U.S. Attorney’s Office For The Southern District Of New York Recovers Nearly $4 Billion From Criminal And Civil Cases Since January 2013

U.S. Attorney Also Announces Creation of Money Laundering and Asset Forfeiture Unit

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the Office obtained recoveries of more than $2.7 billion in forfeiture actions since January 2013. The Office also has collected or has entered into agreements to recover $1.06 billion in restitution, criminal fines, and special assessments, and has recovered $149.8 million from civil actions, since January 2013.

Manhattan U.S. Attorney Preet Bharara said: “Our Office’s nearly $4 billion in forfeitures, penalties, and fines since the beginning of 2013 stands for the principle that those who break the law or commit civil offenses, whether institutions or individuals, must not be allowed to profit from their misconduct. This is not only a matter of deterring bad conduct. A significant portion of the money recovered will go toward compensating victims of crime or other misconduct who suffered real financial loss. And collected assets help fund important state and local law enforcement programs. It is fair to say the taxpayers have gotten a great return on their investment – almost 8,000% – as this $4 billion represents nearly 80 times the Office’s annual budget.”

Forfeited funds are generally deposited into the Department of Justice Assets Forfeiture Fund (the “Assets Forfeiture Fund”) and the Department of Treasury Forfeiture Fund. The forfeited funds are used to restore money to crime victims and for a variety of law enforcement purposes. In 2013, the U.S. Attorney’s Office for the Southern District of New York returned more than $66 million to crime victims. Of the $2.7 billion forfeited since January 2013, in excess of $1.8 billion is expected to be restored to victims.

In recognition of the success that the Office’s Asset Forfeiture Unit has had in spearheading such record forfeitures, often by bringing some of the country’s most significant and innovative money-laundering prosecutions, the Office has renamed the unit the Money Laundering and Asset Forfeiture Unit. The change also reflects and coincides with the Office’s ongoing efforts in this area, including, among other things, the addition of a number of Special Assistant U.S. Attorneys from partner agencies to focus on anti-money laundering and asset forfeiture; the creation of a team of intelligence analysts and other professionals tasked with reviewing and analyzing Suspicious Activity Reports filed by financial institutions; and the use of more technologically sophisticated tools and software to analyze large volumes of relevant data.

The $149.8 million collected in civil actions came from a combination of cases in which the Office collected government money lost due to fraud or other misconduct, collected fines imposed on individuals and/or corporations for violations of federal health, safety, civil rights, or environmental laws, or recovered funds owed to the Internal Revenue Service.

Nationally, in Fiscal Year 2013, approximately $5.9 billion was collected by the Justice Department’s litigating divisions and the 94 U.S. Attorneys’ offices in individually and jointly handled civil actions. The Department’s litigating divisions and U.S. Attorneys’ offices also collected approximately $2.2 billion in restitution, criminal fines, and felony assessments in criminal actions in satisfaction of criminal debts owed to the U.S. and to federal crime victims.

Below are summaries of some of the cases in which the Office obtained substantial forfeitures or other recoveries since January 2013:

JPMorgan Chase

$1.7 billion forfeited

On January 7, 2014, as part of a deferred prosecution agreement, JPMorgan Chase agreed to pay a non-tax deductible penalty of $1.7 billion, in the form of a civil forfeiture for its violations of the Bank Secrecy Act committed in connection with the Bernard Madoff multi-billion dollar Ponzi scheme. These funds will be used to compensate victims of the Madoff Ponzi Scheme.

SAC Capital Advisors, L.P.

$900 million forfeiture order; $284 million to be collected; total agreed-upon penalty of $1.8 billion

In July of 2013, the Government filed a civil money laundering and forfeiture action seeking the forfeiture of all of the assets of the SAC Companies (“SAC”) on the basis that SAC engaged in money laundering by commingling the illegal profits from insider trading with other assets, using the profits to promote additional insider trading, and transferring the profits with the assistance of financial institutions. In November of 2013, the Government entered into an agreement with SAC in which SAC, among other things, agreed to forfeit $900 million to the United States, including the $616 million payment to the Securities & Exchange Commission (“SEC”). The agreement also involved a criminal fine of another $900 million, resulting in a total penalty of approximately $1.2 billion, on top of the $616 million SEC fine.

PokerStars and Related Cases

$181.4 million forfeited

In July 2012, the United States reached an agreement with the two largest online poker companies in the United States, Full Tilt Poker and PokerStars. The United States had brought a civil forfeiture and money laundering action against these companies and their assets. Under the terms of the settlement, Full Tilt forfeited essentially all of its assets to the United States. PokerStars agreed to forfeit $547 Million, to be paid in several installments, and to reimburse the approximately $184 million owed by Full Tilt to foreign players. The settlement further provides that PokerStars will acquire the Forfeited Full Tilt Assets from the Government. In 2013, $181.4 million was forfeited to the United States. To date, in excess of $406.4 million has been forfeited in the PokerStars civil forfeiture action and related cases.

