Southern District of New York

Preet Bharara, the United States Attorney for the Southern District of New York, James R. Farrell, the Sullivan County District Attorney, Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (“FBI”), Joseph A. D’Amico, the Superintendent of the New York State Police (“NYSP”), Michael A. Schiff, the Sullivan County Sheriff, Scott Kinne, the Chief of the Village of Liberty Police, and Robert Mir, the Chief of the Village of Monticello Police Department, today announced the unsealing of an Indictment charging a total of 21 defendants with committing various narcotics and firearms offenses in the Village of Liberty, Sullivan County, New York.

Manhattan U.S. Attorney Preet Bharara stated: “Drugs destroy lives, rip apart families, and fuel a cycle of addiction and violence in our communities.  With the federal drug and gun charges brought today, we seek to incapacitate two different drug rings that have for years been selling heroin and crack cocaine, and protecting their business with guns, in Sullivan County and specifically, in the Village of Liberty.”

Sullivan County District Attorney James R. Farrell stated: “The investigation into the distribution of dangerous narcotics in Sullivan County by local, county, state and federal law enforcement continues to move forward, at full speed, with the twenty-one arrests made today.  Those who traffic in dangerous narcotics in Sullivan County are on notice that all law enforcement agencies, at every level, are working together, every single day, to put you out of business and to hold you accountable for your actions through investigation, arrest and prosecution.” 

FBI Assistant Director-in-Charge Diego Rodriguez stated: “Heroin is spreading through our communities like a cancer.  It brings with it alleged pushers who use crime and weapons to defend their so called turf, in this case targeting people outside of a drug recovery treatment center of all places.  The FBI’s Hudson Valley Safe Streets Task Force and our law enforcement partners won’t let the disease grow and infect neighborhoods and hamlets in Sullivan County and beyond.”

NYSP Superintendent Joseph A. D’Amico stated: “The combined efforts of federal, state and local law enforcement have put this operation out of business and disrupted the sale of heroin and cocaine in Sullivan County.  This case continues our commitment and partnership to identify, arrest and prosecute anyone who tries to sell these dangerous drugs in our communities.”

Sullivan County Sheriff Michael A. Schiff stated: “Many of our residents have expressed concern over the apparent narcotics activity in their towns and villages. We have heard you loud and clear. Today’s joint law enforcement operation is an attempt to restore the quality of life that our citizens have come to expect and deserve. Make no mistake, we will use every resource available, whether it be Federal, State or local, to find those who are peddling poison to our children and bring them to justice.”

Village of Liberty Police Chief Scott Kinne stated: “Todays arrests are part of the ongoing commitment and cooperation of all of Sullivan County’s law enforcement agencies to investigate and arrest the dealers and distributers who sell heroin and other controlled substances on our streets.  This investigation will have a significant impact on drug sales and other crimes in the Village of Liberty, these types of investigations and arrests make Liberty a safer community, I thank all the agencies who work with us to help rid our communities of drugs and violence.”

Village of Monticello Police Chief Robert Mir stated: “The village of Monticello police department will continue to work with our local, state and federal law enforcement partners in investigating, arresting and successfully prosecuting the indivuals that supply the dangerous drugs that are causing so much misery in our communities.”

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

In at least 2015 and 2016, KYLE JAMES, a/k/a “Killa,” 30, JAMAR SHAW, a/k/a “Double R,” 33, DANIEL FRANCO, a/k/a “Young Papi,” 26, RASHAWN PERRY, a/k/a “Cass,” 29, NORDIA TOMPKINS, a/k/a “Nadia,” 31, JUAN MONTERO, a/k/a “Chino,” 37, LOREN PERRY, a/k/a “Skip,” 41, HERBERT MURPHY, a/k/a “Superb,” a/k/a “Perb,” a/k/a “Alan,” a/k/a “Herbie,” 42, GRADY BLACKMON, 57, CANDICE BROOKINS, 29, ASHLEY EDWARDS, 19, DAVID GUZMAN, 18, PATRICK HILLIARD, 23, CHERYL JERNIGAN, 26, ARIK PERKINS, 22, KEVIN PRIMIANO, 41, MANUEL RIVERA, 20, and NICOLE SNEDEKER, 25, conspired to sell one kilogram or more of heroin.  The conspiracy was led, at different times, by JAMES and SHAW.  Members of the conspiracy distributed heroin in and around the Village of Liberty, New York and other locations in Sullivan County, New York.  Members of the conspiracy regularly sold heroin in the parking lots of businesses, including a nursing home and a drug recovery center, in the Village of Liberty. 

In April 2016, JAMES and LOREN PERRY used, carried, and possessed a firearm in furtherance of the heroin conspiracy in which they were both members.

In at least 2015 and 2016, RICHIERAY SUCCI, 35, MONTERO, JONATHAN PAGAN, a/k/a “JP,” 24, and JASON WOOD, 32, conspired to sell 28 grams or more of crack cocaine, and SUCCI, MONTERO, and WOOD conspired to sell 100 grams or more of heroin.  Members of the conspiracy distributed crack and heroin in and around the Village of Liberty.

*                      *                     *

All 21 defendants were taken into federal custody this morning.  These defendants will be presented in White Plains federal court today before U.S. Magistrate Judge Judith C. McCarthy.                                     

Charts containing the names of the defendants who were charged today, and the charges and maximum penalties they face, are attached.  The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the respective judges.

Mr. Bharara praised the outstanding investigative work of the FBI, the New York State Police, the Sullivan County Sheriff’s Department, the Village of Monticello Police Department, the Village of Liberty Police Department, the Town of Fallsburg Police Department, and the Bureau of Alcohol, Tobacco, Firearms, and Explosives.  Mr. Bharara also thanked the Sullivan County District Attorney’s Office for its ongoing assistance in the case.

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Jennifer Beidel, Maurene Comey, Michael Gerber, and Won Shin 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. Kyle James, et al., 16 Mag. 2293

CHARGE(S)

DEFENDANT(S)

MAXIMUM PENALTIES

Narcotics conspiracy

(Conspiracy to distribute and possess with intent to distribute 1 kilogram or more of heroin.)

KYLE JAMES,

         a/k/a “Killa,”

JAMAR SHAW,

         a/k/a “Double R,”  DANIEL FRANCO,

         a/k/a “Young Papi,”  RASHAWN PERRY,

         a/k/a “Cass,”

NORDIA TOMPKINS,

         a/k/a “Nadia,”

JUAN MONTERO,

        a/k/a “Chino,”

LOREN PERRY,

        a/k/a “Skip,”

HERBERT MURPHY,

        a/k/a “Superb,”

        a/k/a “Perb,”

        a/k/a “Alan,”

        a/k/a “Herbie,”

GRADY BLACKMON, CANDICE BROOKINS, ASHLEY EDWARDS,  DAVID GUZMAN,  PATRICK HILLIARD,  CHERYL JERNIGAN,

ARIK PERKINS,

KEVIN PRIMIANO,  MANUEL RIVERA, and NICOLE SNEDEKER

Life in prison

Mandatory minimum: 10 years in prison

Possession of a firearm in furtherance of a drug trafficking crime

LOREN PERRY,

         a/k/a “Skip,” and

KYLE JAMES,

         a/k/a “Killa”

Life in prison

Mandatory minimum: five years in prison, to be imposed consecutively to any other sentence

Narcotics conspiracy

(Conspiracy to distribute and possess with intent to distribute 28 grams or more of crack cocaine and/or 100 grams or more of heroin.)

RICHIERAY SUCCI,

JUAN MONTERO,

         a/k/a “Chino,”

JONATHAN PAGAN,

         a/k/a “JP,” and

JASON WOOD

40 years in prison

Mandatory minimum:

5 years in prison

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that FABIO PORFIRIO LOBO pled guilty in Manhattan federal court to a charge that he conspired to import cocaine into the United States.  LOBO, who was arrested in the Republic of Haiti on May 20, 2015, and arrived in the United States on May 21, 2015, pled guilty before U.S. District Judge Lorna G. Schofield.  LOBO’s father, Porfirio Lobo, served as president of Honduras between 2010 and 2014.

Manhattan U.S. Attorney Preet Bharara said: “Fabio Lobo has now admitted in court that he conspired to import thousands of kilograms of cocaine into the United States.  Whether you are a street-level dealer, a member of a cartel, or the son of a former foreign president, drug dealing is drug dealing.  It is a serious federal crime for which you will be prosecuted.”

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

In 2014, LOBO agreed to assist two purported Mexican drug traffickers, who were in fact confidential sources (the “CSes”) acting at the direction of the Drug Enforcement Administration (“DEA”), with the transportation of a multi-ton load of cocaine through Honduras so that the narcotics could be imported into the United States.  In exchange, LOBO was to receive a financial interest in a portion of the cocaine that was intended to be sold and distributed in the United States.  In furtherance of the conspiracy, LOBO introduced the CSes to, among others, Honduran police officials who agreed to participate in the cocaine transaction by providing security and logistical support for the transportation of the cocaine through Honduras.  During 2015, in consensually recorded calls and emails between LOBO and one of the CSes, LOBO agreed to travel to Haiti for the purpose of receiving payment from the proceeds of the cocaine transaction.  LOBO subsequently traveled to Haiti in May 2015 and was arrested. 

*                *                *

LOBO, 44, pled guilty to one count of conspiring to (i) import five or more kilograms of cocaine into the United States from a foreign country; and (ii) distribute five or more kilograms of cocaine knowing and intending that it would be imported into the United States.  The charge carries a maximum term of life in prison, and a mandatory minimum term of 10 years in prison.  The minimum and 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.

LOBO will be sentenced on September 15, 2016. 

Mr. Bharara praised the outstanding efforts of the Special Operations Division of the DEA.  Mr. Bharara also thanked the DEA’s Port-au-Prince Country Office, the Government of the Republic of Haiti and its Bureau de Lutte Contre le Trafic Illicite de Stupefiants, and the U.S. Department of Justice’s Office of International Affairs for their ongoing assistance. 

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

Preet Bharara, the United States Attorney for the Southern District of New York announced today that GREGORY RORKE was sentenced to two years in prison for his scheme to defraud investors in his company, Navagate, Inc. (“Navagate”), of more than $3 million dollars.  RORKE pled guilty on May 7, 2015, to one count of securities fraud and one count of wire fraud before U.S. District Court Judge Katherine Polk Failla, who also imposed today’s sentence.

U.S. Attorney Preet Bharara said:  “As he admitted, Gregory Rorke lied to investors while soliciting their investments in his company.  He overstated his own net worth and the tax liabilities of the company.  Today, Rorke, a former professor at Columbia Business School, learned an important lesson in business ethics, as he was sentenced to two years in prison for his crimes.”

According to the Complaint, Indictment, other documents filed in the case, and statements made in open court:

From at least December 2009 through October 2014, RORKE engaged in a fraudulent scheme to mislead investors into making investments in a convertible debt offering (the “Navagate Offering”) in his company, Navagate.  RORKE, a former adjunct professor at Columbia Business School, was the co-founder, chief executive, and principal owner of Navagate.  RORKE solicited investments and was involved in the daily management and operation of Navagate.

RORKE solicited investor contributions to the Navagate Offering based on materially false and fraudulent misrepresentations. In particular, RORKE signed and provided to investors a personal guarantee supported by a financial statement. The financial statement falsely indicated that Rorke personally had at least $12 million in assets, including more than $1 million in cash, more than $5 million in “readily marketable securities” and a home worth more than $1 million. In truth, and as RORKE well knew, the majority of the pledged assets did not belong to RORKE.

In addition, in order to obtain access to funds invested by Navagate investors and maintained in an escrow account, RORKE signed a notarized affidavit indicating that he had paid monies owed to the Internal Revenue Service in satisfaction of Navagate’s tax liabilities.  In truth, the tax liabilities had not been paid, remained outstanding, and were actually increasing.

As a result of his fraudulent scheme, RORKE raised approximately $3 million in investor money from more than 30 investors.

*                      *                      *

In addition to the two-year prison term, RORKE, 63, of Manhattan and Bronxville, New York, was sentenced to three years of supervised release.

Mr. Bharara praised the work of the FBI and also thanked the Securities and Exchange Commission, which has brought civil actions against the defendant.

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 Andrea M. Griswold and Michael J. Ferrara are in charge of the prosecution.  

16-123                                              ###

“In the span of just 16 months, we have seen the arrest, prosecution, conviction, and sentencing of both leaders of the New York State legislature.  The nearly simultaneous convictions of Sheldon Silver and Dean Skelos, whose corruption crimes were laid bare during fair and public trials, have no precedent.  And while Silver and Skelos deserve their prison sentences, the people of New York deserve better.  These cases show – and history teaches – that the most effective corruption investigations are those that are truly independent and not in danger of either interference or premature shutdown.  That will continue to be our guiding principle in exposing and punishing corruption throughout New York.  I thank the career investigators and prosecutors in my office, as well as FBI Assistant Director Diego Rodriguez and his entire team for their tremendous work in these two landmark prosecutions.  All New Yorkers who believe in clean government owe them an enormous debt of gratitude.”

Preet Bharara, the United States Attorney for the Southern District of New York, and Thomas P. DiNapoli, the New York State Comptroller, announced today the arrest of JOSEPH GROSSMANN for fraudulently obtaining the pension of a deceased former New York State employee.  The defendant was arrested and presented today in the District of South Carolina. 

Manhattan U.S. Attorney Preet Bharara said:  “As alleged, Joseph Grossmann methodically devised a scheme to steal a deceased New York State employee’s pension money.  He allegedly lied, created fake documents, and deceived state officials to ensure he got his hands on money that didn’t belong to him.  I want to thank New York State Comptroller Thomas DiNapoli for his work to bring Grossmann to account for this conduct.”

State Comptroller Thomas P. DiNapoli said:  “Joseph Grossmann allegedly tried to deceive officials that a deceased New York State employee was alive so he could pocket her retirement checks.  Due to my office’s investigation and our partnership with United States Attorney Preet Bharara, Grossmann’s acts were exposed and he now faces federal prosecution.  My message to would-be pension scammers is this: we will find you no matter what state you are in and recoup what you steal from the retirement system.  I thank U.S. Attorney Bharara for partnering with us in the fight against pension fraud.”

According to the Complaint unsealed today: [1]

From August 2010 until August 2015, GROSSMANN executed a fraud whereby he deceived the New York State and Local Employees’ Retirement System (“NYSLERS”) into believing that a deceased former employee of New York State (“Pensioner-1”) was alive and entitled to continued pension payments.  GROSSMANN then defrauded NYSLERS into depositing the payments into a bank account under GROSSMANN’s control.

Upon her retirement from employment with New York State, Pensioner-1 began to receive pension payments from NYSLERS by electronic deposit or mailed check.  Pensioner-1 received her first payment on February 1, 1999, in the amount of approximately $1,740.  Starting on or about April 30, 1999, Pensioner-1 received a monthly pension payment by either mailed check or electronic deposit. 

Pensioner-1 was reported deceased as of August 5, 2010.  The death certificate filed with the Probate Court in Kershaw County, South Carolina, lists her social security number, date of birth, and place of death, and GROSSMANN is listed as the “informant” of Pensioner-1’s death.  On November 2, 2010, GROSSMANN filed an application for appointment with the same court, seeking to be named the personal representative of Pensioner-1’s estate.  This application was approved on the same day. 

Around the time of Pensioner-1’s death, NYSLERS learned of her death and attempted to verify that she was deceased and thus no longer eligible for pension payments.  NYSLERS sent two letters to Pensioner-1’s last known address of record, and received a phone call in response, explaining that ‘Pensioner-1’ was going to respond to the letter and would provide paperwork showing that her ‘brother’ had been granted her power of attorney.  On November 12, 2010, NYSLERS received a written response to its inquiry.  Included in this response was a copy of the appointment application that GROSSMANN had filed with the probate court, which omitted the portions concerning anything related to the death of Pensioner-1.  This response also included a direct deposit form, requesting that all future pension payments be remitted to an account opened by GROSSMANN on September 17, 2010 – approximately six weeks after Pensioner-1’s death.  Since that time, approximately 61 pension payments totalling approximately $130,624.15 have been made by either check or wire.   

*                      *                      *

GROSSMANN, 67, of Camden, South Carolina, is charged with one count of conspiracy to commit wire fraud, 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.

Mr. Bharara praised the work of the New York State Comptroller’s Office.  He also thanked the United States Marshal’s Service for its assistance in the arrest of the defendant.

This case is being handled by the Office’s General Crimes Unit.  Assistant U.S. Attorney Jason A. Richman is in charge of the prosecution.  

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

[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth 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, Madeline Singas, the Nassau County District Attorney, Diego Rodriguez, Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), William J. Bratton, the Commissioner of the New York City Police Department (“NYPD”), and Thomas C. Krumpter, the Acting Commissioner of the Nassau County Police Department (“NCPD”), announced the unsealing today of a superseding Indictment charging a total of 18 individuals arising out of a multi-year investigation of racketeering activities by members and associates of the Genovese Organized Crime Family of La Cosa Nostra.  The Indictment charges four members and associates of the Genovese Family – namely, Genovese Family soldiers ROBERT DEBELLO and STEVEN PASTORE and Genovese Family associates RYAN ELLIS and SALVATORE DELLIGATTI – with racketeering conspiracy, and various of these defendants with involvement in a murder conspiracy, an attempted murder, an extortion conspiracy, and an illegal gambling operation relating to their participation in the criminal affairs of the Genovese Family, and with firearms offenses.  The Indictment also charges a number of the remaining 14 defendants with involvement (along with DELLIGATTI) in a murder-for-hire conspiracy, participation in the illegal gambling operation, and firearms offenses.  The case, captioned United States v. Robert DeBello, et al., is pending before United States District Judge Laura T. Swain of the Southern District of New York.   

Of the 18 defendants charged in the Indictment, 17 are currently in custody, including 13 defendants who were arrested earlier today as part of a coordinated takedown by the FBI, NYPD, and NCPD.  The 17 defendants in custody will be presented today before United States Magistrate Judge Ronald L. Ellis of the Southern District of New York. 

Manhattan U.S. Attorney Preet Bharara said: “Today’s charges show that the mob continues to wreak havoc in our communities, including through a recent murder conspiracy, attempted murder, and extortion.  With today’s charges, we strike an important blow against the Genovese Crime Family.  Whether you are an old school made member of the mob or a young street criminal looking to join it, the message today is clear: the life of a mobster is a dead-end street that ends nowhere good.  I thank our law enforcement partners at the NYPD, FBI and Nassau County Police Commissioner, as well as, in particular, the Nassau County District Attorney’s Office, for the incredible work in this important case.”      

Nassau County District Attorney Madeline Singas said:  “Today’s arrests send a strong message that we are disrupting organized crime in New York. Working with our federal and local partners we are focused on breaking up criminal organizations that try to operate outside of the law. The allegations against some of the defendants – including conspiracy to commit murder, racketeering and gambling – are very serious, and we will continue our joint efforts to dismantle these violent criminal enterprises.”

FBI Assistant Director-in-Charge Diego Rodriguez said:  “The crimes of extortion for so-called ‘protection,’ illegal gambling businesses, and conspiracy to commit murder are woven into the history of organized crime families, but so are the federal racketeering charges that wise guys face after committing those criminal activities.  Today, 18 defendants were indicted as part of a multi-year investigation by the FBI and our partners at Nassau County Police Department and New York City Police Department. As long as organized crime members and associates keep their criminal ways, we will keep investigating and bringing charges against them.”

NYPD Commissioner Bratton William J. Bratton said:  “This racket was as old as La Cosa Nostra.  From murder for hire to extortion and gambling, there wasn’t a scheme that was off limits to these soldiers and associates of the Genovese family. The mob may be diminished, but it’s not dead, and it requires our continued vigilance.  I commend of the FBI, Nassau County Police, U.S. Attorney, and team of NYPD detectives who made today’s arrests possible.”

Acting NCPD Commissioner Thomas C. Krumpter said:  “The indictment of these members of the Genovese Crime Family is an example of how partners in law enforcement utilize talented personnel and resources to work together and bring individuals to justice.  The Nassau County Police Department is committed to working with our fellow law enforcement partners to ensure public safety.”

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

Four of the defendants – ROBERT DEBELLO, STEVEN PASTORE, RYAN ELLIS, and SALVATORE DELLIGATTI – are members or associates of the Genovese Organized Crime Family of La Cosa Nostra.  The Genovese Family is a criminal organization whose members have engaged in numerous acts of violence and other crimes in the Southern District of New York and elsewhere, including, as relevant in this case, conspiracy to commit murder, attempted murder, conspiracy to commit extortion, and the operation of an illegal gambling business.  DEBELLO and PASTORE were “made” soldiers of the Genovese Family, and ELLIS and DELLIGATTI were associates of the Genovese Family.  In his capacity as a Genovese Family soldier, DEBELLO reported directly to a Genovese Family captain, often at a social club in lower Manhattan within the Southern District of New York.  From at least in or about 2008 through in or about May 2016, DEBELLO, PASTORE, ELLIS, and DELLIGATTI conspired to participate in the criminal affairs of the Genovese Family through a pattern of racketeering activity.  For example, in connection with their involvement in the racketeering activity of the Genovese Family, DEBELLO as well as ELLIS and DELLIGATTI participated in a 2014 conspiracy to commit a murder, in an attempted murder, in a conspiracy to commit extortion, and in the operation of an illegal gambling business (the “Illegal Gambling Business”), and committed firearms offenses.  PASTORE was also involved in the operation of the Illegal Gambling Business.  

Five of the defendants – LUIGI ROMANO, BERTRAM DUKE, TYRONE MCCULLUM, MARCUS GRANT, and SHARIF BROWN – participated in a conspiracy along with Genovese Family associate SALVATORE DELLIGATTI to commit a murder for hire, and committed a related firearms offense.

The nine remaining defendants – LUIGI CAMINITI, SCOTT JACOBSON, FRANK CELSO, JOSEPH TEDESCO, MICHAEL VIGORITO, MICK SOKOL, SPYRO ANTONAKOPOULOS, MICHAEL KARNBACK, and JONATHAN DESIMONE – were involved in the operation of the Illegal Gambling Business.

*                      *                     *           

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

Mr. Bharara praised the outstanding investigative work of the FBI, the NYPD’s Detective Bureau, Criminal Enterprise Investigations, and the NCPD.  He also thanked the Nassau County District Attorney’s Office for their participation and support in this ongoing investigation.

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Samson Enzer, James McDonald, and Jordan Estes, as well as Special Assistant United States Attorney Jeremy Glicksman, 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.       

16-122                                                             ###

 United States v. Robert DeBello, et al., S4 15 Cr. 491 (LTS)

COUNT

CHARGE

DEFENDANTS

MAX. PENALTIES

1

Racketeering conspiracy

18 U.S.C. § 1962(d)

ROBERT DEBELLO

STEVEN PASTORE

RYAN ELLIS

SALVATORE DELLIGATTI

20 years in prison

2

Conspiracy to commit murder in aid of racketeering activity

18 U.S.C. § 1959(a)(5)

ROBERT DEBELLO

RYAN ELLIS

SALVATORE DELLIGATTI

10 years in prison

3

Attempted murder in aid of racketeering activity

18 U.S.C. § 1959(a)(5)

ROBERT DEBELLO

RYAN ELLIS

SALVATORE DELLIGATTI

10 years in prison

4

Conspiracy to commit murder for hire

18 U.S.C. § 1958

SALVATORE DELLIGATTI

LUIGI ROMANO

BERTRAM DUKE

TYRONE MCCULLUM

MARCUS GRANT

SHARIF BROWN

10 years in prison

5

Participating in an illegal gambling business

18 U.S.C. §§ 1955 and 2

ROBERT DEBELLO

STEVEN PASTORE

RYAN ELLIS

SALVATORE DELLIGATTI

LUIGI CAMINITI

SCOTT JACOBSON

FRANK CELSO

JOSEPH TEDESCO

MICHAEL VIGORITO

MICK SOKOL

SPYRO ANTONAKOPOULOS MICHAEL KARNBACK

JONATHAN DESIMONE

5 years in prison

6

Use of Firearms for Crimes of Violence

18 U.S.C. §§ 924(c)(1)(A)(i) and 2

ROBERT DEBELLO

RYAN ELLIS

Life in prison

        7

Use of Firearms for Crimes of Violence

18 U.S.C. §§ 924(c)(1)(A)(i) and 2

SALVATORE DELLIGATTI

Life in prison

8

Use of a Firearm for Murder-for-Hire Conspiracy

LUIGI ROMANO

BERTRAM DUKE

TYRONE MCCULLUM

MARCUS GRANT

SHARIF BROWN

Life in prison

DEFENDANT

AGE

RESIDENCE

ROBERT DEBELLO

a/k/a “Old Man”

a/k/a “Bobby”

a/k/a “Grandpa”

74

Whitestone, Queens, NY

STEVEN PASTORE

56

Staten Island, NY

RYAN ELLIS

a/k/a “Joseph Princi”

a/k/a “Baldy”

a/k/a “Lazy Eye”

a/k/a “Zeus”

34

Bayside, Queens, NY

SALVATORE DELLIGATTI

a/k/a “Jay”

a/k/a “Fat Sal”

40

Oakland Gardens, Queens, NY

LUIGI ROMANO

a/k/a “Louie Sunoco”

38

Whitestone, Queens, NY

BERTRAM DUKE

a/k/a “Birdy”

48

New York, NY

TRYONE MCCULLUM

a/k/a “Ty”

37

Bronx, NY

MARCUS GRANT

27

Bronx, NY

SHARIF BROWN

a/k/a “QB”

31

Bronx, NY

LUIGI CAMINITI

35

Whitestone, Queens, NY

SCOTT JACOBSON

31

Old Beth Page, Long Island, NY

FRANK CELSO

50

West Hempstead, Long Island, NY

JOSEPH TEDESCO

44

Brooklyn, NY

MICHAEL VIGORITO

35

Massapequa, Long Island, NY

MICK SOKOL

41

Brooklyn, NY

SPYRO ANTONAKOPOULOS

31

Elmont, Long Island, NY

MICHAEL KARNBACH

a/k/a “Combat”

43

Brooklyn, NY

JONATHAN DESIMONE

34

Huntington, Long Island, NY 

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that former New York State Senate Majority Leader DEAN SKELOS was sentenced today to five years in prison after having been found guilty by a federal jury of using his official position to obtain more than $300,000 in bribes and extortion payments that were paid to his son, ADAM SKELOS, in exchange for DEAN SKELOS’s official acts.  ADAM SKELOS, who was convicted by the same jury, was also sentenced to six-and-a-half years in prison.  DEAN SKELOS and ADAM SKELOS were sentenced in Manhattan federal court by U.S. District Judge Kimba M. Wood, who also presided over the four-week jury trial.   

U.S. Attorney Preet Bharara said:  “In the span of just 16 months, we have seen the arrest, prosecution, conviction, and sentencing of both leaders of the New York State legislature.  The nearly simultaneous convictions of Sheldon Silver and Dean Skelos, whose corruption crimes were laid bare during fair and public trials, have no precedent.  And while Silver and Skelos deserve their prison sentences, the people of New York deserve better.  These cases show – and history teaches – that the most effective corruption investigations are those that are truly independent and not in danger of either interference or premature shutdown.  That will continue to be our guiding principle in exposing and punishing corruption throughout New York.  I thank the career investigators and prosecutors in my office, as well as FBI Assistant Director Diego Rodriguez and his entire team for their tremendous work in these two landmark prosecutions.  All New Yorkers who believe in clean government owe them an enormous debt of gratitude.”

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

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

The Glenwood Scheme

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

The Abtech Scheme

After successfully obtaining ADAM SKELOS’s Abtech consulting contract for $4,000 per month, DEAN SKELOS assisted Abtech in causing Nassau County to issue a request for proposal (“RFP”) for a public works project that was tailored to Abtech’s stormwater technology.  DEAN SKELOS and ADAM SKELOS then threatened to use DEAN SKELOS’s official powers to block Abtech’s bid for the RFP unless the company sharply increased ADAM SKELOS’s payments.  Abtech ultimately agreed to increase ADAM SKELOS’s payments to $10,000 per month because the company feared that, if it did not meet the defendants’ demands, it would lose the Nassau County contract that was critical to its business.  In return for the payments to ADAM SKELOS, and to ensure that they would continue, DEAN SKELOS facilitated the approval of Abtech’s $12 million contract with Nassau County and thereafter took numerous additional official actions to benefit Abtech. 

For example, when Abtech and ADAM SKELOS believed Nassau County was insufficiently funding the company’s project, DEAN SKELOS pressured Nassau County officials to make additional funds available.  In January 2015, DEAN SKELOS was intercepted in a call with the Nassau County Executive in which he asked for an explanation for the lack of funding, complaining on behalf of ADAM SKELOS that “somebody feels like they’re getting jerked around the last two years.”  The next day, DEAN SKELOS traveled with the County Executive and his Deputy to the funeral of a New York City Police Department officer, where DEAN SKELOS reiterated in person his demand that the County expedite payments to Abtech. 

DEAN SKELOS also used his official position in an attempt to direct a portion of a $5.4 billion sum that the State had recovered in litigation with financial services companies (the “Settlement Funds”) in a way that would benefit water projects and contracts that were being pursued by Abtech.  For example, at the same time ADAM SKELOS was attempting to obtain additional Abtech stormwater projects with local municipalities by claiming that the projects could be funded through State funds, DEAN SKELOS was advocating for a portion of the Settlement Funds to be allocated for stormwater projects. 

DEAN SKELOS also used his official position in an attempt to enact State “design-build” legislation that was being sought by Abetch and that Nassau County officials had explained was necessary to implement fully the $12 million contract with Abtech.  Nassau County officials provided DEAN SKELOS with proposed legislation that DEAN SKELOS stated he would support if backed by the Governor.  In a recorded call on ADAM SKELOS’s “burner” phone, ADAM SKELOS told a representative of Abtech that DEAN SKELOS had privately assured ADAM SKELOS that DEAN SKELOS was “going to be sure that [the design-build legislation] gets done.”  Later, ADAM SKELOS told Abtech’s representatives that while design-build legislation would not be enacted as part of the April 2015 budget process, DEAN SKELOS would continue to pursue it in the legislative session continuing through June 2015.  The defendants were arrested in May 2015 before their plan to enact the legislation could be completed.

The PRI Scheme

During the same time period as the Glenwood and Abtech schemes, DEAN SKELOS pressured yet a third company, called Physician Reciprocal Insurers (“PRI”), to pay ADAM SKELOS.  PRI is a major medical malpractice insurance firm, whose existence depends on New York State legislation that exempts the firm from being liquidated even though its liabilities exceed its assets.  Similar to the Glenwood scheme, DEAN SKELOS solicited payments to ADAM SKELOS from PRI during the same conversations when PRI was seeking DEAN SKELOS’s support for the extension of this legislation that was critical to PRI’s business. 

In response to the pressure from DEAN SKELOS to find sources of payment to ADAM SKELOS, PRI agreed to, among other things, give ADAM SKELOS a full-time job with benefits.  Even though ADAM SKELOS was expected to work 40 hours per week, he treated his PRI position as a “no show” job from the outset of his employment.  When ADAM SKELOS’s supervisor told ADAM SKELOS that he was expected to show up to work, ADAM SKELOS berated him and told him “[g]uys like you . . . couldn’t shine my shoes. . . . And if you talk to me like that again, I will smash your fucking head in.”  When the CEO of PRI told DEAN SKELOS that ADAM SKELOS was not showing up to work and was mistreating the other employees, DEAN SKELOS expressed no concern about ADAM SKELOS’s conduct and simply told the CEO to “[w]ork [it] out.”  Based on this conversation, among others, the CEO understood that if he did not continue to pay ADAM SKELOS, despite his non-performance and misconduct at work, he was risking DEAN SKELOS taking legislative action against PRI.  Later, when former Senator Alphonse D’Amato, one of PRI’s lobbyists, reiterated to DEAN SKELOS that ADAM SKELOS was not showing up to work and was being disruptive when he actually did show up, DEAN SKELOS also dismissed Senator D’Amato’s concerns and told him that ADAM SKELOS needed the income and benefits from PRI.

DEAN SKELOS did not inform any of the companies he pressured to pay ADAM SKELOS that, between 2011 and 2014, ADAM SKELOS was making between $230,000 and $441,000 per year.  

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

*                      *                      *

In addition to the prison sentence, Judge Wood ordered DEAN SKELOS, 68, of Rockville Centre, New York, to pay a $500,000 fine, forfeit $334,120, and pay a $800 special assessment fee.  DEAN SKELOS also was sentenced to one year of supervised release.  In imposing a fine on DEAN SKELOS, Judge Wood took into account the tax-payer funded pension that DEAN SKELOS would be receiving.  Judge Wood ordered ADAM SKELOS, 33, also of Rockville Centre, to forfeit $334,120, pay a $800 special assessment, and serve three years of supervised release. 

DEAN SKELOS and ADAM SKELOS were found guilty by a unanimous jury on December 11, 2015, of conspiracy to commit extortion under color of official right, conspiracy to commit honest services wire fraud, three counts of extortion under color of official right, and three counts of soliciting and receiving bribes.  

U.S. Attorney Bharara praised the work of the Criminal Investigators of the United States Attorney’s Office and the Federal Bureau of Investigation, who jointly conducted this investigation.  

This case was prosecuted by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys Jason A. Masimore, Rahul Mukhi, Tatiana R. Martins, and Thomas A. McKay 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 Office of the Federal Bureau of Investigation (“FBI”), and Philip R. Bartlett, Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced that seven defendants were arrested today and charged with orchestrating a scheme to defraud investors and a Native American tribal entity of tens of millions of dollars.

JASON GALANIS and HUGH DUNKERLEY were arrested in the Central District of California.  JASON GALANIS will be presented later today before a U.S. Magistrate Judge in Los Angeles and DUNKERLEY will be presented before a U.S. Magistrate Judge in Santa Ana, California.  GARY HIRST was arrested in the Middle District of Florida and will be presented later today before a U.S. Magistrate Judge in Orlando.  JOHN GALANIS, a/k/a “Yanni,” was arrested in the Southern District of California and will be presented later today before a U.S. Magistrate Judge in San Diego.  BEVAN COONEY was arrested in the District of Nevada and will be presented later today before a U.S. Magistrate Judge in Reno.  DEVON ARCHER was arrested in the Eastern District of New York.  MICHELLE MORTON was arrested in New Jersey.  ARCHER and MORTON will be presented later today before United States Magistrate Judge Ronald L. Ellis in Manhattan.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, the defendants induced an Oglala Sioux Native American tribal entity to issue bonds through lies about how the bond proceeds would be invested.  Instead of investing the proceeds in a way that would provide capital for development and help cover the interest payments, the defendants allegedly pocketed most of it to pay for their own personal expenses, homes, cars, travel, and jewelry.  The defendants’ alleged fraud did not stop with the tribe.  The defendants also allegedly duped unwitting investors into buying the bonds by hiding material facts about them, including their lack of liquidity. The defendants’ alleged fraud has left devastation in its wake: a tribe with tens of millions in bond obligations it cannot pay, and investors out tens of millions, left holding bonds they did not want.”

