Tuesday, March 11, 2008

Spitzer and the Southern District of New York

The fact that federal prosecutors from the U.S. Attorney's Office for the Southern District of New York pursued the investigation of New York Governor Eliot Spitzer's use of large amounts of cash for transactions that turned out to involve the services of one or more prostitutes means he could be looking at federal charges for his conduct.  Blog co-editor Ellen Podgor has already discussed (here) the possible application of the Mann Act to Spitzer's involvement in the interstate transportation of a person for prostitution, which in fact is among the charges against the leaders of the Emperors Club service Spitzer used (criminal complaint and affidavit below -- the juicy "Client 9" material begins in paragraph 73 for those with their minds in the gutter).  The investigation began because of Suspicious Activity Reports filed by banks because Spitzer purportedly made large cash withdrawals, and while the initial focus was for possible public corruption, the case turned out to involve a more mundane, albeit considerably salacious, prostitution ring.

While Mann Act charges against Spitzer certainly would be quaint, a criminal structuring charge may be more likely.  The applicable statute is 31 U.S.C. Sec. 5324(a), which provides:

No person shall, for the purpose of evading the reporting requirements of section 5313(a) or 5325 or any regulation prescribed under any such section, the reporting or recordkeeping requirements imposed by any order issued under section 5326, or the recordkeeping requirements imposed by any regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91–508—

cause or attempt to cause a domestic financial institution to fail to file a report required under section 5313(a) or 5325 or any regulation prescribed under any such section, to file a report or to maintain a record required by an order issued under section 5326, or to maintain a record required pursuant to any regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91–508 . . . .

If Spitzer split deposits or withdrawals in his accounts to stay below the $10,000 threshold for filing a Currency Transaction Report by the bank, then he could be guilty of structuring.  The predecessor to this provision was the subject of the Supreme Court's decision in Ratzlaf v. United States, 510 U.S. 135 (1994), in which the court interpreted the "willfully" element to require proof that the defendant knew there was a legal duty to report the transactions and sought to have the bank violate the law by structuring his transactions.  As the Court explained, "Undoubtedly there are bad men who attempt to elude official reporting requirements in order to hide from Government inspectors such criminal activity as laundering drug money or tax evasion.  But currency structuring is not inevitably nefarious." (Italics added)  In response, Congress sought to overturn Ratzlaf by removing "willfully" as an element of the crime.  Thus, all the government must prove is that the person intended to structure the transactions, not that the person intended to commit a crime by violating the provision.  So while structuring is not always nefarious, it is a crime regardless of the desire to violate the law.

The Second Circuit rejected a fall-back argument that the statute requires that the money that is the subject of the structuring must be tainted and not just funds properly controlled by the defendant.  In United States v. MacPherson, 424 F.3d 183 (2d Cir. 2005), the court stated, "The anti-structuring law may well have been intended to prevent criminals from concealing their illicit profits, but that is not the limit of its reach. Section 5324 makes no reference to the source of the monies at issue or to the reason why a person seeks to avoid CTR filing. Its singular focus is on the method employed to evade that filing requirement, i.e., structuring."  (Italics in original) Spitzer could not avoid a structuring charge by arguing that the money was his, or at least he had lawful access to it, so he could do with it as he wanted.  Moreover, an ignorance defense would be difficult to offer for a former state Attorney General who fancied himself the Sheriff of Wall Street.  The structuring provision is different from the money laundering statute, which reaches the proceeds of "specified unlawful activity," even though it reaches similar activity and often involves conduct by people who are trying to hide criminal activity.

An interesting question is whether any other federal criminal charges could come out of the cash transactions.  The old adage is to "follow the money," and here it may be to trace the dollars backward to find out where they came from and how they traveled, and not so much where they ended up.  Spitzer is a fairly wealthy man, so he probably has access to a sizable pool of money.  Yet, according to the criminal complaint, he did not want to make a wire transfer, even though Emperor's Club employed a shell corporation that could be used to hide the true nature of the payments.  If Spitzer was trying to hide what he was doing from his family, then large cash withdrawals might have raised just as many questions as wire transfers.  It would not surprise me that federal investigators were looking into whether any campaign money was involved in the transactions, or at least campaign bank accounts, that could be used so that it was not as apparent when slugs of cash were used for personal purposes.  Whether that violates any federal laws is an open question, but I suspect the U.S. Attorney's Office is going to take a very close look at the flow of the money to see what roads it traversed. (ph)

Download us_v_brener_criminal_complaint_spitzer_march_2008.pdf

March 11, 2008 in Corruption, Money Laundering, Prosecutions, Prosecutors | Permalink | Comments (0) | TrackBack (1)

Monday, March 10, 2008

Sex or Crime, Spitzer Has Been Punished?

