Chief Financial Officer Of Furniture Company Sentenced To Two Years In Prison For Accounting Fraud Against Bank, And Gas City, Indiana

   Preet Bharara, the United States Attorney for the Southern District of New York, announced that NORMAN D’SOUZA, the former chief financial officer and vice president of finance of a New Jersey-based furniture wholesaler and retailer (“Company-1”) and an Indiana-based furniture manufacturer affiliated with Company-1 (“Company-2”) (collectively, the “Companies”), was sentenced yesterday to two years in prison for orchestrating a fraudulent scheme to obtain $17 million in loans from a commercial bank based in New York, New York (the “Bank”), and $1 million in municipal loans from Gas City, Indiana (the “City”).  D’SOUZA and his co-conspirators obtained this financing by making false statements and providing false and fraudulent documents concerning the Companies’ financial condition.  D’SOUZA pled guilty on April 1, 2016, before U.S. District Judge Ronnie Abrams, who imposed yesterday’s sentence.  

Manhattan U.S. Attorney Preet Bharara said:  “Norman D’Souza repeatedly misrepresented the financial condition of two companies to deceive a bank and a municipality into lending the companies millions of dollars.  He will now spend time in a federal prison for his crimes.”

According to the allegations contained in the criminal information to which D’SOUZA pled guilty, other documents filed in Manhattan federal court, and statements made in court proceedings:

From 2011 until September 2014, Company-1, through D’SOUZA and others, fraudulently induced the Bank into lending Company-1 millions of dollars by repeatedly making false and misleading statements about Company-1’s financial condition.  D’SOUZA falsely inflated Company-1’s sales and accounts receivable on “borrowing base certificates” and in financial statements that D’SOUZA provided to the Bank pursuant to loan agreements.  D’SOUZA used those falsely inflated sales and accounts receivable to mislead the Bank about Company-1’s true financial performance, which enabled Company-1 to secure and draw down a $17 million revolving credit facility from the Bank.  Company-1 ultimately defaulted on the loans issued by the Bank in September 2014.  At that time, the outstanding balance of the loans was approximately $16.99 million.

Separately, in 2012, the City offered loans and other financial incentives to Company-2 in return for Company-2’s agreement to operate a furniture factory in the City and employ local residents.  To secure this arrangement, among other things, D’SOUZA falsely inflated Company-2’s sales figures in financial statements provided to the City.  The false financial statements misled the City about Company-2’s true financial performance and enabled Company-2 to secure and draw down more than $1 million in loans from the City.  Company-2 ultimately defaulted on the loans issued by the City in September 2014, causing approximately 60 City residents to lose their jobs.  At that time, the outstanding balance of the loans was $1 million/

In addition to his prison term, D’SOUZA, 50, of Monmouth Junction, New Jersey, was sentenced to two years of supervised release, and ordered to pay forfeiture and restitution, both in the amount of $12,256,871.48.

Mr. Bharara praised the outstanding investigative work of the Federal Bureau of Investigation.

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorney Edward A. Imperatore is in charge of the prosecution.

Manhattan U.S. Attorney Announces Charges Against Two Individuals In Connection With Bribery And Kickback Scheme To Secure Business From A Nonprofit Health Organization

   Preet Bharara, the United States Attorney for the Southern District of New York, and Philip R. Bartlett, Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced the unsealing of charges today against NIMESH PATEL, a former information technology employee at a large national nonprofit organization (the “Society”) and DILIP VADLAMUDI, the owner of an information technology outsourcing company located in Indiana, for engaging in a bribery and kickback scheme.  PATEL was arrested this morning in New Jersey, and was presented today before United States Magistrate Judge Katharine H. Parker.  VADLAMUDI was arrested this morning in Indiana, and was expected to be presented US v. Patel and Vadlamudi indictment.pdftoday before a Magistrate Judge in Indianapolis. 

U.S. Attorney Preet Bharara said:  “As alleged, the defendants conspired to defraud a national nonprofit organization.  Patel allegedly abused his position at the nonprofit to funnel millions in fees to Vadlamudi’s company in exchange for hundreds of thousands in kickbacks.  Thanks to the investigative work of the U.S. Postal Inspection Service, the defendants’ alleged fraud scheme has been put to an end.”

USPIS Inspector-in-Charge Philip R. Bartlett said:  “These individuals took advantage of their business relationship by devising a scheme to ‘fatten their wallets,’ while having no regard for the victimized nonprofit organization.  Postal Inspectors will always be on the forefront of bringing criminals to justice for their greedy misdeeds against the American public.”

