Southern District of New York

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, and William J. Bratton, Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of a complaint charging RONDU FRISBY, a/k/a “Reef,” for his role in an armed robbery of a store in the Diamond District of Manhattan on November 11, 2014. FRISBY was arrested yesterday and was presented today in Manhattan federal court before the Honorable Ronald L. Ellis and detained on consent.

Manhattan U.S. Attorney Preet Bharara said: “Thanks to the dogged detective work of the NYPD and the ATF, and the determined efforts of career prosecutors in my Office's Violent and Organized Crime Unit, one of the people allegedly responsible for a brazen armed robbery is in custody. As alleged, the defendant and his accomplices used deceit to gain entry to a Diamond District jewelry store in broad daylight last week, but once inside, the tactics turned violent. With the arrest of Rondu Frisby we are closer to apprehending the other two men willing to use a pistol for profit.”

ATF Acting Special Agent in Charge James Higgins said: “I am extremely gratified that the investigators involved have swiftly apprehended and arrested at least one of the perpetrators in this investigation. This arrest stems from the investigative efforts of the newly formed ATF/NYPD robbery task force. Yesterday's arrest demonstrates the effectiveness of combining federal and local law enforcement resources and expertise in targeting violent offenders.”

Police Commissioner William J. Bratton said: “Through coordinated efforts with our law enforcement partners, Rondu Frisby’s role was quickly uncovered, and he was tracked down and charged. We will continue to pursue the remaining fugitives until they too are brought to justice.”

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

On November 11, 2014, two men carried out an armed commercial 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. RONDU FRISBY, the defendant, is a friend of the owner of the store (the “Owner”). FRISBY arrived at the Store moments before the robbery after having told the Owner that he was going to come by to help a friend pick out jewelry for the friend’s girlfriend. Just after FRISBY arrived, at approximately 2:20 in the afternoon – in broad daylight as the Veteran’s Day Parade proceeded nearby – one man (“Perpetrator-1”), 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. FRISBY let Perpetrator-1 into the Store. After entering, Perpetrator-1 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. Perpetrator-1 then took out a black semiautomatic gun and pointed it at the Owner, FRISBY, and two others present and demanded that they give him all the jewelry in the Store. FRISBY and the others emptied more than $600,000 worth of jewelry from a safe and other locations and placed it into Perpetrator-1’s bag, before he and Perpetrator-2 left the scene. FRISBY, among others, was interviewed after the robbery and provided an account of what happened but did not state that he knew Perpetrator-1 or Perpetrator-2.

Perpetrator-1 was identified based on fingerprint analysis of the envelopes left in the store, and a cellphone number for Perpetrator-1 was then obtained. Cellphone analysis shows 25 phone communications between FRISBY and Perpetrator-1 on the day of the robbery, both before and after the robbery but not during it. In addition, surveillance footage from 47th Street just before the robbery shows FRISBY walking toward the Store, with Perpetrator-1 20 feet behind him, and Perpetrator-2 30 feet behind FRISBY. In particular, at 2:14 p.m., both FRISBY and Perpetrator-1 can be seen talking on their phones. Cellphone records show a call between FRISBY and Perpetrator-1 at that time.

A search of FRISBY’s apartment pursuant to a search warrant uncovered in excess of $100,000 in cash.

FRISBY, 37 of New York, New York, is charged with one count of conspiracy to commit robbery, which carries a maximum sentence of 20 years in prison, and one count of aiding and abetting the brandishing of a firearm in connection with the robbery conspiracy, 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.

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 Attorney Russell Capone 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.

US v. Rondu Frisby Complaint

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 WILLIAMS, SCOTT & ASSOCIATES (“WSA”), a debt collection company based in Norcross, Georgia, its owner JOHN TODD WILLIAMS, and six of its employees – BENITA CANNEDY, RUDY JAMES, ARTHUR COOK, CHRISTOPHER LENYSZYN, CLARK SMITH, and TITUS MCDOWELL – with conspiracy to commit wire fraud in connection with a nationwide debt collection scheme that targeted more than 6,000 victims throughout the United States. As alleged, the defendants contacted consumers whose debt WSA had purchased, and tried to trick and coerce them into making payments to WSA by making false threats and telling a host of lies. Among those lies were that WSA was part of a federal task force and that warrants would be issued for the consumers’ arrests if they failed to make immediate payment to WSA. In total, WSA obtained more than $4.1 million from its victims. Each of the individual defendants was arrested this morning in Georgia and will be presented later today in federal court in Atlanta.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, the defendants –third-party debt collectors acting under the guise of government authority– illegally and repeatedly threatened arrest, prosecution, and prison for countless Americans. Now, after years of threatening false arrest, these defendants are the ones who now find themselves in handcuffs, facing the loss of their own liberty. We are far from finished looking at the seedy side of debt collection. It affects too many people.”

FBI Assistant Director-in-Charge Venizelos said: “As alleged, this was nothing but a scam of total fabrication in order to coerce thousands into paying debts. This scheme took advantage of our poorest and most vulnerable citizens from all fifty states, including right here in New York City. The defendants were nothing more than bullies with bogus badges.”

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

Between approximately 2009 and May 2014, employees working for WSA routinely attempted to trick and coerce thousands of victims throughout the United States into paying millions of dollars in consumer debts through a variety of false statements and false threats. Employees of WSA typically used aliases, sometimes referring to themselves as “Detective” or “Investigator,” falsely advised consumers they had committed purported crimes such as “check fraud” or “depository check fraud,” and told consumers that if they failed to make an immediate payment to WSA to resolve the matter, a warrant would be issued for their arrest. WSA employees also falsely claimed that WSA had contracts with, or was otherwise affiliated with, certain federal or local law enforcement agencies, including the Department of Justice and the United States Marshals Service, as well as non-existent government agencies such as the “Federal Government Task Force” and the “DOJ Task Force.” To further create the appearance that it was affiliated with the federal government, WSA at times sent victims correspondence containing the seal of the United States Department of State and the following language: “Warrant Services Association, A Division of the Federal Government Task Force.”

When victims expressed doubt or sought more information, WSA employees intensified the pressure and created a heightened sense of urgency by imposing false deadlines. In one case, for example, a WSA employee told a victim he/she had 15 minutes to decide whether to make payment to WSA, and that if the victim elected not to, an arrest warrant would be issued for the victim’s spouse. In another instance, a defendant told a victim who advised that she was eight-months pregnant that she had two hours to pay WSA, or else the case would be forwarded to Los Angeles County and a warrant would be issued for her arrest.

Among other false statements, WSA employees claimed that WSA was a law firm, and that they would have the victims’ driver’s licenses suspended if those victims did not make payment to WSA. To falsely create an appearance of legitimacy, and further trick their victims into making payments, WSA employees routinely used legal terminology to invent legitimate-sounding, but completely bogus, explanations for the supposed imminent arrest of the victims, including for example, that the “statute of limitations” on the victims’ “civil legal rights” had expired and therefore the matter was now a criminal matter that could be resolved only by voluntary payment to WSA, or arrest. To frighten their victims, WSA employees warned that the arrest could take place at any time and any place, including at their homes and places of work.

In total, from approximately 2009 through approximately April 2014, WSA obtained more than $4.1 million dollars from over 6,000 victims in all 50 states.

After the FBI conducted a search of WSA’s office in Norcross, Georgia in May 2014, WILLIAMS shut down WSA and opened a new debt collection business. Based on victim complaints, employees of that debt collection business have been making the same threats and false statements to victims.

Scripts Recovered From the WSA Office

When FBI agents searched the WSA Office in May 2014, they recovered, among other things, scripts for calls with victims that contained numerous misrepresentations, including false threats of criminal charges and arrests, and false associations with the government. For example, the scripts included the following language:

“Who are we? We are a government task force set up to investigate and collect info on individuals involved in Depository Account Fraud and theft by deception.”

“This is investigator _____ I calling [sic] in reference to a complaint that has been filed through the national check fraud center were [sic] that stated that they have sent correspondents [sic] to ________ as well _______ and you have not responsed [sic] which has made your statue [sic] of limitations for your civil legal rights exhaust. That means that you are being pursued for one count of theft by deception and can be forwarded over to the local county for proceedings to start.”

“This message is for _______. My name is _______ from the investigation services of WSA. Currently there is a criminal complaint pending against you for theft of services. We are going ahead with legal proceedings today therefore we do need to speak with you immediately. Contact our office as soon as possible at [a particular telephone number] Ext ____. Thank you. Failure to respond will lead to criminal charges persude [sic] against you being forwarded over to your county.”

Recorded Calls Between The Defendants and Their Victims

During the search of WSA’s office, FBI agents also recovered computers containing recordings of thousands of calls between WSA employees and victims. Those recorded calls included the following:

• A call in which CANNEDY identified herself as “Chief Investigator Sharon Wright” and stated that she was investigating a criminal complaint against the victim for a payday loan the victim had taken out. When the victim told CANNEDY she was not currently working, CANNEDY responded that she had no choice but to forward the case to Los Angeles County and that Los Angeles County would issue a warrant for her arrest for “depository check fraud” and “theft by deception.” When the victim asked for customer service, CANNEDY responded: “Customer service? Ma’am you’re on the way to jail.” Later, the victim asked to see information to ensure that everything was legitimate, and CANNEDY responded, “Don’t take care of it, and you’ll see just how legit it is.” The victim said that she wanted to take care of the debt, was eight months pregnant, and did not want to go to jail. CANNEDY then responded, “I’m not going to go back and forth. I wouldn’t care if you were nine months pregnant. I have a job to do here.” CANNEDY told the victim she had two hours to pay WSA, and after that, the case would be forwarded to Los Angeles County for the issuance of an arrest warrant.
• A call in which JAMES told a victim he had an outstanding “restitution” of over $2,000, and when the victim said he had already paid it with a credit card, JAMES claimed the victim still had to pay WSA because “when you file for an ADR, you can’t use a debt instrument to pay a debt.” The victim said he did not have enough money to pay immediately and asked for documentation of the debt since he believed he had paid it already. JAMES told the victim that sending documentation would not stop the warrant from being processed. JAMES said that once he hung up the phone, he would put the case into “refusal status” and that the victim should have his attorney contact the office to set up an arraignment.
• A call in which COOK told a victim that her husband was being pursued for a “theft by receiving” charge to be forwarded to the local county and processed for a warrant. COOK advised that if her husband was “detained by county sheriffs, he would have to sit in reformatory” until he was tried.
• A call in which LENYSZYN told a victim that he was an investigator for “WSA” and was investigating “theft of services.” LENYSZYN explained that “what we do is we issue warrants and we do the suspension of driver’s license over here.” When the victim asked whether a warrant would be issued if he could only pay half the money, LENYSZYN said it could be a suspension of the victim’s driver’s license or a warrant and that “you don’t want any surprises either at the house or work, especially when it comes to that, your business your family and all that.

WILLIAMS, 48, of Norcross, Georgia, CANNEDY, 36, of Duluth, Georgia, JAMES, 32, of Lithonia, Georgia, COOK, 31, of Duluth, Georgia, LENYSZYN, 46, of Acworth, Georgia, SMITH, 39, of Norcross, Georgia, and MCDOWELL, 38, of Avondale Estates, Georgia, are each charged with one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Bharara praised the outstanding investigative work of the FBI. He also thanked the Consumer Financial Protection Bureau (“CFPB”) for referring this case to this Office, and the Federal Trade Commission (“FTC”) for its assistance in this investigation. The FTC separately filed earlier this year a complaint against WSA and WILLIAMS. Mr. Bharara also acknowledged with appreciation the extraordinary partnership between this Office and both the FTC and CFPB in the Office’s ongoing effort to combat consumer fraud.

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

http://www.usdoj.gov/usao/nys/victimwitness.html.

If you wish to report a crime by another debt collector, you may contact the FTC at 1-877-FTC-HELP. For guidance on coping with debt, and information about dealing with debt collection companies in particular, consider the following link to publications issued by the Federal Trade Commission:

http://www.consumer.ftc.gov/articles/0149-debt-collection.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit and Money Laundering and Asset Forfeiture Unit. Assistant United States Attorneys Daniel Tehrani and Jennifer Gachiri are in charge of the prosecution, and Assistant United States Attorney Jonathan Cohen is in charge of the forfeiture aspects of the case.

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

U.S. v. WSA, et al Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced that DARYL PAYTON, a former stock broker at a securities trading firm (“Securities Trading Firm-1”), pled guilty today in Manhattan federal court to charges arising from his involvement in an insider trading scheme. The alleged scheme involved the misappropriation of material, non-public information (“Inside Information”) concerning IBM’s acquisition of a software company, SPSS, Inc., in 2009. PAYTON was charged in June 2012, and pled guilty today before U.S. District Judge Andrew L. Carter, Jr.

Manhattan U.S. Attorney Preet Bharara said: “With his guilty plea today, Daryl Payton must answer for his role in a scheme to acquire inside information about a corporate acquisition, and profit illegally from it to the tune of a quarter of a million dollars.”

According to the Indictment to which PAYTON pled guilty, statements made during the plea proceeding, and other court documents:

The Inside Information concerning IBM’s acquisition of SPSS originated from a corporate lawyer who was part of the legal team that represented IBM in the transaction (“Attorney-1”) in 2009. On or about May 31, 2009, Attorney-1 shared Inside Information concerning the transaction, including the names of the parties and the fact that IBM was going to acquire SPSS for a significant premium over its market price, with his close friend, Trent Martin, a former research analyst at an international financial services firm. The information was shared in confidence and, based on their longstanding history of sharing confidences, Attorney-1 expected that Martin would not share the information or use it to trade.

However, in June and July 2009, Martin bought SPSS common stock and call option contracts based on the Inside Information he was given by Attorney-1 and, in turn, shared the tip with his roommate, Thomas Conradt, who worked as a stock broker at Securities Trading Firm-1. In July 2009, Conradt bought SPSS common stock and tipped PAYTON, his co-worker at Securities Trading Firm-1 who also bought SPSS call options, as well as other co-workers at the firm. When IBM announced its acquisition of SPSS on July 28, 2009, the share price of SPSS common stock rose by 41% in one day. Thereafter, PAYTON sold his SPSS positions, yielding total profits of at least $250,000.

PAYTON, 38, pled guilty to one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison and a fine of $250,000, or twice the gross gain or loss from the offense. He is scheduled to be sentenced by Judge Carter on March 5, 2015, at 2:00 p.m. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

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

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 Masella, Andrew Bauer, and Damian Williams are in charge of the prosecution.

U.S. v. Benjamin Durant and Daryl Payton S3 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, Philip R. Bartlett, Inspector in Charge, United States Postal Inspection Service (“USPIS”), and Shantelle P. Kitchen, Acting Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigations Division (“IRS-CI”), announced today the arrest of KAREN ALAMEDDINE, a/k/a “Karen Dean,” the former controller of a New York-based non-profit organization whose core mission is to cure genetic illnesses by supporting biomedical research (the “Non-Profit”), for allegedly embezzling more than $1.8 million from the Non-Profit. ALAMEDDINE also was charged with tax evasion for deliberately failing to report to the IRS as income the money she embezzled from the Non-Profit. ALAMEDDINE was arrested yesterday in Boston, Massachusetts, and was presented today before United States Magistrate Judge Judith Gail Dein in Boston federal court.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Karen Alameddine not only embezzled almost $2 million and evaded taxes, she did so by ripping off the non-profit organization she worked for – an organization dedicated to finding cures for serious diseases – and she did so when she was supposed to be responsible for its finances. I would like to thank our partners on this investigation, USPIS and IRS-CI, for their work.”

USPIS Inspector in Charge Philip R. Bartlett said: “While Ms. Alameddine allegedly went to great lengths to hide her theft from her employer and those hoping to find the cure for serious illnesses, she could not hide from the watchful eye of law enforcement who put an end to her illegal activities.”

IRS Acting Special Agent in Charge Shantelle P. Kitchen said: “It is clear how embezzlement can hurt a business’s owners or stockholders, but stealing from a non-profit organization deprives those who will benefit from the organization’s mission. As a financial investigative agency, IRS-CI is dedicated to working with federal prosecutors and our partner federal law enforcement agencies, like the U.S. Postal Inspection Service, to investigate those who take advantage of their positions for personal criminal gain, at the expense of others.”

According to the Complaint unsealed in Manhattan federal court:

From approximately late 2008 through early 2014, while working as the controller for the Non-Profit, ALAMEDDINE diverted over $1.8 million of the Non-Profit’s funds to her own bank accounts and for her own personal use. ALAMEDDINE executed the scheme principally by disguising QuickBooks entries to make transfers to her personal bank account appear as if they were transfers made to pay grant recipients of the Non-Profit. ALAMEDDINE further sought to disguise the fraud by inventing a fictitious accounting firm named “Davis & Greene,” purportedly based in Washington, D.C., which was, according to ALAMEDDINE, retained to prepare certain tax returns for the Non-Profit for the 2012 and 2013 tax years.

After ALAMEDDINE fraudulently transferred the funds from an account belonging to the Non-Profit to a personal bank account, she further transferred the funds to other accounts she controlled, and thereafter used those funds for various personal expenses, including to pay personal bills. Among the personal bills ALAMEDDINE paid with the fraudulently diverted funds were utility bills, car payments, and personal mortgages.

In addition, for each of the calendar years 2009 through 2013, ALAMEDDINE filed tax returns with the IRS in which she deliberately omitted the reporting of the income she received from the fraud. Those deliberate omissions resulted in ALAMEDDINE’s evasion of substantial amounts of income for each of the years between 2009 and 2013.

ALAMEDDINE, 57, of Perris, CA, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison, and five counts of tax evasion, each of which carries a maximum sentence of 5 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 IRS and the USPIS.

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

Additional Payments for Individual Tort Victims

Largest Litigation Recovery for the Clean-Up of Environmental Contamination in Government’s History

Preet Bharara, the United States Attorney for the Southern District of New York, Sam Hirsch, Acting Assistant Attorney General for the Justice Department’s Environment and Natural Resources Division (“ENRD”), and Cynthia Giles, Assistant Administrator of the U.S. Environmental Protection Agency, announced today that the United States District Court in Manhattan has approved the historic settlement of fraudulent conveyance claims brought by the United States and co-plaintiff Anadarko Litigation Trust (the “Trust”) against the Kerr-McGee Corporation and certain of its affiliates, including Andarko Petroleum Corporation, in the bankruptcy of Tronox Inc. and its subsidiaries (“Tronox”). Pursuant to the settlement agreement, the defendants must pay $5.15 billion, of which approximately $4.4 billion will be paid to fund environmental clean-up and for environmental claims, plus interest from April 3, 2014. This settlement will result in the largest payment for the clean-up of environmental contamination ever obtained in a lawsuit brought by the Department of Justice.

Manhattan U.S. Attorney Preet Bharara said: “Corporations may not pursue profit at the expense of public health. They may not hide from their responsibilities through corporate shell-games. And they may not rely on bankruptcy to push the cost of their misconduct onto the American taxpayer. This settlement will require the defendants to pay billions to make up for a legacy of environmental contamination and ruination left across the nation. ”

Acting Assistant Attorney General Sam Hirsch said: “The court’s approval of this settlement marks a significant victory for environmental justice by holding Kerr-McGee fully accountable for its attempts to defraud American taxpayers and escape a toxic legacy. Thanks to this settlement, billions of dollars will be made available to clean up contaminated sites across the United States.”

EPA Assistant Administrator Cynthia Giles said: “At EPA, we stand by the principle that if you make a mess, you clean it up. This decision means that soon more than $4 billion will be put to work in American communities, cleaning up water supplies and removing dangerous contamination.”

Settlement Approval

On April 3, 2014, the United States announced this settlement, which was then subject to a period of public comment and judicial approval. After receiving and considering comments from the public, the United States sought approval of the settlement agreement. On May 30, 2014, the United States Bankruptcy Court issued a decision recommending that the District Court approve the settlement. Now, the District Court has followed the Bankruptcy Court’s recommendation and approved the agreement.

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

In approving the settlement, the District Court concluded:

• “The settlement is historic” and provides the “largest [clean-up] recovery in American history.”
• “The Settlement Agreement promotes federal environmental law’s objectives of ‘encourag[ing] prompt and effective responses to hazardous waste releases,’ ‘impos[ing] liability on responsible parties,’ and ‘reduc[ing] the inefficient expenditure of public funds on lengthy litigation.’”
• The settlement is a “fair and reasonable” consent decree resolving the Government’s claims against the defendants.

The District Court issued its opinion on Monday, November 10, 2014.

The District Court’s approval is subject to appeal. If no timely appeal (or other further review specified in the settlement agreement) is filed, the settlement will go into effect. Two days later, the defendants’ payment will be due.

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

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

Tronox Approval
 

Preet Bharara, the United States Attorney for the Southern District of New York, announced that MAHABUBUZ ZAMAN, a/k/a “Mahabub Zaman,” a/k/a “Faisal Ahmed,” was found guilty yesterday of participating in an elaborate bank fraud scheme which yielded millions of dollars in ill-gotten gains. Following a two-week trial before U.S. District Judge Alison J. Nathan, the jury found ZAMAN, one of the leaders of the scheme, guilty of conspiracy to commit bank fraud, conspiracy to commit identification document fraud, and use of a false passport. As part of the scheme, ZAMAN and his co-conspirators used fake companies, phony identification documents and hundreds of counterfeit checks to withdraw millions of dollars in stolen funds from more than a dozen banks.

Manhattan U.S. Attorney Preet Bharara said: “With the jury’s swift verdict, a 16th defendant, Mahabubuz Zaman, now stands convicted for his role in this multimillion-dollar bank fraud scheme. And we’re all the more close to bringing this case to a just and fitting conclusion, where each and every perpetrator of this fraud is made to answer for his or her crimes.”

According to the Superseding Indictment filed October 7, 2014, other court documents, and the evidence presented at trial:

From approximately 2008 through November 2012, ZAMAN and his co-conspirators engaged in a bank fraud scheme in which they created hundreds of counterfeit checks, deposited those counterfeit checks into bank accounts they had opened in the names of sham companies in order to fraudulently inflate the balances in those accounts, and then withdrew funds from those bank accounts before the financial institutions were able to determine the fraudulent nature of the checks. In addition to the check fraud, the defendant and his co-conspirators also obtained fraudulent mortgages and ran up credit card debt using false identities. The scheme victimized approximately 15 different banks, resulting in millions of dollars in losses to the banks.

