Laurie Schneider Indicted by a Federal Grand Jury for Allegedly Operating Ponzi Schemes

February 2, 2012

The Federal Bureau of Investigation (FBI) on February 1, 2012 released the following:

“Oceanside Woman Indicted for Operating Ponzi Schemes

Defendant Allegedly Defrauded Investors of More Than $4 Million

Laurie Schneider, of Oceanside, New York, has been indicted for operating Ponzi schemes that defrauded investors of more than $4 million.[1] The defendant was arraigned earlier today before United States Magistrate Judge A. Kathleen Tomlinson at the United States Courthouse, 100 Federal Plaza, Central Islip, New York.

The charges were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and Janice K. Fedarcyk, Assistant Director in Charge of the Federal Bureau of Investigation, New York Field Office.

As alleged in the indictment, Schneider began accepting money in September 2006 from individuals seeking a return on their investment. In one scheme, operating a shell company incorporated as Janitorial Close-Out City Corp., Schneider falsely informed potential investors that Janitorial Close-Out invested in industrial equipment and machinery manufactured by companies in China. To induce investments, Schneider, among other things, (1) personally guaranteed specified positive rates of return as high as 60 percent, (2) represented that she had a business contact who had strong relationships with companies in China, and (3) represented that she would be able to buy the industrial equipment and machinery at wholesale prices which Janitorial Close-Out would resell in the United States at a 15 to 60 percent profit over a nine to 18-month period. In fact, the indictment charges that Schneider actually was running a Ponzi scheme, paying returns to Janitorial Close-Out investors not from any profits earned on the purchase and resale of industrial equipment and machinery, but rather from existing investors’ deposits or money paid by new investors. Schneider never produced or earned the rates of return that she promised. Rather, the positive rates of return were simply pre-determined rates made up by Schneider based upon fictitious profits.

The government estimates that Schneider defrauded over 25 investors in Janitorial Close-Out of more than $4 million, and more than $5 million through related schemes.

“In these difficult economic times, it’s all the more troubling that, as alleged in the indictment, someone would take advantage of the trust of investors for personal financial gain,” stated United States Attorney Lynch. “As alleged, this defendant falsely represented herself as having international business connections that would benefit her investors, when in reality she was engaged in purely homegrown fraud and deception. This indictment serves as a warning that we will vigorously investigate and prosecute those who, by deceit and false promises, would steal from those who believed they were investing in a legitimate enterprise.” Ms. Lynch added that the government’s investigation is continuing.

FBI Assistant Director-in-Charge Fedarcyk stated, “Ponzi schemes have been around for so long because, unfortunately, they are such an effective means of swindling people out of their hard-earned money. Investors need to be wary of ‘investment opportunities’ that ‘guarantee’ inordinately high rates of return, and should perform due diligence. But it is the perpetrators of these fraudulent schemes, not their victims, who are to blame. The FBI remains committed to protecting the investing public from them.”

If convicted, Schneider faces a maximum sentence of 20 years’ imprisonment on each of three counts of wire fraud count.

The government’s case is being prosecuted by Assistant United States Attorneys Richard T. Lunger and Lara Treinis Gatz.

The Defendant:

LAURIE SCHNEIDER Age: 37

[1] The charges in the indictment are merely allegations, and the defendant is presumed innocent unless and until proven guilty.”

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Douglas McNabb – McNabb Associates, P.C.’s
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Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition and OFAC SDN Sanctions Removal.

The author of this blog is Douglas McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Viktor Bout in Federal Court this Week; Requests Continuance and Improved Prison Conditions

March 1, 2011

Alleged Russian arms dealer, Viktor Bout, is back in federal court this week requesting additional time to prepare his defense strategy since acquiring new U.S. counsel. On Thursday, March 3, the judge will rule on a motion for continuance regarding the already approved court dates. Bout’s trial is set to begin September 12, 2011, in the United States District Court, Southern District of New York.

