BROOKLYN, NY – A criminal complaint was unsealed today in federal court in Brooklyn charging Kaveh Lotfolah Afrasiabi, also known as “Lotfolah Kaveh Afrasiabi,” with acting and conspiring to act as an unregistered agent of the Government of the Islamic Republic of Iran, in violation of the Foreign Agents Registration Act (FARA).  Afrasiabi was arrested yesterday at his home in Watertown, Massachusetts, and will make his initial appearance this morning in federal court in Boston, Massachusetts, before United States Magistrate Judge Jennifer C. Boal.

Seth D. DuCharme, Acting U.S. Attorney for the Eastern District of New York; John C. Demers, Assistant Attorney General for National Security; William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI); and Joseph Bonavolonta, Special Agent-in-Charge, FBI, Boston Field Office announced the arrest and charges.

“Afrasiabi allegedly sought to influence the American public and American policymakers for the benefit of his employer, the Iranian government, by disguising propaganda as objective policy analysis and expertise,” stated Acting U.S. Attorney DuCharme.  “This Office is committed to the robust enforcement of the Foreign Agents Registration Act, which provides the American people the tools they need to evaluate opinions and arguments in the marketplace of ideas by requiring foreign agents to declare their paymasters.  Those, like the defendant, who conceal the full extent of their work for a foreign government when the law requires disclosure will face consequences for their actions.”

“For over a decade, Kaveh Afrasiabi pitched himself to Congress, journalists, and the American public as a neutral and objective expert on Iran," stated Assistant Attorney General Demers.  “However, all the while, Afrasiabi was actually a secret employee of the Government of Iran and the Permanent Mission of the Islamic Republic of Iran to the United Nations (IMUN) who was being paid to spread their propaganda.  In doing so, he intentionally avoided registering with Department of Justice as the Foreign Agents Registration Act required.  He likewise evaded his obligation to disclose who was sponsoring his views.  We now begin to hold him responsible for those deeds.”

“Anyone working to advance the agenda of a foreign government within the United States is required by law to register as an agent of that country,” stated FBI Assistant Director-in-Charge Sweeney. “Mr. Afrasiabi never disclosed to a Congressman, journalists or others who hold roles of influence in our country that he was being paid by the Iranian government to paint an untruthfully positive picture of the nation. Our laws are designed to create transparency in foreign relations, and they are not arbitrary or malleable. As today's action demonstrates, we will fully enforce them to protect our national security.”

“Our arrest of Kaveh Afrasiabi makes it clear that the United States is not going to allow undeclared agents of Iran to operate in our country unchecked. For more than a decade, Mr. Afrasiabi was allegedly paid, directed, and controlled by the Government of Iran to lobby U.S. government officials, including a Congressman; and to create and disseminate information favorable to the Iranian government,” stated FBI Special Agent-in-Charge Bonavolonta. “The FBI will continue to do everything it can to uncover these hidden efforts and hold accountable those who work for our adversaries to the detriment of our national security.”  

According to the complaint, Afrasiabi is a citizen of the Islamic Republic of Iran and a lawful permanent resident of the United States.   Afrasiabi holds a PhD, and frequently publishes books and articles, and appears on English-language television programs discussing foreign relations matters, particularly Iran’s relations with the United States.  Afrasiabi has identified or portrayed himself as a political scientist, a former political science professor or as an expert on foreign affairs.

Since at least 2007 to the present, Afrasiabi has also been secretly employed by the Iranian government and paid by Iranian diplomats assigned to the Permanent Mission of the Islamic Republic of Iran to the United Nations in New York City (IMUN).  Afrasiabi has been paid approximately $265,000 in checks drawn on the IMUN’s official bank accounts since 2007 and has received health insurance through the IMUN’s employee health benefit plans since at least 2011. 

In the course of his employment by the Iranian government, Afrasiabi has lobbied a U.S. Congressman and the U.S. Department of State to advocate for policies favorable to Iran, counseled Iranian diplomats concerning U.S. foreign policy, made television appearances to advocate for the Iranian government’s views on world events, and authored articles and opinion pieces espousing the Iranian government’s position on various matters of foreign policy.  Afrasiabi has long known that FARA requires agents of foreign principals to register with the U.S. Department of Justice and has discussed information obtained from FARA disclosures with others.  Nevertheless, Afrasiabi did not register as an agent of the Government of Iran.

For example, in January 2020, Afrasiabi emailed Iran’s Foreign Minister and Permanent Representative to the United Nations with advice for “retaliation” for the U.S. military airstrike that killed Major General Qasem Soleimani, the head of the Quds Force, the external operations arm of the Iranian government’s Islamic Revolutionary Guard Corps, proposing that the Iranian government “end all inspections and end all information on Iran’s nuclear activities pending a [United Nations Security Council] condemnation of [the United States’] illegal crime.”  Afrasiabi claimed that such a move would, among other things, “strike fear in the heart of [the] enemy.”

Afrasiabi has admitted in his own communications that his extensive body of published works and television appearances, in which he has consistently advocated perspectives and policy positions favored by the Iranian government, has been attributable to the funding he receives from the Iranian government.  For example, in a July 28, 2020 email to Iran’s Foreign Minister, Afrasiabi included “links for many of [his] works, including books, hundreds of articles in international newspapers and academic journals,” telling Iran’s Foreign Minister “Without support none of this would have been possible! This has been a very productive relationship spanning decades that ought not to be interrupted.”

The charges in the complaint are allegations, and the defendant is presumed innocent unless and until proven guilty.  If convicted of both charged offenses, Afrasiabi faces a maximum sentence of 10 years in prison.

The government’s case is being handled by the Office’s National Security and Cybercrime Section.  Assistant United States Attorneys Ian C. Richardson and Michael T. Keilty are in charge of the prosecution, with assistance from Trial Attorney David C. Recker of the National Security Division’s Counterintelligence and Export Control Section.

The Defendant:

KAVEH LOTFOLAH AFRASIABI (also known as “Lotfolah Kaveh Afrasiabi”)

Age: 63

Watertown, Massachusetts

E.D.N.Y. Docket No. 21-MJ-50

 

WASHINGTON --The Justice Department, along with federal partners, announced today a $7.2 billion settlement with Deutsche Bank resolving federal civil claims that Deutsche Bank misled investors in the packaging, securitization, marketing, sale and issuance of residential mortgage-backed securities (RMBS) between 2006 and 2007. This $7.2 billion agreement represents the single largest RMBS resolution for the conduct of a single entity. The settlement requires Deutsche Bank to pay a $3.1 billion civil penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). Under the settlement, Deutsche Bank will also provide $4.1 billion in relief to underwater homeowners, distressed borrowers and affected communities.

 

“This resolution holds Deutsche Bank accountable for its illegal conduct and irresponsible lending practices, which caused serious and lasting damage to investors and the American public,” said Attorney General Loretta E. Lynch. “Deutsche Bank did not merely mislead investors: it contributed directly to an international financial crisis. The cost of this misconduct is significant: Deutsche Bank will pay a $3.1 billion civil penalty, and provide an additional $4.1 billion in relief to homeowners, borrowers, and communities harmed by its practices. Our settlement today makes clear that institutions like Deutsche Bank cannot evade responsibility for the great cost exacted by their conduct.”

 

“This $7.2 billion resolution – the largest of its kind – recognizes the immense breadth of Deutsche Bank’s unlawful scheme by demanding a painful penalty from the bank, along with billions of dollars of relief to the communities and homeowners that continue to struggle because of Wall Street’s greed,” said Principal Deputy Associate Attorney General Bill Baer. “The Department will remain relentless in holding financial institutions accountable for the harm their misconduct inflicted on investors, our economy and American consumers.”

 

“In the Statement of Facts accompanying this settlement, Deutsche Bank admits making false representations and omitting material information from disclosures to investors about the loans included in RMBS securities sold by the Bank. This misconduct, combined with that of the other banks we have already settled with, hurt our economy and threatened the banking system,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “To make matters worse, the Bank’s conduct encouraged shoddy mortgage underwriting and improvident lending that caused borrowers to lose their homes because they couldn’t pay their loans. Today’s settlement shows once again that the Department will aggressively pursue misconduct that hurts the American public.”

 

“Investors who bought RMBS from Deutsche Bank, and who suffered catastrophic losses as a result, included individuals and institutions that form the backbone of our community,” said U.S. Attorney Robert L. Capers for the Eastern District of New York. “Deutsche Bank repeatedly assured investors that its RMBS were safe investments. Instead of ensuring that its representations to investors were accurate and transparent, so that investors could make properly informed investment decisions, Deutsche Bank repeatedly misled investors and withheld critical information about the loans it securitized. Time and again, the bank put investors at risk in pursuit of profit. Deutsche Bank has now been held accountable.”

 

“Deutsche Bank knowingly securitized billions of dollars of defective mortgages and subsequently made false representations to investors about the quality of the underlying loans,” said Special Agent In Charge Steven Perez of the Federal Housing Finance Agency, Office of the Inspector General. “Its actions resulted in enormous losses to investors to whom Deutsche Bank sold these defective Residential Mortgage-Backed Securities. Today’s announcement reaffirms our commitment to working with our law enforcement partners to hold accountable those who deceived investors in pursuit of profits, and contributed to our nation’s financial crisis. We are proud to have worked with the U.S. Department of Justice and the U.S Attorney’s Office for the Eastern District of New York.”

 

As part of the settlement, Deutsche Bank agreed to a detailed Statement of Facts. That statement describes how Deutsche Bank knowingly made false and misleading representations to investors about the characteristics of the mortgage loans it securitized in RMBS worth billions of dollars issued by the bank between 2006 and 2007. For example:



Deutsche Bank represented to investors that loans securitized in its RMBS were originated generally in accordance with mortgage loan originators’ underwriting guidelines. But as Deutsche Bank now acknowledges, the bank’s own reviews confirmed that “aggressive” revisions to the loan originators’ underwriting guidelines allowed for loans to be underwritten to anyone with “half a pulse.” More generally, Deutsche Bank knew, based on the results of due diligence, that for some securitized loan pools, more than 50 percent of the loans subjected to due diligence did not meet loan originators’ guidelines.





Deutsche Bank also knowingly misrepresented that loans had been reviewed to ensure the ability of borrowers to repay their loans. As Deutsche Bank acknowledges, the bank’s own employees recognized that Deutsche Bank would “tolerate misrepresentation” with “misdirected lending practices” as to borrower ability to pay, accepting even blocked-out borrower pay stubs that concealed borrowers’ actual incomes. As a Deutsche Bank employee stated, “What goes around will eventually come around; when performance (default) begins affecting profits and/or the investors who purchase the securities, only then will Wall St. take notice. For now, the buying continues.”

 





Deutsche Bank concealed from investors that significant numbers of borrowers had second liens on their properties. In one instance, a supervisory Deutsche Bank trader specifically instructed his team that if investors asked about second liens, “‘[t]ell them verbally . . . [b]ut don’t put in the prospectus.’” Deutsche Bank knew that these second liens increased the likelihood that a borrower would default on his or her loan.





Deutsche Bank purchased and securitized loans with substantial defects to provide “flexibility” to the mortgage originators on whom Deutsche Bank’s RMBS program depended for a continued supply of loans. Indeed, after the president of a large mortgage originator told Deutsche Bank he was “very upset with the rejection percentage,” Deutsche Bank’s diligence team was instructed, on three separate occasions, to clear loans it previously determined should be rejected.





While Deutsche Bank conducted due diligence on samples of loans it securitized in RMBS, Deutsche Bank knew that the size and composition of these loan samples frequently failed to capture loans that did not meet its representations to investors. In fact, Deutsche Bank knew “the more you sample, the more you reject.”





Deutsche Bank knowingly and intentionally securitized loans originated based on unsupported and fraudulent appraisals. Deutsche Bank knew that mortgage originators were “‘giving’ appraisers the value they want[ed]” and expecting the resulting appraisals to meet the originators’ desired value, regardless of the actual value of the property. Deutsche Bank concealed its knowledge of pervasive and consistent appraisal fraud, instead representing to investors home valuation metrics based on appraisals it knew to be fraudulent. Deutsche Bank misrepresented to investors the value of the properties securing the loans securitized in its RMBS and concealed from investors that it knew that the value of the properties securing the loans was far below the value reflected by the originator’s appraisal.





By May 2007, Deutsche Bank knew that there was an increasing trend of overvalued properties being sold to Deutsche Bank for securitization. As one employee noted, “We are finding ourselves going back quite often and clearing large numbers of loans [with inflated appraisals] to bring down the deletion percentages.” Deutsche Bank nonetheless purchased and securitized such loans because it received favorable prices on the fraudulent loans. Ultimately, Deutsche Bank enriched itself by paying reduced prices for risky loans while representing to investors valuation metrics based on appraisals the Bank knew to be inflated.





Deutsche Bank represented to investors that disclosed borrower FICO scores were accurate as of the “cut-off date” of the RMBS issuance. However, Deutsche Bank knowingly represented borrowers’ FICO scores as of the time of the origination of their loans despite the bank’s knowledge that these scores had often declined materially by the cut-off date.



Assistant U.S. Attorneys Edward K. Newman, Matthew R. Belz, Jeremy Turk, and Ryan M. Wilson of the U.S. Attorney’s Office for the Eastern District of New York investigated Deutsche Bank’s conduct in connection with the issuance and sale of RMBS between 2006 and 2007. The investigation was conducted with the Office of the Inspector General for the Federal Housing Finance Agency.

 

The $3.1 billion civil monetary penalty resolves claims under FIRREA, which authorizes the federal government to impose civil penalties against financial institutions that violate various predicate offenses, including wire and mail fraud. It is one of the largest FIRREA penalties ever paid. The settlement does not release any individuals from potential criminal or civil liability. As part of the settlement, Deutsche Bank has agreed to fully cooperate with investigations related to the conduct covered by the agreement.

 

Deutsche Bank will also provide $4.1 billion in the form of relief to aid consumers harmed by its unlawful conduct. Specifically, Deutsche Bank will provide loan modifications, including loan forgiveness and forbearance, to distressed and underwater homeowners throughout the country. It will also provide financing for affordable rental and for-sale housing throughout the country. Deutsche Bank’s provision of consumer relief will be overseen by an independent monitor who will have authority to approve the selection of any third party used by Deutsche Bank to provide consumer relief. To report RMBS fraud, go to: http://www.stopfraud.gov/rmbs.html

 

About the RMBS Working Group:

 

The RMBS Working Group, part of the Financial Fraud Enforcement Task Force, was established by the Attorney General in late January 2012. The Working Group has been dedicated to initiating, organizing, and advancing new and existing investigations by federal and state authorities into fraud and abuse in the RMBS market that helped precipitate the 2008 Financial Crisis. The Working Group’s efforts to date have resulted in settlements providing for tens of billions of dollars in civil penalties and consumer relief from banks and other entities that are alleged to have committed fraud in connection with the issuance of RMBS.