FBI Assistant Director-in-Charge Diego Rodriguez said: “The alleged fraudsters named in this case didn’t just see an opportunity to steal money when they thought no one was looking, they allegedly hatched a plan to scam a municipal entity from the start.  The most egregious fallout from this scheme is that the bondholders now hold worthless securities, and the tribe can’t make the interest payments due.”

USPIS Inspector-in-Charge Philip R. Bartlett said: “These individuals allegedly took advantage of their clients, by luring them into creating bonds the defendants allegedly knew would never pay any returns to investors.  White-collar criminals always believe their crimes and abilities are above the law, but Postal Inspectors and their law enforcement partners are very skilled at bringing these fraudsters to justice for their illegal financial schemes.”

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

From at least in or about March 2014 through in or about April 2016, JASON GALANIS, GARY HIRST, JOHN GALANIS, a/k/a “Yanni,” HUGH DUNKERLEY, MICHELLE MORTON, DEVON ARCHER, and BEVAN COONEY engaged in a fraudulent scheme to cause a Native American tribal entity to issue more than $60 million in municipal bonds and then misappropriate the proceeds from their sale.  JASON GALANIS and JOHN GALANIS used the millions of dollars in illicit profits derived from the scheme to pay for a variety of personal and business expenses, including house payments, car payments and tax obligations, and to make food, travel and jewelry purchases.  JASON GALANIS also used the proceeds to make millions of dollars of payments to other defendants, including to HIRST, DUNKERLEY, and COONEY, as well as to asset management firms run by MORTON.

To accomplish the scheme, JASON GALANIS and JOHN GALANIS first induced the Wakpamni Lake Community Corporation (“WLCC”), an Oglala Sioux tribal entity, to issue tens of millions of dollars in municipal bonds (the “Tribal Bonds”) based on false and misleading representations.  MORTON and HIRST, at the direction of JASON GALANIS, used approximately $40 million of funds belonging to clients of two related investment advisers run by MORTON – Hughes Capital Management, Inc. (“Hughes”) and Atlantic Asset Management, LLC (“Atlantic”) – to purchase the Tribal Bonds, even though those defendants were well aware that material facts about the Tribal Bonds had been withheld from clients in whose accounts they were placed, including the fact that the Tribal Bond purchases fell outside the investment parameters of certain Hughes clients and of the Atlantic investment vehicle in which the Tribal Bonds were placed.  In addition, those defendants failed to apprise the Hughes and Atlantic clients of substantial conflicts of interest relating to the defendants – including that HIRST and DUNKERLEY were on multiple sides of the deal with respect to the issuance and placement of the Tribal Bonds.  When Hughes and Atlantic clients learned about the purchase of the Tribal Bonds, several of them demanded that the Tribal Bonds be sold.  However, because there was no ready secondary market for the Tribal Bonds, the Tribal Bonds remain in their accounts. 

Moreover, certain defendants, including JASON GALANIS and DUNKERLEY, falsely represented to the WLCC that proceeds from the sale of the Tribal Bonds would be placed with an investment manager who would invest the proceeds in investments that would generate annuity payments sufficient to pay the interest on the Tribal Bonds and provide additional funds to the WLCC to be used for tribal economic development purposes.  In fact, none of the proceeds of the Tribal Bonds were turned over to the investment manager specified in the closing documents.  Instead, the defendants misappropriated significant portions of the proceeds for their own personal use. 

Some of the misappropriated proceeds were recycled and provided by JASON GALANIS to entities affiliated with ARCHER and COONEY in order to facilitate the purchase of additional Tribal Bonds issued by the WLCC in subsequent offerings induced by JOHN GALANIS.  As with the first offering of Tribal Bonds, none of the proceeds of the Tribal Bonds were actually turned over to the investment manager specified in the closing documents.  Instead, the defendants again misappropriated substantial portions of the proceeds for their own use.  As a result of the defendants’ fraudulent scheme, the investors in whose accounts the Tribal Bonds were placed now hold worthless securities that cannot be sold, and the WLCC has no means of paying the interest payments due on the Tribal Bonds. 

*                *                *

JASON GALANIS, HIRST, JOHN GALANIS, DUNKERLEY, MORTON, ARCHER, and COONEY are each charged with one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense; and one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense.  JASON GALANIS, HIRST, and MORTON are also charged with conspiracy to commit 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; and investment adviser fraud, which carries a maximum sentence of five years in prison and a maximum fine of $10,000.  The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the judge.

Mr. Bharara praised the investigative work of the FBI and USPIS, and thanked the SEC, which has filed civil charges in a separate action. 

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.

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

[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth 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, James J. Hunt, the Special Agent in Charge of the New York Division of the Drug Enforcement Administration (“DEA”), Angel M. Melendez, the Special Agent-in-Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (“HSI”), and William J. Bratton, the Commissioner of the New York City Police Department (“NYPD”), announced the unsealing today of two Indictments charging a total of 21 members of a Bronx-based drug trafficking organization with narcotics trafficking and firearms offenses.  The organization operates in the vicinity of the Diego Beekman Houses (“Beekman Houses”) in the South Bronx and is charged in two separate indictments – United States v. Demetrius Flowers et al. and United States v. Damon Guadalupe et al.  Some of the members of the organization were affiliated with a subset of the Bloods Street Gang, known as the “Low Rider Brims,” and other members were affiliated with a gang known as the “Young Shooters.”  Of the 21 defendants charged in both Indictments, 14 are currently in custody, including 12 defendants who were arrested earlier today and yesterday as part of a coordinated takedown.  The defendants already in custody will be presented today before United States Magistrate Ronald L. Ellis in Manhattan federal court. 

In connection with today’s takedown, law enforcement agents also executed search warrants at three locations, including residential apartments in the area occupied by several of the defendants.  During the execution of those search warrants, agents recovered, among other items, crack, cocaine, marijuana, as well as ammunition and gang paperwork.   To date, in this case, agents and officers have seized, among other evidence, quantities of crack, cocaine, heroin, marijuana, prescription pills, as well as firearms, ammunition, and knives.  During the investigation, agents and officers also intercepted thousands of wiretapped calls, during many of which various members and associates of the drug trafficking organization discussed their gang and narcotics activities.

Manhattan U.S. Attorney Preet Bharara said:  “As alleged, these defendants, many of them members of street gangs, terrorized a South Bronx neighborhood with their drug dealing and violence.  Law enforcement has no duty more important than keeping our citizens safe.  As we have done in a number of recent takedowns with our law enforcement partners, we will continue to focus on those in our communities who are allegedly responsible for so much of the gang and gun violence.  All New Yorkers are entitled to live in neighborhoods free from constant drug-dealing and senseless violence.  That is why we bring actions like the one we bring today.”

DEA Special Agent-in-Charge James J. Hunt said:  “Law enforcement’s crackdown on gang related drug trafficking has netted 14 more arrests in New York City.  It is alleged that the ‘Low Rider Brims’ and ‘Young Shooters’ street gangs instilled fear and intimidation in the residents of the Beekman Housing Projects in the Bronx.  Not only did their alleged drug trafficking fuel drug addiction, their ‘armed and ready’ attitude resulted in numerous shootings and turf battles jeopardizing the safety of the neighboring schools and community.”

HSI Special Agent-in-Charge Angel M. Melendez said:  “Residents of the Mott Haven section of the Bronx can rest easier knowing members of a violent gang are under arrest and out of their neighborhood.  These gangs allegedly peddled drugs and used violence to protect their criminal enterprise.  HSI and its law enforcement partners are committed to combating violent criminal organizations and ensure the continued safety of our communities.”

Commissioner William J. Bratton said:  “This investigation is the latest example of a coordinated effort to combat drug trafficking, whose operations brought an influx of violence and firearms to the Bronx. I commend both our NYPD detectives and law enforcement partners for their hard work, which led to these arrests, and for their ongoing commitment to protect our neighborhoods.”

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

The Beekman Houses is a private housing complex comprising approximately 38 apartment buildings in the Mott Haven neighborhood of the Bronx, New York.  From at least 2010 up to and including May 2016, the defendants operated a drug trafficking organization (the “Beekman Houses DTO”) in and around the Beekman Houses.  The Beekman Houses DTO trafficked in a variety of narcotics – including crack cocaine, heroin, and marijuana – on a daily basis.  Some of the members of the Beekman Houses DTO were affiliated with a subset of the Bloods Street Gang known as the “Low Rider Brims,” and other members were affiliated with a gang known as the “Young Shooters.”  The defendants sold narcotics in areas frequented by New York City’s most vulnerable citizens, including in the vicinity of New York City schools.   

In addition, members of the Beekman Houses DTO protected and maintained their drug business through the possession of firearms and acts of violence.  These included shootings that happened in broad daylight on public streets and into apartment buildings. 

*                      *                     *

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

Mr. Bharara praised the outstanding investigative work of the NYPD’s Bronx Gang Squad, HSI’s El Dorado Task Force, and the New York Field Division of the DEA, as well as the United States Marshals’ Service for its assistance in today’s arrests.  He also thanked the Bronx County District Attorney’s Office for their support in this ongoing investigation. 

This case is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Eli J. Mark and Matthew Laroche are in charge of the prosecution.

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

 United States v. Demetrius Flowers, a/k/a “MoJo” et al.

COUNT

CHARGE

DEFENDANTS

MAX. PENALTIES

        1

Conspiracy to Distribute Narcotics

(including crack cocaine, heroin, and marijuana)

21 U.S.C. § 846

DEMETRIUS FLOWERS, a/k/a “Mojo,”

JOSEPH SMITH, a/k/a “Joe Lite,”

FRANK O’BRYANT, a/k/a “Frank White,”

ELADIO PADILLA, a/k/a “Nino,”

QUINZELL FRAZIER, a/k/a “Q Black,” a/k/a “Blizzy,”

JONATHAN SAEZ, a/k/a “John J,” a/k/a “J,”

BRIAN MCBETH, a/k/a “Smoove,”

FRANCISCO REYES, a/k/a “Bundlez,”

LUIS CRUZ, a/k/a “Manny,”

RALPHIE DEJESUS, a/k/a “Nuws,”

GABRIEL OCASIO, a/k/a “Fifty,”

RAHIM SOLANO, a/k/a “Rah,” a/k/a “Radio,”

MICHAEL MESTRE, a/k/a “Getty,” a/k/a “Wax,”

SAQURAN CURTIS, a/k/a “Esai,”

CHRISTOPHER NAPOLEONIS, a/k/a “Pudge,”

ROBERT WILSON, a/k/a “Rubar,” a/k/a “Lil Rubar,”

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

2

Use of Firearms in Furtherance of Narcotics Trafficking

18 U.S.C. § 924(c)(1)(A)

DEMETRIUS FLOWERS, a/k/a “Mojo,”

JOSEPH SMITH, a/k/a “Joe Lite,”

FRANK O’BRYANT, a/k/a “Frank White,”

ELADIO PADILLA, a/k/a “Nino,”

QUINZELL FRAZIER, a/k/a “Q Black,” a/k/a “Blizzy,”

JONATHAN SAEZ, a/k/a “John J,” a/k/a “J,”

BRIAN MCBETH, a/k/a “Smoove,”

FRANCISCO REYES, a/k/a “Bundlez,”

LUIS CRUZ, a/k/a “Manny,”

RALPHIE DEJESUS, a/k/a “Nuws,”

GABRIEL OCASIO, a/k/a “Fifty,”

RAHIM SOLANO, a/k/a “Rah,” a/k/a “Radio,”

MICHAEL MESTRE, a/k/a “Getty,” a/k/a “Wax,”

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

3

Felon in Possession of a Firearm

18 U.S.C. § 922(g)(1)

DEMETRIUS FLOWERS, a/k/a “Mojo,”

10 years in prison

DEFENDANT

AGE

DEMETRIUS FLOWERS, a/k/a “Mojo,”

35

JOSEPH SMITH, a/k/a “Joe Lite,”

28

FRANK O’BRYANT, a/k/a “Frank White,”

29

ELADIO PADILLA, a/k/a “Nino,”

27

QUINZELL FRAZIER, a/k/a “Q Black,” a/k/a “Blizzy,”

23

JONATHAN SAEZ, a/k/a “John J,” a/k/a “J,”

30

BRIAN MCBETH, a/k/a “Smoove,”

24

FRANCISCO REYES, a/k/a “Bundlez,”

22

LUIS CRUZ, a/k/a “Manny,”

20

RALPHIE DEJESUS, a/k/a “Nuws,”

24

GABRIEL OCASIO, a/k/a “Fifty,”

28

RAHIM SOLANO, a/k/a “Rah,” a/k/a “Radio,”

24

MICHAEL MESTRE, a/k/a “Getty,” a/k/a “Wax,”

24

SAQURAN CURTIS, a/k/a “Esai,”

26

CHRISTOPHER NAPOLEONIS, a/k/a “Pudge,”

26

ROBERT WILSON, a/k/a “Rubar,” a/k/a “Lil Rubar,”

24

United States v. Damon Guadalupe, a/k/a “Pappy,” et al.

COUNT

CHARGE

DEFENDANTS

MAX. PENALTIES

1

Conspiracy to Distribute Narcotics

21 U.S.C. § 846

DAMON GUADALUPE, a/k/a “Pappy,”

MOHAMMED FABELO, a/k/a “Mo,”

WILLIAM RODRIGUEZ,

JASON HOOKS, a/k/a “Hamo,”

WILFREDO LABOY, a/k/a “Gutter,”

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

2

Possession of Firearms in Furtherance of Narcotics Trafficking

18 U.S.C. § 924(c)(1)(A)

DAMON GUADALUPE, a/k/a “Pappy,”

Life in prison with a mandatory minimum of 5 years in prison

DEFENDANT

AGE

DAMON GUADALUPE, a/k/a “Pappy,”

34

MOHAMMED FABELO, a/k/a “Mo,”

38

WILLIAM RODRIGUEZ,

54

JASON HOOKS, a/k/a “Hamo,”

31

WILFREDO LABOY, a/k/a “Gutter,”

30

[1] As the introductory phrase signifies, the entirety of the text of the Indictments, and the description of the Indictments 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 ALONZO KNOWLES pled guilty today in Manhattan federal court to criminal copyright infringement of scripts of movies and television shows that had not yet aired, as well as identity theft of personal identification information, all of which KNOWLES obtained by hacking into the personal e-mail accounts of numerous individuals in the entertainment, sports, and media industries.  He pled guilty before U.S. District Judge Paul A. Engelmayer.

Manhattan U.S. Attorney Preet Bharara said:  “Alonzo Knowles targeted and hacked into the private emails of celebrities in entertainment and in professional sports.  His crimes did not end with this frightening invasion of privacy, as Knowles then sought to sell what he stole, including unreleased movie and television scripts, to the highest bidder.  Thanks to the terrific work of the Homeland Security Investigations agents and prosecutors in my office, this story of cybercrime meets celebrity stalking ends well, with the perpetrator caught and convicted.”

According to the Indictment, other documents filed in Manhattan federal court, and statements made at various proceedings in this case, including yesterday’s guilty plea:

ALONZO KNOWLES unlawfully accessed the personal e-mail accounts of numerous individuals in the entertainment, sports, and media industries (the “Victims”).  As a result of his hacking scheme, KNOWLES obtained the Victims’ copyrighted and confidential documents, including scripts of movies and television shows that had not yet been publicly released, personal identifying information such as Social Security numbers, and private sexually explicit photographs and videos. 

Over the course of two weeks in December 2015, KNOWLES and an undercover law enforcement agent (the “UC”) communicated about the material KNOWLES sought to sell to the UC.  KNOWLES claimed to the UC that he had “exclusive content” that was “really profitable” and worth “hundreds of thousands of dollars.”  KNOWLES stated that he obtained the material directly from the Victims without their knowledge, and claimed to be able to acquire such material from at least some of the approximately 130 Victims whose e-mail addresses and phone numbers he had in his possession. 

On December 21, 2015, KNOWLES met with the UC in New York, New York.  During their meeting, KNOWLES described two methods he used to hack each Victim’s e-mail account.  The "easier” method, according to KNOWLES, involved sending a virus to the Victim’s computer that would enable KNOWLES to access it.  The more difficult method, according to KNOWLES, involved KNOWLES sending a false hacking notification to the Victim and asking the Victim for his passcodes.  Once KNOWLES had used the Victim’s passcodes to successfully access the Victim’s e-mail account, KNOWLES, unbeknownst to the Victim, would change the settings in the Victim’s e-mail account in order to continue to access to it.  In order to avoid detection from the Victim, KNOWLES would delete notifications from the e-mail service provider regarding changes to the settings of the Victim’s e-mail account.  KNOWLES attempted to sell numerous movie and television scripts and personal identifying information that he had unlawfully obtained from the Victims to the UC in exchange for thousands of dollars, whereupon KNOWLES was arrested.

*                *                *

KNOWLES, 24, of Freeport, Bahamas, faces a maximum of 10 years in prison and six years of supervised release.  The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  KNOWLES is scheduled to be sentenced by Judge Engelmayer on August 25, 2016.

Mr. Bharara praised the investigative work of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations.

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

Preet Bharara, the United States Attorney for the Southern District of New York, and Leslie R. Caldwell, Assistant Attorney General for the Justice Department’s Criminal Division, announced that ARTHUR BUDOVSKY, 42, was sentenced today in Manhattan federal court to 20 years in prison for running a massive money laundering enterprise through his company Liberty Reserve, a virtual currency once used by cybercriminals around the world to launder the proceeds of their illegal activity.  BUDOVSKY was arrested in Spain in May 2013 and was extradited to the United States in October 2014.  BUDOVSKY pled guilty to one count of conspiring to commit money laundering on January 29, 2016, three days before his trial was scheduled to begin.  U.S. District Judge Denise L. Cote imposed today’s sentence, noting that the defendant did not express any “genuine remorse,” and that his crimes caused “widespread harm” and led to “countless victims of fraud around the world.”

Manhattan U.S. Attorney Preet Bharara stated: “Liberty Reserve founder Arthur Budovsky ran a digital currency empire built expressly to facilitate money laundering on a massive scale for criminals around the globe.  Despite all his efforts to evade prosecution, including taking his operations offshore and renouncing his citizenship, Budovsky has now been held to account for his brazen violations of U.S. criminal laws.” 

Assistant Attorney General Leslie R. Caldwell stated: “The significant sentence handed down today shows that money laundering through the use of virtual currencies is still money laundering, and that online crime is still crime.  Together with our American and international law enforcement partners, we will protect the public even when criminals use modern technology to break the law.”

According to the allegations contained in the Indictment filed against Liberty Reserve, BUDOVSKY, and six other individual defendants; BUDOVSKY’s plea agreement; the evidence filed with the sentencing submissions for BUDOVSKY; and statements made in related court filings and proceedings:

Liberty Reserve S.A. (“Liberty Reserve”) billed itself as the Internet’s “largest payment processor and money transfer system” and operated one of the world’s largest and most widely used digital currencies, which could be used to send and receive payments, via the Internet, to and from people all over the world.  At all relevant times, BUDOVSKY directed and supervised Liberty Reserve’s operations, finances, and business strategy. 

Liberty Reserve was originally conceived by BUDOVSKY and co-defendant Vladimir Kats in Brooklyn, New York, in approximately 2001, and became operational in late 2005.  From his previous experience with “GoldAge” – a digital currency exchange business that he ran with Kats – BUDOVSKY was aware that a substantial volume of digital currency transactions were related to Internet investment schemes called high-yield investment programs (“HYIPs”), which he knew to be online Ponzi schemes.  BUDOVSKY was also aware that digital currencies were used by other online criminals, such as credit card traffickers and identity thieves.

BUDOVSKY designed Liberty Reserve specifically to appeal to these online criminals in order to capture their business.  Among other things, BUDOVSKY set up Liberty Reserve to have weak anti-money laundering (“AML”) controls and allowed users to move money anonymously through Liberty Reserve’s system, regardless of the volume or provenance of the funds.  BUDOVSKY also marketed Liberty Reserve specifically to HYIP operators and other criminal clientele.

In May 2006, BUDOVSKY and Kats were arrested and later pled guilty to operating GoldAge as an unlicensed money transmitting business.  Following their arrests, over the next two years, BUDOVSKY and Kats moved Liberty Reserve’s operations offshore to Costa Rica in an attempt to insulate themselves from the reach of U.S. law enforcement.  BUDOVSKY was so committed to evading U.S. law enforcement that he later renounced his U.S. citizenship and became a Costa Rican citizen.  In May 2008, BUDOVSKY pushed Kats out of Liberty Reserve and became the sole beneficial owner and principal operator of the company, with final decision-making authority over company decisions.  BUDOVSKY maintained this role until Liberty Reserve was shut down in May 2013.

During the time period from 2009 to 2013, Liberty Reserve reached the height of its activity.  At its peak in late 2012, Liberty Reserve handled a transactional volume of over $300 million per month, a significant portion of which came from users in the United States.  BUDOVSKY knew that a substantial number of these transactions were connected to HYIPs and other online criminal activities, and continued to operate Liberty Reserve to cater to these customers.  Among other things, BUDOVSKY and his co-conspirators intentionally failed to implement effective AML controls at Liberty Reserve.  BUDOVSKY and his co-conspirators also took steps to prevent the Costa Rican regulatory authorities and Liberty Reserve’s own compliance officials from discovering the criminal transactions flowing through Liberty Reserve.

Liberty Reserve ultimately grew into a financial hub for cybercriminals around the world who used it to amass, distribute, store, and launder criminal proceeds derived from HYIPs, credit card trafficking, stolen identity information, and computer hacking.  By May 2013, when it was shut down as a result of the Government’s criminal investigation, Liberty Reserve had more than 5.5 million user accounts worldwide, and had processed more than 78 million financial transactions with a combined value of more than $8 billion.  United States users accounted for the largest segment of Liberty Reserve’s total transactional volume – between $1 billion and $1.8 billion – and the largest number of user accounts – over 600,000.   As part of his plea agreement, BUDOVSKY admitted to laundering between $250 million and $550 million in criminal proceeds linked to Liberty Reserve accounts based in the United States.

*                      *                      *

Two co-defendants – Mark Marmilev and Maxim Chukharev – pled guilty and have been sentenced to five and three years in prison, respectively.  Two other co-defendants – Vladimir Kats and Azzeddine El Amine – are currently scheduled to be sentenced before U.S. District Judge Denise L. Cote on May 13, 2016.  Charges against Liberty Reserve and two individual defendants who have not been apprehended remain pending.

Mr. Bharara praised the outstanding work of the United States Secret Service, the Internal Revenue Service-Criminal Investigation, and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, which worked together in this case as part of the Global Illicit Financial Team.  Mr. Bharara also thanked the United States Secret Service’s New York Electronic Crimes Task Force for its extraordinary assistance with the investigation.  Additionally, Mr. Bharara specially thanked all the international law enforcement agencies that assisted in the investigation, in particular, the Judicial Investigation Organization in Costa Rica, Interpol, the National High Tech Crime Unit in the Netherlands, the Spanish National Police-Financial and Economic Crime Unit, the Cyber Crime Unit at the Swedish National Bureau of Investigation, and the Swiss Federal Prosecutor’s Office. 

This case is being prosecuted jointly with the Department of Justice’s Asset Forfeiture and Money Laundering Section (“AFMLS”), which is overseen by Assistant Attorney General Leslie R. Caldwell.  Mr. Bharara thanked AFMLS for its partnership and also thanked the Department of Justice’s Office of International Affairs and Computer Crime and Intellectual Property Section for their support.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit and Money Laundering and Asset Forfeiture Unit.  Assistant United States Attorneys Christian Everdell, Christine Magdo, and Andrew Goldstein of the Southern District of New York and Trial Attorney Kevin Mosley of AFMLS are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and Angel M. Melendez, the Special Agent in Charge of U.S. Immigration and Customs Enforcement’s (ICE), Homeland Security Investigations, New York Field Office (“HSI”), announced today the arrest of ROBERT J. GARNEAU, a/k/a “Raptorr427,” a/k/a “Bobby Sixx,” a/k/a “Allison Denario,” a/k/a “Giannafitz81.”  GARNEAU is charged with communicating with three different underage victims online and convincing them to take sexually explicit photographs and send them to GARNEAU online.  GARNEAU was arrested this morning and will be presented today before U.S. Magistrate Judge Judith McCarthy in White Plains federal court.

Manhattan U.S. Attorney Preet Bharara said:  “Robert Garneau’s alleged crimes are the nightmare of every modern parent.  Using every day social media websites, Garneau allegedly exploited minors for his own sexual gratification.  We will continue to work with our partners at Homeland Security Investigations to vigorously investigate and prosecute defendants who sexually exploit children.”                                                                                                        

Special Agent in Charge Angel M. Melendez said:  “Today’s arrest should serve as a stern reminder to parents that, as kids spend more and more time on the internet and gaming consoles, parents must step up by teaching their kids how to spot internet predators and talking to them about who they talk to and what information they share.  Those who look to exploit the most vulnerable in our society by hiding behind the wall of the internet will remain a top priority for HSI as we continue to identify and arrest these heinous criminals.”

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

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

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

There may be more victims of this alleged conduct.  If you have information to report, contact Homeland Security Investigations through its toll-free Tip Line at 1-866-DHS-2-ICE or by completing its online tip form.  Both are staffed around the clock by investigators.  From outside the U.S. and Canada, callers should dial 802-872-6199.  Hearing-impaired users can call TTY 802-872-6196.

*          *          *

GARNEAU, 21, of Warwick, New York, is charged with three counts of sexual exploitation of a minor, each carrying a minimum sentence of 15 years in prison and a maximum sentence of 30 years in prison.  The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the efforts of Homeland Security Investigations, Long Island University, the Nassau County Police Department, and the Vacaville Police Department in Vacaville, California, in connection with this investigation.  He added that the investigation is ongoing.

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, and Scott J. Lampert, Special Agent in Charge of the U.S. Department of Health and Human Services, Office of Inspector General’s New York Region (“HHS-OIG”), announced today that the United States has settled civil claims under the False Claims Act against the City of New York (the “City”) related to the receipt by the New York City Fire Department (“FDNY”) of reimbursements for claims for emergency ambulance services that did not meet Medicare’s medical necessity requirement.  This matter was brought to the attention of the U.S. Attorney’s Office through a voluntary disclosure by the City.

Manhattan U.S. Attorney Preet Bharara said:  “For the Medicare program to function properly and fairly, it is essential that providers be reimbursed only for those services that are covered.  For more than four years, the New York City Fire Department received reimbursements for emergency ambulance services that did not meet Medicare’s requirements.  We appreciate that the City of New York brought this to our attention, and we believe this settlement to be an appropriate resolution of the problem.”

HHS-OIG Special Agent in Charge Scott L. Lampert said:  “HHS-OIG is committed to protecting the Medicare program and the taxpayers who help fund it.  This settlement will help ensure that our federal health care programs are utilized properly so they continue to serve those who need them most.”

The FDNY, through its Bureau of Emergency Medical Services, provides emergency ambulance services throughout the City, including to patients eligible for Medicare.  FDNY ambulances are dispatched in response to 9-1-1 calls for emergency medical assistance.  To receive payment for emergency ambulance services provided to patients eligible for Medicare, the FDNY, through its ambulance billing contractor, submits claims to Medicare containing required information about each service.  Emergency ambulance services for patients eligible for Medicare are only reimbursable from Medicare if those services meet Medicare’s medical necessity requirement.

As alleged in a complaint filed on Tuesday, May 3, 2016 in Manhattan federal court, between October 2008 and October 2012, the City consistently received reimbursements for tens of thousands of claims submitted to Medicare for emergency ambulance services that the City had identified as not meeting the Medicare medical necessity requirement.  The City was aware that Medicare was paying reimbursements for these claims, but did not take steps to inform Medicare of the reimbursements for more than four years.

In the settlement, approved yesterday by United States District Judge Edgardo Ramos, the City agreed to pay $4.3 million and admitted and accepted responsibility for the following:

• From October 2008 through and including October 2012, the FDNY, through its ambulance billing contractor, submitted claims to Medicare for reimbursement for emergency ambulance services.  As part of the claim submission process, the FDNY made assessments as to whether the emergency ambulance services associated with each claim met the Medicare medical necessity requirement.

• During this time period, the FDNY determined that thousands of claims for emergency ambulance services did not satisfy the Medicare medical necessity requirement, and provided information in the claims reflecting that determination to a Medicare Administrative Contractor as part of the claim submission process.

• During this time period, the FDNY consistently received reimbursements from Medicare for claims submitted to Medicare for emergency ambulance services that FDNY had identified as not meeting the Medicare medical necessity requirement.The FDNY was aware that Medicare was consistently paying the FDNY for such claims, but did not take steps to inform Medicare of its consistent receipt of Medicare reimbursement for such claims until December 2012.

• Beginning in or around September 2013, the FDNY modified its claiming procedures to reduce the risk that the FDNY would be improperly reimbursed for claims for emergency ambulance services that were not medically necessary.

*                *                *

This case is being handled by the Office’s Civil Frauds Unit.  Assistant United States Attorneys Andrew E. Krause and Rebecca C. Martin are in charge of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, James R. Farrell, the Sullivan County District Attorney, Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (“FBI”), Joseph A. D’Amico, the Superintendent of the New York State Police (“NYSP”), Michael A. Schiff, the Sullivan County Sheriff, Robert Mir, the Chief of the Village of Monticello Police Department, and Scott Kinne, the Chief of the Village of Liberty Police Department, announced the unsealing of a Superseding Indictment charging JEFFREY HERRING, TRAVIS DAVIS, JESSE HUMMEL, MARK MACK, and ANDREW REYNOLDS with the October 12, 2015, robbery and murder of Michael Northcote, 34, in Swan Lake, New York.   

Manhattan U.S. Attorney Preet Bharara stated: “As alleged, these defendants undertook a violent home-invasion robbery, which resulted in the senseless murder of Michael Northcote.  I want to thank all our federal, state and local law enforcement partners, especially Sullivan County District Attorney James Farrell for his extraordinary partnership with our office in this important case.”

Sullivan County District Attorney James R. Farrell stated: “This indictment reflects the tireless work of all of the police officers, detectives, investigators, special agents and prosecutors assigned to this case, and their dedication to bringing those allegedly responsible for the robbery and homicide of Michael Northcote to justice. It is the product of unparalleled cooperation among local, county, state and federal law enforcement agencies committed to holding accountable those who allegedly perpetrated these violent acts against Northcote, who was just 34 years old when he was killed during a home invasion. I would like to thank my colleagues in the United States Attorney's Office for their unwavering commitment to working together with my office and all of Sullivan County's law enforcement agencies. Our joint efforts make each of our agencies more effective than we would be if we worked independently of one another, which only enhances the safety of the Sullivan County community and strengthens our ability to do the right thing. This indictment is a step toward justice for Michael Northcote and his family, and I look forward to continued collaboration with our United States Attorney in this and other important cases.”

FBI Assistant Director-in-Charge Diego Rodriguez stated: “Violence isn’t limited to the big cities in this day and age.  However, when someone is robbed and murdered in their own home in a small town, it sends shockwaves through the community.  Our Safe Streets Task Forces work with our local law enforcement partners to keep this type of crime out of every neighborhood, big or small.”

New York State Police Superintendent Joseph A. D’Amico stated: “This indictment is the direct result of the continued collaboration between the State Police and our law enforcement partners on the local and federal level. Because of this partnership, five alleged dangerous criminals are now off the streets and will be fully prosecuted for their involvement in this case.”

Sullivan County Sheriff Michael A. Schiff stated: “Through the coordinated effort of all of the participating law enforcement agencies, we were able to have a multiplier effect on this case and were able to bring these defendants to justice. I would like to thank the U.S. Attorney for the Southern District of New York, Preet Bharara, for taking on this case and ensuring that justice is served.”

Village of Monticello Police Chief Robert Mir stated: “Cooperation between all levels of law enforcement and the community are required to solve crimes. This impressive collaboration between the Sullivan County Sheriff’s Office, New York State Police, F.B.I., Monticello Police, Liberty Police, Sullivan County District Attorney’s Office and the United States Attorney General’s Office, has brought to justice several individuals who allegedly senselessly and viciously robbed and murdered a man. The Monticello Police Department is committed to our sworn oath and will continue to dedicate resources and work with our local, state and federal partners, in order to deliver the best police services. Too many people in our community have been lost to drugs and violence, and too many family members and friends are grieving. I hope that these arrests will bring some comfort and closure to the Northcote family.”

Village of Liberty Police Chief Scott Kinne stated: “The Village of Liberty Police remains committed to sharing our resources and working with all levels of law enforcement. All crimes, especially a violent crime of this nature, affect the residents of our county as a whole. Interagency cooperation is key in a case like this and because of this cooperation several violent criminals have been taken off the streets of Sullivan County.”

As alleged in the Superseding Indictment unsealed today in White Plains federal court,[1] on October 12, 2015, the defendants carried out a home-invasion robbery of Michael Northcote, a marijuana dealer, at 177 Cohen & Cohen Road, Swan Lake, New York.  In the course of the robbery, JEFFREY HERRING shot and killed Northcote.

*                      *                     *

TRAVIS DAVIS and ANDREW REYNOLDS were taken into federal custody this morning.  JEFFREY HERRING and MARK MACK were already in state custody.  These four defendants were presented in White Plains federal court today before U.S. Magistrate Judge Judith C. McCarthy.  JESSE HUMMEL was taken into federal custody last night in the District of Arizona and will be presented there today.  The case is assigned to U.S. District Court Judge Kenneth M. Karas.                                   

Charts containing the names of the defendants who were charged today, and the charges and maximum penalties they face, are attached.  The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the respective judges.

Mr. Bharara praised the outstanding investigative work of the FBI, the New York State Police, the Sullivan County Sheriff’s Department, the Village of Monticello Police Department, the Village of Liberty Police Department, the Town of Fallsburg Police Department, the United States Marshals Service, the New York City Police Department, and the Casa Grande, Arizona, Police Department.  Mr. Bharara also thanked the Sullivan County District Attorney’s Office for its assistance in the case.

