Commissioner James P. O’Neill of the NYPD made the announcement.

 “According to the superseding indictment, between 1999 and 2001, Ganczarski regularly interacted with members of al Qaeda leadership who were responsible for terrorist operations, and provided them with the knowledge and technology to carry out attacks against the U.S. military and its allies,” said Acting Assistant Attorney General Boente.  “This case demonstrates the National Security Division’s resolve to find and bring to justice, terrorists who target U.S. interests in any part of the world.  I want to thank all of the prosecutors, agents and analysts who made this result possible.”

“Christian Ganczarski, a German national, allegedly provided critical support to the most prolific terrorists of our time,” said U.S. Attorney Berman.  “Today we publicly announce charges against Ganczarski alleging that he participated in the planning of plots to kill Americans with high-level al Qaeda terrorists Khaled Shaikh Mohammad, Usama bin Laden and others.  The unsealing of the indictment exemplifies this Office’s commitment to the relentless pursuit and prosecution of those who seek to harm Americans.”

“As alleged, Ganczarski willingly supported the goals of al Qaeda, immersing himself in social circles that included the likes of Usama bin Laden and one of the future hijackers in the September 11 attacks, among others,” said Assistant Director Sweeney.  “He allegedly participated in efforts to kill Americans by providing technological support and guidance, and arranged meetings between senior officials in the organization and other like-minded individuals bent on future attacks against U.S. interests.  While he’s spent the past fifteen years behind bars in France, we haven’t forgotten his allegiance to those who have threatened our interests both at home and abroad.  We will continue to work with our international partners to mitigate the threat of global terrorism, bringing to justice everyone who participates in or materially supports this crime.”

“As alleged, Christian Ganczarski worked for al-Qaeda, lived in its camps and guest houses,” said Police Commissioner O’Neill.  “He rubbed shoulders with Osama Bin Laden and the men who planned and executed plots from the bombing of U.S. embassies in East Africa that killed 225 people, to the 9-11 attacks that cost 3000 lives, most of them here in New York City.  Ganczarski allegedly provided al-Qaeda with expertise in logistics, computers, radio communications and the maintenance of weapons systems that would be used against Americans soldiers after the 9/11 attacks.  This case is another example of the work of the FBI agents and NYPD detectives of the Joint Terrorism Task Force.  There is no time too long, or place to far, or suspect out of reach when it comes to bringing terrorists, or those who aid them to justice.”

As alleged in the Superseding Indictment unsealed in federal court:

Al Qaeda is an international terrorist organization dedicated to opposing non-Islamic governments with force and violence.  The organization was founded by Usama bin Laden and Muhammad Atef, aka Abu Hafs el Masri (Abu Hafs el Masri), and was headquartered in Afghanistan since approximately 1996.  Bin Laden served as the leader or “emir” of al Qaeda until his death on or about May 2, 2011. 

Al Qaeda has a command control structure that included a majlis al shura (or consultation council) that discussed and approved major undertakings, including terrorist operations.  Bin Laden and Abu Hafs el Masri sat on the majlis al shura of al Qaeda, as did others, including Saif al Adel.  Khaled Shaikh Mohammad, aka Mukhtar, devised, planned, and facilitated terrorist operations for al Qaeda, and he also assisted in the preparation of promotional media used by al Qaeda to advertise its terrorist agenda and attract recruits.

Ganczarski, a German citizen born in Poland, traveled from Germany to Pakistan and Afghanistan on at least five separate occasions between 1999 and 2001.  During these trips, Ganczarski became associated with al Qaeda and developed personal relationships with bin Laden, Abu Hafs el Masri, al Adel and Mohammad.  Ganczarski lived at times with his family at al Qaeda’s fortified compound near Kandahar, Afghanistan.  At other times, Ganczarski lived in guest houses and other facilities operated by al Qaeda in Afghanistan.  Ganczarski participated in al Qaeda’s efforts to kill Americans in a number of ways, such as providing al Adel and other al Qaeda members with technological guidance and hardware, including computers, radios and other communications equipment. 

In approximately January 2000, Ganczarski attended a speech delivered by bin Laden at al Qaeda’s headquarters in Kandahar.  The January 2000 speech was attended by at least 100 men, including, among others, many significant al Qaeda leaders and terrorists, such as at least one of the plotters in the August 1998 bombings of the U.S. Embassies in East Africa, and one of the future hijackers in the Sept. 11, 2001, attacks on the United States (the September 11 Attacks).  During the speech, Ganczarski sat in the front row with al Adel’s son in his lap.

In approximately March 2000, Ganczarski attended a meeting in Karachi, Pakistan, between Mohammad and a member of Jamaah Islamiyah (CC-1), a Southeast Asia terrorist organization, at which U.S. and Israeli targets for terrorist attacks were discussed.  Following the meeting, Ganczarski helped transport CC-1 and a written communication from Mohammad to al Qaeda’s fortified compound in Kandahar, where Ganczarski spoke to bin Laden and took CC-1 to meetings with al Adel and Abu Hafs el Masri at which potential attacks on U.S. and Israeli interests were further discussed.

Ganczarski was in Germany at the time of the September 11 Attacks, and he indicated after the attacks that he had been aware that a significant event was about to occur.  In approximately early October 2001, Ganczarski returned to Afghanistan and met with other members of al Qaeda, including al Adel.  In approximately November 2001, Ganczarski and others attempted to repair anti-aircraft missiles controlled by al Qaeda that were not functioning, so that the missiles could be fired at U.S. military aircraft flying in the area at the time.

Ganczarski was arrested in France in 2003, and subsequently convicted of offenses under French law relating to a 2002 al Qaeda attack on a synagogue in Djerba, Tunisia.  Ganczarski has been incarcerated in France since being convicted.

*                *                *

The Superseding Indictment charges Ganczarski, with four counts: one count of conspiracy to kill U.S. nationals which carries a maximum sentence of life in prison; two counts of conspiracy to provide material support and resources to terrorists, and provision of material support and resources to terrorists, which carry a maximum sentence of 15 years in prison on each count; and one count of conspiracy to provide material support and resources to a designated foreign terrorist organization (al Qaeda) which carries a maximum sentence of 15 years in prison.

The maximum potential penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.  The charges contained in the Superseding Indictment are merely allegations, and the defendant is presumed innocent unless and until proven guilty.

Mr. Boente and Mr. Berman praised the extraordinary investigative work of the FBI’s New York Joint Terrorism Task Force – which principally consists of agents from the FBI and detectives from the NYPD – for the critical role they played and continue to play in the investigation of Ganczarski and his co-conspirators.  In addition, Mr. Berman thanked the Department of Justice’s National Security Division and Office of International Affairs.

Assistant U.S. Attorneys Emil J. Bove III and Amanda L. Houle of the Southern District of New York are in charge of the prosecution, with assistance from Trial Attorney David Smith of the National Security Division’s Counterterrorism Section.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Dana J. Boente, Acting Assistant Attorney General for National Security, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and James P. O’Neill, Police Commissioner of the City of New York (“NYPD”), announced today that Christian Ganczarski, a/k/a “Abu Mohamed,” a/k/a “Abu Mohamed al Amani,” a/k/a “Ibrahim,” a/k/a “Ibrahim the German” (“Ganczarski”), has been charged in a Superseding Indictment unsealed in the Southern District of New York with conspiracy to kill United States nationals, providing and conspiring to provide material support and resources to terrorists, and conspiring to provide material support and resources to al Qaeda.  The United States is seeking GANCZARSKI’s extradition from France.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Christian Ganczarski, a German national, allegedly provided critical support to the most prolific terrorists of our time.  Today we publicly announce charges against Ganczarski alleging that he participated in the planning of plots to kill Americans with high-level al Qaeda terrorists Khaled Shaikh Mohammad, Usama bin Laden, and others.  The unsealing of the indictment exemplifies this Office’s commitment to the relentless pursuit and prosecution of those who seek to harm Americans.”

Acting Assistant Attorney General Dana J. Boente said:  “According to the superseding indictment, between 1999 and 2001, Ganczarski regularly interacted with members of al Qaeda leadership who were responsible for terrorist operations, and provided them with the knowledge and technology to carry out attacks against the U.S. military and its allies.  This case demonstrates the National Security Division’s resolve to find and bring to justice, terrorists who target U.S. interests in any part of the world.  I want to thank all of the prosecutors, agents and analysts who made this result possible.”

FBI Assistant Director William F. Sweeney Jr. said:  “As alleged, Ganczarski willingly supported the goals of al Qaeda, immersing himself in social circles that included the likes of Usama bin Laden and one of the future hijackers in the September 11 attacks, among others.  He allegedly participated in efforts to kill Americans by providing technological support and guidance, and arranged meetings between senior officials in the organization and other like-minded individuals bent on future attacks against U.S. interests.  While he’s spent the past fifteen years behind bars in France, we haven’t forgotten his allegiance to those who have threatened our interests both at home and abroad.  We will continue to work with our international partners to mitigate the threat of global terrorism, bringing to justice everyone who participates in or materially supports this crime.”

NYPD Commissioner James P. O’Neill said:  “As alleged, Christian Ganczarski worked for al-Qaeda, lived in its camps and guest houses.  He rubbed shoulders with Osama Bin Laden and the men who planned and executed plots from the bombing of US embassies in East Africa that killed 225 people, to the 9-11 attacks that cost 3000 lives, most of them here in New York City.  Ganczarksi allegedly provided al-Qaeda with expertise in logistics, computers, radio communications and the maintenance of weapons systems that would be used against Americans soldiers after the 9/11 attacks.  This case is another example of the work of the FBI agents and NYPD detectives of the Joint Terrorism Task Force.  There is no time too long, or place to far, or suspect out of reach when it comes to bringing terrorists, or those who aid them to justice.”

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

Al Qaeda is an international terrorist organization dedicated to opposing non-Islamic governments with force and violence.  The organization was founded by Usama bin Laden and Muhammad Atef, a/k/a “Abu Hafs el Masri” (“Abu Hafs el Masri”), and was headquartered in Afghanistan since approximately 1996.  Bin Laden served as the leader or “emir” of al Qaeda until his death on or about May 2, 2011. 

Al Qaeda has a command control structure that included a majlis al shura (or consultation council) that discussed and approved major undertakings, including terrorist operations.  Bin Laden and Abu Hafs el Masri sat on the majlis al shura of al Qaeda, as did others, including Saif al Adel.  Khaled Shaikh Mohammad, a/k/a “Mukhtar,” devised, planned, and facilitated terrorist operations for al Qaeda, and he also assisted in the preparation of promotional media used by al Qaeda to advertise its terrorist agenda and attract recruits.

Ganczarski, a German citizen born in Poland, traveled from Germany to Pakistan and Afghanistan on at least five separate occasions between 1999 and 2001.  During these trips, GANCZARSKI became associated with al Qaeda and developed personal relationships with bin Laden, Abu Hafs el Masri, al Adel, and Mohammad.  GANCZARSKI lived at times with his family at al Qaeda’s fortified compound near Kandahar, Afghanistan.  At other times, GANCZARSKI lived in guest houses and other facilities operated by al Qaeda in Afghanistan.  GANCZARSKI participated in al Qaeda’s efforts to kill Americans in a number of ways, such as providing al Adel and other al Qaeda members with technological guidance and hardware, including computers, radios, and other communications equipment. 

In approximately January 2000, GANCZARSKI attended a speech delivered by bin Laden at al Qaeda’s headquarters in Kandahar.  The January 2000 speech was attended by at least 100 men, including, among others, many significant al Qaeda leaders and terrorists, such as at least one of the plotters in the August 1998 bombings of the U.S. Embassies in East Africa, and one of the future hijackers in the September 11, 2001, attacks on the United States (the “September 11 Attacks”).  During the speech, GANCZARSKI sat in the front row with al Adel’s son in his lap.

In approximately March 2000, GANCZARSKI attended a meeting in Karachi, Pakistan, between Mohammad and a member of Jamaah Islamiyah (“CC-1”), a Southeast Asia terrorist organization, at which U.S. and Israeli targets for terrorist attacks were discussed.  Following the meeting, GANCZARSKI helped transport CC-1 and a written communication from Mohammad to al Qaeda’s fortified compound in Kandahar, where GANCZARSKI spoke to bin Laden and took CC-1 to meetings with al Adel and Abu Hafs el Masri at which potential attacks on U.S. and Israeli interests were further discussed.

GANCZARSKI was in Germany at the time of the September 11 Attacks, and he indicated after the attacks that he had been aware that a significant event was about to occur.  In approximately early October 2001, GANCZARSKI returned to Afghanistan and met with other members of al Qaeda, including al Adel.  In approximately November 2001, GANCZARSKI and others attempted to repair anti-aircraft missiles controlled by al Qaeda that were not functioning, so that the missiles could be fired at U.S. military aircraft flying in the area at the time.

GANCZARSKI was arrested in France in 2003, and subsequently convicted of offenses under French law relating to a 2002 al Qaeda attack on a synagogue in Djerba, Tunisia.  GANCZARSKI has been incarcerated in France since being convicted.

*                *                *

The Superseding Indictment charges GANCZARSKI, 51, with four counts.  A chart containing a description of the charges and their maximum penalties is attached.  If convicted on all counts, GANCZARSKI would face a maximum sentence of life in prison.  The maximum potential penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

Mr. Berman and Mr. Boente praised the extraordinary investigative work of the FBI’s New York Joint Terrorism Task Force – which principally consists of agents from the FBI and detectives from the New York City Police Department – for the critical role they played and continue to play in the investigation of GANCZARSKI and his co-conspirators.  In addition, Mr. Berman thanked the Department of Justice’s National Security Division and Office of International Affairs.

This case is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Emil J. Bove III and Amanda L. Houle are in charge of the prosecution, with assistance from Trial Attorney David Smith of the National Security Division’s Counterterrorism Section.

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

Statute (Title 18)

Counts

Description

Maximum Penalties

Section 2332(b)

Count 1

Conspiracy to kill United States nationals

Maximum sentence of life in prison

Section 2339A

Counts 2 and 3

Conspiracy to provide material support and resources to terrorists, and provision of material support and resources to terrorists

Maximum sentence of 15 years in prison on each count

Section 2339B

Count 4

Conspiracy to provide material support and resources to a designated foreign terrorist organization (al Qaeda)

Maximum sentence of 15 years in prison

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Michael E. McMahon, the District Attorney for Richmond County, James J. Hunt, the Special Agent in Charge of the New York Division of the Drug Enforcement Administration (“DEA”), Angel M. Melendez, the Special Agent-in-Charge of the New York Field Office of Homeland Security Investigations (“HSI”), 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 today the unsealing of an Indictment charging MEDIN KOSIC, a/k/a “Dino,” JASMIN CEJOVIC, a/k/a “Min,” PAUL VAN MANEN, MIRSAD BOGDANOVIC, a/k/a “Mike,” SHAUN SULLIVAN, THEODORE BANASKY, a/k/a “Freddy,” a/k/a “Eduardo,” ANTHONY FRANCESE, ALEXANDER BUCCI, JOSEPH CUCCINIELLO, a/k/a “Cuch,” KENNETH CHARLTON, and JENNIFER BOGDANOVIC with conspiracy to distribute heroin and fentanyl.  Eight defendants were arrested on these charges this morning.  VAN MANEN and SULLIVAN, who were in custody on state charges, were transferred to federal custody today.  The defendants are expected to be arraigned before United States Magistrate Henry Pitman in Manhattan federal court later today. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, these defendants created a network spanning New York City and into New Jersey for the distribution of highly addictive and dangerous drugs.  Even after they realized the potency of the drugs they were distributing and selling – and the overdose risk those drugs posed – the defendants allegedly continued to sell their poison and to fuel the opioid epidemic plaguing our nation.  Today’s arrests are part of our continued commitment, along with our law enforcement partners, to stop the flow of heroin and fentanyl into and out of New York.”   

District Attorney Michael E. McMahon said:  “With the drug epidemic intensifying in Staten Island and other hard-hit parts of the City, these defendants continued to flood our streets with heroin and fentanyl, peddling poison that led to several overdoses.  Our mission to investigate every overdose through the Overdose Response Initiative has helped law enforcement hold drug dealers accountable for the lives they have destroyed, and today’s indictments are a direct result of these ongoing efforts.  The prosecutors in my office’s Narcotics-Investigations Bureau will continue working together with the NYPD and our federal partners to ensure that we attack the drug epidemic on all fronts.”

DEA Special Agent in Charge James J. Hunt said:  “Every day, heroin users put their lives in the hands of mad scientists.  This organization’s trial and error chemistry resulted in unregulated potency and unnecessary overdoses.  The Strike Force and our partners pooled resources in order to dismantle this organization and shut down a major opioid source of supply in Brooklyn, Staten Island and New Jersey.”

HSI Special Agent-in-Charge Angel M. Melendez said:  “Those charged today are alleged to have packaged highly addictive drugs in Brooklyn and Staten Island, and sell them on our city streets.  Our agency is committed to working with our law enforcement partners to seek out and arrest those criminals who choose to bring heroin and fentanyl into our neighborhoods.”

NYSP Superintendent George P. Beach II said:  “Once again through partnership and good police work between our law enforcement partners, we were able to dismantle a dangerous heroin/fentanyl drug trafficking operation. For years, these individuals distributed large amounts of these toxic substances throughout the New York City and New Jersey area, never once concerned about the deadly effects of these drugs on these communities. These arrests should send a strong message that we will continue to do all we can to prevent these drugs from making it to our neighborhoods. I commend our members and our law enforcement partners for their hard work in uncovering this operation and the arrests.”

Police Commissioner O’Neill said:  “The eleven defendants in this case are accused of operating a heroin and fentanyl distribution ring in Staten Island and other parts of our City.  As alleged, they continued to peddle the deadly product even after one of the defendants overdosed himself.  When I spoke recently about the reduction in overdoses on Staten Island in the year 2017, I spoke about the NYPD’s continued commitment to fighting the opioid epidemic.  The charges in this case come as a result of the kind of precision policing that’s one part of the cure.” 

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

The defendants were members of a drug trafficking organization (the “DTO”) that operated in Manhattan, Brooklyn, Staten Island, and New Jersey.  The DTO obtained heroin and fentanyl from a supplier, which was then stored and packaged in Staten Island or Brooklyn, and resold in Brooklyn, Staten Island, and New Jersey, among other places.  Certain defendants also arranged to sell narcotics while in Manhattan. 

Between 2015 and January 2018, the DTO was responsible for distributing large quantities of heroin, including heroin laced with fentanyl, in New York City and other locations.  During the course of the conspiracy, DTO members became aware of the risk posed by the drugs that they sold.  In October 2017, defendant SHAUN SULLIVAN overdosed from heroin supplied by the DTO, but was revived with naloxone.  Members of the DTO knew of SULLIVAN’s overdose and the potency of the narcotics they were distributing.  Even after SULLIVAN overdosed, the DTO continued to distribute heroin and fentanyl to customers in New York City. 

*                      *                     *

A chart setting forth the names, ages, residences, and maximum penalties for the defendants, each charged with one count of conspiracy to distribute narcotics, is set forth below.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.

The arrest was the result of a long-term investigation by the Organized Crime Drug Enforcement Strike Force, which comprises agents and officers of the DEA, the New York City Police Department, Immigration and Customs Enforcement – Homeland Security Investigations (HSI), the New York State Police, the U. S. Internal Revenue Service Criminal Investigation Division, the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), U.S. Secret Service, the U.S. Marshals Service, New York National Guard, the Clarkstown Police Department, U.S. Coast Guard, Port Washington Police Department and New York State Department of Corrections and Community Supervision.  The Strike Force is partially funded by the New York/New Jersey High Intensity Drug Trafficking Area (HIDTA), which is a federally funded crime fighting initiative and part of the Organized Crime Drug Enforcement Task Force program.  Mr. Berman thanked the Richmond County District Attorney’s Office, the Overdose Response Initiative, and the NYPD Overdose Task Force.  Mr. Berman noted that the investigation is ongoing.

This case is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Catherine Geddes and Stephanie Lake 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.      

 United States v. Medin Kosic et al.

DEFENDANT

AGE

RESIDENCE

MAXIMUM PENALTY

MEDIN KOSIC

30

Staten Island

Life in prison with a mandatory minimum of 10 years in prison

JASMIN CEJOVIC

25

Staten Island

Life in prison with a mandatory minimum of 10 years in prison

PAUL VAN MANEN

50

South Amboy, NJ

Life in prison with a mandatory minimum of 10 years in prison

MIRSAD BOGDANOVIC

41

Staten Island

Life in prison with a mandatory minimum of 10 years in prison

SHAUN SULLIVAN

36

Staten Island

Life in prison with a mandatory minimum of 10 years in prison

THEODORE BANASKY

44

Staten Island

Life in prison with a mandatory minimum of 10 years in prison

ANTHONY FRANCESE

48

Staten Island

Life in prison with a mandatory minimum of 10 years in prison

ALEXANDER BUCCI

22

Staten Island

Life in prison with a mandatory minimum of 10 years in prison

JOSEPH CUCCINIELLO

23

Staten Island

Life in prison with a mandatory minimum of 10 years in prison

KENNETH CHARLTON

46

Staten Island

Life in prison with a mandatory minimum of 10 years in prison

JENNIFER BOGDANOVIC

33

Staten Island

Life in prison with a mandatory minimum of 10 years in prison

[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, Angel M. Melendez, Special Agent-in-Charge of the New York Field Office of the Department of Homeland Security, Homeland Security Investigations (“HSI”), Michael C. Mikulka, Special Agent-in-Charge of the New York Regional Office of the United States Department of Labor, Office of Inspector General (“DOL-OIG”), Charles Brandeis, Special Agent-in-Charge of the U.S. Department of State’s Diplomatic Security Service, New York Field Office (“DSS”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced the unsealing of an Indictment charging RICHARD GRIFFIN and FRANK GILLETTE with mail fraud and conspiracy to commit mail fraud in connection with New York City’s Hurricane Sandy cleanup efforts.

