Southern District of New York

Joon H. Kim, 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 Maria T. Vullo, Superintendent of the New York State Department of Financial Services (the “DFS”), announced today the unsealing of an Indictment charging JOHN REIMER with bank fraud and mortgage fraud in connection with his participation in a scheme to defraud banks of money intended for individuals seeking loans to purchase or refinance their homes.  REIMER was arrested today in Boca Raton, Florida, and was presented in U.S. District Court for the Southern District of Florida earlier today before United States Magistrate Judge James M. Hopkins.

Acting U.S. Attorney Joon H. Kim said:  “As alleged, John Reimer, vice president of a mortgage bank, defrauded several other financial institutions of more than $12 million.  Reimer allegedly falsified documents, kept funding for mortgages that never closed, and even acquired funding multiple times for the same loans as part of the scheme.  Fraud schemes that target money intended for home loans can taint the market for honest homebuyers seeking to secure mortgages.  We will continue to work with our law enforcement and regulatory partners to ensure that schemes like the one charged here are stopped.”

FBI Assistant Director William F. Sweeney Jr. said:  “As alleged, Reimer capitalized on his knowledge of the mortgage-lending industry to exploit its vulnerabilities, causing serious damage to a number of warehouse banks fronting him an advance for the loans his bank was in the business of providing.  Mortgage fraud not only affects individual victims and institutions, it risks the overall stability of the housing market, accumulating losses across the board.  The FBI continues to support partnerships within the mortgage industry and law enforcement as we work together to combat this serious crime.”

Financial Services Superintendent Maria T. Vullo said:  “This defendant allegedly used his position and access as a banker to obtain millions of dollars in fraudulent loans.  As regulator of New York’s Financial Services industry, the Department of Financial Services is proud to have assisted the United States Attorney’s Office for the Southern District of New York in bringing this defendant to justice.”

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

REIMER, who was the vice-president and comptroller of a mortgage lending institution (the “Mortgage Bank”), participated in a scheme to defraud several financial institutions (the “Warehouse Banks”) by causing the Warehouse Banks to provide funds to the Mortgage Bank, ostensibly to fund mortgage loans for residential properties, based on false and fraudulent documentation and representations made and provided by Reimer to the Warehouse Banks.

The Mortgage Bank was in the business of providing mortgage loans for residential properties (“Loans”).  Pursuant to agreements, the Warehouse Banks advanced sums of money to the Mortgage Bank so that the Mortgage Bank could fund Loans (the “Warehouse Advances”).  Once a Loan closed, the Mortgage Bank typically sold the loan to an investor and used the proceeds of the sale to re-pay the Warehouse Bank for the Warehouse Advance.

In order to obtain a Warehouse Advance for a particular loan, the Mortgage Bank was required, among other things, to provide the Warehouse Bank with certain documents and information about the Loan.  In addition, the notes and mortgages executed by the residential mortgagors were provided to the Warehouse Banks as collateral for the Warehouse Advances.  REIMER was responsible for providing the Warehouse Banks with the information and documents necessary to obtain the Warehouse Advances.

However, according to the Indictment, with respect to certain Loans, REIMER “double-pledged” residential properties by obtaining multiple Warehouse Advances from more than one Warehouse Bank to fund the same Loan, thus misleading each Warehouse Bank into believing that the Warehouse Advance it made to the Mortgage Bank was fully collateralized.

Moreover, according to the Indictment, with respect to certain Loans, REIMER falsely represented to the Warehouse Banks that the Loans were going to close imminently, when, in fact, such Loans were not imminently closing at the time the Warehouse Advances were made.  In some cases, the Loans never closed, but the Mortgage Bank nevertheless retained the Warehouse Advances made for those particular Loans.  In other cases, the Loans did close, but the Mortgage Bank used those Warehouse Advances to repay other Warehouse Advances.

According to the Indictment, in furtherance of the scheme, REIMER provided the Warehouse Banks with fraudulent documents, including mortgage notes on which REIMER falsified the signatures of the purported residential mortgagors.

According to the Indictment, from November 2008 through January 2009, REIMER used fraudulent misrepresentations to cause the Warehouse Banks to wire the Mortgage Company at least over $12 million.

*                      *                      *

REIMER, 60, of Boca Raton, Florida, is charged with one count of bank fraud and one count of wire fraud, each of which carries a maximum sentence of 30 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 thanked the FBI and DFS for their outstanding work on the investigation.

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorney Michael D. Maimin is 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.

[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 allegations.

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and Angel M. Melendez, Special Agent in Charge of the New York Field Office of the Department of Homeland Security, Homeland Security Investigations (“HSI”), announced today that RANDY WANG was arrested this morning on wire fraud charges stemming from his scheme to defraud his former employer, a company based in Manhattan that manages a global airline alliance whose members consisted of approximately 13 international airlines and their affiliates (the “Company”), by incurring more than $2.2 million in unauthorized charges on the Company’s credit card account, and then making changes to the Company’s accounting system to evade detection. WANG was arrested this morning in Long Island City, New York, and was presented today before United States Magistrate Judge Katharine H. Parker.

Acting U.S. Attorney Joon H. Kim said:  “As alleged, Randy Wang took advantage of his position at a major New York-based company to charge millions of dollars’ worth of non-business-related purchases on the company’s credit card.  Wang allegedly purchased hundreds of electronic devices, including cell phones, computers, and tablets, and then falsified paperwork to hide the transactions.  Wang allegedly tried to take his employer for a ride, but instead he may be facing a trip to prison.”

HSI Special Agent in Charge Angel M. Melendez said:  “Using his position as business manager, Wang allegedly developed a scheme to defraud his employer of millions of dollars by means of unauthorized credit card purchases and altered accounting records.  Twenty-five years ago, HSI New York formed the El Dorado Task Force specifically to target all levels of financial crime, including wire fraud like today’s arrest.  With more than 30 local, state, and federal law enforcement partners under one roof, El Dorado continues to be a leader in financial fraud investigations, working together to bring these perpetrators to justice.”

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

During the relevant time period, WANG was employed as a business manager for the Company, and for approximately the last two months of the scheme, WANG also served as the Company’s interim chief financial officer.  From January 2016 through October 2017, WANG incurred more than $2.2 million of unauthorized charges on the Company’s credit card account by making hundreds of purchases at both online and brick-and-mortar retailers.  WANG’s purchases, which were entirely unrelated to his official duties and were not for the benefit of the Company, included approximately 443 laptop computers, 241 mobile electronic devices, 24 tablet computers, and numerous other electronics.  In order to evade detection of his criminal conduct, WANG made changes to the Company’s accounting records to disguise the nature of the credit card charges.

*                    *                    *

WANG, 33, of Long Island City, New York, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant would be determined by the court.

Mr. Kim praised the work of HSI and the El Dorado Task Force.  

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

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

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

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that CHRISTOPHER ST. LAWRENCE, the former Ramapo Town Supervisor, was sentenced to 30 months in prison today in connection with his scheme to defraud investors in municipal bonds issued by the Town of Ramapo (the “Town”) and the Ramapo Local Development Corporation (the “RLDC”).  ST. LAWRENCE was found guilty of 20 counts of fraud and conspiracy following a four-week trial last May before United States District Judge Cathy Seibel in federal court in White Plains.  It was the first conviction for securities fraud in connection with municipal bonds.

Acting U.S. Attorney Joon H. Kim said:  “For years, Christopher St. Lawrence, as Ramapo Town Supervisor, misled municipal bond investors about the state of Ramapo’s finances.  At a trial earlier this year, the jury quickly saw through his years lies, and today, he was sentenced to time in federal prison.  The integrity of the $3.7 trillion municipal bond market must be protected, and prosecutions like this one should put on all on notice that misleading investors in that market through fraud and deception will lead to prosecution and jail.”

According to the allegations contained in the Indictment and the evidence presented in court during the trial:

As of August 2015, the Town had more than $128 million in outstanding bonds that had been issued for various municipal purposes, while the RLDC, a corporation created and owned by the Town under state law, had issued $25 million in bonds to pay for the construction of Provident Bank Park, a minor league baseball stadium in Ramapo.

While the fraud predated the construction of the stadium, the Town’s financial problems were caused largely by the $58 million total cost of the stadium.  The Town paid more than half of that cost, despite the rejection of the Town’s guarantee of bonds to pay for construction of the stadium in a Town-wide referendum in 2010 and ST. LAWRENCE’s public statements that no public money would be used to pay for the stadium.

The Indictment charged that ST. LAWRENCE lied to investors in the Town’s and RLDC’s bonds in order to conceal the deteriorating state of the Town’s finances and the inability of the RLDC to make scheduled payments of principal and interest to holders of its bonds from its own money.  ST. LAWRENCE lied to investors primarily by making up false assets in the Town’s General Fund. 

The General Fund is the Town’s primary operating fund.  The accumulated difference over time between how much money the Town receives in taxes and fees and how much it spends in a year is the fund’s balance.  The fund balance is a cushion that can be spent during difficult financial times.  The size of the fund balance relative to the amount of the fund’s revenue and trends in the Town’s General Fund balance over time are the primary indicators of the Town’s financial health. 

According to the Indictment and the evidence, ST. LAWRENCE lied to the RLDC’s bond rating service in January 2013 when he told them in a telephone call that the 2012 fund balance would remain unchanged from the 2011 balance.  Immediately after that call ended, ST. LAWRENCE told Town employees “to do [an upcoming] refinancing of the short term debt as fast as possible because . . . we’re going to have to all be magicians to get to some of those numbers.”

When the RLDC issued $25 million in bonds to build the stadium building itself in 2011, ST. LAWRENCE inflated the size of the Town’s General Fund by including a false $3.6 million receivable in the General Fund.  The Town’s financial condition was important to investors in the RLDC’s bonds because the Town guaranteed the payments of principal and interest on the bonds.  Without that fake asset, the General Fund’s balance would have been negative in that year.

In addition, ST. LAWRENCE inflated the General Fund with another fake receivable for $3.08 million from 2010 through 2015.  It first went on the Town’s books when the RLDC agreed to buy property known as The Hamlets from the Town for $3.08 million.  That sale never closed because the land turned out to be a habitat for rattlesnakes.  Rather than take the receivable off the Town’s books – and reduce the size of the General Fund balance by $3.08 million, thereby pushing it into negative territory – ST. LAWRENCE claimed the receivable had to do with the RLDC’s purchase of another property from the Town that had already taken place.  To keep it on the books, ST. LAWRENCE then caused the Town Attorney to tell the Town’s auditors over a period of years that the receivable would be paid back within a year, which was required if the receivable were going to stay in the General Fund.  Without this fake receivable alone, the Town’s General Fund balance would have been negative for years. 

In May 2013, the FBI searched Town Hall in connection with this investigation.  Less than 10 days later, ST. LAWRENCE inflated another receivable in the General Fund – this one for money from FEMA to reimburse the Town for expenses from Hurricanes Irene and Sandy.  ST. LAWRENCE claimed that the Town was going to receive $3.145 million from FEMA when the Town hadn’t even submitted those claims to FEMA yet.  Without ST. LAWRENCE’s inflation of this receivable alone, the projected General Fund balance for 2012 would have been negative when the Town sold bonds in May 2013.

Finally, the Indictment alleged and the evidence showed that ST. LAWRENCE told investors in the Town’s and RLDC’s bonds that the RLDC was making the payments on its bonds from its operating revenue, meaning money it was making from its ordinary business of running the baseball stadium and selling condominiums at a development it had built.  That was important to investors because it led them to believe that the Town would not have to pay off the RLDC’s $25 million bonds.  It also made the RLDC’s bonds look less risky.  The RLDC actually made those payments from money it borrowed from the bank or money it got from the Town. 

*                *                *

In addition to the prison term, ST. LAWRENCE, 67, of Wesley Hills, New York, was sentenced to three years of supervised release and a $2,000 special assessment.  Restitution, if any, will be determined at a future date.

Mr. Kim praised the investigative work of the Federal Bureau of Investigation and the Rockland County District Attorney’s Office.  Mr. Kim also thanked the Securities & Exchange Commission for its substantial assistance in the investigation and trial.

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

There will be a press conference today at 12:00 p.m. to announce federal terrorism charges against Akayed Ullah in connection with yesterday’s bombing at the Port Authority Bus Terminal.  The press conference will be livestreamed at https://www.facebook.com/usaosdny/

WHO:            

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

William F. Sweeney, Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation

John J. Miller, Deputy Commissioner of Intelligence and Counter Terrorism for the City of New York

WHEN:          

Tuesday, December 12, 2017 at 12:00 p.m.

WHERE:        

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

1 St. Andrew’s Plaza

New York, NY 10007

LIVESTREAM:  https://www.facebook.com/usaosdny/

CONTACT:    James Margolin, Dawn Dearden, Nicholas Biase

(212) 637-2600

Akayed Ullah, 27, of Brooklyn, New York, and a lawful permanent resident from Bangladesh, has been charged in the U.S. District Court for the Southern District of New York in connection with Ullah’s attempted detonation of a bomb in a subway terminal near the New York Port Authority Bus Terminal in New York City on Dec. 11.  At least three people were injured as a result of the detonation.

Attorney General Jeff Sessions, Acting Assistant Attorney General for National Security Dana J. Boente, Acting U.S. Attorney Joon H. Kim for the Southern District of New York, Assistant Director in Charge William F. Sweeney Jr., of the FBI’s New York Field Office and Commissioner James P. O’Neill of the NYPD made the announcement.  Ullah will be presented before the Honorable Katharine H. Parker. 

"The Department of Justice is relentless in taking on the terrorist threat," said Attorney General Sessions.  "In my time back at the Department, nothing has impressed me more.  Since 9/11, the Department has convicted more than 500 criminals of terrorism-related offenses, and the FBI has open terrorism investigations in every state.  To make law enforcement’s job easier, however, Congress must finally fix our broken immigration system so that we admit to this country those who are likely to succeed, not violent criminals, gang members, terrorists, or their sympathizers. The fact that somebody won a lottery or is someone’s relative tells us nothing about their ability to assimilate.  Nevertheless, the Department of Justice will prosecute this case and every other case to the fullest extent of the law, and we will bring those who threaten America to justice."

“Yesterday, in the heart of rush hour, as thousands came into New York City through the Port Authority Bus Terminal, Akayed Ullah allegedly came with a hate-filled heart and an evil purpose: to murder as many innocent people as he could and blow himself up in the process, all in support of the vicious terrorist cause of ISIS,” said Acting U.S. Attorney Kim.  “Although yesterday he allegedly stood in the tunnels under Port Authority plotting to kill, today he stands charged with federal crimes of terrorism.  Those alleged terrorists who target New York City do so because they feel threatened by the strength of our spirit, the height of our ambition and the breadth of our freedom.  They come seeking to sow hate, fear and terror.  But in New York City, they find instead strength, resilience and hope.  Like many before him, Akayed Ullah will also find another great American virtue: justice.  That justice will be tough, it will be fair and it will be swift.”

“Akayed Ullah let loose his plan to conduct a mass casualty attack, setting off a pipe bomb, strapped to his body, inside a New York City subway terminal, as we allege today,” said Assistant Director in Charge Sweeney.  Like many others before him, we believe Ullah was inspired by a group that exploits technology in an effort to spread a violent ideology, effectively convincing sympathizers to commit terrorist acts worldwide.  The nature of this particular strain of the terrorism threat can often mean evaluating behavior that doesn’t mean anything until you combine it with other pieces of intelligence.  We rely heavily upon the community’s assistance to accomplish that task.”

“The act of terror committed in New York City yesterday accomplished nothing,” said Commissioner O’Neill.  “It has not changed our way of life. It was a cowardly act, fueled by a false sense of purpose — motivated by propaganda in the shadows of the internet.  What is clear is the resolve of New Yorkers to live in a free society, devoid of fear.  I want to commend the work of the NYPD-FBI Joint Terrorism Task Force and the prosecutors in the Southern District for bringing today’s charges.  Finally, our security requires every single member of the public’s help.  It requires their vigilance.  And it requires their care.  If you see something that doesn’t look right, contact law enforcement.”

As alleged in the Complaint:

Islamic State of Iraq and Al-Sham (ISIS)

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, Attack

On Dec. 11, at approximately 7:20 a.m., 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 located an individual later identified as Akayed 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 Dec. 11 Attack. Ullah was inspired by ISIS to carry out the Dec. 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 comprised 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 Dec. 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 Dec. 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 ago.
• On the morning of Dec. 11, shortly before carrying out the attack, Ullah posted a statement on his Facebook account referring to the President of the U.S., 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, 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 Dec. 11 Attack.

 *                     *                      *

Ullah is charged in a Complaint with one count of provision of material support and resources to a designated foreign terrorist organization which carries a maximum sentence of 20 years’ imprisonment; one count of using and attempting to use a weapon of mass destruction which carries a maximum sentence of life imprisonment; one count of bombing and attempting to bomb a place of public use which carries a maximum sentence of life imprisonment; one count of destruction of property by means of fire or explosives, which carries a mandatory minimum sentence of five years’ imprisonment and a potential maximum sentence of 20 years’ imprisonment; and use of a destructive device in furtherance of a crime of violence, namely, the use and attempted use of a weapon of mass destruction which carries a mandatory minimum consecutive sentence of 30 years’ imprisonment and potential maximum of life, all in connection with Ullah’s alleged detonation of an explosive device in New York City.

Mr. Sessions, Mr. Boente and Mr. Kim praised the outstanding investigative efforts of the FBI; the NYPD; the Department of Homeland Security, Homeland Security Investigations (HSI); and the Port Authority of New York and New Jersey’s Police Department.  Ullah’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’s Joint Terrorism Task Force – which consists of law enforcement officers of the FBI, NYPD, HSI and other agencies – and the U.S. Department of Justice’s National Security Division. 

The charges contained in the Complaint are merely accusations, 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 the Counterterrorism Section of the Justice Department’s National Security Division.

Akayed Ullah, 27, of Brooklyn, New York, and a lawful permanent resident from Bangladesh, has been charged in the U.S. District Court for the Southern District of New York in connection with Ullah’s attempted detonation of a bomb in a subway terminal near the New York Port Authority Bus Terminal in New York City on Dec. 11.  At least three people were injured as a result of the detonation.

Attorney General Jeff Sessions, Acting Assistant Attorney General for National Security Dana J. Boente, Acting U.S. Attorney Joon H. Kim for the Southern District of New York, Assistant Director in Charge William F. Sweeney Jr., of the FBI’s New York Field Office and Commissioner James P. O’Neill of the NYPD made the announcement.  Ullah will be presented before the Honorable Katharine H. Parker. 

"The Department of Justice is relentless in taking on the terrorist threat," said Attorney General Sessions.  "In my time back at the Department, nothing has impressed me more.  Since 9/11, the Department has convicted more than 500 criminals of terrorism-related offenses, and the FBI has open terrorism investigations in every state.  To make law enforcement’s job easier, however, Congress must finally fix our broken immigration system so that we admit to this country those who are likely to succeed, not violent criminals, gang members, terrorists, or their sympathizers. The fact that somebody won a lottery or is someone’s relative tells us nothing about their ability to assimilate.  Nevertheless, the Department of Justice will prosecute this case and every other case to the fullest extent of the law, and we will bring those who threaten America to justice."

“Yesterday, in the heart of rush hour, as thousands came into New York City through the Port Authority Bus Terminal, Akayed Ullah allegedly came with a hate-filled heart and an evil purpose: to murder as many innocent people as he could and blow himself up in the process, all in support of the vicious terrorist cause of ISIS,” said Acting U.S. Attorney Kim.  “Although yesterday he allegedly stood in the tunnels under Port Authority plotting to kill, today he stands charged with federal crimes of terrorism.  Those alleged terrorists who target New York City do so because they feel threatened by the strength of our spirit, the height of our ambition and the breadth of our freedom.  They come seeking to sow hate, fear and terror.  But in New York City, they find instead strength, resilience and hope.  Like many before him, Akayed Ullah will also find another great American virtue: justice.  That justice will be tough, it will be fair and it will be swift.”

“Akayed Ullah let loose his plan to conduct a mass casualty attack, setting off a pipe bomb, strapped to his body, inside a New York City subway terminal, as we allege today,” said Assistant Director in Charge Sweeney.  Like many others before him, we believe Ullah was inspired by a group that exploits technology in an effort to spread a violent ideology, effectively convincing sympathizers to commit terrorist acts worldwide.  The nature of this particular strain of the terrorism threat can often mean evaluating behavior that doesn’t mean anything until you combine it with other pieces of intelligence.  We rely heavily upon the community’s assistance to accomplish that task.”

“The act of terror committed in New York City yesterday accomplished nothing,” said Commissioner O’Neill.  “It has not changed our way of life. It was a cowardly act, fueled by a false sense of purpose — motivated by propaganda in the shadows of the internet.  What is clear is the resolve of New Yorkers to live in a free society, devoid of fear.  I want to commend the work of the NYPD-FBI Joint Terrorism Task Force and the prosecutors in the Southern District for bringing today’s charges.  Finally, our security requires every single member of the public’s help.  It requires their vigilance.  And it requires their care.  If you see something that doesn’t look right, contact law enforcement.”

As alleged in the Complaint:

Islamic State of Iraq and Al-Sham (ISIS)

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, Attack

On Dec. 11, at approximately 7:20 a.m., 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 located an individual later identified as Akayed 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 Dec. 11 Attack. Ullah was inspired by ISIS to carry out the Dec. 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 comprised 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 Dec. 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 Dec. 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 ago.

• On the morning of Dec. 11, shortly before carrying out the attack, Ullah posted a statement on his Facebook account referring to the President of the U.S., 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, 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 Dec. 11 Attack.

 *                     *                      *

Ullah is charged in a Complaint with one count of provision of material support and resources to a designated foreign terrorist organization which carries a maximum sentence of 20 years’ imprisonment; one count of using and attempting to use a weapon of mass destruction which carries a maximum sentence of life imprisonment; one count of bombing and attempting to bomb a place of public use which carries a maximum sentence of life imprisonment; one count of destruction of property by means of fire or explosives, which carries a mandatory minimum sentence of five years’ imprisonment and a potential maximum sentence of 20 years’ imprisonment; and use of a destructive device in furtherance of a crime of violence, namely, the use and attempted use of a weapon of mass destruction which carries a mandatory minimum consecutive sentence of 30 years’ imprisonment and potential maximum of life, all in connection with Ullah’s alleged detonation of an explosive device in New York City.

Mr. Sessions, Mr. Boente and Mr. Kim praised the outstanding investigative efforts of the FBI; the NYPD; the Department of Homeland Security, Homeland Security Investigations (HSI); and the Port Authority of New York and New Jersey’s Police Department.  Ullah’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’s Joint Terrorism Task Force – which consists of law enforcement officers of the FBI, NYPD, HSI and other agencies – and the U.S. Department of Justice’s National Security Division. 

The charges contained in the Complaint are merely accusations, 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 the Counterterrorism Section of the Justice Department’s National Security Division.

Jeff Sessions, the Attorney General of the United States, Joon H. Kim, the Acting U.S. Attorney for the Southern District of New York, Dana J. Boente, the Acting Assistant Attorney General for National Security, William F. Sweeney Jr., Assistant Director-in-Charge of the Federal Bureau of Investigation, New York Field Office (“FBI”), and James P. O’Neill Commissioner of the Police Department for the City of New York (“NYPD”), announced that AKAYED ULLAH has been charged in U.S. District Court for the Southern District of New York in connection with ULLAH’s detonation and attempted denotation of a bomb in a subway terminal near the New York Port Authority Bus Terminal in New York City on December 11, 2017.  Three people were injured as a result of the detonation.  