Just a few weeks ago, Bout expressed disapproval regarding his court appointed federal defense attorney. Bout has since retained new counsel, Albert Dayan, that must review the case and develop a defense strategy before trial. The amount of time Bout’s new counsel will ask for depends on the complexity of the issues involved. The federal judge has discretion whether to grant the motion and set a new trial date, or deny the motion and keep the present schedule.

Bout has also requested the court for improved prison conditions. Bout is being held in a high-security bloc of a New York prison while awaiting trial. Bout has pleaded not guilty to all charges brought against him. If convicted, Bout faces a prison term from 25 years to life sentence.

Dayan says strict prison conditions, under which Bout is allowed to communicate only through a glass panel, make it impossible to discuss the case properly and violate Bout’s right for defense.

Bout’s wife earlier complained that her husband, a vegetarian, did not get proper food and his menu did not comply with the prescribed medicine that he has been taking for the last two months.

The former Soviet military officer was arrested in Thailand in March 2008 during a sting operation led by U.S. agents. He was extradited to the United States in November last year after spending more than two and half years behind bars.

Douglas McNabb and other members of the firm practice and write extensively on matters involving Federal Criminal Defense, INTERPOL Litigation, International Extradition and OFAC SDN Litigation.

The author of this blog is Douglas McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.

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Two Hedge Fund Managers Charged with Insider Trading; Two Others Plead Guilty

February 8, 2011

Four hedge fund managers have been charged by federal prosecutors on insider trading charges.

Two of the men were arrested Tuesday morning by the FBI. Two others have pleaded guilty, officials said. Three of the men work as hedge fund portfolio managers and one is a hedge fund analyst.

Samir Barai, Donald Longueuil, Jason Pflaum and Noah Freeman are the names of those allegedly involved in the scheme to defraud.

Read the criminal complaint against Barai and Longueuil here. Based on the criminal complaint, arrest warrants were issued for Barai and Longueuil. Both are facing charges of conspiracy, securities fraud and obstruction of justice.

Pflaum and Freeman have entered plea agreements, authorized by U.S. Attorney Preet Bharara.

Pflaum’s plea, available here, was entered December 17, 2010. Freeman’s plea, available here, was entered yesterday.

Both plea agreements request the substantial assistance of Pflaum and Freeman in this case. If they comply, a reduced sentence for their cooperation is possible. This is a huge incentive for Pflaum and Freeman, since both are looking at 25 years imprisonment for conspiracy and securities fraud.

The U.S. government has brought insider-trading charges against more than 30 people since October 2009 in an effort to crack down on the alleged criminality within the financial market.

Douglas McNabb and other members of the firm practice and write extensively on matters involving Federal Criminal Defense, INTERPOL Litigation, International Extradition and OFAC SDN Litigation.

The author of this blog is Douglas McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.

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NY State Senator and Son Indicted for Alleged Fraud Scheme

December 15, 2010

Yesterday a federal grand jury in Brooklyn returned an indictment charging Pedro Espada, Jr., a New York State Senator for the 33rd Senatorial District in the Bronx, New York, and his son, Pedro Gautier Espada, with five counts of embezzlement from a nonprofit health care network receiving federal funding, and one count of conspiracy. The individuals’ initial appearances are scheduled for today at 2:00 p.m. before United States Chief Magistrate Judge Steven M. Gold at the United States Courthouse in Brooklyn, New York.

As detailed in the indictment, from 2005 through 2009, the individuals allegedly abused their positions at Soundview Healthcare Center (Soundview), a network of health care clinics located in the Bronx, through a number of alleged schemes designed to divert Soundview funds to their personal use and for the benefit of favored family members and friends. The total amount allegedly embezzled exceeded $500,000.

Pedro Espada founded Soundview in 1978 as a charitable not-for-profit organization under Section 501(c)(3) of the Internal Revenue Code. Soundview receives more than $1 million per year in federal grant money from the United States Department of Health and Human Services, as well as millions of dollars more in Medicare and Medicaid reimbursements.

If convicted, the individuals face a maximum sentence of 10 years’ imprisonment on each of the embezzlement counts and five years’ imprisonment for conspiracy, as well as a fine of $250,000 on each count of conviction. Because Pedro Espada is a state senator, and therefore considered a public official, his sentence may be more severe than his son’s.

