U.S. Attorney’S Office For The Southern District Of New York Recovers Over $3.5 Billion From Criminal And Civil Cases In FY 2012
Office Collected Nearly $3 Billion In Forfeitures And More Than Half A Billion From Civil Actions
In Largest Single-Year Recovery Since Forfeiture Funds Were Established, Office Collected 68% of the National Total For All Asset Forfeiture Actions
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the Office collected more than $2.98 billion in forfeiture actions in Fiscal Year (FY) 2012, representing the largest amount collected in a given year by any office since the United States’ asset forfeiture funds were established in the 1980s. The office also collected $526.7 million from civil actions and $76.8 million in restitution, criminal fines, and special assessments in FY 2012.
Manhattan U.S. Attorney Preet Bharara said: “Effective law enforcement punishes those who break laws and sends a message of deterrence whenever possible. As part of that effort, it is critical to strip defendants of their ill-gotten money and property, and where appropriate, impose fines and penalties. Our aim is not only to take the profit out of crime and the profit incentive away from civil offenders, but also to compensate victims and put money back into government. As this year’s record-setting asset forfeiture numbers reflect, our commitment to these law enforcement principles is unrelenting. The assets we collected also fund vital law enforcement programs at both the state and local levels. It is extremely gratifying that our Office, teamed with our agency partners, has been so successful at taking away the proceeds of crime and compensating victims.”
U.S. Attorney’s offices nationwide collected $4.389 billion in asset forfeiture actions in FY 2012. Of that $4.389 billion, 68% was collected by the U.S. Attorney’s Office for the Southern District of New York. Forfeited funds are 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 FY 2012, the U.S. Attorney’s Office for the Southern District of New York returned more than $1.24 billion to crime victims, 79% of the national total.
The $526.7 million collected by the Office’s Civil Frauds Unit came primarily from affirmative civil actions in which the Office collected government money lost due to fraud or other misconduct, or collected fines imposed on individuals and/or corporations for violations of federal health, safety, civil rights, or environmental laws.
Nationwide, the U.S. Attorneys’ offices collected $13.1 billion in criminal and civil actions during FY 2012, more than doubling the $6.5 billion collected in FY 2011. A portion of this amount, $5.3 billion, was collected in shared cases in which one or more U.S. Attorneys’ offices or department litigating divisions were also involved. The $13.1 billion represents more than six times the appropriated budget of the combined 94 offices for FY 2012.
Below are summaries of some of the cases in which the Office obtained substantial forfeitures or provided significant restoration to victims in FY 2012:
Madoff Ponzi Scheme
The Asset Forfeiture Unit has collected approximately $2.35 billion to date in connection with the massive fraud perpetrated through Bernard L. Madoff Investment Securities (BLMIS), and continues to preserve and recover assets that ultimately will be used to compensate victims of the massive fraud. The amount collected in FY 2012 - $2.222 billion - came from two major settlements:
$2.2 billion forfeited
In December 2010, the estate of BLMIS longtime, high-wealth customer Jeffry Picower, agreed to the forfeiture of more than $7.2 billion. The Office agreed to credit to the forfeiture a $5 billion payment to settle claims brought by Securities Investor Protection Corporation (“SIPC”) Trustee Irving Picard. In August 2012, the Court of Appeals issued a mandate rejecting the objections to the Picower settlement, making final the forfeiture of approximately $7,209,742,817 from the Picower Estate and providing for the deposit of more than 2.2 billion in the Assets Forfeiture Fund.
$22 million forfeited
In December 2010, BLMIS longtime, high-wealth customer Carl Shapiro, agreed to the forfeiture of $625 million. The Office agreed to credit to the forfeiture a $550 million payment to settle claims brought by Securities Investor Protection Corporation (“SIPC”) Trustee Irving Picard. Approximately $22 million of the remaining forfeiture obligation was collected by the Office and deposited to the Assets Forfeiture Fund in FY2012, bringing the total forfeited by Shapiro to approximately $60 million.
Monies collected by the Office in connection with the Madoff cases will be distributed to victims in accordance with the Department of Justice remission process. Richard C. Breeden was recently retained to serve as Special Master on behalf of the Department to administer that process and we expect the victim claims process to begin shortly.