The defendants were taken into federal custody this morning and will be presented before United States Magistrate Judge Barbara Moses later today.  The case has been assigned to United States District Judge Lorna G. Schofield. 

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

Hurricane Sandy

From in or about October 2012 through in or about November 2012, the East Coast of the United States was hit by Hurricane Sandy, the second-largest Atlantic storm in recorded history at that time.  The effects of Hurricane Sandy were felt in approximately 24 states, displacing tens of thousands of people from their homes, leaving more than eight million people without power, causing tens of billions of dollars in damage, and killing at least 160 people. 

The Tri-State area of New York, New Jersey, and Connecticut was hit particularly hard, with record storm surges that devastated the coastal areas of the region and left lower Manhattan underwater and without power.

Cleanup Efforts

On or about October 30, 2012, President Obama declared Hurricane Sandy a major disaster in New York, which made federal funding available to New York State and local governments for, among other things, debris removal and cleanup. 

In the aftermath of Hurricane Sandy, the New York City Department of Sanitation (“DSNY”) contracted with private vendors (the “Vendors”) to remove over 280,000 cubic yards of debris left on the roadways and rights-of-way throughout the five boroughs of New York City.  The Federal Emergency Management Agency reimbursed DSNY for 90% of the cost of the debris removal performed in the wake of Hurricane Sandy.

In order to monitor the work performed during the cleanup effort, DSNY required the Vendors to submit certain paperwork (“Time Certificates”) that tracked the particular machines used and the date and time of usage.  At the end of the project, DSNY paid the Vendors based on the information contained in the Time Certificates.

The Scheme

At all times relevant to the Indictment, RICHARD GRIFFIN and FRANK GILLETTE, the defendants, owned and operated subcontractors that were hired to assist a Vendor in Hurricane Sandy debris removal efforts (“Subcontractor-1” and “Subcontractor-2,” respectively). GRIFFIN and GILLETTE submitted and caused to be submitted fraudulent Time Certificates (“Fraudulent Time Certificates”) to DSNY, which purported to show debris removal that Subcontractor-1 and Subcontractor-2 performed during the Hurricane Sandy cleanup effort, but which in fact was not performed.  As a result of submitting Fraudulent Time Certificates, GRIFFIN and GILLETTE obtained over $80,000 in fraudulent payments from DSNY through one of the Vendors.

*          *          *

Set forth below is a chart containing the names, ages, residences, charges, and maximum penalties for the defendants.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

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

The case is being prosecuted by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Jason M. Swergold and Jessica Greenwood are in charge of the prosecution. 

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

DEFENDANT

AGE

CHARGES

MAXIMUM PENALTY

RICHARD GRIFFIN

48

Mail Fraud Conspiracy;

Mail Fraud In Connection with a Presidentially Declared Major Disaster

 30 years in prison  for each count

FRANK GILLETTE

45

Mail Fraud Conspiracy;

Mail Fraud In Connection with a Presidentially Declared Major Disaster

 30 years in prison  for each count

[1] As the introductory phase 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 FRASER THOMPSON was sentenced today to five 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 THOMPSON and his co-conspirators resulted in the theft of over $100 million from consumers throughout the United States.  THOMPSON was convicted by a jury on September 5, 2017, following a three-week trial, and was sentenced today in Manhattan federal court by the Honorable Katherine B. Forrest. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “This was a gross ‘main street’ fraud.  Fraser Thompson and his co-defendants engaged in ‘auto-subscribing,’ forcing mobile phone users to pay for unsolicited and unwanted text messaging services.  They ripped off everyday cellphone users, $10 a month, netting over $100 million in illegal profits, of which Thompson personally received over $1.5 million.  Thanks to the diligence of the IRS and FBI, consumers are being safeguarded and perpetrators of large-scale criminal frauds are being arrested, prosecuted, and convicted.”

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

THOMPSON was the Senior Vice President of Strategic Operations at Mobile Messenger, a mobile aggregation company.  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, THOMPSON 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 cell 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 were essential to the scheme’s success.  THOMPSON participated in auto-subscribing through two of those content providers, CF Enterprises and DigiMobi, which were operated by one of THOMPSON’s co-conspirators, Eugeni Tsvetnenko, a/k/a “Zhenya.” 

The plan to auto-subscribe with Tsvetnenko came about in early 2012, in connection with discussions between THOMPSON and three other Mobile Messenger executives, co-conspirators Darcy Wedd, Erdolo Eromo, and Michael Pajaczkowki, a/k/a “Paj,” 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, THOMPSON, Wedd, Eromo, and Pajaczkowski 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. 

THOMPSON, Wedd, Eromo, and Pajaczkowski agreed to a revenue split with Tsvetnenko, pursuant to which Tsvetnenko would keep approximately 70% of the auto-subscribing proceeds generated by CF Enterprises and DigiMobi, and the remaining 30% of the auto-subscribing proceeds would be divided evenly among THOMPSON, Wedd, Eromo, and Pajaczkowski.  THOMPSON, Wedd, Eromo, and Pajaczkowski also devised a method of receiving and distributing the auto-subscribing money through multiple layers of shell companies, in an effort to conceal the nature and purpose of the money.  These auto-subscribing activities with Tsvetnenko, which began in approximately April of 2012, and continued into 2013, resulted in hundreds of thousands of mobile phone users being auto-subscribed through Mobile Messenger.  THOMPSON, moreover, personally received over $1.5 million in fraud proceeds as a result of his participation in the illegal scheme.

The auto-subscription scheme, through all of the content providers that it involved, affected millions of consumers and generated over $100 million in criminal proceeds. 

*                *                *

To date, seven defendants, Andrew Bachman, Lin Miao, Pajackowski, Eromo, Jonathan Murad, Francis Assifuah, and Jason Lee have pled guilty in connection with their participation in the fraud.  One additional defendant, Wedd, was convicted by a jury on December 15, 2017, following a two-week trial. 

In addition to the prison term, THOMPSON was sentenced to three years of supervised release, and ordered to forfeit $1,552,114.56.

Mr. Berman praised the investigative work of the Internal Revenue Service - Criminal Investigations 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, and Ashan M. Benedict, the New York Special Agent in Charge of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”), announced today that LAWRENCE BROWN was sentenced to 39 years in prison for committing two armed robberies in Orange County, New York.  BROWN was convicted on March 9, 2017, after a jury trial before U.S. District Judge Nelson Stephen Román, who imposed today’s sentence.

Manhattan U.S. Attorney Geoffrey S. Berman stated:  “Lawrence Brown terrorized the employees of a pharmacy and a supermarket when he robbed them at gunpoint.  Not only did Brown point his gun at five different people, making them fear for their lives, he then tied them up before fleeing with thousands of dollars in cash.  Today’s lengthy prison sentence sends a strong message that violent crimes and firearms offenses like these will not be tolerated.”

ATF New York Special Agent in Charge Ashan M. Benedict stated:  “Lawrence Brown is a violent felon that terrorized his community through the commission of armed robberies, showing an extreme disregard for his fellow citizens.  One of ATF’s Top Most Wanted Fugitives, he zip-tied his victims’ hands, brandished firearms, and held some of his victims as hostages while committing his robberies. Thanks to the efforts of local and federal law enforcement, Brown will no longer be in a position to harm his community.  I would like to extend my gratitude to the United States Attorney’s Office for their work in prosecuting the case. I would also like to thank the Special Agents of ATF, as well as the City of Newburgh Police Department, and the Town of New Windsor Police Department for their investigative efforts that helped bring Brown to justice.”

According to the Indictment filed against BROWN, other court documents publicly filed in this case, and statements made in court proceedings, including today’s sentencing:

In late 2013 and early 2014, the defendant committed two terrifying robberies.  In November 2013, the defendant entered a Rite Aid pharmacy in New Windsor, New York, dressed in a Pepsi deliveryman uniform, and asked to speak to the store’s manager.  He then shoved a firearm into her side and forced the store manager into the manager’s office to empty money from the store’s safes, totaling $5,911, into a shopping bag.  He then bound the store manager’s hands behind her back using a zip-tie and left her in the office.

Five months later, in April 2014, the defendant hid in the manager’s office of a Shop Rite supermarket in Newburgh, New York, where he lay in wait for an employee who could open that store’s safes.  Over the next few hours, three store employees who did not have the combination to the safes separately entered the office, and the defendant brandished a firearm at each of them.  When it became clear that each of these first three employees could not open the safes, Brown bound their hands behind their backs using zip-ties and continued to await a manager.  When a manager eventually arrived, Brown pointed the firearm at the manager and ordered him to empty money totaling $20,140 into a shopping bag.  The defendant then bound the manager’s hands using an electrical cord and left all four employees tied up in the office. 

*                      *                     *

In addition to the prison term, BROWN, 46, was sentenced to restitution in the amount of $26,051.89 and three years of supervised release.

Mr. Berman praised the outstanding investigative work of the ATF, the City of Newburgh Police Department, and the Town of New Windsor 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, Angel M. Melendez, Special Agent-in-Charge of the New York Field Office of the Department of Homeland Security, Homeland Security Investigations (“HSI”), Michael C. Mikulka, the Special Agent-in-Charge of the New York Regional Office of the United States Department of Labor, Office of Inspector General, (“DOL-OIG”), Charles Brandeis, Special Agent-in-Charge of the U.S. Department of State’s Diplomatic Security Service, New York Field Office (“DSS”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced the unsealing of an Indictment charging 10 individuals with racketeering and other offenses in connection with the activities of the organized crime families of La Cosa Nostra.  The Indictment charges eight members of the Bonanno Family – Acting Boss JOSEPH CAMMARANO, JR., Consigliere JOHN ZANCOCCHIO, JOSEPH SABELLA, GEORGE TROPIANO, ALBERT ARMETTA, DOMENICK MINIERO, JOSEPH SANTAPAOLO, and SIMONE ESPOSITO – with racketeering conspiracy involving a wide range of crimes, including extortion, loansharking, wire and mail fraud, narcotics distribution, and conspiracy to commit murder.  Genovese Family member ERNEST MONTEVECCHI is charged with participating in that conspiracy as well.  Several of the defendants and Luchese Family member EUGENE CASTELLE are charged with conspiracy to commit extortion.  ARMETTA is additionally charged with assault resulting in serious bodily injury in aid of racketeering, and aiding and abetting the same.

Of the 10 defendants charged in the Indictment, nine were taken into federal custody this morning.  SANTAPAOLO was presented this morning before a United States Magistrate Judge in the Middle District of Pennsylvania.  The rest of the defendants will be presented before United States Magistrate Judge Barbara Moses later today.  The case has been assigned to United States District Judge Alvin K. Hellerstein. 

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

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

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

At times relevant to the Indictment, the defendants held the following positions with their respective LCN Families:  CAMMARANO was a captain and the Acting Boss of the Bonanno Family; ZANCOCCHIO was a captain and the Consigliere of the Bonanno Family; SABELLA was a captain of the Bonanno Family; TROPIANO was a soldier and an acting captain of the Bonanno Family; ESPOSITO was the Consigliere of the Bonanno Family; MINIERO, SANTAPAOLO, and ARMETTA were soldiers in the Bonanno Family; MONTEVECCHI was a soldier in the Genovese Family; and CASTELLE was a soldier in the Luchese Family.

Count One of the Indictment charges CAMMARANO, ZANCOCCHIO, SABELLA, TROPIANO, ARMETTA, MINIERO, SANTAPAOLO, ESPOSITO, and MONTEVECCHI with participating in a racketeering conspiracy.  Count Two charges ARMETTA with assault resulting in serious bodily injury in aid of racketeering, and aiding and abetting the same.  Count Three charges CAMMARANO, ZANCOCCHIO, SABELLA, TROPIANO, MINIERO, and CASTELLE with extortion conspiracy.

*          *          *

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

Mr. Berman praised the outstanding investigative work of HSI, DOL-OIG, DSS, NYPD, and the Special Agents of the United States Attorney’s Office for the Southern District of New York.  Mr. Berman also thanked the New York City Business Integrity Commission and the Nassau County District Attorney’s Office for their assistance in the investigation.

The case is being prosecuted by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Jason M. Swergold and Jessica Greenwood are in charge of the prosecution. 

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

United States v. Joseph Cammarano, Jr., et al., 18 Cr. 15 (AKH)

DEFENDANT

AGE

CHARGES

MAXIMUM PENALTY

JOSEPH CAMMARANO, JR., a/k/a “Joe C”

58

RICO Conspiracy; Extortion Conspiracy

20 years in prison for each count

JOHN ZANCOCCHIO, a/k/a “Porky”

60

RICO Conspiracy; Extortion Conspiracy

20 years in prison for each count

JOSEPH SABELLA, a/k/a “Joe Valet”

52

RICO Conspiracy;

Extortion Conspiracy

20 years in prison for each count

GEORGE TROPIANO, a/k/a “Grumpy”

68

RICO Conspiracy;

Extortion Conspiracy

20 years in prison for each count

ALBERT ARMETTA, a/k/a “Al Muscles”

48

RICO Conspiracy;

Assault in Aid of Racketeering

20 years in prison for each count

DOMINECK MINIERO

85

RICO Conspiracy;

Extortion Conspiracy

20 years in prison for each count

JOSEPH SANTAPAOLO, a/k/a “Joey Blue Eyes”

66

RICO Conspiracy

20 years in prison

SIMONE ESPOSITO

47

RICO Conspiracy

20 years in prison

ERNEST MONTEVECCHI, a/k/a “Butch”

72

RICO Conspiracy

20 years in prison

EUGENE CASTELLE, a/k/a “Boobsie”

57

Extortion Conspiracy

20 years in prison

[1] As the introductory phase 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 today that ROBERT GARNEAU was sentenced to 16 years in prison for his enticement of three minors to engage in sexual activity.  GARNEAU pled guilty plea to three counts of enticement of a minor on May 25, 2017, before United States District Judge Nelson Román, who imposed today’s sentencing.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Robert Garneau’s crimes are the nightmare of every modern parent.  Using everyday social media websites, Garneau exploited minors for his own sexual gratification.  As today’s sentencing underscores, we will continue to use every tool available to law enforcement to prosecute and punish those who sexually exploit children.”

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

From September 2014 to December 1, 2014, GARNEAU, a registered sex offender, communicated online via Instagram and Kik with a then 12-year-old minor (“Victim-1”) in California, and convinced Victim-1 to take and send sexually explicit photographs of Victim-1 to GARNEAU.   On August 10, 2015, and July 18, 2015, GARNEAU engaged in the same type of activity with two more minors (“Victim-2” and “Victim-3”).   

During his communications with his victims, GARNEAU utilized the screen names “Raptorr427,” “BobbySixx,” “Allison Denario,” and/or “Giannafitz81.”  While communicating with his victims, GARNEAU posed as a minor and threatened his victims that if they did not send additional photos and/or videos, they would be arrested for the photos and/or videos they had already sent.  With respect to Victim-2, GARNEAU also threatened to show the photos and videos to Victim-2’s Instagram followers.

*                      *                     *

In addition to the prison term, GARNEAU, 23, of Warwick, New York, was sentenced to 15 years of supervised release.

Mr. Berman praised the efforts of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, Long Island University, the Nassau County Police Department, and the Vacaville Police Department in Vacaville, California, in connection with this investigation.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Debbi Mayer, Assistant Special Agent in Charge of the U.S. Department of Education Office of Inspector General, Northeastern Regional Office (“ED-OIG”), announced today the unsealing of a criminal complaint charging four individuals, including the former Director of Financial Aid of a graduate school receiving federal funds (the “Graduate School”) and three students, with fraudulently obtaining hundreds of thousands of dollars from the Graduate School, bribery, and kickback scheme.  MELANIE WILLIAMS-BETHEA, the former Director of Financial Aid, and student ANNICE KPANA were arrested this morning and presented today before U.S. Magistrate Judge Barbara Moses.  Student CARMEN CANTY was arrested this morning in the Middle District of North Carolina, and student KYLA THOMAS, a/k/a “Kyla Britt,” was arrested this morning in the District of South Carolina; both are expected to be presented in those districts today.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, for years, these four defendants took advantage of a federal program intended to assist those who need financial aid to make higher education a reality.  The defendants’ alleged falsification of documents to show extreme financial hardship enabled the student defendants cumulatively to pocket hundreds of thousands of dollars for which they did not qualify.  A substantial portion of this stolen money was allegedly kicked back to Williams-Bethea.  Student loan fraud ultimately affects all students and taxpayers with increased fees and interest rates.”

ED-OIG Assistant Special Agent in Charge Debbi Mayer said:  “Today’s action alleges that Melanie Williams-Bethea knowingly and willfully abused her position of trust for personal gain and recruited others to assist her in a fraud scheme that targeted the very students she was supposed to help.  OIG Special Agents will continue to aggressively pursue those who seek to enrich themselves at the expense of our nation’s students.  America’s students, their families, and taxpayers deserve nothing less.”

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

From 2008 through 2017, WILLIAMS-BETHEA, KPANA, CANTY, and THOMAS engaged in fraud and bribery schemes resulting in the loss of hundreds of thousands of dollars from the Graduate School.  WILLIAMS-BETHEA, who was employed by the Graduate School as the Director of Financial Aid during the relevant time period, perpetrated the scheme by approving aid payments to KPANA, CANTY, and THOMAS (collectively, the “Students”) well in excess of their need, and then obtaining kickback payments from the students of portions of the unjustified aid. 

Specifically, WILLIAMS-BETHEA approved excessive “cost of attendance” figures for the Students that did not comport with their actual needs or costs of living, which had the effect of increasing the amount of financial aid they were eligible to receive, and by then approving stipends for the Students up to – and at times exceeding – these inflated amounts.  To facilitate some of the stipends, WILLIAMS-BETHEA created fraudulent stipend request forms for financial awards to the Students, which gave the appearance that professors or other administrators had requested stipends for KPANA, CANTY, and THOMAS, when in fact they had not, and then approved the fraudulently requested stipends herself.

After WILLIAMS-BETHEA facilitated these awards of unjustified financial aid, KPANA, CANTY, and THOMAS paid WILIAMS-BETHEA more than $350,000 in kickbacks.

*                      *                      *

WILLIAMS-BETHEA, 47, of Springfield Gardens, New York, KPANA, 35, of Valley Stream, New York, CANTY, 39, of Winston-Salem, North Carolina, and THOMAS, 39, Greer, South Carolina, each are charged with one count of conspiracy to commit bribery and fraud in connection with federal student aid, 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; and one count of bribery, which carries a maximum sentence of 10 years in prison.  WILLIAMS-BETHEA, CANTY, and THOMAS are each also charged with one count of fraud in connection with federal student aid, which carries a maximum sentence of five years in prison.

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

Mr. Berman praised the investigative work of the Department of Education Office of Inspector General in this investigation, and thanked the Graduate School for its cooperation with the investigation.

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Division of the Federal Bureau of Investigation (“FBI”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced the unsealing today of an Indictment charging VINCENT ESPOSITO, STEVEN ARENA, FRANK GIOVINCO, FRANK COGNETTA, and VINCENT D’ACUNTO, JR., each a member or associate of the Genovese Organized Crime Family of La Cosa Nostra, with racketeering conspiracy and related offenses arising out of a multi-year investigation.  COGNETTA was arrested on January 8, 2018, and charged by criminal complaint.  The remaining defendants were arrested this morning and are expected to be presented before U.S. Magistrate Judge Barbara C. Moses later today.  The case has been assigned to United States District Judge Victor Marrero.

The following allegations are based on the Indictment and other documents filed in Manhattan federal court[1]:

La Cosa Nostra, also known as the “Mob” or the “Mafia,” operates through entities known as “Families.”  One of the Families operating in the New York City area is the Genovese Crime Family.  From 2001 to 2017, ESPOSITO, ARENA, GIOVINCO, COGNETTA, and D’ACUNTO, along with other members and associates of the Genovese Crime Family, committed a wide range of crimes, including multiple acts of extortion, honest services fraud, and bribery.  In particular, and as charged in the Indictment, ESPOSITO conspired with ARENA and D’ACUNTO to extort annual cash payments from an officer at a labor union by threatening the officer with violence and the loss of the officer’s job.  COGNETTA, himself a labor union officer, engaged in multiple schemes to defraud his union of his honest services by, among other things, soliciting and accepting bribes and steering union benefit plans into investments in exchange for kickbacks.

*          *          *

Set forth below is a chart containing the names, ages, residences, charges, and maximum penalties for the defendants.  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 FBI, the NYPD, the U.S. Department of Labor’s Office of Inspector General and Office of Labor-Management Standards, and the Special Agents of the United States Attorney’s Office for the Southern District of New York.

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

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

DEFENDANT

AGE

CHARGES

MAXIMUM PENALTY

VINCENT ESPOSITO

50

RICO Conspiracy; Extortion Conspiracy

 40 years in prison

STEVEN ARENA

60

RICO Conspiracy; Extortion Conspiracy

 40 years in prison

FRANK GIOVINCO

50

RICO Conspiracy

 20 years in prison

FRANK COGNETTA

42

RICO Conspiracy; Six Counts of Honest Services Fraud; Two Counts of Bribery in Connection with Employee Benefit Plans

 126 years in prison

VINCENT D’ACUNTO, JR.

49

RICO Conspiracy; Extortion Conspiracy

 40 years in prison

[1] As the introductory phase 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.

Today, a federal grand jury returned a six-count indictment (the Indictment) against Akayed Ullah, 27, of Brooklyn, New York, in connection with Ullah’s detonation and attempted denotation of a bomb in a subway station near the New York Port Authority Bus Terminal in New York City on Dec. 11, 2017.  Three people were injured as a result of the detonation.  The Indictment charges Ullah with one count of providing and attempting to provide material support to the Islamic State of Iraq and al-Sham (ISIS), a designated foreign terrorist organization; one count of using and attempting to use a weapon of mass destruction; one count of bombing and attempting to bomb a place of public use and a public transportation system; one count of destruction and attempted destruction of property by means of fire or explosives; one count of conducting and attempting to conduct a terrorist attack against a mass transportation system; and one count of using a destructive device during and in furtherance of a crime of violence. 

