Acting Manhattan U.S. Attorney Announces $5.9 Million Settlement Of Civil Money Laundering And Forfeiture Claims Against Real Estate Corporations Alleged To Have Laundered Proceeds Of Russian Tax Fraud

Friday, May 12, 2017
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced today that the United States has settled a money laundering and civil forfeiture action against assets of 11 corporations, including some that own luxury residential and high-end commercial real estate in Manhattan. The Government’s complaint alleged that the defendant corporations laundered some proceeds of a $230 million Russian tax refund fraud scheme involving corrupt Russian officials that was uncovered by Sergei Magnitsky, a Russian lawyer who died in pretrial detention in Moscow under suspicious circumstances and was posthumously prosecuted by Russia.

In the stipulation of settlement filed with U.S. District Judge William H. Pauley III today, which is still subject to approval by the Court, one of the defendant corporations, Prevezon Holdings Ltd., agrees to pay $5,896,333.65 to resolve the Government’s claims against all defendants. This payment represents triple the value of the proceeds that the Government alleged could be traced directly from the Russian treasury fraud to the defendants ($1,965,444.55), and more than ten times the amount of proceeds the Government alleged could be traced directly to property in New York (approximately $582,000).

Acting Manhattan U.S. Attorney Joon H. Kim said: “We will not allow the U.S. financial system to be used to launder the proceeds of crimes committed anywhere – here in the U.S., in Russia, or anywhere else. Under the terms of this settlement, the defendants have agreed to pay not just what we alleged flowed to them from the Russian treasury fraud, but three times that amount, and roughly 10 times the money we alleged could be traced directly into U.S. accounts and real estate.”

The Government’s lawsuit alleged as follows:

In 2007, a Russian criminal organization engaged in an elaborate tax refund fraud scheme resulting in a fraudulently obtained tax refund of approximately $230 million from the Russian treasury. As part of the fraud scheme, members of the organization stole the corporate identities of portfolio companies of the Hermitage Fund, a foreign investment fund operating in Russia. The organization’s members then used these stolen identities to make fraudulent claims for tax refunds.

In order to procure the refunds, the criminal organization fraudulently re-registered the Hermitage companies in the names of members of the organization, and then orchestrated sham lawsuits against these companies. These sham lawsuits involved members of the organization as both the plaintiffs (representing sham commercial counterparties suing the Hermitage companies) and the defendants (purporting to represent the Hermitage companies). In each case, the members of the organization purporting to represent the Hermitage companies confessed full liability in court, leading the courts to award large money judgments to the plaintiffs.

The purpose of the sham lawsuits was to fraudulently generate money judgments against the Hermitage companies. Members of the organization purporting to represent the Hermitage companies then used those money judgments to seek tax refunds. The basis of these refund requests was that the money judgments constituted losses eliminating the profits the Hermitage companies had earned, and thus the Hermitage companies were entitled to a refund of the taxes that had been paid on these profits. The requested refunds totaled 5.4 billion rubles, or approximately $230 million.

Members of the organization who were officials at two Russian tax offices corruptly approved the requests within one business day, and approximately $230 million was disbursed to members of the organization, purportedly on behalf of the Hermitage companies, two days later.

After perpetrating this fraud, members of the organization undertook illegal actions in order to conceal this fraud and retaliate against individuals who attempted to expose it. After learning of the lawsuits against its portfolio companies, Hermitage retained attorneys, including Russian lawyer Sergei Magnitsky, to investigate. Magnitsky and other attorneys for Hermitage uncovered the refund fraud scheme, and the complicity of Russian governmental officials in it, and were subject to retaliatory criminal proceedings against them. Magnitsky was arrested and died approximately a year later in pretrial detention. An independent Russian human rights council concluded that Magnitsky’s arrest and detention were illegal, that Magnitsky was denied necessary medical care in custody, that he was beaten by eight guards with rubber batons on the last day of his life, and that the ambulance crew that was called to treat him as he was dying was deliberately kept outside of his cell for more than an hour until he was dead.

