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Source:
US Department of Justice, US Attorney's Office
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Posted on Thursday, February 18, 2010
LawFuel.com US Attorney News
PREET BHARARA, the United States Attorney for the
Southern District of New York, announced that MILTON BALKANY,
a/k/a "Yehoshua Balkany," Dean of the Bais Yaakov day school in
Borough Park, Brooklyn, was arrested today on wire fraud,
extortion, false statements, and blackmail charges stemming from
an alleged $4 million scheme to extort a Connecticut-based hedge
fund ("the Hedge Fund") into paying millions of dollars to Bais
Yaakov and to another school on behalf of BALKANY.
According to a criminal Complaint filed today in
Manhattan federal court:
From December 2009 to February 2010, BALKANY claimed to
be the spiritual advisor to, in communication with, and in
control of, an individual who is incarcerated at a federal prison
in Otisville, New York (the "Inmate"). According to BALKANY, the
Inmate advised BALKANY that in 2004 and 2005, the Hedge Fund
obtained material, non-public information (the "Inside
Information") and used the purported Inside Information to profit
from trading in at least six stocks. BALKANY told lawyers from
the Hedge Fund that representatives from the Federal Bureau of
Investigation ("FBI") and the United States Attorney's Office for
the Southern District of New York ("USAO")(collectively, the
"Government Officials") were purportedly aware that the Inmate
was in possession of the Inside Information, and that, as of
December 2009, the Government Officials were supposedly anxious
to speak with the Inmate.
In truth and in fact, however, the Government Officials
never contacted the Inmate about the purported Inside
Information. Instead, BALKANY himself contacted the USAO in
January 2010 by telephone, and had conversations during which he
attempted to induce the USAO to make contact with the Inmate.
During the same conversations with the USAO, BALKANY made false
statements and concealed material information from the
Government.
BALKANY separately advised attorneys for the Hedge Fund
that BALKANY was in frequent contact with the Inmate, and that
the Inmate would follow BALKANY's instructions as to what he
should and should not tell the Government Officials. BALKANY
also told lawyers for the Hedge Fund that BALKANY would instruct
the Inmate not to tell the Government Officials about the Hedge
Fund's purported illegal trading if the Hedge Fund made certain
payments to BALKANY, specifically, $2 million to Bais Yaakov, and
$2 million to another school as a "loan." Through numerous
telephone calls and meetings, BALKANY pressured the Hedge Fund
into paying, by falsely claiming that the Government was about to
approach the Inmate for the Inmate's cooperation. BALKANY
further threatened that if the Hedge Fund did not pay, BALKANY
would attempt to help the Inmate reduce his prison sentence by
permitting him to speak to the Government Officials.
Earlier today, BALKANY received two checks from the
Hedge Fund totaling $3.25 million. At the time he received these
checks, BALKANY advised a representative of the Hedge Fund that
the Inmate would not discuss the Hedge Fund with the Government
Officials at a meeting between the Inmate and the USAO that
BALKANY claimed was scheduled for tomorrow. In truth and in
fact, however, no such meeting was scheduled to occur.
BALKANY is charged with wire fraud, extortion,
blackmail, and making false statements. He faces a maximum
sentence of 20 years in prison on the wire fraud count, two years
in prison on the extortion count, one year in prison on the
blackmail count, and five years in prison on the false statement
count. On the wire fraud, extortion, and false statement counts
he also faces a fine of the greater of $250,000 or twice the
gross gain or gross loss from the offense, and on the blackmail
count a fine of the greater of $100,000 or twice the gross gain
or gross loss from the offense.
BALKANY, 63, of Brooklyn, New York, was arrested this
afternoon and presented in Manhattan federal court.
The case is being investigated by the Criminal
Investigators of the United States Attorney's Office for the
Southern District of New York. Mr. BHARARA said that the
investigation is continuing.
Assistant United States Attorney MARC P. BERGER is in
charge of the prosecution.
The charges contained in the Complaint are merely
accusations, and the defendant is presumed innocent unless and
until proven guilty.
10-055 ###
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