As alleged in the Indictment unsealed today in Manhattan federal court:[1]           

The Society is a large nonprofit health care organization with national headquarters in Westchester, New York.  PATEL was employed as a senior director in the information technology group at the Society.  During the time PATEL worked at the Society, he signed acknowledgements of its conflict-of-interest policy, which prohibited employees from soliciting or accepting payments from any individual or organization that had business with the Society.  VADLAMUDI owned a company headquartered in Indiana (“VADLAMUDI Company-1”) that, among other things, acted as a temporary staffing company for information technology (“IT”) professionals.  VADLAMUDI Company-1 had a contract with the Society pursuant to which Society employees, including PATEL, were authorized to hire temporary employees on behalf of the Society from VADLAMUDI Company-1.

From in or about October 2012 through in or about September 2014, PATEL hired numerous temporary IT employees from VADLAMUDI Company-1, which caused the Society to pay VADLAMUDI Company-1 millions of dollars in fees.  During that same time period, VADLAMUDI paid PATEL approximately $274,000 in kickbacks.  PATEL and VADLAMUDI exchanged emails regarding this kickback scheme.  For instance, on a regular basis PATEL and VADLAMUDI exchanged spreadsheets listing the names of VADLAMUDI Company-1 temporary IT employees hired by the Society, along with a kickback amount calculated per employee.

In order to make payments to PATEL, VADLAMUDI used a bank account associated with a different company he controlled to transfer approximately $274,000 to the bank account for a shell corporation set up by PATEL.  PATEL used that money for his personal expenses, including $80,000 toward a down payment on his residence and over $100,000 transferred into his personal bank account.

When the Society conducted an investigation into allegations of bribery and kickbacks in the IT department in the fall of 2014, PATEL falsely denied receiving money from VADLAMUDI.

PATEL, 45, of Woodcliff Lake, New Jersey, and VADLAMUDI, 45, of Carmel, Indiana, are both charged in three counts: one count of conspiracy to commit honest services wire fraud; one count of conspiring to violate the Travel Act; and one count of conspiring to commit money laundering.  Counts One and Three each carry a maximum sentence of 20 years in prison.  Count Two carries a maximum sentence of five years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Bharara praised the work of the USPIS.   

This case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorney Richard Cooper is in charge of the prosecution.   

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

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[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.

A.G. Schneiderman Announces $19.5 Million Multi-State Agreement With Bristol-Myers Squibb To End Deceptive Advertising Practices And Off-Label Promotion Of Drug Used To Treat Schizophrenia

   Attorney General Eric T. Schneiderman announced today a $19.5 million multistate agreement with Bristol-Myers Squibb (“BMS”) arising from alleged improper marketing and promotion of the drug Abilify. New York’s share of the settlement is $788,774.  Abilify is one of several second-generation antipsychotic prescription drugs, commonly referred to as “atypical antipsychotics,” that were originally used to treat schizophrenia.  The agreement is signed with 41 other State Attorneys General and the District of Columbia.

“Drug companies should not market their drug for off-label uses or make claims that are not supported by scientific evidence,” Attorney General Schneiderman said.  “Consumers must be able to rely on their doctor’s advice for medication without having to worry about drug companies manipulating their advertising to promote their products at the expense of patients.”  

Abilify is the brand name for the prescription drug aripiprazole.  It was originally approved by the U.S. Food and Drug Administration (“FDA”) for the treatment of schizophrenia in 2002.  Since then, the FDA has approved various formulations of Abilify for other indications. 

In a complaint filed today in New York County Supreme Court, Attorney General Schneiderman alleges that BMS engaged in off-label marketing, which is the promotion of drugs for uses that are not FDA approved.  BMS improperly promoted Abilify for pediatric use and for use in elderly patients with symptoms consistent with dementia and Alzheimer’s disease.  In fact, in 2006, Abilify received a “black box” warning stating that elderly patients with dementia-related psychosis who are treated with antipsychotic drugs have an increased risk of death.  The complaint further that BMS violated state consumer protection laws by misrepresenting and minimizing risks of the drug including metabolic and weight gain side effects and by misrepresenting the findings of scientific studies.

The consent decree contains strong injunctive terms prohibiting BMS from:

• Promoting Abilify for off-label uses;
• Making false or misleading claims about Abilify;
• Compensating health care providers for merely attending a promotional activity for Abilify;
• Promoting Abilify by highlighting selected symptoms instead of diagnoses without reference to the FDA-approved indications;
• Using medical education grants, including Continuing Medical Education  grants, or any other type of grant to promote Abilify;
• Rewarding health care providers with grants based on their prescribing habits;
• Providing samples of Abilify to health care providers whose clinical practices are inconsistent with Abilify’s FDA-approved label.

