Thursday, February 2, 2006
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.
Monday, December 19, 2005
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."
Friday, December 16, 2005
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)
Saturday, December 10, 2005
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)
Thursday, December 8, 2005
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)
Saturday, October 15, 2005
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)
Thursday, September 15, 2005
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)
Wednesday, September 14, 2005
The Boston Globe reports here that "[t]he vice chair[ ] and former treasurer of the Massachusetts Republican Party was arrested yesterday on federal money-laundering." The case arises from his representation of a criminal client who has agreed to cooperate. And to make matters worse, he does not appear to be getting much support from his party. What is particularly unusual about these charges is that the accused is also running for political office and his campaign slogan is ''the tough, smart, strong leader we need to fight crime." See also here.
Wednesday, June 8, 2005
Victor Conte, founder of the Bay Area Laboratory Co-op (BALCO) who has admitted providing steroids to a number of athletes, will likely face additional money laundering charges, according to an AP story (here). At a closed hearing in San Francisco on June 7, the government disclosed that it plans to issue a superseding indictment with charges that only name Conte and not the other defendants. The trial is scheduled to begin September 6, although additional charges that only name Conte increases the chance that the judge will sever at least some of the defendants to avoid any prejudice to them from unrelated evidence. Conte's admissions in a national television interview (see earlier post here) that BALCO created and distributed steroids certainly makes his defense quite difficult, and the other defendants have a stong incentive not to join him at the defense table once trial starts. (ph)
Friday, April 22, 2005
The Financial Crimes Enforcement Network (FinCEN) filed a notice of proposed rulemaking to prohibit two Latvian banks headquartered in Riga, VEF Banka and Multibanka, from conducting financial transactions with banks in the United States because of possible money laundering activities at the banks. Under the USA PATRIOT Act, U.S. financial institutions can be required to take "special measures" against foreign banks or other institutions when there is a "primary money laundering concern" regarding use of accounts for money laundering. FinCEN seeks to adopt the "fifth special measure" which "prohibits or conditions the opening or maintaining of correspondent or payable through accounts for the designated institution by U.S. financial institutions."
According to the FinCEN release on VEF Banka (here), "The bank’s dealings with foreign shell companies, provision of confidential banking services, and lack of controls and procedures adequate to the risks involved, make VEF vulnerable to money laundering and other financial crimes. As a result of the significant number of credit and debit transactions involving entities that appear to be shell corporations banking at VEF, some U.S. financial institutions have already closed correspondent relationships with VEF." Regarding Multibanka, the FinCEN release (here) states, "Multibanka offers confidential banking services and numbered accounts for non-Latvian customers. Reports substantiate that a significant portion of its business involves wiring money out of the country on behalf of its accountholders. The bank has been suspected of being used by Russian and other shell companies to facilitate financial crime. A common way for criminals to disguise illegal proceeds is to establish shell companies in countries known for lax enforcement of anti-money laundering laws. The criminals use the shell companies to conceal the true ownership of the accounts and assets, which is ideal for the laundering of funds." (ph)
Friday, March 11, 2005
As discussed in a previous post (here) about a number of arrests of public officials in Monmouth County, New Jersey, charges against three additional defendants for money laundering were filed on March 10 as part of a widening crackdown on public corruption resulting from an extensive undercover FBI operation. A press release issued by the U.S. Attorney's Office details charges against the defendants:
Criminal complaints were unsealed today charging a Monmouth County truck and equipment contractor, a transportation service owner and a Far Hills councilman with laundering large sums of cash in exchange for kickbacks from undercover agents in an FBI corruption investigation, U.S. Attorney Christopher J. Christie announced.
One of the complaints charges Stephen Appolonia, 52, of Colts Neck, the co-owner of International Trucks of Central Jersey, based in Howell and Hillside. The company sells International-brand trucks and other equipment to Monmouth County and various municipalities in Monmouth and elsewhere.
The same complaint charges Far Hills Councilman and police commissioner Thomas A. Greenwald, 52, a friend of Appolonia whom Appolonia introduced to undercover agents when Greenwald also wanted to participate in the money-laundering scheme, according to the criminal complaint. Greenwald and Appolonia ultimately laundered more than $350,000, according to the criminal complaint.
The indictment quotes the third defendant as describing his limousine business as "the greatest washing machine in the world" -- that may be tough to explain to a jury. The criminal complaints filed in the case are here and here. (ph)
Saturday, February 26, 2005
Miami attorney Sam Burstyn appeared in federal court in the Southern District of Florida this past week to face an indictment charging money laundering and obstruction of justice. Burstyn has represented celebrity clients, including Robin Givens and the wife of tennis player Boris Becker, and is known for his penthouse office on Brickell Ave. in addition to his criminal defense work. The government alleges that he was the "house counsel" for a marijuana importation enterprise led by Jeffrey Tobin. The charges against Burstyn include a $500,000 money laundering charge related to a loan that was made with alleged drug profits, and that Burstyn obstructed justice by advising Tobin to flee the United States and organized meetings with grand jury witnesses to provide false testimony. According to a press release issued by the U.S. Attorney's Office:
On or about October 22, 1998, Burstyn lent approximately $498,250, in the form of a counter check, to an owner of the business, Auto Fund of Atlanta, Georgia, at a substantial interest rate. This check was drawn on the lawyer’s trust account of Samuel I. Burstyn, P.A. Burstyn obtained the proceeds to make this loan from the financial accounts of his relatives. Burstyn used a fictitious company named “J.B. Partners” as an entity to make the loan. As a condition for making the loan, defendant Burstyn obtained collateral of $500,000 in drug proceeds from Jeffrey Tobin.