Members of the criminal organization, and associates of those members, have also engaged in a broad pattern of money laundering in order to conceal the proceeds of the fraud scheme. In a complex series of transfers through shell corporations, the $230 million from the Russian treasury was laundered into numerous accounts in Russia and other countries. A portion of the funds stolen from the Russian treasury passed through several shell companies into Prevezon Holdings, Ltd., a Cyprus-based real estate corporation that is a defendant in the forfeiture action. Prevezon Holdings laundered these fraud proceeds into its real estate holdings, including investment in multiple units of high-end commercial space and luxury apartments in Manhattan, and created multiple other corporations, also subject to the forfeiture action, to hold these properties.

* * *

A chart listing the companies named as defendants in the lawsuit is attached.

Mr. Kim praised the outstanding investigative work of ICE HSI New York’s El Dorado Task Force.

This case is being handled by the Office’s Money Laundering and Asset Forfeiture Unit. Assistant United States Attorneys Paul M. Monteleoni, Cristine Irvin Phillips, and Tara M. LaMorte are in charge of the case.

Component(s):
USAO – New York, Southern
Press Release Number:
17-134

Man Sentenced To Life In Prison Without Parole For Stabbing-Murder of 17-Year Old Girl In Yorba Linda

SANTA ANA, Calif. – A man was sentenced today to life in state prison without the possibility of parole for stabbing and murdering a 17-year-old girl in Yorba Linda.

Charges

Found guilty by a jury on June 1, 2017, of one felony count of:  Murder

Special Circumstance Found True: Lying in wait

Sentence

Life in state prison without the possibility of parole

Circumstances of the Case

  • In the early morning hours of Feb. 4, 2014, Shin asked 17-year-old Aubreyanna Sade Parks to meet him in an upscale residential neighborhood in Yorba Linda.
  • When Parks arrived to the home where the defendant was waiting, Shin stabbed the victim 39 times in the back, face, and neck and severed her finger.
  • Shin left the victim’s body on a greenbelt outside of a nearby home.
  • Orange County Sheriff’s Department (OCSD) located the defendant at Corona Regional Medical Center, where he was seeking treatment for a deep cut to his left palm.

At his sentencing today, the victim’s mother and several members of a local human trafficking advocacy group were present in court. Mantonette M., delivered an emotional impact statement to the court pursuant to Marsy’s Law. She stated in part, “I miss her laughter, I miss her telling me jokes… but today is not about me, it’s about bringing justice for Aubreyanna… my beautiful jewel.”

The Orange County Sheriff’s Department investigated this case.

Prosecutor: Senior Deputy District Attorney Troy Pino, Homicide Unit.  Case #14NF0220

Valencia Man Sentenced for Burbank Domestic Violence Stabbing

A Valencia man was sentenced today to 12 years and six months in state prison for stabbing his ex-girlfriend’s mother and her roommate at a Burbank home, the Los Angeles County District Attorney’s Office announced.

Deputy District Attorney Carolina Lugo said Cameron Reed Hansen, 31, was found guilty on March 8 of two counts of attempted voluntary manslaughter and one count of injuring a girlfriend.

The jury also found that Hansen was armed with a knife and caused great bodily injury.

On March 3, 2015, the defendant went to his ex-girlfriend’s home a day after they broke up and began attacking and biting her, according to court testimony. When her mother and her roommate came to the victim’s aid, Hansen stabbed both women multiple times, the prosecutor said.

The three victims survived the attack.

Case GA095834 was investigated by the Burbank Police Department.

Massage Therapist Pleads to Killing Patient in Illegal Cosmetic Procedure

A massage therapist accused of performing an illegal buttocks enhancement on a woman who later died pleaded no contest today to one count of involuntary manslaughter, the Los Angeles County District Attorney’s Office announced.

Deputy District Attorney Lee Cernok said Sandra Yaneth Pérez-González, 48, was immediately sentenced to three years in jail.

