Southern District of New York

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that CHARLIE SHREM, the former Chief Executive Officer and Compliance Officer of BitInstant, a Bitcoin exchange company, and the former Vice Chairman of the Bitcoin Foundation, was sentenced today to two 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. SHREM pled guilty in September 2014 before U.S. District Judge Jed S. Rakoff, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “Charlie Shrem knowingly facilitated the purchase and use of Bitcoins by others to buy illegal drugs on the Silk Road site. He willfully abdicated his duties as compliance officer of BitInstant, putting illegal profit ahead of legal and ethical responsibility. Now Shrem has been made to answer for his crimes.”

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, SHREM’s co-defendant, Robert M. 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.

SHREM was the Chief Executive Officer of BitInstant, and from about August 2011 until about July 2013, when BitInstant ceased operating, he was also its Compliance Officer, in charge of ensuring BitInstant’s compliance with federal and other anti-money laundering (“AML”) laws. SHREM was also the Vice Chairman of the Bitcoin Foundation, a foundation dedicated to promoting the Bitcoin virtual currency system.

SHREM, who allegedly bought drugs on Silk Road himself, was fully aware that Silk Road was a drug-trafficking website, and through his communications with Faiella, SHREM also knew that Faiella was operating a Bitcoin exchange service for Silk Road users. Nevertheless, SHREM knowingly facilitated Faiella’s business with BitInstant in order to maintain Faiella’s business as a lucrative source of revenue. SHREM knowingly allowed Faiella to use BitInstant’s services to buy Bitcoins for his Silk Road customers; personally processed Faiella’s orders; gave Faiella discounts on his high-volume transactions; failed to file a single suspicious activity report with the United States Treasury Department about Faiella’s illicit activity, as he was otherwise required to do in his role as BitInstant’s Compliance Officer; and deliberately helped Faiella circumvent BitInstant’s AML restrictions, even though it was SHREM’s job to enforce them and even though BitInstant had registered with the Treasury Department as a money services business.

Working together, SHREM and 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 imposing the sentence, Judge Rakoff remarked: "There's no question that Mr. Shrem, over a period of many months, was knowingly, willfully, and to some extent excitedly, even passionately involved in activity that he knew was a serious violation of the law and that was promoting the evil business of trafficking in drugs."

In addition to the prison sentence, SHREM, 24, of New York, New York, 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.

Mr. Bharara praised the outstanding investigative work of the DEA’s New York Organized Crime Drug Enforcement Strike Force, which is comprised of 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. Marshal 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.

SHREM’s co-defendant, Faiella, pled guilty in September 2014, along with SHREM, and is scheduled to be sentenced before Judge Rakoff on January 20, 2015.

Preet Bharara, the United States Attorney for the Southern District of New York, David Hubbert, the Deputy Assistant Attorney General for Civil Trial Matters in the Department of Justice’s Tax Division, John Koskinen, the Commissioner of the Internal Revenue Service (“IRS”), and Anthony D. Williams, the Special Agent in Charge of the Drug Enforcement Administration’s Los Angeles Field Division (“DEA”), announced that U.S. District Judge Vernon S. Broderick signed an order yesterday in Manhattan federal court authorizing the IRS to issue summonses requiring Federal Express Corporation a/k/a FedEx Express (“FedEx Express”); FedEx Ground Package System, Inc., a/k/a FedEx Ground (“FedEx Ground”); DHL Express (“DHL”); United Parcel Service, Inc. (“UPS”); Western Union Financial Services, Inc. (“Western Union”); the Federal Reserve Bank of New York (the “FRBNY”); Clearing House Payments Company LLC (“Clearing House”); and HSBC Bank USA, National Association (“HSBC USA”), to produce information about U.S. taxpayers who may be evading or have evaded federal taxes by using the services of SOVEREIGN MANAGEMENT & LEGAL, LTD. (“Sovereign”), to establish, maintain, or conceal foreign accounts, assets, and entities.

In this action, the Court granted the IRS permission to serve what are known as “John Doe” summonses on FedEx Express, FedEx Ground, DHL, UPS, Western Union, the FRBNY, Clearing House, and HSBC USA. The IRS uses John Doe summonses to obtain information about possible tax fraud by individuals whose identities are unknown. The John Doe summonses direct these eight entities to produce records that will assist the IRS in identifying U.S. taxpayers who, from the years 2005 through 2013, used Sovereign’s services to establish, maintain, operate, or control any foreign financial account or other assets; any foreign corporation, company, trust, foundation or other legal entity; or any foreign or domestic financial account in the name of such foreign entity.

Manhattan U.S. Attorney Preet Bharara said: “This action demonstrates our Office’s commitment to pursuing tax evaders who use offshore service providers to avoid their U.S. tax obligations. By issuing these John Doe summonses, we continue our joint efforts with the IRS to identify and hold accountable those who conceal their foreign assets in order to dodge their legal responsibility to pay taxes.”

Deputy Assistant Attorney General David Hubbert said: “This summons action is but the latest step in the Department of Justice’s efforts to identify and hold fully accountable U.S. taxpayers who have sidestepped their tax obligations by hiding money overseas. The world is getting smaller for tax cheats, and we will work with our partners at the IRS to vigorously enforce the nation’s tax laws against those who seek to avoid paying their fair share.”

IRS Commissioner John Koskinen said: “The IRS remains committed to continuing our priority efforts to stop offshore tax evasion wherever it is found. We have made tremendous progress in this area, working cooperatively with other agencies. The John Doe summons remains an important tool in our efforts to find international tax evaders and those who help them.”

DEA Special Agent in Charge Anthony D. Williams said: “The DEA has a longstanding commitment to sharing information with our federal, state, and local partners. Issuance of these summonses exemplifies how outstanding investigative results can be derived from a culture of interagency cooperation.”

According to the allegations set forth in the documents filed in support of the petition, and other information in the public record:

Sovereign is a multi-jurisdictional offshore services provider that offers clients, among other things, the formation and administration of anonymous corporations and foundations in Panama as well as offshore entities. Related services provided by Sovereign include the maintenance and operation of offshore structures, mail forwarding, the availability of virtual offices, re-invoicing, and the provision of professional managers who appoint themselves directors of the client’s entity while the client maintains ultimate control over the assets.

As a result of a DEA investigation of online narcotics trafficking known as OPERATION ADAM BOMB, the IRS learned that Sovereign was involved in assisting U.S. clients with tax evasion. During the IRS’s investigation of Sovereign’s conduct, one taxpayer, making a voluntary disclosure of tax non-compliance to avoid prosecution, reported that Sovereign helped the taxpayer form an anonymous corporation in Panama that the taxpayer used to control assets without appearing to own them.

The IRS investigation also determined that Sovereign uses Federal Express, UPS, and DHL to correspond with U.S. clients, and Western Union to transmit funds to and from clients in the U.S. In addition, the IRS learned that the wire services operated by the FRBNY and Clearing House, and the U.S. correspondent bank accounts that HSBC USA holds for Sovereign’s banks in Panama and Hong Kong, are likely to have records of financial transactions between Sovereign and its clients in the U.S. By obtaining information from these entities through John Doe summonses, the IRS expects to be able to identify Sovereign’s U.S. clients who may be avoiding or evading taxes.

Federal law requires U.S. taxpayers to pay taxes on all income earned worldwide. U.S. taxpayers must also report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year. Willful failure to report a foreign account can result in a fine of up to 50 percent of the amount in the account at the time of the violation.

This case is being handled by the Office’s Tax and Bankruptcy Unit. Assistant United States Attorney Joseph N. Cordaro is in charge of the case.

Sovereign Management John Doe Summonses Order
 

Preet Bharara, 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 arrest of KRIS SERGENTAKIS for retaliating against a witness and stalking. The Complaint alleges that SERGENTAKIS has engaged in a scheme to retaliate against, stalk, and harass an individual (“Victim-1”) who previously provided law enforcement with information relating to SERGENTAKIS’s commission of federal offenses, for which SERGENTAKIS was previously convicted and served a federal prison sentence. SERGENTAKIS was arrested this morning in Pennsylvania and is expected to be presented today in federal court in Allentown, Pennsylvania, before a United States Magistrate Judge.

Manhattan U.S. Attorney Bharara said: “As alleged, after Kris Sergentakis was reported for engaging in kickbacks, convicted, and sentenced to a prison term, he began a campaign of retaliation and stalking in an effort to destroy the life of the former colleague who exposed his criminal conduct. There will be zero tolerance from this Office and our law enforcement partners for witness intimidation and harassment. The criminal justice system relies on witnesses, and they should not suffer for being good citizens who come forward to ensure justice is done.”

USPIS Inspector-in-Charge Bartlett said: “Sergentakis viciously and knowingly attempted to destroy his victim’s reputation and livelihood through letters, emails, and the internet. Law enforcement has a responsibility to protect witnesses against intimidation and will bring to justice anyone who engages in these types of slanderous attacks.”

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

SERGENTAKIS was formerly employed in the graphics department of The Leukemia and Lymphoma Society (“LLS”), a charitable non-profit organization that funds cancer research and is headquartered in White Plains. In 2006, SERGENTAKIS pled guilty in Manhattan federal court to commercial bribery and mail fraud charges arising out of his participation in a kickback scheme in which he allocated certain of LLS’s printing contracts to certain vendors in return for payments from the vendors. During the course of that investigation and prosecution, Victim-1, who was LLS’s Chief Financial Officer at the time and subsequently became its Chief Executive Officer, provided information to law enforcement relating to SERGENTAKIS’s conduct at LLS and his violations of federal law.

From at least 2007 to the present, SERGENTAKIS has harassed and threatened Victim-1 through letters, emails, and the Internet. SERGENTAKIS began by sending multiple letters to Victim-1 and other current and former employees at LLS. For example, in 2007, SERGENTAKIS sent a letter to Victim-1 stating, in part, that “[e]very person on the planet will know that you are a dangerous child molester,” and “I’ll be everywhere you are warning people.” SERGENTAKIS’s letter to Victim-1 further stated that “when I am released I will be outside where you live, work, eat, whatever;” “I will never give up;” and “[a]s long as I live this will never end.” The letter concluded with: “This hasn’t even started yet.”

In 2010, shortly after being released from prison, SERGENTAKIS created a website (the “Website”) containing harassing and threatening content regarding Victim-1. On at least two occasions, Internet service providers stopped hosting the Website because of its content, but SERGENTAKIS responded by relaunching the Website with a different service provider. Between 2010 and the present, the Website’s content included, among many other things, the following:

• An image of a guillotine with the title “THE CURE FOR PEDOPHILLIA”[sic] and, immediately below the image, the statement: “We all have a responsibility to keep children safe from pedophiles like [Victim-1] . . . .”
• “[Victim-1] also enjoys beating helpless animals, he had a dalmation [sic] which would have accidents in the house so [Victim-1] would beat the dog to a pulp the same way he abuses cancer patients by denying them the monies the public wants them to have.”
• Photographs of Victim-1 and members of Victim-1’s family that had been posted on the Facebook accounts of certain of Victim-1’s family members.
• The statement that a poster regarding Victim-1 would be produced and that “Manhattan and [the town where Victim-1 lived] would be wallpapered with a 100,000 posters.”

SERGENTAKIS also created a Facebook account on which he posted harassing and threatening content regarding Victim-1. For example, in September 2014, the Facebook account showed a photograph of Victim-1 with the word “CRIMINAL” imposed in all capital letters across the bottom and, in August 2014, SERGENTAKIS posted a comment on the account stating: “I am thinking of running a promotion. What do you prefer a coffee mug or t shirt?” Above this comment was a photograph of a coffee mug bearing the web address of the Website, an image of Victim-1 behind prison bars, and the words “[Victim-1] CEO LLS.” In addition, SERGENTAKIS posted links to and advertisements for the Website on various other websites, including search engine websites, social media websites, news websites, and blogs.

SERGENTAKIS also used email to conduct his campaign of retaliation and harassment. For example, in August 2010, SERGENTAKIS sent an email to the then-principal of the high school where Victim-1’s children were enrolled as students, providing a link to the Website and stating: “this is something u need to know about.” SERGENTAKIS sent numerous emails to the media promoting the Website and making false allegations about Victim-1. For example, in September 2010, SERGENTAKIS sent an email to a TV station in Missouri stating, in part: “the head of a major nonprofit was arrested for child molestation and case fixing see [Website-1].” As another example, in September 2013, SERGENTAKIS sent an email to ABC News with the subject line “please review [Website-1]” and stating: “The CEO is a pedophile and millions of dollars are missing.” SERGENTAKIS further sent multiple emails to donors of LLS promoting the Website, disseminating such allegations about Victim-1, and encouraging the donors to stop supporting LLS.

SERGENTAKIS, 54, of Bangor, Pennsylvania, is charged with one count of retaliating against a witness or informant, which carries a maximum sentence of 10 years in prison, and one count of stalking, 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 thanked and praised the USPIS for its outstanding work in this investigation.

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

Nunez v. City of NY US Complaint in Intervention Exhibit A
Nunez v. City of NY, et al US Motion to Intervene Memo of Law
Nunez v. City of NY, et al US Motion to Intervene Notice of Motion
Nunez v. City of New York, et al US Complaint-In-Intervention

Preet Bharara, the United States Attorney for the Southern District of New York, and Jennifer Shasky Calvery, the Director of the Financial Crimes Enforcement Network (“FinCEN”), announced today that the United States has filed a civil enforcement action against THOMAS E. HAIDER (“HAIDER”), the former Chief Compliance Officer of MoneyGram International, Inc. (“MoneyGram”), for violating the Bank Secrecy Act (“BSA”). At all times relevant to the Complaint, MoneyGram operated a money transfer service that enabled customers to transfer money from one MoneyGram location to another. The Complaint alleges that, notwithstanding his obligations as MoneyGram’s Chief Compliance Officer, HAIDER violated the BSA by failing to ensure that MoneyGram: (1) implemented and maintained an effective anti-money laundering (“AML”) program; and (2) filed timely suspicious activity reports with law enforcement when it knew, suspected, or had reason to suspect that third parties were using its money transfer service to facilitate criminal activity. The Complaint further alleges that, as a result of HAIDER’s conduct, the perpetrators of fraudulent telemarketing and other schemes were able to use MoneyGram’s money transfer system to engage in criminal activity and defraud MoneyGram customers out of substantial amounts of money.

Prior to the filing of the Complaint, FinCEN – which is responsible for enforcing compliance with the BSA – assessed a $1 million penalty against HAIDER for his above-referenced conduct. The Complaint seeks both to collect that assessed penalty and to enjoin Haider from participating, directly or indirectly, in the conduct of the affairs of any “financial institution” (as that term is used in the BSA) that is located in the United States or conducts business within the United States, for a term of years sufficient to prevent future harm to the public.

Manhattan U.S. Attorney Preet Bharara said: “Compliance officers perform an essential function in our society, serving as the first line of defense in the fight against fraud and money laundering. Unfortunately, as the Complaint alleges, Mr. Haider violated his obligations as MoneyGram’s Chief Compliance Officer. By allegedly failing to take the actions clearly required of him under the law, he allowed criminals to use MoneyGram to defraud innocent consumers and then launder the proceeds of their fraudulent schemes. As this case demonstrates, we are committed to working with FinCEN to enforce the requirements of the Bank Secrecy Act and hold individuals such as Mr. Haider accountable.”

FinCEN Director Jennifer Shasky Calvery said: “In my job, I’ve met hundreds of compliance officers and I know them to be some of the most dedicated and trustworthy professionals in the financial industry. FinCEN and our law enforcement partners greatly depend on their judgment and their diligence in our common fight against money laundering, fraud, and terrorist finance. Mr. Haider’s failures are an affront to his peers and to his profession. With his willful violations, he created an environment where fraud and money laundering thrived and dirty money rampaged through the very system he was charged with protecting. His inaction led to personal savings lost and dreams ruined for thousands of victims.”

As alleged in the Complaint, filed today in Manhattan Federal Court:

Since at least 2003, MoneyGram has operated a money transfer service that enables its customers to transfer money to and from various locations in the United States and abroad through its global network of agents and outlets. MoneyGram outlets are independently owned entities that MoneyGram has authorized to transfer money through its money transfer system. Typically, MoneyGram outlets are businesses (such as convenience stores and internet cafes) that offer money transfers through MoneyGram, but primarily provide other types of goods and services. MoneyGram agents are the individuals or entities that own and/or operate MoneyGram outlets.

As a money transmitter, MoneyGram is subject to, and must comply with, various requirements set forth in the BSA and its implementing regulations. As relevant here – and at all times relevant to the Complaint – MoneyGram was required to implement and maintain an effective AML program. MoneyGram was also required to file with FinCEN suspicious activity reports (“SARs”) identifying financial transactions that: (1) were sent by or through MoneyGram; (2) involved (individually or in the aggregate) funds of at least $2,000; and (3) MoneyGram knew, suspected, or had reason to suspect involved, among other things, the use of MoneyGram’s money transfer system to facilitate criminal activity. Such SARs were required to be filed within 30 days of MoneyGram detecting facts that may have constituted a basis for filing the SARs.

From at least 2003 through on or about May 23, 2008, HAIDER was MoneyGram’s Chief Compliance Officer. As such, HAIDER was responsible for ensuring that MoneyGram implemented and maintained an effective AML program and complied with its SAR-filing obligations.

Notwithstanding HAIDER’s obligations as MoneyGram’s Chief Compliance Officer, at all times relevant to the Complaint, HAIDER failed to ensure that MoneyGram (1) implemented and maintained an effective AML program and (2) fulfilled its obligation to file timely SARs. HAIDER’s failures included the following:

• Failure to Implement a Discipline Policy. HAIDER failed to ensure that MoneyGram implemented a policy for disciplining agents and outlets that MoneyGram personnel knew or suspected were involved in fraud and/or money laundering.
• Failure to Terminate Known High-Risk Agents/Outlets. HAIDER failed to ensure that MoneyGram terminated agents and outlets that MoneyGram personnel understood were involved in fraud and/or money laundering, including outlets that HAIDER himself was on notice posed an unreasonable risk of fraud and/or money laundering. For example, with respect to one such outlet: in 2004, HAIDER learned that the Toronto Police Department regarded the outlet as “dirty”; in 2005, 2006 and 2007, MoneyGram’s Fraud Department – which HAIDER supervised – identified the outlet as one of MoneyGram’s leading fraud outlets; in 2007, MoneyGram’s Fraud Department proposed to HAIDER (and others) that the outlet be terminated, and provided compelling evidence that the outlet was complicit in fraudulent schemes; and by the time Haider left MoneyGram in 2008, MoneyGram had received hundreds of reports from its customers linking the outlet to fraudulent activity.
• Failure to File Timely SARs. HAIDER failed to ensure that MoneyGram fulfilled its obligation to file timely SARs, including because: (1) HAIDER maintained MoneyGram’s AML program so that the individuals responsible for filing SARs were not provided with information possessed by MoneyGram’s Fraud Department that should have resulted in the filing of SARs on specific agents or outlets; and (2) HAIDER failed to provide adequate direction to MoneyGram staff regarding when to file SARs relating to fraud.
• Failure to Conduct Effective Audits of Agents/Outlets. HAIDER failed to ensure that MoneyGram conducted effective audits of agents and outlets, including outlets that MoneyGram personnel knew or suspected were involved in fraud and/or money laundering.
• Failure to Conduct Adequate Due Diligence on Agents/Outlets. HAIDER failed to ensure that MoneyGram conducted adequate due diligence on prospective agents, or existing agents seeking to open additional outlets, which resulted in, among other things, MoneyGram (1) granting outlets to agents who had previously been terminated by other money transmission companies and (2) granting additional outlets to agents who MoneyGram personnel knew or suspected were involved in fraud and/or money laundering.

As a result of HAIDER’s above-described AML failures, agents and outlets that MoneyGram personnel knew or suspected were involved in fraud and/or money laundering were allowed to continue to use MoneyGram’s money transfer system to facilitate their fraudulent schemes. The above-referenced failures continued throughout HAIDER’s employment at MoneyGram, and resulted in MoneyGram’s customers suffering substantial losses, as many were duped into using MoneyGram’s money transfer system to send significant sums of money to the perpetrators of fraudulent schemes.

Mr. Bharara thanked FinCEN for its extraordinary assistance in bringing this case, and its ongoing partnership with this Office in identifying and investigating potential BSA violations.

Mr. Bharara also thanked the Asset Forfeiture and Money Laundering Section of the U.S. Department of Justice, the United States Attorney’s Office for the Middle District of Pennsylvania, and the United States Postal Inspection Service for their assistance in connection with this case.

The case is being handled by Assistant U.S. Attorney Christopher B. Harwood from the Office’s Civil Frauds Unit.

U.S. v. Thomas Haider Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced that STEWART DANIEL HARBIN, 30, was sentenced yesterday to 15 months in prison by United States District Judge Cathy Seibel for his 2012 reckless assault of a baby while on the grounds of West Point Military Academy (“West Point”). The sentencing followed HARBIN’S guilty plea on March 13, 2014.

According to documents filed in this case and statements made in related court proceedings:

On October 17, 2012, at approximately 10:40 p.m., emergency personnel at West Point responded to a 911 call from the defendant’s home, a residence located within West Point. The emergency personnel transported the defendant’s 10-week-old infant child (the “Baby”) from the residence to Keller Army Community Hospital (“KACH”), West Point’s hospital. After examination at KACH, the Baby, at approximately 1:30 a.m. on October 18, 2013, was transported, via ambulance, to Westchester County Medical Center (AWCMC@). There, medical personnel determined that the Baby had rib fractures and an intracranial hemorrhage. Tests, including radiological studies, revealed rib fractures in at least two stages of healing. There were eight sub-acute (healing) fractures and one acute (new) rib fracture. The healing fractures were determined to be between 10 days and six weeks old, and were determined to have occurred on multiple occasions as determined by the different stages of healing. In addition, the tests performed on the Baby revealed evidence of a prior intracranial injury.

On March 13, 2014, Harbin pleaded guilty to recklessly assaulting the Baby. During the plea proceeding, the defendant stated that, “on or about October 17, 2012, in the County of Orange, New York, on the land belonging to West Point Military Academy, I, Stewart Harbin, caused serious physical injury to the brain of my son [name omitted], who was less than five years of age, specifically, approximately ten weeks old, by slamming or throwing the child so as to impact the child’s head on a hard surface or object.” HARBIN said, “Specifically, I put [the Baby] down hard onto a hard infant seat that had no give. We used this hard infant seat to secure him on the couch and within his crib and later in which I put [the Baby] down hard, causing his head to impact the hard surface of the infant seat, causing the brain to bleed.” At the plea proceeding, the Government underscored its view that, although HARBIN had admitted that he was the actor who acted upon the Baby and caused the injuries, the Government did not accept the notion that the brain injuries were sustained by putting the Baby down hard onto an infant seat. Judge Seibel inquired of Harbin: “When you say you put the infant down hard on the hard infant seat, do you mean that you slammed the child down or threw the child down?” Harbin stated, “Yes, ma’am.”

