Investment Adviser Pleads Guilty In Manhattan Federal Court To Insider Trading

   Preet Bharara, the United States Attorney for the Southern District of New York, announced that DAVID HOBSON, who served as an investment adviser in the Providence, Rhode Island, offices of two different national broker-dealer and investment advisers (“Brokerage Firm-1” and “Brokerage Firm-2”), pled guilty to engaging in a scheme to commit insider trading in connection with deals involving a pharmaceutical company (the “Pharma Company”) at which Michael Maciocio, HOBSON’s friend and client, worked.  Maciocio, who had been employed by the Pharma Company, regularly possessed material, nonpublic information (“Inside Information”) concerning pending acquisitions and transactions under consideration by the Pharma Company.  From at least 2008 through April 2014, Maciocio breached his duty of confidentiality to the Pharma Company by providing Inside Information about potential acquisitions and transactions to his friend and long-time broker, HOBSON.  HOBSON, in turn, used the Inside Information to execute profitable securities trades for himself, for Maciocio, and for other clients of HOBSON’s.  

U.S. Attorney Preet Bharara said:  “As he admitted today, David Hobson exploited inside information provided by his friend and client Michael Maciocio to reap illegal profits for both of them.  With Maciocio’s earlier guilty plea, both participants in this illegal insider trading scheme have now admitted to their crimes.  Insider trading rigs the markets, and through prosecutions like this, we seek to make the securities markets fair.”

According to the allegations in the charging documents, including the Information and Indictment, and statements made in court proceedings:

From in or about May 2008 through in or about April 2014, Maciocio and HOBSON participated in a scheme to commit insider trading in advance of and in connection with acquisitions and transactions under consideration by the Pharma Company.  Maciocio and HOBSON were childhood friends and HOBSON had served as Maciocio’s investment adviser and broker for many years.

 Maciocio learned about the impending transactions through his role as a Master Planner in the Active Pharmaceutical Ingredient Supply Chain Group at the Pharma Company.  In that role, Maciocio was tasked with evaluating manufacturing demands and capacity within the Pharma Company, and was consulted about potential acquisitions, to assist in determining whether the Pharma Company would be able to manufacture any new product in-house.  Although Maciocio was not typically provided with the name of the target acquisition, he used the Inside Information he received – including the Pharma Company’s code name of the acquisition, the drug indication, the dosage, the phase of any clinical trial, and the chemical structure of the drug – to uncover the true identity of the target company.  He was at times aided in this task by HOBSON.

Having learned the Inside Information about these impending transactions, Maciocio, in breach of fiduciary duties and other duties of trust and confidence owed to the Pharma Company, traded on his own behalf and tipped HOBSON so that HOBSON could use the information to trade both for himself and for Maciocio.  HOBSON also used the Inside Information to trade in other of his clients’ accounts, first at Brokerage Firm-1 and later at Brokerage Firm-2.

HOBSON used the Inside Information that he received from Maciocio to make profitable trades in, among other securities: Medivation, Inc., Ardea Biosciences, Inc., and Furiex Pharmaceuticals, Inc.  As a result of the scheme, HOBSON reaped more than $350,000 in ill-gotten gains for himself, for Maciocio, and for certain of HOBSON’s other clients.  

HOBSON, 47, pled guilty to one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense; and to one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5 million or twice the gross gain or loss from the offense;

Maciocio, 46, pled guilty on May 20, 2016, to one count of conspiracy to commit securities fraud, one count of conspiracy to commit wire fraud, and two counts of securities fraud.  Count One carries a maximum sentence of five years in prison.  Counts Two through Four each carry a maximum sentence of 20 years in prison.  The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.  

The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentences for the defendants will be determined by the judge.

Mr. Bharara praised the work of the FBI, and thanked the SEC.

The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations.  Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants.  For more information on the task force, please visit www.StopFraud.gov.

Managing Director Of Venture Capital Firm Sentenced In Manhattan Federal Court In Connection With Multimillion-Dollar Ponzi Scheme

  Preet Bharara, the United States Attorney for the Southern District of New York, announced that GREGORY W. GRAY, JR., was sentenced today in Manhattan federal court to two years in prison for securities fraud and perjury charges stemming from his scheme to defraud an investor of approximately $5 million to cover up his mismanagement of other investor funds.  GRAY pled guilty on December 23, 2015, and was sentenced today by United States District Judge Sidney H. Stein.