 

Download Settlement Agreement

Download Annex 1 -- Statement of Facts

Download Annex 1A -- Statement of Facts Appendices A through D

Download Annex 2 -- Consumer Relief

Download Annex 3 -- RMBS Covered by the Settlement

 

BROOKLYN, NY – Today in federal court in Brooklyn, Manhattan resident Chen Jinping pleaded guilty to conspiring to act as an agent of the government of the People’s Republic of China (PRC), in connection with opening and operating an undeclared overseas police station in lower Manhattan for the PRC’s Ministry of Public Security (MPS).  Today’s proceeding was held before United States District Judge Nina R. Morrison. When sentenced, the defendant faces up to five years in prison.Breon Peace, United States Attorney for the Eastern District of New York; Matthew G. Olsen, Assistant Attorney General of the Justice Department’s National Security Division; and James E. Dennehy, Assistant Director in Charge, Federal Bureau of Investigation, New York Field Office (FBI), announced the guilty plea.“A priority of my Office has been to counteract the malign activities of foreign governments that violate our nation’s sovereignty by targeting local diaspora communities in the United States,” stated United States Attorney Peace.  “Today, a participant in a transnational repression scheme who worked to establish a secret police station in the middle of New York City on behalf of the national police force of the People’s Republic of China has pleaded guilty to conspiracy to act as an illegal agent.  We will continue our efforts to protect the rights of vulnerable persons who come to this country to escape the repressive activities of authoritarian regimes.”“Today’s guilty plea holds the defendant accountable for his brazen efforts to operate an undeclared overseas police station on behalf of the PRC’s national police force — a clear affront to American sovereignty and danger to our community that will not be tolerated,” stated Assistant Attorney General Olsen.  “The Department of Justice will continue to pursue anyone who attempts to aid the PRC’s efforts to extend their repressive reach into the United States.”“Today, Chen Jinping admitted to his role in audaciously establishing an undeclared police station in the heart of New York City and attempting to conceal the effort when approached by FBI New York,” stated FBI Assistant Director in Charge Dennehy. “This illegal police station was not opened in the interest of public safety, but to further the nefarious and repressive aims of the PRC in direct violation of American sovereignty. The FBI is unwavering in our duty to protect both the freedoms enshrined in the Constitution and the security of our nation from oppressive hostile governments.” As alleged in court filings and facts presented at the plea proceeding, Chen Jinping and co-defendant Lu Jianwang conspired to act as illegal agents of the PRC government and also obstructed justice by destroying evidence of their communications with an MPS official (the MPS Official).  While acting under the direction and control of the MPS Official, the defendants worked together to establish the first known overseas police station in the United States on behalf of the Fuzhou branch of the MPS.  The police station—which closed in the fall of 2022—occupied an entire floor in an office building in Manhattan’s Chinatown.  Chen and Lu  helped open and operate the clandestine police station.  None of the participants in the scheme informed the U.S. government that they were helping the PRC government open and operate an undeclared MPS police station on U.S. soil.In October 2022, the FBI conducted a judicially authorized search of the illegal police station.  In connection with the search, FBI agents interviewed both defendants and seized their phones.  In reviewing the contents of these phones, FBI agents observed that communications between the defendants, on the one hand, and the MPS Official, on the other, appeared to have been deleted.Lu Jianwang has pleaded not guilty to the charges and is awaiting trial.The government’s case is being handled by the Office’s National Security and Cybercrime Section.  Assistant United States  Attorneys Alexander A. Solomon and Antoinette N. Rangel are in charge of the prosecution, with assistance from Trial Attorney Scott A. Claffee of the National Security Division’s Counterintelligence and Export Control Section.The FBI has created a website for victims to report efforts by foreign governments to stalk, intimidate, or assault people in the United States.  If you believe that you are or have been a victim of transnational repression, please visit https://www.fbi.gov/investigate/counterintelligence/transnational-repression.The Defendant:CHEN JINPING Age: 60 Manhattan, New YorkE.D.N.Y. Docket No. 23-CR-316 (NRM)

Breon Peace, the United States Attorney for the Eastern District of New York, and Anne Millgram, Administrator of the U.S. Drug Enforcement Administration (DEA), announced today that the online mental healthcare company Cerebral, Inc. (Cerebral) has entered into a non-prosecution agreement (NPA) with the U.S. Attorney’s Office for the Eastern District of New York (the Office), and has agreed to pay more than $3.6 million for engaging in practices that encouraged the unauthorized distribution of controlled substances from 2019 to 2022.  An additional fine against Cerebral has been deferred in light of the company’s current financial condition.Under the terms of the NPA, Cerebral agreed to forfeit $3,652,000 to the United States.  The NPA requires Cerebral to continue to cooperate with and provide information to the United States for at least the 30-month term of the agreement.  The NPA also requires Cerebral to pay a fine of $2,922,000, which the Office has determined that Cerebral does not currently have the ability to pay; as a result, it will be deferred for the term of the NPA, and waived at the expiration of the NPA if Cerebral is in compliance with the NPA and unless the Office determines that Cerebral’s financial performance has changed such that payment of all or a portion of the fine would be warranted.  In the event that Cerebral violates the NPA, the Office may prosecute Cerebral for any of the conduct that gave rise to the NPA and any newly discovered criminal activity.“People seeking care for their mental health conditions should receive high-quality care that is not motivated or driven by greed,” stated United States Attorney Peace.  “Cerebral sought to increase its bottom line by increasing the prescription of drugs, including controlled substances that can be highly addictive and dangerous.  Since my Office’s investigation came to Cerebral’s attention, the company has cooperated fully and taken significant steps to remediate the institutional failures that allowed this situation to occur in the first place.  This resolution ensures that Cerebral will be financially accountable for its unacceptable conduct and serves as a reminder to the healthcare industry that my Office is committed to ensuring patient safety and protecting the public from business practices like those of Cerebral.”“Today’s settlement holds Cerebral responsible for their failure to protect patients from the harms caused by the unnecessary or overprescribing of potentially-addictive ADHD medications,” said DEA Administrator Anne Milgram. “Cerebral’s exploitation of telemedicine flexibilities deceived patients who were legitimately seeking medical care, putting them at risk in exchange for profit. DEA remains committed to telemedicine accessibility that supports the health of all patients while also ensuring that telemedicine companies and practitioners prioritize patient health and safety above all else.”Cerebral’s Operations Cerebral is an online mental health company that operates primarily as a direct-to-consumer business.  Since October 2019, Cerebral has promoted or sold subscription services offering online health care treatment, including mental health treatment and medication management services, through its online platforms, to hundreds of thousands of patients struggling with depression, anxiety and other mental health issues.  Cerebral generated revenue by offering tiered monthly subscription plans to its patients.  Certain of Cerebral’s subscription plans offered patients the ability to obtain medication from Cerebral’s treatment providers. Attention-Deficit/Hyperactivity Disorder (ADHD) was one of the mental health conditions Cerebral offered treatment for.  Cerebral first launched its ADHD line of service in or around February 2021 and began offering ADHD treatment services to the public across the United States, rolling services out on a state-by-state basis.  Cerebral’s ADHD services were perceived to be a profitable line of business with the potential to increase patient retention at the company.Beginning in October 2020, Cerebral expanded its medication offerings to include controlled substances.  In addition, beginning in February 2021, Cerebral permitted its treatment providers to prescribe stimulant medication, such as Adderall, to its patients.  Prescription stimulants, such as Adderall, are Schedule II drugs under the Controlled Substances Act.Cerebral’s Prescription PracticesBetween February 2021 and October 2022, Cerebral instituted internal measures to increase the prescriptions of medications with the goal of boosting patient retention and, by extension, Cerebral’s revenue.Cerebral monitored the rates at which its providers prescribed medications, including controlled substances, primarily through two metrics which measured: (1) the number of drug prescriptions issued to patients who enrolled in a medication management subscription plan after their first 30-minute telehealth visit (the Initial Visit Rx Rate); and (2) the number of stimulant prescriptions prescribed to patients diagnosed with ADHD who had no comorbidities (the ADHD Stimulant Rx Metric).  Cerebral did not consult with any members of its clinical advisory board—which included multiple experts in the fields of psychology and psychiatry—prior to implementing targeted campaigns to improve both metrics.Between May 2021 and May 2022, Cerebral sought to increase the Initial Visit Rx Rate to 95%. Cerebral recognized inherent problems with the Initial Visit Rx Rate, including the fact that the metric did not take into account whether patients were diagnosed with conditions where drug prescriptions were clinically appropriate, and that the 95% target goal was not based on any established data or benchmark in medical or scientific literature.  Cerebral also recognized that there were a variety of legitimate reasons why its treatment providers would not prescribe drugs to patients immediately after the patient’s first visit, and that the Initial Visit Rx Rate could perversely incentivize its treatment providers into prescribing medication that was not necessary. Nonetheless, the company reviewed treatment providers’ performance using the Initial Visit Rx Rate and engaged in coordinated efforts to increase the Initial Visit Rx Rate, including by implementing a bonus structure that awarded bonuses to supervisory individuals if they increased the Initial Visit Rx metric among their supervisees; and conducting regular reviews of providers’ individual Initial Visit Rx Rate.  Despite the Company’s efforts to increase its performance on the Initial Visit Rx metric, it did not improve after December 2021. Cerebral ceased using the Initial Visit metric in or about May 2022, after Cerebral’s former Chief Executive Officer was terminated.Beginning in at least October 2021, Cerebral also took initiatives to measure the percentage of controlled substances prescriptions issued to patients who had been diagnosed with ADHD without comorbidities.  Cerebral subsequently developed an internal plan to increase the ADHD Stimulant Rx Metric to 100% or “near 100%” and regularly audited its providers’ ADHD prescription practices.  Cerebral also considered disciplinary measures, such as issuing “flags” and “strikes,” for individuals who the company considered to be underperformers for this metric.  Cerebral instituted these measures despite the fact that certain of its treatment providers had expressed concerns to Cerebral’s management about drug diversion risks with ADHD patients.  Cerebral ceased all use of the ADHD Stimulant Rx Metric by October 2022.In addition to the above tactics, Cerebral also provided financial payments that incentivized its providers to issue stimulant medication for ADHD patients.  Specifically, prior to May 2022, Cerebral paid its providers an additional $10 to conduct required pre-prescription checks of Prescription Drug Monitoring Programs (PDMP)/Prescription Monitoring Program (PMP) databases.  Cerebral did not compensate its providers for conducting PDMP/PMP checks for patients with any other medical diagnoses or patient needs.Cerebral’s Diversion RisksAccording to Cerebral’s admissions, Cerebral also did not maintain effective controls against drug diversion, even when risks of drug diversion were elevated to or acknowledged by its management.  For example, Cerebral had thousands of duplicate patient accounts (i.e., multiple accounts that belonged to the same individual) that were not fully addressed internally until at least early 2022.  As a result of the failure to timely identify and remove duplicate accounts, at least one patient was able to obtain stimulant prescriptions from multiple providers at Cerebral, even after having been previously flagged as having misused stimulants.  As another example, prior to 2022, Cerebral also permitted drug-seeking patients who were not prescribed controlled substances in the first instance to seek reassignment to different providers.  The Non-Prosecution AgreementCerebral has agreed to forfeit $3,652,000 to the United States, which represent the amount of proceeds that could be reasonably attributed to the monthly increase in ADHD revenue generated by patients who were diagnosed with ADHD and subsequently prescribed stimulant prescriptions. Cerebral has also agreed to pay a fine of $2,922,000, which the Office has determined that Cerebral does not currently have the ability to pay; as detailed above, it will be deferred for the term of the NPA.The Office reached this resolution with Cerebral after carefully weighing all of the factors relevant to the appropriate corporate resolution.  The NPA recognizes that, although Cerebral’s serious misconduct was reported to the Office before Cerebral self-disclosed it, Cerebral voluntarily took a number of substantial remedial measures beginning in May 2022 to mitigate and correct the effects of the practices described above, including terminating its former Chief Executive Officer, stopping all use of the prescription metrics described above, and improving its compliance measures.  In October 2022, Cerebral voluntarily stopped prescribing controlled substances to all of its patients, and has agreed not to prescribe controlled substances in the future. Cerebral also has no prior criminal history in the United States.  Furthermore, Cerebral has cooperated extensively with the Office in its investigation, including through detailed disclosures, and has agreed to continue to cooperate fully with the Office.The agreement announced today is the result of an investigation conducted by the Drug Enforcement Administration, New York Division, Buffalo Diversion Group, Tactical Diversion Squad.  The government’s case is being handled by the Office’s International Narcotics and Money Laundering Section and Business and Securities Fraud Section.  Assistant United States  Attorneys Genny Ngai, Gillian Kassner and Miranda Gonzalez are in charge of the prosecution, with the assistance of the Office’s former Paralegal Specialists Sophia Cronin, Riley Martinez and Jordi Martinez.The Defendant:CEREBRAL, INC. Claymont, Delaware

Long Island-based pediatrics practice Freed, Kleinberg, Nussbaum, Festa & Kronberg M.D., LLP, doing business as Pediatrics and Adolescent Medicine (the “Practice”), as well as current and former partner physicians of the Practice, including Arnold W. Scherz, M.D., Mitchell Kleinberg, M.D., Michael Nussbaum, M.D., Robert Festa, M.D., and Jason Kronberg, D.O. (“Partners”), have agreed to pay $750,000 to resolve allegations that they billed the Medicaid Program for services provided by physicians who were not enrolled in the program.  The settlement, which resolved government claims under the federal False Claims Act and the New York State False Claims Act, was approved by United States District Judge Joanna Seybert.

Richard P. Donoghue, United States Attorney for the Eastern District of New York, announced the settlement.

“Providers serving Medicaid beneficiaries must be properly credentialed and thoroughly vetted to ensure that proper care is provided and to preserve the integrity of the Medicaid Program, which serves our neediest citizens,” stated United States Attorney Donoghue.  “Today’s settlement reflects this Office’s commitment to safeguarding taxpayer programs like Medicaid by vigorously investigating allegations of fraud in False Claims Act cases.”

Mr. Donoghue thanked the Medicaid Fraud Control Unit of the Office of the New York State Attorney General for its assistance in the investigation.

The government’s investigation revealed that, from July 1, 2004 through December 31, 2010, the Practice and Partners employed a number of physicians who were not enrolled in the Medicaid Program who provided care to Medicaid patients.  Because the physicians were not enrolled in the program, the Practice and Partners could not seek reimbursement from Medicaid for the services provided by these physicians.  The defendants nonetheless did so by submitting requests for payment under the Partners’ Medicaid provider identification numbers, thereby misrepresenting the identities of the individuals who were actually providing treatment to the Practice’s pediatric Medicaid beneficiaries.  This improper billing practice occurred at many of the Practice’s Long Island locations, including facilities in Holbrook, Port Jefferson, Shirley and Wading River.  

The allegations were brought to the government’s attention through the filing of a complaint pursuant to the qui tam provisions of the False Claims Act.  Under the Act, private citizens can bring suit on behalf of the United States and share in any recovery. 

The government’s case was handled by Assistant United States Attorney Jolie Apicella of the Office’s Civil Division. 

E.D.N.Y. Docket No. 14-CV-3943 (JS)

Earlier today, at the federal courthouse in Brooklyn, New York, Johnnie Monroe, also known as “Nut,” was sentenced by United States District Judge Brian M. Cogan to 97 months’ imprisonment for conspiring to distribute fentanyl, to be followed by a term of four years’ supervised release.  The fentanyl the defendant distributed was linked to the overdose death of a young mother in West Virginia in April 2015.  Judge Cogan also ordered forfeiture in the amount of $150,000.

Bridget M. Rohde, Acting United States Attorney for the Eastern District of New York, James J. Hunt, Special Agent-in-Charge, Drug Enforcement Administration, New York Division (DEA), and James P. O’Neill, Commissioner, New York City Police Department (NYPD), announced the sentence. 

“The death of a woman in West Virginia after ingesting fentanyl pills distributed by defendant Johnnie Monroe did not deter him from shortly thereafter shipping another package of pills containing fentanyl to West Virginia,” stated Acting United States Attorney Rohde.  “Today’s sentence holds Monroe accountable for contributing to the deadly opioid epidemic facing this country.  This Office, together with our law enforcement partners, will continue to identify and prosecute those who contribute to and would seek to profit from this epidemic. Through these efforts, lives will be saved by reducing the availability of opioids and preventing new addictions.”

 

“There are no words to express our sorrow for lives lost as a result of drug overdose; but DEA strives to bring justice to the victims’ families by identifying those responsible for distributing the poison,” stated DEA Special Agent in Charge Hunt.  “Heroin and fentanyl are poison and have been the cause of record breaking numbers of overdoses throughout the U.S.  This sentencing is a reminder that DEA and our law enforcement partners will continue to investigate opioid trafficking organizations and put them in jail.” 

According to the Centers for Disease Control and Prevention and the Department of Justice, drug overdoses have become the leading cause of death for Americans under the age of 50.  Between 2012 and 2015, fentanyl overdose deaths in West Virginia increased by more than 20 percent, according to the DEA.  The recent rise in overdose deaths has been driven in large part by fentanyl—a drug that has been described as 50 to 100 times more potent than morphine.  Opioids have been a particular problem in West Virginia, where the defendant and his co-conspirators trafficked substantial amounts of fentanyl.  One of the victims of these trends was a young mother, who Monroe and his co-conspirators believed they killed with their fentanyl pills.  Upon learning of the young mother’s death, Monroe was intercepted over a judicially authorized wiretap stating, “The girl went out.”  When a co-conspirator asked Monroe what he meant by “went out,” Monroe left no ambiguity that a young woman had overdosed: “Went out!  OD, OD!”  Nonetheless, two weeks later, Monroe mailed another package containing hundreds of pills containing fentanyl to a co-conspirator in West Virginia.