Four individuals had a criminal complaint filed against them.  Two were charged with a conspiracy to violate federal laws related to prostitution.  The other two face charges of prostitution and money laundering. (See NYTImes here) Enter client 9 - an individual unnamed in the charges. The details of the D.C. meeting involving client 9, and how the woman meeting him was to arrive are outlined in the NYTimes here.  Some of the questions that are likely to be explored in the upcoming days are:

  • Did Spitzer violate the Mann Act?  The Mann Act, 18 U.S.C. Sec. 2421, provides: "[w]hoever knowingly transports any individual in interstate or foreign commerce, or in any Territory or Possession of the United States, with intent that such individual engage in prostitution, or in any sexual activity for which any person can be charged with a criminal offense, or attempts to do so, shall be fined under this title or imprisoned..." Even if this did amount to a technical violation, one has to seriously question whether consensual acts warrant prosecution.
  • Will Spitzer need to be a witness in the case against the four individuals charged with conspiracy, prostitution, and money laundering?  Will he be given immunity?  In the federal system this would be "use" immunity as opposed to "transactional immunity,"  which means that anything he said or derived from what he said could not be used against him. 
  • Was it really necessary to include all of these acts in the charging instrument? Prosecutors, obviously, knew who they were dealing with in this case.  But, on the other hand, did fairness require this to happen - should any one person be protected here more than others?

From a purely punishment perspective, and irrespective of Spitzer having any criminal culpability, it seems obvious that a "shaming" has occurred here.  Even if there was some criminal culpability, should taxpayer's dollars be spent on investigating and prosecuting this man. The higher the office holder, the longer the fall from power, and in this case it is pretty hard ground that Spitzer is landing upon.

(esp)

Addendum - Check out Brian Baxter's piece at The American Lawyer here. Some thoughtful quotes from Associate Dean Patricia Salkin are in this article. 

March 10, 2008 in Celebrities, Money Laundering, News, Prosecutions | Permalink | Comments (6) | TrackBack (0)

Monday, February 25, 2008

Analyzing Rep. Renzi's Indictment

The indictment of Rep. Richard G. Renzi is 26 pages in length and has 35 counts.  There are two co-defendants also charged, although these two do not face all the charges levied against Renzi.

The opening passages of the Indictment are descriptive and include items such as the location of his law degree, something his law school may not be too happy about. This is interesting in itself as it shows that he graduated in 2001 and was elected to the house in November 2002, although he has an extensive background in Renzi Investments, since 1995, something that is also discussed in this charging document.

Count One charges conspiracy, with the substantive acts of Hobbs and mail and wire fraud being the essence of the illegal agreement. The government, despite recent losses in the honest services realm, uses section 1346 as an unlawful act which formed the conspiracy. There are 28 overt acts specifically outlined in the indictment.  Although the overt acts appear to be many, they could easily be collapsed into relatively few items as they include separate counts for when a check is written and when it is deposited.

Counts Two - Ten charge honest services wire fraud. They are the substantive acts and are very much repetitive of what was described in the conspiracy count.  Thus, the fax of July 6th appears in both places. This is not unusual as the federal system allows the government to charge both the conspiracy and substantive act for the same conduct.

Count Eleven charges conspiracy to commit money laundering with count twelve being the concealment of money laundering, and counts thirteen to twenty-five being transactions in criminally derived funds.

Counts Twenty-Six and Twenty-Seven present Hobbs Act charges.

Counts Twenty-Eight, yet another conspiracy count, presents a conspiracy to commit insurance fraud.

Counts Twenty-Nine through Thirty-Two are the substantive charges of insurance fraud.

Count Thirty-Three through Thirty-Five pertain to false statements to influence insurance regulatory investigations.

The Indictment then presents a claim for forfeiture.

This indictment, like so many, is a classic example of the discretion afforded the government in charging in that many different statutes will often fit the conduct alleged to have been committed. As one finds in many cases, the government uses a good number of the tools in its box when presenting the charges. This is contrasted against cases where there has been an agreement already reached and the government may use an Information to charge one or just a few counts.

