Saturday, July 1, 2017
Statement Of Acting U.S. Attorney Joon H. Kim On Jury Verdict Finding 650 Fifth Avenue And Other Properties Forfeitable To The United States
“For over a decade, hiding in plain sight, this 36-story Manhattan office tower secretly served as a front for the Iranian government and as a gateway for millions of dollars to be funneled to Iran in clear violation of U.S. sanctions laws. In this trial, 650 Fifth Avenue’s secret was laid bare for all to see, and today’s jury verdict affirms what we have been alleging since 2008: that through all the efforts to sanction and isolate Iran, a state sponsor of terrorism, the owners of 650 Fifth Avenue gave the Iranian government a critical foothold in the very heart of Manhattan through which Iran successfully circumvented U.S. economic sanctions. The jury’s verdict finding forfeitable a building valued at over $500 million dollars, as well as other real estate and funds, represents the largest civil forfeiture jury verdict and the largest terrorism-related civil forfeiture in U.S. history. This verdict not only vindicates the exemplary work of all the career prosecutors and law enforcement partners who have doggedly pursued this case for almost a decade, but importantly, it also allows for substantial recovery for victims of Iran-sponsored terrorism.”
Acting Manhattan U.S. Attorney Announces Historic Jury Verdict Finding Forfeiture Of Midtown Office Building And Other Properties
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that a federal jury today found the 36-story office building at 650 Fifth Avenue (the “Building”), worth at least $500 million, and other real property and bank accounts forfeitable to the United States as proceeds of violations of the Iran sanctions and property involved in laundering the proceeds of those sanctions violations. The jury’s verdict, which represents the largest civil forfeiture jury verdict and the largest terrorism-related civil forfeiture in United States history, came after a five-week trial before the Honorable Katherine B. Forrest.
Acting U.S. Attorney Joon H. Kim said: “For over a decade, hiding in plain sight, this 36-story Manhattan office tower secretly served as a front for the Iranian government and as a gateway for millions of dollars to be funneled to Iran in clear violation of U.S. sanctions laws. In this trial, 650 Fifth Avenue’s secret was laid bare for all to see, and today’s jury verdict affirms what we have been alleging since 2008: that through all the efforts to sanction and isolate Iran, a state sponsor of terrorism, the owners of 650 Fifth Avenue gave the Iranian government a critical foothold in the very heart of Manhattan through which Iran successfully circumvented U.S. economic sanctions. The jury’s verdict finding forfeitable a building valued at over $500 million dollars, as well as other real estate and funds, represents the largest civil forfeiture jury verdict and the largest terrorism-related civil forfeiture in U.S. history. This verdict not only vindicates the exemplary work of all the career prosecutors and law enforcement partners who have doggedly pursued this case for almost a decade, but importantly, it also allows for substantial recovery for victims of Iran-sponsored terrorism.”
According to the allegations contained in the Complaint, Amended Complaint, and other filings in this case, and the evidence presented in Court during the trial:
Overview
The International Emergency Economic Powers Act (AIEEPA@) confers upon the President the authority to take certain actions, defined in 50 U.S.C. Section 1702, in response to declared national emergencies. Since 1995, the President has declared national emergencies with respect to the actions and policies of the Government of Iran through a series of Executive Orders. The Treasury Department’s Iranian Transactions Regulations (“ITR”), and Weapons of Mass Destruction Proliferators Sanctions Regulations, implement these Executive Orders. Pursuant to these Orders, and regulations, the provision of services to the Iranian Government has been illegal since 1995.
From before 1995 until the filing of the Government’s civil forfeiture action in 2008, the Alavi Foundation (“Alavi”), Assa Corp. (“Assa”), and the 650 Fifth Avenue Company, a partnership between Alavi and Assa to own the Building (the “Partnership”) were controlled by and provided numerous services to the Government of Iran, including managing the Building for the Iranian Government, running a charitable organization for the Iranian Government, and transferring rental income funds from the Partnership to Bank Melli, an Iranian owned government bank.