Manhattan U.S. Attorney Preet Bharara said:  “Gregory Gray deceived investors, claiming he would use their funds to buy shares of high-flying technology companies like Twitter and Uber.  In reality, Gray did not make the investments he said he would, and later used new investor funds to pay back earlier investors.  In an attempt to cover his tracks, Gray then lied about his investments to the SEC.  Today, his federal crimes have led to a sentence of imprisonment.”

According to the allegations contained in the Information, the underlying criminal Complaint, and other statements made during court proceedings:

From at least in or about April 2014 through in or about February 2015, GRAY engaged in a Ponzi scheme to defraud investors who believed they had invested in funds GRAY controlled at Archipel Capital, LLC (“Archipel”), where GRAY was the Senior Managing Director.

Previously, from in or about June 2012 through in or about November 2013, GRAY raised over $5.2 million, from approximately 52 investors, for four Archipel “Social Media Funds.”  GRAY promised to use that capital to purchase shares of Twitter before the company’s initial public offering (“IPO”).  Based on GRAY’s representations to investors, GRAY promised to purchase over 200,000 pre-IPO Twitter shares.

GRAY frequently comingled funds between the various Archipel investment vehicles that he managed.  Ultimately, GRAY’s withdrawals from the Social Media Funds left those funds with insufficient money to purchase the full complement of pre-IPO Twitter shares he had promised investors.

On or about November 6, 2013, Twitter had its IPO and began trading on the New York Stock Exchange.  At that time, contrary to his representations to investors, GRAY had purchased only 80,000 pre-IPO Twitter shares for a total cost of $1,875,000.  GRAY accordingly owed his investors millions of dollars’ worth of Twitter shares.

In an attempt to make up the shortfall of Twitter stock, in or about April 2014, GRAY persuaded Investor-1 to invest $5 million in Archipel’s “Late Stage Fund,” which GRAY also controlled.  GRAY promised that, through that fund, he would use Investor-1’s $5 million investment to purchase a purported multimillion-dollar, privately held allotment of Uber shares.  However, instead of using the $5 million as promised, GRAY instead used the money to make cash payments to investors in the Social Media Funds and to purchase post-IPO Twitter shares for those same investors, including Investor-1 himself.

When Investor-1 requested documentation of the purchase of Uber shares as promised, GRAY provided Investor-1 with a fabricated stock transfer agreement (the “Uber Stock Transfer Agreement”) that purported to show that the Late Stage Fund had purchased 175,438 Uber shares.  In truth and in fact, and as GRAY well knew, the fund had not purchased any Uber shares.

On or about February 24, 2015, GRAY gave sworn testimony to the SEC.  During his testimony, GRAY falsely stated, in substance and in part, that the Uber Stock Transfer Agreement reflected a bona fide purchase of Uber shares by the Late Stage Fund.

In addition to the prison sentence, GRAY, 41, was sentenced to three years of supervised release.  The Court further ordered that GRAY forfeit $5,000,000 and pay $5,000,000 in restitution.

Mr. Bharara praised the work of the Federal Bureau of Investigation, and thanked the SEC for its assistance. 

The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations.  Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants.  For more information on the task force, please visit www.StopFraud.gov.     

A.G. Schneiderman And NYSP Superintendent Beach Announce The Takedown Of Six Major Narcotics Trafficking Kingpins And Their Associates In “Operation Jailhouse Rock”

Ringleader Orchestrated His Cocaine Trafficking From Federal Prison Using A Smuggled Cellphone

20 Kilos Of Cocaine & Heroin Seized Including Kilos Sent Through The U.S. Mail

14 People Indicted In Cocaine & Heroin Trafficking Ring That Spanned New York, Massachusetts, North Carolina, Florida And Puerto Rico

Schneiderman: We Will Not Tolerate Drug Kingpins Trafficking Narcotics Into New York

   Attorney General Eric T. Schneiderman and New York State Police (NYSP) Superintendent George Beach announced today the indictment of 14 people for their roles in an alleged narcotics trafficking kingpin that spanned New York, Massachusetts, North Carolina, Florida, and Puerto Rico.