The case is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Michael Gerber 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(S)

DEFENDANT(S)

MAXIMUM PENALTIES

Robbery conspiracy

JEFFREY HERRING,

TRAVIS DAVIS,

JESSE HUMMEL,

MARK MACK, and

ANDREW REYNOLDS

20 years in prison

Robbery

JEFFREY HERRING,

TRAVIS DAVIS,

JESSE HUMMEL,

MARK MACK, and

ANDREW REYNOLDS

20 years in prison

Murder

JEFFREY HERRING,

TRAVIS DAVIS,

JESSE HUMMEL,

MARK MACK, and

ANDREW REYNOLDS

Life in prison, or the death penalty

Mandatory minimum: 5 years in prison, to be imposed consecutively to any other sentence

[1] As the introductory phrase signifies, the entirety of the text of the Superseding Indictment and the descriptions of the Superseding 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 today that ROBERT STEWART, a/k/a “Bob,” was sentenced to four years’ probation, with the first year to be served in home detention, and $150,000 in forfeiture for conspiring to use inside information provided by Sean Stewart, the defendant’s son and co-conspirator, to trade and cause another to trade in the securities of five different health care companies.  The insider trading conspiracy spanned over four years and generated profits of approximately $1.16 million, with STEWART himself reaping approximately $150,000 of those gains.  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 before the Honorable James C. Francis, United States Magistrate Judge.  U.S. District Court Judge Laura Taylor Swain imposed today’s sentence.                                                  

Manhattan U.S. Attorney Preet Bharara said:  “Robert Stewart received nonpublic mergers and acquisitions information from his investment banker son, and then used this illegal edge to earn substantial trading profits.  Stewart has admitted to violating federal securities laws and now stands a convicted felon.”                       

According to the Complaint, Indictment, other documents filed in the case, and statements made in open court:

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 nonpublic information about upcoming mergers and acquisitions.  The first of these deals involved the acquisition of Kendle International Inc. by INC Research, LLC, which was announced publicly on May 5, 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 about his Kendle trades by the Securities and Exchange Commission 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 Apex 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 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 Richard Cunniffe, a co-conspirator and cooperating witness, that ROBERT STEWART was “too close to the source” to be trading KCI stock in 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.

When the KCI/Apax Partners deal was announced, ROBERT STEWART and Cunniffe reaped profits totaling approximately $107,790.  Around this time, ROBERT STEWART told Cunniffe that the source of the KCI tip and the earlier Kendle tip had been ROBERT STEWART’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 October 4, 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.

To try to avoid detection for their crimes, ROBERT STEWART and Cunniffe refrained from speaking explicitly about their trading over the phone or via e-mail, sometimes using codes to hide their criminal activity from authorities who might be listening to their phone calls or reading their email.  Other steps ROBERT STEWART and Cunniffe took to avoid detection included trying to discuss their trading at face-to-face meetings and adopting a profit-splitting mechanism that had Cunniffe paying ROBERT STEWART his portion of the illegal proceeds in small increments, over time, typically in cash.   

In March and April of 2015, Cunniffe 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.”              

*                      *                      *

ROBERT STEWART, a/k/a “Bob,” 61, of North Merrick, New York, was sentenced to four years’ probation, with the first year to be served in home detention, $150,000 in forfeiture, and a $100 special assessment.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation and also thanked the Securities and Exchange Commission, which has brought civil actions against the defendant.

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, and Christy Goldsmith Romero, Special Inspector General of the Troubled Asset Relief Program (“SIGTARP”), announced that DIONYSIUS FIUMANO, a/k/a “D,” was found guilty late yesterday in Manhattan federal court of orchestrating a massive mortgage modification scheme through which he and his co-conspirators defrauded more than 30,000 American homeowners out of a total of approximately $31 million.  

Manhattan U.S. Attorney Preet Bharara said: “Dionysius Fiumano was the ringleader of a heartless criminal conspiracy that preyed on desperate homeowners struggling to pay their mortgages.  Claiming to offer a lifeline to homeowners, Fiumano deceived tens of thousands into paying exorbitant fees for mortgage modification services they never got.”

Special Inspector General Christy Goldsmith Romero said: “A jury convicted Dionysius Fiumano for his role in orchestrating an elaborate advance fee scheme that defrauded more than 30,000 struggling homeowners out of more than $30 million.  Using the Treasury’s Home Affordable Modification Program (HAMP) as the backdrop for their fraud, Fiumano and his co-conspirators conned homeowners who had fallen behind on their mortgage payments into believing their mortgages were being modified. In reality, they did little or nothing to help these homeowners.  And when consumer complaints attracted attention, the co-conspirators renamed their companies to continue the fraud.  These crimes were uniquely despicable, as HAMP is a free federal government housing program designed to help those most impacted by the financial crisis.  Rather than offer relief, Fiumano added to the distress and despair of thousands of innocent Americans struggling to stay in their homes.”

According to the Indictment 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, company that offered purported “mortgage modification” services, that is, assistance persuading the homeowner’s lender to agree to a modification to the terms of the homeowner’s mortgage to make it more affordable.  In that capacity, FIUMANO oversaw PMG’s sales staff of approximately 65 telemarketers and managers.

From about November 2011 through May 2014, FIUMANO perpetrated a scheme to defraud homeowners in dire financial straits who were seeking relief through government mortgage relief programs.  Through a series of false and fraudulent representations, FIUMANO 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.

PMG purchased thousands of “leads,” consisting of the name, address, and other contact information of homeowners who had fallen behind in making mortgage payments on their homes.  PMG then sent false and fraudulent solicitation letters by e-mail to the homeowners they identified through the “leads,” misleading these homeowners into believing that their mortgages were already under review and that new, modified rates had already been contemplated and approved by the homeowners’ lenders.   

At FIUMANO’s direction, FIUMANO’s sales staff called and emailed homeowners who received PMG’s fraudulent solicitations.  During these calls, in an effort to convince the homeowners to pay up-front fees, 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. 

*          *          *

FIUMANO, 43, of Irvine, California, was convicted of one count of conspiracy to commit wire fraud and one count of wire fraud, each of which carries a statutory maximum sentence of 20 years in prison.  FIUMANO is scheduled to be sentenced by U.S. District Judge John F. Keenan on September 13, 2016, at 11:00 a.m.

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

Pedram Abghari, a/k/a “Ted Allen,” 38, of Irvine, California, pled guilty to one count of conspiracy to commit wire fraud and one count of wire fraud, each of which carries a statutory maximum sentence of 20 years in prison, and one count of misprision of a felony, which carries a statutory maximum sentence of three years in prison.  

Justin Romano, 41, of Blue Point, New York, pled guilty to one count of conspiracy to commit wire fraud and one count of wire fraud.  

Mahyar Mohases, 33, of Irvine, California, pled guilty to one count of conspiracy to commit wire fraud and one count of wire fraud.  

Abghari, Romano, and Mohases are scheduled to be sentenced in the coming months. 

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.  

“Today’s stiff sentence is a just and fitting end to Sheldon Silver’s long career of corruption.”

Preet Bharara, the United States Attorney for the Southern District of New York, and Scott Lampert, Special Agent in Charge of the U.S. Department of Health and Human Services, Office of Inspector General’s (“HHS-OIG”) New York Region, announced today that the United States has filed a complaint alleging violations of the False Claims Act by NARCO FREEDOM, INC. (“NARCO FREEDOM”), a former operator of outpatient chemical dependency clinics, ALAN BRAND, former CEO of NARCO FREEDOM, GERALD BETHEA, former CEO and program director of NARCO FREEDOM, JOINING HANDS MANAGEMENT INC. (“JOINING HANDS”), a former business associate of NARCO FREEDOM and operator of short-term residences known as “three-quarter houses,” and BERNARD RORIE and DEVORAH HAIGLER, co-owners of JOINING HANDS.  The complaint alleges that each of the defendants engaged in one or more fraudulent schemes that caused Medicaid to be billed for services in NARCO FREEDOM’s outpatient programs that were premised upon illegal kickbacks, or that were based on false and fraudulent medical records. 

Manhattan U.S. Attorney Preet Bharara said: “Having already disrupted Narco Freedom’s fraud and taken steps to protect hundreds whose housing was put at risk by kickbacks, we now bring this follow-on action to recover the funds fraudulently taken from federal healthcare programs and to hold alleged wrongdoers accountable.” 

HHS-OIG Special Agent in Charge Scott Lampert said: “The allegations in this complaint continue to underscore the damage that greed does to our nation’s health care system and the tax payers who help fund it.  HHS-OIG will continue to ensure that substance abuse providers are held accountable for the way they do business, so the services utilized by the vulnerable individuals that need them are delivered in an honest and appropriate manner.”           

The complaint, filed today in Manhattan federal court, alleges three separate fraudulent schemes.  In the first scheme, NARCO FREEDOM, BRAND, and BETHEA are alleged to have provided kickbacks in the form of below-cost housing in NARCO FREEDOM’s three-quarter houses, known as “Freedom Houses,” to induce residents of those houses to enroll in and attend NARCO FREEDOM’s outpatient programs.  The scheme exploited vulnerable individuals who were forced to comply with NARCO FREEDOM’s rules because they lacked stable housing options.  This scheme also was the subject of a lawsuit brought by this Office in October of 2014, United States v. Narco Freedom, Inc., 14 Civ. 8593 (JGK), in which the United States obtained a temporary restraining order and preliminary injunction enjoining NARCO FREEDOM’s conduct.  The injunction was granted based on the Government’s preliminary showing of ongoing violations of the Anti-Kickback Statute and ultimately resulted in a Court order that protected the hundreds of Freedom House residents by transferring management of the Freedom Houses away from NARCO FREEDOM to other providers.

The complaint also alleges a second illegal kickback scheme, whereby NARCO FREEDOM paid JOINING HANDS and RORIE in exchange for RORIE and HAIGLER referring residents of JOINING HANDS three-quarter houses to NARCO FREEDOM outpatient programs and enforcing attendance at those programs. 

The complaint alleges a third scheme in which NARCO FREEDOM and BETHEA directed and paid employees of NARCO FREEDOM’s outpatient program in Red Hook, Brooklyn, to create false medical records for patients despite the fact that those employees had not treated the patients, and to create and backdate records for services allegedly provided months or years earlier.   

According to the complaint, the defendants have subjected HHS to tens of millions of dollars in losses in Medicaid funds paid as a result of the fraudulent kickback schemes.

*          *          *

Mr. Bharara thanked HHS-OIG for its investigative efforts and ongoing support and assistance with the case.

The case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorneys Kirti Vaidya Reddy and Cristine Irvin Phillips are in charge of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that former New York State Assembly Speaker SHELDON SILVER was sentenced this afternoon to 12 years in prison after having been found guilty by a federal jury of using his official position to obtain nearly $4 million in bribes and kickbacks in exchange for his official acts and obtaining another $1 million through laundering the proceeds of his crimes.   SILVER was sentenced in Manhattan federal court by U.S. District Judge Valerie E. Caproni who also presided over the five-week jury trial.     

U.S. Attorney Preet Bharara said:  “Today’s stiff sentence is a just and fitting end to Sheldon Silver’s long career of corruption.”             

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

For more than two decades, SHELDON SILVER served as Speaker of the New York State Assembly, a position that gave him significant power over the operation of state government.  SILVER used this immense power – including, in particular, his power over the real estate industry and his control over certain health care funding – to unlawfully and corruptly enrich himself.  Among other things, he unlawfully solicited and obtained client referrals worth millions of dollars in exchange for SILVER’s official acts, and attempting to disguise this money as legitimate outside income earned from his work as a private lawyer.  In particular, SILVER claimed on financial disclosure forms required to be filed with New York State and in public statements that the millions of dollars he received in outside income while also serving as Speaker of the Assembly came from a Manhattan-based law firm, Weitz & Luxenberg P.C., where SILVER claimed to work representing individual clients in personal injury actions.  These claims were materially false and misleading – and made to cover up unlawful payments SILVER received solely due to his official power and influence as an elected legislator and the Speaker of the Assembly.

The scheme provided SILVER with two different streams of unlawful income: (i) approximately $700,000 in kickbacks SILVER received by steering two real estate developers with business before the state legislature to a law firm with which he was associated, and (ii) more than $3 million in asbestos client referral fees SILVER received by, among other official acts, awarding $500,000 in state grants to a university research center of a physician who referred patients made ill by asbestos to SILVER at Weitz & Luxenberg.

Unlawful Income From the Real Estate Law Firm

SILVER entered into a corrupt relationship with Goldberg & Iryami, which specialized in making applications to New York City to reduce taxes assessed on properties.  Beginning in at least 2000, SILVER approached two prominent developers of properties in Manhattan, Glenwood Management Corp. and The Witkoff Group, Inc., and asked them to hire Goldberg & Iryami.  The developers – both of whom lobbied SILVER on real estate issues because their businesses depended heavily on favorable state legislation – agreed to use Goldberg & Iryami as SILVER had requested.  Over the years, Witkoff and Glenwood Management, in particular, paid millions of dollars in legal fees to Goldberg & Iryami.  SILVER received a cut from the legal fees amounting to nearly $700,000.  SILVER had no public affiliation with Goldberg & Iryami and performed no legal work at all to earn those fees, which were simply payments for SILVER having arranged the business through his official power and influence. 

While continuing to receive the fees and in furtherance of the scheme, SILVER took official action beneficial to Glenwood Management and Witkoff.  For example, while SILVER was publicly associated with advocating for tenants, a proposal that benefitted Glenwood Management was in substantial part enacted in real estate legislation in 2011 with SILVER’s support.

Unlawful Income From Asbestos Client Referrals

SILVER also entered into a corrupt arrangement with Dr. Robert Taub, who was a leading physician specializing in the treatment of asbestos-related diseases, through which SILVER issued state grants and otherwise used his official position to provide favors to Dr. Taub so that Dr. Taub would refer and continue to refer his patients to SILVER at Weitz & Luxenberg, a firm with which SILVER was affiliated as counsel.  Specifically, SILVER arranged for New York State to fund two grants – each for $250,000, and paid out of a secret and un-itemized pool of funds controlled entirely by SILVER – for a research center Dr. Taub had established.  SILVER used his official position to provide Dr. Taub with other benefits as well, including helping to direct $25,000 in state funds to a not-for-profit organization for which one of Dr. Taub’s family members served on the board, and asking the CEO of a second not-for-profit to hire a second family member of Dr. Taub’s. 

From 2002 to the present, SILVER received more than $3 million from legal fees Weitz & Luxenberg received from patients Dr. Taub had referred to SILVER at the firm while SILVER was taking official actions to benefit Dr. Taub.  SILVER did no legal work whatsoever on these asbestos cases, his sole role having been to use his official position and access to state funds to induce Dr. Taub to provide him with these lucrative referrals. 

Silver’s Efforts to Cover Up the Scheme

SILVER took various efforts to disguise his unlawful outside income and prevent the detection of his criminal scheme.  SILVER listed on his official public disclosure forms that his outside income consisted of “limited practice of law in the principal subject area of personal injury claims on behalf of individual clients,” which was false and misleading.  Beginning in 2010, SILVER’s disclosures changed to state that the source of his legal income was a “Law Practice” that “includ[ed]” being of counsel to Weitz & Luxenberg.  SILVER never disclosed his relationship with Goldberg & Iryami or any work beyond what he claimed was a “personal injury” practice.

SILVER also repeatedly made false statements about his outside income in his public statements, including the following:

• SILVER claimed he performed legal work consisting of spending several hours each week evaluating legal matters brought to him by potential clients and then referring cases that appeared to have merit to lawyers at Weitz & Luxenberg.In fact, SILVER did no such work on the asbestos cases and obtained those referrals to Weitz & Luxenberg based on his corrupt arrangement with Dr. Taub.

• SILVER claimed his law practice involved the representation of “plain, ordinary simple people.”In fact, SILVER represented some of the largest real estate developers in the state, for whom favorable state legislation was critical to their business interests.

• SILVER claimed through his spokesperson that SILVER found clients by virtue of his having been a “lawyer for more than 40 years,” in a manner that was “not unlike any other attorney in this state, anywhere.” In fact, SILVER found his lucrative asbestos and real estate developer clients solely by virtue of his official position.

• SILVER stated through his spokesperson that “[n]one of his clients have any business before the state.” In fact, SILVER’s outside income included millions of dollars of fees obtained through Glenwood and Witkoff, both of which had significant business before the state, and Dr. Taub, to whose benefit SILVER provided state funding and other benefits related to SILVER’s official position.

In addition, SILVER thwarted the Moreland Commission to Investigate Public Corruption so that it would not learn of his illegal outside income, first by filing legal motions on behalf of the Assembly and taking other action to block the Moreland Commission’s investigation into legislators’ outside income.

 Finally, SILVER laundered part of crime proceeds through private investment vehicles that yielded him another $1 million in ill-gotten gains.

*                      *                      *

In addition to the prison sentence, Judge Caproni ordered SHELDON SILVER, 72, of New York, New York, to pay a $1.75 million fine, forfeit $5.3 million, and pay a $700 special assessment fee.  SILVER also was sentenced to two years of supervised release.  The Government had sought a fine above the Sentencing Guidelines level in light of the taxpayer-funded pension that Silver will received for the rest of his life, despite having been convicted of federal corruption offenses.  In imposing the fine, Judge Caproni took into account Silver’s pension.

SILVER was found guilty by a unanimous jury on November 30, 2015, of two counts of honest services wire fraud, two counts of honest services mail fraud, two counts of extortion under color of official right, and one count of engaging in illegal monetary transactions.  

U.S. Attorney Bharara praised the work of the Criminal Investigators of the United States Attorney’s Office and the Federal Bureau of Investigation, who jointly conducted this investigation.  

This case was prosecuted by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys Carrie H. Cohen, Howard S. Master, Andrew D. Goldstein, and James McDonald are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that NIKITA KUZMIN, the creator of “Gozi” malware, was sentenced in Manhattan federal court to time served (37 months).  Gozi, which was used to steal money from bank accounts across the United States and Europe, infected over one million computers globally and caused tens of millions of dollars in losses.  KUZMIN pled guilty, pursuant to a cooperation agreement, to various computer intrusion and fraud charges in May 2011.  He was sentenced today by the Honorable Kimba M. Wood.

According to the charging and sentencing documents, and statements made in Manhattan federal court:

In approximately 2007, computer network security experts identified, for the first time, a form of malicious software, or malware, that was stealing victims’ personal bank account information on a widespread basis.  The malware, which the experts named “Gozi” (and which is sometimes called the “Gozi Virus”) infected the victim’s computer, among other ways, when the victim received and opened a .pdf document that was designed to appear innocuous and relevant to the victim.  Opening the .pdf caused Gozi to be downloaded onto the victim’s computer secretly, where it generally remained undetectable by anti-virus software.  Once downloaded, the malware collected bank account-related data from the victim’s computer, including the username and password, to access the victim’s bank account online.  The malware transmitted that data to the individuals who controlled the malware, which they used fraudulently to transfer money out of victims’ bank accounts.   The network security experts subsequently identified a server that contained certain data stolen by Gozi, including 10,000 account records belonging to over 5,200 personal computer users.  The records included login information for accounts at over 300 companies, including leading global banks and financial services firms.  

Coordinated efforts between U.S. and foreign law enforcement ultimately led to the identification of KUZMIN, a Russian national, as the individual who controlled the malware.  KUZMIN previously had significant computer science training, attending two major engineering universities in Russia and graduating with a computer science degree.

In addition to creating Gozi, KUZMIN developed an innovative means of distributing and profiting from it.  Unlike many cybercriminals at the time, who profited from malware solely by using it to steal money, KUZMIN rented out Gozi to other criminals, pioneering the model of cybercriminals as service providers for other criminals.  For a fee of $500 a week paid in WebMoney, a digital currency widely used by cybercriminals, KUZMIN rented the Gozi “executable,” the file that could be used to infect victims with Gozi malware, to other criminals.   KUZMIN designed Gozi to work with customized “web injects” created by other criminals that could be used to enable the malware to target information from specific banks; for example, criminals who sought to target customers of particular American banks could purchase web injects that caused the malware to search for and steal information associated with those banks.   Once KUZMIN’s customers succeeded in infecting victims’ computers with Gozi, the malware caused victims’ bank account information to be sent to a server that KUZMIN controlled where, as long as the criminals had paid their weekly rental fee, KUZMIN gave them access to it.  KUZMIN, who used the online identity “76,” advertised this cybercriminal business, which he called “76 Service,” on underground cybercriminal forums.  KUZMIN made at least a quarter of a million dollars renting and selling Gozi to other criminals.

In the course of the investigation, Gozi was found to have infected over one million computers across the United States, Germany, Great Britain, Poland, France, Finland, Italy, Turkey, and other countries.  U.S. victims include individuals, companies, and others, including the National Aeronautics and Space Administration (“NASA”).  Gozi caused at least tens of millions of dollars in losses to victims.

*              *             *

 In addition to the sentence, KUZMIN, 28, a citizen of Russia, was ordered to pay forfeiture and restitution in the amount of $6,934,979.

On January 5, 2016, Deniss Calovskis, a/k/a “Miami,” a Latvian national who wrote the computer code for certain “web injects” that enabled Gozi to target information from particular banks, was sentenced to time served (21 months) for his role in the offense.  Mihai Ionut Paunescu, a/k/a “Virus,” a Romanian national who allegedly ran a “bulletproof hosting” service that enabled cybercriminals to distribute Gozi and other notorious malware, was arrested in Romania in December 2012 and currently awaits extradition to the United States.

Mr. Bharara praised the Federal Bureau of Investigation for its outstanding work in the investigation.  He also specially thanked the NASA Office of Inspector General.

The case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Nicole Friedlander and Sarah Lai are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that CHERRISE WATSON-JACKSON, a/k/a “Reesie,” a supervisor with the New York City Human Resources Administration (“HRA”), pled guilty today to fraud offenses involving the theft of more than $1.8 million from two public assistance programs she helped to administer.  WATSON-JACKSON, who was arrested in December 2015, entered her plea today before U.S. District Judge John G. Koeltl, and is scheduled to be sentenced by Judge Koeltl on August 5, 2016.

U.S. Attorney Bharara stated: “As she admitted today, Cherrise Watson-Jackson, a supervisor with the New York City Human Resources Administration, abused her official position to defraud public benefit programs out of nearly $2 million.  Because of Watson-Jackson’s crimes, money meant for the needy went instead to the pockets of the corrupt.”

According to the Complaint, Superseding Indictment, other information in the public record, and today’s plea proceeding:

HRA is an agency of the City of New York responsible for administering various public assistance programs.  Among other things, HRA provides temporary help to individuals and families with social service and economic needs to assist them in reaching self-sufficiency.  Its services include, among other things, administering the federally-funded Supplemental Nutrition Assistance Program (“SNAP”) (more commonly known as “food stamps”), and providing rental assistance to low-income families and individuals.

Starting in 1993, WATSON-JACKSON worked at HRA, most recently as a supervisor in a job center in Queens, New York.  In that capacity, she supervised a group of other supervisors who in turn were responsible for teams of employees who review and determine eligibility for public assistance clients.  Since at least early 2012, and continuing until at least December 2013, WATSON-JACKSON abused her position by engaging in a scheme to defraud two of the public assistance programs that she was charged to help administer.  The first of the two schemes involved WATSON-JACKSON fraudulently loading electronic benefit transfer (“EBT”) cards with funds from SNAP, and the cards were then used by co-conspirators throughout the New York City area.  The second scheme involved WATSON-JACKSON fraudulently causing rental assistance checks to be mailed to co-conspirators who posed as “landlords” of low-income tenants.  Co-conspirators then cashed and/or assisted others to cash the fraudulently obtained checks.  The two schemes resulted in the loss of more than $1.8 million in public funds.

*                      *                      *

WATSON-JACKSON, 45, of Queens, New York, pled guilty to one count of conspiracy to commit mail fraud and one count of conspiracy to commit wire fraud, each of which carries a statutory maximum of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

In connection with pleading guilty, WATSON-JACKSON also agreed to forfeit more than $1.8 million and to pay restitution of more than $1.8 million.

WATSON-JACKSON was arrested in December 2015, along with alleged co-conspirators Maurice Cromwell, a/k/a “Reese,” 40, of Staten Island, New York; Isaac Allen, 39, of Brooklyn, New York; Corey Brock, a/k/a “Cee,” 35, of Queens, New York; Derrick Williams, a/k/a “Blood,” 35, of Queens, New York; Vernecka Petersen-Fowler, 45, of Brooklyn, New York; Kevin Williams, 28, of Queens, New York; Jaron Annuziata, 36, of Brooklyn, New York; Beverly Franklin, 38, of Queens, New York; Beverly Lord, 54, of Queens, New York; Yesenia Depena, 24, of Brooklyn, New York; and Gerard Stokes, 32, of Queens, New York.  To date, all defendants except Lord, Depena, and Stokes have pled guilty to their participation in one or both fraudulent schemes, and are scheduled to be sentenced by Judge Koeltl in the coming months.

U.S. Attorney Bharara thanked and praised the work of the New York City Department of Investigation, the New York State Office of Welfare Inspector General, and the Federal Bureau of Investigation.

The case is being prosecuted by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys Daniel C. Richenthal and Andrew D. Beaty are in charge of the prosecution.

The pending charges against Beverly Lord, Yesenia Depena, and Gerard Stokes are merely accusations, and these defendants are presumed innocent unless and until proven guilty.

Preet Bharara, the United States Attorney for the Southern District of New York, and Russell Hermann, Acting Special Agent in Charge of the Food and Drug Administration, Office of Criminal Investigations, New York Field Office (“FDA-OCI”), announced that ROBIN DELEONROSA, a/k/a “Magic,” a/k/a “Robin Deleon Rosa,” a/k/a “Robin Rosa,” was arrested today for his role in a nationwide black market that distributed millions of dollars’ worth of fraudulently obtained HIV prescription drugs to unsuspecting consumers.  DELEONROSA personally obtained and sold more than $1.9 million worth of second-hand HIV prescription drugs.  In addition, a search earlier today of DELEONROSA’s residence in the Bronx resulted in the seizure of over 1,000 bottles of second-hand HIV prescription pills, with an estimated value of $1.8 million, as well as lighter fluid that was used to remove labels from the pill bottles, and over $70,000 in United States currency.  DELEONROSA will be presented later today in Manhattan federal court before Magistrate Judge Frank Maas.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Robin Deleonrosa served as a middle-man in a black market scheme to illegally re-sell potentially dangerous or ineffective second-hand HIV medications to unsuspecting patients and pharmacies.  As a result of his alleged participation in this scheme, Deleonrosa endangered the health of unsuspecting patients needing these drugs, and defrauded Medicaid of more than an estimated $1.9 million.”

FDA-OCI Acting Special Agent in Charge Russell Hermann said: “When prescription medications are diverted from the legal supply chain, there is no longer any assurance that the medicines are safe and effective.  Our office will pursue and bring to justice individuals who endanger the public’s health in this manner.” 

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

From at least in or about September 2013 until April 2016, DELEONROSA was part of a black market distribution network that distributed bulk quantities of second-hand HIV prescription drugs to unsuspecting consumers.  In particular, the members of the black market distribution ring would initially obtain the HIV prescription drugs by purchasing these drugs from patients to whom these medications were originally prescribed.  The prescription HIV bottles were then collected and the labels (containing the patients’ names) were removed using dangerous substances, including lighter fluid and other potentially hazardous chemicals.  Through this process, the members of the black market distribution network made the bottles appear new in order to conceal the fact that the bottles had previously been dispensed to patients.  This process allowed the bottles eventually to be re-sold to pharmacies and unsuspecting consumers.  Consumers who eventually received these second-hand prescription HIV medications were not aware that the prescription bottles had been previously sold, treated with potentially hazardous chemicals, and possibly not stored under conditions sufficient to maintain their medical efficacy. 

In addition to placing consumers at significant risk, Medicaid and other health insurers were defrauded in multiple ways by DELEONROSA’s scheme.  On the front end, health care benefit enrollees, including Medicaid recipients who participated in this scheme, filled their prescriptions for little or no cost with the intention of selling the drugs into the underground black market rather than taking the drugs as prescribed to treat their illnesses.  Because health benefits, such as HIV prescription drugs, are for the sole use of the insured, Medicaid and other health care benefit plans would not have paid for such drugs if the beneficiaries had disclosed their intent to sell the medications rather than take them as prescribed.  On the back end, Medicaid was further defrauded by reimbursing pharmacies for the cost of prescription HIV drugs as if the drugs were new and obtained from a legitimate stream of commerce, when, in truth and in fact, the drugs were second-hand and came from the black market.  Accordingly, as result of this scheme, health care benefit plans, including Medicaid, were defrauded multiple times by paying for the same drugs twice. 

As is detailed in the Complaint, DELEONROSA served as a middleman in this scheme – selling hundreds of second-hand prescription HIV medication bottles to a cooperating source (“CS”) on multiple occasions, with a total estimated Medicaid reimbursement value of more than $1.9 million.  DELEONROSA stored these second-hand prescription HIV medication bottles in his residence in the Bronx, and provided the bottles to the CS in suitcases and a duffel bag.  Many of the HIV prescription bottles that DELEONROSA sold still bore the labels of the patients to whom the drugs were originally dispensed.  In 2014, DELEONROSA also provided the CS with second-hand HIV prescription medication bottles that were to be delivered to addresses in California, but which were intercepted by Federal Express due to the suspicious nature of the packages. 

*          *          *

DELEONROSA, 48, of the Bronx, is charged with one count of conspiracy to commit health care fraud, which carries a maximum potential sentence of 10 years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

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

U.S. Attorney Preet Bharara praised the outstanding work of the FDA’s Office of Criminal Investigations.

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

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

Preet Bharara, United States Attorney for the Southern District of New York, announced that MICHAEL J. VATTER pled guilty today to wire fraud in connection with state pension benefits before U.S. District Judge Cathy Seibel in White Plains federal court.

Manhattan U.S. Attorney Preet Bharara said:  “Michael Vatter, the former Newburgh City Fire Chief, cheated the public he swore to serve by double-dipping, receiving both a public pension and a paycheck at the same time.  Today, he admitted to his fraud, and he will be held accountable for his corruption.”

According to the Indictment:

VATTER served in the Newburgh City Fire Department in various capacities from in or about 1980 until his retirement in May 2000.  Following his retirement, VATTER attended law school and practiced law.  In November 2009, the Indictment charges, VATTER returned to the Newburgh Fire Department as its Chief.  The Indictment further alleges that VATTER failed to report his return to the public sector New York State and Local Police and Fire Retirement System despite knowing he had a duty under state law to do so.  As a result, VATTER received more than $95,000 in pension benefits that he was not entitled to receive. 

Under New York State law, a public sector retiree who is receiving a pension and who returns to public service cannot receive both pension payments and a public sector paycheck.  The law permits public sector retirees to earn up to $30,000 per year from public sector employment before their pension benefits are cut off for that year.

VATTER, 57, of Walkill, New York, faces a maximum sentence of 20 years in prison.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation, the Office of the New York State Comptroller, and the Orange County Sheriff’s Office.  

This prosecution is being handled by the Office’s White Plains Division.  Assistant U.S. Attorney James McMahon 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”), today announced that ABRAHAM INZUNZA INZUNZA was extradited from Mexico where he had been arrested for charges arising out of his leadership of an organization engaged in the trafficking of large-scale quantities of cocaine, marijuana, and methamphetamine into the United States.  INZUNZA, a Mexican citizen, arrived in the Southern District of New York yesterday, and was presented today in Manhattan federal court.  

Manhattan U.S. Attorney Preet Bharara said:  “As alleged, Abraham Inzunza Inzunza was for years the leader of a major Mexican drug trafficking organization.  He is charged with the importation of large quantities of dangerous and potentially lethal drugs to the U.S.  Thanks to the coordinated efforts of the DEA and the Mexican Federal Police, Inzunza will now face American justice.”

Special Agent-in-Charge James J. Hunt said:  “Today marks the end of a violent battle to bring Abraham Inzunza Inzunza to America to face the drug trafficking charges against him.   Allegedly, as one of the largest drug traffickers in Mexico, he sent loads of marijuana, cocaine and crystal methamphetamine to cities across the United States for distribution.  State, local, federal and international law enforcement worked collaboratively to arrest Peque and bring him to justice.” 

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

From at least in or about 2008 through in or about March 6, 2014, INZUNZA operated a continuing criminal enterprise that trafficked large quantities of cocaine, marijuana, and methamphetamine into the United States.  Among other things, in approximately March 2012, INZUNZA directed two co-conspirators to negotiate the importation of over 100 kilograms of cocaine into the United States.  In August and September 2013, INZUNZA oversaw and directed other co-conspirators regarding the distribution of large quantities of methamphetamine to several states in the United States, namely, California, New Mexico, and Arizona.  In September 2013, INZUNZA additionally discussed with another co-conspirator the delivery of approximately 400 kilograms of marijuana from Mexico to the United States.

INZUNZA was arrested by Mexican authorities on or about March 6, 2014, in Mexico, pursuant to a provisional arrest warrant that was issued on the charges in this case. 

*                *                *

INZUNZA, 39, is charged in three counts.  Count One charges INZUNZA with conspiring to distribute at least five kilograms of cocaine, at least 1,000 kilograms of marijuana, and at least 500 grams of methamphetamine, knowing that such substances would be imported into the United States.  Count Two charges INZUNZA with occupying a position of organizer, supervisor, and manager of a continuing criminal enterprise involving cocaine, marijuana, and methamphetamine trafficking.  Count Three charges INZUNZA with occupying the position of a principal administrator, organizer, or leader of a continuing criminal enterprise involving trafficking in at least 150 kilograms of cocaine and at least 10,000 grams, or 10 kilograms, of methamphetamine. 

Count One carries a mandatory minimum term of 10 years in prison, Count Two carries a mandatory minimum term of 20 years in prison, and Count Three carries a mandatory minimum term of life in prison in prison.  Each count carries a maximum penalty of life in prison.  The statutory minimum and maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  The case is assigned to U.S. District Judge Andrew L. Carter, Jr.  