Attorney General Jeff Sessions said:  “The Department of Justice is relentless in taking on the terrorist threat.  In my time back at the Department, nothing has impressed me more.  Since 9/11, the Department has convicted more than 500 criminals of terrorism-related offenses, and the FBI has open terrorism investigations in every state.  To make law enforcement’s job easier, however, Congress must finally fix our broken immigration system so that we admit to this country those who are likely to succeed, not violent criminals, gang members, terrorists, or their sympathizers.  The fact that somebody won a lottery or is someone’s relative tells us nothing about their ability to assimilate.  Nevertheless, the Department of Justice will prosecute this case and every other case to the fullest extent of the law, and we will bring those who threaten America to justice.”

Acting U.S. Attorney Joon H. Kim said:  “Yesterday, in the heart of rush hour, as thousands came into New York City through the Port Authority Bus Terminal, Akayed Ullah allegedly came with a hate-filled heart and an evil purpose: to murder as many innocent people as he could and blow himself up in the process, all in support of the vicious terrorist cause of ISIS.  Although yesterday he allegedly stood in the tunnels under Port Authority plotting to kill, today he stands charged with federal crimes of terrorism.  Those alleged terrorists who target New York City do so because they feel threatened by the strength of our spirit, the height of our ambition, and the breadth of our freedom.  They come seeking to sow hate, fear, and terror.  But in New York City, they find instead strength, resilience, and hope.  Like many before him, Akayed Ullah will also find another great American virtue: justice.  That justice will be tough, it will be fair, and it will be swift.”      

FBI Assistant Director William F. Sweeney Jr. said:  “Akayed Ullah let loose his plan to conduct a mass casualty attack, setting off a pipe bomb, strapped to his body, inside a New York City subway terminal, as we allege today.  Like many others before him, we believe Ullah was inspired by a group that exploits technology in an effort to spread a violent ideology, effectively convincing sympathizers to commit terrorist acts worldwide.  The nature of this particular strain of the terrorism threat can often mean evaluating behavior that doesn’t mean anything until you combine it with other pieces of intelligence.  We rely heavily upon the community’s assistance to accomplish that task.”

NYPD Commissioner James P. O’Neill said:  “The act of terror committed in New York City yesterday accomplished nothing.  It has not changed our way of life.  It was a cowardly act, fueled by a false sense of purpose—motivated by propaganda in the shadows of the internet.  What is clear is the resolve of New Yorkers to live in a free society, devoid of fear.  I want to commend the work of the NYPD-FBI Joint Terrorism Task Force and the prosecutors in the Southern District for bringing today’s charges.  Finally, our security requires every single member of the public’s help.  It requires their vigilance.  And it requires their care.  If you see something that doesn’t look right, contact law enforcement.”

As alleged in 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., 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 an individual later identified as AKAYED 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 ago.

• 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.”

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

 *                     *                      *

ULLAH, 27, of Brooklyn, New York, is charged in the Complaint with one count of provision of material support and resources to a designated foreign terrorist organization, in violation of 18 U.S.C. § 2339B, which carries a maximum sentence of 20 years in prison; one count of using and attempting to use a weapon of mass destruction, in violation of 18 U.S.C. § 2332a, which carries a maximum sentence of life in prison; one count of bombing and attempting to bomb a place of public use, in violation of 18 U.S.C. § 2332f, which carries a maximum sentence of life in prison; one count of destruction of property by means of fire or explosives, which carries a mandatory minimum sentence of five years in prison and a potential maximum sentence of 20 years in prison; and use of a destructive device in furtherance of a crime of violence, namely, the use and attempted use of a weapon of mass destruction, in violation of 18 U.S.C. § 924(c), which carries a mandatory minimum consecutive sentence of 30 years in prison and potential maximum of life, all in connection with ULLAH’s alleged detonation of an explosive device in New York City.

Mr. Sessions, Mr. Kim, and Mr. Boente 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 is 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 Teresinski of the Counterterrorism Section of the Justice Department’s National Security Division.

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 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, Acting United States Attorney for the Southern District of New York, James J. Hunt, Special Agent in Charge of the Drug Enforcement Administration, New York Division (the “DEA”), and Charles Gardner, Yonkers Police Department Commissioner (the “YPD”), announced today the arrest of ANSLEY R. ESTRELLA, RONALD E. LEON, and LUIS OSCAR REYES relating to 13 kilograms of cocaine and nearly 19,000 glassines of heroin in a house in Yonkers.  ESTRELLA, LEON, and REYES were all charged Friday in a complaint with conspiracy to distribute and possess with intent to distribute more than five kilograms of cocaine and more than one kilogram of heroin.

Acting U.S. Attorney Joon H. Kim said:  “After receiving a call about suspicious activity near a house in suburban Yonkers, responding officers allegedly discovered massive quantities of cocaine and heroin, as well as drug paraphernalia, in that home.  We commend our law enforcement partners for their swift and effective response to this potentially dangerous situation, and the citizens who notified them when something just didn’t look right.  Citizens can play an important role in keeping dangerous drugs, including opioids, off our streets.”

DEA Special Agent in Charge James J. Hunt stated:  “A Parent’s worst fear is a heroin dealer setting up shop next door.   This case is a reminder that drug traffickers’ greed outweighs the safety of their neighbors. Law enforcement is committed to keeping a vigilant eye out for drug dealers like these whose trafficking encourages heroin abuse, crime and drug related violence, allegedly.”

Yonkers Police Commissioner Charles Gardner said:  “A thorough investigation conducted by the responding Yonkers police officers resulted in the discovery of a large scale narcotics distribution operation and the arrest of three individuals.  We are working with our federal law enforcement partners on the follow-up investigation and the prosecution of these males.  I would like to thank the U.S Drug Enforcement Administration and the U.S. Attorney’s office for their support and invaluable assistance.”

According to the allegations made in the Complaint:[1]

On the evening of December 7, 2017, YPD officers received a call indicating that three men had pushed a fourth man into a house in Yonkers, New York.  YPD officers responded to the house, and saw ESTRELLA walk out of the house.  The man said he lived in the house with his girlfriend, and that nobody was in the house.  The officers could see – through the closed shades – silhouettes of people moving inside the house.  Nonetheless, the man repeated that nobody was in the house.

As YPD officers approached the open front door, they saw REYES, with a surgical mask on, and then LEON, also with a surgical mask on, who had blood on his face.  The YPD officers entered the house, where LEON denied being hurt.

YPD officers walked through the house to see if there were any additional people committing an ongoing crime or if there were victims in the house.  In a room on the second floor, they found white powder, respiratory masks, and, in an open closet, a large number of glassine envelopes and scales.

In the garage, a YPD officer found a car with an open shopping bag, in which the YPD Officer could see what appeared to be bundles of decks of heroin.

The YPD officers placed ESTRELLA, LEON, and REYES under arrest.  LEON had keys in his possession for the car in the garage.

The YPD obtained and executed a search warrant and did a full search of the house and the car in the garage, as well as two other cars.  During that search, the YPD found, among other things, 13 kilogram-sized bricks of cocaine, 18,598 glassine envelopes containing heroin, 813 tan pills stamped “M30,” a number of plastic bags and clear knotted twists containing white chunky substances, a scale, five small grinders, assorted stamp pads and stamps, a metal kilogram press, and a money-counting machine.

The Complaint charges each of ESTRELLA, LEON, and REYES with one count of narcotics conspiracy, and one count of distribution and possession with intent to distribute controlled substances, and aiding and abetting the same.

*                *                *

Mr. Kim thanked the DEA and YPD for their outstanding work on the investigation.

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

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

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

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that KAREEM LANIER, a/k/a “Reem,” a/k/a “Black,” has been sentenced to a term of 40 years in prison, which must run consecutively to a prior prison sentence of five years, for his crimes as a high-ranking member of the “Young Gunnaz” or “YGz” gang, including murdering Dykeem Etheridge on January 24, 2011, and providing assistance to other YGz gang members in connection with three other murders.  LANIER was sentenced on Friday afternoon in Manhattan federal court by United States District Judge Valerie E. Caproni, before whom he previously pleaded guilty.

According to the charging and other documents filed in the case, as well as statements made during LANIER’s guilty plea and sentencing proceedings and other court proceedings in the case:

LANIER was a high-ranking member of a set of the YGz gang known as the “Morris Avenue Gunnaz,” which was based in and around Maria Lopez Plaza on Morris Avenue in the South Bronx.  From 2005 to 2017, members and associates of the YGz enriched themselves by committing robberies and by selling drugs, such as crack cocaine, and committed acts of violence, including murder and attempted murder, against various people, including rival gang members. 

On January 24, 2011, a group of YGz members, including LANIER, assaulted Dykeem Etheridge, 21, as he exited a store on the corner of 154th Street and Courtlandt Avenue.  LANIER shot and killed Etheridge as he tried to flee the attack.  LANIER later told a fellow gang member that he killed Etheridge in order to enhance his status in the YGz.

On July 3, 2011, LANIER and other YGz members rode on bicycles to the territory of a rival gang on Park Avenue near 158th Street in the South Bronx.  Their goal was to shoot and kill a rival gang member on sight, and LANIER went along to support and encourage the other YGz members.  A member of the YGz shot at a rival gang member, who survived the shooting.  While LANIER and others were fleeing from the scene of the shooting, LANIER’s associate shot Curtis Smith, 23, a bystander, in the head.  Smith died several days later.           

On October 17, 2011, LANIER provided a firearm to a fellow YGz member, who then used the firearm in a shootout with members of a rival gang that resulted in the death of Devon Jackson, 16, in the vicinity of East 146th Street between Third and Collect Avenues in the Bronx.

On December 22, 2011, after several YGz members murdered Taisheem Ferguson, 17, near Morris Avenue and 151st Street in the Bronx, LANIER helped two of the participants in the murder flee from the scene by hailing and paying for a taxi cab so that they would escape before the police could catch them.

*                *                *

LANIER, 26, of the Bronx, is the eighth defendant to be sentenced this year by Judge Caproni for participation in a YGz-related murder.

Acting U.S. Attorney Kim praised the outstanding work of the Bureau of Alcohol, Tobacco, Firearms and Explosives, the Drug Enforcement Administration, and the New York City Police Department in the investigation of this case.  He also thanked the Bronx District Attorney’s Office for their support in this case.

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Samson Enzer, Gina M. Castellano, and Andrew C. Adams are in charge of the prosecution.

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced today that former Hoboken, New Jersey, City Council president and attorney CHRISTOPHER CAMPOS was sentenced today in Manhattan federal court to 30 months in prison for fraudulently obtaining millions of dollars in car loans.  CAMPOS used approximately 20 straw buyers to purchase more than 200 new automobiles based on false representations that, among other things, the straw buyers would use the cars for their personal use when, in fact, CAMPOS and his co-conspirators obtained the vehicles in order to lease them as livery cabs.  After a week-long trial, CAMPOS was found guilty on June 22, 2017, of bank and wire fraud and conspiracy to commit bank and wire fraud.  U.S. District Judge Valerie E. Caproni presided over that trial and imposed today’s sentence.

Acting Manhattan U.S. Attorney Joon H. Kim said:  “Christopher Campos, an attorney and former Hoboken City Council president, defrauded lenders out of millions of dollars.  He put up straw buyers to obtain loans for ‘personal use’ cars that in fact comprised a fleet of over 200 vehicles leased to livery drivers.  Campos has now received the significant sentence his crimes merit.”

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

Between approximately October 2012 and September 2013, CAMPOS and his co-conspirator Julio Alvarez, among others, orchestrated a scheme to fraudulently obtain new automobiles that they intended to lease to livery cab drivers.  In order to secure financing in connection with the purchase of these new cars, CAMPOS and other co-conspirators enlisted and aided individuals with good credit histories (“straw buyers”) to submit fraudulent car loan applications to numerous lenders.  In order to obtain the new vehicles, CAMPOS and other co-conspirators sent straw buyers to several car dealerships located throughout the New York City area, where dealership employees helped straw buyers submit fraudulent loan applications. 

The auto loan applications submitted by the straw buyers falsely represented that the vehicles would be used for the buyers’ personal use, rather than as part of the defendants’ leasing business.  In addition, in many cases, the car loan applications misrepresented personal information about the straw buyers, including their incomes and assets.  CAMPOS also caused financing applications to be sent to multiple financial institutions at the same time so that the lenders would not know that the straw buyers were incurring obligations to other lenders in connection with the purchase of multiple new automobiles.

In total, the scheme carried out by CAMPOS, Alvarez, and others involved approximately 20 straw buyers, the purchase of approximately 200 new vehicles, and ultimately resulted in lenders disbursing over $7,000,000 in fraudulently obtained car loans.  Most of those loans ultimately went into default.

*                *                *

Mr. Kim praised the outstanding investigative work of the Federal Bureau of Investigation.  Mr. Kim also thanked the National Insurance Crime Bureau (“NICB”), the New York Automobile Insurance Plan (“NYAIP”), and the New York State Department of Motor Vehicles for their substantial assistance in the investigation and trial.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Dina McLeod, Sagar K. Ravi, and Niketh Velamoor are in charge of the prosecution.

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, today announced that SHALOM LAMM and KENNETH NAKDIMEN were sentenced for conspiracy to corrupt the electoral process, in connection with an election in Bloomingburg, New York.  LAMM was sentenced today to 10 months in prison.  NAKDIMEN was previously sentenced on September 15, 2017, to six months in prison.  Both defendants were sentenced by United States District Judge Vincent Briccetti in White Plains federal court. 

Acting U.S. Attorney Joon H. Kim stated:  “False and fraudulent voter registrations have no place in our democracy.  As the sentences imposed on Shalom Lamm and Kenneth Nakdimen show, those who try to undermine the integrity of our elections will be prosecuted and punished.”

According to the allegations contained in the Indictment, as well as statements made in related court filings and proceedings:

Starting in 2006, LAMM and NAKDIMEN, real estate developers, sought to build and sell real estate in Bloomingburg, New York.  From these real estate development projects, LAMM, NAKDIMEN, and others hoped for and anticipated making hundreds of millions of dollars.  But by late 2013, the first of their real estate developments had met local opposition, and still remained under construction and uninhabitable.  When met with resistance, rather than seek to advance their real estate development project through legitimate means, LAMM, NAKDIMEN, and others instead decided to corrupt the democratic electoral process in Bloomingburg by falsely registering voters and paying bribes for voters who would help elect public officials favorable to their project.

Specifically, in advance of an election in March 2014 for Mayor of Bloomingburg and other local officials, LAMM, NAKDIMEN, and others, and people working on their behalf, developed and worked on a plan to falsely register numerous people who were not entitled to register and vote in Bloomingburg because they actually lived elsewhere.  Those people included some who never intended to live in Bloomingburg, some who had never kept a home in Bloomingburg, and indeed, some who had never set foot in Bloomingburg.  LAMM, NAKDIMEN, and others took steps to cover up their scheme to register voters who did not actually live in Bloomingburg by, among other things, creating and back-dating false leases and placing items like toothbrushes and toothpaste in unoccupied apartments to make it seem as if the falsely registered voters lived there.

LAMM, NAKDIMEN, and others also bribed potential voters by offering payments, subsidies, and other items of value to get non-residents of Bloomingburg to register unlawfully and vote there. 

*                      *                     *          

In addition to the prison terms, LAMM, 58, of Bloomingburg, New York, was sentenced to one year of supervised release, a $20,000 fine, and 400 hours of community service and NAKDIMEN, 64, of Monsey, New York, was also ordered to pay a $20,000 fine and 400 hours of community service.

Mr. Kim praised the outstanding investigative work of the FBI-Hudson Valley White Collar Crime Task Force, the Sullivan County District Attorney’s Office, the Sullivan County Sherriff’s Office, the Orange County Sheriff’s Office, the Orange County District Attorney’s Office, the Internal Revenue Service, and the United States Postal Inspection Service.  Mr. Kim also thanked the Department of Justice’s Public Integrity Section, Election Crimes Branch, for its assistance in the case.

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Kathryn Martin, Benjamin Allee, and Perry Carbone 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., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an Indictment charging STEPHEN DECKER and LUIS MERCADO with conspiracy to commit wire fraud, wire fraud, and aggravated identity theft in connection with a scheme to steal more than $2 million in stock certificates from the apartment of a deceased Manhattan woman, and then use those stolen assets to attempt to purchase over $2 million worth of gold coins.  DECKER and MERCADO were arrested this morning in Manhattan.  The defendants will be presented before U.S. Magistrate Judge James L. Cott in Manhattan federal court this afternoon.  The case has been assigned to U.S. District Judge Lewis A. Kaplan.   

Acting Manhattan U.S. Attorney Joon H. Kim said:  “As alleged, these defendants preyed on a deceased New Yorker’s estate by stealing millions in stock certificates from her home.  Then, in an attempt to cover their tracks, the defendants allegedly sold the certificates and tried to purchase more than $2 million in gold coins so that the ill-gotten gains couldn’t be traced to them.  Thanks to the outstanding investigative work of the FBI, the defendants will now be held accountable for their brazen actions.”

FBI Assistant Director William F. Sweeney Jr. said:  “As alleged, when Decker and Mercado cashed out on stolen stock certificates, their right to ownership was nothing more than fool’s gold.  Not only did the certificates not belong to them, their rightful owner was an elderly deceased woman with no representatives to stake her claim.  Taking advantage of those who are powerless to defend themselves or their legacy has always been, and will always be, an inexcusable crime.”

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

From March 2016 to February 2017, DECKER and MERCADO engaged in a scheme designed to steal over $2 million from a deceased Manhattan woman (the “Victim”).  As part of the scheme, DECKER and MERCADO stole stock certificates valued at over $2 million from the Victim’s Manhattan apartment after the Victim’s death in March 2016.  In August 2016, based on false representations made by DECKER and MERCADO, a financial institution (“Company-1”) opened a brokerage account (the “Account”) in the Victim’s name.  DECKER and MERCADO then deposited the stolen stock certificates into the Account.  In September 2016, based on additional false representations made by DECKER and MERCADO, Company-1 sold the shares in the brokerage account opened in the Victim’s name, resulting in a cash balance in the Account of more than $2 million.  DECKER and MERCADO then attempted to purchase over $2 million in gold coins using the assets in the Account.            

*                *                *

The Indictment charges DECKER, 59, of Secaucus, New Jersey, and MERCADO, 53, of Manhattan, New York, each with one count of conspiracy to commit wire fraud and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison; and one count of aggravated identity theft, which carries a mandatory sentence of two years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

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

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

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

[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth 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,  William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), Leon Hayward, Acting Director of the New York Field Office of U.S. Customs and Border Protection (“CBP”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced that ELDAR RAKHAMIMOV, NASIM RAKHAMIMOV, VLADIMIR ZABRODIN, RUSLAN KADIROV, and JOSEPH FINNERAN were taken into federal custody today for participating in a scheme to defraud beverage bottling companies and the State of New York.  The defendants were presented this afternoon before U.S. Magistrate Judge James L. Cott.

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

From September 2016 to December 4, 2017, ELDAR RAKHAMIMOV, NASIM RAKHAMIMOV, ZABRODIN, KADIROV, and FINNERAN conspired to defraud bottling companies and the State of New York through a scheme involving recyclable containers.

The defendants’ scheme exploited recycling incentives created by New York State’s Returnable Container Act (the “RCA”).  The RCA created a $.05 deposit on bottled soft drinks, beer, and water sold in New York State to promote the recycling of bottles and cans by bottlers, beverage distributors, and container redemption centers.  Under the RCA, the first bottler, distributor, or dealer to collect the required deposits on beverage containers is required to reimburse the $.05 deposit to redeeming individuals or entities and to pay a handling fee of $.035 per empty beverage container redeemed by redemption centers.

ELDAR RAKHAMIMOV and NASIM RAKHAMIMOV managed a bottle collection company (“Company-1”) that focused on aggregating recyclable containers and delivering them, in exchange for payment, to redemption centers in the New York City area.  ELDAR RAKHAMIMOV and NASIM RAKHAMIMOV, along with ZABRODIN, KADIROV, and FINNERAN, worked together to falsely inflate the number of bottles delivered by Company-1 to induce redemption centers to overpay bottle deposits and handling fees to Company-1.

Using an assortment of deceptive techniques, ranging from doctored invoices to “redeeming” the same bottles twice to impermissibly collecting bottles from New Jersey to paying (or receiving) kickbacks, the defendants extracted hundreds of thousands of dollars from victim companies – and, ultimately, the State of New York.

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ELDAR RAKHAMIMOV, 46, of Brooklyn, New York, NASIM RAKHAMIMOV, 46, of Brooklyn, New York, ZABRODIN, 32, of Staten Island, New York, KADIROV, 32, of Brooklyn, New York, and FINNERAN, 64, of Bay Shore, New York, are each charged with one count of conspiring to commit mail and wire fraud, which carries a maximum penalty of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.

Mr. Kim praised the outstanding work of the FBI, the CBP, and the NYPD for their investigative efforts and ongoing support and assistance with the case.

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

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

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

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that GEORGE DOUMANIS and EMANUEL PANTELAKIS, a/k/a “Manny,” each pled guilty today to defrauding investors in Terminus Energy, Inc., a publicly traded penny stock.  DOUMANIS and PANTELAKIS each pled guilty to conspiracy to commit securities fraud before U.S. Magistrate Judge Debra Freeman.  They will be sentenced before U.S. District Judge Andrew L. Carter on April 9, 2018.

Acting U.S. Attorney Joon H. Kim said:  “Today, George Doumanis and Emanuel Pantelakis both admitted to operating an investment scheme by luring investors in a supposed fuel cell technology which they knew to be fictitious.  In furtherance of their scheme, the two used misleading documents to dupe investors into contributing over $7 million into their phony penny stock – which they eventually used to pay their own personal expenses. This Office and our law enforcement partners will continue to keep a watchful eye on the investment markets and prosecute those who mislead the investing public.”

According to the allegations contained in the Indictment filed against DOUMANIS, PANTELAKIS and their co-conspirator, and statements made in related court filings and proceedings[1]:

From at least February 2008 until at least 2014, DOUMANIS and PANTELAKIS, along with their co-conspirator Danny Pratte, engaged in a scheme to defraud investors in the publicly traded company Terminus Energy, Inc. (“Terminus”), by inducing victims to invest in Terminus stock through material misrepresentations and omissions and by misappropriating investor funds for their own purposes. 

Terminus was purportedly producing and marketing a commercially viable “fuel cell” as an alternative energy source.  DOUMANIS, PANTELAKIS, and Pratte sold shares of Terminus to investors through private offerings.  In connection with such sales, DOUMANIS, PANTELAKIS, and Pratte provided investors with private placement memorandums (“PPMs”) that contained materially false and misleading statements.  For example, the PPMs falsely stated that (i) Terminus had completed its goal of developing a working fuel cell in mid-2008; (ii) Terminus would use specified investors’ funds to make payment on third-party development contracts designed to manufacture a working fuel cell; and (iii) Terminus would pay no more than 10 percent in sales commissions.  In truth, and as DOUMANIS, PANTELAKIS, and Pratte well knew, (i) there was no working fuel cell; (ii) the third party contracts had been cancelled after Terminus failed to make payment to the third parties; and (iii) unregistered salesmen were receiving commissions far in excess of 10 percent.  The PPMs also failed to accurately disclose the involvement of either DOUMANIS, who was barred from involvement in penny stocks as a result of a 2003 conviction for conspiracy to commit securities fraud, wire fraud, and mail fraud, or PANTELAKIS, who had been permanently barred by the Financial Industry Regulatory Authority (“FINRA”) following allegations that he had made fraudulent misrepresentations to customers in connection with the sale of securities.  DOUMANIS, PANTELAKIS, and Pratte also caused similar misrepresentations to be made in business plans, executive summaries, and presentations shared with potential investors, as well as in publicly available press releases.  Through these false and misleading statements, DOUMANIS, PANTELAKIS, and Pratte fraudulently induced investors to purchase nearly $8 million of Terminus stock.