In sentencing HARBIN to 15 months’ imprisonment, Judge Seibel described the offense conduct as “horrifying.” Judge Seibel granted the defendant’s request to enter a residential treatment program for service-related Post Traumatic Stress Disorder before he begins serving his sentence. Judge Seibel ordered HARBIN to surrender to the Bureau of Prisons in six months. The Court also imposed a term of supervised release of three years.

Mr. Bharara praised the efforts of the FBI, the West Point Military Police, and the Westchester District Attorney’s Office in connection with this investigation.

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

Eric Holder, the Attorney General of the United States, Preet Bharara, the United States Attorney for the Southern District of New York, and Vanita Gupta, the Acting Assistant Attorney General for Civil Rights for the Department of Justice, announced today that the United States has taken legal action to ensure that critically important reforms are put in place to address conduct at Rikers Island that has violated the constitutional rights of New York City’s youngest inmates, who are between the ages of 16 and 18 (“Young Inmates”). Specifically, the Department of Justice has filed a motion seeking the Court’s permission to join and become a plaintiff in a pending class action lawsuit against New York City, Nunez v. City of New York (the “Nunez Action”), which alleges that the Department of Correction (“DOC”) has engaged in a pattern and practice of using unnecessary and excessive force against inmates. The Department has taken this legal step as part of its ongoing effort to ensure that DOC implements all needed institutional reforms promptly, and that these reforms are lasting, verifiable, and enforceable through the judicial process.

Attorney General Eric Holder said: “With this filing, the Department of Justice is taking an important step to ensure the safety and constitutional rights of young people incarcerated at Rikers Island. We’ve seen alarming evidence of unnecessary and excessive use of force against juveniles, as well as a systemic failure to protect them from violence and deeply troubling -- and potentially scarring -- use of solitary confinement. This action allows the Justice Department to seek necessary reforms to remedy these unlawful conditions, to ensure fair treatment, and to provide all incarcerated young people with the protections, and opportunities to build better futures, that they deserve.”

Manhattan U.S. Attorney Preet Bharara said: “Sometimes it’s the case that bureaucracy can get in the way of reform-minded thinking and comprehensive cultural change. We hope that won’t be the case here. We welcome the aspirations articulated by Commissioner Ponte but we hope those aspirations will find concrete expression in the form of permanent, enforceable, and verifiable terms in a court-approved settlement agreement. The devil, as they say, is in the details and we have come to the conclusion that joining the pending case as a formal party is the best and most efficient way to get those details done. That is why we are now taking the steps necessary to carry out our responsibility under the law. Given the longstanding sad state of affairs at Rikers Island, our impatience is more than understandable. As I’ve said before, one way or another, we will get enduring and enforceable reform at Rikers Island.”

Acting Assistant Attorney General Vanita Gupta said: “Today we are taking legal action to ensure that critically important reforms are put in place to address the culture of violence and overuse of punitive segregation at Rikers Island that has violated the constitutional rights of New York City’s youngest inmates. We stand ready to work with the City to remedy these deeply disturbing conditions for the safety of confined youth, remedies that will ultimately also promote public safety and the safety of correctional officers.”

On August 4, 2014, the Department issued a report that concluded that “a deep-seated culture of violence is pervasive throughout the adolescent facilities at Rikers, and DOC staff routinely use force not as a last resort, but instead as a means to control the adolescent population and punish disorderly or disrespectful behavior.” The report urged the City to adopt and implement over 70 specific remedial measures. Although DOC’s new leadership has taken some positive steps in response to the report with respect to the 16- and 17-year-old population, including reducing the inmate-to-staff ratio, developing new programming, and moving toward eliminating the use of punitive segregation, much more needs to be done.

The Department’s proposed 36-page Complaint-in-Intervention (“Complaint”), filed today along with a motion to intervene in the Nunez Action, alleges that the City has engaged in a pattern and practice of violating the constitutional rights of Young Inmates, and that the City’s deliberate indifference to these constitutional rights has caused these inmates serious physical, psychological, and emotional harm. Like the August 4, 2014, report, the Complaint focuses on use of force by staff, inmate-on-inmate violence, and the use of punitive segregation.

Specifically, the Complaint alleges:

• Staff use force against Young Inmates with alarming frequency. In Fiscal Year 2014, there were 553 reported staff use of force incidents involving Young Inmates at the Robert D. Davoren Center (“RNDC”) and the Eric M. Taylor Center (“EMTC”), the two facilities that housed most Young Inmates. These incidents resulted in 1,088 injuries.
• Inmate-on-inmate fights and assaults are pervasive in large part because inmates are inadequately supervised by inexperienced and poorly trained officers. In Fiscal Year 2014, there were 657 reported inmate-on-inmate fights involving Young Inmates at RNDC and EMTC.
• Staff use of force and inmate-on-inmate fights and assaults have resulted in an alarming number of serious injuries to Young Inmates, including broken jaws, broken orbital bones, broken noses, long bone fractures, and lacerations requiring stitches.
• Staff frequently punch, strike, or kick Young Inmates in the head or facial area.
• Force is used as a means to punish Young Inmates, and staff unnecessarily continue to use force against inmates who already have been restrained.
• Force is used in response to inmate verbal taunts and insults.
• Specialized response teams, including probe and cell extraction teams, use excessive force.
• Staff regularly tell inmates to “stop resisting,” even though the inmate has been completely subdued, to justify the use of force.
• Use of excessive force is common in areas outside video surveillance coverage. DOC recently transferred many 18-year-old inmates to housing units that have no video surveillance at all.

The Complaint further alleges that, notwithstanding a long and troubled history of pervasive use of force against inmates at Rikers, the City has for years failed to address systemic deficiencies, including:

• Failure to ensure that use of force is accurately reported, and allowing a powerful code of silence to persist.
• Failure to conduct thorough and comprehensive investigations into use of force incidents.
• Failure to appropriately discipline staff for using excessive and unnecessary force.
• Failure to ensure that inmates are adequately supervised.
• Failure to implement an adequate age-appropriate classification system.
• Failure to provide staff with effective training on the proper use of force and how to appropriately manage youth.

In addition, the Complaint asserts that the City has engaged in a pattern and practice of placing Young Inmates in punitive segregation at an alarming rate and for excessive periods of time.

Since issuing its report in August, the U.S. Attorney’s Office has had several meetings with the City’s Law Department regarding the U.S. Attorney’s Office’s proposed remedial measures. Some of these discussions have included attorneys representing the Nunez plaintiffs, who have been engaging in settlement discussions with the City for several months. However, thus far, although there has been some constructive dialogue, the City has been unwilling to commit to an enforceable agreement including the type of reforms and oversight that are necessary to fully address the long-standing problems at Rikers and safeguard the constitutional rights of inmates.

Mr. Bharara thanked the Board of Correction for its continuing assistance in connection with this matter.

This case is being handled by the Office’s Civil Rights Unit. Assistant U.S. Attorneys Jeffrey K. Powell and Emily E. Daughtry are in charge of the case.

Nunez v. City of NY, et al. U.S. Motion to Intervene Notice of Motion
Nunez v. City of NY, et al. US Motion to Intervene Memorandum of Law
Nunez v. City of NY, et al. US Complaint-In-Intervention
Nunez v. City of NY, et al. U.S. Complaint-in-Intervention Exhibit A

Preet Bharara, the United States Attorney for the Southern District of New York, and Leslie R. Caldwell, the Assistant Attorney General for the Criminal Division of the United States Department of Justice, announced the guilty pleas of BENITO CHINEA and JOSEPH DEMENESES , the former Chief Executive Officer and former Managing Director, respectively, of a United States broker-dealer (the “Broker-Dealer”), on felony charges arising from a conspiracy to pay bribes to Maria De Los Angeles Gonzalez De Hernandez (“Gonzalez”), who was a senior official in Venezuela’s state economic development bank, Banco de Desarrollo Económico y Social de Venezuela (“BANDES”). CHINEA and DEMENESES, working with others, arranged the bribe payments to Gonzalez in exchange for her directing BANDES’s financial trading business to the Broker-Dealer. CHINEA and DEMENESES pled guilty today in Manhattan federal court before United States District Judge Denise L. Cote.

Manhattan U.S. Attorney Preet Bharara stated: “In exchange for overseas trading business for their brokerage firm, Benito Chinea and Joseph Demeneses arranged millions of dollars in bribe payments to an officer at a state-run economic development bank of Venezuela. With their guilty pleas today, they are the latest defendants to answer for their roles in this massive international bribery conspiracy.”

Assistant Attorney General Leslie R. Caldwell said: “Benito Chinea and Joseph DeMeneses are the fifth and sixth defendants to plead guilty in connection with this far-reaching bribery scheme, which ranged from Wall Street to the streets of Caracas. The guilty pleas and the forfeiture of assets once again demonstrate that the Department is committed to holding corporate executives who engage in foreign bribery individually accountable and to deny them the proceeds of their corruption.”

According to the allegations in the Indictment and other documents previously filed in Manhattan federal court:

Background on the Broker-Dealer and BANDES

At all times relevant to the charges, CHINEA was the chief executive officer and DEMENESES was a managing director in the Broker Dealer, which was headquartered in New York, New York, with offices in Miami, Florida. In 2008, the Broker-Dealer established a group called the Global Markets Group, which included DEMENESES, Lujan, and Clarke, and which offered fixed income trading services to institutional clients. One of the Broker-Dealer’s clients was BANDES, which operated under the direction of the Venezuelan Ministry of Finance. The Venezuelan government had a majority ownership interest in BANDES and provided it with substantial funding. Gonzalez was a BANDES official and oversaw the development bank’s overseas trading activity. At her direction, BANDES conducted substantial trading through the Broker-Dealer. Most of the trades executed by the Broker-Dealer on behalf of BANDES involved fixed income investments for which the Broker-Dealer charged BANDES a mark-up on purchases and a mark-down on sales.

The Bribery Scheme

From late 2008 through 2012, CHINEA and DEMENESES, together with three Miami-based Broker-Dealer employees, Ernesto Lujan, Tomas Alberto Clarke Bethancourt, and Jose Alejandro Hurtado, participated in a bribery scheme in which Gonzalez directed trading business she controlled at BANDES to the Broker-Dealer, and in return, agents and employees of the Broker-Dealer split the revenue the Broker-Dealer generated from this trading business with Gonzalez. During this time period, the Broker-Dealer generated over $60 million in commissions from trades with BANDES.

In order to conceal their conduct, CHINEA, DEMENESES and their co-conspirators routed the payments to Gonzalez, frequently in six-figure amounts, through third-parties posing as “foreign finders” and into offshore bank accounts. In several instances, CHINEA personally signed checks worth millions of dollars that were made payable to one of these purported “foreign finders” and later deposited in a Swiss bank account.

As further alleged in court documents, as a result of the bribery scheme, BANDES quickly became the Broker-Dealer’s most profitable customer. As the relationship continued, however, Gonzalez became increasingly unhappy about the untimeliness of the payments due her from the Broker-Dealer, and she threatened to suspend BANDES’s business. In response, DEMENESES and Clarke agreed to pay Gonzalez approximately $1.5 million from their personal funds. CHINEA and DEMENESES agreed to use Broker-Dealer funds to reimburse DEMENESES and Clarke for these bribe payments. To conceal their true nature, CHINEA and DEMENESES agreed to hide these reimbursements in the Broker-Dealer’s books as sham loans from the Broker-Dealer to corporate entities associated with DeMeneses and Clarke.

CHINEA, 48, of Manalapan, New Jersey, and DEMENESES, 46, of Fairfield, Connecticut, each pled guilty to one count of conspiracy to violate the Foreign Corrupt Practices Act and to violate the Travel Act. Each defendant faces a maximum term of five years in prison. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge. CHINEA and DEMENESES have also agreed to pay $3,636,432 and $2,670,612 in forfeiture, respectively, which amounts represent their earnings from the bribery scheme.

Each defendant also faces pending civil charges filed by the U.S. Securities and Exchange Commission.

Gonzalez, Clarke, Hurtado, and Lujan have also pled guilty in connection with the scheme.

Mr. Bharara praised Department of Justice’s Criminal Division and the Federal Bureau of Investigation for their work in the investigation. He also thanked the U.S. Securities & Exchange Commission for its assistance in this case.

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 United States Attorneys Harry A. Chernoff and Jason H. Cowley, and Fraud Section Senior Deputy Chief James Koukios are in charge of the prosecution. Assistant United States Attorney Carolina Fornos is responsible for the forfeiture aspects of the case.

Additional information about the Justice Department’s FCPA enforcement efforts can be

found at www.justice.gov/criminal/fraud/fcpa.

“Our efforts to reform Rikers Island continue. Following last week’s conviction of correction officer Austin Romain for taking bribes and smuggling drugs into Rikers Island, today a jury convicted former Rikers Island captain Terrence Pendergrass of a federal civil rights crime. The jury unanimously found that Pendergrass violated Jason Echevarria’s constitutional rights by deliberately ignoring his pleas for help and depriving him of urgent medical care, leaving Echevarria to die alone in his cell. Echevarria should not have died, and the convictions of individual wrongdoers at Rikers Island – as well as the systemic, institution-wide reforms we are pursuing – should help prevent tragedies like Echevarria’s death from occurring again.”

Preet Bharara, the United States Attorney for the Southern District of New York, announced that TERRENCE PENDERGRASS, a correction officer and former captain, was found guilty today in federal court of deliberately ignoring the urgent medical needs of a Rikers Island inmate who had ingested a corrosive disinfectant and later died, in violation of the inmate’s rights under the United States Constitution.

U.S. Attorney Bharara stated: “Our efforts to reform Rikers Island continue. Following last week’s conviction of correction officer Austin Romain for taking bribes and smuggling drugs into Rikers Island, today a jury convicted former Rikers Island captain Terrence Pendergrass of a federal civil rights crime. The jury unanimously found that Pendergrass violated Jason Echevarria’s constitutional rights by deliberately ignoring his pleas for help and depriving him of urgent medical care, leaving Echevarria to die alone in his cell. Echevarria should not have died, and the convictions of individual wrongdoers at Rikers Island – as well as the systemic, institution-wide reforms we are pursuing – should help prevent tragedies like Echevarria’s death from occurring again.”

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

Rikers Island is a jail complex, located in the Bronx, New York, maintained by the New York City Department of Correction. At the time of his death, Jason Echevarria was an inmate incarcerated on Rikers Island in the Mental Health Assessment Unit for Infracted Inmates (known as “MHAUII”), a unit housing inmates who had committed infractions while incarcerated and who were identified as needing mental health treatment.

On the afternoon of August 18, 2012, Echevarria swallowed a powerful disinfectant/detergent combination in powder form, commonly referred to as a “soap ball,” used to clean and disinfect cells. Echevarria had been given the soap ball by a new correction officer for the purpose of cleaning Echevarria’s cell following a sewage backup. The soap ball contained, among other things, ammonium chloride, a corrosive chemical that is life threatening if ingested.

After Echevarria swallowed the soap ball, he began banging on his cell door and asking for help. Echevarria also told a correction officer that he had swallowed a soap ball and needed help. That correction officer in turn informed PENDERGRASS, the captain on duty at that time. As the captain on duty, PENDERGRASS was responsible for arranging for medical treatment for the inmates in his unit. Rather than arrange for that care, however, PENDERGRASS responded that the correction officer should only call on PENDERGRASS if he needed help with the extraction of an inmate from a cell or if there was a dead body. A short time later, the same correction officer told PENDERGRASS that he saw vomit in Echevarria’s cell, and PENDERGRASS responded that Echevarria should be told to “hold it.” Soon after, another correction officer told PENDERGRASS that Echevarria had swallowed a soap ball and that a pharmacy technician had told that officer that Echevarria needed a doctor. Despite what he had been told, and despite going to Echevarria’s cell himself after Echevarria had vomited, PENDERGRASS did not call for medical help. He also ordered an officer who was trying to call for help to hang up the phone.

PENDERGRASS, 50, of Howard Beach, New York, was convicted of one count of deprivation of rights under color of law. He faces a maximum sentence of 10 years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. Sentencing has been scheduled for April 17, 2015, at 4:00 p.m., before U.S. District Judge Ronnie Abrams.

United States Attorney Bharara praised the work of the Federal Bureau of Investigation, and expressed his appreciation for the assistance of the New York City Department of Correction, Investigation Division, the Bronx County District Attorney’s Office, and the New York City Department of Investigation in the investigation of this matter.

This case is being prosecuted jointly by the Office’s Civil Rights Unit and Public Corruption Unit. Assistant U.S. Attorneys Lara K. Eshkenazi and Daniel C. Richenthal are in charge of the prosecution.

U.S. v. Terrence Pendergrass Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, and Michele Leonhart, Administrator of the United States Drug Enforcement Administration (“DEA”), announced today the arrests of CRISTIAN VINTILA (“VINTILA”), MASSIMO ROMAGNOLI (“ROMAGNOLI”), and VIRGIL FLAVIU GEORGESCU (“GEORGESCU”), international arms traffickers charged with conspiring to sell large quantities of military-grade weaponry to the Fuerzas Armadas Revolucionarias de Colombia (the “FARC”) – a designated foreign terrorist organization – to be used to kill Americans in Colombia. VINTILA and GEORGESCU were arrested in Podgorica, Montenegro, by Montenegrin authorities Monday as they prepared to finalize the transaction. ROMAGNOLI was arrested in Montenegro yesterday by Montenegrin authorities.

U.S. Attorney Preet Bharara said: “As alleged, Vintila, Romagnoli, and Georgescu attempted to sell military-grade weapons, from pistols to rocket launchers, to people they believed were associated with a terrorist group. Now they will no longer be able to participate in this illicit trade.”

DEA Administrator Michele Leonhart said: “Ruthless global weapons traffickers pose a direct threat to the safety and stability of the United States and to the rule of law. DEA's strong international partnerships have once again made the difference in disrupting a conspiracy that could have put innocent American lives in grave danger. Nothing is more important than the overall safety and security of our citizens. Thankfully, these alleged conspirators are out of business and will hopefully soon face U.S. justice.”

According to the Indictment unsealed yesterday in Manhattan federal court:

Since May 2014, VINTILA has been a Romania-based weapons trafficker, ROMAGNOLI has been a Europe-based weapons trafficker, who is able to procure fraudulent end-user certificates (“EUCs”) for military-grade weaponry, and GEORGESCU has been a Romania-based weapons broker. Between May and October 2014, VINTILA, ROMAGNOLI, and GEORGESCU conspired to sell an arsenal of weapons, including machine guns and anti-aircraft cannons, with the understanding that the weapons would go to the FARC to be used by the FARC against the United States. During a series of recorded telephone calls and in-person meetings, VINTILA, ROMAGNOLI, and GEORGESCU agreed to sell the weapons to three confidential sources working with the DEA (“CSs”), who represented that they were acquiring these weapons for the FARC. VINTILA, ROMAGNOLI, and GEORGESCU agreed to provide these weapons to the CSs with the specific understanding that the weapons would be used to kill Americans and, in particular, to shoot down American helicopters and airplanes. ROMAGNOLI further agreed to provide fraudulent EUCs, in order to make the illegal sale of weapons look legitimate.

During their consensually recorded meetings, VINTILA and ROMAGNOLI provided the CSs with catalogues of military-grade weapons they were prepared to provide the FARC. VINTILA gave the CSs a catalogue of weapons that included pistols, machine guns, and other high-powered weaponry, and ROMAGNOLI showed the CSs a catalogue that included automatic weapons and shoulder-fired rocket launchers. ROMAGNOLI additionally showed one of the CSs a sample fraudulent EUC. VINTILA, ROMAGNOLI, and GEORGESCU also discussed the logistics of receiving payment for the weapons from the CSs and delivering the weapons to the FARC.

The Indictment charges VINTILA, 44, ROMAGNOLI, 43, and GEORGESCU, 42, with two separate terrorism offenses:

Count One charges all three defendants with conspiracy to kill United States officers or employees, in violation of Title 18, United States Code, Sections 1114 and 1117. If convicted of Count One, each defendant faces a maximum sentence of life in prison. Count Two charges all three defendants with conspiracy to provide material support or resources to a designated foreign terrorist organization, in violation of Title 18, United States Code, Section 2339B. If convicted of Count Two, each defendant faces a maximum sentence of 15 years in prison. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Bharara praised the outstanding investigative efforts of the DEA’s Special Operations Division, the DEA’s Bucharest Country Office, the DEA’s Rome Country Office, the Montenegrin National Police, and the Romanian Authorities. The arrests are also the result of the close cooperative efforts of the U.S. Attorney’s Office for the Southern District of New York, the National Security Division of the U.S. Department of Justice, and the Justice Department’s Office of International Affairs.

The case is being prosecuted by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Andrea Lee Surratt and Ilan Graff 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.

Vintila et al. Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, Leslie R. Caldwell, the Assistant Attorney General for the Criminal Division of the Department of Justice (“DOJ”), and Andrew G. McCabe, Assistant Director-in-Charge of the Washington Field Office of the Federal Bureau of Investigation (“FBI”), announced today the guilty plea of Avon Products (China) Co. Ltd. (“Avon China”), a wholly owned subsidiary of the New York-based cosmetics company, Avon Products, Inc. (“Avon”), to a criminal Information charging Avon China with conspiring to violate the accounting provisions of the Foreign Corrupt Practices Act (“FCPA”) by concealing and disguising gifts, cash, non-business meals, travel, and entertainment it gave to Chinese government officials in order to obtain and retain certain business benefits for Avon China. In addition, the U.S. Attorney’s Office and DOJ entered into a deferred prosecution agreement (“DPA”) with Avon, relating to Avon’s role in the conspiracy and its failure to implement internal controls. Pursuant to the DPA with Avon, a criminal Information has been filed charging Avon with conspiring to violate the books and records provisions of the FCPA and with violating the internal controls provisions of the FCPA. In a proceeding today before United States District Judge George B. Daniels, the criminal Informations were filed against Avon and Avon China, and Avon China entered its guilty plea and was sentenced.

In total, Avon and Avon China have agreed to pay $67,648,000 in criminal penalties. Avon has also agreed to implement rigorous internal controls, cooperate fully with the Government, and retain a compliance monitor for at least 18 months.

In a related matter, Avon reached a settlement with the U.S. Securities and Exchange Commission (“SEC”) and will pay an additional $67,365,013 in disgorgement and prejudgment interest, bringing the total amount of U.S. criminal and regulatory penalties paid by Avon and Avon China to $135,013,013.

Manhattan U.S. Attorney Preet Bharara said: “For years in China it was ‘Avon calling,’ as Avon bestowed millions of dollars in gifts and other things on Chinese government officials in return for business benefits. Avon China was in the door-to-door influence-peddling business, and for years its corporate parent, rather than putting an end to the practice, conspired to cover it up. Avon has now agreed to adopt rigorous internal controls and to the appointment of a monitor to ensure that reforms are instituted and maintained.”

Assistant Attorney General Leslie R. Caldwell said: “Companies that cook their books to hide improper payments will face criminal penalties, as Avon China’s guilty plea demonstrates. Public companies that discover bribes paid to foreign officials, fail to stop them, and cover them up do so at their own peril.”

