Southern District of New York

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that JOSEPH HUNTER, a former member of the U.S. Army, pled guilty in Manhattan federal court to charges that include conspiracy to murder an agent of the Drug Enforcement Administration (“DEA”) and a DEA informant, as well as conspiracy to import cocaine into the United States. HUNTER, who was arrested in September 2013 along with co-defendants Timothy Vamvakias, Dennis Gogel, Slawomir Soborski, and Michael Filter following a long-term DEA undercover investigation, pled guilty today before U.S. District Judge Laura Taylor Swain.

Manhattan U.S. Attorney Preet Bharara said: “Joseph Hunter has now admitted that he conspired to murder a DEA agent and an informant, and provide security and surveillance for a Colombian cocaine trafficking organization. Hunter, a former U.S. Army officer, became a soldier of misfortune who recruited and led an international band of criminal mercenaries. This global gun for hire will now be confined stateside in federal prison.”

According to the Indictment filed against HUNTER, Vamvakias, Gogel, Soborski, and Filter, and statements made at public court proceedings, including today’s guilty plea:

All five defendants previously served in the armed forces of their respective nations. HUNTER served in the U.S. Army between approximately 1983 and 2004; Vamvakias served in the U.S. Army between approximately 1991 and 2004; Gogel served in the German armed forces until 2010; Filter served in the German armed forces until 2009; and Soborski served in the Polish armed forces until 2011. HUNTER served as a sniper instructor and a senior drill sergeant, training other soldiers in marksmanship and tactics. Vamvakias attained the rank of sergeant and served both as infantryman and a military police officer. Gogel, Soborski, and Filter were also trained as snipers.

In 2013, HUNTER recruited Vamvakias, Gogel, Soborski, and Filter to serve as security for a Colombian drug trafficking organization and to perform contract killings. During meetings in Asia, Africa, and the Caribbean that began in January 2013 and continued 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 Vamvakias, Gogel, 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. In late March 2013, in Thailand, Gogel, Filter, and Soborski surveilled a vessel on behalf of the CSs’ purported narcotics trafficking organization and reported their activities to HUNTER. In April 2013, in Mauritius, at the direction of the CSs, Gogel, Filter, and Soborski provided security for a meeting at which the participants discussed the distribution of illegal narcotics to the United States. In late June 2013, Vamvakias, Gogel, 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. The security team reported their activities to HUNTER.

Furthermore, HUNTER, Vamvakias, and Gogel agreed to commit murder-for-hire in Liberia by assassinating both a Special Agent of the DEA 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, Vamvakias and Gogel were together to be paid approximately $700,000, and HUNTER was to receive an additional $100,000 for supervising the hit team. Communications between the defendants and the CSs occurred by telephone, over e-mail, and in a series of surreptitiously audio-recorded and videotaped meetings over an approximately nine-month period.

In mid-May 2013, at a meeting with the CSs in Thailand, HUNTER, Vamvakias, Gogel, 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 a source (a boat captain), who was purportedly providing information to U.S. law enforcement authorities about the CSs’ narcotics trafficking organization. HUNTER confirmed by email that his team would kill both the DEA agent and the informant. At a meeting in late June 2013, CS-3 explained to Vamvakias and Gogel that “the job is to kill a U.S. DEA agent and a source with the DEA,” who would be located in Liberia. Vamvakias and Gogel 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 e-mail 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, HUNTER, VAMVAKIS, and Gogel 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.

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

HUNTER, 49, pleaded guilty to one count of conspiring to import cocaine (Count One), one count of conspiring to murder a federal law enforcement agent and a person assisting a federal law enforcement agent (Count Two), and one count of conspiring to possess a firearm in furtherance of a crime of violence (Count Four). As a result of his guilty pleas, HUNTER faces a mandatory term of imprisonment of ten years and a maximum possible term of imprisonment of life. HUNTER is scheduled to be sentenced by Judge Swain on May 29, 2015. The penalties described here are prescribed by Congress and provided for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Vamvakias, 43, pleaded guilty to Counts One, Two, Four, and Five of the Indictment on January 9, 2015, and is scheduled to be sentenced by Judge Swain on April 30, 2015. Gogel, 29, pleaded guilty to Counts One, Two, Four, and Five of the Indictment on January 13, 2015, and is scheduled to be sentenced by Judge Swain on May 1, 2015. Soborski, 41, pleaded guilty to Count One of the Indictment on February 10, 2015, and is scheduled to be sentenced by Judge Swain on May, 29, 2015.

The remaining defendant, Filter, 30, is charged with conspiracy to import cocaine into the United States. Trial is scheduled to commence before Judge Swain on March 9, 2015. The charges against Filter are merely accusations and he is presumed innocent unless and until proven guilty.

The guilty pleas were 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; Interpol; and the U.S. Department of Justice’s Office of International Affairs.

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

Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced the unsealing of a Complaint against a doctor who participated in a drug distribution conspiracy involving the prescription painkiller oxycodone. As detailed further below, the doctor, NICHOLAS KALOUDIS, operated out of Long Island and engaged in an interstate distribution scheme involving more than one thousand oxycodone tablets obtained through medically unnecessary prescriptions over a two-year period.

KALOUDIS, an endocrinologist, was arrested yesterday morning in connection with the charge in the Complaint and was presented before U.S. Magistrate Judge Michael H. Dolinger yesterday afternoon.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, the defendant violated the law and the oath of his profession when he wrote medically unnecessary prescriptions for pure profit. A physician contributing to the epidemic of pain medication abuse is a prescription for disaster.”

FBI Assistant Director Diego Rodriguez said: “The charges alleged in the complaint describe a growing epidemic that exploits the integrity of the healthcare system. Selling scripts for cash is not a victimless crime, and those who violate the oath of their profession in this way are directly contributing to the illegal distribution of drugs sold on the street. The Health Care Fraud Task Force was formed in part to protect the public from unscrupulous doctors who put profiteering ahead of professional responsibility. Those who employ these schemes will most certainly be brought to justice.”

The following allegations are based on the Complaint unsealed yesterday in Manhattan federal court:

Starting in approximately 2013 and continuing through February 2015, KALOUDIS operated out of medical clinics in Long Island, where KALOUDIS, a Board certified, state licensed doctor, wrote medically unnecessary prescriptions for more than one thousand oxycodone pills in exchange for cash payments. On multiple occasions over the course of this two-year period, KALOUDIS charged hundreds or thousands of dollars in cash for “patient visits” that involved little, if any, actual examination and resulted in the issuance of a prescription for a large quantity of oxycodone, typically 30-milligram tablets. Some of the oxycodone illegally prescribed by KALOUDIS was subsequently resold, including in Virginia, resulting in the unlawful interstate distribution of thousands of oxycodone tablets.

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 defendant is charged with one count of conspiracy to distribute and possess with intent to distribute oxycodone, 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 sentencing of the defendant would be determined by the judge.

Mr. Bharara thanked the FBI’s Health Care Fraud Task Force for their work in this investigation, which he noted is ongoing. The New York FBI Health Care Fraud Task Force was formed in 2007 in an effort to combat health care fraud in the greater New York City area. The task force comprises agents, officers, and investigators from the FBI, the NYPD, the New York State Insurance Fraud Bureau, the U.S. Department of Labor, the U.S. Office of Personnel Management Inspector General, the U.S. Food and Drug Administration, the New York State Attorney General’s Office, the New York State Office of Medicaid Inspector General, the New York State Health and Hospitals Inspector General, the New York City Human Resources Administration’s Bureau of Fraud Investigation, and the National Insurance Crime Bureau.

The case is being prosecuted by the Office’s Narcotics Unit. Assistant U.S. Attorney Alex Rossmiller is in charge of the prosecution.

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

U.S. v. Nicholas Kaloudis complaint

Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and William J. Bratton, Commissioner of the New York City Police Department (“NYPD”), announced today additional criminal charges filed in Manhattan federal court against CARLOS PANIAGUA (“CARLOS PANIAGUA”), JOSE OSVALDO PANIAGUA, JR., (“OSVALDO PANIAGUA JR.”), and JOSE RAFAEL PANIAGUA (“RAFAEL PANIAGUA”), who operated a massive prescription drug ring out of the Joaquin Grocery & Deli Store (the “Joaquin Grocery”) in the Bronx, New York, for orchestrating the October 2010 near-fatal shooting of a rival prescription drug trafficker. CARLOS PANIAGUA, OSVALDO PANIAGUA JR., and RAFAEL PANIAGUA, along with three other defendants, were initially arrested in June 2014 and charged with trafficking in oxycodone, HIV medication, and other prescription drugs. Concurrently with their arrests, and with the assistance of the New York City Law Department, the doors to the Joaquin Grocery were padlocked pursuant to a judicial order from Bronx Supreme Court. The case is assigned to U.S. District Judge Andrew L. Carter.

In addition, two additional members of the conspiracy to distribute oxycodone – VICTOR LUNA, and RAMON PICHARDO – were arrested this morning pursuant to the Superseding Indictment returned yesterday. As alleged, LUNA and PICHARDO distributed oxycodone to and with the individuals who operated the Joaquin Grocery.

Manhattan U.S. Attorney Preet Bharara said: “As with traditional drugs, prescription drug trafficking is a gateway to violence and a plague on the neighborhoods in which it is carried out. As alleged, the defendants not only turned their store into a drug market that took advantage of impoverished Medicaid beneficiaries, but were willing to, and nearly did, kill to maintain their illegal business. My office will continue work with our partners at the FBI and NYPD to investigate and vigorously prosecute these and other alleged prescription drug traffickers for their illegal drug businesses and for any resulting violence.”

FBI Assistant Director-in-Charge Diego Rodriguez said: “Second-hand medications pose significant risks to consumers, and the business of trading prescription drugs for money often encourages people to resist the treatment they need. Engaging in the illegal distribution of prescription drugs is a slippery slope, especially when criminals pick up the prescription pad. The additional charges in this case, which were announced today, detail the violence that often coincides with backdoor drug deals. The FBI and our partners are eternally committed to exposing these markets and shutting them down once and for all.”

Police Commissioner William J. Bratton said: “Thanks to the continued efforts of our investigators, our federal law enforcement partners, and the prosecutors involved in this case, these individuals will now be held accountable for not only allegedly taking part in this illegal prescription drug ring but also for plotting a murder.”

According to the allegations contained in the Complaint unsealed in June 2014, the Indictment unsealed in September 2014, the Superseding Indictment returned yesterday in Manhattan federal court, and statements made in court:

Until June 2014, CARLOS PANIAGUA, OSVALDO PANIAGUA JR., and RAFAEL PANIAGUA operated Joaquin Grocery, a grocery store at 598 Morris Avenue in the Bronx, New York. In addition to selling grocery products, the Joaquin Grocery operated for years as a marketplace for Medicaid beneficiaries to sell their Medicaid-reimbursed prescription medication, including Oxycontin, Percocet, and expensive HIV medications. The drug transactions at the Joaquin Grocery typically took place in a small room behind a door at the back of the store, where Medicaid beneficiaries provided their pill bottles to the defendants for cash. With respect to non-controlled medication such as HIV medication, the defendants removed the patient labels from the medication bottles with lighter fluid, which contains toxic substances, so that the bottles appeared brand new and could eventually be re-sold to pharmacies. With respect to controlled medication such as Oxycontin, the defendants amassed large quantities of pills and re-sold them on the street.

In 2010, a competitor in the prescription drug trafficking business (the “Competitor”) began poaching customers on the same street as the Joaquin Grocery. Ultimately, CARLOS PANIAGUA, OSVALDO PANIAGUA JR., and RAFAEL PANIAGUA planned to have the Competitor killed, and hired individuals from New Jersey to travel to the Bronx to carry out the murder. On October 13, 2010, while standing in front of a store on the same block as the Joaquin Grocery, the Competitor was shot twice, including once in the head, by one of the individuals hired by the defendants. The Competitor was taken to a nearby hospital and ultimately survived.

CARLOS PANIAGUA, OSVALDO PANIAGUA JR., and RAFAEL PANIAGUA are

each charged with one count of engaging in a conspiracy to distribute and possess with the intent to distribute a controlled substance (Count One); one count of engaging in a conspiracy to commit the unlawful misbranding, adulteration, and wholesale distribution of prescription drugs (Count Two); one count of engaging in a conspiracy to commit murder for hire (Count Three); and one count of aiding and abetting the use of a firearm in connection with the murder-for-hire conspiracy (Count Four). They each face a mandatory minimum sentence of 10 years in prison on Count Four and maximum sentences of 20 years in prison on Counts One and Three, five years in prison on Count Two, and 10 years in prison on Count Four.

LUNA and PICHARDO are each charged with one count of engaging in a conspiracy to distribute and possess with the intent to distribute a controlled substance. They each face a maximum sentence of 20 years in prison.

The previous charges against two other defendants, Osvaldo Paniagua Sr. and Joan Torres, remain unchanged.

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

Mr. Bharara praised the investigative work of the FBI and NYPD, and thanked the New York City Law Department for its assistance.

Mr. Bharara also thanked the FBI’s Health Care Fraud Task Force for their work in this investigation, which he noted is ongoing. The New York FBI Health Care Fraud Task Force was formed in 2007 in an effort to combat health care fraud in the greater New York City area. The task force comprises agents, officers, and investigators from the FBI, the NYPD, the New York State Insurance Fraud Bureau, the U.S. Department of Labor, the U.S. Office of Personnel Management Inspector General, the U.S. Food and Drug Administration, the New York State Attorney General’s Office, the New York State Office of Medicaid Inspector General, the New York State Health and Hospitals Inspector General, the New York City Human Resources Administration’s Bureau of Fraud Investigation, and the National Insurance Crime Bureau.

This case is being handled by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorney Russell Capone is in charge of the prosecution.

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

US v. Jose Carlos Paniagua, et al. (Joaquin Grocery) S4 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, and John P. Carlin, Assistant Attorney General for National Security, announced that ADEL ABDEL BARY, a/k/a “Adel Mohammed Abdul Almagid Abdel Bary,” a/k/a “Abbas,” a/k/a “Abu Dia,” a/k/a “Adel” (“BARY”), was sentenced in Manhattan federal court to 25 years in prison for his conviction on international terrorism charges in connection with BARY’s work on behalf of al Qaeda and the Egyptian Islamic Jihad. BARY was extradited to the United States from the United Kingdom on October 6, 2012, 13 years after the United States had sought his extradition. On September 19, 2014, BARY pled guilty to a three-count superseding Information charging him with one count of conspiring to make a threat to kill, injure, intimidate, and damage and destroy property by means of an explosive, one count of making such a threat, and one count of conspiring to kill U.S. nationals. BARY pled guilty before United States District Judge Lewis A. Kaplan, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “Adel Abdel Bary occupied important positions in Egyptian Islamic Jihad and al Qaeda. As he admitted at his plea last September, he facilitated communications by Osama bin Laden and other al Qaeda leaders, including publication of the 1998 al Qaeda fatwah to kill Americans, and al Qaeda’s claims of responsibility for the 1998 bombings of two American embassies in Africa. The sentence imposed today reflects the seriousness of Bary’s crimes, his role, and his acceptance of responsibility for them.”

Assistant Attorney General John Carlin said: “Adel Abdel Bary was a member of the London cell of the Egyptian Islamic Jihad and worked closely with al Qaeda leadership both before and after the bombings of the U.S Embassies in Kenya and Tanzania in 1998 to disseminate al Qaeda threats against U.S. citizens and interests around the world. This sentence holds him accountable for his key role in facilitating the delivery of al Qaeda’s message to extremists around the world encouraging the commission of violent acts against the United States and its citizens. I commend all of the people who worked on this case over many years in order to reach this result.”

According to the Indictment based on which BARY was extradited, the Superseding Information to which he pled, other documents filed in Manhattan federal court, and statements made at BARY’s guilty plea and at today’s sentencing:

In 1997 and 1998, BARY led the London, England, cell of the Egyptian Islamic Jihad (“EIJ”) organization. EIJ, which was led for years by co-defendant Ayman al Zawahiri, was dedicated to the forceful overthrow of the Egyptian Government and to violent opposition of the United States, in part, for its support of the Government in Egypt. By February 1998, EIJ had effectively merged with al Qaeda, and EIJ joined with al Qaeda in targeting American civilians. To that end, in February 1998, indicted co-defendant Usama Bin Laden, now deceased, and Zawahiri endorsed a purported fatwah under the banner of the “International Islamic Front for Jihad on the Jews and Crusaders.” This fatwah stated that Muslims should kill Americans – including civilians – anywhere in the world where they can be found. Then again, on August 4, 1998, EIJ published a statement threatening to retaliate against America for its claimed involvement in the apprehension of EIJ members. A copy of this statement was found in the London office used by BARY and his London-based co-conspirators.

While in London, BARY pledged his commitment to pursue the goals of EIJ and to follow the orders of the leadership of the group. Many of the leading members of EIJ became influential members of al Qaeda, including Zawahiri and indicted co-defendant Muhammad Atef, both of whom later sat on the majlis al shura (or consultation council) of al Qaeda. Zawahiri is now the declared leader of al Qaeda.

On August 7, 1998, three days after EIJ published its threat to retaliate against America, al Qaeda operatives bombed the United States Embassies in Nairobi, Kenya, and Dar es Salaam, Tanzania, killing 224 people. BARY transmitted, via international telephone calls to the media, the contents of al Qaeda’s claims of responsibility for the August 7, 1998, bombings. These claims of responsibility included threats of future terrorist attacks by al Qaeda and its allies, and were sent from London, England, to media organizations in France, Qatar, and the United Arab Emirates on August 8, 1998 – the day after the embassy bombings.

In August 1998, both before and after the bombings, BARY additionally arranged for messages to be transmitted from members of the media to his co-conspirators, including Bin Laden and Zawahiri, and conveyed messages from his co-conspirators, including Bin Laden and Zawahiri, to members of the media. BARY also used an office in London, which he shared with co-conspirators, to store documents, including the claims of responsibility described above, as well as for other conduct related to the conspiracy to murder U.S. nationals.

In addition to his prison term, BARY, 54, was ordered to pay restitution in the amount of $33,816,561.75, including $7,516,561.75 to victims’ family members for loss of income and $26,300,000.00 to the United States for property loss.

A co-defendant, Khalid al Fawwaz, a/k/a “Khaled Abdul Rahman Hamad al Fawwaz,” a/k/a “Abu Omar,” a/k/a “Hamad” (“Fawwaz”), is currently on trial before Judge Kaplan. The charges against Fawwaz are merely accusations, and Fawwaz is presumed innocent unless and until proven guilty.

Mr. Bharara praised the outstanding efforts of the FBI’s New York-based Joint Terrorism Task Force – which principally consists of special agents of the Federal Bureau of Investigation and detectives of the New York City Police Department – as well as the outstanding efforts of the United States Marshals Service and the Metropolitan Police Department of London (New Scotland Yard). Mr. Bharara also thanked the U.S. Department of Justice’s Office of International Affairs and National Security Division for their ongoing assistance.

This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Sean S. Buckley, Adam Fee, Nicholas J. Lewin, and Stephen J. Ritchin are in charge of the prosecution.

“As the jury unanimously found, the give-and-take of the political process should not be the giving and taking of bribes, which is what Malcolm Smith and Vincent Tabone tried to make it. Smith gave, and Tabone took, a $25,000 cash bribe to permit Smith to run for New York City Mayor as a Republican. Smith and Tabone were not alone in this scheme – Smith also bribed Daniel Halloran, another Republican Party official. And sadly, this was just one of many pockets of corruption this Office has uncovered in New York, which has become the ‘show me the money’ state. It should not be asking too much to expect public officials at least to obey the law. This Office will continue the vigorous prosecution of political corruption until every public official understands that violating the public trust will likely land you in prison.”

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that ROSS WILLIAM ULBRICHT, a/k/a “Dread Pirate Roberts,” a/k/a “DPR,” a/k/a “Silk Road,” was found guilty yesterday on all seven counts in connection with his operation and ownership of Silk Road, a hidden website designed to enable its users to buy and sell illegal drugs and other unlawful goods and services anonymously and beyond the reach of law enforcement, following a four-week trial before U.S. District Judge Katherine B. Forrest.

Manhattan U.S. Attorney Preet Bharara said: “As a unanimous jury has found, Ross William Ulbricht operated Silk Road – a clandestine global marketplace that offered buyers and sellers of illegal goods and services a promise of anonymity. Ulbricht built this black market bazaar to exploit the dark web and the digital currency Bitcoin to allow users to conduct illegal business beyond the reach of law enforcement. Ulbricht’s arrest and conviction – and our seizure of millions of dollars of Silk Road Bitcoins – should send a clear message to anyone else attempting to operate an online criminal enterprise. The supposed anonymity of the dark web is not a protective shield from arrest and prosecution.”

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

ULBRICHT created Silk Road in approximately January 2011, and owned and operated the underground website until it was shut down by law enforcement authorities in October 2013. Silk Road emerged as the most sophisticated and extensive criminal marketplace on the Internet, serving as a sprawling black-market bazaar where unlawful goods and services, including illegal drugs of virtually all varieties, were bought and sold regularly by the site’s users. While in operation, Silk Road was used by thousands of drug dealers and other unlawful vendors to distribute hundreds of kilograms of illegal drugs and other unlawful goods and services to well over a hundred thousand buyers, and to launder hundreds of millions of dollars deriving from these unlawful transactions.

ULBRICHT deliberately operated Silk Road as an online criminal marketplace intended to enable its users to buy and sell drugs and other illegal goods and services anonymously and outside the reach of law enforcement. ULBRICHT sought to anonymize transactions on Silk Road in two principal ways. First, ULBRICHT operated Silk Road on what is known as “The Onion Router,” or “Tor” network, a special network of computers on the Internet, distributed around the world, designed to conceal the true IP addresses of the computers on the network and thereby the identities of the networks’ users. Second, ULBRICHT designed Silk Road to include a Bitcoin-based payment system that served to facilitate the illegal commerce conducted on the site, including by concealing the identities and locations of the users transmitting and receiving funds through the site.

The vast majority of items for sale on Silk Road were illegal drugs, which were openly advertised as such on the site. As of September 23, 2013, Silk Road had nearly 13,000 listings for controlled substances, listed under such categories as “Cannabis,” “Dissociatives,” “Ecstasy,” “Intoxicants,” “Opioids,” “Precursors,” “Prescription,” “Psychedelics,” and “Stimulants.” From November 2011 to September 2013, law enforcement agents made more than 60 individual undercover purchases of controlled substances from Silk Road vendors. These purchases included heroin, cocaine, ecstasy, and LSD, among other illegal drugs, and were filled by vendors believed to be located in more than ten different countries, including the United States, Germany, the Netherlands, Canada, the United Kingdom, Spain, Ireland, Italy, Austria and France.

In addition to illegal narcotics, other illicit goods and services were openly bought and sold on Silk Road as well. For example, as of September 23, 2013, there were: 159 listings under the category “Services,” most of which offered computer hacking services, such as a listing by a vendor offering to hack into social networking accounts of the customer’s choosing; 801 listings under the category “Digital goods,” including malicious software, hacked accounts at various online services, and pirated media content; and 169 listings under the category “Forgeries,” including offers to produce fake driver’s licenses, passports, Social Security cards, utility bills, credit card statements, car insurance records, and other forms of false identification documents.

Using the online moniker “Dread Pirate Roberts,” or “DPR,” ULBRICHT controlled and oversaw every aspect of Silk Road, and managed a staff of paid, online administrators and computer programmers who assisted with the day-to-day operation of the site. Through his ownership and operation of Silk Road, ULBRICHT reaped commissions worth over $13 million generated from the illicit sales conducted through the site. ULBRICHT also demonstrated a willingness to use violence to protect his criminal enterprise and the anonymity of its users. ULBRICHT even solicited six murders-for-hire in connection with operating the site, although there is no evidence that these murders were actually carried out.

ULBRICHT, 30, of San Francisco, California, was found guilty of: one count of distributing narcotics, one count of distributing narcotics by means of the Internet, and one count of conspiring to distribute narcotics, each of which carries a maximum sentence of life in prison and a mandatory minimum sentence of 10 years; one count of engaging in a continuing criminal enterprise, which carries a maximum sentence of life in prison and a mandatory minimum sentence of 20 years in prison; one of count of conspiring to commit computer hacking, which carries a maximum sentence of five years in prison; one count of conspiring to traffic in false identity documents, which carries a maximum sentence of 15 years; and one count of conspiring to commit money laundering, which carries a maximum sentence of 20 years in prison. The maximum sentences are prescribed by Congress and are provided for informational purposes only, as the sentence will be determined by the judge. ULBRICHT is scheduled to be sentenced on May 15, 2015.