As part of the scheme, the conspirators incorporated sham companies and then opened bank accounts in the names of those sham companies. The individuals opening the accounts (the “accountholders”) often used false identities, including names and social security numbers, and presented false identification documents, including false Bangladeshi passports and forged United States visas. The accountholders were generally instructed to make small legitimate deposits at first, so that the banks would make funds immediately available upon future fraudulent deposits.

The defendant and his co-conspirators obtained copies of legitimate checks and then used the payor account information that appeared on those checks to create counterfeit checks made payable to the sham companies they had incorporated as part of the scheme. The accountholders deposited the counterfeit checks into the sham company bank accounts at various banks. The accountholders often made deposits at numerous branches of the same bank on the same day. These deposits often were made on a Thursday or Friday so that the defendant and his co-conspirators could withdraw the illegal proceeds over the weekend when the banks were closed and were less likely to determine that the checks were counterfeit.

Once the defendant and his co-conspirators confirmed that funds from the counterfeit checks were available for withdrawal, the accountholders were directed to withdraw the funds from the counterfeit checks, typically over the weekend. The defendant and his co-conspirators often withdrew the funds from global cash access machines at casinos in Atlantic City, New Jersey, which did not have daily withdrawal limits. The accountholders often used false identification documents, including false Bangladeshi passports and fake United States visas, when making the withdrawals.

ZAMAN was one of the leaders of the scheme. Among other things, he recruited accountholders, directed both accountholders and higher-ranking members of the crew in the scheme’s operations, and collected a large share of the illicit profits. In addition, ZAMAN was primarily responsible for the crew’s fraudulent mortgage operations.

ZAMAN, 42, of Queens, New York, faces a maximum sentence of 30 years in prison for conspiring to commit bank fraud, 15 years in prison for conspiring to commit identification document fraud, and 10 years in prison for using a false passport. 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. ZAMAN is scheduled to be sentenced by Judge Nathan on February 27, 2015.

In addition to the verdict yesterday, 15 of ZAMAN’s co-conspirators have previously pled guilty in connection with the bank fraud and fraudulent identity document conspiracy. A chart listing the date of conviction and charges of conviction for each of the 16 convicted defendants is attached. Four charged co-conspirators – Hamid Khan, Akther Rahman, Abdur Razzak, and Khairul Islam – are still at large.

U.S. Attorney Bharara praised the investigative work of ICE HSI. He also thanked United States Citizenship and Immigration Services, Queens County District Attorney’s office, the New Jersey State Police, the New York City Police Department, the New York State Police, the United States Secret Service, and the New York City Taxi and Limousine Commission for their assistance in the matter.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Lisa Korologos and Alexander Wilson are in charge of the prosecution.

Click here to view chart(s)

U.S. v. Mahabubuz Zaman S4 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that FENG LING LIU, a/k/a Karen, the attorney and owner of law firms in the Chinatown neighborhood of Manhattan, was sentenced in Manhattan federal court to five years in prison for her leadership of an immigration fraud conspiracy. Following a four-week trial in March and April 2014, a jury convicted LIU of participating in a conspiracy to commit immigration fraud between approximately 2007 and approximately 2012. LIU was sentenced yesterday by United States District Judge Ronnie Abrams.

Manhattan U.S. Attorney Preet Bharara said: “I would like to thank our law enforcement partners at the Federal Bureau of Investigation and U.S. Citizenship and Immigration Services for their hard work on this case.”

According to the Indictment filed in Manhattan federal court, public court filings, and the evidence admitted at trial:

LIU, a lawyer, operated two law firms – the Law Offices of Feng Ling Liu and Moslemi and Associates, Inc. – both of which assisted aliens from China in obtaining asylum status through fraud. LIU and her employees profited by creating and submitting asylum applications containing false stories of persecution purportedly suffered by alien applicants. LIU and her employees coached applicants to lie to immigration authorities and assisted applicants in obtaining and/or creating false documentation to support the fraudulent claims. In total, the two law firms filed thousands of fraudulent applications and earned tens of millions of dollars from their fraud.

In addition to the prison term, LIU, 48, of New York, New York, was ordered to pay a $12,500 fine and a $100 special assessment fee, and to forfeit $7,245,000.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation, and thanked the New York Asylum Office of the Department of Homeland Security, U.S. Citizenship and Immigration Services.

The case is being handled by the Office’s Organized Crime Unit. Assistant U.S. Attorneys Rebecca Mermelstein, Patrick Egan, and Robert Boone are in charge of the prosecution. Assistant U.S. Attorney Andrew Adams is in charge of the forfeiture.

U.S. v. Irving Rubin, 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”), and Carl E. DuBois, the Sheriff of Orange County, today announced the unsealing of an Indictment (the “Indictment”) charging 15 defendants, including 14 defendants with conspiracy to commit bank fraud and wire fraud in connection with mortgages and other loans secured by properties in Brooklyn, Manhattan and Monroe in Orange County, New York. The defendants include several related members of a family, the Rubins, as well as a real estate attorney and a real estate appraiser. The Indictment sets forth a total of 21 counts charging various defendants with additional crimes, including making false statements to lenders, aggravated identity theft, and theft of public money. Thirteen of the defendants were arrested today in a coordinated takedown. They will be arraigned on the charges in the Indictment before United States Magistrate Judge Paul E. Davison in the White Plains federal courthouse.

U.S. Attorney Preet Bharara stated: “The charges unsealed today describe a sweeping and cynical fraud. As alleged, the scheme carried out by the Rubins and others ripped off banks, welfare programs, and taxpayers. It ranged from 2004 to 2014, from Brooklyn to Harlem to Orange County, and the individuals involved alternately played the parts of prince or pauper, depending on which scam was being perpetrated. Now their alleged double dealing will be stopped, and they will have to submit to the truth-seeking process of the criminal justice system.”

FBI Assistant Director George Venizelos stated: “In a clear case of double dipping, the defendants convinced lenders of their affluence while allegedly accepting aid from government programs established for the benefit of those less fortunate, profiting from the proceeds of millions of dollars in fraudulently obtained loans and significantly defrauding the government of public money. May today’s charges remind those who poke holes in the government safety net and exploit gaps in the mortgage and banking sectors that they will face the error of their ways.”

Orange County Sheriff Carl E. DuBois stated: “We would like to thank United States Attorney Preet Bharara and his staff for their efforts and assistance, and I would also like to thank the personnel from all of the agencies involved for a commitment to this long and complicated investigation. It is important to note that this case originated from the Orange County Sheriff’s Office. Upon investigating what is usually a routine case, our investigator showed due diligence in her follow up, and with the latitude and encouragement by my office to investigate further using FBI resources, the result was a lengthy and comprehensive multi-jurisdictional, multi-million dollar mortgage fraud investigation.”

According to allegations made in the Indictment:

IRVING RUBIN, the defendant, was a purported real estate developer. IRVING RUBIN’s son, YEHUDA RUBIN, the defendant, was a purported mortgage broker and real estate developer. IRVING RUBIN, as well as his brothers ABRAHAM RUBIN, JACOB RUBIN, and SAMUEL RUBIN, the defendants; his sons YEHUDA RUBIN and JOEL RUBIN, the defendants; his wife, DESIREE RUBIN, the defendant; and his relatives-in-law JOEL KOPPEL, BENZION KRAUS, RIFKA RUBIN, RACHEL RUBIN, and RIVKY RUBIN, the defendants, claimed to own properties in Brooklyn, New York, as well as in Manhattan and Orange County, New York. MARTIN KOFMAN, the defendant, was a real estate lawyer licensed to practice in New York. PINCHUS GLAUBER, the defendant, was a real estate appraiser licensed in New York.

From at least in or about 2004 through in or about 2014, IRVING RUBIN, a/k/a “Joseph Rubin,” YEHUDA RUBIN, a/k/a “Yidel Rubin,” PINCHUS GLAUBER, MARTIN KOFMAN, JOEL KOPPEL, a/k/a “Yoel Koppel,” a/k/a “Joel Kopple,” BENZION KRAUS, a/k/a “Benzion Krauz,” a/k/a “Benzion Krause,” ABRAHAM RUBIN, DESIREE RUBIN, a/k/a “Henchy Rubin,” JACOB RUBIN, a/k/a “Yaakov Rubin,” JOEL RUBIN, a/k/a “Yoel Rubin,” RACHEL RUBIN, a/k/a “Ruchy Rubin,” RIFKA RUBIN, a/k/a “Sura Rubin,” RIVKY RUBIN, a/k/a “Rivka Rubin,” and SAMUEL RUBIN, a/k/a “Shaye Rubin,” the defendants, and others known and unknown (hereinafter, the “Rubin Organization”), fraudulently obtained mortgage loans and other loans from banks and other lending institutions (the “lenders”). The defendants obtained the loans by providing materially false information to the lenders about the borrowers’ assets and liabilities, including but not limited to false information about the borrower’s employment, income, bank accounts, and primary residence. Through their scheme, the defendants fraudulently obtained more than $20 million in loan proceeds in connection with more than twenty fraudulent loans. The majority of the loans went into default, and the majority of the loan proceeds were not repaid.

As part of the scheme to defraud, the defendants used the fraudulent loan proceeds to personally enrich themselves and their families. Fraudulently obtained loan proceeds were used toward, among other things, (i) credit card debts for personal expenses of defendants, (ii) personal home mortgage payments of defendants, (iii) other real estate development projects including projects from which the defendants and others earned rental income, and (iv) debts arising from other fraudulently obtained loans, to conceal the fraudulent nature of these loans.

As part of the scheme to defraud, the defendants and others known and unknown also engaged in extensive efforts to perpetuate and conceal the fraudulent scheme. These efforts included, but were not limited to:

• Numerous members of the conspiracy acting as the borrowers for different loans, falsely claiming that the purpose of the loans was to purchase or refinance their primary residence, when, in fact the property was not their primary residence, and the loan proceeds were later distributed to other members of the conspiracy and to entities they controlled.
• The common claim by multiple co-conspirators acting as borrowers of sole ownership or control of assets or bank accounts, to give the false appearance of creditworthiness, when in fact the assets and/or bank accounts were non-existent or were owned and controlled by other members of the conspiracy, and the borrower either had joint or no ownership of them.
• Sham transfers of ownership of properties from one member of the conspiracy to another, or to other trusted individuals, thereby confounding attempts by lenders to recover on defaulted loans and facilitating further fraudulent borrowing against the properties.
• Following default on a fraudulently obtained loan, coordinated efforts to deceive the lender into granting a satisfaction of the debt at a significant loss, such as by proposing short sales of properties that, unbeknownst to the lender, were not arm’s-length transactions.

In furtherance of the scheme to defraud, members of the conspiracy participated in fraudulently obtaining loans in several ways, including but not limited to the following:

• YEHUDA RUBIN, the defendant, was an organizer of the fraudulent scheme. YEHUDA RUBIN personally participated in at least ten of the particular fraudulent loans, in various roles, including as borrower, borrower’s power of attorney, mortgage broker, distributor of fraudulent loan proceeds, and arranger of short sales.
• IRVING RUBIN, DESIREE RUBIN, ABRAHAM RUBIN, JACOB RUBIN, SAMUEL RUBIN, JOEL RUBIN, RIVKY RUBIN, RACHEL RUBIN, JOEL KOPPEL, RIFKA RUBIN, and BENZION KRAUSE, the defendants, were borrowers who fraudulently obtained loans from banks and other lenders. Working in concert with co-conspirators, they obtained loans upon false representations and pretenses. IRVING RUBIN, ABRAHAM RUBIN, JACOB RUBIN, SAMUEL RUBIN, and JOEL RUBIN, among others, also participated in the scheme by, among other things, (i) obtaining ownership of properties, (ii) assisting other borrowers in making false representations, (iii) receiving fraudulent loan proceeds, (iv) obtaining and distributing rental income on the properties, and (v) assisting in efforts to prevent or dissuade a lender from collecting on a defaulted loan.
• MARTIN KOFMAN, the defendant, acted as real estate attorney on numerous transactions associated with the fraudulent loans, including closings. KOFMAN, through his law firm’s trust account, distributed fraudulent loan proceeds between and among members of the conspiracy. KOFMAN also provided false information to lenders, including “show checks,” to deceive a bank into believing that the borrower had made a down payment toward the purchase of a property, when in fact the borrower made no such payment and the checks were ultimately deposited back into the law firm’s trust account.
• PINCHUS GLAUBER, the defendant, completed multiple appraisals of properties in connection with particular fraudulent loans. GLAUBER included false information in the appraisals, including about the detail with which he had inspected the properties he appraised. The estimated value of certain properties appraised by GLAUBER was false and inflated.

At the same time that the defendants were representing to banks that they had substantial income and assets, they were also representing to state and local agencies that they had little or no income and assets and were entitled to receive various forms of public assistance, including Medicaid, Food Stamps, and Home Energy Assistance Program (“HEAP”) benefits. For example:

• YEHUDA RUBIN and RACHEL RUBIN, the defendants, received Medicaid and Food Stamps at various times during the conspiracy. To receive benefits, they claimed, among other things, that their only income was $180 per month, and later $360 bi-weekly, from RACHEL RUBIN’s employment. To receive loans totaling more than $1 million, on the other hand, YEHUDA RUBIN claimed that he was employed, earning more than $17,000 per month in employment and rental income, and RACHEL RUBIN claimed that she was employed, earning $14,000 per month.
• JOEL RUBIN and RIVKY RUBIN, the defendants, received Medicaid and Food Stamps at various times during the conspiracy. To receive benefits, they claimed, among other things, that they were homeless, and later that their only income was $130 per week and $180 per week. To receive loans totaling more than $1 million, on the other hand, they claimed that RIVKY RUBIN was employed and had an income of $12,000 per month.
• SAMUEL RUBIN, the defendant, received Medicaid and Food Stamps at various times during the conspiracy. To receive benefits, SAMUEL RUBIN claimed, among other things, an income of $200 per week and $0 in financial resources. To receive loans in excess of $7 million, however, SAMUEL RUBIN claimed an income of more than $350,000 per year and a net worth of more than $10 million.
• IRVING RUBIN and DESIREE RUBIN, the defendants, received Medicaid at various times during the conspiracy. To receive benefits, IRVING RUBIN and DESIREE RUBIN claimed, among other things, that their only income was $1,200 per week, from IRVING RUBIN’s employment at Tristate Management. To receive a loan in excess of $500,000, on the other hand, IRVING RUBIN and DESIREE RUBIN claimed, among other things, that DESIREE RUBIN was employed at Tristate Management with a monthly income of $16,000.

In addition, seven are charged with theft of public money, in violation of Title 18, United States Code, Section 641. In particular, the defendants are charged with obtaining Medicaid and/or Food Stamps by submitting false information in the applications for such benefits.

The defendants and the counts with which they are charged in the Indictment are set forth in the attached list.

Mr. Bharara praised the investigative work of the FBI and the Orange County Sheriff’s Office.

The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Benjamin Allee, Kathryn Martin, and Michael Maimin 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.

U.S. v. Irving Rubin, et al. Indictment
U.S. v. Rubin, et al. Ages & Residences Chart
 

U.S. Attorney Preet Bharara for the Southern District of New York and Acting Special Agent in Charge Shantelle P. Kitchen of the New York Field Office of the Internal Revenue Service- Criminal Investigation (IRS-CI) announced today the indictment of Martin Dunki, a former client advisor and Senior Vice President at a Swiss bank headquartered in Zurich, Switzerland (Swiss Bank No. 1), for conspiring with U.S. taxpayer-clients and others to hide hundreds of millions of dollars in offshore accounts from the IRS, and to evade U.S. taxes on the income earned in those accounts.

“As alleged, Martin Dunki went to great lengths to help his U.S. taxpayer clients secret away millions of dollars in Swiss bank accounts,” said U.S. Attorney Bharara.  “With today’s Indictment, Dunki joins the ranks of many other individuals this Office has charged in connection with hiding money in offshore bank accounts from the Internal Revenue Service.”   

“The vigorous pursuit of unreported income in hidden offshore accounts is a top priority for the Internal Revenue Service,” said Acting IRS-CI Special Agent in Charge Shantelle P. Kitchen.  “As part of our strategy, we will continue to identify and investigate banking and finance professionals who advise U.S. clients about ways to conceal their assets from the U.S. Government.”

According to the allegations contained in the indictment, which was unsealed today in Manhattan federal court, and other publicly available information:

Between 1995 and 2012, Dunki helped U.S. taxpayers evade taxes and hide hundreds of millions of dollars in undeclared accounts at Swiss Bank No. 1.  Dunki provided this advice and assistance to U.S. taxpayers in his capacity as a client advisor at Swiss Bank No. 1, where he was employed until early 2012.

One of Dunki’s co-conspirators was Edgar Paltzer, an attorney based in Zurich, Switzerland, who previously pleaded guilty in the Southern District of New York for his role in assisting U.S. taxpayers and others to evade taxes.  In 1999, Dunki, Paltzer and an attorney from Santa Barbara, California (Attorney 1), began working together in the management of undeclared accounts at Swiss Bank No. 1 for a number of U.S. taxpayers (collectively, the Dunki/Attorney 1 Clients).  The undeclared assets of the Dunki/Attorney 1 Clients were maintained in accounts held in the names of sham foreign foundations, rather than in the names of the clients individually, to help the clients conceal their ownership of these undeclared accounts from the IRS.  Initially, the sham foundations that held the accounts were organized under the laws of Liechtenstein.  In December 2008, however, Liechtenstein and the United States signed a Tax Information Exchange Treaty (TIEA), under which Liechtenstein agreed to provide the United States with access to certain bank and other information needed to enforce U.S. tax laws.  As a result of the TIEA between Liechtenstein and the United States, and to prevent disclosure to the IRS of the undeclared accounts maintained by the Dunki/Attorney 1 Clients, Dunki and others transferred the undeclared assets of the Dunki/Attorney 1 Clients to new accounts at Swiss Bank No. 1, held by new sham foundations organized under the laws of Panama.  Moreover, beginning in August 2009, in response to the investigation of another Swiss bank, UBS AG, for helping U.S. taxpayers maintain undeclared accounts in Switzerland, Dunki and others helped to further conceal the undeclared accounts of the Dunki/Attorney 1 Clients by using assets in those accounts to purchase gold and other precious metals.  The gold and precious metals, which amounted to tens of millions of dollars, were then transferred to escrow accounts opened at Swiss Bank No. 1 and hidden, along with substantial sums of cash, in a vault in Switzerland for the benefit of the Dunki/Attorney 1 Clients.

In addition to opening, maintaining, and managing undeclared accounts at Swiss Bank No. 1 for the Dunki/Attorney 1 Clients, Dunki opened, maintained and managed undeclared accounts at Swiss Bank No. 1 for other U.S. taxpayers.  For instance, between 2000 and 2012, Dunki helped one U.S. taxpayer hide nearly $300 million in assets at Swiss Bank No. 1, in undeclared accounts held in the names of sham Liberian corporations.  Further, between 1995 and 2008, Dunki helped another U.S. taxpayer maintain approximately $70 million in an undeclared account at Swiss Bank No. 1.  When Dunki met with this taxpayer in the United States, the account statements that Dunki brought with him were deliberately cut off at the top, to omit the account number and the name of Swiss Bank No. 1, because – as Dunki himself acknowledged to the taxpayer – Dunki had to be careful not to leave a trace when going through U.S. customs. 

Dunki also helped U.S. taxpayers bring funds back to the United States in ways designed to ensure that U.S. authorities would not discover the existence of the taxpayers’ undeclared accounts at Swiss Bank No. 1.  For example, on at least one occasion, Dunki met a U.S. taxpayer in the United States and provided the taxpayer with an envelope containing approximately $10,000 in cash, which represented a cash withdrawal from the taxpayer’s undeclared account at Swiss Bank No. 1.  On other occasions, Dunki helped send money from a U.S. taxpayer’s undeclared account at Swiss Bank No. 1 to another account in Geneva, Switzerland, and, from there, to a diamond dealer in Manhattan.  Once the money was received by the diamond dealer, the U.S. taxpayer would pick it up and give the diamond dealer a fraction of the money as a commission.

Dunki, 66, a Swiss citizen, resides in Switzerland and has not been arrested.  Dunki is charged with one count of conspiracy to defraud the IRS, which carries a maximum sentence of five years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

U.S. Attorney Bharara praised the outstanding efforts of IRS-CI in the investigation, which he noted is ongoing.  He also thanked the Justice Department’s Tax Division for their significant assistance in the investigation.

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

The charge and allegations 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, Acting Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today the indictment of MARTIN DUNKI, a former client advisor and Senior Vice President at a Swiss bank headquartered in Zurich, Switzerland (“Swiss Bank No. 1”), for conspiring with U.S. taxpayer-clients and others to hide hundreds of millions of dollars in offshore accounts from the IRS, and to evade U.S. taxes on the income earned in those accounts.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Martin Dunki went to great lengths to help his U.S. taxpayer clients secret away millions of dollars in Swiss bank accounts. With today’s Indictment, Dunki joins the ranks of many other individuals this Office has charged in connection with hiding money in offshore bank accounts from the Internal Revenue Service.”

Acting IRS-CI Special Agent in Charge Shantelle P. Kitchen said: “The vigorous pursuit of unreported income in hidden offshore accounts is a top priority for the Internal Revenue Service. As part of our strategy, we will continue to identify and investigate banking and finance professionals who advise U.S. clients about ways to conceal their assets from the U.S. Government.”

According to the allegations contained in the Indictment, which was unsealed today in Manhattan federal court, and other publicly available information:

Between 1995 and 2012, DUNKI helped U.S. taxpayers evade taxes and hide hundreds of millions of dollars in undeclared accounts at Swiss Bank No. 1. DUNKI provided this advice and assistance to U.S. taxpayers in his capacity as a client advisor at Swiss Bank No. 1, where DUNKI was employed until early 2012.

