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DISTRICT ATTORNEY - NEW YORK COUNTY |
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NEWS RELEASE |
Contact:
Alicia Maxey Greene |
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Manhattan District Attorney Robert M. Morgenthau announced today the arrest and guilty pleas of the chief executive officer of an industrial supply company and of that corporation, for selling counterfeit parts for subway car motors and bus transmissions to the New York City Transit (NYCT) division of the Metropolitan Transportation Authority (MTA). The counterfeit parts were inferior in quality and workmanship to the material that should have been supplied, and raised the prospect of accidental injuries to NYCT passengers and employees. The defendant, JOSEPH UNGAR, 47, pleaded guilty today to Grand Larceny in the Second Degree, a class C felony, and Scheme to Defraud in the First Degree, a class E felony, in State Supreme Court. UNGAR also pleaded guilty to one felony count of Repeated Failure to File Corporate Taxes, a class E felony. As a result of his plea, UNGAR will make full restitution of over $125,000, accept a lifetime debarment from doing business with the MTA and serve a five-year period of probation. UNGAR must also pay $5,000 in criminal fines and over $200,000 in taxes, accrued interest and penalties. If UNGAR does not fully comply with the agreement he could be sentenced to 2 to 6 years in state prison. The corporation, ABEC Industries, Inc. (ABEC), pleaded guilty to Trademark Counterfeiting in the First Degree, a class C felony, and Identity Theft in the First Degree, a class D felony. The corporation will pay $5,000 in criminal fines, cease operations and dissolve. The investigation was initiated by the MTA Office of the Inspector General (OIG) and conducted jointly with the Manhattan District Attorney’s Office. In light of the findings of the investigation, NYCT has decided to expand inspection practices with respect to safety-critical commodities; audit the quality practices of distributors; and implement a training program for all procurement staff. That program will include this investigation as a case study in product substitution fraud. The Counterfeiting Scheme Between 2003 and 2008, UNGAR, acting as the principal of ABEC, repeatedly participated in the competitive bidding process through which MTA purchases material related to the operation of NYCT subways and buses. Because of his checkered history as an MTA supplier, which included twice being found a non-responsible bidder, UNGAR placed bids using an array of corporate and personal pseudonyms. UNGAR recruited notaries public to certify the fake signatures he affixed to his bids. For example, to obtain one of the three master contracts he was awarded in this case for direct drive clutch bearings used in bus transmissions, UNGAR bid in the name of a defunct bearing distributor, Patron Transmission Company, and signed the name of that company’s late founder, Irving Patron. In telephone conversations and written correspondence with NYCT procurement staff, UNGAR repeatedly represented himself as Irving from Patron Transmission. Throughout the investigation, as soon as an MTA contract was linked to UNGAR, immediate action was taken by the MTA OIG and NYCT to quarantine the parts supplied by UNGAR. In every instance where stock associated with an UNGAR purchase order was found, the parts consisted exclusively of counterfeit material. The investigation revealed that, in addition to adopting various aliases, UNGAR and ABEC also deceived NYCT personnel by stealing the identities of manufacturers and distributors and falsely presenting those companies as the source of material sold to NYCT. Search warrants were executed during the investigation at storage facilities at the Brooklyn Navy Yard and the Wood-Ridge (New Jersey) Industrial Complex, as well as at UNGAR’s Brooklyn residence. Investigators recovered evidence directly connecting UNGAR and ABEC to the scheme, including label printing equipment used to mark the packaging of counterfeit bearings and additional supplies of the counterfeit bearings fraudulently sold to NYCT by the defendants. The Tax Evasion A financial investigation conducted in connection with the counterfeiting scheme determined that since 2003, UNGAR evaded personal income tax on the vast majority of his income and avoided paying New York City taxes on ABEC’s corporate income. For example, ABEC failed to pay any New York City general corporation tax from 2003 to 2007 by falsely reporting that it was located on a bungalow-lined residential street in Monroe, New York. In connection with his guilty plea, UNGAR will pay $139,734.92 in personal and corporate back taxes, accrued interest and penalties. In addition, UNGAR will pay $78,557.29, representing his 2007 personal income tax, accrued interest and penalties. Finally, UNGAR will file a 2008 personal income tax return correctly reflecting his income and pay any tax he owes. Mr. Morgenthau thanked the following MTA and NYCT employees for their assistance in the investigation: Inspector General Barry L. Kluger, Senior Investigative Counsel Andrew S. Auslander, Chief Investigator Michael Sweeney, Principal Investigator Richard Regan, Senior Investigator Patrick McAllister, Assistant Chief Operations Officer of Vendor Relations Kennith B. Norman, Senior Director of Vendor Relations/Procurement Accountability Joy Charles, Material Inspector Andres Gonzales, Department of Buses Superintendent Jack Araujo, former Procurement Specialist Paul Irving, Executive Director of Security William Morange, and Police Detective Sergeant James Flanagan. Mr. Morgenthau also thanked New York Police Department Detective Dino Polichetti of the Organized Crime Investigation Division. In addition, Mr. Morgenthau thanked the following people for their assistance with the tax case: Acting Commissioner Michael Hyman of the New York City Department of Finance; Audit Group Chief Michael Schenk and the rest of the staff at the Department of Finance Office of Tax Enforcement; and Commissioner Robert L. Megna of the New York State Department of Taxation and Finance and his staff. Mr. Morgenthau also thanked the Bergen County Prosecutor’s Office for their assistance in conducting the search at a warehouse in New Jersey and in particular, Detective Sergeant Sylvia Presto of the Criminal Investigation Division. The investigation was conducted by Assistant District Attorney Jordan Arnold, with assistance from Assistant District Attorney Gilda Mariani, Chief of the Money Laundering and Tax Crimes Unit, by Deputy Chief Accountant Robert Demarest, Analyst Avram Lansky, Financial Intelligence Coordinator David Rosenzweig, IT Deputy Director Steven Moran and the Computer Forensics Unit, including Analysts Alex Allphin, John Forames, Jr. and Selena Ley, and by Trial Preparation Assistant Kevin Brennan, DA Photo Unit Chief Laura Badger and Photographers Margarita McDowell and Lisa Ramsay. Defendant Information: JOSEPH UNGAR, 1/13/1962 ABEC INDUSTRIES, INC. ###
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