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

Mr. Bharara praised the investigative work of the New York Division of the DEA and its Organized Crime Drug Enforcement Strike Force, and the DEA Mexico City Country Office.  The DEA New York Organized Crime Drug Enforcement Strike Force, which is composed of agents and officers of the DEA, the New York City Police Department, Immigration and Customs Enforcement – Homeland Security Investigations (HSI), the New York State Police, the U. S. Internal Revenue Service Criminal Investigation Division, the Federal Bureau of Investigation, U.S. Secret Service, the U.S. Marshal Service, New York National Guard, the New York Department of Taxation and Finance, the Rockland County Sheriff’s Office, the Clarkstown Police Department, Port Washington Police Department and New York State Department of Corrections and Community Supervision.  Mr. Bharara also thanked the Government of Mexico for its assistance, in particular, the Mexican Federal Police, and the U.S. Department of Justice, Office of International Affairs.

This case is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorney Shane T. Stansbury is in charge of the prosecution.

[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 today the conviction of ROBERT SMUTEK on four counts of distributing and possessing with intent to distribute 1,4 butanediol, an illegal analogue of the date rape drug gamma hydroxybutyric acid, or GHB.  SMUTEK was found guilty by a jury after a five-day trial before U.S. District Judge Kenneth M. Karas.

U.S. Attorney Preet Bharara said:  “Robert Smutek was a modern-day drug dealer, dealing a date rape drug over the Internet out of his suburban home.  Despite his bucolic surroundings, Smutek was as much a drug dealer as those who sell on street corners, and he will now face the consequences of running a narcotics enterprise for more than five years.”

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

SMUTEK, a former police officer and member of a drug task force, operated Online Coral Calcium, an Internet website that sold patent medicines.  Starting in 2009, SMUTEK sold “Potion 9” as a “mood enhancer” that supposedly made users feel euphoric.  According to the label, Potion 9 contained yohimbe, a derivation of a tree root found in South Africa, as well as other natural ingredients.  But according to the evidence at trial, Potion 9 actually contained 1,4 butanediol, an industrial solvent that converted to GHB in the body when ingested. 

At trial, SMUTEK testified that he sold more than 200,000 one-ounce bottles of Potion 9 in a five-year period, reaping well over $1.2 million in revenue. 

*                      *                      *

SMUTEK, 52, of Sleepy Hollow, New York, was convicted of four counts of possession with intent to distribute a controlled substance, each carrying a maximum sentence of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  SMUTEK was remanded to prison following the verdict.  His sentencing is scheduled for September 8, 2016. 

 Mr. Bharara praised the work of the Rhode Island Task Force of the Office of Criminal Investigations, Food & Drug Administration.  Mr. Bharara also thanked the Internal Revenue Service, Criminal Investigation Division, and the Postal Inspection Service for their assistance in the investigation.

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Maurene Comey, Douglas Zolkind, and James McMahon are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that MICHAEL ADAMS, 30, of the Bronx, pled guilty before U.S. Magistrate Judge Frank Maas to participating in an armed robbery of a small business on the Upper West Side of Manhattan on June 18, 2015, which resulted in the shooting and killing of a store clerk, Bubacarr Camera.

U.S. Attorney Preet Bharara stated: “Today, Michael Adams admitted to his role in the June 2015 robbery and murder of innocent shopkeeper Bubacarr Camera.  I want to thank the ATF, the NYPD, and the U.S. Marshals for their outstanding investigative work on this important case.”

According to the allegations in the Indictment to which MICHAEL ADAMS pled guilty and other documents in the public record:           

On June 18, 2015, MICHAEL ADAMS and two other men, Stephen Adams and Zubearu Bettis, shot and killed Bubacarr Camera in the course of a robbery of a store located at 906 Amsterdam Avenue on the Upper West Side of Manhattan.

*                      *                      *

The charges to which MICHAEL ADAMS pled guilty carry a maximum of life in prison, and a mandatory minimum of 10 years in prison.  The maximum and minimum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

The prosecution is being handled by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Jared Lenow and Max Nicholas are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, William J. Bratton, the Commissioner of the New York City Police Department (“NYPD”), Angel M. Melendez, the Special Agent-in-Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), James J. Hunt, the Special Agent-in-Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), and  Delano Reid, the Special Agent-in-Charge of the New York Field Division of the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), announced charges today against 120 members and associates of two rival street gangs operating in the Bronx: the 2Fly YGz (“2Fly”) and the Big Money Bosses (“BMB”).  The gangs are charged in two separate Indictments – United States v. Laquan Parrish et al., S1 16 Cr. 212 (LAK) (the “Parrish Indictment”), and United States v. Nico Burrell et al., S2 15 Cr. 95 (AJN) (the “Burrell Indictment”) – with racketeering conspiracy, narcotics conspiracy, narcotics distribution, and firearms offenses.   

Manhattan U.S. Attorney Preet Bharara said: “Today, we seek to eviscerate two violent street gangs – 2Fly and BMB – that have allegedly wreaked havoc on the streets of the Northern Bronx for years, by committing countless acts of violence against rival gang members and innocents alike.  The gangs’ alleged victims include not only a 15 year-old child stabbed and left to die in the street, as well as a 92 year-old woman shot by a stray bullet in her own home, but also extend to the thousands of residents of Eastchester Gardens and its surrounding neighborhoods terrorized for years by the gangs’ open-air drug dealing and senseless violence.  We bring these charges today so that all New Yorkers, including those in or near NYCHA public housing, can live their lives as they deserve: free of drugs, free of guns, and free of gang violence.  I thank and recognize the bravery and tireless investigative work of the NYPD’s Bronx Gang Squad, HSI’s Violent Gang Unit, the New York Field Division of the DEA, and the ATF’s Joint Firearms Task Force, as well as all the other law enforcement partners that assisted in the operations today.”           

NYPD Commissioner William Bratton said:  “As alleged, these individuals engaged in open-air drug sales near homes and schools in the Bronx, pushing poison onto our streets.  Allegedly, they also committed numerous acts of violence and at least eight murders in the course of their illicit operations.  This includes the murder of a 92 year-old innocent bystander who was killed by a stray bullet inside her home.  I want to thank the members of the NYPD’s Bronx Gang Squad and our law enforcement partners for dismantling these gangs.  I commend them for their dedication and precision throughout this long-term investigation.”

HSI Special Agent-in-Charge Angel M. Melendez said:  “Those arrested today allegedly used violence and fear to intimidate people who live within and around the Eastchester Gardens Public Housing.  These ruthless gang members are allegedly responsible for more than 1,800 shots fired, resulting in eight alleged homicides.  Public safety is important to us, and today our city streets are safer because of the work of HSI agents in our Violent Gang Unit and the work of our federal and local law enforcement partners.”

DEA Special Agent-in-Charge James J. Hunt said:  “The gangs of New York have returned to open air drug markets; brazenly selling marijuana, crack cocaine, powder cocaine and prescription pain medication to drug users in neighborhood parks, abandoned houses, and playgrounds.  A decade long rivalry between two of the Bronx's most violent gangs has resulted in drug related violence, fatal stray bullets and daily intimidation felt by the law abiding residents living in their crosshairs.  Law enforcement has come together again to identify and dismantle these gangs that have plagued our community for too long.”

ATF Special Agent-in-Charge Delano Reid said:  “This investigation demonstrates ATF’s commitment to our communities by partnering with our federal and local counterparts in order to dismantle armed criminal organizations.  These two violent groups, allegedly responsible for multiple shootings, homicides, and other acts of violence, will now have to face the consequences of terrorizing the communities that they lived in.  This should be a lesson to others who are engaged in these types of illegal activities.  Our cooperative law enforcement efforts will continue.”

According to the Indictments[1] unsealed today in Manhattan federal court and other publicly filed documents:

The Indictments arise from a joint investigation by the NYPD’s Bronx Gang Squad, HSI’s Violent Gang Unit, the New York Field Division of the DEA, and the ATF’s Joint Firearms Task Force into the years-long gang war between 2Fly and BMB, which has led to an enormous amount of fatal and non-fatal violence between 2007 and the present in the Northern Bronx, including shootings, stabbings, slashings, beatings, and robberies.  

2Fly is a subset of the “Young Gunnaz,” or “YG” street gang, which operates throughout New York City.  2Fly is based in the Bronx, within and around the Eastchester Gardens housing development (“ECG”) and in an area called the “Valley” or the “V,” which is in the vicinity of Gun Hill Road.  ECG is a rectangular complex of residential buildings bordered by Burke, Adee, Yates, and Bouck Avenues, in the middle of which is a playground.  Members and associates of 2Fly control the narcotics trade at ECG, which takes place in the open air at the playground and in apartments at ECG.  2Fly primarily sells marijuana and crack cocaine, but also sells powder cocaine and prescription pills, such as oxycodone.  2Fly members and associates store guns at the playground or in nearby apartments or cars in order to protect the narcotics business and for protection against rival gangs.  The case of United States v. Laquan Parrish et al. charges 57 members and associates of 2Fly, including its “Big Guns,” or leaders: LAQUAN PARRISH, a/k/a “MadDog,” a/k/a “Quanzaa,” ANDRE BENT, a/k/a “Dula,” and AARON RODRIGUEZ, a/k/a “Gunz,” a/k/a “Cito.”  2Fly coexists at ECG with a faction of the Bloods street gang called “Sex Money Murder” (“SMM”), which controlled ECG before 2Fly and has allied with 2Fly to prevent others from selling drugs at ECG.  Two of the leaders of SMM at ECG – brothers PRESTON PASLEY, a/k/a “Fresh,” and TERRENCE PASLEY, a/k/a “Smoove” – and several of its members are also charged in the Parrish Indictment.

BMB is a subset of the “Young Bosses,” or “YBz” street gang, which operates throughout New York City.  BMB – whose members also sometimes refer to themselves as the “Money Making Mafia” or “Triple M” – operates primarily on White Plains Road from 215th Street to 233rd Street in the Bronx.  This area is a long stretch of road under a subway train overpass, bordered on each side by single-family homes and local commercial establishments, and in the vicinity of several playgrounds and schools.  BMB’s narcotics trafficking activity is based principally in the vicinity of White Plains Road and 224th Street, an open-air drug spot that is referred to by gang members as the “Forts.”  BMB members also operate a drug spot on Boston Road and Eastchester Road in the Bronx, which they refer to as “B Road.”  BMB members who work principally at the B Road spot typically refer to themselves as “Blamma.”  BMB primarily sells marijuana and crack cocaine, but also sells prescription pills, such as oxycodone.  BMB members and associates store guns in abandoned homes and other places near their drug spots in order to protect their narcotics business and for protection against rivals.  The case of United States v. Nico Burrell et al. charges 63 members and associates of BMB, including its “Big Suits,” or leaders: NICO BURRELL, a/k/a “Nico Zico,” and DOUGLAS MCLARTY, a/k/a “Q-Don,” a/k/a “Q-Dizzy.”

In addition to numerous non-fatal acts of violence against both rival gang members and innocents, the rivalry between 2Fly and BMB – as well as with other gangs, such as the “Slut Gang,” which is based at the Boston Secor housing development, and the “YSGz,” who are based at the Edenwald housing development – has led to the following murders, among others:

• The murder of Sadie Mitchell, who was killed in her own home by a stray bullet, at the age of 92, by an associate of BMB in the vicinity of White Plains Road and 224th Street and White Plains Road, on or about October 20, 2009;

• The murder of Jeffrey Delmore, a/k/a “Famous,” a/k/a “Junior,” who was stabbed to death, at the age of 15, by members of BMB in the vicinity of East Gun Hill Road, on or about May 15, 2010;

• The murder of Alexander “A.J.” Walters, who was stabbed to death at age 17 by members of 2Fly in the vicinity of 1824 Prospect Avenue in the Bronx, on or about March 8, 2012;

• The murder of Donville Simpson, a/k/a “Donny,” who was shot to death at ECG at age 17 by members of 2Fly, on or about October 5, 2013

• The murder of Keshon Potterfield, a/k/a “Keke,” who was shot to death, at the age of 18, by a member of BMB in the vicinity of 232nd Street between White Plains Road and Barnes Avenue, on or about June 22, 2014;

• The murder of Fabian Pennant, an associate of 2Fly, who was shot to death by a member of BMB at the age of 24 in the vicinity of Eastchester Road on October 22, 2014;

• The murder of Jordan Jackwett, who was shot and killed at the age of 23 in the vicinity of Ely Avenue during a shooting between members of 2Fly and BMB on July 26, 2015; and

• The murder of Darren Epps, age 47, who was shot to death by a member of 2Fly in the vicinity of 215th and White Plains Road during a botched robbery on March 13, 2016.

In connection with these arrests, federal and local law enforcement officers also executed court-authorized search warrants at four locations tied to the defendants.  During the arrests and searches, agents and officers seized, among other evidence, seven guns, ammunition, crack, marijuana, counterfeit currency, and drug paraphernalia.  To date, in this case, agents and officers have seized, among other evidence, quantities of marijuana, crack, cocaine, and oxycodone, as well as firearms, ammunition, scalpels, and knives.  During the investigation, agents and officers also intercepted thousands of wiretap calls, during many of which various members and associates of the gangs discussed their racketeering and narcotics activities. 

*                   *                  *

In a coordinated operation, 78 defendants were arrested in New York yesterday and early this morning.  They will be presented later this afternoon in Manhattan federal court.  Defendants ANDRE BENT, ROBERT POPE, JAMES PILGRIM, JAMAL BLAIR, STEPHAN CLARKE, LAQUAN PARRISH, JAFAR BORDEN, ANDERSON ROSS, BARFFOUR ABEBERSE, ROBERT HAUGHTON, SHAQUILLE DEWAR, MARTIN MITCHELL, DONQUE TYRELL, DEVANTE JOSEPH, DAQUAN ANDERSON, JAQUAN MCINTOSH, and SEAN MCINTOSH were in custody on state charges and were transferred to federal custody today.  Charts identifying each defendant, the charges, and the maximum penalties are below.

U.S. v. Parrish et al. is assigned to U.S.  District Judge Lewis A. Kaplan.  U.S. v. Burrell et al. is assigned to U.S. District Judge Alison J. Nathan.

Mr. Bharara praised the outstanding investigative work of the NYPD’s Bronx Gang Squad, HSI’s Violent Gang Unit, the New York Field Division of the DEA, and the ATF’s Joint Firearms Task Force, as well as the United States Marshals’ Service, the New York State Office of Special Investigation--Department of Corrections and Community Supervision, and the New York State Police for their assistance in today’s arrests.  He also thanked the Department of Investigation and the Bronx County District Attorney’s Office for their support in this ongoing investigation.

The Office’s Violent and Organized Crime Unit is overseeing the case.  Assistant U.S. Attorneys Rachel Maimin, Micah W.J. Smith, Robert Allen, Hagan Scotten, Jessica Feinstein, and Drew Johnson-Skinner are in charge of the prosecution.

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

United States v. Burrell et al.

Count

Charge

Defendant

Maximum Penalty

1

Racketeering Conspiracy

NICO BURRELL,

a/k/a “Zico Nico,”

DOUGLAS MCLARTY,

a/k/a “Q-Don,”

a/k/a “Q-Dizzy,”

MARTIN MITCHELL,

a/k/a “Tyliek,” 

DONQUE TYRELL,

a/k/a “Polo Rell,”

GERARD BASS,

 a/k/a “Roddo,”

DOMINICK SHERLAND,

a/k/a “D-Nick,”

BARFFOUR ABEBERSE,

a/k/a “BB,”

a/k/a “Duce Bigga,”

MASHUD YODA,

a/k/a “Papa Ola,”

ANDERSON ROSS,

a/k/a “Boogy,”

a/k/a “Boogy Boo,”

a/k/a “Ray Allen Jr.,”

ANTHONY KING,

a/k/a “Ant-Dog,”

MARK WILLIAMS,

a/k/a “Spangler,”

a/k/a “Markie Bossin,”

QUAYSEAN CANNONIER,

a/k/a “Tic-Tic,”

TAYQUAN TUCKER,

a/k/a “Chicken,”

a/k/a “Chickenita,”

WILLIAM REID,

a/k/a “Uptown Will,”

MARLON ROBERTS,

a/k/a “Fetti,”

ABDULLAH YODA,

a/k/a “Dellah,”

KENNETH RUGGS,

a/k/a “Money Making Kenny,”

CALVIN RUGGS,

a/k/a “GQ,”

FABIAN MORRISON,

a/k/a “Fabo,”

SHAQUILLE DEWAR,

a/k/a “Shaq Doe,”

DESEAN BENNETT,

a/k/a “Doola,”

JAFAR BORDEN,

a/k/a “Jaffy,”

JOSE RODRIGUEZ,

a/k/a “Hov,”

SHAVON WRIGHT,

a/k/a “Bhippy,”

a/k/a “Yung Bhippy,”

RASHEID BUTLER,

a/k/a “Rah,”

BRIAN RICHARDS,

a/k/a “B-Rich,”

DEVANTE JOSEPH,

a/k/a “Wiz,”

STEPHAN CLARKE,

JAMES PILGRIM,

a/k/a “Jizzle,”

MICHELLE JEMISON,

a/k/a “Pebbles,”

IVANJOEL ARYEETEY,

a/k/a “Ijoe,”

a/k/a “Ivan,”

ROBERT HAUGHTON,

a/k/a “Duke,”

JAMAL BLAIR,

a/k/a “Fish,”

ONEIL DASILVA,

a/k/a “Soxx,”

a/k/a “Bobby Soxx,”

DURELL GUY,

HAKEEM CAMPBELL,

a/k/a “Ocky,”

a/k/a “Ackee,”

RICHARD PHILLIPS,

 a/k/a “G-Mack,”

RUSHAUN BROWN,

a/k/a “Boobie,”

a/k/a “Gambino,”

MICHAEL FRANCIS,

a/k/a “Mikey Bandz,”

TYRONE GRAY,

a/k/a “Ty,”

LAMAR FRANCIS,

a/k/a “Lammy,”

a/k/a “Andrew Blacks,”

SHANE BENNETT,

a/k/a “Fattah,”

DAVID JONES,

RICARDO STEWART,

a/k/a “Cardo,”

DANTE PLUMMER,

a/k/a “Tae,”

JOEL HARGROVE,

a/k/a “Flow,”

SHAWN REID,

a/k/a “Sama,”  

a/k/a “Sama Lama,”

BRADLEY WILSON,

a/k/a “Broadway,”

ROBERT FELICIANO,

a/k/a “RJ,”

DANTE STEPHENS,

a/k/a “Jibba,”

CARLETTO ALLEN,

a/k/a “Joker,”

20 years’ imprisonment

2

Narcotics Conspiracy

NICO BURRELL,

a/k/a “Zico Nico,”

DOUGLAS MCLARTY,

a/k/a “Q-Don,”

 a/k/a “Q-Dizzy,”

MARTIN MITCHELL,

a/k/a “Tyliek,” 

DONQUE TYRELL,

a/k/a “Polo Rell,”

GERARD BASS,

a/k/a “Roddo,”

DOMINICK SHERLAND,

a/k/a “D-Nick,”

BARFFOUR ABEBERSE,

a/k/a “BB,”

a/k/a “Duce Bigga,”

MASHUD YODA,

a/k/a “Papa Ola,”

ANDERSON ROSS,

a/k/a “Boogy,”

a/k/a “Boogy Boo,”

a/k/a “Ray Allen Jr.,”

ANTHONY KING,

a/k/a “Ant-Dog,”

MARK WILLIAMS,

a/k/a “Spangler,”

a/k/a “Markie Bossin,”

TAYQUAN TUCKER,

a/k/a “Chicken,”

a/k/a “Chickenita,”

WILLIAM REID,

a/k/a “Uptown Will,”

MARLON ROBERTS,

a/k/a “Fetti,”

ABDULLAH YODA,

a/k/a “Dellah,”

KENNETH RUGGS,

a/k/a “Money Making Kenny,”

CALVIN RUGGS,

a/k/a “GQ,”

FABIAN MORRISON,

 a/k/a “Fabo,”

SHAQUILLE DEWAR,

a/k/a “Shaq Doe,”

DESEAN BENNETT,

a/k/a “Doola,”

JOSE RODRIGUEZ,

a/k/a “Hov,”

SHAVON WRIGHT,

a/k/a “Bhippy,”

a/k/a “Yung Bhippy,”

RASHEID BUTLER,

a/k/a “Rah,”

BRIAN RICHARDS,

a/k/a “B-Rich,”

MICHELLE JEMISON,

a/k/a “Pebbles,”

IVANJOEL ARYEETEY,

a/k/a “Ijoe,”

a/k/a “Ivan,”

ROBERT HAUGHTON,

 a/k/a “Duke,”

JAMAL BLAIR,

a/k/a “Fish,”

ONEIL DASILVA,

a/k/a “Soxx,”

a/k/a “Bobby Soxx,”

DURELL GUY,

HAKEEM CAMPBELL,

a/k/a “Ocky,”

a/k/a “Ackee,”

RICHARD PHILLIPS,

 a/k/a “G-Mack,”

RUSHAUN BROWN,

 a/k/a “Boobie,”

 a/k/a “Gambino,”

MICHAEL FRANCIS,

a/k/a “Mikey Bandz,”

TYRONE GRAY,

a/k/a “Ty,”

LAMAR FRANCIS,

a/k/a “Lammy,”

a/k/a “Andrew Blacks,”

SHANE BENNETT,

a/k/a “Fattah,”

DAVID JONES,

RICARDO STEWART,

a/k/a “Cardo,”

DANTE PLUMMER,

 a/k/a “Tae,”

JOEL HARGROVE,

 a/k/a “Flow,”

SHAWN REID,

a/k/a “Sama,”  

a/k/a “Sama Lama,”

BRADLEY WILSON,

 a/k/a “Broadway,”

ROBERT FELICIANO,

 a/k/a “RJ,”

DANTE STEPHENS,

 a/k/a “Jibba,”

CARLETTO ALLEN,

 a/k/a “Joker,”

SHAQUILLE JOHN,

 a/k/a “Poppy,”

OKEIFA JOHN,

   a/k/a “Ratty,”

DAQUAN REID,

   a/k/a “DQ,”

MICHAEL REDLEY,

a/k/a “Mikey,”

a/k/a “Jones,”

ALBERT AMPONSAH,

a/k/a “Jungle,”

RICHARD MONTAGUE,

a/k/a “Spanks,”

ANTHONY LETTERIO,

a/k/a “Yay,”

RAI THOMAS,

a/k/a “Ritch,”

JAVONE PEARCE,

 a/k/a “Jevy,”

SHANICE JOHN,

DOMINIQUE BASS,

a/k/a “Domo,”

RICARDO BURGESS,

a/k/a “Zilla,”

Life imprisonment with a mandatory minimum of 10 years’ imprisonment

3

Narcotics Distribution

DOUGLAS MCLARTY,

a/k/a “Q-Don,”

a/k/a “Q-Dizzy,”

DONQUE TYRELL,

a/k/a “Polo Rell,”

GERARD BASS,

a/k/a “Roddo,”

DOMINICK SHERLAND,

a/k/a “D-Nick,”

BARFFOUR ABEBERSE,

a/k/a “BB,”

a/k/a “Duce Bigga,”

MARK WILLIAMS,

a/k/a “Spangler,”

a/k/a “Markie Bossin,”

TAYQUAN TUCKER,

a/k/a “Chicken,”

a/k/a “Chickenita,”

MARLON ROBERTS,

a/k/a “Fetti,”

FABIAN MORRISON,

a/k/a “Fabo,”

SHAQUILLE DEWAR,

a/k/a “Shaq Doe,”

DESEAN BENNETT, a/k/a “Doola,”

JOSE RODRIGUEZ,

a/k/a “Hov,”

SHAVON WRIGHT,

a/k/a “Bhippy,”

a/k/a “Yung Bhippy,”

MICHELLE JEMISON,

a/k/a “Pebbles,”

IVANJOEL ARYEETEY,

a/k/a “Ijoe,”

a/k/a “Ivan,”

ROBERT HAUGHTON,

a/k/a “Duke,”

JAMAL BLAIR,

a/k/a “Fish,”

ONEIL DASILVA,

a/k/a “Soxx,”

a/k/a “Bobby Soxx,”

DURELL GUY,

HAKEEM CAMPBELL,

a/k/a “Ocky,”

a/k/a “Ackee,”

RICHARD PHILLIPS,

a/k/a “G-Mack,”

RUSHAUN BROWN,

a/k/a “Boobie,”

a/k/a “Gambino,”

MICHAEL FRANCIS,

a/k/a “Mikey Bandz,”

TYRONE GRAY,

a/k/a “Ty,”

LAMAR FRANCIS,

a/k/a “Lammy,”

a/k/a “Andrew Blacks,”

SHANE BENNETT,

a/k/a “Fattah,”

DAVID JONES,

RICARDO STEWART,

a/k/a “Cardo,”

JOEL HARGROVE,

a/k/a “Flow,”

SHAWN REID,

a/k/a “Sama,”  

a/k/a “Sama Lama,”

BRADLEY WILSON,

a/k/a “Broadway,”

ROBERT FELICIANO,

a/k/a “RJ,”

DANTE STEPHENS,

a/k/a “Jibba,”

CARLETTO ALLEN,

a/k/a “Joker,”

SHAQUILLE JOHN,

a/k/a “Poppy,”

OKEIFA JOHN,

a/k/a “Ratty,”

DAQUAN REID,

a/k/a “DQ,”

MICHAEL REDLEY,

a/k/a “Mikey,”

a/k/a “Jones,”

ALBERT AMPONSAH,

a/k/a “Jungle,”

RICHARD MONTAGUE,

a/k/a “Spanks,”

JAVONE PEARCE,

a/k/a “Jevy,”

SHANICE JOHN,

DOMINIQUE BASS,

a/k/a “Domo,”

RICARDO BURGESS,

a/k/a “Zilla,”

Life imprisonment with a mandatory minimum of one year’s imprisonment

4

Firearms Offense

NICO BURRELL,

a/k/a “Zico Nico,”

DOUGLAS MCLARTY,

a/k/a “Q-Don,”

a/k/a “Q-Dizzy,”

MARTIN MITCHELL,

a/k/a “Tyliek,” 

DONQUE TYRELL,

a/k/a “Polo Rell,”

GERARD BASS,

 a/k/a “Roddo,”

DOMINICK SHERLAND,

a/k/a “D-Nick,”

BARFFOUR ABEBERSE,

a/k/a “BB,”

a/k/a “Duce Bigga,”

MASHUD YODA,

a/k/a “Papa Ola,”

ANDERSON ROSS,

a/k/a “Boogy,”

a/k/a “Boogy Boo,”

a/k/a “Ray Allen Jr.,”

ANTHONY KING,

a/k/a “Ant-Dog,”

QUAYSEAN CANNONIER,

a/k/a “Tic-Tic,”

TAYQUAN TUCKER,

a/k/a “Chicken,”

a/k/a “Chickenita,”

WILLIAM REID,

a/k/a “Uptown Will,”

MARLON ROBERTS,

a/k/a “Fetti,”

ABDULLAH YODA,

a/k/a “Dellah,”

KENNETH RUGGS,

a/k/a “Money Making Kenny,”

CALVIN RUGGS,

a/k/a “GQ,”

FABIAN MORRISON,

a/k/a “Fabo,”

SHAQUILLE DEWAR,

a/k/a “Shaq Doe,”

DESEAN BENNETT,

a/k/a “Doola,”

JAFAR BORDEN,

a/k/a “Jaffy,”

JOSE RODRIGUEZ,

a/k/a “Hov,”

RASHEID BUTLER,

a/k/a “Rah,”

BRIAN RICHARDS,

a/k/a “B-Rich,”

DEVANTE JOSEPH,

a/k/a “Wiz,”

STEPHAN CLARKE,

JAMES PILGRIM,

a/k/a “Jizzle,”

IVANJOEL ARYEETEY,

a/k/a “Ijoe,”

a/k/a “Ivan,”

JAMAL BLAIR,

a/k/a “Fish,”

ONEIL DASILVA,

a/k/a “Soxx,”

a/k/a “Bobby Soxx,”

DURELL GUY,

HAKEEM CAMPBELL,

a/k/a “Ocky,”

a/k/a “Ackee,”

RUSHAUN BROWN,

a/k/a “Boobie,”

a/k/a “Gambino,”

TYRONE GRAY,

a/k/a “Ty,”

LAMAR FRANCIS,

a/k/a “Lammy,”

a/k/a “Andrew Blacks,”

SHANE BENNETT,

a/k/a “Fattah,”

DAVID JONES,

RICARDO STEWART,

a/k/a “Cardo,”

DANTE PLUMMER,

a/k/a “Tae,”

ROBERT FELICIANO,

a/k/a “RJ,”

CARLETTO ALLEN,

a/k/a “Joker,”

OKEIFA JOHN,

a/k/a “Ratty,”

RICARDO BURGESS,

a/k/a “Zilla,”

Life imprisonment with a mandatory minimum of 10 years’ imprisonment

“BMB” Defendants

Age

Barffour Abeberse

23

Carleto Allen

21

Albert Amponsah

29

IvanJoel Aryeetey

20

Dominique Bass

26

Gerard Bass

23

Desean Bennet

22

Shayne Bennet

24

Vashon Bennett

22

Jamal Blair

24

Jaffar Borden

19

Rushaun Brown

24

Ricado Burgess

38

Nico Burrell

23

Rasheid Butler

19

Hakeem Campbell

22

Quaysean Cannonier

20

Stephan Clarke

21

Oneil Dasilva

22

Shaquille Dewar

21

Robert Feliciano

25

Lamar Francis

25

Michael Francis

25

Tyrone Gray

22

Durell Guy

24

Joel Hargrove

25

Robert Haughton

21

Michelle Jemison

22

Okeifa John

20

Shanice John

23

Shaquille John,

21

Howard Johnson

39

David Jones

23

Anthony King

26

Anthony Letterio

35

Douglas McLarty

22

Robert Miles

55

Martin Mitchell

21

Richard Montague

21

Fabian Morrison

26

Javone Pearce

24

Richard Phillips

23

James Pilgrim

21

Michael Redley

27

Daquan Reid

21

Shawn Reid

21

William Reid

22

Brian Richards

22

Marlon Roberts

26

Jose Rodriguez

23

Anderson Ross

21

Calvin Ruggs

21

Kenneth Ruggs

19

Dominick Sherland

23

Dante Stephens

23

Ricardo Stewart

23

Rai Thomas

21

Tayquan Tucker

20

Donque Tyrell

20

Mark Williams

24

Bradley Wilson

24

Shavon Wright

24

Abdullah Yoda

19

Mashud Yoda

23

United States v. Parrish et al.