The yearlong investigation, dubbed “Operation Jailhouse Rock,” seized more than 20 kilos of cocaine and heroin, including kilos that were sent through U.S. mail, by four distinct large-scale trafficking operations connected by New York-based distributors. The total street value of the narcotics seized in the bust is approximately $1.53 million.

One of the ringleaders directed traffic via a contraband cellphone while serving out a ten-year remainder of a federal drug trafficking sentence in Florida. 

“This bust should send a clear message to dealers and traffickers that we will not tolerate drug kingpins brazenly trafficking narcotics into our state,” said Attorney General Schneiderman. “My office will use every tool at our disposal to root out criminal drug operations and get dangerous narcotics off our streets. I want to thank the New York State Police for all of their help in bringing these defendants to justice.”

State Police Superintendent George P. Beach II said, “I want to thank the Attorney General’s Office and our federal and local partners for their collaboration on this case. Because of this extensive cooperation between law enforcement agencies, we have disrupted a major drug trafficking operation and put 14 individuals behind bars. This case sends a strong message that we will not tolerate those who bring these dangerous drugs into our communities. “

The indictment, unsealed today in Bronx County Supreme Court Part 60, before Justice Steven Barrett, detailed a sophisticated distribution ring that moved cocaine from Puerto Rico to New York and other states, which was ultimately distributed across the eastern seaboard. Kilograms of cocaine were also sent through the mail hidden in boxing equipment and statues of Santa Maria destined for “catcher” or recipient locations in Brooklyn, Queens and the Bronx. The heroin was transported and recovered in multiple states hidden in concealed compartments, also called “traps.”

The investigation utilized confidential informants, wiretaps, physical and video surveillance and strategic interceptions of narcotics carried out prior to their ultimately delivery destination. In the wiretaps, the defendants can allegedly be heard discussing methods of transportation, packaging, and tracking numbers and recipient names and addresses for the shipments sent through the mail.  Intercepted conversations also included conversations between the distributors and their “testers” who would discuss how well the cocaine “cooked” into crack cocaine and what their assessment was of the quality of the heroin once it was ingested. 

Those charged as major traffickers include:

• Angel Melendez Orsini (36), Miami Federal Prison
• Francisco Vega Vasquez (51), Caguas, PR
• Francisco Vega Cancel (26) Cidra, PR
• Juan Rodirguez (50) Bronx, NY
• Edwin Vega (40) Bronx, NY
• Jan Santiago Garcia (38) San Juan, PR

Others indicted include:

• Mayolo Toxqui (36) Bronx, NY
• William Estrada (37) Bronx, NY
• Juan Javier Rivera (38) Winter Haven, Fl
• Wilber Marquez Torres (31) Richmond Hill, NY
• Ramon Amaro (46) Bronx, NY
• Jamille Nelly Nieves (42) Carolina, PR
• George Suggs (54) Bronx, NY
• Victor Holloway (53) Kinston, NC

Those charged as major traffickers could face up to life in prison if convicted. All others could face up to 20 years in prison if convicted.

The investigation was conducted by OCTF Investigator Brian Fleming together with Supervising Investigator Paul Grzegorski and The New York State Police Special Investigations Unit, members of Troop K and C-NET. OCTF investigators are supervised by Deputy Chief Christopher Vasta. The Attorney General’s Investigations Bureau is led by Chief Investigator Dominick Zarrella. 

Several additional agencies assisted in the investigation, including the Drug Enforcement Agency, United States Postal Inspectors, Army Air National Guard, Virginia State Troopers, Deputy Warden Stevie Knight of the Federal Correctional Institution Miami, Orange County (Florida) Sheriff’s Office, United States Marshal Service, Bronx County District Attorney Darcel Clark, the New York City Police Department, and the Pennsylvania Attorney General’s office.

The case is being prosecuted by OCTF Assistant Deputy Attorney General Howard Feldberg. Deputy Attorney General Peri Alyse Kadanoff runs the Organized Crime Task Force.

The charges against the defendants are accusations and the defendants are presumed innocent unless and until proven guilty in a court of law.