One of DUNKI’s co-conspirators was Edgar Paltzer, an attorney based in Zurich, Switzerland, who previously pled guilty in the Southern District of New York for his role in assisting U.S. taxpayers and others to evade taxes. In 1999, DUNKI, Paltzer, and an attorney from Santa Barbara, California (“Attorney 1”) began working together in the management of undeclared accounts at Swiss Bank No. 1 for a number of U.S. taxpayers (collectively, the “Dunki/Attorney 1 Clients”). The undeclared assets of the Dunki/Attorney 1 Clients were maintained in accounts held in the names of sham foreign foundations, rather than in the names of the clients individually, to help the clients conceal their ownership of these undeclared accounts from the IRS. Initially, the sham foundations that held the accounts were organized under the laws of Liechtenstein. In December 2008, however, Liechtenstein and the United States signed a Tax Information Exchange Treaty (“TIEA”), under which Liechtenstein agreed to provide the United States with access to certain bank and other information needed to enforce U.S. tax laws. As a result of the TIEA between Liechtenstein and the United States, and to prevent disclosure to the IRS of the undeclared accounts maintained by the Dunki/Attorney 1 Clients, DUNKI and others transferred the undeclared assets of the Dunki/Attorney 1 Clients to new accounts at Swiss Bank No. 1, held by new sham foundations organized under the laws of Panama. Moreover, beginning in August 2009, in response to the investigation of another Swiss bank, UBS AG (“UBS”), for helping U.S. taxpayers maintain undeclared accounts in Switzerland, DUNKI and others helped to further conceal the undeclared accounts of the Dunki/Attorney 1 Clients by using assets in those accounts to purchase gold and other precious metals. The gold and precious metals, which amounted to tens of millions of dollars, were then transferred to escrow accounts opened at Swiss Bank No. 1 and hidden, along with substantial sums of cash, in a vault in Switzerland for the benefit of the Dunki/Attorney 1 Clients.

In addition to opening, maintaining, and managing undeclared accounts at Swiss Bank No. 1 for the Dunki/Attorney 1 Clients, DUNKI opened, maintained, and managed undeclared accounts at Swiss Bank No. 1 for other U.S. taxpayers. For instance, between 2000 and 2012, DUNKI helped one U.S. taxpayer hide nearly $300 million in assets at Swiss Bank No. 1, in undeclared accounts held in the names of sham Liberian corporations. Further, between 1995 and 2008, DUNKI helped another U.S. taxpayer maintain approximately $70 million in an undeclared account at Swiss Bank No. 1. When DUNKI met with this taxpayer in the United States, the account statements that DUNKI brought with him were deliberately cut off at the top, to omit the account number and the name of Swiss Bank No. 1, because – as DUNKI himself acknowledged to the taxpayer – DUNKI had to be careful not to leave a trace when going through U.S. customs.

DUNKI also helped U.S. taxpayers bring funds back to the United States in ways designed to ensure that U.S. authorities would not discover the existence of the taxpayers’ undeclared accounts at Swiss Bank No. 1. For example, on at least one occasion, DUNKI met a U.S. taxpayer in the United States and provided the taxpayer with an envelope containing approximately $10,000 in cash, which represented a cash withdrawal from the taxpayer’s undeclared account at Swiss Bank No. 1. On other occasions, DUNKI helped send money from a U.S. taxpayer’s undeclared account at Swiss Bank No. 1 to another account in Geneva, Switzerland and, from there, to a diamond dealer in Manhattan. Once the money was received by the diamond dealer, the U.S. taxpayer would pick it up and give the diamond dealer a fraction of the money as a commission.

DUNKI, 66, a Swiss citizen, resides in Switzerland and has not been arrested. DUNKI is charged with one count of conspiracy to defraud the IRS, which carries a maximum sentence of five years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the outstanding efforts of IRS-CI in the investigation, which he noted is ongoing. He also thanked DOJ’s Tax Division for their significant assistance in the investigation.

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

The charge and allegations 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, announced today that DMITRY BRAVERMAN, a former Senior Systems Engineer at a prominent national law firm, pled guilty today in Manhattan federal court to insider trading. Specifically, BRAVERMAN admitted repeatedly using material nonpublic information concerning planned merger and acquisition activity of at least eight clients of the law firm to acquire stock and options, resulting in profits of more than $300,000. BRAVERMAN, who was arrested in September 2014, pled guilty to a one-count Information before U.S. District Judge Paul A. Engelmayer.

Manhattan U.S. Attorney Preet Bharara said: “Dmitry Braverman abused the trust not only of his employer, a major law firm, but also of the numerous companies that relied upon the law firm to handle sensitive matters. Today’s conviction is yet another in a long line.”

According to the allegations contained in the Information filed today in Manhattan federal court, the underlying criminal Complaint, and statements made during court proceedings:

From at least September 2010 through December 2013, BRAVERMAN was engaged in an insider trading scheme. BRAVERMAN, who was a senior systems engineer at a national, full-service law firm, was primarily responsible for maintaining and designing software in connection with the law firm’s finance function, and had access to financial and billing databases. BRAVERMAN consequently had computer and database systems access to confidential information about, among other things, the law firm’s clients in potential merger and acquisition activity, as well as information about the identities of the other parties to the potential deal.

Between about 2010 and 2011, BRAVERMAN engaged in at least four trades that were based on inside information concerning potential mergers and acquisition activity of clients of the law firm. In April 2011, however, BRAVERMAN closed out the last of these trades on the same day that another employee of the law firm, Matthew Kluger, was arrested on separate insider trading charges. In November 2012, BRAVERMAN opened a new brokerage account in the name of a relative living in Russia, and again began trading on the basis of inside information he obtained from the law firm. Specifically, between November 2012 and December 2013, BRAVERMAN engaged in at least four additional trades based on inside information. In total, BRAVERMAN made more than approximately $300,000 in profits from the trades.

BRAVERMAN, 41, of San Mateo, California, pled guilty to one count of securities fraud, without the benefit of a plea agreement. The securities fraud count carries a maximum sentence of 20 years in prison, a maximum fine of $5 million, or twice the gross gain or loss from the offense, and forfeiture of the proceeds of the offense. BRAVERMAN is scheduled to be sentenced by U.S. District Judge Paul A. Engelmayer on March 6, 2015. 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.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation and thanked the Securities and Exchange Commission, which has filed civil charges in a separate action.

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

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

Preet Bharara, the United States Attorney for the Southern District of New York, Leslie R. Caldwell, Assistant Attorney General of the Justice Department’s Criminal Division, George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Peter Edge, Executive Associate Director of Homeland Security Investigations (“HSI”), announced today the seizure of the Silk Road 2.0 website as well as dozens of additional “dark market” websites offering a range of illegal goods and services for sale on the “Tor” network, a special network of computers on the Internet designed to conceal the true IP addresses of the computers on the network. The website addresses and computer servers hosting these websites were seized yesterday as part of a coordinated international law enforcement action involving the U.S. Attorney’s Office for the Southern District of New York, the Department of Justice’s Computer Crime and Intellectual Property Section, and the law enforcement agencies of approximately 16 foreign nations working under the umbrella of Europol’s European Cybercrime Centre (EC3) and Eurojust. This action follows the arrest announced Thursday of BLAKE BENTHALL, a/k/a “Defcon,” for his alleged role in operating the Silk Road 2.0 website. It constitutes the largest law enforcement action to date against criminal websites operating on the “Tor” network.

Manhattan U.S. Attorney Preet Bharara said: “As illegal activity online becomes more prevalent, criminals can no longer expect that they can hide in the shadows of the ‘dark web.’ We shut down the original Silk Road website and now we have shut down its replacement, as well as multiple other ‘dark market’ sites allegedly offering all manner of illicit goods and services, from firearms to computer hacking. In coordination with domestic and international law enforcement agencies, we will continue to seize websites that promote illegal and harmful activities, and prosecute those who create and operate them.”

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division said: “It is a plain fact that criminals use advanced technology to commit their crimes and conceal evidence – and they hide behind international borders so they can stymie law enforcement. But the global law enforcement community has innovated and collaborated to disrupt these ‘dark market’ websites, no matter how sophisticated or far-flung they have become.”

FBI Assistant Director-in-Charge George Venizelos said: “In today’s world we do everything online, from banking to grocery shopping. In much the same way, criminals have taken their illicit business to the ‘Tor’ network. However, websites that offer everything from drugs to illegal services on these black-market sites are not out of reach of law enforcement, as today’s announcement shows. We will continue to work with law enforcement at home and abroad to investigate, disrupt, and dismantle illicit networks that pose a threat in cyberspace.”

HSI Executive Associate Director Peter Edge said: “Underground websites such as Silk Road and Silk Road 2 are like the Wild West of the Internet, where criminals can anonymously buy and sell all things illegal. We will continue to use all of our resources and work closely with our U.S. and international law enforcement partners to shut down these hidden black market sites, and hold criminals accountable who use anonymous Internet software to peddle their illegal activities.”

According to the forfeiture complaint and other public documents:

The sites targeted in the seizure operation include the Silk Road 2.0 website and dozens of other “dark market” websites operating on what is known as “The Onion Router” or “Tor” network, a part of the Internet designed to make it practically impossible to physically locate the computers hosting or accessing websites on the network (the “Dark Market Sites”). These sites were all operating online criminal marketplaces, openly advertising on their home pages and offering to sell a variety of illicit goods and services to customers in the United States and elsewhere. The advertised goods and services included, among other things: illegal narcotics; firearms; stolen credit card data and personal identification information; counterfeit currency; fake passports and other identification documents; and computer-hacking tools and services.

The Dark Market Sites were designed to facilitate the illicit commerce hosted on the sites by providing anonymity to their users, in at least two ways. First, the Dark Market Sites were only accessible to users of the Tor anonymizing network. Second, the Dark Market Sites accepted payments for their illicit goods and services in “Bitcoin” or similar electronic currency designed to be as anonymous as cash.

The operation against the Dark Market Sites involved the seizure of over 400 Tor website addresses – known as “.onion” addresses – as well as the servers hosting them. Examples of some of the sites seized in the operation include:

• “Pandora” (pandora3uym4z42b.onion), “Blue Sky” (blueskyplzv4fsti.onion), “Hydra” (hydrampvvnunildl.onion), and “Cloud Nine” (xvqrvtnn4pbcnxwt.onion), all of which were dark markets similar to Silk Road 2.0, offering an extensive range of illegal goods and services for sale, including drugs, stolen credit card data, counterfeit currency, and fake identity documents.
• “Executive Outcomes” (http://iczyaan7hzkyjown.onion), which specialized in firearms trafficking, with offerings including assault rifles, automatic weapons, and sound suppressors. The site stated that it used “secure drop ship locations” throughout the world so that “anonymity [was] ensured” throughout the shipping process, and that all serial numbers from the weapons it sold were “remove[d] . . . and refill[ed] with metal.”
• “Fake Real Plastic” (http://igvmwp3544wpnd6u.onion), which offered to sell counterfeit credit cards, encoded with “stolen credit card data” and “printed to look just like real VISA and Mastercards.” The cards were “[g]uaranteed to have at least $2500 left on [the] credit card limit” and could be embossed with “any name you want on the card.”
• “Fake ID” (http://23swqgocas65z7xz.onion), which offered fake passports from a number of countries, advertised as “high quality” and having “all security features” of genuine documents.
• “Fast Cash!” (http://5oulvdsnka55buw6.onion) and “Super Notes Counter” (http://67yjqewxrd2ewbtp.onion), which offered to sell counterfeit Euros and U.S. dollars in exchange for Bitcoin.

Mr. Bharara praised the outstanding joint efforts of the FBI and its New York Special Operations and Cyber Branch and HSI and its Cyber Crimes Center and Chicago-O’Hare Field Office. He also thanked the Drug Enforcement Administration’s New York Organized Crime Drug Enforcement Strike Force, which comprises agents and officers of the DEA, the Internal Revenue Service, the New York City Police Department, HSI, the New York State Police, the Bureau of Alcohol, Tobacco, Firearms and Explosives, the U.S. Secret Service, the U.S. Marshals Service, Office of Foreign Assets Control, and New York Department of Taxation. Mr. Bharara also thanked the Department of Justice’s Computer Crime and Intellectual Property Section for its partnership in the operation, the Office of International Affairs, and the law enforcement authorities of Bulgaria, the Czech Republic, Finland, France, Germany, Hungary, Ireland, Latvia, Lithuania, Luxembourg, the Netherlands, Romania, Spain, Sweden, Switzerland, and the United Kingdom, whose actions have been coordinated through Eurojust and Europol’s EC3. Mr. Bharara also noted that the investigation remains ongoing.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit and Money Laundering and Asset Forfeiture Unit. Assistant United States Attorneys Serrin Turner, Timothy Howard, and Daniel Noble are in charge of the prosecution. Assistant United States Attorney Margaret Graham is in charge of the forfeiture aspect of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Peter Edge, Executive Associate Director of Homeland Security Investigations (“HSI”), announced today the arrest of BLAKE BENTHALL, a/k/a “Defcon,” in connection with his operation and ownership of the Silk Road 2.0 website, a hidden website designed to enable its users to buy and sell illegal drugs and other unlawful goods and services anonymously and beyond the reach of law enforcement. BENTHALL was arrested yesterday in San Francisco, California. He will be presented later today in federal court in San Francisco before Magistrate Judge Jaqueline Scott Corley.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Blake Benthall attempted to resurrect Silk Road, a secret website that law enforcement seized last year, by running Silk Road 2.0, a nearly identical criminal enterprise. Let’s be clear – this Silk Road, in whatever form, is the road to prison. Those looking to follow in the footsteps of alleged cybercriminals should understand that we will return as many times as necessary to shut down noxious online criminal bazaars. We don’t get tired.”

FBI Assistant Director-in-Charge George Venizelos said: “It’s been more than a year since the FBI made an arrest of the administrator of the black-market bazaar, Silk Road, and here we stand again, announcing the arrest of the creator and operator of Silk Road 2.0. Following a very close business model to the first, as alleged, Blake Benthall ran a website on the Tor network facilitating supposedly anonymous deals of drugs and illegal services generating millions of dollars in monthly sales. Benthall should have known that those who hide behind the keyboard will ultimately be found. The FBI worked with law enforcement partners here and abroad on this case and will continue to investigate and bring to prosecution those who seek to run similar black markets online.”

HSI Executive Associate Director Peter Edge said: “Blake Benthall’s arrest ends his status as the alleged administrator of a website that allows illicit black-market activities to evolve and expand, and provides a safe haven for illegal vices. HSI will continue to work in partnership with its federal and international law enforcement partners around the world to hold criminals who use anonymous internet software for illegal activities who seek to hide behind the anonymity of the Internet to carry out illegal activities accountable for their actions.”

According to the Complaint unsealed today in Manhattan federal court:

Since about December 2013, BENTHALL, a/k/a “Defcon,” has secretly owned and operated an underground website known as “Silk Road 2.0” – one of the most extensive, sophisticated, and widely used criminal marketplaces on the Internet today. The website has operated on the “Tor” network, a special network of computers on the Internet, distributed around the world, designed to conceal the true IP addresses of the computers on the network and thereby the identities of the network’s users. Since its launch in November 2013, Silk Road 2.0 has been used by thousands of drug dealers and other unlawful vendors to distribute hundreds of kilograms of illegal drugs and other illicit goods and services to buyers throughout the world, as well as to launder millions of dollars generated by these unlawful transactions. As of September 2014, Silk Road 2.0 was generating sales of at least approximately $8 million per month and had approximately 150,000 active users.

Silk Road 2.0 was created in the wake of the Government’s October 2013 seizure of the website known as “Silk Road” and the arrest of its alleged owner and operator, Ross William Ulbricht, a/k/a “Dread Pirate Roberts.” The original Silk Road website had been designed to enable people anywhere in the world to buy and sell illegal drugs and other illegal goods and services anonymously and beyond the reach of law enforcement. Before its seizure in October 2013, Silk Road was used extensively to facilitate such transactions.

In November 2013, approximately five weeks after the Government shut down Silk Road and arrested Ulbricht, Silk Road 2.0 was launched. Designed to fill the void left by the Government’s seizure of Silk Road, Silk Road 2.0 was virtually identical to the original Silk Road website in the way it appeared and functioned. In particular, like its predecessor, Silk Road 2.0 operated exclusively on the “Tor” network and required all transactions to be paid for in Bitcoins in order to preserve its users’ anonymity and evade detection by law enforcement. Likewise, the offerings on Silk Road 2.0 consisted overwhelmingly of illegal drugs, which were openly advertised as such on the site. As of October 17, 2014, Silk Road 2.0 had over 13,000 listings for controlled substances, including, among others, 1,783 listings for “Psychedelics,” 1,697 listings for “Ecstasy,” 1,707 listings for “Cannabis,” and 379 listings for “Opioids.” Besides illegal narcotics, other illicit goods and services were openly advertised for sale on Silk Road 2.0 as well, including fraudulent identification documents and computer-hacking tools and services.

When Silk Road 2.0 was launched, it was controlled for a short time by a co-conspirator using the same online moniker as that allegedly used by Ross Ulbricht in operating the original Silk Road website – “Dread Pirate Roberts.” In late December 2013, however, BENTHALL, using the moniker “Defcon,” took over administration of the site and has owned and operated it continuously since that time. In that role, BENTHALL has controlled and overseen all aspects of Silk Road 2.0, including, among other things: the computer infrastructure and programming code underlying the website; the terms of service and commission rates imposed on vendors and customers of the website; the small staff of online administrators and forum moderators who have assisted with the day-to-day operation of the website; and the massive profits generated from the operation of the illegal business.

During the Government’s investigation, which was conducted jointly by the FBI and HSI, an HSI agent acting in an undercover capacity (the “HSI-UC”) successfully infiltrated the support staff involved in the administration of the Silk Road 2.0 website, and was given access to private, restricted areas of the site reserved for BENTHALL and his administrative staff. By doing so, the HSI-UC was able to interact directly with BENTHALL throughout his operation of the website.

BENTHALL, 26, of San Francisco, California, is charged with one count of conspiring to commit narcotics trafficking, which carries a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison; one count of conspiring to commit computer hacking, which carries a maximum sentence of five years in prison; one count of conspiring to traffic in fraudulent identification documents, which carries a maximum sentence of 15 years in prison; and one count of money laundering conspiracy, which carries a maximum sentence of 20 years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the outstanding joint efforts of the FBI and its New York Cyber Branch and HSI and its Cyber Crimes Center and Chicago-O’Hare Field Office. He also thanked the Drug Enforcement Administration’s New York Organized Crime Drug Enforcement Strike Force, which comprises agents and officers of the DEA, the Internal Revenue Service, the New York City Police Department, HSI, the New York State Police, the Bureau of Alcohol, Tobacco, Firearms and Explosives, the U.S. Secret Service, the U.S. Marshals Service, Office of Foreign Assets Control, and New York Department of Taxation. Mr. Bharara also thanked the Department of Justice’s Computer Crime and Intellectual Property Section for its assistance and support, the Department of Justice’s Criminal Division Office of International Affairs, and the law enforcement authorities of France, Germany, Lithuania, the Netherlands, and the United Kingdom. Mr. Bharara also noted that the investigation remains ongoing.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit and Money Laundering and Asset Forfeiture Unit. Assistant United States Attorneys Serrin Turner, Timothy Howard, and Daniel Noble are in charge of the prosecution. Assistant United States Attorney Margaret Graham is in charge of the forfeiture aspect of the case.

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

U.S. v. Blake Benthall Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, and Thomas O'Donnell, Special Agent in Charge of the U.S. Department of Health and Human Services, Office of Inspector General’s (“HHS-OIG”) New York Region, announced today that the United States has settled civil fraud claims under the False Claims Act against VISITING NURSE SERVICE OF NEW YORK, VNS CHOICE, and VNS CHOICE COMMUNITY CARE (collectively, “VNS”) related to the enrollment of ineligible members in the VNS Choice managed long-term care plan (“Choice MLTCP”). VNS improperly billed the Medicaid program for 1,740 members whose needs did not qualify for the managed care plan. These members were improperly referred by social adult day care centers (“SADCCs”), or received services primarily from SADCCs, many of which provided substandard and minimal care.

Under the terms of the settlement approved today by United States District Judge Ronnie Abrams, VNS must pay a total of $34,994,428 to the Medicaid Program, $13,997,771 of which will go to the United States. In addition, VNS is required to:

• Credential only SADCCs that are properly certified and capable of providing community-based personal care services consistent with regulatory requirements
• Ensure that SADCCs provide the community-based personal care services called for under Choice MLTCP member care plans
• Monitor SADCCs in its provider network to ensure compliance with applicable regulations
• Prohibit marketing practices specifically directed at enrolling Choice MLTCP members through SADCCs

Manhattan U.S. Attorney Preet Bharara said: “VNS collected millions of dollars in Medicaid payments by enrolling ineligible persons into its managed care plan who clearly did not meet the criteria for long-term care. The company developed a network of social adult day care centers that were ill-equipped to provide the required level of care and instead served merely as a conduit to induce Medicaid beneficiaries to enroll.”

HHS-OIG Special Agent in Charge Thomas O'Donnell said: “VNS’s conduct compromised the integrity of the Medicaid program. HHS-OIG is committed to holding providers accountable for the quality of care they deliver and the manner in which that care is provided.”

Pursuant to the Medicaid managed long-term care program, health care providers, such as VNS, are responsible for arranging and managing long-term health care services offered to Medicaid beneficiaries. In exchange, providers receive a monthly capitation payment of approximately $3800 for each beneficiary enrolled in the health care plan. In order to qualify for enrollment in the Choice MLTCP, Medicaid beneficiaries need to be eligible for a nursing home level of care and require at least 120 days of community-based long-term care, which includes a wide range of health care services such as personal care services. VNS contracted with SADCCs to provide care, including personal care services, to Choice MLTCP members.

In the settlement agreement, VNS admits that 1,740 Choice MLTC members who had been referred by SADCCs or used SADCC services were not eligible to be members of the plan. These members were eventually unenrolled, beginning in August 2013. Although the SADCCs were supposed to be providing care to VNS Choice members, VNS admits that, during 2012 and 2013, various SADCCs in its provider network did not provide services that qualified as personal care services under the terms of its Medicaid contract. The settlement also resolves claims that VNS Choice improperly received referrals from SADCCs and induced members to use SADCCs as the members’ primary source of personal care services.

