Southern District of New York

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that GARY HIRST, former president and chairman of the board of Gerova Financial Group, Ltd. (“Gerova”), a publicly traded company listed on the New York Stock Exchange, was found guilty of defrauding the shareholders of that company by secretly giving away nearly $72 million of company stock to himself and his co-conspirators for no legitimate business purpose.  HIRST was convicted after a two-week trial before U.S. District Judge P. Kevin Castel. 

U.S. Attorney Preet Bharara said:  “As the jury found today after a two-week trial, Gary Hirst conspired to commit securities and wire fraud by having Gerova issue more than $70 million worth of shares for no legitimate business purpose and by hiding his and others’ control of those shares.  As a result of the manipulation of Gerova’s stock price, Hirst personally reaped more than $2.6 million in illegal profits.”

According to the allegations contained in the Indictment as well as the evidence presented during trial[1]:

From 2009 to 2011, GARY HIRST, along with his co-conspirators Jason Galanis, John Galanis, Jared Galanis, Derek Galanis, Ymer Shahini, and Gavin Hamels, engaged in a scheme to defraud the shareholders of Gerova, and the investing public, by issuing shares of Gerova stock for no legitimate business purpose and by effecting securities transactions in Gerova stock for the purpose of conferring millions of dollars of undisclosed remuneration on HIRST and his co-conspirators.

As a part of the scheme to defraud, GARY HIRST and Jason Galanis obtained sufficient control over Gerova to be able to cause Gerova to enter into transactions of their own design, and for their benefit, including the issuance of Gerova stock.  Jason Galanis obtained this control without causing himself to be identified as an officer or director of Gerova in order to appear to abide by an SEC-imposed bar which forbade him from holding such positions at publicly traded companies.  Among other means and methods, HIRST caused over 5 million shares of Gerova stock, which represented nearly half the company’s public float and which were intended for HIRST and his co-conspirators’ ultimate benefit, to be issued to and held in the name of Ymer Shahini, who knowingly served as a foreign nominee for the co-conspirators.  HIRST, Jason Galanis, John Galanis, Jared Galanis, Derek Galanis, and Shahini understood that the purpose of the stock grant to Shahini was to disguise the co-conspirators’ true ownership interest in the stock, and to evade the SEC’s regulations for issuing unregistered shares of stock.  

In furtherance of the scheme, HIRST and his co-conspirators created fraudulent, back-dated documents to conceal their theft of the stock and cover their tracks.  Also in furtherance of the scheme, HIRST deliberately misled Gerova’s other officers, including its chief financial officer, and caused Gerova to fail to disclose the stock giveaway in Gerova’s public filings with the SEC.  In a telephone call with Jason Galanis that was recorded by the FBI, HIRST gloated, upon reviewing a draft of one such public filing, “That whole, that whole Shahini thing, I mean, nobody, they totally missed it.  Everybody.”   

At the same time, and as a further part of the scheme to defraud, GARY HIRST’s co-conspirators opened and managed brokerage accounts in the name of Shahini (the “Shahini Accounts”), effected the sale of Gerova stock from the Shahini Accounts, and received and concealed the proceeds, knowing that this activity was designed to conceal from the investing public the fraudulent nature of the co-conspirators’ ownership of and control over the Gerova stock.

Jason Galanis, among others, also fraudulently induced investment advisers, including Gavin Hamels, to purchase shares of Gerova stock in the investment advisers’ client accounts by offering compensation and/or other benefits to the respective investment adviser.  By causing the purchase of Gerova stock at the time, quantity, and/or price of their choosing, the co-conspirators were able to, among other things, effectuate the sale of large quantities of Gerova stock from the Shahini Accounts that the co-conspirators controlled while artificially maintaining the price of Gerova stock through coordinated matched trading.  Such coordinated trading served to manipulate the market for Gerova stock and deceive the investing public. 

As a result, GARY HIRST, Jason Galanis, and their co-conspirators reaped nearly $20 million in profits, including approximately $2.6 million that benefitted HIRST directly.

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GARY HIRST, 64, was convicted of one count of conspiracy to commit securities fraud and one count of conspiracy to commit wire fraud, each of which carries a maximum sentence of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense; and of one count of securities fraud and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison.  The defendant also faces a maximum fine of $5,000,000 or twice the gross gain or loss from the offense on the securities fraud count and a maximum fine of $250,000 or twice the gross gain or loss from the offense on the wire fraud count.  

Jason Galanis, 46, pled guilty on July 21, 2016 to two counts of conspiracy to commit securities fraud, each of which carries a maximum sentence of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense; one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5,000,000 or twice the gross gain or loss from the offense; and one count of investment adviser fraud, which carries a maximum sentence of five years in prison and a maximum fine of $10,000 or twice the gross gain or loss from the offense. 

John Galanis, 73, pled guilty on July 20, 2016 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; and one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5,000,000 or twice the gross gain or loss from the offense. 

Jared Galanis, 37, pled guilty to one count of misprision of a felony, which carries a maximum sentence of three years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.

Gavin Hamels, 40, pled guilty on March 22, 2016, 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; one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5,000,000 or twice the gross gain or loss from the offense; and one count of investment adviser 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 sentences for the defendants will be determined by the judge.

Mr. Bharara praised the work of the U.S. Postal Inspection Service and the Federal Bureau of Investigation, and thanked the SEC.

The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations.  Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants.  For more information on the task force, please visit www.StopFraud.gov.       

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

 

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[1]  As for co-defendant Ymer Shahini, who remains a fugitive, the description of the charges set forth herein constitute only allegations.

Preet Bharara, the United States Attorney for the Southern District of New York, and Mark G. Peters, Commissioner of the New York City Department of Investigation (“DOI”), announced today the filing of criminal charges against six defendants for participating in long-running schemes to hide substantial assets and income obtained from significant business and real estate interests in order to attain government benefits designed for low-income individuals. In total, the defendants allegedly obtained more than $1.3 million of government benefits.  SHLOMO KUBITSHUK, RACHEL KUBITSHUK, NAFTALI ENGLANDER, and HINDA ENGLANDER were charged in one complaint, and LEIB TEITELBAUM and DEVORAH TEITELBAUM were charged in a separate complaint.  The defendants were arrested in Brooklyn this morning and are scheduled to appear in Manhattan federal court later today.    

U.S. Attorney Preet Bharara said:  “For over a decade, this ring of six defendants allegedly lied to city and federal officials about their financial status in order to obtain benefits that were meant for the needy.  The alleged schemes that netted them over a million dollars has been put to an end and the defendants now face federal fraud charges.”

Commissioner Mark G. Peters said:  “These defendants were millionaires stealing from the poor, as charged.  The defendants fraudulently concealed their wealth to obtain benefits, including Section 8 vouchers intended to help low income New Yorkers find housing, according to the allegations.  At a time when affordable housing is scarce, and there is a waiting list for Section 8 vouchers, it is reprehensible that some New Yorkers went without so that these defendants could have still more.”

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

From 2001 to 2016, SHLOMO KUBITSHUK, RACHEL KUBITSHUK, NAFTALI ENGLANDER, and HINDA ENGLANDER conspired and engaged in a scheme to obtain government benefits designed for low-income residents, including Section 8 housing subsidies, Medicaid health insurance, and Supplemental Nutrition Assistance Program (“SNAP”) food stamps, totaling more than $980,000.  In connection with applications for these benefits, they failed to disclose substantial income and financial assets, including a portfolio of multimillion-dollar residential real estate properties.  The defendants also perpetrated the fraud by providing false income affidavits for each other.

From 2007 to 2016, LEIB TEITELBAUM and DEVORAH TEITELBAUM also conspired and engaged in a scheme to obtain government benefits designed for low-income residents, including Section 8 housing subsidies, Medicaid health insurance, and SNAP food stamps, totaling more than $330,000.  In connection with applications for these benefits, they failed to disclose substantial income and financial assets, including a jewelry business and an apartment they owned.

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SHLOMO KUBITSHUK, 38, RACHEL KUBITSHUK, 39, both from Brooklyn, New York, are each charged with one count of conspiracy to steal government funds, which carries a maximum sentence of five years in prison, and two counts of theft of government funds, each carrying a maximum sentence of 10 years in prison.  NAFTALI ENGLANDER, 40, HINDA ENGLANDER, 41, LEIB TEITELBAUM, 39, and DEVORAH TEITELBAUM, 36, all from Brooklyn, New York, are each charged with one count of conspiracy to steal government funds, which carries a maximum penalty of five years in prison, and three counts of theft of government funds, each carrying a maximum sentence of 10 years in prison.

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

U.S. Attorney Bharara praised the work of DOI and the Criminal Investigators of the United States Attorney’s Office for the Southern District of New York. 

The case is being prosecuted by the Office’s General Crimes Unit.  Assistant U.S. Attorneys Eli J. Mark and Thane Rehn 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.

 

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

Preet Bharara, the United States Attorney for the Southern District of New York, and Shantelle P. Kitchen, the Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced that ELIANA SARMIENTO, a former tax preparer at K&S Tax Solution, Inc. (“K&S”), was found guilty last Friday of multiple charges in connection with her participation in schemes to file fraudulent tax returns, in order to receive tax refunds in the form of checks and wire transfers.  Together with her co-workers at K&S, SARMIENTO stole more than $19 million in tax refunds by submitting false tax returns using stolen identities, largely stolen from residents of Puerto Rico.  To date, 14 employees and associates of K&S, in addition to SARMIENTO, have been convicted in connection with this scheme.  SARMIENTO was convicted after a two-week jury trial before U.S. District Judge Kimba Wood.

According to the allegations contained in the Indictment as well as the evidence presented during trial:

Since January 2010, SARMIENTO, along with her co-conspirators, perpetrated a large-scale scheme to defraud the Internal Revenue Service (“IRS”) through the filing of fraudulent tax returns, so as to receive tax refunds in the form of checks and wire transfers.  Specifically, SARMIENTO obtained stolen identities in part through one co-conspirator, based in Puerto Rico, who stole the identities of patients of a medical clinic in Ponce, Puerto Rico.  She then obtained electronic filing identification numbers (“EFINs”), which are used for the purpose of filing hundreds of electronic tax returns, under the names of the victims of the defendants’ identity theft scheme.  SARMIENTO and her co-conspirators used those EFINs to file tax returns bearing the names and Social Security Numbers (“SSNs) of additional identity theft victims.  Additionally, SARMIENTO and other employees of K&S used the stolen identities of children as false “dependents” on the tax returns of certain K&S clients.

In these ways, SARMIENTO and others at K&S obtained millions of dollars from the U.S. Treasury.  To date, and based on a subset of EFINs associated with SARMIENTO and her co-conspirators at K&S, the IRS has identified $281,348,627 in attempted fraudulent returns and $19,799,175 in Treasury funds successfully stolen by SARMIENTO and her criminal associates.   

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SARMIENTO, 32, of Passaic, New Jersey, was found guilty of two counts of theft of public funds, each carrying a maximum sentence of 10 years in prison; two counts of conspiring to steal public funds, each carrying a maximum sentence of five years in prison; and two counts of aggravated identity theft, each carrying a mandatory sentence of two years in prison.  The statutory maximum and minimum penalties 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. Bharara praised the IRS-CI for its work in the investigation and expressed his appreciation to the United States Secret Service for its assistance.

This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Eun Young Choi and Andrew C. Adams are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that KELVIN ACOSTA pled guilty today to one count of sexual exploitation of a child.  ACOSTA, who was arrested on March 29, 2016, entered his plea before United States District Judge Paul A. Crotty, and was remanded into federal custody.

U.S. Attorney Preet Bharara said:  “Kelvin Acosta preyed on vulnerable teenagers in a cruel way, contacting them on Facebook, hacking into their accounts and threatening to publish sensitive images and videos of them unless they created and sent to him child pornography.  He has now pled guilty and will face a substantial term of imprisonment.  Together with our partners at the FBI and the NYPD, we are committed to protecting children from those, like Acosta, who seek to exploit, extort, or entice them.”

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

From December 2013 through November 2015, KELVIN ACOSTA committed “sextortion” by hacking into email accounts belonging to teenage girls and extorting them into producing child pornography for him.  ACOSTA did so by messaging the girls on Facebook and tricking them into revealing personal information that he then exploited to hack their email accounts.  ACOSTA then told his minor victims that he had hacked their email accounts and found compromising material (sex videos and/or nude photographs), which he threatened to send their families, friends, and schools – unless they created child pornography for him via video chat and/or paid him money. 

ACOSTA, 27, of the Bronx, New York, pled guilty to one count of sexual exploitation of a child, which carries a mandatory minimum sentence of 15 years in prison and 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 the defendant’s sentence will be determined by the judge.  ACOSTA is scheduled to be sentenced by Judge Crotty on January 10, 2017, at 11 a.m.

Any individuals who believe they have information concerning exploitation of children may contact the Federal Bureau of Investigation at 1-212-384-1000 or https://tips.fbi.gov/.

Mr. Bharara praised the investigative work of the FBI and the NYPD, and thanked the Brooklyn District Attorney’s Office for its valuable cooperation in this matter.

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ANTHONY SCOTT, a/k/a “Tyson,” pled guilty today to involvement in a racketeering conspiracy in connection with his membership in the “Young Gunnaz” (“YGz”), a violent street gang that operated in and around several housing developments in the New York City Police Department’s 40th Precinct in the South Bronx.  As part of his guilty plea, SCOTT admitted to his participation in two acts of violence in the 40th Precinct: (a) the murder of Darrel Ledgister on or about June 27, 2009, in which SCOTT shot and killed Ledgister during the course of an attempted robbery, and (b) aiding and abetting the aggravated assault of a rival gang associate on or about June 22, 2014, by helping another YGz member shoot the rival gang associate in the foot.  SCOTT faces a maximum term of life in prison, and will be sentenced before United States District Judge Valerie E. Caproni later this year.  The Ledgister murder is one of several previously unsolved 40th Precinct murders charged in this case.

U.S. Attorney Preet Bharara said:  “Anthony Scott has admitted to his role in the murder of a 21-year-old man and a second gang-related shooting.  Gang violence threatens the safety and security of all New Yorkers, and we will continue to work with our law enforcement partners to prevent it and to bring those who commit it to justice.”

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

SCOTT was a member of the Bronx-based street gang known as the YGz and committed acts of violence with other gang members to further the interests of the gang.  From at least 2005 to August 2016, members and associates of the YGz enriched themselves by selling drugs, such as “crack” cocaine, heroin, and marijuana, and committed acts of violence, including murder and attempted murder, against various people, including rival gang members, rival drug traffickers, and innocent bystanders.  As part of this enterprise, members and associates of the YGz killed and attempted to kill other individuals. 

As part of his involvement in the YGz gang, SCOTT participated in two shootings.  First, on or about June 27, 2009, SCOTT attempted to commit a gunpoint robbery of the passenger of a vehicle parked on 140th Street near Willis Avenue in the South Bronx, in the vicinity of YGz-controlled territory in the Mott Haven Houses.  During the course of the attempted robbery, SCOTT shot and killed Darrel Ledgister, the 21-year-old driver of the vehicle.  Second, on or about June 22, 2014, SCOTT aided and abetted the commission of an aggravated assault of a rival gang associate in which one of SCOTT’s fellow gang members shot the rival gang associate in the foot in the vicinity of the Mott Haven Houses.

SCOTT was arrested in this case as a result of a multi-year investigation by the Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), the Drug Enforcement Administration (“DEA”), and the New York City Police Department (“NYPD”) into gang violence in and around the 40th Precinct.  In July 2014, SCOTT was initially arrested in the vicinity of the Mott Haven Houses for possession of a firearm following a felony conviction, and was prosecuted by this Office for that firearm offense, convicted, and sentenced to 30 months in prison.  In December 2015, while SCOTT was in federal prison serving that sentence, SCOTT and more than 20 other members and associates of the YGz gang were charged with racketeering conspiracy, and some were charged with murders, attempted murders, narcotics trafficking, and firearms offenses.  The racketeering indictment in this case was subsequently superseded twice, in June 2016 and August 2016, to charge more than 10 additional defendants, two additional murders, and other offenses.  The controlling Indictment now charges various YGz members with four previously unsolved 40th Precinct murders:  the June 27, 2009, murder of Darrel Ledgister; the January 24, 2011, murder of Dykeem Etheridge; the December 22, 2011, murder of Taisheem Ferguson; and the April 16, 2012, murder of Moises Lora. 

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Mr. Bharara praised the outstanding work of the ATF, the DEA, and the NYPD in the investigation of this case.   He also thanked the Bronx County 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, James McDonald, Andrew Adams, and Dina McLeod are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, Robert E. Perez, Director, Field Operations New York, U.S. Customs and Border Protection (CBP), and Angel M. Melendez, Special Agent in Charge of New York, U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI), announced today that the United States has filed a civil complaint (the “Complaint”) alleging violations of the False Claims Act by YINGSHUN GARMENTS, INC. (“YINGHSUN”), an importer of women’s apparel manufactured in China; MARIE ROGERS (“ROGERS”), former Managing Director of YINGSHUN; IMPORT GLOBAL DESIGNS INC. (“IMPORT GLOBAL”) and OLGREM LLC (“OLGREM”), successor entities to YINGSHUN; and NOTATIONS, INC. (“NOTATIONS”), a wholesaler of women’s apparel and YINGSHUN’s biggest customer.  The Complaint alleges that defendants conspired to defraud and did defraud CBP by engaging in a double-invoice scheme whereby YINGSHUN (and later IMPORT GLOBAL and OLGREM), presented false and fraudulent invoices to CBP for the purpose of avoiding import duties on garments sold to NOTATIONS.  The Complaint further alleges that NOTATIONS took actions to aid YINGSHUN in perpetrating and concealing the fraud.   

As set forth in the Complaint, filed yesterday in Manhattan federal court, import duties for merchandise imported into the United States are calculated by multiplying the value of the merchandise by the applicable duty rate.  An importer or its agent must therefore disclose to CBP the value of all imported merchandise and furnish an invoice to justify that value.  The Complaint alleges that YINGSHUN created false and fraudulent commercial invoices for garments purchased by NOTATIONS, which undervalued the garments by 75% or more.  YINGSHUN then submitted these false invoices to CBP and, based upon the gross undervaluations, paid significantly less in import duties than it actually owed.  NOTATIONS was aware of YINGSHUN’s fraudulent scheme and benefited from it, as YINGSHUN’s underpaying of import duties resulted in NOTATIONS paying lower prices for the garments it was purchasing from YINGSHUN, among other benefits.  Rather than taking steps to prevent the fraud, NOTATIONS agreed to create and accept false and misleading documents in order to perpetuate the false impression that YINGSHUN’s fraudulent invoices reflected actual prices paid for the garments.  ROGERS managed all aspects of YINGSHUN’s business and facilitated the double-invoice scheme, including by utilizing a “formula” that generated garment prices for NOTATIONS that incorporated the underpayment of import duties.  ROGERS also created IMPORT GLOBAL and OLGREM and continued YINGSHUN’s fraudulent scheme through these entities, in order to avoid detection by CBP. 

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

According to the Complaint, the defendants have subjected CBP to millions of dollars in losses from unpaid import duties as a result of the double-invoice scheme.

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Mr. Bharara thanked CBP and HSI for their efforts and ongoing support and assistance with the case.

The case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorney Cristy Irvin Phillips is in charge of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that U.S. District Judge Alison J. Nathan has permanently enjoined LESTER MORRISON, a tax preparer who pled guilty in 2010 to orchestrating a large-scale tax fraud scheme, from working as a federal income tax return preparer or engaging in any conduct that interferes with the administration and enforcement of federal tax laws.  Judge Nathan previously issued permanent injunctions against four of Morrison’s associates who also had pled guilty to tax fraud, Paulette Bullock, Gary Hanna, Joy David, and Kevin Vaden, to bar them from engaging in the tax preparation business.  

Manhattan U.S. Attorney Preet Bharara said:  “The injunctions against Lester Morrison and his cohorts make clear that tax preparers who defraud the IRS will not only face criminal charges, but will also be barred from working in the tax return preparation business.  This Office is committed to using all the enforcement tools at its disposal to protect the integrity of the federal tax system and public funds.”

As alleged in the Complaint and the United States’ filings:

Between 2000 and 2008, MORRISON and his associates orchestrated a tax fraud scheme involving the preparation of thousands of false and fraudulent tax returns through a tax preparation business located in the Bronx and Englewood, New Jersey.  The fraudulent tax returns prepared by MORRISON and his associates sought improper deductions by, among other things, using stolen identities of deceased children to claim dependent deductions, and claiming phony business losses for non-existent businesses.  In 2010, MORRISON and his four associates pled guilty to tax fraud in federal court.  As of April 2016, MORRISON and his associates have all been released from prison. 

In connection with entering the injunction against MORRISON, the Court found, among other things, that:

• Morrison was the organizer and leader of a tax preparation fraud scheme;
• Morrison caused loss of tax receipts to the United States in excess of $17 million;
• Morrison lied to the IRS during the course of the IRS’s investigation into his conduct; and
• Enjoining Morrison from acting as a tax return preparer is needed to protect the integrity of the federal tax system.

Based on those findings, the Court permanently enjoined MORRISON, either personally or by acting in concert with others, from acting as a federal income tax preparer for compensation, providing tax advice or services for compensation, or representing any person or entity before the IRS for compensation.  The Court also permanently enjoined MORRISON from engaging in conduct that interferes with the administration or enforcement of federal tax laws.  The Court further empowered the Government to take appropriate steps to monitor MORRISON’s compliance. 

The Court previously made similar findings and imposed similar injunctions against each of MORRISON’s four associates.

The case is being handled by the Office’s Tax and Bankruptcy Unit.  Assistant U.S. Attorney Li Yu is in charge of the case.

 

        

Preet Bharara, the United States Attorney for the Southern District of New York, announced that JON CRUZ, a former teacher and debate coach at the Bronx High School for Science, pled guilty today to one count of receiving child pornography.  CRUZ, who was arrested on March 5, 2015, entered his plea before United States District Judge P. Kevin Castel. 

U.S. Attorney Preet Bharara said:  “Crimes that sexually exploit and victimize children are some of the most disturbing and harmful.  It is particularly so when those entrusted to teach and guide our children in our schools, instead lure and then sexually exploit them.  Jon Cruz, a public school teacher and well-known debate coach, has admitted to doing just that, having now pled guilty to receiving child pornography.”

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

From July 2014 through December 2015, JON CRUZ, while employed as a teacher and debate coach at Bronx High School for Science, engaged in multiple chats over a mobile communication application and social media service with at least five minor victims from different states.  In those chats, CRUZ, who was aware of the ages of the victims, provided payments to the victims in exchange for sexually explicit photographs of themselves. 

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CRUZ, 33, of New York, New York, pled guilty to one count of receiving child pornography, which carries a mandatory minimum sentence of five years in prison and a maximum sentence of 20 years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the investigative work of the FBI in this matter.

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

Preet Bharara, the United States Attorney for the Southern District of New York, and John S. Comer, Special Agent in Charge of the Los Angeles Division of the U.S. Drug Enforcement Administration (“DEA”), announced today an Indictment charging ALEJANDRO JAVIER RODRIGUEZ-JIMENEZ, JESUS RODRIGUEZ-JIMENEZ, ELOY CARDENAS-MORENO, SERGIO URBINA, LEOBARDO TAMEZ, and MARCO CORONADO with conspiring to commit money laundering.  ALEJANDRO JAVIER RORDIGUEZ-JIMENEZ, JESUS RODRIGUEZ-JIMENEZ, ELOY CARDENAS-MORENO, and MARCO CORONADO were also charged with conspiring to distribute narcotics.  ALEJANDRO JAVIER RODRIGUEZ-JIMENEZ, JESUS RODRIUGUEZ-JIMENEZ, and MARCO CORONADO were further charged with substantive money laundering counts.  JESUS RODRIGUEZ-JIMENEZ, SERGIO URBINA, LEOBARDO TAMEZ, and MARCO CORONADO were all previously arrested on criminal complaints in, respectively, Las Vegas; Orlando; McAllen, Texas; and Houston, Texas.  The case is assigned to U.S. District Judge Katherine B. Forrest.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, these defendants established a shadow banking system, with stash houses in a number of American cities where co-conspirators received proceeds of hundreds of kilograms of cocaine and heroin, and then laundered them through accounts in North and Central America, Europe, and Asia.  This Office, along with all of our federal partners, is committed to stanching the flow of illegal drugs into the United States and shutting down the financial networks that fuel the trade.”

DEA SAC John S. Comer said, “The complexity and scale of operations allegedly consummated by this money laundering organization are immense – hundreds of millions of drug dollars remitted across six continents on behalf of the World’s most violent drug cartels.  The investigation led by our office in Las Vegas reflects DEA’s resolve and reach; working with our international, state and local partners, we will cripple these global organizations no matter where they’re based.”

According to the allegations in the Indictment[1], the previously filed criminal complaints against the defendants, and statements made in Court:

The Investigation

Since July 2013, the DEA has been investigating an international drug trafficking and money laundering organization (the “Organization”) involved in trafficking hundreds of kilograms of cocaine and heroin, among other narcotics, and laundering narcotics proceeds through a variety of methods including through one or more seemingly “legitimate” corporations under their control.   The Organization has ties to Panama, Mexico, Italy, Spain, and the United States, among other locations, and its members are believed to include each of the defendants.

This prosecution is connected to the prosecution of Roberto Ponce-Rocha, a large-scale international narcotics trafficker based in Central and South America, who used various methods, including commercial shipments, drivers, and couriers to move narcotics around the world, and to import narcotics into the United States.  Ponce-Rocha is among four individuals charged in a superseding indictment captioned United States v. Ponce-Rocha, 16 Cr. 30 (JMF) unsealed in the Southern District of New York on May 25, 2016.