According to the government’s sentencing memorandum, the defendant traveled to West Virginia to sell fentanyl, and, in addition, supplied a significant amount of the crack cocaine that was sold by street-level dealers in the Queensbridge community.  The defendant himself sold crack on 20 separate occasions in deals monitored by the NYPD.  The defendant also agreed to commit an armed robbery of an individual believed to be traveling with $110,000, and went to a bus station in Manhattan to look for the individual.  The failed robbery plot was not for a lack of effort—the targeted victim never arrived.  The next day, Monroe was intercepted over a wiretap bragging to a co-conspirator that they were in position, armed and ready to commit the robbery: “We had biscuits [i.e., firearms], stun guns . . . we would a taken him down.”    

On December 5, 2017, co-defendant Edward Carrillo was sentenced to 126 months’ imprisonment for the same charge of conspiring to distribute fentanyl.  For conspiring to distribute crack-cocaine in Queensbridge, co-defendant Terrell Carmichael was sentenced on November 16, 2017 to 51 months’ imprisonment and co-defendant Kyle Williams was sentenced on December 12, 2017 to 42 months’ imprisonment.  Three additional co-defendants are awaiting sentencing. 

The government’s case is being handled by the Office’s Organized Crime and Gangs Section.  Assistant United States Attorneys Andrey Spektor and Lindsay K. Gerdes are in charge of the prosecution. 

Defendant Sentenced Today:

JOHNNIE MONROE, also known as “Nut”Age: 46Brooklyn, New York

Defendants Previously Sentenced:

TERRELL CARMICHAEL, also known as “Rell”Age: 31Long Island City, New York

EDWARD CARRILLO, also known as “Super Ed”Age: 43Manhattan, New York

KYLE WILLIAMS, also known as “Sleepy”Age: 31Long Island City, New York

Defendants Awaiting Sentencing:

LASHAWN BALANCE, also known as “Flip”Age: 41Princeton, West Virginia

DARRYL KNOWLESAge: 29Bronx, New York

MICHAEL YOUNG, also known as “Littles”Age: 32Long Island City, New York

E.D.N.Y. Docket No. 16-CR-617 (BMC)

Earlier today, a federal jury in Brooklyn convicted Ppassim Elder, also known as “Bsam,” “Big Sam” and “Sam,” and Wilbert Bryant, also known as “Will” and “La,” of extortion, bank fraud, firearms and murder offenses.  The verdict followed a three-week trial before by United States District Judge William F. Kuntz, II.  When sentenced, the defendants face up to life in prison.

Jacquelyn M. Kasulis, Acting United States Attorney for the Eastern District of New York; Michael J. Driscoll, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI); and Dermot F. Shea, Commissioner, New York City Police Department, announced the verdict.

“With today’s verdict, a jury has held the defendants accountable for their heinous crimes, including the murder of a Queens business owner while attempting to collect a debt they claimed was owed by the victim’s son,” stated Acting United States Attorney Kasulis.  “This Office and our law enforcement partners are working tirelessly to protect the communities in our district from violent criminals like the defendants who will now face very serious consequences for their actions.”  Ms. Kasulis also expressed her appreciation to the Queens County District Attorney’s Office for their assistance during the investigation and prosecution.

As proven at trial, on the morning of October 23, 2017, Bryant and two other perpetrators walked into Garden Valley Distributors, a family-owned wholesale distribution business located in Ozone Park, Queens.  The perpetrators said that “Big Sam” had sent them to collect his money.  Earlier that year, Elder, who was known as “Big Sam,” had given the murder victim’s son money, which the son used to support the business.  When Elder demanded full repayment, the son was unable to repay the debt because much of the money had been used to purchase merchandise for Garden Valley.  Elder then began a campaign of intimidation against the son and his family.  On one occasion, Elder paid co-conspirators to throw a rock through a window of the victim’s home.  On another, Elder barged into the family home, intimidating members of the victim’s family.  Finally, Elder dispatched Bryant and two co-conspirators into Garden Valley business where, on October 23, 2017, the perpetrators brandished a firearm, pistol-whipped the son and fatally shot the father in the face. 

In addition to the murder, Elder extorted another person whose brother had stolen the proceeds of a fraud scheme committed by Elder.  Although the victim was not involved in the theft, Elder nonetheless punched him in his face in front of his daughters, breaking and bloodying his nose in order to “send a message” to the victim’s brother.  Elder and Bryant were also convicted of bank fraud conspiracy for lying to banks about the true owner of certain bank accounts, which permitted Elder to defraud innocent victims across the country, including an elderly man who lost over $30,000 when he was tricked into believing he was purchasing a car and another individual who lost over $150,000 when he was defrauded into believing he was purchasing two real estate properties.  Elder was also convicted of crimes committed after his arrest in this case, including stealing his attorney’s identity and lying to federal officials.

This case was brought as part of Project Safe Neighborhoods (PSN), a program bringing together all levels of law enforcement and the communities they serve to reduce violent crime and make our neighborhoods safer for everyone.  As part of the program, U.S. Attorneys’ Offices work in partnership with federal, state, local and tribal law enforcement and their local communities to develop effective, locally based strategies to reduce violent crime.  

The government’s case is being handled by the Office’s Organized Crime and Gangs Section.  Assistant United States Attorneys Keith D. Edelman, Genny Ngai and Anna L. Karamigios are in charge of the prosecution. 

The Defendants:

PPASSIM ELDER (also known as “Bsam,” “Sam” and “Big Sam”)

Age: 42 

Staten Island, New York

WILBERT BRYANT (also known as “Will” and “La”)

Age: 57

Brooklyn, New York

E.D.N.Y. Docket No. 18-CR-92 (S-5) (WFK)

A federal jury in Brooklyn today, following two weeks of trial, convicted Dr. Martin Tesher of 10 counts of unlawful distribution of oxycodone without legitimate medical purpose to five patients, one of whom died as a result two days after his last visit with the defendant.  When sentenced by United States District Judge Raymond J. Dearie, Dr. Tesher faces a mandatory minimum sentence of 20 years’ imprisonment and a maximum of life in prison.

Attorney General Jeff Sessions, Richard P. Donoghue, United States Attorney for the Eastern District of New York, and James J. Hunt, Special Agent-in-Charge, Drug Enforcement Administration (DEA), New York Division, announced the verdict.

“It is incredible but true that some medical professionals have chosen to violate their oaths and exploit our nation's drug epidemic for profit, even at the cost of human lives,” stated Attorney General Sessions.  “This doctor knowingly took advantage of drug addicts and even contributed to the death of a young man.  The Department of Justice is relentlessly pursuing criminals like him: we have charged more than 200 doctors with opioid-related crimes since the beginning of last year.  We are going to keep pursuing these cases because they help cut off the supply of drugs and stop fraudsters from exploiting vulnerable people.  I want to thank the DEA, our partners at IRS, four local police departments and especially our fabulous prosecutors Jennifer Sasso and Penelope Brady for their hard work in this case.  I believe that they have helped prevent many more New Yorkers from falling into addiction and death.”

 “Dr. Tesher dispensed opioids to patients whom he knew were abusing illegal drugs and the tragic result was an overdose death,” stated United States Attorney Donoghue.  “Today, the jury held Dr. Tesher responsible for the part he played in fueling the opioid epidemic by abandoning his responsibilities as a medical professional and for acting as a drug dealer with a prescription pad.  This Office and our law enforcement partners will continue to work tirelessly to combat the opioid epidemic on all fronts, including prosecuting corrupt doctors who disregard the well-being of their patients by prescribing highly addictive drugs without legitimate medical purpose.”

“DEA doesn’t tell doctors how to practice medicine, DEA is a watchdog to ensure doctors’ prescriptions are written for the right reason and betterment of their patient’s health,” stated DEA Special Agent-in-Charge Hunt.  “This trial brings to light how opioid traffickers can hide in plain sight, like Dr. Tesher; and how heartbreaking drug addiction is to families and friends of substance abusers.   I commend the U.S. Attorney’s Office for the Eastern District of New York and the DEA’s Long Island District Office Tactical Diversion Squad on their diligent work throughout this investigation.  DEA will continue to work with our federal, state and local law enforcement partners to battle opioid traffickers and suppliers at all levels.” 

The evidence at trial established that between June 2013 and January 2017, Dr. Tesher, a medical doctor specializing in general family care, prescribed oxycodone and fentanyl on a continuing basis without a legitimate medical purpose to patients after he learned, or had reason to believe, that these patients were addicted to drugs.  The five patients either told Dr. Tesher that they had a drug addiction, had previously been treated for drug addiction, or tested positive for illegal drugs such as cocaine or heroin during the course of their treatment by the defendant.  While under Dr. Tesher’s care, Nicholas Benedetto, 27, tested positive for cocaine, heroin and methadone in addition to oxycodone and fentanyl.  Dr. Tesher continued to prescribe oxycodone and fentanyl to Benedetto despite indicators that he was abusing those drugs.  Benedetto was found dead of a fatal combination of oxycodone and fentanyl on March 5, 2016, two days after he had been prescribed oxycodone and fentanyl patches by Dr. Tesher.  According to a government expert witness, none of the patients for whom Tesher is charged in the superseding indictment had verified medical conditions that would require the prescription of Schedule II opioids.

The government’s investigation was led by the DEA’s Long Island Tactical Diversion Squad, which is comprised of agents and officers of the DEA, Internal Revenue Service, Nassau County Police Department (NCPD), Suffolk County Police Department, Port Washington Police Department and Rockville Centre Police Department.  The DEA Tactical Diversion Squad also worked in conjunction with officers and agents of the New York City Police Department, Criminal Enterprise Investigations, the Department of Health & Human Services, Office of Inspector General, the New York City Department of Investigation and NCPD’s Asset Forfeiture and Intelligence Bureau. 

This case is the latest in a series of federal prosecutions by the United States Attorney’s Office for the Eastern District of New York as part of the Prescription Drug Initiative.  In January 2012, this Office and the DEA, in conjunction with the five District Attorneys in this district, the Nassau and Suffolk County Police Departments, the New York City Police Department and the New York State Police, along with other key federal, state and local government partners, launched the Initiative to mount a comprehensive response to what the United States Department of Health and Human Services Centers for Disease Control and Prevention called an epidemic increase in the abuse of so-called opioid analgesics.  To date, the Initiative has brought over 160 federal and local criminal prosecutions, including the prosecution of 19 health care professionals; taken civil enforcement actions against a hospital, a pharmacy and pharmacy chain; removed prescription authority from numerous rogue doctors, and expanded information-sharing among enforcement agencies to better target and pursue drug traffickers.  The Initiative also is involved in an extensive community outreach program to address the abuse of pharmaceuticals.

The government’s case is being handled by the Office’s International Narcotics and Money Laundering Section.  Assistant United States Attorneys Jennifer M. Sasso and Penelope Brady are in charge of the prosecution.

The Defendant:

DR. MARTIN TESHER

Age:  82

Manhattan, New York

E.D.N.Y. Docket No. 17-CR-523 (RJD)

Today, in federal court in Central Islip, Klaus Pflugbeil was sentenced by Judge Joan M. Azrack to 24 months’ imprisonment for conspiring to send trade secrets that belong to a leading U.S.-based electric vehicle company (Victim Company-1).  Pflugbeil, a resident of the People’s Republic of China (the “PRC” or “China”) and a Canadian and German national, and his co-defendant, Yilong Shao, who remains at large, are owners of a PRC-based business (Business-1) that sold technology used to make batteries, including batteries used in electric vehicles.  Pflugbeil and Shao, former employees of a company that was purchased by Victim Company-1, took trade secrets from their employer, and later used the trade secrets to build a business that they marketed as a replacement for Victim Company-1’s products.  Pflugbeil pleaded guilty in June 2024.Breon Peace, United States Attorney for the Eastern District of New York, Matthew G. Olsen, Assistant Attorney General of the Justice Department’s National Security Division, and James E. Dennehy, Assistant Director in Charge, Federal Bureau of Investigation, New York Field Office (FBI), announced the charges.“The defendant built a business in China to sell sensitive technology that belongs to a U.S. company.  His actions were bold—he even advertised that he was selling the victim’s products—because he thought, incorrectly, that he was outside the reach of U.S. prosecutors,” stated United States Attorney Peace.  “Today’s sentencing sends a clear message to would-be offenders: my Office will do everything it can to protect American innovation and national security no matter where you try to hide.”Mr. Peace expressed his appreciation to the Justice Department’s Computer Crime and Intellectual Property Section (CCIPS) and the Japanese authorities for their assistance on this case.“In stealing trade secrets from an American electric vehicle manufacturer to use in his own China-based company, Pflugbeil’s actions stood to benefit the PRC in a critical industry with national security implications,” said Assistant Attorney General for National Security Matthew G. Olsen. “The Justice Department will mobilize every available resource to prevent our adversaries from advancing their global ambitions at the expense of U.S. national security.”Victim Company-1 is a U.S.-based leading manufacturer of battery-powered electric vehicles and battery energy systems.  In 2019, Victim Company-1 acquired a Canada-based manufacturer of automated, precision dispensing pumps and battery assembly lines (the “Canadian Manufacturer”).  Prior to its purchase by Victim Company-1, the Canadian Manufacturer sold battery assembly lines to customers who manufactured alkaline and lithium‑ion batteries for consumer use.  The battery assembly lines contained or utilized a proprietary technology now owned by Victim Company-1: continuous motion battery assembly (the “Battery Assembly Trade Secret”).  The proprietary technology provided a substantial competitive advantage to Victim Company-1 in the lithium-ion battery manufacturing process.Both Pflugbeil and his co-defendant Shao are former employees of the Canadian Manufacturer, and Shao also worked for Victim Company-1.  As detailed in court documents, by no later than 2019, Pflugbeil and Shao planned to use Victim Company-1’s trade secrets for their own business activities.  Pflugbeil told Shao that he had “a lot of original documents” related to the technology and sought out more “original drawings” of the trade secrets.  Shao confirmed, among other things, that, “we have all of original assembly drawings by PDF.”The conspirators took measures to obfuscate that they had stolen trade secrets. For example, Pflugbeil wrote to Shao about a document he created based on one that Shao had stolen from Victim Company-1, “[its] in a different format, so it looks very original and not like a copy.”In or about July 2020, Pflugbeil joined Business-1, a company previously established by Shao, which has since expanded to locations in China, Canada, Germany and Brazil.  Business‑1 makes the same precision dispensing pumps and battery assembly lines that the Canadian Manufacturer developed.  The battery assembly technology is related to the development of electric vehicles that can compete with U.S.-made vehicles.  The potential for Chinese automakers to swamp the U.S. and global market with vehicles like those that can be built using this stolen technology presents a potential national security risk.Business-1 was marketed by Pflugbeil as an alternative source for the sale of products that relied upon Victim Company-1’s trade secrets, publishing online advertisements on Google, YouTube and LinkedIn.  Pflugbeil repeatedly sent LinkedIn messages that named Victim Company-1 and said Business-1 was not infringing on any intellectual property:Hello [name], I hope to get some of your busy time.  As I like to introduce our company to you.  We already have supplied companies such [a]s [list of U.S. Fortune 500 Companies by name] . . . We engineer and manufacture all of our products in-house, and we warrant that none of our products infringe any patents, copyrights, or other intellectual property rights of any third party.(Emphasis added.)  The above reflects a blatant lie, told over and over—that Business-1’s products did not infringe on intellectual property rights of a third party.  Pflugbeil also advertised products based on stolen trade secrets on Google.  These ads were shown tens of thousands of times per week.On or about September 11, 2023, undercover agents attended a trade show for the packaging and processing industries (the “Trade Show”) in Las Vegas, Nevada.  The undercover agents posed as businesspeople who were interested in purchasing a battery assembly line from Business-1 to manufacture batteries at a facility in Long Island, New York.  The undercover agents were introduced to Shao at the trade show and later to Pflugbeil via email.Subsequently, on or about November 17, 2023, Pflugbeil sent, via email, a detailed 66-page technical documentation proposal (the “Proposal”) to an undercover agent (UC-1).  The Proposal noted, “this technical documentation package contains [Business-1] proprietary information which must be kept confidential.”  In reality, the Proposal contained Battery Assembly Trade Secret information belonging to Victim Company-1:  at least half a dozen drawings Pflugbeil used in the Proposal and sent to UC-1 were, in fact, Victim Company-1’s information related to the Battery Assembly Trade Secret.  The business proposal quoted the battery assembly line at costing over $15 million to purchase.The investigation and prosecution were coordinated through the Justice and Commerce Departments’ Disruptive Technology Strike Force.  The Disruptive Technology Strike Force is an interagency law enforcement strike force co-led by the Departments of Justice and Commerce designed to target illicit actors, protect supply chains and prevent critical technology from being acquired by authoritarian regimes and hostile nation states.The government’s case is being handled by the Office’s National Security and Cybercrime Section and the Long Island Criminal Division.  Assistant United States  Attorneys Ellen H. Sise and Samantha Alessi are in charge of the prosecution, along with Trial Attorney Scott A. Claffee of the National Security Division’s Counterintelligence and Export Control Section with assistance from Paralegal Specialist Rebecca Roth.The DefendantKLAUS PFLUGBEIL AGE: 59 NINGBO, CHINAE.D.N.Y. Docket No. 24-CR-238

Daniel Small, a former portfolio manager for Platinum Partners L.P. (Platinum), was convicted today by a federal jury in Brooklyn on charges of securities fraud and securities fraud conspiracy for his role in defrauding the bondholders of Black Elk Energy (Black Elk), an oil company that was one of Platinum’s largest assets, by rigging a consent solicitation vote.  The verdict followed a two-week trial before United States District Court Judge Brian M. Cogan. 

