A Statement on NYCHA's Unaccounted $3 Million of Expenses

  "It is outrageous that Bronxites and New Yorkers are living in public housing with rats in their homes, lead paint, lack hot water and have an abundance of mold, meanwhile, the monitor responsible for fixing this mess received a high-priced contract and can’t say what work is actually being done. How in the world can the Monitor incur $3 million in expenses since its appointment without any transparency and accountability and yet money still isn’t going to where it’s needed most: to make repairs and restore dignity?

It is clear that a thorough audit and investigation is needed from Comptroller Stringer and Attorney General James. In addition, the New York congressional delegation should use its oversight authority to demand answers from the Department of Housing and Urban Development.  We need to get to the bottom of how the federal monitor overseeing reforms at NYCHA is spending money, and whether it is helping families across New York."

 

Sincerely, 

MAYOR DE BLASIO ANNOUNCES MORE THAN 18,000 NEW STUDENT VOTERS REGISTERED DURING CIVICS WEEK

  Mayor de Blasio announced today that the City has registered 18,233 first-time student voters. The effort was part of the Administration’s youth voter registration drive during the City’s first-ever Civics Week, which took place the week of April 8th. Hundreds of high schools hosted events during Civics Week – an initiative of Mayor de Blasio’s 10-Point democracy agenda announced as part of the Mayor’s 2017 State of the City and known as DemocracyNYC. This initiative aims to increase civic engagement and strengthen democracy locally and nationally.

“With Civics Week, we’re helping schools mold the future leaders of our City and reminding students that their voices are powerful and can effectuate change,” said Mayor Bill de Blasio. “Whether it’s hosting a town hall, participating in Participatory Budgeting or registering to vote, students have a real opportunity to strengthen our democracy. I encourage everyone to get involved.”

“Our young people are the future leaders of our City and our nation, and I’m excited that a record 18,000 students registered to vote and make their voices heard as part of our first-ever Civics Week,” said Schools Chancellor Richard A. Carranza. “We’ll continue to invest in Civics for All to elevate student voice and bring the democratic process to life for our students.”

“By participating in Civics Week, students across hundreds of schools and colleges are now equipped with the information and tools they need to be active, productive participants in our democracy,” said Deputy Mayor for Strategic Policy Initiatives J. Phillip Thompson. “Harnessing their creativity and energy to solve important problems will help us achieve a fairer and stronger democracy at home and across the nation."

“Your vote is your voice – and thousands of young people across the City of New York made clear that they want their voices heard,” said Chief Democracy Officer Ayirini Fonseca-Sabune. “Registering to vote at the earliest possible opportunity – as young people across the City had the opportunity to do through this year’s youth voter registration drive – facilitates a young person’s critical first step towards a lifetime of civic engagement.”

“Registering the next generation to vote and increasing participation in elections is fundamental to making our government and communities even more representative of our diverse voices,” said Mayor’s Public Engagement Director Omar Khan. “I’m beyond proud of this collaborative effort to educate New York City’s students about their civic duty and to make the process of participating in our elections as easy as possible. This is a great example of how government can be innovative in the pursuit of greater civic engagement.”

The 18,233 newly registered student voters attend 258 New York City public schools, as well as college campuses and non-public schools. The Mayor’s Public Engagement Unit organized voter registration drives at approximately 70 schools, resulting in over 63 percent of the more than 18,000 registrations citywide. Civics Week, which took place the week of April 8th, is part of the Department of Education’s Civics for All initiative, which teaches students about the foundations of American government and the democratic process.

During Civics Week, students at public schools had the opportunity to participate in a variety of activities including youth voter registration drives, Participatory Budgeting for their schools, public speaking competitions, and town halls on issues that matter to them and their communities.

The next election in New York City will be the Primary Election on Tuesday, June 25th. The primary ballot includes races for Queens District Attorney, City Council District 45 and judicial offices throughout the city. New Yorkers who need to register to vote can do so online, by mail or in person at a New York City Board of Elections office by May 31st to be eligible to vote in the primary election. New Yorkers who are interested in registering to vote, need to update their existing registration, or want more information on the upcoming election can call 311 or visit voting.nyc.