Alavi and the Building
Alavi is a New York non‑profit organization originally created by the Shah of Iran in the 1970s, under the name the Pahlavi Foundation, to pursue Iran’s charitable interests in the United States. The Building was constructed in the 1970s by Alavi, financed by a substantial loan from Bank Melli Iran (“Bank Melli”).
Following the Iranian revolution of 1979, the Islamic Republic of Iran established the Bonyad Mostazafan, also known as the Bonyad Mostazafan va Janbazan (“Bonyad Mostazafan”), to centralize, take possession of, and manage property expropriated by the revolutionary government. The Bonyad Mostazafan was created in or about March 1979 by order of the Ayatollah Khomeini and approved by the Revolutionary Council of the Islamic Republic of Iran, and is controlled by the government of Iran. The Bonyad Mostazafan sought to take control of the Shah’s property, including the assets of the Pahlavi Foundation. The Bonyad Mostazafan reports directly to the Ayatollah. The Bonyad Mostazafan assumed control of Alavi shortly after the revolution.
The Creation of Assa and the Partnership
In 1989, Alavi and Bank Melli formed the Partnership in order to avoid paying federal taxes on rental income from the Building. Bank Melli’s ownership interest in the Partnership, however, was disguised through the creation of two shell companies. Alavi transferred 35 percent of the Partnership to Assa, an entity wholly owned by Assa Co. Ltd. Assa Co. Ltd. is a Jersey, Channel Islands, United Kingdom, entity owned by Iranian citizens who represent the interests of Bank Melli. In conjunction with the transfer of the 35 percent interest in the Partnership to Assa, Bank Melli cancelled its loan on the Building. Several years later Assa received an additional 5 percent, leaving Alavi owning 60 percent of the Partnership, and Bank Melli owning 40 percent of the Partnership, through Assa and Assa Co. Ltd.
The decision to convert Bank Melli’s mortgage on the Building into a partnership interest in the Partnership was discussed and approved by high-level Iranian government officials. Among others, the head of the Bonyad Mostazafan (also the Deputy Prime Minister of Iran), the Office of the Prime Minister of Iran, the director of the Central Bank of Iran, and the general director of Bank Melli, as well as other Bonyad Mostazafan and Bank Melli officials, discussed and approved the partnership between Alavi and Bank Melli. After Alavi and Assa Corp. entered into the partnership agreement, a Bonyad Mostazafan official forwarded the agreement to the head of the Bonyad Mostazafan, noting that “the partnership is based on prior agreements between the Ministry of Finance, Bank Melli Iran, and the Bonyad Mostazafan, with the only change being the building will be valued at two million dollars less than as previously agreed. . . .”
The Partnership continued to distribute rental income from the Building to Bank Melli, concealed by the use of Assa as an intermediary, after it became illegal with the imposition of Iranian sanctions in 1995.
The Government of Iran’s Continued Control over Alavi
The Iranian Government’s control of Alavi continued after the creation of the Partnership and the imposition of the sanctions against Iran.
In 1991, the Supreme Leader of Iran, the Ayatollah Ruhollah Khomeini ordered that control of Alavi be transferred from the Bonyad Mostazafan to the Iranian Ambassador to the United Nations. According to the minutes of a May 16, 1991, board meeting held in Zurich, Switzerland, the head of the Bonyad Mostazafan explained that, as directed by the Supreme Leader, several board members were to resign. In a letter, Alavi’s president described how, a few days later, Ambassador Kamal Kharrazi called the president and another board member to his office. The Ambassador said that “the Foundation from here on out is under the oversight of Haj Agha, not Mr. Rafighdoost [then the head of the Bonyad Mostazafan]. . . . [F]rom now on, the role of the Managing Director and the role of the Board of Directors will be just a formality and he [the Ambassador] will be conducting all of its [the Foundation’s] affairs.” The president of Alavi then wrote a letter to the Ayatollah cautioning that although the Ambassador’s “appointment to a position of responsibility connected to the Foundation’s affairs presents enormous political, security, and economic dangers, we feel assured that the Supreme Leader has made this decision with discernment, unique insight, and a thorough knowledge of all pertaining aspects.” In July 1991, the president resigned his position and he was replaced that August by an individual who served as president until the summer of 2007.