Breon Peace, United States Attorney for the Eastern District of New York, Michael J. Driscoll, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI) and Daniel Brubaker, Inspector-in-Charge, United States Postal Inspection Service, New York Division (USPIS), announced the verdict.

"Small and his co-conspirators engaged in a scheme to deceive the bondholders of Black Elk by rigging the vote to enrich themselves,” stated United States Attorney Breon Peace.  “Today’s verdict demonstrates this Office’s dedication to prosecuting those who refuse to play by the rules and defraud others.  This Office will pursue justice without fear or favor no matter the obstacles.”

Mr. Peace thanked the Securities and Exchange Commission, New York Regional Office for their significant cooperation and assistance during the investigation.

"Mr. Small and his co-conspirators, fueled by their own self-interest and avarice, purposely cheated their investors.  Today the jury held Mr. Small accountable for his actions, another step in the process of getting justice for his victims. The FBI and our partners remain committed to holding actors who defraud and manipulate investors responsible for their crimes so the public maintains its confidence in the integrity of our financial markets,” stated FBI Assistant Director-in-Charge Driscoll.

USPIS Inspector in Charge Daniel B. Brubaker said: “Daniel Small,  former Managing Director of Platinum Partners, conspired in an elaborate scheme to fraudulently divert millions in proceeds from bond investors to Platinum Partners.  This scheme was artfully concealed through what appeared to be a series of legitimate events. Nonetheless, it was an outright multi-million dollar theft from innocent victims. The United States Postal Inspection Service has a long and proven history of investigating egregious Wall Street Security Frauds such as these.  Small’s conviction represents our dedication to help maintain an honest and fair trading environment across all publicly traded companies."

Platinum was a New York City-based hedge fund founded in 2003.  The evidence at trial established that between approximately November 2011 and December 2016, Small, along with co-conspirators including Mark Nordlicht, the founder and Chief Investment Officer of Platinum, and David Levy, the co-Chief Investment Officer of Platinum, orchestrated a fraudulent scheme to defraud third-party holders of Black Elk’s publicly traded bonds (the bondholders) by diverting to Platinum the proceeds from the sale of the vast majority of Black Elk’s most lucrative oil fields even though the bondholders had priority over Platinum’s equity interests.

To execute this scheme, in early 2014, Small, Nordlicht, Levy and others caused Platinum to secretly purchase Black Elk bonds on the open market and gain control of $98 million of the $150 million of outstanding bonds.  The bonds were then transferred through a number of related entities to conceal their ownership and control by Platinum.  Small, Nordlicht, Levy and their co-conspirators then rigged a consent solicitation vote to amend the Black Elk indenture so that the proceeds from the sale of Black Elk’s best assets would be paid to the preferred equity – which was held by Platinum and Platinum insiders – ahead of the other bondholders.  Notably, non-Platinum related bondholders overwhelmingly voted against changing the indenture; one testified that bondholders would never knowingly give up being “as senior as possible in the capital structure” for “nothing” in return, which he characterized as an “irrational choice.”

After the rigged vote was complete, Small, Nordlicht, Levy and their co-conspirators took millions of dollars from the asset sale for themselves, family members and friends, including approximately $7 million to Nordlicht’s father, approximately $250,000 to Levy, approximately $100,000 to Small and approximately $2 million to the brother of another co-conspirator.

In July 2019, Nordlicht and Levy were convicted on the same charges by a federal jury following a two-month trial.  Both defendants are awaiting sentencing.   

In July 2022, Mr. Peace was selected as the Chairperson of the White Collar Fraud subcommittee for the Attorney General’s Advisory Committee (AGAC).  As the leader of the subcommittee, Mr. Peace will play a key role in making recommendations to the AGAC to facilitate the prevention, investigation and prosecution of various financially motivated, non-violent crimes including mail and wire fraud, bank fraud, health care fraud, tax fraud, securities and commodities fraud, and identity theft. 

The government’s case is being handled by the Office’s Business and Securities Fraud Section.  Assistant United States Attorneys David Pitluck, Lauren Elbert and Nicholas Axelrod are in charge of the prosecution.

The Defendants:

DANIEL SMALL

Age: 53

New York, New York

MARK NORDLICHT

Age: 54

New Rochelle, New York

DAVID LEVY

Age: 37

New York, New York

E.D.N.Y. Docket No. 16-CR-640 (BMC

BROOKLYN, NY – An indictment was unsealed today charging seven nationals of the People’s Republic of China (PRC) with conspiracy to commit computer intrusions and conspiracy to commit wire fraud for their involvement in a PRC-based hacking group that spent approximately 14 years targeting U.S. and foreign critics, businesses and political officials in furtherance of the PRC’s economic espionage and foreign intelligence objectives.

The defendants are Ni Gaobin (倪高彬), Weng Ming (翁明), Cheng Feng (程锋), Peng Yaowen (彭耀文), Sun Xiaohui (孙小辉), Xiong Wang (熊旺), and Zhao Guangzong (赵光宗).

Merrick B. Garland, United States Attorney General; Breon Peace, United States Attorney for the Eastern District of New York; Lisa O. Monaco, United States Deputy Attorney General; Matthew G. Olsen, Assistant Attorney General of the Justice Department’s National Security Division; James Smith, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and Robert W. “Wes” Wheeler, Jr., Special Agent-in-Charge, FBI, Chicago Field Office (FBI), announced the indictment.

“The Justice Department will not tolerate efforts by the Chinese government to intimidate Americans who serve the public, silence the dissidents who are protected by American laws, or steal from American businesses,” said Attorney General Merrick B. Garland. “This case serves as a reminder of the ends to which the Chinese government is willing to go to target and intimidate its critics, including launching malicious cyber operations aimed at threatening the national security of the United States and our allies.”

“These allegations pull back the curtain on China’s vast illegal hacking operation that targeted sensitive data from U.S. elected and government officials, journalists and academics; valuable information from American companies; and political dissidents in America and abroad.  Their sinister scheme victimized thousands of people and entities across the world, and lasted for well over a decade,” stated U.S. Attorney Peace. “America’s sovereignty extends to its cyberspace. Today’s charges demonstrate my Office’s commitment to upholding and protecting that jurisdiction, and to putting an end to malicious nation state cyber activity.”

“Over 10,000 malicious emails, impacting thousands of victims, across multiple continents. As alleged in today’s indictment, this prolific global hacking operation – backed by the PRC government – targeted journalists, political officials, and companies to repress critics of the Chinese regime, compromise government institutions, and steal trade secrets,” said Deputy Attorney General Lisa Monaco. “The Department of Justice will relentlessly pursue, expose, and hold accountable cyber criminals who would undermine democracies and threaten our national security.” 

“The indictment unsealed today, together with statements from our foreign partners regarding related activity, shed further light on the PRC Ministry of State Security’s aggressive cyber espionage and transnational repression activities worldwide,” said Assistant Attorney General Matthew G. Olsen of the Justice Department’s National Security Division. “Today’s announcements underscore the need to remain vigilant to cybersecurity threats and the potential for cyber-enabled foreign malign influence efforts, especially as we approach the 2024 election cycle. The Department of Justice will continue to leverage all tools to disrupt malicious cyber actors who threaten our national security and aim to repress fundamental freedoms worldwide.”

“These defendants were part of a Chinese government sponsored hacking group, targeting U.S. businesses and U.S. political officials for intrusion for over a decade as part of a larger, malicious global campaign. These charges are yet another example of hostile actions taken by the PRC to attack not only American businesses and infrastructure, but the security of our nation. FBI New York is united with our partners - internationally, federally, and the private sector – to protect our common goals and ideals from antagonistic nation state actors,” stated FBI Assistant Director-in-Charge Smith.

“APT31 Group’s practices further demonstrate the size and scope of the PRC’s state-sponsored hacking apparatus,” said Robert W. “Wes” Wheeler, Jr., Special Agent-in-Charge of the Chicago Field Office of the FBI. “FBI Chicago worked tirelessly to uncover this complex web of alleged foreign intelligence and economic espionage crimes. Thanks to these efforts, as well as our partnerships with the U.S. Attorney’s Offices and fellow Field Offices, the FBI continues to be successful in holding groups accountable and protecting national security.”

Overview

As alleged in the indictment and court filings, the defendants, along with dozens of identified PRC Ministry of State Security (MSS) intelligence officers, contractor hackers, and support personnel, were members of a hacking group operating in the PRC and known within the cyber security community as Advanced Persistent Threat 31 (the APT31 Group).  The APT31 Group was part of a cyberespionage program run by the MSS’s Hubei State Security Department, located in the city of Wuhan.  Through their involvement with the APT31 Group, since at least 2010, the defendants conducted global campaigns of computer hacking targeting political dissidents and perceived supporters located inside and outside of China, government and political officials, candidates and campaign personnel in the United States and elsewhere and American companies.

The defendants and others in the APT31 Group targeted thousands of U.S. and foreign individuals and companies.  Some of this activity resulted in successful compromises of the targets’ networks, email accounts, cloud storage accounts, and telephone call records, with some surveillance of compromised email accounts lasting many years. 

Hacking Scheme

The more than 10,000 malicious emails that the defendants and others in the APT31 Group sent to these targets often appeared to be from prominent news outlets or journalists and appeared to contain legitimate news articles.  The malicious emails contained hidden tracking links, such that if the recipient simply opened the email, information about the recipient, including the recipient’s location, internet protocol (IP) addresses, network schematics and specific devices used to access the pertinent email accounts, was transmitted to a server controlled by the defendants and those working with them.  The defendants and others in the APT31 Group then used this information to enable more direct and sophisticated targeted hacking, such as compromising the recipients’ home routers and other electronic devices. 

The defendants and others in the APT31 Group also sent malicious tracking-link emails to government officials across the world who expressed criticism of the PRC government.  For example, in or about 2021, the Conspirators targeted the email accounts of various foreign government individuals world who were part of the Inter-Parliamentary Alliance on China (IPAC), a group founded in 2020 on the anniversary of the 1989 Tiananmen Square protests whose stated purpose was to counter the threats posed by the Chinese Communist Party to the international order and democratic principles.  The targets included every European Union member of IPAC, and 43 United Kingdom parliamentary accounts, most of whom were members of IPAC or had been outspoken on topics relating to the PRC government.

To gain and maintain access to the victim computer networks, the defendants and others in the APT31 Group employed sophisticated hacking techniques including zero-day exploits, which are exploits that the hackers became aware of before the manufacturer or the victim were able to patch or fix the vulnerability. These activities resulted in the confirmed and potential compromise of economic plans, intellectual property, and trade secrets belonging to American businesses, and contributed to the estimated billions of dollars lost every year as a result of the PRC’s state-sponsored apparatus to transfer U.S. technology to the PRC. 

Targeting of U.S. Government Officials and U.S. and Foreign Politicians and Campaigns

The targeted U.S. government officials included individuals working in the White House, at the Departments of Justice, Commerce, Treasury and State, and U.S. Senators and Representatives of both political parties.  The defendants and others in the APT31 Group targeted these individuals at both professional and personal email addresses. Additionally in some cases, the defendants also targeted victims’ spouses, including the spouses of a high-ranking Department of Justice official, high-ranking White House officials and multiple United States Senators.  Targets also included election campaign staff from both major U.S. political parties in advance of the 2020 election.

The allegations in the indictment regarding the malicious cyber activity targeting political officials, candidates, and campaign personnel are consistent with the March 2021 Joint Report of the Department of Justice and the Department of Homeland Security on Foreign Interference Targeting Election Infrastructure or Political Organization, Campaign, or Candidate Infrastructure Related to the 2020 US Federal Elections.  That report cited incidents when Chinese government-affiliated actors “materially impacted the security of networks associated with or pertaining to US political organizations, candidates, and campaigns during the 2020 federal elections.”  That report also concluded that “such actors gathered at least some information they could have released in influence operations,” but which the Chinese actors did not ultimately deploy in such a manner.  Consistent with that conclusion, the indictment does not allege that the hacking furthered any Chinese government influence operations against the U.S.  The indictment’s allegations nonetheless serve to underscore the need for U.S. and allied political organizations, candidates, and campaigns to remain vigilant in their cybersecurity posture and in otherwise protecting their sensitive information from foreign intelligence services, particularly in light of the U.S. Intelligence Community’s recent assessment that “[t]he PRC may attempt to influence the U.S. elections in 2024 at some level because of its desire to sideline critics of China and magnify U.S. societal divisions.”

Targeting of U.S. Companies

The defendants and others in the APT31 Group also targeted individuals and dozens of companies operating in areas of national economic importance, including the defense, information technology, telecommunications, manufacturing and trade, finance, consulting, legal and research industries.  The defendants and others in the APT31 Group hacked and attempted to hack dozens of companies or entities operating in these industries, including multiple cleared defense contractors who provide products and services to the U.S. military, multiple managed service providers who managed the computer networks and security for other companies, a leading provider of 5G network equipment, and a leading global provider of wireless technology, among many others. 

Targeting for Transnational Repression of Dissidents

The defendants and the APT31 Group also targeted individual dissidents around the world and other individuals who were perceived as supporting such dissidents.  For example, in 2018, after several activists who spearheaded Hong Kong’s Umbrella Movement were nominated for the Nobel Peace Prize, the defendants and the APT31 Group targeted Norwegian government officials and a Norwegian managed service provider.  The conspirators also successfully compromised Hong Kong pro-democracy activists and their associates located in Hong Kong, the United States, and other foreign locations with identical malware.

The charged defendants’ roles in the conspiracy consisted of testing and exploiting the malware used to conduct these intrusions, managing infrastructure associated with these intrusions, and conducting surveillance and intrusions against specific U.S. entities.  For example, defendants Cheng Feng, Sun Xiaohui, Weng Ming, Xiong Wang and Zhao Guangzong were involved in testing and exploiting malware, including malware used in some of these intrusions.  Cheng and Ni Gaobin managed infrastructure associated with some of these intrusions, including the domain name for a command-and-control server that accessed at least 59 unique victim computers, including a telecommunications company that was a leading provider of 5G network equipment in the United States, an Alabama-based research corporation in the aerospace and defense industries and a Maryland-based professional support services company.  Sun and Weng operated the infrastructure used in an intrusion into a U.S. company known for its public opinion polls.  Sun and Peng Yaowen conducted research and reconnaissance on several additional U.S. entities that were later the victims of the APT31 Group’s intrusion campaigns.  Ni and Zhao sent emails with links to files containing malware to PRC dissidents, specifically Hong Kong legislators and democracy advocates, as well as targeting U.S. entities focusing on PRC-related issues.

The government’s case is being prosecuted by the Office’s National Security and Cybercrime Section.  Assistant United States Attorneys Douglas M. Pravda, Saritha Komatireddy and Jessica Weigel are in charge of the prosecution, with assistance from Matthew Anzaldi and Matthew Chang of the National Security Division’s National Security Cyber Section and from the Office’s Litigation Analyst Mary Clare McMahon.