Rather than use the investor money as promised, DOUMANIS, PANTELAKIS, and Pratte misappropriated the funds for their own use and for use by their co-conspirators.  For example, DOUMANIS, entities affiliated with DOUMANIS, and certain of his family members received at least $570,000, including payments to personal credit cards and toward DOUMANIS’s residential mortgage.  PANTELAKIS and certain of his family members received at least $420,000, including payments to personal credit cards and to pay for PANTELAKIS’s wife’s Mercedes-Benz.  Pratte personally received approximately $1 million.  In addition, the unregistered salespeople collectively received undisclosed commissions of more than $1.5 million.

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GEORGE DOUMANIS, 59, and EMANUEL PANTELAKIS, a/k/a “Manny,” 42, each pled guilty to one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense. 

The maximum potential 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 Court.

Trial against defendant Danny Pratte is scheduled to commence on May 1, 2018, on charges of conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire and mail fraud, and wire fraud.  The allegations contained in the Indictment as to Pratte are merely accusations, and he is presumed innocent unless and until proven guilty.

Mr. Kim praised the work of the Federal Bureau of Investigation, and thanked the SEC.

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

[1]  As for the defendant who has not pled guilty, Danny Pratte, the description of the charges set forth herein constitute only allegations.

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that a federal jury today found MARIA SOLY ALMONTE, a/k/a “Soly Almonte,” a/k/a “Soly La Fuerte,” a/k/a “SoSo,” a/k/a “SoSo Wavy,” a/k/a “Soly Montana,” guilty of sex trafficking of minors, sex trafficking conspiracy, and use of interstate commerce to promote illegal activity.  ALMONTE was convicted following a two-week jury trial before U.S. District Judge Kimba M. Wood.     

Acting Manhattan U.S. Attorney Joon H. Kim said:  “As a jury unanimously found, Maria Soly Almonte was the ringleader of a sex trafficking conspiracy that exploited children as young as 13.  Her predatory conduct shocks the conscience.  Protecting children is one of our most important missions, and I thank the FBI and the NYPD for their outstanding work to that end.  Almonte now awaits sentencing for her heinous crimes.”

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

Since at least 2015, MARIA SOLY ALMONTE operated a brothel in New York City, which trafficked minors as young as 13 years old.  The brothel operated at various locations throughout New York, including apartments in the Bronx and Harlem.

ALMONTE served as the brothel’s proprietor.  The brothel’s sex workers were required to pay ALMONTE a fee for prostitution services they rendered at the brothel.  The brothel advertised its services on the internet and communicated with clients by telephone.  During the time period of the conspiracy, at least six minors provided prostitution services at one or more of the brothel’s locations. 

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ALMONTE, 33, was convicted of one count of conspiring to commit sex trafficking, which carries a maximum sentence of life in prison; one count of sex trafficking a minor under the age of 14, which carries a mandatory minimum sentence of 15 years in prison and a maximum sentence of life in prison; one count of sex trafficking a minor under the age of 18, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison; one count of using facilities of interstate commerce to promote illegal activity, which carries a maximum sentence of five years in prison; and one count of conspiring to use facilities of interstate commerce to promote illegal activity, 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.

Mr. Kim thanked the FBI and NYPD for their outstanding investigative work in this matter.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Stephanie Lake and Alison Moe are in charge of the prosecution.

Joon H. Kim, Acting United States Attorney for the Southern District of New York, announced that AHARON GOLDBERG, SHIMEN LIEBOWITZ, and BINYAMIN GOTTLIEB were sentenced today for their respective roles in devising and covering up a plot to kidnap and murder an individual in order to obtain a religious divorce for that individual’s wife.  GOLDBERG pled guilty on September 28, 2017, to conspiring to commit kidnapping and murder for hire.  LIEBOWITZ pled guilty on July 27, 2017, to conspiring to commit extortion.  GOTTLIEB pled guilty on September 15, 2017, to helping to conceal the plot from law enforcement.  U.S. District Judge Sidney H. Stein, who presided over today’s sentencings, sentenced GOLDBERG to three years in prison, LIEBOWITZ to two years in prison, and GOTTLIEB to one year’s probation.

Acting U.S. Attorney Joon H. Kim said:  “The defendants were involved in a terrifying plot to kidnap, and ultimately to kill, their intended victim.  Fortunately, the person they hired to carry out their crime alerted the FBI, and now the defendants have been held accountable for their crimes.”

According to the Complaints and statements made during court proceedings and in public filings:

According to Jewish religious law as observed in certain communities, in order to effect a divorce, a husband must provide his wife with a document known as a “get.”  A woman whose husband will not consent to a divorce is known as an “agunah.”  In the absence of the husband’s issuing a get, an agunah may be released from her marriage only through the husband’s death.

In or about July 2016, the defendants AHARON GOLDBERG and SHIMEN LIEBOWITZ began working to orchestrate the kidnapping of an individual who refused to grant a get to his wife (the “Intended Victim”).  The purpose of the kidnapping was to imprison and torture the Intended Victim until he agreed to give his wife a get.  BINYAMIN GOTTLIEB, an associate of GOLDBERG and LIEBOWITZ, placed them in touch with a private investigator (the “CS”), whom GOLDBERG and LIEBOWITZ solicited to personally carry out the kidnapping and torture in exchange for payment.  Unbeknownst to GOLDBERG and LIEBOWITZ, however, the CS reported the plot to the Federal Bureau of Investigation and recorded several of his meetings with the defendants.

In July 2016, the CS met with GOLDBERG, in GOTTLIEB’s presence, to discuss the kidnapping plot.  Although LIEBOWITZ was not present at the beginning of the meeting, he arrived and joined the conversation after several minutes.  The CS made an audio recording of the meeting using a hidden recording device.  During the meeting and after LIEBOWITZ arrived, the parties discussed, among other things, the logistics of the kidnapping plot, including the possibility of kidnapping the Intended Victim in the United States and holding him captive in a cage, or kidnapping him in Ukraine and transporting him to Israel.  LIEBOWITZ also provided the CS with details to assist the CS in carrying out the kidnapping plot.  During the meeting, GOLDBERG and LIEBOWITZ also agreed to advance the CS $25,000 to assist in efforts to plan the kidnapping.  Within days of this initial meeting, an envelope containing approximately $25,000 cash was delivered to the CS.

On or about August 9, 2016, the CS met with LIEBOWITZ and GOLDBERG in Kiryas Joel, New York.  During this meeting, the CS, GOLDBERG, and LIEBOWITZ discussed additional details of the kidnapping plan, including logistics and the cost associated with a plan to kidnap the Intended Victim overseas.  This conversation was also recorded.

On August 12, 2016, the CS again met with LIEBOWITZ and GOLDBERG, at which time they provided the CS with an additional payment of over $20,000 for use in making arrangements for the kidnapping.  In this meeting, which was also recorded, the CS, GOLDBERG and LIEBOWITZ further discussed their plan to kidnap the Intended Victim in the United States and to obtain the get from him in this country.

Subsequent to the August 12, 2016, meeting, the CS had additional conversations with GOLDBERG, in which GOLDBERG discussed his desire not merely to kidnap the Intended Victim, but also to kill him.

On August 25, 2016, the CS met LIEBOWITZ in Central Valley, New York.  During the meeting, LIEBOWITZ paid the CS an additional sum of about $12,000 to carry out the kidnapping.  Also during the meeting, the CS spoke by phone with GOLDBERG, who was still in Israel, about the kidnapping plan, which the CS and GOLDBERG referred to in code as a “wedding,” as well as GOLDBERG’s desire that the CS kill the Intended Victim.  This conversation was also recorded.

On or about September 2, 2016, the CS had another recorded conversation with LIEBOWITZ, during which LIEBOWITZ indicated his understanding that the Intended Victim would be murdered as part of the plan.

Subsequently, on September 6, 2016, LIEBOWITZ and GOLDBERG again met with the CS.  During that meeting, LIEBOWITZ and GOLDBERG paid the CS an additional $16,000.  The CS led LIEBOWITZ and GOLDBERG to believe that the CS had captured the Intended Victim, had tortured the Intended Victim in order to force him to provide a get, and that the Intended Victim had so far refused to do so.  The CS discussed options for what to do with the Intended Victim given his unwillingness to give the get.  GOLDBERG replied by referencing his prior directive to the CS to kill the Intended Victim: “I’ve told you whatever I’ve told you, and I even got an okay from one of the rabbis.  He [the Intended Victim] cannot slip out of your fingers.”  LIEBOWITZ then interjected, “I’m on his side, whatever he says I’m with him.”  GOLDBERG resolved that the only way forward was to put a bullet in the Intended Victim.  LIEBOWITZ interjected that if LIEBOWITZ were to be killed, arrangements would have to be made to ensure that there was a witness who could verify that the Intended Victim was dead (and that the wife could remarry) without leading back to LIEBOWITZ and his co-conspirators.  LIEBOWITZ later stated, “Somebody is going to need to tell a rabbi that I have saw” with respect to the death of the Intended Victim.  GOLDBERG and the CS then discussed the possibility of burying the Intended Victim and seeing to it that his body was exhumed and identified using DNA.  LIEBOWITZ interjected, “There is no way to put him out on the street somewhere?”  The September 6 conversation ended with FBI agents arresting LIEBOWITZ and GOLDBERG.

On September 11, 2016, FBI agents interviewed GOTTLIEB about his knowledge of the plot.  At that time, Gottlieb stated that he had no knowledge of any conversation where the plot was discussed, despite the fact that he had been present at the initial meeting between the CS, GOLDBERG, and LIEBOWITZ.

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In addition to their prison sentences, GOLDBERG, 56, of Bnei Brak, Israel, and LIEBOWITZ, 26, of Monroe, New York, were each sentenced to three years of supervised release.  GOTTLIEB 34, is from Airmont, New York. 

Mr. Kim praised the outstanding investigative work of the Federal Bureau of Investigation and the New York City Police Department, working through the Joint Organized Crime Task Force.

This case is being handled by the Office’s Violent and Organized Crime Unit and Public Corruption Unit.  Assistant United States Attorneys Scott Hartman and Paul M. Monteleoni are in charge of the prosecution.   

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and David E. Beach, Special Agent in Charge of the U.S. Secret Service, New York Field Office (“USSS”), announced charges today against 13 individuals in connection with a scheme to defraud drivers of two ride-sharing companies (“Company-1” and “Company-2”) by accessing those drivers’ accounts without authorization in order to divert driver funds to bank accounts controlled by the defendants and other members of the scheme (the “Scheme”).  Through the course of the Scheme, the defendants compromised thousands of Company-1 and Company-2 driver accounts, and diverted millions of dollars from those accounts.  Defendants LOUIS PINA, MALIK GRAY, GEORGE JOSEPH, AKEEM KRUBALLY, THERESA OUTERBRIDGE, DEVON WILLIAMS, HAKEEM BALDEO, QUINTEEN LYNCH, KHALID NAZZAL, FRANCISCO VIRUET, JOHNNY SERRANO, THALIA CAQUIAS, and TANESHA FORD were charged in two Complaints (the “Complaints”) unsealed today in Manhattan federal court.  WILLIAMS, BALDEO, LYNCH, NAZZAL, VIRUET, CAQUIAS, and FORD were arrested today and presented this afternoon before U.S. Magistrate Judge Debra Freeman in Manhattan federal court. 

Acting Manhattan U.S. Attorney Joon H. Kim said:  “These 13 defendants allegedly developed a sophisticated scheme to swindle hard-working drivers out of their income.  Through elaborate identity theft and phishing, the defendants allegedly diverted millions of dollars from company accounts to line their own pockets.  Thanks to the skilled investigative work of the Criminal Investigators of the U.S. Attorney’s Office and the U.S. Secret Service, the defendants now will be held to account.”

David E. Beach, Special Agent in Charge of the USSS said:  “The success in this case demonstrates the investigative capabilities of the United States Secret Service and the collaborative efforts of our law enforcement partners, specifically the U.S. Attorney’s Office Southern District of NY, Federal Bureau of Investigation’s Westchester County Safe Streets Task Force, and Westchester County District Attorney’s Office.  The Secret Service will continue to develop innovative ways to protect the financial infrastructure of the United States and combat criminals who use emerging technologies to conduct business.”

According to allegations contained in the two Complaints[1]:

Overview of the Scheme

The charges in the Complaints result from a Scheme to defraud livery drivers and ride-sharing companies using mobile ride-sharing applications.  The Scheme targeted drivers associated with Company-1 and Company-2.  Scheme members called Company-1 and Company-2 drivers posing as Company-1 and Company-2 representatives, and deceived the drivers into providing unique personal identifiers and other information that was then used to obtain unauthorized access into the online Company-1 and Company-2 driver accounts.  Once members of the Scheme logged into Company-1 and Company-2 driver accounts without authorization, they altered information in those compromised accounts and diverted driver funds to bank accounts they controlled.

Overview of the Company-1 Scheme

With respect to the Scheme involving Company-1, members of the Scheme ordered rides on the Company-1 mobile application (“App-1”), which provided Scheme members with the driver’s name, picture, and an anonymized phone number so that the rider could communicate with the driver.  Scheme members canceled the rides shortly after receiving the driver’s anonymized phone number.  The Scheme members then called the driver on the driver’s anonymized telephone number impersonating a representative from Company-1.  During the call, the Scheme member would ask the driver for the driver’s true telephone number and, while remaining on the phone with the driver, the Scheme member would attempt to log into the driver’s Company-1 account.  The driver then received a text message from Company-1 containing a unique code on the driver’s cellphone, and the Scheme member impersonating a Company-1 representative then requested that the driver provide this unique code to the Scheme member.  In addition, during the call, Scheme members would request that the driver provide the driver’s license number. 

Using the victim driver’s telephone number, driver’s license number, and the unique code, Scheme members thereafter logged into the victim driver’s Company-1 account through App-1 or the Company-1 web interface without the driver’s authorization.  After Scheme members obtained unauthorized access to the victim driver’s account, they changed the bank account information associated with the account to a bank account that either they or another Scheme member controlled.  Once the victim driver’s account had been compromised and the bank account information altered, funds that the victim driver earned from Company-1 were diverted to Scheme members’ bank accounts.

Overview of the Company-2 Scheme

With respect to the Scheme involving Company-2, members of the Scheme ordered rides on the Company-2 mobile application (“App-2”), which provided Scheme members with the driver’s name, picture, and an anonymized phone number so that the rider could communicate with the driver.  Scheme members canceled the rides shortly after receiving the driver’s anonymized phone number.  The Scheme members then called the driver on the driver’s anonymized telephone number impersonating a representative from Company-2.  During the call, the Scheme member would ask the driver for the driver’s true telephone number.  The Scheme member would then tell the victim driver that Company-2 would be sending the driver a link to a website that the driver must use to verify the driver’s information in order to obtain a bonus from Company-2. 

Thereafter, the Scheme member sent the victim driver a link to a malicious website (the “Fraudulent Company-2 Website”), that was controlled by Scheme members.  The Fraudulent Company-2 Website was designed to appear as if it were a website maintained by Company-2, and requested, among other information, the driver’s login credentials, including the driver’s phone number, email address, and unique Company-2 password.  Once the victim driver had entered this information on the Fraudulent Company-2 Website, Scheme members used the driver’s login credentials to log into the driver’s account through App-2 or the Company-2 web interface without the driver’s authorization.  Once Scheme members logged into the victim driver’s Company-2 account, Scheme members changed the bank account information associated with the account to a bank account that either they or another Scheme member controlled.  Once the victim driver’s account had been compromised and the bank account information altered, funds that the victim driver earned from Company-2 were diverted to Scheme members’ bank accounts.

The Defendants' Participation in the Scheme

Through the course of the Scheme, the defendants compromised thousands of Company-1 and Company-2 driver accounts, and stole millions of dollars from Company-1 and Company-2 driver accounts.  After receiving unauthorized transfers from Company-1 and Company-2, Scheme members withdrew the fraudulent proceeds from bank accounts, typically through large cash withdrawals or large purchases. 

Scheme members played different, and, at times, multiple roles in the Scheme.  “Recruiters” – including LOUIS PINA, MALIK GRAY, GEORGE JOSEPH, and DEVON WILLIAMS – used social media, including Snapchat, to bring new people into the Scheme and to coordinate the Scheme. 

“Callers” – including LOUIS PINA, MALIK GRAY, GEORGE JOSEPH, DEVON WILLIAMS and HAKEEN BALDEO – made calls to drivers impersonating Company-1 and Company-2 representatives using either their personal phones or a service that allows users to mask the number they use to make phone calls to victim drivers, during which they tricked drivers into providing personal information to allow them to obtain unauthorized access to their driver accounts.

“Account Hackers” – including LOUIS PINA, AKEEM KRUBALLY, DEVON WILLIAMS, and JOHNNY SERRANO – logged into Company-1 and Company-2 driver accounts without authorization to change bank account information. 

“Money Receivers” – including LOUIS PINA, MALIK GRAY, GEORGE JOSEPH, AKEEM KRUBALLY, THERESA OUTERBRIDGE, HAKEEM BALDEO, QUINTEEN LYNCH, KHALID NAZZAL, FRANCISCO VIRUET, JOHNNY SERRANO, THALIA CAQUIAS, and TANESHA FORD – received unauthorized transfers into their bank accounts from Company-1 and Company-2 as a result of the Scheme, and then withdrew large amounts of cash from those accounts shortly following these unauthorized transfers. 

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PINA, 23, of Bronx, NY; GRAY, 21, of Mount Vernon, NY; JOSEPH, 22, of Mount Vernon, NY; KRUBALLY, 21, of Mount Vernon, NY; OUTERBRIDGE, 27, of Mount Vernon, NY; WILLIAMS, 22, of Mount Vernon, NY; BALDEO, 20, of Rye Brook, NY; LYNCH, 27, of Mount Vernon, NY; NAZZAL, 22, of Yonkers, NY; VIRUET, 19, of Bronx, NY; SERRANO, 25, of Bronx, NY; CAQUIAS, 20, of Bronx, NY; and FORD, 21, of Mount Vernon, NY, are each charged with one count of conspiring to commit wire fraud, which carries a maximum sentence of 20 years in prison, one count of conspiracy to commit access device fraud, which carries a maximum sentence of seven-and-a-half years in prison, and one count of aggravated identity theft, which carries a mandatory sentence of two years in prison that must be imposed consecutively to any other sentence.  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 work of the Criminal Investigators of the United States Attorney’s Office for the Southern District of New York and the USSS.  Mr. Kim further thanked the Westchester County District Attorney’s Office for their assistance and cooperation throughout this investigation, and also thanked the FBI’s Westchester County Safe Streets Task Force for their assistance. 

The case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Sheb Swett and Noah Solowiejczyk are in charge of the prosecution.

[1] As the introductory phrase signifies, the entirety of the texts of the Complaints and the descriptions of the Complaints 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, and James D. Robnett, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced that EARL SIMMONS, an internationally known recording artist, performer, and actor known professionally as “DMX” and “X,” pled guilty today in Manhattan federal court to one count of tax fraud for evading the payment of income taxes in the period from 2010 through 2016.  In total, during that time period, SIMMONS engaged in a scheme to conceal millions of dollars of income from the IRS and to avoid paying $1.7 million of tax liabilities.  SIMMONS pled guilty before U.S. District Judge Jed S. Rakoff.

Acting U.S. Attorney Joon H. Kim said:  “Today, Earl Simmons, the actor, producer and recording artist known as DMX, admitted to systematically cheating on his taxes.  By insisting to be paid in cash whenever possible and having royalty payments diverted to the accounts of financial surrogates, Simmons concealed hundreds of thousands of dollars of income from the IRS.  Today, Simmons made a choice between ‘Right or Wrong,’ and did the right thing, admitting his guilt, and agreeing to pay his tax liabilities.  No matter who you are or whatever fame you may have achieved, the law applies equally to all, and no one is exempt from the shared obligation to pay our taxes.”

IRS-CI Special Agent in Charge James D. Robnett said:  “Mr. Simmons skirted his responsibilities when he chose to ignore his duty to pay his taxes. We should not forget that the ultimate victims in tax fraud cases are the honest US taxpayers who file and pay their taxes. This guilty plea shows that IRS-Criminal Investigation is working to ensure all taxpayers file and pay their fair share.”

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

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

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

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

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

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SIMMONS, 46, of Yonkers, New York, faces a maximum sentence of five years in prison.  As part of his plea agreement, SIMMONS is also required to pay restitution to the IRS.  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.  SIMMONS is scheduled to be sentenced by Judge Rakoff on March 29, 2018, at 4:00 P.M.

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

This case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorney Richard Cooper is in charge of the prosecution.

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and James P. O’Neill, the Police Commissioner of the City of New York (“NYPD”), announced the unsealing of a criminal complaint charging REYNALDO LOPEZ with attempting to traffic narcotics and using a firearm in furtherance of that offense, access device fraud, conspiracy to commit access device fraud, aggravated identity theft, and passing counterfeit obligations.  LOPEZ is a police officer with the NYPD, assigned to the Anti-Terrorism Unit in the Transit Bureau.  LOPEZ was presented yesterday before U.S. Magistrate Judge Debra Freeman.

Acting U.S. Attorney Joon H. Kim said:  “Reynaldo Lopez, a police officer sworn to serve and protect his community, instead allegedly engaged in a shocking crime spree.  Lopez allegedly attempted to traffic nearly three kilograms of heroin, stole people’s identities to create and use credit cards for his own use, and knowingly used counterfeit money.  Police officers who violate their oath and break the laws betray not only the public, but their fellow officers who have nobly committed themselves serving and protecting our communities.”

FBI Assistant Director William F. Sweeney Jr. said:  “The list of allegations Officer Lopez faces is troubling on many levels. Not only is Lopez accused of participating in a fraudulent credit card operation and a counterfeit money scheme, he’s also accused of misusing his position as a police officer to engage in the trafficking into our city of what he believed to be heroin.  The NYPD works diligently day in and day out to protect the public from those who engage in these types of crimes. As evidenced by the charges today, nobody is exempt from that practice.”

NYPD Police Commissioner James P. O'Neill said:  “Police officers are sworn to protect and serve the public.  As alleged, the defendant violated our oath, breaking the law, repeatedly, to traffic narcotics or steal others' identities.  Today he finds himself under arrest and charged criminally in federal court after eroding the trust we work on building every day with the public.”

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

LOPEZ is an NYPD police officer assigned to the Transit Bureau’s Anti-Terrorism Unit. 

On November 29, 2017, LOPEZ attempted to traffic approximately three kilograms of heroin from a location in New Jersey to the Bronx, New York.  LOPEZ agreed with another undercover police officer (“UC-2”) to transport what LOPEZ believed were three kilograms of heroin to a drug dealer located in the Bronx, New York, under LOPEZ’s protection as an NYPD police officer, and was arrested when he attempted to make the delivery.  LOPEZ also possessed a firearm in furtherance of this attempted narcotics trafficking.

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

From October 2017 to the present, LOPEZ possessed, passed, and used counterfeit United States currency.  In multiple recorded conversations with an undercover NYPD officer (“UC-1”), LOPEZ discussed his possession of counterfeit money, stating that he previously had successfully used some of the counterfeit currency.  LOPEZ also showed UC-1 a stack of currency that LOPEZ claimed was counterfeit, and provided UC-1 with a counterfeit $100 bill.

*                      *                      *

LOPEZ, 26, of Brooklyn, New York, was arrested yesterday in the Bronx, New York.  LOPEZ is charged with one count of access device fraud, which carries a maximum sentence of 15 years in prison; one count of conspiracy to commit access device fraud, which carries a maximum sentence of five years in prison; one count of aggravated identity theft, which carries a mandatory sentence of two years in prison; one count of passing counterfeit obligations, which carries a maximum sentence of 20 years in prison; attempted possession of one kilogram and more of mixtures and substances containing heroin, which carries a mandatory minimum sentence of 10 years in prison and a maximum of life in prison; and firearms use, carrying, and possession in connection with a narcotics trafficking offense, which carries a mandatory sentence of five years in prison.