 ALEJANDRO JAVIER RODRIGUEZ-JIMENEZ ran a number of business in Las Vegas, Nevada, including a LED screens business that he used as a front to facilitate money laundering transactions and to ship narcotics in connection with Ponce-Rocha.  Together with his brother, JESUS RODRIGUEZ-JIMENEZ, who was based in Monterrey, Mexico, ALEJANDRO JAVIER RODRIGUEZ-JIMENEZ directed their associates, including ELOY CARDENAS-MORENO, to set up stash houses in various cities throughout the United States, including Atlanta and Philadelphia, in order to receive drug proceeds from criminal clients who wanted those proceeds funneled into the international banking system.  MARCO CORONADO, SERGIO URBINA, and LEOBARDO TAMEZ each participated in cash money pick-ups in, among other places, New York City and Atlanta, receiving cash from narcotics traffickers and, as directed by the RODRIGUEZ-JIMENEZ brothers, bringing that cash to co-conspirators with directions to wire it to shell accounts in Mexico, Hong Kong, and Italy, among other places.

 In this way, the Organization laundered hundreds of millions of dollars through the international banking system, and facilitated the distribution of hundreds of kilograms of cocaine and heroin, among other narcotics.

*                *                *

A chart containing the charges and maximum penalties for the defendants is attached.                                                                                         

Mr. Bharara praised the DEA and the Las Vegas Office of the Internal Revenue Service, Criminal Investigation, for their work in the investigation.  Mr. Bharara also expressed his appreciation to La Comisión Nacional de Seguridad – Policía Federal, and La Unidad de Inteligencia Financiera, Mexican law enforcement agencies who assisted in the investigation.

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

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

United States v. Rodriguez-Jimenez, Et al.

COUNT(S)

  CHARGE                      

DEFENDANT(S)

MAXIMUM PENALTIES[2]

 

ONE

 

Conspiracy to Commit Money Laundering

 

Alejandro Javier Rodriguez-Jimenez,

Jesus Rodriguez-Jimenez,

Eloy Cardenas-Moreno,

Sergio Urbina,

Leonardo Tamez,

Marco Coronado

 

 

20 years in prison; fine of the greatest of $500,000 or twice the value of the property involved in the transaction

 

 

TWO

 

 

 

Conspiracy to Distribute Narcotics

 

 

Alejandro Javier Rodriguez-Jimenez,

Jesus Rodriguez-Jimenez,

Eloy Cardenas-Moreno,

Marco Coronado

 

 

 

Life in prison; with a ten-year mandatory minimum prison sentence; $10,000,000 fine

 

 

THREE AND FOUR

 

Money Laundering

 

Alejandro Javier Rodriguez-Jimenez,

Jesus Rodriguez-Jimenez,

Marco Coronado

 

 

 

20 years in prison; fine of the greatest of $500,000 or twice the value of the property involved in the transaction

 

 

FIVE THROUGH SEVEN

 

Money Laundering

 

Jesus Rodriguez-Jimenez, Marco Coronado

 

 

 

20 years in prison; fine of the greatest of $500,000 or twice the value of the property involved in the transaction

 

 

 

---

[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.

[2] 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 Court.

There will be a press conference today at noon to announce public corruption charges against nine defendants, including Joseph Percoco, the former Executive Deputy Secretary to the Governor, and Alain Kaloyeros, the President of SUNY Polytechnic Institute, for their roles in two bribery and fraud schemes in connection with the award of hundreds of millions of dollars in New York State contracts and other official state actions.  Relevant charging documents are attached. 

WHO:            

Preet Bharara, United States Attorney for the Southern District of New York

Adam Cohen, Special Agent-in-Charge of the Buffalo Field Office of the Federal Bureau of Investigation

Shantelle P. Kitchen, Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation Division

WHAT:          

Press Conference

WHEN:          

Thursday, September 22, 2016 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

CONTACT:   

James Margolin, Dawn Dearden, Nicholas Biase

(212) 637-2600

 

Preet Bharara, the United States Attorney for the Southern District of New York, Adam Cohen, Special Agent-in-Charge of the Buffalo Field Office of the Federal Bureau of Investigation (“FBI”), and Shantelle P. Kitchen, the Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today the unsealing of a Complaint charging eight defendants with federal public corruption offenses, including JOSEPH PERCOCO, the former Executive Deputy Secretary to the Governor of the State of New York, and ALAIN KALOYEROS, the President of SUNY Polytechnic Institute (“SUNY Poly”).  The charges arise from two separate but overlapping schemes involving bribery, corruption, and fraud in the award of hundreds of millions of dollars in New York State contracts and other official state actions. 

In the first scheme, PERCOCO is charged with soliciting and accepting more than $315,000 in bribes in return for taking official state action to benefit an energy company (the “Energy Company”) and a Syracuse-based real estate developer (the “Syracuse Developer”).  As part of this scheme, PETER GALBRAITH KELLY JR., an executive at the Energy Company, and STEVEN AIELLO and JOSEPH GERARDI, executives at the Syracuse Developer, are charged with orchestrating the payment of bribes to PERCOCO. 

In the second scheme, AIELLO and GERARDI, along with LOUIS CIMINELLI, MICHAEL LAIPPLE, and KEVIN SCHULER, who are executives at a Buffalo-based development company (the “Buffalo Developer”), are charged with paying hundreds of thousands of dollars in bribes to TODD HOWE, a consultant hired by KALOYEROS to help administer the state’s “Buffalo Billion” initiative and related programs.  As the charges allege, in exchange for the bribe payments, HOWE and KALOYEROS secretly rigged the bids on lucrative state-funded contracts to ensure that the Syracuse Developer and the Buffalo Developer would win the contracts. 

All eight defendants charged in the Complaint were arrested this morning.  PERCOCO, KELLY, and KALOYEROS are scheduled to be presented later today before U.S. Magistrate Judge Sarah Netburn in Manhattan federal court.  AIELLO and GERARDI are scheduled to appear later today in federal court in Syracuse.  CIMINELLI, LAIPPLE, and SCHULER are scheduled to appear later today in federal court in Buffalo. 

Also unsealed today is the guilty plea of TODD HOWE in connection with his participation in both corruption schemes described above.  HOWE pled guilty pursuant to an Information before U.S. District Judge Richard M. Berman on September 20, 2016, and is cooperating with the Government.

U.S. Attorney Preet Bharara said:  “Today’s charges shine a light on yet another sordid side of the show-me-the money culture that has so plagued Albany.  As alleged, Joseph Percoco, the former Executive Deputy Secretary to the Governor, was on the take.  And pervasive corruption and fraud allegedly infected signature state development projects like the Buffalo Billion program.  The bids allegedly were rigged, the results preordained; companies got rich and the public got bamboozled.  As alleged in the Complaint, it turns out the state legislature does not have a monopoly on crass corruption in New York.”      

FBI Special Agent-in-Charge Adam Cohen said:  “These arrests speak volumes to those who, as alleged in the complaint, arrogantly took what was not theirs and who acted without morals and ignored ethics.  Each of them allegedly broke the law because they chose greed, and, as a result, personally tarnished an historic opportunity.  Their alleged behavior compromised the integrity of government and impeded the promise of liberty.  We cannot say it often enough: It is the expectation of the public that government officials are not in their positions to self-deal or to serve their personal interests.”

IRS-CI SAC Shantelle P. Kitchen said:  “The honest taxpayer’s confidence in the tax system depends on everyone paying their fair share, regardless of their occupation, wealth or prominence – or their public office or public position.  IRS Criminal Investigation takes allegations of public corruption by public officials and public employees very seriously, and we are always ready to contribute to an investigation when the allegation has a financial component.”

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

The PERCOCO Bribery Scheme

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

PERCOCO solicited the bribe payments from two clients of HOWE –the Energy Company and the Syracuse Developer – both of which had retained HOWE as a consultant to help them obtain official State action.  In email correspondence between HOWE and PERCOCO obtained through judicially-authorized search warrants, PERCOCO and HOWE referred to the bribe payments as “ziti,” a reference to a term for money used by the characters in the television show “The Sopranos.”

Bribes from KELLY and the Energy Company

The bribes paid to PERCOCO from the Energy Company were orchestrated by KELLY, the head of external affairs and government relations for the Energy Company.  Kelly conspired with PERCOCO and HOWE to funnel more than $287,000 in bribe payments from the Energy Company to PERCOCO and PERCOCO’s wife in exchange for PERCOCO’s official assistance for the Energy Company on an as-needed basis. 

As alleged in the Complaint: (a) State action was critical to the Energy Company’s business; (b) starting as early as 2010, KELLY provided personal benefits to PERCOCO, including expensive meals and a Hamptons fishing trip, in an effort to cultivate access to PERCOCO; (c) in response to KELLY’s requests for official State assistance, PERCOCO, who was experiencing financial difficulties at the time, requested that the Energy Company hire his then-unemployed wife; (d) in or around the end of 2012, KELLY caused the Energy Company to create a position for PERCOCO’s wife that paid approximately $90,000 per year while requiring PERCOCO’s wife to do little work.  In exchange for these payments, PERCOCO agreed to use his official position and influence, and did in fact use his official position and influence, to help the Energy Company with specific State matters as the opportunities arose.  Among other things, PERCOCO agreed to use his official position and influence to assist the Energy Company’s efforts to obtain (i) a valuable agreement from the State allowing the Energy Company to buy lower-cost emissions credits in New York for a power plant proposed to be built in New Jersey and (ii) a lucrative long-term power purchase agreement (the “PPA”) with the State guaranteeing a buyer for the power to be produced at a power plant proposed to be built in New York, which was expected to save the Energy Company approximately $100 million in development costs.

The Energy Company’s payments to PERCOCO’s wife were concealed in various ways to hide their true source.  KELLY ran the monthly payments to PERCOCO and his wife through a consultant who worked for the Energy Company in order to disguise the source of the payments.  KELLY also made sure that PERCOCO’s wife’s photograph and full name were not included in promotional materials for the Energy Company, and he falsely told his superiors at the Energy Company – on two separate occasions – that PERCOCO had obtained an ethics opinion from the Governor’s Office approving of PERCOCO’s wife’s employment with the Energy Company, when in fact no such opinion existed.  For his part, PERCOCO concealed the criminal scheme by failing to include the Energy Company as the source of payments on his State-mandated financial disclosure forms. 

Bribes from AIELLO, GERARDI, and the Syracuse Developer

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

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

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

The “Buffalo Billion” Fraud and Bribery Scheme

The second scheme alleged in the Complaint involves bribery, corruption, and fraud in the award of contracts under the “Buffalo Billion” initiative and similar programs.  In that scheme, executives at two companies, one of which was the Syracuse Developer, conspired with KALOYEROS and HOWE to deceive Fort Schuyler Management Corporation (“Fort Schuyler”), a State-funded entity charged with awarding State contracts worth hundreds of millions of dollars, by secretly rigging the bidding process so that the contracts would be awarded to those two companies.

KALOYEROS, who oversaw the application process for many of the State grants awarded under the Buffalo Billion and similar programs, retained HOWE to assist with developing the projects and identifying developers for those projects.  HOWE in turn solicited and received bribe and gratuity payments from (a) the Syracuse Developer, facilitated by AIELLO and GERARDI, when the Syracuse Developer was seeking State development grants for projects in Syracuse, New York, and (b) the Buffalo Developer, facilitated by LOUIS CIMINELLI, MICHAEL LAIPPLE, and KEVIN SCHULER, when the Buffalo Developer was seeking State development grants for projects in Buffalo, New York.  In exchange for the bribe payments, HOWE worked with KALOYEROS to deceive Fort Schuyler by secretly tailoring the required qualifications for those development deals so that the Syracuse Developer and the Buffalo Developer would be awarded the contracts, in Syracuse and Buffalo respectively, without any meaningful competition, while falsely representing to Fort Schuyler that the bidding process was fair, open, and competitive. 

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

False Statements by Aiello and Gerardi

On or about June 21, 2016, AIELLO and GERARDI were voluntarily interviewed by law enforcement agents conducting the investigation in this case.  As alleged in the Complaint, both AIELLO and GERARDI made false statements during their respective interviews.  Specifically, they both denied (i) hiring or making payments to PERCOCO and (ii) being asked by HOWE to make any campaign contributions to the Governor.  GERARDI further claimed that his handwritten edits and suggestions on the early nonpublic draft of the RFP were intended not to help the Syracuse Developer win the RFP, but to ensure that a broader, more open RFP was created so more companies could compete to be SUNY Poly’s preferred developer in Syracuse.  As alleged in the Complaint, those statements were false. 

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

U.S. Attorney Bharara praised the work of the FBI and Internal Revenue Service-Criminal Investigation, which jointly conducted this investigation with investigators from the U.S. Attorney’s Office.  Mr. Bharara also recognized the New York State Attorney General’s Office, which This case is being prosecuted by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys Janis Echenberg, Robert Boone, David Zhou, and Matthew Podolsky are in charge of the prosecution.

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

United States v. Joseph Percoco, et al. 16 Mag, 6005

DEFENDANT

AGE

RESIDENCE

CHARGE(S)

MAXIMUM SENTENCE(S)

JOSEPH PERCOCO

47

South Salem, NY

Conspiracy to Commit Extortion Under the Color of Official Right,

18 U.S.C. § 1951 (Count One)

 

Extortion Under the Color of Official Right,

18 U.S.C. § 1951 (Counts Two and Three)

 

Conspiracy to Commit Honest Services Fraud, 18 U.S.C. § 1349 (Count Four)

 

Solicitation of Bribes and Gratuities,

18 U.S.C. § 666 (Counts Five and Six)

 

 

20 years

 

 

 

20 years

 

 

 

 

20 years

 

 

10 years (on each count)

ALAIN KALOYEROS

60

Slingerlands, NY

Conspiracy to Commit Wire Fraud,

18 U.S.C. § 1349 (Count Nine)

 

 

20 years

PETER GALBRAITH KELLY, JR.

53

Canterbury, CT

Conspiracy to Commit Honest Services Fraud, 18 U.S.C. § 1349 (Count Four)

 

Payment of Bribes and Gratuities,

18 U.S.C. § 666 (Count Seven)

 

 

20 years

 

 

10 years

 

STEVEN AIELLO

58

Fayetteville, NY

Conspiracy to Commit Honest Services Fraud, 18 U.S.C. § 1349 (Count Four)

 

Payment of Bribes and Gratuities,

18 U.S.C. § 666 (Counts Eight and Ten)

 

Conspiracy to Commit Wire Fraud,

18 U.S.C. § 1349 (Count Nine)

 

False Statements to Federal Officers,

18 U.S.C. § 1001 (Count Twelve)

 

 

20 years

 

 

10 years (on each count)

 

 

20 years

 

 

5 years

JOSEPH GERARDI

57

Fayetteville, NY

Conspiracy to Commit Honest Services Fraud, 18 U.S.C. § 1349 (Count Four)

 

Payment of Bribes and Gratuities,

18 U.S.C. § 666 (Counts Eight and Ten)

 

Conspiracy to Commit Wire Fraud,

18 U.S.C. § 1349 (Count Nine)

 

False Statements to Federal Officers,

18 U.S.C. § 1001 (Count Twelve)

 

 

20 years

 

 

10 years (on each count)

 

 

20 years

 

 

5 years

 

LOUIS CIMINELLI

61

Buffalo, NY

Conspiracy to Commit Wire Fraud,

18 U.S.C. § 1349 (Count Nine)

 

Payment of Bribes and Gratuities,

18 U.S.C. § 666 (Count Eleven)

 

 

20 years

 

 

10 years

MICHAEL LAIPPLE

51

Orchard Park, NY

Conspiracy to Commit Wire Fraud,

18 U.S.C. § 1349 (Count Nine)

 

Payment of Bribes and Gratuities,

18 U.S.C. § 666 (Count Eleven)

 

 

20 years

 

 

10 years

KEVIN SCHULER

45

North Tonawanda, NY

Conspiracy to Commit Wire Fraud,

18 U.S.C. § 1349 (Count Nine)

 

Payment of Bribe and Gratuities,

18 U.S.C. § 666 (Count Eleven)

 

 

20 years

 

 

10 years

United States v. Todd Howe (Information)

TODD HOWE

56

Washington, DC

Conspiracy to Commit Honest Services Fraud,

18 U.S.C. § 1349 (Count One)

 

Conspiracy to Commit Extortion Under the Color of Official Right,

18 U.S.C. § 1951 (Count Two)

 

Extortion Under the Color of Official Right,

18 U.S.C. § 1951 (Count Three)

 

Conspiracy to Commit Wire Fraud

Wire Fraud,

18 U.S.C. § 1349 (Count Four)

 

Wire Fraud,

18 U.S.C. § 1343 (Counts Five and Seven)

 

Conspiracy to Commit Bribery,

18 U.S.C. § 371 (Count Six)

 

Tax Fraud

26 U.S.C. § 7201 (Count Eight)

 

 

20 years

 

 

 

20 years

 

 

 

20 years

 

 

 

20 years

 

 

 

20 years (on each count)

 

 

5 years

 

 

5 years

 

---

[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.

There will be a press conference today at 1 p.m. to announce criminal civil rights and obstruction charges against five New York State correction officers involved in a November 2013 beating of an inmate at the Downstate Correctional Facility in Fishkill, New York.  A relevant charging document is attached.    

WHO:

Preet Bharara, United States Attorney for the Southern District of New York

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

William V. Grady, the District Attorney of Dutchess County

WHAT:          

Press Conference

WHEN:          

Wednesday, September 21, 2016 at 1:00 p.m.

WHERE:        

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

1 St. Andrew’s Plaza

New York, NY 10007

CONTACT:   

James Margolin, Dawn Dearden, Nicholas Biase

(212) 637-2600

 

Preet Bharara, the 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”), William V. Grady, the District Attorney of Dutchess County, and Anthony J. Annucci, Acting Commissioner of the New York State Department of Corrections and Community Supervision (“DOCCS”), announced today criminal charges against five New York State correction officers relating to the November 12, 2013 beating of Kevin Moore, an inmate at the Downstate Correctional Facility (“Downstate”) in Fishkill, New York, and a conspiracy to cover-up the beating.  Two of the correction officers have pled guilty to the charges filed against them.

Three defendants are charged by Indictment: a former Sergeant named KATHY SCOTT, also known as Kathy Todd, and former correction officers GEORGE SANTIAGO JR. and CARSON MORRIS.  All three defendants are charged with federal civil rights offenses, including conspiring to deprive the victim of his Constitutional rights and depriving the victim of his Constitutional rights under color of law, as well as two counts of obstructing justice by conspiring to file false reports and filing false reports with DOCCS.

Two defendants, former correction officers DONALD COSMAN and ANDREW LOWERY, are charged by felony Informations.  They have both pled guilty to four counts:  conspiring to deprive the victim of his Constitutional rights; depriving the victim of his Constitutional rights under color of law; obstructing justice by conspiring to file false reports; and filing false reports.

Manhattan U.S. Attorney Preet Bharara said: “Today’s charges allege a brutal beating and a brazen cover-up by five state correction officers that left Kevin Moore, a 54-year-old inmate, with life-threatening injuries and in the hospital for 17 days.  Inmates may be walled off from the public, but they are not walled off from the Constitution.  And when correction officers viciously beat an inmate in their charge, then collude among themselves to cover it up – as alleged here – they trample on the Constitution and the very laws they have sworn to uphold.” 

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “What we see in this case is the sheer deprivation of liberty without due process of law.  As charged, the defendants were relentless in their approach to admonish Moore for speaking up – brutally beating him with their boots and batons.  In an outward symbol of inner immorality, one of the officers allegedly boasted of the group’s illicit conduct by referring to the dreadlocks ripped from Moore’s scalp as souvenirs.  This type of behavior is outrageous, and it won’t be tolerated within our criminal justice system.”

Dutchess County District Attorney William V. Grady said:  “The Grand Jury indictment and existing pleas in this case would not have happened were it not for the close cooperation and partnership between my Office and United States Attorney Preet Bharara and his staff.  I sincerely compliment Mr. Bharara for his willingness to take the lead in this investigation after it became apparent that existing New York State Law would make it extremely difficult, if not impossible, for us to conduct an effective investigation at the State level.”

Department of Corrections and Community Supervision Acting Commissioner Anthony J. Annucci said:  “These five individuals not only allegedly broke the trust placed in them by their fellow correction officers – they broke the law as well.  DOCCS has zero tolerance for any criminal activity involving staff or inmates within our facilities.  This announcement sends a strong message that we will pursue anyone that fails to uphold the integrity and professionalism that we place in our Department.  I commend DOCCS Office of Special Investigations, the FBI, and the U.S. Attorney’s Office for their cooperation in bringing these individuals to justice.”

As alleged in the Indictment unsealed today[1], on November 12, 2013, a 54-year-old inmate named Kevin Moore was brutally beaten by a group of Downstate correction officers, causing life-threatening injuries.  As a result of the beating, Moore suffered five fractured ribs, a collapsed lung, and several facial fractures.  The officers also injured Moore’s back, hands, legs, and feet, and they ripped a clump of dreadlocks from his head.  Moore was ultimately hospitalized for approximately 17 days.

At approximately 5:00 p.m. that day, Moore and other Downstate inmates were escorted to the 1-Delta Housing Unit to be confined overnight.  Moore and another inmate were instructed to remove their shoelaces because they were going to be confined in Forensic Diagnostic Unit cells, which are designed for inmates with mental health issues.  SCOTT, SANTIAGO, MORRIS, COSMAN, LOWERY, and other correction officers were surrounding the inmates when Moore objected to being confined in a mental health cell, saying he had a good lawyer and that he was “a monster.”  MORRIS punched Moore and struck him with his correction officer baton.  Several of the officers then threw Moore to the floor.    

After the officers forced Moore to the ground, the defendants beat Moore for several minutes, striking him dozens of times.  Defendant SANTIAGO kicked and punched Moore multiple times, and at one point, reared back and kicked Moore in the face, and then laughed.  Defendant MORRIS punched and struck Moore with his knee multiple times while Moore was prone on the floor.   Moore’s pants fell down during the beating, and COSMAN and LOWERY punched and kicked him in his exposed groin as he lay on the floor.  Both SCOTT and SANTIAGO taunted Moore by saying, “Who’s a monster now?”  During the beating, dreadlocks were ripped from Moore’s head and SANTIAGO later retrieved the dreadlocks, saying that he wanted to keep them as a souvenir for his motorcycle.

Sergeant SCOTT was present for and watched over the entire beating without stopping the violence.  At one point while Moore was on the floor being beaten, SCOTT grabbed him herself.  She also directed that Moore be held in place on the ground, rendering him even more exposed to punches and kicks.  While Moore was being beaten, he cried out in pain, begged for the beating to stop, and pleaded with Sergeant SCOTT, “Why, Sarge, why?  Make it stop.” 

After the beating, the correction officers needed to physically lift Moore from the ground, where he was lying in a pool of his own blood.  Moore suffered several fractured ribs, several facial fractures, and a collapsed lung, in addition to other injuries.  Instead of being sent to the hospital for treatment, Moore was locked into solitary confinement to suffer in pain overnight.   

Soon afterward, defendants SANTIAGO, MORRIS, and COSMAN met to fabricate a story to justify the excessive force used against Moore.  Although they knew it was not true, SANTIAGO, MORRIS and COSMAN agreed that COSMAN would pretend to have been injured by Moore at the beginning of the incident, in order to justify the excessive force used against Moore.  To substantiate that cover story, SANTIAGO struck COSMAN on the back with a baton, causing marks.  SCOTT took photographs of the marks to document the group’s cover story.  SCOTT, SANTIAGO, MORRIS, LOWERY, and COSMAN also agreed to make false reports supporting the cover story.  

Defendants KATHY SCOTT, GEORGE SANTIAGO JR., and CARSON MORRIS were taken into custody today.  SCOTT and SANTIAGO will be presented before United States Magistrate Judge Lisa Margaret Smith today in federal court in White Plains, New York.  MORRIS was arrested in Coconut Creek, Florida, and was presented today before a federal judge in Ft. Lauderdale, Florida.

SCOTT, 42, of Saugerties, New York, SANTIAGO, 34, of Fremont Center, New York, and MORRIS, 31, of Coconut Creek, Florida,  are each charged with one count of deprivation of rights under color of law, which carries a maximum penalty of 10 years in prison; one count of conspiracy to deprive civil rights, which carries a maximum penalty of 10 years in prison; one count of falsifying documents, which carries a maximum penalty of 20 years in prison; and one count of conspiring to falsify documents, which carries a maximum penalty of five years in prison.

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

Mr. Bharara praised the investigative work of the FBI, the Criminal Investigators at the United States Attorney’s Office, the Dutchess County District Attorney’s Office, and the New York State Department of Corrections and Community Supervision’s Office of Special Investigations.

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

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

 

---

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

 

Preet Bharara, the United States Attorney for the Southern District of New York, announced that DAVID S. YOUNGER, a neurologist with a private medical practice in Manhattan, was sentenced yesterday in Manhattan federal court to four months in prison for tax fraud in connection with his falsely classifying and deducting, in 2007 and 2008, over $580,000 in personal expenses – including golf and country club dues, property taxes for his home, and the purchase of a Mickey Mantle baseball card – as business expenses attributable to his medical professional corporation.  YOUNGER pled guilty on May 19, 2016, before United States District Judge Jed S. Rakoff, who also imposed sentence.

According to the Information and statements made in open court:

YOUNGER, a resident of Westchester County, is a board-certified neurologist engaged in private medical practice in Manhattan through the David S. Younger M.D., P.C. professional corporation (the “Younger P.C.”).  In 2007 and 2008, Younger filed both personal tax returns on behalf of himself and his wife, and corporate tax returns on behalf of the Younger P.C.  In 2007, YOUNGER used approximately $250,000 of corporate funds to pay personal expenses, and in 2008, YOUNGER used approximately $335,000 of corporate funds to pay personal expenses.  YOUGNER caused all of these expenses falsely to be recorded as business expenses such as medical supplies, office expenses, and professional fees in the books and records of the Younger P.C.  YOUNGER caused these expenses falsely to be deducted from income on tax returns of the Younger P.C., and YOUNGER also fraudulently omitted these personal expenses as income on his personal tax returns.

