Family Cyber Alert screen showing the danger signs

Posing as a fifteen year old girl, undercover detectives for Westchester County PD trapped a predatory pedophile using AOL’s messenger service to entice young girls into participating in sexual activity with him.

In early January 2009, Luis Antonio Rebutti, using instant messaging, contacted an America Online profile maintained by an undercover detective with the Westchester County Police Department. In the profile, the detective posed as a 15-year-old girl.

Over the course of several weeks, the defendant communicated, using instant messaging and e-mails, with the detective. During those communications, Rebutti attempted to persuade, induce, and entice the undercover detective to engage in sexual activity with him.

Rebutti told the detective to pretend that she was 18 years old, instead of 15. On January 20, 2009, the defendant went to the Eldorado Diner on the border of Elmsford and Tarrytown, New York, to meet the 15-year-old girl for the purposes of engaging in sexual activity with her, and was arrested.

Rebutti is charged with one count of enticement of a minor to engage in sexual activity and faces of a maximum sentence of life in prison and a mandatory minimum sentence of 120 months in prison.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that Rebutti, 43, pleaded guilty before United States District Judge Cathy Seibel in White Plains federal court to a charge of using the Internet to attempt to entice, induce, and persuade an undercover officer posing as a 15-year-old girl to meet Rebutti for the purpose of engaging in sexual activity. He is scheduled to be sentenced by Judge Seibel on March 12, 2010.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation and the Westchester County Department of Public Safety.

Assistant United States Attorneys SARAH R. KRISSOFF and MARCIA S. COHEN are in charge of the prosecution.

Meanwhile, another pedophile was caught by Westchester County PD using similar methods.

From October 20, to December 1, 2009, Alfred Doty had numerous instant message exchanges and telephone conversations with undercover law enforcement officers from the Westchester County Police Department posing as a 15-year-old girl.

PREET BHARARA, the United States Attorney for the Southern District of New York, JOSEPH M. DEMAREST, JR., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and THOMAS BELFIORE, the Commissioner of the Westchester County Department of Public Safety, announced that Doty, 54, of Monroe, Connecticut, was arrested yesterday on charges of enticing a minor to engage in sexual activity.

During the recorded telephone conversations and instant message exchanges, Doty and the undercover law enforcement officers discussed meeting to engage in sexual activity. Doty was arrested yesterday morning in Elmsford, New York, as he was driving to meet up with the undercover officer.

Doty was presented in White Plains federal court before United States Magistrate Judge PAUL E. DAVISON yesterday afternoon. He was detained pending a hearing scheduled for today at 2:30 p.m. If convicted, Doty faces a mandatory minimum of 10 years in prison and a maximum of life imprisonment.

The former employee of a art collector has surrendered and been charged with mail and wire fraud in Manhattan federal court, in connection with a joint investigation conducted by the FBI and the Westchester County Police Department into James Biear’s possession of numerous pieces of notable artwork believed to have been stolen from his former employer. The federal charges relate to Biear’s sale of one of those pieces of artwork, a Heinz 57 box created by the artist Andy Warhol, to an unwitting collector in New York City.

The stolen Warhol

According to the Complaint unsealed today in Manhattan federal court: In July 2008, Biear sold a Andy Warhol silkscreen on a wooden crate mimicking a Heinz 57 case of ketchup (the “Warhol Heinz 57 box”) to an art collector in New York City for approximately $220,000. In connection with the sale, Biear claimed that the Warhol Heinz 57 box had been gifted to him from his uncle who had legal title to it. In truth, Andy Warhol had gifted the Warhol Heinz 57 box to an art collector in 1964. In or around April 2007, the Warhol Heinz 57 box was noticed to be missing from the collector’s New York residence after a birthday party. Biear had been employed by the Art Collector at the time that the Warhol Heinz 57 box was believed to have been stolen.

Biear is charged with one count of mail fraud and one count of wire fraud. If convicted, he faces a maximum sentence of 40 years in prison and a fine of the greater of $250,000 or twice the gross gain or loss caused by his crimes.