The statutory minimum, maximum, and mandatory 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. Kim praised the FBI and the NYPD for their outstanding work on the investigation.  He added that the investigation is continuing.

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

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

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and Scott J. Lampert, the Special Agent in Charge of the New York Regional Office of the United States Department of Health and Human Services Office of Inspector General (“HHS-OIG”), announced the arrests of MEHMET DIKENGIL, ANNA JONES, and LUIS OMAR VARGAS for their participation in a scheme to defraud Medicaid of more than $400,000.  DIKENGIL, the owner of Dental Express Broadway, P.C., a dental clinic located in upper Manhattan, employed JONES, an officer manager, and VARGAS, an unlicensed dental provider, in furtherance of the health care fraud, which involved billing Medicaid for dental services that were not provided to patients.  DIKENGIL and VARGAS were arrested this morning in New Jersey.  JONES was arrested this morning in Queens, New York.  The defendants will be presented later today in Manhattan federal court before Chief Magistrate Judge Debra Freeman.

Acting Manhattan U.S. Attorney Joon H. Kim said:  “As alleged, these defendants, including a licensed dentist, defrauded Medicaid time and again by billing for services that were never provided.  Together with our law enforcement partners, we will aggressively prosecute those who defraud federal programs that provide care for low income New Yorkers.”

HHS-OIG Special Agent-in-Charge Scott J. Lampert:  “Health providers, including an unqualified ‘dentist,’ allegedly siphoned money from the vital Medicaid program to pay for services not needed or never delivered. Patients and taxpayers need to know that suspected government health program fraud will be investigated and prosecuted.”    

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

From at least January 2017, up to and including November 2017, DIKENGIL, a licensed dentist and owner of Dental Express Broadway, P.C. (the “Dental Clinic”), JONES, the office manager at the Dental Clinic, and VARGAS, an unlicensed dental provider at the Dental Clinic, engaged in a health care fraud conspiracy.  In furtherance of the fraud, the defendants submitted numerous reimbursement claims to Medicaid for having provided Medicaid patients with dental services, when, in fact, they did not provide such services.  Patients were recruited to the Dental Clinic where they were paid kickbacks of $25 to undergo minimal dental procedures.  The Dental Clinic then billed Medicaid for any dental services provided to the patients, as well as for additional dental services that were not provided.  In addition, VARGAS, although not licensed as a dentist, performed dental work and then billed Medicaid under DIKENGIL’s name.  In total, the Dental Clinic submitted fraudulent Medicaid claims totaling more than $400,000.

*                *                *

The Complaint charges MEHMET DIKENGIL, 69, of Chester, New Jersey, ANNA JONES, 59, of Queens, New York, and LUIS OMAR VARGAS, 45, of Roselle, New Jersey, with conspiracy to commit health care fraud and health care fraud.  The maximum sentence on each count is 10 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Kim praised the investigative work of HHS-OIG.  Mr. Kim also thanked the New York City Human Resources Administration for their assistance during the investigation.

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

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

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

Joon H. Kim, Acting United States Attorney for the Southern District of New York, announced today that RODINY CALYPSO, a former New York City Correction Officer, was sentenced today in Manhattan federal court to 16 months in prison for filing a false “Use of Force” report in connection with his beating of a handcuffed inmate at Rikers Island.  CALYPSO was found guilty of filing the false report on August 16, 2017, following a five-day jury trial at which he was also acquitted of one count of violating the civil rights of an inmate and one count of obstruction of justice.  U.S. District Judge Valerie E. Caproni imposed today’s sentence.

Acting Manhattan U.S. Attorney Joon H. Kim said:  “Today, Rodiny Calypso received the prison term that his cover-up deserved.  A day after being caught on videotape beating a handcuffed man at Rikers Island, Rodiny Calypso undermined the ensuing investigation by repeatedly lying on a report.  The integrity of investigations into Constitutional violations at New York’s jails and prisons is critically important, and lying to interfere with them can lead to a federal conviction, as well as time in prison.” 

In sentencing CALYPSO, Judge Caproni said:  “Make no mistake about it, this is a serious offense.  Other correction officers should think long and hard about telling the truth on the Use of Force forms.  It is important that they know that it’s not just that use of force that will get you in trouble, but lying to cover it up will, too.”  Judge Caproni added that “the message has to be that you will pay dearly, not just with the loss of your job, but with the loss of your liberty” if a correction officer files a false report.

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

Rikers Island is a jail complex located in the Bronx, New York, maintained by the New York City Department of Correction.  At the time of his assault, the inmate (“Inmate-1”) was a pretrial detainee in the Otis Bantum Correctional Center (“OBCC”), a facility that houses, among other inmates, inmates in need of maximum security.  Inmate-1 was housed in 5 North, a dormitory area within the OBCC in which inmates were generally kept in solitary confinement in individual cells for 23 hours per day.  The shower facilities within 5 North were individual stalls, to be occupied by one inmate at a time, and to which inmates were brought handcuffed, then uncuffed through a port in the shower stall door, and then handcuffed again through the port before being brought out of the stalls by correction officers.

The Assault and Cover-Up
 

Shortly before noon on February 27, 2014, CALYPSO relieved another correction officer at 5 North while Inmate-1 was in the shower.  Inmate-1 and CALYPSO had an extended and heated verbal exchange, during which CALYPSO picked up some personal items Inmate-1 had dropped outside the door through the port.  At one point, CALYPSO stepped away from the door and spoke to a fellow correction officer one level down within the dorm area.  That person left the dorm area and returned with another officer (“Officer-1”), who looked up at the shower area.

CALYPSO rear-cuffed Inmate-1 for removal and briefly looked down in the direction of the other officer.  CALYPSO then opened the door to the shower stall and, within seconds, sucker-punched Inmate-1 several times in the face.  He followed Inmate-1 into the shower area, where he put Inmate-1 into a headlock and punched him several more times in the head.  CALYPSO then began to lose his footing, and clung to Inmate-1’s side.  Officer-1 arrived in the stall at this point.  As Officer-1 restrained Inmate-1, CALYPSO regained his footing and elbowed Inmate-1 repeatedly – approximately five times – in the head.  As a result of the assault, Inmate-1 suffered lacerations to his face and the back of his head.  The entire assault was captured on surveillance video and witnessed by multiple inmates whose cells were positioned opposite the shower area.

The New York City Department of Correction issues directives governing the circumstances under which the use of force against inmates is appropriate.  Under these directives, force is to be used as a last resort, when an inmate in restraints is still dangerous to himself and others.  The directives also dictate how incidents in which force is used are to be reported – on a “Use of Force” report to be filled out truthfully and promptly.

A full day after the assault, in violation of the directives, CALYPSO filled out a “Use of Force Report” form on which he was supposed to report truthfully the circumstances of that assault.  Over multiple pages and numerous answer fields within the report, CALYPSO attempted to justify his conduct by lying about whether and how Inmate-1 had acted aggressively toward him and whether his violent response was necessary.  He also mischaracterized and misstated portions of the assault, omitting the punches he delivered while holding Inmate-1 in a headlock and claiming that he had hit CALYPSO only in the “upper torso” area.

CALYPSO was terminated from his job as a correction officer following his criminal conviction.

*                      *                      *

Mr. Kim praised the investigative work of the FBI.  Mr. Kim also thanked the New York City Department of Investigation, the New York City Department of Correction, Investigative Division, and the Bronx District Attorney’s Office for their assistance in the investigation.

This case is being handled by the Office’s Civil Rights and Public Corruption Units.  Assistant U.S. Attorneys Martin S. Bell and Tara M. La Morte are in charge of the prosecution.   

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and Daniel D. Brownell, the Commissioner of the New York City Business Integrity Commission (“BIC”), announced today the unsealing of a complaint charging VINCENT PERRETTI with bank fraud and conspiracy to commit bank fraud in connection with a scheme to steal over $900,000 in checks from his employer at the Fulton Fish Market.  PERRETTI was arrested this morning and was presented this afternoon before Magistrate Judge Debra Freeman in federal court in Manhattan.

Manhattan Acting U.S. Attorney Joon H. Kim said:  “As alleged, Vincent Perretti’s fishy scheme involved stealing nearly a million dollars from his employer and spending it on trips and jewelry.  Thanks to the outstanding investigative work of the NYPD, Perretti’s alleged two-year scheme has gone belly up.” 

Commissioner Daniel D. Brownell said:  “Vincent Perretti allegedly directed a blatant, long-term fraud in the Fulton Fish Market, stealing nearly $1 million from his own employer. As the regulator for all of the City’s public wholesale markets, BIC will continue to work to keep the markets fair and competitive, free from corruption and theft.”

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

Over a two-year period, PERRETTI and a co-conspirator who also worked at the Fulton Fish Market entered fake invoices into their employer’s accounting system, causing the employer to issue unauthorized checks to PERRETTI for shipments of fish that were neither ordered nor delivered.  PERRETTI then cashed the checks and spent the money on personal items, including jewelry and trips to the Bahamas. 

*                *                *

PERRETTI, 49, of Aberdeen, New Jersey, is charged with one count of conspiracy to commit bank fraud, which carries a maximum sentence of 30 years in prison, and one count of bank fraud, which carries a maximum sentence of 30 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 Business Integrity Commission and the New York City Police Department.  

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorney Adam S. Hobson 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 Acting United States Attorney for the Southern District of New York, announced that JAMES ROSEMOND, a/k/a “Jimmy the Henchman,” was found guilty last night of murder-for-hire, conspiracy to commit murder-for-hire, and firearms offenses for ordering the murder of Lowell Fletcher, a/k/a “Lodi Mack.”  The jury convicted ROSEMOND on all counts in the controlling indictment following a nine-day retrial before United States District Judge Lewis A. Kaplan.

Acting U.S. Attorney Joon H. Kim said:  “James Rosemond’s team of hitmen assassinated Lowell Fletcher as payback for an assault on Rosemond’s son.  Rosemond’s defense at trial – that he hired these men to shoot Fletcher, but did not intend for Fletcher to be killed – was swiftly and unanimously rejected by the jury.  Justice for Fletcher’s family has been a long time coming, in part because of a hung jury and an overturned conviction in two prior trials, but that thanks to the unwavering commitment and tireless work of the detectives, agents, and prosecutors on this case, it is finally here.”   

According to court papers and the evidence at trial:

JAMES ROSEMOND was the founder of Czar Entertainment, a rap music management company, and also the head of a large-scale cocaine trafficking organization.  In March 2007, members and associates of a rival rap music group known as “G-Unit,” including Marvin Bernard, a/k/a “Tony Yayo,” and Lowell Fletcher, a/k/a “Lodi Mack,” assaulted ROSEMOND’s son.  ROSEMOND’s son was not seriously injured in the assault, and Fletcher ended up serving prison time for his involvement in the assault.  Nevertheless, in 2009, ROSEMOND recruited a crew of men to murder Fletcher upon his release from prison by promising at least $30,000 in payment for killing Fletcher.  At ROSEMOND’s direction, members of the murder crew selected a dark and secluded location for the murder in the vicinity of Mount Eden and Jerome Avenues in the Bronx, and lured Fletcher to that spot.  When Fletcher arrived there in the evening on September 27, 2009, a member of the murder crew stepped out of the shadows and fired five bullets into Fletcher’s back and arms using ROSEMOND’s .22 caliber handgun with a silencer.  Fletcher died later that night.  On October 2, 2009, ROSEMOND had a trusted employee of his cocaine organization provide a kilogram of cocaine – worth about $30,000 in street value – to a member of his murder crew as payment for the murder. 

For his role in ordering, planning, and paying for the murder of Lowell Fletcher, ROSEMOND was convicted of one count of substantive murder-for-hire, one count of conspiracy to commit murder-for-hire, and two firearms counts.  ROSEMOND faces a mandatory minimum sentence of life in prison.  ROSEMOND is scheduled to be sentenced on March 13, 2018, before Judge Kaplan.

At the conclusion of ROSEMOND’s first trial, in February and March 2014, a mistrial was declared after the jury was unable to reach a unanimous verdict on the counts against ROSEMOND relating to the murder-for-hire of Fletcher.  At ROSEMOND’s second trial in December 2014, ROSEMOND was convicted on all counts.  On appeal to the United States Court of Appeals for the Second Circuit, ROSEMOND argued in part that his conviction in this murder-for-hire case should be overturned because certain rulings by the trial court effectively barred him from advancing a line of defense that ROSEMOND wanted to pursue – namely, ROSEMOND’s claim that although he ordered hitmen to shoot Fletcher, he did not intend for the shooting to result in Fletcher’s death.  In November 2016, the Second Circuit vacated ROSEMOND’s conviction and remanded the case for a new trial.  The case was reassigned to Judge Kaplan for retrial.  ROSEMOND presented that defense at this third trial, which began on November 6, 2017, and ended on November 28, 2017, when a unanimous jury found ROSEMOND guilty of all the charges against him.

Acting U.S. Attorney Kim thanked and praised the U.S. Drug Enforcement Administration, the New York City Police Department, the U.S. Department of Homeland Security, and the U.S. Marshals Service for their persistence and outstanding work in this investigation. 

The case is being prosecuted by the Office’s Violent and Organized Crime Unit.  The trial was conducted by Assistant U.S. Attorneys Samson Enzer, Drew Skinner, and Elizabeth Hanft.

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that AVINOAM LUZON pled guilty this morning to selling fentanyl that resulted in the overdose death of Gabriel Tramiel, 32, of Manhattan, on October 22, 2016.  LUZON pled guilty earlier today before Chief Magistrate Judge Debra Freeman.

Acting Manhattan U.S. Attorney Joon H. Kim said:  “Avinoam Luzon was a trained medical doctor who sold a lethal dose of fentanyl.  Even as he was enrolled as a graduate student in public health, Luzon fueled the nation’s most serious health crisis, the opioid abuse epidemic.  As he admitted today, Luzon sold fentanyl to Gabriel Tramiel, a 32-year-old New Yorker, and, tragically, it killed him.”

According to the charging and other documents filed in federal court, as well as statements made in the plea proceeding:

Gabriel Tramiel was found dead by his wife in the early morning hours of October 23, 2016.  Tramiel was transported to the hospital and was examined by a medical examiner from the New York City Office of the Chief Medical Examiner who determined that a fentanyl overdose was the cause of Tramiel’s death.  Text messages recovered from Tramiel’s phone show a conversation with LUZON the evening of October 22, 2016, in which LUZON requested payment from Tramiel for narcotics and the two arranged a meeting to exchange narcotics for payment.  LUZON later admitted to providing the lethal dose of fentanyl to Tramiel on October 22, 2016.  LUZON also turned over to law enforcement over 160 grams of fentanyl he was storing in his dorm room in Manhattan, while enrolled as a public health student.         

*                *                *

LUZON, 33, of Manhattan, New York, faces a maximum sentence of 20 years in prison.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as the defendant’s sentence will be determined by a judge.  LUZON is scheduled to be sentenced in March 2018, by the Honorable Lewis A. Kaplan, U.S. District Judge.

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

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

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and Scott J. Lampert, the Special Agent in Charge of the New York Office of the U.S. Department of Health and Human Services’ Office of Inspector General (“HHS-OIG”), announced today the filing of criminal and civil charges against ALEXANDER NEUMEISTER (“NEUMEISTER”), a prominent researcher into neurological disorders who, at all times relevant to the charges, was a professor of psychology at a New York City medical school (the “School”).  NEUMEISTER was charged with using his position at the School to convert tens of thousands of dollars of federal grant funds, as well as funds belonging to the School, to his personal use by spending them on, among other things, trips for family members and trips and meals for himself and a social friend (the “Friend”).  Among other expenses, NEUMEISTER used approximately $9,000 in government funds to pay for eight roundtrip flights from New York City to Salt Lake City to visit the Friend, as well as more than $4,300 in School funds to pay for the Friend to enjoy a nine-day, all-expense paid trip to a resort hotel in Miami Beach.  In addition, NEUMEISTER falsely claimed that the Friend was a research study participant in studies that NEUMEISTER was overseeing for the School, and caused the School to pay over $10,000 of the School’s own funds directly to the Friend.  To date, NEUMEISTER has not repaid any of the misappropriated funds.

NEUMEISTER was arrested on November 21, 2017, in Ogdensberg, New York, and appeared before a U.S. magistrate judge in the Northern District of New York on November 22, 2017.  He will be presented before Chief U.S. Magistrate Judge Debra Freeman in Manhattan federal court today.  In addition, a civil case was brought against NEUMEISTER in Manhattan federal court earlier today.

Acting U.S. Attorney Joon H. Kim said:  “As alleged, Alexander Neumeister, fraudulently charged tens of thousands of dollars in personal expenses as research or school-related expenses.  For allegedly betraying the trust of the medical school that employed him and the government institute that funded his research, Neumeister now faces serious federal charges.” 

Special Agent in Charge Scott J. Lampert said:  “The defendant allegedly stole thousands of dollars from grants that were meant for important mental health research.  We will continue to hold individuals accountable for blatant misuse of federal funds.”

According to the allegations in the Government’s criminal and civil complaints[1]:

From 2012 through 2014 (“Covered Period”), NEUMEISTER was employed by the School and served as the principal investigator for a variety of research studies, many of which were funded by grants issued by the National Institute of Mental Health (“NIMH”).  As the principal investigator of these studies, NEUMEISTER was responsible for overseeing all aspects of the studies.  NEUMEISTER was provided a credit card by the School, referred to as a procurement card (“P-Card”), and was authorized to charge study-related expenses to the P-Card, but in doing so he was required to identify to which specific funding source (i.e., which grant or other source) each such expense should be allocated.  To the extent NEUMEISTER allocated expenses to NIMH grants or School expense accounts, the School would pay the expenses using funds it received from NIMH or its own funds, respectively.

During the Covered Period, NEUMEISTER used his P-Card to charge tens of thousands of dollars of expenses that were personal in nature and unrelated to his research studies or employment at the School.  Nevertheless, NEUMEISTER falsely classified, or caused others to classify falsely, these expenses as related to his research or for business purposes related to his position at the School, which resulted in the expenses being paid for using NIMH funds or the School’s own funds.  For example, during the Covered Period, NEUMEISTER used his P-Card to charge the following personal expenses, all of which were ultimately paid for with NIMH or School funds:  

• airline tickets so that the Friend could travel from Charlotte, North Carolina, or Salt Lake City, Utah, depending on where the Friend was then living, to New York City, where NEUMEISTER was then living;
   
• airline tickets so that NEUMEISTER could travel from New York City to Charlotte and Salt Lake City to visit the Friend, as well as lodging, bar tabs, meals and other travel-related expenses associated with this travel;
   

• an all-expense paid trip to Miami Beach for the Friend, during which the Friend was given authorization by NEUMEISTER to use NEUMEISTER’s P-Card to pay for food, beverages, and beach facilities;

• an iPhone for the friend; and

• airline tickets so that NEUMEISTER’s spouse could travel from Newark, New Jersey, to Vienna, Austria, to attend a family event.
   

When one of NEUMEISTER’s supervisors at the School questioned him in connection with an audit of his P-Card charges, NEUMEISTER, among other things: (1) asked that the audit findings not be disclosed to others because it would jeopardize his job and his children’s ability to attend the School without having to pay tuition; and (2) offered to pay back certain of the expenses that he had charged to the P-Card.  Yet, Neumeister never repaid any of the misappropriated funds and later denied much of the improper conduct. 

*                      *                      *

NEUMEISTER, 51, of Hamden, Connecticut, is charged with one count of theft of government funds, which carries a maximum sentence of 10 years in prison, and one count of wire fraud, which carries a maximum sentence of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the Judge.  NEUMEISTER is also charged with civil claims under the False Claims Act, through which the Government may recover damages and civil penalties arising from his conduct.

Mr. Kim thanked HHS-OIG for their efforts and ongoing support and assistance with the case.

The criminal case is being handled by the Office’s Complex Frauds Unit, and Assistant U.S. Attorneys Dina McLeod and Christopher B. Harwood are in charge of the prosecution.

The civil case is being handled by the Office’s Civil Frauds Unit, and Assistant U.S. Attorneys Christopher B. Harwood and Anthony J. Sun are in charge of the matter.

The charges contained in the criminal 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 criminal and civil complaints, and the description of the complaints 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 FRANK MERCEDES was found guilty yesterday of murder in connection with a drug conspiracy, murder-for-hire, murder-for-hire conspiracy, and use of a firearm resulting in death, for his role in the murder of Richard Diaz, 28, in Manhattan in 1999.  MERCEDES was convicted after a one-week jury trial before U.S. District Judge Richard J. Sullivan. 

Acting U.S. Attorney Joon H. Kim said: “Thanks to the work of dedicated agents, detectives, and prosecutors who relentlessly pursued justice, the cold-case murder of an innocent 28-year-old man has been solved after more than 18 years.  We hope the verdict brings some measure of peace to Richard Diaz’s family.” 

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

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

On the night of July 19, 1999, Gracesqui and a member of his crew saw the Intended Victim in a car with Richard Diaz and began following them through Manhattan.  When the car with the Intended Victim stopped at a red light, Gracesqui got out of the car that he had been in, approached the car with the Intended Victim, and began shooting.  The shots hit both the Intended Victim and the driver of the car, Richard Diaz.  Diaz was able to drive a short distance to the Henry Hudson Parkway, until he lost consciousness and died.  The Intended Victim sustained injuries but survived.   Shortly thereafter, MERCEDES met with Gracesqui and the other members of the hit team to pay them tens of thousands of dollars in exchange for committing the murder. 

*               *               *

MERCEDES, 51, from the Dominican Republic, faces a mandatory minimum sentence of life in prison.  MERCEDES is scheduled to be sentenced on April 4, 2018, before Judge Sullivan. 

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

Mr. Kim praised the investigative work of the U.S. Drug Enforcement Administration (DEA) New York Drug Enforcement Task Force, which is comprised of agents, detectives and investigators from the DEA, the New York City Police Department and the New York State Police.  Mr. Kim also thanked the NYPD.

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

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and William Grady, the Dutchess County District Attorney, announced today that KATHY SCOTT and GEORGE SANTIAGO JR., both former New York State Correction Officers, were convicted yesterday of the November 12, 2013, beating of Kevin Moore, a sentenced inmate at the Downstate Correctional Facility in Fishkill New York, and of falsifying records after the fact to cover up the beating.  SCOTT and SANTIAGO assaulted Moore in violation of his rights under the U.S. Constitution by repeatedly punching and kicking him in the head and body as he lay prone on the floor – injuries that caused Moore to be hospitalized for two weeks with facial bone fractures, five broken ribs, and a collapsed lung.  SCOTT and SANTIAGO were also charged with, and convicted of, conspiring to violate Moore’s civil rights, as well as falsifying and conspiring to falsify Department of Correction records concerning the assault.  After a nine-day jury trial before U.S. District Judge Kenneth M. Karas, SCOTT and SANTIAGO were convicted of all charges and immediately taken into custody.

Manhattan U.S. Attorney Joon H. Kim said:  “Yesterday, a unanimous jury in White Plains found two New York State correction officers guilty of federal crimes in brutally beating 54-year-old inmate Kevin Moore and then orchestrating a massive cover-up involving scores of lies and even a phony injury.  This verdict should send a loud, clear message to the New York State prison system that the protections of the U.S. Constitution do not stop at the prison wall.  Although most correction officers are good and honest public servants doing an enormously challenging and important job, there are those who become criminals themselves.  Officers who beat inmates, supervising officers who facilitate abuse, and those who lie about it to investigators will face the consequences.  And that could be a federal conviction and time in prison as an inmate themselves.”