Students at 48 high schools participated in the DOE’s first-ever Participatory Budgeting Project. A lead teacher at each of the participating schools guided the school community through the process, and students identified projects and organized votes on project proposals. Participating schools had $2,000 to spend on chosen projects. Examples include:

• School greenhouse for growing produce, plants, and flowers
• Creation of a student lounge
• Rooftop gardens
• Materials for a composting program at the school
• Materials for upgrading school common area and garden
• Equipment for clubs and after-school activities
• Upgrades to improve school spirit and pride: costume for school mascot; logo for gym floor
• Student game room
• Start-up funding for a school store

During Civics Week, schools also participated in SoapboxNYC, a K-12 public speaking competition that calls on students to speak out on issues that affect them and their communities. Students participated in the City’s Civics for All poster competition and created posters that speak to important social issues. Guest speakers including New York City Schools Chancellor Richard Carranza, Deputy Mayor Phil Thompson, Assembly Member Cathy Nolan, and Council Member Mark Treyger visited a variety of schools to encourage public engagement. To support Civics Week and participating schools, the Department of Education developed instructional guides to help schools host voter registration drives and design activities that encourage civic participation.

Civics Week is part of the Department of Education’s Civics for All initiative. The DOE believes civic education is an essential part of every students’ core academic program. The goal of Civics for All, a new initiative announced in Spring 2018, is to provide resources, programming, and professional learning to all of our schools with models for civic education that are interactive, project-based, and relevant to students’ lives. In addition to participatory budgeting, the initiative includes a DOE developed K-12 civics curriculum, increased opportunities for student civic engagement, a student voter registration drive, and school partnerships with community organizations.

The DemocracyNYC initiative aims to increase voter registrations and civic engagement in New York City, while also empowering New Yorkers to be active, informed voters. DemocracyNYC was first announced by Mayor Bill de Blasio in his 2018 State of the City address, detailing a robust 10-Point Plan to make New York City the fairest, most civically engaged big city in America. DemocracyNYC is an initiative of the Office of the Deputy Mayor for Strategic Policy Initiatives.

EDITOR'S NOTE:

Now if only these students would get a proper education so they could read and understand the voting ballot.

DAKOTA'S LAW PASSES THE SENATE HEALTH COMMITTEE

The recently amended bill represents the most comprehensive legislative effort to address lead exposure and poisoning in private and public housing in New York State

These amendments include strong code enforcement protocols, mandatory annual screenings for young children, and full coverage for lead screenings and testing under private health insurances and the Medicaid program

Last year, Senator Rivera introduced Dakota's Law after collaborating with NYCHA Resident and Tenant Leader Tiesha Jones whose daughter Dakota suffered from permanent developmental challenges after being exposed to lead in their NYCHA apartment

  