Ernst and Young

$123 Million forfeited

In March 2013, as part of a non-prosecution agreement, Ernst & Young LLP (“E&Y”) forfeited $123 million in connection with the firm’s participation, from 1999 to 2004, in four tax shelters that were used by approximately 200 E&Y clients in an effort to defer, reduce, or eliminate tax liabilities of more than $2 billion.

PartyGaming

$105 million forfeited

In April 2009, PartyGaming, an Internet gambling company entered into a non-prosecution agreement, wherein, among other things, the company agreed to forfeit a total of $105 million, to be paid in several installments. The $105 million represents proceeds of PartyGaming’s United States Internet gambling operations. In 2013, $105 million was forfeited to the United States.

Lebanese Canadian Bank

$102 million forfeited

In December 2011, this Office filed an in rem forfeiture and civil money laundering action alleging that Lebanese financial institutions, including the Lebanese Canadian Bank (“LCB”) and two exchange houses linked to Hizballah, used the U.S. financial system to launder narcotics proceeds through West Africa and back into Lebanon. Part of the scheme involved wiring funds from Lebanon to buy used cars in the U.S. which were then transported to West Africa and sold. Cash from the sale of the cars, along with the proceeds of narcotics trafficking, were then funneled to Lebanon through Hizballah-controlled money laundering channels. On June 25, 2013, the Government entered into a settlement agreement with LCB in which, among other things, LCB forfeited in excess of $102 million.

Insider Trading Cases

$63 million forfeited

In addition to the SAC forfeiture, in 2013 the Office has forfeited and collected in excess of $63 million from insider trading criminal prosecution and civil forfeitures actions, including the forfeiture of $53.8 million from Raj Rajaratnam.

Wegelin & Co.

$15.8 million forfeited; total penalty, including fine and restitution, exceeding $76 million

In March 2013, Wegelin & Co., a Swiss private bank pled guilty to conspiring with U.S. taxpayers and others to hide more than $1.2 billion in secret Swiss bank accounts and the income generated in these accounts from the Internal Revenue Service. In connection with the guilty plea, Wegelin agreed to the civil forfeiture of $15.8 million, representing the gross fees earned by the bank on the undeclared accounts of U.S. taxpayers. Together with the April 2012 forfeiture of over $16.2 million from Wegelin’s correspondent bank account, this amounts to a total forfeiture of $30 million.

650 Fifth Avenue

36-story Office Tower; appraised value $525 million

In November of 2009, the Office filed an amended civil forfeiture complaint seeking the forfeiture of, among other things, a 36-story office tower located at 650 Fifth Avenue in Manhattan. The Government alleged that 40% of the office tower was owned by Bank Melli Iran, a state-owned bank, through a shell company Assa Corp. The remaining 60% was owned by Alavi Foundation, a New York-based charitable foundation, which the Government alleged provided services to Iran. On September 11, 2013, the court granted summary judgment for the Government, finding that Assa and Alavi provided services to Iran and that the office tower was forfeitable as proceeds of violations of the International Emergency Economic Powers Act and as property involved in money laundering.

10th Century Cambodian Sculpture

The Office filed a civil forfeiture action seeking to forfeit and return to Cambodia a 10th century sandstone sculpture, known as the Duryodhana, that was allegedly stolen from the Prasat Chen Temple at Koh Ker in Cambodia in 1972 by an organized looting network, and ultimately imported into the United States and offered for sale by Sotheby’s Inc. (“Sotheby’s”). In December 2013, the United States entered into a settlement of the civil forfeiture action under which Sotheby’s and the customer selling the Duryodhana, Decia Ruspoli de Poggia Suasa, agreed to return the Duryodhana to Cambodia.

Tyrannosauras bataar and other dinosaur skeletons

In 2012, the Office filed a civil action seeking to forfeit and return to Mongolia a Tyrannosaurus bataar skeleton which was looted from the Gobi desert in Mongolia, imported into the United States in violation of law and put up for auction in Manhattan by a commercial paleontologist, Eric Prokopi (“Prokopi”). Prokopi was arrested for smuggling and interstate transportation of stolen property. Prokopi pled guilty and agreed to forfeit the Tyrannosaurus bataar skeleton, an additional Tyrannosaurus bataar skeleton and several other fossils. The investigation also led to the seizure and forfeiture for the purpose of returning them to Mongolia of additional dinosaur skeletons and fossils, including a Saurolophus skeleton, another Tyrannosaurus bataar skeleton, a Saurolophus Angustirostris skeleton, a Oviraptor matrix containing at least five Oviraptor skeletons and an additional Oviraptor skeleton. In 2013, all the dinosaur skeletons and fossils were forfeited. In May 2013, the United States returned the Tyrannosaurus bataar and other dinosaur skeletons to Mongolia.