It is also important to keep in mind that an indictment merely contains allegations. When the government presents its case to the grand jury, legally they are not required to show any evidence or call any witnesses. Further, there is no opportunity for the accused individual(s) to present a defense. Unfortunately, the grand jury hears only one side of the story before granting an indictment.

Douglas McNabb and other members of the firm practice and write extensively on matters involving Federal Criminal Defense, Interpol Litigation, International Extradition and OFAC Litigation.

The author of this blog is Douglas McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.

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Largest Alleged Medicare Fraud Scheme in DOJ History

October 14, 2010

Seventy-three individuals, including a number of alleged members and associates of an Armenian-American organized crime enterprise, were charged in indictments unsealed today in five judicial districts with various health care fraud-related crimes involving more than $163 million in fraudulent billing, announced Acting Deputy Attorney General Gary G. Grindler, FBI Assistant Director of the Criminal Investigative Division Kevin Perkins, and Health and Human Services Inspector General Daniel R. Levinson.

In this national, multi-agency investigation, more than 50 were arrested yesterday by FBI agents in the largest alleged Medicare fraud scheme ever perpetrated by a single criminal enterprise and charged by the Department of Justice.

The individuals are charged with allegedly engaging in numerous fraud activities, including highly-organized, multi-million dollar schemes to defraud Medicare and insurance companies by submitting fraudulent bills for medically unnecessary treatments or treatments that were never performed. According to the indictments, the individuals allegedly stole the identities of doctors and thousands of Medicare beneficiaries and operated at least 118 different phony clinics in 25 states for the purposes of submitting Medicare reimbursements. The government believes the enterprise behind the alleged fraud is the international group known as the Mirzoyan-Terdjanian.

Forty-four individuals were charged in two indictments unsealed today in the Southern District of New York with racketeering conspiracy and conspiracy to commit the following acts: health care fraud, bank fraud, money laundering, fraud in connection with identity theft, credit card fraud, and immigration fraud. In addition, seven individuals were charged in the District of New Mexico with health care fraud, mail fraud, wire fraud, money laundering conspiracy, money laundering, forfeiture, and aggravated identity theft. Six individuals were charged in the Southern District of Georgia with health care fraud, conspiracy to commit health care fraud, money laundering conspiracy, and aggravated identity theft. Six individuals were charged in the Northern District of Ohio with health care fraud, mail fraud, conspiracy to commit mail fraud, wire fraud, conspiracy to commit money laundering, and aggravated identity theft. Lastly, ten individuals were charged in two indictments in the Central District of California with conspiracy to commit bank fraud, bank fraud, money laundering, conspiracy to launder monetary instruments, criminal forfeiture, aggravated identity theft, aiding and abetting, and causing an act to be done.

According to the charges filed in U.S. District Court in the Southern District of New York, the Mirzoyan-Terdjanian Organization is named for its alleged principal leaders, Davit Mirzoyan and Robert Terdjanian. Allegedly, the leadership of the organization is based in Los Angeles and New York, and its operations extend throughout the United States and internationally. Among the individuals charged with racketeering is Armen Kazarian, who is alleged to be a “Vor,” a term translated as “Thief-in-Law” and refers to a member of a select group of high-level criminals from Russia and the countries that has been part of the former Soviet Union, including Armenia. This is the first time an alleged Vor has ever been charged for a racketeering offense, and the first time since 1996 that a Vor has been arrested on any federal charge.

The racketeering charges carry a maximum penalty of life in prison and a $250,000 fine. The health care fraud and conspiracy to commit health care fraud charges each carry a maximum penalty of 10 years in prison and a $250,000 fine. The conspiracy to commit bank fraud charges each carry a maximum penalty of 30 years in prison and a fine of $1 million. The conspiracy to commit money laundering charges each carry a maximum penalty of 25 years in prison and a $500,000 fine. The conspiracy to commit money laundering charges each carry maximum penalties of 20 years in prison and a $500,000 fine. The conspiracy to commit fraud in connection with identity theft charges carry a maximum penalty of five years in prison and a $250,000 fine. The aggravated identity theft charges each carry a required two-year consecutive prison sentence to any other sentence imposed, the conspiracy to commit credit card fraud charges carry a maximum penalty of 10 years in prison and a $250,000 fine. The conspiracy to commit immigration fraud charges carry a maximum penalty of five years in prison and a $250,000 fine.