Dutchess County District Attorney William Grady said:  "The United States Attorney’s Office, in agreeing to take the lead in this case, allowed us to avoid the serious legal restrictions that would have been encountered if we had pursued this investigation at the state level.  The resulting joint investigation coupled with this jury verdict has allowed our two offices to ensure that there would be full accountability in this horrific case and send the message that every available option was and will continue to be pursued to ensure that justice is achieved."

According to the evidence introduced at trial:

On November 12, 2013, Kevin Moore, then 54, was brought to the 1D Housing Unit at Downstate Correctional Facility to be housed overnight.  Moore objected to his cell assignment and a verbal dispute ensued between Moore and a group of correction officers.  After Moore yelled, in sum and substance, “I’m a monster,” multiple officers, including SANTIAGO, forced Moore to the floor, held him down, and proceeded to assault Moore as he lay there, repeatedly punching and kicking Moore in the head and body.  At no time did Moore ever try to attack, touch, or even make a threatening gesture toward any of the officers.  While Moore lay defenseless on the floor, SANTIAGO cocked back his leg and kicked Moore in the face.  SANTIAGO also continued to strike Moore after Moore was handcuffed.  During the beating, SANTIAGO laughed and taunted Moore, yelling, “Who’s the monster now?” 

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

Immediately after the beating, SANTIAGO and other officers, led by SCOTT, engaged in an elaborate cover-up of the crime they had committed.  They made up a false cover story that Moore had attacked one of the officers and that another officer had to strike Moore once in the head.  To make this lie believable, the officers claimed that Moore had injured the officer’s back by pushing the officer backward onto a table.  Because nothing of the sort had occurred, they created a phony injury.  Specifically, SANTIAGO hit one of the other officers repeatedly on the back with a baton and SCOTT photographed the fake injury.  SCOTT then prepared a false Use of Force Report of the incident, incorporating the photos and false statements from herself and other officers, including SANTIAGO, and submitted the report to her superiors.  SCOTT and SANTIAGO also repeatedly pressured other officers to lie to investigators about what had occurred.

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

*          *          *

SCOTT, 43, of Saugerties, New York, and SANTIAGO, 35, of Fremont Center, New York, were each convicted of one count of deprivation of rights under color of law, which carries a maximum sentence of 10 years in prison; one count of conspiracy to deprive civil rights, which carries a maximum sentence of 10 years in prison; one count of falsifying documents, which carries a maximum sentence of 20 years in prison; and one count of conspiring to falsify documents, which carries a maximum sentence of five years in prison.  SCOTT AND SANTIAGO are scheduled to be sentenced by Judge Karas on April 10, 2018.

Three other former Downstate correction officers pled guilty to the same four offenses.  Andrew Lowery pled guilty on July 27, 2016; Donald Cosman pled guilty on August 31, 2016; and Carson Morris, pled guilty on November 1, 2017. 

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. Kim praised the investigative work of the Federal Bureau of Investigation and the Criminal Investigators at the United States Attorney’s Office.  Mr. Kim, also thanked the New York State Department of Correction Office of Special Investigation, and the Dutchess County District Attorney’s Office for their assistance in the investigation.

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

Jeff Sessions, the Attorney General of the United States, Joon H. Kim, Acting 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 Field Office of the Federal Bureau of Investigation (“FBI”), and James P. O’Neill, the Commissioner of the Police Department for the City of New York (“NYPD”), announced that a grand jury in the Southern District of New York has returned a 22-count indictment (the “Indictment”) against SAYFULLO HABIBULLAEVIC SAIPOV in connection with SAIPOV’s alleged terrorist attack in lower Manhattan on October 31, 2017, which killed eight people and injured 12 more.  The Indictment charges SAIPOV with eight counts of murder in aid of racketeering, 12 counts of attempted murder in aid of racketeering, one count of providing and attempting to provide material support to the Islamic State of Iraq and al-Sham (“ISIS”), and one count of violence and destruction of a motor vehicle.  The case has been assigned to U.S. District Judge Vernon S. Broderick.

SAIPOV was initially arrested on a Complaint and presented before the Honorable Barbara Moses on November 1, 2017.  He was ordered detained and has been in federal custody since his arrest.  

Attorney General Jeff Sessions said:  “As alleged in this indictment, Sayfullo Saipov murdered eight innocent people and injured many more in a calculated act of terrorism in the heart of one of our great cities.  People have a right to safety walking down a sidewalk or riding a bike, and we will not change our resolve to confront these threats both at home and abroad.  I am especially proud today of the law enforcement officers who acted quickly and courageously to respond and to protect people from further harm.  We continue to offer our assistance, our support and our prayers to the victims of this attack and to all the people of New York City.”

Acting U.S. Attorney Joon H. Kim said:  “Consumed by hate and a twisted ideology, Sayfullo Saipov allegedly barreled down a pedestrian walkway and bicycle path on a sunny afternoon on the West Side of Manhattan, killing eight innocent people and injuring at least a dozen others.  As the scores of videos and images on his cellphone showed, Saipov’s depraved use of a rental truck as a weapon of terror was allegedly in support of the terrorist organization ISIS.  As of today, Saipov stands indicted of material support of terrorism, as well as eight counts of murder and 12 counts of attempted murder in aid of racketeering.  Like many terrorists before him, Saipov will now face justice in an American court.  And like New York City’s response to his alleged attack, we expect that justice in this case will be swift, firm, and resolute.”

FBI Assistant Director William F. Sweeney Jr. said:  “When Sayfullo Saipov carried out his brutal attack last month, his intentions were to inflict significant damage, death and injury to innocent victims and terrorize this city. We announce today’s indictment with the understanding that nothing can ever reverse the unfortunate events of that day, or alleviate the pain and sorrow of the victims’ families.  Today’s indictment should be a signal though that the rule of law will always prevail and we are dedicated to holding this perpetrator and anyone else who threatens to disrupt our most basic freedoms accountable for their criminal actions.”

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. 

ISIS, including its leadership, membership, and associates, constitutes an “enterprise,” as that term is defined in Title 18, United States Code, Section 1959(b)(2) – that is, a group of individuals associated in fact, although not a legal entity, which is engaged in, and the activities of which affect, interstate and foreign commerce.  ISIS members and associates make and have made public statements and issued public declarations, which, among other things: (i) proclaimed and acknowledged acts of violence had been committed by ISIS; (ii) threatened future acts of violence if ISIS’s demands were not met; and (iii) were intended to promote and foster the prestige and standing of ISIS.  ISIS has specifically distributed propaganda designed to encourage ISIS followers to commit acts of violence using vehicles as weapons.   

The October 31, 2017, Truck Attack

On October 31, 2017, at approximately 3:00 p.m., SAIPOV drove a rented flatbed truck (the “Truck”) from New Jersey over the George Washington Bridge into New York City.  After SAIPOV entered New York City, he proceeded in the Truck to the West Side Highway and began traveling southbound.  Once SAIPOV was in the vicinity of Houston Street in Manhattan, he drove the Truck onto the bike lane and pedestrian walkway of the West Side Highway.  SAIPOV then drove down the walkway for several blocks, striking numerous civilians.  SAIPOV eventually collided with a school bus, which was carrying occupants in the vicinity of West Street and Chambers Street, at which point the Truck came to a halt. 

After SAIPOV collided with the school bus, he exited the driver’s door of the Truck with two objects in his hands that appeared to be firearms.  Moments after SAIPOV got out of the Truck, he yelled, in substance and in part, “Allahu Akbar,” which is an Arabic phrase that translates to “God is Great.”

SAIPOV was shot by a law enforcement officer and taken into custody.  Law enforcement officers subsequently recovered in the vicinity of the Truck, among other things, a paintball gun, a pellet gun, a stun gun, and three knives.  Law enforcement officers also recovered, approximately ten feet from the driver’s door of the Truck, a document that contained, among other things, the Arabic text for “No God but God and Muhammad is his Prophet” and “Islamic Supplication.  It will endure.”  “It will endure” is commonly used to refer to ISIS.  Cellphones recovered from the Truck contained, among other things, videos and images of ISIS propaganda, and internet searches for truck rentals and for Halloween in New York City.  

After SAIPOV 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, SAIPOV stated, among other things, the following:

• SAIPOV was inspired to carry out the Truck attack by ISIS videos he had watched on his cellular phone. 
   
• Approximately one year ago, SAIPOV began planning an attack in the United States.  Approximately two months ago, he decided to use a truck to inflict maximum damage against civilians.  On or about October 22, 2017, SAIPOV rented a truck so he could practice making turns in advance of his attack.

• SAIPOV planned to use the Truck to strike pedestrians in the vicinity of the West Side Highway and then proceed to the Brooklyn Bridge to continue to strike pedestrians.  SAIPOV wanted to kill as many people as he could.  SAIPOV chose October 31, Halloween, for the attack because he believed there would be more civilians on the street for the holiday. 
   
• SAIPOV wanted to display ISIS flags in the front and back of the Truck during the attack, but decided against it because he did not want to draw attention to himself.  SAIPOV requested to display ISIS’s flag in his hospital room and stated that he felt good about what he had done.
   
  Eight individuals died from the injuries they sustained as a result of the Truck driving on the walkway and at least 12 additional individuals were injured.
   

*                      *                      *

SAIPOV, 29, of Paterson, New Jersey, was initially arrested by the NYPD on October 31, 2017.  A chart containing the charges and maximum penalties against SAIPOV is set forth below.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge. 

Mr. Kim, Attorney General Sessions, and Mr. Boente praised the outstanding investigative efforts of the FBI, the NYPD, and the Department of Homeland Security, Homeland Security Investigations (“HSI”).  SAIPOV’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’s Joint Terrorism Task Force – which consists of law enforcement officers of the FBI, NYPD, HSI, and other agencies – and the U.S. Department of Justice’s National Security Division.  Mr. Kim also thanked the U.S. Department of Justice’s Organized Crime and Gang Section, Office of Enforcement Operations, and Capital Case Section for their exceptional assistance. 

The case is being prosecuted by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Andrew D. Beaty, Amanda Houle, and Matthew Laroche are in charge of the prosecution, with assistance from Trial Attorney Rebecca Magnone of the National Security Division’s Counterterrorism Section. 

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

COUNT

CHARGES

MAXIMUM PENALTIES ON EACH COUNT

1-8

Murder in Aid of Racketeering

Life in prison or death

9-20

Attempted Murder in Aid of Racketeering

10 years in prison

21

Providing and Attempting to Provide Material Support to a Designated Foreign Terrorist Organization

Life in prison

[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.

Today, a grand jury returned a twenty-two count Indictment against Sayfullo Habibullaevic Saipovm, 29, of Paterson, New Jersey, in connection with Saipov’s alleged terrorist attack in lower Manhattan on Oct. 31, which killed eight people and injured twelve more.

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

The Indictment charges Saipov with eight counts of murder in aid of racketeering, twelve counts of attempted murder in aid of racketeering, one count of providing and attempting to provide material support to the Islamic State of Iraq and al-Sham (ISIS) and one count of violence and destruction of a motor vehicle resulting in death.  This case has been assigned to U.S. District Judge Vernon S. Broderick.

Saipov was initially arrested on a Complaint and presented before the Honorable Barbara Moses on Nov. 1.  He was ordered detained and has been in federal custody since his arrest. 

 “As alleged in this indictment, Sayfullo Saipov murdered eight innocent people and injured many more in a calculated act of terrorism in the heart of one of our great cities,” said Attorney General Sessions.   “People have a right to safety walking down a sidewalk or riding a bike, and we will not change our resolve to confront these threats both at home and abroad.   I am especially proud today of the law enforcement officers who acted quickly and courageously to respond and to protect people from further harm.  We continue to offer our assistance, our support and our prayers to the victims of this attack and to all the people of New York City.”

“Consumed by hate and a twisted ideology, Sayfullo Saipov allegedly barreled down a pedestrian walkway and bicycle path on a sunny afternoon on the West Side of Manhattan, killing eight innocent people and injuring at least a dozen others,” said Acting U.S. Attorney Kim.  “As the scores of videos and images on his cellphone showed, Saipov’s depraved use of a rental truck as a weapon of terror was allegedly in support of the terrorist organization ISIS.  As of today, Saipov stands indicted of material support of terrorism, as well as eight counts of murder and 12 counts of attempted murder in aid of racketeering.  Like many terrorists before him, Saipov will now face justice in an American court.  And like New York City’s response to his alleged attack, we expect that justice in this case will be swift, firm, and resolute.”

“When Sayfullo Saipov carried out his brutal attack last month, his intentions were to inflict significant damage, death and injury to innocent victims and terrorize this city,” said Assistant Director in Charge Sweeney.  “We announce today’s indictment with the understanding that nothing can ever reverse the unfortunate events of that day, or alleviate the pain and sorrow of the victims’ families.  Today’s indictment should be a signal though that the rule of law will always prevail and we are dedicated to holding this perpetrator and anyone else who threatens to disrupt our most basic freedoms accountable for their criminal actions.”

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 its objective through, among other things, indiscriminate killing and deliberate targeting of civilians, mass executions and extrajudicial killings, 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 around the world. 

ISIS, including its leadership, membership and associates, constitutes an “enterprise,” as that term is defined in Title 18, United States Code, Section 1959(b)(2) — that is, a group of individuals associated in fact, although not a legal entity, which is engaged in, and the activities of which affect, interstate and foreign commerce.  ISIS members and associates make and have made public statements and issued public declarations, which, among other things: (i) proclaimed and acknowledged acts of violence had been committed by ISIS; (ii) threatened future acts of violence if ISIS’s demands were not met; and (iii) were intended to promote and foster the prestige and standing of ISIS. 

ISIS has specifically distributed propaganda designed to encourage ISIS followers to commit acts of violence using vehicles as weapons.  For example, the July 2016 issue of Dabiq, ISIS’s then-official magazine, praised the “brother” who answered “the Islamic State’s calls to target nations participating in the Crusader coalition fighting the Caliphate” by “killing more than 80 people and injuring more than 300 others” with a truck in an attack that occurred in Nice, France on or about July 14, 2016.  In September 2016, ISIS changed the name of its official magazine from Dabiq to Rumiyah.  In November 2016, ISIS released Rumiyah, Issue 3, which has an article titled “Just Terror Tactics,” which again focused on a vehicle attack as a primary attack weapon with a secondary attack using a knife or gun to maximize death and terror.   

The Oct. 31, Truck Attack

On Oct. 31, at approximately 3:00 p.m., Saipov drove a rented flatbed truck (the “Truck”) from New Jersey over the George Washington Bridge into New York City.  After Saipov entered New York City, he proceeded in the Truck to the West Side Highway and began traveling southbound. Once Saipov was in the vicinity of Houston Street in Manhattan, he drove the Truck onto the bike lane and pedestrian walkway of the West Side Highway.  Saipov then drove down the walkway for several blocks, striking numerous civilians.  Saipov eventually collided with a school bus, which was carrying occupants in the vicinity of West Street and Chambers Street, at which point the Truck came to a halt. 

After Saipov collided with the school bus, he exited the driver’s door of the Truck with two objects in his hands that appeared to be firearms.  Moments after Saipov got out of the Truck, he yelled, in substance and in part, “Allahu Akbar,” which is an Arabic phrase that translates to “God is Great.”

Saipov was shot by a law enforcement officer and taken into custody.  Law enforcement officers subsequently recovered in the vicinity of the Truck, among other things, a paintball gun, a pellet gun, a stun gun and three knives.  Law enforcement officers also recovered, approximately ten feet from the driver’s door of the Truck, a document that contained, among other things, the Arabic text for “No God but God and Muhammad is his Prophet” and “Islamic Supplication.  It will endure.”  “It will endure” is commonly used to refer to ISIS. Cellphones recovered from the Truck contained, among other things, videos and images of ISIS propaganda and internet searches for truck rentals and for Halloween in New York City. 

After Saipov 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, Saipov stated, among other things, the following:

• Saipov was inspired to carry out the Truck attack by ISIS videos he had watched on his cellular phone. 
• Approximately one year ago, Saipov began planning an attack in the United States. Approximately two months ago, he decided to use a truck to inflict maximum damage against civilians.  On or about Oct. 22, Saipov rented a truck so he could practice making turns in advance of his attack.
• Saipov planned to use the Truck to strike pedestrians in the vicinity of the West Side Highway and then proceed to the Brooklyn Bridge to continue to strike pedestrians.  Saipov wanted to kill as many people as he could.  Saipov chose Oct. 31, Halloween, for the attack because he believed there would be more civilians on the street for the holiday. 
• Saipov wanted to display ISIS flags in the front and back of the Truck during the attack, but decided against it because he did not want to draw attention to himself.  Saipov requested to display ISIS’s flag in his hospital room and stated that he felt good about what he had done.

Eight individuals died from the injuries they sustained as a result of the Truck driving on the walkway and at least twelve additional individuals were injured.

*                      *                      *

Saipov was initially arrested by the NYPD on Oct. 31.  The defendant is charged with:

• Counts 1-8: Murder in Aid of Racketeering with a maximum sentence of life imprisonment or death on each count.
• Counts 9-20: Attempted Murder in Aid of Racketeering with a maximum sentence of 10 years’ imprisonment on each count.
• Count 21: Providing and Attempting to Provide Material Support to a Designated Foreign Terrorist Organization Resulting in Death with a maximum sentence of life imprisonment.
• Count 22: Violence and Destruction of Motor Vehicles Resulting in Death with a maximum sentence of life imprisonment or death.

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

Attorney General Sessions, Mr. Boente, and Mr. Kim praised the outstanding investigative efforts of the FBI, the NYPD and the Department of Homeland Security Homeland Security Investigations (HSI).  Saipov’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’s Joint Terrorism Task Force — which consists of law enforcement officers of the FBI, NYPD, HSI and other agencies — and the U.S. Department of Justice’s National Security Division.  Attorney General Sessions, Mr. Boente, and Mr. Kim also thanked the U.S. Department of Justice’s Organized Crime and Gang Section, Office of Enforcement Operations and Capital Case Section for their exceptional assistance. 

The case is being prosecuted by Assistant U.S. Attorneys Andrew D. Beaty, Amanda Houle and Matthew Laroche of the Southern District of New York, and Trial Attorney Rebecca Magnone of the National Security Division’s Counterterrorism Section.

There will be a press conference today at 12:30 p.m. to announce charges against Behzad Mesri, an Iranian national, for allegedly hacking into the computer servers of Home Box Office, Inc. (HBO), stealing proprietary data, including information about then-unreleased episodes of the popular television series, “Game of Thrones,” and then allegedly seeking to extort HBO.    

WHO:            

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

William F. Sweeney, Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation

WHEN:          

Tuesday, November 21, 2017 at12:30 p.m.

WHERE:        

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

1 St. Andrew’s Plaza

New York, NY 10007

LIVESTREAM:

Facebook @USAOSDNY

CONTACT:   

James Margolin, Dawn Dearden, Nicholas Biase

(212) 637-2600

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 New York Field Division of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an indictment charging BEHZAD MESRI, a/k/a “Skote Vahshat,” for his involvement in a scheme to obtain unauthorized access to the computer systems of Home Box Office, Inc. (“HBO”), steal proprietary data from those systems, and obtain $6 million worth of Bitcoin from HBO through extortion by threatening to disseminate stolen content.  Subsequently, MESRI leaked the stolen content on the Internet, including but not limited to confidential information about upcoming episodes of the popular television series, “Game of Thrones,” and video files containing unreleased episodes of other television series created by HBO.

Acting Manhattan U.S. Attorney Joon H. Kim said:  “Behzad Mesri, an Iranian national who had previously hacked computer systems for the Iranian military, allegedly infiltrated HBO’s systems, stole proprietary data, including scripts and plot summaries for unaired episodes of Game of Thrones, and then sought to extort HBO of $6 million in Bitcoins.  Mesri now stands charged with federal crimes, and although not arrested today, he will forever have to look over his shoulder until he is made to face justice.  American ingenuity and creativity is to be cultivated and celebrated -- not hacked, stolen, and held for ransom.  For hackers who test our resolve in protecting our intellectual property -- even those hiding behind keyboards in countries far away -- eventually, winter will come.”

FBI Assistant Director William F. Sweeney Jr. said:  “In the simplest of terms, he lurked in the alleyways of the Internet, identified the vulnerabilities of his victim, and pickpocketed their information from thousands of miles away. After he had successfully identified their proprietary secrets, he held their future for ransom.  Today’s charges show that international cybercriminals are never beyond the reach of U.S. laws.  This indictment unsealed today is the product of the countless hours put in by investigators in the FBI’s Cyber Division working alongside our prosecutors at the Southern District of New York U.S. Attorney’s office.”

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

Background on Behzad Mesri

MESRI is an Iran-based computer hacker who had previously worked on behalf of the Iranian military to conduct computer network attacks that targeted military systems, nuclear software systems, and Israeli infrastructure.  At certain times, MESRI has been a member of an Iran-based hacking group called the Turk Black Hat security team and, as a member of that group, conducted hundreds of website defacements using the online hacker pseudonym “Skote Vahshat” against websites in the United States and elsewhere.

Online Reconnaissance and Hack of HBO

Starting in approximately May 2017, MESRI conducted online reconnaissance of HBO’s computer networks and employees.  Among other things, MESRI searched for access points to the network where employees and other authorized users could remotely access HBO’s computer systems. 

From approximately May 2017 to July 2017, MESRI successfully compromised multiple user accounts belonging to HBO employees and other authorized users, and used those accounts to repeatedly obtain unauthorized access to HBO’s computer servers.  Over the course of several months, MESRI used that unauthorized access to steal confidential and proprietary information belonging to HBO, which he then exfiltrated to servers under his control.  Through the course of the intrusions into HBO’s systems, MESRI was responsible for stealing confidential and proprietary data belonging to HBO, including, but not limited to: (a) confidential video files containing unaired episodes of original HBO television programs, including episodes of “Barry,” “Ballers,” “Curb Your Enthusiasm,” “Room 104,” and “The Deuce;” (b) scripts and plot summaries for unaired programming, including but not limited to episodes of “Game of Thrones;”(c) confidential cast and crew contact lists; (d) emails belonging to at least one HBO employee; (e) financial documents; and (f) online credentials for HBO social media accounts (collectively, the “Stolen Data”).

Commencement of Extortion Scheme

Between approximately July 23, 2017, and July 29, 2017, MESRI engaged in a scheme to extort HBO by transmitting, or aiding and abetting the transmission of, the following email messages, each of which was sent to multiple HBO executives and employees: 

• An email on July 23, 2017, that provided evidence of the hack and claimed, in substance and in part, that the sender had hacked into HBO’s computer systems and had stolen approximately 1.5 terabytes of HBO’s data.

• A second email on July 23, 2017, that claimed, in substance and in part,  that the stolen data included full scripts and cast lists for the seventh season of the television series, “Game of Thrones,” and “precious data” for other shows, including shows that were as of that time unaired.  The email further stated, in substance and in part, that HBO was a “difficult target” and that infiltration was accomplished through “a complex cyber operation[.]”  The email included a threat to release the data publicly unless HBO paid a ransom of $5.5 million worth of Bitcoin.  The email concluded with a custom image depicting the “Night King,” an undead character from “Game of Thrones,” and bearing the message, “Good luck to HBO.”

• An email on July 26, 2017, that stated, in substance and in part, that the ransom demand had been increased to $6 million worth of Bitcoin, and included additional threats to destroy data on HBO computer servers.

• An email on July 29, 2017, that included, among other things, information regarding Bitcoin addresses to which HBO should direct ransom payments, and provided a firm deadline of later that same day for HBO to begin making ransom payments if it wanted to prevent the public leak of the Stolen Data.