Dakota's Law (S.499B/A.7687), a lead prevention and mitigation bill introduced last year by State Senator Gustavo Rivera, passed the Senate Health Committee. The bill is also sponsored in the State Senate by State Senator Tim Kennedy (D-Buffalo) and by Assembly Majority Leader Crystal Peoples-Stokes (D-Buffalo) in the State Assembly. The bill has been referred to the Senate Finance Committee. Dakota's Law will enhance protocols for parents, guardians, healthcare providers, state and local health officers, private property owners, and public housing officials to take proactive action to prevent lead poisoning in children. The amendments recognize the recently adopted measure of changing the blood lead levels of concern from 10 to 5 micrograms, as recommended by the Center for Disease Control (CDC), as well as: Implement strong code enforcement protocols and subsequent penalties for individuals and/or entities that fail to ensure their properties are lead-safe;  Require annual screenings for children up to 6 years old by healthcare providers. This would identify elevated blood lead levels to trigger home inspections and prompt mitigation of the source of the exposure to eliminate it before a child's blood lead levels can cause permanent health damage; Require that doctors notify parents or guardians that they have a right to a home inspection if a child is at risk of lead exposure;  Provide full coverage of lead screening and testing to ensure access for all children in New York State. This would expand parameters so that private health insurance and Medicaid coverage include preventive services and prohibits any copays and annual deductibles on these services; Require local or state health departments to investigate cases of elevated lead levels when reported by physicians; Allow local health departments to request assistance from the state department of health if they do not have the capacity or resources to conduct investigations and enforcement.  Dakota's Law originated from the experience of Tiesha Jones, the mother of Dakota, a child living in a NYCHA apartment who experienced increasing blood lead levels throughout her childhood. Ms. Jones took Dakota to the doctor and received appropriate testing at the required ages, 12- and 24-months-old. Upon changing doctors at age 4, she was offered a lead screening and within this time frame, Dakota's blood lead levels elevated from 5 micrograms to 45. This left Dakota with permanent developmental challenges that affect her education. If this bill had been law at the time, Dakota would have received a required test at age 3 and steps would have been taken earlier to identify and address the lead exposure in her home before it became detrimental to her health. "The newly amended Dakota's Law is the most comprehensive approach to solve a public health crisis that should have been addressed a long time ago in our State," said State Senator Gustavo Rivera, Chairman of the Senate Health Committee and sponsor of the bill. "This multi-layered effort, spearheaded by the tireless work of Tiesha Jones, will make a real difference in the lives of millions of children and parents in New York. We must do everything in our power to end lead poisoning in New York State and ensure our children live in safe and healthy environments."   "Dakota's Law will ensure New York children and their parents do not suffer from the devastating effects of lead poisoning," said Tiesha Jones, Dakota's Mother and President of the NYCHA Bailey Houses Residents' Council. "I don't want child in our State to go through what Dakota did and this law will prevent precisely that by empowering parents with the tools they need and requiring all relevant stakeholders to take proactive action to protect children before it's too late."   "Lead exposure continues to be a very real problem across New York State, and our children are suffering long-term as a result," said Senator Tim Kennedy, sponsor of the bill. "A 2017 Reuters investigation revealed that in four zip codes in the City of Buffalo, 40% of children who were tested between 2006 and 2014 had high lead levels, making it one of the most saturated lead-burdened communities in the country. That needs to change, and New York needs to do its part to change it. Through Dakota's law, we're taking steps to enact stronger protections for those potentially exposed to lead through rental properties, and requiring routine pediatric screenings by health care professionals to protect children from dangerous lead levels, particularly in their formative years when exposure can cause permanent developmental damage."  "Establishing an evaluation and remediation process for elevated levels of lead in children's bloodstreams is a concrete avenue toward environmental justice. Far too many children have been poisoned in my community and all over the state.  It is vital that our most vulnerable children are protected from potential developmental delays, which can follow them their whole lives. Dakota's law will help all children and families through a collaborative response to elevated lead levels," said Assembly Majority Leader Crystal Peoples-Stokes and sponsor of the bill.  "New York State has the highest number of children with lead poisoning in the country," said Kathleen Curtis, Executive Director of Clean and Healthy New York. "Addressing lead is critical in protecting our children. CHNY has played a major role in advocating for this, and will continue to do so until lead is no longer a threat to New York's children."   Unfortunately, Dakota's story is not an isolated incident. Data shows that where children experience poverty and where residential building stock is aging and neglected incidences of elevated blood lead levels rise. The Buffalo region has particularly high rates of elevated blood lead levels where four zip codes in particular have rates of 40% or more. From upstate to downstate New York, children are only receiving required screenings at 12- and 24-months-old at a statewide rate of 62.8%. By extending screening requirements to children older than 2 and through 6 years of age, the goal is to dramatically increase awareness and thus screening of children to identify more who have dangerous levels. By determining the areas where children may be exposed and undiagnosed and by creating statewide code enforcement standards for lead exposure remediation, Dakota's Law is the most comprehensive legislation to proactively eliminate lead exposure and poisoning in children. Another effort to find adequate solutions to combat lead poisoning in New York State, a bill sponsored by Senator Rivera (S5113), which will provide that a majority of the appointed voting members of the Advisory Council on Lead Poisoning Prevention constitute a quorum, is scheduled to be voted on the Senate floor today. The Advisory Council on Lead Poisoning Prevention has struggled to achieve a quorum due to a lack of appointees, which has obstructed the Council's ability to provide the guidance it was tasked in producing. Similar amendments have been implemented on other advisory councils, and changes have proven to be helpful. Further, Senator Rivera has recommended Ms. Tiesha Jones to Governor Cuomo and the New York State Department of Health to become a member of this council, which currently has a parent advocate vacancy.