Among the personal expenses that YOUNGER falsely categorized as business expenses and deducted on his corporate tax returns in 2007 and 2008 are the following:  approximately $100,000 in fees to a private golf and country club, approximately $53,000 in property taxes for YOUGNER’s residence, a $4,300 placement fee for a nanny/housekeeper, approximately $17,000 for the construction of an electric gate at YOUNGER’s residence, $345 for a Mickey Mantle baseball card, approximately $26,000 for the restoration of a piano that was picked up from and delivered to YOUNGER’s residence, approximately $37,000 for a vendor to perform construction work at YOUNGER’s residence, approximately $18,000 for furniture delivered to YOUNGER’s residence, and at least approximately $20,000 of airfare for members of YOUNGER’s family.

*                      *                     *

In addition to his prison sentence, YOUNGER, 62, of Scarsdale, New York, was ordered to pay a fine of $25,000 and restitution to the IRS to be determined. 

Mr. Bharara 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.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today the guilty plea of New York City Correction Officer BYRON TAYLOR in connection with efforts to cover up the cause of the death of Ronald Spear, a pre-trial detainee at Rikers Island.  TAYLOR pled guilty to perjury and conspiracy to obstruct justice in connection with his actions following Spear’s death, after lying repeatedly about his actions and those of other correction officers to a federal grand jury investigating Spear’s death.  TAYLOR pled guilty before U.S. District Judge Loretta A. Preska.

Manhattan U.S. Attorney Preet Bharara said:  “As he admitted today, New York City Correction Officer Byron Taylor conspired to cover up the beating and death of Ronald Spear, a detainee at Rikers Island.  Taylor lied to a federal grand jury and together with others concocted a story that blamed the victim – who had serious physical ailments – for starting an altercation with correction officers.  This Office is committed to ensuring that incarcerated people are treated fairly and protected from abuse by the correction officers sworn to both guard and protect them.”       

According to the Indictment, Superseding Indictment, and Complaint[1] filed in this case, and statements made during the plea proceeding:

Rikers Island is a jail complex located in the Bronx, New York, and is maintained by the New York City Department of Correction.  At the time of his death, Ronald Spear was a pretrial detainee incarcerated on Rikers Island in the North Infirmary Command, a facility housing detainees who have serious physical ailments or conditions requiring medical supervision and intervention. Spear was suffering from end-stage renal disease, which required him to receive dialysis treatments, and wore a bracelet indicating that he was at “Risk of Fall.”  Spear typically walked with a cane.  

In the early morning hours of December 19, 2012, Spear left the housing area in the infirmity unit in an attempt to see the on-duty doctor.  Spear was stopped outside the doctor’s office by a correction officer.  When Spear was told the doctor was not available to see him at that time, an altercation between officers and Spear ensued, and Spear was pronounced dead at the scene shortly afterward.          

After Spear’s death, TAYLOR and others covered up the true cause of Spear’s death by concocting a false story that portrayed Spear as the aggressor.  Consistent with their agreement, correction officers filed false Use of Force reports with the Department of Correction and lied repeatedly to Department of Correction investigators, to the Bronx District Attorney and, in TAYLOR’S case, to a federal grand jury.        

*                      *                      *

BYRON TAYLOR, 32, of Brentwood, New York, pled guilty to one count of perjury, which carries a maximum sentence of five years in prison, and one count of conspiracy to obstruct justice, which carries a maximum sentence of 20 years in prison.    

TAYLOR is scheduled to be sentenced by Judge Preska on December 20, 2016.

ANTHONY TORRES, 60, of New Rochelle, New York, previously pled guilty to one count of conspiracy to obstruct justice and file false reports, which carries a maximum penalty of five years in prison, and one count of filing a false report, which carries a maximum sentence of 20 years in prison. 

The trial of a third defendant, BRIAN COLL, is scheduled to commence on October 18, 2016, in front of Judge Preska.  The charges against Brian Coll are merely accusations, and Coll is presumed innocent unless and until proven guilty.

Mr. Bharara praised the investigative work of the FBI and the Criminal Investigators at the United States Attorney’s Office.  Mr. Bharara also thanked 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 Brooke E. Cucinella, Jeannette A. Vargas, and Martin S. Bell are in charge of the prosecution.   

 

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[1] As to Brian Coll, as the introductory phrase signifies, the text of the Complaint, Indictment, and Superseding Indictment constitute only allegations and every fact described should be treated as an allegation.

Attorney General of the United States Loretta E. Lynch, Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Preet Bharara for the Southern District of New York, U.S. Attorney Paul J. Fishman for the District of New Jersey, Federal Bureau of Investigation (“FBI”) Director James B. Comey, Assistant Director-in-Charge William Sweeney of the FBI New York Field Office, Special Agent in Charge Timothy Gallagher of the FBI Newark Field Office and Commissioner of the Police Department for the City of New York (“NYPD”) James O’Neill announced that Ahmad Khan Rahami, a/k/a “Ahmad Rahimi,” has been charged in the United States District Court for the Southern District of New York and the United States District Court for the District of New Jersey, for conducting and attempting to conduct bombings in New York City and various locations in New Jersey on September 17, 2016, and September 18, 2016.  

Rahami will first be transported by the United States Marshals Service, pursuant to a writ of habeas corpus ad prosequendum, to the United States District Court for the Southern District of New York to face the charges filed in the Southern District of New York. More than 30 people were injured as a result of the detonation of a bomb in the Chelsea area of New York City.

Rahami, 28, of Elizabeth, New Jersey, is charged in a Complaint filed in the Southern District of New York with one count of using and attempting to use weapons of mass destruction, in violation of 18 U.S.C. § 2332a, which carries a maximum sentence of life imprisonment; 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 imprisonment; one count of destroying and attempting to destroy property by means of fire or explosive, in violation of 18 U.S.C. § 844(d), which carries a 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 weapons of mass destruction, in violation of 18 U.S.C. § 924(c), which carries a mandatory minimum consecutive sentence of 30 years in prison, all in connection with Rahami’s alleged detonation of an explosive device and efforts to detonate explosives in New York City.

Rahami is also charged in a Complaint filed in the District of New Jersey with two counts of using and attempting to use weapons of mass destruction, in violation of 18 U.S.C. § 2332a, which carries a maximum sentence of life imprisonment on each count; one count of bombing and attempting to bomb a place of public use and public transportation system, in violation of 18 U.S.C. § 2332f, which carries a maximum sentence of life imprisonment; one count of attempting to destroy property by means of fire or explosive, in violation of 18 U.S.C. § 844(i), which carries a maximum sentence of 20 years in prison; and two counts of using a destructive device in furtherance of a crime of violence, namely, the use and attempted use of weapons of mass destruction, in violation of 18 U.S.C. § 924(c), each count of which carries a mandatory minimum consecutive sentence of 30 years in prison and, if convicted of both counts, a mandatory sentence of life imprisonment, all in connection with Rahami’s alleged efforts to detonate explosives in Seaside Park, New Jersey, and Elizabeth, New Jersey.

Mr. Bharara and Mr. Fishman praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force, which principally consists of agents from the FBI and detectives from the NYPD, and the FBI’s New Jersey Joint Terrorism Task Force.  Mr. Bharara and Mr. Fishman also thanked the Counterterrorism Section of the Department of Justice’s National Security Division for its assistance.

The prosecution in the Southern District of New York is being handled by that Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Nicholas J. Lewin, Emil J. Bove III, Andrew J. DeFilippis, and Shawn G. Crowley are in charge of the prosecution, with assistance from Trial Attorney Brian Morgan of the National Security Division’s Counterterrorism Section.

The prosecution in the District of New Jersey is being handled by that Office’s National Security Unit.  Assistant U.S. Attorneys Dennis C. Carletta, Francisco J. Navarro, Margaret Ann Mahoney, and James M. Donnelly are in charge of the prosecution, with assistance from Trial Attorney Brian Morgan of the National Security Division’s Counterterrorism Section.

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ASHRAF LAKOU was sentenced to seven years in prison for bank fraud, credit card fraud, passport fraud, and aggravated identity theft charges in connection with orchestrating a scheme to use stolen victim identification information to make fraudulent credit card purchases and to defraud financial institutions by depositing counterfeit checks into accounts controlled by LAKOU and his co-conspirators.  Through these schemes, LAKOU and his co-conspirators attempted to defraud individuals, businesses, and financial institutions out of more than $3 million.  On April 12, 2016, LAKOU pled guilty before United States Magistrate Judge James L. Cott.  United States District Judge Victor Marrero imposed today’s sentence.  

Manhattan U.S. Attorney Preet Bharara said: “Ashraf Lakou engaged in all means of fraud, from bank and credit card fraud to identity theft and passport fraud.  Today, Lakou received a significant sentence matching the seriousness of his crimes.”

According to the criminal complaint, indictment, and other documents filed in Manhattan federal court, as well as statements made at related court proceedings:

From September 2013 through July 2015, LAKOU and his co-conspirators engaged in a scheme to defraud businesses and financial institutions by obtaining checks made out to legitimate businesses, opening fraudulent bank accounts in the names of the victim businesses, depositing the checks into the fraudulent accounts, and withdrawing funds from the fraudulent accounts.  LAKOU and his co-conspirators carried out this scheme by, among other means, stealing checks from the mail, submitting false documentation in connection with bank account applications, and forging the signatures of other actual persons.

From May 2014 through July 2015, LAKOU and his co-conspirators also engaged in a scheme to commit credit card fraud by using stolen credit card information to make fraudulent purchases of jewelry and other merchandise.  LAKOU and his co-conspirators carried out this credit card fraud scheme by, among other means, adding their own names as authorized users of pre-existing victim credit cards without the knowledge or consent of the victims and by submitting fraudulent applications for new credit card accounts in the names and identities of their victims.     

*                *                *

In addition to the prison term, LAKOU, 27, of Manhattan, was sentenced to three years of supervised release and was ordered to pay $557,894.50 in restitution, $557,894.50 in forfeiture, and a $600 special assessment. 

Zoheb Qamran, 29, of Manhattan, and Jessica Hattar, 26, of Manhattan, have been separately charged in connection with the bank fraud and credit card fraud schemes.  On May 19, 2016, Qamran pled guilty to credit card fraud, bank fraud, and aggravated identity theft charges before United States Magistrate Judge Barbara C. Moses.  On May 6, 2016, Hattar pled guilty to credit card fraud and aggravated identity theft charges before United States Magistrate Judge Sarah Netburn.

Mr. Bharara praised the outstanding efforts of Department of State, Diplomatic Security Service, in the investigation.

The case is being handled by the Office’s Money Laundering and Asset Forfeiture Unit.  Assistant United States Attorney Jonathan Cohen is in charge of the prosecution.

 

 

 

 

 

Preet Bharara, the United States Attorney for the Southern District of New York, announced that DIONYSIUS FIUMANO, a/k/a “D,” was sentenced in Manhattan federal court to 16 years in prison for helping to orchestrate a massive mortgage modification scheme through which he and his co-conspirators defrauded thousands of American homeowners out of a total of approximately $31 million.  FIUMANO was convicted on May 3, 2016, following a jury trial before U.S. District Court Judge John F. Keenan, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said:  “At a time when many homeowners needed help the most, Dionysius Fiumano and his co-defendants claimed to be the mortgage modification lifeline they needed.  But instead, Fiumano’s company preyed on and victimized the desperate homeowners, taking their money and doing nothing to actually help.  Thankfully, Fiumano and his co-defendants have been put out of the swindling business and put behind bars.”

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

FIUMANO was the general manager of sales at Vortex Financial Management, Inc., a/k/a Professional Marketing Group, a/k/a Professional Legal Network (“PMG”), an Irvine, California-based company that offered purported “mortgage modification” services.  Specifically, PMG convinced homeowners that it would work with their lenders to modify the terms of the homeowners’ mortgages to make them more affordable.  In that capacity, FIUMANO oversaw PMG’s sales staff of approximately 65 telemarketers and managers.

From November 2011 through May 2014, FIUMANO, while working with and through his sales staff, perpetrated a scheme to defraud homeowners in dire financial straits who were seeking relief through mortgage modifications.  Through a series of false and fraudulent representations, FIUMANO and his staff duped thousands of homeowners into paying thousands of dollars each in up-front fees in exchange for little or no mortgage modification service.  In total, through their scheme, FIUMANO and his co-conspirators obtained approximately $31 million from more than 30,000 victim homeowners throughout the United States.

As part of the scheme, PMG purchased thousands of “leads,” consisting of the names, addresses, and other contact information of homeowners who had fallen behind in making mortgage payments on their homes.  At FIUMANO’s direction, PMG sales staff then solicited these customers by email and by phone, and, using a series of fraudulent misrepresentations, tried to lure them into sending money to PMG for purported mortgage modifications.  FIUMANO, through his sales staff, regularly lied to homeowners, including by saying that (a) the homeowners were retaining a “law firm” and an “attorney” who would complete a mortgage modification application and negotiate aggressively on the homeowners’ behalf with banks to modify the terms of the homeowners’ mortgages; (b) the homeowners had been “pre-approved” or “pre-qualified” to receive a mortgage modification; (c) PMG employed underwriters who would calculate and guarantee the homeowners a new, modified rate and monthly mortgage payment; and (d) the up-front fees paid by the homeowners would be paid directly to the homeowners’ lenders, to the attorneys to pay their fees, or to pay the purported “hard costs” of the modification.  In truth and in fact, and as FIUMANO well knew, all of these representations were false.

*          *          *

In addition to his prison term, FIUMANO, 45, of Irvine, California, was sentenced to three years of supervised release, and ordered to pay forfeiture and restitution of $11,975,404.

Four other co-conspirators have also been convicted for their roles in the scheme:

Pedram Abghari, a/k/a “Ted Allen,” 39, of Irvine, California, pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison; one count of wire fraud, which carries a maximum sentence of 20 years in prison; and one count of misprision of a felony, which carries a maximum sentence of three years in prison. 

Justin Romano, 42, of Blue Point, New York, pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison, and one count of wire fraud, which carries a maximum sentence of 20 years in prison. 

Mahyar Mohases, a/k/a “Christian Mohases,” 34, of Irvine, California, pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison, and one count of wire fraud, which carries a maximum sentence of 20 years in prison. 

Johnny Linderman, a/k/a “Johnny Lamboy,” 55, of Irvine, California, pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison, and one count of wire fraud, which carries a maximum sentence of 20 years in prison. 

Abghari, Romano, Mohases, and Linderman are scheduled to be sentenced by Judge Keenan on November 21, 2016.

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. Bharara praised the investigative work of the Office of the Special Inspector General for the Troubled Asset Relief Program.

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that BALDEV TAL, a/k/a “David Tal,” was sentenced today by the U.S. District Judge Vincent Briccetti to four years in prison for conspiring to commit bank fraud.

Manhattan U.S. Attorney Bharara stated:  “Banks, credit unions, and small businesses in our community lost millions of dollars because of the fraud perpetrated by Baldev Tal and his co-conspirators.  Today, Tal has been sentenced to federal prison for his crime.”

According to the Information previously filed in White Plains federal court and public information: 

From at least in or about 2007 through in or about August 2015, Binder Tal, BALDEV TAL, a/k/a “David Tal,” a/k/a “Ashok Kumar,” Shariful Mintu, and their co-conspirators fraudulently obtained loans and lines of credit from banks, credit unions, and other lending institutions.  The defendants obtained the loans by providing materially false information to the lenders about the borrowers’ assets, including, but not limited to, false information about the borrowers’ employment and income.  Through their scheme, the defendants and their co-conspirators fraudulently obtained more than $2.5 million in proceeds in connection with dozens of loan applications and applications for lines of credit.  The vast majority of the loans and lines of credit went into default, and millions of dollars were not repaid.

As part of the scheme to defraud, the defendants used the proceeds to personally enrich themselves and their families.  Fraudulently obtained proceeds from the loans and lines of credit were used toward, among other things, (i) credit card debts for personal expenses of the defendants, (ii) debts arising from business expenses, and (iii) debts arising from other fraudulently obtained loans, to conceal the fraudulent nature of these loans.

In addition, the defendants and their co-conspirators also engaged in extensive efforts to perpetuate and conceal the fraudulent scheme.  These efforts included, but were not limited to, multiple members of the conspiracy acting as the borrowers for different loans, falsely claiming that the purpose of the loans was to purchase or finance used luxury automobiles, when in fact many of the automobiles were never purchased or leased by the defendants or their co-conspirators, and the loan proceeds were later distributed to other members of the conspiracy and to entities they controlled.

*                *                *

Previously, the Judge Briccetti sentenced Binder Tal to 30 months in prison and Shariful Mintu to one year and one day in prison.

Mr. Bharara praised the outstanding efforts of the United States Postal Inspection Service, the Internal Revenue Service, Criminal Investigation Division, and the New York State Police Auto Crimes Unit.

This case is being handled by the Office’s White Plains Division.  Assistant U.S. Attorney John P. Collins Jr. is in charge of the prosecution.    

 

16-247                                                                              ###

Preet Bharara, the 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 William J. Bratton, the Police Commissioner of the City of New York (“NYPD”), announced the arrests of 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,” DAWITT DYKES, a/k/a “Daweezy,” a/k/a “Dawezzy,” MARIA MAGDALENA ALMONTE, DARLENE DELEON, and GABRIELY M. JOSE, a/k/a “Gabriela Vuitton,” a/k/a “Gabby,” on charges of sex trafficking of minors, sex trafficking conspiracy, use of interstate commerce to promote illegal activity, enticement of a minor, and receipt and possession of child pornography.  The sixth defendant, VETTHYA ALCIUS, a/k/a “Theiya Cole,” remains at large.

All of the defendants arrested today will be presented today in Manhattan federal court before U.S. Magistrate Judge James L. Cott.

Manhattan U.S. Attorney Preet Bharara said:  “The defendants allegedly engaged in the sexual exploitation of minors as young as 13 years old.  Protecting children from the predatory conduct of adults who would sexually exploit them for profit is a critically important law enforcement mission to which our office and our law enforcement partners at the FBI and NYPD are committed.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “Human trafficking of minors can at times be overlooked by our society because some may believe the children involved have a choice.  But these children aren’t given a vote while the pimps peddle their bodies for money.  It’s a grotesque violation of the law that the FBI and our law enforcement partners won’t stop pursuing until every child is rescued.” 

Police Commissioner William J. Bratton said:  “The defendants trafficked kids for sex as young as the age of 13.  Today, those who, as alleged, took advantage of some of our society's youngest find themselves under arrest.  I commend the work of the NYPD investigators, FBI agents and prosecutors involved in this case who continue to work to protect this city’s children and bring to justice those who profit from the abuse of the city’s youngest and most vulnerable victims.”

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

Since at least 2015, MARIA SOLY ALMONTE, ALCIUS, DYKES, DELEON, and JOSE have helped operate 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.  Several of the defendants, including MARIA SOLY ALMONTE, MARIA MAGDALENA ALMONTE, and DELEON resided at apartments used for the brothel.  

MARIA SOLY ALMONTE served as the brothel’s proprietor.  ALCIUS, MARIA MAGDALENA ALMONTE, DELEON, and JOSE all were sex workers at the brothel, and DYKES provided security.  The brothel’s sex workers were required to pay MARIA SOLY ALMONTE a fee for prostitution services they rendered at the brothel.  The brothel advertised its services on the internet via Backpage.com and communicated with clients by telephone. 

The NYPD arrested DYKES and ALCIUS in 2015 at one of the brothel locations at which minor sex trafficking victims had worked.  The Complaint refers to five minor victims, all of whom provided prostitution services at one or more of the brothel’s locations.  ALCIUS and JOSE communicated with several of the minor victims about the brothel’s activities through social media, including setting up “dates.” 

*                *                *

The charges in the Complaint against MARIA SOLY ALMONTE, 32, ALCIUS, 22, DYKES, 24, MARIA MAGDALENA ALMONTE, 51, DELEON, 29, and JOSE, 20, are included in the chart 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 the judge.

Any individuals who believe they have information that may be relevant to the investigation should contact the Federal Bureau of Investigation at 1-212-384-1000 or https://tips.fbi.gov/.

Mr. Bharara 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 Dina McLeod and Stephanie Lake are in charge of the prosecution.

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

16-244                                                             ###

 

Count

Defendants

Charge

Mandatory Minimum Prison Term

Maximum Prison Term

One

MARIA SOLY ALMONTE, ALCIUS, DYKES, DELEON, and JOSE

Sex Trafficking Conspiracy

15 years

Life

Two

MARIA SOLY ALMONTE, ALCIUS, DYKES, DELEON, and JOSE

Sex Trafficking of a Minor

15 years

Life

Three

MARIA SOLY ALMONTE, ALCIUS, DYKES, MARIA MAGDALENA ALMONTE, DELEON, and JOSE

Use of Interstate Commerce to Promote Unlawful Activity

 

5 Years

Four

ALCIUS

Enticement of a Minor

10 years

Life

Five

ALCIUS

Receipt of Child Pornography

5 years

Life

Six

ALCIUS

Possession of Child Pornography

 

10 years

 

 

 

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

 

Preet Bharara, the 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 the arrest of RUDY MENA stemming from his possession and distribution of child pornography.  MENA was arrested at his apartment in the Bronx, New York, on September 9, 2016, and was presented today before United States Magistrate Judge James L. Cott in Manhattan federal court. 

Manhattan U.S. Attorney Preet Bharara said:  “Mena is charged with possessing and distributing child pornography, and in online chats with undercover agents, he allegedly boasted about molesting a young child.  Thanks to the dedicated work of law enforcement, Mena is under arrest and can no longer hurt other children.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “There is nothing more disturbing than an offender raping and sexually abusing a young child.  I must commend the super-human effort of investigators and prosecutors who are required to view and testify to the content of videos and photos depicting depravity well beyond anything that should exist in our society.”

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

Starting in July 2016, an individual who was later identified as MENA communicated through an online messaging application with an undercover detective assigned to the Metropolitan Police Department-FBI (“MPD-FBI”) Child Exploitation Task Force, based in Washington, D.C. (“UC-1”).  Through these exchanges, MENA, using the screen name “ragzbagz,” indicated to UC-1 that he was a 23-year-old New Yorker with access to a young child.  He allegedly sent UC-1 a video purportedly depicting that young child naked, and informed UC-1 in graphic detail that he had molested the child.  MENA also sent UC-1 multiple images of child pornography, including photographs of a prepubescent child’s vagina being touched and penetrated by an adult penis.

On September 9, 2016, MENA communicated online with a New York City-based undercover agent assigned to the FBI’s Crimes Against Children squad (“UC-2”).  MENA informed UC-2 that MENA was primarily interested in children aged 4 through 8.  MENA also sent UC-2 multiple photographs of an infant, at least one of which was taken from a media device that appeared to have been used by MENA.  Later that day, the FBI arrested MENA at his residence in the Bronx, New York. 

*                *                *

 MENA, 23, of the Bronx, is charged with one count of possession of child pornography, which carries a maximum sentence of 20 years in prison, and one count of distribution of child pornography, which carries a maximum sentence of 40 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.

Any individuals who believe they have information concerning MENA that may be relevant to the investigation should contact the FBI at 1-212-384-1000 or https://tips.fbi.gov/.

 Mr. Bharara praised the efforts of the MPD and FBI in this investigation.  He added that the investigation is continuing.

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

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

 

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

Preet Bharara, United States Attorney for the Southern District of New York, and Andriana Vamvakas, District Director of the Office of Labor-Management Standards, U.S. Department of Labor (“OLMS”), announced today that a grand jury sitting in White Plains has returned an Indictment charging BRIAN W. SCOTT with embezzlement of union funds, mail fraud, and making false statements to the Department of Labor.

Manhattan U.S. Attorney Preet Bharara said:  “Brian Scott allegedly abused the trust placed in him by the hard-working men and women of Local 503 by stealing the union’s money and spending it on himself.  I thank the Department of Labor’s Office of Labor-Management Standards for their work in this investigation.” 

OLMS District Director Andriana Vamvakas said:  “Embezzlement of union funds doesn’t only violate the law, it also betrays the trust of the union membership who rightfully expect their officials to protect and safeguard their union’s funds and assets.  We thank U.S. Attorney Bharara’s office for its work on this case and look forward to working again with it and other agencies to root out such corruption.”

The Indictment[1] alleges that SCOTT, the former president of Local 503 of the International Brotherhood of Electrical Workers in Monroe, New York, embezzled more than $63,000 from Local 503 between July 2008 and February 2012.  According to court filings, SCOTT made unauthorized charges to Local 503’s credit cards for personal items such as computers and other electronic devices, and travel, dining, and entertainment expenses.  SCOTT also charged fees for a bail bond to Local 503’s credit card following his arrest on unrelated charges in 2012.  In addition, SCOTT wrote checks to himself from Local 503’s checking account.  SCOTT claimed the checks were reimbursement for a clothing allowance and unused vacation time, neither of which was permitted under Local 503’s policies.

SCOTT, 46, of Miami Beach, Florida, faces a maximum sentence of 20 years in prison on the mail fraud count, five years in prison on the embezzlement count, and one year in prison on the false statement count.

The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentence imposed on the defendant will be determined by the Court.

Mr. Bharara praised the investigative work of the Department of Labor’s Office of Labor-Management Standards.  

This prosecution is being handled by the Office’s White Plains Division.  Assistant U.S. Attorneys Maurene Comey and James McMahon are in charge of the prosecution.

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

 

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that FRANK HARRISON was sentenced yesterday to 18 months in prison for defrauding the United States Department of Education of over $1 million by submitting false documents in connection with his requests for financial aid as a graduate student.  HARRISON pled guilty on February 19, 2016, before U.S. Magistrate Judge Ronald L. Ellis.  Yesterday’s sentence was imposed by U.S. District Judge Richard M. Berman.

According to the allegations contained in the indictment to which HARRISON pled guilty, other documents filed in Manhattan federal court, and statements made in court proceedings:

From at least March 2008 up to and including August 2013, HARRISON, who was a graduate student at a university in New York City (the “University”), submitted documentation to the University in order to obtain additional financial aid that was above the standard cost of attendance.  Specifically, HARRISON submitted false letters and other documents purporting to be from doctors, his landlord, and a University professor, which allowed HARRISON to receive more than $1.3 million in federal student loans.