A.G. Schneiderman Announces $12 Million Settlement With Draftkings And Fanduel

Each Company Agrees To Pay $6 Million For Repeated False Advertising Violations In New York; Year-Long Investigation Found That Both Companies Had Consistently Misled Consumers In Advertisements

Companies Agree To Sweeping Marketing Reforms, Including Enhanced Disclosure To Users About Terms and Conditions Of Marketing Promotions, Expected Winnings, And Rates Of Success

Schneiderman: Today’s Settlement Makes It Clear That No Company Has A Right To Deceive New Yorkers For Its Own Profit

   Attorney General Eric T. Schneiderman announced that his office has reached separate $6 million settlements – for a total of $12 million in penalties and costs - with DraftKings and FanDuel, resolving lawsuits alleging false and deceptive advertising practices by the companies. The settlement agreements impose the highest New York penalty awards for deceptive advertising in recent memory. The agreements also require sweeping reforms to the companies’ marketing, including clear disclosure of terms and conditions for marketing promotions, expected winnings, and expected performance in the online contests, as well as resources for players at risk for compulsive gaming disorders, including addiction. Furthermore, the companies will be required to maintain a webpage that provides information about the rate of success of users in its contests, including the percentage of winnings captured by the top 1%, 5% and 10% of players.

Attorney General Schneiderman said, “Today’s settlements make it clear that no company has a right to deceive New Yorkers for its own profit. DraftKings and FanDuel will now be required to operate with greater transparency and disclosure and to permanently end the misrepresentations they made to millions of consumers. These agreements will help ensure that both companies operate, honestly and lawfully in the future.”  

The Attorney General’s investigation found, among other violations, that the companies:

• Misled casual and novice players about the substantial advantages of high-volume and professional players, which included using automated computer “scripts” and sophisticated statistical and game theory strategies;
• Gave false and misleading statistics in marketing and advertising about the likelihood that players will win cash prizes and earn a positive return on their entry fees (in fact, most players lost money over time);
• Deceptively promised to match a player’s initial deposit in marketing promotions, while providing a much less generous rebate on entry fees; and
• Marketed its contests as harmless fun, while failing to disclose the danger to populations at risk for compulsive gaming and addiction or provide responsible safeguards.

The agreements cover penalties for the deceptive advertising. The Attorney General’s Office reviewed and considered the financial condition of the companies in determining the amount and schedule for the settlement payments.

The settlement with FanDuel is available here and the settlement with DraftKings is available here. 

On March 21, 2016, the OAG reached a partial settlement with DraftKings and FanDuel, which required the companies to stop accepting entry fees in New York until the games became expressly legalized in New York State. The settlement allowed the OAG to continue to pursue claims of false and deceptive advertising against DraftKings and FanDuel.

On June 18, 2016, the State Legislature passed a bill legalizing and regulating Daily Fantasy Sports contests, which was signed into law on August 3, 2016.  Today’s settlement agreement resolves all outstanding claims against DraftKings and FanDuel by the OAG.

52nd Precinct Community Council Fellowship Breakfast

  The 52nd Precinct Community Council Fellowship Recognition Breakfast will be held on Friday, October28th, from 9:30 AM-12:30 PM at Monroe College, 2501 Jerome Avenue.

You can RSVP from October 22 to 27th to Brenda Caldwell-Paris 917-650-0620, Grace Seimer 718-220-3183, Sallie Caldwell 718-367-3066 or the 52 Precinct Community Affairs Office 718-220-5824, with PO Reveron, Puente, and Cortez.

Assemblyman Jeffrey Dinowitz and Senator Jeff Klein Allocate Over a Quarter Million Dollars in State Funding to High School of American Studies at Lehman College

Senator Jeff Klein, and Assemblyman Jeffrey Dinowitz awarded High School of American Studies at Lehman College over a quarter of a million dollars in state funding on October 25^th to improve this top school. High School of American Studies, a specialized high school, serves many gifted students from the community and from throughout the city. As the school approaches its 15^th anniversary, it is considered one of the best high schools in the country.

Senator Klein and Assemblyman Dinowitz allocated a combined $270,000 in state funding. The $145,000 from the State Senate will allow the school to build retractable walls in some of its larger rooms. The $125,000 from the State Assembly will be used for furniture, laptops, and various high tech pieces of equipment.