1

Racketeering Conspiracy

LAQUAN PARRISH,

a/k/a “MadDog,”  a/k/a “Quanzaa,”

ANDRE BENT, a/k/a “Dula,”

AARON RODRIGUEZ,

a/k/a “Gunz,” a/k/a “Cito,”

SEAN MCINTOSH,

a/k/a “Slimmy,”

JAQUAN MCINTOSH,

a/k/a “BJ,”

MARK CLARKE,

a/k/a “Gritty,”  a/k/a “Mark the Gritty Shark,”

BOWLIN WALLINGFORD,

 a/k/a “BK,”a/k/a “Bay Kay,”

RODRIGO GONZALEZ,

a/k/a “Frenchy,”

ELIJAH BROWN, a/k/a “Lil Eli,”

JOSHUA BROWN, a/k/a “Josh,”

KAYSHAWN CAMPBELL,

a/k/a “Fresh,”

ROBERT POPE,

a/k/a “Big Bert,”

DAVID MATTISON,

a/k/a “Dave,” a/k/a “Daddy,”

KEVIN MATTISON,

a/k/a “Kev,”

JAYVON CARTER,

 a/k/a “Jay,” a/k/a “Jigga,”

MARCEL BENT,

a/k/a “Marcellus,” a/k/a “Cellie,”

PRESTON PASLEY,

a/k/a “Smoove,”

TERRENCE PASLEY, a/k/a “Fresh,”

DAQUAN ANDERSON,

a/k/a “BD,”

DANTE GREGORY,

a/k/a “Smiley,”

CINTRON POWELL,

a/k/a “C-Live,”

WALTER JERNIGAN,

a/k/a “Lil G,” a/k/a “G-Boo,”

MOUHAHAMET CHERRY,

a/k/a “Momo,”

HASANI FITTS,

a/k/a “Has,”

EMMANUEL MCKENZIE,

a/k/a “Manny Fresh,”

LLOYD RODRIGUEZ,

a/k/a “T-Boy,”

NICHOLAS BAILEY,

a/k/a “Nicholas Dale,”

a/k/a “Nick,”

SHAWN WALKER,

a/k/a “Styles,”

PETER LEWIS,

a/k/a “Pebbs,”

KRAIG LEWIS

a/k/a “K-Murda,”

RONALD MATTHEWS,

a/k/a “Ronnie,”

TRAVIS THOMPSON,

KAREEM SANDERS,

a/k/a “Reem,”

JONATHON CUMMINGS,

 a/k/a “J-Starz,”

WAYNE LEON,

a/k/a “Wayne Brady,”

PATRICK LITTLEJOHN,

a/k/a “Pat,”

EMILE ANDERSON,

a/k/a “Fetti,”

a/k/a “Kev,”

KAVONE HORTON,

 a/k/a “Styles,”

DEVIN WALKER,

 a/k/a “Dev,”

20 years’ imprisonment

2

Narcotics Conspiracy

LAQUAN PARRISH,

a/k/a “MadDog,”

a/k/a “Quanzaa,”

ANDRE BENT,

a/k/a “Dula,”

AARON RODRIGUEZ,

a/k/a “Gunz,”

a/k/a “Cito,”

SEAN MCINTOSH,

a/k/a “Slimmy,”

JAQUAN MCINTOSH,

a/k/a “BJ,”

MARK CLARKE,

a/k/a “Gritty,” a/k/a “Mark the Gritty Shark,”

BOWLIN WALLINGFORD,

a/k/a “BK,”

a/k/a “Bay Kay,”

RODRIGO GONZALEZ,

a/k/a “Frenchy,”

ELIJAH BROWN,

a/k/a “Lil Eli,”

JOSHUA BROWN,

a/k/a “Josh,”

KAYSHAWN CAMPBELL,

a/k/a “Fresh,”

ROBERT POPE,

a/k/a “Big Bert,”

DAVID MATTISON,

a/k/a “Dave,”

a/k/a “Daddy,”

KEVIN MATTISON,

a/k/a “Kev,”

JAYVON CARTER,

a/k/a “Jay,”

a/k/a “Jigga,”

MARCEL BENT,  

a/k/a “Marcellus,”

a/k/a “Cellie,”

PRESTON PASLEY,

a/k/a “Smoove,”

TERRENCE PASLEY,

a/k/a “Fresh,”

DAQUAN ANDERSON,

a/k/a “BD,”

DANTE GREGORY,

a/k/a “Smiley,”

CINTRON POWELL,

a/k/a “C-Live,”

WALTER JERNIGAN,

a/k/a “Lil G,”

a/k/a “G-Boo,”

MOUHAHAMET CHERRY,

a/k/a “Momo,”

HASANI FITTS,

a/k/a “Has,”

LLOYD RODRIGUEZ,

a/k/a “T-Boy,”

NICHOLAS BAILEY,

a/k/a “Nicholas Dale,”

a/k/a “Nick,”

SHAWN WALKER,

a/k/a “Styles,”

PETER LEWIS,

a/k/a “Pebbs,”

KRAIG LEWIS

 a/k/a “K-Murda,”

RONALD MATTHEWS,

a/k/a “Ronnie,”

TRAVIS THOMPSON,

KAREEM SANDERS,

a/k/a “Reem,”

JONATHON CUMMINGS,

 a/k/a “J-Starz,”

WAYNE LEON,

a/k/a “Wayne Brady,”

DANNY JONES,

a/k/a “Red,”

a/k/a “Casper,”

LAMOR MILES,

a/k/a “Ls,”

ROBERT MILES,

PATRICK LITTLEJOHN,

a/k/a “Pat,”

ANDREW MONCRIEFFE,

a/k/a “Drew,”

GARY ARRINGTON,

a/k/a “G,”

WILLIAMS RODRIGUEZ,

a/k/a “Will,”

MELVIN RODRIGUEZ,

a/k/a “YB,”

BRANDON ANDERSON,

a/k/a “Big BD,”

EMILE ANDERSON,

a/k/a “Fetti,”

a/k/a “Kev,”

KAVONE HORTON,

a/k/a “Styles,”

JOHN ALVAREZ,

a/k/a “Gotti,”

COURTNEY GREEN,

a/k/a “C-Rock,”

ERICK CANALES,

 a/k/a “EC,”

GREGORY CAMERON,

a/k/a “Biggs, a/k/a “Bigga,”

a/k/a “GG,”

JABRIEL LEWIS,

a/k/a “Breeze,” a/k/a “Breezy,”

VAUGHN WASHINGTON,

a/k/a “Murder,”

BRUCE WASHINGTON,

 a/k/a “BJ,”

DAMON PARRISH,

ROBERTO MUNOZ,

a/k/a “Jr,”

ALONZO MCINTOSH,

 a/k/a “Manuke,”

Life imprisonment with a mandatory minimum of 10 years’ imprisonment

3

Narcotics Distribution

LAQUAN PARRISH,

a/k/a “MadDog,”

a/k/a “Quanzaa,”

ANDRE BENT,

a/k/a “Dula,”

AARON RODRIGUEZ,

a/k/a “Gunz,”

a/k/a “Cito,”

SEAN MCINTOSH,

a/k/a “Slimmy,”

JAQUAN MCINTOSH,

a/k/a “BJ,”

MARK CLARKE,

a/k/a “Gritty,” a/k/a “Mark the Gritty Shark,”

BOWLIN WALLINGFORD,

a/k/a “BK,”

a/k/a “Bay Kay,”

RODRIGO GONZALEZ,

a/k/a “Frenchy,”

ELIJAH BROWN,

a/k/a “Lil Eli,”

JOSHUA BROWN,

 a/k/a “Josh,”

KAYSHAWN CAMPBELL,

a/k/a “Fresh,”

ROBERT POPE,

a/k/a “Big Bert,”

DAVID MATTISON,

a/k/a “Dave,”

a/k/a “Daddy,”

KEVIN MATTISON,

a/k/a “Kev,”

JAYVON CARTER,

a/k/a “Jay,”

a/k/a “Jigga,”

MARCEL BENT,  

a/k/a “Marcellus,”

a/k/a “Cellie,”

PRESTON PASLEY,

a/k/a “Smoove,”

TERRENCE PASLEY,

a/k/a “Fresh,”

DAQUAN ANDERSON,

a/k/a “BD,”

DANTE GREGORY,

a/k/a “Smiley,”

CINTRON POWELL,

a/k/a “C-Live,”

WALTER JERNIGAN,

a/k/a “Lil G,”

a/k/a “G-Boo,”

MOUHAHAMET CHERRY,

a/k/a “Momo,”

HASANI FITTS,

a/k/a “Has,”

LLOYD RODRIGUEZ,

a/k/a “T-Boy,”

NICHOLAS BAILEY,

 a/k/a “Nicholas Dale,”

 a/k/a “Nick,”

SHAWN WALKER,

a/k/a “Styles,”

PETER LEWIS,

a/k/a “Pebbs,”

KRAIG LEWIS

a/k/a “K-Murda,”

RONALD MATTHEWS,

a/k/a “Ronnie,”

TRAVIS THOMPSON,

KAREEM SANDERS,

a/k/a “Reem,”

JONATHON CUMMINGS,

 a/k/a “J-Starz,”

WAYNE LEON,

a/k/a “Wayne Brady,”

DANNY JONES,

a/k/a “Red,”

a/k/a “Casper,”

LAMOR MILES,

a/k/a “Ls,”

ROBERT MILES,

PATRICK LITTLEJOHN,

a/k/a “Pat,”

ANDREW MONCRIEFFE,

a/k/a “Drew,”

GARY ARRINGTON,

a/k/a “G,”

WILLIAMS RODRIGUEZ,

a/k/a “Will,”

MELVIN RODRIGUEZ,

a/k/a “YB,”

BRANDON ANDERSON,

a/k/a “Big BD,”

EMILE ANDERSON,

a/k/a “Fetti,”

a/k/a “Kev,”

KAVONE HORTON,

 a/k/a “Styles,”

JOHN ALVAREZ,

a/k/a “Gotti,”

COURTNEY GREEN,

 a/k/a “C-Rock,”

ERICK CANALES,

 a/k/a “EC,”

GREGORY CAMERON,

a/k/a “Biggs, a/k/a “Bigga,”

a/k/a “GG,”

JABRIEL LEWIS,

a/k/a “Breeze,” a/k/a “Breezy,”

VAUGHN WASHINGTON,

a/k/a “Murder,”

BRUCE WASHINGTON,

 a/k/a “BJ,”

DAMON PARRISH,

ROBERTO MUNOZ,  a/k/a “Jr,”

ALONZO MCINTOSH,

a/k/a “Manuke,”

Life imprisonment with a mandatory minimum of 1 year’s imprisonment

4

Firearms Offense

LAQUAN PARRISH,

a/k/a “MadDog,”

a/k/a “Quanzaa,”

ANDRE BENT,

a/k/a “Dula,”

AARON RODRIGUEZ,

a/k/a “Gunz,”

 a/k/a “Cito,”

SEAN MCINTOSH,

a/k/a “Slimmy,”

JAQUAN MCINTOSH,

a/k/a “BJ,”

MARK CLARKE,

a/k/a “Gritty,” a/k/a “Mark the Gritty Shark,”

BOWLIN

WALLINGFORD,

a/k/a “BK,”

a/k/a “Bay Kay,”

RODRIGO GONZALEZ,

a/k/a “Frenchy,”

ELIJAH BROWN,

a/k/a “Lil Eli,”

JOSHUA BROWN,

a/k/a “Josh,”

KAYSHAWN CAMPBELL,

a/k/a “Fresh,”

ROBERT POPE,

a/k/a “Big Bert,”

DAVID MATTISON,

a/k/a “Dave,”

a/k/a “Daddy,”

KEVIN MATTISON,

a/k/a “Kev,”

JAYVON CARTER,

a/k/a “Jay,”

a/k/a “Jigga,”

MARCEL BENT,  

a/k/a “Marcellus,”

a/k/a “Cellie,”

PRESTON PASLEY,

a/k/a “Smoove,”

TERRENCE PASLEY,

a/k/a “Fresh,”

DAQUAN ANDERSON,

a/k/a “BD,”

DANTE GREGORY,

a/k/a “Smiley,”

CINTRON POWELL,

a/k/a “C-Live,”

WALTER JERNIGAN,

a/k/a “Lil G,”

a/k/a “G-Boo,”

MOUHAHAMET CHERRY,

a/k/a “Momo,”

HASANI FITTS,

a/k/a “Has,”

EMMANUEL MCKENZIE,

a/k/a “Manny Fresh,”

LLOYD RODRIGUEZ,

a/k/a “T-Boy,”

NICHOLAS BAILEY,

 a/k/a “Nicholas Dale,”

 a/k/a “Nick,”

SHAWN WALKER,

a/k/a “Styles,”

PETER LEWIS,

a/k/a “Pebbs,”

KRAIG LEWIS

a/k/a “K-Murda,”

RONALD MATTHEWS,

a/k/a “Ronnie,”

TRAVIS THOMPSON,

KAREEM SANDERS,

a/k/a “Reem,”

JONATHON CUMMINGS,

 a/k/a “J-Starz,”

WAYNE LEON,

 a/k/a “Wayne Brady,”

DANNY JONES,

a/k/a “Red,”

a/k/a “Casper,”

ROBERT MILES,

PATRICK LITTLEJOHN,

a/k/a “Pat,”

MELVIN RODRIGUEZ,

a/k/a “YB,”

EMILE ANDERSON,

a/k/a “Fetti,”

a/k/a “Kev,”

KAVONE HORTON,

a/k/a “Styles,”

DEVIN WALKER,

a/k/a “Dev,”

JOHN ALVAREZ,

a/k/a “Gotti,”

COURTNEY GREEN,

 a/k/a “C-Rock,”

ERICK CANALES,

a/k/a “EC,”

GREGORY CAMERON,

 a/k/a “Biggs,  a/k/a “Bigga,”

 a/k/a “GG,”

JABRIEL LEWIS,

 a/k/a “Breeze,”

 a/k/a “Breezy,”

VAUGHN WASHINGTON,

a/k/a “Murder,”

BRUCE WASHINGTON,

a/k/a “BJ,”

DAMON PARRISH,

ROBERTO MUNOZ,

a/k/a “Jr,”

ALONZO MCINTOSH,

a/k/a “Manuke,”

Life imprisonment with a mandatory minimum of 10 years’ imprisonment

Defendants

Age

John Alvarez

29

Brandon Anderson

31

Daquan Anderson

22

Emile Anderson

22

Gary Arrington

32

Nicholas Bailey

23

Andre Bent

23

Marcel Bent

25

Elijah Brown

18

Joshua Brown

20

Kayshawn Campbell

23

Erick Canales

22

Jayvon Carter

21

Mouhahmet Cherry

23

Mark Clarke

21

Hasani Fitts

23

Rodrigo Gonzalez

19

Courtney Green

29

Dante Gregory

19

Kavone Horton

18

Walter Jernigan

21

Danny Jones

27

Kraig Lewis

24

Peter Lewis

24

Patrick Littlejohn

23

Ronald Matthews

25

David Mattison

24

Kevin Mattison

21

Jacquon McIntosh

21

Sean McIntosh

24

Emmanuel McKenzie

25

Lamor Miles

26

Andrew Moncrieffe

40

Laquan Parrish

24

Preston Pasley

26

Terrence Pasley

27

Robert Pope

23

Cintron Powell

21

Aaron Rodriguez

23

Lloyd Rodriguez

20

Melvin Rodriguez

23

Williams Rodriguez

34

Kareem Sanders

25

Travis Thompson

20

Davon Walker

19

Shawn Walker

24

Bowlin Wallingford

26

Bruce Washington

28

Vaughn Washington

26

[1] As the introductory phrase signifies, the entirety of the text of the Indictments, and the description of the Indictments 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 Philip R. Bartlett, Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced the charges today against six men – ERIC ROBINSON, ELDRIDGE MITCHELL, JHAYMES BETHEL BROWN, JR., CRAIG SMITH, AKIL CHRISTOPHER, and KORDELL NESBITT – on charges stemming from their conspiracy to commit credit card fraud and their commission of credit card fraud.  ROBINSON, MITCHELL, BROWN, JR., and NESBITT were arrested today in the New York City metro area.  SMITH and CHRISTOPHER remain at large. 

Manhattan U.S. Attorney Preet Bharara said:  “As alleged, these six men conspired to use fraudulent credit cards, encoded with the stolen bank account information of victims, to purchase scores of American Express, Visa and MasterCards.  Together with our partners at the USPIS, we have put this alleged criminal ring out of business.”

USPIS Inspector-in-Charge Philip R. Bartlett said:  “When the defendants used their ill-gotten gains for the finer things in life, they miscalculated the true cost of their crimes: being arrested. U.S. based merchants are quickly transitioning to EMV Chip-Pin point of sale terminals, eventually making these low level credit card fraud schemes a thing of the past.”

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

From May 2015 until August 2015, a number of individuals, including all six defendants, engaged in a conspiracy and scheme to defraud others.  They went to various post offices in the Southern District of New York and elsewhere, where they purchased American Express, Visa, and MasterCard gift cards (“Gift Cards”).  Typically, the defendants bought or attempted to buy several $500 Gift Cards at one time.  The defendants purchased these Gift Cards using fraudulent credit cards.  The credit cards appeared legitimate, and they were often made out in the names of the defendants.  However, the credit cards were intentionally encoded with stolen bank account information.  As a result, the individuals who purchased Gift Cards were not the individuals charged for the purchase; instead the victims whose bank account information had been stolen and encoded onto the fraudulent credit cards were paying for the Gift Cards, unbeknownst to them.  Frequently, the stolen bank account information was for bank accounts maintained in foreign countries.  In just four months, the defendants defrauded others, or attempted to defraud others, out of more than $150,000.

According to the Complaint, the defendants’ misconduct occurred at post offices throughout New York, as well as in Connecticut and Pennsylvania.

*          *          *

Each of the defendants is charged with one count of conspiracy to commit wire fraud and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison.  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.

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

Mr. Bharara praised the outstanding efforts of the USPIS.  He added that the investigation is ongoing.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Matthew J. Laroche and Michael D. Neff are in charge of the prosecution.

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

[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth 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 Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that EMIL RENSING, former chief digital officer at a premium entertainment network, was arrested this morning on wire fraud and aggravated identity theft charges resulting from a scheme in which RENSING used companies he owned and controlled to fraudulently obtain from his former employer approximately $8 million for services that were, in large part, never performed.  RENSING was presented today in Manhattan federal court before Magistrate Judge Frank Maas. 

Manhattan U.S. Attorney Preet Bharara said:  “As alleged, Emil Rensing abused the trust of his employer, hiding behind false and stolen identities, and submitting fraudulent invoices for millions of dollars of services never performed.  Thanks to the hard work of the FBI, Rensing’s alleged scheme has been uncovered.” 

FBI Assistant Director-in-Charge Diego Rodriguez said:  “Greed clouds people’s judgment, so much so that in this case Rensing allegedly used his friends’ names in a scheme to steal money from his employers.  This isn’t a case of an employee keeping the change after getting coffee for the office, Rensing is accused of stealing $8 million from the company that hired him.”          

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

EMIL RENSING, who was Chief Digital Officer of a premium movie network (the “Network”), defrauded the Network out of more than $8 million over five years.  As Chief Digital Officer of the Network, RENSING caused the Network to contract with at least two vendor companies owned and controlled by RENSING (the “RENSING Companies”) to perform digital media services for the Network.  In addition, the agreements between the RENSING Companies and the Network specified which personnel at the RENSING Companies were to perform the services for the Network.  In truth and in fact, however, the promised services were, in large part, never performed by the RENSING Companies, and the vendor personnel designated in the contracts to perform the services – who included several of RENSING’s former professional associates and business partners – had never heard of the vendors or performed services for the Network.  These individuals were unaware that their names were being used by RENSING in this manner. 

RENSING concealed his fraudulent scheme by, among other things, using false and stolen identities to hide his own involvement.  As to one of the vendors RENSING used to perpetrate the scheme (“Vendor-1”), RENSING provided the Network with a false name and e-mail address as the “contact” to be used by the Network to communicate with Vendor-1.  As to a second RENSING Company, (“Vendor-2”), RENSING provided the Network with the name of a personal acquaintance as a “project manager” and “contact” for Vendor-2 when, in truth and in fact, this acquaintance had nothing to do with Vendor-2.  Unbeknownst to this personal acquaintance, RENSING also established an e-mail account in that acquaintance’s name that RENSING, posing as the acquaintance, used regularly to communicate with the Network about the vendor’s billing and other administrative matters.   

After the Network learned of RENSING’s fraudulent scheme, RENSING was interviewed by attorneys for the Network.  During this interview, which was recorded at the request of RENSING and his counsel, RENSING lied to further conceal his fraudulent scheme.

*                *                *

RENSING, 42, of Manhattan, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison, and one count of aggravated identity theft, which carries a mandatory minimum sentence of two years in prison to run consecutively with any other term of imprisonment imposed.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

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

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

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that VLADIMIR TSASTSIN was sentenced in Manhattan federal court to more than seven years in prison for perpetrating a massive internet fraud scheme by infecting more than four million computers in over 100 countries with malware.  The malware secretly altered the settings on infected computers, enabling TSASTSIN and his co-conspirators to digitally hijack users’ Internet searches and re-route their computers to certain websites and advertisements.  As a result, the defendants received millions of dollars in fees from advertisers who paid the defendants to bring customers to their websites or ads, but were unaware that the defendants did so by digitally hijacking victims’ computers.  The malware also prevented the installation of anti-virus software and operating system updates on millions of infected computers, leaving those computers and their users unable to detect or stop the malware, and exposing them to attacks by other malware.  On July 8, 2015, TSASTSIN pled guilty to one count of conspiracy to commit wire fraud and one count of conspiracy to commit computer intrusion.  U.S. District Judge Lewis A. Kaplan sentenced TSASTSIN earlier today.

U.S. Attorney Preet Bharara said: “Vladimir Tsastin was sentenced today to 87 months in prison for his role in a massive fraud scheme, which victimized more than four million Internet users in 100 countries.  By falsely collecting advertising fees for every ‘click’ their victims made, Tsastsin and his co-conspirators collected over $14 million. Together with our law enforcement partners all over the globe, this Office will continue to investigate and prosecute sophisticated cyber frauds.”

According to the Indictment and other court documents previously filed in the case and statements made in court proceedings:

From 2007 until October 2011, TSASTSIN and co-defendants Andrey Taame, Timur Gerassimenko, Dmitri Jegorov, Valeri Aleksejev, Konstantin Poltev, and Anton Ivanov controlled and operated various companies that masqueraded as legitimate publisher networks (the “Publisher Networks”) in the Internet advertising industry.  The Publisher Networks entered into agreements with ad brokers under which they were paid based on the number of times Internet users clicked on the links for certain websites or advertisements, or based on the number of times certain advertisements were displayed on certain websites.  Thus, the more traffic that went to the advertisers’ websites and display ads, the more money the defendants earned under their agreements with the ad brokers.  The defendants fraudulently increased the traffic to the websites and advertisements that would earn them money and made it appear to advertisers that the Internet traffic came from legitimate “clicks” and ad displays on the defendants’ Publisher Networks when, in actuality, it had not.

To carry out the scheme, the defendants and their co-conspirators used dozens of “rogue” Domain Name System (“DNS”) servers and malware (“the Malware”) designed to alter the DNS server settings on infected computers.  Victims’ computers became infected with the Malware when they visited certain websites or downloaded certain software to view videos online.  The Malware altered the DNS server settings on victims’ computers to route the infected computers to rogue DNS servers controlled and operated by the defendants and their co-conspirators.  The re-routing took two forms that are described below: “click hijacking” and “advertising replacement fraud” (together, “click fraud”).  The Malware also prevented the infected computers from receiving anti-virus software updates or operating system updates that otherwise might have detected the Malware and stopped it.  In addition, the infected computers were left vulnerable to infections by other malware.

Click Hijacking

When the user of an infected computer clicked on a search result link displayed through a search engine query, the Malware caused the computer to be re-routed to a different website.  Instead of being brought to the website to which the user asked to go, the user was brought to a website designated by the defendants.  Each “click” triggered payment to the defendants under their advertising agreements.  This click hijacking occurred for clicks by users on unpaid links that appeared in response to a user’s query as well as clicks on "sponsored” links or advertisements that appeared in response to a user’s query – often at the top of, or to the right of, the search results – thus causing the search engines to lose money.  For example, when the user of an infected computer clicked on the domain name link for the official website of Apple-iTunes, the user was instead taken to a website for a business unaffiliated with Apple Inc. that purported to sell Apple software.  The advertisers who paid for such Internet traffic to their websites were never told that the traffic consisted of hijacked clicks and that the visitors had not intended to visit their websites.

Advertising Replacement Fraud

In the advertisement replacement scheme, using their DNS Changer Malware and rogue DNS servers, the defendants replaced legitimate advertisements on websites, without the paying advertisers’ knowledge or consent, with substituted advertisements that triggered payments to themselves.  For example, when the user of an infected computer visited the home page of The Wall Street Journal, a featured advertisement for American Express had been fraudulently replaced with an ad for “Fashion Girl LA,” which triggered a payment to the defendants from another advertiser.

To acquire the online infrastructure for the fraudulent scheme, enter into contracts to sell Internet traffic, and launder the proceeds from the fraudulent scheme, Tsastsin and his co-defendants created and controlled over a dozen front companies located and/or registered in the United States, Estonia, Russia, Denmark, the Republic of Seychelles, England, and Cyprus.  At the time of his arrest, TSASTSIN, assisted by his co-defendants, operated approximately 50 rogue DNS servers located in New York City and additional ones at a data center in Chicago. Each of the rogue servers contained approximately two hard drives; the larger hard drives received as many as 3,000 fraudulent “clicks,” or DNS resolution requests, per second, while the smaller servers received several hundred requests per second.

*           *           *

In addition to the 87-month prison term, TSASTSIN, 35, of Tartu, Estonia, was sentenced to one year of supervised release and ordered to forfeit $2.5 million and pay a $200 special assessment.  In imposing sentence, Judge Kaplan described TSASTSIN’s crimes as “brazen, sophisticated, and outrageous.”

On July 27, 2015, Gerassimenko, Jegorov, and Poltev were sentenced to 48 months, 44 months, and 40 months in prison, respectively.  Aleksejev was sentenced on October 30, 2013, to 48 months in prison.  Ivanov was sentenced on July 25, 2014, to time served.  Judge Kaplan also entered orders against each defendant forfeiting his criminal proceeds and the electronic and online infrastructure used to perpetrate their fraudulent scheme.  The last defendant, Taame, who is a Russian national, remains at large.   

Mr. Bharara praised the outstanding investigative work of the Federal Bureau of Investigation, National Aeronautics and Space Administration-Office of the Inspector General, and the Estonian Central Criminal Police.  He also thanked the U.S. Department of Justice’s Office of International Affairs for its assistance with the extraditions.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Sarah Lai is in charge of the prosecution.  Alexander Wilson, Deputy Chief of the Asset Forfeiture Unit, is in charge of the forfeiture aspects of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that SCOTT A. BEATTY was arrested this morning on commodities fraud and wire fraud charges stemming from his scheme to defraud more than 49 investors of more than $825,000 through a fraud scheme in which BEATTY solicited investments for off-exchange foreign currency contracts known as “forex.”  BEATTY was arrested this morning in Roy, Utah, and will be presented at 4:30 EST today in federal court in Salt Lake City, Utah.

U.S. Attorney Preet Bharara said:  “As alleged, Scott Beatty perpetrated one of the oldest financial crimes in the book – lying to investors about his plans for their money and instead, spending it on himself and to pay other investors.  Through alleged misleading representations on his website, Beatty lured close to 50 investors interested in foreign exchange trading and defrauded them out of close to a million dollars.  I thank the FBI and Commodity Futures Trading Commission for their work in this case.”

FBI Assistant Director-in-Charge Diego Rodriguez said:  “When investors look for help finding wise and lucrative investments, they put trust in experts who should have their best interests in mind.  Beatty allegedly abused that trust and spent his clients’ money on himself.  Investors should have a healthy skepticism when investing in high yield investments, and ask questions about how their money is being invested.  If the answers don't add up, call the FBI.”

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

From January 2011 through June 2014, BEATTY, through his investment companies Peak Capital Management Group, Inc., and Peak Capital Group, Inc., engaged in a fraudulent scheme to obtain investments from individual investors purportedly for the purpose of trading in forex.  In connection with the scheme, BEATTY made a series of false and misleading representations to investors, on the website www.peakforex.com (the “Website”) and through email, including: (a) that BEATTY was using investors’ funds to conduct forex trading when in, in fact, BEATTY used just $125,000 of the $825,000 in investor funds for trading; (b); that BEATTY’s forex trading was generating consistently positive annualized returns as high as 43.9 percent when, in fact, his limited trading was consistently unsuccessful; and (c) that BEATTY had created individual accounts for each investor on whose behalf BEATTY purported to execute forex trading, when in fact, BEATTY failed to create such individualized accounts.  In addition to false and misleading representations made on the Website and over email, BEATTY generated wholly fictitious account statements that he provided to his clients through a client portal on the Website.

As a result of these misrepresentations, BEATTY obtained more than $825,000 in investments from more than 49 investors, the majority of whom were Japanese citizens who, under the Commodity Exchange Act, were not authorized to trade leveraged, margined, or financed forex in individually managed accounts.  BEATTY routinely converted investor funds to his own use in the form of cash withdrawals and debit card purchases, including at least $517,000 for, among other things, BEATTY’s personal expenses such as restaurant bills and retail purchases.  In addition, to hide his trading losses and continue to fund his personal lifestyle, BEATTY used new investor funds to pay back other investors in a Ponzi-like fashion.  In total, BEATTY distributed approximately $184,000 back to investors. 

*                      *                      *

BEATTY, 40, of Roy, Utah, is charged with one count of commodities fraud, which carries a maximum sentence of 10 years in prison and a maximum fine of $1 million, or twice the gross gain or loss from the offense; and one count of wire fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the work of the FBI and the Commodity Futures Trading Commission.  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. Attorney Andrea M. Griswold is in charge of the prosecution.  

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the Office obtained recoveries of more than $8.6 billion in forfeiture actions, more than $3 billion in civil actions, and more than $1.3 billion from restitution, criminal fines, and special assessments, between January 1, 2014, and December 31, 2015.   The amounts collected include criminal and civil forfeitures of nearly $3.44 billion for calendar year 2014 and more than $5.24 billion for 2015.

Manhattan U.S. Attorney Preet Bharara said: “Our Office’s more than $12 billion in forfeitures, penalties, and fines for the calendar years 2014 and 2015 includes more than $8.6 billion in forfeitures, the most that this Office or any U.S. Attorney’s Office has forfeited in a two-year period.  These recoveries demonstrate that those who break the law or commit civil offenses, whether institutions or individuals, are not free to profit from their misconduct.  These recoveries not only serve to deter bad conduct.  These recoveries not only serve to deter bad conduct, but also a significant portion of the money recovered will go toward compensating victims of crime or other misconduct who suffered real financial loss.”

Forfeitures

Forfeited funds are generally deposited into the Department of Justice Assets Forfeiture Fund (the “Assets Forfeiture Fund”) and the Department of Treasury Forfeiture Fund. The forfeited funds are used to restore money to crime victims and for a variety of law enforcement purposes.

BNP Paribas

$8.8336 billion forfeiture order; $3.8388 billion collected; total financial penalties collected $8.9736 billion 

In July 2014, BNP Paribas S.A. (“BNPP”) pled guilty to conspiring to violate the International Emergency Economic Powers Act and the Trading with the Enemy Act by knowingly and willfully moving more than $8.8 billion through the U.S. financial system on behalf of Sudanese, Iranian, and Cuban entities subject to U.S. economic sanctions.  In May 2015, BNPP was sentenced to forfeit $8.8336 billion, with penalties paid to the Federal Reserve Bank, New York State Department of Financial Services, and the New York County District Attorney to be credited against that forfeiture money judgment.  After crediting those penalties, $3.8 billion was forfeited to the United States in connection with the case in 2015.  Pursuant to recently enacted legislation, a substantial portion of these funds will be placed in a Congressionally-created terror victim compensation fund. 

JPMorgan Chase

$1.7 billion forfeited

On January 7, 2014, as part of a deferred prosecution agreement, JPMorgan Chase agreed to pay a non-tax deductible penalty of $1.7 billion, in the form of a civil forfeiture for its violations of the Bank Secrecy Act committed in connection with the Bernard Madoff multibillion-dollar Ponzi scheme.  The full amount was forfeited to the United States in 2014. 

Toyota Motor Corporation

$1.2 billion forfeited

In March 2014, the Toyota Motor Corporation entered into a deferred prosecution agreement with this Office based on charges that Toyota misled U.S. consumers by concealing and making deceptive statements regarding two safety issues affecting its vehicles, each of which caused a type of unintended acceleration.  Pursuant to the agreement, Toyota, among other things, agreed to a $1.2 billion penalty in the form of a civil forfeiture, constituting the largest criminal penalty ever imposed by the Department of Justice on an automotive company.  This amount was forfeited to the United States in 2014. 

General Motors

$900 million forfeited

In September 2015, the General Motors Company (“GM”) entered into a deferred prosecution agreement with this Office based on charges that GM concealed a potentially deadly safety defect from its U.S. regulator, the National Highway Traffic Safety Administration, and, in the process, misled consumers concerning the safety of certain of GM’s cars.  Pursuant to the deferred prosecution agreement, GM, among other things, agreed to the forfeiture of $900 million to the United States, which was completed in 2015.

Commerzbank

$300 million forfeited

In March 2015, Commerzbank entered into a deferred prosecution agreement with this Office and other components of the Department of Justice, including the Department’s Asset Forfeiture and Money Laundering Section, based in part on this Office’s charges that Commerzbank violated the Bank Secrecy Act (“BSA”) by willfully failing to have an effective anti-money laundering program, willfully failing to conduct due diligence on its foreign correspondent accounts, and willfully failing to file suspicious activity reports, which allowed the perpetrators of a major accounting fraud involving the Olympus Corporation to transfer more than $1.6 billion through Commerzbank in furtherance of the fraud.  Pursuant to the deferred prosecution agreement, Commerzbank, among other things, agreed to the forfeiture of $300 million to the United States based on the BSA charges, which was completed in 2015.

SAC Capital Advisors, L.P.

$284 million forfeited

In July 2013, this Office filed a civil money laundering and forfeiture action seeking the forfeiture of all of the assets of the SAC Companies (“SAC”) on the basis that SAC engaged in money laundering by commingling the illegal profits from insider trading with other assets, using the profits to promote additional insider trading, and transferring the profits with the assistance of financial institutions.  In November 2013, this Office entered into an agreement with SAC in which SAC, among other things, agreed to forfeit $900 million to the United States, including the $616 million payment to the Securities and Exchange Commission (“SEC”).  The agreement also involved a criminal fine of another $900 million, resulting in a total penalty of approximately $1.2 billion, on top of the $616 million SEC fine. The Stipulation and Order of Settlement in connection with the civil case was entered on November 6, 2013, and the Judgment in a Criminal Case was entered on April 11, 2014.  $284 million was forfeited to the United States in 2014.    

PokerStars and Related Cases

$213,047,848 forfeited

In July 2012, the United States reached an agreement with the two largest online poker companies in the United States, Full Tilt Poker and PokerStars.  The United States had brought a civil forfeiture and money laundering action against these companies and their assets.  Under the terms of the settlement, Full Tilt forfeited essentially all of its assets to the United States.   PokerStars agreed to forfeit $547 Million, to be paid in several installments, and to reimburse the approximately $184 million owed by Full Tilt to foreign players.  The settlement further provides that PokerStars will acquire the Forfeited Full Tilt Assets from the Government.  In 2014 and 2015, $197 million was forfeited to the United States by PokerStars and more than $16 million was forfeited by other parties in related actions.  To date, in excess of $1.2 billion has been forfeited in the PokerStars civil forfeiture action and related cases.

US v. Tokhtakhounov, et al.

$39,455,928 forfeited

In April 2013, this Office brought charges against more than 30 alleged members and associates of two related Russian-American organized crime enterprises, including a Russian “Vor,” for a range of offenses including the operation of at least two international bookmaking organizations – or “sportsbooks” – that catered to multimillionaires and billionaires in the U.S., Russia, and Ukraine – and the laundering of tens of millions of dollars from Russia and Ukraine through Cyprus and into the U.S.  Thirty-one of the defendants have since been convicted and sentenced to up to five years in prison and forfeiture of the proceeds of the offenses and all property involved in the money laundering operation.  In 2014 and 2015, the United States forfeited nearly $40 million in connection with the case.

US v. Robert C. Trosten

$30,742,072 forfeited 

On February 20, 2008, Robert C. Trosten, the former Chief Financial Officer of Refco, pled guilty to five counts charged in a superseding indictment to a $2.4 billion fraud.  Pursuant to the plea agreement, Trosten agreed to forfeit $2.4 billion, along with other funds and property, to the United States.  Trosten was sentenced on June 5, 2014.  $30,742,072 was forfeited to the United States in 2014.  To date, in excess of $680 million has been forfeited to the United States.

Silk Road

$18,742,916 forfeited

On September 30, 2013, the United States filed a civil action against the assets of Silk Road, the subject of a criminal prosecution, including its domain name and approximately 173,991 Bitcoins.  The civil complaint alleges that Silk Road was a global illegal cyber business designed to broker criminal transactions.  On January 14, 2014, a forfeiture order was entered forfeiting 29,655 Bitcoins to the United States.  The remaining 144,336 Bitcoins are restrained pending the conclusion of the criminal appeal in United States v. Ross William Ulbricht.  Since the entry of the forfeiture order, a portion of the Bitcoins have been auctioned and sold for a total of $18,742,916.

Civil Actions and Restitution, Criminal Fines, and Special Assessments

From January 1, 2014, through December 31, 2015, the Office also has recovered more than $1.3 billion in restitution, criminal fines, and special assessments, and more than $3 billion from civil actions. 

The $3 billion collected in civil actions came from a combination of cases in which the Office recouped government money lost due to fraud or other misconduct, collected fines imposed on individuals and/or corporations for violations of federal health, safety, civil rights, or environmental laws, or recovered funds owed to the Internal Revenue Service.   

Below are summaries of some of the civil actions in which the Office has obtained significant recoveries:

Tronox bankruptcy; United States and Tronox v. Anadarko Petroleum Corp., et al. 