*                *                *

In addition to his prison term, HARRISON, 48, of New York, New York, was sentenced to three years of supervised release, and ordered to pay restitution in the amount of $1,170,694.

Mr. Bharara praised the investigative work of the Department of Education.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Katherine C. Reilly and Jason M. Swergold are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an Indictment in Manhattan federal court charging BRIAN BLOCK, the former chief financial officer of the publicly traded real estate investment trust (“REIT”) formerly known as American Realty Capital Partners (“ARCP”).  BLOCK was charged with fraudulently 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 arrested on conspiracy, securities fraud, and other charges this morning at his home in Hatfield, Pennsylvania.  The case is assigned to U.S. District Judge J. Paul Oetken.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Brian Block knowingly misled the investing public through material misrepresentations about a key metric that was used to evaluate ARCP’s financial performance.  All market investors are entitled to be told the truth from publicly traded companies when those investors are making decisions about where to invest their funds.  And when investors are lied to about material information, as is alleged to have happened here, the perpetrators need to be investigated and prosecuted.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said: “Inflating the performance of publicly traded companies places investors at a disadvantage. Block overstated adjusted funds from operations by millions of dollars and underestimated the consequences he would face as a result. Today’s charges outline the FBI’s continued determination to root out those who unlawfully interfere with the principles of supply and demand in free-market trading.”

According to the Indictment[1] unsealed today 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, BRIAN 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 or about 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 falsely inflated.

On or about 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, BRIAN 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% 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, BRIAN 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.

*                *                *           

BRIAN BLOCK, 44, of Hatfield, Pennsylvania, was charged in the Indictment with one count of conspiracy to commit securities fraud and other offenses (Count One), one count of securities fraud (Count Two), two counts of making false filings with the SEC (Counts Three and Four), and two counts of submitting false certifications along with required filings with the SEC (Counts Five and Six).  The securities fraud, false filings charges, and false certification charges each carry a maximum prison term of 20 years.  The charge of conspiracy carries a maximum prison term of five years.  

Lisa McAlister, 52, of Arlington, Massachusetts, pled guilty on June 29, 2016, before U.S. District Judge Alvin K. Hellerstein to one count of conspiracy to commit securities fraud and other offenses, one count of securities fraud, one count of making false filings with the SEC, and one count of making false statements in a matter within the jurisdiction of the executive branch of the United States Government.  The securities fraud and false filings charges each carry a maximum prison term of 20 years.  The conspiracy and false statements charges each carry a maximum prison term of five years. 

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

Mr. Bharara praised the investigative work of the FBI and also thanked the Securities and Exchange Commission, which has brought a civil action against the defendants.

The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit www.StopFraud.gov.

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

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

 

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that EMANUEL COHEN, the former chief executive officer of a Florida-based wholesaler and distributor of beauty products (the “Company”), was sentenced today to 27 months in prison for orchestrating a fraudulent scheme to obtain millions of dollars in loans by making false statements and providing fraudulent documents to two commercial banks based in New York (the “Banks”).  COHEN pled guilty on June 23, 2015, before U.S. Magistrate Judge Sarah Netburn.  Today’s sentence was imposed by U.S. District Judge Lewis A. Kaplan.

Manhattan U.S. Attorney Preet Bharara said:  “Emanuel Cohen and his co-conspirators blatantly lied about their company’s financial condition to obtain millions of dollars in loans, which the company later defaulted on.  I want to thank the FBI for their excellent investigative work on this case.”

According to the allegations contained in the information to which COHEN pled guilty, other documents filed in Manhattan federal court, and statements made in court proceedings:

From 2007 through March 2014, COHEN and others engaged in a scheme to fraudulently induce the Banks to lend millions of dollars to the Company.  Among other things, COHEN knowingly made false representations to the Banks, concealed material facts from the Banks, and submitted false and fraudulent documents to the Banks, including fabricated borrowing base certificates.  Specifically, COHEN falsely inflated the Company’s sales and accounts receivable on borrowing base certificates that were provided to the Banks pursuant to loan agreements between the Banks and the Company.  COHEN used those falsely inflated sales and accounts receivable to mislead the Banks about the Company’s true financial performance so that the Company could secure and draw down millions of dollars in loans from the Banks that the Company would not otherwise have been entitled to receive. 

In March 2014, the Company defaulted on the loans at issue.  At that time, the outstanding balance on the loans was more than $4.8 million.

*                *                *

In addition to his prison term, COHEN, 73, of Boca Raton, Florida, was sentenced to three years of supervised release, and ordered to pay forfeiture and restitution, both in the amount of $4,888,460.35.

Three other defendants in this matter, Jay Sosonko, the chief financial officer of the Company, Thomas Thompson, the sales manager of the Company, and Marc Wieselthier, the Company’s outside accountant, pled guilty for their roles in the fraudulent scheme.  Sosonko, Thompson, and Wieselthier were sentenced to 16 months, 21 days, and 27 months in prison, respectively. 

Mr. Bharara praised the investigative work of the FBI.

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

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Preet Bharara, the United States Attorney for the Southern District of New York and James J. Hunt, Special Agent in Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), announced today that a federal grand jury has returned an Indictment charging ALDINTON VALERIO and ALEXIS OVALLE-LOPEZ with trafficking heroin and fentanyl in and around the Bronx, New York.  VALERIO was also charged with possessing a firearm in furtherance of the narcotics distribution conspiracy.  The defendants were arrested in August 2016 on the same charges.  The case has been assigned to United States District Judge Katherine B. Forrest.   

Manhattan U.S. Attorney Preet Bharara said:  “Fentanyl and heroin are incredibly dangerous substances that have wreaked havoc in our communities.  The sale of heroin laced with fentanyl is particularly alarming, since fentanyl is many times more powerful than heroin.  We will continue to work tirelessly to prosecute anyone who seeks to profit from these dangerous drugs.”

DEA Special Agent in Charge James J. Hunt said:  “The combination of heroin and fentanyl has elevated the opioid threat to the most dangerous level yet.  Drug traffickers have hijacked fentanyl’s legitimate medical purpose resulting in unprecedented numbers of fentanyl-related overdoses and deaths.  It is imperative to warn our communities that these bathtub chemists are selling this deadly combination to unsuspecting users, as well as to those seeking the ultimate fatal high.” 

According to allegations contained in the Indictment, the underlying criminal Complaint filed on August 12, 2016, and statements made in court proceedings[1]:

From at least in or about July 2016 up to and including in or about August 2016, the defendants sold narcotics to a confidential source on multiple occasions.  During each of those transactions, VALERIO represented to the source that he was selling heroin.  However, when the narcotics were submitted to a DEA laboratory for testing, a chemical analysis revealed that, for at least two of the transactions, the narcotics were actually fentanyl – a drug that can be 50 times more powerful than heroin.

The defendants were arrested on August 11, 2016.  Following their arrest, DEA agents searched an apartment used by VALERIO and OVALLE-LOPEZ.  DEA agents seized approximately seven kilograms of fentanyl, as well as approximately two kilograms of heroin laced with fentanyl, from the apartment.  In addition, DEA agents seized two firearms from that apartment and approximately $100,000 in cash found in another apartment used by VALERIO.  

Mr. Bharara praised the outstanding investigative work of the DEA.

This prosecution is being handled by the Office’s Narcotics Unit.  Assistant U.S. Attorneys Gina Castellano, Jordan Estes, and Jason A. Richman are in charge of the prosecution.

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

 

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[1] The charges contained in the Complaint and Indictment set forth herein constitute only allegations, and every fact described should be treated as an allegation.

Preet Bharara, United States Attorney for the Southern District of New York, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and William J. Bratton, Commissioner of the New York City Police Department (“NYPD”), announced the filing of a federal criminal complaint charging SHIMEN LIEBOWITZ and AHARON GOLDBERG with conspiring to kidnap and murder an individual in order to obtain a religious divorce for that individual’s wife.  LIEBOWITZ and GOLDBERG were arrested yesterday in Central Valley, New York, while meeting to plan the kidnapping and murder.  They will be presented later today before Magistrate Judge Debra Freeman in federal court in Manhattan.

Manhattan U.S. Attorney Preet Bharara said:  “The defendants are charged with a chilling plot to kidnap and murder the intended victim.  Over a period of months, the Complaint alleges, they met repeatedly to plan the kidnapping and to pay more than $55,000 to an individual they believed would carry it out.  Thanks to the exemplary work of our partners at the FBI and NYPD, Liebowitz and Goldberg are now in custody.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “As if the plan to kidnap the victim and force him to divorce his wife in this alleged conspiracy wasn’t bad enough, the plotters allegedly decided halfway through the arrangement to go a step further and add murder to the list of their planned crimes.  Our country protects freedom of religious beliefs and practices, but no one is allowed to plot a kidnapping and murder regardless of their motivation.”

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

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 early July, an individual (the “CS”) contacted the FBI and reported that the CS had been recruited by LIEBOWITZ and GOLDBERG to kidnap a particular individual (the “Intended Victim”) in order to force the Intended Victim to issue a get to his wife.  Like the CS, GOLDBERG and LIEBOWITZ are orthodox Jews.  LIEBOWITZ is a member of the Satmar community in Kiryas Joel, New York (a village in Orange County, New York), and GOLDBERG is an Israel-based rabbi who also maintains a position of prominence in Kiryas Joel.

The CS provided the FBI with information about a conversation he had with LIEBOWITZ and GOLDBERG on or about July 6 or July 7.  During the meeting, which was recorded, the CS feigned interest in participating in the kidnapping.  He, GOLDBERG, and LIEBOWITZ discussed how such a kidnapping might be carried out, including the possibility of luring the Intended Victim to Pennsylvania in order to kidnap him, torture him, and force him to give the get.  The CS, GOLDBERG, and LIEBOWITZ also discussed the possibility of kidnapping the Intended Victim in Ukraine, where the Intended Victim planned to travel in late September to celebrate the Jewish New Year.  GOLDBERG and LIEBOWITZ agreed to advance the CS $25,000 to assist in efforts to plan the kidnapping.  According to the CS, 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.

*              *             *  

LIEBOWITZ, 25, of Monroe, New York, and GOLDBERG, 55, of Bnei Brak, Israel, are charged with one count each of conspiracy to commit kidnapping, which carries a maximum potential sentence of life in prison, and one count each of conspiracy to commit murder for hire, which carries a maximum potential sentence of 10 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge. 

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

Mr. Bharara 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.    

 

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

Preet Bharara, the United States Attorney for the Southern District of New York announced that WILLIAM J. WELLS was sentenced today in Manhattan federal court to 46 months in prison for securities and wire fraud charges stemming from his scheme to defraud more than 30 investors, including friends, colleagues, and family, of more than $1.5 million through a Ponzi-like scheme, over the course of nearly six years until his arrest in October 2015.  WELLS was arrested on October 1, 2015, and pled guilty on March 18, 2016, before United States Magistrate Judge Henry B. Pitman.  Today’s sentencing was presided over by United States District Judge Kimba M. Wood.

U.S. Attorney Preet Bharara said: “William Wells repeatedly lied to his investors, falsely claiming positive returns when his trading was in fact calamitous.  Buttressing his lies with fake account statements, he used investor money to pay personal expenses and to pay back other investors.  For depriving his clients of their money – and sometimes their life savings – Wells has been sentenced to a substantial term in prison.”

Among other false and misleading statements, WELLS lied to prospective and existing investors by representing, including in fictitious account statements prepared by WELLS, that he had achieved consistently positive trading returns.  In fact, WELLS’s trading was remarkably unsuccessful and he realized trading losses every year from 2009 until his arrest in October 2015.  Of the money WELLS did not lose in securities trading, WELLS routinely converted investor funds to his own use to pay personal expenses and used new investor funds to pay back other investors in a Ponzi-like fashion. 

Many of WELLS’s victims, several of whom submitted letters to the Court or spoke today at WELLS’s sentencing, lost their life savings to WELLS’s scheme, including money saved for retirement, medical bills, tuition, or wedding costs, or to purchase a family home.           

According to the Complaint, the Indictment, and statements made in open court, including at the sentencing proceeding today:

From September 2009 through the present, WELLS, through his investment firm Promitor Capital LLC (“Promitor Capital”), engaged in a fraudulent scheme to obtain investments by falsely representing that he had achieved consistently positive trading returns in the U.S. equity markets, including through the successful use of options to hedge risk.  In truth, WELLS’s trading was remarkably unsuccessful.  Between 2009 and the present, WELLS realized trading losses every year and, in total, trading losses in excess of $500,000.  In fact, as of September 2015, Promitor Capital had less than $1,000 under management. 

In connection with the scheme, WELLS made a series of false and misleading representations to investors, including: (a) that WELLS’s trading was generating consistently positive returns when, in fact, his trading was consistently unsuccessful; (b) that investors were invested in certain stocks at certain times when, in fact, none of the accounts held by Promitor or WELLS held those stocks; and (c) that WELLS had created so-called sub-accounts for clients, for which WELLS purported to execute individualized trading strategies, when, in fact, no such sub-accounts were ever funded.  In addition to false and misleading representations made orally and in writing, WELLS also generated wholly fictitious account statements that he provided to his clients. 

As a result of these misrepresentations, WELLS obtained more than $1.5 million in investments from more than 30 investors, many of whom were friends, colleagues, or family members. Of the money he did not lose in securities trading, WELLS routinely converted investor funds to his own use in the form of cash withdrawals and to pay personal expenses, including more than $500,000 for, among other things, credit card bills, payments for WELLS’s automobile, and for private school tuition.  In addition, to hide his trading losses and continue to fund his personal lifestyle, WELLS used new investor funds to pay back other investors in a Ponzi-like fashion.  In total, WELLS distributed less than approximately $500,000 back to investors. 

*                      *                      *

In addition to the 46-month prison sentence, WELLS, 43, formerly of Manhattan and New Jersey, now living in Valley Cottage, New York, was sentenced to three years of supervised release.  The Court further ordered WELLS to forfeit the proceeds of the scheme and to pay restitution in an amount to be determined.

Mr. Bharara praised the work of the Federal Bureau of Investigation and thanked the U.S. Securities and Exchange Commission for their assistance with the investigation.  

The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations.  Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants.  For more information on the task force, please visit www.StopFraud.gov.      

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that TERRANCE WILLIAMS, a/k/a “TA,” pled guilty yesterday before U.S. District Judge Valerie E. Caproni to his involvement in a racketeering conspiracy for which he participated in an attempted murder, a robbery, and crack cocaine trafficking in connection with his membership in the “Young Gunnaz” (“YGz”) violent street gang, which operated in and around several housing developments in the South Bronx. 

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

WILLIAMS was a member of the Bronx-based street gang known as the YGz, a leading member of a set of the YGz based in Maria Lopez Plaza in the Bronx, and committed acts of violence with other YGz gang members to further the interests of the gang.  From 2005 to 2016, members and associates of the YGz enriched themselves by committing robberies and by selling drugs, such as crack cocaine, heroin, and marijuana, and committed acts of violence, including murder and attempted murder, against various people, including rival gang members, rival drug traffickers, and innocent bystanders.  As part of this enterprise, members and associates of the YGz killed and attempted to kill other individuals. 

As part of his involvement in the YGz gang, WILLIAMS participated in acts of violence and crack cocaine trafficking with other YGz members.  First, on November 22, 2010, WILLIAMS and other YGz members participated in a shootout with members of a rival gang, the Courtlandt Avenue Crew, near East 163rd Street and Park Avenue in the Bronx.  During the shootout, WILLIAMS fired gunshots at and tried to kill the rival gang members, a rival Courtlandt Avenue Crew member was shot and nearly killed, and two others were shot and injured.  Second, on January 24, 2011, WILLIAMS and other YGz members robbed and assaulted a rival Courtlandt Avenue Crew associate inside a bodega on Courtlandt Avenue in the Bronx.  Third, WILLIAMS sold crack cocaine with other YGz members near Maria Lopez Plaza in the Bronx during his participation in the gang.

*                      *                     *

WILLIAMS, 24, of the Bronx, New York, pled guilty to one count of racketeering conspiracy, which carries a maximum sentence of 20 years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  WILLIAMS will be sentenced before U.S. District Judge Valerie E. Caproni on November 29, 2016.

Mr. Bharara praised the work of ATF, the DEA, and the NYPD in the investigation of this case.   He also thanked the Bronx County 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, James McDonald, Andrew Adams, and Dina McLeod are in charge of the prosecution.

 

16-235                                                                                 ###

Preet Bharara, the United States Attorney for the Southern District of New York, William G. Squires Jr., Special Agent-in-Charge, United States Department of Agriculture (“USDA”), Office of Inspector General, and Angel M. Melendez, the Special Agent in Charge of the U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), New York (“HSI”), announced the arrest today of YOUSIF MOSLEH, an individual associated with two retail food stores in Manhattan, New York, who engaged in sales of synthetic cannabinoids in exchange for benefits issued by the Supplemental Nutrition Assistance Program (“SNAP”), and who conspired with others to sell other items not eligible for sale under SNAP in exchange for SNAP benefits.  MOSLEH was arrested this afternoon and is expected to be presented before Magistrate Judge James C. Francis IV this afternoon.

Manhattan U.S. Attorney Preet Bharara said:  “Yousif Mosleh is charged with peddling dangerous synthetic drugs in New York City neighborhoods and funding his drug sales by abusing a system created to assist the most vulnerable in our society.  Thanks to the dedicated agents of the USDA and HSI, Mosleh can no longer profit from this illegal scheme.”     

Special Agent-in-Charge William G. Squires Jr. stated:  “The Supplemental Nutrition Assistance Program was created to provide food and nutrition to those who truly need this assistance.  Those who are involved in fraud and abuse of SNAP and other USDA programs will be aggressively pursued by our office.  Our joint investigation with the U.S. Immigration and Customs Enforcement, Homeland Security Investigations, and the New York City Sheriff’s Office has brought to justice an individual who sought to profit from the SNAP program through illegal schemes. The USDA Office of Inspector General will continue to dedicate resources and work with our law enforcement partners in order to protect the integrity of these programs and to prosecute those who commit fraud.”

Special Agent in Charge Angel M. Melendez said:  “SNAP was created to help low income families put food on their tables. Instead, Mosleh allegedly used SNAP to feed drug addicts a hazardous synthetic narcotic.  K2 poses a public safety risk, especially for our teens and young adults.  Mosleh’s arrest is a testament to HSI’s commitment to keep illegal drugs off our streets.” 

The following allegations are based on the unsealed Complaint filed today in Manhattan federal court[1]:

Congress established the Federal Food Stamp Program in 1977 for the purpose of alleviating hunger and malnutrition.  In 2008, the program was renamed the Supplemental Nutrition Assistance Program (“SNAP” or “the Program”).  The Program uses tax dollars to subsidize low-income households, helping low-income individuals and families to maintain more nutritious diets by increasing the food purchasing power of eligible households.  According to USDA regulations, items such as cigarettes, hot foods for immediate consumption, and controlled substances, among other items, are ineligible for purchase with SNAP benefits (“Ineligible Items”).      

MOSLEH’s Knowledge of and Participation in the SNAP Program

According to USDA records, a deli located on Lexington Avenue East 124th Street and East 125th Street in Manhattan, New York (“Deli-1”), received a license to accept and redeem SNAP benefits in December 2007.  MOSLEH, the defendant, frequently works behind the counter at Deli-1, operating the cash register and the electronic benefits transfer (EBT) terminal.

In the immediate vicinity of Deli-1 is another deli (“Deli-2”), owned and operated by MOSLEH.  According to USDA records, MOSLEH submitted an application for a license for Deli-2 to accept and redeem SNAP benefits in December 2013, and Deli-2 received such license in June 2014. 

MOSLEH’s Sales of K2 for SNAP Benefits

“K2” is a street name applied to a synthetic cannabinoid, in green leafy form, that is intended to mimic the effects of marijuana.  K2 frequently contains synthetic cannabinoids AB-CHMINACA and XLR-11.  XLR-11 was classified as a Schedule I controlled substance on May 16, 2013, and AB-CHMINACA was classified as a Schedule I controlled substance on January 30, 2015.

As part of this investigation, the USDA has worked with two cooperating sources (“CS-1” and “CS-2”), who assisted the USDA in making controlled purchases of K2 and other Ineligible Items, which were video recorded covertly.  Between June 29, 2015, and July 30, 2015, CS-1, at the direction of law enforcement, used SNAP benefits at Deli-1 to purchase multiple packages of synthetic cannabinoids directly from MOSLEH.  These packages contained XLR-11 and AB-CHMINACA, based on laboratory testing. 

Additionally, between July 23, 2015, and July 30, 2015, law enforcement recovered more than 2,000 packages of what appeared to be K2 from Deli-1. 

*                      *                     *

MOSLEH, 26, of Manhattan, is charged with two counts of distribution and possession with intent to distribute a controlled substance, each carrying a maximum sentence of 20 years in prison; and one count of conspiracy to violate the statutes and regulations governing the Supplemental Nutrition Assistance Program, which carries a maximum sentence of 5 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. Bharara praised the investigative work of the USDA and HSI.  Mr. Bharara also thanked the New York City Sheriff’s Office, U.S. Immigration and Customs Enforcement, and the New York City Police Department, for their critical support and cooperation throughout the investigation.

The prosecution is being handled by the Office’s Narcotics Unit.  Assistant U.S. Attorney Amanda L. Houle is in charge of the prosecution.

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

 

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

Preet Bharara, the United States Attorney for the Southern District of New York, George Ennis, Acting Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), George P. Beach II, Superintendent of the New York State Police, Ramon Bethencourt, Chief of the City of Middletown Police Department, and Carl E. DuBois, the Orange County Sherriff, today announced the unsealing of a Superseding Indictment charging fifteen defendants with trafficking cocaine and crack cocaine in and around Orange County, New York.  One of the defendants is also charged with possessing a firearm in furtherance of the narcotics distribution conspiracy.

U.S. Attorney Preet Bharara said: “As alleged, the fifteen men and women charged today were part of a drug distribution network that peddled large quantities of powder and crack cocaine in and around Orange County.  The residents of Orange County are entitled to live and work free from the ills of narcotics trafficking.  Our joint effort with the FBI, the City of Middletown Police Department, the Orange County Sherriff’s Office, and the New York State Police brings us closer to that goal.”

FBI Acting Assistant Director-in-Charge George Ennis said: “When the public hears about the FBI Hudson Valley Safe Streets Task Force rounding up a group of alleged drug dealers and violent criminals, it may almost sound redundant.  When we take out the alleged leaders of one conspiracy, unfortunately there are more people waiting to take over.  However, our determination to stop the drug trade from having an impact on communities won’t go away.  The next group waiting to take over should take this case as a warning that their actions will be met with severe consequences.” 

New York State Police Superintendent George P. Beach II said: “Through close collaboration with our federal and local partners, we have dismantled a dangerous cocaine trafficking operation that was allegedly supplying illegal drugs to a large area of the Hudson Valley. I commend our members and those from the involved law enforcement agencies for their hard work in uncovering this operation, and preventing more illegal drugs from reaching our streets.”

City of Middletown Police Chief Ramon Bethencourt said: “Law enforcement agencies continue to work together to eliminate narcotics traffickers and it is these collaborative efforts that lead to successful operations such as this investigation. The scourge of narcotics and narcotics trafficking cannot and will not maintain a foothold in the City of Middletown. The City of Middletown Police Department will continue to work with our law enforcement partners to rid our community of these dangerous criminals who allegedly prey on members of society when they are at their very weakest.”

Orange County Sherriff Carl E. DuBois said: “I want to thank the members of local, state, and federal law enforcement whose tireless investigative work made this day possible.  I also want to thank U.S. Attorney Preet Bharara and his team of prosecutors for their commitment to make Orange County a safer place in helping to eradicate drugs from our communities.”

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

From at least in or about 2015, up to and including in or about August 2016, in the Southern District of New York and elsewhere, JUAN BENIQUEZ, a/k/a “Johnny,” JUSTIN BENIQUEZ, OSCAR BORIA, JR., ELIJAH CABRERA, WILLIS CALDWELL, a/k/a “Fatts,” ANTHONY CRUM, DEREK DEGROAT, ANTHONY FIELDS, a/k/a “Tone,” DENISE FLORES-JACOBSON, COLLYER GOODMAN, a/k/a “West,” ALAN KING, a/k/a “Killa Grip,” LIEUNIGEL LEWIS, a/k/a “Gucci Louie,” DURANN ROLLINS, a/k/a “Dee,” DAMON WHEELER, a/k/a “Ross,” and LINDA WILLIAMS conspired to sell cocaine and crack cocaine.  Specifically, the defendants JUAN BENIQUEZ, JUSTIN BENIQUEZ, DEGROAT, FIELDS, FLORES-JACOBSON, KING, LEWIS, ROLLINS, and LINDA WILLIAMS conspired to sell 280 grams or more of crack cocaine, and the defendants JUAN BENIQUEZ, BORIA, CABRERA, CALDWELL, CRUM, GOODMAN, and WHEELER conspired to sell five kilograms or more of cocaine.  During the course of the conspiracy, law enforcement officers observed several defendants participate in the sale of cocaine and crack cocaine to confidential informants working with law enforcement.  Law enforcement officers using court-authorized wiretaps also intercepted numerous communications in which the defendants discussed trafficking cocaine and crack and arranged sales of both narcotics. 

The Superseding Indictment also charges JUAN BENIQUEZ with possessing a firearm in furtherance of the narcotics conspiracy.

A chart containing the names of the defendants, and the charges and maximum penalties they face, is attached.         

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

*              *             *

Thirteen defendants were taken into federal custody this morning.  Oscar Boria, Jr., had previously been taken into custody.  These defendants will be presented in White Plains federal court today before U.S. Magistrate Judge Lisa Margaret Smith.  This case is assigned to U.S. District Judge Cathy Seibel.  Derek Degroat remains at large.

Mr. Bharara praised the outstanding investigative work of the FBI, the City of Middletown Police Department, the Orange County Sherriff’s Office, and the New York State Police. 