Biear also faces charges brought by the Westchester District Attorney’s Office. According to the Felony Complaint filed in Westchester County court, Biear is charged with Criminal Possession of Stolen Property in the second degree in connection with Biear’s possession of artwork also believed to have been stolen from his prior employer, specifically, an ink drawing by Francis Picabia titled, “Jean Cocteau par Francis Picabia.” If convicted, Biear faces a maximum sentence of 15 years in prison.

Biear, 49, of Ossining, New York, is expected to be presented today before United States Magistrate Judge HENRY B. PITMAN and is expected to appear later today in state court in Ossining, New York.

Preet Bharara, the United States Attorney for the Southern District of New York, praised the FBI and the Westchester District Attorney’s Office for their work in the investigation and thanked the Westchester County Police Department for its assistance.

The federal case is being prosecuted by the Office’s Complex Frauds Unit. Assistant United States Attorney LISA P. KOROLOGOS is in charge of the prosecution. The state case is being handled by Assistant District Attorney BRIAN FITZGERALD for the Investigations Division at the Westchester District Attorney’s Office.

After a coordinated strike beginning last night involving more than 200 federal and local law enforcement officers, 37 defendants are in custody. Six defendants are still being sought. The defendants taken into custody today are expected to be presented in White Plains federal court later this afternoon.

Preet Bharara, the United States Attorney for the Southern District of New York; Joseph M. Demarest, JR., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”); Thomas Belfiore, the Commissioner of the Westchester County Department of Public Safety; Edmund Harnett, the Commissioner of the City of Yonkers Police Department; Gene Tumolo, the Chief of the City of Peekskill Police Department; and Joseph Burton, the Chief of the Village of Ossining Police Department, announced today the unsealing of an Indictment charging 43 members of a cocaine trafficking ring with conspiracy to distribute approximately $1 million worth of crack and powder cocaine across Westchester County.

Left to Right: ADIC Joseph Demarest; USA SDNY Preet Bharara; Thomas Belfiore, Commissioner, Westchester County Dept. of Public Safety; Edmund Hartnett Commissioner Yonkers Police Department; and Detective Lieutenant William Sullivan of Village of Ossining Police Department. Photo credit: James Margolin, FBI

In connection with these arrests, federal and local law enforcement officers also executed court-authorized search warrants on seven locations tied to many of the named defendants. During the arrests and searches, agents and officers seized, among other evidence: (1) a gun; (2) hollow point bullets; (3) approximately $40,000 in cash: and (4) approximately one kilogram of crack cocaine.

According to the Indictment unsealed today in White Plains federal court:

Between February 2009 and October 2009, a cocaine trafficking organization led by ELVIS SANTANA (the “Santana Organization”) distributed at least 22 kilograms of crack cocaine and 6.5 kilograms of powder cocaine across Westchester County, primarily in Yonkers and Peekskill. The Santana Organization collected approximately $1 million in criminal proceeds from its alleged cocaine trafficking crimes during this nine-month period.

Captain Thomas Gleason of the Westchester County Department of Public Safety reviewing operational specs with ADIC Joseph Demarest. Photo credit: Rich Kolko, FBI

ELVIS SANTANA was the leader of the Santana Organization. As the leader, SANTANA oversaw the transportation of the Santana Organization’s cocaine, the cooking of cocaine into crack cocaine, the delivery of the drugs, and the collection of drug proceeds. EMMANUEL MARTINEZ, DANNY BUENO, and ANGEL DELACRUZ were core members of the Santana Organization, and were responsible for supplying cocaine to the other members of the organization who distributed the drugs. More specifically, EMMANUEL MARTINEZ delivered crack and powder cocaine to other Santana Organization members in Yonkers and other communities in southern Westchester. DANNY BUENO and ANGEL DELACRUZ delivered crack and powder cocaine to other Santana Organization members in Peekskill and other communities in northern Westchester and Rockland Counties. Deliveries of cocaine were arranged by telephone conversations and text messages and were usually made either inside buildings or apartments or on the street, often inside cars that had been used to transport the drugs.