More than $5.15 billion in total recovery, with more than $1.8 billion paid directly to the United States

This Office and a litigation trust created in the bankruptcy of Tronox, Inc., obtained a $5.15 billion settlement of a fraudulent conveyance lawsuit.  The United States and the litigation trust alleged that Tronox’s predecessor, the Kerr-McGee Corporation, had transferred billions of dollars of assets to companies that became subsidiaries of Anadarko Petroleum Corp., and that as a result of these transfers, Tronox was left insolvent and unable to clean up contaminated sites around the country for which it was liable.  After a lengthy bench trial, the bankruptcy court found Anadarko’s subsidiaries liable.  Thereafter, a settlement was reached.  On January 23, 2015, defendants paid $5.15 billion (plus interest since April 3, 2014) to the litigation trust, which then distributed the funds to the United States, certain states, and four environmental response trusts created in the Tronox bankruptcy to clean up contaminated sites. The total distribution to the United States was more than $1.8 billion.

Bank of America and Countrywide  

More than $1 billion paid to the United States

The Office conducted investigations into the origination of defective residential mortgage loans by Countrywide’s Consumer Markets Division and Bank of America’s Retail Lending Division, as well as the fraudulent sale of such loans to the government-sponsored enterprises Fannie Mae and Freddie Mac.  The Office’s investigation into these practices, as well as three private whistleblower lawsuits filed under seal in the Southern District of New York pursuant to the False Claims Act, were resolved in connection with a broad settlement with Bank of America announced by the Department of Justice in Washington in August 2014.  As part of the settlement, Countrywide and Bank of America paid $1 billion to resolve their liability under the False Claims Act in the SDNY cases.  Bank of America also paid a total penalty of $5 billion to settle the Department of Justice’s claims under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”). 

JPMorgan Chase Bank

$614 million paid to the United States

In February 2014, the Office filed, and simultaneously settled, a civil fraud lawsuit against JPMorgan Chase for improperly approving thousands of residential home mortgage loans for government insurance and refinancing.  In the settlement, JPMorgan Chase admitted, acknowledged, and accepted responsibility for, among other things, submitting false certifications to the U.S. Department of Housing and Urban Development (“HUD”), the U.S. Department of Veterans Affairs (“VA”), and the Federal Housing Administration (“FHA”) that induced HUD-FHA and the VA to accept for government insurance and refinancing thousands of loans that were not eligible for such insurance or refinancing, and ultimately resulted in substantial losses to the Government when the loans defaulted.  JPMorgan Chase also admitted to failing to self-report to HUD-FHA hundreds of loans that it had identified as fraudulent or otherwise deficient, and to submitting loan data to HUD-FHA that lacked integrity.  To resolve the claims against it, the bank agreed to pay $614 million to the United States under the False Claims Act and to implement an enhanced quality control program to address the misconduct concerning the integrity of loan data submitted to HUD-FHA.    

Bank of New York Mellon

$167.5 million paid to the United States

In March 2015, the Office settled civil fraud charges filed in 2011 against Bank of New York Mellon (“BNYM”) and David Nichols, one of its former executives, as part of a $714 million global settlement with private litigants and other regulators concerning BNYM’s foreign exchange practices.  In October 2011, this Office filed a civil fraud action against BNYM seeking civil penalties under FIRREA and alleging that BNYM had defrauded clients using one of its foreign exchange products.  In April 2014, the district court issued a landmark ruling affirming the novel FIRREA theory that a bank could be “affected” by its own fraudulent conduct.  The case was coordinated with a multi-district litigation involving class actions brought by BNYM customers and a lawsuit filed by the New York State Attorney General (“NYAG”).  Under the settlement, BNYM paid $167.5 million to this Office as a FIRREA penalty.  BNYM also paid $167.5 million to the NYAG and $335 million to customer classes, as well as $30 million to the SEC and $14 million to the Department of Labor, which had ongoing investigations.  As part of the settlement, BNYM and Nichols admitted and accepted responsibility for conduct alleged in this Office’s complaint, including that, contrary to statements to clients that BNYM offered “best rates” and “best execution,” it actually assigned clients the worst interbank rates available during the trading day or session.  BNYM was also required to reform its business practices and terminate employment relationships with responsible individuals, including Nichols.  The settlement proceeds were held in escrow pending approvals by the court and disbursed in October 2015. 

Fifth Third Bankcorp.

$84.9 million paid to the United States

In October 2015, this Office filed and simultaneously settled a civil fraud lawsuit against Fifth Third Bancorp and its subsidiaries (“FTB”) for misconduct in connection with FTB’s origination of residential mortgage loans insured by FHA.  FTB made a voluntary disclosure to this Office and HUD of approximately 1,400 mortgage loans that the bank had certified as eligible for FHA insurance, later determined were materially defective and thus ineligible for FHA insurance, but never self-reported to HUD, resulting in millions of dollars in HUD losses.  As part of the settlement, FTB paid $84,911,018 to cover federal losses on approximately 500 of the loans that defaulted and for which HUD paid insurance claims, and agreed to indemnify HUD for all losses HUD may incur on the other approximately 900 defective loans that had not yet defaulted.  FTB admitted and accepted responsibility for failing to self-report mortgage loans it knew to be defective, contrary to HUD requirements.  FTB also reformed its business practices and terminated the employment of responsible employees.

Accredo

$45 million paid to the United States

In April 2015, the Office settled civil fraud claims against Accredo Healthcare Group, Inc. (“Accredo”) relating to Accredo’s participation in an alleged kickback scheme with Novartis in connection with Accredo’s distribution of the blood chelation drug Exjade.  In the settlement, Accredo admitted and accepted responsibility for participating in a patient referral allocation system created by Novartis under which, in order to get more patient referrals and related benefits from Novartis, Accredo assigned a nurse to call Exjade patients and tell them that it was extremely important to continue taking Exjade, but without advising patients about the less common and more severe adverse reactions associated with Exjade.  Accredo also paid $45.06 million to resolve its liability to the United States for this conduct.

L-3/EOTech

$25.6 million paid to the United States

In November 2015, the Office filed and simultaneously settled a civil fraud lawsuit against L-3 Communications EOTech, Inc. (“EOTech”), L-3 Communications Corporation (“L-3”), and EOTech president Paul Mangano for selling defective holographic weapon sights to the U.S. Department of Defense (“DOD”), the U.S. Department of Homeland Security, and the Federal Bureau of Investigation.  The sights were designed to allow users to quickly acquire targets, return fire, and hit targets, in a range of extreme environmental conditions.  In the settlement, L-3 and EOTech admitted that EOTech knew the sights failed in extreme temperatures and humid environments, but delayed disclosure of these defects to the Government for years, despite EOTech’s representations to DOD that the sights performed in hot, cold, and humid conditions, and despite EOTech’s contractual obligation to disclose to DOD performance-related data affecting the reliability of the sights.  Mangano also admitted knowing that the sights experienced failures in cold temperatures or humid environments.  EOTech and L-3 agreed to pay $25.6 million to resolve their liability to the United States under the False Claims Act.

Qualitest

$22.4 million paid to the United States

In December 2015, the Office settled civil fraud claims against Endo Pharmaceuticals, Inc., and subsidiaries of Endo that, doing business as Qualitest Pharmaceuticals (collectively, the “Qualitest entities”), manufactured and sold chewable fluoride tablets that contained less than half of the amount of fluoride ion indicated by the product labeling.  In the settlement, the Qualitest entities admitted and accepted responsibility for their manufacturing and labeling practices that caused children, including children covered by Medicaid, to receive only approximately 44% of the fluoride ion as recommended by guidelines issued by the American Dental Association and the American Academy of Pediatrics.  The Qualitest entities also paid $22.44 million to the United States, as well as $16.56 million to plaintiff states, to resolve their liability for this conduct.

Lyondell

$18.8 million paid to the United States

In 2014, the Office recovered more than $18 million pursuant to a previously approved bankruptcy settlement agreement between federal and state environmental regulators and Lyondell Chemical Company and its subsidiaries.  Pursuant to the 2010 settlement, Lyondell paid approximately $162 million to the United States and an environmental response trust on account of federal and state environmental claims at certain sites and provided the government an unsecured bankruptcy claim for clean-up costs at other sites.  The 2014 recovery of $18.8 million was a partial payment by Lyondell, through a stock distribution, on the bankruptcy claim.  Prior to its bankruptcy, Lyondell had been one of the largest chemical manufacturers in the United States and was liable for contamination at numerous sites around the country. 

HSBC

$10 million paid to the United States

In June 2014, the Office settled civil fraud claims against HSBC Bank USA and other HSBC entities (collectively “HSBC”) relating to HSBC’s failure to oversee the reasonableness of foreclosure-related charges HSBC submitted for reimbursement to FHA and Fannie Mae, contrary to program requirements and HSBC’s certifications that it had done so.  In the settlement, HSBC accepted responsibility for failing to create or maintain systems to review fees and charges submitted by outside counsel and other third-party providers to HSBC during 2009 and 2010, fees and charges which HSBC then submitted to FHA and Fannie Mae for reimbursement without the requisite oversight and review.  HSBC also paid $10 million to resolve its liability to the United States for this conduct.

*                *                *

The Criminal Division’s Money Laundering and Asset Forfeiture Unit is led by Chief Jason Cowley and Deputy Chief Alexander Wilson and handles all criminal and civil forfeiture actions for the Office.  Civil recoveries are handled by the Office’s Civil Division, which is led by Sara L. Shudofsky.  Criminal and civil collections are handled by the Civil Division’s Financial Litigation Unit, which is led by Kathleen Zebrowski.

            For further information, the United States Attorneys’ Annual Statistical Reports can be found online at http://www.justice.gov/usao/reading_room/foiamanuals.html.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that LAKUAN RHYNE pled guilty to conspiring to distribute more than a kilogram of heroin in and around Westchester County during 2014.  RHYNE admitted that in the course of the conspiracy, on January 26, 2014, in Peekskill, New York, he sold heroin and fentanyl that resulted in the overdose death of an individual.  RHYNE pled guilty to a felony Information today in White Plains federal court before U.S. District Judge Nelson S. Román.

U.S. Attorney Bharara stated:  “Overdose deaths from heroin and fentanyl have become tragically too frequent in many of our communities.  As he admitted today, Lakuan Rhyne sold fentanyl-laced heroin that resulted in the overdose death of a 23-year old man.  Rhyne’s guilty plea today serves as a reminder of the destruction that follows the heroin and fentanyl trade.”

According to the allegations in the Information and other information in the public record:

LAKUAN RHYNE, a/k/a “Rico,” was a leader of a drug trafficking ring centered in Westchester County, New York.  From early 2014 through the fall of 2014, RHYNE and his associates conspired to distribute significant quantities of heroin, as well as crack cocaine and powder cocaine, in and around Westchester County.  RHYNE and his associates sold their drugs out of cars, residences, and on the streets.  At least some of the heroin distributed by RHYNE was laced with fentanyl, a synthetic opioid that is significantly stronger than both ordinary heroin and morphine.

On the evening of January 26, 2014, in the parking lot of a restaurant in Peekskill, New York, RHYNE supplied a mixture containing heroin and fentanyl to an associate for the purpose of selling that mixture to a customer.  That customer was Thomas Coogan, a 23-year-old from Buchanan, New York.  Later that night, Coogan used the fentanyl-laced heroin supplied by RHYNE, and died as a result.

*                *                *

RHYNE, 24, of Peekskill, New York, pled guilty to one count of conspiring to distribute at least one kilogram of heroin, which carries a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

RHYNE is scheduled to be sentenced on July 21, 2016.

Mr. Bharara praised the outstanding work of the FBI, the Westchester County Northern Narcotics Initiative, which includes the Westchester County Department of Public Safety and the police departments of Peekskill, Croton-on-Hudson, Buchanan, Bedford, Yorktown, Mount Kisco, and Ossining, as well as the FBI Violent Crimes Task Force.  Mr. Bharara also thanked the Westchester County District Attorney’s Office for its assistance. 

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that HARVEY NEWKIRK, formerly counsel at a law firm in Manhattan, was sentenced today to a prison term of six months for wire fraud in connection with his participation in a scheme to fraudulently induce lenders to provide tens of millions of dollars toward the purchase of Maxim Magazine and related assets (“Maxim”).  A jury convicted NEWKIRK of one count of wire fraud on December 14, 2015, after a five-week trial.  He was found not guilty of one count of conspiracy to commit wire fraud, and not guilty of one count of aggravated identity theft.  Today’s sentence was imposed by U.S. District Judge Jed S. Rakoff.

Manhattan U.S. Attorney Preet Bharara said: ​“Harvey Newkirk, an attorney with a major law firm with an obligation and responsibility to practice law in good faith, instead violated the law by lying and defrauding lenders out of millions of dollars in an attempt to help his client purchase Maxim Magazine.  His conviction by a jury and now his sentence to imprisonment marks the close of Newkirk’s unfortunate journey from lawyer to felon.”

As established by the evidence at the trial:

In connection with the potential purchase of Maxim by a company (the “Company”) controlled by Calvin Ramarro Darden (“Darden Junior”), from in or about August 2013 to on or about February 11, 2014, NEWKIRK told a series of lies to lenders to induce the lenders to provide tens of millions of dollars in capital toward the purchase of Maxim.  In order to mislead the lenders into believing that they would receive sufficient collateral for their loans, NEWKIRK falsely promised them that Calvin Darden (“Darden Senior”), the former Senior Vice President of U.S. Operations of UPS, and a member of the Board of Directors of Coca-Cola Enterprises, Target Corporation, and Cardinal Health, Inc., would pledge his personal stock holdings in the latter three companies as collateral for the loans.  In addition to knowingly making this false promise, NEWKIRK concealed from lenders that, as NEWKIRK knew, the stock owned by Darden Senior was subject to restrictions, and could not be pledged as collateral for any loans.  NEWKIRK further falsely promised at least six lenders that each would have a first and sole priority interest in the purported collateral when, as NEWKIRK well knew, only one lender could have any such interest. 

NEWKIRK, who represented the Company in the attempted Maxim acquisition in his capacity as an attorney at Bryan Cave LLC, engaged in the fraud in part because NEWKIRK secretly owned part of the Company’s parent company (the “Parent Company”), and would share in any of the Parent Company’s profits resulting from the acquisition.  NEWKIRK hid his partial ownership of the Parent Company from Bryan Cave and others.  NEWKIRK further lied to Bryan Cave about his relationship with Darden Senior, falsely claiming that Darden Senior had been NEWKIRK’s client for many years when, in truth and in fact, and as NEWKIRK well knew, NEWKIRK had never represented Darden Senior.   

In the course of the fraud, NEWKIRK provided lenders with account statements that purported to show Darden Senior’s stock holdings.  In truth, however, the account statements were fake documents, and Darden Senior was not providing any financial support for the purchase of Maxim.  Also in the course of the fraud, NEWKIRK went to great lengths to hide from Darden Senior, and from Bryan Cave, the existence of a lawsuit filed by one lender in which that lender sought to obtain the collateral of Darden Senior that NEWKIRK had fraudulently pledged to the lender.  NEWKIRK deliberately caused a default judgment to be entered against Darden Senior in that lawsuit, knowing that he had concealed the existence of the lawsuit from both Darden Senior and Bryan Cave.

Furthermore, after one of the lenders placed approximately $5.5 million in escrow at Bryan Cave, Darden Junior arranged for a fraudulent email to be sent to NEWKIRK that purported to have been authored by the lender.  In response to that fraudulent email, and with knowledge that the email was in fact fraudulent, NEWKIRK released approximately $4.9 million of the lender’s money from the escrow account to fund the purchase of Maxim.  Moreover, in an effort to close the deal, NEWKIRK also falsely represented to another individual that approximately $12 million, consisting of funds supposedly provided by, or secured by the personal assets of, Darden Senior, had been placed in escrow at Bryan Cave.  In truth and in fact, no funds were ever held in escrow at Bryan Cave in connection with the purchase of Maxim, other than the $5.5 million placed in escrow by the lender described above, which was subsequently misappropriated by NEWKIRK.  Lenders lost a total of $8 million in connection with the fraud.

                                                                                                                                *                *                *

In addition to his prison term, NEWKIRK, 40, of New Rochelle, New York, was sentenced to three years of supervised release and was ordered to pay restitution in the amount of $3.1 million.

Mr. Bharara praised the investigative work of the United States Secret Service and the Federal Bureau of Investigation.  

The prosecution of this case is being overseen by the Office’s Complex Frauds and Cybercrime Unit.Assistant U.S. Attorneys Andrew C. Adams and Sarah E. Paul are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that JAMES J. SHEA and EUGENE FALLON were sentenced in Manhattan federal court to 18 and three months in prison, respectively, for their participation in a scheme to embezzle approximately $2.6 million from a large international insurance company.  In perpetrating the scheme, SHEA, an executive at the company, forged the signature of the company’s Chief Financial Officer to authorize numerous payments to consulting companies that FALLON controlled for purported work that was never performed.  FALLON then returned more than two-thirds of the proceeds of the fraud to SHEA, who used the money to purchase a multimillion-dollar house and luxury automobiles, and FALLON kept the remainder.  On November 13, 2015, SHEA pled guilty to one count of wire fraud before U.S. District Judge Paul A. Engelmayer.  FALLON pled guilty to one count of wire fraud before Judge Engelmayer on November 18, 2015.  Judge Engelmayer sentenced SHEA on March 31, 2016, and sentenced FALLON earlier today.

U.S. Attorney Preet Bharara said:  “Not satisfied with the income they earned as senior executives in their respective companies, James Shea and Eugene Fallon broke the law for even more money.  They embezzled $2.6 million from Shea’s company by claiming the money was for consulting work by Fallon, when in fact it was shared between the two to fund the purchase of lavish homes and luxury cars.”

According to the Complaint, Indictment, other documents filed in the case, and statements made in open court:

From January 2012 through December 2013, SHEA and FALLON engaged in a scheme to embezzle approximately $2.6 million from SHEA’s employer, the North American subsidiary of an international insurance company (“Company-1”).  SHEA, who rose to the title of Executive Vice President at Company-1, was responsible for the integration of the information technology systems of subsidiaries of Company-1.  In that capacity, SHEA oversaw the use of third-party consultants, one of whom was FALLON, who worked in that capacity at Company-1 from 2010 through 2013.  According to Company-1’s policies and practices, the CFO of Company-1 could personally authorize and approve any third-party vendor contracts up to $1.5 million. 

In 2012, SHEA forged the signature of Company-1’s CFO on contracts between Company-1 and two consulting companies controlled by FALLON (the “Consulting Companies”).  According to the contracts that outlined the sham engagement between Company-1 and the Consulting Companies, the Consulting Companies were primarily tasked with providing Company-1 with assistance in integrating the technology systems of Company-1.  For a total of 17 months of work, the agreements required Company-1 to pay one of the Consulting Companies approximately $1.5 million and the other approximately $1.1 million.  In fact, the Consulting Companies did no work for Company-1.

Beginning in August 2012, and continuing through February 2013, FALLON submitted fraudulent invoices on behalf of the Consulting Companies to Company-1 for consulting work that was not performed.  On behalf of Company-1, SHEA then authorized approximately 16 payments for the invoices in the amount of approximately $2.6 million to bank accounts that were controlled by FALLON.  Of the approximately $2.6 million that SHEA and FALLON embezzled, more than $1.8 million was routed back to SHEA, while FALLON kept the remainder.  SHEA used the majority of his fraudulent proceeds to purchase a multimillion-dollar house and two luxury cars.

*                      *                      *

SHEA, 49, of Paramus, New Jersey, was sentenced to 18 months in prison, to be followed by three years of supervised release, and a $100 special assessment.  FALLON, 52, of Nanuet, New York, was sentenced to three months in prison, to be followed by three years of supervised release, and a $100 special assessment. 

Mr. Bharara praised the work of the Federal Bureau of 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. Attorneys Daniel S. Goldman and Michael Ferrara are in charge of the prosecution, and Edward Diskant is in charge of the forfeiture aspects of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, the Assistant Director-in-Charge of the New York 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 today of two Indictments charging a total of 36 members of two rival Manhattan-based drug trafficking organizations for narcotics trafficking and firearms offenses (the “Washington Houses Indictment” and the “East River Indictment”).  These two drug trafficking organizations operate out of three New York City Housing Authority (“NYCHA”) developments in East Harlem: the President George Washington Houses (the “Washington Houses”), the East River Houses (“East River”), and the Metro North Plaza (“Metro North”). 

The Washington Houses Indictment charges 20 members of the Washington Houses Drug Trafficking Organization (“DTO”) in the case of United States v. Hasoan Alto, a/k/a “Hass,” et al., which has been assigned to United States District Judge Victor Marrero.  The East River Indictment charges 16 members of the East River DTO in the case of United States v. Charles Kenyatta, a/k/a “Charlie Cee,” et al., which has been assigned to United States District Judge Alison J. Nathan.  Of the 36 defendants charged in both the Washington Houses and East River Indictments, 29 are currently in custody, including 26 defendants who were arrested earlier last night and today as part of a coordinated takedown between the FBI and NYPD.  The defendants already in custody will be presented today before United States Magistrate Henry B. Pitman. 

Manhattan U.S. Attorney Preet Bharara said:  “For far too long, NYCHA residents have had to live with drug dealing and violence as part of their everyday lives.  With the arrests of 36 alleged members of violent drug trafficking groups, we seek to stem the flow of drugs and the cycle of violence plaguing the Washington Houses, East River Houses and Metro North Plaza.  As the indictments allege, these defendants trafficked in all types of drugs, including heroin, crack cocaine, oxycodone and marijuana; peddled in all areas in and around the housing projects, including near schools and in city hospitals; and protected their lucrative businesses with guns and violence.  Residents of public housing – like all residents of New York City – deserve safe streets, free of drugs and violence.  I thank our partners at the FBI and NYPD for their work in this investigation and for their commitment to making our city and our housing projects safer and drug free.”

FBI Assistant Director-in-Charge Diego Rodriguez said:  “Today we carried out a coordinated operation to arrest more than 30 members of two drug trafficking organizations who violently carried out their illegal business dealings in the East Harlem area.  Getting those who bring guns and drugs in to our neighborhoods, schools, and hospitals is the only way we can get violence off the city streets that affects everyday citizens. The FBI will continue our partnership with the NYPD to investigate and bring those who are part of such criminal organizations to justice.”

Commissioner William J. Bratton said:  "For years the residents of East Harlem have been subjected to the violence and fear associated with the rampant illegal narcotics activity in this area. Today's arrests with the FBI and prosecution by the office of the US Attorney for the Southern District will undoubtedly result in a safer East Harlem community."

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

United States v. Hasoan Alto, a/k/a “Hass,” et al.

The Washington Houses are a housing development operated by NYCHA in East Harlem.  From at least in or about 2015 up to and including in or about April 2016, HASOAN ALTO, a/k/a “Hass,” ANTONIO REYES, a/k/a “Tone,” a/k/a “Capo,” CARLOS VEGA, a/k/a “Gotti,” JASON KELLY, a/k/a “Beast,” ANTOINE BOYCE, a/k/a “Fetty Baller,” AARON RICE, a/k/a “Goon,” TYRONE SCHULTZ, a/k/a “Fats,” ZAGORA DAVIS, a/k/a “Bianca,” JOSE MEDINA, a/k/a “JoJo,” JASON JARVIS, a/k/a “Slim,” JONATHAN ANGULO, a/k/a “J.O.,” TAQUAN SANDERS, a/k/a “Goose,” a/k/a “Goo,” ANGEL VILLAFANE, DEVIN RODRIGUEZ, LEON ROBINSON, a/k/a “Pop,” JOSHUA NEGRON, TAHIEM HOLMES, NIJEL RICHARDSON, NATHANIEL COLEMAN, and AISA TOMPKINS (the “Washington Houses Defendants”), operated a drug trafficking organization (the “Washington Houses DTO”) in and around the Washington Houses.  The Washington Houses DTO trafficked in a variety of narcotics – including crack cocaine, heroin, oxycodone, and marijuana on a daily basis.  The Washington Houses Defendants sold narcotics in areas frequented by New York City’s most vulnerable citizens, including in and within the vicinity of New York City schools and inside two New York City hospitals.    

In addition, members of the Washington Houses DTO protected and maintained their drug business through the firearms and acts of violence.  For example, in or about 2016, ANTONIO REYES, a/k/a “Tone,” a/k/a “Capo,” and JONATHAN ANGULO, a/k/a “J.O.,” the defendants, discussed plans to shoot another individual because it was their “block.”  Similarly, ANTOINE BOYCE, a/k/a “Fetty Baller,” bragged about having assaulted another individual and having knocked him unconscious.  Also in or about 2016, DEVIN RODRIGUEZ, with REYES’s help, robbed another drug dealer at gunpoint. 

Count One of the Washington Houses Indictment charges HASOAN ALTO, a/k/a “Hass,” ANTONIO REYES, a/k/a “Tone,” a/k/a “Capo,” CARLOS VEGA, a/k/a “Gotti,” JASON KELLY, a/k/a “Beast,” ANTOINE BOYCE, a/k/a “Fetty Baller,” AARON RICE, a/k/a “Goon,” TYRONE SCHULTZ, a/k/a “Fats,” ZAGORA DAVIS, a/k/a “Bianca,” JOSE MEDINA, a/k/a “JoJo,” JASON JARVIS, a/k/a “Slim,” JONATHAN ANGULO, a/k/a “J.O.,” TAQUAN SANDERS, a/k/a “Goose,” a/k/a “Goo,” ANGEL VILLAFANE, DEVIN RODRIGUEZ, LEON ROBINSON, a/k/a “Pop,” JOSHUA NEGRON, TAHIEM HOLMES, NIJEL RICHARDSON, NATHANIEL COLEMAN, and AISA TOMPKINS, with participating in a conspiracy to distribute narcotics, including crack cocaine, heroin, oxycodone, and marijuana.

Count Two of the Washington Houses Indictment charges ANTONIO REYES, a/k/a “Tone,” a/k/a “Capo,” DEVIN RODRIGUEZ, JONATHAN ANGULO, a/k/a “J.O. ,” AARON RICE, a/k/a “Goon,” and ANTOINE BOYCE, a/k/a “Fetty Baller,” with possessing a firearm in furtherance of the narcotics conspiracy charged in Count One.

United States v. Charles Kenyatta, a/k/a “Charlie Cee,” et al.

In addition to the Washington Houses, NYCHA also operates two other housing developments in East Harlem: East River and Metro North.  CHARLES KENYATTA, a/k/a “Charlie Cee,” KASEEM WILSON, a/k/a “Kas,” a/k/a “Brown,” EFRAIN SANCHEZ, a/k/a “Solo,” SAMUEL RIVERA, a/k/a “Jazz,” a/k/a “Mulah,” a/k/a “Sammy,” FNU LNU, a/k/a “Sha,” KENYATTA FURS, a/k/a “Kenny Gilmore,” IVETTE COLON, WILLIAM ROBERTS, a/k/a “Mel Black,” TERRELL BLAND, a/k/a “Relly Rell,” a/k/a “Cash,” DAVON STEWART, a/k/a “Q,” MARCUS TOXEY, a/k/a “Bee Bee,” CARL ZELLER, a/k/a “Tone,” SHARON HILL, BRYAN DAFFIN, a/k/a “Q,” a/k/a “BJ,” ABRAHAM CUCUTA, a/k/a “Holiday,” and BISHAUNTI POLAND, a/k/a “Bino” (the “East River Defendants”).  From at least in or about 2012 up to and including in or about April 2016, the East River Defendants operated another drug trafficking organization (the “East River DTO”) in and around East River and Metro North.  Like the Washington Houses DTO, the East River DTO trafficked in several narcotics, including crack cocaine, heroin, and marijuana, on a daily basis.  Furthermore, the East River Defendants’ narcotics trafficking activity extended to, among other places, public streets and the vicinity of New York City schools. 

Also like the Washington Houses Defendants, the East River Defendants planned and engaged in violent acts and possessed firearms to protect and maintain the East River DTO’s illegal businesses.  For example, in or about 2016, CHARLES KENYATTA, a/k/a “Charlie Cee,” planned to rob a victim in a barbershop in the area. TERRELL BLAND, a/k/a “Relly Rell,” a/k/a “Cash,” claimed in social media that individuals who were not part of the East River DTO would be “target[s].”  KASEEM WILSON, a/k/a “Kas,” a/k/a “Brown,” also possessed a firearm in the area of where the East River DTO operated in furtherance of the charged drug dealing conspiracy.          

Count One of the East River Indictment charges CHARLES KENYATTA, a/k/a “Charlie Cee,” KASEEM WILSON, a/k/a “Kas,” a/k/a “Brown,” EFRAIN SANCHEZ, a/k/a “Solo,” SAMUEL RIVERA, a/k/a “Jazz,” a/k/a “Mulah,” a/k/a “Sammy,” FNU LNU, a/k/a “Sha,” KENYATTA FURS, a/k/a “Kenny Gilmore,” IVETTE COLON, WILLIAM ROBERTS, a/k/a “Mel Black,” TERRELL BLAND, a/k/a “Relly Rell,” a/k/a “Cash,” DAVON STEWART, a/k/a “Q,” MARCUS TOXEY, a/k/a “Bee Bee,” CARL ZELLER, a/k/a “Tone,” SHARON HILL, BRYAN DAFFIN, a/k/a “Q,” a/k/a “BJ,” ABRAHAM CUCUTA, a/k/a “Holiday,” and BISHAUNTI POLAND, a/k/a “Bino,” with participating in a conspiracy to distribute narcotics, including crack cocaine, heroin, and marijuana.

Count Two of the East River Indictment charges KASEEM WILSON, a/k/a “Kas,” a/k/a “Brown,” with possessing a firearm in furtherance of the narcotics conspiracy charged in Count One.

*                      *                     *

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

Mr. Bharara praised the outstanding investigative work of the FBI and the NYPD. 

This case is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Sidhardha Kamaraju, Max Nicholas, and Jane Kim are in charge of the prosecution.

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

       ###                                                                        

 United States v. Hasoan Alto, a/k/a “Hass,” et al., 16 Cr 272 (VM)

COUNT

CHARGE

DEFENDANTS

MAX. PENALTIES

        1

Conspiracy to Distribute Narcotics

21 U.S.C. § 846

HASOAN ALTO

ANTONIO REYES CARLOS VEGA

JASON KELLY

ANTOINE BOYCE

AARON RICE

TYRONE SCHULTZ

ZAGORA DAVIS

LEON ROBINSON

JOSE MEDINA

JASON JARVIS

JONATHAN ANGULO

TAQUAN SANDERS ANGEL VILLAFANE DEVIN RODRIGUEZ LEON ROBINSON JOSHUA NEGRON TAHIEM HOLMES

NIJEL RICHARDSON NATHANIEL COLEMAN AISA TOMPKINS

Life in prison

2

Possession of Firearm in Furtherance of Narcotics Trafficking

18 U.S.C. 924(c)(1)(A)

ANTONIO REYES

DEVIN RODRIGUEZ JONATHAN ANGULO AARON RICE

ANTOINE BOYCE

Life in prison

DEFENDANT

AGE

RESIDENCE

HASOAN ALTO,

   a/k/a “Hass”

41

New York, New York

ANTONIO REYES,

   a/k/a “Tone,”

   a/k/a “Capo”

24

New York, New York

CARLOS VEGA,

   a/k/a “Gotti”

31

New York, New York

JASON KELLY,

   a/k/a “Beast”

26

New York, New York

ANTOINE BOYCE,

   a/k/a “Fetty Baller”

26

New York, New York

AARON RICE,

   a/k/a “Goon”

24

New York, New York

TYRONE SCHULTZ,”

   a/k/a “Fats”

44

New York, New York

ZAGORA DAVIS,

   a/k/a “Bianca”         

25

New York, New York

JOSE MEDINA,

   a/k/a “JoJo”

34

New York, New York

JASON JARVIS,

   a/k/a “Slim”

28

New York, New York

JONATHAN ANGULO,

   a/k/a “J.O.”

23

New York, New York

TAQUAN SANDERS,

   a/k/a “Goose,”

   a/k/a “Goo”

29

New York, New York

ANGEL VILLAFANE

32

New York, New York

DEVIN RODRIGUEZ

22

New York, New York

LEON ROBINSON,

   a/k/a “Pop”

43

New York, New York

JOSHUA NEGRON,

34

New York, New York

TAHIEM HOLMES

25

New York, New York

NIJEL RICHARDSON

27

New York, New York

NATHANIEL COLEMAN

25

New York, New York

AISA TOMPKINS

25

New York, New York

United States v. Charles Kenyatta, a/k/a “Charlie Cee,” et al., 16 Cr 273 (AJN)

COUNT

CHARGE

DEFENDANTS

MAX. PENALTIES

1

Conspiracy to Distribute Narcotics

21 U.S.C. § 846

CHARLES KENYATTA KASEEM WILSON EFRAIN SANCHEZ

SAMUEL RIVERA

FNU LNU

KENYATTA FURS

IVETTE COLON WILLIAM ROBERTS

TERRELL BLAND

DAVON STEWART

MARCUS TOXEY

CARL ZELLER

SHARON HILL

BRYAN DAFFIN ABRAHAM CUCUTA

BISHAUNTI POLAND

Life in prison

2

Possession of Firearm in Furtherance of Narcotics Trafficking

18 U.S.C. § 924(c)(1)(A)

KASEEM WILSON

Life in prison

DEFENDANT

AGE

RESIDENCE

CHARLES KENYATTA,

   a/k/a “Charlie Cee”

24

New York, New York

KASEEM WILSON,

   a/k/a “Kas,”

   a/k/a “Brown”

25

New York, New York

EFRAIN SANCHEZ,

   a/k/a “Solo”

23

New York, New York

SAMUEL RIVERA,

   a/k/a “Jazz,”

   a/k/a “Mulah,”

   a/k/a “Sammy”

24

New York, New York

FNU LNU,

   a/k/a “Sha”

--

New York, New York

KENYATTA FURS,

   a/k/a “Kenny Gilmore”

39

New York, New York

IVETTE COLON

51

New York, New York

WILLIAM ROBERTS,

   a/k/a “Mel Black”

41

New York, New York

TERRELL BLAND,

   a/k/a “Relly Rell,”

   a/k/a “Cash”

20

New York, New York

DAVON STEWART,

   a/k/a “Q”

30

New York, New York

MARCUS TOXEY,

   a/k/a “Bee Bee”

28

New York, New York

CARL ZELLER,

   a/k/a “Tone”

36

New York, New York

SHARON HILL

49

New York, New York

BRYAN DAFFIN,

   a/k/a “Q,”

   a/k/a “BJ”

19

New York, New York

ABRAHAM CUCUTA,

   a/k/a “Holiday”

32

New York, New York

BISHAUNTI POLAND,

   a/k/a “Bino”

30

New York, New York

[1] As the introductory phrase signifies, the entirety of the text of the Indictments, and the description of the Indictments 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 Robert L. Capers, the United States Attorney for the Eastern District of New York, announced today that special telephone numbers have been set up to receive complaints of possible violations of federal election laws relating to the upcoming primary elections in New York City and other counties in their districts. 