The Defendants:

Ni Gaobin (倪高彬)

Age:  38

People’s Republic of China

Weng Ming (翁明)

Age:  37

People’s Republic of China

Cheng Feng (程锋)

Age:  34

People’s Republic of China

Peng Yaowen (彭耀文)

Age:  38

People’s Republic of China

Sun Xiaohui (孙小辉)

Age:  38

People’s Republic of China

Xiong Wang (熊旺)

Age:  35

People’s Republic of China

Zhao Guangzong (赵光宗)

Age:  38

People’s Republic of China

E.D.N.Y. Docket No. 24-CR-42 (RER)

Martin Tesher, a former family medical doctor, was sentenced today by United States District Judge Raymond J. Dearie to 20 years’ imprisonment for nine counts of unlawful distribution of oxycodone without a legitimate medical purpose and one count of unlawful distribution of oxycodone and fentanyl that resulted in the death of a patient.  The Court also ordered Tesher to pay $3,700 in restitution and forfeit $2,725 in criminal proceeds.  Tesher was convicted by a federal jury in July 2018 following a nearly two-week trial.    

Richard P. Donoghue, United States Attorney for the Eastern District of New York, and Ray Donovan, Special Agent-in-Charge, Drug Enforcement Administration, New York Division (DEA), announced the sentence.

Between June 2013 and January 2017, Tesher prescribed oxycodone tablets and fentanyl patches without a legitimate medical purpose to five patients after learning, or had reason to believe, that these patients were addicted to drugs.  None of these patients had verified medical conditions that would require the prescription of Schedule II opioids.  While under Tesher’s care, Nicholas Benedetto, 27, tested positive for cocaine, heroin, methadone, oxycodone and fentanyl.  Nonetheless, Tesher prescribed oxycodone and fentanyl patches for Benedetto.  On March 5, 2016, Benedetto was found dead of a fatal combination of oxycodone and fentanyl, two days after he had been prescribed those drugs by Tesher.    

“In the midst of an unprecedented opioid epidemic, Dr. Tesher used his medical skills to harm, not heal and in doing so he cost a young man his life,” stated United States Attorney Donoghue.  “Such criminal conduct is an utter betrayal of the trust our society places in doctors and it warrants the severe sentence imposed today.”

 “Today’s sentence demonstrates how DEA, EDNY and their many law enforcement partners have come full circle to eliminate the threat of rogue doctors, like Tesher who posed a threat to the public health of the citizens of New York City, Staten Island, and beyond,” stated DEA Special Agent-in-Charge Donovan.  “DEA and its law enforcement partners will continue to seek justice for patients like Nicholas Benedetto, as well as the countless other families and friends who have suffered greatly at the hands of this opioid epidemic.”

The government’s investigation was led by the DEA’s Long Island Tactical Diversion Squad, comprising agents and officers of the DEA, Internal Revenue Service, Nassau County Police Department (NCPD), Suffolk County Police Department (SCPD), Port Washington Police Department and Rockville Centre Police Department.  The DEA Tactical Diversion Squad also worked in conjunction with officers and agents of the New York City Police Department (NYPD), Criminal Enterprise Investigations, the Department of Health & Human Services, Office of Inspector General and NCPD’s Asset Forfeiture and Intelligence Bureau. 

This case is the latest in a series of federal prosecutions by the United States Attorney’s Office for the Eastern District of New York as part of the Prescription Drug Initiative.  In January 2012, this Office and the DEA, in conjunction with the five District Attorneys in this district, the NCPD and SCPD, the NYPD and the New York State Police, along with other key federal, state and local government partners, launched the Initiative to mount a comprehensive response to what the United States Department of Health and Human Services Centers for Disease Control and Prevention called an epidemic increase in the abuse of so-called opioid analgesics.  To date, the Initiative has brought over 160 federal and local criminal prosecutions, including the prosecution of 20 health care professionals; taken civil enforcement actions against a hospital, a pharmacy and pharmacy chain; removed prescription authority from numerous rogue doctors, and expanded information-sharing among enforcement agencies to better target and pursue drug traffickers.  The Initiative also is involved in an extensive community outreach program to address the abuse of pharmaceuticals.

The government’s case is being handled by the Office’s International Narcotics and Money Laundering Section.  Assistant United States Attorneys Jennifer M. Sasso and Penelope Brady are in charge of the prosecution.

The Defendant:

DR. MARTIN TESHER

Age:  83

Manhattan, New York

E.D.N.Y. Docket No. 17-CR-523 (RJD)

CENTRAL ISLIP, NY – Earlier today, in federal court in Central Islip, Carmine Maietta pleaded guilty to conspiracy to commit mail fraud in connection with a fraudulent mass-mailing scheme that tricked consumers into paying fees for falsely promised cash prizes.

Breon Peace, United States Attorney for the Eastern District of New York, Brian M. Boynton, Acting Assistant Attorney of the Justice Department’s Civil Division, and Daniel B. Brubaker, Inspector-in-Charge, United States Postal Inspection Service (USPIS), announced the guilty pleas.

“With today’s guilty plea, Maietta admits to deceiving elderly and other vulnerable victims into believing they had won cash prizes when, in reality, he was simply pocketing their hard-earned funds,” stated United States Attorney Peace. “This Office is committed to protecting the vulnerable from the financial harm caused by fraudulent mail solicitation schemes.”

“Mass mailing fraud schemes often trick elderly victims into sending money based on false promises of large cash prizes,” stated Acting Assistant Attorney General Boynton.  “The Department of Justice is committed to pursuing and prosecuting the perpetrators of these schemes.”

“Sweepstakes and other frauds are extremely damaging to those who fall victim to a scammers’ pitch of trickery and lies. These fraudulent schemes by design are nothing more than lies written on paper. Postal Inspectors will always vigorously pursue individuals who prey on the public, bringing them to justice for their criminal activity,” stated USPIS Inspector-in-Charge Brubaker.

According to court documents, from November 2013 through November 2018, Maietta engaged in a direct-mail scheme that sent fraudulent prize notification mailings to thousands of consumers. The mailings induced consumers to pay a fee, purportedly in return for a large cash prize. None of the consumers who sent a fee ever received such a prize.   

Four other defendants previously pleaded guilty to conspiracy to commit mail fraud for participating in the scheme.  Charles Kafeiti pleaded guilty on December 23, 2020; Steven Diaz pleaded guilty on February 8, 2021; Anthony Kafeiti pleaded guilty on July 28, 2021; and Drew Wilson pleaded guilty on August 24, 2021. 

When sentenced, the five defendants each face a maximum penalty of 20 years in prison.

Assistant United States Attorney Charles P. Kelly of the Eastern District of New York prosecuted the case with Trial Attorneys Timothy Finley and Daniel Zytnick of the Civil Division’s Consumer Protection Branch. The case was investigated by the United States Postal Inspection Service.

The Department of Justice has engaged in extensive efforts to combat elder fraud to halt the widespread financial losses senior citizens suffer from fraud schemes. If you or someone you know is age 60 or older and has been a victim of financial fraud, help is available at the National Elder Fraud Hotline: 1-833-FRAUD-11 (1-833-372-8311). This hotline, which is managed by the Office for Victims of Crime at the Department of Justice, is staffed by experienced professionals who provide personalized support to victims. Case managers will identify appropriate reporting agencies, provide information to callers to assist them in reporting, connect callers directly with appropriate agencies, and provide resources and referrals, on a case-by-case basis. Reporting is the first step. Reporting can help authorities identify those who commit fraud and reporting certain financial losses due to fraud as soon as possible can increase the likelihood of recovering losses. The hotline is staffed seven days a week from 6:00 a.m. to 11:00 p.m. Eastern time. English, Spanish and other languages are available.

Additional information about the Consumer Protection Branch and its enforcement efforts may be found at www.justice.gov/civil/consumer-protection-branch. Information about the Department of Justice’s Elder Fraud Initiative is available at www.justice.gov/elderjustice.

The Defendant:

CARMINE MAIETTA

Age:  74

Westbury, New York

E.D.N.Y. Docket No.: 21-CR-639 (JMA)

The Defendants Who Previously Pleaded Guilty:

STEVEN DIAZ

Age:  53

Mount Sinai, New York

E.D.N.Y. Docket No.: 21-CR-35 (JMA)

ANTHONY KAFEITI

Age:  61

Port Jefferson, New York

E.D.N.Y. Docket No.: 21-CR-253 (JMA)

CHARLES KAFEITI

Age:  58

Scottsdale, Arizona

E.D.N.Y. Docket No.: 20-CR-578 (JMA)

DREW WILSON

Age:  63

British Columbia, Canada

E.D.N.Y. Docket No.: 21-CR-373 (JMA)

Late yesterday, in federal court in Central Islip, an 18-count indictment was returned charging Dr. Roya Jafari-Hassad with illegal distribution of oxycodone and witness tampering. Hassad was arrested this morning and is scheduled to be arraigned this afternoon before United States Magistrate Judge Steven L. Tiscione.

Breon Peace, United States Attorney for the Eastern District of New York, Frank A. Tarentino, Special Agent-in-Charge, Drug Enforcement Administration (DEA), New York Division and Elysia M. Doherty, Assistant Special Agent-in-Charge, U.S. Department of Health and Human Services, Office of Inspector General’s Office of Investigations, New York Region (HHS-OIG) announced the charges.

“As alleged, the defendant abandoned her medical oath to operate a pill mill in Nassau County, illegally dispensing oxycodone to patients for a cash fee,” stated United States Attorney Breon Peace.  “This Office will continue to protect our community from bad actors who flood our streets with dangerous drugs, even if they hide behind their prescription pad.” 

“A prescription pad in the wrong hands can be a deadly weapon,” said DEA Special Agent in Charge Frank Tarentino.  “The diversion of prescription medication is inexcusable for medical professionals and I applaud the hard work by DEA and our law enforcement partners who brought these charges against Dr. Jafari-Hassad.”   

“Health care professionals have a duty to prescribe medication responsibly to ensure the well-being of their patients. Failing to do so puts the health and safety of patients at risk and undermines critical measures to address the opioid epidemic,” said Susan A. Frisco, Acting Special Agent in Charge with the U.S. Department of Health and Human Services, Office of the Inspector General. "HHS-OIG will continue to work with our law enforcement partners to hold accountable bad actors who exploit opioid addiction for personal financial gain.”

Specifically, the investigation has disclosed that Hassad operated a medical office in Great Neck, New York, in which she charged her patients hundreds of dollars in cash in exchange for an illegal monthly oxycodone prescription. These oxycodone prescriptions had no legitimate medical purpose. The cash charge was often in addition to Hassad billing the patient’s insurance for a variety of charges, many relating to procedures that never occurred.  It is estimated that Hassad made hundreds of thousands of dollars a year cash solely from the cash payments made by patients to obtain their oxycodone prescriptions. 

For example, Hassad prescribed oxycodone to an undercover agent at every visit including the first visit.  These visits took place over a year long period and none of the oxycodone prescriptions had a legitimate medical purpose.  In addition, after a search warrant was executed at her medical offices, Hassad reached out to patients and attempted to convince them to alter their testimony about their oxycodone prescriptions.    

Oxycodone is a scheduled controlled substance that may be dispensed by medical professionals only for a legitimate medical purpose in the usual course of a doctor’s professional practice. It is a powerful and highly addictive drug and is frequently abused because of its potency when crushed into a powder and ingested, leading to a heroin-like euphoria.

The government’s case is being prosecuted by Assistant United States Attorneys Charles P. Kelly and Madeline O’Connor.

The Defendant:

ROYA JAFARI-HASSAD

Age:  56

Bayside, New York

E.D.N.Y. Docket No. 22-545

A criminal complaint was unsealed today in federal court in Brooklyn charging Aurelien Michel, a French national residing in the United Arab Emirates (UAE), with defrauding purchasers of “Mutant Ape Planet” NFTs, a type of digital asset, of more than $2.9 million in cryptocurrency.  The defendant was arrested last night at John F. Kennedy International Airport.  His initial appearance is scheduled for this afternoon before United States Magistrate Judge James R. Cho. 

As part of the scheme, NFTs were marketed to purchasers, who were falsely promised numerous rewards and benefits designed to increase demand for, and the value of, their newly acquired NFTs.  After selling out of the NFTs, the purchasers were “rug pulled” – a cryptocurrency scam in which a developer attracts investors, but pulls out before the project is complete, leaving buyers with a worthless asset – as none of the promised benefits were provided.  Instead, millions worth of the NFT purchasers’ cryptocurrency was diverted for Michel’s personal benefit. 

Breon Peace, United States Attorney for the Eastern District of New York, Ivan J. Arvelo, Special Agent-in-Charge, Homeland Security Investigations (HSI), New York and Thomas Fattorusso, Acting Special Agent-in-Charge, Internal Revenue Service-Criminal Investigation, New York (IRS-CI), announced the charges.

“As alleged, the defendant used a traditional criminal scheme to defraud consumers eager to participate in a new digital asset market,” stated United States Attorney Peace.  “Protection from fraud and manipulation extends to all consumers and investors, including those participating in the fast-evolving market for NFTs and other crypto assets.  Our Office is committed to bringing to justice any criminal actor abusing any markets for their own gain.”

“As alleged, Aurelien Michel perpetrated a ‘rug pull’ scheme - stealing nearly $3 million from investors for his own personal use. Purchasers of Mutant Ape Planet NFTs thought they were investing in a trendy new collectible, but they were deceived and received none of the promised benefits,” said Ivan J. Arvelo, Special Agent in Charge of Homeland Security Investigations (HSI) in New York. “HSI uses our extensive experience investigating financial crime in conjunction with our cutting edge cyber capabilities to uncover fraud and bring the perpetrators to justice.”

“It’s alleged that Michel defrauded investors by making false representations of, amongst other things, giveaways, tokens with staking features, and merchandise collections.  Once the NFTs were sold-out, Michel allegedly ceased communications and withdrew purchasers’ funds from the company’s cryptocurrency wallets, lining his pockets with nearly $3 Million of investors’ money,” stated IRS-CI Fattorusso.  “Michel can no longer blame the NFT community for his criminal behavior.  His arrest means he will now face the consequences of his own actions.”

As alleged in the criminal complaint, Mutant Ape Planet NFTs were a digital asset stored on the Ethereum blockchain.  As an NFT, each Mutant Ape Planet NFT was unique, freely transferrable, and gave purchasers exclusive ownership over each NFT.  The NFTs were marketed with promises of exclusive benefits potential purchasers would receive.  Those benefits included exclusive opportunities for additional investments, giveaways, merchandise, and other rewards.  However, after sending their cryptocurrency and obtaining the NFT, purchasers received nothing while their cryptocurrency was diverted from the Mutant Ape Planet NFT project to cryptocurrency wallets controlled by the defendant Aurelien Michel.  In total, more than $2.9 million in purchasers’ cryptocurrency was diverted as part of the Michel’s scheme. 

As alleged, in a social media chat with current and prospective purchasers, Michel admitted to the fraudulent “rug pull,” but blamed the community of NFT purchasers for his actions, stating, “We never intended to rug but the community went way too toxic.”

The charges in the complaint are merely allegations, and the defendant is presumed innocent unless and until proven guilty.

The government’s case is being prosecuted by Assistant United States Attorneys Drew Rolle and Dylan Stern of the Office’s Business and Securities Fraud Section with assistance from Paralegal Specialist William Daniels.

If you believe that you have been a victim of this crime, please call the HSI Tip Line at 1-866-347-2423.

The Defendant:

AURELIEN MICHEL

Age:  24

Dubai, United Arab Emirates

E.D.N.Y. Docket No. 23-MJ-7

A criminal complaint was unsealed today in federal court in Brooklyn charging Shimon Rosenfeld, an attorney admitted to practice law in the State of New York since 1987, with defrauding multiple investors of at least $4 million by falsely claiming he was investing their funds in real estate opportunities.  Rosenfeld was arrested this morning and made his initial appearance this afternoon via videoconference before United States Chief Magistrate Judge Cheryl. L. Pollak.  The defendant was released on a $200,000 bond.

Seth D. DuCharme, 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 Patrick J. Freaney, Deputy Special Agent-in-Charge, United States Secret Service, New York Field Office (USSS), announced the charge.