“HERE WE GO AGAIN” SAYS DINOWITZ, AS ANOTHER NEW BUILDING IS PLANNED FOR NORTHWEST BRONX

A deluge of new development has arrived in the Northwest Bronx, taking advantage of the as-of-right zoning loophole and hiding behind anonymous limited liability corporations.

  On May 20, building permits were filed with the NYC Department of Buildings to construct another new building in the Northwest Bronx – this time for a new eight story building at 3631 Johnson Avenue. The proposed building would include 22 new units and only 8 parking spaces, with an average apartment size of 908 square feet. Since the beginning of 2016, there have been 63 permits for new buildings filed with DOB in the 81^st Assembly District and dozens more have filed for demolition.

Local residents have become increasingly frustrated by current zoning regulations that allow large buildings to go up without any form of public input, despite increasing demand for already limited infrastructure. Much of the development has been concentrated in areas that are currently occupied by single-family homes or similarly sized small buildings but are within a zone that allows for much higher density. However, infrastructure such as gas and water mains, sewage pipes, available parking, and transit options are already heavily burdened by existing demand. The current permit approval process for DOB or New York City Department of City Planning does not typically require environmental impact statements, which would incorporate these factors into whether a proposed development is appropriate for a given neighborhood.

Many of these developments are filed by limited liability corporations (LLC’s), which rarely identify any of the principal investors involved on corporation filings with the Department of State and only list a single representative on DOB filings. For example, the building permit for 3631 Johnson Avenue lists the owner as Great Gold Summit LLC and lists a business address on Long Island along with the name of one member. The NYS Department of State - Division of Corporations does not list any of the principal investors under the entity information available online and apparently does not require the listing of a registered agent. In order to view the names of the original members, one must submit a written request along with payment to receive a paper copy of the original certificate.

Assemblyman Jeffrey Dinowitz (D - Northwest Bronx) said: “One of the main aspects which attract homeowners to live in the Northwest Bronx is the well-balanced density of our neighborhoods. Many people choose to live further away from the city center precisely to avoid the feeling of living stacked on top of each other. Real estate developers seem to be so hell-bent on maximizing their profits that we are at a very real risk of losing what makes our area desirable in the first place. Whatever the current rules are now for development, these developers are not being good neighbors. They come into our neighborhood, tear down a building that has been there for years, they don’t even always tell us who they are. And when somebody dares to voice concerns about the impact on their neighborhood, they are told ‘too bad, we can do whatever we want because the property is as-of-right.’ I don’t think that is a good way to operate and it is very clear that changes need to be made.”

Engel Introduces Bill to Repeal Cuts to Medicaid DSH Payments

  Representative Eliot L. Engel, a top member on the House Energy and Commerce Committee, today introduced the Patient Access Protection Act, legislation that would repeal mandated cuts to Medicaid Disproportionate Share Hospital (DSH) payments.

Medicaid DSH payments sustain safety-net hospitals that serve a disproportionate number of low-income and uninsured patients. In treating those who have nowhere else to turn, these hospitals incur uncompensated costs. Medicaid DSH payments allow these hospitals to continue serving communities in dire need of access to care, but current federal law mandates severe cuts to DSH payments, which would jeopardize their ability to do so.