Mr. Bharara praised the outstanding investigative work of the Federal Bureau of Investigation and its New York Special Operations and Cyber Division, as well as the outstanding investigative work of the DEA’s New York Organized Crime Drug Enforcement Strike Force, which comprises agents and officers of the DEA, the IRS, the New York City Police Department, U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), the New York State Police, the Bureau of Alcohol, Tobacco, Firearms and Explosives, the U.S. Secret Service, the U.S. Marshals Service, Office of Foreign Assets Control, and NY Department of Taxation. Mr. Bharara also thanked the ICE-HSI Chicago-O’Hare office for its assistance and support, as well as the Department of Justice’s Computer Crime and Intellectual Property Section and Office of International Affairs. Additionally, Mr. Bharara praised the foreign law enforcement partners whose contributions to the success of the investigation and prosecution have been invaluable, namely, the Reykjavik Metropolitan Police of the Republic of Iceland, and the French Republic’s Central Office for the Fight Against Crime Linked to Information Technology and Communication.

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 Attorneys Serrin Turner and Timothy Howard are in charge of the prosecution, and Assistant United States Attorney Christine Magdo is in charge of the forfeiture aspects of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, and Thomas P. Zugibe, the Rockland County District Attorney, announced that former New York State Senate leader MALCOLM SMITH was found guilty in federal court of bribing New York City Republican leaders, including Queens County Republican Party Vice Chairman VINCENT TABONE, who was also convicted of receiving bribes, to allow SMITH, a Democrat, to run as a Republican candidate for New York City Mayor in 2013. SMITH was also found guilty of extortion for his role in obtaining New York State funding for a real estate project in Spring Valley, New York, in exchange for cash bribes paid on his behalf to the New York City Republican Party chairmen. In addition, TABONE was convicted of witness tampering when he attempted to persuade former Queens County Republican Party Chairman Philip Ragusa not to testify against him. The two were convicted after a four-week jury trial before U.S. District Judge Kenneth M. Karas.

Manhattan U.S. Attorney Preet Bharara said: “As the jury unanimously found, the give-and-take of the political process should not be the giving and taking of bribes, which is what Malcolm Smith and Vincent Tabone tried to make it. Smith gave, and Tabone took, a $25,000 cash bribe to permit Smith to run for New York City Mayor as a Republican. Smith and Tabone were not alone in this scheme – Smith also bribed Daniel Halloran, another Republican Party official. And sadly, this was just one of many pockets of corruption this Office has uncovered in New York, which has become the ‘show me the money’ state. It should not be asking too much to expect public officials at least to obey the law. This Office will continue the vigorous prosecution of political corruption until every public official understands that violating the public trust will likely land you in prison.”

Rockland County District Attorney Thomas P. Zugibe said: “The facts put forth at this trial and the resulting verdict clearly display how official corruption can potentially impact our system of government and how it can be stopped. I'd like to thank the United States Attorney's Office for taking this case to a successful conclusion and I commend our federal partners and the members of my staff for their efforts. I look forward to future success in rooting out corruption through the continued efforts of the United States Attorney's Office, the Federal Bureau of Investigation, and the Rockland County District Attorney's Office through our Public Corruption Task Force.”

According to the Complaint and the Indictment filed in federal court and the evidence presented at trial:

The Bribery and Extortion Schemes

SMITH was first elected to the New York State Senate in November 2000, and represented a district within Queens, New York. He was Chairman of the Independent Democratic Conference of the State Senate and, among other positions, has served as the State Senate’s minority and majority leader and acting lieutenant governor. From November 2012 through April 2, 2013, SMITH agreed with former New York City councilman Daniel Halloran, who was convicted in a separate trial, and an undercover FBI agent posing as a wealthy real estate developer (the “UC”), and a cooperating witness (“CW”) to bribe New York City Republican Party county leaders, including TABONE, in exchange for their authorization for SMITH to appear as a Republican candidate for New York City Mayor in 2013, even though SMITH is a registered Democrat.

SMITH participated in two overlapping criminal schemes that involved the payment of bribes to obtain official action. First, SMITH authorized the payment of $110,000 in cash bribes to be paid to leaders of the New York City Republican Party, including TABONE, so that they would allow SMITH to run for mayor on the Republican Party’s ballot line. Second, SMITH agreed to use his influence to help steer at least $500,000 in New York State transportation funding to a real estate project the UC and CW had proposed to develop in Spring Valley, New York, in exchange for the UC and CW paying bribes on SMITH’s behalf to the New York City Republican Party Chairs.

In furtherance of the scheme, SMITH authorized the UC and the CW to meet TABONE, the Executive Vice Chairman of the Queens County Republican Party, Joseph Savino, the Chairman of the Bronx County Republican Party, and other party leaders. During a meeting with the UC, TABONE accepted a $25,000 cash bribe in a dimly lit SUV parked in front of a Manhattan restaurant and agreed to accept another $25,000 after his committee authorized SMITH to compete in the Republican primary. Savino similarly accepted a $15,000 cash bribe and agreed to accept another $15,000 after he voted to authorize SMITH to compete for the Republican ballot line. In return for his efforts in negotiating the bribes, Daniel Halloran accepted $15,500 as a down payment on a “broker’s” fee of at least $75,000 and expected to be appointed First Deputy Mayor if Smith was elected mayor.

Witness Tampering

Shortly before the start of a previously scheduled trial, the Government sought permission from the Court to take the deposition of Philip Ragusa, the former Chairman of the Queens County Republican Party. Ragusa, who was gravely ill at the time, was expected to testify favorably to the Government. Over TABONE’s objections, the Court ordered the deposition to take place. An hour before the scheduled start of the deposition, TABONE unexpectedly appeared at Ragusa’s home and attempted to pressure Ragusa not to testify against him.

SMITH, 57, and TABONE, 48, both of Queens, New York, were found guilty of one count of conspiracy, which carries a maximum sentence of five years in prison; one count of wire fraud, which carries a maximum sentence of 20 years in prison; and one count of Travel Act bribery, which carries a maximum sentence of five years in prison. SMITH was separately convicted of one count of extortion, which carries a maximum sentence of 20 years in prison, and TABONE was separately convicted of one count of witness tampering, which carries a maximum sentence of 20 years in prison. Each of the counts of conviction also carries a maximum fine of $250,000, or twice the gross gain or loss from the offense.

SMITH and TABONE are scheduled to be sentenced by Judge Karas on July 1, 2015, at 10:00 a.m. and 11:00 a.m., respectively.

Mr. Bharara praised the outstanding investigative work of the Federal Bureau of Investigation and the Rockland County District Attorney’s Office.

This case is being handled by the Office’s White Plains Division and Public Corruption Unit. Assistant United States Attorneys Douglas B. Bloom, Justin Anderson and Perry Carbone are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that ALEX V. EKDESHMAN, the Chief Executive Officer of Paramount Management, LLC, pleaded guilty today to commodities fraud. EKDESHMAN ran a fraudulent scheme in which he solicited over $1.5 million dollars from over 100 investors for the purpose of investing in foreign exchange currency transactions and then misappropriated the majority of investors’ funds to pay for personal and business expenses. EKDESHMAN was originally charged in May 2014, and he pled guilty today in Manhattan federal court before the Honorable Vernon S. Broderick, United States District Judge.

U.S. Attorney Preet Bharara said: “Alex Ekdeshman stole over $1.5 million from over 100 investors. His actions are another example of greed overpowering judgment.”

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

From at least in or about May 2011 through May 2013, EKDESHMAN ran a fraudulent commodities trading scheme. EKDESHMAN, who was chief executive officer of Paramount Management, LLC (“Paramount Management”), located in New York, New York, represented to investors that Paramount Management was in the business of investing in foreign exchange currency transactions, or “forex.” Through various employees of Paramount Management, EKDESHMAN solicited investor funds on the understanding that the funds would be solely invested in forex. As a result of these solicitations, EKDESHMAN and his employees collected at least $1.58 million from approximately 115 investors.

Contrary to EKDESHMAN’s promise to invest the investors’ funds in forex, EKDESHMAN misappropriated the large majority of investor funds. More than $1 million in investor funds were never traded in forex. Instead, EKDESHMAN used those funds to make payments to himself and his family members, to buy personal items, to pay for business expenses related to Paramount Management, and to pay employees of Paramount Management.

EKDESHMAN, 38, of Holmdel, New Jersey, pleaded guilty to one count of commodities fraud. This charge carries a maximum sentence of 10 years in prison and a maximum fine of $1 million, or twice the gross gain or loss from the offense. The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

Mr. Bharara praised the work of the Federal Bureau of Investigation, and thanked the United States Commodity Futures Trading Commission for its assistance. He added that the investigation is continuing.

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 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 the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

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

"As a unanimous jury has found, Ross William Ulbricht operated Silk Road – a clandestine global marketplace that offered buyers and sellers of illegal goods and services a promise of anonymity. Ulbricht built this black market bazaar to exploit the dark web and the digital currency Bitcoin to allow users to conduct illegal business beyond the reach of law enforcement. Ulbricht’s arrest and conviction – and our seizure of millions of dollars of Silk Road Bitcoins – should send a clear message to anyone else attempting to operate an online criminal enterprise. The supposed anonymity of the dark web is not a protective shield from arrest and 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”), Cheryl Garcia, the Special Agent-in-Charge of the New York Regional Office of the United States Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud Investigations (“DOL-OIG”), and William J. Bratton, the Police Commissioner of the City of New York (“NYPD”), announced today that a federal grand jury has returned an Indictment charging ADAM FORESTA, CHRISTOPHER LUPINO, JAMES SHEERAN, and KELWYN BENJAMIN with conspiring to commit honest services wire fraud in connection with their accepting bribes in exchange for memberships in Steamfitters Local 638, a New York City labor union. The defendants were arrested in November 2014 on the same charges, pursuant to a criminal Complaint. The case is assigned to United States District Judge William H. Pauley, III, in Manhattan federal court.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, the defendants – Adam Foresta, Christopher Lupino, James Sheeran, and Kelwyn Benjamin – disgraced the idea of union membership and disserved the interests of the plumbing and pipefitting industry workers of Steamfitters Local 638 when they concocted a scheme to sell Union memberships for thousands of dollars in cash bribes to fill their personal coffers. This Office remains committed to protecting the integrity of unions from this type of alleged misconduct and ensuring that those who would engage in it face justice.”

FBI Assistant Director-in-Charge Diego Rodriguez said: “For a bribe, the defendants granted membership to the highly sought-after Steamfitters union. Ironically, the defendants’ actions didn’t protect their two key constituents: union members and those with leaky pipes. The FBI continues to police this city’s labor organizations for corruption at all levels.”

NYPD Commissioner William J. Bratton said: “I would like to thank the members of the NYPD’s Joint Organized Crime Task Force and our Federal partners who built this case and made these indictments possible.”

According to allegations contained in the Indictment, the underlying criminal Complaint unsealed on November 5, 2014, and statements made during court proceedings:

FORESTA, LUPINO, SHEERAN, and BENJAMIN were all members of Steamfitters Local 638, a local division of a labor union that represents workers in the plumbing and pipefitting industries in New York City (the “Union”). SHEERAN was an organizer for the Union and worked on membership recruitment. In that capacity, he owed fiduciary duties to Steamfitters Local 638.

In December 2013, an individual who has not been charged (“Applicant-1”) told a cooperating witness (the “CW”) that Applicant-1 had been offered membership in the Union – what is known as a “Union book” – in exchange for a $35,000 bribe. Applicant-1 asked the CW to help him/her pay for the Union book.

Over the next several months, FORESTA, LUPINO, and BENJAMIN each had conversations, which were recorded by the FBI, with the CW about buying Union books for Applicant-1 and another individual who has not been charged (“Applicant-2”). During these calls, the CW was told that each Union book would cost $40,000 – $5,000 for the typical Union application fee and a $35,000 cash bribe.

In October 2014, Applicant-1 met with SHEERAN, who coached Applicant-1 to provide answers to questions from Union officials to enable him to secure approval from the interviewing officials, including by misleading the Union officials. Applicant-1 and Applicant-2 met with the Union committee later that month in connection with their applications. After that meeting, LUPINO told the CW that approvals from the Union would come soon.

On November 3, 2014, a few days before Applicant-1 and Applicant-2’s memberships were to be issued, LUPINO and FORESTA arranged for FORESTA to meet with the CW to pick up the bribes for the two Union books. LUPINO told the CW to bring $70,000 in cash and that the other $10,000, which would go to the Union for application fees, should be paid for by check or money order. On November 4, 2014, FORESTA and the CW met in Manhattan. The CW gave FORESTA $35,000 in cash for one Union book – telling him he would pay for the second Union book the next day. Thereafter, the agents arrested FORESTA; LUPINO, BENJAMIN, and SHEERAN were arrested in the following days.

FORESTA, 45, of Staten Island, New York, LUPINO, 51, of New Monmouth, New Jersey, SHEERAN, 49, of Jackson, New Jersey, and BENJAMIN, 41, of New York, New York, are each charged with one count of conspiring to commit honest services wire fraud, 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.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation, United States Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud Investigations, and the New York City Police Department.

The case is being prosecuted by the Office’s Violent & Organized Crime Unit. Assistant U.S. Attorneys Joshua A. Naftalis and Jordan Estes 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.

U.S. v. Adam Foresta, et al Indictment

PREET BHARARA, the United States Attorney for the Southern District of New York, and Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the indictment of CEDRIC CAÑAS MAILLARD, a former high-level adviser to the CEO of a global bank, who engaged in securities trades based on material, nonpublic information he obtained through his employment. CAÑAS’s trades resulted in profits of approximately $917,239.

U.S. Attorney Preet Bharara said: “As alleged, Cedric Cañas exploited his access to material nonpublic information to purchase securities he reasonably knew would increase in value after a public announcement. In short order, he allegedly sold the securities for a nearly $1 million profit. Working with the FBI, we will continue to prosecute those who seek to reap illegal windfall profits from insider information.”

FBI Assistant Director-in-Charge Diego Rodriguez said: “Cañas allegedly based his purchase of Potash equities on illegally obtained inside information, which provided him with nearly $1 million in profits when all was said and done. His actions detail the existence of disingenuous trading principles that effectively thwart fairness in the marketplace. Today we remind the public that the FBI and our partners will continue to work to restore and uphold the integrity of our financial markets.”

According to the two-count Indictment unsealed today in Manhattan federal court:

In August 2010, CAÑAS engaged in a series of trades based on material, nonpublic information he obtained during the course of his employment. Prior to engaging in these trades, CAÑAS, who was employed at a global bank (the “Bank”) as a high-level adviser to the chief executive officer of the Bank, obtained confidential information related to the planned acquisition of Potash Corporation of Saskatchewan Inc. (“Potash”) by BHP Billiton (“BHP”) for $45 billion.

After receiving this information, and prior to the public announcement of the planned acquisition, CAÑAS, who worked for the Bank in Spain, purchased 30,000 Potash equity Contracts for Difference (“CFDs”), which are a form of highly leveraged securities, for which he paid a total of $1,500 in commission fees. Upon receiving CAÑAS’s CFD purchase orders, CAÑAS’s broker purchased an equivalent number of New York Stock Exchange-listed Potash shares. CAÑAS’s purchase of Potash CFDs violated the Bank’s Code of Conduct, which CAÑAS was aware of and understood. The Code of Conduct prohibited trading based upon inside information such as BHP’s planned acquisition of Potash.

On August 16, 2010, the closing price of Potash’s stock on the New York Stock Exchange was $112.15. On August 17, 2010, it was publicly announced that the board of Potash had received and rejected an unsolicited offer from BHP to purchase the common stock of Potash for $38.6 billion, or the equivalent of $130 per share. The price of Potash stock rose and ultimately closed on August 17, 2010, at $143.17 per share. CAÑAS liquidated his position in Potash equity CFDs on the same day as the public announcement, resulting in profits of approximately $917,239.

CAÑAS, 41, a Spanish citizen, has not been arrested.

CAÑAS is charged with two counts of securities fraud. Each count carries a maximum of 20 years in prison and a maximum fine of $5,000,000. 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 SEC for its assistance. He added that the investigation is continuing.

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 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 the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

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

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

Preet Bharara, United States Attorney for the Southern District of New York, announced today that AKIM MURRAY was sentenced in Manhattan federal court to 63 months in prison for orchestrating a substantial Medicaid fraud. MURRAY, a former employee of the Medicaid Reimbursement Unit of the New York City Human Resources Administration (“HRA”), was sentenced today by U.S. District Judge Richard M. Berman. MURRAY pled guilty in September 2014 to one count of conspiracy to commit health care fraud for abusing his access as an HRA employee in order to have dozens of checks amounting to over a million dollars issued to his friends and criminal associates, who in turn gave him a substantial cut of the proceeds.

Manhattan U.S. Attorney Bharara said: “Taking money meant for people in need, Akim Murray used his position as a New York City employee to divert over a million dollars to himself and his friends. City employees who abuse their access in similar ways should heed the lesson in his deserved prison sentence: this office and its law enforcement partners will not tolerate such conduct.”

According to the allegations in the Complaint and other documents, and statements made in Manhattan federal court:

Medicaid is a federally funded program designed to provide low-income families with affordable health care. The New York City Human Resources Administration oversees the program and processes applications from New York City residents. Under Medicaid, individuals who successfully apply for Medicaid coverage can be reimbursed for eligible expenses submitted in the approximately three-month period prior to the application (“Pre-Enrollment Services”). In order to be reimbursed for Pre-Enrollment Services, the successful Medicaid applicant requesting reimbursement must provide proof that he or she made eligible health care payments out of pocket before applying for Medicaid. City employees known as Eligibility Specialists, working for HRA’s Medicaid Reimbursement Unit, receive and process requests for reimbursement using a computer system, and make recommendations for HRA supervisors as to whether a request should be approved.

From at least July 2009 until September 2010, MURRAY, an HRA Eligibility Specialist, exploited loopholes in HRA’s computer systems to both recommend and then separately approve the issuance of Medicaid reimbursement checks without meaningful oversight. MURRAY used the personal identifying information of his co-conspirators to create and unilaterally approve requests for reimbursement checks in their names. When the checks were sent to his friends and other associates, MURRAY demanded that they cash the checks and give him between 50-70% of the proceeds. MURRAY approved over $1 million in Medicaid reimbursement requests without proper oversight.

MURRAY, 53, of New York, New York, was also sentenced to three years of supervised release, and ordered to pay $1,383,501.15 in restitution and $100,000 in forfeiture.

Mr. Bharara praised the investigative work of the FBI’s Health Care Fraud Task Force and the DOI for their assistance in this investigation, which he noted is ongoing. The New York FBI Health Care Fraud Task Force was formed in 2007 in an effort to combat health care fraud in the greater New York City area. The task force comprises agents, officers, and investigators from the FBI, NYPD, the New York State Insurance Fraud Bureau, U.S. Department of Labor, U.S. Office of Personnel Management Inspector General, U.S. Food and Drug Administration, New York State Attorney General’s Office, New York State Office of Medicaid Inspector General, New York State Health and Hospitals Inspector General, and the National Insurance Crime Bureau.

This case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorney Martin S. Bell is in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that attorney ALBERT BALDEO, a former Queens District Leader, was sentenced today in federal court to 18 months in prison for tampering with witnesses during the Federal Bureau of Investigation’s (“FBI”) investigation of alleged campaign fraud by BALDEO. Sentence was imposed by U.S. District Judge Paul A. Crotty. BALDEO was convicted of six counts of obstruction of justice and one count of conspiracy to obstruct justice in Manhattan federal court on August 11, 2014, after a two-week trial.

U.S. Attorney Bharara stated: “Albert Baldeo tried through intimidation and harassment to obstruct the government’s investigation of his alleged fraudulent campaign practices. The obstruction of justice by a political official has no place in our politics, but it shows how officials who see fit to hold themselves above the rules will inevitably see fit to hold themselves above the law, and finish not fit to hold office. This has been all too common in New York City and New York State. Today’s sentence is a fitting punishment for Baldeo’s crimes, and a reminder that this Office and its law enforcement partners will continue to vigorously investigate and prosecute political corruption.”

According to the Complaint, Indictment, and Superseding Indictment and evidence presented at trial and during the sentencing proceeding:

In the fall of 2010, BALDEO, then a Queens District Leader of a political party and an attorney, participated in a scheme to defraud New York City that involved the funneling of multiple illegal campaign contributions to his ultimately unsuccessful campaign for City Council. On various occasions, BALDEO, and in at least one instance one of BALDEO’s employees, provided money orders or cash to individuals to contribute to the campaign in their own names, even though BALDEO supplied the funds and these individuals did not contribute any of their own money or reimburse him for these donations.

As part of this scheme, BALDEO gave each such donor, commonly referred to as a “straw donor,” a campaign contribution card in which he or she wrote his or her name, address, employment information, and the amount of money purportedly donated to the BALDEO campaign. BALDEO instructed the straw donors to sign the contribution cards falsely affirming that the contribution was being made from their personal funds and was not being reimbursed in any manner. The New York City Campaign Finance Board (“CFB”) relied upon the information contained in these fraudulent contribution forms, among other things, in order to determine whether to release public matching campaign funds to BALDEO’s 2010 campaign. Moreover, as part of this scheme, BALDEO instructed several of these straw donors to sign affidavits, at least one of which was actually provided to the CFB in connection with BALDEO’s efforts to obtain matching funds, and which also falsely asserted that these straw donors’ contributions were made using their own funds.

After learning of the FBI’s investigation of this matter, BALDEO obstructed the investigation by repeatedly instructing certain straw donors to provide false information to, or not cooperate with, the FBI agents who were investigating contributions to his campaign.

Moreover, in response to BALDEO learning that one straw donor was going to refuse to lie as instructed by BALDEO: (1) a threatening letter was faxed from BALDEO’s office to the office of this straw donor’s attorney; (2) a co-conspirator of BALDEO not charged in this matter made false allegations to the New York City Administration for Children’s Services that this straw donor was abusing his grandchild; and (3) BALDEO and the same co-conspirator made at least one complaint each to the New York City Department of Buildings about properties owned by this straw donor or his wife.

BALDEO, 54, of Richmond Hill, New York, was convicted after trial of one count of conspiracy to obstruct justice, and six counts of obstruction of justice, each relating to a separate instance of witness tampering. He was found not guilty of three fraud-related counts. In addition to his prison term, BALDEO was sentenced to two years of supervised release, including three months on home confinement. He was also ordered to pay a $15,000 fine.

Mr. Bharara praised the investigative work of the FBI and expressed his appreciation for the assistance of the New York City Campaign Finance Board, the New York City Administration for Children’s Services, and the New York City Department of Buildings in the investigation and prosecution of this matter.

This case is being prosecuted by the Office’s Public Corruption Unit. Assistant United States Attorneys Daniel C. Richenthal and Martin S. Bell 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 arrest of LYLE KAMLET for possession and receipt of child pornography. KAMLET, a former teacher at a school in Mamaroneck, New York, was arrested on Friday, January 30th by USPIS agents, and presented in White Plains federal court before United States Magistrate Judge Lisa Margaret Smith.

According to the allegations in the criminal Complaint unsealed on Friday in White Plains federal court:

From 2008 through 2010, on a number of occasions, KAMLET ordered child pornography videos – some of which he directed to be mailed to the school where he was then employed. During a search of his residence, law enforcement seized those videos and also found home movies that he had created that contained images of naked children.

KAMLET, 62, of Mount Vernon, New York, is charged with one count of receiving child pornography, which carries a mandatory minimum sentence of five years in prison and a maximum sentence of 20 years in prison, and one count of possessing child pornography, which carries a maximum sentence of 10 years in prison. Both counts also carry 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.

Mr. Bharara praised the outstanding investigative work of the United States Postal Inspection Service. He requests that individuals with relevant information about KAMLET contact the U.S. Postal Inspection Service at 877-876-2455, and reference case # 1972872.

