Southern District of New York

            Preet Bharara, the United States Attorney for the Southern District of New York, announced that CHARLES A. BENNETT pled guilty in Manhattan federal court today to an Indictment charging him with securities and wire fraud in connection with a scheme to defraud over 30 investors of more than $5 million over the course of more than five years.  Among other false and misleading statements, BENNETT lied to investors by claiming to have exclusive access to a highly successful privately held investment fund in which he would purportedly invest the investors’ money.  BENNETT solicited millions of dollars from over 30 investors, including his close friends and family members, but never actually invested any of the money in the investment fund or any other investment vehicle.  Instead, BENNETT used the investors’ money for his own personal benefit and to pay back other investors.  BENNETT was arrested on December 12, 2014, and pled guilty today before United States District Judge Laura Taylor Swain.

            U.S. Attorney Preet Bharara said: “As he admitted today, Charles Bennett spun an elaborate web of lies and ensnared dozens of investors, including his own friends and family.  Bennett, a former corporate attorney, solicited millions of dollars from investors, issuing fake promissory notes and account statements, but actually just spent all of the money on his personal expenses.  He now awaits sentencing for his fraudulent investment scheme.”

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

            From 2008 through November 2014, BENNETT, a former corporate lawyer at a law firm based in New York City, engaged in a multimillion-dollar Ponzi scheme, during which he solicited money from investors based on materially false and misleading representations.  Specifically, BENNETT told the investors that he himself had invested money in a highly successful privately held investment fund, and that, should they choose to invest, the investors’ money would be held in BENNETT’s account.  BENNETT communicated by email and telephone with many of the investors in order to tell them about the purported status of their investments, including their purported returns.  BENNETT also led most of the investors to believe that they were the only individuals to whom he had extended the offer to invest with him.

            BENNETT created false and misleading paperwork in furtherance of the scheme, including “promissory notes” that he provided to the investors as a record of the amounts of money they had given to BENNETT to invest.  BENNETT also provided certain investors with account statements that purported to show the amount that BENNETT (and the investors, through BENNETT) had invested.  In fact, BENNETT never invested any of the investors’ money in the investment fund or in any other investment vehicle, but instead spent the money on his own personal expenses and to repay other investors.

            During the course of the fraudulent scheme, BENNETT solicited more than $5 million from more than 30 investors.

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            BENNETT, 57, formerly of Manhattan, now living in Minnesota, pled guilty to one count of securities fraud and one count of wire fraud.  The securities fraud count and the wire fraud count each carry a maximum sentence of 20 years in prison; and the charges carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  BENNETT is scheduled to be sentenced by Judge Swain on March 17, 2016.

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

            The case was 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 Amy Lester is in charge of the prosecution.  

Preet Bharara, the United States Attorney for the Southern District of New York, announced today the unsealing of an indictment charging TRAVELL THOMAS, the co-owner, chief executive officer, and president of a Buffalo, New York-based debt collection company (the “Company”), MAURICE SESSUM, a co-owner and chief operating officer of the Company, ANTHONY BRZEZOWSKI, the Company’s director of operations, three Company managers – JIMMY STOKES, HEATHER GASTA, and TACOBY THOMAS – and five Company debt collectors – ANTHONY CABA, COLUMBUS SIMMONS, CHARLES STARKS, WILLIAM CLARK, and MICHAEL CALLANDRA – with wire fraud and conspiracy to commit wire fraud in connection with a nationwide debt collection scheme that took in more than $31 million from thousands of victims across the United States.  As alleged, the defendants tried to trick and coerce victims into making payments to the Company by making false threats and telling a host of lies, including that the Company was a law office and that warrants would be issued for the victims’ arrests if they failed to repay debts.  Each of the individual defendants was arrested this morning and will be presented later today in federal court in Buffalo.

Also unsealed today were the guilty pleas of four Company employees – MARK LAVIN JOHN SALATINO, JESSICA MANN, and JENNIFER SHERK – for their participation in the fraudulent scheme.  LAVIN, SALATINO, MANN, and SHERK each pled guilty pursuant to an information before U.S. District Judge Katherine Polk Failla.

Manhattan U.S. Attorney Preet Bharara said:  “As alleged, the defendants engaged in what is believed to be the largest fraudulent debt collection scheme ever to be prosecuted, falsely threatening arrest and prosecution of countless Americans, including those who suffered from disabilities.  The defendants charged today allegedly took ruthless advantage of the desperate situation in which their victims found themselves, using threats and lies to coerce payment and even trying to collect more money than the victims ever owed.  Thanks to the tireless work of the criminal investigators in our office, those involved in this massive debt collection scheme will no longer be able to prey on vulnerable Americans burdened by debt.”

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

Between 2010 and February 2015, the defendants routinely attempted to trick and coerce thousands of victims throughout the United States into paying millions of dollars in consumer debts through a variety of false statements and false threats.  The defendants, using a variety of aliases, falsely told victims, among other things, that: (1) the Company was affiliated with local government and law enforcement agencies, including the “county” and the district attorney’s office; (2) the consumers had committed criminal acts, such as “wire fraud” or “check fraud,” and if they did not pay the debt immediately, warrants or other process would be issued, at which point they would be arrested or haled into court; (3) the victims would have their driver’s licenses suspended if they did not pay their debts immediately; (4) the Company was a law firm or mediation firm and that the Company’s employees were working with lawyers, a law firm, mediators, or arbitrators; and (5) a civil lawsuit would be filed, or was pending, against the victims for failing to pay their debts.

Employees of the Company at times prepared and sent correspondence to victims that made it falsely appear that the Company was affiliated with the government or courts.  The defendants also routinely used legal-sounding terminology to invent legitimate-sounding but bogus explanations for the supposed criminal or legal action that had been or would be initiated against the victims for failure to repay purported debts, including that the victim had “breached a contractual agreement,” committed “theft of goods and services,” and engaged in “malicious intent to defraud a financial institution.”  The defendants used these quasi-legal terms to frighten and coerce victims into paying actual or purported debts.

As a further part of the scheme, the defendants lied to victims by falsely inflating the balances of the debts so that they could collect more money from the victims than the victims actually owed, a practice known within the Company as “juicing” balances.

In total, from about January 2010 through November 2014, the Company collected more than approximately $31 million from thousands of victims across the United States.  Of the money that the Company took in from victims, approximately $850,000 in cash was paid to SESSUM, approximately $750,000 in cash was paid to TRAVELL THOMAS, approximately $1.4 million was cashed from banks and ATMs, and tens of thousands of dollars was used to pay for TRAVELL THOMAS’s gambling expenses, tickets for professional sports games, TRAVELL THOMAS’s wedding reception, jewelry, and cosmetic surgery for his wife, among other expenses.

Collection Scripts

The defendants disseminated to Company employees and used collection “scripts” to solicit consumers by phone.  The scripts contained various misrepresentations designed to trick victims into paying purported debts.  For example, the scripts falsely stated, among other things: “In the next 48 hours we will be handing the matter over to our fraud department who will work together with your local district attorneys [sic] office in attempting to resolve the matter”; the collector was calling “from [the] law firm of Global Management Group”; the collector was a “claims associate calling on behalf of the legal processing firm” who would “file with our affiliate litigator in _____ county, to serve you to appear to plea”; and the consumers’ voice was being recorded on a “federally recorded line” for use “as admissible evidence.”

In about May 2015, following a federal criminal investigation of the Company, TRAVELL THOMAS instructed a former employee of the Company not to show Company scripts “to anyone” because they “weren’t legal.”

The Defendants’ Lies

The defendants made a variety of misrepresentations to victims across the country over the phone, and directed that those misrepresentations be made, including as follows:

• As a part of the scheme, TRAVELL THOMAS and SESSUM, the owners and officers of the Company, at times instructed employees of the Company to make misrepresentations to victims, including to “juice” balances, in order to trick them into paying debts.

• BRZEZOWSKI misrepresented to victims, including to a victim who stated that she was physically disabled and unable to work, that he was an attorney and an “associate with the firm” and was calling from an attorney’s office and would “handle their legals for free.”  BRZEZOWSKI also instructed collectors on his team to falsely introduce him to victims on calls as an attorney in an effort to “close” a debt repayment.

• STOKES misrepresented to victims that he would have a bench warrant issued for their arrest, would contact the “county” to initiate legal proceedings, and was not calling from a collection agency.

• GASTA misrepresented to victims, including to a victim who stated that she was homeless, among other things, that “we are directly linked in with the court system,” her office had been “retained” regarding “bad check charges,” GASTA was working with attorneys, and the victims’ failure to repay the debt was a “federal issue.”

• TACOBY THOMAS misrepresented to victims that he was a “process server” from “U.S. Couriers” with “legal documents” to serve to victims, that victims had committed “check fraud,” and that TACOBY THOMAS was calling from an “arbitration firm.”

• CABA misrepresented to victims, including to the mother of a consumer undergoing dialysis for kidney failure, that he was a “legal investigator” calling from a law firm, the Company was not a collection agency, and victims had committed check fraud.

• SIMMONS misrepresented to victims that they had committed a felony by failing to repay debts and would face charges for “theft of services” and fraud, that their driver’s licenses would be suspended, and that SIMMONS would refer the matter to his “attorney network.”

• STARKS misrepresented to victims that they had committed a “federal offense” by failing to repay debt, that charges would be “press[ed],” victims were “under investigation for check fraud,” and that STARKS was working with attorneys.

• CLARK misrepresented to victims that he was “lead investigator” with a law office that has been retained by a particular company that issues payday loans (the “Payday Loan Company”) to bring an action for fraud and theft of goods and services, victims had committed fraud, including “social security fraud,” and victims would be served with process at their “home or place of employment” within 72 hours.

• CALLANDRA misrepresented to victims that they had committed fraud, including wire fraud under Title 18, United States Code, Section 1343, that CALLANDRA was “in contact with the magistrate,” and that “they’re en route right now . . . within 46 minutes they’ll be there to serve you.”

• CABA, SIMMONS, CLARK, and STARKS were members of the Company’s so-called “elite team,” which used particularly aggressive and egregious tactics in attempting to trick consumers into paying debts.

In November 2012, the Payday Loan Company advised TRAVELL THOMAS that it had learned that employees of the Company were making improper threats and misrepresentations in order to collect debts purportedly owed to the Payday Loan Company and falsely indicating to consumers that the Company was providing collection services on behalf of the Payday Loan Company.  The Payday Loan Company issued a letter to TRAVELL THOMAS directing him to cease and desist using the Payday Loan Company’s name in collecting debt.  TRAVELL THOMAS refused, and employees of the Company continued to attempt to collect debts purportedly on behalf of the Payday Loan Company.

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TRAVELL THOMAS, 37, of Orchard Park, New York; SESSUM, 39, of Buffalo; BRZEZOWSKI, 49, of Buffalo; STOKES, 38, of Buffalo; GASTA, 41, of Buffalo; TACOBY THOMAS, 32, of Buffalo; CABA, 25, of Buffalo; SIMMONS, 46, of Buffalo; STARKS, 32, of Buffalo; CLARK, 30, of Buffalo; and CALLANDRA, 31, of Angola, New York, are each charged with one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison, and one count of wire fraud, which carries a maximum sentence of 20 years in prison.  LAVIN, 45, of Buffalo; SALATINO, 34, of Amherst, New York; MANN, 30, of Dunkirk, New York; and SHERK, 27, of Buffalo, each pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison, and one count of wire fraud, which carries a maximum sentence of 20 years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Bharara praised the investigative work of the Criminal Investigators at the United States Attorney’s Office.  He also thanked the Federal Trade Commission (“FTC”) for referring this case to this Office and the U.S. Marshals Service, Western District Regional Fugitive Task Force for their assistance.  Mr. Bharara noted that the investigation remains ongoing.

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.

If you wish to report a crime by another debt collector, you may contact the FTC at 1-877-FTC-HELP.  For guidance on coping with debt, and information about dealing with debt collection companies in particular, go to http://www.consumer.ftc.gov/articles/0149-debt-collection.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Edward A. Imperatore and Jordan L. Estes are in charge of the prosecution.

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

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

            Preet Bharara, United States Attorney for the Southern District of New York, Andriana Vamvakas, the New York District Director of the Department of Labor’s Office of Labor-Management Standards  (“DOL-OLMS”), and Jeffrey G. Hughes, Special Agent-in-Charge of the Northeast Field Office of the U.S. Department of Veterans Affairs, Office of the Inspector General (“VA OIG”), announced the indictment of WILLIAM DAVIS, a former president of the American Federation of Government Employees (“AFGE”) Local 1119 (the “Union”), for making at least $120,000 in unauthorized debit card charges and cash withdrawals from the Local’s bank account.  The Indictment charges DAVIS with one count of wire fraud and two counts of false statements in forms submitted to the DOL-OLMS.  DAVIS voluntarily surrendered to federal authorities yesterday morning, and was presented yesterday afternoon in White Plains federal court before United States Magistrate Judge Lisa Margaret Smith.

            According to the allegations in the Indictment[1]:

            The AFGE is a national labor union that represents approximately 670,000 workers employed by the federal government across all agencies and departments.  The Union is a local union chapter of AFGE that represents approximately 300 employees of the Veterans Affairs Medical Center-Montrose (the “Hospital”), and maintains offices on the Hospital’s campus in Montrose, New York.  At all times relevant to the Indictment, the Union maintained a checking account (the “Union Bank Account”) for Union funds, including members’ dues payments.

            From at least January 2008 through in or about October 2012, DAVIS served as the elected president of the Local.  As the president, it was DAVIS’s duty to preside over the Union’s meetings and conduct the day-to-day affairs of the Union.  During that time period, DAVIS used a debit card for the Union Bank Account (the “Union Debit Card”) issued to a deceased former Union officer to make hundreds of charges and cash withdrawals for non-Union expenses and without the authorization of the Union.  For example, DAVIS used the Union Debit Card at stores and online retailers including Apple, Best Buy, Wal-Mart, and Radio Shack, purchasing items for his personal benefit including electronics, music downloads, video games, cellphones, men’s clothing, gasoline, and cigarettes.  DAVIS purchased money orders using the Union Debit Card which totaled at least $30,000 from the United States Post Office in Montrose, New York.  On several occasions, DAVIS paid for rent for his residence using the money orders he purchased with the Union Debit Card.  DAVIS also used the Union Debit Card to make over 900 cash withdrawals from ATM machines in the Southern District of New York and elsewhere, in the process incurring thousands of dollars of ATM fees and fees for insufficient funds.  Between January 2008 and June 2012, the unauthorized purchases and cash withdrawals that DAVIS made with the Union Debit Card totaled in excess of $120,000.

            In order to conceal his misuse and theft of Union funds, DAVIS also made false statements and omissions in annual DOL-OLMS reports for the fiscal years 2008, 2009, 2010, and 2011, reporting a total of only $7,000 in allowances and disbursements to himself as president.

*              *             *

            DAVIS, 56, of Wappingers Falls, New York, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison, and two counts of false statements, which each carry a maximum sentence of five years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

            Mr. Bharara thanked and praised the DOL and the VA OIG for their work in this investigation.

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

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

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

            “Today, this Office will move to dismiss charges against Michael Steinberg, who was previously convicted at trial, and six cooperating witnesses who pled guilty, all in connection with the same insider trading scheme charged in United States v. Newman and Chiasson.  The decision to dismiss these charges follows the Second Circuit’s Newman decision, and also reflects determinations, after careful consideration of all of our prior insider trading prosecutions, that insisting on maintaining guilty pleas in these cases would not be in the interests of justice.  These prosecutions were all undertaken in good faith reliance on what this Office and others, including able defense counsel for all those who pled guilty, understood to be the well-settled law before Newman.”

Manhattan U.S. Attorney Preet Bharara issued the following statement today in connection with the approval of the settlement agreement among the parties in Nunez v. City of New York:

 “Today, the Court approved the landmark Rikers Island agreement.  With the agreement now formally in place, the City can move quickly toward long overdue reforms at Rikers Island.  This agreement establishes a detailed and comprehensive framework to reduce violence in the jails and to keep inmates and correction officers safe.  For too long, a culture of violence has prevailed at Rikers Island, denying those within its walls the protections of the Constitution, rights to which all in this country, including prison inmates, are entitled.  Through this agreement, we will remain vigilant in ensuring that reform at Rikers Island is enduring and enforceable.”

Principal Deputy Assistant Attorney General Vanita Gupta, Head of the Civil Rights Division, issued the following statement today:

“The Rikers Island agreement approved by the Court today should serve as a model for the country.  DOJ's Civil Rights Division is committed to protecting youth from unconstitutional conditions of confinement, in both the juvenile and criminal justice systems, and this agreement furthers that commitment.  Given the history of operations and the culture of excessive use of force at Rikers Island that we found, the remedies in the agreement approved today in court are not only appropriate, but essential to ensuring we can provide key protections for the complicated, and often underserved, population of youth in the criminal justice system.”

Preet Bharara, United States Attorney for the Southern District of New York, and John P. Carlin, Assistant Attorney General for the National Security Division, announced that HAROON ASWAT was sentenced today by U.S. District Court Judge Katherine B. Forrest to 20 years in prison for terrorism offenses relating to ASWAT’s efforts to establish a terrorist training camp in the United States.  ASWAT was extradited to the United States from the United Kingdom on October 21, 2014.  ASWAT pled guilty on March 30, 2015, to one count of conspiring to provide material support to al Qaeda, and one count of providing material support to al Qaeda.

Manhattan U.S. Attorney Preet Bharara said: “Haroon Aswat, with his co-conspirators, sought to establish a terrorist training camp on American soil, and traveled to Afghanistan to receive training from al Qaeda.  Arrested abroad in 2005, Aswat fought extradition for nearly 10 years, but faced with overwhelming evidence against him, pled guilty in Manhattan federal court to providing material support to al Qaeda shortly after arriving here.  Aswat’s conviction and the sentence imposed today – along with the other recent terrorism prosecutions by this Office, including of Sulaiman Abu Ghayth, Abu Hamza, and Khaled al Fawwaz – serve as further proof that justice in international terrorism cases continues to be delivered in American civilian courts.”

Assistant Attorney General for National Security John P. Carlin said: “Haroon Aswat provided material support to al Qaeda and plotted to establish a terrorist training camp on American soil.  Aswat was arrested more than 10 years ago, and his sentence is the result of the tireless and persistent efforts of law enforcement to hold accountable all those who wish to harm the United States, whether at home or abroad, no matter how long it takes.”

According to the allegations contained in the Indictment, statements made at related court proceedings including today’s sentencing, court fillings, and evidence presented at prior trials:

In late 1999, ASWAT, along with co-defendants Mustafa Kamel Mustafa, a/k/a “Abu Hamza” (“Abu Hamza”), Ouassama Kassir, and Earnest James Ujaama, attempted to establish a terrorist training camp in the United States to support al Qaeda, which has been designated by the United States Secretary of State as a foreign terrorist organization.  ASWAT conspired with Abu Hamza, Kassir, and Ujaama to establish the terrorist training camp on a rural parcel of property located in Bly, Oregon.  The purpose of the Bly, Oregon, camp was for Muslims to receive various types of training – including military-style jihad training – in preparation to fight jihad in Afghanistan.  As used by the conspirators in this case, the term “jihad” meant defending Islam against purported enemies through violence and armed aggression, including, if necessary, by using murder to rid Muslim holy lands of non-believers in Islam.

In a letter faxed from Ujaama, in the United States, to Abu Hamza, in the United Kingdom, the property in Bly was described as a place that “looks just like Afghanistan,” and the letter noted that the men at Bly were “stock-piling weapons and ammunition.”  In late 1999, after transmission of the faxed letter, Abu Hamza directed ASWAT and Kassir, both of whom resided in London, England, and attended Abu Hamza’s mosque there, to travel to Oregon to assist in establishing the camp.  On November 26, 1999, ASWAT and Kassir arrived in New York, and then traveled to Bly.

ASWAT and Kassir traveled to Bly for the purpose of training men to fight jihad.  Kassir told witnesses that he supported Usama bin Laden and al Qaeda, and that he had previously received jihad training in Pakistan.  Kassir also possessed a compact disc that contained instructions on how to make bombs and poisons.  After leaving Bly, ASWAT and Kassir traveled to Seattle, Washington, where they resided at a mosque for approximately two months. While in Seattle, Kassir, in ASWAT’s presence, provided men from the mosque with additional terrorist training lessons – including instructions on different types of weapons, how to construct a homemade silencer for a firearm, how to assemble and disassemble an AK-47, and how an AK-47 could be altered to be fully automatic and to launch a grenade.  On another occasion, with ASWAT sitting by his side, Kassir announced to the men in Seattle that he had come to the United States for martyrdom and to destroy, and he informed his audience that some of them could die or get hurt.

ASWAT subsequently linked up with al Qaeda, and received training at al Qaeda’s al Faruq training camp in Afghanistan, which was al Qaeda’s primary training camp and where recruits were trained in topics that included military tactics, weapons, and explosives.  ASWAT remained in Afghanistan after the terrorist attacks of September 11, 2001, and after the United States invaded Afghanistan.  A ledger recovered in September 2002 from an al Qaeda safe house in Karachi, Pakistan, listed a number of individuals associated with al Qaeda, including ASWAT.  The al Qaeda safe house was used by Khalid Sheikh Mohammed, al Qaeda’s chief operational planner and the alleged planner of the terrorist attacks of September 11, 2001.

At the time of ASWAT’s arrest in Zambia in 2005, he had with him a computer that contained, among other things:  (1) a book on survival skills in the event of a nuclear, biological, or chemical weapon detonation; (2) the “Anarchist Cookbook,” which contained instructions on how to make bombs and hack into computers; (3) a hand-to-hand combat instruction manual, which noted that its purpose was to “teach you how you can kill another person with your own two hands;” (4) the “Close Combat Textbook;” and (5) the “Big Book of Mischief,” which also contained detailed and extensive instructions on how to make explosives.

*                           *                          *

ASWAT, 41, was convicted of one count of conspiracy to provide material support to al Qaeda, and one count of providing material support to al Qaeda.  In addition to the term of imprisonment, Judge Forrest imposed a $200 special assessment.  Judge Forrest also ordered that ASWAT be removed from the United States to the United Kingdom following the completion of his sentence.

Abu Hamza and Kassir were previously convicted for their roles in attempting to establish a terrorist training camp in the United States.  On May 12, 2009, after a four-week jury trial in the Southern District of New York, Kassir was found guilty of charges relating to his efforts to establish the terrorist training camp in Bly, and his operation of several terrorist websites.  On September 15, 2009, U.S. District Judge John F. Keenan sentenced Kassir to life in prison.

On May 19, 2014, after a four-week jury trial in the Southern District of New York, Abu Hamza was found guilty of charges relating to his role in the conspiracy to establish the terrorist training camp in Bly, as well as his role in a hostage-taking in Yemen in 1998 that resulted in four deaths, and his support of violent jihad in Afghanistan in 2000 and 2001.  On January 9, 2015, Judge Forrest sentenced Abu Hamza to life in prison.

Mr. Bharara praised the outstanding efforts of the Federal Bureau of Investigation’s Manhattan-based Joint Terrorism Task Force – which principally consists of agents of the FBI and detectives of the New York City Police Department, and includes officers of numerous federal, state, and local law enforcement agencies – the United States Marshals Service, and the Metropolitan Police Department of London, England.  Mr. Bharara also thanked the U.S. Department of Justice’s National Security Division and 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 John P. Cronan, Ian McGinley, Shane T. Stansbury, and Edward Y. Kim are in charge of the prosecution.

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”), and William J. Bratton, the Commissioner of the Police Department for the City of New York (“NYPD”), announced the arrest today of the owner of a retail smoke shop called Liquid Glass in Nyack, New York, that is alleged to have sold smokeable synthetic cannabinoids (“SSC”).  The owner, ANDREW GROGAN, allegedly sold or conspired to sell at least 39 packets of SSCs over a one-year period, resulting in at least one overdose.  GROGAN was arrested this morning and was presented before U.S. Magistrate Judge Judith C. McCarthy this afternoon in White Plains federal court. 

Manhattan U.S. Attorney Preet Bharara said:  “As I emphasized when we announced New York City’s largest joint federal and local action confronting these drugs a month ago, synthetic cannabinoids are a public health crisis that is reaching epidemic proportions.  Smoking it is a dangerous game of Russian Roulette that too many in our communities are playing.  These drugs aggravate all manner of other societal ills: they are entering prisons, preying on the homeless; burdening our emergency rooms; fueling addiction; exacerbating mental health problems; and increasing risks to cops who have to deal with people high on it.  Today’s arrest is part of our ongoing commitment to confront this serious public health problem.”

DEA Special Agent in Charge James J. Hunt said:  “To make it simple, synthetic cannabinoids (K2) have become one of the most significant threats to public health because it is cheap and because it is misconceived as being safe.  K2 is second only to marijuana as the most frequently used illegal drug among high school seniors, and has resulted in a dramatic increase of emergency room visits and overdose deaths.  K2 is nothing more than poisonous products wrapped in candy wrappers and sold on the street as safe highs.  DEA and our law enforcement partners are prioritizing efforts to identify those responsible for distributing synthetic cannabinoids throughout our communities.” 

NYPD Commissioner Bratton said:  “Synthetic cannabinoids, more commonly known as K2, can be incredibly dangerous and pose a significant risk to both the public and the emergency responders who come into contact with them.  I want to thank the investigators involved in this case whose hard work held accountable this individual’s alleged effort to sell K2.”

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

Starting in January 2015 and continuing until his arrest, GROGAN sold SSCs, with brand names like “Green Giant” and “Geeked Up,” from his smoke shop in Nyack, New York.  GROGAN mentioned to undercover law enforcement that he had a supplier of SSCs from whom he could either pick up products after store hours or receive products by mail.  On at least one occasion, GROGAN traveled to New York, New York, to purchase 10 packets of SSCs from another smoke shop.

GROGAN also stated to undercover law enforcement that he was “all out” of the SSC “Green Giant” because there had been a festival in Nyack that had “kids lined up outside the door” to buy the products.

The SSCs distributed by GROGAN caused one known overdose:  On January 10, 2015, an individual overdosed after consuming a mixture of four packets of SSCs labeled “Tranquility,” “Meditate,” “Karma,” and “Dream Catcher.”  Medical reports concluded that the overdose resulted from cannabinoid consumption.  Friends of the victim obtained the SSCs from GROGAN’s smoke shop in Nyack.

SSCs are made by mixing illegal synthetic compounds with chemical solvents, including acetone and/or flavoring additives, and spraying the resulting liquid mixture onto leafy materials, like tea leaves.  The SSCs are then bundled into colorful retail packets that are sold under names such as “Green Giant” and “Geeked Up,” each containing between approximately three and six grams of product, and sometimes marked “not for human consumption” or “potpourri.”

SSCs are widely accessible because they are inexpensive and commonly sold at otherwise legitimate retail locations, like GROGAN’s Liquid Glass.  The colorful logos used on the SSC retail packets and the flavors used, such as lime, strawberry, and blueberry, make SSCs attractive to teenagers and young adults.  Physical effects of SSCs include agitation, rapid heart rate, confusion, dizziness, nausea and vomiting, paranoia, panic attacks, and acute kidney injury.  In addition, SSCs have inconsistent potencies, often containing more than one synthetic compound, and are sometimes laced with other toxic chemicals.  Nationally, calls to poison centers in the United States related to SSC use between January and May 2015 increased 229% over the same period in 2014.

Some of the brand names of SSCs sold by GROGAN, like “Geeked Up” and “Green Giant,” were also alleged to have been used by the 10-member international narcotics conspiracy charged by this office by Indictment on September 16, 2015.  This Complaint marks a continuation of the major law enforcement action against SSC manufacturers and distributors announced via press release following that Indictment.

* * *

GROGAN, 48, of Nyack, New York, is charged with one count of conspiring to distribute a controlled substance, and one count of distributing a controlled substance, each of which carries a maximum sentence of 20 years in prison.  The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentence will be determined by the judge.

U.S. Attorney Preet Bharara thanked the Drug Enforcement Administration’s Tactical Diversion Squad (Group TDS-NY) comprised of agents and officers from the U.S. Drug Enforcement Administration (DEA), the New York City Police Department, the New York State Police, Town of Orangetown Police Department, and the Westchester County Police Department in conjunction with Rockland County Drug Task Force and South Nyack Police Department for their work in the year-long investigation, which he noted is ongoing.

The case is being prosecuted by the Office’s White Plains Division.  Assistant U.S. Attorney Jennifer L. Beidel is in charge of the prosecution.

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ANTONIO OLMEDA of New York, New York, was sentenced today by U.S. District Court Judge Richard M. Berman to 151 months in prison.  OLMEDA pled guilty on October 14, 2014, to all six counts charged in the Indictment against him:  three counts of being a convicted felon in possession of various firearms, two counts of possessing unregistered machine guns, and one count of possessing an unregistered short-barreled shotgun.  OLMEDA was arrested in December 2011 on state charges in connection with his alleged attempt to shoot two police officers with the New York City Police Department (“NYPD”).

U.S. Attorney Bharara stated:  “Antonio Olmeda, a one-man armory, was a convicted felon in possession of a vast cache of deadly weapons.  He violated federal law by possessing guns at all, and even had he not been a convicted felon, he violated federal law by failing to register certain of the weapons.  As is alleged in the pending state prosecution of Olmeda for attempted murder, he was not merely a hoarder of weapons, he used them with deadly intentions, shooting at two uniformed police officers.  His sentence today reflects the seriousness of his crimes.”

According to the Indictment filed in federal court, other documents filed in federal court, statements made at various proceedings in this case, and evidence presented at a two-day sentencing hearing:

On December 2, 2011, OLMEDA, who at the time was wearing a disguise, was approached by two uniformed NYPD officers in Queens, New York.  The officers asked OLMEDA to remove his hands from his pockets, which OLMEDA refused to do.  When one of the officers attempted to restrain OLMEDA, OLMEDA resisted, pulled a revolver out of his pocket, and fired two shots at the officers, missing the officers.  OLMEDA then fled the scene.  Bullet fragments from the gun that OLMEDA fired were later found at a nearby pediatric dental office.

