Cops Bust $7M Sex And Drugs Business In NYC

Nov 21, 2012
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A very 21st century mob prostitution ring that used ads on cable TV, Craigslist and to gross $7 million over three years has been busted by authorities.

Operated out of Manhattan’s Midtown, the organized crime syndicate set up a firm called Somad Enterprises to optimize internet searches and even employed an ‘information technology coordinator’ to keep their websites ranking highly online.

This morning, NYPD Commissioner Ray Kelly and New York Attorney General Eric Schneiderman announced the arrest of 17 people and described the operation as a ‘remarkable enterprise…like the mob goes to business school.’

Through the high-tech sting, the police discovered clients of the prostitution racket as coming from ‘all walks of life’, including 58-year-old David Mendelowitz, the dean of students at Scarsdale High School in Westchester, New York.

Outsourcing their Search Engine Optimisation (SEO) to the Philippines, Somad Enterprises created a ‘proprietary auto-posting system’ which allowed the crime group to target their ads for prostitutes to ensure they always came top of internet searches.

Crime bosses arranged for drivers to ferry girls, mostly from China or South Korea to clients homes where they paid for their services with check’s cash and credit cards.

Fronts created by Somad Enterprises registered the charges as being for physical therapy, business consultancy, acupuncture, antiques, party planning and other similar services.

In addition, it is claimed that the women would also provide their clients with drugs, mostly cocaine and that Mendelowitz was one of three men arrested and charged with numerous counts patronizing a prostitute, possession of a controlled substance and hindering prosecution.

‘This investigation led to the arrests of multiple individuals who were part of a criminal enterprise that made millions of dollars by profiting off the exploitation of women,’ said Schneiderman.

‘The message we are sending is clear: these crimes will not be tolerated in the state of New York.’

The 16-month long investigation targeted the sophisticated money laundering operation that Somad ran by allowing the prostitution profits to be syphoned through it.

‘All anyone has to do is open a copy of the Village Voice to get a good sense of how classified advertising and prostitution go hand in hand,’ said New York City Police Commissioner Raymond Kelly said.

‘Our focus remains the profiteers and johns (clients) engaged in promoting prostitution, not the women exploited by them.’

Operating out of 150 West 25th Street and coordinated by Milagros Katz, 40, authorities were aware of the firm for years and according to Schniederman, ‘We urged some publications to remove the ads, but it’s sort of a running battle…They have a 1st Amendment right to publish them, and in the internet era they just spring up somewhere else.’

The crackdown was the result of a 16-month investigation into Somad Enterprises Inc., an advertising agency with offices in New York, New Jersey and Pennsylvania that placed classified ads for five escort services, Attorney General Eric Schneiderman and New York City Police Commissioner Ray Kelly said at a joint news conference.

In a 180-count indictment, 19 people and one corporation were charged with enterprise corruption, money laundering, falsifying business records, narcotics sales and prostitution. Each faces up to 25 years in prison. In addition, three prostitution clients have been charged.

Somad operated a ‘one-stop shopping vehicle for prostitution rings,’ Schneiderman told reporters, creating advertisements for escort services and placing them on cable access television, on websites like Craigslist and and in newspapers like the Village Voice.

The agency also employed a webmaster based in the Philippines who was tasked with promoting the ads so they appeared more prominently in Google and other online searches.

Some of the prostitution managers offered cocaine to clients in addition to sex. To conceal their transactions, Somad and the five escort services established multiple shell corporations with false information and disguised payments for sex and drugs as charges for acupuncture, antiques or party planning, Schneiderman said.

This was almost like the ‘mob-goes-to-business-school’ kind of a situation,’ Schneiderman told reporters. ‘It essentially shows what you can do if you have a high level of creativity and a very low level of morality.’

Authorities said Somad kept about half the $7 million in revenue the ring earned in the past 2-1/2 years with the other half going to the escort groups that prostituted about 40 women at any given time, many from China and Korea.

In breaking up the ring, authorities rescued two women who were victims of human trafficking, one of whom was from Korea, Schneiderman said.

So far, 17 people have been arrested in connection with running the prostitution ring. In addition, police arrested three prostitution clients, including the former dean of students at well-respected Scarsdale High School, David Mendelowitz, Schneiderman said.

Mendelowitz, who served on the suburban New York school’s drug task force, was charged with patronizing a prostitute, possession of crack cocaine and hindering prosecution.

Two of the 19 people indicted remain at large, the New York Police Department said.

Calls to Somad went unanswered, and calls to Mendelowitz and his attorney were not immediately returned.


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