In 1992, Alavi’s new president met in New York and in Tehran with Bank Melli officials concerning $1.7 million in real estate taxes owed by the Partnership and $2.2 million in unpaid distributions owed by the partnership to Assa. The Tehran meeting was attended by a Bank Melli board member, the head of Bank Melli’s Overseas Network Supervisory Department, the head of Bank Melli’s New York branch, and the head of Bank Melli’s Foreign Affairs. The head of the board of directors and managing director of Bank Melli forwarded the minutes of the Tehran meeting to the head of the Bonyad Mostazafan along with a cover letter stating, among other things, that “It is hoped that your firm instructions and the extra attention of the brothers from that esteemed Foundation, who are responsible for the Alavi Foundation of New York, will resolve the partnership’s mutual problems quickly . . . .”
Iranian Ambassadors to the U.N. continued to direct the affairs of Alavi and to attend meetings of Alavi’s board. In the late 1990s, two Bank Melli employees sought Ambassador Kharrazi’s permission for Assa to sell its interest in the Partnership. The Ambassador informed Bank Melli that the Building would be sold when the real estate market improved. In 2004, Ambassador Javad Zarif directed Alavi to settle a lawsuit that threatened to expose Assa’s ownership by Bank Melli and Alavi’s relationship with the Government of Iran for $4 million, and then caused these settlement proceeds to be distributed through other New York real estate companies to officials at Iranian Embassies in Europe.
In October 2007, Alavi Foundation board members met with Ambassador Mohammad Khazaee and a former Iranian government official to address issues relating to the Building’s management and Alavi’s charitable services. According to notes taken by a board member, the Ambassador stated, among other things, that it was necessary to increase the profit from the Building; the Ambassador was worried about Assa’s 40 percent share; the Foundation should only allocate to Shiites; and that the Ambassador would determine the composition of the board. The Ambassador ordered a study about the possibility of increasing the Foundation’s revenue and profit, stating that a business plan and comparative analysis had to be done. The Ambassador instructed: “I have to definitely see the proposed allocations before a final decision is reached. I have to be kept informed and I have to be able to state my opinion in order for you to make a decision.” The Ambassador told the board members that “[i]f there is an issue that needs to be conveyed to Tehran, let me know, I will convey it.”
On December 19, 2008, Farshid Jahedi, who at the time was the president of Alavi, was arrested for obstruction of justice for allegedly destroying documents required to be produced under a grand jury subpoena concerning Alavi’s relationship with Bank Melli Iran and the ownership of the Building. Jahedi pled guilty to obstruction of justice on December 30, 2009.
The Complaints and the Jury Verdict
On December 17, 2008, this Office filed a civil Complaint seeking forfeiture of the 40 percent interest held by Assa in the Partnership. In the Amended Complaint, filed on November 12, 2009, the United States sought to forfeit all right, title and interest in the Partnership, including Alavi’s 60 percent interest in the company. The United States also sought to forfeit the contents of bank accounts held by the Partnership, Alavi, and Assa, as well as other real properties owned by Alavi.
After a five-week trial, the jury found that both IEEPA violations and money laundering had been committed, and that all but one of the defendant properties were fully or partially forfeitable as result. Specifically, the jury found the Building and Alavi’s share in the 650 Fifth Avenue Partnership, along with the contents of bank accounts containing in excess of a million dollars, forfeitable in their entirety as a result of their involvement in money laundering. The jury also found certain portions of properties owned by Alavi in Queens, New York; Houston, Texas; Carmichael, California; and Rockville, Maryland partially forfeitable to the United States as proceeds of IEEPA violations and properties traceable to properties involved in money laundering, in the following amounts:
Alavi Foundation Property
|
Percentage
Found
Forfeitable
|
Queens, NY
|
44%
|
Houston, TX
|
15%
|
Rockville, MD (two properties)
|
17%
|
Carmichael, CA
|
7%
|
The jury also found Alavi’s share in the 650 Fifth Avenue Partnership entirely forfeitable, and the Building partially forfeitable, as the proceeds of an IEEPA violation in addition to both being entirely forfeitable as property involved in money laundering.