“Just a few weeks ago I led 300 of my colleagues in a bipartisan letter to House leadership calling for a delay to scheduled cuts in Medicaid DSH payments. But that’s still only a band-aid. What we need is a full repeal of these cuts codified into law,” Engel said. “Safety-net hospitals rely on Medicaid DSH payments to provide critical care to millions of people across the country. These scheduled cuts would have a devastating impact on our communities and we need to do everything we can to ensure they never go into effect.”

Bronx Man Sentenced In Manhattan Federal Court To 70 Months In Prison For Building Improvised Explosive Device

  Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that CHRISTIAN TORO was sentenced today by United States District Judge Richard M. Berman to 70 months in prison for stockpiling explosive materials and manufacture of a destructive device.  TORO previously pled guilty before Judge Berman.  Tyler Toro, TORO’s co-defendant and brother, who also pled guilty, is scheduled to be sentenced on May 29, 2019.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Today’s sentence serves as a message that building and stockpiling destructive devices are grave offenses in and of themselves.  Thanks to the outstanding work of the Joint Terrorism Task Force in eliminating this destructive threat in its nascent stages, Christian Toro and his brother were apprehended before they could carry out any attack with the device they were building.  Christian Toro has nevertheless received a substantial sentence for seriously endangering the public (including minor children) and inspiring fear throughout his community with his conduct.”

According to the allegations in the Complaint, the Indictment, and statements made during court proceedings:

Between approximately October 2017 and February 2018, CHRISTIAN TORO and Tyler Toro conspired to build and possess a destructive device at their residence in the Bronx, New York (the “Residence”).  CHRISTIAN TORO, a former teacher at a high school in Harlem, New York (the “School”), paid students from the School for their assistance in manufacturing the destructive device, giving them approximately $50 per hour in return for the students’ work dismantling fireworks and storing the explosive powder contained within those fireworks in containers.  TORO encouraged one of those students to call in a bomb threat to the School in December 2017.  TORO also had on his School laptop a copy of a book that provided instructions for, among other things, manufacturing explosive devices.

On February 15, 2018, law enforcement agents searched the Residence pursuant to a judicially authorized search warrant.  In a bedroom shared by TORO and Tyler Toro, law enforcement agents recovered the components for building an improvised explosive device and other dangerous substances, including: (i) a glass jar containing low explosive powder; (ii) a strip of magnesium metal; (iii) approximately 20 pounds of iron oxide; (iv) approximately five pounds of aluminum powder; (v) a mixture of iron oxide and aluminum powder, the key ingredients for thermite (used in incendiary bombs); (vi) approximately five pounds of potassium nitrate; (vii) a cardboard box containing firecrackers; and (viii) metal spheres and C02 cartridges, which can be used as fragmentation for a bomb.  On the Residence’s fire escape, agents also found a jar of improvised napalm, consisting of gasoline and Styrofoam.

Also in the Residence, law enforcement agents found a handwritten diary labeled with Tyler Toro’s name, which stated, among other things, “WE ARE TWIN TOROS STRIKE US NOW, WE WILL RETURN WITH NANO THERMITE” and “I AM HERE 100%, LIVING, BUYING WEAPONS.  WHATEVER WE NEED.”  Agents also recovered a page inside a notebook found in the Residence labeled “Operation Flash,” with a ledger appearing to delineate the hours worked and payment owed to one of the School’s students for that student’s work on the destructive device.

In addition to his prison sentence, CHRISTIAN TORO, 28, was sentenced to three years of supervised release.

Mr. Berman praised the excellent work of the Federal Bureau of Investigation’s (“FBI”) New York Joint Terrorism Task Force, which principally consists of agents from the FBI and detectives from the New York City Police Department.

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant United States Attorney Elizabeth A. Hanft is in charge of the prosecution.