These cases are being handled by the Office’s White Plains Division.  Assistant United States Attorney Anden Chow is in charge of the prosecutions.

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

 

CHARGE

DEFENDANT

MAXIMUM PENALTIES

Narcotics Conspiracy – Crack Cocaine

(Conspiracy to distribute and possess with intent to distribute crack cocaine, in violation of 21 U.S.C. §§ 846, 841(a)(1) & 841(b)(1)(A))

JUAN BENIQUEZ, a/k/a “Johnny”

Life in prison

 

Mandatory minimum: 10 years in prison

JUSTIN BENIQUEZ

DEREK DEGROAT

ANTHONY FIELDS, a/k/a “Tone”

DENISE FLORES-JACOBSON

ALAN KING, a/k/a “Killa Grip”

LIEUNIGEL LEWIS, a/k/a “Gucci Louie”

DURANN ROLLINS, a/k/a “Dee”

LINDA WILLIAMS

Narcotics Conspiracy – Cocaine

(Conspiracy to distribute and possess with intent to distribute cocaine, in violation of 21 U.S.C. §§ 846, 841(a)(1) & 841(b)(1)(A))

JUAN BENIQUEZ, a/k/a “Johnny”

Life in prison

Mandatory minimum: 10 years in prison

OSCAR BORIA, JR.

ELIJAH CABRERA

WILLIS CALDWELL, a/k/a “Fatts”

ANTHONY CRUM

COLLYER GOODMAN, a/k/a “West”

DAMON WHEELER, a/k/a “Ross”

Firearms Possession

(Possession of a firearm in furtherance of a drug trafficking offense, in violation of 18 U.S.C. § 924(c))

JUAN BENIQUEZ, a/k/a “Johnny”

Life in prison

Mandatory minimum: 5 years in prison

 

 

 

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that MICHAEL BROWN, a/k/a “Mighty,” pled guilty late last Friday to engaging in a racketeering conspiracy that involved his participation in two attempted murders in connection with his membership in a racketeering enterprise known as the “Young Gunnaz” (“YGz”), a violent street gang that operated in and around several housing developments in the South Bronx.  As part of his guilty plea, BROWN admitted to participating in: (a) an attempted murder of a member of the rival “Murda Moore Gangstas” gang (“MMG”) in which a lower-ranking YGz member shot and seriously injured a rival MMG member at the direction of BROWN, and (b) an attempted murder of members of the rival Lyman Place gang (“LPG”) in which BROWN fired gunshots that struck and injured at least two bystanders.  BROWN faces a maximum term of 20 years in prison, and will be sentenced before United States District Judge Valerie E. Caproni on November 28, 2016.

Manhattan U.S. Attorney Preet Bharara said: “The YGz gang turned the Bronx neighborhoods in which it operated into a war zone – terrorizing residents and innocent bystanders with violence stemming from its feuds with rivals, and flooding the streets with drugs.  Michael Brown’s guilty plea shows that law enforcement won’t give up until the perpetrators of gang violence are brought to justice.”

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

BROWN was a member of the Bronx-based street gang known as the YGz, a leading member of a set of the YGz based in the Mitchell Houses in the Bronx, and committed acts of violence with other gang members to further the interests of the gang.  From at least 2005 to June 2016, members and associates of the YGz enriched themselves by selling drugs, such as “crack” cocaine, heroin, and marijuana, and committed acts of violence, including murder and attempted murder, against various people, including rival gang members, rival drug traffickers, and innocent bystanders.  As part of this enterprise, members and associates of the YGz killed and attempted to kill other individuals. 

As part of his involvement in the YGz gang, BROWN participated in at least two attempted murders of members of rival gangs.  First, in or about 2008, BROWN himself fired gunshots at and attempted to murder rival LPG gang members and ended up hitting and injuring two bystanders in the vicinity of Lyman Place in the Bronx.  Second, on or about November 15, 2011, at the direction of BROWN, a lower-ranking member of the Millbrook set of the YGz shot and seriously injured a rival MMG gang member near the Moore Houses in the Bronx in an attempt to kill the victim of this shooting. 

*                      *                     *

Mr. Bharara praised the work of the Bureau of Alcohol, Tobacco, Firearms and Explosives, the Drug Enforcement Administration, and the New York City Police Department.   He also thanked the Bronx County 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, James McDonald, Andrew Adams, and Dina McLeod are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, Charlie Patterson, Acting Special Agent in Charge of the New York Division of the United States Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), and William J. Bratton, Commissioner of the New York City Police Department (“NYPD”), announced that ANTHONY GREEN was sentenced on Wednesday, August 24, 2016, by U.S. District Judge Ronnie Abrams to 70 months in prison for being a member of a robbery crew that committed 11 commercial robberies, and numerous other street robberies of individuals, in August and September 2015.  ANTHONY GREEN personally participated in three of those robberies, and was arrested in the midst of attempting to commit a fourth.  During one of the robberies, ANTHONY GREEN assaulted a 61-year-old robbery victim, throwing the victim to the floor and beating him.  GREEN pled guilty before Judge Abrams on February 26, 2016.        

According to the Indictment and statements made at court proceedings and in court filings:

From at least on or about August 27, 2015, through on or about September 3, 2015, ANTHONY GREEN joined with his co-defendants Lennox Josephs and Cameron Green (as well as another individual) to commit at least three commercial robberies of gas stations and convenience stores in the Bronx and Elmsford, New York, and they planned to commit a fourth such robbery in Pleasantville, New York.  These robberies were the last in a weeks-long spree that Josephs and Cameron Green had been on since at least August 12, 2015, during which they robbed at least 11 commercial businesses and individuals engaged in commercial activity, such as restaurant deliverymen and taxi cab drivers.  Prior to August 27, 2015, ANTHONY GREEN had also joined Josephs and Cameron Green to commit street robberies, during which they physically assaulted victims and snatched wallets and cellphones.

During the three commercial robberies in which ANTHONY GREEN participated, the defendants wore masks and used BB guns that appeared to be real firearms.  The victims of the robberies were terrorized and in several instances subjected to physical violence by ANTHONY GREEN and his associates, including one robbery in which Cameron Green dislocated a pregnant woman’s shoulder.

Mr. Bharara praised the outstanding investigative work of the SPARTA Task Force, which comprises agents and detectives of the Bureau of Alcohol, Tobacco, Firearms, and Explosives, the New York City Police Department, and the U.S. Marshals Service. 

Cameron Green pled guilty on February 19, 2016, and was sentenced by Judge Abrams on July 8, 2016, to 78 months in prison.  Lennox Josephs pled guilty on March 9, 2016, and was sentenced by Judge Abrams on August 8, 2016, to 78 months in prison.

*                *                *           

The case is being prosecuted by the Office’s Violent & Organized Crime Unit.  Assistant U.S. Attorneys Frank Balsamello and Jared Lenow are in charge of the prosecution. 

Preet Bharara, the United States Attorney for the Southern District of New York, Scott J. Lampert, Special Agent in Charge of the New York Field Office of the U.S. Department of Health and Human Services, Office of Inspector General (“HHS-OIG”), Eric Schneiderman, New York State Attorney General, and Thomas P. DiNapoli, the New York State Comptroller, today announced a $2,950,000 settlement of a civil fraud lawsuit against Beth Israel Medical Center d/b/a Mount Sinai Beth Israel (“Beth Israel”), St. Luke’s-Roosevelt Hospital Center d/b/a Mount Sinai St. Luke’s and Mount Sinai Roosevelt (“St. Luke’s Roosevelt,” and together with Beth Israel, the “Hospitals”), and Continuum Health Partners, Inc. (“Continuum,” and together with the Hospitals, “Defendants”) for willfully delaying repayment of over $ 800,000 in Medicaid overpayments.  The settlement resolves claims under the federal False Claims Act and the New York State False Claims Act. 

Manhattan U.S. Attorney Preet Bharara said:  “When Continuum learned that it had received over $800,000 in potential overpayments from Medicaid in 2011, it had an obligation under the law to return those funds within 60 days.  Instead, Continuum delayed repayment for more than two years and only fully repaid the Medicaid program in 2013.  With this settlement, Continuum has made admissions and is paying $2.95 million for its fraud on Medicaid.”

HHS-OIG Special Agent in Charge Scott J. Lampert said:  “Any threat to the financial health of Medicaid is a threat to the vulnerable citizens who depend upon it for critical services.  Today’s settlement should send a message to providers that this behavior will not be tolerated, and we will pursue justice in these cases.”

Attorney General Eric Schneiderman said:  “Repaying Medicaid for false claims is not only vital to the integrity of the program, but it is also the law. We will not allow hospitals to drain important resources from the system, and will continue to ensure that the program is properly reimbursed for the funds that it is owed.”

New York State Comptroller Thomas P. DiNapoli said:  “Our audits of the defendants revealed $700,000 in Medicaid overpayments.  After we were contacted about this matter, we quickly partnered with law enforcement to recover taxpayer dollars, including further overpayments that came to light only afterwards.  I thank U.S. Attorney Preet Bharara and his office for their perspicacity in seeing that justice was served.  There have been too many cases of Medicaid waste, fraud and abuse, and we will continue to partner with law enforcement to combat Medicaid fraud statewide.”

The United States Complaint-In-Intervention (the “Complaint”) alleges that between 2009 and 2010, CONTINUUM erroneously submitted claims to Medicaid for payment due to a software error.  In 2010, Continuum was alerted to the software error by the New York State Comptroller.  In February 2011, an internal investigation by CONTINUUM identified approximately 900 claims totaling over $1 million that may have been wrongly submitted to and paid by Medicaid.  This list, created by the whistleblower who filed this qui tam lawsuit, contained all of the claims that were affected by the software glitch.  Rather than using the list to repay the claims, CONTINUUM terminated the whistleblower, failed to bring this list to the attention of the Government and took nearly two years to complete its repayments.  Specifically, between 2009 and 2010, DEFENDANTS erroneously billed 444 claims to Medicaid.  These claims were identified in the whistleblower’s list on February 4, 2011, yet DEFENDANTS did not fully repay these claims until March 2013, i.e., nearly two years later, in violation of a Federal law requiring recipients of Government funds to repay the Government within 60 days of discovering the overpayment. 

DEFENDANTS moved to dismiss the Government’s Complaint and, in a first-of-its-kind decision, Judge Edgardo Ramos denied the motion in an opinion that was referred to in the New York Law Journal as “the most significant case interpretation” of the “reverse false claims provision” of the federal False Claims Act.  Brian Feldman, Health Care Overpayments and Reverse False Claims, New York Law Journal, September 8, 2015. 

Today, U.S. District Judge Edgardo Ramos approved a settlement to resolve the Government’s claims against DEFENDANTS.  Under that settlement, DEFENDANTS agree to pay $2,950,000 to resolve the claims under the federal and New York false claims acts.  In the settlement, DEFENDANTS admit, acknowledge and accept responsibility for the following conduct:

1. During the relevant time period, the Hospitals had managed care agreements with Healthfirst, Inc. (“Healthfirst”), a managed-care organization (“MCO”), and rendered care to numerous patients who obtained their Medicaid managed-care plans through Healthfirst.Pursuant to their contracts with Healthfirst, the Hospitals obtained from Healthfirst contractually fixed managed-care payments for services rendered to the Healthfirst beneficiaries.

2. Pursuant to Medicaid regulations, the Hospitals were entitled to receive as payment for services rendered to Medicaid managed-care patients only the amount paid by the MCO and were not permitted to seek additional payments from Medicaid or, with certain limited exceptions, the patients.

3. Beginning in or around 2009, due to a software compatibility issue, the Healthfirst remittances contained coding that caused the Hospitals and Continuum to mistakenly submit claims on behalf of the Hospitals to the Medicaid program, as a secondary payor, for additional payment for services rendered to enrollees of Healthfirst, above and beyond what they had received from Healthfirst for these services, and Medicaid paid Beth Israel and St. Luke’s Roosevelt for such claims.

4. In September 2010, the New York Office of the State Comptroller (the “Comptroller”) brought to Continuum’s attention a small number of claims submitted by Continuum on behalf of the Hospitals that had been wrongly billed to Medicaid as a secondary payor.

5. In late 2010 and January 2011, Relator and other Continuum staff members gathered and analyzed Continuum’s billing data in order to discover possibly affected claims.

6. On February 4, 2011, Relator sent an email to certain members of Continuum’s management, attaching a spreadsheet (“Relator’s Spreadsheet”) containing 890 claims of which 444 had been erroneously billed to Medicaid.

7. Continuum terminated Relator on February 8, 2011.Continuum reimbursed Medicaid in February 2011, for only five of the improperly submitted claims.

8. In March 2011, and continuing through February 2012, the Comptroller brought additional affected claims to Continuum’s attention, at which time Continuum would return the overpayments.

9. Continuum never brought Relator’s analysis to the attention of the Comptroller.

10. Continuum did not fully reimburse Medicaid for claims erroneously billed to Medicaid for over two years and did so in more than thirty tranches after February 2011, beginning in April 2011 and concluding in March 2013.

The Complaint in this case was filed under the federal False Claims Act, which punishes violators who submit false claims to the Government or knowingly attempt to avoid an obligation to repay federal funds. The allegations of fraud stated in the Complaint were first brought to the attention of the Government by a whistleblower, who filed a lawsuit under the qui tam provisions of the False Claims Act.  Those provisions allow private parties who have knowledge of fraud committed against the Government to file suit on behalf of the Government and share in any recovery.  The United States may then intervene and file a complaint, as it did here.

*                *                *

Mr. Bharara praised the investigative work of the Office of the State Comptroller.  He also thanked the U.S. Department of Health and Human Services, Office of Inspector General, and the Office of the New York Attorney General for their assistance in this case.

The case is being handled by the Office’s Civil Frauds Unit. Civil Frauds Co-Chief Rebecca C. Martin and Assistant U.S. Attorneys Jean-David Barnea and Jacob Bergman are in charge of this matter.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that EDWARD DURANTE, a/k/a “Ted Wise,” a/k/a “Efran Eisenberg,” a/k/a “Yulia,” a/k/a “Ed Simmons,” pled guilty today before U.S. Magistrate Judge Andrew J. Peck to conspiracy, securities fraud, money laundering, and perjury offenses stemming from a scheme, between 2009 and March 2015, to defraud at least 100 investors of more than $15 million, more than $9 million of which was funneled to DURANTE, his family, or co-conspirators.  DURANTE executed the scheme – which principally involved a publicly traded Over-The-Counter company called VGTel, Inc. (“VGTL”) – through false and misleading representations about how private investor monies would be used, making material omissions in connection with the sale of VGTL securities, and through manipulation of the public market in VGTL’s stock.  DURANTE, who was previously convicted of similar charges in this District in 2001 and was released from prison in 2009, arrived in the United States in December 2015 following his extradition from Germany.  In January 2016, a superseding indictment (the “Indictment”) charging Christopher Cervino, a/k/a “Smitty,” Larry Werbel, and Sheik F. Khan, a/k/a “Abida Khan,” was unsealed and these defendants were arrested and charged for their involvement in the scheme.[1]  Two additional participants in the scheme, defendants Kenneth Wise and Walter Reissman, have pled guilty and are cooperating with the Government in this investigation:

U.S. Attorney Preet Bharara said:   “Edward Durante embarked on the fraud scheme to which he pled guilty today while still in prison from a prior securities fraud conviction.  Doing what he knows best, making money through deception, Durante lied to investors about how their money would be used and concealed his manipulation of the securities market.  Edward Durante now awaits sentencing for securities fraud yet again.”

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

2001 Securities Fraud Conviction

In December 2001, DURANTE was convicted in federal court of conspiracy to commit securities fraud, wire fraud, and money laundering, as well as making false statements in connection with a market manipulation scheme in which the defendant also used the alias “Ed Simmons.”  The defendant was sentenced to 121 months in prison and was released in or about 2009, the year he began the current scheme.  In connection with that scheme, DURANTE was ordered to pay disgorgement and prejudgment interest totaling over $39 million.  DURANTE was also barred from certain activities in connection with the securities industry, including the sale of securities. 

Private Placement Securities Fraud Involving VGTL

Beginning from when he was first in prison, between 2009 and in or about March 2015, DURANTE and his co-conspirators fraudulently induced victims to invest in private shares of VGTL by, among other things, concealing from investors that DURANTE controlled the entities selling the shares; that DURANTE was prohibited from any association with the sale of securities; and that DURANTE was previously convicted of crimes related to a similar scheme to defraud.  Furthermore, some of the defendants lied to investors by (a) representing that their investments would be used to fund the operations and growth of VGTL in connection with potential reverse mergers, when in reality no reverse merger was ever consummated and the investments were instead used primarily to personally benefit the defendants; and (b) representing that the investors would receive an eight percent dividend on their investments until their private shares could be sold at a promised premium on the public market, when, in reality, no interest payments were ever provided to the investors and many investors never received VGTL stock certificates or were not permitted to sell the stock.  In order to fund his illegal scheme, DURANTE used a network of brokers, including Werbel and Khan, investment advisers in Cleveland, Ohio, and Los Angeles, California, respectively, to induce investors to buy shares of VGTL. 

Manipulation of the Market for Shares of VGTL

DURANTE also engaged in a scheme to control and manipulate the public stock of VGTL in order to artificially inflate the stock price and trading volume so as to profit from sales of VGTL stock and to further induce investments in private shares of VGTL.  To that end, through entities he controlled, DURANTE held a majority of the publicly traded stock of VGTL.  DURANTE recruited Cervino, a broker, to open brokerage accounts associated with DURANTE-controlled entities and investors who were clients of Werbel and Khan, many of whom did not know they had accounts with Cervino.  Werbel and Khan, along with DURANTE, induced their clients to purchase VGTL stock through Cervino – sometimes without the clients’ knowledge or permission – while DURANTE and Cervino ensured that many of these purchases were matched with sales of VGTL stock by DURANTE-controlled accounts.  The result of these transactions was that DURANTE and his co-conspirators were effectively taking both sides of a single transaction in VGTL stock in order to artificially control VGTL’s stock price.  The defendants’ efforts to artificially inflate the market for VGTL increased the stock price from approximately $.25 per share in April 2012 to as much as $1.90, and dramatically inflated the trading volume, which increased the defendants’ abilities to raise private investments in VGTL.  To compensate Cervino for his efforts to control and manipulate the market in VGTL, DURANTE made at least two cash payments to Cervino totaling $35,000.  Moreover, DURANTE personally siphoned off more than $4 million in profits, which he concealed through the use of wire transfers among multiple accounts in the names of other individuals.  

*                      *                      *

DURANTE, 64, pled guilty to one count of conspiracy to commit securities fraud (Count One), one count of securities fraud (Count Two), one count of money laundering (Count Six), and one count of perjury (Count Nine).  Count One and Nine each carry a maximum sentence of five years in prison.  Counts Two and Six each carry a maximum sentence of 20 years in prison.  The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  DURANTE will be sentenced before U.S. District Judge Andrew L. Carter.            

 On January 4, 2016, Wise, 75, pled guilty before Judge Peck to one count of conspiracy to commit securities fraud, one count of securities fraud, one count of conspiracy to commit wire fraud, one count of wire fraud, one count of conspiracy to commit money laundering, and one count of money laundering.  Count One carries a maximum sentence of five years in prison.  Counts Two through Six each carry a maximum sentence of 20 years in prison.  The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.

On January 5, 2016, Reissman, 58, pled guilty before Judge Carter to one count of conspiracy to commit securities fraud, one count of securities fraud, one count of conspiracy to commit wire fraud, one count of wire fraud, and one count of making false statements to federal officers.  Counts One and Five each carry a maximum sentence of five years in prison.  Counts Two through Four each carry a maximum sentence of 20 years in prison.  The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.

Trial against defendants Christopher Cervino, Larry Werbel, and Sheik Khan is scheduled for February 27, 2017, before Judge Carter, on charges of conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire fraud, and wire fraud.  Defendants Werbel and Khan will also face trial on charges of investment adviser fraud.  Defendants Werbel and Cervino will also face trial on charges of making false statements and perjury, respectively.  The allegations contained in the Indictment as to those defendants are merely accusations, and they are presumed innocent unless and until proven guilty.

Mr. Bharara praised the work of the Federal Bureau of Investigation and the U.S. Postal Inspection Service, and thanked the Securities and Exchange Commission for its assistance.  He added that the investigation is continuing.

The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations.  Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants.  For more information on the task force, please visit www.StopFraud.gov.

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

 

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[1] As for the defendants who have not pled guilty (Christopher Cervino, Larry Werbel and Sheik Khan), the charges described herein constitute only allegations.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that JAMAL SMALLS was sentenced today to 55 years in prison for the July 26, 2012, drug-related murder of Doneil White; leading a narcotics trafficking conspiracy that distributed powder cocaine, crack cocaine, and heroin in 2012 and 2013; and using and discharging firearms in connection with that narcotics conspiracy.  SMALLS was convicted in Manhattan federal court on November 20, 2015, following a two-week jury trial before United States District Judge Naomi Reice Buchwald, who imposed sentence. 

U.S. Attorney Preet Bharara said:  “Jamal Smalls, convicted by a jury of a drug-related murder, narcotics trafficking, and gun charges, has now been sentenced for his crimes.  For his years of murder, mayhem, and drug peddling, Smalls has received an appropriately severe sentence.  Thanks to the FBI and the NYPD, Smalls no longer poses a threat to public safety.”

According to the Superseding Indictment, evidence admitted at trial, and statements made at court proceedings and in court filings:

JAMAL SMALLS, a/k/a “Poo Black,” a/k/a “Machiavelli,” a/k/a “Mack,” was a high-ranking member of the Bloods.  In 2012 and 2013, SMALLS ran a drug trafficking crew that operated in and around the John Adams Houses in the Bronx, New York.  SMALLS and his crew sold large quantities of powder cocaine, crack cocaine, and heroin in and around the housing project, as well as in North Carolina, South Carolina, and Virginia. 

In 2000, SMALLS was convicted of first degree manslaughter in New York State.  Throughout SMALLS’s term of incarceration, he received narcotics from his brother and people working on behalf of the crew to distribute within the state prison system.  In April 2012, SMALLS was released from New York State prison.  After his release, SMALLS began to lead the crew with his brother, participating in large-quantity narcotics deals in the Bronx and out-of-state. 

SMALLS was also involved in repeated violence committed in connection with the crew’s drug trafficking.  On July 18, 2012, SMALLS tried to shoot Doneil White, a rival drug dealer, but missed; SMALLS, however, hit a bystander in the back outside the Johns Adams Houses.  A week later, on July 25, 2012, SMALLS again shot at Doneil White in the John Adams Houses, but missed again.  Early the next morning, on July 26, 2012, SMALLS paid a member of his crew $10,000 to shoot Doneil White in a stairwell at the John Adams Houses.  White died a few days later as result of his severe injuries.

Following his arrest in August 2012, and while in pre-trial detention, SMALLS continued to lead the narcotics conspiracy, by, among other things, giving directives to members of the crew through telephone calls and in-person visits. 

*                *                *           

In addition to the prison sentence, Judge Buchwald sentenced SMALLS to 10 years of supervised release and ordered SMALLS to pay a $300 special assessment fee.

U.S. Attorney Preet Bharara thanked the Federal Bureau of Investigation and the New York City Police Department for their continued outstanding work in this investigation.  Mr. Bharara also thanked the Bronx District Attorney’s Office for their valuable assistance with the investigation.

The case is being prosecuted by the Office’s Violent & Organized Crime Unit.  Assistant U.S. Attorneys Kan M. Nawaday, Joshua A. Naftalis, and Drew Johnson-Skinner are in charge of the prosecution.                          

Preet Bharara, the United States Attorney for the Southern District of New York, announced that JARED GALANIS pled guilty today to concealing a conspiracy to manipulate the market for Gerova Financial Group, Ltd. (“Gerova”), a publicly traded company listed on the New York Stock Exchange, and to defraud the shareholders of that company.  GALANIS pled guilty to misprision of a felony before U.S. District Judge P. Kevin Castel. 

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

The Gerova Scheme

From 2009 to 2011, Jason Galanis, John Galanis, Derek Galanis, Gary Hirst, Ymer Shahini, and Gavin Hamels engaged in a scheme to defraud the shareholders of a publicly traded company called Gerova Financial Group, Ltd. (“Gerova”), and the investing public, by effecting securities transactions in Gerova stock for the purpose of conferring millions of dollars of undisclosed remuneration on the co-conspirators, without adequate disclosure of Jason Galanis’s role in directing the transactions or the benefits received by Jason Galanis and his co-conspirators.

As a part of the scheme to defraud, Jason Galanis obtained sufficient control over Gerova so as to be able to cause Gerova to enter into transactions of his design, and for his benefit, including the issuance of Gerova stock.  Jason Galanis obtained this control without causing himself to be identified as an officer or director of Gerova so as to purport to abide by an SEC-imposed bar that forbade him from holding such positions at publicly traded companies.  Among other means and methods, Jason Galanis, with the assistance of Hirst, caused over five million shares of Gerova stock, which represented nearly half the company’s public float and which were intended for Jason Galanis’s ultimate benefit, to be issued to and held in the name of Ymer Shahini, who knowingly served as a foreign nominee for Jason Galanis.  Jason Galanis, John Galanis, Derek Galanis, Hirst, and Shahini understood that the purpose of the stock grant to Shahini was to disguise Jason Galanis’s ownership interest in the stock, and to evade the SEC’s regulations for issuing unregistered shares of stock. 

At the same time, and as a further part of the scheme to defraud, various co-conspirators opened and managed brokerage accounts in the name of Shahini (the “Shahini Accounts”), effected the sale of Gerova stock from the Shahini Accounts through manipulative trading, and received and concealed the proceeds, knowing that this activity was designed to conceal from the investing public Jason Galanis’s ownership of and control over the Gerova stock.  In total, the co-conspirators sold nearly $20 million worth of Gerova shares from the Shahini Accounts for their own benefit.

In contrast, unsuspecting Gerova shareholders were left with a worthless investment.  More specifically, in March 2011, the New York Stock Exchange (“NYSE”) halted trading of Gerova and in April 2011, Gerova asked the NYSE to delist its securities.  By November 2, 2011, Gerova’s stock price had bottomed out at $0.00 per share. 