Judge Forrest had previously ruled, on September 11, 2013, that Assa was a front company for Bank Melli Iran and that Assa’s interests in the Partnership and the Building also subject to forfeiture.
Claims against the defendant properties brought by private parties holding terrorism-related judgments against the Government of Iran were also resolved against Alavi and the 650 Fifth Avenue Partnership in a separate ruling issued by Judge Forrest today.
Mr. Kim praised the investigative work of the Federal Bureau of Investigation (“FBI”), the Internal Revenue Service - Criminal Investigation Division, the New York FBI Joint Terrorism Task Force, and the Police Department of the City of New York. He also thanked the Counterterrorism Section of the Department of Justice National Security Division and the Manhattan District Attorney’s Office for their assistance in this case.
Acting Manhattan U.S. Attorney Sues To Shut Down Mamaroneck Fish Smokehouse After Findings Of Listeria
Court Approves Consent Decree Requiring Shut Down of Operations Until Violations Are Redressed
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and Melinda K. Plaisier, Associate Commissioner for Regulatory Affairs of the Food and Drug Administration (“FDA”), announced today the filing of a Complaint and the entry of a Consent Decree against defendants SMOKEHOUSE OF NEW YORK, LLC (“Smokehouse”), its director of operations, BRETT H. PORTIER (“Portier”), and its president and owner, PANAGIOTA SOUBLIS (“Soublis”), for violations of the Food, Drug, and Cosmetic Act and related food-safety regulations at Smokehouse’s Mamaroneck facility, where the defendants prepare and sell fish products and other specialty foods to consumers across the country.
Acting U.S. Attorney Joon H. Kim stated: “We will not let businesses put profits over public health. Smokehouse, Portier, and Soublis have repeatedly put their customers at risk of severe illness. Our Complaint and today’s Consent Decree hold them accountable and require them to clean up their operations and protect the public.”
FDA Associate Commissioner for Regulatory Affairs Melinda K. Plaisier said: “The Smokehouse of NY has had several opportunities to come into compliance with the law. Through the use of modern technology, the FDA was able to establish that the company has resident strains of Listeria in its facility that it has consistently failed to eradicate. Conditions like these are unacceptable and the FDA took action to protect Americans.”
According to the Complaint filed Monday in White Plains federal court:
Listeria monocytogenes (“Listeria”) is a bacterium that can be very harmful to human health. In the general population, it can cause severe flu-like symptoms and, in extreme cases, confusion, loss of balance, and convulsions. For pregnant women, it can cause miscarriage, stillbirth, premature delivery, or life-threatening infection of the newborn.
The defendants have repeatedly failed to operate their packaged fish business in compliance with food and safety standards set by FDA. As a result, the FDA has repeatedly found Listeria in their facility. Although the defendants previously have proposed to undertake corrective measures to address the Listeria problems at their facility, they have failed to fix the problem: An FDA inspection conducted between March 8 and April 5, 2017, again found Listeria at various locations within the facility, including on direct food-contact surfaces.
In the Consent Decree entered today, Smokehouse, Portier, and Soublis admit, acknowledge, and accept responsibility for the following:
The defendants failed to manufacture, package, and store food under conditions and controls necessary to minimize the potential for microorganism growth and contamination.
- At each of five inspections conducted by FDA between 2011 and 2015, FDA found Listeria in the facility, including on a food-contact surface and in packaged, ready-to-eat food.
- Following the 2011-2015 inspections, the defendants took a number of corrective actions that they stated would address the conditions found by investigators.
- However, during an FDA inspection between March 8 and April 5, 2017, FDA again found Listeria at the facility, including on food-contact surfaces, including a stainless steel table where food is processed and on a plastic tray used interchangeably to hold raw and finished products.
Pursuant to the Consent Decree, Smokehouse, Portier, and Soublis are enjoined from receiving, preparing, processing, packing, labeling, holding, and/or distributing articles of food until they (1) clean and sanitize their facility; (2) implement appropriate pathogen control and other food safety plans; and (3) implement training programs on proper food hygiene and sanitation for all its employees. Additionally, the Consent Decree requires Smokehouse, Portier, and Soublis to destroy their current stock of processed food and recall certain food previously sold by them. The defendants are subject to additional actions by the FDA, including mandated future recalls and shut downs, as well as liquidated damages and costs to cover future necessary inspections and other monitoring actions, if they violate the provisions of the Consent Decree.