States participating in the settlement include: Alabama, Arkansas, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Texas, Vermont, Washington, West Virginia, and Wisconsin. 

A.G. Schneiderman Announces $1.6 Million Settlements With Auto Dealerships That Illegally Charged Thousands Of Customers For Hidden Purchases

Settlements Conclude Investigations By A.G. Finding Dealerships In Staten Island And Floral Park Unlawfully Charged More Than 2,500 Consumers For Undisclosed Products, Services Costing Up To $2,000 Per Consumer; Dealerships Must Pay Restitution, Barred From Selling ‘After-Sale’ Items 

Since 2015, A.G. Schneiderman Has Obtained More Than $17 Million In Restitution, Penalties For More Than 22,000 Consumers Illegally Charged By Auto Dealerships For Hidden Products, Services

  Attorney General Eric T. Schneiderman today announced the settlement of a lawsuit against SG Hylan Motors Corp., a Staten Island dealership doing business as Staten Island Honda and Staten Island Nissan (collectively “SG Hylan”) and a separate settlement with Best Auto Outlet, Inc. (“Best Auto”) located in Floral Park.  The SG Hylan settlement resolves a lawsuit filed by the Attorney General in July 2016, which alleged that these auto dealerships unlawfully sold “after-sale” products and services, including credit repair and identity theft protection services, to over 2,300 consumers, sometimes exceeding a cost of $2,000 per consumer.  The settlement requires SG Hylan to pay $1.5 million in restitution to these consumers. The agreement with Best Auto, which returns $115,000 in restitution to consumers, concludes an investigation into this dealership for similar misconduct – alleged unlawful sale of credit repair and identity theft prevention services, and other “after-sale” items to over 200 consumers. 

“When consumers shop for a car, they deserve an honest and fair negotiation – and not to be misled by deceptive dealerships looking to saddle customers with hidden costs,” Attorney General Schneiderman said. “My office will continue to investigate and hold accountable any auto dealers trying to pad their pockets by charging fees for undisclosed products and services that consumers do not need and did not ask for.” 

Each agreement requires payment into a restitution fund to be distributed to consumers with CFI contracts. SG Hylan must also pay $100,000 in penalties, and Best Auto must pay $10,000 in penalties.

Under the settlements, the dealerships are prohibited from:

• Selling, offering to sell or marketing credit repair and identity theft services in connection with the sale or lease of a vehicle;
• Selling, offering for sale, or providing to consumers any after-sale product or service unless, prior to such sale, certain material terms, including price, are disclosed verbally and in writing;
• Misrepresenting the price of the vehicle in final lease or sale contracts;
• Failing to provide consumers with sales or lease agreements that clearly and conspicuously itemize each after-sale product or service and its price.

These settlements are part of the Attorney General’s initiative to end the practice that automobile dealers call “jamming,” or charging consumers for hidden purchases. In 2015, Attorney General Schneiderman announced a settlement with Credit Forget, Inc., the company that purported to provide the credit repair and identity theft protection services. Since 2015, the Attorney General has settled with 11 dealerships for amounts totaling over $17 million in restitution and penalties. Over 22,000 consumers have been eligible for restitution under these settlements. 

The settlements include the following dealerships:

• Paragon Auto Dealership:  a group of automobile dealers in Queens and Westchester counties, including Paragon Honda, Paragon Acura, and White Plains Honda
• Plaza Auto Dealership: a group of dealers located on Nostrand Avenue, Brooklyn, including, Plaza Toyota-Plaza Scion, Plaza Hyundai, Plaza Honda and Acura of Brooklyn
• Manfredi Auto Dealership:  a group of dealers located on Hylan Blvd, Staten Island, including Manfredi Fiat and Fiat of SI, Manfredi Mitsubishi, Manfredi  Kia, Manfredi Hyundai, Manfredi Cadillac, Manfredi Chrysler Jeep & Dodge, Manfredi Fiat Inc., S.I. Toyota, Manfredi Toyota and Manfredi Scion, Manfredi Subaru, Manfredi Mazda and Staten Island Subaru
• Koeppel Auto Dealership: a group of dealers located in Jackson Heights, Long Island City and Woodside, Queens, including Koeppel Nissan, Inc.; LK Automotive Enterprises, LLC. d/b/a Koeppel Subaru, KL Auto Enterprises LLC. d/b/a Koeppel Mazda and Koeppel Volkswagen, Inc.
• I. Autoworld, Inc. d/b/a Generation Kia: located in Bohemia, Long Island
• Nissan 112:   located in Patchogue, Long Island
• Huntington Honda, Honda of New Rochelle and New Rochelle Toyota: located on Long Island and in Westchester counties
• Westbury Jeep Dodge and Fiat of Westbury: located in Westbury, Long Island
• Security Auto Sales, Inc. d/b/a Security Dodge: located in Amityville, Long Island