JARED GALANIS, an attorney, was aware of the criminal scheme involving Gerova and took steps to conceal it.  In particular, JARED GALANIS permitted John Galanis to use a phone and a law firm email account registered to JARED GALANIS in furtherance of the scheme and transferred the proceeds of the fraudulent scheme through his attorney trust account.

*                *                *

JARED GALANIS, 37, pled guilty to one count of misprision of a felony, which carries a maximum sentence of three years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.

Derek Galanis, 44, pled guilty on August 15, 2016, 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; and one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5,000,000 or twice the gross gain or loss from the offense. 

Jason Galanis, 46, pled guilty on July 21, 2016, to two counts of conspiracy to commit securities fraud, each carrying a maximum sentence of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense; one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5,000,000 or twice the gross gain or loss from the offense; and one count of investment adviser fraud, which carries a maximum sentence of five years in prison and a maximum fine of $10,000 or twice the gross gain or loss from the offense. 

John Galanis, 73, pled guilty on July 20, 2016, 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; and one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5,000,000 or twice the gross gain or loss from the offense. 

Gavin Hamels, 40, pled guilty on March 22, 2016, 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; one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5,000,000 or twice the gross gain or loss from the offense; and one count of investment adviser fraud, which carries a maximum sentence of five years in prison and a maximum fine of $10,000 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 sentence for the defendant will be determined by the judge.           

Trial against defendant Gary Hirst is scheduled for September 12, 2016, on charges of conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire fraud, and wire fraud.  Defendant Ymer Shahini remains a fugitive.  The allegations contained in the Indictment as to those defendants are merely accusations, and they are presumed innocent unless and until proven guilty.

Mr. Bharara praised the work of the U.S. Postal Inspection Service and the Federal Bureau of Investigation, and thanked the SEC.

The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations.  Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants.  For more information on the task force, please visit www.StopFraud.gov.                   

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

 

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[1]  As for the defendants who have not pled guilty (Gary Hirst and Ymer Shahini), the charges described herein constitute only allegations.

Preet Bharara, the United States Attorney for the Southern District of New York, Charlie Patterson, the Acting Special Agent in Charge of the Bureau of Alcohol, Tobacco, Firearms & Explosives (“ATF”), and William Bratton, the Police Commissioner of the City of New York (“NYPD”), announced the arrest of CHRISTOPHER MULLIGAN on charges of robbery conspiracy, robbery, and a firearms offense.  MULLIGAN was arrested yesterday in Stockton, California, and will be presented later today in U.S. District Court for the Eastern District of California.

One other defendant, Omar Rawlins, was arrested on May 12, 2015, the day of the robbery, in connection with the same charges, contained in a Complaint.  Rawlins’s case was assigned to the Honorable Kimba M. Wood, United States District Judge for the Southern District of New York, and he pled guilty to participating in a conspiracy to rob the Tourneau Watch Store.  Rawlins’s sentencing remains pending.

Manhattan U.S. Attorney Preet Bharara said: “In broad daylight in Midtown Manhattan, Mulligan and his co-conspirators allegedly carried out a gunpoint robbery of a Madison Avenue watch store, stealing not just Rolex watches worth more than $700,000, but robbing New York City residents of their sense of security.  Thanks to good old-fashioned police work by the ATF and the NYPD, Mulligan has joined his alleged co-conspirator Omar Rawlins in facing federal criminal charges.”

ATF Acting Special Agent in Charge Charlie Patterson said: “This arrest is the culmination of the diligent investigative work of the ATF Special Agents and NYPD Detectives assigned to the ATF SPARTA Task Force, which investigates armed commercial robberies throughout New York City.  The arrest of Mr. Mulligan should serve as a warning to those out there engaged in these violent crimes that we will bring the full force of the federal justice system to bear against you.  While it may seem that you can receive a quick payday by committing an armed robbery, the price you will pay is a lengthy prison sentence in a federal penitentiary.  ATF would like to extend our gratitude to the NYPD and the United States Attorney’s Office for their continued partnership in combatting violent crime in New York City.”

NYPD Commissioner William J. Bratton said: “This violent crime at a Midtown watch store took 60 seconds to commit, but after being indicted and apprehended in California, the defendant’s time on the lam has run out and he’s facing decades in prison if convicted.  I want to thank the investigators from the Southern District, the ATF and the NYPD who worked on this investigation and tracked the defendant to Pennsylvania and then cross-country.”

According to the allegations contained in the Indictment charging MULLIGAN, the Complaint[1] charging Rawlins, and other documents in the public record, and statements made in court:

On May 12, 2015, MULLIGAN, Rawlins, and a third individual committed a gunpoint robbery of the Tourneau Watch Store (“Tourneau”) in Midtown Manhattan.  At the time of the robbery, all three men were dressed in suits and fedoras.  After entering Tourneau, one of the men produced a gun and fired a round into the floor.  The bullet fragmented, and a customer was hit with a bullet fragment, receiving a minor laceration.  The two other robbers hit one of the glass display cases with hammers.  The display case shattered, and the two robbers began removing watches from the display case.  A Tourneau employee stuck his head out through a door behind the display case.  The robber with the gun fired a shot in the direction of the employee, who was not hit.  After approximately one minute, all three robbers exited Tourneau and began running.  They were pursued by NYPD officers, who caught up to and arrested Rawlins.  When Rawlins was arrested, he was carrying, among other things, five watches, a hammer, two pairs of gloves, a yellow hard hat, and a yellow safety vest.  Surveillance footage captured some of MULLIGAN, Rawlins, and the third robber’s activities as they executed the robbery.  In total, the crew obtained approximately 20 Rolex watches, worth approximately $730,000.

*              *             *

MULLIGAN, 22, of Brooklyn, is charged with one count of robbery conspiracy, which carries a maximum sentence of 20 years in prison; one count of robbery, which carries a maximum sentence of 20 years in prison; and one count of use of a firearm, which carries a maximum sentence of life in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Mr. Bharara praised the investigative work of the ATF and the NYPD, and in particular, the ATF Strategic Pattern Armed Robbery and Technical Apprehensions (“SPARTA”) Task Force.  Mr. Bharara also thanked the United States Marshals Service and the United States Attorney’s Office for the Eastern District of California for their assistance in the arrest and apprehension of MULLIGAN.

The case is being prosecuted by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Jessica Lonergan and Christopher J. Clore are in charge of the prosecution.

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

 

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

Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and William J. Bratton, the Commissioner of the New York City Police Department (“NYPD”), announced today the charges against three members of the Sex Money Murder gang (“SMM”),  COREY BROWN, a/k/a “CB,” JOSNEL RODRIGUEZ, a/k/a “DO,” and  CHRISTOPHER CANADA, a/k/a “Brabs,” with racketeering and firearms charges, including the gang-related murder of Vincent Davis on July 15, 2012.The case has been assigned to United States District Judge Denise L. Cote.  RODRIGUEZ was presented before Judge Cote yesterday; BROWN was presented before Judge Cote today. 

Manhattan U.S. Attorney Preet Bharara said: “The Sex, Money, Murder gang has terrorized residents of the Bronx for years with drug dealing, gang violence, and even murder.  Today’s charges against three alleged members of this notoriously violent gang – possible only because of the work of the FBI and the NYPD – is another step toward keeping our communities free from drugs and gang violence.”   

FBI Assistant Director in Charge Diego Rodriguez said: “The drugs these inner city gangs push end up on the streets everywhere in our cities and communities, not just in the areas they control.  As long as there is a market for their products, these gangs will continue to commit crimes to maintain control.  Unfortunately in this case, murder has become the normal course of their business day.  The FBI New York Metro Safe Streets Task Force will continue to go after the heads of these gangs in the hope that one day the demand for their drugs will go away.”

As alleged in the Indictment and in other court papers[1]:

SMM is a criminal enterprise that operates mainly in and around several housing developments in the Bronx, New York.  From 2011 up to and including 2016, members and associates of SMM enriched themselves by selling drugs, such as crack cocaine, cocaine, and heroin, and engaged in acts of violence, including murder and attempted murder of rival gang members, rival drug traffickers, and fellow gang members.

On July 15, 2012, SMM members BROWN and RODRIGUEZ participated in the murder of Vincent Davis, in the vicinity of 566 Pugsley Avenue, Bronx, New York, in order to maintain and increase their standing within SMM.  CANADA later assisted his fellow SMM members avoid arrest by disposing of the murder weapon after Davis was shot. 

Count One charges BROWN, RODRIGUEZ, and CANADA with participating in a racketeering conspiracy for their involvement in the SMM gang, which carries a maximum sentence of life in prison. 

Count Two charges BROWN and RODRIGUEZ with murder in aid of a racketeering conspiracy, in connection with the murder of Davis, which carries a maximum sentence of death, or life in prison.   

Count Three charges BROWN and RODRIGUEZ with conspiracy to commit murder in aid of a racketeering conspiracy, in connection with the murder of Davis, which carries a maximum sentence of 10 years in prison.

Count Four charges BROWN and RODRIGUEZ with murder through the use of a firearm, in connection with the murder of Davis, which carries a maximum sentence of death, or life in prison. 

Count Five charges CANADA with being an accessory after the fact to murder in aid of a racketeering conspiracy, in connection with the murder of Davis, which carries a maximum sentence of 15 years’ imprisonment.    

Mr. Bharara thanked the FBI and the NYPD, in particular, the New York Metro Safe Streets Task Force, as well as the Criminal Investigators at the United States Attorney’s Office for their work on the investigation.

RODRIGUEZ, 26, of the Bronx, New York, and BROWN, 37, of the Bronx, New York, were taken into custody yesterday.  CANADA, 27, of Bronx, New York, remains at large. 

The case is being prosecuted by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Brooke Cucinella, Rebekah Donaleski, and Margaret Graham are in charge of the prosecution. 

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

 

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

Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the unsealing this morning of an indictment charging GREVY GERARD PIERRE-LOUIS, a/k/a “Cadillac Slim,” a/k/a “Caddy,” in four counts stemming from his long-running criminal enterprise that turned the violent sexual exploitation of girls and women into his own profit.  The defendant was arrested this morning at his home in Miami, Florida, and was presented this afternoon in Miami federal court before Magistrate Judge Jonathan Goodman.  The case is assigned to Chief United States District Judge Colleen McMahon. 

Manhattan U.S. Attorney Preet Bharara said:  “As alleged, the defendant victimized girls and women for the better part of 20 years through extreme violence, threats, and other types of abuse, all for profit.  Along with our partners at the FBI, we are committed to protecting vulnerable victims from those alleged predators who seek to hurt and sexually exploit them.”

FBI Assistant Director-in-Charge Diego Rodriguez said:  “People see human trafficking every day in this city, but may not realize it because this crime that can be hidden in plain sight.  The subject in this case allegedly used violence and intimidation as weapons, using these women as disposable chattel to line his pocket.  The FBI and our law enforcement partners need the general public to watch for things that don’t seem right, and call us if they suspect someone is being trafficked or held against their will.” 

As alleged in the Indictment:[1]

Starting in or about 1998 and continuing through 2016, PIERRE-LOUIS has been compelling minor girls and women to engage in prostitution through extreme violence, psychological and verbal abuse, coercion, and threats of violence to his victims and their family members.  PIERRE-LOUIS victimized minor girls and women in and around New York, including in Manhattan and the Bronx, and in a number of other states between New York and Florida, all for his own profit.   

*                      *                     *

PIERRE-LOUIS, 44, from Queens, New York, is charged with one count of conspiracy to commit sex trafficking, one count of interstate transportation of minors for the purpose of prostitution, one count of use of interstate commerce to promote unlawful activity, and one count of operating a child exploitation enterprise.  The defendant faces a mandatory minimum term of 20 years in prison, and a maximum sentence of life in prison.

The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentences imposed on the defendant will be determined by the Court.

Anyone with information concerning GREVY GERARD PIERRE-LOUIS, a/k/a “Cadillac Slim,” a/k/a “Caddy,” that may be relevant to the investigation should contact the Federal Bureau of Investigation at 1-212-384-1000 or https://tips.fbi.gov/.

Mr. Bharara praised the outstanding investigative work of the FBI, and noted that the investigation is continuing.  Mr. Bharara also thanked the New York City Police Department, the U.S. Attorney’s Office for the Southern District of Florida, the Miami Field Office of the FBI, the United States Secret Service, the City of Miami Police Department, the Miami Beach Police Department, and the Miramar Police Department for their critical support and cooperation throughout the investigation. 

The prosecution is being handled by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Jessica K. Fender and Amanda Kramer are in charge of the prosecution.

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

 

 

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that SEAN STEWART, a former Managing Director at an investment advisory firm headquartered in Manhattan, was found guilty of providing inside information to trade and cause another to trade in the securities of five different health care companies, the acquisitions of which were announced between 2011 and 2014.  He was convicted after trial before U.S. District Judge Laura Taylor Swain.                                                

Manhattan U.S. Attorney Preet Bharara said:  “Another insider trading defendant stands convicted after trial by jury.  Time and time again, Sean Stewart took his clients’ most sensitive corporate secrets and fed them to his father on a silver platter for quick and illegal profits.  Insider trading rigs the securities markets in favor of cheaters, and we will continue to investigate and prosecute this crime aggressively.”           

According to the allegations contained in the Indictment as well as the evidence presented during trial:

In early 2011, SEAN STEWART, who at the time held the position of Vice President in the Healthcare Investment Banking Group of a global bank headquartered in Manhattan (“Investment Bank A”), began tipping his father, Robert Stewart, with material nonpublic information about upcoming mergers and acquisitions, including with the names of the companies that were acquisition targets, both when the target was an Investment Bank A client and when the bank represented the acquirer, as well as with information that indicated the likely timing of an upcoming deal. 

The first of these deals involved the acquisition of Kendle International Inc. by INC Research, LLC, which was announced publicly on May 4, 2011.  SEAN STEWART worked on the deal, representing Kendle.  Robert Stewart made about $7,900 in profits on purchases of Kendle stock executed in February and March of 2011.  When questioned by the Securities and Exchange Commission about his Kendle trades in May 2013, Robert Stewart reported that he used the proceeds of those trades to pay expenses related to SEAN STEWART’s June 2011 wedding.    

The second deal about which SEAN STEWART tipped Robert Stewart was the acquisition of Kinetic Concepts, Inc. (“KCI”) by Apax Partners, announced on July 13, 2011.  Although Robert Stewart purchased some stock in KCI based on SEAN STEWART’s tip, he sold that stock before the acquisition was announced, around the same time that SEAN STEWART learned the Financial Industry Regulatory Authority (“FINRA”) was conducting an inquiry into Robert Stewart’s Kendle trading. 

Also around this time, in the spring of 2011, Robert Stewart expressed a concern to co-conspirator Richard Cunniffe that Robert Stewart was “too close to the source” to be trading in KCI stock his own account, and asked Cunniffe to make purchases of KCI call options for Robert Stewart in Cunniffe’s brokerage account.  Cunniffe agreed to do so, and also mirrored for his own benefit the KCI trades that Robert Stewart was directing.

In connection with the FINRA inquiry, FINRA prepared a list of persons and entities that had traded in advance of the Kendle deal.  The list included Robert Stewart’s name.  When Investment Bank-A asked SEAN STEWART whether he knew anyone on the list, he initially denied recognizing the name of his father; later, when confronted by lawyers from Investment Bank-A, SEAN STEWART acknowledged that his father was on the list but told a series of lies designed to make it seem as if Robert Stewart had independently decided to invest in Kendle.  SEAN STEWART told these lies one day after meeting with his father to apprise his father of the FINRA inquiry and to get their stories straight. 

When the KCI/Apax Partners deal was announced, Robert Stewart and Cunniffe reaped profits totaling approximately $107,790.  At around this time, Robert Stewart told Cunniffe that the source of the KCI tip and the earlier Kendle tip had been Robert’s son.  Later, around the spring of 2012, Robert Stewart clarified for Cunniffe that the son in question was SEAN STEWART, who worked on the “sell side” on Wall Street.

In October 2011, SEAN STEWART left Investment Bank A.  A few months later, he joined an investment banking advisory firm headquartered in Manhattan (“Investment Bank B”) as a Managing Director.

During SEAN STEWART’s tenure with Investment Bank B, based on tips concerning nonpublic acquisition-related information supplied by SEAN STEWART, Robert Stewart had Cunniffe conduct options trading in advance of the public announcements of three more deals: (1) the acquisition of Gen-Probe Inc. by Hologic, Inc., announced on April 30, 2012; (2) the acquisition, by tender offer, of Lincare Holdings Inc. by Linde AG, announced on July 1, 2012; and (3) the acquisition of CareFusion Corp. by Becton, Dickinson & Co. (“Becton”), announced on October 5, 2014.  Investment Bank B represented Hologic in connection with its acquisition of Gen-Probe; Linde in connection with its acquisition of Lincare; and CareFusion in connection with its acquisition by Becton.  The profits that Robert Stewart and Cunniffe reaped from illegal insider trading in advance of the announcements of these three deals totaled over $1 million.  

During the course of the scheme, SEAN STEWART because aware that his father was having financial problems.  Rather than loan his father money, SEAN STEWART gave his father stock tips, the proceeds of which Robert Stewart used to benefit himself and his son.

In March and April of 2015, Cunniffe, who was then cooperating with the Government, recorded meetings he had with Robert Stewart.  During one such meeting, Robert Stewart accepted a payment of $2,500 cash from Cunniffe, which was the balance of the proceeds owed to Robert Stewart for profitable trading executed in Cunniffe’s account in advance of the CareFusion acquisition announcement.  Also during this meeting, Robert Stewart admitted that SEAN STEWART once chastised him for failing to make use of a tip, saying, “I can’t believe I handed you this on a silver platter and you didn’t invest in it.”              

*                      *                      *

SEAN STEWART, 35, of New York, New York, was convicted of one count of conspiracy to commit securities fraud and fraud in connection with a tender offer, one count of conspiracy to commit wire fraud, six counts of securities fraud, and one count of fraud in connection with a tender offer.  The securities fraud, tender offer fraud, and wire fraud conspiracy charges each carries a maximum prison term of 20 years.  The charge of conspiracy to commit securities fraud and tender offer fraud carries a maximum prison term of five years.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge. 

Robert Stewart pled guilty on August 12, 2015, to one count of conspiracy to commit securities fraud and fraud in connection with a tender offer and was sentenced to four years’ probation, with the first year to be served in home detention, and $150,000 in forfeiture.

Richard Cunniffe pled guilty on May 12, 2015, to one count of conspiracy to commit securities fraud and fraud in connection with a tender offer, one count of conspiracy to commit wire fraud, three counts of securities fraud, and one count of fraud in connection with a tender offer.

Mr. Bharara praised the investigative work of the FBI and also thanked the Securities and Exchange Commission.

The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations.  Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants.  For more information on the task force, please visit www.StopFraud.gov.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Sarah E. McCallum and Brooke E. Cucinella are in charge of the prosecution.   

Preet Bharara, the United States Attorney for the Southern District of New York, announced that DEREK GALANIS pled guilty today to manipulating the market for Gerova Financial Group, Ltd. (“Gerova”), a publicly traded company listed on the New York Stock Exchange, and to defrauding the shareholders of that company.  GALANIS pled guilty to conspiracy to commit securities fraud and securities fraud before U.S. Magistrate Judge Kevin Nathaniel Fox. 

U.S. Attorney Preet Bharara said:  “As he admitted in his guilty plea today, Derek Galanis conspired to have Gerova issue more than $70 million worth of shares for no legitimate business purpose and to hide Jason Galanis’s control of those shares.  Galanis and his co-conspirators then artificially manipulated Gerova’s stock price so that they could secretly cash out for massive profits.  Derek Galanis is the fourth person to plead guilty in this stock fraud scheme that left many victim investors holding worthless shares.”

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

The Gerova Scheme

From 2009 to 2011, DEREK GALANIS, along with his co-conspirators Jason Galanis, John Galanis, Jared Galanis, Gary Hirst, Ymer Shahini, and Gavin Hamels, engaged in a scheme to defraud the shareholders of Gerova, and the investing public, by effecting securities transactions in Gerova stock for the purpose of conferring millions of dollars of undisclosed remuneration on the co-conspirators, without adequate disclosure of Jason Galanis’s role in directing the transactions or the benefits received by Jason Galanis and his co-conspirators.

As a part of the scheme to defraud, Jason Galanis obtained sufficient control over Gerova so as to be able to cause Gerova to enter into transactions of his design, and for his benefit, including the issuance of Gerova stock.  Jason Galanis obtained this control without causing himself to be identified as an officer or director of Gerova in order to appear to abide by an SEC-imposed bar that forbade him from holding such positions at publicly traded companies.  Among other means and methods, Jason Galanis, with the assistance of Hirst, caused over five million shares of Gerova stock, which represented nearly half the company’s public float and which were intended for Jason Galanis’s ultimate benefit, to be issued to and held in the name of Ymer Shahini, who knowingly served as a foreign nominee for Jason Galanis.  DEREK GALANIS, a longstanding friend of Shahini’s, recruited Shahini to the scheme, telling Shahini in an email, “All we need is a foreign national we trust which is where you come in my friend.”  DEREK GALANIS, Jason Galanis, John Galanis, Jared Galanis, Hirst, and Shahini understood that the purpose of the stock grant to Shahini was to disguise Jason Galanis’s ownership interest in the stock, and to evade the SEC’s regulations for issuing unregistered shares of stock. 

At the same time, and as a further part of the scheme to defraud, John Galanis and Jared Galanis, with DEREK GALANIS’s knowledge, opened and managed brokerage accounts in the name of Shahini (the “Shahini Accounts”), effected the sale of Gerova stock from the Shahini Accounts through manipulative trading, and received and concealed the proceeds, knowing that this activity was designed to conceal from the investing public Jason Galanis’s ownership of and control over the Gerova stock.  In total, DEREK GALANIS and his co-conspirators sold nearly $20 million worth of Gerova shares from the Shahini Accounts for their own benefit.

In contrast, unsuspecting Gerova shareholders were left with a worthless investment.  More specifically, in March 2011 the New York Stock Exchange (“NYSE”) halted trading of Gerova and in April 2011 Gerova asked the NYSE to delist its securities.  By November 2, 2011, Gerova’s stock price had bottomed out at $0.00 per share. 

*                *                *

DEREK GALANIS, 44, 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; and one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5,000,000 or twice the gross gain or loss from the offense. 

Jason Galanis, 46, pled guilty on July 21, 2016, to two counts of conspiracy to commit securities fraud, each carrying a maximum sentence of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense; one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5,000,000 or twice the gross gain or loss from the offense; and one count of investment adviser fraud, which carries a maximum sentence of five years in prison and a maximum fine of $10,000 or twice the gross gain or loss from the offense. 

John Galanis, 73, pled guilty on July 20, 2016, 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; and one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5,000,000 or twice the gross gain or loss from the offense. 

Gavin Hamels, 40, pled guilty on March 22, 2016, 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; one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5,000,000 or twice the gross gain or loss from the offense; and one count of investment adviser 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 sentences for the defendants will be determined by the judge.           

Trial against defendants Gary Hirst and Jared Galanis is scheduled for September 12, 2016, on charges of conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire fraud, and wire fraud, and with regard to Jared Galanis, on charges of investment adviser fraud and misprision of a felony.  Defendant Ymer Shahini remains a fugitive.  The allegations contained in the Indictment as to those defendants are merely accusations, and they are presumed innocent unless and until proven guilty.

Mr. Bharara praised the work of the U.S. Postal Inspection Service and the Federal Bureau of Investigation, and thanked the SEC.

The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations.  Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants.  For more information on the task force, please visit www.StopFraud.gov.                   

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

 

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[1]  As for the defendants who have not pled guilty (Gary Hirst, Jared Galanis, and Ymer Shahini), the charges described herein constitute only allegations.

Preet Bharara, the United States Attorney for the Southern District of New York, announced the arrest and unsealing of a complaint charging NICHOLAS MITSAKOS with securities and wire fraud in connection with a scheme to induce investments in a hedge fund by misrepresenting the fund’s performance and assets under management.  From at least May 2014 through August 2016, MITSAKOS fraudulently solicited investments in a hedge fund that he had founded, Matrix Capital (“Matrix”), by distributing marketing materials claiming that Matrix had millions of dollars under management and had achieved outsized returns since 2012.  In or about September 2015, one entity (“Victim-1”) invested approximately $2 million with MITSAKOS based on these representations.  The claims that MITSAKOS made to help secure this investment, however, were false.  Matrix had no assets under management and its returns were based on a hypothetical stock portfolio that had been retroactively altered on multiple occasions in order to enhance the fund’s supposed performance.  And rather than invest Victim-1’s money as promised, MITSAKOS misappropriated parts of this money to pay personal expenses and expenses associated with his administration of the fund.  MITSAKOS surrendered to law enforcement today in Los Angeles and will be presented in the United States District Court for the Central District of California.

In a separate action, the SEC filed civil charges against MITSAKOS.  

U.S. Attorney Preet Bharara said:  “Nicholas Mitsakos, founder of Matrix Capital, allegedly promised huge returns and told would-be investors that he had ‘a little more than $60 million’ in his hedge fund.  But as alleged, Mitsakos essentially ran an imaginary portfolio, which just tracked the performance of certain stocks without actually having a financial position in them.  Instead, Mitsakos allegedly spent much of his investors’ money on car payments, credit cards, and rent.”

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

In or about October 2013, MITSAKOS created an entity called Matrix Capital.  Matrix purported to be a “long-short” hedge fund that invested in undervalued securities and sold overvalued securities short.  In order to raise capital for Matrix, MITSAKOS and another co-conspirator (“CC-1”) sent marketing materials and newsletters to numerous investors.  Certain of these materials claimed that Matrix had returns “exceed[ing] all major indices,” including returns of approximately 25.4% in 2012, 66.3% in 2013, 20.9% in 2014, and 49.5% between January and October of 2015.  MITSAKOS also told investors that these returns were based on actual trades, and that he had millions of dollars under management.  In one communication with a potential investor, for example, MITSAKOS represented that he had “a little more than 60 million” of assets under management at the time. 