“Through this alleged scheme, Rosenfeld abused his position as an attorney and betrayed his victims’ trust for his own selfish gain,” stated Acting United States Attorney DuCharme.  “Those who commit fraud, including lawyers, must be brought to justice, and this Office will continue to work tenaciously to ensure integrity in the practice of law.”

“As alleged, Rosenfeld solicited investments based on his stated intent to purchase various real estate and 'flip' it for substantial profit.  In reality, he didn't buy any properties, so there were none to sell.  Rather, Rosenfeld used the money he received to make his own financial trades and investments. Today, we’ve flipped the script on him and held him accountable for his fraudulent actions,” stated FBI Assistant Director-in-Charge Sweeney.

“The U.S. Secret Service remains dedicated to investigating those who commit financial fraud and would like to recognize the efforts of our law enforcement partners in helping bring them to justice,” stated USSS Deputy Special Agent-in-Charge Freaney. “This investigation exemplifies the success that law enforcement can achieve when working in a collaborative manner. In this instance, the defendant allegedly perpetrated a scheme to defraud and misappropriated funds from numerous victims for his own personal gain.”   

According to the complaint, between May 2014 and March 2018, Rosenfeld allegedly perpetrated a fraudulent scheme by soliciting and receiving approximately at least $4 million from various individuals (collectively, the “Victims”) based on fraudulent misrepresentations.  Specifically, Rosenfeld induced the Victims to invest their money with the defendant based, in part, on representations that he would purchase real estate and sell it to a prospective buyer at a higher price, also referred to as “flipping” the property.  Rosenfeld further told the Victims that he would split the profits from the real estate transactions with the Victims.  In reality, Rosenfeld misappropriated the investors’ money by directing the funds into bank accounts he controlled and using the money to trade securities out of his brokerage account. Rosenfeld falsely told the Victims that there were problems with the real estate transactions, such as title or appraisal issues, to explain why no properties had been purchased. 

If convicted of wire fraud, Rosenfeld faces up to 20 years’ imprisonment.  The charge in the complaint are allegations, and the defendant is presumed innocent unless and until proven guilty.

The government’s case is being handled by the Office’s Business & Securities Fraud Section.  Assistant United States Attorney Hiral D. Mehta is in charge of the prosecution.

The Defendant:

SHIMON ROSENFELD

Age:  59

Brooklyn, New York

E.D.N.Y. Docket No. 21-MJ-96

Earlier today, in federal court in Central Islip, Morris Barnard, a medical doctor practicing in Great Neck, New York, pleaded guilty to health care fraud in connection with billing Medicare for millions of dollars for medical procedures that were never actually performed.  The proceeding was held before United States Magistrate Judge Anne Y. Shields. 

Breon Peace, United States Attorney for the Eastern District of New York, Scott Lampert, Special Agent-in-Charge, Health & Human Services and Michael Driscoll, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI) announced the guilty plea.

“With today’s guilty plea, Dr. Barnard admits to committing a multi-million dollar fraud on the Medicare program by billing for procedures he did not perform,” stated United States Attorney Peace.   “By claiming to render services to disabled and other vulnerable patients, Dr. Barnard not only pocketed taxpayer funds that were intended to help beneficiaries in need, he also betrayed his oath for profit.  We will continue to work closely with our law enforcement partners to protect the integrity of taxpayer-funded health care programs.” 

“Money that’s allocated for Medicare-approved services, and fraudulently paid out to providers who don’t actually perform these services, is a crime that’s ultimately paid for by taxpayers themselves. Our office is committed to rooting out this type of fraudulent activity and maintaining the integrity of our government-sponsored health care programs,” stated FBI Assistant Director-in Charge Driscoll.

“The defendant’s actions diverted scarce taxpayer funds from the Medicare program for personal enrichment, while taking advantage of vulnerable individuals,” stated HHS-OIG Special Agent-in-Charge Lampert.  “Working with our law enforcement partners, HHS-OIG will continue to ensure that providers that bill federally funded health care programs do so in an honest manner, and criminals will be held accountable.”

From October 2015 through February 2020, Dr. Barnard submitted over $3 million in billings to Medicare for colonoscopy and gastroenterological procedures that were not done.  Most of these billings indicated that the services were rendered to disabled beneficiaries, who were living in residential group homes.  Medicare reimbursed approximately $1.4 million of these false claims, none of which Dr. Barnard was entitled to receive.

The government’s case is being prosecuted by Assistant United States Attorneys Erin Argo, Charles P. Kelly and Madeline O’Connor of the Long Island Criminal Division.

The Defendant:

MORRIS BARNARD

Age:  58

Great Neck, New York

E.D.N.Y. Docket No. 21-018 (GRB)

Earlier today, in federal court in Central Islip, Morris Barnard, a gastroenterologist practicing in Great Neck, New York, was sentenced by United States District Judge Gary R. Brown to 30 months in prison for health care fraud. Barnard pleaded guilty to the charge in March 2022.  The Court also ordered over $1.4 million in restitution to Medicare. 

Breon Peace, United States Attorney for the Eastern District of New York and Michael J. Driscoll, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI) and Susan A. Frisco , Acting Special Agent-in-Charge, U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG), announced the sentence.

“Today, Dr. Barnard learned the consequences for his greed-driven scheme in which he took advantage of patients who are disabled and living in residential group homes by falsely billing Medicare for medical procedures on them that he never actually performed,” stated United States Attorney Peace.  “The defendant was not entitled to one penny of the $1.4 million in precious public health care funds that he pocketed and will now have to pay back as part of his sentence.” 

“As the defendant learned today, defrauding Medicare does not pay - it has consequences.  The FBI is committed to eradicating all fraud and schemes that abuse government-sponsored health care programs,” stated FBI Assistant Director-in-Charge Driscoll.

“Health care professionals who fraudulently bill Medicare for services never actually provided divert taxpayer funding meant to pay for medically necessary services for people enrolled in Medicare,” stated Acting Special Agent in Charge Susan A. Frisco of HHS-OIG. “OIG will continue to work with our law enforcement partners to protect the integrity of federal health care programs.”

From October 2015 through February 2020, the defendant submitted over $3 million in billings to Medicare for colonoscopy and gastroenterological procedures that were not performed.  Most of these billings indicated that the services were rendered to disabled beneficiaries, who were living in residential group homes.  Medicare reimbursed approximately $1.4 million of these false claims, none of which the defendant was entitled to receive.

The government’s case is being prosecuted by Assistant United States Attorneys Charles P. Kelly and Madeline O’Connor.

The Defendant:

Morris Barnard

Age:  59

Great Neck, New York

E.D.N.Y. Docket No. 21-018(GRB)

A criminal complaint was unsealed today in Brooklyn federal court charging Sherry Xue Li and Lianbo Wang with wire fraud conspiracy, money laundering conspiracy and conspiracy to defraud the United States by obstructing the Federal Election Commission’s (FEC) administration of campaign finance laws.  Li and Wang, both naturalized U.S. citizens, were arrested earlier today in Oyster Bay, New York, and their initial appearance is scheduled for this afternoon before United States Magistrate Judge Ramon E. Reyes, Jr. at the United States Courthouse in Brooklyn, New York.

Breon Peace, United States Attorney for the Eastern District of New York; Michael J. Driscoll, Assistant Director-in-Charge, Federal Bureau of Investigation (FBI), New York Field Office; Ricky J. Patel, Acting Special Agent-in-Charge, Department of Homeland Security, Homeland Security Investigations (HSI), New York; and Thomas Fattorusso, Special Agent-in-Charge, Internal Revenue Service-Criminal Investigation, New York (IRS-CI) announced the arrests and charges.

“As alleged, the defendants enticed their victims to invest in a fraudulent scheme aided by misleadingly claiming that their fictitious project had the support of prominent politicians,” stated United States Attorney Peace.  “The defendants were able to perpetrate this fraud by then selling access to U.S. politicians by unlawfully contributing foreign money to political campaigns in their own names and bringing foreign nationals as their guests to fundraising events.  This Office is committed to protecting our democratic process from those who would expose it to unlawful foreign influence, and investors from the predatory fraudsters who would steal their money.” 

United States Attorney Peace thanked the U.S. Citizenship and Immigration Services for its assistance in the investigation.

"We allege Li and Wang promised investors green cards, access to political figures, and dividends on their money. Tens of millions of dollars came in from investors and straw donors, who expected their money would bear fruit. However, only one promise came to fruition, the access to political power. Foreign money pollutes our immigration and democratic processes, and we must do all we can to protect them," stated FBI Assistant Director-in-Charge Driscoll. 

Li and Wang are alleged to have perpetrated a massive, multi-layered fraud scheme targeting foreign nationals ranging from a sham real estate investment, promised benefits for payment, the solicitation for access to U.S. politicians, to making illegal donations for campaigns.  The staggering scope of this alleged fraud was facilitated by an abuse in the investor visa process,” said HSI New York Acting Special Agent in Charge Patel.  “In tandem with our partners, HSI continues to steadfastly monitor U.S. visa and travel systems for indicators of malign foreign actor abuse and will continue to aggressively investigate attacks on the integrity of the framework that allows access to the United States.”

“It’s alleged that Li and Wang defrauded their victim-investors out of millions, then used their ill-gotten gains to live luxuriously and ‘rub elbows’ with prominent politicians.  It is through law enforcement partnerships and collaboration that we were able to break-down this multi-layered fraud scheme and ensure that the alleged culprits now face justice for their criminal behavior,” said Thomas M. Fattorusso, Special Agent in Charge of IRS:CI New York.

The Scheme to Defraud Investors

As alleged in the complaint, Li and Wang orchestrated a nearly decade-long scheme to defraud investors in a fictitious project to develop, build and operate a private educational institution in Sullivan County, New York, called the “Thompson Education Center” (the TEC Project).  The defendants solicited victim-investors, many of them foreign nationals located outside of the United States, by falsely representing the progress they were making on the TEC Project and its support from government officials, including by sending investors and prospective investors promotional materials that included photographs of Li, the TEC Project’s President, with prominent U.S. politicians.  Many foreign national victims were persuaded to invest in the TEC Project by, among other things, the defendants’ false assurances that their $500,000 investments would guarantee them lawful permanent residence in the United States through the EB-5 investment visa program administered by the Department of Homeland Security, U.S. Citizenship and Immigration Services (USCIS). 

As alleged, instead Li, Wang and other members of the conspiracy siphoned off the money they fraudulently obtained from investors by transferring the funds through bank accounts held in the names of various companies that Li had created.  Once the funds were in those accounts, Li and Wang used the funds to pay for numerous personal expenses including clothing and accessories, jewelry, housing, vacation travel, upscale dining, and political contributions to prominent politicians.  The portion of the invested capital Li and Wang actually spent on the TEC Project was used merely to create and perpetuate the fiction that the TEC Project was a viable development project that was actually under construction.  For example, Li and Wang hired contractors, engineers and other professionals to create architectural drawings and plans and perform minor work on or around the development site, which Li and Wang showed to potential investors to mislead them into believing the TEC Project had a realistic probability of completion and of delivering the returns on investment that the conspirators promised their investors.

As of July 2022, more than 150 investors have invested at least $27 million in the TEC Project, including approximately $16.5 million from EB-5 investors who were promised a green card in return for their investment, and approximately $11 million from stock investors who were promised that an IPO would take place.  As of March 2022, Li, Wang, and their co-conspirators have misappropriated and laundered at least $2 million in TEC Project investor funds.  During this same period, Li, Wang and their co-conspirators spent at least an additional $2.5 million dollars in investor funds on various personal expenses with no clear business purpose, none of which was reported as income to the Internal Revenue Service by Li or Wang.  To date, no EB-5 investor in the TEC Project has received a temporary or permanent green card and the TEC Project has not made an IPO or been listed on any stock exchange.

Selling Access to U.S. Politicians

In furtherance of their scheme, Li and Wang also acted as “straw donors” for foreign nationals to unlawfully contribute to campaigns supporting U.S. politicians and political committees.  Among other things, Li and Wang promised foreign nationals access to U.S. political events and politicians in exchange for a fee.  Li and Wang used the money they received from foreign nationals to fund political contributions, and falsely identified themselves and other U.S. citizens as the contributors of the funds, in violation of the Federal Election Campaign Act (FECA) and FEC regulations.  In some cases, Li and Wang used TEC investors’ investment funds to make the political contributions which they used to gain access to the political events, where Li and Wang took photographs with elected officials.  Li and Wang would then use the photographs as a marketing tool in soliciting investments from foreign nationals in the TEC Project.   

For example, as alleged in the complaint, Li and Wang charged twelve foreign nationals $93,000 per person for admission to a June 28, 2017 fundraising event (the June 28, 2017 Fundraiser) with the then-President of the United States.  Li and Wang used the funds that they collected from the foreign nationals to unlawfully make $600,000 in political contributions in their own names—$270,500 from Li and $329,500 from Wang—to the joint fundraising committee hosting the June 28, 2017 Fundraiser.  Li, Wang and their foreign national guests attended the June 28, 2017 Fundraiser and took photographs with the then-President of the United States.  Li and Wang later used a photograph of Li and the President taken at the fundraiser to solicit investment in the TEC Project.

* * *

'The FBI has established a hotline for potential victims.  If you have information regarding the allegations in the complaint or believe you may have been a victim, please call 1-800-CALL-FBI or submit a tip online at tips.fbi.gov.

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

The government’s case is being handled by the Office’s National Security and Cybercrime Section and the Office’s Public Integrity Section.  Assistant United States Attorneys Robert T. Polemeni, Ian C. Richardson, and Joshua Hafetz are in charge of the prosecution with assistance from Paralegal Specialist Magdalena St. Surin.  Assistant United States Attorney Claire S. Kedeshian of the Office’s Asset Recovery Section is responsible for the forfeiture of assets.

The Defendants:

SHERRY XUE LI

Age:  50

Oyster Bay, New York

Lianbo Wang, also known as “Mike Wang”

Age:  45

Oyster Bay, New York

E.D.N.Y. Docket No. 22-MJ-756

Former Suffolk County District Attorney Thomas J. Spota and Christopher McPartland, the former Chief of Investigations and Chief of the Government Corruption Bureau  of the Suffolk County District Attorney’s Office (SCDAO), were convicted today by a federal jury in Central Islip, New York, of all four counts of the indictment charging them with conspiracy to tamper with witnesses and obstruct an official proceeding, witness tampering, obstruction of justice, and being accessories after-the-fact to former Suffolk County Police Department (SCPD) Chief of Department James Burke’s deprivation of a prisoner’s civil rights.  The verdict followed a six-week trial before United States District Judge Joan M. Azrack.  When sentenced, Spota and McPartland each face up to 20 years’ imprisonment.

Richard P. Donoghue, United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), announced the verdicts.

“When a sitting District Attorney and the Chief of the Government Corruption Bureau attempt to obstruct a federal grand jury investigation, it is nothing short of an attack on  the justice system itself, and it will not be tolerated by the Justice Department.  As prosecutors, the defendants were obligated to support the law they enforce, but the criminal actions taken by these men made a mockery of that obligation.  Thankfully, the rule of law has prevailed, and the defendants now must face the consequences of their actions, just like any other defendant who has broken the law,” stated United States Attorney Donoghue.

“Spota and McPartland violated the law by obstructing a federal investigation into the assault on an individual’s civil rights,” stated FBI Assistant Director-in-Charge Sweeney. “Today they are reminded that positions of power come with a great responsibility to respect both the law and public trust.  Any abuse of this privilege will be prosecuted to the fullest extent.”

As proven at trial, Spota and McPartland, the top prosecutors in Suffolk County, abused their leadership positions and authority within the SCDAO to obstruct and attempt to obstruct the FBI and federal grand juries investigating the assault of a SCPD prisoner, Christopher Loeb, in order to protect then-Chief Burke.  On December 14, 2012, Loeb was arrested on larceny charges, among other offenses, in connection with his burglarizing Burke’s department-issued vehicle and stealing Burke’s gun belt and ammunition, as well as a duffel bag containing cigars, sex toys, a pornographic video and a bottle of Viagra.  Loeb was transported to the Fourth Precinct in Hauppauge, New York, where he was assaulted by Burke and other members of the SCPD, while handcuffed and shackled to the floor. 