Acting Assistant Attorney General for National Security Dana J. Boente and U.S. Attorney Geoffrey S. Berman of the Southern District of New York made the announcement.  The case has been assigned to the Honorable Richard J. Sullivan. 

“As alleged in the indictment Akayed Ullah constructed a pipe bomb and detonated it in a mass transit hub in the heart of New York City to terrorize as many people as possible and to bring ISIS-inspired violence to American soil,” said Acting Assistant Attorney General Boente.  “Thanks to the tremendous efforts of the law enforcement community, the defendant was safely apprehended at the scene of the attack that injured three people, and will now be held accountable to the fullest extent of the law.  The National Security Division remains steadfast in its mission to pursue justice against those who seek to harm our country and our citizens in the name of terrorism.”

“Less than one month ago, during the holiday rush hour, Akayed Ullah allegedly detonated a bomb in a major transit hub of New York City,” said U.S. Attorney Berman.  “In selecting this time and place, Ullah’s alleged purpose in the Port Authority bombing was painfully clear: to inflict as much damage as possible, and to strike fear into the hearts of New Yorkers in the name of ISIS.  Ullah’s alleged plot failed, and he is now charged with federal terrorism offenses and facing life behind bars.”

Ullah was initially arrested on a Complaint and presented before the Honorable Katharine H. Parker on Dec. 13, 2017.  Ullah was ordered detained and has been in federal custody since his arrest.  He will be arraigned before Judge Sullivan on Jan. 11, at 3:00 p.m.

As alleged in the Indictment and the Complaint:

Islamic State of Iraq and Al-Sham 

ISIS is a foreign terrorist organization based in the Middle East and Africa whose publicly stated purpose is the establishment of an Islamic state or caliphate based in the Middle East and Africa that encompasses all Muslims worldwide.  ISIS has pursued the objective of an Islamic state through, among other things, killing and deliberate targeting of civilians, mass executions, persecution of individuals and communities on the basis of their religion, nationality, or ethnicity, kidnapping of civilians, forced displacement of Shia communities and minority groups, killing and maiming of children, rape and other forms of sexual violence.  ISIS has recruited thousands of foreign fighters from across the globe to assist with its efforts to expand its so-called caliphate in Iraq, Syria and other locations in Africa and the Middle East, and has leveraged technology to spread its violent extremist ideology and for incitement to commit terrorist acts. 

The Dec. 11, 2017 Attack

On Dec. 11, 2017, at approximately 7:20 a.m., Akayed Ullah detonated an improvised explosive device (IED) detonated inside a subway terminal (the Subway Terminal) in or around the New York Port Authority Bus Terminal located at West 42nd Street and Eighth Avenue in New York, New York (the December 11 Attack).  Shortly after the blast, members of the Port Authority of New York and New Jersey Police Department (PAPD) located Ullah lying on the ground in the vicinity of the explosion.  Surveillance footage captured Ullah walking through the Subway Terminal immediately prior to the explosion, and then falling to the ground after the explosion. 

Ullah was subsequently taken into custody by law enforcement.  During the course of Ullah’s arrest, law enforcement officers located on his person and in the surrounding area what appeared to be the components of an exploded pipe bomb (the Pipe Bomb).  Specifically, law enforcement located, among other items, (i) a nine-volt battery inside Ullah’s pants pocket; (ii) wires connected to the battery and running underneath Ullah’s jacket; (iii) two plastic zip ties underneath Ullah’s jacket; (iv) several fragments of a metal pipe, including pieces of a metal end cap, on the ground; (v) the remnants of what appeared to be a Christmas tree lightbulb attached to wires; and (vi) pieces of what appear to be plastic zip ties, among other items.

After Ullah was taken into custody, he was transferred to Bellevue Hospital, where he made statements to law enforcement officers after waiving his Miranda rights.  During that interview, Ullah stated, among other things, the following:  

• Ullah constructed the Pipe Bomb and carried out the December 11 Attack.  Ullah was inspired by ISIS to carry out the December 11 Attack, and stated, among other things, “I did it for the Islamic State.”
• Ullah constructed the Pipe Bomb at his residence in Brooklyn (the Residence).
• The Pipe Bomb was composed of a metal pipe, which Ullah filled with explosive material that he created.  Ullah used Christmas tree lights, wires, and a nine-volt battery as a trigger to detonate the Pipe Bomb.  Ullah filled the Pipe Bomb with metal screws, which he believed would cause maximum damage.  Ullah used zip ties to secure the Pipe Bomb to his body.
• Ullah carried out the December 11 Attack in part because of the United States Government’s policies in, among other places, the Middle East.  One of Ullah’s goals in carrying out the December 11 Attack was to terrorize as many people as possible.  He chose to carry out the attack on a work day because he believed that there would be more people.
• Ullah’s radicalization began in at least approximately 2014.  Ullah viewed pro-ISIS materials online, including a video instructing, in substance, that if supporters of ISIS were unable to travel overseas to join ISIS, they should carry out attacks in their homelands.  He began researching how to build IEDs on the Internet approximately one year prior to the attack.
• On the morning of Dec. 11, 2017, shortly before carrying out the attack, Ullah posted a statement on his Facebook account referring to the President of the United States, stating, in substance, “Trump you failed to protect your nation.”  Ullah also posted a statement that he believed would be understood by members and supporters of ISIS to convey that Ullah carried out the attack in the name of ISIS.

Items Recovered from Ullah’s Residence

On Dec. 11, 2017, law enforcement agents conducted a search of the Residence pursuant to a judicially authorized search warrant.  Law enforcement agents recovered, among other items, (i) multiple pieces of metal pipes; (ii) pieces of wire and fragments of what appear to be Christmas tree lights; (iii) multiple screws consistent with the screws recovered at the scene of the December 11 Attack; and (iv) a passport in Ullah’s name with multiple handwritten notations, including: “O AMERICA, DIE IN YOUR RAGE.”

Three individuals were injured as a result of the December 11 Attack.

 *                     *                      *

If convicted of the charges in the Indictment, potential maximum sentences could include: (i) 20 years in prison for providing and attempting to provide material support and resources to a designated foreign terrorist organization, namely, ISIS; (ii) life in prison for using and attempting to use a weapon of mass destruction; (iii) life in prison for bombing and attempting to bomb a place of public use and a public transportation system; (iv) a maximum of 20 years in prison and a mandatory minimum sentence of five years for destruction and attempted destruction of property by means of fire or explosives; (v) life in prison for conducting and attempting to conduct a terrorist attack against a mass transportation system; and (vi) a consecutive sentence of 30 years to life in prison for using a destructive device during and in furtherance of a crime of violence.  The potential sentences are all related to Ullah’s detonation and attempted detonation of an explosive device in New York City. 

The maximum statutory sentences are prescribed by Congress and are  provided here for informational purposes only. If convicted of any offense, the sentencing of the defendant will be determined by the court after considering the advisory Sentencing Guidelines and other statutory factors.  The charges in the Indictment are merely allegations, and the defendant is presumed innocent unless and until proven guilty.

The prosecution is being handled by Assistant U.S. Attorneys Shawn G. Crowley, Rebekah Donaleski and George D. Turner of the Southern District of New York, with assistance from Trial Attorney Jerome J. Teresinski of the Counterterrorism Section of the Justice Department’s National Security Division.

Dana J. Boente, the Acting Assistant Attorney General for National Security, and Geoffrey S. Berman, the U.S. Attorney for the Southern District of New York, announced that a grand jury in the Southern District of New York has returned a six-count indictment (the “Indictment”) against AKAYED ULLAH in connection with ULLAH’s detonation and attempted detonation of a bomb in a subway station near the New York Port Authority Bus Terminal in New York City on December 11, 2017.  The Indictment charges ULLAH with one count of providing and attempting to provide material support to the Islamic State of Iraq and al-Sham (“ISIS”), one count of using and attempting to use a weapon of mass destruction, one count of bombing and attempting to bomb a place of public use and a public transportation system, one count of destruction and attempted destruction of property by means of fire or explosives, one count of conducting and attempting to conduct a terrorist attack against a mass transportation system, and one count of using a destructive device during and in furtherance of a crime of violence.  The case has been assigned to the Honorable Richard J. Sullivan. 

ULLAH was initially arrested on a Complaint and presented before the Honorable Katharine H. Parker on December 13, 2017.  ULLAH was ordered detained and has been in federal custody since his arrest.  He will be arraigned before Judge Sullivan on January 11, 2018, at 3:00 p.m.

U.S. Attorney Geoffrey S. Berman said:  “Less than one month ago, during the holiday rush hour, Akayed Ullah allegedly detonated a bomb in a major transit hub of New York City.  In selecting this time and place, Ullah’s alleged purpose in the Port Authority bombing was painfully clear: to inflict as much damage as possible, and to strike fear into the hearts of New Yorkers in the name of ISIS.  Ullah’s alleged plot failed, and he is now charged with federal terrorism offenses and facing life behind bars.”

Acting Assistant Attorney General Boente said:  “As alleged in the indictment Akayed Ullah constructed a pipe bomb and detonated it in a mass transit hub in the heart of New York City to terrorize as many people as possible and to bring ISIS-inspired violence to American soil. Thanks to the tremendous efforts of the law enforcement community, the defendant was safely apprehended at the scene of the attack that injured three people, and will now be held accountable to the fullest extent of the law.  The National Security Division remains steadfast in its mission to pursue justice against those who seek to harm our country and our citizens in the name of terrorism.”

As alleged in the Indictment and the Complaint:[1]

Islamic State of Iraq and Al-Sham 

ISIS is a foreign terrorist organization based in the Middle East and Africa whose publicly stated purpose is the establishment of an Islamic state or caliphate based in the Middle East and Africa that encompasses all Muslims worldwide.  ISIS has pursued the objective of an Islamic state through, among other things, killing and deliberate targeting of civilians, mass executions, persecution of individuals and communities on the basis of their religion, nationality, or ethnicity, kidnapping of civilians, forced displacement of Shia communities and minority groups, killing and maiming of children, rape, and other forms of sexual violence.  ISIS has recruited thousands of foreign fighters from across the globe to assist with its efforts to expand its so-called caliphate in Iraq, Syria, and other locations in Africa and the Middle East, and has leveraged technology to spread its violent extremist ideology and for incitement to commit terrorist acts. 

The December 11, 2017 Attack

On December 11, 2017, at approximately 7:20 a.m., AKAYED ULLAH detonated an improvised explosive device (“IED”) detonated inside a subway terminal (the “Subway Terminal”) in or around the New York Port Authority Bus Terminal located at West 42nd Street and Eighth Avenue in New York, New York (the “December 11 Attack”).  Shortly after the blast, members of the Port Authority of New York and New Jersey Police Department (“PAPD”) located ULLAH lying on the ground in the vicinity of the explosion.  Surveillance footage captured ULLAH walking through the Subway Terminal immediately prior to the explosion, and then falling to the ground after the explosion.  ULLAH was subsequently taken into custody by law enforcement.  During the course of ULLAH’s arrest, law enforcement officers located on his person and in the surrounding area what appeared to be the components of an exploded pipe bomb (the “Pipe Bomb”).  Specifically, law enforcement located, among other items, (i) a nine-volt battery inside ULLAH’s pants pocket; (ii) wires connected to the battery and running underneath ULLAH’s jacket; (iii) two plastic zip ties underneath ULLAH’s jacket; (iv) several fragments of a metal pipe, including pieces of a metal end cap, on the ground; (v) the remnants of what appeared to be a Christmas tree lightbulb attached to wires; and (vi) pieces of what appear to be plastic zip ties, among other items.After ULLAH was taken into custody, he was transferred to Bellevue Hospital, where he made statements to law enforcement officers after waiving his Miranda rights. 

During that interview, ULLAH stated, among other things, the following:  

• ULLAH constructed the Pipe Bomb and carried out the December 11 Attack.  ULLAH was inspired by ISIS to carry out the December 11 Attack, and stated, among other things, “I did it for the Islamic State.”
• ULLAH constructed the Pipe Bomb at his residence in Brooklyn (“the Residence”).
• The Pipe Bomb was composed of a metal pipe, which ULLAH filled with explosive material that he created.  ULLAH used Christmas tree lights, wires, and a nine-volt battery as a trigger to detonate the Pipe Bomb.  ULLAH filled the Pipe Bomb with metal screws, which he believed would cause maximum damage.  ULLAH used zip ties to secure the Pipe Bomb to his body.
• ULLAH carried out the December 11 Attack in part because of the United States Government’s policies in, among other places, the Middle East.  One of ULLAH’s goals in carrying out the December 11 Attack was to terrorize as many people as possible.  He chose to carry out the attack on a work day because he believed that there would be more people.
• ULLAH’s radicalization began in at least approximately 2014.  ULLAH viewed pro-ISIS materials online, including a video instructing, in substance, that if supporters of ISIS were unable to travel overseas to join ISIS, they should carry out attacks in their homelands.  He began researching how to build IEDs on the Internet approximately one year prior to the attack.
• On the morning of December 11, 2017, shortly before carrying out the attack, ULLAH posted a statement on his Facebook account referring to the President of the United States, stating, in substance, “Trump you failed to protect your nation.”  ULLAH also posted a statement that he believed would be understood by members and supporters of ISIS to convey that ULLAH carried out the attack in the name of ISIS.

Items Recovered from ULLAH’s Residence

On December 11, 2017, law enforcement agents conducted a search of the Residence pursuant to a judicially authorized search warrant.  Law enforcement agents recovered, among other items, (i) multiple pieces of metal pipes; (ii) pieces of wire and fragments of what appear to be Christmas tree lights; (iii) multiple screws consistent with the screws recovered at the scene of the December 11 Attack; and (iv) a passport in ULLAH’s name with multiple handwritten notations, including: “O AMERICA, DIE IN YOUR RAGE.”

 *                     *                      *

If convicted of the charges in the Indictment, potential maximum sentences could include: (i) 20 years in prison for providing and attempting to provide material support and resources to a designated foreign terrorist organization, namely, ISIS; (ii) life in prison for using and attempting to use a weapon of mass destruction; (iii) life in prison for bombing and attempting to bomb a place of public use and a public transportation system; (iv) 20 years in prison (maximum) and a mandatory minimum sentence of five years for destruction and attempted destruction of property by means of fire or explosives; (v) life in prison for conducting and attempting to conduct a terrorist attack against a mass transportation system; and (vi) a consecutive sentence of 30 years in prison (to life) for using a destructive device during and in furtherance of a crime of violence.  The potential sentences are all related to Ullah’s detonation and attempted detonation of an explosive device in New York City. 

 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. Boente and Mr. Berman praised the outstanding investigative efforts of the FBI, the NYPD, the Department of Homeland Security, Homeland Security Investigations (“HSI”), and the PAPD.  ULLAH’s arrest and indictment are the result of the close cooperative efforts of the U.S. Attorney’s Office for the Southern District of New York, the FBI’s Joint Terrorism Task Force – which consists of law enforcement officers of the FBI, NYPD, HSI, PAPD, and other agencies – and the U.S. Department of Justice’s National Security Division.

The prosecution is being handled by the Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Shawn G. Crowley, Rebekah Donaleski, and George D. Turner are in charge of the prosecution, with assistance from Trial Attorney Jerome J. Teresinski of the Counterterrorism Section of the Justice Department’s National Security Division.

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, James J. Hunt, the Special Agent in Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced additional charges in a Superseding Indictment against a member of the “Killbrook” gang based in the Mill Brook Houses in the Bronx.  In the Superseding Indictment, which was returned today, GARY DAVIS, a/k/a “Reckless,” a/k/a “Poppa,” is charged with the April 18, 2011, murder of Bolivia Beck, the girlfriend of a rival gang member.  Beck was shot and killed as she was being introduced to her boyfriend’s grandparents on a sidewalk in the Mill Brook Houses. 

DAVIS and 14 others were previously charged in an Indictment unsealed on October 11, 2017.  That Indictment charges four individuals with racketeering conspiracy, in connection with their membership in a gang known as “Killbrook,” and charges other individuals with narcotics conspiracy and firearms offenses.  In addition to the new murder charges, the Superseding Indictment contains the charges that had previously been brought in the Indictment against DAVIS and 14 others.  The case is assigned to U.S. District Judge Lorna G. Schofield. 

U.S. Attorney Geoffrey S. Berman said:   “As alleged, Bolivia Beck was the victim of a horrific murder, shot and killed in broad daylight while being introduced to her boyfriend’s grandparents.  We thank our law enforcement partners for their extraordinary efforts investigating this murder.  With their help, we are committed to making our streets and communities safer through the eradication of gangs that bring this senseless violence to our streets.” 

DEA Special Agent in Charge James Hunt stated:  “This investigation uncovered that this unnecessary and brazen murder was a result of gang violence.  I commend the hardworking prosecutors, detectives and agents who collaborated to bring additional charges against the shooter and bring justice to the victim’s family.”    

*                      *                     *

According to the allegations in the Superseding Indictment[1] and information in the public record:

On April 18, 2011, Bolivia Beck was struck in the head by a bullet as she was being introduced to her boyfriend’s grandparents on a sidewalk in the Mill Brook Houses.  The shooting occurred in broad daylight.  Beck died two days later from the gunshot wound.  The shooting arose out of an ongoing gang dispute between Killbrook and the rival “MBG” street gang. 

GARY DAVIS, 27, of the Bronx, is charged in the Superseding Indictment with one count of murder in aid of racketeering, and aiding and abetting the same, and one count of murder through the use of a firearm and aiding and abetting the same.  DAVIS faces a maximum penalty of death or life in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. 

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

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Jordan Estes, Drew Skinner, and Alexandra Rothman are in charge of the prosecution.

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

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

Joan Loughnane, the Acting Deputy United States Attorney for the Southern District of New York, announced today that SCOTT TUCKER was sentenced to 200 months in prison for operating a nationwide internet payday lending enterprise that systematically evaded state laws for more than 15 years in order to charge illegal interest rates as high as 1,000 percent on loans.  TUCKER’s co-defendant, TIMOTHY MUIR, an attorney, was also sentenced, to 84 months in prison, for his participation in the scheme.  In addition to their willful violation of state usury laws across the country, TUCKER and MUIR lied to millions of customers regarding the true cost of their loans to defraud them out of hundreds, and in some cases, thousands of dollars.  Further, as part of their multi-year effort to evade law enforcement, the defendants formed sham relationships with Native American tribes and laundered the billions of dollars they took from their customers through nominally tribal bank accounts to hide Tucker’s ownership and control of the business.

After a five-week jury trial, TUCKER and MUIR were found guilty on October 13, 2017, on all 14 counts against them, including racketeering, wire fraud, money laundering, and Truth-In-Lending Act (“TILA”) offenses.  U.S. District Judge P. Kevin Castel presided over the trial and imposed today’s sentences.

Acting Deputy U.S. Attorney Joan Loughnane said:  “For more than 15 years, Scott Tucker and Timothy Muir made billions of dollars exploiting struggling, everyday Americans through payday loans carrying interest rates as high as 1,000 percent.  And to hide their criminal scheme, they tried to claim their business was owned and operated by Native American tribes.  But now Tucker and Muir’s predatory business is closed and they have been sentenced to significant time in prison for their deceptive practices.”

According to the allegations contained in the Superseding Indictment, and evidence presented at trial:

The Racketeering Influenced Corrupt Organizations (“RICO”) Crimes

            From at least 1997 until 2013, TUCKER engaged in the business of making small, short-term, high-interest, unsecured loans, commonly referred to as “payday loans,” through the Internet.  TUCKER’s lending enterprise, which had up to 1,500 employees based in Overland Park, Kansas, did business as Ameriloan, f/k/a Cash Advance; OneClickCash, f/k/a Preferred Cash Loans; United Cash Loans; US FastCash; 500 FastCash; Advantage Cash Services; and Star Cash Processing (the “Tucker Payday Lenders”).  TUCKER, working with MUIR, the general counsel for TUCKER’s payday lending businesses since 2006, routinely charged interest rates of 600 percent or 700 percent, and sometimes higher than 1,000 percent.  These loans were issued to more than 4.5 million working people in all 50 states, including more than 250,000 people in New York, many of whom were struggling to pay basic living expenses.  Many of these loans were issued in states, including New York, with laws that expressly forbid lending at the exorbitant interest rates TUCKER charged.  Evidence at trial established that TUCKER and MUIR were fully aware of the illegal nature of the loans charged and, in fact, prepared scripts to be used by call center employees to deal with complaints by customers that their loans were illegal. 

Fraudulent Loan Disclosures

TILA is a federal statute intended to ensure that credit terms are disclosed to consumers in a clear and meaningful way, both to protect customers against inaccurate and unfair credit practices, and to enable them to compare credit terms readily and knowledgeably.  Among other things, TILA and its implementing regulations require lenders, including payday lenders like the Tucker Payday Lenders, to disclose accurately, clearly, and conspicuously, before any credit is extended, the finance charge, the annual percentage rate, and the total of payments that reflect the legal obligation between the parties to the loan.

The Tucker Payday Lenders purported to inform prospective borrowers, in clear and simple terms, as required by TILA, of the cost of the loan (the “TILA Box”).  For example, for a loan of $500, the TILA Box provided that the “finance charge – meaning the ‘dollar amount the credit will cost you’” – would be $150, and that the “total of payments” would be $650.  Thus, in substance, the TILA Box stated that a $500 loan to the customer would cost $650 to repay.  While the amounts set forth in the Tucker Payday Lenders’ TILA Box varied according to the terms of particular customers’ loans, they reflected, in substance, that the borrower would pay $30 in interest for every $100 borrowed.