500.3 million forfeited; $466 million remitted to the City of New York
In March 2012, as part of a Deferred Prosecution Agreement, Science Applications International Corporation (SAIC), the primary contractor on New York City's “CityTime” payroll project, forfeited $500,392,977 in connection with its role in a fraud and kickback scheme. As compensation for its losses on the CityTime project, $466,093,333.53 was remitted to the City. The mayor’s office stated that this compensation enabled the City to fill more than 2,500 teaching positions that were to be eliminated in the budget for the coming fiscal year, while avoiding tax increases or layoffs of police officers or firefighters.
Adelphia Securities Fraud
More than $728.9 million remitted to victims
In April and May 2012, more than $728.9 million forfeited in connection with the Office’s investigation and prosecution of the Adelphia Communications Corporation securities fraud was distributed to victims who suffered financial losses as a direct result of the fraud. In July
2004, John Rigas, the founder and former Chairman and Chief Executive Officer of Adelphia, and Timothy Rigas, the former Chief Financial Officer, were convicted in Manhattan federal court for their participation in a massive securities fraud scheme to defraud investors, creditors, and the public concerning the financial condition and operating performance of Adelphia. Following the convictions of John and Timothy Rigas, the Office negotiated a settlement that created a fund to compensate defrauded investors. As part of the settlement, the Rigases, as well as other members of the family, agreed to forfeit more than 95% of the family’s assets to the Government. The Adelphia distribution is the largest single distribution of forfeited assets to victims in Department of Justice history.
$158.5 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 brought by this Office 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. In order to fully resolve the action, the settlement further provides that PokerStars will acquire the Forfeited Full Tilt Assets from the Government. To date, $158.5 million in funds resulting from the settlement has been received and fully forfeited.
Below are summaries of some of the civil actions in which the Office has obtained substantial recoveries:
Deutsche Bank & MortgageIT Fraud
$202.3 million paid to the United States
In May 2012, the Office reached a settlement with Deutsche Bank and MortgageIt for $202.3 million that resolved a civil fraud Complaint alleging that MortgageIT, and later Deutsche Bank AG, made repeated false certifications to the U.S. Department of Housing and Urban Development (“HUD”) to obtain approval of mortgages that MortgageIT underwriters recklessly endorsed for Federal Housing Administration (“FHA”) insurance. The Complaint also alleged that defendants falsely certified to HUD that MortgageIT maintained a compliant quality control program when it did not. The defendants also admitted, acknowledged, and accepted responsibility for certain misconduct outlined in the Complaint.
$158.3 million paid to the United States
In February 2012, the Office filed, and simultaneously settled, a civil fraud lawsuit for $158.3 million against CitiMortgage, Inc., a subsidiary of CitiBank, N.A., for over six years of misconduct in connection with CitiMortgage’s participation in the FHA’s Direct Endorsement Lender Program. The Complaint alleged that CitiMortgage submitted false certifications stating that certain loans were eligible for FHA mortgage insurance when in fact, they were not. This caused HUD to incur losses when the loans defaulted. In addition, CitiMortgage admitted and accepted responsibility for certain conduct alleged in the Complaint.
City of New York - Personal Care Services Fraud
$70 million paid to the United States
In October 2011, the Office reached a settlement with the City of New York for $70 million in connection with the City’s operation of the Personal Care Services (PCS) program - a Medicaid funded program designed to provide cleaning, shopping, grooming, and basic aid services to eligible Medicaid beneficiaries. The civil health care fraud Complaint alleged that for 10 years, the City improperly overcharged the Medicaid program for the provision of 24-hour personal care services by routinely re-authorizing 24-hour continuous PCS for applicants without the required local medical director assessment; that in some cases, City administrators overruled the findings of the local medical director that PCS services were inappropriate for the patient; and that the City knowingly re-authorized 24-hour care for patients where the nursing and social worker assessments were missing or were not reviewed by the City.
Beth Israel Medical Center Fraud
$13 million paid to the United States
In March 2012, this Office filed, and simultaneously settled, a civil health care fraud lawsuit against Beth Israel Medical Center (“Beth Israel”), recovering $13,031,355 in damages and penalties under the False Claims Act from the hospital. The Complaint alleged that Beth Israel fraudulently inflated its charges to Medicare patients to obtain larger “outlier” reimbursements, which are supplemental reimbursements made in cases where the cost of care is unusually high, from Medicare. In the settlement, Beth Israel admitted, acknowledged, and accepted responsibility for having selectively increased its charges to obtain more outlier payments than it
The Office’s 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 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/.