The charges announced today are merely allegations, and individuals are presumed innocent unless proven guilty in a court of law.

The individuals charged in each district will be prosecuted by Assistant U.S. Attorneys from each of the respective districts in which the cases were charged. The cases were investigated by special agents from the FBI’s Los Angeles and New York field offices.

Douglas McNabb and other members of the firm practice and write extensively on matters involving Federal Criminal Defense, Interpol Litigation, International Extradition and OFAC Litigation.

The author of this blog is Douglas McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.

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37 Individuals Charged for Alleged Participation in Global Bank Fraud Schemes

September 30, 2010

Charges have been brought against 37 individuals, in 21 separate cases, for their alleged roles in global bank fraud schemes that allegedly used hundreds of false-name bank accounts to acquire over $3 million from dozens of U.S. accounts that were compromised by malware attacks.

According to complaints unsealed today in Manhattan federal court, the cyber-attacks began in Eastern Europe, and included the use of a malware known as the “Zeus Trojan,” which was typically sent as an apparently-benign e-mail to computers at small businesses and municipalities in the United States. Once the email was opened, the malware embedded itself in the victims’ computers, and recorded their keystrokes—including their account numbers, passwords, and other vital security codes—as they logged into their bank accounts online. Those allegedly responsible for the malware then used the stolen account information to take over the victims’ bank accounts, and made unauthorized transfers of thousands of dollars at a time to receiving accounts controlled by the co-conspirators.

These receiving accounts were set up by, what the government has coined, a “money mule organization,” responsible for retrieving the proceeds of the malware attacks and transporting or transferring the stolen money overseas. To carry out the scheme, the organization allegedly recruited individuals who had entered the United States on student visas, providing them with fake foreign passports, and instructing them to open false-name accounts at U.S. banks. Once these false-name accounts were successfully opened and received the stolen funds from the accounts compromised by the malware attacks, the alleged participants were instructed to transfer the proceeds to other accounts, most of which were overseas, or to withdraw the proceeds and transport them overseas as smuggled bulk cash.

The individuals charged in Manhattan federal court include alleged managers of and recruiters for the organization, an individual who allegedly obtained the false foreign passports for the participants, and those allegedly involved in the organization.

Federal and local law enforcement officers arrested 10 of the individuals earlier today. Another 10 were previously arrested. Those taken into custody in New York today are expected to be presented in Manhattan federal court later this afternoon. Seventeen defendants are still being sought here and abroad. If the U.S. government finds these alleged participants abroad, they will undoubtedly use their power to extradite these individuals to face charges in New York.

Unfortunately, most of those indicted are under the age of 25 years old. These young adults are facing serious charges, but hopefully each will be able to prove their innocence and avoid federal prison.

Douglas McNabb and other members of the firm practice and write extensively on matters involving Federal Criminal Defense, Interpol Litigation, International Extradition and OFAC Litigation.

The author of this blog is Douglas McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.

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Former Financial Executives Indicted for Alleged Fraud Scheme

July 28, 2010

Three former financial services executives were indicted today for their alleged participation in fraud schemes and conspiracies related to bidding for contracts for the investment of municipal bond proceeds and other municipal finance contracts, the Department of Justice announced.

The 12-count indictment was filed yesterday in U.S. District Court in New York City. The indictment charges Dominick P. Carollo, Steven E. Goldberg, and Peter S. Grimm, all former executives at financial service companies or financial institutions, with participating in alleged wire fraud schemes and separate fraud conspiracies at various time periods from as early as 1999 until 2006.