The evidence at trial consisted of SCPD and SCDAO documents and records, voluminous telephone records, cell site records and testimony from 30 witnesses, including multiple cooperating witnesses.  One such witness was James Hickey, a retired SCPD Lieutenant who was part of the “Inner Circle” that included Spota, McPartland and Burke.  Hickey and several other cooperating and immunized witnesses detailed the defendants’ use of intimidation and threats to pressure witnesses to withhold information, refuse to cooperate with law enforcement, and lie under oath in order to thwart the federal investigation of the Loeb assault.  Hickey supervised the SCPD’s elite Criminal Intelligence Unit, which Burke referred to as his “Palace Guards.”  Three detectives from this unit participated with Burke in the assault of Loeb.  Hickey testified that Burke told him the Intel guys “did themselves proud,” they “beat the hell” out of Loeb, and it was “just like the good old days.” 

Loeb’s case was handled by the SCDAO’s Government Corruption Bureau, supervised by McPartland, although the charges would not typically be handled by that bureau, in an attempt to control the flow of information and cover-up the assault.  In February 2013, after Loeb’s attorney disclosed that her client had been assaulted at the Fourth Precinct, Hickey testified that McPartland advised him to “keep the guys quiet and tight … it’s imperative we keep Jimmy [Burke] out of jail, so we needed to keep the guys quiet and in line.”  Hickey testified that Spota regularly pressured him to keep the Intel detectives quiet by repeatedly inquiring – “Are they holding up?”  “Are they towing the line?” – conveying the message that they should refuse to cooperate with the federal investigation and, if necessary, lie to protect Burke.

In April 2013, the United States Attorney’s Office for the Eastern District of New York and the FBI initiated a federal grand jury investigation into the assault of Loeb. 

On June 25, 2013, FBI Special Agents served members of the SCPD with federal grand jury subpoenas.  That same day, defendants Spota and McPartland learned of the existence of the federal investigation.  McPartland instructed Hickey to debrief his Intel detectives and learn what was said by the FBI agents serving the subpoenas, and find out who might be cooperating with them.  However, because of the threats and intimidation, none of the Intel detectives cooperated with the investigation, and it was closed eight months later, in December 2013.  Through the efforts of the defendants and Burke, the initial grand jury investigation of Burke’s civil rights violation was successfully derailed. 

In or about mid-2015, Spota and McPartland learned that the federal investigation had been reopened, and that its scope had expanded to include an investigation of the obstruction of justice and witness tampering offenses.  The defendants reacted swiftly to obstruct it.  Hickey testified that at a meeting with the defendants in Spota’s office on June 4, 2015, Spota asked him, “Who do you think has flipped?”  In discussing which of the detectives might be a “rat,” cooperating with federal investigators, Spota said about one of the likely cooperators, “If he talks, he’s dead.  He will never work in Suffolk County again.”  In that same meeting, McPartland told Hickey to pass along a message to the Intel detectives, threatening them with prosecution if they cooperated with the investigation.

The defendants’ efforts to thwart the grand jury investigations ultimately failed.  In early December 2015, a federal grand jury in the Eastern District of New York indicted Burke.  Burke pleaded guilty approximately two months later, admitting to his involvement in both the deprivation of Loeb’s civil rights and the conspiracy to obstruct justice.  In November 2016, he was sentenced to 46 months’ in prison. 

The government’s case is being handled by the Office’s Long Island Criminal Division.  Assistant United States Attorneys Nicole Boeckmann, Lara Treinis Gatz, Justina L. Geraci and Michael R. Maffei are in charge of the prosecution, and were assisted by Assistant United States Attorney John Durham and Investigator William Hessle.

The Defendants:

THOMAS J. SPOTA

Age:  78

Mount Sinai, New York

CHRISTOPHER McPARTLAND

Age:  54

Northport, New York

E.D.N.Y. Docket No. 17-CR-587 (JMA)

 

Earlier today, in federal court in Central Islip, Lorraine Chalavoutis pleaded guilty before United States District Judge Joanna Seybert to conspiracy to commit mail fraud by participating in a scheme to mail fraudulent prize notices that induced recipients, many of whom were elderly and vulnerable, to believe that they could claim large cash prizes in exchange for a modest fee.  None of the victims who submitted fees, which in total exceeded $30 million, received a substantial cash prize.  When sentenced, Chalavoutis faces up to 20 years in prison, as well as forfeiture and a fine. 

Jacquelyn M. Kasulis, Acting United States Attorney for the Eastern District of New York, Brian M. Boynton, Acting Assistant Attorney General for the Justice Department’s Civil Division, and Philip R. Bartlett, Inspector-in-Charge, United States Postal Inspection Service, New York Division (USPIS), announced the guilty plea.

“With today’s plea, Chalavoutis has admitted her role in a nefarious and fraudulent scheme to enrich herself by tricking elderly and vulnerable victims into believing they had won a cash prize that they could collect after paying her modest fees,” stated Acting United States Attorney Kasulis.  “Protecting the community from those who commit fraud to deliberately prey on the false hopes of the vulnerable remains a priority of this Office and the Department of Justice.”

“Chalavoutis set up and ran the administrative and financial operations that allowed this fraud scheme to work,” stated Acting Assistant Attorney General Boynton. “The Department of Justice is committed to protecting elderly and vulnerable Americans and to prosecuting those who defraud them.”

“Today’s plea is an example of the coordinated efforts of law enforcement to bring those to justice who prey on vulnerable adults through the distribution of bogus solicitations, luring the unsuspecting ‘prize winner’ to send money in an effort to steal not only their money, but in many cases their independence,” stated USPIS  Inspector-in-Charge Bartlett.

Between December 2010 and July 2016, Chalavoutis conspired to mail fraudulent prize notices to thousands of victims throughout the United States.  The mailings appeared to be personally addressed to thousands of individuals whose names were on consumer lists obtained by Chalavoutis and her primary co-conspirators, Shaun Sullivan and Tully Lovisa.  Chalavoutis created various shell companies for the purported senders of the mailings and hid her co-conspirators’ involvement in the business by using straw owners.  Lovisa and Sullivan previously pleaded guilty to conspiracy to commit mail fraud and are awaiting sentencing.  In separate cases, several other defendants have also pleaded guilty to conspiracy to commit mail fraud in connection with the scheme.

The government’s case is being prosecuted by Assistant United States Attorney Charles P. Kelly and Trial Attorneys Daniel Zytnick and Timothy Finley of the Justice Department’s Consumer Protection Branch.  Assistant United States Attorney Tanisha R. Payne of the Office’s Civil Division is in charge of forfeiture matters.

The Defendant:

LORRAINE CHALAVOUTIS

Age:  64

Greenlawn, New York

E.D.N.Y. Docket No. 18-CR-349 (JS)

Earlier today, at the federal courthouse in Brooklyn, Gregory Altieri pleaded guilty to wire fraud for running a two-year $200 million Ponzi scheme based on false statements to investors about inflated returns for nonexistent wholesale jewelry deals.  As part of the plea, Altieri also admitted to committing securities fraud in connection with the scheme.  When sentenced, Altieri faces up to 20 years in prison.  Today’s proceeding took place before United States District Judge Brian M. Cogan.

Seth D. DuCharme, Acting United States Attorney for the Eastern District of New York, announced the guilty plea. 

“With today’s guilty plea, Altieri is held accountable for duping dozens of investors, including retirees living off their pensions,” stated Acting United States Attorney DuCharme.  “The defendant’s lies have caught up to him and he will now face the consequences of his fraudulent scheme.”  Mr. DuCharme expressed his grateful appreciation to the Federal Bureau of Investigation, New York Field Office, for its exemplary work on the case, and to the Securities and Exchange Commission, New York Regional Office, for their assistance.

Beginning in August 2017, Altieri solicited between $75 million to $85 million in investments in his entity, LNA Associates, from over 80 investors located in Queens, Staten Island, Long Island and elsewhere.  Altieri told investors that their money would be used to purchase jewelry at “closeout” prices, which would then be resold at a high profit yielding returns on those investments of between 30 and 70 percent in a matter of months.  While Altieri initially purchased some jewelry with investors’ money, since approximately May 2018, he used money from new investors to pay earlier investors, representing to the latter group that they were receiving returns on their investments.  These purported “returns” were used by Altieri to convince the earlier investors to keep their money with LNA Associates by “rolling over” their funds into new investments based on false promises to use this money to purchase additional jewelry.  By January 2020, when Altieri stopped making payments to investors, he owed them approximately $200 million based on the falsely inflated promised returns.   

The government’s case is being handled by the Office’s Business & Securities Fraud Section.  Assistant United States Attorneys Andrey Spektor and Lindsay K. Gerdes are in charge of the prosecution, assisted by Assistant United States Attorney Brian D. Morris of the Office’s Asset Forfeiture Unit and by a Special Agent of the Office’s Business & Securities Fraud Section. 

The Defendant:

GREGORY ALTIERI

Age:  53

Melville, New York

E.D.N.Y. Docket No. 20-CR-249 (BMC)

CHICAGO — A former investigator for the Illinois Department of Agriculture has been sentenced to a year in federal prison for groping several women while on duty and then lying under oath about it during an official proceeding.

JOSE GUILLEN inappropriately touched and groped female operators of animal care facilities that he inspected for the State of Illinois.  In his official capacity as a state investigator, Guillen had the power to influence whether an animal care facility received a license to operate and whether it could continue in operation after receiving the license.

When one of the victims filed a civil lawsuit against Guillen, he repeatedly lied under oath during a deposition in the case.  In the deposition, Guillen stated that he touched the victim’s buttocks by accident.  In a plea agreement with the U.S. Attorney’s Office to resolve the federal criminal case, Guillen admitted that he “intentionally touched [the victim’s] buttocks for purposes of his own sexual gratification.”  Guillen also admitted in the plea agreement that he lied in his deposition when he denied having inappropriately touched four other animal care facility operators.

Guillen, 43, of Melrose Park, Ill., pleaded guilty last year to obstruction of justice.  U.S. District Judge Joan Humphrey Lefkow imposed the year-and-a-day sentence during a hearing Wednesday in federal court in Chicago.

The sentence was announced by Morris Pasqual, Acting United States Attorney for the Northern District of Illinois, and Robert W. “Wes” Wheeler, Jr., Special Agent-in-Charge of the Chicago Field Office of the FBI. 

“None of these women consented to the defendant’s lecherous advances,” Assistant U.S. Attorneys Amarjeet S. Bhachu and Diane MacArthur argued in the government’s sentencing memorandum.  “It was only when confronted by a series of accusers who were brave enough to step forward to put a stop to his misconduct that the defendant capitulated and accepted responsibility for his serial wrongdoing by pleading guilty.”

Earlier today, in federal court in Central Islip, Tully Lovisa pleaded guilty before United States Magistrate Judge Gary R. Brown to conspiracy to commit mail fraud by sending prize-promotion mailings that led recipients, many of whom were elderly and vulnerable, to believe that they could claim large cash prizes in exchange for a modest fee.  Lovisa also pleaded guilty to wire fraud in connection with a related scheme to defraud the Federal Trade Commission (FTC).   

Richard P. Donoghue, United States Attorney for the Eastern District of New York, Joseph H. Hunt, Assistant Attorney General for the Justice Department’s Civil Division, and Philip R. Bartlett, Inspector-in-Charge, United States Postal Inspection Service, New York Division (USPIS), announced the guilty pleas.

As he admitted at his guilty plea, Lovisa’s prize promotion mailings were fraudulent.  None of the victims who submitted fees, which in total exceeded $30 million, received a substantial cash prize.  Lovisa’s involvement in the scheme was also in violation of prior court orders that resulted from a lawsuit against him by the FTC.  As part of his resolution the FTC lawsuit, Lovisa was ordered by a federal court to sell a home he owned in Las Vegas, Nevada, and turn over the proceeds to the FTC.  Lovisa arranged for a sham sale of the house in September 2012 for $155,500, and then sold the house in April 2015 for $540,000 and kept the proceeds.

When sentenced, Lovisa faces up to 20 years in prison on each count, as well as forfeiture of at least $1 million and a fine of up to $250,000 or twice the gross gain or gross loss from each offense.

The government’s case is being handled by the Office’s Long Island Criminal Division.  Assistant United States Attorney Charles P. Kelly, with Trial Attorneys Daniel Zytnick and Timothy Finley of the Justice Department’s Consumer Protection Branch, are in charge of the prosecution.  Assistant United States Attorney Tanisha R. Payne is in charge of the forfeiture.

The Defendant:

TULLY LOVISA

Age:  55

Huntington Station, New York

E.D.N.Y. Docket No. 18-CR-349

Today, a complaint was unsealed in federal court in Brooklyn charging two defendants in connection with opening and operating an undeclared overseas police station, located in lower Manhattan, for the Ministry of Public Security (“MPS”) of the People’s Republic of China (“PRC”).  Lu Jianwang and Chen Jinping were arrested earlier this morning at their homes in New York City.  Their initial appearances are scheduled this afternoon before United States Magistrate Judge James R. Cho. 

Breon Peace, United States Attorney for the Eastern District of New York; Matthew G. Olsen, Assistant Attorney General of the Justice Department’s National Security Division; and Michael J. Driscoll, Assistant Director-in-Charge, FBI, New York Field Office, announced the arrests and charges.

“This prosecution reveals the Chinese government’s flagrant violation of our nation’s sovereignty by establishing a secret police station in the middle of New York City,” stated United States Attorney Peace.  “As alleged, the defendants were directed to do the PRC’s bidding, including helping locate a Chinese dissident living in the United States, and obstructed our investigation by deleting their communications with a Chinese Ministry of Public Security official.  Such a police station has no place here in New York City—or any American community.”

“The PRC, through its repressive security apparatus, established a secret physical presence in New York City to monitor and intimidate dissidents and those critical of its government,” stated Assistant Attorney General Olsen. “The PRC’s actions go far beyond the bounds of acceptable nation-state conduct. We will resolutely defend the freedoms of all those living in our country from the threat of authoritarian repression.”

“The defendants, operating on behalf of the government of the People’s Republic of China, are alleged to have operated an undeclared police station in downtown New York City,” stated FBI Assistant Director-in-Charge Driscoll.  “Upon learning of the FBI’s investigation into the police station, the defendants erased their communications to conceal their activities.  Clandestine police stations operating within our communities are not only illegal but infringe on the United States' freedom - they will not be tolerated.   The FBI is unwavering in our mission to protect the American people and uphold our Constitution; anyone working on behalf of a hostile foreign nation to violate our national security and freedoms will be held accountable.”

As alleged in the complaint, Lu Jianwang and Chen Jinping are charged with conspiring to act as agents of the PRC government as well as obstructing justice by destroying evidence of their communications with an MPS official (the “MPS Official”).  While acting under the direction and control of the MPS Official, the defendants worked together to establish the first known overseas police station in the United States on behalf of the Fuzhou branch of the MPS.  The police station—which closed in the fall of 2022—occupied an entire floor in an office building in Manhattan’s Chinatown.  Lu and Chen helped open and operate the clandestine police station.  None of the participants in the scheme informed the U.S. government that they were helping the PRC government surreptitiously open and operate an undeclared MPS police station on U.S. soil.

Before helping open the police station in early 2022, Lu had a longstanding relationship of trust with PRC law enforcement, including the MPS.  Since 2015, and through the operation of the secret police station, Lu was directed to assist the PRC government’s repressive activities on U.S. soil:



In 2015, during PRC President Xi Jinping’s visit to the United States, Lu participated in counterprotests in Washington, D.C. against members of a religion that is forbidden under PRC law.  A deputy director of the MPS awarded Lu a plaque for the work he performed on behalf of the PRC government. 

In 2018, Lu was enlisted in efforts to cause a purported PRC fugitive to return to the PRC.  The victim reported being repeatedly harassed to return to the PRC, including through threats of violence made to the victim and the victim’s family in the United States and in the PRC. 

In 2022, the MPS Official sought Lu’s assistance in locating an individual living in California who is a pro-democracy activist.  In turn, Lu enlisted the help of another co-conspirator.  Later, when confronted by the FBI about these conversations, Lu denied that they occurred.



In October 2022, the FBI conducted a judicially authorized search of the illegal police station.  In connection with the search, FBI agents interviewed both Lu and Chen and seized their phones.  In reviewing the contents of these phones, FBI agents observed that communications between Lu and Chen, on the one hand, and the MPS Official, on the other, appeared to have been deleted.  In subsequent consensual interviews, Lu and Chen admitted to the FBI that they had deleted their communications with the MPS Official after learning about the ongoing FBI investigation, thus preventing the FBI from learning the full extent of the MPS’s directions for the overseas police station.  