(esp)

February 25, 2008 in Celebrities, Congress, Money Laundering, News, Prosecutions | Permalink | Comments (0) | TrackBack (1)

Saturday, February 9, 2008

Indicted for Writing Opinion Letters

Would the government actually indict an attorney premised upon allegations that the attorney wrote several opinion letters for another lawyer?  As surprising as it might seem, the answer is "yes." The government has indicted Attorney Ben Kuehne for his alleged writing of six opinion letters based upon his investigation of whether funds being paid to an attorney were proceeds of criminal conduct.

Several observations and comments on the Indictment and the accompanying Motion to Seal:

  • The indictment is preceded by a page titled - "Motion to Seal."  It is signed by a "trial attorney - DOJ." It requests the indictment be sealed "for the reason that the named defendants may flee and the integrity of the ongoing investigation may be compromised." - Did the government really believe that Attorney Ben Kuehne would flee?  A later sentence states that"many of the named defendants are foreign nationals." But the government fails to limit the language used in the prior sentence that explicitly states "that the named defendants may flee" to only those who might be foreign nationals.  That is a powerful statement to claim that a prominent Miami attorney might flee.  If they didn't mean to apply this statement to him, is it prosecutorial over-reaching, an attempt to taint the accused, or just sloppy drafting? 
  • The indictment alleges that Kuehne's opinion letters were inaccurate in stating that some of the moneys had come from an individual/company that "his investigation" "had determined.... were reputable and well-established, without any connection to illegal activities."  The indictment claims that some of these opinions were untrue because moneys had in fact come from "undercover law enforcement operations."  ----  Isn't the very purpose of an undercover operation to make it seem like things are real?  Is this a situation of accusing someone of issuing incorrect opinion letters because the government did a good job of misleading him?
  • Count Six of the Indictment charges Obstruction of Justice. The charge is expressed in a total of 2 sentences. It states: 

"From on or about January 23, 2003, continuing to the date of this indictment, the defendants, .......did corruptly endeavor to influence, obstruct and impede the due administration of justice; that is investigations by the grand jury; to wit, endeavoring to influence, obstruct, and impede a federal investigation, as set forth above.  In violation of Title 18, United States Code, s 1503."  (names omitted)

A charge without any facts?  Did the government actually put a mere restatement of section 1503 as the basis of a criminal charge against an attorney? Co-blogger Peter Henning called the Indictment of Ben Kuehne a "head-scratcher," but that was prior to receiving the document. But after reading it, I'd go a step further - they have actually indicted an attorney for obstruction of justice and alleged no facts in this count to support the charge.  It almost sounds like a case the 11th Circuit reversed, U.S. v. Thomas, 916 F.2d 547 (11th Cir. 1990).

Perhaps the most troubling aspect of this indictment is that it represents yet another instance of the government interfering in the payment of attorney fees for the criminally accused.  As opposed to going to court and asking for the fees to be returned as improper, they have opted to proceed with criminal charges that in some cases carry up to 20 years.

Indictment - Download us_v_kuehne_indictment_oct_2007.pdf

(esp)

February 9, 2008 in Attorney Fees, Money Laundering, Obstruction, Prosecutions | Permalink | Comments (3) | TrackBack (0)

Friday, February 8, 2008

Respected Miami Attorney Charged with Money Laundering

A highly-regarded Miami attorney, Ben Kuehne, was charged with money laundering for his role in approving payments to well-known defense lawyer Roy Black that allegedly were funds from a drug smuggling operation of the Medellín cocaine cartel.  According to a story in the Miami Herald (here), Kuehne was retained by Black in connection with his representation of the head of the Medellín cartel to ensure that the funds were not tainted.  According to the article, "Kuehne's research gave Black the confidence -- in the form of legal opinion letters -- to accept payments totaling $3.7 million in fees and $1.3 million in expenses from Ochoa, according to several sources. Kuehne earned a portion of the expense payments -- $220,000 to $260,000 -- from Black for vetting Ochoa's payments."  Kuehne is a past president of the Dade County Bar Association and one of the fifty-two members of the Florida Bar Board of Governors, elected from the Eleventh Circuit.  The Board of Governors "has exclusive authority to formulate and adopt matters of policy concerning the activities of the Bar," according to the Bar website (here).