The United States Attorneys said that their Offices will be available to receive complaints at the following numbers on Tuesday, April 19, 2016:

(212) 637-0840                       (For Manhattan, Bronx, Dutchess, Orange, Putnam, Rockland, Sullivan and Westchester counties)

(718) 254-6323                       (For Brooklyn, Queens, Staten Island, Nassau and Suffolk counties)

In addition, complaints of possible violations of federal election laws may be made directly to the Federal Bureau of Investigation at (212) 384-1000.

It is unlawful under federal law to deny or abridge anyone’s right to vote because of race, color, or national origin.  Federal laws also require local election authorities to make voting accessible to disabled and elderly voters.  Voters who require assistance because of blindness, disability, or inability to read and write have the right to receive such assistance from a person of their own choosing.  In counties with substantial numbers of non-English speaking voters, federal laws prohibit the denial or abridgement of a voter’s ability to participate in the election process in certain languages other than English (i.e., Spanish, Chinese, Korean).         

In addition, certain activities designed to subvert the integrity of the election process are federal crimes.  It is a federal crime, for example, to deprive citizens of their right to fair elections or to conspire to do so.  Specific election laws also make it a crime to bribe or intimidate voters, to cause ballots to be cast fraudulently in the names of individuals who did not vote (“ballot stuffing”), to vote more than once, or to alter or falsify the vote count.  It can also be a federal offense to challenge qualified voters without cause and in bad faith or to harass persons seeking to vote for the purpose of discouraging their vote.

The United States Attorneys also noted that the following additional telephone numbers are available on Election Day for citizens to call for routine inquiries, such as where to vote or how late the polls are open, or to register complaints that may concern violations of New York State election laws:

IN NEW YORK CITY

City Board of Elections

Main Office                (212) 487-5300

                                     (212) 868-3692

Bronx                         (718) 299-9017

Brooklyn                    (718) 797-8800

Manhattan                 (212) 886-2100

Queens                      (718) 730-6730

Staten Island              (718) 876-0079

IN COUNTIES OUTSIDE NEW YORK CITY

County Boards of Elections

Dutchess                     (845) 486-2473

Nassau                       (516) 571-2411

Orange                       (845) 291-2444

Putnam                       (845) 278-6970

Rockland                    (845) 638-5172

Suffolk                        (631) 852-4500

Sullivan                       (845) 794-3000

Westchester                (914) 995-5700

Assistant United States Attorney David J. Kennedy is responsible for overseeing the handling of complaints of voting rights abuses and election fraud for the Southern District of New York.

Assistant United States Attorney Catherine Mirabile is responsible for overseeing the handling of complaints of voting rights abuses and election fraud for the Eastern District of New York.

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, Commissioner of the New York City Police Department (“NYPD”), announced today that ALEX LICHTENSTEIN, a/k/a “Shaya,” was arrested and charged in Manhattan federal court with bribery and conspiracy to commit bribery in connection with his efforts to pay bribes to obtain gun licenses through the NYPD’s License Division.  LICHTENSTEIN was arrested by FBI agents and officers from the NYPD’s Internal Affairs Bureau (“IAB”) on April 17, 2016, in Pomona, New York, and will be presented before U.S. Magistrate Judge Henry B. Pitman in Manhattan this afternoon.

Manhattan U.S. Attorney Preet Bharara said:  “As alleged, Alex Lichtenstein sought to bribe police officers with thousands of dollars to obtain gun licenses.  Just a few days ago, claiming that his prior connections in the License Department were no longer able to help, Lichtenstein allegedly attempted to bribe another officer.  As alleged, Lichtenstein offered the officer $6,000 per license, bragging that he had already used his NYPD connections to obtain 150 gun licenses.  Corruption in any part of government cuts at the very fabric of our society.  But it is particularly damaging when it undermines public safety.  I thank the FBI and the New York City Police Department, particularly its Internal Affairs Bureau, for their dedication and commitment to this ongoing and important investigation.” 

FBI Assistant Director-in-Charge Diego Rodriquez said, “The requirements for obtaining a legal gun license are there for very specific reasons, and the details of this case illustrate why those regulations are needed.  This bribery scheme allowed a man to obtain a gun who made a threat against someone’s life.  It’s further alarming that Lichtenstein bragged about beating the system and potentially put the general public in danger.” 

NYPD Commissioner William J. Bratton said: “This case was developed as part of a long-term joint investigation by the NYPD’s Internal Affairs Bureau, the Federal Bureau of Investigation, and the United States Attorney’s Office. As we have previously stated, this investigation will continue to go where the leads take us.”

According to the allegations in the Complaint filed today in Manhattan federal

court[1]:

LICHTENSTEIN is a member of the Borough Park Shomrim, a volunteer, ostensibly unarmed Orthodox Jewish patrol society whose mission includes combating criminal activity and locating missing people.  In April 2016, LICHTENSTEIN approached an officer for the NYPD and offered the officer cash bribes in order for the officer to help LICHTENSTEIN obtain gun licenses for LICHTENSTEIN’s customers from the NYPD’s License Division.  The License Division is responsible for reviewing, investigating, and approving or disapproving all applications for gun licenses in New York City.  LICHTENSTEIN told the officer that he charged customers thousands of dollars to help obtain License Division approval for their gun license applications, and that he was able to get the licenses approved using his own connections in the License Division, although those connections had recently cut him out. 

The officer did not agree to assist LICHTENSTEIN, and reported the encounter to IAB.  Working with the FBI and IAB, the officer set up and recorded a meeting with LICHTENSTEIN, at which LICHTENSTEIN offered the officer $6,000 per license application that the officer could help get through the License Division.  In that recorded meeting, LICHTENSTEIN told the officer that he had obtained gun licenses for approximately 150 individuals in the past, and that his customers needed his services because the License Division would otherwise reject applications “for the biggest stupidity,” such as a history of moving violations.  LICHTENSTEIN boasted that he was able to use his connections in the License Division to “expedite” the application process, i.e., to forego the full investigation typically conducted before the NYPD License Division approves or disapproves an application.  The officer asked LICHTENSTEIN if his previous connections in the License Division were making money, to which LICHTENSTEIN responded “now they cut down, now nobody’s making money.”

In fact, LICHTENSTEIN had substantial connections to a sergeant (“Sergeant-1”) who had worked at the License Division for more than a decade.  A Commanding Officer at the NYPD with whom Sergeant-1 was friendly introduced LICHTENSTEIN to the License Division and Sergeant-1 in or about 2013.  From that introduction through early 2016, LICHTENSTEIN spent significant time at the License Division with Sergeant-1, often on a near daily basis.  Sergeant-1 frequently bragged about his relationship with the Commanding Officer and the Hasidic Jewish community.  In early 2016, Sergeant-1 told others at the NYPD License Division, in sum and in substance, that LICHTENSTEIN charged his customers $18,000 per gun license, and that, at some point in time, the deputy inspector in charge of the License Division had sat Sergeant-1 and LICHTENSTEIN down and banished LICHTENSTEIN from the License Division because of the money that LICHTENSTEIN was making selling gun licenses.  An officer who processed applications for Sergeant-1 was interviewed and acknowledged his and Sergeant-1’s relationship with LICHTENSTEIN.  When asked if LICHTENSTEIN gave them cash, the officer paused before saying that LICHTENSTEIN provided them “lunch money,” and when asked how much “lunch money,” the officer responded, “$100.” 

The NYPD License Division receives approximately 5,000 applications for gun licenses a year.  Most licenses approved by the NYPD License Division are for individuals to keep in their homes or businesses, but a small portion of the approved licenses are for individuals to carry guns for limited work reasons or to carry guns at all times based on a substantial showing of employment-based need.  After receiving an application the NYPD License Division conducts an investigation of the applicant before electing to approve or disapprove the application.  The investigation includes (i) a review of the applicant’s criminal history, including summonses, arrests, and convictions; (ii) a review of the applicant’s mental health history; (iii) a verification of the details of the application; (iv) an in-person interview of the applicant; and (v) an investigation into the business need for a license to carry a gun. 

Certain findings, such as a prior felony conviction, result in the automatic disapproval of an applicant.  Pursuant to New York State Law, the NYPD License Division has discretion to reject gun license applications for additional reasons, such as moral character, mental health issues, or substance abuse issues.  On its website, the NYPD License Division indicates that it may reject applications if the investigation reveals a history of arrest, driving infractions, or domestic violence incidents, among other reasons.  Typically, the processing, investigation, and approval or disapproval of an application takes several months and, for licenses to carry guns, at times in excess of one year.

Yesterday, detectives from IAB seized applicant files from the NYPD License Division associated with LICHTENSTEIN and/or Sergeant-1.  A review of those files has begun and is ongoing.  One such file appears to have been for an individual (“License Holder-1”) who, in 2013, was approved for and obtained a license to carry a firearm at all times.  Prior to his application for a gun license, License Holder-1 had been arrested for forgery, received approximately 10 moving violations and three vehicle-related summonses, and had been the subject of at least four domestic violence complaints, including one in which he was accused of threatening to kill someone.

LICHTENSTEIN, 44, who now resides in Pomona, New York, has been charged with one count of bribery, which carries a maximum term of 10 years in prison, and one count of conspiracy, which carries a maximum term of five years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the investigative work of the FBI and the NYPD Internal Affairs Bureau, and noted that the investigation is continuing.  

This case is being handled by the Office’s Public Corruption Unit.  Assistant United States Attorneys Kan M. Nawaday, Russell Capone, and Martin S. Bell are in charge of the prosecution.

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

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

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”), Andrew J. Ceresney, Director of the Securities and Exchange Commission’s Division of Enforcement (“SEC”), and Thomas Zugibe, the Rockland County District Attorney, announced the unsealing of an indictment charging CHRISTOPHER ST. LAWRENCE, the elected Supervisor of the Town of Ramapo, New York (the “Town”), and N. AARON TROODLER, the former Executive Director of the Ramapo Local Development Corporation (“RLDC”), with 22 counts of securities fraud, wire fraud, and conspiracy in connection with municipal bonds issued by the Town and by the RLDC. 

U.S. Attorney Preet Bharara said: “Today, this Office has brought what is believed to be the first ever municipal bond-related criminal securities fraud charges against public officials.  As alleged, Christopher St. Lawrence and N. Aaron Troodler kicked truth and transparency to the curb, selling over $150 million of municipal bonds on fabricated financials.  In doing so, they defrauded both the citizens of Ramapo and thousands of municipal bond investors around the country.  The $3.7 trillion municipal bond market is no place for fraud and manipulation; there should be no tolerance for it.  Whether you are a publicly listed company or a municipality, you are not allowed to cook the books, plain and simple.  And whether you are state legislator responsible for enacting laws or a municipal executive responsible for a town’s finances, you must be accountable.  You must be accountable to the public, and you must be accountable to the truth.  Thanks to the outstanding efforts of our partners at the FBI, Rockland County District Attorney’s Office and the SEC, we will now seek to hold St. Lawrence and Troodler accountable for their alleged fraud.”

FBI Assistant Director-in-Charge Diego Rodriguez said:  “St. Lawrence and Troodler allegedly engaged in a complex securities fraud scheme so they could hide public funds being used for the construction of a stadium and other projects. The illegal activity allegedly continued even after they became aware the town and the corporation tasked with development initiatives were subjects of a federal investigation. Public corruption wastes billions in tax dollars every year. Investigating these types of crimes remains among the FBI's top priorities.”

Director Andrew J. Ceresney said:  “Retail investors account for more than 75 percent of the $3.7 trillion municipal bond market, which is critical for our nation’s infrastructure and development.  We won’t stand for public officials and employees who resort to alleged accounting trickery to mislead investors who are investing in their financial futures as well as the future betterment of our communities.”

Rockland County District Attorney Thomas Zugibe said:  “As the Town of Ramapo Supervisor, Christopher St. Lawrence took an oath to honestly and faithfully serve his residents.  But instead, St. Lawrence is accused of shamelessly exploiting his position for a personal agenda. Public officials, whether elected or appointed, are more than mere employees. They are servants of the public interest, and we must insist on absolute honesty, integrity and trustworthiness from every one. The charges announced today are the direct result of the good work of our Public Corruption Task Force, a true collaboration between my office, the U.S. Attorney and the FBI.”

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

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

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

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

The General Fund is the Town’s primary operating fund.  The accumulated difference over time between how much money the Town receives in taxes and fees and how much it spends in a year is the General Fund’s balance.  The General Fund balance is a cushion that can be spent during difficult financial times.  The primary indicators of a town’s financial health are 1) the size of its general fund balance relative to the amount of the fund’s revenue and 2) trends in the size of a town’s general fund balance over time.

When the RLDC issued $25 million in bonds to build the stadium building itself in April 2011, ST. LAWRENCE and TROODLER inflated the size of the Town’s 2010 General Fund balance by including a false $3.6 million receivable in the General Fund.  The Town’s financial condition was important to investors in the RLDC’s bonds because the Town guaranteed the payments of principal and interest on the bonds.  Without that fake asset, the General Fund’s balance would have been negative for 2010.

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

In May 2013, the FBI searched Ramapo Town Hall in connection with this investigation.  Less than 10 days later, ST. LAWRENCE inflated another receivable in the General Fund – this time for money from the Federal Emergency Management Agency (“FEMA”) to reimburse the Town for expenses from Hurricanes Irene and Sandy.  ST. LAWRENCE claimed that the Town was going to receive $3.145 million from FEMA when the Town had yet to submit those claims to FEMA.  Without ST. LAWRENCE’s inflation of this receivable, the projected General Fund balance for 2012 would have been negative when the Town sold bonds in May 2013.

The Indictment alleges that ST. LAWRENCE also inflated the General Fund balance by making more than $12 million in transfers from the Town’s Ambulance Fund to the General Fund from 2009 to 2014.  The group of properties in Ramapo that pays into the Ambulance Fund is different from the group of properties that pays into the General Fund.  Under state law, transfers between funds with different tax bases can only be loans.  To justify the transfers, ST. LAWRENCE told the auditors, members of the Town Board, and others that the two funds had the same tax base.

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

*                *                *

ST. LAWRENCE, 65, of Wesley Hills, New York, and TROODLER, 42, of Bala Cynwyd, Pennsylvania, are each charged with eight counts of securities fraud, each of which carries a maximum sentence of 20 years in prison; 13 counts of wire fraud, each of which carries a maximum sentence of 20 years in prison; and one count of conspiracy, which carries a maximum sentence of five years in prison. 

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

Mr. Bharara thanked the SEC for their investigative work.  He also praised the FBI and the investigators from the United States Attorney's Office for the Southern District of New York.  He also thanked the Rockland County District Attorney’s Office for its assistance in the investigation.  This investigation was conducted by the Office with the Public Corruption Task Force set up between the FBI and the Rockland County District Attorney’s Office. 

In a related case, the Securities & Exchange Commission brought a civil action today against ST. LAWRENCE, TROODLER, and others in U.S. District Court in White Plains.

The criminal case is being prosecuted by the Office’s White Plains Division.  Assistant U.S. Attorneys James McMahon and Andrew Dember are in charge of the prosecution.

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

Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the filing of a civil forfeiture complaint against the funds in at least 20 bank accounts around the world that are alleged to constitute the proceeds of an elaborate scheme to defraud a United States company (the “Victim Company”).  In particular, the complaint filed today in Manhattan federal court alleges that the perpetrators of this fraud created a fake email address and posed as one of the Victim Company’s legitimate vendors (the “Vendor”) in communications with a professional services company (the “Professional Services Company”) that the Victim Company retained to handle the details and logistics of vendor payments.  Through these fraudulent communications, the perpetrators of the scheme caused the Victim Company to transfer nearly $100 million due to the Vendor to an account at Eurobank Cyprus, Ltd (“Eurobank”) that was actually under their control.  Almost immediately after funds were transferred into this account, the perpetrators of this scheme caused portions of the fraud proceeds to be further dispersed to accounts under their control around the world, including in Latvia, Estonia, Hungary, Lithuania, Slovakia, Estonia, and Hong Kong.

Through the timely actions of officials at Eurobank, and in coordination with U.S. and Cypriot law enforcement authorities, more than $74 million of the stolen funds have already been returned to the Victim Company.  Foreign governments acting at the request of U.S. authorities have restrained 20 accounts worldwide that received portions of the remaining ill-gotten funds, and the funds in those accounts are the subject of the complaint filed today in Manhattan federal court.

Manhattan U.S. Attorney Preet Bharara said: “Criminals can be resourceful and unrelenting in their efforts to scam innocent victims out of money.  Here, the alleged perpetrators – through a fake email address and by impersonating a legitimate vendor – almost got away with $100 million.  Thanks to the timely actions of law enforcement here and abroad, as well as by Eurobank in Cyprus, where the stolen funds were first sent, $74 million has already been returned to the victim company.  With this civil forfeiture action, we seek to return the rest.”

FBI Assistant Director-in-Charge Diego Rodriguez, said: “This modern-day impersonation scheme used a fake email account to scam a business instead of the old way of in-person imitation by the perpetrators.  However, this scam was cut short in the end thanks to modern-day tools used by banks to stop suspicious transactions and cooperation by our foreign partners to restrain the transferred funds.”   

As alleged in the Complaint:

The Victim Company is an American-based corporation doing business worldwide.  Like many corporations, the Victim Company has contractors and vendors who are paid via wire transfer for services provided, including the Vendor, which is based in Asia.  During all times relevant to the Complaint, the Victim Company retained the Professional Services Company to communicate with vendors and handle the details of vendor payments.         

Over the course of several weeks in August and September 2015, the perpetrators of the scheme described in the Complaint managed to impersonate the Vendor by creating a fake email address that resembled email addresses used by actual employees of the Vendor.  Using this fake email address, the perpetrators then communicated with an email account maintained for the purpose of allowing vendors to communicate with the Professional Services Company on behalf of the Victim Company.  Through those email communications, the perpetrators of the scheme convinced the Professional Services Company to change the designated bank account to which the Victim Company would make recurring payments to the Vendor for services rendered.  As a result, payments from the Victim Company meant for the Vendor were transferred to an account under the control of the perpetrators of this scheme (“Subject Account-1”) rather than an account actually affiliated with the Vendor. 

Once this change was put into effect, the Professional Services Company, on behalf of the Victim Company, began directing a series of payments from Victim Company accounts in the United States to Subject Account-1 that were intended for the Vendor.  Specifically, between August 21, 2015, and September 14, 2015, approximately 16 payments intended for the Vendor as payment for services rendered to the Victim Company were wired for deposit into Subject Account-1, totaling approximately $98,879,545.80.  Officials at Eurobank developed concerns regarding these transfers and, as a result, restrained approximately $74 million of the transferred funds before they settled into Subject Account-1.  In coordination with law enforcement authorities, those funds have since been returned to the Victim Company.    

In regard to the approximately $25 million that actually settled into Subject Account-1, the perpetrators of the scheme then laundered portions of those crime proceeds through at least 19 additional accounts, including accounts in Cyprus, Latvia, Hungary, Estonia, Lithuania, Slovakia, and Hong Kong.  Those accounts, along with Subject Account-1, have since been restrained by foreign governments acting at the request of U.S. authorities. 

*                *                *

Mr. Bharara praised the outstanding investigative work of FBI.  He also thanked the

Financial Crimes Enforcement Network (“FinCEN”) of the United States Department of the Treasury, the Law Office of the Republic of Cyprus Unit for Combating Money Laundering, and Eurobank Cyprus Ltd. for all of their assistance in the investigation and the return of funds to the Victim Company.

This investigation is being handled by the Office’s Money Laundering and Asset Forfeiture Unit and Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Edward B. Diskant and Megan L. Gaffney are in charge of the case.

The investigation is ongoing.

Preet Bharara, the United States Attorney for the Southern District of New York, John P. Carlin, Assistant Attorney General for National Security, Angel M. Melendez, Special Agent in Charge of the New York Field Office of the Department of Homeland Security, Homeland Security Investigations (“HSI”), Jonathan Carson, Special Agent in Charge of the U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement, New York Field Office (“DOC”), and Craig Rupert, Special Agent in Charge of the Department of Defense, Defense Criminal Investigative Service, Northeast Field Office (“DCIS”), announced the arrest of FUYI SUN, a/k/a “Frank,” a citizen of the People’s Republic of China (“China”), in connection with a scheme to illegally export to China, without a license, high-grade carbon fiber that is used primarily in aerospace and military applications.

SUN was arrested yesterday after traveling to New York to meet with undercover agents (“UCs”) in an effort to obtain the specialized fiber, which – due to its military and aerospace applications – requires an export license for export to China.

SUN was presented last night in Manhattan federal court before U.S. Magistrate Judge James L. Cott.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Fuyi Sun attempted for years to acquire high-grade carbon fiber for illegal export to China.  Earlier this week, after traveling to New York from China to finalize the deal, Sun allegedly told undercover agents that the carbon fiber he sought was headed for the Chinese military, and then paid tens of thousands of dollars in cash to purchase two cases of it.  And to avoid law enforcement detection, Sun allegedly directed the undercover agents to ship the carbon fiber in unmarked boxes and to falsify the shipping documents regarding the contents of the boxes.”

Assistant Attorney General John P. Carlin said: “Sun allegedly attempted to procure high grade carbon fiber for a source he repeatedly identified as the Chinese military.  The carbon fiber – which has many aerospace and defense applications – is strictly controlled, and Sun expressed a willingness to pay a premium to skirt U.S. export laws.  The National Security Division will continue to work to identify and hold accountable those who seek to violate IEEPA and other laws designed to protect our strategic commodities from those who may wish us harm.”

HSI Special Agent in Charge Angel M. Melendez said: “Keeping items such as this high grade carbon fiber, which can be used for military applications, from falling into the wrong hands possibly endangering national security, is a job HSI takes very seriously. Through this investigation, we have disrupted an alleged attempt to knowingly circumvent export controls and ensured this material will not be used for nefarious purposes.”

DOC Special Agent in Charge Jonathan Carson said: “A top priority of The Office of Export Enforcement is identifying and disrupting the illicit export of items for unauthorized military end-uses and users in China.  Carbon fiber has military, missile and nuclear applications.  In this case, working with our law enforcement partners we thwarted an alleged attempt to illegally export carbon fiber to China.”

DCIS Northeast Field Office Special Agent in Charge Craig Rupert said “The recent arrest ‎reinforces the commitment of the Defense Criminal Investigative Service (DCIS) to halting the spread of Defense technology to restricted nations. The ongoing partnership with other law enforcement agencies is essential to shielding America's investment in defense.”

According to the allegations in the Complaint that was filed yesterday in Manhattan federal court:[1]

Since approximately 2011, SUN has attempted to acquire extremely high-grade carbon fiber, including Toray type M60JB-3000-50B carbon fiber (“M60 Carbon Fiber”).  M60 Carbon Fiber has applications in aerospace technologies, unmanned aerial vehicles (commonly known as “drones”) and other government defense applications.  Accordingly, M60 Carbon Fiber is strictly controlled – including that it requires a license for export to China – for nuclear non-proliferation and anti-terrorism reasons.

In furtherance of his attempts to illegally export M60 Carbon Fiber from the United States to China without a license, SUN contacted what he believed was a distributor of carbon fiber – but which was, in fact, an undercover entity created by HSI and “staffed” by HSI undercover special agents (the “UC Company”).  SUN inquired about purchasing the M60 Carbon Fiber without the required license.  In the course of his years-long communications with the undercover agents and UC Company, SUN repeatedly suggested various security measures that he believed would protect them from “U.S. intelligence.”  Among other such measures, at one point, SUN instructed the undercover agents to use the term “banana” instead of “carbon fiber” in their communications.  Consequently, soon thereafter he inquired about purchasing 450 kilograms of “banana” for more than $62,000.  In order to avoid detection, SUN also suggested removing the identifying barcodes for the M60 Carbon Fiber, prior to transshipment, and further suggested that they identify the M60 Carbon Fiber as “acrylic fiber” in customs documents.

On or about April 11, 2016, SUN traveled from China to New York for the purpose of purchasing M60 Carbon Fiber from the UC Company.  During meetings with the undercover agents, on or about April 11 and 12, 2016, among other things, SUN repeatedly suggested that the Chinese military was the ultimate end-user for the M60 Carbon Fiber he sought to acquire from the UC Company.  SUN claimed to have personally worked in the Chinese missile program.  And SUN asserted that he maintained a close relationship with the Chinese military, had a sophisticated understanding of the Chinese military’s need for carbon fiber, and suggested that he would be supplying the M60 Carbon Fiber to the Chinese military or to institutions closely associated with it. 

On or about April 12, 2016, SUN agreed to purchase two cases of M60 Carbon Fiber from the UC Company.  SUN paid the undercover agents $23,000 in cash for the carbon fiber.  He also paid an additional $2,000 to the undercover agents as compensation for the risk he believed they were taking to illegally export the carbon fiber to China without a license.           

*                *                *

The Complaint charges SUN, age 52, in three counts: Count One charges attempt to violate the International Emergency Economic Powers Act (“IEEPA”); Count Two charges conspiracy to violate IEEPA; and Count Three charges attempt to smuggle goods from the United States.  Counts One and Two each carry a maximum sentence of 20 years in prison.  Count Three carries a maximum sentence of 10 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the extraordinary investigative work of the New York Field Office of HSI, the DOC’s Bureau of Industry and Security’s Office of Export Enforcement, the DCIS New York Office, and the Department of Justice, National Security Division, Counterintelligence and Export Control Section.

This prosecution is being handled by the Office’s Terrorism and International Narcotics and Complex Frauds and Cybercrime Units.  Assistant United States Attorneys Matthew Podolsky, Patrick Egan, Sean Buckley, and Nick Lewin are in charge of the prosecution.  David Recker, Trial Attorney in the National Security Division, Counterintelligence and Export Control Section, is also assisting in the prosecution.

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

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

Fuyi Sun, aka Frank, 52, a citizen of the People’s Republic of China, was arrested yesterday in connection with a scheme to illegally export to China, without a license, high-grade carbon fiber that is used primarily in aerospace and military applications.

The arrest was announced by Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Preet Bharara of the Southern District of New York, Special Agent in Charge Angel M. Melendez of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI) New York Field Office, Special Agent in Charge Jonathan Carson of the U.S. Department of Commerce (DOC) Bureau of Industry and Security’s Office of Export Enforcement New York Field Office and Special Agent in Charge Craig Rupert of the Department of Defense’s Defense Criminal Investigative Service (DCIS) Northeast Field Office.

The complaint charges Sun with one count of attempting to violate the International Emergency Economic Powers Act (IEEPA), one count of conspiracy to violate IEEPA and one count of attempting to smuggle goods from the United States.  Sun was arrested yesterday after traveling to the United States to meet with undercover agents (UCs) in an effort to obtain the specialized fiber which, due to its military and aerospace applications, requires an export license for export to China.  Sun was presented last night before U.S. Magistrate Judge James L. Cott of the Southern District of New York.

“Sun allegedly attempted to procure high grade carbon fiber for a source he repeatedly identified as the Chinese military,” said Assistant Attorney General Carlin.  “The carbon fiber – which has many aerospace and defense applications – is strictly controlled, and Sun expressed a willingness to pay a premium to skirt U.S. export laws.  The National Security Division will continue to work to identify and hold accountable those who seek to violate IEEPA and other laws designed to protect our strategic commodities from those who may wish us harm.”

“As alleged, Fuyi Sun attempted for years to acquire high-grade carbon fiber for illegal export to China,” said U.S. Attorney Bharara.  “Earlier this week, after traveling to New York from China to finalize the deal, Sun allegedly told undercover agents that the carbon fiber he sought was headed for the Chinese military, and then paid tens of thousands of dollars in cash to purchase two cases of it.  And to avoid law enforcement detection, Sun allegedly directed the undercover agents to ship the carbon fiber in unmarked boxes and to falsify the shipping documents regarding the contents of the boxes.”

“Keeping items such as this high grade carbon fiber, which can be used for military applications, from falling into the wrong hands possibly endangering national security, is a job HSI takes very seriously,” said Special Agent in Charge Melendez.  “Through this investigation, we have disrupted an alleged attempt to knowingly circumvent export controls and ensured this material will not be used for nefarious purposes.”

“A top priority of the Office of Export Enforcement is identifying and disrupting the illicit export of items for unauthorized military end-uses and users in China,” said Special Agent in Charge Carson.  “Carbon fiber has military, missile and nuclear applications.  In this case, working with our law enforcement partners we thwarted an alleged attempt to illegally export carbon fiber to China.”

“The recent arrest ‎reinforces the commitment of the Defense Criminal Investigative Service (DCIS) to halting the spread of Defense technology to restricted nations,” said Special Agent in Charge Rupert.  “The ongoing partnership with other law enforcement agencies is essential to shielding America's investment in defense.”

According to the allegations in the complaint that was filed yesterday in the Southern District of New York:

Since approximately 2011, Sun has attempted to acquire extremely high-grade carbon fiber, including Toray type M60JB-3000-50B carbon fiber (M60 Carbon Fiber).  M60 Carbon Fiber has applications in aerospace technologies, unmanned aerial vehicles (commonly known as drones) and other government defense applications.  Accordingly, M60 Carbon Fiber is strictly controlled – including that it requires a license for export to China – for nuclear non-proliferation and anti-terrorism reasons.

In furtherance of his attempts to illegally export M60 Carbon Fiber from the United States to China without a license, Sun contacted what he believed was a distributor of carbon fiber, but which was, in fact, an undercover entity created by HSI and staffed by HSI UCs.  Sun inquired about purchasing the M60 Carbon Fiber without the required license.  In the course of his years-long communications with the UCs, Sun repeatedly suggested various security measures that he believed would protect them from U.S. intelligence.  Among other such measures, at one point, Sun instructed the undercover agents to use the term “banana” instead of “carbon fiber” in their communications.  Consequently, soon thereafter he inquired about purchasing 450 kilograms of “banana” for more than $62,000.  In order to avoid detection, Sun also suggested removing the identifying barcodes for the M60 Carbon Fiber prior to transshipment and further suggested that they identify the M60 Carbon Fiber as “acrylic fiber” in customs documents.

During meetings with the UCs, on or about April 11 and 12, 2016, among other things, Sun repeatedly suggested that the Chinese military was the ultimate end-user for the M60 Carbon Fiber he sought to acquire; claimed to have personally worked in the Chinese missile program; and asserted that he maintained a close relationship with the Chinese military, had a sophisticated understanding of the Chinese military’s need for carbon fiber and suggested that he would be supplying the M60 Carbon Fiber to the Chinese military or to institutions closely associated with it. 

On or about April 12, 2016, Sun agreed to purchase two cases of M60 Carbon Fiber from the UCs and paid $23,000 in cash.  He paid an additional $2,000 to the UCs as compensation for the risk he believed they were taking to illegally export the carbon fiber to China without a license.

Attempting to violate IEEPA and conspiracy to violate IEEPA each carry a maximum sentence of 20 years in prison.  Attempting to smuggle goods from the United States carries a maximum sentence of 10 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

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

Assistant Attorney General Carlin joined U.S. Attorney Bharara in praising the extraordinary investigative work of the HSI’s New York Field Office, DOC’s Bureau of Industry and Security’s Office of Export Enforcement and DCIS New York Office.

The case is being prosecuted Assistant U.S. Attorneys Matthew Podolsky, Patrick Egan, Sean Buckley and Nick Lewin of the Southern District of New York, with assistance from Trial Attorney David Recker of the National Security Division’s Counterintelligence and Export Control Section.

Sun Complaint

Preet Bharara, United States Attorney for the Southern District of New York, announced today the successful forfeiture of a Tyrannosaurus bataar skull (the “Bataar Skull”) unlawfully taken from the Gobi Desert in Mongolia.  The Bataar Skull, a fossil from the Cretaceous period, which ended approximately 65 million years ago, had been auctioned in Manhattan in 2007 after being unlawfully brought into the United States.  The current owner of the Bataar Skull, having been informed of its origins and the circumstances of its importation into the United States, consented to its forfeiture.  The forfeiture order was signed this morning by the U.S. District Judge J. Paul Oetken.

The Bataar Skull is the latest addition to a lengthy list of looted dinosaur fossils the Office, together with its law enforcement partners at Homeland Security Investigations, has successfully forfeited.  Since 2012, the United States Attorney’s Office for the Southern District of New York has secured the return and repatriation to Mongolia of several dinosaur fossils that include three full Tyrannosaurus bataar skeletons; a full Saurolophus angustirostris skeleton and another partial Saurolophus; six Oviraptor skeletons; four Gallimimus skeletons; a partial Ankylosaurus skeleton; a Protoceratops skeleton; a composite nest containing miscellaneous dinosaur eggs; and numerous small, unidentified prehistoric lizards and turtles.

Manhattan U.S. Attorney Preet Bharara said: “Our Office will continue to work to restore culturally and scientifically important artifacts to their rightful owner.  Together with our law enforcement partners at the Department of Homeland Security, we are proud to repatriate another priceless dinosaur fossil to the Government of Mongolia.”       

According to the civil complaint in this matter and other documents filed in this action:

The Tyrannosaurus bataar is indigenous to, and has only been unearthed in, a specific portion of the Gobi Desert called the Nemegt Basin, in what is now Mongolia.  Mongolian law has long declared dinosaur fossils found within Mongolia to be government property.  Their export from Mongolia without permission of the Government of Mongolia is a violation of Mongolian law.

On or about March 25, 2007, a California-based auction house offered the Bataar skull for sale at auction in Manhattan.  The Bataar Skull had been shipped into the United States in June 2006 with United States Customs documents that described it only as “fossil stone pieces.”  At auction, the Bataar Skull was described as native to the “Eurasian continent.”  The Bataar Skull sold for approximately $230,000 at auction to an anonymous California-based buyer (the “Buyer”).

In 2015, HSI performed a physical examination of the skull and confirmed that it rightfully belongs to the Government of Mongolia and had been illegally imported into the United States.  After being informed of the origins of the Bataar Skull, the Buyer agreed to turn it over to HSI and consented to its forfeiture.

Mr. Bharara praised the investigative work of HSI, and thanked the Government of Mongolia for its assistance. 