In addition to delivering cocaine, EMMANUEL MARTINEZ, ANGEL DELACRUZ, and DANNY BUENO collected proceeds from the sales of cocaine from other Santana Organization members. The cocaine proceeds were temporarily stored in locations in and around Westchester County before being brought to ELVIS SANTANA.

New York Special Agent in Charge David Cardona, On-Scene Commander, in mobile command vehicle with FBI personnel. Photo credit: Lynda Obi, FBI

The defendants charged in the Indictment unsealed today were as follows: ELVIS SANTANA, 27, Yonkers, New York; DANNY BUENO, 25, Bergenfield, New Jersey; ANGEL DELACRUZ, 27, Peekskill, New York; EMMANUEL MARTINEZ, 26, Bronx, New York; HAROLD ROMAN, 28, Yonkers, New York; JOEL NORWOOD, 23, Yonkers, New York; LAMONT MASON, 26, Yonkers, New York; ANDRE RODRIGUEZ, 36, Yonkers, New York; HECTOR BARBOSA, 26, Yonkers, New York; JESSIE FONSECA, 20, Yonkers, New York; DENNIS MANCUSI, 28, Yonkers, New York; FRED CANNON, 31, Yonkers, New York; DONTAE DEGREE, 23, Ossining, New York; PABLO RIVERA, 22, Yonkers, New York; MARK HAMMARY, 42, Yonkers, New York; ROBERT BENEDITTINI, 25, Yonkers, New York; JULIO GARCIA, 28, Brooklyn, New York; FRANK VACCARIELLO, 37, Hopewell Junction, New York; DONALD TAYLOR, 40, Peekskill, New York; ROBERT CURRY, 32, Peekskill, New York; JAMES McCRAE, 35, Peekskill, New York; BLAINE SCOTT, 43, Peekskill, New York; ERIC McKENZIE, 49, Peekskill, New York; BYRON OVERBY, 37, Peekskill, New York; ROBERT BARNES, 27, Peekskill, New York; OMARI NELSON, 22, Peekskill, New York; WILLIAM ANDERSON, 29, Peekskill, New York; JERMAINE GILLEO, 19, Peekskill, New York; MICHAEL CUNNINGHAM, 20, Peekskill, New York; PIERRE MYKE, 26, Waterbury, Connecticut; JAI PATTERSON, 26, Ossining, New York; KADEMA NELSON, 26, Peekskill, New York; DONIEL THOMAS, 26, Peekskill, New York; JAMES SKAGGS, 24, Peekskill, New York; TYRELL MOSLEY, 27, Peekskill, New York; TAINA VALENTINE, 24, Peekskill, New York; PRINCE MARSH, 26, Peekskill, New York; TAWAN HINES, 30, Peekskill, New York; SAM SHULER, 28, Peekskill, New York; CHRIS CURRY, 30, Peekskill, New York; SHAUN BROOKS, 22, Ossining, New York; ROBERT EVANS, 26, Peekskill, New York; and MORGAN STOKES, 27, Peekskill, New York.

SSA Edward M. McCabe briefing ADIC Joseph Demarest on arrests and operations. Photo credit: Rich Kolko, FBI

Mr. BHARARA praised the investigative work of the FBI, the Westchester County Department of Public Safety, the Yonkers Police Department, the Peekskill Police Department, the Village of Ossining Police Department, and the Rockland County Narcotics Task Force. He added that the investigation is continuing.

United States Attorney Preet Bharara said, “Cocaine is poison. It is a poison that affects our schools, our communities, and our economy. The antidote to that poison is the kind of tough law enforcement action that we have taken today. Families throughout Westchester County have the right to live in neighborhoods free from the poison of drugs and the violence that inevitably accompanies it. That is the right we protect today.”

FBI Assistant Director-in-Charge JOSEPH DEMAREST said, “We combined forces to cut off the toxic supply of drugs to Westchester neighborhoods. Experience also tells us that guns and violence often go hand-in-hand with drug trafficking. The thing that unites us is simple but certain: the determination to make our neighborhoods safe and secure for law-abiding New Yorkers, wherever they live.”