In the morning of December 19, 2011, law enforcement officers approached OLMEDA in Manhattan and arrested him for the shooting on December 2, 2011.  At the time of this arrest, the officers recovered from OLMEDA’s person a .45 caliber handgun, and from OLMEDA’s car a .38 caliber revolver with two live rounds of ammunition and three spent .38 caliber shell casings.  Subsequent ballistics testing confirmed that this .38 caliber revolver was the same firearm that OLMEDA fired on December 2, 2011.  OLMEDA’s possession of the .38 caliber revolver was the subject of an evidentiary hearing before Judge Berman in connection with OLMEDA’s sentencing in this case.  Judge Berman concluded that “[t]here is no doubt . . . that by firing the gun at [the two NYPD police officers] Mr. Olmeda intended to cause serious injury to those officers.”

In connection with OLMEDA’s arrest on December 19, 2011, officers also recovered from OLMEDA’s car a document containing the names of two attorneys and a federal judge.  One of the attorneys had previously represented OLMEDA in a prior case, and had an office in close proximity to the location where OLMEDA, wearing a disguise and carrying the .38 caliber revolver, had been approached by officers.  Another attorney on the document had previously represented one of Olmeda’s former lawyers in a civil lawsuit brought by OLMEDA.  The federal judge on the document had presided over, and dismissed, the lawsuit.  Also found in OLMEDA’s car was a copy of a last will and testament in OLMEDA’s name.  OLMEDA previously had purchased a lot at a cemetery and commissioned the engraving of a tombstone in his name.          

Later on December 19, 2011, law enforcement officers conducted a search of OLMEDA’s apartment in Manhattan.  This search resulted in the recovery of a number of additional firearms, including a .223 caliber fully automatic rifle, a 9-mm fully automatic pistol, and two other pistols.  

On September 6, 2012, law enforcement officers searched OLMEDA’s storage locker in Yonkers, New York.  The officers found inside the storage locker, among other things, a sawed-off shotgun, two sniper rifles with scopes, two machine guns, at least eight pistols, a revolver, and numerous rounds of ammunition.  Officers also found a lifelike mask that could be used to disguise one’s face and various protective gear, including bulletproof vests and gas masks.

In total, in or about 2011, OLMEDA illegally possessed the following firearms:

• Springfield Armory Ultra Compact .45-caliber semi-automatic handgun
• Taurus 85 Ultralite .38 caliber revolver
• Olympic Arms PCR03 .223 caliber fully-automatic rifle
• Smith & Wesson .40 caliber semi-automatic pistol
• Beretta 92SB Compact 9-mm Luger semi-automatic pistol
• Cobray Industries M-11 9-mm Luger fully automatic pistol
• Remington model Mohawk 600 .308 caliber rifle
• Roggio Arsenal model RA-15 rifle receiver/frame
• Interarms rifle
• Three Springfield Armory model 1911A1 .45-caliber pistols
• Sig Sauer model SP 2022 9-mm pistol
• Taurus model PT140 Millenium .40 caliber pistol
• Smith & Wesson model 4006 .40 caliber pistol
• Star Bonifacio Echeverria model Firestar 9-mm pistol
• Charter Arms model Police Undercover .32 caliber revolver
• Walther model PPK/S .380 caliber pistol
• Vulcan Arms model V15 7.62x39-mm machine gun
• Norinco AK-type 7.62x39-mm machine gun
• Mossberg model 500A 12-gauge shotgun
• A .45 caliber semi-automatic pistol of unknown make and model

OLMEDA has two prior felony convictions.  First, in November 1995, OLMEDA was convicted in Bronx County Supreme Court of criminal possession of a dangerous weapon in the first degree.  At the time of his arrest on that charge, OLMEDA possessed an Uzi machine gun, a sawed-off shotgun, a silencer, and several boxes of ammunition for the Uzi.  A search of OLMEDA’s van on the same day uncovered a flamethrower, 18 pipe bombs, seven cans containing black powder, and 1,100 rounds of ammunition.

Second, in April 2003, OLMEDA was convicted in the United States District Court for the Eastern District of North Carolina of possessing ammunition after having previously been convicted of a felony.  On June 12, 2002, OLMEDA, who was in possession of luggage, was approached by law enforcement officers outside of the Fort Bragg military installation in North Carolina after inquiring about the security at Fort Bragg.  A search of OLMEDA’s luggage resulted in the recovery of 328 rounds of ammunition and receipts for ammunition purchased earlier that day.

*                *                *

OLMEDA, 57, was convicted of three counts of being a convicted felon in possession of various firearms, in violation of 18 U.S.C. § 922(g)(1); two counts of possessing unregistered machine guns, in violation of 18 U.S.C. §§ 5845(b), 5861(d); and one count of possessing an unregistered short-barreled shotgun, in violation of 18 U.S.C. §§ 5845(a)(2), 5861(d).  In addition to the 151-month prison term, OLMEDA was sentenced by Judge Berman to three years of supervised release and ordered to pay a $600 special assessment.

OLMEDA is separately charged by the state in Queens County, New York, with two counts of attempted murder in the first degree, two counts of attempted assault on a police officer with a deadly weapon, one count of criminal possession of a weapon in the second degree, and two counts of attempted assault in the first degree, all arising out of his alleged attempt to shoot two NYPD police officers in Queens, New York, on or about December 2, 2011.  The state charges are merely accusations, and OLMEDA is presumed innocent of those state charges unless and until proven guilty.

Mr. Bharara praised the outstanding efforts of the Joint Terrorism Task Force – which principally consists of agents from the Federal Bureau of Investigation and detectives from the NYPD; the United States Bureau of Alcohol, Tobacco, Firearms and Explosives; and the United States Marshals Service.  Mr. Bharara also thanked the NYPD and the Yonkers Police Department for their assistance.

The case is being handled jointly by the Office’s Terrorism and International Narcotics Unit and Violent and Organized Crime Unit.  Assistant U.S. Attorneys Shane T. Stansbury, Michael D. Maimin, and John P. Cronan are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that CATHERINE MORALES, a member of a drug trafficking organization (the “Organization”) that operated in the Bronx, was sentenced to 45 years in prison for murdering Aisha Morales (no relation) in June 2011.  MORALES pled guilty in February 2015 to one count of intentionally killing an individual while engaged in a narcotics conspiracy, before United States District Judge Richard J. Sullivan, who imposed yesterday’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “Catherine Morales, someone featured on ‘America’s Most Wanted,’ not only sold dangerous and potentially lethal drugs, but also committed a cold-blooded murder in broad daylight on East 163th Street in the Bronx.  She has now been sentenced to the lengthy prison term those crimes merit.”

MORALES was initially charged in an Indictment with narcotics trafficking and firearms offenses, and was arrested by federal authorities in August 2013 in Philadelphia, Pennsylvania, where she was living in hiding under an assumed name.  While MORALES was a fugitive, she was featured on the “America’s Most Wanted” television program.  She was subsequently brought to Manhattan federal court in September 2013 to face those charges in the Southern District of New York.  In January 2014, she was additionally charged with the murder of Aisha Morales in a superseding Indictment.  The leader of the organization, Adony Nina, was later charged with the murder in a superseding Indictment filed in April 2014.  Nina and co-defendant Candido Antomattei, another high-ranking member of the Organization, were convicted of narcotics trafficking and firearms charges following a trial in October 2013; Nina was subsequently convicted of participating in the Aisha Morales murder in a trial in May 2015.  Thirteen other members of the Organization have pled guilty to various federal narcotics and firearms charges.

According to the publicly filed documents, evidence presented at the trials in this case, and statements made in court throughout the pendency of the case:

From 2008 through 2013, the Organization’s members sold crack cocaine and heroin, among other drugs, primarily in the vicinity of Longwood Avenue, and Beck, Kelly, and Simpson Streets in the Bronx.  MORALES was involved primarily in the sale of heroin in the vicinity of Simpson and East 163rd Streets.

During and in relation to MORALES’s participation in the drug trafficking conspiracy, MORALES fatally shot victim Aisha Morales, who was 21 at the time of her death, in the head.  The shooting took place in the vicinity of 1018 East 163rd Street, in broad daylight.  Prior to the murder, MORALES and other members of the Organization threatened rival drug dealers who were selling drugs in the Organization’s territory.  In one instance, MORALES threatened a rival that he needed to “get down or lay down.”  The murder was the culmination of the dispute with the rival drug dealers.  Aisha Morales was not involved in the drug-dealing activities that led to the dispute.         

*               *                 *

In addition to the prison term, MORALES, 30, of the Bronx, New York, was sentenced to five years of supervised release and ordered to pay restitution.  Nina is scheduled to be sentenced in January 2016.  

Mr. Bharara praised the outstanding investigative work of the Bureau of Alcohol, Tobacco, Firearms and Explosives and the New York City Police Department.

The prosecution is being handled by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Christopher DiMase, Rebecca Mermelstein, Margaret Graham, and Sarah Krissoff are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, Glenn Sorge, the Acting Special Agent in Charge for U.S. Immigration and Customs Enforcement’s (“ICE”), Homeland Security Investigations (“HSI”), and Robert E. Perez, the Director of New York Field Operations for U. S. Customs and Border Protection (“CBP”), announced charges today against two individuals for conspiring to traffic in millions of dollars’ worth of counterfeit goods.  Defendants LE FU CHEN, a/k/a “Tom Chen,” a/k/a “Danny Chen,” and HAI FAN HUANG, a/k/a “Cindy Huang,” are charged with importing counterfeit goods from China into the United States with the intent to distribute and sell the counterfeit products to retailers in Manhattan and elsewhere.  The defendants were arrested and presented before U.S. Magistrate Judge Kevin Nathaniel Fox today.

Manhattan U.S. Attorney Preet Bharara said:  “I would like to thank our partners, Homeland Security Investigations, U.S. Customs and Border Protection, and the New York City Police Department, for their outstanding investigative efforts and assistance in uncovering this alleged counterfeiting conspiracy.”         

ICE HSI Acting Special Agent-in-Charge Glenn Sorge said:  “This couple allegedly conspired to profit from the sale of knock offs.  Fake products that infringe on business owners’ intellectual property rights cost jobs and hurts the U.S. economy.  Today’s arrests and seizures embody HSI and its law enforcement partners’ commitment to disrupt the importation and sale of counterfeit goods.”

CBP Director of New York Field Operations Robert E. Perez said:  “This is the second example in recent weeks where an air cargo seizure by U.S. Customs and Border Protection led to a full investigation resulting in the takedown of an elaborate criminal enterprise.  It is through our interagency partnerships, and collaborative approaches like the one leading to today’s arrests, that law enforcement successfully combats modern criminal organizations.”

According to the allegations in the Complaint[1]:

From at least in or about November 2014 up to and including in or about October 2015, CHEN and HUANG, who are husband and wife, imported counterfeit luxury and designer brand goods into the United States from China.  CHEN and HUANG stored the imported counterfeit goods in multiple storage units and business suites across New York with the intent to transfer the goods to retailers in Manhattan and elsewhere.

On October 15, 2015, pursuant to court-authorized search warrants, federal law enforcement agents conducted searches of CHEN and HUANG’s storage units, business suites, and residence, and found over 130,000 pieces of luxury and designer brand counterfeit goods, including watches and jewelry.  The estimated loss attributable to the defendants’ efforts amounts to millions of dollars.

CHEN, 40, and HUANG, 36, of Roslyn Heights, New York, are each charged with one count of conspiring to traffic in counterfeit goods, and one count of trafficking in counterfeit goods.  Each defendant faces a maximum potential sentence of 20 years in prison.

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

Mr. Bharara praised the outstanding investigative work of the U.S. Department of Homeland Security, Homeland Security Investigations, and U.S. Customs and Border Protection.  He also thanked the New York Police Department for its assistance.

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

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

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

            Preet Bharara, the United States Attorney for the Southern District of New York, and Caroline Ciraolo, Acting Assistant Attorney General of the Justice Department's Tax Division, announced today that MICHAEL J. MITROW, Jr. (“MITROW”), the former CEO and President  of a pharmaceutical marketing company (the “Marketing Agency”), was sentenced to three-and-a-half years in prison for participating in a scheme to defraud the Marketing Agency in which MITROW obtained over $2 million in fraud and kickback proceeds, and for willfully failing to report that unlawful income to the Internal Revenue Service (“IRS”).  MITROW pled guilty in January 2015 before U.S. District Judge Paul A. Engelmayer, who also imposed today’s sentence.

            Manhattan U.S. Attorney Preet Bharara said: “Michael Mitrow defrauded the marketing agency that he led as its CEO out of over $1 million, using it to pay personal expenses including $600,000 to fly in private jets.  His fraud and his failure to report the proceeds as income resulted in a federal conviction for Mitrow.  At his sentencing today, he learned that the price of his crimes is not only repayment of the ill-gotten money but also the loss of his liberty.”

            Acting Assistant Attorney General Caroline Ciraolo said: “Corporate officers who engage in fraud and kickback schemes and fail to report their illegal gains are defrauding their employers and cheating honest taxpayers.  The sentence handed down today sends a strong message that these individuals will be held to account for committing offenses that were made possible by violating their fiduciary obligations.”

            According to the Indictment and Superseding Information previously filed in Manhattan federal court, other court filings, and statements made during the proceedings in this case:

            MITROW was the CEO and President of the Marketing Agency from 1998 through approximately 2009.  From approximately 2008 through 2009, MITROW defrauded the Marketing Agency by submitting fraudulent invoices for consulting services that were purportedly provided to the Marketing Agency but were, in fact, never provided.  Instead, Mitrow used the proceeds from those invoices to fund more than $600,000 in private jet travel. MITROW further defrauded the Marketing Company by causing it to pay $415,000 that was ultimately provided to a relative of MITROW and his co-defendant and brother, Matthew Mitrow, despite the representations made by the Mitrows to a private equity firm that acquired the company that the relative had severed all ties to the company.  In addition, MITROW willfully failed to report to the IRS his income from the fraudulent consulting invoices, which exceeded $600,000; $1.4 million in kickback payments he received from Creative Press and East Coast Vending, printing and direct mail marketing companies owned by co-defendant Robert Madison and located in Phoenix, in order to help grow the business through additional  printing and direct mailing contracts for Creative Press with his company; and more than $200,000 in personal purchases that Mitrow made with his corporate credit card and fraudulently coded as business expenses of the company.

*                *                *

            MITROW, 48, of Whitehouse Station, New Jersey, pled guilty to one count of conspiracy to commit wire fraud and one count of tax evasion.  In addition to the prison term, MITROW was sentenced to three years of supervised release and 200 hours of community service in each of those years.  He was also ordered to pay restitution in the amount of $83,219 to the IRS and $1,468,259.43 to the Marketing Agency.

            Matthew Mitrow, 42, of Westfield, New Jersey, previously pled guilty to one count of filing a false tax return for the 2008 tax year, and was sentenced in July 2015 to three months in prison.  As part of his plea agreement with the Government, Matthew Mitrow paid restitution of $30,822 to the IRS.

            Robert Madison, 44, of Henderson, Nevada, pled guilty to one count of conspiracy to commit honest services fraud in the payment of undisclosed kickbacks to the Mitrow brothers, and was sentenced in May 2015 to 18 months in prison and 18 months of home confinement. As part of his plea agreement with the Government, Madison will be subject to an order of restitution in an amount to be determined by the Court.

           Mr. Bharara thanked the Internal Revenue Service - Criminal Investigations and the United States Postal Inspection Service for their outstanding investigative work in this case.  Mr. Bharara also thanked the U.S. Department of Justice’s Tax Division for its assistance.

            This case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorney Andrew Young and Department of Justice Tax Division Senior Litigation Counsel Nanette L. Davis are in charge of the prosecution.

The former CEO and president of a pharmaceutical marketing company was sentenced to three and one half years in prison for participating in a scheme to defraud the company in which he obtained more than $2 million in fraud and kickback proceeds, and for willfully failing to report that unlawful income to the Internal Revenue Service (IRS), announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Preet Bharara of the Southern District of New York. 

Michael J. Mitrow Jr., 48, of Whitehouse Station, New Jersey, was sentenced to serve 42 months in prison to be followed by three years of supervised release and 200 hours of community service in each of those years.  He was also ordered to pay $83,219 in restitution to the IRS and $1,468,259.43 to Access Communications.  In January 2015, Mitrow pleaded guilty to one count of conspiracy to commit wire fraud and one count of tax evasion before U.S. District Judge Paul A. Engelmayer of the Southern District of New York, who also imposed today’s sentence.

“Corporate officers who engage in fraud and kickback schemes and fail to report their illegal gains are defrauding their employers and cheating honest taxpayers,” said Acting Assistant Attorney General Ciraolo.  “The sentence handed down today sends a strong message that these individuals will be held to account for committing offenses that were made possible by violating their fiduciary obligations.”

“Michael Mitrow defrauded the marketing agency that he led as its CEO out of over $1 million, using it to pay personal expenses including $600,000 to fly in private jets,” said U.S. Attorney Bharara.  “His fraud and his failure to report the proceeds as income resulted in a federal conviction for Mitrow.  At his sentencing today, he learned that the price of his crimes is not only repayment of the ill-gotten money but also the loss of his liberty.”

According to the indictment and superseding information previously filed in Manhattan federal court, other court filings and statements made during the proceedings in this case:

Mitrow was the CEO and president of the company from 1998 through approximately 2009.  From approximately 2008 through 2009, Mitrow defrauded the company by submitting fraudulent invoices for consulting services that were purportedly provided to the company but were, in fact, never provided.  Instead, Mitrow used the proceeds from those invoices to fund more than $600,000 in private jet travel.  Mitrow further defrauded the company by causing it to pay $415,000 in payments by the company to a relative of Mitrow and his co-defendant and brother, Matthew Mitrow, despite the representations made by the Mitrows to a private equity firm that acquired the company that the relative had severed all ties to the company. In addition, Mitrow willfully failed to report to the IRS his income from the fraudulent consulting invoices, which exceeded $600,000; $1.4 million in kickback payments he received from Creative Press and East Coast Vending, printing and direct mail marketing companies owned by co-defendant Robert Madison and located in Phoenix, in order to help grow the business through additional  printing and direct mailing contracts for Creative Press with his company; and more than $200,000 in personal purchases that Mitrow made with his corporate credit card and fraudulently coded as business expenses of the company. 

Matthew Mitrow, 42, of Westfield, New Jersey, previously pleaded guilty to one count of filing a false tax return for the 2008 tax year, and was sentenced in July 2015 to serve three months in prison.  As part of his plea agreement with the government, Matthew Mitrow paid $30,822 in restitution to the IRS. 

Robert Madison, 44, of Henderson, Nevada, pleaded guilty to one count of conspiracy to commit honest services fraud in the payment of undisclosed kickbacks to the Mitrow brothers, and was sentenced in May 2015 to serve 18 months in prison and 18 months of home confinement.  As part of his plea agreement with the government, Madison will be subject to an order of restitution in an amount to be determined by the court. 

Assistant Attorney General Ciraolo and U.S. Attorney Bharara thanked the IRS-Criminal Investigation and the U.S. Postal Inspection Service, who investigated this case, and Assistant U.S. Attorney Andrew Young of the Southern District of New York and Senior Litigation Counsel Nanette L. Davis of the Tax Division, who are prosecuting this case.  The U.S. Attorney’s Office of the Southern District of New York’s Complex Frauds and Cybercrime Unit is handling this case.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that RYAN TOMAZIN, the founder and managing partner of R2 Capital Group LLC (“R2 Capital”), was sentenced today in Manhattan federal court to six months in prison for crimes stemming from his defrauding investors and misappropriating investment funds.  Among other things, TOMAZIN lied to investors in an R2 Capital commodity pool by disseminating, or causing others to disseminate, documents containing false representations regarding how assets in the commodity pool would be managed, and falsely informed investors that their investments were increasing when, in fact, the value was declining.  Furthermore, TOMAZIN and other principals at R2 Capital caused over $850,000 of investors’ funds to be withdrawn from bank accounts associated with the commodity pool and directed to bank accounts held in their own names or those of their respective holding companies.  TOMAZIN, 35, of Stamford, Connecticut, pled guilty on July 30, 2015, and was sentenced today before United States District Judge Paul A. Crotty.

According to the Indictment and other statements made in open court:

In late 2009, R2 Capital created a commodity pool, R2 Capital Partners I L.P. (the “Commercial Pool”) and began to solicit investors, eventually raising approximately $2.2 million.  In early 2010, TOMAZIN solicited a potential investor in the Commercial Pool (“Investment Fund-1”) and provided Investment Fund-1 with documentation that stated, among other things, that R2 Capital would receive a management fee limited to 50% of the profits earned by the Commercial Pool.  Investment Fund-1 invested over $1 million in the Commercial Pool.  From June 2010 up to and including July 2011, the Commercial Pool experienced significant net losses.  In July 2011, all trading activity in the Commercial Pool ceased.  By August 2011, there was less than $5,000 remaining in bank accounts associated with the Commercial Pool.  Nonetheless, between August 2011 and March 2013, TOMAZIN caused false “Trading Statements” to be sent to Investment Fund-1 reflecting false purported monthly trading profits and inaccurate trade balances.  Furthermore, contrary to prior representations that R2 Capital’s management fee would be limited to 50% of profits earned, TOMAZIN and other principals at R2 Capital caused approximately $850,000 to be withdrawn from bank accounts associated with the Commercial Pool for their own personal benefit.

*                *                *

TOMAZIN was convicted of one count of securities fraud (Count One) and one count of commodities fraud (Count Two).  In addition to the prison term, TOMAZIN was sentenced to three years of supervised release and ordered to pay forfeiture and restitution to the victims of the offense in the amount of $288,000.

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 Aimee Hector and Harry A. Chernoff are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that AUSTIN ROMAIN, a former New York City Correction Officer, was sentenced in Manhattan federal court today to 41 months in prison for narcotics, bribery, and honest services fraud offenses arising from a scheme to smuggle drugs and other contraband into Rikers Island for inmates.  ROMAIN was convicted on December 12, 2014, following a four-day trial before the Honorable Robert W. Sweet, who imposed today’s sentence.                  

Manhattan U.S. Attorney Preet Bharara said: “The sentencing of Austin Romain marks the latest step in our efforts to root out unlawful conduct at Rikers Island, by individuals and by the institution as a whole.  Romain abused his position of authority as a corrections officer to become, in effect, a jailhouse drug dealer.  Corruption at New York prisons, whether by individual officers like Romain or by the corrections system more broadly, is unacceptable and remains a top priority of this Office.”

As alleged in the Superseding Indictment against ROMAIN and established by the evidence admitted at trial:

ROMAIN became a Correction Officer in 2007.  He was assigned to the George R. Vierno Center (GRVC) and later the Otis Bantum Correctional Center (OBCC) at Rikers Island.  On multiple occasions in 2012 and 2013, ROMAIN smuggled marijuana, tobacco, and other contraband into the GRVC and provided it to inmates housed in that facility, who in turn sold it to other inmates.  ROMAIN coordinated with the girlfriends of his inmate co-conspirators, who met with him to supply him with marijuana and to pay him for his smuggling activities.  ROMAIN accepted thousands of dollars in bribes for the packages that he smuggled in to the GRVC and OBCC.

*                *                *

ROMAIN, 33, of Brooklyn, New York, was convicted on one count of honest services fraud, one count of bribery, and one count of conspiring to distribute marijuana.

Mr. Bharara praised the outstanding investigative work of the Drug Enforcement Administration and the New York City Department of Investigation.

The prosecution is being handled by the Office’s Public Corruption Unit. Assistant United States Attorneys Russell Capone and Martin S. Bell are in charge of the prosecution.

            PREET BHARARA, the United States Attorney for the Southern District of New York announced that ZACHARY ZWERKO was sentenced today in Manhattan federal court to 37 months in prison for his participation in an insider trading scheme.  ZWERKO, who worked for a pharmaceutical company (the “Pharma Company”),  passed material, nonpublic information to a co-conspirator (“CC-1”) who then made profitable securities trades based on the information and reaped more than $700,000 in profits.  The information concerned potential and actual corporate transactions, including acquisitions.  ZWERKO was sentenced by U.S. District Judge Alvin K. Hellerstein.

            U.S. Attorney Preet Bharara said: “Zachary Zwerko’s attempts to circumvent the law and share inside information may have made him and his co-conspirator lots of money, but such criminal conduct has now come at the expense of his freedom.”

            According to the allegations contained in court documents previously filed in federal court, and statements made during the plea and sentencing proceedings of ZWERKO:

            From 2010 to 2014, ZWERKO engaged in an insider trading scheme involving trading around information related to the acquisitions of certain pharmaceutical companies.  ZWERKO, who was a senior finance analyst in the financial evaluation and analysis group of the Pharma Company, passed material, non-public information related to potential acquisitions to CC-1.  As part of his employment, ZWERKO performed work in connection with numerous potential and actual corporate transactions, including acquisitions.  ZWERKO also had access to a computer directory maintained by the Pharma Company that contained material, non-public information related to potential acquisitions by the Pharma Company.

            ZWERKO on multiple occasions passed to CC-1 material, non-public information related to future acquisitions by the Pharma Company, including the identities of companies that were in negotiations with the Pharma Company for potential acquisitions (the “Target Companies”).  ZWERKO and CC-1 at times communicated with each other via disposable cellphone to disguise their communications.  CC-1 then traded in the securities of the Target Companies.  The Target Companies were subsequently acquired, in one instance by the Pharma Company, and the prices of the shares of the Target Companies increased after the acquisitions were announced publicly.  CC-1 then exited CC-1’s positions in the shares of the Target Companies, thereby profiting from the movement in stock price.  From this illegal trading, CC-1 reaped trading profits of at least $737,000.  CC-1 gave ZWERKO approximately $57,000 in cash, from CC-1’s illegal proceeds, as part of ZWERKO’s share of the scheme’s profits.

                                                *                      *                      *

            ZWERKO, 33, of Cambridge, Massachusetts, pled guilty on February, 19, 2015, to one count of conspiracy to commit securities fraud and three counts of securities fraud.  In addition to his prison term, ZWERKO was sentenced to three years of supervised release, and was ordered to pay a fine of $50,000, a special assessment of $400, and forfeiture in the amount of $644,314.

            Mr. Bharara praised the investigative work of the Federal Bureau of Investigation.  He also thanked the U.S. Securities and Exchange Commission.

            The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it’s 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 Jessica Masella and Edward Kim are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, Melvin F. Williams, Jr., General Counsel of the U.S. Small Business Administration (“SBA”), Peggy E. Gustafson, SBA Inspector General, and Craig W. Rupert, Special Agent in Charge of the Northeast Field Office of the Defense Criminal Investigative Service (“DCIS”), announced today that the United States has filed, and simultaneously settled, a civil fraud lawsuit against UFC AEROSPACE LLC (“UFC”) and DOUGLAS B. DAVIS, the former president of UFC, for engaging in fraudulent conduct in violation of the Small Business Act, 15 U.S.C. § 632(n), in order to secure numerous lucrative defense subcontracts with government contractors.  As alleged in the amended complaint-in-intervention, UFC falsely certified to government contractors that UFC was a woman-owned small business (“WOSB”) when UFC at no point met either requirement for WOSB status under the Small Business Act.  Specifically, no women were majority owners of UFC or managed or controlled UFC’s management and daily business operations.  UFC made these misrepresentations, as the amended complaint-in-intervention alleges, because it believed that WOSB status provided a competitive advantage in obtaining contracts that it knew were funded by the United States government, and the government contractors in turn made representations to the government regarding its WOSB hiring.  In the settlement, approved in Manhattan federal court by U.S. District Judge William H. Pauley III, UFC and DAVIS admitted and accepted responsibility for the fact that UFC never qualified for WOSB credit under the Small Business Act and will pay the Government $20,015,956.92.

Manhattan U.S. Attorney Preet Bharara said:  “The Small Business Act serves the important purpose of increasing legitimate participation by woman-owned businesses, and when business owners engage in fraud that undermines this purpose, they need to be held to account.  I want to thank the SBA Office of General Counsel, the SBA Office of Inspector General, the Defense Criminal Investigative Service, and the Procurement Fraud Division of the Air Force Materiel Command Law Office for their invaluable work on this case.”

SBA General Counsel Melvin F. Williams, Jr., said: “This case represents the cooperative effort of SBA’s Offices of the General Counsel and the Inspector General and the Department of Justice to uncover and remedy fraud in our procurement programs.  Uncovering and pursuing fraud cases is one of SBA’s highest priorities.”

SBA Inspector General Peggy E. Gustafson said: “This settlement sends an important message that falsely certifying a company’s status as a Woman Owned Small Business is unacceptable and bears a significant consequence.  We will continue to aggressively pursue parties that wrongfully obtain both prime and subcontracting opportunities for small businesses that are legitimately owned and controlled by women.  I want to thank the U.S. Department of Justice for its dedication to reaching a settlement in this case.”

DCIS Special Agent in Charge Craig W. Rupert said: “This settlement is evidence of the continuing efforts of the Defense Criminal Investigative Service and our law enforcement partners to assure integrity within the Defense procurement process.  The Department of Defense relies on numerous certifications from our contractors and any fraud in this process has a serious impact throughout this industry.  DCIS will continue to aggressively pursue allegations of fraud and corruption harmful to U.S. taxpayers and the Department.”       

The following allegations are based on the amended complaint-in-intervention filed Monday in Manhattan Federal court:

The Small Business Act, which provides that it is the policy of the United States that small businesses owned and controlled by women should have the “maximum practicable opportunity to participate in the performance of [federal] contracts,” defines a “woman owned small business” (“WOSB”) to mean that women own 51% of the company and “the management and daily business operations of the business are controlled” by women.  15 U.S.C. §§ 637(d)(1), 632(n).  Prime contractors that obtain federal funds are required to negotiate with the procuring authority a subcontracting plan setting forth, among other things, what percentage of the work will be given to WOSBs, and the Comprehensive Subcontracting Plan Group of the Defense Contract Management Agency is responsible for ensuring that Government defense contractors meet all of the requirements for hiring small businesses, including WOSBs.