Kuehne and his two co-defendants maintain their innocence, and it is not immediately apparent what the government's theory is in the case.  The amount he received for his work may well be on the high side, at least if he were charging an hourly rate for his work on Black's behalf, which could have triggered the government's interest.  If he received a percentage of Black's fee, then that could call into question the objectivity of his legal opinion.  But when an attorney is asked to opine on the legality of funds to pay for the defense of a drug lord, it seems counterintuitive to say the least that he would give his imprimatur knowing that the funds were in fact the proceeds of narcotics transactions that the government was likely to scrutinize carefully.  Given Kuehne's pristine reputation, it is hard to believe he would risk his entire legal career for an amount that, while significant, is hardly worth the loss of prestige and income he would suffer from a money laundering conviction.  Would you sell your law license and career for a quarter of a million dollars?  The documents in the case are not yet available, so I can't say at this point what approach the government plans to take or the evidence it is like to put on.  It is certainly a head-scratcher at this point. (ph)

February 8, 2008 in Money Laundering | Permalink | Comments (1) | TrackBack (0)

Monday, October 15, 2007

Supremes Take Money Laundering Case

The United States Supreme Court accepted certiorari on a money laundering case.  (Cuellar v. United States) The question the petitioner raises is "[w]hether merely hiding funds with no design to create the appearance of legitimate wealth is sufficient to support a money laundering conviction." (See Scotus Blog here)  The Brief of the National Association of Criminal Defense Lawyers here explains that "[t]he expansive and unwarranted interpretation adopted by the Courts of Appeals for the Second, Third, Fifth, and Eleventh Circuits improperly expands the scope of an already broad statute far beyond its intended reach."   

Although the case accepted by the court is not a white collar crime case, the Court's decision here could make a difference in the white collar world.  One finds money laundering charges in white collar crime cases as charges that are "tacked" onto the substantive offenses. (See Teresa E. Adams, Tacking on Money Laundering Charges to White Collar Crimes: What Did Congress Intend, and What Are the Courts Doing?, 17 Ga. St. L.Rev. 531 (2000)) (see also here)  Applying a strict interpretation to the statute and reading the legislative intent narrowly could assist in keeping money laundering as the crime it should be, as opposed to one that can be used as a bargaining chip to secure a plea agreement in a white collar case.

(esp)

October 15, 2007 in Money Laundering | Permalink | Comments (0) | TrackBack (0)

Monday, September 3, 2007

ABA/ABA Money Laundering Conference

The American Bar Association and the American Banker's Association have a upcoming Money Laundering Enforcement conference.  The keynote speech will be given by Robert Mueller, the Director of the FBI. For details see here.

(esp)

September 3, 2007 in Money Laundering | Permalink | Comments (0) | TrackBack (1)

Saturday, June 23, 2007

Money Laundering Charges in Routine White Collar Case Against Civil Rights Attorney

It seems like there are more and more cases of money laundering charges being added onto routine white collar cases. One has to wonder if Congress intended for this statute to be used this way. (See Teresa E. Adams, Tacking on Money Laundering Charges to White Collar Crimes: What Did Congress Intend, and What Are the Courts Doing?, 17 Ga. St. L.Rev. 531 (2000)). For example, in a press release of the U.S. Attorney's Office for the Central District of California, one sees that a civil rights attorney was convicted of bankruptcy and tax charges.  But in addition to the bankruptcy and tax charges were convictions for "seventeen counts of money laundering (engaging in monetary transactions in criminally-derived property)." And its no wonder that the Government would want to add the money laundering charges as the tax and bankruptcy charges have a statutory maximum of five years, while the money laundering charges have a maximum of ten years.  But were these extra charges really necessary in this case, a case of a civil rights attorney who the LATimes describes as having "brought hundreds of cases against the Los Angeles Police Department and other law enforcement agencies."

Press Release - Download postverdict_press_release.pdf

(esp)

June 23, 2007 in Money Laundering | Permalink | Comments (0) | TrackBack (0)

Monday, April 9, 2007

Former "Olympic Sprinter' Pleads

In April 2006, the New York Times reported that "Olympic sprinter" Tim Montgomery,  was indicted for bank fraud and money laundering. Montgomery's name was also mentioned during the BALCO investigation when his grand jury testimony was said to be leaked. (see here)  The bank fraud and money laundering case is now resolved, as Sports Illustrated (AP) reports on the guilty plea entered by Montgomery.