FBI personnel in front of mobile command vehicle during operation against drug ring. Photo credit: Lynda Obi, FBI

All 43 of the defendants are charged in Count One of the Indictment with conspiring to distribute 50 grams and more of crack cocaine and five kilograms and more of powder cocaine. If convicted, the defendants all face maximum sentences of life and mandatory sentences of 10 years in prison on Count One. ELVIS SANTANA and EMMANUEL MARTINEZ are charged in Count Two with possession of 50 grams and more of crack cocaine. They each face a maximum sentence of life in prison and a mandatory sentence of 10 years in prison on Count Two. ANGEL DELACRUZ and DANNY BUENO are charged in Count Three with possession of five grams and more of crack cocaine. They each face a maximum sentence of 40 years in prison and a mandatory sentence of five years in prison on Count Three.

Assistant United States Attorneys NICHOLAS L. McQUAID, DOUGLAS B. BLOOM, and ANNA M. SKOTKO are in charge of the prosecution.

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

FBI agent stands on top of mobile command vehicle. Photo credit: Lynda Obi, FBI

U.S. Senator Charles E. Schumer

In the wake of a new major Medicaid fraud bust in Nassau County and New York City, U.S. Senator Charles E. Schumer, joined by Nassau County District Attorney Kathleen Rice, has announced he is backing new comprehensive health care fraud legislation that will dramatically ramp up efforts to track, arrest, and convict Medicaid and Medicare scam artists that cost New York State taxpayers billions every year and raise health care costs for the entire country.

People stealing from Medicare and Medicaid are taking money straight out of the pockets of Long Island taxpayers: Sen Schumer

Schumer said that he will push this plan as part of comprehensive health care reform legislation now being considered in the Senate saying that cracking down on fraud is essential to cutting health care costs for federal, state, and local governments. Schumer today announced he is backing legislation authored by Senator Ted Kaufman (D-DE), a member of the Committee, called the Health Care Fraud Enforcement Act of 2009 which would dramatically increase funding to hire new fraud investigators and beef up penalties for convicted scam artists.

“People stealing from Medicare and Medicaid are taking money straight out of the pockets of Long Island taxpayers,” said Schumer. “Equipping federal prosecutors with the resources they need to track down and persecute these people is important to reigning in health care costs. This is just another step Washington should take to make sure Americans on Main Street can afford high quality health insurance and eliminate waste from our system.”

Nassau County District Attorney Kathleen Rice recently announced ten arrests for Medicaid fraud, including two married couples charged with stealing more than $128,000 in Medicaid benefits combined. One couple, Danial and Mojgan Kidanian, claimed income of only a few hundred dollars a week from working at a local discount store. In reality, they owned the store, the building, several rental apartments, a $625,000 home, and had deposited more than $1 million into their bank accounts over a five-year period.

Similarly, the other couple, Rabi and Siona Kamel, concealed income from a business they owned and the ownership and sale of a second home. The couple, claiming income of only $31,000 per year, was actually earning as much as $147,000 annually.

Late last week, various branches of New York City law enforcement announced they had busted nineteen Medicaid cheats – including some with luxury cars and million-dollar homes – for significant Medicaid fraud. The various schemes entailed writing up phony claims through front companies in order to collect insurance benefits meant for the poor, authorities said Thursday.

So-called “Operation Free Ride” included a Hamptons homeowner who claimed to get by on $5,000 a year, an artist who cried poverty despite owning two $1 million Manhattan apartments and a New Jersey woman who claimed she lived in her Manhattan nail salon.

“When thieves are stealing billions of dollars out of the pockets of honest taxpayers, it is our responsibility as elected officials to give law enforcement the most effective tools possible,” DA Rice said. “This common sense legislation puts fraudsters on notice: you will be found, prosecuted, and you will pay back every nickel you stole from the people of New York.”

Schumer and Rice made their announcement today in front of Doctor’s Immediate Care, a medical office convicted of fraud by the District Attorney for billing Medicare out of $73,280.00 for services not covered by the program.