Below are summaries of some of the civil actions in which the Office has obtained significant recoveries:

Ambac

$101.9 million paid to the United States

In April 2013, the Office entered into a settlement in bankruptcy court resolving a dispute arising out of the tax accounting methods used by Ambac, a financial guarantee insurance company, to account for the credit default swap contract losses it purportedly sustained in the wake of the 2008 financial crisis. The United States recovered $101.9 million pursuant to the settlement. The settlement also secured a $1 billion reduction of Ambac’s net operating losses attributable to the credit default swaps, thereby preventing the company from potentially reducing its tax burden by several hundred million dollars.

Delphi

$23.1 million paid to the United States

In November 2013, the Office settled environmental claims and liabilities asserted against DPH Holdings Corporation, formerly known as Delphi Corporation (one of the largest auto parts manufacturers in the world), and its corporate affiliates. Pursuant to the settlement agreement, filed in bankruptcy court, Delphi paid approximately $23.1 million in cash for the clean-up of four properties in Michigan and Ohio contaminated with hazardous waste.

Bioscrip

$2.3 million (out of $11 million total) paid to date to the United States

In January 2014, the Office filed, and simultaneously settled, a civil fraud lawsuit for $11 million against Bioscrip, Inc., for accepting kickbacks from Novartis Pharmaceuticals Corp. in connection with the distribution of Exjade, a Novartis prescription drug. The Complaint alleged that Bioscrip accepted kickbacks in the form of patient referrals and rebates in exchange for recommending to Exjade patients that they should order refills. As part of the settlement, Bioscrip made extensive admissions concerning this conduct and agreed to continue to cooperate in the Government’s continuing investigation. $2.3 million of the $11 million total has been paid to date.

US v. NY Institute of Technology and Cardean Learning Group, LLC

$2.5 million paid to the United States

In December 2012, the Office settled civil fraud lawsuits against New York Institute of Technology and against Cardean Learning Group, LLC, for submitting false claims in connection with federal student loans and grants. In the settlement agreements, NYIT and Cardean made admissions concerning certain conduct set forth in the complaint.

US v. SEEDCO et al.

$1.8 million paid to the United States

In December 2012, the Office settled a civil fraud lawsuit for $1.725 million against Structured Employment Economic Development Corporation, or SEEDCO, for fraud in connection with a federally-funded program to provide job placement assistance to unemployed and underemployed New York City residents. SEEDCO, a national not-for-profit corporation, operated two New York City Workforce1 Career Centers, which provided services to prepare and connect job candidates to job opportunities. The Government’s lawsuit, filed May 22, 2012, asserted False Claims Act violations against SEEDCO and seven former managers for fraud for, among other things, routinely falsifying entries in the government job placement reporting database. As part of the settlement SEEDCO made extensive admissions and instituted a compliance program. Subsequently in 2013, the Office obtained Consent Decrees and Orders of Settlement and Dismissal as to five settling defendants, each of whom made certain admissions regarding their conduct and made “ability to pay” payments totaling $86,000.

US v. Test Quest et al.

$1.725 million paid to the United States

In January 2013, the Office filed a lawsuit against TestQuest and Michael Logan (a manager at TestQuest) in connection with a scheme whereby TestQuest obtained federal funds for allegedly providing after-school tutoring services that it did not actually provide. At the same time, Logan was arrested. In June 2013, Logan pled guilty to one count of conspiring to defraud the United States and, pursuant to the plea agreement, agreed to pay the Government approximately $750,000 in restitution. In August 2013, the Office filed settlement agreements with TestQuest and Logan, and simultaneously filed an amended civil complaint naming three public school teachers who also participated in the fraud. Pursuant to the settlement agreements, TestQuest made admissions of wrongdoing and paid $1,725,000, and Logan made admissions of wrongdoing.

The Office’s Money Laundering and Asset Forfeiture Unit is led by Sharon Cohen Levin and handles all criminal and civil forfeiture actions for the U.S. Attorney’s Office for the Southern District of New York. Civil recoveries are handled by the Office’s Civil Division, which is led by Sara L. Shudofsky. Criminal and civil collections are handled by the Office’s Financial Litigation Unit, which is led by Kathleen Zebrowski.

For further information, the United States Attorneys’ Annual Statistical Reports can be found online at http://www.justice.gov/usao/resources/reports/.