Release of Stolen Data

Starting on approximately July 30, 2017, and continuing through August 2017, MESRI caused portions of the Stolen Data to be publicly leaked over the Internet on websites that he controlled.  Certain of the video materials that MESRI caused to be leaked included a graphic depicting the “Night King” that was superimposed at the bottom of the video.  In addition, MESRI undertook efforts to promote the leaks of the Stolen Data on the Internet, including by, among other things, causing emails to be sent to members of the media regarding the leaks, and causing the creation of a Twitter profile to announce the leaks and provide evidence of the hack of HBO’s computer network.

*                *                *

MESRI, 29, a citizen and resident of Iran, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison; one count of computer hacking, which carries a maximum sentence of five years in prison; three counts of threatening to impair the confidentiality of information, each of which carries a maximum sentence of five years in prison; one count of aggravated identity theft, which carries a mandatory sentence of two years in prison; and one count of interstate transmission of an extortionate communication, which carries a maximum sentence of two years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the assigned judge.

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

The case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Timothy T. Howard, Richard Cooper, and Jonathan Cohen are in charge of the prosecution, with assistance provided by Heather Alpino of the National Security Division’s Counterintelligence and Export Control Section.

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 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.

A criminal complaint was unsealed today charging the head of a non-governmental organization based in Hong Kong and Virginia and the former Foreign Minister of Senegal with participating in a multi-year, multimillion-dollar scheme to bribe high-level officials in Chad and Uganda in exchange for business advantages for a Chinese oil and gas company (the “Energy Company”) in violation of the Foreign Corrupt Practices Act (FCPA). 

Chi Ping Patrick Ho aka Patrick C.P. Ho, 68, of Hong Kong, China, and Cheikh Gadio, 61, of Senegal, are each charged with conspiring to violate the FCPA, violating the FCPA, conspiring to commit international money laundering, and committing international money laundering.  Gadio was arrested in New York on Friday afternoon and presented on Saturday before U.S. Magistrate Judge Kevin Nathaniel Fox.  Ho was arrested on Saturday afternoon and was presented today before U.S. Magistrate Judge Andrew J. Peck and ordered detained.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Joon H. Kim for the Southern District of New York, Assistant Director-in-Charge William F. Sweeney Jr. of the FBI New York Field Office, Special Agent in Charge James D. Robnett of the Internal Revenue Service Criminal Investigation (IRS-CI) and Special Agent in Charge Angel M. Melendez of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) New York Field Office, made the announcement.

“This alleged scheme involved bribes at the highest levels of the governments of two nations,” said Acting Assistant Attorney General Blanco.  “The Criminal Division is committed to investigating and prosecuting corrupt individuals who put at risk a level playing field for corporate competitiveness, regardless of where they live or work.  Their bribes and corrupt acts hurt our economy and undermine confidence in the free marketplace.”

“In an international corruption scheme that spanned the globe, Chi Ping Patrick Ho and Cheikh Gadio allegedly conspired to bribe African government officials on behalf of a Chinese energy conglomerate,” said Acting U.S. Attorney Kim.  “Wiring almost a million dollars through New York’s banking system in furtherance of their corrupt schemes, the defendants allegedly sought to generate business through bribes paid to the President of Chad and the Ugandan Foreign Minister.  As alleged, Ho’s Ugandan scheme was hatched in the halls of the United Nations in New York, when the country’s current Foreign Minister served as the President of the U.N. General Assembly, and then continued unabated upon his return to Uganda.  International bribery not only harms legitimate businesses and fair competition, but it also destroys public faith in the integrity of government.  And when this type of international corruption and bribery touches our shores and our financial system, as the alleged schemes did, federal criminal charges in an American court may very well be the end result.” 

“The scheme described in this case boils down to these subjects allegedly trying to get their hands on the rights to lucrative opportunities in Africa,” said FBI Assistant Director-in-Charge Sweeney.  “They were allegedly willing to throw money at the leaders of two countries to bypass the normal course of business, but didn’t realize that using the U.S. banking system would be their undoing.  The FBI, our partners in the IRS and the law enforcement community work diligently day after day to protect the integrity of our financial institutions, and stop foreign entities corrupting international commerce.” 

“IRS Criminal Investigation operates worldwide and has the expertise to identify bribery schemes such as alleged in the criminal complaint,” said IRS-CI Special Agent in Charge Robnett. “Our special agents are especially skilled at piecing together these financial puzzles, even those that involve such high level participants.”

“These individuals allegedly offered millions of dollars in bribes to foreign officials, disguised as charitable donations, in order to seek business advantages,” said HSI Special Agent in Charge Melendez.  “One used his position with a United Nations Council to further this scheme.  We will continue to aggressively investigate financial crimes committed by corrupt foreign officials while working collaboratively with our counterparts at the FBI and IRS.” 

According to the allegations in the complaint, the defendants engaged in two bribery schemes to pay high-level officials of Chad and Uganda in exchange for business advantages for the Energy Company, a Shanghai-headquartered multibillion-dollar conglomerate that operates internationally in the energy and financial sectors.  Defendant Ho was the head of a non-governmental organization based in Hong Kong and Virginia (the “Energy NGO”) that holds “Special Consultative Status” with the United Nations (UN) Economic and Social Council.  The Energy NGO is funded by the Energy Company.

The complaint alleges that Ho, with Gadio’s assistance, caused the Energy Company to offer a $2 million bribe to the President of Chad in exchange for securing business advantages for the Energy Company in its efforts to obtain valuable oil rights from the Chadian government.  In particular, in exchange for the bribe, the President of Chad provided the Energy Company with, among other things, an exclusive opportunity to obtain particular oil rights in Chad without facing international competition.  Gadio, who is the former Foreign Minister of Senegal and who operated an international consulting firm, is alleged to have played an instrumental role in the scheme by, among other things, connecting Ho with the President of Chad and conveying the $2 million bribe offer to the President of Chad.  Ho allegedly compensated Gadio by paying him $400,000 via wires transmitted through New York, New York.

It is further alleged that Ho caused a $500,000 bribe to be paid, via wires transmitted through New York, New York, to an account designated by the Minister of Foreign Affairs of Uganda, who had recently completed his term as the President of the UN General Assembly (the “Ugandan Foreign Minister”).  Ho also allegedly provided the Ugandan Foreign Minister, as well as the President of Uganda, with gifts and promises of future benefits, including offering to share the profits of a potential joint venture in Uganda involving the Energy Company and businesses owned by the families of the Ugandan Foreign Minister and the President of Uganda.  These payments and promises were allegedly made in exchange for assistance from the Ugandan Foreign Minister in obtaining business advantages for the Energy Company, including the potential acquisition of a Ugandan bank.

The charges and allegations in the complaint are merely accusations.  All defendants are presumed innocent unless proven guilty in a court of law.

The investigation was jointly conducted by the FBI and IRS-CI and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) and the Criminal Division’s Office of International Affairs provided critical assistance.

This case is being prosecuted by Trial Attorneys David A. Last and Paul A. Hayden of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Douglas S. Zolkind, Thomas McKay, Daniel C. Richenthal and Shane T. Stansbury U.S. Attorney’s Office for the Southern District of New York’s Public Corruption Unit.

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

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, Kenneth A. Blanco, Acting Assistant Attorney General of the Criminal Division of the U.S. Department of Justice, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), James D. Robnett, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), and Angel M. Melendez, Special Agent in Charge of the New York Field Office of the Department of Homeland Security, Homeland Security Investigations (“HSI”), announced today the unsealing of a Complaint charging CHI PING PATRICK HO, a/k/a “Patrick C.P. Ho,” and CHEIKH GADIO with participating in a multi-year, multimillion-dollar scheme to bribe high-level officials in Chad and Uganda in exchange for business advantages for a Chinese oil and gas company (the “Energy Company”).  HO and GADIO were charged with violations of the Foreign Corrupt Practices Act (“FCPA”), international money laundering, and conspiracy to commit both.  GADIO was arrested in New York on Friday afternoon and presented on Saturday before U.S. Magistrate Judge Kevin Nathaniel Fox.  HO was arrested on Saturday afternoon and was presented today before U.S. Magistrate Judge Andrew J. Peck and ordered detained.

Acting Manhattan U.S. Attorney Joon H. Kim said:  “In an international corruption scheme that spanned the globe, Chi Ping Patrick Ho and Cheikh Gadio allegedly conspired to bribe African government officials on behalf of a Chinese energy conglomerate.  Wiring almost a million dollars through New York’s banking system in furtherance of their corrupt schemes, the defendants allegedly sought to generate business through bribes paid to the President of Chad and the Ugandan Foreign Minister.  As alleged, Ho’s Ugandan scheme was hatched in the halls of the United Nations in New York, when the country’s current Foreign Minister served as the President of the U.N. General Assembly, and then continued unabated upon his return to Uganda.  International bribery not only harms legitimate businesses and fair competition, but it also destroys public faith in the integrity of government.  And when this type of international corruption and bribery touches our shores and our financial system, as the alleged schemes did, federal criminal charges in an American court may very well be the end result.”

Acting Assistant Attorney General Kenneth A. Blanco said:  “This alleged scheme involved bribes at the highest levels of the governments of two nations.  The Criminal Division is committed to investigating and prosecuting corrupt individuals who put at risk a level playing field for corporate competitiveness, regardless of where they live or work.  Their bribes and corrupt acts hurt our economy and undermine confidence in the free marketplace.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “The scheme described in this case boils down to these subjects allegedly trying to get their hands on the rights to lucrative opportunities in Africa.  They were allegedly willing to throw money at the leaders of two countries to bypass the normal course of business, but didn’t realize that using the U.S. banking system would be their undoing.  The FBI, our partners in the IRS and the law enforcement community work diligently day after day to protect the integrity of our financial institutions, and stop foreign entities corrupting international commerce.”

IRS-CI Special Agent in Charge James D. Robnett said:  “IRS Criminal Investigation operates worldwide and has the expertise to identify bribery schemes such as alleged in the Criminal Complaint.  Our Special Agents are especially skilled at piecing together these financial puzzles, even those that involve such high level participants.”

HSI Special Agent in Charge Angel M. Melendez said:  “These individuals allegedly offered millions of dollars in bribes to foreign officials, disguised as charitable donations, in order to seek business advantages. One used his position with a United Nations Council to further this scheme.  We will continue to aggressively investigate financial crimes committed by corrupt foreign officials while working collaboratively with our counterparts at the FBI and IRS.” 

According to the allegations in the Complaint[1] and other statements in the public record:

Overview

This case involves two bribery schemes to pay high-level officials of Chad and Uganda in exchange for business advantages for the Energy Company, a Shanghai-headquartered multibillion-dollar conglomerate that operates internationally in the energy and financial sectors.  At the center of both schemes is CHI PING PATRICK HO, a/k/a “Patrick C.P. Ho,” the head of a non-governmental organization based in Hong Kong and Virginia (the “Energy NGO”) that holds “Special Consultative Status” with the United Nations (“UN”) Economic and Social Council.  The Energy NGO is funded by the Energy Company.

In the first scheme (the “Chad Scheme”), HO, with GADIO’s assistance, caused the Energy Company to offer a $2 million bribe to the President of Chad in exchange for securing business advantages for the Energy Company in its efforts to obtain valuable oil rights from the Chadian government.  In particular, in exchange for the bribe, the President of Chad provided the Energy Company with, among other things, an exclusive opportunity to obtain particular oil rights in Chad without facing international competition.  GADIO, who is the former Foreign Minister of Senegal and who operated an international consulting firm, played an instrumental role in the Chad Scheme by, among other things, connecting HO with the President of Chad and conveying the $2 million bribe offer to the President of Chad.  HO compensated GADIO by paying him $400,000 via wires transmitted through New York, New York.

In the second scheme (the “Uganda Scheme”), HO caused a $500,000 bribe to be paid, via wires transmitted through New York, New York, to an account designated by the Minister of Foreign Affairs of Uganda, who had recently completed his term as the President of the UN General Assembly (the “Ugandan Foreign Minister”).  HO also provided the Ugandan Foreign Minister, as well as the President of Uganda, with gifts and promises of future benefits, including offering to share the profits of a potential joint venture in Uganda involving the Energy Company and businesses owned by the families of the Ugandan Foreign Minister and the President of Uganda.  These payments and promises were made in exchange for assistance from the Ugandan Foreign Minister in obtaining business advantages for the Energy Company, including the potential acquisition of a Ugandan bank.

The Chad Scheme

As alleged in the Complaint, the Chad Scheme began in or about October 2014, when HO and GADIO met at the UN in New York, New York.  At that time, the Energy Company wanted to expand its oil operations to Chad, and to do so, it wanted to enter into a joint venture with a Chinese government-owned oil and gas company (the “Chinese State Oil Company”) that was already operating in Chad.  Earlier that year, the Chinese State Oil Company had been fined $1.2 billion by the government of Chad for environmental violations.  HO enlisted GADIO – who had a personal relationship with the President of Chad – to assist the Energy Company in gaining access to the President of Chad, with the initial goal of resolving the dispute between the government of Chad and the Chinese State Oil Company, and the ultimate goal of obtaining oil opportunities for the Energy Company in Chad.

GADIO successfully connected HO and the Energy Company to the President of Chad and to other Chadian officials.  HO, acting on GADIO’s advice, then caused the Energy Company to pledge a $2 million bribe to the President of Chad, in what was characterized as a “donation” for charitable causes.  GADIO later solicited from HO a $500,000 payment for GADIO’s firm, arguing that he should receive a percentage of the $2 million “gift” from the Energy Company to the President of Chad.

In reality, this “donation” was a bribe intended to influence the award of oil rights in favor of the Energy Company.  Following this $2 million pledge to the President of Chad, the Energy Company obtained a business advantage in its negotiations to acquire oil rights in Chad, in particular, by having the exclusive opportunity to purchase particular oil rights without facing international competition.  Ultimately, the Energy Company did not complete this acquisition, but instead purchased other oil rights in Chad from a Taiwanese company.  In exchange for GADIO’s efforts to facilitate the bribery of the President of Chad, HO caused $400,000 to be paid to GADIO’s firm, via two wires that were transmitted through a bank in New York, New York.

The Uganda Scheme

As alleged in the Complaint, the Uganda Scheme began in or about October 2014, when HO met at the UN in New York, New York with the Ugandan Foreign Minister, who had recently begun his term as the 69th President of the UN General Assembly (“PGA”).[2]  HO, purporting to act on behalf of the Energy NGO, met with the Ugandan Foreign Minister and began to cultivate a relationship with him.  During the year that the Ugandan Foreign Minister served as PGA, HO and the Ugandan Foreign Minister discussed a “strategic partnership” between Uganda and the Energy Company for various business ventures, to be formed once the Ugandan Foreign Minister completed his term as PGA and returned to Uganda.

In or about February 2016 – after the Ugandan Foreign Minister had resumed his role as Foreign Minister of Uganda, and his in-law had been reelected as the President of Uganda – the Ugandan Foreign Minister solicited a payment from HO, purportedly for a charitable foundation that he wished to launch.  HO caused a $500,000 payment to be wired to an account in Uganda designated by the Ugandan Foreign Minister, through a bank in New York, New York.  In his communications, HO variously referred to this payment as a “donation” to the reelection campaign of the President of Uganda (who had already been reelected) and as a “donation” to “support” the Ugandan Foreign Minister.

In fact, this payment was a bribe to obtain business advantages for the Energy Company in its efforts to secure contracts and ventures in Uganda’s financial and energy sectors.  HO also provided the Ugandan Foreign Minister, as well as the President of Uganda, with promises of future benefits, including proposing to partner with both officials’ family businesses in potential joint ventures.  In exchange, the Ugandan Foreign Minister assisted the Energy Company in obtaining business in Uganda, including by facilitating the Energy Company’s interest in potentially acquiring a bank.

*                      *                      *

HO, 68, of Hong Kong, China, and GADIO, 61, of Senegal, are each charged with conspiring to violate the FCPA, violating the FCPA, conspiring to commit international money laundering, and committing international money laundering.  The maximum penalties for these charges are as follows: five years in prison for conspiring to violate the FCPA; five years in prison for each violation of the FCPA; 20 years in prison for conspiring to commit international money laundering; and 20 years in prison for each charge of committing international money laundering.  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 work of the FBI and IRS-CI, who jointly conducted this investigation.  He also thanked the Department of Homeland Security, Homeland Security Investigations (“HSI”), and the Department of Justice, Criminal Division’s Office of International Affairs, which provided critical assistance.  Mr. Kim noted that the investigation is ongoing.

This case is being prosecuted by the Office’s Public Corruption Unit and the Criminal Division’s Fraud Section.  Assistant U.S. Attorneys Douglas S. Zolkind, Thomas McKay, Daniel C. Richenthal, and Shane T. Stansbury, and Trial Attorneys David A. Last and Paul A. Hayden of the Fraud Section, are in charge of the prosecution.

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

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

[2] Although the Complaint refers to the “Ugandan Foreign Minister” throughout for clarity, during the year that he served as PGA, he did not simultaneously serve as Foreign Minister of Uganda.  Rather, he resumed as Foreign Minister of Uganda shortly after his term as PGA ended.

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that HECTOR RIVERA was found guilty on Friday of ordering the 2004 murder of Eduard Nektalov, a Manhattan diamond dealer.  RIVERA was convicted on all counts following a six-day trial before U.S. District Judge Paul A. Engelmayer. 

Acting U.S. Attorney Joon H. Kim said: “Thirteen years ago, Eduard Nektalov was shot to death on a crowded sidewalk in midtown Manhattan.  For over a decade, this brazen murder was left unexplained.  Now, not only has that mystery been solved, a unanimous jury has convicted Hector Rivera of ordering the execution-style murder of Eduard Nektalov over a business dispute.  Rivera now faces a mandatory sentence of life in a federal prison.  We hope the verdict brings some measure of closure and comfort to Eduard Nektalov’s family.”

According to the allegations in the Indictment and the evidence presented in court during the trial:

RIVERA was the leader of a violent robbery crew that operated in the diamond district in midtown Manhattan.  In 2004, RIVERA commissioned the murder of Eduard Nektalov because of a business dispute between Nektalov and one of RIVERA’s criminal associates.  During the evening rush hour on May 20, 2004, a hitman hired by RIVERA followed Nektalov from his jewelry store on West 47th Street.  Less than a block from the store, the hitman shot Nektalov once in the head and twice in the back in the middle of a crowded sidewalk on Sixth Avenue.  Nektalov was pronounced dead within 20 minutes of the shooting.  RIVERA paid the hitman and another participant a combined total of $30,000 to carry out the murder.

*                      *                      *

RIVERA, 65, was found guilty of conspiring to commit murder for hire and murder for hire, each of which carries a mandatory minimum sentence of life in prison; and using a firearm to commit murder, which carries a mandatory minimum sentence of five years in prison, which must run consecutively to the sentences imposed on all other counts.  RIVERA is scheduled to be sentenced by Judge Engelmayer on April 11, 2018.   

Mr. Kim praised the outstanding investigative work of the Federal Bureau of Investigation and the New York City Police Department.  He also thanked the District Attorney’s Office for New York County and the District Attorney’s Office for Bronx County for their assistance with the prosecution.  

The case is being prosecuted by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Scott Hartman and Jordan Estes are in charge of the prosecution. 

“Unfortunately, the jury in the trial against Norman Seabrook and Murray Huberfeld was unable to reach a unanimous verdict.  We look forward to a retrial where we will present again the powerful proof of how Seabrook allegedly sold his duty to safeguard correction officers’ retirement money to Murray Huberfeld in exchange for cash bribes.  Although justice has been delayed, we expect it will ultimately prevail.”

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that LUIS DIAZ JR. and LUIS JAVIER DIAZ were found guilty yesterday in Manhattan federal court of operating an unlicensed money transmitting business and international money laundering in connection with their transmission of over $100 million from foreign businesses into and through the United States financial system.  DIAZ JR. was additionally convicted of conspiracies to operate an unlicensed money transmitting business and engage in international money laundering.  DIAZ JR. and JAVIER DIAZ were convicted following a two-week trial before U.S. District Judge William H. Pauley III. 

Acting Manhattan U.S. Attorney Joon H. Kim said:  “As a jury has now found, Luis Diaz Jr. and Luis Javier Diaz operated an illegal shadow bank outside the legitimate financial system to move more than $100 million into and through the United States.  Financial institutions must serve as the first line of defense against money laundering and financial crime, and this Office is committed to rooting out those who evade these controls and serve as a back channel for dirty money.”

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

THE ILLEGAL MONEY TRANSMITTING SCHEME

Between at least 2010 and 2016, LUIS DIAZ JR. and LUIS JAVIER DIAZ used Miami Equipment and Export Company (“Miami Equipment”), a company they owned in Doral, Florida, to effect the transmission of at least $100 million from entities outside the United States, mostly located in Venezuela, to bank accounts in the United States and elsewhere, in exchange for a fee.  During this time, the Company was not registered with the state of Florida or the Financial Crimes Enforcement Network (FinCEN), a component of the United States Department of the Treasury, as required by both state and federal laws applicable to money transmitting businesses. 

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

THE DEFENDANTS ILLEGALY TRANSMITTED MONEY

ON BEHALF OF NUMEROUS FOREIGN ENTITIES

Through their unlicensed money transmitting business, LUIS DIAZ JR. and LUIS JAVIER DIAZ enabled a number of foreign businesses to move money into and around the United States.  For instance, the defendants used Miami Equipment to transmit over $100 million into the United States on behalf of KCT, a large Venezuelan consortium of construction companies.  After they received this money from the Venezuelan Company, the defendants received instructions about where to send the money as well as fake invoices and contracts purporting to set forth a valid business reason for these payments.  In this manner, the defendants sent money on behalf of KCT to U.S. and foreign bank accounts of shell companies located around the world, Venezuelan government officials, KCT employees in Venezuela, and others who had no relationship with Miami Equipment.  For all of these transmitting activities, the Company received over $1 million in fees from KCT.  In addition to KCT, DIAZ JR. and JAVIER DIAZ used Miami Equipment to effect transfers into and around the United States on behalf of other companies, mainly located in Venezuela and other South American countries.

In connection with these transfers, LUIS DIAZ JR. and LUIS JAVIER DIAZ often maintained false invoices purporting to be from the recipients of the funds to make it appear as if the payments were for actual goods or services rendered to Miami Equipment when, in truth, the money was intended for beneficiaries in the United States and abroad with no business relationship to Miami Equipment.  The invoices had the effect of insulating the transmissions from scrutiny by providing a pretextual explanation for the many millions of dollars’ worth of payments.  Through this conduct, the defendants and Miami Equipment functioned as an unregulated financial institution allowing foreign entities to move funds into and through the U.S. without any scrutiny, including being subject to the filing of SARs that licensed transmitting businesses are required to file.

*          *          *

DIAZ JR., 75, and JAVIER DIAZ, 50, both of Doral, Florida, were each convicted of one count of operation of an unlicensed money transmitting business and one count of international money laundering, which carry maximum prison sentences of five years in prison and 20 years in prison, respectively.  DIAZ JR. was also convicted of conspiracy to operate an unlicensed money transmitting business and conspiracy to commit international money laundering, which carry maximum prison sentences of five years in prison and 20 years in prison, respectively.  DIAZ JR. and JAVIER DIAZ are scheduled to be sentenced by Judge Pauley on March 2, 2018, at 3:00 p.m.

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 work of HSI, DEA, the Englewood, New Jersey, Police Department, and the Border Enforcement Security Task Force.

The case is being prosecuted by the Office’s Money Laundering and Asset Forfeiture Unit.  Assistant U.S. Attorneys Edward B. Diskant, Daniel M. Tracer, and Benet J. Kearney are in charge of the prosecution.  

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that RICHARD MOSELEY SR. was found guilty today in Manhattan federal court of wire fraud, aggravated identity theft, and violating the Racketeer Influenced Corrupt Organizations Act (“RICO”) and the Truth in Lending Act (“TILA”) for operating a payday lending enterprise that systematically evaded state usury laws in order to charge illegally high interest rates, and for issuing payday loans to consumers who never even sought them.  MOSELEY was convicted following a two-and-a-half week trial before U.S. District Judge Edgardo Ramos. 