If convicted of conspiring to act as agents of the PRC, the defendants face a maximum sentence of five years in prison.  The obstruction of justice charge carries a maximum sentence of 20 years in prison.

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

The government’s case is being handled by the Office’s National Security and Cybercrime Section.  Assistant United States Attorneys Alexander A. Solomon, and Antoinette N. Rangel are in charge of the prosecution, with assistance from Trial Attorney Scott A. Claffee of the National Security Division’s Counterintelligence and Export Control Section.

The FBI has created a website for victims to report efforts by foreign governments to stalk, intimidate, or assault people in the United States.  If you believe that you are or have been a victim of transnational repression, please visit https://www.fbi.gov/investigate/counterintelligence/transnational-repression.

The Defendants:

Lu Jianwang

Age:  61

Bronx, New York

E.D.N.Y. Docket No.  23-MJ-265

Chen Jinping

Age: 59

Manhattan, New York

E.D.N.Y. Docket No.  23-MJ-265

Junior Zelaya-Canales, a regional leader of the 18th Street gang, will be arraigned this afternoon before United States Magistrate Judge Robert M. Levy in federal court in Brooklyn on a fourth superseding indictment charging him with murder in aid of racketeering in connection with the September 2016 fatal shooting of 15-year-old Josue Guzman in Hempstead, New York; conspiracy to murder rival gang members; and attempted murder of rival gang members.  The superseding indictment also charged 18th Street gang members Jonathan Zelaya-Diaz with conspiracy to commit murder and attempted murder in aid of racketeering, and Eric Chavez with attempted murder and assault in aid of racketeering.  Chavez was arrested on Tuesday and ordered detained pending trial.  Zelaya-Diaz remains at large.

Richard P. Donoghue, United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), announced the charges.

As alleged in the superseding indictment and other court filings, the 18th Street gang is a violent street gang with members and associates in Jamaica, Queens, and in various locations across the United States.

“The superseding indictment and arrests announced today are a significant step in dismantling a violent street gang in our district,” stated United States Attorney Donoghue.  “This Office, with the assistance of local and federal law enforcement partners, will not relent until violent street gangs that endanger communities have been eradicated.”  Mr. Donoghue expressed his grateful appreciation to the Nassau County District Attorney’s Office, Nassau County Police Department, Queens District Attorney’s Office and the New York City Police Department (NYPD) for their assistance with the investigations.  

"It defies comprehension these gang members are allegedly murdering and attempting to murder human beings for respect in their gang or in retaliation for some perceived slight,” stated FBI Assistant Director-in-Charge Sweeney.  “Josue Guzman was just 15-years-old when he was shot and killed because someone deemed him to be disrespectful. We may never be able to change the mindlessness of a teenager being killed for no reason, but we can certainly make sure anyone who commits such a grotesque act will suffer the consequences.”

The Guzman Murder

In September 2016, Zelaya-Canales allegedly directed two lower-level gang members to kill Josue Guzman to demonstrate their allegiance to 18th Street gang.  The murder was ordered, in part, because Guzman was believed to have offended 18th Street gang members.  On September 12, 2016, at approximately 1:00 a.m., the Hempstead Police Department responded to a report of shots fired near the intersection of Linden Avenue and Laurel Avenue in Hempstead.  There, the police officers found Guzman’s body lying near the curb, shot once in the back of the head.  Guzman was pronounced dead at the scene.

Attempted Murder of Rival Gang Members

On July 9, 2017, Zelaya-Canales, Zelaya-Diaz and another 18th Street gang member allegedly directed the shooting of rival gang members over a turf dispute in Woodhaven, Queens.  At approximately 10:30 p.m., NYPD officers responded to a 911 call about shots fired in the vicinity of 86th Road in Woodhaven.  There, the police officers recovered nine 9-millimeter shell casings.  

On August 9, 2017, NYPD detectives investigating the shooting executed a search warrant at Zelaya-Canales’s apartment and recovered a 9-millimeter Ruger handgun with a defaced serial number, four rounds of 9-millimeter ammunition, 56 rounds of .357 magnum ammunition, 34 rounds of .380 caliber ammunition and 23 rounds of .38 ammunition.  Ballistic tests subsequently revealed that the Ruger handgun was the weapon that fired the 9-millimeter shell casings found at the scene of the shooting in Woodhaven.

Attempted Murder of “John Doe”

On September 20, 2017, in Jamaica, Queens, Eric Chavez allegedly shot “John Doe” for the purpose of maintaining and increasing his own position in the 18th Street gang, incorrectly suspecting that “Doe” was a member of the rival MS-13 gang.  Chavez and another gang member approached “Doe” with guns drawn and searched him for MS-13 gang tattoos, but discovered none.  Nevertheless, they shot and wounded “Doe” as he fled. 

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

The government’s case is being prosecuted by Assistant United States Attorneys Soumya Dayananda and Jonathan P. Lax.

The Defendants:

JUNIOR ZELAYA-CANALES (also known as “Terco”)

Age: 23

Queens, New York

JONATHAN ZELAYA-DIAZ (also known as “Scooby”)

Age:  25

Hempstead, New York

ERIC CHAVEZ (also known as “Lunatico”)

Age:  20

Queens, New York

E.D.N.Y. Docket No. 18-139 (S-4) (LDH)

 

A 12-count indictment was unsealed today in federal court in Central Islip charging Tully Lovisa, Shaun Sullivan and Lorraine Chalavoutis with mail fraud and money laundering for their participation in a fraudulent mass-mailing scheme that tricked hundreds of thousands of consumers, many of them elderly, into paying at least $30 million in fees for falsely promised cash prizes.  The defendants were arrested today and are scheduled to be arraigned this afternoon before United States Magistrate Judge A. Kathleen Tomlinson.

Attorney General Jeff Sessions, Richard P. Donoghue, United States Attorney for the Eastern District of New York, and Peter R. Rendina, Inspector-in-Charge, United States Postal Inspection Service, New York Division (USPIS), announced the indictment.

“Earlier this year, when we announced the largest elder fraud sweep in history, we sent a clear message:  we will hold perpetrators of elder fraud schemes accountable wherever they are,” said Attorney General Jeff Sessions.  “When criminals steal the hard-earned life savings of older Americans, we will respond with all the tools at the Department’s disposal – criminal prosecutions to punish offenders, civil injunctions to shut the schemes down, and asset forfeiture to take back ill-gotten gains.  Today’s indictment shows we are following through on this promise, and fraudsters everywhere should take note of it.”

“As alleged in the indictment, the defendants perpetrated a cruel hoax on their victims, many of them elderly and vulnerable, by sending promotional mailings that falsely claimed they would receive tens of thousands of dollars in prize money if they paid a fee,” stated United States Attorney Donoghue.  “In so doing, Lovisa violated prior court orders directing him to stop engaging in mass mailing operations and his co-conspirators were well aware of prior enforcement action to stop this conduct.  Protecting the elderly from brazen predators like the defendants is a priority of this Office and the Department of Justice.”

“These defendants showed a willingness to stop at nothing to bilk unwitting victims of their hard earned cash; many who were deliberately targeted because of their vulnerability,” stated USPIS Inspector-in-Charge Rendina.  “Postal Inspectors remind you, if you have to pay to play, it’s a scam.”

According to the indictment, the defendants’ prize-promotion mailings claimed that recipients could receive a large cash prize in exchange for paying a modest fee and, in fact, none of them did.  The scheme began after the Federal Trade Commission (“FTC”) sued Lovisa in 2010 for sending deceptive prize-promotion mailings.  In response to that suit, a federal court in the Northern District of California enjoined Lovisa in December 2010 and April 2012 from any involvement with prize-promotion mailings.  Despite these orders, Lovisa conspired with Sullivan and Chalavoutis to set up numerous prize-promotion companies using straw owners and aliases to continue defrauding consumers.  Chalavoutis, who provided operational services, including opening companies and bank accounts in the name of straw owners, helped conceal the involvement of Lovisa and Sullivan in controlling the operation.

The indictment also charges Lovisa with perjury for submitting a false compliance report to the FTC in which he claimed not to be involved in prize-promotion mailings.  The additional wire fraud and money laundering charges involve Lovisa’s further deception of the FTC related to the court-ordered sale of a house he owned in Las Vegas.  According to the indictment, Lovisa arranged a sham sale of the house for $155,500 in September 2012 that allowed him to maintain control of it and only give the FTC proceeds of that sale.  Lovisa sold the house in April 2015 for $540,000.

If convicted, the defendants face up to 20 years’ imprisonment for mail fraud, wire fraud and conspiracy.  Each charge also carries a statutory maximum fine of $250,000 or twice the gross gain or gross loss from the offense.

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

The case is being prosecuted by Assistant United States Attorney Charles P. Kelly of the Office’s Long Island Criminal Division, with Trial Attorneys Daniel Zytnick and Timothy Finley of the Justice Department’s Consumer Protection Branch.

For more information about the Consumer Protection Branch, visit its website at http://www.justice.gov/civil/consumer-protection-branch.  For more information about the U.S. Attorney’s Office for the Eastern District of New York, visit its website at https://www.justice.gov/usao-edny.

The Defendants:

LORRAINE CHALAVOUTIS

Age:  61

Greenlawn, New York

TULLY LOVISA

Age:  55

Huntington Station, New York

SHAUN SULLIVAN

Age:  37

Merrick, New York

CENTRAL ISLIP, NY – Earlier today, at the federal courthouse in Central Islip, New York, Scott Gammon pleaded guilty to conspiracy to commit mail fraud. The over $4 million fraud involved a mass mailing scheme that tricked consumers into paying fees for falsely promised cash prizes. The plea took place before Magistrate Judge Steven I. Locke.

Breon Peace, United States Attorney for the Eastern District of New York, Brian M. Boynton, Principal Deputy Attorney General of the Justice Department’s Civil Division, and Daniel B. Brubaker, Inspector-in-Charge, United States Postal Inspection Service (USPIS) announced the guilty plea.

“The defendant admitted he deceived elderly and vulnerable victims into believing they had won cash prizes by inducing them to pay bogus ‘fees’ to him and his co-conspirators,” stated United States Attorney Peace. “This Office will continue to protect our seniors and other consumers from harm caused by predatory solicitation schemes.”

“Fraudulent prize notices often trick elderly victims into sending away their money based on false promises of large cash prizes,” said Principal Deputy Assistant Attorney General Boynton. “This guilty plea is the latest example of the Department of Justice continuing to pursue and prosecute the perpetrators of these schemes.”

“Postal Inspectors remind consumers, if you have to pay to win a prize, you’ll lose your money. These are all scams designed to lure consumers into sending their hard-earned money—not for a prize, but to fatten the pockets of a fraudster. Mr. Gammon may have thought he got away with this scheme, but he was sadly mistaken when he was confronted by the full investigative power of law enforcement,” said USPIS Inspector-in-Charge Brubaker.

According to court documents, from August 2014 through August 2019, Gammon engaged in a direct-mail scheme that sent fraudulent prize notification mailings to thousands of consumers. The mailings induced consumers to pay a fee, purportedly in return for a large cash prize. None of the consumers who paid the fee ever received such a prize. Gammon is the third defendant to plead guilty to conspiracy to commit mail fraud in connection with this scheme.

Two other defendants previously pleaded guilty to conspiracy to commit mail fraud for participating in the scheme. Christopher King pleaded guilty on September 15, 2021 and Natasha Khan, pleaded guilty on December 15, 2021.

Each of the three defendants faces a maximum penalty of 20 years in prison.

Assistant United States Attorneys Charles P. Kelly and Madeline O’Connor of the Eastern District of New York, Long Island Criminal Division are prosecuting the case with Trial Attorneys Daniel Zytnick and Timothy Finley of the Civil Division’s Consumer Protection Branch.

The Defendant:

SCOTT GAMMON

Age: 47

Broad Channel, New York

E.D.N.Y. Docket No. 22-085 (DRH)

Defendants Previously Pleaded Guilty:

CHRISTOPHER KING

Age: 36

Oceanside, New York

E.D.N.Y. Docket No. 21-CR-418 (DRH)

NATASHA KHAN

Age: 38

Elmont, New York

E.D.N.Y. Docket No. 21-CR-609 (DRH)

CENTRAL ISLIP, NY – Earlier today, in federal court in Central Islip, Scott Gammon was sentenced by United States District Judge Joan M. Azrack to 36 months in prison for participating in a mass mailing scheme that tricked consumers into paying fees for falsely promised cash prizes. As part of the sentence, Gammon was also ordered to forfeit $139,611.97.

Breon Peace, United States Attorney for the Eastern District of New York, Brian M. Boynton, Principal Deputy Assistant Attorney General of the Justice Department’s Civil Division, and Daniel B. Brubaker, Inspector-in-Charge, United States Postal Inspection Service (USPIS), announced the sentence.

“Financially exploiting the elderly and other victims through fraudulent prize schemes is a form of abuse and deserving of punishment as today’s sentence demonstrates,” stated United States Attorney Peace.  “A term in prison should deter others from preying on the vulnerable.”

“Participants in fraud schemes face the prospect of federal prison,” stated Principal Deputy Assistant Attorney General Boynton. “The Department of Justice is committed to protecting elderly and vulnerable Americans and to prosecuting individuals who engage in such schemes.”

“Today’s sentencing brings to a close the investigation of Mr. Gammon, who devised a fake prize promotion scheme designed to defraud older Americans and steal from those who believed they had won a prize.  Unfortunately, for those who participated, they realized too late that they had been swindled. When a prize did not materialize, and their money was not returned, they became victims. Postal Inspectors remind consumers to be ever vigilant and play an active role in protecting their money.  If you’re asked to pay for a prize you didn’t enter to win, it’s a scam,” stated USPIS Inspector-in-Charge Brubaker.

From August 2014 through August 2019, Gammon engaged in a direct-mail scheme that sent fraudulent prize notification mailings to thousands of consumers. The mailings induced consumers to pay a fee, purportedly in return for a large cash prize. None of the consumers who sent a fee ever received such a prize.  Co-defendants Christopher King and Natasha Khan also pleaded guilty to conspiracy to commit mail fraud and are awaiting sentencing.

The U.S. Postal Inspection Service investigated the case.

Assistant United States Attorney Charles P. Kelly of the Eastern District of New York’s Long Island Criminal Division is prosecuting the case with Trial Attorneys Daniel Zytnick and Timothy Finley of the Civil Division’s Consumer Protection Branch.  Assistant United States Attorney Tanisha Payne of the Eastern District’s Asset Recovery Section is handing forfeiture matters.

The department seeks to prevent the widespread losses seniors and other consumers suffer from fraud schemes.  The best method to prevent fraud is to share information about the various types of elder fraud schemes with relatives, friends, neighbors and other seniors who can use that information to protect themselves.

If you or someone you know is age 60 or older and has been a victim of financial fraud, help is available at the National Elder Fraud Hotline: 1-833-FRAUD-11 (1-833-372-8311). This Department of Justice hotline, managed by the Office for Victims of Crime, is staffed by experienced professionals who provide personalized support to callers by assessing the needs of the victim and identifying relevant next steps. Case managers will identify appropriate reporting agencies, provide information to callers to assist them in reporting, connect callers directly with appropriate agencies, and provide resources and referrals, on a case-by-case basis. Reporting is the first step. Reporting can help authorities identify those who commit fraud, and reporting certain financial losses due to fraud as soon as possible can increase the likelihood of recovering losses. The hotline is staffed seven days a week from 6:00 a.m. to 11:00 p.m. ET. English, Spanish and other languages are available.

Additional information about the Consumer Protection Branch and its enforcement efforts may be found at www.justice.gov/civil/consumer-protection-branch. Information about the Department of Justice’s Elder Fraud Initiative is available at www.justice.gov/elderjustice.

The Defendant Sentenced Today:

SCOTT GAMMON

Age: 48

Howard Beach, Queens

The Defendants Awaiting Sentencing

CHRISTOPHER KING

Age: 37

Oceanside, New York

NATASHA KHAN

Age: 39

Elmont, New York

E.D.N.Y. Docket No.: 22-CR-85 (JMA)