The prosecution is being overseen by the Office’s White Plains Unit. Assistant United States Attorney John P. Collins, Jr., is in charge of the prosecution.

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

U.S. v. Lyle Kamlet Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, Shantelle P. Kitchen, the Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced that PATRICK WHITE pled guilty today in White Plains federal court to tax fraud charges.

WHITE is charged with one count of failing to pay over payroll taxes accumulated by his commercial construction business.

Manhattan U.S. Attorney Bharara stated: “The victims in this scheme are the American taxpayers. But the ultimate loser will be the defendant Mr. White who gambled his liberty and his reputation on his tax fraud scheme not being found out.”

Special Agent in Charge Shantelle P. Kitchen stated: “When business owners deliberately fail to pay their fair share of payroll taxes, American taxpayers and businesses have to make up the difference. Additionally, they hurt their own workforce by potentially depriving their workers of future benefits to which they may be entitled.”

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 certain employees’ wages were not properly reported, with the funds diverted from their proper purpose, payment of taxes due, so that White could use them for personal expenses including homes and gambling. In so doing, R & L Construction accumulated approximately $3,758,000 in unpaid payroll tax liabilities.

WHITE faces a maximum sentence of three years in prison on the sole charge in the Information. The statutory maximum sentence is prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge. WHITE is scheduled to be sentenced on May 21, at 10 a.m. before U.S. District Judge Cathy Seibel.

Mr. Bharara praised the outstanding efforts of IRS-CID and United States Department of State Diplomatic Security Service. 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. Attorneys John P. Collins, Jr. is in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and Leslie R. Caldwell, Assistant Attorney General for the Justice Department’s Criminal Division, announced that MAXIM CHUKHAREV was sentenced today to three years in prison for conspiring to operate an unlicensed money transmitting business in connection with his work for Liberty Reserve, a company that operated one of the world’s most widely used digital currency services. CHUKHAREV was primarily responsible for maintaining Liberty Reserve’s technological infrastructure and for implementing systems designed to create the false appearance that Liberty Reserve had an effective anti-money laundering program. CHUKHAREV pled guilty in September 2014 before U.S. District Judge Denise L. Cote, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “Maxim Chukharev provided essential assistance to a criminal enterprise that he knew was operating as an unlicensed money transmitting business. By evading U.S. licensing requirements, Liberty Reserve allowed cybercriminals to move money anonymously around the world. Whenever cybercriminals, including those who intentionally encrypt and cloak criminal cyber activity, are found within the reach of justice, they will be held accountable for their actions.”

According to allegations contained in the Indictment filed against Liberty Reserve, CHUKHAREV and six other individual defendants, and statements made in other documents filed in Manhattan federal court and related court proceedings:

Liberty Reserve was incorporated in Costa Rica in 2006 and billed itself as the Internet’s “largest payment processor and money transfer system.” Liberty Reserve was created, structured, and operated to help users conduct illegal transactions anonymously and launder the proceeds of their crimes. It emerged as one of the principal money transfer agents used by cybercriminals around the world to distribute, store, and launder the proceeds of their illegal activity. Liberty Reserve was used extensively for illegal purposes, functioning as the bank of choice for the criminal underworld because it provided an infrastructure that enabled cybercriminals around the world to conduct anonymous and untraceable financial transactions.

Before being shut down by the U.S. government in May 2013, Liberty Reserve had more than five million user accounts worldwide, including more than 600,000 accounts associated with users in the United States, and processed tens of millions of transactions through its system, totaling more than $16 billion in funds. These funds encompassed suspected proceeds of credit card fraud, identity theft, investment fraud, computer hacking, child pornography, narcotics trafficking, and other crimes.

CHUKHAREV began doing work for Liberty Reserve in 2009, and was hired as an employee in January 2010. At first, CHUKHAREV reported directly to Mark Marmilev, Liberty Reserve’s chief technology officer. As time went on, CHUKHAREV took on greater responsibility, including the creation and implementation of a system designed to hide information about Liberty Reserve’s users and the sources of its business from the company’s Costa Rican regulatory agency. By design, the system provided mostly “fake” statistics about Liberty Reserve’s business to the agency, in order to give the appearance that Liberty Reserve had an effective anti-money laundering program. Beginning in January 2012, CHUKHAREV took over many of Marmilev’s responsibilities in the day-to-day management of Liberty Reserve’s technical operations, including the maintenance and operation of its website. CHUKHAREV worked for Liberty Reserve for years despite knowing that the business was not licensed as a money transmitting business under United States law. The fact that Liberty Reserve had not registered as a money transmitting business under U.S. law was a vital component of its success as a system used to launder funds derived from or intended to promote criminal activity.

CHUKHAREV, 28, is a citizen of Russia and resident of Costa Rica.

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

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

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

The charges contained in the Indictment against certain of CHUKHAREV’s co-defendants remain pending and, as to those defendants, are merely accusations. Those defendants are presumed innocent unless and until they are proven guilty.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that MICHAEL J. MITROW, Jr., pled guilty today to conspiracy to commit wire fraud for defrauding his former employer, a New Jersey-based pharmaceutical marketing agency (the “Marketing Agency”), and co-defendant MATTHEW J. MITROW pled guilty on Monday to filing a false tax return that failed to report more than $90,000 in income. MICHAEL MITROW submitted false invoices to the Marketing Agency and used the proceeds to pay for more than $600,000 in private jet travel. MICHAEL MITROW also pled guilty to tax evasion for failing to report those proceeds to the IRS, as well as approximately $1 million of additional income he received from a co-defendant. Co-defendant MATTHEW MITROW failed to report to the IRS payments received from Creative Press that he used for home renovations, private jet travel, and other personal expenses. Both defendants pled guilty before U.S. District Judge Paul A. Engelmayer.

According to the Indictment and Superseding Information previously filed in Manhattan federal court, as well as statements made at plea proceedings Monday and today and in other court proceedings:

MICHAEL J. MITROW, Jr., was the former CEO and President of the Marketing Agency from 1998 through approximately 2009. From 2008 through 2009, MICHAEL MITROW defrauded the Marketing Agency by submitting fraudulent invoices for consulting services that were purportedly provided to the Marketing Agency. In truth, however, no such consulting services had been provided. Instead, MICHAEL MITROW used the proceeds from those invoices to fund more than $600,000 in private jet travel.

MICHAEL MITROW also failed to report more than $1.6 million in income he received during the 2008 tax year, including payments he received from two companies owned by Robert Madison, as well as personal purchases MICHAEL MITROW made with his corporate credit card that he fraudulently coded as business expenses of the Marketing Agency.

MATTHEW J. MITROW was the Executive Vice-President of the Marketing Agency. During the 2008 tax year, MATTHEW MITROW received approximately $91,000 in payments from Creative Press, a printing and direct mail marketing company located in Phoenix, Arizona, that provided printing and direct mailing services to the “Marketing Agency”. The payments MATTHEW MITROW received from Madison and Creative Press included approximately $39,000 in home renovations, $30,000 in payments to MATTHEW MITROW’s personal credit cards, and more than $21,000 for private jet travel. MATTHEW MITROW willfully failed to include those payments as income on his 2008 tax return. In 2009, Creative Press also paid a $19,000 debt at a New York City “Gentlemen’s Club,” which he also failed to report on his tax returns.

MICHAEL J. MITROW, Jr., 47, of Whitehouse Station, New Jersey, pled guilty today to one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison, and one count of tax evasion, which carries a maximum sentence of five years in prison. MICHAEL MITROW also agreed to pay restitution in an amount to be determined by the Court. MICHAEL MITROW’s sentencing is scheduled for June 25, 2015, at 9:30 a.m., before Judge Engelmayer.

MATTHEW J. MITROW, 40, of Westfield, New Jersey, pled guilty on Monday, January 26, 2015, to one count of filing a false tax return, which carries a maximum sentence of five years in prison. MATTHEW MITROW’s sentencing is scheduled for June 4, 2015, at 11:00 a.m., before Judge Engelmayer.

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.

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. Special Assistant United States Attorney Andrew Young and Department of Justice Tax Division Senior Litigation Counsel Nanette L. Davis are in charge of the prosecution.

Preet Bharara, United States Attorney for the Southern District of New York, and Caroline D. Ciraolo, Principal Deputy Assistant Attorney General for the U.S. Department of Justice’s Tax Division, announced that Matthew Libous, an attorney licensed to practice in New York, was found guilty yesterday of three counts of subscribing to false tax returns for the 2007, 2008, and 2009 tax years following a bench trial before U.S. District Judge Vincent L. Briccetti. Judge Briccetti also found that Libous was not guilty of false subscription counts for his 2010, 2011, and 2011 amended returns and not guilty of one count of obstructing the Internal Revenue Service (the “IRS”).

Manhattan U.S. Attorney Preet Bharara said: “Yesterday’s verdict was a just conclusion for Matthew Libous’s repeated, willful failures to report all his income to the IRS over a period of years. As a practicing attorney, Libous knew better. My Office will continue to make every effort to ensure that everyone pays his or her fair share of taxes.”

Principal Deputy Assistant Attorney General Caroline D. Ciraolo said: “Yesterday’s conviction should serve as clear notice that the Tax Division, working with IRS Criminal Investigation and the Offices of the U.S. Attorneys, will vigorously enforce our nation’s criminal tax laws and prosecute those individuals, including legal professionals, who willfully file false federal tax returns.”

According to the Superseding Indictment and the evidence presented at trial, Libous engaged in the practice of law from 2006 through 2008. Libous deposited the fees he received into his personal bank account but never reported them on his tax return. In 2008, Libous became a minority partner and manager of Wireless Construction Solutions, LLC ("WCS"), a company that maintained cellular telephone towers. Libous caused WCS to pay thousands of dollars in his personal expenses on his behalf from 2008 to 2011. In returning his verdict yesterday, following a three-day bench trial, Judge Briccetti said that he found that Libous willfully failed to report the income from his law practice in 2007 and 2008 and the income he received as a result of his causing WCS to pay his personal expenses in 2008 and 2009.

Each of the three false subscription counts of which Libous was found guilty carries a maximum sentence of three years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. Sentencing is scheduled for April 29, 2015.

This prosecution is being handled by the Office's White Plains Division. Assistant U.S. Attorney James McMahon and Special Assistant U.S. Attorney Andrew Kameros of the Justice Department’s Tax Division are in charge of the prosecution.

Evgeny Buryakov, a/k/a “Zhenya,” Worked Under “Non-Official Cover” as a Bank Employee in Manhattan

Eric Holder, the Attorney General of the United States, Preet Bharara, the United States Attorney for the Southern District of New York, John S. Carlin, Assistant Attorney General for National Security, and Randall C. Coleman, the Assistant Director of the Federal Bureau of Investigation (“FBI”) for the Counterintelligence Division, announced charges today against EVGENY BURYAKOV, a/k/a “Zhenya,” IGOR SPORYSHEV, and VICTOR PODOBNYY in connection with BURYAKOV’s service as a covert intelligence agent on behalf of the Russian Federation (“Russia”) in New York City, without notifying the United States Attorney General of BURYAKOV’s status as an agent of Russia, as required by federal law. BURYAKOV was placed under arrest earlier today in Bronx, New York, and is scheduled to appear before U.S. Magistrate Judge Sarah Netburn in Manhattan federal court later today. SPORYSHEV and PODOBNYY no longer reside in the United States and have not been arrested. By virtue of their prior positions in the United States on behalf of Russia, both of them were protected by diplomatic immunity from arrest and prosecution while in the United States.

Attorney General Eric Holder said: “These charges demonstrate our firm commitment to combating attempts by covert agents to illegally gather intelligence and recruit spies within the United States. We will use every tool at our disposal to identify and hold accountable foreign agents operating inside this country – no matter how deep their cover. I want to thank the dedicated men and women of the FBI’s Counterintelligence Division and New York Field Office, the National Security Division’s Counterespionage Section, and the U.S. Attorney’s Office for the Southern District of New York for their skilled handling of this complex and highly sensitive matter.”

U.S. Attorney Preet Bharara said: “Following our previous prosecution with the FBI of Russian spies, who were expelled from the United States in 2010 when their plan to infiltrate upper levels of U.S. business and government was revealed, the arrest of Evgeny Buryakov and the charges against him and his co-defendants make clear that – more than two decades after the presumptive end of the Cold War – Russian spies continue to seek to operate in our midst under cover of secrecy. Indeed, the presence of a Russian banker in New York would in itself hardly draw attention today, which is why these alleged spies may have thought Buryakov would blend in. What they could not do without drawing the attention of the FBI was engage in espionage. New York City may be more hospitable to Russian businessmen than during the Cold War, but my Office and the FBI remain vigilant to the illegal intelligence-gathering activities of other nations.”

Assistant Attorney General John P. Carlin said: “The attempt by foreign nations to illegally gather economic and other intelligence information in the United States through covert agents is a direct threat to the national security of the United States, and it exemplifies why counterespionage is a top priority of the National Security Division. I want to thank the FBI’s New York Field Office and Counterintelligence Division as well as the U.S. Attorney’s Office for the Southern District of New York for their continued effort to conduct these highly complex and sensitive counterespionage investigations and prosecutions, and for their continued close partnership with the National Security Division and the Counterespionage Section.”

FBI Assistant Director Randall Coleman said: “This investigation is one of many that highlight the determined and prolific efforts by foreign governments to target Americans for the purposes of collecting intelligence and stealing secrets. This case is especially egregious as it demonstrates the actions of a foreign intelligence service to integrate a covert intelligence agent into American society under the cover of an employee in the financial sector. Espionage is as pervasivetoday as it has even been, and FBI counterintelligence teams will continue to aggressively investigate and expose hostile foreign intelligence activities conducted on U.S. soil.”

According to the Complaint unsealed in Manhattan federal court today:

BURYAKOV worked in the United States as an agent of Russia’s foreign intelligence agency, known as the “SVR.” BURYAKOV operated under “non-official cover,” meaning he entered and remained in the United States as a private citizen, posing as an employee in the Manhattan office of a Russian bank. SVR agents operating under such non-official cover – sometimes referred to as “NOCs” – typically are subject to less scrutiny by the host government, and, in many cases, are never identified as intelligence agents by the host government. As a result, a NOC is an extremely valuable intelligence asset for the SVR.

Federal law prohibits individuals from acting as agents of foreign governments within the United States without prior notification to the United States Attorney General. Department of Justice records indicate that BURYAKOV has never notified the United States Attorney General that he is, in fact, an agent of Russia.

SPORYSHEV and PODOBNYY are also SVR agents who worked in the United States to gather intelligence on behalf of Russia by posing as official representatives of Russia. From November 22, 2010, to November 21, 2014, SPORYSHEV served as a Trade Representative of the Russian Federation in New York. From December 13, 2012, to September 12, 2013, PODOBNYY served as an Attaché to the Permanent Mission of the Russian Federation to the United Nations. Based on their official government postings on behalf of Russia, SPORYSHEV and PODOBNYY are exempt from notifying the United States Attorney General of the true nature of their work. However, that exemption does not permit them to conspire with, or aid and abet, BURYAKOV in his work as an unregistered agent of Russia operating within the United States.

The intelligence-gathering efforts of SPORYSHEV and PODOBNYY included, among other things, (i) attempting to recruit New York City residents as intelligence sources for Russia; (ii) tasking BURYAKOV to gather intelligence; and (iii) transmitting intelligence reports prepared by BURYAKOV back to SVR headquarters in Moscow. Specifically, during the course of the charged offenses, SPORYSHEV was responsible for relaying assignments from the SVR to BURYAKOV, and SPORYSHEV and PODOBNYY were responsible for analyzing and reporting back to the SVR about the fruits of BURYAKOV’s intelligence-gathering efforts.

The directives from the SVR to BURYAKOV, SPORYSHEV, and PODOBNYY, as well as to other covert SVR agents acting within the United States, included requests to gather intelligence on, among other subjects, potential United States sanctions against Russian banks and the United States’ efforts to develop alternative energy resources.

Clandestine Meetings and Communications

During the course of their work as covert SVR agents in the United States, BURYAKOV, SPORYSHEV, and PODOBNYY regularly met and communicated using clandestine methods and coded messages, in order to exchange intelligence-related information while shielding their associations with one another as SVR agents. These efforts were designed, among other things, to preserve their respective covers as an employee of a bank in Manhattan (BURYAKOV), a Trade Representative of the Russian Federation in New York (SPORYSHEV), and an Attaché to the Permanent Mission of the Russian Federation to the United Nations (PODOBNYY). In particular, the defendants worked to safeguard BURYAKOV’s work as a “NOC.”

SPORYSHEV and PODOBNYY acted as covert intermediaries for BURYAKOV to communicate with the SVR on intelligence-related matters. As an agent posing as someone without any official ties to the Russian government or the SVR, BURYAKOV was unable to access the SVR New York Office – which is located within an office maintained by Russia in New York, New York – without potentially alerting others to his association with the SVR. As such, BURYAKOV required the assistance of other SVR agents, like SPORYSHEV and PODOBNYY, to exchange communications and information with the SVR through the communications systems located in the SVR New York Office.

From as early as March 2012 through as recently as mid-September 2014, the FBI has conducted physical or electronic surveillance of BURYAKOV and SPORYSHEV engaging in over four dozen brief meetings, several of which involved BURYAKOV passing a bag, magazine, or slip of paper to SPORYSHEV. These meetings typically took place outdoors, where the risk of effective surveillance was reduced relative to an indoor location.

These meetings were nearly always preceded by a short telephone call between BURYAKOV and SPORYSHEV during which one of the men typically told the other that he had an item to give to him. Typically, during these telephone calls, which were intercepted by the FBI, the item in question was referred to as some non-specific “ticket,” “book,” “list,” or other ordinary item (e.g., “umbrella” or “hat”).

Subsequently, at each meeting surveilled by the FBI, BURYAKOV and SPORYSHEV met and sometimes exchanged documents or other small items. Notably, despite discussing on approximately one dozen occasions the need to meet to transfer “tickets,” BURYAKOV and SPORYSHEV, were – other than one occasion where they discussed going to a movie – never observed attending, or discussing in any detail, events that would typically require tickets, such as a sporting event or concert. In fact, BURYAKOV and SPORYSHEV used this coded language to signal that they needed to meet, and then met to exchange intelligence information.

Attempts by Sporyshev and Podobnyy to Recruit Intelligence Sources in New York City

In numerous recorded communications, SPORYSHEV and PODOBNYY discussed their attempts to recruit United States residents, including several individuals employed by major companies, and several young women with ties to a major university located in New York, New York (“University-1”), as intelligence sources for the SVR. On these recordings, the defendants discussed the potential value of these sources, and identified particular sources by use of a “source name,” which appears to be a coded name. In addition, during these recordings, SPORYSHEV and PODOBNYY discussed the efforts of other SVR agents to recruit a number of other Russian-origin individuals associated with University-1 as intelligence sources.

For example, SPORYSHEV and PODOBNYY discussed PODOBNYY’s efforts to recruit a male working as a consultant in New York City as an intelligence source. During this conversation, PODOBNYY explained his source recruitment method, which included cheating, promising favors, and then discarding the intelligence source once the relevant information was obtained by the SVR: “This is intelligence method to cheat. . . . You promise a favor for a favor. You get the documents from him and tell him to go [expletive] himself.”

In other recorded conversations, SPORYSHEV and PODOBNYY made clear that they worked for the SVR. For example, on January 31, 2013, SPORYSHEV and another SVR agent not charged in the Complaint (“CC-1”) had a discussion inside the SVR New York Office about their contracts with the SVR. SPORYSHEV stated that, “Everyone has a five-year contract,” and explained, in response to CC-1’s question about reimbursement for the travel of SVR agents’ family members, that “travel for military personnel and their families on authorized home leave is paid, and in our, in our SVR, this, the payment for getting to and from the duty station.” In addition, on April 25, 2013, SPORYSHEV and PODOBNYY discussed the use of nontraditional cover for Russian intelligence officers and, in particular, the Illegals program that ended with the arrest of 10 “deep cover” SVR agents in July 2010.

Buryakov’s Intelligence Taskings

SPORYSHEV was responsible for relaying intelligence assignments from the SVR to BURYAKOV. The FBI obtained electronic recordings of several conversations relating to such intelligence directives being communicated to and carried out by BURYAKOV in his position as an SVR agent acting under non-official cover. For example, on May 21, 2013, SPORYSHEV called BURYAKOV to ask for BURYAKOV’s help in formulating questions to be used for intelligence gathering purposes by others associated with a leading Russian state-owned news organization (the “News Organization”). BURYAKOV responded by supplying SPORYSHEV with a particular line of questioning about the New York Stock Exchange for use by the News Organization.

Buryakov’s Receipt of Purported Official United States Government Documents

In the summer of 2014, BURYAKOV met numerous times with a confidential source working for the FBI (“CS-1”). CS-1 posed as the representative of a wealthy investor looking to develop casinos in Russia. During the course of these meetings, and consistent with his interests as a Russian intelligence agent, BURYAKOV demonstrated his strong desire to obtain information about subjects far outside the scope of his work as a bank employee. During these meetings, BURYAKOV also accepted documents that CS-1 claimed he had obtained from a U.S. government agency and which purportedly contained information potentially useful to Russia, including information about United States sanctions against Russia.

BURYAKOV, 39, SPORYSHEV, 40, and PODOBNYY, 27, are charged in two counts. The first count charges the defendants with participating in a conspiracy for BURYAKOV to act in the United States as an agent of a foreign government without first notifying the Attorney General, and carries a maximum penalty of five years in prison. The second count charges BURYAKOV with acting in the United States as an agent of a foreign government without first notifying the Attorney General, and charges SPORYSHEV and PODOBYNYY with aiding and abetting that offense. The second count carries a maximum penalty of 10 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.

Mr. Bharara praised the investigative work of the FBI’s Counterintelligence Division.

The prosecution is being handled by Assistant U.S. Attorneys Adam Fee, Ian McGinley, and Anna M. Skotko of the Terrorism and International Narcotics Unit of the U.S. Attorney’s Office for the Southern District of New York, and Senior Trial Attorney Heather Schmidt of the Counterespionage Section of the Department of Justice’s National Security Division.

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

US v. Evgeny Buryakov, et al Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that JABAR GILLIAM was sentenced in Manhattan federal court to 20 years in prison for trafficking a 16 year-old girl (the “Victim”) from Maryland to the Bronx and forcing her to engage in prostitution. GILLIAM was convicted of one count of sex trafficking of a minor by means of force, fraud or coercion and one count of transporting a minor interstate for the purpose of prostitution in September 2012 following a four-day trial before U.S. District Judge Thomas P. Griesa and a jury. GILLIAM was sentenced today by Judge Griesa.

Manhattan U.S. Attorney Preet Bharara said: “Jabar Gilliam forced a young woman into prostitution, and repeatedly subjected her to abuse of all kinds and threats, in effect terrorizing her physically and emotionally. Gilliam deserved a heavy punishment and that is what he received. I would like to thank the Federal Bureau of Investigation, the New York Police Department, and the Maryland State Police Department for helping this Office prosecute and punish those who perpetrate the heinous crime of sex trafficking of minors.”

According to the evidence at trial and documents filed in the case:

In October 2011, GILLIAM recruited the Victim to travel to New York to work for him as a prostitute. In addition to physically and sexually assaulting her, Gilliam threatened both the Victim and her family if she did not continue to work for him. In December 2011, GILLIAM traveled with the Victim from Maryland to New York, and thereafter, he arranged for her to engage in commercial sex acts with various individuals. GILLIAM set the prices for the commercial sex acts, and kept all of the money for himself. While in New York, he also continued physically, sexually and psychologically abusing the Victim. On December 2, 2011, GILLIAM was arrested as he and the Victim were returning to the apartment in the Bronx where he had prostituted her earlier that day.

In addition to the prison term, GILLIAM, 32, of Hagerstown, Maryland, was sentenced to five years of supervised release, and ordered to pay restitution in the amount of $2,100 to the Victim.

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

The case is being prosecuted by the Office’s General Crimes Unit. Assistant U.S. Attorney Kristy J. Greenberg is in charge of the prosecution.