Bank CEO Stephen M. Calk Charged With Corruptly Soliciting A Presidential Administration Position In Exchange For Approving $16 Million In Loans

  Audrey Strauss, the Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Patricia Tarasca, the Special Agent-in-Charge of the New York Region for the Federal Deposit Insurance Corporation Office of Inspector General (“FDIC OIG”), announced today the unsealing of an indictment charging STEPHEN M. CALK with financial institution bribery for corruptly using his position as the head of a federally insured bank to issue millions of dollars in high-risk loans to a borrower in exchange for a personal benefit: assistance from the borrower in obtaining a senior position with an incoming presidential administration.  CALK is expected to be presented this afternoon before U.S. Magistrate Judge Debra Freeman.

Ms. Strauss said:  “As alleged, Stephen M. Calk abused the power entrusted to him as the top official of a federally insured bank by approving millions of dollars in high-risk loans in an effort to secure a personal benefit, namely an appointment as Secretary of the Army or another similarly high-level position in the incoming presidential administration.  Calk’s alleged attempt to obtain such an appointment was unsuccessful, and the loans he approved were ultimately downgraded by the bank’s primary regulator.  Thanks to the outstanding work of the FBI and FDIC OIG, Calk’s alleged corrupt scheme has now resulted in a federal criminal charge.”

FBI Assistant Director William F. Sweeney Jr. said:  “As alleged, Calk went to great lengths to avoid banking violations in an attempt to secure a senior position in a presidential administration. He curried favor with an influential borrower, exploited his position as CEO of a bank and its holding company, and exercised control over the bank and the borrower’s loans, intentionally turning his back on the many red flags posted along the way.  His attempt at petitioning for political favors was unsuccessful in more ways than one – he didn’t get the job he wanted, and he compromised the one he had.”  

FDIC OIG Special Agent-in-Charge Patricia Tarasca said:  “Today’s indictment charges Stephen Calk with misusing his position as Chairman and Chief Executive Officer of a bank for his own personal gain.  The FDIC Office of Inspector General remains committed to investigating cases where bank officials cause multimillion-dollar losses to a financial institution and undermine its integrity.  We will continue to work with our law enforcement partners to bring to justice those who commit such offenses.”

According to the allegations in the Indictment:[1]

CALK, the Bank, and the Borrower

STEPHEN M. CALK is the chairman and chief executive officer of the “Bank,” a federal savings association headquartered in Chicago, Illinois, with an office in New York, New York.  The Bank is owned in its entirety by the “Holding Company,” a Chicago-based bank holding company, and CALK is the chairman, chief executive officer, and owner of approximately 67% of the Holding Company.

The “Borrower” was, at all relevant times, a lobbyist and political consultant.  Beginning in or about March 2016, the Borrower held a senior role with a presidential campaign (the “Presidential Campaign”), and from June 2016 through August 2016, he served as chairman of the Presidential Campaign.  After the Borrower’s formal role with the Presidential Campaign concluded in or about August 2016, the Borrower continued to be informally involved in the campaign.  Beginning in or about November 2016, when the candidate for whom the Borrower had been working was elected President of the United States, the Borrower provided informal input to the presidential transition team (the “Presidential Transition Team”).

The Corrupt Scheme

Between in or about July 2016 and January 2017, CALK engaged in a corrupt scheme to exploit his position as the head of the Bank and the Holding Company in an effort to secure a valuable personal benefit for himself, namely, the Borrower’s assistance in obtaining for CALK a senior position in the presidential administration.  During this time period, the Borrower sought millions of dollars in loans from the Bank.  CALK understood that the Borrower urgently needed these loans in order to terminate or avoid foreclosure proceedings on multiple properties owned by the Borrower and the Borrower’s family.  Further, CALK believed that the Borrower could use his influence with the Presidential Transition Team to assist CALK in obtaining a senior administration position.

CALK thus sought to leverage his control over the Bank and the loans sought by the Borrower to his personal advantage.  Specifically, CALK offered to, and did, cause the Bank and Holding Company to extend $16 million in loans to the Borrower in exchange for the Borrower’s requested assistance in obtaining a high-level position in the presidential administration.  For example, and while the Borrower’s loans were pending approval, CALK provided the Borrower with a ranked list of the governmental positions he desired, which started with Secretary of the Treasury, and was followed by Deputy Secretary of the Treasury, Secretary of Commerce, and Secretary of Defense, as well as 19 ambassadorships similarly ranked and starting with the United Kingdom, France, Germany, and Italy.