UFC began claiming WOSB status at least beginning in late 2001, by representing to contractors UFC knew were doing work with the federal government that it was a WOSB.  UFC falsely relied on the purported ownership interest of the wives of the actual owners, John Davis and DOUGLAS DAVIS, to make these representations.  UFC continued to represent that it was a WOSB at various times until 2011, and earned millions of dollars on the contracts procured with those representations.  UFC did so because it understood that this status mattered both to the contractors and to the Government, and it believed that it was obtaining a competitive advantage by claiming to be a WOSB.  However, at no time during the entire time period from 2001 to 2011 did UFC ever qualify under the Small Business Act as a WOSB.  The only ownership interest that the wives of John and DOUGLAS DAVIS had in UFC was through trusts that were entirely controlled by John and DOUGLAS DAVIS, and under which the women were entitled to a maximum of only 5% of the trusts’ assets.  Moreover, neither woman controlled or managed the company at any time.  In fact, neither woman had company email accounts, attended management meetings, or spent regular time in the office during the relevant time period.

In the stipulation of settlement with the Government, defendant DOUGLAS DAVIS admitted, acknowledged, and accepted responsibility for the following:  From 2001 to 2011, he was the President of UFC and controlled the management and business operations of UFC, and UFC certified that it was a WOSB to contractors UFC knew were conducting millions of dollars of business with the United States in order to obtain a competitive advantage with those contractors.  At no time during the relevant period did UFC actually meet either of the statutory requirements for claiming WOSB status.

Defendant UFC admitted, acknowledged, and accepted responsibility for the fact that at various times between the years 2001 and 2011 inclusive, UFC certified that it was a WOSB to contractors that were conducting millions of dollars of business with the United States in order to obtain a competitive advantage with these contractors, even though at no point did UFC meet the statutory requirements for claiming WOSB status.

Mr. Bharara praised the SBA Office of General Counsel, the SBA Office of Inspector General, the Defense Criminal Investigative Service, and the Procurement Fraud Division of the Air Force Materiel Command Law Office for their invaluable work on this case.                                

The case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorneys Ellen London and Mara E. Trager are in charge 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 that MATTHEW TIVY was arrested in Manhattan today and charged in a criminal complaint with two counts stemming from his sexual exploitation and enticement of a minor and his receipt and distribution of child pornography.

Manhattan U.S. Attorney Preet Bharara said:  “As alleged, Matthew Tivy took advantage of a minor for his own sexual gratification, even when he knew the minor was only in high school.  He then allegedly shared the video he recorded of his encounter with others.  Tivy allegedly targeted and exploited vulnerable and innocent children, and for that, he will now face the criminal consequences.  I want to thank the FBI and the Manhattan District Attorney’s Office for its collaboration in this investigation.”

FBI Assistant Director-in-Charge Diego Rodriquez said:  “As alleged, Tivy used a dating app to meet minors, even acknowledging their age on text messages after they met.  He then allegedly shared the sexually explicit videos of the minors with others through internet sharing communities.  This case would not be possible without the outstanding collaboration between the FBI and the Office of Manhattan’s District Attorney Cyrus R. Vance, Jr.  The FBI will continue to investigate and bring to justice those who sexually exploit our children.”

According to the Complaint[1]:

From December 2014, TIVY initiated online communications with a fourteen- or fifteen-year-old boy (“Victim-1”), and enticed Victim-1 to engage in illegal sexual activity.  The Complaint further alleges that TIVY engaged in sexual acts with Victim-1, enticed Victim-1 to engage in sexually explicit conduct for the purpose of producing a visual depiction of such conduct, and then distributed these visual depictions to others online.

*          *          *

TIVY, 53, of Manhattan, New York, is charged with one count of enticing a minor to engage in sexually explicit conduct for the purpose of producing a visual depiction of such conduct, which carries a maximum penalty of 30 years in prison.  TIVY is also charged with one count of receipt and distribution of child pornography, which 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.

There may be more victims of this alleged conduct; if you have information report, call the FBI at 212-384-1000 or https://tips.fbi.gov/.

Mr. Bharara praised the efforts of the FBI in this investigation.  He added that the investigation is continuing.  He also thanked the Manhattan District Attorney’s Office for its participation and support in this ongoing investigation.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorney Jilan Kamal 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, announced today that DENNIS SICA was sentenced today in White Plains federal court to 35 years in prison for participating in a conspiracy to distribute heroin and fentanyl, the use of which resulted in the deaths of three individuals: Anthony Delello, Laura Brown, and Thomas Miller.  SICA was sentenced by United States District Judge Cathy Seibel.

U.S. Attorney Preet Bharara stated:  “Sica chose again and again, to sell lethal heroin laced with fentanyl for profit, even after realizing that his ‘Breaking Bad’ branded drugs were killing people.  No sentence is going to bring back the three young people whose lives were cut short, but this prosecution hopefully brings some closure to their loved ones and causes others who peddle the poison of fentanyl-laced heroin not to make the same terrible choices Sica made.”

According to the allegations contained in the Indictment, the underlying criminal Complaint unsealed on June 19, 2014, and statements made during court proceedings:

From at least late 2013 to February 2014, SICA and others worked together in Dutchess County to sell a particularly potent form of heroin, bags of which were stamped with the brand name ‘Breaking Bad.’  At least some of the heroin distributed by SICA was laced with fentanyl, a synthetic opioid that is significantly stronger than street heroin.

On the night of December 28, 2013, SICA sold ‘Breaking Bad’ heroin to Anthony Delello, a 20-year-old resident of Beekman, New York.  Delello snorted some of SICA’s heroin and was found dead by his girlfriend the following day.  The Dutchess County Medical Examiner’s report concluded that he died from “acute heroin intoxication.”

Delello’s death did not stop SICA from selling ‘Breaking Bad’ heroin.  Four days after Delello was found dead, SICA exchanged a series of text messages with a co-conspirator in which SICA urged the co-conspirator to delete the text message history in the phone they used to sell heroin and, if asked, to deny knowing anything about Delello or the manner of his death.

Slightly more than a month after Delello’s death, two more individuals died after overdosing on ‘Breaking Bad’ heroin.  On February 1, 2014, Thomas Miller, 31, was found dead by his mother at his home in Pawling, New York.  A hypodermic needle, as well as several glassine bags stamped with the words ‘Breaking Bad,’ were found near his body.  Some of the glassine bags were full, others were empty.  A chemical analysis of the contents of the full glassine bags showed that they contained a mixture of quinine, fentanyl, and heroin.  The medical examiner’s report indicates that Miller died of “acute intoxication by the combined effects of heroin and fentanyl.”

The same day that Miller was found dead, Laura Brown, 35, was found dead of an apparent heroin overdose in New Milford, Connecticut.  Brown was found with needles and glassine bags near her body.  Several of the glassine bags were stamped with the words ‘Breaking Bad.’  The autopsy performed on Brown’s body showed that she died of “acute heroin and fentanyl intoxication.”  According to Brown’s brother, he and Brown together bought ‘Breaking Bad’ heroin from SICA two days before Brown was found dead.

On February 2, 2014, SICA was arrested by state authorities in East Fishkill, New York, after a car in which he was riding was stopped by law enforcement.  During a subsequent search of the car, law enforcement officers recovered several glassine bags stamped with a ‘Breaking Bad’ stamp identical to the one that appears on the envelopes recovered from Thomas Miller’s bedroom.

*                      *                      *

SICA, 37, of Hopewell Junction, New York, pled guilty to one count of conspiracy to distribute heroin and fentanyl resulting in death.  In addition to the sentence of 35 years in prison, SICA was also sentenced to four years supervised release.

Mr. Bharara praised the outstanding investigative work of the Drug Enforcement Administration’s (“DEA”) Tactical Diversion Squad and the Dutchess County Drug Task Force.  The DEA’s Tactical Diversion Squad is comprised of agents and officers from the DEA, the New York City Police Department, the New York State Police, Town of Orangetown Police Department, and the Westchester County Police Department.  The Dutchess County Drug Task Force is composed of the City of Poughkeepsie Police Department, the Town of Poughkeepsie Police Department, the East Fishkill Police Department, and the Dutchess County Sheriff’s Office.  Mr. Bharara also thanked the New York State Police Forensics Unit, the Dutchess County District Attorney’s Office, the Dutchess County Sheriff’s Office, and the police department for the City of New Milford, Connecticut, for their assistance in the investigation.

The prosecution is being handled by the Office’s White Plains Division.  Assistant U.S. Attorneys Scott Hartman and Benjamin Allee are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and Mark Hamlet, the Special Agent in Charge of the Special Operations Division of the United States Drug Enforcement Administration (“DEA”), announced today that Honduran bankers JAIME ROLANDO ROSENTHAL OLIVA, YANI BENJAMIN ROSENTHAL HIDALGO, YANKEL ROSENTHAL COELLO, and ANDRES ACOSTA GARCIA were charged in connection with a multi-year scheme to launder the proceeds of narcotics trafficking offenses and foreign bribery offenses through accounts located in the United States.  ROSENTHAL COELLO was arrested last night in Miami, Florida, and will appear this afternoon before United States Magistrate Judge Chris M. McAliley in Miami federal court.  The remaining three defendants are at large.

Manhattan U.S. Attorney Preet Bharara said:  “As alleged, Yankel Rosenthal Coello and his co-defendants used the banking system and their businesses to launder proceeds of narcotics trafficked to the U.S.  Thanks to the outstanding investigative work of the DEA, these alleged criminals now face U.S. charges.”

In a separate action today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) designated ROSENTHAL OLIVA, ROSENTHAL HIDALGO, and ROSENTHAL COELLO as Specially Designated Narcotics Traffickers pursuant to the Foreign Narcotics Kingpin Designation Act (“Kingpin Act”) for playing a significant role in international narcotics trafficking.  OFAC also designated several of the businesses associated with the defendants as Specially Designated Nationals under the Kingpin Act, including Inversiones Continental (Panama), S.A. de C.V., known as Grupo Continental, the parent company of a conglomerate of businesses in Honduras involved in banking, financial services, real estate, agriculture, construction, tourism, and media; Grupo Continental’s agricultural arm, Empacadora Continental S.A de C.V. (now known as Alimentos Continental); Inversiones Continental, S.A. (a.k.a. Grupo Financiero Continental); and the Honduran bank Banco Continental S.A.

According to the allegations in the Indictment,[1] which was previously unsealed in Manhattan federal court, the defendants conspired with others from 2004 through September 2015 to commit money laundering offenses in violation of Title 18, United States Code, Sections 1956 and 1957.  Specifically, the Indictment charges the defendants with conspiring to conduct financial transactions occurring in whole or in part in the United States and involving the proceeds of (i) narcotics offenses and (ii) offenses against a foreign nation involving bribery of public officials and the misappropriation, theft, or embezzlement of public funds.

ROSENTHAL COELLO, 46, ROSENTHAL OLIVA, 79, ROSENTHAL HIDALGO, 50, and ACOSTA GARCIA, 40, all of Honduras, are each charged with one count of money laundering, which carries a maximum penalty 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 sentence will be determined by a judge.

Mr. Bharara praised the outstanding investigative work of the DEA’s Special Operations Division, New York Strike Force, and New York Task Force.  Mr. Bharara also thanked the U.S. Department of Justice’s Office of International Affairs, OFAC, the U.S. Attorney’s Office for the Southern District of Florida, and the United States Department of the Treasury’s Financial Crimes Enforcement Network for their ongoing assistance.

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

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

[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth 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, Delano A. Reid, Special Agent in Charge of the New York Division of the United States Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), and William J. Bratton, the Commissioner of the New York City Police Department (“NYPD”), announced today the arrest of two individuals charged with firearms trafficking in the Bronx, New York, and one individual charged with firearms trafficking, narcotics distribution, and possession of a firearm during a narcotics offense.  The defendants will be presented later today before the Honorable James C. Francis, IV, United States Magistrate Judge.          

            Manhattan U.S. Attorney Preet Bharara said: “As alleged, these defendants brought more than 50 guns into New York so that they could sell them on the streets of the Bronx.   Together with our law enforcement partners, we will continue to work to rid our neighborhoods of illegal guns.”

            ATF Special Agent-in-Charge Delano A. Reid, stated: “In these especially chaotic times, with firearm related violence pervasive in our society, I am extremely pleased to see that the assigned investigators and prosecutors have remained focused in their pursuit of these alleged firearms traffickers who mistakenly thought they could wreak havoc on the streets of this great city by selling weapons for their own financial gain. Now, as defendants, they will begin to appreciate the depravity of their conduct and will know that law enforcement will leave no stone unturned in the interdiction of interstate firearms trafficking.”          

            Police Commissioner William J. Bratton said: “The NYPD remains committed to saving lives by stopping the distribution of illegal firearms.  We continue bringing traffickers to justice who, by providing easy access to firearms, play a significant role in perpetrating gun violence. As alleged, these individuals engaged in a trafficking operation in which they sold numerous firearms in the Bronx, to the detriment of the safety and welfare of everyone. Thankfully, NYPD investigators and our law enforcement partners dismantled the operation, and this flow of firearms has been shut down.”

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

            From at least in or about December 2014 through in or about September 2015, PAUL BARRY, ANTHONY ROMAN, and TIANA WILLIAMS, the defendants, conspired to and did purchase firearms in Ohio for the purpose of illegally reselling the firearms in the Bronx, New York.  During the course of the conspiracy, law enforcement officers conducted controlled purchases of over 50 firearms, including a semi-automatic assault rifle, and over 1,000 rounds of ammunition from the defendants.  In addition, in or about August and September 2015, law enforcement officers conducted controlled purchases of ethylone, commonly referred to as “Molly,” from ROMAN.

            BARRY, 31, of West Carrollton, Ohio, ROMAN, 37, of the Bronx, New York, and WILLIAMS, 24, of the Bronx, New York, are each charged with one count of one count of firearms trafficking, which carries a maximum sentence of 10 years in prison, and one count of conspiracy to traffic in firearms, which carries a maximum sentence of five years in prison.  ROMAN is also charged with one count of interstate transportation and receipt of firearms, which carries a maximum sentence of five years in prison; narcotics possession with intent to distribute, which carries a maximum sentence of 20 years in prison; and one count of firearm possession in furtherance of a narcotics offense, which carries a mandatory minimum sentence of five years in prison and a maximum sentence of life in prison.  The maximum potential sentences 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 ATF and the NYPD.  He also thanked the Bronx County District Attorney’s Office for its participation and support in this ongoing investigation.

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

            The charges contained in the criminal 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, Helen R. Kanovsky, General Counsel of the U.S. Department of Housing and Urban Development (“HUD”), and Christy Goldsmith Romero, Special Inspector General for the Troubled Asset Relief Program (“SIGTARP”), announced today an $85 million settlement with FIFTH THIRD BANCORP and its subsidiaries (“FTB” or the “Bank”) resolving civil fraud claims arising from FTB’s origination of residential mortgage loans insured by the Federal Housing Administration (“FHA”).  FTB made a voluntary disclosure 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 approved yesterday by United States District Judge Deborah A. Batts, FTB will pay approximately $85 million to cover federal losses on approximately 500 of the loans that defaulted and for which HUD paid insurance claims, and indemnify HUD for all losses HUD may incur on approximately 900 defective loans that have 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 has also reformed its business practices and terminated the employment of responsible employees.

Manhattan U.S. Attorney Preet Bharara said:  “Federal insurers rely on banks when they promise that the mortgage loans they originate are eligible for that insurance.  When banks discover that some of the loans are lemons and that their promises of quality were false, as Fifth Third Bank did, they must come forward and report it promptly, so that taxpayers don’t get stuck with the bill.  With this settlement, Fifth Third Bancorp has admitted to originating about 1,400 materially defective loans that were not eligible to be FHA insured and has taken positive steps to reform its quality control program, including terminating the employees responsible.”

HUD General Counsel Helen R. Kanovsky said: “Lenders have a responsibility to notify us when they discover material defects in the FHA-insured loans they originate.  We will continue to protect FHA’s insurance fund and to ensure borrowers have access to affordable and sustainable mortgage financing.”

SIGTARP Special Inspector General Christy Goldsmith Romero said: “Before and during the time Fifth Third was bailed out in TARP, its Quality Control employees made false representations to HUD that residential mortgages the bank originated were of the quality required to be insured by HUD.  The bank’s false representations cost HUD millions of dollars to pay insurance claims on 519 of the materially defective loans that later defaulted.  Fifth Third’s actions to fire those employees, voluntarily disclose its violations of the False Claims Act and FIRREA to law enforcement, and make corporate changes should stand as an example for others who violated the law.  SIGTARP will root out violations of the law related to TARP with our law enforcement partners such as U.S. Attorney Preet Bharara.  It is always better to disclose those violations rather than wait for SIGTARP to find them‎.”

As set forth in the settlement agreement:

HUD offers various mortgage insurance programs through which it insures approved lenders against losses on mortgage loans made to buyers of single-family housing, including FHA’s Direct Endorsement Lender program, which authorizes private-sector mortgage lenders (“Direct Endorsement Lenders”) to underwrite mortgage loans, decide whether the borrower represents an acceptable credit risk for HUD, and certify loans for FHA mortgage insurance without prior HUD review or approval.

Because HUD relies on Direct Endorsement Lenders to determine which loans should be endorsed for FHA insurance, it requires that Direct Endorsement Lenders conduct adequate due diligence on loans before certifying them for FHA insurance.  Direct Endorsement Lenders are also required to maintain an adequate quality control program, which includes self-reporting to HUD in writing within 60 days of initial discovery any loans identified during quality reviews that are affected by serious deficiencies, patterns of non-compliance, or fraud.

Direct Endorsement Lenders make a number of certifications to HUD, including annual certifications and individual loan certifications.  In the annual certification, the Direct Endorsement Lender represents that it conforms to all HUD-FHA regulations necessary to maintain its HUD-FHA approval, and among the basic requirements necessary to maintain such approval is the implementation of a compliant quality control program, including timely self-reporting to HUD any loans affected by serious deficiencies, patterns of non-compliance, or fraud.  In the individual loan certification, the Direct Endorsement Lender represents that each mortgage is eligible for FHA mortgage insurance.

FTB is an Ohio-chartered bank headquartered in Cincinnati, Ohio.  FTB has been a Direct Endorsement Lender since at least 2003 and has submitted both annual and individual loan certifications to HUD.

In 2012, FTB made a voluntary disclosure to the Government of certain residential mortgage loans that FTB had originated and certified to HUD as eligible for FHA insurance, but had later found, through post-closing quality reviews, were in fact materially defective and not eligible for FHA insurance.  In 2014, FTB made a supplemental voluntary disclosure to the Government identifying additional materially defective mortgage loans that FTB had failed to self-report to HUD.  FTB voluntarily disclosed to the Government a total of 1,439 materially defective loans originated from 2003 through 2013.  HUD paid insurance claims on 519 of those loans after they defaulted, and no insurance claims have been submitted to HUD for 920 of the loans.

As part of the settlement, the Bank will pay $84,911,018 to resolve liability under the False Claims Act and the Financial Institutions Reform, Recovery and Enforcement Act arising from the 519 loans for which HUD paid insurance claims.  FTB will indemnify HUD for all losses HUD may incur on the 914 loans that have not defaulted.  The Bank will also make an administrative payment to HUD of $2,044,000 as part of a separate indemnification agreement with HUD.

FTB admitted, acknowledged, and accepted responsibility for its self-reporting violations, including that:

• FTB was required to self-report to HUD any serious deficiencies, patterns of non-compliance, or fraud within 60 days of the initial discovery;
• FTB made annual certifications to HUD that it conformed to all HUD-FHA regulations necessary to maintain its HUD-FHA approval, which included the implementation of a mandatory quality control program by which FTB reported to HUD all serious deficiencies, patterns of non-compliance, or fraud;
• From 2003 through 2013, FTB’s quality control program identified through post-closing reviews 1,436 residential mortgage loans that FTB had originated and certified to HUD as eligible for FHA insurance that were materially defective and thus ineligible for FHA insurance; and
• FTB failed timely to self-report these materially defective loans to HUD pursuant to HUD requirements.

FTB has taken steps to reform its quality control program, including terminating the employment of personnel responsible for FTB’s failure to self-report materially defective loans to HUD.

This matter arose, in part, from the filing of a whistleblower complaint under the False Claims Act.FTB made its voluntary disclosure to the Government without knowledge of the whistleblower complaint filed under seal or the Government’s investigation of that complaint.The Government intervened in the whistleblower lawsuit and entered into this settlement resolving the case.

The case has been handled by the Office's Civil Frauds Unit.  Assistant U.S. Attorney Pierre G. Armand is 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 Thomas E. Bishop, Acting Special Agent in Charge of the New York Field Office of the Internal Revenue Service-Criminal Investigation (“IRS-CI”), announced today that former United Nations (“UN”) Ambassador for Antigua and Barbuda (“Antigua”) and President of the UN General Assembly (“UNGA”) JOHN W. ASHE, Deputy UN Ambassador for the Dominican Republic FRANCIS LORENZO, NG LAP SENG, a/k/a “David NG” (“NG”), JEFF C. YIN, a/k/a “Yin Chuan,” SHIWEI YAN, a/k/a “Sheri YAN,” and HEIDI HONG PIAO, a/k/a “Heidi Park,” were charged in connection with a multi-year scheme to pay more than $1.3 million in bribes to ASHE in exchange for official actions in his capacity as UNGA President and Antiguan government official in support of Chinese business interests.  LORENZO, NG, YIN, YAN, and PIAO are charged with multiple bribery-related counts.  ASHE is charged with tax fraud for failure to report or pay income taxes on the over $1 million he received in bribes in 2013 and 2014.  YAN and PIAO are also charged with laundering bribery money from China.  ASHE was arrested in Dobbs Ferry, New York, and LORENZO, YAN, and PIAO were arrested in New York, New York, this morning, and are scheduled to appear before U.S. Magistrate Judge James C. Francis IV in Manhattan federal court later today.  NG and YIN were previously arrested on September 19, 2015, based on a separate complaint alleging that NG and YIN agreed to make false statements to Customs and Border Protection officers about the true purpose of approximately $4.5 million in cash that NG and YIN had brought into the U.S. from China since 2013. 

U.S. Attorney Preet Bharara said: “If proven, today’s charges will confirm that the cancer of corruption that plagues too many local and state governments infects the United Nations as well.  As alleged, for Rolexes, bespoke suits, and a private basketball court, John Ashe, the 68th President of the UN General Assembly, sold himself and the global institution he led.  United in greed, the defendants allegedly formed a corrupt alliance of business and government, converting the UN into a platform for profit.  We will continue to do everything we can to root out public corruption – whether we find it in a city council, in Albany, or as here, in the United Nations.”

FBI Assistant Director-In-Charge Diego Rodriguez said: “The charges announced today are sending a message to those who come to the United States from other countries with corruption plans or bags full of cash - no one is above or beyond the law. Investigating public corruption remains a top priority for the FBI.”     

IRS-CI Acting Special Agent-in-Charge Bishop said: “IRS-Criminal Investigation is committed to ensuring that everyone pays their fair share of taxes, regardless of an individual’s position, wealth or prominence.  Everyone is expected to report all of their income, even if the income comes from an illegal source, including bribes.  We are always ready to partner with the United States Attorney’s and the FBI on investigations involving allegations of misuse of positions of public trust and their impact on tax compliance.”

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

Since approximately 2011, ASHE has been soliciting and accepting bribes from various businesspeople in China seeking to influence the actions of the UN and officials in ASHE’s home country of Antigua.  ASHE solicited and took the bribes at the time when he served as UN Ambassador for Antigua and as the 68th President of the UN General Assembly.  The bribes were facilitated by LORENZO, NG, YIN, YAN, and PIAO, among others, who arranged for the transmission and laundering of over $1 million of bribery money from sources in China.  In exchange for the bribes, ASHE agreed to and did perform official actions for businesspeople who were seeking benefits from the UN and Antigua.  Among other things, ASHE accepted over $500,000 of bribes facilitated by LORENZO and YIN from NG, who was seeking to build a multibillion-dollar, UN-sponsored conference center in Macau, China (the “UN Macau Conference Center”).  In exchange for these payments from NG, among other actions, ASHE submitted a UN document to the UN Secretary General, which claimed that there was a purported need to build the UN Macau Conference Center.  In addition, ASHE received over $800,000 in bribes from various Chinese businessmen arranged through YAN and PIAO and, in return for these bribes, ASHE advocated for these businessmen’s interests within the UN and with senior Antiguan government officials, including the country’s then-Prime Minister (the “Prime Minister”), with whom ASHE shared a portion of the bribe payments.

During the course of the scheme, defendant ASHE solicited and received bribes in various forms, including cash and payments to third parties to cover ASHE’s personal expenses, such as a family vacation and construction of a private basketball court at his house in Dobbs Ferry, New York.  ASHE also transferred the bribery money to his personal bank accounts, primarily through checks he wrote to himself for a purported “salary” (although he already collected a salary from the Government of Antigua).  ASHE then used the bribe money for his personal expenses, such as paying the mortgage on his house in Dobbs Ferry, making his BMW lease payments, and buying luxury items such as Rolex watches and custom suits.  During the same period of time, ASHE failed to report sufficient income to the Internal Revenue Service (“IRS”) to account for the self-described salary and other bribes he received.  In total, ASHE underreported his income to the IRS by more than $1.2 million in tax years 2013 and 2014 alone.

The Scheme by LORENZO, NG, and YIN to Bribe ASHE

As alleged in the Complaint, the scheme began in or about the spring of 2011, when ASHE was approached by LORENZO, the Deputy Permanent Representative to the UN for the Dominican Republic.  Since in or about 2010, in addition to being the Dominican Republic’s representative to the UN, LORENZO has also been the “Honorary President” of a New York-based nongovernmental organization created by NG (“NGO-1”), which purportedly is a “21st century media platform” whose mission is to advance the implementation of the UN’s Millennium Development Goals

In the spring of 2011, LORENZO invited ASHE to fly to Macau, China, to meet with NG.  As alleged in the Complaint, NG was interested in bribing ASHE in order to acquire business interests in Antigua and to obtain UN support for his proposed UN Macau Conference Center.  ASHE agreed to meet NG in Macau in exchange for LORENZO buying ASHE and his family a trip to New Orleans, including first-class airline tickets and a luxury hotel suite.  After ASHE’s meeting with NG in Macau, ASHE told LORENZO that he had arranged for NG to meet with the then-Prime Minister of Antigua to discuss “concrete investment opportunities, including the immediate acquisition of hotel properties.”  ASHE also then began soliciting additional payments from LORENZO to pay for the installation of a private basketball court at ASHE’s house in Westchester County.  In addition to agreeing to pay for ASHE’s family vacation and basketball court, LORENZO began paying ASHE’s wife, as a “climate change consultant” for NGO-1, in the amount of $2,500 per month.

After initially focusing on paying ASHE to obtain access to the then-Prime Minister and other Antiguan officials to further NG’s effort to invest and acquire property in Antigua, LORENZO and NG then decided to use ASHE to seek to obtain UN support for NG’s proposed UN Macau Conference Center.  In February 2012, LORENZO drafted a UN document in ASHE’s name for ASHE to submit to the UN Secretary General in support of the development of NG’s UN Macau Conference Center.  After exchanging several drafts of the UN Document with LORENZO, on February 24, 2012, ASHE submitted the final document to the UN.  LORENZO used the UN document in promotional materials for NG’s conference center with other officials and an investment banking firm, using the document to imply that the conference center NG was seeking to develop was likely to be supported in some fashion by the United Nations.

In early 2013, YIN, who serves as NG’s principal assistant, repeatedly pressed LORENZO to make progress on NG’s request and threatened to halt the payments to LORENZO unless progress was made.  Following the repeated demands by YIN (on NG’s behalf), LORENZO arranged for ASHE to issue a revised UN document that specifically promoted NG’s private company – by name – as the developer of the proposed conference center.

Later, LORENZO arranged for ASHE to travel to Macau with other UN officials to meet with NG in exchange for a $200,000 payment from NG to an account that ASHE had set up in the name of the President of the General Assembly, his role at the time.  Prior to agreeing to make the trip, ASHE told LORENZO, “Even though NG has made a lot of empty promises in the past, I am willing to travel to Macau to see his project, since it is important to him.  But it has to [be] made absolutely clear to him that I will not go unless I see the funds - funds which are NOT for my personal use but to help run the PGA office.  Period.  Please let them know that I am requesting somewhere between $100K and $250K.”  Although ASHE claimed the funds would not be used by him personally, as described in detail in the Complaint, ASHE transferred the vast majority of funds that were paid to ASHE to ASHE’s personal account with his wife and used them to pay for personal expenses.     

The Scheme by YAN and PIAO to Bribe ASHE

In addition to soliciting bribes from LORENZO, YIN, and NG, ASHE also solicited and received payments from YAN and PIAO, who represented other Chinese businessmen seeking to invest in or obtain favors from Antiguan government officials.  In particular, as alleged in the Complaint, YAN and PIAO arranged for over $800,000 of payments to ASHE in exchange for official favors by ASHE and other Antiguan officials for various Chinese businessmen.

The initial payment arranged by YAN and PIAO was a $300,000 payment on behalf of a Chinese media executive referred to as “CC-1” in the Complaint.  After receiving the payment, ASHE reported that he had traveled to Antigua “to meet with all the key decision makers to discuss [CC-1’s] plans; that I had the initial resources in hand (and which have now been fully utilized),  certainly served the intended purpose of focusing minds and getting the conversation started.”  Financial records reflect that ASHE sent $100,000 of CC-1’s payment to the Prime Minister of Antigua, and sent more funds to other Antiguan political interests.