During the period of May 2, 2003 through October 24, 2006, Susan Wang, the wife and office manager of Dr. Shih Wang, intentionally billed the Medicare program for Osteopathic Manipulative Treatments (“OMT”) and office visits for 89 patients that actually received acupuncture, a medical service specifically not covered by Medicare. Medicare paid $73,280.00 for the aforementioned services. Susan Wang made the decision to bill Medicare for OMT and office visits because Medicare does not cover acupuncture. Gang Shi, a Licensed Acupuncturist employed by Dr. Wang, actually preformed the acupuncture procedures at issue in this case. Shi did not bill Medicare for the services he provided. He provided his acupuncture treatment records to Susan Wang, who processed the billing.

In 2008, the NYMFCU obtained 257 settlements or court orders requiring the payment of $263.5 million: $259.6 million in civil damages and almost $3.9 million in criminal restitution, exceeding the $59.3 million achieved in 2006 and $113.8 million in 2007. The Unit collected a total of $256.2 million in both civil and criminal recoveries.

According to recent reports, the U.S. loses at least $60 billion to health-care fraud every year, and some estimates put the cost as high as 10% of the nation’s total health-care spending, which exceeds $2 trillion. Medicare, the federal insurance program for the elderly and disabled, and Medicaid, the federal-state program for the poor, are especially susceptible. Medicare currently has the resources to review only 3% of claims. Medicare has reported that it improperly paid more than $10 billion in claims in the fiscal year that ended Sept. 30, 2008.

The new scam Schumer highlighted involves using social security numbers of recently deceased Medicare beneficiaries to file new claims even though the recipient died. Auditors found a whopping 417 dead people still on the rolls, the state Office of Medicaid Inspector General said Friday in its annual report on Medicaid fraud, waste and abuse. Another 912 prison inmates were still collecting – although they’re supposed to be cut off.

The top accused suspect thus far is Echo Pharmacy, in Miller Place, LI, and its owner Bryan McCutcheon, according to an ongoing probe conducted by New York Medicaid Inspector General James Sheehan’s office. McCutcheon allegedly filed claims for 46 prescriptions on behalf of 17 dead patients from 2003 to 2005. Many of these patients had lived at a nearby nursing home where McCutcheon was previously employed, state investigators said.

The Schumer backed legislation beefs up sentencing guidelines for healthcare fraud offenses with substantial losses, updates the definition of “healthcare fraud offense” in the federal criminal code so that violations of the anti kickback statute, the FDCA, and certain provisions of ERISA make things like criminal forfeiture easier to get, and gives administrative subpoena power to DOJ (meaning they don’t have to go through a grand jury) to investigate civil rights violations at places like nursing homes. As the law currently stands, DOJ either has to have a grand jury investigation going on or has to rely on local officials to compel cooperation. The legislation also does the following:

• Sentencing increases: The bill directs the Sentencing Commission to increase the guidelines range for health care fraud offenses and clarifies that the full potential scope of the fraud should be considered at sentencing.
• Redefining “health care fraud offense”: The bill includes all health care crimes within the definition of “health care fraud offense,” regardless of where they are codified. (ERISA, drug marketing, and kickback crimes are currently not included) This change will make available to law enforcement the full range of antifraud tools, including criminal forfeiture and obstruction penalties, to combat these offenses.
• Improving whistleblower claims: kickbacks lead to unnecessary and risky medical care and pervert the doctor-patient relationship. This bill clarifies that all payments made pursuant to illegal kickbacks are false for purposes of the False Claims Act.
• Creating a common-sense mental state requirement for health care fraud offenses: some courts have held that defendants must be aware that their conduct violates a specific provision of criminal law in order to be held accountable. This bill restores the original intent of Congress that a person is guilty of a health care offense if he knowingly does what the law forbids.
• Increasing funding: Money spent on health care fraud prevention and enforcement is returned manifold through costs savings and civil and criminal recoveries. This bill authorizes a modest, yet significant, increase in federal antifraud spending of $20,000,000 per year through 2016.

In the wake of the financial crisis earlier this year, Sen. Kaufman introduced similar legislation to strengthen tools and increase resources available to federal prosecutors to find, prosecute and jail those who committed financial fraud. The Fraud Enforcement and Recovery Act, introduced with Sens. Leahy and Chuck Grassley (R-IA), was signed into law.