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

Preet Bharara, the United States Attorney for the Southern District of New York, and Angel M. Melendez, the Special Agent in Charge of the Department of Homeland Security, Homeland Security Investigations, New York Field Office, announced today that FRED ELM, a/k/a “Frederic Elmaleh,” the founder and manager of Elm Tree Investment Advisors LLC, was arrested this morning in Florida on securities fraud and wire fraud charges stemming from his and Chief Operating Officer AHMAD NAQVI’s scheme to defraud investors in multiple funds created and controlled by ELM and NAQVI.  Among other illicit activity, ELM and NAQVI fraudulently induced more than 50 investors to invest over $17 million based on the false representation that ELM and NAQVI would invest that money, through the funds, in the shares of privately held technology companies, like Twitter, Inc., Alibaba Group Holding Limited, and Uber Technologies, Inc.  ELM was presented this morning in federal court in Fort Lauderdale, Florida, before United States Magistrate Judge Alicia O. Valle.  NAQVI remains at large.

U.S. Attorney Preet Bharara said:  “Fred Elm and Ahmad Naqvi claimed that through their business relationships with elite venture capital firms they could generate profits from well-timed investments in privately-held technology companies.  But as alleged, Elm and Naqvi never returned a penny of profit, spending much of the $17 million of investor money to fund their own high life and pay back other defrauded investors.  As alleged, while promising investors high performing returns, Elm instead took the money and put high-performance sports cars – a Bentley, Maserati and Range Rover – in his own garage. Thanks to the dedicated Homeland Security Investigations agents with the El Dorado Task Force and our partners at the SEC, Elm and Naqvi are now done defrauding investors.”

Special Agent in Charge Angel M. Melendez said:  “These individuals allegedly defrauded investors out of more than $17 million dollars by falsely representing the ability to invest in privately held technology companies, when in reality they used the money to buy homes, luxury cars, and expensive jewelry.  HSI and its El Dorado Task Force partners are committed to fighting financial frauds and to hold accountable the people that commit them.”

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

From at least June 2013 through December 2014, ELM and NAQVI engaged in a scheme to defraud investors in funds that ELM and NAQVI created and controlled at Elm Tree Investment Advisors LLC (“ETIA”), where ELM was the founder and manager, and NAQVI was the chief operating officer.  ELM and NAQVI raised more than $17 million from over 50 investors in four limited partnerships for which ETIA acted as the fund manager:  Elm Tree Investment Fund, LP; Elm Tree Emerging Growth Fund, LP; Elm Tree ‘e’Conomy Fund, LP; and Elm Tree Motion Opportunity, LP (collectively the “Elm Tree Funds”). 

ELM and NAQVI falsely represented that the Elm Tree Funds used investor capital to purchase shares in privately held technology companies before their initial public offerings (“IPOs”).  These companies included Twitter, Inc., Alibaba Group Holding Limited, Uber Technologies, Inc., Square, Inc., Pinterest, Inc., and GoDaddy Group, Inc.  Moreover, ELM and NAQVI falsely represented that they had access to these pre-IPO shares because of their business relationships with leading venture capital firms, such as Kleiner Perkins Caufield & Byers, Benchmark Capital, and Silver Lake Management, L.L.C.  In truth and in fact, ELM and NAQVI did not invest in the pre-IPO shares of these companies and did not have relationships with these venture capital firms.

ELM and NAQVI comingled the approximately $17 million that was invested in the Elm Tree Funds in a single investment account, and then invested only a portion of the money, approximately $7.1 million.  At no point did any of the Elm Tree Funds return a profit.  Instead, for example, between January 2014 and November 2014, the Elm Tree Funds lost approximately $3.9 million in trading.

Moreover, of the investor funds that ELM and NAQVI did not lose in securities trading, ELM routinely converted investor funds to his own use in the form of cash withdrawals and to pay personal expenses, including to purchase a $1.75 million home, high-end furnishings, and other personal items, such as jewelry, daily living expenses, and luxury automobiles, including a Bentley, a Maserati, and a Range Rover.

The conversion of investors’ funds was contrary to the representations that ELM and NAQVI made to investors concerning their and ETIA’s fees.  ELM and NAQVI falsely represented that they and ETIA would take a two percent annual management fee plus 20 percent of any profits that the Elm Tree Funds earned.  In truth and in fact, ELM converted investor money that far exceeded the two percent management fee.  Moreover, because the Elm Tree Funds never returned a profit, ELM, NAQVI, and ETIA were not entitled to a percentage of any profits.

ELM and NAQVI also used approximately $5.2 million of new investor funds to make payments to earlier investors in a Ponzi-like fashion.

To prevent or forestall redemptions, and continue to raise money to fund their scheme, ELM and NAQVI also generated fictitious account statements and also made oral and written misrepresentations that their trading strategies were generating consistently positive returns.

For example, beginning in mid-2013, ELM and NAQVI began to solicit Victim-1 to invest with ETIA in the Elm Tree Funds.  On June 11, 2013, NAQVI sent Victim-1 a series of e-mails regarding the Elm Tree Emerging Growth Fund, in which he falsely represented, among other things, that the fund would invest in pre-IPO Twitter shares, and that ELM, NAQVI, and ETIA had “key contacts” with venture capital firms like Kleiner Perkins Caufield & Byers and Benchmark Capital.  ELM and NAQVI subsequently had in-person meetings and telephone calls with Victim-1 about this investment.  On October 9, 2013, Victim-1 invested approximately $52,500 in the Elm Tree Emerging Growth Fund.  Following Twitter’s IPO on November 6, 2013, Twitter’s stock price rose, and NAQVI subsequently told Victim-1 that ELM, NAQVI, and ETIA had used an options strategy to lock in Victim-1’s profits in Twitter.  Because the fund had not invested in pre-IPO Twitter shares, there were no profits to lock in.  Thereafter, ELM and NAQVI sent fraudulent account statements to Victim-1, including one sent on March 7, 2014.  The statement falsely indicated that Victim-1’s investment in the fund was valued at $274,550 (up from $52,500), and that the Elm Tree Emerging Growth Fund was valued at $68,115,855. 

ELM and NAQVI made similar misrepresentations with respect to Victim-1’s subsequent investments in the Elm Tree ‘e’Conomy Fund and the Elm Tree Motion Opportunity, falsely indicating that those funds invested in Alibaba Group Holding Limited, Uber Technologies, Inc., Square, Inc., Pinterest, Inc., and GoDaddy Group, Inc., and that Victim-1’s investments were growing.  ELM and NAQVI also falsely represented that the value of the Elm Tree ‘e’Conomy Fund as of December 12, 2014, was $125,484,750 and that the value of the Elm Tree Motion Opportunity as of December 18, 2014, was $77,286,220 – falsely claiming that the total value of the Elm Tree Funds was more than $270 million.

*                      *                      *

ELM, 46, was arrested this morning at his home in Hollywood, Florida.  NAQVI, 47, remains at large.  ELM and NAQVI are each charged with one count of securities fraud, one count of wire fraud conspiracy, and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison.  Each is also charged with one count of securities fraud conspiracy, which carries a maximum sentence of five years in prison.  The charges carry a maximum fine of $5 million, or twice the gross gain or loss from the offenses.  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 work of HSI New York’s El Dorado Task Force, and thanked the U.S. 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 U.S. Attorney Joshua A. Naftalis is in charge of the prosecution.   

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, David ‎Schnorbus, Special Agent-in-Charge of the New York Field Office of the United States Department of State, Diplomatic Security Service (“DOS-DSS”); Angel M. Melendez, the Special Agent in Charge of the Department of Homeland Security, Homeland Security Investigations, New York Field Office (“HSI”); Shantelle P. Kitchen, Special Agent in Charge of the Internal Revenue Service-Criminal Investigation (“IRS-CI”); and Philip R. Bartlett, Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS” and together with DSS, HSI, and the IRS, the “Investigating Agencies”), announced charges today against 11 individuals, RYAN JUNGHUN KIM, a/k/a “Ryan Junghun Choi,” a/k/a “Ki Soo Choi,” a/k/a “Lion King,” HOI HAM, SUNG HWAN KIM, a/k/a “Sean Kim,” YOUNG HO JOO, a/k/a “Jay Joo,” MI SOOK KIM, SU YEON YUN, a/k/a “Bebe,”  HYUN JOO LEE, HYUN JOO SHIN, YING AI LI, a/k/a “Sung Soon Kim,” JIN AE JUNG, a/k/a “Jaqueline Kim,” a/k/a “Jackie Kim,” and MOOJA PETERSON, a/k/a “MJ,” for laundering in excess of $1.4 million in illegal proceeds between 2011 and 2016.  These illegal proceeds were generated by at least 10 illegal brothels in and around the New York City metro area that the defendants owned, operated, managed, or advertised. 

HOI HAM, YOUNG HO JOO, SU YEON YUN, HYUN JOO SHIN, YING AI LI, and JIN AE JUNG and were arrested in the New York City metro area today.  SUNG HWAN KIM was arrested in Pennsylvania today.  These defendants will be presented in the Southern District of New York today before United States Magistrate Judge James L. Cott.  RYAN JUNGHUN KIM was arrested in Seoul, South Korea.  MI SOOK KIM, MOOJA PETERSON, and HYUN JOO LEE have not yet been apprehended.

Manhattan U.S. Attorney Preet Bharara said:  “Eleven individuals are charged with laundering more than a million dollars of proceeds from their illegal commercial sex businesses.   I want to thank our federal and local law enforcement partners and recognize the assistance of the Seoul Metropolitan Police Agency.”

Special Agent-in-Charge David ‎Schnorbus said:  “The dismantling of this international conspiracy, stretching from South Korea to the United States, is an important achievement made possible by the coordinated efforts of all agencies supporting this investigation and prosecution. Diplomatic Security’s global presence enables our organization to partner with foreign law enforcement, and the investigative support of the Seoul Metropolitan Police Agency highlights that global reach.”

Special Agent in Charge Angel M. Melendez said:  “Today's arrests and search warrants are the result of the great partnership between HSI and its law enforcement partners to shut down a large international prostitution and money laundering organization operating illegal brothels here in New York.  Sex businesses like these pose a threat to public safety in our communities and must not be tolerated.”

Special Agent in Charge Shantelle P. Kitchen said:  “Money laundering is not just a crime committed by drug dealers.  The kinds of criminal enterprises that launder money to conceal illicit proceeds and to keep their operations going are as diverse as the ways that money can be laundered.  IRS-Criminal Investigation is always ready to bring its financial investigative expertise to money laundering investigations of all kinds.”

Inspector-in-Charge Philip R. Bartlett said: “These individuals operated an illegal prostitution ring, lining their pockets with the profits from the world’s oldest profession.  Today's arrests are yet another example of law enforcements commitment to identify, disrupt and dismantle organized criminal enterprises.”

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

Since 2012, the Investigating Agencies have been investigating a group of brothels (the “Brothels”) operating in and around New York.  Each of the Brothels is independently owned and operated, but the owners of the Brothels work cooperatively through, among other things, the sharing of approved customer lists and information.  Defendants RYAN JUNGHUN KIM, HOI HAM, SUNG HWAN KIM, YOUNG HO JOO, MI SOOK KIM, SU YEON YUN, HYUN JOO LEE, HYUN JOO SHIN, YING AI LI, JIN AE JUNG, and MOOJA PETERSON are individuals who operated the Brothels, including advertisers, website developers, brothel owners, and brothel managers. 

The defendants typically used websites associated with the Brothels to advertise the women prostituted in the Brothels (the “Brothel Websites”).  The Brothel Websites describe, among other things, specific services that the Brothels offer, including a service called the “girlfriend experience.”  In addition to the Brothel Websites, the Brothels used an online aggregator of advertisements to advertise the Brothels (the “Advertising Website”).  The management of online advertising and payment for this advertising was coordinated by the defendants.  The defendants would regularly email among themselves sexually explicit photographs of women prostituted in the Brothels to be used in online advertising, as well as instructions for how certain posts should appear.  They would also exchange emails concerning, among other things, advertising for the Brothels and payment of advertising fees to the Advertising Website. 

To pay for these advertising fees, the defendants would use hundreds of thousands of dollars in illegal proceeds generated by the Brothels’ prostitution business.  These proceeds would be transferred among the defendants through several methods, including cash deliveries, payment of credit card balances, and wire transfers.  An account associated with RYAN JUNGHUN KIM received tens of thousands of dollars from accounts in the names of several of the defendants.  HOI HAM, the defendant, made cash pickups from the Brothels on multiple occasions, and even discussed these pickups in electronic chat messages with RYAN KIM.  Moreover, between December 2012 and May 2014, approximately $326,381 was transferred from a single credit card in HAM’s name to the Advertising Website.  Similarly, between December 2011 and September 2013, approximately $150,000 in cash was deposited into an account in the name of SUNG HWAN KIM and approximately $90,000 during that same period was remitted to the Advertising Website.  Finally, between December 2011 and May 2014, approximately $268,000 was deposited into a bank account maintained in the name of YOUNG HO JOO, the defendant, and another individual.  During this same period, this account remitted approximately $92,311 to the Advertising Website.  To date, the investigation, which is ongoing, has identified more than $1.4 million worth of illegal transactions.         

        *          *          *

Each of the defendants is charged with one count of conspiracy to commit money laundering, which carries of maximum sentence of 20 years in prison; and one count of conspiracy to violate the Travel Act, which carries a maximum sentence of five years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

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

Mr. Bharara praised the outstanding efforts of DSS, HSI, the IRS, USPIS, the New York City Police Department, and the Seoul Metropolitan Police Agency.  He added that the investigation is ongoing.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Sidhardha Kamaraju, Lauren Schorr, and Michael Neff are in charge of the prosecution.

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

[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth 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 Diego Rodriguez, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today that JOHN AFRIYIE, a former analyst at a Manhattan-based private investment fund (the “Fund”), was arrested this morning and charged with insider trading.  AFRIYIE made approximately $1.5 million in profits in connection with options trading based on material nonpublic information he misappropriated from the Fund about an impending acquisition of a publicly traded company.  AFRIYIE was presented today in Manhattan federal court before United States Magistrate Judge James L. Cott.            

Manhattan U.S. Attorney Preet Bharara said:  “In February of this year, John Afriyie made a quick $1.5 million profit by trading in options of ADT stock.  His profits were not the result of trading acumen, diligent research, or blind luck, but rather the alleged spoils of criminal insider trading.  Afriyie allegedly traded on material nonpublic information he had obtained about a pending acquisition of ADT that had not yet been made public.  Afriyie’s attempts to keep his alleged criminal insider trading secret by trading in his mother’s name failed, and thanks to the efforts of the FBI and the SEC, he will now answer to federal securities fraud charges.”

FBI Assistant Director-in-Charge Diego Rodriguez said: “Afriyie allegedly disregarded insider trading laws to enrich himself.  The FBI is committed to working with our partners to pursue those who commit these crimes and undermine the public's confidence in the financial markets.”

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

In January 2016, Apollo Investment Management LLC (“Apollo”) contacted the Fund to discuss whether the Fund would provide debt financing for Apollo’s potential acquisition of ADT Corporation (“ADT”) in an all-cash transaction.  The Fund entered into a non-disclosure agreement with Apollo and was granted access to an electronic data room for the ADT transaction.  As an investment analyst at the Fund, AFRIYIE had access to the Fund’s network server, which maintained, among other things, electronic shared directory file folders containing material nonpublic information, including information about Apollo’s acquisition of ADT. 

In violation of the Fund’s policies and in breach of his duties to the Fund and its clients, AFRIYIE accessed material nonpublic information about Apollo’s pending acquisition of ADT in an electronic shared drive folder on the Fund’s network server.  In approximately 28 separate transactions between January 28, 2016, and February 12, 2016, AFRIYIE purchased approximately 2,279 ADT call options for a total of $24,254.02 before the public announcement of that transaction.  AFRIYIE purchased the ADT call options through a brokerage account in the name of AFRIYIE’s mother, which AFRIYIE controlled.  AFRIYIE did not reveal his affiliation with the Fund in the account opening documents for the brokerage account or in his communications with the brokerage firm.  Nor did AFRIYE reveal his trades or the existence of the brokerage account to the Fund. 

The public announcement of Apollo’s acquisition of ADT in February 2016 caused ADT shares to increase in value from $29.20 per share on the day AFRIYIE began purchasing ADT options to $39.64 per share, resulting in a corresponding increase in the value of the call options AFRIYIE had purchased.  As a result of the insider trading alleged in the Complaint, AFRIYIE earned at least $1.53 million in realized and unrealized profits.

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AFRIYIE is charged with one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense.  The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

Mr. Bharara praised the investigative work of the FBI and thanked the SEC, which has filed civil charges in a separate action.  He added that the FBI’s investigation is ongoing.

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 Edward A. Imperatore is in charge of the prosecution.

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

[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth 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 David ‎Schnorbus, Special Agent-in-Charge of the New York Field Office of the United States Department of State, Diplomatic Security Service (“DOS-DSS”), announced today that ASHRAF LAKOU pled guilty to 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 $1.5 million.  LAKOU pled guilty before United States Magistrate Judge James L. Cott.   

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, 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, fraudulently adding their own names as authorized users of preexisting victim credit cards and by submitting fraudulent applications for new credit card accounts in the names of their victims.

       *                *                *

 LAKOU, 27, of Manhattan, pled guilty to one count of conspiracy to commit bank fraud, which carries a maximum sentence of 30 years in prison; one count of conspiracy to commit access device fraud, which carries a maximum sentence of seven-and-a-half years in prison; one count of passport fraud, which carries a maximum sentence of 10 years in prison; and three counts of aggravated identity theft, each of which carries a mandatory sentence of two years in prison.  The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.  As part of his plea, LAKOU agreed to pay $557,894.50 in restitution to victims and to pay $557,894.50 in forfeiture.  Lakou is scheduled to be sentenced at a future date by U.S. District Judge Victor Marrero. 

Zoheb Qamran, 28, of Manhattan, and Jessica Hattar, 26, of Manhattan, have been separately charged in connection with the bank fraud and credit card fraud schemes.  The charges against Qamran and Hattar are merely allegations, and they are presumed innocent unless and until they are proven guilty beyond a reasonable doubt.

Mr. Bharara praised the outstanding efforts of DOS-DDS 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 JOHN CREWS, JR., was sentenced today in White Plains federal court to a prison term of 17 years for his participation in a series of armed robberies in the summer of 2013.  CREWS pled guilty on September 21, 2015, to conspiring to commit armed robberies and brandishing a firearm in the course of those robberies.  CREWS pled guilty before U.S. District Judge Vincent L. Briccetti, who imposed today’s sentence. 

According to the allegations contained in the Indictment, and information adduced during the Court proceedings:

In the summer of 2013, CREWS and others carried out a string of armed robberies in Orange County and Sullivan County.  In a span of approximately six weeks, Crews participated in 10 robberies.  He and others robbed two gas stations, a bar, a bakery, three stores, and a restaurant.  They also carried out two home invasions.  The robberies were in Middletown, Wallkill, and Monticello.  CREWS brandished a gun during each of the robberies.

*                      *                      *

In addition to his prison term, CREWS, 28, of Middletown, New York, was sentenced to three years of supervised release and was ordered to pay restitution in the amount of $5,577 to various establishments that he robbed.    

Mr. Bharara praised the outstanding investigative work of the Bureau of Alcohol, Tobacco, Firearms and Explosives, the New York State Police, the City of Middletown Police Department, the Town of Wallkill Police Department, the Village of Monticello Police Department, the Orange County District Attorney’s Office, and the Sullivan County District Attorney’s Office.

The prosecution is being handled by the Office’s White Plains Division.  Assistant U.S. Attorneys Michael Gerber and Lauren Schorr are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, Julián  Castro, Secretary of the U.S. Department of Housing and Urban Development (“HUD”), Benjamin C. Mizer, Principal Deputy Assistant Attorney General for the Justice Department’s Civil Division, Brian J. Stretch, United States Attorney for the Northern District of California, and David A. Montoya, Inspector General of HUD (“HUD-OIG”), announced today that the United States has settled civil mortgage fraud claims against WELLS FARGO BANK, N.A. (“WELLS FARGO” or the “Bank”), and WELLS FARGO executive KURT LOFRANO (“LOFRANO”), stemming from WELLS FARGO’s participation in the Federal Housing Administration (“FHA”) Direct Endorsement Lender Program.  In the settlement, WELLS FARGO agreed to pay $1.2 billion and admitted, acknowledged, and accepted responsibility for, among other things, certifying to HUD, during the period from May 2001 through December 2008, that certain residential home mortgage loans were eligible for FHA insurance when in fact they were not, resulting in the Government having to pay FHA insurance claims when certain of those loans defaulted.  The agreement resolves the United States’ civil claims in its lawsuit in the Southern District of New York, as well as an investigation conducted by the U.S. Attorney’s Office for the Southern District of New York regarding WELLS FARGO’s FHA origination and underwriting practices subsequent to the claims in its lawsuit, and an investigation conducted by the U.S. Attorney’s Office for the Northern District of California into whether American Mortgage Network, LLC (“AMNET”), a mortgage lender acquired by WELLS FARGO in 2009, falsely certified and submitted ineligible residential mortgage loans for FHA insurance.

The settlement was approved today by U.S. District Judge Jesse M. Furman.

Manhattan U.S. Attorney Preet Bharara said: “Today, Wells Fargo, one of the biggest mortgage lenders in the world, has been held responsible for years of reckless underwriting, while relying on government insurance to deal with the damage.  Wells Fargo has long taken advantage of the FHA mortgage insurance program, designed to help millions of Americans realize the dream of home ownership, to write thousands and thousands of faulty loans.  Driven to maximize profits, Wells Fargo employed shoddy underwriting practices to drive up loan volume, at the expense of loan quality.  Even though Wells Fargo identified through internal quality assurance reviews thousands of problematic loans, the Bank decided not to report them to HUD.  As a result, while Wells Fargo enjoyed huge profits from its FHA loan business, the government was left holding the bag when the bad loans went bust.  With today’s settlement, Wells Fargo has finally resolved the years-long litigation, adding to the list of large financial institutions against which this Office has successfully pursued civil fraud prosecutions.” 

HUD Secretary Julián Castro said: “This Administration remains committed to holding lenders accountable for their lending practices.  The $1.2 billion settlement with Wells Fargo is the largest recovery for loan origination violations in FHA’s history.  Yet, this monetary figure can never truly make up for the countless families that lost homes as a result of poor lending practices.” 

Principal Deputy Assistant Attorney General Benjamin C. Mizer said: “This settlement is another step in the Department of Justice’s continuing efforts to hold accountable FHA approved lenders that unlawfully submitted false claims at the expense of American homeowners and taxpayers.  In addition to today’s resolution with Wells Fargo, the department has pursued similar misconduct by numerous other lenders, returning more than $4 billion to the FHA fund and the Treasury and filing suit where appropriate.  We remain committed to protecting the public fisc from all who seek to abuse it, whether they do business on Wall Street or Main Street.”

Northern District of California U.S. Attorney Brian Stretch said: “Misconduct in the mortgage industry helped lead to a destructive financial crisis that spanned the globe.  American Mortgage Network’s origination of FHA-insured loans that did not comply with Government requirements also caused major losses to the public fisc.  Today’s settlement demonstrates the Department of Justice’s resolve to pursue remedies against those who engaged in this type of misconduct.”                     

HUD Inspector General David A. Montoya said:  “This matter is not just a failure by Wells Fargo to comply with federal requirements in FHA’s Direct Endorsement Lender program – it’s a failure by one of our trusted participants in the FHA program to demonstrate a commitment to integrity and to ordinary Americans who are trying to fulfill their dreams of homeownership.”

According to the Second Amended Complaint filed in Manhattan federal court:

WELLS FARGO has been a participant in the Direct Endorsement Lender program, a federal program administered by FHA.As a Direct Endorsement Lender, WELLS FARGO has the authority to originate, underwrite, and certify mortgages for FHA insurance.If a Direct Endorsement Lender approves a mortgage loan for FHA insurance and the loan later defaults, the holder or servicer of the loan may submit an insurance claim to HUD for the outstanding balance of the defaulted loan, along with any associated costs, which HUD must then pay.Under the Direct Endorsement Lender program, neither FHA nor HUD reviews a loan for compliance with FHA requirements before it is endorsed for FHA insurance.Direct Endorsement Lenders are therefore required to follow program rules designed to ensure that they are properly underwriting and certifying mortgages for FHA insurance and maintaining a quality control program that can prevent and correct any deficiencies in their underwriting.The quality control program requirements include conducting a full review of all loans that go 60 days into default within the first six payments, known as “early payment defaults”; taking prompt and adequate corrective action upon discovery of fraud or serious underwriting problems; and disclosing to HUD in writing all loans containing evidence of fraud or other serious underwriting deficiencies.WELLS FARGO failed to comply with these basic requirements.

First, between at least May 2001 and October 2005, WELLS FARGO, the largest HUD-approved residential mortgage lender, engaged in a practice of reckless underwriting of its retail FHA loans, all the while knowing that it would not be responsible when the defective loans went into default.To maximize its loan volume (and profits), WELLS FARGO elected to hire temporary staff to churn out and approve an ever increasing quantity of FHA loans, but neglected to provide this inexperienced staff with proper training.At the same time, WELLS FARGO’s management applied pressure on its underwriters to approve more and more FHA loans.The Bank also imposed short turnaround times for deciding whether to approve the loans, employed lax underwriting standards and controls, and paid bonuses to underwriters and other staff based on the number of loans approved.Predictably, as a result, WELLS FARGO’s loan volume and profits soared, but the quality of its loans declined significantly. Yet, when WELLS FARGO’s senior management was repeatedly advised by its own quality assurance reviews of serious problems with the quality of the retail FHA loans that the Bank was originating, management failed to implement proper and effective corrective measures, leaving HUD to pay hundreds of millions of dollars in claims for defaulted loans.

Second, WELLS FARGO failed to self-report to HUD the bad loans that it was originating, in violation of FHA program reporting requirements.During the period 2002 through 2010, HUD required Direct Endorsement Lenders to perform post-closing reviews of the loans that they originated and to report to HUD in writing loans that contained fraud or other serious deficiencies.This requirement provided HUD with an opportunity to investigate the defective loans and request reimbursement for any claim that HUD had paid or request indemnification for any future claim, as appropriate.During this nine-year period, WELLS FARGO, through its post-closing reviews, internally identified thousands of defective FHA loans that it was required to self-report to HUD, including a substantial number of loans that had gone into “early payment default.”However, instead of reporting these loans to HUD as required, WELLS FARGO engaged in virtually no self-reporting during the four-year period from 2002 through 2005, and only minimal self-reporting after 2005.

In his capacity as Vice President of Credit-Risk – Quality Assurance at WELLS FARGO, LOFRANO executed on WELLS FARGO’s behalf the annual certifications required by HUD for the Bank’s participation in the Direct Endorsement Lender program for certain years.  LOFRANO also organized and participated in the working group responsible for creating and implementing WELLS FARGO’s self-reporting policies and procedures.  In contravention of HUD’s requirements, that group failed to report to HUD loans that WELLS FARGO had internally identified as containing material underwriting findings.  Moreover, LOFRANO received WELLS FARGO quality assurance reports identifying thousands of FHA loans with material findings – very few of which WELLS FARGO reported to HUD.

*          *          *

As part of the settlement, WELLS FARGO has admitted, acknowledged, and accepted responsibility for, among other things, the following conduct:During the period from May 2001 through on or about December 31, 2008, WELLS FARGO submitted to HUD certifications stating that certain residential home mortgage loans were eligible for FHA insurance when in fact they were not, resulting in the Government having to pay FHA insurance claims when certain of those loans defaulted.From May 2001 through January 2003, WELLS FARGO’s quality assurance group conducted monthly internal reviews of random samples of the retail FHA mortgage loans that the Bank had already originated, underwritten, and closed which identified for most of the months that in excess of 25 percent of the loans, and in several consecutive months, more than 40 percent of the loans, had a material finding.For a number of the months during the period from February 2003 through September 2004, the material finding rate was in excess of 20 percent.  A “material” finding was defined by WELLS FARGO generally as a loan file that did not conform to internal parameters and/or specific FHA parameters, contained significant risk factors affecting the underwriting decision, and/or evidenced misrepresentation.

WELLS FARGO also admitted, acknowledged, and accepted responsibility for the following additional conduct:Between 2002 and October 2005, WELLS FARGO made only one self-report to HUD, involving multiple loans.During that same period, the Bank identified through its internal quality assurance reviews approximately 3,000 FHA loans with material findings.Further, during the period between October 2005 and December 2010, WELLS FARGO only self-reported approximately 300 loans to HUD.During that same period, WELLS FARGO’s internal quality assurance reviews identified more than 2,900 additional FHA loans containing material findings.The Government was required to pay FHA insurance claims when certain of these loans that WELLS FARGO identified with material findings defaulted.

LOFRANO admitted, acknowledged, accepted responsibility for, among other things, the following matters in which he participated:From January 1, 2002, until December 31, 2010, he held the position of Vice President of Credit Risk – Quality Assurance at WELLS FARGO; in that capacity, he supervised the Decision Quality Management group; in 2004, he was asked to organize a working sub-group to address reporting to HUD; in or about October 2005, he organized a working group that drafted WELLS FARGO’s new self-reporting policy and procedures; and during the period October 2005 through December 31, 2010, based on application of the Bank’s new self-reporting policy and by committee decision, WELLS FARGO did not report to HUD the majority of the FHA loans that the Bank’s internal quality assurance reviews had identified as having material findings.

*          *          *

Mr. Bharara and Mr. Stretch thanked HUD’s Office of General Counsel, HUD-OIG, and the Commercial Litigation Branch of the U.S. Department of Justice’s Civil Division for their extraordinary assistance with the prosecution and settlement of this case.

This case against WELLS FARGO is the latest in a string of civil fraud lawsuits brought by this Office since May 2011 alleging fraudulent lending practices by residential mortgage lenders.  In addition to WELLS FARGO, this Office has pursued claims against Citi Mortgage (a subsidiary of Citibank), Flagstar Bank, Deutsche Bank (and a number of its subsidiaries), Countrywide, Bank Of America (“BOA”), former BOA executive Rebecca Mairone, Golden First Mortgage Corp. (“Golden First”), former Golden First owner David Movtady, Allied Home Mortgage Corp. (“Allied”), and former Allied executives Jim Hodge and Jeanne Stell.

Assistant U.S. Attorneys Jeffrey S. Oestericher, Christopher B. Harwood, Rebecca S. Tinio, Caleb Hayes-Deats, and Dominika Tarczynska are in charge of the case.

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, Commissioner of the New York City Police Department (“NYPD”), announced today that HAMLET PERALTA, the former owner of a restaurant in Manhattan, was charged in Manhattan federal court with committing wire fraud through a scheme in which he obtained more than $12 million from investors on false pretenses and used that money to repay other investors and for personal expenses.  PERALTA was arrested by FBI agents in Macon, Georgia, yesterday and will be presented before U.S. Magistrate Judge Charles Weigle in Macon this afternoon.

Manhattan U.S. Attorney Preet Bharara said:  “As alleged, Hamlet Peralta solicited investors for his fictitious wholesale liquor business by peddling wholesale lies.  Peralta’s Ponzi scheme allegedly fleeced his victims out of more than $12 million, virtually all of which he spent on himself or to repay other investors.  Thanks to the work of the FBI and NYPD in this investigation, Peralta will not be able to victimize any other investors.”

FBI Assistant Director-in-Charge Diego Rodriquez said:  “Fraud cases remain a priority for the FBI as we continue to identify and investigate those who commit financial crimes against unwitting victims. Peralta, who allegedly engaged in a multimillion-dollar enrichment scheme, will ultimately be brought to justice for his actions.  We are appreciative of the support and cooperation we continue to receive from our law enforcement partners in this and so many cases.”

NYPD Commissioner William J. Bratton said: “As alleged, Hamlet Peralta violated the trust that investors placed in his fictitious wholesale liquor business venture by spending millions of his victim’s investments on clothes, food, and to continue the scheme.  Thanks to the NYPD investigators and our federal law enforcement partners, Peralta will be held accountable for his actions.”

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

From at least in or about July 2013, up to and including at least in or about 2014, PERALTA solicited more than $12 million from various investors by falsely representing that the investors’ money would be used to engage in wholesale liquor distribution for a profit.  PERALTA promised investors high rates of return in the form of regular interest payments on their investments, which he represented were based on the profits to be generated by what he claimed would be his successful wholesale liquor business.

In truth and in fact, however, PERALTA misappropriated the millions of dollars in investments he received, and used those funds to repay other investors or for his own purposes.  Of the more than $12 million provided to him by investors based on the representation that their money would be used to purchase wholesale liquor for resale, PERALTA in fact purchased no more than $700,000 in wholesale liquor.  He used nearly all of the remaining money – more than $11 million – to repay other investors, wire money to himself, take out large cash withdrawals, and pay for personal expenses other than liquor.

As one example, in or about 2013, PERALTA told a prospective investor (“Investor-1”) who was a frequent customer at PERALTA’s restaurant and who had become friendly with PERALTA that he (PERALTA) owned a separate business called West 125th Street Liquors and that he had been approved as an exclusive wine distributor to a major national restaurant supply company (the “Restaurant Supply Company”) that was beginning a wholesale wine business.  PERALTA told the investor that he would receive four percent interest on his investments, based on profits from the wholesale liquor distribution business.  In truth and in fact, however, PERALTA did not own West 125th Street Liquors, and he had not been approved to be a distributor for the Restaurant Supply Company. 

Over the course of the next year, based on PERALTA’s representations, the investor provided PERALTA with more than $3.5 million.  Of that amount, none, or at most only a minimal amount, was spent on wholesale liquor purchases.  Rather, Investor-1’s money was used to pay back other investors; was used to pay for expenses such as restaurant bills and high-end clothing purchases; and was wired to PERALTA’s personal accounts and/or withdrawn in cash.  In or about June 2014, PERALTA provided Investor-1 with a document that purported to be on the letterhead of the Restaurant Supply Company indicating that the Restaurant Supply Company would be electronically transferring PERALTA $1,826,350 within seven days.  In truth and in fact, however, neither PERALTA nor West 125th Street Liquors has ever been a supplier to the Restaurant Supply Company.   

*                *                *

PERALTA, 36, of the Bronx, New York, has been charged with one count of wire fraud, which carries a maximum term of 20 years in prison.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the investigative work of the FBI and the NYPD Internal Affairs Bureau, and noted that the investigation is continuing.  

This case is being handled by the Office’s Public Corruption Unit.  Assistant United States Attorneys Martin Bell, Russell Capone, and Kan M. Nawaday are in charge of the prosecution.

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

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