In April 2013, New York State had suspended enrollment in the Choice MLTCP based on concerns regarding the relationship between VNS and SADCCs. This suspension remained in effect until the Government reached an agreement in principle to resolve its investigation.

Mr. Bharara thanked the Medicaid Fraud Control Unit of the New York State Attorney General’s Office for its investigative efforts and extensive work on the case. Mr. Bharara also thanked HHS’s Office of the Inspector General for its assistance.

The case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorney Jeffrey K. Powell is in charge of the case.

Visiting Nurse Service Settlement

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 TRENDON SHAVERS, a/k/a “pirateat40,” was arrested this morning on securities fraud and wire fraud charges stemming from his involvement in a Bitcoin-related Ponzi scheme. SHAVERS was the founder and operator of Bitcoin Savings and Trust (“BCS&T”), which offered and sold Bitcoin-based investments through the Internet. In total, SHAVERS raised at least 764,000 Bitcoin in BCS&T investments, which amounted to more than $4.5 million based on the average price of Bitcoin during the period of the scheme. SHAVERS is expected to be presented today in the Eastern District of Texas, Sherman Division, before a United States Magistrate Judge.

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

U.S. Attorney Preet Bharara said: “As alleged, Trendon Shavers managed to combine financial and cyber fraud into a Bitcoin Ponzi scheme that offered absurdly high interest payments, and ultimately cheated his investors out of their Bitcoin investments. This case, the first of its kind, should serve as a warning to those looking to make a quick buck with unsecured currency.”

FBI Assistant Director-in-Charge George Venizelos said: “Shavers used a new currency, but the same old reprehensible tricks. He claimed to offer a Bitcoin market-arbitrage strategy. In reality, it was nothing more than an insidious scheme motivated by greed. Today, Shavers’ jig is up. He finds himself under arrest and charged in Manhattan federal court.”

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

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

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

SHAVERS, 32, was arrested this morning at his home in McKinney, Texas. He is charged with one count of securities fraud and one count of wire fraud. The securities fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense. The wire fraud count carries a maximum sentence of 20 years in prison and maximum fine of $250,000, or twice the gross gain or loss from the offense. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

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

Mr. Bharara praised the work of the FBI, and thanked the SEC for its invaluable 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 is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Benjamin Naftalis, Daniel S. Goldman, and Michael Ferrara 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.

The United States Attorney’s Office for the Southern District of New York is committed to protecting the rights of crime victims. If you are a victim of an offense being prosecuted by our Office, our Victim/Witness Unit can make sure that you are notified of important stages of the case to help you exercise your rights. In addition, our Victim/Witness Unit can help refer you to agencies that provide other services to witnesses, such as compensation and counseling. For information or assistance with referrals, please contact:

Wendy Olsen Clancy

Victim/Witness Coordinator

United States Attorney's Office

One St. Andrew’s Plaza

New York, New York 10007

(866) 874-8900

Wendy.Olsen@usdoj.gov

U.S. v. Trendon Shavers Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced that RUDY MENDOZA, 29, was sentenced today in Manhattan federal court to 25 years in prison for racketeering conspiracy, narcotics conspiracy, robbery conspiracy, and firearms charges. MENDOZA was convicted after a nine-day trial in November 2013. The Honorable Colleen McMahon imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “Within months of being released from state prison, Rudy Mendoza rejoined the Los Vagos street gang and attempted to participate in an armed robbery. Multi-agency cooperation and coordination, including the effective use of an ATF undercover agent, ensured that a violent criminal was prevented from causing harm and has been held accountable for the full scope of his crimes.”

In September 2011, a few months after being released from state prison in March 2011, MENDOZA and five other members of a Bronx-based robbery crew were arrested as part of an undercover investigation by the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”) in connection with a plan to conduct an armed robbery of cocaine dealers. MENDOZA and three of his co-conspirators who were arrested on their way to the planned robbery each possessed a loaded handgun.

At the time of MENDOZA’s arrest in the robbery case, he had already been identified in a separate investigation by the Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”) as a member of the Los Vagos street gang, a criminal organization comprising Mexican and Mexican-American members based primarily in East Harlem. Wiretapped telephone calls in the HSI case revealed that the handgun the ATF seized from MENDOZA belonged to the Los Vagos gang.

In November 2011, MENDOZA and 11 other members and associates of the Los Vagos gang were charged with racketeering conspiracy, murder conspiracy, firearms, and narcotics offenses.

The evidence at trial revealed MENDOZA’s active participation in the robbery crew, and the inner workings of the Los Vagos gang. Shortly before he expected to commit the robbery, MENDOZA assured the ATF undercover agent that he was prepared to violently assault the drug dealers his crew planned to rob. Former Los Vagos gang members testified about MENDOZA’s role in the gang, which included supplying cocaine for the leader of the gang to resell. The former gang members also described the full scope of the Los Vagos gang’s criminal activities, including acts of violence such as beatings, stabbings, and shootings, to protect their members from rival gangs, including the Latin Kings, and to dissuade rival gangs from encroaching on their territory. The gang also extorted or robbed individuals who lived or worked in their territory, and collected dues from members in order to buy firearms and to assist gang members who had been incarcerated or who wished to return to the United States from Mexico illegally.

With MENDOZA’s conviction at trial, all six charged members of the robbery crew and all twelve charged members and associates of the Los Vagos gang have been convicted.

Mr. Bharara praised the outstanding investigative work of the ATF, HSI, and the New York City Police Department. He also thanked the New York County District Attorney’s Office for their assistance.

The prosecution of the cases is being overseen by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Amie N. Ely and Amy Lester are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that MARVIN JEMAL, the former Chief Executive Officer of a Manhattan-based company that designed, imported and distributed luggage, business bags, backpacks, and accessories (the “Company”), was sentenced today to three years in prison for orchestrating and carrying out a scheme to fraudulently obtain millions of dollars in loans from a commercial bank. To secure the loans, JEMAL and others made false statements and submitted false and phony documents to the bank. JEMAL pled guilty in August 2014 before U.S. District Judge Valerie E. Caproni, who imposed today’s sentence.

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

From 2007 through October 2009, MARVIN JEMAL and Mark Bernstein, the former CEO and CFO, respectively, of the Company, engaged in a scheme to fraudulently induce a commercial bank based in New York (the “Bank”) to lend millions of dollars to the Company. Among other things, JEMAL and Bernstein knowingly made false representations to the Bank, concealed material facts from the Bank, and submitted false and fraudulent documents to the Bank, including fabricated invoices and shipping documents. In total, the Company obtained approximately $6.9 million in loans from the Bank and defaulted on over $6 million of those loans. Nearly $2.0 million in loans were obtained through the submission of fraudulent information. Moreover, although the loans were purportedly for the benefit of the Company’s business, JEMAL diverted approximately $1.9 million of the loan proceeds to personal bank accounts and used the money to pay for various personal expenses, including mortgage payments on properties he owned, credit card bills, and payments on his Porsche.

The Factoring Agreement

The Company obtained the loans from the Bank as part of a secured credit facility, pursuant to a factoring agreement between the Company and the Bank. Under the terms of the factoring agreement, the Company would assign and sell the Company’s interest in its accounts receivable to the Bank and, in exchange, the Company could borrow from the Bank up to 85% of the value of those receivables. In addition, the Company could borrow up to 50% of the value of its inventory. In order to draw down on its secured credit facility, however, the Company was required to provide the Bank with, among other things, an accurate listing of all accounts receivable, as well as supporting documentation, including copies of (i) relevant underlying invoices and (ii) shipping documents or other proof of delivery.

The Scheme to Obtain Loans Fraudulently

To obtain loans from the Bank fraudulently under the factoring agreement, JEMAL and Bernstein made false statements and submitted false and fraudulent documents to the Bank, including the following:

• JEMAL and Bernstein sent duplicate and/or fabricated invoices to the Bank that purported to reflect the sale of certain products by the Company and, thus, an outstanding receivable for the Company. In truth, however, the sales reflected on those invoices were false, as those sales either had never occurred or had already been invoiced separately.
• JEMAL and Bernstein provided fraudulent shipping documents to the Bank to substantiate the purported sales of products by reflecting that those products had been shipped to customers. In truth, however, those shipping documents were false and fraudulent, as the products had not, in fact, been shipped to the customers as reflected in the shipping documents.
• JEMAL and Bernstein concealed material facts from the Bank, including credits that the Company had provided to certain of its customers (which thereby reduced the total accounts receivable associated with those customers) and instances in which the Company had directly collected and deposited payments from its customers on the same invoices the Company assigned to the Bank.
• JEMAL and Bernstein provided inaccurate monthly inventory spreadsheets to the Bank which overstated the Company’s existing inventory.

Further, in order to conceal the scheme, JEMAL made various oral misrepresentations to certain representatives of the Bank when those representatives confronted him about irregularities and other issues that the Bank had discovered with respect to the Company’s assignment of its accounts receivable.

In addition to the prison sentence, JEMAL, 61, of Brooklyn, New York, was ordered to pay $2,729,422.71 in restitution to the Bank and to forfeit $2,729,422.71 in criminal proceeds.

Bernstein, 64, of Belle Harbor, New York, pled guilty in October 2013 before U.S. District Judge Robert P. Patterson for his role in the scheme and is scheduled to be sentenced on January 15, 2015.

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. Attorney Daniel S. Noble is in charge of the prosecution.

Preet Bharara and Loretta Lynch, the United States Attorneys for the Southern and Eastern Districts of New York, respectively, announced today that special telephone numbers have been set up to receive complaints of possible violations of federal election laws relating to the upcoming general elections in New York City and other counties in their districts.

The United States Attorneys said that their Offices will be available to receive complaints at the following numbers on Tuesday, November 4, 2014:

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

(718) 254-7000 (for Brooklyn, Queens, Staten Island, and Nassau and Suffolk counties)

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

A spokesperson for the United States Attorneys said that the enforcement of federal laws protecting the rights of all eligible persons to vote for the candidates of their choice is a high priority of the Department of Justice.

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

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

The spokesperson said that the ability of federal law enforcement authorities to detect and eliminate improper restrictions on voting rights and to prosecute election fraud depends to a large extent on the watchfulness and cooperation of the voters. It is therefore imperative that those who have been asked to participate in illegal election practices, who have been the subject of such practices, who have observed such practices, or who have information bearing on such practices, make that information known promptly to the FBI or the United States Attorneys Offices at the telephone numbers listed above.

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

IN NEW YORK CITY

City Board of Elections

Main Office (212) 487-5300

(212) 868-3692

Bronx (718) 299-9017

Brooklyn (718) 797-8800

Manhattan (212) 886-2100

Queens (718) 730-6730

Staten Island (718) 876-0079

IN COUNTIES OUTSIDE NEW YORK CITY

County Boards of Elections

Dutchess (845) 486-2473

Nassau (516) 571-2411

Orange (845) 291-2444

Putnam (845) 808-1300

Rockland (845) 638-5172

Suffolk (631) 852-4500

Sullivan (845) 794-3000

Westchester (914) 995-5700

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that OSCAR RODRIGUEZ, a/k/a “Chan,” 37, was sentenced today in Manhattan federal court on racketeering conspiracy and marijuana trafficking charges. OSCAR RODRIGUEZ was convicted after a trial in April 2014. The Honorable Donald E. Walter, visiting judge from the Western District of Louisiana, imposed a sentence of 20 years in prison.

Manhattan U.S. Attorney Preet Bharara said: “Oscar Rodriguez has now been sentenced for crimes he committed as a key member of a murderous narcotics-trafficking gang. The neighborhoods in Washington Heights that Rodriguez and his gang terrorized for over a decade are safer as a result of his arrest, conviction, and sentencing, as well as the conviction of over 50 other Rodriguez Enterprise members and associates in related cases brought by our Office. I commend the outstanding work of federal and local law enforcement in making this community safer.”

RODRIGUEZ’s charges arose out of a multi-year investigation titled “Operation Green Venom,” a coordinated multi-agency investigation that was led by ICE HSI and first announced in October 2010. With his conviction, a total of more than 50 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,” and High Times Magazine editor Matthew Woodstock Stang, a/k/a “Magazine Guy.”

According to the Indictment and the evidence at trial, OSCAR RODRIGUEZ was a member of the “Rodriguez Enterprise,” a massive racketeering organization whose members sold large quantities of marijuana, engaged in murders and other violent acts, transported and laundered millions of dollars, obstructed justice and committed perjury, and engaged in firearms offenses. The Rodriguez Enterprise was led by Manuel Geovanny Rodriguez-Perez, OSCAR RODRIGUEZ’s cousin. OSCAR RODRIGUEZ’s role in the organization included trafficking truckloads of marijuana, managing a lucrative block in Washington Heights, Manhattan, perpetrating violent assaults – including the 2005 near-fatal assault of a young man who sold marijuana for him – and participating in a plot to locate and move the body of another young man who had been strangled to death and buried in a park in the Bronx years earlier. The assault victim and the murder victim both were targeted for violent retaliation for stealing marijuana from the Rodriguez Enterprise. In 2005, OSCAR RODRIGUEZ also threatened the family of the employee he assaulted, in a successful effort to cause the employee to stop cooperating with state authorities. OSCAR RODRIGUEZ participated in these acts on behalf of the Rodriguez Enterprise from at least 1998 through his arrest on October 14, 2010.

In addition to the prison term, Judge Walter also sentenced RODRIGUEZ to five years of supervised release.

Mr. Bharara praised the outstanding investigative work of Immigration and Customs Enforcement’s Homeland Security Investigations and the New York City Police Department. He also thanked the U.S. Drug Enforcement Administration; the U.S. Marshals Service; the Bergen County, New Jersey, Prosecutor’s Office; the Englewood, New Jersey, Police Department; the U.S. Department of Housing and Urban Development; the City of New York Department of Investigation; and the New York County District Attorney’s Office for their assistance.

The prosecution of the cases arising from “Operation Green Venom” is being overseen by the Office’s Violent and Organized Crimes Unit. Assistant U.S. Attorneys Amie N. Ely and Andrew C. Adams are in charge of the prosecution. Assistant U.S. Attorney Adams is also responsible for forfeiture proceedings in connection with this 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 Field Office of the Federal Bureau of Investigation (“FBI”), announced today that GREGORY RORKE was arrested this morning on securities and wire fraud charges stemming from his alleged scheme to defraud investors in his company, Navagate, Inc. (“Navagate”), of approximately $3 million dollars. RORKE was presented today in Manhattan federal court before United States Magistrate Judge Gabriel W. Gorenstein.

U.S. Attorney Preet Bharara said: “As alleged, Gregory Rorke grossly misrepresented his character and financial stability to investors, whom he then defrauded of millions of dollars. I want to thank the Federal Bureau of Investigation and the Securities and Exchange Commission for their tireless work on this case.”

FBI Assistant Director-in-Charge George Venizelos said: “As alleged, Rorke bilked clients out of approximately $3 million based on lies and false representations of his and Navagate’s financial worth. The arrest of Rorke should serve as a reminder that lying to investors comes at a cost. The FBI will continue to aggressively pursue those who engage in securities fraud in an effort to prevent future victimization of unsuspecting investors and to protect the integrity of the financial market.”

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

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

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

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

Further, on November 28, 2012, after receiving multiple complaints from Navagate investors demanding repayment and/or threatening to sue RORKE, RORKE forwarded an email purporting to be from a representative of Hong Kong Shanghai Bank Corporation (“HSBC”), which falsely stated that HSBC had just signed a multimillion-dollar contract with Navagate when, in truth and in fact, the email appears to have been a complete fabrication.

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

RORKE, 60, was arrested this morning at his residence in Bronxville, New York. He is charged with one count of wire fraud and one count of securities fraud, each of which carries a maximum sentence of 20 years in prison. The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense. The maximum potential 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.

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

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

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Andrea M. Griswold and Eugene Ingoglia 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. Gregory Rorke Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced today the extradition of VLADIMIR TSASTSIN from Estonia to face charges of computer intrusion, wire fraud, and money laundering, among other offenses. The charges relate to the alleged operation of a massive and sophisticated Internet fraud scheme that infected with malware more than four million computers located in over 100 countries. The malware secretly altered the settings on infected computers, enabling TSASTSIN and the six other charged defendants –Timur Gerassimenko, Dmitri Jegorov, Valeri Aleksejev, Konstantin Poltev, Andrey Taame, and Anton Ivanov – to digitally hijack Internet searches and re-route computers to certain websites and advertisements. TSASTSIN, an Estonian citizen, was arrested in Estonia on November 8, 2011, when the Indictment against him was unsealed. He arrived in the Southern District of New York yesterday, and was presented today before U.S. Magistrate Judge Gabriel W. Gorenstein.

Manhattan U.S. Attorney Preet Bharara said: “Now that Vladimir Tsastsin has been delivered to the Southern District of New York, he can answer for his alleged role in a scheme in which he and others manipulated Internet advertising techniques and reaped at least $14 million in ill-gotten gains in the process.”

The following allegations are based on the Indictment and other court documents previously filed in Manhattan federal court:

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

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

When the user of an infected computer clicked on a search result link displayed through a search engine query, the Malware caused the computer to be re-routed to a different website. Instead of being brought to the website to which the user asked to go, the user was brought to a website designated by the defendants. Each “click” triggered payment to the defendants under their advertising agreements. This click hijacking occurred for clicks on unpaid links that appeared in response to a user’s query as well as clicks on “sponsored” links or advertisements that appeared in response to a user’s query – often at the top of, or to the right of, the search results – thus causing the search engines to lose money. For example, when the user of an infected computer clicked on the domain name link for the official website of Apple-iTunes, the user was instead taken to a website for a business unaffiliated with Apple Inc. that purported to sell Apple software.

Advertising Replacement Fraud

Using the DNS Changer Malware and rogue DNS servers, the defendants also replaced legitimate advertisements on websites with substituted advertisements that triggered payments to the defendants. For example, when the user of an infected computer visited the home page of the Wall Street Journal, a featured advertisement for the American Express “Plum Card” had been fraudulently replaced with an ad for “Fashion Girl LA.”

The defendants earned millions of dollars under their advertising agreements, not by legitimately displaying advertisements through their Publisher Networks, but rather by using the Malware to fraudulently drive Internet traffic to the websites and ads that would earn them more money. As a result, the defendants and their co-conspirators earned at least $14 million in ill-gotten gains through click hijacking and advertisement replacement fraud. The defendants laundered the proceeds of the scheme through numerous companies including, among others, Rove Digital, an Estonian corporation, and others listed in the Indictment.

TSASTSIN, 34, of Estonia, is charged with one count of wire fraud conspiracy, which carries a maximum sentence of 30 years in prison; one count of wire fraud, which carries a maximum sentence of 30 years in prison; one count of computer intrusion conspiracy, which carries a maximum sentence of 10 years in prison; one count of computer intrusion furthering fraud, which carries a maximum sentence of five years in prison; one count of computer intrusion by transmitting information, which carries a maximum sentence of 10 years in prison; one count of money laundering, which carries a maximum sentence of 30 years in prison; and 21 counts of engaging in monetary transactions of value over $10,000 involving fraud proceeds, each of which carries 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 a judge.

Estonian nationals Gerassimenko, Jegorov, Aleksejev, Poltev, and Ivanov were also arrested in November 2011, and were all previously extradited to the United States. The last defendant, Taame, who is a Russian national, remains at large. Aleksejev pleaded guilty to conspiracy to commit unauthorized computer intrusion and computer intrusion on February 1, 2013, and was sentenced to 48 months in prison. Ivanov pleaded guilty to all charges on February 21, 2013, and was sentenced to time served.

The case against TSASTSIN and the remaining co-defendants is pending before U.S. District Judge Lewis A. Kaplan. The next conference is scheduled for November 5, 2014 at 2:30 p.m.

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

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

The charges and allegations contained in the Indictment against TSASTSIN and the remaining defendants are merely accusations, and they are presumed innocent unless and until proven guilty.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that VIKTOR KORDASH was sentenced today to three months in prison for willfully failing to file Reports of Foreign Bank and Financial Accounts (“FBARs”) with the IRS regarding a secret Swiss bank account that he maintained and controlled at Wegelin & Co. (“Wegelin”), a Swiss bank formerly headquartered in St. Gallen, Switzerland, which separately pled guilty in January 2013 to assisting U.S. taxpayers in maintaining undeclared accounts. During the time that KORDASH maintained his undeclared account at Wegelin, KORDASH received tens of thousands of dollars in cash distributions from his undeclared account. KORDASH pled guilty in May 2014 before U.S. District Judge Ronnie Abrams, who also imposed today’s sentence.

According to the Information filed in Manhattan federal court, other court documents, and statements made in connection with KORDASH’s guilty plea and sentencing:

In the early 1980s, KORDASH opened an account at Wegelin. At that time, KORDASH was living in Russia and was a Russian citizen. In 1984, however, KORDASH emigrated to the United States, and in 1986, KORDASH applied for and was granted citizenship in the United States. After immigrating to the United States, and after becoming a United States citizen, KORDASH continued to maintain his account at Wegelin, and failed to declare it to the IRS, up until approximately November 2010. KORDASH used the undeclared account as an operating and investment account for his antique reproductions business, which he operated out of New York, New York.

During the time period that KORDASH maintained his undeclared account at Wegelin, capital gains and losses were generated in the account from KORDASH’s investments in foreign securities. Between 2007 and 2010, the high value of KORDASH’s undeclared account was over $1.5 million. Further, between at least April 2008 and June 2010, KORDASH received a series of cash distributions from the undeclared account from Wegelin’s correspondent account in Stamford, Connecticut, which totaled over $168,000. In November 2010, KORDASH closed the undeclared account and transferred the balance to his wife. The balance of the undeclared account at the time of its closure and transfer was nearly $1 million.