Hamilet Suarez, 36, died after undergoing the cosmetic work at a Long Beach beauty salon on Feb. 12, 2014, the prosecutor said. Pérez-González, who is not a licensed doctor, performed the procedure.

The defendant advertised various cosmetic procedures such as buttocks and lip enhancements and “vampire facelifts.” She had previously performed a similar procedure on the victim’s family member, the prosecutor added.

Case NA105844 was investigated by the Long Beach Police Department.

U.S. Border Patrol Agent Pleads Guilty to Drug Smuggling

SAN DIEGO – U.S. Border Patrol Agent Noe Lopez pleaded guilty to drug trafficking charges in federal court June 22, 2017, admitting that he attempted to smuggle methamphetamine and cocaine while on duty in exchange for cash.

In a hearing before U.S. Magistrate Judge Andrew G. Schopler, Lopez pleaded guilty to two counts of attempted distribution of methamphetamine and cocaine, in violation of 21 U.S.C. §§ 841 (a) (1) and 846. Sentencing is scheduled for September 8, 2017 at 9 a.m. before U.S. District Judge Dana M. Sabraw.

“It’s an audacious thing for an on-duty Border Patrol agent to transport what he believes to be methamphetamine and cocaine in his official vehicle, on behalf of drug traffickers,” said Acting U.S. Attorney Alana W. Robinson. “While there are a relatively small number of them, corrupt Border Patrol agents are a national security threat, and for that reason they are a very high prosecutorial priority.”

“The U.S. Border Patrol stresses honor and integrity in every aspect of our mission; Honor First is our Motto,” said Chief Patrol Agent Richard A. Barlow of San Diego Sector Border Patrol. “Mr. Lopez’ action is a stain on the agents and employees of the Border Patrol who perform their duties with honor and distinction, working diligently day-to-day to keep our country safe. We do not tolerate corruption within our ranks, and are grateful to the hard work of the Border Corruption Task Force and other agencies that rooted out Mr. Lopez’ atrocious behavior.”

FBI Special Agent in Charge Eric S. Birnbaum said, “The vast majority of public servants who work at the local, state, and federal levels of government are honest and dedicated folks who strive every day to do the right thing for their constituents, their communities, and their country. In the U.S. and abroad, the FBI is doing everything we can to help ensure that the good name of the vast majority of public servants is not besmirched by a corrupt few. This type of corruption at our San Diego borders strikes at the heart of government and erodes public confidence, therefore, the investigation of public corruption is one of FBI’s top criminal priorities.”

According to the plea agreement, in November 2016, Lopez and a confidential source whom Lopez believed to be a drug trafficker agreed to a plan whereby Lopez would retrieve backpacks containing what Lopez believed to be controlled substances from the north side of the United States/Mexico border fence while on duty with the Border Patrol.
Lopez admitted that he agreed to transport the backpacks in his Border Patrol vehicle and deliver them to the source in exchange for thousands of dollars.

On November 30, 2016, Lopez purchased three backpacks that would be used to transport the controlled substances and gave the backpacks to the source. They agreed that on December 6, 2016, Lopez would retrieve a backpack containing six pounds of methamphetamine while on duty with the Border Patrol and deliver the backpack to the source. Lopez told the source where to place the backpack containing methamphetamine on the north side of the United States/Mexico border.

According to Lopez’s admissions in his plea agreement, on December 6, 2016, undercover DEA agents placed a backpack (one of the three backpacks purchased by Lopez) containing six pounds of a substance resembling methamphetamine near the prearranged location. Lopez drove to the location in his Border Patrol vehicle and retrieved the backpack. He returned to the Border Patrol Station and placed the backpack in his personal vehicle. At the conclusion of his Border Patrol work shift, Lopez met the source at a parking lot in Chula Vista, where Lopez gave the source the backpack containing what Lopez believed to be six pounds of methamphetamine.

On December 7, 2016, the source paid Lopez $3,000 for retrieving and delivering the purported methamphetamine.