These representations were all false.  Matrix had not achieved the returns MITSAKOS and CC-1 had represented to investors, and had no real assets before receiving an investment from Victim-1 in or about September 2015.  Instead, MITSAKOS and CC-1 maintained a hypothetical portfolio that tracked the performance of certain stocks.  MITSAKOS and CC-1 retroactively manipulated this portfolio from time to time to improve its performance.  In or about May 2014, for example, MITSAKOS sent CC-1 an email stating, “Let’s talk about our monthly performance in 2014…. [T]here are some big monthly losses that I don’t think we would’ve had if we were managing the portfolio.  I know this is a bit of revisionist history....”  Later that day, CC-1 suggested “trim[ming]” two positions that had performed poorly in order to “see what that does to the performance [of the fund].”  The revised hypothetical performance figures from these changes were then disseminated to potential investors as returns on actual investments. 

Based in part on misrepresentations about Matrix’s performance and assets under management, among other things, Victim-1 invested approximately $2 million with MITSAKOS.  MITSAKOS, however, only used a portion of this amount – about $1.2 million – to actually buy and sell stocks.  Of the remaining amount, MITSAKOS spent hundreds of thousands of dollars on business expenses and personal expenses like car payments, credit cards, and rent before Victim-1 learned what had come of its investment.  MITSAKOS’s trading of the $1.2 million that he did invest, moreover, resulted in significant losses.

*                      *                      *

MITSAKOS is charged with one count of conspiring to commit securities and wire fraud, one count of securities fraud, and one count of wire fraud. The conspiracy charge carries a maximum term of five years in prison.  The securities and wire fraud charges each carry a maximum term of 20 years in prison.  The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.           

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

The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations.  Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants.  For more information on the task force, please visit www.StopFraud.gov.

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

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ANTHONY GRECCO was sentenced today to life in prison for robbing and murdering Ryan Ennis, a resident of Ossining, New York, and conspiring to distribute marijuana and heroin.  In January 2016, following a nine-day trial in White Plains federal court before the Honorable Kenneth M. Karas, a jury found that on August 26, 2014, GRECCO traveled from New Jersey to Ossining, where he robbed and murdered Ennis in furtherance of GRECCO’s narcotics trafficking activities.  Judge Karas imposed today’s sentence.

U.S. Attorney Preet Bharara stated:  “Anthony Grecco violently murdered Ryan Ennis, repeatedly stabbing him and slashing his throat, all for a few thousand dollars Ennis had for marijuana he thought Grecco was delivering.  The significant sentence imposed on Grecco today reflects the horrific and cold-hearted nature of his crime.”  

As established by the evidence at trial: 

GRECCO was a marijuana dealer based in New Jersey.  As of the spring of 2014, one of his customers was Ryan Ennis, 25, who had been purchasing marijuana from GRECCO and reselling it in the area around Ossining, New York.  By late summer 2014, GRECCO’s marijuana supply had dried up and he became desperate for cash. 

GRECCO set up a meeting with Ennis, on the pretense that he would be bringing more marijuana for Ennis.  In fact, GRECCO intended to rob Ennis, and kill him if necessary, in order to get money.  He wanted that money not only because he was strapped for cash, but because he intended to invest in the heroin business of another drug dealer in New Jersey.  In preparation for the meeting with Ennis, GRECCO obtained a knife and stuffed a backpack full of linens so that Ennis would not realize that GRECCO had arrived without any marijuana.

On August 26, 2014, GRECCO drove with two accomplices from New Jersey to an apartment complex in Ossining, where Ennis was waiting alone in his father’s apartment.  After arriving in Ossining, while the other two individuals waited outside, GRECCO went into the apartment and robbed Ennis.  In the course of the robbery, GRECCO stabbed Ennis repeatedly and slashed his throat, killing him.  GRECCO took $8,900 – the cash that Ennis had prepared for the marijuana deal – as well as a cellphone and a hat, from Ennis.  After the murder, GRECCO returned to New Jersey, where he showered and threw away the blood-stained clothes that he had been wearing in an attempt to cover his tracks. 

*                      *                     *

GRECCO, 35, is from Manville, New Jersey.

U.S. Attorney Bharara praised the outstanding work of the Village of Ossining Police Department and the FBI’s Westchester County Violent Crimes Task Force, which is comprised of investigators from the FBI, the Westchester County Police Department, the Westchester County District Attorney’s Office, the City of Peekskill Police Department, the New York City Police Department, and the City of Yonkers Police Department.

The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Michael Gerber, Scott Hartman, and George Turner are in charge of the prosecution.

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Preet Bharara, the United States Attorney for the Southern District of New York, announced today that LARRY DAVIS, President and Chief Executive Officer of DCM Erectors, Inc. (“DCM”), and DCM itself, were convicted of engaging in a fraudulent scheme to violate the Port Authority’s Minority and Women-Owned Business Enterprise Program (“M/WBE Program”), which is designed to increase the role of minority and women-owned businesses working on its projects.  DAVIS was convicted after an eight-day jury trial before U.S. District Judge Loretta A. Preska. 

Manhattan U.S. Attorney Preet Bharara said: “As the jury found in its guilty verdict today, Larry Davis, the CEO of DCM Erectors, used fraud in connection with nearly a billion dollars of construction contracts on One World Trade Center.  The construction work awarded to Davis came with the obligation to employ minority and women-owned businesses, an obligation that Davis shirked and then lied about.  We cannot allow major public projects – particularly ones on the sacred World Trade Center site – to be built on a foundation of fraud.  By its verdict today, the jury of New Yorkers made clear that it will not.”

According to the Complaint, Indictment and evidence presented at trial:

DCM specialized in steel erection for large construction projects.  Since at least March 1999, DAVIS has owned DCM and served as its President and Chief Executive Officer.  In 2007, DCM was awarded an approximately $256 million contract for work to be performed on One World Trade Center and in 2009, DCM was awarded an approximately $330 million trade contract for work to be performed on the World Trade Center Port Authority Trans-Hudson (PATH) Transportation Hub (collectively, the “World Trade Center Project”).

The work to be performed by DCM for the World Trade Center Project included, but was not limited to, structural steel supply and erection, supply and installation of metal decking, drafting and engineering, and surveying.

The Port Authority’s M/WBE Program is designed to ensure that M/WBEs receive work on its projects and applied to the World Trade Center Project.  Pursuant to the M/WBE Program, all contractors, including contractors such as DCM, were obligated to make good faith efforts to enter into subcontracts with M/WBEs, with a goal of 17 percent of the overall contract amount to be given to M/WBEs (12 percent for MBEs and five percent for WBEs).

In order to satisfy the M/WBE Program, DAVIS engaged in a fraudulent scheme in which he caused DCM to claim that certain work was performed by a minority-owned business, Solera/DCM Joint Venture LLC (“Solera/DCM,” and a woman-owned business, GLS Enterprises, Inc. (“GLS”), when, in truth and in fact, DCM itself performed such work or arranged for such work to be performed by other non-M/WBE contractors.

Solera/DCM was a joint venture between DCM and a minority owned business, Solera Construction, Inc. (“Solera”), which was owned by Johnny Garcia, a qualified minority business owner who previously pled guilty for his role in the fraudulent scheme.  Solera/DCM was purportedly owned 60 percent by Solera and 40 percent by DCM. DCM and DAVIS established Solera/DCM as a joint venture majority owned by Solera with the express purpose of using it to satisfy MBE requirements on public construction projects.

From 2009 through 2012, DAVIS caused DCM to misrepresent to the Port Authority that Solera/DCM performed certain work on the World Trade Center Project when, in truth and in fact, the work, including metal decking and steel procurement, was performed by a non-minority contractor or by DCM itself.  To facilitate the fraud, DAVIS directed Solera/DCM to place laborers who worked for a non-minority contractor performing metal decking on Solera/DCM’s payroll and then invoice DCM for such laborers’ time and also created certain invoices and directed Garcia to sign them to make it appear as if Solera/DCM procured steel, when, in truth and in fact, DCM did so.  DCM claimed MBE credit for work purportedly performed by Solera/DCM on the World Trade Center Project.  As part of the fraudulent scheme, DCM paid Garcia a total of at least $2 million ($150,000 in annual salary and additional monthly payments).

The owner of GLS was Gale D’Aloia, who served as GLS’s President and previously pled guilty for her role in the fraudulent scheme.  D’Aloia had been a long-time employee of DCM performing payroll management services for DCM and DAVIS’s related companies (the “Davis Group”).  In 2004, D’Aloia left DCM and began performing the same payroll management services for DCM and the Davis Group through her company, GLS, which she registered as a WBE with the Port Authority. 

From 2009 through 2012, DAVIS and DCM misrepresented to the Port Authority that GLS performed surveying work, and fraudulently claimed WBE credit for GLS’s purported surveying work, on the World Trade Center Project when, in truth and in fact, the surveying work was performed by DCM itself.  To facilitate the fraud, DAVIS directed D’Aloia to place unionized surveyors on GLS’s payroll who had been on DCM’s payroll and then to certify such payroll and also to invoice DCM for the workers even though DCM continued to actually supervise them.  As compensation for engaging in the fraudulent scheme, DAVIS paid GLS up to 10 percent of each week’s total gross payroll for the surveyors, which totaled hundreds of thousands of dollars.

*                      *                     *

DAVIS, 65, of Mississauga, Ontario, Canada, was convicted of one count of wire fraud and one count of conspiracy to commit wire fraud, each of which carries a maximum sentence of 20 years in prison.  He is scheduled to be sentenced November 15, 2016.

Mr. Bharara praised the investigative work of the Port Authority’s Office of Inspector General; U.S. Department of Labor, Office of Inspector General; IRS-Criminal Investigation; and DOT-OIG.

This case is being prosecuted by the Office’s Public Corruption Unit.  Assistant United States Attorneys Robert L. Boone and Kan M. Nawaday are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), Thomas P. Zugibe, Rockland County District Attorney, Chris Goldrick,  Director of the Rockland County Drug Task Force, and Charles Miller, Town of Haverstraw Police Chief, today announced the unsealing of an indictment charging eleven defendants with trafficking in cocaine and crack cocaine in and around Rockland County, New York.  Eleven defendants were taken into federal custody today, and will be presented in White Plains federal court this afternoon before U.S. Magistrate Judge Lisa Margaret Smith.  This case is assigned to U.S. District Judge Nelson S. Roman.  In a related prosecution, New York State has indicted an additional five defendants.

U.S. Attorney Preet Bharara stated: “As alleged, the eleven men charged today were part of a narcotics distribution network that peddled large quantities of powder and crack cocaine all around Rockland County.  The residents of our communities are entitled to live and work free from the ills of narcotics trafficking.  Our joint effort with the FBI, Rockland County District Attorney’s Office, the Rockland County Drug Task Force and Haverstraw Police Department brings us closer to that goal.”

FBI Assistant Director-in-Charge Diego Rodriguez said:  “For over two years, a drug trafficking organization allegedly led by Jemel Goode, trafficked and sold cocaine and crack cocaine in Rockland County.  Today, with our partners in the Westchester County Safe Streets Task Force, in coordination with the Rockland County Drug Task Force, we can announce the arrest of 11 members of this organization. We will continue our investigations and work with local partners to clear our communities of violence and drugs.”

Rockland County District Attorney Zugibe stated:  “This investigation is another example of local and federal law enforcement working together to reduce drug dealing that too often plagues our community.  The charges are the result of hundreds of hours of investigation and surveillance over a 12-month period, led by the Rockland County Drug Task Force. Not only were we able to arrest street dealers, but also the two brothers who were allegedly running the large-scale cocaine distribution network.  ‘Operation No Goode’ underscores law enforcement’s collective commitment to ridding our towns and villages of illegal drug activity.”

Rockland County Drug Task Force Director Chris Goldrick said, “The defendants are accused of being part of a sweeping operation dealing in drugs all across Rockland County. These charges are the result of hundreds of hours of investigation and surveillance over a year-long period. Working closely with our partners at the local and federal levels, technology and physical surveillance allowed detectives to uncover the entire operation from the bosses to the street-level couriers. We will continue to work together to keep our residents safe.”

Town of Haverstraw Police Chief Charles Miller stated:  “These arrests are the result of a coordinated law enforcement and prosecutorial initiative to rid our community of dangerous drug dealers. The Haverstraw Police Department and our law abiding residents will not tolerate the illegal narcotics trade on our streets.  This case clearly demonstrates the success that can be achieved through local and federal law enforcement cooperation.”

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

From July 2014, up to and including July 2016, : JEMEL GOODE, a/k/a “J Rock,” BENANCIO CABA, a/k/a “Bennie Caba,” LASEAN GOODE, a/k/a “Bones,” EDWIN HILARIO, ANEUDI JIMENEZ, a/k/a “Fat Bastard,” QUELVIN LOPEZ, NATHANIEL SAUNDERS, SR., NATHANIEL SAUNDERS, JR., a/k/a “Quan,” ALEXANDER SCUDDER, DUANE TAYLOR, a/k/a “Daquan Jenkins,” a/k/a “Antwan Scott,” and SHARRAHN WALTON conspired to sell cocaine and crack cocaine.  Specifically, the defendants JEMEL GOODE, LASEAN GOODE CABA, NATHANIEL SAUNDERS, SR., NATHANIEL SAUNDERS, JR., TAYLOR, and WALTON, conspired to sell 280 grams or more of crack cocaine.  The defendants CABA, SCUDDER, HILARIO, LOPEZ, and JIMENEZ conspired to sell 500 grams or more of cocaine.  During the course of the conspiracy, law enforcement officers observed several defendants participate in the sale of cocaine and crack cocaine to confidential informants working with law enforcement and to an undercover law enforcement officer.  Law enforcement officers using court-authorized wiretaps also intercepted numerous communications in which the defendants discussed trafficking cocaine and crack and arranged sales of both narcotics. 

*              *             *

A chart containing the names of the defendants, and the charges and maximum penalties they face, is attached.        

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

Mr. Bharara praised the outstanding investigative work of the FBI, the Rockland County District Attorney’s Office, the Rockland County Drug Task Force, and the Town of Haverstraw Police Department. 

These cases are being handled by the Office’s White Plains Division.  Assistant United States Attorneys Christopher Clore and Lauren Schorr are in charge of the prosecutions.

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

 

CHARGE

DEFENDANT

AGE
 

RESIDENCE

MAXIMUM PENALTIES

Narcotics conspiracy – Crack cocaine

(Conspiracy to distribute and possess with intent to distribute crack cocaine, in violation of 21 U.S.C. §§ 846, 841(a)(1) & 841(b)(1)(A))

JEMEL GOODE, a/k/a “J Rock”

34

Congers, New York

Life in prison

 

Mandatory minimum: 10 years in prison

BENANCIO CABA, a/k/a “Bennie Caba”

27

Haverstraw, New York

LASEAN GOODE, a/k/a “Bones”

31

W. Haverstraw, New York

NATHANIEL SAUNDERS, SR.

44

Haverstraw, New York

NATHANIEL SAUNDERS, JR., a/k/a “Quan,”

22

Haverstraw, New York

DUANE TAYLOR, a/k/a “Daquan Jenkins,” a/k/a “Antwan Scott”

36

Haverstraw, New York

SHARRAHN WALTON

19

Haverstraw, New York

Narcotics conspiracy – Cocaine (Conspiracy to distribute and possess with intent to distribute cocaine, in violation of 21 U.S.C. §§ 846, 841(a)(1) & 841(b)(1)(B))

BENANCIO CABA, a/k/a “Bennie Caba”

27

Haverstraw, New York

Maximum of 40 years in prison

Mandatory minimum: 5 years in prison

ALEXANDER SCUDDER

35

Nyack, New York

EDWIN HILARIO

30

Haverstraw, New York

QUELVIN LOPEZ

32

Haverstraw, New York

ANEUDI JIMENEZ, a/k/a “Fat Bastard”

34

W. Haverstraw, New York

 

---

[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.

Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and William J. Bratton, the Commissioner of the New York City Police Department (“NYPD”) announced the unsealing this morning of an indictment charging six defendants:  NASHEAN FOLDS, a/k/a “Snow,” a/k/a “Nae Heffner,” DAVID HIGHTOWER, a/k/a “Haze,” GREGORY LUCK, a/k/a “Boogz,” a/k/a “Boogley,” TREMAIN MOORE, a/k/a “Trey Dub,” a/k/a, “Frass,” COREY ROPER, a/k/a “Sneaks,” and ANTWONE WASHINGTON, a/k/a “Bigbank Gotti,” a/k/a “Adam Reyes.”  Each defendant was charged with conspiracy to commit sex trafficking of minors, sex trafficking of minors, and conspiracy to travel in interstate commerce and use facilities in interstate commerce to promote sex trafficking.  ROPER was also charged with kidnapping.  HIGHTOWER and MOORE were arrested on June 13, 2016 pursuant to a criminal complaint containing related charges and have been in federal custody since that time.  LUCK, FOLDS, and ROPER were arrested yesterday and presented in Manhattan federal court before Magistrate Judge Barbara Moses.  WASHINGTON remains at large.  The case is assigned to United States District Judge Naomi Reice Buchwald. 

Manhattan U.S. Attorney Preet Bharara said:  “The six defendants in this case allegedly trafficked minors for the purpose of using them as sex workers.  The defendants’ alleged crime is particularly insidious in that they selected the victims specifically because of their vulnerable nature and their inability to fend for themselves. This office, along with our law enforcement partners at the FBI and NYPD, will continue to find, investigate and prosecute those engaged in sex trafficking.”  

FBI Assistant Director-in-Charge Diego Rodriguez said:  “Contrary to what some believe, the teenagers who get tangled up in the sex trade don’t do it for fun when they are abused and belittled by their pimps.  These men allegedly knew exactly how to manipulate the girls in this case, and used their vulnerabilities against them so the subjects could make some cash.  The FBI and our law enforcement partners are out every day and night doing all we can to track down the victims and stop the pimps from moving on to their next targets.” 

New York Police Commissioner William J. Bratton said: “As alleged, the individuals preyed upon the vulnerable and uneducated, exploiting children for sex and profit. Protecting children is the most important work this department does. I am particularly proud of the detectives and agents who arrested those who carried out these heinous crimes that are alleged in today’s indictment.”

As alleged in the Indictment, the Complaint against HIGHTOWER and MOORE, and in other documents previously filed in Manhattan federal court[1]:

Beginning in or about February 2015 through the present, each of the defendants agreed to engage in sex trafficking of minor female victims, and actually did traffic at least four minor female victims in the Southern District of New York and elsewhere, and also agreed to travel in interstate commerce and use facilities of interstate commerce to promote their sex trafficking activities.

ROPER is also charged with kidnapping a female victim in or about February 2016.

As explained in the Complaint, sex traffickers like the defendants typically recruit vulnerable minor victims who lack education, a stable home, family support, and who have suffered past physical and emotional trauma.  Sex traffickers often use their minor victims’ need for shelter, stability, and affection as a means to sexually exploit their victims for their own financial gain.  Similarly, such sex traffickers or pimps often prey on young adult women who suffer many of the same vulnerabilities.  Once these sex traffickers have recruited victims, they advertise them on websites dedicated to “escort” services and on classifieds websites.  To evade detection by law enforcement, advertisements are posted in the adult entertainment section of the website and purport to offer individuals as mere escorts, but the advertisements signal that they are, in fact, offering individuals for sale for commercial sex acts.

It is also common for domestic sex traffickers to set rules for their victims, control their actions, and take their earnings.  Often, if a victim violates one of the rules set by a sex trafficker, punishment is meted out in the form of physical violence.  A violation of the rules could include, among other things, failing to answer the trafficker’s phone calls, leaving the area where the victim is supposed to be soliciting or servicing customers, not making enough money for the day, or holding back money from the sex trafficker.

In or about March 2016, prior to being charged in the Complaint, MOORE and HIGHTOWER were arrested on state charges after they brought three minor victims to Athens, Georgia, to promote their sex trafficking enterprise.   

*                      *                     *

FOLDS, 20, is from Staten Island; LUCK, 20, WASHINGTON, 24, ROPER, 24, HIGHTOWER, 23, and MOORE, 22, are all from Queens, New York.  All of the defendants face a maximum term of life in prison.  

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

A chart containing the names of the defendants, and the charges and maximum penalties they face, is attached.        

Mr. Bharara praised the outstanding investigative work of the New York City Police Department’s Human Trafficking Team and the Federal Bureau of Investigation.  Mr. Bharara also thanked the Georgia Bureau of Investigation, the District Attorney’s Office for Athens-Clarke County, the U.S. Attorney’s Office for the Middle District of Georgia, the Department of Homeland Security Investigations, the U.S. Attorney’s Office for the District of New Jersey, the Office of the State Attorney for the Third Judicial Circuit, the Nassau County District Attorney’s Office, the Nassau County Police Department, the Office of the Middlesex County Prosecutor, and the Edison New Jersey Police Department for their critical support and cooperation throughout the investigation.

The prosecution is being handled by the Office’s General Crimes Unit.  Assistant U.S. Attorneys Amanda L. Houle and Lara Pomerantz are in charge of the prosecution.

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

16-218                                                               ###

CHARGES

DEFENDANTS

MAXIMUM PENALTIES

Sex trafficking conspiracy

NASHEAN FOLDS

DAVID HIGHTOWER

GREGORY LUCK

TREMAINE MOORE

COREY ROPER

ANTWONE WASHINGTON

Life in prison

 

 

Sex trafficking of a minor

NASHEAN FOLDS

DAVID HIGHTOWER

GREGORY LUCK

TREMAINE MOORE

COREY ROPER

ANTWONE WASHINGTON

Life in prison

Mandatory minimum: 15 years in prison

Kidnapping

COREY ROPER

Life in prison

 

Conspiracy to use and travel in interstate commerce to promote unlawful activity

NASHEAN FOLDS

DAVID HIGHTOWER

GREGORY LUCK

TREMAINE MOORE

COREY ROPER

ANTWONE WASHINGTON

5 years in prison

 

 

 

 

 

 

---

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

Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), William J. Bratton, Commissioner of the New York City Police Department (“NYPD”), and James A. McCarty, Acting District Attorney for Westchester County, announced today the unsealing of an Indictment charging 46 defendants for their alleged roles in a sprawling and long-running racketeering conspiracy composed of leaders, members, and associates of the Genovese, Gambino, Luchese, Bonanno, and Philadelphia Organized Crime Families of La Cosa Nostra (“LCN”), who worked together to engage in a multitude of criminal activities throughout the East Coast of the United States between Springfield, Massachusetts, and Southern Florida (the “East Coast LCN Enterprise” or the “Enterprise”).  The defendants are charged with racketeering conspiracy, arson, illegal trafficking in firearms, and conspiracy to commit assault in aid of racketeering. 

Thirty-nine of the defendants charged were taken into custody today.  During the arrests, law enforcement officers recovered, among other items, three handguns, a shotgun, gambling paraphernalia, and more than $30,000 in cash.

Two defendants, CONRAD IANNIELLO and PASQUALE MAIORINO, a/k/a “Patty Boy,” were already in federal custody on other charges.  Another defendant, JOHN LEMBO, was already in custody on state charges and will be transferred to federal custody.  Six defendants, JOSEPH MERLINO, a/k/a “Joey,” PASQUALE CAPOLONGO, a/k/a “Patsy,” a/k/a “Pat C.,” a/k/a “Mustache Pat,” a/k/a “Fish,” FRANK TRAPANI, a/k/a “Harpo,” CARMINE GALLO, CRAIG BAGON, BRADLEY SIRKIN, a/k/a “Brad,” were arrested this morning in Florida, and will be presented in federal court in West Palm Beach later today.  Two defendants, FRANCESCO DEPERGOLA, a/k/a “Frank,” and RALPH SANTANIELLO were arrested this morning in Massachusetts, where they face additional federal charges, and will be presented in federal court in Springfield, Massachusetts later today.  All other defendants arrested today will be presented in Manhattan federal court before U.S. Magistrate Judges Barbara Moses, Frank Maas, and Gabriel W. Gorenstein this afternoon.  Two defendants, NICHOLAS DEVITO, a/k/a “Nicky,” and ANTHONY CIRILLO, surrendered today.  One defendant, HAROLD THOMAS, a/k/a “Harry,” is expected to surrender in the next few days.  Three defendants, ANTHONY CAMISA, a/k/a “Anthony the Kid,” LAURENCE KEITH ALLEN, a/k/a “Keith Allen,” and WAYNE KREISBERG remain at large.  The case is assigned to United States District Judge Richard J. Sullivan.

Manhattan U.S. Attorney Preet Bharara said: “Today’s charges against 46 men, including powerful leaders, members and associates of five different La Cosa Nostra families, demonstrate that the mob remains a scourge on this city and around the country.  From loansharking and illegal gambling, to credit card and health care fraud, and even firearms trafficking, today’s mafia is fully diversified in its boundless search for illegal profits.  And as alleged, threatening to assault, maim and kill people who get in the way of their criminal schemes remains the go-to play in the mob’s playbook.”

FBI Assistant Director-in-Charge Diego Rodriguez said:  “The indictment reads like an old school mafia novel, where extortion, illegal gambling, arson and threats to ‘whack’ someone are carried out along with some modern-day crimes of credit card skimming. But the 40-plus arrests of mob associates, soldiers, capos, and a boss this morning show this isn’t fiction. As alleged, Genovese, Gambino, Luchese, and Bonanno LCN crime families are still carrying out their criminal activities from Mulberry Street here in New York City to areas of Springfield, Massachusetts. The FBI, working with our task force partners from the New York Police Department, are just as steadfast investigating and rooting out organized crime as wise guys are to bringing it our streets. We thank all our partners on this multi-year investigation, including the FBI field offices from New Haven, Newark, Miami and Boston for their assistance with operations.”