The office is continuing to investigate a number of other New York auto dealers that sold or sell after-sale services without the knowledge and consent of consumers. 

Consumers who believe they have been jammed with unwanted products or services in connection with a vehicle lease or purchase or who were sold Credit Forget It’s credit repair or identity theft protection services are urged to file complaints online or call 1-800-771-7755.

Statement from New York City Comptroller Scott M. Stringer on the Tragic Explosion at a Bronx Homeless Shelter

  “This stirs up incredibly difficult emotions. What heartbreaking news. It’s another tragic day for the city, with more tragic news for those who need our help most.

“We’ve lost two more of our youngest, most vulnerable New Yorkers. It comes as the homeless population has just reached yet another record high, and the number of children in the DHS system is soaring. We have to do better.

“We will ask questions and work to get answers about what happened here—transparency is key. But for now, these children are in my family’s thoughts. It’s a sad day.”

Following Tragedy, Comptroller Stringer Calls on the City to Create a Roadmap to Tackle Homelessness

After promising to phase out both “cluster sites” and commercial hotels, the City is making little progress on both 

With over 13,000 open violations, "cluster site" shelters remain dangerous for our children

Department of Homeless Services dramatically escalating the use of commercial hotels, costing hundreds of millions of dollars

  

  Following the tragic death of two children in the Bronx yesterday, New York City Comptroller Scott M. Stringer today called for the City to release a roadmap to solving the homelessness crisis.

“I am outraged by the deaths of these children. What a horrifying loss. My heart goes out to this family in this time of unimaginable pain,” New York City Comptroller Scott M. Stringer said. “I’m calling on the City to release a roadmap to tackle our homeless crisis. Cluster sites are known to be dangerous. Hotels are extraordinarily expensive and provide limited services. These options make no sense. That’s why we need a clear, transparent, public plan. While I know that progress will take time, we cannot continue to accept the status quo. The City promised to end its reliance on both of these forms of shelter – and we are no doubt trending in the wrong direction.”

As the deaths of two young children in the Bronx yesterday highlighted, “cluster sites” – buildings that have a mix of renters and DHS clients – can be extremely dangerous for homeless families. Many of these rooms are within buildings owned by notoriously bad landlords, a problem the City has known about for years. Currently, cluster sites not previously identified for closure have more than 13,000 open violations – including nearly 1,000 that are “high priority” and especially dangerous.

Currently, roughly 280 of the over 600 buildings that are used to house homeless New Yorkers – or 42 percent – contain cluster sites for families with children. At 720 Hunts Point Avenue, the location of yesterday’s tragedy, there are over 60 open HPD and DOB violations.

In January 2016, the City pledged to phase out thousands of units in the cluster program within three years. Yet, the city has made minimal progress towards that goal and the public has no timelines or milestones upon which to judge the agency’s approach.

New data also shows DHS’ use of commercial hotels is soaring. Because of a lack of a roadmap, in the letter to HRA Commissioner Steven Banks, Comptroller Stringer outlined his deep concerns with greatly expanding the approved capacity for hotel use:

• 2,629 hotel units for families with kids.
• 225 hotel units for adult families.
• 1,075 beds for single adults.
• The total cost of the most recent hotel escalation: over $217,000,000.

New cost numbers show the soaring price-tag for commercial hotels:

• Commercial hotel units cost about $6,600 per month, or almost $79,000 per year – nearly double the cost for any other shelter type.
• Yet, often, commercial hotel shelters have more limited services than other types of shelter, like child care service for families.
• These hotels are also known to be less secure than traditional shelters.
• Furthermore, hotel units lack kitchens and provide less privacy – making them inappropriate for families to live in long-term.