In fact, through at least 2012, TUCKER and MUIR structured the repayment schedule of the loans such that, on the borrower’s payday, the Tucker Payday Lenders automatically withdrew the entire interest payment due on the loan, but left the principal balance untouched so that, on the borrower’s next payday, the Tucker Payday Lenders could again automatically withdraw an amount equaling the entire interest payment due (and already paid) on the loan.  With TUCKER and MUIR’s approval, the Tucker Payday Lenders proceeded automatically to withdraw such “finance charges” payday after payday (typically every two weeks), applying none of the money toward repayment of principal, until at least the fifth payday, when they began to withdraw an additional $50 per payday to apply to the principal balance of the loan.  Even then, the Tucker Payday Lenders continued to assess and automatically withdraw the entire interest payment calculated on the remaining principal balance until the entire principal amount was repaid.  Accordingly, as TUCKER and MUIR well knew, the Tucker Payday Lenders’ TILA box materially understated the amount the loan would cost, including the total of payments that would be taken from the borrower’s bank account.  Specifically, for a customer who borrowed $500, contrary to the TILA Box disclosure stating that the total payment by the borrower would be $650, in fact, and as TUCKER and MUIR well knew, the finance charge was $1,425, for a total payment of $1,925 by the borrower. 

The Sham Tribal Ownership of the Business

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

In order to create the illusion that the Tribes owned and controlled TUCKER’s payday lending business, TUCKER and MUIR engaged in a series of lies and deceptions.  Among other things:

• MUIR and other counsel for TUCKER prepared false factual declarations from tribal representatives that were submitted to state courts, falsely claiming, among other things, that tribal corporations substantively owned, controlled, and managed the portions of TUCKER’s business targeted by state enforcement actions.

• TUCKER opened bank accounts to operate and receive the profits of the payday lending enterprise, which were nominally held by tribally owned corporations, but which were, in fact, owned and controlled by TUCKER.  TUCKER received over $380 million from these accounts on lavish personal expenses, some of which was spent on a fleet of Ferraris and Porsches, the expenses of a professional auto racing team, a private jet, a luxury home in Aspen, Colorado, and his personal taxes.

• In order to deceive borrowers into believing that they were dealing with Native American tribes, employees of TUCKER making payday loans over the phone told borrowers, using scripts directed and approved by TUCKER and MUIR, that they were operating in Oklahoma and Nebraska, where the Tribes were located, when in fact they were operating at TUCKER’s corporate headquarters in Kansas.

These deceptions succeeded for a time, and several state courts dismissed enforcement actions against TUCKER’s payday lending businesses based on claims that they were protected by sovereign immunity.  In reality, the Tribes neither owned nor operated any part of TUCKER’s payday lending business.  The Tribes made no payment to TUCKER to acquire the portions of the business they purported to own.  TUCKER continued to operate his lending business from a corporate headquarters in Kansas, and TUCKER continued to reap the profits of the payday lending businesses, which generated over $3.5 billion in revenue from just 2008 to June 2013 – in substantial part by charging struggling borrowers high interest rates expressly forbidden by state laws.

*                      *                     *

In addition to their prison terms, TUCKER, 55, of Leawood, Kansas, and MUIR, 46, of Overland Park, Kansas, were each sentenced to three years of supervised release.  Judge Castel ordered the defendants to forfeit the proceeds of their crimes.  TUCKER was remanded into custody. 

In pronouncing sentence, Judge Castel described the crimes as “a scheme to extract money from people in desperate circumstances” that “created heartbreak and sorrow . . . not just a financial loss.”

Mrs. Loughnane praised the outstanding investigative work of the St. Louis Field Office of the IRS-CI.  Mrs. Loughnane also thanked the Criminal Investigators at the United States Attorney’s Office, the Federal Bureau of Investigation, and the Federal Trade Commission for their assistance with the case.

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

A New Jersey-based real estate broker pleaded guilty today to foreign bribery charges in connection with his role in a scheme to bribe a foreign official in the Middle East to secure a real estate deal for a South Korean construction company, Keangnam Enterprises Co. Ltd. (Keangnam). 

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 William F. Sweeney Jr. of the FBI’s New York Field Office made the announcement.

Joo Hyun Bahn, aka Dennis Bahn, 39, of Tenafly, New Jersey, pleaded guilty in federal court in Manhattan to one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and one count of violating the FCPA.  U.S. District Judge Edgardo Ramos of the Southern District of New York accepted the guilty plea.  Sentencing is scheduled for June 29 at 11 am.

Bahn was charged alongside his father, Ban Ki Sang (Ban), and Malcolm Harris in December 2016.  Ban was a senior executive at Keangnam.  Harris, an arts and fashion consultant and blogger, held himself out as an agent of a foreign official.

“Bribery and corruption undermine fair competition and the rule of law,” said Acting Assistant Attorney General Cronan.  “The fact that Joo Hyun Bahn’s intended scheme was thwarted by the greed and deception of one of his codefendants does not change the fact that he sought to steer an $800 million real estate deal by paying hundreds of thousands of dollars in bribes.  The Department is committed to prosecuting those like Bahn who seek to corruptly tilt the playing field to their advantage.”

“As he has now admitted, Joo Hyun Bahn schemed to bribe a foreign official to close an $800 million real estate deal for a skyscraper in Vietnam -- a deal that would have earned him a multimillion-dollar commission and much needed capital for his client, Keangnam Enterprises,” said Manhattan U.S. Attorney Berman.  “As Bahn’s conviction demonstrates, federal law enforcement stands ready to root out commercial bribery wherever it is found.”

According to admissions made in connection with Bahn’s plea, from between February 2014 and May 2015, Bahn joined a scheme to pay bribes to a foreign official in a country in the Middle East in order to facilitate the sale by Keangnam of a commercial building known as Landmark 72 in Hanoi, Vietnam, to the Middle Eastern country’s sovereign wealth fund.  In particular, Bahn, Ban and others agreed to pay $500,000 upfront to the foreign official, who he believed made decisions about the acquisition of assets for the Middle Eastern country’s sovereign wealth fund, in order to corruptly influence him to cause the sovereign wealth fund to purchase Landmark 72. In furtherance of the scheme, Bahn and Ban transferred $500,000 to Harris for him to pass on to the foreign official.  In related proceedings, codefendant Harris admitted that he double-crossed his codefendants, and simply stole the $500,000 bribe.

Harris pleaded guilty to his role in the scheme on June 21, 2017, and was sentenced to 42 months in prison.  Ban is still awaiting trial.  All defendants are presumed innocent unless convicted beyond a reasonable doubt in a court of law.

The FBI’s International Corruption Squad in New York City investigated the case.  In 2015, the FBI formed International Corruption Squads across the country to address national and international implications of foreign corruption.  Trial Attorney Dennis R. Kihm of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Daniel S. Noble of the Southern District of New York are prosecuting the case.  The Criminal Division’s Office of International Affairs also provided substantial assistance in this matter.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and John P. Cronan, Acting Assistant Attorney General of the Criminal Division of the U.S. Department of Justice, announced that JOO HYUN BAHN, a/k/a “Dennis Bahn” (“BAHN”) pled guilty today to one count of conspiracy to violate the Foreign Corrupt Practices Act (“FCPA”) and one count of violating the FCPA.  BAHN pled guilty before U.S. District Judge Edgardo Ramos, and is scheduled to sentence BAHN on June 29, 2018.

Manhattan U.S. Attorney Geoffrey Berman said:  “As he has now admitted, Joo Hyun Bahn schemed to bribe a foreign official to close an $800 million real estate deal for a skyscraper in Vietnam -- a deal that would have earned him a multimillion-dollar commission and much needed capital for his client, Keangnam Enterprises.  As Bahn’s conviction demonstrates, federal law enforcement stands ready to root out commercial bribery wherever it is found.”

Acting Assistant Attorney General Cronan said:  “Bribery and corruption undermine fair competition and the rule of law.  The fact that Joo Hyun Bahn’s intended scheme was thwarted by the greed and deception of one of his codefendants does not change the fact that he sought to steer an $800 million real estate deal by paying hundreds of thousands of dollars in bribes.  The Department is committed to prosecuting those like Bahn who seek to corruptly tilt the playing field to their advantage.”

According to the allegations contained in the Indictment to which BAHN pled guilty, and statements made during the plea and other court proceedings:

Between February 2014 and May 2015, BAHN engaged in a scheme to pay bribes to a foreign official in a country in the Middle East in order to facilitate the sale of Landmark 72 in Hanoi, Vietnam, to the Middle Eastern country’s sovereign wealth fund.  In particular, BAHN, his father Ban Ki Sang, and others agreed to pay $500,000 upfront to the foreign official, whom BAHN believed made decisions about the acquisition of assets for the Middle Eastern country’s sovereign wealth fund, in order to corruptly influence him to cause the sovereign wealth fund to purchase Landmark 72. In furtherance of the scheme, BAHN and Ban transferred $500,000 to an intermediary in New York, Malcolm Harris, which BAHN believed Harris would pass on to the foreign official.  In related proceedings, Harris admitted that he double-crossed his codefendants, and simply stole the $500,000 bribe.

*                *                *

BAHN, 39, of Tenafly, New Jersey, pled guilty to one count of conspiracy to violate the FCPA and one count of violating the FCPA, each of 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.   

On June 21, 2017, Harris pled guilty to one count of wire fraud and one count of conducting monetary transactions in illicit funds.  On October 5, 2017, Judge Ramos sentenced Harris to 42 months in prison. 

The case against Ban, 70, of Seoul, South Korea, is still pending.  Ban is presumed innocent unless convicted beyond a reasonable doubt in a court of law.

Mr. Berman and Mr. Cronan praised the outstanding investigative work of the International Corruption Squad of the Federal Bureau of Investigation’s New York Field Office.  Mr. Berman also thanked the Department of Justice’s Office of International Affairs for its ongoing assistance in this investigation. 

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorney Daniel S. Noble and Trial Attorney Dennis R. Kihm of the Fraud Section of the Justice Department’s Criminal Division are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, today announced the selection of Robert Khuzami as Deputy U.S. Attorney.

Mr. Khuzami will return to the Office from the law firm of Kirkland & Ellis, where he is a partner in the Government & Internal Investigations Practice Group.  Mr. Khuzami was an Assistant U.S. Attorney in the Office for 12 years, from 1990 to 2002, and for three of those years, he served as Chief of the Office’s Securities and Commodities Fraud Task Force.  Mr. Khuzami was a 1996 recipient of the Attorney General’s Award for Exceptional Service for his work in the prosecution of Omar Abdel Rahman and nine co-defendants for an international terrorist conspiracy targeting New York City landmarks.  From 2009 to 2013, Mr. Khuzami was the Director of Enforcement for the U.S. Securities and Exchange Commission.  Mr. Khuzami graduated magna cum laude from the University of Rochester in 1979, where he was a member of Phi Beta Kappa, and from Boston University School of Law in 1983.

In making the appointment, Manhattan U.S Attorney Geoffrey S. Berman said: “I am extremely pleased that Rob Khuzami will be returning to public service as Deputy U.S. Attorney.  Rob was an outstanding AUSA during his prior tenure in the Office, and he has since distinguished himself in further public service and in the private sector.  I am confident that with his intelligence, experience, and judgment, Rob will be an outstanding Deputy U.S. Attorney.  I welcome Rob’s return, and I thank Joan Loughnane for her exceptional work as the Deputy U.S. Attorney for the last 10 months.  She will resume her role as Chief Counsel upon Rob’s arrival.”

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced today that there is insufficient evidence to pursue federal criminal charges in connection with the fatal shooting of Kenneth Chamberlain.  Mr. Chamberlain was killed during an encounter with police officers from the White Plains Police Department (“WPPD”) on November 19, 2011.  Mr. Chamberlain was 68 years old at the time. 

Our Office opened an investigation following the decision by a New York State grand jury not to indict any of the officers involved.  On November 17, 2016, a federal jury in a civil case filed by Mr. Chamberlain’s family concluded that the City of White Plains and the officer who shot Mr. Chamberlain were not liable for the death of Mr. Chamberlain.  After conducting a thorough and independent investigation, the U.S. Attorney’s Office has determined that there is insufficient evidence to meet the high burden of proof required for a federal criminal civil rights prosecution.  To prove a violation of the federal criminal civil rights statute, prosecutors must establish, beyond a reasonable doubt, that a law enforcement officer willfully deprived an individual of a constitutional right, meaning that the officer acted with the deliberate and specific intent to do something the law forbids.  This is the highest standard of intent imposed by law, and is different from and higher than the intent standard under relevant state statutes.  Accident, mistake, fear, negligence, or bad judgment is not sufficient to establish a federal criminal civil rights violation.

The evidence from the investigation reveals the following:  At approximately 5:00 a.m. on November 19, 2011, a medical alert company, Life Aid, received an alert from the console in Mr. Chamberlain’s apartment in the Winbrook Houses complex on South Lexington Avenue in White Plains.  In response to the alert, a Life Aid operator called the console and asked if Mr. Chamberlain needed medical assistance.  Receiving no response, the operator then called the WPPD and informed the dispatcher that she had received a medical alert from Mr. Chamberlain’s apartment and that Mr. Chamberlain had not responded to her call.  An ambulance and a police officer were dispatched to the scene.  The WPPD dispatcher also ran a computer check on Mr. Chamberlain and his address, and learned that there had previously been calls from that address that had been described as involving a person who was potentially emotionally disturbed.  Based on that information, the dispatcher sent two additional police officers, including Sergeant Keith Martin, to the building as back-up and informed them of the possibility of encountering an emotionally disturbed person.  Upon arriving at Mr. Chamberlain’s apartment, the officers banged on the door and asked to be admitted to confirm he did not need assistance, but Mr. Chamberlain refused to allow the officers to enter the apartment.  The officers called for additional back-up, and four additional officers were dispatched to the apartment with tactical gear, including Police Officers Anthony Carelli and Steven Hart, and Sergeant Stephen Fottrell.  Officers Carelli and Hart were part of the Neighborhood Conditions Unit, a tactical unit of the WPPD assigned to patrol the Winbrook Houses, and were able to obtain a master key to the apartment.  The officers used the key to open the door to the apartment, but were only able to open the door a few inches because Mr. Chamberlain had engaged a safety lock on the door. 

At approximately 5:25 a.m., Life Aid received a second call from Mr. Chamberlain, who stated, “I have the White Plains Police Department banging on my door and I did not call them, and I am not sick.”  Life Aid attempted to cancel the dispatch, but the WPPD dispatcher informed Life Aid that the police officers needed to enter the apartment to make sure Mr. Chamberlain was not in distress.  The Life Aid operator stayed on the line for approximately 40 minutes while also attempting to contact Mr. Chamberlain’s sister.  Because Life Aid records its calls, there are audio recordings of Mr. Chamberlain’s conversations with the police officers from 5:25 a.m. until approximately 6:08 a.m., when the Life Aid call ended in order to allow Mr. Chamberlain’s sister to call the home phone.  During that time period, the recordings captured the near constant communications between the police officers trying to enter the apartment and Mr. Chamberlain, who refused to open the door.  For example, the recordings show that the officers at the door repeatedly told Mr. Chamberlain that they could not leave until they could see him and make sure he was “okay,” and Mr. Chamberlain responded that he was “okay” and “fine,” but also cursed at the officers, and at one point said he would “kill” whoever came through the door.     

Between 5:30 a.m. and 6:00 a.m., the police officers worked with various tools to pry open the apartment door.  While they were trying to open the door, Mr. Chamberlain poked a kitchen knife through the door opening.  Officer Carelli grabbed the knife with bolt cutters and tossed it out of reach.  While the officers were trying to open the door, Life Aid was able to reach Mr. Chamberlain’s sister, who spoke to Officer Carelli on a cell phone.  As captured on the Life Aid recording, Mr. Chamberlain’s sister informed Officer Carelli that Mr. Chamberlain had a “mental problem,” and Officer Carelli responded that the officers wanted to enter the apartment to make sure Mr. Chamberlain was “okay.”  The recording also indicates that as the officers continued to try to open the door, Mr. Chamberlain became increasingly agitated; he at times threatened the officers; and he told the Life Aid operator that he had a weapon.  Throughout this time period, the officers continued to explain that they were not there to hurt him, but just wanted to see him to make sure he was fine before they could leave.  While one of the officers was alleged to have used a racial slur in communicating with Mr. Chamberlain, that officer was not involved in the shooting, and none of the other officers present heard the use of such a slur.  

At some point between 6:13 a.m. and 6:29 a.m., one of the officers kicked the apartment door open.  At the time this occurred, Sergeant Fottrell had turned on his Taser, which automatically activated the video recording device on the Taser.  As seen on the video recorded by Sergeant Fottrell’s Taser, Mr. Chamberlain was standing about six to seven feet from the doorway when the door was opened and there appeared to be an object in his right hand.  According to all four officers who entered the apartment, the object in Mr. Chamberlain’s right hand was a knife.  The Taser also recorded Sergeant Fottrell instructing Mr. Chamberlain to “put the knife down” and Mr. Chamberlain responding “shoot me, come on motherfucker, shoot me.”  Sergeant Fottrell deployed his Taser twice from the hallway.  After the second Taser was deployed, the Taser automatically ceased recording.  The Tasers failed to incapacitate Mr. Chamberlain, as only one of the two barbs fired from the weapon connected with Mr. Chamberlain’s body.  After the Tasers were deployed, one of the officers fired non-lethal beanbag ammunition rounds, striking Mr. Chamberlain in his chest and thigh.  The non-lethal rounds did not incapacitate Mr. Chamberlain and he started to advance toward Sergeant Martin with the knife.  At that point, Officer Carelli shot his pistol twice from inside the doorway.  One of the bullets shot by Officer Carelli hit Mr. Chamberlain and fatally wounded him.  Once Mr. Chamberlain fell to the ground, Officer Steven Demchuk used his baton to strike Mr. Chamberlain’s wrist to make him drop the knife.  The autopsy report indicates that Mr. Chamberlain’s death was caused by the bullet shot by Officer Carelli.

In the context of this case, to establish a violation of federal law, the Department of Justice would be required to establish beyond a reasonable doubt that, at the time of the shooting, Officer Carelli lacked probable cause to believe that Mr. Chamberlain posed a significant threat of death or serious physical injury to the officer or to others, and that Officer Carelli willfully deprived Mr. Chamberlain of his right to be free from excessive force.  The weight of the evidence indicates that, at the time the shooting took place, the WPPD officers believed that Mr. Chamberlain was threatening Sergeant Martin with a knife and that Officer Carelli believed that Sergeant Martin was in danger of being seriously injured by Mr. Chamberlain. 

The investigation revealed no evidence to refute Officer Carelli’s testimony that he shot Mr. Chamberlain in response to his belief that Sergeant Martin was in danger of being seriously physically injured by Mr. Chamberlain.  The statements of the other officers present corroborate Officer Carelli’s account – namely, that Mr. Chamberlain had a knife and that he advanced toward Sergeant Martin with that knife before Officer Carelli shot his pistol.  There is no physical or other evidence that contradicts these accounts, nor is there any video of the shooting itself, as the Taser video stopped recording after the Tasers were deployed.  Accordingly, the Department of Justice cannot conclude or prove beyond a reasonable doubt that there was a federal criminal civil rights violation.

Accordingly, this Office’s investigation into Mr. Chamberlain’s death has been closed.

This Office analyzed these issues under the standard applicable to criminal cases, which is proof beyond a reasonable doubt.  The Office expresses no view regarding any claims made against any party under the standard applicable to civil cases, which is proof by a preponderance of the evidence.

Mr. Kim expressed his deep sympathy to the family of Mr. Chamberlain for their tragic loss.

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced today that JOHN EDWARD TAYLOR a/k/a “Jay Taylor,” a/k/a “Josie Reeser,” was sentenced today to 46 months in prison in connection with his seven-year scheme to defraud multiple victims into providing their personal identifying information, which Taylor had used to make hundreds of thousands of dollars in unauthorized purchases.  Taylor pled guilty on September 19, 2017, before U.S. District Judge Laura Taylor Swain, who imposed today’s sentence.

Acting U.S. Attorney Joon H. Kim said:  “John Edward Taylor used online dating and networking sites to cultivate prospective victims.  This admitted confidence man stole personal information and looted the bank accounts of women across the country – and then threatened them when they discovered his schemes.  Now Taylor will spend years in federal prison for his deceitful conduct.”  

According to the allegations in the Complaint, the Indictment, and statements made at related court proceedings, including today’s sentencing:

JOHN EDWARD TAYLOR, a/k/a “Jay Taylor,” a/k/a “Josie Reeser,” stole, or attempted to steal, money, credit, and personal information from more than a dozen women (the “Victims”) in cities across the country, including New York City, Chicago, Atlanta, and Philadelphia.

TAYLOR contacted Victims using online matchmaking and networking websites, such as Match.com, eHarmony, Craigslist, and Seeking Arrangement.  TAYLOR typically introduced himself as “Jay” and often falsely described himself as a wealthy businessman with oil and land interests in North Dakota.  To some Victims, TAYLOR feigned interest in hiring the Victims to work on a new business TAYLOR purported to be creating.  To other Victims, TAYLOR expressed an interest in a romantic and personal relationship. To most Victims, TAYLOR purported to be interested in both a personal and a professional relationship.

Using a variety of false pretenses, TAYLOR obtained the Victims’ personal identifying information, often including birthdates, addresses, and bank and credit account numbers.  TAYLOR used the Victims’ personal identifying information to purchase goods, transfer funds, and open new accounts – all without authorization.  In certain circumstances, TAYLOR opened accounts without the Victims’ knowledge.  In other circumstances, TAYLOR opened accounts that he assured Victims were business accounts, but were, in fact, personal accounts in the Victims’ names, over which TAYLOR maintained exclusive control.

Often within a matter of months, Victims would discover thousands of dollars in unauthorized charges and transfers in their existing accounts, receive bills for accounts they had never created, or learn their existing accounts had been closed due to delinquency.

Independent of each other, multiple Victims confronted TAYLOR about his activities.  To some, TAYLOR responded with insults.  To others, TAYLOR responded with promises to repay the losses – and on at least one occasion attempted to repay one Victim with funds unlawfully obtained from another Victim.  On multiple occasions, TAYLOR threatened to transmit sexually explicit images of the Victims – which he had obtained as part of his purported romantic relationships with them – to the Victims’ employers if the Victims tried to collect their debts.

*                *                *

In addition to the prison term, TAYLOR, 49, was sentenced to five years of supervised release, and was ordered to pay restitution in the amount of $290,184.