In August 2013, YAN and PIAO began paying ASHE approximately $20,000 per month to be the “Honorary Chairman” of a new New York-based non-governmental organization (“NGO-2”), of which YAN serves as the CEO, which purportedly was formed to promote the UN’s sustainable development goals.

The next month, after ASHE formally assumed his one-year term as UNGA President, YAN and PIAO arranged for another Chinese businessman, referred to as “CC-2” in the Complaint, to send ASHE $100,000 purportedly to pay for a UN reception in honor of ASHE’s presidency.  Approximately one month later, YAN and PIAO arranged for PIAO to travel with ASHE and CC-2 to meet with Antiguan officials about a $20 million deal for CC-2’s company to install a “national internet security system” for Antigua.  ASHE’s intercession on CC-2’s behalf resulted in a signed “memorandum of understanding” between CC-2’s company and the Government of Antigua to move forward with CC-2’s project.  ASHE also used his position as UNGA President to promote CC-2’s company to officials with the Government of Kenya.   ASHE paid a portion of these bribe payments to the Prime Minister of Antigua.

In addition, YAN and PIAO arranged for ASHE to be paid $200,000 (plus travel expenses) in exchange for attending and speaking in ASHE’s official capacity at a private conference in China hosted by a Chinese real estate developer identified as CC-3 in the Complaint.  In addition to attendance at the conference, CC-3 also sought to “offer [ASHE] a permanent convention venue for the UN meetings on sustainability and climate changes . . . as well as for the 193 members of the UN to convene. . . .”

ASHE’s Tax Fraud

As alleged in the Complaint, in 2013 and 2014, while ASHE was UNGA President, he solicited and received payments from LORENZO, NG, YIN, YAN, PIAO, and others, to business accounts he personally created in the name of the President of the General Assembly.  More than $1 million of the money that ASHE solicited to allegedly support his UN Presidency ASHE then transferred to himself, primarily in the form of $25,000 monthly checks written to and by him with the memo line “salary” (notwithstanding the fact that he already received a salary from the Government of Antigua).  During these years, ASHE was also paid approximately $200,000 annually in “consulting” income from LORENZO, NG, PIAO, and YAN.  For tax years 2013 and 2014, ASHE filed tax returns that materially failed to account for the income he was deriving from his purported salary payments and his “consulting” contracts.  Specifically, for year 2013, ASHE and his wife underreported their income by approximately $462,350 and, for year 2014, they underreported his income by approximately $796,329.28.

*                      *                      *

ASHE, 61, of Dobbs Ferry, New York, is charged with two counts of subscribing to false and fraudulent U.S. individual income tax returns.  Each of these counts carries a maximum penalty of three years in prison.  LORENZO, 48, of the Bronx, New York, NG, 67, YIN, 29, YAN, 57, and PIAO, 52, are each charged with bribery conspiracy and bribery.  The conspiracy charge carries a maximum penalty of five years in prison and the bribery charge carries a maximum penalty of 10 years in prison.  YAN and PIAO are also charged with conspiracy to commit money laundering.  This charge carries a maximum penalty of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.

LORENZO, YIN, YAN, and PIAO are naturalized U.S. citizens.  ASHE is a citizen of Antigua and legal permanent resident of the United States.  NG is a citizen of China, Portugal, and the Dominican Republic.

U.S. Attorney Bharara praised the work of the FBI and the IRS-CI, who jointly conducted this investigation, and noted that the investigation is ongoing.

This case is being prosecuted by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys Daniel C. Richenthal, Rahul Mukhi, and Janis M. Echenberg are in charge of the prosecution.

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

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

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 WILLIAM J. WELLS was arrested this morning on securities fraud and wire fraud charges stemming from his scheme to defraud more than 30 investors of more than $1.5 million through a fraud scheme.

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

WELLS is expected to be presented today in federal court in Manhattan before United States Magistrate Judge Michael H. Dolinger.

U.S. Attorney Preet Bharara said:  “As alleged, William Wells repeatedly lied to his investors, falsely claiming consistently positive returns, when in fact his trading was spectacularly unsuccessful.  But his alleged lies did not stop there.  He also allegedly used investor money to pay personal expenses, including for private school tuition, and used new investor money to pay back old investors.”

FBI Assistant Director-in-Charge Diego Rodriguez said:  “As alleged, Wells didn’t run an investment firm, he ran a Ponzi scheme totaling more than $1.5 million from potential investors. Wells allegedly used the funds to pay some investors to hide his trading losses and to support his personal lifestyle. The FBI is committed to investigating and bringing to justice those who prey upon trusting individuals for their own personal gain.”

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

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

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

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

*                      *                      *

WELLS, 42, was arrested this morning in Valley Cottage, New York.  He is charged with one count of securities fraud and one count of wire fraud.  The securities fraud count and the wire fraud count each carry a maximum sentence of 20 years in prison and the charges carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.   The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the work of the FBI, and thanked the U.S. Securities and Exchange Commission for its assistance.  He added that the investigation is continuing.

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

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorney Andrea M. Griswold 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, James A. Hunt, Special Agent-in-Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), and William J. Bratton, Commissioner of the New York Police Department (“NYPD”), announced the unsealing of a Complaint against a doctor and a co-conspirator who are alleged to have participated in a drug distribution conspiracy involving the prescription painkiller oxycodone.  As alleged, the doctor, ALFRED RAMIREZ, sold medically unnecessary prescriptions for over 10,000 oxycodone tablets over a four-year period, resulting in at least one death.

RAMIREZ, a psychiatrist, and JAMES COONEY, a co-conspirator, were arrested this morning on the charges in the Complaint.  Both defendants were presented before U.S. Magistrate Judge Paul E. Davison this afternoon in White Plains federal court.  

U.S. Attorney Preet Bharara said: “Abuse of prescription pills is a national health epidemic – causing more overdose deaths than heroin and cocaine combined.  Unscrupulous healthcare professionals like Doctor Alfred Ramirez, who is alleged to have prescribed over 10,000 medically unnecessary oxycodone pills over a four-year period, and his alleged distributor, James Cooney, fuel this epidemic of poison by prescription.  The danger of this type of criminal distribution of prescription pills was brought home by a tragic death allegedly resulting from Dr. Ramirez’s prescriptions.”

DEA Special Agent-in-Charge James A. Hunt said: “Criminals are constantly scheming ways to make an illegal profit, and Dr. Ramirez was no different.  Allegedly selling scripts for money, Dr. Ramirez supplied opioid addicts with their fix and supplied street distributors, like James Cooney, with doses of death.  Today’s arrests come after a five-month investigation into the illegal practices of Dr. Ramirez and the subsequent consequences of James Cooney’s street distribution.”

 NYPD Commissioner William J. Bratton said: “As alleged, this doctor traded cash for prescriptions, pushing pills into the illegal drug market, resulting in the senseless death of at least one person.  I commend the work of the NYPD investigators and our law enforcement partners for holding these individuals accountable for their actions.”

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

Starting in approximately 2012 and continuing until his arrest, RAMIREZ operated out of offices in Orange and Dutchess Counties, where RAMIREZ, a Board certified doctor and State licensed psychiatrist, wrote medically unnecessary prescriptions for more than ten thousand oxycodone pills in exchange for cash payments.  On numerous occasions over the course of this four-year period, RAMIREZ charged hundreds of dollars in cash for “patient visits” that involved little, if any, actual examination and resulted in the issuance of multiple prescriptions for large quantities of 30-milligram oxycodone tablets, sometimes for patients who were not even present.

Also charged in the Complaint is COONEY, who obtained prescriptions for thousands of oxycodone tablets from RAMIREZ, including in the name of third persons.  COONEY resold many of these pills for profit.

The pills distributed by RAMIREZ and COONEY caused one known death:  On March 23, 2015, a school teacher was found dead in his Yonkers, New York, apartment.  Medical reports concluded that the death resulted from an overdose of oxycodone and alprazolam, another drug frequently prescribed by RAMIREZ and distributed by COONEY.   Records show that the victim obtained the lethal oxycodone, and likely the alprazolam as well, from COONEY, and that RAMIREZ had issued prescriptions for those drugs in COONEY’s name.

Oxycodone is a prescription-strength Schedule II narcotic used to treat severe and chronic pain conditions.  Oxycodone can result in addiction similar to an addiction to codeine or morphine, and there is an illegal market for oxycodone, as a substitute for – or adjunct to – other illegal narcotics, such as heroin.

*          *          *

The defendants are charged with violations of the federal narcotics laws carrying a maximum sentence of twenty years in prison.  The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as the judge will determine any sentence imposed on the defendants.

Mr. Bharara praised the outstanding investigative work of the DEA’s Tactical Diversion Squad, composed of agents and officers of the DEA New York Division, the NYPD, the New York State Police, the New York Bureau of Narcotics Enforcement, the Westchester County Police Department, and the Town of Orangetown Police Department.  Mr. Bharara also thanked the Town of New Windsor Police Department, the New York Bureau of Narcotics Enforcement, the U.S. Department of Health and Human Services, the Westchester County Department of Public Safety, the New York State Department of Financial Services, the Orange County Drug Task Force, the New York Office of Professional Medical Conduct, and the Town of Woodbury Police Department. 

The case is being prosecuted by the Office’s White Plains Division.  Assistant U.S. Attorneys Lauren Schorr and Hagan Scotten 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, announced that ANDRES TRUPPEL, former chief financial officer for Siemens Argentina, pled guilty today in Manhattan federal court to conspiring to pay $100 million in bribes to senior Argentine government officials to secure, implement, and enforce a $1 billion contract between Siemens and the Argentine government to produce national identity cards.  He is the first individual defendant to plead guilty in the massive scheme.  TRUPPEL, a citizen of Argentina and Germany, pled guilty to one count of conspiring to violate the Foreign Corrupt Practices Act’s anti-bribery, internal controls, and books and records provisions, and to commit wire fraud, before U.S. District Judge Denise L. Cote.

Manhattan U.S. Attorney Preet Bharara stated:  “Andres Truppel has admitted to playing a significant role in the massive Siemens bribery conspiracy that spanned over a decade.  To reap the benefits of a billion dollar contract with the Argentinian government, Truppel and his co-conspirators funneled close to $100 million in bribes to government officials, including wiring more than $7 million in bribe money to a bank account in New York, and filed a fraudulent arbitration claim in the United States that included a false witness statement from Truppel.  This conduct violated U.S. anti-bribery and fraud laws, and Truppel is the first individual in this criminal scheme to admit his guilt.”

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

ANDRES TRUPPEL was employed by Siemens Aktiengeselleschaft (“Siemens AG”) from 1977 until 2004.From approximately 1996 to 2002, TRUPPEL was the chief financial officer for Siemens Argentina, a subsidiary of Siemens AG.

In 1994, the government of Argentina issued a tender for bids to replace an existing system of manually created national identity booklets with state-of-the-art national identity cards (the DNI project). The value of the DNI project was $1 billion. In 1998, the Argentine government awarded the DNI project to a special-purpose subsidiary of Siemens AG.

In connection with this project, TRUPPEL and his co-conspirators caused Siemens to commit to paying nearly $100 million in bribes to sitting officials of the Argentine government, members of the opposition party, and candidates for office who were likely to come to power during the performance of the project. Members of the conspiracy worked to conceal the illicit payments through various means. For instance, they wired more than $7 million in bribes to a bank account in New York disguised as a foreign exchange hedging contract related to the DNI project.

In May 1999, the Argentine government suspended the DNI project, due in part to instability of the local economy and an impending presidential election. When a new government took power in Argentina, and in the hopes of getting the DNI project resumed, members of the conspiracy committed Siemens to paying additional bribes to the incoming officials, and to satisfying existing obligations to officials of the outgoing administration, many of whom remained in influential positions within the government. When the project was terminated in May 2001, members of the conspiracy nevertheless sought to recover the anticipated proceeds of the DNI project by causing Siemens AG to file a fraudulent arbitration claim against the Republic of Argentina in Washington, D.C. The claim alleged wrongful termination of the contract for the DNI project and demanded nearly $500 million in lost profits and expenses. Members of the conspiracy hid from the tribunal the fact that the contract for the DNI project had been secured by means of bribery and corruption by filing a claim and supporting evidence, including a witness statement from TRUPPEL, which contained material misrepresentations and omissions.

Members of the conspiracy also continued the bribe scheme, in part to prevent disclosure of the bribery in the arbitration but also to ensure Siemens’ ability to secure future government contracts in Argentina and elsewhere in the region. In four installments between 2002 and 2007, members of the conspiracy allegedly caused Siemens to pay approximately $28 million in further satisfaction of the obligations. Conspirators continued to conceal these additional payments through various means. For example, TRUPPEL and other members of the conspiracy caused Siemens to transfer approximately $9.5 million through fictitious transactions involving a Siemens business division that had no role in the DNI project. They also caused Siemens to pay an additional $8.8 million in 2007 to settle an arbitration that was brought to enforce a sham consulting contract.Siemens’s corrupt procurement of the DNI project was not exposed during the lifespan of the conspiracy, and, in February 2007, the arbitration tribunal in Washington sided with Siemens AG, awarding the company nearly $220 million on its DNI claims, plus interest. The company, however, never claimed the award money, because after Siemens reached corporate resolutions with the U.S. and German authorities, Siemens AG agreed to forego its right to receive the award.

*          *         *

TRUPPEL, 60, of Buenos Aires, Argentina, faces a maximum sentence of five years in prison and three years of supervised release. The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Charges against the other individuals named in the indictment – Uriel Sharef, Herbert Steffen, Ulrich Bock, Eberhard Reichert, Stephan Signer, Carlos Sergi, and Miguel Czysch – are pending.  The charges and allegations against the other individuals named in the Indictment are merely accusations, and these defendants are presumed innocent unless and until proven guilty.

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

Mr. Bharara praised the Federal Bureau of Investigation’s New York and Washington D.C. Field Offices for their work on the case.  He also thanked the Department of Homeland Security for its assistance.  

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

The former chief financial officer (CFO) of Siemens S.A. – Argentina (Siemens Argentina) pleaded guilty today to conspiring to pay tens of millions of dollars in bribes to Argentine government officials to secure, implement and enforce a $1 billion contract to create national identity cards.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Preet Bharara of the Southern District of New York and Assistant Director in Charge Paul M. Abbate of the FBI’s Washington, D.C.  Field Office made the announcement.

Andres Truppel, 61, of Argentina, pleaded guilty today in the Southern District of New York to conspiring to violate the anti-bribery, internal controls and books and records provisions of the Foreign Corrupt Practices Act (FCPA); and to commit wire fraud.

In 1998, the government of Argentina awarded to a subsidiary of Siemens Aktiengesellschaft (Siemens AG) a contract worth approximately $1 billion to create state-of-the-art national identity cards (the Documento Nacional de Identidad or DNI project).  The Argentine government terminated the DNI project in 2001.

In connection with his guilty plea, Truppel admitted that he engaged in a decade-long scheme to pay tens of millions of dollars in bribes to Argentine government officials in connection with the DNI project, which was worth more than $1 billion to Siemens.  Truppel admitted that he and his co-conspirators concealed the illicit payments through various means, including using shell companies associated with intermediaries to disguise and launder the funds, and by paying $7.4 million as part of a hedging contract with a foreign currency company incorporated in the Bahamas.

In addition, Truppel admitted that he and his co-conspirators paid nearly $1 million to a former official in Argentina’s Ministry of Justice that was used to bribe an Argentine government official.

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

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

The case is being investigated by the FBI’s Washington Field Office.  The case is being prosecuted by Assistant Chief Tarek J. Helou of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Niketh Velamoor of the Southern District of New York.  The Criminal Division’s Office of International Affairs, the SEC and the Munich Public Prosecutor’s Office also provided significant assistance. 

Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.

            Preet Bharara, the United States Attorney for the Southern District of New York, announced today the return of a superseding indictment charging BRIAN COLL, a New York City Correction Officer, with causing the death of Ronald Spear, a pre-trial detainee at Rikers Island.  COLL, then a correction officer on Rikers Island, had previously been charged with causing injury to Mr. Spear by repeatedly kicking him in the head while he was fully restrained and lying prone on the floor, in violation of his rights under the United States Constitution.  Mr. Spear died shortly after the attack.  Today’s Superseding Indictment newly alleges that COLL’s assault of Spear was the proximate cause of Spear’s death, and exposes COLL to a maximum prison term of life.  COLL was arrested on a complaint on June 10, 2015, and has been in federal custody since that time.

            Manhattan U.S. Attorney Preet Bharara said: “Ronald Spear’s death at Rikers Island in December 2012 was a tragedy that should never have happened.  As alleged, his tragic death was the direct result of Correction Officer Brian Coll’s unconstitutional beating.  Repeatedly kicking a downed inmate in the head and then picking up and dropping his head on the ground as he lay helpless, as Correction Officer Coll is alleged to have done, had deadly consequences for Ronald Spear.”

            According to the Complaint and Superseding Indictment:

            Rikers Island is a jail complex, located in the Bronx, New York, maintained by the New York City Department of Correction.  At the time of his death, Ronald Spear was a pretrial detainee incarcerated on Rikers Island in the North Infirmary Command, a facility housing detainees who, like Mr. Spear, have serious or chronic medical needs.  In the early morning hours of December 19, 2012, Mr. Spear left the housing area in the infirmary unit in an attempt to see the on-duty doctor but was stopped by COLL, who said that the doctor was not available to see him.  In an altercation that ensued, COLL punched Mr. Spear several times in the face and stomach, and Mr. Spear was then restrained by two other correction officers, Anthony Torres and Byron Taylor.  While Mr. Spear was lying prone on the ground and was still restrained, COLL repeatedly kicked Spear in the head, even after Torres attempted to shield the inmate’s head with his hand and shouted to COLL to stop.  After COLL stopped kicking Mr. Spear, COLL lifted Mr. Spear’s head up, told him in substance not to forget who had done this to him, and then dropped Spear’s head to the ground.  Mr. Spear was pronounced dead at the scene shortly after the assault.

            Spear’s autopsy was conducted at the Bronx Office of the Chief Medical Examiner.  As described in today’s Superseding Indictment, the autopsy revealed that Spear had three recent contusions on his skull, including a “brain bleed” caused by blunt force impact to the head, consistent with Spear being kicked in the head while he was lying prone on the ground.  The Medical Examiner conducting the autopsy concluded that the cause of death was “hypertensive cardiovascular disease” with “physical altercation including blunt force trauma to head” and diabetes as contributing factors, and ruled the death a homicide.  The assault by COLL was therefore, as alleged, a proximate cause of Spear’s death.

            COLL, along with another officer involved in the incident, Byron Taylor, is also charged with obstruction of justice related offenses for covering up COLL’s assault, which resulted in the death of Mr. Spear.  The third officer, Anthony Torres, previously pled guilty to obstruction of justice charges and is cooperating with the Government.            

*                      *                      *

            BRIAN COLL, 45, of Smithtown, New York, is charged with one count of death resulting from deprivation of rights under color of law, which carries a maximum penalty of  life in prison or death, one count of conspiracy to obstruct justice, which carries a maximum penalty of 20 years in prison, one count of obstruction of justice, which carries a maximum penalty of 20 years in prison, one count of filing false forms, which carries a maximum penalty of 20 years in prison, and one count of conspiracy to file false forms, which carries a maximum sentence of five years in prison.

            Byron Taylor, 31, of Brentwood, New York, is charged with one count of obstruction of justice by lying to a federal grand jury, which carries a maximum sentence of 20 years in prison, one count of conspiracy to obstruct justice, which carries a maximum sentence of 20 years in prison, one count conspiracy to file false forms, which carries a maximum sentence of five years in prison and three counts of perjury, each of which carries a maximum penalty of five years in prison.   

            Anthony Torres, 59 of New Rochelle, New York, pled guilty to one count of conspiracy to obstruct justice and file false reports, which carries a maximum penalty of five years in prison, and one count of filing a false report, which carries a maximum sentence of 20 years in prison.  Torres is scheduled to be sentenced before Chief U.S. District Judge Loretta A. Preska on December 9, 2015.

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

            Mr. Bharara praised the investigative work of the Federal Bureau of Investigation and the Criminal Investigators at the United States Attorney’s Office.  Mr. Bharara also thanked the New York City Department of Correction, Investigative Division, and the Bronx District Attorney’s Office for their assistance in the investigation, which remains ongoing.

            This case is being handled by the Office’s Civil Rights and Public Corruption Units.  Assistant U.S. Attorneys Brooke E. Cucinella and Jeannette A. Vargas are in charge of the prosecution.  

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that STEVEN STALTARE was sentenced in Manhattan federal court to 77 months in prison for defrauding investors in connection with two fraudulent investment schemes.  STALTARE’s first scheme involved fraud in connection with the transfer of stock in Dematco, Inc. (“Dematco”).  STALTARE’s second scheme involved defrauding investors in connection with investments in various stocks, including Dematco, Preventia, Inc. (“Preventia”), First Choice Healthcare Solutions, Inc. (“First Choice”), and Savtira Corporation (“Savtira”).  STALTARE admitted to misleading investors in both schemes through numerous false statements and misrepresentations, as well as by misappropriating investment funds for his own personal use.  STALTARE pled guilty on December 2, 2014, and was sentenced today by United States District Judge George B. Daniels.

Manhattan U.S. Attorney Preet Bharara said:  “Steven Staltare offered investors bogus investment opportunities, knowing that it was a shell game in which he pocketed over $800,000 of investors’ money.  Thanks to the efforts of the FBI and the Securities and Exchange Commission, Staltare will now begin to pay the price for his scheme to defraud innocent investors.”

According to the allegations contained in the Indictment, other documents filed in Manhattan federal court, and statements made during court proceedings:

First, from at least in or about 2011 through in or about 2012, STALTARE defrauded two investors (“Victim-1” and “Victim-2”) in connection with the transfer of shares of Dematco stock.  In or about late 2011, STALTARE approached Victim-1 and asked Victim-1 to transfer hundreds of thousands of shares of Dematco stock that Victim-1 owned to a “partner” of STALTARE’s in exchange for $70,000 in cash.  Victim-1 agreed to turn over his shares in Dematco in exchange for $70,000.  At approximately the same time, STALTARE and another individual (“Partner-1”) approached Victim-2 and asked Victim-2 to loan them approximately $150,000 so that STALTARE could purchase shares of Dematco stock.  STALTARE and Partner-1 promised Victim-2 that he would be paid $200,000 in three weeks and that Victim-2 would receive approximately one-third of the profits from the eventual sale of Dematco stock.  Victim-2 was also promised that he would receive Dematco stock certificates as collateral for this loan.  Based upon these representations, Victim-2 agreed to make this $150,000 loan to STALTARE and Partner-1.  After Victim-2 made this loan, STALTARE provided Victim-2 with stock certificates that had been provided to STALTARE by Victim-1.  Ultimately, STALTARE did not provide Victim-1 with the $70,000 that he had promised to pay in exchange for Victim-1’s shares of Dematco nor did STALTARE provide Victim-2 with any repayment for the $150,000 loan or any profits from any sale of Dematco stock.  In reality, STALTARE transferred Victim-1’s shares in Dematco to Victim-2 without compensating Victim-1 and misappropriated the funds provided by Victim-2 for STALTARE’s own personal benefit.

Second, from at least in or about 2012 through in or about 2013, STALTARE defrauded two other investors (“Victim-3” and “Victim-4”) by misappropriating funds intended for investment in the stock of various companies.  STALTARE agreed to invest approximately $25,000 for Victim-3 in Preventia stock, promising significant investment returns.  STALTARE also agreed to invest approximately $357,000 for Victim-4 in various securities, including stock in Dematco, Preventia, First Choice and Savtira, again promising significant investment returns.  However, once Victim-3 and Victim-4 provided STALTARE with the funds to invest in these stocks, rather than investing these funds in stocks on behalf of Victim-3 and Victim-4 as promised, STALTARE misappropriated these funds for his own personal benefit.

In the course of effectuating these fraudulent schemes, STALTARE defrauded victims in excess of $800,000.

*                      *                      *

In addition to the prison sentence, STALTARE, 50, of Tampa, Florida, was sentenced to three years of supervised release, ordered to forfeit $846,250, and ordered to pay restitution of $846,250 to victims of his offenses.

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

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that DENNIS GOGEL, a former member of the German Army and a trained sniper, was sentenced to 20 years in prison for his participation in a conspiracy to murder a Drug Enforcement Administration (“DEA”) agent and a confidential informant working at the direction of the DEA, a conspiracy to import cocaine into the United States, a conspiracy to possess a firearm in furtherance of the murder conspiracy, and a conspiracy to import cocaine on board an aircraft registered in the United States.  GOGEL was arrested in September 2013 along with co-defendants Joseph Hunter, Timothy Vamvakias, Slawomir Soborski, and Michael Filter following a long-term DEA undercover investigation.  Each defendant pled guilty before U.S. District Judge Laura Taylor Swain, who imposed yesterday’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “Dennis Gogel used his elite German military training to support a network of underground criminals who were prepared and willing to kill a DEA agent and informant, and import 300 kilograms of cocaine to New York.  Thanks to the efforts of the DEA and coordination with law enforcement partners from around the world, Gogel and his co-conspirators are now safely behind bars.”

According to the Indictment filed against GOGEL, Hunter, Vamvakias, Soborski, and Filter, as well as sentencing proceedings and other filings in Manhattan federal court:

All five defendants have previously served in the armed forces of their respective nations. GOGEL served in the German armed forces until 2010; Hunter served in the U.S. Army between approximately 1983 and 2004; Vamvakias served in the U.S. Army between approximately 1991 and 2004; Filter served in the German armed forces until 2009; and Soborski served in the Polish armed forces until 2011.  GOGEL attained the rank of corporal and served as a sniper from 2007 to 2010.  Hunter served as a sniper instructor and a senior drill sergeant, training other soldiers in marksmanship and tactics; and Soborski and Filter were also trained as snipers.

In 2013, GOGEL was recruited by Hunter to serve as security for a Colombian drug trafficking organization and to perform contract killings.  Hunter recruited GOGEL based on his military training and experience in the private security industry.  During meetings in Asia, Africa, and the Caribbean, beginning in January 2013 and continuing through late September 2013, Hunter communicated with three confidential sources (the “CSs”) working with the DEA, who purported to be Colombian narcotics traffickers.  Hunter agreed to serve as the head of security for the CSs’ purported narcotics trafficking organization, and assembled a “security team” consisting of GOGEL, Vamvakias, Filter, and Soborski.  Hunter also told the CSs that he had previously been involved in contract killings – referred to as “bonus jobs” – and that some team members wanted to do as much “bonus work” as possible.

Hunter and his co-defendants thereafter agreed, in meetings and communications with the CSs, to provide security and surveillance services to the narcotics trafficking organization.  Furthermore, GOGEL, Vamvakias, and Hunter agreed to commit murder-for-hire in Liberia by assassinating both a DEA Special Agent and a person who, according to the CSs, was providing information to the DEA about the CSs’ narcotics trafficking organization.  In exchange for the murders, GOGEL and Vamvakias were together to be paid approximately $700,000, and Hunter was to receive an additional $100,000 for his leadership role.  Communications between the defendants and the CSs occurred by telephone, over email, and in a series of surreptitiously audio-recorded and videotaped meetings over an approximately nine-month period.

In March 2013, GOGEL, Filter, and Soborski conducted counter-surveillance of a boat in Thailand that the CSs had represented would be used to transport narcotics, seeking to detect law enforcement monitoring of the vessel.

In April 2013, GOGEL acted as team leader as he, Filter, and Soborski provided security for meetings in Mauritius between the CSs and representatives of a bona fide international drug trafficking organization.  The security team also performed counter-surveillance of additional individuals that the CSs met with to discuss international weapons dealers.

In late June 2013, GOGEL, Vamvakias, Filter, and Soborski conducted surveillance of a purported U.S.-registered aircraft at the direction of the third CS (“CS-3”), who posed as a member of the CSs’ narcotics trafficking organization.  CS-3 informed the defendants that the aircraft was to be loaded with 300 kilograms of cocaine to be shipped to New York.

With respect to the murder-for-hire scheme, in mid-May 2013, at a meeting with the CSs in Thailand, GOGEL, Vamvakias, Hunter, and Soborski were told that a “bonus job” – that is, a contract killing – was in the offing, due to a leak within the CSs’ narcotics trafficking organization.  In late May 2013, in email communications, Hunter confirmed that his team would be willing to murder both a U.S. law enforcement agent and an informant (a boat captain) who was providing information to U.S. law enforcement authorities.  Hunter confirmed by email that his team would kill both the DEA agent and the informant who was providing information to law enforcement about the CSs’ narcotics trafficking organization.  At a meeting in late June 2013, CS-3 explained to GOGEL and Vamvakias that “the job is to kill a U.S. DEA agent and a source with the DEA,” who would be located in Liberia.  GOGEL and Vamvakias discussed the weapons that could be used and masks to be worn for the murders, and Vamvakias stated that it would be better to “hit the agent first” and then “the snitch.”  In early July 2013, Hunter sent via email a list of the items needed for the murders, including “[t]wo submachine guns with silencers . . . [t]wo .22 pistols with silencers.”

In mid-August 2013, at a meeting in Thailand, GOGEL, Vamvakias, and Hunter discussed in detail the weapons that would be used and the possibility of entering Liberia without having their passports stamped.  They suggested that CS-3 fly them out of the country via private plane following the murders.  Vamvakias stated that among other weapons, a sub-machine gun and two .22 caliber pistols would be needed for the murders, and CS-3 agreed to deliver the weapons to Liberia.  The next day, at a meeting with GOGEL, CS-3 confirmed that an order for the requested weapons had been made.  Later that same day, GOGEL met again with CS-3 and provided CS-3 with two highly sophisticated latex facemasks, which can make the wearer appear to be of another race, for CS-3 to transport to Liberia.  Discussing his work with the purported drug cartel, GOGEL told the CS that, “That’s fun.  It is for me.  I love that, I love this work.”