FBI Assistant Director-In-Charge Andrew G. McCabe said: “When corporations knowingly engage in bribery in order to obtain and retain contracts, it disrupts the level playing field to which all businesses are entitled. Companies who attempt to advance their businesses through foreign bribery should be on notice. The FBI, with our law enforcement partners, is continuing to push this unacceptable practice out of the business playbook by investigating companies that ignore the law.”

According to the allegations contained in the criminal Informations, which were filed today in Manhattan federal court, and other publicly available information:

From at least 2004 through late 2008, Avon and Avon China conspired to falsify Avon’s books and records by falsely and misleadingly describing the nature and purpose of certain Avon China transactions in order to disguise things of value that Avon China executives and employees gave to government officials in China. Specifically, Avon China disguised over $8 million in gifts, cash, non-business travel, meals, and entertainment it gave to Chinese government officials in order to obtain and retain business benefits for Avon China. Avon China attempted to disguise the payments and benefits through various means, including by falsely or misleadingly describing the nature or purpose of, or participants associated with, such expenses, and falsely recording payments to a third-party consultant as payments for legitimate services.

Moreover, in late 2005, Avon learned that Avon China was routinely providing things of value to Chinese government officials and failing to properly document them. Instead of ensuring the practice was halted, disciplining the culpable individuals, and implementing appropriate controls to address this problem, Avon and Avon China took steps to conceal the conduct, despite knowing that Avon’s books and records would continue to be inaccurate if steps were not taken to correct the conduct. Avon China thus continued operating in the same improper manner, until late 2008.

Avon has since cooperated with the Government, including by conducting an extensive internal investigation, voluntarily making U.S. and foreign employees available for interviews, and collecting, analyzing, translating, and organizing voluminous evidence. Avon has also undertaken extensive anti-corruption remedial efforts, including taking appropriate disciplinary action against culpable employees, and continuing to enhance Avon’s internal accounting, reporting, and compliance functions.

Mr. Bharara praised the outstanding efforts of the FBI in the investigation. He also thanked the SEC’s Division of Enforcement for its significant assistance in the investigation.

The case is being handled by the Complex Frauds and Cybercrime Unit and the Fraud Section of the DOJ’s Criminal Division. Assistant U.S. Attorney Sarah E. Paul, and Senior Trial Attorney Laura Perkins of the Criminal Division’s Fraud Section, are in charge of the prosecution.

Avon Products Information
Avon China Information
Avon DPA
Avon China Plea Agreement
 

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ARMANI CUMMINGS, a/k/a “A1,” and JOSE MUNOZ, a/k/a “Rico,” were found guilty on December 12 of murder, drug trafficking, firearms offenses, and other crimes. The jury convicted CUMMINGS and MUNOZ on all 14 counts in the indictment following a four-week trial before U.S. District Judge Victor Marrero.

Manhattan U.S. Attorney Preet Bharara said: “Armani Cummings and Jose Munoz were members of a violent drug trafficking crew who themselves used violence in the extreme. As a unanimous jury found, they murdered three men who were rivals, for control of territory. Thanks to the FBI and the NYPD, Cummings and Munoz will likely never return to any section of the Bronx.”

According to court papers and the evidence admitted at trial:

ARMANI CUMMINGS, 23, and JOSE MUNOZ, 26, were members of a crack cocaine distribution organization operating in the Allerton Avenue section of the Bronx, New York, between 2006 and 2012, responsible for the distribution of crack cocaine. CUMMINGS and MUNOZ carried, possessed, and brandished firearms during the period of the charged narcotics conspiracy in order to protect their narcotics and narcotics proceeds, and to ensure that rival drug dealers did not encroach on their territory.

In or about mid-2009, a dispute over narcotics territory in the Allerton area erupted between a drug crew lead by CUMMINGS, and another drug crew. On January 14, 2010, as a result of this drug dispute, CUMMINGS shot and killed 18-year-old Laquan Jones, a/k/a “Bills.” On June 9, 2010, CUMMINGS, along with a criminal associate, shot and killed 45-year old Carl Copeland, a/k/a “Giovanni.” Jones and Copeland were both members of a rival drug crew, and had taken steps to keep CUMMINGS and CUMMINGS’s associates from selling crack in certain locations in the Allerton area.

MUNOZ, a/k/a “Rico,” who had been selling crack in the Allerton area in 2008, was released from jail in or about 2010, and returned to the Allerton area. MUNOZ joined CUMMINGS’s drug crew, and used violence and threats of violence to ensure that drug dealers from outside of Allerton did not sell crack in the area. In that regard, MUNOZ attacked a number of rival drug dealers in 2010, stole their crack, and warned them not to return. On December 31, 2011, while at a New Year’s Eve party, MUNOZ saw one of his drug rivals, Shameek Young, a/k/a “Boom.” Munoz then fired into a crowd of people, and hit Young in the back four times, killing him.

For their roles in the Allerton Avenue crack cocaine distribution conspiracy, CUMMINGS and MUNOZ were convicted of one count of conspiring to distribute 280 or more grams of crack; and with carrying and possessing guns in connection with, and in furtherance of, the narcotics conspiracy. CUMMINGS was also convicted, in six additional counts, with the narcotics-related murder of Laquan Jones, and of the murder of Carl Copeland. MUNOZ was convicted, on three counts, of the narcotics-related murder of Shameek Young. MUNOZ was also convicted of two counts of robbery, and one count of possessing and brandishing a firearm during, and in relation to, the robbery. CUMMINGS and MUNOZ will be sentenced by Judge Marrero on April 10, 2015. Both face mandatory life sentences.

U.S. Attorney Bharara praised the Federal Bureau of Investigation and the New York City Police Department for their outstanding work in this investigation.

The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Hadassa Waxman and Michael Gerber are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ANNETTE BONGIORNO, the manager of the fraudulent investment advisory business at Bernard L. Madoff Investment Securities LLC, JOANN CRUPI, a/k/a “Jodi,” who managed hundreds of millions of dollars in fictitious investments, and JEROME O’HARA and GEORGE PEREZ, who worked as computer programmers designing and maintaining the proprietary software that enabled the fraud, were sentenced in Manhattan federal court. BONGIORNO was sentenced last Tuesday to six years in prison, and ordered to forfeit more than $155 billion. O’HARA, who was sentenced last Tuesday, and PEREZ, who was sentenced on Wednesday, were each sentenced to two-and-a-half years in prison, and ordered to forfeit more than $19 billion. CRUPI, who was sentenced today, was sentenced to six years in prison, and ordered to forfeit more than $33 billion. After a nearly six-month trial before U.S. District Judge Laura Taylor Swain, BONGIORNO, CRUPI, O’HARA, and PEREZ were convicted in March 2014 of, respectively, ten, thirteen, eight, and eight counts of securities fraud, falsifying the books and records of Madoff Securities, and conspiracy; BONGIORNO and CRUPI were also convicted of tax fraud, and CRUPI was convicted of bank fraud.

Manhattan U.S. Attorney Preet Bharara said: “Earlier this year, a jury unanimously found Annette Bongiorno, Joann Crupi, Jerome O’Hara, and George Perez guilty of every crime with which they were charged as a result of their willful participation in Bernard Madoff’s historic Ponzi scheme. As the Court acknowledged today and last week, each of them knowingly agreed to defraud thousands of victims, leading to billions of dollars in losses and unspeakable hardship. Although the sentences imposed by the Court cannot adequately compensate their many, many victims, time in prison for Bongiorno, Crupi, O’Hara, and Perez is a measure of justice.”

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

BONGIORNO, an employee in the investment advisory business for 40 years, managed hundreds of investment advisory accounts purportedly having a cumulative balance of approximately $8.5 billion as of November 30, 2008. BONGIORNO also supervised employees who worked for the investment advisory business, and was for many years the head of the fraudulent investment business.

CRUPI, an employee in the investment advisory business for 25 years, managed several Madoff Securities investment advisory accounts purportedly having a cumulative balance of approximately $900 million as of November 30, 2008. CRUPI also, like BONGIORNO before her, tracked the daily activity of the bank account into which billions of dollars of investment advisory client money was deposited, and from which investment advisory client redemptions were paid.

During the course of managing investment advisory accounts, BONGIORNO and CRUPI “executed” trades in the investment advisory clients’ accounts only on paper, based on historically reported prices of securities that they researched in the Wall Street Journal and Bloomberg. Those trades achieved annual rates of return that had been pre-determined by Madoff. BONGIORNO and CRUPI also backdated the purchase dates of purported trades so that they could control the amount of gains reflected in the investment advisory accounts. For example, on at least one occasion, BONGIORNO back-dated a trade by more than twelve years in the account of her co-defendant, Daniel Bonventre (who was sentenced last Monday to 10 years in prison). On another occasion, in the fall of 2008, BONGIORNO back-dated sales of Lehman Brothers shares in her own investment advisory account, after Lehman Brothers had in reality filed for bankruptcy. Similarly, CRUPI caused backdated, losing trades to be placed in her own investment account for tax purposes.

Further, BONGIORNO processed exceptional gains in certain investment advisory accounts that purportedly occurred months before the investment advisory accounts had been established. BONGIORNO also asked certain investment advisory clients to return previously issued Madoff Securities account statements so that she could alter them, and often include additional backdated trades.

CRUPI handled the receipt of funds sent to Madoff Securities by its clients for investment; transferred clients’ funds between and among various Madoff Securities bank accounts; handled client requests for redemptions sent to Madoff Securities by clients; monitored, on a daily basis, funds transferred into and out of the Madoff Securities bank account that was principally used to perpetrate the fraud; and prepared and assisted in the preparation of fabricated documents designed to deceive regulators and outside auditors. Further, CRUPI provided banks with false information in connection with mortgage loans for other Madoff Securities employees.

BONGIORNO and CRUPI also filed false Income Tax Returns on their own behalf, in which they failed to report income that they received from Madoff Securities. Specifically, BONGIORNO was convicted for failing to report thousands of dollars in cash that she withdrew from two “Bernard L. Madoff Special” accounts over a period of many years. Similarly, CRUPI was convicted for failing to report thousands of dollars in personal expenditures on a corporate credit card, including for food, wine, personal travel, and home improvement projects.

O’HARA and PEREZ were employed as computer programmers at Madoff Securities beginning in 1990 and 1991, respectively. They were responsible for developing and maintaining computer programs that supported the operation of the Madoff Securities investment advisory business. For example, O’HARA and PEREZ created special programs that, among other things: created books and records for a small subset of Madoff Securities investment advisory clients to help hide the scope and nature of the investment advisory business; changed the names of account holders to help explain why the SEC would not find investment advisory client securities at the Depository Trust Company (“DTC”); altered details about the number of shares, execution times, and transaction numbers for trades reported on Madoff Securities trade blotters, by employing algorithms that produced false and random results; created false and fraudulent order entry and execution reports that included fictitious times at which orders for equities transactions purportedly were placed; generated fraudulent commission reports; and created fraudulent investment advisory client account statements in a format different from those sent to clients.

Between 2004 and 2008, Madoff Securities was subject to at least five reviews by the United States Securities and Exchange Commission (“SEC”) and a European accounting firm that was conducting a review of Madoff Securities’ operations on behalf of investment advisory clients. As part of a concerted effort overseen by Madoff to deceive both the SEC and the European accounting firm, CRUPI, O’HARA, and PEREZ participated in creating numerous false and fraudulent books and records. O’HARA and PEREZ knew that the special programs they developed contained fraudulent information and that they were used in connection with the SEC and European accounting firm reviews. Similarly, O’HARA created false books and records – including by inserting fictitious securities positions – for the Madoff Securities market making and proprietary trading businesses, in order to deceive auditors from the Internal Revenue Service and New York State taxing authorities.

In imposing the sentences, Judge Swain observed that BONGIORNO’s “work was integral to the success of the unspeakable fraud perpetrated by Bernard Madoff,” and thereby “destroyed or at least chipped away at the foundation of innocent investors’ dreams.” Similarly, Judge Swain noted that O’HARA and PEREZ’s “work kept in place the essential backbone of the infrastructure through which the [] fraud was perpetrated,” and that through their conduct, “so many innocent lives were irreversibly upended.” Judge Swain observed that CRUPI was “the reassuring voice of Madoff Securities to at least one victim” (who had written a letter to the Court) and that she caused “staggering and continuing harm.”

In addition to the six-year prison term, BONGIORNO, 66, was also ordered to forfeit more than $155 billion, including specific bank accounts and real estate, representing property traceable to the massive Ponzi scheme. Judge Swain also imposed a term of two years of supervised release following BONGIORNO’s completion of this sentence. O’HARA, 51, and PEREZ, 48, were each ordered to forfeit more than $19 billion, and each was sentenced to three years of supervised release following the completion of his sentence. In addition to her prison sentence, CRUPI, 53, was ordered to forfeit $33.9 billion, and to serve four years of supervised release.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation. He also thanked the U.S. Securities and Exchange Commission, the Internal Revenue Service, and the U.S. Department of Labor 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.

Assistant United States Attorneys Matthew L. Schwartz, John T. Zach, and Randall W. Jackson are in charge of the prosecution. Assistant United States Attorneys Matthew L. Schwartz and Paul M. Monteleoni are in charge of the forfeiture aspects of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that EDGAR ENCARNACION, a/k/a “Edgar Encarnacion-Lafontaine,” a/k/a “Tapon,” 47, was convicted on December 11 in Manhattan federal court of conspiring to distribute marijuana, conspiring to distribute cocaine, conspiring to commit extortion, extortion, and conspiring to commit witness tampering. As a result of his conviction, ENCARNACION faces a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison.

Manhattan U.S. Attorney Preet Bharara said: “A jury convicted Edgar Encarnacion of conspiring with a massive marijuana trafficking ring, and using his FedEx truck to transport large amounts of cocaine from California to the New York City area. While he was on pretrial release for the marijuana charges, Encarnacion threatened family members of another FedEx driver. Witness tampering and extortion will not be tolerated, and the jury has properly held Encarnacion accountable for his crimes.”

ENCARNACION’s charges initially arose out of a multi-year investigation titled “Operation Green Venom,” a coordinated multi-agency investigation that was led by Homeland Security Investigations, Immigration and Customs Enforcement (“ICE HSI”), and first announced in October 2010. More than 60 defendants have been convicted in United States v. Manuel Geovanny Rodriguez-Perez, et al., 10 Cr. 905 (LTS), and related cases. Those defendants include former Rock-a-fella music founder Kareem Burke, a/k/a “Biggs,” who received a sentence of five years in prison, High Times Magazine editor Matthew Woodstock Stang, a/k/a “Magazine Guy,” and Oscar Rodriguez, the cousin of the organization’s leader, who was convicted of racketeering and marijuana related charges and sentenced to 20 years in prison earlier this year.

According to the complaints, Indictments, and the evidence at trial, in 2010, EDGAR ENCARNACION agreed to use his FedEx truck to smuggle marijuana for Manuel Geovanny Rodriguez-Perez, a/k/a “Manuel Rodriguez,” a/k/a “Shorty,” the leader of a Washington Heights-based marijuana trafficking organization. During that same period, ENCARNACION was working with a separate cocaine-trafficking organization. ENCARNACION smuggled up to multi-kilogram quantities of cocaine in the sleeper area of his truck as he drove cross-country from California to Woodbridge, New Jersey. In December 2010, a man who was assigned to drive with ENCARNACION (the “Co-Driver”) stole $30,000 of several hundred thousand dollars of drug money that ENCARNACION had agreed to transport for the cocaine organization. About a week later, ENCARNACION was arrested in connection with the marijuana-trafficking investigation, Operation Green Venom. ENCARNACION was released on bail on those charges.

In early 2012, ENCARNACION began a campaign intended to force the Co-Driver to return the drug money he had stolen. ENCARNACION employed Facebook accounts set up in women’s names – including the name of one of the Co-Driver’s family members – to reach out to the Co-Driver’s in-laws. In these messages, ENCARNACION warned that the cocaine trafficking organization was “equipped with dangerous people who will do anything for money,” and threatened that the Co-Driver’s family in the Dominican Republic was “the most vulnerable, but nobody will be spared.” ENCARNACION posted photographs of the Co-Driver and his family members, including his three young daughters, on one of the Facebook accounts. In addition to using these Facebook accounts to threaten the Co-Driver’s family members, ENCARNACION used them to send disparaging messages about his ex-wife to her current in-laws.

During the same period in which he was making the Facebook threats, ENCARNACION also caused a telephone call to be made to one of the Co-Driver’s relatives in the Dominican Republic, during which she was warned that if the Co-Driver did not return the money, “blood was going to be spilled.” When these efforts did not cause the Co-Driver to return the money, ENCARNACION then went to the Co-Driver’s mother’s house, and demanded that she tell her son to call him about the money. During this visit, ENCARNACION also showed her a photograph of her son and grand-daughters. A week later, ENCARNACION left a threatening letter in front of the Co-Driver’s mother’s door, which reported that there would be violent retaliation if the Co-Driver did not return the money and warned, “Avoid the ‘law,’ otherwise the family in the [Dominican Republic] will not be saved.”

The Co-Driver’s family used an Internet search to discover that ENCARNACION was on pretrial release in connection with Operation Green Venom, and contacted federal authorities. The Co-Driver then agreed to assist the investigation by recording telephone conversations with ENCARNACION and his associate, co-defendant Juan Peralta, a/k/a “Johnny Jay,” who pled guilty to threats-related charges. After approximately six additional weeks of investigation – during which the threats continued through Superstorm Sandy – ENCARNACION was arrested at his residence on new charges, and remanded.

ENCARNACION, 47, was convicted of one count of cocaine conspiracy, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison; one count of marijuana conspiracy, which carries a mandatory minimum sentence of five years in prison and a maximum sentence of 40 years in prison; one count of conspiracy to commit extortion, which carries a maximum sentence of five years in prison; one count of extortion, which carries a maximum sentence of 20 years in prison; and one count of witness tampering, which carries a maximum sentence of 20 years in prison. Because the defendant was on pretrial release for all but one of the counts, he faces a potential additional penalty of 40 years – 10 years for each count. The maximum potential sentences in this case are prescribed by Congress and are provided for informational purposes only, as any sentencing of the defendant will be determined by the Court.

Mr. Bharara praised the outstanding investigative work of ICE HSI.

The prosecution of the cases arising from “Operation Green Venom” is being overseen by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Amie N. Ely and Emil Bove conducted the trial.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that JAMES ROSEMOND, a/k/a “Jimmy the Henchman,” was found guilty on December 11 of murder-for-hire, conspiracy to murder-for-hire, and firearms offenses for ordering the murder of Lowell Fletcher. The jury convicted ROSEMOND on all counts in the controlling indictment following a two-week re-trial before U.S. District Judge Colleen McMahon.

According to court papers and the evidence admitted at trial:

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

At the conclusion of ROSEMOND’s first trial earlier in 2014, a mistrial was declared because the jury was not able to reach a unanimous verdict on the counts against ROSEMOND and a co-defendant relating to the Fletcher murder. ROSEMOND’s co-defendant in that trial, Rodney Johnson, was convicted of narcotics and firearms counts, and is scheduled to be sentenced in January 2015 before Judge McMahon. ROSEMOND was retried on the murder-for-hire, conspiracy to murder-for-hire, and firearms offenses, resulting in yesterday’s conviction on all the counts against ROSEMOND arising from the Fletcher murder.

For his role in ordering, planning, and paying for the murder of Lowell Fletcher, ROSEMOND was convicted of one count of substantive murder-for-hire, one count of conspiracy to murder-for-hire, and two firearms counts. ROSEMOND faces a mandatory minimum sentence of life in prison. ROSEMOND is scheduled to be sentenced in March 2015 before Judge McMahon.

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

The case is being prosecuted by the Office’s Violent and Organized Crime Unit. The trial was conducted by Assistant U.S. Attorneys Samson Enzer and Ryan P. Poscablo.

"Our efforts to root out bad conduct at Rikers Island, by individuals and by the institution as a whole, continue. Today, we took another step in the right direction with the conviction of correction officer Austin Romain for taking bribes and conspiring to smuggle drugs into Rikers Island. Holding corrupt officers like Romain accountable for their misconduct is just part of the solution; it is not a substitute for the sweeping, institutional reforms necessary at Rikers Island. We will continue to press forward on both fronts – holding individual bad actors accountable and demanding meaningful, institutional reforms."

Preet Bharara, the United States Attorney for the Southern District of New York, announced today the conviction of AUSTIN ROMAIN, a New York City Correction Officer, in connection with his receipt of thousands of dollars in cash bribes to smuggle marijuana and other contraband into Rikers Island for inmates. Following a four-day trial before the Honorable Robert W. Sweet, United States District Judge, the jury convicted ROMAIN of bribery and narcotics offenses.

Last month, former Correction Officer Khalif Phillips, who conspired with some of the same individuals as ROMAIN, was sentenced by the Honorable Richard J. Sullivan, United States District Judge, to 36 months in prison after his conviction for narcotics-related offenses.

Manhattan U.S. Attorney Preet Bharara said: “Our efforts to root out bad conduct at Rikers Island, by individuals and by the institution as a whole, continue. Today, we took another step in the right direction with the conviction of correction officer Austin Romain for taking bribes and conspiring to smuggle drugs into Rikers Island. Holding corrupt officers like Romain accountable for their misconduct is just part of the solution; it is not a substitute for the sweeping, institutional reforms necessary at Rikers Island. We will continue to press forward on both fronts – holding individual bad actors accountable and demanding meaningful, institutional reforms.”

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

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

ROMAIN, 32, of Brooklyn, New York, was convicted on one count of honest services fraud, one count of bribery, and one count of conspiring to distribute marijuana. Romain was acquitted on one count that alleged he had distributed marijuana on a particular date. The marijuana conspiracy count carries a maximum term of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense. The bribery conviction carries a maximum term of 10 years in prison. The honest services fraud conviction carries a maximum sentence of 20 years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the outstanding investigative work of the New York City Department of Investigation and the DEA’s New York Drug Enforcement Task Force, which comprises members of the DEA, the New York City Police Department, and the New York State Police.

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

Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that CHARLES A. BENNETT was arrested this morning on securities and wire fraud charges stemming from his scheme to defraud over 30 investors of more than $5 million through a Ponzi scheme that he perpetrated for more than five years. Among other false and misleading statements, BENNETT lied to investors by claiming to have exclusive access to a highly successful privately held investment fund in which he would purportedly invest the investors’ money. BENNETT solicited millions of dollars from over 30 investors, including his close friends and family members, but never actually invested any of the money in the investment fund or any other investment vehicle. Instead, BENNETT used the investors’ money for his own personal benefit and to pay back other investors.

BENNETT is expected to be presented today before United States Magistrate Judge Kevin Nathaniel Fox.

U.S. Attorney Preet Bharara said: “As alleged, Charles Bennett built a Ponzi scheme with money from friends and family, among others. The scheme, in which he allegedly told lie upon lie, lasted over five years and defrauded investors of over $5 million.”