The charged conspiracies and schemes all relate to the provision of a type of contract, known as an investment agreement, to public entities, such as state, county, and local governments and agencies throughout the United States. Major financial institutions, including banks, investment banks, insurance companies, and financial services companies are among the providers of investment agreements and other related municipal finance contracts. Public entities seek to invest money from a variety of sources, primarily the proceeds of municipal bonds that they issued to raise money for, among other things, public projects. Public entities typically hire a broker to conduct a competitive bidding process among various providers for the award of an investment agreement to invest such money. Competitive bidding for these agreements is the subject of regulations issued by the U.S. Department of the Treasury and is related to the tax-exempt status of the bonds.

The companies that employed Carollo, Goldberg, and Grimm all marketed financial products and services, including services as a provider of investment agreements. It is interesting to wonder, if the indicted individuals were in fact engaged in the alleged scheme, why wasn’t their employer aware and why was their behavior not discovered earlier? It seems that the government may have pieced this indictment together over a time period of several years in order to get the charges to stick and complete their version of the story.

The indictment alleges that Carollo, Goldberg, and Grimm conspired with various brokers to attempt to increase the number and profitability of investment agreements and other municipal finance contracts awarded to the provider companies where they were employed. According to court documents, Beverly Hills, California-based Rubin/Chambers, Dunhill Insurance Services Inc., also known as CDR Financial Products, was one of the alleged co-conspirator brokers. Supposedly, Carollo, Goldberg, and Grimm obtained from CDR and other alleged co-conspirator brokers information about the prices, price levels or conditions in competing providers’ bids, a practice known as a “last look,” which is explicitly prohibited by U.S. Treasury regulations. As a result of the information, allegedly, various providers won investment agreements and other municipal finance contracts at artificially determined price levels. In exchange for this information, Carollo, Goldberg, and Grimm submitted losing bids for certain investment agreements and other contracts when requested, and, on occasion, agreed to pay or arranged for kickbacks to be paid to CDR and other co-conspirator brokers.

The indictment also alleges that Carollo, Goldberg, Grimm, and co-conspirators misrepresented to municipal issuers or bond counsel that the bidding process was in compliance with U.S. Treasury regulations. This allegedly caused the municipal issuers to award investment agreements and other municipal finance contracts to providers that otherwise would not have been awarded the contracts if the issuers had true and accurate information regarding the bidding process. The alleged conduct affected the tax-exempt status of the underlying bonds.

According to court documents, the supposed efforts by Carollo, Goldberg, Grimm, and their co-conspirators to affect the bidding for investment contracts, and the execution of a variety of certifications that covered up their actions, also obstructed the Internal Revenue Service’s (IRS) ability to monitor compliance with U.S. Treasury regulations and impeded the IRS’s ability to determine whether municipal issuers had correctly accounted for any money that was owed to the U.S. Treasury.

Again, if the three individuals were in fact engaging in such a wide ranging and complex scheme, why was it not discovered until now, years after the scheme took place? The employers of the three individuals apparently did not notice any illegal behavior. The government is attempting to piece together their version of the story, but we will not really know what happened until the truth comes out at trial.

The fraud conspiracies with which Carollo, Goldberg, and Grimm are charged each carry a maximum penalty per count of five years in prison and a $250,000 fine. The wire fraud charges each carry a maximum penalty per count of 20 years in prison and a $1 million fine. Goldberg is charged with eight counts of conspiracy and two counts of wire fraud, Grimm is charged with five counts of conspiracy and one count of wire fraud, and Carollo is charged with four counts of conspiracy and one count of wire fraud. The maximum fines for each of these offenses may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

An indictment does not mean that the individuals are guilty, or even that they did anything wrong. In order for a grand jury to indict an individual, the government presents their biased story, without having to prove any evidence, and without the individual knowing they are under investigation. An indictment merely alleges the one sided views of the federal government. All individuals are innocent until proven guilty beyond a reasonable doubt.

Douglas McNabb and other members of the firm practice and write extensively on matters involving Federal Criminal Defense, Interpol Litigation, International Extradition and OFAC Litigation.

The author of this blog is Douglas McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.

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