This scenario was repeated on December 8, 2016, except the backpack purportedly contained seven kilograms of cocaine. On December 9, 2016, the source paid Lopez $7,000 for retrieving and delivering the purported cocaine.

DEFENDANT                                                 Case Number 17cr0086

Noe Lopez Age: 37 Chula Vista, CA

SUMMARY OF CHARGES

Attempted Distribution of Methamphetamine and Cocaine, in violation of 21 U.S.C. 841 (a) (1) and 846. Maximum penalty: Life in prison and $10 million fine.

AGENCIES

Federal Bureau of Investigation
U.S. Drug Enforcement Agency
U.S. Border Patrol

Component(s):
USAO – California, Southern

Los Angeles Police Officer Sentenced For 2014 Assault

A Los Angeles police officer was sentenced for using unlawful force during an arrest three years ago, the Los Angeles County District Attorney’s Office announced.

Richard Garcia, 36, pleaded no contest to one misdemeanor count of assault by an officer. He was immediately sentenced to two years of formal probation.

Deputy District Attorney Oscar Plascencia of the Justice System Integrity Division prosecuted the case.

On Oct. 16, 2014, LAPD officers approached the victim in South Los Angeles during a robbery investigation. The victim ran away but later surrendered after a foot pursuit.

During the arrest, Garcia struck him while he lay prone on the ground.

Case BA435794 was investigated by the Los Angeles Police Department.

Former Orange County Income Tax Return Preparer Sentenced to 21 Months in Federal Prison for Filing Fraudulent Returns

LOS ANGELES – An Orange County man who prepared tax returns for clients after falsely claiming to be a certified public accountant and a former IRS agent was sentenced this morning to serve 21 months in federal prison for preparing and filing fraudulent federal income tax returns.

Michael Raymond Martinez, 48, of Fullerton, was sentenced by United States District Judge Beverly Reid O’Connell. In addition to the prison term, Judge O’Connell ordered Martinez to pay $205,465 in restitution to the Internal Revenue Service.

Martinez – who operated his tax preparation business under the names Your Home Tax Service, Great Tax Services and Great Tax Solutions – pleaded guilty in February to one count of aiding and abetting in the preparation of a false income tax return. In marketing materials provided to clients and potential clients, Martinez claimed he could get them “The Largest Refund…Guaranteed!!!”

Martinez, who often met with clients at their homes or at public locations, admitted that he prepared and filed with the IRS at least 245 false federal income tax returns that resulted in tax losses to the United States of approximately $1,155,006.

According to a plea agreement filed in this case, from the beginning of 2009 through April 2015, Martinez had brief meetings with clients to obtain their documents and to receive his payment. Martinez typically prepared and electronically filed the tax returns, but he would not review the returns with his clients.

According to documents filed with the court, Martinez prepared and filed tax returns that claimed false deductions and expenses that his clients were not entitled to receive. The tax returns included fraudulent moving expenses, education expenses and itemized deductions. The fraudulent deductions and expenses lowered the taxpayers’ income tax liability.

In addition to the 245 fraudulent tax returns filed for clients, Martinez failed to report his own taxable income from his tax preparation business for the years 2011 and 2012, which caused a loss to the government of approximately $85,000.

This case is the product of an investigation by IRS Criminal Investigation.

The case was prosecuted by Assistant United States Attorneys Paul Rochmes and Benjamin Tompkins of the Tax Division.

Component(s):
USAO – California, Central

Press Release Number:
17-131

Man Sentenced To Eight Years In Prison For DUI Crash That Killed Woman’s Dog And Caused Her Arm To Be Amputated

SANTA ANA, Calif. – A man was sentenced today to eight years in state prison for crashing into a woman’s vehicle while driving under the influence of alcohol (DUI), killing her dog and causing her arm to be amputated.