Comptroller Stringer also questioned if DHS had a comprehensive plan to address our City’s homelessness crisis. He specifically asked the City to answer:

• How the City plans to phase out the use of “cluster site” shelters by the end of 2018, and if it was on track to do so;
• If, given DHS’ request to dramatically expand the use of commercial hotels, the Administration’s policy was still to end using this type of shelter.
• Whether the City had offered security services to every commercial hotel used as a shelter, what those services entail, if the hotels had accepted, and if the City had stopped using any hotels that declined security services.

Over the last year, audits, investigations, and reports from Comptroller Stringer’s office have highlighted deplorable shelter conditions, the use of unsafe commercial hotels to house the homeless, and unregulated shelter-based childcare centers that put children at risk.

CRESPO AND DIAZ ANNOUNCE NEW APPLIANCES FOR NYCHA RESIDENTS

Assemblyman Marcos Crespo and Senator Ruben Diaz worked to secure  $3 Million in funding for New York City Housing Authority Improvements

    Assemblyman Marcos A. Crespo, Chair of the Assembly Puerto Rican Hispanic Task Force and member of the Speaker’s Anti-Poverty Working Group has announced that thanks to funding he helped secure through the 2016-17 State Budget, residents of housing developments in the Bronx will be receiving new appliances.  The upgrade to new appliances comes a few weeks before Christmas, Hanukkah and end of year celebrations.

According to Assemblyman Marcos A. Crespo: “I am proud to be able to deliver critical funding for the developments in my district including providing over $500,000 for new appliances for the residents of Stebbins and Bronx River housing developments.”

In addition, Assemblyman Crespo said: “This is part of my ongoing work to improve our communities and quality of life for all its residents.  Safe, decent and affordable housing is the bedrock to achieving such goals.”  

“These investments in Stebbins-Hewitt and Bronx River Houses will improve quality of life for hundreds of residents,” said NYCHA General Manager Michael Kelly. “Brand-new appliances, like stoves and refrigerators, will improve residents’ kitchens and cooking experiences for the long term. We thank the Assembly Member for his commitment to strengthening these communities with these in-home upgrades.”

Norma Saunders, President of the Bronx River Houses Tenant Association made the following remarks: "They say that when you practice gratefulness, there is a sense of respect towards others. This quote is exactly who Assemblyman Marcos Crespo and Senator Rev. Ruben Diaz Sr. represents They are providing new appliances for our seniors in both senior buildings at Bronx River Houses. This is much needed and much appreciated by the seniors and the Resident Association."

Ray Serrano President for the Resident Association of Stebbins Hewitt said: "It was definitely a pleasant surprise to our residents from Stebbins Hewitt Houses to receive new stoves and refrigerators this week. As resident leader I appreciate the fact that NYCHA with the help of Marcos Crespo recognize that the stoves and refrigerators we previously had in our apartments or substandard. One of our residents stated "the stove I had previously had two burners that did not light and I was constantly worried if there was a gas leak. Now I do not have to worry about that. I guess I could call it an early Christmas gift. Thanks NYCHA for stepping up!”

Under the Leadership of Assembly Speaker Carl E. Heastie, the Assembly Majority fought hard to secure much needed capital funding for the public housing developments owned and operated by New York City House Authority (NYCHA). 

While the residents of Stebbins – Hewitt are already in the process of receiving the delivery of new appliances, On Friday, December 9th at 3:30PM, Assemblyman Crespo, and NYCHA staff met with the residents of 1350 Manor Avenue of the Bronx River Houses Senior Buildings to announce their delivery schedule.

Above and Below - Assemblyman Marcos Crespo went to the residents with NYCHA officials to personally let the residents know that they were to receive a new stove and refrigerator providing the appliances had not been already replaced in the past five years. The residents thanked Assemblyman Crespo for his help, while informing him of other problems at the houses that the assemblyman and his staff will look into.

2016 New Year's Eve Party in the Heart of Times Square

BP DIAZ STATEMENT ON TODDLERS DEATH IN CLUSTER HOMELESS SHELTER

  "The cluster homeless shelter program has been broken for a long time and should have been eliminated years ago," said Bronx Borough President Ruben Diaz Jr. "There is an undeniable homelessness crisis in this city, and the city must initiate an aggressive reform in the shelter system to provide humane, clean and safe spaces for our most vulnerable residents during a difficult time.

“This is why Councilmember Rafael Salamanca will be introducing legislation, at my behest, to prevent the City of New York from leasing space in buildings that have outstanding C-level violations or stop-work orders; including hotels, motels, cluster-sites, and shelters; used for the purpose of housing homeless individuals or families.

“I will continue to work with all of my partners in government to identify the bad actors in our shelter system, in order to protect our most vulnerable residents.”