PREET BHARARA, the United States Attorney for the Southern District of New York

A financial adviser who once played for the New York Giants has pleaded guilty to fraud charges. Clyde “Peter” Hall, who played one season as an end after being drafted in 1960, had been scheduled for trial in Manhattan federal court on charges he cheated investors out of millions.

Hall, drafted out of Marquette University as a quarterback in 1960, became “a professional fraudster,” Assistant U.S. Attorney Thomas Brown told Judge Richard J. Sullivan. He was on the team only one season and was not used as a quarterback; he was moved to end.

PREET BHARARA, the United States Attorney for the Southern District of New York, JOSEPH M. DEMAREST, JR., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation, PATRICIA J. HAYNES, the Special Agent-in-Charge of the Internal Revenue Service, Criminal Inspection Division (“IRS-CID”), and RONALD J. VERROCHIO, the Inspector-in-Charge of the New York Office of the United States Postal Inspection Service (“USPIS”), announced that CLYDE “PETER” HALL, 70, of Manhattan, pleaded guilty this morning to charges arising out of a scheme in which HALL conspired to file serial, fraudulent bankruptcy petitions to evade eviction and remain in a Manhattan apartment rent-free.

HALL pleaded guilty today in Manhattan federal court before United States District Judge RICHARD J. SULLIVAN to one count of conspiring to commit bankruptcy fraud. HALL’s wife, ANNE TORSELIUS HALL, 45, pleaded guilty yesterday to a charge related to HALL’s bankruptcy fraud scheme.

According to the Indictment to which HALL pleaded guilty, other documents filed in connection with this case, and statements made in court:

In April 2003, HALL, who decades ago played football for the New York Giants, and his wife ANNE TORSELIUS HALL signed a one-year lease for an apartment occupying the top three floors of a five-story brownstone building on Manhattan’s Upper West Side. The HALLs’ rent was $5,800 per month. In November 2003, the HALLs stopped paying rent to the owner of the apartment (the “Landlady”), and they refused to move out when the Lease expired in May 2004. Between August 2004 and December 2004, and after the Landlady successfully obtained an order for the HALLs’ eviction, CLYDE HALL filed or caused to be filed a series of last-minute bankruptcy petitions in United States Bankruptcy Court for the Southern District of New York, which contained false representations, for the purpose of halting the eviction proceeding and allowing CLYDE HALL and ANNE HALL to remain in the apartment without paying rent.

The HALLs eventually moved out of the apartment in early January 2004 and into an new, $9,500 per month apartment on the Upper West Side. By that time, the HALLs owed the Landlady approximately $81,200 in rent, which they never paid. At the same time, CLYDE HALL caused a total of approximately $78,000 to be paid to his new landlord for alterations to the new apartment and to pre-pay a significant amount of the rent.

On April 20, 2009, CLYDE HALL pleaded guilty to wire fraud charges arising from a separate scheme in which he peddled bogus bank instruments and claimed to have access to high yield investment programs in order to defraud investors of millions of dollars.

On the conspiracy to commit bankruptcy fraud to which HALL pleaded guilty today (Count Five of the Indictment), he faces a maximum potential penalty of five years in prison and a fine of $250,000 or twice the gross gain or loss resulting from the offense. The six wire fraud counts to which HALL pleaded guilty in April each carry a maximum potential penalty of 20 years in prison and a fine of $250,000 or twice the gross gain or loss derived from the offense. The total maximum possible term of imprisonment is therefore 125 years.

Judge SULLIVAN remanded CLYDE HALL to prison following his April guilty plea; he is scheduled to be sentenced by Judge SULLIVAN on the charges to which he pleaded guilty in April and today on February 19, 2010, at 11:00 a.m. ANNE HALL is scheduled to be sentenced by Judge SULLIVAN on March 5, 2010, at 10:00 a.m.

Mr. BHARARA thanked the FBI, the IRS-CID, and USPIS for their work in this investigation.