NYPD Commissioner William J. Bratton said:  “The charges applied today to these 46 individuals deal a significant blow to La Cosa Nostra, which the NYPD is committed to putting out of business.  As alleged, in typical mob fashion, the rackets ran from Springfield to South Florida and left no scheme behind. These mobsters seemed to use every scheme known to us, from arson, to shake-downs, violence, health care fraud, and even untaxed cigarettes to keep the racket going.  I want to thank my friends Preet Bharara and Diego Rodriguez for their work at the Justice Department and FBI for making today’s case possible and their collaborative efforts during my tenure as Commissioner of the NYPD.”   

Westchester County Acting District Attorney James A. McCarty said: “I want to congratulate the prosecutors and investigators whose combined efforts resulted in today’s indictment.  Those charged with these crimes believe they can commit them at will, undetected and without consequence.  These dedicated members of law enforcement through their actions, have made it clear that those individuals who commit these crimes will be rooted out.”

According to the allegations in the Indictment[1], which was filed in Manhattan federal court, and other publicly filed documents:

The instant charges are the culmination of a multi-year joint investigation conducted by the Federal Bureau of Investigation (“FBI”), FBI-NYPD Organized Crime Task Force, the Westchester County District Attorney’s Office, the New York City Police Department (“NYPD”), and this Office.  The evidence includes thousands of hours of consensual recordings obtained by a cooperating witness (“CW-1”) and an FBI Special Agent working in an undercover capacity (“UC-1”).  CW-1 worked under PASQUALE PARRELLO, a/k/a “Patsy,” believed to be a Genovese Capo in charge of a crew based out of a restaurant that bears his name in the Bronx, New York (Pasquale’s Rigoletto, hereinafter “Rigoletto”).  At one point, with PARRELLO’S approval, CW-1 began working under JOSEPH MERLINO, a/k/a “Joey,” believed to be the Boss of the Philadelphia Crime Family, who resided in southern Florida for part of the year.  UC-1 worked under EUGENE O’NOFRIO, a/k/a “Rooster,” a Genovese Acting Capo in charge of crews on Mulberry Street in New York, New York, and Springfield, Massachusetts.  As evidenced by the consensual recordings made by CW-1 and UC-1, the myriad criminal schemes pursued by PARRELLO, MERLINO, O’NOFRIO, and their underlings were in many respects intertwined.

The Enterprise charged in the Indictment is composed of leaders, members, and associates of the Genovese, Gambino, Luchese, Bonanno, and Philadelphia Crime Families of LCN, who worked together and coordinated with each other to engage in a multitude of criminal activities throughout the East Coast of the United States, including in Springfield, Massachusetts, the Bronx and Manhattan, Philadelphia, Pennsylvania, and Southern Florida.  The members of the Enterprise have been involved in gambling, extortionate collection of loans, other extortion activities, arson, conspiracies to commit assaults in aid of racketeering, trafficking in unstamped and cigarettes, gun trafficking, access device fraud, and health care fraud.  The members of the Enterprise include, but are not limited to, PASQUALE PARRELLO, a/k/a “Patsy,” a/k/a “Pat,” JOSEPH MERLINO, a/k/a “Joey,” EUGENE O’NOFRIO, a/k/a “Rooster,” CONRAD IANNIELLO, ISRAEL TORRES, a/k/a “Buddy,” ANTHONY ZINZI, a/k/a “Anthony Boy,” ANTHONY VAZZANO, a/k/a “Tony the Wig,” a/k/a “Muscles,” ALEX CONIGLIARO, FRANK BARBONE, RALPH BALSAMO, PASQUALE MAIORINO, a/k/a “Patty Boy,” JOHN SPIRITO, a/k/a “Johnny Joe,” VINCENT CASABLANCA, a/k/a “Vinny,” MARCO MINUTO, PAUL CASSANO, a/k/a “Paul Cassone,” DANIEL MARINO, JR., a/k/a “Danny,” JOHN LEMBO, a/k/a “Johnny,” MITCHELL FUSCO, a/k/a “Mitch,” REYNOLD ALBERTI, a/k/a “Randy,” VINCENT TERRACCIANO, a/k/a “Big Vinny,” JOSEPH TOMANELLI, a/k/a “Joe,” AGOSTINO CAMACHO, a/k/a “Augie,” NICHOLAS DEVITO, a/k/a “Nicky,” ANTHONY CASSETTA, a/k/a “Tony the Cripple,” NICHOLAS VUOLO, a/k/a “Nicky the Wig,” BRADFORD WEDRA, MICHAEL POLI, a/k/a “Mike Polio,” PASQUALE CAPOLONGO, a/k/a “Patsy,” a/k/a “Pat C.,” a/k/a “Mustache Pat,” a/k/a “Fish,” ANTHONY DEPALMA, a/k/a “Harpo,” a/k/a “Harp,” JOHN TOGNINO, a/k/a “Tugboat,” MARK MAIUZZO, a/k/a “Stymie,” JOSEPH DIMARCO, HAROLD THOMAS, a/k/a “Harry,” RICHARD LACAVA, a/k/a “Richie,” VINCENT THOMAS, a/k/a “Vinny,” ANTHONY CAMISA, a/k/a “Anthony the Kid,” FRANK TRAPANI, a/k/a “Harpo,” ANTHONY CIRILLO, CARMINE GALLO, JOSEPH FALCO, a/k/a “Joe Cub,” FRANCESCO DEPERGOLA, a/k/a “Frank,” RALPH SANTANIELLO, LAURENCE KEITH ALLEN, a/k/a “Keith Allen,” CRAIG BAGON, BRADLEY SIRKIN, a/k/a “Brad,” and WAYNE KREISBERG, the defendants.

To protect and expand the Enterprise’s business and criminal operations, members and associates of the Enterprise assaulted, threatened to assault, and destroyed the property of people who engaged in activity that jeopardized: (i) the power and criminal activities of the Enterprise and the power and criminal activities of their respective LCN Families; (ii) the power of leaders of the Enterprise; and (iii) the flow of criminal proceeds to the leaders of the Enterprise.  Members and associates of the Enterprise promoted a climate of fear in the community through threats of economic harm and violence, as well as actual violence, including assault and arson.  Members and associates of the Enterprise generated or attempted to generate income for the Enterprise through firearms trafficking, extortion, operating illegal gambling businesses, health care fraud, credit card fraud, selling untaxed cigarettes, making extortionate extensions of credit, and other offenses.  Members and associates of the Enterprise at times engaged in criminal conduct or coordinated their criminal activities with leaders, members, and associates of their respective LCN Families.  At other times, members and associates of the Enterprise met with leaders, members, and associates of their respective LCN Families to resolve disputes over their criminal activities.

Enterprise members PASQUALE PARRELLO, a/k/a “Patsy,” a/k/a “Pat,” JOSEPH MERLINO, a/k/a “Joey,” and EUGENE O’NOFRIO, a/k/a “Rooster,” the defendants, supervised and controlled other members of the Enterprise engaged in illegal schemes, including those that were the objects of the conspiracy.  At various times, members and associates of the Enterprise (including those who are leaders, members, and associates of different LCN families) met, coordinated, and worked together with PARRELLO, MERLINO, and O’NOFRIO, and each other, as well as other members and associates of their respective LCN Families, to engage in criminal activity.

To avoid law enforcement scrutiny, members and associates of the Enterprise conducted meetings surreptitiously, typically using coded language to make arrangements for meetings, and meeting at rest stops along highways and at restaurants.

Certain members and associates of the Enterprise engaged in and conspired to engage in the following violent crimes: 

Arson of Vehicle Belonging to Victim-1

In early 2011, an individual (“Victim-1”) operated an illegal gambling establishment on Saw Mill River Road, Yonkers, New York, which was around the corner from a similar establishment (the “Yonkers Club”) run by ANTHONY ZINZI, a/k/a “Anthony Boy,” and other associates of the charged Enterprise.  ZINZI and others paid PARRELLO tribute from the profits from the Yonkers Club. 

While PARRELLO was on federal supervision stemming from a federal conviction in this Court, the Yonkers Club struggled.  Indeed, Victim-1’s club was more successful than the Yonkers Club.  ZINZI suggested to other members of the conspiracy that they light Victim-1’s vehicle on fire while it was outside of Victim-1’s club.  Then, on or about March 7, 2011, co-defendant MARK MAIUZZO, a/k/a “Stymie,” and others not charged in the above-referenced Indictment located Victim-1’s vehicle, poured gasoline into the vehicle, and lit it on fire.

Conspiracy to Assault and Assault of Victim-2

On or about June 5 and 6, 2011, PARRELLO ordered ZINZI and Ronald “The Beast” Mastrovincenzo (now deceased) to assault a panhandler (“Victim-2”) in the area of Arthur Avenue and Fordham Road, Bronx, New York.  ZINZI and Mastrovincenzo enlisted the help of ISRAEL TORRES, a/k/a “Buddy,” and others.  Victim-2 had been bothering some female customers in the parking lot nearby Rigoletto, and these women complained to PARRELLO. 

ZINZI, TORRES, Mastrovincenzo, and others, on PARRELLO’s orders to “break” Victim-2’s knees, went looking for Victim-2.  Eventually, Victim-2 was beaten by Mastrovincenzo and CW-1 (prior to CW-1’s cooperation with the Government).   A New York State wiretap revealed that after the beating, Mastrovincenzo told ZINZI, in sum and substance: “[r]emember the old days in the neighborhood when we used to play baseball? . . . A ball game like that was done.”  After the beating, TORRES and ZINZI helped Mastrovincenzo and CW-1 in hiding and disposing of evidence. 

Conspiracy to Extort Victim-1

PASQUALE CAPOLONGO, a/k/a “Patsy,” a/k/a “Pat C.,” a/k/a “Mustache Pat,” a/k/a “Fish,” a Luchese associate and longtime bookmaker, placed large bets on behalf of several “professional gamblers,” to help conceal their status as professionals.  CAPOLONGO also placed bets himself as a gambler.  In 2011, CW-1 gave CAPOLONGO access to gambling accounts controlled by individuals known as bookmakers so that CAPOLONGO could place bets on those accounts on behalf of professional gamblers.  In turn, CW-1 received approximately 10 percent of the winnings and was also responsible to the bookmaker for the losses.  As part of this arrangement, in late 2011, CAPOLONGO obtained betting accounts on Victim-1’s book through CW-1.  In December 2011, CAPOLONGO, on behalf of his bettors, won approximately $30,000 from sports wagers CAPOLONGO placed in Victim-1’s book.  Victim-1 refused to pay CAPOLONGO. 

On or about December 12, 2011, CW-1 met with PARRELLO and explained that CAPOLONGO won approximately $30,000 on sports wagers and that CW-1 was unable to collect because Victim-1 was refusing to pay despite CW-1’s affiliation with PARRELLO.  CW-1 asked PARRELLO to intervene on his behalf and sought assistance in collecting the approximately $30,000 debt from Victim-1.  PARRELLO agreed to help collect the debt.  

Between about December 2011 and March 2014, PARRELLO sent ZINZI, TORRES, VINCENT TERRACCIANO, a/k/a “Big Vinny,” and others to threaten and intimidate Victim-1, and collect the money for the debt.  On one such occasion, PARRELLO told them: “You get Buddy [TORRES] and let Buddy go there and choke him [Victim-1], choke him.  I want Buddy to choke him, choke him, actually choke the motherfucker…and tell him, ‘Listen to me…next time I’m not gonna stop choking… I’m gonna kill you.’” 

Conspiracy to Extort Victim-3

Victim-3 was working as a bookmaker and had accounts with defendant JOHN TOGNINO, a/k/a “Tugboat,” who worked under by ALEX CONIGLIARO.  CONIGLIARO suspected that Victim-3 had allowed professional bettors to place bets and, as a result of their winning bets, CONIGLIARO owed approximately $400,000 to the winning bettors. 

On or about February 21, 2012, PARRELLO summoned Victim-3 to Rigoletto.  There, CONIGLIARO, PARRELLO, and IANNIELLO confronted Victim-3 in a small room in the basement of the restaurant, threatening and intimidating him.  Ultimately, CONIGLIARO refused to pay the money owed.

Conspiracy to Extort Victim-4

An unindicted co-conspirator (“CC-1”) operated a gambling club in the Bronx, New York.  CC-1 was affiliated with PARRELLO, and, from in or about 2012 to in or about 2013, CC-1 paid PARRELLO approximately $500 per week in tribute in connection with the Bronx gambling club.  Another individual, Victim-4, owed tens of thousands of dollars to CC-1.  PARRELLO directed CW-1 to find Victim-4 to collect the money.  TORRES and co-defendant JOHN SPIRITO, a/k/a “Johnny Joe,” a made member of the Bonanno family, tried to get a picture of Victim-4.  The plan was to identify Victim-4, bring Victim-4 to an isolated area, and confront Victim-4 about the debt.

Conspiracy to Extort Victim-5

Victim-5 was a gambler who gave CW-1 access to gambling accounts.  As a result, Victim-5 incurred a debt that he did not pay.  At the same time, Victim-5 separately owed money to defendants VINCENT CASABLANCA, a/k/a “Vinny,” and PASQUALE MAIORINO, a/k/a “Patty Boy,” members of the Luchese and Bonanno crime families, respectively.  PARRELLO worked with others, including members of the Genovese and Bonanno crime families, to ensure that Victim-5 paid the debt.  Among other things, PARRELLO stated, in a recorded conversation, that members of PARRELLO’s crew should:

[C]ut his [Victim-5’s] fuckin’ tire.  That way he has to change the tire.  So then you know you can catch up with him. Give him a flat.  Take the air out of the tire, whatever the fuck you got to do.  Then you catch up with him because then he’s there, ya know, he’s got to get it fixed, he can’t go nowhere, and then you surround the mother fucker.  That’s how yous do it.

PARRELLO further stated, “go ahead, get this motherfucker.  Don’t make a mistake.  Get your fuckin’ money.”  Co-defendant ZINZI provided an icepick to use to slash the tire of Victim-5’s car in order to carry out PARRELLO’s order.  Eventually, Victim-5 agreed to make weekly payments on Victim-5’s outstanding debt. 

Conspiracy to Assault Victim-6

On or about January 22, 2013, Genovese associate and defendant ANTHONY VAZZANO, a/k/a “Tony the Wig,” a/k/a “Muscles,” was stabbed in the neck by Victim-6 during an altercation at a bar in the Bronx, New York (the “Bar”).  VAZZANO was at the Bar with Mastrovincenzo and others when the stabbing occurred.  After that, associates of PARRELLO’s crew, including Mastrovincenzo and TORRES, among others, at PARRELLO’s direction, agreed to assault Victim-6 in retaliation for the stabbing.  During one such conversation, TORRES stated that they would “whack” and “maim this mother fucker [Victim-6].”  PARRELLO instructed Mastrovincenzo to “keep the pipes handy and pipe him, pipe him, over here [gesturing to the knees], not on his head.”     

Gun Trafficking

Between about January and March 2012, MITCHELL FUSCO, a/k/a “Mitch,” sold eleven firearms on three separate dates to CW-1.  Mastrovincenzo also sold guns to CW-1 and the Enterprise, including six firearms on five separate occasions between 2012 and 2013.  During a June 27, 2012 consensually recorded conversation, PARRELLO asked CW-1 if the guns were “clean” and directed CW-1 to “get some nines.”

On or about August 20, 2012, CW-1 met with Mastrovincenzo and ZINZI.  During this recorded meeting, Mastrovincenzo asked CW-1 and ZINZI how many guns he should get, and ZINZI told Mastrovincenzo, “at least a hundred.” 

Additional Criminal Activity

In addition to the violent crimes described above, members and associates also conspired to, and in some cases did, work together and coordinate with each other to perpetrate a number of other crimes.

a.         Loansharking.  Members of the East Coast LCN Enterprise, including, but not limited to, PARRELLO, O’NOFRIO, HAROLD THOMAS, VINCENT THOMAS, a/k/a “Vinny,” FRANCESCO DEPERGOLA, a/k/a “Frank,” and RALPH SANTANIELLO, the defendants regularly made and took extortionate loans (“loansharking”) as part of the business of the East Coast LCN Enterprise.  In connection with one such loan, HAROLD THOMAS said to AGOSTINO CAMACHO, a/k/a “Augie,” who owed an outstanding debt to HAROLD THOMAS: “If you don’t have my money the first of the month you will never hear another sound I give you [my] word on that. . . . If you miss don’t call me.  You’ve had enough breaks.  I’ve just given you the biggest break in your life. . . . [I]n about a minute I’m going to go over to the car and take the fucking pistol and I’m going to kill you.”

b.         Gambling.  Illegal gambling was a significant part of the regular course of business of certain members of the East Coast LCN Enterprise.  Dozens of members of the Enterprise engaged in two different types of illegal gambling activities as a way to generate money for the Enterprise: (1) casino-style club gambling and (2) sports gambling.  

i.          Casino-Style Club Gambling.  At various times relevant to the Indictment, PARRELLO, TORRES, ZINZI, VAZZANO, CAMACHO, and MAIUZZO, a/k/a “Stymie,” the defendants operated the above-mentioned Yonkers Club.  Several nights a week, the Yonkers Club held poker tournaments, dice tournaments, and took bets on horse races.  The owners of the Yonkers Club (the “House”) took a percentage of the gambling proceeds.  Additionally, the Yonkers Club generated profits through the installation of illegal poker machines. 

ii.         Sports Gambling.  At various times relevant to the Indictment, multiple members of the East Coast LCN Enterprise operated several gambling operations as a way to enrich the Enterprise. Members of the Enterprise, playing different roles in the sports gambling operations, utilized gambling websites based in the United States and abroad to keep track of wagers and proceeds. 

c.         Cigarettes.  Receiving, causing others to receive, and profiting from the purchase of contraband cigarettes was part of the regular business of certain members of the East Coast LCN Enterprise, including, but not limited to, PARRELLO, O’NOFRIO, TORRES, ZINZI, VAZZANO, SPIRITO, CASABLANCA, REYNOLD ALBERTI, a/k/a “Randy,” TERRACCIANO, JOSEPH TOMANELLI, a/k/a “Joe,” CAMACHO, NICHOLAS DEVITO, a/k/a “Nicky,” NICHOLAS VUOLO, a/k/a “Nicky the Wig,” BRADFORD WEDRA, HAROLD THOMAS, RICHARD LACAVA, a/k/a “Richie,” and VINCENT THOMAS, the defendants.  At various times relevant to the Indictment, these defendants obtained, caused others to obtain, and profited from the obtaining of, hundreds of cases of contraband cigarettes, which did not bear a stamp evincing payment of applicable cigarette taxes, with a street value of more than approximately $3 million. 

d.         Credit Card Fraud Conspiracy.  In or around 2012, PARRELLO, TORRES, PASQUALE MAIORINO, a/k/a “Patty Boy,” JOHN LEMBO, a/k/a “Johnny,” and ALBERTI, the defendants, and others known and unknown, conspired to obtain and use a credit card “skimmer” — a small device that captures and retains unwitting credit card owners’ personal identifying information — to steal credit card information and use the information to create new fraudulent credit cards which could, in turn, be used to make unauthorized purchases. 

e.         Health Care Fraud.  At various times relevant to the Indictment, PARRELLO, MERLINO, RALPH BALSAMO, CAMACHO, DEVITO, MICHAEL POLI, a/k/a “Mike Polio,” CARMINE GALLO, BRAD SIRKIN, a/k/a “Brad,” and WAYNE KREISBERG, the defendants, were involved in a scheme targeting providers of health insurance (the “Victim Insurers”), by causing, and causing others to cause, corrupt doctors to issue unnecessary and excessive prescriptions for expensive compound cream (“Prescription Compound Cream”) that were then billed to the Victim Insurers.  Had the Victim Insurers known the fraudulent nature of the scheme — that wrongful kickbacks were paid to doctors to write, and to patients to request and receive, unnecessary and excessive prescriptions for the Prescription Compound Cream — the Victim Insurers would not have issued reimbursements for the Prescription Compound Cream.

*          *          *

A chart containing the ages, residency information, and charges against the defendants, as well as the maximum penalties they face is attached.  The maximum penalties 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. Bharara praised the work of the Federal Bureau of Investigation in this case. He thanked the NYPD for their assistance. Mr. Bharara also noted that the investigation is continuing.

Assistant U.S. Attorneys Amanda Kramer, Abigail Kurland, Jessica Lonergan, and Jonathan Rebold, along with Special Assistant U.S. Attorney Lauren Abinanti of the Westchester County District Attorney’s Office, are in charge of the prosecution.  The case is being handled by the Office’s Violent and Organized Crime Unit.

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

UNITED STATES V.  PARRELLO, ET AL.

 

DEFENDANT

AGE

CITY OF RESIDENCE

CHARGES

MAX SENT.

Alberti, Reynold

47

Bronx, NY

18 U.S.C. § 1962(d)

20 years

Allen, Laurence Keith

46

Costa Rica

18 U.S.C. § 1962(d)

20 years

Bagon, Craig

56

Boca Raton, FL

18 U.S.C. § 1962(d)

20 years

Balsamo, Ralph

46

Bronx, NY

18 U.S.C. § 1962(d)

20 years

Barbone, Frank

44

Queens, NY

18 U.S.C. § 1962(d)

20 years

Camacho, Agostino

40

Yonkers, NY

18 U.S.C. § 1962(d)

20 years

Camisa, Anthony

24

Unknown

18 U.S.C. § 1962(d)

20 years

Capolongo, Pasquale

67

West Palm Beach, FL

18 U.S.C. § 1962(d)

20 years

Casablanca, Vincent

49

Bronx, NY

18 U.S.C. § 1962(d)

20 years

Cassano, Paul

37

Nanuet, NY

18 U.S.C. § 1962(d)

20 years

Cassetta, Anthony

48

Belmar, NJ

18 U.S.C. § 1962(d)

20 years

Cirillo, Anthony

51

Englewood Cliffs, NJ

18 U.S.C. § 1962(d)

20 years

Conigliaro, Alex

56

Staten Island, NY

18 U.S.C. § 1962(d)

20 years

Depalma, Anthony

70

Stony Point, NY

18 U.S.C. § 1962(d)

20 years

Depergola, Francesco

60

Springfield, MA

18 U.S.C. § 1962(d)

20 years

Devito, Nicholas

64

Monticello, NY

18 U.S.C. § 1962(d)

20 years

DiMarco, Joseph

46

Bronx, NY

18 U.S.C. § 1962(d)

20 years

Falco, Joseph

72

Bronx, NY

18 U.S.C. § 1962(d)

20 years

Fusco, Mitchell

52

Yonkers, NY

18 U.S.C. § 1962(d)

18 U.S.C. § 922(a)(1)(A) &

18 U.S.C. 2

20 years

5 years

Gallo, Carmine

38

Delray Beach, FL

18 U.S.C. § 1962(d)

20 years

Ianniello, Conrad

72

In Custody

18 U.S.C. § 1962(d)

20 years

Kreisberg, Wayne

39

Parkland, FL

18 U.S.C. § 1962(d)

20 years

LaCava, Richard

67

Pelham, NY

18 U.S.C. § 1962(d)

20 years

Lembo, John

50

In Custody

18 U.S.C. § 1962(d)

20 years

Maiorino, Pasquale

56

In Custody

18 U.S.C. § 1962(d)

20 years

Maiuzzo, Mark

37

Scarsdale, NY

18 U.S.C. § 1962(d), 18 U.S.C. § 844(h) &

18 U.S.C. § 2

20 years

10 years

Marino, Jr., Daniel

49

Short Hills, NJ

18 U.S.C. § 1962(d)

20 years

Merlino, Joseph

54

Boca Raton, FL

18 U.S.C. § 1962(d)

20 years

Minuto, Marco

80

Upper Saddle River, NJ

18 U.S.C. § 1962(d)

20 years

O’Nofrio, Eugene

74

East Haven, CT

18 U.S.C. § 1962(d)

20 years

Parrello, Pasquale

72

Tuckahoe, NY

18 U.S.C. § 1962(d), 18 U.S.C. § 1959(a)(6)

20 years

20 years

Poli, Michael

31

Bronx, NY

18 U.S.C. § 1962(d)

20 years

Santaniello, Ralph

49

Longmeadow, MA

18 U.S.C. § 1962(d)

20 years

Sirkin, Bradley

54

Boca Raton, FL

18 U.S.C. § 1962(d)

20 years

Spirito, John

34

Bronx, NY

18 U.S.C. § 1962(d)

20 years

Terracciano, Vincent

40

Yonkers, NY

18 U.S.C. § 1962(d)

20 years

Thomas, Harold

71

Bronx, NY

18 U.S.C. § 1962(d)

20 years

Thomas, Vinny

69

Bronx, NY

18 U.S.C. § 1962(d)

20 years

Tognino, John

74

Bronx, NY

18 U.S.C. § 1962(d)

20 years

Tomanelli, Joseph

70

Yonkers, NY

18 U.S.C. § 1962(d)

20 years

Torres, Israel

66

Queens, NY

18 U.S.C. § 1962(d), 18 U.S.C. § 1959(a)(6)

20 years

20 years

Trapani, Frank

63

Boca Raton, FL

18 U.S.C. § 1962(d)

20 years

Vazzano, Anthony

51

Brewster, NY

18 U.S.C. § 1962(d)

20 years

Vuolo, Nicholas

71

Bronx, NY

18 U.S.C. § 1962(d)

20 years

Wedra, Bradford

61

Mt. Vernon, NY

18 U.S.C. § 1962(d)

20 years

Zinzi, Anthony

73

Bronx, NY

18 U.S.C. § 1962(d), 18 U.S.C. § 844(h) &

18 U.S.C. § 2

20 years

10 years

 

 

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

U.S. Attorney Preet Bharara said:  “Commissioner Bratton has been a great leader of the finest police force in the world.  For his strong stewardship of the NYPD during these challenging times for law enforcement, every New Yorker owes him a debt of gratitude.  Over a long career, on both coasts, no one has done more for policing and public safety in America’s largest cities than Bill Bratton.  Under his leadership, the relationship between the NYPD and our office is as strong as ever.  He has become a personal friend to me and a great law enforcement partner to my office.  I thank him for his service to the people of our great city and all the others he has served around the country during his long and distinguished career in public life.”

 

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