More than $4.4 Billion of the Money Expected to Be Distributed to Fund Environmental Clean-Up and Claims; More than $600 Million for Tort Victims

Largest Litigation Recovery by Government for the Clean-Up of Environmental Contamination

Preet Bharara, the United States Attorney for the Southern District of New York, John C. Cruden, Assistant Attorney General for the Justice Department’s Environment and Natural Resources Division (“ENRD”), and Cynthia Giles, Assistant Administrator of the U.S. Environmental Protection Agency, announced today that the historic settlement between the United States, co-plaintiff Anadarko Litigation Trust (the “Trust”), and Anadarko Petroleum Corporation and its affiliates (the “defendants”) has gone into effect. This settlement resolves fraudulent conveyance claims brought by the United States and the Trust against the defendants in the bankruptcy of Tronox Inc. and its subsidiaries. Today, pursuant to the settlement agreement, the defendants paid $5.15 billion, plus interest, to the Trust. The Trust is expected to distribute more than $4.4 billion to fund environmental clean-up and for environmental claims. The settlement constitutes the largest payment for the clean-up of environmental contamination ever obtained in a lawsuit brought by the Department of Justice.

Manhattan U.S. Attorney Preet Bharara said: “The Kerr-McGee Corporation spent decades despoiling our Nation’s natural resources, leaving a toxic legacy for communities across the nation, from Sidney, New York, to the Navajo Nation. Then, Kerr-McGee tried to escape the consequences of its misdeeds by transferring its most valuable assets to affiliates, leaving an insolvent shell behind, unable to pay its environmental liabilities. As today’s historic payment shows, the Government will not allow polluters to escape paying for the damage they inflict on our land, water and people, and we will hold accountable those who attempt to shield themselves from responsibility behind improper corporate transactions.”

Assistant Attorney General John C. Cruden said: “This recovery will lead to cleanups across the country that will undo lasting damage to the environment, including contamination of tribal lands, by Kerr-McGee’s businesses. This result emphatically demonstrates the Justice Department’s commitment to environmental justice for all Americans, and it fulfills the Department’s promise to hold accountable those who pollute and those who try to foist their responsibility for cleanup on the American taxpayer.”

EPA Assistant Administrator Cynthia Giles said: “If you pollute the environment, you should be responsible for cleaning it up. From Navajo Nation to low income neighborhoods across America, more than $4.4 billion will be put to work cleaning up toxic pollution. This historical environmental cleanup will have a lasting impact on American communities.”

Settlement Approval

As noted by United States District Judge Katherine B. Forrest, in approving the settlement in November, this case arises from a “series of transactions [by the Kerr-McGee Corporation] that resulted in the spin-off of Tronox, which Kerr-McGee left saddled with the massive environmental and tort liabilities it had accumulated over the course of decades of operating in the chemical, mining, and oil and gas industries, but without sufficient assets with which to address these liabilities.” For this reason, as the District Court explained, both the United States and the Tronox estate (now represented by the Trust) brought fraudulent conveyance claims against the defendants.

On April 3, 2014, the United States announced this settlement resolving the claims against the defendants, which was then subject to a period of public comment and judicial approval. After receiving and considering comments from the public, the United States sought approval of the settlement agreement, and on November 10, 2014, the district court approved the settlement as “fair and reasonable.” The deadline for any appeals from the district court’s decision passed on January 20, 2015, without any appeals having been taken and therefore the settlement agreement went into effect on January 21, 2015.

Today, pursuant to the settlement agreement, the defendants paid $5.15 billion, plus interest from April 3, 2014, to the Trust. Pursuant to the terms of prior agreements in the Tronox bankruptcy, the Government estimates that more than $4.4 billion of this recovery will be paid to the United States, state governments, the Navajo Nation, and four environmental response trusts created in the bankruptcy to clean up contaminated property. An estimated more than $600 million will be paid to a trust created to pay tort victims.

Mr. Bharara again thanked the many federal, state, and tribal officials who worked tirelessly on this matter, as well as the Trust, its trustee, and its counsel, for their critical work on this case.

This case was handled by the Environmental Protection Unit and the Tax and Bankruptcy Unit of the Office’s Civil Division. Assistant U.S. Attorney Robert William Yalen is in charge of the case, which he handled along with Assistant U.S. Attorney Joseph Pantoja and Alan S. Tenenbaum, Katherine Kane, Frederick S. Phillips, Marcello Mollo, and Erica Pencak of ENRD.

Preet Bharara, the United States Attorney for the Southern District of New York, and Richard Frankel, Special Agent-in-Charge of the Criminal Division of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that New York State Assembly Speaker SHELDON SILVER was arrested this morning on charges that he used his official position to receive nearly $4 million in bribes and kickbacks from people and businesses in exchange for his official acts, and that SILVER masked these payments from public view by disguising the payments as income from what he claimed was a law practice primarily focused on personal injury matters. SILVER was placed under arrest at the FBI in lower Manhattan, this morning, and is scheduled to appear before U.S. Magistrate Judge Frank Maas in Manhattan federal court later today. Judge Maas also issued seizure warrants to prevent SILVER from accessing approximately $3.8 million in proceeds alleged to be traceable to the charged corruption offenses until the case is resolved.

U.S. Attorney Preet Bharara said: “Over his decades in office, Speaker Silver has amassed titanic political power. But, as alleged, during that same time, Silver also amassed a tremendous personal fortune – through the abuse of that political power. All told, we allege that Silver corruptly collected some $4 million in bribes and kickbacks disguised as ‘referral fees.’ Those disguised bribes and kickbacks account for approximately two-thirds of all of Silver’s outside income since 2002.

“As today’s charges make clear, the show-me-the-money culture of Albany has been perpetuated and promoted at the very top of the political food chain. And as the charges also show, the greedy art of secret self-reward was practiced with particular cleverness and cynicism by the Speaker himself. Among other things, we allege that Sheldon Silver, Speaker of the New York State Assembly, was on retainer to a mammoth real estate developer at the very same time that the chamber he dominates was considering and passing legislation vitally affecting the bottom line of that developer; at the very same time that he was hearing out lobbyists paid by that developer and at the very same time that he was deliberately keeping secret from the public any information about this lucrative side-deal, in violation of the law.

“Politicians are supposed to be on the people’s payroll, not on secret retainer to wealthy special interests they do favors for. These charges go to the very core of what ails Albany – a lack of transparency, lack of accountability, and lack of principle joined with an overabundance of greed, cronyism, and self-dealing.”

FBI Special Agent-in-Charge Richard Frankel said: “As alleged, Silver took advantage of the political pulpit to benefit from unlawful profits. When all was said and done, he amassed nearly $4 million in illegitimate proceeds and arranged for approximately $500,000 in state funds to be used for projects that benefited his personal plans. We hold our elected representatives to the highest standards and expect them to act in the best interest of their constituents. In good faith, we trust they will do so while defending the fundamental tenets of the legal system. But as we are reminded today, those who make the laws don’t have the right to break the laws.”

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

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

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

Unlawful Income From the Real Estate Law Firm

SILVER entered into a corrupt relationship with a co-conspirator (“CC-1”) who had been SILVER’s counsel in the Assembly and operated a real estate law firm (the “Real Estate Law Firm”) that specialized in making applications to the City of New York to reduce taxes assessed on properties.

Beginning in at least 2000, SILVER approached two prominent developers of properties in Manhattan, one personally and one in part through a lobbyist, and asked the developers to hire the Real Estate Law Firm. The developers – both of whom lobbied SILVER on real estate issues because their profits depended significantly on state legislation favorable to their business– agreed to use the Real Estate Law Firm as SILVER had requested. Over the years, these developers paid millions of dollars in legal fees to the Real Estate Law Firm. SILVER received a cut from the legal fees amounting to nearly $700,000. SILVER had no public affiliation with the Real Estate Law Firm and performed no legal work at all to earn those fees, which were simply payments for SILVER having arranged the business through his official power and influence.

While continuing to receive the fees and in furtherance of the scheme, SILVER took official action beneficial to the developers. For example, while SILVER was publicly associated with advocating for tenants, a proposal made by the one of the developers who sent work to the Real Estate Law Firm was in substantial part enacted in real estate legislation in 2011 with SILVER’s support.

Unlawful Income From Asbestos Client Referrals

SILVER also entered into a corrupt arrangement with a leading physician who specialized in the treatment of asbestos-related diseases (“Doctor-1”) through which SILVER issued state grants and otherwise used his official position to provide favors to Doctor-1 so that Doctor-1 would refer and continue to refer his patients to SILVER at Weitz & Luxenberg, a firm with which SILVER was affiliated as counsel. Specifically, SILVER arranged for the State of New York to fund two state grants – each for $250,000, and paid out of a secret and unitemized pool of funds controlled entirely by SILVER – for a research center Doctor-1 had established. SILVER used his official position to provide Doctor-1 with other benefits as well, including helping to direct $25,000 in state funds to a not-for-profit organization for which one of Doctor-1’s family members served on the board, and asking the CEO of a second not-for-profit to hire a second family member of Doctor-1.

From 2002 to the present, SILVER received more than $3 million from legal fees Weitz & Luxenberg received from patients Doctor-1 had referred to SILVER at the firm while SILVER was taking official actions to benefit Doctor-1. SILVER did no legal work whatsoever on these asbestos cases, his sole role having been to use his official position and access to state funds to induce Doctor-1 to provide him with these lucrative referrals.

Silver’s Efforts to Cover Up the Scheme

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

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

• SILVER claimed he performed legal work consisting of spending several hours each week evaluating legal matters brought to him by potential clients and then referring cases that appeared to have merit to lawyers at Weitz & Luxenberg. In fact, SILVER did no such work on the asbestos cases and obtained those referrals to Weitz & Luxenberg based on his corrupt arrangement with Doctor-1.
• SILVER claimed his law practice involved the representation of “plain, ordinary simple people.” In fact, SILVER represented some of the largest real estate developers in the State of New York, whose interests are in many ways dependent on state legislation.
• SILVER claimed through his spokesperson that SILVER found clients by virtue of his having been a “lawyer for more than 40 years,” in a manner that was “not unlike any other attorney in this state, anywhere.” In fact, SILVER found his lucrative asbestos and real estate developer clients solely by virtue of his official position.
• SILVER recently stated through his spokesperson that “[n]one of his clients have any business before the state.” In fact, SILVER’s outside income included millions of dollars of fees obtained through real estate developers with significant business before the state and a prominent physician to whose benefit SILVER provided state funding and other benefits related to SILVER’s official position.

Finally, SILVER thwarted the Moreland Commission to Investigate Public Corruption so that it would not learn of his illegal outside income, first by filing legal motions on behalf of the Assembly and taking other action to block the Moreland Commission’s investigation into legislative outside income and then by negotiating with the Governor of New York to prematurely terminate the Moreland Commission.

SILVER, 70, of New York, New York, is charged with two counts of honest services fraud, one count of conspiracy to commit honest services fraud, one count of extortion under color of official right, and one count of conspiracy to commit extortion under color of official right. Each of these five counts 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 defendant will be determined by a judge.

U.S. Attorney Bharara praised the work of the Criminal Investigators of the United States Attorney’s Office and the FBI, who jointly conducted this investigation. Mr. Bharara also noted that the investigation is continuing.

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

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

U.S. v. Sheldon Silver Complaint
U.S. v. Sheldon Silver Seizure Affidavit

Preet Bharara, United States Attorney for the Southern District of New York, James T. Hayes, Jr., the Special Agent in Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), Philip R. Bartlett, Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), and Barry Kluger, Inspector General of the Metropolitan Transportation Authority (“MTA”), announced today the arrest of BEY DOMINICK for conspiring to distribute kilogram quantities of Ethylone, a substance similar to Butylone, a Schedule I controlled substance. Ethylone is also similar to MDEA, also known as “Eve,” and MDMA, also known as “Molly” or “ecstasy.” DOMINICK is a police officer with the Triborough Bridge and Tunnel Authority (“TBTA”), which is part of the MTA. The defendant was arrested yesterday and presented today in Manhattan federal court before Chief U.S. Magistrate Judge Frank Maas.

According to the allegations contained in the Complaint filed today in Manhattan federal court:

In October 2014, law enforcement officers intercepted and seized a parcel (“Package-1”) at John F. Kennedy International Airport that originated from Shanghai, China. Package-1 contained approximately one kilogram of a substance that tested positive for Ethylone, an isomer of Butylone, which is a Schedule I controlled substance. Package-1 was addressed to a business (“Business-1”) at a UPS store mailbox (“Mailbox-1”) in Newburgh, New York. An individual using the name “Ali Smith” had rented Mailbox-1, using a fraudulent New York State driver’s license that contained a photograph of BEY DOMINICK (the “Fraudulent License”). An employee of the Newburgh UPS store identified a photograph of DOMINICK as the person who had picked up a subsequent package delivered to Mailbox-1 and signed for that package in the name “Ali Smith.”

From October 2013 to August 2014, an individual or individuals using the names “Bey Dominick,” “Dominick Beq,” and “Ali Smith” sent more than $29,000 in Western Union wire transfers from the United States to banks in China.

An individual using the name “Ali Smith” and the Fraudulent License also rented a mailbox (“Mailbox-2”) at another UPS store, in New Windsor, New York. From January 2014 to December 2014, approximately 17 packages from China were delivered to a business (“Business-2”) with an address of Mailbox-2. A search of public records has revealed that Business-1 and Business-2 are not registered with the New York State Department of State Division of Corporations.

In January 2015, law enforcement officers learned that a package (“Package-2”) was in transit from China to Mailbox-2. After searching Package-2 pursuant to a search warrant, law enforcement officers found that it contained approximately one kilogram of a substance that tested positive for Ethylone. Yesterday, after law enforcement officers removed the Ethylone, re-sealed Package-2, and provided it to the New Winsdor UPS store for delivery to Mailbox-2, DOMINICK entered the UPS store. While under surveillance by law enforcement officers, DOMINICK signed for Package-2 under the name “Ali Smith” and exited the store in possession Package-2, at which time he was arrested.

At the time of his arrest, DOMINICK possessed his police badge and a firearm.

DOMINICK, 43, of Middletown, New York, is charged with one count of conspiracy to distribute and possess with the intent to distribute narcotics, which carries a maximum term of 20 years and a mandatory term of three years of supervised release. 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 work of HSI, USPIS, and the MTA Inspector General’s Office in the investigation.

The case is being handled by the Office’s Narcotics Unit. Assistant U.S. Attorney Drew Johnson-Skinner is in charge of the prosecution.

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

Dominick, Bey Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, Scott Lampert, Special Agent-in-Charge of the New York Regional Office of the United States Department of Health and Human Services Office of Inspector General (“HHS-OIG”), Thomas E. Bishop, the Acting Special Agent-in-Charge of the New York Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that JORGE JUVIER pled guilty today in Manhattan federal court to participating in a scheme to defraud Medicare out of more than $12 million through the use of fraudulent HIV/AIDS clinics in New York City. As part of the Medicare fraud scheme, JUVIER and his co-conspirators billed Medicare for medications that were never administered, that were administered at incorrect dosages or that were medically unnecessary. JUVIER pled guilty today before U.S. Magistrate Judge Frank Maas.

Manhattan U.S. Attorney Preet Bharara said: “With today’s plea, Jorge Juvier has admitted his role in a scheme to set up and operate health care fraud mills where he and his co-conspirators billed Medicare for medications for HIV/AIDS patients that were never correctly provided, and recruited patients to undergo treatments that were largely unnecessary – all so Juvier and his co-conspirators could bilk a federal health care program out of more than $12 million.”

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

JUVIER and his co-conspirators set up and operated multiple health care clinics in New York City that purported to provide injection and infusion treatments to Medicare-eligible HIV/AIDS patients, but that were, in reality, health care fraud mills (the “Clinics”), that routinely billed Medicare for medications that were never provided or were provided at highly diluted doses and that were often unnecessary because the person being “treated” did not medically need the treatments.

JUVIER and his co-conspirators executed the fraudulent scheme by recruiting HIV/AIDS patients who were eligible for Medicare to come to the Clinics multiple times per week, for multiple months, to undergo expensive “treatments” that were often unnecessary. The purported treatments included drugs costing hundreds of dollars each to administer and typically reserved for cancer and anemia patients. JUVIER and his co-conspirators paid the patients cash kickbacks of up to $300 per week in exchange for coming to the Clinics and agreeing to undergo the treatments. Patients were also offered approximately $50 for each additional patient they referred to the Clinics. JUVIER and his co-conspirators then used these patients’ status as Medicare beneficiaries to submit claims to Medicare for reimbursement for the treatments purportedly administered to the patients, often receiving tens of thousands of dollars in reimbursements per patient. However, in truth, the treatments typically were provided in highly diluted doses or not provided at all, and were often medically unnecessary. As a result of the scheme, from 2010 through 2013, JUVIER and his co-conspirators defrauded the Medicare system out of at least $12 million.

JUVIER, 56, a resident of Manhattan, pled guilty to one count of conspiracy to commit health care fraud, which carries a maximum sentence of 10 years in prison. The statutory maximum sentence is prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge. As part of his plea, JUVIER agreed to pay over $12 million in forfeiture and restitution. JUVIER is scheduled to be sentenced by Judge Kimba Wood on May 18, 2015, at 11:00 a.m.

Oscar Huachillo, 54, of Manhattan, has been charged separately in connection with the Medicare fraud scheme. Huachillo pled guilty before U.S. District Judge Katherine Polk Failla on July 1, 2014, and is scheduled to be sentenced by Judge Failla on Thursday, March 5, 2015, at 3:30 p.m.

Mr. Bharara praised the outstanding efforts of HHS-OIG, IRS-CI, and the FBI in the investigation.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Jonathan Cohen is in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that MICHAEL A. LUCARELLI, the former Director of Market Intelligence at Lippert/Heilshorn & Associates, Inc. (“LHA”), an investor relations firm, was sentenced in Manhattan federal court to 30 months in prison for insider trading. LUCARELLI repeatedly used material nonpublic information that he acquired during his employment at LHA to take positions in the stock of LHA clients over the course of the year-long scheme. LUCARELLI pled guilty on September 24, 2014, and was sentenced today by United States District Judge Jesse M. Furman.

Manhattan U.S. Attorney Preet Bharara said: “Michael Lucarelli took part in corrupting our markets by abusing his access to nonpublic information and ultimately generating over $900,000 in illicit proceeds for himself. Such behavior denotes a misguided perception among privileged professionals who consider themselves above the law – a perception that we will continue to seek to correct through aggressive prosecution of financial crime.”

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

From at least August 2013 through at least August 2014, LUCARELLI engaged in an insider trading scheme to use and trade upon material nonpublic information that he acquired during his employment at LHA, an investor relations firm based in Manhattan. Specifically, LUCARELLI, as an LHA employee, had access to working drafts of press releases prepared by LHA for its clients prior to their issuance to the investing public. Those draft press releases contained material, nonpublic information about business events and announcements relating to LHA’s clients.

In violation of LHA’s policies and in breach of his duties to LHA and its clients, on multiple occasions, LUCARELLI took positions in the stock of LHA clients shortly before the announcement by these companies of material information through press releases prepared by LHA. Shortly after LHA issued the press releases, LUCARELLI sold these securities that he had acquired prior to the issuance, thereby profiting on the movement in the stock price.

LUCARELLI repeatedly traded in LHA client securities despite LHA’s written code of conduct, which strictly prohibited LHA employees from trading in any security issued by an LHA client. LUCARELLI carried out his scheme in at least four different brokerage accounts. When opening new brokerage accounts through which to conduct his illegal trades, LUCARELLI did not reveal his affiliation with LHA. And, on two occasions, LUCARELLI opened new brokerage accounts soon after his ability to trade in other accounts had been suspended by the respective brokerage firms.

On or about July 24, 2014, the Federal Bureau of Investigation (“FBI”) obtained a court-approved search warrant to search LUCARELLI’s office at LHA for evidence of his insider trading activities. During that search, which was conducted without LUCARELLI’s knowledge, the FBI located a locked briefcase that contained a draft press release for LHA client TREX Company (“TREX”). That press release was marked “DRAFT” and contained TREX’s second fiscal quarter 2014 financial results. The following day, after the FBI completed the search, LUCARELLI started purchasing shares of TREX. Between July 25, 2014, and August 1, 2014, LUCARELLI took a net position of 37,400 shares of TREX. Then, on August 4, 2014, shortly before the market opened, TREX issued a press release announcing its second fiscal quarter 2014 financial results. Among other things, TREX announced that sales and earnings before taxes had increased 23 percent and 62 percent, respectively, in comparison with the comparable period in 2013. TREX also issued revenue guidance for the third fiscal quarter of 2014, which was a 27 percent increase over the comparable period in 2013. Within two hours of the announcement, LUCARELLI sold 35,058 of the 37,400 TREX shares he previously purchased. Those sales yielded a profit of almost $90,000.

As a result of the 13 instances of insider trading specifically set forth in the Information, LUCARELLI earned at least $538,215.32 in illicit proceeds. Furthermore, as reflected in the plea agreement, on at least 18 additional occasions, LUCARELLI took positions in LHA client securities on the basis of inside information. In total, these 31 instances yielded LUCARELLI $955,521.62 in profits.

In addition to the prison sentence, LUCARELLI, 52, of New York, New York, was sentenced to three years of supervised release and ordered to forfeit $955,521.62.

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

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 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 the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Brian R. Blais and Damian Williams are in charge of the prosecution. Assistant U.S. Attorney Carolina A. Fornos of the Office’s Money Laundering and Asset Forfeiture Unit is responsible for the forfeiture of assets.

Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today that a federal grand jury returned a two-count Indictment against CHENG LE for attempting to acquire and distribute ricin and committing postal fraud. LE was arrested in Manhattan on December 23, 2014, by the FBI. He was presented before the U.S. Magistrate Judge James C. Francis IV on December 24, 2014, and has been detained since his arrest. He is expected to be arraigned on Friday, January 23, 2015, before the United States District Judge Alison J. Nathan.

U.S. Attorney Preet Bharara said: “As alleged, Cheng Le attempted to acquire ricin, a potentially lethal toxin, through the Dark Web so that it could be used for deadly purposes. Thankfully, with the help of our law enforcement partners he was intercepted and must now answer for his alleged crimes.”

Assistant Director-in-Charge George Venizelos said: “In the shadows of the Dark Web, criminals hide behind a veil of anonymity, sniffing out hidden opportunities to buy and sell illegal and potentially dangerous merchandise. As alleged, in this case, activity carried out in the marketplace served as a conduit for Le to obtain ricin. In his desire to acquire this potentially deadly toxin, he picked his own poison and now faces the consequences of the justice system.”

According to the allegations contained in the Complaint unsealed today in Manhattan federal court, and the Indictment:

Ricin is a highly potent and potentially fatal toxin with no known antidote. The “Dark Web” is a colloquial name for a number of extensive, sophisticated, and widely used online criminal marketplaces, which allow participants to buy and sell illegal items, including ricin.

In early December 2014, an individual (the “Ricin Buyer”) contacted an FBI online covert employee (the “OCE”) on a particular Dark Web marketplace using an encrypted messaging service. In December of 2014, the Ricin Buyer exchanged a series of messages with the OCE, during which the Ricin Buyer explored the possibility of the OCE supplying the Ricin Buyer with ricin, for the Ricin Buyer to resell to at least one secondary buyer.

The Ricin Buyer’s messages to the OCE included the following:

• “If [the ricin’s] good quality, I’ve already had buyers lining up.”
• “Does ricin have antidote? Last I check there isn’t one, isn’t it?”
• “I probably told you this before, about mixing one and only one toxic pill into a bottle of normal pills. They all look identical. And as the target takes the medicine every day, sooner or later he’d ingest that poisonous pill and die. Even if there is a murder investigation, they won’t find any more toxin. 100% Risk Free.”
• “I’ll be trying out new methods in the future. After all, it is death itself we’re selling here, and the more risk-free, the more efficient we can make it, the better.”
• “Also, besides that one bottle of pills with one poisonous pill in there, can you send some extra loose powder/liquid ricin? I’d like to test something.”

On December 18, 2014, the Ricin Buyer directed the OCE to send a quantity of ricin to a particular postal box in Manhattan (the “Postal Box”). The FBI later determined that the Postal Box belonged to CHENG LE. Later that same day, FBI agents observed LE wear latex gloves while retrieving a package from the Postal Box (the “Package”) and mailing it at a nearby post office (the “Post Office”). Law enforcement officers examined the Package, confirmed that it did not contain any hazardous materials, and determined that LE had listed a fake name as the Package’s return address. A postal employee (the “Postal Employee”) told the FBI that the Postal Employee had seen LE at the Post Office on multiple prior occasions and that LE had worn blue latex gloves on at least some of those occasions.