(esp)(w/ a Stetson hat tip to Dean Darby Dickerson)

April 9, 2007 in Fraud, Money Laundering, Prosecutions, Settlement | Permalink | Comments (0) | TrackBack (0)

Thursday, February 22, 2007

Make Sure You Go to Lunch When Your Client Goes to Jail

West Palm Beach (Fla.) attorney John Garcia learned the hard way that lawyers have to keep their distance from clients, especially when a client is involved in a significant drug dealing operation.  Garcia received an 18--month sentence after pleading guilty to three counts of failing to file CTRs for cash transactions over $10,000 and one count of making a false statement to a DEA agent.  The case arose out of an investigation of Garcia's client, Joel McDermott, who was convicted on drug distribution charges.  In looking at McDermott's assets after his conviction, the DEA noticed that payments were being made on a house being built in Wellington, Fla., in his name.  Needless to say, McDermott was more than willing to roll over on his attorney, and it came to light that he gave Garcia cash to purchase cashier's checks to make the payments.  As described in a press release (here) issued by the U.S. Attorney's Office for the Southern District of Florida:

Garcia admitted structuring cash transactions in his bank account to avoid the filing of currency transaction reports that would have disclosed the source of the monies and their amounts; he also admitted that he lied to Special Agents of the Drug Enforcement Administration when he said that: (1) he had no financial or equitable interest in the construction of a residence in the name of Joel McDermott located in a real estate development known as “Olympia;” and (2) he did not purchase cashier’s checks from Bank of America for the residence of Joel McDermott located in a real estate development known as “Olympia.” In fact, however, Garcia had a financial and equitable interest in the residence in “Olympia” and had purchased several cashier’s checks at Bank of America with cash given to him by Joel McDermott. Thereafter, Garcia caused those cashier’s checks to be tendered to Minto Homes for the benefit of Joel McDermott and a home McDermott was building in “Olympia.”

A Palm Beach Post story (here) discusses the sentencing hearing for Garcia, attended by a number of defense attorneys and a retired circuit court judge, who attested to Garcia's integrity.  Indeed, the Assistant U.S. Attorney prosecuting the case said that Garcia is "an honorable man of his word."  While U.S. District Judge Daniel Hurley expressed some sympathy, noting the number of supporting letters he received, he also pointed out that Garcia's conduct was "180 degrees at odds with the person we thought we knew."  While the judge mused about possibly giving a higher sentence than called for by the Federal Sentencing Guidelines, he ended up giving Garcia a term at the bottom of the sentencing range.

The old adage is that the client goes to jail and the lawyer goes to lunch (or dinner, or back to the office).  When the attorney crosses the line and starts helping a client launder money, then the last person on earth that client will protect is the lawyer, who will join the client in jail.  (ph)

February 22, 2007 in Defense Counsel, Money Laundering, Sentencing | Permalink | Comments (0) | TrackBack (1)

Tuesday, October 3, 2006

ABA Money Laundering Conference

The ABA Money Laundering Conference is scheduled for October 8-10 in Washington, D.C.  Details can be found here and the program can be found here.

(esp)

October 3, 2006 in Money Laundering | Permalink | Comments (0) | TrackBack (1)

Friday, April 28, 2006

Olympic Gold Medalist Arrested on Bank Fraud and Money Laundering Charges

Tim Montgomery won a gold medal in the 2000 Olympics as a member of the United States 400-meter relay team, and set the record for the 100-meter dash in 2002.  That record was wiped from the books and he was banned from international competition for two years because of accusations arising from his involvement in the Balco (Bay Area Laboratory Cooperative) steroid scandal.  Now, Montgomery has been stopped in his tracks by an arrest for alleged involvement in a scheme to cash stolen or forged checks and launder the funds.  In February, Montgomery's one-time coach, 1976 Olympic gold medalist Steve Riddick, was charged with being part of the scheme, and now the U.S. Attorney's Office for the Southern District of New York announced that Montgomery has been added to the indictment as a defendant and arrested in Virginia.  The press release (here, from the Wall Street Journal Law Blog) states that Montgomery is accused of depositing three checks into his account, totaling $775,000, for which he received $20,000 from Riddick for assisting in the transactions.  Riddick is also accused of depositing three checks for over $900,000 into accounts with which he was associated. 