An AP story here discusses Burstyn's law practice and his attorney's statement that "If you were to see him now, you would be struck by how confident he is that he will be acquitted." (ph)
Wednesday, February 9, 2005
As discussed in an earlier post (here), former Georgia School Superintendent and 2002 gubernatorial candidate Linda Schrenko was charged in a federal indictment with corruption charges involving the misappropriation of over $600,000 in federal education funds that were used for her campaign and also for cosmetic surgery. Her top deputy entered a plea agreement on Jan. 10 (see post here), and his cooperation may have led to new charges. The U.S. Attorney's Office for the Northern District of Georgia (Atlanta) upped the ante on Feb. 8 when the grand jury issued a superseding indictment alleging an additional 20 counts of money laundering, which could substantially affect the sentence if she is convicted of those charges. Among the methods alleged by the government to disguise the source and use of the funds were the issuance of 104 blank checks for $590 each that were to be used for "focus groups" related to the campaign. An article in the Atlanta Journal-Constitution describes the new allegations against Schrenko and her codefendants. (ph)
Monday, February 7, 2005
As discussed in earlier posts (here and here), the acquisition of Riggs National Bank by PNC Financial was delayed by the federal investigation of possible money laundering violations by Riggs, including the bank's failure to monitor transactions by former Chilean dictator Augusto Pinochet. Riggs ultimately settled the criminal case by agreeing to plead guilty to a violation of the Bank Secrecy Act and pay a $16 million fine. The fallout from that case, and "continued deterioration" in Riggs' operations, led PNC to seek to modify the terms of the transaction, and Riggs has struck back by withdrawing from the deal and suing PNC in DC Superior Court. An article in the Wall Street Journal (Feb. 7) discusses the collapse of the deal, which will likely result in Riggs drifting even further unless another can be located that might be interested in acquiring the bank. Unfortunately for Riggs (and its shareholders), the prospect of a fire sale looms. (ph)
Wednesday, January 26, 2005
Riggs National Corporation, the parent of Washington D.C.'s Riggs National Bank, is on the verge of accepting a plea agreement with the Department of Justice for violating the Bank Secrecy Act for failing to report suspicious activity in accounts involving possible money laundering, according to an article in the Wall Street Journal (Jan. 26). The article states: "The Riggs board has been presented with a plea agreement by prosecutors in which the bank would admit to one count of violating the Bank Secrecy Act by failing to file reports to regulators on suspicious transfers and withdrawals by clients, people close to the case said. Directors are expected to accept the plea and the bank would pay a fine of between $16 million and $18 million. The deal could be announced as soon as tomorrow, these people said." As discussed in earlier posts here and here, Riggs came under federal scrutiny for possible money laundering by foreign government executives, including former Chilean dictator Augusto Pinochet, through accounts maintained that involved large-scale transfers of funds. The article notes that the plea agreement, if it goes through, may affect the deal Riggs has to be acquired by PNC Financial, including the possibility that the transaction will be canceled. (ph)
Monday, January 24, 2005
Bloomberg.com reports (here) that the New York and Miami branches of the Banco de Chile are being investigated for possible money laundering violations. Earlier posts (here and here) discussed the federal investigation of Riggs National Bank in Washington DC for money laundering problems involving foreign leaders, including former Chilean dictator Augusto Pinochet. The report states:
Banco de Chile's New York branch, which caters to foreign customers, is under investigation for compliance with anti-money laundering laws, according to a filing with the U.S. Securities and Exchange Commission. The Office of the Comptroller of the Currency is looking into the New York branch of Chile's second-largest bank, while the Federal Reserve Bank of Atlanta is examining certain accounts at the Miami operation, according to today's filing.
Monday, January 17, 2005
Riggs National Bank became embroiled in a money laundering scandal related to its relationships with foreign governments and leaders, including former Chilean dictator Gen. Augusto Pinochet, and as a result the bank was bought out by PNC Financial (see earlier posts here and here). A story in the Washington Post (Jan. 17) details the failure of the Riggs board of directors to pursue any additional information, much less remedial measures, when informed of the problem. According to the article:
In October 2002, the directors of Riggs Bank received an internal memorandum listing $1.9 million in suspicious cash withdrawals by former Chilean dictator Augusto Pinochet from 2000 to 2002 -- the board's first official notification of a relationship that bank regulators were investigating. The directors did not question the nature of the bank's relationship with Pinochet, who only a year before had eluded a Spanish criminal indictment on genocide and torture charges, according to sources who have seen minutes and transcripts of the meeting. No internal procedures were changed. The board took no action.
Even worse, the banks controlling shareholder, Joe Allbritton and his wife Barbara--both board members--took the lead in ignoring the problem, according to the article. "At Riggs, the directors at the bank and its holding company did not confront the huge risks connected with Riggs international banking relationships. The boards followed the lead of Allbritton and his wife, Barbara -- both directors who were often openly derisive of efforts by regulators to improve oversight of its international banking operations." In an industry as heavily regulated--and prone to abuse--as banking, it is surprising to hear that directors would tolerate such an attitude. Maybe I'm just naive. (ph)