“I am so proud of High School of American Studies and all of its students, teachers, staff and principal. The school has achieved amazing success and I am pleased that I was able to secure funding to help enhance the education of these great students,” said Assemblyman Jeffrey Dinowitz.

“As the High School of American Studies nears its 15^th anniversary I am excited to work to ensure that the coming years are as successful as the past.  Over the years the high school has demonstrated great success in educating students from The Bronx and across the city.  These improvements will allow teachers and staff to continue that mission,” said Senator Jeff Klein.

 Pictured are PA Co-President Alice Lee, President of Lehman College José L. Cruz, Assemblyman Jeffrey Dinowitz, Principal Alessandro Weiss, Senator Jeff Klein and PA Co President Unjoo Trebach.

Chancellor Fariña and Commissioner O’Neill Announce Expansion of Team Up! Tuesday Initiative

   Schools Chancellor Carmen Fariña and Police Commissioner James O’Neill attended a Team Up! Tuesday event at The Hunts Point Middle School in the Bronx today with officers from the 41st precinct and School Safety officers assigned to the school. They visited classrooms, participated in a restorative circle, and cheered on students and officers playing in a basketball game. 

Above - Chancellor Farina asks the opinion of students of the new Team Up Tuesday program.

Below - The Chancellor gets the opinion of one of the students. Both students and police officers liked the idea of getting to know one another better.

“Building strong community relationships from an early age is essential to ensuring that New Yorkers across the City are aware of the many supports available to them,” Mayor Bill de Blasio has said. “Team Up! Tuesday is an important opportunity for middle school students to connect with officers from their local precincts and strengthen relationships through engaging activities.” 

“Through Team Up Tuesday!, schools and precincts are coming together to make meaningful connections and build community,” said Schools Chancellor Carmen Fariña. “We’re thrilled to continue our partnership with the NYPD to support our students and officers as they collaborate and build relationships of mutual respect and support, and I look forward to bringing it to more schools next years.” 

“Team Up! Tuesday is one of many ways the Police Department and Department of Education work together and it is another opportunity to build meaningful relationships between students, teachers, and officers,” said Police Commissioner James P. O’Neill. “My cops are excited to continue building new relationships with students at middle schools in every borough.” 

These events introduce students to officers in their local precinct and provide an opportunity to hear directly from them about their personal experiences and will help build rapport. The expansion of Team Up! Tuesday also includes a new parent engagement component – schools are inviting families to participate in activities so the entire community is involved. As part of the ongoing effort to promote partnership between the school community and police, the DOE is encouraging schools to continue to build upon these new connections throughout the school year. 

Above - The Chancellor and police commissioner participated in the Restorative Circle where one at a time when given the Kouch Ball spoke about what they felt. Today the group used preprinted index cards with topics on them.

Below - It is the turn of one of the students to speak her mind on the subject on her card.

Above - It was Police Commissioner James O'Neill's turn to speak, as he holds up his card with his topic on it.

Below - Later, there was a press conference where the chancellor and police commissioner answered a few questions from reporters. I was able to say that as a former middle school Parent's Association President that there was a similar program years ago in middle schools which was discontinued. When I asked Commissioner O'Neill why the program was disbanded, he just spoke about the new program now in effect. 

Save the Senate By John Kasich Republican Governor of Ohio

The Democrats are just four seats away from winning a majority in the U.S. Senate, but we can stop them. At least half a dozen campaigns are too close to call and we need to do all that we can to win them and hold our majority!   If Hillary becomes president, it is vital that Republicans keep control of the United States Senate. Today, we're launching a Save the Senate campaign to raise the funds to ensure that our Republican team wins. I've been traveling the country doing everything I can to make sure down ballot Republicans win, but now I need your help.  Thank you for all that you’re doing to help. John Kasich Governor of Ohio EDITOR'S NOTE: The above comes from a man who pledged to honor and support the winner of the Presidential Republican Primary which Governor Kasich was a candidate. Not only did Governor Kasich lose badly, but John Kasich has not kept his word on supporting the Republican candidate for president. In fact John Kasich has gone out of his way to try to get Donald Trump removed as the Republican Party candidate for president. When his term of office expires the people of Ohio should not re-elect John Kasich.