Acting U.S. Attorney Joon H. Kim said: “Richard Moseley Sr.’s predatory loan company exploited more than 600,000 of the most financially vulnerable people in the United States.  Charging exorbitant interest, fees, and even signing up some individuals for loans they didn’t authorize, Moseley made it nearly impossible for those already struggling to make ends meet.  With today’s conviction, however, Moseley can no longer take advantage of those already on the brink, and he now faces significant time in prison for his predatory ways.”

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

Between 2004 and September 2014, MOSELEY owned and operated a group of payday lending businesses (the “Hydra Lenders”) that issued and serviced small, short-term, unsecured loans, known as “payday loans,” through the Internet to customers across the United States.   

For nearly a decade, MOSELEY systematically exploited more than 620,000 financially struggling working people throughout the United States, many of whom were having trouble paying for basic living expenses.  MOSELEY, through the Hydra Lenders, targeted and extended loans to these individuals at illegally high interest rates of more than 700 percent, using deceptive and misleading communications and contracts and in violation of the usury laws of numerous states that were designed to protect residents from such abusive conduct.  

In furtherance of the scheme, the Hydra Lenders’ loan agreements materially understated the amount the payday loan would cost and the total of payments that would be taken from borrowers’ bank accounts.  The loan agreements suggested, for example, that the borrower would pay $30 in interest for $100 borrowed.  In truth and in fact, however, MOSELEY structured the repayment schedule of the loans such that, on the borrower’s payday, the Hydra Lenders automatically withdrew the entire interest payment due on the loan, but left the principal balance untouched.  As a result, on the borrower’s next payday, the Hydra Lenders could again automatically withdraw an amount equaling the entire interest payment due (and already paid) on the loan.  Under MOSELEY’s control and oversight, the Hydra Lenders proceeded automatically to withdraw such “finance charges” payday after payday, applying none of the money toward repayment of principal.  Indeed, under the terms of the loan agreement, the Hydra Lenders withdrew finance charges from their customers’ accounts unless and until consumers took affirmative action to stop the automatic renewal of the loan. 

Through the Hydra Lenders, MOSELEY also extended numerous payday “loans” to victims across the country who did not even want the loans or authorize the issuance of the loans, but instead had merely submitted their personal and bank account information in order to inquire about the possibility of obtaining a payday loan.  MOSELEY then automatically withdrew the Hydra Lenders’ usurious “financing fees” directly from the financially struggling victims’ bank accounts on a bi-weekly basis.  Although hundreds of victims, over a period of years, lodged complaints that they had never approved or even been aware of the issuance of the loans, the Hydra Lenders, at MOSELEY’s direction, continued to issue loans to consumers without confirming that the consumers in fact wanted the loans that they received or had reviewed and approved the loan terms.    

Throughout their existence, the Hydra Lenders were the subject of complaints from customers across the country, numerous state regulators, and consumer protection groups, about the Hydra Lenders’ deceptive and misleading practices in issuing usurious and fraudulent loans.  Beginning in approximately 2006, in an attempt to avoid civil and criminal liability for his conduct, and to enable the Hydra Lenders to extend usurious loans contrary to state laws, MOSELEY created the sham appearance that the Hydra Lenders were located overseas.  MOSELEY nominally incorporated the Hydra Lenders first in Nevis, and later in New Zealand, and claimed that the Hydra Lenders could not be sued or subject to state enforcement actions because they were beyond the jurisdiction of every state in the United States.  In truth and in fact, the entirety of MOSELEY’s lending business, including all bank accounts from which loans were originated, all communications with consumers, and all employees, were located at MOSELEY’s corporate office in Kansas City, Missouri.  The Hydra Lenders’ purported “offshore” operation consisted of little more than a service that forwarded mail from addresses in Nevis or New Zealand to the Kansas City, Missouri, office. 

In furtherance of the scheme, MOSELEY falsely told his attorneys that the Hydra Lenders maintained physical offices and employees in Nevis and New Zealand and that the decision whether to extend loans to particular consumers was made by employees of the Hydra Lenders in Nevis and New Zealand.  As MOSELEY knew, at no time did the Hydra Lenders have any employees involved in the lending business in Nevis or New Zealand, and at all times the decision whether to underwrite loans was made by employees under MOSELEY’s direction in Kansas City, Missouri.  To defeat state complaints and inquiries, MOSELEY directed his attorneys at outside law firms to submit correspondence to state Attorneys General that stated – falsely, unbeknownst to MOSELEY’s attorneys – that the Hydra Lenders originated loans “exclusively” from their offices overseas and had no physical presence anywhere in the United States.  In reliance on this materially false and misleading correspondence, many state Attorneys General and regulators closed their investigations on the apparent basis that they lacked jurisdiction over the Hydra Lenders and that the Hydra Lenders had no presence or operations in the United States. 

From approximately November 2006 through approximately August 2014, the Hydra Lenders generated more than $200 million in revenues.  MOSELEY himself made millions of dollars from the scheme, which he spent on, among other things, a vacation home in Mexico, luxury automobiles, and country club membership dues. 

*          *          *

MOSELEY, 73, of Kansas City, Missouri, was convicted of one count of conspiracy to collect unlawful debts in violation of RICO; one count of collecting unlawful debts in violation of RICO; one count of conspiracy to commit wire fraud; and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison.  In addition, he was convicted of one count of aggravated identity theft, which carries a maximum sentence of two years in prison, and one count of violating TILA, which carries a maximum sentence of one year in prison.  MOSELEY is scheduled to be sentenced by Judge Ramos on April 27, 2018, at 11:00 a.m.

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. Kim praised the outstanding investigative work of the Federal Bureau of Investigation and the Office of the Inspector General for the Board of Governors of the Federal Reserve System.  Mr. Kim also thanked the Consumer Financial Protection Bureau, which brought a separate civil action against MOSELEY, for referring the matter and for its assistance.

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Edward A. Imperatore and David Abramowicz are in charge of the prosecution.  

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 Homeland Security Investigations in New York City (“HSI”), announced today the arrest and filing of charges against ANUPAM BISWAS.  The Complaint charges that BISWAS distributed child pornography on January 11, 2017, from a computer in Westchester County and possessed child pornography on February 17, 2017.  BISWAS was presented today before U.S. Magistrate Judge Judith C. McCarthy in White Plains federal court.

According to the Complaint[1], in or about January 2017, the Westchester County District Attorney’s Office’s High Technology Crime Squad (“HTCS”), using investigative software, downloaded child pornography from an IP address in Westchester, New York.  On February 17, 2017, HTCS executed a search warrant of BISWAS’s address in Westchester, New York.  BISWAS was present and identified two external hard drives as belonging to him.  HTCS seized several digital items, including a Western Digital Hard Drive that was found to contain thousands of images and videos of child pornography.   

BISWAS, 46, is charged with one count of distribution of child pornography and one count of possession of child pornography.  He faces a mandatory minimum sentence of five years in prison and a maximum sentence of 20 years in prison on each of the two charged counts.  The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

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

Mr. Kim praised the efforts of Homeland Security Investigations, the Westchester County District Attorney’s Office, the Westchester District Attorney’s Office’s High Technology Crime Squad, and the Briarcliff Manor Police Department.  

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.  

[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, announced today that five defendants have pleaded guilty in the past week to participating in a scheme to defraud Medicare and Medicaid through the operation of eight medical clinics and related health care providers in Brooklyn. The defendants pleading guilty are Dr. MUSTAK Y. VAID, medical supply company president MARINA BURMAN, clinic executives ASHER OLEG KATAEV, a/k/a “Oleg Kataev,” and ALLA TSIRLIN, and IVAN VOYCHAK, who helped run two of the fraudulent clinics and a related ambulette company. The defendants were charged with participating in a $30 million health care fraud scheme. As part of the scheme, the defendants or their co-conspirators paid cash kickbacks to elderly patients (the “Paid Patients”) insured by Medicare and/or Medicaid, and then billed Medicare and Medicaid for unnecessary medical services, tests, and supplies.

Acting U.S. Attorney Joon H. Kim said:  “These five defendants bilked Medicare and Medicaid out of millions of dollars for unjustified medications, procedures, and supplies. Medicare and Medicaid were established to assist the elderly and economically disadvantaged, not to serve as cash cows for corrupt professionals.”

Five additional defendants remain under indictment in the case, which is scheduled to go to trial before United States District Judge Lorna G. Schofield on April 23, 2018. Those remaining defendants are presumed innocent unless and until proven guilty.

As alleged in the Indictment and in court papers and proceedings in the case: Aleksandr Burman, an individual with no medical license, established eight medical clinics in Brooklyn (the “Related Clinics”), which operated between 2007 and 2013. For each clinic, Aleksandr Burman hired a doctor, one of whom was VAID, as the nominal owner of the clinic, since New York State law requires that such clinics be owned by a medical professional. In fact, however, VAID was hired by Aleksandr Burman simply to pose as the owner of one of the clinics, and to sign medical charts falsely stating that he had examined a number of Paid Patients, and to provide prescriptions and referrals for medically unnecessary supplies.

In pleading guilty, the five defendants have admitted to various specific roles in operating several of the clinics and two related businesses.

VAID, 44, a physician, pled guilty before Magistrate Judge Henry B. Pitman on November 8, 2017 to charges of falsely holding himself out as the owner of one medical clinic, and falsely signing medical documents stating that he had provided medical services that he had not.

BURMAN, 54, is a resident of Manhattan whose former husband, Aleksandr Burman, previously pleaded guilty in a related indictment and was sentenced in May 2017 to 10 years in prison.  BURMAN pled guilty before Judge Schofield on November 14, 2017 to charges that, as the registered president and owner of Universal Supply Depot, she fraudulently billed Medicaid more than $3 million for medical equipment, particularly including large amounts of adult diapers, that were in fact not dispensed. BURMAN was also charged with arranging for Paid Patients to exchange their diaper prescriptions for valuable merchandise, such as bed linens, tablecloths, dishes, kitchen appliances, and other housewares.

KATAEV, 49, and TSIRLIN, 47, who are siblings, pled guilty to charges of helping operate two of the fraudulent clinics, where they participated in bribing patients and causing fraudulent bills to be submitted to Medicare and Medicaid. KATAEV pled guilty before Magistrate Judge Barbara C. Moses on November 6, 2017. TSIRLIN pled guilty before Judge Pitman on November 9, 2017.

VOYCHAK, 37, pled guilty before Magistrate Judge Kevin Nathaniel Fox on November 13, 2017 to charges that he helped operate a medical ambulette company that fraudulently billed Medicaid for transportation services that were not medically necessary, and participated a scheme to pay kickbacks to patients at the fraudulent medical clinics.

Each of the defendants pled guilty to Counts One and Two of the indictment. Count One charges the defendants with conspiring to commit health care fraud, mail fraud, and wire fraud; while Count Two charges each defendant with health care fraud. Count One carries a maximum sentence of 20 years in prison, while Count Two carries a maximum penalty of 10 years in prison.

The statutory maximum sentence is prescribed by Congress and provided here for informational purposes only, as the appropriate sentences will be determined by the Judge.

Mr. Kim praised the investigative work of the New York FBI’s Health Care Fraud Task Force and the New York State Office of the Medicaid Inspector General (“OMIG”).

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney David Raymond Lewis is in charge of the prosecution.

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that WALTER C. LITTLE, a/k/a “Chet,” a former partner at an international law firm (the “Firm”), pled guilty yesterday to conspiracy to commit securities fraud.  Between February 2015 and May 2016, LITTLE used his position at the Firm to learn nonpublic information about certain of the Firms’ clients, including sensitive information regarding expected mergers and earnings.  LITTLE used that information to place securities trades and passed that information to Andrew M. Berke, who allegedly also traded on it.  LITTLE and Berke allegedly made approximately $1 million in illegal profits through their trading.  LITTLE pled guilty earlier today before the Honorable Katherine Polk Failla.  The charges against Berke remain pending.

Acting Manhattan U.S. Attorney Joon H. Kim said:  “As he admitted in court today, Walter Little, while a law firm partner, accessed confidential information about firm clients, and then traded on it.  He violated the terms of his employment, the canons of his profession, and federal securities laws.  Now Walter Little awaits sentencing for his crime.”

According to allegations in a Complaint and Indictment[1] filed in Manhattan federal court, as well as previous court filings and statements made in public court proceedings:

LITTLE began working for the Firm in 2005, eventually becoming a partner.  The Firm provided legal services to a wide variety of corporations in connection with financial transactions and regulatory issues, among other things.  Clients regularly entrusted the Firm with nonpublic information when using its services, and the Firm consequently enacted policies requiring its employees to respect the confidences of such information.  LITTLE, however, failed to abide by the Firm’s internal policies prohibiting the improper use of its clients’ confidential information.  Even though he did not perform any billable work for the associated clients, LITTLE used the Firm’s document management system to view numerous documents relating to seven different companies.  These documents contained material nonpublic information about, among other things, an anticipated delisting from the NASDAQ stock exchange, clients’ involvement in mergers and acquisitions, clients’ anticipated earnings announcements, and a planned securities offering.  All of these events would have predictable impacts on the associated stocks’ prices, and, between February 2015 and May 2016, LITTLE traded stocks and options based on the information contained in these documents, making hundreds of thousands of dollars in profits.  In addition to trading on the information himself, LITTLE also provided the information to BERKE, his business associate and friend, who also traded on it and made hundreds of thousands of dollars in illegal gains as well. 

LITTLE has agreed to forfeit the illegal profits that he made through his trading as part of his plea agreement with the Government.  

*                *                *

LITTLE pled guilty to one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense.  LITTLE will be sentenced February 22, 2018, by Judge Failla.

BERKE is charged in the Indictment with one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison; six counts of securities fraud, each of which carries a maximum penalty of 20 years in prison; and one count of conspiracy to commit wire fraud, which also carries a maximum penalty of 20 years in prison.  These charges also have a maximum fine of $5 million, or twice the gross gain or loss from the offense.

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

The charges against BERKE are merely accusations and the defendant is presumed innocent unless and until proven guilty.

Mr. Kim praised the investigative work of the Federal Bureau of Investigation and thanked the Securities and Exchange Commission.

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

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

The Department of Justice today announced that on Nov. 9, the Madoff Victim Fund (MVF) began its initial distribution of $772.5 million in funds forfeited to the U.S. Government in connection with the Bernard L. Madoff Investment Securities LLC (BLMIS) fraud scheme.  These funds will be sent to 24,631 victims across the globe. This distribution represents the first in a series of payments that will eventually return over $4 billion to victims as compensation for losses they suffered from the collapse of the BLMIS.  The MVF has received over 65,000 petitions from victims in 136 countries. 

These payments mark the single largest distribution of forfeited funds in the history of the Department’s victim compensation program.

Deputy Attorney General Rod J. Rosenstein, Acting U.S. Attorney Joon H. Kim for the Southern District of New York and Assistant Director in Charge William F. Sweeney Jr., of the FBI’s New York Field Division made the announcement.

“Thanks to civil asset forfeiture, the Department of Justice is announcing today the record-setting distribution of restitution to victims of Bernard Madoff’s notorious investment fraud scheme,” said Deputy Attorney General Rosenstein.  “We have recovered billions of dollars from third parties – not Mr. Madoff – and are now returning that money to tens of thousands of victims. This is the largest restoration of forfeited property in history.”

“Bernie Madoff committed one of history’s largest and most devastating frauds,” said Acting U.S. Attorney Kim.  “This Office not only prosecuted Madoff himself and others who helped perpetrate his fraud, but has remained committed to recovering money for his victims.  To date, this Office has recovered more than $9 billion for the innocent victims of Madoff’s fraud, and today’s distribution of $770 million, the single largest distribution of forfeited funds in the Department’s history is part of our ongoing commitment to not only prosecute criminals but also find relief for victims.”

“No amount of money in the world could ever reverse the catastrophic effects Madoff’s historic Ponzi scheme had on individuals and businesses alike,” Assistant Director in Charge Sweeney.   “But now, nearly a decade after this crime was exposed, it is our hope that victims will finally be able to see the light at the end of a long, dark tunnel.”

For decades, Bernard L. Madoff used his position as Chairman of BLMIS, the investment advisory business he founded in 1960, to steal billions from his clients.  On March 12, 2009, Madoff pleaded guilty to 11 federal felonies, admitting that he had turned his wealth management business into the world’s largest Ponzi scheme, benefitting himself, his family and select members of his inner circle.  On June 29, 2009, U.S. District Judge Denny Chin sentenced Madoff to 150 years in prison for running the largest fraudulent scheme in history.  Judge Chin ordered Madoff to forfeit $170.799 billion as part of Madoff’s sentence.  

Of the approximately $4.05 billion that will be made available to victims, approximately $2.2 billion was collected as part of the historic civil forfeiture recovery from the estate of deceased Madoff investor Jeffry Picower.  An additional $1.7 billion was collected as part of a Deferred Prosecution Agreement with JPMorgan Chase Bank N.A. and civilly forfeited in a parallel action.  The remaining funds were collected through a civil forfeiture action against investor Carl Shapiro and his family, and from civil and criminal forfeiture actions against Bernard L. Madoff, Peter B. Madoff and their co-conspirators.

The MVF’s payouts would not have been possible without the extraordinary efforts of the U.S. Department of Justice Criminal Division’s Money Laundering and Asset Recovery Section, the U.S. Attorney’s Office for the Southern District of New York, and the FBI in the prosecution of these crimes and the recovery of assets supporting the forfeiture in this case.  The MVF is overseen by Richard Breeden, former Chairman of the U.S. Securities and Exchange Commission, in his capacity as Special Master appointed by the Department of Justice to assist in connection with the victim remission proceedings.

More information about MVF and its compensation to victims of BLMIS is available on the MVF website at www.madoffvictimfund.com, such as eligibility criteria, process updates, and frequently asked questions.  Further questions may be directed to the MVF at 866-624-3670 or info@madoffvictimfund.com.

Rod J. Rosenstein, the Deputy Attorney General, 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 New York Field Division of the Federal Bureau of Investigation (“FBI”), announced today that the Madoff Victim Fund established by the Department of Justice began its initial distribution of $772.5 million in funds forfeited to the United States Government in connection with the Bernard L. Madoff Investment Securities LLC (“BLMIS”) fraud scheme.  These funds will be sent to more than 24,000 victims worldwide, the first in a series of payments from the Madoff Victim Fund that will return to victims more than $4 billion in assets recovered as compensation for losses suffered by the collapse of BLMIS, following the largest fraud in history.  Another $5 billion in assets recovered by the U.S. Attorney’s Office are being separately paid to Madoff victims through the BLMIS Customer Fund administered by the Securities Investor Protection Act Trustee.

Deputy Attorney General Rod J. Rosenstein said:  “Thanks to civil asset forfeiture, the Department of Justice is announcing today the record-setting distribution of restitution to victims of Bernard Madoff’s notorious investment fraud scheme.  We have recovered billions of dollars from third parties – not Mr. Madoff – and are now returning that money to tens of thousands of victims.  This is the largest restoration of forfeited property in history.”

Acting Manhattan U.S. Attorney Joon H. Kim said:  “Bernie Madoff committed one of history’s largest and most devastating frauds.  This Office not only prosecuted Madoff himself and others who helped perpetrate his fraud, but has remained committed to recovering money for his victims.  To date, this Office has recovered more than $9 billion for the innocent victims of Madoff’s fraud, and today’s distribution of $770 million, the single largest distribution of forfeited funds in the Department’s history, is part of our ongoing commitment to not only prosecute criminals but also find relief for victims.” 

FBI Assistant Director William F. Sweeney Jr. said:  “No amount of money in the world could ever reverse the catastrophic effects Madoff’s historic Ponzi scheme had on individuals and businesses alike. But now, nearly a decade after this crime was exposed, it is our hope that victims will finally be able to see the light at the end of a long, dark tunnel.”

Since the early 1970s, BERNARD L. MADOFF (“MADOFF”) used his position as Chairman of BLMIS, the investment advisory business he founded, to steal billions from his clients.  On March 12, 2009, MADOFF pled guilty to 11 federal felonies, admitting that he had turned his wealth management business into the world’s largest Ponzi scheme, benefitting himself, his family, and select members of his inner circle.  On June 29, 2009, United States District Judge Denny Chin sentenced MADOFF to 150 years in prison for running the largest fraudulent scheme in history.  Judge Chin ordered MADOFF to forfeit $170,799,000,000 as part of MADOFF’s sentence. 

The Madoff Victim Fund is funded through recoveries by the U.S. Attorney’s Office in various criminal and civil forfeiture actions, and is overseen by Richard Breeden, the former Chairman of the United States Securities and Exchange Commission, in his capacity as Special Master appointed by the Department of Justice to assist in connection with the victim remission proceedings.   

Of the approximately $4.05 billion that will be made available to victims through the Madoff Victim Fund, approximately $2.2 billion was collected as part of the civil forfeiture recovery from the estate of deceased MADOFF investor Jeffry Picower.  An additional $1.7 billion was collected as part of a Deferred Prosecution Agreement with JPMorgan Chase Bank N.A. for MADOFF-related Bank Secrecy Act violations.  Additional funds were collected through criminal and civil forfeiture actions against MADOFF and his co-conspirators, and certain MADOFF investors.

Mr. Kim praised the work of the FBI and the Madoff Victim Fund, and thanked the Money Laundering and Asset Recovery Section of the Department of Justice’s Criminal Division for their assistance.    

For more information about the Madoff Victim Fund, compensation to victims of BLMIS, eligibility criteria, and payment information, please visit www.madoffvictimfund.com.

The case is being handled by the Office’s Money Laundering and Asset Forfeiture Unit.  Assistant United States Attorneys Jonathan Cohen, Louis A. Pellegrino, and Niketh Velamoor are in charge of the case.   

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced today that NAVNOOR KANG, the former Director of Fixed Income and Head of Portfolio Strategy at the New York State Common Retirement Fund (“NYSCRF”), pled guilty today before U.S. District Judge J. Paul Oetken for participating in a massive “pay-for-play” bribery scheme involving the NYSCRF, the nation’s third largest public pension fund. 

Acting Manhattan U.S. Attorney Joon H. Kim said:  “As an investment professional with New York State Common Retirement Fund, Navnoor Kang owed a duty to the public employees whose pension money he oversaw.  But in this case of public corruption meets securities fraud, Kang sold himself and his duty to safeguard public retirement money for luxury vacations, jewelry, cash and even drugs.  He has now admitted to his crimes and is a convicted felon. ”

According to allegations contained in the Indictment charging KANG and statements made during his plea proceeding:

The NYSCRF

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

The Scheme to Steer NYSCRF Fixed-Income Business in Exchange for Secret Bribes

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

In exchange for the bribes paid by Kelley, Schonhorn, and others, KANG used his position as Director of Fixed Income and Head of Portfolio Strategy at the NYSCRF to promote the interests of Kelley, Schonhorn, and their respective brokerage firms.  KANG, in exchange for the bribes he received, agreed to steer fixed-income business to Broker-Dealer-1 and Broker-Dealer-2.  In fact, KANG steered more than $3 billion in fixed-income business to Broker-Dealer-1 and Broker-Dealer-2, from which Kelley, Schonhorn, and their respective employers earned millions of dollars in commissions from the NYSCRF.  In so doing, KANG, with the knowledge and approval of Kelley and Schonhorn, breached his fiduciary duty to make investment decisions in the best interest of the NYSCRF and its members and beneficiaries, and free of conflict, and deprived the NYSCRF of its intangible right to KANG’s honest services.

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

KANG’s trades resulted in the payment of millions of dollars in commissions to Broker-Dealer-1 and Broker-Dealer-2, of which Kelley and Schonhorn personally earned approximately 35 to 40 percent.