FBI Assistant Director-in-Charge George Venizelos said: “All attorneys take an oath to deal honestly and promote their client’s best interests. As alleged, Bennett appeared to his clients to be a reputable attorney whom they could trust to invest their hard-earned money. Instead, he breached his oath and leveraged relationships he had with clients, some of whom he identified as close friends and family members, for personal financial gain. The FBI will continue to work with its law enforcement and private sector partners to investigate those whose greed-based schemes rob individuals of their hard-earned money.”

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

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

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

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

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

BENNETT, 56, of Manhattan, is charged with one count of wire fraud and one count of securities fraud. The securities fraud count and the wire fraud count each carry a maximum sentence of 20 years in prison; and the charges carry a maximum fine of $5 million, or twice the gross gain or loss from the offense. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the work of the Federal Bureau of Investigation, 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 Amy Lester is in charge of the prosecution.

The allegations contained in the Complaint are merely accusations, and the defendant is

presumed innocent unless and until proven guilty.

Charles Bennett Complaint

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 MARK MARMILEV was sentenced today to five years in prison for conspiring to operate an unlicensed money transmitting business that he knew involved the transmission of funds derived from criminal activity. MARMILEV was principally responsible for designing and maintaining the technological infrastructure for Liberty Reserve, a company that operated one of the world’s most widely used digital currency services. MARMILEV 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: “Mark Marmilev spent years designing and maintaining the technological architecture that allowed Liberty Reserve to operate a global payment processor and money transfer system that catered to criminals. Now, he will pay for that crime with five years in federal prison. ”

Assistant Attorney General Leslie R. Caldwell said: “Marmilev used his tech savvy to create a virtual currency business that was used extensively by criminals throughout the world. He and Liberty Reserve’s founders boasted they were outside the reach of U.S. law enforcement, and he couldn’t have been more wrong. His prison sentence shows that those who hide their illegal activities from the scrutiny of the Justice Department will be caught and will go to prison.”

According to allegations contained in the Indictment filed against Liberty Reserve, MARMILEV, 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.

MARMILEV was a longtime associate of Liberty Reserve founder Arthur Budovsky and served as Liberty Reserve’s chief technology officer. In that role, MARMILEV was principally responsible for designing and maintaining Liberty Reserve’s technological infrastructure. MARMILEV worked for Liberty Reserve for years despite knowing that the business was used extensively to process criminal transactions. MARMILEV even promoted Liberty Reserve to criminals on Internet discussion forums, where, using aliases, he touted Liberty Reserve’s lack of anti-money laundering policies and its tolerance for, as he put it, “shady businesses.”

In addition to the prison sentence, MARMILEV, 35, of Brooklyn, New York, was sentenced to three years of supervised release and a $250,000 fine. In conjunction with the sentencing, a civil forfeiture complaint was filed today seeking the forfeiture of Gourmet Boutique, a retail grocery business located in Brooklyn, New York, and the forfeiture of MARMILEV’s interest in Grimaldi’s, a pizzeria located in the Coney Island area of Brooklyn, New York; according to the complaint, MARMILEV purchased these business interests using more than $1.6 million in Liberty Reserve proceeds.

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 MARMILEV’s co-defendants remain pending and are merely accusations. Those defendants are presumed innocent unless and until proven guilty.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that PATRICK MORGAN pled guilty today to conspiring to distribute narcotics. MORGAN, who was arrested in July 2014, pled guilty before United States District Judge Edgardo Ramos.

Manhattan U.S. Attorney Preet Bharara said: “With today’s guilty plea, Patrick Morgan now stands convicted of conspiring to distribute the drug Molly, which led to the tragic death of Jeffery Russ. This Office remains committed to aggressively pursuing and prosecuting those who peddle this extremely dangerous drug.”

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

In early August 2013, PATRICK MORGAN sold pills commonly called “Molly,” which contained 3,4-methylenedioxymethamphetamine (“MDMA” or “ecstasy”) and 3,4-methylenedioxy-N-methylcathinone (“methylone”), to three individuals (the “Three Individuals”), including Jeffrey Russ, for their use at an electronic dance music concert in Buffalo, New York.

In mid-August 2013, the Three Individuals pooled their money in order to buy additional Molly pills from MORGAN. The Three Individuals intended to consume and distribute these Molly pills at the Electric Zoo music festival. Electric Zoo was a three-day, outdoor electronic dance music festival on Randall’s Island, New York, scheduled to be held from August 30, 2013, through September 1, 2013. Attendance at Electric Zoo was estimated to be over 130,000 people.

In mid-August 2013, MORGAN sold one of the Three Individuals approximately 80 Molly pills that MORGAN understood the Three Individuals intended to consume and distribute at Electric Zoo.

On August 30, 2013, the Three Individuals, including Jeffrey Russ, attended Electric Zoo and consumed some of the Molly pills that were purchased from MORGAN. Toward the end of the concert on August 30, 2013, Russ collapsed and had a seizure. Russ was treated by emergency medical technicians on Randall’s Island and ultimately taken to Harlem Hospital. When Russ arrived at Harlem Hospital, he was unresponsive. On August 31, 2013, at approximately 3:21 a.m., Russ died at Harlem Hospital from acute intoxication by the combined effect of MDMA and methylone with hyperthermia.

MORGAN, 24, of Buffalo, New York, pled guilty to conspiring to distribute narcotics, which carries a maximum term of 20 years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. MORGAN is scheduled to be sentenced on March 13, 2015, at 10:30 a.m., by Judge Ramos.

Mr. Bharara praised the investigative work of the Drug Enforcement Administration.

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

Preet Bharara, the United States Attorney for the Southern District of New York, James J. Hunt, Special Agent-in-Charge of the U.S. Drug Enforcement Administration’s New York Division (“DEA”), and William J. Bratton, the Police Commissioner of the New York City Police Department (“NYPD”), today announced the unsealing of an Indictment against 11 participants in a massive illegal drug distribution ring involving the prescription painkiller oxycodone. As detailed further below, the distribution ring operated out of purported medical clinics in Manhattan and the Bronx, including the office of MOSHE MIRILISHVILI, a Board certified, state licensed doctor, who alone wrote more than 13,000 medically unnecessary prescriptions for oxycodone in a two-year period, resulting in the unlawful distribution of nearly 1.2 million oxycodone tablets. The scheme also involved drug traffickers who oversaw crews of “patients” sent into the clinics to obtain medically unnecessary oxycodone prescriptions so that the pills could be obtained and resold, and clinic staff who profited by selling access to MIRILISHVILI and the fraudulent prescriptions he wrote.

Nine of the 11 defendants were arrested this morning in connection with the charges unsealed today and are expected to be presented before U.S. Magistrate Judge Kevin N. Fox later this afternoon. Defendants Ganeene Goode and Kevin Frye remain at large.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Moshe Mirilishvili violated the oath of his profession and flouted the law to write more than 13,000 medically unnecessary prescriptions for oxycodone. He and his co-defendants, motivated by greed, allegedly conspired to enrich themselves by flooding the illicit market for this highly addictive and dangerous drug.”

DEA Special Agent-in-Charge James C. Hunt said: “As alleged, these defendants are drug dealers playing doctor. They use nicknames, roles and an organizational hierarchy that mimics street drug trafficking crews. Instead of providing legitimate medical examinations or treatment, Dr. Mirilishvili and his office staff allegedly took payments from drug chiefs, drug crews and ‘patients’ in exchange for oxycodone prescriptions used to fuel the spread of opioid abuse throughout New York City.”

NYPD Commissioner William J. Bratton said: “Dr. Mirilishvili not only made millions in illegal profits, he contributed to the growing addiction of oxycodone. Today’s arrests will help prevent more illegally prescribed prescription pain killers from reaching our streets and will hopefully improve quality of life for the residents who live on the same blocks as these pseudo medical facilities. I want to thank the investigators, agents and prosecutors involved in bringing this drug distribution network to justice.”

The following allegations are based on the Indictment unsealed today in Manhattan federal court:

Oxycodone is a highly addictive, prescription-strength narcotic used to treat severe and chronic pain conditions. Every year more than 13 million Americans abuse oxycodone, with the misuse of prescription painkillers such as oxycodone leading to as many as 500,000 annual emergency room visits. Oxycodone prescriptions have enormous cash value to street level drug dealers, who can fill the prescriptions at most pharmacies and resell the resulting pills at vastly inflated rates. Indeed, a single prescription for 90 30-milligram oxycodone pills has an average resale value in New York City of $2,700 or more.

From approximately January 2012 until December 2014, the drug distribution ring operated at various purported medical clinics in Manhattan and the Bronx, including the office of the defendant MOSHE MIRILISHVILI (the “Clinic”), where MIRILISHIVILI, a Board certified, state licensed doctor, wrote thousands of medically unnecessary prescriptions for large quantities of oxycodone in exchange for cash payments. MIRILISHVILI typically charged $200 in cash for “patient visits” that typically involved little, if any, actual examination and almost always resulted in the issuance of a prescription for a large quantity of oxycodone, typically 90 30-milligram tablets.

Virtually none of these “patients” had any medical need for oxycodone, nor any legitimate medical records documenting an ailment for which oxycodone would be prescribed. Instead, most of these individuals were members of “crews” – that is, they were recruited and paid by drug traffickers (the “Crew Chiefs”), to pose as “patients” in order to receive medically unnecessary prescriptions. The Crew Chiefs then obtained these prescriptions and arranged for them to be filled at various pharmacies so that the oxycodone pills thereby obtained could be resold on the streets of New York.

Various Clinic employees participated in and profited from the scheme, charging Crew Chiefs cash fees for scheduling “patient visits” necessary to obtain these oxycodone prescriptions (the “Office Staff”). The Office Staff also profited by creating fake documents such as MRI reports purporting to reflect injuries or urinalysis reports ostensibly documenting that the patient was taking rather than selling the oxycodone, all of which MIRILISHVILI would frequently request in an effort to avoid the attention of law enforcement.

In total, between October 2012 and December 2014, MIRILISHVILI wrote more than 13,000 medically unnecessary prescriptions for oxycodone, comprising nearly 1.2 million oxycodone tablets with a street value of $36,000,000 or more. MIRILISHIVILI collected more than $2.6 million in fees for “doctor visits” during this time period.

To maximize their profits, many of the Crew Chiefs involved in this scheme also sent their “patients” to see other doctors operating out of similar fraudulent medical clinics, including a clinic on Southern Boulevard in the Bronx, New York, and a clinic in Upper Manhattan. Between January 2012 and the present, doctors at these clinics wrote more than 35,000 oxycodone prescriptions, virtually none of them medically necessary, resulting in the unlawful distribution of millions of oxycodone tablets.

All of the defendants are charged with one count of conspiracy to distribute and possess with intent to distribute oxycodone. This offense 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.

A chart containing each defendant’s age and residence information is attached. The case is assigned to U.S. District Judge Colleen McMahon.

U.S. Attorney Bharara praised the investigative efforts of the Drug Enforcement Administration’s Tactical Diversion Squad (Group TDS-NY), which led this two-year investigation, and thanked the New York State Department of Financial Services and the Hackensack, New Jersey, Police Department for their assistance in the investigation. DEA’s Group TDS-NY consists of agents and officers from the U.S. Drug Enforcement Administration, the New York City Police Department, the Town of Orangetown Police Department, and the Westchester County Police Department. Mr. Bharara also noted that the investigation is ongoing.

The case is being prosecuted by the Office’s Narcotics Unit. Assistant U.S. Attorneys Edward B. Diskant and Brooke E. Cucinella are in charge of the prosecution.

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

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Mirilishvili, Moshe et al. Indictment

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”), today announced the arrest of RYAN TOMAZIN, a founder and managing partner of R2 Capital Group LLC (“R2 Capital”), in connection with the unsealing of a two-count Indictment charging TOMAZIN with defrauding investors and misappropriating investment funds. Beginning in late 2009, TOMAZIN solicited over one million dollars from investors for investment in a commodity pool. From late 2009 through December 2014, TOMAZIN defrauded investors by disseminating, or causing others to disseminate, documents containing false representations regarding how assets in the commodity pool would be managed, and by falsely informing investors that their investments were increasing in value when, in fact, their investments had declined in value precipitously. As a further part of the scheme, TOMAZIN and other principals at R2 Capital caused over $850,000 of investors’ funds to be withdrawn from bank accounts associated with the commodity pool, and directed to bank accounts held in TOMAZIN’s and other principals’ own names or those of their respective holding companies for no legitimate purpose.

TOMAZIN was arrested by the FBI this morning at his residence in Connecticut, and will be presented in federal court in the Southern District of New York this afternoon.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Ryan Tomazin misled investors about the commodity pool he ran, and then misappropriated their money. With today’s arrest, he will now be brought to justice for this fraud.”

FBI Assistant Director-in-Charge George Venizelos said: “Once again we see greed and unethical behavior by those we trust with our investments. As alleged in the indictment, Mr. TOMAZIN defrauded investors, misappropriated their investment funds for his own personal benefit and then made false representations to cover his unethical scheme. Today’s arrest is another example of our continued commitment to work with our partners to expose and prosecute such criminal activity.”

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

R2 Capital began operations as an investment firm in 2008. In late 2009, R2 Capital created a commodity pool, R2 Capital Partners I L.P. (the “Commercial Pool”) and began to solicit investors, eventually raising approximately $2.2 million. In early 2010, R2 Capital engaged in trading on behalf of the Commercial Pool, but experienced significant losses and ceased all trading activity in or about July 2011. By August 2011, there was less than $5,000 remaining in bank accounts associated with the Commercial Pool.

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

TOMAZIN, 39, of Stamford, Connecticut, is charged in the Indictment with securities fraud (Count One) and commodities fraud (Count Two). The securities fraud charge 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.

In a separate action, the United States Commodities Futures Trading Commission (“CFTC”) previously sued TOMAZIN, two others, and R2 Capital, in an action filed in United States District Court for the District of Colorado.

Mr. Bharara praised the investigative work of the FBI. 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 Harry Chernoff and Aimee Hector 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.

Ryan Tomazin Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Charles Gardner, the Commissioner of the Yonkers Police Department, announced today the unsealing of a Superseding Indictment charging 13 members and associates of a Yonkers-based street gang, the “Grimy Motherfuckers” (“GMF”), with racketeering, violent crimes, narcotics conspiracy, and firearms offenses. The original Indictment, filed in July 2014, alleged that GMF operated as a Racketeer Influenced and Corrupt Organization (RICO) and charged three GMF affiliates with offenses related to the murder of Tyrone Arthur on December 27, 2013. Today’s Superseding Indictment charges 10 additional GMF members and associates (as well as the three defendants previously charged) with a variety of crimes, including charges related to the March 27, 2010, maiming of a rival gang member.

Eleven of the 13 defendants charged in the Superseding Indictment unsealed today were arrested today or have previously been taken into custody. The defendants arrested today were presented in White Plains federal court this afternoon. The case is assigned to U.S. District Judge Cathy Seibel.

U.S. Attorney Preet Bharara stated: “As alleged, this Yonkers-based gang plagued the community of the Schlobohm Housing Projects with drug dealing and lethal violence. With today’s Indictment and arrests, we are another step closer to making the streets and citizens in this neighborhood safer.”

FBI Assistant Director-in-Charge George Venizelos stated: “As alleged, this investigation targeted violent individuals who used murder, threats and intimidation to further their criminal agenda. The charges demonstrate our continued effort to work closely with our law enforcement partners to strike at gang-related criminal enterprises and to eliminate the terror these groups inflict on our communities. Dismantling violent gangs remains a priority for the FBI.”

Yonkers Police Commissioner Charles Gardner stated: “Once again we have worked with our federal partners the FBI and the US Attorney’s Office for the Southern District of NY to target violent gang members who choose to do business here in Yonkers. These particular suspects failed to recognize our determination in ridding our community of violence. They will now be held accountable for their actions and I would like to thank all of the investigators who were involved in this morning’s arrests.”

According to the allegations in the Superseding Indictment and other documents in the public record:

From at least 2008 through 2014, the GMF has been a criminal enterprise operating in and around the Schlobohm Housing Projects in Yonkers, New York. At its inception, GMF was aligned with the Strip Boyz, a different street gang that was likewise based in the Schlobohm Housing Project in Yonkers and was made up of members one generation older than most GMF members. GMF and the Strip Boyz controlled crack cocaine and marijuana sales in and around the Schlobohm Housing Project and were allied in disputes with rival gang members, including members of the Cliff Street Gangsters and the Elm Street Wolves, two gangs from the east side of Nepperhan Avenue in Yonkers. In late June and early July 2012, law enforcement authorities arrested 20 members of the Strip Boyz on charges of narcotics distribution and/or firearm offenses in a federal case captioned United States v. Mark David, S1 12 Cr. 214 (ER). All 20 defendants have pled guilty in connection with those charges.

The 2012 arrests of the Strip Boyz left GMF the dominant gang in the area around the Schlobohm Housing Project, and GMF members have continued to engage in acts of violence and intimidation to preserve their dominance of the Schlobohm Housing Project and the surrounding areas that they previously shared with the Strip Boyz. In order to protect their territory and enhance the reputation of the gang, GMF members have committed numerous acts of violence, including murder, attempted murders, stabbings, and assaults.

The 10-count Superseding Indictment, United States v. Da’Quan Johnson, et al., charges DA’QUAN JOHNSON, JAMES JOHNSON, KENNETH MOORE, JAMEKE BROWN, DAQUAN COUCH, DARIN FIELDS, ANTHONY FORD, FLOYD GILHAM, CHRISTOPHER GREBINGER, RONNIE KING, GERALD MARTIN, JAMES MCCALLUM, and WILBUR RANDOLPH with conspiring to violate the RICO statute and with using, carrying, possessing, and discharging firearms during and in relation to their participation in the conspiracy. As in the initial Indictment, DA’QUAN JOHNSON and MOORE are also charged with racketeering murder, conspiracy to commit the same, and a firearms offense in connection with the December 27, 2013, shooting death of Tyrone Arthur. JAMES JOHNSON is charged with serving as an accessory after the fact to the December 27, 2013, murder and with attempted murder, maiming, and a firearms offense in connection with the March 27, 2010, shooting of a rival gang member that left the victim paralyzed. Defendants DA’QUAN JOHNSON, JAMES JOHNSON, BROWN, COUCH, GILHAM, KING, MCCALLUM, and RANDOLPH are also charged with conspiring to distribute marijuana.

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

Mr. Bharara praised the outstanding investigative work of the FBI’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 Police, and the Westchester County District Attorney’s Office. He also thanked the Westchester County District Attorney’s Office. He added that the investigation is continuing.

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

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

U.S. v. Da'quan Johnson S1 Indictment
United States v. Da'Quan Johnson Chart
 

“Today’s decision by the Court of Appeals interprets the securities laws in a way that will limit the ability to prosecute people who trade on leaked inside information. The decision affects only a subset of our recent cases, and in those cases – as in all our criminal cases – we investigated and prosecuted misconduct based on our good faith assessment and understanding of the facts and the law that existed at the time. We are still assessing the Court’s decision, which appears in our view to narrow what has constituted illegal insider trading, and are considering our options for further appellate review.”

Preet Bharara, the United States Attorney for the Southern District of New York, announced today the settlement of a federal civil rights lawsuit with the RELATED COMPANIES (“RELATED”) by consent decree. Under the settlement, RELATED agrees to establish procedures that will ensure that its ongoing and future development projects, such as the residential complexes at the Hudson Yards development on Manhattan’s West Side, will comply with the accessibility requirements of the federal Fair Housing Act (“FHA”). RELATED also agrees to make retrofits at four residential rental complexes in Manhattan – One Carnegie Hill, Tribeca Green, 500 West 30th Street, and 529 West 29th Street – to make them more accessible to individuals with disabilities. Additionally, RELATED agrees to inspect its twelve other residential rental complexes in Manhattan and, where necessary, make retrofits at those buildings as well. Finally, RELATED agrees to provide up to $1.9 million to compensate aggrieved persons and pay a civil penalty of $100,000. The consent decree was approved today by U.S. District Judge Shira A. Scheindlin.

Manhattan U.S. Attorney Preet Bharara said: “For over two decades, the Fair Housing Act has required newly built residential rental buildings to be accessible to people with disabilities. Yet developers in New York City have too often disregarded that requirement. It is encouraging that a major developer like Related has embraced its obligations under the law by agreeing to establish a process for ensuring accessibility at its ongoing and future development projects and to make retrofits in thousands of apartments. We hope this settlement will serve as a positive example for the developer community. But any developer that continues to ignore its obligation to comply with the law must understand that my Office is prepared to use all legal tools available to enforce the Fair Housing Act and ensure that New Yorkers with disabilities have full access to rental apartments in New York City.”

The FHA’s accessible design and construction provisions require new multi-family housing complexes constructed after January 1993 to have basic features accessible to persons with disabilities. In March 2014, the United States filed this lawsuit against RELATED and two architectural firms, alleging that a number of past and ongoing rental projects designed and constructed by RELATED and the architects, including One Carnegie Hill and Tribeca Green, do not comply with the FHA’s accessibility requirements.

Under the settlement, RELATED agrees that, for every multi-family housing project it constructs in the next four years, it will retain an FHA compliance consultant to ensure that the building, as constructed, will comply with the FHA’s accessibility requirements. For example, the FHA consultant will advise RELATED on the selection of fixtures and appliances and whether deviating from the architects’ drawings will affect accessibility. The FHA consultant also will conduct a site visit to identify non-compliant conditions and recommend appropriate solutions prior to the completion of construction. In addition, RELATED agrees to institute policies and training to ensure that its own employees and agents will comply with the FHA’s accessibility requirements.

Further, the settlement also requires RELATED to make extensive retrofits at two rental complexes, One Carnegie Hill and Tribeca Green, and to commit to additional retrofits at two other rental complexes that have been inspected, 500 West 30th Street, and 529 West 29th Street, in order to make them accessible. RELATED also agrees to arrange for inspection at its 12 other rental complexes in Manhattan and, where necessary, to make retrofits at those properties as well. Together, the 16 buildings covered by the consent decree contain more than 4,500 rental apartments.

Finally, the settlement requires RELATED to provide up to $1.9 million in funds to compensate aggrieved persons. RELATED also agrees to pay a civil penalty of $100,000.

The government’s lawsuit also asserted claims against the architects of One Carnegie Hill and Tribeca Green, ISMAIL LEYVA ARECHITECTS and ROBERT M. STERN ARCHITECTS. The United States is engaged in active negotiations with those architects regarding a potential settlement.

This settlement resolves claims against the developers in this eighth FHA lawsuit brought by the United States in Manhattan federal court to rectify inaccessible conditions at residential apartment buildings. The United States has settled claims against developers in the seven prior cases through consent decrees. A ninth lawsuit involving inaccessible design and construction of residential apartment buildings, against the Durst Organization, is still pending.