Circumstances of the Case

  • On Oct. 25, 2015, at approximately 4:30 a.m., Swartz was speeding on the Southbound 405 freeway in Westminster with a blood alcohol content (BAC) of .13%. He was driving on a suspended license and had a prior DUI conviction.
  • The defendant’s vehicle began to swerve across multiple lanes due to unsafe speed and intoxication.
  • Jane Doe was also driving on the Southbound 405 to the emergency vet with her dog, Sadie, at the time of the crime.
  • Swartz collided with Jane Doe’s vehicle, which rolled multiple times, pinned the victim upside down by her seat belt, and ejected her dog, who did not survive the crash.
  • Emergency medical responders and the California Highway Patrol (CHP) responded to the scene and Swartz was arrested for driving under the influence of alcohol (DUI).
  • Jane Doe was transported to a trauma center and received expansive medical treatment for injuries including a crushed arm, collapsed lung, severed scalp, broken ribs, fractured sternum, and brain injuries that led to a medically-induced coma.
  • The victim’s left arm was amputated as a result of her injuries.

At the sentencing today, Jane Doe gave a powerful victim impact statement pursuant to Marsy’s Law. She stated in part, “Besides my many surgeries while in the hospital, my hospitalization wasn’t over. I returned 4 more times for other procedures the following year.” Among many challenges, Jane Doe described how the accident changed her, stating in part, “As you can imagine, since getting injured, there were many things about driving that now made me nervous. The confidence I once had driving was ripped away from me.”

She continued, “My goal is to keep challenging myself every day. I know I must ask for help sometimes, but I will strive to be as independent as I can and make the most of this life that I have. Sometimes I watch videos of people with severe handicaps achieving amazing success in their lives. I know I will too!”

Jane Doe concluded her statement by thanking everyone who has helped her recovery, and stated, “There is no set amount of years that can give me back all that I lost financially, emotionally and or physically for the rest of my life. He needs to take responsibility. I am still afraid. I’ve got a long way to go.”

Prosecutor: Deputy District Attorney Harris Siddiq. Case # 15WF2361

Former Silicon Valley CEO Indicted for Allegedly Defrauding Employees of Tech Company Start-Up

The founder and chief executive officer of a now-defunct Silicon Valley technology start-up company was charged in an indictment unsealed June 8, 2017 in Orange County, California with allegedly defrauding several of his company’s former employees by luring them to join his company based on false and misleading statements about his educational, professional and financial background, and by allegedly enticing them to continue working for his company by providing them with forged documents purportedly reflecting payments for unpaid salaries.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, U.S. Attorney Brian J. Stretch of the Northern District of California and Special Agent in Charge John F. Bennett of the FBI’s San Francisco Field Office made the announcement.

Isaac Choi, aka Yi Suk Choi, aka Yisuk Choi, aka Yi Suk Chae, aka Isaac Chae, (Choi), 36, most recently of Orange County and previously of Santa Clara, California, was charged with five counts of wire fraud.

The indictment alleges that Choi, while working at his company, known publicly as WrkRiot, falsely claimed that he received a degree from a prestigious New York business school, worked as an analyst at a major financial instution, had access to significant personal wealth, and was investing significant amounts of that money into the company. The indictment further alleges that after certain WrkRiot employees came to learn that WrkRiot’s bank accounts did not contain the capital that Choi claimed to have invested, Choi falsely claimed that a significant portion of the money he pledged to invest was tied up overseas and elsewhere.

The indictment further alleges that in August 2016, Choi sent a series of individualized emails to WrkRiot’s employees stating that salary payments were forthcoming, and attaching documents purporting to confirm wire transfers from a U.S.-based bank to the bank accounts of the recipient WrkRiot employees. In reality, as alleged in the indictment, Choi sent forged wire transfer confirmations in order to induce WrkRiot employees to continue working for the company without being paid.

An indictment is merely an allegation and all defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

The FBI investigated the case. Trial Attorneys Cory E. Jacobs and L. Rush Atkinson of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Jeffrey B. Schenk of the Northern District of California are prosecuting the case.

Component(s):
Criminal Division
USAO – California, Northern

Press Release Number:
17-623