The Obstruction of Justice

In late 2015, the Securities and Exchange Commission (“SEC”) opened an investigation into the entertainment and benefits that Kelley had provided KANG, and the SEC subpoenaed both KANG and Kelley for their testimony.  In advance of their testimony, KANG and Kelley agreed to align their stories and testify falsely before the SEC in order to conceal their scheme.  In late 2015 and early 2016, KANG and Kelley each falsely testified under oath before the SEC about expenses Kelley had paid for KANG.  Moreover, after a federal grand jury investigation was opened, KANG instructed Schonhorn to testify falsely before the grand jury, and KANG admitted that he had hidden relevant evidence. 

*                      *                      *

KANG, 37, of Glendale, California, pled guilty to one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison, and one count of conspiracy to commit honest services wire fraud, which carries a maximum sentence of 20 years in prison.  KANG is scheduled to be sentenced on February 23, 2018, by Judge Oetken.

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

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

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

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that BRIAN BLOCK, the former chief financial officer of the publicly traded real estate investment trust (“REIT”) formerly known as American Realty Capital Partners (“ARCP”), was sentenced to 18 months in prison for inflating a key metric used to evaluate the financial performance of publicly traded REITS in ARCP’s filings with the U.S. Securities and Exchange Commission (the “SEC”).  BLOCK was convicted by a jury in June, following a three-week trial before U.S. District Judge J. Paul Oetken, who imposed today’s sentence.[1]          

Acting Manhattan U.S. Joon H. Kim said:  “Block, the CFO of a major REIT, deliberately cooked the books to mislead investors and the SEC.  Investors in our securities markets must be able to trust that corporate officers will not lie about the financial health of a publicly traded company.  And corporate officers who do lie face time in a federal prison, as Brian Block has learned.”

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

In 2014, ARCP was a publicly traded REIT headquartered in Manhattan, New York.  ARCP’s securities traded under the symbol “ARCP” on the National Association of Securities Dealers Automated Quotations (“NASDAQ”) exchange.

ARCP, like many REITs, measured its financial performance through metrics besides, or in addition to, traditional measurements of company performance calculated using Generally Accepted Accounting Principles (“GAAP”).  ARCP calculated and reported to the investing public a non-GAAP measure called adjusted funds from operations, or AFFO, which was designed to more accurately reflect ARCP’s cash flow and financial performance by presenting ARCP’s income before consideration of non-cash depreciation and amortization expense and by excluding certain one-time charges and expenses.  REITs such as ARCP commonly reported their AFFO figures, including AFFO per share, to the investing public and in filings with the SEC.  ARCP also provided forward-looking guidance to the investing public regarding their anticipated AFFO performance in upcoming time periods.      

Prior to the filing of ARCP’s Form 10-Q setting forth ARCP’s financial statements for the second quarter of 2014 (the “Second Quarter 10-Q”), BRIAN BLOCK, along with Lisa McAlister and others, came to understand that the method used by ARCP to calculate AFFO in the first quarter of 2014 and in certain previous quarters was erroneously inflated.  Another employee of ARCP (“CC-1”) had brought this methodological error to the attention of BLOCK, McAlister, and others shortly before the filing of ARCP’s first quarter 2014 10-Q (the “First Quarter 10-Q”), but no corrective change was made to the First Quarter 10-Q while the issue was under review.  Following the filing of the First Quarter 10-Q, CC-1 concluded, and advised BLOCK, McAlister, and others, that the reported AFFO per share calculation for the first quarter of 2014 was overstated by approximately $0.03 per share.  Instead of $0.26 per share, which was publicly reported by ARCP to its shareholders and the investing public, and which placed ARCP on track to meet its full-year AFFO per-share guidance, the correct AFFO for the first quarter of 2014 was $0.23 per share.  

Despite his knowledge of a material error in ARCP’s previous filings with the SEC, BLOCK took no steps to advise the Audit Committee of ARCP’s Board of Directors, or ARCP’s outside auditors, of the error in the First Quarter 10-Q.  Moreover, BLOCK, McAlister, and CC-1 then knowingly facilitated the use of the same materially misleading calculations in ARCP’s Second Quarter 10-Q.  For example, on July 24, 2014, a draft of ARCP’s Second Quarter 10-Q was circulated to members of ARCP’s Audit Committee.  The draft included an AFFO calculation for the six-month period ending June 30, 2014, that incorporated AFFO figures from the first quarter of 2014 that BLOCK, McAlister, and CC-1 knew to be erroneously inflated.

On July 28, 2014, BLOCK met with McAlister and CC-1 in his office in Manhattan for the purpose of finalizing the financial figures that were to be included in ARCP’s Second Quarter 10-Q.  Utilization of a proper method to calculate ARCP’s second quarter 2014 AFFO would have exposed that the reported AFFO and AFFO per share figures from the first quarter were inflated.  Accordingly, during the meeting, BLOCK, McAlister, and CC-1 inserted into a spreadsheet BLOCK was using to calculate AFFO and AFFO per share for the first and second quarters of 2014 and for the first six months of 2014 (“YTD 2014”) figures that fraudulently inflated the AFFO and AFFO per share calculations that were to be included in the Second Quarter 10-Q and the related ARCP press release.  The fraudulent numbers BLOCK, McAlister, and CC-1 used to inflate the AFFO and AFFO per share figures had no basis in fact, were without documentary support, and did not tie to ARCP’s general ledger accounting system, as BLOCK knew and understood at the time.  The fraudulent numbers included in the spreadsheet prepared by BLOCK were then incorporated into ARCP’s Second Quarter 10-Q, which was filed with the SEC the following day.  As a result of the manipulative efforts of BLOCK, McAlister, and CC-1, ARCP’s SEC filings included AFFO and AFFO per share figures for the second quarter of 2014 and for the first six months of 2014 that were fraudulently inflated.    

The Second Quarter 10-Q was signed by, among others, BLOCK.  Additionally, on a certification accompanying the 10-Q, BLOCK falsely certified, among other things, that the Second Quarter 10-Q did not contain any materially untrue statements or material omissions.  He further falsely certified that he had disclosed to ARCP’s auditors and the audit committee of its board of directors:  “Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.”  In a second certification accompanying the 10-Q, BLOCK falsely certified that: “The quarterly report on Form 10-Q of the Company, which accompanies this Certificate, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and all information contained in this quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company.”

With regard to YTD 2014 specifically, the fraud resulted in an intended overstatement of AFFO by approximately $13 million and an intended overstatement of AFFO per share by approximately $0.03, or approximately 5 percent of total AFFO per share.  By reporting AFFO per share of $0.24 in the second quarter, after having reported AFFO per share of $0.26 in the first quarter, BLOCK and his co-conspirators misled ARCP’s shareholders and the investing public by falsely representing that ARCP’s AFFO per share for the first six months of 2014 was consistent with analysts’ expectations and on track to meet ARCP’s guidance for AFFO per share for calendar year 2014, when in fact, they were not.

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In addition to the prison term, BLOCK, 45, of Hatfield, Pennsylvania, was sentenced to three years of supervised release, and a $100,000 fine.  Restitution will be determined at a future date.

Mr. Kim praised the investigative work of the Federal Bureau of Investigation and also thanked the SEC.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Brian Blais, Edward Imperatore, and Daniel Tehrani are in charge of the prosecution.

[1] BLOCK’s co-defendant, ARCP’s former chief accounting officer Lisa McAlister, pled guilty to securities fraud and related charges on June 29, 2016, and has yet to be sentenced.         

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that ROBERT WALTER MURRAY pled guilty today in Manhattan federal court to securities fraud.  In November 2016, MURRAY conducted a scheme to manipulate the market for the stock of Fitbit, Inc. (“Fitbit”) by filing a sham tender offer with the Securities and Exchange Commission (“SEC”).  The sham tender offer falsely reported that another entity had made a bid to purchase all outstanding Fitbit stock at a significant premium to the then-existing market price.  As a result, the price of Fitbit stock temporarily but significantly increased in price, allowing MURRAY to sell for a profit options that he had previously purchased.  MURRAY’s sham tender offer, moreover, resulted in a temporary inflation in Fitbit’s market capitalization of over $100 million. 

Acting U.S. Attorney Joon H. Kim said:  “As Robert Murray admitted today, he manipulated the market in Fitbit stock by making a false filing with the SEC about a tender offer.  After manipulating Fitbit's stock price and temporarily inflating its market capitalization by over $100 million, Murray sought to take a quick profit from trading in Fitbit stock.  Murray’s ill-advised and criminal attempt to game the system has ended in a federal securities fraud conviction.”  

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

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

MURRAY, moreover, took significant steps to hide his connection to the tender offer filing.  He created a separate email account to register with the SEC and to file the sham tender offer, taking care to disguise his actual IP address when accessing it. 

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MURRAY, 24, of Chesapeake, Virginia, pled guilty to one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5 million.  In addition, pursuant to a plea agreement with the Government, MURRAY agreed to forfeit proceeds of the offense.  MURRAY is scheduled to be sentenced by Judge Katherine B. Forrest on March 9, 2018.  

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 exceptional work of the Office’s criminal investigators, and thanked the United States Postal Inspection Service and the Securities and Exchange Commission for their assistance. 

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

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that NICHOLAS MITSAKOS was sentenced today to 30 months in prison on charges of conspiring to commit securities fraud and wire fraud in connection with his operation of a purported hedge fund called Matrix Capital.  MITSAKOS pled guilty on May 25, 2017, and was sentenced by the Honorable Denny Chin, a judge on the United States Court of Appeals for the Second Circuit who was sitting by designation in the Southern District of New York.

Acting Manhattan U.S. Attorney Joon H. Kim said:  “As he previously admitted in pleading guilty, Nicholas Mitsakos spun a fake tale to investors about his miraculous track record of trading in the securities markets.  Mitsakos lured investors by claiming returns of over 66 percent for one year, never disclosing that his portfolio was an entirely ‘hypothetical’ one and that in fact, he had never entered into any real trades.”

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

In or about October 2013, MITSAKOS created a purported hedge fund called Matrix Capital (“Matrix”), which claimed to be a long-short fund with a long track record of success.  In order to raise money for his fund, MITSAKOS sent marketing materials to numerous potential investors claiming that Matrix had achieved outsized returns that exceeded major indices like the S&P 500.  One newsletter sent to potential investors, for example, claimed that Matrix had achieved returns of approximately 25% in 2012, 66% in 2013, 20% in 2014, and 49% between January and October of 2015.  MITSAKOS also led potential investors to believe that these returns were based on actual securities trades by Matrix, and that Matrix had tens of millions in assets under management (“AUM”). 

MITSAKOS’s representations regarding Matrix’s performance and AUM were false.  In fact, Matrix had no track record in actually purchasing and selling securities, and, indeed, had no meaningful assets at all until receiving funds from a victim in September 2015.  Instead, the purported performance results provided to potential investors were premised on how a hypothetical portfolio would have performed had Matrix actually acquired certain securities.  No such trading actually took place and Matrix never actually owned any of the securities in the hypothetical portfolio that MITSAKOS maintained.  Even in regard to Matrix’s hypothetical investment portfolio, MITSAKOS retroactively manipulated the investments in that portfolio from time to time in order to improve dramatically its hypothetical performance. 

Based in part on these and other misrepresentations, Matrix received approximately $2 million from an investor in September 2015.  However, MITSAKOS used only a portion of that amount – about $1.2 million – to actually buy and sell securities.  Of the remaining amount, MITSAKOS spent hundreds of thousands of dollars on business expenses and personal expenses like car payments, credit cards, and his own rent.  MITSAKOS’s trading of the $1.2 million that he did invest, moreover, resulted in significant losses.

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In addition to the prison sentence, MITSAKOS, 57, was sentenced to two years of supervised release.  The Court further ordered MITSAKOS to forfeit a sum of $861,163.62 and to pay restitution to victims of his offense.           

Mr. Kim praised the exceptional work of the Office’s criminal investigators, and thanked the Securities and Exchange Commission for its assistance. 

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

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that GIBRON LOPEZ and JUDIE OLIVERA were convicted in Manhattan federal court yesterday of Hobbs Act robbery and Hobbs Act robbery conspiracy charges stemming from their commission of a May 2012 home invasion robbery of victim Miles Klein, which resulted in Klein’s death.  LOPEZ and OLIVERA were convicted after a one-and-a-half week trial before U.S. District Judge Katherine Polk Failla.

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

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

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LOPEZ, 37 and OLIVERA, 39, both of the Bronx, were each convicted of one count of Hobbs Act robbery, which carries a maximum sentence of 20 years in prison, and one count of Hobbs Act robbery conspiracy, which carries a maximum sentence of 20 years in prison.

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

Mr. Kim praised the outstanding investigative work of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”), the Strategic Pattern Armed Robbery Technical Apprehension (“SPARTA”) Task Force, and the New York City Police Department (“NYPD”). 

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

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and Philip R. Bartlett, Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced that PHILIP JACOBY, the former chief financial officer of Osiris Therapeutics, Inc. (“Osiris”), a developer and producer of regenerative medicine products, was charged by criminal information (the “Information”) and pled guilty today to lying to Osiris’s auditors in connection with the auditors’ review of Osiris’s 2014 10-K and Third Quarter 2015 10-Q filings.  JACOBY pled guilty before U.S. District Judge Denise Cote.

Acting Manhattan U.S. Attorney Joon H. Kim said:  “Philip Jacoby, the former CFO of a pharmaceutical company, admitted today to lying to auditors conducting an examination of the financial well-being of his company.  Jacoby fabricated documents, made false statements, and asked others to backdate critical transactions in furtherance of his scheme to mislead auditors. For his criminal conduct, which ultimately misled those looking to invest in his publicly traded company, Jacoby faces time in federal prison.”

Inspector-in-Charge Philip R. Bartlett said:  “In a misguided effort to avoid a restatement of Osiris’s fourth quarter revenue numbers, Philip Jacoby lied about the conversion of $1.1 million dollars of consignment inventory to a final sale.  He wasn’t so clever when he left a paper trail of evidence Postal Inspectors followed right back to him.”

According to allegations contained in the Information and statements made in public Court proceedings:

Osiris, headquartered in Columbia, Maryland, is a publicly traded company specializing in the research, development, and marketing of regenerative medicine products.  Osiris sold its products either through its direct sales force, or, more typically, through numerous distributors.  Osiris’s securities traded under the symbol “OSIR” on the NASDAQ stock exchange. 

From in or about 2008 up to and including in or about September 2015, JACOBY held the position of chief financial officer (“CFO”) of Osiris.  From in or about September 2015 through in or about January 2016, JACOBY held the position of principal accounting officer.  During the period that JACOBY was the CFO of Osiris, he signed Osiris’s quarterly and yearly financial reports.  These reports were required to be filed with the United States Securities and Exchange Commission (“SEC”) and provided the investing public with information regarding Osiris’s financial performance.

Although Osiris was initially a research and development company, by at least in or about 2014, Osiris’s management was focused on the company’s “top line,” or gross revenue growth.  Osiris was especially focused on being able to demonstrate quarter-over-quarter revenue growth, that is, reporting revenue for each quarter that was greater than the previous quarter’s.  For example, a former CEO of Osiris (the “CEO”) regularly prepared internal presentations emphasizing the company’s historical quarter-over-quarter revenue growth and emphasizing the need to achieve future growth.  Similarly, in public earnings calls run by the CEO and in its earnings press releases, Osiris touted its revenue performance and quarter-over-quarter revenue growth. 

Improper Accounting at Osiris With Respect to Distributor-1

Between approximately 2010 and approximately 2015, Distributor-1 was a distributor for Osiris’s Ovation product, among other products.  Distributor-1 was owned in its entirety by a sole principal (“Owner-1”).

In or about September 2013, the Food and Drug Administration (“FDA”) informed Osiris that Ovation failed to meet certain regulatory requirements and thus required pre-marketing approval from the FDA, which Ovation did not have.  Thereafter, Osiris agreed with the FDA that it would not sell Ovation after December 31, 2014. 

In order to maintain access to Ovation following December 31, 2014, Distributor-1 agreed to take possession of a significant quantity of Ovation prior to December 31, 2014, and by December 2014 was in possession of approximately $1.8 million worth of Ovation.  Because Distributor-1 lacked the ability to pay for such a large purchase, the Ovation was shipped to Distributor-1 on consignment.  Because the product was on consignment, under governing accounting rules Osiris could not properly recognize revenue until Distributor-1 had sold the product to an end user or Distributor-1 otherwise agreed to purchase the product.

In or about December 2014, JACOBY requested that Owner-1 convert some or all of the consigned inventory to inventory owned by Distributor-1 by December 31, 2014.  To the extent other revenue recognition criteria were satisfied, completion of the actual sale of the inventory to Distributor-1 by December 31, 2014, would have allowed Osiris to recognize revenue for that product in 2014 and reference that revenue in the 2014 10-K it would subsequently file.

Notwithstanding internal pressure to make sales, however, JACOBY and Owner-1 did not reach a final agreement regarding the conversion of the consigned inventory until at least in or about January 2015.  Despite the fact that no agreement was reached in 2014, Osiris, at the direction of JACOBY, booked approximately $1.1 million in revenue related to the conversion of consignment product in the fourth quarter of 2014 (the “Distributor-1 Transaction”).

Jacoby Conveys False Information to Auditors After Improper Accounting Is Questioned

In or about October 2015, the Company’s auditors (the “Auditors”), in connection with an inspection by the Public Company Accounting Oversight Board (the “PCAOB”), requested additional documentation and information supporting Osiris’s recognition of revenue in December 2014 relating to the Distributor-1 Transaction.  In an effort to deceive the Auditors and the PCAOB, JACOBY provided or caused to be provided false, inaccurate, and misleading information to the Auditors. 

For example, in or about October 2015, JACOBY and others prepared a memorandum from Osiris to its Auditors attempting to justify the recognition of $1.1 million of revenue from the Distributor-1 Transaction in the fourth quarter of 2014.  In the memorandum, JACOBY falsely represented that on December 31, 2014, JACOBY had “discussed the sale terms with [Owner-1] via a conference call, and [Owner-1] agreed to purchase 933 units of Ovation for $1,072,950.”  As JACOBY well knew, no telephone call had taken place on December 31, 2014. 

Similarly, on or about November 5, 2015, JACOBY created a letter, backdated to December 29, 2014, purporting to memorialize an agreement between Osiris and Distributor-1 (the “Backdated Letter”).  That same day, JACOBY used his personal email account to send the Backdated Letter by email to Owner-1 stating:

“attached is something that I think you should find and send to me in an email saying you had this in your file from late last year, and just came across it – and that it does memorialize our several phone conversations . . . . . Call me if necessary, but write a wonderfully warm and convincing email, please – send it to my Osiris email.”

Owner-1 complied and sent the Backdated Letter to Jacoby’s Osiris email account.  JACOBY then forwarded Owner-1’s email containing the fraudulent Backdated Letter to the CEO and the then-CFO of Osiris, who forwarded the document to the Auditors. 

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PHILIP JACOBY, 65, pled guilty to one count of making fraudulent statements to Osiris’s auditors, which carries a maximum sentence of 20 years in prison.  The defendant also faces a maximum fine of $5 million.  Sentencing before Judge Cote has been scheduled for February 2, 2018, at 11:00 a.m.    

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

Mr. Kim praised the investigative work of the United States Postal Inspection Service and also thanked the SEC, which filed a parallel civil case today.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Rebecca Mermelstein, Brendan F. Quigley, and Daniel B. Tehrani are in charge of the prosecution.

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, James J. Hunt, the Special Agent in Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), James P. O’Neill, the Commissioner of the Police Department for the City of New York (“NYPD”), and Mark G. Peters, the Commissioner of the New York City Department of Investigation (“DOI”), today announced the arrests of ERNESTO LOPEZ, a New York-licensed doctor who wrote thousands of medically unnecessary prescriptions for oxycodone and fentanyl patches over an approximately three-year period, SHARON WASHINGTON-BHAMRE, a pediatric nurse practitioner who also wrote medically unnecessary prescriptions for oxycodone, and AUDRA BAKER, an employee at one of LOPEZ’s medical offices who helped facilitate the diversion scheme.  All three defendants are charged with conspiracy to distribute controlled substances and were arrested earlier this morning.  The defendants will be presented in Manhattan federal court before U.S. Magistrate Judge Barbara C. Moses later today.

Acting U.S. Attorney Joon H. Kim stated: “As alleged, these defendants acted like drug dealers in lab coats, directly contributing to the glut of highly-addictive opioids flooding the streets of New York City and its surrounding communities.  Our office will continue to investigate and prosecute all those who abuse their medical licenses to enrich themselves.”

DEA Special Agent in Charge James J. Hunt stated:  “At the same time that cartels are pushing fentanyl on opioid users, this investigation identified a rogue doctor following suit.  With offices strategically located in Nassau County, Manhattan, and Queens, Dr. Lopez allegedly wrote unnecessary prescriptions for oxycodone and fentanyl worth millions of dollars on the street.  I commend our law enforcement partners for their collaboration and hard work on this investigation.”

DOI Commissioner Mark G. Peters said:  “This doctor and his co-defendants in the medical profession disregarded their duty to aid the sick and infirmed, deciding instead to heed personal profit in return for pushing dangerous opioids, according to the charges. DOI is proud to work with our federal and local law enforcement partners on this significant investigation to expose and stop a pill mill advancing the perilous opioid crisis.”

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

Oxycodone and fentanyl are highly addictive, narcotic opioids that are used to treat severe and chronic pain conditions.  Oxycodone prescriptions are in high demand and have significant cash value to drug dealers, who sell them on the street for large amounts of money.  For example, 30-milligram oxycodone tablets have a current street value of approximately $20 to $30 per tablet in New York City, with street prices even higher in other parts of the country.  Thus, a single prescription for 120 30-milligram tablets of oxycodone can net an illicit distributor $2,400 in cash or more.  Fentanyl patches are also commonly abused and sold for cash on the street by drug dealers.  Because it is much more potent than heroin, fentanyl frequently results in overdoses that can lead to respiratory depression and death.  

From 2015 until October 2017, LOPEZ operated medical clinics located in Manhattan, New York; Jackson Heights, New York; and Franklin Square, New York, where LOPEZ wrote thousands of prescriptions for large quantities of oxycodone and fentanyl patches in exchange for cash payments.  BAKER assisted LOPEZ in operating two of his medical offices.  LOPEZ typically charged $200 to $300 in cash for “patient visits,” where LOPEZ performed no meaningful physical examination of patients.  Instead, a typical “patient visit” consisted primarily of recording a patient’s vital signs and sometimes involved the brief movement of a patient’s limbs.  LOPEZ then prescribed large quantities of oxycodone, most frequently 120 30-milligram tablets, and fentanyl patches.  Between January 2015 and the present, LOPEZ wrote more than 8,000 oxycodone prescriptions, resulting in an estimated $2 million in fees to LOPEZ.  BAKER assisted LOPEZ in the diversion of oxycodone and fentanyl.  For example, BAKER steered at least one patient to a particular individual (“CC-1”), so that CC-1 could purchase that individual’s oxycodone prescriptions and resell the drugs on the street.

From December 2015 until October 2017, WASHINGTON-BHAMRE, a pediatric nurse practitioner, wrote scores of medically unnecessary oxycodone prescriptions.  During this time, WASHINGTON-BHAMRE wrote oxycodone prescriptions in the names of individuals provided to her by CC-1 without performing any examination of the purported patients. 

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LOPEZ, 74, of Flushing, New York, BAKER, 49, of Manhattan, New York, and  WASHINGTON-BHAMRE, 52, of Rochelle Park, New Jersey, are each charged with one count of conspiring to distribute and possess with intent to distribute a controlled substance, which carries a maximum sentence of 20 years in prison.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

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

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

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

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