Mr. Kim praised the outstanding work of the Federal Bureau of Investigation 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 Jonathan Rebold and Andrew Thomas are in charge of the case.

Mehmet Hakan Atilla was found guilty today of conspiring with others, including Reza Zarrab, aka Riza Sarraf, who previously pleaded guilty to evading U.S. sanctions among other offenses, to use the U.S. financial system to conduct transactions on behalf of the Government of Iran and other Iranian entities, which were barred by U.S. sanctions, and to defraud U.S. financial institutions by concealing these transactions’ true nature.  

Acting Assistant Attorney General for National Security Dana J. Boente and Acting U.S. Attorney Joon H. Kim for the Southern District of New York made the announcement.  The jury convicted Atilla of five charges in the controlling indictment following a four-week trial before U.S. District Judge Richard M. Berman.

“For years, Mehmet Hakan Atilla conspired to use the American financial system to conduct millions of dollars’ worth of illegal transactions on behalf of the Government of Iran,” said Acting Assistant Attorney General Boente.  “He used his high rank at a Turkish bank to disguise the transactions as humanitarian food payments and deceive American officials, but now, after receiving due process of law, he has been held accountable in court, by an impartial jury.  This successful prosecution is another example of our resolve to pursue and bring to justice those who violate our sanctions and other laws that protect our national security.”

“Today, after a full, fair, and open trial, a unanimous jury convicted Hakan Atilla, a senior banker at Halk Bank,” said Acting U.S. Attorney Kim.  “Along with the prior guilty plea of Reza Zarrab, two men at the heart of this massive and brazen scheme that blew a billion-dollar hole in the Iran sanctions regime now stand convicted of serious federal crimes.  Foreign banks and bankers have a choice:  You can choose willfully to help Iran and other sanctioned nations evade U.S. law, or you can choose to be part of the international banking community transacting in U.S. dollars.  But you can’t do both.  If you lie repeatedly to U.S. Treasury officials and fabricate documents – all as part of a secret scheme to smuggle billions of dollars in Iranian oil money past the U.S. sanctions net – as Atilla did, then you should be prepared for the consequences.  The consequence of Atilla’s choice is now a felony conviction in an American court of law.”

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

Beginning in or about 1979, the President, pursuant to the International Emergency Economic Powers Act (IEEPA), has repeatedly found that the actions and policies of the government of Iran constitute an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States and declared a national emergency to deal with the threat.  In accordance with these presidential declarations, the United States has instituted a host of economic sanctions against Iran and Iranian entities.  This sanctions regime prohibits, among other things, financial transactions involving the United States or United States persons that were intended for the Government of Iran or Iranian entities. 

Atilla, Zarrab and others used deceptive measures to provide access to international financial networks, including U.S. financial institutions, to the Government of Iran, Iranian entities and entities identified by the Department of the Treasury Office of Foreign Assets Control as Specially Designated Nationals (SDNs).  They did so by, among other things, using the Turkish bank at which Atilla acted as Deputy General Manager of International Banking (Turkish Bank-1) to engage in transactions that violated U.S. sanctions against Iran.  In particular, they took steps to protect and hide Zarrab’s supply of currency and gold to the Government of Iran, Iranian entities, and SDNs using Turkish Bank-1, and in doing so, shielded Turkish Bank-1 from U.S. sanctions.  Atilla, Zarrab, and others conspired to create and use false and fraudulent documents to disguise prohibited transactions for Iran and make those transactions falsely appear as transactions involving food, thus falling within humanitarian exceptions to the sanctions regime.  As a result of this scheme, the co-conspirators induced U.S. banks to unknowingly process international financial transactions in violation of the IEEPA. 

*                *                *

Mehmet Hakan Atilla, 47, is a resident and citizen of Turkey.  Atilla was convicted of conspiracies to defraud the United States, to violate the IEEPA, to commit bank fraud and to commit money laundering, as well as a substantive count of bank fraud.  The conspiracy to defraud the United States count carries a maximum term of imprisonment of five years.  The conspiracy to violate the IEEPA and money laundering conspiracy counts each carry a maximum term of imprisonment of 20 years.  The bank fraud counts each carry a maximum term of imprisonment of 30 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.  Atilla is scheduled to be sentenced on April 11, before Judge Berman.

Zarrab, 34, also a resident and citizen of Turkey, pleaded guilty Oct. 26, 2017, to one count of conspiring to defraud the United States, which carries a maximum sentence of five years in prison; one count of conspiracy to violate the IEEPA, which carries a maximum sentence of 20 years in prison; one count of bank fraud, which carries a maximum sentence of 30 years in prison; one count of conspiring to commit bank fraud, which carries a maximum sentence of 30 years in prison; one count of money laundering, which carries a maximum sentence of 20 years in prison; one count of conspiring to commit money laundering, which carries a maximum sentence of 20 years in prison; and one count of conspiring to bribe a U.S. public official and possessing contraband in a federal detention center, which carries a maximum sentence of five years in prison.  Zarrab’s sentencing date has not been scheduled. 

Mr. Boente and Mr. Kim praised the outstanding investigative work of the FBI and its New York Field Office, Counterintelligence Division. 

Assistant U.S. Attorneys Michael D. Lockard, Sidhardha Kamaraju and David W. Denton, Jr., and Special Assistant U.S. Attorney Dean Sovolos of the Southern District of New York are in charge of the prosecution, with assistance from Deputy Chief Elizabeth Cannon and Trial Attorney David Recker of the National Security Division’s Counterintelligence and Export Control Section. 

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and Dana J. Boente, Acting Assistant Attorney General for National Security, announced that MEHMET HAKAN ATILLA was found guilty today of conspiring with others, including Reza Zarrab, a/k/a “Riza Sarraf,” who previously pled guilty to evading U.S. sanctions among other offenses, to use the U.S. financial system to conduct transactions on behalf of the Government of Iran and other Iranian entities, which were barred by U.S. sanctions, and to defraud U.S. financial institutions by concealing these transactions’ true nature.  The jury convicted ATILLA on five of six charges in the controlling indictment following a four-week trial before U.S. District Judge Richard M. Berman.

Acting U.S. Attorney Joon H. Kim stated:  “Today, after a full, fair, and open trial, a unanimous jury convicted Hakan Atilla, a senior banker at Halk Bank.  Along with the prior guilty plea of Reza Zarrab, two men at the heart of this massive and brazen scheme that blew a billion-dollar hole in the Iran sanctions regime now stand convicted of serious federal crimes.  Foreign banks and bankers have a choice:  You can choose willfully to help Iran and other sanctioned nations evade U.S. law, or you can choose to be part of the international banking community transacting in U.S. dollars.  But you can’t do both.  If you lie repeatedly to U.S. Treasury officials and fabricate documents – all as part of a secret scheme to smuggle billions of dollars in Iranian oil money past the U.S. sanctions net – as Atilla did, then you should be prepared for the consequences.  The consequence of Atilla’s choice is now a felony conviction in an American court of law.”   

Acting Assistant Attorney General Dana J. Boente stated:  “For years, Mehmet Hakan Atilla conspired to use the American financial system to conduct millions of dollars’ worth of illegal transactions on behalf of the Government of Iran.  He used his high rank at a Turkish bank to disguise the transactions as humanitarian food payments and deceive American officials, but now, after receiving due process of law, he has been held accountable in court, by an impartial jury.  This successful prosecution is another example of our resolve to pursue and bring to justice those who violate our sanctions and other laws that protect our national security.”

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

Beginning in or about 1979, the President, pursuant to the International Emergency Economic Powers Act (the IEEPA), has repeatedly found that the actions and policies of the government of Iran constitute  an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States and declared a national emergency to deal with the threat.  In accordance with these presidential declarations, the United States has instituted a host of economic sanctions against Iran and Iranian entities.  This sanctions regime prohibits, among other things, financial transactions involving the United States or United States persons that were intended for the Government of Iran or Iranian entities. 

Specifically, ATILLA, Zarrab, and others used deceptive measures to provide access to international financial networks, including U.S. financial institutions, to the Government of Iran, Iranian entities, and entities identified by the Department of the Treasury Office of Foreign Assets Control as Specially Designated Nationals (“SDNs“).  They did so by, among other things, using Halk Bank, at which ATILLA acted as Deputy General Manager of International Banking, to engage in transactions that violated U.S. sanctions against Iran.  In particular, they took steps to protect and hide Zarrab’s supply of currency and gold to the Government of Iran, Iranian entities, and SDNs using Halk Bank, and in doing so, shielded the bank from U.S. sanctions.  ATILLA, Zarrab, and others conspired to create and use false and fraudulent documents to disguise prohibited transactions for Iran and make those transactions falsely appear as transactions involving food, thus falling within humanitarian exceptions to the sanctions regime.  As a result of this scheme, the co-conspirators induced U.S. banks to unknowingly process international financial transactions in violation of the IEEPA. 

*                *                *

Mehmet Hakan Atilla, 47, is a resident and citizen of Turkey.  Atilla was convicted of conspiracies to defraud the United States, to violate the IEEPA, to commit bank fraud and to commit money laundering, as well as a substantive count of bank fraud.  The conspiracy to defraud the United States count carries a maximum term of imprisonment of five years.  The conspiracy to violate the IEEPA and money laundering conspiracy counts each carry a maximum term of imprisonment of 20 years.  The bank fraud counts each carry a maximum term of imprisonment of 30 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.  ATILLA is scheduled to be sentenced on April 11, 2018, before Judge Berman.

Zarrab, 34, also a resident and citizen of Turkey, pled guilty October 26, 2017, to one count of conspiring to defraud the United States, which carries a maximum sentence of five years in prison; one count of conspiracy to violate the IEEPA, which carries a maximum sentence of 20 years in prison; one count of bank fraud, which carries a maximum sentence of 30 years in prison; one count of conspiring to commit bank fraud, which carries a maximum sentence of 30 years in prison; one count of money laundering, which carries a maximum sentence of 20 years in prison; one count of conspiring to commit money laundering, which carries a maximum sentence of 20 years in prison; and one count of conspiring to bribe a U.S. public official and possessing contraband in a federal detention center, which carries a maximum sentence of five years in prison.  Zarrab’s sentencing date has not been scheduled. 

Mr. Kim and Mr. Boente praised the outstanding investigative work of the FBI and its New York Field Office, Counterintelligence Division. 

Assistant U.S. Attorneys Michael D. Lockard, Sidhardha Kamaraju and David W. Denton, Jr., and Special Assistant U.S. Attorney Dean Sovolos of the Southern District of New York are in charge of the prosecution, with assistance from Deputy Chief Elizabeth Cannon and Trial Attorney David Recker of the National Security Division’s Counterintelligence and Export Control Section. 

“Today, after a full, fair, and open trial, a unanimous jury convicted Hakan Atilla, a senior banker at Halk Bank.  Along with the prior guilty plea of Reza Zarrab, two men at the heart of this massive and brazen scheme that blew a billion-dollar hole in the Iran sanctions regime now stand convicted of serious federal crimes.  Foreign banks and bankers have a choice:  You can choose willfully to help Iran and other sanctioned nations evade U.S. law, or you can choose to be part of the international banking community transacting in U.S. dollars.  But you can’t do both.  If you lie repeatedly to U.S. Treasury officials and fabricate documents – all as part of a secret scheme to smuggle billions of dollars in Iranian oil money past the U.S. sanctions net – as Atilla did, then you should be prepared for the consequences.  The consequence of Atilla’s choice is now a felony conviction in an American court of law.”

Attorney General Jeff Sessions today announced the appointment of Geoffrey S. Berman as Interim United States Attorney pursuant to 28 U.S.C. § 546, which provides that “the Attorney General may appoint a United States Attorney for the district in which the office of United States Attorney is vacant.”  This appointment will take effect on January 5, 2018.

Attorney General Jeff Sessions said:  “Geoffrey Berman brings three decades of invaluable experience to the role of Interim United States Attorney.  He was part of the prosecution team charged with investigating the Iran-Contra matter and served as a federal prosecutor in the Southern District of New York.  As Interim U.S. Attorney for this same district, he will lead an incredible team of attorneys and investigators and help provide New Yorkers with safety, security, and peace of mind.  I am pleased to appoint him to this important role.”

Biographical information for Interim U.S. Attorney Geoffrey S. Berman:

• Mr. Berman is currently a principal shareholder in the New York and New Jersey offices of Greenberg Traurig.
• From 1990 to 1994, Mr. Berman was an Assistant U.S. Attorney in the Southern District of New York, where he handled complex criminal prosecutions, including tax, securities and computer hacking violations.
• Prior to that Mr. Berman was an Associate Counsel in the Office of Independent Counsel Iran-Contra, where he successfully prosecuted a former CIA employee for tax fraud.
• Mr. Berman clerked for Judge Leonard Garth of the United States Court of Appeals for the Third Circuit.
• Mr. Berman received his B.A., magna cum laude, from University of Pennsylvania and his B.A., beta gamma sigma, from the Wharton School.  Mr. Berman received his J.D. from Stanford Law School, where he was Note Editor of the Stanford Law Review.

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that KALEIL ISAZA TUZMAN, the former chairman of the board of directors and chief executive officer of the technology start-up company KIT digital (“KITD”), and OMAR AMANAT, an associate of Tuzman’s, were found guilty this afternoon in Manhattan federal court of various securities fraud-related offenses, after a six-week trial presided over by U.S District Judge Paul G. Gardephe. 

Acting Manhattan U.S. Attorney Joon H. Kim said:  “Today, after a six-week trial, a New York jury convicted Kaleil Tuzman and Omar Amanat of securities and accounting fraud.  Kaleil Isaza Tuzman built the company named after himself, Kit Digital, on a foundation of lies, working with his co-defendant Omar Amanat to defraud investors out of millions of dollars through years of deceit.  The evidence of their criminal schemes was so overwhelming that Amanat actually tried to fool the jury by introducing fake emails into the record as exculpatory ‘evidence’ in this trial.  Unfortunately for Tuzman and Amanat, the jury saw through their tangled web of lies, convicting them on all counts.  Today, Tuzman and Amanat’s lies finally caught up to them, and they now must face what they have been desperately seeking to evade for years – justice.”    

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

The Scheme to Defraud Maiden Capital Investors

Stephen Maiden was the managing member of Maiden Capital, an unregistered investment advisory firm that managed portfolios of securities.  Between in or about February 2009 and in or about June 2012, AMANAT, along with Maiden and others, devised and carried out a scheme to hide the fact that investments by Maiden Capital clients in Enable, an investment vehicle for which AMANAT raised money (based, in part, on false and misleading representations), had been lost.  To facilitate the scheme, Maiden, with the knowledge and approval of AMANAT, generated fictitious client account statements that failed to disclose the Enable losses.  In addition, AMANAT wired hundreds of thousands of dollars to a Maiden Capital bank account to support Maiden Capital, including to allow Maiden to repay investors whose redemption requests could not be forestalled and thus to continue to keep secret from Maiden Capital investors the Enable losses for over three years.

Evidence at trial also revealed that AMANAT produced to the Government and entered into evidence at trial email communications that had been fabricated.  After two evidentiary hearings into the issue, the Court allowed the Government to present to the jury evidence of AMANAT’s use of false and fabricated email evidence during the trial.

After the verdict, Judge Gardephe revoked AMANAT’s bail and ordered him remanded into custody, citing numerous factors, including that “substantial evidence was introduced at trial that Mr. Amanat fabricated emails” showing “disdain for the court” and its procedures.

The Market Manipulation Scheme

Between in or about December 2008 and in or about September 2011, TUZMAN, Maiden, and AMANAT engaged in efforts to artificially inflate the share price and trading volume of KITD shares.  During this time period, during which KITD shares traded on the OTC Bulletin Board and on the NASDAQ, Maiden, at TUZMAN’s and AMANAT’s behest, purchased and sold shares of KITD through Maiden Capital, at times for the purpose of manipulating the stock price and at times for the purpose of creating the illusion of greater volume in the trading for KITD shares. 

For instance, Maiden, with TUZMAN’s knowledge and approval, frequently engaged in match trading in which Maiden caused an account under Maiden’s control to buy or sell KITD stock, and on the same day caused an account under Maiden’s control to take the opposite position.  TUZMAN also directed Maiden to make timely purchases of KITD stock in an effort to manipulate the price of KITD shares at certain critical moments, including, for example, when KITD was seeking to raise additional capital and in the weeks before KITD’s stock began trading on the NASDAQ.  At times, Maiden was responsible for nearly all of the day’s trading activity in KITD stock.

Over the course of the scheme, TUZMAN caused KITD to invest approximately $1,150,000 in company cash in Maiden Capital but failed to disclose to KITD shareholders that these investments with Maiden Capital were not part of an arms-length relationship.  Instead, TUZMAN portrayed these investments as efforts to safely invest assets of KITD.  In reality, TUZMAN caused KITD to make these investments in order to help fund Maiden’s purchases of KITD shares, as part of the effort to manipulate the market described above.  And, on one occasion, TUZMAN caused KITD to invest $250,000 in Maiden Capital so that Maiden could reimburse TUZMAN for a prior, personal investment that TUZMAN made with Maiden Capital, thereby using KITD as his personal bank.   

The Accounting Fraud Scheme

From at least in or about 2010 through in or about 2012, TUZMAN, along with Robin Smyth, KITD’s former CFO, Gaven Campion, KITD’s former president,[1] and others, engaged in an illegal scheme to deceive KITD shareholders, members of the investing public, KITD’s independent auditors, and others concerning KITD’s true operating performance and financial results. 

TUZMAN, working with others, including Smyth and Campion, devised and executed a scheme to inflate KITD’s revenue falsely.  This scheme involved two principal methods: (a) the improper recognition of revenue from so-called “perpetual license” contracts for KITD software (contracts that gave the purchasing customer the right to use the licensed software indefinitely), and (b) the execution of fraudulent “round-trip” transactions that had the effect of using KITD’s own cash, rather than payments received from customers, to pay off bills, known as accounts receivable, that were due and owed to KITD, including those resulting from KITD’s improper revenue recognition practices, rather than disclose to KITD’s auditors and the investing public the fact that the bills were uncollectible or, in some cases, had resulted from fabricated contracts.  These fraudulent practices caused KITD to materially overstate its reported revenue, which had the effect of materially overstating KITD’s net income and earnings on its annual and quarterly financial reports issued from the fiscal quarter ending June 30, 2010, through the fiscal quarter ending March 31, 2012.

*                *                *

TUZMAN, 45, was found guilty of one count of conspiracy to commit securities fraud and one count of conspiracy to commit wire fraud with respect to the market manipulation scheme.  For the accounting fraud scheme, TUZMAN was found guilty of one count of conspiracy to commit securities fraud, make false statements in annual and quarterly SEC reports, and make false statements to auditors.  The Counts of which TUZMAN was convicted carry a combined maximum term of imprisonment of 30 years, which includes five years each on the conspiracies to commit securities fraud and 20 years on the conspiracy to commit wire fraud.

AMANAT, 44, was found guilty of one count of conspiracy to commit wire fraud, one count of wire fraud, one count of aiding and abetting investment advisor fraud, and one count of conspiracy to commit securities fraud, all in relation to the market manipulation scheme.  The Counts of which AMANAT was convicted carry a combined maximum term of imprisonment of 50 years, which includes five years each on the conspiracies to commit securities fraud and aiding and abetting investment advisor fraud and 20 years each on the conspiracy to commit wire fraud and wire fraud counts.

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

AMANAT is scheduled to be sentenced by Judge Gardephe on April 25, 2018, at 12:30 p.m.  TUZMAN is scheduled to be sentenced by Judge Gardephe on April 26, 2018, at 12:30 p.m.

Mr. Kim praised the investigative work of the Federal Bureau of Investigation and the U.S. Postal Inspection Service.  He also thanked the SEC for its assistance. 

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Damian Williams, Andrea M. Griswold, and Joshua A. Naftalis are in charge of the prosecution.

[1] Maiden, Smyth, and Campion have pled guilty to various offenses for their roles in the schemes and cooperated with the Government.

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, Darcel D. Clark, the Bronx County District Attorney, Ashan M. Benedict, the Special Agent-in-Charge of the New York Field Division of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”), James J. Hunt, the Special Agent-in-Charge of the New York Field Office of the U.S. Drug Enforcement Administration (“DEA”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced additional charges in a Superseding Indictment[1] against members of a drug trafficking crew based in the Bronx.  In the Superseding Indictment returned on Tuesday, December 19, JASON POLANCO, a/k/a “Jin,” a/k/a “Wolfman,” is charged with the August 31, 2014, murder of Shawn Ross, a/k/a “S.B.,” and RENE RUIZ, a/k/a “Lil’ Rene,” a/k/a “Nae Nae,” is charged with a May 2, 2014, non-fatal shooting.

POLANCO, RUIZ, and 12 others were previously charged in an Indictment unsealed on February 6, 2017.  That prior Indictment charged narcotics trafficking, firearms possession, and participation in robberies of commercial establishments in the Bronx and Manhattan.  In addition to the new charges described above, the Superseding Indictment re-alleges the charges that had previously been brought in the Indictment against POLANCO, RUIZ, and 10 others.  The case is assigned to U.S. District Judge Laura Taylor Swain.  POLANCO, RUIZ, and the 10 other defendants charged in the Superseding Indictment were arraigned today.

Acting Manhattan U.S. Attorney Joon H. Kim said:  “As alleged, Jason Polanco and Rene Ruiz not only participated in a drug conspiracy, but also personally participated in the drug crew’s gun violence, including, for Polanco, a murder.  Fortunately, federal authorities and our local law enforcement partners, working together, can make our streets safer, as they did in this case.”

Bronx District Attorney Darcel D. Clark said:  “We are pleased to have assisted our federal law enforcement partners in their superseding indictment charging Jason Polanco with the murder of a Bronx man.  It is one of numerous violent felonies that Polanco and his co-defendants allegedly committed in the Bronx and Manhattan.  In addition to facing justice in federal court, he will face justice in the Bronx for shooting two New York City police officers in 2015.  With seamless cooperation between city, state and federal agencies we will continue to do all we can to ensure safety for all who live and work in the Bronx.”