Mr. Kim thanked the FDA for its work leading to the Complaint.
Leader Of Violent Drug Crew Pleads Guilty To 2016 Murder Of Nelson Dubon
Kenneth Rudge Oversaw Activities of “YNR” Members on Webster Avenue, Including Heroin and Crack Sales, Shootings, and the Murder of a Robbery Victim in January 2016
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, Ashan M. Benedict, the Special Agent in Charge of the New York Field Office of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced the plea by KENNETH RUDGE, of the Bronx, New York, to firearms charges including RUDGE’s use of a firearm in the murder of Nelson Dubon on January 21, 2016.
As part of his guilty plea, RUDGE admitted to shooting and killing Nelson Dubon, a victim of RUDGE’s robbery plot, on Park Avenue near 187th Street at an underground billiards hall, in the course of a narcotics-related robbery. RUDGE further admitted using other firearms in the course of his criminal activities with the YNR drug crew between 2012 and January 2016. RUDGE faces a maximum term of life in prison and a mandatory minimum term of 35 years in prison. RUDGE is scheduled to be sentenced later this year by the Honorable Kimba M. Wood, U.S. District Judge.
Acting Manhattan U.S. Attorney Joon H. Kim said: “As he admitted in court today, Kenneth Rudge repeatedly engaged in gun violence in furtherance of his drug trafficking, including the murder of Nelson Dubon. Four days after the murder, Rudge pistol-whipped a livery driver in a robbery attempt. And even after his arrest, Rudge tried to have fellow gang members find and silence a witness to the murder. Now, thanks to the work of the NYPD and the ATF, Rudge awaits sentencing for his murderous conduct.”
ATF Special Agent in Charge Ashan M. Benedict said: “The defendant engaged in a gratuitous spree of violent crimes including multiple armed robberies and a homicide. is committed to targeting the most violent offenders and their co-conspirators for federal prosecution. I commend the outstanding work of the Special Agents, NYPD Detectives, and Assistant United States Attorneys in securing today’s plea and the prosecution of the defendant’s criminal associates. The residents of New York City are safer today because of their efforts.”
NYPD Commissioner James P. O’Neill said: “We remain deeply focused on those who commit violence and carry firearms in New York City. That focus is no more evident than today’s guilty plea in a 2016 murder of Nelson Dubon in Washington Heights. Thanks to the detectives, agents, and prosecutors who have worked on this case and whose work has resulted in the unprecedented reduction in violence in New York City so far this year.”
According to the charging documents filed in the case, as well as statements made during the plea proceedings and earlier court appearances:
Since at least 2012, a group of young men and women living in the vicinity of 188th Street and Webster Avenue, and referring to itself as “YNR,” engaged in a conspiracy to distribute crack cocaine and heroin to addicts in that area. YNR managed to bring large quantities of crack cocaine and heroin into its neighborhood and to inflict mindless and, ultimately, deadly violence on its community.
RUDGE personally participated in multiple acts of drug-related violence, including:: 1) a robbery in or about 2015, of a marijuana dealer in that marijuana dealer’s apartment, during which a victim was pistol-whipped by one of RUDGE’s co-conspirators; 2) a robbery, in or about 2015, of a marijuana dealer, resulting in a shooting by RUDGE and others to thwart the victim’s attempt to retaliate for that robbery; 3) an attempted armed robbery, on or about January 21, 2016, of a marijuana stash apartment; and 4) a robbery, on or about January 21, 2016, of a narcotics dealer and others located inside a billiards club, during which RUDGE shot and killed Nelson Dubon.
Following his arrest by the NYPD in connection with the murder of Dubon, RUDGE attempted to influence and silence witnesses against him, including by attempting to have other YNR members find and silence an eyewitness to the murder. RUDGE also continued his firearms use and violence in the days after the murder of Dubon, including through the pistol-whipping of a livery cab driver in a failed attempt to rob that person of his fares on or about January 25, 2016, in the Bronx.