Montgomery and Riddick are two of twelve defendants charged, and appear to be peripheral players in a multimillion dollar scheme organized out of New York City.  Whether the former Olympians knowingly participated in a check fraud or were duped into allowing their accounts to be used will have to be sorted out later, either at trial or through a plea agreement.  For now, Montgomery's reputation continues to sink.  An AP story (here) discusses the charges against Montgomery. (ph)

April 28, 2006 in Celebrities, Fraud, Money Laundering, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Thursday, April 13, 2006

Lawyer Sentenced to Two Years for Money Laundering of Client Funds

R. Scott Cunningham received a two-year prison term for his conviction on two counts of money laundering and one count of conspiracy arising from transactions he undertook on behalf of his client prior to filing for bankruptcy.  The jury acquitted Cunningham on 39 other money laundering counts.  The client, Abraham Kennard, was convicted in 2005 on 116 counts of fraud, money laundering, conspiracy, and tax evasion related to a scheme to defraud over 1,600 churches and non-profit organizations, most of which were poor; Kennard received over 17 years in prison.  A press release issued by the U.S. Attorney's Office for the Northern District of Georgia (here) describes Cunningham's role:

Cunningham represented Kennard in bankruptcy proceedings shortly before the criminal activity began. After Kennard began the church fund scheme, CUNNINGHAM agreed to deposit the proceeds of the fraud scheme into his attorney escrow account and disburse the proceeds when and as directed by Kennard.  From January 2002 through October 2002, CUNNINGHAM laundered more than $8.7 million in fraud proceeds through his attorney escrow account and assisted Kennard in concealing and disguising the source, location, ownership, nature, and control of the fraud proceeds. The evidence showed that Cunningham assisted Kennard in siphoning off approximately $3 million of the fraud proceeds for his own use. Kennard paid Cunningham more than $440,000 for his assistance in laundering the fraud proceeds.

The district court ordered Cunningham to forfeit assets acquired through the money laundering, including "his residence in Dalton,Georgia; approximately $422,000 in cash; a 2002 GMC pickup truck; a 2002 Cadillac Escalade; and a 1995 Harley Davidson motorcycle." (ph)

April 13, 2006 in Money Laundering, Sentencing | Permalink | Comments (0) | TrackBack (3)

Thursday, February 2, 2006

Two Former Bank of China Employees Charged with $485 Million Fraud and Money Laundering Scheme

Two former Bank of China employees and their wives have been charged with fraud, money laundering, and RICO violations related to a fraud that netted approximately $485 million.  According to the Department of Justice press release (here):

Xu Chaofan (a/k/a Hui Yat Fai), Xu Guojun (a/k/a Hui Kit Shun), Kuang Wan Fang (a/k/a Wendy Kuang), Yu Ying Yi, and Kwong Wa Po were charged in the 15-count superseding indictment. The charges in the indictment stem from an elaborate scheme to defraud the Bank of China of at least $485 million, orchestrated by former managers Xu Chaofan, Xu Guojun and a third former bank manager, Yu Zhendong (a/k/a Yu Wing Chung) who has pleaded guilty in connection with this investigation and is cooperating. The scheme allegedly involved efforts by the bank managers to launder the stolen money through, Hong Kong, Canada and the United States, among other countries, and then immigrate to the United States from China with their wives by obtaining false identities and entering into sham marriages with naturalized U.S. citizens. The bank managers’ true wives, Kuang Wan Fang and Yu Ying Yi, allegedly assisted their husbands in laundering the proceeds of the fraudulent scheme and violated U.S. immigration laws by entering this country illegally and then securing United States citizenship and passports through fraudulent means.

(ph)

February 2, 2006 in Fraud, Money Laundering, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Monday, December 19, 2005

ABN AMRO Bank to Pay $80 Million in Civil Settlement

A massive consent order with state, federal, and international parties, has |ABN AMRO Bank, N.V. taking remedial measures and also paying "$80 million in penalties to U.S. federal and state regulators." (See Wall Street Jrl here). 

The joint press release here demonstrates how several entities were able to cooperate to arrive at this resolution.  It was issued by the Board of Governors of the Federal Reserve System, Financial Crimes Enforcement Network, Office of Foreign Assets Control, NY State Banking Dept., and the Illinois Dept. of Financial and Professional Regulation. The press release states in part:

"The Order requires ABN AMRO to make improvements to its global compliance and risk management systems to ensure adequate oversight, effective risk management, and full compliance with applicable U.S. laws and regulations. . . .