On December 22, 2014, the FBI prepared a mock shipment of ricin (the “Sham Shipment”) that was consistent with the Ricin Buyer’s request to the OCE. The Sham Shipment included both a fake “ricin” tablet concealed in a pill bottle (the “Pill Bottle”), and a quantity of loose fake “ricin” powder. The next day, the Sham Shipment was delivered to the Postal Box. LE, wearing latex gloves, retrieved the Sham Shipment, opened it, and took the contents to his apartment. When FBI agents entered LE’s apartment to arrest LE and to search the apartment, pursuant to a search warrant, they saw the Pill Bottle open in his apartment.

The Indictment charges LE, 21, of New York, New York with one count of attempting to possess a biological toxin for use as a weapon, which carries a maximum sentence of life in prison, and one count of using a fictitious name in furtherance of unlawful business involving the mail, which carries a maximum sentence of five years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Mr. Bharara praised the outstanding investigative efforts of the FBI, the New York City Police Department (“NYPD”), and the United States Postal Inspection Service (“USPIS”). LE’s arrest is the result of the close cooperative efforts of the U.S. Attorney’s Office for the Southern District of New York, the FBI’s Joint Terrorism Task Force – which consists of law enforcement officers of the FBI, NYPD, USPIS, and other agencies – and the National Security Division of the U.S. Department of Justice.

The case is being prosecuted by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Ilan Graff and Andrew D. Beaty are in charge of the prosecution.

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

US v. Cheng Le Indictment

US v. Cheng Le Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, and Thomas E. Bishop, the Acting Special Agent-in-Charge of the New York Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced that GEORGE LANDEGGER pled guilty on January 16, 2015, to willfully failing to file Reports of Foreign Bank and Financial Accounts (“FBARs”) with the IRS regarding secret Swiss bank accounts that he maintained and controlled at a Swiss private bank headquartered in Zurich, Switzerland (the “Swiss Bank”). LANDEGGER, the Chairman and CEO of an international pulp mill company, maintained his undeclared accounts at the Swiss Bank from at least the early 2000s up until 2010. During that time, LANDEGGER’s undeclared assets reached a high value of over $8.4 million. LANDEGGER entered his guilty plea before U.S. Magistrate Judge Debra Freeman.

Manhattan U.S. Attorney Preet Bharara said: “As he admitted, George Landegger maintained secret Swiss bank accounts he repeatedly failed to declare to the IRS, and he took steps to conceal his ownership of the accounts. The benefits of citizenship or residency in the United States come with certain obligations, including, as George Landegger well knew, the legal requirement to report foreign bank accounts. He will now pay for his illegal conduct.”

IRS Acting Special Agent-in-Charge Thomas E. Bishop said: “The Internal Revenue Service has made uncovering hidden offshore accounts and income a top priority and, working with the Department of Justice, we continue to demonstrate our success in doing so. The prosecutions of individuals who decide to keep their foreign assets concealed and of those who advise and assist them serve as clear warnings to anyone who doubts the U.S. Government’s resolve.”

According to the Information filed today in Manhattan federal court:

From at least the early 2000s, up until 2010, LANDEGGER maintained undeclared bank accounts on his own behalf at the Swiss Bank. In 2005, a representative of the Swiss Bank (“Swiss Bank Representative-1”) recommended to LANDEGGER that for the protection of LANDEGGER and the Swiss Bank, LANDEGGER utilize the services of an attorney based in Zurich, Switzerland, to form a sham entity to hold LANDEGGER’s undeclared accounts at the Swiss Bank. Thereafter, a sham trust was formed to hold LANDEGGER’s undeclared accounts at the Swiss Bank and further conceal LANDEGGER’s ownership of those accounts from the IRS. The sham trust, which was organized under the laws of Lichtenstein, was named “Onicuppac,” which is the word “Cappucino” in reverse.

In April 2009, LANDEGGER, Swiss Bank Representative-1, and another individual had a meeting in Switzerland, the purpose of which was to discuss the future of LANDEGGER’s undeclared accounts at the Swiss Bank, in light of the public news that another Swiss bank, UBS AG, had been investigated by United States law enforcement authorities for helping U.S. taxpayers maintain undeclared accounts. During that meeting, LANDEGGER and Swiss Bank Representative-1 discussed the possibility of LANDEGGER disclosing his undeclared accounts to the IRS, including by entering the IRS’s offshore voluntary disclosure program (the “OVDP”). LANDEGGER affirmatively rejected the possibility of disclosing his undeclared accounts to the IRS, whether by entering the OVDP or by any other method. Instead, LANDEGGER and Swiss Bank Representative-1 determined to empty the accounts of their assets by slowly moving the undeclared assets out of Switzerland. Thereafter, between May 2009 and July 2010, LANDEGGER, with the assistance of Swiss Bank Representative-1 and others at the Swiss Bank, emptied the assets from his undeclared accounts at the Swiss Bank by transferring a portion of those undeclared assets to a new, declared account in Canada, and by transferring the remainder of the undeclared assets to an account maintained by another individual in Hong Kong.

During the time LANDEGGER maintained his undeclared accounts at the Swiss Bank, capital gains and losses were generated in the account from LANDEGGER’s investments in foreign securities. Between 2007 and 2010, the high value of LANDEGGER’s undeclared assets was over $8.4 million. For each of the calendar years from at least the early 2000s through 2010, LANDEGGER failed to file FBARs with the IRS, as he was required to, disclosing his signatory or other authority over his undeclared accounts at the Swiss Bank.

LANDEGGER, 77, of Ridgefield, Connecticut, faces a maximum sentence of five years in prison. As part of his plea, LANDEGGER has agreed to pay a civil penalty of over $4.2 million and back taxes of over $71,000. He is scheduled to be sentenced by U.S. District Judge Richard J. Sullivan on May 12, 2015, at 10:00 a.m. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

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

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Sarah E. Paul and Jason H. Cowley are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and John P. Carlin, Assistant Attorney General for National Security, announced that WESAM EL-HANAFI was sentenced today in Manhattan federal court to 15 years in prison for his extensive efforts to support al Qaeda – including financial support and facilitating surveillance of a New York City landmark for an attack – that spanned nearly three years. EL-HANAFI was arrested in the United Arab Emirates in April 2010 and transferred to United States custody. On June 10, 2012, EL-HANAFI pled guilty to one count of providing and attempting to provide material support and resources to al Qaeda, and one count of conspiring to provide material support and resources to al Qaeda, before U.S. District Judge Kimba M. Wood, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara stated: “Wesam El-Hanafi was deeply involved in supporting al Qaeda both financially and by facilitating surveillance of a New York landmark to bring an attack to our homeland in our city. Today’s sentence is a fitting punishment for these crimes and we will continue, with our law enforcement partners, to pursue punishment for those who provide and conspire to provide material support for terrorists.”

According to various public filings and statements made during public proceedings, including today’s sentencing:

From 2007 through late 2009, EL-HANAFI supported al Qaeda in a variety of ways. In 2007, EL-HANAFI and his co-defendant Sabirhan Hasanoff developed contact with individuals whom they understood to be affiliated with al Qaeda. After a period of providing financial support to these individuals, in February 2008, EL-HANAFI traveled to Yemen to meet with two terrorist operatives who EL-HANAFI understood were members of al Qaeda. While in Yemen, EL-HANAFI swore an oath of allegiance, called bayat, to al Qaeda and delivered money and other items, including a laptop computer, to the terrorist operatives. EL-HANAFI also taught the terrorist operatives in Yemen covert Internet communications techniques and supplied them with encryption tools that would facilitate communicating without detection. EL-HANAFI and Hasanoff additionally sent other items, including remote-controlled devices capable of use in an explosives attack, to EL-HANAFI’s terrorist contacts in Yemen.

EL-HANAFI and Hasanoff together funneled approximately $67,000 to terrorist operatives overseas. EL-HANAFI and Hasanoff collected some of this money from a third individual who resided in the United States. During this time, both EL-HANAFI and Hasanoff used aliases to disguise the source of their money when making cash donations to their terrorist contacts.

Moreover, at the direction of his Yemen-based terrorist contacts, EL-HANAFI assigned Hasanoff to perform surveillance of locations in the United States, including the New York Stock Exchange in Manhattan, as potential targets of a terrorist attack by al Qaeda. EL-HANAFI received Hasanoff’s report of his surveillance of the New York Stock Exchange, and sent that report to the terrorist operatives in Yemen.

EL-HANAFI and Hasanoff also undertook efforts to enable their own travel to engage in jihad in Somalia, Afghanistan, and Iraq. Their al Qaeda contacts would not facilitate EL-HANAFI’s and Hasanoff’s travel for jihad, however, because al Qaeda viewed the two men as more valuable for potential attacks on U.S. soil.

In addition to his prison term, EL-HANAFI, 39, a citizen of the United States, who formerly resided in Brooklyn, New York, was sentenced to three years of supervised release. EL-HANAFI was also ordered to pay a $200 special assessment fee and forfeiture in the amount of $70,000.

Hasanoff pled guilty on June 4, 2012, to one count of providing and attempting to provide material support and resources to al Qaeda, and one count of conspiracy to provide material support and resources to al Qaeda. On September 30, 2013, Hasanoff was sentenced to a total term of 18 years in prison, to be followed by a three-year term of supervised release, and was ordered to pay forfeiture in the amount of $70,000.

Mr. Bharara praised the outstanding investigative work of the FBI’s New York-based Joint Terrorism Task Force (“JTTF”) – which principally consists of special agents of the Federal Bureau of Investigation and detectives of the New York City Police Department. Mr. Bharara thanked the Department of Justice’s National Security Division and Office of International Affairs, the Kansas City-based JTTF, and the United States Attorney’s Office for the Western District of Missouri for their extraordinary assistance in this matter.

This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys John P. Cronan, Aimee Hector, Michael Lockard, and Brendan R. McGuire are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that ROBERT M. FAIELLA, a/k/a “BTCKing,” an underground Bitcoin exchanger, was sentenced today to four years in prison for his role in knowingly transmitting nearly $1 million in Bitcoins intended to facilitate drug trafficking on “Silk Road,” a black-market website designed to enable users to buy and sell illegal drugs anonymously and beyond the reach of law enforcement. FAIELLA pled guilty in September 2014 before U.S. District Judge Jed S. Rakoff, who also imposed today’s sentence.

According to the allegations contained in the Complaint, the Indictment, the Superseding Information, and statements made in other documents filed in Manhattan federal court and related court proceedings:

From about December 2011 to October 2013, FAIELLA ran an underground Bitcoin exchange on the Silk Road website, a website that served as a sprawling and anonymous black market bazaar where illegal drugs of virtually every variety were bought and sold regularly by the site’s users. Operating under the username “BTCKing,” FAIELLA sold Bitcoins – the only form of payment accepted on Silk Road – to users seeking to buy illegal drugs on the site. Upon receiving orders for Bitcoins from Silk Road users, he filled the orders through BitInstant, a company based in New York, New York. BitInstant was designed to enable customers to exchange cash for Bitcoins anonymously, that is, without providing any personal identifying information, and charged a fee for its service. FAIELLA obtained Bitcoins with BitInstant’s assistance, and then sold the Bitcoins to Silk Road users at a markup.

With the knowledge and active assistance of Charles Shrem, the Chief Executive Officer of BitInstant, FAIELLA exchanged nearly $1 million in cash for Bitcoins for the benefit of Silk Road users, so that the users could, in turn, make illegal purchases on Silk Road.

In addition to the prison sentence, FAIELLA, 55, of Fort Myers Beach, Florida, was sentenced to three years of supervised release and was ordered to forfeit $950,000, representing the amount of funds involved in the offense that were intended to promote illegal activity.

FAIELLA’s co-defendant, Shrem, was sentenced to two years in prison by Judge Rakoff on December 19, 2014.

Mr. Bharara praised the outstanding investigative work of the DEA’s New York Organized Crime Drug Enforcement Strike Force, which comprises agents and officers of the U. S. Drug Enforcement Administration, the New York City Police Department, Immigration and Customs Enforcement - Homeland Security Investigations, the New York State Police, the U. S. Internal Revenue Service Criminal Investigation Division, the Federal Bureau of Investigation, the Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S. Secret Service, the U.S. Marshals Service, New York National Guard, Office of Foreign Assets Control, and the New York Department of Taxation and Finance. Mr. Bharara also thanked the FBI’s New York Field Office.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Serrin Turner is in charge of the prosecution, and Assistant United States Attorney Andrew Adams of the Money Laundering and Asset Forfeiture Unit is in charge of the forfeiture aspects of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States has obtained civil judgments against seven former employees of The Academic Advantage (“Academic Advantage”) in connection with their role in a scheme whereby Academic Advantage fraudulently obtained federal funds for tutoring services that it never provided. During the relevant period, Academic Advantage participated in a federally funded program pursuant to which it was to provide after-school tutoring to students attending underperforming New York City public schools. The civil judgments are against: (1) JASON ISAACS, an Executive Director of Academic Advantage and the senior-most official overseeing its New York City tutoring program; and (2) six individuals who supervised Academic Advantage’s tutoring program at particular New York City public schools — AYESHA YOUNG, ARLETTE HERNANDEZ, RAYVON JONES, TERESA OSORIO, ALICIA MCKAY, and KRISTIN JOYNER. The judgments against ISAACS, YOUNG, HERNANDEZ, JONES, OSORIO, MCKAY, and JOYNER are for $185,000, $33,308, $27,867, $24,951, $23,616, $20,838, and $20,412, respectively. U.S. District Judge Lewis A. Kaplan endorsed some of the judgments on January 14, 2015, and others on January 12, 2015. The above-referenced judgments are in addition to the more than $2.1 million in settlements and judgments that this Office previously obtained against Academic Advantage and three of its other former employees, Edwin Guzman, Luz Mercedes and Nilsa Dalmasi.

Manhattan U.S. Attorney Preet Bharara said: “With these judgments against seven more former employees of Academic Advantage for their roles in a scheme to fraudulently bill the government for tutoring services that were never provided, we continue our push to clean up corruption in the tutoring of our school kids. Today’s judgments should serve as a reminder that when companies engage in fraud, we will seek to hold those responsible accountable.”

According to the Government’s previously filed pleadings against Academic Advantage and the above-named individuals, as well as other documents filed in Manhattan federal court (including a settlement agreement between the Government and ISAACS):

From 2010 through 2012 (“Covered Period”), the New York City Department of Education (“NYCDOE”) received funds from the federal government to pay for Supplemental Educational Services (“SES”), which included after-school tutoring for students attending underperforming public schools. The NYCDOE entered into contracts with private entities to provide SES tutoring to students in New York City public schools. Students were eligible to receive SES tutoring if they met certain criteria, such as attending a school that had been identified as needing improvement or restructuring for at least two years. Private entities contracted by the NYCDOE to provide SES tutoring were required to have each student who attended a tutoring class sign a daily attendance sheet. A representative from the entity was also required to sign each attendance sheet, certifying that SES tutoring had been provided to all of the students whose signatures appeared on the attendance sheet.

Academic Advantage

During the Covered Period, Academic Advantage contracted with the NYCDOE to provide SES tutoring to students in New York City. Academic Advantage employed individuals whom it referred to as “Site Managers” to supervise its SES program at particular New York City public schools. The Site Managers supervised other employees, known as “Program Aides,” who were also assigned to those schools. Employees with the title “Director” supervised the Site Managers and Program Aides. The Directors reported to an “Executive Director” of Academic Advantage, the highest ranking official overseeing Academic Advantage’s New York City SES program.

During the Covered Period, ISAACS was the Executive Director, YOUNG was a Director, and HERNANDEZ, JONES, OSORIO, MCKAY, and JOYNER were Site Managers.

The Fraudulent Scheme

During the Covered Period, Academic Advantage obtained federal funds by falsely reporting that it had provided SES tutoring to certain students when no SES tutoring had, in fact, been provided to those students. As part of the scheme, Academic Advantage repeatedly submitted to the NYCDOE bills for students who had not actually received any tutoring.

In his settlement agreement with the Government, ISAACS admitted that throughout the Covered Period, Site Managers, Program Aides, and Directors engaged in the following fraudulent conduct in connection with Academic Advantage’s New York City SES program:

• Site Managers routinely forged student signatures on daily student attendance sheets to make it appear that more students had attended Academic Advantage’s SES tutoring classes than had, in fact, attended;
• Site Managers instructed Program Aides to forge student signatures on daily student attendance sheets;
• Program Aides followed the instructions they received from those Site Managers and forged student signatures on daily student attendance sheets;
• Site Managers and Program Aides instructed students to sign daily student attendance sheets for SES tutoring classes that those Site Managers and Program Aides knew the students either had not attended or would not be attending;
• Site Managers routinely signed false certifications on daily student attendance sheets, falsely certifying that after-school tutoring had been provided to all of the students whose purported signatures appeared on the sheets, even though those Site Managers knew that tutoring had not been provided to many of those students; and
• Some Directors knew — and others deliberately ignored or recklessly disregarded — that Site Managers and Program Aides were forging student signatures on daily student attendance sheets or otherwise falsifying student attendance records.

ISAACS further admitted that, during the Covered Period, he had access to information suggesting that Site Managers and/or Program Aides were forging student signatures on daily student attendance sheets and failed to investigate instances of potential forgeries. In addition, ISAACS admitted that Academic Advantage used the above-referenced falsified daily student attendance sheets to prepare invoices that it then submitted in connection with its SES tutoring program. Those invoices ultimately resulted in Academic Advantage being paid federal funds for SES tutoring that it never provided.

In addition to obtaining more than $2.4 million in civil settlements and judgments against Academic Advantage and its former employees, this Office has brought criminal actions against several of those former employees, including Guzman and Mercedes, who have pled guilty to criminal fraud charges.

This is the third coordinated proceeding this Office has pursued against New York City SES providers and their employees for falsifying attendance records and billing for tutoring they did not provide. In 2012 and 2013, this Office filed civil charges against The Princeton Review, Inc. (“Princeton Review”), and civil and criminal charges against several of its former employees. In 2013, this Office filed civil charges against TestQuest, Inc. (“TestQuest”), and civil and criminal charges against several of its former employees. Princeton Review settled the civil charges against it by admitting misconduct and committing to pay the Government up to $10 million. TestQuest settled with the Government for $1.75 million and admissions of wrongdoing. The following former employees of Princeton Review and TestQuest have pled guilty to criminal fraud charges, settled civil fraud charges, or both: Robert Stephen Green, Ana Azocar, Zorayma Azocar, Michael Logan, and Sandra Allen. In addition, Sylvia Brathwaite, a former employee of TestQuest, has had a default judgment entered against her.

Mr. Bharara thanked the U.S. Department of Education Office of the Inspector General for its extraordinary assistance in this case.

The above-referenced civil matters are being handled by the Civil Frauds Unit, and the criminal matters are being handled by the Complex Frauds Unit. Assistant U.S. Attorney Christopher B. Harwood is in charge of the matters.

Preet Bharara, the United States Attorney for the Southern District of New York, announced the guilty pleas of TIMOTHY VAMVAKIAS, a former member of the U.S. Army, and DENNIS GOGEL, a former member of the German armed forces, to charges that include conspiracy to murder an agent of the Drug Enforcement Administration (“DEA”) and conspiracy to import cocaine into the United States. VAMVAKIAS and GOGEL, who were arrested in September 2013 along with co-defendants Joseph Hunter, Slawomir Soborski, and Michael Filter following a long-term DEA undercover investigation, each pled guilty before U.S. District Judge Laura Taylor Swain. VAMVAKIAS pled guilty on Friday, January 9, 2015, and GOGEL pled guilty on Tuesday, January 13, 2015.

Manhattan U.S. Attorney Preet Bharara said: “Timothy Vamvakias and Dennis Gogel have now admitted their roles in a mercenary international narcotics and murder-for-hire conspiracy. These two former members of their countries’ armed forces traded patriotism for profit, plotting to murder a DEA agent and a witness, and facilitating the importation of cocaine, for a promised payoff. Now they face the prospect of lengthy prison terms.”

According to the Indictment filed against VAMVAKIAS, GOGEL, Hunter, Soborski, and Filter, and statements made at the plea proceedings:

All five defendants have previously served in the armed forces of their respective nations. VAMVAKIAS served in the U.S. Army between approximately 1991 and 2004; GOGEL served in the German armed forces between approximately 2006 and 2010; Hunter served in the U.S. Army between approximately 1983 and 2004; Filter served in the German armed forces between approximately 2006 and 2010; and Soborski served in the Polish armed forces between approximately 1998 and 2011. VAMVAKIAS attained the rank of sergeant and served both as infantryman and a military police officer. GOGEL was trained as a sniper. 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, VAMVAKIAS and GOGEL were recruited by Hunter to serve as security for a Colombian drug trafficking organization and to perform contract killings. 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 VAMVAKIAS, GOGEL, 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.

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

In late March 2013, in Thailand, GOGEL and Filter surveilled a vessel on behalf of the CSs’ purported narcotics trafficking organization and reported their activities to Hunter. In April 2013, in Mauritius, at the direction of the CSs, GOGEL, Filter, and Soborski provided security for a meeting at which the participants discussed the distribution of illegal narcotics to the United States. In late June 2013, in the Bahamas, VAMVAKIAS, GOGEL, 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, VAMVAKIAS, GOGEL, 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 a source (purportedly 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. VAMVAKIAS and GOGEL 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, Hunter told CS-3 that VAMVAKIAS and GOGEL would commit the murders. VAMVAKIS, GOGEL, 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.

In late September 2013, VAMVAKIAS and GOGEL arrived in Liberia to commit the planned murders-for-hire, where they were arrested. On the same day, Hunter was arrested in Thailand, and Soborski and Filter were arrested in Estonia.

VAMVAKIAS, 43, and GOGEL, 29, each pled guilty to one count of conspiring to import cocaine into the United States, one count of conspiring to murder a federal law enforcement agent and an individual assisting a federal law enforcement agent, one count of conspiring to possess machine guns and silencers during and in furtherance of the murders, and one count of conspiring to distribute cocaine on board an aircraft registered in the United States. As a result of their guilty pleas, VAMVAKIAS and GOGEL each face a mandatory term of 10 years in prison and a maximum possible term of life in prison. VAMVAKIAS is scheduled to be sentenced by Judge Swain on April 30, 2015. GOGEL is scheduled to be sentenced by Judge Swain on May 1, 2015.

The remaining defendants, Hunter, 49, Soborski, 41, and Filter, 30, are charged with conspiracy to import cocaine into the United States. Hunter is also charged with conspiracy to murder a law enforcement agent and a person assisting a law enforcement agent; conspiracy to kill a person to prevent communications to law enforcement agents; and conspiracy to possess a firearm in furtherance of a crime of violence. Each count carries a maximum penalty of life in prison. Trial is scheduled to commence before Judge Swain on March 9, 2015.

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

The charges against Hunter, Soborski, and Filter are merely accusations and they are presumed innocent unless and until proven guilty.

The guilty pleas were 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 Lockard, Anna Skotko, Aimee Hector, and Emil Bove are in charge of the prosecution.

AJC v. Modi - Order of Dismissal

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States Attorney’s Office and the International Brotherhood of Teamsters (the “IBT” or the “Union”) have entered into a settlement agreement (the “proposed agreement”) that, if approved by the Court, would replace the Consent Decree currently governing the Union’s affairs. The Consent Decree has been in place since March 1989, following the Government’s filing of a landmark civil lawsuit under the Racketeer Influenced and Corrupt Organizations (“RICO”) Act designed to rid the Union of the corrupting influence of organized crime and put in place an electoral system that would foster democracy within the Union.

Manhattan U.S. Attorney Preet Bharara said: “The proposed settlement agreement seeks to strike the appropriate balance, recognizing the significant progress that has been made in ridding the International Brotherhood of Teamsters of the influence of organized crime and corruption, while providing an avenue for the Union to demonstrate its ability to preserve these gains through its own independent disciplinary and electoral systems. We recognize that, although substantially diminished, the threat posed to the IBT by organized crime and other corrupting influences persists, and the proposed agreement provides for a continuing monitoring role for the Government. We should also recognize, however, that reaching this juncture is a great tribute to the success of the Consent Decree in forging meaningful and positive change in the IBT.”