ATF Special Agent in Charge Ashan M. Benedict said:  “Jason Polanco, Rene Ruiz and his charged co-conspirators are alleged to have committed a litany of crimes, including firearms offenses and violent crimes.  The defendants are alleged to have possessed and used firearms in the commission of violent crimes with some crimes resulting in serious bodily injury and in one case death.  The members of this violent drug trafficking crew have been a plague to the citizens of the Bronx and Manhattan for some time.  I would like to commend our partners in the Bronx District Attorney’s Office and the United States Attorney’s Office for their collaboration that made this case possible.  I also would like to extend my gratitude to the special agents of the DEA and ATF, and the NYPD detectives, who worked tirelessly to bring these individuals to justice.”

DEA Special Agent in Charge James J. Hunt said:  “This case shows the intrinsic link between drug trafficking, crime and gun violence.  New York law enforcement is committed to weeding out drug dealers in our neighborhoods so law abiding residents can live in neighborhoods  free from drugs and safe from the consequences of drug trafficking.” 

POLANCO is separately being prosecuted by the Bronx County District Attorney’s Office for his alleged shooting of two NYPD Officers in January 2015.  Mr. Kim thanked the District Attorney’s Office for their cooperation in the federal investigation of POLANCO for the alleged murder of Shawn Ross. 

The prosecution is being handled by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Justina L. Geraci, Jordan Estes, Christopher J. Clore, and Amanda L. Houle are in charge of the prosecution.   

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

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

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, Anthony A. Scarpino Jr., Westchester County District Attorney, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Division of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an Indictment charging MARKEL OVERTON, a/k/a “Kellz,” THOMAS BLANTON, a/k/a “LT,” MARQUIS COLLIER, a/k/a “Keise,” KADEEM DINHAM, a/k/a “Polo,” DONNIE DIXON, a/k/a “Scooter,” DAVID HARDY, a/k/a “Mooka,” JERMAINE HUGHLEY, a/k/a “Blacks,” RAHEEM JONES, a/k/a “Rah Trigger,” a/k/a “Trigga,” SINCERE SAVOY, a/k/a “Bitty,” JAMAAL SINCLAIR, a/k/a “Diggz,” NOEL SMITH, a/k/a “Georgie,” and ERNEST WEBB, a/k/a “Ern,” a/k/a “Ern Millz,” with various crimes relating to racketeering, murder, narcotics, and firearms offenses.  The defendants have been charged as a result of their membership in the “Goonies” street gang that operated in the City of Mount Vernon, New York.  Eight of the defendants were previously charged in United States v. Overton, et al., 17 Cr. 644 (NSR) (the “Indictment”).  The Superseding Indictment, S1 17 Cr. 644 (NSR) (the “Superseding Indictment”), charges four additional defendants with racketeering charges and also charges the following two murders in Mount Vernon, New York:

• DAVID HARDY, a/k/a “Mooka,” MARQUIS COLLIER, a/k/a “Keise,” JERMAINE HUGHLEY, a/k/a “Blacks,” and SINCERE SAVOY, a/k/a “Bitty,” with the December 31, 2016, murder of Shamoya McKenzie, a 13-year-old innocent bystander; and
• ERNEST WEBB, a/k/a “Ern,” a/k/a “Ern Millz,” with the September 22, 2014, murder of Dean Daniels.    

Acting U.S. Attorney Joon H. Kim said:  “When gangs flourish, neighborhoods suffer, parents grieve, and children die.  It is as simple as that.  Dreams like the ones Shamoya McKenzie must have had for herself — as she sat innocently in the car, next to her mother on New Year's Eve, coming from basketball practice — should be cultivated and allowed to flourish, not violently crushed, a tragic victim of an utterly senseless war between street gangs.  Shamoya McKenzie deserved better.  Dean Daniels deserved better.  Mount Vernon deserves better.  And that is why we, with our federal and local partners, have brought this prosecution.  Today’s announcement is part of our Office’s ongoing and steadfast commitment to making the streets of Mt. Vernon, and the communities of Westchester safe.”

Westchester County District Attorney Anthony A. Scarpino Jr. said:  “For the better part of a decade, the Goonies have had a grip on neighborhoods in and around the City of Mount Vernon.  Through intimidation and violence, they’ve jeopardized the safety and quality of life for the hard working residents of Mount Vernon.  That violence turned deadly on at least two occasions when the lives of Shamoya McKenzie and Dean Daniels were cut short.  While we were able to charge David Hardy for the senseless murder of Shamoya, our partnership with the United States Attorney’s Office and the FBI will now enable us to charge others who also participated in those crimes.  Thanks to the collaborative efforts of federal, state and local law authorities, these defendants will all be held accountable for the crimes they now stand accused of.”

FBI Assistant Director William F. Sweeney Jr. said:  “The new charges members of this criminal gang now face show just how badly they allegedly terrorized a community.  They used violence to push illegal drugs and demonstrate how tough they were as a gang.  They didn’t think about who was hit by their bullets, and in the end that disregard cost an innocent young girl her life.  The FBI Westchester County Safe Streets Task Force won’t let up on their investigations into gangs that believe they act with impunity.  They don’t and now they will face justice for their deadly actions.”

According to the Superseding Indictment[1] unsealed today in White Plains federal court, and prior proceedings in the matter:

From 2007 to 2017, in the Southern District of New York and elsewhere, OVERTON, BLANTON, COLLIER, DINHAM, DIXON, HARDY, HUGHLEY, JONES, SAVOY, SINCLAIR, SMITH, and WEBB were members or associates of a racketeering enterprise known as the “Goonies.”  In order to fund the enterprise, protect and expand its interests, and promote its standing, members and associates of the Goonies committed, conspired, attempted, and threatened to commit acts of violence, including murder, attempted murder and robbery; they conspired to distribute and possess with the intent to distribute narcotics; and they obtained, possessed, and used firearms, including by brandishing and firing them.  BLANTON, COLLIER, DINHAM, DIXON, and JONES also conspired with one another, and certain other members of the Goonies, to distribute and possess with the intent to distribute crack cocaine and marijuana.

The Goonies have been engaged in a long-standing and violent feud with several rival Mount Vernon street gangs, including, among others, the “Boss Playa Family,” the “Get Money Gangstas,” the “Gunnas,” and the “Much Better Gang,” among others.  On December 31, 2016, the intended target of the shooting was a rival gang member.  Shamoya McKenzie was in the front passenger seat of a car driving by the shooting location, in the vicinity of Tecumseh Avenue and Third Street in Mount Vernon, New York, and was struck in the head by a bullet, resulting in her death.  As set forth in the Superseding Indictment, on or about September 22, 2014, in the vicinity of Park Avenue in Mount Vernon, Dean Daniels was shot to death.       

OVERTON, BLANTON, COLLIER, DINHAM, DIXON, JONES, and SMITH were already in custody based on the charges in the Indictment.  HARDY and HUGHLEY were already in custody on state charges, and were transferred to federal custody today.  SAVOY was arrested this morning in New Rochelle.  WEBB remains a fugitive.  The defendants who are in custody will be arraigned before the Honorable Lisa Margaret Smith, United States Magistrate Judge, this afternoon in White Plains federal court.  The case is assigned the United States District Judge Nelson S. Román.    

*                *                *

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

Mr. Kim thanked the Westchester County District Attorney’s Office and praised the outstanding investigative work of the FBI’s Westchester County Safe Streets Task Force, which comprises agents and detectives from the FBI, Yonkers Police Department, Westchester County District Attorney’s Office, Westchester County Police Department, Peekskill Police Department, Mount Vernon Police Department, New York City Police Department, and U.S. Probation.

The prosecution is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Anden F. Chow, Sarah Krissoff, Olga Zverovich, Christopher Clore, and Special Assistant United States Attorneys John O’Rourke and Lauren Abinanti are in charge of the prosecution.

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

United States v. Markel Overton, et al.

CHARGE

DEFENDANTS

MAXIMUM PENALTIES

Count One

Racketeering Conspiracy

MARKEL OVERTON

  a/k/a “Kellz”

THOMAS BLANTON

  a/k/a “LT”

MARQUIS COLLIER

  a/k/a “Keise”

KADEEM DINHAM

  a/k/a “Polo”

DONNIE DIXON

  a/k/a “Scooter”

DAVID HARDY

  a/k/a “Mooka”

JERMAINE HUGHLEY

   a/k/a “Blacks”

RAHEEM JONES

  a/k/a “Rah Trigger”

  a/k/a “Trigga”

SINCERE SAVOY

  a/k/a “Bitty”

JAMAAL SINCLAIR

  a/k/a “Diggz”

NOEL SMITH

  a/k/a “Georgie”

ERNEST WEBB

  a/k/a “Ern,”

  a/k/a “Ern Millz”

Life in prison

Count Two

Firearms Offense

MARKEL OVERTON

THOMAS BLANTON

MARQUIS COLLIER

KADEEM DINHAM

DONNIE DIXON

DAVID HARDY

RAHEEM JONES

JAMAAL SINCLAIR

NOEL SMITH

Life in prison with a mandatory minimum of 10 years in prison

Count Three

Conspiracy to Commit Murder in Aid of Racketeering

DAVID HARDY

MARQUIS COLLIER

JERMAINE HUGHLEY

SINCERE SAVOY

10 years in prison

Count Four

Murder in Aid of Racketeering

DAVID HARDY

MARQUIS COLLIER

JERMAINE HUGHLEY

SINCERE SAVOY

Mandatory minimum:  Life in prison

Maximum sentence:  Death

Count Five

Use, Carrying, and Possession of Firearms, Resulting in Death

DAVID HARDY

MARQUIS COLLIER

JERMAINE HUGHLEY

SINCERE SAVOY

Mandatory minimum:  5 years in prison

Maximum sentence:  Death

Count Six

Conspiracy to Commit Murder in Aid of Racketeering

ERNEST WEBB

10 years in prison

Count Seven

Murder in Aid of Racketeering

ERNEST WEBB

Mandatory minimum:  Life in prison

Maximum sentence:  Death

Count Eight

Use, Carrying, and Possession of Firearms, Resulting in Death

ERNEST WEBB

Mandatory minimum:  5 years in prison

Maximum sentence:  Death

Count Nine

Narcotics Conspiracy

THOMAS BLANTON

MARQUIS COLLIER

KADEEM DINHAM

DONNIE DIXON

RAHEEM JONES

Life in prison with a mandatory minimum of 10 years in prison

DEFENDANT

AGE

MARKEL OVERTON

27

THOMAS BLANTON

24

MARQUIS COLLIER

26

KADEEM DINHAM

26

DONNIE DIXON

28

DAVID HARDY

22

JERMAINE HUGHLEY

25

RAHEEM JONES

29

SINCERE SAVOY

20

JAMAAL SINCLAIR

29

NOEL SMITH

34

ERNEST WEBB

29

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

There will be a press conference today in White Plains at 11:00 a.m. to announce the arrests and federal criminal charges against a dozen gang members in the Mount Vernon area, including murder charges for the shooting deaths of 13-year-old Shamoya McKenzie and Dean Daniels. 

WHO:            

Joon H. Kim, Acting United States Attorney for the Southern District of New York

Michael Osborn, Assistant Special-Agent-In Charge of the New York Field Office of the FBI

Anthony Scarpino Jr., Westchester County District Attorney

WHEN:          

Thursday, December 21, 2017 at 11:00 a.m.

WHERE:        

U.S. Attorney’s Office, White Plains

300 Quarropas St.

White Plains, New York, NY

CONTACT:   

James Margolin, Dawn Dearden, Nicholas Biase

(212) 637-2600

A former sales executive of Embraer S.A. (Embraer), a Brazilian-based manufacturer of aircraft, pleaded guilty today in connection with a scheme to pay bribes to a high-level foreign government official in exchange for assistance in securing Embraer’s sale of aircraft to Saudi Arabia’s national oil company.

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, Acting U.S. Attorney Joon H. Kim of the Southern District of New York, Assistant Director Stephen E. Richardson of the FBI’s Criminal Investigative Division and Special Agent in Charge Robert F. Lasky of the FBI’s Miami Field Office made the announcement.

Colin Steven, 61, a U.K. citizen residing in the United Arab Emirates, was charged by information filed today in the Southern District of New York with one count of violating the Foreign Corrupt Practices Act (FCPA), one count of conspiracy to violate the FCPA, one count of wire fraud, one count of conspiracy to commit wire fraud, one count of money laundering, one count of conspiracy to launder money and one count of making a false statement.  Steven pleaded guilty to all of those counts before U.S. District Judge Alison J. Nathan of the Southern District of New York.  A sentencing date has not been scheduled yet.  The Court set a control date of June 21, 2018.

As part of his plea, Steven, a former vice president of sales & marketing in Embraer’s Executive Jets Division, admitted that he engaged in a scheme to have Embraer pay bribes to a foreign official in exchange for assistance in getting an aircraft sales contract with favorable terms awarded to Embraer; retained a kickback as part of the scheme; and lied to law enforcement officials about his kickback.

Steven consented to the filing of the information, which alleged that Embraer was in negotiations with Saudi Arabia’s national oil company over a potential aircraft sale when Steven and the foreign official devised an arrangement whereby the foreign official would guarantee that Embraer would win a contract and that the contract would involve new rather than used aircraft in exchange for approximately $1.5 million in bribe payments.  In early 2010, Saudi Arabia’s national oil company awarded Embraer a contract for three new aircraft, valued at approximately $93 million.  The information further alleged that he arranged to disguise the bribes as commissions to a South African company that was owned in part by Steven’s personal friends.  The South African company transferred the bulk of the bribe proceeds to the foreign official’s intermediary but, at Steven’s direction, paid a portion of the bribe proceeds to Steven.

In pleading guilty, Steven admitted that he executed, and conspired with others to execute, the bribery and kickback schemes; laundered and conspired to launder the proceeds of those schemes through the South African company and lied to U.S. law enforcement about the kickback.

The guilty plea entered today follows the execution in October 2016 of a deferred prosecution agreement between the Department and Embraer, under which Embraer agreed to pay a $107 million penalty to the Department as part of a $205 million global resolution to investigations by the Department, the Securities and Exchange Commission and Brazilian authorities related to corrupt conduct in several countries, including Saudi Arabia.  The agreement acknowledged Embraer’s cooperation with the investigations.  With the cooperation of U.S. authorities, Brazilian authorities have charged 11 individuals for their alleged involvement in Embraer’s misconduct in the Dominican Republic.  Saudi Arabian authorities have charged two individuals for their alleged involvement in Embraer’s misconduct in Saudi Arabia.

The FBI’s International Corruption Squads, based in Miami, Florida, and Los Angeles, California, investigated the case.  Trial Attorneys John-Alex Romano and Nikhila Raj and Assistant Chief David Johnson of the Criminal Division’s Fraud Section, and Assistant U.S. Attorney Richard Cooper of the Southern District of New York, are prosecuting the case. The Fraud Section appreciates the cooperation and assistance provided by the SEC in this matter.

The Criminal Division’s Office of International Affairs provided significant assistance in this matter.  The Department also appreciates the cooperation and assistance provided by authorities in Brazil, the Dominican Republic, South Africa and Switzerland in this matter.

In 2015, the FBI formed International Corruption Squads across the country to address national and international implications of foreign corruption.

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

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and John P. Cronan, the Acting Assistant Attorney General of the Criminal Division of the U.S. Department of Justice, announced that COLIN STEVEN pled guilty to Foreign Corrupt Practices Act, wire fraud, money laundering, and false statement charges arising from his role in paying bribes to a foreign official in exchange for assistance in obtaining business for STEVEN’s employer, Embraer S.A. (“Embraer”).  STEVEN, a former executive in Embraer’s Executive Jets Division, arranged for Embraer to pay over $1.5 million in bribes to an official at the state-owned and state-controlled national oil company of Saudi Arabia (the “Saudi Arabia Company”), and ultimately received a kickback from a portion of the bribe proceeds.  STEVEN pled guilty today before U.S. District Judge Alison J. Nathan.

According to the allegations contained in the Information to which STEVEN pled guilty, and statements made during the plea and other court proceedings:

Embraer, an aircraft manufacturer based in Brazil, has operations and subsidiaries in various locations around the world, including the United States and the Middle East.  Embraer manufactures commercial, executive, and defense aircraft for governmental and private customers throughout the world.  STEVEN, a British national, was an executive responsible for overseeing the generation of sales for a particular Embraer division in regions that included the Middle East.

In approximately 2006, STEVEN learned that the Saudi Arabia Company was interested in purchasing aircraft, and for a period of three years after that STEVEN and a salesperson who reported to him had occasional contact with employees of the Saudi Arabia Company to discuss the potential sale of three Embraer jets.  In late 2009, STEVEN met with an official of the Saudi Arabia Company (the “Saudi Arabia Official”) in London, England.  The Saudi Arabia Official offered to help Embraer win the aircraft contract from the Saudi Arabia Company, and to ensure that the Saudi Arabia Company would buy new – not used – jets from Embraer, in exchange for a payment.  STEVEN agreed to cause Embraer to pay the Saudi Arabia Official $550,000 per aircraft, for a total bribe amount of $1.65 million.

In late 2009 and early 2010, STEVEN developed a plan to use a company based in South Africa (the “South Africa Company”) as a purported agent on the transaction, which would result in Embraer paying the South Africa Company $1.65 million in “finders fees,” when in fact the South African Company would perform no work on the transaction and would be used to facilitate and to disguise the payment to the Saudi Arabia Official.

In early 2010, on the Saudi Arabia Official’s recommendation, a committee at the Saudi Arabia Company approved the purchase of three new aircraft from Embraer for $93 million.  A subsidiary of Embraer also entered into an agreement with the South Africa Company, pursuant to which the South Africa Company would purportedly promote the sale of Embraer aircraft to a subsidiary of the Saudi Arabia Company.  In reality, the South Africa Company provided no services to Embraer other than serving as a conduit to funnel payments to the Saudi Arabia Official.  An Embraer subsidiary subsequently wired $1.65 million to the South Africa Company, in December 2010 and February 2011.  Between February 2011 and April 2011, the South Africa Company wired approximately $1.4 million to bank accounts in Switzerland and Bahrain held by an individual who was acting as an intermediary for the Saudi Arabia Official.

STEVEN also developed a plan to take a portion of the bribe proceeds as a kickback, and ultimately received approximately $130,000 in wire transfers from the South Africa Company in October and December 2011.

STEVEN was later interviewed by an agent of the Federal Bureau of Investigation in December 2014, and falsely stated that a wire transfer he received from the South Africa Company in 2011 was for the purpose of buying real estate in connection with a potential business venture between STEVEN and an executive of the South Africa Company.

The guilty plea entered today follows the execution in October 2016 of a deferred prosecution agreement between the Department of Justice and Embraer, under which Embraer agreed to pay a $107 million penalty as part of a $205 million global resolution to investigations by the Department, the Securities & Exchange Commission, and Brazilian authorities related to corrupt conduct in several countries, including Saudi Arabia.  The agreement acknowledged Embraer’s cooperation with the investigations.

*                      *                     *

STEVEN, 61, resides in Dubai, United Arab Emirates.  A chart listing the maximum sentences relating to the charges in the Information is below.  As part of his plea agreement, STEVEN is also required to pay forfeiture and restitution.  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.  STEVEN is scheduled to be sentenced by Judge Nathan on June 21, 2018.

This case is being prosecuted by the Justice Department’s Criminal Division Fraud Section and the Office’s Complex Frauds and Cybercrime Unit.  Trial Attorneys John-Alex Romano and Nikhila Raj as well as Assistant United States Attorney Richard Cooper and Assistant Chief David Johnson of the Fraud Section are prosecuting the case.

The FBI’s International Corruption Squads, based in Miami, Florida, and Los Angeles, California, investigated the case.  The Criminal Division’s Office of International Affairs provided significant assistance in this matter.  The Office also appreciates the cooperation and assistance provided by authorities in Brazil, the Dominican Republic, South Africa and Switzerland in this matter.

Count

Charge

Maximum sentence

One

Conspiracy to violate the Foreign Corrupt Practices Act (“FCPA”), 18 U.S.C. § 371

Five years in prison

Two

Violation of the FCPA, 15 U.S.C. §§ 78dd-1 and 78ff(c)(2)(A), and 18 U.S.C. § 2 

Five years in prison

Three

Conspiracy to commit wire fraud, 18 U.S.C. § 1349

20 years in prison

Four

Wire fraud, 18 U.S.C. §§ 1343 and 2

20 years in prison

Five

Conspiracy to commit money laundering, 18 U.S.C. § 1956(h)

20 years in prison

Six

Money laundering, 18 U.S.C. §§ 1956(a)(2)(A) and 2

20 years in prison

Seven

False statements, 18 U.S.C. § 1001

Five years in prison

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and Special Agent-in-Charge Eileen Neff of the Northeast Area Field Office, U.S. Postal Service Office of Inspector General (“USPS-OIG”), announced the arrest of JOSEFINA SALAS, an employee of the U.S. Postal Service for over eighteen years, on charges of mail theft.  SALAS was presented yesterday in Manhattan federal court before the Honorable Sarah Netburn.

Acting U.S. Attorney Joon H. Kim said:  “During the holiday season when the spirit of giving abounds, Josefina Salas, a postal employee, was allegedly interested only in taking and stealing. Salas allegedly used her access to U.S. mail to steal valuable items from people who trusted their mail would be delivered safely. We thank the U.S. Postal Service for their work to halt postal theft and insure the integrity of the mail.” 

Special Agent-in-Charge of USPS-OIG Eileen Neff said:  “If an employee of the Postal Service abuses their position and the public’s trust, as alleged in this matter, OIG agents thoroughly and vigorously investigate to resolve the situation.”

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

Over the course of approximately a year, SALAS, who was employed as an elevator operator at the USPS Processing and Distribution Center (“PDC”) located at 341 Ninth Avenue in New York, New York, stole various items from the United States mail, including cash, gift cards, jewelry, clothing, and a phone.  SALAS was previously captured on video using a box-cutter to open mail packages and then stealing the contents of those packages.  SALAS was arrested yesterday at the end of her shift at the PDC. 