Mr. Kim praised the outstanding work of the NYPD and ATF for their investigative efforts and ongoing support and assistance with the case.
Five Charged In $28 Million Nutraceuticals Credit Card Fraud Affecting Thousands Of Consumers
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and David E. Beach, Special Agent-in-Charge of the New York Field Office of the U.S. Secret Service (“USSS”), announced today the unsealing of charges against JAMES BECKISH, RICHARD WITCHER, JAMES TONER, PETER O’BRIEN, and JOSEPH ANTHONY DEMARIA for their respective roles in operating a series of companies between 2013 and 2016 that were used as a cover to place approximately $28 million of unauthorized charges on thousands of consumers’ credit cards. The websites of the defendants’ companies purported to sell products like dietary supplements but, in reality, were primarily used to repeatedly bill consumers who never ordered their products, or even if they did, almost never received them. All of the defendants were arrested today and presented before Magistrate Judges in the District of New Jersey, the Middle District of Florida, and the Southern District of Florida.
Acting Manhattan U.S. Attorney Joon H. Kim said: “These defendants allegedly created and operated more than 100 companies that specialized in one service: ripping off consumers and credit card companies. By allegedly billing consumers for dietary supplements they didn’t order or receive, the defendants reaped millions of dollars, affecting thousands of consumers and leaving credit companies holding the bag. Thanks to the U.S. Secret Service, this scheme is over.”
Secret Service Special Agent-in-Charge David E. Beach said: “The Secret Service is committed to aggressively investigating these offenses. Emerging technologies and cyber capabilities enable criminal networks to evolve and significantly impact financial markets. This case is another example of the transnational investigative capabilities of the United States Secret Service. Our developed partnerships with other federal, state and local law enforcement agencies as well as private sector stakeholders, enables us to focus our resources to uncover, investigate and prevent these crimes more effectively.”
According to the Complaint unsealed today in Manhattan federal court:[1]
Between 2013 and 2016, BECKISH, WITCHER, TONER, O’BRIEN, DEMARIA and others, created and operated more than 100 companies that purported to sell dietary supplements and similar products called “nutraceuticals.” Although the companies were purportedly distinct, they nonetheless marketed similar products on websites that contained similar photographs, were hosted by the same entity, had similar typographical errors, and used the same or nearly identical JavaScript coding. These websites were used by the defendants and others to serve as justification for unauthorized and recurring charges that were placed on tens of thousands of credit card numbers that the defendants had illicitly purchased or obtained, or had acquired from consumers who had attempted to order the products in question. For example, in one email between TONER and BECKISH in October 2013, TONER stated that they could simply charge unsuspecting customers by falsely “say[ing] they opted in online for something.” In total, more than $28 million in fraudulent charges were placed during the duration of the scheme.
BECKISH, WITCHER, TONER, O’BRIEN, DEMARIA, and others created these different companies and websites, moreover, because they knew that credit card processors would stop doing business with them over time as consumers noticed the unauthorized charges and sought refunds. These refunds, called “chargebacks” by credit card processors, are generally low for legitimate businesses but reached extremely high percentages for many of the companies associated with the defendants’ scheme. In certain instances, the chargeback rates quickly approached or even exceeded 20 percent – that is, consumers were seeking refunds of more than 20 percent of the charges placed by certain of the defendants’ companies. Credit card processors, in turn, paid millions of dollars in refunds for fraudulent charges associated with the defendants’ companies between 2013 and 2016 in attempts to refund affected consumers.
BECKISH, WITCHER, TONER, O’BRIEN, DEMARIA are each charged with one count of conspiring to commit wire fraud and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison. In addition, they each are charged with one count of aggravated identity theft, which carries a mandatory consecutive sentence of two years in prison. The charges also carry a maximum fine of $250,000, or twice the gross gain or loss from the offenses. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants would be determined by the judge.
Mr. Kim praised the investigative work of the USSS and expressed his gratitude for the assistance of the Offices of the United States Attorney in the District of New Jersey, the Southern District of Florida, and the Middle District of Florida.
The allegations contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth below constitute only allegations, and every fact described should be treated as an allegation.