Richard Luthmann, an attorney licensed by the State of New York, was sentenced today by United States District Judge Jack B. Weinstein to four years’ imprisonment for his convictions on one count of wire fraud conspiracy and one count of extortion conspiracy. Luthmann was also ordered to pay $500,000 in restitution and $130,000 in forfeiture.  Luthmann pleaded guilty to the charges on March 18, 2019. 

Richard P. Donoghue, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and Jonathan Carson, Special Agent-in-Charge, U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement, New York Field Office, announced the sentence. 

“With today’s sentence, Luthmann has been held accountable for using his law practice as a launching pad for his schemes to defraud businesses in the United States and abroad, and to extort a former client, all for the purpose of lining his pockets,” stated United States Attorney Donoghue.  Mr. Donoghue extended his appreciation to the Department of Homeland Security, Homeland Security Investigations, the New York City Police Department and the Social Security Administration for their assistance in the investigation. 

“Our legal system works because everyone believes attorneys are going to be honest brokers of justice.  Mr. Luthmann’s actions, defrauding and extorting his victims, chip away at the foundations of that system and cannot be tolerated,” stated FBI Assistant Director-in-

Charge Sweeney.  “The FBI New York Joint Organized Crime Task Force did an outstanding job in this investigation stopping a criminal who thought he could use his knowledge of the law to skirt it.”

“This successful prosecution is the result of outstanding collaborative efforts by the Office of Export Enforcement, the FBI, the Justice Department and our other law enforcement partners,” stated Department of Commerce Special Agent-in-Charge Carson.  “Engaging in export fraud scams and falsifying export records are matters we take seriously.  We will continue to pursue violators who jeopardize fair and secure trade.”

In the summer of 2015, Luthmann and his co-conspirators formed multiple shell companies, ostensibly to sell scrap metal and recycled products to U.S. and foreign customers.  Rather than conducting legitimate scrap metal businesses, the conspirators deceived customers by contracting to sell them scrap metal, receiving payment on their orders and then intentionally failing to make delivery of the material.  After an aggrieved customer threatened to report Luthmann and his co-conspirators to the police, the conspirators changed tactics and began shipping worthless filler materials, including concrete and road barriers to customers who had contracted to buy valuable copper and other scrap metal.  In the course of a few months in 2015, Luthmann and his co-conspirators made more than $500,000 in fraudulent sales. 

In an effort to conceal the fraudulent scheme, Luthmann registered the shell companies with the New York Department of State, recruited a client of his law practice, who was blind and living on public assistance, to be the nominal president of one of the shell companies and directed payments from the fraudulent sales through his law firm’s accounts.  Luthmann and his co-conspirators then split the fraud proceeds at Luthmann’s law office. 

In December 2016, Luthmann and his co-conspirators began an extortion scheme directed at one of his former clients, who had participated in the scrap metal fraud.  Luthmann invited the former client to meet at his law office in Staten Island, ostensibly to sign legal paperwork.  Luthmann was not present when the former client arrived, but two of his co-conspirators were.  One of them threatened the former client with what appeared to be a handgun and demanded the $10,000 owed.

The government’s case is being handled by the Office’s Organized Crime and Gangs Section.  Assistant United States Attorney James P. McDonald is in charge of the prosecution.

The Defendant:

Richard Luthmann

Age: 39

Staten Island, New York

E.D.N.Y. Docket No. 17-CR-664 (JBW)

Earlier today in federal court in Brooklyn, Richard Luthmann, a Staten Island attorney, pleaded guilty to wire fraud conspiracy and extortion conspiracy before United States Magistrate Judge Ramon E. Reyes, Jr.  As part of his guilty plea, Luthmann stipulated that he obstructed justice following his arrest, by sending a threatening letter to a potential witness whom he believed was cooperating with the government and violating a court order regarding discovery materials. 

Richard P. Donoghue, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and Jonathan Carson, Special Agent-in-Charge, U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement, New York Field Office (Commerce), announced the guilty plea.

Beginning in summer 2015, Luthmann, co-defendant George Padula and the victim participated in a scheme in which they contracted with overseas companies to sell and ship them containers of valuable scrap metal, but instead packed the containers with cheap filler material, such as concrete blocks.  As part of the scheme, Luthmann registered shell companies, including Omni Metal Corporation, with the New York Department of State and recruited a client of his law practice to be the nominal president of Omni.  At the direction of Luthmann and Padula, the client opened bank accounts to facilitate the fraud, and between October 2015 and December 2015, the over-seas companies wired over $500,000 to those accounts.  That money was then transferred into accounts controlled by Luthmann or a co-conspirator.

On December 5, 2016, Luthmann lured the victim to his law office, ostensibly to sign some paperwork.  Once there, Padula and co-defendant Michael Beck blocked the victim from leaving.  Beck then pulled out a firearm, aimed it at the victim’s head and knee, and claimed the victim owed him $10,000 because Beck had purchased a $7,000 debt that the victim owed Padula, plus a $3,000 “vig,” or interest payment, that Beck had added.  The victim was then permitted to leave, but not before being warned by Padula not to contact the police. 

When sentenced, Luthmann faces a maximum sentence of 20 years’ imprisonment on each count.  

Padula and Beck have previously pleaded guilty, respectively, to wire fraud conspiracy (Padula), kidnapping conspiracy (Beck), extortion conspiracy and use of a firearm in connection with a crime of violence (Padula and Beck).

The government’s case is being handled by the Office’s Organized Crime and Gangs Section.  Assistant United Attorneys Moira Kim Penza and James P. McDonald are in charge of the prosecution. 