In late September 2013, GOGEL and Vamvakias arrived in Liberia to commit the planned murders-for-hire.

*          *          *

GOGEL, 30, pled guilty on January 13, 2015, to conspiracy to import cocaine into the United States (Count One); conspiracy to murder a federal law enforcement agent and a person assisting a federal law enforcement agent (Count Two); conspiracy to possess a firearm in furtherance of a crime of violence (Count Four); and conspiracy to distribute cocaine on board an aircraft registered in the United States (Count Five).  In addition to the 20-year prison term, GOGEL was sentenced to five years of supervised release.

The remaining defendants, Hunter, 50, Vamvakias, 43, Soborski, 43, and Filter, 30, each pled guilty to conspiracy to import cocaine into the United States (Count One).  Hunter and Vamvakias also pled guilty to conspiracy to murder a law enforcement agent and a person assisting a law enforcement agent (Count Two); and conspiracy to possess a firearm in furtherance of a crime of violence (Count Four).  Each count carries a maximum possible term of life in prison; Count One carries a mandatory minimum term of 10 years in prison.  The maximum potential sentences faced by these remaining defendants are prescribed by Congress and are provided here for informational purposes only, as any sentencing of these defendants will be determined by the judge.

Vamvakias was sentenced on July 16, 2015, to 20 years in prison by Judge Swain.  Filter was sentenced on September 9, 2015, to eight years in prison by Judge Swain.  Hunter is scheduled to be sentenced on October 13, 2015, and Soborski is scheduled to be sentenced on October 22, 2015.

The prosecution was the result of the close cooperative efforts of the United States Attorney’s Office for the Southern District of New York; DEA’s Special Operations Division; DEA’s  Bangkok, Ghana, Pretoria, Bucharest, Manila, Nassau and Copenhagen Offices; the Royal Thai Police Narcotics Suppression Bureau and Crime Suppression Division;  the Royal Thai Immigration; the Royal Thai Attorney General’s Office; Republic of Liberia’s National Security Agency; the Republic of Liberia’s Attorney General’s Office; the Estonian Police and Border Guard; the Estonian National Criminal Police, Investigative Bureau; the Estonian State Prosecutors Office; the Royal Bahamas Police Force and Drug Enforcement Unit; the Romanian National Police; Interpol; and the U.S. Department of Justice Office of International Affairs.

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant United States Attorneys Michael D. Lockard, Anna Skotko, Emil Bove, and Aimee Hector are in charge of the prosecution.

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 today the unsealing of an indictment charging seven defendants with orchestrating multiple schemes to defraud investors of tens of millions of dollars.

Two of the defendants were arrested this morning in connection with today’s charges.  JASON GALANIS was arrested in Manhattan and will be presented later today.  JARED GALANIS was arrested in the District of Maryland and will be presented later today before a U.S. Magistrate Judge in Baltimore.  DEREK GALANIS is expected to surrender today in the Northern District of California and will be presented before a U.S. Magistrate Judge in San Francisco.  GAVIN HAMELS is expected to surrender on Monday in the Southern District of New York and will be presented at that time.  JOHN GALANIS, a/k/a “Yanni,” GARY HIRST, and YMER SHAHINI remain at large.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Jason Galanis and his co-conspirators used their Wall Street credentials and the veneer of a legitimate-sounding financial firm to manipulate the market and fleece investors.  Their alleged market manipulation brought them nearly $20 million in profits, but now also a federal indictment.”

USPIS Inspector-in-Charge Philip R. Bartlett said: “Galanis and his co-conspirators exemplified arrogance and contempt for financial regulations when they allegedly devised a scheme to defraud investors to fund a lavish lifestyle.  Law enforcement will never tolerate this alleged egregious behavior and will bring those to justice who lie and do not play by the rules.”

According to the Indictment unsealed in Manhattan federal court[1], the defendants engaged in the following fraudulent schemes:

The Gerova Scheme

From 2009 to 2011, JASON GALANIS, JOHN GALANIS, JARED GALANIS, HIRST, DEREK GALANIS, SHAHINI, and HAMELS engaged in a scheme to defraud the shareholders of a publicly traded company called Gerova Financial Group, Ltd. (“Gerova”), and the investing public, by obtaining secret control over millions of shares of Gerova stock and then manipulating the market for the stock as the defendants caused their secretly held shares to be sold.As part of the scheme, the defendants fraudulently generated demand for Gerova stock by bribing investment advisers to purchase for client accounts the Gerova stock that was sold by the defendants, thereby enabling the defendants to cash out from the scheme and make millions in illegal profits.

As a part of the scheme to defraud, JASON GALANIS obtained such control over Gerova so as to be able to cause Gerova to enter into transactions of his design, and for his benefit, including the issuance of Gerova stock.JASON GALANIS obtained this control without identifying himself as an officer or director of Gerova to avoid the SEC-imposed bar that prohibited him from holding such positions at publicly traded companies.Among other means and methods, JASON GALANIS, with the assistance of GARY HIRST, caused more than five million shares of Gerova stock, which represented nearly half the company’s public float and which was intended for JASON GALANIS’s ultimate benefit, to be issued to and held in the name of YMER SHAHINI, who knowingly served as a foreign nominee for JASON GALANIS.JASON GALANIS, JOHN GALANIS, JARED GALANIS, DEREK GALANIS, HIRST, and SHAHINI understood that the purpose of the stock grant to SHAHINI was to disguise JASON GALANIS’s ownership interest in the stock, and to evade the SEC’s regulations for issuing unregistered shares of stock.

At the same time, and as a further part of the scheme to defraud, JOHN GALANIS, JARED GALANIS, and DEREK GALANIS, among others, with the knowledge and approval of JASON GALANIS, opened and managed brokerage accounts in the name of SHAHINI (the “SHAHINI Accounts”), effected the sale of Gerova stock from the SHAHINI Accounts, and received and concealed the proceeds, knowing that this activity was designed to conceal from the investing public JASON GALANIS’s ownership of and control over the Gerova stock.

JASON GALANIS and JARED GALANIS also fraudulently induced investment advisers, including GAVIN HAMELS and others, to purchase shares of Gerova stock in the investment advisers’ client accounts by offering compensation and/or other benefits to the respective investment adviser.By causing the purchase of Gerova stock at the time, quantity, and/or price of their choosing, JASON GALANIS and JARED GALANIS were able to, among other things, effectuate the sale of large quantities of Gerova stock from the SHAHINI Accounts that JASON GALANIS controlled while artificially maintaining the price of Gerova stock through coordinated match trading.Such coordinated trading served to manipulate the market for Gerova stock and deceive the investing public.As a result, JASON GALANIS and his co-conspirators reaped nearly $20 million in profits.

The Scheme to Defraud Clients of Investment Firm-2

From November 2007 to April 2010, JASON GALANIS and JARED GALANIS, along with an investment adviser identified in the Indictment as “CC-2,” participated in a scheme to defraud the clients of CC-2’s investment advisory firm, identified in the Indictment as “Investment Firm-2.”Oftentimes in exchange for compensation from JASON GALANIS and JARED GALANIS, CC-2 caused Investment Firm-2 clients to invest in notes issued by entities associated with JASON GALANIS and JARED GALANIS.

When obligations owed by entities associated with JASON GALANIS and JARED GALANIS became due, CC-2, with the knowledge of JASON GALANIS and JARED GALANIS, used client funds to purchase either notes issued by other entities associated with JASON GALANIS and JARED GALANIS, or publicly traded shares held by such entities.The funds generated were then used to pay the original obligations owed to other Investment Firm-2 clients.Through these securities trades, funds in client accounts of one set of Investment Firm-2 investors were used to pay obligations owed to a different set of Investment Firm-2 investors by entities associated with JASON GALANIS and JARED GALANIS.

*     *     *

Charts identifying each defendant, the charges, and the maximum penalties are attached to this release.  The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants would be determined by the judge.  The case has been assigned to U.S. District Judge P. Kevin Castel.

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

The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force.The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it’s 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 Andrew Bauer, Brian Blais, and Dina McLeod are in charge of the prosecution.

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

COUNT

CHARGE

DEFENDANTS

MAXIMUM PENALTIES

1

Conspiracy to Commit Securities Fraud  (18 U.S.C. § 371)

JASON GALANIS

JOHN GALANIS, a/k/a “Yanni”

JARED GALANIS

GARY HIRST
DEREK GALANIS

YMER SHAHINI

GAVIN HAMELS

Five years in prison and a $250,000 fine or twice the gross gain or loss from the offense

2

Securities Fraud (15 U.S.C. §§ 78j(b) & 78ff; 17 C.F.R. § 240.10b-5; 18 U.S.C. § 2)

JASON GALANIS

JOHN GALANIS, a/k/a “Yanni”

JARED GALANIS

GARY HIRST
DEREK GALANIS

YMER SHAHINI

GAVIN HAMELS

20 years in prison and a $5,000,000 fine or twice the gross gain or loss from the offense

3

Conspiracy to Commit Wire Fraud (18 U.S.C. § 1349)

JASON GALANIS

JOHN GALANIS, a/k/a “Yanni”

JARED GALANIS

GARY HIRST
DEREK GALANIS

YMER SHAHINI

20 years in prison and a $250,000 fine or twice the gross gain or loss from the offense

4

Wire Fraud (18 U.S.C.      §§ 1343 and 2)

JASON GALANIS

JOHN GALANIS, a/k/a “Yanni”

JARED GALANIS

GARY HIRST
DEREK GALANIS

YMER SHAHINI

20 years in prison and a $250,000 fine or twice the gross gain or loss from the offense

5

Investment Adviser Fraud (15 U.S.C. §§ 80b-6 & 80b-17; 18 U.S.C. § 2)

JASON GALANIS

JARED GALANIS

GAVIN HAMELS

Five years in prison and a fine of $10,000

6

Investment Adviser Fraud (15 U.S.C. §§ 80b-6 & 80b-17; 18 U.S.C. § 2)

JASON GALANIS

JARED GALANIS

Five years in prison and a fine of $10,000

7

Investment Adviser Fraud (15 U.S.C. §§ 80b-6 & 80b-17; 18 U.S.C. § 2)

JASON GALANIS

Five years in prison and a fine of $10,000

8

Conspiracy to Commit Securities Fraud  (18 U.S.C. § 371)

JASON GALANIS

JARED GALANIS

Five years in prison and a $250,000 fine or twice the gross gain or loss from the offense

9

Securities Fraud (15 U.S.C. §§ 78j(b) & 78ff; 17 C.F.R. § 240.10b-5; 18 U.S.C. § 2)

JASON GALANIS

JARED GALANIS

20 years in prison and a $5,000,000 fine or twice the gross gain or loss from the offense

DEFENDANT

RESIDENCE

AGE

1. Jason Galanis

Los Angeles, CA

45

1. John Galanis, a/k/a “Yanni”

Oceanside, CA

72

1. Jared Galanis

Baltimore, MD

36

1. Gary Hirst

Lake Mary, FL

63

1. Derek Galanis

Oceanside, CA

43

1. Ymer Shahini

Kosovo

45

1. Gavin Hamels

Encinitas, CA

39

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that TRENDON SHAVERS, a/k/a “pirateat40,” pled guilty before U.S. Magistrate Judge Sarah Netburn to one count of securities fraud stemming from his involvement in a Bitcoin-related Ponzi scheme.  SHAVERS was the founder and operator of Bitcoin Savings and Trust (“BCS&T”), which offered and sold Bitcoin-based investments through the Internet.  In total, SHAVERS fraudulently obtained approximately 146,000 Bitcoin in BCS&T investments, which amounted to approximately $807,380 based on the average price of Bitcoin over the duration of the scheme.  SHAVERS is expected to be sentenced before U.S. District Judge Lewis A. Kaplan on February 3, 2016.

Bitcoin are a decentralized form of electronic currency, existing entirely on the Internet and not in any physical form.  The currency is not issued by any government, bank, or company, but rather is generated and controlled automatically through computer software operating on a “peer-to-peer” network.  Bitcoin transactions are processed collectively by the software-enabled computers composing the network.

U.S. Attorney Preet Bharara said: “Trendon Shavers has admitted that his high-yield Bitcoin investment program yielded high returns for himself rather than his investors.  Instead of reaping gains, his investors were largely swindled out of their money in a cyber-age Ponzi scheme.  Shavers now awaits sentencing for his crime.”

According to the Indictment, other public records, and statements made today in court:

From at least September 2011 up through and including September 2012, SHAVERS operated a Ponzi scheme.  Specifically, SHAVERS solicited investments in BCS&T on the “Bitcoin Forum” – a public, Internet-based forum where, among other things, Bitcoin investment opportunities were posted.  SHAVERS’s offer to investors was straightforward: investors who loaned Bitcoin to BCS&T would be paid up to seven percent interest weekly – an annualized interest rate of 3,641% per year – and investors could withdraw their investments in BCS&T at any time.  SHAVERS claimed that the Bitcoin invested by BCS&T investors would be used to support a Bitcoin market-arbitrage strategy, which included (i) lending Bitcoin to others for a fixed period of time; (ii) trading Bitcoin via online exchanges; and (iii) selling Bitcoin locally via private, off-markets transactions – i.e., “over-the-counter transactions.”  SHAVERS also personally guaranteed that he would cover any losses in the event of a market change.  In truth, SHAVERS largely failed to execute the claimed market arbitrage strategy, failed to honor all of his investors’ redemption requests as well as his personal guarantee, and failed to deliver the agreed-upon rates of interest.

In the end, BCS&T was simply a Ponzi scheme through which SHAVERS used Bitcoin from new investors to make purported interest payments and cover investor withdrawals on outstanding BCS&T investments.  In addition, SHAVERS diverted investors’ Bitcoin for day trading in his own account on a Bitcoin currency exchange, and exchanged investors’ Bitcoin for U.S. dollars to pay his personal expenses.  At the peak of the scheme, SHAVERS raised, and had in his possession, about seven percent of all the Bitcoin that was in public circulation at the time.  At least 48 of approximately 100 investors lost all or part of their investment in BCS&T.

*                      *                      *

SHAVERS, 33, pled guilty to one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as the defendant’s sentence will be determined by the judge.

On September 18, 2014, in a separate civil action, the United States District Court for the Eastern District of Texas entered final judgment against both SHAVERS and BCS&T, and ordered SHAVERS to pay more than $40 million in disgorgement and prejudgment interest, and a civil penalty of $150,000 related to BCS&T.

Mr. Bharara praised the work of the Federal Bureau of Investigation, and thanked the Securities and Exchange Commission for its invaluable 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’s 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.

Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriquez, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced that GALEN MARSH, a private wealth management adviser, pled guilty today in Manhattan federal court to obtaining confidential client information from his employer, a multinational investment bank and financial services company headquartered in Manhattan (the “Bank”), by gaining unauthorized access to certain of the Bank’s computer systems.  Marsh pled guilty to one count of unauthorized access to a computer before U.S. District Judge Kevin Thomas Duffy.

Manhattan U.S. Attorney Preet Bharara said: “Galen Marsh has admitted that he accessed confidential and private account information of hundreds of thousands of his employer’s clients without authorization and to use it for his personal advantage.  Accessing such confidential information through a bank’s computer systems is a federal crime and one to which Marsh has now pled guilty.”

FBI Assistant Director-in-Charge Diego Rodriquez said: “Marsh obtained unauthorized access to confidential data on approximately 730,000 clients from his then-employer. Marsh’s illegal access of this data put the confidential information of those clients at risk when he put the information on his personal server.  Today’s guilty plea should send a message to those who inappropriately obtain and mishandle sensitive information that such actions may not just be improper, they can also be criminal.”

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

MARSH was employed in the private wealth management division of the Bank, initially as a Customer Service Associate (“CSA”) and then as a Financial Advisor (“FA”).  In that capacity, MARSH worked as part of a group of CSAs and FAs at the Bank’s Manhattan office (the “Group”) that provided financial and investment services to particular private wealth management clients of the Bank.  Other similarly structured groups within the private wealth management division provided the same services to the Bank’s other private wealth management clients (together with the Group’s clients, the “Clients”).

The Bank maintained certain computer systems to manage confidential account information regarding the Clients.  Like other FAs and CSAs, MARSH was authorized to access the Client information maintained in the Bank’s computer systems only with respect to Clients of his own Group.  From June 2011 through December 2014, MARSH used the Bank’s computer systems to access, without permission or authority, confidential information about certain Clients serviced by FAs and CSAs outside of his Group.  In order to obtain this unauthorized access to confidential Client information, MARSH used the identification numbers of other Bank branches, groups, and FAs in the Bank’s computer systems.  MARSH conducted a total of approximately 6,000 unauthorized searches in the Bank’s computer systems, and thereby obtained confidential Client information, including names, addresses, telephone numbers, account numbers, fixed-income investment information, and account values, of approximately 730,000 Client accounts at the Bank.  Over a series of dates from June 2011 through December 2014, MARSH uploaded the confidential Client information from the Bank to a personal server at his home in New Jersey.

MARSH illegally accessed the Bank’s confidential client information in order to use it for his personal advantage as a private wealth management adviser at the Bank.  From October 2013 through December 2014, MARSH was engaged in discussions regarding potential employment with two other financial institutions that are competitors of the Bank.

*                      *                      *

MARSH, 31, of Hoboken, New Jersey, faces a maximum of five years in prison and three years of supervised release.  The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  MARSH is scheduled to be sentenced by Judge Duffy on Monday, December 7, 2015, at 10:00 a.m.

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that OCTAVIO LOMBARDO, a/k/a “Otto Lombardo,” pled guilty in Manhattan federal court to one count of wire fraud stemming from his scheme to defraud small business owners of more than $1 million through an advance fee scheme.  In connection with the scheme, LOMBARDO induced more than 30 business owners to pay an upfront due diligence fee that was purportedly necessary to obtain loans for the business owners.  Instead, LOMBARDO used the vast majority of the money he received from the business owners – over $1 million in total – on his own personal expenses, including rental payments, club dues, food, and other personal items.  LOMBARDO was arrested on December 4, 2014, and pled guilty today before United States District Judge Jesse M. Furman.

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

From 2007 through 2013, LOMBARDO engaged in a fraudulent scheme to mislead small business owners into paying an upfront due diligence fee, typically in the amount of $25,000, in connection with loans that LOMBARDO promised to obtain for the small business owners.  During this period, LOMBARDO convinced the business owners he had the ability and expertise to structure investment loans for their businesses through LOMBARDO’s purported exclusive relationships with small community banks across the United States.  In fact, LOMBARDO had no ability to provide such financing, and none of the businesses at issue received a loan through LOMBARDO during this period of time.

In connection with the scheme, LOMBARDO made a series of false and misleading misrepresentations to the business owners, including: (i) that LOMBARDO could obtain interest-only loans in amounts ranging from $1 million to $75 million by consolidating the lending power of several small community banks into a trust, which he would manage through his holding company, Lombardo & Company; (ii) that, in order to structure the loan appropriately, LOMBARDO needed to conduct due diligence of the businesses, including by obtaining corporate and financial documentation, and by conducting site visits; (iii) that LOMBARDO required a non-refundable upfront payment – generally in the amount of $25,000 – to cover the expenses incurred during the due diligence process, including legal and other professional fees, taxes, appraisals, and the like; and (iv) that this fee would be incorporated into the final loan agreement, so that the business owners would ultimately “get back” the upfront payment once the financing was in place.  

As a result of these misrepresentations, LOMBARDO obtained more than $1 million in so-called due diligence payments from more than three dozen business owners.  LOMBARDO spent the vast majority of the due diligence payments on his own personal expenses, including, among other things, rental payments, club dues, food, and other personal items.  For example, LOMBARDO spent more than $300,000 on rental payments for his residence in Brooklyn, more than $100,000 on membership dues for a private gun club located in Manhattan, and more than $50,000 on restaurants and purchases of wine and liquor.

Once he received the due diligence payments, LOMBARDO made a variety of excuses to the business owners – including, among others, that he was having health problems and had been hospitalized, that he was traveling, and that he had a new grandchild – in order to explain the delay in closing the loans.

Ultimately, LOMBARDO did not provide any of the loans to the business owners as promised.

*                      *                      *

LOMBARDO, 68, of Brooklyn, New York, pled guilty to one count of wire fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  LOMBARDO is scheduled to be sentenced by Judge Furman on January 6, 2016 at 3:00 p.m.

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’s 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 Amy Lester and Damian Williams are in charge of the prosecution.  

General Motors Admits to Failing to Disclose Deadly Safety Defect in Its Cars to Consumers and U.S. Regulator

Independent Monitor to Be Appointed to Oversee General Motors’ Reporting of Safety Issues and Public Statements

Attorney General Loretta E. Lynch, Secretary Anthony Foxx of the Department of Transportation, U.S. Attorney Preet Bharara of the Southern District of New York, Administrator Mark R. Rosekind of the National Highway Traffic Safety Administration (NHTSA), Inspector General Calvin L. Scovel III of the U.S. Department of Transportation (DOT-OIG), Special Inspector General Christy Goldsmith Romero of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), and Assistant Director in charge Diego Rodriguez of the FBI’s New York Field Office, announced the filing of criminal charges against General Motors Company (GM or the company), an automotive company headquartered in Detroit, that has designed, manufactured, assembled and sold Chevrolet, Pontiac and Saturn brand vehicles, among others.  GM is charged with concealing a potentially deadly safety defect from its U.S. regulator, the National Highway Traffic Safety Administration (NHTSA), from the spring of 2012 through February 2014, and, in the process, misleading consumers concerning the safety of certain of GM’s cars.  The defect consisted of an ignition switch that had been designed and manufactured with too-low torque resistance and could therefore move easily out of the “Run” position into “Accessory” or “Off” (the defective switch).  When the switch moved out of Run, it could disable the affected car’s frontal airbags – increasing the risk of death and serious injury in certain types of crashes in which airbags were otherwise designed to deploy.  The models equipped with the defective switch were the 2005, 2006 and 2007 Chevrolet Cobalt; the 2005, 2006 and 2007 Pontiac G5; the 2003, 2004, 2005, 2006 and 2007 Saturn Ion; the 2006 and 2007 Chevrolet HHR; the 2007 Saturn Sky; and the 2006 and 2007 Pontiac Solstice.  To date, GM has acknowledged a total of 15 deaths, as well as a number of serious injuries, caused by the defective switch.

U.S. Attorney Bharara also announced a deferred prosecution agreement with GM (the agreement) under which the company admits that it failed to disclose a safety defect to NHTSA and misled U.S. consumers about that same defect.  The admissions are contained in a detailed statement of facts attached to the agreement.  The agreement imposes on GM an independent monitor to review and assess policies, practices and procedures relating to GM’s safety-related public statements, sharing of engineering data and recall processes.  The agreement also requires GM to transfer $900 million to the United States by no later than Sept. 24, 2015, and agree to the forfeiture of those funds pursuant to a parallel civil action also filed today in the Southern District of New York.            

The criminal charges are contained in an information (the information) alleging one count of engaging in a scheme to conceal material facts from NHTSA and one count of wire fraud.  If GM abides by all of the terms of the agreement, the government will defer prosecution on the information for three years and then seek to dismiss the charges.

“Every consumer has the right to expect that car manufacturers are taking their safety seriously,” said Attorney General Lynch.  “The Department of Justice is committed to ensuring that the products Americans buy are safe; that consumers are protected from harm; and that auto companies follow the law.”

“General Motors not only failed to disclose this deadly defect, but as the Department of Justice investigation shows, it actively concealed the truth from NHTSA and the public,” said Transportation Secretary Foxx.  “Today’s announcement sends a message to manufacturers: deception and delay are unacceptable, and the price for engaging in such behavior is high.”

“For nearly two years, GM failed to disclose a deadly safety defect to the public and its regulator,” said U.S. Attorney Bharara.  “By doing so, GM put its customers and the driving public at serious risk.  Justice requires the filing of criminal charges, detailed admissions, a significant financial penalty, and the appointment of a federal monitor.  These measures are designed to make sure that this never happens again.”

“Today’s action strengthens NHTSA’s efforts to protect the driving public,” said Administrator Rosekind.  “It sends a message not only to GM, but to the entire auto industry, that when it comes to safety, telling the full truth is the only option.”

“To the families and friends of those who died and to those who were injured as a result of crashes related to GM’s defective ignition switches, I offer my deepest sympathies for your loss and my highest admiration for the strength you demonstrate every day,” said Inspector General Scovel III.  “As is true for Secretary Foxx and the Department of Transportation, safety is and will remain the highest priority of my office, and we will continue to work relentlessly to ensure accountability throughout the Department and transportation sector.  The OIG is committed to working with our law enforcement and prosecutorial partners in pursuing those who commit criminal violations.  The efforts of this dedicated multi-agency team and the agreement reached with General Motors, and that with Toyota in March 2014, must continue to serve as a clarion call to all auto manufacturers and their suppliers of the need to be vigilant and forthcoming to keep the public safe.”

“General Motors’ criminal conduct found by SIGTARP and our law enforcement partners defies comprehension,” said Special Inspector General Goldsmith Romero.  “Our investigation uncovered that GM learned about a life-threatening ignition switch defect that would cause air bags not to inflate, but concealed the deadly safety defect from its regulator, and from people buying used cars from GM dealers.  The worst part about this tragedy is that it was entirely avoidable.  GM could have significantly reduced the risk of this deadly defect by improving the key design for less than one dollar per vehicle but GM chose not to because of the cost.  Americans stepped up and bailed out General Motors with $50 billion; and General Motors must step up and make substantial corporate changes to prevent anything like this from happening again.  SIGTARP commends U.S. Attorney Bharara for bringing these charges and standing united in the fight against TARP-related crime.”

“GM concealed a safety defect from consumers and regulators, which put drivers at risk,” said Assistant Director in Charge Rodriguez.  “The resolution of this case shows that safety should never take a backseat to expediency.”

According to the allegations in the information, as well as other documents filed today in the Southern District of New York, including the statement of facts:

From the spring of 2012 through February 2014, GM deceived consumers and failed to make a required disclosure to NHTSA, its U.S. regulator, by regarding the connection that certain of its personnel had identified between the defective switch and airbag non-deployment.  GM also falsely represented to consumers that vehicles equipped with the defective switch posed no safety concern.

Early Knowledge of the Defective Switch

GM engineers knew before the defective switch even went into production in 2002 that it was prone to easy movement out of the Run position.  Testing of a prototype showed that the torque return between the Run and Accessory positions fell below GM’s own internal specifications.  But the engineer in charge of the defective switch approved its production anyway.

In 2004 and 2005, as GM employees, media representatives and GM customers began to experience sudden stalls and engine shutoffs caused by the defective switch, GM considered fixing the problem.  However, having decided that the switch did not pose a safety concern, and citing cost and other factors, engineers responsible for decision-making on the issue opted to leave the defective switch as it was and simply promulgate an advisory to dealerships with tips on how to minimize the risk of unexpected movement out of the Run position.  GM even rejected a simple improvement to the head of the key that would have significantly reduced unexpected shutoffs at a price of less than a dollar a car.

At the same time, in June 2005, GM made public statements that, while acknowledging the existence of the defective switch, gave assurance that the defect did not pose a safety concern.

GM’s Knowledge that the Defective Switch Causes Airbag Non-Deployment

By the spring of 2012, GM knew that the defective switch presented a safety defect because it could cause airbag non-deployment in certain GM cars.  Specifically, GM personnel investigating the cause of a series of airbag non-deployment incidents learned that the defective switch could cause frontal airbag non-deployment in at least some model years of the Cobalt, and were aware of several fatal incidents and serious injuries that occurred as a result of accidents in which the defective switch may have caused or contributed to airbag non-deployment.  This knowledge extended well above the ranks of investigating engineers to certain supervisors and attorneys at the company.

GM’s Failure to Disclose the Defect and Recall Affected Cars

Yet not until approximately 20 months later, in February 2014, did GM first notify NHTSA and the public of the connection it had identified between the defective switch and airbag non-deployment incidents.  The company thus egregiously disregarded NHTSA’s five-day regulatory reporting requirement for safety defects.

Moreover, for much of the period during which GM failed to disclose this safety defect, it not only failed to correct its June 2005 assurance that the defective switch posed no safety concern but also actively touted the reliability and safety of cars equipped with the defective switch, with a view to promoting sales of used GM cars.  Although GM sold no new cars equipped with the defective switch during this period, GM dealers were still, from in or about the spring of 2012 through in or about the spring of 2013, selling pre-owned Chevrolet, Pontiac and Saturn brand cars that would later become subject to the February 2014 recalls.  These sales were accompanied by certifications from GM, assuring the unwitting consumers that the vehicles’ components, including their ignition systems and keys, met all safety standards.

GM’s delay in disclosing the defect at issue was the product of actions by certain personnel responsible for shepherding safety defects through GM’s internal recall process, who delayed the recall until GM could fully package, present, explain and handle the deadly problem.  Rather than move swiftly and efficiently toward recall of at least the population of cars known to be affected by the safety defect and thus certainly destined for recall, GM personnel took affirmative steps to keep the company’s internal investigation into airbag non-deployment caused by the defective switch “offline” – outside of GM’s regular recall process.

Moreover, on at least two occasions while the defective switch condition was well known by some within GM but not disclosed to the public or NHTSA, GM personnel made incomplete and therefore misleading presentations to NHTSA assuring the regulator that GM would and did act promptly, effectively and in accordance with its formal recall policy to respond to safety problems – including airbag-related safety defects.

GM’s Acceptance of Responsibility and Cooperation in the Government Investigation

In February 2014, GM finally conducted a recall of approximately 700,000 vehicles affected by the defective switch.  By March 2014, the recall population had grown to more than 2 million vehicles. 