*          *          *

SALAS, 66, of the Bronx, New York, is charged with one count of mail theft by a U.S. Postal Service employee, which carries a maximum sentence of 5 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. Kim praised the outstanding investigative work of the USPS-OIG.

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 Wendy Olsen-Clancy, the Victim Witness Coordinator at the United States Attorney’s Office for the Southern District of New York, at (866) 874-8900, or Wendy.Olsen@usdoj.gov. For additional information, go to: http://www.usdoj.gov/usao/nys/victimwitness.html. The USPS OIG Hotline can be reached by phone 888-USPS-OIG and online at www.uspsoig.gov. 

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

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

[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.

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the Federal Bureau of Investigation in New York (“FBI”), announced that FAYCAL TAHIRI was sentenced yesterday to 21 months in prison for international parental kidnapping.  TAHIRI pled guilty on July 17, 2017, before Chief U.S. District Judge Colleen McMahon, who imposed yesterday’s sentence. 

Acting Manhattan U.S. Attorney Joon H. Kim said:  “Faycal Tahiri, a naturalized U.S. citizen and practicing doctor, kidnapped his own children in order to keep them from their mother.  For more than two years, in defiance of court orders from both U.S. and Moroccan courts, he moved from country to country to prevent his young sons from seeing their mother.  We are committed to prosecuting all those who, like Tahiri, unlawfully interfere with a parent’s right to be with her child.”

According to the Superseding Indictment filed against TAHIRI, other court documents publicly filed in this case, and statements made in court proceedings, including yesterday’s sentencing:

Between June 2010 and November 2015, TAHIRI kept his two American-born sons outside of the United States and away from their mother, moving between Morocco, Europe, and Saudi Arabia.  TAHIRI kidnapped his children to Saudi Arabia in December 2012, and lied to the children’s mother, the FBI, the Moroccan authorities, and an American court about the children’s whereabouts.  TAHIRI kept his children out of contact with their mother for approximately two years, and the children were located and returned to the United States thanks to the efforts of their mother and the FBI.  The two boys were eight and ten years old when they reunited with their mother.  

*                      *                     *

In addition to the prison term, TAHIRI, 42, of Bay Shore, New York, was sentenced to one year of supervised release.

Mr. Kim praised the outstanding investigative work of the FBI, and expressed gratitude for the efforts of the FBI’s Child Exploitation Task Force.  

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Catherine Geddes and Danielle R. Sassoon are in charge of the prosecution.

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that JUAN THOMPSON was sentenced today by U.S. District Judge P. Kevin Castel to 60 months in prison for cyberstalking and making hoax bomb threats as part of THOMPSON’s campaign to harass and intimidate a particular woman (“Victim-1”).  Over a period of months in 2016 and 2017, THOMPSON, among other things, communicated at least 12 threats to Jewish Community Centers (“JCCs”) and other Victim Organizations in Victim-1’s name and his own name and made false allegations about Victim-1 to Victim-1’s employer.  THOMPSON was arrested by the Federal Bureau of Investigation (“FBI”) on March 3, 2017, and pled guilty before Judge Castel on June 13, 2017.

Acting U.S. Attorney Joon H. Kim said:  “Today, Juan Thompson was held to account and justly punished for his efforts to harass an ex-girlfriend by sending disturbing and dangerous hoax threats to Jewish Community Centers and other organizations across the country in her name.  Thompson’s harassment and threats caused severe distress to both his victim and to Jewish communities around the country.  We thank our partners at the FBI for their excellent work on this important case.”

According to the Complaint, the Information, and statements made at sentencing:

In July 2016, THOMPSON began a months-long campaign of harassment targeting Victim-1 after Victim-1 ended their relationship.  THOMPSON’s conduct culminated with a series of hoax threats, including hoax bomb threats, targeting JCCs, organizations that provide service to and on behalf of the Jewish community, schools, and police departments.

THOMPSON started his campaign of harassment of Victim-1 in 2016.  In July of that year, an email was sent to Victim-1’s employer, which made false allegations about Victim-1, including that she had broken the law, using an internet protocol (“IP”) address that THOMPSON had previously used to access his social media account.  On October 15, 2016, an IP address that traced back to THOMPSON’s residence was used to falsely report that Victim-1 possessed child pornography.  When confronted by law enforcement on November 22, 2016, THOMPSON claimed that his email account had been hacked a few weeks earlier. 

THOMPSON also made at least 12 hoax threats targeting JCCs.  For instance, on February 21, 2017, the Anti-Defamation League (“ADL”) received an emailed threat at their midtown Manhattan office that indicated that “[Victim-1’s name and birthdate] is behind the bomb threats against jews. She lives in nyc and is making more bomb threats tomorrow.”  The next day, the ADL received a phone call claiming that explosive material had been placed in the ADL’s midtown Manhattan office. 

Some of THOMPSON’s threats were made in his own name, as part of an apparent effort to claim that Victim-1 was trying to frame THOMPSON for a crime.  For instance, on or about February 7, 2017, a JCC in Manhattan received an emailed bomb threat from an anonymous email account, which stated: “Juan Thompson [THOMPSON’s birthday] put two bombs in the office of the Jewish center today.  He wants to create Jewish newtown tomorrow.”  The email’s use of the phrase “Jewish newtown” appeared to refer to a December 2012 school shooting in Newtown, Connecticut, in which a gunman murdered 26 victims.

In February 2017, a Twitter account used by THOMPSON (the “Thompson Twitter Account”) was used to accuse Victim-1 of responsibility for the JCC Threats and claim that Victim-1 was trying to frame THOMPSON for her crimes.  For instance, on February 24, 2017, the Thompson Twitter Account posted: “[s]he [Victim-1], though I can’t prove it, even sent a bomb threat in my name to a Jewish center, which was odd given her antisemitic statements.  I got a visit from the FBI.  So now I’m battling the racist FBI and this vile, evil, racist white woman.”  On February 26, 2017, the Thompson Twitter Account posted: “The hatred of Jews goes across all demos.  Ask NYC’s [Victim-1’s employer].  They employ a filthy anti-Semite in [Victim-1].  These ppl are evil.”

*                      *                     *

In addition to the prison term, THOMPSON, 32, of St. Louis, Missouri, was sentenced to  three years of supervised release.

Mr. Kim praised the outstanding investigative work of the FBI, and thanked the United States Secret Service, New York City Police Department, and Saint Louis Police Department for their ongoing investigative assistance. 

The prosecution is being handled by the Office’s Terrorism & International Narcotics Unit.  Assistant U.S. Attorneys Jacob Warren and Andrew DeFilippis are in charge of the prosecution.

Joon H. Kim, the Acting 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 Donald B. Smith, Putnam County Sheriff, announced today that JENNIFER COVIELLO was arrested for the sex trafficking of a 17-year-old girl.  COVIELLO was presented before U.S. Magistrate Judge Lisa Margaret Smith in White Plains federal court this afternoon. 

Acting Manhattan U.S. Attorney Joon H. Kim said:  “Jennifer Coviello coerced a child to engage in commercial sex acts for Coviello’s profit, introducing the minor to illegal drugs, and fostering a drug dependency in the process.  Today’s arrest takes an allegedly dangerous woman off the street and is a testament to the continued cooperation between our federal and local law enforcement partners to combat the exploitation of children in our communities.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “There are simply no words to express how despicable human behavior can be at times, and in law enforcement we see a lot of lows in human behavior.  But for a woman to allegedly sell an underage girl for sex is too much to understand.  The FBI agents and law enforcement officers who investigate these cases each day should be truly commended for their work, and their dedication to save these children from adults who put them in harm’s way just to make a dollar.”

Putnam County Sheriff Donald B. Smith said:  “My office is grateful to the U.S.  Attorney’s Office and the FBI for their diligent work in helping to put an end to this deplorable case, stopping the victimization of a young woman and bringing the perpetrator to justice.  This case is yet another example of how effective law enforcement can be when local agencies, the FBI, and the U.S. Attorney’s Office all work together to fight crime and to help keep Putnam County and the Hudson Valley safe.”   

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

In December 2017, COVIELLO posted online advertisements soliciting prostitution customers for herself and the victim (“Victim-1”).  When COVIELLO received inquiries in response to the advertisements, she emailed and sent by text message photographs of Victim-1, including nude and partially nude photographs.  For approximately a week, COVIELLO operated her commercial sex business out of a motel in Putnam County, where she arranged for customers to meet her and Victim-1 to engage in commercial sex acts in exchange for cash.  During that week, COVIELLO provided Victim-1 with illegal drugs, including heroin, and arranged for Victim-1 to misrepresent to customers that she was over 18 years old.  COVIELLO kept the bulk of the profits from the commercial sex acts.

*                *                *

COVIELLO, 43, is charged with one count of sex trafficking of a minor, which carries a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison; and one count of use of interstate facilities to promote a prostitution enterprise, which carries a maximum sentence of five years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

The investigation was conducted by the FBI’s Westchester County Safe Streets Task Force with the assistance of the Putnam County Sherriff’s Department.  Mr. Kim praised the outstanding investigative work of the FBI and the Putnam County Sherriff’s Department.  

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

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

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

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that OLIVER SOHNGEN, a/k/a “Helmuth Moss,” a/k/a “Stephan Weierbach,” was sentenced today to 135 months in prison for sex trafficking of minors.  SOHNGEN pled guilty on August 10, 2017, before U.S. Magistrate Judge Ronald L. Ellis, and was sentenced today by U.S. District Judge Lewis A. Kaplan.

Acting Manhattan U.S. Attorney Joon H. Kim said:  “Oliver Sohngen, a teacher at a music school for children, was a sexual predator.  He paid to have sex with minor girls at least twice, and attempted to engage in sex trafficking of girls under the age of 14.   His significant sentence will ensure that he is no longer a threat to our community, in particular, our children.  We remain committed to prosecuting all those who, like Sohngen, prey on our most innocent and vulnerable victims.”

According to the Complaint and Information filed against SOHNGEN, other court documents publicly filed in this case, and statements made in court proceedings, including today’s sentencing:

Between March 2013 and November 2013, SOHNGEN exchanged text messages with a co-conspirator to arrange paid sexual encounters with minor girls ranging in age from 8 to 17.  On at least two occasions, SOHNGEN engaged in sexual contact with minor girls at the co-conspirator’s apartment in the Bronx, New York.  In addition, between November 2015 and January 2016, SOHNGEN participated in recorded telephone conversations with an undercover NYPD officer who was posing as a 15-year-old girl.  SOHNGEN proposed to meet with the purported 15-year-old girl in order to engage in sexual conduct.

*                      *                     *

In addition to the prison term, SOHNGEN, 52, of Queens, New York, was sentenced to 10 years of supervised release.

Mr. Kim praised the outstanding investigative work of HSI and the NYPD, and expressed gratitude for the efforts of HSI’s New York Trafficking in Persons Unit and the NYPD’s Vice Enforcement Division Major Case Team.  Mr. Kim also expressed gratitude to the Bronx County District Attorney’s Office for its partnership in this investigation.   

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Frank Balsamello and Michael Krouse are in charge of the prosecution, with assistance from Bronx County Assistant District Attorney Meagan Powers.

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and Angel M. Melendez, the Special Agent in Charge of the New York Office of the Department of Homeland Security, Homeland Security Investigations (“HSI”), announced yesterday’s arrest of SCOTT McKINNEY, a flight attendant, for conspiracy to violate airport security requirements and operation of an unlicensed money transmitting business.  McKINNEY will be presented later today in federal court in San Diego, California, before United States Magistrate Judge Andrew G. Schopler.

Acting U.S. Attorney Joon H. Kim said:  “As alleged, Scott McKinney abused his privileges as an airline employee, misusing the Known Crewmember lane to smuggle hundreds of thousands of dollars through security, in furtherance of an illegal money transmitting business.  Thanks to the dedicated investigative work of HSI, McKinney’s illegal money transmitting business has been grounded.”

HSI Special Agent in Charge Melendez said:  “As a Known Crewmember, McKinney allegedly took advantage of the security access allowed with his position by transmitting large sums of money across the country without a license. Those who choose to use their position’s security clearance at our airports to smuggle cash, narcotics, or any other unlawful good, pose a significant threat to our national security and our efforts are centered to shut down that vulnerability.”

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

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

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

For example, on September 15, 2017, McKINNEY flew from Los Angeles, landed at JFK Airport not wearing his crewmember uniform, entered the terminal, changed into his uniform, and retrieved a package from a co-conspirator in the airport parking garage.  McKINNEY then used the KCM lane to smuggle the package through security.  HSI agents subsequently approached McKINNEY while he was waiting to board a return flight to Los Angeles.  During a search of McKINNEY’s carry-on luggage, agents found the package that he had just received in the parking garage, which contained approximately $54,000 in cash.  McKINNEY told the agents that, on several prior trips, he had transported bulk cash from New York to California and then given the cash to a co-conspirator at the airport in Los Angeles.

*              *             *

McKINNEY, 49, of San Diego, California, was arrested on December 18, 2017, in San Diego.  McKINNEY is charged with one count of conspiracy to enter an aircraft or airport area in violation of security requirements and one count of conspiracy to operate an unlicensed money transmitting business.  Each count carries a maximum sentence of five years in prison. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. 

Mr. Kim thanked HSI for its outstanding work on this investigation.  He added that the investigation is continuing.

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

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

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

Joon H. Kim, the United States Attorney for the Southern District of New York, announced today that DARCY WEDD, the CEO of a U.S. mobile aggregation company called Mobile Messenger, was convicted after a two-week jury trial on eight counts for his participation in a 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.” 

Acting Manhattan U.S. Attorney Joon H. Kim said:  “As a Manhattan jury has unanimously found today, Darcy Wedd engaged in a scheme known as ‘auto-subscribing,’ forcing mobile phone users to pay charges for unsolicited and unwanted text messaging services, including horoscopes and celebrity gossip.  The conduct of Wedd and his co-conspirators ultimately netted over a hundred million dollars in illegal profits.  Thanks to the diligence of the IRS and FBI, the message is clear: perpetrators of consumer fraud schemes beware, federal investigators and prosecutors will protect everyday consumers and look to hold you accountable for your criminal fraud.”

According to the allegations contained in the Superseding Indictment and evidence presented at trial, from in or about 2011, through in or about 2013, WEDD and other co-conspirators engaged in a multimillion-dollar scheme to defraud consumers by placing unauthorized charges for premium text messaging services on consumers’ cellular phone bills, without the consumers’ knowledge or consent, through a practice known as “auto-subscribing.”

WEDD was the Chief Operating Officer, and eventually the Chief Executive Officer, of Mobile Messenger.  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.

In or about 2010, Lin Miao, one of WEDD’s co-conspirators, who was the CEO of another company in the cellphone industry that provided premium text messaging content (the “Content Provider”), decided to begin auto-subscribing mobile phone users to the Content Provider’s premium text messaging services in order to boost the Content Provider’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 (the “Auto-Subscription Platform”), 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 needed to go through Pajaczkowski.  WEDD later received his portion of the payments from Miao via Pajaczkowski.

Also in or about early 2012, WEDD, Pajaczkowski, and two other co-conspirators, Erdolo Eromo and Fraser Thompson, had discussions about how to increase revenues at Mobile Messenger, which were flagging because premium text messaging services had become less profitable.  Among other things, WEDD, Pajaczkowski, Eromo, and Thompson agreed to allow co-conspirator Eugeni Tsvetnenko, who operated a content provider in Australia (“the Australian Content Provider”), to begin auto-subscribing consumers through Mobile Messenger.  By at least in or about April 2012, Tsvetnenko had started auto-subscribing consumers.  Over the course of the next several months through in or about mid-2013, Tsvetnenko and the Australian Content Provider auto-subscribed hundreds of thousands of phone numbers through Mobile Messenger and generated millions of dollars of revenue, which Tsvetnenko shared with WEDD, Pajaczkowski, Eromo, and Thompson.

The auto-subscription scheme affected hundreds of thousands of consumers and generated over $100 million dollars in proceeds, which the defendants apportioned among themselves and used to fund lavish lifestyles of expensive vacations, luxury cars, and gambling.

*                *                *

WEDD, 40, was convicted of two counts of conspiracy to commit wire fraud, two counts of wire fraud, and two counts of conspiracy to commit money laundering, each of which carries a maximum term of 20 years in prison.  WEDD was also convicted of two counts of aggravated identity theft, each of which carries a minimum term of two years in prison.  WEDD was remanded into custody following the verdict and is scheduled to be sentenced on April 2, 2018, before Judge Katherine B. Forrest.  

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.

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

Assifuah was sentenced to 33 months in prison.  Thompson is scheduled to be sentenced on January 12, 2018.  Sentencing dates have not been set for Bachman, Miao, Pajackowski, Murad, or Eromo.

Mr. Kim praised the investigative work of the IRS-CI and the FBI, and expressed his sincere gratitude to the Federal Trade Commission for their support and assistance with the investigation. 

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

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the Federal Bureau of Investigation, New York Division (“FBI”), announced today the unsealing of a complaint charging EZRA CHOWAIKI with fraud and transportation of stolen property for using his art gallery located on Park Avenue in Manhattan to defraud art dealers and collectors of millions of dollars.  EZRA CHOWAIKI surrendered this morning to FBI agents and will be presented before Magistrate Judge Katharine H. Parker this afternoon.

Acting U.S. Attorney Joon H. Kim said:  “While Ezra Chowaiki appeared to buy and sell high-end artwork in his upscale Manhattan gallery, as alleged, he sold clients nothing more than an illusion. Chowaiki allegedly tricked his clients into investing hundreds of thousands of dollars in artwork that he never actually bought and secretly sold artwork that they had entrusted to him.  As a result of Chowaiki’s alleged fraud, valuable works of art have been stolen from their rightful owners and unlawfully distributed all over the world.”

FBI Assistant Director William F. Sweeney Jr. said:  “Investors believed the subject in this case had their best interests at heart, taking their money in an investment, but never followed through on his promises.  When they dared to demand their money back, he allegedly refused.  We believe there may be others out there who could be a victim of this scheme, and we ask that they contact us at NYArtcrime@fbi.gov.”

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

Until November 2017, EZRA CHOWAIKI was the president and the minority owner of a private art gallery located on Park Avenue in New York, New York (the “Gallery”).  CHOWAIKI founded the Gallery in or about 2004, and since that time, CHOWAIKI has used the Gallery to facilitate the purchase, sale, and consignment of works of fine art, as well as for the hosting of various art exhibitions featuring works of art and sculptures by well-known artists such as Pablo Picasso, Alexander Calder, Marc Chagall, and others.  CHOWAIKI lost control of the Gallery in or about November 2017 when the Gallery filed for bankruptcy and was taken over by a trustee to oversee its liquidation.

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

For example, a number of victims reported being asked by CHOWAIKI to invest money to purchase artwork through the Gallery that would then be sold by the Gallery, thereby generating profit for the investors.  After a number of these investors sent hundreds of thousands of dollars to CHOWAIKI, CHOWAIKI did not use the funds to purchase the artwork, nor did he return the money to the investors.  Similarly, other victims reported consigning artwork to CHOWAIKI for sale by the Gallery.  After these victims attempted to cancel the consignments, CHOWAIKI refused to return the artwork and, in some cases, purported to sell the artwork to other galleries and auctioneers located in the United States and abroad with the authorization of the work’s rightful owner.

At the time the Gallery filed for bankruptcy and CHOWAIKI was removed as president, the Gallery purported to have only approximately $276,681 in assets, whereas the Gallery owed at least approximately $11.8 million in claims to dozens of art dealers and others, including those who had sent money to the Gallery to buy artwork or who had consigned artwork to the Gallery that was never returned. 

 *                     *                      *

CHOWAIKI, 49, of Brooklyn, New York, is charged with one count of conspiracy to commit wire fraud and one count of wire fraud, each of which carries a maximum potential sentence of 20 years in prison, and one count of interstate transportation of stolen goods, which carries a maximum potential sentence of 10 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Mr. Kim praised the work of the FBI and the New York City Police Department’s Major Case Squad.  Any person who believes he/she is a victim of this crime is encouraged to send an email to NYArtCrime@fbi.gov.

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

[1] As the introductory phrase signifies, the entirety 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.

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced today that four defendants have pled guilty to participating in two bank burglaries.  In April and May 2016, MICHAEL MAZZARA, CHARLES KERRIGAN, and ANTHONY MASCUZZIO, assisted by CHRISTOPHER KERRIGAN, stole more than $5 million in cash, jewelry, collectables, and other valuables from the banks’ vaults and safe deposit boxes.

Acting U.S. Attorney Joon H. Kim said:  “Like a scene from a movie, these defendants used blow torches to cut into bank roofs, and subsequently vaults and safe deposit boxes, to steal more than $5 million in cash and customer valuables.  But the scene in court today was of guilty pleas under oath and the prospect of real-life prison.”

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

In April and May 2016, MAZZARA, CHARLES KERRIGAN, MASCUZZIO, and CHRISTOPHER KERRIGAN formed a crew that burglarized banks in Brooklyn and Queens, New York, by cutting into the banks’ vaults and the safe deposit boxes inside.  Specifically, from about April 8 to April 10, 2016, MAZZARA, CHARLES KERRIGAN, and MASCUZZIO, with the assistance of CHRISTOPHER KERRIGAN, burglarized an HSBC Bank branch in Brooklyn, and from about May 19 to May 22, 2016, MAZZARA, CHARLES KERRIGAN, and MASCUZZIO, with the assistance of CHRISTOPHER KERRIGAN, burglarized a Maspeth Federal Savings Bank branch in Queens.  On both occasions, the burglars used acetylene blowtorches to cut into the top of the banks’ vaults from the roof of the building.  At the Maspeth Federal Savings Bank branch, they shielded their activities from view by constructing a plywood shed on the roof of the bank.  The burglars then entered the vaults from above and took cash belonging to the bank and broke open customers’ safe deposit boxes, stealing the valuables inside.  In total, the crew obtained more than $600,000 in cash and more than $4.3 million in valuables from both banks.  Surveillance footage captured some of the burglars’ activities as they prepared for and executed the burglaries.  Financial records and video surveillance also showed MAZZARA and MASCUZZIO purchasing some of the supplies that appear to have been used in the Maspeth burglary. 