". . . . The agencies have assessed penalties based on findings of unsafe and unsound practices; on findings of systemic defects in ABN AMRO's internal controls to ensure compliance with U.S. anti-money laundering laws and regulations, which resulted in failures to identify, analyze, and report suspicious activity; and on findings that ABN AMRO participated in transactions that violated U.S. sanctions laws. ABN AMRO is also required to take ongoing measures to ensure compliance with U.S. sanctions laws."

There are 34 signature lines (the ABN AMRO's lines are repeats for each of the parties) on this "Order to Cease and Desist Issued Upon Consent" (here) and it even has the Dutch translation of the title of this Order included in the document [Order to issue a Direction (in Dutch, "Besluit tot het geven van een aanwijzing")].

And although there is a consent to a civil penalty, one does not find an admitting to wrongdoing.  For example, in the Assessment of Civil Penalty (here) it specifically states that it was entered into "without admitting or denying the determinations by the Financial Crimes Enforcement Network, as described in Sections III and IV below."

(esp)

December 19, 2005 in Civil Enforcement, Money Laundering, Settlement | Permalink | Comments (0) | TrackBack (3)

Friday, December 16, 2005

If the President Says So

A Washington Post story (here) notes that in a recent interview of President Bush by Fox News anchor Brit Hume, the President expressed his belief that Rep. Tom DeLay was innocent of the money laundering and conspiracy charges brought in Texas.  According to the story, the President said, "I hope that he will [be acquitted], 'cause I like him, and plus, when he's over there, we get our votes through the House."  Thank goodness the facts and the jury are less important than political expediency.  Of course, the President also said he did not believe that former Baltimore Oriole Rafael Palmeiro -- who he knew from their time together with the Texas Rangers -- did not lie to Congress about his steroid use, and the House Government Reform Committee found insufficient evidence to make of criminal referral on the case, so maybe the President knows something we don't. (ph)

December 16, 2005 in Money Laundering, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Saturday, December 10, 2005

Attorney Convicted of Money Laundering

Georgia attorney R. Scott Cunningham was convicted of two counts of money laundering related to use of his client trust account to transfer funds from a client's advanced-fee loan scheme.  While the jury acquitted Cunningham on 39 other money laundering charges, that is hardly anything to be proud of, and the conviction (which also includes a conspiracy charge) will certainly end Cunningham's legal career.  A Rome News story (here) discusses the conviction. (ph)

December 10, 2005 in Money Laundering | Permalink | Comments (3) | TrackBack (0)

Thursday, December 8, 2005

Rep. DeLay Requests Quick Trial on Money Laundering Charge Only

After Judge Priest dismissed one of the three counts against Rep. Tom DeLay (see earlier post here), he has now requested that a severance of the two remaining counts of money laundering and conspiracy so he can go to trial quickly on just the money laundering count.  Rep. DeLay and two aides were charged with illegally transferring corporate campaign contributions in 2002 to avoid limitations on such contributions under Texas law.  An AP story (here) asserts that if a not guilty verdict were returned on the substantive money laundering count then the conspiracy charge could be moot.  Under Texas law, however, conspiracy is a  separate crime from the object offense (see Farrington v. State,  489 S.W. 607, 609 (Tx. Ct. Crim. App. 1973)), so a not guilty verdict on the money laundering charge would not necessarily preclude a subsequent trial for conspiracy.  It may be that a not guilty verdict in the first trial would call into question the viability of the conspiracy charge, and could even constitute collateral estoppel (if you're flashing back to law school, that haunting vision will pass). 

Rep. DeLay clearly hopes to end the case quickly and definitively, but the trial court may not be willing to split the prosecution in half at the cost of having to conduct two trials involving the same evidence, witnesses, etc.  Even though the conspiracy and money laundering charges are separate, there is a substantial overlap that usually calls for a single trial.  It may be that Rep. DeLay is also seeking a separate trial from his subordinates, which would facilitate a lack-of-knowledge defense on his part. (ph)

December 8, 2005 in Money Laundering, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Saturday, October 15, 2005

Pimp Pleads Guilty to Money Laundering

The U.S. Attorney's Office for the District of Nevada announced that Louis Wright, who has appeared in documentaries discussing how he is a pimp, entered into a guilty plea to two counts of money laundering for using a stolen identity to clean up the cash from the prostitutes he oversaw.  According to a press release (here):

In pleading guilty today, WRIGHT admitted that he is a nationally known pimp who has had numerous prostitutes work for him and who has appeared in several documentary films about pimping, including the 1999 documentary, “American Pimp.” WRIGHT admitted that he opened a CitiBank bank account using the name Tyler Montana and the social security number of a woman in Rialto, California, and deposited cash into it during 2003 and 2004 totaling approximately $95,000. The deposits were made in Illinois, New York, and California, all places where prostitutes had worked for WRIGHT.