For each of the calendar years from at least 1986 through 2010, Kordash failed to file an FBAR with the IRS, as he was required to do, disclosing his signatory or other authority over his undeclared account at Wegelin. He was required to identify the financial institution with which his account was held, the type of account, the account number, and the maximum value of the account during the calendar year for which the FBAR was being filed. He willfully failed to do so.

In addition to the sentence of three months in prison, KORDASH, 64, of Cliffside Park, New Jersey, was also sentenced to three years’ supervised release, and ordered to pay back taxes of over $268,000 and a civil penalty of over $750,000.

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, Assistant Director-In-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), Ramon Bethencourt, the Chief of the City of Middletown Police Department, and Joseph A. D’Amico, the Superintendent of the New York State Police, announced the arrest of eight defendants and the unsealing of an Indictment charging a conspiracy to distribute over a kilogram of heroin in and around Middletown, New York.

U.S. Attorney Preet Bharara stated: “To those heroin traffickers in Middletown who still have not gotten the message, let me be clear: Together with our federal and local partners, we will not rest until heroin is off our streets, and until those who supply this destructive drug are brought to justice.”

FBI Assistant Director-in-Charge George Venizelos stated: “Today, we announce the arrest of eight individuals who sought to traffic heroin in the Middleton area. The FBI remains committed to working with our law enforcement partners to investigate those who introduce drugs and other dangers into our neighborhoods.”

NY State Police Superintendent Joseph A. D’Amico stated: “These arrests and the seriousness of the charges these traffickers face show the commitment our law enforcement partners have in keeping dangerous drugs off our streets. Today, eight defendants are behind bars and the heroin they intended to distribute will never reach the Middletown community."

The Indictment charges eight defendants, FREDDIE SERRANO, a/k/a “Jose,” 53, GISELLE SANTANA,33, JOHN BAKER, a/k/a “Johnny Joint,” 38, DEBRA JEAN BLISS, 61, ANTONIO DIAZ-PEREZ, a/k/a “TONE,” 39, JOSEPH FREEHILL, 36, FRANCISCO RODRIGUEZ, a/k/a “Tito,” 58, and ANGEL SOSTRE-SOSTRE, a/k/a “Nito,” 47, with conspiring to distribute, and possess with intent to distribute, over a kilogram of heroin.

The charge against each defendant and the corresponding maximum potential penalties are outlined in the chart attached to this press release. The maximum potential sentences are prescribed by Congress and are provided for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Seven of the defendants charged in the Indictment were arrested today. Five were presented in White Plains federal court this afternoon before U.S. Magistrate Judge Judith C. McCarthy; two are scheduled to be presented tomorrow, and the eighth is currently in the Orange County Jail on unrelated charges.

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

The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Michael Gerber and Jessica K. Feinstein 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.

CHARGE(S) DEFENDANTS MAXIMUM PENALTIES

Narcotics conspiracy

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

a/k/a “Jose,”

Life in prison

GISELLE SANTANA,

JOHN BAKER,

a/k/a “Johnny Joint,”

DEBRA JEAN BLISS,

ANTONIO DIAZ-PEREZ,

a/k/a “TONE,”

JOSEPH FREEHILL,

FRANCISCO RODRIGUEZ,

a/k/a “Tito,” and

ANGEL SOSTRE-SOSTRE,

a/k/a “Nito.”

Mandatory minimum: 10 years in prison

Preet Bharara, the United States Attorney for the Southern District of New York, announced criminal charges today against JUAN MEDINA. MEDINA faces federal charges for lying to the United States Secret Service about his responsibility for making a fake emergency call about a plot to assassinate the President of the United States. MEDINA was arrested this morning at his home in Yonkers, and was presented this afternoon in White Plains federal court before United States Magistrate Judge Judith C. McCarthy, who released him on a $25,000 personal recognizance bond secured by two co-signers.

According to a Complaint filed today in White Plains federal court:

On or about August 29, 2014, when the President of the United States was visiting Westchester County, 911 emergency operators received a phone call reporting that a former roommate of the caller (“the suspect”) was traveling to New York with AR-14 and AK-47 firearms to kill the President. The caller, who identified himself only as “Hassan,” gave law enforcement the suspect’s address in New Haven, Connecticut, and a description of the roommate’s vehicle.

Following the 911 call, dozens of federal, state, and local law enforcement were dispatched in New York and Connecticut in an attempt to locate the roommate and his vehicle. Secret Service agents arrived at the suspect’s New Haven residence and interviewed his neighbors. Based on the results of their investigation, agents guided their interagency search teams to a few neighboring towns. Hours later, officers from the Hamden Police Department identified the suspect’s vehicle in a parking lot. Secret Service agents then located and interviewed the suspect at a nearby residence. Searches of the suspect’s vehicle and the residence revealed no evidence supporting the allegations in the 911 call. The suspect, who was surprised that the Secret Service was looking for him, cooperated with law enforcement and told agents that he believed an individual named “Juan,” who was a friend of his girlfriend, was responsible for the 911 call.

On or about September 1, 2014, Secret Service agents traveled to the home of the suspect’s girlfriend in Yonkers, New York. JUAN MEDINA, the defendant, answered the door. After being informed by the Secret Service agents that they were federal agents, MEDINA acknowledged that he disliked the suspect but, in response to questioning by the Secret Service about the 911 call, MEDINA denied having made the call.

On or about September 3, 2014, JUAN MEDINA voluntarily agreed to be interviewed by the Secret Service and Yonkers police. During the interview, MEDINA again denied making the 911 call about the plot to kill the President, and he denied knowing who made the call. MEDINA provided a written statement summarizing his denial.

At the request of the Secret Service, MEDINA agreed to be interviewed again. During this interview, MEDINA admitted that he was the one who made the 911 call. MEDINA told the Secret Service that he had made the call using a pre-paid “burner” cellphone, which he later sold on the street. MEDINA said he made the call because he did not approve of the relationship between his former roommate (the suspect) and the girlfriend, and he wanted to get his former roommate in trouble.

MEDINA, 30, a resident of Yonkers, New York, is charged with one count of making false statements to federal authorities, which carries a maximum sentence of 5 years’ imprisonment. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Mr. Bharara praised the investigative efforts of the United States Secret Service and their law enforcement partners, specifically the New York State Police, the Yonkers Police Department, the Connecticut State Police, the Hamden Police Department, the New Haven Police Department, the Fairfield Police Department, the East Haven Police Department, the Westchester County Department of Public Safety, and the FBI’s Joint Terrorism Task Forces in White Plains, New York and New Haven, Connecticut.

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

The case is being handled by the Office’s White Plains Division. Assistant U.S. Attorney Jessica K. Feinstein is in charge of the prosecution

Medina 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 Field Office of the Federal Bureau of Investigation (“FBI”), and Joseph Burton, Jr., the Chief of Police of the Village of Ossining Police Department, announced the filing of a federal criminal Complaint charging ANTHONY GRECCO, 33, of Manville, New Jersey, and ANDREA BEATTY, 27, of New Brunswick, New Jersey, in connection with the fatal robbery of Ryan Ennis of Ossining, New York. BEATTY was arrested this morning and is expected to be presented later today in White Plains federal court before United States Magistrate Judge Judith C. McCarthy. GRECCO is currently detained at the Somerset County Jail in Somerville, New Jersey. It is expected that he will be presented in White Plains federal court later this week.

U.S. Attorney Preet Bharara stated: “As alleged in the Complaint, the defendants carried out a violent robbery that resulted in a brutal death. Thanks to the dogged investigative work of the FBI and the extraordinary dedication of our local partners, the defendants will have to answers for their crimes. I particularly want to thank District Attorney Janet DiFiore and her team at the Westchester County District Attorney’s Office for their assistance with this investigation.”

Assistant Director in Charge George Venizelos stated: “This murder was as violent as it was gruesome and is the most recent example of the violence drugs can cause. The impressive cooperation between the Ossining Police Department, Westchester District Attorney and federal law enforcement made today’s arrest a reality.”

Chief Joseph Burton, Jr. of the Village of Ossining Police Department stated: Chief Joseph Burton, Jr. of the Village of Ossining Police Department stated: “I would like to thank all of the agencies that helped us continue our investigation across state lines, especially the Westchester County District Attorney’s Office, the Westchester County Police Forensic Investigation Unit, the United States Attorney’s Office, the Federal Bureau of Investigation and all of our counterparts in New Jersey. I am especially proud of Detective Lieutenant William Sullivan for his leadership and the members of the Ossining Police Department Detective Division for their dedication and perseverance. Their determination and tenacious approach were critical in apprehending these suspects. This was a total team effort involving 10 law enforcement agencies from New York and New Jersey, all working together as a team, which resulted in the timely arrest of these two defendants. Hopefully this will give some closure to the victim’s family.”

According to allegations in the Complaint:

On August 27, 2014, shortly after 9:00 p.m., Ryan Ennis was found dead in an apartment in Ossining, New York. An autopsy was performed, and Ennis’s death was ruled a homicide. There was a large wound to the left side of Ennis’s neck, a large wound to the back of Ennis’s head, and additional wounds on his abdomen and upper left arm. The medical examiner determined that Ennis had been killed between 18 and 36 hours earlier.

The account history for Ennis’s cellphone shows that on August 26, 2014, between the hours of 9:37 a.m. and 7:28 p.m., there were 35 text messages between Ennis’s cellphone and a cellphone identified as belonging to GRECCO. The text messages discuss a drug transaction between Ennis and GRECCO scheduled to take place after 4:00 p.m. on August 26.

After the 7:28 p.m. message between Ennis and GRECCO on August 26, no other text messages were received by, or transmitted from Ennis’s cellphone. There was an incoming call to Ennis’s cellphone at 7:36 p.m. from GRECCO’s phone. Cellphone data shows that at the time of the 7:36 p.m. call, GRECCO’s phone was located in the vicinity of Croton Avenue, at the intersection of Routes 9 and 133, approximately half a mile from the apartment where Ennis was found dead.

On September 23, 2014, law enforcement officers interviewed GRECCO in Manville, New Jersey. During the interview, GRECCO admitted that in August he traveled to New York with another person for the purposes of robbing Ennis, to whom GRECCO had sold marijuana in the past, and that the robbery had not gone according to plan.

On October 22, 2014, law enforcement officers interviewed BEATTY in Ossining, New York. BEATTY admitted that in August 2014, she went to New York with GRECCO and another man for the purpose of committing a robbery. BEATTY knew before she made the trip that GRECCO intended to rob a man who owed him money in connection with drugs. BEATTY described the apartment complex where she drove GRECCO to commit the robbery and led officers to the apartment where Ennis was found dead.

BEATTY recalled that when GRECCO came back to her car after going into the apartment building to commit the robbery, he appeared flustered and said that the robbery had not proceeded according to plan. GRECCO also said, in effect, that “it” had been easier than he thought it would have been.

After they left the apartment complex, BEATTY drove GRECCO to a rooming house in New Jersey. Inside of the rooming house, GRECCO handed BEATTY a stack of money. She later counted it and found that it totaled $8900. GRECCO used the rooming house bathroom to shower. When he came out of the bathroom, he was carrying a garbage bag with clothing in it. GRECCO asked BEATTY if she knew where he could dispose of the clothing.

The Complaint charges GRECCO and BEATTY each with one count of Hobbs Act Robbery and one count of conspiracy to commit Hobbs Act Robbery, in violation of Title 18, United States Code, Section 1951. If convicted of the two offenses charged in the Complaint, GRECCO and BEATTY each face a combined maximum prison term of 40 years. The maximum potential sentences are prescribed by Congress and are provided 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 Ossining Police Department and the FBI’s Westchester County Violent Crimes Task Force, which is comprised of investigators from the FBI, the Westchester County Department of Public Safety, the Westchester County District Attorney’s Office, and the City of Yonkers Police Department. Mr. Bharara also thanked the following agencies for their assistance with the investigation: the FBI’s Newark Division; the Manville, New Jersey Police Department; the New Brunswick, New Jersey Police Department; the Middlesex County Prosecutor’s Office; and the Somerset County Prosecutor’s Office.

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

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

Grecco et al.Complaint
Grecco et al.Complaint
 

Preet Bharara, the United States Attorney for the Southern District of New York, and Thomas O'Donnell, Special Agent in Charge of the U.S. Department of Health and Human Services, Office of Inspector General’s (“HHS-OIG”) New York Region, announced today that the United States has obtained a temporary restraining order (“TRO”) in Manhattan federal court against NARCO FREEDOM, INC. (“NARCO FREEDOM”), a provider of health care services including outpatient chemical dependency clinics. The TRO addresses an ongoing fraudulent kickback scheme whereby NARCO FREEDOM offers Medicaid recipients short-term housing in residences known as “three-quarter houses” or “Freedom Houses,” conditioned upon those residents attending NARCO FREEDOM’s outpatient clinics, thereby generating tens of millions of dollars in Medicaid funds for NARCO FREEDOM. The TRO enjoins NARCO FREEDOM from evicting the residents of its Freedom Houses for refusing to engage in the kickback scheme. U.S. District Judge John G. Koeltl entered the TRO today.

Manhattan U.S. Attorney Preet Bharara said: “Through its alleged scheme, Narco Freedom has both defrauded the government and profited from the exploitation of vulnerable individuals specifically when they are most in need of help. There is now a temporary restraining order in place that protects these vulnerable individuals, and this Office looks forward to obtaining further relief to remedy the alleged fraud that Narco Freedom has perpetrated.”

HHS-OIG Special Agent in Charge Thomas O'Donnell said: “The conduct displayed by Narco Freedom is another example of the damage personal greed does to our nation’s healthcare system. HHS-OIG recognizes the importance of substance abuse treatment, and will continue to ensure that those who provide those services do so in an honest fashion that complies with the law.”

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

Since in or about 2006, NARCO FREEDOM has been engaged in a scheme to induce individuals who qualify for Medicaid, and who lack stable housing, to enroll in and attend NARCO FREEDOM’s outpatient clinics in exchange for short-term housing in residences known as “three-quarter houses,” which NARCO FREEDOM refers to as “Freedom Houses.” NARCO FREEDOM allows individuals without housing, many of whom have been recently released on parole, to reside in the Freedom Houses for approximately six to nine months, but requires all Freedom House residents to enroll in and attend its outpatient clinics, and evicts residents who do not comply. NARCO FREEDOM operates the Freedom Houses specifically in order to drive business to its outpatient clinics, and forces residents of its Freedom Houses who are already enrolled in other outpatient programs to transfer to NARCO FREEDOM’s outpatient programs, in violation of the Patients’ Rights provision of the New York State Code.

The complaint alleges that residents of the Freedom Houses are forced to sign paperwork purporting to relinquish any housing rights as well as privacy rights under the Health Care Portability and Accountability Act and other federal statutes. Staff at the Freedom Houses then monitor the residents’ attendance at outpatient programs and evict residents who do not attend all outpatient services as directed. NARCO FREEDOM obtains substantial financial gain from these outpatient services, which are funded almost entirely through Medicaid. NARCO FREEDOM also requires the Freedom House residents to direct their monthly shelter allowance provided by the New York City Human Resources Administration to NARCO FREEDOM. The Freedom Houses are the subject of numerous building code violations and resident complaints, including lack of basic sanitation and failure to curb drug use in the residences. The scheme exploits vulnerable individuals who are forced to comply with NARCO FREEDOM’s rules because they lack stable housing options.

According to the complaint, NARCO FREEDOM has subjected HHS to tens of millions of dollars in losses in Medicaid funds paid as a result of its fraudulent kickback scheme.

Mr. Bharara thanked the Office of the Inspector General at HHS-OIG for its investigative efforts and ongoing support and assistance with the case.

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

US v. Narco Freedom Complaint_14-CV-8593
US v. Narco Freedom TRO
 

Preet Bharara, the United States Attorney for the Southern District of New York, and Thomas O’Donnell, Special Agent in Charge of the New York Region of the Office of Inspector General (OIG) for the U.S. Department of Health and Human Services (HHS), announced today that the United States filed a civil fraud lawsuit in Manhattan federal court against THE TRUSTEES OF COLUMBIA UNIVERSITY IN THE CITY OF NEW YORK (“Columbia University”), and ICAP (formerly known as INTERNATIONAL CENTER FOR AIDS CARE AND TREATMENT PROGRAMS) (collectively, “Columbia”) for submitting false claims in connection with federal grants that Columbia University obtained to fund ICAP’s AIDS- and HIV-related work. The United States’ Complaint-in-Intervention (the “Complaint”) alleges that Columbia University, as the grant administrator on behalf of ICAP, received millions of dollars in federal grants and, pursuant to the rules applicable to such grants, was required for nearly 200 of ICAP’s employees located in New York City to use a suitable means of verifying that the employees had actually performed the work charged to a particular grant. The Complaint alleges that Columbia was well aware that this was not being done, yet continued wrongly to charge many federal grants for work that was not devoted to the projects they funded. The lawsuit seeks damages and penalties under the False Claims Act.

Simultaneous with the filing of the lawsuit, the United States settled the claims against Columbia pursuant to a settlement stipulation approved today by U.S. District Judge Lorna G. Schofield. In the settlement and as detailed below, Columbia admitted failing to use a suitable means of verifying whether the salary and wage charges that ICAP applied to specific federal grants were based on an employee’s actual effort for that grant. Columbia also admitted that as a result, certain effort reports contained inaccurate information, and for a number of years ICAP mischarged certain federal grants for work that was not allocable to those agreements. Columbia also agreed to pay $9,020,073 to resolve the Government’s claims.

Manhattan U.S. Attorney Preet Bharara said: “Columbia University and ICAP applied to the federal government and received many millions of dollars to fund AIDS and HIV projects around the world. We admire and applaud Columbia’s work in combatting AIDS and HIV. But grantees cannot disregard the terms under which grant money is provided. Grantees are required to use federal money for the purpose for which the grant was given and nothing else. The applicable rules are clear, and they are at the core of ensuring that tax dollars are appropriately spent. Educational institutions, like everyone else, should be held accountable when they fail to follow those rules.”

OIG HHS Special Agent in Charge Thomas O’Donnell said: “Violating rules designed to protect HIV-AIDS grant programs leads to wasteful spending, squandering vital funds that could be used to help end this worldwide epidemic. As HHS is the largest grant-making organization in the Federal government, OIG HHS is committed to protecting these grants and will work tirelessly to ensure all money is used properly.”

As set forth in the Complaint filed in Manhattan federal court:

In 2004, President Bush created the President’s Emergency Plan for AIDS Relief (“PEPFAR program”), a global HIV/AIDS program, targeting billions of dollars in new funding for prevention, treatment, and care services in the most affected countries of the world. That same year, Columbia received $125 million in PEPFAR funding through the Multi-Country Columbia Antiretroviral Program (“MCAP”) grant, and over the years obtained over 75 grants and many millions more from the federal government for HIV- and AIDs-related work performed by ICAP.

These grants are governed by certain rules that require, among other things, that grantees track the work performed by the recipient’s employees and, with limited exceptions, charge grants only for work actually performed as a part of that grant. Columbia claimed to accomplish this by producing effort reports for ICAP’s New York City-based employees purportedly detailing the employees’ distribution of work across federal, state, and private grants, as well as Columbia-sponsored projects. These reports were used to determine how much a given grant was charged for work performed by individual employees.

For nearly 200 individuals, however, these reports were not created or verified by the individuals to whom they applied. Instead, Columbia’s Finance Department provided information for these reports even though the employees of that department had limited or no knowledge of which grants the individuals actually worked on. In addition, the effort reports were certified as correct by the principal investigators on the grants without using suitable means to verify the accuracy of the reports. Instead of taking the appropriate steps to determine whether the reports were accurate, the principal investigators would certify large batches of the reports, without making any inquiry into whether the allocation of work among the grants was accurate. Moreover, ICAP’s management was well aware of the inaccuracies of the effort reporting system.

This resulted in Columbia charging grants for work that was not performed on the project being funded by that grant. For instance, an ICAP Finance Analyst stated that he spent approximately 15-20% of his time on MCAP in fiscal year 2010, but his effort report falsely listed his MCAP effort, and related salary charges, as 85%. Likewise, in fiscal year 2010, an ICAP Subcontracts Manager’s effort report listed her effort as 100% MCAP, but the Subcontracts Manager actually worked on three other grants, in addition to MCAP, that year. The time submitted for many other employees was similarly mischarged.

ICAP also charged federal grants for time spent on activities that are not chargeable to any federal grants, such as competitive grant proposal writing. For example, an ICAP Grants Manager spent a significant amount of her time writing competitive grant proposals, but her effort report showed that all of her time was charged to grants, with as much as 92% of her time charged to MCAP in some years.

Mr. Bharara thanked the Office of Inspector General for HHS for its investigative efforts and extensive assistance with the case.

The case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorney Rebecca C. Martin is in charge of the case.

US ex rel. v. Columbia U. and ICAP complaint-in-intervention
US ex rel. v. Columbia U. and ICAP stipulation and order
 

Preet Bharara, the United States Attorney for the Southern District of New York, announced that PATRICK NAYYAR, 50, an Indian citizen who was residing illegally in the United States, was sentenced today in Manhattan federal court to 15 years in prison for crimes related to support he attempted to provide Hizballah, a designated foreign terrorist organization. NAYYAR was convicted in March 2012 after a seven-day jury trial, and he was sentenced today by U.S. District Judge Robert W. Sweet.

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

Between July 2009 and September 2009, NAYYAR and his co-conspirator, Conrad Stanisclaus Mulholland, agreed to provide weapons, ammunition, and vehicles to Hizballah, a U.S.-designated foreign terrorist organization based in Lebanon. During a series of meetings with a confidential informant working with the Federal Bureau of Investigation (“FBI”), who represented himself as able to deliver materials to Hizballah, NAYYAR and Mulholland agreed to sell guns, ammunition, vehicles, bulletproof vests, and night-vision goggles to the confidential informant. During these meetings, NAYYAR and Mulholland also provided the confidential informant with a handgun, a box of ammunition, and a pick-up truck, believing that the confidential informant would deliver the items to Hizballah in Lebanon.

NAYYAR’s co-conspirator Mulholland, 47, who is not a citizen of the U.S. and resides abroad, left the U.S. before charges were filed, and remains at large. The charges against Mulholland are pending, and he is presumed innocent unless and until proven guilty.