Among other features, the Consent Decree permanently enjoined all IBT members, officers, employees, and agents from committing acts of racketeering activity or knowingly associating with various organized crime groups or persons otherwise enjoined from participating in union affairs; provided for “one-member, one-vote” direct elections of IBT International Officers, subject to independent oversight; and established a Court-appointed, three-member Independent Review Board (“IRB”) to investigate and prosecute wrongdoing and oversee the IBT’s implementation of disciplinary or trusteeship charges.

The proposed settlement agreement was submitted today to United States District Chief Judge Loretta A. Preska for her approval. The terms of the proposed agreement seek to ensure that the progress made under the Consent Decree’s disciplinary and electoral reform provisions will be preserved while reducing the Government’s oversight role over time. Among other things, the proposed agreement retains the permanent injunction feature of the Consent Decree, enjoining IBT members, officers, employees and agents from engaging in racketeering or knowingly associating with organized crime groups or persons otherwise banned from Union affairs. With regard to its elections, the Union also has agreed to permanently retain the structural reforms of the Consent Decree, including, without limitation, the one-Teamster, one vote direct elections of IBT International Officers, and to the appointment of an independent election supervisor to oversee those elections. During these elections, the Union will fund the direct mailing of candidate campaign materials to Union members. Further, with regard to the IBT’s disciplinary system, the IRB will be phased out during a five-year transition period, and the Union will establish its own independent disciplinary enforcement mechanism through the appointment of disciplinary officers approved by the Government. Following the transition period, the Government may apply to the Court for further equitable relief upon showing that either the IBT’s electoral or disciplinary systems are functioning ineffectively or that there exists systemic corruption or organized crime influence in the Union. Under the terms of the proposed agreement, the Court retains jurisdiction to ensure that the agreement is enforced.

The proposed agreement has been filed with the Court today as part of the parties’ joint motion requesting that the Court approve the agreement, following a three-week comment period and judicial hearing.

Any written comments that interested persons wish to provide for the Court’s consideration must be received no later than 5:00 p.m. on February 4, 2015. Comments may be sent via email to USANYS.IBTsettlement@usdoj.gov, or by first class mail or overnight delivery to:

United States Attorney’s Office, Southern District of New York

AUSA Tara M. La Morte

86 Chambers Street, 3d Floor

New York, New York 10007

A hearing in this matter is scheduled for February 11, 2015, at 11:00 a.m., at 500 Pearl Street, Courtroom 12A, New York, New York 10007.

The proposed settlement agreement and the parties’ joint motion requesting that the Court approve the agreement can be found on the website of the United States Attorney for the Southern District of New York at http://www.justice.gov/usao/nys, and via a link from www.teamster.org.

Assistant United States Attorneys Neil Corwin, Tara M. La Morte, and Jaimie Nawaday are currently in charge of the case.

U.S. v. Teamsters Settlement Agreement

U.S. v. IBT Order regarding comments and hearing
 

Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director-In-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and George N. Longworth, the Commissioner of the Westchester County Department of Public Safety, on behalf of the Westchester County Northern Narcotics Initiative, announced the unsealing of an Indictment charging 15 defendants with conspiring to distribute heroin, crack cocaine, and powder cocaine in and around Westchester County from at least in or about January 2014 up to and including in or about January 2015.

Manhattan U.S. Attorney Bharara stated: “Illegal, damaging drugs such as heroin, crack and cocaine continue to be scourges of many communities north of New York City. We and our federal and local law enforcement partners are determined to prevent drug organizations from taking root in our communities, as evidenced by today’s charges and arrests.”

FBI Assistant Director-in-Charge Venizelos stated: “With the scourge of drugs often comes addiction and violence that can cripple a community. We will continue to dismantle the infrastructure for distributing heroin and cocaine, wherever we find it.”

Commissioner Longworth stated: “I am grateful to the FBI and the local chiefs of police who committed resources and personnel to this year-long, multi-agency investigation. I would also like to thank the U.S. Attorney’s Office and the Westchester District Attorney’s Office for partnering with us to combat the scourge of heroin in our communities.”

According to allegations in the Indictment unsealed today in White Plains federal court:

The Indictment charges 15 defendants and contains three counts. Count One charges LAKUAN RHYNE, a/k/a “Rico,” 22, JESSE DABBS, 24, DAIVON PRYOR, 19, JONATHAN THORNTON, a/k/a “Staxx,” 29, JOHNSON VANIYAPURAKAL, 26, and ALLEN WRIGHT, 24, with conspiring to distribute, and possess with intent to distribute, one kilogram or more of heroin in and around Westchester County, in violation of Title 21, United States Code, Sections 846, 841(a)(1), and 841(b)(1)(A).

Count Two charges RHYNE, DABBS, MICHAEL DOUSE, 38, MICHAEL GRAY, 48, ANGELO HARRIS, 34, KEVIN HERBIN, 23, KEVIN MALLORY, 43, ROBERT MILLER, 35, DWAYNE MOUNTAIN, 27, and THORNTON with conspiring to distribute, and possess with intent to distribute, 280 grams or more of crack cocaine in and around Westchester County, in violation of Title 21, United States Code, Sections 846, 841(a)(1), and 841(b)(1)(A).

Count Three charges RHYNE, DABBS, CURTIS DIMMIE, 47, DOUSE, GRAY, MICHAEL HARRINGTON, 34, MALLORY, MILLER, THORNTON, and VANIYAPURAKAL with conspiring to distribute, and possess with intent to distribute, 500 grams or more of cocaine in and around Westchester County, in violation of Title 21, United States Code, Sections 846, 841(a)(1), and 841(b)(1)(B).

The charges against each defendant and the corresponding maximum potential penalties are outlined in the chart attached to this press release.

Twelve of the 15 defendants charged in the Indictment unsealed today were arrested today or had previously been taken into custody. Those defendants were presented in White Plains federal court this afternoon before U.S. Magistrate Judge Judith C. McCarthy. RHYNE was previously taken into custody by Arkansas state authorities, and will be presented in White Plains federal court on a future date.

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

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

Rhyne, Lakuan, et al. Indictment 15 Cr 005
 

Preet Bharara, the United States Attorney for the Southern District of New York, announced that DEBORAH DUFFY, the former Chief Compliance Officer of WG Trading Company, LP (“WG Trading”), was sentenced in Manhattan federal court to time served in prison for conspiracy, securities fraud, and money laundering. DUFFY maintained the books and records for WG Trading, a fraudulent commodities trading and investment advisory scheme run by principals Stephen Walsh and Paul Greenwood, which raised billions of dollars, misappropriated hundreds of millions of those dollars for their own personal benefit, and then created false promissory notes and account statements to conceal their theft. DUFFY pled guilty on July 21, 2009, and was sentenced on January 8, 2015, by United States District Judge Naomi Reice Buchwald.

Manhattan U.S. Attorney Preet Bharara said: “Deborah Duffy abdicated her oversight responsibility at WG Trading, enabling Walsh and Greenwood to perpetuate their massive investment fraud scheme. But she not only admitted her conduct, she assisted the government’s investigation. Her sentence today reflects both her acknowledgment of her guilt and the value of her cooperation.”

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

From at least 1996 through February 2009, Walsh and Greenwood solicited $7.6 billion in investor funds on the understanding that they would invest the funds in a program called “equity index arbitrage,” which they represented was a conservative trading strategy that had outperformed the results of the S&P 500 Index for more than ten years. As a result, several institutional investors – including charitable and university foundations, retirement and pension plans, and other institutions – invested billions of dollars. Contrary to their representations to investors, Walsh and Greenwood misappropriated hundreds of millions of dollars in investor funds for their own personal use and to satisfy obligations on investments that were unrelated to the “equity index arbitrage” trading business. Walsh and Greenwood executed promissory notes to, among other things, conceal trading losses and their misappropriation of investor funds. These promissory notes totaled approximately $554 million, and these notes materially misstated the financial condition of WG Trading and misled investors. Walsh and Greenwood also created and caused others to create false account statements that were sent to clients to reflect fictitious returns consistent with the returns that had been promised to those clients.

During this time period, DUFFY was the Chief Compliance Officer of WG Trading. Among other duties, she maintained the books and records of WG Trading, communicated with WG Trading’s regulators and auditors, and prepared and maintained the promissory notes signed by Walsh and Greenwood.

In addition time served, DUFFY, 59, of Mahwah, New Jersey, was sentenced to one year of supervised release and ordered to forfeit $1,272,841. The Court further ordered restitution to be paid by DUFFY in an amount to be determined.

Walsh pled guilty on April 25, 2014, and was sentenced on October 29, 2014, by United States District Judge Miriam Goldman Cedarbaum to 20 years in prison. Greenwood pled guilty on July 28, 2010, and was sentenced on December 3, 2014, by Judge Cedarbaum to 10 years in prison.

Mr. Bharara praised the work of the Federal Bureau of Investigation, and thanked the United States Securities and Exchange Commission, the United States Commodity Futures Trading Commission, and the National Futures Association, for their assistance.

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 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 the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

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

Charges Based on Participating in a Deadly Hostage-Taking in Yemen, Conspiring to Establish a Terrorism Training Camp in the United States, and Sending One of his Followers to Train and Fight with al Qaeda in Afghanistan

Preet Bharara, the United States Attorney for the Southern District of New York, and John P. Carlin, Assistant Attorney General for National Security, announced that MUSTAFA KAMEL MUSTAFA, a/k/a “Abu Hamza,” a/k/a “Abu Hamza al Masri,” (“ABU HAMZA”) was sentenced today in Manhattan federal court to life in prison by U.S. District Judge Katherine B. Forrest, for his participation in a hostage-taking in Yemen in 1998 that resulted in four deaths, a conspiracy to establish a terrorist training camp in Bly, Oregon, and sending a follower to train and fight with al Qaeda in Afghanistan in 2000. ABU HAMZA, who was extradited from the United Kingdom to the Southern District of New York in October 2012, was found guilty on May 19, 2014, following a four-week jury trial, of each of the 11 charges he faced.

Manhattan U.S. Attorney Preet Bharara said: “Abu Hamza’s blood-soaked journey from cleric to convict, from Imam to inmate, is now complete. In May, after a fair and public trial, a jury pronounced Abu Hamza guilty for his leadership and support of, as well as participation in, terrorist activities, ranging from a fatal hostage-taking in Yemen to establishing a terrorist training camp in Oregon to sending a follower to aid Al Qaeda in Afghanistan. After years of fighting extradition, Abu Hamza finally faced justice, as all those who engage in terrorism against innocent civilians must, here in the U.S., and all around the globe, as the terrible events in Paris remind us.”

Assistant Attorney General Carlin said: “Abu Hamza is an unrepentant all-purpose terrorist. With today’s sentence, he is being held accountable for the many ways in which he supported terrorism and other terrorists through much of his life, including his role in a hostage-taking in Yemen, his plot to create a terrorist training camp on U.S. soil, and his facilitation of violent jihad in Afghanistan. This case was charged over ten years ago and was tried after years of extradition proceedings—and is but one example of our resolve to pursue those who threaten the United States and our interests anywhere in the world, no matter how long it takes. I applaud the many prosecutors, agents, and analysts who have devoted years of hard work to the pursuit of justice in this case.”

According to the evidence presented at trial, statements made during other public proceedings including today’s sentencing, and other court documents:

Hostage-Taking in Yemen in December 1998

On December 28, 1998, in Yemen, hostage-takers stormed a caravan of sport utility vehicles carrying 16 tourists, including two United States citizens, and took the tourists hostage by force. Before the hostage-taking, ABU HAMZA issued a public warning to “infidels” not to travel to Yemen. In addition, five days prior to the hostage-taking, ABU HAMZA’s stepson and other associates of ABU HAMZA were arrested in Yemen. During the hostage-taking, the hostages told their victims that they were taken prisoner to free the hostage-takers’ “friends.”

Before the hostage-taking, ABU HAMZA provided the leader of the hostage-takers with a satellite telephone, and subsequently spoke with him on that satellite telephone the night before the hostage-taking and during the hostage-taking. During the call on the day of the hostage-taking, ABU HAMZA agreed to act as an intermediary on behalf of the hostage-takers. ABU HAMZA also provided advice to the leader of the hostage-takers over the telephone.

On December 29, 1998, the Yemeni military launched a rescue operation to free the hostages. The hostage-takers fought the Yemeni military, using the hostages as human shields. During the rescue operation, four of the hostages were killed and several others were wounded.

Subsequently, in a recorded interview with one of the surviving hostages conducted at ABU HAMZA’s mosque, ABU HAMZA said that hostage-taking was “a good thing” under Islam, that people had been warned to stay out of Yemen, that the plan was to hold the tourists captive “until the government let my people go,” and that the hostage-takers “snatched you to exchange you.”

Efforts to Create a Terrorist Training Camp in Bly, Oregon in 1999

In late 1999, ABU HAMZA and several of his followers, including Oussama Abdullah Kassir, Haroon Rashid Aswat, Earnest James Ujaama, and others, attempted to create a terrorist training camp to support al Qaeda on property located in Bly, Oregon. The primary purpose of the Bly, Oregon, camp was to provide various types of terrorist training, including weapons training. In late November 1999, at ABU HAMZA’s direction, Kassir and Aswat traveled from London, England, to Bly to assist in setting up the camp. Kassir brought with him to the camp a manual on the use of sarin nerve gas and letters of appreciation to Usama bin Laden and ABU HAMZA. Aswat subsequently was present at an al Qaeda guest house in Pakistan.

On May 12, 2009, after a four-week jury trial in this District, Kassir was convicted of various criminal offenses, including conspiring to provide material support to terrorists and to al Qaeda, and conspiracy to kill persons overseas, as a result of Kassir’s participation in the efforts to establish the Bly terrorist training camp. On September 15, 2009, United States District Judge John F. Keenan sentenced Kassir to multiple terms of life in prison. The conviction was subsequently affirmed by the Court of Appeals.

Aswat was arrested in Zambia in July 2005 and then deported to England, where he was arrested at the request of the United States, pursuant to a warrant issued in this District. Aswat was extradited to the United States on October 21, 2014. The charges against Aswat are currently pending, and trial is scheduled to commence before Judge Forrest on June 1, 2015.

Facilitating Violent Jihad in Afghanistan in 2000 and 2001

In November 2000, ABU HAMZA requested that Ujaama escort another one of ABU HAMZA’s followers, Feroz Abassi, from London to Ibn Sheikh al-Libi, a commander at a terrorist training camp in Afghanistan. Thereafter, Ujaama and Abassi traveled from London to Pakistan. Ujaama and Abassi then separately entered Afghanistan. ABU HAMZA subsequently conveyed instructions for Abassi to contact Ibn Sheikh al-Libi, who was expecting Abassi. Thereafter, Abassi passed through an al Qaeda safe house in Afghanistan, attended al Qaeda’s al Faruq training camp, and met with senior al Qaeda leaders. In December 2001, United States forces took Abassi into custody in Afghanistan.

In addition, from the spring of 2000 through late 2001, ABU HAMZA provided goods and services to the Taliban by, among other things, directing Ujaama to deliver money to Taliban-controlled parts of Afghanistan.

Ujaama was arrested in 2002 and testified against ABU HAMZA as a cooperating witness for the Government.

ABU HAMZA, 56, a naturalized citizen of the United Kingdom, was convicted after trial of the following 11 offenses:

One - Conspiracy to take hostages (18 U.S.C. § 1203)

Two - Hostage-taking (18 U.S.C. §§ 1203, 2)

Three - Conspiracy to provide material support to terrorists (18 U.S.C. § 371)

Four - Providing material support to terrorists (18 U.S.C. §§ 2339A, 2)

Five - Conspiracy to provide material support to a foreign terrorist organization (al Qaeda) (18 U.S.C. §2339B)

Six - Providing material support to a foreign terrorist organization (al Qaeda) (18 U.S.C. §§ 2339B, 2)

Seven - Conspiracy to provide material support to terrorists (18 U.S.C. § 2339A)

Eight - Providing material support to terrorists (18 U.S.C. §§ 2339A, 2)

Nine - Conspiracy to provide material support to a foreign terrorist organization (al Qaeda) (18 U.S.C. § 2339B)

Ten - Providing material support to a foreign terrorist organization (al Qaeda) (18 U.S.C. §§ 2339B, 2)

Eleven - Conspiracy to provide goods and services to the Taliban (18 U.S.C. § 371)

In addition to the prison term, ABU HAMZA was ordered to pay a $1,100 special assessment fee. In addressing ABU HAMZA’s conduct, Judge Forrest described it as “barbaric, misguided and wrong,” and remarked, “It is important to me that you have not expressed sympathy for the victims of the Yemeni kidnappings.”

Abu Hamza’s conviction is the result of the close cooperative efforts of the U.S. Attorney’s Office for the Southern District of New York, the Justice Department's National Security Division, the Federal Bureau of Investigation, the New York City Police Department, the United States Marshals Service, and New Scotland Yard in the United Kingdom.

The U.S. Department of Justice’s Office of International Affairs contributed extraordinary assistance with the extradition in this case. The U.S. Attorney also thanked the FBI’s Seattle Field Office, the Home Office of the United Kingdom, the United States Department of State, and the United States Department of the Treasury’s Office of Foreign Assets Control for their assistance.

The prosecution is being handled by the Office’s Terrorism and International Narcotics Unit, with assistance from the Counterterrorism Section of the Justice Department's National Security Division. Assistant U.S. Attorneys John P. Cronan, Edward Y. Kim and Ian McGinley are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that LEONARD MARCHETTA, a physician’s assistant, pled guilty in Manhattan federal court to conspiring to distribute a massive quantity of oxycodone out of a Staten Island-based medical clinic he oversaw. During a period of approximately three years, in exchange for cash payments, MARCHETTA wrote medically unnecessary prescriptions for more than 125,000 30-milligram oxycodone pills to individuals claiming to be “patients,” and on a number of occasions MARCHETTA issued prescriptions in the names of fictitious individuals or individuals whom he had never seen. MARCHETTA was charged in September 2014, and pled guilty today before U.S. District Judge P. Kevin Castel.

Manhattan U.S. Attorney Preet Bharara said “As Leonard Marchetta oversaw the day-to-day operations of the Staten Island clinic where he worked as a physician’s assistant, he also sat at the center of a scheme to dole out medically unnecessary prescriptions for more than 125,000 oxycodone pills to fake ‘patients.’ His guilty plea today ensures that he will be punished for contributing to the prescription pill abuse epidemic.”

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

As a physician’s assistant, MARCHETTA, under the supervision of a physician or surgeon, was able to diagnose and treat illnesses and prescribe medications. From at least 2012 until his arrest, MARCHETTA was employed by and oversaw the day-to-day operations of a Staten Island-based medical clinic (the “Clinic”), which advertised itself to the public as a family medical clinic.

During an approximately three-year period, MARCHETTA prescribed oxycodone to “patients” who had no medical need for oxycodone and no legitimate medical record documenting an ailment for which oxycodone would be prescribed. MARCHETTA’s fee for his participation in the scheme was typically approximately $250 in cash for “doctor visits” that usually lasted just a minute or two, involved no actual physical examination, and consistently resulted in the issuance of a prescription for large doses of oxycodone, typically 150 30-milligram tablets. MARCHETTA also received a separate fee of approximately $500 in cash for each medically unnecessary oxycodone prescription he issued. On a number of occasions, MARCHETTA issued prescriptions in the names of fictitious individuals or individuals whom he never saw in exchange for cash. In total, MARCHETTA wrote medically unnecessary prescriptions for more than 125,000 30-milligram oxycodone pills during a period of approximately three years.

As part of the scheme, MARCHETTA’s co-conspirators recruited and paid individuals to pose as “patients” in order to receive medically unnecessary prescriptions from MARCHETTA. On a number of occasions, MARCHETTA wrote a prescription in the name of the “patient” without the “patient” setting foot in the Clinic.

After MARCHETTA issued a medically unnecessary oxycodone prescription in the name of the “patient,” the “patient” was taken or referred to a pharmacy to fill the oxycodone prescription – that is, to obtain the oxycodone tablets – in part for distribution. The patients were paid, typically $150 to $200 in cash, for obtaining and handing over the oxycodone tablets that MARCHETTA had prescribed to them. At times, the “patients,” some of whom were addicted to oxycodone, were paid with oxycodone tablets for their services.

MARCHETTA, 47, of Staten Island, New York, pled guilty to one count of conspiracy to distribute and possess with intent to distribute oxycodone, which carries a maximum sentence of 20 years in prison. He also agreed to forfeit the proceeds that he received from the scheme. MARCHETTA is scheduled to be sentenced by Judge Castel on April 16, 2015, at 11:30 a.m. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of MARCHETTA will be determined by the judge.

Mr. Bharara thanked the United States Department of Health and Human Services, the New York State Department of Financial Services, and the DEA Tactical Diversion Squad New York – comprising agents and officers from the DEA, the New York City Police Department, Town of Orangetown Police Department, and Westchester County Police Department – for their work in the investigation, which he noted is ongoing.

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

Preet Bharara, United States Attorney for the Southern District of New York, Thomas E. Bishop, Acting Special Agent in Charge of the New York Office of the Internal Revenue Service-Criminal Investigation (“IRS-CI”), and Mark Peters, Commissioner of the New York City Department of Investigation (“DOI”), announced today the arrests of NOEL CUELLO, LUZ C. RICARDO, a/k/a “Lucy,” FRANCISCO ABREU, a/k/a “Seyayin,” ARISMENDY CUELLO, a/k/a “Cheito,” JONATHAN ORBE, a/k/a “Jigga,” CATHERINE RICART, a/k/a “Cathy,” and JOEL VARGAS in connection with a large-scale identity theft and tax fraud scheme through which identifying information of minors, including social security numbers, was obtained, including through corrupt payments to ABREU, who worked as a fraud investigator with the New York City Human Resources Administration, and was then used to file thousands of fraudulent tax returns, resulting in millions of dollars in estimated loss to the United States Treasury. The defendants were arrested today and presented in Manhattan federal court before U.S. Magistrate James L. Cott.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, these defendants committed wholesale tax fraud by falsely claiming minor dependents on thousands of tax returns. That they committed this alleged massive fraud with the assistance of a city agency fraud investigator adds an element of galling irony. We are grateful to our partners in this investigation for exposing the scheme and stopping it.”

IRS-CI Acting Special Agent in Charge Thomas E. Bishop said: “IRS-CI remains committed to the fight against stolen identity tax refund fraud. Large stolen identity tax refund fraud schemes require volumes of personal information to succeed and it is unfortunate when people who have access to such information are willing to sell their positions for personal gain. We are appreciative of the opportunity to work with our law enforcement partners in this investigation.”

DOI Commissioner Mark Peters said: “The first obligation of government officials is to protect the private information of the people we serve. Violating this trust is not only illegal, but affects government’s ability to perform its core functions.”

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

Under federal law, taxpayers may be entitled to claim certain tax credits, including the Earned Income Tax Credit (“EITC”) available to qualifying low and moderate income working individuals and families. If the individual claims the EITC based on having a child, the individual must list the name and social security number (“SSN”) of the child on his or her tax return, along with completing a separate schedule that contains the child’s name, SSN, year of birth, relationship to the taxpayer, and how many months the child lived with the taxpayer during the tax year.

Between at least approximately 2009 and spring 2014, through a tax preparation business in the Bronx, New York, with multiple locations, the defendants, assisted by co-conspirators, charged individual taxpayers a cash fee in return for which the business would prepare and file tax returns that falsely claimed that the taxpayer had one or more minor dependents, to take fraudulent advantage of the EITC. The business filed thousands of such returns, resulting in refunds of millions of dollars.

The business, which went by several names over the years, was principally operated by NOEL CUELLO and RICARDO, with the assistance of ARISMENDY CUELLO, ORBE, RICART, and VARGAS, who played various roles, including bringing taxpayers to the business, preparing fraudulent returns, and receiving cash payments from clients. ABREU, who worked at the time as a fraud investigator with the New York City Human Resources Administration, sold identifying information of minors to be used in the scheme, including names, dates of birth, and SSNs.

The scheme continued even after IRS-CI executed multiple search warrants on the business, with ORBE claiming to have purchased the business from NOEL CUELLO, and ORBE and RICART establishing new electronic filer accounts with the IRS, and opening new bank accounts, which were used to continue the scheme.