Since February 2014 and the inception of this federal criminal investigation, GM has taken exemplary actions to demonstrate acceptance and acknowledgement of responsibility for its conduct.  GM, among other things, conducted a swift and robust internal investigation, furnished the government with a continuous flow of unvarnished facts gathered during the course of that internal investigation, voluntarily provided, without prompting, certain documents and information otherwise protected by the attorney-client privilege, provided timely and meaningful cooperation more generally in the federal criminal investigation, terminated wrongdoers and established a full and independent victim compensation program that has to date paid out hundreds of millions of dollars in awards. 

*                *                *

U.S. Attorney Bharara praised the outstanding investigative work of SIGTARP, DOT-OIG, NHTSA and the FBI.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force and Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorney Bonnie Jonas, Deputy Chief of the Criminal Division, and Assistant U.S. Attorneys Sarah Eddy McCallum and Edward A. Imperatore are in charge of the prosecution, and Assistant U.S. Attorney Jason H. Cowley, Chief of the Money Laundering and Asset Forfeiture Unit, is responsible for the forfeiture aspects of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, announced the arrest and charge against RAHEEM JONES for possession of a gun after a shooting in New Rochelle, New York that resulted in a victim being shot three times.  JONES was arrested Tuesday by the Westchester County Department of Public Safety and was presented before United States Magistrate Judge Paul E. Davison yesterday and detained.  

U.S. Attorney Preet Bharara said:  “Raheem Jones has been charged with the federal crime of being a felon in possession of a firearm.  As alleged, Jones showed a blatant disregard for public safety when he possessed the gun in a car from which multiple shots were fired, in broad daylight on a busy street in New Rochelle, hitting a victim three times.  Because of Westchester law enforcement’s quick response, this allegedly violent criminal is now off of the street.  I want to thank the Westchester County District Attorney’s Office for their cooperation in this case, as well as the investigative work of the FBI, the Westchester County Department of Public Safety and the New Rochelle Police Department.”

As alleged in the Complaint[1]:

On September 15, 2015, around lunchtime, there was a shooting in the vicinity of Clinton Avenue in New Rochelle.  The shots were fired from the front passenger window of an SUV into another car, hitting an individual in the second car approximately three times.  The individuals in the SUV fled, leading to an area-wide search for the SUV.  Shortly thereafter, an officer with the Westchester County Department of Public Safety located an SUV matching the description of the vehicle used in the shooting, and attempted to pull that SUV over.

The SUV stopped momentarily, and then fled at a high rate of speed.  The officer pursued the SUV in his patrol car.  When the SUV slowed and the man sitting in the front passenger seat of the SUV jumped out of the car, carrying a backpack, the officer pursued that man, later identified as JONES, on foot.  After a short chase, JONES, who had thrown the backpack nearby, was detained outside of a building.  Law enforcement officers found a Smith and Wesson .38 caliber revolver inside of the backpack.     

*          *          *

JONES, 26, of Mount Vernon, was charged with possession of a gun after having committed a felony, which carries a maximum sentence of 10 years in prison.  The statutory maximum penalty 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 outstanding investigative work of the FBI, the Westchester County Department of Public Safety, the Mount Vernon Police Department, and the New Rochelle Police Department.

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

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

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

Loretta E. Lynch, the Attorney General of the United States, Anthony Foxx, the United States Secretary of Transportation, Preet Bharara, the United States Attorney for the Southern District of New York, Mark R. Rosekind, Administrator of the National Highway Traffic Safety Administration (“NHTSA”), Calvin L. Scovel, III, Inspector General of the United States Department of Transportation (“DOT-OIG”), Christy Goldsmith Romero, Special Inspector General of the Office of the Special Inspector General for the Troubled Asset Relief Program (“SIGTARP”), and Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the filing of criminal charges against General Motors Company (“GM” or the “Company”), an automotive company headquartered in Detroit, Michigan, that has designed, manufactured, assembled, and sold Chevrolet, Pontiac, and Saturn brand vehicles, among others.  GM is charged with concealing a potentially deadly safety defect from its U.S. regulator, the National Highway Traffic Safety Administration (“NHTSA”), from the spring of 2012 through February 2014, and, in the process, misleading consumers concerning the safety of certain of GM’s cars.  The defect consisted of an ignition switch that had been designed and manufactured with too-low torque resistance and could therefore move easily out of the “Run” position into “Accessory” or “Off” (the “Defective Switch”).  When the switch moved out of Run, it could disable the affected car’s frontal airbags – increasing the risk of death and serious injury in certain types of crashes in which airbags were otherwise designed to deploy.  The models equipped with the Defective Switch were the 2005, 2006, and 2007 Chevrolet Cobalt; the 2005, 2006, and 2007 Pontiac G5; the 2003, 2004, 2005, 2006, and 2007 Saturn Ion; the 2006 and 2007 Chevrolet HHR; the 2007 Saturn Sky; and the 2006 and 2007 Pontiac Solstice. To date, GM has acknowledged a total of 15 deaths, as well as a number of serious injuries, caused by the Defective Switch.

Mr. Bharara also announced a deferred prosecution agreement with GM (the “Agreement”) under which the Company admits that it failed to disclose a safety defect to NHTSA and misled U.S. consumers about that same defect.  The admissions are contained in a detailed Statement of Facts attached to the Agreement.  The Agreement imposes on GM an independent monitor to review and assess policies, practices, and procedures relating to GM’s safety-related public statements, sharing of engineering data, and recall processes.  The Agreement also requires GM to transfer $900 million to the United States by no later than September 24, 2015, and agree to the forfeiture of those funds pursuant to a parallel civil action also filed today in the Southern District of New York.         

The criminal charges are contained in an Information (the “Information”) alleging one count of engaging in a scheme to conceal material facts from NHTSA and one count of wire fraud.  If GM abides by all of the terms of the Agreement, the Government will defer prosecution on the Information for three years and then seek to dismiss the charges.

Attorney General Loretta E. Lynch said: “Every consumer has the right to expect that car manufacturers are taking their safety seriously.  The Department of Justice is committed to ensuring that the products Americans buy are safe; that consumers are protected from harm; and that auto companies follow the law.”

Transportation Secretary Anthony Foxx said:  “General Motors not only failed to disclose this deadly defect, but as the Department of Justice investigation shows, it actively concealed the truth from NHTSA and the public.  Today’s announcement sends a message to manufacturers: Deception and delay are unacceptable, and the price for engaging in such behavior is high.”

Manhattan U.S. Attorney Preet Bharara said:  “For nearly two years, GM failed to disclose a deadly safety defect to the public and its regulator.  By doing so, GM put its customers and the driving public at serious risk.  Justice requires the filing of criminal charges, detailed admissions, a significant financial penalty, and the appointment of a federal monitor.  These measures are designed to make sure that this never happens again.”

NHTSA Administrator Mark R. Rosekind said:  “Today’s action strengthens NHTSA’s efforts to protect the driving public.  It sends a message not only to GM, but to the entire auto industry, that when it comes to safety, telling the full truth is the only option.”

DOT Inspector General Calvin L. Scovel, III, said:  “To the families and friends of those who died and to those who were injured as a result of crashes related to GM’s defective ignition switches, I offer my deepest sympathies for your loss and my highest admiration for the strength you demonstrate every day.  As is true for Secretary Foxx and the Department of Transportation, safety is and will remain the highest priority of my office, and we will continue to work relentlessly to ensure accountability throughout the Department and transportation sector.  The OIG is committed to working with our law enforcement and prosecutorial partners in pursuing those who commit criminal violations. The efforts of this dedicated multi-agency team and the agreement reached with General Motors, and that with Toyota in March 2014, must continue to serve as a clarion call to all auto manufacturers and their suppliers of the need to be vigilant and forthcoming to keep the public safe.”

SIGTARP Special Inspector General Christy Goldsmith Romero said:  “General Motors’ criminal conduct found by SIGTARP and our law enforcement partners defies comprehension.   Our investigation uncovered that GM learned about a life-threatening ignition switch defect that would cause air bags not to inflate, but concealed the deadly safety defect from its regulator, and from people buying used cars from GM dealers.  The worst part about this tragedy is that it was entirely avoidable.  GM could have significantly reduced the risk of this deadly defect by improving the key design for less than one dollar per vehicle but GM chose not to because of the cost.  Americans stepped up and bailed out General Motors with $50 billion; and General Motors must step up and make substantial corporate changes to prevent anything like this from happening again. SIGTARP commends U.S. Attorney Bharara for bringing these charges and standing united in the fight against TARP-related crime.”

FBI Assistant Director-in-Charge Diego Rodriguez said:  “GM concealed a safety defect from consumers and regulators, which put drivers at risk.  The resolution of this case shows that safety should never take a backseat to expediency.”

According to the allegations in the Information, as well as other documents filed today in Manhattan federal court, including the Statement of Facts:

From the spring of 2012 through February 2014, GM deceived consumers and failed to make a required disclosure to NHTSA, its U.S. regulator, by regarding the connection that certain of its personnel had identified between the Defective Switch and airbag non-deployment.  GM also falsely represented to consumers that vehicles equipped with the Defective Switch posed no safety concern.

Early Knowledge of the Defective Switch

GM engineers knew before the Defective Switch even went into production in 2002 that it was prone to easy movement out of the Run position.  Testing of a prototype showed that the torque return between the Run and Accessory positions fell below GM’s own internal specifications.  But the engineer in charge of the Defective Switch approved its production anyway.

In 2004 and 2005, as GM employees, media representatives, and GM customers began to experience sudden stalls and engine shutoffs caused by the Defective Switch, GM considered fixing the problem.  However, having decided that the switch did not pose a safety concern, and citing cost and other factors, engineers responsible for decision-making on the issue opted to leave the Defective Switch as it was and simply promulgate an advisory to dealerships with tips on how to minimize the risk of unexpected movement out of the Run position.  GM even rejected a simple improvement to the head of the key that would have significantly reduced unexpected shutoffs at a price of less than a dollar a car.

At the same time, in June 2005, GM made public statements that, while acknowledging the existence of the Defective Switch, gave assurance that the defect did not pose a safety concern.

GM’s Knowledge that the Defective Switch Causes Airbag Non-Deployment

By the spring of 2012, GM knew that the Defective Switch presented a safety defect because it could cause airbag non-deployment in certain GM cars.  Specifically, GM personnel investigating the cause of a series of airbag non-deployment incidents learned that the Defective Switch could cause frontal airbag non-deployment in at least some model years of the Cobalt, and were aware of several fatal incidents and serious injuries that occurred as a result of accidents in which the Defective Switch may have caused or contributed to airbag non-deployment.  This knowledge extended well above the ranks of investigating engineers to certain supervisors and attorneys at the Company.

GM’s Failure to Disclose the Defect and Recall Affected Cars

Yet not until approximately 20 months later, in February 2014, did GM first notify NHTSA and the public of the connection it had identified between the Defective Switch and airbag non-deployment incidents.  The Company thus egregiously disregarded NHTSA’s five-day regulatory reporting requirement for safety defects.

Moreover, for much of the period during which GM failed to disclose this safety defect, it not only failed to correct its June 2005 assurance that the Defective Switch posed no safety concern but also actively touted the reliability and safety of cars equipped with the Defective Switch, with a view to promoting sales of used GM cars.  Although GM sold no new cars equipped with the Defective Switch during this period, GM dealers were still, from in or about the spring of 2012 through in or about the spring of 2013, selling pre-owned Chevrolet, Pontiac, and Saturn brand cars that would later become subject to the February 2014 recalls.  These sales were accompanied by certifications from GM, assuring the unwitting consumers that the vehicles’ components, including their ignition systems and keys, met all safety standards.

GM’s delay in disclosing the defect at issue was the product of actions by certain personnel responsible for shepherding safety defects through GM’s internal recall process, who delayed the recall until GM could fully package, present, explain, and handle the deadly problem.  Rather than move swiftly and efficiently toward recall of at least the population of cars known to be affected by the safety defect and thus certainly destined for recall, GM personnel took affirmative steps to keep the Company’s internal investigation into airbag non-deployment caused by the Defective Switch “offline” – outside of GM’s regular recall process.

Moreover, on at least two occasions while the Defective Switch condition was well known by some within GM but not disclosed to the public or NHTSA, GM personnel made incomplete and therefore misleading presentations to NHTSA assuring the regulator that GM would and did act promptly, effectively, and in accordance with its formal recall policy to respond to safety problems – including airbag-related safety defects.

GM’s Acceptance of Responsibility and Cooperation in the Government Investigation

In February 2014, GM finally conducted a recall of approximately 700,000 vehicles affected by the Defective switch.  By March 2014, the recall population had grown to more than 2 million vehicles.

Since February 2014 and the inception of this federal criminal investigation, GM has taken exemplary actions to demonstrate acceptance and acknowledgement of responsibility for its conduct.  GM, among other things, conducted a swift and robust internal investigation, furnished the Government with a continuous flow of unvarnished facts gathered during the course of that internal investigation, voluntarily provided, without prompting, certain documents and information otherwise protected by the attorney-client privilege, provided timely and meaningful cooperation more generally in the federal criminal investigation, terminated wrongdoers, and established a full and independent victim compensation program that has to date paid out hundreds of millions of dollars in awards.

*                *                *

Mr. Bharara praised the outstanding investigative work of SIGTARP, DOT-OIG, NHTSA, and the FBI.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force and Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorney Bonnie Jonas, Deputy Chief of the Criminal Division, and Assistant U.S. Attorneys Sarah Eddy McCallum and Edward A. Imperatore are in charge of the prosecution, and Assistant U.S. Attorney Jason H. Cowley, Chief of the Money Laundering and Asset Forfeiture Unit, is responsible for the forfeiture aspects of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, and Shantelle P. Kitchen, the Special Agent-in-Charge of the New York Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced that PATRICK WHITE was sentenced today by the United States District Judge Cathy Seibel to six months in prison on payroll tax fraud charges.

WHITE previously pled guilty to one count of failing to pay payroll taxes accumulated by his commercial construction business.

According to the Information previously filed in White Plains federal court: WHITE operates R & L Construction Inc., a Yonkers based contracting company.  From 2005 through 2011, R&L Construction operated a scheme whereby some employee’s wages were properly reported, while others’ were not.  In so doing, R & L Construction accumulated approximately $3,758,000 in unpaid payroll tax liabilities.

In addition to the prison term, WHITE was sentenced to one year of home confinement, and was ordered to liquidate certain real property to satisfy the $3,758,000 owed to the IRS.

*          *         *

Mr. Bharara praised the outstanding efforts of IRS-CI. He also thanked U.S. Department of Justice’s Tax Division for its significant assistance in the investigation.

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

Preet Bharara, the United States Attorney for the Southern District of New York; William J. Bratton, Commissioner of the New York Police Department (“NYPD”); James J. Hunt, Special Agent in Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”); Glenn Sorge, Acting Special Agent in Charge Homeland Security Investigations (“HSI”) New York; Robert E. Perez, Director of the New York Field Office of Customs and Border Protection (“CBP”); and Joseph Fucito, Sheriff of the City of New York, announced today the unsealing of an Indictment against ten defendants involved in a massive drug distribution ring involving smokable synthetic cannabinoids (“SSC”).  The scheme, which operated in all five boroughs of New York City, allegedly involved the unlawful importation of at least 100 kilograms of illegal synthetic compounds, an amount sufficient to produce approximately 1,300 kilograms of dried SSC product, or approximately 260,000 SSC retail packets.  Coordinated with the unsealing of these criminal charges were searches of five processing facilities and warehouses used to process, store, and distribute SSC, as well as inspections of over 80 stores and bodegas around New York City.

Six of the defendants were arrested last night in connection with today’s charges.  Those defendants will be presented in Manhattan federal court before U.S. Magistrate Judge Sarah Netburn later this afternoon.  MOHAMED ALMATHEEL, HAMID MOSHREF, ABDULLAH DEIBAN, AND FARIS NASSER KASSIM have not yet been arrested.

 Manhattan U.S. Attorney Preet Bharara said:  “Today, we launch an aggressive assault on a public health crisis that is reaching epidemic proportions: the scourge of dangerous new drugs that are killing people and sending thousands upon thousands to emergency rooms in New York City and around the country.  Despite sometimes being called synthetic marijuana, this is not marijuana – it can have unpredictably severe and even lethal effects.  What is more, use of these drugs aggravates all manner of other societal ills: it is entering prisons; preying on the homeless; burdening our hospitals and emergency rooms; fueling addiction; exacerbating mental health problems; and increasing risks to cops who must deal with people high on this poison.  Synthetic cannabinoids are a deadly serious problem that demands an equally serious response.  Today’s collective action is just the start of that response, one that will not end until this poison in a packet no longer endangers our community.”

NYPD Commissioner William Bratton said:  “This is a scourge on our society, affecting the most disadvantaged neighborhoods and our most challenged citizens. It affects teenagers in public housing, homeless in the city shelter system, and it’s quite literally flooding our streets. This is marketed as synthetic marijuana, some call it K2. It is sold by the names of Galaxy, Diamond, Rush, and Matrix. But its real name is poison.”       

DEA Special Agent in Charge James J. Hunt said:  “There is a misconception that synthetic cannabinoids, known on the street as ‘synthetic marijuana,’” ‘K2,’ and ‘spice,’ are safe.  Synthetic cannabinoids are anything but safe.  They are a toxic cocktail of lethal chemicals created in China and then disguised as plant material here in New York City. Today’s arrests represent law enforcement’s efforts to combat this emerging public threat.  By investigating and arresting manufacturers and distributors of ‘spice’ in the city, we have cut off the accessibility for those feeding the beast.”                            

HSI Acting Special Agent in Charge Glenn Sorge said:  “Synthetic marijuana is rapidly becoming a huge problem in our communities.  It is cheap and dangerous, especially for our teens and young adults.  We are working side by side with our law enforcement partners both here and abroad to combat the sale of this hazardous alternative to marijuana.”

CBP Director Robert Perez said:  “Today’s actions are a textbook example of the positive results that come with interagency collaboration among the law enforcement community.  The expertise of our CBP Officers, specifically their targeting and analysis capabilities, resulted in a major investigation involving multiple agencies at all levels of government; the arrest of six individuals, and the takedown of a significant drug trafficking organization.”

Sheriff Joseph Fucito said:  “The Sheriff’s Office stands ready with our partners in law enforcement in addressing the sudden proliferation of synthetic drugs sales in licensed retail locations throughout New York City. Owners and operators of licensed locations have an obligation to keep illegal and highly dangerous substances out of the hands of our children. The Sheriff’s Office is committed to agency partnerships and enforcement strategies that advance this goal.”                  

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

This scheme involves the unlawful importation, manufacture, and distribution of massive quantities of smokable synthetic cannabinoids (“SSC”), containing controlled substances, throughout the New York City area and elsewhere. ABDULLAH DEIBAN, FARIS NASSER KASSIM, MORAD NASSER KASSIM, a/k/a “BK,” NAGEAB SAEED, WALIDE SAEED, MOHOMED SAEED, HAMID MOSHREF, MOHAMED SALEM, MOHAMED ALMATHEEL, and FIKRI NAGI, the defendants, were members of an international organization that trafficked, manufactured, and distributed SSC (the “Organization”).      

DEIBAN, FARIS NASSER KASSIM, and MORAD NASSER KASSIM arranged the importation of illegal synthetic compounds in powdered form from China to the United States via commercial delivery services.After the chemical compounds arrived in the United States, DEIBAN, FARIS NASSER KASSIM, and MORAD NASSER KASSIM then arranged for them to be retrieved and transported to a processing facility, where they directed other co-conspirators to mix the illegal synthetic compounds with chemical solvents including acetone and/or flavoring additives and to spray the resulting liquid mixture onto tea leaves. DEIBAN, FARIS NASSER KASSIM, and MORAD NASSER KASSIM also organized and supervised the processing facility located on Light Street in the Bronx, New York, where co-conspirators acting under their direction bundled the resulting dried SSC product into retail packets bearing colorful logos and brand names and arranged for the transfer of bulk quantities of the SSC retail packets to warehouses controlled by wholesale distributors.The SSC retail packets were sold under names such as “AK-47,” “Blue Caution,” “Green Giant,” “Geeked Up,” “Psycho,” “Red Eye,” and “Black Extreme,” each containing between approximately three and six grams of product, and sometimes marked “not for human consumption,” or “potpourri.” The illegal SSC retail packets were sold to individual customers for approximately $5 per packet.

NAGEAB SAEED, WALIDE SAEED, and MOHOMED SAEED were among the Organization’s wholesale distributors.NAGEAB SAEED, WALIDE SAEED, and MOHOMED SAEED were responsible for coordinating the distribution of the retail SSC packets to more than 70 retail locations located within the five boroughs of New York City.NAGEAB SAEED, WALIDE SAEED, and MOHOMED SAEED purchased bulk quantities of retail SSC packets from the Organization’s manufacturers, prepared them for delivery, and organized their distribution to retail sellers by directing the Organization’s transporters.

AMID MOSHREF, MOHAMED SALEM, and MOHAMED ALMATHEEL were among the Organization’s transporters.MOSHREF, SALEM, and ALMATHEEL were responsible for moving bulk quantities of SSC retail packets from warehouses controlled by NAGEAB SAEED, WALIDE SAEED, and MOHOMED SAEED to retail sellers throughout New York City.FIKRI NAGI, the defendant, was one of the Organization’s retail sellers.NAGI ordered large quantities of SSC retail packets from NAGEAB SAEED, WALIDE SAEED, and MOHOMED SAEED for resale at retail locations.

Between September 2014 and September 2015, the Organization imported at least 100 kilograms of illegal synthetic compounds, an amount sufficient to produce approximately 1,300 kilograms of dried SSC product, or approximately 260,000 SSC retail packets.

SSC are widely accessible because they are inexpensive and commonly sold at otherwise legitimate retail locations.The colorful logos used on the SSC retail packets and the flavors used, such as lime, strawberry, and blueberry, make SSC attractive to teenagers and young adults. Physical effects of SSC include agitation, rapid heart rate, confusion, dizziness, nausea and vomiting, paranoia, panic attacks, and acute kidney injury.In addition, SSC products have inconsistent potencies, often containing more than one synthetic compound, and are sometimes laced with other toxic chemicals.In a recent two-month period, use of SSC resulted in 2,300 emergency room visits in New York State.Nationally, calls to poison centers in the United States related to synthetic cannabinoid use between January and May 2015 increased 229% over the same period in 2014.

Charts identifying each defendant, the charges, and the maximum penalties are attached to this release.  The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.  The case is assigned to U.S. District Judge Thomas Griesa.

U.S. Attorney Preet Bharara thanked the DEA, the NYPD, HSI, CBP, and the Office of the Sheriff of the City of New York for their work in the year-long investigation, which he noted is ongoing.  The DEA’s New York Organized Crime Drug Enforcement Strike Force also played an important role in today’s enforcement actions.  The Strike Force is comprised of agents and officers of the DEA, NYPD,  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. Marshals 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.      

The case is being prosecuted by the Office’s Narcotics Unit.  Assistant U.S. Attorneys Negar Tekeei, Alexander Rossmiller, Katherine Reilly, and Max Nicholas are in charge of the prosecution.  Assistant U.S. Attorney Niketh Velamoor of the Office’s Money Laundering and Asset Forfeiture Unit is responsible for the forfeiture of assets.

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

U.S. v. Deiban, et al.

COUNT

CHARGE

DEFENDANTS

MAXIMUM PENALTIES

1

Conspiracy to Distribute Narcotics (21 U.S.C. § 846)

ABDULLAH DEIBAN,

FARIS NASSER KASSIM,

MORAD NASSER KASSIM

   a/k/a “BK,”

NAGEAB SAEED,

WALIDE SAEED,

MOHOMED SAEED,

HAMID MOSHREF,

MOHAMED SALEM,

MOHAMED ALMATHEEL, and FIKRI NAGI

20 years in prison

Defendants’ Ages and Residencies

DEFENDANT

RESIDENCE

AGE

1. Murad Nasser Kassim

29

1. Nageab Saeed

26

1. Walide Saeed

30

1. Mohamed Saeed

31

1. Mohamed Abdullah Salem

47

1. Fikri Yahwa Nagi

31

1. Abdullah Deiban

35

1. Faris Nasser Kassim

32

1. Mohamed Almatheel

Unknown

1. Hamid Moshref

Unknown

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that PED ABGHARI, a/k/a “Ted Allen,” and JUSTIN ROMANO pled guilty for their roles in orchestrating a massive mortgage modification scheme that collectively defrauded over 8,000 homeowners out of over $18.5 million.  ABGHARI and ROMANO each pled guilty to wire fraud and conspiracy to commit wire fraud, and ABGHARI also pled guilty to misprision of a felony.  ROMANO pled on September 14, 2015, and ABGHARI pled on September 15, 2015, before U.S. District Judge. John F. Keenan.

Manhattan U.S. Attorney Preet Bharara said: “As they have now admitted, Ped Abghari and Justin Romano took advantage of thousands of homeowners under water with debt and in need of assistance from the Home Affordable Modification Program and similar mortgage modification programs.  Instead of helping to lift desperate homeowners out of debt, Abghari and Romano pushed them deeper in through exorbitant fees for mortgage modification services they never intended to provide.  More than 8,000 homeowners were victimized by the defendants’ greed, but thanks to the extraordinary efforts of the Office of the Special Inspector General for the Troubled Asset Relief Program, those victims now can find some comfort in knowing that those who preyed on their suffering have been forced to admit to their crimes.”

According to the Indictment, and statements made at the plea proceedings:

The Home Affordable Modification Program

As a result of the financial crisis and collapse of the housing bubble in 2008, Congress enacted the Home Affordable Modification Program (“HAMP”), which was to be funded through the Troubled Asset Relief Program (“TARP”).  HAMP permits qualified home owners to obtain mortgage relief.  Specifically, HAMP seeks to prevent foreclosure by modifying troubled loans to achieve monthly payments the homeowner can afford.

Pursuant to HAMP, any homeowner may apply to his or her mortgage provider by completing a short form and submitting it, along with supporting paperwork, to the homeowner’s mortgage provider.  HAMP further sets guidelines for lenders to follow in determining eligibility, such as guidelines based on the homeowner’s income and the principal balance remaining on the mortgage.  Pursuant to HAMP, only a homeowner’s lender may determine the homeowner’s eligibility for a modification and, if appropriate, the modified rate and monthly payment for which the homeowner is eligible.

HAMP applications are readily available online as well as in many local banks.  Submitting an application is, by law, free of charge to the homeowner.  Virtually all mortgage providers are required to participate in the HAMP program and accept HAMP applications.

If a HAMP applicant is approved, he or she receives a reduced monthly mortgage payment set by the lender.  If the HAMP applicant is not eligible for a modification, the application may be rejected.  Common reasons for rejection of a HAMP application include that the homeowner earns too much income to qualify or has not demonstrated sufficient financial hardship or need for a modification.

Mortgage Modification Fraud

PED ABGHARI, a/k/a “Ted Allen,” was a president and owner of an Irvine, California, company that offered purported mortgage modification services (the “Telemarketing Firm”).    JUSTIN ROMANO held himself out as the president of two purported law firms (the “Purported Law Firms”), based in Holbrook, New York, and Sayville, New York, which offered purported mortgage modification services in conjunction with the Telemarketing Firm.

From at least January 2011 through May 2014, through the Telemarketing Firm and the Purported Law Firms, ABGHARI and ROMANO, among others, perpetrated a scheme to defraud homeowners in dire financial straits who were seeking relief through HAMP and other mortgage relief programs.  Through a series of false and fraudulent representations, the defendants duped thousands of homeowners into paying thousands of dollars each in up-front fees in exchange for little or no service from the defendants or their companies.  In total, through their scheme, the defendants obtained over $18.5 million from more than 8,000 victim-homeowners throughout the United States.

Through the Telemarketing Firm, ABGHARI and others 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.  ABGHARI and others then caused the Telemarketing Firm to send, by e-mail, false and fraudulent solicitation letters 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 the direction of ABGHARI and ROMANO, among others, the Telemarketing Firm’s telemarketer and sales people (the “Sales Staff”) called homeowners and/or answered telephone calls from homeowners who received the Telemarketing Firm’s fraudulent solicitations.  During these calls, in an effort to convince the homeowners to pay up-front fees, the defendants, through the Sales Staff, regularly caused various false and fraudulent representations to be made to homeowners, including that (a) the homeowners were retaining a “law firm” and an “attorney” who would complete the HAMP application and negotiate aggressively on the homeowners’ behalf with banks to modify the terms of the homeowners’ mortgages; (b) the defendants would “pre-approve” the homeowners for a guaranteed modification through HAMP; (c) the defendants employed underwriters who would calculate and guarantee the homeowners a new, modified rate and monthly mortgage payment; and (d) the defendants’ mortgage modification services were free, and the up-front fees paid by the homeowners would be paid directly to the homeowners’ lenders.  In truth and in fact, and as ABGHARI and ROMANO well knew, all of these representations were false and fraudulent.

*          *          *

ABGHARI, 38, of Irvine, California, and ROMANO, 41, of Blue Point, New York, each pled guilty to one count of conspiracy to commit wire fraud and one count of wire fraud, each of which carries a maximum sentence of twenty years in prison.  ABGHARI also pled guilty to one count of misprision of a felony, which carries a maximum sentence of three years in prison.  Sentencings for ABGHARI and ROMANO have been set for January 14, 2016.

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

The remaining defendant charged for his role in the scheme, Dionysius Fiumano, a/k/a “D,” is scheduled to begin trial on December 9, 2015, before Judge Keenan.  The charges pending against Fiumano are merely allegations, and he is presumed innocent unless and until proven guilty.