In approving these loans to the Borrower, CALK was aware of significant red flags regarding the Borrower’s ability to repay the loans, such as his history of defaulting on prior loans.  Moreover, given the size of the loans, the Borrower’s debt became the single largest lending relationship at the Bank.  In order to enable the Bank to issue these loans without violating the Bank’s legal limit on loans to a single borrower, CALK authorized a maneuver never before performed by the Bank, in which the Holding Company – which CALK also controlled – acquired a portion of the loans from the Bank.

During the same time period, the Borrower provided CALK with valuable personal benefits.  First, in or about the summer of 2016, during the Presidential Campaign – and just days after CALK and the rest of the Bank’s credit committee conditionally approved a proposed $9.5 million loan to the Borrower – the Borrower appointed CALK to a prestigious economic advisory committee affiliated with the campaign.  And second, in or about late November and early December 2016 – after the presidential candidate had been elected president, after the Borrower’s first loan from the Bank had been issued, and while a second set of loans worth more than $6 million sought by the Borrower was pending approval by the Bank – the Borrower used his influence with the Presidential Transition Team to assist Calk, recommending CALK for an administration position.  Due to the Borrower’s efforts, CALK was formally interviewed for the position of Under Secretary of the Army in or about early January 2017 at the Presidential Transition Team’s principal offices in New York, New York.  CALK was not ultimately hired.

As a result of its independent review of the Bank’s loans to the Borrower, in or around July 2017, the bank’s primary regulator, the Office of the Comptroller of the Currency (“OCC”), downgraded the credit quality of those loans to “substandard,” concluding that the Bank’s classification of them as satisfactory had been inappropriate.  Moreover, to conceal the unlawful nature of his scheme, CALK made false and misleading statements to the OCC regarding the loans to the Borrower.  Among other things, CALK falsely stated to the OCC regulators that he had never desired a position in the presidential administration. 

In or about October 2017, the Borrower was charged with federal crimes and the U.S. Government sought the forfeiture of the Borrower’s interests in properties securing the loans he had received from the Bank.  The Borrower subsequently ceased making loan payments to the Bank, and the Bank and the Holding Company foreclosed on the cash collateral securing the loans and have currently written off the remaining principal balance – totaling over $12 million – as a loss.

STEPHEM M. CALK, 54, is charged with one count of financial institution bribery, which carries a maximum sentence of 30 years in prison.

The statutory maximum penalty is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

Ms. Strauss praised the outstanding investigative work of the FBI and FDIC OIG.

The allegations contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

 [1] As the introductory phrase signifies, the entirety of the text of the Indictment, and the description of the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.

U.S. Attorney Announces Indictment Of Michael Avenatti For Aggravated Identity Theft, Engaging In A Scheme To Defraud A Former Client

Avenatti Separately Indicted on Previously-Announced Charges Relating to a Scheme to Extort the Athletic Apparel Company Nike, Inc.

  Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced the indictment today of MICHAEL AVENATTI on fraud and aggravated identity theft charges.  As alleged, AVENATTI used misrepresentations and a fraudulent document purporting to bear his client’s name and signature to convince his client’s literary agent to divert money owed to AVENATTI’s client to an account controlled by AVENATTI.  AVENATTI then spent the money principally for his own personal and business purposes.  The fraud and aggravated identity theft case is assigned to U.S. District Judge Deborah Batts of the Southern District of New York.