In addition to accepting cash in return for assisting other taxpayers to file fraudulent returns, RICARDO, ARISMENDY CUELLO, ORBE, RICART, and VARGAS filed their own fraudulent returns in multiple years, falsely claiming to have one or more minor dependents.

Each of the defendants, NOEL CUELLO, 31, LUZ C. RICARDO, 33, FRANCISCO ABREU, 43, ARISMENDY CUELLO, 28, JONATHAN ORBE, 25, CATHERINE RICART, 36, and JOEL VARGAS, 28, all of the Bronx, New York, is charged with one count of conspiracy to defraud the United States with respect to claims, which carries a maximum term of 10 years; one count of conspiracy to commit wire fraud, which carries a maximum term of 20 years; and one count of aggravated identity theft, which carries a mandatory minimum term of 24 months, to be served consecutively to the sentence imposed for any other count. In addition, RICARDO is charged with two counts of subscribing to a false return; ARISMENDY CUELLO is charged with three counts of subscribing to a false return; ORBE is charged with two counts of subscribing to a false return; RICART is charged with five counts of subscribing to a false return; and VARGAS is charged with two counts of subscribing to false return. Each of the false return counts carries a maximum term of three years. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Bharara praised the outstanding work of IRS-CI and DOI in the investigation. Mr. Bharara also thanked the Social Security Administration-Office of Inspector General for its assistance in the case, which he noted is ongoing.

The case is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Daniel C. Richenthal and Sarah R. 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.

USA v. Noel Cuello, et al., Complaint 15 Mag. 41
 

Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that ELFEGO BOYD, a/k/a “Kush da Dawn,” 29, of the Bronx, New York, was sentenced today in Manhattan federal court to 10 years in prison in connection with the sex trafficking of a teenage girl (“Minor Victim-1”). BOYD was also ordered to pay $20,000 in restitution to Minor Victim-1. He was sentenced by U.S. District Judge Robert P. Patterson. U.S. Magistrate Judge Michael Dolinger presided over BOYD’s guilty plea on June 25, 2014.

Manhattan U.S. Attorney Preet Bharara said: “Sex trafficking is a heinous crime, but it is particularly reprehensible where perpetrators target vulnerable, minor runaways as Elfego Boyd did in this case. This investigation and prosecution sends the message that individuals who target the vulnerable will themselves become targets for prosecution.”

FBI Assistant Direct-in-Charge George Venizelos said: “Boyd engaged in the act of prostituting a minor, contributing to a rapidly spreading epidemic that projects its poison onto the most vulnerable members of society. January is Human Trafficking Awareness Month, and today’s sentencing should send a message to those with similar intentions of targeting minors: the FBI and our law enforcement partners are committed to investigating allegations of sex trafficking and sending those responsible for such heinous acts to prison.”

According to the Complaint, the Indictment, and other documents filed in Manhattan federal court, and statements made at various proceedings in this case:

In approximately September 2010, Minor Victim-1, who was 15 years old at the time, met BOYD in Times Square, New York after running away from her home in Pennsylvania to New York City. BOYD, who introduced himself as “Kush da Dawn,” asked Minor Victim-1 if she wanted to prostitute for him and she agreed. BOYD then provided food and shelter to Minor Victim-1. While staying with BOYD, Minor Victim-1 also met Norman Darby, BOYD’s co-defendant, who introduced himself as “Black.” Both BOYD and Darby placed advertisements Offering Minor Victim-1 for sex using an online classifieds website. The ads did not receive any responses and Minor Victim-1 left New York City and returned to Pennsylvania a short while later.

In the spring of 2011, Minor Victim-1 traveled from Pennsylvania to New York City where she again encountered BOYD and stayed at his apartment in the Bronx, New York. BOYD told Minor Victim-1 that he loved her and that they were boyfriend-girlfriend. BOYD then posted online advertisements offering Minor Victim-1 for sex in exchange for money. At BOYD’s direction, Minor Victim-1 had sex in exchange for money with multiple men who responded to those ads, after which BOYD took all the money.

Later, BOYD took Minor Victim-1 to a house in Long Island where she stayed along with BOYD, Darby and others, for several months. During that period, Darby and Minor Victim-1 posted advertisements offering Minor Victim-1 for sex online in exchange for money. At BOYD and Darby’s direction, Minor Victim-1 had sex in exchange for money with several men who responded to those ads at hotels (where she was driven by BOYD and Darby).

Eventually, BOYD returned to New York City with Minor Victim-1. At BOYD’s direction, Minor Victim-1 continued to have sex in exchange for money with multiple men who responded to online advertisements, after which BOYD took all the money.

Minor Victim-1, who turned sixteen years old during the several-month period she was being offered for sex by BOYD and Darby, told BOYD her age.

In November 2011, after getting into an argument with BOYD, Minor Victim-1 ran away.

In his plea allocution, BOYD acknowledged that he knew Minor Victim-1 was underage at the time he offered her for commercial sex in exchange for money.

In addition to the prison term and restitution, BOYD was sentenced to five years of supervised release.

BOYD’s co-defendant, Norman Darby, pled guilty to conspiracy to engage in sex trafficking and is scheduled to be sentenced later this month before Judge Patterson.

Mr. Bharara praised the outstanding investigative work of the Federal Bureau of Investigation and the New York City Police Department in investigating this case.

The prosecution of this case is being overseen by the Office’s General Crimes Unit. Assistant United States Attorneys Andrea Griswold and Gina Castellano are in charge of the prosecution.

U.S. v. Elfego Boyd Indictment

CONTACT: Barbara Burns
PHONE: (716) 843-5817
FAX:  (716) 551-3051

BUFFALO, N.Y. -- U.S. Attorney William J. Hochul, Jr. announced today that Anthony Drayton, Jr., 38, of Buffalo, NY, who was convicted of possession with intent to distribute and distribution of crack cocaine, was sentenced to 108 months in prison by Chief U.S. District Judge William M. Skretny.

Assistant U.S. Thomas S. Duszkiewicz, who handled the case, stated that between December 2010 and June 21, 2011, the defendant traveled from buffalo to Olean, NY to sell quantities of crack cocaine. On June 9 and June 21, 2011, Drayton sold crack cocaine to undercover police officers.

The sentencing is the culmination of an investigation by the Drug Enforcement Administration, under the direction of Special Agent in Charge James J. Hunt, New York Field Division, the Southern Tier Regional Drug Task Force, and the New York State Police, under the direction of Major Michael Cerretto.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ROBERT T. MADISON pled guilty today for his participation in a scheme to pay kickbacks to two executives of a pharmaceutical marketing company in exchange for printing contracts. MADISON pled guilty before U.S. District Judge Paul A. Engelmayer.

Manhattan U.S. Attorney Preet Bharara said: “Rather than building a true business relationship, Robert Madison built one based on bribery –with everything from private jet travel to cash to payments at a “Gentlemen’s Club” – and deceit by directing the payments to third parties and controlled companies. Because of this, he will now pay over $1.4 million in restitution.”

According to the Indictment previously filed in Manhattan federal court, statements made during MADISON’s guilty plea, and other Court filings:

MADISON was the owner and operator of Creative Press, a printing and direct mail marketing company located in Phoenix, Arizona. MADISON’s company provided printing and direct mailing services to a New Jersey-based pharmaceutical marketing agency (the “Marketing Agency”). MADISON also owned and operated a company called East Coast Vending. From February 2007 through January 2009, ROBERT MADISON engaged in a scheme to commit honest services fraud by paying undisclosed kickbacks to, or for the benefit of, two executives at the Marketing Agency – Michael J. Mitrow and Matthew J. Mitrow – in order to continue the business relationship between the Marketing Agency and MADISON’s company.

MADISON took various steps to conceal from the Marketing Agency the kickback payments, including by causing certain payments to be made through East Coast Vending rather than Creative Press; causing payments to be made to third parties on behalf of Michael Mitrow and Matthew Mitrow rather than directly to them; and routing kickback payments through companies controlled by one of the executives and others.

Among the kickbacks that MADISON paid to or for the benefit of Michael Mitrow and Matthew Mitrow were the following: (i) over $700,000 in private jet travel by the Mitrows and their friends and relatives; (ii) approximately $426,000 to a company owned by one of the executives; (iii) approximately $39,000 in home renovations; (iv) a $19,000 payment to a New York City “Gentlemen’s Club;” and (v) approximately $30,000 in credit card debts.

MADISON, 43, of Henderson, Nevada, pled guilty to one count of conspiracy to commit honest services mail and wire fraud, and faces a maximum sentence of 20 years in prison. As part of his plea agreement with the Government, MADISON agreed to pay restitution of $1.416 million.

Michael Mitrow, 46, of Whitehouse Station, New Jersey, is charged with two counts of conspiracy to commit wire fraud, which each carry a maximum sentence of 20 years in prison, three counts of wire fraud, which each carry a maximum sentence of 20 years in prison, one count of tax evasion, which carries a maximum sentence of five years in prison, and one count of obstructing and impeding the IRS, which carries a maximum sentence of three years in prison.

Matthew Mitrow, 40, of Westfield, New Jersey, is charged with one count of conspiracy to commit 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.

The charges against Michael Mitrow and Matthew Mitrow are merely accusations, and they are presumed innocent unless and until proven guilty.

Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the arrest of JEREMY MOTT on charges of threatening to shoot members of the Police Department of the City of Mount Vernon, New York. The Complaint alleges that MOTT posted messages on Internet social media sites in which he threatened to shoot Mount Vernon police officers and included a digital image depicting the shooting of a police officer.

MOTT was taken into federal custody today. He was presented in White Plains federal court before U.S. Magistrate Judge Lisa Margaret Smith and was released on bond.

U.S. Attorney Preet Bharara stated: “We will not tolerate threats of violence against police officers. Period. Here, as alleged, social media were used for the threat. Law enforcement should not have to wait to see whether a threat will be acted on, so now the defendant will have to answer for his threatening intentions, as charged.”

FBI Assistant Director-in-Charge George Venizelos stated: “As we seen all too often, social media is used as a platform for posting threats against members of the law enforcement community. As alleged, Mott made significant online threats in which he threatened to shoot Mount Vernon police officers. Those who threaten the lives of law enforcement officers through interstate communications will be fully investigated by the FBI and our partners.”

According to allegations in the Complaint unsealed today in White Plains federal court:

MOTT posted messages on Facebook and Instagram, both of which included digital images of an individual discharging a firearm into a police vehicle through the driver’s side window. The Facebook message included the threat, “I SWEAR IF COPS IN MOUNT VERNON THINK THEY CAN FOLLOW THE MADNESS THIS IS HOW THEY GOING TO END UP.” The Instagram message included the threat, “THEY BETTER KEEP THAT CRAZY SHYT AWAY FROM MOUNT VERNON CAUSE ME & MY [N****S] NOT PLAYING NO GAMES WITH THEM PPL ! !”

MOTT, 24, of Mount Vernon, New York, is charged with one count of making interstate threats, which upon conviction carries a maximum sentence of five years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Mr. Bharara praised the outstanding investigative work of the FBI’s Westchester Violent Crimes Task Force, which comprises agents and detectives of the FBI, Homeland Security Investigations, the City of Yonkers Police Department, the Westchester County Department of Public Safety, and the Westchester County District Attorney’s Office. He also thanked the Police Department of the City of Mount Vernon. He added that the investigation is continuing.

The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorney Douglas Zolkind is in charge of the prosecution.

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

Mott.complaint.signed

Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the arrests of STEVEN KAITZ, LATCHMEE MAHATO, a/k/a “Robbie,” JONATHAN WHEELER, and ZACHARY KAITZ, former executives and employees of a New Jersey-based company that provided in-store displays for retailers (the “Company”), and KATHLEEN SMITH, a former employee of a New York-based sports apparel and footwear retailer that was a major customer of the Company (“Customer-1”), in connection with an elaborate scheme to defraud the Company’s lenders and customers out of millions of dollars. Among other things, the defendants fraudulently inflated the Company’s sales and accounts receivables to secure millions of dollars in loans, and falsely verified to the Company’s lenders and outside auditors false financial information about the Company. The defendants were arrested this morning and are expected to be presented later today in Manhattan federal court before United States Magistrate Judge James L. Cott. The defendants will be arraigned tomorrow at 4:00 p.m. before United States District Judge Jed S. Rakoff.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, the defendants went to elaborate lengths to falsify company accounting data to defraud lenders and customers. To bolster the falsehoods, the defendants allegedly created fake email accounts for fictitious employees of the defrauded customers. Now they will be made to answer for the charged collusion and self-dealing that supplanted honest business practices.”

FBI Assistant Director-in-Charge George Venizelos said: “As alleged, the defendants concocted a scheme to make millions of dollars and concealed their misdeeds by lying to customers and lenders. Their dishonesty resulted in unjust enrichment at the expense of unsuspecting customers, burdening lenders with bad loans and weakening our financial markets. Those who engage in this type of financial fraud will be identified and held accountable.”

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

STEVEN KAITZ, WHEELER, and MAHATO (the “Management Defendants”) were the three owners and principals of the Company, and ZACHARY KAITZ served as the Company’s Vice President of Creative Services. SMITH worked for Customer-1 – one of the Company’s two largest customers – and was the director of a business unit that handled visual displays for Customer-1. From approximately 2012 to May 2014, in order to trick various lenders into lending millions of dollars to the Company, the defendants engaged in a scheme to falsely inflate the Company’s revenue and accounts receivables, and as part of the scheme, made and caused to be made materially false and misleading statements about the Company’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 the Company’s customers. The defendants also tricked certain of the Company’s customers, including Customer-1, into paying falsely inflated invoices from the Company. For her role in the scheme, SMITH received substantial kickbacks from the Management Defendants that included cash payments, personal family vacations, and home renovations.

The defendants took elaborate steps to keep the scheme afloat and prevent the Company’s lenders and outside auditors from discovering the fraud. For example, STEVEN KAITZ, WHEELER, and MAHATO created fake email accounts purporting to belong to fictitious employees of Customer-1 and “Customer-2” (a multinational designer and manufacturer of athletic footwear, clothing, and accessories, with U.S. headquarters in Portland, Oregon). To do so, the defendants used domain names that were very similar to the actual domain names used by Customer-1 and Customer-2. These defendants operated the fake email accounts themselves, pretending to be employees of Customer-1 and Customer-2, and then used those fake email accounts to “verify” false information about the Company’s financial condition, including its sales and accounts receivables, to the Company’s lenders and outside auditors. Further, at the Management Defendants’ direction, and in exchange for kickbacks, SMITH also falsely “verified” to the Company’s lenders certain financial information concerning the Company, including the amounts of money that Customer-1 supposedly owed the Company, even though SMITH knew those amounts were false. SMITH also caused Customer-1 to pay invoices from the Company that she knew were falsely inflated.

As another example of the steps taken to keep their scheme afloat, STEVEN KAITZ, WHEELER, and MAHATO utilized shell companies to engage in “round-trip” transactions to create the false appearance that customers were paying the Company’s phony outstanding receivables. 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 the Company’s business.

STEVEN KAITZ, WHEELER, and MAHATO 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 the Company’s lenders terminated their lending relationships with the Company after discovering the fraud, the Company had approximately $18.6 million in loans outstanding.

STEVEN KAITZ and ZACHARY KAITZ are also charged in a separate mortgage fraud scheme based on their creation of fake documents that STEVEN KAITZ used to secure a mortgage for a vacation home in Martha’s Vineyard, Massachusetts.

STEVEN KAITZ, 56, of Jersey City, New Jersey, is charged with one count of conspiracy to commit bank fraud and wire fraud, and two counts of bank fraud, each of which carries a maximum sentence of 30 years in prison; and one count of conspiracy to commit honest services wire fraud, one count of wire fraud, and one count of conspiracy to commit money laundering, each of which carries a maximum sentence of 20 years.

LATCHMEE MAHATO, a/k/a “Robbie, 49, of Jamaica, Queens, is charged with one count of conspiracy to commit bank fraud and wire fraud, and one count of bank fraud, each of which carries a maximum term of 30 years; and one count of conspiracy to commit honest services wire fraud, one count of wire fraud, and one count of conspiracy to commit money laundering, each of which carries a maximum sentence of 20 years.

JONATHAN WHEELER, 46, of Southport, Connecticut, is charged with one count of conspiracy to commit bank fraud and wire fraud, and one count of bank fraud, each of which carries a maximum term of 30 years; and one count of conspiracy to commit honest services wire fraud, one count of wire fraud, and one count of conspiracy to commit money laundering, each of which carries a maximum sentence of 20 years.

KATHLEEN SMITH, 49, of South Plainfield, New Jersey, is charged with one count of conspiracy to commit bank fraud and wire fraud, and one count of bank fraud, each of which carries a maximum term of 30 years; and one count of conspiracy to commit honest services wire fraud and one count of wire fraud, each of which carries a maximum sentence of 20 years.

ZACHARY KAITZ, 31, of Brooklyn, New York, is charged with one count of conspiracy to commit bank fraud and wire fraud, and two counts of bank fraud, each of which carries a maximum sentence of 30 years; and one count of wire fraud, which carries a maximum sentence of 20 years.

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

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Joshua A. Naftalis and Rosemary Nidiry are in charge of the prosecution.

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

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

U.S. v. Steven Kaitz, et al. Indictment

Defendants Admit to and Accept Responsibility for Submitting False Loan Certifications to HUD-FHA

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States has settled a civil mortgage fraud lawsuit against GOLDEN FIRST MORTGAGE CORP. (“GOLDEN FIRST”), and its owner, operator and President, DAVID MOVTADY (“MOVTADY”). The Government’s complaint, filed in April 2013, and amended in August 2013 (the “Amended Complaint”), sought damages and civil penalties under the False Claims Act for years of misconduct in connection with GOLDEN FIRST’s participation in the Federal Housing Administration’s (“FHA’s”) Direct Endorsement Lender Program. In the settlement approved today in Manhattan federal court by U.S. District Judge Jesse Furman, MOVTADY and GOLDEN FIRST admitted, acknowledged, and accepted responsibility for conduct alleged in the Amended Complaint, specifically that they failed to maintain a compliant quality control program and therefore did not conform to all U.S. Department of Housing and Urban Development (“HUD”) and FHA regulations applicable to the Direct Endorsement Lender Program. This conduct was contrary to the representations in GOLDEN FIRST’S annual certification, including the annual certification signed by MOVTADY on September 15, 2008. The defendants also agreed to a $36 million judgment against GOLDEN FIRST and a $300,000 payment from MOVTADY. Finally, the settlement permanently bars MOVTADY from conducting any business with the federal government.

Manhattan U.S. Attorney Preet Bharara said: “This settlement holds Golden First and its owner, David Movtady, accountable for lying to the Government about compliance with HUD requirements and approving bad loans. This type of conduct costs the United States millions of dollars when the loans inevitably default, and this Office is committed to snuffing it out.”

According to the allegations contained in the Complaint, the Amended Complaint, and other public court filings:

GOLDEN FIRST was a participant in the Direct Endorsement Lender program – a federal program administered by FHA – from 1989 until 2010. MOVTADY was the owner, president and operator of GOLDEN FIRST from 1979 until 2010. As a Direct Endorsement Lender, GOLDEN FIRST had the authority to originate, underwrite, and certify mortgages for FHA insurance. If a Direct Endorsement Lender approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to HUD for the costs associated with the defaulted loan, which HUD must then pay. Under the Direct Endorsement Lender program, HUD relies on lenders to properly review, underwrite, and certify loans before they are endorsed for FHA insurance. Direct Endorsement Lenders are therefore required to follow HUD’s program rules, including certifying mortgages and maintaining a quality control program that can prevent and correct any deficiencies in their underwriting. The quality control program requirements include maintaining a program independent of the lender’s business units; disclosing to HUD, within 60 days of initial discovery, all loans containing evidence of fraud or other serious underwriting problems; and conducting a full review of all loans that go into default within the first six payments (“early payment defaults”). GOLDEN FIRST and MOVTADY failed to comply with all three of these basic requirements. Notwithstanding these failures, MOVTADY fraudulently certified that GOLDEN FIRST “conforms to all HUD-FHA regulations necessary to maintain its HUD-FHA approval.”

GOLDEN FIRST and MOVTADY also engaged in a regular practice of originating and underwriting FHA loans that GOLDEN FIRST and MOVTADY knew should have never been approved. Nonetheless, GOLDEN FIRST certified that more than a thousand FHA loans met HUD’s requirements and therefore were eligible for FHA insurance.

Pursuant to the settlement, the United States will obtain a $36 million judgment against GOLDEN FIRST and recover $300,000 from MOVTADY, individually, within six months of the settlement. MOVTADY will also be permanently barred from conducting any business with the federal government. As part of the settlement, the defendants admitted, acknowledged, and accepted responsibility for the following misconduct:

• GOLDEN FIRST failed to conform fully to HUD-FHA rules requiring Direct Endorsement Lenders to maintain a compliant quality control program;
• Contrary to representations in GOLDEN FIRST’S annual certifications, including an annual certification signed by MOVTADY on September 15, 2008, GOLDEN FIRST did not conform to all applicable HUD-FHA regulations;
• GOLDEN FIRST endorsed certain loans for FHA mortgage insurance that did not meet all underwriting requirements contained in HUD’s handbooks and mortgagee letters, and therefore were not eligible for FHA mortgage insurance under the DEL program; and
• GOLDEN FIRST submitted to HUD-FHA certifications stating that certain loans were eligible for FHA mortgage insurance when in fact they were not; FHA insured certain loans endorsed by GOLDEN FIRST that were not eligible for FHA mortgage insurance; and HUD consequently incurred losses when some of those loans defaulted.

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 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 the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

Mr. Bharara thanked HUD’s Office of the Inspector General for its assistance in this case.

This case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorneys Lara K. Eshkenazi and Lawrence H. Fogelman are in charge of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, Leslie R. Caldwell, the Assistant Attorney General of the Justice Department’s Criminal Division, and Michael E. Horowitz, the Justice Department Inspector General, announced that ROBERT LUSTYIK, a former Special Agent with the Federal Bureau of Investigation (“FBI”), pleaded guilty today in White Plains federal court to all counts with which he is charged, including bribery, conspiracy to commit fraud, and theft of government property. LUSTYIK pleaded guilty before United States District Judge Vincent L. Briccetti,.

U.S. Attorney Preet Bharara said: “Robert Lustyik today admitted to conducting a bribery scheme in which, for his own personal gain, he secretly sold information and documents to which he had access as an FBI agent. Lustyik betrayed our system of justice: he breached not only the law, but also his sworn oath, and the great trust and confidence placed in him by citizens and colleagues. For his criminal conduct he now faces, as he must, serious, commensurate penalties.”

Assistant Attorney General Leslie R. Caldwell said: “Robert Lustyik discarded the FBI’s principles of ‘fidelity, bravery, and integrity,’ and sold his badge to the highest bidder. Greed has no place in public service or law enforcement. The Department of Justice will root out corruption wherever it takes hold, and hold accountable those who abuse the public’s trust for personal gain.”

Inspector General Michael E. Horowitz said: “The Department of Justice Office of the Inspector General is committed to working with our law enforcement partners to identify, investigate, and bring to justice all DOJ employees who engage misconduct.”

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

LUSTYIK was an FBI Special Agent who worked on the counterintelligence squad in the White Plains Resident Agency. LUSTYIK’s co-defendant, Johannes Thaler, was LUSTYIK’s friend, and LUSTYIK’s other co-defendant, 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 to be 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 . . . .”

As 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, 52, of Westchester County, pleaded guilty to all five counts in the Indictment in which he is charged. LUSTYIK pleaded 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. He faces a maximum sentence of 55 years in prison. LUSTYIK is scheduled to be sentenced by Judge Briccetti on April 30, 2015, at 9:30 a.m.

Thaler and Ahmed previously pleaded guilty to bribery and conspiracy to commit fraud before Judge Briccetti. Thaler, 51, of New Fairfield, Connecticut, faces a maximum sentence of 35 years in prison. He is scheduled to be sentenced by Judge Briccetti on January 23, 2015, at 11:30 a.m. Ahmed, 35, of Danbury, Connecticut, faces a maximum sentence of 35 years in prison. He is scheduled to be sentenced by Judge Briccetti on January 23, 2015, at 2:30 p.m. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the efforts of the Department of Justice Office of the Inspector General, which conducted the investigation in this case, and the Financial Crimes Enforcement Network for the U.S. Department of Treasury.