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 B. Diskant and Joshua A. Naftalis are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, William P. Offord, the Special Agent-in-Charge of the Boston Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), and Diego Rodriguez, Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the arrests of DARCY WEDD and ERDOLO EROMO, the CEO and Senior Vice-President of Business Development, respectively, at a mobile aggregation company based in the United States (the “U.S. Mobile Aggregator”), for their participation in a scheme to charge mobile phone customers millions of dollars in monthly fees for unsolicited, recurring text messages without the customers’ knowledge or consent  – a practice known as “auto-subscribing.”  EROMO was arrested this morning in California, and is expected to be presented today in federal court in Los Angeles before United States Magistrate Judge John E. McDermott.  WEDD was arrested this afternoon in New York, and is expected to be presented today in federal court in New York before United States Magistrate Judge Ronald L. Ellis.  Also named in the Indictment were CHRISTOPHER GOFF, MICHAEL PEARSE, YONGCHAO LIU, a/k/a “Kevin Liu,” and YONG JASON LEE, a/k/a “Jason Lee,” all of whom were previously charged in a criminal complaint for their respective roles in the scheme.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Darcy Wedd, Erdolo Eromo and their co-conspirators engaged in a practice known as ‘auto-subscribing,’ forcing mobile phone users to pay charges for unsolicited and unwanted text messaging services, including horoscopes and celebrity gossip.  Although the text messages were often trivial, what the defendants allegedly did was far from a joking matter.  Their criminal scheme allegedly fleeced hundreds of thousands of everyday customers from around the country out of millions of dollars.”

IRS Special Agent-in-Charge William Offord said: “Criminals rely more and more on technology to facilitate their fraud schemes. Those considering this type of cybercrime should take note: “auto-subscribing” scams could mean “auto-arrest,” conviction and jail time.”

FBI Assistant Director-in-Charge Diego Rodriguez said: “As alleged, the defendants and their co-conspirators profited in the sum of tens of millions of dollars from the scheme to charge mobile phone customers monthly fees for unsolicited text messages.  Consumer fraud like this can have devastating impacts on consumers, businesses and the integrity of the mobile phone industry.”

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

The Auto-Subscription Scheme

From in or about 2011, through in or about 2013, WEDD, EROMO, GOFF, PEARSE, LIU, LEE, and other co-conspirators engaged in a multimillion-dollar scheme to defraud consumers by placing unauthorized charges for premium text messaging services on consumers’ cellular phone bills, without the consumers’ knowledge or consent, through a practice known as “auto-subscribing.”

During the relevant time period, LEE and two other co-conspirators (“CC-1” and “CC-2”) worked for a company that offered premium text messaging services to mobile phone customers (the “Content Provider”).  WEDD, EROMO, GOFF, and another co-conspirator (“CC-3”) worked for the U.S. Mobile Aggregator.  PEARSE and LIU worked for a mobile aggregator based in Australia (the “Australian Mobile Aggregator”).  Mobile aggregators compile, or “aggregate,” charges for premium text messaging services – such as monthly horoscopes, celebrity gossip, and trivia facts – on consumers’ mobile phone bills.

In or about 2010, CC-1 decided to begin auto-subscribing mobile phone users to the Content Provider’s premium text messaging services in order to boost the Content Provider’s sagging revenues.  CC-1 approached PEARSE and LIU and asked them to build a computer program that could spoof the required consumer authorizations for premium text messaging services – i.e., a program that could generate the text message correspondence that one would ordinarily see if a consumer was genuinely signing up to receive the services.  PEARSE and LIU agreed to build the program (the “Auto-Subscription Platform”), which was operational by in or about the middle of 2011.  In or about July 2011, CC-1 approached GOFF, who was the account manager for the Content Provider at the U.S. Mobile Aggregator, in order to obtain a large volume of mobile phone numbers to run through the Auto-Subscription Platform.  GOFF sent CC-1 hundreds of thousands of phone numbers, in exchange for payment, for the purpose of auto-subscribing consumers.

In or about October 2011, CC-1 met with WEDD and told him, in sum and substance, that CC-1 wanted to auto-subscribe consumers through the U.S. Mobile Aggregator’s billing platform and needed additional phone numbers to do so.  WEDD agreed to assist CC-1 in exchange for an up-front payment of approximately $100,000 and a percentage of the auto-subscription proceeds.  WEDD further told CC-1, in sum and substance, that CC-3, who was the Vice President of Compliance and Consumer Protection for the U.S. Mobile Aggregator, would provide phone numbers to CC-1 and that all payments needed to go through CC-3.  WEDD later received his portion of the payments from CC-1 via CC-3.

After CC-1 received phone numbers from WEDD and CC-3, CC-1 passed them on to LEE, the Chief Technology Officer of the Content Provider, who was responsible for verifying that the numbers were still valid and active, and for sorting and filtering the numbers to make it easier to run them through the Auto-Subscription Platform.  After LEE performed these functions, CC-1 sent the numbers to PEARSE and LIU to be run through the Auto-Subscription Platform.

CC-1 also met with EROMO, at the direction of WEDD.  EROMO told CC-1, in sum and substance, that EROMO knew about the plan to auto-subscribe consumers and requested $10,000 in cash to migrate each of CC-1’s premium text messaging services to a different billing platform at the U.S. Mobile Aggregator to facilitate the auto-subscriptions.  EROMO and CC-3 also sold CC-1 and CC-2 so-called “blacklists” or “ninja lists” for approximately $10,000 each.  The blacklists or ninja lists, which were lists of phone numbers that should not be auto-subscribed, included phone numbers belonging to executives at the mobile phone carriers and people at mobile industry compliance groups, who would likely initiate an audit if they noticed that they had been auto-subscribed to a premium text messaging service that they had not authorized.  To pay EROMO for his assistance, CC-1 sent, or caused to be sent, several cash payments to EROMO’s residence through the mail.

The auto-subscription scheme affected hundreds of thousands of consumers and generated tens of millions of dollars in proceeds, which the defendants apportioned among themselves and were used to fund a lavish lifestyle of expensive vacations and gambling.

***

WEDD, EROMO,  GOFF,  PEARSE,  LIU,  and LEE  are each charged with one count of conspiracy to commit wire fraud and mail fraud, and one count of wire fraud, each of which carries a maximum term of 20 years in prison.  WEDD, EROMO, and GOFF are also each charged with one count of conspiracy to commit money laundering, which carries a maximum term 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.

GOFF and LEE were arrested on May 27, 2015.  PEARSE and LIU reside in Australia and have not yet been arrested.

Mr. Bharara praised the investigative work of the IRS-CI and the FBI, and expressed his sincere gratitude to the Federal Trade Commission for their support and assistance with the investigation.  He also thanked the U.S. Attorney’s Office for the Central District of California for their help in coordinating the arrests of the defendants.

The prosecution of this case is being overseen by the Office’s Complex Frauds and Cybercrime Unit.Assistant U.S. Attorneys Christian R. Everdell and Sarah E. Paul are in charge of the prosecution.Assistant U.S. Attorney Edward B. Diskant of the Office’s Money Laundering and Asset Forfeiture Unit is in charge of the forfeiture aspects of the case.

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

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

Preet Bharara, the United States Attorney for the Southern District of New York and Robert J. Sica, the Special Agent in Charge of the New York Office of the United States Secret Service (“USSS”), announced today the filing of a criminal complaint against TIMOTHY SEDLAK for attempting to gain unauthorized access to the computer network of a global charitable organization based in New York, New York (the “Organization”).  SEDLAK was arrested in Ocoee, Florida in the evening of September 11, 2015.  He will be presented later today in federal court in Orlando, Florida before United States Magistrate Judge Gregory J. Kelly.   

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

From in or about June 2015, up to and including in or about July 2015, computers associated with two particular internet protocol addresses (the “IP Addresses”) made nearly four hundred thousand attempts to gain unauthorized access to the Organization’s computer network.  As a result, numerous Organization employees experienced difficulty accessing their Organization email accounts, and were disrupted in their ability to conduct regular business functions.  Both of the IP Addresses were subscribed to SEDLAK at SEDLAK’s residence in Florida (the “Sedlak Residence”)

In particular, between June 22, 2015 and July 8, 2015, from one of the IP Addresses, there were approximately 195,000 attempts to log into approximately twenty email accounts of the Organization.  Between July 8, 2015 and July 10, 2015, from the other IP Address, there were an additional approximately 195,000 attempts to log into approximately six email accounts of the Organization.  SEDLAK has never been employed by the Organization, and was not authorized to access any email accounts of the Organization.

On or about September 11, 2015, USSS agents executed a search warrant at the Sedlak Residence, from which they seized, among other things, (i) approximately 30 computers connected to the same internal network, which enabled each computer to communicate with the others (the “Sedlak Computers”); (ii) notes pertaining to the Organization, an executive of the Organization (“Individual-1”) and an individual who has been publicly affiliated with the Organization (“Individual-2”), including e-mail addresses, registrant information for certain website domain names, and certain IP address information associated with the Organization, Individual-1 and/or Individual-2; and (iii) lists of e-mail addresses and e-mail servers, many of which included the word “jihad.”  The Sedlak Computers contained, among other things, a list of certain Organization employees’ email account usernames, and a “brute force” password-cracking tool.  Such a tool is designed to launch a relentless barrage of potential passwords at an email account in an attempt to guess the account’s password.

On or about September 11, 2015, USSS agents interviewed SEDLAK, who claimed to be using the Sedlak Computers to conduct “research” into charitable organizations in the course of his work as a private investigator.  In particular, SEDLAK claimed to be trying to determine if such organizations are unintentionally financing jihadist groups by sending, to charitable organizations in the Middle East, funds which are then seized by jihadist groups.  When asked about notes pertaining to Individual-1 and Individual-2 found at the Sedlak Residence, SEDLAK claimed that he came across such information in his “research” into the financing of jihadist groups.  SEDLAK claimed that he hoped to sell the information he found.

*                *                *

SEDLAK, 42, of Ocoee, Florida, is charged with one count of attempted unauthorized access to a computer, which carries a maximum sentence of five years.  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 outstanding investigative work of the U.S. Secret Service.  Mr. Bharara also noted that the investigation remains ongoing.

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.

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ROBERT LUSTYIK was sentenced today in White Plains federal court by U.S. District Judge Vincent Briccetti to 5 years in prison, to be served consecutively with a ten year federal sentence imposed on him previously in the District of Utah.  LUSTYIK was sentenced for his convictions arising out of a bribery scheme during which he sold confidential law enforcement information in exchange for cash and the promise of additional cash.

U.S. Attorney Preet Bharara said:  “Decades of honest, hard work by thousands of FBI Special Agents dedicated to the pursuit of justice have earned the FBI a well-deserved reputation for public service and integrity.  Robert Lustyik’s criminal conduct, driven by greed and corruption, displayed  a disdain for the integrity for which the FBI stands.  Today, he was held accountable for putting his own greedy self-interest above the interests of the public he served.”    

According to the Complaint, the Indictment, court hearings, and today’s proceedings:

LUSTYIK was a Special Agent with the Federal Bureau of Investigation (“FBI”) who worked on the counterintelligence squad in the White Plains Resident Agency.  Johannes Thaler was LUSTYIK’s friend, and Rizve Ahmed was an acquaintance of Thaler.  From in or about September 2011 through March 2012, LUSTYIK, Thaler, and Ahmed engaged in a bribery scheme.  As part of the scheme, LUSTYIK and Thaler solicited payments of money from Ahmed, in exchange for LUSTYIK’s agreement to provide internal, confidential documents and other confidential information to which LUSTYIK had access by virtue of his position as an FBI Special Agent.  The documents and information pertained to a prominent citizen of Bangladesh (“Individual 1”).  Ahmed perceived himself on the opposite side of a political rivalry with Individual 1.  Ahmed sought, among other things, to obtain information about Individual 1, to locate Individual 1, and to harm Individual 1 and others associated with Individual 1.

As part of the scheme, LUSTYIK and Thaler exchanged text messages, including messages about how to pressure Ahmed to pay them additional money in exchange for confidential information.  For example, in text messages, LUSTYIK told Thaler, “we need to push [Ahmed] for this meeting and get that 40 gs quick . . . . I will talk us into getting the cash . . . . I will work my magic . . . . We r sooooooo close.”  Thaler responded, “I know.  It’s all right there in front of us.  Pretty soon we’ll be having lunch in our oceanfront restaurant . . . .”

For another example, in or about late January 2012, LUSTYIK, upon learning that Ahmed was considering using a different source to obtain confidential information about Individual 1, texted Thaler, “I want to kill C . . . . I hung my ass out the window n we got nothing? . . . . Tell [Ahmed], I’ve got [Individual 1’s] number and I’m pissed. . . . I will put a wire on n get [Ahmed and his associates] to admit they want [a Bangladeshi political figure] offed n we sell it to Individual 1].”  LUSTYIK further texted Thaler, “So bottom line.  I need ten gs asap.  We gotta squeeze C.”

*                *                *

LUSTYIK, 53, of Westchester County, pled guilty on December 23, 2014, to all five counts in the Indictment in which he is charged.  LUSTYIK pled guilty to (1) conspiracy to engage in a bribery scheme; (2) soliciting bribes by a public official; (3) conspiracy to defraud the citizens of the United States and the FBI; (4) theft of government property; and (5) unauthorized disclosure of a Suspicious Activity Report.  In addition to his prison term, LUSTYIK is also sentenced to two years supervised release.

Thaler, 51, of New Fairfield, Connecticut, and Ahmed, 35, of Danbury, Connecticut, were each sentenced for bribery and conspiracy to commit fraud, to which each previously pled guilty.  Thaler was sentenced by Judge Briccetti to 30 months in prison, and Ahmed to 42 months in prison.

Mr. Bharara praised the efforts of the Department of Justice Office of the Inspector General, which conducted the investigation in this case.

The prosecution is being handled by the Office’s White Plains Division and by the Public Integrity Section of the U.S. Department of Justice.  Assistant United States Attorney Benjamin Allee and Trial Attorney Emily Rae Woods are in charge of the prosecution. 

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 that a transition plan for NARCO FREEDOM, INC. (“NARCO FREEDOM”), a provider of outpatient chemical dependency clinics and short-term housing in residences known as “three-quarter houses,” has been approved in Manhattan Federal Court.  In April 2015, NARCO FREEDOM was enjoined from engaging in a fraudulent kickback scheme and a temporary receiver was appointed to take over NARCO FREEDOM’s operations.  On September 11, 2015, the Court approved the receiver’s plan to transition the substance abuse clinics and the housing operated by NARCO FREEDOM to other healthcare providers.  This transition prevents the imminent disruption of clinical services and housing for NARCO FREEDOM residents.  U.S. District Judge John G. Koeltl entered the order last Friday.

Manhattan U.S. Attorney Preet Bharara said:  “As the Complaint in this case alleged, Narco Freedom defrauded the government and profited from the exploitation of people most in need of their help.  Enjoining Narco Freedom from continuing to engage in the kickback scheme and transitioning its clinics and houses to other providers will provide this vulnerable population with the continuity of care and housing they sorely need.”

HHS-OIG Special Agent in Charge Scott Lampert said: “The conduct displayed by Narco Freedom is a clear example of the damage personal greed does to our nation’s healthcare system.  The transition approved by the Court puts an end to Narco Freedom’s illegal practices and allows important substance abuse treatment to continue to be provided without interruption.  HHS-OIG recognizes the importance of such treatment, and will continue to ensure that those who provide those services do so in an honest fashion that complies with the law.”

As set forth in the complaint filed on October 28, 2014, in Manhattan federal court:

Since in or about 2006, NARCO FREEDOM was engaged in a scheme to induce individuals who qualified for Medicaid and lacked stable housing to enroll in and attend NARCO FREEDOM’s outpatient clinics in exchange for short-term housing in residences known as “three-quarter houses,” which NARCO FREEDOM referred to as “Freedom Houses.”  NARCO FREEDOM allowed individuals without housing, many of whom had been released on parole, to reside in the Freedom Houses for approximately six to nine months, but required all Freedom House residents to enroll in and attend its outpatient clinics, and evicted residents who did not comply.  NARCO FREEDOM operated the Freedom Houses specifically in order to drive business to its outpatient clinics, and forced residents of its Freedom Houses who were already enrolled in other outpatient programs to transfer to NARCO FREEDOM’s outpatient programs, in violation of the Patients’ Rights provision of the New York State Code.

On October 29, 2014, U.S. District Judge Koeltl granted the Government’s motion for a restraining order which enjoined NARCO FREEDOM from evicting the residents of its Freedom Houses for refusing to engage in the kickback scheme.  On April 2, 2015, Judge Koeltl granted the Government’s motion for a preliminary injunction, concluding that NARCO FREEDOM provided numeration to Medicaid recipients in the form of below-market housing.  Judge Koeltl found that by “[p]roviding below-market housing to Medicaid recipients increases costs to the Medicaid program through over-and inappropriate utilization.  For those who need housing, the prospect of nearly free housing creates a strong incentive to overuse Narco Freedom’s drug treatment programs.”  On April 3, 2015, the Court granted the Government request for an appointment of a temporary receiver to take over and manage the operations of NARCO FREEDOM.  On July 28, 2015, New York State Office of Alcohol and Substance Abuse Services issued temporary emergency operating certificates for certain of the three-quarter houses, which were now being operated by the temporary receiver, certifying them as chemical dependence supportive living services.

Friday, Judge Koeltl granted the temporary receiver’s application to transition NARCO FREEDOM’s substance abuse clinics and houses to two other providers who will ensure the continuity of operations, subject to the Court’s order.  Specifically the Court ordered Narco Freedom to transition all of its clinics and houses to two different providers, Samaritan Village and Acacia Network, effective on September 22, 2015.  Both organizations currently provide housing and substance abuse services in New York City.

*          *          *

Mr. Bharara thanked the Office of the Inspector General at HHS-OIG for its investigative efforts and support and assistance with the case, as well as the New York State Office of Alcohol and Substance Abuse Services and the New York City Human Resources Administration for their assistance and cooperation.

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 that SAMUEL L. WHITESIDE pled guilty on September 10, 2015, in Manhattan federal court to traveling interstate to commit murder to further his prostitution business, and to persuading, inducing, enticing, and coercing women to travel interstate to engage in prostitution.  He pled guilty before U.S. District Judge Paul A. Crotty.

            Manhattan U.S. Attorney Preet Bharara said: “Samuel Whiteside has now admitted that he traveled from Boston to New York to murder a rival with whom he had a dispute over his prostitution business.  Violence that is so often associated with the prostitution business led to a murder here.  Thanks to the work of the FBI and the New York City Police Department, the murderer here has been brought to justice.”

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

            In the early morning hours of June 5, 2012, WHITESIDE murdered Anthony Martino (the “Victim”) by stabbing him to death in a motel room at the Metro Motel, in the Bronx, New York.  WHITESIDE attacked Martino because of a dispute between Whiteside and Martino relating to their respective prostitution businesses.

              Specifically, WHITESIDE and the Victim had a dispute about a woman who had worked for WHITESIDE as a prostitute.  WHITESIDE believed that the Victim owed WHITESIDE money related to that woman, who had been traded and sold between WHITESIDE and the Victim.  In the weeks leading up to Martino’s murder, WHITESIDE searched for Martino in order to confront him about the money he believed Martino owed to him for that prostitute.

            On the evening of June 4, 2012, and continuing through the early morning hours of June 5, 2012, WHITESIDE was in telephone contact with Martino and learned that Martino was at the Metro Motel.  During the course of that night, WHITESIDE traveled from New England to the Metro Motel.  When he arrived, WHITESIDE forced his way into Martino’s room and attacked and stabbed the Victim with a knife three times, which resulted in the Victim’s death.

            In addition, between at least January 2012 and February 2013, WHITESIDE operated a prostitution business in which he marketed the sexual services of women to male customers in exchange for money.  WHITESIDE took the women to various locations in Massachusetts, Rhode Island, New York, New Jersey, North Carolina, and Illinois to engage in prostitution.

*                *                *

            WHITESIDE, 31, of Dorchester, Massachusetts, faces a maximum of life in prison and eight 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.  WHITESIDE is scheduled to be sentenced by Judge Crotty on December 8, 2015.

            Mr. Bharara praised the investigative work of the Federal Bureau of Investigation and New York City Police Department.

            The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Kan M. Nawaday and Kristy J. Greenberg are in charge of the prosecution.

UPDATE

The charges against the defendant in this case, Benjamin Wey, were dismissed on August 8, 2017. Click the link below for further detail.

Charges Also Unsealed Against a Geneva-Based Banker, Who Remains at Large

            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 the unsealing of an Indictment against BENJAMIN WEY and his Geneva-based banker, SEREF DOGAN ERBEK, charging them with conspiracy, securities fraud, wire fraud, and other charges stemming from WEY’s scheme to obtain and conceal his beneficial ownership interest in publicly trading companies through so-called “reverse merger” transactions between Chinese companies and U.S. shell companies, and then to reap tens of millions of dollars of illegal profit by manipulating the companies’ stock prices.  WEY was arrested this morning at his home in Manhattan and is expected to be presented today in federal court in Manhattan before United States Magistrate Judge Frank Maas.  ERBEK remains at large.

            In a separate action, the U.S. Securities and Exchange Commission (“SEC”) announced civil charges against WEY and ERBEK, among others.

           U.S. Attorney Preet Bharara said:  “Ben Wey fashioned himself a master of industry, but as alleged, he was merely a master of manipulation.  The indictment charges that Wey used reverse merger transactions between Chinese companies and U.S. shell companies to illegally conceal his ownership interest and then, with the help of his alleged co-conspirator, manipulated the market so that he could sell his interest at artificially inflated prices.  As alleged, in making tens of millions in illicit profit, Wey refused to let the securities laws or the rules of a fair marketplace get in the way of his dishonest scheme.”

           FBI Assistant Director-in-Charge Diego Rodriguez said:  “The illegal manipulation of stock prices causes significant losses for innocent investors and creates sizeable profits for fraudsters. Wey and Erbek allegedly falsified the true sales volume, demand, and price of stocks in the over-the-counter marketplace through a series of reverse merger transactions involving shell companies. They are believed to have profited in the tens of millions, while victim shareholders were left holding the bill. The FBI and our partners will continue to investigate and prosecute those who cheat the system in this way.”

            According to the eight-count Indictment unsealed today in Manhattan federal court[1]:

            Among other fraudulent and illicit conduct, WEY engineered reverse mergers between Chinese operating companies and publicly traded U.S. shell companies designed to give WEY significant undisclosed ownership in the resulting publicly trading entities, in violation of U.S. securities laws.  Specifically, WEY caused entities controlled by a sibling and other nominees to obtain large portions of the shares of certain U.S. shell companies trading over the counter.  WEY then identified various Chinese operating companies that wanted to raise capital in the U.S. markets.  WEY, through his company, New York Global Group (“NYGG”), facilitated the Chinese companies’ reverse mergers with the U.S. shell companies in which WEY, through his nominees, secretly held significant ownership interest.  Not only did WEY defraud the investing public by failing to disclose, as required under the securities laws, his beneficial ownership of more than five percent of the stock of the new companies, but he then manipulated the market price and demand for the shares in these companies, resulting in tens of millions of dollars of undisclosed and illicit profit.

Reverse Merger Scheme That Illegally Hid Ownership Interest

            WEY caused certain entities (the “Nominee Entities”) that were owned or otherwise associated with a sibling of WEY’s (“Wey’s Sibling”), certain other members of WEY’s extended family, and employees of an NYGG entity located in Beijing, China, NYGG-Asia (collectively, the “Nominee Owners” and, together with the Nominee Entities, the “Nominees”), to obtain a substantial portion of the shares of certain U.S. shell companies (the “Shell Companies”) that were trading on the National Association of Securities Dealers’ Over-the-Counter Bulletin Board, a regulated quotation service that displays real-time quotes, last-sale prices, and volume information for certain over-the-counter securities.

            Although records associated with the Nominee Entities, all of which were incorporated offshore, identify certain of the Nominee Owners as the sole shareholders, directors, and/or signatories of the Nominee Entities, in fact, and unbeknownst to the investing public, WEY actually controlled the Nominee Entities.  In executing the scheme to defraud, WEY routinely directed ERBEK, who knew of WEY’s control over the Nominees and knew of the securities laws’ requirements for disclosing beneficial ownership interest of over five percent, to conduct stock trading for accounts held in the names of the Nominees.

            In addition, WEY, through NYGG-Asia, identified various Chinese operating companies (the “Operating Companies”) that wanted to raise capital in the U.S. markets, and offered NYGG’s services in facilitating reverse merger transactions for the purpose of gaining access to those capital markets.  WEY intentionally caused the Operating Companies to merge with the particular Shell Companies in which WEY, through the Nominees, held significant, illegally undisclosed ownership stakes.  The companies that resulted from these reverse merger transactions were SmartHeat, Inc.; Deer Consumer Products, Inc.; and CleanTech Innovations, Inc. (the “Issuers”).

            As a further part of the conspiracy and scheme to defraud, WEY caused the Nominees to continue to retain undisclosed control of more than five percent of the shares of each of the Issuers – shares originally of the Shell Companies that, by virtue of the reverse merger transactions, became shares of the Issuers.  Although WEY was required by federal securities laws to report his beneficial ownership in the Issuers, he deliberately did not.  In fact, to further obscure from the investing public the extent to which he owned and exercised control over Issuers’ stock, and with ERBEK’s knowledge and assistance, WEY purposefully caused the Nominees’ holdings to be structured in such a way as to ensure that no single one of the Nominees held a greater than five percent beneficial ownership interest in any of the Issuers.

Manipulation of the Market for Shares of the Reverse Merger Companies

             At the time that the Issuers emerged from reverse merger transactions, their common stock traded only in over-the-counter markets and in low volumes.  The Issuers’ stock could not be sold in significant quantities in the open market until a liquid market developed and the shares traded on an exchange.  To create liquidity so that WEY could profit from his scheme, WEY caused the Issuers’ management to apply for listings on the Nasdaq, which would increase market interest and liquidity in the Issuers’ securities.  To satisfy Nasdaq’s requirement that an issuer have at least 300 “round-lot” shareholders – defined as shareholders owning at least 100 shares of common stock each – WEY deceptively caused shares of some of the Issuers to be transferred from certain of the Nominees to dozens of WEY’s friends, employees, and business associates, among others, as gifts or unsolicited bonuses in increments of 100 or more, thereby artificially inflating the number of shareholders in each of the Issuers.

            Both before and after an Issuer became listed on Nasdaq, WEY and ERBEK caused the share price of its stock to be manipulated in various ways.  For example, on multiple occasions, WEY caused two retail brokers located in Manhattan to solicit their customers to buy shares of common stock of the Issuers while those brokers simultaneously actively discouraged the sale of these stocks by their customers, so as to artificially maintain the stock price of each Issuer.  Similarly, WEY explicitly instructed ERBEK to maintain the share prices of at least two Issuers’ stock held in certain of the Nominees’ accounts.  For example, on or about February 7, 2011, WEY sent an email to ERBEK stating, “Cleantech just traded at $4.50 per share.  Please make sure the trader buys the stock at $5 per share, stay at $5 per share bid price, not less.  Please make sure this happens right away.”  ERBEK agreed to do so, but cautioned WEY, “Obviously, we need to be careful to give such orders/make such comments.  I may explain it over the phone; please call me if you have time.”  WEY also orchestrated match trades in the securities of the Issuers, for the purpose of manipulating the prices of those stocks.

            At the same time that WEY and ERBEK were causing the share prices of the Issuers’ stock to be manipulated, WEY caused shares held in the name of Wey’s Sibling and other Nominees at brokerage accounts in the United States and overseas to be sold, thereby generating millions of dollars in proceeds at artificially inflated prices.  WEY caused those proceeds to be transferred from accounts in the United States to accounts overseas, only to then send millions of dollars back to the United States for his own benefit.  For example, more than $20 million in cash was transferred from a Hong Kong account in the name of Wey’s Sibling to bank accounts in the United States that WEY and/or WEY’s wife controlled.

*                      *                      *

            WEY, 43, is charged with one count of conspiracy to commit securities fraud and wire fraud; two counts of securities fraud; one count of wire fraud; two counts of failure to disclose ownership in excess of five percent; and two counts of money laundering.  Count One carries a maximum sentence of five years in prison.  Counts Two and Four through Eight each carry a maximum sentence of 20 years in prison.  Count Three carries a maximum sentence of 25 years in prison.  The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.  ERBEK, 53, is charged with one count of conspiracy to commit securities fraud and wire fraud, which carries a maximum sentence of five years in prison; two counts of securities fraud, one of which carries a maximum sentence of 20 years in prison, the other of which carries a sentence of 25 years in prison; and one count of wire fraud, which carries a maximum sentence of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

            Mr. Bharara praised the work of the Federal Bureau of Investigation, and thanked the SEC for its assistance.  He added that the investigation is continuing.

            The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it’s 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 Eddy McCallum, Andrew C. Adams, and Michael Ferrara are in charge of the prosecution.  

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

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

            Preet Bharara, the United States Attorney for the Southern District of New York, Glenn Sorge, Acting Special Agent-in-Charge of the New York Field Office of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), James J. Hunt, Special Agent in Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), and William J. Bratton, the Commissioner of the New York City Police Department (“NYPD”), today announced the unsealing of two Indictments charging a total of 17 members and associates of two Bronx-based street gangs, the Taylor Avenue Crew and the Leland Avenue Crew, with various racketeering and narcotics offenses, including two murders of rival gang members.

            Twelve of the seventeen defendants, JAMES CAPERS, TOMMY BROWN, JESSE IRVIN, EDWIN MOYE, UNIQUE CHRISTOPHER, DANTE RODGERS, IRVIN ORTIZ, ELIJAH DAVILA, RICARDO GARCIA, PABLO CHEVERE, GLADYS MORALES, KENNETH MERCADO, and ANDREA BELL, were taken into federal custody yesterday or this morning and will be presented before Chief United States Magistrate Judge Frank Maas later today.  Four of the defendants, MARQUISE ROCHESTER, CHRISTIAN McKNIGHT, SAMUEL SERRANO, and MESSIAH PERRY, are currently incarcerated in state custody on other charges, and will be presented at a later date.  The case of United States v. Irvin Ortiz, et al, 15 Cr. 608 (KPF) has been assigned to U.S. District Judge Katherine Polk Failla.  The case of United States v. James Capers, et al., 15 Cr. 607 (WHP) has been assigned to U.S. District Judge William H. Pauley, III.          