Aggrieved individuals may be entitled to monetary compensation from the fund created through today’s settlement. Aggrieved individuals may include those who were:

• Injured by a lack of accessible features at One Carnegie Hill, Tribeca Green, or the other properties constructed by RELATED;
• Discouraged from living at One Carnegie Hill, Tribeca Green, or the other properties constructed by RELATED because of the lack of accessible features;
• Required to pay to have an apartment at One Carnegie Hill, Tribeca Green, or the other properties constructed by RELATED made accessible,
• Prevented from having visitors because of a lack of accessible features at One Carnegie Hill, Tribeca Green, or the other properties constructed by RELATED; or
• Otherwise injured or discriminated against on the basis of disability as a result of the design or construction of One Carnegie Hill, Tribeca Green, or the other properties constructed by RELATED.

People who may be entitled to compensation should file a claim by contacting the Civil Rights Complaint Line at (212) 637-0840, using the Civil Rights Complaint Form available on the United States Attorney’s Office’s website http://www.justice.gov/usao/nys/civilrights.html, or sending a written claim to:

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

86 Chambers Street, 3rd Floor

New York, New York 10007

Attention: Chief, Civil Rights Unit

The case is being handled by the Office’s Civil Rights Unit. Assistant U.S. Attorneys Li Yu, Emily E. Daughtry, Carina H. Schoenberger, and Jessica J. Hu are in charge of the case.

Related Companies Consent Decree

Preet Bharara, the United States Attorney for the Southern District of New York, announced that TCHAMY YALA, a citizen of Guinea Bissau, was sentenced today in Manhattan federal court to five years in prison for participating in a conspiracy to import narcotics into the United States. YALA was arrested on April 2, 2013, by the Drug Enforcement Administration’s (“DEA”) Special Operations Division, Bilateral Investigative Unit Narco-Terrorism Group, and the DEA’s Foreign-deployed Advisory Support Team (“FAST”) off the coast of West Africa while onboard a vessel under DEA control in international waters. On April 28, 2014, YALA pled guilty before U.S. District Judge Richard M. Berman.

Manhattan U.S. Attorney Preet Bharara stated: “With his sentence today, Yala is being held responsible for his integral role in an international scheme to traffic narcotics into the United States. I would like to thank the Drug Enforcement Administration for their outstanding work on this case.”

According to the Indictment, other documents filed in Manhattan federal court, and statements made at YALA’s guilty plea and today’s sentencing:

Beginning in the summer of 2012, YALA and his co-defendants, former Guinea Bissau Naval Admiral Jose Americo Bubo Natchuto and Papis Djeme, engaged in a series of recorded meetings in Guinea Bissau with confidential sources (the “CSs”) working with the DEA, who purported to be representatives and associates of South American-based narcotics traffickers.

In an early meeting in which Nachuto and YALA discussed the shipment of ton-quantities of cocaine from South America to Guinea Bissau by sea, Nachuto noted that the Guinea Bissau government was weak in light of the recent coup d’etat, and that it was therefore an ideal time for the proposed cocaine transaction. YALA indicated that the boat carrying the cocaine would unload at a secure location in Guinea Bissau that could not be detected. At an October 2012 meeting at which YALA was present, Djeme advocated using “go-fast” boats to transport the cocaine into Guinea Bissau, because such boats could more easily navigate the waters of Guinea Bissau, and provided a photograph of the type of “go-fast” boat that could be used to transport the cocaine as well as information for the purchase of such boats.

In further meetings, YALA, Nachuto, and Djeme agreed to assist the CSs by receiving a two-ton load of cocaine that would be transported to Guinea Bissau by boat and stored in Guinea Bissau for distribution to Europe and the United States. In one November 2012 meeting, YALA and his co-defendants met with two of the CSs in Guinea Bissau and discussed importing large quantities of cocaine into the United States. During that meeting, Nachuto offered to utilize a company that he owned to facilitate the shipment of cocaine out of Guinea Bissau. Natchuto indicated that YALA and Djeme would be responsible for handling the security of the drugs while they remained in Guinea Bissau, with only Djeme, Nachuto, and YALA knowing the precise location of the drugs.

At a meeting the following day at which YALA was present, Nachuto confirmed that he would charge a fee of $1,000,000 per 1,000 kilograms of cocaine received in Guinea Bissau. In February 2013, YALA escorted one of the CSs to a location in Guinea Bissau where the narcotics were to be stored and hidden. The following month, YALA purchased two cisterns, which were intended to be filled with the narcotics and buried underground for safe-keeping, as well as additional equipment for the storage of the narcotics.

In addition to his prison term, YALA, 42, was sentenced to three years of supervised release and was ordered to pay a $100 special assessment.

On April 29, 2014, YALA’s co-defendant, Papis Djeme, pled guilty to participating in a conspiracy to import narcotics into the United States. On September 3, 2014, Djeme was sentenced by Judge Berman to 78 months in prison.

Mr. Bharara praised the outstanding efforts of the Special Operations Division of the DEA. Mr. Bharara also thanked DEA’s FAST, Lisbon Country Office, and Bogota Country Office, as well as the U.S. Department of Justice’s Office of International Affairs.

This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorney Aimee Hector is in charge of the prosecution.

Suit Seeks to Recover More than $190 Million in Taxes, Penalties, and Interest

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States has filed a lawsuit against DEUTSCHE BANK, A.G., DB U.S. FINANCIAL MARKETS HOLDING CORP., DEUTSCHE BANK SECURITIES, INC., BMY ACQUISITION CORP., BMY ACQUISITION LLC, BMY STATUTORY TRUST, and FIRST UNION NATIONAL BANK, now known as WELLS FARGO BANK, N.A., as trustee of BMY STATUTORY TRUST, alleging that these parties participated in a series of transactions that amounted to fraudulent conveyances done with the purpose and effect of leaving the United States Treasury with a significant, uncollectable tax bill. The lawsuit seeks to recover those funds, along with appropriate penalties and interest.

Manhattan U.S. Attorney Preet Bharara said: “Through fraudulent conveyances involving shell companies, Deutsche Bank tried to make its potential tax liabilities disappear. This was nothing more than a shell game. This lawsuit seeks to hold Deutsche Bank and the other defendants liable for $190 million in taxes, penalties, and interest owed to the United States taxpayers.”

The following allegations are based on the Complaint filed today in Manhattan Federal court:

Deutsche Bank acquired a corporation in the fall of 1999 that held stock with a very low cost-basis, such that the sale of this stock would trigger more than $100 million in taxable gain as a result of the appreciation in value of the stock. In order to avoid paying taxes on the stock’s built-in gain, Deutsche Bank entered into an arrangement with a firm that created three shell companies: defendants BMY Acquisition Corp. (“BMY Corp.”), BMY Acquisition LLC (“BMY LLC”), and BMY Statutory Trust (“BMY Trust” and, collectively with BMY Corp. and BMY LLC, “BMY”). These shell corporations collectively served as an underfunded special-purpose vehicle with no function other than to be stuck with a tax bill that it could never pay.

To carry out the scheme, the Deutsche Bank and BMY entities executed a series of pre-planned transactions in the spring of 2000. First, a Deutsche Bank entity sold the corporation holding the appreciated stock to BMY for a price that did not represent fair value for it in light of, at a minimum, the tens of millions of dollars of tax liabilities on the built-in gains. BMY paid for the stock using a short-term loan conditioned on the completion of the pre-planned transaction. Immediately after purchasing the stock, BMY sold it to a different Deutsche Bank entity. At the time of this sale, the tax liability on the built-in gains of the stock was triggered on the part of BMY. BMY then paid back its loan and other expenses, leaving it with insufficient funds to pay the tax liability. Meanwhile, Deutsche Bank profited from this transaction by selling the stock with a stepped-up cost basis and without paying the resulting tax liability.

The Internal Revenue Service (“IRS”) has determined that as a result of these transactions the current unpaid federal tax liability, with penalties and interest that resided with the BMY shell company, is greater than $190 million.

The Complaint seeks recovery of the full amount of the unpaid federal tax liability.

The case is being handled by the Tax and Bankruptcy Unit of the Office’s Civil Division. Assistant U.S. Attorneys Robert William Yalen and Ellen London are in charge of the litigation.

U.S.. v. Deutsche Bank (Tax Case) 14 Civ 9669 Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced that DANIEL BONVENTRE, the former Director of Operations for Bernard L. Madoff Investment Securities LLC, was sentenced in Manhattan federal court today to 10 years in prison for his role in Madoff’s multibillion-dollar Ponzi scheme, the largest in history. BONVENTRE was also ordered to forfeit more than $155.5 billion. After a nearly six-month trial before U.S. District Judge Laura Taylor Swain, BONVENTRE was convicted in March 2014 of 22 counts of securities fraud, bank fraud, tax fraud, falsifying the books and records of Madoff Securities, making false filings with the United States Securities and Exchange Commission, and conspiracy.

Manhattan U.S. Attorney Preet Bharara said: “Daniel Bonventre was Bernard Madoff’s Director of Operations, and his partner in crime. For decades, Bonventre used his skills to help hide Madoff’s massive Ponzi scheme, and to funnel stolen customer money out of the fraudulent investment business. Today, Bonventre was sentenced to 10 years in prison and financial penalties that will rob him of his ill-gotten wealth – a punishment that fits Bonventre’s central role in the biggest financial fraud in history.”

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

BONVENTRE was employed at Bernard L. Madoff Investment Securities (“Madoff Securities”) for 40 years and served as its Director of Operations since approximately 1978. BONVENTRE was responsible for maintaining and supervising the production of the principal internal accounting documents for Madoff Securities, including its general ledger, financial statements, and stock record. BONVENTRE directed that false entries be made in the general ledger that concealed the scope of Madoff Securities’ fraudulent investment advisory operations and understated Madoff Securities’ liabilities by billions of dollars. For example, from 1997 to 2008, more than $750 million of investment advisory investor funds were used to support Madoff Securities’ Market Making and Proprietary Trading operations, but were not accounted for on Madoff Securities’ books and records, including the general ledger, so as to conceal the true source of the funds. Moreover, as BONVENTRE knew, the general ledger did not accurately reflect the assets contained in the bank and brokerage accounts into which investment advisory investor funds were deposited, and likewise did not reflect the liability of Madoff Securities to its investment advisory clients that arose from the custody of investment advisory client funds in those accounts. The assets and associated liabilities of Madoff Securities’ investment advisory operations, which were omitted from the general ledger, ranged from millions to billions of dollars.

As a registered broker-dealer, Madoff Securities was required to file Financial and Operational Combined Uniform Single Reports (“FOCUS Reports”) with the SEC. Those FOCUS Reports require the production of basic information that amounts to a condensed version of a broker-dealer’s general ledger. Because the general ledger was inaccurate, as BONVENTRE well knew, the FOCUS Reports were likewise false because they failed to accurately reflect Madoff Securities’ assets and liabilities. For example, one such report, for the month of April 2006, in the midst of a liquidity crisis in the Ponzi scheme, failed to reflect at least $299 million in Madoff Securities liabilities related to $154 million of an investment advisory client’s bonds and the $145 million that Madoff Securities had borrowed using those bonds as collateral.

During one of those liquidity crises, in late 2005, BONVENTRE used falsified financial statements, false FOCUS Reports, and other fraudulent documents to obtain hundreds of millions of dollars in loans and lines of credit from federally insured financial institutions. Madoff Securities used the proceeds of those fraudulently obtained loans to pay back redemptions to customers of the investment advisory business, thereby prolonging the Ponzi scheme.

Further, between 2004 and 2008, Madoff Securities was subject to at least five reviews by the United States Securities and Exchange Commission (“SEC”) and a European accounting firm which was conducting a review of Madoff Securities’ operations on behalf of investment advisory clients. As part of a concerted effort overseen by Madoff to deceive both the SEC and the European accounting firm, BONVENTRE participated in creating numerous false and fraudulent books and records, including counterfeit Depository Trust Company (“DTC”) reports, which falsely reflected billions of dollars in non-existent securities held on behalf of Madoff Securities clients at the DTC, a third-party clearinghouse.

In addition, between 2004 and 2007, in connection with audits of Bernard L. Madoff’s U.S. Individual Income Tax Returns, Forms 1040, BONVENTRE created false, backdated Madoff Securities records to show the tax auditors. Because Madoff had under-reported his income by tens of millions of dollars each year, BONVENTRE created false documents that appeared consistent with Madoff’s tax returns for the purposes of maintaining the falsity of Madoff’s tax returns and deceiving the auditors.

Likewise, BONVENTRE filed false Income Tax Returns on his own behalf, in which he failed to report cash and other benefits he received from Madoff Securities. Specifically, BONVENTRE was convicted of failing to report millions of dollars in cash and other benefits, including payments on his behalf for his membership in a country club, his son’s private high school tuition, common charges for his Upper East Side cooperative apartment, thousands of dollars in cigars and other luxury items charged to BONVENTRE’s personal credit card, and cash.

In addition to the millions of dollars of off-the-books income that BONVENTRE took from Madoff Securities, he also had his own investment advisory account, through which he received the benefit of more than $1.8 million in at least three fictitious backdated trades that appeared in his account between 2002 and 2006. The trade that appeared in BONVENTRE’s account in 2002 included a purchase that was backdated 12 years, to 1990, and generated fraudulent long-term capital gains of nearly $1 million. The trade that appeared in BONVENTRE’s account in 2006 was entered following his handwritten instructions directing another Madoff Securities employee to generate a fraudulent long-term capital gain of $449,000.

In imposing the 10-year sentence, Judge Swain observed that by “agree[ing] to facilitate the conduct of business ‘Madoff-style,’” BONVENTRE committed “despicable” and “literally, devastatingly serious crimes,” that were “at all times a key to [Madoff’s] success,” and which caused “financial devastation of unprecedented magnitude.” Bonventre was denied bail pending appeal and has been ordered to surrender and begin serving his term on February 19, 2015.

BONVENTRE, 67, was also ordered to forfeit $155.5 billion, including specific bank accounts and real estate, representing property traceable to the massive Ponzi scheme, as well as a related $457 million bank fraud. Judge Swain also imposed a term of two years of supervised release following BONVENTRE’s completion of this sentence.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation. He also thanked the U.S. Securities and Exchange Commission, the Internal Revenue Service and the U.S. Department of Labor 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.

Assistant United States Attorneys Matthew L. Schwartz, John T. Zach, and Randall W. Jackson are in charge of the prosecution. Assistant United States Attorneys Matthew L. Schwartz and Paul M. Monteleoni are in charge of the forfeiture aspects of the case.

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 the unsealing of a Complaint charging ALLAH JUSTICE MCQUEEN with conspiracy to commit wire fraud in connection with a scheme that targeted and victimized elderly people across the United States. As alleged, MCQUEEN and his co-conspirators tricked each victim, by phone, into believing that the victim’s grandchild had just been arrested on a narcotics offense and needed thousands of dollars in bail money immediately to avoid prison. The Complaint describes MCQUEEN’s victimization of 17 elderly individuals in New York and across the United States. MCQUEEN was arrested this morning and will be presented later today in federal court in Manhattan.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Allah Justice McQueen showed no justice to his elderly victims. Instead, he exploited the emotions of vulnerable grandparents by convincing them that those they loved were in trouble and needed money. Not only did he allegedly swindle grandparents out of thousands of dollars, he also caused them considerable emotional distress. We are seeing more and more fraud schemes that target vulnerable people, and we urge you to contact our Victim/Witness Unit if you believe you have been affected.”

FBI Assistant Director-in-Charge Venizelos said: “Courtesy and compassion are among the many traits valued by the elderly, making them attractive targets for criminals who seek to capitalize on their trusting nature. McQueen allegedly preyed upon some of society's most vulnerable citizens in a so-called grandparent scam that pinched more than pennies. In this and all cases, justice will certainly come to those who engage in crimes of this nature.”

According to the Complaint unsealed today in Manhattan federal court:

Beginning in approximately 2013, MCQUEEN and his co-conspirators perpetrated a scheme to defraud elderly victims around the United States by tricking them into believing their grandchildren had been imprisoned and needed immediate bail money. In particular, in each case, a member of the conspiracy contacted the victim by phone, purported to be a law enforcement official or attorney, and falsely claimed that the victim’s grandchild had been taken into custody for a narcotics offense and would not be released unless the victim paid thousands of dollars, and in some cases tens of thousands of dollars, in purported bail money. A member of the conspiracy also frequently posed on the call as the victim’s grandchild, typically crying and pleading with the elderly victim to send money to secure the grandchild’s release from jail, and asking the victim not to contact any other family members because the grandchild felt ashamed. In each case, in extreme distress, the victim sent thousands of dollars, at a minimum, as instructed, to certain individuals who, among other things, provided that money to MCQUEEN at his direction. In each case, after paying the “bail” money as directed, the victim directly contacted his or her grandchild and thereupon learned that the grandchild had not, in fact, been arrested, that the grandchild knew nothing about the claims made on the call to the victim, and that the call was fraudulent.

For example, among the 17 examples set forth in the complaint, one 79 year-old victim in New York received a phone call in August 2013 from an individual who identified himself as a police sergeant and claimed that the victim’s grandson had been arrested after drugs were discovered in a car in which the grandson was a passenger. The purported sergeant said the grandson would be released if the victim sent $6,000 in bail money as directed. The victim, who briefly heard, on the phone, an individual who sounded like the victim’s grandson, wired the money as directed. The victim subsequently spoke directly with the victim’s grandson, and learned that he had not been arrested, and knew nothing about the purported sergeant or the basis for his request for bail money. The victim never received any money back from the purported sergeant.

In fact, the victim’s money was wired to particular individuals working with MCQUEEN who collected the wired funds on MCQUEEN’s behalf and provided the money to MCQUEEN. As to a portion of the victim’s money, MCQUEEN appeared personally at a particular location in Brooklyn to arrange for the collection of the proceeds. MCQUEEN subsequently deposited another portion of the money sent by the victim directly into his personal bank account.

MCQUEEN, 33, of Brooklyn, New York, is charged with one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison. The maximum potential sentence 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 FBI.

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

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

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

U.S. v. Allah J. McQueen Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced that FELIX LOPEZ-CABRERA, 24, CARLOS LOPEZ, 26, and LUIS BELTRAN, 26, were convicted yesterday in Manhattan of various racketeering charges, murder, conspiracy to murder, attempted murder, narcotics conspiracy, and firearms offenses following a twelve-week jury trial before U.S. District Judge Paul A. Engelmayer. The jury convicted LOPEZ-CABRERA, LOPEZ and BELTRAN of charges arising out of their involvement, from 2003 through 2012, in the criminal activities of the Bronx Trinitarios gang (the “BTG”) – a violent street gang that was involved in drug-trafficking and multiple acts of violence, including murder and attempted murder, in New York, New York, the Bronx, New York, and Yonkers, New York.

According to the Superseding Indictment and evidence admitted at trial:

The BTG is a criminal organization that operates primarily in the Bronx, New York. It started in the prison system in the late 1980’s and subsequently spread to the streets. FELIX LOPEZ-CABRERA was a member, and a leader, of the BTG who directed other members to carry out illegal and other activities as part of the racketeering conspiracy. As part of their membership and participation in that enterprise, LOPEZ-CABRERA and CARLOS LOPEZ murdered Raffy Tavares and Irving Cruz, both 19, in the vicinity of 81 East 181st Street, Bronx, New York, on May 23, 2010. LUIS BELTRAN and LOPEZ-CABRERA murdered Raymond Casul, 23, in the vicinity of 271 West Kingsbridge Road, Bronx, New York, on March 31, 2009. LOPEZ-CABRERA was also involved in the September 4, 2009, murder of David Avila-Gomez, 23, in the vicinity of 15 Mount Carmel Place, Yonkers, New York. CARLOS LOPEZ was also involved in the November 20, 2010, murder of Freddy Polanco, 19, in the vicinity of 75 West 190th Street, Bronx, New York. LOPEZ-CABRERA, LOPEZ, and BELTRAN also carried out multiple assaults and attempted murders of individuals believed to be members of rival gangs including the Latin Kings, Dominicans Don’t Play, and the Bloods. LOPEZ-CABRERA and LOPEZ also participated in a more than decade-long conspiracy to distribute kilograms of marijuana and crack cocaine in the Bronx. The evidence at trial also showed that LOPEZ-CABRERA, LOPEZ, BELTRAN, and other members of the BTG possessed, brandished, and discharged a number of firearms in connection with their drug trafficking and racketeering activities with the Trinitarios gang.

FELIX LOPEZ-CABRERA was convicted of one count of racketeering, one count of racketeering conspiracy, two counts of conspiracy to murder in aid of racketeering, four counts of murder in aid of racketeering, two counts of assault and attempted murder in aid of racketeering, one count of conspiracy to distribute or possess with intent to distribute 100 kilograms and more of marijuana, 28 grams and more of crack cocaine, quantities of cocaine and oxycodone, two counts of discharging a firearm in furtherance of a crime of violence or a drug-trafficking crime, and four counts of discharging a firearm in connection with the murders of Raymond Casul, Raffy Taveras, Irving Cruz, and David Avila-Gomez. LOPEZ-CABRERA is scheduled to be sentenced on May 4, 2015, at 9:30 a.m., before Judge Engelmayer.

CARLOS LOPEZ was convicted of one count of racketeering, one count of racketeering conspiracy, two counts of conspiracy to murder in aid of racketeering, three counts of murder in aid of racketeering, one count of assault and attempted murder in aid of racketeering, one count of conspiracy to distribute or possess with intent to distribute 100 kilograms and more of marijuana, 28 grams and more of crack cocaine, quantities of cocaine and oxycodone, two counts of discharging a firearm in furtherance of a crime of violence or a drug-trafficking crime, and three counts of discharging a firearm in connection with the murders of Raffy Taveras, Irving Cruz, and Freddy Polanco. LOPEZ is scheduled to be sentenced on May 5, 2015, at 9:30 a.m., before Judge Engelmayer.

LUIS BELTRAN was convicted of one count of racketeering conspiracy, one count of conspiracy to murder in aid of racketeering, one count of murder in aid of racketeering, and one count of discharging a firearm in connection with the murder of Raymond Casul. BELTRAN is scheduled to be sentenced on May 8, 2015, at 9:30 a.m., before Judge Engelmayer.

The chart below provides the counts of conviction and the penalties for each defendant. The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the judge.

Mr. Bharara praised the investigative work of the New York City Police Department’s Bronx Gang Squad, the Bureau of Alcohol, Tobacco, Firearms and Explosives’ Joint Firearms Task Force, the Drug Enforcement Administration, and Immigration and Customs Enforcement’s Homeland Security Investigations.

This case is being handled by the Office’s Violent and Organized Crimes Unit. Assistant United States Attorneys Jessica Ortiz, Rachel Maimin, and Micah Smith conducted the trial.

Preet Bharara, the United States Attorney for the Southern District of New York, James Higgins, Acting Special Agent-in-Charge of the New York Field Division of the Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), and William J. Bratton, Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of a complaint charging LEON FENNER for the armed robbery of a store in the Diamond District of Manhattan on November 11, 2014. FENNER was arrested yesterday in Suitland, Maryland, and presented today in the United States District Court for the District of Maryland before U.S. Magistrate Judge Charles B. Day.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, on November 11th Leon Fenner – armed with a semiautomatic gun – committed a cold and calculated robbery of a jewelry store in the Diamond District during which he brazenly pistol-whipped a bystander. Thanks to the collaboration of law enforcement, Fenner was tracked down and apprehended and will now face justice.”