AVENATTI was separately indicted today on extortion charges, which were the subject of a previous Complaint and arrest of AVENATTI, relating to his alleged attempt to extract more than $20 million in payments from Nike, Inc., by threatening to use his ability to garner publicity to inflict substantial financial and reputational harm on the company if his demands were not met.  That case is assigned to U.S. District Judge Paul Gardephe of the Southern District of New York.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Michael Avenatti abused and violated the core duty of an attorney – the duty to his client.  As alleged, he used his position of trust to steal an advance on the client’s book deal.  As alleged, he blatantly lied to and stole from his client to maintain his extravagant lifestyle, including to pay for, among other things, a monthly car payment on a Ferrari.  Far from zealously representing his client, Avenatti, as alleged, instead engaged in outright deception and theft, victimizing rather than advocating for his client.”

According to the allegations in the Indictment unsealed today[1]:

From August 2018 through February 2019, AVENATTI defrauded a client (“Victim-1”) by diverting money owed to Victim-1 to AVENATTI’s control and use.  After assisting Victim-1 in securing a book contract, AVENATTI allegedly stole a significant portion of Victim-1’s advance on that contract.  He did so by, among other things, sending a fraudulent and unauthorized letter purporting to contain Victim-1’s signature to Victim-1’s literary agent, which instructed the agent to send payments not to Victim-1 but to a bank account controlled by AVENATTI.  As alleged, Victim-1 had not signed or authorized the letter, and did not even know of its existence.

Specifically, prior to Victim-1’s literary agent wiring the second of four installment payments due to Victim-1 as part of the book advance, AVENATTI sent a letter to Victim-1’s literary agent purportedly signed by Victim-1 that instructed the literary agent to send all future payments to a client trust account in Victim-1’s name and controlled by AVENATTI.  The literary agent then wired $148,750 to the account, which AVENATTI promptly began spending for his own purposes, including on airfare, hotels, car services, restaurants and meal delivery, online retailers, payroll for his law firm and another business he owned, and insurance.  When Victim-1 began inquiring of AVENATTI as to why Victim-1 had not received the second installment, AVENATTI lied to Victim-1, telling Victim-1 that he was still attempting to obtain the payment from Victim-1’s publisher.  Approximately one month after diverting the payment, AVENATTI used funds recently received from another source to pay $148,750 to Victim-1, so that Victim-1 would not realize that AVENATTI had previously taken and used Victim-1’s money.

Approximately one week later, pursuant to AVENATTI’s earlier fraudulent instructions, the literary agent sent another payment of $148,750 of Victim-1’s book advance to the client account controlled by AVENATTI.  AVENATTI promptly began spending the money for his own purposes, including to make payments to individuals with whom AVENATTI had a personal relationship, to make a monthly lease payment on a luxury automobile, and to pay for airfare, dry cleaning, hotels, restaurants and meals, payroll, and insurance costs.  Moreover, to conceal his scheme, and despite repeated requests to AVENATTI, as Victim-1’s lawyer, for assistance in obtaining the book payment that Victim-1 believed was missing, AVENATTI led Victim-1 to believe that Victim-1’s publisher was refusing to make the payment to the literary agent, when, as AVENATTI knew, the publisher had made the payment to the literary agent, who had then sent the money to AVENATTI pursuant to AVENATTI’s fraudulent instructions.

AVENATTI, 48, of Los Angeles, California, is charged in the fraud and aggravated identity theft indictment with one count of wire fraud, which carries a maximum penalty of 20 years in prison, and one count of aggravated identity theft, which carries a mandatory term of imprisonment of two years in addition to the sentence imposed for the wire fraud charge. 

AVENATTI is charged in the extortion indictment with one count of conspiracy to transmit interstate communications with intent to extort, which carries a maximum penalty of five years in prison, one count of conspiracy to commit extortion, which carries a maximum penalty of 20 years in prison, one count of transmission of interstate communications with intent to extort, which carries a maximum penalty of two years in prison, and one count of extortion, which carries a maximum penalty of 20 years in prison.  

The maximum potential sentences in both cases are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. 

Mr. Berman praised the work of the FBI and the Special Agents of the United States Attorney’s Office for the Southern District of New York, and noted that the investigation is ongoing.

 [1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth below constitute only allegations, and every fact described should be treated as an allegation.