Mr. Bharara praised the investigative work of the FBI’s New York Joint Terrorism Task Force.

The case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Sean Buckley and Stephen Ritchin are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States has filed a civil healthcare fraud lawsuit in Manhattan federal court against COMPUTER SCIENCES CORP. (“CSC”) and the CITY OF NEW YORK (the “CITY”). The Government’s Complaint seeks treble damages and civil penalties under the False Claims Act against CSC and the CITY for orchestrating billing fraud schemes that used computer programs to automatically alter billing data. Two of the schemes involved CSC and the CITY using computer programs to circumvent the requirement that Medicaid should be billed after private insurance coverage had been exhausted, and a third scheme involved the use of a defaulting program to systematically falsify diagnosis codes submitted to Medicaid. According to the Complaint, these fraud schemes caused the submission of tens of thousands of false claims to Medicaid and allowed the CITY, through CSC, improperly to obtain millions of dollars of Medicaid reimbursements.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, CSC and the City created computer programs that systematically, and fraudulently, altered billing data in order to get paid by Medicaid as quickly as possible and as much as possible. Billing frauds like those alleged undermine the integrity of public healthcare programs like Medicaid. All public healthcare program participants, whether they are healthcare providers, localities like the City, or contractors like CSC, should understand that they must comply with the applicable billing rules.”

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

In New York State, early intervention program (“EIP”) services are available to children under the age of three who demonstrated developmental delay or have been diagnosed with medical conditions likely to cause delay. For children in New York City receiving EIP services, the CITY was responsible for processing and paying claims submitted by service providers, then seeking coverage from private insurers or Medicaid or billing New York State for its 49% share of the costs not covered by private insurance or Medicaid.

To minimize its share of the costs of the EIP services, the CITY set annual targets for Medicaid payments and made it a priority to obtain Medicaid payments as soon as possible and for as much as possible. The CITY contracted with CSC to process service provider claims and then seek coverage from private insurers, Medicaid, or the State. To ensure that CSC would focus on obtaining Medicaid payments, the CITY offered CSC financial incentives for exceeding certain targets for Medicaid payments and imposed penalties when CSC failed to meet the CITY’s goals for Medicaid payments. To meet those targets, CSC and the CITY implemented billing fraud schemes using computer programs that automatically altered billing data.

Two of these schemes were designed to circumvent Medicaid’s secondary payor requirement, which required the CITY and CSC to exhaust private insurance coverage before billing Medicaid. In the first scheme, rather than obtaining correct private insurance policy IDs for children who had missing or incomplete policy IDs, CSC developed a program to identify missing insurance policy IDs and then applied a default policy number of 999-999-999, which CSC and the CITY knew would result in denials by private insurers. This scheme enabled CSC and the CITY to submit tens of thousands of false claims to Medicaid without exhausting private insurance coverage and to obtain millions of dollars from Medicaid improperly.

In a second scheme, CSC and the CITY used defaulting programs so that they could bypass waiting for private insurance claims to be adjudicated and, instead, submit claims to Medicaid before private insurers had made a determination regarding payment. CSC developed computer programs that identified all private insurance claims that had been pending for a period of time (initially 90 days, and then 120 days) and then submitted those claims to Medicaid by improperly using a code – 0Fill – to indicate that private insurers either did not cover those services or had adjudicated the claims with zero payment. CSC and the CITY did this even where they knew that the lack of adjudication was due to the CITY’s failure to respond to the private insurers’ requests for information from the CITY in connection with adjudicating the claims. This scheme also resulted in the submission of tens of thousands of false claims to Medicaid without exhausting private insurance coverage and allowed the CITY improperly to obtain millions of dollars in Medicaid reimbursement in violation of Medicaid’s secondary payor requirement.

A third scheme was designed to enable CSC and the CITY to evade their responsibility to ensure that EIP service providers supplied accurate and complete diagnosis data, which was required before CSC or the CITY could seek Medicaid coverage on behalf of the providers. Instead of setting up procedures for validating the diagnosis data supplied by service providers, CSC and the CITY developed computer programs to identify diagnosis codes from service providers that they expected Medicaid to reject and then replace those codes with 315.9, a generic diagnosis that CSC and the CITY knew would be accepted by Medicaid. As part of this scheme, CSC and the CITY submitted tens of thousands of claims containing false diagnosis data, including diagnoses that were not accurate, to Medicaid. This enabled the CITY to obtain millions of dollars from Medicaid improperly.

The Complaint seeks treble damages and penalties under the False Claims Act for the millions of dollars in reimbursements that Medicaid paid as a result of the false claims that CSC and the CITY submitted in connection with their billing fraud schemes. In addition, the United States seeks compensatory damages under the common law theories of unjust enrichment and mistake of fact.

Mr. Bharara praised the investigative work of the U.S. Department of Health and Human Services Office of the Inspector General, and thanked it for its ongoing assistance. He also thanked the New York State Medicaid Fraud Control Unit for its active cooperation and assistance in the investigation.

The case is being handled by the Office’s Civil Frauds Unit. Mr. Bharara established the Civil Frauds Unit in March 2010 to bring renewed focus and additional resources to combating healthcare and other types of frauds. Assistant U.S. Attorneys Li Yu and Rebecca C. Martin are in charge of the case.

US v CSC and City of New York Complaint

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 DAVID POST pled guilty today in Manhattan federal court to one count of conspiracy to commit securities fraud and three counts of securities fraud in connection with an insider trading scheme in which POST received material, nonpublic information from a co-conspirator (“CC-1”) who worked for a pharmaceutical company (the “Pharma Company”). POST then made profitable securities trades based on the information provided by CC-1 and reaped over $700,000 in profits. The information concerned potential and actual corporate transactions, including acquisitions. POST pled guilty before U.S. District Judge Alvin K. Hellerstein.

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

According to the Information and statements made at today’s plea proceeding in Manhattan federal court:

From at least 2010 through August 2014, POST engaged in an insider trading scheme involving trading around information related to the acquisitions of certain pharmaceutical companies. POST received material, nonpublic information related to potential acquisitions from CC-1, who was a Senior Finance Analyst in the Financial Evaluation and Analysis Group of the Pharma Company. POST and CC-1 communicated with each other via disposable cellphone to disguise their communications. As part of his employment, CC-1 performed work in connection with numerous potential and actual corporate transactions, including acquisitions. CC-1 also had access to a computer directory maintained by the Pharma Company which contained material, nonpublic information related to potential acquisitions by the Pharma Company.

POST on multiple occasions received from CC-1 material, nonpublic information related to future acquisitions by the Pharma Company, including the identities of companies that were in negotiations with the Pharma Company for potential acquisitions (the “Target Companies”). POST then traded in the securities of the Target Companies. The Target Companies were subsequently acquired, in one instance by the Pharma Company, and the prices of the shares of the Target Companies increased after the acquisitions were announced publicly. POST then sold his positions in the shares of the Target Companies, thereby profiting from the movement in stock price. From this illegal trading, POST earned profits in excess of $737,000. POST gave approximately $57,000, in cash, of his illegal proceeds to CC-1, as part of CC-1’s share of the scheme’s profits.

POST, 42, of Livingston, New Jersey, pled guilty to one count of conspiracy to commit securities fraud and three counts of securities fraud. The conspiracy count carries a maximum sentence of five years in prison. The three counts of securities fraud each carry a maximum of 20 years in prison. POST also faces a maximum fine of $5,000,000, or twice the gross gain or loss from the offense on the conspiracy count, and agreed as part of his plea agreement to forfeit the proceeds he obtained as a result of the offenses. 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. POST is scheduled to be sentenced by Judge Hellerstein on February 6, 2015 at 11:00 a.m.

Mr. Bharara praised the investigative work of the FBI. He also thanked the SEC 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 Jessica Masella and Edward Kim are in charge of the prosecution.

U.S. v. David Post Information

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States filed a civil injunction complaint in Manhattan federal court against five individuals, LESTER MORRISON, PAULETTE BULLOCK, GARY HANNA, JOY DAVID, and KEVIN VADEN, who were previously convicted of preparing fraudulent federal tax returns through a tax preparation business, to prohibit them from preparing tax returns for others or engaging in activities that substantially interfere with the administration of federal tax laws.

Manhattan U.S. Attorney Preet Bharara said: “Tax preparers who filed fraudulent returns using the names of deceased children or by concocting phony business losses should not be permitted to continue preparing tax returns for others. This Office is committed to bringing cases like this to protect the integrity of the tax system and the general treasury, which is, after all, the people’s money.”

As set forth in the Complaint:

MORRISON, BULLOCK, HANNA, DAVID, and VADEN all were involved in a tax preparation business with locations in the Bronx and in Englewood, New Jersey. Through that tax preparation business, defendants orchestrated a tax fraud scheme from 2000 to 2008. As part of the scheme, defendants prepared thousands of false and fraudulent tax returns that sought improper deductions through a variety of deceptive means. For example, defendants used the stolen identities of deceased children to claim those children as dependents for the purpose of seeking deductions, claimed phony business losses for non-existent businesses, and falsely claimed education credits.

In 2009 and 2010, all five defendants were indicted based on their participation in this tax fraud scheme. Subsequently, all defendants pled guilty to tax fraud in federal court. HANNA, DAVID, and VADEN have been released from prison, while BULLOCK and MORRISON are scheduled to be released in 2015 and 2016, respectively.

To prevent these defendants from resuming the practice of preparing false and fraudulent tax returns or otherwise interfering with tax collection and administration in the future, the United States seeks a permanent injunction against each defendant to bar him or her from preparing tax returns for others or engaging in any other activity that substantially interferes with the administration of federal tax laws.

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

Defendants Agree to Injunctive Relief and Payment of $330,000 Penalty

Preet Bharara, the United States Attorney for the Southern District of New York, and Judith Enck, Regional Administrator of the U.S. Environmental Protection Agency (“EPA”), announced today that the United States has filed and simultaneously entered into a consent decree settling a civil lawsuit against the KIRYAS JOEL POULTRY PROCESSING PLANT, INC. and KIRYAS JOEL MEAT MARKET CORPORATION (collectively, “Defendants”), for violations of the Clean Water Act (“CWA”) in connection with the operation of a poultry processing plant in Orange County.

U.S. Attorney Preet Bharara stated: “For years, the defendants flouted the law by repeatedly discharging waste from their poultry slaughterhouse into the waters of the United States. Today’s consent decree will ensure that the defendants do not resume these illegal practices in the future and requires them to pay a significant financial penalty for their misconduct. ”

EPA Regional Administrator Judith Enck stated: “From disposing of chicken parts and fats directly into storm drains and sewers, to discharging animal waste into Ramapo River tributaries, this poultry processing plant has a long history of violating the Clean Water Act. This legal agreement and fine will help protect the Ramapo River.”

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

At various times between September 2008 and March 2012, the Defendants have spilled and allowed the overflow of untreated wastewater from their poultry processing plant into storm drains and storm sewers that discharge into two tributaries of the Ramapo River, known as Highland Brook and Tributary No. 25, in the Village of Kiryas Joel, in Orange County, New York. Between January 2008 and May 2011, Defendants also failed to obtain a permit for the discharge of stormwater associated with industrial activities, and illegally discharged contaminated stormwater through storm drains. Finally, from January 2008 to April 2011, Defendants discharged substantial volumes of untreated wastewater to the local sewage plant, interfering with that plant’s operations and causing contaminated waste to be discharged into the waters of the United States in violation of the sewage plant’s permit.

In the consent decree filed today, Defendants admit, acknowledge, and accept responsibility for the following:

• At various times between September 2008 and March 2010, and again on March 18, 2012, Defendants took inadequate steps to prevent spills of untreated wastewater from overflowing into storm drains that discharged to waters of the United States.
• From at least 2008 until May 1, 2011, as dischargers of stormwater associated with industrial activity, Defendants failed to apply for an individual permit or to seek coverage under a stormwater general permit, as required by law.
• At various times from at least 2008 until May 1, 2011, Defendants took inadequate steps to prevent stormwater associated with their industrial activities from discharging into storm drains and storm sewers that ultimately discharged into waters of the United States.
• At various times between January 2008 and April 2011, Defendants discharged wastewater containing excess concentrations of pollutants into the sewage plant at levels that caused violations of the plant’s permit.

Pursuant to the consent decree filed today in the United States District Court in White Plains, Defendants will pay a civil penalty of $330,000. To ensure Defendants’ compliance with the CWA, Defendants also agree, among other measures, to conduct ongoing monitoring and recording of pretreatment operations and to submit to EPA an emergency operation plan and a corrective plan of action to prevent CWA violations from reoccurring. Defendants will be subject to substantial additional penalties if they fail to adhere to any of the deadlines in the consent decree and cause further violations of the CWA.

The consent decree will be lodged with the Court for a period of at least 30 days before it is submitted for the Court’s approval, in order to provide public notice and to afford members of the public the opportunity to comment on the consent decree.

This case is being handled by the Office’s Environmental Protection Unit. Assistant United States Attorney Tomoko Onozawa is in charge of the case.

KJP CD - 2014.10.23 CONSENT DECREE (to be filed)
United States v. KJPPP, 14 Civ. 8458 (VB) - Complaint

Preet Bharara, United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and William J. Bratton, the Commissioner of the New York City Police Department (“NYPD”), announced today the arrest of JOSEPH P. DWYER and RONALD G. BUELL on charges that DWYER, a private investigator often retained by Court-appointed attorneys in the Southern District of New York, paid bribes to BUELL, then an NYPD Officer, so that BUELL would access a confidential federal law enforcement database to obtain personal information about potential witnesses in federal criminal cases. DWYER was also charged with mail fraud for improperly billing the Criminal Justice Act fund – which provides public funds for indigent defendants – in connection with the bribery scheme. DWYER and BUELL were arrested this morning, and presented this afternoon in Manhattan federal court before U.S. Magistrate Judge James L. Cott.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, private investigator Joseph Dwyer bribed NYPD officer Ronald Buell for confidential reports from a federal law enforcement database, and, at least in some instances, asked the public to foot the bill. Private investigators assisting criminal defendants can – and should – do many things to serve their clients, but bribing law enforcement officials for confidential data is not one of them. Any private investigator who pays such a bribe, and any law enforcement officer who accepts one, should expect to be prosecuted.”

FBI Assistant Director-in-Charge George Venizelos said: “As alleged, Dwyer and Buell conspired to access a database containing sensitive law enforcement information, abusing their positions of trust for personal gain. In addition to robbing us of taxpayer money, corrupt practices rob us of trust in government, particularly with respect to those who take an oath to enforce and obey the law, not break it. The FBI will continue to investigate those in public positions who engage in corrupt activities.”

Commissioner of the NYPD William Bratton said: “These two individuals are charged with crimes that involved the abuse of their positions for monetary gain. By illegally accessing confidential information, they undermined the integrity of law enforcement operations and data systems. I want to thank our law enforcement partners and the NYPD Internal Affairs Bureau for their commitment in pursuing this case.”

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

The Federal Bureau of Investigation operates the National Crime Information Center database (“NCIC”), which allows federal, state and local law enforcement the ability to access confidential personal information about individuals in connection with their law enforcement duties. The database is not accessible to the general public, and the disclosure of certain information in the database can jeopardize law enforcement operations and safety.

Between at least October 2011 through at least in or about November 2013, BUELL, while an active-duty member of the New York City Police Department, accessed the NCIC using a New York state computer system on at least 15 occasions to obtain criminal history information and other personal information related to witnesses and other individuals associated with at least 11 federal criminal prosecutions in the Southern District of New York on which DWYER had been retained as a defense investigator and paid with public funds pursuant to the Criminal Justice Act (“CJA”), Title 18, United States Code, Section 3006A.

During the same time period, BUELL deposited into his personal bank account at least 17 checks issued by DWYER’s private investigations firm, totaling nearly $9,000. In addition, DWYER submitted billing invoices to the CJA administrative office in the Southern District of New York seeking payments and reimbursements for purported investigative work performed to obtain criminal histories of the individuals associated with the federal criminal prosecutions, when, as alleged, DWYER had illegally obtained the criminal history information through bribes paid to BUELL. The United States Treasury Department issued checks on these invoices, which were mailed from a location outside the State of New York to DWYER’s office on Long Island, New York.

DWYER, 46, is charged with one count of participating in a conspiracy to commit bribery and to access a federal database without authorization, one count of bribery, one count of unauthorized database access, and one count of mail fraud. He faces a maximum sentence of 45 years in prison.

BUELL, 48, is charged with one count of participating in a conspiracy to commit bribery and to access a federal database without authorization, one count of bribery, and one count of unauthorized database access. He faces a maximum sentence of 25 years in prison.

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

Mr. Bharara praised the investigative work of the Criminal Investigators at the United States Attorney’s Office, the Federal Bureau of Investigation and the NYPD Internal Affairs Bureau. Mr. Bharara noted that the investigation is ongoing.

The case is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Hadassa Waxman and Brooke E. Cucinella are in charge of the prosecution.

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

U.S. v. Dwyer and Buell Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced that MELANIE FERREIRA was sentenced yesterday afternoon in White Plains federal court to 51 months in prison following her conviction for engaging in a series of frauds, which included cheating the Internal Revenue Service (“IRS”) out of nearly half a million dollars, and perpetrating a bank fraud scheme. U.S. District Judge Cathy Seibel, who presided over FERREIRA’s seven-day jury trial in February 2014, imposed the sentence.

U.S. Attorney Preet Bharara said: “Melanie Ferreira thought she could enjoy the fruits of law-abiding taxpayers’ money while evading the tax laws and defrauding the government. Through yesterday’s sentence, she learned how wrong she was.”

According to the Indictment and the evidence presented at trial:

On October 15, 2009, FERREIRA filed a U.S. Individual Income Tax Return, Form 1040, for the year 2008 (“2008 Return”). In her 2008 Return, she falsely reported interest income of $661,600 from three different banks. She then falsely claimed that she had paid taxes in the amount of $661,536 to the IRS for 2008. On that basis, she claimed a refund of $440,924. In reality, in 2008 she actually earned only $17 in interest income. Further, contrary to her claim on her 2008 Return that she had already paid $661,536 in federal taxes, she actually paid only $236.

On October 23, 2009, the IRS wired $440,924 to FERREIRA’s bank account. That same day, FERREIRA wired $44,100 to the individual listed on her tax return as her “tax preparer” and $88,172 to the individual who introduced her to the “tax preparer.”

The following spring, on April 15, 2010, FERREIRA tried to carry out the same type of scheme – requesting a refund of more than $332,033 – when she filed her Form 1040 for the year 2009, but this time, the IRS rejected her refund request. Thereafter, when the IRS notified FERREIRA that she was required to pay back the $440,924 plus interest and penalties, FERREIRA sent the IRS a worthless check for $759,033.05 written on a closed account.

FERREIRA also perpetrated a bank fraud scheme against the Bank of America (“BOA”), the bank that held the mortgage for her house in Dutchess County, New York (“House 1”). In May 2010, she caused a forged cashier’s check for $316,966.05, purporting to be drawn on the Federal Reserve Bank of Cleveland, Ohio (“Check 1”), to be sent to BOA in satisfaction of the mortgage on House 1. Believing that Check 1 was legitimate, BOA filed a satisfaction of mortgage. BOA subsequently determined that Check 1 was fraudulent and filed suit in New York State Supreme Court in order to have the mortgage reinstated. On June 2, 2012, FERREIRA sent a personal check in the amount of $305,000 (“Check 2”) to BOA, purporting, again, to pay off the balance of her mortgage. On the memo line of Check 2, FERREIRA wrote, in red ink, “FOR DISCHARGE OF DEBT EFT ONLY.” Check 2 was written on a bank account that had been closed two years before.

FERREIRA’s schemes – sometimes known as a 1099-OID scheme and an electronic funds transfer or “EFT” scheme – are often used by adherents to the Sovereign Citizens Movement, a group of individuals who, although they reside in the United States, assert the position that they do not have to answer to any government authority, including courts, taxing entities, motor vehicle departments or law enforcement.

In addition to the prison term, Judge Seibel sentenced FERREIRA, 62, of Lagrangeville, New York, to three years of supervised release. FERREIRA was also ordered to make restitution and to forfeit $440,924 that she had wrongfully obtained from the IRS. FERREIRA was ordered to forfeit approximately $96,000 worth of gold Krugerrands and silver coins that she had purchased with the proceeds of her crimes.

In sentencing FERREIRA, Judge Seibel noted that the defendant’s offenses involved “blatant, shameless lies” and that the defendant had “thumbed her nose” at the Government and the Court. The Judge added that FERREIRA showed “no respect for the system” and acted like she was “above the law.”

Mr. Bharara praised the outstanding investigative work of the law enforcement partners involved in the investigation, including the Federal Bureau of Investigation’s Joint Terrorism Task Force and the IRS.

This prosecution is being handled jointly by the Office’s Terrorism and International Narcotics Unit and the White Plains Division. Assistant United States Attorneys Jason P.W. Halperin and Marcia S. Cohen are in charge of the prosecution.

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 Investigation Division (“IRS-CI”), today announced charges against two individuals for participating in a large-scale tax refund scheme that used tens of thousands of stolen identities to file fraudulent returns to obtain fraudulent tax refund checks. GERARDO ENMANUEL LUNA MARMOLEJOS, a/k/a “Jorge Rodriguez Burgos,” and YOHAURIS RODRIGUEZ HERNANDEZ, a/k/a “Joana Esquilin,” a/k/a “Joana Esquilin Ramirez,” a/k/a “Carla Nunos,” citizens of the Dominican Republic, are charged in a tax fraud scheme involving in excess of 40,000 stolen identities and millions of dollars in fraudulent returns. LUNA MARMOLEJOS and RODRIGUEZ HERNANDEZ were charged in a superseding indictment today and will appear in Manhattan federal court before U.S. District Judge Naomi Reice Buchwald at 3:30 p.m.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Luna Marmolejos and Rodriguez Hernandez conspired to steal tens of thousands of identities in order to file fraudulent tax returns and collect millions of dollars in fraudulent refunds. Tax fraud amounts to theft from the general treasury; and in effect, these defendants allegedly conspired to steal money that belongs to the public. I commend IRS-CI and our other law enforcement partners on this case.”