ATF Acting Special Agent-in-Charge James Higgins said: “The arrest of Mr. Fenner yesterday has even further dismantled the illegal activities of this violent and armed robbery crew. The teamwork and relentless investigative pursuit exhibited by the newly formed ATF-led SPARTA task force coupled with a focused prosecution team is extremely gratifying to be a part of. The unit’s performance in this case should be a stark reminder to the criminal element that law enforcement, especially here in New York City, will not tolerate brazen acts of violence.”

NYPD Commissioner William J. Bratton said: “The New York City Police Department, along with our law enforcement partners, will continue to track down each person responsible for this crime until all parties are in custody and held accountable.”

According to the allegations Complaint unsealed today in Manhattan federal court, it is alleged that:

On November 11, 2014, two men carried out an armed robbery of a jewelry store (the “Store”) on the 8th Floor of a building on 47th Street in the Diamond District of Manhattan. The Store is not open to the public but is a space where clients can view and purchase jewelry. At the time of the robbery, the owner of the store (the “Owner”) and three other individuals were present inside the Store. At approximately 2:20 in the afternoon – in broad daylight as the Veteran’s Day Parade proceeded nearby – LEON FENNER, the defendant, dressed in a suit, carrying a bag, and appearing to be a messenger, came to the door of the store, while a second man (“Perpetrator-2”) served as a lookout in the hallway. After entering, FENNER first said that he was there to serve the Owner of the Store with papers, and took two envelopes out of his bag before placing them on a desk. FENNER then took out a black semiautomatic gun and pointed it at the Owner and the others present and demanded that they give him all the jewelry in the Store. As the robbery was occurring, a relative of the Owner arrived and was let into the Store. FENNER pistol-whipped the Owner’s relative as he entered the Store. The Owner and the others present in the Store emptied more than $600,000 worth of jewelry from a safe and other locations and placed it into FENNER’s bag. FENNER, leaving the envelopes behind in the Store, left the scene with Perpetrator-2.

FENNER was identified based on, among other things, fingerprint analysis of the envelopes left in the Store and surveillance images.

FENNER, 58, of New York, New York, is charged with one count of armed robbery, which carries a maximum sentence of 20 years in prison, and one count of brandishing of a firearm in connection with that robbery, which carries a maximum sentence of life in prison, with a seven-year mandatory minimum sentence. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

Rondu Frisby, a/k/a “Reef,” who was one of the individuals present in the Store at the time of the Robbery and a friend of the Owner, was arrested on November 17, 2014, and charged with conspiracy to commit the robbery, and aiding and abetting the brandishing of a firearm in connection with the robbery conspiracy. Frisby allegedly coordinated with FENNER to perpetrate the robbery.

Mr. Bharara praised the investigative work of the NYPD and the Joint Robbery Task Force, consisting of members of the NYPD, ATF, and the United States Marshals Service.

This case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Russell Capone and Gina Castellano 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. Leon Fenner Complaint & Warrant (14 MAG 2572)
 

Preet Bharara, the United States Attorney for the Southern District of New York, announced that RICHARD AMMAR CHICHAKLI, an associate of convicted international arms dealer Viktor Bout, was sentenced today in Manhattan federal court to five years in prison. CHICHAKLI, who was arrested in Australia in January 9, 2013, and then extradited to the United States in May 2013, was convicted on December 13, 2013, following a four-week jury trial, of conspiring with Bout and others to violate the International Emergency Economic Powers Act (“IEEPA”) by attempting to purchase commercial airplanes from American companies in violation of U.S. sanctions. CHICHAKLI was also found guilty of money laundering conspiracy, wire fraud conspiracy, and six separate counts of wire fraud, in connection with the attempted aircraft purchases. U.S. District Judge William H. Pauley III, who presided over the trial, imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “Richard Chichakli conspired to violate international sanctions by attempting to buy commercial aircraft from an American company, even though it was illegal for that company to do business with him. He illegally tried to conceal his own identity and the involvement in the transactions of international arms trafficker Viktor Bout. Now Richard Chichakli will again be engaged in the same enterprise as Viktor Bout: serving time in a federal prison.”

According to evidence at trial and documents previously filed in Manhattan federal court:

CHICHAKLI conspired with Viktor Bout and others to violate IEEPA by engaging in prohibited business transactions with companies based in the United States. The focus of these transactions was the purchase of commercial airplanes for a company that Bout and CHICHAKLI controlled, and the ferrying of those aircraft to Tajikistan. At the time of these unlawful transactions, both CHICHAKLI and Bout had been designated by the U.S. Treasury Department as Specially Designated Nationals (“SDNs”), which meant that individuals and businesses in the United States were prohibited from engaging in financial transactions with them. CHICHAKLI sought to evade these SDN sanctions by, among other things, concealing his identity and his SDN listing, and by concealing Viktor Bout’s involvement in the airplane transactions. In connection with this fraudulent scheme, CHICHAKLI helped to make a series of wire transfer payments, totaling more than $1.7 million from overseas bank accounts into accounts in the United States.

CHICHAKLI was convicted of one count of conspiring to violate IEEPA, one count of money laundering conspiracy, one count of wire fraud conspiracy, and six counts of wire fraud. In addition to a prison term of five years, CHICHAKLI was sentenced to two years of supervised release, was ordered to pay forfeiture in the amount of $1.7 million and was ordered to pay a $900 special assessment fee.

CHICHAKLI’s co-conspirator, Viktor Bout, is currently serving a 25-year prison term as a result of his November 2011 conviction in this District in connection with his conspiring to sell millions of dollars of weapons to a designated foreign terrorist organization.

Mr. Bharara praised the outstanding investigative efforts of the Special Operations Division of the Drug Enforcement Administration (“DEA”), and specially thanked the DEA Canberra Country Office, and the DEA Digital Evidence Laboratory. Mr. Bharara also thanked the Australian Federal Police, the Victoria State Police, and the Australian Attorney General’s Department, as well as the U.S. Department of Justice Office of International Affairs and National Security Division, the United States Department of the Treasury, Office of Foreign Assets Control, and Interpol.

The case is being handled by the Terrorism and International Narcotics Unit. Assistant United States Attorneys Christian R. Everdell, Ian McGinley, and Jenna M. Dabbs are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that MAXO JEAN was sentenced today to 10 years in prison for perpetrating a multi-year insurance fraud scheme in which JEAN directed co-conspirators to engage in more than 30 car crashes with innocent third parties, and then fraudulently obtained insurance benefits based on unnecessary medical treatments he secured for his co-conspirators following the crashes. A jury convicted JEAN of conspiracy to commit mail, wire, and health care fraud on January 31, 2014, after a one-week trial. JEAN was sentenced today in Manhattan federal court by U.S. Court of Appeals Judge Denny Chin, sitting by designation, who also presided over JEAN’s trial.

Manhattan U.S. Attorney Preet Bharara said: “A car crash is an awful experience. Yet Maxo Jean directed others to cause crashes with innocent drivers, just so that he and his co-conspirators could line their pockets. His scheme quite literally added insult to injury for the innocent drivers and the insurance companies he defrauded.”

According to the Indictment and the evidence presented at JEAN’s trial and other court proceedings:

From 2006 through 2011, JEAN engaged in a scheme to cause more than 30 intentional car crashes in order to fraudulently obtain insurance benefits. JEAN orchestrated the scheme by finding cars, recruiting crews of drivers and passengers, and then sending the crews out to hit cars driven by innocent victims. JEAN paid the drivers and passengers he recruited, and directed them to crash into cars driven by innocent people so that the supposed “accidents” would appear to be real accidents. Following the crashes, JEAN took his co-conspirators to corrupt medical clinics and directed them to submit to unnecessary treatment, including unnecessary surgeries, for their non-existent injuries, so that the treatments could be billed to car insurance companies. JEAN encouraged his co-conspirators to submit to treatments that he thought were likely to result in the largest payments from insurance companies, such as unnecessary back and shoulder surgeries. JEAN and his co-conspirators then filed fraudulent no-fault insurance claims and insurance claims that fraudulently alleged pain and suffering. The fraudulent insurance claims filed by JEAN and his co-conspirators totaled over $1.5 million, of which they succeeded in collecting nearly $600,000 in payments from ten different insurance companies. JEAN further profited from the scheme by collecting more than $150,000 in insurance company payouts and in kickbacks from the corrupt medical clinics.

In addition to the prison term, Judge Chin ordered JEAN, 52, of Long Island, New York, to forfeit $ 586,831.74 and to pay restitution to his victims.

Mr. Bharara praised the outstanding investigative work of the FBI, and thanked the National Insurance Crime Bureau for its assistance in the case.

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

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 that OCTAVIO LOMBARDO, a/k/a “Otto Lombardo,” was arrested this morning on wire fraud charges stemming from his advance fee scheme, which allegedly defrauded small business owners of more than $1 million.

Among other false and misleading statements, LOMBARDO allegedly lied to small business owners by claiming to have the ability and expertise to structure investment loans for their businesses through LOMBARDO’s exclusive relationships with small community banks across the United States, when in fact he did not have the ability to obtain such financing. In connection with the scheme, LOMBARDO induced over 30 business owners to pay an upfront fee that was purportedly to pay for expenses incurred during the due diligence process prior to the loan’s closing. Instead, LOMBARDO used the vast majority of the money he received from the business owners – over $1 million in total – on his own personal expenses, including rental payments, club dues, food and other personal items.

LOMBARDO is expected to be presented today in federal court in Manhattan before Chief United States Magistrate Judge Frank Maas.

U.S. Attorney Preet Bharara said: “As alleged, Mr. Lombardo repeatedly lied to dozens of small business owners and used an illegal scheme to defraud them of their hard-earned money. He proceeded to use this corruptly obtained money, amounting to over $1 million, on his own living expenses and leisure activities. I want to thank our partners at the FBI for their hard work in investigating this case and in continuing to expose unlawful schemes such as this one.”

FBI Assistant Director-in-Charge George Venizelos said: “As alleged, Lombardo stole from dozens of small business owners, looking to make significant investments with their new equity. His scheme not only defrauded the owners, but took capital away from new investments and critical employee hires.”

According to the Complaint unsealed today in Manhattan federal court:

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

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

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

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

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

LOMBARDO, 67, was arrested this morning at his residence in Brooklyn, New York. He is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the work of the Federal Bureau of Investigation. 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. Attorneys Amy Lester and Damian Williams are in charge of the prosecution.

The allegations contained in the Complaint are merely accusations, and the defendant is

presumed innocent unless and until proven guilty.

U.S. v. Octavio Lombardo Complaint

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”), William J. Bratton, Commissioner of the New York City Police Department (“NYPD), and Thomas O’Donnell, the Special Agent-in-Charge of the New York Office of the Department of Health and Human Services, announced today the unsealing of an indictment charging ten defendants with operating a massive health care fraud scheme through three medical clinics in Brooklyn and Queens through which the defendants submitted over $70 million in fraudulent claims to Medicaid and Medicare. As alleged in the Indictment, VICTOR LIPKIN, VADIM ZUBKOV, EDUARD ZAVALUNOV, NIKOLOZ CHOCHIEV, ANATOLIY FATAKHOV, MARIANA SWAFFAR, JACQUELINE PINEZ, JONATHAN OLIVER, JASON BRISSETT, and GILBERT TROTMAN recruited financially disadvantaged and homeless people insured by Medicare and/or Medicaid (the “Phony Patients”) to undergo unnecessary medical tests, typically performed by unlicensed personnel, at the clinics in exchange for cash, and then billed the insurers for administering those unnecessary tests. In total, the defendants are alleged to have submitted over $70 million in fraudulent claims to Medicaid and Medicare, for which they fraudulently received over $25 million in insurance payments. Each of the defendants was arrested this morning. All of the defendants other than TROTMAN are expected to be arraigned in Manhattan federal court later today before a U.S. Magistrate Judge. TROTMAN was arrested in the Atlanta, Georgia, area and will be presented there later today.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, these defendants corrupted financially strapped people and fleeced Medicare and Medicare to the tune of tens of millions of dollars. To fuel their greedy scheme, the defendants allegedly had phony patients submit to medically unnecessary treatments, paying these ‘patients’ a fraction of what they themselves reaped from the fraudulent billings. The scheme enriched the defendants and burdened Medicare and Medicaid, but the scheme has been exposed and ended.”

FBI Assistant Director-in-Charge Venizelos said: “As alleged, the defendants engaged in a systematic scheme to defraud government programs designed to assist deserving patients. Adding insult to injury, the defendants preyed upon vulnerable members of our community, exploiting the less fortunate in furtherance of their criminal activity. Health care fraud wastes tax dollars, increases costs for the public and destroys the integrity of our health care system. The FBI, along with our federal, state, and local law enforcement partners, is committed to investigating this type of fraud and holding accountable those who take advantage of our government health care programs.”

NYPD Commissioner William J. Bratton said: “Healthcare fraud places a burden on taxpayers and on a healthcare system that millions of people rely on for medical care. Thanks to the collaborative efforts of our investigators, along with our federal partners, this criminal network was dismantled and its members will be held accountable for their actions.”

HHS Special Agent-in-Charge O’Donnell said: “Kickbacks and medically unnecessary services have no place in the Medicare and Medicaid systems. These programs are intended for the elderly and the most vulnerable segments of our society. The Office of Investigations will continue to vigorously pursue those that defraud these programs for their personal gain.”

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

The Heath Care Fraud Scheme

Beginning in or about 2005, LIPKIN and ZUBKOV recruited and paid a particular licensed physician (the “Doctor”) to act as the nominal owner and/or physician under whose name three purported medical clinics would bill Medicare, Medicaid, and private insurance providers (the “Insurance Providers”) for unnecessary services and tests – including sleep tests and stress tests – performed at the clinics. The clinics were located on Avenue V in Brooklyn, New York, and on Hillside Avenue and Elmhurst Avenue, respectively, in Queens, New York. LIPKIN and ZUBKOV were, in fact, the beneficial owners of the clinics, but they concealed their ownership through the Doctor’s nominal affiliation with the clinics, and by laundering the proceeds of the clinics’ operation through shell companies that they owned and controlled. LIPKIN, ZUBKOV, and ZAVALUNOV operated and controlled the clinics, and ran the clinics’ day-to-day operations, despite the fact that they were not licensed physicians, as required by New York law.

At the direction of LIPKIN, ZUBKOV, and ZAVALUNOV, other members of the scheme, including OLIVER, BRISSETT and TROUTMAN (the “Runners”), and CHOCHIEV, recruited financially disadvantaged individuals with Medicaid and/or Medicare insurance to act as Phony Patients and undergo unnecessary medical tests at the clinics in exchange for cash payments. The Runners often recruited such individuals from soup kitchens and local welfare offices, and coached them on what to say on various medical forms in order to make it falsely appear that the medical tests to which the defendants intended to subject them were medically necessary. In furtherance of the scheme, CHOCHIEV also made threats of physical violence to individuals who CHOCHIEV believed owed money to the scheme members.

Also in furtherance of the scheme, before the medically unnecessary tests were performed on the Phony Patients, SWAFFAR and PINEZ obtained the Phony Patients’ Medicaid and/or Medicare insurance information, and then contacted the Insurance Providers to confirm that the Insurance Providers would reimburse for the tests. SWAFFAR and PINEZ engaged in such conduct knowing that the Phony Patients were being recruited and paid by the Runners to undergo the tests. Once they determined that a particular Phony Patient’s insurance would pay out claims made by the clinic for the planned medical tests, SWAFFAR and PINEZ notified the Runners that the individuals were eligible and could be brought to the clinic to undergo such tests.

After the Phony Patients had been recruited, confirmed to be Medicare and/or Medicaid eligible, and transported to one of the clinics by the Runners or CHOCHIEV, in many instances, certain individuals who were not physicians administered a host of unnecessary medical tests to them. In particular, for example, FATAKHOV administered unnecessary medical tests, including stress tests, to the Phony Patients of the Elmhurst Avenue Clinic. FATAKHOV administered these tests outside the presence and supervision of the Doctor or other licensed physician, knowing that the presence or supervision of a licensed physician was required. After the unnecessary medical tests were administered, the Phony Patients were paid cash kickbacks. The defendants, through the clinics, then submitted fraudulent claims to Medicaid and Medicare seeking reimbursement for the unnecessary medical tests. In total, in the course of the scheme, the defendants fraudulently billed over $70 million to Medicaid and Medicare, for which they received over $25 million in reimbursements.

All ten defendants are charged with conspiring to commit mail fraud, wire fraud, and health care fraud. LIPKIN, ZUBKOV, and ZAVALUNOV are also charged with conspiring to launder the proceeds of the fraud. A table listing the charges against each defendant and the potential penalties for each count is attached. The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the judge.

Mr. Bharara praised the outstanding investigative work of the FBI’s New York Health Care Fraud Task Force, the NYPD, and HHS. Mr. Bharara also thanked the New York City Human Resources Administration, the New York State Office of Medicaid Inspector General, and the New York State Attorney General Medicaid Fraud Control Unit for their assistance in the investigation.

The FBI’s New York 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 of the FBI, NYPD, 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, NYS Attorney General’s Office, NYS-Office of Medicaid Inspector General, NYC Health and Hospitals Inspector General, New York City Human Resources Administration, and National Insurance Crime Bureau.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Timothy Howard and Daniel Tehrani are in charge of the prosecution. Assistant United States Attorney Carolina Fornos is in charge of the forfeiture aspects of the case.

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

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Lipkin, Victor, et al. Indictment (14 Cr 773)

Preet Bharara, the United States Attorney for the Southern District of New York, announced that STEPHEN WALSH and PAUL GREENWOOD, investment managers and principals of WG Trading Company, LP, and WG Trading Investors, were sentenced in Manhattan federal court in connection with a fraudulent commodities trading and investment advisory scheme. WALSH was sentenced to 20 years in prison, and GREENWOOD was sentenced to 10 years in prison. WALSH and GREENWOOD ran a fraudulent commodities trading and investment advisory scheme that 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. WALSH pled guilty on April 25, 2014, and was sentenced on October 29, 2014, by United States District Judge Miriam Goldman Cedarbaum. GREENWOOD pled guilty pursuant to a cooperation agreement on July 28, 2010, and was sentenced today by Judge Cedarbaum.

Manhattan U.S. Attorney Preet Bharara said: “Stephen Walsh and Paul Greenwood ran an investment operation that purported to follow a conservative strategy but was in fact mostly fictional. They stole hundreds of millions of dollars of investors’ funds – much of it from sophisticated institutional investors – and lied to conceal their theft. Now they are answering for their massive fraud, and they will have to forfeit their ill-gotten gains and their freedom”

According to the Indictment, 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 10 years. As a result, several institutional investors – including charitable and university foundations, retirement and pension plans, and other institutions – invested billions of dollars. Investors either became limited partners in WG Trading Company or received promissory notes issued by WG Trading Investors that WALSH and GREENWOOD represented would pay interest at a rate equal to the investment returns earned by a limited partner of WG Trading Company.

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 in favor of WG Trading Investors to, among other things, conceal trading losses and their misappropriation of investor funds. These promissory notes materially misstated the financial condition of WG Trading Company 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.

In addition to the prison sentence, WALSH, 69, of Sands Point, New York, was sentenced to three years of supervised release, and ordered to forfeit $50,743,779; and GREENWOOD, 67, of Southern Pines, North Carolina, was sentenced to three years of supervised release, and ordered to forfeit $83.5 million. The Court further ordered restitution to be paid by both WALSH and GREENWOOD in an amount to be determined.

On July 21, 2009, Deborah Duffy, the former Chief Compliance Office of WG Trading Company, pled guilty to conspiracy, securities fraud, and money laundering for her role in the fraud scheme. Duffy’s sentencing is set for January 8, 2015.

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’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 Jessica A. Masella and Benjamin Naftalis are in charge of the prosecution.

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 NIZAR OTHMAN, the former principal of a Manhattan-based financial firm, NAOK Financial, Inc. (“NAOK”), was sentenced today to five years in prison for a fraudulent investment scheme in which OTHMAN lied to victims and tricked them into paying him over $2 million for purported investments with supposed guaranteed rates of return. In reality, OTHMAN did not invest the funds as promised, and instead, used the funds largely for his own benefit. OTHMAN pled guilty in September 2014 before U.S. District Judge Lorna G. Schofield, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “Nizar Othman was a fraudster who through his investment firm swindled numerous individuals out of millions of dollars. He preyed on people’s life savings and took the benefits of a widowed spouse while he exploited personal relationships for personal gain. We hope today’s sentence gives some measure of comfort to the victims.”

Assistant Director in Charge George Venizelos said: “This was another phony investment scheme, pitched to some of the most vulnerable people in our society. Today, Othman rightfully finds himself facing a stiff sentence for his investor shakedown.”

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

From 2008 through March 2013, OTHMAN owned and operated NAOK, a now-defunct financial consulting and investment firm with an office in Manhattan. In connection with his operation of NAOK, OTHMAN engaged in a fraudulent scheme whereby he tricked multiple victims into investing millions of dollars with his company. For example, in April 2011, OTHMAN convinced Victim-1to invest $1.2 million with NOAK, using the proceeds of her recently-deceased husband’s life insurance and pension benefits. OTHMAN falsely told Victim-1 that he would invest the money in real estate ventures and promised to triple her investment in three years. OTHMAN even showed Victim-1 photographs of properties that he claimed he was investing in. Instead of investing the $1.2 million in real estate, however, OTHMAN used Victim-1’s money to pay for NAOK’s operating expenses, to repay other individuals who had invested with NAOK, and to pay for OTHMAN’s personal expenses, including dining, clothing, and travel expenses. Victim-1 lost her entire $1.2 million investment.

In addition to Victim-1, OTHMAN defrauded at least five other victims by fraudulently inducing them to invest hundreds of thousands of dollars with NAOK. In each instance, OTHMAN exploited personal relationships with the victims to gain their trust, and then betrayed that trust by lying about how the victims’ money would be invested and the rates of return that the victims would receive. For example, in March 2011, OTHMAN induced Victim-2, a retired barber, to invest his life savings of $480,000 with NAOK. OTHMAN falsely claimed that Victim-2’s money would be invested with a hedge fund broker with whom OTHMAN claimed to have a business relationship. OTHMAN visited Victim-2 at his house multiple times, invited Victim-2 to NAOK’s office in Manhattan, and guaranteed Victim-2 that he would receive at least a 10 percent return on his investment in three years. OTHMAN further promised to pay the guaranteed 10 percent return himself if the investment failed. As with Victim-1’s investment, instead of investing Victim-2’s money as promised, OTHMAN used the money for his own personal benefit. Victim-2 lost his entire $480,000 investment.