*                *                *

MAZZARA, 45, of Brooklyn, New York, pled guilty before Hon. Katherine B. Forrest on December 13, 2017, to two counts of bank theft, each of which carries a maximum sentence of 10 years in prison.  MAZZARA will be sentenced by Judge Forrest on April 13, 2017. 

CHARLES KERRIGAN, 42, of Brooklyn, New York, pled guilty before Judge Forrest on December 11, 2017, to one count of conspiracy to commit bank burglary and bank theft, which carries a maximum sentence of five years in prison, two counts of bank burglary, each of which carries a maximum sentence of 20 years in prison, and two counts of bank theft, each of which carries a maximum sentence of 10 years in prison.  CHARLES KERRIGAN also pled guilty to one count of witness retaliation while on pre-trial release, in connection with his assault of an individual who he believed had provided information regarding the burglaries to the Federal Bureau of Investigation (“FBI”) and the New York City Police Department (“NYPD”).  That count carries a maximum sentence of 20 years in prison, and a mandatory consecutive term of 10 years in prison.  CHARLES KERRIGAN will be sentenced by Judge Forrest on April 6, 2017.

MASCUZZIO, 38, of Brooklyn, New York, pled guilty before Judge Forrest on December 15, 2017, to two counts of bank theft, each of which carries a maximum sentence of 10 years in prison.  MASCUZZIO will be sentenced by Judge Forrest on May 4, 2018.

CHRISTOPHER KERRIGAN, 40, of Staten Island, New York, pled guilty before Judge Forrest on November 9, 2017, to one count of conspiracy to commit bank burglary and bank theft, which carries a maximum sentence of five years in prison, one count of bank burglary, which carries a maximum sentence of 20 years in prison, and one count of bank theft, which carries a maximum sentence of 10 years in prison.  CHRISTOPHER KERRIGAN will be sentenced by Judge Forrest on March 30, 2018.

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. Kim praised the outstanding investigative efforts of the FBI and NYPD.

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

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Benet J. Kearney and David W. Denton, Jr., are in charge of the prosecution.

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced today that Yani Benjamin Rosenthal Hidalgo was sentenced to 36 months in prison for engaging in monetary transactions in property derived from drug trafficking offenses.  ROSENTHAL pled guilty on July 26, 2017, before U.S. District Judge John G. Koeltl, who imposed today’s sentence.  During the course of the money laundering scheme, ROSENTHAL was a Honduran congressman between 2010 and 2014, and a candidate for president of Honduras between 2012 and 2013.

Acting Manhattan U.S. Attorney Joon H. Kim said:  “As he previously admitted in court, Yani Rosenthal was a prominent Honduran politician and businessman who moonlighted as a money launderer for the Cachiros, a violent Honduran drug organization.  Now this former presidential candidate has received a prison sentence called for by his crimes committed on behalf of a ruthless criminal syndicate.”

According to the Indictment, other court filings, and statements made during court proceedings[1]: 

ROSENTHAL and his co-defendants – including Jaime Rolando Rosenthal Oliva, ROSENTHAL’s father and a former vice president and congressman in Honduras – used entities associated with a holding company controlled by the Rosenthal family, Inversiones Continental (Panama), S.A. de C.V. (“Inversiones Continental”), to launder drug proceeds for the Cachiros, a prolific and violent Honduran criminal syndicate that distributed huge quantities of cocaine before being dismantled by the Drug Enforcement Administration (“DEA”).  Through his conduct, which occurred over a period of at least approximately five years, ROSENTHAL provided the Cachiros with sources of funding for their criminal enterprise, a means to launder their narcotics proceeds, and public legitimacy, thereby contributing to an environment of impunity that allowed the Cachiros to thrive in Honduras and to import tons of cocaine into the United States. 

ROSENTHAL and his co-defendants helped the Cachiros launder drug money and gain access to the international financial system.  ROSENTHAL enriched himself through this conduct by profiting from business transactions with the Cachiros.  In 2012, while ROSENTHAL acted as a Honduran congressman and campaigned for the Honduran presidency, he accepted hundreds of thousands of dollars in drug proceeds from one of the leaders of the Cachiros and another major Honduran drug trafficker who led a separate drug trafficking organization, which were styled as purported campaign contributions.  Several aspects of the Cachiros money laundering scheme also received support from Fabio Porfirio Lobo, the son of a former president of Honduras.  Lobo was sentenced on September 5, 2017, by U.S. District Judge Lorna G. Schofield in United States v. Lobo, No. 15 Cr. 174 (LGS) to 24 years in prison based on his conviction for participating in a conspiracy with members of the Cachiros and others to import cocaine into the United States.

ROSENTHAL’s money laundering conduct involved a trade-based scheme in which the Cachiros used a front company, Ganaderos Agricultores Del Norte S De RL De CV (“Ganaderos”), to purchase cattle with drug proceeds at auctions in Honduras.  ROSENTHAL and others used Empacadora Continental, S.A. de C.V. (“Empacadora”), a cattle- and meat-processing firm affiliated with Inversiones Continental, to purchase the narcotics-derived cattle from Ganaderos.  Between 2008 and 2013, while Rosenthal acted as the vice president of Empacadora, he caused Empacadora to buy cattle from Ganaderos, knowing that Ganaderos was financed and supported by drug trafficking proceeds of the Cachiros.  By knowingly authorizing Empacadora to engage in transactions in criminally derived property, ROSENTHAL used the company in connection with a process that allowed the Cachiros to conceal the criminally derived nature of the Ganaderos assets, and to obtain fresh funds from Empacadora that were used to promote Cachiros drug trafficking activities and purchase other assets.  Empacadora, in turn, processed and exported the meat to the United States, among other places, in exchange for payments to Empacadora from U.S.-based companies that totaled approximately $500,000 between 2008 and 2013.  Over that same period, Empacadora paid a total of $6.8 million to Ganaderos in connection with the scheme.          

*                      *                      *

In addition to the prison term, ROSENTHAL, 52, was ordered to forfeit $500,000 and to pay a $2.5 million fine.  ROSENTHAL also remains designated as a Specially Designated Narcotics Trafficker pursuant to the Foreign Narcotics Kingpin Designation Act, along with Rosenthal Oliva, Yankel Antonio Rosenthal Coello (ROSENTHAL’s cousin and co-defendant), Inversiones Continental, Empacadora, and Banco Continental, among other entities, as announced in October 2015 by the U.S. Department of Treasury, Office of Foreign Assets Control (“OFAC”). 

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

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

The charges contained in the Indictment against Jaime Rolando Rosenthal Oliva are merely accusations, and Rosenthal Oliva is presumed innocent unless and until proven guilty.

[1] The descriptions set forth below of conduct by co-defendant Jaime Rolando Rosenthal Oliva constitute only allegations, and every fact described should be treated as an allegation with respect to Rosenthal Oliva.

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the Federal Bureau of Investigation in New York (“FBI”), announced that ALI SOOFI, a Canadian-Iranian dual citizen, was sentenced to 32 months in prison for his participation in a conspiracy to violate the International Emergency Economic Powers Act (“IEEPA”).  SOOFI was charged and arrested by special agents of the Federal Bureau of Investigation (“FBI”) following a federal investigation.  SOOFI pled guilty to one count of conspiracy to violate IEEPA on September 7, 2017, before U.S. District Judge Nelson S. Román, who imposed today’s sentence.

According to the Indictment filed against SOOFI, other court documents publicly filed in this case, and statements made in court proceedings, including today’s sentencing:

Between 2014 and December 2016, SOOFI conspired to export military items from the United States to Iran, both directly and through transshipment to intermediary countries, without a license.  In particular, SOOFI acted as a broker on behalf of Iranian clients, including a high-ranking official in the Iranian Revolutionary Guard Corps (“IRGC”), who sought American military technology.  Over the course of the conspiracy, SOOFI sought to purchase and ship numerous items, including helicopters, high-tech machine gun parts, tank parts, and military vehicles, from the United States to Iran, all without a license and while knowing that such shipments were illegal under U.S. law.  During the multi-year conspiracy, SOOFI worked to fill specific orders for the IRGC by contacting other individuals with access to the requested military items through email, phone, and in-person meetings. 

The IRGC consists of an army, navy, and air force, Basij Resistance Force, and Qods Force.  Current IRGC forces consist of approximately 150,000 naval, ground, and air fighters, although the number of Qods Force fighters is unknown.  The IRGC has been designated as a Specially Designated Global Terrorist, for its activities in support of the Qods Force, which consistently provides support to terrorist groups including Hezbollah, Hamas, and the Taliban.

One of SOOFI’s customers was a Commander in the IRGC, who acted as a key figure at the Iranian Ministry of Defense responsible for procurement of parts and weapons.  Among the weapons SOOFI sought on behalf of the IRGC were dampeners – or shock absorbers – which allow high-tech machine guns to be mounted on helicopters and boats.  In addition, SOOFI sought to obtain slewing rings for tanks, military helicopters, target sights, jet engines, and military vehicles such as Humvees for the IRGC.  During one meeting in December 2016 during which SOOFI sought to acquire some of these military items, SOOFI explained that the items he sought were “for military for defense” and emphasized that the IRGC specifically wanted American military technology.

*                *                *

In addition to the prison term, SOOFI, 63, of Canada, was sentenced to one year of supervised release.

Mr. Kim praised the outstanding investigative work of the FBI.  SOOFI’s arrest is the result of the close cooperative efforts of the U.S. Attorney’s Office for the Southern District of New York, the FBI, and the U.S. Department of Justice’s National Security Division.

The prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorney Maurene Comey is in charge of the prosecution, with assistance from Trial Attorney Elizabeth Cannon from the National Security Division’s Counterintelligence and Export Control Section.

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, Anthony A. Scarpino, Jr., the Westchester County District Attorney, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Division of the Federal Bureau of Investigation (“FBI”), and Patrick J. Carroll, the Commissioner of the New Rochelle Police Department, announced the a coordinated operation earlier today in which federal, state, and local law enforcement officers arrested 36 defendants in Westchester County.  Nineteen defendants are charged in a federal indictment, unsealed today, charging them with conspiracy to distribute 500 grams and more of powder cocaine and 28 grams and more of crack cocaine in and around New Rochelle, New York, since at least in or about September 2017.  The Westchester County District Attorney has charged an additional 23 defendants.  Those defendants arrested today who are charged in the federal indictment are expected to be presented in White Plains federal court today before Magistrate Judge Paul E. Davison. 

Acting U.S. Attorney Joon H. Kim said:  “Today, we have charged 19 defendants with running a narcotics organization in New Rochelle, New York.  These men allegedly conspired to sell large quantities of cocaine and crack cocaine.  I commend our law enforcement partners for their work to keep our streets free of illegal drugs and the dangers they present.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “The speed with which this group of alleged drug dealers was investigated and arrested should serve as a warning to others who look to fill the void.  Our FBI Westchester County Safe Streets Task Force and our outstanding partnerships with state and local law enforcement agencies allow everyone to act with an agility that only gets sharper with each new case.  These arrests will have a significant impact on the criminal underbelly in the Westchester County area, and we won't stop working each day to make these communities safer.”

Westchester County District Attorney Anthony A. Scarpino, Jr. said:  “I congratulate the New Rochelle Police Department and the FBI for the success of this important effort to stop the flow of illegal narcotics into our communities.  We are pleased to join with our colleagues in law enforcement in an ongoing collaborative effort to combat this serious problem.”

New Rochelle Police Commissioner Patrick J. Carroll said:  “I am proud of the dedicated efforts of our members and those of our law enforcement partners which resulted in the indictments and arrests of these individuals.  New Rochelle will not tolerate the sale of drugs, or the violent crimes that are associated with the narcotic trade.  This sends a strong message of our dedication to clearing our community of these dangerous substances.”

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

From at least in or about September 2017 up to and including December 2017, ANDRE FRANCIS, a/k/a “Huddy,” a/k/a “Hut,” RAYMOND GILKES, a/k/a “Fresh,” KRISHNA RAGHUBAR, JOSE ACEVEDO, a/k/a “Cake,” ANTHONY JACKSON, a/k/a “Razor,” a/k/a “Worm,” DEVAUGHN BLAKEY, a/k/a “Natron,” CHRIS MABRY, ERIC LANDRINE, a/k/a “E Waterz,” DAVID TUCKER, a/k/a “Prince,” KAREEM PARNELL, a/k/a “Goofy,” JERRY AUGUSTINE, a/k/a “Juice,” JASON ORTEGA, a/k/a “Fetty,” RAKEEM JONES, RYAN HINES, a/k/a “Mooch,” DAVID THOMAS, CHANJU CARROL, a/k/a “Choo,” JACK BENJAMIN, KENDALL MILLER, a/k/a “Swin,” and TROY WILCOX conspired to distribute 28 grams and more of crack cocaine and 500 grams and more of powder cocaine.

The defendants each face a maximum term of 40 years in prison, and a mandatory minimum term of five years in prison.  The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the respective judges.

The Indictment arises from a joint investigation by the FBI’s Hudson Valley Safe Streets Task Force and the City of New Rochelle Police Department.

Mr. Kim praised the outstanding investigative work of the FBI and the New Rochelle Police Department.  Mr. Kim also thanked the Westchester County District Attorney’s Office for its ongoing coordination in the case.

These cases are being handled by the Office’s White Plains Division.  Assistant United States Attorneys Celia V. Cohen and Berit W. Berger are in charge of the prosecutions.

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

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

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced today that DAVID CHUKWUNEKE ADINDU was sentenced today in Manhattan federal court to 41 months in prison for participating in a wire fraud conspiracy and identity theft conspiracy.  These charges stemmed from ADINDU’s participation in fraudulent business email compromise scams that targeted thousands of victims around the world, including the United States.  Collectively, the scams attempted to defraud victims of more than $25 million.  Today’s sentence was imposed by U.S. District Judge Paul A. Crotty.

Acting U.S. Attorney Joon H. Kim said:  “As part of a business email compromise scam, David Chukwuneke Adindu tricked thousands of victims around the world into fraudulently wiring him over $25 million.  As Adindu learned today, building a business based on fraud can come with a steep price, and that is years in a federal prison.”

According to publicly filed court documents and statements made at public court proceedings:

Between 2014 and 2016, ADINDU participated in Business Email Compromise scams (“BEC scams”) targeting thousands of victims around the world, including in the United States.  As part of the BEC scams, emails were sent to employees of various companies directing that funds be transferred to specified bank accounts.  The emails purported to be from supervisors at those companies or third party vendors that did business with those companies.  The emails, however, were not legitimate.  Rather, they were either from email accounts with a domain name that was very similar to a legitimate domain name, or the metadata in the emails had been modified so that the emails appeared as if they were from legitimate email addresses.  After victims complied with the fraudulent wiring instructions, the transferred funds were quickly withdrawn or moved into different bank accounts.  In total, the BEC scams attempted to defraud over $25 million from victims.

ADINDU and others carried out BEC scams by exchanging information regarding: (1) bank accounts used for receiving funds from victims; (2) email accounts for communicating with victims; (3) scripts for requesting wire transfers from victims; and (4) lists of names and email addresses for contacting and impersonating potential victims.                

*                *                *

In addition to the prison term, ADINDU, 30, of Lagos, Nigeria, and Guangzhou, China, was ordered to pay over $1.4 million in restitution. 

Mr. Kim praised the investigative work of the Federal Bureau of Investigation.  Mr. Kim also thanked the Yahoo! E-Crime Investigations Team, and noted that the investigation is continuing.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorney Andrew K. Chan is in charge of the prosecution.

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced today that EFRAIN ANTONIO CAMPO FLORES (“CAMPO FLORES”) and FRANQUI FRANCISCO FLORES DE FREITAS (“FLORES DE FREITAS”) was each sentenced to 216 months in prison for conspiring to import cocaine into the United States.  A jury convicted CAMPO FLORES and FLORES DE FREITAS on November 18, 2016, following a two-week trial before U.S. District Judge Paul A. Crotty, who imposed today’s sentences.    

Acting Manhattan U.S. Attorney Joon H. Kim said:  “In part to fund an election campaign for the First Lady of Venezuela, Efrain Antonio Campo Flores and Franqui Francisco Flores de Freitas devised a plan to work with the FARC terrorist organization to send literally tons of cocaine to the United States.  At their trial last November, a unanimous jury saw their plot for what it was – a massive drug distribution conspiracy.  With today’s sentencing, for participating in this brazen cocaine trafficking scheme, they will spend many years in an American prison.” 

According to the evidence presented at trial and in connection with sentencing proceedings:

Beginning in August 2015, CAMPO FLORES and FLORES DE FREITAS worked with others in Venezuela, Mexico, Honduras, and elsewhere – including at least one member of Fuerzas Armadas Revolucionarias de Colombia (“FARC”), a designated foreign terrorist organization – in an effort to dispatch large loads of cocaine via private aircraft from premises controlled by Venezuelan President Nicolás Maduro at Simón Bolívar International Airport in Maiquetia, Venezuela.  The defendants’ aunt, Cilia Flores, is the First lady of Venezuela, and during the investigation, CAMPO FLORES and FLORES DE FREITAS told individuals acting at the direction of the Drug Enforcement Administration (“DEA”) that they intended to use part of the proceeds of their drug trafficking to fund her December 2015 campaign for a position in the Venezuelan National Assembly.  Electronic communications seized from the defendants’ phones also demonstrated, among other things, that CAMPO FLORES and FLORES DE FREITAS had engaged in a scheme to solicit bribes from debtors of Venezuela’s state-run oil and natural gas company, Petróleos de Venezuela S.A. (“PDVSA”), in exchange for promises that a cousin, Carlos Erik Malpica-Flores, would cause PDVSA to approve and make payments on certain debts.

In early October 2015, an individual who was cooperating with the DEA in Honduras (“CW-1”) reported to the DEA that a Honduran national had introduced CW-1 to two Venezuelans – later identified as the defendants – who were interested in sending cocaine-laden aircraft with legitimate-seeming flight plans from Venezuela to Honduras.  On October 3, 2015, CAMPO FLORES and FLORES DE FREITAS traveled to San Pedro Sula, Honduras, via private jet to meet with CW-1 to discuss sending hundreds of kilograms of cocaine from Simón Bolívar International Airport to Juan Manuel Gálvez International Airport in Roatan, Honduras.  Two days after the meeting, CAMPO FLORES sent text messages to CW-1 that stated:  “What I want is to start work because the electoral campaign is almost here and I always contribute . . . [w]ith money if you know what I mean that is why I want to start work.”

In late October 2015, two confidential sources working at the direction of the DEA (“CS-1” and “CS-2”) traveled to Caracas, Venezuela, to meet with the defendants.  CS-1 purported to be the Mexican boss of the drug trafficking organization with which CW-1 was affiliated, and CS-2 purported to be an associate of CS-1.  On October 23, 2015, during a recorded meeting with CS-1 and CS-2 regarding potential drug shipments, CAMPO FLORES explained:  “[M]y mom,” i.e., Cilia Flores, “is running for the election and I need . . . $20 million. . . .  In other words, the issue of the money . . . we need it by December [2015].”  During the same meeting, CAMPO FLORES reiterated:  “[W]e want to take possession again of the . . . National Assembly and . . . several places with power.”  In another recorded meeting in Caracas on October 26, 2015, CAMPO FLORES described the defendants’ plan to use some of the drug proceeds to bribe local Venezuelan officials who they anticipated would assist Cilia Flores in connection with the upcoming election.  CAMPO FLORES also told CS-1 and CS-2 that there had been an “agreement” involving Venezuelan official Diosdado Cabello that allowed the defendants’ family to “control the oil completely in Venezuela.”  At a third recorded meeting in Caracas, on October 27, 2015, CAMPO FLORES and FLORES DE FREITAS presented CS-1 and CS-2 with a kilogram of cocaine, referring to it as a “little animal,” so that they could test the quality of the drugs.

On November 6, 2015, FLORES DE FREITAS and a bodyguard traveled to Honduras via private jet in order to meet with individuals acting at the direction of the DEA as well as co-conspirators, including co-defendant Robert de Jesus Soto Garcia, to further discuss the cocaine shipment.  During the recorded meeting, Soto Garcia indicated that numerous officials at the airport in Roatán, including military and police personnel, would participate in receiving the defendants’ drug load.  FLORES DE FREITAS and Soto Garcia proceeded to make precise plans for the shipment during the meeting, and FLORES DE FREITAS agreed to send the first load of cocaine on November 15, 2015.

On November 10, 2015, CAMPO FLORES and FLORES DE FREITAS flew on a private jet to Haiti intending to pick up an initial multimillion-dollar payment for the cocaine.  During a recorded meeting, CAMPO FLORES described the defendants’ connection to a “supposedly high ranked” “commander for the FARC,” and both defendants indicated that the first drug shipment, consisting of 800 kilograms, was prepared to be dispatched from Venezuela.  Following the meeting, CAMPO FLORES and FLORES DE FREITAS were arrested by Haitian law enforcement officers, expelled from Haiti, and flown to Westchester County International Airport in White Plains, New York, on a DEA jet.

*                *                *

In addition to the prison terms, CAMPO FLORES, 31, and FLORES DE FREITAS, 33, was each ordered to pay a fine of $50,000.   

Mr. Kim praised the outstanding investigative work of the DEA’s Special Operations Division, Bilateral Investigations Unit, and New York Strike Force.  Mr. Kim also thanked the DEA’s Port-au-Prince Country Office, U.S. Customs and Border Patrol’s National Targeting Center, DEA’s Airwing, the Government of the Republic of Haiti and the Haitian National Police, and the U.S. Department of Justice’s Office of International Affairs for their assistance. 

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

17-398   rrorism and International Narcotics Unit.  Assistant U.S. Attorneys Emil J. Bove III and Brendan F. Quigley are in charge of the prosecution.