IRS-CI Acting Special Agent-in-Charge Shantelle P. Kitchen said: “One of the ways the Internal Revenue Service is addressing the identity theft problem is through the vigorous investigation of stolen identity tax refund fraud schemes. These investigations send a clear message about the consequences of filing tax refunds using stolen information, as those involved expose themselves to criminal prosecution and sentences of imprisonment.”

According to the Superseding Indictment filed today in Manhattan federal court:

From at least December 2011 through September 29, 2014, LUNA MARMOLEJOS and RODRIGUEZ HERNANDEZ conspired and engaged in a scheme to steal the names, dates of birth, and Social Security Numbers of individuals, which the defendants then used to file fraudulent income tax returns that claimed tax refunds to which the defendants were not entitled.

LUNA MARMOLEJOS, 23, and RODRIGUEZ HERNANDEZ, 33, both citizens of the Dominican Republic and residing in New Jersey at the time of their arrest, are each charged with one count of conspiracy to steal government funds, which carries a maximum sentence of 5 years in prison, one count of conspiracy to file false claims, which carries a maximum sentence of 10 years in prison, one count of conspiracy to engage in wire fraud, which carries a maximum sentence of 20 years in prison, and one count of aggravated identity theft in connection with the tax fraud scheme, which carries a mandatory sentence of 2 years in prison, to be served consecutively to any other sentence imposed. In addition, LUNA MARMOLEJOS is charged with one count of bail jumping, which carries a maximum sentence of 5 years in prison, to be served consecutively to any other sentence, and one count of visa fraud, which carries a maximum sentence of 10 years in prison. RODRIGUEZ is also charged with one count of visa fraud, which carries a maximum sentence of 10 years in prison, and one count of passport fraud, which carries a maximum sentence of 10 years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the Court.

Mr. Bharara praised the outstanding investigative work of IRS-CI, the United States Postal Inspection Service, Immigration and Customs Enforcement’s Homeland Security Investigations, the United States Marshals Service, and the U.S. Department of State’s Diplomatic Security Service.

This case is being handled by the Office’s General Crimes Unit. Assistant U.S. Attorney Carolina A. Fornos is in charge of the prosecutions.

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

U.S. v. Gerardo Enmanuel Luna Marmolejos & Yohauris Rodriguez Hernandez S1 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, and Judith A. Enck, Regional Administrator for the U.S. Environmental Protection Agency (“EPA”), announced today that the United States has entered into a settlement agreement with a bankruptcy trust on behalf of GETTY PETROLEUM MARKETING INC. (“GPMI”) and GETTY TERMINALS CORP. (“GETTY TERMINALS”) (collectively, “GETTY”), which filed for bankruptcy on December 5, 2011. The settlement resolves Getty’s liabilities at Newtown Creek, a Superfund Site in Brooklyn and Queens, New York, and one of the nation’s most polluted waterways. Pursuant to the settlement agreement, which addresses Getty’s liability under the Comprehensive Environmental Response, Compensation and Liability Act (also known as the Superfund law) and the federal Oil Pollution Act, Getty agrees that the United States will receive an allowed $16 million claim in the bankruptcy process.

U.S. Attorney Preet Bharara said: “For more than a century, irresponsible industrial activities turned Newtown Creek into a tributary of toxic waste. Today’s settlement ensures that Getty takes responsibility for its contribution to that sad legacy, and pays a fair share of clean-up costs at the site. This Office is committed to holding those who contaminate our nation’s lands and waterways accountable for their actions, and bankruptcy is not a free pass for polluters.”

EPA Regional Administrator Judith Enck said: “The Superfund program operates on the principle that polluters should pay for the cleanups, rather than passing the costs to taxpayers. Getty’s decades of irresponsibility and indifference to the environment could pose significant environmental risks to Newtown Creek communities and must be addressed. EPA added Newtown Creek to its Superfund National Priorities List of the country’s most hazardous waste sites in September 2010 because its water and sediment contain a range of contaminants including pesticides, heavy metals, polychlorinated biphenyls (PCBs) and volatile organic compounds. EPA is dedicated to cleaning up this area and will hold all responsible parties accountable.”

In its proof of claim, the United States asserted claims against Getty on behalf of the EPA for clean-up costs at the Newtown Creek Superfund Site and on behalf of the U.S. Department of the Interior (“DOI”) and the National Oceanic and Atmospheric Administration (“NOAA”) of the U.S. Department of Commerce for injuries to natural resources at the site. The proof of claim alleged, among other things, that Getty Terminals operated a facility adjacent to Newtown Creek that stored, blended, and distributed gasoline, fuel oil, and gasoline blending additives, and that Getty Terminals utilized underground and aboveground tanks at the facility for the storage of gasoline, diesel, and fuel oil. As alleged in the proof of claim, during the course of operations of the facility, Getty Terminals discharged contaminants from the facility to Newtown Creek, including effluent with lead concentrations and other hazardous substances.

In the settlement agreement filed in bankruptcy court today, the bankruptcy trustee acknowledges Getty’s admission that GPMI was formed to run the marketing and sales business of the former Getty Petroleum Corporation, including the Newtown Creek facility, and that GPMI leased the facility. The bankruptcy trustee also acknowledges Getty’s admission that Getty Terminals operated the facility and exercised actual control or held significant authority to control activities at the facility. Further, the trustee acknowledges in the settlement agreement that Getty has admitted that a spill occurred at the facility in October 2005.

Under the settlement agreement, the United States will receive an allowed general unsecured claim in the amount of $14,844,800 for EPA in settlement of the United States’ claim for the costs of clean-up at the Newtown Creek Superfund Site, and an additional allowed general unsecured claim in the amount of $1,155,200 for claims by DOI and NOAA relating to natural resource damages and costs of assessment at the Newtown Creek Superfund Site. The allowed claims will be paid in an amount to be determined through the bankruptcy process.

The settlement agreement will be lodged with the Bankruptcy Court for a period of at least 30 days before it is submitted for the Court’s approval, to provide public notice and to afford members of the public the opportunity to comment on the consent decree.

Mr. Bharara praised the efforts of EPA, DOI, and NOAA in this case.

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

In Re Getty Notice of Lodging

Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and William J. Bratton, Commissioner of the New York City Police Department (“NYPD”), announced the extradition of HAROON ASWAT from the United Kingdom to face charges of conspiring to provide and providing material support to al Qaeda and terrorists for attempting to establish a terrorist training camp in the United States.

ASWAT was arrested in Zambia in July 2005, and in August 2005, ASWAT was deported from Zambia to the United Kingdom, where he was arrested pursuant to a provisional warrant that was issued in response to a request by the U.S. Government in connection with this case. On September 4, 2014, the United Kingdom ordered ASWAT extradited to the United States on the charges described below. In coordination with British authorities, ASWAT was extradited from the United Kingdom to the Southern District of New York on October 21, 2014. ASWAT will make his first court appearance later today before U.S. District Judge Katherine B. Forrest.

According to the allegations contained in the Indictment, statements made at related court proceedings, and evidence presented at prior trials:

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

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

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

In September 2002, special agents from the FBI recovered a ledger, among other items, from an al Qaeda safe house in Karachi, Pakistan. The ledger listed a number of individuals associated with al Qaeda, including ASWAT. The al Qaeda safe house was used by Khalid Sheikh Mohammed, al Qaeda’s chief operational planner and the alleged planner of the terrorist attacks of September 11, 2001.

The Indictment charges ASWAT, 40, a British citizen, with four offenses that carry the following maximum penalties:

1) Conspiracy to provide material support to terrorists (18 U.S.C. § 371): Five years

2) Providing material support to terrorists (18 U.S.C. §§ 2339A, 2): 10 years

3) Conspiracy to provide material support to a foreign terrorist organization (al Qaeda) (18 U.S.C. §2339B): 10 years

4) Providing material support to a foreign terrorist organization (al Qaeda) (18 U.S.C. §§ 2339B, 2): 10 years

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.

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

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

Mr. Bharara praised the outstanding efforts of the FBI’s Manhattan-based Joint Terrorism Task Force, which principally consists of agents and detectives of the FBI and the NYPD, the United States Marshals Service, and the Metropolitan Police Department of London, England. Mr. Bharara also thanked the U.S. Department of Justice’s National Security Division and Office of International Affairs for their ongoing assistance.

This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys John P. Cronan and Ian McGinley are in charge of the prosecution.

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that XING LIN, a/k/a “Ding Pa,” the leader of a gang that operated for nearly 15 years in the Chinatown neighborhood of Manhattan as well as in Queens, Atlanta, and Toronto, was sentenced today in Manhattan federal court to life in prison on murder, extortion, and racketeering charges. Following a three-week trial in April 2013, a jury convicted LIN of engaging in racketeering from 1996 through 2009, murdering two individuals in a Queens nightclub in 2004, operating multiple illegal gambling parlors, and extorting bus company owners. LIN was sentenced today by United States District Judge Miriam Goldman Cedarbaum.

Manhattan U.S. Attorney Preet Bharara said: “With today’s sentence, Xing Lin will finally be punished for ordering the murder of two victims, and for his lengthy criminal career of extortion and racketeering. I would like to thank our law enforcement partners at ICE’s Homeland Security Investigations and the New York City Police Department for their hard work on this case.”

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

From 1996 until December 2009, LIN was a “Dai Lo” – a Chinese term that refers to the boss of a criminal gang. LIN’s gang operated in the Chinatown neighborhood of Manhattan; Flushing, Queens; Atlanta, Georgia; Toronto, Canada; and elsewhere. The members of LIN’s gang were known as followers. LIN and his followers, including co-defendant Hao Chao, a/k/a “Little Beijing,” engaged in a number of criminal ventures, including the operation of high-stakes illegal gambling parlors, the extortion of business owners, and the beating, stabbing, and murder of rivals.

Beginning in 2002, LIN extorted the owners of a bus company that operated buses between Manhattan and Raleigh, North Carolina. In May 2004, Chang Qin Zhou, one of the bus company shareholders, whom LIN was extorting, refused to pay LIN additional money that he had demanded. During the early morning hours of July 30, 2004, Zhou was with a group of men and women in a private room in a karaoke bar located on Kissena Boulevard in Flushing, Queens. LIN and Chou forced their way into the private room, and LIN ordered Chou to “shoot” Zhou. Chou shot Zhou six times, killing him. One of the bullets also struck and killed Mei Ying Li, a waitress who was working at the karaoke bar and who was in the private room at the time of the shooting. A second waitress was shot in the leg and survived.

Following the shooting in the karaoke bar, LIN relocated his criminal gang to Toronto, Canada, where he continued to run gambling parlors and use violence against his rivals.

LIN was arrested in Toronto, Canada, on April 14, 2011. Following extradition, LIN arrived in the United States on August 19, 2011.

In addition to the prison term, LIN, 42, was also ordered to pay a $25,000 fine, and a $400 special assessment fee.

Chou, who was charged in the Superseding Indictment with murder, extortion, and racketeering offenses, is a fugitive. The allegations against Chou are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

Mr. Bharara praised the investigative work of Immigration and Customs Enforcement’s Homeland Security Investigations and the New York City Police Department.

The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Jennifer Burns and Peter Skinner are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, Philip R. Bartlett, Inspector in Charge, United States Postal Inspection Service (“USPIS”), and James J. Hunt, Acting Special Agent in Charge, Drug Enforcement Administration (“DEA”), New York Division, announced today that YINMI RODRIGUEZ, an employee of the New York City Department of Education, and ROBINSON PAULINO were arrested Wednesday on narcotics conspiracy charges. PAULINO and RODRIGUEZ were presented in Manhattan federal court yesterday afternoon before United States Magistrate Judge Gabriel Gorenstein.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Yinmi Rodriguez and Robinson Paulino worked together to deal cocaine using the United States Postal Service. Based on the charges, each could face at least ten years in prison.”

USPIS Inspector in Charge Philip R. Bartlett said: “U.S. Postal Inspectors will vigorously pursue, arrest and bring to justice anyone who uses the US Mail to facilitate the transport of illegal drugs, ensuring the safety of the mail, our employees and customers.”

DEA Acting Special Agent-in-Charge James J. Hunt said: “The arrests of Paulino and Rodriguez result in a lesson learned for drug traffickers everywhere - law enforcement's combined resources will track you down.”

According to the Complaint filed yesterday:

From at least February 2014 through October 15, 2014, ROBINSON PAULINO, YINMI RODRIGUEZ and others engaged in a conspiracy to transport multiple kilograms of cocaine from Puerto Rico to the Bronx for distribution in New York City. Packages containing cocaine were sent via the United States Postal Service from Puerto Rico to PAULINO in the Bronx, New York. RODRIGUEZ, an information technology consultant employed by the New York City Department of Education (“DOE”) since 2008, used an IP address (the “DOE IP Address”) associated with a New York City High School to track the shipment of several of these packages. Once PAULINO received delivery of the packages, he brought them to RODRIGUEZ’s apartment in the Bronx.

Between February and September 2014, numerous packages were sent from Puerto Rico to PAULINO or addresses associated with PAULINO in the Bronx. At least three of these packages were intercepted prior to delivery and found to contain in excess of five kilograms of cocaine.

On October 15, 2014, USPIS Postal Inspectors identified a package sent from Puerto Rico and addressed to “Ron Paul,” at an address in the Bronx associated with PAULINO. After a trained narcotics canine reacted to the package in a manner indicating the presence of narcotics, a USPIS Postal Inspector acting in an undercover capacity delivered the package to PAULINO while other law enforcement agents conducted surveillance. As with prior packages, RODRIGUEZ tracked the shipment of this package from Puerto Rico to the Bronx using the DOE IP Address.

After PAULINO accepted delivery of the package, he was observed delivering the package to RODRIGUEZ’s apartment in the Bronx. USPIS Postal Inspectors and DEA agents then conducted a search of RODRIGUEZ’s apartment, pursuant to a court authorized search warrant, recovering, among other things, two kilograms of cocaine from the delivered package and another kilogram of cocaine hidden in the apartment. PAULINO and RODRIGUEZ, who was present in his apartment at the time of the search, were subsequently arrested.

PAULINO, 31, and RODRIGUEZ, 27, both of the Bronx, are each charged with one count of conspiring to distribute narcotics, which carries a maximum term of life in prison and a mandatory minimum of ten years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the investigative work of the Drug Enforcement Administration and United States Postal Inspection Service.

The case is being prosecuted by the Office’s Narcotics Unit. Assistant U.S. Attorneys Joshua A. Naftalis and Andrea M. Griswold are in charge of the prosecution.

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

U.S. v. Rodriguez and Paulino Complaint

Preet Bharara, the U.S. Attorney for the Southern District of New York , Leslie R. Caldwell, the Assistant Attorney General of the Justice Department’s Criminal Division, and Michael E. Horowitz, the Justice Department Inspector General, announced that JOHANNES THALER, and RIZVE AHMED, a/k/a “Caesar,” a native of Bangladesh and co-conspirator of THALER, pled guilty today in White Plains federal court to bribery and conspiracy to commit honest services and wire fraud before U.S. District Judge Vincent L. Briccetti.

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

Both THALER and AHMED admitted to participating in a bribery scheme with Robert Lustyik, a former FBI Special Agent in White Plains, whereby Lustyik sold confidential, internal law enforcement information to AHMED in exchange for cash.

Lustyik was an FBI Special Agent who worked on the counterintelligence squad in the White Plains Resident Agency. THALER was Lustyik’s friend, and AHMED was an acquaintance of THALER.

From about September 2011 through March 2012, Lustyik and THALER solicited payments of money from AHMED, in exchange for Lustyik’s agreement to provide internal, confidential documents and other confidential information to which Lustyik had access by virtue of his position as an FBI Special Agent. AHMED was a native of Bangladesh who sought confidential law enforcement information, including a Suspicious Activity Report, pertaining to a prominent Bangladeshi political figure who was affiliated with a political party opposing AHMED’s views (“Individual 1”). AHMED sought, among other things, to obtain information about Individual 1, to locate Individual 1, and to harm Individual 1 and others associated with Individual 1.

As part of the scheme, THALER and AHMED exchanged text messages, including text messages about a “contract” the terms of which would require AHMED to pay a $40,000 “retainer” and $30,000 “monthly” and, in return, Lustyik and THALER would “give [AHMED] everything [they] ha[d] plus set up [Individual 1] and get the inside from the party.”

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

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

Lustyik and THALER accepted at least $1,000 from AHMED in exchange for the confidential FBI information, including a Suspicious Activity Report. Lustyik and THALER schemed to obtain additional monthly cash bribes from AHMED, in increments of tens of thousands of dollars, in exchange for additional confidential law enforcement information about Individual 1 and for assistance in having criminal charges against a Bangladeshi political figure dismissed.

THALER, 51, of New Fairfield, Connecticut, pled guilty to one count of bribery and one count of conspiracy to commit honest services and wire fraud. He faces a maximum sentence of 35 years in prison. THALER is scheduled to be sentenced by Judge Briccetti at 11:30 a.m. on January 23, 2015.

AHMED, 35, of Danbury, Connecticut, pled guilty to one count of bribery and one count of conspiracy to commit honest services and wire fraud. He faces a maximum sentence of 35 years in prison. AHMED is scheduled to be sentenced by Judge Briccetti at 2:30 p.m. on January 23, 2015.

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.

Charges against Lustyik, the other defendant who was charged with THALER and AHMED, remain pending. These charges are merely accusations, and the defendant is presumed innocent unless and until proven guilty. Trial is scheduled to begin on November 17, 2014.

This case was investigated by the Department of Justice Office of the Inspector General. The case is being prosecuted by Trial Attorney Emily Rae Woods of the Justice Department’s Public Integrity Section and Assistant U.S. Attorney Benjamin Allee of the White Plains Division of the U.S. Attorney’s Office for the Southern District of New York.

Lustyik Et Al.Indictment
LustyikEtAlComplaint signed (2)
 

Attorney General Eric Holder recognized 278 department employees earlier this week, including six from the U.S. Attorney’s Office for the Southern District of New York, for their distinguished public service at the 62nd Annual Attorney General’s Awards Ceremony. Held Wednesday at DAR Constitution Hall, this annual ceremony recognized both department employees and others for their outstanding dedication to carrying out the Department of Justice’s missions.

Attorney General Holder stated: “With this important event, we come together to honor some of our nation’s most distinguished, dedicated, and deserving public servants. The hard work and impressive achievements of these 278 award recipients have inspired their colleagues at every level of the U.S. Department of Justice – including me. Their leadership has been indispensable in defining the past year as one of historic accomplishment in the face of nearly unprecedented challenge.”

Six Assistant U.S. Attorneys from the Office of Manhattan U.S. Attorney Preet Bharara were honored at the ceremony.

Manhattan U.S. Attorney Preet Bharara stated: “I am exceedingly proud of the accomplishments of the prosecutors in the Bernard Madoff investment fraud. Their tireless work uncovering the breadth of the scheme has led to multiple indictments and convictions, ensuring that all who played a role in the largest Ponzi scheme in history are brought to justice. Their ongoing efforts to achieve meaningful compensation for victims show their commitment not just to holding accountable those responsible for the fraud, but to making the victims whole.”

The John Marshall Award for Asset Forfeiture was presented to Assistant U.S. Attorneys Arlo Devlin-Brown, Christopher D. Frey, Randall Wade Jackson, Paul M. Monteleoni, Matthew L. Schwartz, and John T. Zach for the U.S. Attorney’s Office for the Southern District of New York, and Assistant U.S. Attorney Barbara A. Ward of the U.S. Attorney’s Office for the District of New Jersey. This team is responsible for the investigation and prosecution of various cases stemming from the collapse of Bernard L. Madoff Investment Securities, which was revealed in December 2008 to be the largest Ponzi scheme in history. In the five years since Bernard Madoff was arrested for orchestrating his massive Ponzi scheme, the team conducted an international investigation that resulted in the prosecution of more than a dozen individuals; a deferred prosecution agreement with JPMorgan Chase Bank; and the forfeiture and collection of more than $4 billion. The forfeited funds are being distributed through the largest and most ambitious remission project in the department’s history, where it will reach thousands of victims in dozens of countries, and serve as a precedent for future large-scale remission programs. The team’s extraordinary work, including its novel use of forfeiture, has ensured a meaningful measure of recompense to thousands of innocent victims who otherwise would not have recovered anything from the failed investments.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ROHAN WIJETILAKA was sentenced today by U.S. District Judge Vincent L. Briccetti in White Plains federal court to three years in prison for health care fraud. WIJETILAKA, who previously pled guilty in June 2014, was also ordered by Judge Briccetti to pay a total of $2 million in forfeiture and restitution.

U.S. Attorney Preet Bharara stated: "Sworn to use his education and skills to comfort and heal, Wijetilaka instead resorted to fraud on a massive scale, abusing the trust placed in him by his patients and by the community. Our Office commends the investigative efforts in this case of the Drug Enforcement Administration, the Federal Bureau of Investigation, the U.S. Department of Health and Human Services – Office of the Inspector General, the Westchester County Department of Public Safety, and the Yonkers Police Department.”

According to the Indictment to which WIJETILAKA pled guilty, statements made during the plea, and other information presented during the case:

WIJETILAKA, 65, of Manhattan, was a cardiologist licensed to practice medicine in the State of New York. He maintained a cardiology practice in Westchester County, New York (the “Wijetilaka Practice”), which included examination rooms and diagnostic testing facilities. WIJETILAKA obtained payments for diagnostic tests, office visits, and other procedures (collectively, the “Medical Procedures”) from Medicare and numerous private health insurance providers (the “Health Insurance Providers”).

In July 2007, WIJETILAKA received written notice from the New York State Department of Health, State Board for Professional Medical Conduct (the “State Board”), that he was the subject of a State Board investigation. In November 2011, following an initial inquiry, the State Board served WIJETILAKA with formal charges of professional misconduct relating, in part, to alleged fraudulent billing. In June 2012, after multiple hearings, a State Board committee found against WIJETILAKA on 41 specifications of professional misconduct, including fraudulent billing, filing false reports, and failing to maintain adequate medical records.