Further, in order to conceal and perpetuate the scheme, OTHMAN made various misrepresentations to the victims regarding the performance of their investments. For example, in October 2012, when Victim-1 inquired about the status of her $1.2 million real estate investment, OTHMAN told her that it was presently valued at $1.35 million. In truth and in fact, and as OTHMAN was well aware, OTHMAN never invested Victim-1’s $1.2 million in any real estate ventures. Similarly, in the first year following Victim-2’s $480,000 investment, OTHMAN falsely represented that the investment had earned a 13 percent return; in the second year, OTHMAN falsely reported a 14 percent return.

In total, the defendant’s fraudulent investment scheme resulted in losses to victims of approximately $2,138,000.

In addition to the prison sentence, OTHMAN, 31, of Albertson, New York, was sentenced to three years of supervised release. OTHMAN was also ordered to pay $2,138,000 million in restitution to his victims, and to forfeit $2,138,000 in criminal proceeds.

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 Serrin Turner, Daniel Noble, and Alexander Wilson are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that STEVEN STALTARE pled guilty today to defrauding investors in connection with two fraudulent investment schemes. STALTARE’s first scheme involved defrauding investors in connection with the transfer of stock in Dematco, Inc. (“Dematco”). STALTARE’s second scheme involved defrauding investors in connection with soliciting investment in various stocks, including Dematco, Preventia, Inc. (“Preventia”), First Choice Healthcare Solutions, Inc. (“First Choice”), and Savtira Corporation (“Savtira”). STALTARE admitted misleading investors in connection with both schemes by making numerous false statements and misrepresentations and by misappropriating investment funds for his own personal use. STALTARE was arrested on August 8, 2013, and pled guilty today to a four-count Indictment before U.S. District Judge George B. Daniels.

STALTARE was previously convicted of securities fraud in United States v. Herbert Cannon et al., 04 Cr. 842 (GBD), in the Southern District of New York. STALTARE was sentenced to 32 months in prison by Judge Daniels in connection with his prior conviction.

Manhattan U.S. Attorney Preet Bharara stated: “Steven Staltare purported to offer investment opportunities, but was instead engaged in a shell game where he failed to pay for securities he purchased from one victim and offered them as collateral for a loan he secured from another victim whom he never repaid. He also took hundreds of thousands of dollars from other investors and never invested it as promised, instead using the money for himself. Now, having admitted his crimes, he stands to pay for them with his liberty.”

According to the allegations contained in the Indictment, the underlying criminal Complaint unsealed on August 7, 2013, and statements made during court proceedings:

First, from at least 2011 through 2012, STALTARE defrauded two investors (“Victim-1” and “Victim-2,” respectively) in connection with the transfer of shares of Dematco stock. In late 2011, STALTARE approached Victim-1 and asked Victim-1 to transfer hundreds of thousands of shares of Dematco stock that Victim-1 owned to a “partner” of STALTARE in exchange for $70,000 in cash. Victim-1 agreed to turn over his shares in Dematco in exchange for $70,000. At approximately the same time, STALTARE and another individual (“Partner-1”) approached Victim-2 and asked Victim-2 to loan them approximately $150,000 so that STALTARE could purchase shares of Dematco stock. STALTARE and Partner-1 promised Victim-2 that he would be paid $200,000 in three weeks and that Victim-2 would receive approximately 1/3 of the profits from the eventual sale of Dematco stock. Victim-2 was also promised that he would receive Dematco stock certificates as collateral for this loan. Based upon these representations, Victim-2 agreed to make this $150,000 loan to STALTARE and Partner-1. After Victim-2 made this loan, STALTARE provided Victim-2 with stock certificates that had been provided to STALTARE by Victim-1. Ultimately, STALTARE did not provide Victim-1 with the $70,000 that he had promised to pay in exchange for Victim-1’s shares of Dematco, nor did STALTARE provide Victim-2 with any repayment for the $150,000 loan or any profits from any sale of Dematco stock. In reality, STALTARE transferred Victim-1’s shares in Dematco to Victim-2 without compensating Victim-1, and misappropriated the funds provided by Victim-2 for STALTARE’s own personal benefit.

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

In the course of effectuating these fraudulent schemes, STALTARE defrauded victims in excess of $600,000 from 2011 through 2013.

STALTARE, 49, of Tampa, Florida, pled guilty to two counts of securities fraud and two counts of wire fraud. Each of the securities fraud and wire fraud charges carries a maximum term of 20 years in prison. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge. STALTARE is scheduled to be sentenced on March 12, 2015, at 10:00 a.m. by Judge Daniels.

Mr. Bharara praised the investigative work of the USPIS.

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 Brian Blais is in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, Shantelle P. Kitchen, Acting Special Agent in Charge of the New York Office of the Internal Revenue Service, Criminal Investigation Division (“IRS-CID”), and 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”), announced that EDWIN MEJIA pled guilty today to participating in a scheme to cash more than $400,000 in fraudulently obtained federal tax refund checks issued in other people’s names. MEJIA was arrested in March 2014 and pled guilty today before U.S. District Judge Paul A. Engelmayer.

According to the allegations in the Complaint and Information filed in Manhattan federal court, and statements made during today’s plea proceeding:

Until approximately March 2014, MEJIA worked at branches of a bank (“Bank-1”) in Yonkers and Manhattan. MEJIA initially was a banker and later became the branch manager of multiple branches of Bank-1. From approximately 2010 through 2013, MEJIA participated in a scheme to fraudulently obtain and cash tax refund checks issued by the United States Treasury. The fraudulent refund checks were generated by the filing of false and fraudulent tax returns in the names of other people (the “purported filers”), and the checks were made payable to the purported filers. As part of this scheme, MEJIA helped facilitate the cashing of the fraudulent refund checks.

In particular, MEJIA obtained personal identification information for the purported filers, including their Social Security numbers and dates of birth. MEJIA then cashed the fraudulent checks himself or by paying a co-conspirator to do so. When cashing a fraudulent check himself, MEJIA presented the refund check, along with the corresponding Social Security number and date of birth of the purported filer, to a complicit bank employee. Other times, MEJIA paid a co-conspirator to open bank accounts in the names of the purported filers and cash the checks. As part of the scheme, MEJIA cashed, or caused others to cash, more than $400,000 in fraudulent Treasury checks.

* * *

MEJIA, 31, of Yonkers, New York, pled guilty to one count of theft of public funds, which carries a maximum sentence of 10 years in prison, and one count of aggravated identity theft, which carries a mandatory consecutive sentence of two years in prison. The statutory minimum and maximum sentences are prescribed by Congress and are provided here for informational purposes, as any sentencing of the defendant will be determined by the judge. As part of his plea, MEJIA also agreed to pay $442,642.58 in forfeiture. He is scheduled to be sentenced by Judge Engelmayer on March 12, 2015, at 2:15 p.m.

Mr. Bharara praised the outstanding efforts of IRS-CID and HSI 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.

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Edwin Mejia Information

Preet Bharara, the United States Attorney for the Southern District of New York, Shantelle P. Kitchen, Acting Special Agent in Charge of the New York Office of the Internal Revenue Service, Criminal Investigation Division (“IRS-CID”), and 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”), announced that EDWIN MEJIA pled guilty today to participating in a scheme to cash more than $400,000 in fraudulently obtained federal tax refund checks issued in other people’s names. MEJIA was arrested in March 2014 and pled guilty today before U.S. District Judge Paul A. Engelmayer.

According to the allegations in the Complaint and Information filed in Manhattan federal court, and statements made during today’s plea proceeding:

Until approximately March 2014, MEJIA worked at branches of a bank (“Bank-1”) in Yonkers and Manhattan. MEJIA initially was a banker and later became the branch manager of multiple branches of Bank-1. From approximately 2010 through 2013, MEJIA participated in a scheme to fraudulently obtain and cash tax refund checks issued by the United States Treasury. The fraudulent refund checks were generated by the filing of false and fraudulent tax returns in the names of other people (the “purported filers”), and the checks were made payable to the purported filers. As part of this scheme, MEJIA helped facilitate the cashing of the fraudulent refund checks.

In particular, MEJIA obtained personal identification information for the purported filers, including their Social Security numbers and dates of birth. MEJIA then cashed the fraudulent checks himself or by paying a co-conspirator to do so. When cashing a fraudulent check himself, MEJIA presented the refund check, along with the corresponding Social Security number and date of birth of the purported filer, to a complicit bank employee. Other times, MEJIA paid a co-conspirator to open bank accounts in the names of the purported filers and cash the checks. As part of the scheme, MEJIA cashed, or caused others to cash, more than $400,000 in fraudulent Treasury checks.

MEJIA, 31, of Yonkers, New York, pled guilty to one count of theft of public funds, which carries a maximum sentence of 10 years in prison, and one count of aggravated identity theft, which carries a mandatory consecutive sentence of two years in prison. The statutory minimum and maximum sentences are prescribed by Congress and are provided here for informational purposes, as any sentencing of the defendant will be determined by the judge. As part of his plea, MEJIA also agreed to pay $442,642.58 in forfeiture. He is scheduled to be sentenced by Judge Engelmayer on March 12, 2015, at 2:15 p.m.

Mr. Bharara praised the outstanding efforts of IRS-CID and HSI 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, and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today that JOHN RE, 54, of East Hampton, New York, pled guilty to one count of wire fraud in connection with his nine-year scheme to defraud art collectors who sought to acquire works by famous American artists such as Jackson Pollock and Willem De Kooning, which resulted in approximately $2.5 million in losses to victims. RE pled guilty today before U.S. District Judge P. Kevin Castel.

According to the allegations set forth in the Criminal Complaint, other documents filed in the case, and statements made at related court proceedings:

From at least March 2005 through January 2014, RE invented a false provenance, the history demonstrating an artwork’s authenticity, for dozens of paintings, sketches, and pastels that he sold to art collectors in order to extract thousands of dollars from his victims for every piece that RE sold. RE persisted in selling these artworks despite his knowledge that their provenance was falsified and despite repeated instances of de-authentication by respected appraisers and experts in the field of forensic analysis. In at least one instance, when confronted by a victim, RE resorted to threats of violence, claiming that his victim should be wary of RE’s purported connections to organized crime.

In his plea agreement, RE expressly acknowledged that he has never discovered or sold any work of art found in a home that formerly belonged to a purported acquaintance of Jackson Pollock and Willem De Kooning, as RE had falsely represented to collectors, and RE further acknowledged that he knowingly and fraudulently fabricated such a provenance for every work of art to which he previously attributed such a provenance.

RE, 54, of East Hampton, New York, pled guilty to one count of wire fraud, which carries a maximum sentence of twenty years in prison. The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes, as any sentencing of the defendant will be determined by the judge. RE also agreed to forfeit $2,500,000, representing the proceeds of RE’s sales of fraudulent artworks. In connection with today’s plea, Judge Castel issued a post-indictment restraining order that effectively restricts RE’s ability to sell a submarine – the “U.S.S. Deep Quest” – pending the satisfaction of RE’s forfeiture debt. RE purchased the submarine in Texas using proceeds he obtained from the fraudulent sale of a purported Jackson Pollock painting in the course of the scheme. RE is scheduled to be sentenced by Judge Castel on April 10, 2015.

Mr. Bharara praised the outstanding efforts of the FBI, the Suffolk County District Attorney’s Office, and the Suffolk County Police Department in the investigation. Mr. Bharara also thanked the Village of East Hampton Police Department for their assistance with this case.

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

Preet Bharara, the United States Attorney for the Southern District of New York, and Robert J. Sica, the Special Agent-in-Charge of the New York Office of the United States Secret Service, announced today that ALI REZA KANUGA pled guilty yesterday in Manhattan federal court to conspiracy to commit access device fraud and aggravated identity theft. KANUGA is the ninth defendant to plead guilty as part of an international investigation into a massive credit card fraud ring, which was responsible for stealing the personal financial information of hundreds of thousands of consumers, and using it to steal tens of millions of dollars worldwide. KANUGA, who was extradited from the United Kingdom in February 2012, pled guilty yesterday before U.S. Magistrate Judge Michael H. Dolinger.

Manhattan U.S. Attorney Preet Bharara said: “Ali Reza Kanuga and his co-conspirators stole sensitive bank account information around the globe, travelling from one country to the next to victimize consumers and financial institutions alike. Because of the wide-ranging investigation conducted by this Office and the U.S. Secret Service, together with our international partners, this global criminal organization has been dismantled, and its leaders are either behind bars or are fugitives from justice.”

Chart of Defendants

Secret Service Special Agent-in-Charge Robert J. Sica said: “The arrest of Ali Reza Kanuga is yet another example of how the Secret Service continues to successfully combat data theft and financial crimes. The Secret Service utilized state-of-the-art investigative techniques to dismantle this criminal network. Our success in this case and other similar investigations is a result of the extraordinary work of our cyber investigators and our close work with our extensive network of law enforcement partners.”

According to the allegations contained in the Indictment filed on November 15, 2012, and other court documents:

From at least 2007 until at least the summer of 2011, the Khan Family Organization was an international criminal organization principally in the business of stealing credit card, bank account, and related financial information from consumers at retail establishments; using the stolen account information to extract cash from automated teller machines (“ATMs”) using counterfeit ATM cards; and laundering the proceeds of the scheme back to its organizers. The Khan Family Organization (or the “Organization”) – which has at various times been based out of the United Kingdom, the United Arab Emirates, and the Netherlands – developed an especially sophisticated method of fraudulently obtaining customer account data from retail locations. At the time of the arrest of its leader, Irfan Khan, a/k/a “Superman,” in or about March 2010, the Organization was one of the largest, if not the single largest, credit card skimming syndicates throughout the world. As described below, members and associates of the Organization were dispatched throughout the United Kingdom, mainland Europe, and elsewhere to install credit card reader devices that had been customized to steal users’ account information, through the addition of particularly advanced “skimmers.”

The Organization’s leadership then dispatched members and associates throughout the world – including to New York City, the United Kingdom, mainland Europe, Southeast Asia, the Middle East, Africa, the Caribbean, South America, Australia, and elsewhere – to create counterfeit ATM cards using the stolen account information and fraudulently to withdraw cash from victims’ accounts. Members and associates of the Organization then laundered the proceeds of the fraud back to its leadership through various means, including by physically carrying cash internationally; through structured Western Union or similar transactions; and through the informal system of banking known as hawala or its functional equivalent.

Using extraordinarily sophisticated technology, the Organization began to mass produce its skimmers for installation into bank-card readers (also known as PIN Entry Devices, or “PEDs”) in retail locations throughout Europe. The Organization operated on a massive scale:

● In 2008, a member of the Organization’s leadership contacted various electronics and software purveyors in Britain to source component parts to manufacture the Organization’s skimmers, ordering, for example, 900 modems and 1,300 circuit boards.

● Between April 2008 and March 2009, a secure FTP site used by the Organization to receive text messages containing stolen accounts and PINs received approximately 350,000 transfers of data, representing approximately the number of accounts compromised by the Organization over that period.

● In early 2009, a pair of police seizures from the Organization’s premises in London resulted in the seizure of almost a thousand PEDs in various stages of alteration.

● In early 2010, two co-conspirators were arrested in the Netherlands carrying a memory device that contained, among other things, approximately 186,000 unique stolen bank account numbers and their associated PINS.

● In April 2011, three co-conspirators were arrested in the Netherlands carrying a laptop computer that contained, among other things, approximately 15,000 unique stolen bank account numbers and their associated PINS.

KANUGA was responsible for leading a group of conspirators – including co-defendants Ujval Jethwa and Michaela Jo Berney – in installing the Organization’s custom-made PEDs in at least 15 retail locations in the Netherlands. In March 2010, data stolen from the Dutch skimmers was disseminated to members and associates of the Organization throughout the world, who used it to create counterfeit ATM cards, which they then used at local banks and other ATM locations. For instance, Jethwa, co-defendant Asif Khan, and another co-conspirator travelled from the United Kingdom to New York City. On just two days, March 6-7, 2010, Jethwa and other co-conspirators, including Timothy Guvercin, engaged in at least 1,110 transactions at approximately 95 locations in Manhattan, resulting in the theft of approximately $260,000 in cash. During the same two days, different co-conspirators were using the same stolen data in at least 18 other countries. Asif Khan then assisted with laundering those fraud proceeds back to the Organization’s leadership in Europe and the Middle East through the use of hawala bankers.

At around the same time, Irfan Khan and another co-conspirator, Zeshan Mian, were arrested in Amsterdam, the Netherlands, and were charged with possession of stolen bank data. They had, among other things, a memory card containing approximately 186,000 unique stolen bank card numbers and their associated PINS, along with an illustrated, step-by-step manual to creating the Organization’s skimming device, which Irfan Khan and Mian had created.

While in prison, Irfan Khan continued to run the Organization. For example, in April 2011, co-defendants Mohammed Shabaz Khawar, Abdul Qayam Durrani, Fassel Azim, and David Ashley Smith travelled to the Netherlands from the United Kingdom to install additional PEDs at retail outlets in and around Rotterdam. Khawar, Durrani, and Smith were arrested by Dutch authorities, in possession of a laptop computer that contained financial information about more than 15,000 back accounts, as well as skimmers built to the Organization’s specifications. The group also possessed a “top up” card to add credit to an illicit pre-paid cellphone that Irfan Khan was using in his Dutch prison to direct the Organization.

KANUGA, 32, of London, England, pled guilty to one count of conspiracy to commit access device fraud and one count of aggravated identity theft. The conspiracy count carries a maximum sentence of seven and a half years in prison, a maximum fine of $250,000, or twice the gross gain or loss from the offense, and forfeiture of the proceeds of the offense. The aggravated identity theft count carries a mandatory two-year sentence, which must run consecutively to any other sentence imposed. The statutory minimum and 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. A chart reflecting the status of the other charged defendants is attached. KANUGA is scheduled to be sentenced in February 2015.

Mr. Bharara praised the investigative work of the United States Secret Service. He also thanked the Politie Amsterdam Amstelland, the Arrondissementsparket Amsterdam, the Metropolitan Police Service, the City of London Police, and the Dedicated Cheque and Plastic Crime Unit for their help in the investigation.

This case is being handled by the Office’s General Crimes Unit. Assistant U.S. Attorneys Matthew L. Schwartz and Negar Tekeei are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and Sam Hirsch, the Acting Assistant Attorney General for the Environment and Natural Resources Division of the Department of Justice, announced that XIAO JU GUAN, a/k/a “Tony Guan,” a Canadian antiques dealer, pled guilty today in Manhattan federal court to attempting to smuggle rhinoceros horns from New York to Canada. GUAN was arrested in March 2014 as part of “Operation Crash,” a nationwide crackdown in the illegal trafficking in rhinoceros horns, for his role in smuggling and attempting to smuggle rhinoceros horns as well as items carved from elephant ivory and coral, from auction houses throughout the United States to Canada. He pled guilty today before U.S. District Judge Laura Taylor Swain.

Manhattan U.S. Attorney Preet Bharara said: “Because all species of rhinos are endangered, and elephant populations are either vulnerable or endangered, the trade in rhinoceros horns and elephant ivory is stringently limited. The survival of these magnificent animals depends in large part on enforcement of laws and international treaties governing such trade. Tony Guan’s admitted conduct increased the existential threat to these creatures, and now he awaits the penalty for that conduct.”

Acting Assistant Attorney General Sam Hirsch said: “The United States will aggressively prosecute anyone who illegally traffics in endangered wildlife species, in whatever form. Rhinos and elephants are not antiques, as the president of an antique company engaged in international trade should know. These are iconic animals of pre-historic origin, fighting for their very survival as a species. The illegal trade in rhino horn and elephant ivory and the escalation of black-market prices are directly related to horrific poaching on living animals. Guan has admitted to smuggling rhino horn and elephant ivory across international borders. The United States is grateful for the Canadian authorities’ coordination and assistance in bringing this wildlife trafficker to justice.”

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

GUAN, the president and owner of an antiques business in Richmond, British Columbia, was arrested on March 29, 2014, after flying from Vancouver to New York and purchasing two endangered black rhinoceros horns from undercover special agents with the U.S. Fish and Wildlife Service at a storage facility in the Bronx. After purchasing the horns, GUAN had the undercover agents drive him and a female accomplice acting as his interpreter to a nearby express mail store where he mailed the horns to an address in Point Roberts, Washington, less than a mile from the Canadian border and 17 miles from his business. GUAN falsely labeled the box of black rhino horns as containing “handicrafts.” GUAN indicated that he had people who could drive the horns across the border and that he had done so many times before.

As part of his plea, GUAN admitted that he, and others acting at his direction, smuggled more than $400,000 of rhino horns and sculptures made from elephant ivory and coral from various U.S. auction houses to Canada by the same method, or by having packages mailed directly to Canada with false paperwork and without the required declaration or permits.

GUAN, 39, of Richmond, British Columbia, Canada, pled guilty to one count of attempted smuggling, which carries a maximum penalty of ten years in prison. He is scheduled to be sentenced by Judge Swain on March 13, 2015, at 3:30 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, GUAN agreed to forfeit items recovered from a search of his antiques business in Canada, and also agreed that he will not participate in any further trade, purchase, or sale of wildlife in the United States.

Rhinoceros are an herbivore species of prehistoric origin and one of the largest remaining mega-fauna on earth. They have no known predators other than humans. All species of rhinoceros are protected under U.S. and international law. Since 1976, trade in rhinoceros horn has been regulated under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), a treaty signed by over 170 countries around the world to protect fish, wildlife, and plants that are or may become imperiled due to the demands of international markets.

Operation Crash is a continuing investigation by the Department of the Interior’s Fish and Wildlife Service, in coordination with the Department of Justice. A “crash” is the term for a herd of rhinoceros. Operation Crash is an ongoing effort to detect, deter, and prosecute those engaged in the illegal killing of rhinoceros and the unlawful trafficking of rhinoceros horns.

Mr. Bharara commended the U.S. Fish and Wildlife Service for its outstanding work in this investigation. He also thanked the Department of Justice’s Environment and Natural Resources Division, and Canada’s Wildlife Enforcement Directorate.

The case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Janis M. Echenberg and Senior Litigation Counsel Richard A. Udell with the Environmental Crimes Section of the Department of Justice are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that BRENDAN JOHNSTON, an administrator of Blackshades who helped market and sell malicious software, or malware, including the Blackshades’ Remote Access Tool (“RAT”), pled guilty today in Manhattan federal court to conspiracy to commit computer hacking. As an administrator, JOHNSTON marketed and sold the RAT and other malware, and provided technical assistance to Blackshades’ customers. He pled guilty today before U.S. District Judge Jesse M. Furman.

Manhattan U.S. Attorney Preet Bharara said: “Today Brendan Johnston, who helped market and sell the Blackshades RAT, became the latest individual to plead guilty to computer hacking offenses in connection with this case. This Office will continue to work with our law enforcement partners at the Federal Bureau of Investigation to find and prosecute those who create, market, and employ malicious software.”