This prosecution is being handled by the Complex Frauds Unit of the United States Attorney’s Office. Assistant United States Attorney THOMAS G. A. BROWN is in charge of the prosecution.

Bourke was a co-founder of Dooney and Bourke

Frederic A. Bourke Jr., of Greenwich, Conn., has been sentenced in U.S. District Court in Manhattan to one year and one day in prison, announced Mythili Raman, Principal Deputy Assistant Attorney General for the Criminal Division and Preet Bharara, U.S. Attorney for the Southern District of New York.

Bourke, chairman of handbag firm , had been indicted on federal bribery and money laundering charges involving an investment consortium in oil interests in the Republic of Azerbaijan. He was also was accused of making false statements during two FBI interviews about an $8 million investment that he made on behalf of himself, friends and family, according to the indictment.

Following a six-week trial, Bourke, 63, was found guilty on July 10, 2009, of conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and related prohibitions, and of making false statements to the FBI. The FCPA makes it a crime to pay or offer to pay foreign government officials in order to obtain or retain business. In addition to the prison term, U.S. District Judge Shira A. Scheindlin ordered Bourke to pay a $1 million fine and serve three years of supervised release following the prison term.

According to evidence presented at trial, Bourke participated in a scheme to bribe senior government officials in Azerbaijan with several hundred million dollars in shares of stock, cash and other gifts, to ensure that those officials would privatize the State Oil Company of the Azerbaijan Republic (SOCAR) in a rigged auction that only Bourke, fugitive Czech investor Viktor Kozeny and members of their investment consortium could win, to their massive profit. Kozeny is under indictment in the Southern District of New York for his alleged role in the scheme.

Under the privatization program, citizens of Azerbaijan could use free government-issued vouchers to bid for shares of state-owned industries that were to be privatized. Privatization vouchers were bearer instruments that were freely tradable, and they typically were bought and sold using U.S. currency. Foreigners could also participate in Azerbaijan’s privatization program and own vouchers, but only if they purchased a government-issued “option” for each voucher they held. The vouchers and options were largely purchased with millions of dollars of cash flown into Azerbaijan on private planes, and were intended to be exercised by Oily Rock Ltd., a company Kozeny allegedly controlled.

According to trial evidence, Bourke, a friend and neighbor of Kozeny’s in Aspen, Colo., invested approximately $8 million in Oily Rock, on behalf of himself, family members and friends. Bourke also obtained directorships, salary and stock options with related companies that Kozeny allegedly set up and funded.

The takeover of SOCAR, however, could only take place if the president of Azerbaijan issued a decree directing SOCAR’s privatization. Beginning in August 1997 through fall 1998, Bourke and others conspired to pay or cause to be paid millions of dollars worth of bribes to Azeri government officials to ensure that their investment consortium would gain, in secret partnership with the Azeri officials, a controlling interest in SOCAR and its substantial oil reserves.

For example, in August 1997, Kozeny allegedly agreed to transfer to corrupt Azeri officials two-thirds of the vouchers and options Oily Rock purchased, and to give them two-thirds of all of the profits arising from his investment consortium’s participation in SOCAR’s privatization. In June 1998, Bourke knew that Kozeny allegedly arranged for Oily Rock to increase its authorized share capital from $150 million to $450 million so that the additional $300 million worth of Oily Rock shares could be transferred to one or more of the Azeri officials as a further bribe payment. Bourke also arranged for two of the corrupt officials to receive medical treatment in New York City on different occasions in 1998, for which Oily Rock paid. Thereafter, in interviews with the FBI in April and May of 2002, Bourke falsely stated that he was not aware that Kozeny allegedly had made payments to the Azeri officials.

The charges against Kozeny remain merely accusations, and he is presumed innocent unless and until proven guilty.

The case against Bourke and the related case pending against Kozeny are being prosecuted by Deputy Chief Mark F. Mendelsohn and Assistant Chief Robertson Park of the Criminal Division’s Fraud Section, and Assistant U.S. Attorneys Harry A. Chernoff and Iris Lan of the U.S. Attorney’s Office for the Southern District of New York.