To receive payments for Medical Procedures from the Health Insurance Providers, WIJETILAKA was required, among other things, to submit, and cause the Wijetilaka Practice to submit, information to the Health Insurance Providers regarding aspects of the Medical Procedures he performed or caused to be performed. For instance, in order to bill Medicare for a particular patient procedure, WIJETILAKA had to submit a form that stated a diagnosis of the patient’s condition and provided a procedure code identifying the service or services rendered. WIJETILAKA also had to certify, in substance, that the services rendered were medically necessary and furnished by the Wijetilaka Practice.

Between 2009 and 2011, WIJETILAKA routinely performed Medical Procedures at the Wijetilaka Practice for which WIJETILAKA and the Wijetilaka Practice submitted claims to Health Insurance Providers. During this period, WIJETILAKA submitted millions of dollars of claims to Medicare alone.

With respect to many of the Medical Procedures he performed or caused to be performed, WIJETILAKA furnished, and caused to be furnished, false information to Health Insurance Providers (the “Fraudulent Claims”) that resulted in the Health Insurance Providers paying the Wijetilaka Practice for procedures that were medically unnecessary and served no meaningful diagnostic purpose. Among other things, WIJETILAKA falsely billed for office visits that did not occur and falsely reported non-existent symptoms to justify costly and unnecessary diagnostic tests.

In order to attract additional patients to the Wijetilaka Practice and maintain existing patients, WIJETILAKA would and did provide Schedule II controlled substances, including oxycodone, to drug-seeking patients, in exchange for those patients undergoing unnecessary diagnostic tests and other Medical Procedures.

In this manner, WIJETILAKA defrauded Health Insurance Providers out of money paid to the Wijetilaka Practice as a result of the Fraudulent Claims.

Despite being on notice that he was under State Board investigation in July 2007, and being formally charged with professional misconduct by the State Board in or about November 2011, for, among other things, fraudulent billing, WIJETILAKA continued his illicit scheme. To conceal his scheme from the State Board, WIJETILAKA generated additional false records to justify tests that he had performed.

Mr. Bharara praised the investigative efforts of the Drug Enforcement Administration, the Federal Bureau of Investigation, the U.S. Department of Health and Human Services – Office of the Inspector General, the Westchester County Department of Public Safety, and the Yonkers Police Department.

The case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Ilan Graff, Andrew Bauer, Kathryn Martin, and Benjamin Allee are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that BRIAN RAMNARINE was sentenced in Manhattan federal court to 30 months in prison for fraudulently selling and attempting to sell, for more than $11 million, bronze sculptures that he falsely represented to be works of art by prominent artists Jasper Johns, Robert Indiana, and Saint Clair Cemin. RAMNARINE pled guilty in January 2014, on the fifth day of trial, before U.S. District Judge John G. Koeltl, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “Brian Ramnarine’s only art was as a con artist who concocted and carried out not one, but three separate schemes to peddle fake sculptures to unsuspecting buyers for millions of dollars, pretending that they had been made by well-known artists. I would like to thank the Federal Bureau of Investigation, the Police Department of the Port Authority of New York and New Jersey, and the New York State Police for their assistance on this case.”

According to the Indictment, to which RAMNARINE pled guilty, evidence presented at trial, and statements made in Manhattan federal court:

In 1960, Jasper Johns created a painting titled “Flag,” which he gave to fellow artist and friend Robert Rauschenberg. Years later, Johns made a mold (the “Flag Mold”) from that painting in order to make a sculpture. In 1990, Johns provided the Flag Mold to RAMNARINE, who owned a Queens, New York, foundry. Johns instructed RAMNARINE to use the Flag Mold to make a wax cast. RAMNARINE completed the wax cast and gave it to Johns, but never returned to Johns the Flag Mold from which the wax cast was made.

In 2010, RAMNARINE began representing to various members of the art world that he owned a bronze sculpture, titled “Flag,” that was an authorized Jasper Johns work of art created in 1989 (the “Purported 1989 Bronze Sculpture”). In an effort to identify a purchaser for the Purported 1989 Sculpture, he showed it to a representative of an auction house who specialized in the sale of rare art, and to an art dealer. Around the same time, RAMNARINE also attempted to sell the Purported 1989 Bronze Flag directly to an art collector. At RAMNARINE’s direction, several art brokers were in frequent contact with the art collector, and with the art collector’s representative, regarding the possible sale of what was represented to be a genuine and authorized Jasper Johns work of art. Through an art broker to whom RANMARINE had shown the Purported 1989 Bronze Sculpture, RAMNARINE informed the art collector’s representative that he would sell it for approximately $11 million.

After the art collector expressed doubts about the authenticity of the Purported 1989 Bronze Sculpture, RAMNARINE provided false and fraudulent documents and information in an effort to deceive the art collector into believing that the artwork was genuine. For example, RAMNARINE stated that the Purported 1989 Bronze Sculpture was a gift from Johns. To support that assertion, RAMNARINE provided an art broker with a letter dated August 23, 1989, purportedly from Johns, along with other documents that falsely and fraudulently reflected that the Purported 1989 Bronze Sculpture was a genuine Johns work of art, and that it was owned by RAMNARINE.

In truth, the Purported 1989 Bronze Sculpture was a fake. Johns never authorized its production nor did he transfer ownership to RAMNARINE. Instead, against Johns’s earlier instructions and without authorization, RAMNARINE used the original Flag Mold provided by Johns to make the Purported 1989 Bronze Flag, dated it “1989,” and forged Johns’s signature on the back of the sculpture.

RAMNARINE was arrested in November 2012 on charges arising from his attempt to sell the Purported 1989 Bronze sculpture. Shortly after his arrest and while he was on bail, RAMNARINE engaged in two new schemes to defraud an online art gallery located in Queens (the “Gallery”). In particular, RAMNARINE sold to the Gallery two fake sculptures, titled “Two” and “Orb,” that he falsely claimed had been made and authorized by Robert Indiana, and numerous fake sculptures that he falsely claimed had been made and authorized by Saint Clair Cemin. The Gallery paid RAMNARINE tens of thousands of dollars for the phony sculptures.

In addition to the prison sentence, RAMNARINE, 60, of Queens, New York, was sentenced to three years of supervised release, and ordered to forfeit $34,250 and the fake sculptures and to pay $34,250 in restitution to his victims.

Mr. Bharara praised the Federal Bureau of Investigation for its outstanding work in the investigation. He also thanked the Port Authority of New York/New Jersey Police Department and the New York State Police for their assistance.

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that MATTHEW TEEPLE, a former analyst for San Francisco-based hedge fund Artis Capital Management, L.P. (“Artis”), was sentenced today to five years in prison for participating in an insider trading scheme that yielded tens of millions of dollars in ill-gotten gains. When he pled guilty in May 2014, TEEPLE admitted that in 2008 he repeatedly gathered and passed to Artis inside information about Foundry Networks, Inc. (“Foundry”), a technology company located in Santa Clara, California, which he had obtained from David Riley, Foundry’s Chief Information Officer at the time. This inside information included the fact – before it became public on July 21, 2008 – that Brocade Communications, Inc. (“Brocade”) was planning to acquire Foundry. On October 2, 2014, following a 13-day jury trial before U.S. District Judge Valerie E. Caproni, Riley was convicted of crimes related to his role in the scheme with which he and TEEPLE were charged together. TEEPLE’s sentence today was imposed by U.S. District Judge Robert P. Patterson, who accepted TEEPLE’s guilty plea in May.

Manhattan U.S. Attorney Preet Bharara said: “Matthew Teeple flagrantly and repeatedly traded on inside information he received from a Foundry Networks, Inc. insider and convicted tipster, David Riley. With today’s sentence, Teeple joins a growing group of professionals who have forfeited their freedom for making a mockery of market rules.”

According to the agreement pursuant to which TEEPLE entered his plea of guilty, other documents filed in Manhattan federal court, and statements made during court proceedings:

From 2005 and continuing through 2008, TEEPLE gathered from Riley sensitive, nonpublic information about Foundry – specifically, its monthly and quarterly sales data and secrets relating to its impending acquisition by Brocade. As CIO and a Vice President at Foundry, Riley had access to Foundry’s sales performance numbers well before they became public and – along with only a handful of other Foundry employees – learned of the Brocade deal before it was announced publicly. TEEPLE gathered these sales- and Brocade-related secrets from Riley over the telephone and in meetings the two held in the San Jose, California, area. On several occasions, TEEPLE spoke with Riley while Riley was logged into the database that Foundry used to maintain sensitive financial information.

TEEPLE passed the inside information he received from Riley on to others, including others at Artis. From the inside information TEEPLE provided about Foundry, Artis ultimately reaped gains and avoided losses of over $36 million.

In addition to the prison sentence he received today, TEEPLE, 43, of San Clemente, California, was sentenced to one year of supervised release. TEEPLE was also ordered to forfeit $553,890.00 in illegal proceeds and to pay a $100,000 fine. Restitution will be determined at a later date.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation and thanked the Securities and Exchange Commission, which has filed civil charges in a separate action.

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 Telemachus P. Kasulis and Sarah E. McCallum, and Special Assistant U.S. Attorney Michael P. Holland, are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ANTONIO OLMEDA of New York, New York, pled guilty today in Manhattan federal court to all six counts charged in the Indictment against him: three counts of being a convicted felon in possession of various firearms, two counts of possessing unregistered machine guns and one count of possessing an unregistered short-barreled shotgun. OLMEDA was arrested in December 2011 in connection with his alleged attempt to shoot two police officers with the New York City Police Department (“NYPD”). He pled guilty today before U.S. Magistrate Judge Debra Freeman.

Manhattan U.S. Attorney Bharara said: “Antonio Olmeda, a convicted felon, possessed a vast arsenal, including numerous automatic firearms, multiple machine guns and a sawed-off shotgun. The law prohibited Olmeda from having this kind of firepower at his disposal in light of his felony conviction. Our Office and our law enforcement partners remain committed to keeping deadly weapons out of the hands of convicted criminals.”

As alleged in the Indictment, OLMEDA illegally possessed the following firearms:

• Springfield Armory Ultra Compact .45 caliber semi-automatic handgun
• Taurus 85 Ultralite .38 caliber revolver
• Olympic Arms PCR03 .223 caliber fully-automatic rifle
• Smith & Wesson .40 caliber semi-automatic pistol
• Beretta 92SB Compact 9mm Luger semi-automatic pistol
• Cobray Industries M-11 9mm Luger fully-automatic pistol
• Remington model Mohawk 600 .308 caliber rifle
• Roggio Arsenal model RA-15 rifle receiver/frame
• Interarms rifle
• Three Springfield Armory model 1911A1 .45 caliber pistols
• Sig Sauer model SP 2022 9mm caliber pistol
• Taurus model PT140 Millenium .40 caliber pistol
• Smith & Wesson model 4006 .40 caliber pistol
• Star Bonifacio Echeverria model Firestar 9mm caliber pistol
• Charter Arms model Police Undercover .32 caliber revolver
• Walther model PPK/S .380 caliber pistol
• Vulcan Arms model V15 7.62x39mm machine gun
• Norinco AK-type 7.62x39mm machine gun
• Mossberg model 500A 12 gauge shotgun

OLMEDA, 56, from New York City, pled guilty to three counts of being a convicted felon in possession of various firearms, two counts of possessing unregistered machine guns, and one count of possessing an unregistered short-barreled shotgun. Each of these counts carries a maximum sentence of 10 years in prison. OLMEDA is scheduled to be sentenced by U.S. District Judge Richard M. Berman on January 13, 2015. 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.

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

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

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that ERNEST D. DAVIS, the mayor of the City of Mount Vernon, pled guilty in White Plains federal court to failing to file corporate and personal income tax returns. DAVIS surrendered today and entered his plea before U.S. Magistrate Judge Paul E. Davison.

According to the Information and today’s plea proceeding:

In 1988, ERNEST D. DAVIS purchased a rental property located at 14-16 Sandford Boulevard East in Mount Vernon, New York. He held the building through a corporation known as 14-16 Sandford East, Inc. DAVIS admitted that he sold the building in 2003 but he failed to file the required federal corporate income tax return with the Internal Revenue Service on which he should have reported the proceeds of the sale. In addition, DAVIS also failed to report the proceeds of the sale of 14-16 Sandford Blvd. on his 2003 U.S. Individual Income Tax Return, Form 1040, which he filed on or about February 1, 2005.

DAVIS also admitted today that he knowingly failed to file a personal federal income tax return for the tax year 2011, when he earned approximately $106,743 in adjusted gross income.

DAVIS, 76, of Mount Vernon, New York, pled guilty to two counts of willfully failing to file federal income tax returns. He faces a maximum sentence of two 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.

DAVIS is scheduled to be sentenced by Judge Davison at 11a.m. on January 26, 2015.

Mr. Bharara praised the investigative work of the Internal Revenue Service, the Federal Bureau of Investigation, and the U.S. Department of Housing and Urban Development’s Office of the Inspector General.

The case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Perry A. Carbone, Kathryn Martin and James McMahon are in charge of the prosecution.

U.S. v. Ernest Davis Information

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 ZACHARY ZWERKO was arrested on securities fraud charges stemming from his involvement in an insider trading scheme. Specifically, ZWERKO passed material nonpublic information about potential merger and acquisition activity related to certain pharmaceutical companies to a co-conspirator, who then traded on the information, resulting in profits of approximately $722,000. ZWERKO was arrested on Friday, October 10, 2014, in Cambridge, Massachusetts, and is expected to be presented today in Boston federal court before a United States Magistrate Judge.

Manhattan U.S. Attorney Preet Bharara said: “Today we announce charges against yet another individual for alleged insider trading. As alleged, Zachary Zwerko was a spy in the camp of his own company who passed secret merger and acquisition information to his co-conspirator so that lucrative illegal trades could be made. Those with access to inside information who contemplate releasing it for financial profit should understand that this Office and our law enforcement partners will track them down and prosecute them.”

FBI Assistant Director-in-Charge George Venizelos said: “Zwerko is charged, like so many others, with insider trading. This is a crime that undermines the public’s faith in our financial markets and puts companies at risk. The FBI remains committed to curbing corruption to better ensure fairness in the marketplace.”

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

From at least 2012 through the present, ZWERKO was engaged in an insider trading scheme related to the acquisitions of certain pharmaceutical companies. ZWERKO, a Senior Finance Analyst in the Financial Evaluation and Analysis Group of a pharmaceutical company that operates in New Jersey (the “Pharma Company”), performed work in connection with numerous potential and actual corporate transactions, including acquisitions. As a Financial Evaluation and Analysis Group employee, ZWERKO had access to a computer directory maintained by the Pharma Company that contained material, nonpublic information related to the Pharma Company’s potential acquisitions.

On multiple occasions, ZWERKO passed to another person (“CC-1”) material, nonpublic information related to future acquisitions by the Pharma Company, including the identities of companies that were in negotiations with the Pharma Company for potential acquisitions (the “Target Companies”). CC-1 then traded in the securities of the Target Companies. The Target Companies were later acquired, in one instance by the Pharma Company, and the prices of the shares of the Target Companies increased after the acquisitions were announced publicly. CC-1 then sold CC-1’s positions in the shares of the Target Companies, thereby profiting from the movement in stock price. From this illegal trading, CC-1 earned profits of at least approximately $722,000.

ZWERKO, 32, is charged with one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

The U.S. Securities and Exchange Commission (“SEC”) announced civil charges against ZWERKO in a separate action.

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. Attorneys Jessica Masella and Edward Kim 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.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that CHARLES HUGGINS was found guilty in Manhattan federal court of perpetrating a multimillion-dollar investment fraud against dozens of victims across the United States. HUGGINS was convicted following a two-week jury trial before U.S. District Judge Sidney H. Stein.

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

From 2008 through at least September 2011, HUGGINS and others solicited millions of dollars from various investors through companies known as JYork Industries Inc. (“JYork”) and Urogo Inc. (“Urogo”) with false and misleading representations that he would use the investors’ money exclusively to mine gold and diamonds from Sierra Leone and Liberia. HUGGINS falsely promised investors, among other things, high rates of return on their investments, which he represented were based upon the profits generated by the sale of the gold and diamonds in the United States.

In fact, from 2008 through at least September 2011, HUGGINS and his co-conspirators misappropriated millions of dollars of investors’ funds and used those funds for their own purposes or to repay other investors. Contrary to the representations of HUGGINS and his co-conspirators, the vast majority of the investment funds was used to pay HUGGINS’s personal expenses and for purposes entirely unrelated to what was represented to investors. For example, hundreds of thousands of dollars in investor funds were diverted to Orpheus Inc., a record label owned by HUGGINS, and used to pay, among other expenses, HUGGINS’s $7,200 monthly apartment rent in the Sutton Place section of Manhattan, for upkeep of HUGGINS’s Mercedes Benz, restaurant tabs, clothes from expensive boutiques, and personal credit card bills. HUGGINS personally received hundreds of thousands of dollars in cash and gave tens of thousands of dollars in cash to other members of his family. A portion of the funds was used to make payments to other investors, as in a classic Ponzi scheme.

Dozens of victims across the United States lost their money in the scheme. When certain investors complained that they had not received the investment return that they were promised, HUGGINS gave those investors small repayments from funds invested by others, or claimed that he converted their investment into restricted shares of Oraco Resources, a publicly traded company of which Huggins was a majority shareholder, that were nearly worthless.

HUGGINS, 68, of Edgewater, New Jersey, was convicted of one count of conspiracy to commit wire fraud and one count of wire fraud. Each of those counts carries a maximum potential penalty of 20 years in prison and a fine of the greater of $250,000 or twice the gross gain or loss derived from the offense. 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. HUGGINS is scheduled to be sentenced in January 2015 before Judge Stein.

Mr. Bharara praised the work of the FBI in the investigation of this case. He added that the investigation is continuing.

The case is being handled by the General Crimes Unit of the United States Attorney's Office. Assistant United States Attorneys Edward A. Imperatore and Andrea L. Surratt are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and Leslie R. Caldwell, Assistant Attorney General for the Justice Department’s Criminal Division, today announced the extradition of ARTHUR BUDOVSKY from Spain to face charges related to his alleged operation of Liberty Reserve, a virtual currency that was used by cybercriminals around the world to launder the proceeds of their illegal activity. BUDOVSKY, 40, a citizen of Costa Rica, was arrested in Spain in May 2013, as a result of an Indictment filed in Manhattan federal court. Following his extradition by Spanish authorities, BUDOVSKY arrived in New York this afternoon. BUDOVSKY will be arraigned before U.S. District Judge Denise L. Cote on October 14, 2014, at 12:45 p.m.

Manhattan U.S. Attorney Preet Bharara stated: “As alleged, Arthur Budovsky founded Liberty Reserve to enable criminals in the United States and around the world to process illegal payments and to launder billions of dollars in crime proceeds anonymously and beyond the reach of U.S. law enforcement. Budovsky allegedly operated Liberty Reserve from Costa Rica and renounced his United States citizenship to evade the authorities. Now, thanks to the cooperative efforts of our law enforcement partners here and in Spain, Arthur Budovsky has been apprehended and will face justice in an American courtroom.”

Assistant Attorney General Leslie R. Caldwell stated: “Arthur Budovsky allegedly built Liberty Reserve overseas to provide the international underworld with a crime-friendly digital currency and elude the scrutiny of American authorities. He even renounced his U.S. citizenship to try to escape facing justice in an American courtroom. With the cooperation of our foreign partners in Spain and elsewhere, this case and extradition are a clear example that money launderers can run, but they cannot hide from the Department of Justice.”

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

Liberty Reserve was born out of BUDOVSKY’s unsuccessful experience running a third-party exchange service, called Gold Age, Inc., for another digital currency, called E-Gold. In or about 2006, BUDOVSKY was convicted in New York State of operating Gold Age, Inc., as an unlicensed money transmitting business. In 2007, the operators of E-Gold were also charged with criminal offenses, including money laundering and operating an unlicensed money transmitting business,, and subsequently ceased doing business. In the wake of his own criminal conviction, BUDOVSKY set about building a digital currency that would succeed in eluding law enforcement where E-Gold had failed, by, among other ways, locating the business outside the United States. Accordingly, BUDOVSKY emigrated to Costa Rica, where he and other defendants began operating Liberty Reserve.

Liberty Reserve 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. BUDOVSKY devoted himself to building and expanding Liberty Reserve so that the company could profit from attracting more and more criminal customers, all while seeking to evade the scrutiny and reach of U.S. law enforcement authorities. At all relevant times, BUDOVSKY directed and supervised Liberty Reserve’s operations, finances, and corporate strategy.

Liberty Reserve 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 to conduct anonymous and untraceable financial transactions. BUDOVSKY was so committed to evading U.S. law enforcement that he formally renounced his U.S. citizenship in 2011 and became a Costa Rican citizen, telling U.S. immigration authorities that he was concerned that the “software” his “company” was developing “might open him up to liability in the U.S.”

Before being shut down by the U.S. government in May 2013, Liberty Reserve had more than one million users worldwide, including more than 200,000 users in the United States, who conducted approximately 55 million transactions through its system totaling more than $6 billion in funds. These funds encompassed suspected proceeds of credit card fraud, identity theft, investment fraud, computer hacking, narcotics trafficking, and other crimes.

BUDOVSKY is among seven individuals charged in the Indictment, which was unsealed on May 28, 2013. Four co-defendants – Vladimir Kats, Azzeddine el Amine, Mark Marmilev, and Maxim Chukharev – have pled guilty and await sentencing before U.S. District Judge Denise L. Cote. Charges against Liberty Reserve and two individual defendants who have not been apprehended remain pending.

Mr. Bharara praised the outstanding work of the United States Secret Service, the Internal Revenue Service-Criminal Investigation, and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, which worked together in this case as part of the Global Illicit Financial Team. Mr. Bharara also thanked the United States Secret Service’s New York Electronic Crimes Task Force for its extraordinary assistance with the investigation. Additionally, Mr. Bharara specially thanked all the international law enforcement agencies that assisted in the investigation, in particular, Interpol, 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 BUDOVSKY and certain of BUDOVSKY’s co-defendants remain pending and are merely accusations. Those defendants are presumed innocent unless and until proven guilty.