On April 8, 2005, investigating agents executed search warrants at 10024 Garamound; 8321 W. Sahara, #1058; and 9824 Concord Downs, all Las Vegas residences connected with the defendant. Agents recovered numerous items related to pimping, including a motorcycle helmet depicting a skeleton dressed as a pimp, belt buckles, trophies and other awards presented to “Kenny Red.”

Records from "Blackjack Bail Bonds" showed that Wright provided the bail for a number of women arrested on prostitution charges.  I didn't know there was a line of products specifically related to pimping, but then I've led a very sheltered life.  (ph)

October 15, 2005 in Money Laundering | Permalink | TrackBack (0)

Thursday, September 15, 2005

Ratzlaf Redux: Intent for Structuring

In Ratzlaf v. U.S., 510 U.S. 65 (1994), the Supreme Court interpreted the "willfully" element for a currency structuring violation under 31 U.S.C. Sec. 5324 to require proof that the defendant knew the structuring was illegal.  Congress responded rather promptly to the Court's holding by dropping willfulness from the statute, so that now all the government needs to prove is that the defendant knows that the financial institution is required to file a Currency Transaction Report (CTR) for transactions over $10,000 in cash, and that the defendant intended to avoid having the report filed by structuring the transactions to keep them under $10,000.  A Second Circuit decision in U.S. v. MacPherson deals with the issue of what evidence suffices to establish this intent, particularly when the funds are not the proceeds of any unlawful activity.

MacPherson was a New York City policeman and real estate investor who held a real estate license.  To shield his assets from a tort lawsuit filed by a tenant of one of his buildings, MacPherson began to liquidate various accounts and held the funds in cash.  Once the tort case settled, MacPherson shifted his assets back into bank accounts.  For an unknown reason, he did so by engaging in a series of 32 cash deposits into various banks of amounts below $10,000, including 23 in the $9,000 range; some days, MacPherson went to three separate banks to make his deposits.  He deposited approximately $250,000 in cash over a four-month period  Charged with violating the anti-structuring statute, MacPherson argued that there was insufficient evidence of his intent to evade the bank's currency reporting requirement.  He noted that the funds were not the proceeds of any illegal activity, and the tort case had been settled so he had no motive to hide the amount of money he had.  The trial judge granted a Rule 29 judgment of acquittal after the jury returned a guilty verdict, and the Second Circuit reversed (opinion available here).

The court rejected MacPherson's argument that an inference of the defendant's intent to structure should be limited to cases in which the proceeds are known to be derived from illegal activity.  The court stated: "If a defendant structures cash transactions knowing that the financial institution involved is obligated to report transactions exceeding $10,000 and intending to evade that requirement, he is guilty of structuring without regard to whether the cash at issue represents criminal or lawful proceeds. More to the point, whether or not a § 5324 prosecution relates to criminal proceeds, a jury may properly consider the pattern of structuring activities and draw reasonable inferences therefrom as to whether the defendant possessed the requisite mens rea."

The court also rejected MacPherson's argument that he was unaware that banks have to file CTRs for cash transactions over $10,000.  When he first started to shield his assets, he withdrew cash from his bank accounts and the banks obtained the necessary information from him for the CTRs on that side of the transaction.  When it came to depositing the money back into banks, the court stated: "More to the point, a reasonable jury could certainly infer that it was improbable in the extreme that MacPherson, a New York City police officer, would have repeatedly gone through these identification procedures (three times on one day) without knowing their purpose. Indeed, the possibility of naive ignorance is rendered all the more unlikely by the fact that MacPherson, as a licensed real estate salesperson, would himself have been required to file CTRs in connection with cash business transactions." 

In other words, the Second Circuit has a very hard time believing that anyone involved in either real estate or law enforcement could plausibly claim not to have heard about the currency transaction reporting requirements.  The interesting aspect of the case is that, while Justice Ginsburg stated in Ratzlaf that structuring cash transactions is "not inevitably nefarious," it is a crime regardless of the reason for the structuring.  As always, be very careful with cash. (ph)

September 15, 2005 in Money Laundering | Permalink | TrackBack (0)