The Defendants

RICHARD LUTHMANN

Age:  39

Staten Island, New York

GEORGE PADULA III

Age:  30

Staten Island, New York

MICHAEL BECK

Age:  60

Staten Island, New York

E.D.N.Y. Docket No. 17-CR-664 (JBW)

An 11-count indictment was unsealed today in federal court in Brooklyn charging Richard Luthmann, George Padula III, and Michael Beck with kidnapping and kidnapping conspiracy, extortionate collection of credit, conspiracy to commit extortionate collection of credit and brandishing a firearm during the commission of those crimes.  Luthmann and Padula were also charged with conspiracy to commit wire fraud, money laundering, money laundering conspiracy and aggravated identity theft, and Luthmann was additionally charged with access device fraud and a second count of aggravated identity theft.  A fourth defendant, Stephen Cotogno, was charged by complaint with participating in the same wire fraud conspiracy as Luthmann, Padula and Beck.  Luthmann, Padula, Beck and Cotogno were arrested earlier today and will be arraigned this afternoon before United States Magistrate Judge Robert M. Levy.

Bridget M. Rohde, Acting United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and Jonathan Carson, Special Agent-in-Charge, U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement, New York Field Office (Commerce), announced the charges.

“As alleged, Richard Luthmann crossed the line from attorney to violent criminal and fraudster,” stated Acting United States Attorney Rohde.  “Luthmann and his coconspirators cheated scrap metal customers in order to make easy money for themselves, took advantage of a disabled man to conceal their fraud, and used gunpoint extortion to collect a purported debt.  Whether such crimes are committed on the street or in a law office, this Office and our law enforcement partners will investigate and prosecute them to the fullest extent of the law.”  Ms. Rohde expressed her grateful appreciation to the FBI and Commerce, who are responsible for leading the investigation, and thanked the Department of Homeland Security, Homeland Security Investigations, the New York City Police Department and the Social Security Administration for their assistance.

“After allegedly devising a scheme to cheat potential business partners, an attorney and his cohorts threatened using a purported organized crime syndicate to manage those who disagreed with the fraud,” stated FBI Assistant Director-in-Charge Sweeney.  “They are even accused of forcing a blind man to take part in their criminal attempt at profiting in business without working for it.  The FBI Organized Crime Task Force will continue going after those who think the law doesn't apply to them.”

The Fraud Scheme

According to court documents, beginning in the summer of 2015, Luthmann, who is a practicing lawyer on Staten Island, New York, along with Padula and another co-conspirator

(“Co-Conspirator 1”) agreed to defraud companies seeking to purchase scrap metal.  In part, the scheme involved contracting with victims to ship them containers of valuable scrap metal, but then filling the shipping containers primarily with cheap filler material.  Luthmann had encouraged Co-Conspirator 1 to involve Padula in the fraud because Padula claimed that his father was a member of a New York-based organized crime family and that his uncle was a high-ranking member of that crime family.  Luthmann said Padula could use his organized crime connections to settle any disputes that arose with disgruntled victims.  Cotogno participated in the scheme by renting his warehouse to the co-conspirators at an above-market price, making suggestions for filler material and helping procure filler material.  

To facilitate the fraud, Luthmann registered fake companies, including one called Omni Metal Corporation (“Omni”), with the New York Department of State, and recruited a client of his law practice (the “client”), who was blind and living on public assistance, to be the nominal president of Omni.  When the client expressed concern that he could face criminal exposure or lose his public assistance if the government learned about the arrangement, Luthmann assured the client that the government would not find out. 

Luthmann, Padula and Co-Conspirator 1 agreed to have the client open bank accounts to facilitate the fraud, and between October 2015 and December 2015, victims wired over half-a-million dollars into these accounts.  That money was then transferred into accounts controlled by Luthmann or Co-Conspirator 1, including Luthmann’s attorney trust account, or was withdrawn in cash and split among Luthmann, Padula and Co-Conspirator 1.

The Kidnapping and Extortion

On December 5, 2016, Luthmann asked Co-Conspirator 1 to meet him at his law office to sign some paperwork and said that they would then go out together for the evening.  When Co-Conspirator 1 arrived at the office, Luthmann was not there.  Co-Conspirator 1 contacted Luthmann, who told him to wait inside a conference room in the office.  While

Co-Conspirator 1 was waiting, Padula and Beck entered the room and blocked him from exiting.  Beck pulled out a gun, aimed it at Co-Conspirator 1’s head and knee and said he (Beck) was owed $10,000 because he had purchased a $7,000 debt that Co-Conspirator 1 owed Padula, and had added a $3,000 “vig,” or interest payment.  Co-Conspirator 1 was eventually allowed to leave, but Padula told him not to contact the police. 

Padula and Luthmann had previously told Co-Conspirator 1 that Beck was an enforcer for the organized crime family to which Padula’s family members belonged, and that he was “muscle” for Padula.  Moreover, in August 2016, Luthmann and Padula told

Co-Conspirator 1 that they had arranged for Beck to conduct a “sit down” with members of Chinese organized crime to resolve a conflict that arose out of the scrap metal fraud.

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

If convicted of the charges, defendants Luthmann, Padula, and Beck each face up to life imprisonment. Cotogno faces up to 20 years’ imprisonment if convicted of wire fraud conspiracy.  

The government’s case is being handled by the Office’s Organized Crime and Gangs Section.  Assistant United States Attorney Moira Kim Penza is in charge of the prosecution. 

The Defendant:

RICHARD LUTHMANNAge: 38

Residence: Staten Island, New York

GEORGE PADULA IIIAge:  29

Residence: Staten Island, New York

MICHAEL BECKAge: 59

Residence: Staten Island, New York

STEPHEN COTOGNOAge:  48

Residence: Holmdel, New Jersey

E.D.N.Y. Docket No. 17-CR-664 (JBW)