            Manhattan U.S. Attorney Preet Bharara said: “Members of the Taylor Avenue and Leland Avenue Crews allegedly wreaked havoc on the community through the sale of crack cocaine and a wave of violence on the streets of the Bronx.  On two occasions, that violence allegedly ended in the murders of rival gang members.”

            HSI Acting Special Agent-in-Charge Glenn Sorge said: “Today’s arrests deal a serious blow to two gangs that allegedly used the streets of New York City to sell drugs and commit acts of violence including murder.  HSI will continue to work with our law enforcement partners to rid the streets of these dangerous criminal organizations that instill fear in our communities.”

            DEA Special Agent in Charge James J. Hunt said: “Drug trafficking inevitably leads to further crime and violence, as depicted in the alleged charges against the members of the Leland Avenue and Taylor Avenue Crews.  Through a common goal, law enforcement pooled resources to investigate and arrest those who converted their Avenues into their own private battlefields.”                                       

            Police Commissioner William J. Bratton said: “These indictments and arrests are the result of the collaborative power of law enforcement to address narcotics sales and street level shootings, crimes which are often committed by just a few individuals but affect a great many more.  I would like to thank the NYPD investigators and our federal law enforcement partners who worked tirelessly to protect this Bronx community and bring justice to those responsible for this scourge of drugs, death and violence.”

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

United States v. Irvin Ortiz, et al., 15 Cr. 608 (KPF)

            The Taylor Avenue Crew was a criminal enterprise that operated principally in and around the Bronx, New York, from at least 2012 up to and including 2015.  One of the Taylor Avenue Crew’s principal objectives was to sell cocaine base, commonly known as “crack cocaine,” primarily in and around Taylor Avenue in the Bronx.  The Taylor Avenue Crew controlled crack cocaine sales within this area by prohibiting and preventing non-members, outsiders, and rival narcotics dealers from distributing crack cocaine in the area controlled by the enterprise.

            Members and associates of the Taylor Avenue Crew engaged in acts of violence against the Leland Avenue Crew, a rival gang that sold crack cocaine primarily in and around Leland Avenue, which runs parallel to Taylor Avenue and is located two blocks east.  These acts of violence included assaults, attempted murder, and murder, and were committed to protect the Taylor Avenue Crew’s drug territory, to retaliate against members of rival gangs who had encroached on the territory controlled by the Taylor Avenue Crew, and to otherwise promote the standing and reputation of the Taylor Avenue Crew amongst rival gangs.

            The violence perpetrated by the Taylor Avenue Crew turned deadly in March 2015.  On or about March 3, 2015, ELIJAH DAVILA and Allen McQueen, a now deceased member of the Taylor Avenue Crew,    murdered Pablo Beard, a member of the Leland Avenue Crew, by shooting Beard in the vicinity of 1512 Leland Avenue in the Bronx.  As alleged in the Ortiz Indictment, DAVILA committed this murder to maintain and increase his position in the Taylor Avenue Crew.

            Count One of the Ortiz Indictment charges IRVIN ORTIZ, RICARDO GARCIA, ELIJAH DAVILA, SAMUEL SERRANO, MESSIAH PERRY, PABLO CHEVERE, GLADYS MORALES, and KENNETH MERCADO with participating in a racketeering conspiracy.  Count Seven of the Ortiz Indictment charges ORTIZ, GARCIA, DAVILA, SERRANO, PERRY, MORALES, and MERCADO, with a firearms offense in connection with that conspiracy.

            Counts Two, Three, Six, and Eight charge DAVILA with conspiracy to commit murder in aid of racketeering activity, murder in aid of racketeering activity, murder in connection with a drug crime, and a related firearms offense in connection with the March 2015 murder of Pablo Beard.

            Count Four of the Ortiz Indictment charges MERCADO with assault and attempted murder in aid of racketeering activity in connection with the August 2015 shooting of members of the Leland Avenue Crew.

            Count Five of the Ortiz Indictment charges ORTIZ, GARCIA, DAVILA, SERRANO, PERRY, CHEVERE, MORALES, MERCADO, and ANDREA BELL with participating in a narcotics conspiracy, in connection with their distribution of crack cocaine in and around Taylor Avenue.

United States v. James Capers, et al., 15 Cr. 607 (WHP)

            The Leland Avenue Crew was a criminal enterprise that operated principally in and around the Bronx, New York, from at least 2012 up to and including 2015.  One of the principal objectives of the Leland Avenue Crew was to sell crack cocaine, primarily in and around Leland Avenue in the Bronx.  Members and associates of the Leland Avenue Crew engaged in acts of violence against the Taylor Avenue Crew.  These acts of violence included assaults, attempted murder, and murder intended either to protect the Leland Avenue Crew’s drug territory, retaliate against members of rival gangs who had encroached on the territory controlled by the Leland Avenue Crew, or to otherwise promote the standing and reputation of the Leland Avenue Crew among rival gangs.

            The violence perpetrated by the Leland Avenue Crew also turned deadly in July 2015.  On or about July 7, 2015, JAMES CAPERS   murdered Allen McQueen, a member of the Taylor Avenue Crew, by shooting McQueen in the vicinity of 1531 Taylor Avenue in the Bronx.  As alleged in the Capers Indictment, CAPERS committed this murder to maintain and increase his position in the Leland Avenue Crew.

            Count One of the Capers Indictment charges CAPERS, TOMMY BROWN, JESSE IRVIN, MARQUISE ROCHESTER, EDWIN MOYE, CHRISTIAN MCKNIGHT, UNIQUE CHRISTOPHER, and DANTE RODGERS with participating in a racketeering conspiracy.  Count Six of the Capers Indictment charges CAPERS, IRVIN, ROCHESTER, MOYE, and MCKNIGHT with a firearms offense in connection with that conspiracy.

            Counts Two, Four, and Five charge CAPERS with murder in aid of racketeering activity, murder in connection with a drug crime, and a related firearms offense, in connection with the July 2015 murder of Allen McQueen.

             Count Three charges CAPERS, BROWN, IRVIN, ROCHESTER, MOYE, MCKNIGHT, CHRISTOPHER, and RODGERS with participating in a narcotics conspiracy, in connection with their distribution of crack cocaine in and around Leland Avenue.

*                      *                     *

            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 HSI, the DEA, and the NYPD.  He also thanked the Bronx County District Attorney’s Office for its 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 Jessica Lonergan, Scott Hartman, and Jason Swergold 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. Irvin Ortiz, et al., 15 Cr. 608 (KPF)

COUNT

CHARGE

DEFENDANTS

MAX. PENALTIES

1

Racketeering conspiracy

18 U.S.C. § 1962(d)

IRVIN ORTIZ

RICARDO GARCIA

ELIJAH DAVILA

SAMUEL SERRANO

MESSIAH PERRY

PABLO CHEVERE

GLADYS MORALES

KENNETH MERCADO

20 years in prison

2

Conspiracy to commit murder in aid of racketeering activity

18 U.S.C. § 1959(a)(5)

ELIJAH DAVILA

10 years in prison

3

Murder in aid of racketeering activity

18 U.S.C. § 1959(a)(1)

ELIJAH DAVILA

Death penalty, or life in prison

4

Assault and attempted murder in aid of racketeering activity

18 U.S.C. §§ 1959(a)(3) and 1959 (a)(5)

KENNETH MERCADO

20 years in prison

5

Narcotics conspiracy

21 U.S.C. § 846

IRVIN ORTIZ

RICARDO GARCIA

ELIJAH DAVILA

SAMUEL SERRANO

MESSIAH PERRY

PABLO CHEVERE

GLADYS MORALES

KENNETH MERCADO

ANDREA BELL

Life in prison

Mandatory minimum of 10 years in prison

6

Murder in connection with a drug crime

21 U.S.C. § 848(e)(1)(A)

ELIJAH DAVILA

Death penalty, or life in prison

Mandatory minimum of 20 years in prison

7

Using or carrying a firearm during and in relation to, or possessing a firearm in furtherance of, a crime of violence or drug trafficking crime

924(c)(1)(A)(iii)

IRVIN ORTIZ

RICARDO GARCIA

ELIJAH DAVILA

SAMUEL SERRANO

MESSIAH PERRY

GLADYS MORALES

KENNETH MERCADO

Life in prison

Mandatory minimum of 10 years in prison

8

Murder through use of a firearm

18 U.S.C. § 9249(j)

ELIJAH DAVILA

Death penalty, or mandatory minimum of life in prison

DEFENDANT

AGE

RESIDENCE

IRVIN ORTIZ

a/k/a “Goonie”

27

Bronx, NY

RICARDO GARCIA

a/k/a “Bucky”

24

Bronx, NY

ELIJAH DAVILA

a/k/a “Montana”

23

Bronx, NY

SAMUEL SERRANO

a/k/a “Smaxx”

22

Bronx, NY

MESSIAH PERRY

a/k/a “Showtime”

22

Bronx, NY

PABLO CHEVERE

a/k/a “Splash”

32

Bronx, NY

GLADYS MORALES

a/k/a “La Bruja”

34

Bronx, NY

KENNETH MERCADO

a/k/a “Fly,” a/k/a “Twin”

25

Bronx, NY

ANDREA BELL

a/k/a “Andrea Martin,” a/k/a “Drea”

41

Bronx, NY

United States v. James Capers, et al., 15 Cr. 607 (WHP)

COUNT

CHARGE

DEFENDANTS

MAX. PENALTIES

1

Racketeering conspiracy

18 U.S.C. § 1962(d)

JAMES CAPERS

TOMMY BROWN

JESSE IRVIN

MARQUISE ROCHESTER

EDWIN MOYE

CHRISTIAN MCKNIGHT

UNIQUE CHRISTOPHER

DANTE RODGERS

20 years in prison

2

Murder in aid of racketeering activity

18 U.S.C. § 1959(a)(1)

JAMES CAPERS

Death penalty, or life in prison

3

Narcotics conspiracy

21 U.S.C. § 846

JAMES CAPERS

TOMMY BROWN

JESSE IRVIN

MARQUISE ROCHESTER

EDWIN MOYE

CHRISTIAN MCKNIGHT

UNIQUE CHRISTOPHER

DANTE RODGERS

Life in prison

Mandatory minimum of 10 years in prison

4

Murder in connection with a drug crime

21 U.S.C. § 848(e)(1)(A)

JAMES CAPERS

Death penalty, or life in prison

Mandatory minimum of 20 years in prison

5

Murder through use of a firearm

18 U.S.C. § 924(j)

JAMES CAPERS

Death penalty, or mandatory minimum of life in prison

6

Using or carrying a firearm during and in relation to, or possessing a firearm in furtherance of, a crime of violence or drug trafficking crime

924(c)(1)(A)(iii)

JAMES CAPERS

JESSE IRVIN

MARQUISE ROCHESTER

EDWIN MOYE

CHRISTIAN MCKNIGHT

Life in prison

Mandatory minimum of 10 years in prison

DEFENDANT

AGE

RESIDENCE

JAMES CAPERS,

a/k/a “Mitch,”

22

Bronx, NY

TOMMY BROWN

a/k/a “Bizzy”

20

Bronx, NY

JESSE IRVIN

a/k/a “Spookz”

24

Bronx, NY

MARQUISE ROCHESTER,

a/k/a “Mook,” a/k/a “Millz”

23

Bronx, NY

EDWIN MOYE,

a/k/a “Eazy”

24

Bronx, NY

CHRISTIAN MCKNIGHT,

a/k/a “Spice”

22

Bronx, NY

UNIQUE CHRISTOPHER,

a/k/a “Bills”

19

Bronx, NY

DANTE RODGERS

21

Bronx, NY

[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 today that STEVEN KAITZ, LATCHMEE MAHATO, a/k/a “Robbie,” and JONATHAN WHEELER, the three owners and principals of Projuban, LLC, d/b/a G3K Displays, Inc., and related entities (“G3K”) – a New Jersey-based company that provided in-store displays for retailers – and ZACHARY KAITZ, an executive at G3K, were sentenced in Manhattan federal court for their roles in an elaborate scheme to defraud G3K’s lenders and customers out of millions of dollars.  U.S. District Judge Jed S. Rakoff sentenced STEVEN KAITZ yesterday to 40 months in prison.  Today, Judge Rakoff sentenced MAHATO to 24 months in prison; WHEELER to 21 months in prison; and ZACHARY KAITZ to four months in prison.  STEVEN KAITZ, MAHATO, WHEELER, and ZACHARY KAITZ, and Kathleen Smith, the fifth defendant charged in this case, each pled guilty earlier this year before Judge Rakoff.

Manhattan U.S. Attorney Preet Bharara said:  “This case highlights the lengths people will go to steal money and cover their tracks.  These defendants covered much of the fraud playbook, from creating phony purchase orders and invoices to using fake email customer accounts to inflate company revenues, and then used the ill-gotten gains to pay for homes, luxury cars, and private school tuition.”

According to the Indictment and statements made during the proceedings in this case:

STEVEN KAITZ, LATCHMEE MAHATO, and JONATHAN WHEELER were the three owners and principals of G3K, a company that manufactured and designed displays for retailers around the world, including major retailers of sports apparel and footwear.  ZACHARY KAITZ served as G3K’s vice president of creative services. 

From 2012 to May 2014, in order to trick various lenders, including Veritas Financial Partners, LLC, and MVC Capital, Inc., into lending at least $18.6 million to G3K, STEVEN KAITZ, MAHATO, WHEELER, and others engaged in a scheme to falsely inflate G3K’s revenue and accounts receivable, and as part of the scheme, made and caused to be made materially false and misleading statements about G3K’s financial condition.  To create the false impression of sales, the defendants created phony documents, including fake and falsely inflated purchase orders purporting to reflect sales to G3K’s customers.  STEVEN KAITZ, MAHATO, WHEELER, and Kathleen Smith also tricked certain of the company’s customers, including Foot Locker, Inc., Smith’s employer, into paying falsely inflated invoices from G3K.

The defendants took elaborate steps to keep the scheme afloat and prevent G3K’s lenders and outside auditors from discovering the fraud.  For example, STEVEN KAITZ, MAHATO, and WHEELER were involved in the creation of fake email accounts purporting to belong to fictitious employees of Foot Locker and Adidas, G3K’s two largest customers.  STEVEN KAITZ, MAHATO, and WHEELER operated these fake email accounts themselves, pretending to be employees of those customers, and then used those fake email accounts to “verify” false information about G3K’s financial condition, including its sales and accounts receivable, to G3K’s lenders and outside auditors.  STEVEN KAITZ, MAHATO, and WHEELER also utilized shell companies to engage in “round-trip” transactions to create the false appearance that customers were paying G3K’s phony outstanding receivables, thereby allowing G3K to continue to borrow from its lenders.  ZACHARY KAITZ, who was skilled in graphic design, helped carry out the fraud by creating fraudulent documentation, such as fake invoices, purchase orders, and bills of lading, to support the false representations to the lenders about G3K’s business.

STEVEN KAITZ, MAHATO, and WHEELER further misappropriated approximately $2.8 million of the loan proceeds for their own personal use, to pay for homes and luxury cars, private school tuition, and personal credit card bills, as well as kickbacks to Smith.

As of May 2014, when G3K’s lenders terminated their lending relationships with the company after discovering the fraud, G3K had approximately $18.6 million in loans outstanding.

*                      *                      *

In addition to their prison terms, STEVEN KAITZ, 56, of Jersey City, New Jersey, was ordered to forfeit $1,382,427 and pay $18,687,518 in restitution; LATCHMEE MAHATO, a/k/a “Robbie,” 50, of Jamaica, Queens, was ordered to forfeit $2,215,417 and pay $18,687,518 in restitution; JONATHAN WHEELER, 46, of Southport, Connecticut, was ordered to forfeit $957,435 and pay $18,687,518 in restitution; and ZACHARY KAITZ, 32, of Brooklyn, New York, was ordered to forfeit $100,000 and pay $18,687,518 in restitution.

Kathleen Smith, 50, of South Plainfield, New Jersey, is scheduled to be sentenced before Judge Rakoff on October 16, 2015.

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

The case is being prosecuted by the Office’s Complex Frauds & Cybercrime Unit.  Assistant U.S. Attorney Joshua A. Naftalis is in charge of the prosecution.  Assistant U.S. Attorney Edward B. Diskant of the Money Laundering & Asset Forfeiture Unit is responsible for the forfeiture aspects of the prosecution.

            Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Philip R. Bartlett, Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced today the arrests of KALEIL ISAZA TUZMAN and ROBIN SMYTH.  TUZMAN, the former chairman of the board of directors and chief executive officer of the technology start-up company KIT digital, was arrested yesterday in Colombia on market manipulation and accounting fraud charges.  TUZMAN is being held in Colombia pending extradition proceedings.  SMYTH, the former chief financial officer (“CFO”) of KIT digital, a publicly traded company that was based in New York, New York, and Prague, Czech Republic, was arrested today in Australia on accounting fraud charges.  SMYTH is being held in Australia pending extradition proceedings.

            Manhattan U.S. Attorney Preet Bharara said: “As alleged, Kaleil Isaza Tuzman and Robin Smyth engaged in an elaborate conspiracy to mislead investors and regulators about the financial health of the publicly traded company they oversaw.  I want to thank the FBI and the Postal Inspection Service for helping to bring these two alleged fraudsters to justice.”

            FBI Assistant Director Diego Rodriguez said: “As alleged, Tuzman and Smyth conspired to personally profit through market manipulation and accounting fraud in the tens of millions of dollars.  Despite being as far away as Australia and Colombia, we seek to bring them to justice in the United States to face their accusers and alleged victims.  The FBI will continue to work with U.S. Postal Inspection Service and our other partners in an effort at ensuring that our financial markets are legal, fair, and equitable.”       

            USPIS Inspector-in-Charge Philip R. Bartlett said: “These individuals took extraordinary steps to conceal their deceit from auditors and clients, creating instability in investor portfolios.  Their actions highlight their arrogance and disregard for rules and regulations.”

            According to the Indictment unsealed in Manhattan federal court[1], TUZMAN and SMYTH engaged in the following fraudulent schemes during their tenures as KIT digital’s Chairman and CEO, and CFO, respectively:

The Market Manipulation Scheme

            Between in or about December 2008 and in or about September 2011, TUZMAN and a co-conspirator (“CC-1”), who operated a hedge fund (the “Hedge Fund”), engaged in a scheme to artificially inflate the share price and trading volume of KIT digital’s shares.Specifically, at various times when KIT digital’s shares traded on the OTC Bulletin Board and later on the NASDAQ, TUZMAN directed a scheme in which KIT digital shares were purchased and sold through the Hedge Fund, at times for the purpose of manipulating the stock price and at times for the purpose of creating the illusion of greater volume in the trading of KIT digital shares.TUZMAN personally invested his own money into the Hedge Fund and also arranged for KIT digital to invest money in the Hedge Fund, thereby using the Hedge Fund as a vehicle by which KIT digital, at TUZMAN’s direction, invested in itself without disclosing that fact, or the fact of the manipulation, to the investing public.

            Specifically, CC-1, with TUZMAN’s knowledge and approval, frequently engaged in match trading in which CC-1 caused an account under CC-1’s control to buy or sell KIT digital stock, and on the same day caused an account under CC-1’s control to take the opposite position.TUZMAN also directed CC-1 to make timely purchases of KIT digital stock in an effort to manipulate the price of KIT digital shares at certain critical moments, including, for instance, when KIT digital was seeking to raise additional capital and in the weeks before KIT digital’s stock began trading on the NASDAQ.At times, CC-1 was responsible for nearly all of the day’s trading activity in KIT digital stock.

            Between 2009 and 2010, TUZMAN caused KIT digital to invest approximately $1,150,000 in company cash in the Hedge Fund but failed to disclose to KIT digital shareholders that these investments with the Hedge Fund were not part of an arms-length relationship.Instead, TUZMAN portrayed these investments as efforts to safely invest assets of KIT digital. In reality, TUZMAN caused KIT digital to make these investments in order to help fund CC-1’s purchases of KIT digital shares, as part of the effort to manipulate the market described above.And, on one occasion, TUZMAN caused KIT digital to invest $250,000 in the Hedge Fund so that CC-1 could reimburse TUZMAN for a prior, personal investment that TUZMAN made with the Hedge Fund, thereby using KIT digital as his personal bank.

The Accounting Fraud Scheme

            From at least in or about 2010 through in or about 2012, TUZMAN and SMYTH, with others, engaged in an illegal scheme to deceive KIT digital shareholders, members of the investing public, KIT digital’s independent auditors, and others concerning KIT digital’s true operating performance and financial results.

            TUZMAN, working with others, including SMYTH, devised and executed a scheme to inflate KIT digital’s revenue falsely.This scheme involved two principal methods: (a) the improper recognition of revenue from so-called “perpetual license” contracts for KIT digital software (contracts that gave the purchasing customer the right to use the licensed software indefinitely), and (b) the execution of fraudulent “round-trip” transactions which had the effect of using KIT digital’s own cash, rather than payments received from customers, to pay off bills, known as accounts receivable, that were due and owed to KIT digital from those customers, rather than disclose to KIT digital’s auditors and the investing public the fact that the bills were uncollectible.       

            With regard to the first method, TUZMAN and SMYTH knew that KIT digital had sold perpetual licenses for software that, at the time of sale, was not complete and required substantial future development.But instead of booking revenue ratably as KIT digital reached interim development milestones or recognizing revenue in full once software development was complete, TUZMAN and SMYTH caused KIT digital to recognize the entirety of the revenue from certain contracts at the time of sale despite the fact that KIT digital had not delivered a product to KIT digital’s customers.This premature revenue recognition violated relevant software accounting principles and was contrary to KIT digital’s statements to the investing public and its independent auditors, among others.Because of TUZMAN’s and SMYTH’s actions, KIT digital recognized approximately $6,000,000 in revenue that should not have been in its quarterly and annual reports submitted to the SEC, thus misleading the investing public and others about KIT digital’s true financial health.

            With regard to the second method, TUZMAN and SMYTH, on at least one occasion, caused KIT digital to use company money, ostensibly escrowed in connection with a KIT digital corporate acquisition, to pay off suspicious or uncollectible receivables by year-end.Specifically, TUZMAN and SMYTH caused KIT digital to add an artificial $7,850,000 “restructuring fee” to the purchase price of a company that KIT digital sought to acquire.  Once the purchase price was raised, TUZMAN and SMYTH established an escrow account that was funded with $7,850,000 in KIT digital cash which purported to represent the so-called restructuring fee.  The use of the escrowed KIT digital money was governed by a “side letter” between KIT digital and the acquired company that SMYTH created but both defendants intentionally hid from KIT digital’s auditors and the investing public.  The side letter dictated that escrowed funds could be used only to cover the costs KIT digital expected to incur from integrating the acquired company into KIT digital.  However, TUZMAN and SMYTH used the escrowed money in a round-trip transaction that resulted in KIT digital using its own cash to pay down approximately $4,400,000 in suspicious or uncollectable accounts receivables.  TUZMAN’s and SMYTH’s actions caused KIT digital’s 2011 annual financial report to overstate the company’s assets by $7,850,000 and to understate the company’s pre-tax, year-end losses by approximately $4,400,000.

            TUZMAN, 43, is charged in eight counts.For the market manipulation scheme, TUZMAN is charged with one count of conspiracy to commit securities fraud, one count of securities fraud, one count of conspiracy to commit wire fraud, and one count of wire fraud.For the accounting fraud scheme, TUZMAN is charged with one count of conspiracy to commit securities fraud, make false statements in annual and quarterly SEC reports, and make false statements to auditors, one count of securities fraud, and two counts of making false statements in annual and quarterly SEC reports.

            SMYTH, 61, is charged with one count of conspiracy to commit securities fraud, make false statements in annual and quarterly SEC reports, and make false statements to auditors, one count of securities fraud, and three counts of making false statements in annual and quarterly SEC reports.

            The securities fraud and wire fraud counts each carry a maximum sentence of 20 years in prison and a maximum fine of $5,000,000, or twice the gross gain or loss from the offense.Each of the counts for conspiracy to commit securities fraud, make false statements in annual and quarterly SEC reports, and make false statements to auditors carries a maximum sentence of five years in prison.  Each count for making false statements in annual and quarterly SEC reports carries a maximum sentence of 20 years in prison.

            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 work of the Federal Bureau of Investigation and the United States Postal Inspection Service.He also thanked the SEC – which filed charges against TUZMAN and SMYTH today in a parallel civil case – for its assistance.He also thanked the Colombian government for its help in apprehending TUZMAN and thanked the Australian government for its assistance in apprehending SMYTH.  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’s 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 Edward Y. Kim, Sarah E. McCallum, and Damian Williams are in charge of the prosecution.

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, and Mark Hamlet, the Special Agent in Charge of the Special Operations Division of the United States Drug Enforcement Administration (“DEA”), announced today the extradition of  PIRZADA KHAWAJA ABDUL HAMEED CHISHTI, a/k/a “Abdul Hameed Chishti Pirzada Khawaja,” a/k/a “Benny,” and PIRZADA KHAWAJA ABDUL WAHAB CHISHTI, a/k/a “Abdul Wahab Chishti Pirzada Khawaja,” a/k/a “Angel.”  Both are citizens of Pakistan residing in Spain and are charged with conspiring to commit narco-terrorism, to provide material support to a foreign terrorist organization, to import heroin into the United States, and to unlawfully sell missile launching systems.  HAMEED CHISHTI and WAHAB CHISHTI were arrested, along with co-defendants Sohail Kaskar and Ali Danish, in Spain on June 17, 2014, at the request of the United States.  HAMEED CHISHTI and WAHAB CHISHTI arrived in the Southern District of New York today, and will be presented before United States Magistrate Judge Gabriel W. Gorenstein.  The case is assigned to United States District Judge J. Paul Oetken.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Hameed Chishti and Wahab Chishti had no qualms selling multi-kilogram quantities of U.S.-bound heroin to individuals they believed to be members of a terrorist organization, the FARC.  According to the complaint and indictment, they also planned to arm these purported terrorists with military-grade weapons, believing they would be used to protect the FARC’s drug-trafficking enterprise.  Thanks to the dedicated work of the DEA, this entire conspiracy was foiled and these defendants will face justice on American soil.”

DEA Special Agent in Charge Mark Hamlet said: “Hameed and Wahab Chishti illustrate once again that drug trafficking and terror conspiracies often intersect, support, and facilitate each other’s dangerous and potential deadly plots.  DEA and our global partners often uncover criminal activities where drug trafficking networks and terror organizations are one and the same.  DEA will continue to work to strengthen our national security and rule of law by attacking these deadly transnational criminal groups who deal in weapons, drugs, and other crimes with the ultimate goal of bringing them to justice here in the United States.”

According to the allegations contained in the Indictment and the underlying Complaint unsealed in Manhattan federal court[1]:

From 2013 through the date of their arrests, HAMEED CHISHTI and WAHAB CHISHTI, and their co-defendants, Kaskar and Danish, participated in a conspiracy to import heroin into the United States, to distribute heroin that would be imported into the United States, and to support the Fuerzas Armadas Revolucionarias de Colombia (“FARC”), or the Revolutionary Armed Forces of Colombia.  During meetings at locations in Spain and elsewhere, the defendants agreed to sell multi-kilogram quantities of heroin to individuals they believed to be representatives of the FARC.  In fact, the purported FARC representatives were confidential sources working with the DEA.  The defendants believed that the purported FARC representatives planned to transport the heroin to the United States.  In April 2014, HAMEED CHISHTI and WAHAB CHISHTI arranged for the delivery of a one-kilogram sample of heroin to the purported FARC representatives in the Netherlands, for transport on to the United States.

During the course of the narcotics negotiations, the purported FARC representatives indicated that the FARC was interested in buying “Iglas” – the name of Russian-made surface-to-air missiles – to protect its drug-trafficking business in Colombia.  From April 2014 through June 2014, HAMEED CHISHTI, WAHAB CHISHTI, and their co-conspirators participated in discussions where they agreed to sell several missiles to the purported FARC representatives for the purpose of protecting and furthering the FARC’s efforts to manufacture and distribute cocaine for importation, ultimately, into the United States.  In April 2014, Danish told the purported FARC representatives that three to five missiles could be delivered directly to wherever they were needed, and that a larger quantity of missiles could be delivered to the FARC in Colombia by diverting the missiles from a “legitimate” order.  In May 2014, HAMEED CHISHTI forwarded Danish’s bank account information to one of the purported FARC representatives to facilitate payment for the surface-to-air missiles.

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The indictment charges HAMEED CHISHTI, 47, and WAHAB CHISHTI, 49, with conspiring to commit narco-terrorism, to provide material support to a foreign terrorist organization, to import heroin into the United States, and to unlawfully sell missile launching systems.  The United States is seeking extradition of the remaining defendants in the indictment, Kaskar and Danish, from Spain.

If convicted, each defendant faces a maximum sentence of life in prison and a mandatory minimum term of 25 years in prison.The maximum and mandatory minimum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentences will be determined by the judge.

Mr. Bharara praised the outstanding efforts of the Special Operations Division of the DEA. Mr. Bharara also thanked the DEA’s New York Field Division and the New York Organized Crime Drug Enforcement Strike Force; the U.S. Customs and Border Patrol, National Targeting Center; the DEA’s Madrid Country Office, the Hague Country Office, the Bogota Country Office, and the Port of Spain Country Office; the Government of the Kingdom of Spain and the Guardia Civil, Central Operations Unit; the Government of the Kingdom of the Netherlands and the National Police of the Netherlands; the Government of the Republic of Colombia and the Colombian National Police; and the U.S. Department of Justice’s Office of International Affairs and National Security Division.

This case is being handled by the Office’s Terrorism and International Narcotics Unit.Assistant United States Attorneys Michael D. Lockard, Adam Fee, and Emil J. Bove III are in charge of the prosecution.

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