According to the allegations in documents filed in Manhattan federal court, and statements made at today’s plea and other court proceedings:

Beginning in at least 2010, an organization known as “Blackshades” sold and distributed malware to thousands of cybercriminals throughout the world. Blackshades’ flagship product was the RAT – a sophisticated piece of malware that enabled cybercriminals secretly and remotely to gain control over a victim’s computer. After installing the RAT on a victim’s computer, a user of the RAT had free rein to, among other things, access and view documents, photographs, and other files on the victim’s computer, record all of the keystrokes entered on the victim’s keyboard, steal the passwords to the victim’s online accounts, and even activate the victim’s web camera to spy on the victim – all of which could be done without the victim’s knowledge.

The RAT was purchased by at least several thousand users in more than 100 countries and used to infect more than half a million computers worldwide. Blackshades generated sales of more than $350,000 between September 2010 and April 2014.

JOHNSTON personally used Blackshades malware and was also a paid employee of the Blackshades organization who, among other things, marketed and sold the RAT, and provided technical assistance to users of the RAT to assist them in infecting and remotely controlling victims’ computers with the RAT. In certain online postings, JOHNSTON described himself as an “authorized seller” and “admin,” or administrator, of Blackshades.

JOHNSTON, 24, of Thousand Oaks, California, pled guilty today before U.S. District Judge Jesse M. Furman to conspiracy to commit computer hacking, which carries a maximum sentence of 10 years in prison. He is scheduled to be sentenced by Judge Furman on May 27, 2015, at 3:30 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.

Alex Yücel, the alleged owner of Blackshades and co-creator of the RAT, was arrested in Moldova in November 2013 and extradited to the United States in May 2014. His case is pending before United States District Judge Kevin P. Castel. The charges against Yücel are merely accusations and he is presumed innocent unless and until proven guilty.

Michael Hogue, the co-creator of the RAT, pled guilty before Judge Castel in January 2013 and is awaiting sentencing.

Kyle Fedorek, a customer of Blackshades who purchased the RAT and used it to steal financial and other account information from more than 400 victims, pled guilty on August 19, 2014, before U.S. Magistrate Judge Gabriel W. Gorenstein and is scheduled to be sentenced by U.S. District Judge Vernon S. Broderick on January 30, 2015, at 2:30 p.m.

Marlen Rappa, a customer of Blackshades who purchased the RAT and used it to infect victims’ computers, spy on those victims using their web cameras, and steal personal files from their computers, pled guilty on October 31, 2014, before U.S. District Judge Valerie E. Caproni. He is scheduled to be sentenced by Judge Caproni on January 29, 2015, at 2:00 p.m.

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

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Sarah Lai and Daniel Noble are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and Thomas M. Harrigan, the Deputy Administrator of the United States Drug Enforcement Administration (“DEA”), today announced that MICHAEL FILTER was extradited from Estonia where he had been arrested for conspiracy to import cocaine into the United States and conspiracy to distribute cocaine on board an aircraft. FILTER, a German citizen, arrived in the Southern District of New York yesterday, and made his first appearance in Manhattan federal court today. FILTER’s co-defendants, Joseph Manuel Hunter, Timothy Vamvakias, and Dennis Gogel were previously arrested in Thailand (Hunter) and Liberia (Vamvakias and Gogel) and brought to the United States in September 2013. Co-defendant Slawomir Soborski was previously arrested in Estonia in September 2013 and was extradited to the United States in April 2014.

Manhattan U.S. Attorney Preet Bharara said: “Now that he has arrived in the Southern District, Michael Filter can begin to answer for his role as an alleged member of a would-be ‘security team’ to international narcotics traffickers. This Office remains committed to pursuing and prosecuting those who would help perpetuate the flow of illegal drugs into our country.”

DEA Deputy Administrator Thomas M. Harrigan said: “Michael Filter, who allegedly facilitated global drug trafficking and violence with associates such as Joseph Hunter, will now face justice in the United States. A former member of the German armed forces, Filter was a key player in a worldwide criminal enterprise that included associates charged in an elaborate murder-for-hire scheme.”

According to the allegations contained in the Superseding Indictment:

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

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 FILTER, Vamvakias, Gogel, and Soborski.

Hunter and his co-defendants, including FILTER, thereafter agreed, in meetings and communications with the CSs, to provide security and surveillance services to the narcotics trafficking organization. Hunter and his four co-defendants provided a variety of services to the CSs’ purported narcotics organization. In late March 2013, in Thailand, at Hunter’s direction, FILTER, Soborski, and Gogel surveilled a vessel on behalf of the CSs’ purported narcotics trafficking organization. In April 2013, in Mauritius, at the direction of the CSs, FILTER, Soborski, and Gogel provided security for a meeting at which the participants discussed the distribution of illegal narcotics to the United States, and in late June 2013, in the Bahamas, FILTER, Soborski, Vamvakias, and Gogel conducted surveillance of a purported U.S.-registered aircraft at the direction of one of the CSs. That CS informed the defendants that the aircraft was to be loaded with 300 kilograms of cocaine to be shipped to New York.

In late September 2013, FILTER was arrested in Estonia, with Soborski, in coordination with Estonian authorities, and remained in the custody of Estonian authorities until his extradition today to the United States.

FILTER, Hunter, Vamvakias, Gogel, and Soborski have each been charged with conspiracy to import cocaine into the United States (Count One) and FILTER, Vamvakias, Gogel, and Soborski are also charged with conspiracy to distribute cocaine on board an aircraft (Count Five).

Hunter, Vamvakias, and Gogel are also charged with conspiracy to murder a law enforcement agent and a person assisting a law enforcement agent (Count Two); conspiracy to kill a person to prevent communications to law enforcement agents (Count Three); and conspiracy to possess a firearm in furtherance of a crime of violence (Count Four). These additional charges against Hunter, Vamvakias, and Gogel relate to their alleged participation in a murder-for-hire plot proposed by the CSs targeting a Special Agent of the DEA and a person who those defendants believed was providing information to the DEA about the CSs’ narcotics trafficking. FILTER is not charged with participating in the murder-for-hire plot.

Each count carries a maximum penalty of life in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge. The case is assigned to U.S. District Judge Laura Taylor Swain. Trial has been set for March 9, 2015.

The charges, arrests, and transfers of the defendants 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; 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’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, Aimee Hector, Anna Skotko, and Emil Bove are in charge of the prosecution.

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

Preet Bharara, the United States Attorney for the Southern District of New York (“SDNY”), and Loretta E. Lynch, the United States Attorney for the Eastern District of New York (“EDNY”), announced that DANIEL BARRERA BARRERA, also known as “Loco Barrera,” a citizen of Colombia, pled guilty today in the Southern District of New York before U.S. Magistrate Judge Ronald L. Ellis to conspiring to distribute and manufacture cocaine knowing that it would be imported into the United States. For decades, BARRERA manufactured hundreds of tons of cocaine annually in Colombia and trafficked it to various parts of the world, including the U.S., and laundered tens of millions of dollars in proceeds from that narcotics trafficking activity. BARRERA was previously extradited from Colombia to the United States on July 9, 2013.

In March 2010, the U.S. Department of the Treasury’s Office of Foreign Assets Control designated BARRERA as a “Special Designated Narcotics Trafficker,” pursuant to the Foreign Narcotics Kingpin Designation Act. BARRERA was arrested in Venezuela on September 18, 2012. Thereafter, he was sent to Colombia, from where the U.S. sought and obtained BARRERA’s extradition. The extradition and guilty plea of BARRERA is the result of an ongoing Organized Crime Drug Enforcement Task Forces (“OCDETF”) investigation led by the Drug Enforcement Administration (“DEA”) and Homeland Security Investigations (“HSI”). The principal mission of the OCDETF program is to identify, disrupt, and dismantle the most serious drug trafficking, weapons trafficking, and money laundering organizations, and those primarily responsible for the nation’s illegal drug supply.

U.S. Attorney Preet Bharara said: “Daniel Barrera Barrera operated at the interface of two Colombian terrorist organizations that were sworn enemies of each other but each of which benefitted from Barrera’s patronage. As he has now admitted in our courthouse, Barrera bought cocaine paste from the FARC and, under the protection of the AUC, turned it into hundreds of tons of hugely profitable product annually, some of which he knew was intended for distribution in the U.S. A drug kingpin who enriched two terrorist organizations and himself by producing and peddling poison now stands to lose his wealth, his empire, and his liberty.”

U.S. Attorney Loretta E. Lynch said: “Daniel ‘Loco’ Barrera Barrera’s reign as one of the world’s most prolific narcotics traffickers has come to an end. Barrera’s illegal empire, funded by millions of dollars of illicit proceeds and backed by some of the most lethal drug cartels and terrorist groups in the world, wreaked havoc in Colombia and around the world for decades. The amount of destruction Barrera wrought upon the world, all in pursuit of staggering profits, is truly incalculable. This plea demonstrates our government’s commitment to bringing all narcotics traffickers to justice, no matter how rich, powerful, ruthless and violent they may be.”

As alleged in the Superseding Indictment filed in the Southern District of New York (S1 07 Cr. 862 (AKH)), the Superseding Indictment filed in the Eastern District of New York (S2 10 Cr. 288 (ILG)), statements made at today’s guilty plea and other court proceedings, and other information in the public record:

From 1998 until 2010, BARRERA ran a cocaine manufacturing and trafficking syndicate out of Colombia. BARRERA purchased the raw cocaine base or paste from the designated terrorist group Fuerzas Armadas Revolucionarias de Colombia (Revolutionary Armed Forces of Colombia, or the “FARC”). The FARC, which has been and is dedicated to the violent overthrow of the democratically elected Government of Colombia, has been the world’s largest supplier of cocaine and has engaged in bombings, massacres, kidnappings, and other acts of violence within Colombia.

After purchasing the raw cocaine base from the FARC, BARRERA converted the raw cocaine into powder at laboratories he owned and operated in an area of Colombia controlled by the since demobilized terrorist group, Autodefensas Unidas de Colombia (the “AUC”). For years, the AUC’s main political objective was to defeat the FARC in armed conflict, and it financed its terrorist activities through the proceeds of cocaine trafficking in AUC-controlled regions of Colombia. At the time of BARRERA’s criminal conduct, the FARC and the AUC were both designated by the U.S. Department of State as Foreign Terrorist Organizations.

After processing the cocaine powder in his laboratories, BARRERA arranged for the shipment and transportation of the cocaine powder to locations on four continents, including the United States. Although BARRERA purchased raw materials for cocaine production from the FARC, he was able to maintain his network of cocaine-processing laboratories in AUC-controlled territory, in part by paying monthly “taxes” to the AUC. The fees BARRERA paid to the AUC also allowed him to safely move the processed cocaine through and out of Colombia.

Each month, BARRERA processed approximately 30,000 kilograms of raw cocaine base into about the same amount of cocaine powder, resulting in approximately 400 tons of cocaine annually. In total, BARRERA reaped tens of millions of dollars of profits from cocaine trafficking, which he laundered through illicit means.

Earlier today, BARRERA, 47, pled guilty in the Southern District of New York to one count of conspiring to distribute and manufacture cocaine knowing it would be unlawfully imported into the U.S. On that count, BARRERA faces a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison. BARRERA is scheduled to be sentenced by U.S. District Judge Alvin K. Hellerstein on February 27, 2015.

On October 9, 2014, BARRERA pleaded guilty in the Eastern District of New York to one count of conspiring to launder money. On that count, BARRERA faces a maximum sentence of 20 years in prison. BARRERA is scheduled to be sentenced by U.S. District Judge I. Leo Glasser on January 22, 2015.

BARRERA is also charged in the Southern District of Florida with one count of conspiring to import cocaine into the U.S. and one count of conspiring to manufacture and distribute cocaine knowing that it would be unlawfully imported into the U.S. On those counts, BARRERA faces a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison. Following his prosecutions in the Southern and Eastern Districts of New York, BARRERA will be presented and arraigned in the Southern District of Florida. The charge and allegations contained in the Southern District of Florida Indictment are merely accusations and the defendant is presumed innocent of that charge unless and until proven guilty.

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 and Ms. Lynch praised the outstanding work of the OCDETF, working in cooperation with HSI New York’s El Dorado Task Force, the DEA’s Bogota Country Office, the DEA’s Caracas Country Office, the DEA’s Miami Field Division, the DEA’s New York Drug Enforcement Task Force – which comprises agents and officers of the DEA, the New York City Police Department, and the New York State Police – as well as HSI Bogota. Mr. Bharara and Ms. Lynch also thanked the Colombian National Police, the U.S. Marshals Service, and the U.S. Department of Justice’s Office of International Affairs for their ongoing assistance.

The Southern District of New York case is being handled by that office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Jenna Dabbs, Benjamin Naftalis, and Andrea Surratt are in charge of the prosecution. The Eastern District of New York case is being handled by that office’s International Narcotics and Money Laundering Section. Assistant United States Attorneys Justin Lerer, Soumya Dayananda, and Amir Toossi are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that MICHAEL LEVITIS, the owner of MISSION SETTLEMENT AGENCY (“MISSION”), was sentenced in Manhattan federal court to 108 months in prison in connection with a multimillion-dollar scheme that victimized more than 1,200 financially struggling people across the country. MISSION was also sentenced today, and ordered to pay a fine of $4,393,044. LEVITIS and MISSION pled guilty on April 8, 2014, before U.S. District Judge Paul G. Gardephe, who also imposed today’s sentences.

Manhattan U.S. Attorney Preet Bharara said: “Michael Levitis preyed upon people across the country who, like so many Americans, were struggling to pay off their debts after the financial downturn. Through Mission Settlement Agency, Levitis lied about quick, guaranteed cures to their serious financial problems in order to trick them out of money they could not afford to lose. Worse, he created, for many people, a nightmare of spiraling debt and plummeting credit scores that plagues them to this day. With his sentence today, he has been held responsible and punished for his crimes. As we demonstrated just yesterday through our announcement of another consumer debt-related case, this Office is committed to working with our law enforcement partners to pursue and prosecute those who seek to profit by exploiting financially struggling and vulnerable people. I would like to thank the U.S. Postal Inspection Service for their work on this case, and the Consumer Financial Protection Bureau for bringing this matter to our attention.”

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

Beginning in 2009, MISSION offered “debt settlement” services to financially disadvantaged people who were struggling or unable to pay their credit card debts. Like other purported debt settlement providers, MISSION held itself out as a company that could successfully negotiate to lower the overall debt its customers owed to credit card companies and banks. MISSION solicited prospective customers through telemarketing and mail solicitations. Thereafter, MISSION’s sales representatives typically spoke to the prospective customers on the phone, describing MISSION’s work and its supposed ability to renegotiate debt.

LEVITIS was MISSION’s beneficial owner, and was responsible for managing MISSION’s day-to-day operations, its finances, its hiring and termination of employees, and its advertising and solicitation of customers.

From 2009 through May 2013, at LEVITIS’s direction, he and his co-conspirators Denis Kurlyand, Boris Shulman, Manuel Cruz, Felix Lemberskiy, and Zakhir Shirinov systematically exploited and defrauded over 1,200 customers across the country, who were financially disadvantaged people struggling to pay their credit card debts. They tricked people into paying MISSION for purported debt settlement services by lying to prospective customers about MISSION’s ability to help settle their debts, the fees that MISSION charged, and MISSION’s purported affiliation with the federal government. Among other things, the defendants: (1) lied about and/or concealed MISSION’s fees, falsely assuring customers that MISSION would charge a mere $49 per month when, in truth, MISSION took thousands of dollars in fees from funds that its customers believed would be used to pay creditors, (2) deceived customers by fraudulently and falsely promising that MISSION could slash their debts – typically, by 45% -- when, in fact, for the majority of its customers, MISSION did little or no work and failed to achieve any reduction in debt, and (3) sent prospective customers solicitation letters that falsely suggested that the agency was acting on behalf of or in connection with a federal governmental program, which letters included an image of the Great Seal of the United States and indicated that they were coming from the “Reduction Plan Administrator” of the purported “Office of Disbursement.” As a result of the defendants’ scheme, in addition to losing money, most of MISSION’s customers failed to achieve the reduction in debt that the defendants had promised them, and some of them suffered further declines in their credit ratings, were sued by their creditors, and/or fell into bankruptcy.

MISSION received over $6.6 million in fees during the course of the scheme. For more than 1,200 of its customers, MISSION took fees totaling nearly $2.2 million but never paid a penny to the customers’ creditors. LEVITIS used the money that MISSION took from its customers to pay for, among other things, the operating expenses of Rasputin, a restaurant/nightclub he controlled, lease payments for two different luxury Mercedes cars, credit card bills for his mother, and expenses for parties and other events featured in a reality television show in which he starred during the course of the scheme.

In addition to his prison term, LEVITIS, 38, of Brooklyn, New York, was sentenced to three years of supervised release, and ordered to pay forfeiture and restitution of $2,196,522 and a fine of $15,000.

In sentencing LEVITIS, Judge Gardephe said, “There is something special and extraordinary about the crimes here: the fact that they were directed at desperate people, hundreds of desperate people drowning in debt, trying to find a way out of their problems. […] The determination to extract from these people their last few dollars makes this crime extraordinary.”

LEVITIS and MISSION previously entered into a stipulation of settlement of the civil forfeiture action filed by the United States Attorney’s Office for the Southern District of New York entitled United States v. All Right, Title, and Interest in Rasputin Restaurant, 13 Civ. 3069 (GHW). As part of that stipulation of settlement, LEVITIS and MISSION consented to the entry of a permanent injunction barring them from providing, directly or indirectly, any debt relief or mortgage relief services in the future.

Five other defendants, Denis Kurlyand, Boris Shulman, Felix Lemberskiy, Zakhir Shirinov, and Manuel Cruz, previously pled guilty for their roles in the fraudulent scheme, and await sentencing.

Mr. Bharara praised the investigative work of the United State Postal Inspection Service. He also thanked the Consumer Financial Protection Bureau for referring this case to this Office and for their assistance in this matter. Mr. Bharara also thanked the New York City Department of Consumer Affairs for their assistance in the case.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Nicole W. Friedlander and Edward A. Imperatore are in charge of the prosecution. Assistant United States Attorney Carolina A. Fornos of the Office’s Asset Forfeiture Unit is responsible for the forfeiture aspects of the case.

U.S. Attorney Preet Bharara for the Southern District of New York and Acting Special Agent in Charge Shantelle P. Kitchen of the Internal Revenue Service-Criminal Investigation (IRS-CI) New York Field Office announced today the unsealing of an indictment against Peter Canale, a U.S. citizen and resident of Kentucky, for conspiring to defraud the IRS and evade taxes by establishing and maintaining secret, undeclared bank accounts in Switzerland.  Canale was arrested this morning at his residence in Jamestown, Kentucky, and is expected to be presented later today in the U.S. District Court for the Eastern District of Kentucky.  Canale is scheduled to be arraigned before U.S District Judge Katherine B. Forrest in Manhattan federal court on Dec. 3, 2014, at 3:00 p.m.

According to the allegations in the indictment unsealed today in Manhattan federal court:

Canale conspired with others – including Michael Canale, his brother, Beda Singenberger, a Swiss citizen who ran a financial advisory firm, and Hans Thomann, a Swiss citizen who served as a client adviser at UBS and certain Swiss asset management firms – to establish and maintain undeclared bank accounts in Switzerland and to hide those accounts from the IRS.  Canale used a sham entity to conceal from the IRS his ownership of the undeclared accounts and deliberately failed to report the accounts and the income generated in the accounts to the IRS.

In approximately 2000, a relative of Canale’s who held an undeclared bank account in Switzerland died and left a substantial portion of the assets in the undeclared account to Canale and Michael Canale.  Canale and his brother met with Thomann and Singenberger and determined they would continue to maintain the assets in the undeclared account for the benefit of Canale and his brother. 

Thereafter, in approximately 2005, Canale, with Singenberger’s assistance, opened an undeclared account at the Swiss bank Wegelin.  The account was opened in the name of a sham foundation formed under the laws of Lichtenstein to conceal Canale’s ownership.  As of Dec. 31, 2009, the account held assets valued at approximately $789,000.  

For each of the calendar years from 2007 through 2010, Canale willfully failed to report on his tax returns his interest in the undeclared accounts and the income generated in those accounts.  For each of these years, Canale also failed to file a Report of Foreign Bank and Financial Accounts (FBAR) with the IRS, as the law required him to do.

Canale, 61, is charged with one count of conspiracy to defraud the United States, evade taxes, and file a false and fraudulent income tax return, which carries a statutory maximum sentence of five years in prison.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

U.S. Attorney Bharara praised the outstanding investigative work of IRS-CI and also thanked the U.S. Department of Justice’s Tax Division for their assistance.

The case is being prosecuted by the U.S. Attorney’s Office for the Southern District of New York’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Jason Cowley and Sarah Paul and Special Assistant U.S. Attorney Jorge Almonte of the Tax Division 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.

Preet Bharara, the United States Attorney for the Southern District of New York, and Shantelle P. Kitchen, the Acting Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigations Division (“IRS-CI”), announced today the unsealing of an Indictment against PETER CANALE, a U.S. Citizen and resident of Kentucky, for conspiring to defraud the IRS and evade taxes by establishing and maintaining secret, undeclared bank accounts in Switzerland. CANALE was arrested this morning at his residence in Jamestown, Kentucky, and is expected to be presented later today in the United States District Court for the Eastern District of Kentucky. CANALE is scheduled to be arraigned before U.S District Judge Katherine B. Forrest in Manhattan federal court on December 3, 2014, at 3:00 p.m.

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

CANALE conspired with others – including his brother Michael Canale, Beda Singenberger, a Swiss citizen who ran a financial advisory firm, and Hans Thomann, a Swiss citizen who served as a client adviser at UBS and certain Swiss asset management firms – to establish and maintain undeclared bank accounts in Switzerland, and to hide those accounts from the IRS. CANALE used a sham entity to conceal from the IRS his ownership of the undeclared accounts, and deliberately failed to report the accounts and the income generated in the accounts to the IRS.

In approximately 2000, a relative of CANALE’s who held an undeclared bank account in Switzerland died and left a substantial portion of the assets in the undeclared account to CANALE and Michael Canale. CANALE and his brother met with Thomann and Singenberger and determined they would continue to maintain the assets in the undeclared account for the benefit of CANALE and his brother.

Thereafter, in approximately 2005, CANALE, with Singenberger’s assistance, opened an undeclared account at the Swiss bank Wegelin. The account was opened in the name of a sham foundation formed under the laws of Lichtenstein to conceal CANALE’s ownership. As of December 31, 2009, the account held assets valued at approximately $789,000.

For each of the calendar years from 2007 through 2010, CANALE willfully failed to report on his tax returns his interest in the undeclared accounts and the income generated in those accounts. For each of these years, CANALE also failed to file with the IRS a Report of Foreign Bank and Financial Accounts, or FBAR, as the law required him to do.

CANALE, 61, of Jamestown, Kentucky, is charged with one count of conspiracy to defraud the United States, evade taxes, and file a false and fraudulent income tax return, which carries a maximum sentence of five years in prison. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

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

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Jason Cowley and Sarah Paul and Special Assistant United States Attorney Jorge Almonte of the DOJ’s Tax Division 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.

US v Peter Canale Indictment