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.

Lustyik Et Al.Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, and David A. Hubbert, Deputy Assistant Attorney General for the Tax Division of the Department of Justice, announced that WILBUR ANTHONY HUFF, a Kentucky businessman, pled guilty today in Manhattan federal court to various tax crimes that caused more than $50 million in losses to the Internal Revenue Service (“IRS”), and a massive fraud that involved the bribery of bank officials, the fraudulent purchase of an insurance company, and the defrauding of insurance regulators. HUFF pled guilty this afternoon before U.S. District Judge Naomi Reice Buchwald.

Manhattan U.S. Attorney Preet Bharara said: “Today’s guilty plea ensures that Wilbur Huff will be punished for perpetuating a vortex of fraud – complete with bribery, tax crimes that caused $53 million in losses to the IRS, the fraudulent purchase of a company, and the defrauding of insurance regulators. Those who might be tempted to follow in Huff’s criminal footsteps should understand that this Office and our law enforcement partners will aggressively pursue and root out fraud wherever we find it.”

According to the information, plea agreement, and statements made during court proceedings:

HUFF was a businessman who controlled numerous entities located throughout the United States (“HUFF-Controlled Entities”). HUFF controlled the companies and their finances, using them to orchestrate a $53 million fraud on the IRS as well as other illegal schemes. However, rather than exercise control of these companies openly, HUFF concealed his control by installing other individuals to oversee the companies’ day-to-day functions and to serve as the companies’ titular owners, directors, or officers. HUFF also maintained a corrupt relationship with Park Avenue Bank and its executives, Charles J. Antonucci, Sr., the President and Chief Executive Officer, and Matthew L. Morris, the Senior Vice President.

Tax Crimes

From 2008 to 2010, HUFF controlled O2HR, a professional employer organization (“PEO”) located in Tampa, Florida. Like other PEOs, O2HR was paid to manage the payroll, tax, and workers’ compensation insurance obligations of its client companies. However, instead of paying $53 million in taxes that O2HR’s clients owed the IRS, and instead of paying $5 million to Providence Property and Casualty Insurance Company (“Providence P&C”) – an Oklahoma-based insurance company – for workers’ compensation coverage expenses for O2HR clients, HUFF stole the money that his client companies had paid O2HR for those purposes. Among other things, HUFF diverted millions of dollars from O2HR to fund his investments in unrelated business ventures, and to pay his family members’ personal expenses. The expenses included mortgages on HUFF’s homes, rent payments for his children’s apartments, staff and equipment for HUFF’s farm, designer clothing, jewelry, and luxury cars.

Conspiracy to Commit Bank Bribery, Defraud Bank Regulators, and Fraudulently Purchase an Oklahoma Insurance Company

From 2007 up to and including 2010, HUFF engaged in a massive multi-faceted conspiracy, in which he schemed to (i) bribe executives of Park Avenue Bank, (ii) defraud bank regulators and the board and shareholders of a publicly-traded company and (iii) fraudulently purchase an Oklahoma insurance company. As described in more detail below, HUFF paid bribes totaling hundreds of thousands of dollars in cash and other items to Morris and Antonucci, in exchange for their favorable treatment at Park Avenue Bank.

As part of the corrupt relationship between HUFF and the bank executives, HUFF, Morris, Antonucci, and others conspired to defraud various entities and regulators during the relevant time period. Specifically, Huff conspired with Morris and Antonucci to falsely bolster Park Avenue Bank’s capital, by orchestrating a series of fraudulent transactions to make it appear that Park Avenue Bank had received an outside infusion of $6.5 million, and engaged in a series of further fraudulent actions to conceal from bank regulators the true source of the funds.

HUFF further conspired with Morris, Antonucci, and others to defraud Oklahoma insurance regulators and others by making material misrepresentations and omissions regarding the source of $37.5 million used to purchase Providence Property and Casualty Insurance Company, an Oklahoma insurance company that provided workers’ compensation insurance for O2HR’s clients, and to whom O2HR owed a significant debt.

Bribery of Park Avenue Bank Executives

From 2007 to 2009, HUFF paid Morris and Antonucci at least $400,000 in exchange for which they: (1) provided HUFF with fraudulent letters of credit obligating Park Avenue Bank to pay an investor in one of HUFF’s businesses $1.75 million if HUFF failed to pay the investor back himself; (2) allowed the HUFF-Controlled Entities to accrue $9 million in overdrafts; (3) facilitated intra-bank transfers in furtherance of HUFF’s frauds; and (4) fraudulently caused Park Avenue Bank to issue at least $4.5 million in loans to the HUFF-Controlled Entities.

Fraud on Bank Regulators and a Publicly-Traded Company

From 2008 to 2009, HUFF, Morris, and Antonucci engaged in a scheme to prevent Park Avenue Bank from being designated as “undercapitalized” by regulators – a designation that would prohibit the Bank from engaging in certain types of banking transactions, and that would subject the Bank to a range of potential enforcement actions by regulators. Specifically, they engaged in a series of deceptive, “round-trip” financial transactions to make it appear that Antonucci had infused the Bank with $6.5 million in new capital when, in actuality, the $6.5 million was part of the Bank’s pre-existing capital. HUFF, Morris, and Antonucci funneled the $6.5 million from the Bank through accounts controlled by HUFF to Antonucci. This was done to make it appear as though Antonucci was helping to stabilize the Bank’s capitalization problem, so the Bank could continue engaging in certain banking transactions that it would otherwise have been prohibited from doing, and to put the Bank in a better posture to receive $11 million from the Troubled Asset Relief Program. To conceal their unlawful financial maneuvering, HUFF created, or directed the creation of, documents falsely suggesting that Antonucci had earned the $6.5 million through a bogus transaction involving another company Antonucci owned. HUFF, Morris, and Antonucci further concealed their scheme by stealing $2.3 million from General Employment Enterprises, Inc., a publicly-traded temporary staffing company, in order to pay Park Avenue Bank back for monies used in connection with the $6.5 million transaction.

Fraud on Insurance Regulators and the Investment Firm

From July 2008 to November 2009, HUFF, Morris, Antonucci, and Allen Reichman, an executive at an investment bank and financial services company headquartered in New York, New York (the “Investment Firm”), conspired to (i) defraud Oklahoma insurance regulators into allowing Antonucci to purchase the assets of Providence P&C – the Oklahoma insurance company that was owed $5 million by O2HR and (ii) defraud the Investment firm into providing a $30 million loan to finance the purchase. Specifically, HUFF and Antonucci devised a scheme in which Antonucci would purchase Providence P&C’s assets by obtaining a $30 million loan from the “Investment Firm,” which used Providence P&C’s own assets as collateral for the loan. However, because Oklahoma insurance regulators had to approve any sale of Providence P&C, and because Oklahoma law forbade the use of Providence P&C’s assets as collateral for such a loan, HUFF, Morris, Antonucci, and Reichman made, and conspired to make, a number of material misstatements and material omissions to the Investment Firm and Oklahoma insurance regulators concerning the true nature of the financing for Antonucci’s purchase of Providence P&C. Among other things, Reichman directed Antonucci to sign a letter that provided false information regarding the collateral that would be used for the loan, and HUFF, Morris, and Antonucci conspired to falsely represent to Oklahoma insurance regulators that Park Avenue Bank – not the Investment Firm – was funding the purchase of Providence P&C.

After deceiving Oklahoma regulators into approving the sale of Providence P&C, HUFF took $4 million dollars of the company’s assets, which he used to continue the scheme to defraud O2HR’s clients. Ultimately, in November 2009, the insurance company became insolvent and was placed in receivership after HUFF, Morris, and Antonucci had pilfered its remaining assets.

HUFF, 53, of Caneyville and Louisville, Kentucky, pleaded guilty to one count of corruptly endeavoring to obstruct and impede the due administration of the internal revenue laws, which carries a maximum penalty of three years in prison, one count of aiding and assisting with the preparation and presentation of false and fraudulent tax returns, which carries a maximum penalty of three years in prison, one count of failing and causing the failure to pay taxes to the IRS, which carries a maximum penalty of one year in prison, and one count of conspiracy to (a) commit bank bribery, (b) commit fraud on bank regulators and the board and shareholders of a publicly-traded company, and (c) fraudulently purchase an Oklahoma insurance company, which carries a maximum penalty of five years in prison. He is scheduled to be sentenced by Judge Buchwald on April 8, 2015, at 2:30 p.m. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. As part of his plea, Huff also agreed to forfeit $10.8 million to the United States and to provide restitution in the following amounts to victims of his crimes: $70,100,000 to the Receiver for Park Avenue Property and Casualty Insurance Company; $4,857,266.62 to the Federal Deposit Insurance Corporation (“FDIC”); $597,420.29 to Valley National Bank (the successor of Park Avenue Bank); and $53,094,219 to the Internal Revenue Service.

Charles Antonucci, who was charged separately by complaint on March 15, 2010, pleaded guilty to his role in the crimes described above on October 8, 2010. Matthew L. Morris and Allen Reichman were charged by Indictment with HUFF on October 1, 2012. Morris pleaded guilty in connection with the case on October 17, 2014.

Reichman is currently scheduled to go to trial before Judge Buchwald beginning on March 2, 2015. The charges against Reichman are allegations and he is presumed innocent unless and until proven guilty beyond a reasonable doubt.

Mr. Bharara praised the investigative work of the Special Inspector General for the Troubled Asset Relief Program, the Federal Bureau of Investigation, the IRS, the New York State Department of Financial Services, Immigration and Customs Enforcement’s Homeland Security Investigations, and the Office of Inspector General of the FDIC. Mr. Bharara also thanked the Department of Justice’s Tax Division and the United States Attorney’s Office for the Southern District of Florida for their assistance.

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 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 the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

The case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Janis Echenberg and Daniel Tehrani and Special Assistant U.S. Attorney Tino Lisella are in charge of the criminal case.

Preet Bharara, the United States Attorney for the Southern District of New York, and Larry Wszalek, Acting Deputy Assistant Attorney General for the Tax Division of the Department of Justice, announced today that THOMAS NASTASI III, was sentenced to 12 months in prison for failing to pay to the Internal Revenue Service (“IRS”) more than $1.7 million in payroll taxes of his companies, Nastasi Maintenance LLC and Nastasi Maintenance & Construction, LLC. NASTASI pled guilty in August 2013 before U.S. District Judge Paul G. Gardephe, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “The crime for which Thomas Nastasi has been sentenced was not a complex scheme. His companies worked on luxury buildings in New York. Rather than remit payroll taxes he owed, Nastasi spent the money buying luxury items for himself. Now, he not only has to pay the taxes he owed, he has to pay for his crime with a prison term as well.”

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

From 2001 through 2011, NASTASI owned and operated several Manhattan construction and maintenance companies, including Nastasi Maintenance & Construction, which performs contracting work on such buildings as Rockefeller Center and the Chrysler Building. As the President of the companies, NASTASI was responsible for withholding payroll taxes from his employees and paying those taxes over to the IRS. Those taxes included the employees’ income taxes, Social Security, and Medicare taxes. NASTASI accumulated over $1.7 million in payroll taxes that were owed but never paid to the IRS. Those taxes also included the employer’s portion of Social Security and Medicare taxes for his employees.

Instead of paying the companies’ payroll taxes to the IRS, NASTASI used company funds to pay hundreds of thousands of dollars in personal expenses, including $67,000 in cigar purchases, a house in Mt. Kisco, and expenses related to his boat. NASTASI also made false statements to the IRS in the course of its attempts to obtain delinquent tax returns and collect the corporate and personal taxes owed by NASTASI and his companies.

In addition to his prison sentence, NASTASI, 48, of Mt. Kisco, New York, was sentenced to three years of supervised release, ordered to pay a fine of $60,000, and was also ordered to pay restitution to the IRS of $1,593,414 to be paid within 90 days.

Mr. Bharara thanked the IRS Criminal Investigation Division for its outstanding investigative work in this case.

Department of Justice Tax Division Senior Litigation Counsel Nanette L. Davis is in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, Douglas Shoemaker, the Regional Special Agent-in-Charge for the United States Department of Transportation Office of Inspector General (“USDOT-OIG”), and Michael Nestor, the Inspector General for The Port Authority of New York & New Jersey (“Port Authority”), announced today that the United States has filed, and simultaneously settled, a civil fraud lawsuit against a subcontractor, RMD HOLDINGS, LTD., D/B/A NATIONWIDE CONSTRUCTION (“RMD”), for engaging in fraudulent conduct designed to take advantage of the Disadvantaged Business Enterprise Program in order to secure a subcontract on a federally funded project. Specifically, RMD caused the prime contractor on a project for the design and construction of the LaGuardia Central Terminal building (the “LaGuardia Project”) to falsely represent to the Port Authority of New York and New Jersey (“PANYNJ”) that RMD paid approximately one million dollars to a disadvantaged business enterprise (“DBE”) to perform legitimate work on the contract when, in fact, the DBE did not perform a commercially useful function, but rather received a “commission” from RMD for the fraudulent use of its DBE status. In the settlement, approved yesterday in Manhattan federal court by U.S. District Judge Vernon S. Broderick, RMD admitted and accepted responsibility for violating the DBE regulations governing the LaGuardia Project and agreed to pay $416,000. This is part of a global settlement between RMD and the United States for fraudulent conduct on the part of RMD with regard to DBEs, pursuant to which RMD will pay $1,750,000.

Manhattan U.S. Attorney Preet Bharara said: “The Disadvantaged Business Enterprise program exists to help qualified minority-owned and women-owned businesses succeed. That aim was subverted here. The regulations governing the program must be followed by all contractors working on federally funded contracts – not just prime contractors. Today’s settlement will help ensure that subcontractors as well as prime contractors comply with this important law.”

USDOT-OIG Special Agent-in-Charge Douglas Shoemaker stated: “As evidenced by this settlement agreement, we remain steadfast in our commitment to maintaining the integrity of the U.S. Department of Transportation’s Disadvantaged Business Enterprise program. Working with the Secretary of Transportation and other DOT leaders, and our law enforcement and prosecutorial colleagues, we will continue to protect the taxpayers’ investment in our nation’s infrastructure from fraud, waste, abuse and violations of law.”

Port Authority Inspector General Michael Nestor stated: “This investigation has shown how individuals in the construction industry have manipulated and circumvented the intent of the DBE Program on a Port Authority project by utilizing a firm as a pass-through to satisfy the Program goals. I would hope that this case serves as an incentive to the industry to adhere to the Program’s intent. I urge those with information of instances of other fraudulent practices to report them to law enforcement. Working with our law enforcement partners we will continue to vigilantly investigate allegations of fraud in the construction industry.”

BACKGROUND ON DBEs

In 1980, the USDOT issued regulations in connection with the DBE program, a program to increase the participation of business enterprises owned by socially and economically disadvantaged individuals in federally funded public construction contracts. To become certified as a DBE, a company must:

• be owned and controlled by socially and economically disadvantaged individuals;
• be an independent business whose viability does not depend on its relationship with other firms;
• employ its own work force and own the equipment necessary to perform its work; and
• be able to meet its financial obligations.

Recipients of USDOT construction grants, such as the Port Authority of New York and New Jersey (“PANYNJ”), are required to establish a DBE program that establishes goals for the percentage of a project’s work that should be awarded to DBEs (“DBE goals”). General contractors on construction projects must make good faith efforts to meet the relevant DBE goals. As a condition of receiving USDOT funding for the LaGuardia Project, the PANYNJ established DBE goals for the project and required the general contractor to either meet or make good faith efforts to meet the DBE goal.

General contractors can count funds paid to DBEs toward the attainment of the DBE goals only if the DBEs performed a “commercially useful function.” A DBE subcontractor performs a commercially useful function only when it actually performs, manages, and supervises the work involved. A DBE does not perform a “commercially useful function” if “its role is limited to that of an extra participant in a transaction, contract, or project through which funds are passed in order to obtain the appearance of DBE participation.”

RMD’S FRAUD

According to the allegations in the complaint:

USDOT set the DBE participation goal for the LaGuardia Project at 17% of the project’s cost (or approximately $1.8 million). An intermediary contractor was hired by the prime contractor on the LaGuardia Project to install the bollard structural steel, and this intermediary contractor hired RMD as a subcontractor. The contract between the intermediary and RMD required RMD to provide materials provided by a DBE or woman-owned business, and RMD represented to the intermediary contractor that it would use the DBE MS Construction Co. (“MS”) to supply approximately $1.1 million in bollard structural steel. RMD provided the intermediary contractor with invoices and other documentation purportedly from MS so that the intermediary contractor could claim credit toward its DBE contract requirements. The payments to MS were incorporated into a report signed by the president of the intermediary contractor and submitted to the prime contractor to show that the intermediary contractor was meeting its DBE goals as required by the contract with the prime contractor. In reality, RMD knew that MS was not actually supplying the steel, which instead was supplied by several third-party suppliers, none of which was a DBE. RMD paid MS a percentage of the amount paid to the actual steel suppliers for the sole purpose of fraudulently using MS’s DBE status to earn DBE credit for the prime contractor.

Pursuant to the settlement agreement, RMD admitted, acknowledged, and accepted responsibility for the fact that one of its employees caused false certifications to be submitted to USDOT representing that a DBE performed certain work on, and received certain payments in connection with, the LaGuardia Project, when in fact the DBE never performed any work and merely received a commission from RMD for the fraudulent use of its DBE status. RMD also agreed to pay the United States $416,000 in damages.

Mr. Bharara commended the USDOT Office of Inspector General and the Port Authority Office of Inspector General for their invaluable work on this case. Mr. Bharara also expressed his thanks to the U.S. Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud Investigations, New York Region, for its assistance in the case.

The case is being handled by the Office’s Civil Frauds Unit.

Assistant U.S. Attorneys Mara Trager and Ellen London are in charge of the case.

RMD complaint

RMD executed stipulation

Preet Bharara, the United States Attorney for the Southern District of New York, and Philip R. Bartlett, the Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced today the unsealing of an indictment in Manhattan federal court against WHILEON CHAY for his alleged management of several fraudulent commodities pools, generally operating under the name “4X Solutions” or a variation thereof. Beginning in or about 2007, CHAY solicited more than $5 million from investors in commodities pools that purported to engage principally in foreign exchange (“forex”) trading, promising approximate annual returns of 24% and claiming that “[t]here is no risk in this activity.” In fact, however, CHAY lost more than $2 million in forex and other commodities trading, and misappropriated a significant portion of the remaining investor funds for his personal use, including to pay for luxury cars and for his deceased wife to be cryogenically frozen. CHAY fled the United States during the course of the investigation. The case has been assigned to United States District Judge Kimba M. Wood.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Whileon Chay deceived investors about the commodities pools he managed, claiming to be a successful trader when he in fact was losing millions and misappropriating investors’ money for his own use. Although he has fled the country, these charges against him will persist and so will our efforts to bring him back to face them.”

USPIS Inspector-in-Charge Bartlett said: “Over the past five years Postal Inspectors have investigated hundreds of investment fraud schemes. In each case there are misrepresentations made to investors and the misuse of funds entrusted to the companies. As alleged here, Mr. Chay betrayed the trust of his clients when he misappropriated their investments to fund his lavish lifestyle.”

According to the allegations in the Indictment unsealed yesterday in Manhattan federal court and other court documents:

In approximately 2007, CHAY began operating the first of several unregistered commodities pools operating under the name “4X Solutions,” collectively referred to in the Indictment as the “4X Entities,” and began to solicit investors. CHAY represented to investors, orally and through written materials, that he had “been successfully trading the 4x for 15 years. During this period [CHAY’s] clients have never experienced a month that did not make money.” CHAY also caused monthly account statements to be sent to investors, which represented that the 4X Entities were producing steady returns. By 2011, the 4X Entities purported to have more than $16.5 million in assets under management.

In fact, CHAY did not invest the money as promised, and to the extent that he did invest it at all, he lost it. Between 2007 and 2011, CHAY lost approximately $2.3 million in forex and other commodities and securities trading, even as he continued to represent to investors and potential investors that the 4X Entities were profitable and that “[w]e have never had a loosing [sic] month.” Materials distributed to investors also claimed that “[t]here is no risk in this activity.” CHAY perpetuated the fraud by disseminating fraudulent account statements that represented that investors were receiving consistent positive returns, and by using new investors’ funds to pay purported returns to existing investors. He also misappropriated a significant portion of the funds invested in the 4X Entities for his personal use, including to pay his personal expenses and to maintain a lavish lifestyle, which he flaunted to potential investors. For example, CHAY drove a different luxury car virtually every time he met with one particular investor. CHAY also misappropriated investor funds for other purposes, including more than $150,000 to pay for his deceased wife to be cryogenically frozen.

In October 2011, during the course of the investigation, CHAY departed from New York to Lima, Peru, and has not returned to the United States.

CHAY, 38, formerly of New York, New York, is charged in the Indictment with commodities fraud (Count One), wire fraud (Count Two), and mail fraud (Count Three). The mail and wire fraud charge each carries a maximum term of 20 years in prison, and the commodities fraud charge carries a maximum term of 10 years in prison. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Separately, the United States Commodities Futures Trading Commission (“CFTC”) has sued CHAY and 4X Solutions, Inc., in an action filed in United States District Court for the Southern District of New York. CHAY has not appeared in that case, and the Clerk of Court has issued a certificate of default against CHAY.

Mr. Bharara praised the investigative work of the USPIS. He also thanked the CFTC for its assistance.

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 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 the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Matthew L. Schwartz and Katherine Reilly are in charge of the prosecution.

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

Chay, Whileon Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that MELVIN LOWE, a former consultant to the New York State Democratic Senate Campaign Committee ("DSCC"), was sentenced today to 36 months in prison for conspiring with New York State Senator John Sampson to defraud the DSCC of $100,000, and for personal income tax offenses. LOWE was convicted by a jury in September 2014. United States District Judge Vincent L. Briccetti imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “Melvin Lowe’s corrupt actions were another example of a political figure in New York State putting his own personal greed ahead of the public’s trust. I hope that today’s sentence will send yet another powerful signal to any public official who questions the resolve of this office to root out public corruption.”

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

LOWE was retained as a consultant by the DSCC after New York State Senator John Sampson was appointed as the Senate's Democratic Conference Leader following the June 2009 "coup" that temporarily shifted the balance of power in the New York Senate from the Democrats to the Republicans. In early June 2010, Sampson asked LOWE to arrange for a covert payment of $20,000 to Michael Nieves, a Queens-based political operative who had previously worked for former New York State Senator Hiram Monserrate and who had helped engineer the resolution of the Senate coup that had brought Sampson to power. LOWE then arranged for a New Jersey-based political consultant to submit a false invoice to the DSCC for $100,000 in printing services. Sampson approved payment of the invoice and the DSCC sent $100,000 to the New Jersey-based consultant. LOWE instructed the consultant to send $20,000 of the proceeds to Nieves, $75,000 of the proceeds to LOWE's consulting company, and to keep $5,000 for himself. The jury heard evidence that LOWE and Senator Sampson had a close relationship of trust that included LOWE giving Sampson an envelope of cash.

LOWE received more than $2.1 million in consulting income from 2007 to 2012. He reported less than $25,000 in income in each of his federal income tax returns for 2007 through 2009, which he did not file until late 2010. LOWE never filed tax returns for 2010 through 2012. He never made any payments toward his taxes for the years 2000 through 2012.

LOWE also caused a bank to make a false statement to his mortgage lender regarding the balance in his checking account. When the mortgage lender sent LOWE’s bank a Verification of Deposit form to verify LOWE's claim that he had $65,000 in his checking account, LOWE caused the assistant manager to claim that LOWE's account had a balance of more than $80,000. At that time, the balance in LOWE's checking account was $2,156.

In addition to the prison sentence, LOWE, 53, of Manhattan, was sentenced to three years’ supervised release.

Mr. Bharara praised the outstanding investigative work of the Internal Revenue Service - Criminal Investigation and the investigators from the U.S. Attorney's Office for the Southern District of New York.

This case is being handled by the Office’s White Plains Division. Assistant United States Attorneys Perry A. Carbone and James McMahon are in charge of the prosecution.